II 

Calendar No. 276 

109TH CONGRESS 

1ST SESSION S. 1953 

[Report No. 109–174] 

To amend the Internal Revenue Code of 1986 and the Employee Retirement 

Income Security Act of 1974 to protect the retirement security of American workers by ensuring that pension benefits are funded and that 

pension assets are adequately diversified and by providing workers with 

adequate access to, and information about, their pension plans, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 2, 2005 

Mr. GRASSLEY, from the Committee on Finance, reported the following 

original bill; which was read twice and placed on the calendar 

A BILL 

To amend the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 to protect the retirement security of American workers by ensuring that pension benefits are funded and that pension 

assets are adequately diversified and by providing workers with adequate access to, and information about, their 

pension plans, and for other purposes. 

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

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

3 ‘‘National Employee Savings and Trust Equity Guarantee 

4 Act of 2005’’. 

5 (b) TABLE OF CONTENTS.— 

Sec. 1. Short title; table of contents. 

TITLE I—DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT 

PROTECTIONS UNDER DEFINED CONTRIBUTION PLANS 

Sec. 101. Defined contribution plans required to provide employees with freedom to invest their plan assets. 

Sec. 102. Notice of freedom to divest employer securities or real property. 

Sec. 103. Periodic pension benefit statements. 

Sec. 104. Notice to participants or beneficiaries of blackout periods. 

Sec. 105. Allowance of, and credit for, additional IRA payments in certain 

bankruptcy cases. 

TITLE II—INFORMATION TO ASSIST PENSION PLAN 

PARTICIPANTS 

Sec. 201. Defined contribution plans required to provide adequate investment 

education to participants. 

Sec. 202. Material information relating to investment in employer securities. 

Sec. 203. Independent investment advice provided to plan participants. 

Sec. 204. Treatment of qualified retirement planning services. 

Sec. 205. Administrative provisions. 

TITLE III—IMPROVEMENTS IN FUNDING RULES FOR SINGLEEMPLOYER PENSION PLANS 

Subtitle A—Rules Relating to Funding, Benefit Limitations, and Deductions 

PART I—AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986 

Sec. 301. Modifications of the minimum funding standards. 

Sec. 302. Funding rules applicable to single-employer pension plans. 

Sec. 303. Limitation on benefit improvements by single-employer plans which 

are underfunded or maintained by financially weak or bankrupt 

employers. 

Sec. 304. Increase in deduction limit for single-employer plans. 

Sec. 305. Technical and conforming amendments. 

PART II—AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY

ACT OF 1974 

Sec. 311. Modifications of the minimum funding standards. 

Sec. 312. Funding rules applicable to single-employer pension plans. 

Sec. 313. Limitation on benefit improvements by single-employer plans which 

are underfunded or maintained by financially weak or bankrupt 

employers. 

Sec. 314. Technical and conforming amendments. 
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PART III—INTEREST RATE ASSUMPTIONS AND DEDUCTIBLE AMOUNTS FOR

2006 

Sec. 321. Extension of replacement of 30-year Treasury rates. 

Sec. 322. Deduction limits for plan contributions. 

Sec. 323. Updating deduction rules for combination of plans. 

Subtitle B—Related Provisions 

Sec. 331. Replacement of 30-year Treasury rate for calculating lump-sum distributions. 

Sec. 332. Interest rate assumption for applying benefit limitations to lump sum 

distributions. 

Sec. 333. Restrictions on funding of nonqualified deferred compensation plans 

by employers maintaining underfunded or terminated singleemployer plans. 

Sec. 334. Special funding rules for plans maintained by commercial airlines 

that are amended to cease future benefit accruals. 

Sec. 335. Modification of pension funding requirements for plans subject to 

current transition rule. 

Subtitle C—Other Provisions 

Sec. 341. Treatment of cash balance and other hybrid defined benefit pension 

plans. 

Sec. 342. Treatment of eligible combined defined benefit plans and qualified 

cash or deferred arrangements. 

Subtitle D—Studies 

Sec. 351. Joint study on revitalizing defined benefit plans. 

Sec. 352. Study on floor-offset ESOPS. 

TITLE IV—DISCLOSURE AND BENEFIT STATEMENT REQUIREMENTS FOR SINGLE-EMPLOYER DEFINED BENEFIT PLANS 

Sec. 401. Actuarial reports and summary annual reports. 

Sec. 402. Notice of funding benefit limitations and restrictions on benefit increases. 

Sec. 403. Notice of bankruptcy filing. 

TITLE V—IMPROVEMENTS IN FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFITS PENSION PLANS AND RELATED 

PROVISIONS 

Sec. 501. Deduction limits for multiemployer plans. 

Sec. 502. Multiemployer defined benefit plan funding notices. 

Sec. 503. Transfer of excess pension assets to multiemployer health plan. 

Sec. 504. Administrative provisions. 

TITLE VI—PBGC PREMIUM AND GUARANTEE PROVISIONS 

Sec. 601. Increases in PBGC premiums for single-employer plans. 

Sec. 602. Rules relating to bankruptcy of employer. 

Sec. 603. Limitation on PBGC guarantee of shutdown and other benefits. 

Sec. 604. PBGC premiums for new plans of small employers. 

Sec. 605. PBGC premiums for small and new plans. 
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Sec. 606. Authorization for PBGC to pay interest on premium overpayment refunds. 

Sec. 607. Rules for substantial owner benefits in terminated plans. 

Sec. 608. Acceleration of PBGC computation of benefits attributable to recoveries from employers. 

TITLE VII—PROVISIONS RELATING TO SPOUSAL PENSION 

PROTECTION 

Sec. 701. Joint study of application of spousal consent rules to defined contribution plans. 

Sec. 702. Regulations on time and order of issuance of domestic relations orders. 

Sec. 703. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee. 

Sec. 704. Extension of tier II railroad retirement benefits to surviving former 

spouses pursuant to divorce agreements. 

Sec. 705. Requirement for additional survivor annuity option. 

TITLE VIII—IMPROVEMENTS IN PORTABILITY AND 

DISTRIBUTION RULES 

Sec. 801. Clarifications regarding purchase of permissive service credit. 

Sec. 802. Allow rollover of after-tax amounts in annuity contracts. 

Sec. 803. Clarification of minimum distribution rules for governmental plans. 

Sec. 804. Waiver of 10 percent early withdrawal penalty tax on certain distributions of pension plans for public safety employees. 

Sec. 805. Allow rollovers by nonspouse beneficiaries of certain retirement plan 

distributions. 

Sec. 806. Faster vesting of employer nonelective contributions. 

Sec. 807. Allow direct rollovers from retirement plans to Roth IRAs. 

Sec. 808. Elimination of higher penalty on certain simple plan distributions. 

Sec. 809. Simple plan portability. 

Sec. 810. Eligibility for participation in retirement plans. 

Sec. 811. Transfers to the PBGC. 

Sec. 812. Missing participants. 

TITLE IX—ADMINISTRATIVE PROVISIONS 

Sec. 901. Employee Plans Compliance Resolution System. 

Sec. 902. Extension to all governmental plans of moratorium on application of 

certain nondiscrimination rules applicable to State and local 

plans. 

Sec. 903. Notice and consent period regarding distributions. 

Sec. 904. Reporting simplification. 

Sec. 905. Voluntary early retirement incentive and employment retention plans 

maintained by local educational agencies and other entities. 

Sec. 906. No reduction in unemployment compensation as a result of pension 

rollovers. 

Sec. 907. Withholding on distributions from governmental section 457 plans. 

Sec. 908. Clarification of treatment of defined benefit plans of Indian tribal 

governments. 

Sec. 909. Treatment of defined benefit plan as governmental plan. 

Sec. 910. Provisions relating to plan amendments. 

TITLE X—UNITED STATES TAX COURT MODERNIZATION 
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Sec. 1000. Amendment of 1986 Code. 

Subtitle A—Tax Court Pension and Compensation 

Sec. 1001. Annuities for survivors of Tax Court judges who are assassinated. 

Sec. 1002. Cost-of-Living adjustments for Tax Court judicial survivor annuities. 

Sec. 1003. Life insurance coverage for Tax Court judges. 

Sec. 1004. Cost of life insurance coverage for Tax Court judges age 65 or over. 

Sec. 1005. Modification of timing of Lump-Sum Payment of judges’ accrued 

annual leave. 

Sec. 1006. Participation of Tax Court judges in the Thrift Savings Plan. 

Sec. 1007. Exemption of teaching compensation of retired judges from limitation on outside earned income. 

Sec. 1008. General provisions relating to Magistrate Judges of the Tax Court. 

Sec. 1009. Annuities to surviving spouses and dependent children of Magistrate 

Judges of the Tax Court. 

Sec. 1010. Retirement and Annuity Program. 

Sec. 1011. Incumbent Magistrate Judges of the Tax Court. 

Sec. 1012. Provisions for recall. 

Sec. 1013. Effective date. 

Subtitle B—Tax Court Procedure 

Sec. 1021. Jurisdiction of Tax Court over collection due process cases. 

Sec. 1022. Authority for Magistrate Judges to hear and decide certain employment status cases. 

Sec. 1023. Confirmation of authority of Tax Court to apply doctrine of equitable recoupment. 

Sec. 1024. Tax Court filing fee in all cases commenced by filing petition. 

Sec. 1025. Amendments to appoint employees. 

Sec. 1026. Expanded use of Tax Court practice fee for pro se taxpayers. 

TITLE XI—OTHER PROVISIONS 

Sec. 1101. Transfer of excess funds from black lung disability trusts to United 

Mine Workers of America Combined Benefit Fund. 

Sec. 1102. Treatment of death benefits from corporate-owned life insurance. 
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1 TITLE I—DIVERSIFICATION 

2 RIGHTS AND OTHER PARTICI3 PANT PROTECTIONS UNDER 

4 DEFINED CONTRIBUTION 

5 PLANS 

6 SEC. 101. 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-
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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 
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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. 
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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) 
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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, 
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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.— 
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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 
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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 
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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. 
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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 
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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.’’ 
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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 
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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. 
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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 
20 

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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 
21 

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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. 
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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-
23 

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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.— 
24 

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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.’’. 
25 

•S 1953 PCS 

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 
26 

•S 1953 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 
27 

•S 1953 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. 102. NOTICE OF FREEDOM TO DIVEST EMPLOYER SE12 CURITIES OR REAL PROPERTY. 

13 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

14 (1) EXCISE TAX.—Chapter 43 of the Internal 

15 Revenue Code of 1986 (relating to qualified pension, 

16 etc., plans) is amended by adding at the end the fol17 lowing new section: 

18 ‘‘SEC. 4980H. FAILURE OF CERTAIN DEFINED CONTRIBU19 TION PLANS TO PROVIDE NOTICE OF FREE20 DOM TO DIVEST EMPLOYER SECURITIES. 

21 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

22 a tax on the failure of a defined contribution plan to meet 

23 the requirements of subsection (e) with respect to any par24 ticipant or beneficiary. 

25 ‘‘(b) AMOUNT OF TAX.— 
28 

•S 1953 PCS 

1 ‘‘(1) IN GENERAL.—The amount of the tax im2 posed by subsection (a) on any failure with respect 

3 to any participant or beneficiary shall be $100 for 

4 each day in the noncompliance period with respect to 

5 the failure. 

6 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

7 of this section, the term ‘noncompliance period’ 

8 means, with respect to any failure, the period begin9 ning on the date the failure first occurs and ending 

10 on the date the notice to which the failure relates is 

11 provided or the failure is otherwise corrected. 

12 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 

13 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

14 DISCOVERED AND REASONABLE DILIGENCE EXER15 CISED.—No tax shall be imposed by subsection (a) 

16 on any failure during any period for which it is es17 tablished to the satisfaction of the Secretary that 

18 any person subject to liability for tax under sub19 section (d) did not know that the failure existed and 

20 exercised reasonable diligence to meet the require21 ments of subsection (e). 

22 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR23 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

24 by subsection (a) on any failure if— 
29 

•S 1953 PCS 

1 ‘‘(A) any person subject to liability for the 

2 tax under subsection (d) exercised reasonable 

3 diligence to meet the requirements of subsection 

4 (e), and 

5 ‘‘(B) such person provides the notice de6 scribed in subsection (e) during the 30-day pe7 riod beginning on the first date such person 

8 knew, or exercising reasonable diligence should 

9 have known, that such failure existed. 

10 ‘‘(3) OVERALL LIMITATION FOR UNINTEN11 TIONAL FAILURES.— 

12 ‘‘(A) IN GENERAL.—If the person subject 

13 to liability for tax under subsection (d) exer14 cised reasonable diligence to meet the require15 ments of subsection (e), the tax imposed by 

16 subsection (a) for failures during the taxable 

17 year of the employer (or, in the case of a multi18 employer plan, the taxable year of the trust 

19 forming part of the plan) shall not exceed 

20 $500,000. For purposes of the preceding sen21 tence, all multiemployer plans of which the 

22 same trust forms a part shall be treated as 1 

23 plan. 

24 ‘‘(B) TAXABLE YEARS IN THE CASE OF

25 CERTAIN CONTROLLED GROUPS.—For purposes 
30 

•S 1953 PCS 

1 of this paragraph, if all persons who are treated 

2 as a single employer for purposes of this section 

3 do not have the same taxable year, the taxable 

4 years taken into account shall be determined 

5 under principles similar to the principles of sec6 tion 1561. 

7 ‘‘(4) WAIVER BY SECRETARY.—In the case of a 

8 failure which is due to reasonable cause and not to 

9 willful neglect, the Secretary may waive part or all 

10 of the tax imposed by subsection (a) to the extent 

11 that the payment of such tax would be excessive or 

12 otherwise inequitable relative to the failure involved. 

13 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia14 ble for the tax imposed by subsection (a): 

15 ‘‘(1) In the case of a plan not described in 

16 paragraph (2), the employer. 

17 ‘‘(2) In the case of a multiemployer plan, the 

18 plan. 

19 ‘‘(e) NOTICE OF RIGHT TO DIVEST.—Not later than 

20 30 days before the first date on which an applicable indi21 vidual of an applicable defined contribution plan is eligible 

22 to exercise the right under section 401(a)(35) to direct 

23 the proceeds from the divestment of employer securities 

24 or employer real property with respect to any type of con-
31 

•S 1953 PCS 

1 tribution, the plan administrator shall provide to such in2 dividual a notice— 

3 ‘‘(1) setting forth such right under such sec4 tion, and 

5 ‘‘(2) describing the importance of diversifying 

6 the investment of retirement account assets. 

7 The notice required by this subsection shall be written in 

8 a manner calculated to be understood by the average plan 

9 participant and may be delivered in written, electronic, or 

10 other appropriate form to the extent that such form is rea11 sonably accessible to the applicable individual. 

12 ‘‘(f) DEFINITIONS.—Any term used in this section 

13 which is also used in section 401(a)(35) shall have the 

14 meaning given such term by section 401(a)(35).’’ 

15 (2) AGGREGATION.—Section 414(t) of such 

16 Code is amended by striking ‘‘or 4980B’’ and insert17 ing ‘‘4980B, or 4980H’’. 

18 (3) CLERICAL AMENDMENT.—The table of sec19 tions for chapter 43 of such Code is amended by 

20 adding at the end the following new item: 

‘‘Sec. 4980H. Failure of certain defined contribution plans to provide notice of 

freedom to divest employer securities.’’. 

21 (b) AMENDMENTS OF ERISA.— 

22 (1) IN GENERAL.—Section 101 of the Employee 

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

24 1021) is amended by redesignating subsection (j) as 
32 

•S 1953 PCS 

1 subsection (k) and by inserting after subsection (i) 

2 the following new subsection: 

3 ‘‘(j) NOTICE OF RIGHT TO DIVEST.—Not later than 

4 30 days before the first date on which an applicable indi5 vidual of an applicable individual account plan is eligible 

6 to exercise the right under section 204(j) to direct the pro7 ceeds from the divestment of employer securities or em8 ployer real property with respect to any type of contribu9 tion, the administrator shall provide to such individual a 

10 notice— 

11 ‘‘(1) setting forth such right under such sec12 tion, and 

13 ‘‘(2) describing the importance of diversifying 

14 the investment of retirement account assets. 

15 The notice required by this subsection shall be written in 

16 a manner calculated to be understood by the average plan 

17 participant and may be delivered in written, electronic, or 

18 other appropriate form to the extent that such form is rea19 sonably accessible to the applicable individual.’’ 

20 (2) PENALTIES.—Section 502(c)(7) of the Em21 ployee Retirement Income Security Act of 1974 (29 

22 U.S.C. 1132(c)(7)) is amended by striking ‘‘section 

23 101(j)’’ and inserting ‘‘subsection (i) or (j) of sec24 tion 101’’. 
33 

•S 1953 PCS 

1 (c) MODEL NOTICE.—The Secretary of the Treasury 

2 shall, within 180 days after the date of the enactment of 

3 this subsection, prescribe a model notice for purposes of 

4 satisfying the requirements of the amendments made by 

5 this section. 

6 (d) EFFECTIVE DATES.— 

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

8 this section shall apply to plan years beginning after 

9 December 31, 2005. 

10 (2) TRANSITION RULE.—If notice under section 

11 4980H(e) of the Internal Revenue Code of 1986 or 

12 section 101(j) of the Employee Retirement Income 

13 Security Act of 1974 (as added by this section) 

14 would otherwise be required to be provided before 

15 the 90th day after the date of the enactment of this 

16 Act, such notice shall not be required to be provided 

17 until such 90th day. 

18 SEC. 103. PERIODIC PENSION BENEFIT STATEMENTS. 

19 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

20 (1) EXCISE TAX.—Chapter 43 of the Internal 

21 Revenue Code of 1986 (relating to qualified pension, 

22 etc., plans), as amended by this Act, is amended by 

23 adding at the end the following new section: 
34 

•S 1953 PCS 

1 ‘‘SEC. 4980I. FAILURE OF CERTAIN PENSION PLANS TO PRO2 VIDE REQUIRED INFORMATION. 

3 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

4 a tax on the failure of an applicable pension plan to meet 

5 the requirements of subsection (e) with respect to any par6 ticipant or beneficiary. 

7 ‘‘(b) AMOUNT OF TAX.— 

8 ‘‘(1) IN GENERAL.—The amount of the tax im9 posed by subsection (a) on any failure with respect 

10 to any participant or beneficiary shall be $100 for 

11 each day in the noncompliance period with respect to 

12 the failure. 

13 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

14 of this section, the term ‘noncompliance period’ 

15 means, with respect to any failure, the period begin16 ning on the date the failure first occurs and ending 

17 on the date the statement to which the failure re18 lates is provided or the failure is otherwise corrected. 

19 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 

20 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

21 DISCOVERED AND REASONABLE DILIGENCE EXER22 CISED.—No tax shall be imposed by subsection (a) 

23 on any failure during any period for which it is es24 tablished to the satisfaction of the Secretary that 

25 any person subject to liability for tax under sub26 section (d) did not know that the failure existed and 
35 

•S 1953 PCS 

1 exercised reasonable diligence to meet the require2 ments of subsection (e). 

3 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR4 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

5 by subsection (a) on any failure if— 

6 ‘‘(A) any person subject to liability for the 

7 tax under subsection (d) exercised reasonable 

8 diligence to meet the requirements of subsection 

9 (e), and 

10 ‘‘(B) such person provides the statement 

11 described in subsection (e) during the 30-day 

12 period beginning on the first date such person 

13 knew, or exercising reasonable diligence should 

14 have known, that such failure existed. 

15 ‘‘(3) OVERALL LIMITATION FOR UNINTEN16 TIONAL FAILURES.— 

17 ‘‘(A) IN GENERAL.—If the person subject 

18 to liability for tax under subsection (d) exer19 cised reasonable diligence to meet the require20 ments of subsection (e), the tax imposed by 

21 subsection (a) for failures during the taxable 

22 year of the employer (or, in the case of a multi23 employer plan, the taxable year of the trust 

24 forming part of the plan) shall not exceed 

25 $500,000. For purposes of the preceding sen-
36 

•S 1953 PCS 

1 tence, all multiemployer plans of which the 

2 same trust forms a part shall be treated as 1 

3 plan. 

4 ‘‘(B) TAXABLE YEARS IN THE CASE OF

5 CERTAIN CONTROLLED GROUPS.—For purposes 

6 of this paragraph, if all persons who are treated 

7 as a single employer for purposes of this section 

8 do not have the same taxable year, the taxable 

9 years taken into account shall be determined 

10 under principles similar to the principles of sec11 tion 1561. 

12 ‘‘(4) WAIVER BY SECRETARY.—In the case of a 

13 failure which is due to reasonable cause and not to 

14 willful neglect, the Secretary may waive part or all 

15 of the tax imposed by subsection (a) to the extent 

16 that the payment of such tax would be excessive or 

17 otherwise inequitable relative to the failure involved. 

18 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia19 ble for the tax imposed by subsection (a): 

20 ‘‘(1) In the case of a plan not described in 

21 paragraph (2) or (3), the employer. 

22 ‘‘(2) In the case of a multiemployer plan, the 

23 plan. 
37 

•S 1953 PCS 

1 ‘‘(3) In the case of an arrangement described in 

2 subsection (e)(4), the person required to provide the 

3 statement under subsection (e). 

4 ‘‘(e) REQUIREMENTS TO PROVIDE PENSION BENEFIT

5 STATEMENTS.— 

6 ‘‘(1) REQUIREMENTS.— 

7 ‘‘(A) DEFINED CONTRIBUTION PLAN.— 

8 The administrator of an applicable pension plan 

9 which is a defined contribution plan shall fur10 nish a pension benefit statement described in 

11 paragraph (2)— 

12 ‘‘(i) at least once each calendar quar13 ter to a participant or beneficiary who has 

14 the right to direct the investment of assets 

15 in his or her account under the plan, 

16 ‘‘(ii) at least once each calendar year 

17 to a participant or beneficiary who has his 

18 or her own account under the plan but who 

19 does not have the right to direct the invest20 ment of assets in that account, and 

21 ‘‘(iii) upon written request to a plan 

22 beneficiary who is not a participant or ben23 eficiary described in clause (i) or (ii), ex24 cept that this clause shall apply to only 1 

25 request during any 12-month period. 
38 

•S 1953 PCS 

1 ‘‘(B) DEFINED BENEFIT PLAN.—The ad2 ministrator of an applicable pension plan which 

3 is a defined benefit plan shall furnish a pension 

4 benefit statement described in paragraph (2)— 

5 ‘‘(i) at least once every 3 years to 

6 each participant who has a nonforfeitable 

7 accrued benefit and who is employed by 

8 the employer maintaining the plan at the 

9 time the statement is to be furnished, and 

10 ‘‘(ii) to a participant or beneficiary of 

11 the plan upon written request, except that 

12 this clause shall apply to only 1 request 

13 during any 12-month period. 

14 Information furnished under clause (i) to a par15 ticipant may be based on reasonable estimates 

16 determined under regulations prescribed by the 

17 Secretary of Labor, in consultation with the 

18 Pension Benefit Guaranty Corporation. 

19 ‘‘(2) STATEMENTS.— 

20 ‘‘(A) IN GENERAL.—A pension benefit 

21 statement furnished under paragraph (1)— 

22 ‘‘(i) shall indicate, on the basis of the 

23 latest available information— 

24 ‘‘(I) the total benefits accrued, 

25 and 
39 

•S 1953 PCS 

1 ‘‘(II) the nonforfeitable pension 

2 benefits, if any, which have accrued, 

3 or the earliest date on which benefits 

4 will become nonforfeitable, 

5 ‘‘(ii) shall include an explanation of 

6 any permitted disparity under section 

7 401(l) or any floor-offset arrangement that 

8 may be applied in determining any accrued 

9 benefits described in clause (i), 

10 ‘‘(iii) shall be written in a manner cal11 culated to be understood by the average 

12 plan participant, and 

13 ‘‘(iv) may be delivered in written, elec14 tronic, or other appropriate form to the ex15 tent such form is reasonably accessible to 

16 the participant or beneficiary. 

17 ‘‘(B) ADDITIONAL INFORMATION.—In the 

18 case of a defined contribution plan, any pension 

19 benefit statement under clause (i) or (ii) of 

20 paragraph (1)(A) shall include— 

21 ‘‘(i) the value of each investment to 

22 which assets in the individual account have 

23 been allocated, determined as of the most 

24 recent valuation date under the plan, in25 cluding the value of any assets held in the 
40 

•S 1953 PCS 

1 form of employer securities or employer 

2 real property, without regard to whether 

3 such securities or real property were con4 tributed by the plan sponsor or acquired at 

5 the direction of the plan or of the partici6 pant or beneficiary, and 

7 ‘‘(ii) in the case of a pension benefit 

8 statement under paragraph (1)(A)(i)— 

9 ‘‘(I) an explanation of any limita10 tions or restrictions on any right of 

11 the participant or beneficiary under 

12 the plan to direct an investment, and 

13 ‘‘(II) a notice that investments in 

14 any individual account may not be 

15 adequately diversified if the value of 

16 any investment in the account exceeds 

17 20 percent of the fair market value of 

18 all investments in the account. 

19 ‘‘(C) ALTERNATIVE NOTICE.—The require20 ments of subparagraph (A)(i)(II) are met if, at 

21 least annually and in accordance with require22 ments of the Secretary of Labor, the plan— 

23 ‘‘(i) updates the information described 

24 in such paragraph which is provided in the 

25 pension benefit statement, or 
41 

•S 1953 PCS 

1 ‘‘(ii) provides in a separate statement 

2 such information as is necessary to enable 

3 a participant or beneficiary to determine 

4 their nonforfeitable vested benefits. 

5 ‘‘(3) DEFINED BENEFIT PLANS.— 

6 ‘‘(A) ALTERNATIVE NOTICE.—In the case 

7 of a defined benefit plan, the requirements of 

8 paragraph (1)(B)(i) shall be treated as met 

9 with respect to a participant if at least once 

10 each year the administrator provides to the par11 ticipant notice of the availability of the pension 

12 benefit statement and the ways in which the 

13 participant may obtain such statement. Such 

14 notice may be delivered in written, electronic, or 

15 other appropriate form to the extent such form 

16 is reasonably accessible to the participant. 

17 ‘‘(B) YEARS IN WHICH NO BENEFITS AC18 CRUE.—The Secretary may provide that years 

19 in which no employee or former employee bene20 fits (within the meaning of section 410(b)) 

21 under the plan need not be taken into account 

22 in determining the 3-year period under para23 graph (1)(B)(i). 

24 ‘‘(4) SPECIAL RULE FOR CERTAIN ANNU25 ITIES.—In the case of an annuity contract or custo-
42 

•S 1953 PCS 

1 dial account described in section 403(b) which is not 

2 a plan established or maintained by the employer, 

3 the pension benefit statement under this subsection 

4 shall be furnished by the issuer of the contract, the 

5 custodian of the account, or such other person as is 

6 specified by the Secretary. 

7 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur8 poses of this section— 

9 ‘‘(1) APPLICABLE PENSION PLAN.—The term 

10 ‘applicable pension plan’ means a plan described in 

11 clause (i), (ii), or (iv) of section 219(g)(5)(A) other 

12 than a one-participant retirement plan (as defined in 

13 section 401(a)(35)(E)(iv)). 

14 ‘‘(2) EXCEPTION FOR GOVERNMENT AND

15 CHURCH PLANS.—This section shall not apply to any 

16 governmental or church plan. For purposes of this 

17 paragraph, the terms ‘governmental plan’ and 

18 ‘church plan’ have the meanings given such terms by 

19 section 414.’’ 

20 (2) AGGREGATION.—Section 414(t) of such 

21 Code, as amended by this Act, is amended by strik22 ing ‘‘or 4980H’’ and inserting ‘‘4980H, or 4980I’’. 

23 (3) CLERICAL AMENDMENT.—The table of sec24 tions for chapter 43 of such Code, as amended by 
43 

•S 1953 PCS 

1 this Act, is amended by adding at the end the fol2 lowing new item: 

‘‘Sec. 4980I. Failure of certain pension plans to provide required information.’’. 

3 (b) AMENDMENTS OF ERISA.— 

4 (1) IN GENERAL.—Section 105(a) of the Em5 ployee Retirement Income Security Act of 1974 (29 

6 U.S.C. 1025(a)) is amended to read as follows: 

7 ‘‘(a) REQUIREMENTS TO PROVIDE PENSION BEN8 EFIT STATEMENTS.— 

9 ‘‘(1) REQUIREMENTS.— 

10 ‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The 

11 administrator of an individual account plan 

12 (other than a one-participant retirement plan 

13 described in section 101(i)(8)(B)) shall furnish 

14 a pension benefit statement— 

15 ‘‘(i) at least once each calendar quar16 ter to a participant or beneficiary who has 

17 the right to direct the investment of assets 

18 in his or her account under the plan, 

19 ‘‘(ii) at least once each calendar year 

20 to a participant or beneficiary who has his 

21 or her own account under the plan but 

22 does not have the right to direct the invest23 ment of assets in that account, and 
44 

•S 1953 PCS 

1 ‘‘(iii) upon written request to a plan 

2 beneficiary not described in clause (i) or 

3 (ii). 

4 ‘‘(B) DEFINED BENEFIT PLAN.—The ad5 ministrator of a defined benefit plan (other 

6 than a one-participant retirement plan de7 scribed in section 101(i)(8)(B)) shall furnish a 

8 pension benefit statement— 

9 ‘‘(i) at least once every 3 years to 

10 each participant with a nonforfeitable ac11 crued benefit and who is employed by the 

12 employer maintaining the plan at the time 

13 the statement is to be furnished, and 

14 ‘‘(ii) to a participant or beneficiary of 

15 the plan upon written request. 

16 Information furnished under clause (i) to a par17 ticipant may be based on reasonable estimates 

18 determined under regulations prescribed by the 

19 Secretary, in consultation with the Pension 

20 Benefit Guaranty Corporation. 

21 ‘‘(2) STATEMENTS.— 

22 ‘‘(A) IN GENERAL.—A pension benefit 

23 statement under paragraph (1)— 

24 ‘‘(i) shall indicate, on the basis of the 

25 latest available information— 
45 

•S 1953 PCS 

1 ‘‘(I) the total benefits accrued, 

2 and 

3 ‘‘(II) the nonforfeitable pension 

4 benefits, if any, which have accrued, 

5 or the earliest date on which benefits 

6 will become nonforfeitable, 

7 ‘‘(ii) shall include an explanation of 

8 any permitted disparity under section 

9 401(l) of the Internal Revenue Code of 

10 1986 or any floor-offset arrangement that 

11 may be applied in determining any accrued 

12 benefits described in clause (i), 

13 ‘‘(iii) shall be written in a manner cal14 culated to be understood by the average 

15 plan participant, and 

16 ‘‘(iv) may be delivered in written, elec17 tronic, or other appropriate form to the ex18 tent such form is reasonably accessible to 

19 the participant or beneficiary. 

20 ‘‘(B) ADDITIONAL INFORMATION.—In the 

21 case of an individual account plan, any pension 

22 benefit statement under clause (i) or (ii) of 

23 paragraph (1)(A) shall include— 

24 ‘‘(i) the value of each investment to 

25 which assets in the individual account have 
46 

•S 1953 PCS 

1 been allocated, determined as of the most 

2 recent valuation date under the plan, in3 cluding the value of any assets held in the 

4 form of employer securities or employer 

5 real property, without regard to whether 

6 such securities or real property were con7 tributed by the plan sponsor or acquired at 

8 the direction of the plan or of the partici9 pant or beneficiary, and 

10 ‘‘(ii) in the case of a pension benefit 

11 statement under paragraph (1)(A)(i)— 

12 ‘‘(I) an explanation of any limita13 tions or restrictions on any right of 

14 the participant or beneficiary under 

15 the plan to direct an investment, and 

16 ‘‘(II) a notice that investments in 

17 any individual account may not be 

18 adequately diversified if the value of 

19 any investment in the account exceeds 

20 20 percent of the fair market value of 

21 all investments in the account. 

22 ‘‘(C) ALTERNATIVE NOTICE.—The require23 ments of subparagraph (A)(i)(II) are met if, at 

24 least annually and in accordance with require25 ments of the Secretary, the plan— 
47 

•S 1953 PCS 

1 ‘‘(i) updates the information described 

2 in such paragraph which is provided in the 

3 pension benefit statement, or 

4 ‘‘(ii) provides in a separate statement 

5 such information as is necessary to enable 

6 a participant or beneficiary to determine 

7 their nonforfeitable vested benefits. 

8 ‘‘(3) DEFINED BENEFIT PLANS.— 

9 ‘‘(A) ALTERNATIVE NOTICE.—In the case 

10 of a defined benefit plan, the requirements of 

11 paragraph (1)(B)(i) shall be treated as met 

12 with respect to a participant if at least once 

13 each year the administrator provides to the par14 ticipant notice of the availability of the pension 

15 benefit statement and the ways in which the 

16 participant may obtain such statement. Such 

17 notice may be delivered in written, electronic, or 

18 other appropriate form to the extent such form 

19 is reasonably accessible to the participant. 

