II 

Calendar No. 231 

109TH CONGRESS 

1ST SESSION S. 1783 

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. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 28, 2005 

Mr. GRASSLEY (for himself, Mr. ENZI, Mr. KENNEDY, and Mr. BAUCUS) introduced the following bill; which was read twice and ordered to be placed 

on the calendar 

A BILL 

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’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 
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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. 

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. 

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. 

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. 
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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. 

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. 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 

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. 

TITLE VIII—INFORMATION TO ASSIST PENSION PLAN 

PARTICIPANTS 
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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. Administrative provisions. 

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. 

TITLE XI—ADMINISTRATIVE PROVISIONS 

Sec. 1101. Employee plans compliance resolution system. 

Sec. 1102. Extension to all governmental plans of moratorium on application 

of certain nondiscrimination rules applicable to State and local 

plans. 

Sec. 1103. Notice and consent period regarding distributions. 

Sec. 1104. Reporting simplification. 

Sec. 1105. Voluntary early retirement incentive and employment retention 

plans maintained by local educational agencies and other entities. 

Sec. 1106. No reduction in unemployment compensation as a result of pension 

rollovers. 

Sec. 1107. Withholding on distributions from governmental section 457 plans. 

Sec. 1108. Clarification of treatment of defined benefit plans of Indian Tribal 

governments. 

Sec. 1109. Treatment of defined benefit plan as governmental plan. 

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. 
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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 

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. 
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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 In12 come Security Act of 1974 (29 U.S.C. 1082 through 

13 1086) are repealed. 

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

15 of subtitle B of title I of such Act (as amended by sub16 section (a)) is amended by inserting after section 301 the 

17 following new section: 

18 ‘‘MINIMUM FUNDING STANDARDS

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

20 FUNDING STANDARD.— 

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

22 applies shall satisfy the minimum funding standard 

23 applicable to the plan for any plan year. 

24 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur25 poses of paragraph (1), a plan shall be treated as 
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1 satisfying the minimum funding standard for a plan 

2 year if— 

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

4 which is a single-employer plan, the employer 

5 makes contributions to or under the plan for 

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

7 less than the minimum required contribution 

8 determined under section 303 for the plan for 

9 the plan year, 

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

11 which is a single-employer plan, the employer 

12 makes contributions to or under the plan for 

13 the plan year which are required under the 

14 terms of the plan, and 

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

16 the employers make contributions to or under 

17 the plan for any plan year which, in the aggre18 gate, are sufficient to ensure that the plan does 

19 not have an accumulated funding deficiency 

20 under section 304 as of the end of the plan 

21 year. 

22 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.— 

23 ‘‘(1) IN GENERAL.—Except as provided in para24 graph (2), the amount of any contribution required 

25 by this section (including any required installments 
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1 under section 303(j)) shall be paid by the employer 

2 responsible for making contributions to or under the 

3 plan. 

4 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

5 EMPLOYER MEMBER OF CONTROLLED GROUP.—If 

6 the employer referred to in paragraph (1) is a mem7 ber of a controlled group, each member of such 

8 group shall be jointly and severally liable for pay9 ment of such contributions. 

10 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND11 ARDS.— 

12 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD13 SHIP.— 

14 ‘‘(A) IN GENERAL.—If— 

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

16 a multiemployer plan, 10 percent or more 

17 of the number of employers contributing to 

18 or under the plan are) unable to satisfy the 

19 minimum funding standard for a plan year 

20 without temporary substantial business 

21 hardship (substantial business hardship in 

22 the case of a multiemployer plan), and 

23 ‘‘(ii) application of the standard would 

24 be adverse to the interests of plan partici25 pants in the aggregate, 
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1 the Secretary of the Treasury may, subject to 

2 subparagraph (C), waive the requirements of 

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

4 or any portion of the minimum funding stand5 ard. The Secretary of the Treasury shall not 

6 waive the minimum funding standard with re7 spect to a plan for more than 3 of any 15 (5 

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

9 consecutive plan years. 

10 ‘‘(B) EFFECTS OF WAIVER.—If a waiver is 

11 granted under subparagraph (A) for any plan 

12 year— 

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

14 plan, the minimum required contribution 

15 under section 303 for the plan year shall 

16 be reduced by the amount of the waived 

17 funding deficiency and such amount shall 

18 be amortized as required under section 

19 303(e), and 

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

21 plan, the funding standard account shall 

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

23 with the amount of the waived funding de24 ficiency and such amount shall be amor-
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1 tized as required under section 

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

3 ‘‘(C) WAIVER OF AMORTIZED PORTION

4 NOT ALLOWED.—The Secretary of the Treasury 

5 may not waive under subparagraph (A) any 

6 portion of the minimum funding standard 

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

8 attributable to any waived funding deficiency 

9 for any preceding plan year. 

10 ‘‘(2) DETERMINATION OF BUSINESS HARD11 SHIP.—For purposes of this subsection, the factors 

12 taken into account in determining temporary sub13 stantial business hardship (substantial business 

14 hardship in the case of a multiemployer plan) shall 

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

16 not— 

17 ‘‘(A) the employer is operating at an eco18 nomic loss, 

19 ‘‘(B) there is substantial unemployment or 

20 underemployment in the trade or business and 

21 in the industry concerned, 

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

23 concerned are depressed or declining, and 
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1 ‘‘(D) it is reasonable to expect that the 

2 plan will be continued only if the waiver is 

3 granted. 

4 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur5 poses of this part, the term ‘waived funding defi6 ciency’ means the portion of the minimum funding 

7 standard under subsection (a) (determined without 

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

9 Secretary of the Treasury and not satisfied by em10 ployer contributions. 

11 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM12 PLOYER PLANS, CONSULTATIONS.— 

13 ‘‘(A) SECURITY MAY BE REQUIRED.— 

14 ‘‘(i) IN GENERAL.—Except as pro15 vided in subparagraph (C), the Secretary 

16 of the Treasury may require an employer 

17 maintaining a defined benefit plan which is 

18 a single-employer plan (within the meaning 

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

20 to such plan as a condition for granting or 

21 modifying a waiver under paragraph (1). 

22 ‘‘(ii) SPECIAL RULES.—Any security 

23 provided under clause (i) may be perfected 

24 and enforced only by the Pension Benefit 

25 Guaranty Corporation, or, at the direction 
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1 of the Corporation, by a contributing spon2 sor (within the meaning of section 

3 4001(a)(13)) or a member of such spon4 sor’s controlled group (within the meaning 

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

6 ‘‘(B) CONSULTATION WITH THE PENSION

7 BENEFIT GUARANTY CORPORATION.—Except as 

8 provided in subparagraph (C), the Secretary of 

9 the Treasury shall, before granting or modi10 fying a waiver under this subsection with re11 spect to a plan described in subparagraph 

12 (A)(i)— 

13 ‘‘(i) provide the Pension Benefit 

14 Guaranty Corporation with— 

15 ‘‘(I) notice of the completed ap16 plication for any waiver or modifica17 tion, and 

18 ‘‘(II) an opportunity to comment 

19 on such application within 30 days 

20 after receipt of such notice, and 

21 ‘‘(ii) consider— 

22 ‘‘(I) any comments of the Cor23 poration under clause (i)(II), and 

24 ‘‘(II) any views of any employee 

25 organization (within the meaning of 
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1 section 3(4)) representing participants 

2 in the plan which are submitted in 

3 writing to the Secretary of the Treas4 ury in connection with such applica5 tion. 

6 Information provided to the Corporation under 

7 this subparagraph shall be considered tax re8 turn information and subject to the safe9 guarding and reporting requirements of section 

10 6103(p) of the Internal Revenue Code of 1986. 

11 ‘‘(C) EXCEPTION FOR CERTAIN WAIV12 ERS.— 

13 ‘‘(i) IN GENERAL.—The preceding 

14 provisions of this paragraph shall not 

15 apply to any plan with respect to which the 

16 sum of— 

17 ‘‘(I) the aggregate unpaid min18 imum required contributions for the 

19 plan year and all preceding plan 

20 years, and 

21 ‘‘(II) the present value of all 

22 waiver amortization installments de23 termined for the plan year and suc24 ceeding plan years under section 

25 303(e)(2), 
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1 is less than $1,000,000. 

2 ‘‘(ii) TREATMENT OF WAIVERS FOR

3 WHICH APPLICATIONS ARE PENDING.—The 

4 amount described in clause (i)(I) shall in5 clude any increase in such amount which 

6 would result if all applications for waivers 

7 of the minimum funding standard under 

8 this subsection which are pending with re9 spect to such plan were denied. 

10 ‘‘(iii) UNPAID MINIMUM REQUIRED

11 CONTRIBUTION.—For purposes of this sub12 paragraph— 

13 ‘‘(I) IN GENERAL.—The term 

14 ‘unpaid minimum required contribu15 tion’ means, with respect to any plan 

16 year, any minimum required contribu17 tion under section 303 for the plan 

18 year which is not paid on or before 

19 the due date (as determined under 

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

21 ‘‘(II) ORDERING RULE.—For 

22 purposes of subclause (I), any pay23 ment to or under a plan for any plan 

24 year shall be allocated first to unpaid 

25 minimum required contributions for 
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1 all preceding plan years on a first-in, 

2 first-out basis and then to the min3 imum required contribution under sec4 tion 303 for the plan year. 

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

6 PLANS.— 

7 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 8 ⁄2 MONTHS AFTER CLOSE OF

9 YEAR.—In the case of a single-employer plan, 

10 no waiver may be granted under this subsection 

11 with respect to any plan for any plan year un12 less an application therefor is submitted to the 

13 Secretary of the Treasury not later than the 

14 15th day of the 3rd month beginning after the 

15 close of such plan year. 

16 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM17 BER OF CONTROLLED GROUP.—In the case of a 

18 single-employer plan, if an employer is a mem19 ber of a controlled group, the temporary sub20 stantial business hardship requirements of 

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

22 such requirements are met— 

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

24 and 
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1 ‘‘(ii) with respect to the controlled 

2 group of which such employer is a member 

3 (determined by treating all members of 

4 such group as a single employer). 

5 The Secretary of the Treasury may provide that 

6 an analysis of a trade or business or industry 

7 of a member need not be conducted if the Sec8 retary of the Treasury determines such analysis 

9 is not necessary because the taking into account 

10 of such member would not significantly affect 

11 the determination under this paragraph. 

12 ‘‘(6) ADVANCE NOTICE.— 

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

14 Treasury shall, before granting a waiver under 

15 this subsection, require each applicant to pro16 vide evidence satisfactory to such Secretary that 

17 the applicant has provided notice of the filing of 

18 the application for such waiver to each affected 

19 party (as defined in section 4001(a)(21)) and in 

20 the case of a multiemployer plan, to each em21 ployer required to contribute to the plan under 

22 subsection (b)(1). Such notice shall include a 

23 description of the extent to which the plan is 

24 funded for benefits which are guaranteed under 

25 title IV and for benefit liabilities. 
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1 ‘‘(B) CONSIDERATION OF RELEVANT IN2 FORMATION.—The Secretary of the Treasury 

3 shall consider any relevant information provided 

4 by a person to whom notice was given under 

5 subparagraph (A). 

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

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

8 plan which increases the liabilities of the plan 

9 by reason of any increase in benefits, any 

10 change in the accrual of benefits, or any change 

11 in the rate at which benefits become nonforfeit12 able under the plan shall be adopted if a waiver 

13 under this subsection or an extension of time 

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

15 the plan, or if a plan amendment described in 

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

17 the preceding 24 months. If a plan is amended 

18 in violation of the preceding sentence, any such 

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

20 any plan year ending on or after the date on 

21 which such amendment is adopted. 

22 ‘‘(B) EXCEPTION.—Subparagraph (A) 

23 shall not apply to any plan amendment which— 

24 ‘‘(i) the Secretary of the Treasury de25 termines to be reasonable and which pro-
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1 vides for only de minimis increases in the 

2 liabilities of the plan, 

3 ‘‘(ii) only repeals an amendment de4 scribed in subsection (d)(2), or 

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

6 qualification under part I of subchapter D, 

7 of chapter 1 of the Internal Revenue Code 

8 of 1986. 

9 ‘‘(8) CROSS REFERENCE.—For corresponding 

10 duties of the Secretary of the Treasury with regard 

11 to implementation of the Internal Revenue Code of 

12 1986, see section 412(c) of such Code. 

13 ‘‘(d) MISCELLANEOUS RULES.— 

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

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

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

17 only if approved by the Secretary of the Treasury. 

18 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND19 MENTS.—For purposes of this section, any amend20 ment applying to a plan year which— 

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

year but no later than 21 22 ⁄2 months after the 

23 close of the plan year (or, in the case of a mul24 tiemployer plan, no later than 2 years after the 

25 close of such plan year), 
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1 ‘‘(B) does not reduce the accrued benefit 

2 of any participant determined as of the begin3 ning of the first plan year to which the amend4 ment applies, and 

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

6 any participant determined as of the time of 

7 adoption except to the extent required by the 

8 circumstances, 

9 shall, at the election of the plan administrator, be 

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

11 plan year. No amendment described in this para12 graph which reduces the accrued benefits of any par13 ticipant shall take effect unless the plan adminis14 trator files a notice with the Secretary of the Treas15 ury notifying him of such amendment and such Sec16 retary has approved such amendment, or within 90 

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

18 failed to disapprove such amendment. No amend19 ment described in this subsection shall be approved 

20 by the Secretary of the Treasury unless such Sec21 retary determines that such amendment is necessary 

22 because of a substantial business hardship (as deter23 mined under subsection (c)(2)) and that a waiver 

24 under subsection (c) (or, in the case of a multiem-
20 

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1 ployer plan, any extension of the amortization period 

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

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

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

5 group treated as a single employer under subsection 

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

7 Revenue Code of 1986.’’. 

8 (c) CLERICAL AMENDMENT.—The table of contents 

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

10 relating to sections 302 through 308 and inserting the fol11 lowing new item: 

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

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

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

14 SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE15 FINED BENEFIT PENSION PLANS. 

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 section 101 of this Act) is amended by insert19 ing after section 302 the following new section: 

20 ‘‘MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER

21 DEFINED BENEFIT PENSION PLANS

22 ‘‘SEC. 303. (a) MINIMUM REQUIRED CONTRIBU23 TION.—For purposes of this section and section 

24 302(a)(2)(A), except as provided in subsection (f), the 

25 term ‘minimum required contribution’ means, with respect 
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1 to any plan year of a defined benefit plan which is a single 

2 employer plan— 

3 ‘‘(1) in any case in which the value of plan as4 sets of the plan (as reduced under subsection (f)(4)) 

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

6 plan year, the sum of— 

7 ‘‘(A) the target normal cost of the plan for 

8 the plan year, 

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

10 any) for the plan for the plan year determined 

11 under subsection (c), and 

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

13 any) for the plan for the plan year as deter14 mined under subsection (e); or 

15 ‘‘(2) in any case in which the value of plan as16 sets of the plan (as reduced under subsection (f)(4)) 

17 equals or exceeds the funding target of the plan for 

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

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

20 such excess. 

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

22 section, except as provided in subsection (i)(2) with re23 spect to plans in at-risk status, the term ‘target normal 

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

25 benefits which are expected to accrue or to be earned 
22 

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

2 subsection, if any benefit attributable to services per3 formed in a preceding plan year is increased by reason 

4 of any increase in compensation during the current plan 

5 year, the increase in such benefit shall be treated as hav6 ing accrued during the current plan year. 

7 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.— 

8 ‘‘(1) IN GENERAL.—For purposes of this sec9 tion, the shortfall amortization charge for a plan for 

10 any plan year is the aggregate total of the shortfall 

11 amortization installments for such plan year with re12 spect to the shortfall amortization bases for such 

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

14 ‘‘(2) SHORTFALL AMORTIZATION INSTALL15 MENT.—For purposes of paragraph (1)— 

16 ‘‘(A) DETERMINATION.—The plan sponsor 

17 shall determine the amounts necessary to amor18 tize the shortfall amortization base of the plan 

19 for any plan year in level annual installments 

20 over the 7-plan-year period beginning with such 

21 plan year. 

22 ‘‘(B) SHORTFALL INSTALLMENT.—The 

23 shortfall amortization installment for any plan 

24 year in the 7-plan-year period under subpara25 graph (A) with respect to any shortfall amorti-
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1 zation base is the annual installment deter2 mined under subparagraph (A) for that year for 

3 that base. 

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

5 any shortfall amortization installment under 

6 this paragraph, the plan sponsor shall use the 

7 segment rates determined under subparagraph 

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

9 similar to the rules of subparagraph (B) of sub10 section (h)(2). 

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

12 purposes of this section, the shortfall amortization 

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

14 of— 

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

16 such plan year, over 

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

18 the segment rates determined under subpara19 graph (C) of subsection (h)(2), applied under 

20 rules similar to the rules of subparagraph (B) 

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

22 the shortfall amortization installments and 

23 waiver amortization installments which have 

24 been determined for such plan year and any 

25 succeeding plan year with respect to the short-
24 

•S 1783 PCS 

1 fall amortization bases and waiver amortization 

2 bases of the plan for any plan year preceding 

3 such plan year. 

4 ‘‘(4) FUNDING SHORTFALL.— 

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

6 section, except as provided in subparagraph 

7 (B), the funding shortfall of a plan for any plan 

8 year is the excess (if any) of— 

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

10 the plan year, over 

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

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

13 for the plan year which are held by the 

14 plan on the valuation date. 

15 ‘‘(B) TRANSITION RULE FOR AMORTIZA16 TION OF FUNDING SHORTFALL.— 

17 ‘‘(i) IN GENERAL.—Solely for pur18 poses of applying paragraph (3) in the case 

19 of plan years beginning after 2006 and be20 fore 2011, only the applicable percentage 

21 of the funding target shall be taken into 

22 account under paragraph (3)(A) in deter23 mining the funding shortfall for the plan 

24 year. 
25 

•S 1783 PCS 

1 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

2 purposes of subparagraph (A)— 

3 ‘‘(I) IN GENERAL.—Except as 

4 provided in clause (ii), the applicable 

5 percentage shall be 93 percent for 

6 plan years beginning in 2007, 96 per7 cent for plan years beginning in 2008, 

8 and 100 percent for any succeeding 

9 plan year. 

10 ‘‘(II) SMALL PLANS.—In the case 

11 of a plan described in subsection 

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

13 shall be determined in accordance 

14 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. 

15 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT16 TAINMENT OF FUNDING TARGET.—In any case in 

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

18 is zero, for purposes of determining the shortfall am19 ortization charge for such plan year and succeeding 

20 plan years, the shortfall amortization bases for all 

21 preceding plan years (and all shortfall amortization 
26 

•S 1783 PCS 

1 installments determined with respect to such bases) 

2 shall be reduced to zero. 

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

4 purposes of this section— 

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

6 subsection (i)(1) with respect to plans in at-risk sta7 tus, the funding target of a plan for a plan year is 

8 the present value of all benefits accrued or earned 

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

10 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT11 AGE.—The ‘funding target attainment percentage’ of 

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

13 percentage) which— 

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

15 year, bears to 

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

17 plan year (determined without regard to sub18 section (i)(1)). 

19 ‘‘(e) WAIVER AMORTIZATION CHARGE.— 

20 ‘‘(1) DETERMINATION OF WAIVER AMORTIZA21 TION CHARGE.—The waiver amortization charge (if 

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

23 total of the waiver amortization installments for 

24 such plan year with respect to the waiver amortiza25 tion bases for each of the 5 preceding plan years. 
27 

•S 1783 PCS 

1 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.— 

2 For purposes of paragraph (1)— 

3 ‘‘(A) DETERMINATION.—The plan sponsor 

4 shall determine the amounts necessary to amor5 tize the waiver amortization base of the plan for 

6 any plan year in level annual installments over 

7 a period of 5 plan years beginning with the suc8 ceeding plan year. 

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

10 amortization installment for any plan year in 

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

12 respect to any waiver amortization base is the 

13 annual installment determined under subpara14 graph (A) for that year for that base. 

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

16 waiver amortization installment under this sub17 section, the plan sponsor shall use the segment rates 

18 determined under subparagraph (C) of subsection 

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

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

21 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiv22 er amortization base of a plan for a plan year is the 

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

24 such plan year under section 302(c). 
28 

•S 1783 PCS 

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 waiver am5 ortization charge for such plan year and succeeding 

6 plan years, the waiver amortization base for all pre7 ceding plan years shall be reduced to zero. 

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

9 MINIMUM REQUIRED CONTRIBUTIONS.— 

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

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

12 plan year against the minimum required contribu13 tion for the plan year and the amount of the con14 tributions an employer is required to make under 

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

16 the amount so credited. Any such amount shall be 

17 credited on the first day of the plan year. 

18 ‘‘(2) PREFUNDING BALANCE.— 

19 ‘‘(A) BEGINNING BALANCE.—The begin20 ning balance of a prefunding balance main21 tained by a plan shall be zero, except that if a 

22 plan was in effect for a plan year beginning in 

23 2006 and had a positive balance in the funding 

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

25 effect for such plan year) as of the end of such 
29 

•S 1783 PCS 

1 plan year, the beginning balance for the plan 

2 for its first plan year beginning after 2006 shall 

3 be such positive balance. 

4 ‘‘(B) INCREASES.— 

5 ‘‘(i) IN GENERAL.—As of the first day 

6 of each plan year beginning after 2007, the 

7 prefunding balance of a plan shall be in8 creased by the excess (if any) of— 

9 ‘‘(I) the aggregate amount of em10 ployer contributions to the plan for 

11 the preceding plan year, over 

12 ‘‘(II) the minimum required con13 tribution for the preceding plan year. 

14 ‘‘(ii) ADJUSTMENTS FOR INTEREST.— 

15 Any excess contributions under clause (i) 

16 shall be properly adjusted for interest ac17 cruing for the periods between the first 

18 day of the current plan year and the dates 

19 on which the excess contributions were 

20 made, determined by using the effective in21 terest rate for the preceding plan year and 

22 by treating contributions as being first 

23 used to satisfy the minimum required con24 tribution. 
30 

•S 1783 PCS 

1 ‘‘(iii) CERTAIN CONTRIBUTIONS DIS2 REGARDED.—Any contribution which is re3 quired to be made under section 206(g) in 

4 addition to any contribution required 

5 under this section shall not be taken into 

6 account for purposes of clause (i). 

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

8 each plan year after 2007, the prefunding bal9 ance of a plan shall be decreased (but not below 

10 zero) by the amount of the balance credited 

11 under paragraph (1) against the minimum re12 quired contribution of the plan for the pre13 ceding plan year. 

14 ‘‘(D) ADJUSTMENTS FOR INVESTMENT EX15 PERIENCE.—In determining the prefunding bal16 ance of a plan as of the first day of the plan 

17 year, the plan sponsor shall, in accordance with 

18 regulations prescribed by the Secretary of the 

19 Treasury, adjust such balance to reflect the 

20 rate of net gain or loss with respect to plan as21 sets for the preceding plan year. Notwith22 standing subsection (g)(3), such rate of net 

23 gain or loss shall be determined on the basis of 

24 fair market value and shall properly take into 

25 account, in accordance with such regulations, 
31 

•S 1783 PCS 

1 all contributions, distributions, and other plan 

2 payments made during such period. 

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

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

5 as a percentage) for any plan year which— 

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

7 preceding plan year, bears to 

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

9 the preceding plan year (determined with10 out regard to subsection (i)(1)), 

11 is less than 80 percent, the preceding provisions 

12 of this subsection shall not apply unless employ13 ers liable for contributions to the plan under 

14 section 302(b) make contributions to the plan 

15 for the plan year in an aggregate amount not 

16 less than the amount determined under sub17 paragraph (B). Any contribution required by 

18 this subparagraph may not be reduced by any 

19 credit otherwise allowable under paragraph (1). 

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

21 determined under this subparagraph for any 

22 plan year is the greater of— 

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

24 for the plan year, or 
32 

•S 1783 PCS 

1 ‘‘(ii) 25 percent of the minimum re2 quired contribution under subsection (a) 

3 for the plan year without regard to this 

4 subsection. 

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

6 for purposes of applying subsections (a) and 

7 (c)(4)(A)(ii) in determining the minimum required 

8 contribution under this section, the value of the plan 

9 assets otherwise determined without regard to this 

10 paragraph shall be reduced by the amount of the 

11 prefunding balance under this subsection. 

12 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL13 ITIES.— 

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

15 otherwise provided under this subsection, all deter16 minations under this section for a plan year shall be 

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

18 plan year. 

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

20 section— 

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

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

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

24 plan year. 
33 

•S 1783 PCS 

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

2 on each day during the preceding plan year, a 

3 plan had 100 or fewer participants, the plan 

4 may designate any day during the plan year as 

5 its valuation date for such plan year and suc6 ceeding plan years. For purposes of this sub7 paragraph, all defined benefit plans (other than 

8 multiemployer plans) maintained by the same 

9 employer (or any member of such employer’s 

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

11 only employees of such employer or member 

12 shall be taken into account. 

13 ‘‘(C) APPLICATION OF CERTAIN RULES IN

14 DETERMINATION OF PLAN SIZE.—For purposes 

15 of this paragraph— 

16 ‘‘(i) PLANS NOT IN EXISTENCE IN

17 PRECEDING YEAR.—In the case of the first 

18 plan year of any plan, subparagraph (B) 

19 shall apply to such plan by taking into ac20 count the number of participants that the 

21 plan is reasonably expected to have on 

22 days during such first plan year. 

23 ‘‘(ii) PREDECESSORS.—Any reference 

24 in subparagraph (B) to an employer shall 
34 

•S 1783 PCS 

1 include a reference to any predecessor of 

2 such employer. 

3 ‘‘(3) DETERMINATION OF VALUE OF PLAN AS4 SETS.—For purposes of this section— 

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

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

7 be the fair market value of the assets. 

8 ‘‘(B) AVERAGING ALLOWED.—A plan may 

9 determine the value of plan assets on the basis 

10 of any reasonable actuarial method of valuation 

11 providing for the averaging of fair market val12 ues, but only if such method— 

13 ‘‘(i) is permitted under regulations 

14 prescribed by the Secretary of the Treas15 ury, and 

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

17 such values over more than the period be18 ginning on the last day of the 12th month 

19 preceding the valuation date and ending on 

20 the valuation date (or a similar period in 

21 the case of a valuation date which is not 

22 the 1st day of a month). 

23 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE24 CEIPTS.—For purposes of determining the value of 

25 assets under paragraph (3)— 
35 

•S 1783 PCS 

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

2 ‘‘(i) an employer makes any contribu3 tion to the plan after the valuation date for 

4 the plan year in which the contribution is 

5 made, and 

6 ‘‘(ii) the contribution is for a pre7 ceding plan year, 

8 the contribution shall be taken into account as 

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

10 except that in the case of any plan year begin11 ning after 2007, only the present value (deter12 mined as of the valuation date) of such con13 tribution may be taken into account. For pur14 poses of the preceding sentence, present value 

15 shall be determined using the effective interest 

16 rate for the preceding plan year to which the 

17 contribution is properly allocable. 

18 ‘‘(B) SPECIAL RULE FOR CURRENT YEAR

19 CONTRIBUTIONS MADE BEFORE VALUATION

20 DATE.—If any contributions for any plan year 

21 are made to or under the plan during the plan 

22 year but before the valuation date for the plan 

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

24 date shall not include— 

25 ‘‘(i) such contributions, and 
36 

•S 1783 PCS 

1 ‘‘(ii) interest on such contributions for 

2 the period between the date of the con3 tributions and the valuation date, deter4 mined by using the effective interest rate 

5 for the plan year. 

6 ‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.— 

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

8 the determination of any present value or other com9 putation under this section shall be made on the 

10 basis of actuarial assumptions and methods— 

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

12 into account the experience of the plan and rea13 sonable expectations), and 

14 ‘‘(B) which, in combination, offer the actu15 ary’s best estimate of anticipated experience 

16 under the plan. 

17 ‘‘(2) INTEREST RATES.— 

18 ‘‘(A) EFFECTIVE INTEREST RATE.—For 

19 purposes of this section, the term ‘effective in20 terest rate’ means, with respect to any plan for 

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

22 if used to determine the present value of the 

23 plan’s accrued or earned benefits referred to in 

24 subsection (d)(1), would result in an amount 
37 

•S 1783 PCS 

1 equal to the funding target of the plan for such 

2 plan year. 

3 ‘‘(B) INTEREST RATES FOR DETERMINING

4 FUNDING TARGET.—For purposes of deter5 mining the funding target of a plan for any 

6 plan year, the interest rate used in determining 

7 the present value of the benefits of the plan 

8 shall be— 

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

10 determined to be payable during the 5-year 

11 period beginning on the first day of the 

12 plan year, the first segment rate with re13 spect to the applicable month, 

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

15 determined to be payable during the 15- 

16 year period beginning at the end of the pe17 riod described in clause (i), the second seg18 ment rate with respect to the applicable 

19 month, and 

20 ‘‘(iii) in the case of benefits reason21 ably determined to be payable after the pe22 riod described in clause (ii), the third seg23 ment rate with respect to the applicable 

24 month. 
38 

•S 1783 PCS 

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

2 this paragraph— 

3 ‘‘(i) FIRST SEGMENT RATE.—The 

4 term ‘first segment rate’ means, with re5 spect to any month, the single rate of in6 terest which shall be determined by the 

7 Secretary of the Treasury for such month 

8 on the basis of the corporate bond yield 

9 curve for such month, taking into account 

10 only that portion of such yield curve which 

11 is based on bonds maturing during the 5- 

12 year period commencing with such month. 

13 ‘‘(ii) SECOND SEGMENT RATE.—The 

14 term ‘second segment rate’ means, with re15 spect to any month, the single rate of in16 terest which shall be determined by the 

17 Secretary of the Treasury for such month 

18 on the basis of the corporate bond yield 

19 curve for such month, taking into account 

20 only that portion of such yield curve which 

21 is based on bonds maturing during each of 

22 the years in the 15-year period beginning 

23 at the end of the period described in clause 

24 (i). 
39 

•S 1783 PCS 

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 of the Treasury for such month 

6 on the basis of the corporate bond yield 

7 curve for such month, taking into account 

8 only that portion of such yield curve which 

9 is based on bonds maturing during periods 

10 beginning after the period described in 

11 clause (ii). 

12 ‘‘(D) CORPORATE BOND YIELD CURVE.— 

13 The term ‘corporate bond yield curve’ means, 

14 with respect to any month, a yield curve which 

15 is prescribed by the Secretary of the Treasury 

16 for such month and which reflects the average, 

17 for the 12-month period ending with the month 

18 preceding such month, of yields on investment 

19 grade corporate bonds with varying maturities. 

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

21 of this paragraph, the term ‘applicable month’ 

22 means, with respect to any plan for any plan 

23 year, the month which includes the valuation 

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

25 election of the plan administrator, any of the 4 
40 

•S 1783 PCS 

1 months which precede such month. Any election 

2 made under this subparagraph shall apply to 

3 the plan year for which the election is made and 

4 all succeeding plan years, unless the election is 

5 revoked with the consent of the Secretary of the 

6 Treasury. 

7 ‘‘(F) PUBLICATION REQUIREMENTS.—The 

8 Secretary of the Treasury shall publish for each 

9 month the corporate bond yield curve for such 

10 month and each of the rates determined under 

11 this paragraph for such month. The Secretary 

12 of the Treasury shall also publish a description 

13 of the methodology used to determine such yield 

14 curve and such rates which is sufficiently de15 tailed to enable plans to make reasonable pro16 jections regarding the yield curve and such 

17 rates for future months based on the plan’s 

18 projection of future interest rates. 

19 ‘‘(G) TRANSITION RULE.— 

20 ‘‘(i) IN GENERAL.—Notwithstanding 

21 the preceding provisions of this paragraph, 

22 for plan years beginning in 2007 or 2008, 

23 the first, second, or third segment rate for 

24 a plan with respect to any month shall be 

25 equal to the sum of— 
41 

•S 1783 PCS 

1 ‘‘(I) the product of such rate for 

2 such month determined without re3 gard to this subparagraph, multiplied 

4 by the applicable percentage, and 

5 ‘‘(II) the product of the rate de6 termined under the rules of section 

7 302(b)(5)(B)(ii)(II) (as in effect for 

8 plan years beginning in 2006), multi9 plied by a percentage equal to 100 

10 percent minus the applicable percent11 age. 

12 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

13 purposes of clause (i), the applicable percentage is 331 14 ⁄3 percent for plan years beginning in 2007 and 662 15 ⁄3 percent for plan 

16 years beginning in 2008. 

17 ‘‘(3) MORTALITY TABLES.— 

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

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

20 used in determining any present value or mak21 ing any computation under this section shall be 

22 the RP–2000 Combined Mortality Table, using 

23 Scale AA, as published by the Society of Actu24 aries, as in effect on the date of the enactment 

25 of the Pension Security and Transparency Act 
42 

•S 1783 PCS 

1 of 2005 and as revised from time to time under 

2 subparagraph (B). 

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

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

5 make revisions in any table in effect under sub6 paragraph (A) to reflect the actual experience 

7 of pension plans and projected trends in such 

8 experience. 

9 ‘‘(C) SUBSTITUTE MORTALITY TABLE.— 

10 ‘‘(i) IN GENERAL.—Upon request by 

11 the plan sponsor and approval by the Sec12 retary of the Treasury, a mortality table 

13 which meets the requirements of clause (ii) 

14 shall be used in determining any present 

15 value or making any computation under 

16 this section during the 10-consecutive plan 

17 year period specified in the request. A 

18 mortality table described in this clause 

19 shall cease to be in effect if the plan actu20 ary determines at any time that such table 

21 does not meet the requirements of sub22 clauses (I) and (II) of clause (ii). 

23 ‘‘(ii) REQUIREMENTS.—A mortality 

24 table meets the requirements of this clause 
43 

•S 1783 PCS 

1 if the Secretary of the Treasury determines 

2 that— 

3 ‘‘(I) there is a sufficient number 

4 of plan participants, and the pension 

5 plans have been maintained for a suf6 ficient period of time, to have credible 

7 information necessary for purposes of 

8 subclause (II), 

9 ‘‘(II) such table reflects the ac10 tual experience of the pension plans 

11 maintained by the sponsor and pro12 jected trends in general mortality ex13 perience, 

14 ‘‘(III) except as provided by the 

15 Secretary, such table will be used by 

16 all plans maintained by the plan spon17 sor and all members of any controlled 

18 group which includes the plan spon19 sor, and 

20 ‘‘(IV) such table is significantly 

21 different from the table described in 

22 subparagraph (A). 

23 ‘‘(iii) DEADLINE FOR DISPOSITION OF

24 APPLICATION.—Any mortality table sub25 mitted to the Secretary of the Treasury for 
44 

•S 1783 PCS 

1 approval under this subparagraph shall be 

2 treated as in effect for the first plan year 

3 in the 10-year period described in clause 

4 (i) unless the Secretary of the Treasury, 

5 during the 180-day period beginning on 

6 the date of such submission, disapproves of 

7 such table and provides the reasons that 

8 such table fails to meet the requirements 

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

10 extended for any period during which the 

11 Secretary of the Treasury has requested 

12 information from the plan sponsor and 

13 such information has not been provided. 

14 ‘‘(D) SEPARATE MORTALITY TABLES FOR

15 THE DISABLED.—Notwithstanding subpara16 graph (A)— 

17 ‘‘(i) IN GENERAL.—The Secretary of 

18 the Treasury shall establish mortality ta19 bles which may be used (in lieu of the ta20 bles under subparagraph (A)) under this 

21 subsection for individuals who are entitled 

22 to benefits under the plan on account of 

23 disability. The Secretary of the Treasury 

24 shall establish separate tables for individ25 uals whose disabilities occur in plan years 
45 

•S 1783 PCS 

1 beginning before January 1, 1995, and for 

2 individuals whose disabilities occur in plan 

3 years beginning on or after such date. 

4 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

5 OCCURRING AFTER 1994.—In the case of 

6 disabilities occurring in plan years begin7 ning after December 31, 1994, the tables 

8 under clause (i) shall apply only with re9 spect to individuals described in such sub10 clause who are disabled within the meaning 

11 of title II of the Social Security Act and 

12 the regulations thereunder. 

13 ‘‘(iii) PERIODIC REVISION.—The Sec14 retary of the Treasury shall (at least every 

15 10 years) make revisions in any table in ef16 fect under clause (i) to reflect the actual 

17 experience of pension plans and projected 

18 trends in such experience. 

19 ‘‘(E) TRANSITION RULE.—Under regula20 tions of the Secretary of the Treasury, any dif21 ference in assumptions as set forth in the mor22 tality table specified in subparagraph (A) and 

23 assumptions as set forth in the mortality table 

24 described in section 302(d)(7)(C)(ii) (as in ef25 fect for plan years beginning in 2006) shall be 
46 

•S 1783 PCS 

1 phased in ratably over the first period of 5 plan 

2 years beginning in or after 2007 so as to be 

3 fully effective for the fifth plan year. 

4 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

5 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

6 FORMS.—For purposes of determining any present 

7 value or making any computation under this section, 

8 there shall be taken into account— 

9 ‘‘(A) the probability that future benefit 

10 payments under the plan will be made in the 

11 form of optional forms of benefits provided 

12 under the plan (including lump sum distribu13 tions, determined on the basis of the plan’s ex14 perience and other related assumptions), and 

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

16 such future benefit payments resulting from the 

17 use of actuarial assumptions, in determining 

18 benefit payments in any such optional form of 

19 benefits, which are different from those speci20 fied in this subsection. 

21 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU22 ARIAL ASSUMPTIONS.— 

23 ‘‘(A) IN GENERAL.—No actuarial assump24 tion used to determine the funding target for a 

25 plan to which this paragraph applies may be 
47 

•S 1783 PCS 

1 changed without the approval of the Secretary 

2 of the Treasury. 

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

5 only if— 

6 ‘‘(i) the aggregate unfunded vested 

7 benefits as of the close of the preceding 

8 plan year (as determined under section 

9 4006(a)(3)(E)(iii)) of such plan and all 

10 other plans maintained by the contributing 

11 sponsors (as defined in section 

12 4001(a)(13)) and members of such spon13 sors’ controlled groups (as defined in sec14 tion 4001(a)(14)) which are covered by 

15 title IV (disregarding plans with no un16 funded vested benefits) exceed 

17 $50,000,000; and 

18 ‘‘(ii) the change in assumptions (de19 termined after taking into account any 

20 changes in interest rate and mortality 

21 table) results in a decrease in the funding 

22 shortfall of the plan for the current plan 

23 year that exceeds $50,000,000, or that ex24 ceeds $5,000,000 and that is 5 percent or 
48 

•S 1783 PCS 

1 more of the funding target of the plan be2 fore such change. 

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

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

5 STATUS.— 

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

7 to which this subsection applies for a plan year, 

8 the funding target of the plan for the plan year 

9 is equal to the present value of all liabilities to 

10 participants and their beneficiaries under the 

11 plan for the plan year, as determined by using 

12 the actuarial assumption described in subpara13 graph (B). 

14 ‘‘(B) ADDITIONAL ACTUARIAL ASSUMP15 TION.—The actuarial assumptions used in de16 termining the valuation of the funding target 

17 shall include an assumption that all partici18 pants who will be eligible to elect benefits dur19 ing the plan year and the 7 succeeding plan 

20 years will elect benefits at such times and in 

21 such forms as will result in the highest present 

22 value of liabilities under subparagraph (A). 

23 ‘‘(2) TARGET NORMAL COST OF AT-RISK

24 PLANS.—In the case of a plan to which this sub25 section applies for a plan year, the target normal 
49 

•S 1783 PCS 

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

2 the present value of all benefits which are expected 

3 to accrue or be earned under the plan during the 

4 plan year, determined using the additional actuarial 

5 assumption described in paragraph (1)(B). 

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

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

8 the target liability, as determined without re9 gard to this subsection, or 

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

11 than the target normal cost, as determined 

12 without regard to this subsection. 

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

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

15 status for a plan year if— 

16 ‘‘(A) the plan is maintained by a finan17 cially-weak employer, and 

18 ‘‘(B) the funding target attainment per19 centage for the plan year is less than 93 per20 cent. 

21 ‘‘(5) FINANCIALLY-WEAK EMPLOYER.— 

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

23 subsection, the term ‘financially-weak employer’ 

24 means any employer if— 
50 

•S 1783 PCS 

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

2 of the years during a period of at least 3 

3 consecutive plan years ending with the 

4 plan year— 

5 ‘‘(I) the employer has an out6 standing senior unsecured debt instru7 ment which is rated lower than invest8 ment grade by each of the nationally 

9 recognized statistical rating organiza10 tions for corporate bonds that has 

11 issued a credit rating for such instru12 ment, or 

13 ‘‘(II) if no such debt instrument 

14 has been rated by such an organiza15 tion but 1 or more of such organiza16 tions has made an issuer credit rating 

17 for such employer, all such organiza18 tions which have so rated the em19 ployer have rated such employer lower 

20 than investment grade, and 

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

22 such period are deterioration years. 

23 ‘‘(B) CONTROLLED GROUP EXCEPTION.— 

24 If an employer treated as a financially-weak 

25 employer under subparagraph (A) is a member 
51 

•S 1783 PCS 

1 of a controlled group (as defined in section 

2 302(d)(3)), the employer shall not be treated as 

3 a financially-weak employer if a significant 

4 member (as determined under regulations pre5 scribed by the Secretary of the Treasury) of 

6 such group has an outstanding senior unse7 cured debt instrument that is rated as being in8 vestment grade by an organization described in 

9 subparagraph (A). 

10 ‘‘(C) EMPLOYERS WITH NO RATINGS.— 

11 If— 

12 ‘‘(i) an employer has no debt instru13 ment described in subparagraph (A)(i) 

14 which was rated by an organization de15 scribed in such subparagraph, and 

16 ‘‘(ii) no such organization has made 

17 an issuer credit rating for such employer, 

18 then such employer shall only be treated as a 

19 financially-weak employer to the extent provided 

20 in regulations prescribed by the Secretary of 

21 the Treasury. 

22 ‘‘(6) DETERMINATION OF DETERIORATION

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

24 ‘deterioration year’ means any year during the pe25 riod described in paragraph (5)(A)(i) for which the 
52 

•S 1783 PCS 

1 rating described in subclause (I) or (II) of para2 graph (5)(A)(i) by each organization is either— 

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

4 employer by such organization for a preceding 

5 year in such period, or 

6 ‘‘(B) the lowest rating used by such orga7 nization. 

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

9 purposes of paragraphs (5) and (6), plan years be10 ginning before 2007 shall not be taken into account. 

11 ‘‘(8) TRANSITION BETWEEN APPLICABLE FUND12 ING TARGETS AND BETWEEN APPLICABLE TARGET

13 NORMAL COSTS.— 

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

15 a plan which is in at-risk status for a plan year 

16 has been in such status for a consecutive period 

17 of fewer than 5 plan years, the applicable 

18 amount of the funding target and of the target 

19 normal cost shall be, in lieu of the amount de20 termined without regard to this paragraph, the 

21 sum of— 

22 ‘‘(i) the amount determined under this 

23 section without regard to this subsection, 

24 plus 
53 

•S 1783 PCS 

1 ‘‘(ii) the transition percentage for 

2 such plan year of the excess of the amount 

3 determined under this subsection (without 

4 regard to this paragraph) over the amount 

5 determined under this section without re6 gard to this subsection. 

7 ‘‘(B) TRANSITION PERCENTAGE.—For 

8 purposes of subparagraph (A), the transition 

9 percentage shall be determined in accordance 

10 with 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. 

11 ‘‘(C) YEARS BEFORE EFFECTIVE DATE.— 

12 For purposes of this paragraph, plan years be13 ginning before 2007 shall not be taken into ac14 count. 

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

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

17 this paragraph, this subsection shall apply to 

18 any plan to which this section applies and 

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

20 ‘‘(B) EXCEPTION FOR SMALL PLANS.— 

21 This subsection shall not apply to a plan for a 

22 plan year if the plan was described in sub-
54 

•S 1783 PCS 

1 section (g)(2)(B) for the preceding plan year, 

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

3 ‘‘(C) EXCEPTION FOR PLANS MAINTAINED

4 BY CERTAIN COOPERATIVES.—This subsection 

5 shall not apply to a plan for a plan year if the 

6 plan is maintained by more than 1 employer 

7 and at least 85 percent of the employers are— 

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

9 section 401(k)(7)(B) without regard to 

10 clause (iv) thereof), 

11 ‘‘(ii) rural telephone cooperative asso12 ciations described in section 3(40)(B)(v) of 

13 the Employee Retirement Income Security 

14 Act of 1974 which is not described in 

15 clause (i), or 

16 ‘‘(iii) organizations described in sec17 tion 1381(a) more than 50 percent of the 

18 ownership or capital and profits interests 

19 of which are held— 

20 ‘‘(I) by producers of agricultural 

21 products, or 

22 ‘‘(II) organizations described in 

23 section 1381(a) meeting the require24 ments of subclause (I). 
55 

•S 1783 PCS 

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 

11 the payment date, at the effective rate of interest for 

12 the plan for such plan year. 

13 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

14 SCHEDULE FOR UNDERFUNDED PLANS.— 

15 ‘‘(A) FAILURE TO TIMELY MAKE RE16 QUIRED INSTALLMENT.— 

17 ‘‘(i) IN GENERAL.—In the case of a 

18 plan to which this paragraph applies, the 

19 employer maintaining the plan shall make 

20 the required installments under this para21 graph and if the employer fails to pay the 

22 full amount of a required installment for 

23 the plan year, then the amount of interest 

24 charged under paragraph (2) on the under25 payment for the period of underpayment 
56 

•S 1783 PCS 

1 shall be determined by using a rate of in2 terest equal to the rate otherwise used 

3 under paragraph (2) plus 5 percentage 

4 points. 

5 ‘‘(ii) PLANS TO WHICH PARAGRAPH

6 APPLIES.—This paragraph applies to any 

7 defined benefit plan to which this section 

8 applies other than a plan which— 

9 ‘‘(I) is a plan described in sub10 section (g)(2)(B)), or 

11 ‘‘(II) had a funding shortfall of 

12 $1,000,000 or less for the preceding 

13 plan year. 

14 ‘‘(B) AMOUNT OF UNDERPAYMENT, PE15 RIOD OF UNDERPAYMENT.—For purposes of 

16 subparagraph (A)— 

17 ‘‘(i) AMOUNT.—The amount of the 

18 underpayment shall be the excess of— 

19 ‘‘(I) the required installment, 

20 over 

21 ‘‘(II) the amount (if any) of the 

22 installment contributed to or under 

23 the plan on or before the due date for 

24 the installment. 
57 

•S 1783 PCS 

1 ‘‘(ii) PERIOD OF UNDERPAYMENT.— 

2 The period for which any interest is 

3 charged under this paragraph with respect 

4 to any portion of the underpayment shall 

5 run from the due date for the installment 

6 to the date on which such portion is con7 tributed to or under the plan. 

8 ‘‘(iii) ORDER OF CREDITING CON9 TRIBUTIONS.—For purposes of clause 

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

11 against unpaid required installments in the 

12 order in which such installments are re13 quired to be paid. 

14 ‘‘(C) NUMBER OF REQUIRED INSTALL15 MENTS; DUE DATES.—For purposes of this 

16 paragraph— 

17 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.— 

18 There shall be 4 required installments for 

19 each plan year. 

20 ‘‘(ii) TIME FOR PAYMENT OF IN21 STALLMENTS.—The due dates for required 

22 installments are set forth in the following 

23 table: 

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

1st ........................................................................... April 15 
58 

•S 1783 PCS 

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. 
59 

•S 1783 PCS 

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 
60 

•S 1783 PCS 

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 (other than a plan that would be described in 

6 subsection (g)(2)(B) if ‘100’ were substituted 

7 for ‘500’ therein) which— 

8 ‘‘(i) is required to pay installments 

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

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

11 quarter during such plan year. 

12 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

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

14 installment that is treated as not paid under 

15 subparagraph (A) shall continue to be treated 

16 as unpaid until the close of the quarter in 

17 which the due date for such installment occurs. 

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

19 amount of any required installment is increased 

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

21 shall such increase exceed the amount which, 

22 when added to prior installments for the plan 

23 year, is necessary to increase the funding target 

24 attainment percentage of the plan for the plan 

25 year (taking into account the expected increase 
61 

•S 1783 PCS 

1 in funding target due to benefits accruing or 

2 earned during the plan year) to 100 percent. 

3 ‘‘(E) DEFINITIONS.—For purposes of this 

4 subparagraph: 

5 ‘‘(i) LIQUIDITY SHORTFALL.—The 

6 term ‘liquidity shortfall’ means, with re7 spect to any required installment, an 

8 amount equal to the excess (as of the last 

9 day of the quarter for which such install10 ment is made) of— 

11 ‘‘(I) the base amount with re12 spect to such quarter, over 

13 ‘‘(II) the value (as of such last 

14 day) of the plan’s liquid assets. 

15 ‘‘(ii) BASE AMOUNT.— 

16 ‘‘(I) IN GENERAL.—The term 

17 ‘base amount’ means, with respect to 

18 any quarter, an amount equal to 3 

19 times the sum of the adjusted dis20 bursements from the plan for the 12 

21 months ending on the last day of such 

22 quarter. 

23 ‘‘(II) SPECIAL RULE.—If the 

24 amount determined under subclause 

25 (I) exceeds an amount equal to 2 
62 

•S 1783 PCS 

1 times the sum of the adjusted dis2 bursements from the plan for the 36 

3 months ending on the last day of the 

4 quarter and an enrolled actuary cer5 tifies to the satisfaction of the Sec6 retary of the Treasury that such ex7 cess is the result of nonrecurring cir8 cumstances, the base amount with re9 spect to such quarter shall be deter10 mined without regard to amounts re11 lated to those nonrecurring cir12 cumstances. 

13 ‘‘(iii) DISBURSEMENTS FROM THE

14 PLAN.—The term ‘disbursements from the 

15 plan’ means all disbursements from the 

16 trust, including purchases of annuities, 

17 payments of single sums and other bene18 fits, and administrative expenses. 

19 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

20 The term ‘adjusted disbursements’ means 

21 disbursements from the plan reduced by 

22 the product of— 

23 ‘‘(I) the plan’s funding target at24 tainment percentage for the plan year, 

25 and 
63 

•S 1783 PCS 

1 ‘‘(II) the sum of the purchases of 

2 annuities, payments of single sums, 

3 and such other disbursements as the 

4 Secretary of the Treasury shall pro5 vide in regulations. 

6 ‘‘(v) LIQUID ASSETS.—The term ‘liq7 uid assets’ means cash, marketable securi8 ties, and such other assets as specified by 

9 the Secretary of the Treasury in regula10 tions. 

11 ‘‘(vi) QUARTER.—The term ‘quarter’ 

12 means, with respect to any required install13 ment, the 3-month period preceding the 

14 month in which the due date for such in15 stallment occurs. 

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

17 Treasury may prescribe such regulations as are 

18 necessary to carry out this paragraph. 

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

20 MAKE REQUIRED CONTRIBUTIONS.— 

21 ‘‘(1) IN GENERAL.—In the case of a plan cov22 ered under section 4021 of this Act and to which 

23 this subsection applies (as provided under paragraph 

24 (2)), if— 
64 

•S 1783 PCS 

1 ‘‘(A) any person fails to make a contribu2 tion payment required by section 302 and this 

3 section before the due date for such payment, 

4 and 

5 ‘‘(B) the unpaid balance of such payment 

6 (including interest), when added to the aggre7 gate unpaid balance of all preceding such pay8 ments for which payment was not made before 

9 the due date (including interest), exceeds 

10 $1,000,000, 

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

12 amount determined under paragraph (3) upon all 

13 property and rights to property, whether real or per14 sonal, belonging to such person and any other per15 son who is a member of the same controlled group 

16 of which such person is a member. 

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

18 This subsection shall apply to a defined benefit plan 

19 which is a single-employer plan for any plan year for 

20 which the funding target attainment percentage (as 

21 defined in subsection (d)(2)) of such plan is less 

22 than 100 percent. 

23 ‘‘(3) AMOUNT OF LIEN.—For purposes of para24 graph (1), the amount of the lien shall be equal to 

25 the aggregate unpaid balance of contribution pay-
65 

•S 1783 PCS 

1 ments required under this section and section 302 

2 for which payment has not been made before the due 

3 date. 

4 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

5 ‘‘(A) NOTICE OF FAILURE.—A person 

6 committing a failure described in paragraph (1) 

7 shall notify the Pension Benefit Guaranty Cor8 poration of such failure within 10 days of the 

9 due date for the required contribution payment. 

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

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

12 the required contribution payment and shall 

13 continue until the last day of the first plan year 

14 in which the plan ceases to be described in 

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

16 run without regard to whether such plan con17 tinues to be described in paragraph (2) during 

18 the period referred to in the preceding sentence. 

19 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

20 amount with respect to which a lien is imposed 

21 under paragraph (1) shall be treated as taxes 

22 due and owing the United States and rules 

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

24 (e) of section 4068 shall apply with respect to 
66 

•S 1783 PCS 

1 a lien imposed by subsection (a) and the 

2 amount with respect to such lien. 

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

4 paragraph (1) may be perfected and enforced only 

5 by the Pension Benefit Guaranty Corporation, or at 

6 the direction of the Pension Benefit Guaranty Cor7 poration, by the contributing sponsor (or any mem8 ber of the controlled group of the contributing spon9 sor). 

10 ‘‘(6) DEFINITIONS.—For purposes of this sub11 section— 

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

13 ‘contribution payment’ means, in connection 

14 with a plan, a contribution payment required to 

15 be made to the plan, including any required in16 stallment under paragraphs (3) and (4) of sub17 section (i). 

18 ‘‘(B) DUE DATE; REQUIRED INSTALL19 MENT.—The terms ‘due date’ and ‘required in20 stallment’ have the meanings given such terms 

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

22 payment other than a required installment, the 

23 due date shall be the date such payment is re24 quired to be made under section 303. 
67 

•S 1783 PCS 

1 ‘‘(C) CONTROLLED GROUP.—The term 

2 ‘controlled group’ means any group treated as 

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

4 (m), and (o) of section 414 of the Internal Rev5 enue Code of 1986. 

6 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT

7 ACCOUNTS.—In the case of a qualified transfer (as de8 fined in section 420 of the Internal Revenue Code of 

9 1986), any assets so transferred shall not, for purposes 

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

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

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

13 amended by inserting after the item relating to section 

14 302 the following new item: 

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

pension plans.’’. 

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

16 this section shall apply with respect to plan years begin17 ning after 2006. 

18 SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EM19 PLOYER PLANS. 

20 (a) LIMITS ON BENEFITS AND BENEFIT ACCRU21 ALS.— 

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

23 amended by adding at the end the following new 

24 subsection: 
68 

•S 1783 PCS 

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

2 BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER

3 PLANS.— 

4 ‘‘(1) LIMITATIONS ON PLAN AMENDMENTS IN5 CREASING LIABILITY FOR BENEFITS.— 

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

7 paragraph (4), no amendment to a single-em8 ployer plan which has the effect of increasing li9 abilities of the plan by reason of increases in 

10 benefits, establishment of new benefits, chang11 ing the rate of benefit accrual, or changing the 

12 rate at which benefits become nonforfeitable 

13 may take effect during any plan year if the ad14 justed funding target attainment percentage as 

15 of the valuation date of the plan for such plan 

16 year is— 

17 ‘‘(i) less than 80 percent, or 

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

19 taking into account such amendment. 

20 ‘‘(B) EXEMPTION.—Subparagraph (A) 

21 shall cease to apply with respect to any plan 

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

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

24 amendment), upon payment by the plan sponsor 

25 of a contribution (in addition to any minimum 
69 

•S 1783 PCS 

1 required contribution under section 303) equal 

2 to— 

3 ‘‘(i) in the case of subparagraph 

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

5 funding target of the plan (under section 

6 303) for the plan year attributable to the 

7 amendment, and 

8 ‘‘(ii) in the case of subparagraph 

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

10 an adjusted funding target attainment per11 centage of 80 percent. 

12 ‘‘(C) EXCEPTION FOR CERTAIN BENEFIT

13 INCREASES.—Subparagraph (A) shall not apply 

14 to any amendment which provides for an in15 crease in benefits under a formula which is not 

16 based on a participant’s compensation, but only 

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

18 the contemporaneous rate of increase in average 

19 wages of participants covered by the amend20 ment. 

21 ‘‘(2) LIMITATIONS ON ACCELERATED BENEFIT

22 DISTRIBUTIONS.— 

23 ‘‘(A) FAILURE TO TIMELY MAKE RE24 QUIRED INSTALLMENT.— 
70 

•S 1783 PCS 

1 ‘‘(i) IN GENERAL.—In the case of a 

2 plan to which this paragraph applies, the 

3 employer maintaining the plan shall make 

4 the required installments under this para5 graph and if the employer fails to pay the 

6 full amount of a required installment for 

7 the plan year, then the amount of interest 

8 charged under paragraph (2) on the under9 payment for the period of underpayment 

10 shall be determined by using a rate of in11 terest equal to the rate otherwise used 

12 under paragraph (2) plus 5 percentage 

13 points. 

14 ‘‘(ii) PLANS TO WHICH PARAGRAPH

15 APPLIES.—This paragraph applies to any 

16 defined benefit plan to which this section 

17 applies other than a plan which— 

18 ‘‘(I) is a plan described in sub19 section (g)(2)(B)), or 

20 ‘‘(II) had a funded shortfall tar21 get liability of $1,000,000 or less for 

22 the preceding plan year. 

23 ‘‘(B) PROHIBITED PAYMENT.—For pur24 pose of this subsection— 
71 

•S 1783 PCS 

1 ‘‘(i) IN GENERAL.—The term ‘prohib2 ited payment’ means— 

3 ‘‘(I) any payment, in excess of 

4 the monthly amount paid under a sin5 gle life annuity (plus any social secu6 rity supplements described in the last 

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

8 a participant or beneficiary whose an9 nuity starting date (as defined in sec10 tion 205(h)(2)) occurs during a pro11 hibited period, 

12 ‘‘(II) any payment for the pur13 chase of an irrevocable commitment 

14 from an insurer to pay benefits, and 

15 ‘‘(III) any other payment speci16 fied by the Secretary of the Treasury 

17 by regulations. 

18 ‘‘(ii) EXCEPTION FOR CERTAIN PAY19 MENTS.—In the case of any prohibited pe20 riod described in subparagraph (C)(i), the 

21 term ‘prohibited payment’ shall not include 

22 any payment if the amount of the payment 

23 does not exceed the lesser of— 
72 

•S 1783 PCS 

1 ‘‘(I) 50 percent of the amount of 

2 the payment which could be made 

3 without regard to this subsection, or 

4 ‘‘(II) the present value (deter5 mined under guidance prescribed by 

6 the Pension Benefit Guaranty Cor7 poration, using the interest and mor8 tality assumptions under section 

9 205(g)) of the maximum guarantee 

10 with respect to the participant under 

11 section 4022. 

12 The exception under this clause shall only 

13 apply once with respect to any participant, 

14 except that, for purposes of this sentence, 

15 a participant and any beneficiary on his 

16 behalf (including an alternate payee, as de17 fined in section 206(d)(3)(K)) shall be 

18 treated as 1 participant. If the accrued 

19 benefit of a participant is allocated to such 

20 an alternate payee and 1 or more other 

21 persons, the amount under subclause (II) 

22 shall be allocated among such persons in 

23 the same manner as the accrued benefit is 

24 allocated unless the qualified domestic rela-
73 

•S 1783 PCS 

1 tions order (as defined in section 

2 206(d)(3)(B)(i)) provides otherwise. 

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

4 of subparagraph (A), the term ‘prohibited pe5 riod’ means— 

6 ‘‘(i) except as provided in subpara7 graph (D), if a plan sponsor is required to 

8 make the contribution for the current plan 

9 year under subparagraph (A), the period 

10 beginning on the 1st day of the plan year 

11 and ending on the last day of the 1st pe12 riod of 2 consecutive plan years (beginning 

13 on or after such 1st day) for which the 

14 plan’s adjusted funded target liability per15 centage was at least 60 percent, 

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

17 bankruptcy, or 

18 ‘‘(iii) any period during which the 

19 plan has a liquidity shortfall (as defined in 

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

21 The prohibited period for purposes of clause (ii) 

22 shall not include any portion of a plan year 

23 (even if the plan sponsor is in bankruptcy dur24 ing such period) which occurs on or after the 

25 date the plan’s enrolled actuary certifies that, 
74 

•S 1783 PCS 

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

2 plan’s adjusted funded target liability percent3 age is at least 100 percent. 

4 ‘‘(D) SATISFACTION OF REQUIREMENT BE5 FORE CLOSE OF PLAN YEAR.—If, before the 

6 close of the current plan year— 

7 ‘‘(i) the plan sponsor makes the con8 tribution required to be made under sub9 paragraph (A), or 

10 ‘‘(ii) the plan’s enrolled actuary cer11 tifies that, as of the valuation date for the 

12 plan year, the adjusted funded target li13 ability percentage of the plan is at least 60 

14 percent, 

15 this paragraph shall be applied as if no prohib16 ited period had begun as of the beginning of 

17 such year and the plan shall, under rules de18 scribed by the Secretary of the Treasury, re19 store any payments not made during the pro20 hibited period in effect before the application of 

21 this paragraph. 

22 ‘‘(3) LIMITATION ON BENEFIT ACCRUALS FOR

23 PLANS WITH SEVERE FUNDING SHORTFALLS.— 

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

25 paragraph (4), a single-employer plan shall pro-
75 

•S 1783 PCS 

1 vide that all future benefit accruals under the 

2 plan shall cease during a severe funding short3 fall period, but only to the extent the cessation 

4 of such accruals would have been permitted 

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

6 implemented by a plan amendment adopted im7 mediately before the severe funding shortfall pe8 riod. 

9 ‘‘(B) SEVERE FUNDING SHORTFALL PE10 RIOD.—For purposes of subparagraph (A), the 

11 term ‘severe funding shortfall period’ means in 

12 the case of a plan the adjusted funding target 

13 attainment percentage of which as of the valu14 ation date of the plan for any plan year is less 

15 than 60 percent, the period— 

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

17 succeeding plan year, and 

18 ‘‘(ii) ending on the date the plan’s en19 rolled actuary certifies that the plan’s ad20 justed funding target attainment percent21 age is at least 60 percent, and 

22 ‘‘(C) OPPORTUNITY FOR INCREASED

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

24 a plan shall not be treated as described in such 

25 subparagraph for a plan year if the plan’s en-
76 

•S 1783 PCS 

1 rolled actuary certifies that the plan sponsor 

2 has before the end of the plan year contributed 

3 (in addition to any minimum required contribu4 tion under section 303) the amount sufficient to 

5 result in an adjusted funding target attainment 

6 percentage as of the valuation date for the plan 

7 year of 60 percent. 