20 ‘‘(B) YEARS IN WHICH NO BENEFITS AC21 CRUE.—The Secretary may provide that years 

22 in which no employee or former employee bene23 fits (within the meaning of section 410(b) of 

24 the Internal Revenue Code of 1986) under the 

25 plan need not be taken into account in deter-
48 

•S 1953 PCS 

1 mining the 3-year period under paragraph 

2 (1)(B)(i).’’ 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Section 105 of the Employee Retire5 ment Income Security Act of 1974 (29 U.S.C. 

6 1025) is amended by striking subsection (d). 

7 (B) Section 105(b) of such Act (29 U.S.C. 

8 1025(b)) is amended to read as follows: 

9 ‘‘(b) LIMITATION ON NUMBER OF STATEMENTS.—In 

10 no case shall a participant or beneficiary of a plan be enti11 tled to more than 1 statement described in subparagraph 

12 (A)(iii) or (B)(ii) of subsection (a)(1), whichever is appli13 cable, in any 12-month period.’’ 

14 (C) Section 502(c)(1) of such Act (29 

15 U.S.C. 1132(c)(1)) is amended by striking ‘‘or 

16 section 101(f)’’ and inserting ‘‘section 101(f), 

17 or section 105(a)’’. 

18 (c) MODEL STATEMENTS.— 

19 (1) IN GENERAL.—The Secretary of Labor 

20 shall, within 180 days after the date of the enact21 ment of this section, develop 1 or more model benefit 

22 statements that are written in a manner calculated 

23 to be understood by the average plan participant and 

24 that may be used by plan administrators in com25 plying with the requirements of section 4980I of the 
49 

•S 1953 PCS 

1 Internal Revenue Code of 1986 and section 105 of 

2 the Employee Retirement Income Security Act of 

3 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 
50 

•S 1953 PCS 

1 extension thereof after such date of enact2 ment), or 

3 (B) December 31, 2008. 

4 SEC. 104. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF 

5 BLACKOUT PERIODS. 

6 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

7 (1) EXCISE TAX.— 

8 (A) IN GENERAL.—Chapter 43 of the In9 ternal Revenue Code of 1986 (relating to quali10 fied pension, etc., plans), as amended by this 

11 Act, is amended by adding at the end the fol12 lowing new section: 

13 ‘‘SEC. 4980J. FAILURE OF CERTAIN DEFINED CONTRIBU14 TION PLANS TO PROVIDE NOTICE OF BLACK15 OUT PERIODS. 

16 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

17 a tax on the failure of any defined contribution plan to 

18 which this section applies to meet the requirements of sub19 section (e) with respect to any participant or beneficiary. 

20 ‘‘(b) AMOUNT OF TAX.— 

21 ‘‘(1) IN GENERAL.—The amount of the tax im22 posed by subsection (a) on any failure with respect 

23 to any participant or beneficiary shall be $100 for 

24 each day in the noncompliance period with respect to 

25 the failure. 
51 

•S 1953 PCS 

1 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

2 of this section, the term ‘noncompliance period’ 

3 means, with respect to any failure, the period begin4 ning on the date the failure first occurs and ending 

5 on the date the notice to which the failure relates is 

6 provided or the failure is otherwise corrected. 

7 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 

8 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

9 DISCOVERED AND REASONABLE DILIGENCE EXER10 CISED.—No tax shall be imposed by subsection (a) 

11 on any failure during any period for which it is es12 tablished to the satisfaction of the Secretary that 

13 any person subject to liability for tax under sub14 section (d) did not know that the failure existed and 

15 exercised reasonable diligence to meet the require16 ments of subsection (e). 

17 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR18 RECTED AS SOON AS REASONABLY PRACTICABLE.— 

19 No tax shall be imposed by subsection (a) on any 

20 failure if— 

21 ‘‘(A) any person subject to liability for the 

22 tax under subsection (d) exercised reasonable 

23 diligence to meet the requirements of subsection 

24 (e), and 
52 

•S 1953 PCS 

1 ‘‘(B) such person provides the notice de2 scribed in subsection (e) as soon as reasonably 

3 practicable after the first date such person 

4 knew, or exercising reasonable diligence should 

5 have known, that such failure existed. 

6 ‘‘(3) OVERALL LIMITATION FOR UNINTEN7 TIONAL FAILURES.— 

8 ‘‘(A) IN GENERAL.—If the person subject 

9 to liability for tax under subsection (d) exer10 cised reasonable diligence to meet the require11 ments of subsection (e), the tax imposed by 

12 subsection (a) for failures during the taxable 

13 year of the employer (or, in the case of a multi14 employer plan, the taxable year of the trust 

15 forming part of the plan) shall not exceed 

16 $500,000. For purposes of the preceding sen17 tence, all multiemployer plans of which the 

18 same trust forms a part shall be treated as 1 

19 plan. 

20 ‘‘(B) TAXABLE YEARS IN THE CASE OF

21 CERTAIN CONTROLLED GROUPS.—For purposes 

22 of this paragraph, if all persons who are treated 

23 as a single employer for purposes of this section 

24 do not have the same taxable year, the taxable 

25 years taken into account shall be determined 
53 

•S 1953 PCS 

1 under principles similar to the principles of sec2 tion 1561. 

3 ‘‘(4) WAIVER BY SECRETARY.—In the case of a 

4 failure which is due to reasonable cause and not to 

5 willful neglect, the Secretary may waive part or all 

6 of the tax imposed by subsection (a) to the extent 

7 that the payment of such tax would be excessive or 

8 otherwise inequitable relative to the failure involved. 

9 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia10 ble for the tax imposed by subsection (a): 

11 ‘‘(1) In the case of a plan not described in 

12 paragraph (2) or (3), the employer. 

13 ‘‘(2) In the case of a multiemployer plan, the 

14 plan. 

15 ‘‘(3) In the case of an arrangement described in 

16 subsection (e)(1)(B), the person required to provide 

17 the notice under subsection (e). 

18 ‘‘(e) NOTICE OF BLACKOUT PERIODS TO PARTICI19 PANT OR BENEFICIARY UNDER DEFINED CONTRIBUTION

20 PLAN.— 

21 ‘‘(1) IN GENERAL.— 

22 ‘‘(A) DUTIES OF PLAN ADMINISTRATOR.— 

23 In advance of the commencement of any black24 out period with respect to a defined contribu25 tion plan, the plan administrator shall notify 
54 

•S 1953 PCS 

1 the plan participants and beneficiaries who are 

2 affected by such action in accordance with this 

3 subsection. 

4 ‘‘(B) SPECIAL RULE FOR CERTAIN ANNU5 ITIES.—In the case of an annuity contract or 

6 custodial account described in section 403(b) 

7 which is not a plan established or maintained 

8 by the employer, the notice shall be furnished 

9 by the issuer of the contract, the custodian of 

10 the account, or such other person as is specified 

11 by the Secretary. 

12 ‘‘(2) NOTICE REQUIREMENTS.— 

13 ‘‘(A) IN GENERAL.—The notices described 

14 in paragraph (1) shall be written in a manner 

15 calculated to be understood by the average plan 

16 participant and shall include— 

17 ‘‘(i) the reasons for the blackout pe18 riod, 

19 ‘‘(ii) an identification of the invest20 ments and other rights affected, 

21 ‘‘(iii) the expected beginning date and 

22 length of the blackout period, 

23 ‘‘(iv) in the case of investments af24 fected, a statement that the participant or 

25 beneficiary should evaluate the appro-
55 

•S 1953 PCS 

1 priateness of their current investment deci2 sions in light of their inability to direct or 

3 diversify assets credited to their accounts 

4 during the blackout period, and 

5 ‘‘(v) such other matters as the Sec6 retary of Labor may require by regulation. 

7 ‘‘(B) NOTICE TO PARTICIPANTS AND

8 BENEFICIARIES.—Except as otherwise provided 

9 in this subsection, notices described in para10 graph (1) shall be furnished to all participants 

11 and beneficiaries under the plan to whom the 

12 blackout period applies at least 30 days in ad13 vance of the blackout period. 

14 ‘‘(C) EXCEPTION TO 30-DAY NOTICE RE15 QUIREMENT.—In any case in which— 

16 ‘‘(i) a deferral of the blackout period 

17 would violate the requirements of subpara18 graph (A) or (B) of section 404(a)(1) of 

19 the Employee Retirement Income Security 

20 Act of 1974, and a fiduciary of the plan 

21 reasonably so determines in writing, or 

22 ‘‘(ii) the inability to provide the 30- 

23 day advance notice is due to events that 

24 were unforeseeable or circumstances be25 yond the reasonable control of the plan ad-
56 

•S 1953 PCS 

1 ministrator, and a fiduciary of the plan 

2 reasonably so determines in writing, 

3 subparagraph (B) shall not apply, and the no4 tice shall be furnished to all participants and 

5 beneficiaries under the plan to whom the black6 out period applies as soon as reasonably pos7 sible under the circumstances unless such a no8 tice in advance of the termination of the black9 out period is impracticable. 

10 ‘‘(D) WRITTEN NOTICE.—The notice re11 quired to be provided under this subsection 

12 shall be in writing, except that such notice may 

13 be in electronic or other form to the extent that 

14 such form is reasonably accessible to the recipi15 ent. 

16 ‘‘(E) NOTICE TO ISSUERS OF EMPLOYER

17 SECURITIES SUBJECT TO BLACKOUT PERIOD.— 

18 In the case of any blackout period in connection 

19 with a defined contribution plan, the plan ad20 ministrator shall provide timely notice of such 

21 blackout period to the issuer of any employer 

22 securities subject to such blackout period. 

23 ‘‘(3) EXCEPTION FOR BLACKOUT PERIODS

24 WITH LIMITED APPLICABILITY.—In any case in 

25 which the blackout period applies only to 1 or more 
57 

•S 1953 PCS 

1 participants or beneficiaries in connection with a 

2 merger, acquisition, divestiture, or similar trans3 action involving the plan or plan sponsor and occurs 

4 solely in connection with becoming or ceasing to be 

5 a participant or beneficiary under the plan by reason 

6 of such merger, acquisition, divestiture, or trans7 action, the requirement of this subsection that the 

8 notice be provided to all participants and bene9 ficiaries shall be treated as met if the notice required 

10 under paragraph (1) is provided to such participants 

11 or beneficiaries to whom the blackout period applies 

12 as soon as reasonably practicable. 

13 ‘‘(4) CHANGES IN LENGTH OF BLACKOUT PE14 RIOD.—If, following the furnishing of the notice pur15 suant to this subsection, there is a change in the be16 ginning date or length of the blackout period (speci17 fied in such notice pursuant to paragraph 

18 (2)(A)(iii)), the administrator shall provide affected 

19 participants and beneficiaries notice of the change as 

20 soon as reasonably practicable. In relation to the ex21 tended blackout period, such notice shall meet the 

22 requirements of paragraph (2)(D) and shall specify 

23 any material change in the matters referred to in 

24 clauses (i) through (v) of paragraph (2)(A). 
58 

•S 1953 PCS 

1 ‘‘(5) REGULATORY EXCEPTIONS.—The Sec2 retary of Labor may provide by regulation for addi3 tional exceptions to the requirements of this sub4 section which the Secretary of Labor determines are 

5 in the interests of participants and beneficiaries. 

6 ‘‘(6) GUIDANCE AND MODEL NOTICES.—The 

7 Secretary of Labor shall issue guidance and model 

8 notices which meet the requirements of this sub9 section. 

10 ‘‘(7) BLACKOUT PERIOD.—For purposes of this 

11 subsection— 

12 ‘‘(A) IN GENERAL.—The term ‘blackout 

13 period’ means, in connection with a defined con14 tribution plan, any period for which any ability 

15 of participants or beneficiaries under the plan, 

16 which is otherwise available under terms of the 

17 plan, to direct or diversify assets credited to 

18 their accounts, to obtain loans from the plan, or 

19 to obtain distributions from the plan is tempo20 rarily suspended, limited, or restricted, if such 

21 suspension, limitation, or restriction is for any 

22 period of more than 3 consecutive business 

23 days. 
59 

•S 1953 PCS 

1 ‘‘(B) EXCLUSIONS.—The term ‘blackout 

2 period’ does not include a suspension, limita3 tion, or restriction— 

4 ‘‘(i) which occurs by reason of the ap5 plication of the securities laws (as defined 

6 in section 3(a)(47) of the Securities Ex7 change Act of 1934), 

8 ‘‘(ii) which is a change to the plan 

9 which provides for a regularly scheduled 

10 suspension, limitation, or restriction which 

11 is disclosed to participants or beneficiaries 

12 through any summary of material modi13 fications, any materials describing specific 

14 investment alternatives under the plan, or 

15 any changes thereto, or 

16 ‘‘(iii) which applies only to 1 or more 

17 individuals, each of whom is the partici18 pant, an alternate payee (as defined in sec19 tion 414(p)(8)), or any other beneficiary 

20 pursuant to a qualified domestic relations 

21 order (as defined in section 414(p)(1)(A)). 

22 ‘‘(8) DEFINED CONTRIBUTION PLAN TO WHICH

23 SECTION APPLIES.— 

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

25 this paragraph, this section applies to any de-
60 

•S 1953 PCS 

1 fined contribution plan described in clause (i), 

2 (ii), or (iv) of section 219(g)(5)(A). 

3 ‘‘(B) EXCEPTION FOR ONE-PARTICIPANT

4 RETIREMENT PLAN.—This section shall not 

5 apply to a one-participant retirement plan (as 

6 defined in section 401(a)(35)(E)(iv)). 

7 ‘‘(C) EXCEPTION FOR GOVERNMENTAL

8 AND CHURCH PLANS.—This section shall not 

9 apply to governmental and church plans. For 

10 purposes of this subparagraph, the terms ‘gov11 ernmental plan’ and ‘church plan’ have the 

12 meanings given such terms by section 414.’’ 

13 (B) AGGREGATION.—Section 414(t) of 

14 such Code, as amended by this Act, is amended 

15 by striking ‘‘or 4980I’’ and inserting ‘‘4980I, or 

16 4980J’’. 

17 (C) CLERICAL AMENDMENT.—The table of 

18 sections for chapter 43 of such Code is amend19 ed by adding at the end the following new item: 

‘‘Sec. 4980J. Failure of applicable defined contribution plan to provide notice 

of blackout periods.’’. 

20 (2) EFFECTIVE DATE.—The amendments made 

21 by this subsection shall apply to failures after the 

22 date of the enactment of this Act. 

23 (b) AMENDMENTS OF ERISA.— 
61 

•S 1953 PCS 

1 (1) IN GENERAL.—Section 101(i) of the Em2 ployee Retirement Income Security Act of 1974 (29 

3 U.S.C. 1021(i)) is amended— 

4 (A) by striking clause (i) of paragraph 

5 (8)(B) and inserting: 

6 ‘‘(i) on the first day of the plan 

7 year— 

8 ‘‘(I) covered only one individual 

9 (or the individual and the individual’s 

10 spouse) and the individual owned 100 

11 percent of the plan sponsor (whether 

12 or not incorporated), or 

13 ‘‘(II) covered only one or more 

14 partners (or partners and their 

15 spouses) in the plan sponsor,’’, 

16 (B) by striking ‘‘employer’’ and ‘‘employ17 er’s’’ in paragraph (8)(B)(iii) and inserting ‘‘in18 dividual’’ and ‘‘individual’s’’, respectively, 

19 (C) by striking ‘‘leases employees’’ in para20 graph (8)(B)(v) and inserting ‘‘uses the services 

21 of leased employees (within the meaning of sec22 tion 414(n) of the Internal Revenue Code of 

23 1986)’’, and 

24 (D) by adding at the end of paragraph 

25 (8)(B) the following flush sentence: 
62 

•S 1953 PCS 

1 ‘‘For purposes of this paragraph, an individual 

2 shall be treated as a partner if the individual is 

3 so treated under section 401(a)(35)(E)(iv) of 

4 the Internal Revenue Code of 1986.’’ 

5 (2) EFFECTIVE DATE.—The amendments made 

6 by this subsection shall take effect as if included in 

7 the provisions of section 306 of Public Law 107–204 

8 (116 Stat. 745 et seq.). 

9 SEC. 105. ALLOWANCE OF, AND CREDIT FOR, ADDITIONAL 

10 IRA PAYMENTS IN CERTAIN BANKRUPTCY 

11 CASES. 

12 (a) ALLOWANCE OF CONTRIBUTIONS.—Section 

13 219(b)(5) of the Internal Revenue Code of 1986 (relating 

14 to deductible amount) is amended by redesignating sub15 paragraph (C) as subparagraph (D) and by inserting after 

16 subparagraph (B) the following new subparagraph: 

17 ‘‘(C) CATCHUP CONTRIBUTIONS FOR CER18 TAIN INDIVIDUALS.— 

19 ‘‘(i) IN GENERAL.—In the case of an 

20 applicable individual who elects to make a 

21 qualified retirement contribution in addi22 tion to the deductible amount determined 

23 under subparagraph (A)— 

24 ‘‘(I) the deductible amount for 

25 any taxable year shall be increased by 
63 

•S 1953 PCS 

1 an amount equal to 3 times the appli2 cable amount determined under sub3 paragraph (B) for such taxable year, 

4 and 

5 ‘‘(II) subparagraph (B) shall not 

6 apply. 

7 ‘‘(ii) APPLICABLE INDIVIDUAL.—For 

8 purposes of this subparagraph, the term 

9 ‘applicable individual’ means, with respect 

10 to any taxable year, any individual who 

11 was a qualified participant in a qualified 

12 cash or deferred arrangement (as defined 

13 in section 401(k)) of an employer described 

14 in clause (iii) under which the employer 

15 matched at least 50 percent of the employ16 ee’s contributions to such arrangement 

17 with stock of such employer. 

18 ‘‘(iii) EMPLOYER DESCRIBED.—An 

19 employer is described in this clause if, in 

20 any taxable year preceding the taxable year 

21 described in clause (ii)— 

22 ‘‘(I) such employer (or any con23 trolling corporation of such employer) 

24 was a debtor in a case under title 11 
64 

•S 1953 PCS 

1 of the United States Code, or similar 

2 Federal or State law, and 

3 ‘‘(II) such employer (or any other 

4 person) was subject to an indictment 

5 or conviction resulting from business 

6 transactions related to such case. 

7 ‘‘(iv) QUALIFIED PARTICIPANT.—For 

8 purposes of clause (ii), the term ‘qualified 

9 participant’ means any applicable indi10 vidual who was a participant in the cash or 

11 deferred arrangement described in clause 

12 (i) on the date that is 6 months before the 

13 filing of the case described in clause (iii). 

14 ‘‘(v) TERMINATION.—This subpara15 graph shall not apply to taxable years be16 ginning after December 31, 2009.’’ 

17 (b) SAVER’S CREDIT EXPANDED TO INCLUDE

18 CATCHUP CONTRIBUTIONS.— 

19 (1) IN GENERAL.—Section 25B of the Internal 

20 Revenue Code of 1986 (relating to credit for elective 

21 deferrals and IRA contributions by certain individ22 uals) is amended by redesignating subsection (h) as 

23 subsection (i) and by inserting after subsection (g) 

24 the following new subsection: 
65 

•S 1953 PCS 

1 ‘‘(h) ADDITIONAL CREDIT FOR CERTAIN CATCHUP

2 CONTRIBUTIONS.— 

3 ‘‘(1) IN GENERAL.—In the case of an eligible 

4 individual who is an applicable individual under sec5 tion 219(b)(5)(C) for any taxable year, the amount 

6 of the credit allowable under subsection (a) for the 

7 taxable year shall be increased by 50 percent of so 

8 much of the qualified retirement contributions (as 

9 defined in section 219(e)) of the individual for the 

10 taxable year as exceeds the deductible amount for 

11 the taxable year under section 219(b)(5) (without 

12 regard to subparagraphs (B) and (C) thereof). 

13 ‘‘(2) COORDINATION WITH OTHER CONTRIBU14 TIONS.—For purposes of this section— 

15 ‘‘(A) any contribution to which this sub16 section applies shall not be taken into account 

17 in determining the amount of the credit allow18 able under subsection (a) without regard to this 

19 subsection, and 

20 ‘‘(B) in applying any reduction in qualified 

21 retirement savings contributions under sub22 section (d)(2), the reduction shall be applied 

23 first to qualified retirement savings contribu24 tions other than contributions to which this 

25 subsection applies.’’. 
66 

•S 1953 PCS 

1 (2) EXTENSION OF TERMINATION DATE FOR

2 CATCHUP CREDIT.—Section 25B(i) of such Code, as 

3 redesignated by paragraph (1), is amended by in4 serting ‘‘(December 31, 2007, in the case of the por5 tion of the credit allowed under subsection (h))’’ 

6 after ‘‘2006’’. 

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2004. 

10 TITLE II—INFORMATION TO AS11 SIST PENSION PLAN PARTICI12 PANTS 

13 SEC. 201. DEFINED CONTRIBUTION PLANS REQUIRED TO 

14 PROVIDE ADEQUATE INVESTMENT EDU15 CATION TO PARTICIPANTS. 

16 (a) EXCISE TAX ON FAILURE OF CERTAIN DEFINED

17 CONTRIBUTION PLANS TO PROVIDE ADEQUATE INVEST18 MENT INFORMATION.— 

19 (1) IN GENERAL.—Section 4980I(e)(1)(A) of 

20 the Internal Revenue Code of 1986, as added by sec21 tion 103, is amended by adding at the end the fol22 lowing new flush sentence: 

23 ‘‘In addition to the pension benefit statement, 

24 the administrator shall furnish at least once 

25 each year to each participant or beneficiary who 
67 

•S 1953 PCS 

1 has the right to direct the investment of assets 

2 in his or her account the model form relating 

3 to basic investment guidelines as provided in 

4 paragraph (5).’’ 

5 (2) BASIC INVESTMENT GUIDELINES.—Section 

6 4980I(e) of such Code, as so added, is amended by 

7 adding at the end the following new paragraph: 

8 ‘‘(5) BASIC INVESTMENT GUIDELINES.— 

9 ‘‘(A) IN GENERAL.—The Secretary of 

10 Labor shall, in consultation with the Secretary, 

11 develop and make available to defined contribu12 tion plans for distribution under paragraph 

13 (1)(A) a model form containing basic guidelines 

14 for investing for retirement. Except as other15 wise provided by the Secretary of Labor, such 

16 guidelines shall include— 

17 ‘‘(i) information on the benefits of di18 versification, 

19 ‘‘(ii) information on the essential dif20 ferences, in terms of risk and return, of 

21 pension plan investments, including stocks, 

22 bonds, mutual funds, and money market 

23 investments, 

24 ‘‘(iii) information on how an individ25 ual’s pension plan investment allocations 
68 

•S 1953 PCS 

1 may differ depending on the individual’s 

2 age and years to retirement and on other 

3 factors determined by the Secretary of 

4 Labor, 

5 ‘‘(iv) sources of information where in6 dividuals may learn more about pension 

7 rights, individual investing, and investment 

8 advice, and 

9 ‘‘(v) such other information related to 

10 individual investing as the Secretary of 

11 Labor determines appropriate. 

12 ‘‘(B) CALCULATION INFORMATION.—The 

13 model form under subparagraph (A) shall in14 clude addresses for Internet sites, and a work15 sheet, which a participant or beneficiary may 

16 use to calculate— 

17 ‘‘(i) the retirement age value of the 

18 participant’s or beneficiary’s nonforfeitable 

19 pension benefits under the plan (expressed 

20 as an annuity amount and determined by 

21 reference to varied historical annual rates 

22 of return and annuity interest rates), and 

23 ‘‘(ii) other important amounts relating 

24 to retirement savings, including the 

25 amount which a participant or beneficiary 
69 

•S 1953 PCS 

1 would be required to save annually to pro2 vide a retirement income equal to various 

3 percentages of their current salary (ad4 justed for expected growth prior to retire5 ment). 

6 The Secretary of Labor shall develop an Inter7 net site which an individual may use in making 

8 such calculations and the address for such site 

9 shall be included with the form. 

10 ‘‘(C) RULES RELATING TO FORM AND

11 STATEMENT.—The model form under subpara12 graph (A)— 

13 ‘‘(i) shall be written in a manner cal14 culated to be understood by the average 

15 plan participant, and 

16 ‘‘(ii) may be delivered in written, elec17 tronic, or other appropriate form to the ex18 tent such form is reasonably accessible to 

19 participants and beneficiaries.’’ 

20 (3) CONFORMING AMENDMENTS.—Section 

21 4980I of such Code is amended— 

22 (A) by adding at the end of subsection 

23 (c)(3) the following new subparagraph: 

24 ‘‘(C) SEPARATE APPLICATION.—This para25 graph shall be applied separately to failures to 
70 

•S 1953 PCS 

1 meet the requirements of subsection (e)(1)(A) 

2 to provide pension benefit statements and fail3 ures to meet the requirements of subsection 

4 (e)(1)(A) to provide model forms containing 

5 basic investment guidelines.’’; 

6 (B) by inserting ‘‘or model form’’ after 

7 ‘‘statement’’ in subsection (d)(3); and 

8 (C) by inserting ‘‘or model form containing 

9 basic investment guidelines’’ after ‘‘statement’’ 

10 in subsection (e)(4). 

11 (b) ADEQUATE INVESTMENT EDUCATION.— 

12 (1) IN GENERAL.—Section 104 of the Employee 

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

14 1024) is amended by redesignating subsection (d) as 

15 subsection (e) and by inserting after subsection (c) 

16 the following new subsection: 

17 ‘‘(d) BASIC INVESTMENT GUIDELINES.— 

18 ‘‘(1) IN GENERAL.—The administrator of an in19 dividual account plan (other than a one-participant 

20 retirement plan described in section 101(i)(8)(B)) 

21 shall furnish at least once each year to each partici22 pant or beneficiary who has the right to direct the 

23 investment of assets in his or her account the model 

24 form relating to basic investment guidelines which is 

25 described in paragraph (2). 
71 

•S 1953 PCS 

1 ‘‘(2) MODEL FORM.— 

2 ‘‘(A) IN GENERAL.—The Secretary shall, 

3 in consultation with the Secretary of Treasury, 

4 develop and make available to individual ac5 count plans for distribution under paragraph 

6 (1) a model form containing basic guidelines for 

7 investing for retirement. Except as otherwise 

8 provided by the Secretary, such guidelines shall 

9 include— 

10 ‘‘(i) information on the benefits of di11 versification, 

12 ‘‘(ii) information on the essential dif13 ferences, in terms of risk and return, of 

14 pension plan investments, including stocks, 

15 bonds, mutual funds, and money market 

16 investments, 

17 ‘‘(iii) information on how an individ18 ual’s pension plan investment allocations 

19 may differ depending on the individual’s 

20 age and years to retirement and on other 

21 factors determined by the Secretary, 

22 ‘‘(iv) sources of information where in23 dividuals may learn more about pension 

24 rights, individual investing, and investment 

25 advice, and 
72 

•S 1953 PCS 

1 ‘‘(v) such other information related to 

2 individual investing as the Secretary deter3 mines appropriate. 

4 ‘‘(B) CALCULATION INFORMATION.—The 

5 model form under subparagraph (A) shall in6 clude addresses for Internet sites, and a work7 sheet, which a participant or beneficiary may 

8 use to calculate— 

9 ‘‘(i) the retirement age value of the 

10 participant’s or beneficiary’s nonforfeitable 

11 pension benefits under the plan (expressed 

12 as an annuity amount and determined by 

13 reference to varied historical annual rates 

14 of return and annuity interest rates), and 

15 ‘‘(ii) other important amounts relating 

16 to retirement savings, including the 

17 amount which a participant or beneficiary 

18 would be required to save annually to pro19 vide a retirement income equal to various 

20 percentages of their current salary (ad21 justed for expected growth prior to retire22 ment). 

23 The Secretary shall develop an Internet site 

24 which an individual may use in making such 
73 

•S 1953 PCS 

1 calculations and the address for such site shall 

2 be included with the form. 

3 ‘‘(C) PUBLIC COMMENT.—The Secretary of 

4 Labor shall provide at least 90 days for public 

5 comment before publishing final notice of the 

6 model form. 

7 ‘‘(3) RULES RELATING TO FORM AND STATE8 MENT.—The model form under paragraph (2)— 

9 ‘‘(A) shall be written in a manner cal10 culated to be understood by the average plan 

11 participant, and 

12 ‘‘(B) may be delivered in written, elec13 tronic, or other appropriate form to the extent 

14 such form is reasonably accessible to partici15 pants and beneficiaries.’’ 

16 (2) ENFORCEMENT.—Section 502(c)(7) of such 

17 Act (29 U.S.C. 1132(c)(7)), as amended by section 

18 102, is amended by striking ‘‘section 101’’ and in19 serting ‘‘section 101 or section 104(d)’’. 

20 (c) EFFECTIVE DATE.— 

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

22 this section shall apply to plan years beginning after 

23 December 31, 2006. 

24 (2) SPECIAL RULE FOR COLLECTIVELY BAR25 GAINED AGREEMENTS.—In the case of a plan main-
74 

•S 1953 PCS 

1 tained pursuant to 1 or more collective bargaining 

2 agreements between employee representatives and 1 

3 or more employers ratified on or before the date of 

4 the enactment of this Act, paragraph (1) shall be 

5 applied to benefits pursuant to, and individuals cov6 ered by, any such agreement by substituting for 

7 ‘‘December 31, 2006’’ the earlier of— 

8 (A) the later of— 

9 (i) December 31, 2007, or 

10 (ii) the date on which the last of such 

11 collective bargaining agreements termi12 nates (determined without regard to any 

13 extension thereof after such date of enact14 ment), or 

15 (B) December 31, 2008. 

16 SEC. 202. MATERIAL INFORMATION RELATING TO INVEST17 MENT IN EMPLOYER SECURITIES. 

18 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

19 (1) IN GENERAL.—Section 4980H(e) of the In20 ternal Revenue Code of 1986, as added by section 

21 102, is amended— 

22 (A) by striking ‘‘(e) NOTICE OF RIGHT TO

23 DIVEST.—Not’’ and inserting: 

24 ‘‘(e) NOTICE REQUIREMENTS.— 

25 ‘‘(1) NOTICE OF RIGHT TO DIVEST.—Not’’, 
75 

•S 1953 PCS 

1 (B) by redesignating paragraphs (1) and 

2 (2) as subparagraphs (A) and (B) and adjust3 ing all margins accordingly, and 

4 (C) by adding at the end the following new 

5 paragraph: 

6 ‘‘(2) MATERIAL INFORMATION.— 

7 ‘‘(A) IN GENERAL.—The administrator of 

8 a defined contribution plan (other than a one9 participant retirement plan) shall provide to 

10 each participant and beneficiary who has the 

11 right to direct the investment of assets in his or 

12 her account in employer securities with all re13 ports, proxy statements, and other communica14 tions regarding investment of such assets in 

15 employer securities to the extent that such re16 ports, statements, and communications are re17 quired to be provided by the plan sponsor to in18 vestors in connection with such an investment 

19 under applicable securities laws. Such reports, 

20 statements, and communications may be deliv21 ered in written, electronic, or other appropriate 

22 form to the extent such form is reasonably ac23 cessible to participants and beneficiaries. 

24 ‘‘(B) PLAN SPONSOR.—If any information 

25 required to be provided under paragraph (1) is 
76 

•S 1953 PCS 

1 maintained by the plan sponsor, the plan spon2 sor shall transmit such information to the plan 

3 administrator.’’ 

4 (2) CONFORMING AMENDMENTS.— 

5 (A) Section 4980H(c)(3) of such Code, as 

6 so added, is amended by adding at the end the 

7 following new subparagraph: 

8 ‘‘(C) SEPARATE APPLICATION.—This para9 graph shall be applied separately for failures to 

10 meet the requirements of subsection (e)(1) and 

11 failures to meet the requirements of subsection 

12 (e)(2).’’ 

13 (B)(i) The heading for section 4980H of 

14 such Code, as so added, is amended by striking 

15 ‘‘NOTICE OF FREEDOM TO DIVEST EM16 PLOYER SECURITIES’’ and inserting ‘‘INFOR17 MATION REGARDING INVESTMENT IN EM18 PLOYER SECURITIES’’. 

19 (ii) The item relating to section 4980H in 

20 the table of sections for chapter 43 of such 

21 Code, as so added, is amended by striking ‘‘no22 tice of freedom to divest employer securities’’ 

23 and inserting ‘‘information regarding invest24 ment in employer securities’’. 

25 (b) AMENDMENTS OF ERISA.— 
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1 (1) IN GENERAL.—Section 101 of the Employee 

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

3 1021), as amended by this Act, is amended by redes4 ignating subsection (k) as subsection (l) and by in5 serting after subsection (j) the following new sub6 section: 

7 ‘‘(k) PROVIDING OF MATERIAL INFORMATION.— 

8 ‘‘(1) IN GENERAL.—The administrator of an in9 dividual account plan (other than a one-participant 

10 retirement plan described in section 101(i)(8)(B)) 

11 shall provide to each participant and beneficiary who 

12 has the right to direct the investment of assets in 

13 his or her account in employer securities with all re14 ports, proxy statements, and other communications 

15 regarding investment of such assets in employer se16 curities to the extent that such reports, statements, 

17 and communications are required to be provided by 

18 the plan sponsor to investors in connection with such 

19 an investment under applicable securities laws. Such 

20 reports, statements, and communications may be de21 livered in written, electronic, or other appropriate 

22 form to the extent such form is reasonably accessible 

23 to participants and beneficiaries. 

24 ‘‘(2) PLAN SPONSOR.—If any information re25 quired to be provided under paragraph (1) is main-
78 

•S 1953 PCS 

1 tained by the plan sponsor, the plan sponsor shall 

2 transmit such information to the plan adminis3 trator.’’ 

4 (2) ENFORCEMENT.—Section 502 of such Act 

5 (29 U.S.C. 1132) is amended— 

6 (A) in subsection (a)(6), by striking ‘‘(6), 

7 or (7)’’ and inserting ‘‘(6), (7), or (8)’’; 

8 (B) by redesignating paragraph (8) of sub9 section (c) as paragraph (9); and 

10 (C) by inserting after paragraph (7) of 

11 subsection (c) the following new paragraph: 

12 ‘‘(8) The Secretary may assess a civil penalty against 

13 any person of up to $1,000 a day from the date of the 

14 person’s failure or refusal to comply with the requirements 

15 of section 101(k) until such failure or refusal is cor16 rected.’’ 

17 (c) EFFECTIVE DATE.— 

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

19 this section shall apply to plan years beginning after 

20 December 31, 2005. 

21 (2) SPECIAL RULE FOR COLLECTIVELY BAR22 GAINED AGREEMENTS.—In the case of a plan main23 tained pursuant to 1 or more collective bargaining 

24 agreements between employee representatives and 1 

25 or more employers ratified on or before the date of 
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1 the enactment of this Act, paragraph (1) shall be 

2 applied to benefits pursuant to, and individuals cov3 ered by, any such agreement by substituting for 

4 ‘‘December 31, 2005’’ the earlier of— 

5 (A) the later of— 

6 (i) December 31, 2006, or 

7 (ii) the date on which the last of such 

8 collective bargaining agreements termi9 nates (determined without regard to any 

10 extension thereof after such date of enact11 ment), or 

12 (B) December 31, 2007. 

13 SEC. 203. INDEPENDENT INVESTMENT ADVICE PROVIDED 

14 TO PLAN PARTICIPANTS. 

15 (a) IN GENERAL.—Section 404 of the Employee Re16 tirement Income Security Act of 1974 (29 U.S.C. 1104) 

17 is amended by adding at the end the following new sub18 section: 

19 ‘‘(e) INDEPENDENT INVESTMENT ADVISER.— 

20 ‘‘(1) IN GENERAL.—In the case of an individual 

21 account plan which permits a plan participant or 

22 beneficiary to direct the investment of the assets in 

23 his or her account, if a plan sponsor or other person 

24 who is a fiduciary designates and monitors a quali-
80 

•S 1953 PCS 

1 fied investment adviser pursuant to the requirements 

2 of paragraph (3), such fiduciary— 

3 ‘‘(A) shall be deemed to have satisfied the 

4 requirements under this section for the prudent 

5 designation and periodic review of an invest6 ment adviser with whom the plan sponsor or 

7 other person who is a fiduciary enters into an 

8 arrangement for the provision of advice referred 

9 to in section 3(21)(A)(ii), 

10 ‘‘(B) shall not be liable under this section 

11 for any loss, or by reason of any breach, with 

12 respect to the provision of investment advice 

13 given by such adviser to any plan participant or 

14 beneficiary, and 

15 ‘‘(C) shall not be liable for any co-fiduciary 

16 liability under subsections (a)(2) and (b) of sec17 tion 405 with respect to the provision of invest18 ment advice given by such adviser to any plan 

19 participant or beneficiary. 

20 ‘‘(2) QUALIFIED INVESTMENT ADVISER.— 

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

22 subsection, the term ‘qualified investment ad23 viser’ means, with respect to a plan, a person— 

24 ‘‘(i) who is a fiduciary of the plan by 

25 reason of the provision of investment ad-
81 

•S 1953 PCS 

1 vice by such person to a plan participant 

2 or beneficiary; 

3 ‘‘(ii) who— 

4 ‘‘(I) is registered as an invest5 ment adviser under the Investment 

6 Advisers Act of 1940 (15 U.S.C. 80b– 

7 1 et seq.), 

8 ‘‘(II) is registered as an invest9 ment adviser under the laws of the 

10 State in which such adviser maintains 

11 the principal office and place of busi12 ness of such adviser, but only if such 

13 State laws are consistent with section 

14 203A of the Investment Advisers Act 

15 of 1940 (15 U.S.C. 80b–3a), 

16 ‘‘(III) is a bank or similar finan17 cial institution referred to in section 

18 408(b)(4), 

19 ‘‘(IV) is an insurance company 

20 qualified to do business under the 

21 laws of a State, or 

22 ‘‘(V) is any other comparably 

23 qualified entity which satisfies such 

24 criteria as the Secretary determines 
82 

•S 1953 PCS 

1 appropriate, consistent with the pur2 poses of this subsection, and 

3 ‘‘(iii) who meets the requirements of 

4 subparagraph (B). 

5 ‘‘(B) ADVISER REQUIREMENTS.—The re6 quirements of this subparagraph are met if 

7 every individual employed (or otherwise com8 pensated) by a person described in subpara9 graph (A)(ii) who provides investment advice on 

10 behalf of such person to any plan participant or 

11 beneficiary is— 

12 ‘‘(i) an individual described in sub13 clause (I) of subparagraph (A)(ii), 

14 ‘‘(ii) an individual described in sub15 clause (II) of subparagraph (A)(ii), but 

16 only if such State has an examination re17 quirement to qualify for registration, 

18 ‘‘(iii) registered as a broker or dealer 

19 under the Securities Exchange Act of 1934 

20 (15 U.S.C. 78a et seq.), 

21 ‘‘(iv) a registered representative as de22 scribed in section 3(a)(18) of the Securi23 ties Exchange Act of 1934 (15 U.S.C. 

24 78c(a)(18)) or section 202(a)(17) of the 
83 

•S 1953 PCS 

1 Investment Advisers Act of 1940 (15 

2 U.S.C. 80b–2(a)(17)), or 

3 ‘‘(v) any other comparably qualified 

4 individual who satisfies such criteria as the 

5 Secretary determines appropriate, con6 sistent with the purposes of this sub7 section. 

8 ‘‘(3) VERIFICATION REQUIREMENTS.—The re9 quirements of this paragraph are met if— 

10 ‘‘(A) the plan sponsor or other person who 

11 is a fiduciary in designating a qualified invest12 ment adviser receives at the time of the des13 ignation, and annually thereafter, a written 

14 verification from the qualified investment ad15 viser that the investment adviser— 

16 ‘‘(i) is and remains a qualified invest17 ment adviser, 

18 ‘‘(ii) acknowledges that the investment 

19 adviser is a fiduciary with respect to the 

20 plan and is solely responsible for its invest21 ment advice, 

22 ‘‘(iii) has reviewed the plan documents 

23 (including investment options) and has de24 termined that its relationship with the plan 

25 and the investment advice provided to any 
84 

•S 1953 PCS 

1 plan participant or beneficiary, including 

2 any fees or other compensation it will re3 ceive, will not constitute a violation of sec4 tion 406, 

5 ‘‘(iv) will, in providing investment ad6 vice to any participant or beneficiary, con7 sider any employer securities or employer 

8 real property allocated to his or her ac9 count, and 

10 ‘‘(v) has the necessary insurance cov11 erage (as determined by the Secretary) for 

12 any claim by any plan participant or bene13 ficiary, 

14 ‘‘(B) the plan sponsor or other person who 

15 is a fiduciary in designating a qualified invest16 ment adviser reviews the documents described 

17 in paragraph (4) provided by such adviser and 

18 determines that there is no material reason not 

19 to enter into an arrangement for the provision 

20 of advice by such qualified investment adviser, 

21 and 

22 ‘‘(C) the plan sponsor or other person who 

23 is a fiduciary in designating a qualified invest24 ment adviser, within 30 days of having informa25 tion brought to its attention that the invest-
85 

•S 1953 PCS 

1 ment adviser is no longer qualified or that a 

2 substantial number of plan participants or 

3 beneficiaries have raised concerns about the 

4 services being provided by the investment ad5 viser— 

6 ‘‘(i) investigates such information and 

7 concerns, and 

8 ‘‘(ii) determines that there is no mate9 rial reason not to continue the designation 

10 of the adviser as a qualified investment ad11 viser. 

12 ‘‘(4) DOCUMENTATION.—A qualified investment 

13 adviser shall provide the following documents to the 

14 plan sponsor or other person who is a fiduciary in 

15 designating the adviser: 

16 ‘‘(A) The contract with the plan sponsor or 

17 other person who is a fiduciary for the services 

18 to be provided by the investment adviser to the 

19 plan participants and beneficiaries. 

20 ‘‘(B) A disclosure as to any fees or other 

21 compensation that will be received by the in22 vestment adviser for the provision of such in23 vestment advice and as to any fees and other 

24 compensation that will be received as a result of 

25 a participant’s investment election. 
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1 ‘‘(C) The Uniform Application for Invest2 ment Adviser Registration as filed with the Se3 curities and Exchange Commission or a sub4 stantially similar disclosure application as de5 termined by and filed with the Secretary. 

6 ‘‘(5) TREATMENT AS FIDUCIARY.—Any quali7 fied investment adviser that acknowledges it is a fi8 duciary pursuant to paragraph (3)(A)(ii) shall be 

9 deemed a fiduciary under this part with respect to 

10 the provision of investment advice to a plan partici11 pant or beneficiary.’’ 

12 (b) FIDUCIARY LIABILITY.—Section 404(c)(1)(B) of 

13 such Act is amended by inserting ‘‘(other than a qualified 

14 investment adviser)’’ after ‘‘fiduciary’’. 

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

16 this section shall apply with respect to investment advisers 

17 designated after the date of the enactment of this Act. 

18 SEC. 204. TREATMENT OF QUALIFIED RETIREMENT PLAN19 NING SERVICES. 

20 (a) IN GENERAL.—Subsection (m) of section 132 of 

21 the Internal Revenue Code of 1986 (defining qualified re22 tirement services) is amended by adding at the end the 

23 following new paragraph: 

24 ‘‘(4) NO CONSTRUCTIVE RECEIPT.— 
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1 ‘‘(A) IN GENERAL.—No amount shall be 

2 included in the gross income of any employee 

3 solely because the employee may choose between 

4 any qualified retirement planning services pro5 vided by an eligible investment advisor and 

6 compensation which would otherwise be includ7 ible in the gross income of such employee. The 

8 preceding sentence shall apply to highly com9 pensated employees only if the choice described 

10 in such sentence is available on substantially 

11 the same terms to each member of the group of 

12 employees normally provided education and in13 formation regarding the employer’s qualified 

14 employer plan. 

15 ‘‘(B) LIMITATION.—The maximum amount 

16 which may be excluded under subparagraph (A) 

17 with respect to any employee for any taxable 

18 year shall not exceed $1,000. 

19 ‘‘(C) ELIGIBLE INVESTMENT ADVISER.— 

20 For purposes of this paragraph, the term ‘eligi21 ble investment adviser’ means, with respect to 

22 a plan, a person— 

23 ‘‘(i) who— 

24 ‘‘(I) is registered as an invest25 ment adviser under the Investment 
88 

•S 1953 PCS 

1 Advisers Act of 1940 (15 U.S.C. 80b– 

2 1 et seq.), 

3 ‘‘(II) is registered as an invest4 ment adviser under the laws of the 

5 State in which such adviser maintains 

6 the principal office and place of busi7 ness of such adviser, but only if such 

8 State laws are consistent with section 

9 203A of the Investment Advisers Act 

10 of 1940 (15 U.S.C. 80b–3a), 

11 ‘‘(III) is a bank or similar finan12 cial institution referred to in section 

13 408(b)(4), 

14 ‘‘(IV) is an insurance company 

15 qualified to do business under the 

16 laws of a State, or 

17 ‘‘(V) is any other comparably 

18 qualified entity which satisfies such 

19 criteria as the Secretary determines 

20 appropriate, consistent with the pur21 poses of this subsection, and 

22 ‘‘(ii) who meets the requirements of 

23 subparagraph (D). 

24 ‘‘(D) ADVISER REQUIREMENTS.—The re25 quirements of this subparagraph are met if 
89 

•S 1953 PCS 

1 every individual employed (or otherwise com2 pensated) by a person described in subpara3 graph (C)(i) who provides investment advice on 

4 behalf of such person to any plan participant or 

5 beneficiary is— 

6 ‘‘(i) an individual described in sub7 clause (I) of subparagraph (C)(i), 

8 ‘‘(ii) an individual described in sub9 clause (II) of subparagraph (C)(i), but 

10 only if such State has an examination re11 quirement to qualify for registration, 

12 ‘‘(iii) registered as a broker or dealer 

13 under the Securities Exchange Act of 1934 

14 (15 U.S.C. 78a et seq.), 

15 ‘‘(iv) a registered representative as de16 scribed in section 3(a)(18) of the Securi17 ties Exchange Act of 1934 (15 U.S.C. 

18 78c(a)(18)) or section 202(a)(17) of the 

19 Investment Advisers Act of 1940 (15 

20 U.S.C. 80b–2(a)(17)), or 

21 ‘‘(v) any other comparably qualified 

22 individual who satisfies such criteria as the 

23 Secretary determines appropriate, con24 sistent with the purposes of this para25 graph. 
90 

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1 ‘‘(E) TERMINATION.—This paragraph 

2 shall not apply to taxable years beginning after 

3 December 31, 2010.’’ 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Section 403(b)(3)(B) of such Code is 

6 amended by inserting ‘‘132(m)(4),’’ after 

7 ‘‘132(f)(4),’’. 

8 (2) Section 414(s)(2) of such Code is amended 

9 by inserting ‘‘132(m)(4),’’ after ‘‘132(f)(4),’’. 

10 (3) Section 415(c)(3)(D)(ii) of such Code is 

11 amended by inserting ‘‘132(m)(4),’’ after 

12 ‘‘132(f)(4),’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2005. 

16 SEC. 205. ADMINISTRATIVE PROVISIONS. 

17 (a) AUTHORITY OF THE SECRETARY OF THE TREAS18 URY.—The Secretary of the Treasury shall have the au19 thority to prescribe rules applicable to the statements re20 quired under section 4980H(e)(1) of the Internal Revenue 

21 Code of 1986 (as added and amended by this Act) and 

22 section 101(j) of the Employee Retirement Income Secu23 rity Act of 1974 (as added by this Act). 
91 

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1 (b) AUTHORITY OF THE SECRETARY OF LABOR.— 

2 The Secretary of Labor shall have the authority to pre3 scribe rules applicable to the statements required under— 

4 (1) section 4980H(e)(2) of the Internal Rev5 enue Code of 1986 (as added by this Act) and sec6 tion 101(k) of this Employee Retirement Income Se7 curity Act of 1974 (as added by this Act); 

8 (2) section 4980I of such Code (as added by 

9 this Act) and section 105(a) of such Act (as added 

10 by this Act); and 

11 (3) section 4980J of such Code (as added by 

12 this Act) and section 101(i) such Act (as amended 

13 by this Act). 
92 

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1 TITLE III—IMPROVEMENTS IN 

2 FUNDING RULES FOR SINGLE3 EMPLOYER PENSION PLANS 

4 Subtitle A—Rules Relating to 

5 Funding, Benefit Limitations, 

6 and Deductions 

7 PART I—AMENDMENTS TO THE INTERNAL 

8 REVENUE CODE OF 1986 

9 SEC. 301. MODIFICATIONS OF THE MINIMUM FUNDING 

10 STANDARDS. 

11 (a) IN GENERAL.—Section 412 of the Internal Rev12 enue Code of 1986 (relating to minimum funding stand13 ards) is amended to read as follows: 

14 ‘‘SEC. 412. MINIMUM FUNDING STANDARDS. 

15 ‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING

16 STANDARD.— 

17 ‘‘(1) IN GENERAL.—A plan to which this sec18 tion applies shall satisfy the minimum funding 

19 standard applicable to the plan for any plan year. 

20 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur21 poses of paragraph (1), a plan shall be treated as 

22 satisfying the minimum funding standard for a plan 

23 year if— 

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

25 which is a single-employer plan, the employer 
93 

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1 makes contributions to or under the plan for 

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

3 less than the minimum required contribution 

4 determined under section 430 for the plan for 

5 the plan year, 

6 ‘‘(B) in the case of a money purchase pen7 sion plan which is a single-employer plan, the 

8 employer makes contributions to or under the 

9 plan for the plan year which are required under 

10 the plan, and 

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

12 the employers make contributions to or under 

13 the plan for the plan year which, in the aggre14 gate, are sufficient to ensure that the plan does 

15 not have an accumulated funding deficiency 

16 under section 431 as of the end of the plan 

17 year. 

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

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graphs (2) and (3), this section applies to a plan if, 

21 for any plan year beginning on or after the effective 

22 date of this section for such plan under the Em23 ployee Retirement Income Security Act of 1974— 
94 

•S 1953 PCS 

1 ‘‘(A) the plan included a trust which quali2 fied (or was determined by the Secretary to 

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

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

5 by the Secretary to have satisfied) the require6 ments of section 403(a). 

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

8 apply to— 

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

10 plan, 

11 ‘‘(B) any insurance contract plan described 

12 in subsection (g)(3), 

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

14 meaning of section 414(d)), 

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

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

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

18 made, 

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

20 after September 2, 1974, provided for employer 

21 contributions, or 

22 ‘‘(F) any plan established and maintained 

23 by a society, order, or association described in 

24 section 501(c) (8) or (9), if no part of the con-
95 

•S 1953 PCS 

1 tributions to or under such plan are made by 

2 employers of participants in such plan. 

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

4 shall be treated as a qualified plan for purposes of 

5 section 401(a) unless such plan meets the require6 ments of section 401(a)(7) as in effect on September 

7 1, 1974. 

8 ‘‘(3) CERTAIN TERMINATED MULTIEMPLOYER

9 PLANS.—This section applies with respect to a ter10 minated multiemployer plan to which section 4021 

11 of the Employee Retirement Income Security Act of 

12 1974 applies until the last day of the plan year in 

13 which the plan terminates (within the meaning of 

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

15 ‘‘(c) LIABILITY FOR CONTRIBUTIONS.— 

16 ‘‘(1) IN GENERAL.—Except as provided in para17 graph (2), the amount of any contribution required 

18 by this section and any required installments under 

19 section 430(j) shall be paid by any employer respon20 sible for making the contribution to or under the 

21 plan. 

22 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

23 EMPLOYER MEMBER OF CONTROLLED GROUP.—If 

24 the employer referred to in paragraph (1) is a mem25 ber of a controlled group, each member of such 
96 

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1 group shall be jointly and severally liable for pay2 ment of such contribution or required installment. 

3 ‘‘(d) VARIANCE FROM MINIMUM FUNDING STAND4 ARD.— 

5 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD6 SHIP.— 

7 ‘‘(A) IN GENERAL.—If— 

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

9 a multiemployer plan, 10 percent or more 

10 of the number of employers contributing to 

11 or under the plan, are) unable to satisfy 

12 the minimum funding standard for a plan 

13 year without temporary substantial busi14 ness hardship (substantial business hard15 ship in the case of a multiemployer plan), 

16 and 

17 ‘‘(ii) application of the standard would 

18 be adverse to the interests of plan partici19 pants in the aggregate, 

20 the Secretary may, subject to subparagraphs 

21 (B) and (C), waive the requirements of sub22 section (a) for such year with respect to all or 

23 any portion of the minimum funding standard. 

24 The Secretary shall not waive the minimum 

25 funding standard with respect to a plan for 
97 

•S 1953 PCS 

1 more than 3 of any 15 (5 of any 15 in the case 

2 of a multiemployer plan) consecutive plan years. 

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

4 granted under subparagraph (A) for any plan 

5 year, in the case of— 

6 ‘‘(i) a single-employer plan, the min7 imum required contribution under section 

8 430 for the plan year shall be reduced by 

9 the amount of the waived funding defi10 ciency and such amount shall be amortized 

11 as required under section 430(d), and 

12 ‘‘(ii) a multiemployer plan, the fund13 ing standard account shall be credited 

14 under section 431(b)(3)(C) with the 

15 amount of the waived funding deficiency 

16 and such amount shall be amortized as re17 quired under section 431(b)(2)(C), except 

18 that the interest rate used for purposes of 

19 computing the amortization charge de20 scribed in such section shall be the rate de21 termined under section 6621(b). 

22 ‘‘(C) WAIVER OF AMORTIZED PORTION

23 NOT ALLOWED.—The Secretary may not waive 

24 under subparagraph (A) any portion of the 

25 minimum funding standard under subsection 
98 

•S 1953 PCS 

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

2 amortization payment required to be made for 

3 such plan year with respect to any amortization 

4 described in subparagraph (B) of any waived 

5 funding deficiency for any preceding plan year. 

6 ‘‘(2) DETERMINATION OF BUSINESS HARD7 SHIP.—For purposes of this section, the factors 

8 taken into account in determining temporary sub9 stantial business hardship (substantial business 

10 hardship in the case of a multiemployer plan) shall 

11 include, but shall not be limited to, whether or not— 

12 ‘‘(A) the employer is operating at an eco13 nomic loss, 

14 ‘‘(B) there is substantial unemployment or 

15 underemployment in the trade or business and 

16 in the industry concerned, 

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

18 concerned are depressed or declining, and 

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

20 plan will be continued only if the waiver is 

21 granted. 

22 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur23 poses of this section, the term ‘waived funding defi24 ciency’ means the portion of the minimum funding 

25 standard under subsection (a) (determined without 
99 

•S 1953 PCS 

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

2 Secretary under this subsection and not satisfied by 

3 employer contributions. 

4 ‘‘(4) APPLICATION MUST BE SUBMITTED BEFORE DATE 21 5 ⁄2 MONTHS AFTER CLOSE OF YEAR.— 

6 In the case of a single-employer plan, no waiver may 

7 be granted under this subsection with respect to any 

8 plan for any plan year unless an application therefor 

9 is submitted to the Secretary not later than the 15th 

10 day of the 3rd month beginning after the close of 

11 such plan year. 

12 ‘‘(5) SPECIAL RULE IF EMPLOYER IS MEMBER

13 OF CONTROLLED GROUP.—In the case of a single14 employer plan, if an employer is a member of a con15 trolled group, the temporary substantial business 

16 hardship requirements of paragraph (1) shall be 

17 treated as met only if such requirements are met— 

18 ‘‘(A) with respect to such employer, and 

19 ‘‘(B) with respect to the controlled group 

20 of which such employer is a member (deter21 mined by treating all members of such group as 

22 a single employer). 

23 The Secretary may provide that an analysis of a 

24 trade or business or industry of a member need not 

25 be conducted if the Secretary determines such anal-
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1 ysis is not necessary because the taking into account 

2 of such member would not significantly affect the 

3 determination under this subsection. 

4 ‘‘(e) EXTENSION OF AMORTIZATION PERIODS.—In 

5 the case of a multiemployer plan, the period of years re6 quired to amortize any unfunded liability (described in any 

7 clause of section 431(b)(2)(B)) of the plan may be ex8 tended by the Secretary for a period of time (not in excess 

9 of 10 years) if the Secretary determines that such exten10 sion would carry out the purposes of the Employee Retire11 ment Income Security Act of 1974 and would provide ade12 quate protection for participants under the plan and their 

13 beneficiaries and if the Secretary determines that the fail14 ure to permit such extension would— 

15 ‘‘(1) result in— 

16 ‘‘(A) a substantial risk to the voluntary 

17 continuation of the plan, or 

18 ‘‘(B) a substantial curtailment of pension 

19 benefit levels or employee compensation, and 

20 ‘‘(2) be adverse to the interests of plan partici21 pants in the aggregate. 

22 The interest rate applicable for any plan year under any 

23 arrangement entered into by the Secretary in connection 

24 with an extension granted under this subsection shall be 

25 the rate determined under section 6621(b). 
101 

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1 ‘‘(f) REQUIREMENTS RELATING TO WAIVERS AND

2 EXTENSIONS.— 

3 ‘‘(1) BENEFITS MAY NOT BE INCREASED DUR4 ING WAIVER OR EXTENSION PERIOD.—If— 

5 ‘‘(A) a waiver under subsection (d)(1) or 

6 an extension of time under subsection (e) is in 

7 effect with respect to the plan, or 

8 ‘‘(B) a plan amendment described in sub9 section (g)(2) which reduces the accrued benefit 

10 of any participant has been made at any time 

11 in the preceding 12 months (24 months for 

12 multiemployer plans), 

13 no applicable benefit increase shall take effect. If an 

14 applicable benefit increase takes effect in violation of 

15 the preceding sentence, any such waiver or extension 

16 of time shall not apply to any plan year ending on 

17 or after the date on which such increase takes effect. 

18 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

19 apply to any applicable benefit increase pursuant to 

20 a plan amendment which— 

21 ‘‘(A) the Secretary determines to be rea22 sonable and which provides for only de minimis 

23 increases in the liabilities of the plan, 
102 

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1 ‘‘(B) only repeals an amendment described 

2 in subsection (g)(2) which reduced the accrued 

3 benefit of any participant, or 

4 ‘‘(C) is required as a condition of qualifica5 tion under this part. 

6 ‘‘(3) APPLICABLE BENEFIT INCREASE.—The 

7 term ‘applicable benefit increase’ has the meaning 

8 given such term by section 436(b)(3) without regard 

9 to subparagraph (B) or (C) thereof. 

10 ‘‘(4) SECURITY FOR WAIVERS; CONSULTA11 TIONS.— 

12 ‘‘(A) SECURITY MAY BE REQUIRED.— 

13 ‘‘(i) IN GENERAL.—Except as pro14 vided in subparagraph (C), the Secretary 

15 may require an employer maintaining a de16 fined benefit plan which is a single-em17 ployer plan to provide security to such plan 

18 as a condition for granting or modifying a 

19 waiver under subsection (d). 

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

21 provided under clause (i) may be perfected 

22 and enforced only by— 

23 ‘‘(I) the Pension Benefit Guar24 anty Corporation, or 
103 

•S 1953 PCS 

1 ‘‘(II) at the direction of the Cor2 poration, by a contributing sponsor 

3 (within the meaning of section 

4 4001(a)(13) of the Employee Retire5 ment Income Security Act of 1974) or 

6 a member of such sponsor’s controlled 

7 group (within the meaning of section 

8 4001(a)(14) of such Act). 

9 ‘‘(B) CONSULTATION WITH THE PENSION

10 BENEFIT GUARANTY CORPORATION.—Except as 

11 provided in subparagraph (C), the Secretary 

12 shall, before granting or modifying a waiver 

13 under subsection (d) with respect to a plan de14 scribed in subparagraph (A)(i)— 

15 ‘‘(i) provide the Pension Benefit 

16 Guaranty Corporation with— 

17 ‘‘(I) notice of the completed ap18 plication for any waiver or modifica19 tion, and 

20 ‘‘(II) an opportunity to comment 

21 on such application within 30 days 

22 after receipt of such notice, and 

23 ‘‘(ii) consider— 

24 ‘‘(I) any comments of the Cor25 poration under clause (i)(II), and 
104 

•S 1953 PCS 

1 ‘‘(II) any views of any employee 

2 organization (within the meaning of 

3 section 3(4) of the Employee Retire4 ment Income Security Act of 1974) 

5 representing participants in the plan 

6 which are submitted in writing to the 

7 Secretary in connection with such ap8 plication. 

9 Information provided to the Corporation 

10 under this subparagraph shall be consid11 ered tax return information and subject to 

12 the safeguarding and reporting require13 ments of section 6103(p). 

14 ‘‘(C) EXCEPTION FOR CERTAIN WAIV15 ERS.— 

16 ‘‘(i) IN GENERAL.—The preceding 

17 provisions of this paragraph shall not 

18 apply to any plan with respect to which the 

19 sum of— 

20 ‘‘(I) the aggregate unpaid min21 imum required contributions (within 

22 the meaning of section 4971) for the 

23 plan year and all preceding plan 

24 years, and 
105 

•S 1953 PCS 

1 ‘‘(II) the present value of all 

2 waiver amortization payments under 

3 section 430(d) determined for the 

4 plan year and all succeeding plan 

5 years, 

6 is less than $1,000,000. 

7 ‘‘(ii) TREATMENT OF PENDING WAIV8 ERS.—For purposes of clause (i)(I), min9 imum required contributions shall include 

10 any increase in such amount which would 

11 result if all applications for waivers of the 

12 minimum funding standard under sub13 section (d) or section 302(c) of the Em14 ployee Retirement Income Security Act of 

15 1974 which are pending with respect to 

16 such plan were denied. 

17 ‘‘(5) ADDITIONAL REQUIREMENTS.— 

18 ‘‘(A) ADVANCE NOTICE.—The Secretary 

19 shall, before granting a waiver under subsection 

20 (d) or an extension under subsection (e), re21 quire each applicant to provide evidence satis22 factory to the Secretary that the applicant has 

23 provided notice of the filing of the application 

24 for such waiver or extension to each affected 

25 party. Such notice shall include a description of 
106 

•S 1953 PCS 

1 the extent to which the plan is funded for bene2 fits which are guaranteed under title IV of the 

3 Employee Retirement Income Security Act of 

4 1974 and for benefit liabilities (within the 

5 meaning of section 4041(d) of such Act). 

6 ‘‘(B) CONSIDERATION OF RELEVANT IN7 FORMATION.—The Secretary shall consider any 

8 relevant information provided by a person to 

9 whom notice was given under subparagraph 

10 (A). 

11 ‘‘(g) OTHER DEFINITIONS AND RULES.—For pur12 poses of this section— 

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

14 funding method or a plan year for a plan is changed, 

15 the change shall take effect only if approved by the 

16 Secretary. 

17 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND18 MENTS.—For purposes of this section, any amend19 ment applying to a plan year which— 

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

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

22 close of the plan year (or, in the case of a mul23 tiemployer plan, no later than 2 years after the 

24 close of such plan year), 
107 

•S 1953 PCS 

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 notifying him 

15 of such amendment and the Secretary has approved 

16 such amendment, or within 90 days after the date 

17 on which such notice was filed, failed to disapprove 

18 such amendment. No amendment described in this 

19 subsection shall be approved by the Secretary unless 

20 the Secretary determines that such amendment is 

21 necessary because of a substantial business hardship 

22 (as determined under subsection (d)(2)) and that a 

23 waiver under subsection (d)(1) is unavailable or in24 adequate. 
108 

•S 1953 PCS 

1 ‘‘(3) CERTAIN INSURANCE CONTRACT PLANS.— 

2 A plan is described in this paragraph if— 

3 ‘‘(A) the plan is funded exclusively by the 

4 purchase of individual insurance contracts, 

5 ‘‘(B) such contracts provide for level an6 nual premium payments to be paid extending 

7 not later than the retirement age for each indi8 vidual participating in the plan, and com9 mencing with the date the individual became a 

10 participant in the plan (or, in the case of an in11 crease in benefits, commencing at the time such 

12 increase becomes effective), 

13 ‘‘(C) benefits provided by the plan are 

14 equal to the benefits provided under each con15 tract at normal retirement age under the plan 

16 and are guaranteed by an insurance carrier (li17 censed under the laws of a State to do business 

18 with the plan) to the extent premiums have 

19 been paid, 

20 ‘‘(D) premiums payable for the plan year, 

21 and all prior plan years, under such contracts 

22 have been paid before lapse or there is rein23 statement of the policy, 
109 

•S 1953 PCS 

1 ‘‘(E) no rights under such contracts have 

2 been subject to a security interest at any time 

3 during the plan year, and 

4 ‘‘(F) no policy loans are outstanding at 

5 any time during the plan year. 

6 A plan funded exclusively by the purchase of group 

7 insurance contracts which are determined under reg8 ulations prescribed by the Secretary to have the 

9 same characteristics as contracts described in the 

10 preceding sentence shall be treated as a plan de11 scribed in this paragraph. 