8 ‘‘(4) EXCEPTION FOR CERTAIN COLLECTIVELY

9 BARGAINED BENEFITS.—In the case of a plan main10 tained pursuant to a collective bargaining agreement 

11 between employee representatives and the plan spon12 sor and in effect before the beginning of the first 

13 day on which a limitation would otherwise apply 

14 under paragraph (1), (2), or (3)— 

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

16 any amendment, prohibited payment, or accrual 

17 with respect to such plan, but 

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

19 addition to any minimum required contribution 

20 under section 303) the amount sufficient to re21 sult in an adjusted funding target attainment 

22 percentage (as of the valuation date for the 

23 plan year in which any such limitation would 

24 otherwise apply) equal to the percentage nec25 essary to prevent the limitation from applying. 
77 

•S 1783 PCS 

1 ‘‘(5) RULES RELATING TO REQUIRED CON2 TRIBUTIONS.— 

3 ‘‘(A) SECURITY MAY BE PROVIDED.— 

4 ‘‘(i) IN GENERAL.—For purposes of 

5 this subsection, the adjusted funding tar6 get attainment percentage shall be deter7 mined by treating as an asset of the plan 

8 any security provided by a plan sponsor in 

9 a form meeting the requirements of clause 

10 (ii) . 

11 ‘‘(ii) FORM OF SECURITY.—The secu12 rity required under clause (i) shall consist 

13 of— 

14 ‘‘(I) a bond issued by a corporate 

15 surety company that is an acceptable 

16 surety for purposes of section 412 of 

17 this Act, 

18 ‘‘(II) cash, or United States obli19 gations which mature in 3 years or 

20 less, held in escrow by a bank or simi21 lar financial institution, or 

22 ‘‘(III) such other form of security 

23 as is satisfactory to the Secretary of 

24 the Treasury and the parties involved. 
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•S 1783 PCS 

1 ‘‘(iii) ENFORCEMENT.—Any security 

2 provided under clause (i) may be perfected 

3 and enforced at any time after the earlier 

4 of— 

5 ‘‘(I) the date on which the plan 

6 terminates, 

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

8 a payment of the minimum required 

9 contribution for any plan year begin10 ning after the security is provided, the 

11 due date for the payment under sec12 tion 303(j), or 

13 ‘‘(III) if the adjusted funding 

14 target attainment percentage is less 

15 than 60 percent for a consecutive pe16 riod of 7 years, the valuation date for 

17 the last year in the period. 

18 ‘‘(iv) RELEASE OF SECURITY.—The 

19 security shall be released (and any 

20 amounts thereunder shall be refunded to21 gether with any interest accrued thereon) 

22 at such time as the Secretary of the Treas23 ury may prescribe in regulations, including 

24 regulations for partial releases of the secu-
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•S 1783 PCS 

1 rity by reason of increases in the funding 

2 target attainment percentage. 

3 ‘‘(B) PREFUNDING BALANCE MAY NOT BE

4 USED.—No prefunding balance under section 

5 303(f) may be used to satisfy any required con6 tribution under this subsection. 

7 ‘‘(C) TREATMENT AS UNPAID MINIMUM

8 REQUIRED CONTRIBUTION.—The amount of any 

9 required contribution which a plan sponsor fails 

10 to make under paragraph (2) or (4) for any 

11 plan year shall be treated as an unpaid min12 imum required contribution for purposes of sub13 section (j) and (k) of section 303 and for pur14 poses of section 4971 of the Internal Revenue 

15 Code of 1986. 

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

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

18 of the plan. For purposes of this paragraph, the ref19 erence in this paragraph to a plan shall include a 

20 reference to any predecessor plan. Notwithstanding 

21 the preceding sentence, paragraph (1) shall apply if 

22 the plan is in bankruptcy during any of such years. 

23 ‘‘(7) PRESUMED UNDERFUNDING FOR PUR24 POSES OF BENEFIT LIMITATIONS BASED ON PRIOR

25 YEAR’S FUNDING STATUS.— 
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1 ‘‘(A) PRESUMPTION OF CONTINUED

2 UNDERFUNDING.—In any case in which a ben3 efit limitation under paragraph (1), (2), or (3) 

4 has been applied to a plan with respect to the 

5 plan year preceding the current plan year, the 

6 funding target attainment percentage of the ad7 justed plan as of the valuation date of the plan 

8 for the current plan year shall be presumed to 

9 be equal to the adjusted funding target attain10 ment percentage of the plan as of the valuation 

11 date of the plan for the preceding plan year 

12 until the enrolled actuary of the plan certifies 

13 the actual adjusted funding target attainment 

14 percentage of the plan as of the valuation date 

15 of the plan for the current plan year. 

16 ‘‘(B) PRESUMPTION OF UNDERFUNDING

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

18 such certification is made with respect to the 

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

20 the current plan year, for purposes of para21 graphs (1), (2), and (3), the plan’s adjusted 

22 funding target attainment percentage shall be 

23 conclusively presumed to be less than 60 per24 cent as of the first day of such 10th month, 

25 and such day shall be deemed, for purposes of 
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•S 1783 PCS 

1 such paragraphs, to be the valuation date of the 

2 plan for the current plan year. 

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

4 PROHIBITED OR CESSATION PERIOD.—For purposes 

5 of applying this part— 

6 ‘‘(A) OPERATION OF PLAN AFTER PE7 RIOD.—Unless the plan provides otherwise, pay8 ments and accruals will resume effective as of 

9 the day following the close of a period of limita10 tion of payment or accrual of benefits under 

11 paragraph (2) or (3). 

12 ‘‘(B) TREATMENT OF AFFECTED BENE13 FITS.—Nothing in this paragraph shall be con14 strued as affecting the plan’s treatment of ben15 efits which would have been paid or accrued but 

16 for this subsection. 

17 ‘‘(9) FUNDING TARGET ATTAINMENT PERCENT18 AGE.—For purposes of this subsection— 

19 ‘‘(A) IN GENERAL.—The term ‘funding 

20 target attainment percentage’ has the same 

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

22 ‘‘(B) ADJUSTED FUNDED TARGET LIABIL23 ITY PERCENTAGE.—The term ‘adjusted funded 

24 target liability percentage’ means the funded 

25 target liability percentage which is determined 
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•S 1783 PCS 

1 under subparagraph (A) by increasing each of 

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

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

4 of purchases of annuities, payments of single 

5 sums, and such other disbursements as the Sec6 retary of the Treasury shall prescribe in regula7 tions, which were made by the plan during the 

8 preceding 2 plan years.’’. 

9 (2) NOTICE REQUIREMENT.— 

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

11 Act (29 U.S.C. 1021) is amended— 

12 (i) by redesignating subsection (j) as 

13 subsection (k); and 

14 (ii) by inserting after subsection (i) 

15 the following new subsection: 

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

17 CERTAIN FORMS OF DISTRIBUTION.—The plan adminis18 trator of a single-employer plan shall provide a written no19 tice to plan participants and beneficiaries within 30 

20 days— 

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

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

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

24 206(g)(3) applies, after— 
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•S 1783 PCS 

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

2 section 206(g)(3)(B) on which the plan’s en3 rolled actuary certifies that the plan’s adjusted 

4 funding target attainment percentage for the 

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

6 the date such percentage is deemed to be less 

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

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

9 shortfall period, and 

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

11 by the Secretary of the Treasury.’’. 

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

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

14 striking ‘‘section 302(b)(7)(F)(iv)’’ and insert15 ing ‘‘sections 101(j) and 302(b)(7)(F)(iv)’’. 

16 (b) SPECIAL RULE FOR PLAN AMENDMENTS.—A 

17 plan shall not fail to meet the requirements of section 

18 204(g) of the Employee Retirement Income Security Act 

19 of 1974 or section 411(d)(6) of the Internal Revenue Code 

20 of 1986 solely by reason of the adoption by the plan of 

21 an amendment necessary to meet the requirements of the 

22 amendments made by this section. 

23 (c) EFFECTIVE DATES.— 

24 (1) BENEFIT RESTRICTIONS.—Except as pro25 vided in paragraph (2)— 
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•S 1783 PCS 

1 (A) IN GENERAL.—Subject to subpara2 graph (B), the amendments made by subsection 

3 (b) shall apply with respect to plan years begin4 ning after 2006. 

5 (B) BENEFIT INCREASES.—Section 

6 201(g)(1) of the Employee Retirement Income 

7 Security Act of 1974 (as added by subsection 

8 (a)) shall apply with respect to plan years be9 ginning after 2007. 

10 (2) COLLECTIVE BARGAINING EXCEPTION.—In 

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

12 collective bargaining agreements between employee 

13 representatives and 1 or more employers ratified 

14 January 1, 2007, the amendments made by this sec15 tion shall not apply to plan years beginning before 

16 the earlier of— 

17 (A) the later of— 

18 (i) the date on which the last collec19 tive bargaining agreement relating to the 

20 plan terminates (determined without re21 gard to any extension thereof agreed to 

22 after the date of the enactment of this 

23 Act), or 

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

25 to which the amendments made by this 
85 

•S 1783 PCS 

1 subsection would (but for this subpara2 graph) apply, or 

3 (B) January 1, 2010. 

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

5 amendment made pursuant to a collective bargaining 

6 agreement relating to the plan which amends the 

7 plan solely to conform to any requirement added by 

8 this section shall not be treated as a termination of 

9 such collective bargaining agreement. 

10 SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS. 

11 (a) MISCELLANEOUS AMENDMENTS TO TITLE I.— 

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

13 is amended— 

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

15 302(e)’’ and inserting ‘‘section 303(j)’’; 

16 (2) in section 101(f)(2)(B), by striking clause 

17 (i) and inserting the following: 

18 ‘‘(i) a statement as to whether— 

19 ‘‘(I) in the case of a single-em20 ployer plan, the plan’s funding target 

21 attainment percentage (as defined in 

22 section 303(d)(2)), or 

23 ‘‘(II) in the case of a multiem24 ployer plan, the plan’s funded percent25 age (as defined in section 305(d)(2)), 
86 

•S 1783 PCS 

1 is at least 100 percent (and, if not, the ac2 tual percentage);’’; 

3 (3) in section 103(d)(8)(B), by striking ‘‘the re4 quirements of section 302(c)(3)’’ and inserting ‘‘the 

5 applicable requirements of sections 303(h) and 

6 304(c)(3)’’; 

7 (4) in section 103(d), by striking paragraph 

8 (11) and inserting the following: 

9 ‘‘(11) If the current value of the assets of the 

10 plan is less than 70 percent of— 

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

12 the funding target (as defined in section 

13 303(d)(1)) of the plan, or 

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

15 the current liability (as defined in section 

16 304(c)(6)(D)) under the plan, 

17 the percentage which such value is of the amount 

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

19 (5) in section 203(a)(3)(C), by striking ‘‘section 

20 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

21 (6) in section 204(g)(1), by striking ‘‘section 

22 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

23 (7) in section 204(i)(2)(B), by striking ‘‘section 

24 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 
87 

•S 1783 PCS 

1 (8) in section 204(i)(3), by striking ‘‘funded 

2 current liability percentage (within the meaning of 

3 section 302(d)(8) of this Act)’’ and inserting ‘‘fund4 ing target attainment percentage (as defined in sec5 tion 303(d)(2))’’; 

6 (9) in section 204(i)(4), by striking ‘‘section 

7 302(c)(11)(A), without regard to section 

8 302(c)(11)(B)’’ and inserting ‘‘section 302(b)(1), 

9 without regard to section 302(b)(2)’’; 

10 (10) in section 206(e)(1), by striking ‘‘section 

11 302(d)’’ and inserting ‘‘section 303(j)(4)’’, and by 

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

13 303(j)(4)(E)(i)’’; 

14 (11) in section 206(e)(3), by striking ‘‘section 

15 302(e) by reason of paragraph (5)(A) thereof’’ and 

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

17 303(j)(4)(A)’’; and 

18 (12) in sections 101(e)(3), 403(c)(1), and 

19 408(b)(13), by striking ‘‘American Jobs Creation 

20 Act of 2004’’ and inserting ‘‘Pension Protection Act 

21 of 2005’’. 

22 (b) MISCELLANEOUS AMENDMENTS TO TITLE IV.— 

23 Title IV of such Act is amended— 

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

25 1301(a)(13)), by striking ‘‘302(c)(11)(A)’’ and in-
88 

•S 1783 PCS 

1 serting ‘‘302(b)(1)’’, by striking ‘‘412(c)(11)(A)’’ 

2 and inserting ‘‘412(b)(1)’’, by striking 

3 ‘‘302(c)(11)(B)’’ and inserting ‘‘302(b)(2)’’, and by 

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

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

6 1303(e)(1)), by striking ‘‘302(f)(1)(A) and (B)’’ and 

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

8 ‘‘412(n)(1)(A) and (B)’’ and inserting 

9 ‘‘430(k)(1)(A) and (B)’’; 

10 (3) in section 4010(b)(2) (29 U.S.C. 

11 1310(b)(2)), by striking ‘‘302(f)(1)(A) and (B)’’ and 

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

13 ‘‘412(n)(1)(A) and (B)’’ and inserting 

14 ‘‘430(k)(1)(A) and (B)’’; 

15 (4) in section 4011(b) (29 U.S.C. 1311(b)), by 

16 striking ‘‘to which’’ and all that follows and insert17 ing ‘‘for any plan year for which the plan’s funding 

18 target attainment percentage (as defined in section 

19 303(d)(2)) is at least 90 percent.’’; 

20 (5) in section 4062(c)(1) (29 U.S.C. 

21 1362(c)(1)), by striking paragraphs (1), (2), and (3) 

22 and inserting the following: 

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

24 the sum of the shortfall amortization charge (within 

25 the meaning of section 303(c)(1) of this Act and 
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•S 1783 PCS 

1 430(c)(1) of the Internal Revenue Code of 1986) 

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

3 in which the termination date occurs, plus the aggre4 gate total of shortfall amortization installments (if 

5 any) determined for succeeding plan years under 

6 section 303(c)(2) of this Act and section 430(c)(2) 

7 of such Code (which, for purposes of this subpara8 graph, shall include any increase in such sum which 

9 would result if all applications for waivers of the 

10 minimum funding standard under section 302(c) of 

11 this Act and section 412(c) of such Code which are 

12 pending with respect to such plan were denied and 

13 if no additional contributions (other than those al14 ready made by the termination date) were made for 

15 the plan year in which the termination date occurs 

16 or for any previous plan year), or 

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

18 outstanding balance of the accumulated funding de19 ficiencies (within the meaning of section 304(a)(2) 

20 of this Act and section 431(a) of the Internal Rev21 enue Code of 1986) of the plan (if any) (which, for 

22 purposes of this subparagraph, shall include the 

23 amount of any increase in such accumulated funding 

24 deficiencies of the plan which would result if all 

25 pending applications for waivers of the minimum 
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•S 1783 PCS 

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

2 section 412(c) of such Code and for extensions of 

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

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

5 such plan were denied and if no additional contribu6 tions (other than those already made by the termi7 nation date) were made for the plan year in which 

8 the termination date occurs or for any previous plan 

9 year), 

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

11 the sum of the waiver amortization charge (within 

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

13 430(j)(2) of the Internal Revenue Code of 1986) 

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

15 in which the termination date occurs, plus the aggre16 gate total of waiver amortization installments (if 

17 any) determined for succeeding plan years under 

18 section 303(e)(2) of this Act and section 430(j)(3) 

19 of such Code, or 

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

21 outstanding balance of the amount of waived fund22 ing deficiencies of the plan waived before such date 

23 under section 302(c) of this Act or section 412(c) of 

24 such Code (if any), and 
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•S 1783 PCS 

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

2 outstanding balance of the amount of decreases in 

3 the minimum funding standard allowed before such 

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

5 431(d) of such Code (if any);’’; 

6 (6) in section 4071 (29 U.S.C. 1371), by strik7 ing ‘‘302(f)(4)’’ and inserting ‘‘303(k)(4)’’; 

8 (7) in section 4243(a)(1)(B) (29 U.S.C. 

9 1423(a)(1)(B)), by striking ‘‘302(a)’’ and inserting 

10 ‘‘304(a)’’, and, in clause (i), by striking ‘‘302(a)’’ 

11 and inserting ‘‘304(a)’’; 

12 (8) in section 4243(f)(1) (29 U.S.C. 

13 1423(f)(1)), by striking ‘‘303(a)’’ and inserting 

14 ‘‘302(c)’’; 

15 (9) in section 4243(f)(2) (29 U.S.C. 

16 1423(f)(2)), by striking ‘‘303(c)’’ and inserting 

17 ‘‘302(c)(3)’’; and 

18 (10) in section 4243(g) (29 U.S.C. 1423(g)), by 

19 striking ‘‘302(c)(3)’’ and inserting ‘‘304(c)(3)’’. 

20 (c) AMENDMENTS TO REORGANIZATION PLAN NO. 4 

21 OF 1978.—Section 106(b)(ii) of Reorganization Plan No. 

22 4 of 1978 (ratified and affirmed as law by Public Law 

23 98–532 (98 Stat. 2705)) is amended by striking 

24 ‘‘302(c)(8)’’ and inserting ‘‘302(d)(2)’’, by striking 

25 ‘‘304(a) and (b)(2)(A)’’ and inserting ‘‘304(d)(1), (d)(2), 
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•S 1783 PCS 

1 and (e)(2)(A)’’, and by striking ‘‘412(c)(8), (e), and 

2 (f)(2)(A)’’ and inserting ‘‘412(d)(2) and 431(d)(1), (d)(2), 

3 and (e)(2)(A)’’. 

4 (d) REPEAL OF EXPIRED AUTHORITY FOR TEM5 PORARY VARIANCES.—Section 207 of such Act (29 U.S.C. 

6 1057) is repealed. 

7 (e) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to plan years beginning after 2005. 

9 SEC. 105. SPECIAL RULES FOR MULTIPLE EMPLOYER 

10 PLANS OF CERTAIN COOPERATIVES. 

11 (a) GENERAL RULE.—Except as provided in this sec12 tion, if a plan in existence on July 26, 2005, was an eligi13 ble cooperative plan for its plan year which includes such 

14 date, the amendments made by this subtitle and subtitle 

15 B shall not apply to plan years beginning before the earlier 

16 of— 

17 (1) the first plan year for which the plan ceases 

18 to be an eligible cooperative plan, or 

19 (2) January 1, 2017. 

20 (b) INTEREST RATE.—In applying section 

21 302(b)(5)(B) of the Employee Retirement Income Secu22 rity Act of 1974 and section 412(b)(5)(B) of the Internal 

23 Revenue Code of 1986 (as in effect before the amendments 

24 made by this subtitle and subtitle B) to an eligible cooper25 ative plan for plan years beginning after December 31, 
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•S 1783 PCS 

1 2006, and before the first plan year to which such amend2 ments apply, the third segment rate determined under sec3 tion 303(h)(2)(C)(iii) of such Act and section 

4 430(h)(2)(C)(iii) of such Code (as added by such amend5 ments) shall be used in lieu of the 4-year weighted average 

6 interest rate otherwise used. 

7 (c) ELIGIBLE COOPERATIVE PLANS.—For purposes 

8 of this section, the term ‘‘eligible cooperative plan’’ means 

9 a plan which is maintained by more than 1 employer and 

10 at least 85 percent of the employers are— 

11 (1) rural cooperatives (as defined in section 

12 401(k)(7)(B) of the Internal Revenue Code of 1986 

13 without regard to clause (iv) thereof), 

14 (2) rural telephone cooperative associations de15 scribed in section 3(40)(B)(v) of the Employee Re16 tirement Income Security Act of 1974 which is not 

17 described in paragraph (1), or 

18 (3) organizations described in section 1381(a) 

19 of such Code more than 50 percent of the ownership 

20 or capital and profits interests of which are held— 

21 (A) by producers of agricultural products, 

22 or 

23 (B) organizations described in section 

24 1381(a) of such Code meeting the requirements 

25 of subparagraph (A). 
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1 Subtitle B—Amendments to 

2 Internal Revenue Code of 1986 

3 SEC. 111. MODIFICATIONS OF THE MINIMUM FUNDING 

4 STANDARDS. 

5 (a) IN GENERAL.—Section 412 of the Internal Rev6 enue Code of 1986 (relating to minimum funding stand7 ards) is amended to read as follows: 

8 ‘‘SEC. 412. MINIMUM FUNDING STANDARDS. 

9 ‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING

10 STANDARD.— 

11 ‘‘(1) IN GENERAL.—A plan to which this sec12 tion applies shall satisfy the minimum funding 

13 standard applicable to the plan for any plan year. 

14 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur15 poses of paragraph (1), a plan shall be treated as 

16 satisfying the minimum funding standard for a plan 

17 year if— 

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

19 which is a single-employer plan, the employer 

20 makes contributions to or under the plan for 

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

22 less than the minimum required contribution 

23 determined under section 430 for the plan for 

24 the plan year, 
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•S 1783 PCS 

1 ‘‘(B) in the case of a money purchase pen2 sion plan which is a single-employer plan, the 

3 employer makes contributions to or under the 

4 plan for the plan year which are required under 

5 the terms of the plan, and 

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

7 the employers make contributions to or under 

8 the plan for the plan year which, in the aggre9 gate, are sufficient to ensure that the plan does 

10 not have an accumulated funding deficiency 

11 under section 431 as of the end of the plan 

12 year. 

13 ‘‘(b) PLANS TO WHICH SECTION APPLIES.— 

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graphs (2) and (3), this section applies to a plan if, 

16 for any plan year beginning on or after the effective 

17 date of this section for such plan under the Em18 ployee Retirement Income Security Act of 1974— 

19 ‘‘(A) the plan included a trust which quali20 fied (or was determined by the Secretary to 

21 have qualified) under section 401(a), or 

22 ‘‘(B) the plan satisfied (or was determined 

23 by the Secretary to have satisfied) the require24 ments of section 403(a). 
96 

•S 1783 PCS 

1 ‘‘(2) EXCEPTIONS.—This section shall not 

2 apply to— 

3 ‘‘(A) any profit-sharing or stock bonus 

4 plan, 

5 ‘‘(B) any insurance contract plan described 

6 in subsection (g)(3), 

7 ‘‘(C) any governmental plan (within the 

8 meaning of section 414(d)), 

9 ‘‘(D) any church plan (within the meaning 

10 of section 414(e)) with respect to which the 

11 election provided by section 410(d) has not been 

12 made, 

13 ‘‘(E) any plan which has not, at any time 

14 after September 2, 1974, provided for employer 

15 contributions, or 

16 ‘‘(F) any plan established and maintained 

17 by a society, order, or association described in 

18 section 501(c) (8) or (9), if no part of the con19 tributions to or under such plan are made by 

20 employers of participants in such plan. 

21 No plan described in subparagraph (C), (D), or (F) 

22 shall be treated as a qualified plan for purposes of 

23 section 401(a) unless such plan meets the require24 ments of section 401(a)(7) as in effect on September 

25 1, 1974. 
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•S 1783 PCS 

1 ‘‘(3) CERTAIN TERMINATED MULTIEMPLOYER

2 PLANS.—This section applies with respect to a ter3 minated multiemployer plan to which section 4021 

4 of the Employee Retirement Income Security Act of 

5 1974 applies until the last day of the plan year in 

6 which the plan terminates (within the meaning of 

7 section 4041A(a)(2) of such Act). 

8 ‘‘(c) LIABILITY FOR CONTRIBUTIONS.— 

9 ‘‘(1) IN GENERAL.—Except as provided in para10 graph (2), the amount of any contribution required 

11 by this section and any required installments under 

12 section 430(j) shall be paid by any employer respon13 sible for making the contribution to or under the 

14 plan. 

15 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

16 EMPLOYER MEMBER OF CONTROLLED GROUP.—If 

17 the employer referred to in paragraph (1) is a mem18 ber of a controlled group, each member of such 

19 group shall be jointly and severally liable for pay20 ment of such contribution or required installment. 

21 ‘‘(d) VARIANCE FROM MINIMUM FUNDING STAND22 ARDS.— 

23 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD24 SHIP.— 

25 ‘‘(A) IN GENERAL.—If— 
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•S 1783 PCS 

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

2 a multiemployer plan, 10 percent or more 

3 of the number of employers contributing to 

4 or under the plan are) unable to satisfy the 

5 minimum funding standard for a plan year 

6 without temporary substantial business 

7 hardship (substantial business hardship in 

8 the case of a multiemployer plan), and 

9 ‘‘(ii) application of the standard would 

10 be adverse to the interests of plan partici11 pants in the aggregate, 

12 the Secretary may, subject to subparagraph 

13 (C), waive the requirements of subsection (a) 

14 for such year with respect to all or any portion 

15 of the minimum funding standard. The Sec16 retary of the Treasury shall not waive the min17 imum funding standard with respect to a plan 

18 for more than 3 of any 15 (5 of any 15 in the 

19 case of a multiemployer plan) consecutive plan 

20 years. 

21 ‘‘(B) EFFECTS OF WAIVER.—If a waiver is 

22 granted under subparagraph (A) for any plan 

23 year— 

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

25 plan, the minimum required contribution 
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•S 1783 PCS 

1 under section 430 for the plan year shall 

2 be reduced by the amount of the waived 

3 funding deficiency and such amount shall 

4 be amortized as required under section 

5 430(e), and 

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

7 plan, the funding standard account shall 

8 be credited under section 431(b)(3)(C) 

9 with the amount of the waived funding de10 ficiency and such amount shall be amor11 tized as required under section 

12 431(b)(2)(C). 

13 ‘‘(C) WAIVER OF AMORTIZED PORTION

14 NOT ALLOWED.—The Secretary may not waive 

15 under subparagraph (A) any portion of the 

16 minimum funding standard under subsection 

17 (a) for a plan year which is attributable to any 

18 waived funding deficiency for any preceding 

19 plan year. 

20 ‘‘(2) DETERMINATION OF BUSINESS HARD21 SHIP.—For purposes of this subsection, the factors 

22 taken into account in determining temporary sub23 stantial business hardship (substantial business 

24 hardship in the case of a multiemployer plan) shall 
100 

•S 1783 PCS 

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

2 not— 

3 ‘‘(A) the employer is operating at an eco4 nomic loss, 

5 ‘‘(B) there is substantial unemployment or 

6 underemployment in the trade or business and 

7 in the industry concerned, 

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

9 concerned are depressed or declining, and 

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

11 plan will be continued only if the waiver is 

12 granted. 

13 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur14 poses of this part, the term ‘waived funding defi15 ciency’ means the portion of the minimum funding 

16 standard under subsection (a) (determined without 

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

18 Secretary and not satisfied by employer contribu19 tions. 

20 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM21 PLOYER PLANS, CONSULTATIONS.— 

22 ‘‘(A) SECURITY MAY BE REQUIRED.— 

23 ‘‘(i) IN GENERAL.—Except as pro24 vided in subparagraph (C), the Secretary 

25 may require an employer maintaining a de-
101 

•S 1783 PCS 

1 fined benefit plan which is a single-em2 ployer plan (within the meaning of section 

3 4001(a)(15) of the Employee Retirement 

4 Income Security Act of 1974) to provide 

5 security to such plan as a condition for 

6 granting or modifying a waiver under 

7 paragraph (1). 

8 ‘‘(ii) SPECIAL RULES.—Any security 

9 provided under clause (i) may be perfected 

10 and enforced only by the Pension Benefit 

11 Guaranty Corporation, or, at the direction 

12 of the Corporation, by a contributing spon13 sor (within the meaning of section 

14 4001(a)(13) of such Act) or a member of 

15 such sponsor’s controlled group (within the 

16 meaning of section 4001(a)(14) of such 

17 Act). 

18 ‘‘(B) CONSULTATION WITH THE PENSION

19 BENEFIT GUARANTY CORPORATION.—Except as 

20 provided in subparagraph (C), the Secretary 

21 shall, before granting or modifying a waiver 

22 under this subsection with respect to a plan de23 scribed in subparagraph (A)(i)— 

24 ‘‘(i) provide the Pension Benefit 

25 Guaranty Corporation with— 
102 

•S 1783 PCS 

1 ‘‘(I) notice of the completed ap2 plication for any waiver or modifica3 tion, and 

4 ‘‘(II) an opportunity to comment 

5 on such application within 30 days 

6 after receipt of such notice, and 

7 ‘‘(ii) consider— 

8 ‘‘(I) any comments of the Cor9 poration under clause (i)(II), and 

10 ‘‘(II) any views of any employee 

11 organization (within the meaning of 

12 section 3(4) of such Act) representing 

13 participants in the plan which are 

14 submitted in writing to the Secretary 

15 of the Treasury in connection with 

16 such application. 

17 Information provided to the Corporation under 

18 this subparagraph shall be considered tax re19 turn information and subject to the safe20 guarding and reporting requirements of section 

21 6103(p). 

22 ‘‘(C) EXCEPTION FOR CERTAIN WAIV23 ERS.— 

24 ‘‘(i) IN GENERAL.—The preceding 

25 provisions of this paragraph shall not 
103 

•S 1783 PCS 

1 apply to any plan with respect to which the 

2 sum of— 

3 ‘‘(I) the aggregate unpaid min4 imum required contributions for the 

5 plan year and all preceding plan 

6 years, and 

7 ‘‘(II) the present value of all 

8 waiver amortization installments de9 termined for the plan year and suc10 ceeding plan years under section 

11 430(e)(2), 

12 is less than $1,000,000. 

13 ‘‘(ii) TREATMENT OF WAIVERS FOR

14 WHICH APPLICATIONS ARE PENDING.—The 

15 amount described in clause (i)(I) shall in16 clude any increase in such amount which 

17 would result if all applications for waivers 

18 of the minimum funding standard under 

19 this subsection which are pending with re20 spect to such plan were denied. 

21 ‘‘(iii) UNPAID MINIMUM REQUIRED

22 CONTRIBUTION.—For purposes of this sub23 paragraph— 

24 ‘‘(I) IN GENERAL.—The term 

25 ‘unpaid minimum required contribu-
104 

•S 1783 PCS 

1 tion’ means, with respect to any plan 

2 year, any minimum required contribu3 tion under section 430 for the plan 

4 year which is not paid on or before 

5 the due date (as determined under 

6 section 430(j)(1)) for the plan year. 

7 ‘‘(II) ORDERING RULE.—For 

8 purposes of subclause (I), any pay9 ment to or under a plan for any plan 

10 year shall be allocated first to unpaid 

11 minimum required contributions for 

12 all preceding plan years on a first-in, 

13 first-out basis and then to the min14 imum required contribution under sec15 tion 430 for the plan year. 

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

17 PLANS.— 

18 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 19 ⁄2 MONTHS AFTER CLOSE OF

20 YEAR.—In the case of a single-employer plan, 

21 no waiver may be granted under this subsection 

22 with respect to any plan for any plan year un23 less an application therefor is submitted to the 

24 Secretary not later than the 15th day of the 
105 

•S 1783 PCS 

1 3rd month beginning after the close of such 

2 plan year. 

3 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM4 BER OF CONTROLLED GROUP.—In the case of a 

5 single-employer plan, if an employer is a mem6 ber of a controlled group, the temporary sub7 stantial business hardship requirements of 

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

9 such requirements are met— 

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

11 and 

12 ‘‘(ii) with respect to the controlled 

13 group of which such employer is a member 

14 (determined by treating all members of 

15 such group as a single employer). 

16 The Secretary may provide that an analysis of 

17 a trade or business or industry of a member 

18 need not be conducted if the Secretary deter19 mines such analysis is not necessary because 

20 the taking into account of such member would 

21 not significantly affect the determination under 

22 this paragraph. 

23 ‘‘(6) ADVANCE NOTICE.— 

24 ‘‘(A) IN GENERAL.—The Secretary shall, 

25 before granting a waiver under this subsection, 
106 

•S 1783 PCS 

1 require each applicant to provide evidence satis2 factory to such Secretary that the applicant has 

3 provided notice of the filing of the application 

4 for such waiver to each affected party (as de5 fined in section 4001(a)(21) of the Employee 

6 Retirement Income Security Act of 1974) and 

7 in the case of a multiemployer plan, to each em8 ployer required to contribute to the plan under 

9 subsection (b)(1). Such notice shall include a 

10 description of the extent to which the plan is 

11 funded for benefits which are guaranteed under 

12 title IV and for benefit liabilities. 

13 ‘‘(B) CONSIDERATION OF RELEVANT IN14 FORMATION.—The Secretary shall consider any 

15 relevant information provided by a person to 

16 whom notice was given under subparagraph 

17 (A). 

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

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

20 plan which increases the liabilities of the plan 

21 by reason of any increase in benefits, any 

22 change in the accrual of benefits, or any change 

23 in the rate at which benefits become nonforfeit24 able under the plan shall be adopted if a waiver 

25 under this subsection or an extension of time 
107 

•S 1783 PCS 

1 under section 431(d) is in effect with respect to 

2 the plan, or if a plan amendment described in 

3 subsection (e)(2) has been made at any time in 

4 the preceding 24 months. If a plan is amended 

5 in violation of the preceding sentence, any such 

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

7 any plan year ending on or after the date on 

8 which such amendment is adopted. 

9 ‘‘(B) EXCEPTION.—Subparagraph (A) 

10 shall not apply to any plan amendment which— 

11 ‘‘(i) the Secretary determines to be 

12 reasonable and which provides for only de 

13 minimis increases in the liabilities of the 

14 plan, 

15 ‘‘(ii) only repeals an amendment de16 scribed in subsection (e)(2), or 

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

18 qualification under part I of subchapter D, 

19 of chapter 1 of the Internal Revenue Code 

20 of 1986. 

21 ‘‘(e) MISCELLANEOUS RULES.—For purposes of this 

22 section— 

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

24 funding method, the valuation date, or a plan year 
108 

•S 1783 PCS 

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

2 only if approved by the Secretary. 

3 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND4 MENTS.—For purposes of this section, any amend5 ment applying to a plan year which— 

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

year but no later than 21 7 ⁄2 months after the 

8 close of the plan year (or, in the case of a mul9 tiemployer plan, no later than 2 years after the 

10 close of such plan year), 

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

12 of any participant determined as of the begin13 ning of the first plan year to which the amend14 ment applies, and 

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

16 any participant determined as of the time of 

17 adoption except to the extent required by the 

18 circumstances, 

19 shall, at the election of the plan administrator, be 

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

21 plan year. No amendment described in this para22 graph which reduces the accrued benefits of any par23 ticipant shall take effect unless the plan adminis24 trator files a notice with the Secretary notifying him 

25 of such amendment and the Secretary has approved 
109 

•S 1783 PCS 

1 such amendment, or within 90 days after the date 

2 on which such notice was filed, failed to disapprove 

3 such amendment. No amendment described in this 

4 subsection shall be approved by the Secretary unless 

5 the Secretary determines that such amendment is 

6 necessary because of a substantial business hardship 

7 (as determined under subsection (d)(2)) and that a 

8 waiver under subsection (d)(1) is unavailable or in9 adequate. 

10 ‘‘(3) CERTAIN INSURANCE CONTRACT PLANS.— 

11 A plan is described in this paragraph if— 

12 ‘‘(A) the plan is funded exclusively by the 

13 purchase of individual insurance contracts, 

14 ‘‘(B) such contracts provide for level an15 nual premium payments to be paid extending 

16 not later than the retirement age for each indi17 vidual participating in the plan, and com18 mencing with the date the individual became a 

19 participant in the plan (or, in the case of an in20 crease in benefits, commencing at the time such 

21 increase becomes effective), 

22 ‘‘(C) benefits provided by the plan are 

23 equal to the benefits provided under each con24 tract at normal retirement age under the plan 

25 and are guaranteed by an insurance carrier (li-
110 

•S 1783 PCS 

1 censed under the laws of a State to do business 

2 with the plan) to the extent premiums have 

3 been paid, 

4 ‘‘(D) premiums payable for the plan year, 

5 and all prior plan years, under such contracts 

6 have been paid before lapse or there is rein7 statement of the policy, 

8 ‘‘(E) no rights under such contracts have 

9 been subject to a security interest at any time 

10 during the plan year, and 

11 ‘‘(F) no policy loans are outstanding at 

12 any time during the plan year. 

13 A plan funded exclusively by the purchase of group 

14 insurance contracts which are determined under reg15 ulations prescribed by the Secretary to have the 

16 same characteristics as contracts described in the 

17 preceding sentence shall be treated as a plan de18 scribed in this paragraph. 

19 ‘‘(4) CONTROLLED GROUP.—For purposes of 

20 this section and section 430, the term ‘controlled 

21 group’ means any group treated as a single employer 

22 under subsection (b), (c), (m), or (o) of section 

23 414.’’. 
111 

•S 1783 PCS 

1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to plan years beginning after De3 cember 31, 2006. 

4 SEC. 112. FUNDING RULES APPLICABLE TO SINGLE-EM5 PLOYER PENSION PLANS. 

6 Subchapter D of chapter 1 of the Internal Revenue 

7 Code of 1986 (relating to deferred compensation, etc.) is 

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

9 ‘‘PART III—RULES RELATING TO MINIMUM 

10 FUNDING STANDARDS AND BENEFIT LIMITATION 

‘‘430. Minimum funding standards for single-employer defined benefit plans. 

‘‘431. Minimum funding standards for multiemployer plans. 

11 ‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE12 EMPLOYER DEFINED BENEFIT PLANS. 

13 ‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For 

14 purposes of this section and section 412(a)(2)(A), except 

15 as provided in subsection (f), the term ‘minimum required 

16 contribution’ means, with respect to any plan year of a 

17 defined benefit plan which is a single employer plan— 

18 ‘‘(1) in any case in which the value of plan as19 sets of the plan (as reduced under subsection (f)(4)) 

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

21 plan year, the sum of— 

22 ‘‘(A) the target normal cost of the plan for 

23 the plan year, 
112 

•S 1783 PCS 

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

2 any) for the plan for the plan year determined 

3 under subsection (c), and 

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

5 any) for the plan for the plan year as deter6 mined under subsection (e); or 

7 ‘‘(2) in any case in which the value of plan as8 sets of the plan (as reduced under subsection (f)(4)) 

9 equals or exceeds the funding target of the plan for 

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

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

12 such excess. 

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

14 section, except as provided in subsection (i)(2) with re15 spect to plans in at-risk status, the term ‘target normal 

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

17 benefits which are expected to accrue or to be earned 

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

19 subsection, if any benefit attributable to services per20 formed in a preceding plan year is increased by reason 

21 of any increase in compensation during the current plan 

22 year, the increase in such benefit shall be treated as hav23 ing accrued during the current plan year. 

24 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.— 
113 

•S 1783 PCS 

1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the shortfall amortization charge for a plan for 

3 any plan year is the aggregate total of the shortfall 

4 amortization installments for such plan year with re5 spect to the shortfall amortization bases for such 

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

7 ‘‘(2) SHORTFALL AMORTIZATION INSTALL8 MENT.—For purposes of paragraph (1)— 

9 ‘‘(A) DETERMINATION.—The plan sponsor 

10 shall determine the amounts necessary to amor11 tize the shortfall amortization base of the plan 

12 for any plan year in level annual installments 

13 over the 7-plan-year period beginning with such 

14 plan year. 

15 ‘‘(B) SHORTFALL INSTALLMENT.—The 

16 shortfall amortization installment for any plan 

17 year in the 7-plan-year period under subpara18 graph (A) with respect to any shortfall amorti19 zation base is the annual installment deter20 mined under subparagraph (A) for that year for 

21 that base. 

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

23 any shortfall amortization installment under 

24 this paragraph, the plan sponsor shall use the 

25 segment rates determined under subparagraph 
114 

•S 1783 PCS 

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

2 similar to the rules of subparagraph (B) of sub3 section (h)(2). 

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

5 purposes of this section, the shortfall amortization 

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

7 of— 

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

9 such plan year, over 

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

11 the segment rates determined under subpara12 graph (C) of subsection (h)(2), applied under 

13 rules similar to the rules of subparagraph (B) 

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

15 the shortfall amortization installments and 

16 waiver amortization installments which have 

17 been determined for such plan year and any 

18 succeeding plan year with respect to the short19 fall amortization bases and waiver amortization 

20 bases of the plan for any plan year preceding 

21 such plan year. 

22 ‘‘(4) FUNDING SHORTFALL.— 

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

24 section, except as provided in subparagraph 
115 

•S 1783 PCS 

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 clause (ii), the applicable 

23 percentage shall be 93 percent for 

24 plan years beginning in 2007, 96 per25 cent for plan years beginning in 2008, 
116 

•S 1783 PCS 

1 and 100 percent for any succeeding 

2 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 
117 

•S 1783 PCS 

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 plan sponsor 

22 shall determine the amounts necessary to amor23 tize the waiver amortization base of the plan for 

24 any plan year in level annual installments over 
118 

•S 1783 PCS 

1 a period of 5 plan years beginning with the suc2 ceeding 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 412(d). 

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 base for all pre25 ceding plan years shall be reduced to zero. 
119 

•S 1783 PCS 

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

2 MINIMUM REQUIRED CONTRIBUTIONS.— 

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

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

5 plan year against the minimum required contribu6 tion for the plan year and the amount of the con7 tributions an employer is required to make under 

8 section 412(c) for the plan year shall be reduced by 

9 the amount so credited. Any such amount shall be 

10 credited on the first day of the plan year. 

11 ‘‘(2) PREFUNDING BALANCE.— 

12 ‘‘(A) BEGINNING BALANCE.—The begin13 ning balance of a prefunding balance main14 tained by a plan shall be zero, except that if a 

15 plan was in effect for a plan year beginning in 

16 2006 and had a positive balance in the funding 

17 standard account under section 412(b) (as in 

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

19 plan year, the beginning balance for the plan 

20 for its first plan year beginning after 2006 shall 

21 be such positive balance. 

22 ‘‘(B) INCREASES.— 

23 ‘‘(i) IN GENERAL.—As of the first day 

24 of each plan year beginning after 2007, the 
120 

•S 1783 PCS 

1 prefunding balance of a plan shall be in2 creased by the excess (if any) of— 

3 ‘‘(I) the aggregate amount of em4 ployer contributions to the plan for 

5 the preceding plan year, over 

6 ‘‘(II) the minimum required con7 tribution for the preceding plan year. 

8 ‘‘(ii) ADJUSTMENTS FOR INTEREST.— 

9 Any excess contributions under clause (i) 

10 shall be properly adjusted for interest ac11 cruing for the periods between the first 

12 day of the current plan year and the dates 

13 on which the excess contributions were 

14 made, determined by using the effective in15 terest rate for the preceding plan year and 

16 by treating contributions as being first 

17 used to satisfy the minimum required con18 tribution. 

19 ‘‘(iii) CERTAIN CONTRIBUTIONS DIS20 REGARDED.—Any contribution which is re21 quired to be made under section 436 in ad22 dition to any contribution required under 

23 this section shall not be taken into account 

24 for purposes of clause (i). 
121 

•S 1783 PCS 

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

2 each plan year after 2007, the prefunding bal3 ance of a plan shall be decreased (but not below 

4 zero) by the amount of the balance credited 

5 under paragraph (1) against the minimum re6 quired contribution of the plan for the pre7 ceding plan year. 

8 ‘‘(D) ADJUSTMENTS FOR INVESTMENT EX9 PERIENCE.—In determining the prefunding bal10 ance of a plan as of the first day of the plan 

11 year, the plan sponsor shall, in accordance with 

12 regulations prescribed by the Secretary, adjust 

13 such balance to reflect the rate of net gain or 

14 loss with respect to plan assets for the pre15 ceding plan year. Notwithstanding subsection 

16 (g)(3), such rate of net gain or loss shall be de17 termined on the basis of fair market value and 

18 shall properly take into account, in accordance 

19 with such regulations, all contributions, dis20 tributions, and other plan payments made dur21 ing such period. 

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

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

24 as a percentage) for any plan year which— 
122 

•S 1783 PCS 

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 412(c) 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 
123 

•S 1783 PCS 

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 
124 

•S 1783 PCS 

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. 
125 

•S 1783 PCS 

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, and 

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

9 such values over more than the period be10 ginning on the last day of the 12th month 

11 preceding the valuation date and ending on 

12 the valuation date (or a similar period in 

13 the case of a valuation date which is not 

14 the 1st day of a month). 

15 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE16 CEIPTS.—For purposes of determining the value of 

17 assets under paragraph (3)— 

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

19 ‘‘(i) an employer makes any contribu20 tion to the plan after the valuation date for 

21 the plan year in which the contribution is 

22 made, and 

23 ‘‘(ii) the contribution is for a pre24 ceding plan year, 
126 

•S 1783 PCS 

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.— 
127 

•S 1783 PCS 

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 
128 

•S 1783 PCS 

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 for such month on the basis of 
129 

•S 1783 PCS 

1 the corporate bond yield curve for such 

2 month, taking into account only that por3 tion of such yield curve which is based on 

4 bonds maturing during the 5-year period 

5 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 for such month on the basis of 

11 the corporate bond yield curve for such 

12 month, taking into account only that por13 tion of such yield curve which is based on 

14 bonds maturing during each of the years in 

15 the 15-year period beginning at the end of 

16 the period described in clause (i). 

17 ‘‘(iii) THIRD SEGMENT RATE.—The 

18 term ‘third segment rate’ means, with re19 spect to any month, the single rate of in20 terest which shall be determined by the 

21 Secretary for such month on the basis of 

22 the corporate bond yield curve for such 

23 month, taking into account only that por24 tion of such yield curve which is based on 
130 

•S 1783 PCS 

1 bonds maturing during periods beginning 

2 after the period described in clause (ii). 

3 ‘‘(D) CORPORATE BOND YIELD CURVE.— 

4 The term ‘corporate bond yield curve’ means, 

5 with respect to any month, a yield curve which 

6 is prescribed by the Secretary for such month 

7 and which reflects the average, for the 12- 

8 month period ending with the month preceding 

9 such month, of yields on investment grade cor10 porate bonds with varying maturities. 

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

12 of this paragraph, the term ‘applicable month’ 

13 means, with respect to any plan for any plan 

14 year, the month which includes the valuation 

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

16 election of the plan administrator, any of the 4 

17 months which precede such month. Any election 

18 made under this subparagraph shall apply to 

19 the plan year for which the election is made and 

20 all succeeding plan years, unless the election is 

21 revoked with the consent of the Secretary. 

22 ‘‘(F) PUBLICATION REQUIREMENTS.—The 

23 Secretary shall publish for each month the cor24 porate bond yield curve for such month and 

25 each of the rates determined under this para-
131 

•S 1783 PCS 

1 graph for such month. The Secretary shall also 

2 publish a description of the methodology used 

3 to determine such yield curve and such rates 

4 which is sufficiently detailed to enable plans to 

5 make reasonable projections regarding the yield 

6 curve and such rates for future months based 

7 on the plan’s projection of future interest rates. 

8 ‘‘(G) TRANSITION RULE.— 

9 ‘‘(i) IN GENERAL.—Notwithstanding 

10 the preceding provisions of this paragraph, 

11 for plan years beginning in 2007 or 2008, 

12 the first, second, or third segment rate for 

13 a plan with respect to any month shall be 

14 equal to the sum of— 

15 ‘‘(I) the product of such rate for 

16 such month determined without re17 gard to this subparagraph, multiplied 

18 by the applicable percentage, and 

19 ‘‘(II) the product of the rate de20 termined under the rules of section 

21 412(b)(5)(B)(ii)(II) (as in effect for 

22 plan years beginning in 2006), multi23 plied by a percentage equal to 100 

24 percent minus the applicable percent25 age. 
132 

•S 1783 PCS 

1 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

2 purposes of clause (i), the applicable percentage is 331 3 ⁄3 percent for plan years beginning in 2007 and 662 4 ⁄3 percent for plan 

5 years beginning in 2008. 

6 ‘‘(3) MORTALITY TABLES.— 

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

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

9 used in determining any present value or mak10 ing any computation under this section shall be 

11 the RP–2000 Combined Mortality Table, using 

12 Scale AA, as published by the Society of Actu13 aries, as in effect on the date of the enactment 

14 of the Pension Security and Transparency Act 

15 of 2005 and as revised from time to time under 

16 subparagraph (B). 

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

18 shall (at least every 10 years) make revisions in 

19 any table in effect under subparagraph (A) to 

20 reflect the actual experience of pension plans 

21 and projected trends in such experience. 

22 ‘‘(C) SUBSTITUTE MORTALITY TABLE.— 

23 ‘‘(i) IN GENERAL.—Upon request by 

24 the plan sponsor and approval by the Sec25 retary, a mortality table which meets the 
133 

•S 1783 PCS 

1 requirements of clause (ii) shall be used in 

2 determining any present value or making 

3 any computation under this section during 

4 the 10-consecutive plan year period speci5 fied in the request. A mortality table de6 scribed in this clause shall cease to be in 

7 effect if the plan actuary determines at 

8 any time that such table does not meet the 

9 requirements of subclauses (I) and (II) of 

10 clause (ii). 

11 ‘‘(ii) REQUIREMENTS.—A mortality 

12 table meets the requirements of this clause 

13 if the Secretary determines that— 

14 ‘‘(I) there is a sufficient number 

15 of plan participants, and the pension 

16 plans have been maintained for a suf17 ficient period of time, to have credible 

18 information necessary for purposes of 

19 subclause (II), 

20 ‘‘(II) such table reflects the ac21 tual experience of the pension plans 

22 maintained by the sponsor and pro23 jected trends in general mortality ex24 perience, 
134 

•S 1783 PCS 

1 ‘‘(III) except as provided by the 

2 Secretary, such table will be used by 

3 all plans maintained by the plan spon4 sor and all members of any controlled 

5 group which includes the plan spon6 sor, and 

7 ‘‘(IV) such table is significantly 

8 different from the table described in 

9 subparagraph (A). 

10 ‘‘(iii) DEADLINE FOR DISPOSITION OF

11 APPLICATION.—Any mortality table sub12 mitted to the Secretary for approval under 

13 this subparagraph shall be treated as in ef14 fect for the first plan year in the 10-year 

15 period described in clause (i) unless the 

16 Secretary, during the 180-day period be17 ginning on the date of such submission, 

18 disapproves of such table and provides the 

19 reasons that such table fails to meet the 

20 requirements of clause (ii). The 180-day 

21 period shall be extended for any period 

22 during which the Secretary has requested 

23 information from the plan sponsor and 

24 such information has not been provided. 
135 

•S 1783 PCS 

1 ‘‘(D) SEPARATE MORTALITY TABLES FOR

2 THE DISABLED.—Notwithstanding subpara3 graph (A)— 

4 ‘‘(i) IN GENERAL.—The Secretary 

5 shall establish mortality tables which may 

6 be used (in lieu of the tables under sub7 paragraph (A)) under this subsection for 

8 individuals who are entitled to benefits 

9 under the plan on account of disability. 

10 The Secretary shall establish separate ta11 bles for individuals whose disabilities occur 

12 in plan years beginning before January 1, 

13 1995, and for individuals whose disabilities 

14 occur in plan years beginning on or after 

15 such date. 

16 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

17 OCCURRING AFTER 1994.—In the case of 

18 disabilities occurring in plan years begin19 ning after December 31, 1994, the tables 

20 under clause (i) shall apply only with re21 spect to individuals described in such sub22 clause who are disabled within the meaning 

23 of title II of the Social Security Act and 

24 the regulations thereunder. 
136 

•S 1783 PCS 

1 ‘‘(iii) PERIODIC REVISION.—The Sec2 retary shall (at least every 10 years) make 

3 revisions in any table in effect under clause 

4 (i) to reflect the actual experience of pen5 sion plans and projected trends in such ex6 perience. 

7 ‘‘(E) TRANSITION RULE.—Under regula8 tions of the Secretary, any difference in as9 sumptions as set forth in the mortality table 

10 specified in subparagraph (A) and assumptions 

11 as set forth in the mortality table described in 

12 section 412(l)(7)(C)(ii) (as in effect for plan 

13 years beginning in 2006) shall be phased in rat14 ably over the first period of 5 plan years begin15 ning in or after 2007 so as to be fully effective 

16 for the fifth plan year. 

17 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

18 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

19 FORMS.—For purposes of determining any present 

20 value or making any computation under this section, 

21 there shall be taken into account— 

22 ‘‘(A) the probability that future benefit 

23 payments under the plan will be made in the 

24 form of optional forms of benefits provided 

25 under the plan (including lump sum distribu-
137 

•S 1783 PCS 

1 tions, determined on the basis of the plan’s ex2 perience and other related assumptions), and 

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

4 such future benefit payments resulting from the 

5 use of actuarial assumptions, in determining 

6 benefit payments in any such optional form of 

7 benefits, which are different from those speci8 fied in this subsection. 

9 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU10 ARIAL ASSUMPTIONS.— 

11 ‘‘(A) IN GENERAL.—No actuarial assump12 tion used to determine the funding target for a 

13 plan to which this paragraph applies may be 

14 changed without the approval of the Secretary. 

15 ‘‘(B) PLANS TO WHICH PARAGRAPH AP16 PLIES.—This paragraph shall apply to a plan 

17 only if— 

18 ‘‘(i) the aggregate unfunded vested 

19 benefits as of the close of the preceding 

20 plan year (as determined under section 

21 4006(a)(3)(E)(iii) of the Employee Retire22 ment Income Security Act of 1974) of such 

23 plan and all other plans maintained by the 

24 contributing sponsors (as defined in sec25 tion 4001(a)(13) of such Act) and mem-
138 

•S 1783 PCS 

1 bers of such sponsors’ controlled groups 

2 (as defined in section 4001(a)(14) of such 

3 Act) which are covered by title IV of such 

4 Act (disregarding plans with no unfunded 

5 vested benefits) exceed $50,000,000; and 

6 ‘‘(ii) the change in assumptions (de7 termined after taking into account any 

8 changes in interest rate and mortality 

9 table) results in a decrease in the funding 

10 shortfall of the plan for the current plan 

11 year that exceeds $50,000,000, or that ex12 ceeds $5,000,000 and that is 5 percent or 

13 more of the funding target of the plan be14 fore such change. 

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

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

17 STATUS.— 

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

19 to which this subsection applies for a plan year, 

20 the funding target of the plan for the plan year 

21 is equal to the present value of all liabilities to 

22 participants and their beneficiaries under the 

23 plan for the plan year, as determined by using 

24 the additional actuarial assumption described in 

25 subparagraph (B). 
139 

•S 1783 PCS 

1 ‘‘(B) ADDITIONAL ACTUARIAL ASSUMP2 TIONS.—The actuarial assumptions used in de3 termining the valuation of the funding target 

4 shall include an assumption that all partici5 pants who will be eligible to elect benefits dur6 ing the plan year and the 7 succeeding plan 

7 years will elect benefits at such times and in 

8 such forms as will result in the highest present 

9 value of liabilities under subparagraph (A). 

10 ‘‘(2) TARGET NORMAL COST OF AT-RISK

11 PLANS.—In the case of a plan to which this sub12 section applies for a plan year, the target normal 

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

14 the present value of all benefits which are expected 

15 to accrue or be earned under the plan during the 

16 plan year, determined using the additional actuarial 

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

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

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

20 the target liability, as determined without re21 gard to this subsection, or 

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

23 than the target normal cost, as determined 

24 without regard to this subsection. 
140 

•S 1783 PCS 

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

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

3 status for a plan year if— 

4 ‘‘(A) the plan is maintained by a finan5 cially-weak employer, and 

6 ‘‘(B) the funding target attainment per7 centage for the plan year is less than 93 per8 cent. 

9 ‘‘(5) FINANCIALLY-WEAK EMPLOYER.— 

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

11 subsection, the term ‘financially-weak employer’ 

12 means any employer if— 

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

14 of the years during a period of at least 3 

15 consecutive plan years ending with the 

16 plan year— 

17 ‘‘(I) the employer has an out18 standing senior unsecured debt instru19 ment which is rated lower than invest20 ment grade by each of the nationally 

21 recognized statistical rating organiza22 tions for corporate bonds that has 

23 issued a credit rating for such instru24 ment, or 
141 

•S 1783 PCS 

1 ‘‘(II) if no such debt instrument 

2 has been rated by such an organiza3 tion but 1 or more of such organiza4 tions has made an issuer credit rating 

5 for such employer, all such organiza6 tions which have so rated the em7 ployer have rated such employer lower 

8 than investment grade, and 

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

10 such period are deterioration years. 

11 ‘‘(B) CONTROLLED GROUP EXCEPTION.— 

12 If an employer treated as a financially-weak 

13 employer under subparagraph (A) is a member 

14 of a controlled group (as defined in section 

15 412(e)(4)), the employer shall not be treated as 

16 a financially-weak employer if a significant 

17 member (as determined under regulations pre18 scribed by the Secretary) of such group has an 

19 outstanding senior unsecured debt instrument 

20 that is rated as being investment grade by an 

21 organization described in subparagraph (A). 

22 ‘‘(C) EMPLOYERS WITH NO RATINGS.— 

23 If— 

24 ‘‘(i) an employer has no debt instru25 ment described in subparagraph (A)(i) 
142 

•S 1783 PCS 

1 which was rated by an organization de2 scribed in such subparagraph, and 

3 ‘‘(ii) no such organization has made 

4 an issuer credit rating for such employer, 

5 then such employer shall only be treated as a 

6 financially-weak employer to the extent provided 

7 in regulations prescribed by the Secretary. 

8 ‘‘(6) DETERMINATION OF DETERIORATION

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

10 ‘deterioration year’ means any year during the pe11 riod described in paragraph (5)(A)(i) for which the 

12 rating described in subclause (I) or (II) of para13 graph (5)(A)(i) by each organization is either— 

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

15 employer by such organization for a preceding 

16 year in such period, or 

17 ‘‘(B) the lowest rating used by such orga18 nization. 

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

20 purposes of paragraphs (5) and (6), plan years be21 ginning before 2007 shall not be taken into account. 

22 ‘‘(8) TRANSITION BETWEEN APPLICABLE FUND23 ING TARGETS AND BETWEEN APPLICABLE TARGET

24 NORMAL COSTS.— 
143 

•S 1783 PCS 

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

2 a plan which is in at-risk status for a plan year 

3 has been in such status for a consecutive period 

4 of fewer than 5 plan years, the applicable 

5 amount of the funding target and of the target 

6 normal cost shall be, in lieu of the amount de7 termined without regard to this paragraph, the 

8 sum of— 

9 ‘‘(i) the amount determined under this 

10 section without regard to this subsection, 

11 plus 

12 ‘‘(ii) the transition percentage for 

13 such plan year of the excess of the amount 

14 determined under this subsection (without 

15 regard to this paragraph) over the amount 

16 determined under this section without re17 gard to this subsection. 

18 ‘‘(B) TRANSITION PERCENTAGE.—For 

19 purposes of subparagraph (A), the transition 

20 percentage shall be determined in accordance 

21 with 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. 
144 

•S 1783 PCS 

1 ‘‘(C) YEARS BEFORE EFFECTIVE DATE.— 

2 For purposes of this paragraph, plan years be3 ginning before 2007 shall not be taken into ac4 count. 

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

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

7 this paragraph, this subsection shall apply to 

8 any plan to which this section applies and 

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

10 ‘‘(B) EXCEPTION FOR SMALL PLANS.— 

11 This subsection shall not apply to a plan for a 

12 plan year if the plan was described in sub13 section (g)(2)(B) for the preceding plan year, 

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

15 ‘‘(C) EXCEPTION FOR PLANS MAINTAINED

16 BY CERTAIN COOPERATIVES.—This subsection 

17 shall not apply to a plan for a plan year if the 

18 plan is maintained by more than 1 employer 

19 and at least 85 percent of the employers are— 

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

21 section 401(k)(7)(B) without regard to 

22 clause (iv) thereof), 

23 ‘‘(ii) rural telephone cooperative asso24 ciations described in section 3(40)(B)(v) of 

25 the Employee Retirement Income Security 
145 

•S 1783 PCS 

1 Act of 1974 which is not described in 

2 clause (i), or 

3 ‘‘(iii) organizations described in sec4 tion 1381(a) more than 50 percent of the 

5 ownership or capital and profits interests 

6 of which are held— 

7 ‘‘(I) by producers of agricultural 

8 products, or 

9 ‘‘(II) organizations described in 

10 section 1381(a) meeting the require11 ments of subclause (I). 

12 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU13 TIONS.— 

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, the due date for any payment of any minimum 

required contribution for any plan year shall be 81 16 ⁄2

17 months after the close of the plan year. 

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

19 paragraph (1) for a plan year made after the valu20 ation date for such plan year shall be increased by 

21 interest, for the period from the valuation date to 

22 the payment date, at the effective rate of interest for 

23 the plan for such plan year. 

24 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

25 SCHEDULE FOR UNDERFUNDED PLANS.— 
146 

•S 1783 PCS 

1 ‘‘(A) INTEREST PENALTY FOR FAILURE TO

2 MEET ACCELERATED QUARTERLY PAYMENT

3 SCHEDULE.—A plan shall make the required in4 stallments under this paragraph for a plan year 

5 if the plan had a funding shortfall for the pre6 ceding plan year. If the required installment is 

7 not paid in full, then the minimum required 

8 contribution for the plan year (as increased 

9 under paragraph (2)) shall be further increased 

10 by an amount equal to the interest on the 

11 amount of the underpayment for the period of 

12 the underpayment, using an interest rate equal 

13 to the excess of— 

14 ‘‘(i) 175 percent of the Federal mid15 term rate (as in effect under section 1274 

16 for the 1st month of such plan year), over 

17 ‘‘(ii) the effective rate of interest for 

18 the plan for the plan year. 

19 ‘‘(B) AMOUNT OF UNDERPAYMENT, PE20 RIOD OF UNDERPAYMENT.—For purposes of 

21 subparagraph (A)— 

22 ‘‘(i) AMOUNT.—The amount of the 

23 underpayment shall be the excess of— 

24 ‘‘(I) the required installment, 

25 over 
147 

•S 1783 PCS 

1 ‘‘(II) the amount (if any) of the 

2 installment contributed to or under 

3 the plan on or before the due date for 

4 the installment. 

5 ‘‘(ii) PERIOD OF UNDERPAYMENT.— 

6 The period for which any interest is 

7 charged under this paragraph with respect 

8 to any portion of the underpayment shall 

9 run from the due date for the installment 

10 to the date on which such portion is con11 tributed to or under the plan. 

12 ‘‘(iii) ORDER OF CREDITING CON13 TRIBUTIONS.—For purposes of clause 

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

15 against unpaid required installments in the 

16 order in which such installments are re17 quired to be paid. 

18 ‘‘(C) NUMBER OF REQUIRED INSTALL19 MENTS; DUE DATES.—For purposes of this 

20 paragraph— 

21 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.— 

22 There shall be 4 required installments for 

23 each plan year. 

24 ‘‘(ii) TIME FOR PAYMENT OF IN25 STALLMENTS.—The due dates for required 
148 

•S 1783 PCS 

1 installments are set forth in the following 

2 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. 