12 ‘‘(4) CONTROLLED GROUP.—For purposes of 

13 this section and section 430, the term ‘controlled 

14 group’ means any group treated as a single employer 

15 under subsection (b), (c), (m), or (o) of section 

16 414.’’. 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to plan years beginning after De19 cember 31, 2006. 

20 SEC. 302. FUNDING RULES APPLICABLE TO SINGLE-EM21 PLOYER PENSION PLANS. 

22 (a) IN GENERAL.—Subchapter D of chapter 1 of the 

23 Internal Revenue Code of 1986 (relating to deferred com24 pensation, etc.) is amended by adding at the end the fol25 lowing new part: 
110 

•S 1953 PCS 

1 ‘‘PART III—RULES RELATING TO MINIMUM FUND2 ING STANDARDS AND BENEFIT LIMITATIONS 

‘‘Sec. 430. Minimum funding standards for single-employer defined benefit 

plans. 

‘‘Sec. 431. Minimum funding standards for multiemployer plans. 

3 ‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE4 EMPLOYER DEFINED BENEFIT PLANS. 

5 ‘‘(a) MINIMUM REQUIRED CONTRIBUTION.— 

6 ‘‘(1) IN GENERAL.—The minimum required 

7 contribution for a defined benefit plan to which sec8 tion 412(a)(2)(A) applies for any plan year shall, for 

9 purposes of this section and section 412, be equal to 

10 the sum of— 

11 ‘‘(A) the target normal cost for the plan 

12 year, 

13 ‘‘(B) the aggregate amortization payment 

14 (if any) for the plan year, and 

15 ‘‘(C) the waiver amortization payment (if 

16 any) for the plan year. 

17 In no event shall the sum of the amounts deter18 mined under subparagraphs (B) and (C) for any 

19 plan year exceed the unfunded target liability for the 

20 plan year. 

21 ‘‘(2) LIMITATION ON ANNUAL INCREASES OR

22 DECREASES.— 
111 

•S 1953 PCS 

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

2 subparagraph (B), the minimum required con3 tribution for any plan year beginning after 

4 2007— 

5 ‘‘(i) shall not exceed the minimum re6 quired contribution for the preceding plan 

7 year (determined after application of this 

8 paragraph and without regard to any ad9 justment under subsection (i)(2)), in10 creased by the greater of— 

11 ‘‘(I) 30 percent of the target nor12 mal cost of the plan for the preceding 

13 plan year, or 

14 ‘‘(II) 2 percent of the target li15 ability of the plan for the preceding 

16 plan year, and 

17 ‘‘(ii) shall not be less than such min18 imum required contribution for the pre19 ceding plan year, reduced by the greater of 

20 the amounts under subclause (I) or (II) of 

21 clause (i). 

22 ‘‘(B) SPECIAL RULES FOR BENEFIT IN23 CREASES OR DECREASES DURING PLAN YEAR.— 

24 If an applicable benefit increase (as defined in 

25 section 436(b)(3) without regard to subpara-
112 

•S 1953 PCS 

1 graph (B) or (C) thereof) takes effect during 

2 the current plan year— 

3 ‘‘(i) the minimum required contribu4 tion for the current plan year for purposes 

5 of applying subparagraph (A) shall be de6 termined without regard to any increase in 

7 such contribution attributable to the appli8 cable benefit increase, and 

9 ‘‘(ii) the amount determined under 

10 subparagraph (A) (after application of 

11 clause (i)) shall be increased by the 

12 amount of the increase in the minimum re13 quired contribution disregarded under 

14 clause (i). 

15 A similar rule shall apply in the case of any 

16 benefit decrease which takes effect during the 

17 current plan year. 

18 ‘‘(C) SPECIAL RULES RELATING TO PRE19 CEDING YEAR.—For purposes of subparagraph 

20 (A)— 

21 ‘‘(i) all target liability amortization in22 stallments and waiver amortization install23 ments under subsections (c) and (d) which 

24 were determined with respect to any amor25 tizable target liability or waived funding 
113 

•S 1953 PCS 

1 deficiency which is fully amortized as of 

2 the close of the preceding plan year shall 

3 not be taken into account in determining 

4 the minimum required contribution for the 

5 preceding plan year, and 

6 ‘‘(ii) if paragraph (3) applied for the 

7 preceding plan year, the minimum required 

8 contribution for the preceding plan year 

9 shall be treated as being equal to the tar10 get normal cost for such year. 

11 ‘‘(3) SPECIAL RULES FOR PLANS WHERE AS12 SETS EXCEED TARGET LIABILITY.—If, as of the 

13 valuation date for any plan year, the value of the as14 sets of the plan (reduced as provided in subsection 

15 (e)(3)) equals or exceeds the target liability for the 

16 plan year (in this subsection referred to as the ‘cur17 rent plan year’)— 

18 ‘‘(A) the minimum required contribution 

19 for the current plan year shall be equal to tar20 get normal cost, reduced (but not below zero) 

21 by the amount of any such excess, and 

22 ‘‘(B) all target liability amortization in23 stallments and waiver amortization installments 

24 under subsections (c) and (d) which were deter25 mined with respect to any amortizable target li-
114 

•S 1953 PCS 

1 ability or waived funding deficiency for the cur2 rent plan year or any preceding plan year shall 

3 not be taken into account for any succeeding 

4 plan year. 

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

6 section— 

7 ‘‘(1) IN GENERAL.—The term ‘target normal 

8 cost’ means, with respect to any plan year, the 

9 present value of all benefits which accrue or are 

10 earned under the plan during the plan year. If any 

11 benefit attributable to services performed in a pre12 ceding plan year is increased by reason of any in13 crease in compensation during the current plan year, 

14 the increase shall be treated as accruing during the 

15 current plan year. 

16 ‘‘(2) FINANCIALLY-WEAK EMPLOYERS.—If a 

17 plan sponsor of a plan for any plan year is a finan18 cially-weak employer for any plan year, the target 

19 normal cost of the plan for the plan year shall be 

20 the at-risk target normal cost determined under sub21 section (f). 

22 ‘‘(c) DEFINITIONS AND RULES RELATING TO TAR23 GET LIABILITY .—For purposes of this section— 

24 ‘‘(1) TARGET LIABILITY.— 
115 

•S 1953 PCS 

1 ‘‘(A) IN GENERAL.—The term ‘target li2 ability’ means, with respect to any plan year, 

3 the present value of all benefits accrued or 

4 earned under the plan as of the beginning of 

5 the plan year. 

6 ‘‘(B) FINANCIALLY-WEAK EMPLOYERS.—If 

7 a plan sponsor of a plan for any plan year is 

8 a financially-weak employer for any plan year, 

9 the target liability of the plan for the plan year 

10 shall be the at-risk target liability determined 

11 under subsection (f). 

12 ‘‘(2) UNFUNDED TARGET LIABILITY.—The 

13 term ‘unfunded target liability’ means, with respect 

14 to any plan year, the excess (if any) of— 

15 ‘‘(A) the target liability for the plan year, 

16 over 

17 ‘‘(B) the value of the assets of the plan 

18 (reduced as provided under subsection (e)(3)) 

19 as of the valuation date. 

20 ‘‘(3) AGGREGATE AMORTIZATION PAYMENTS.— 

21 For purposes of this section— 

22 ‘‘(A) AGGREGATE AMORTIZATION PAY23 MENT.—The aggregate amortization payment 

24 for any plan year is the aggregate amount of 

25 the target liability amortization installments de-
116 

•S 1953 PCS 

1 termined for the plan year with respect to any 

2 amortizable target liability for the plan year 

3 and each of the 6 preceding plan years. 

4 ‘‘(B) AMORTIZABLE TARGET LIABILITY.— 

5 ‘‘(i) IN GENERAL.—The term ‘amor6 tizable target liability’ means, with respect 

7 to any plan year, the amount (if any) by 

8 which the unfunded target liability for the 

9 current plan year is more or less than the 

10 amount determined under clause (ii). 

11 ‘‘(ii) AMOUNTS PREVIOUSLY AC12 COUNTED FOR.—The amount determined 

13 under this clause is the present value of all 

14 target liability amortization installments 

15 and waiver amortization installments under 

16 this subsection and subsection (d) which 

17 were determined for the current plan year 

18 or any succeeding plan year with respect to 

19 any amortizable target liability or waived 

20 funding deficiency for any plan year pre21 ceding the current plan year. 

22 ‘‘(C) TARGET LIABILITY AMORTIZATION

23 INSTALLMENTS.—If a plan has an amortizable 

24 target liability for any plan year— 
117 

•S 1953 PCS 

1 ‘‘(i) the liability shall be amortized in 

2 7 level amortization amounts over the 7- 

3 plan year period beginning with the plan 

4 year, and 

5 ‘‘(ii) the target liability amortization 

6 installment with respect to the liability for 

7 each of the 7 plan years shall be the fixed 

8 amount necessary to amortize the liability 

9 as provided under clause (i). 

10 ‘‘(D) COMPUTATION ASSUMPTIONS.—In 

11 determining the present value of any amortiza12 tion installment under subparagraph (B)(ii), or 

13 the amount of any amortization installment 

14 under subparagraph (C), the following rules 

15 shall apply: 

16 ‘‘(i) Each amortization installment 

17 shall be treated as made on the valuation 

18 date for the plan year for which the install19 ment is determined. 

20 ‘‘(ii) The interest rates used shall be 

21 the interest rates determined under the 

22 yield curve method under subsection 

23 (h)(2)(B) for the current plan year. 

24 ‘‘(4) TRANSITION RULE FOR AMORTIZATION OF

25 UNFUNDED TARGET LIABILITY.— 
118 

•S 1953 PCS 

1 ‘‘(A) IN GENERAL.—Solely for purposes of 

2 applying paragraph (3) in the case of plan 

3 years beginning after 2006 and before 2011, 

4 only the applicable percentage of target liability 

5 shall be taken into account under paragraph 

6 (2)(A) in determining unfunded target liability 

7 for the plan year. 

8 ‘‘(B) APPLICABLE PERCENTAGE.—For 

9 purposes of subparagraph (A)— 

10 ‘‘(i) IN GENERAL.—Except as pro11 vided in clause (ii), the applicable percent12 age shall be 93 percent for plan years be13 ginning in 2007, 96 percent for plan years 

14 beginning in 2008, and 100 percent for 

15 any succeeding plan year. 

16 ‘‘(ii) SMALL PLANS.—In the case of a 

17 plan described in subsection (g)(1)(B)(ii), 

18 the applicable percentage shall be deter19 mined in accordance with the following 

20 table: 

‘‘In the case of a plan year The applicable 

beginning in calendar year: percentage is—

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

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

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

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

21 ‘‘(d) AMORTIZATION OF WAIVED FUNDING DEFI22 CIENCY.—For purposes of this section— 
119 

•S 1953 PCS 

1 ‘‘(1) IN GENERAL.—The waiver amortization 

2 payment for any plan year is the aggregate amount 

3 of the waiver amortization installments determined 

4 for the plan year with respect to any waived funding 

5 deficiency for each of the 5 preceding plan years. 

6 ‘‘(2) WAIVER AMORTIZATION INSTALLMENTS.— 

7 If a plan has a waived funding deficiency for any 

8 plan year— 

9 ‘‘(A) the deficiency shall be amortized in 5 

10 level amortization amounts over the 5-plan year 

11 period beginning with the succeeding plan year, 

12 and 

13 ‘‘(B) the waiver amortization installment 

14 with respect to the deficiency for each of the 5 

15 plan years shall be the fixed amount necessary 

16 to amortize the deficiency as provided under 

17 subparagraph (A). 

18 ‘‘(3) COMPUTATION ASSUMPTIONS.—In making 

19 any determination under paragraph (2) with respect 

20 to the amount of any amortization installment, the 

21 following rules shall apply: 

22 ‘‘(A) Each amortization installment will be 

23 treated as made on the valuation date for the 

24 plan year for which the installment is deter25 mined. 
120 

•S 1953 PCS 

1 ‘‘(B) The interest rates used shall be the 

2 interest rates determined under the yield curve 

3 method under subsection (h)(2)(B) for the plan 

4 year in which the waived funding deficiency to 

5 which the installment relates arose. 

6 ‘‘(4) WAIVED FUNDING DEFICIENCY.—The 

7 waived funding deficiency of a plan for any plan 

8 year is the amount of any waived funding deficiency 

9 for the plan year under section 412(d). 

10 ‘‘(e) USE OF PREFUNDING BALANCES TO SATISFY

11 MINIMUM REQUIRED CONTRIBUTIONS.— 

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

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

14 plan year against the minimum required contribu15 tion for the plan year and the amount of the con16 tributions an employer is required to make under 

17 section 412 for the plan year shall be reduced by the 

18 amount so credited. Any such amount shall be cred19 ited on the first day of the plan year. 

20 ‘‘(2) PREFUNDING BALANCE.— 

21 ‘‘(A) BEGINNING BALANCE.—The begin22 ning balance of a prefunding balance main23 tained by a plan shall be zero, except that if a 

24 plan was in effect for a plan year beginning in 

25 2006 and had a positive balance in the funding 
121 

•S 1953 PCS 

1 standard account under section 412(b) (as in 

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

3 plan year, the beginning balance for the plan 

4 for its first plan year beginning after 2006 shall 

5 be such positive balance. 

6 ‘‘(B) INCREASES.— 

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

8 of each plan year beginning after 2007, the 

9 prefunding balance of a plan shall be in10 creased by the excess (if any) of— 

11 ‘‘(I) the aggregate amount of em12 ployer contributions to the plan for 

13 the preceding plan year, over 

14 ‘‘(II) the minimum required con15 tribution for the preceding plan year. 

16 ‘‘(ii) ADJUSTMENTS FOR INTEREST.— 

17 Any excess contributions under clause (i) 

18 shall be properly adjusted for interest ac19 cruing for the periods between the first 

20 day of the current plan year and the dates 

21 on which the excess contributions were 

22 made, determined by using the applicable 

23 effective interest rate (as defined in sub24 section (g)(3)) for the preceding plan year 

25 and by treating contributions as being first 
122 

•S 1953 PCS 

1 used to satisfy the minimum required con2 tribution. 

3 ‘‘(iii) CERTAIN CONTRIBUTIONS DIS4 REGARDED.—Any contribution which is re5 quired to be made under section 436 in ad6 dition to any contribution required under 

7 this section shall not be taken into account 

8 for purposes of clause (i). 

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

10 each plan year after 2007, the prefunding bal11 ance of a plan shall be decreased (but not below 

12 zero) by the amount of the balance credited 

13 under paragraph (1) against the minimum re14 quired contribution of the plan for the pre15 ceding plan year. 

16 ‘‘(D) ADJUSTMENTS FOR INVESTMENT EX17 PERIENCE.—In determining the prefunding bal18 ance of a plan as of the first day of the plan 

19 year, the plan sponsor shall, in accordance with 

20 regulations prescribed by the Secretary, adjust 

21 such balance to reflect the rate of net gain or 

22 loss with respect to plan assets for the pre23 ceding plan year. Notwithstanding subsection 

24 (g)(2)(B), such rate of net gain or loss shall be 

25 determined on the basis of fair market value 
123 

•S 1953 PCS 

1 and shall properly take into account, in accord2 ance with such regulations, all contributions, 

3 distributions, and other plan payments made 

4 during such period. 

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

6 for purposes of applying subsections (a)(3) and 

7 (c)(2) in determining the minimum required con8 tribution under this section, the value of the plan as9 sets otherwise determined under subsection (g)(2) 

10 shall be reduced by the amount of the prefunding 

11 balance under this subsection. 

12 ‘‘(f) SPECIAL RULES FOR LARGE PLANS MAIN13 TAINED BY FINANCIALLY-WEAK EMPLOYERS.— 

14 ‘‘(1) DETERMINATION OF TARGET LIABILITY

15 AND NORMAL COST.— 

16 ‘‘(A) IN GENERAL.—If, as of the valuation 

17 date for any plan year, any plan sponsor of a 

18 plan to which this section applies is a finan19 cially-weak employer, then, in applying this sec20 tion for the plan year, the at-risk target liability 

21 and at-risk target normal cost shall (if greater) 

22 be substituted for the target liability and target 

23 normal cost, respectively. Such substitution 

24 shall not be applied for any plan year for which 

25 the plan has no unfunded target liability (deter-
124 

•S 1953 PCS 

1 mined without regard to this subsection or any 

2 reduction in the value of assets under sub3 section (e)(3)). 

4 ‘‘(B) EXCEPTION FOR SMALL PLANS.— 

5 This subsection shall not apply to a plan for a 

6 plan year if the plan was described in sub7 section (g)(1)(B)(ii) for the preceding plan 

8 year, determined by substituting ‘500’ for ‘100’. 

9 ‘‘(C) EXCEPTION FOR PLANS MAINTAINED

10 BY CERTAIN COOPERATIVES.—This subsection 

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

12 plan is maintained by more than 1 employer 

13 and at least 85 percent of the employers are— 

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

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

16 clause (iv) thereof), or 

17 ‘‘(ii) organizations described in section 

18 1381(a) more than 50 percent of the own19 ership or capital and profits interests of 

20 which are held— 

21 ‘‘(I) by producers of agricultural 

22 products, or 

23 ‘‘(II) organizations described in 

24 section 1381(a) meeting the require25 ments of subclause (I). 
125 

•S 1953 PCS 

1 ‘‘(D) PLANS LOSING EXEMPTION.—If sub2 paragraph (B) or (C) does not apply to a plan 

3 year but did apply for the preceding plan year, 

4 no plan year preceding the current plan year 

5 shall be taken into account for purposes of 

6 paragraph (3) or (4)(A). 

7 ‘‘(2) AT-RISK AMOUNTS.— 

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

9 paragraph (3), the at-risk target liability and 

10 at-risk target normal cost shall be determined 

11 in the same manner as the target liability and 

12 target normal cost, except that the actuarial as13 sumptions described in subparagraph (B) shall 

14 be used in computing such amounts. 

15 ‘‘(B) ACTUARIAL ASSUMPTIONS.—The ac16 tuarial assumptions described in this subpara17 graph are as follows: 

18 ‘‘(i) All employees who are not other19 wise assumed to retire as of the valuation 

20 date shall be assumed to retire at the ear21 liest retirement age under the plan but not 

22 before the end of the plan year for which 

23 the at-risk target liability and at-risk tar24 get normal cost are being determined. 
126 

•S 1953 PCS 

1 ‘‘(ii) All employees shall be assumed 

2 to elect the retirement benefit available 

3 under the plan at the assumed retirement 

4 age (determined after application of clause 

5 (i)) which would result in the highest 

6 present value of liabilities. 

7 ‘‘(3) PLAN SPONSORS FINANCIALLY WEAK FOR

8 LESS THAN 5 YEARS.— 

9 ‘‘(A) IN GENERAL.—If a plan sponsor to 

10 which this subsection applies for any plan year 

11 was not a financially-weak employer on the 

12 valuation date for each of the 4 immediately 

13 preceding plan years, the at-risk target liability 

14 or at-risk target normal cost shall be equal to 

15 the sum of— 

16 ‘‘(i) the applicable percentage of the 

17 at-risk target liability or the at-risk target 

18 normal cost, whichever is applicable, deter19 mined under this subsection (without re20 gard to this paragraph), and 

21 ‘‘(ii) the product of the target liability 

22 or the target normal cost, whichever is ap23 plicable, determined without regard to this 

24 subsection, and a percentage equal to 100 

25 percent minus the applicable percentage. 
127 

•S 1953 PCS 

1 ‘‘(B) APPLICABLE PERCENTAGE.—For 

2 purposes of subparagraph (A), the applicable 

3 percentage shall be determined in accordance 

4 with the following table: 

‘‘If the consecutive number of 

years (including the plan year) 

the plan sponsor is financially The applicable 

weak is— percentage is—

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

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

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

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

5 ‘‘(4) FINANCIALLY-WEAK EMPLOYER.— 

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

7 subsection, the term ‘financially-weak employer’ 

8 means any employer if, as of the valuation date 

9 for each of the 3 consecutive plan years ending 

10 with the plan year— 

11 ‘‘(i) the employer has an outstanding 

12 senior unsecured debt instrument which is 

13 rated lower than investment grade by each 

14 of the nationally recognized statistical rat15 ing organizations for corporate bonds that 

16 has issued a credit rating for such instru17 ment, or 

18 ‘‘(ii) if no such debt instrument has 

19 been rated by such an organization but 1 

20 or more of such organizations has made an 

21 issuer credit rating for such employer, all 
128 

•S 1953 PCS 

1 such organizations which have so rated the 

2 employer have rated such employer lower 

3 than investment grade. 

4 ‘‘(B) CONTROLLED GROUP EXCEPTION.— 

5 If an employer treated as a financially-weak 

6 employer under subparagraph (A) is a member 

7 of a controlled group (as defined in section 

8 412(g)(4)), the employer shall not be treated as 

9 a financially-weak employer if a significant 

10 member (as determined under regulations pre11 scribed by the Secretary) of such group has an 

12 outstanding senior unsecured debt instrument 

13 that is rated as being investment grade by an 

14 organization described in subparagraph (A). 

15 ‘‘(C) EMPLOYERS WITH NO RATINGS.— 

16 If— 

17 ‘‘(i) an employer has no debt instru18 ment described in subparagraph (A)(i) 

19 which was rated by an organization de20 scribed in such subparagraph, and 

21 ‘‘(ii) no such organization has made 

22 an issuer credit rating for such employer, 

23 then such employer shall only be treated as a 

24 financially-weak employer to the extent provided 

25 in regulations prescribed by the Secretary. Such 
129 

•S 1953 PCS 

1 regulations shall also provide for the application 

2 of paragraph (5) in the case of employers treat3 ed as financially weak under such regulations. 

4 ‘‘(5) DETERMINATION OF CONSECUTIVE PERI5 ODS WHERE EMPLOYER IS FINANCIALLY WEAK.— 

6 ‘‘(A) RATINGS OF INVESTMENT GRADE OR

7 HIGHER.—If, as of the valuation date for any 

8 plan year, any rating described in clause (i) or 

9 (ii) of paragraph (4)(A) is investment grade or 

10 higher— 

11 ‘‘(i) this subsection shall not apply for 

12 the plan year, and 

13 ‘‘(ii) in applying this subsection for 

14 any succeeding plan year, the plan year de15 scribed in clause (i) and any preceding 

16 plan year shall not be taken into account 

17 in determining any consecutive period of 

18 plan years under paragraphs (3) and 

19 (4)(A). 

20 ‘‘(B) IMPROVEMENT YEARS NOT TAKEN

21 INTO ACCOUNT.— 

22 ‘‘(i) IN GENERAL.—An improvement 

23 year shall not be taken into account in de24 termining any consecutive period of plan 
130 

•S 1953 PCS 

1 years for purposes of paragraphs (3) and 

2 (4)(A). 

3 ‘‘(ii) APPLICATION OF SUBSECTION

4 AFTER IMPROVEMENT YEAR ENDS.—Plan 

5 years immediately before and after an im6 provement year (or consecutive period of 

7 improvement years) shall be treated as 

8 consecutive for purposes of paragraphs (3) 

9 and (4)(A). 

10 ‘‘(iii) IMPROVEMENT YEAR.—For pur11 poses of this subparagraph, the term ‘im12 provement year’ means any plan year for 

13 which any rating described in clause (i) or 

14 (ii) of paragraph (4)(A) is higher than 

15 such rating for the preceding plan year. 

16 ‘‘(6) YEARS BEFORE EFFECTIVE DATE.—For 

17 purposes of paragraphs (3) and (4), plan years be18 ginning before 2007 shall not be taken into account. 

19 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL20 ITIES.— 

21 ‘‘(1) TIME FOR MAKING DETERMINATIONS.— 

22 ‘‘(A) IN GENERAL.—Except as otherwise 

23 provided in this section, all determinations 

24 under this section for a plan year shall be made 
131 

•S 1953 PCS 

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

2 year. 

3 ‘‘(B) VALUATION DATE.— 

4 ‘‘(i) IN GENERAL.—Except as pro5 vided in clause (ii), the valuation date is 

6 the first day of the plan year. 

7 ‘‘(ii) EXCEPTION FOR SMALL

8 PLANS.—If, on each day during the pre9 ceding plan year, a plan had 100 or fewer 

10 participants, a plan may designate any day 

11 during the plan year as its valuation date 

12 for the plan year and succeeding plan 

13 years. For purposes of this clause, all de14 fined benefit plans (other than multiem15 ployer plans) maintained by the same em16 ployer (or any member of such employer’s 

17 controlled group (as defined in section 

18 412(g)(4))) shall be treated as 1 plan, but 

19 only participants with respect to such em20 ployer or member shall be taken into ac21 count. 

22 ‘‘(iii) APPLICATION OF CERTAIN

23 RULES IN DETERMINATION OF PLAN

24 SIZE.— 
132 

•S 1953 PCS 

1 ‘‘(I) PLANS NOT IN EXISTENCE

2 IN PRECEDING YEAR.—In the case of 

3 the first plan year of any plan, clause 

4 (ii) shall apply to such plan by taking 

5 into account the number of partici6 pants the plan is reasonably expected 

7 to have on days during such first plan 

8 year. 

9 ‘‘(II) PREDECESSORS.—Any ref10 erence in clause (ii) to an employer 

11 shall include a reference to any prede12 cessor of such employer. 

13 ‘‘(2) DETERMINATION OF VALUE OF PLAN AS14 SETS.—For purposes of this section— 

15 ‘‘(A) IN GENERAL.—The value of plan as16 sets shall be the fair market value of the assets. 

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

18 determine the value of plan assets on the basis 

19 of any reasonable actuarial method of valuation 

20 providing for the averaging of fair market val21 ues, but only if such method— 

22 ‘‘(i) is permitted under regulations 

23 prescribed by the Secretary, and 

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

25 such values over more than the period be-
133 

•S 1953 PCS 

1 ginning on the last day of the 4th month 

2 preceding the valuation date and ending on 

3 the valuation date (or a similar period in 

4 the case of a valuation date which is not 

5 the 1st day of a month). 

6 ‘‘(C) ACCOUNTING FOR CONTRIBUTION RE7 CEIPTS.—For purposes of determining the 

8 value of assets under this paragraph— 

9 ‘‘(i) PRIOR YEAR CONTRIBUTIONS.— 

10 If— 

11 ‘‘(I) an employer makes any con12 tribution to the plan after the valu13 ation date for the plan year in which 

14 the contribution is made, and 

15 ‘‘(II) the contribution is for a 

16 preceding plan year, 

17 the contribution shall be taken into ac18 count as an asset of the plan as of the 

19 valuation date, except that in the case of 

20 any plan year beginning after 2007, only 

21 the present value (determined as of the 

22 valuation date) of such contribution may 

23 be taken into account. For purposes of the 

24 preceding sentence, present value shall be 

25 determined using the applicable effective 
134 

•S 1953 PCS 

1 interest rate for the preceding plan year to 

2 which the contribution is properly allo3 cable. 

4 ‘‘(ii) SPECIAL RULE FOR CURRENT

5 YEAR CONTRIBUTIONS MADE BEFORE

6 VALUATION DATE.—If any contributions 

7 for any plan year are made to or under the 

8 plan during the plan year but before the 

9 valuation date for the plan year, the assets 

10 of the plan as of the valuation date shall 

11 not include— 

12 ‘‘(I) such contributions, and 

13 ‘‘(II) interest on such contribu14 tions for the period between the date 

15 of the contributions and the valuation 

16 date, determined by using the applica17 ble effective interest rate for the plan 

18 year. 

19 ‘‘(3) APPLICABLE EFFECTIVE INTEREST

20 RATE.—For purposes of this section, the term ‘ap21 plicable effective interest rate’ means, with respect 

22 to any plan year, the single rate of interest which, 

23 if used to determine the present value of benefits ac24 crued or earned under the plan as of the beginning 
135 

•S 1953 PCS 

1 of the plan year, would result in an amount equal 

2 to the target liability for the plan year. 

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

4 For purposes of this section— 

5 ‘‘(1) ACTUARIAL ASSUMPTIONS.—Subject to 

6 this subsection, the determination of any present 

7 value or other computation under this section shall 

8 be made on the basis of actuarial assumptions and 

9 methods— 

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

11 into account the experience of the plan and rea12 sonable expectations), and 

13 ‘‘(B) which, in combination, offer the actu14 ary’s best estimate of anticipated experience 

15 under the plan. 

16 ‘‘(2) INTEREST RATE ASSUMPTIONS USED.— 

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

18 this section, the determination of present value 

19 or other computation requiring any interest rate 

20 assumption shall be made— 

21 ‘‘(i) in the case of plan years begin22 ning in 2007 or 2008, by using the phase23 in yield curve method (as defined in sub24 paragraph (C)), and 
136 

•S 1953 PCS 

1 ‘‘(ii) in the case of plan years begin2 ning after 2008, by using the yield curve 

3 method (as defined in subparagraph (B)). 

4 ‘‘(B) YIELD CURVE METHOD.—For pur5 poses of this paragraph— 

6 ‘‘(i) IN GENERAL.—The yield curve 

7 method is a method under which present 

8 value or other amounts requiring interest 

9 rate assumptions are determined— 

10 ‘‘(I) by using interest rates 

11 drawn from a yield curve which is pre12 scribed by the Secretary and which re13 flects the yield on high-quality cor14 porate bonds with varying maturities, 

15 and 

16 ‘‘(II) by matching the timing of 

17 the expected benefit payments under 

18 the plan to the interest rates on such 

19 yield curve. 

20 ‘‘(ii) PUBLICATION.—Each month the 

21 Secretary shall publish any yield curve pre22 scribed under this subparagraph which 

23 shall apply to plan years beginning in such 

24 month and such yield curve shall be based 
137 

•S 1953 PCS 

1 on average interest rates for business days 

2 occurring during the 3 preceding months. 

3 ‘‘(C) PHASE-IN YIELD CURVE METHOD.— 

4 ‘‘(i) IN GENERAL.—Present value or 

5 any other amount requiring the use of in6 terest rate assumptions determined under 

7 the phase-in yield curve method shall be 

8 equal to the sum of— 

9 ‘‘(I) the applicable percentage of 

10 such amount determined under the 

11 yield curve method described in sub12 paragraph (B), and 

13 ‘‘(II) the product of such amount 

14 determined by using the interest rate 

15 rules in effect under section 412(b)(5) 

16 for plan years beginning in 2006 and 

17 a percentage equal to 100 percent 

18 minus the applicable percentage. 

19 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

20 purposes of clause (i), the applicable per21 centage is 33 percent for plan years begin22 ning in 2007 and 67 percent for plan years 

23 beginning in 2008. 

24 ‘‘(3) MORTALITY TABLE USED.— 
138 

•S 1953 PCS 

1 ‘‘(A) SECRETARIAL AUTHORITY.—The Sec2 retary shall by regulation prescribe mortality 

3 tables to be used under this subsection. Such 

4 tables shall be based upon the actual experience 

5 of pension plans and projected trends in such 

6 experience. In prescribing such tables, the Sec7 retary shall take into account results of avail8 able independent studies of mortality of individ9 uals covered by pension plans. 

10 ‘‘(B) SEPARATE MORTALITY TABLES FOR

11 THE DISABLED.—Notwithstanding subpara12 graph (A)— 

13 ‘‘(i) IN GENERAL.—The Secretary 

14 shall establish mortality tables which may 

15 be used (in lieu of the tables under sub16 paragraph (A)) under this subsection for 

17 individuals who are entitled to benefits 

18 under the plan on account of disability. 

19 The Secretary shall establish separate ta20 bles for individuals whose disabilities occur 

21 in plan years beginning before January 1, 

22 1995, and for individuals whose disabilities 

23 occur in plan years beginning on or after 

24 such date. 
139 

•S 1953 PCS 

1 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

2 OCCURRING AFTER 1994.—In the case of 

3 disabilities occurring in plan years begin4 ning after December 31, 1994, the tables 

5 under clause (i) shall apply only with re6 spect to individuals described in such sub7 clause who are disabled within the meaning 

8 of title II of the Social Security Act and 

9 the regulations thereunder. 

10 ‘‘(C) PERIODIC REVIEW.—The Secretary 

11 shall periodically (at least every 5 years) review 

12 any tables in effect under this paragraph and 

13 shall, to the extent the Secretary determines 

14 necessary, update the tables to reflect the ac15 tual experience of pension plans and projected 

16 trends in such experience. 

17 ‘‘(4) TREATMENT OF OPTIONAL FORMS OF

18 BENEFITS.—For purposes of determining any 

19 present value or making any computation under this 

20 section, there shall be taken into account— 

21 ‘‘(A) the probability that future payments 

22 will be made in an optional form of benefit pro23 vided under the plan (including lump sum pay24 ments), and 
140 

•S 1953 PCS 

1 ‘‘(B) any differences between the present 

2 value of any such optional form of benefit and 

3 the present value of the future payments used 

4 in computing target normal costs and target li5 ability under this section. 

6 ‘‘(5) APPROVAL REQUIRED FOR CERTAIN

7 CHANGES IN ASSUMPTIONS BY CERTAIN PLANS.— 

8 ‘‘(A) IN GENERAL.—No actuarial assump9 tion used to determine the target liability for a 

10 plan to which this paragraph applies may be 

11 changed without the approval of the Secretary. 

12 The preceding sentence shall not apply to 

13 changes required under paragraph (2) or (3) 

14 with respect to any assumption. 

15 ‘‘(B) PLANS TO WHICH PARAGRAPH AP16 PLIES.—This paragraph shall apply to a plan 

17 only if— 

18 ‘‘(i) the plan is a defined benefit plan 

19 to which title IV of the Employee Retire20 ment Income Security Act of 1974 applies; 

21 ‘‘(ii) the aggregate unfunded target li22 abilities as of the close of the preceding 

23 plan year of— 

24 ‘‘(I) such plan, and 
141 

•S 1953 PCS 

1 ‘‘(II) all other plans to which 

2 such title IV applies maintained by 

3 persons which are liable for payment 

4 of contributions to such plan under 

5 section 412(c), 

6 exceed $50,000,000; and 

7 ‘‘(iii) the change in assumptions (de8 termined after taking into account any 

9 changes as a result of the application of 

10 paragraphs (2) and (3)) results in a de11 crease in the unfunded target liability of 

12 the plan for the current plan year which— 

13 ‘‘(I) exceeds $50,000,000, or 

14 ‘‘(II) exceeds $5,000,000 and is 

15 5 percent or more of the target liabil16 ity of the plan before such change. 

17 ‘‘(i) PAYMENT OF MINIMUM REQUIRED CONTRIBU18 TION.— 

19 ‘‘(1) IN GENERAL.—The due date for any pay20 ment of any minimum required contribution for any 

plan year shall be 81 21 ⁄2 months after the close of the 

22 plan year. 

23 ‘‘(2) INTEREST.—Any minimum required con24 tribution for a plan year which is made on a date 

25 other than the valuation date for such plan year 
142 

•S 1953 PCS 

1 shall be properly adjusted for interest accruing for 

2 the period between the valuation date and the pay3 ment date, determined by using the applicable effec4 tive interest rate (as defined in subsection (g)(3)) 

5 for the plan year. 

6 ‘‘(j) QUARTERLY CONTRIBUTIONS REQUIRED.— 

7 ‘‘(1) FAILURE TO TIMELY MAKE REQUIRED IN8 STALLMENT.— 

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

10 to which this subsection applies, the employer 

11 maintaining the plan shall make the required 

12 installments under this subsection and if the 

13 employer fails to pay the full amount of a re14 quired installment for the plan year, then the 

15 amount of interest charged under subsection 

16 (i)(2) on the underpayment for the period of 

17 underpayment shall be determined by using a 

18 rate of interest equal to the rate otherwise used 

19 under subsection (i)(2) plus 5 percentage 

20 points. 

21 ‘‘(B) PLANS TO WHICH SUBSECTION AP22 PLIES.—This subsection applies to any defined 

23 benefit plan to which this section applies other 

24 than a plan which— 
143 

•S 1953 PCS 

1 ‘‘(i) is a plan described in subsection 

2 (g)(1)(B)(ii)), or 

3 ‘‘(ii) had an unfunded target liability 

4 of $1,000,000 or less for the preceding 

5 plan year. 

6 ‘‘(2) AMOUNT OF UNDERPAYMENT, PERIOD OF

7 UNDERPAYMENT.—For purposes of paragraph (1)— 

8 ‘‘(A) AMOUNT.—The amount of the under9 payment shall be the excess of— 

10 ‘‘(i) the required installment, over 

11 ‘‘(ii) the amount (if any) of the in12 stallment contributed to or under the plan 

13 on or before the due date for the install14 ment. 

15 ‘‘(B) PERIOD OF UNDERPAYMENT.—The 

16 period for which interest is charged under this 

17 subsection with regard to any portion of the un18 derpayment shall run from the due date for the 

19 installment to the date on which such portion is 

20 contributed to or under the plan. 

21 ‘‘(C) ORDER OF CREDITING CONTRIBU22 TIONS.—For purposes of subparagraph (A)(ii), 

23 contributions shall be credited against unpaid 

24 required installments in the order in which such 

25 installments are required to be paid. 
144 

•S 1953 PCS 

1 ‘‘(3) NUMBER OF REQUIRED INSTALLMENTS; 

2 DUE DATES.—For purposes of this subsection— 

3 ‘‘(A) PAYABLE IN 4 INSTALLMENTS.— 

4 There shall be 4 required installments for each 

5 plan year. 

6 ‘‘(B) TIME FOR PAYMENT OF INSTALL7 MENTS.— 

In the case of the following 

required installments: The due date is: 

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

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

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

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

8 ‘‘(4) AMOUNT OF REQUIRED INSTALLMENT.— 

9 For purposes of this subsection— 

10 ‘‘(A) IN GENERAL.—The amount of any 

11 required installment shall be 25 percent of the 

12 required annual payment. 

13 ‘‘(B) REQUIRED ANNUAL PAYMENT.—For 

14 purposes of subparagraph (A), the term ‘re15 quired annual payment’ means the lesser of— 

16 ‘‘(i) 90 percent of the minimum re17 quired contribution under subsection (a) 

18 required to be contributed to or under the 

19 plan by the employer for the plan year, or 

20 ‘‘(ii) 100 percent of the minimum re21 quired contribution so required for the pre-
145 

•S 1953 PCS 

1 ceding plan year (without regard to any 

2 waiver under section 412(d)). 

3 Clause (ii) shall not apply if the preceding plan 

4 year was not a year of 12 months. In the case 

5 of any plan year beginning in 2007, the amount 

6 under clause (ii) for the preceding plan year 

7 shall be determined by reference to the amount 

8 required to be contributed to or under the plan 

9 under section 412 (as such section was in effect 

10 before the date of the enactment of this part). 

11 ‘‘(5) LIQUIDITY REQUIREMENT.— 

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

13 paragraph applies shall be treated as failing to 

14 pay the full amount of any required installment 

15 to the extent that the value of the liquid assets 

16 paid in such installment is less than the liquid17 ity shortfall (whether or not such liquidity 

18 shortfall exceeds the amount of such install19 ment required to be paid but for this para20 graph). 

21 ‘‘(B) PLANS TO WHICH PARAGRAPH AP22 PLIES.—This paragraph shall apply to a de23 fined benefit plan— 

24 ‘‘(i) to which this subsection applies 

25 for a plan year, and 
146 

•S 1953 PCS 

1 ‘‘(ii) which has a liquidity shortfall for 

2 any quarter during such plan year. 

3 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

4 purposes of paragraph (1), any portion of an 

5 installment that is treated as not paid under 

6 subparagraph (A) shall continue to be treated 

7 as unpaid until the close of the quarter in 

8 which the due date for such installment occurs. 

9 ‘‘(D) LIMITATION ON INCREASE.—In no 

10 event shall the increase in the amount of any 

11 required installment under subparagraph (A) 

12 exceed the sum of the unfunded target liability 

13 and target normal cost for the plan year. 

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

15 paragraph— 

16 ‘‘(i) LIQUIDITY SHORTFALL.—The 

17 term ‘liquidity shortfall’ means, with re18 spect to any required installment, an 

19 amount equal to the excess (as of the last 

20 day of the quarter for which such install21 ment is made) of the base amount with re22 spect to such quarter over the value (as of 

23 such last day) of the plan’s liquid assets. 

24 ‘‘(ii) BASE AMOUNT.— 
147 

•S 1953 PCS 

1 ‘‘(I) IN GENERAL.—The term 

2 ‘base amount’ means, with respect to 

3 any quarter, an amount equal to 3 

4 times the sum of the adjusted dis5 bursements from the plan for the 12 

6 months ending on the last day of such 

7 quarter. 

8 ‘‘(II) SPECIAL RULE.—If the 

9 amount determined under subclause 

10 (I) exceeds an amount equal to 2 

11 times the sum of the adjusted dis12 bursements from the plan for the 36 

13 months ending on the last day of the 

14 quarter and an enrolled actuary cer15 tifies to the satisfaction of the Sec16 retary that such excess is the result of 

17 nonrecurring circumstances, the base 

18 amount with respect to such quarter 

19 shall be determined without regard to 

20 amounts related to those nonrecurring 

21 circumstances. 

22 ‘‘(iii) DISBURSEMENTS FROM THE

23 PLAN.—The term ‘disbursements from the 

24 plan’ means all disbursements from the 

25 trust, including purchases of annuities, 
148 

•S 1953 PCS 

1 payments of single sums and other bene2 fits, and administrative expenses. 

3 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

4 The term ‘adjusted disbursements’ means 

5 disbursements from the plan reduced by 

6 the product of— 

7 ‘‘(I) the plan’s funded target li8 ability percentage (as defined in sec9 tion 436(e)) for the plan year, and 

10 ‘‘(II) the sum of the purchases of 

11 annuities, payments of single sums, 

12 and such other disbursements as the 

13 Secretary shall provide in regulations. 

14 ‘‘(v) LIQUID ASSETS.—The term ‘liq15 uid assets’ means cash, marketable securi16 ties and such other assets as specified by 

17 the Secretary in regulations. 

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

19 means, with respect to any required install20 ment, the 3-month period preceding the 

21 month in which the due date for such in22 stallment occurs. 

23 ‘‘(6) FISCAL YEARS AND SHORT YEARS.— 

24 ‘‘(A) FISCAL YEARS.—In applying this 

25 subsection to a plan year beginning on any date 
149 

•S 1953 PCS 

1 other than January 1, there shall be substituted 

2 for the months specified in this subsection the 

3 months which correspond thereto. 

4 ‘‘(B) SHORT PLAN YEAR.—This subsection 

5 shall be applied to plan years of less than 12 

6 months in accordance with regulations pre7 scribed by the Secretary. 

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

9 MAKE REQUIRED CONTRIBUTIONS.— 

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

11 which this subsection applies, if— 

12 ‘‘(A) any person fails to make a required 

13 installment under subsection (j) or any other 

14 payment required under this section before the 

15 due date for such installment or other payment, 

16 and 

17 ‘‘(B) the unpaid balance of such install18 ment or other payment (including interest), 

19 when added to the aggregate unpaid balance of 

20 all preceding such installments or other pay21 ments for which payment was not made before 

22 the due date (including interest), exceeds 

23 $1,000,000, 

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

25 amount determined under paragraph (3) upon all 
150 

•S 1953 PCS 

1 property and rights to property, whether real or per2 sonal, belonging to such person and any other per3 son who is a member of the same controlled group 

4 of which such person is a member. 

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

6 This subsection shall apply to a defined benefit plan 

7 for any plan year for which the funded target liabil8 ity percentage (within the meaning of section 

9 436(e)) of such plan is less than 100 percent. This 

10 subsection shall not apply to any plan to which sec11 tion 4021 of the Employee Retirement Income Secu12 rity Act of 1974 does not apply. 

13 ‘‘(3) AMOUNT OF LIEN.—For purposes of para14 graph (1), the amount of the lien shall be equal to 

15 the aggregate unpaid balance of required install16 ments and other payments required under this sec17 tion (including interest) for which payment has not 

18 been made before the due date. 

19 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

20 ‘‘(A) NOTICE OF FAILURE.—A person 

21 committing a failure described in paragraph (1) 

22 shall notify the Pension Benefit Guaranty Cor23 poration of such failure within 10 days of the 

24 due date for the required installment or other 

25 payment. 
151 

•S 1953 PCS 

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

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

3 the required installment or other payment and 

4 shall continue until the last day of the first plan 

5 year in which the plan ceases to be described in 

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

7 run without regard to whether such plan con8 tinues to be described in paragraph (2) during 

9 the period referred to in the preceding sentence. 

10 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

11 amount with respect to which a lien is imposed 

12 under paragraph (1) shall be treated as taxes 

13 due and owing the United States and rules 

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

15 (e) of section 4068 of the Employee Retirement 

16 Income Security Act of 1974 shall apply with 

17 respect to a lien imposed by subsection (a) and 

18 the amount with respect to such lien. 

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

20 paragraph (1) may be perfected and enforced only 

21 by the Pension Benefit Guaranty Corporation, or at 

22 the direction of the Pension Benefit Guaranty Cor23 poration, by the contributing sponsor (or any mem24 ber of the controlled group (as defined in section 

25 412(g)(4)) of the contributing sponsor). 
152 

•S 1953 PCS 

1 ‘‘(6) DEFINITIONS.—For purposes of this sub2 section, the terms ‘due date’ and ‘required install3 ment’ have the meanings given such terms by sub4 section (j), except that in the case of a payment 

5 other than a required installment, the due date shall 

6 be the date such payment is required to be made 

7 under this section. 

8 ‘‘(l) REGULATIONS.—The Secretary shall prescribe 

9 such regulations as are necessary to carry out the provi10 sions of this section, including regulations— 

11 ‘‘(1) for the proper treatment of increases in li12 abilities of any plan pursuant to plan amendments 

13 which are adopted, or which take effect, on a date 

14 during the plan year other than the valuation date, 

15 ‘‘(2) for the application of any small plan ex16 ception under this section in cases of mergers and 

17 acquisitions, and 

18 ‘‘(3) for the application of this section in the 

19 case of a plan maintained by more than one em20 ployer. 

21 ‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEM22 PLOYER PLANS. 

23 ‘‘(a) IN GENERAL.—In the case of a multiemployer 

24 plan to which section 412(a)(2)(C) applies, the accumu-
153 

•S 1953 PCS 

1 lated funding deficiency of the plan for any plan year for 

2 purposes of section 412 shall be— 

3 ‘‘(1) except as provided in paragraph (2), the 

4 amount, determined as of the end of the plan year, 

5 equal to the excess (if any) of the total charges to 

6 the funding standard account of the plan for all plan 

7 years (beginning with the first plan year to which 

8 section 412 applies to the plan) over the total credits 

9 to such account for such years, or 

10 ‘‘(2) if the multiemployer plan is in reorganiza11 tion for any plan year, the accumulated funding de12 ficiency of the plan determined under section 418B. 

13 ‘‘(b) FUNDING STANDARD ACCOUNT.— 

14 ‘‘(1) ACCOUNT REQUIRED.—Each multiem15 ployer plan to which this section applies shall estab16 lish and maintain a funding standard account. Such 

17 account shall be credited and charged solely as pro18 vided in this section. 

19 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year, 

20 the funding standard account shall be charged with 

21 the sum of— 

22 ‘‘(A) the normal cost of the plan for the 

23 plan year, 
154 

•S 1953 PCS 

1 ‘‘(B) the amounts necessary to amortize in 

2 equal annual installments (until fully amor3 tized)— 

4 ‘‘(i) in the case of a plan in existence 

5 on January 1, 1974, the unfunded past 

6 service liability under the plan on the first 

7 day of the first plan year to which this sec8 tion applies, over a period of 40 plan 

9 years, 

10 ‘‘(ii) in the case of a plan which comes 

11 into existence after January 1, 1974, the 

12 unfunded past service liability under the 

13 plan on the first day of the first plan year 

14 to which this section applies, over a period 

15 of 30 plan years, 

16 ‘‘(iii) separately, with respect to each 

17 plan year, the net increase (if any) in un18 funded past service liability under the plan 

19 arising from plan amendments adopted in 

20 such year, over a period of 30 plan years, 

21 ‘‘(iv) separately, with respect to each 

22 plan year, the net experience loss (if any) 

23 under the plan, over a period of 15 plan 

24 years, and 
155 

•S 1953 PCS 

1 ‘‘(v) separately, with respect to each 

2 plan year, the net loss (if any) resulting 

3 from changes in actuarial assumptions 

4 used under the plan, over a period of 30 

5 plan years, 

6 ‘‘(C) the amount necessary to amortize 

7 each waived funding deficiency (within the 

8 meaning of section 412(d)(3)) for each prior 

9 plan year in equal annual installments (until 

10 fully amortized) over a period of 15 plan years, 

11 ‘‘(D) the amount necessary to amortize in 

12 equal annual installments (until fully amor13 tized) over a period of 5 plan years any amount 

14 credited to the funding standard account under 

15 section 412(b)(3)(D) (as in effect on the day 

16 before the date of the enactment of this sec17 tion), and 

18 ‘‘(E) the amount necessary to amortize in 

19 equal annual installments (until fully amor20 tized) over a period of 20 years the contribu21 tions which would be required to be made under 

22 the plan but for the provisions of section 

23 412(c)(7)(A)(i)(I) (as in effect on the day be24 fore the date of the enactment of this section). 
156 

•S 1953 PCS 

1 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year, 

2 the funding standard account shall be credited with 

3 the sum of— 

4 ‘‘(A) the amount considered contributed by 

5 the employer to or under the plan for the plan 

6 year, 

7 ‘‘(B) the amount necessary to amortize in 

8 equal annual installments (until fully amor9 tized)— 

10 ‘‘(i) separately, with respect to each 

11 plan year, the net decrease (if any) in un12 funded past service liability under the plan 

13 arising from plan amendments adopted in 

14 such year, over a period of 30 plan years, 

15 ‘‘(ii) separately, with respect to each 

16 plan year, the net experience gain (if any) 

17 under the plan, over a period of 15 plan 

18 years, and 

19 ‘‘(iii) separately, with respect to each 

20 plan year, the net gain (if any) resulting 

21 from changes in actuarial assumptions 

22 used under the plan, over a period of 30 

23 plan years, 
157 

•S 1953 PCS 

1 ‘‘(C) the amount of the waived funding de2 ficiency (within the meaning of section 

3 412(d)(3)) for the plan year, and 

4 ‘‘(D) in the case of a plan year for which 

5 the accumulated funding deficiency is deter6 mined under the funding standard account if 

7 such plan year follows a plan year for which 

8 such deficiency was determined under the alter9 native minimum funding standard under section 

10 412(g) (as in effect on the day before the date 

11 of the enactment of this section), the excess (if 

12 any) of any debit balance in the funding stand13 ard account (determined without regard to this 

14 subparagraph) over any debit balance in the al15 ternative minimum funding standard account. 

16 ‘‘(4) COMBINING AND OFFSETTING AMOUNTS

17 TO BE AMORTIZED.—Under regulations prescribed 

18 by the Secretary, amounts required to be amortized 

19 under paragraph (2) or paragraph (3), as the case 

20 may be— 

21 ‘‘(A) may be combined into one amount 

22 under such paragraph to be amortized over a 

23 period determined on the basis of the remaining 

24 amortization period for all items entering into 

25 such combined amount, and 
158 

•S 1953 PCS 

1 ‘‘(B) may be offset against amounts re2 quired to be amortized under the other such 

3 paragraph, with the resulting amount to be am4 ortized over a period determined on the basis of 

5 the remaining amortization periods for all items 

6 entering into whichever of the two amounts 

7 being offset is the greater. 

8 ‘‘(5) INTEREST.—The funding standard ac9 count (and items therein) shall be charged or cred10 ited (as determined under regulations prescribed by 

11 the Secretary) with interest at the appropriate rate 

12 consistent with the rate or rates of interest used 

13 under the plan to determine costs. 

14 ‘‘(6) CERTAIN AMORTIZATION CHARGES AND

15 CREDITS.—In the case of a plan which, immediately 

16 before the date of the enactment of the Multiem17 ployer Pension Plan Amendments Act of 1980, was 

18 a multiemployer plan (within the meaning of section 

19 414(f) as in effect immediately before such date)— 

20 ‘‘(A) any amount described in paragraph 

21 (2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this sub22 section which arose in a plan year beginning be23 fore such date shall be amortized in equal an24 nual installments (until fully amortized) over 40 
159 

•S 1953 PCS 

1 plan years, beginning with the plan year in 

2 which the amount arose; 

3 ‘‘(B) any amount described in paragraph 

4 (2)(B)(iv) or (3)(B)(ii) of this subsection which 

5 arose in a plan year beginning before such date 

6 shall be amortized in equal annual installments 

7 (until fully amortized) over 20 plan years, be8 ginning with the plan year in which the amount 

9 arose; 

10 ‘‘(C) any change in past service liability 

11 which arises during the period of 3 plan years 

12 beginning on or after such date, and results 

13 from a plan amendment adopted before such 

14 date, shall be amortized in equal annual install15 ments (until fully amortized) over 40 plan 

16 years, beginning with the plan year in which the 

17 change arises; and 

18 ‘‘(D) any change in past service liability 

19 which arises during the period of 2 plan years 

20 beginning on or after such date, and results 

21 from the changing of a group of participants 

22 from one benefit level to another benefit level 

23 under a schedule of plan benefits which— 

24 ‘‘(i) was adopted before such date, 

25 and 
160 

•S 1953 PCS 

1 ‘‘(ii) was effective for any plan partici2 pant before the beginning of the first plan 

3 year beginning on or after such date, 

4 shall be amortized in equal annual installments 

5 (until fully amortized) over 40 plan years, be6 ginning with the plan year in which the change 

7 arises. 

8 ‘‘(7) SPECIAL RULES.—For purposes of this 

9 section— 

10 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

11 amount received by a multiemployer plan in 

12 payment of all or part of an employer’s with13 drawal liability under part 1 of subtitle E of 

14 title IV of the Employee Retirement Income Se15 curity Act of 1974 shall be considered an 

16 amount contributed by the employer to or 

17 under the plan. The Secretary may prescribe by 

18 regulation additional charges and credits to a 

19 multiemployer plan’s funding standard account 

20 to the extent necessary to prevent withdrawal li21 ability payments from being unduly reflected as 

22 advance funding for plan liabilities. 

23 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM24 PLOYER PLAN LEAVES REORGANIZATION.—If a 

25 multiemployer plan is not in reorganization in 
161 

•S 1953 PCS 

1 the plan year but was in reorganization in the 

2 immediately preceding plan year, any balance in 

3 the funding standard account at the close of 

4 such immediately preceding plan year— 

5 ‘‘(i) shall be eliminated by an offset6 ting credit or charge (as the case may be), 

7 but 

8 ‘‘(ii) shall be taken into account in 

9 subsequent plan years by being amortized 

10 in equal annual installments (until fully 

11 amortized) over 30 plan years. 

12 The preceding sentence shall not apply to the 

13 extent of any accumulated funding deficiency 

14 under section 418B(a) as of the end of the last 

15 plan year that the plan was in reorganization. 

16 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

17 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

18 FUND.—Any amount paid by a plan during a 

19 plan year to the Pension Benefit Guaranty Cor20 poration pursuant to section 4222 of such Act 

21 or to a fund exempt under section 501(c)(22) 

22 pursuant to section 4223 of such Act shall re23 duce the amount of contributions considered re24 ceived by the plan for the plan year. 
162 

•S 1953 PCS 

1 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

2 PAYMENTS.—Any amount paid by an employer 

3 pending a final determination of the employer’s 

4 withdrawal liability under part 1 of subtitle E 

5 of title IV of such Act and subsequently re6 funded to the employer by the plan shall be 

7 charged to the funding standard account in ac8 cordance with regulations prescribed by the 

9 Secretary. 

10 ‘‘(E) ELECTION FOR DEFERRAL OF

11 CHARGE FOR PORTION OF NET EXPERIENCE

12 LOSS.—If an election is in effect under section 

13 412(b)(7)(F) (as in effect on the day before the 

14 date of the enactment of this section) for any 

15 plan year, the funding standard account shall 

16 be charged in the plan year to which the por17 tion of the net experience loss was deferred in 

18 the same manner as required under such sec19 tion (and paragraph (2)(B)(iv) shall not apply 

20 to the amount so charged) . 

21 ‘‘(F) FINANCIAL ASSISTANCE.—Any 

22 amount of any financial assistance from the 

23 Pension Benefit Guaranty Corporation to any 

24 plan, and any repayment of such amount, shall 

25 be taken into account under this section and 
163 

•S 1953 PCS 

1 section 412 in such manner as determined by 

2 the Secretary. 

3 ‘‘(c) SPECIAL RULES.— 

4 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

5 FUNDING METHOD.—For purposes of this section, 

6 normal costs, accrued liability, past service liabilities, 

7 and experience gains and losses shall be determined 

8 under the funding method used to determine costs 

9 under the plan. 

10 ‘‘(2) VALUATION OF ASSETS.— 

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

12 section, the value of the plan’s assets shall be 

13 determined on the basis of any reasonable actu14 arial method of valuation which takes into ac15 count fair market value and which is permitted 

16 under regulations prescribed by the Secretary. 

17 ‘‘(B) ELECTION WITH RESPECT TO

18 BONDS.—The value of a bond or other evidence 

19 of indebtedness which is not in default as to 

20 principal or interest may, at the election of the 

21 plan administrator, be determined on an amor22 tized basis running from initial cost at purchase 

23 to par value at maturity or earliest call date. 

24 Any election under this subparagraph shall be 

25 made at such time and in such manner as the 
164 

•S 1953 PCS 

1 Secretary shall by regulations provide, shall 

2 apply to all such evidences of indebtedness, and 

3 may be revoked only with the consent of the 

4 Secretary. 

5 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA6 SONABLE.—For purposes of this section, all costs, li7 abilities, rates of interest, and other factors under 

8 the plan shall be determined on the basis of actu9 arial assumptions and methods— 

10 ‘‘(A) which, in the aggregate, are reason11 able (taking into account the experience of the 

12 plan and reasonable expectations), and 

13 ‘‘(B) which, in combination, offer the actu14 ary’s best estimate of anticipated experience 

15 under the plan. 

16 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX17 PERIENCE GAIN OR LOSS.—For purposes of this sec18 tion, if— 

19 ‘‘(A) a change in benefits under the Social 

20 Security Act or in other retirement benefits cre21 ated under Federal or State law, or 

22 ‘‘(B) a change in the definition of the term 

23 ‘wages’ under section 3121, or a change in the 

24 amount of such wages taken into account under 
165 

•S 1953 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 paragraphs 

13 (2)(B), (C), and (D) and (3)(B) of subsection 

14 (b) which are required to be amortized shall be 

15 considered fully amortized for purposes of such 

16 paragraphs. 

17 ‘‘(6) FULL-FUNDING LIMITATION.— 

18 ‘‘(A) IN GENERAL.—For purposes of para19 graph (5), the term ‘full-funding limitation’ 

20 means the excess (if any) of— 

21 ‘‘(i) the accrued liability (including 

22 normal cost) under the plan (determined 

23 under the entry age normal funding meth24 od if such accrued liability cannot be di-
166 

•S 1953 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 For purposes of subparagraph (A), unless oth9 erwise provided by the plan, the accrued liabil10 ity under a plan shall not include benefits which 

11 are not nonforfeitable under the plan after the 

12 termination of the plan (taking into consider13 ation section 411(d)(3)). 

14 ‘‘(B) MINIMUM AMOUNT.— 

15 ‘‘(i) IN GENERAL.—In no event shall 

16 the full-funding limitation determined 

17 under subparagraph (A) be less than the 

18 excess (if any) of— 

19 ‘‘(I) 90 percent of the current li20 ability of the plan (including the ex21 pected increase in current liability due 

22 to benefits accruing during the plan 

23 year), over 

24 ‘‘(II) the value of the plan’s as25 sets determined under paragraph (2). 
167 

•S 1953 PCS 

1 ‘‘(ii) ASSETS.—For purposes of clause 

2 (i), assets shall not be reduced by any 

3 credit balance in the funding standard ac4 count. 

5 ‘‘(C) CURRENT LIABILITY.—For purposes 

6 of this paragraph— 

7 ‘‘(i) IN GENERAL.—The term ‘current 

8 liability’ means all liabilities to employees 

9 and their beneficiaries under the plan. 

10 ‘‘(ii) TREATMENT OF UNPREDICTABLE

11 CONTINGENT EVENT BENEFITS.—For pur12 poses of clause (i), any benefit contingent 

13 on an event other than— 

14 ‘‘(I) age, service, compensation, 

15 death, or disability, or 

16 ‘‘(II) an event which is reason17 ably and reliably predictable (as deter18 mined by the Secretary), 

19 shall not be taken into account until the 

20 event on which the benefit is contingent oc21 curs. 

22 ‘‘(iii) INTEREST RATE USED.—The 

23 rate of interest used to determine current 

24 liability under this paragraph shall be the 
168 

•S 1953 PCS 

1 rate of interest determined under subpara2 graph (D). 

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. 
169 

•S 1953 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 (ii)) 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 
170 

•S 1953 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 the Secretary determines necessary, update 

13 the tables to reflect the actual experience 

14 of pension plans and projected trends in 

15 such experience. 

16 ‘‘(D) 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)(5) 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. 
171 

•S 1953 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— 
172 

•S 1953 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. 
173 

•S 1953 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)(C) 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)(C) without regard to clause 

23 (iv) thereof). 

24 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

25 DEEMED MADE.—For purposes of this section, any 
174 

•S 1953 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 (b) CONFORMING AMENDMENT.—The table of parts 

10 for subchapter D of chapter 1 of such Code is amended 

11 by adding at the end the following new item: 

‘‘Part III. Rules relating to minimum funding standards and benefit limitations.’’. 

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

13 this section shall apply to plan years beginning after De14 cember 31, 2006. 

15 SEC. 303. LIMITATION ON BENEFIT IMPROVEMENTS BY SIN16 GLE-EMPLOYER PLANS WHICH ARE UNDER17 FUNDED OR MAINTAINED BY FINANCIALLY 

18 WEAK OR BANKRUPT EMPLOYERS. 

19 (a) IN GENERAL.—Part III of subchapter D of chap20 ter 1 of the Internal Revenue Code of 1986 (relating to 

21 rules relating to minimum funding standards) is amended 

22 by adding at the end the following new subpart: 
175 

•S 1953 PCS 

1 ‘‘Subpart B—Limitations on Benefit Improvements 

2 by Single-Employer Plans 

‘‘Sec. 436. Limitations on benefit improvements by single-employer plans 

which are underfunded or maintained by financially weak 

or bankrupt employers. 

3 ‘‘SEC. 436. LIMITATIONS ON BENEFIT IMPROVEMENTS BY 

4 SINGLE-EMPLOYER PLANS WHICH ARE UN5 DERFUNDED OR MAINTAINED BY FINAN6 CIALLY WEAK EMPLOYERS. 

7 ‘‘(a) BENEFIT LIMITATION REQUIREMENTS.—For 

8 purposes of section 401(a)(29), except as provided in sub9 section (f)(5), a defined benefit plan which is a single-em10 ployer plan shall be treated as meeting the requirements 

11 of this section if the plan meets the requirements of sub12 sections (b), (c), and (d). 

13 ‘‘(b) LIMITATIONS ON BENEFIT INCREASES.— 

14 ‘‘(1) IN GENERAL.—A plan meets the require15 ments of this subsection for any plan year if the 

16 plan provides that if the plan’s adjusted funded tar17 get liability percentage for the preceding plan year 

18 is less than 80 percent, any applicable benefit in19 crease shall not take effect during the plan year 

20 until the plan has met the additional funding re21 quirements of paragraph (2). 

22 ‘‘(2) ADDITIONAL FUNDING REQUIREMENTS.— 
176 

•S 1953 PCS 

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

2 this paragraph are met with respect to any ap3 plicable benefit increase for any plan year if the 

4 plan sponsor, in addition to any other contribu5 tion required under section 430, contributes to 

6 or under the plan an amount (if any) which, 

7 when added to the portion of the minimum re8 quired contribution for the plan year described 

9 in subparagraphs (B) and (C) of section 

10 430(a)(1), is sufficient to result in the adjusted 

11 funded target liability percentage of the plan 

12 for the plan year being equal to 80 percent. 

13 ‘‘(B) BENEFIT INCREASES COUNTED FOR

14 PURPOSES OF FUNDED PERCENTAGE.—For 

15 purposes of subparagraph (A), the adjusted 

16 funded target liability percentage shall be deter17 mined by taking into account all increases in li18 abilities of the plan which would have been 

19 taken into account in determining such percent20 age if the applicable benefit increase had taken 

21 effect as of the beginning of the plan year. 

22 ‘‘(C) PAYMENTS AFTER VALUATION

23 DATE.—In the case of any contribution required 

24 by this subsection which is made after the first 

25 day of the plan year, the amount of the con-
177 

•S 1953 PCS 

1 tribution shall be adjusted in the same manner 

2 as it would be under section 430(i)(2) if it were 

3 a minimum required contribution for the plan 

4 year. 

5 ‘‘(D) TREATMENT OF PAYMENT IN COM6 PUTING MINIMUM REQUIRED CONTRIBUTION.— 

7 If any applicable benefit increase to which this 

8 subsection applies for any plan year is required 

9 to be taken into account in determining the 

10 minimum required contribution under section 

11 430 for the plan year, any payment required by 

12 this paragraph with respect to the applicable 

13 benefit increase shall, for purposes of deter14 mining the amount of such minimum required 

15 contribution, be treated in the same manner as 

16 a contribution for a preceding plan year is 

17 treated under section 430(g)(2)(C)(i). 