3 ‘‘(D) AMOUNT OF REQUIRED INSTALL4 MENT.—For purposes of this paragraph— 

5 ‘‘(i) IN GENERAL.—The amount of 

6 any required installment shall be 25 per7 cent of the required annual payment. 

8 ‘‘(ii) REQUIRED ANNUAL PAYMENT.— 

9 For purposes of clause (i), the term ‘re10 quired annual payment’ means the lesser 

11 of— 

12 ‘‘(I) 90 percent of the minimum 

13 required contribution (without regard 

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

15 the plan for the plan year under this 

16 section, or 

17 ‘‘(II) in the case of a plan year 

18 beginning after 2007, 100 percent of 

19 the minimum required contribution 

20 (without regard to any waiver under 
149 

•S 1783 PCS 

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

2 preceding plan year. 

3 Subclause (II) shall not apply if the pre4 ceding plan year referred to in such clause 

5 was not a year of 12 months. 

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

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

8 paragraph to a plan year beginning on any 

9 date other than January 1, there shall be 

10 substituted for the months specified in this 

11 paragraph, the months which correspond 

12 thereto. 

13 ‘‘(ii) SHORT PLAN YEAR.—This sub14 paragraph shall be applied to plan years of 

15 less than 12 months in accordance with 

16 regulations prescribed by the Secretary of 

17 the Treasury. 

18 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

19 WITH QUARTERLY CONTRIBUTIONS.— 

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

21 paragraph applies shall be treated as failing to 

22 pay the full amount of any required installment 

23 under paragraph (3) to the extent that the 

24 value of the liquid assets paid in such install25 ment is less than the liquidity shortfall (wheth-
150 

•S 1783 PCS 

1 er or not such liquidity shortfall exceeds the 

2 amount of such installment required to be paid 

3 but for this paragraph). 

4 ‘‘(B) PLANS TO WHICH PARAGRAPH AP5 PLIES.—This paragraph shall apply to a plan 

6 (other than a plan that would be described in 

7 subsection (g)(2)(B) if ‘100’ were substituted 

8 for ‘500’ therein) which— 

9 ‘‘(i) is required to pay installments 

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

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

12 quarter during such plan year. 

13 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

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

15 installment that is treated as not paid under 

16 subparagraph (A) shall continue to be treated 

17 as unpaid until the close of the quarter in 

18 which the due date for such installment occurs. 

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

20 amount of any required installment is increased 

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

22 shall such increase exceed the amount which, 

23 when added to prior installments for the plan 

24 year, is necessary to increase the funding target 

25 attainment percentage of the plan for the plan 
151 

•S 1783 PCS 

1 year (taking into account the expected increase 

2 in funding target due to benefits accruing or 

3 earned during the plan year) to 100 percent. 

4 ‘‘(E) DEFINITIONS.—For purposes of this 

5 subparagraph: 

6 ‘‘(i) LIQUIDITY SHORTFALL.—The 

7 term ‘liquidity shortfall’ means, with re8 spect to any required installment, an 

9 amount equal to the excess (as of the last 

10 day of the quarter for which such install11 ment is made) of— 

12 ‘‘(I) the base amount with re13 spect to such quarter, over 

14 ‘‘(II) the value (as of such last 

15 day) of the plan’s liquid assets. 

16 ‘‘(ii) BASE AMOUNT.— 

17 ‘‘(I) IN GENERAL.—The term 

18 ‘base amount’ means, with respect to 

19 any quarter, an amount equal to 3 

20 times the sum of the adjusted dis21 bursements from the plan for the 12 

22 months ending on the last day of such 

23 quarter. 

24 ‘‘(II) SPECIAL RULE.—If the 

25 amount determined under subclause 
152 

•S 1783 PCS 

1 (I) exceeds an amount equal to 2 

2 times the sum of the adjusted dis3 bursements from the plan for the 36 

4 months ending on the last day of the 

5 quarter and an enrolled actuary cer6 tifies to the satisfaction of the Sec7 retary that such excess is the result of 

8 nonrecurring circumstances, the base 

9 amount with respect to such quarter 

10 shall be determined without regard to 

11 amounts related to those nonrecurring 

12 circumstances. 

13 ‘‘(iii) DISBURSEMENTS FROM THE

14 PLAN.—The term ‘disbursements from the 

15 plan’ means all disbursements from the 

16 trust, including purchases of annuities, 

17 payments of single sums and other bene18 fits, and administrative expenses. 

19 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

20 The term ‘adjusted disbursements’ means 

21 disbursements from the plan reduced by 

22 the product of— 

23 ‘‘(I) the plan’s funding target at24 tainment percentage for the plan year, 

25 and 
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1 ‘‘(II) the sum of the purchases of 

2 annuities, payments of single sums, 

3 and such other disbursements as the 

4 Secretary shall provide in regulations. 

5 ‘‘(v) LIQUID ASSETS.—The term ‘liq6 uid assets’ means cash, marketable securi7 ties, and such other assets as specified by 

8 the Secretary in regulations. 

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 may 

15 prescribe such regulations as are necessary to 

16 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 cov20 ered under section 4021 of the Employee Retirement 

21 Income Security Act of 1974 and to which this sub22 section applies (as provided under paragraph (2)), 

23 if— 

24 ‘‘(A) any person fails to make a contribu25 tion payment required by section 412 and this 
154 

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1 section before the due date for such payment, 

2 and 

3 ‘‘(B) the unpaid balance of such payment 

4 (including interest), when added to the aggre5 gate unpaid balance of all preceding such pay6 ments for which payment was not made before 

7 the due date (including interest), exceeds 

8 $1,000,000, 

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

10 amount determined under paragraph (3) upon all 

11 property and rights to property, whether real or per12 sonal, belonging to such person and any other per13 son who is a member of the same controlled group 

14 of which such person is a member. 

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

16 This subsection shall apply to a defined benefit plan 

17 which is a single-employer plan for any plan year for 

18 which the funding target attainment percentage (as 

19 defined in subsection (d)(2)) of such plan is less 

20 than 100 percent. 

21 ‘‘(3) AMOUNT OF LIEN.—For purposes of para22 graph (1), the amount of the lien shall be equal to 

23 the aggregate unpaid balance of contribution pay24 ments required under this section and section 302 
155 

•S 1783 PCS 

1 for which payment has not been made before the due 

2 date. 

3 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

4 ‘‘(A) NOTICE OF FAILURE.—A person 

5 committing a failure described in paragraph (1) 

6 shall notify the Pension Benefit Guaranty Cor7 poration of such failure within 10 days of the 

8 due date for the required contribution payment. 

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

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

11 the required contribution payment and shall 

12 continue until the last day of the first plan year 

13 in which the plan ceases to be described in 

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

15 run without regard to whether such plan con16 tinues to be described in paragraph (2) during 

17 the period referred to in the preceding sentence. 

18 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

19 amount with respect to which a lien is imposed 

20 under paragraph (1) shall be treated as taxes 

21 due and owing the United States and rules 

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

23 (e) of section 4068 of the Employee Retirement 

24 Income Security Act of 1974 shall apply with 
156 

•S 1783 PCS 

1 respect to a lien imposed by subsection (a) and 

2 the amount with respect to such lien. 

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

4 paragraph (1) may be perfected and enforced only 

5 by the Pension Benefit Guaranty Corporation, or at 

6 the direction of the Pension Benefit Guaranty Cor7 poration, by the contributing sponsor (or any mem8 ber of the controlled group of the contributing spon9 sor). 

10 ‘‘(6) DEFINITIONS.—For purposes of this sub11 section— 

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

13 ‘contribution payment’ means, in connection 

14 with a plan, a contribution payment required to 

15 be made to the plan, including any required in16 stallment under paragraphs (3) and (4) of sub17 section (i). 

18 ‘‘(B) DUE DATE; REQUIRED INSTALL19 MENT.—The terms ‘due date’ and ‘required in20 stallment’ have the meanings given such terms 

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

22 payment other than a required installment, the 

23 due date shall be the date such payment is re24 quired to be made under section 303. 
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1 ‘‘(C) CONTROLLED GROUP.—The term 

2 ‘controlled group’ means any group treated as 

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

4 (m), and (o) of section 414. 

5 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT

6 ACCOUNTS.—In the case of a qualified transfer (as de7 fined in section 420), any assets so transferred shall not, 

8 for purposes of this section, be treated as assets in the 

9 plan.’’. 

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

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

13 SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EM14 PLOYER PLANS. 

15 (a) IN GENERAL.—Part III of subchapter D of chap16 ter 1 of the Internal Revenue Code of 1986 (relating to 

17 rules relating to minimum funding standards) is amended 

18 by adding at the end the following new subpart: 

19 ‘‘Subpart B—Limitations on Benefit Improvements 

20 by Single-Employer Plans 

‘‘Sec. 436. Funding-based limits on benefits and benefit accruals under 

single-employer plans. 
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1 ‘‘SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND BEN2 EFIT ACCRUALS UNDER SINGLE-EMPLOYER 

3 PLANS. 

4 ‘‘(a) GENERAL RULE.—For purposes of section 

5 401(a)(29), a defined benefit plan which is a single-em6 ployer plan shall be treated as meeting the requirements 

7 of this section if the plan meets the requirements of sub8 sections (b), (c), and (d). 

9 ‘‘(b) LIMITATIONS ON PLAN AMENDMENTS INCREAS10 ING LIABILITY FOR BENEFITS.— 

11 ‘‘(1) IN GENERAL.—Except as provided in sub12 section (e), no amendment to a single-employer plan 

13 which has the effect of increasing liabilities of the 

14 plan by reason of increases in benefits, establish15 ment of new benefits, changing the rate of benefit 

16 accrual, or changing the rate at which benefits be17 come nonforfeitable may take effect during any plan 

18 year if the adjusted funding target attainment per19 centage as of the valuation date of the plan for such 

20 plan year is— 

21 ‘‘(A) less than 80 percent, or 

22 ‘‘(B) would be less than 80 percent taking 

23 into account such amendment. 

24 ‘‘(2) EXEMPTION.—Paragraph (1) shall cease 

25 to apply with respect to any plan year, effective as 

26 of the first date of the plan year (or if later, the ef-
159 

•S 1783 PCS 

1 fective date of the amendment), upon payment by 

2 the plan sponsor of a contribution (in addition to 

3 any minimum required contribution under section 

4 430) equal to— 

5 ‘‘(A) in the case of paragraph (1)(A), the 

6 amount of the increase in the funding target of 

7 the plan (under section 430) for the plan year 

8 attributable to the amendment, and 

9 ‘‘(B) in the case of paragraph (1)(B), the 

10 amount sufficient to result in a funding target 

11 attainment percentage of 80 percent. 

12 ‘‘(3) EXCEPTION FOR CERTAIN BENEFIT IN13 CREASES.—Paragraph (1) shall not apply to any 

14 amendment which provides for an increase in bene15 fits under a formula which is not based on a partici16 pant’s compensation, but only if the rate of such in17 crease is not in excess of the contemporaneous rate 

18 of increase in average wages of participants covered 

19 by the amendment. 

20 ‘‘(c) LIMITATIONS ON ACCELERATED BENEFIT DIS21 TRIBUTIONS.— 

22 ‘‘(1) IN GENERAL.—The requirements of this 

23 subsection are met if the plan provides that, with re24 spect to any plan year— 
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•S 1783 PCS 

1 ‘‘(A) if the plan’s adjusted funded target 

2 liability percentage as of the valuation date for 

3 the preceding plan year was less than 60 per4 cent and the preceding plan year is not other5 wise in a prohibited period, the plan sponsor 

6 shall, in addition to any other contribution re7 quired under section 430, contribute for the 

8 current plan year and each succeeding plan 

9 year in the prohibited period with respect to the 

10 current plan year the amount (if any) which, 

11 when added to the portion of the minimum re12 quired contribution for the plan year described 

13 in subparagraphs (B) and (C) of section 

14 430(a)(1), is sufficient to result in an adjusted 

15 funded target liability percentage for the plan 

16 year of 60 percent, and 

17 ‘‘(B) no prohibited payments will be made 

18 during a prohibited period. 

19 ‘‘(2) PROHIBITED PAYMENT.—For purpose of 

20 this subsection— 

21 ‘‘(A) IN GENERAL.—The term ‘prohibited 

22 payment’ means— 

23 ‘‘(i) any payment, in excess of the 

24 monthly amount paid under a single life 

25 annuity (plus any social security supple-
161 

•S 1783 PCS 

1 ments described in the last sentence of sec2 tion 411(a)(9)), to a participant or bene3 ficiary whose annuity starting date (as de4 fined in section 417(f)(2)) occurs during a 

5 prohibited period, 

6 ‘‘(ii) any payment for the purchase of 

7 an irrevocable commitment from an insurer 

8 to pay benefits, and 

9 ‘‘(iii) any other payment specified by 

10 the Secretary by regulations. 

11 ‘‘(B) EXCEPTION FOR CERTAIN PAY12 MENTS.—In the case of any prohibited period 

13 described in paragraph (3)(A), the term ‘pro14 hibited payment’ shall not include any payment 

15 if the amount of the payment does not exceed 

16 the lesser of— 

17 ‘‘(i) 50 percent of the amount of the 

18 payment which could be made without re19 gard to this subsection, or 

20 ‘‘(ii) the present value (determined 

21 under guidance prescribed by the Pension 

22 Benefit Guaranty Corporation, using the 

23 interest and mortality assumptions under 

24 section 417(e)) of the maximum guarantee 

25 with respect to the participant under sec-
162 

•S 1783 PCS 

1 tion 4022 of the Employee Retirement In2 come Security Act of 1974. 

3 The exception under this subparagraph shall 

4 only apply once with respect to any participant, 

5 except that, for purposes of this sentence, a 

6 participant and any beneficiary on his behalf 

7 (including an alternate payee, as defined in sec8 tion 414(p)(8)) shall be treated as 1 partici9 pant. If the accrued benefit of a participant is 

10 allocated to such an alternate payee and 1 or 

11 more other persons, the amount under clause 

12 (ii) shall be allocated among such persons in 

13 the same manner as the accrued benefit is allo14 cated unless the qualified domestic relations 

15 order (as defined in section 414(p)(1)(A)) pro16 vides otherwise. 

17 ‘‘(3) PROHIBITED PERIOD.—For purposes of 

18 paragraph (1), the term ‘prohibited period’ means— 

19 ‘‘(A) except as provided in paragraph (4), 

20 if a plan sponsor is required to make the con21 tribution for the current plan year under para22 graph (1), the period beginning on the 1st day 

23 of the plan year and ending on the last day of 

24 the 1st period of 2 consecutive plan years (be25 ginning on or after such 1st day) for which the 
163 

•S 1783 PCS 

1 plan’s adjusted funded target liability percent2 age was at least 60 percent, 

3 ‘‘(B) any period the plan sponsor is in 

4 bankruptcy, or 

5 ‘‘(C) any period during which the plan has 

6 a liquidity shortfall (as defined in section 

7 430(j)(4)(E)(i)). 

8 The prohibited period for purposes of subparagraph 

9 (B) shall not include any portion of a plan year 

10 (even if the plan sponsor is in bankruptcy during 

11 such period) which occurs on or after the date the 

12 plan’s enrolled actuary certifies that, as of the valu13 ation date for the plan year, the plan’s adjusted 

14 funded target liability percentage is at least 100 per15 cent. 

16 ‘‘(4) SATISFACTION OF REQUIREMENT BEFORE

17 CLOSE OF PLAN YEAR.—If, before the close of the 

18 current plan year— 

19 ‘‘(A) the plan sponsor makes the contribu20 tion required to be made under paragraph (1), 

21 or 

22 ‘‘(B) the plan’s enrolled actuary certifies 

23 that, as of the valuation date for the plan year, 

24 the adjusted funded target liability percentage 

25 of the plan is at least 60 percent, 
164 

•S 1783 PCS 

1 this subsection shall be applied as if no prohibited 

2 period had begun as of the beginning of such year 

3 and the plan shall, under rules described by the Sec4 retary, restore any payments not made during the 

5 prohibited period in effect before the application of 

6 this paragraph. 

7 ‘‘(d) LIMITATION ON BENEFIT ACCRUALS FOR

8 PLANS WITH SEVERE FUNDING SHORTFALLS.— 

9 ‘‘(1) IN GENERAL.—Except as provided in sub10 section (e), a single-employer plan shall provide that 

11 all future benefit accruals under the plan shall cease 

12 during a severe funding shortfall period, but only to 

13 the extent the cessation of such accruals would have 

14 been permitted under section 411(d)(6) if the ces15 sation had been implemented by a plan amendment 

16 adopted immediately before the severe funding short17 fall period. 

18 ‘‘(2) SEVERE FUNDING SHORTFALL PERIOD.— 

19 For purposes of paragraph (1), the term ‘severe 

20 funding shortfall period’ means in the case of a plan 

21 the adjusted funding target attainment percentage 

22 of which as of the valuation date of the plan for any 

23 plan year is less than 60 percent, the period— 

24 ‘‘(A) beginning on the 1st day of the suc25 ceeding plan year, and 
165 

•S 1783 PCS 

1 ‘‘(B) ending on the date the plan’s enrolled 

2 actuary certifies that the plan’s funding target 

3 attainment percentage is at least 60 percent. 

4 ‘‘(3) OPPORTUNITY FOR INCREASED FUND5 ING.—For purposes of paragraph (2)(A), a plan 

6 shall not be treated as described in such paragraph 

7 for a plan year if the plan’s enrolled actuary certifies 

8 that the plan sponsor has before the end of the plan 

9 year contributed (in addition to any minimum re10 quired contribution under section 430) the amount 

11 sufficient to result in an adjusted funding target at12 tainment percentage as of the valuation date for the 

13 plan year of 60 percent. 

14 ‘‘(e) EXCEPTION FOR CERTAIN COLLECTIVELY BAR15 GAINED BENEFITS.—In the case of a plan maintained 

16 pursuant to a collective bargaining agreement between em17 ployee representatives and the plan sponsor and in effect 

18 before the beginning of the first day on which a limitation 

19 would otherwise apply under subsections (b), (c), or (d)— 

20 ‘‘(1) such limitations shall not apply to any 

21 amendment, prohibited payment, or accrual with re22 spect to such plan, but 

23 ‘‘(2) the plan sponsor shall contribute (in addi24 tion to any minimum required contribution under 

25 section 430) the amount sufficient to result in a 
166 

•S 1783 PCS 

1 funding target attainment percentage (as of the 

2 valuation date for the plan year in which any such 

3 limitation would otherwise apply) equal to the per4 centage necessary to prevent the limitation from ap5 plying. 

6 ‘‘(f) RULES RELATING TO REQUIRED CONTRIBU7 TIONS.— 

8 ‘‘(1) SECURITY MAY BE PROVIDED.— 

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

10 section, the adjusted funding target attainment 

11 percentage shall be determined by treating as 

12 an asset of the plan any security provided by a 

13 plan sponsor in a form meeting the require14 ments of subparagraph (B) . 

15 ‘‘(B) FORM OF SECURITY.—The security 

16 required under subparagraph (A) shall consist 

17 of— 

18 ‘‘(i) a bond issued by a corporate sur19 ety company that is an acceptable surety 

20 for purposes of section 412 of the Em21 ployee Retirement Income Security Act of 

22 1974, 

23 ‘‘(ii) cash, or United States obliga24 tions which mature in 3 years or less, held 
167 

•S 1783 PCS 

1 in escrow by a bank or similar financial in2 stitution, or 

3 ‘‘(iii) such other form of security as is 

4 satisfactory to the Secretary and the par5 ties involved. 

6 ‘‘(C) ENFORCEMENT.—Any security pro7 vided under subparagraph (A) may be perfected 

8 and enforced at any time after the earlier of— 

9 ‘‘(i) the date on which the plan termi10 nates, 

11 ‘‘(ii) if there is a failure to make a 

12 payment of the minimum required con13 tribution for any plan year beginning after 

14 the security is provided, the due date for 

15 the payment under section 430(j), or 

16 ‘‘(iii) if the adjusted funding target 

17 attainment percentage is less than 60 per18 cent for a consecutive period of 7 years, 

19 the valuation date for the last year in the 

20 period. 

21 ‘‘(D) RELEASE OF SECURITY.—The secu22 rity shall be released (and any amounts there23 under shall be refunded together with any inter24 est accrued thereon) at such time as the Sec25 retary may prescribe in regulations, including 
168 

•S 1783 PCS 

1 regulations for partial releases of the security 

2 by reason of increases in the funding target at3 tainment percentage. 

4 ‘‘(2) PREFUNDING BALANCE MAY NOT BE

5 USED.—No prefunding balance under section 430(f) 

6 may be used to satisfy any required contribution 

7 under this section. 

8 ‘‘(3) TREATMENT AS UNPAID MINIMUM RE9 QUIRED CONTRIBUTION.—The amount of any re10 quired contribution which a plan sponsor fails to 

11 make under subsection (b) or (d) for any plan year 

12 shall be treated as an unpaid minimum required 

13 contribution for purposes of subsection (j) and (k) of 

14 section 430 and for purposes of section 4971. 

15 ‘‘(f) NEW PLANS.—Subsections (b) and (d) shall not 

16 apply to a plan for the first 5 plan years of the plan. For 

17 purposes of this subsection, the reference in this sub18 section to a plan shall include a reference to any prede19 cessor plan. Notwithstanding the preceding sentence, sub20 section (b) shall apply if the plan is in bankruptcy during 

21 any of such years. 

22 ‘‘(g) PRESUMED UNDERFUNDING FOR PURPOSES OF

23 BENEFIT LIMITATIONS BASED ON PRIOR YEAR’S FUND24 ING STATUS.— 
169 

•S 1783 PCS 

1 ‘‘(1) PRESUMPTION OF CONTINUED UNDER2 FUNDING.—In any case in which a benefit limitation 

3 under subsection (b), (c), or (d) has been applied to 

4 a plan with respect to the plan year preceding the 

5 current plan year, the adjusted funding target at6 tainment percentage of the plan as of the valuation 

7 date of the plan for the current plan year shall be 

8 presumed to be equal to the adjusted funding target 

9 attainment percentage of the plan as of the valu10 ation date of the plan for the preceding plan year 

11 until the enrolled actuary of the plan certifies the 

12 actual adjusted funding target attainment percent13 age of the plan as of the valuation date of the plan 

14 for the current plan year. 

15 ‘‘(2) PRESUMPTION OF UNDERFUNDING AFTER

16 10TH MONTH.—In any case in which no such certifi17 cation is made with respect to the plan before the 

18 first day of the 10th month of the current plan year, 

19 for purposes of subsections (b), (c), and (d), the 

20 plan’s adjusted funding target attainment percent21 age shall be conclusively presumed to be less than 60 

22 percent as of the first day of such 10th month, and 

23 such day shall be deemed, for purposes of such sub24 sections, to be the valuation date of the plan for the 

25 current plan year. 
170 

•S 1783 PCS 

1 ‘‘(h) TREATMENT OF PLA N A S OF CLOSE OF PRO2 HIBITED OR CESSATION PERIOD.—For purposes of apply3 ing this part— 

4 ‘‘(1) OPERATION OF PLAN AFTER PERIOD.— 

5 Unless the plan provides otherwise, payments and 

6 accruals will resume effective as of the day following 

7 the close of a period of limitation of payment or ac8 crual of benefits under subsection (c) or (d). 

9 ‘‘(2) TREATMENT OF AFFECTED BENEFITS.— 

10 Nothing in this subsection shall be construed as af11 fecting the plan’s treatment of benefits which would 

12 have been paid or accrued but for this section. 

13 ‘‘(i) FUNDING TARGET ATTAINMENT PERCENT14 AGE.—For purposes of this section— 

15 ‘‘(1) IN GENERAL.—The term ‘funding target 

16 attainment percentage’ has the same meaning given 

17 such term by section 430(d)(2). 

18 ‘‘(2) ADJUSTED FUNDED TARGET LIABILITY

19 PERCENTAGE.—The term ‘adjusted funded target li20 ability percentage’ means the funded target liability 

21 percentage which is determined under subparagraph 

22 (A) by increasing each of the amounts under sub23 paragraphs (A) and (B) of section 430(d)(2) by the 

24 aggregate amount of purchases of annuities, pay25 ments of single sums, and such other disbursements 
171 

•S 1783 PCS 

1 as the Secretary shall prescribe in regulations, which 

2 were made by the plan during the preceding 2 plan 

3 years.’’. 

4 (b) EFFECTIVE DATES.— 

5 (1) BENEFIT RESTRICTIONS.—Except as pro6 vided in paragraph (2)— 

7 (A) IN GENERAL.—Subject to subpara8 graph (B), the amendments made by this sec9 tion shall apply with respect to plan years be10 ginning after 2006. 

11 (B) BENEFIT INCREASES.—Section 436(a) 

12 of the Internal Revenue Code of 1986 (as added 

13 by subsection (a)) shall apply with respect to 

14 plan years beginning after 2007. 

15 (2) COLLECTIVE BARGAINING EXCEPTION.—In 

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

17 collective bargaining agreements between employee 

18 representatives and 1 or more employers ratified 

19 January 1, 2007, the amendments made by this sec20 tion shall not apply to plan years beginning before 

21 the earlier of— 

22 (A) the later of— 

23 (i) the date on which the last collec24 tive bargaining agreement relating to the 

25 plan terminates (determined without re-
172 

•S 1783 PCS 

1 gard to any extension thereof agreed to 

2 after the date of the enactment of this 

3 Act), or 

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

5 to which the amendments made by this 

6 subsection would (but for this subpara7 graph) apply, or 

8 (B) January 1, 2010. 

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

10 amendment made pursuant to a collective bargaining 

11 agreement relating to the plan which amends the 

12 plan solely to conform to any requirement added by 

13 this section shall not be treated as a termination of 

14 such collective bargaining agreement. 

15 SEC. 114. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EM16 PLOYER PLANS. 

17 (a) IN GENERAL.—Section 404 of the Internal Rev18 enue Code of 1986 (relating to deduction for contributions 

19 of an employer to an employees’ trust or annuity plan and 

20 compensation under a deferred payment plan) is amend21 ed— 

22 (1) in subsection (a)(1)(A), by inserting ‘‘in the 

23 case of a defined benefit plan other than a multiem24 ployer plan, in an amount determined under sub-
173 

•S 1783 PCS 

1 section (o), and in the case of any other plan’’ after 

2 ‘‘section 501(a),’’, and 

3 (2) by inserting at the end the following new 

4 subsection: 

5 ‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER

6 PLANS.—For purposes of subsection (a)(1)(A)— 

7 ‘‘(1) IN GENERAL.—In the case of a defined 

8 benefit plan to which subsection (a)(1)(A) applies 

9 (other than a multiemployer plan), the amount de10 termined under this subsection for any taxable year 

11 shall be equal to the greater of— 

12 ‘‘(A) the sum of the amounts determined 

13 under paragraph (2) with respect to each plan 

14 year ending with or within the taxable year, or 

15 ‘‘(B) the sum of the minimum required 

16 contributions under section 430 for such plan 

17 years. 

18 ‘‘(2) DETERMINATION OF AMOUNT.— 

19 ‘‘(A) IN GENERAL.—The amount deter20 mined under this paragraph for any plan year 

21 shall be equal to the excess (if any) of— 

22 ‘‘(i) the sum of— 

23 ‘‘(I) the funding target for the 

24 plan year, 
174 

•S 1783 PCS 

1 ‘‘(II) the target normal cost for 

2 the plan year, and 

3 ‘‘(III) the cushion amount for the 

4 plan year, over 

5 ‘‘(ii) the value (determined under sec6 tion 430(g)(2)) of the assets of the plan 

7 which are held by the plan as of the valu8 ation date for the plan year. 

9 ‘‘(B) SPECIAL RULE FOR CERTAIN EM10 PLOYERS.—If section 430(i) does not apply to 

11 a plan for a plan year, the amount determined 

12 under subparagraph (A)(i) for the plan year 

13 shall in no event be less than the sum of— 

14 ‘‘(i) the funding target for the plan 

15 year (determined as if section 430(i) ap16 plied to the plan), plus 

17 ‘‘(ii) the target normal cost for the 

18 plan year (as so determined). 

19 ‘‘(3) CUSHION AMOUNT.—For purposes of para20 graph (2)(A)(i)(III)— 

21 ‘‘(A) IN GENERAL.—The cushion amount 

22 for any plan year is the sum of— 

23 ‘‘(i) 80 percent of the funding target 

24 for the plan year, and 
175 

•S 1783 PCS 

1 ‘‘(ii) the amount by which the funding 

2 target for the plan year would increase if 

3 the plan were to take into account— 

4 ‘‘(I) increases in compensation 

5 which are expected to occur in suc6 ceeding plan years, or 

7 ‘‘(II) if the plan does not base 

8 benefits for service to date on com9 pensation, increases in benefits which 

10 are expected to occur in succeeding 

11 plan years (determined on the basis of 

12 the average annual increase in bene13 fits over the 6 immediately preceding 

14 plan years). 

15 ‘‘(B) LIMITATIONS.— 

16 ‘‘(i) IN GENERAL.—In making the 

17 computation under subparagraph (A)(ii), 

18 the plan’s actuary shall assume that the 

19 limitations under subsection (l) and section 

20 415(b) shall apply. 

21 ‘‘(ii) EXPECTED INCREASES.—In the 

22 case of a plan year during which a plan is 

23 covered under section 4021 of the Em24 ployee Retirement Income Security Act of 

25 1974, the plan’s actuary may, notwith-
176 

•S 1783 PCS 

1 standing subsection (j) or (l), take into ac2 count increases in the limitations which are 

3 expected to occur in succeeding plan years. 

4 ‘‘(4) SPECIAL RULES FOR PLANS WITH 100 OR

5 FEWER PARTICIPANTS.— 

6 ‘‘(A) IN GENERAL.—For purposes of deter7 mining the amount under paragraph (3) for any 

8 plan year, in the case of a plan which has 100 

9 or fewer participants for the plan year, the li10 ability of the plan attributable to benefit in11 creases for highly compensated employees (as 

12 defined in section 414(q)) resulting from a plan 

13 amendment which is made or becomes effective, 

14 whichever is later, within the last 2 years shall 

15 not be taken into account in determining the 

16 target liability. 

17 ‘‘(B) RULE FOR DETERMINING NUMBER

18 OF PARTICIPANTS.—For purposes of deter19 mining the number of plan participants, all de20 fined benefit plans maintained by the same em21 ployer (or any member of such employer’s con22 trolled group (within the meaning of section 

23 412(f)(4))) shall be treated as one plan, but 

24 only participants of such member or employer 

25 shall be taken into account. 
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•S 1783 PCS 

1 ‘‘(5) SPECIAL RULE FOR TERMINATING

2 PLANS.—In the case of a plan which, subject to sec3 tion 4041 of the Employee Retirement Income Secu4 rity Act of 1974, terminates during the plan year, 

5 the amount determined under paragraph (2) shall in 

6 no event be less than the amount required to make 

7 the plan sufficient for benefit liabilities (within the 

8 meaning of section 4041(d) of such Act). 

9 ‘‘(6) ACTUARIAL ASSUMPTIONS.—Any computa10 tion under this subsection for any plan year shall 

11 use the same actuarial assumptions which are used 

12 for the plan year under section 430. 

13 ‘‘(7) DEFINITIONS.—Any term used in this sub14 section which is also used in section 430 shall have 

15 the same meaning given such term by section 430.’’. 

16 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

17 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

18 DEFINED BENEFIT PLANS.—Section 404(a)(7)(C) of 

19 such Code, as amended by this Act, is amended by adding 

20 at the end the following new clause: 

21 ‘‘(iv) GUARANTEED PLANS.—In apply22 ing this paragraph, any single-employer 

23 plan covered under section 4021 of the 

24 Employee Retirement Income Security Act 

25 of 1974 shall not be taken into account.’’. 
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•S 1783 PCS 

1 (c) TECHNICAL AND CONFORMING AMENDMENTS.— 

2 (1) The last sentence of section 404(a)(1)(A) of 

3 such Code is amended by striking ‘‘section 412’’ 

4 each place it appears and inserting ‘‘section 431’’. 

5 (2) Section 404(a)(1)(B) of such Code is 

6 amended— 

7 (A) by striking ‘‘In the case of a plan’’ and 

8 inserting ‘‘In the case of a multiemployer plan’’, 

9 (B) by striking ‘‘section 412(c)(7)’’ each 

10 place it appears and inserting ‘‘section 

11 431(c)(6)’’, 

12 (C) by striking ‘‘section 412(c)(7)(B)’’ and 

13 inserting ‘‘section 431(c)(6)(A)(ii)’’, 

14 (D) by striking ‘‘section 412(c)(7)(A)’’ and 

15 inserting ‘‘section 431(c)(6)(A)(i)’’, and 

16 (E) by striking ‘‘section 412’’ and insert17 ing ‘‘section 431’’. 

18 (3) Section 404(a)(7)(A) of such Code, as 

19 amended by this Act, is amended— 

20 (A) by adding at the end of subparagraph 

21 (A) the following new sentence: ‘‘In the case of 

22 a defined benefit plan which is a single em23 ployer plan, the amount necessary to satisfy the 

24 minimum funding standard provided by section 
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1 412 shall not be less than the plan’s funding 

2 shortfall determined under section 430.’’, and 

3 (B) by striking subparagraph (D) and in4 serting: 

5 ‘‘(D) INSURANCE CONTRACT PLANS.—For 

6 purposes of this paragraph, a plan described in 

7 section 412(g)(3) shall be treated as a defined 

8 benefit plan.’’. 

9 (4) Section 404A(g)(3)(A) of such Code is 

10 amended by striking ‘‘paragraphs (3) and (7) of sec11 tion 412(c)’’ and inserting ‘‘paragraphs (3) and (6) 

12 of section 431(c)’’. 

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

14 this section shall apply to plan years beginning after De15 cember 31, 2006. 

16 SEC. 115. TECHNICAL AND CONFORMING AMENDMENTS. 

17 (a) AMENDMENTS RELATED TO QUALIFICATION RE18 QUIREMENTS.— 

19 (1) Section 401(a)(29) of the Internal Revenue 

20 Code of 1986 is amended to read as follows: 

21 ‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT22 RISK STATUS.—In the case of a defined benefit plan 

23 (other than a multiemployer plan) to which the re24 quirements of section 412 apply, the trust of which 

25 the plan is a part shall not constitute a qualified 
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1 trust under this subsection unless the plan meets the 

2 requirements of section 436.’’. 

3 (2) Section 401(a)(32) of such Code is amend4 ed— 

5 (A) in subparagraph (A), by striking 

6 ‘‘412(m)(5)’’ each place it appears and insert7 ing ‘‘section 430(j)(4)’’, and 

8 (B) in subparagraph (C), by striking ‘‘sec9 tion 412(m)’’ and inserting ‘‘section 430(j)’’. 

10 (3) Section 401(a), as amended by this Act, is 

11 amended by striking paragraph (33) and by redesig12 nating paragraphs (34) and (35) as paragraph (33) 

13 and (34). 

14 (b) VESTING RULES.—Section 411 of such Code is 

15 amended— 

16 (1) by striking ‘‘section 412(c)(8)’’ in sub17 section (a)(3)(C) and inserting ‘‘section 412(d)(2)’’, 

18 (2) in subsection (b)(1)(F)— 

19 (A) by striking ‘‘paragraphs (2) and (3) of 

20 section 412(i)’’ in clause (ii) and inserting 

21 ‘‘subparagraphs (B) and (C) of section 

22 412(e)(3)’’, and 

23 (B) by striking ‘‘paragraphs (4), (5), and 

24 (6) of section 412(i)’’ and inserting ‘‘subpara-
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1 graphs (D), (E), and (F) of section 412(e)(3)’’, 

2 and 

3 (3) by striking ‘‘section 412(c)(8)’’ in sub4 section (d)(6)(A) and inserting ‘‘section 412(e)(2)’’. 

5 (c) MERGERS AND CONSOLIDATIONS OF PLANS.— 

6 Subclause (I) of section 414(l)(2)(B)(i) of such Code is 

7 amended to read as follows: 

8 ‘‘(I) the amount determined 

9 under section 431(c)(6)(A)(i) in the 

10 case of a multiemployer plan (and the 

11 sum of the funding shortfall and tar12 get normal cost determined under sec13 tion 430 in the case of any other 

14 plan), over’’. 

15 (d) TRANSFER OF EXCESS PENSION ASSETS TO RE16 TIREE HEALTH ACCOUNTS.— 

17 (1) Section 420(e)(2) of such Code is amended 

18 to read as follows: 

19 ‘‘(2) EXCESS PENSION ASSETS.—The term ‘ex20 cess pension assets’ means the excess (if any) of— 

21 ‘‘(A) the lesser of— 

22 ‘‘(i) the fair market value of the 

23 plan’s assets (reduced by the pre-funding 

24 balance and the funding standard carry-
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1 over balance, as determined under section 

2 430(f)), or 

3 ‘‘(ii) the value of plan assets as deter4 mined under section 430(g)(3) after reduc5 tion under section 430(f), over 

6 ‘‘(B) 125 percent of the sum of the fund7 ing shortfall and the target normal cost deter8 mined under section 430 for such plan year.’’. 

9 (2) Section 420(e)(4) of such Code is amended 

10 to read as follows: 

11 ‘‘(4) COORDINATION WITH SECTION 430.—In 

12 the case of a qualified transfer, any assets so trans13 ferred shall not, for purposes of this section, be 

14 treated as assets in the plan.’’. 

15 (e) EXCISE TAXES.— 

16 (1) IN GENERAL.—Subsections (a) and (b) of 

17 section 4971 of such Code are amended to read as 

18 follows: 

19 ‘‘(a) INITIAL TAX.—If at any time during any taxable 

20 year an employer maintains a plan to which section 412 

21 applies, there is hereby imposed for the taxable year a tax 

22 equal to— 

23 ‘‘(1) in the case of a single-employer plan, 10 

24 percent of the aggregate unpaid minimum required 

25 contributions for all plan years remaining unpaid as 
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1 of the end of any plan year ending with or within 

2 the taxable year, and 

3 ‘‘(2) in the case of a multiemployer plan, 5 per4 cent of the accumulated funding deficiency deter5 mined under section 431 as of the end of any plan 

6 year ending with or within the taxable year. 

7 ‘‘(b) ADDITIONAL TAX.—If— 

8 ‘‘(1) a tax is imposed under subsection (a)(1) 

9 on any unpaid required minimum contribution and 

10 such amount remains unpaid as of the close of the 

11 taxable period, or 

12 ‘‘(2) a tax is imposed under subsection (a)(2) 

13 on any accumulated funding deficiency and the accu14 mulated funding deficiency is not corrected within 

15 the taxable period, 

16 there is hereby imposed a tax equal to 100 percent of the 

17 unpaid minimum required contribution or accumulated 

18 funding deficiency, whichever is applicable, to the extent 

19 not so paid or corrected.’’. 

20 (2) Section 4971(c) of such Code is amended— 

21 (A) by striking ‘‘the last two sentences of 

22 section 412(a)’’ in paragraph (1) and inserting 

23 ‘‘section 431’’, and 

24 (B) by adding at the end the following new 

25 paragraph: 
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1 ‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBU2 TION.— 

3 ‘‘(A) IN GENERAL.—The term ‘unpaid 

4 minimum required contribution’ means, with re5 spect to any plan year, any minimum required 

6 contribution under section 430 for the plan 

7 year which is not paid on or before the due date 

8 (as determined under section 430(j)(1)) for the 

9 plan year. 

10 ‘‘(B) ORDERING RULE.—Any payment to 

11 or under a plan for any plan year shall be allo12 cated first to unpaid minimum required con13 tributions for all preceding plan years on a 

14 first-in, first-out basis and then to the min15 imum required contribution under section 430 

16 for the plan year.’’. 

17 (3) Section 4971(e)(1) of such Code is amended 

18 by striking ‘‘section 412(b)(3)(A)’’ and inserting 

19 ‘‘section 412(a)(1)(A)’’. 

20 (4) Section 4971(f)(1) of such Code is amend21 ed— 

22 (A) by striking ‘‘section 412(m)(5)’’ and 

23 inserting ‘‘section 430(j)(4)’’, and 

24 (B) by striking ‘‘section 412(m)’’ and in25 serting ‘‘section 430(j)’’. 
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1 (5) Section 4972(c)(7) of such Code is amended 

2 by striking ‘‘except to the extent that such contribu3 tions exceed the full-funding limitation (as defined in 

4 section 412(c)(7), determined without regard to sub5 paragraph (A)(i)(I) thereof)’’ and inserting ‘‘except, 

6 in the case of a multiemployer plan, to the extent 

7 that such contributions exceed the full-funding limi8 tation (as defined in section 431(c)(6))’’. 

9 (f) REPORTING REQUIREMENTS.—Section 6059(b) of 

10 such Code is amended— 

11 (1) by striking ‘‘the accumulated funding defi12 ciency (as defined in section 412(a))’’ in paragraph 

13 (2) and inserting ‘‘the minimum required contribu14 tion determined under section 430, or the accumu15 lated funding deficiency determined under section 

16 431,’’, and 

17 (2) by striking paragraph (3)(B) and inserting: 

18 ‘‘(B) the requirements for reasonable actu19 arial assumptions under section 430(h)(1) or 

20 431(c)(3), whichever are applicable, have been 

21 complied with.’’. 
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1 Subtitle C—Interest Rate Assump2 tions and Deductible Amounts 

3 for 2006 

4 SEC. 121. EXTENSION OF REPLACEMENT OF 30-YEAR 

5 TREASURY RATES. 

6 (a) AMENDMENTS OF ERISA.— 

7 (1) DETERMINATION OF RANGE.—Subclause 

8 (II) of section 302(b)(5)(B)(ii) of the Employee Re9 tirement Income Security Act of 1974 is amended— 

10 (A) by striking ‘‘2006’’ and inserting 

11 ‘‘2007’’, and 

12 (B) by striking ‘‘AND 2005’’ in the heading 

13 and inserting ‘‘, 2005, AND 2006’’. 

14 (2) DETERMINATION OF CURRENT LIABILITY.— 

15 Subclause (IV) of section 302(d)(7)(C)(i) of such 

16 Act is amended— 

17 (A) by striking ‘‘or 2005’’ and inserting ‘‘, 

18 2005, or 2006’’, and 

19 (B) by striking ‘‘AND 2005’’ in the heading 

20 and inserting ‘‘, 2005, AND 2006’’. 

21 (3) PBGC PREMIUM RATE.—Subclause (V) of 

22 section 4006(a)(3)(E)(iii) of such Act is amended by 

23 striking ‘‘2006’’ and inserting ‘‘2007’’. 

24 (b) AMENDMENTS OF INTERNAL REVENUE CODE.— 
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•S 1783 PCS 

1 (1) DETERMINATION OF RANGE.—Subclause 

2 (II) of section 412(b)(5)(B)(ii) of the Internal Rev3 enue Code of 1986 is amended— 

4 (A) by striking ‘‘2006’’ and inserting 

5 ‘‘2007’’, and 

6 (B) by striking ‘‘AND 2005’’ in the heading 

7 and inserting ‘‘, 2005, AND 2006’’. 

8 (2) DETERMINATION OF CURRENT LIABILITY.— 

9 Subclause (IV) of section 412(l)(7)(C)(i) of such 

10 Code is amended— 

11 (A) by striking ‘‘or 2005’’ and inserting ‘‘, 

12 2005, or 2006’’, and 

13 (B) by striking ‘‘AND 2005’’ in the heading 

14 and inserting ‘‘, 2005, AND 2006’’. 

15 (c) PLAN AMENDMENTS.—Clause (ii) of section 

16 101(c)(2)(A) of the Pension Funding Equity Act of 2004 

17 is amended by striking ‘‘2006’’ and inserting ‘‘2007’’. 

18 SEC. 122. DEDUCTION LIMITS FOR PLAN CONTRIBUTIONS. 

19 (a) IN GENERAL.—Clause (i) of section 404(a)(1)(D) 

20 of the Internal Revenue Code of 1986 (relating to special 

21 rule in case of certain plans) is amended by striking ‘‘sec22 tion 412(l)’’ and inserting ‘‘section 412(l)(8)(A), except 

23 that section 412(l)(8)(A) shall be applied for purposes of 

24 this clause by substituting ‘180 percent (130 percent in 
188 

•S 1783 PCS 

1 the case of a multiemployer plan) of current liability’ for 

2 ‘the current liability’ in clause (i).’’ 

3 (b) CONFORMING AMENDMENT.—Section 404(a)(1) 

4 of the Internal Revenue Code of 1986 is amended by strik5 ing subparagraph (F). 

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

7 this section shall apply to years beginning after December 

8 31, 2005. 

9 SEC. 123. UPDATING DEDUCTION RULES FOR COMBINA10 TION OF PLANS. 

11 (a) IN GENERAL.—Subparagraph (C) of section 

12 404(a)(7) of the Internal Revenue Code of 1986 (relating 

13 to limitation on deductions where combination of defined 

14 contribution plan and defined benefit plan) is amended by 

15 adding after clause (ii) the following new clause: 

16 ‘‘(iii) LIMITATION.—In the case of 

17 employer contributions to 1 or more de18 fined contribution plans, this paragraph 

19 shall only apply to the extent that such 

20 contributions exceed 6 percent of the com21 pensation otherwise paid or accrued during 

22 the taxable year to the beneficiaries under 

23 such plans. For purposes of this clause, 

24 amounts carried over from preceding tax25 able years under subparagraph (B) shall 
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•S 1783 PCS 

1 be treated as employer contributions to 1 

2 or more defined contributions to the extent 

3 attributable to employer contributions to 

4 such plans in such preceding taxable 

5 years.’’ 

6 (b) CONFORMING AMENDMENT.—Subparagraph (A) 

7 of section 4972(c)(6) of such Code (relating to nondeduct8 ible contributions) is amended to read as follows: 

9 ‘‘(A) so much of the contributions to 1 or 

10 more defined contribution plans which are not 

11 deductible when contributed solely because of 

12 section 404(a)(7) as does not exceed the 

13 amount of contributions described in section 

14 401(m)(4)(A), or’’. 

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

16 this section shall apply to contributions for taxable years 

17 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 
191 

•S 1783 PCS 

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 
193 

•S 1783 PCS 

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 
194 

•S 1783 PCS 

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 
195 

•S 1783 PCS 

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 
196 

•S 1783 PCS 

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— 
197 

•S 1783 PCS 

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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•S 1783 PCS 

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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•S 1783 PCS 

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 
200 

•S 1783 PCS 

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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•S 1783 PCS 

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 
202 

•S 1783 PCS 

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 
203 

•S 1783 PCS 

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— 
204 

•S 1783 PCS 

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 
205 

•S 1783 PCS 

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-
206 

•S 1783 PCS 

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-
207 

•S 1783 PCS 

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 para17 graph— 

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— 
208 

•S 1783 PCS 

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 
209 

•S 1783 PCS 

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 
210 

•S 1783 PCS 

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 
211 

•S 1783 PCS 

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). 
212 

•S 1783 PCS 

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-
213 

•S 1783 PCS 

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 
214 

•S 1783 PCS 

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.— 
215 

•S 1783 PCS 

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 
216 

•S 1783 PCS 

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. 
217 

•S 1783 PCS 

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 interest rate used for purposes of determining 

9 any amortization payment with respect to the exten10 sion (or any modification of the extension) shall be 

11 the rate determined under section 6621(b) of such 

12 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— 
218 

•S 1783 PCS 

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 
219 

•S 1783 PCS 

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 
220 

•S 1783 PCS 

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). 
221 

•S 1783 PCS 

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). 
222 

•S 1783 PCS 

1 ‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTU2 ARY.— 

3 ‘‘(A) IN GENERAL.—During the 90-day pe4 riod beginning on the first day of each plan 

5 year of a multiemployer plan, the plan actuary 

6 shall certify to the Secretary of the Treasury— 

7 ‘‘(i) whether or not the plan is in en8 dangered status for such plan year and 

9 whether or not the plan is in critical status 

10 for such plan year, and 

11 ‘‘(ii) in the case of a plan which is in 

12 a funding improvement or rehabilitation 

13 period, whether or not the plan is making 

14 the scheduled progress in meeting the re15 quirements of its funding improvement or 

16 rehabilitation plan. 

17 ‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS

18 AND LIABILITIES.— 

19 ‘‘(i) IN GENERAL.—In making the de20 terminations and projections under this 

21 subsection, the plan actuary shall make 

22 projections required for the current and 

23 succeeding plan years, using reasonable ac24 tuarial estimates, assumptions, and meth25 ods, of the current value of the assets of 
223 

•S 1783 PCS 

1 the plan and the present value of all liabil2 ities to participants and beneficiaries under 

3 the plan for the current plan year as of the 

4 beginning of such year. The projected 

5 present value of liabilities as of the begin6 ning of such year shall be determined 

7 based on the actuarial statement required 

8 under section 103(d) with respect to the 

9 most recently filed annual report or the ac10 tuarial valuation for the preceding plan 

11 year. 

12 ‘‘(ii) DETERMINATIONS OF FUTURE

13 CONTRIBUTIONS.—Any actuarial projection 

14 of plan assets shall assume— 

15 ‘‘(I) reasonably anticipated em16 ployer contributions for the current 

17 and succeeding plan years, assuming 

18 that the terms of the one or more col19 lective bargaining agreements pursu20 ant to which the plan is maintained 

21 for the current plan year continue in 

22 effect for succeeding plan years, or 

23 ‘‘(II) that employer contributions 

24 for the most recent plan year will con25 tinue indefinitely, but only if the plan 
224 

•S 1783 PCS 

1 actuary determines there have been no 

2 significant demographic changes that 

3 would make such assumption unrea4 sonable. 

5 ‘‘(C) PENALTY FOR FAILURE TO SECURE

6 TIMELY ACTUARIAL CERTIFICATION.—Any fail7 ure of the plan’s actuary to certify the plan’s 

8 status under this subsection by the date speci9 fied in subparagraph (A) shall be treated for 

10 purposes of section 502(c)(2) as a failure or re11 fusal by the plan administrator to file the an12 nual report required to be filed with the Sec13 retary under section 101(b)(4). 

14 ‘‘(D) NOTICE.—In any case in which a 

15 multiemployer plan is certified to be in endan16 gered or critical status under subparagraph (A), 

17 the plan sponsor shall, not later than 30 days 

18 after the date of the certification, provide notifi19 cation of the endangered or critical status to 

20 the participants and beneficiaries, the bar21 gaining parties, the Pension Benefit Guaranty 

22 Corporation, the Secretary of the Treasury, and 

23 the Secretary. 
225 

•S 1783 PCS 

1 ‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE

2 ADOPTED FOR MULTIEMPLOYER PLANS IN ENDANGERED

3 STATUS.— 

4 ‘‘(1) IN GENERAL.—In any case in which a 

5 multiemployer plan is in endangered status for a 

6 plan year, the plan sponsor, in accordance with this 

7 subsection— 

8 ‘‘(A) shall adopt a funding improvement 

9 plan not later than 240 days following the re10 quired date for the actuarial certification of en11 dangered status under subsection (b)(3)(A), 

12 and 

13 ‘‘(B) within 30 days after the adoption of 

14 the funding improvement plan— 

15 ‘‘(i) in the case of a plan in seriously 

16 endangered status, shall provide to the 

17 bargaining parties 1 or more schedules 

18 showing revised benefit structures, revised 

19 contribution structures, or both, which, if 

20 adopted, may reasonably be expected to en21 able the multiemployer plan to meet the 

22 applicable requirements under paragraph 

23 (3) in accordance with the funding im24 provement plan, including a description of 

25 the reductions in future benefit accruals 
226 

•S 1783 PCS 

1 and increases in contributions that the 

2 plan sponsor determines are reasonably 

3 necessary to meet the applicable require4 ments if the plan sponsor assumes that 

5 there are no increases in contributions 

6 under the plan other than the increases 

7 necessary to meet the applicable require8 ments after future benefit accruals have 

9 been reduced to the maximum extent per10 mitted by law, and 

11 ‘‘(ii) may, if the plan sponsor deems 

12 appropriate, prepare and provide the bar13 gaining parties with additional information 

14 relating to contribution rates or benefit re15 ductions, alternative schedules, or other in16 formation relevant to achieving the re17 quirements under paragraph (3) in accord18 ance with the funding improvement plan. 

19 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

20 BEGINS.—Paragraph (1) shall not apply to a plan 

21 year if such year is in a funding plan adoption pe22 riod or funding improvement period by reason of the 

23 plan being in endangered status for a preceding plan 

24 year. For purposes of this section, such preceding 

25 plan year shall be the initial determination year with 
227 

•S 1783 PCS 

1 respect to the funding improvement plan to which it 

2 relates. 

3 ‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur4 poses of this section— 

5 ‘‘(A) IN GENERAL.—A funding improve6 ment plan is a plan which consists of the ac7 tions, including options or a range of options to 

8 be proposed to the bargaining parties, which, 

9 under reasonable actuarial assumptions, will re10 sult in the plan meeting the requirements of 

11 this paragraph. 

12 ‘‘(B) PLANS OTHER THAN SERIOUSLY EN13 DANGERED PLANS.—In the case of plan not in 

14 seriously endangered status, the requirements 

15 of this paragraph are met if the plan’s funded 

16 percentage as of the close of the funding im17 provement period exceeds the lesser of 80 per18 cent or a percentage equal to the sum of— 

19 ‘‘(i) such percentage as of the begin20 ning of such period, plus 

21 ‘‘(ii) 10 percent of the percentage 

22 under clause (i). 

23 ‘‘(C) SERIOUSLY ENDANGERED PLANS.— 

24 In the case of a plan in seriously endangered 
228 

•S 1783 PCS 

1 status, the requirements of this paragraph are 

2 met if— 

3 ‘‘(i) the plan’s funded percentage as 

4 of the close of the funding improvement 

5 period equals or exceeds the percentage 

6 which is equal to the sum of— 

7 ‘‘(I) such percentage as of the 

8 beginning of such period, plus 

9 ‘‘(II) 33 percent of the difference 

10 between 100 percent and the percent11 age under subclause (I), and 

12 ‘‘(ii) there is no accumulated funding 

13 deficiency for any plan year during the 

14 funding improvement period (taking into 

15 account any extension of amortization peri16 ods under section 304(d)). 

17 ‘‘(4) FUNDING IMPROVEMENT PERIOD.—For 

18 purposes of this section— 

19 ‘‘(A) IN GENERAL.—The funding improve20 ment period for any funding improvement plan 

21 adopted pursuant to this subsection is the 10- 

22 year period beginning on the first day of the 

23 first plan year of the multiemployer plan begin24 ning after the earlier of— 
229 

•S 1783 PCS 

1 ‘‘(i) the second anniversary of the 

2 date of the adoption of the funding im3 provement plan, or 

4 ‘‘(ii) the expiration of the collective 

5 bargaining agreements in effect on the due 

6 date for the actuarial certification of en7 dangered status for the initial determina8 tion year under subsection (b)(3)(A) and 

9 covering, as of such due date, at least 75 

10 percent of the active participants in such 

11 multiemployer plan. 

12 ‘‘(B) COORDINATION WITH CHANGES IN

13 STATUS.— 

14 ‘‘(i) PLANS NO LONGER IN ENDAN15 GERED STATUS.—If the plan’s actuary cer16 tifies under subsection (b)(3)(A) for a plan 

17 year in any funding plan adoption period 

18 or funding improvement period that the 

19 plan is no longer in endangered status and 

20 is not in critical status, the funding plan 

21 adoption period or funding improvement 

22 period, whichever is applicable, shall end as 

23 of the close of the preceding plan year. 

24 ‘‘(ii) PLANS IN CRITICAL STATUS.—If 

25 the plan’s actuary certifies under sub-
230 

•S 1783 PCS 

1 section (b)(3)(A) for a plan year in any 

2 funding plan adoption period or funding 

3 improvement period that the plan is in 

4 critical status, the funding plan adoption 

5 period or funding improvement period, 

6 whichever is applicable, shall end as of the 

7 close of the plan year preceding the first 

8 plan year in the rehabilitation period with 

9 respect to such status. 

10 ‘‘(C) PLANS IN ENDANGERED STATUS AT

11 END OF PERIOD.—If the plan’s actuary certifies 

12 under subsection (b)(3)(A) for the first plan 

13 year following the close of the period described 

14 in subparagraph (A) that the plan is in endan15 gered status, the provisions of this subsection 

16 and subsection (d) shall be applied as if such 

17 first plan year were an initial determination 

18 year, except that the plan may not be amended 

19 in a manner inconsistent with the funding im20 provement plan in effect for the preceding plan 

21 year until a new funding improvement plan is 

22 adopted. 

23 ‘‘(5) SPECIAL RULES FOR CERTAIN UNDER24 FUNDED PLANS.— 
231 

•S 1783 PCS 

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

2 subparagraph (B), if the funded percentage of 

3 a plan in seriously endangered status was 70 

4 percent or less as of the beginning of the initial 

5 determination year, the following rules shall 

6 apply in determining whether the requirements 

7 of paragraph (3)(C)(i) are met: 

8 ‘‘(i) The plan’s funded percentage as 

9 of the close of the funding improvement 

10 period must equal or exceed a percentage 

11 which is equal to the sum of— 

12 ‘‘(I) such percentage as of the 

13 beginning of such period, plus 

14 ‘‘(II) 20 percent of the difference 

15 between 100 percent and the percent16 age under subclause (I). 

17 ‘‘(ii) The funding improvement period 

18 under paragraph (4)(A) shall be 15 years 

19 rather than 10 years. 

20 ‘‘(B) SPECIAL RULES FOR PLANS WITH

21 FUNDED PERCENTAGE OVER 70 PERCENT.—If 

22 the funded percentage described in subpara23 graph (A) was more than 70 percent but less 

24 than 80 percent as of the beginning of the ini25 tial determination year— 
232 

•S 1783 PCS 

1 ‘‘(i) subparagraph (A) shall apply if 

2 the plan’s actuary certifies, within 30 days 

3 after the certification under subsection 

4 (b)(3)(A) for the initial determination 

5 year, that, based on the terms of the plan 

6 and the collective bargaining agreements in 

7 effect at the time of such certification, the 

8 plan is not projected to meet the require9 ments of paragraph (3)(C)(i) without re10 gard to this paragraph, and 

11 ‘‘(ii) if there is a certification under 

12 clause (i), the plan may, in formulating its 

13 funding improvement plan, only take into 

14 account the rules of subparagraph (A) for 

15 plan years in the funding improvement pe16 riod beginning on or before the date on 

17 which the last of the collective bargaining 

18 agreements described in paragraph 

19 (4)(A)(ii) expires. 

20 Notwithstanding clause (ii), if for any plan year 

21 ending after the date described in clause (ii) the 

22 plan actuary certifies (at the time of the annual 

23 certification under subsection (b)(3)(A) for such 

24 plan year) that, based on the terms of the plan 

25 and collective bargaining agreements in effect 
233 

•S 1783 PCS 

1 at the time of that annual certification, the plan 

2 is not projected to be able to meet the require3 ments of paragraph (3)(C)(i) without regard to 

4 this paragraph, the plan may continue to as5 sume for such year that the funding improve6 ment period is 15 years rather than 10 years. 

7 ‘‘(6) UPDATES TO FUNDING IMPROVEMENT

8 PLAN AND SCHEDULES.— 

9 ‘‘(A) FUNDING IMPROVEMENT PLAN.—The 

10 plan sponsor shall annually update the funding 

11 improvement plan and shall file the update with 

12 the plan’s annual report under section 104. 

13 ‘‘(B) SCHEDULES.—The plan sponsor may 

14 periodically update any schedule of contribution 

15 rates provided under this subsection to reflect 

16 the experience of the plan, except that the 

17 schedule or schedules described in paragraph 

18 (1)(B)(i) shall be updated at least once every 3 

19 years. 

20 ‘‘(C) DURATION OF SCHEDULE.—A sched21 ule of contribution rates provided by the plan 

22 sponsor and relied upon by bargaining parties 

23 in negotiating a collective bargaining agreement 

24 shall remain in effect for the duration of that 

25 collective bargaining agreement. 
234 

•S 1783 PCS 

1 ‘‘(7) PENALTY IF NO FUNDING IMPROVEMENT

2 PLAN ADOPTED.—A failure of the plan sponsor to 

3 adopt a funding improvement plan by the date speci4 fied in paragraph (1)(A) shall be treated for pur5 poses of section 502(c)(2) as a failure or refusal by 

6 the plan administrator to file the annual report re7 quired to be filed with the Secretary under section 

8 101(b)(4). 

9 ‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For 

10 purposes of this section, the term ‘funding plan 

11 adoption period’ means the period beginning on the 

12 date of the certification under subsection (b)(3)(A) 

13 for the initial determination year and ending on the 

14 day before the first day of the funding improvement 

15 period. 

16 ‘‘(d) RULES FOR OPERATION OF PLAN DURING

17 ADOPTION AND IMPROVEMENT PERIODS; FAILURE TO

18 MEET REQUIREMENTS.— 

19 ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PE20 RIOD.—During the plan adoption period— 

21 ‘‘(A) the plan sponsor may not accept a 

22 collective bargaining agreement or participation 

23 agreement with respect to the multiemployer 

24 plan that provides for— 
235 

•S 1783 PCS 

1 ‘‘(i) a reduction in the level of con2 tributions for any participants, 

3 ‘‘(ii) a suspension of contributions 

4 with respect to any period of service, or 

5 ‘‘(iii) any new direct or indirect exclu6 sion of younger or newly hired employees 

7 from plan participation, 

8 ‘‘(B) no amendment of the plan which in9 creases the liabilities of the plan by reason of 

10 any increase in benefits, any change in the ac11 crual of benefits, or any change in the rate at 

12 which benefits become nonforfeitable under the 

13 plan may be adopted unless the amendment is 

14 required as a condition of qualification under 

15 part I of subchapter D of chapter 1 of the In16 ternal Revenue Code of 1986 or to comply with 

17 other applicable law, and 

18 ‘‘(C) in the case of a plan in seriously en19 dangered status, the plan sponsor shall take all 

20 reasonable actions which are consistent with the 

21 terms of the plan and applicable law and which 

22 are expected, based on reasonable assumptions, 

23 to achieve— 

24 ‘‘(i) an increase in the plan’s funded 

25 percentage, and 
236 

•S 1783 PCS 

1 ‘‘(ii) postponement of an accumulated 

2 funding deficiency for at least 1 additional 

3 plan year. 

4 Actions under subparagraph (C) include applications 

5 for extensions of amortization periods under section 

6 304(d), use of the shortfall funding method in mak7 ing funding standard account computations, amend8 ments to the plan’s benefit structure, reductions in 

9 future benefit accruals, and other reasonable actions 

10 consistent with the terms of the plan and applicable 

11 law. 