18 ‘‘(3) APPLICABLE BENEFIT INCREASE.—For 

19 purposes of this subsection— 

20 ‘‘(A) IN GENERAL.—The term ‘applicable 

21 benefit increase’ means, with respect to any 

22 plan year, any increase in liabilities of the plan 

23 by plan amendment (or otherwise as provided in 

24 regulations prescribed by the Secretary) which, 
178 

•S 1953 PCS 

1 but for this subsection, would occur during the 

2 plan year by reason of— 

3 ‘‘(i) any increase in benefits, 

4 ‘‘(ii) any change in the accrual of ben5 efits, or 

6 ‘‘(iii) any change in the rate at which 

7 benefits become nonforfeitable under the 

8 plan. 

9 ‘‘(B) EXCEPTION FOR CERTAIN BENEFIT

10 INCREASES.—In the case of a plan maintained 

11 pursuant to 1 or more collective bargaining 

12 agreements between employee representatives 

13 and 1 or more plan sponsors, such term shall 

14 not include any increase in liabilities of the plan 

15 by reason of any increase in benefits pursuant 

16 to, and for individuals covered by, the agree17 ments under a formula which is not based on 

18 a participant’s compensation, but only if the 

19 rate of such increase is not in excess of the con20 temporaneous rate of increase in average wages 

21 of participants covered by the amendment. 

22 ‘‘(C) EXCEPTION FOR COLLECTIVELY BAR23 GAINED INCREASES NEGOTIATED BEFORE

24 UNDERFUNDING OCCURS.—In the case of a 

25 plan maintained pursuant to 1 or more collec-
179 

•S 1953 PCS 

1 tive bargaining agreements between employee 

2 representatives and 1 or more plan sponsors 

3 and ratified in a plan year with respect to 

4 which the adjusted funded target liability per5 centage was at least 80 percent, such term shall 

6 not include any increase or change described in 

7 subparagraph (A) pursuant to, and for individ8 uals covered by, the agreements which takes ef9 fect in any plan year beginning after the plan 

10 year in which the agreements are ratified and 

11 before the earlier of— 

12 ‘‘(i) the date on which the last of such 

13 collective bargaining agreement terminates 

14 (determined without regard to any exten15 sion thereof), or 

16 ‘‘(ii) the date which is 3 years after 

17 the date on which this subsection would 

18 otherwise apply but for this subparagraph. 

19 ‘‘(D) OTHER EXCEPTIONS.—Such term 

20 shall not include any increase in liabilities— 

21 ‘‘(i) by reason of a plan amendment if 

22 such amendment is required as a condition 

23 of qualification under this part, or 

24 ‘‘(ii) which is specified in regulations 

25 prescribed by the Secretary. 
180 

•S 1953 PCS 

1 ‘‘(4) SPECIAL RULE FOR PLANS IN BANK2 RUPTCY.—In the case of any period during which 

3 the plan sponsor is in bankruptcy— 

4 ‘‘(A) paragraphs (1) and (2)(A) shall be 

5 applied by substituting ‘100 percent’ for ‘80 

6 percent’, and 

7 ‘‘(B) the exceptions under subparagraphs 

8 (B) and (C) of paragraph (3) shall not apply. 

9 ‘‘(c) LIMITATIONS ON ACCELERATED BENEFIT DIS10 TRIBUTIONS.— 

11 ‘‘(1) IN GENERAL.—The requirements of this 

12 subsection are met if the plan provides that, with re13 spect to any plan year— 

14 ‘‘(A) if the plan’s adjusted funded target 

15 liability percentage as of the valuation date for 

16 the preceding plan year was less than 60 per17 cent and the preceding plan year is not other18 wise in a prohibited period, the plan sponsor 

19 shall, in addition to any other contribution re20 quired under section 430, contribute for the 

21 current plan year and each succeeding plan 

22 year in the prohibited period with respect to the 

23 current plan year the amount (if any) which, 

24 when added to the portion of the minimum re25 quired contribution for the plan year described 
181 

•S 1953 PCS 

1 in subparagraphs (B) and (C) of section 

2 430(a)(1), is sufficient to result in an adjusted 

3 funded target liability percentage for the plan 

4 year of 60 percent, and 

5 ‘‘(B) no prohibited payments will be made 

6 during a prohibited period. 

7 ‘‘(2) PROHIBITED PAYMENT.—For purpose of 

8 this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘prohibited 

10 payment’ means— 

11 ‘‘(i) any payment, in excess of the 

12 monthly amount paid under a single life 

13 annuity (plus any social security supple14 ments described in the last sentence of sec15 tion 411(a)(9)), to a participant or bene16 ficiary whose annuity starting date (as de17 fined in section 417(f)(2)) occurs during a 

18 prohibited period, 

19 ‘‘(ii) any payment for the purchase of 

20 an irrevocable commitment from an insurer 

21 to pay benefits, and 

22 ‘‘(iii) any other payment specified by 

23 the Secretary by regulations. 

24 ‘‘(B) EXCEPTION FOR CERTAIN PAY25 MENTS.—In the case of any prohibited period 
182 

•S 1953 PCS 

1 described in paragraph (3)(A), the term ‘pro2 hibited payment’ shall not include any payment 

3 if the amount of the payment does not exceed 

4 the lesser of— 

5 ‘‘(i) 50 percent of the amount of the 

6 payment which could be made without re7 gard to this subsection, or 

8 ‘‘(ii) the present value (determined 

9 under guidance prescribed by the Pension 

10 Benefit Guaranty Corporation, using the 

11 interest and mortality assumptions under 

12 section 417(e)) of the maximum guarantee 

13 with respect to the participant under sec14 tion 4022 of the Employee Retirement In15 come Security Act of 1974. 

16 The exception under this subparagraph shall 

17 only apply once with respect to any participant, 

18 except that, for purposes of this sentence, a 

19 participant and any beneficiary on his behalf 

20 (including an alternate payee, as defined in sec21 tion 414(p)(8)) shall be treated as 1 partici22 pant. If the accrued benefit of a participant is 

23 allocated to such an alternate payee and 1 or 

24 more other persons, the amount under clause 

25 (ii) shall be allocated among such persons in 
183 

•S 1953 PCS 

1 the same manner as the accrued benefit is allo2 cated unless the qualified domestic relations 

3 order (as defined in section 414(p)(1)(A)) pro4 vides otherwise. 

5 ‘‘(3) PROHIBITED PERIOD.—For purposes of 

6 paragraph (1), the term ‘prohibited period’ means— 

7 ‘‘(A) except as provided in paragraph (5), 

8 if a plan sponsor is required to make the con9 tribution for the current plan year under para10 graph (1), the period beginning on the 1st day 

11 of the plan year and ending on the last day of 

12 the 1st period of 2 consecutive plan years (be13 ginning on or after such 1st day) for which the 

14 plan’s adjusted funded target liability percent15 age was at least 60 percent, 

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

17 bankruptcy, or 

18 ‘‘(C) any period during which the plan has 

19 a liquidity shortfall (as defined in section 

20 430(j)(5)(E)(i)). 

21 The prohibited period for purposes of subparagraph 

22 (B) shall not include any portion of a plan year 

23 (even if the plan sponsor is in bankruptcy during 

24 such period) which occurs on or after the date the 

25 plan’s enrolled actuary certifies that, as of the valu-
184 

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1 ation date for the plan year, the plan’s adjusted 

2 funded target liability percentage is at least 100 per3 cent. 

4 ‘‘(4) RULES RELATING TO REQUIRED CON5 TRIBUTIONS.— 

6 ‘‘(A) SECURITY MAY BE PROVIDED.— 

7 ‘‘(i) IN GENERAL.—A plan sponsor 

8 shall not be treated as failing to meet the 

9 requirements of paragraph (1) if the plan 

10 sponsor provides security in a form meet11 ing the requirements of clause (ii) for any 

12 portion of the amount required to be con13 tributed under paragraph (1) but which is 

14 not so contributed. Such security shall be 

15 provided no later than the due date of the 

16 contribution to which it relates or such 

17 earlier date as the Secretary may pre18 scribe. 

19 ‘‘(ii) FORM OF SECURITY.—The secu20 rity required under clause (i) shall consist 

21 of— 

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

23 surety company that is an acceptable 

24 surety for purposes of section 412 of 
185 

•S 1953 PCS 

1 the Employee Retirement Income Se2 curity Act of 1974, 

3 ‘‘(II) cash, or United States obli4 gations which mature in 3 years or 

5 less, held in escrow by a bank or simi6 lar financial institution, or 

7 ‘‘(III) such other form of security 

8 as is satisfactory to the Secretary and 

9 the parties involved. 

10 ‘‘(iii) ENFORCEMENT.—Any security 

11 provided under clause (i) may be perfected 

12 and enforced at any time after the earlier 

13 of— 

14 ‘‘(I) the date on which the plan 

15 terminates, 

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

17 a payment of the minimum required 

18 contribution for any plan year begin19 ning after the security is provided, the 

20 due date for the payment under sec21 tion 430(i), or 

22 ‘‘(III) if the adjusted funded tar23 get liability percentage is less than 60 

24 percent for a consecutive period of 7 
186 

•S 1953 PCS 

1 years, the valuation date for the last 

2 year in the period. 

3 ‘‘(iv) RELEASE OF SECURITY.—The 

4 security shall be released (and any 

5 amounts thereunder shall be refunded to6 gether with any interest accrued thereon) 

7 at the end of the prohibited period for the 

8 failure to which the security relates. The 

9 Secretary may prescribe regulations for 

10 partial releases of the security by reason of 

11 increases in the adjusted funded target li12 ability percentage. 

13 ‘‘(v) SECURITY NOT TREATED AS

14 PLAN ASSET.—Any security under this 

15 subparagraph shall not be taken into ac16 count in determining the value of the 

17 plan’s assets except to the extent provided 

18 in clause (i). 

19 ‘‘(B) TREATMENT AS UNPAID MINIMUM

20 REQUIRED CONTRIBUTION.—The amount of any 

21 required contribution which a plan sponsor fails 

22 to make under paragraph (1) by the close of 

23 the plan year to which the contribution relates 

24 shall be treated as an unpaid minimum required 

25 contribution for purposes of subsection (j) and 
187 

•S 1953 PCS 

1 (k) of section 430 and for purposes of section 

2 4971. 

3 ‘‘(5) SATISFACTION OF REQUIREMENT BEFORE

4 CLOSE OF PLAN YEAR.—If, before the close of the 

5 current plan year— 

6 ‘‘(A) the plan sponsor makes the contribu7 tion required to be made under paragraph (1), 

8 or 

9 ‘‘(B) the plan’s enrolled actuary certifies 

10 that, as of the valuation date for the plan year, 

11 the adjusted funded target liability percentage 

12 of the plan is at least 60 percent, 

13 this subsection shall be applied as if no prohibited 

14 period had begun as of the beginning of such year 

15 and the plan shall, under rules described by the Sec16 retary, restore any payments not made during the 

17 prohibited period in effect before the application of 

18 this paragraph. 

19 ‘‘(d) FREEZE ON PLAN BENEFITS.— 

20 ‘‘(1) IN GENERAL.—The requirements of this 

21 subsection are met if the plan provides that, not22 withstanding any other provision of the plan, during 

23 a freeze period— 

24 ‘‘(A) the accrued benefit, any death or dis25 ability benefit, and any social security supple-
188 

•S 1953 PCS 

1 ment described in the last sentence of section 

2 411(a)(9) of each participant are frozen at the 

3 amount of such benefit or supplement imme4 diately before the freeze period, and 

5 ‘‘(B) all other benefits provided under the 

6 plan are eliminated, 

7 but only to the extent the freezing or elimination of 

8 such benefits would have been permitted under sec9 tion 411(d)(6) if they had been implemented by a 

10 plan amendment adopted immediately before the 

11 freeze period. 

12 ‘‘(2) FREEZE PERIOD.—For purposes of para13 graph (1), the term ‘freeze period’ means any period 

14 treated as a prohibited period under subsection 

15 (c)(3)(A). A rule similar to the rule of subsection 

16 (c)(5) shall apply for purposes of this subsection. 

17 ‘‘(3) COLLECTIVELY BARGAINED PLANS.—In 

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

19 collective bargaining agreements between employee 

20 representatives and 1 or more plan sponsors and 

21 ratified in a plan year with respect to which the 

22 funded target liability percentage as of the valuation 

23 date was at least 60 percent, this subsection shall 

24 not be applied to benefits pursuant to, and individ-
189 

•S 1953 PCS 

1 uals covered by, such agreement for plan years be2 ginning before the earlier of— 

3 ‘‘(A) the date on which the last of such 

4 collective bargaining agreements terminates (de5 termined without regard to any extension there6 of), or 

7 ‘‘(B) the date which is 3 years after the 

8 date the freeze period would otherwise begin 

9 under this subsection. 

10 ‘‘(e) DEFINITIONS AND RULES RELATING TO APPLI11 CATION OF LIMITATIONS.—For purposes of this section— 

12 ‘‘(1) FUNDED TARGET LIABILITY PERCENT13 AGE.— 

14 ‘‘(A) IN GENERAL.—The term ‘funded tar15 get liability percentage’ means, with respect to 

16 any plan year, the percentage equal to a frac17 tion— 

18 ‘‘(i) the numerator of which is the 

19 value of assets of the plan determined 

20 under section 430(g)(2) for the plan year, 

21 and 

22 ‘‘(ii) the denominator of which is the 

23 target liability for the plan year. 

24 ‘‘(B) ADJUSTED FUNDED TARGET LIABIL25 ITY PERCENTAGE.—The term ‘adjusted funded 
190 

•S 1953 PCS 

1 target liability percentage’ means the funded 

2 target liability percentage which is determined 

3 under subparagraph (A) by increasing each of 

4 the amounts under clauses (i) and (ii) of sub5 paragraph (A) by the aggregate amount of pur6 chases of annuities, payments of single sums, 

7 and such other disbursements as the Secretary 

8 shall prescribe in regulations, which were made 

9 by the plan during the preceding 2 plan years. 

10 ‘‘(2) CERTIFICATION.—A certification by an en11 rolled actuary under this section shall be made in 

12 such form and manner as the Secretary may pre13 scribe and shall be based on the information avail14 able to the enrolled actuary. The enrolled actuary 

15 shall notify the plan administrator of any change in 

16 the funded target liability percentage if the actual 

17 target liability or asset value differs from that used 

18 for the certification. 

19 ‘‘(3) CONTRIBUTIONS INCLUDED IN ASSETS.— 

20 In making a certification under paragraph (2) for 

21 purposes of this section, the determination of wheth22 er and to what extent contributions are to be taken 

23 into account in computing the assets of the plan 

24 shall be made in the same manner as under section 

25 430(g)(2)(C), except that contributions in excess of 
191 

•S 1953 PCS 

1 the minimum required contribution for any pre2 ceding plan year shall not be taken into account un3 less made before the date of the certification. 

4 ‘‘(4) TREATMENT OF PLAN AS OF CLOSE OF

5 PROHIBITED OR FREEZE PERIOD.—For purposes of 

6 applying this part— 

7 ‘‘(A) OPERATION OF PLAN AFTER PE8 RIOD.—Unless the plan provides otherwise, the 

9 accrual and payment of benefits which were 

10 prohibited, frozen, or eliminated under sub11 section (c) or (d) shall resume, effective as of 

12 the day following the close of a prohibited or 

13 freeze period under subsection (c) or (d), which14 ever is applicable. 

15 ‘‘(B) TREATMENT OF AFFECTED BENE16 FITS.—Nothing in this paragraph shall be con17 strued as affecting the plan’s treatment of ben18 efits prohibited, frozen, or eliminated during 

19 the prohibited or freeze period. 

20 ‘‘(f) OTHER DEFINITIONS AND RULES.—For pur21 poses of this section— 

22 ‘‘(1) COORDINATION WITH MINIMUM REQUIRED

23 CONTRIBUTIONS.—Any contribution by a plan spon24 sor for a plan year shall be allocated first to any 

25 minimum required contribution under section 430 
192 

•S 1953 PCS 

1 for any plan year the valuation date of which occurs 

2 on or before the date of the contribution by the plan 

3 sponsor until all such minimum required contribu4 tions are fully made and then to the contributions 

5 required under subsection (b), (c), or (d). 

6 ‘‘(2) TERMS USED IN SECTION 430.—Any term 

7 used in this section which is also used in section 430 

8 shall have the meaning given such term by section 

9 430. 

10 ‘‘(3) BANKRUPTCY.—A plan sponsor is in bank11 ruptcy during any period the plan sponsor is a debt12 or in a case under title 11, United States Code, or 

13 similar Federal or State law. 

14 ‘‘(4) PLAN SPONSOR.—The term ‘plan sponsor’ 

15 means the employer referred to in section 

16 412(c)(without regard to paragraph (2)). 

17 ‘‘(5) PLANS IN EXISTENCE LESS THAN 5

18 YEARS.—This section (other than subsection (c)) 

19 shall not apply to a plan for each of the plan’s first 

20 5 plan years. For purposes of this paragraph, plan 

21 years of any predecessor plan shall be taken into ac22 count. Notwithstanding this paragraph, subsections 

23 (b) and (d) shall apply during any period the plan 

24 sponsor is in bankruptcy. 
193 

•S 1953 PCS 

1 ‘‘(6) COORDINATION WITH OTHER REQUIRE2 MENTS.—A trust forming part of a plan to which 

3 this section applies shall not be treated as failing to 

4 constitute a qualified trust merely because the plan 

5 does not make a payment required under the plan 

6 because the plan is prohibited from making the pay7 ment by reason of this section. 

8 ‘‘(7) YEARS BEFORE EFFECTIVE DATE.—No 

9 plan year beginning before 2007 shall be taken into 

10 account in determining whether this section applies 

11 to any plan year beginning after 2006.’’. 

12 (b) CONFORMING AMENDMENTS.—Part III of sub13 chapter D of chapter 1 of such Code, as added by this 

14 subtitle, is amended by striking the heading and table of 

15 sections and inserting: 

16 ‘‘PART III—RULES RELATING TO MINIMUM FUND17 ING STANDARDS AND BENEFIT LIMITATIONS 

‘‘Subpart A. Minimum funding standards for pension plans. 

‘‘Subpart B. Limitations on benefit improvements by single-employer plans. 

18 ‘‘Subpart A—Minimum Funding Standards for 

19 Pension Plans 

‘‘Sec. 430. Minimum funding standards for plans other than multiemployer plans. 

‘‘Sec. 431. Minimum funding standards for multiemployer plans.’’. 

20 (c) EFFECTIVE DATE.— 
194 

•S 1953 PCS 

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

2 this section shall apply to plan years beginning after 

3 December 31, 2006. 

4 (2) COLLECTIVE BARGAINING EXCEPTION.—In 

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

6 collective bargaining agreements between employee 

7 representatives and 1 or more employers ratified be8 fore the date of the enactment of this Act, the 

9 amendments made by this subsection shall not apply 

10 to plan years beginning before the earlier of— 

11 (A) the later of— 

12 (i) the date on which the last collec13 tive bargaining agreement relating to the 

14 plan terminates (determined without re15 gard to any extension thereof agreed to 

16 after the date of the enactment of this 

17 Act), or 

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

19 to which the amendments made by this 

20 subsection would (but for this subpara21 graph) apply, or 

22 (B) January 1, 2009. 

23 For purposes of clause (i), any plan amendment 

24 made pursuant to a collective bargaining agreement 

25 relating to the plan which amends the plan solely to 
195 

•S 1953 PCS 

1 conform to any requirement added by this subsection 

2 shall not be treated as a termination of such collec3 tive bargaining agreement. 

4 SEC. 304. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EM5 PLOYER PLANS. 

6 (a) IN GENERAL.—Section 404 of the Internal Rev7 enue Code of 1986 (relating to deduction for contributions 

8 of an employer to an employees’ trust or annuity plan and 

9 compensation under a deferred payment plan) is amend10 ed— 

11 (1) in subsection (a)(1)(A), by inserting ‘‘in the 

12 case of a single-employer plan, in an amount deter13 mined under subsection (o), and in the case of any 

14 other plan’’ after ‘‘section 501(a),’’, and 

15 (2) by inserting at the end the following new 

16 subsection: 

17 ‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER

18 PLANS.—For purposes of subsection (a)(1)(A)— 

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

20 benefit plan to which subsection (a)(1)(A) applies 

21 (other than a multiemployer plan), the amount de22 termined under this subsection for any taxable year 

23 shall be equal to the greater of— 
196 

•S 1953 PCS 

1 ‘‘(A) the sum of the amounts determined 

2 under paragraph (2) with respect to each plan 

3 year ending with or within the taxable year, or 

4 ‘‘(B) the sum of the minimum required 

5 contributions under section 430 for such plan 

6 years. 

7 ‘‘(2) DETERMINATION OF AMOUNT.— 

8 ‘‘(A) IN GENERAL.—The amount deter9 mined under this paragraph for any plan year 

10 shall be equal to the excess (if any) of— 

11 ‘‘(i) the sum of— 

12 ‘‘(I) the target liability for the 

13 plan year, 

14 ‘‘(II) the target normal cost for 

15 the plan year, and 

16 ‘‘(III) the cushion amount for the 

17 plan year, over 

18 ‘‘(ii) the value (determined under sec19 tion 430(g)(2)) of the assets of the plan 

20 which are held by the plan as of the valu21 ation date for the plan year. 

22 ‘‘(B) SPECIAL RULE FOR CERTAIN EM23 PLOYERS.—If section 430(f) does not apply to 

24 a plan for a plan year, the amount determined 
197 

•S 1953 PCS 

1 under subparagraph (A)(i) for the plan year 

2 shall in no event be less than the sum of— 

3 ‘‘(i) the at-risk target liability for the 

4 plan year (determined as if section 430(f) 

5 applied to the plan), plus 

6 ‘‘(ii) the at-risk target normal cost for 

7 the plan year (as so determined). 

8 ‘‘(3) CUSHION AMOUNT.—For purposes of para9 graph (2)(A)(i)(III)— 

10 ‘‘(A) IN GENERAL.—The cushion amount 

11 for any plan year is the sum of— 

12 ‘‘(i) 80 percent of the target liability 

13 for the plan year, and 

14 ‘‘(ii) the amount by which the target 

15 liability for the plan year would increase if 

16 the plan were to take into account— 

17 ‘‘(I) increases in compensation 

18 which are expected to occur in suc19 ceeding plan years, or 

20 ‘‘(II) if the plan does not base 

21 benefits for service to date on com22 pensation, increases in benefits which 

23 are expected to occur in succeeding 

24 plan years (determined on the basis of 

25 the average annual increase in bene-
198 

•S 1953 PCS 

1 fits over the 6 immediately preceding 

2 plan years). 

3 ‘‘(B) LIMITATIONS.— 

4 ‘‘(i) IN GENERAL.—In making the 

5 computation under subparagraph (A)(ii), 

6 the plan’s actuary shall assume that the 

7 limitations under subsections (j)(1) and (l) 

8 shall apply. 

9 ‘‘(ii) EXPECTED INCREASES.—In the 

10 case of a plan year during which a plan is 

11 covered under section 4021 of the Em12 ployee Retirement Income Security Act of 

13 1974, the plan’s actuary may, notwith14 standing subsection (j) or (l), take into ac15 count increases in the limitations which are 

16 expected to occur in succeeding plan years. 

17 ‘‘(4) SPECIAL RULES FOR PLANS WITH 100 OR

18 FEWER PARTICIPANTS.— 

19 ‘‘(A) IN GENERAL.—For purposes of deter20 mining the amount under paragraph (3) for any 

21 plan year, in the case of a plan which has 100 

22 or fewer participants for the plan year, the li23 ability of the plan attributable to benefit in24 creases for highly compensated employees (as 

25 defined in section 414(q)) resulting from a plan 
199 

•S 1953 PCS 

1 amendment which is made or becomes effective, 

2 whichever is later, within the last 2 years shall 

3 not be taken into account in determining the 

4 target liability. 

5 ‘‘(B) RULE FOR DETERMINING NUMBER

6 OF PARTICIPANTS.—For purposes of deter7 mining the number of plan participants, all de8 fined benefit plans (other than multiemployer 

9 plans) maintained by the same employer (or 

10 any member of such employer’s controlled 

11 group (within the meaning of section 

12 412(g)(4))) shall be treated as one plan, but 

13 only participants with respect to such member 

14 or employer shall be taken into account. 

15 ‘‘(5) SPECIAL RULE FOR TERMINATING

16 PLANS.—In the case of a plan which, subject to sec17 tion 4041 of the Employee Retirement Income Secu18 rity Act of 1974, terminates during the plan year, 

19 the amount determined under paragraph (2) shall in 

20 no event be less than the amount required to make 

21 the plan sufficient for benefit liabilities (within the 

22 meaning of section 4041(d) of such Act). 

23 ‘‘(6) ACTUARIAL ASSUMPTIONS.—Any computa24 tion under this subsection for any plan year shall 
200 

•S 1953 PCS 

1 use the same actuarial assumptions which are used 

2 for the plan year under section 430. 

3 ‘‘(7) DEFINITIONS.—Any term used in this sub4 section which is also used in section 430 shall have 

5 the same meaning given such term by section 430.’’. 

6 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

7 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

8 DEFINED BENEFIT PLANS.—Section 404(a)(7)(C) of 

9 such Code, as amended by section 323 of this Act, is 

10 amended by adding at the end the following new clause: 

11 ‘‘(iv) GUARANTEED PLANS.—In apply12 ing this paragraph, any single-employer 

13 plan covered under section 4021 of the 

14 Employee Retirement Income Security Act 

15 of 1974 shall not be taken into account.’’. 

16 (c) TECHNICAL AND CONFORMING AMENDMENTS.— 

17 (1) The last sentence of section 404(a)(1)(A) of 

18 such Code is amended by striking ‘‘section 412’’ 

19 each place it appears and inserting ‘‘section 431’’. 

20 (2) Section 404(a)(1)(B) of such Code is 

21 amended— 

22 (A) by striking ‘‘In the case of a plan’’ and 

23 inserting ‘‘In the case of a multiemployer plan’’, 
201 

•S 1953 PCS 

1 (B) by striking ‘‘section 412(c)(7)’’ each 

2 place it appears and inserting ‘‘section 

3 431(c)(6)’’, 

4 (C) by striking ‘‘section 412(c)(7)(B)’’ and 

5 inserting ‘‘section 431(c)(6)(A)(ii)’’, 

6 (D) by striking ‘‘section 412(c)(7)(A)’’ and 

7 inserting ‘‘section 431(c)(6)(A)(i)’’, and 

8 (E) by striking ‘‘section 412’’ and insert9 ing ‘‘section 431’’. 

10 (3) Section 404(a)(7) of such Code, as amended 

11 by this Act, is amended— 

12 (A) by adding at the end of subparagraph 

13 (A) the following new sentence: ‘‘In the case of 

14 a defined benefit plan which is a single-em15 ployer plan, the amount necessary to satisfy the 

16 minimum funding standard provided by section 

17 412 shall not be less than the plan’s unfunded 

18 target liability determined under section 430.’’, 

19 and 

20 (B) by striking subparagraph (D) and in21 serting: 

22 ‘‘(D) INSURANCE CONTRACT PLANS.—For 

23 purposes of this paragraph, a plan described in 

24 section 412(g)(3) shall be treated as a defined 

25 benefit plan.’’. 
202 

•S 1953 PCS 

1 (4) Section 404A(g)(3)(A) of such Code is 

2 amended by striking ‘‘paragraphs (3) and (7) of sec3 tion 412(c)’’ and inserting ‘‘paragraphs (3) and (6) 

4 (without regard to subparagraph (B) thereof) of sec5 tion 431(c)’’. 

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

7 this section shall apply to years beginning after December 

8 31, 2006. 

9 SEC. 305. TECHNICAL AND CONFORMING AMENDMENTS. 

10 (a) AMENDMENTS RELATED TO QUALIFICATION RE11 QUIREMENTS.— 

12 (1) Section 401(a)(29) of the Internal Revenue 

13 Code of 1986 is amended to read as follows: 

14 ‘‘(29) BENEFIT LIMITATIONS ON UNDER15 FUNDED PLANS AND PLANS MAINTAINED BY FINAN16 CIALLY WEAK EMPLOYERS.—In the case of a defined 

17 benefit plan (other than a multiemployer plan) to 

18 which the requirements of section 412 apply, the 

19 trust of which the plan is a part shall not constitute 

20 a qualified trust under this subsection unless the 

21 plan meets the requirements of section 436.’’. 

22 (2)(A) Section 401(a) of such Code, as amend23 ed by section 101 of this Act, is amended by striking 

24 paragraphs (32) and (33) and by redesignating 
203 

•S 1953 PCS 

1 paragraphs (34) and (35) as paragraphs (32) and 

2 (33). 

3 (B)(i) Section 401(a)(28)(B)(v) of such Code, 

4 as added by section 101 of this Act, is amended by 

5 striking ‘‘paragraph (35)(E)’’ and inserting ‘‘para6 graph (33)(E)’’. 

7 (ii) Section 409(h)(7) of such Code, as amended 

8 by section 101 of this Act, is amended by striking 

9 ‘‘section 401(a)(35)’’ and inserting ‘‘section 

10 401(a)(33)’’. 

11 (iii) Section 101(c)(3)(C) of this Act is amend12 ed by striking ‘‘section 401(a)(35)(H)’’ and insert13 ing ‘‘section 401(a)(33)(H)’’. 

14 (iv) Subsections (e) and (f) of section 4980H(e) 

15 of such Code, as added by section 102 of this Act, 

16 are each amended by striking ‘‘section 401(a)(35)’’ 

17 each place it appears and inserting ‘‘section 

18 401(a)(33)’’. 

19 (v) Section 4980I(f)(1) of such Code, as added 

20 by section 103 of this Act, is amended by striking 

21 ‘‘section 401(a)(35)(E)(iv)’’ and inserting ‘‘section 

22 401(a)(33)(E)(iv)’’. 

23 (vi) Section 4980J(e)(9)(B) of such Code, as 

24 added by section 104 of this Act, is amended by 
204 

•S 1953 PCS 

1 striking ‘‘section 401(a)(35)(E)(iv)’’ and inserting 

2 ‘‘section 401(a)(33)(E)(iv)’’. 

3 (vii) Section 101(i)(8)(B) of the Employee Re4 tirement Income Security Act of 1974, as amended 

5 by section 104 of this Act, is amended by striking 

6 ‘‘section 401(a)(35)(E)(iv)’’ and inserting 

7 ‘‘401(a)(33)(E)(iv)’’. 

8 (b) VESTING RULES.—Section 411 of such Code is 

9 amended— 

10 (1) by striking ‘‘section 412(c)(8)’’ in sub11 section (a)(3)(C) and inserting ‘‘section 412(g)(2)’’, 

12 (2) in subsection (b)(1)(F)— 

13 (A) by striking ‘‘paragraphs (2) and (3) of 

14 section 412(i)’’ in clause (ii) and inserting 

15 ‘‘subparagraphs (B) and (C) of section 

16 412(g)(3)’’, and 

17 (B) by striking ‘‘paragraphs (4), (5), and 

18 (6) of section 412(i)’’ and inserting ‘‘subpara19 graphs (D), (E), and (F) of section 412(g)(3)’’, 

20 and 

21 (3) by striking ‘‘section 412(c)(8)’’ in sub22 section (d)(6)(A) and inserting ‘‘section 412(g)(2)’’. 

23 (c) MERGERS AND CONSOLIDATIONS OF PLANS.— 

24 Subclause (I) of section 414(l)(2)(B)(i) of such Code is 

25 amended to read as follows: 
205 

•S 1953 PCS 

1 ‘‘(I) the amount determined 

2 under section 431(c)(6)(A)(i) in the 

3 case of a multiemployer plan (and the 

4 sum of the target liability and target 

5 normal cost determined under section 

6 430 in the case of any other plan), 

7 over’’. 

8 (d) SPECIAL RULES FOR MULTIEMPLOYER PLANS.— 

9 (1) Section 418(b)(2) of such Code is amend10 ed— 

11 (A) by striking ‘‘section 412(b)(2)’’ in sub12 paragraph (A) and inserting ‘‘section 

13 431(b)(2)’’, and 

14 (B) by striking ‘‘section 412(b)(3)(B)’’ in 

15 subparagraph (B) and inserting ‘‘section 

16 431(b)(3)(B)’’. 