12 ‘‘(2) COMPLIANCE WITH FUNDING IMPROVE13 MENT PLAN.— 

14 ‘‘(A) IN GENERAL.—A plan may not be 

15 amended after the date of the adoption of a 

16 funding improvement plan under subsection (c) 

17 so as to be inconsistent with the funding im18 provement plan. 

19 ‘‘(B) NO REDUCTION IN CONTRIBU20 TIONS.—A plan sponsor may not during any 

21 funding improvement period accept a collective 

22 bargaining agreement or participation agree23 ment with respect to the multiemployer plan 

24 that provides for— 
237 

•S 1783 PCS 

1 ‘‘(i) a reduction in the level of con2 tributions for any participants, 

3 ‘‘(ii) a suspension of contributions 

4 with respect to any period of service, or 

5 ‘‘(iii) any new direct or indirect exclu6 sion of younger or newly hired employees 

7 from plan participation, 

8 ‘‘(C) SPECIAL RULES FOR BENEFIT IN9 CREASES.—A plan may not be amended after 

10 the date of the adoption of a funding improve11 ment plan under subsection (c) so as to in12 crease benefits, including future benefit accru13 als, unless— 

14 ‘‘(i) in the case of a plan in seriously 

15 endangered status, the plan actuary cer16 tifies that, after taking into account the 

17 benefit increase, the plan is still reasonably 

18 expected to meet the requirements under 

19 subsection (c)(3) in accordance with the 

20 schedule contemplated in the funding im21 provement plan, and 

22 ‘‘(ii) in the case of a plan not in seri23 ously endangered status, the actuary cer24 tifies that such increase is paid for out of 

25 contributions not required by the funding 
238 

•S 1783 PCS 

1 improvement plan to meet the require2 ments under subsection (c)(3) in accord3 ance with the schedule contemplated in the 

4 funding improvement plan. 

5 ‘‘(3) FAILURE TO MEET REQUIREMENTS.— 

6 ‘‘(A) IN GENERAL.—Notwithstanding sec7 tion 4971(g) of the Internal Revenue Code of 

8 1986, if a plan fails to meet the requirements 

9 of subsection (c)(3) by the end of the funding 

10 improvement period, the plan shall be treated 

11 as having an accumulated funding deficiency 

12 for purposes of section 4971 of such Code for 

13 the last plan year in such period (and each suc14 ceeding plan year until such requirements are 

15 met) in an amount equal to the greater of the 

16 amount of the contributions necessary to meet 

17 such requirements or the amount of such accu18 mulated funding deficiency without regard to 

19 this paragraph. 

20 ‘‘(B) WAIVER.—In the case of a failure de21 scribed in subparagraph (A) which is due to 

22 reasonable cause and not to willful neglect, the 

23 Secretary of the Treasury may waive part or all 

24 of the tax imposed by section 4971 of such 

25 Code to the extent that the payment of such tax 
239 

•S 1783 PCS 

1 would be excessive or otherwise inequitable rel2 ative to the failure involved. 

3 ‘‘(e) REHABILITATION PLAN MUST BE ADOPTED

4 FOR MULTIEMPLOYER PLANS IN CRITICAL STATUS.— 

5 ‘‘(1) IN GENERAL.—In any case in which a 

6 multiemployer plan is in critical status for a plan 

7 year, the plan sponsor, in accordance with this sub8 section— 

9 ‘‘(A) shall adopt a rehabilitation plan not 

10 later than 240 days following the required date 

11 for the actuarial certification of critical status 

12 under subsection (b)(3)(A), and 

13 ‘‘(B) within 30 days after the adoption of 

14 the rehabilitation plan— 

15 ‘‘(i) shall provide to the bargaining 

16 parties 1 or more schedules showing re17 vised benefit structures, revised contribu18 tion structures, or both, which, if adopted, 

19 may reasonably be expected to enable the 

20 multiemployer plan to emerge from critical 

21 status in accordance with the rehabilitation 

22 plan, and 

23 ‘‘(ii) may, if the plan sponsor deems 

24 appropriate, prepare and provide the bar25 gaining parties with additional information 
240 

•S 1783 PCS 

1 relating to contribution rates or benefit re2 ductions, alternative schedules, or other in3 formation relevant to emerging from crit4 ical status in accordance with the rehabili5 tation plan. 

6 The schedule or schedules described in subparagraph 

7 (B)(i) shall reflect reductions in future benefit ac8 cruals and increases in contributions that the plan 

9 sponsor determines are reasonably necessary to 

10 emerge from critical status. One schedule shall be 

11 designated as the default schedule and such schedule 

12 shall assume that there are no increases in contribu13 tions under the plan other than the increases nec14 essary to emerge from critical status after future 

15 benefit accruals and other benefits (other than bene16 fits the reduction or elimination of which are not 

17 permitted under section 204(g)) have been reduced 

18 to the maximum extent permitted by law. 

19 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

20 BEGINS.—Paragraph (1) shall not apply to a plan 

21 year if such year is in a rehabilitation plan adoption 

22 period or rehabilitation period by reason of the plan 

23 being in critical status for a preceding plan year. 

24 For purposes of this section, such preceding plan 
241 

•S 1783 PCS 

1 year shall be the initial critical year with respect to 

2 the rehabilitation plan to which it relates. 

3 ‘‘(3) REHABILITATION PLAN.—For purposes of 

4 this section— 

5 ‘‘(A) IN GENERAL.—A rehabilitation plan 

6 is a plan which consists of— 

7 ‘‘(i) actions which will enable, under 

8 reasonable actuarial assumptions, the plan 

9 to cease to be in critical status by the end 

10 of the rehabilitation period and may in11 clude reductions in plan expenditures (in12 cluding plan mergers and consolidations), 

13 reductions in future benefit accruals or in14 creases in contributions, if agreed to by the 

15 bargaining parties, or any combination of 

16 such actions, or 

17 ‘‘(ii) if the plan sponsor determines 

18 that, based on reasonable actuarial as19 sumptions and upon exhaustion of all rea20 sonable measures, the plan can not reason21 ably be expected to emerge from critical 

22 status by the end of the rehabilitation pe23 riod, reasonable measures to emerge from 

24 critical status at a later time or to forestall 
242 

•S 1783 PCS 

1 possible insolvency (within the meaning of 

2 section 4245). 

3 Such plan shall include the schedules required 

4 to be provided under paragraph (1)(B)(i). If 

5 clause (ii) applies, such plan shall set forth the 

6 alternatives considered, explain why the plan is 

7 not reasonably expected to emerge from critical 

8 status by the end of the rehabilitation period, 

9 and specify when, if ever, the plan is expected 

10 to emerge from critical status in accordance 

11 with the rehabilitation plan. 

12 ‘‘(B) UPDATES TO REHABILITATION PLAN

13 AND SCHEDULES.— 

14 ‘‘(i) REHABILITATION PLAN.—The 

15 plan sponsor shall annually update the re16 habilitation plan and shall file the update 

17 with the plan’s annual report under section 

18 104. 

19 ‘‘(ii) SCHEDULES.—The plan sponsor 

20 may periodically update any schedule of 

21 contribution rates provided under this sub22 section to reflect the experience of the 

23 plan, except that the schedule or schedules 

24 described in paragraph (1)(B)(i) shall be 

25 updated at least once every 3 years. 
243 

•S 1783 PCS 

1 ‘‘(iii) DURATION OF SCHEDULE.—A 

2 schedule of contribution rates provided by 

3 the plan sponsor and relied upon by bar4 gaining parties in negotiating a collective 

5 bargaining agreement shall remain in ef6 fect for the duration of that collective bar7 gaining agreement. 

8 ‘‘(C) DEFAULT SCHEDULE.—If the collec9 tive bargaining agreement providing for con10 tributions under a multiemployer plan that was 

11 in effect at the time the plan entered critical 

12 status expires and, after receiving a schedule 

13 from the plan sponsor under paragraph 

14 (1)(B)(i), the bargaining parties have not 

15 adopted a collective bargaining agreement with 

16 terms consistent with such a schedule, the de17 fault schedule described in the last sentence of 

18 paragraph (1) shall go into effect with respect 

19 to those bargaining parties. 

20 ‘‘(4) REHABILITATION PERIOD.—For purposes 

21 of this section— 

22 ‘‘(A) IN GENERAL.—The rehabilitation pe23 riod for a plan in critical status is the 10-year 

24 period beginning on the first day of the first 
244 

•S 1783 PCS 

1 plan year of the multiemployer plan following 

2 the earlier of— 

3 ‘‘(i) the second anniversary of the 

4 date of the adoption of the rehabilitation 

5 plan, or 

6 ‘‘(ii) the expiration of the collective 

7 bargaining agreements in effect on the 

8 date of the due date for the actuarial cer9 tification of critical status for the initial 

10 critical year under subsection (a)(1) and 

11 covering, as of such date at least 75 per12 cent of the active participants in such mul13 tiemployer plan. 

14 If a plan emerges from critical status as pro15 vided under subparagraph (B) before the end of 

16 such 10-year period, the rehabilitation period 

17 shall end with the plan year preceding the plan 

18 year for which the determination under sub19 paragraph (B) is made. 

20 ‘‘(B) EMERGENCE.—A plan in critical sta21 tus shall remain in such status until a plan 

22 year for which the plan actuary certifies, in ac23 cordance with subsection (b)(3)(A), that the 

24 plan is not projected to have an accumulated 

25 funding deficiency for the plan year or any of 
245 

•S 1783 PCS 

1 the 9 succeeding plan years, without regard to 

2 use of the shortfall method or any extension of 

3 amortization periods under section 304(d). 

4 ‘‘(5) PENALTY IF NO REHABILITATION PLAN

5 ADOPTED.—A failure of a plan sponsor to adopt a 

6 rehabilitation plan by the date specified in para7 graph (1)(A) shall be treated for purposes of section 

8 502(c)(2) as a failure or refusal by the plan admin9 istrator to file the annual report required to be filed 

10 with the Secretary under section 101(b)(4). 

11 ‘‘(6) REHABILITATION PLAN ADOPTION PE12 RIOD.—For purposes of this section, the term ‘reha13 bilitation plan adoption period’ means the period be14 ginning on the date of the certification under sub15 section (b)(3)(A) for the initial critical year and end16 ing on the day before the first day of the rehabilita17 tion period. 

18 ‘‘(7) LIMITATION ON REDUCTION IN RATES OF

19 FUTURE ACCRUALS.—Any reduction in the rate of 

20 future accruals under any schedule described in 

21 paragraph (1)(B)(i) shall not reduce the rate of fu22 ture accruals below— 

23 ‘‘(A) a monthly benefit (payable as a single 

24 life annuity commencing at the participant’s 

25 normal retirement age) equal to 1 percent of 
246 

•S 1783 PCS 

1 the contributions required to be made with re2 spect to a participant, or the equivalent stand3 ard accrual rate for a participant or group of 

4 participants under the collective bargaining 

5 agreements in effect as of the first day of the 

6 initial critical year, or 

7 ‘‘(B) if lower, the accrual rate under the 

8 plan on such first day. 

9 The equivalent standard accrual rate shall be deter10 mined by the plan sponsor based on the standard or 

11 average contribution base units which the plan spon12 sor determines to be representative for active partici13 pants and such other factors as the plan sponsor de14 termines to be relevant. 

15 ‘‘(f) RULES FOR OPERATION OF PLAN DURING

16 ADOPTION AND REHABILITATION PERIOD.— 

17 ‘‘(1) COMPLIANCE WITH REHABILITATION

18 PLAN.— 

19 ‘‘(A) IN GENERAL.—A plan may not be 

20 amended after the date of the adoption of a re21 habilitation plan under subsection (e) so as to 

22 be inconsistent with the rehabilitation plan. 

23 ‘‘(B) SPECIAL RULES FOR BENEFIT IN24 CREASES.—A plan may not be amended after 

25 the date of the adoption of a rehabilitation plan 
247 

•S 1783 PCS 

1 under subsection (e) so as to increase benefits, 

2 including future benefit accruals, unless the 

3 plan actuary certifies that such increase is paid 

4 for out of additional contributions not con5 templated by the rehabilitation plan, and, after 

6 taking into account the benefit increase, the 

7 multiemployer plan still is reasonably expected 

8 to emerge from critical status by the end of the 

9 rehabilitation period on the schedule con10 templated in the rehabilitation plan. 

11 ‘‘(2) RESTRICTION ON LUMP SUMS AND SIMI12 LAR BENEFITS.— 

13 ‘‘(A) IN GENERAL.—Effective on the date 

14 the notice of certification of the plan’s critical 

15 status for the initial critical year under sub16 section (b)(3)(D) is sent, and notwithstanding 

17 section 204(g), the plan shall not pay— 

18 ‘‘(i) any payment, in excess of the 

19 monthly amount paid under a single life 

20 annuity (plus any social security supple21 ments described in the last sentence of sec22 tion 204(b)(1)(G)), 

23 ‘‘(ii) any payment for the purchase of 

24 an irrevocable commitment from an insurer 

25 to pay benefits, and 
248 

•S 1783 PCS 

1 ‘‘(iii) any other payment specified by 

2 the Secretary of the Treasury by regula3 tions. 

4 ‘‘(B) EXCEPTION.—Subparagraph (A) 

5 shall not apply to a benefit which under section 

6 203(e) may be immediately distributed without 

7 the consent of the participant. 

8 ‘‘(3) ADJUSTMENTS DISREGARDED IN WITH9 DRAWAL LIABILITY DETERMINATION.—Any benefit 

10 reductions under this subsection shall be disregarded 

11 in determining a plan’s unfunded vested benefits for 

12 purposes of determining an employer’s withdrawal li13 ability under section 4201. 

14 ‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE15 RIOD.—During the rehabilitation plan adoption pe16 riod— 

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 
249 

•S 1783 PCS 

1 ‘‘(iii) any new direct or indirect exclu2 sion of younger or newly hired employees 

3 from plan participation, and 

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 of the In12 ternal Revenue Code of 1986 or to comply with 

13 other applicable law. 

14 ‘‘(5) FAILURE TO MEET REQUIREMENTS.— 

15 ‘‘(A) IN GENERAL.—Notwithstanding sec16 tion 4971(g) of the Internal Revenue Code of 

17 1986, if a plan— 

18 ‘‘(i) fails to meet the requirements of 

19 subsection (e) by the end of the rehabilita20 tion period, or 

21 ‘‘(ii) has received a certification under 

22 subsection (b)(3)(A)(ii) for 3 consecutive 

23 plan years that the plan is not making the 

24 scheduled progress in meeting its require25 ments under the rehabilitation plan, 
250 

•S 1783 PCS 

1 the plan shall be treated as having an accumu2 lated funding deficiency for purposes of section 

3 4971 of such Code for the last plan year in 

4 such period (and each succeeding plan year 

5 until such requirements are met) in an amount 

6 equal to the greater of the amount of the con7 tributions necessary to meet such requirements 

8 or the amount of such accumulated funding de9 ficiency without regard to 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 ‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR

19 DECISIONS.—If, within 60 days of the due date for adop20 tion of a funding improvement plan under subsection (c) 

21 or a rehabilitation plan under subsection (e), the plan 

22 sponsor of a plan in endangered status or a plan in critical 

23 status has not agreed on a funding improvement plan or 

24 rehabilitation plan, then any member of the board or 

25 group that constitutes the plan sponsor may require that 
251 

•S 1783 PCS 

1 the plan sponsor enter into an expedited dispute resolution 

2 procedure for the development and adoption of a funding 

3 improvement plan or rehabilitation plan. 

4 ‘‘(h) NONBARGAINED PARTICIPATION.— 

5 ‘‘(1) BOTH BARGAINED AND NONBARGAINED

6 EMPLOYEE-PARTICIPANTS.—In the case of an em7 ployer that contributes to a multiemployer plan with 

8 respect to both employees who are covered by one or 

9 more collective bargaining agreements and to em10 ployees who are not so covered, if the plan is in en11 dangered status or in critical status, benefits of and 

12 contributions for the nonbargained employees, in13 cluding surcharges on those contributions, shall be 

14 determined as if those nonbargained employees were 

15 covered under the first to expire of the employer’s 

16 collective bargaining agreements in effect when the 

17 plan entered endangered or critical status. 

18 ‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In 

19 the case of an employer that contributes to a multi20 employer plan only with respect to employees who 

21 are not covered by a collective bargaining agreement, 

22 this section shall be applied as if the employer were 

23 the bargaining parties, and its participation agree24 ment with the plan was a collective bargaining 

25 agreement with a term ending on the first day of the 
252 

•S 1783 PCS 

1 plan year beginning after the employer is provided 

2 the schedule or schedules described in subsections 

3 (c) and (e). 

4 ‘‘(3) EMPLOYEES COVERED BY ACOLLECTIVE

5 BARGAINING AGREEMENT.—The determination as to 

6 whether an employee covered by a collective bar7 gaining agreement for purposes of this section shall 

8 be made without regard to the special rule in Treas9 ury Regulation section 1.410(b)–6(d)(ii)(D). 

10 ‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For pur11 poses of this section— 

12 ‘‘(1) BARGAINING PARTY.—The term ‘bar13 gaining party’ means, in connection with a multiem14 ployer plan— 

15 ‘‘(A) an employer that has an obligation to 

16 contribute under the plan, and 

17 ‘‘(B) an employee organization which, for 

18 purposes of collective bargaining, represents 

19 plan participants employed by such an em20 ployer. 

21 ‘‘(2) FUNDED PERCENTAGE.—The term ‘fund22 ed percentage’ means the percentage equal to a frac23 tion— 
253 

•S 1783 PCS 

1 ‘‘(A) the numerator of which is the value 

2 of the plan’s assets, as determined under sec3 tion 304(c)(2), and 

4 ‘‘(B) the denominator of which is the ac5 crued liability of the plan, determined using ac6 tuarial assumptions described in section 

7 304(c)(3). 

8 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.— 

9 The term ‘accumulated funding deficiency’ has the 

10 meaning given such term in section 304(a). 

11 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active 

12 participant’ means, in connection with a multiem13 ployer plan, a participant who is in covered service 

14 under the plan. 

15 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac16 tive participant’ means, in connection with a multi17 employer plan, a participant, or the beneficiary or 

18 alternate payee of a participant, who— 

19 ‘‘(A) is not in covered service under the 

20 plan, and 

21 ‘‘(B) is in pay status under the plan or has 

22 a nonforfeitable right to benefits under the 

23 plan. 

24 ‘‘(6) PAY STATUS.—A person is in pay status 

25 under a multiemployer plan if— 
254 

•S 1783 PCS 

1 ‘‘(A) at any time during the current plan 

2 year, such person is a participant or beneficiary 

3 under the plan and is paid an early, late, nor4 mal, or disability retirement benefit under the 

5 plan (or a death benefit under the plan related 

6 to a retirement benefit), or 

7 ‘‘(B) to the extent provided in regulations 

8 of the Secretary of the Treasury, such person 

9 is entitled to such a benefit under the plan. 

10 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term 

11 ‘obligation to contribute’ has the meaning given such 

12 term under section 4212(a). 

13 ‘‘(8) ACTUARIAL METHOD.—Notwithstanding 

14 any other provision of this section, the actuary’s de15 terminations with respect to a plan’s normal cost, 

16 actuarial accrued liability, and improvements in a 

17 plan’s funded percentage under this section shall be 

18 based upon the unit credit funding method (whether 

19 or not that method is used for the plan’s actuarial 

20 valuation).’’. 

21 (b) CAUSE OF ACTION TO COMPEL ADOPTION OF

22 FUNDING IMPROVEMENT OR REHABILITATION PLAN.— 

23 Section 502(a) of the Employee Retirement Income Secu24 rity Act of 1974 is amended by striking ‘‘or’’ at the end 

25 of paragraph (8), by striking the period at the end of para-
255 

•S 1783 PCS 

1 graph (9) and inserting ‘‘; or’’ and by adding at the end 

2 the following: 

3 ‘‘(10) in the case of a multiemployer plan that 

4 has been certified by the actuary to be in endan5 gered or critical status under section 305, if the plan 

6 sponsor has not adopted a funding improvement or 

7 rehabilitation plan under subsection (c) or (e) of 

8 that section by the deadline established in that sec9 tion, by an employer that has an obligation to con10 tribute with respect to the multiemployer plan or an 

11 employee organization that represents active partici12 pants in the multiemployer plan, for an order com13 pelling the plan sponsor to adopt a funding improve14 ment or rehabilitation plan.’’. 

15 (c) 4971 EXCISE TAX INAPPLICABLE.—Section 4971 

16 of the Internal Revenue Code of 1986 is amended by re17 designating subsection (g) as subsection (h), and inserting 

18 after subsection (f) the following: 

19 ‘‘(g) MULTIEMPLOYER PLANS IN CRITICAL STA20 TUS.—No tax shall be imposed under this section for a 

21 taxable year with respect to a multiemployer plan if, for 

22 the plan years ending with or within the taxable year, the 

23 plan is in critical status pursuant to section 305 of the 

24 Employee Retirement Income Security Act of 1974. This 

25 subsection shall only apply if the plan adopts a rehabilita-
256 

•S 1783 PCS 

1 tion plan in accordance with section 305(e) of such Act 

2 and complies with such rehabilitation plan (and any modi3 fications of the plan).’’. 

4 (d) NO ADDITIONAL CONTRIBUTIONS REQUIRED.— 

5 (1) Section 302(b) of the Employee Retirement 

6 Income Security Act of 1974, as amended by this 

7 Act , is amended by adding at the end the following 

8 new paragraph: 

9 ‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STA10 TUS.—Subparagraph (A) shall not apply in the case 

11 of a multiemployer plan for any plan year in which 

12 the plan is in critical status pursuant to section 305. 

13 This paragraph shall only apply if the plan adopts 

14 a rehabilitation plan in accordance with section 

15 305(e) of such Act and complies with such rehabili16 tation plan (and any modifications of the plan).’’. 

17 (2) Section 412(c) of the Internal Revenue 

18 Code of 1986, as amended by this Act, is amended 

19 by adding at the end the following new paragraph: 

20 ‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STA21 TUS.—Subparagraph (A) shall not apply in the case 

22 of a multiemployer plan for any plan year in which 

23 the plan is in critical status pursuant to section 305 

24 of the Employee Retirement Income Security Act of 

25 1974. This paragraph shall only apply if the plan 
257 

•S 1783 PCS 

1 adopts a rehabilitation plan in accordance with sec2 tion 305(e) of such Act and complies with such re3 habilitation plan (and any modifications of the 

4 plan).’’. 

5 (e) CONFORMING AMENDMENT.—The table of con6 tents in section 1 of such Act (as amended by the pre7 ceding provisions of this Act) is amended by inserting 

8 after the item relating to section 304 the following new 

9 item: 

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered status or critical status.’’. 

10 (f) EFFECTIVE DATES.— 

11 (1) IN GENERAL.—The amendment made by 

12 this section shall apply with respect to plan years be13 ginning after 2006. 

14 (2) SPECIAL RULE FOR CERTAIN RESTORED

15 BENEFITS.—In the case of a multiemployer plan— 

16 (A) with respect to which benefits were re17 duced pursuant to a plan amendment adopted 

18 on or after January 1, 2002, and before June 

19 30, 2005, and 

20 (B) which, pursuant to the plan document, 

21 the trust agreement, or a formal written com22 munication from the plan sponsor to partici23 pants provided before June 30, 2005, provided 

24 for the restoration of such benefits, 
258 

•S 1783 PCS 

1 the amendments made by this section shall not apply 

2 to such benefit restorations to the extent that any 

3 restriction on the providing or accrual of such bene4 fits would otherwise apply by reason of such amend5 ments. 

6 SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MUL7 TIEMPLOYER PLANS. 

8 (a) ADVANCE DETERMINATION OF IMPENDING IN9 SOLVENCY OVER 5 YEARS.—Section 4245(d)(1) of the 

10 Employee Retirement Income Security Act of 1974 (29 

11 U.S.C. 1426(d)(1)) is amended— 

12 (1) by striking ‘‘3 plan years’’ the second place 

13 it appears and inserting ‘‘5 plan years’’; and 

14 (2) by adding at the end the following new sen15 tence: ‘‘If the plan sponsor makes such a determina16 tion that the plan will be insolvent in any of the next 

17 5 plan years, the plan sponsor shall make the com18 parison under this paragraph at least annually until 

19 the plan sponsor makes a determination that the 

20 plan will not be insolvent in any of the next 5 plan 

21 years.’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply with respect to determinations 

24 made in plan years beginning after 2006. 
259 

•S 1783 PCS 

1 PART II—AMENDMENTS TO INTERNAL REVENUE 

2 CODE OF 1986 

3 SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED 

4 BENEFIT PLANS. 

5 (a) IN GENERAL.—Subpart A of part III of sub6 chapter D of chapter 1 of the Internal Revenue Code of 

7 1986 (as added by this Act) is amended by inserting after 

8 section 430 the following new section: 

9 ‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEM10 PLOYER PLANS. 

11 ‘‘(a) IN GENERAL.—For purposes of section 412, the 

12 accumulated funding deficiency of a multiemployer plan 

13 for any plan year is— 

14 ‘‘(1) except as provided in paragraph (2), the 

15 amount, determined as of the end of the plan year, 

16 equal to the excess (if any) of the total charges to 

17 the funding standard account of the plan for all plan 

18 years (beginning with the first plan year for which 

19 this part applies to the plan) over the total credits 

20 to such account for such years, and 

21 ‘‘(2) if the multiemployer plan is in reorganiza22 tion for any plan year, the accumulated funding de23 ficiency of the plan determined under section 4243 

24 of the Employee Retirement Income Security Act of 

25 1974. 

26 ‘‘(b) FUNDING STANDARD ACCOUNT.— 
260 

•S 1783 PCS 

1 ‘‘(1) ACCOUNT REQUIRED.—Each multiem2 ployer plan to which this part applies shall establish 

3 and maintain a funding standard account. Such ac4 count shall be credited and charged solely as pro5 vided in this section. 

6 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year, 

7 the funding standard account shall be charged with 

8 the sum of— 

9 ‘‘(A) the normal cost of the plan for the 

10 plan year, 

11 ‘‘(B) the amounts necessary to amortize in 

12 equal annual installments (until fully amor13 tized)— 

14 ‘‘(i) separately, with respect to each 

15 plan year, the net increase (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 loss (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 loss (if any) resulting 

25 from changes in actuarial assumptions 
261 

•S 1783 PCS 

1 used under the plan, over a period of 15 

2 plan years, 

3 ‘‘(C) the amount necessary to amortize 

4 each waived funding deficiency (within the 

5 meaning of section 412(d)(3)) for each prior 

6 plan year in equal annual installments (until 

7 fully amortized) over a period of 15 plan years, 

8 ‘‘(D) the amount necessary to amortize in 

9 equal annual installments (until fully amor10 tized) over a period of 5 plan years any amount 

11 credited to the funding standard account under 

12 section 412(b)(3)(D) (as in effect on the day 

13 before the date of the enactment of the Pension 

14 Security and Transparency Act of 2005), and 

15 ‘‘(E) the amount necessary to amortize in 

16 equal annual installments (until fully amor17 tized) over a period of 20 years the contribu18 tions which would be required to be made under 

19 the plan but for the provisions of section 

20 412(c)(7)(A)(i)(I) (as in effect on the day be21 fore the date of the enactment of the Pension 

22 Security and Transparency Act of 2005). 

23 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year, 

24 the funding standard account shall be credited with 

25 the sum of— 
262 

•S 1783 PCS 

1 ‘‘(A) the amount considered contributed by 

2 the employer to or under the plan for the plan 

3 year, 

4 ‘‘(B) the amount necessary to amortize in 

5 equal annual installments (until fully amor6 tized)— 

7 ‘‘(i) separately, with respect to each 

8 plan year, the net decrease (if any) in un9 funded past service liability under the plan 

10 arising from plan amendments adopted in 

11 such year, over a period of 15 plan years, 

12 ‘‘(ii) separately, with respect to each 

13 plan year, the net experience gain (if any) 

14 under the plan, over a period of 15 plan 

15 years, and 

16 ‘‘(iii) separately, with respect to each 

17 plan year, the net gain (if any) resulting 

18 from changes in actuarial assumptions 

19 used under the plan, over a period of 15 

20 plan years, 

21 ‘‘(C) the amount of the waived funding de22 ficiency (within the meaning of section 

23 412(d)(3)) for the plan year, and 

24 ‘‘(D) in the case of a plan year for which 

25 the accumulated funding deficiency is deter-
263 

•S 1783 PCS 

1 mined under the funding standard account if 

2 such plan year follows a plan year for which 

3 such deficiency was determined under the alter4 native minimum funding standard under section 

5 412(g) (as in effect on the day before the date 

6 of the enactment of the Pension Security and 

7 Transparency Act of 2005), the excess (if any) 

8 of any debit balance in the funding standard 

9 account (determined without regard to this sub10 paragraph) over any debit balance in the alter11 native minimum funding standard account. 

12 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AM13 ORTIZED TO PLAN YEARS BEFORE 2007.—In the case 

14 of any amount amortized under section 412(b) (as 

15 in effect on the day before the date of the enactment 

16 of the Pension Security and Transparency Act of 

17 2005) over any period beginning with a plan year 

18 beginning before 2007, in lieu of the amortization 

19 described in paragraphs (2)(B) and (3)(B), such 

20 amount shall continue to be amortized under such 

21 section as so in effect. 

22 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS

23 TO BE AMORTIZED.—Under regulations prescribed 

24 by the Secretary, amounts required to be amortized 
264 

•S 1783 PCS 

1 under paragraph (2) or paragraph (3), as the case 

2 may be— 

3 ‘‘(A) may be combined into one amount 

4 under such paragraph to be amortized over a 

5 period determined on the basis of the remaining 

6 amortization period for all items entering into 

7 such combined amount, and 

8 ‘‘(B) may be offset against amounts re9 quired to be amortized under the other such 

10 paragraph, with the resulting amount to be am11 ortized over a period determined on the basis of 

12 the remaining amortization periods for all items 

13 entering into whichever of the two amounts 

14 being offset is the greater. 

15 ‘‘(6) INTEREST.—The funding standard ac16 count (and items therein) shall be charged or cred17 ited (as determined under regulations prescribed by 

18 the Secretary of the Treasury) with interest at the 

19 appropriate rate consistent with the rate or rates of 

20 interest used under the plan to determine costs. 

21 ‘‘(7) SPECIAL RULES RELATING TO CHARGES

22 AND CREDITS TO FUNDING STANDARD ACCOUNT.— 

23 For purposes of this part— 

24 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

25 amount received by a multiemployer plan in 
265 

•S 1783 PCS 

1 payment of all or part of an employer’s with2 drawal liability under part 1 of subtitle E of 

3 title IV of the Employee Retirement Income Se4 curity Act of 1974 shall be considered an 

5 amount contributed by the employer to or 

6 under the plan. The Secretary may prescribe by 

7 regulation additional charges and credits to a 

8 multiemployer plan’s funding standard account 

9 to the extent necessary to prevent withdrawal li10 ability payments from being unduly reflected as 

11 advance funding for plan liabilities. 

12 ‘‘(B) ADJUSTMENTS WHEN AMULTIEM13 PLOYER PLAN LEAVES REORGANIZATION.—If a 

14 multiemployer plan is not in reorganization in 

15 the plan year but was in reorganization in the 

16 immediately preceding plan year, any balance in 

17 the funding standard account at the close of 

18 such immediately preceding plan year— 

19 ‘‘(i) shall be eliminated by an offset20 ting credit or charge (as the case may be), 

21 but 

22 ‘‘(ii) shall be taken into account in 

23 subsequent plan years by being amortized 

24 in equal annual installments (until fully 

25 amortized) over 30 plan years. 
266 

•S 1783 PCS 

1 The preceding sentence shall not apply to the 

2 extent of any accumulated funding deficiency 

3 under section 4243(a) of such Act as of the end 

4 of the last plan year that the plan was in reor5 ganization. 

6 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

7 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

8 FUND.—Any amount paid by a plan during a 

9 plan year to the Pension Benefit Guaranty Cor10 poration pursuant to section 4222 of such Act 

11 or to a fund exempt under section 501(c)(22) 

12 pursuant to section 4223 of such Act shall re13 duce the amount of contributions considered re14 ceived by the plan for the plan year. 

15 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

16 PAYMENTS.—Any amount paid by an employer 

17 pending a final determination of the employer’s 

18 withdrawal liability under part 1 of subtitle E 

19 of title IV of such Act and subsequently re20 funded to the employer by the plan shall be 

21 charged to the funding standard account in ac22 cordance with regulations prescribed by the 

23 Secretary. 

24 ‘‘(E) ELECTION FOR DEFERRAL OF

25 CHARGE FOR PORTION OF NET EXPERIENCE
267 

•S 1783 PCS 

1 LOSS.—If an election is in effect under section 

2 412(b)(7)(F) (as in effect on the day before the 

3 date of the enactment of the Pension Security 

4 and Transparency Act of 2005) for any plan 

5 year, the funding standard account shall be 

6 charged in the plan year to which the portion 

7 of the net experience loss deferred by such elec8 tion was deferred with the amount so deferred 

9 (and paragraph (2)(B)(ii) shall not apply to the 

10 amount so charged). 

11 ‘‘(F) FINANCIAL ASSISTANCE.—Any 

12 amount of any financial assistance from the 

13 Pension Benefit Guaranty Corporation to any 

14 plan, and any repayment of such amount, shall 

15 be taken into account under this section and 

16 section 412 in such manner as is determined by 

17 the Secretary. 

18 ‘‘(G) SHORT-TERM BENEFITS.—To the ex19 tent that any plan amendment increases the un20 funded past service liability under the plan by 

21 reason of an increase in benefits which are pay22 able under the terms of the plan for a period 

23 that does not exceed 14 years from the effective 

24 date of the amendment, paragraph (2)(B)(i) 

25 shall be applied separately with respect to such 
268 

•S 1783 PCS 

1 increase in unfunded past service liability by 

2 substituting the number of years of the period 

3 during which such benefits are payable for ‘15’. 

4 ‘‘(c) ADDITIONAL RULES.— 

5 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

6 FUNDING METHOD.—For purposes of this part, nor7 mal costs, accrued liability, past service liabilities, 

8 and experience gains and losses shall be determined 

9 under the funding method used to determine costs 

10 under the plan. 

11 ‘‘(2) VALUATION OF ASSETS.— 

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

13 part, the value of the plan’s assets shall be de14 termined on the basis of any reasonable actu15 arial method of valuation which takes into ac16 count fair market value and which is permitted 

17 under regulations prescribed by the Secretary. 

18 ‘‘(B) ELECTION WITH RESPECT TO

19 BONDS.—The value of a bond or other evidence 

20 of indebtedness which is not in default as to 

21 principal or interest may, at the election of the 

22 plan administrator, be determined on an amor23 tized basis running from initial cost at purchase 

24 to par value at maturity or earliest call date. 

25 Any election under this subparagraph shall be 
269 

•S 1783 PCS 

1 made at such time and in such manner as the 

2 Secretary shall by regulations provide, shall 

3 apply to all such evidences of indebtedness, and 

4 may be revoked only with the consent of the 

5 Secretary. 

6 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA7 SONABLE.—For purposes of this section, all costs, li8 abilities, rates of interest, and other factors under 

9 the plan shall be determined on the basis of actu10 arial assumptions and methods— 

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

12 into account the experience of the plan and rea13 sonable expectations), and 

14 ‘‘(B) which, in combination, offer the actu15 ary’s best estimate of anticipated experience 

16 under the plan. 

17 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX18 PERIENCE GAIN OR LOSS.—For purposes of this sec19 tion, if— 

20 ‘‘(A) a change in benefits under the Social 

21 Security Act or in other retirement benefits cre22 ated under Federal or State law, or 

23 ‘‘(B) a change in the definition of the term 

24 ‘wages’ under section 3121, or a change in the 

25 amount of such wages taken into account under 
270 

•S 1783 PCS 

1 regulations prescribed for purposes of section 

2 401(a)(5), 

3 results in an increase or decrease in accrued liability 

4 under a plan, such increase or decrease shall be 

5 treated as an experience loss or gain. 

6 ‘‘(5) FULL FUNDING.—If, as of the close of a 

7 plan year, a plan would (without regard to this para8 graph) have an accumulated funding deficiency in 

9 excess of the full funding limitation— 

10 ‘‘(A) the funding standard account shall be 

11 credited with the amount of such excess, and 

12 ‘‘(B) all amounts described in subpara13 graphs (B), (C), and (D) of subsection (b) (2) 

14 and subparagraph (B) of subsection (b)(3) 

15 which are required to be amortized shall be con16 sidered fully amortized for purposes of such 

17 subparagraphs. 

18 ‘‘(6) FULL-FUNDING LIMITATION.— 

19 ‘‘(A) IN GENERAL.—For purposes of para20 graph (5), the term ‘full-funding limitation’ 

21 means the excess (if any) of— 

22 ‘‘(i) the accrued liability (including 

23 normal cost) under the plan (determined 

24 under the entry age normal funding meth25 od if such accrued liability cannot be di-
271 

•S 1783 PCS 

1 rectly calculated under the funding method 

2 used for the plan), over 

3 ‘‘(ii) the lesser of— 

4 ‘‘(I) the fair market value of the 

5 plan’s assets, or 

6 ‘‘(II) the value of such assets de7 termined under paragraph (2). 

8 ‘‘(B) MINIMUM AMOUNT.— 

9 ‘‘(i) IN GENERAL.—In no event shall 

10 the full-funding limitation determined 

11 under subparagraph (A) be less than the 

12 excess (if any) of— 

13 ‘‘(I) 90 percent of the current li14 ability of the plan (including the ex15 pected increase in current liability due 

16 to benefits accruing during the plan 

17 year), over 

18 ‘‘(II) the value of the plan’s as19 sets determined under paragraph (2). 

20 ‘‘(ii) ASSETS.—For purposes of clause 

21 (i), assets shall not be reduced by any 

22 credit balance in the funding standard ac23 count. 

24 ‘‘(C) FULL FUNDING LIMITATION.—For 

25 purposes of this paragraph, unless otherwise 
272 

•S 1783 PCS 

1 provided by the plan, the accrued liability under 

2 a multiemployer plan shall not include benefits 

3 which are not nonforfeitable under the plan 

4 after the termination of the plan (taking into 

5 consideration section 411(d)(3)). 

6 ‘‘(D) CURRENT LIABILITY.—For purposes 

7 of this paragraph— 

8 ‘‘(i) IN GENERAL.—The term ‘current 

9 liability’ means all liabilities to employees 

10 and their beneficiaries under the plan. 

11 ‘‘(ii) TREATMENT OF UNPREDICTABLE

12 CONTINGENT EVENT BENEFITS.—For pur13 poses of clause (i), any benefit contingent 

14 on an event other than— 

15 ‘‘(I) age, service, compensation, 

16 death, or disability, or 

17 ‘‘(II) an event which is reason18 ably and reliably predictable (as deter19 mined by the Secretary), 

20 shall not be taken into account until the 

21 event on which the benefit is contingent oc22 curs. 

23 ‘‘(iii) INTEREST RATE USED.—The 

24 rate of interest used to determine current 

25 liability under this paragraph shall be the 
273 

•S 1783 PCS 

1 rate of interest determined under subpara2 graph (E). 

3 ‘‘(iv) MORTALITY TABLES.— 

4 ‘‘(I) COMMISSIONERS’ STANDARD

5 TABLE.—In the case of plan years be6 ginning before the first plan year to 

7 which the first tables prescribed under 

8 subclause (II) apply, the mortality 

9 table used in determining current li10 ability under this paragraph shall be 

11 the table prescribed by the Secretary 

12 which is based on the prevailing com13 missioners’ standard table (described 

14 in section 807(d)(5)(A)) used to de15 termine reserves for group annuity 

16 contracts issued on January 1, 1993. 

17 ‘‘(II) SECRETARIAL AUTHOR18 ITY.—The Secretary may by regula19 tion prescribe for plan years beginning 

20 after December 31, 1999, mortality 

21 tables to be used in determining cur22 rent liability under this subsection. 

23 Such tables shall be based upon the 

24 actual experience of pension plans and 

25 projected trends in such experience. 
274 

•S 1783 PCS 

1 In prescribing such tables, the Sec2 retary shall take into account results 

3 of available independent studies of 

4 mortality of individuals covered by 

5 pension plans. 

6 ‘‘(v) SEPARATE MORTALITY TABLES

7 FOR THE DISABLED.—Notwithstanding 

8 clause (iv)— 

9 ‘‘(I) IN GENERAL.—The Sec10 retary shall establish mortality tables 

11 which may be used (in lieu of the ta12 bles under clause (iv)) to determine 

13 current liability under this subsection 

14 for individuals who are entitled to 

15 benefits under the plan on account of 

16 disability. The Secretary shall estab17 lish separate tables for individuals 

18 whose disabilities occur in plan years 

19 beginning before January 1, 1995, 

20 and for individuals whose disabilities 

21 occur in plan years beginning on or 

22 after such date. 

23 ‘‘(II) SPECIAL RULE FOR DIS24 ABILITIES OCCURRING AFTER 1994.— 

25 In the case of disabilities occurring in 
275 

•S 1783 PCS 

1 plan years beginning after December 

2 31, 1994, the tables under subclause 

3 (I) shall apply only with respect to in4 dividuals described in such subclause 

5 who are disabled within the meaning 

6 of title II of the Social Security Act 

7 and the regulations thereunder. 

8 ‘‘(vi) PERIODIC REVIEW.—The Sec9 retary shall periodically (at least every 5 

10 years) review any tables in effect under 

11 this subparagraph and shall, to the extent 

12 such Secretary determines necessary, by 

13 regulation update the tables to reflect the 

14 actual experience of pension plans and pro15 jected trends in such experience. 

16 ‘‘(E) REQUIRED CHANGE OF INTEREST

17 RATE.—For purposes of determining a plan’s 

18 current liability for purposes of this para19 graph— 

20 ‘‘(i) IN GENERAL.—If any rate of in21 terest used under the plan under sub22 section (b)(6) to determine cost is not 

23 within the permissible range, the plan shall 

24 establish a new rate of interest within the 

25 permissible range. 
276 

•S 1783 PCS 

1 ‘‘(ii) PERMISSIBLE RANGE.—For pur2 poses of this subparagraph— 

3 ‘‘(I) IN GENERAL.—Except as 

4 provided in subclause (II), the term 

5 ‘permissible range’ means a rate of in6 terest which is not more than 5 per7 cent above, and not more than 10 per8 cent below, the weighted average of 

9 the rates of interest on 30-year Treas10 ury securities during the 4-year period 

11 ending on the last day before the be12 ginning of the plan year. 

13 ‘‘(II) SECRETARIAL AUTHOR14 ITY.—If the Secretary finds that the 

15 lowest rate of interest permissible 

16 under subclause (I) is unreasonably 

17 high, the Secretary may prescribe a 

18 lower rate of interest, except that 

19 such rate may not be less than 80 

20 percent of the average rate deter21 mined under such subclause. 

22 ‘‘(iii) ASSUMPTIONS.—Notwith23 standing paragraph (3)(A), the interest 

24 rate used under the plan shall be— 
277 

•S 1783 PCS 

1 ‘‘(I) determined without taking 

2 into account the experience of the 

3 plan and reasonable expectations, but 

4 ‘‘(II) consistent with the assump5 tions which reflect the purchase rates 

6 which would be used by insurance 

7 companies to satisfy the liabilities 

8 under the plan. 

9 ‘‘(7) ANNUAL VALUATION.— 

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

11 section, a determination of experience gains and 

12 losses and a valuation of the plan’s liability 

13 shall be made not less frequently than once 

14 every year, except that such determination shall 

15 be made more frequently to the extent required 

16 in particular cases under regulations prescribed 

17 by the Secretary. 

18 ‘‘(B) VALUATION DATE.— 

19 ‘‘(i) CURRENT YEAR.—Except as pro20 vided in clause (ii), the valuation referred 

21 to in subparagraph (A) shall be made as of 

22 a date within the plan year to which the 

23 valuation refers or within one month prior 

24 to the beginning of such year. 
278 

•S 1783 PCS 

1 ‘‘(ii) USE OF PRIOR YEAR VALU2 ATION.—The valuation referred to in sub3 paragraph (A) may be made as of a date 

4 within the plan year prior to the year to 

5 which the valuation refers if, as of such 

6 date, the value of the assets of the plan are 

7 not less than 100 percent of the plan’s cur8 rent liability (as defined in paragraph 

9 (6)(D) without regard to clause (iv) there10 of). 

11 ‘‘(iii) ADJUSTMENTS.—Information 

12 under clause (ii) shall, in accordance with 

13 regulations, be actuarially adjusted to re14 flect significant differences in participants. 

15 ‘‘(iv) LIMITATION.—A change in fund16 ing method to use a prior year valuation, 

17 as provided in clause (ii), may not be made 

18 unless as of the valuation date within the 

19 prior plan year, the value of the assets of 

20 the plan are not less than 125 percent of 

21 the plan’s current liability (as defined in 

22 paragraph (6)(D) without regard to clause 

23 (iv) thereof). 

24 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

25 DEEMED MADE.—For purposes of this section, any 
279 

•S 1783 PCS 

1 contributions for a plan year made by an employer 

2 after the last day of such plan year, but not later 

3 than two and one-half months after such day, shall 

4 be deemed to have been made on such last day. For 

5 purposes of this subparagraph, such two and one6 half month period may be extended for not more 

7 than six months under regulations prescribed by the 

8 Secretary. 

9 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

10 MULTIEMPLOYER PLANS.— 

11 ‘‘(1) AUTOMATIC EXTENSION UPON APPLICA12 TION BY CERTAIN PLANS.— 

13 ‘‘(A) IN GENERAL.—If the plan sponsor of 

14 a multiemployer plan— 

15 ‘‘(i) submits to the Secretary an appli16 cation for an extension of the period of 

17 years required to amortize any unfunded 

18 liability described in any clause of sub19 section (b)(2)(B) or described in subsection 

20 (b)(4), and 

21 ‘‘(ii) includes with the application a 

22 certification by the plan’s actuary de23 scribed in subparagraph (B), 

24 the Secretary shall extend the amortization pe25 riod for the period of time (not in excess of 5 
280 

•S 1783 PCS 

1 years) specified in the application. Such exten2 sion shall be in addition to any extension under 

3 paragraph (2). 

4 ‘‘(B) CRITERIA.—A certification with re5 spect to a multiemployer plan is described in 

6 this subparagraph if the plan’s actuary certifies 

7 that, based on reasonable assumptions— 

8 ‘‘(i) absent the extension under sub9 paragraph (A), the plan would have an ac10 cumulated funding deficiency in the cur11 rent plan year or any of the 9 succeeding 

12 plan years, 

13 ‘‘(ii) the plan sponsor has adopted a 

14 plan to improve the plan’s funding status, 

15 ‘‘(iii) the plan is projected to have suf16 ficient assets to timely pay expected bene17 fits and anticipated expenditures over the 

18 amortization period as extended, and 

19 ‘‘(iv) the notice required under para20 graph (3)(A) has been provided. 

21 ‘‘(2) ADDITIONAL EXTENSION.— 

22 ‘‘(A) IN GENERAL.—If the plan sponsor of 

23 a multiemployer plan submits to the Secretary 

24 an application for an extension of the period of 

25 years required to amortize any unfunded liabil-
281 

•S 1783 PCS 

1 ity described in any clause of subsection 

2 (b)(2)(B) or described in subsection (b)(4), the 

3 Secretary may extend the amortization period 

4 for a period of time (not in excess of 5 years) 

5 if the Secretary of the Treasury makes the de6 termination described in subparagraph (B). 

7 Such extension shall be in addition to any ex8 tension under paragraph (1). 

9 ‘‘(B) DETERMINATION.—The Secretary 

10 may grant an extension under subparagraph 

11 (A) if the Secretary determines that— 

12 ‘‘(i) such extension would carry out 

13 the purposes of this Act and would provide 

14 adequate protection for participants under 

15 the plan and their beneficiaries, and 

16 ‘‘(ii) the failure to permit such exten17 sion would— 

18 ‘‘(I) result in a substantial risk 

19 to the voluntary continuation of the 

20 plan, or a substantial curtailment of 

21 pension benefit levels or employee 

22 compensation, and 

23 ‘‘(II) be adverse to the interests 

24 of plan participants in the aggregate. 
282 

•S 1783 PCS 

1 ‘‘(C) ACTION BY SECRETARY.—The Sec2 retary shall act upon any application for an ex3 tension under this paragraph within 180 days 

4 of the submission of such application. If the 

5 Secretary rejects the application for an exten6 sion under this paragraph, the Secretary shall 

7 provide notice to the plan detailing the specific 

8 reasons for the rejection, including references to 

9 the criteria set forth above. 

10 ‘‘(3) ADVANCE NOTICE.— 

11 ‘‘(A) IN GENERAL.—The Secretary shall, 

12 before granting an extension under this sub13 section, require each applicant to provide evi14 dence satisfactory to such Secretary that the 

15 applicant has provided notice of the filing of the 

16 application for such extension to each affected 

17 party (as defined in section 4001(a)(21) of the 

18 Employee Retirement Income Security Act of 

19 1974) with respect to the affected plan. Such 

20 notice shall include a description of the extent 

21 to which the plan is funded for benefits which 

22 are guaranteed under title IV of such Act and 

23 for benefit liabilities. 

24 ‘‘(B) CONSIDERATION OF RELEVANT IN25 FORMATION.—The Secretary shall consider any 
283 

•S 1783 PCS 

1 relevant information provided by a person to 

2 whom notice was given under paragraph (1).’’. 

3 (b) EFFECTIVE DATE.— 

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

5 this section shall apply to plan years beginning after 

6 2006. 

7 (2) SPECIAL RULE FOR CERTAIN AMORTIZATION

8 EXTENSIONS.—If the Secretary of the Treasury 

9 grants an extension under section 304 of the Em10 ployee Retirement Income Security Act of 1974 and 

11 section 412(e) of the Internal Revenue Code of 1986 

12 with respect to any application filed with the Sec13 retary of the Treasury on or before June 30, 2005, 

14 the interest rate used for purposes of determining 

15 any amortization payment with respect to the exten16 sion (or any modification of the extension) shall be 

17 the rate determined under section 6621(b) of such 

18 Code. 

19 SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEM20 PLOYER PLANS IN ENDANGERED OR CRIT21 ICAL STATUS. 

22 (a) IN GENERAL.—Subpart A of part III of sub23 chapter D of chapter 1 of the Internal Revenue Code of 

24 1986 (as amended by this Act) is amended by inserting 

25 after section 431 the following new section: 
284 

•S 1783 PCS 

1 ‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEM2 PLOYER PLANS IN ENDANGERED STATUS OR 

3 CRITICAL STATUS. 

4 ‘‘(a) GENERAL RULE.—For purposes of this part, in 

5 the case of a multiemployer plan— 

6 ‘‘(1) if the plan is in endangered status— 

7 ‘‘(A) the plan sponsor shall adopt and im8 plement a funding improvement plan in accord9 ance with the requirements of subsection (c), 

10 and 

11 ‘‘(B) the requirements of subsection (d) 

12 shall apply during the funding plan adoption 

13 period and the funding improvement period, 

14 and 

15 ‘‘(2) if the plan is in critical status— 

16 ‘‘(A) the plan sponsor shall adopt and im17 plement a rehabilitation plan in accordance with 

18 the requirements of subsection (e), and 

19 ‘‘(B) the requirements of subsection (f) 

20 shall apply during the rehabilitation plan adop21 tion period and the rehabilitation period. 

22 ‘‘(b) DETERMINATION OF ENDANGERED AND CRIT23 ICAL STATUS.—For purposes of this section— 

24 ‘‘(1) ENDANGERED STATUS.—A multiemployer 

25 plan is in endangered status for a plan year if, as 

26 determined by the plan actuary under paragraph 
285 

•S 1783 PCS 

1 (3), the plan is not in critical status for the plan 

2 year and either— 

3 ‘‘(A) the plan’s funded percentage for such 

4 plan year is less than 80 percent, or 

5 ‘‘(B) the plan has an accumulated funding 

6 deficiency for such plan year, or is projected to 

7 have such an accumulated funding deficiency 

8 for any of the 6 succeeding plan years, taking 

9 into account any extension of amortization peri10 ods under section 431(d). 

11 For purposes of this section, a plan described in 

12 subparagraph (B) shall be treated as in seriously en13 dangered status. 

14 ‘‘(2) CRITICAL STATUS.—A multiemployer plan 

15 is in critical status for a plan year if, as determined 

16 by the plan actuary under paragraph (3), the plan 

17 is described in 1 or more of the following subpara18 graphs as of the beginning of the plan year: 

19 ‘‘(A) A plan is described in this subpara20 graph if— 

21 ‘‘(i) the funded percentage of the plan 

22 is less than 65 percent, and 

23 ‘‘(ii) the sum of— 

24 ‘‘(I) the market value of plan as25 sets, plus 
286 

•S 1783 PCS 

1 ‘‘(II) the present value of the 

2 reasonably anticipated employer con3 tributions for the current plan year 

4 and each of the 5 succeeding plan 

5 years, assuming that the terms of all 

6 collective bargaining agreements pur7 suant to which the plan is maintained 

8 for the current plan year continue in 

9 effect for succeeding plan years, 

10 is less than the present value of all benefits 

11 projected to be payable under the plan dur12 ing the current plan year and each of the 

13 5 succeeding plan years (plus administra14 tive expenses for such plan years). 

15 ‘‘(B) A plan is described in this subpara16 graph if— 

17 ‘‘(i) the plan has an accumulated 

18 funding deficiency for the current plan 

19 year, not taking into account any extension 

20 of amortization periods under section 

21 431(d), or 

22 ‘‘(ii) the plan is projected to have an 

23 accumulated funding deficiency for any of 

24 the 3 succeeding plan years (4 succeeding 

25 plan years if the funded percentage of the 
287 

•S 1783 PCS 

1 plan is 65 percent or less), not taking into 

2 account any extension of amortization peri3 ods under section 431(d). 

4 ‘‘(C) A plan is described in this subpara5 graph if— 

6 ‘‘(i)(I) the plan’s normal cost for the 

7 current plan year, plus interest (deter8 mined at the rate used for determining 

9 costs under the plan) for the current plan 

10 year on the amount of unfunded benefit li11 abilities under the plan as of the last date 

12 of the preceding plan year, exceeds 

13 ‘‘(II) the present value of the reason14 ably anticipated employer contributions for 

15 the current plan year, 

16 ‘‘(ii) the present value of nonforfeit17 able benefits of inactive participants is 

18 greater than the present value of non19 forfeitable benefits of active participants, 

20 and 

21 ‘‘(iii) the plan has an accumulated 

22 funding deficiency for the current plan 

23 year, or is projected to have such a defi24 ciency for any of the 4 succeeding plan 

25 years, not taking into account any exten-
288 

•S 1783 PCS 

1 sion of amortization periods under section 

2 431(d). 

3 ‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTU4 ARY.— 

5 ‘‘(A) IN GENERAL.—During the 90-day pe6 riod beginning on the first day of each plan 

7 year of a multiemployer plan, the plan actuary 

8 shall certify to the Secretary— 

9 ‘‘(i) whether or not the plan is in en10 dangered status for such plan year and 

11 whether or not the plan is in critical status 

12 for such plan year, and 

13 ‘‘(ii) in the case of a plan which is in 

14 a funding improvement or rehabilitation 

15 period, whether or not the plan is making 

16 the scheduled progress in meeting the re17 quirements of its funding improvement or 

18 rehabilitation plan. 

19 ‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS

20 AND LIABILITIES.— 

21 ‘‘(i) IN GENERAL.—In making the de22 terminations and projections under this 

23 subsection, the plan actuary shall make 

24 projections required for the current and 

25 succeeding plan years, using reasonable ac-
289 

•S 1783 PCS 

1 tuarial estimates, assumptions, and meth2 ods, of the current value of the assets of 

3 the plan and the present value of all liabil4 ities to participants and beneficiaries under 

5 the plan for the current plan year as of the 

6 beginning of such year. The projected 

7 present value of liabilities as of the begin8 ning of such year shall be determined 

9 based on the actuarial statement required 

10 under section 103(d) of the Employee Re11 tirement Income Security Act of 1974 with 

12 respect to the most recently filed annual 

13 report or the actuarial valuation for the 

14 preceding plan year. 

15 ‘‘(ii) DETERMINATIONS OF FUTURE

16 CONTRIBUTIONS.—Any actuarial projection 

17 of plan assets shall assume— 

18 ‘‘(I) reasonably anticipated em19 ployer contributions for the current 

20 and succeeding plan years, assuming 

21 that the terms of the one or more col22 lective bargaining agreements pursu23 ant to which the plan is maintained 

24 for the current plan year continue in 

25 effect for succeeding plan years, or 
290 

•S 1783 PCS 

1 ‘‘(II) that employer contributions 

2 for the most recent plan year will con3 tinue indefinitely, but only if the plan 

4 actuary determines there have been no 

5 significant demographic changes that 

6 would make such assumption unrea7 sonable. 

8 ‘‘(C) PENALTY FOR FAILURE TO SECURE

9 TIMELY ACTUARIAL CERTIFICATION.—Any fail10 ure of the plan’s actuary to certify the plan’s 

11 status under this subsection by the date speci12 fied in subparagraph (A) shall be treated for 

13 purposes of section 502(c)(2) of such Act as a 

14 failure or refusal by the plan administrator to 

15 file the annual report required to be filed with 

16 the Secretary under section 101(b)(4) of such 

17 Act. 

18 ‘‘(D) NOTICE.—In any case in which a 

19 multiemployer plan is certified to be in endan20 gered or critical status under subparagraph (A), 

21 the plan sponsor shall, not later than 30 days 

22 after the date of the certification, provide notifi23 cation of the endangered or critical status to 

24 the participants and beneficiaries, the bar25 gaining parties, the Pension Benefit Guaranty 
291 

•S 1783 PCS 

1 Corporation, the Secretary, and the Secretary 

2 of Labor. 

3 ‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE

4 ADOPTED FOR MULTIEMPLOYER PLANS IN ENDANGERED

5 STATUS.— 

6 ‘‘(1) IN GENERAL.—In any case in which a 

7 multiemployer plan is in endangered status for a 

8 plan year, the plan sponsor, in accordance with this 

9 subsection— 

10 ‘‘(A) shall adopt a funding improvement 

11 plan not later than 240 days following the re12 quired date for the actuarial certification of en13 dangered status under subsection (b)(3)(A), 

14 and 

15 ‘‘(B) within 30 days after the adoption of 

16 the funding improvement plan— 

17 ‘‘(i) in the case of a plan in seriously 

18 endangered status, shall provide to the 

19 bargaining parties 1 or more schedules 

20 showing revised benefit structures, revised 

21 contribution structures, or both, which, if 

22 adopted, may reasonably be expected to en23 able the multiemployer plan to meet the 

24 applicable requirements under paragraph 

25 (3) in accordance with the funding im-
292 

•S 1783 PCS 

1 provement plan, including a description of 

2 the reductions in future benefit accruals 

3 and increases in contributions that the 

4 plan sponsor determines are reasonably 

5 necessary to meet the applicable require6 ments if the plan sponsor assumes that 

7 there are no increases in contributions 

8 under the plan other than the increases 

9 necessary to meet the applicable require10 ments after future benefit accruals have 

11 been reduced to the maximum extent per12 mitted by law, 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 achieving the re19 quirements under paragraph (3) in accord20 ance with the funding improvement plan. 

21 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

22 BEGINS.—Paragraph (1) shall not apply to a plan 

23 year if such year is in a funding plan adoption pe24 riod or funding improvement period by reason of the 

25 plan being in endangered status for a preceding plan 
293 

•S 1783 PCS 

1 year. For purposes of this section, such preceding 

2 plan year shall be the initial determination year with 

3 respect to the funding improvement plan to which it 

4 relates. 

5 ‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur6 poses of this section— 

7 ‘‘(A) IN GENERAL.—A funding improve8 ment plan is a plan which consists of the ac9 tions, including options or a range of options to 

10 be proposed to the bargaining parties, which, 

11 under reasonable actuarial assumptions, will re12 sult in the plan meeting the requirements of 

13 this paragraph. 

14 ‘‘(B) PLANS OTHER THAN SERIOUSLY EN15 DANGERED PLANS.—In the case of plan not in 

16 seriously endangered status, the requirements 

17 of this paragraph are met if the plan’s funded 

18 percentage as of the close of the funding im19 provement period exceeds the lesser of 80 per20 cent or a percentage equal to the sum of— 

21 ‘‘(i) such percentage as of the begin22 ning of such period, plus 

23 ‘‘(ii) 10 percent of the percentage de24 termined under clause (i). 
294 

•S 1783 PCS 

1 ‘‘(C) SERIOUSLY ENDANGERED PLANS.— 

2 In the case of a plan in seriously endangered 

3 status, the requirements of this paragraph are 

4 met if— 

5 ‘‘(i) the plan’s funded percentage as 

6 of the close of the funding improvement 

7 period equals or exceeds the percentage 

8 which is equal to the sum of— 

9 ‘‘(I) such percentage as of the 

10 beginning of such period, plus 

11 ‘‘(II) 33 percent of the difference 

12 between 100 percent and the percent13 age under subclause (I), and 

14 ‘‘(ii) there is no accumulated funding 

15 deficiency for any plan year during the 

16 funding improvement period (taking into 

17 account any extension of amortization peri18 ods under section 431(d)). 

19 ‘‘(4) FUNDING IMPROVEMENT PERIOD.—For 

20 purposes of this section— 

21 ‘‘(A) IN GENERAL.—The funding improve22 ment period for any funding improvement plan 

23 adopted pursuant to this subsection is the 10- 

24 year period beginning on the first day of the 
295 

•S 1783 PCS 

1 first plan year of the multiemployer plan begin2 ning after the earlier of— 

3 ‘‘(i) the second anniversary of the 

4 date of the adoption of the funding im5 provement plan, or 

6 ‘‘(ii) the expiration of the collective 

7 bargaining agreements in effect on the due 

8 date for the actuarial certification of en9 dangered status for the initial determina10 tion year under subsection (b)(3)(A) and 

11 covering, as of such due date, at least 75 

12 percent of the active participants in such 

13 multiemployer plan. 

14 ‘‘(B) COORDINATION WITH CHANGES IN

15 STATUS.— 

16 ‘‘(i) PLANS NO LONGER IN ENDAN17 GERED STATUS.—If the plan’s actuary cer18 tifies under subsection (b)(3)(A) for a plan 

19 year in any funding plan adoption period 

20 or funding improvement period that the 

21 plan is no longer in endangered status and 

22 is not in critical status, the funding plan 

23 adoption period or funding improvement 

24 period, whichever is applicable, shall end as 

25 of the close of the preceding plan year. 
296 

•S 1783 PCS 

1 ‘‘(ii) PLANS IN CRITICAL STATUS.—If 

2 the plan’s actuary certifies under sub3 section (b)(3)(A) for a plan year in any 

4 funding plan adoption period or funding 

5 improvement period that the plan is in 

6 critical status, the funding plan adoption 

7 period or funding improvement period, 

8 whichever is applicable, shall end as of the 

9 close of the plan year preceding the first 

10 plan year in the rehabilitation period with 

11 respect to such status. 

12 ‘‘(5) SPECIAL RULES FOR CERTAIN UNDER13 FUNDED PLANS.— 

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

15 subparagraph (B), if the funded percentage of 

16 a plan in seriously endangered status was 70 

17 percent or less as of the beginning of the initial 

18 determination year, the following rules shall 

19 apply in determining whether the requirements 

20 of paragraph (3)(C)(i) are met: 

21 ‘‘(i) The plan’s funded percentage as 

22 of the close of the funding improvement 

23 period must equal or exceed a percentage 

24 which is equal to the sum of— 
297 

•S 1783 PCS 

1 ‘‘(I) such percentage as of the 

2 beginning of such period, plus 

3 ‘‘(II) 20 percent of the difference 

4 between 100 percent and the percent5 age under subclause (I). 

6 ‘‘(ii) The funding improvement period 

7 under paragraph (4)(A) shall be 15 years 

8 rather than 10 years. 

9 ‘‘(B) SPECIAL RULES FOR PLANS WITH

10 FUNDED PERCENTAGE OVER 70 PERCENT.—If 

11 the funded percentage described in subpara12 graph (A) was more than 70 percent but less 

13 than 80 percent as of the beginning of the ini14 tial determination year— 

15 ‘‘(i) subparagraph (A) shall apply if 

16 the plan’s actuary certifies, within 30 days 

17 after the certification under subsection 

18 (b)(3)(A) for the initial determination 

19 year, that, based on the terms of the plan 

20 and the collective bargaining agreements in 

21 effect at the time of such certification, the 

22 plan is not projected to meet the require23 ments of paragraph (3)(C)(i) without re24 gard to this paragraph, and 
298 

•S 1783 PCS 

1 ‘‘(ii) if there is a certification under 

2 clause (i), the plan may, in formulating its 

3 funding improvement plan, only take into 

4 account the rules of subparagraph (A) for 

5 plan years in the funding improvement pe6 riod beginning on or before the date on 

7 which the last of the collective bargaining 

8 agreements described in paragraph 

9 (4)(A)(ii) expires. 

10 Notwithstanding clause (ii), if for any plan year 

11 ending after the date described in clause (ii) the 

12 plan actuary certifies (at the time of the annual 

13 certification under subsection (b)(3)(A) for such 

14 plan year) that, based on the terms of the plan 

15 and collective bargaining agreements in effect 

16 at the time of that annual certification, the plan 

17 is not projected to be able to meet the require18 ments of paragraph (3)(C)(i) without regard to 

19 this paragraph, the plan may continue to as20 sume for such year that the funding improve21 ment period is 15 years rather than 10 years. 

22 ‘‘(6) UPDATES TO FUNDING IMPROVEMENT

23 PLAN AND SCHEDULES.— 

24 ‘‘(A) FUNDING IMPROVEMENT PLAN.—The 

25 plan sponsor shall annually update the funding 
299 

•S 1783 PCS 

1 improvement plan and shall file the update with 

2 the plan’s annual report under section 104 of 

3 the Employee Retirement Income Security Act 

4 of 1974. 

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) of such Act as a failure 

23 or refusal by the plan administrator to file the an24 nual report required to be filed with the Secretary 

25 of Labor under section 101(b)(4) of such Act. 
300 

•S 1783 PCS 

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 
301 

•S 1783 PCS 

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 or to com7 ply with other applicable law, and 

8 ‘‘(C) in the case of a plan in seriously en9 dangered status, the plan sponsor shall take all 

10 reasonable actions which are consistent with the 

11 terms of the plan and applicable law and which 

12 are expected, based on reasonable assumptions, 

13 to achieve— 

14 ‘‘(i) an increase in the plan’s funded 

15 percentage, and 

16 ‘‘(ii) postponement of an accumulated 

17 funding deficiency for at least 1 additional 

18 plan year. 

19 Actions under subparagraph (C) include applications 

20 for extensions of amortization periods under section 

21 431(d), use of the shortfall funding method in mak22 ing funding standard account computations, amend23 ments to the plan’s benefit structure, reductions in 

24 future benefit accruals, and other reasonable actions 
302 

•S 1783 PCS 

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-
303 

•S 1783 PCS 

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), if a plan fails to meet the require23 ments of subsection (c)(3) by the end of the 

24 funding improvement period, the plan shall be 

25 treated as having an accumulated funding defi-
304 

•S 1783 PCS 

1 ciency for purposes of section 4971 for the last 

2 plan year in such period (and each succeeding 

3 plan year until such requirements are met) in 

4 an amount equal to the greater of the amount 

5 of the contributions necessary to meet such re6 quirements or the amount of such accumulated 

7 funding deficiency without regard to this para8 graph. 

9 ‘‘(B) WAIVER.—In the case of a failure de10 scribed in subparagraph (A) which is due to 

11 reasonable cause and not to willful neglect, the 

12 Secretary of the Treasury may waive part or all 

13 of the tax imposed by section 4971 of such 

14 Code to the extent that the payment of such tax 

15 would be excessive or otherwise inequitable rel16 ative to the failure involved. 

17 ‘‘(e) REHABILITATION PLAN MUST BE ADOPTED

18 FOR MULTIEMPLOYER PLANS IN CRITICAL STATUS.— 

19 ‘‘(1) IN GENERAL.—In any case in which a 

20 multiemployer plan is in critical status for a plan 

21 year, the plan sponsor, in accordance with this sub22 section— 

23 ‘‘(A) shall adopt a rehabilitation plan not 

24 later than 240 days following the required date 
305 

•S 1783 PCS 

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 
306 

•S 1783 PCS 

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 411(d)(6)) have been re8 duced 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-
307 

•S 1783 PCS 

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 of the Employee Retirement 

16 Income Security Act of 1974). 

17 Such plan shall include the schedules required 

18 to be provided under paragraph (1)(B)(i). If 

19 clause (ii) applies, such plan shall set forth the 

20 alternatives considered, explain why the plan is 

21 not reasonably expected to emerge from critical 

22 status by the end of the rehabilitation period, 

23 and specify when, if ever, the plan is expected 

24 to emerge from critical status in accordance 

25 with the rehabilitation plan. 
308 

•S 1783 PCS 

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 of the Employee Retirement Income 

8 Security Act of 1974. 

9 ‘‘(ii) SCHEDULES.—The plan sponsor 

10 may periodically update any schedule of 

11 contribution rates provided under this sub12 section to reflect the experience of the 

13 plan, except that the schedule or schedules 

14 described in paragraph (1)(B)(i) shall be 

15 updated at least once every 3 years. 

16 ‘‘(iii) DURATION OF SCHEDULE.—A 

17 schedule of contribution rates provided by 

18 the plan sponsor and relied upon by bar19 gaining parties in negotiating a collective 

20 bargaining agreement shall remain in ef21 fect for the duration of that collective bar22 gaining agreement. 

23 ‘‘(C) DEFAULT SCHEDULE.—If the collec24 tive bargaining agreement providing for con25 tributions under a multiemployer plan that was 
309 

•S 1783 PCS 

1 in effect at the time the plan entered critical 

2 status expires and, after receiving a schedule 

3 from the plan sponsor under paragraph 

4 (1)(B)(i), the bargaining parties have not 

5 adopted a collective bargaining agreement with 

6 terms consistent with such a schedule, the de7 fault schedule described in the last sentence of 

8 paragraph (1) shall go into effect with respect 

9 to those bargaining parties. 

10 ‘‘(4) REHABILITATION PERIOD.—For purposes 

11 of this section— 

12 ‘‘(A) IN GENERAL.—The rehabilitation pe13 riod for a plan in critical status is the 10-year 

14 period beginning on the first day of the first 

15 plan year of the multiemployer plan following 

16 the earlier of— 

17 ‘‘(i) the second anniversary of the 

18 date of the adoption of the rehabilitation 

19 plan, or 

20 ‘‘(ii) the expiration of the collective 

21 bargaining agreements in effect on the 

22 date of the due date for the actuarial cer23 tification of critical status for the initial 

24 critical year under subsection (a)(1) and 

25 covering, as of such date at least 75 per-
310 

•S 1783 PCS 

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 431(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) of the Employee Retirement Income Secu23 rity Act of 1974 as a failure or refusal by the plan 

24 administrator to file the annual report required to 
311 

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1 be filed with the Secretary of Labor under section 

2 101(b)(4) of such Act. 

3 ‘‘(6) REHABILITATION PLAN ADOPTION PE4 RIOD.—For purposes of this section, the term ‘reha5 bilitation plan adoption period’ means the period be6 ginning on the date of the certification under sub7 section (b)(3)(A) for the initial critical year and end8 ing on the day before the first day of the rehabilita9 tion period. 

10 ‘‘(7) LIMITATION ON REDUCTION IN RATES OF

11 FUTURE ACCRUALS.—Any reduction in the rate of 

12 future accruals under any schedule described in 

13 paragraph (1)(B)(i) shall not reduce the rate of fu14 ture accruals below— 

15 ‘‘(A) a monthly benefit (payable as a single 

16 life annuity commencing at the participant’s 

17 normal retirement age) equal to 1 percent of 

18 the contributions required to be made with re19 spect to a participant, or the equivalent stand20 ard accrual rate for a participant or group of 

21 participants under the collective bargaining 

22 agreements in effect as of the first day of the 

23 initial critical year, or 

24 ‘‘(B) if lower, the accrual rate under the 

25 plan on such first day. 
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•S 1783 PCS 

1 The equivalent standard accrual rate shall be deter2 mined by the plan sponsor based on the standard or 

3 average contribution base units which the plan spon4 sor determines to be representative for active partici5 pants and such other factors as the plan sponsor de6 termines to be relevant. 

7 ‘‘(f) RULES FOR OPERATION OF PLAN DURING

8 ADOPTION AND REHABILITATION PERIOD.— 

9 ‘‘(1) COMPLIANCE WITH REHABILITATION

10 PLAN.— 

11 ‘‘(A) IN GENERAL.—A plan may not be 

12 amended after the date of the adoption of a re13 habilitation plan under subsection (e) so as to 

14 be inconsistent with the rehabilitation plan. 

15 ‘‘(B) SPECIAL RULES FOR BENEFIT IN16 CREASES.—A plan may not be amended after 

17 the date of the adoption of a rehabilitation plan 

18 under subsection (e) so as to increase benefits, 

19 including future benefit accruals, unless the 

20 plan actuary certifies that such increase is paid 

21 for out of additional contributions not con22 templated by the rehabilitation plan, and, after 

23 taking into account the benefit increase, the 

24 multiemployer plan still is reasonably expected 

25 to emerge from critical status by the end of the 
313 

•S 1783 PCS 

1 rehabilitation period on the schedule con2 templated in the rehabilitation plan. 

3 ‘‘(2) RESTRICTION ON LUMP SUMS AND SIMI4 LAR BENEFITS.— 

5 ‘‘(A) IN GENERAL.—Effective on the date 

6 the notice of certification of the plan’s critical 

7 status for the initial critical year under sub8 section (b)(3)(D) is sent, and notwithstanding 

9 section 411(d)(6), the plan shall not pay— 

10 ‘‘(i) any payment, in excess of the 

11 monthly amount paid under a single life 

12 annuity (plus any social security supple13 ments described in the last sentence of sec14 tion 411(b)(1)(A)), 

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.—Subparagraph (A) 

21 shall not apply to a benefit which under section 

22 411(a)(11) may be immediately distributed 

23 without the consent of the participant. 

24 ‘‘(3) ADJUSTMENTS DISREGARDED IN WITH25 DRAWAL LIABILITY DETERMINATION.—Any benefit 
314 

•S 1783 PCS 

1 reductions under this subsection shall be disregarded 

2 in determining a plan’s unfunded vested benefits for 

3 purposes of determining an employer’s withdrawal li4 ability under section 4201 of the Employee Retire5 ment Income Security Act of 1974. 

6 ‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE7 RIOD.—During the rehabilitation plan adoption pe8 riod— 

9 ‘‘(A) the plan sponsor may not accept a 

10 collective bargaining agreement or participation 

11 agreement with respect to the multiemployer 

12 plan that provides for— 

13 ‘‘(i) a reduction in the level of con14 tributions for any participants, 

15 ‘‘(ii) a suspension of contributions 

16 with respect to any period of service, or 

17 ‘‘(iii) any new direct or indirect exclu18 sion of younger or newly hired employees 

19 from plan participation, and 

20 ‘‘(B) no amendment of the plan which in21 creases the liabilities of the plan by reason of 

22 any increase in benefits, any change in the ac23 crual of benefits, or any change in the rate at 

24 which benefits become nonforfeitable under the 

25 plan may be adopted unless the amendment is 
315 

•S 1783 PCS 

1 required as a condition of qualification under 

2 part I of subchapter D of chapter 1 or to com3 ply with other applicable law. 

4 ‘‘(5) FAILURE TO MEET REQUIREMENTS.— 

5 ‘‘(A) IN GENERAL.—Notwithstanding sec6 tion 4971(g), if a plan— 

7 ‘‘(i) fails to meet the requirements of 

8 subsection (e) by the end of the rehabilita9 tion period, or 

10 ‘‘(ii) has received a certification under 

11 subsection (b)(3)(A)(ii) for 3 consecutive 

12 plan years that the plan is not making the 

13 scheduled progress in meeting its require14 ments under the rehabilitation plan, 

15 the plan shall be treated as having an accumu16 lated funding deficiency for purposes of section 

17 4971 for the last plan year in such period (and 

18 each succeeding plan year until such require19 ments are met) in an amount equal to the 

20 greater of the amount of the contributions nec21 essary to meet such requirements or the 

22 amount of such accumulated funding deficiency 

23 without regard to this paragraph. 

24 ‘‘(B) WAIVER.—In the case of a failure de25 scribed in subparagraph (A) which is due to 
316 

•S 1783 PCS 

1 reasonable cause and not to willful neglect, the 

2 Secretary may waive part or all of the tax im3 posed by section 4971 to the extent that the 

4 payment of such tax would be excessive or oth5 erwise inequitable relative to the failure in6 volved. 

7 ‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR

8 DECISIONS.—If, within 60 days of the due date for adop9 tion of a funding improvement plan under subsection (c) 

10 or a rehabilitation plan under subsection (e), the plan 

11 sponsor of a plan in endangered status or a plan in critical 

12 status has not agreed on a funding improvement plan or 

13 rehabilitation plan, then any member of the board or 

14 group that constitutes the plan sponsor may require that 

15 the plan sponsor enter into an expedited dispute resolution 

16 procedure for the development and adoption of a funding 

17 improvement plan or rehabilitation plan. 

18 ‘‘(h) NONBARGAINED PARTICIPATION.— 

19 ‘‘(1) BOTH BARGAINED AND NONBARGAINED

20 EMPLOYEE-PARTICIPANTS.—In the case of an em21 ployer that contributes to a multiemployer plan with 

22 respect to both employees who are covered by one or 

23 more collective bargaining agreements and to em24 ployees who are not so covered, if the plan is in en25 dangered status or in critical status, benefits of and 
317 

•S 1783 PCS 

1 contributions for the nonbargained employees, in2 cluding surcharges on those contributions, shall be 

3 determined as if those nonbargained employees were 

4 covered under the first to expire of the employer’s 

5 collective bargaining agreements in effect when the 

6 plan entered endangered or critical status. 

7 ‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In 

8 the case of an employer that contributes to a multi9 employer plan only with respect to employees who 

10 are not covered by a collective bargaining agreement, 

11 this section shall be applied as if the employer were 

12 the bargaining parties, and its participation agree13 ment with the plan was a collective bargaining 

14 agreement with a term ending on the first day of the 

15 plan year beginning after the employer is provided 

16 the schedule or schedules described in subsections 

17 (c) and (e). 

18 ‘‘(3) EMPLOYEES COVERED BY ACOLLECTIVE

19 BARGAINING AGREEMENT.—The determination as to 

20 whether an employee covered by a collective bar21 gaining agreement for purposes of this section shall 

22 be made without regard to the special rule in Treas23 ury Regulation section 1.410(b)–6(d)(ii)(D). 

24 ‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For pur25 poses of this section— 
318 

•S 1783 PCS 

1 ‘‘(1) BARGAINING PARTY.—The term ‘bar2 gaining party’ means, in connection with a multiem3 ployer plan— 

4 ‘‘(A) an employer that has an obligation to 

5 contribute under the plan, and 

6 ‘‘(B) an employee organization which, for 

7 purposes of collective bargaining, represents 

8 plan participants employed by such an em9 ployer. 

10 ‘‘(2) FUNDED PERCENTAGE.—The term ‘fund11 ed percentage’ means the percentage equal to a frac12 tion— 

13 ‘‘(A) the numerator of which is the value 

14 of the plan’s assets, as determined under sec15 tion 431(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 

19 431(c)(3). 

20 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.— 

21 The term ‘accumulated funding deficiency’ has the 

22 meaning given such term in section 412(a). 

23 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active 

24 participant’ means, in connection with a multiem-
319 

•S 1783 PCS 

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, such person is entitled to such 

22 a benefit under the plan. 

23 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term 

24 ‘obligation to contribute’ has the meaning given such 
320 

•S 1783 PCS 

1 term under section 4212(a) of the Employee Retire2 ment Income Security Act of 1974. 

3 ‘‘(8) ACTUARIAL METHOD.—Notwithstanding 

4 any other provision of this section, the actuary’s de5 terminations with respect to a plan’s normal cost, 

6 actuarial accrued liability, and improvements in a 

7 plan’s funded percentage under this section shall be 

8 based upon the unit credit funding method (whether 

9 or not that method is used for the plan’s actuarial 

10 valuation).’’ 

11 (b) EFFECTIVE DATES.— 

12 (1) IN GENERAL.—The amendment made by 

13 this section shall apply with respect to plan years be14 ginning after 2006. 

15 (2) SPECIAL RULE FOR CERTAIN RESTORED

16 BENEFITS.—In the case of a multiemployer plan— 

17 (A) with respect to which benefits were re18 duced pursuant to a plan amendment adopted 

19 on or after January 1, 2002, and before June 

20 30, 2005, and 

21 (B) which, pursuant to the plan document, 

22 the trust agreement, or a formal written com23 munication from the plan sponsor to partici24 pants provided before June 30, 2005, provided 

25 for the restoration of such benefits, 
321 

•S 1783 PCS 

1 the amendments made by this section shall not apply 

2 to such benefit restorations to the extent that any 

3 restriction on the providing or accrual of such bene4 fits would otherwise apply by reason of such amend5 ments. 

6 PART III—SUNSET OF FUNDING RULES 

7 SEC. 216. SUNSET OF FUNDING RULES. 

8 (a) REPORT.—Not later than December 31, 2011, 

9 the Secretary of Labor, the Secretary of the Treasury, and 

10 the Executive Director of the Pension Benefit Guaranty 

11 Corporation shall conduct a study of the effect of the 

12 amendments made by this subtitle on the operation and 

13 funding status of multiemployer plans and shall report the 

14 results of such study, including any recommendations for 

15 legislation, to the Congress. 

16 (b) SUNSET.—Notwithstanding any other provision 

17 of this Act, the provisions of, and the amendments made 

18 by, this subtitle shall not apply to plan years after Decem19 ber 31, 2014. 
322 

•S 1783 PCS 

1 Subtitle B—Deduction and Related 

2 Provisions 

3 SEC. 221. DEDUCTION LIMITS FOR MULTIEMPLOYER 

4 PLANS. 

5 (a) INCREASE IN DEDUCTION.—Section 

6 404(a)(1)(D) of the Internal Revenue Code of 1986, as 

7 amended by this Act, is amended to read as follows: 

8 ‘‘(D) AMOUNT DETERMINED ON BASIS OF

9 UNFUNDED CURRENT LIABILITY.— 

10 ‘‘(i) IN GENERAL.—In the case of a 

11 defined benefit plan which is a multiem12 ployer plan, except as provided in regula13 tions, the maximum amount deductible 

14 under the limitations of this paragraph 

15 shall not be less than the unfunded current 

16 liability of the plan. 

17 ‘‘(ii) UNFUNDED CURRENT LIABIL18 ITY.—For purposes of clause (i), the term 

19 ‘unfunded current liability’ means the ex20 cess (if any) of— 

21 ‘‘(I) 130 percent of the current 

22 liability of the plan determined under 

23 section 431(c)(6)(C), over 
323 

•S 1783 PCS 

1 ‘‘(II) the value of the plan’s as2 sets determined under section 

3 431(c)(2).’’. 

4 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

5 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

6 DEFINED BENEFIT PLANS.— 

7 (1) IN GENERAL.—Section 404(a)(7)(C) of such 

8 Code, as amended by this Act, is amended by adding 

9 at the end the following new clause: 

10 ‘‘(v) MULTIEMPLOYER PLANS.—In ap11 plying this paragraph, any multiemployer 

12 plan shall not be taken into account.’’. 

13 (2) CONFORMING AMENDMENT.—Section 

14 404(a)(7)(A) of such Code is amended by striking 

15 the last sentence. 

16 (c) EFFECTIVE DATES.— 

17 (1) DEDUCTION LIMIT.—The amendment made 

18 by subsection (a) shall apply to years beginning after 

19 December 31, 2006. 

20 (2) EXCEPTION.—The amendments made by 

21 subsection (b) shall apply to years beginning after 

22 December 31, 2005. 
324 

•S 1783 PCS 

1 SEC. 222. TRANSFER OF EXCESS PENSION ASSETS TO MUL2 TIEMPLOYER HEALTH PLAN. 

3 (a) IN GENERAL.—Section 420(e) of the Internal 

4 Revenue Code of 1986 (relating to definitions and special 

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

6 paragraph: 

7 ‘‘(5) APPLICATION TO MULTIEMPLOYER

8 PLAN.—In the case of any plan to which section 

9 404(c) applies (or any successor plan primarily cov10 ering employees in the building and construction in11 dustry)— 

12 ‘‘(A) the prohibition under subsection (a) 

13 on the application of this section to a multiem14 ployer plan shall not apply, and 

15 ‘‘(B) this section shall be applied to any 

16 such plan— 

17 ‘‘(i) by treating any reference in this 

18 section to an employer as a reference to all 

19 employers maintaining the plan (or, if ap20 propriate, the plan sponsor), and 

21 ‘‘(ii) in accordance with such modi22 fications of this section (and the provisions 

23 of this title and the Employee Retirement 

24 Income Security Act of 1974 relating to 

25 this section) as the Secretary determines 
325 

•S 1783 PCS 

1 appropriate to reflect the fact the plan is 

2 not maintained by a single employer.’’ 

3 (b) AMENDMENTS OF ERISA.— 

4 (1) Section 101(e)(3) of the Employee Retire5 ment Income Security Act of 1974 (29 U.S.C. 

6 1021(e)(3)) is amended by striking ‘‘American Jobs 

7 Creation Act of 2004’’ and inserting ‘‘Pension Secu8 rity and Transparency Act of 2005’’. 

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

10 1103(c)(1)) is amended by striking ‘‘American Jobs 

11 Creation Act of 2004’’ and inserting ‘‘Pension Secu12 rity and Transparency Act of 2005’’. 

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

14 1108(b)(13)) is amended by striking ‘‘American 

15 Jobs Creation Act of 2004’’ and inserting ‘‘Pension 

16 Security and Transparency Act of 2005’’. 

17 (c) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to transfers made in taxable years 

19 beginning after December 31, 2004. 

20 TITLE III—INTEREST RATE 

21 ASSUMPTIONS 

22 SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINA23 TION OF LUMP SUM DISTRIBUTIONS. 

24 (a) AMENDMENTS OF ERISA.— 
326 

•S 1783 PCS 

1 (1) IN GENERAL.—Section 205(g)(3)(A) of the 

2 Employee Retirement Income Security Act of 1974 

3 (29 U.S.C. 1055(g)(3)(A)) is amended by adding at 

4 the end the following new sentence: ‘‘In the case of 

5 plan years beginning after 2006, the preceding sen6 tence shall be applied by using the applicable yield 

7 curve method under subparagraph (C) rather than 

8 the applicable interest rate.’’. 

9 (2) APPLICABLE YIELD CURVE METHOD.—Sec10 tion 205(g)(3) of such Act (29 U.S.C. 1055(g)(3)) 

11 is amended by adding at the end the following new 

12 subparagraphs: 

13 ‘‘(C) APPLICABLE YIELD CURVE METH14 OD.—For purposes of subparagraph (A), the 

15 term ‘applicable yield curve method’ means— 

16 ‘‘(i) the phase-in yield curve method 

17 in the case of plan years beginning in 

18 2007, 2008, and 2009, and 

19 ‘‘(ii) the yield curve method for years 

20 beginning after 2009. 

21 ‘‘(D) YIELD CURVE METHOD.—For pur22 poses of this paragraph— 

23 ‘‘(i) IN GENERAL.—The yield curve 

24 method is a method under which present 

25 value is determined— 
327 

•S 1783 PCS 

1 ‘‘(I) by using interest rates 

2 drawn from a yield curve which is pre3 scribed by the Secretary of the Treas4 ury and which reflects the yield on 

5 high-quality corporate bonds with 

6 varying maturities, and 

7 ‘‘(II) by matching the timing of 

8 the expected benefit payments under 

9 the plan to the interest rates on such 

10 yield curve. 

11 ‘‘(ii) PUBLICATION.—Each month the 

12 Secretary of the Treasury shall publish any 

13 yield curve prescribed under this subpara14 graph which shall apply to plan years be15 ginning in such month and such yield 

16 curve shall be based on average interest 

17 rates for business days occurring during 

18 the 3 preceding months. 

19 ‘‘(E) PHASE-IN YIELD CURVE METHOD.— 

20 ‘‘(i) IN GENERAL.—Present value de21 termined under the phase-in yield curve 

22 method shall be equal to the sum of— 

23 ‘‘(I) the applicable percentage of 

24 such amount determined under the 
328 

•S 1783 PCS 

1 yield curve method described in sub2 paragraph (D), and 

3 ‘‘(II) the product of such amount 

4 determined by using the applicable in5 terest rate and a percentage equal to 

6 100 percent minus the applicable per7 centage. 

8 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

9 purposes of clause (i), the applicable per10 centage is 25 percent for plan years begin11 ning in 2007, 50 percent for plan years be12 ginning in 2008, and 75 percent for plan 

13 years beginning in 2009.’’. 

14 (b) AMENDMENTS OF INTERNAL REVENUE CODE.— 

15 (1) IN GENERAL.—Section 417(e)(3)(A) of the 

16 Internal Revenue Code of 1986 (relating to deter17 mination of present value) is amended by adding at 

18 the end the following new sentence: ‘‘In the case of 

19 plan years beginning after 2006, the preceding sen20 tence shall be applied by using the applicable yield 

21 curve method under subparagraph (C) rather than 

22 the applicable interest rate.’’ 

23 (2) APPLICABLE YIELD CURVE METHOD.—Sec24 tion 417(e) of such Code is amended by adding at 

25 the end the following new subparagraphs: 
329 

•S 1783 PCS 

1 ‘‘(C) APPLICABLE YIELD CURVE METH2 OD.—For purposes of subparagraph (A), the 

3 term ‘applicable yield curve method’ means— 

4 ‘‘(i) the phase-in yield curve method 

5 in the case of plan years beginning in 

6 2007, 2008, and 2009, and 

7 ‘‘(ii) the yield curve method for years 

8 beginning after 2009. 

9 ‘‘(D) YIELD CURVE METHOD.—For pur10 poses of this paragraph— 

11 ‘‘(i) IN GENERAL.—The yield curve 

12 method is a method under which present 

13 value is determined— 

14 ‘‘(I) by using interest rates 

15 drawn from a yield curve which is pre16 scribed by the Secretary and which re17 flects the yield on high-quality cor18 porate bonds with varying maturities, 

19 and 

20 ‘‘(II) by matching the timing of 

21 the expected benefit payments under 

22 the plan to the interest rates on such 

23 yield curve. 

24 ‘‘(ii) PUBLICATION.—Each month the 

25 Secretary shall publish any yield curve pre-
330 

•S 1783 PCS 

1 scribed under this subparagraph which 

2 shall apply to plan years beginning in such 

3 month and such yield curve shall be based 

4 on average interest rates for business days 

5 occurring during the 3 preceding months. 

6 ‘‘(E) PHASE-IN YIELD CURVE METHOD.— 

7 ‘‘(i) IN GENERAL.—Present value de8 termined under the phase-in yield curve 

9 method shall be equal to the sum of— 

10 ‘‘(I) the applicable percentage of 

11 such amount determined under the 

12 yield curve method described in sub13 paragraph (D), and 

14 ‘‘(II) the product of such amount 

15 determined by using the applicable in16 terest rate and a percentage equal to 

17 100 percent minus the applicable per18 centage. 

19 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

20 purposes of clause (i), the applicable per21 centage is 25 percent for plan years begin22 ning in 2007, 50 percent for plan years be23 ginning in 2008, and 75 percent for plan 

24 years beginning in 2009.’’. 
331 

•S 1783 PCS 

1 (c) SPECIAL RULE FOR PLAN AMENDMENTS.—A 

2 plan shall not fail to meet the requirements of section 

3 204(g) of the Employee Retirement Income Security Act 

4 of 1974 or section 411(d)(6) of the Internal Revenue Code 

5 of 1986 solely by reason of the adoption by the plan of 

6 an amendment necessary to meet the requirements of the 

7 amendments made by this section. 

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

9 this section shall apply with respect to plan years begin10 ning after 2006. 

11 SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING 

12 BENEFIT LIMITATIONS TO LUMP SUM DIS13 TRIBUTIONS. 

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

15 415(b)(2)(E) of the Internal Revenue Code of 1986 is 

16 amended to read as follows: 

17 ‘‘(ii) For purposes of adjusting any 

18 benefit under subparagraph (B) for any 

19 form of benefit subject to section 

20 417(e)(3), clause (i) shall be applied by 

21 substituting ‘5.5 percent’ for ‘5 percent’.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 subsection (a) shall apply to years beginning after Decem24 ber 31, 2005. 
332 

•S 1783 PCS 

1 SEC. 303. RESTRICTIONS ON FUNDING OF NONQUALIFIED 

2 DEFERRED COMPENSATION PLANS BY EM3 PLOYERS MAINTAINING UNDERFUNDED OR 

4 TERMINATED SINGLE-EMPLOYER PLANS. 

5 (a) AMENDMENTS OF ERISA.— 

6 (1) IN GENERAL.—Part 3 of subtitle A of title 

7 I of the Employee Retirement Income Security Act 

8 of 1974 (29 U.S.C. 1081 et seq.), as amended by 

9 this Act, is amended by adding at the end the fol10 lowing new section: 

11 ‘‘NOTICE OF FUNDING OF NONQUALIFIED DEFERRED

12 COMPENSATION PLANS

13 ‘‘SEC. 306. (a) NOTICE AND ACCESS.— 

14 ‘‘(1) NOTICE RELATING TO RESTRICTED PE15 RIOD.—The plan administrator of a defined benefit 

16 plan which is a single-employer plan shall notify 

17 each plan sponsor of the plan within a reasonable 

18 period of time after the occurrence of an event which 

19 results in a restricted period with respect to the 

20 plan. Such notice shall include information— 

21 ‘‘(A) as to the duration of the restricted 

22 period, and 

23 ‘‘(B) the restrictions under section 

24 409A(b)(3) of the Internal Revenue Code of 

25 1986 which apply during the restricted period 
333 

•S 1783 PCS 

1 to the plan sponsor and any member of a con2 trolled group which includes such sponsor. 

3 ‘‘(2) NOTICE OF EXISTENCE OF, AND TRANS4 FERS TO, NONQUALIFIED DEFERRED COMPENSATION

5 PLANS.— 

6 ‘‘(A) INITIAL NOTICE.—Within 30 days of 

7 receipt of a notice under paragraph (1), each 

8 plan sponsor shall notify the plan administrator 

9 of the plan described in paragraph (1)— 

10 ‘‘(i) of nonqualified deferred com11 pensation plans maintained by the plan 

12 sponsor or any member of a controlled 

13 group which includes such sponsor, and 

14 ‘‘(ii) the amount of any assets trans15 ferred or otherwise reserved by the plan 

16 sponsor or such member in violation of sec17 tion 409A(b)(3) of such Code during any 

18 portion of the restricted period occurring 

19 on or before the date the plan sponsor pro20 vides such notice. 

21 ‘‘(B) ADDITIONAL NOTICES.—If, after the 

22 date on which notice is provided under subpara23 graph (A) and during any portion of the re24 maining restricted period specified in the notice 

25 provided under paragraph (1), the plan sponsor 
334 

•S 1783 PCS 

1 of a plan described in paragraph (1) or a mem2 ber of a controlled group which includes such 

3 sponsor— 

4 ‘‘(i) transfers or reserves assets in vio5 lation of section 409A(b)(3) of such Code, 

6 or 

7 ‘‘(ii) establishes a new nonqualified 

8 deferred compensation plan, 

9 the plan sponsor shall notify the plan adminis10 trator of the plan described in paragraph (1) of 

11 such transfer, reservation, or establishment 

12 within 3 days of the date of such action. 

13 ‘‘(3) ACCESS TO FINANCIAL DATA.—Any fidu14 ciary of the plan shall have access to the financial 

15 records of a plan sponsor or any member of a con16 trolled group which includes such sponsor to deter17 mine if assets were transferred or otherwise reserved 

18 in violation of section 409A(b)(3) of such Code. 

19 ‘‘(4) FORM AND MANNER.—The Secretary may 

20 prescribe the form and manner of a notice required 

21 under this section. Such a notice shall be written in 

22 a manner calculated to be understood by the average 

23 plan participant and may be delivered in written, 

24 electronic, or other appropriate form to the extent 
335 

•S 1783 PCS 

1 that such form is reasonably accessible to the recipi2 ent. 

3 ‘‘(b) RESTRICTED PERIOD.—For purposes of this 

4 section, the term ‘restricted period’ means, with respect 

5 to any plan described in subsection (a)(1)— 

6 ‘‘(1) any period— 

7 ‘‘(A) beginning on the first day of a plan 

8 year following a plan year for which the plan’s 

9 adjusted funding target attainment percentage 

10 (as defined in section 303) was less than 60 

11 percent (determined as of the close of such 

12 year), and 

13 ‘‘(B) ending on the last day of the first pe14 riod of 2 consecutive plan years (beginning on 

15 or after such first day) for which such percent16 age was at least 60 percent, 

17 ‘‘(2) any period the plan sponsor is in bank18 ruptcy, and 

19 ‘‘(3) the 12-month period beginning on the date 

20 which is 6 months before the termination date of the 

21 plan if, as of the termination date, the plan is not 

22 sufficient for benefit liabilities (within the meaning 

23 of section 4041). 
336 

•S 1783 PCS 

1 In the case of a plan which is in at-risk status, paragraph 

2 (1) shall be applied by substituting ‘80 percent’ for ‘60 

3 percent’ each place it appears. 

4 ‘‘(c) NONQUALIFIED DEFERRED COMPENSATION

5 PLAN.—For purposes of this section— 

6 ‘‘(1) IN GENERAL.—The term ‘nonqualified de7 ferred compensation plan’ means any plan that pro8 vides for the deferral of compensation, other than— 

9 ‘‘(A) a qualified employer plan, and 

10 ‘‘(B) any bona fide vacation leave, sick 

11 leave, compensatory time, disability pay, or 

12 death benefit plan. 

13 ‘‘(2) QUALIFIED EMPLOYER PLAN.—The term 

14 ‘qualified employer plan’ means— 

15 ‘‘(A) any plan, contract, pension, account, 

16 or trust described in subparagraph (A) or (B) 

17 of section 219(g)(5) of the Internal Revenue 

18 Code of 1986 (without regard to subparagraph 

19 (A)(iii)), 

20 ‘‘(B) any eligible deferred compensation 

21 plan (within the meaning of section 457(b)) of 

22 such Code, and 

23 ‘‘(C) any plan described in section 415(m) 

24 of such Code. 
337 

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1 ‘‘(3) PLAN INCLUDES ARRANGEMENTS, ETC.— 

2 The term ‘plan’ includes any agreement or arrange3 ment, including an agreement or arrangement that 

4 includes one person. 

5 ‘‘(d) OTHER DEFINITIONS.—For purposes of this 

6 section— 

7 ‘‘(1) APPLICABLE COVERED EMPLOYEE.— 

8 ‘‘(A) IN GENERAL.—The term ‘applicable 

9 covered employee’ mean any— 

10 ‘‘(i) covered employee of a plan spon11 sor, 

12 ‘‘(ii) covered employee of a member of 

13 a controlled group which includes the plan 

14 sponsor, and 

15 ‘‘(iii) former employee who was a cov16 ered employee at the time of termination of 

17 employment with the plan sponsor or a 

18 member of a controlled group which in19 cludes the plan sponsor. 

20 ‘‘(B) COVERED EMPLOYEE.—The term 

21 ‘covered employee’ has the meaning given such 

22 term by section 162(m)(3) of the Internal Rev23 enue Code of 1986. 
338 

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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 
339 

•S 1783 PCS 

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 
340 

•S 1783 PCS 

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-
341 

•S 1783 PCS 

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. 
342 

•S 1783 PCS 

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— 
343 

•S 1783 PCS 

1 (i) determining unfunded target liabil2 ity under section 4006(a)(3)(E)(ii) of the 

3 Employee Retirement Income Security Act 

4 of 1974, and 

5 (ii) determining any present value or 

6 making any computation under section 412 

7 of the Internal Revenue Code of 1986 or 

8 section 302 of such Act, 

9 the mortality table shall be the mortality table used 

10 by the plan. 

11 (B) Notwithstanding section 303(e)(3) of 

12 such Act or 430(e)(3) of such Code, for pur13 poses of section 303(c)(2)(B) of such Act and 

14 430(c)(2)(B) of such Code, the value of plan 

15 assets shall not be reduced by the amount of 

16 the prefunding balance if, pursuant to a binding 

17 written agreement with the Pension Benefit 

18 Guaranty Corporation entered into before Janu19 ary 1, 2006, the prefunding balance is not 

20 available to reduce the minimum required con21 tribution for the plan year. 

22 (3) DEFINITIONS.—Any term used in this sec23 tion which is also used in section 303 of such Act 

24 or section 430 of such Code shall have the meaning 

25 provided such term in such section. 
344 

•S 1783 PCS 

1 (4) CONFORMING AMENDMENT.—Section 769 

2 of the Retirement Protection Act of 1994 is amend3 ed by striking subsection (c). 

4 (5) EFFECTIVE DATE.—The amendments made 

5 by this subsection shall apply to plan years begin6 ning after 2006. 

7 TITLE IV—IMPROVEMENTS IN 

8 PBGC GUARANTEE PROVISIONS 

9 SEC. 401. INCREASES IN PBGC PREMIUMS. 

10 (a) FLAT-RATE PREMIUMS.—Section 

11 4006(a)(3)(A)(i) of the Employee Retirement Income Se12 curity Act of 1974 (29 U.S.C. 1306(a)(3)(A)(i)) is amend13 ed to read as follows: 

14 ‘‘(i) in the case of a single-employer plan, an 

15 amount equal to— 

16 ‘‘(I) for plan years beginning after Decem17 ber 31, 1990, and before January 1, 2006, $19, 

18 or 

19 ‘‘(II) for plan years beginning after De20 cember 31, 2005, $30, 

21 plus the additional premium (if any) determined 

22 under subparagraph (E) for each individual who is 

23 a participant in such plan during the plan year;’’. 

24 (b) RISK-BASED PREMIUMS.— 
345 

•S 1783 PCS 

1 (1) CONFORMING AMENDMENTS RELATED TO

2 FUNDING RULES FOR SINGLE-EMPLOYER PLANS.— 

3 Section 4006(a)(3)(E) of such Act (as amended by 

4 paragraph (1)) is amended by striking clauses (iii) 

5 and (iv) and inserting the following: 

6 ‘‘(iii)(I) For purposes of clause (ii), except as pro7 vided in subclause (II), the term ‘unfunded vested bene8 fits’ means, for a plan year, the amount which would be 

9 the plan’s funding shortfall (as defined in section 

10 303(c)(4)), if the value of plan assets of the plan were 

11 equal to the fair market value of such assets and only vest12 ed benefits were taken into account. 

13 ‘‘(II) The interest rate used in valuing vested benefits 

14 for purposes of subclause (I) shall be equal to the first, 

15 second, or third segment rate which would be determined 

16 under section 303(h)(2)(C) if section 303(h)(2)(D) were 

17 applied by using the yields on investment grade corporate 

18 bonds with varying maturities rather than the average of 

19 such yields for a 12-month period.’’. 

20 (2) EFFECTIVE DATE.—The amendments made 

21 by paragraph (1) shall apply with respect to plan 

22 years beginning after 2005. 

23 (c) FLAT-RATE PREMIUM ADJUSTMENT.— 

24 (1) IN GENERAL.—Beginning in 2011, and 

25 every 5 years thereafter, the Board of Directors of 
346 

•S 1783 PCS 

1 the Pension Benefit Guaranty Corporation under 

2 title IV of the Employee Retirement Income Security 

3 Act (29 U.S.C. 1301 et seq.) shall submit to Con4 gress a report that describes any recommendations 

5 for adjusting the premium rate payable to the Cor6 poration described under section 4006(a)(3)(A)(i) of 

7 such Act (as amended by subsection (a)). 

8 (2) CONSIDERATIONS.—In developing the re9 port described under paragraph (1), the Corporation 

10 shall consider— 

11 (A) the national average wage index (as 

12 defined in section 209(k)(1) of the Social Secu13 rity Act (42 U.S.C. 409(k)(1))); 

14 (B) the finances of the Corporation as of 

15 the date of such report and an actuarial evalua16 tion of the expected operations and status of 

17 the funds established under section 4005 of 

18 such title IV (29 U.S.C. 1305) for the 5 years 

19 succeeding such date; 

20 (C) the impact of any increases in such 

21 premium rate on plan sponsors subject to such 

22 title IV; and 

23 (D) such other factors determined relevant 

24 by the Corporation. 
347 

•S 1783 PCS 

1 SEC. 402. AUTHORITY TO ENTER ALTERNATIVE FUNDING 

2 AGREEMENTS TO PREVENT PLAN TERMI3 NATIONS. 

4 (a) AUTHORITY TO ENTER INTO AGREEMENTS.— 

5 (1) DISTRESS TERMINATIONS.—Section 4041(c) 

6 of the Employee Retirement Income Security Act of 

7 1974 (29 U.S.C. 1341(c)) is amended by adding at 

8 the end the following: 

9 ‘‘(4) ALTERNATIVE FUNDING AGREEMENTS.— 

10 ‘‘(A) IN GENERAL.—If the corporation de11 termines that— 

12 ‘‘(i) a plan meets the requirements for 

13 a distress termination under this sub14 section without regard to an alternative 

15 funding agreement under section 4047(a), 

16 and 

17 ‘‘(ii) the termination of the plan 

18 would not be necessary if such an agree19 ment were entered into, 

20 the corporation may request that the Secretary 

21 of the Treasury, in consultation with the cor22 poration, may enter into such an agreement 

23 with the contributing sponsors under the plan. 

24 ‘‘(B) EARLY ACTION INITIATIVES.—Sub25 ject to the limitations in subsection (a)(3), if— 
348 

•S 1783 PCS 

1 ‘‘(i) the corporation determines that it 

2 is reasonable to believe that a plan may be 

3 subject to a distress termination within 6 

4 months unless action is taken, the corpora5 tion may request that the Secretary of the 

6 Treasury, in consultation with the corpora7 tion, enter into an alternative funding 

8 agreement under section 4047(a); and 

9 ‘‘(ii) the corporation, upon the request 

10 of the contributing sponsor of a plan or 

11 other person, determines that it is reason12 able to believe that a plan may be subject 

13 to a distress termination within 2 years 

14 unless action is taken, the corporation may 

15 request that the Secretary of the Treasury, 

16 in consultation with the corporation, enter 

17 into an alternative funding agreement 

18 under section 4047(a).’’. 

19 (2) INVOLUNTARY TERMINATIONS.—Section 

20 4042 of the Employee Retirement Income Security 

21 Act of 1974 (29 U.S.C. 1342) is amended by adding 

22 at the end the following: 

23 ‘‘(i) ALTERNATIVE FUNDING AGREEMENTS.—If— 

24 ‘‘(1) the corporation determines that it is rea25 sonable to believe that a plan will meet the require-
349 

•S 1783 PCS 

1 ments for an involuntary termination under this sec2 tion without regard to an alternative funding agree3 ment under section 4047(a) within 6 months unless 

4 action is taken, or 

5 ‘‘(B) the corporation, upon the request of the 

6 contributing sponsor of a plan or other person, de7 termines that it is reasonable to believe that a plan 

8 may be subject to an involuntary termination within 

9 2 years unless action is taken, 

10 and such a termination would not be necessary if such 

11 an agreement is entered into, the corporation may request 

12 that the Secretary of the Treasury, in consultation with 

13 the corporation, enter into an alternative funding agree14 ment under section 4047(a).’’. 

15 (b) ALTERNATIVE FUNDING SCHEDULES TO PRE16 VENT PLAN TERMINATION.— 

17 (1) IN GENERAL.—Section 4047 of the Em18 ployee Retirement Income Security Act of 1974 (29 

19 U.S.C. 1347) is amended by— 

20 (A) striking the section heading and all 

21 that follows though ‘‘Whenever’’ and insert22 ing— 
350 

•S 1783 PCS 

1 ‘‘SEC. 4047. ALTERNATIVE FUNDING SCHEDULES TO PRE2 VENT TERMINATION; RESTORATION OF TER3 MINATED PLANS. 

4 ‘‘(a) ALTERNATIVE FUNDING AGREEMENTS.— 

5 ‘‘(1) IN GENERAL.—If the requirements of sec6 tion 4041(c)(4) or 4042(i) are met with respect to 

7 any plan, the Secretary of the Treasury, in consulta8 tion with the corporation, may enter into an alter9 native funding agreement with the contributing 

10 sponsors under the plan that meets the requirements 

11 of this subsection. 

12 ‘‘(2) OTHER REQUIREMENTS.—An alternative 

13 funding agreement may be entered into by the Sec14 retary of the Treasury, in consultation with corpora15 tion, only if— 

16 ‘‘(A) such Secretary finds the agreement to 

17 be in the best interests of the participants and 

18 beneficiaries; and 

19 ‘‘(B) the agreement meets the require20 ments set forth by such Secretaryin regulations. 

21 ‘‘(3) ALTERNATIVE FUNDING AGREEMENT.— 

22 ‘‘(A) IN GENERAL.—An agreement meets 

23 the requirements of this subsection if the agree24 ment— 
351 

•S 1783 PCS 

1 ‘‘(i) provides for an additional amorti2 zation schedule for a period not to exceed 

3 10 years; 

4 ‘‘(ii) requires the plan to pay at the 

5 time the agreement is entered into any 

6 professional fees or other expenses in7 curred by the Secretary of the Treasury or 

8 the corporation in connection with the 

9 agreements, 

10 ‘‘(iii) requires approval by the cor11 poration before the contributing sponsor 

12 establishes or maintains any other defined 

13 benefit plan other than any multiemployer 

14 plan that covers a substantial number of 

15 employees who are covered by the plan 

16 subject to the agreement or who perform 

17 substantially the same type of work with 

18 respect to the same business operations as 

19 employees covered by such plan, and 

20 ‘‘(iv) provides for a termination date, 

21 or a schedule of termination dates, for the 

22 purpose of the guarantee under section 

23 4022, to apply if a plan terminates during 

24 the period that the agreement is in effect. 
352 

•S 1783 PCS 

1 ‘‘(B) OTHER CONDITIONS.—Notwith2 standing any other provision of this Act, an 

3 agreement meeting the requirements of this 

4 subsection may provide— 

5 ‘‘(i) for restrictions on, or the elimi6 nation of, future accruals, but only to the 

7 extent that such restrictions or elimi8 nations would have been permitted under 

9 section 204(g) or section 411(d)(6) of the 

10 Internal Revenue Code of 1986 if they had 

11 been implemented by a plan amendment 

12 adopted immediately before the effective 

13 date of the agreement, 

14 ‘‘(ii) that the contributing sponsors 

15 will provide security or other collateral in 

16 such form and amount as specified in the 

17 agreement, 

18 ‘‘(iii) conditions under which the plan 

19 could be terminated in a standard termi20 nation under section 4041(b) or conditions 

21 under which accruals to which clause (i) 

22 applies could resume in the future, and 

23 ‘‘(iv) for such other terms and condi24 tions as the Secretary of the Treasury, in 

25 consultation with the corporation, deter-
353 

•S 1783 PCS 

1 mines necessary to protect the interests of 

2 the corporation. 

3 ‘‘(C) EMPLOYEE REQUIREMENTS.— 

4 ‘‘(i) IN GENERAL.—An agreement 

5 meets the requirements of this subsection 

6 only if— 

7 ‘‘(I) at least 60 days before the 

8 agreement is to take effect the con9 tributing sponsors notify affected par10 ties (other than the corporation) of 

11 the terms of the agreement and its ef12 fect on such parties, and 

13 ‘‘(II) each employee organization 

14 representing participants in the plan 

15 approves the agreement before it 

16 takes effect. 

17 ‘‘(ii) FORM AND MANNER OF NO18 TICE.—The notice under clause (i) shall be 

19 written in a manner calculated to be un20 derstood by the average plan participant 

21 and may be provided to a person des22 ignated, in writing, by the person to which 

23 it would otherwise be provided. Such notice 

24 may be provided in written, electronic, or 

25 other appropriate form to the extent such 
354 

•S 1783 PCS 

1 form is reasonably accessible to persons to 

2 whom the notice is required to be provided. 

3 ‘‘(4) COORDINATION WITH MINIMUM FUNDING

4 REQUIREMENTS.—Any alternative funding schedule 

5 under an agreement meeting the requirements under 

6 this subsection shall supersede the minimum funding 

7 requirements of this Act and the Internal Revenue 

8 Code of 1986. For purposes of applying this Act or 

9 such Code, any contribution required under such 

10 schedule shall be treated in the same manner as con11 tributions required under section 302 of this Act 

12 and section 412 of such Code. 

13 ‘‘(b) RESTORATION OF TERMINATED PLANS.— 

14 Whenever’’. 

15 (2) CONFORMING AMENDMENT.—The table of 

16 contents for title IV of such Act is amended by 

17 striking the item relating to section 4047 and insert18 ing the following: 

‘‘4047. Alternative funding schedules to prevent terminations; restoration of 

terminated plans.’’. 

19 (c) AMENDMENTS TO OTHER PROVISIONS.— 

20 (1) QUALIFICATION REQUIREMENT.—Section 

21 401(a) of the Internal Revenue Code of 1986 is 

22 amended by inserting after paragraph (34) the fol23 lowing new paragraph: 
355 

•S 1783 PCS 

1 ‘‘(35) SUCCESSOR PLANS TO CERTAIN PLANS.— 

2 If— 

3 ‘‘(A) an alternative funding agreement de4 scribed in section 4047(a) of the Employee Re5 tirement Income Security Act of 1974 is in ef6 fect with respect to any plan, and 

7 ‘‘(B) the plan is maintained by an em8 ployer that establishes or maintains 1 or more 

9 other defined benefit plans (other than any 

10 multiemployer plan), and such other plans in 

11 combination provide benefit accruals to any 

12 substantial number of successor employees, 

13 the Secretary may, in the Secretary’s discretion, de14 termine that any trust of which any other such plan 

15 is a part does not constitute a qualified trust under 

16 this subsection unless all benefit obligations of the 

17 plan to which the alternative funding agreement ap18 plies have been satisfied. For purposes of this para19 graph, the term ‘successor employee’ means any em20 ployee who is or was covered by the plan to which 

21 the alternative funding agreement applies and any 

22 employee who performs substantially the same type 

23 of work with respect to the same business operations 

24 as an employee covered by such plan.’’. 
356 

•S 1783 PCS 

1 (2) LIMITATION ON DEDUCTIONS UNDER CER2 TAIN PLANS.—Section 404(a)(7)(C) of the Internal 

3 Revenue Code of 1986 is amended by adding at the 

4 end the following: 

5 ‘‘(iii) PLANS SUBJECT TO ALTER6 NATIVE FUNDING AGREEMENTS.—This 

7 paragraph shall not apply to any plan for 

8 a plan year if an alternative funding agree9 ment described in section 4047(a) of the 

10 Employee Retirement Income Security Act 

11 of 1974 is in effect for such year.’’. 

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

13 this section shall take effect on the date of enactment of 

14 this Act. 

15 SEC. 403. SPECIAL FUNDING RULES FOR PLANS MAIN16 TAINED BY COMMERCIAL AIRLINES THAT 

17 ARE AMENDED TO CEASE FUTURE BENEFIT 

18 ACCRUALS. 

19 (a) IN GENERAL.—If an election is made to have this 

20 section apply to an eligible plan— 

21 (1) in the case of any applicable plan year be22 ginning before January 1, 2007, the plan shall not 

23 have an accumulated funding deficiency for purposes 

24 of section 302 of the Employee Retirement Income 

25 Security Act of 1974 and sections 412 and 4971 of 
357 

•S 1783 PCS 

1 the Internal Revenue Code of 1986 if contributions 

2 to the plan for the plan year are not less than the 

3 minimum required contribution determined under 

4 subsection (d) for the plan for the plan year, and 

5 (2) in the case of any applicable plan year be6 ginning on or after January 1, 2007, the minimum 

7 required contribution determined under sections 303 

8 of such Act and 430 of such Code shall, for purposes 

9 of sections 302 and 303 of such Act and sections 

10 412, 430, and 4971 of such Code, be equal to the 

11 minimum required contribution determined under 

12 subsection (d) for the plan for the plan year. 

13 (b) ELIGIBLE PLAN.—For purposes of this section— 

14 (1) IN GENERAL.—The term ‘‘eligible plan’’ 

15 means a defined benefit plan (other than a multiem16 ployer plan) to which sections 302 of such Act and 

17 412 of such Code applies— 

18 (A) which is sponsored by an employer 

19 which is a commercial passenger airline, and 

20 (B) with respect to which the requirements 

21 of paragraphs (2) and (3) are met. 

22 (2) ACCRUAL RESTRICTIONS.—The require23 ments of this paragraph are met if, effective as of 

24 the first day of the first applicable plan year and at 

25 all times thereafter, the plan provides that— 
358 

•S 1783 PCS 

1 (A) the accrued benefit, any death or dis2 ability benefit, and any social security supple3 ment described in the last sentence of section 

4 411(a)(9) of such Code and section 

5 204(b)(1)(G) of such Act, of each participant 

6 are frozen at the amount of such benefit or 

7 supplement immediately before such first day, 

8 and 

9 (B) all other benefits under the plan are 

10 eliminated, 

11 but only to the extent the freezing or elimination of 

12 such benefits would have been permitted under sec13 tion 411(d)(6) of such Code and section 204(g) of 

14 such Act if they had been implemented by a plan 

15 amendment adopted immediately before such first 

16 day. 

17 (3) RESTRICTION ON APPLICABLE BENEFIT IN18 CREASES.—The requirements of this paragraph are 

19 met if no applicable benefit increase (as defined in 

20 section 436(b)(3) of such Code and section 

21 305(b)(3) of such Act, but determined without re22 gard to subparagraph (B) or (C) thereof) takes ef23 fect at any time during the period beginning on July 

24 26, 2005, and ending on the day before the first day 

25 of the first applicable plan year. 
359 

•S 1783 PCS 

1 (c) ELECTIONS AND RELATED TERMS.— 

2 (1) IN GENERAL.—A plan sponsor shall make 

3 the election under subsection (a) at such time and 

4 in such manner as the Secretary of the Treasury 

5 may prescribe. Such election, once made, may be re6 voked only with the consent of such Secretary. 

7 (2) YEARS FOR WHICH ELECTION MADE.— 

8 (A) IN GENERAL.—The plan sponsor may 

9 select the first plan year to which the election 

10 under subsection (a) applies from among plan 

11 years ending after the date of the election. The 

12 election shall apply to such plan year and all 

13 subsequent years. 

14 (B) ELECTION OF NEW PLAN YEAR.—The 

15 plan sponsor may specify a new plan year in the 

16 election under subsection (a) and the plan year 

17 of the plan may be changed to such new plan 

18 year without the approval of the Secretary of 

19 the Treasury. 

20 (3) APPLICABLE PLAN YEAR.—The term ‘‘ap21 plicable plan year’’ means each plan year to which 

22 the election under subsection (a) applies under para23 graph (1). 

24 (d) MINIMUM REQUIRED CONTRIBUTION.— 
360 

•S 1783 PCS 

1 (1) IN GENERAL.—In the case of any applicable 

2 plan year during the amortization period, the min3 imum required contribution shall be the amount nec4 essary to amortize the unfunded liability of the plan, 

5 determined as of the first day of the plan year, in 

6 equal annual installments (until fully amortized) 

7 over the remainder of the amortization period. Such 

8 amount shall be separately determined for each ap9 plicable plan year. 

10 (2) YEARS AFTER AMORTIZATION PERIOD.—In 

11 the case of any plan year beginning after the end of 

12 the amortization period, section 302(a)(2)(A) of 

13 such Act and section 412(a)(2)(A) of such Code 

14 shall apply to such plan, but the prefunding balance 

15 as of the first day of the first of such years under 

16 section 303(f) of such Act and section 430(f) of such 

17 Code shall be zero. 

18 (3) DEFINITIONS.—For purposes of this sec19 tion— 

20 (A) UNFUNDED LIABILITY.—The term 

21 ‘‘unfunded liability’’ means the unfunded ac22 crued liability under the plan, determined under 

23 the unit credit funding method. 

24 (B) AMORTIZATION PERIOD.—The term 

25 ‘‘amortization period’’ means the 14-plan year 
361 

•S 1783 PCS 

1 period beginning with the first applicable plan 

2 year. 

3 (4) OTHER RULES.—In determining the min4 imum required contribution and amortization 

5 amount under this subsection— 

6 (A) the provisions of section 302(c)(3) of 

7 such Act and section 412(c)(3) of such Code, as 

8 in effect before the date of enactment of this 

9 section, shall apply, 

10 (B) the rate of interest under section 

11 302(b) of such Act and section 412(b) of such 

12 Code, as so in effect, shall be used for all cal13 culations requiring an interest rate, and 

14 (C) the value of plan assets shall be equal 

15 to their fair market value. 

16 (e) FUNDING STANDARD ACCOUNT AND

17 PREFUNDING BALANCE.—Any charge or credit in the 

18 funding standard account under section 302 of such Act 

19 or section 412 of such Code, and any prefunding balance 

20 under section 303 of such Act or section 430 of such Code, 

21 as of the day before the first day of the first applicable 

22 plan year, shall be reduced to zero. 

23 (f) AMENDMENTS TO OTHER PROVISIONS.— 

24 (1) QUALIFICATION REQUIREMENT.—Section 

25 401(a)(35) of the Internal Revenue Code of 1986, as 
362 

•S 1783 PCS 

1 added by this Act, is amended by adding at the end 

2 the following: ‘‘This paragraph shall also apply to 

3 any plan during any period during which an amorti4 zation schedule under section 403 of the Pension Se5 curity and Transparency Act of 2005 is in effect.’’ 

6 (2) PBGC LIABILITY LIMITED.—Section 4022 

7 of the Employee Retirement Income Security Act of 

8 1974, as amended by this Act, is amended by adding 

9 at the end the following new subsection: 

10 ‘‘(h) SPECIAL RULE FOR PLANS ELECTING CERTAIN

11 FUNDING REQUIREMENTS.—If any plan makes an elec12 tion under section 403 of the Pension Security and Trans13 parency Act of 2005, then this section and section 

14 4044(a)(3) shall be applied by treating the first day of 

15 the first applicable plan year as the termination date of 

16 the plan.’’. 

17 (3) LIMITATION ON DEDUCTIONS UNDER CER18 TAIN PLANS.—Section 404(a)(7)(C)(iii) of the Inter19 nal Revenue Code of 1986, as added by this Act, is 

20 amended by adding at the end the following new 

21 sentence: ‘‘This clause shall also apply to any plan 

22 for a plan year if an election under section 403 of 

23 the Pension Security and Transparency Act of 2005 

24 is in effect for such year.’’ 
363 

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1 (4) NOTICE.—In the case of a plan amendment 

2 adopted in order to comply with this section, any no3 tice required under section 204(h) of such Act or 

4 section 4980F(e) of such Code shall be provided 

5 within 15 days of the effective date of such plan 

6 amendment. This subsection shall not apply to any 

7 plan unless such plan is maintained pursuant to one 

8 or more collective bargaining agreements between 

9 employee representatives and 1 or more employers. 

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

11 this section shall apply to plan years ending after the date 

12 of the enactment of this Act. 

13 SEC. 404. LIMITATION ON PBGC GUARANTEE OF SHUT14 DOWN AND OTHER BENEFITS. 

15 (a) IN GENERAL.—Section 4022(b) of the Employee 

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

17 1322(b)) is amended by adding at the end the following: 

18 ‘‘(8) If a benefit is payable by reason of— 

19 ‘‘(A) a plant shutdown or similar event; or 

20 ‘‘(B) any event other than attainment of 

21 any age, performance of any service, receipt or 

22 derivation of any compensation, or the occur23 rence of death or disability, 
364 

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1 this section shall be applied as if a plan amendment 

2 had been adopted on the date such event occurred 

3 that provides for the payment of such benefit.’’. 

4 (b) EFFECTIVE DATE.—The amendment made by 

5 this section shall apply to benefits that become payable 

6 as a result of a plant shutdown or other similar event, 

7 as such terms are used in the amendment made by sub8 section (a), that occurs after July 26, 2005. 

9 SEC. 405. RULES RELATING TO BANKRUPTCY OF EM10 PLOYER. 

11 (a) GUARANTEE.—Section 4022 of the Employee Re12 tirement Income Security Act of 1974 (29 U.S.C. 1322), 

13 as amended by this Act, is amended by adding at the end 

14 the following: 

15 ‘‘(i) 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 this 

22 section shall be applied by treating the date such petition 

23 was filed as the date of plan termination.’’. 

24 (b) ALLOCATION OF ASSETS AMONG PRIORITY

25 GROUPS IN BANKRUPTCY PROCEEDINGS.—Section 4044 
365 

•S 1783 PCS 

1 of the Employee Retirement Income Security Act of 1974 

2 (29 U.S.C. 1344) is amended by adding at the end the 

3 following: 

4 ‘‘(e) BANKRUPTCY FILING SUBSTITUTED FOR TER5 MINATION DATE.—If a contributing sponsor of a plan has 

6 filed or has had filed against such person a petition seek7 ing liquidation or reorganization in a case under title 11, 

8 United States Code, or under any similar Federal law or 

9 law of a State or political subdivision, and the case has 

10 not been dismissed as of the termination date, then sub11 section (a)(3) shall be applied by treating the date such 

12 petition was filed as the termination date of the plan.’’. 