17 (2) Section 418B of such Code is amended— 

18 (A) by striking ‘‘section 412(b)(2)(A) or 

19 (B)’’ in subsection (d)(1)(B) and inserting 

20 ‘‘section 431(b)(2)(A) or (B)’’, 

21 (B) by striking ‘‘section 412(c)(8)’’ in sub22 section (e) and inserting ‘‘section 412(g)(2)’’, 

23 and 

24 (C) by striking ‘‘section 412(c)(3)’’ in sub25 section (g) and inserting ‘‘section 431(c)(3)’’. 
206 

•S 1953 PCS 

1 (3) Section 418D(a)(2) of such Code is amend2 ed— 

3 (A) by striking ‘‘section 412(c)(8)’’ and in4 serting ‘‘section 412(g)(2)’’, and 

5 (B) by striking ‘‘section 412(c)(10)’’ and 

6 inserting ‘‘section 431(c)(8)’’. 

7 (e) TRANSFER OF EXCESS PENSION ASSETS TO RE8 TIREE HEALTH ACCOUNTS.— 

9 (1) Section 420(e)(2) of such Code is amended 

10 to read as follows: 

11 ‘‘(2) EXCESS PENSION ASSETS.—The term ‘ex12 cess pension assets’ means the excess (if any) of— 

13 ‘‘(A) the lesser of the amount determined 

14 under subparagraph (A) or (B) of section 

15 430(g)(2) as of the valuation date for the plan 

16 year in which the transfer occurs, over 

17 ‘‘(B) 125 percent of the sum of the target 

18 liability and the target normal cost determined 

19 under section 430 for such plan year.’’. 

20 (2) Section 420(e)(4) of such Code is amended 

21 to read as follows: 

22 ‘‘(4) COORDINATION WITH SECTION 430.—In 

23 the case of a qualified transfer to a health benefits 

24 account, any assets transferred in a plan year on or 

25 before the valuation date for the plan year (and any 
207 

•S 1953 PCS 

1 income allocable thereto) shall, for purposes of sec2 tion 430, not be treated as assets in the plan as of 

3 the valuation date. The prefunding balance under 

4 section 430(e) for the plan year shall be reduced by 

5 the assets so transferred.’’. 

6 (f) EXCISE TAXES.— 

7 (1) Subsections (a) and (b) of section 4971 of 

8 such Code are amended to read as follows: 

9 ‘‘(a) INITIAL TAX.—If at any time during any taxable 

10 year an employer maintains a plan to which section 412 

11 applies, there is hereby imposed for the taxable year a tax 

12 equal to— 

13 ‘‘(1) in the case of a plan other than a multiem14 ployer plan, 10 percent of the aggregate unpaid min15 imum required contributions for all plan years re16 maining unpaid as of the end of any plan year end17 ing with or within the taxable year, and 

18 ‘‘(2) in the case of a multiemployer plan, 5 per19 cent of the accumulated funding deficiency deter20 mined under section 431 as of the end of any plan 

21 year ending with or within the taxable year. 

22 ‘‘(b) ADDITIONAL TAX.—If— 

23 ‘‘(1) a tax is imposed under subsection (a)(1) 

24 on any unpaid required minimum contribution and 
208 

•S 1953 PCS 

1 such amount remains unpaid as of the close of the 

2 taxable period, or 

3 ‘‘(2) a tax is imposed under subsection (a)(2) 

4 on any accumulated funding deficiency and the accu5 mulated funding deficiency is not corrected within 

6 the taxable period, 

7 there is hereby imposed a tax equal to 100 percent of the 

8 unpaid minimum required contribution or accumulated 

9 funding deficiency, whichever is applicable, to the extent 

10 not so paid or corrected.’’. 

11 (2) Section 4971(c) of such Code is amended— 

12 (A) by striking ‘‘the last two sentences of 

13 section 412(a)’’ in paragraph (1) and inserting 

14 ‘‘section 431’’, and 

15 (B) by adding at the end the following new 

16 paragraph: 

17 ‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBU18 TION.— 

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

20 minimum required contribution’ means, with re21 spect to any plan year, any minimum required 

22 contribution under section 430 for the plan 

23 year which is not paid on or before the due date 

24 (as determined under section 430(h)(1)) for the 

25 plan year. 
209 

•S 1953 PCS 

1 ‘‘(B) ORDERING RULE.—Any payment to 

2 or under a plan for any plan year shall be allo3 cated first to unpaid minimum required con4 tributions for all preceding plan years in the 

5 order in which such contributions became due 

6 and then to the minimum required contribution 

7 under section 430 for the plan year.’’. 

8 (3) Section 4971(e)(1) of such Code is amended 

9 by striking ‘‘section 412(b)(3)(A)’’ and inserting 

10 ‘‘section 412(c)(1)’’. 

11 (4) Section 4971(f)(1) of such Code is amend12 ed— 

13 (A) by striking ‘‘section 412(m)(5)’’ and 

14 inserting ‘‘section 430(j)(5)’’, and 

15 (B) by striking ‘‘section 412(m)’’ and in16 serting ‘‘section 430(j)’’. 

17 (5) Section 4972(c)(7) of such Code is amended 

18 by striking ‘‘except to the extent that such contribu19 tions exceed the full-funding limitation (as defined in 

20 section 412(c)(7), determined without regard to sub21 paragraph (A)(i)(I) thereof)’’ and inserting ‘‘except, 

22 in the case of a multiemployer plan, to the extent 

23 that such contributions exceed the full-funding limi24 tation (as defined in section 431(c)(6))’’. 
210 

•S 1953 PCS 

1 (g) REPORTING REQUIREMENTS.—Section 6059(b) 

2 of such Code is amended— 

3 (1) by striking ‘‘the accumulated funding defi4 ciency (as defined in section 412(a))’’ in paragraph 

5 (2) and inserting ‘‘the unpaid minimum required 

6 contributions determined under section 430, or the 

7 accumulated funding deficiency determined under 

8 section 431,’’, and 

9 (2) by striking paragraph (3)(B) and inserting: 

10 ‘‘(B) the requirements for reasonable actu11 arial assumptions under section 430(h)(1) or 

12 431(c)(3), whichever are applicable, have been 

13 complied with.’’. 

14 (h) DEFINITIONS.—Section 414 of such Code (relat15 ing to definitions and special rules) is amended by adding 

16 at the end the following: 

17 ‘‘(w) OTHER DEFINITIONS.—For purposes of this 

18 part— 

19 ‘‘(1) AFFECTED PARTY.—The term ‘affected 

20 party’ means, with respect to any plan— 

21 ‘‘(A) a participant, 

22 ‘‘(B) a beneficiary, 

23 ‘‘(C) an alternate payee (as defined in sec24 tion 414(p)(8)), 
211 

•S 1953 PCS 

1 ‘‘(D) each employee organization rep2 resenting participants in the plan, and 

3 ‘‘(E) each employer with an obligation to 

4 make contributions to the plan. 

5 ‘‘(2) SINGLE-EMPLOYER PLAN.—The term ‘sin6 gle-employer plan’ means a defined benefit plan, or 

7 a defined contribution plan, which is not a multiem8 ployer plan.’’. 

9 (i) EFFECTIVE DATE.— 

10 (1) IN GENERAL.—Except as prescribed in 

11 paragraph (2), the amendments made by this section 

12 shall apply to plan years beginning after December 

13 31, 2006. 

14 (2) EXCISE TAX.—The amendments made by 

15 subsection (f) shall apply to any taxable year with 

16 or within which a plan year beginning after Decem17 ber 31, 2006, ends. 

18 PART II—AMENDMENTS TO THE EMPLOYEE 

19 RETIREMENT INCOME SECURITY ACT OF 1974 

20 SEC. 311. MODIFICATIONS OF THE MINIMUM FUNDING 

21 STANDARDS. 

22 (a) REPEAL OF EXISTING FUNDING RULES.—Sec23 tions 302 through 308 of the Employee Retirement In24 come Security Act of 1974 (29 U.S.C. 1082 through 

25 1086) are repealed. 
212 

•S 1953 PCS 

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

2 of subtitle B of title I of such Act (as amended by sub3 section (a)) is amended by inserting after section 301 the 

4 following new section: 

5 ‘‘MINIMUM FUNDING STANDARDS

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

7 FUNDING STANDARD.— 

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

9 applies shall satisfy the minimum funding standard 

10 applicable to the plan for any plan year. 

11 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur12 poses of paragraph (1), a plan shall be treated as 

13 satisfying the minimum funding standard for a plan 

14 year if— 

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

16 which is a single-employer plan, the employer 

17 makes contributions to or under the plan for 

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

19 less than the minimum required contribution 

20 determined under section 303 for the plan for 

21 the plan year, 

22 ‘‘(B) in the case of a money purchase pen23 sion plan which is a single-employer plan, the 

24 employer makes contributions to or under the 

25 plan for the plan year which are required under 

26 the plan, and 
213 

•S 1953 PCS 

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

2 the employers make contributions to or under 

3 the plan for the plan year which, in the aggre4 gate, are sufficient to ensure that the plan does 

5 not have an accumulated funding deficiency 

6 under section 304 as of the end of the plan 

7 year. 

8 ‘‘(b) 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 303(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 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND22 ARD.— 

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

25 ‘‘(A) IN GENERAL.—If— 
214 

•S 1953 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 

5 the minimum funding standard for a plan 

6 year without temporary substantial busi7 ness hardship (substantial business hard8 ship in the case of a multiemployer plan), 

9 and 

10 ‘‘(ii) application of the standard would 

11 be adverse to the interests of plan partici12 pants in the aggregate, 

13 the Secretary of the Treasury may, subject to 

14 subparagraphs (B) and (C), waive the require15 ments of subsection (a) for such year with re16 spect to all or any portion of the minimum 

17 funding standard. The Secretary of the Treas18 ury shall not waive the minimum funding 

19 standard with respect to a plan for more than 

20 3 of any 15 (5 of any 15 in the case of a multi21 employer plan) consecutive plan years. 

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

23 granted under subparagraph (A) for any plan 

24 year, in the case of— 
215 

•S 1953 PCS 

1 ‘‘(i) a single-employer plan, the min2 imum required contribution under section 

3 303 for the plan year shall be reduced by 

4 the amount of the waived funding defi5 ciency and such amount shall be amortized 

6 as required under section 303(d), and 

7 ‘‘(ii) a multiemployer plan, the fund8 ing standard account shall be credited 

9 under section 304(b)(3)(C) with the 

10 amount of the waived funding deficiency 

11 and such amount shall be amortized as re12 quired under section 304(b)(2)(C), except 

13 that the interest rate used for purposes of 

14 computing the amortization charge de15 scribed in such section shall be the rate de16 termined under section 6621(b) of the In17 ternal Revenue Code of 1986. 

18 ‘‘(C) WAIVER OF AMORTIZED PORTION

19 NOT ALLOWED.—The Secretary of the Treasury 

20 may not waive under subparagraph (A) any 

21 portion of the minimum funding standard 

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

23 attributable to any amortization payment re24 quired to be made for such plan year with re25 spect to any amortization described in subpara-
216 

•S 1953 PCS 

1 graph (B) of any waived funding deficiency for 

2 any preceding plan year. 

3 ‘‘(2) DETERMINATION OF BUSINESS HARD4 SHIP.—For purposes of this section, the factors 

5 taken into account in determining temporary sub6 stantial business hardship (substantial business 

7 hardship in the case of a multiemployer plan) shall 

8 include, but shall not be limited to, whether or not— 

9 ‘‘(A) the employer is operating at an eco10 nomic loss, 

11 ‘‘(B) there is substantial unemployment or 

12 underemployment in the trade or business and 

13 in the industry concerned, 

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

15 concerned are depressed or declining, and 

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

17 plan will be continued only if the waiver is 

18 granted. 

19 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur20 poses of this section, the term ‘waived funding defi21 ciency’ means the portion of the minimum funding 

22 standard under subsection (a) (determined without 

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

24 Secretary of the Treasury under this subsection and 

25 not satisfied by employer contributions. 
217 

•S 1953 PCS 

1 ‘‘(4) APPLICATION MUST BE SUBMITTED BEFORE DATE 21 2 ⁄2 MONTHS AFTER CLOSE OF YEAR.— 

3 In the case of a single-employer plan, no waiver may 

4 be granted under this subsection with respect to any 

5 plan for any plan year unless an application therefor 

6 is submitted to the Secretary of the Treasury not 

7 later than the 15th day of the 3rd month beginning 

8 after the close of such plan year. 

9 ‘‘(5) SPECIAL RULE IF EMPLOYER IS MEMBER

10 OF CONTROLLED GROUP.—In the case of a single11 employer plan, if an employer is a member of a con12 trolled group, the temporary substantial business 

13 hardship requirements of paragraph (1) shall be 

14 treated as met only if such requirements are met— 

15 ‘‘(A) with respect to such employer, and 

16 ‘‘(B) with respect to the controlled group 

17 of which such employer is a member (deter18 mined by treating all members of such group as 

19 a single employer). 

20 The Secretary of the Treasury may provide that an 

21 analysis of a trade or business or industry of a mem22 ber need not be conducted if the Secretary of the 

23 Treasury determines such analysis is not necessary 

24 because the taking into account of such member 
218 

•S 1953 PCS 

1 would not significantly affect the determination 

2 under this subsection. 

3 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS.—In 

4 the case of a multiemployer plan, the period of years re5 quired to amortize any unfunded liability (described in any 

6 clause of section 304(b)(2)(B)) of the plan may be ex7 tended by the Secretary of the Treasury for a period of 

8 time (not in excess of 10 years) if the Secretary of the 

9 Treasury determines that such extension would carry out 

10 the purposes of this Act and would provide adequate pro11 tection for participants under the plan and their bene12 ficiaries and if the Secretary of the Treasury determines 

13 that the failure to permit such extension would— 

14 ‘‘(1) result in— 

15 ‘‘(A) a substantial risk to the voluntary 

16 continuation of the plan, or 

17 ‘‘(B) a substantial curtailment of pension 

18 benefit levels or employee compensation, and 

19 ‘‘(2) be adverse to the interests of plan partici20 pants in the aggregate. 

21 The interest rate applicable for any plan year under any 

22 arrangement entered into by the Secretary of the Treasury 

23 in connection with an extension granted under this sub24 section shall be the rate determined under section 6621(b) 

25 of the Internal Revenue Code of 1986. 
219 

•S 1953 PCS 

1 ‘‘(e) REQUIREMENTS RELATING TO WAIVERS AND

2 EXTENSIONS.— 

3 ‘‘(1) BENEFITS MAY NOT BE INCREASED DUR4 ING WAIVER OR EXTENSION PERIOD.—If— 

5 ‘‘(A) a waiver under subsection (c)(1) or 

6 an extension of time under subsection (d) is in 

7 effect with respect to the plan, or 

8 ‘‘(B) a plan amendment described in sub9 section (f)(2) which reduces the accrued benefit 

10 of any participant has been made at any time 

11 in the preceding 12 months (24 months for 

12 multiemployer plans), 

13 no applicable benefit increase shall take effect. If an 

14 applicable benefit increase takes effect in violation of 

15 the preceding sentence, any such waiver or extension 

16 of time shall not apply to any plan year ending on 

17 or after the date on which such increase takes effect. 

18 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

19 apply to any applicable benefit increase pursuant to 

20 a plan amendment which— 

21 ‘‘(A) the Secretary of the Treasury deter22 mines to be reasonable and which provides for 

23 only de minimis increases in the liabilities of 

24 the plan, 
220 

•S 1953 PCS 

1 ‘‘(B) only repeals an amendment described 

2 in subsection (f)(2) which reduced the accrued 

3 benefit of any participant, or 

4 ‘‘(C) is required as a condition of qualifica5 tion under part I of subchapter D of chapter 1 

6 of the Internal Revenue Code of 1986. 

7 ‘‘(3) APPLICABLE BENEFIT INCREASE.—The 

8 term ‘applicable benefit increase’ has the meaning 

9 given such term by section 305(b)(3) without regard 

10 to subparagraph (B) or (C) thereof. 

11 ‘‘(4) SECURITY FOR WAIVERS; CONSULTA12 TIONS.— 

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 to provide security 

19 to such plan as a condition for granting or 

20 modifying a waiver under subsection (c). 

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

22 provided under clause (i) may be perfected 

23 and enforced only by— 

24 ‘‘(I) the Pension Benefit Guar25 anty Corporation, or 
221 

•S 1953 PCS 

1 ‘‘(II) at the direction of the Cor2 poration, by a contributing sponsor 

3 (within the meaning of section 

4 4001(a)(13)) or a member of such 

5 sponsor’s controlled group (within the 

6 meaning of section 4001(a)(14)). 

7 ‘‘(B) CONSULTATION WITH THE PENSION

8 BENEFIT GUARANTY CORPORATION.—Except as 

9 provided in subparagraph (C), the Secretary of 

10 the Treasury shall, before granting or modi11 fying a waiver under subsection (c) with respect 

12 to a plan described in subparagraph (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 
222 

•S 1953 PCS 

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 

7 under this subparagraph shall be consid8 ered tax return information and subject to 

9 the safeguarding and reporting require10 ments of section 6103(p) of the Internal 

11 Revenue Code of 1986. 

12 ‘‘(C) EXCEPTION FOR CERTAIN WAIV13 ERS.— 

14 ‘‘(i) IN GENERAL.—The preceding 

15 provisions of this paragraph shall not 

16 apply to any plan with respect to which the 

17 sum of— 

18 ‘‘(I) the aggregate unpaid min19 imum required contributions (within 

20 the meaning of section 4971 of the 

21 Internal Revenue Code of 1986) for 

22 the plan year and all preceding plan 

23 years, and 

24 ‘‘(II) the present value of all 

25 waiver amortization payments under 
223 

•S 1953 PCS 

1 section 303(d) determined for the 

2 plan year and all succeeding plan 

3 years, 

4 is less than $1,000,000. 

5 ‘‘(ii) TREATMENT OF PENDING WAIV6 ERS.—For purposes of clause (i)(I), min7 imum required contributions shall include 

8 any increase in such amount which would 

9 result if all applications for waivers of the 

10 minimum funding standard under sub11 section (c) or section 412(d) of the Inter12 nal Revenue Code of 1986 which are pend13 ing with respect to such plan were denied. 

14 ‘‘(5) ADDITIONAL REQUIREMENTS.— 

15 ‘‘(A) ADVANCE NOTICE.—The Secretary of 

16 the Treasury shall, before granting a waiver 

17 under subsection (c) or an extension under sub18 section (d), require each applicant to provide 

19 evidence satisfactory to the Secretary of the 

20 Treasury that the applicant has provided notice 

21 of the filing of the application for such waiver 

22 or extension to each affected party (as defined 

23 in section 4001(a)(21)) other than the Corpora24 tion, and each employer with an obligation to 

25 make contributions to the affected plan. Such 
224 

•S 1953 PCS 

1 notice shall include a description of the extent 

2 to which the plan is funded for benefits which 

3 are guaranteed under title IV and for benefit li4 abilities (within the meaning of section 

5 4041(d)). 

6 ‘‘(B) CONSIDERATION OF RELEVANT IN7 FORMATION.—The Secretary of the Treasury 

8 shall consider any relevant information provided 

9 by a person to whom notice was given under 

10 subparagraph (A). 

11 ‘‘(f) OTHER DEFINITIONS AND RULES.—For pur12 poses of this section— 

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

14 funding method or a plan year for a plan is changed, 

15 the change shall take effect only if approved by the 

16 Secretary of the Treasury. 

17 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND18 MENTS.—For purposes of this section, any amend19 ment applying to a plan year which— 

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

21 year but no later than 2 and one-half months 

22 after the close of the plan year (or, in the case 

23 of a multiemployer plan, no later than 2 years 

24 after the close of such plan year), 
225 

•S 1953 PCS 

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)(1) is unavailable or inadequate. 
226 

•S 1953 PCS 

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

2 this section and section 303, the term ‘controlled 

3 group’ means any group treated as a single employer 

4 under subsection (b), (c), (m), or (o) of section 414 

5 of the Internal Revenue Code of 1986.’’. 

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

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

8 relating to sections 302 through 306 and inserting the fol9 lowing new item: 

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

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

11 this section shall apply to plan years beginning after De12 cember 31, 2006. 

13 SEC. 312. FUNDING RULES APPLICABLE TO SINGLE-EM14 PLOYER PENSION PLANS. 

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

16 the Employee Retirement Income Security Act of 1974, 

17 as amended by section 311 of this Act, is amended by in18 serting after section 302 the following new section: 

19 ‘‘MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER

20 DEFINED BENEFIT PLANS

21 ‘‘SEC. 303. (a) MINIMUM REQUIRED CONTRIBU22 TION.— 

23 ‘‘(1) IN GENERAL.—The minimum required 

24 contribution for a defined benefit plan to which sec25 tion 302(a)(2)(A) applies for any plan year shall, for 
227 

•S 1953 PCS 

1 purposes of this section and section 302, be equal to 

2 the sum of— 

3 ‘‘(A) the target normal cost for the plan 

4 year, 

5 ‘‘(B) the aggregate amortization payment 

6 (if any) for the plan year, and 

7 ‘‘(C) the waiver amortization payment (if 

8 any) for the plan year. 

9 In no event shall the sum of the amounts deter10 mined under subparagraphs (B) and (C) for any 

11 plan year exceed the unfunded target liability for the 

12 plan year. 

13 ‘‘(2) LIMITATION ON ANNUAL INCREASES OR

14 DECREASES.— 

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

16 subparagraph (B), the minimum required con17 tribution for any plan year beginning after 

18 2007— 

19 ‘‘(i) shall not exceed the minimum re20 quired contribution for the preceding plan 

21 year (determined after application of this 

22 paragraph and without regard to any ad23 justment under subsection (i)(2)), in24 creased by the greater of— 
228 

•S 1953 PCS 

1 ‘‘(I) 30 percent of the target nor2 mal cost of the plan for the preceding 

3 plan year, or 

4 ‘‘(II) 2 percent of the target li5 ability of the plan for the preceding 

6 plan year, and 

7 ‘‘(ii) shall not be less than such min8 imum required contribution for the pre9 ceding plan year, reduced by the greater of 

10 the amounts under subclause (I) or (II) of 

11 clause (i). 

12 ‘‘(B) SPECIAL RULES FOR BENEFIT IN13 CREASES OR DECREASES DURING PLAN YEAR.— 

14 If an applicable benefit increase (as defined in 

15 section 305(b)(3) without regard to subpara16 graph (B) or (C) thereof) takes effect during 

17 the current plan year— 

18 ‘‘(i) the minimum required contribu19 tion for the current plan year for purposes 

20 of applying subparagraph (A) shall be de21 termined without regard to any increase in 

22 such contribution attributable to the appli23 cable benefit increase, and 

24 ‘‘(ii) the amount determined under 

25 subparagraph (A) (after application of 
229 

•S 1953 PCS 

1 clause (i)) shall be increased by the 

2 amount of the increase in the minimum re3 quired contribution disregarded under 

4 clause (i). 

5 A similar rule shall apply in the case of any 

6 benefit decrease which takes effect during the 

7 current plan year. 

8 ‘‘(C) SPECIAL RULES RELATING TO PRE9 CEDING YEAR.—For purposes of subparagraph 

10 (A)— 

11 ‘‘(i) all target liability amortization in12 stallments and waiver amortization install13 ments under subsections (c) and (d) which 

14 were determined with respect to any amor15 tizable target liability or waived funding 

16 deficiency which is fully amortized as of 

17 the close of the preceding plan year shall 

18 not be taken into account in determining 

19 the minimum required contribution for the 

20 preceding plan year, and 

21 ‘‘(ii) if paragraph (3) applied for the 

22 preceding plan year, the minimum required 

23 contribution for the preceding plan year 

24 shall be treated as being equal to the tar25 get normal cost for such year. 
230 

•S 1953 PCS 

1 ‘‘(3) SPECIAL RULES FOR PLANS WHERE AS2 SETS EXCEED TARGET LIABILITY.—If, as of the 

3 valuation date for any plan year, the value of the as4 sets of the plan (reduced as provided in subsection 

5 (e)(3)) equals or exceeds the target liability for the 

6 plan year (in this subsection referred to as the ‘cur7 rent plan year’)— 

8 ‘‘(A) the minimum required contribution 

9 for the current plan year shall be equal to tar10 get normal cost, reduced (but not below zero) 

11 by the amount of any such excess, and 

12 ‘‘(B) all target liability amortization in13 stallments and waiver amortization installments 

14 under subsections (c) and (d) which were deter15 mined with respect to any amortizable target li16 ability or waived funding deficiency for the cur17 rent plan year or any preceding plan year shall 

18 not be taken into account for any succeeding 

19 plan year. 

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

21 section— 

22 ‘‘(1) IN GENERAL.—The term ‘target normal 

23 cost’ means, with respect to any plan year, the 

24 present value of all benefits which accrue or are 

25 earned under the plan during the plan year. If any 
231 

•S 1953 PCS 

1 benefit attributable to services performed in a pre2 ceding plan year is increased by reason of any in3 crease in compensation during the current plan year, 

4 the increase shall be treated as accruing during the 

5 current plan year. 

6 ‘‘(2) FINANCIALLY-WEAK EMPLOYERS.—If a 

7 plan sponsor of a plan for any plan year is a finan8 cially-weak employer for any plan year, the target 

9 normal cost of the plan for the plan year shall be 

10 the at-risk target normal cost determined under sub11 section (f). 

12 ‘‘(c) DEFINITIONS AND RULES RELATING TO TAR13 GET LIABILITY .—For purposes of this section— 

14 ‘‘(1) TARGET LIABILITY.— 

15 ‘‘(A) IN GENERAL.—The term ‘target li16 ability’ means, with respect to any plan year, 

17 the present value of all benefits accrued or 

18 earned under the plan as of the beginning of 

19 the plan year. 

20 ‘‘(B) FINANCIALLY-WEAK EMPLOYERS.—If 

21 a plan sponsor of a plan for any plan year is 

22 a financially-weak employer for any plan year, 

23 the target liability of the plan for the plan year 

24 shall be the at-risk target liability determined 

25 under subsection (f). 
232 

•S 1953 PCS 

1 ‘‘(2) UNFUNDED TARGET LIABILITY.—The 

2 term ‘unfunded target liability’ means, with respect 

3 to any plan year, the excess (if any) of— 

4 ‘‘(A) the target liability for the plan year, 

5 over 

6 ‘‘(B) the value of the assets of the plan 

7 (reduced as provided under subsection (e)(3)) 

8 as of the valuation date. 

9 ‘‘(3) AGGREGATE AMORTIZATION PAYMENTS.— 

10 For purposes of this section— 

11 ‘‘(A) AGGREGATE AMORTIZATION PAY12 MENT.—The aggregate amortization payment 

13 for any plan year is the aggregate amount of 

14 the target liability amortization installments de15 termined for the plan year with respect to any 

16 amortizable target liability for the plan year 

17 and each of the 6 preceding plan years. 

18 ‘‘(B) AMORTIZABLE TARGET LIABILITY.— 

19 ‘‘(i) IN GENERAL.—The term ‘amor20 tizable target liability’ means, with respect 

21 to any plan year, the amount (if any) by 

22 which the unfunded target liability for the 

23 current plan year is more or less than the 

24 amount determined under clause (ii). 
233 

•S 1953 PCS 

1 ‘‘(ii) AMOUNTS PREVIOUSLY AC2 COUNTED FOR.—The amount determined 

3 under this clause is the present value of all 

4 target liability amortization installments 

5 and waiver amortization installments under 

6 this subsection and subsection (d) which 

7 were determined for the current plan year 

8 or any succeeding plan year with respect to 

9 any amortizable target liability or waived 

10 funding deficiency for any plan year pre11 ceding the current plan year. 

12 ‘‘(C) TARGET LIABILITY AMORTIZATION

13 INSTALLMENTS.—If a plan has an amortizable 

14 target liability for any plan year— 

15 ‘‘(i) the liability shall be amortized in 

16 7 level amortization amounts over the 7- 

17 plan year period beginning with the plan 

18 year, and 

19 ‘‘(ii) the target liability amortization 

20 installment with respect to the liability for 

21 each of the 7 plan years shall be the fixed 

22 amount necessary to amortize the liability 

23 as provided under clause (i). 

24 ‘‘(D) COMPUTATION ASSUMPTIONS.—In 

25 determining the present value of any amortiza-
234 

•S 1953 PCS 

1 tion installment under subparagraph (B)(ii), or 

2 the amount of any amortization installment 

3 under subparagraph (C), the following rules 

4 shall apply: 

5 ‘‘(i) Each amortization installment 

6 shall be treated as made on the valuation 

7 date for the plan year for which the install8 ment is determined. 

9 ‘‘(ii) The interest rates used shall be 

10 the interest rates determined under the 

11 yield curve method under subsection 

12 (h)(2)(B) for the current plan year. 

13 ‘‘(4) TRANSITION RULE FOR AMORTIZATION OF

14 UNFUNDED TARGET LIABILITY.— 

15 ‘‘(A) IN GENERAL.—Solely for purposes of 

16 applying paragraph (3) in the case of plan 

17 years beginning after 2006 and before 2011, 

18 only the applicable percentage of target liability 

19 shall be taken into account under paragraph 

20 (2)(A) in determining unfunded target liability 

21 for the plan year. 

22 ‘‘(B) APPLICABLE PERCENTAGE.—For 

23 purposes of subparagraph (A)— 

24 ‘‘(i) IN GENERAL.—Except as pro25 vided in clause (ii), the applicable percent-
235 

•S 1953 PCS 

1 age shall be 93 percent for plan years be2 ginning in 2007, 96 percent for plan years 

3 beginning in 2008, and 100 percent for 

4 any succeeding plan year. 

5 ‘‘(ii) SMALL PLANS.—In the case of a 

6 plan described in subsection (g)(1)(B)(ii), 

7 the applicable percentage shall be deter8 mined in accordance with the following 

9 table: 

‘‘In the case of a plan year The applicable 

beginning in calendar year: percentage is—

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

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

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

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

10 ‘‘(d) AMORTIZATION OF WAIVED FUNDING DEFI11 CIENCY.—For purposes of this section— 

12 ‘‘(1) IN GENERAL.—The waiver amortization 

13 payment for any plan year is the aggregate amount 

14 of the waiver amortization installments determined 

15 for the plan year with respect to any waived funding 

16 deficiency for each of the 5 preceding plan years. 

17 ‘‘(2) WAIVER AMORTIZATION INSTALLMENTS.— 

18 If a plan has a waived funding deficiency for any 

19 plan year— 

20 ‘‘(A) the deficiency shall be amortized in 5 

21 level amortization amounts over the 5-plan year 
236 

•S 1953 PCS 

1 period beginning with the succeeding plan year, 

2 and 

3 ‘‘(B) the waiver amortization installment 

4 with respect to the deficiency for each of the 5 

5 plan years shall be the fixed amount necessary 

6 to amortize the deficiency as provided under 

7 subparagraph (A). 

8 ‘‘(3) COMPUTATION ASSUMPTIONS.—In making 

9 any determination under paragraph (2) with respect 

10 to the amount of any amortization installment, the 

11 following rules shall apply: 

12 ‘‘(A) Each amortization installment will be 

13 treated as made on the valuation date for the 

14 plan year for which the installment is deter15 mined. 

16 ‘‘(B) The interest rates used shall be the 

17 interest rates determined under the yield curve 

18 method under subsection (h)(2)(B) for the plan 

19 year in which the waived funding deficiency to 

20 which the installment relates arose. 

21 ‘‘(4) WAIVED FUNDING DEFICIENCY.—The 

22 waived funding deficiency of a plan for any plan 

23 year is the amount of any waived funding deficiency 

24 for the plan year under section 302(c). 
237 

•S 1953 PCS 

1 ‘‘(e) 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 302 for the plan year shall be reduced by the 

9 amount so credited. Any such amount shall be cred10 ited 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 302(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 
238 

•S 1953 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 applicable 

15 effective interest rate (as defined in sub16 section (g)(3)) for the preceding plan year 

17 and by treating contributions as being first 

18 used to satisfy the minimum required con19 tribution. 

20 ‘‘(iii) CERTAIN CONTRIBUTIONS DIS21 REGARDED.—Any contribution which is re22 quired to be made under section 305 in ad23 dition to any contribution required under 

24 this section shall not be taken into account 

25 for purposes of clause (i). 
239 

•S 1953 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)(2)(B), such rate of net gain or loss shall be 

17 determined on the basis of fair market value 

18 and shall properly take into account, in accord19 ance with such regulations, all contributions, 

20 distributions, and other plan payments made 

21 during such period. 

22 ‘‘(3) REDUCTION IN VALUE OF ASSETS.—Solely 

23 for purposes of applying subsections (a)(3) and 

24 (c)(2) in determining the minimum required con25 tribution under this section, the value of the plan as-
240 

•S 1953 PCS 

1 sets otherwise determined under subsection (g)(2) 

2 shall be reduced by the amount of the prefunding 

3 balance under this subsection. 