13 (c) EFFECTIVE DATE.—The amendments made this 

14 section shall apply with respect to proceedings initiated 

15 under title 11, United States Code, or under any similar 

16 Federal law or law of a State or political subdivision, on 

17 or after the date that is 30 days after the date of enact18 ment of this Act. 

19 SEC. 406. PBGC PREMIUMS FOR NEW PLANS OF SMALL EM20 PLOYERS. 

21 (a) IN GENERAL.—Subparagraph (A) of section 

22 4006(a)(3) of the Employee Retirement Income Security 

23 Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended— 

24 (1) in clause (i), by inserting ‘‘other than a new 

25 single-employer plan (as defined in subparagraph 
366 

•S 1783 PCS 

1 (F)) maintained by a small employer (as so de2 fined),’’ after ‘‘single-employer plan,’’, 

3 (2) in clause (iii), by striking the period at the 

4 end and inserting ‘‘, and’’, and 

5 (3) by adding at the end the following new 

6 clause: 

7 ‘‘(v) in the case of a new single-employer plan 

8 (as defined in subparagraph (F)) maintained by a 

9 small employer (as so defined) for the plan year, $5 

10 for each individual who is a participant in such plan 

11 during the plan year.’’ 

12 (b) DEFINITION OF NEW SINGLE-EMPLOYER

13 PLAN.—Section 4006(a)(3) of the Employee Retirement 

14 Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is 

15 amended by adding at the end the following new subpara16 graph: 

17 ‘‘(F)(i) For purposes of this paragraph, a single-em18 ployer plan maintained by a contributing sponsor shall be 

19 treated as a new single-employer plan for each of its first 

20 5 plan years if, during the 36-month period ending on the 

21 date of the adoption of such plan, the sponsor or any 

22 member of such sponsor’s controlled group (or any prede23 cessor of either) did not establish or maintain a plan to 

24 which this title applies with respect to which benefits were 
367 

•S 1783 PCS 

1 accrued for substantially the same employees as are in the 

2 new single-employer plan. 

3 ‘‘(ii)(I) For purposes of this paragraph, the term 

4 ‘small employer’ means an employer which on the first day 

5 of any plan year has, in aggregation with all members of 

6 the controlled group of such employer, 100 or fewer em7 ployees. 

8 ‘‘(II) In the case of a plan maintained by two or more 

9 contributing sponsors that are not part of the same con10 trolled group, the employees of all contributing sponsors 

11 and controlled groups of such sponsors shall be aggregated 

12 for purposes of determining whether any contributing 

13 sponsor is a small employer.’’ 

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

15 this section shall apply to plans first effective after Decem16 ber 31, 2005. 

17 SEC. 407. PBGC PREMIUMS FOR SMALL AND NEW PLANS. 

18 (a) NEW PLANS.—Subparagraph (E) of section 

19 4006(a)(3) of the Employee Retirement Income Security 

20 Act of 1974 (29 U.S.C. 1306(a)(3)), as amended by this 

21 Act, is amended by adding at the end the following new 

22 clause: 

23 ‘‘(iv) In the case of a new defined benefit plan, the 

24 amount determined under clause (ii) for any plan year 

25 shall be an amount equal to the product of the amount 
368 

•S 1783 PCS 

1 determined under clause (ii) and the applicable percent2 age. For purposes of this clause, the term ‘applicable per3 centage’ means— 

4 ‘‘(I) 0 percent, for the first plan year. 

5 ‘‘(II) 20 percent, for the second plan year. 

6 ‘‘(III) 40 percent, for the third plan year. 

7 ‘‘(IV) 60 percent, for the fourth plan year. 

8 ‘‘(V) 80 percent, for the fifth plan year. 

9 For purposes of this clause, a defined benefit plan (as de10 fined in section 3(35)) maintained by a contributing spon11 sor shall be treated as a new defined benefit plan for each 

12 of its first 5 plan years if, during the 36-month period 

13 ending on the date of the adoption of the plan, the sponsor 

14 and each member of any controlled group including the 

15 sponsor (or any predecessor of either) did not establish 

16 or maintain a plan to which this title applies with respect 

17 to which benefits were accrued for substantially the same 

18 employees as are in the new plan.’’ 

19 (b) SMALL PLANS.—Paragraph (3) of section 

20 4006(a) of the Employee Retirement Income Security Act 

21 of 1974 (29 U.S.C. 1306(a)), is amended— 

22 (1) by striking ‘‘The’’ in subparagraph (E)(i) 

23 and inserting ‘‘Except as provided in subparagraph 

24 (G), the’’, and 
369 

•S 1783 PCS 

1 (2) by inserting after subparagraph (F) the fol2 lowing new subparagraph: 

3 ‘‘(G)(i) In the case of an employer who has 25 or 

4 fewer employees on the first day of the plan year, the addi5 tional premium determined under subparagraph (E) for 

6 each participant shall not exceed $5 multiplied by the 

7 number of participants in the plan as of the close of the 

8 preceding plan year. 

9 ‘‘(ii) For purposes of clause (i), whether an employer 

10 has 25 or fewer employees on the first day of the plan 

11 year is determined by taking into consideration all of the 

12 employees of all members of the contributing sponsor’s 

13 controlled group. In the case of a plan maintained by two 

14 or more contributing sponsors, the employees of all con15 tributing sponsors and their controlled groups shall be ag16 gregated for purposes of determining whether the 25-or17 fewer-employees limitation has been satisfied.’’ 

18 (c) EFFECTIVE DATES.— 

19 (1) SUBSECTION (a).—The amendments made 

20 by subsection (a) shall apply to plans first effective 

21 after December 31, 2005. 

22 (2) SUBSECTION (b).—The amendments made 

23 by subsection (b) shall apply to plan years beginning 

24 after December 31, 2005. 
370 

•S 1783 PCS 

1 SEC. 408. AUTHORIZATION FOR PBGC TO PAY INTEREST ON 

2 PREMIUM OVERPAYMENT REFUNDS. 

3 (a) IN GENERAL.—Section 4007(b) of the Employ4 ment Retirement Income Security Act of 1974 (29 U.S.C. 

5 1307(b)) is amended— 

6 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, 

7 and 

8 (2) by inserting at the end the following new 

9 paragraph: 

10 ‘‘(2) The corporation is authorized to pay, subject to 

11 regulations prescribed by the corporation, interest on the 

12 amount of any overpayment of premium refunded to a des13 ignated payor. Interest under this paragraph shall be cal14 culated at the same rate and in the same manner as inter15 est is calculated for underpayments under paragraph (1).’’ 

16 (b) EFFECTIVE DATE.—The amendments made by 

17 subsection (a) shall apply to interest accruing for periods 

18 beginning not earlier than the date of the enactment of 

19 this Act. 

20 SEC. 409. RULES FOR SUBSTANTIAL OWNER BENEFITS IN 

21 TERMINATED PLANS. 

22 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.— 

23 Section 4022(b)(5) of the Employee Retirement Income 

24 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended 

25 to read as follows: 
371 

•S 1783 PCS 

1 ‘‘(5)(A) For purposes of this paragraph, the term 

2 ‘majority owner’ means an individual who, at any time 

3 during the 60-month period ending on the date the deter4 mination is being made— 

5 ‘‘(i) owns the entire interest in an unincor6 porated trade or business, 

7 ‘‘(ii) in the case of a partnership, is a partner 

8 who owns, directly or indirectly, 50 percent or more 

9 of either the capital interest or the profits interest 

10 in such partnership, or 

11 ‘‘(iii) in the case of a corporation, owns, directly 

12 or indirectly, 50 percent or more in value of either 

13 the voting stock of that corporation or all the stock 

14 of that corporation. 

15 For purposes of clause (iii), the constructive ownership 

16 rules of section 1563(e) of the Internal Revenue Code of 

17 1986 shall apply (determined without regard to section 

18 1563(e)(3)(C)). 

19 ‘‘(B) In the case of a participant who is a majority 

20 owner, the amount of benefits guaranteed under this sec21 tion shall equal the product of— 

22 ‘‘(i) a fraction (not to exceed 1) the numerator 

23 of which is the number of years from the later of the 

24 effective date or the adoption date of the plan to the 
372 

•S 1783 PCS 

1 termination date, and the denominator of which is 

2 10, and 

3 ‘‘(ii) the amount of benefits that would be guar4 anteed under this section if the participant were not 

5 a majority owner.’’ 

6 (b) MODIFICATION OF ALLOCATION OF ASSETS.— 

7 (1) Section 4044(a)(4)(B) of the Employee Re8 tirement Income Security Act of 1974 (29 U.S.C. 

9 1344(a)(4)(B)) is amended by striking ‘‘section 

10 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’. 

11 (2) Section 4044(b) of such Act (29 U.S.C. 

12 1344(b)) is amended— 

13 (A) by striking ‘‘(5)’’ in paragraph (2) and 

14 inserting ‘‘(4), (5),’’, and 

15 (B) by redesignating paragraphs (3) 

16 through (6) as paragraphs (4) through (7), re17 spectively, and by inserting after paragraph (2) 

18 the following new paragraph: 

19 ‘‘(3) If assets available for allocation under 

20 paragraph (4) of subsection (a) are insufficient to 

21 satisfy in full the benefits of all individuals who are 

22 described in that paragraph, the assets shall be allo23 cated first to benefits described in subparagraph (A) 

24 of that paragraph. Any remaining assets shall then 

25 be allocated to benefits described in subparagraph 
373 

•S 1783 PCS 

1 (B) of that paragraph. If assets allocated to such 

2 subparagraph (B) are insufficient to satisfy in full 

3 the benefits described in that subparagraph, the as4 sets shall be allocated pro rata among individuals on 

5 the basis of the present value (as of the termination 

6 date) of their respective benefits described in that 

7 subparagraph.’’ 

8 (c) CONFORMING AMENDMENTS.— 

9 (1) Section 4021 of the Employee Retirement 

10 Income Security Act of 1974 (29 U.S.C. 1321) is 

11 amended— 

12 (A) in subsection (b)(9), by striking ‘‘as 

13 defined in section 4022(b)(6)’’, and 

14 (B) by adding at the end the following new 

15 subsection: 

16 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub17 stantial owner’ means an individual who, at any time dur18 ing the 60-month period ending on the date the determina19 tion is being made— 

20 ‘‘(1) owns the entire interest in an unincor21 porated trade or business, 

22 ‘‘(2) in the case of a partnership, is a partner 

23 who owns, directly or indirectly, more than 10 per24 cent of either the capital interest or the profits inter25 est in such partnership, or 
374 

•S 1783 PCS 

1 ‘‘(3) in the case of a corporation, owns, directly 

2 or indirectly, more than 10 percent in value of either 

3 the voting stock of that corporation or all the stock 

4 of that corporation. 

5 For purposes of paragraph (3), the constructive ownership 

6 rules of section 1563(e) of the Internal Revenue Code of 

7 1986 shall apply (determined without regard to section 

8 1563(e)(3)(C)).’’ 

9 (2) Section 4043(c)(7) of such Act (29 U.S.C. 

10 1343(c)(7)) is amended by striking ‘‘section 

11 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’. 

12 (d) EFFECTIVE DATES.— 

13 (1) IN GENERAL.—Except as provided in para14 graph (2), the amendments made by this section 

15 shall apply to plan terminations— 

16 (A) under section 4041(c) of the Employee 

17 Retirement Income Security Act of 1974 (29 

18 U.S.C. 1341(c)) with respect to which notices 

19 of intent to terminate are provided under sec20 tion 4041(a)(2) of such Act (29 U.S.C. 

21 1341(a)(2)) after December 31, 2005, and 

22 (B) under section 4042 of such Act (29 

23 U.S.C. 1342) with respect to which proceedings 

24 are instituted by the corporation after such 

25 date. 
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1 (2) CONFORMING AMENDMENTS.—The amend2 ments made by subsection (c) shall take effect on 

3 January 1, 2006. 

4 SEC. 410. ACCELERATION OF PBGC COMPUTATION OF BEN5 EFITS ATTRIBUTABLE TO RECOVERIES FROM 

6 EMPLOYERS. 

7 (a) MODIFICATION OF AVERAGE RECOVERY PER8 CENTAGE OF OUTSTANDING AMOUNT OF BENEFIT LI9 ABILITIES PAYABLE BY CORPORATION TO PARTICIPANTS

10 AND BENEFICIARIES.—Section 4022(c)(3)(B)(ii) of the 

11 Employee Retirement Income Security Act of 1974 (29 

12 U.S.C. 1322(c)(3)(B)(ii)) is amended to read as follows: 

13 ‘‘(ii) notices of intent to terminate 

14 were provided (or in the case of a termi15 nation by the corporation, a notice of de16 termination under section 4042 was 

17 issued) during the 5-Federal fiscal year pe18 riod ending with the third fiscal year pre19 ceding the fiscal year in which occurs the 

20 date of the notice of intent to terminate 

21 (or the notice of determination under sec22 tion 4042) with respect to the plan termi23 nation for which the recovery ratio is being 

24 determined.’’ 
376 

•S 1783 PCS 

1 (b) VALUATION OF SECTION 4062(c) LIABILITY FOR

2 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

3 PARTICIPANTS AND BENEFICIARIES.—Section 4044 of the 

4 Employee Retirement Income Security Act of 1974 (29 

5 U.S.C. 1362), as amended by this Act, is amended by add6 ing at the end the following new subsection: 

7 ‘‘(f) VALUATION OF SECTION 4062(c) LIABILITY FOR

8 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

9 PARTICIPANTS AND BENEFICIARIES.— 

10 ‘‘(1) IN GENERAL.—In the case of a terminated 

11 plan, the value of the recovery of liability under sec12 tion 4062(c) allocable as a plan asset under this sec13 tion for purposes of determining the amount of ben14 efits payable by the corporation shall be determined 

15 by multiplying— 

16 ‘‘(A) the amount of liability under section 

17 4062(c) as of the termination date of the plan, 

18 by 

19 ‘‘(B) the applicable section 4062(c) recov20 ery ratio. 

21 ‘‘(2) SECTION 4062(c) RECOVERY RATIO.—For 

22 purposes of this subsection— 

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

24 subparagraph (C), the term ‘section 4062(c) re25 covery ratio’ means the average, determined 
377 

•S 1783 PCS 

1 with respect to prior plan terminations de2 scribed in subparagraph (B), of the ratio 

3 which— 

4 ‘‘(i) the value of the recovery under 

5 section 4062(c) determined by the corpora6 tion in connection with any such prior ter7 mination, bears to 

8 ‘‘(ii) the amount of liability under sec9 tion 4062(c) with respect to such plans as 

10 of the termination date in connection with 

11 any such prior termination. 

12 ‘‘(B) PRIOR TERMINATIONS.—A plan ter13 mination described in this subparagraph is a 

14 termination with respect to which— 

15 ‘‘(i) the value of recoveries under sec16 tion 4062(c) have been determined by the 

17 corporation, and 

18 ‘‘(ii) notices of intent to terminate 

19 were provided (or in the case of a termi20 nation by the corporation, a notice of de21 termination under section 4042 was 

22 issued) during the 5-Federal fiscal year pe23 riod ending with the third fiscal year pre24 ceding the fiscal year in which occurs the 

25 date of the notice of intent to terminate 
378 

•S 1783 PCS 

1 (or the notice of determination under sec2 tion 4042) with respect to the plan termi3 nation for which the recovery ratio is being 

4 determined. 

5 ‘‘(C) EXCEPTION.—In the case of a termi6 nated plan with respect to which the out7 standing amount of benefit liabilities exceeds 

8 $20,000,000, the term ‘section 4062(c) recovery 

9 ratio’ means, with respect to the termination of 

10 such plan, the ratio of— 

11 ‘‘(i) the value of the recoveries on be12 half of the plan under section 4062(c), to 

13 ‘‘(ii) the amount of the liability owed 

14 under section 4062(c) as of the date of 

15 plan termination to the trustee appointed 

16 under section 4042 (b) or (c). 

17 ‘‘(3) SUBSECTION NOT TO APPLY.—This sub18 section shall not apply with respect to the deter19 mination of— 

20 ‘‘(A) whether the amount of outstanding 

21 benefit liabilities exceeds $20,000,000, or 

22 ‘‘(B) the amount of any liability under sec23 tion 4062 to the corporation or the trustee ap24 pointed under section 4042 (b) or (c). 
379 

•S 1783 PCS 

1 ‘‘(4) DETERMINATIONS.—Determinations under 

2 this subsection shall be made by the corporation. 

3 Such determinations shall be binding unless shown 

4 by clear and convincing evidence to be unreason5 able.’’ 

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

7 this section shall apply for any termination for which no8 tices of intent to terminate are provided (or in the case 

9 of a termination by the corporation, a notice of determina10 tion under section 4042 under the Employee Retirement 

11 Income Security Act of 1974 is issued) on or after the 

12 date which is 30 days after the date of enactment of this 

13 section. 

14 TITLE V—DISCLOSURE 

15 SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE. 

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

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

18 1021(f)) is amended to read as follows: 

19 ‘‘(f) DEFINED BENEFIT PLAN FUNDING NOTICES.— 

20 ‘‘(1) IN GENERAL.—The administrator of a de21 fined benefit plan shall for each plan year provide a 

22 plan funding notice to the Pension Benefit Guaranty 

23 Corporation, to each plan participant and bene24 ficiary, to each labor organization representing such 

25 participants or beneficiaries, and, in the case of a 
380 

•S 1783 PCS 

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 in14 clude— 

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 
381 

•S 1783 PCS 

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 
382 

•S 1783 PCS 

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 
383 

•S 1783 PCS 

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-
384 

•S 1783 PCS 

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.— 
385 

•S 1783 PCS 

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. 
386 

•S 1783 PCS 

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

2 this section shall apply to plan years beginning after De3 cember 31, 2005. 

4 SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN IN5 FORMATION. 

6 (a) FINANCIAL INFORMATION WITH RESPECT TO

7 MULTIEMPLOYER PLANS.— 

8 (1) IN GENERAL.—Section 101 of the Employee 

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

10 1021) is amended— 

11 (A) by redesignating subsection (j) as sub12 section (k); and 

13 (B) by inserting after subsection (i) the 

14 following new subsection: 

15 ‘‘(j) MULTIEMPLOYER PLAN INFORMATION MADE

16 AVAILABLE ON REQUEST.— 

17 ‘‘(1) IN GENERAL.—Each administrator of a 

18 multiemployer plan shall, upon written request, fur19 nish to any plan participant or beneficiary, employee 

20 representative, or any employer that has an obliga21 tion to contribute to the plan— 

22 ‘‘(A) a copy of any periodic actuarial re23 port (including sensitivity testing) received by 

24 the plan for any plan year which has been in 

25 the plan’s possession for at least 30 days, and 
387 

•S 1783 PCS 

1 ‘‘(B)(i) a copy of any quarterly, semi-an2 nual, or annual financial report prepared for 

3 the plan by any plan investment manager or ad4 visor or other fiduciary which has been in the 

5 plan’s possession for at least 30 days, or 

6 ‘‘(ii) at the discretion of the person sub7 mitting the written request, a copy of a quar8 terly summary of the financial reports described 

9 clause (i). 

10 ‘‘(2) COMPLIANCE.—Information required to be 

11 provided under paragraph (1) — 

12 ‘‘(A) shall be provided to the requesting 

13 participant, beneficiary, or employer within 30 

14 days after the request in a form and manner 

15 prescribed in regulations of the Secretary, 

16 ‘‘(B) may be provided in written, elec17 tronic, or other appropriate form to the extent 

18 such form is reasonably accessible to persons to 

19 whom the information is required to be pro20 vided, and 

21 ‘‘(C) shall not— 

22 ‘‘(i) include any individually identifi23 able information regarding any plan partic24 ipant, beneficiary, employee, fiduciary, or 

25 contributing employer, or 
388 

•S 1783 PCS 

1 ‘‘(ii) reveal any proprietary informa2 tion regarding the plan, any contributing 

3 employer, or entity providing services to 

4 the plan. 

5 ‘‘(3) LIMITATIONS.—In no case shall a partici6 pant, beneficiary, or employer be entitled under this 

7 subsection to receive more than one copy of any re8 port described in paragraph (1) during any one 12- 

9 month period. The administrator may make a rea10 sonable charge to cover copying, mailing, and other 

11 costs of furnishing copies of information pursuant to 

12 paragraph (1). The Secretary may by regulations 

13 prescribe the maximum amount which will constitute 

14 a reasonable charge under the preceding sentence.’’. 

15 (2) ENFORCEMENT.—Section 502(c)(4) of such 

16 Act (29 U.S.C. 1132(c)(4)) is amended by striking 

17 ‘‘section 101(f)(1)’’ and inserting ‘‘subsection (f)(1) 

18 or (j) of section 101’’. 

19 (3) REGULATIONS.—The Secretary shall pre20 scribe regulations under section 101(j)(2) of the 

21 Employee Retirement Income Security Act of 1974 

22 (added by paragraph (1)) not later than 270 days 

23 after the date of the enactment of this Act. 

24 (b) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY

25 TO MULTIEMPLOYER PLANS.— 
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•S 1783 PCS 

1 (1) IN GENERAL.—Section 101 of such Act (as 

2 amended by subsection (a)) is amended— 

3 (A) by redesignating subsection (k) as sub4 section (l); and 

5 (B) by inserting after subsection (j) the 

6 following new subsection: 

7 ‘‘(k) NOTICE OF POTENTIAL WITHDRAWAL LIABIL8 ITY.— 

9 ‘‘(1) IN GENERAL.—The plan sponsor or ad10 ministrator of a multiemployer plan shall, upon writ11 ten request, furnish to any employer who has an ob12 ligation to contribute to the plan a notice of— 

13 ‘‘(A) the estimated amount which would be 

14 the amount of such employer’s withdrawal li15 ability under part 1 of subtitle E of title IV if 

16 such employer withdrew on the last day of the 

17 plan year preceding the date of the request, in18 cluding separate calculations of the share of the 

19 employer’s withdrawal liability attributable to 

20 participant’s service with the employer and an 

21 estimate of the employer’s proportional share of 

22 any unfunded vested benefits which are not at23 tributable to service with the employer, as de24 termined under section 4211(c)(4), and 
390 

•S 1783 PCS 

1 ‘‘(B) an explanation of how such estimated 

2 liability amount was determined, including the 

3 actuarial assumptions and methods used to de4 termine the value of the plan liabilities and as5 sets, the data regarding employer contributions, 

6 unfunded vested benefits, annual changes in the 

7 plan’s unfunded vested benefits, and the appli8 cation of any relevant limitations on the esti9 mated withdrawal liability. 

10 For purposes of subparagraph (B), the term ‘em11 ployer contribution’ means, in connection with a par12 ticipant, a contribution made by an employer as an 

13 employer of such participant. 

14 ‘‘(2) COMPLIANCE.—Any notice required to be 

15 provided under paragraph (1)— 

16 ‘‘(A) shall be provided to the requesting 

17 employer within— 

18 ‘‘(i) 180 days after the request in a 

19 form and manner prescribed in regulations 

20 of the Secretary, or 

21 ‘‘(ii) subject to regulations of the Sec22 retary, such longer time as may be nec23 essary in the case of a plan that deter24 mines withdrawal liability based on any 
391 

•S 1783 PCS 

1 method described under paragraph (4) or 

2 (5) of section 4211(c); and 

3 ‘‘(B) may be provided in written, elec4 tronic, or other appropriate form to the extent 

5 such form is reasonably accessible to employers 

6 to whom the information is required to be pro7 vided. 

8 ‘‘(3) LIMITATIONS.—In no case shall an em9 ployer be entitled under this subsection to receive 

10 more than one notice described in paragraph (1) 

11 during any one 12-month period. The person re12 quired to provide such notice may make a reasonable 

13 charge to cover copying, mailing, and other costs of 

14 furnishing such notice pursuant to paragraph (1). 

15 The Secretary may by regulations prescribe the max16 imum amount which will constitute a reasonable 

17 charge under the preceding sentence.’’. 

18 (2) ENFORCEMENT.—Section 502(c)(4) of such 

19 Act (29 U.S.C. 1132(c)(4)) is amended by striking 

20 ‘‘subsection (f)(1) or (j)’’ and inserting ‘‘subsection 

21 (f)(1), (j), or (k)’’. 

22 (c) NOTICE OF AMENDMENT REDUCING FUTURE AC23 CRUALS.—Section 204(h)(1) of such Act (29 U.S.C. 

24 1054(h)(1)) is amended by inserting at the end before the 
392 

•S 1783 PCS 

1 period ‘‘and to each employer who has an obligation to 

2 contribute to the plan.’’. 

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

4 this section shall apply to plan years beginning after De5 cember 31, 2005. 

6 SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIRE7 MENTS. 

8 (a) ADDITIONAL ANNUAL REPORTING REQUIRE9 MENTS WITH RESPECT TO DEFINED BENEFIT PLANS.— 

10 (1) IN GENERAL.—Section 103 of the Employee 

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

12 1023) is amended— 

13 (A) in subsection (a)(1)(B), by striking 

14 ‘‘subsections (d) and (e)’’ and inserting ‘‘sub15 sections (d), (e), and (f)’’; and 

16 (B) by adding at the end the following new 

17 subsection: 

18 ‘‘(f) ADDITIONAL INFORMATION WITH RESPECT TO

19 DEFINED BENEFIT PLANS.— 

20 ‘‘(1) GENERAL INFORMATION.—With respect to 

21 any defined benefit plan, an annual report under 

22 this section for a plan year shall include the fol23 lowing: 

24 ‘‘(A) In any case in which any liabilities to 

25 participants or their beneficiaries under such 
393 

•S 1783 PCS 

1 plan as of the end of such plan year consist (in 

2 whole or in part) of liabilities to such partici3 pants and beneficiaries under 2 or more pen4 sion plans as of immediately before such plan 

5 year, the funded percentage of each of such 2 

6 or more pension plans as of the last day of such 

7 plan year and the funded percentage of the plan 

8 with respect to which the annual report is filed 

9 as of the last day of such plan year. 

10 ‘‘(B) For purposes of this paragraph, the 

11 term ‘funded percentage’— 

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

13 plan, means the funding target attainment 

14 percentage, as defined in section 

15 303(d)(2), and 

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

17 plan, has the meaning given such term in 

18 section 305(i)(2). 

19 ‘‘(2) ADDITIONAL INFORMATION FOR MULTIEM20 PLOYER PLANS.—With respect to any defined ben21 efit plan which is a multiemployer plan, an annual 

22 report under this section for a plan year shall in23 clude, in addition to the information required under 

24 paragraph (1), the following, as of the end of the 

25 plan year to which the notice relates: 
394 

•S 1783 PCS 

1 ‘‘(A) The number of employers obligated to 

2 contribute to the plan. 

3 ‘‘(B) A list of the employers that contrib4 uted more than 5 percent of the total contribu5 tions to the plan during such plan year. 

6 ‘‘(C) The number of participants under the 

7 plan on whose behalf no employer contributions 

8 have been made to the plan for such plan year 

9 and for each of the 2 preceding plan years. For 

10 purposes of this paragraph, the term ‘employer 

11 contribution’ means, in connection with a par12 ticipant, a contribution made by an employer as 

13 an employer of such participant. 

14 ‘‘(D) The ratio of— 

15 ‘‘(i) the number of participants under 

16 the plan on whose behalf no employer had 

17 an obligation to make an employer con18 tribution during the plan year, to 

19 ‘‘(ii) the number of participants under 

20 the plan on whose behalf no employer had 

21 an obligation to make an employer con22 tribution during each of the 2 preceding 

23 plan years. 

24 ‘‘(E) Whether the plan received an amorti25 zation extension under section 304(d) or section 
395 

•S 1783 PCS 

1 431(d) of the Internal Revenue Code of 1986 

2 for such plan year and, if so, the amount of the 

3 difference between the minimum required con4 tribution for the year and the minimum re5 quired contribution which would have been re6 quired without regard to the extension, and the 

7 period of such extension. 

8 ‘‘(F) Whether the plan used the shortfall 

9 funding method (as such term is used in section 

10 305) for such plan year and, if so, the amount 

11 of the difference between the minimum required 

12 contribution for the year and the minimum re13 quired contribution which would have been re14 quired without regard to the use of such meth15 od, and the period of use of such method. 

16 ‘‘(G) Whether the plan was in critical or 

17 endangered status under section 305 for such 

18 plan year, and if so, a summary of any funding 

19 improvement or rehabilitation plan (or modi20 fication thereto) adopted during the plan year, 

21 and the funding ratio of the plan. 

22 ‘‘(H) The number of employers that with23 drew from the plan during the preceding plan 

24 year and the aggregate amount of withdrawal 
396 

•S 1783 PCS 

1 liability assessed, or estimated to be assessed, 

2 against such withdrawn employers. 

3 ‘‘(I) In the case of a multiemployer plan 

4 that has merged with another plan or to which 

5 assets and liabilities have been transferred, the 

6 actuarial valuation of the assets and liabilities 

7 of each affected plan during the year preceding 

8 the effective date of the merger or transfer, 

9 based upon the most recent data available as of 

10 the day before the first day of the plan year, or 

11 other valuation method performed under stand12 ards and procedures as the Secretary may pre13 scribe by regulation.’’. 

14 (2) GUIDANCE BY SECRETARY OF LABOR.— 

15 (A) IN GENERAL.—Not later than 180 

16 days after the date of enactment of this Act, 

17 the Secretary of Labor (referred to in this para18 graph as the ‘‘Secretary’’) shall publish guid19 ance to assist multiemployer defined benefit 

20 plans to— 

21 (i) identify and enumerate plan par22 ticipants for whom there is no employer 

23 with an obligation to make an employer 

24 contribution under the plan; and 
397 

•S 1783 PCS 

1 (ii) report such information under sec2 tion 103(f)(2)(D) of the Employee Retire3 ment Income Security Act of 1974 (as 

4 added by this section). 

5 (B) WAIVER OF REQUIREMENT.—The Sec6 retary shall waive the requirement under sec7 tion 103(f)(2)(D) of such Act (as added by this 

8 section) for the construction and entertainment 

9 industries. 

10 (b) ADDITIONAL INFORMATION IN ANNUAL ACTU11 ARIAL STATEMENT REGARDING PLAN RETIREMENT PRO12 JECTIONS.—Section 103(d) of such Act (29 U.S.C. 

13 1023(d)) is amended— 

14 (1) by redesignating paragraphs (12) and (13) 

15 as paragraphs (13) and (14), respectively; and 

16 (2) by inserting after paragraph (11) the fol17 lowing new paragraph: 

18 ‘‘(12) A statement explaining the actuarial as19 sumptions and methods used in projecting future re20 tirements and forms of benefit distributions under 

21 the plan.’’. 

22 (c) FORM AND MANNER OF REPORT.—Section 

23 104(b)(3) of such Act (29 U.S.C. 1024(b)(3)) is amended 

24 by— 

25 (1) striking ‘‘(3) Within’’ and inserting— 
398 

•S 1783 PCS 

1 ‘‘(A) IN GENERAL.—Within’’; and 

2 (2) adding at the end the following: 

3 ‘‘(B) FORM OF REPORT.—The material 

4 provided pursuant to subparagraph (A) to sum5 marize the latest annual report shall be written 

6 in a manner calculated to be understood by the 

7 average plan participant. 

8 (d) FURNISHING SUMMARY PLAN INFORMATION TO

9 EMPLOYERS AND EMPLOYEE REPRESENTATIVES OF

10 MULTIEMPLOYER PLANS.— 

11 (1) IN GENERAL.—Section 104 of such Act (29 

12 U.S.C. 1024) is amended— 

13 (A) in the header, by striking ‘‘PARTICI14 PANTS’’ and inserting ‘‘PARTICIPANTS AND CER15 TAIN EMPLOYERS’’; 

16 (B) redesignating subsection (d) as sub17 section (e); and 

18 (C) inserting after subsection (c) the fol19 lowing: 

20 ‘‘(d) FURNISHING SUMMARY PLAN INFORMATION TO

21 EMPLOYERS AND EMPLOYEE REPRESENTATIVES OF

22 MULTIEMPLOYER PLANS.— 

23 ‘‘(1) IN GENERAL.—With respect to a multiem24 ployer plan subject to this section, within 30 days 

25 after the due date under subsection (a)(1) for the 
399 

•S 1783 PCS 

1 filing of the annual report for the fiscal year of the 

2 plan, the administrators shall furnish to each em3 ployee organization, employer with an obligation to 

4 contribute to the plan, and the Pension Benefit 

5 Guaranty Corporations, a report that contains— 

6 ‘‘(A) a description of the contribution 

7 schedules and benefit formulas under the plan, 

8 and any modification to such schedules and for9 mulas, during such plan year; 

10 ‘‘(B) the number of employers obligated to 

11 contribute to the plan; 

12 ‘‘(C) a list of the employers that contrib13 uted more than 5 percent of the total contribu14 tions to the plan during such plan year; 

15 ‘‘(D) the number of participants under the 

16 plan on whose behalf no employer contributions 

17 (which, for purposes of this paragraph, means, 

18 in connection with a participant, a contribution 

19 made by an employer as an employer of such 

20 participant) have been made to the plan for 

21 such plan year and for each of the 2 preceding 

22 plan years; 

23 ‘‘(E) whether the plan was in critical or 

24 endangered status under section 305 for such 

25 plan year and, if so, include— 
400 

•S 1783 PCS 

1 ‘‘(i) a list of the actions taken by the 

2 plan to improve its funding status; and 

3 ‘‘(ii) a statement describing how a 

4 person may obtain a copy of the plan’s im5 provement or rehabilitation plan, as appro6 priate, adopted under section 305 and the 

7 actuarial and financial data that dem8 onstrate any action taken by the plan to9 ward fiscal improvement; 

10 ‘‘(H) the number of employers that with11 drew from the plan during the preceding plan 

12 year and the aggregate amount of withdrawal 

13 liability assessed, or estimated to be assessed, 

14 against such withdrawn employers; 

15 ‘‘(I) in the case of a multiemployer plan 

16 that has merged with another plan or to which 

17 assets and liabilities have been transferred, the 

18 actuarial valuation of the assets and liabilities 

19 of each affected plan during the year preceding 

20 the effective date of the merger or transfer, 

21 based upon the most recent data available as of 

22 the day before the first day of the plan year, or 

23 other valuation method performed under stand24 ards and procedures as the Secretary may pre25 scribe by regulation; 
401 

•S 1783 PCS 

1 ‘‘(J) a description as to whether the 

2 plan— 

3 ‘‘(i) sought or received an amortiza4 tion extension under section 304(d) or sec5 tion 431(d) of the Internal Revenue Code 

6 of 1986 for such plan year; 

7 ‘‘(ii) used the shortfall funding meth8 od (as such term is used in section 305) 

9 for such plan year; or 

10 ‘‘(iii) was in critical or endangered 

11 status under section 305 for such plan 

12 year; and 

13 ‘‘(K) notification of the right under this 

14 section of the recipient to a copy of the annual 

15 report filed with the Secretary under subsection 

16 (a), summary annual report, summary plan de17 scription, summary of any material modification 

18 of the plan, upon written request, but that— 

19 ‘‘(i) in no case shall a recipient be en20 titled to receive more than one copy of any 

21 such report described during any one 12- 

22 month period; and 

23 ‘‘(ii) the administrator may make a 

24 reasonable charge to cover copying, mail25 ing, and other costs of furnishing copies of 
402 

•S 1783 PCS 

1 information pursuant to this subpara2 graph. 

3 ‘‘(2) EFFECT OF SECTION.—Nothing in this 

4 section waives any other provision under this title re5 quiring plan administrators to provide, upon request, 

6 information to employers that have an obligation to 

7 contribution under the plan.’’. 

8 (e) MODEL FORM.—Not later than 270 days after 

9 the date of the enactment of this Act, the Secretary of 

10 Labor shall publish a model form for providing the state11 ments, schedules, and other material required to be pro12 vided under section 104(b)(3) of the Employee Retirement 

13 Income Security Act of 1974, as amended by this section. 

14 (f) FIVE-YEAR REPORT WITH RESPECT TO MULTI15 EMPLOYER PLANS.—Section 4022A(f) of such Act (29 

16 U.S.C. 1322a(f)) is amended by adding at the end the fol17 lowing: 

18 ‘‘(6) Not later than 5 years after the date of 

19 the enactment of the Pension Security and Trans20 parency Act of 2005, and at least every fifth year 

21 thereafter, the corporation shall submit to Congress 

22 a report that contains a description of the fiscal con23 ditions of the multiemployer pension plan system as 

24 of the date of such report based on the information 

25 submitted to the corporation under section 104(d).’’. 
403 

•S 1783 PCS 

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.’’. 
404 

•S 1783 PCS 

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 
405 

•S 1783 PCS 

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— 
406 

•S 1783 PCS 

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);’’; 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 
407 

•S 1783 PCS 

1 is substantial unemployment or underemployment 

2 and the sales and profits are depressed or declin3 ing;’’. 

4 (b) ADDITIONAL INFORMATION REQURIED.—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 in11 clude— 

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). 
408 

•S 1783 PCS 

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. 
409 

•S 1783 PCS 

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-
410 

•S 1783 PCS 

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. 
411 

•S 1783 PCS 

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-
412 

•S 1783 PCS 

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 
413 

•S 1783 PCS 

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. 
414 

•S 1783 PCS 

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 
415 

•S 1783 PCS 

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. STUDY AND REPORT BY GOVERNMENT ACCOUNT9 ABILITY OFFICE. 

10 (a) IN GENERAL.—The Comptroller General of the 

11 United States shall conduct a study to determine the effec12 tiveness of the enforcement of provisions in the Employee 

13 Retirement Income Security Act of 1974 (29 U.S.C. 1001 

14 et seq.) and in other Federal laws designed to protect pen15 sion plans and the assets and participants of such plan 

16 from fraud and mismanagement, including excessive in17 vestment management fees, violations of fiduciary duties 

18 under Title I of such Act, and the quality of plan assets. 

19 (b) CONTENT OF STUDY.—The study described in 

20 subsection (a) shall include: 

21 (1) An identification of which Federal depart22 ments and agencies have responsibility for enforce23 ment of these provisions, including the recovery of 

24 lost plan assets due to fraud and mismanagement. 
416 

•S 1783 PCS 

1 (2) Identification of all administrative enforce2 ment powers, procedures, and strategies used by the 

3 Securities and Exchange Commission that have the 

4 potential to improve the Department of Labor’s en5 forcement of the fiduciary provisions of the Em6 ployee Retirement Income Security Act of 1974 (29 

7 U.S.C. 1001 et seq.). 

8 (3) Identification of any statutory or other bar9 riers that restrict the Department of Labor’s author10 ity to use such powers, procedures, and strategies 

11 identified in paragraph (2). 

12 (4) An evaluation of whether giving additional 

13 investigative or enforcement authority to the Pension 

14 Benefit Guaranty Corporation or the Securities and 

15 Exchange Commission would significantly improve 

16 enforcement of those provisions. 

17 (5) An evaluation of the current authority of 

18 the Pension Benefit Guaranty Corporation to bring 

19 actions to recover any funds lost by pension plans 

20 due to violations of any fiduciary standards under 

21 Title I of such Act or other Federal statutes. 

22 (6) The impact that expanding any such au23 thority by the Pension Benefit Guaranty Corpora24 tion to bring such actions would have on the Cor25 poration’s solvency. 
417 

•S 1783 PCS 

1 (c) REPORT.—Not later than 6 months after the en2 actment of this Act, the Comptroller General shall submit 

3 a report to Congress on the study conducted under sub4 section (a) that includes such recommendations for legisla5 tion or administrative action as the Comptroller General 

6 determines are appropriate. 

7 TITLE VI—TREATMENT OF CASH 

8 BALANCE AND OTHER HY9 BRID DEFINED BENEFIT PEN10 SION PLANS 

11 SEC. 601. PROSPECTIVE APPLICATION OF AGE DISCRIMINA12 TION, CONVERSION, AND PRESENT VALUE AS13 SUMPTION RULES. 

14 (a) APPLICATION OF AGE DISCRIMINATION PROHIBI15 TIONS.— 

16 (1) AMENDMENT OF ERISA.—Section 204(b) of 

17 the Employee Retirement Income Security Act of 

18 1974 (29 U.S.C. 1054(b)) is amended by adding at 

19 the end the following: 

20 ‘‘(5) SPECIAL RULES FOR CASH BALANCE AND

21 OTHER HYBRID DEFINED BENEFIT PLANS.— 

22 ‘‘(A) IN GENERAL.—A qualified cash bal23 ance plan shall not be treated as violating the 

24 requirements of paragraph (1)(H) merely be25 cause it may reasonably be expected that the 
418 

•S 1783 PCS 

1 period over which interest credits will be made 

2 to a participant’s accumulation account (or its 

3 equivalent) is longer for a younger participant. 

4 This paragraph shall not apply to any plan if 

5 the rate of any pay credit or interest credit to 

6 such an account under the plan decreases by 

7 reason of the participant’s attainment of any 

8 age. 

9 ‘‘(B) QUALIFIED CASH BALANCE PLAN.— 

10 For purposes of this paragraph— 

11 ‘‘(i) IN GENERAL.—The term ‘quali12 fied cash balance plan’ means a cash bal13 ance plan which meets the vesting require14 ment under clause (ii) and the interest 

15 credit requirement under clause (iii). 

16 ‘‘(ii) VESTING REQUIREMENTS.—A 

17 plan meets the requirements of this clause 

18 if an employee who has completed at least 

19 3 years of service has a nonforfeitable 

20 right to 100 percent of the employee’s ac21 crued benefit derived from employer con22 tributions. 

23 ‘‘(iii) INTEREST CREDITS.—A plan 

24 meets the requirements of this clause if the 

25 terms of the plan provide that any interest 
419 

•S 1783 PCS 

1 credit (or equivalent amount) for any plan 

2 year shall be at a rate which— 

3 ‘‘(I) is not less than the applica4 ble Federal mid-term interest rate (as 

5 determined under section 1274(d)(1) 

6 of the Internal Revenue Code of 

7 1986), and 

8 ‘‘(II) is not greater than the 

9 greater of the rate determined under 

10 subclause (I) or a rate equal to the 

11 rate of interest on amounts invested 

12 conservatively in long-term investment 

13 grade corporate bonds. 

14 ‘‘(iv) DETERMINATION OF RATES.— 

15 For purposes of clause (iii)(II), the rate of 

16 interest on amounts invested conservatively 

17 in long-term investment grade corporate 

18 bonds shall be determined by the Secretary 

19 of the Treasury on the basis of 2 or more 

20 indices that are selected periodically by the 

21 Secretary of the Treasury. The Secretary 

22 of the Treasury shall make publicly avail23 able the indices and methodology used to 

24 determine the rate. 
420 

•S 1783 PCS 

1 ‘‘(v) VARIABLE RATE OF INTEREST.— 

2 If the interest credit rate under the plan is 

3 a variable rate, the plan shall provide that, 

4 upon the termination of the plan, the rate 

5 of interest used to determine accrued bene6 fits under the plan shall be equal to the av7 erage of the rates of interest used under 

8 the plan during the 5-year period ending 

9 on the termination date. 

10 ‘‘(C) CASH BALANCE PLAN.—For purposes 

11 of this paragraph, the term ‘cash balance plan’ 

12 means a defined benefit plan under which— 

13 ‘‘(i) the accrued benefit is determined 

14 by reference to the balance of a hypo15 thetical accumulation account, and 

16 ‘‘(ii) pay credits and interest credits 

17 are credited to such account. 

18 ‘‘(D) REGULATIONS TO INCLUDE SIMILAR

19 OR OTHER HYBRID PLANS.— 

20 ‘‘(i) CASH BALANCE PLAN.—The Sec21 retary of the Treasury shall issue regula22 tions which include in the definition of 

23 cash balance plan any defined benefit plan 

24 (or any portion of such a plan) which has 

25 an effect similar to a cash balance plan. 
421 

•S 1783 PCS 

1 Such regulations may provide that if a 

2 plan sponsor represents in communications 

3 to participants and beneficiaries that a 

4 plan amendment results in a plan being 

5 described in the preceding sentence, such 

6 plan shall be treated as a cash balance 

7 plan. 

8 ‘‘(ii) QUALIFIED CASH BALANCE

9 PLAN.—The Secretary of the Treasury 

10 may in the regulations issued under clause 

11 (i) provide for the treatment of a cash bal12 ance plan as a qualified cash balance plan 

13 in cases where the cash balance plan has 

14 an effect similar to the qualified cash bal15 ance plan.’’. 

16 (2) AGE DISCRIMINATION IN EMPLOYMENT

17 ACT.—Section 4(i)(2) of the Age Discrimination of 

18 Employment Act of 1967 (29 U.S.C. 623(i)(2)) is 

19 amended— 

20 (A) by inserting ‘‘(A)’’ after ‘‘(2)’’, and 

21 (B) by adding at the end the following new 

22 subparagraph: 

23 ‘‘(B) A defined benefit plan which is treated as a 

24 qualified cash balance plan for purposes of section 

25 204(b)(5) of the Employee Retirement Income Security 
422 

•S 1783 PCS 

1 Act of 1974 shall not be treated as violating the require2 ments of paragraph (1)(A) merely because it may reason3 ably be expected that the period over which interest credits 

4 will be made under the plan to a participant’s accumula5 tion account (or its equivalent) is longer for a younger 

6 participant. This subparagraph shall not apply to any plan 

7 if the rate of any pay credit or interest credit to such an 

8 account under the plan decreases by reason of the partici9 pant’s attainment of any age.’’. 

10 (3) AMENDMENT OF INTERNAL REVENUE

11 CODE.—Section 411(b) of the Internal Revenue 

12 Code of 1986 (relating to accrued benefit require13 ments) is amended by adding at the end the fol14 lowing: 

15 ‘‘(5) SPECIAL RULES FOR CASH BALANCE AND

16 OTHER HYBRID DEFINED BENEFIT PLANS.— 

17 ‘‘(A) IN GENERAL.—A qualified cash bal18 ance plan shall not be treated as violating the 

19 requirements of paragraph (1)(H) merely be20 cause it may reasonably be expected that the 

21 period over which interest credits will be made 

22 to a participant’s accumulation account (or its 

23 equivalent) is longer for a younger participant. 

24 This paragraph shall not apply to any plan if 

25 the rate of any pay credit or interest credit to 
423 

•S 1783 PCS 

1 such an account under the plan decreases by 

2 reason of the participant’s attainment of any 

3 age. 

4 ‘‘(B) QUALIFIED CASH BALANCE PLAN.— 

5 For purposes of this paragraph— 

6 ‘‘(i) IN GENERAL.—The term ‘quali7 fied cash balance plan’ means a cash bal8 ance plan which meets the vesting require9 ment under clause (ii) and the interest 

10 credit requirement under clause (iii). 

11 ‘‘(ii) VESTING REQUIREMENTS.—A 

12 plan meets the requirements of this clause 

13 if an employee who has completed at least 

14 3 years of service has a nonforfeitable 

15 right to 100 percent of the employee’s ac16 crued benefit derived from employer con17 tributions. 

18 ‘‘(iii) INTEREST CREDITS.—A plan 

19 meets the requirements of this clause if the 

20 terms of the plan provide that any interest 

21 credit (or equivalent amount) for any plan 

22 year shall be at a rate which— 

23 ‘‘(I) is not less than the applica24 ble Federal mid-term interest rate (as 
424 

•S 1783 PCS 

1 determined under section 1274(d)(1)), 

2 and 

3 ‘‘(II) is not greater than the 

4 greater of the rate determined under 

5 subclause (I) or a rate equal to the 

6 rate of interest on amounts invested 

7 conservatively in long-term investment 

8 grade corporate bonds. 

9 ‘‘(iv) DETERMINATION OF RATES.— 

10 For purposes of clause (iii)(II), the rate of 

11 interest on amounts invested conservatively 

12 in long-term investment grade corporate 

13 bonds shall be determined by the Secretary 

14 on the basis of 2 or more indices that are 

15 selected periodically by the Secretary. The 

16 Secretary shall make publicly available the 

17 indices and methodology used to determine 

18 the rate. 

19 ‘‘(v) VARIABLE RATE OF INTEREST.— 

20 If the interest credit rate under the plan is 

21 a variable rate, the plan shall provide that, 

22 upon the termination of the plan, the rate 

23 of interest used to determine accrued bene24 fits under the plan shall be equal to the av25 erage of the rates of interest used under 
425 

•S 1783 PCS 

1 the plan during the 5-year period ending 

2 on the termination date. 

3 ‘‘(C) CASH BALANCE PLAN.—For purposes 

4 of this paragraph, the term ‘cash balance plan’ 

5 means a defined benefit plan under which— 

6 ‘‘(i) the accrued benefit is determined 

7 by reference to the balance of a hypo8 thetical accumulation account, and 

9 ‘‘(ii) pay credits and interest credits 

10 are credited to such account. 

11 ‘‘(D) REGULATIONS TO INCLUDE SIMILAR

12 OR OTHER HYBRID PLANS.— 

13 ‘‘(i) CASH BALANCE PLAN.—The Sec14 retary shall issue regulations which include 

15 in the definition of cash balance plan any 

16 defined benefit plan (or any portion of 

17 such a plan) which has an effect similar to 

18 a cash balance plan. Such regulations may 

19 provide that if a plan sponsor represents in 

20 communications to participants and bene21 ficiaries that a plan amendment results in 

22 a plan being described in the preceding 

23 sentence, such plan shall be treated as a 

24 cash balance plan. 
426 

•S 1783 PCS 

1 ‘‘(ii) QUALIFIED CASH BALANCE

2 PLAN.—The Secretary may in the regula3 tions issued under clause (i) provide for 

4 the treatment of a cash balance plan as a 

5 qualified cash balance plan in cases where 

6 the cash balance plan has an effect similar 

7 to the qualified cash balance plan.’’. 

8 (b) RULES APPLICABLE TO ACCRUED BENEFITS

9 UNDER CONVERTED PLANS.— 

10 (1) AMENDMENT OF ERISA.—Section 204(g) of 

11 the Employee Retirement Income Security Act of 

12 1974 (29 U.S.C. 1054(g)) is amended by adding at 

13 the end the following new paragraph: 

14 ‘‘(6) TREATMENT OF CONVERSIONS TO CASH

15 BALANCE OR OTHER HYBRID PLANS.— 

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

17 subsection, an applicable plan amendment shall 

18 be treated as reducing the accrued benefit of a 

19 participant if, under the terms of the plan as in 

20 effect after the amendment, the accrued benefit 

21 of any participant who was a participant as of 

22 the effective date of the amendment may at any 

23 time be less than the accrued benefit deter24 mined under the method under subparagraph 

25 (B), (C), or (D) which is specified in the plan 
427 

•S 1783 PCS 

1 and applies uniformly to all participants. An 

2 applicable plan amendment shall in no event be 

3 treated as meeting the requirements of any 

4 such subparagraph if the conversion described 

5 in subparagraph (G)(i) is into a cash balance 

6 plan other than a qualified cash balance plan 

7 (as defined in subsection (b)(5)(B)). 

8 ‘‘(B) NO WEARAWAY.— 

9 ‘‘(i) IN GENERAL.—The accrued ben10 efit determined under this subparagraph is 

11 the sum of— 

12 ‘‘(I) the participant’s accrued 

13 benefit for years of service before the 

14 effective date of the amendment, de15 termined under the terms of the plan 

16 as in effect before the amendment, 

17 plus 

18 ‘‘(II) except as provided in clause 

19 (ii), the participant’s accrued benefit 

20 for years of service after the effective 

21 date of the amendment, determined 

22 under the terms of the plan as in ef23 fect after the amendment. 
428 

•S 1783 PCS 

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: 
429 

•S 1783 PCS 

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. 
430 

•S 1783 PCS 

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 require a plan to provide a credit of addi6 tional amounts or increases in initial account 

7 balances in amounts substantially equivalent to 

8 the benefits that would be required to be pro9 vided to meet the requirements of subpara10 graphs (B) or (C). 

11 ‘‘(E) INCLUSION OF PRIOR ACCRUED BEN12 EFIT INTO INITIAL ACCOUNT BALANCE.— 

13 ‘‘(i) IN GENERAL.—If, for purposes of 

14 subparagraphs (B), (C), or (D), an appli15 cable plan amendment provides that an 

16 amount will be initially credited to a par17 ticipant’s accumulation account (or its 

18 equivalent) on the effective date of the 

19 amendment with respect to the partici20 pant’s accrued benefit for periods before 

21 such date, the requirements of such sub22 paragraph shall be treated as met with re23 spect to such accrued benefit if the amount 

24 initially credited is not less than the 

25 present value of the participant’s accrued 
431 

•S 1783 PCS 

1 benefit determined by using the applicable 

2 mortality table and the lower of the appli3 cable interest rate under section 

4 205(g)(3)(A), or the interest rate used to 

5 credit interest under the plan, as of such 

6 date. 

7 ‘‘(ii) ADJUSTMENTS FOR CERTAIN

8 SUBSIDIZED BENEFITS.—For purposes of 

9 subparagraph (B), if any early retirement 

10 benefit or retirement-type subsidy (within 

11 the meaning of paragraph (6)(B)(i)) is not 

12 included in the initial account balance 

13 under clause (i), the plan shall credit the 

14 accumulation account with the amount of 

15 such benefit or subsidy for the plan year in 

16 which the participant retires if, as of such 

17 time, the participant has met the age, 

18 years of service, and other requirements 

19 under the plan for entitlement to such ben20 efit or subsidy. 

21 ‘‘(F) REQUIREMENTS WHERE PARTICIPANT

22 OFFERED CHOICE.—If a plan provides a partici23 pant with an election described in subparagraph 

24 (B)(iii)(II) or (C)(ii), the following rules shall 

25 apply: 
432 

•S 1783 PCS 

1 ‘‘(i) NOTICE.—The plan shall not be 

2 treated as meeting the requirements of ei3 ther such subparagraph unless the plan 

4 provides the participant a notice of the 

5 right to make such election which includes 

6 information (meeting such requirements as 

7 may be prescribed by the Secretary of the 

8 Treasury)— 

9 ‘‘(I) by which the participant 

10 may project benefits under the for11 mulas from which the participant may 

12 choose and may model the impact of 

13 any such choice, and 

14 ‘‘(II) with respect to cir15 cumstances under which a participant 

16 may not receive the projected accrued 

17 benefits by reason of a plan termi18 nation or otherwise. 

19 ‘‘(ii) SIGNIFICANT REDUCTION OF

20 RATE OF ACCRUAL.—The plan shall pro21 vide that if, during any of the first 5 plan 

22 years during which such an election is in 

23 effect, the plan adopts an amendment 

24 which results in a significant reduction in 

25 the rate of future benefit accrual (within 
433 

•S 1783 PCS 

1 the meaning of section 204(h)), the ac2 crued benefit of the participant shall be de3 termined as if the participant had made 

4 the election which resulted in the greatest 

5 accrued benefit. 

6 ‘‘(iii) BENEFITS MUST NOT BE CON7 TINGENT ON ELECTION.—The plan shall 

8 not be treated as meeting the requirements 

9 of either such subparagraph if any other 

10 benefit is conditioned (directly or indi11 rectly) on such election. 

12 ‘‘(G) APPLICABLE PLAN AMENDMENT.— 

13 For purposes of this paragraph— 

14 ‘‘(i) IN GENERAL.—The term ‘applica15 ble plan amendment’ means an amendment 

16 to a defined benefit plan which has the ef17 fect of converting the plan to a cash bal18 ance plan. 

19 ‘‘(ii) SPECIAL RULE FOR COORDI20 NATED BENEFITS.—If the benefits of 2 or 

21 more defined benefit plans established or 

22 maintained by an employer are coordinated 

23 in such a manner as to have the effect of 

24 the adoption of an amendment described in 

25 clause (i), the sponsor of the defined ben-
434 

•S 1783 PCS 

1 efit plan or plans providing for such co2 ordination shall be treated as having 

3 adopted such a plan amendment as of the 

4 date such coordination begins. 

5 ‘‘(iii) MULTIPLE AMENDMENTS.—The 

6 Secretary of the Treasury shall issue regu7 lations to prevent the avoidance of the pur8 poses of this paragraph through the use of 

9 2 or more plan amendments rather than a 

10 single amendment. 

11 ‘‘(iv) CASH BALANCE PLAN.—For pur12 poses of this paragraph, the term ‘cash 

13 balance plan’ has the meaning given such 

14 term by subsection (b)(5)(C). 

15 ‘‘(v) COORDINATION WITH ACCRUAL

16 RULES.—If a plan amendment is treated 

17 as meeting the requirements of this para18 graph with respect to any participant be19 cause such participant is eligible to con20 tinue to accrue benefits in the same man21 ner as under the terms of the plan in ef22 fect before the amendment, the Secretary 

23 of the Treasury shall prescribe regulations 

24 under which the plan shall not be treated 

25 as failing to meet the requirements of sub-
435 

•S 1783 PCS 

1 paragraph (A), (B), or (C) of section 

2 204(b)(1) if the requirements of this para3 graph are met. 

4 ‘‘(H) APPLICATION OF CERTAIN RULES TO

5 EARLY-RETIREMENT BENEFITS.—Rules similar 

6 to the rules of clauses (i), (ii), and (iii) of sub7 paragraph (B) and subparagraph (C) shall 

8 apply in the case of any early retirement benefit 

9 or retirement-type subsidy (within the meaning 

10 of section 204(g)(2)(A)).’’. 

11 (2) AMENDMENT OF INTERNAL REVENUE

12 CODE.—Section 411(d) of the Internal Revenue 

13 Code of 1986 (relating to special rules) is amended 

14 by adding at the end the following new paragraph: 

15 ‘‘(7) TREATMENT OF CONVERSIONS TO CASH

16 BALANCE OR OTHER HYBRID PLANS.— 

17 ‘‘(A) IN GENERAL.—For purposes of para18 graph (6), an applicable plan amendment shall 

19 be treated as reducing the accrued benefit of a 

20 participant if, under the terms of the plan as in 

21 effect after the amendment, the accrued benefit 

22 of any participant who was a participant as of 

23 the effective date of the amendment may at any 

24 time be less than the accrued benefit deter25 mined under the method under subparagraph 
436 

•S 1783 PCS 

1 (B), (C), or (D) which is specified in the plan 

2 and applies uniformly to all participants. An 

3 applicable plan amendment shall in no event be 

4 treated as meeting the requirements of any 

5 such subparagraph if the conversion described 

6 in subparagraph (G)(i) is into a cash balance 

7 plan other than a qualified cash balance plan 

8 (as defined in subsection (b)(5)(B)). 

9 ‘‘(B) NO WEARAWAY.— 

10 ‘‘(i) IN GENERAL.—The accrued ben11 efit determined under this subparagraph is 

12 the sum of— 

13 ‘‘(I) the participant’s accrued 

14 benefit for years of service before the 

15 effective date of the amendment, de16 termined under the terms of the plan 

17 as in effect before the amendment, 

18 plus 

19 ‘‘(II) except as provided in clause 

20 (ii), the participant’s accrued benefit 

21 for years of service after the effective 

22 date of the amendment, determined 

23 under the terms of the plan as in ef24 fect after the amendment. 
437 

•S 1783 PCS 

1 A similar rule shall apply in the case of 

2 any early retirement benefit or retirement3 type subsidy (within the meaning of section 

4 411(d)(6)(B)(i)). 

5 ‘‘(ii) REQUIRED AMOUNTS FOR CER6 TAIN PERIODS.—Notwithstanding clause 

7 (i)(II), the plan shall provide that either— 

8 ‘‘(I) the accrued benefit of all 

9 participants for each of the first 5 

10 plan years to which the amendment 

11 applies shall be equal to the greater of 

12 the accrued benefit determined under 

13 the terms of the plan as in effect both 

14 before and after the amendment, or 

15 ‘‘(II) the accrued benefit for peri16 ods after the effective date of the 

17 amendment of all participants who, as 

18 of the effective date of the amend19 ment, had attained the age of 40 and 

20 had a combined age and years of serv21 ice under the plan of not less than 55 

22 shall be determined under either of 

23 the methods described in clause (iii) 

24 which is selected by the plan and 

25 which is specified in the amendment. 
438 

•S 1783 PCS 

1 ‘‘(iii) APPLICABLE METHOD.—For 

2 purposes of clause (ii)(II), the plan shall 

3 select 1 of the following methods: 

4 ‘‘(I) The accrued benefit shall be 

5 equal to the greater of the accrued 

6 benefit determined under the terms of 

7 the plan as in effect both before and 

8 after the amendment. 

9 ‘‘(II) At the election of the par10 ticipant, the accrued benefit shall be 

11 determined under the terms of the 

12 plan as in effect either before or after 

13 the amendment. 

14 ‘‘(C) GREATER OF OLD OR NEW OR ELEC15 TION OF EITHER.—The accrued benefit deter16 mined under this subparagraph is the accrued 

17 benefit determined under 1 of the following 

18 methods which is selected by the plan and 

19 which is specified in the amendment: 

20 ‘‘(i) The accrued benefit shall be equal 

21 to the greater of the accrued benefit deter22 mined under the terms of the plan as in ef23 fect both before and after the amendment. 

24 ‘‘(ii) At the election of the participant, 

25 the accrued benefit shall be determined 
439 

•S 1783 PCS 

1 under the terms of the plan as in effect ei2 ther before or after the amendment. 

3 ‘‘(D) METHOD PRESCRIBED BY SEC4 RETARY.—The accrued benefit determined 

5 under this subparagraph shall be determined 

6 under regulations prescribed by the Secretary 

7 which require a plan to provide a credit of addi8 tional amounts or increases in initial account 

9 balances in amounts substantially equivalent to 

10 the benefits that would be required to be pro11 vided to meet the requirements of subpara12 graphs (B) or (C). 

13 ‘‘(E) INCLUSION OF PRIOR ACCRUED BEN14 EFIT INTO INITIAL ACCOUNT BALANCE.— 

15 ‘‘(i) IN GENERAL.—If, for purposes of 

16 subparagraphs (B), (C), or (D), an appli17 cable plan amendment provides that an 

18 amount will be initially credited to a par19 ticipant’s accumulation account (or its 

20 equivalent) on the effective date of the 

21 amendment with respect to the partici22 pant’s accrued benefit for periods before 

23 such date, the requirements of such sub24 paragraph shall be treated as met with re25 spect to such accrued benefit if the amount 
440 

•S 1783 PCS 

1 initially credited is not less than the 

2 present value of the participant’s accrued 

3 benefit determined by using the applicable 

4 mortality table and the lower of the appli5 cable interest rate under section 

6 417(e)(3)(A), or the interest rate used to 

7 credit interest under the plan, as of such 

8 date. 

9 ‘‘(ii) ADJUSTMENTS FOR CERTAIN

10 SUBSIDIZED BENEFITS.—For purposes of 

11 subparagraph (B), if any early retirement 

12 benefit or retirement-type subsidy (within 

13 the meaning of paragraph (6)(B)(i)) is not 

14 included in the initial account balance 

15 under clause (i), the plan shall credit the 

16 accumulation account with the amount of 

17 such benefit or subsidy for the plan year in 

18 which the participant retires if, as of such 

19 time, the participant has met the age, 

20 years of service, and other requirements 

21 under the plan for entitlement to such ben22 efit or subsidy. 

23 ‘‘(F) REQUIREMENTS WHERE PARTICIPANT

24 OFFERED CHOICE.—If a plan provides a partici25 pant with an election described in subparagraph 
441 

•S 1783 PCS 

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)— 

10 ‘‘(I) by which the participant 

11 may project benefits under the for12 mulas from which the participant may 

13 choose and may model the impact of 

14 any such choice, and 

15 ‘‘(II) with respect to cir16 cumstances under which a participant 

17 may not receive the projected accrued 

18 benefits by reason of a plan termi19 nation or otherwise. 

20 ‘‘(ii) SIGNIFICANT REDUCTION OF

21 RATE OF ACCRUAL.—The plan shall pro22 vide that if, during any of the first 5 plan 

23 years during which such an election is in 

24 effect, the plan adopts an amendment 

25 which results in a significant reduction in 
442 

•S 1783 PCS 

1 the rate of future benefit accrual (within 

2 the meaning of section 4980F(e)), the ac3 crued benefit of the participant shall be de4 termined as if the participant had made 

5 the election which resulted in the greatest 

6 accrued benefit. 

7 ‘‘(iii) BENEFITS MUST NOT BE CON8 TINGENT ON ELECTION.—The plan shall 

9 not be treated as meeting the requirements 

10 of either such subparagraph if any other 

11 benefit is conditioned (directly or indi12 rectly) on such election. 

13 ‘‘(G) APPLICABLE PLAN AMENDMENT.— 

14 For purposes of this paragraph— 

15 ‘‘(i) IN GENERAL.—The term ‘applica16 ble plan amendment’ means an amendment 

17 to a defined benefit plan which has the ef18 fect of converting the plan to a cash bal19 ance plan. 

20 ‘‘(ii) SPECIAL RULE FOR COORDI21 NATED BENEFITS.—If the benefits of 2 or 

22 more defined benefit plans established or 

23 maintained by an employer are coordinated 

24 in such a manner as to have the effect of 

25 the adoption of an amendment described in 
443 

•S 1783 PCS 

1 clause (i), the sponsor of the defined ben2 efit plan or plans providing for such co3 ordination shall be treated as having 

4 adopted such a plan amendment as of the 

5 date such coordination begins. 

6 ‘‘(iii) MULTIPLE AMENDMENTS.—The 

7 Secretary shall issue regulations to prevent 

8 the avoidance of the purposes of this para9 graph through the use of 2 or more plan 

10 amendments rather than a single amend11 ment. 

12 ‘‘(iv) CASH BALANCE PLAN.—For pur13 poses of this paragraph, the term ‘cash 

14 balance plan’ has the meaning given such 

15 term by subsection (b)(5)(C). 

16 ‘‘(v) COORDINATION WITH ACCRUAL

17 AND NONDISCRIMINATION RULES.—If a 

18 plan amendment is treated as meeting the 

19 requirements of this paragraph with re20 spect to any participant because such par21 ticipant is eligible to continue to accrue 

22 benefits in the same manner as under the 

23 terms of the plan in effect before the 

24 amendment, the Secretary shall prescribe 

25 regulations under which— 
444 

•S 1783 PCS 

1 ‘‘(I) the plan shall not be treated 

2 as failing to meet the requirements of 

3 subparagraph (A), (B), or (C) of sec4 tion 411(b)(1) if the requirements of 

5 this paragraph are met, and 

6 ‘‘(II) the plan shall, subject to 

7 such terms and conditions as may be 

8 provided in such regulations, not be 

9 treated as failing to meet the require10 ments of section 401(a)(4) merely be11 cause the plan provides any accrual or 

12 benefit which is required to be pro13 vided under subparagraph (B), (C), or 

14 (D) or because only participants as of 

15 the effective date of the amendment 

16 are so eligible, except that this sub17 clause shall only apply if the plan met 

18 the requirements of section 401(a)(4) 

19 under the terms of the plan as in ef20 fect before the amendment. 

21 ‘‘(H) APPLICATION OF CERTAIN RULES TO

22 EARLY-RETIREMENT BENEFITS.—Rules similar 

23 to the rules of clauses (i), (ii), and (iii) of sub24 paragraph (B) and subparagraph (C) shall 

25 apply in the case of any early retirement benefit 
445 

•S 1783 PCS 

1 or retirement-type subsidy (within the meaning 

2 of section 204(g)(2)(A)).’’. 

3 (c) ASSUMPTIONS USED IN COMPUTING PRESENT

4 VALUE OF ACCRUED BENEFIT.— 

5 (1) AMENDMENT OF ERISA.—Section 205(g)(3) 

6 of such Act (29 U.S.C. 1055(g)(3)), is amended— 

7 (A) by striking ‘‘or (B)’’ in subparagraph 

8 (A)(i) and inserting ‘‘, (B), or (C)’’, and 

9 (B) by adding at the end the following new 

10 subparagraph: 

11 ‘‘(C) PRESENT VALUE OF ACCRUED BEN12 EFIT UNDER CASH BALANCE PLAN.—Except as 

13 provided in regulations, in the case of a quali14 fied cash balance plan (as defined in section 

15 204(g)(6)(B)), the present value of the accrued 

16 benefit of any participant shall, for purposes of 

17 paragraphs (1) and (2), be equal to the balance 

18 in the participant’s accumulation account (or 

19 its equivalent) as of the time the present value 

20 determination is being made.’’. 

21 (2) AMENDMENT OF INTERNAL REVENUE

22 CODE.—Section 417(e)(3) of such Code, is amend23 ed— 

24 (A) by striking ‘‘or (B)’’ in subparagraph 

25 (A)(i) and inserting ‘‘, (B), or (C)’’, and 
446 

•S 1783 PCS 

1 (B) by adding at the end the following new 

2 subparagraph: 

3 ‘‘(C) PRESENT VALUE OF ACCRUED BEN4 EFIT UNDER CASH BALANCE PLAN.—Except as 

5 provided in regulations, in the case of a quali6 fied cash balance plan (as defined in section 

7 411(d)(7)(B)), the present value of the accrued 

8 benefit of any participant shall, for purposes of 

9 paragraphs (1) and (2), be equal to the balance 

10 in the participant’s accumulation account (or 

11 its equivalent) as of the time the present value 

12 determination is being made.’’ 

13 (d) NO INFERENCE.—Nothing in the amendments 

14 made by this section shall be construed to infer the proper 

15 treatment of cash balance plans or conversions to cash bal16 ance plans under sections 204(b)(1)(H) of the Employee 

17 Retirement Income Security Act of 1974, 4(i)(1) of the 

18 Age Discrimination in Employment Act of 1967, and 

19 411(b)(1)(H) of the Internal Revenue Code of 1986, as 

20 in effect before such amendments. 

21 (e) EFFECTIVE DATES.— 

22 (1) AGE DISCRIMINATION AND LUMP-SUM DIS23 TRIBUTIONS.— 
447 

•S 1783 PCS 

1 (A) IN GENERAL.—The amendments made 

2 by subsections (a) and (c) shall apply to periods 

3 after July 31, 2005. 

4 (B) VESTING AND INTEREST CREDIT RE5 QUIREMENTS.—In the case of a plan in exist6 ence on July 31, 2005, the requirements of 

7 clauses (ii) and (iii) of section 411(b)(5)(B) of 

8 the Internal Revenue Code of 1986, and of 

9 clauses (ii) and (iii) of 204(b)(5)(B) of the Em10 ployee Retirement Income Security Act of 1974 

11 shall, for purposes of applying the amendments 

12 made by subsections (a) and (c), apply to years 

13 beginning after December 31, 2006, unless the 

14 plan sponsor elects the application of such re15 quirements for any period after July 31, 2005, 

16 and before the first year beginning after De17 cember 31, 2006. 

18 (C) SPECIAL RULE FOR COLLECTIVELY

19 BARGAINED PLANS.—In the case of a plan 

20 maintained pursuant to 1 or more collective 

21 bargaining agreements between employee rep22 resentatives and 1 or more employers ratified 

23 on or before the date of the enactment of this 

24 Act, the requirements described in subpara25 graph (B) shall, for purposes of applying the 
448 

•S 1783 PCS 

1 amendments made by subsections (a) and (c), 

2 not apply to plan years beginning before— 

3 (i) the earlier of— 

4 (I) the date on which the last of 

5 such collective bargaining agreements 

6 terminates (determined without re7 gard to any extension thereof on or 

8 after such date of enactment), or 

9 (II) January 1, 2007, or 

10 (ii) January 1, 2009. 

11 (2) CONVERSIONS.—The amendments made by 

12 subsection (b) shall apply to plan amendments 

13 adopted after, and taking effect after, July 31, 

14 2005. 

15 SEC. 602. REGULATIONS RELATING TO MERGERS AND AC16 QUISITIONS. 

17 The Secretary of the Treasury or his delegate shall, 

18 not later than 12 months after the date of the enactment 

19 of this Act, prescribe regulations for the application of the 

20 amendments made by, and the provisions of, this title in 

21 cases where the conversion of a plan to a cash balance 

22 plan is made with respect to a group of employees who 

23 become employees by reason of a merger, acquisition, or 

24 similar transaction. 
449 

•S 1783 PCS 

1 TITLE VII—DIVERSIFICATION 

2 RIGHTS AND OTHER PARTICI3 PANT PROTECTIONS UNDER 

4 DEFINED CONTRIBUTION 

5 PLANS 

6 SEC. 701. DEFINED CONTRIBUTION PLANS REQUIRED TO 

7 PROVIDE EMPLOYEES WITH FREEDOM TO IN8 VEST THEIR PLAN ASSETS. 

9 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

10 (1) QUALIFICATION REQUIREMENT.—Section 

11 401(a) of the Internal Revenue Code of 1986 (relat12 ing to qualified pension, profit-sharing, and stock 

13 bonus plans) is amended by inserting after para14 graph (34) the following new paragraph: 

15 ‘‘(35) DIVERSIFICATION REQUIREMENTS FOR

16 CERTAIN DEFINED CONTRIBUTION PLANS.— 

17 ‘‘(A) IN GENERAL.—A trust which is part 

18 of an applicable defined contribution plan shall 

19 not be treated as a qualified trust unless the 

20 plan meets the diversification requirements of 

21 subparagraphs (B), (C), and (D). 

22 ‘‘(B) EMPLOYEE CONTRIBUTIONS AND

23 ELECTIVE DEFERRALS INVESTED IN EMPLOYER

24 SECURITIES OR REAL PROPERTY.—In the case 

25 of the portion of an applicable individual’s ac-
450 

•S 1783 PCS 

1 count attributable to employee contributions 

2 and elective deferrals which is invested in em3 ployer securities or employer real property, a 

4 plan meets the requirements of this subpara5 graph if the applicable individual may elect to 

6 direct the plan to divest any such securities or 

7 real property and to reinvest an equivalent 

8 amount in other investment options meeting the 

9 requirements of subparagraph (D). 

10 ‘‘(C) EMPLOYER CONTRIBUTIONS IN11 VESTED IN EMPLOYER SECURITIES OR REAL

12 PROPERTY.—In the case of the portion of the 

13 account attributable to employer contributions 

14 other than elective deferrals which is invested in 

15 employer securities or employer real property, a 

16 plan meets the requirements of this subpara17 graph if each applicable individual who— 

18 ‘‘(i) is a participant who has com19 pleted at least 3 years of service, or 

20 ‘‘(ii) is a beneficiary of a participant 

21 described in clause (i) or of a deceased 

22 participant, 

23 may elect to direct the plan to divest any such 

24 securities or real property and to reinvest an 
451 

•S 1783 PCS 

1 equivalent amount in other investment options 

2 meeting the requirements of subparagraph (D). 

3 ‘‘(D) INVESTMENT OPTIONS.— 

4 ‘‘(i) IN GENERAL.—The requirements 

5 of this subparagraph are met if the plan 

6 offers not less than 3 investment options, 

7 other than employer securities or employer 

8 real property, to which an applicable indi9 vidual may direct the proceeds from the di10 vestment of employer securities or em11 ployer real property pursuant to this para12 graph, each of which is diversified and has 

13 materially different risk and return charac14 teristics. 

15 ‘‘(ii) TREATMENT OF CERTAIN RE16 STRICTIONS AND CONDITIONS.— 

17 ‘‘(I) TIME FOR MAKING INVEST18 MENT CHOICES.—A plan shall not be 

19 treated as failing to meet the require20 ments of this subparagraph merely be21 cause the plan limits the time for di22 vestment and reinvestment to peri23 odic, reasonable opportunities occur24 ring no less frequently than quarterly. 
452 

•S 1783 PCS 

1 ‘‘(II) CERTAIN RESTRICTIONS

2 AND CONDITIONS NOT ALLOWED.— 

3 Except as provided in regulations, a 

4 plan shall not meet the requirements 

5 of this subparagraph if the plan im6 poses restrictions or conditions with 

7 respect to the investment of employer 

8 securities or employer real property 

9 which are not imposed on the invest10 ment of other assets of the plan. This 

11 subclause shall not apply to any re12 strictions or conditions imposed by 

13 reason of the application of securities 

14 laws. 

15 ‘‘(E) APPLICABLE DEFINED CONTRIBU16 TION PLAN.—For purposes of this paragraph— 

17 ‘‘(i) IN GENERAL.—The term ‘applica18 ble defined contribution plan’ means any 

19 defined contribution plan which holds any 

20 publicly traded employer securities. 

21 ‘‘(ii) EXCEPTION FOR CERTAIN

22 ESOPS.—Such term does not include an 

23 employee stock ownership plan if— 

24 ‘‘(I) there are no contributions to 

25 such plan (or earnings thereunder) 
453 

•S 1783 PCS 

1 which are held within such plan and 

2 are subject to subsection (k) or (m), 

3 and 

4 ‘‘(II) such plan is a separate plan 

5 for purposes of section 414(l) with re6 spect to any other defined benefit plan 

7 or defined contribution plan main8 tained by the same employer or em9 ployers. 

10 ‘‘(iii) EXCEPTION FOR ONE PARTICI11 PANT PLANS.—Such term does not include 

12 a one-participant retirement plan. 

13 ‘‘(iv) ONE-PARTICIPANT RETIREMENT

14 PLAN.—For purposes of clause (iii), the 

15 term ‘one-participant retirement plan’ 

16 means a retirement plan that— 

17 ‘‘(I) on the first day of the plan 

18 year covered only one individual (or 

19 the individual and the individual’s 

20 spouse) and the individual owned 100 

21 percent of the plan sponsor (whether 

22 or not incorporated), or covered only 

23 one or more partners (or partners and 

24 their spouses) in the plan sponsor, 
454 

•S 1783 PCS 

1 ‘‘(II) meets the minimum cov2 erage requirements of section 410(b) 

3 without being combined with any 

4 other plan of the business that covers 

5 the employees of the business, 

6 ‘‘(III) does not provide benefits 

7 to anyone except the individual (and 

8 the individual’s spouse) or the part9 ners (and their spouses), 

10 ‘‘(IV) does not cover a business 

11 that is a member of an affiliated serv12 ice group, a controlled group of cor13 porations, or a group of businesses 

14 under common control, and 

15 ‘‘(V) does not cover a business 

16 that uses the services of leased em17 ployees (within the meaning of section 

18 414(n)). 

19 For purposes of this clause, the term ‘part20 ner’ includes a 2-percent shareholder (as 

21 defined in section 1372(b)) of an S cor22 poration. 

23 ‘‘(F) CERTAIN PLANS TREATED AS HOLD24 ING PUBLICLY TRADED EMPLOYER SECURI25 TIES.— 
455 

•S 1783 PCS 

1 ‘‘(i) IN GENERAL.—Except as pro2 vided in regulations or in clause (ii), a plan 

3 holding employer securities which are not 

4 publicly traded employer securities shall be 

5 treated as holding publicly traded employer 

6 securities if any employer corporation, or 

7 any member of a controlled group of cor8 porations which includes such employer 

9 corporation, has issued a class of stock 

10 which is a publicly traded employer secu11 rity. 

12 ‘‘(ii) EXCEPTION FOR CERTAIN CON13 TROLLED GROUPS WITH PUBLICLY TRAD14 ED SECURITIES.—Clause (i) shall not 

15 apply to a plan if— 

16 ‘‘(I) no employer corporation, or 

17 parent corporation of an employer 

18 corporation, has issued any publicly 

19 traded employer security, and 

20 ‘‘(II) no employer corporation, or 

21 parent corporation of an employer 

22 corporation, has issued any special 

23 class of stock which grants particular 

24 rights to, or bears particular risks for, 

25 the holder or issuer with respect to 
456 

•S 1783 PCS 

1 any corporation described in clause (i) 

2 which has issued any publicly traded 

3 employer security. 

4 ‘‘(iii) DEFINITIONS.—For purposes of 

5 this subparagraph, the term— 

6 ‘‘(I) ‘controlled group of corpora7 tions’ has the meaning given such 

8 term by section 1563(a), except that 

9 ‘50 percent’ shall be substituted for 

10 ‘80 percent’ each place it appears, 

11 ‘‘(II) ‘employer corporation’ 

12 means a corporation which is an em13 ployer maintaining the plan, and 

14 ‘‘(III) ‘parent corporation’ has 

15 the meaning given such term by sec16 tion 424(e). 

17 ‘‘(G) OTHER DEFINITIONS.—For purposes 

18 of this paragraph— 

19 ‘‘(i) APPLICABLE INDIVIDUAL.—The 

20 term ‘applicable individual’ means— 

21 ‘‘(I) any participant in the plan, 

22 and 

23 ‘‘(II) any beneficiary who has an 

24 account under the plan with respect to 
457 

•S 1783 PCS 

1 which the beneficiary is entitled to ex2 ercise the rights of a participant. 

3 ‘‘(ii) ELECTIVE DEFERRAL.—The 

4 term ‘elective deferral’ means an employer 

5 contribution described in section 

6 402(g)(3)(A). 

7 ‘‘(iii) EMPLOYER SECURITY.—The 

8 term ‘employer security’ has the meaning 

9 given such term by section 407(d)(1) of 

10 the Employee Retirement Income Security 

11 Act of 1974. 

12 ‘‘(iv) EMPLOYER REAL PROPERTY.— 

13 The term ‘employer real property’ has the 

14 meaning given such term by section 

15 407(d)(2) of the Employee Retirement In16 come Security Act of 1974. 

17 ‘‘(v) EMPLOYEE STOCK OWNERSHIP

18 PLAN.—The term ‘employee stock owner19 ship plan’ has the meaning given such 

20 term by section 4975(e)(7). 

21 ‘‘(vi) PUBLICLY TRADED EMPLOYER

22 SECURITIES.—The term ‘publicly traded 

23 employer securities’ means employer secu24 rities which are readily tradable on an es25 tablished securities market. 
458 

•S 1783 PCS 

1 ‘‘(vii) YEAR OF SERVICE.—The term 

2 ‘year of service’ has the meaning given 

3 such term by section 411(a)(5). 

4 ‘‘(H) TRANSITION RULE FOR SECURITIES

5 OR REAL PROPERTY ATTRIBUTABLE TO EM6 PLOYER CONTRIBUTIONS.— 

7 ‘‘(i) RULES PHASED IN OVER 3

8 YEARS.— 

9 ‘‘(I) IN GENERAL.—In the case 

10 of the portion of an account to which 

11 subparagraph (C) applies and which 

12 consists of employer securities or em13 ployer real property acquired in a plan 

14 year beginning before January 1, 

15 2006, subparagraph (C) shall only 

16 apply to the applicable percentage of 

17 such securities or real property. This 

18 subparagraph shall be applied sepa19 rately with respect to each class of se20 curities and employer real property. 

21 ‘‘(II) EXCEPTION FOR CERTAIN

22 PARTICIPANTS AGED 55 OR OVER.— 

23 Subclause (I) shall not apply to an 

24 applicable individual who is a partici25 pant who has attained age 55 and 
459 

•S 1783 PCS 

1 completed at least 3 years of service 

2 before the first plan year beginning 

3 after December 31, 2005. 

4 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

5 purposes of clause (i), the applicable per6 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.’’. 

7 (2) CONFORMING AMENDMENTS.— 

8 (A) Section 401(a)(28)(B) of such Code 

9 (relating to additional requirements relating to 

10 employee stock ownership plans) is amended by 

11 adding at the end the following new clause: 

12 ‘‘(v) EXCEPTION.—This subparagraph 

13 shall not apply to an applicable defined 

14 contribution plan (as defined in paragraph 

15 (35)(E)).’’ 

16 (B) Section 409(h)(7) of such Code is 

17 amended by inserting ‘‘or subparagraph (B) or 

18 (C) of section 401(a)(35)’’ before the period at 

19 the end. 

20 (C) Section 4980(c)(3)(A) of such Code is 

21 amended by striking ‘‘if—’’ and all that follows 

22 and inserting ‘‘if the requirements of subpara23 graphs (B), (C), and (D) are met.’’ 
460 

•S 1783 PCS 

1 (b) AMENDMENTS OF ERISA.— 

2 (1) IN GENERAL.—Section 204 of the Employee 

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

4 1054) is amended by redesignating subsection (j) as 

5 subsection (k) and by inserting after subsection (i) 

6 the following new subsection: 

7 ‘‘(j) DIVERSIFICATION REQUIREMENTS FOR CERTAIN

8 INDIVIDUAL ACCOUNT PLANS.— 

9 ‘‘(1) IN GENERAL.—An applicable individual ac10 count plan shall meet the diversification require11 ments of paragraphs (2), (3), and (4). 

12 ‘‘(2) EMPLOYEE CONTRIBUTIONS AND ELEC13 TIVE DEFERRALS INVESTED IN EMPLOYER SECURI14 TIES OR REAL PROPERTY.—In the case of the por15 tion of an applicable individual’s account attrib16 utable to employee contributions and elective defer17 rals which is invested in employer securities or em18 ployer real property, a plan meets the requirements 

19 of this paragraph if the applicable individual may 

20 elect to direct the plan to divest any such securities 

21 or real property and to reinvest an equivalent 

22 amount in other investment options meeting the re23 quirements of paragraph (4). 

24 ‘‘(3) EMPLOYER CONTRIBUTIONS INVESTED IN

25 EMPLOYER SECURITIES OR REAL PROPERTY.—In the 
461 

•S 1783 PCS 

1 case of the portion of the account attributable to 

2 employer contributions other than elective deferrals 

3 which is invested in employer securities or employer 

4 real property, a plan meets the requirements of this 

5 paragraph if each applicable individual who— 

6 ‘‘(A) is a participant who has completed at 

7 least 3 years of service, or 

8 ‘‘(B) is a beneficiary of a participant de9 scribed in subparagraph (A) or of a deceased 

10 participant, 

11 may elect to direct the plan to divest any such secu12 rities or real property and to reinvest an equivalent 

13 amount in other investment options meeting the re14 quirements of paragraph (4). 

15 ‘‘(4) INVESTMENT OPTIONS.— 

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

17 this paragraph are met if the plan offers not 

18 less than 3 investment options, other than em19 ployer securities or employer real property, to 

20 which an applicable individual may direct the 

21 proceeds from the divestment of employer secu22 rities or employer real property pursuant to this 

23 subsection, each of which is diversified and has 

24 materially different risk and return characteris25 tics. 
462 

•S 1783 PCS 

1 ‘‘(B) TREATMENT OF CERTAIN RESTRIC2 TIONS AND CONDITIONS.— 

3 ‘‘(i) TIME FOR MAKING INVESTMENT

4 CHOICES.—A plan shall not be treated as 

5 failing to meet the requirements of this 

6 paragraph merely because the plan limits 

7 the time for divestment and reinvestment 

8 to periodic, reasonable opportunities occur9 ring no less frequently than quarterly. 

10 ‘‘(ii) CERTAIN RESTRICTIONS AND

11 CONDITIONS NOT ALLOWED.—Except as 

12 provided in regulations, a plan shall not 

13 meet the requirements of this paragraph if 

14 the plan imposes restrictions or conditions 

15 with respect to the investment of employer 

16 securities or employer real property which 

17 are not imposed on the investment of other 

18 assets of the plan. This subparagraph shall 

19 not apply to any restrictions or conditions 

20 imposed by reason of the application of se21 curities laws. 

22 ‘‘(5) APPLICABLE INDIVIDUAL ACCOUNT

23 PLAN.—For purposes of this subsection— 

24 ‘‘(A) IN GENERAL.—The term ‘applicable 

25 individual account plan’ means any individual 
463 

•S 1783 PCS 

1 account plan (as defined in section 3(34)) which 

2 holds any publicly traded employer securities. 

3 ‘‘(B) EXCEPTION FOR CERTAIN ESOPS.— 

4 Such term does not include an employee stock 

5 ownership plan if— 

6 ‘‘(i) there are no contributions to such 

7 plan (or earnings thereunder) which are 

8 held within such plan and are subject to 

9 subsection (k) or (m) of section 401 of the 

10 Internal Revenue Code of 1986, and 

11 ‘‘(ii) such plan is a separate plan (for 

12 purposes of section 414(l) of such Code) 

13 with respect to any other defined benefit 

14 plan or individual account plan maintained 

15 by the same employer or employers. 

16 ‘‘(C) EXCEPTION FOR ONE PARTICIPANT

17 PLANS.—Such term shall not include a one-par18 ticipant retirement plan (as defined in section 

19 101(i)(8)(B)). 

20 ‘‘(D) CERTAIN PLANS TREATED AS HOLD21 ING PUBLICLY TRADED EMPLOYER SECURI22 TIES.— 

23 ‘‘(i) IN GENERAL.—Except as pro24 vided in regulations or in clause (ii), a plan 

25 holding employer securities which are not 
464 

•S 1783 PCS 

1 publicly traded employer securities shall be 

2 treated as holding publicly traded employer 

3 securities if any employer corporation, or 

4 any member of a controlled group of cor5 porations which includes such employer 

6 corporation, has issued a class of stock 

7 which is a publicly traded employer secu8 rity. 

9 ‘‘(ii) EXCEPTION FOR CERTAIN CON10 TROLLED GROUPS WITH PUBLICLY TRAD11 ED SECURITIES.—Clause (i) shall not 

12 apply to a plan if— 

13 ‘‘(I) no employer corporation, or 

14 parent corporation of an employer 

15 corporation, has issued any publicly 

16 traded employer security, and 

17 ‘‘(II) no employer corporation, or 

18 parent corporation of an employer 

19 corporation, has issued any special 

20 class of stock which grants particular 

21 rights to, or bears particular risks for, 

22 the holder or issuer with respect to 

23 any corporation described in clause (i) 

24 which has issued any publicly traded 

25 employer security. 
465 

•S 1783 PCS 

1 ‘‘(iii) DEFINITIONS.—For purposes of 

2 this subparagraph, the term— 

3 ‘‘(I) ‘controlled group of corpora4 tions’ has the meaning given such 

5 term by section 1563(a) of the Inter6 nal Revenue Code of 1986, except 

7 that ‘50 percent’ shall be substituted 

8 for ‘80 percent’ each place it appears, 

9 ‘‘(II) ‘employer corporation’ 

10 means a corporation which is an em11 ployer maintaining the plan, and 

12 ‘‘(III) ‘parent corporation’ has 

13 the meaning given such term by sec14 tion 424(e) of such Code. 

15 ‘‘(6) OTHER DEFINITIONS.—For purposes of 

16 this paragraph— 

17 ‘‘(A) APPLICABLE INDIVIDUAL.—The term 

18 ‘applicable individual’ means— 

19 ‘‘(i) any participant in the plan, and 

20 ‘‘(ii) any beneficiary who has an ac21 count under the plan with respect to which 

22 the beneficiary is entitled to exercise the 

23 rights of a participant. 

24 ‘‘(B) ELECTIVE DEFERRAL.—The term 

25 ‘elective deferral’ means an employer contribu-
466 

•S 1783 PCS 

1 tion described in section 402(g)(3)(A) of the In2 ternal Revenue Code of 1986. 

3 ‘‘(C) EMPLOYER SECURITY.—The term 

4 ‘employer security’ has the meaning given such 

5 term by section 407(d)(1). 

6 ‘‘(D) EMPLOYER REAL PROPERTY.—The 

7 term ‘employer real property’ has the meaning 

8 given such term by section 407(d)(2). 

9 ‘‘(E) EMPLOYEE STOCK OWNERSHIP

10 PLAN.—The term ‘employee stock ownership 

11 plan’ has the meaning given such term by sec12 tion 4975(e)(7) of such Code. 

13 ‘‘(F) PUBLICLY TRADED EMPLOYER SECU14 RITIES.—The term ‘publicly traded employer 

15 securities’ means employer securities which are 

16 readily tradable on an established securities 

17 market. 

18 ‘‘(G) YEAR OF SERVICE.—The term ‘year 

19 of service’ has the meaning given such term by 

20 section 203(b)(2). 

21 ‘‘(7) TRANSITION RULE FOR SECURITIES OR

22 REAL PROPERTY ATTRIBUTABLE TO EMPLOYER CON23 TRIBUTIONS.— 

24 ‘‘(A) RULES PHASED IN OVER 3 YEARS.— 
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1 ‘‘(i) IN GENERAL.—In the case of the 

2 portion of an account to which paragraph 

3 (3) applies and which consists of employer 

4 securities or employer real property ac5 quired in a plan year beginning before 

6 January 1, 2006, paragraph (3) shall only 

7 apply to the applicable percentage of such 

8 securities or real property. This subpara9 graph shall be applied separately with re10 spect to each class of securities and em11 ployer real property. 

12 ‘‘(ii) EXCEPTION FOR CERTAIN PAR13 TICIPANTS AGED 55 OR OVER.—Clause (i) 

14 shall not apply to an applicable individual 

15 who is a participant who has attained age 

16 55 and completed at least 3 years of serv17 ice before the first plan year beginning 

18 after December 31, 2005. 

19 ‘‘(B) APPLICABLE PERCENTAGE.—For 

20 purposes of subparagraph (A), the applicable 

21 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.’’. 
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1 (2) CONFORMING AMENDMENT.—Section 

2 407(b)(3) of such Act (29 U.S.C. 1107(b)(3)) is 

3 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).’’

4 (c) EFFECTIVE DATES.— 

5 (1) IN GENERAL.—Except as provided in para6 graphs (2) and (3), the amendments made by this 

7 section shall apply to plan years beginning after De8 cember 31, 2005. 

9 (2) SPECIAL RULE FOR COLLECTIVELY BAR10 GAINED AGREEMENTS.—In the case of a plan main11 tained pursuant to 1 or more collective bargaining 

12 agreements between employee representatives and 1 

13 or more employers ratified on or before the date of 

14 the enactment of this Act, paragraph (1) shall be 

15 applied to benefits pursuant to, and individuals cov16 ered by, any such agreement by substituting for 

17 ‘‘December 31, 2005’’ the earlier of— 

18 (A) the later of— 

19 (i) December 31, 2006, or 

20 (ii) the date on which the last of such 

21 collective bargaining agreements termi22 nates (determined without regard to any 
469 

•S 1783 PCS 

1 extension thereof after such date of enact2 ment), or 

3 (B) December 31, 2007. 

4 (3) SPECIAL RULE FOR CERTAIN EMPLOYER SE5 CURITIES HELD IN AN ESOP.— 

6 (A) IN GENERAL.—In the case of employer 

7 securities to which this paragraph applies, the 

8 amendments made by this section shall apply to 

9 plan years beginning after the earlier of— 

10 (i) December 31, 2006, or 

11 (ii) the first date on which the fair 

12 market value of such securities exceeds the 

13 guaranteed minimum value described in 

14 subparagraph (B)(ii). 

15 (B) APPLICABLE SECURITIES.—This para16 graph shall apply to employer securities which 

17 are attributable to employer contributions other 

18 than elective deferrals, and which, on Sep19 tember 17, 2003— 

20 (i) consist of preferred stock, and 

21 (ii) are within an employee stock own22 ership plan (as defined in section 

23 4975(e)(7) of the Internal Revenue Code 

24 of 1986), the terms of which provide that 

25 the value of the securities cannot be less 
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•S 1783 PCS 

1 than the guaranteed minimum value speci2 fied by the plan on such date. 

3 (C) COORDINATION WITH TRANSITION

4 RULE.—In applying section 401(a)(35)(H) of 

5 the Internal Revenue Code of 1986 and section 

6 204(j)(7) of the Employee Retirement Income 

7 Security Act of 1974 (as added by this section) 

8 to employer securities to which this paragraph 

9 applies, the applicable percentage shall be de10 termined without regard to this paragraph. 

11 SEC. 702. NOTICE OF FREEDOM TO DIVEST EMPLOYER SE12 CURITIES OR REAL PROPERTY. 

13 (a) IN GENERAL.—Section 101 of the Employee Re14 tirement Income Security Act of 1974 (29 U.S.C. 1021), 

15 as amended by this Act, is amended by redesignating sub16 section (l) as subsection (m) and by inserting after sub17 section (k) the following new subsection: 

18 ‘‘(l) NOTICE OF RIGHT TO DIVEST.—Not later than 

19 30 days before the first date on which an applicable indi20 vidual of an applicable individual account plan is eligible 

21 to exercise the right under section 204(j) to direct the pro22 ceeds from the divestment of employer securities or em23 ployer real property with respect to any type of contribu24 tion, the administrator shall provide to such individual a 

25 notice— 
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1 ‘‘(1) setting forth such right under such sec2 tion, and 

3 ‘‘(2) describing the importance of diversifying 

4 the investment of retirement account assets. 

5 The notice required by this subsection shall be written in 

6 a manner calculated to be understood by the average plan 

7 participant and may be delivered in written, electronic, or 

8 other appropriate form to the extent that such form is rea9 sonably accessible to the applicable individual.’’ 

10 (b) PENALTIES.—Section 502(c)(7) of the Employee 

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

12 1132(c)(7)) is amended by striking ‘‘section 101(i)’’ and 

13 inserting ‘‘subsection (i) or (l) of section 101’’. 

14 (c) MODEL NOTICE.—The Secretary of the Treasury 

15 shall, within 180 days after the date of the enactment of 

16 this subsection, prescribe a model notice for purposes of 

17 satisfying the requirements of the amendments made by 

18 this section. 

19 (d) EFFECTIVE DATES.— 

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

21 this section shall apply to plan years beginning after 

22 December 31, 2005. 

23 (2) TRANSITION RULE.—If notice under section 

24 101(l) of the Employee Retirement Income Security 

25 Act of 1974 (as added by this section) would other-
472 

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1 wise be required to be provided before the 90th day 

2 after the date of the enactment of this Act, such no3 tice shall not be required to be provided until such 

4 90th day. 

5 SEC. 703. PERIODIC PENSION BENEFIT STATEMENTS. 

6 (a) AMENDMENTS OF ERISA.— 

7 (1) IN GENERAL.—Section 105(a) of the Em8 ployee Retirement Income Security Act of 1974 (29 

9 U.S.C. 1025(a)) is amended to read as follows: 

10 ‘‘(a) REQUIREMENTS TO PROVIDE PENSION BEN11 EFIT STATEMENTS.— 

12 ‘‘(1) REQUIREMENTS.— 

13 ‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The 

14 administrator of an individual account plan 

15 (other than a one-participant retirement plan 

16 described in section 101(i)(8)(B)) shall furnish 

17 a pension benefit statement— 

18 ‘‘(i) at least once each calendar quar19 ter to a participant or beneficiary who has 

20 the right to direct the investment of assets 

21 in his or her account under the plan, 

22 ‘‘(ii) at least once each calendar year 

23 to a participant or beneficiary who has his 

24 or her own account under the plan but 
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•S 1783 PCS 

1 does not have the right to direct the invest2 ment of assets in that account, and 

3 ‘‘(iii) upon written request to a plan 

4 beneficiary not described in clause (i) or 

5 (ii). 

6 ‘‘(B) DEFINED BENEFIT PLAN.—The ad7 ministrator of a defined benefit plan (other 

8 than a one-participant retirement plan de9 scribed in section 101(i)(8)(B)) shall furnish a 

10 pension benefit statement— 

11 ‘‘(i) at least once every 3 years to 

12 each participant with a nonforfeitable ac13 crued benefit and who is employed by the 

14 employer maintaining the plan at the time 

15 the statement is to be furnished, and 

16 ‘‘(ii) to a participant or beneficiary of 

17 the plan upon written request. 

18 Information furnished under clause (i) to a par19 ticipant may be based on reasonable estimates 

20 determined under regulations prescribed by the 

21 Secretary, in consultation with the Pension 

22 Benefit Guaranty Corporation. 

23 ‘‘(2) STATEMENTS.— 

24 ‘‘(A) IN GENERAL.—A pension benefit 

25 statement under paragraph (1)— 
474 

•S 1783 PCS 

1 ‘‘(i) shall indicate, on the basis of the 

2 latest available information— 

3 ‘‘(I) the total benefits accrued, 

4 and 

5 ‘‘(II) the nonforfeitable pension 

6 benefits, if any, which have accrued, 

7 or the earliest date on which benefits 

8 will become nonforfeitable, 

9 ‘‘(ii) shall include an explanation of 

10 any permitted disparity under section 

11 401(l) of the Internal Revenue Code of 

12 1986 or any floor-offset arrangement that 

13 may be applied in determining any accrued 

14 benefits described in clause (i), 

15 ‘‘(iii) shall be written in a manner cal16 culated to be understood by the average 

17 plan participant, and 

18 ‘‘(iv) may be delivered in written, elec19 tronic, or other appropriate form to the ex20 tent such form is reasonably accessible to 

21 the participant or beneficiary. 

22 ‘‘(B) ADDITIONAL INFORMATION.—In the 

23 case of an individual account plan, any pension 

24 benefit statement under clause (i) or (ii) of 

25 paragraph (1)(A) shall include— 
475 

•S 1783 PCS 

1 ‘‘(i) the value of each investment to 

2 which assets in the individual account have 

3 been allocated, determined as of the most 

4 recent valuation date under the plan, in5 cluding the value of any assets held in the 

6 form of employer securities or employer 

7 real property, without regard to whether 

8 such securities or real property were con9 tributed by the plan sponsor or acquired at 

10 the direction of the plan or of the partici11 pant or beneficiary, and 

12 ‘‘(ii) in the case of a pension benefit 

13 statement under paragraph (1)(A)(i)— 

14 ‘‘(I) an explanation of any limita15 tions or restrictions on any right of 

16 the participant or beneficiary under 

17 the plan to direct an investment, and 

18 ‘‘(II) a notice that investments in 

19 any individual account may not be 

20 adequately diversified if the value of 

21 any investment in the account exceeds 

22 20 percent of the fair market value of 

23 all investments in the account. 

24 ‘‘(C) ALTERNATIVE NOTICE.—The require25 ments of subparagraph (A)(i)(II) are met if, at 
476 

•S 1783 PCS 

1 least annually and in accordance with require2 ments of the Secretary, the plan— 

3 ‘‘(i) updates the information described 

4 in such paragraph which is provided in the 

5 pension benefit statement, or 

6 ‘‘(ii) provides in a separate statement 

7 such information as is necessary to enable 

8 a participant or beneficiary to determine 

9 their nonforfeitable vested benefits. 

10 ‘‘(3) DEFINED BENEFIT PLANS.— 

11 ‘‘(A) ALTERNATIVE NOTICE.—In the case 

12 of a defined benefit plan, the requirements of 

13 paragraph (1)(B)(i) shall be treated as met 

14 with respect to a participant if at least once 

15 each year the administrator provides to the par16 ticipant notice of the availability of the pension 

17 benefit statement and the ways in which the 

18 participant may obtain such statement. Such 

19 notice may be delivered in written, electronic, or 

20 other appropriate form to the extent such form 

21 is reasonably accessible to the participant. 

22 ‘‘(B) YEARS IN WHICH NO BENEFITS AC23 CRUE.—The Secretary may provide that years 

24 in which no employee or former employee bene25 fits (within the meaning of section 410(b) of 
477 

•S 1783 PCS 

1 the Internal Revenue Code of 1986) under the 

2 plan need not be taken into account in deter3 mining the 3-year period under paragraph 

4 (1)(B)(i).’’ 

5 (2) CONFORMING AMENDMENTS.— 

6 (A) Section 105 of the Employee Retire7 ment Income Security Act of 1974 (29 U.S.C. 

8 1025) is amended by striking subsection (d). 

9 (B) Section 105(b) of such Act (29 U.S.C. 

10 1025(b)) is amended to read as follows: 

11 ‘‘(b) LIMITATION ON NUMBER OF STATEMENTS.—In 

12 no case shall a participant or beneficiary of a plan be enti13 tled to more than 1 statement described in subparagraph 

14 (A)(iii) or (B)(ii) of subsection (a)(1), whichever is appli15 cable, in any 12-month period.’’ 

16 (C) Section 502(c)(1) of such Act (29 

17 U.S.C. 1132(c)(1)) is amended by striking ‘‘or 

18 section 101(f)’’ and inserting ‘‘section 101(f), 

19 or section 105(a)’’. 

20 (b) MODEL STATEMENTS.— 

21 (1) IN GENERAL.—The Secretary of Labor 

22 shall, within 180 days after the date of the enact23 ment of this section, develop 1 or more model benefit 

24 statements that are written in a manner calculated 

25 to be understood by the average plan participant and 
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•S 1783 PCS 

1 that may be used by plan administrators in com2 plying with the requirements of section 105 of the 

3 Employee Retirement Income Security Act of 1974. 

4 (2) INTERIM FINAL RULES.—The Secretary of 

5 Labor may promulgate any interim final rules as the 

6 Secretary determines appropriate to carry out the 

7 provisions of this subsection. 

8 (d) EFFECTIVE DATE.— 

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

10 this section shall apply to plan years beginning after 

11 December 31, 2006. 

12 (2) SPECIAL RULE FOR COLLECTIVELY BAR13 GAINED AGREEMENTS.—In the case of a plan main14 tained pursuant to 1 or more collective bargaining 

15 agreements between employee representatives and 1 

16 or more employers ratified on or before the date of 

17 the enactment of this Act, paragraph (1) shall be 

18 applied to benefits pursuant to, and individuals cov19 ered by, any such agreement by substituting for 

20 ‘‘December 31, 2006’’ the earlier of— 

21 (A) the later of— 

22 (i) December 31, 2007, or 

23 (ii) the date on which the last of such 

24 collective bargaining agreements termi25 nates (determined without regard to any 
479 

•S 1783 PCS 

1 extension thereof after such date of enact2 ment), or 

3 (B) December 31, 2008. 

4 SEC. 704. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF 

5 BLACKOUT PERIODS. 

6 (a) AMENDMENTS OF ERISA.— 

7 (1) IN GENERAL.—Section 101(i) of the Em8 ployee Retirement Income Security Act of 1974 (29 

9 U.S.C. 1021(i)) is amended— 

10 (A) by striking clause (i) of paragraph 

11 (8)(B) and inserting: 

12 ‘‘(i) on the first day of the plan 

13 year— 

14 ‘‘(I) covered only one individual 

15 (or the individual and the individual’s 

16 spouse) and the individual owned 100 

17 percent of the plan sponsor (whether 

18 or not incorporated), or 

19 ‘‘(II) covered only one or more 

20 partners (or partners and their 

21 spouses) in the plan sponsor,’’, 

22 (B) by striking ‘‘employer’’ and ‘‘employ23 er’s’’ in paragraph (8)(B)(iii) and inserting ‘‘in24 dividual’’ and ‘‘individual’s’’, respectively, 
480 

•S 1783 PCS 

1 (C) by striking ‘‘leases employees’’ in para2 graph (8)(B)(v) and inserting ‘‘uses the services 

3 of leased employees (within the meaning of sec4 tion 414(n) of the Internal Revenue Code of 

5 1986)’’, and 

6 (D) by adding at the end of paragraph 

7 (8)(B) the following flush sentence: 

8 ‘‘For purposes of this paragraph, an individual 

9 shall be treated as a partner if the individual is 

10 so treated under section 401(a)(35)(E)(iv) of 

11 the Internal Revenue Code of 1986.’’ 

12 (2) EFFECTIVE DATE.—The amendments made 

13 by this subsection shall take effect as if included in 

14 the provisions of section 306 of Public Law 107–204 

15 (116 Stat. 745 et seq.). 

16 SEC. 705. ALLOWANCE OF, AND CREDIT FOR, ADDITIONAL 

17 IRA PAYMENTS IN CERTAIN BANKRUPTCY 

18 CASES. 

19 (a) ALLOWANCE OF CONTRIBUTIONS.—Section 

20 219(b)(5) of the Internal Revenue Code of 1986 (relating 

21 to deductible amount) is amended by redesignating sub22 paragraph (C) as subparagraph (D) and by inserting after 

23 subparagraph (B) the following new subparagraph: 

24 ‘‘(C) CATCHUP CONTRIBUTIONS FOR CER25 TAIN INDIVIDUALS.— 
481 

•S 1783 PCS 

1 ‘‘(i) IN GENERAL.—In the case of an 

2 applicable individual who elects to make a 

3 qualified retirement contribution in addi4 tion to the deductible amount determined 

5 under subparagraph (A)— 

6 ‘‘(I) the deductible amount for 

7 any taxable year shall be increased by 

8 an amount equal to 3 times the appli9 cable amount determined under sub10 paragraph (B) for such taxable year, 

11 and 

12 ‘‘(II) subparagraph (B) shall not 

13 apply. 

14 ‘‘(ii) APPLICABLE INDIVIDUAL.—For 

15 purposes of this subparagraph, the term 

16 ‘applicable individual’ means, with respect 

17 to any taxable year, any individual who 

18 was a qualified participant in a qualified 

19 cash or deferred arrangement (as defined 

20 in section 401(k)) of an employer described 

21 in clause (iii) under which the employer 

22 matched at least 50 percent of the employ23 ee’s contributions to such arrangement 

24 with stock of such employer. 
482 

•S 1783 PCS 

1 ‘‘(iii) EMPLOYER DESCRIBED.—An 

2 employer is described in this clause if, in 

3 any taxable year preceding the taxable year 

4 described in clause (ii)— 

5 ‘‘(I) such employer (or any con6 trolling corporation of such employer) 

7 was a debtor in a case under title 11 

8 of the United States Code, or similar 

9 Federal or State law, and 

10 ‘‘(II) such employer (or any other 

11 person) was subject to an indictment 

12 or conviction resulting from business 

13 transactions related to such case. 

14 ‘‘(iv) QUALIFIED PARTICIPANT.—For 

15 purposes of clause (ii), the term ‘qualified 

16 participant’ means any applicable indi17 vidual who was a participant in the cash or 

18 deferred arrangement described in clause 

19 (i) on the date that is 6 months before the 

20 filing of the case described in clause (iii). 

21 ‘‘(v) TERMINATION.—This subpara22 graph shall not apply to taxable years be23 ginning after December 31, 2009.’’ 

24 (b) SAVER’S CREDIT EXPANDED TO INCLUDE

25 CATCHUP CONTRIBUTIONS.— 
483 

•S 1783 PCS 

1 (1) IN GENERAL.—Section 25B of the Internal 

2 Revenue Code of 1986 (relating to credit for elective 

3 deferrals and IRA contributions by certain individ4 uals) is amended by redesignating subsection (h) as 

5 subsection (i) and by inserting after subsection (g) 

6 the following new subsection: 

7 ‘‘(h) ADDITIONAL CREDIT FOR CERTAIN CATCHUP

8 CONTRIBUTIONS.— 

9 ‘‘(1) IN GENERAL.—In the case of an eligible 

10 individual who is an applicable individual under sec11 tion 219(b)(5)(C) for any taxable year, the amount 

12 of the credit allowable under subsection (a) for the 

13 taxable year shall be increased by 50 percent of so 

14 much of the qualified retirement contributions (as 

15 defined in section 219(e)) of the individual for the 

16 taxable year as exceeds the deductible amount for 

17 the taxable year under section 219(b)(5) (without 

18 regard to subparagraphs (B) and (C) thereof). 

19 ‘‘(2) COORDINATION WITH OTHER CONTRIBU20 TIONS.—For purposes of this section— 

21 ‘‘(A) any contribution to which this sub22 section applies shall not be taken into account 

23 in determining the amount of the credit allow24 able under subsection (a) without regard to this 

25 subsection, and 
484 

•S 1783 PCS 

1 ‘‘(B) in applying any reduction in qualified 

2 retirement savings contributions under sub3 section (d)(2), the reduction shall be applied 

4 first to qualified retirement savings contribu5 tions other than contributions to which this 

6 subsection applies.’’. 

7 (2) EXTENSION OF TERMINATION DATE FOR

8 CATCHUP CREDIT.—Section 25B(i) of such Code, as 

9 redesignated by paragraph (1), is amended by in10 serting ‘‘(December 31, 2007, in the case of the por11 tion of the credit allowed under subsection (h))’’ 

12 after ‘‘2006’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2004. 

16 TITLE VIII—INFORMATION TO 

17 ASSIST PENSION PLAN PAR18 TICIPANTS 

19 SEC. 801. DEFINED CONTRIBUTION PLANS REQUIRED TO 

20 PROVIDE ADEQUATE INVESTMENT EDU21 CATION TO PARTICIPANTS. 

22 (a) ADEQUATE INVESTMENT EDUCATION.— 

23 (1) IN GENERAL.—Section 101 of the Employee 

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

25 1024), as amended by this Act, is amended by redes-
485 

•S 1783 PCS 

1 ignating subsection (m) as subsection (n) and by in2 serting after subsection (l) the following new sub3 section: 

4 ‘‘(m) BASIC INVESTMENT GUIDELINES.— 

5 ‘‘(1) IN GENERAL.—The administrator of an in6 dividual account plan (other than a one-participant 

7 retirement plan described in subsection (i)(8)(B)) 

8 shall furnish at least once each year to each partici9 pant or beneficiary who has the right to direct the 

10 investment of assets in his or her account the model 

11 form relating to basic investment guidelines which is 

12 described in paragraph (2). 

13 ‘‘(2) MODEL FORM.— 

14 ‘‘(A) IN GENERAL.—The Secretary shall, 

15 in consultation with the Secretary of Treasury, 

16 develop and make available to individual ac17 count plans for distribution under paragraph 

18 (1) a model form containing basic guidelines for 

19 investing for retirement. Except as otherwise 

20 provided by the Secretary, such guidelines shall 

21 include— 

22 ‘‘(i) information on the benefits of di23 versification, 

24 ‘‘(ii) information on the essential dif25 ferences, in terms of risk and return, of 
486 

•S 1783 PCS 

1 pension plan investments, including stocks, 

2 bonds, mutual funds, and money market 

3 investments, 

4 ‘‘(iii) information on how an individ5 ual’s pension plan investment allocations 

6 may differ depending on the individual’s 

7 age and years to retirement and on other 

8 factors determined by the Secretary, 

9 ‘‘(iv) sources of information where in10 dividuals may learn more about pension 

11 rights, individual investing, and investment 

12 advice, and 

13 ‘‘(v) such other information related to 

14 individual investing as the Secretary deter15 mines appropriate. 

16 ‘‘(B) CALCULATION INFORMATION.—The 

17 model form under subparagraph (A) shall in18 clude addresses for Internet sites, and a work19 sheet, which a participant or beneficiary may 

20 use to calculate— 

21 ‘‘(i) the retirement age value of the 

22 participant’s or beneficiary’s nonforfeitable 

23 pension benefits under the plan (expressed 

24 as an annuity amount and determined by 
487 

•S 1783 PCS 

1 reference to varied historical annual rates 

2 of return and annuity interest rates), and 

3 ‘‘(ii) other important amounts relating 

4 to retirement savings, including the 

5 amount which a participant or beneficiary 

6 would be required to save annually to pro7 vide a retirement income equal to various 

8 percentages of their current salary (ad9 justed for expected growth prior to retire10 ment). 

11 The Secretary shall develop an Internet site 

12 which an individual may use in making such 

13 calculations and the address for such site shall 

14 be included with the form. 

15 ‘‘(C) PUBLIC COMMENT.—The Secretary of 

16 Labor shall provide at least 90 days for public 

17 comment before publishing final notice of the 

18 model form. 

19 ‘‘(3) RULES RELATING TO FORM AND STATE20 MENT.—The model form under paragraph (2)— 

21 ‘‘(A) shall be written in a manner cal22 culated to be understood by the average plan 

23 participant, and 

24 ‘‘(B) may be delivered in written, elec25 tronic, or other appropriate form to the extent 
488 

•S 1783 PCS 

1 such form is reasonably accessible to partici2 pants and beneficiaries.’’ 

3 (2) ENFORCEMENT.—Section 502(c)(7) of such 

4 Act (29 U.S.C. 1132(c)(7)), as amended by this Act, 

5 is amended by striking ‘‘or (l)’’ and inserting ‘‘, (l), 

6 or (m)’’. 

7 (c) EFFECTIVE DATE.— 

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

9 this section shall apply to plan years beginning after 

10 December 31, 2006. 

11 (2) SPECIAL RULE FOR COLLECTIVELY BAR12 GAINED AGREEMENTS.—In the case of a plan main13 tained pursuant to 1 or more collective bargaining 

14 agreements between employee representatives and 1 

15 or more employers ratified on or before the date of 

16 the enactment of this Act, paragraph (1) shall be 

17 applied to benefits pursuant to, and individuals cov18 ered by, any such agreement by substituting for 

19 ‘‘December 31, 2006’’ the earlier of— 

20 (A) the later of— 

21 (i) December 31, 2007, or 

22 (ii) the date on which the last of such 

23 collective bargaining agreements termi24 nates (determined without regard to any 
489 

•S 1783 PCS 

1 extension thereof after such date of enact2 ment), or 

3 (B) December 31, 2008. 

4 SEC. 802. INDEPENDENT INVESTMENT ADVICE PROVIDED 

5 TO PLAN PARTICIPANTS. 

6 (a) IN GENERAL.—Section 404 of the Employee Re7 tirement Income Security Act of 1974 (29 U.S.C. 1104) 

8 is amended by adding at the end the following new sub9 section: 

10 ‘‘(e) INDEPENDENT INVESTMENT ADVISER.— 

11 ‘‘(1) IN GENERAL.—In the case of an individual 

12 account plan which permits a plan participant or 

13 beneficiary to direct the investment of the assets in 

14 his or her account, if a plan sponsor or other person 

15 who is a fiduciary designates and monitors a quali16 fied investment adviser pursuant to the requirements 

17 of paragraph (3), such fiduciary— 

18 ‘‘(A) shall be deemed to have satisfied the 

19 requirements under this section for the prudent 

20 designation and periodic review of an invest21 ment adviser with whom the plan sponsor or 

22 other person who is a fiduciary enters into an 

23 arrangement for the provision of advice referred 

24 to in section 3(21)(A)(ii), 
490 

•S 1783 PCS 

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 
491 

•S 1783 PCS 

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 
492 

•S 1783 PCS 

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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•S 1783 PCS 

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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•S 1783 PCS 

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 ad21 viser— 

22 ‘‘(i) investigates such information and 

23 concerns, and 

24 ‘‘(ii) determines that there is no mate25 rial reason not to continue the designation 
495 

•S 1783 PCS 

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 
496 

•S 1783 PCS 

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 
497 

•S 1783 PCS 

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), 
498 

•S 1783 PCS 

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 
499 

•S 1783 PCS 

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),’’. 
500 

•S 1783 PCS 

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. ADMINISTRATIVE PROVISIONS. 

8 (a) AUTHORITY OF THE SECRETARY OF THE TREAS9 URY.—The Secretary of the Treasury shall have the au10 thority to prescribe rules applicable to the statements re11 quired under section 101(l) of the Employee Retirement 

12 Income Security Act of 1974 (as added by this Act). 

13 (b) AUTHORITY OF THE SECRETARY OF LABOR.— 

14 The Secretary of Labor shall have the authority to pre15 scribe rules applicable to the statements required under— 

16 (1) section 105(a) of such Act (as added by this 

17 Act); and 

18 (2) and section 101(i) such Act (as amended by 

19 this Act). 
501 

•S 1783 PCS 

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, 
502 

•S 1783 PCS 

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 
503 

•S 1783 PCS 

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-
504 

•S 1783 PCS 

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 
505 

•S 1783 PCS 

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: 
506 

•S 1783 PCS 

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— 
507 

•S 1783 PCS 

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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•S 1783 PCS 

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-
509 

•S 1783 PCS 

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— 
510 

•S 1783 PCS 

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 
511 

•S 1783 PCS 

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-
512 

•S 1783 PCS 

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 
513 

•S 1783 PCS 

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-
514 

•S 1783 PCS 

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)’’. 
515 

•S 1783 PCS 

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). 
516 

•S 1783 PCS 

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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•S 1783 PCS 

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 graph (2), the amendments made by this section 

12 shall apply to contributions for plan years beginning 

13 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 SEC. 1007. ALLOW DIRECT ROLLOVERS FROM RETIREMENT 

16 PLANS TO ROTH IRAS. 

17 (a) IN GENERAL.—Subsection (e) of section 408A of 

18 the Internal Revenue Code of 1986 (defining qualified roll19 over contribution) is amended to read as follows: 

20 ‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 

21 purposes of this section, the term ‘qualified rollover con22 tribution’ means a rollover contribution— 

23 ‘‘(1) to a Roth IRA from another such account, 

24 ‘‘(2) from an eligible retirement plan, but only 

25 if— 
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1 ‘‘(A) in the case of an individual retire2 ment plan, such rollover contribution meets the 

3 requirements of section 408(d)(3), and 

4 ‘‘(B) in the case of any eligible retirement 

5 plan (as defined in section 402(c)(8)(B) other 

6 than clauses (i) and (ii) thereof), such rollover 

7 contribution meets the requirements of section 

8 402(c), 403(b)(8), or 457(e)(16), as applicable. 

9 For purposes of section 408(d)(3)(B), there shall be dis10 regarded any qualified rollover contribution from an indi11 vidual retirement plan (other than a Roth IRA) to a Roth 

12 IRA.’’ 

13 (b) CONFORMING AMENDMENTS.— 

14 (1) Section 408A(c)(3)(B) of such Code is 

15 amended— 

16 (A) in the text by striking ‘‘individual re17 tirement plan’’ and inserting ‘‘an eligible retire18 ment plan (as defined by section 

19 402(c)(8)(B))’’, and 

20 (B) in the heading by striking ‘‘IRA’’ and 

21 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

22 (2) Section 408A(d)(3) of such Code is amend23 ed— 
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1 (A) in subparagraph (A), by striking ‘‘sec2 tion 408(d)(3)’’ inserting ‘‘sections 402(c), 

3 403(b)(8), 408(d)(3), and 457(e)(16)’’, 

4 (B) in subparagraph (B), by striking ‘‘in5 dividual retirement plan’’ and inserting ‘‘eligible 

6 retirement plan (as defined by section 

7 402(c)(8)(B))’’, 

8 (C) in subparagraph (D), by inserting ‘‘or 

9 6047’’ after ‘‘408(i)’’, 

10 (D) in subparagraph (D), by striking ‘‘or 

11 both’’ and inserting ‘‘persons subject to section 

12 6047(d)(1), or all of the foregoing persons’’, 

13 and 

14 (E) in the heading, by striking ‘‘IRA’’ and 

15 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

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

17 this section shall apply to distributions after December 31, 

18 2005. 

19 SEC. 1008. ELIMINATION OF HIGHER PENALTY ON CERTAIN 

20 SIMPLE PLAN DISTRIBUTIONS. 

21 (a) IN GENERAL.—Subsection (t) of section 72 of the 

22 Internal Revenue Code of 1986 (relating to 10-percent ad23 ditional tax on early distributions from qualified retire24 ment plans), as amended by section 1004, is amended by 

25 striking paragraph (6) and redesignating paragraphs (7), 
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1 (8), (9), and (10) as paragraphs (6), (7), (8), and (9), 

2 respectively. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 72(t)(2)(E) of such Code is amend5 ed by striking ‘‘paragraph (7)’’ and inserting ‘‘para6 graph (6)’’. 

7 (2) Section 72(t)(2)(F) of such Code is amend8 ed by striking ‘‘paragraph (8)’’ and inserting ‘‘para9 graph (7)’’. 

10 (3) Section 408(d)(3)(G) of such Code is 

11 amended by striking ‘‘applies’’ and inserting ‘‘ap12 plied on the day before the date of the enactment of 

13 the Pension Security and Transparency Act of 

14 2005)’’. 

15 (4) Section 457(a)(2) of such Code is amended 

16 by striking ‘‘section 72(t)(9)’’ and inserting ‘‘section 

17 72(t)(8)’’. 

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

19 this section shall apply to years beginning after December 

20 31, 2005. 

21 SEC. 1009. SIMPLE PLAN PORTABILITY. 

22 (a) REPEAL OF LIMITATION.—Paragraph (3) of sec23 tion 408(d) of the Internal Revenue Code of 1986 (relat24 ing to rollover contributions), as amended by this Act, is 

25 amended by striking subparagraph (G) and redesignating 
524 

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1 subparagraphs (H) and (I) as subparagraphs (G) and (H), 

2 respectively. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to years beginning after December 

5 31, 2005. 

6 SEC. 1010. ELIGIBILITY FOR PARTICIPATION IN RETIRE7 MENT PLANS. 

8 An individual shall not be precluded from partici9 pating in an eligible deferred compensation plan by reason 

10 of having received a distribution under section 457(e)(9) 

11 of the Internal Revenue Code of 1986, as in effect prior 

12 to the enactment of the Small Business Job Protection 

13 Act of 1996. 

14 SEC. 1011. TRANSFERS TO THE PBGC. 

15 (a) MANDATORY DISTRIBUTIONS TO PBGC.—Clause 

16 (i) of section 401(a)(31)(B) of the Internal Revenue Code 

17 of 1986 (relating to general rule for certain mandatory 

18 distributions) is amended by inserting ‘‘to the Pension 

19 Benefit Guaranty Corporation in accordance with section 

20 4050(e) of the Employee Retirement Income Security Act 

21 of 1974 or’’ after ‘‘such transfer’’. 

22 (b) TAX TREATMENT OF DISTRIBUTIONS.—Subpara23 graph (B) of section 401(a)(31) of such Code is amended 

24 by adding at the end the following new clause: 
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1 ‘‘(iii) INCOME TAX TREATMENT OF

2 TRANSFERS TO PBGC.—For purposes of 

3 determining the income tax treatment re4 lating to transfers to the Pension Benefit 

5 Guaranty Corporation under clause (i)— 

6 ‘‘(I) the transfer of amounts to 

7 the Pension Benefit Guaranty Cor8 poration pursuant to clause (i) shall 

9 be treated as a transfer to an indi10 vidual retirement plan under such 

11 clause, and 

12 ‘‘(II) the distribution of such 

13 amounts from the Pension Benefit 

14 Guaranty Corporation shall be treated 

15 as a distribution from an individual 

16 retirement plan.’’ 

17 (c) MISSING PARTICIPANTS AND BENEFICIARIES.— 

18 Section 4050 of the Employee Retirement Income Security 

19 Act of 1974 (29 U.S.C. 1350), as amended by section 

20 1012, is amended by redesignating subsection (e) as sub21 section (g) and by inserting after subsection (d) the fol22 lowing new subsections: 

23 ‘‘(e) INVOLUNTARY CASHOUTS.— 

24 ‘‘(1) PAYMENT BY THE CORPORATION.—If ben25 efits under a plan described in paragraph (3) were 
526 

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1 transferred to the corporation under section 

2 401(a)(31)(B) of the Internal Revenue Code of 

3 1986, the corporation shall, upon application filed by 

4 the participant or beneficiary with the corporation in 

5 such form and manner as may be prescribed in regu6 lations of the corporation, pay to the participant or 

7 beneficiary the amount transferred (or the appro8 priate survivor benefit) either— 

9 ‘‘(A) in a single sum (plus interest), or 

10 ‘‘(B) in such other form as is specified in 

11 regulations of the corporation. 

12 ‘‘(2) INFORMATION TO THE CORPORATION.—To 

13 the extent provided in regulations, the plan adminis14 trator of a plan described in paragraph (3) shall, 

15 upon a transfer of benefits to the corporation under 

16 section 401(a)(31)(B) of such Code, provide the cor17 poration information with respect to benefits of the 

18 participant or beneficiary so transferred. 

19 ‘‘(3) PLANS DESCRIBED.—A plan is described 

20 in this paragraph if the plan is a pension plan (with21 in the meaning of section 3(2))— 

22 ‘‘(A) which provides for mandatory dis23 tributions under section 401(a)(31)(B) of the 

24 Internal Revenue Code of 1986, and 
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1 ‘‘(B) which is not a plan described in para2 graphs (2) through (11) of section 4021(b). 

3 ‘‘(4) CERTAIN PROVISIONS NOT TO APPLY.— 

4 Subsections (a)(1) and (a)(3) shall not apply to a 

5 plan described in paragraph (3). 

6 ‘‘(f) AUTHORITY TO CHARGE FEE.—The corporation 

7 may charge a reasonable fee for costs incurred in connec8 tion with the transfer and management of amounts trans9 ferred to the corporation under this section. Such fee may 

10 be imposed on the transferor and may be deducted from 

11 amounts so transferred.’’ 

12 (d) EFFECTIVE DATES.— 

13 (1) INTERNAL REVENUE CODE PROVISIONS.— 

14 The amendments made by subsections (a) and (b) 

15 shall take effect as if included in the amendments 

16 made by section 657 of the Economic Growth and 

17 Tax Relief Reconciliation Act of 2001. 

18 (2) EMPLOYEE RETIREMENT INCOME SECURITY

19 ACT OF 1974 PROVISIONS.—The amendments made 

20 by subsection (c) shall apply to distributions made 

21 after final regulations implementing subsections (e) 

22 and (f) of section 4050 of the Employee Retirement 

23 Income Security Act of 1974 (as added by sub24 section (c)) are prescribed. 
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1 (3) REGULATIONS.—The Pension Benefit Guar2 anty Corporation shall issue regulations necessary to 

3 carry out the amendments made by subsection (c) 

4 not later than December 31, 2006. 

5 SEC. 1012. MISSING PARTICIPANTS. 

6 (a) IN GENERAL.—Section 4050 of the Employee Re7 tirement Income Security Act of 1974 (29 U.S.C. 1350) 

8 is amended by redesignating subsection (c) as subsection 

9 (e) and by inserting after subsection (b) the following new 

10 subsections: 

11 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation 

12 shall prescribe rules similar to the rules in subsection (a) 

13 for multiemployer plans covered by this title that termi14 nate under section 4041A. 

15 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.— 

16 ‘‘(1) TRANSFER TO CORPORATION.—The plan 

17 administrator of a plan described in paragraph (4) 

18 may elect to transfer a missing participant’s benefits 

19 to the corporation upon termination of the plan. 

20 ‘‘(2) INFORMATION TO THE CORPORATION.—To 

21 the extent provided in regulations, the plan adminis22 trator of a plan described in paragraph (4) shall, 

23 upon termination of the plan, provide the corpora24 tion information with respect to benefits of a miss25 ing participant if the plan transfers such benefits— 
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1 ‘‘(A) to the corporation, or 

2 ‘‘(B) to an entity other than the corpora3 tion or a plan described in paragraph (4)(B)(ii). 

4 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben5 efits of a missing participant were transferred to the 

6 corporation under paragraph (1), the corporation 

7 shall, upon location of the participant or beneficiary, 

8 pay to the participant or beneficiary the amount 

9 transferred (or the appropriate survivor benefit) ei10 ther— 

11 ‘‘(A) in a single sum (plus interest), or 

12 ‘‘(B) in such other form as is specified in 

13 regulations of the corporation. 

14 ‘‘(4) PLANS DESCRIBED.—A plan is described 

15 in this paragraph if— 

16 ‘‘(A) the plan is a pension plan (within the 

17 meaning of section 3(2))— 

18 ‘‘(i) to which the provisions of this 

19 section do not apply (without regard to 

20 this subsection), and 

21 ‘‘(ii) which is not a plan described in 

22 paragraphs (2) through (11) of section 

23 4021(b), and 

24 ‘‘(B) at the time the assets are to be dis25 tributed upon termination, the plan— 
530 

•S 1783 PCS 

1 ‘‘(i) has missing participants, and 

2 ‘‘(ii) has not provided for the transfer 

3 of assets to pay the benefits of all missing 

4 participants to another pension plan (with5 in the meaning of section 3(2)). 

6 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.— 

7 Subsections (a)(1) and (a)(3) shall not apply to a 

8 plan described in paragraph (4).’’ 

9 (b) CONFORMING AMENDMENTS.—Section 206(f) of 

10 such Act (29 U.S.C. 1056(f)) is amended— 

11 (1) by striking ‘‘title IV’’ and inserting ‘‘section 

12 4050’’; and 

13 (2) by striking ‘‘the plan shall provide that,’’. 

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

15 this section shall apply to distributions made after final 

16 regulations implementing subsections (c) and (d) of sec17 tion 4050 of the Employee Retirement Income Security 

18 Act of 1974 (as added by subsection (a)), respectively, are 

19 prescribed. 

20 TITLE XI—ADMINISTRATIVE 

21 PROVISIONS 

22 SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION 

23 SYSTEM. 

24 (a) IN GENERAL.—The Secretary of the Treasury 

25 shall have full authority to establish and implement the 
531 

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1 Employee Plans Compliance Resolution System (or any 

2 successor program) and any other employee plans correc3 tion policies, including the authority to waive income, ex4 cise, or other taxes to ensure that any tax, penalty, or 

5 sanction is not excessive and bears a reasonable relation6 ship to the nature, extent, and severity of the failure. 

7 (b) IMPROVEMENTS.—The Secretary of the Treasury 

8 shall continue to update and improve the Employee Plans 

9 Compliance Resolution System (or any successor pro10 gram), giving special attention to— 

11 (1) increasing the awareness and knowledge of 

12 small employers concerning the availability and use 

13 of the program; 

14 (2) taking into account special concerns and 

15 circumstances that small employers face with respect 

16 to compliance and correction of compliance failures; 

17 (3) extending the duration of the self-correction 

18 period under the Self-Correction Program for signifi19 cant compliance failures; 

20 (4) expanding the availability to correct insig21 nificant compliance failures under the Self-Correc22 tion Program during audit; and 

23 (5) assuring that any tax, penalty, or sanction 

24 that is imposed by reason of a compliance failure is 
532 

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1 not excessive and bears a reasonable relationship to 

2 the nature, extent, and severity of the failure. 

3 SEC. 1102. EXTENSION TO ALL GOVERNMENTAL PLANS OF 

4 MORATORIUM ON APPLICATION OF CERTAIN 

5 NONDISCRIMINATION RULES APPLICABLE TO 

6 STATE AND LOCAL PLANS. 

7 (a) IN GENERAL.—The following provisions are each 

8 amended by striking ‘‘maintained by a State or local gov9 ernment or political subdivision thereof (or agency or in10 strumentality thereof)’’: 

11 (1) Section 401(a)(5)(G) of the Internal Rev12 enue Code of 1986. 

13 (2) Section 401(a)(26)(H) of such Code. 

14 (3) Section 401(k)(3)(G) of such Code. 

15 (4) Section 1505(d)(2) of the Taxpayer Relief 

16 Act of 1997. 

17 (b) CONFORMING AMENDMENTS.— 

18 (1) The heading for section 401(a)(5)(G) of 

19 such Code is amended to read as follows: ‘‘GOVERN20 MENTAL PLANS.—’’. 

21 (2) The heading for section 401(a)(26)(H) of 

22 such Code is amended to read as follows: ‘‘EXCEP23 TION FOR GOVERNMENTAL PLANS.—’’. 
533 

•S 1783 PCS 

1 (3) Section 401(k)(3)(G) of such Code is 

2 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’ 

3 after ‘‘(G)’’. 

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

5 this section shall apply to plan years beginning after De6 cember 31, 2005. 

7 SEC. 1103. NOTICE AND CONSENT PERIOD REGARDING DIS8 TRIBUTIONS. 

9 (a) EXPANSION OF PERIOD.— 

10 (1) AMENDMENT OF INTERNAL REVENUE

11 CODE.— 

12 (A) IN GENERAL.—Section 417(a)(6)(A) of 

13 the Internal Revenue Code of 1986 is amended 

14 by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 

15 (B) MODIFICATION OF REGULATIONS.— 

16 The Secretary of the Treasury shall modify the 

17 regulations under sections 402(f), 411(a)(11), 

18 and 417 of the Internal Revenue Code of 1986 

19 by substituting ‘‘180 days’’ for ‘‘90 days’’ each 

20 place it appears in Treasury Regulations sec21 tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)– 

22 1(b). 

23 (2) AMENDMENT OF ERISA.— 

24 (A) IN GENERAL.—Section 205(c)(7)(A) of 

25 the Employee Retirement Income Security Act 
534 

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1 of 1974 (29 U.S.C. 1055(c)(7)(A)) is amended 

2 by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 

3 (B) MODIFICATION OF REGULATIONS.— 

4 The Secretary of the Treasury shall modify the 

5 regulations under part 2 of subtitle B of title 

6 I of the Employee Retirement Income Security 

7 Act of 1974 relating to sections 203(e) and 205 

8 of such Act by substituting ‘‘180 days’’ for ‘‘90 

9 days’’ each place it appears. 

10 (3) EFFECTIVE DATE.—The amendments and 

11 modifications made or required by this subsection 

12 shall apply to years beginning after December 31, 

13 2005. 

14 (b) NOTIFICATION OF RIGHT TO DEFER.— 

15 (1) IN GENERAL.—The Secretary of the Treas16 ury shall modify the regulations under section 

17 411(a)(11) of the Internal Revenue Code of 1986 

18 and under section 205 of the Employee Retirement 

19 Income Security Act of 1974 to provide that the de20 scription of a participant’s right, if any, to defer re21 ceipt of a distribution shall also describe the con22 sequences of failing to defer such receipt. 

23 (2) EFFECTIVE DATE.— 
535 

•S 1783 PCS 

1 (A) IN GENERAL.—The modifications re2 quired by paragraph (1) shall apply to years be3 ginning after December 31, 2005. 

4 (B) REASONABLE NOTICE.—A plan shall 

5 not be treated as failing to meet the require6 ments of section 411(a)(11) of such Code or 

7 section 205 of such Act with respect to any de8 scription of consequences described in para9 graph (1) made within 90 days after the Sec10 retary of the Treasury issues the modifications 

11 required by paragraph (1) if the plan adminis12 trator makes a reasonable attempt to comply 

13 with such requirements. 

14 SEC. 1104. REPORTING SIMPLIFICATION. 

15 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

16 OWNERS AND THEIR SPOUSES.— 

17 (1) IN GENERAL.—The Secretary of the Treas18 ury and the Secretary of Labor shall modify the re19 quirements for filing annual returns with respect to 

20 one-participant retirement plans to ensure that such 

21 plans with assets of $250,000 or less as of the close 

22 of the plan year need not file a return for that year. 

23 (2) ONE-PARTICIPANT RETIREMENT PLAN DE24 FINED.—For purposes of this subsection, the term 

25 ‘‘one-participant retirement plan’’ means a retire-
536 

•S 1783 PCS 

1 ment plan with respect to which the following re2 quirements are met: 

3 (A) on the first day of the plan year— 

4 (i) the plan covered only one indi5 vidual (or the individual and the individ6 ual’s spouse) and the individual owned 100 

7 percent of the plan sponsor (whether or 

8 not incorporated), or 

9 (ii) the plan covered only one or more 

10 partners (or partners and their spouses) in 

11 the plan sponsor; 

12 (B) the plan meets the minimum coverage 

13 requirements of section 410(b) of the Internal 

14 Revenue Code of 1986 without being combined 

15 with any other plan of the business that covers 

16 the employees of the business; 

17 (C) the plan does not provide benefits to 

18 anyone except the individual (and the individ19 ual’s spouse) or the partners (and their 

20 spouses); 

21 (D) the plan does not cover a business that 

22 is a member of an affiliated service group, a 

23 controlled group of corporations, or a group of 

24 businesses under common control; and 
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•S 1783 PCS 

1 (E) the plan does not cover a business that 

2 uses the services of leased employees (within 

3 the meaning of section 414(n) of such Code). 

4 For purposes of this paragraph, the term ‘‘partner’’ 

5 includes a 2-percent shareholder (as defined in sec6 tion 1372(b) of such Code) of an S corporation. 

7 (3) OTHER DEFINITIONS.—Terms used in para8 graph (2) which are also used in section 414 of the 

9 Internal Revenue Code of 1986 shall have the re10 spective meanings given such terms by such section. 

11 (4) EFFECTIVE DATE.—The provisions of this 

12 subsection shall apply to plan years beginning on or 

13 after January 1, 2006. 

14 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

15 PLANS WITH FEWER THAN 25 PARTICIPANTS.—In the 

16 case of plan years beginning after December 31, 2006, the 

17 Secretary of the Treasury and the Secretary of Labor shall 

18 provide for the filing of a simplified annual return for any 

19 retirement plan which covers less than 25 participants on 

20 the first day of a plan year and which meets the require21 ments described in subparagraphs (B), (D), and (E) of 

22 subsection (a)(2). 
538 

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1 SEC. 1105. VOLUNTARY EARLY RETIREMENT INCENTIVE 

2 AND EMPLOYMENT RETENTION PLANS MAIN3 TAINED BY LOCAL EDUCATIONAL AGENCIES 

4 AND OTHER ENTITIES. 

5 (a) VOLUNTARY EARLY RETIREMENT INCENTIVE

6 PLANS.— 

7 (1) TREATMENT AS PLAN PROVIDING SEVER8 ANCE PAY.—Section 457(e)(11) of the Internal Rev9 enue Code of 1986 (relating to certain plans ex10 cluded) is amended by adding at the end the fol11 lowing new subparagraph: 

12 ‘‘(D) CERTAIN VOLUNTARY EARLY RETIRE13 MENT INCENTIVE PLANS.— 

14 ‘‘(i) IN GENERAL.—If an applicable 

15 voluntary early retirement incentive plan— 

16 ‘‘(I) makes payments or supple17 ments as an early retirement benefit, 

18 a retirement-type subsidy, or a benefit 

19 described in the last sentence of sec20 tion 411(a)(9), and 

21 ‘‘(II) such payments or supple22 ments are made in coordination with 

23 a defined benefit plan which is de24 scribed in section 401(a) and includes 

25 a trust exempt from tax under section 

26 501(a) and which is maintained by an 
539 

•S 1783 PCS 

1 eligible employer described in para2 graph (1)(A) or by an education asso3 ciation described in clause (ii)(II), 

4 such applicable plan shall be treated for 

5 purposes of subparagraph (A)(i) as a bona 

6 fide severance pay plan with respect to 

7 such payments or supplements to the ex8 tent such payments or supplements could 

9 otherwise have been provided under such 

10 defined benefit plan (determined as if sec11 tion 411 applied to such defined benefit 

12 plan). 

13 ‘‘(ii) APPLICABLE VOLUNTARY EARLY

14 RETIREMENT INCENTIVE PLAN.—For pur15 poses of this subparagraph, the term ‘ap16 plicable voluntary early retirement incen17 tive plan’ means a voluntary early retire18 ment incentive plan maintained by— 

19 ‘‘(I) a local educational agency 

20 (as defined in section 9101 of the Ele21 mentary and Secondary Education 

22 Act of 1965 (20 U.S.C. 7801)), or 

23 ‘‘(II) an education association 

24 which principally represents employees 

25 of 1 or more agencies described in 
540 

•S 1783 PCS 

1 subclause (I) and which is described 

2 in section 501(c) (5) or (6) and ex3 empt from tax under section 501(a).’’ 

4 (2) AGE DISCRIMINATION IN EMPLOYMENT

5 ACT.—Section 4(l)(1) of the Age Discrimination in 

6 Employment Act of 1967 (29 U.S.C. 623(l)(1)) is 

7 amended— 

8 (A) by inserting ‘‘(A)’’ after ‘‘(1)’’, 

9 (B) by redesignating subparagraphs (A) 

10 and (B) as clauses (i) and (ii), respectively, 

11 (C) by redesignating clauses (i) and (ii) of 

12 subparagraph (B) (as in effect before the 

13 amendments made by subparagraph (B)) as 

14 subclauses (I) and (II), respectively, and 

15 (D) by adding at the end the following: 

16 ‘‘(B) A voluntary early retirement incentive 

17 plan that— 

18 ‘‘(i) is maintained by— 

19 ‘‘(I) a local educational agency (as de20 fined in section 9101 of the Elementary 

21 and Secondary Education Act of 1965 (20 

22 U.S.C. 7801), or 

23 ‘‘(II) an education association which 

24 principally represents employees of 1 or 

25 more agencies described in subclause (I) 
541 

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1 and which is described in section 501(c) 

2 (5) or (6) of the Internal Revenue Code of 

3 1986 and exempt from taxation under sec4 tion 501(a) of such Code, and 

5 ‘‘(ii) makes payments or supplements de6 scribed in subclauses (I) and (II) of subpara7 graph (A)(ii) in coordination with a defined 

8 benefit plan (as so defined) maintained by an 

9 eligible employer described in section 

10 457(e)(1)(A) of such Code or by an education 

11 association described in clause (i)(II), 

12 shall be treated solely for purposes of subparagraph 

13 (A)(ii) as if it were a part of the defined benefit plan 

14 with respect to such payments or supplements. Pay15 ments or supplements under such a voluntary early 

16 retirement incentive plan shall not constitute sever17 ance pay for purposes of section 4(l)(2) of the Age 

18 Discrimination in Employment Act (29 U.S.C. 

19 623(l)(2)).’’ 

20 (b) EMPLOYMENT RETENTION PLANS.— 

21 (1) IN GENERAL.—Section 457(f)(2) of the In22 ternal Revenue Code of 1986 (relating to exceptions) 

23 is amended by striking ‘‘and’’ at the end of subpara24 graph (D), by striking the period at the end of sub-
542 

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1 paragraph (E) and inserting ‘‘, and’’, and by adding 

2 at the end the following: 

3 ‘‘(F) that portion of any applicable employ4 ment retention plan described in paragraph (4) 

5 with respect to any participant.’’ 

6 (2) DEFINITIONS AND RULES RELATING TO EM7 PLOYMENT RETENTION PLANS.—Section 457(f) of 

8 such Code is amended by adding at the end the fol9 lowing new paragraph: 

10 ‘‘(4) EMPLOYMENT RETENTION PLANS.—For 

11 purposes of paragraph (2)(F)— 

12 ‘‘(A) IN GENERAL.—The portion of an ap13 plicable employment retention plan described in 

14 this paragraph with respect to any participant 

15 is that portion of the plan which provides bene16 fits payable to the participant not in excess of 

17 twice the applicable dollar limit determined 

18 under subsection (e)(15). 

19 ‘‘(B) OTHER RULES.— 

20 ‘‘(i) LIMITATION.—Paragraph (2)(F) 

21 shall only apply to the portion of the plan 

22 described in subparagraph (A) for years 

23 preceding the year in which such portion is 

24 paid or otherwise made available to the 

25 participant. 
543 

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1 ‘‘(ii) TREATMENT.—A plan shall not 

2 be treated for purposes of this title as pro3 viding for the deferral of compensation for 

4 any year with respect to the portion of the 

5 plan described in subparagraph (A). 

6 ‘‘(C) APPLICABLE EMPLOYMENT RETEN7 TION PLAN.—The term ‘applicable employment 

8 retention plan’ means an employment retention 

9 plan maintained by— 

10 ‘‘(i) a local educational agency (as de11 fined in section 9101 of the Elementary 

12 and Secondary Education Act of 1965 (20 

13 U.S.C. 7801), or 

14 ‘‘(ii) an education association which 

15 principally represents employees of 1 or 

16 more agencies described in clause (i) and 

17 which is described in section 501(c) (5) or 

18 (6) and exempt from taxation under sec19 tion 501(a). 

20 ‘‘(D) EMPLOYMENT RETENTION PLAN.— 

21 The term ‘employment retention plan’ means a 

22 plan to pay, upon termination of employment, 

23 compensation to an employee of a local edu24 cational agency or education association de25 scribed in subparagraph (C) for purposes of— 
544 

•S 1783 PCS 

1 ‘‘(i) retaining the services of the em2 ployee, or 

3 ‘‘(ii) rewarding such employee for the 

4 employee’s service with 1 or more such 

5 agencies or associations.’’ 

6 (c) COORDINATION WITH ERISA.—Section 3(2)(B) 

7 of the Employee Retirement Income Security Act of 1974 

8 (29 U.S.C. 1002(2)(B)) is amended by adding at the end 

9 the following: ‘‘An applicable voluntary early retirement 

10 incentive plan (as defined in section 457(e)(11)(D)(ii) of 

11 the Internal Revenue Code of 1986) making payments or 

12 supplements described in section 457(e)(11)(D)(i) of such 

13 Code, and an applicable employment retention plan (as de14 fined in section 457(f)(4)(C) of such Code) making pay15 ments of benefits described in section 457(f)(4)(A) of such 

16 Code, shall, for purposes of this title, be treated as a wel17 fare plan (and not a pension plan) with respect to such 

18 payments and supplements.’’ 

19 (d) EFFECTIVE DATES.— 

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

21 this Act shall take effect on the date of the enact22 ment of this Act. 

23 (2) TAX AMENDMENTS.—The amendments 

24 made by subsections (a)(1) and (b) shall apply to 
545 

•S 1783 PCS 

1 taxable years ending after the date of the enactment 

2 of this Act. 

3 (3) ERISA AMENDMENTS.—The amendment 

4 made by subsection (c) shall apply to plan years 

5 ending after the date of the enactment of this Act. 

6 (4) CONSTRUCTION.—Nothing in the amend7 ments made by this section shall alter or affect the 

8 construction of the Internal Revenue Code of 1986, 

9 the Employee Retirement Income Security Act of 

10 1974, or the Age Discrimination in Employment Act 

11 of 1967 as applied to any plan, arrangement, or con12 duct to which such amendments do not apply. 

13 SEC. 1106. NO REDUCTION IN UNEMPLOYMENT COMPENSA14 TION AS A RESULT OF PENSION ROLLOVERS. 

15 (a) IN GENERAL.—Section 3304(a) of the Internal 

16 Revenue Code of 1986 (relating to requirements for State 

17 unemployment laws) is amended by adding at the end the 

18 following new flush sentence: 

19 ‘‘Compensation shall not be reduced under paragraph (15) 

20 for any pension, retirement or retired pay, annuity, or 

21 similar payment which is not includible in gross income 

22 of the individual for the taxable year in which paid because 

23 it was part of a rollover distribution.’’ 
546 

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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to weeks beginning on or after the 

3 date of the enactment of this Act. 

4 SEC. 1107. WITHHOLDING ON DISTRIBUTIONS FROM GOV5 ERNMENTAL SECTION 457 PLANS. 

6 (a) IN GENERAL.—Section 641(f) of the Economic 

7 Growth and Tax Relief Reconciliation Act of 2001 is 

8 amended by adding at the end the following new para9 graph: 

10 ‘‘(4) TRANSITION RULE FOR CERTAIN GOVERN11 MENTAL PLANS.—In the case of distributions from 

12 an eligible deferred compensation plan of an em13 ployer described in section 457(e)(1)(A) of the Inter14 nal Revenue Code of 1986 which are made after De15 cember 31, 2001, and which are part of a series of 

16 distributions which— 

17 ‘‘(A) began before January 1, 2002, and 

18 ‘‘(B) are payable for 10 years or less, the 

19 Internal Revenue Code of 1986 may be applied 

20 to such distributions without regard to the 

21 amendments made by subsection (a)(1)(D).’’ 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 subsection (a) shall take effect as if included in the provi24 sions of section 641 of the Economic Growth and Tax Re25 lief Reconciliation Act of 2001. 
547 

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1 SEC. 1108. CLARIFICATION OF TREATMENT OF DEFINED 

2 BENEFIT PLANS OF INDIAN TRIBAL GOVERN3 MENTS. 

4 (a) DEFINITION OF GOVERNMENTAL PLAN.— 

5 (1) AMENDMENT TO INTERNAL REVENUE CODE

6 OF 1986.—Section 414(d) of the Internal Revenue 

7 Code of 1986 (definition of governmental plan) is 

8 amended by adding at the end the following: ‘‘The 

9 term ‘governmental plan’ includes a defined benefit 

10 plan established or maintained for its employees by 

11 an Indian tribal government (as defined in section 

12 7701(a)(40)), a subdivision of an Indian tribal gov13 ernment (determined in accordance with section 

14 7871(d)), an agency or instrumentality (or subdivi15 sion) of an Indian tribal government, or an entity 

16 established under Federal, State, or tribal law which 

17 is wholly owned or controlled by any of the fore18 going.’’. 

19 (2) AMENDMENT TO EMPLOYEE RETIREMENT

20 INCOME SECURITY ACT OF 1974.—Section 3(32) of 

21 the Employee Retirement Income Security Act of 

22 1974 (29 U.S.C. 1002(32)) is amended by adding at 

23 the end the following: ‘‘The term ‘governmental 

24 plan’ includes a defined benefit plan established or 

25 maintained for its employees by an Indian tribal 

26 government (as defined in section 7701(a)(40) of the 
548 

•S 1783 PCS 

1 Internal Revenue Code of 1986), a subdivision of an 

2 Indian tribal government (determined in accordance 

3 with section 7871(d) of such Code), an agency or in4 strumentality (or subdivision) of an Indian tribal 

5 government, or an entity established under Federal, 

6 State, or tribal law that is wholly owned or con7 trolled by any of the foregoing.’’. 

8 (b) CLARIFICATION THAT TRIBAL GOVERNMENTS

9 ARE SUBJECT TO THE SAME PLAN RULES AND REGULA10 TIONS APPLIED TO STATE AND OTHER LOCAL GOVERN11 MENTS AND THEIR POLICE AND FIREFIGHTERS.— 

12 (1) AMENDMENTS TO INTERNAL REVENUE

13 CODE OF 1986.— 

14 (A) POLICE AND FIREFIGHTERS.—Sub15 paragraph (H) of section 415(b)(2) of such 

16 Code (defining participant) is amended— 

17 (i) in clause (i), by striking ‘‘State or 

18 political subdivision’’ and inserting ‘‘State, 

19 Indian tribal government (as defined in 

20 section 7701(a)(40)), or any political sub21 division’’; and 

22 (ii) in clause (ii)(I), by striking ‘‘State 

23 or political subdivision’’ each place it ap24 pears and inserting ‘‘State, Indian tribal 
549 

•S 1783 PCS 

1 government (as so defined), or any political 

2 subdivision thereof’’. 

3 (B) STATE AND LOCAL GOVERNMENT

4 PLANS.— 

5 (i) IN GENERAL.—Subparagraph (A) 

6 of section 415(b)(10) of such Code (relat7 ing to limitation to equal accrued benefit) 

8 is amended— 

9 (I) by inserting ‘‘, Indian tribal 

10 government (as defined in section 

11 7701(a)(40)),’’ after ‘‘State’’; 

12 (II) by inserting ‘‘any’’ before 

13 ‘‘political subdivision’’; and 

14 (III) by inserting ‘‘any of’’ before 

15 ‘‘the foregoing’’. 

16 (ii) CONFORMING AMENDMENT.—The 

17 heading of paragraph (10) of section 

18 415(b) of such Code is amended by strik19 ing ‘‘SPECIAL RULE FOR STATE AND’’ and 

20 inserting ‘‘SPECIAL RULE FOR STATE, IN21 DIAN TRIBAL, AND’’. 

22 (C) GOVERNMENT PICKUP CONTRIBU23 TIONS.—Paragraph (2) of section 414(h) of 

24 such Code (relating to designation by units of 

25 government) is amended by adding at the end 
550 

•S 1783 PCS 

1 the following new sentence: ‘‘This paragraph 

2 shall also apply to any defined benefit plan 

3 maintained by any Indian tribal government (as 

4 defined in section 7701(a)(40)) or political sub5 division thereof, or an agency or instrumentality 

6 of either’’ . 

7 (2) AMENDMENTS TO EMPLOYEE RETIREMENT

8 INCOME SECURITY ACT OF 1974.—Section 4021(b) of 

9 the Employee Retirement Income Security Act of 

10 1974 (29 U.S.C. 1321(b)) is amended— 

11 (A) in paragraph (12), by striking ‘‘or’’ at 

12 the end; 

13 (B) in paragraph (13), by striking ‘‘plan.’’ 

14 and inserting ‘‘plan; or’’; and 

15 (C) by adding at the end the following: 

16 ‘‘(14) which is a defined benefit plan estab17 lished and maintained for its employees by an Indian 

18 tribal government (as defined in section 7701(a)(40) 

19 of the Internal Revenue Code of 1986), a subdivision 

20 of an Indian tribal government (determined in ac21 cordance with section 7871(d) of such Code), an 

22 agency or instrumentality of an Indian tribal govern23 ment or subdivision thereof, or an entity established 

24 under Federal, State, or tribal law that is wholly 

25 owned or controlled by any of the foregoing.’’. 
551 

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

2 this section shall apply to any year beginning before, on, 

3 or after the date of the enactment of this Act. 

4 SEC. 1109. TREATMENT OF DEFINED BENEFIT PLAN AS 

5 GOVERNMENTAL PLAN. 

6 (a) IN GENERAL.—For purposes of the Internal Rev7 enue Code of 1986 and the Employee Retirement Income 

8 Security Act of 1974, an eligible defined benefit plan shall 

9 be treated as a governmental plan (within the meaning 

10 of section 414(d) of such Code and section 3(32) of such 

11 Act). 

12 (b) ELIGIBLE DEFINED BENEFIT PLAN.—For pur13 poses of this section, an eligible defined benefit plan is 

14 a defined benefit plan maintained by a nonprofit corpora15 tion which was— 

16 (1) incorporated on September 16, 1998, under 

17 a State nonprofit corporation statute; and 

18 (2) organized for the express purpose of sup19 porting the missions and goals of a public corpora20 tion which— 

21 (A) was created by a State statute effective 

22 on July 1, 1995; 

23 (B) is a governmental entity under State 

24 law; and 
552 

•S 1783 PCS 

1 (C) is a member of the nonprofit corpora2 tion. 

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

4 this section shall apply to any year beginning before, on, 

5 or after the date of the enactment of this Act. 

6 TITLE XII—UNITED STATES TAX 

7 COURT MODERNIZATION 

8 SEC. 1200. AMENDMENT OF 1986 CODE. 

9 Except as otherwise expressly provided, whenever in 

10 this title an amendment or repeal is expressed in terms 

11 of an amendment to, or repeal of, a section or other provi12 sion, the reference shall be considered to be made to a 

13 section or other provision of the Internal Revenue Code 

14 of 1986. 

15 SEC. 1201. ANNUITIES FOR SURVIVORS OF TAX COURT 

16 JUDGES WHO ARE ASSASSINATED. 

17 (a) ELIGIBILITY IN CASE OF DEATH BY ASSASSINA18 TION.—Subsection (h) of section 7448 (relating to annu19 ities to surviving spouses and dependent children of 

20 judges) is amended to read as follows: 

21 ‘‘(h) ENTITLEMENT TO ANNUITY.— 

22 ‘‘(1) IN GENERAL.— 

23 ‘‘(A) ANNUITY TO SURVIVING SPOUSE.—If 

24 a judge described in paragraph (2) is survived 

25 by a surviving spouse but not by a dependent 
553 

•S 1783 PCS 

1 child, there shall be paid to such surviving 

2 spouse an annuity beginning with the day of the 

3 death of the judge or following the surviving 

4 spouse’s attainment of the age of 50 years, 

5 whichever is the later, in an amount computed 

6 as provided in subsection (m). 

7 ‘‘(B) ANNUITY TO CHILD.—If such a judge 

8 is survived by a surviving spouse and a depend9 ent child or children, there shall be paid to such 

10 surviving spouse an immediate annuity in an 

11 amount computed as provided in subsection 

12 (m), and there shall also be paid to or on behalf 

13 of each such child an immediate annuity equal 

14 to the lesser of— 

15 ‘‘(i) 10 percent of the average annual 

16 salary of such judge (determined in accord17 ance with subsection (m)), or 

18 ‘‘(ii) 20 percent of such average an19 nual salary, divided by the number of such 

20 children. 

21 ‘‘(C) ANNUITY TO SURVIVING DEPENDENT

22 CHILDREN.—If such a judge leaves no surviving 

23 spouse but leaves a surviving dependent child or 

24 children, there shall be paid to or on behalf of 
554 

•S 1783 PCS 

1 each such child an immediate annuity equal to 

2 the lesser of— 

3 ‘‘(i) 20 percent of the average annual 

4 salary of such judge (determined in accord5 ance with subsection (m)), or 

6 ‘‘(ii) 40 percent of such average an7 nual salary, divided by the number of such 

8 children. 

9 ‘‘(2) COVERED JUDGES.—Paragraph (1) applies 

10 to any judge electing under subsection (b)— 

11 ‘‘(A) who dies while a judge after having 

12 rendered at least 5 years of civilian service com13 puted as prescribed in subsection (n), for the 

14 last 5 years of which the salary deductions pro15 vided for by subsection (c)(1) or the deposits 

16 required by subsection (d) have actually been 

17 made or the salary deductions required by the 

18 civil service retirement laws have actually been 

19 made, or 

20 ‘‘(B) who dies by assassination after hav21 ing rendered less than 5 years of civilian service 

22 computed as prescribed in subsection (n) if, for 

23 the period of such service, the salary deductions 

24 provided for by subsection (c)(1) or the deposits 
555 

•S 1783 PCS 

1 required by subsection (d) have actually been 

2 made. 

3 ‘‘(3) TERMINATION OF ANNUITY.— 

4 ‘‘(A) IN THE CASE OF A SURVIVING

5 SPOUSE.—The annuity payable to a surviving 

6 spouse under this subsection shall be terminable 

7 upon such surviving spouse’s death or such sur8 viving spouse’s remarriage before attaining age 

9 55. 

10 ‘‘(B) IN THE CASE OF A CHILD.—The an11 nuity payable to a child under this subsection 

12 shall be terminable upon (i) the child attaining 

13 the age of 18 years, (ii) the child’s marriage, or 

14 (iii) the child’s death, whichever first occurs, ex15 cept that if such child is incapable of self-sup16 port by reason of mental or physical disability 

17 the child’s annuity shall be terminable only 

18 upon death, marriage, or recovery from such 

19 disability. 

20 ‘‘(C) IN THE CASE OF A DEPENDENT

21 CHILD AFTER DEATH OF SURVIVING SPOUSE.— 

22 In case of the death of a surviving spouse of a 

23 judge leaving a dependent child or children of 

24 the judge surviving such spouse, the annuity of 
556 

•S 1783 PCS 

1 such child or children shall be recomputed and 

2 paid as provided in paragraph (1)(C). 

3 ‘‘(D) RECOMPUTATION.—In any case in 

4 which the annuity of a dependent child is termi5 nated under this subsection, the annuities of 

6 any remaining dependent child or children, 

7 based upon the service of the same judge, shall 

8 be recomputed and paid as though the child 

9 whose annuity was so terminated had not sur10 vived such judge. 

11 ‘‘(4) SPECIAL RULE FOR ASSASSINATED

12 JUDGES.—In the case of a survivor or survivors of 

13 a judge described in paragraph (2)(B), there shall be 

14 deducted from the annuities otherwise payable under 

15 this section an amount equal to— 

16 ‘‘(A) the amount of salary deductions pro17 vided for by subsection (c)(1) that would have 

18 been made if such deductions had been made 

19 for 5 years of civilian service computed as pre20 scribed in subsection (n) before the judge’s 

21 death, reduced by 

22 ‘‘(B) the amount of such salary deductions 

23 that were actually made before the date of the 

24 judge’s death.’’ 
557 

•S 1783 PCS 

1 (b) DEFINITION OF ASSASSINATION.—Section 

2 7448(a) (relating to definitions) is amended by adding at 

3 the end the following new paragraph: 

4 ‘‘(8) The terms ‘assassinated’ and ‘assassina5 tion’ mean the killing of a judge that is motivated 

6 by the performance by that judge of his or her offi7 cial duties.’’ 

8 (c) DETERMINATION OF ASSASSINATION.—Sub9 section (i) of section 7448 is amended— 

10 (1) by striking the subsection heading and in11 serting the following: 

12 ‘‘(i) DETERMINATIONS BY CHIEF JUDGE.— 

13 ‘‘(1) DEPENDENCY AND DISABILITY.—’’, 

14 (2) by moving the text 2 ems to the right, and 

15 (3) by adding at the end the following new 

16 paragraph: 

17 ‘‘(2) ASSASSINATION.—The chief judge shall 

18 determine whether the killing of a judge was an as19 sassination, subject to review only by the Tax Court. 

20 The head of any Federal agency that investigates 

21 the killing of a judge shall provide information to 

22 the chief judge that would assist the chief judge in 

23 making such a determination.’’ 

24 (d) COMPUTATION OF ANNUITIES.—Subsection (m) 

25 of section 7448 is amended— 
558 

•S 1783 PCS 

1 (1) by striking the subsection heading and in2 serting the following: 

3 ‘‘(m) COMPUTATION OF ANNUITIES.— 

4 ‘‘(1) IN GENERAL.—’’, 

5 (2) by moving the text 2 ems to the right, and 

6 (3) by adding at the end the following new 

7 paragraph: 

8 ‘‘(2) ASSASSINATED JUDGES.—In the case of a 

9 judge who is assassinated and who has served less 

10 than 3 years, the annuity of the surviving spouse of 

11 such judge shall be based upon the average annual 

12 salary received by such judge for judicial service.’’ 

13 (e) OTHER BENEFITS.—Section 7448 is amended by 

14 adding at the end the following: 

15 ‘‘(u) OTHER BENEFITS.—In the case of a judge who 

16 is assassinated, an annuity shall be paid under this section 

17 notwithstanding a survivor’s eligibility for or receipt of 

18 benefits under chapter 81 of title 5, United States Code, 

19 except that the annuity for which a surviving spouse is 

20 eligible under this section shall be reduced to the extent 

21 that the total benefits paid under this section and chapter 

22 81 of that title for any year would exceed the current sal23 ary for that year of the office of the judge.’’ 
559 

•S 1783 PCS 

1 SEC. 1202. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT 

2 JUDICIAL SURVIVOR ANNUITIES. 

3 (a) IN GENERAL.—Subsection (s) of section 7448 

4 (relating to annuities to surviving spouses and dependent 

5 children of judges) is amended to read as follows: 

6 ‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each 

7 time that an increase is made under section 8340(b) of 

8 title 5, United States Code, in annuities payable under 

9 subchapter III of chapter 83 of that title, each annuity 

10 payable from the survivors annuity fund under this section 

11 shall be increased at the same time by the same percent12 age by which annuities are increased under such section 

13 8340(b).’’ 

14 (b) EFFECTIVE DATE.—The amendment made by 

15 this section shall apply with respect to increases made 

16 under section 8340(b) of title 5, United States Code, in 

17 annuities payable under subchapter III of chapter 83 of 

18 that title, taking effect after the date of the enactment 

19 of this Act. 

20 SEC. 1203. LIFE INSURANCE COVERAGE FOR TAX COURT 

21 JUDGES. 

22 (a) IN GENERAL.—Section 7447 (relating to retire23 ment of judges) is amended by adding at the end the fol24 lowing new subsection: 

25 ‘‘(j) LIFE INSURANCE COVERAGE.—For purposes of 

26 chapter 87 of title 5, United States Code (relating to life 
560 

•S 1783 PCS 

1 insurance), any individual who is serving as a judge of 

2 the Tax Court or who is retired under this section is 

3 deemed to be an employee who is continuing in active em4 ployment.’’ 

5 (b) EFFECTIVE DATE.—The amendment made by 

6 this section shall apply to any individual serving as a judge 

7 of the United States Tax Court or to any retired judge 

8 of the United States Tax Court on the date of the enact9 ment of this Act. 

10 SEC. 1204. COST OF LIFE INSURANCE COVERAGE FOR TAX 

11 COURT JUDGES AGE 65 OR OVER. 

12 Section 7472 (relating to expenditures) is amended 

13 by inserting after the first sentence the following new sen14 tence: ‘‘Notwithstanding any other provision of law, the 

15 Tax Court is authorized to pay on behalf of its judges, 

16 age 65 or over, any increase in the cost of Federal Em17 ployees’ Group Life Insurance imposed after April 24, 

18 1999, including any expenses generated by such payments, 

19 as authorized by the chief judge in a manner consistent 

20 with such payments authorized by the Judicial Conference 

21 of the United States pursuant to section 604(a)(5) of title 

22 28, United States Code.’’ 
561 

•S 1783 PCS 

1 SEC. 1205. MODIFICATION OF TIMING OF LUMP-SUM PAY2 MENT OF JUDGES’ ACCRUED ANNUAL LEAVE. 

3 (a) IN GENERAL.—Section 7443 (relating to mem4 bership of the Tax Court) is amended by adding at the 

5 end the following new subsection: 

6 ‘‘(h) LUMP-SUM PAYMENT OF JUDGES’ ACCRUED

7 ANNUAL LEAVE.—Notwithstanding the provisions of sec8 tions 5551 and 6301 of title 5, United States Code, when 

9 an individual subject to the leave system provided in chap10 ter 63 of that title is appointed by the President to be 

11 a judge of the Tax Court, the individual shall be entitled 

12 to receive, upon appointment to the Tax Court, a lump13 sum payment from the Tax Court of the accumulated and 

14 accrued current annual leave standing to the individual’s 

15 credit as certified by the agency from which the individual 

16 resigned.’’ 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to any judge of the United States 

19 Tax Court who has an outstanding leave balance on the 

20 date of the enactment of this Act and to any individual 

21 appointed by the President to serve as a judge of the 

22 United States Tax Court after such date. 
562 

•S 1783 PCS 

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-
563 

•S 1783 PCS 

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, 
564 

•S 1783 PCS 

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: 
565 

•S 1783 PCS 

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 
566 

•S 1783 PCS 

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: 
567 

•S 1783 PCS 

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 
568 

•S 1783 PCS 

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’’. 
569 

•S 1783 PCS 

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 amend12 ed— 

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: 
570 

•S 1783 PCS 

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 
571 

•S 1783 PCS 

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— 
572 

•S 1783 PCS 

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)’’. 
573 

•S 1783 PCS 

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 
574 

•S 1783 PCS 

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 
575 

•S 1783 PCS 

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 
576 

•S 1783 PCS 

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. 
577 

•S 1783 PCS 

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, 
578 

•S 1783 PCS 

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 
579 

•S 1783 PCS 

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-
580 

•S 1783 PCS 

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 
581 

•S 1783 PCS 

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-
582 

•S 1783 PCS 

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.— 
583 

•S 1783 PCS 

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 
584 

•S 1783 PCS 

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, 
585 

•S 1783 PCS 

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 
586 

•S 1783 PCS 

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 
587 

•S 1783 PCS 

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-
588 

•S 1783 PCS 

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-
589 

•S 1783 PCS 

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 inter21 est— 

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 
591 

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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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•S 1783 PCS 

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 
595 

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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 
596 

•S 1783 PCS 

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 
597 

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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 
598 

•S 1783 PCS 

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-
599 

•S 1783 PCS 

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-
601 

•S 1783 PCS 

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— 
602 

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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-
603 

•S 1783 PCS 

1 lines by reason of the Presidentially declared disaster 

2 areas in Louisiana, Mississippi, Alabama, Texas, or else3 where, due to the effect of Hurricane Katrina or Rita. The 

4 Secretaries and the Executive Director of the Corporation 

5 shall issue guidance as soon as is practicable to plan spon6 sors and participants regarding extension of deadlines and 

7 rules applicable to these extraordinary circumstances. 

8 Nothing in this section shall be construed to relieve any 

9 plan sponsor from any requirement to pay benefits or 

10 make contributions under the plan of the sponsor. 

11 Subtitle B—Governmental Pension 

12 Plan Equalization 

13 SEC. 1311. DEFINITION OF GOVERNMENTAL PLAN. 

14 (a) AMENDMENT TO INTERNAL REVENUE CODE OF

15 1986.—Section 414(d) of the Internal Revenue Code of 

16 1986 (definition of governmental plan) is amended by add17 ing at the end the following: ‘‘The term ‘governmental 

18 plan’ includes a plan established or maintained for its em19 ployees by an Indian tribal government (as defined in sec20 tion 7701(a)(40)), a subdivision of an Indian tribal gov21 ernment (determined in accordance with section 7871(d)), 

22 an agency instrumentality (or subdivision) of an Indian 

23 tribal government, or an entity established under Federal, 

24 State, or tribal law which is wholly owned or controlled 

25 by any of the foregoing.’’ 
604 

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1 (b) AMENDMENT TO EMPLOYEE RETIREMENT IN2 COME SECURITY ACT OF 1974.—Section 3(32) of the Em3 ployee Retirement Income Security Act of 1974 (29 

4 U.S.C. 1002(32)) is amended by adding at the end the 

5 following: ‘‘The term ‘governmental plan’ includes a plan 

6 established or maintained for its employees by an Indian 

7 tribal government (as defined in section 7701(a)(40)), a 

8 subdivision of an Indian tribal government (determined in 

9 accordance with section 7871(d)), an agency instrumen10 tality (or subdivision) of an Indian tribal government, or 

11 an entity established under Federal, State, or tribal law 

12 that is wholly owned or controlled by any of the fore13 going.’’ 

14 SEC. 1312. EXTENSION TO ALL GOVERNMENTAL PLANS OF 

15 CURRENT MORATORIUM ON APPLICATION OF 

16 CERTAIN NONDISCRIMINATION RULES APPLI17 CABLE TO STATE AND LOCAL PLANS. 

18 (a) IN GENERAL.— 

19 (1) Subparagraph (G) of section 401(a)(5) and 

20 subparagraph (G) of section 401(a)(26) of the Inter21 nal Revenue Code of 1986 are each amended by 

22 striking ‘‘section 414(d))’’ and all that follows and 

23 inserting ‘‘section 414(d)).’’. 

24 (2) Subparagraph (G) of section 401(k)(3) of 

25 such Code and paragraph (2) of section 1505(d) of 
605 

•S 1783 PCS 

1 the Taxpayer Relief Act of 1997 (Public Law 105– 

2 34; 111 Stat. 1063) are each amended by striking 

3 ‘‘maintained by a State or local government or polit4 ical subdivision thereof (or agency or instrumentality 

5 thereof)’’. 

6 (b) CONFORMING AMENDMENTS.— 

7 (1) The heading of subparagraph (G) of section 

8 401(a)(5) of the Internal Revenue Code of 1986 is 

9 amended by striking ‘‘STATE AND LOCAL GOVERN10 MENTAL’’ and inserting ‘‘GOVERNMENTAL’’. 

11 (2) The heading of subparagraph (G) of section 

12 401(a)(26) of such Code is amended by striking 

13 ‘‘EXCEPTION FOR STATE AND LOCAL’’ and inserting 

14 ‘‘EXCEPTION FOR’’. 

15 (3) Section 401(k)(3)(G) of such Code is 

16 amended by inserting ‘‘GOVERNMENTAL PLAN.—’’ 

17 after ‘‘(G)’’. 

18 SEC. 1313. CLARIFICATION THAT TRIBAL GOVERNMENTS 

19 ARE SUBJECT TO THE SAME DEFINED BEN20 EFIT PLAN RULES AND REGULATIONS AP21 PLIED TO STATE AND OTHER LOCAL GOV22 ERNMENTS, THEIR POLICE AND FIRE23 FIGHTERS. 

24 (a) AMENDMENTS TO INTERNAL REVENUE CODE OF

25 1986.— 
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1 (1) POLICE AND FIREFIGHTERS.—Subpara2 graph (H) section 415(b)(2) of the Internal Revenue 

3 Code of 1986 (defining participant) is amended— 

4 (A) in clause (i), by striking ‘‘State or po5 litical subdivision’’ and inserting ‘‘State, Indian 

6 tribal government (as defined in section 

7 7701(a)(40)), or any political subdivision’’; and 

8 (B) in clause (ii)(I), by striking ‘‘State or 

9 political subdivision’’ each place it appears and 

10 inserting ‘‘State, Indian tribal government (as 

11 so defined), or any political subdivision’’. 

12 (2) STATE AND LOCAL GOVERNMENT PLANS.— 

13 (A) IN GENERAL.—Subparagraph (A) of 

14 section 415(b)(10) of such Code (relating to 

15 limitation to equal accrued benefit) is amend16 ed— 

17 (i) by inserting ‘‘, Indian tribal gov18 ernment (as defined in section 

19 7701(a)(40)),’’ after ‘‘State’’; 

20 (ii) by inserting ‘‘any’’ before ‘‘polit21 ical subdivision’’; and 

22 (iii) by inserting ‘‘any of’’ before ‘‘the 

23 foregoing’’. 

24 (B) CONFORMING AMENDMENT.—The 

25 heading of paragraph (1) of section 415(b) of 
607 

•S 1783 PCS 

1 such Code is amended by striking ‘‘SPECIAL

2 RULE FOR STATE AND’’ and inserting ‘‘SPECIAL

3 RULE FOR STATE, INDIAN TRIBAL, AND’’. 

4 (3) GOVERNMENT PICK UP CONTRIBUTIONS.— 

5 Paragraph (2) of section 414(h) of such Code (relat6 ing to designation by units of government) is amend7 ed by striking ‘‘State or political subdivision’’ and 

8 inserting ‘‘State, Indian tribal government (as de9 fined in section 7701(a)(40)), or any political sub10 division’’. 

11 (b) AMENDMENTS TO EMPLOYEE RETIREMENT IN12 COME SECURITY ACT OF 1974.—Section 4021(b) of the 

13 Employee Retirement Income Security Act of 1974 (29 

14 U.S.C. 1321(b)) is amended— 

15 (1) in paragraph (12), by striking ‘‘or’’ at the 

16 end; 

17 (2) in paragraph (13), by striking ‘‘plan.’’ and 

18 inserting ‘‘plan; or’’; and 

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

20 ‘‘(14) established and maintained for its em21 ployees by an Indian tribal government (as defined 

22 in section 7701(a)(40) of the Internal Revenue Code 

23 of 1986), a subdivision of an Indian tribal govern24 ment (determined in accordance with section 

25 7871(d) of such Code), an agency or instrumentality 
608 

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1 of an Indian tribal government or subdivision there2 of, or an entity established under Federal, State, or 

3 tribal law that is wholly owned or controlled by any 

4 of the foregoing.’’. 

5 SEC. 1314. EFFECTIVE DATE. 

6 The amendments made by this subtitle shall apply to 

7 any year beginning before, on, or after the date of the 

8 enactment of this Act. 

9 Subtitle C—Miscellaneous 

10 Provisions 

11 SEC. 1321. TRANSFER OF EXCESS FUNDS FROM BLACK 

12 LUNG DISABILITY TRUSTS TO UNITED MINE 

13 WORKERS OF AMERICA COMBINED BENEFIT 

14 FUND. 

15 (a) IN GENERAL.—So much of section 501(c)(21)(C) 

16 of the Internal Revenue Code of 1986 (relating to black 

17 lung disability trusts) as precedes the last sentence is 

18 amended to read as follows: 

19 ‘‘(C) Payments described in subparagraph 

20 (A)(i)(IV) may be made from such trust during 

21 a taxable year only to the extent that the aggre22 gate amount of such payments during such tax23 able year does not exceed the excess (if any), as 

24 of the close of the preceding taxable year, of— 
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•S 1783 PCS 

1 ‘‘(i) the fair market value of the as2 sets of the trust, over 

3 ‘‘(ii) 110 percent of the present value 

4 of the liability described in subparagraph 

5 (A)(i)(I) of such person.’’ 

6 (b) TRANSFER.—Section 9705 of such Code (relating 

7 to transfer) is amended by adding at the end the following 

8 new subsection: 

9 ‘‘(c) TRANSFER FROM BLACK LUNG DISABILITY

10 TRUSTS.— 

11 ‘‘(1) IN GENERAL.—The Secretary shall trans12 fer each fiscal year to the Fund from the general 

13 fund of the Treasury an amount which the Secretary 

14 estimates to be the additional amounts received in 

15 the Treasury for that fiscal year by reason of the 

16 amendment made by section 1101(a) of the Pension 

17 Security and Transparency Act of 2005. The Sec18 retary shall adjust the amount transferred for any 

19 year to the extent necessary to correct errors in any 

20 estimate for any prior year. 

21 ‘‘(2) USE OF FUNDS.—Any amount transferred 

22 to the Combined Fund under paragraph (1) shall be 

23 used to proportionately reduce the unassigned bene24 ficiary premium under section 9704(a)(3) of each 
610 

•S 1783 PCS 

1 assigned operator for any plan year beginning after 

2 December 31, 2002.’’ 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2002. 

6 SEC. 1322. TREATMENT OF DEATH BENEFITS FROM COR7 PORATE-OWNED LIFE INSURANCE. 

8 (a) IN GENERAL.—Section 101 of the Internal Rev9 enue Code of 1986 (relating to certain death benefits) is 

10 amended by adding at the end the following new sub11 section: 

12 ‘‘(j) TREATMENT OF CERTAIN EMPLOYER-OWNED

13 LIFE INSURANCE CONTRACTS.— 

14 ‘‘(1) GENERAL RULE.—In the case of an em15 ployer-owned life insurance contract, the amount ex16 cluded from gross income of an applicable policy17 holder by reason of paragraph (1) of subsection (a) 

18 shall not exceed an amount equal to the sum of the 

19 premiums and other amounts paid by the policy20 holder for the contract. 

21 ‘‘(2) EXCEPTIONS.—In the case of an employer22 owned life insurance contract with respect to which 

23 the notice and consent requirements of paragraph 

24 (4) are met, paragraph (1) shall not apply to any of 

25 the following: 
611 

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1 ‘‘(A) EXCEPTIONS BASED ON INSURED’S

2 STATUS.—Any amount received by reason of 

3 the death of an insured who, with respect to an 

4 applicable policyholder— 

5 ‘‘(i) was an employee at any time dur6 ing the 12-month period before the in7 sured’s death, or 

8 ‘‘(ii) is, at the time the contract is 

9 issued— 

10 ‘‘(I) a director, 

11 ‘‘(II) a highly compensated em12 ployee within the meaning of section 

13 414(q) (without regard to paragraph 

14 (1)(B)(ii) thereof), or 

15 ‘‘(III) a highly compensated indi16 vidual within the meaning of section 

17 105(h)(5), except that ‘35 percent’ 

18 shall be substituted for ‘25 percent’ in 

19 subparagraph (C) thereof. 

20 ‘‘(B) EXCEPTION FOR AMOUNTS PAID TO

21 INSURED’S HEIRS.—Any amount received by 

22 reason of the death of an insured to the ex23 tent— 

24 ‘‘(i) the amount is paid to a member 

25 of the family (within the meaning of sec-
612 

•S 1783 PCS 

1 tion 267(c)(4)) of the insured, any indi2 vidual who is the designated beneficiary of 

3 the insured under the contract (other than 

4 the applicable policyholder), a trust estab5 lished for the benefit of any such member 

6 of the family or designated beneficiary, or 

7 the estate of the insured, or 

8 ‘‘(ii) the amount is used to purchase 

9 an equity (or capital or profits) interest in 

10 the applicable policyholder from any person 

11 described in clause (i). 

12 ‘‘(3) EMPLOYER-OWNED LIFE INSURANCE CON13 TRACT.— 

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

15 subsection, the term ‘employer-owned life insur16 ance contract’ means a life insurance contract 

17 which— 

18 ‘‘(i) is owned by a person engaged in 

19 a trade or business and under which such 

20 person (or a related person described in 

21 subparagraph (B)(ii)) is directly or indi22 rectly a beneficiary under the contract, and 

23 ‘‘(ii) covers the life of an insured who 

24 is an employee with respect to the trade or 
613 

•S 1783 PCS 

1 business of the applicable policyholder on 

2 the date the contract is issued. 

3 For purposes of the preceding sentence, if cov4 erage for each insured under a master contract 

5 is treated as a separate contract for purposes of 

6 sections 817(h), 7702, and 7702A, coverage for 

7 each such insured shall be treated as a separate 

8 contract. 

9 ‘‘(B) APPLICABLE POLICYHOLDER.—For 

10 purposes of this subsection— 

11 ‘‘(i) IN GENERAL.—The term ‘applica12 ble policyholder’ means, with respect to 

13 any employer-owned life insurance con14 tract, the person described in subpara15 graph (A)(i) which owns the contract. 

16 ‘‘(ii) RELATED PERSONS.—The term 

17 ‘applicable policyholder’ includes any per18 son which— 

19 ‘‘(I) bears a relationship to the 

20 person described in clause (i) which is 

21 specified in section 267(b) or 

22 707(b)(1), or 

23 ‘‘(II) is engaged in trades or 

24 businesses with such person which are 

25 under common control (within the 
614 

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1 meaning of subsection (a) or (b) of 

2 section 52). 

3 ‘‘(4) NOTICE AND CONSENT REQUIREMENTS.— 

4 The notice and consent requirements of this para5 graph are met if, before the issuance of the contract, 

6 the employee— 

7 ‘‘(A) is notified in writing that the applica8 ble policyholder intends to insure the employee’s 

9 life and the maximum face amount for which 

10 the employee could be insured at the time the 

11 contract was issued, 

12 ‘‘(B) provides written consent to being in13 sured under the contract and that such cov14 erage may continue after the insured terminates 

15 employment, and 

16 ‘‘(C) is informed in writing that an appli17 cable policyholder will be a beneficiary of any 

18 proceeds payable upon the death of the em19 ployee. 

20 ‘‘(5) DEFINITIONS.—For purposes of this sub21 section— 

22 ‘‘(A) EMPLOYEE.—The term ‘employee’ in23 cludes an officer, director, and highly com24 pensated employee (within the meaning of sec25 tion 414(q)). 
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1 ‘‘(B) INSURED.—The term ‘insured’ 

2 means, with respect to an employer-owned life 

3 insurance contract, an individual covered by the 

4 contract who is a United States citizen or resi5 dent. In the case of a contract covering the 

6 joint lives of 2 individuals, references to an in7 sured include both of the individuals.’’. 

8 (b) REPORTING REQUIREMENTS.—Subpart A of part 

9 III of subchapter A of chapter 61 of the Internal Revenue 

10 Code of 1986 (relating to information concerning persons 

11 subject to special provisions) is amended by inserting after 

12 section 6039H the following new section: 

13 ‘‘SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO 

14 EMPLOYER-OWNED LIFE INSURANCE CON15 TRACTS. 

16 ‘‘(a) IN GENERAL.—Every applicable policyholder 

17 owning 1 or more employer-owned life insurance contracts 

18 issued after the date of the enactment of this section shall 

19 file a return (at such time and in such manner as the 

20 Secretary shall by regulations prescribe) showing for each 

21 year such contracts are owned— 

22 ‘‘(1) the number of employees of the applicable 

23 policyholder at the end of the year, 

24 ‘‘(2) the number of such employees insured 

25 under such contracts at the end of the year, 
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1 ‘‘(3) the total amount of insurance in force at 

2 the end of the year under such contracts, 

3 ‘‘(4) the name, address, and taxpayer identifica4 tion number of the applicable policyholder and the 

5 type of business in which the policyholder is en6 gaged, and 

7 ‘‘(5) that the applicable policyholder has a valid 

8 consent for each insured employee (or, if all such 

9 consents are not obtained, the number of insured 

10 employees for whom such consent was not obtained). 

11 ‘‘(b) RECORDKEEPING REQUIREMENT.—Each appli12 cable policyholder owning 1 or more employer-owned life 

13 insurance contracts during any year shall keep such 

14 records as may be necessary for purposes of determining 

15 whether the requirements of this section and section 

16 101(j) are met. 

17 ‘‘(c) DEFINITIONS.—Any term used in this section 

18 which is used in section 101(j) shall have the same mean19 ing given such term by section 101(j).’’. 

20 (c) CONFORMING AMENDMENTS.— 

21 (1) Paragraph (1) of section 101(a) of the In22 ternal Revenue Code of 1986 is amended by striking 

23 ‘‘and subsection (f)’’ and inserting ‘‘subsection (f), 

24 and subsection (j)’’. 
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1 (2) The table of sections for subpart A of part 

2 III of subchapter A of chapter 61 of such Code is 

3 amended by inserting after the item relating to sec4 tion 6039H the following new item: 

‘‘Sec. 6039I. Returns and records with respect to employer-owned life insurance 

contracts.’’. 

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

6 this section shall apply to life insurance contracts issued 

7 after the date of the enactment of this Act, except for a 

8 contract issued after such date pursuant to an exchange 

9 described in section 1035 of the Internal Revenue Code 

10 of 1986 for a contract issued on or prior to that date. 

11 For purposes of the preceding sentence, any material in12 crease in the death benefit or other material change shall 

13 cause the contract to be treated as a new contract except 

14 that, in the case of a master contract (within the meaning 

15 of section 264(f)(4)(E) of such Code), the addition of cov16 ered lives shall be treated as a new contract only with re17 spect to such additional covered lives. 
Calendar No. 231 

109TH CONGRESS 

1ST SESSION S. 1783 

A BILL 

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 

SEPTEMBER 28, 2005 

Read twice and ordered to be placed on the calendar