4 ‘‘(f) SPECIAL RULES FOR LARGE PLANS MAIN5 TAINED BY FINANCIALLY-WEAK EMPLOYERS.— 

6 ‘‘(1) DETERMINATION OF TARGET LIABILITY

7 AND NORMAL COST.— 

8 ‘‘(A) IN GENERAL.—If, as of the valuation 

9 date for any plan year, any plan sponsor of a 

10 plan to which this section applies is a finan11 cially-weak employer, then, in applying this sec12 tion for the plan year, the at-risk target liability 

13 and at-risk target normal cost shall (if greater) 

14 be substituted for the target liability and target 

15 normal cost, respectively. Such substitution 

16 shall not be applied for any plan year for which 

17 the plan has no unfunded target liability (deter18 mined without regard to this subsection or any 

19 reduction in the value of assets under sub20 section (e)(3)). 

21 ‘‘(B) EXCEPTION FOR SMALL PLANS.— 

22 This subsection shall not apply to a plan for a 

23 plan year if the plan was described in sub24 section (g)(1)(B)(ii) for the preceding plan 

25 year, determined by substituting ‘500’ for ‘100’. 
241 

•S 1953 PCS 

1 ‘‘(C) EXCEPTION FOR PLANS MAINTAINED

2 BY CERTAIN COOPERATIVES.—This subsection 

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

4 plan is maintained by more than 1 employer 

5 and at least 85 percent of the employers are— 

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

7 section 401(k)(7)(B) of the Internal Rev8 enue Code of 1986 without regard to 

9 clause (iv) thereof), or 

10 ‘‘(ii) organizations described in section 

11 1381(a) of such Code more than 50 per12 cent of the ownership or capital and profits 

13 interests of which are held— 

14 ‘‘(I) by producers of agricultural 

15 products, or 

16 ‘‘(II) organizations described in 

17 section 1381(a) of such Code meeting 

18 the requirements of subclause (I). 

19 ‘‘(D) PLANS LOSING EXEMPTION.—If sub20 paragraph (B) or (C) does not apply to a plan 

21 year but did apply for the preceding plan year, 

22 no plan year preceding the current plan year 

23 shall be taken into account for purposes of 

24 paragraph (3) or (4)(A). 

25 ‘‘(2) AT-RISK AMOUNTS.— 
242 

•S 1953 PCS 

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

2 paragraph (3), the at-risk target liability and 

3 at-risk target normal cost shall be determined 

4 in the same manner as the target liability and 

5 target normal cost, except that the actuarial as6 sumptions described in subparagraph (B) shall 

7 be used in computing such amounts. 

8 ‘‘(B) ACTUARIAL ASSUMPTIONS.—The ac9 tuarial assumptions described in this subpara10 graph are as follows: 

11 ‘‘(i) All employees who are not other12 wise assumed to retire as of the valuation 

13 date shall be assumed to retire at the ear14 liest retirement age under the plan but not 

15 before the end of the plan year for which 

16 the at-risk target liability and at-risk tar17 get normal cost are being determined. 

18 ‘‘(ii) All employees shall be assumed 

19 to elect the retirement benefit available 

20 under the plan at the assumed retirement 

21 age (determined after application of clause 

22 (i)) which would result in the highest 

23 present value of liabilities. 

24 ‘‘(3) PLAN SPONSORS FINANCIALLY WEAK FOR

25 LESS THAN 5 YEARS.— 
243 

•S 1953 PCS 

1 ‘‘(A) IN GENERAL.—If a plan sponsor to 

2 which this subsection applies for any plan year 

3 was not a financially-weak employer on the 

4 valuation date for each of the 4 immediately 

5 preceding plan years, the at-risk target liability 

6 or at-risk target normal cost shall be equal to 

7 the sum of— 

8 ‘‘(i) the applicable percentage of the 

9 at-risk target liability or the at-risk target 

10 normal cost, whichever is applicable, deter11 mined under this subsection (without re12 gard to this paragraph), and 

13 ‘‘(ii) the product of the target liability 

14 or the target normal cost, whichever is ap15 plicable, determined without regard to this 

16 subsection, and a percentage equal to 100 

17 percent minus the applicable percentage. 

18 ‘‘(B) APPLICABLE PERCENTAGE.—For 

19 purposes of subparagraph (A), the applicable 

20 percentage shall be determined in accordance 

21 with the following table: 

‘‘If the consecutive number of 

years (including the plan year) 

the plan sponsor is financially The applicable 

weak is— percentage is—

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

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

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

4 ............................................................................................... 80. 
244 

•S 1953 PCS 

1 ‘‘(4) FINANCIALLY-WEAK EMPLOYER.— 

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

3 subsection, the term ‘financially-weak employer’ 

4 means any employer if, as of the valuation date 

5 for each of the 3 consecutive plan years ending 

6 with the plan year— 

7 ‘‘(i) the employer has an outstanding 

8 senior unsecured debt instrument which is 

9 rated lower than investment grade by each 

10 of the nationally recognized statistical rat11 ing organizations for corporate bonds that 

12 has issued a credit rating for such instru13 ment, or 

14 ‘‘(ii) if no such debt instrument has 

15 been rated by such an organization but 1 

16 or more of such organizations has made an 

17 issuer credit rating for such employer, all 

18 such organizations which have so rated the 

19 employer have rated such employer lower 

20 than investment grade. 

21 ‘‘(B) CONTROLLED GROUP EXCEPTION.— 

22 If an employer treated as a financially-weak 

23 employer under subparagraph (A) is a member 

24 of a controlled group (as defined in section 

25 302(f)(3)), the employer shall not be treated as 
245 

•S 1953 PCS 

1 a financially-weak employer if a significant 

2 member (as determined under regulations pre3 scribed by the Secretary of the Treasury) of 

4 such group has an outstanding senior unse5 cured debt instrument that is rated as being in6 vestment grade by an organization described in 

7 subparagraph (A). 

8 ‘‘(C) EMPLOYERS WITH NO RATINGS.— 

9 If— 

10 ‘‘(i) an employer has no debt instru11 ment described in subparagraph (A)(i) 

12 which was rated by an organization de13 scribed in such subparagraph, and 

14 ‘‘(ii) no such organization has made 

15 an issuer credit rating for such employer, 

16 then such employer shall only be treated as a 

17 financially-weak employer to the extent provided 

18 in regulations prescribed by the Secretary of 

19 the Treasury. Such regulations shall also pro20 vide for the application of paragraph (5) in the 

21 case of employers treated as financially weak 

22 under such regulations. 

23 ‘‘(5) DETERMINATION OF CONSECUTIVE PERI24 ODS WHERE EMPLOYER IS FINANCIALLY WEAK.— 
246 

•S 1953 PCS 

1 ‘‘(A) RATINGS OF INVESTMENT GRADE OR

2 HIGHER.—If, as of the valuation date for any 

3 plan year, any rating described in clause (i) or 

4 (ii) of paragraph (4)(A) is investment grade or 

5 higher— 

6 ‘‘(i) this subsection shall not apply for 

7 the plan year, and 

8 ‘‘(ii) in applying this subsection for 

9 any succeeding plan year, the plan year de10 scribed in clause (i) and any preceding 

11 plan year shall not be taken into account 

12 in determining any consecutive period of 

13 plan years under paragraphs (3) and 

14 (4)(A). 

15 ‘‘(B) IMPROVEMENT YEARS NOT TAKEN

16 INTO ACCOUNT.— 

17 ‘‘(i) IN GENERAL.—An improvement 

18 year shall not be taken into account in de19 termining any consecutive period of plan 

20 years for purposes of paragraphs (3) and 

21 (4)(A). 

22 ‘‘(ii) APPLICATION OF SUBSECTION

23 AFTER IMPROVEMENT YEAR ENDS.—Plan 

24 years immediately before and after an im25 provement year (or consecutive period of 
247 

•S 1953 PCS 

1 improvement years) shall be treated as 

2 consecutive for purposes of paragraphs (3) 

3 and (4)(A). 

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

7 which any rating described in clause (i) or 

8 (ii) of paragraph (4)(A) is higher than 

9 such rating for the preceding plan year. 

10 ‘‘(6) YEARS BEFORE EFFECTIVE DATE.—For 

11 purposes of paragraphs (3) and (4), plan years be12 ginning before 2007 shall not be taken into account. 

13 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL14 ITIES.— 

15 ‘‘(1) TIME FOR MAKING DETERMINATIONS.— 

16 ‘‘(A) IN GENERAL.—Except as otherwise 

17 provided in this section, all determinations 

18 under this section for a plan year shall be made 

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

20 year. 

21 ‘‘(B) VALUATION DATE.— 

22 ‘‘(i) IN GENERAL.—Except as pro23 vided in clause (ii), the valuation date is 

24 the first day of the plan year. 
248 

•S 1953 PCS 

1 ‘‘(ii) EXCEPTION FOR SMALL

2 PLANS.—If, on each day during the pre3 ceding plan year, a plan had 100 or fewer 

4 participants, a plan may designate any day 

5 during the plan year as its valuation date 

6 for the plan year and succeeding plan 

7 years. For purposes of this clause, all de8 fined benefit plans (other than multiem9 ployer plans) maintained by the same em10 ployer (or any member of such employer’s 

11 controlled group (as defined in section 

12 302(f)(3))) shall be treated as 1 plan, but 

13 only participants with respect to such em14 ployer or member shall be taken into ac15 count. 

16 ‘‘(iii) APPLICATION OF CERTAIN

17 RULES IN DETERMINATION OF PLAN

18 SIZE.— 

19 ‘‘(I) PLANS NOT IN EXISTENCE

20 IN PRECEDING YEAR.—In the case of 

21 the first plan year of any plan, clause 

22 (ii) shall apply to such plan by taking 

23 into account the number of partici24 pants the plan is reasonably expected 
249 

•S 1953 PCS 

1 to have on days during such first plan 

2 year. 

3 ‘‘(II) PREDECESSORS.—Any ref4 erence in clause (ii) to an employer 

5 shall include a reference to any prede6 cessor of such employer. 

7 ‘‘(2) DETERMINATION OF VALUE OF PLAN AS8 SETS.—For purposes of this section— 

9 ‘‘(A) IN GENERAL.—The value of plan as10 sets shall be the fair market value of the assets. 

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

12 determine the value of plan assets on the basis 

13 of any reasonable actuarial method of valuation 

14 providing for the averaging of fair market val15 ues, but only if such method— 

16 ‘‘(i) is permitted under regulations 

17 prescribed by the Secretary of the Treas18 ury, and 

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

20 such values over more than the period be21 ginning on the last day of the 4th month 

22 preceding the valuation date and ending on 

23 the valuation date (or a similar period in 

24 the case of a valuation date which is not 

25 the 1st day of a month). 
250 

•S 1953 PCS 

1 ‘‘(C) ACCOUNTING FOR CONTRIBUTION RE2 CEIPTS.—For purposes of determining the 

3 value of assets under this paragraph— 

4 ‘‘(i) PRIOR YEAR CONTRIBUTIONS.— 

5 If— 

6 ‘‘(I) an employer makes any con7 tribution to the plan after the valu8 ation date for the plan year in which 

9 the contribution is made, and 

10 ‘‘(II) the contribution is for a 

11 preceding plan year, 

12 the contribution shall be taken into ac13 count as an asset of the plan as of the 

14 valuation date, except that in the case of 

15 any plan year beginning after 2007, only 

16 the present value (determined as of the 

17 valuation date) of such contribution may 

18 be taken into account. For purposes of the 

19 preceding sentence, present value shall be 

20 determined using the applicable effective 

21 interest rate for the preceding plan year to 

22 which the contribution is properly allo23 cable. 

24 ‘‘(ii) SPECIAL RULE FOR CURRENT

25 YEAR CONTRIBUTIONS MADE BEFORE
251 

•S 1953 PCS 

1 VALUATION DATE.—If any contributions 

2 for any plan year are made to or under the 

3 plan during the plan year but before the 

4 valuation date for the plan year, the assets 

5 of the plan as of the valuation date shall 

6 not include— 

7 ‘‘(I) such contributions, and 

8 ‘‘(II) interest on such contribu9 tions for the period between the date 

10 of the contributions and the valuation 

11 date, determined by using the applica12 ble effective interest rate for the plan 

13 year. 

14 ‘‘(3) APPLICABLE EFFECTIVE INTEREST

15 RATE.—For purposes of this section, the term ‘ap16 plicable effective interest rate’ means, with respect 

17 to any plan year, the single rate of interest which, 

18 if used to determine the present value of benefits 

19 earned or accrued under the plan as of the begin20 ning of the plan year, would result in an amount 

21 equal to the target liability for the plan year. 

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

23 For purposes of this section— 

24 ‘‘(1) ACTUARIAL ASSUMPTIONS.—Subject to 

25 this subsection, the determination of any present 
252 

•S 1953 PCS 

1 value or other computation under this section shall 

2 be made on the basis of actuarial assumptions and 

3 methods— 

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

5 into account the experience of the plan and rea6 sonable expectations), and 

7 ‘‘(B) which, in combination, offer the actu8 ary’s best estimate of anticipated experience 

9 under the plan. 

10 ‘‘(2) INTEREST RATE ASSUMPTIONS USED.— 

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

12 this section, the determination of present value 

13 or other computation requiring any interest rate 

14 assumption shall be made— 

15 ‘‘(i) in the case of plan years begin16 ning in 2007 or 2008, by using the phase17 in yield curve method (as defined in sub18 paragraph (C)), and 

19 ‘‘(ii) in the case of plan years begin20 ning after 2008, by using the yield curve 

21 method (as defined in subparagraph (B)). 

22 ‘‘(B) YIELD CURVE METHOD.—For pur23 poses of this paragraph— 

24 ‘‘(i) IN GENERAL.—The yield curve 

25 method is a method under which present 
253 

•S 1953 PCS 

1 value or other amounts requiring interest 

2 rate assumptions are determined— 

3 ‘‘(I) by using interest rates 

4 drawn from a yield curve which is pre5 scribed by the Secretary of the Treas6 ury and which reflects the yield on 

7 high-quality corporate bonds with 

8 varying maturities, and 

9 ‘‘(II) by matching the timing of 

10 the expected benefit payments under 

11 the plan to the interest rates on such 

12 yield curve. 

13 ‘‘(ii) PUBLICATION.—Each month the 

14 Secretary of the Treasury shall publish any 

15 yield curve prescribed under this subpara16 graph which shall apply to plan years be17 ginning in such month and such yield 

18 curve shall be based on average interest 

19 rates for business days occurring during 

20 the 3 preceding months. 

21 ‘‘(C) PHASE-IN YIELD CURVE METHOD.— 

22 ‘‘(i) IN GENERAL.—Present value or 

23 any other amount requiring the use of in24 terest rate assumptions determined under 
254 

•S 1953 PCS 

1 the phase-in yield curve method shall be 

2 equal to the sum of— 

3 ‘‘(I) the applicable percentage of 

4 such amount determined under the 

5 yield curve method described in sub6 paragraph (B), and 

7 ‘‘(II) the product of such amount 

8 determined by using the interest rate 

9 rules in effect under section 302(b)(5) 

10 for plan years beginning in 2006 and 

11 a percentage equal to 100 percent 

12 minus the applicable percentage. 

13 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

14 purposes of clause (i), the applicable per15 centage is 33 percent for plan years begin16 ning in 2007 and 67 percent for plan years 

17 beginning in 2008. 

18 ‘‘(3) MORTALITY TABLE USED.— 

19 ‘‘(A) SECRETARIAL AUTHORITY.—The Sec20 retary of the Treasury shall by regulation pre21 scribe mortality tables to be used under this 

22 subsection. Such tables shall be based upon the 

23 actual experience of pension plans and projected 

24 trends in such experience. In prescribing such 

25 tables, the Secretary of the Treasury shall take 
255 

•S 1953 PCS 

1 into account results of available independent 

2 studies of mortality of individuals covered by 

3 pension plans. 

4 ‘‘(B) SEPARATE MORTALITY TABLES FOR

5 THE DISABLED.—Notwithstanding subpara6 graph (A)— 

7 ‘‘(i) IN GENERAL.—The Secretary of 

8 the Treasury shall establish mortality ta9 bles which may be used (in lieu of the ta10 bles under subparagraph (A)) under this 

11 subsection for individuals who are entitled 

12 to benefits under the plan on account of 

13 disability. The Secretary of the Treasury 

14 shall establish separate tables for individ15 uals whose disabilities occur in plan years 

16 beginning before January 1, 1995, and for 

17 individuals whose disabilities occur in plan 

18 years beginning on or after such date. 

19 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

20 OCCURRING AFTER 1994.—In the case of 

21 disabilities occurring in plan years begin22 ning after December 31, 1994, the tables 

23 under clause (i) shall apply only with re24 spect to individuals described in such sub25 clause who are disabled within the meaning 
256 

•S 1953 PCS 

1 of title II of the Social Security Act and 

2 the regulations thereunder. 

3 ‘‘(C) PERIODIC REVIEW.—The Secretary of 

4 the Treasury shall periodically (at least every 5 

5 years) review any tables in effect under this 

6 paragraph and shall, to the extent the Secretary 

7 of the Treasury determines necessary, update 

8 the tables to reflect the actual experience of 

9 pension plans and projected trends in such ex10 perience. 

11 ‘‘(4) TREATMENT OF OPTIONAL FORMS OF

12 BENEFITS.—For purposes of determining any 

13 present value or making any computation under this 

14 section, there shall be taken into account— 

15 ‘‘(A) the probability that future payments 

16 will be made in an optional form of benefit pro17 vided under the plan (including lump sum pay18 ments), and 

19 ‘‘(B) any differences between the present 

20 value of any such optional form of benefit and 

21 the present value of the future payments used 

22 in computing target normal costs and target li23 ability under this section. 

24 ‘‘(5) APPROVAL REQUIRED FOR CERTAIN

25 CHANGES IN ASSUMPTIONS BY CERTAIN PLANS.— 
257 

•S 1953 PCS 

1 ‘‘(A) IN GENERAL.—No actuarial assump2 tion used to determine the target liability for a 

3 plan to which this paragraph applies may be 

4 changed without the approval of the Secretary 

5 of the Treasury. The preceding sentence shall 

6 not apply to changes required under paragraph 

7 (2) or (3) with respect to any assumption. 

8 ‘‘(B) PLANS TO WHICH PARAGRAPH AP9 PLIES.—This paragraph shall apply to a plan 

10 only if— 

11 ‘‘(i) the plan is a defined benefit plan 

12 to which title IV applies; 

13 ‘‘(ii) the aggregate unfunded target li14 abilities as of the close of the preceding 

15 plan year of— 

16 ‘‘(I) such plan, and 

17 ‘‘(II) all other plans to which 

18 title IV applies maintained by persons 

19 which are liable for payment of con20 tributions to such plan under section 

21 302(b), 

22 exceed $50,000,000; and 

23 ‘‘(iii) the change in assumptions (de24 termined after taking into account any 

25 changes as a result of the application of 
258 

•S 1953 PCS 

1 paragraphs (2) and (3)) results in a de2 crease in the unfunded target liability of 

3 the plan for the current plan year which— 

4 ‘‘(I) exceeds $50,000,000, or 

5 ‘‘(II) exceeds $5,000,000 and is 

6 5 percent or more of the target liabil7 ity of the plan before such change. 

8 ‘‘(i) PAYMENT OF MINIMUM REQUIRED CONTRIBU9 TION.— 

10 ‘‘(1) IN GENERAL.—The due date for any pay11 ment of any minimum required contribution for any 

plan year shall be 81 12 ⁄2 months after the close of the 

13 plan year. 

14 ‘‘(2) INTEREST.—Any minimum required con15 tribution for a plan year which is made on a date 

16 other than the valuation date for such plan year 

17 shall be properly adjusted for interest accruing for 

18 the period between the valuation date and the pay19 ment date, determined by using the applicable effec20 tive interest rate (as defined in subsection (g)(3)) 

21 for the plan year. 

22 ‘‘(j) QUARTERLY CONTRIBUTIONS REQUIRED.— 

23 ‘‘(1) FAILURE TO TIMELY MAKE REQUIRED IN24 STALLMENT.— 
259 

•S 1953 PCS 

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

2 to which this subsection applies, the employer 

3 maintaining the plan shall make the required 

4 installments under this subsection and if the 

5 employer fails to pay the full amount of a re6 quired installment for the plan year, then the 

7 amount of interest charged under subsection 

8 (i)(2) on the underpayment for the period of 

9 underpayment shall be determined by using a 

10 rate of interest equal to the rate otherwise used 

11 under subsection (i)(2) plus 5 percentage 

12 points. 

13 ‘‘(B) PLANS TO WHICH SUBSECTION AP14 PLIES.—This subsection applies to any defined 

15 benefit plan to which this section applies other 

16 than a plan which— 

17 ‘‘(i) is a plan described in subsection 

18 (g)(1)(B)(ii)), or 

19 ‘‘(ii) had an unfunded target liability 

20 of $1,000,000 or less for the preceding 

21 plan year. 

22 ‘‘(2) AMOUNT OF UNDERPAYMENT, PERIOD OF

23 UNDERPAYMENT.—For purposes of paragraph (1)— 

24 ‘‘(A) AMOUNT.—The amount of the under25 payment shall be the excess of— 
260 

•S 1953 PCS 

1 ‘‘(i) the required installment, over 

2 ‘‘(ii) the amount (if any) of the in3 stallment contributed to or under the plan 

4 on or before the due date for the install5 ment. 

6 ‘‘(B) PERIOD OF UNDERPAYMENT.—The 

7 period for which interest is charged under this 

8 subsection with regard to any portion of the un9 derpayment shall run from the due date for the 

10 installment to the date on which such portion is 

11 contributed to or under the plan. 

12 ‘‘(C) ORDER OF CREDITING CONTRIBU13 TIONS.—For purposes of subparagraph (A)(ii), 

14 contributions shall be credited against unpaid 

15 required installments in the order in which such 

16 installments are required to be paid. 

17 ‘‘(3) NUMBER OF REQUIRED INSTALLMENTS; 

18 DUE DATES.—For purposes of this subsection— 

19 ‘‘(A) PAYABLE IN 4 INSTALLMENTS.— 

20 There shall be 4 required installments for each 

21 plan year. 

22 ‘‘(B) TIME FOR PAYMENT OF INSTALL23 MENTS.— 

In the case of the following 

required installments: The due date is: 

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

2nd ................................................. July 15 
261 

•S 1953 PCS 

In the case of the following 

required installments: The due date is: 

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

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

1 ‘‘(4) AMOUNT OF REQUIRED INSTALLMENT.— 

2 For purposes of this subsection— 

3 ‘‘(A) IN GENERAL.—The amount of any 

4 required installment shall be 25 percent of the 

5 required annual payment. 

6 ‘‘(B) REQUIRED ANNUAL PAYMENT.—For 

7 purposes of subparagraph (A), the term ‘re8 quired annual payment’ means the lesser of— 

9 ‘‘(i) 90 percent of the minimum re10 quired contribution under subsection (a) 

11 required to be contributed to or under the 

12 plan by the employer for the plan year, or 

13 ‘‘(ii) 100 percent of the minimum re14 quired contribution so required for the pre15 ceding plan year (without regard to any 

16 waiver under section 302(c)). 

17 Clause (ii) shall not apply if the preceding plan 

18 year was not a year of 12 months. In the case 

19 of any plan year beginning in 2007, the amount 

20 under clause (ii) for the preceding plan year 

21 shall be determined by reference to the amount 

22 required to be contributed to or under the plan 
262 

•S 1953 PCS 

1 under section 302 (as such section was in effect 

2 before the date of the enactment of this part). 

3 ‘‘(5) LIQUIDITY REQUIREMENT.— 

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

5 paragraph applies shall be treated as failing to 

6 pay the full amount of any required installment 

7 to the extent that the value of the liquid assets 

8 paid in such installment is less than the liquid9 ity shortfall (whether or not such liquidity 

10 shortfall exceeds the amount of such install11 ment required to be paid but for this para12 graph). 

13 ‘‘(B) PLANS TO WHICH PARAGRAPH AP14 PLIES.—This paragraph shall apply to a de15 fined benefit plan— 

16 ‘‘(i) to which this subsection applies 

17 for a plan year, and 

18 ‘‘(ii) which has a liquidity shortfall for 

19 any quarter during such plan year. 

20 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

21 purposes of paragraph (1), any portion of an 

22 installment that is treated as not paid under 

23 subparagraph (A) shall continue to be treated 

24 as unpaid until the close of the quarter in 

25 which the due date for such installment occurs. 
263 

•S 1953 PCS 

1 ‘‘(D) LIMITATION ON INCREASE.—In no 

2 event shall the increase in the amount of any 

3 required installment under subparagraph (A) 

4 exceed the sum of the unfunded target liability 

5 and target normal cost for the plan year. 

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

7 paragraph— 

8 ‘‘(i) LIQUIDITY SHORTFALL.—The 

9 term ‘liquidity shortfall’ means, with re10 spect to any required installment, an 

11 amount equal to the excess (as of the last 

12 day of the quarter for which such install13 ment is made) of the base amount with re14 spect to such quarter over the value (as of 

15 such last 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 
264 

•S 1953 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 of the Treasury that such ex8 cess is the result of nonrecurring cir9 cumstances, the base amount with re10 spect to such quarter shall be deter11 mined without regard to amounts re12 lated to those nonrecurring cir13 cumstances. 

14 ‘‘(iii) DISBURSEMENTS FROM THE

15 PLAN.—The term ‘disbursements from the 

16 plan’ means all disbursements from the 

17 trust, including purchases of annuities, 

18 payments of single sums and other bene19 fits, and administrative expenses. 

20 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

21 The term ‘adjusted disbursements’ means 

22 disbursements from the plan reduced by 

23 the product of— 
265 

•S 1953 PCS 

1 ‘‘(I) the plan’s funded target li2 ability percentage (as defined in sec3 tion 305(e)) for the plan year, and 

4 ‘‘(II) the sum of the purchases of 

5 annuities, payments of single sums, 

6 and such other disbursements as the 

7 Secretary of the Treasury shall pro8 vide in regulations. 

9 ‘‘(v) LIQUID ASSETS.—The term ‘liq10 uid assets’ means cash, marketable securi11 ties and such other assets as specified by 

12 the Secretary of the Treasury in regula13 tions. 

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

15 means, with respect to any required install16 ment, the 3-month period preceding the 

17 month in which the due date for such in18 stallment occurs. 

19 ‘‘(6) FISCAL YEARS AND SHORT YEARS.— 

20 ‘‘(A) FISCAL YEARS.—In applying this 

21 subsection to a plan year beginning on any date 

22 other than January 1, there shall be substituted 

23 for the months specified in this subsection the 

24 months which correspond thereto. 
266 

•S 1953 PCS 

1 ‘‘(B) SHORT PLAN YEAR.—This subsection 

2 shall be applied to plan years of less than 12 

3 months in accordance with regulations pre4 scribed by the Secretary of the Treasury. 

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

6 MAKE REQUIRED CONTRIBUTIONS.— 

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

8 which this subsection applies, if— 

9 ‘‘(A) any person fails to make a required 

10 installment under subsection (j) or any other 

11 payment required under this section before the 

12 due date for such installment or other payment, 

13 and 

14 ‘‘(B) the unpaid balance of such install15 ment or other payment (including interest), 

16 when added to the aggregate unpaid balance of 

17 all preceding such installments or other pay18 ments for which payment was not made before 

19 the due date (including interest), exceeds 

20 $1,000,000, 

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

22 amount determined under paragraph (3) upon all 

23 property and rights to property, whether real or per24 sonal, belonging to such person and any other per-
267 

•S 1953 PCS 

1 son who is a member of the same controlled group 

2 of which such person is a member. 

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

4 This subsection shall apply to a defined benefit plan 

5 for any plan year for which the funded target liabil6 ity percentage (within the meaning of section 

7 305(e)) of such plan is less than 100 percent. This 

8 subsection shall not apply to any plan to which sec9 tion 4021 does not apply. 

10 ‘‘(3) AMOUNT OF LIEN.—For purposes of para11 graph (1), the amount of the lien shall be equal to 

12 the aggregate unpaid balance of required install13 ments and other payments required under this sec14 tion (including interest) for which payment has not 

15 been made before the due date. 

16 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

17 ‘‘(A) NOTICE OF FAILURE.—A person 

18 committing a failure described in paragraph (1) 

19 shall notify the Pension Benefit Guaranty Cor20 poration of such failure within 10 days of the 

21 due date for the required installment or other 

22 payment. 

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

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

25 the required installment or other payment and 
268 

•S 1953 PCS 

1 shall continue until the last day of the first plan 

2 year in which the plan ceases to be described in 

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

4 run without regard to whether such plan con5 tinues to be described in paragraph (2) during 

6 the period referred to in the preceding sentence. 

7 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

8 amount with respect to which a lien is imposed 

9 under paragraph (1) shall be treated as taxes 

10 due and owing the United States and rules 

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

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

13 a lien imposed by subsection (a) and the 

14 amount with respect to such lien. 

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

16 paragraph (1) may be perfected and enforced only 

17 by the Pension Benefit Guaranty Corporation, or at 

18 the direction of the Pension Benefit Guaranty Cor19 poration, by the contributing sponsor (or any mem20 ber of the controlled group (as defined in section 

21 302(f)(3)) of the contributing sponsor). 

22 ‘‘(6) DEFINITIONS.—For purposes of this sub23 section, the terms ‘due date’ and ‘required install24 ment’ have the meanings given such terms by sub25 section (j), except that in the case of a payment 
269 

•S 1953 PCS 

1 other than a required installment, the due date shall 

2 be the date such payment is required to be made 

3 under this section. 

4 ‘‘(l) REGULATIONS.—The Secretary of the Treasury 

5 shall prescribe such regulations as are necessary to carry 

6 out the provisions of this section, including regulations— 

7 ‘‘(1) for the proper treatment of increases in li8 abilities of any plan pursuant to plan amendments 

9 which are adopted, or which take effect, on a date 

10 during the plan year other than the valuation date, 

11 ‘‘(2) for the application of any small plan ex12 ception under this section in cases of mergers and 

13 acquisitions, and 

14 ‘‘(3) for the application of this section in the 

15 case of a plan maintained by more than one em16 ployer. 

17 ‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER

18 PLANS

19 ‘‘SEC. 304. (a) IN GENERAL.—In the case of a multi20 employer plan to which this section 302(a)(2)(C) applies, 

21 the accumulated funding deficiency of the plan for any 

22 plan year for purposes of section 302 shall be— 

23 ‘‘(1) except as provided in paragraph (2), the 

24 amount, determined as of the end of the plan year, 

25 equal to the excess (if any) of the total charges to 

26 the funding standard account of the plan for all plan 
270 

•S 1953 PCS 

1 years (beginning with the first plan year to which 

2 section 302 applies to the plan) over the total credits 

3 to such account for such years, or 

4 ‘‘(2) if the multiemployer plan is in reorganiza5 tion for any plan year, the accumulated funding de6 ficiency of the plan determined under section 4243. 

7 ‘‘(b) FUNDING STANDARD ACCOUNT.— 

8 ‘‘(1) ACCOUNT REQUIRED.—Each multiem9 ployer plan to which this section applies shall estab10 lish and maintain a funding standard account. Such 

11 account shall be credited and charged solely as pro12 vided in this section. 

13 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year, 

14 the funding standard account shall be charged with 

15 the sum of— 

16 ‘‘(A) the normal cost of the plan for the 

17 plan year, 

18 ‘‘(B) the amounts necessary to amortize in 

19 equal annual installments (until fully amor20 tized)— 

21 ‘‘(i) in the case of a plan in existence 

22 on January 1, 1974, the unfunded past 

23 service liability under the plan on the first 

24 day of the first plan year to which this sec-
271 

•S 1953 PCS 

1 tion applies, over a period of 40 plan 

2 years, 

3 ‘‘(ii) in the case of a plan which comes 

4 into existence after January 1, 1974, the 

5 unfunded past service liability under the 

6 plan on the first day of the first plan year 

7 to which this section applies, over a period 

8 of 30 plan years, 

9 ‘‘(iii) separately, with respect to each 

10 plan year, the net increase (if any) in un11 funded past service liability under the plan 

12 arising from plan amendments adopted in 

13 such year, over a period of 30 plan years, 

14 ‘‘(iv) separately, with respect to each 

15 plan year, the net experience loss (if any) 

16 under the plan, over a period of 15 plan 

17 years, and 

18 ‘‘(v) separately, with respect to each 

19 plan year, the net loss (if any) resulting 

20 from changes in actuarial assumptions 

21 used under the plan, over a period of 30 

22 plan years, 

23 ‘‘(C) the amount necessary to amortize 

24 each waived funding deficiency (within the 

25 meaning of section 302(c)(3)) for each prior 
272 

•S 1953 PCS 

1 plan year in equal annual installments (until 

2 fully amortized) over a period of 15 plan years, 

3 ‘‘(D) the amount necessary to amortize in 

4 equal annual installments (until fully amor5 tized) over a period of 5 plan years any amount 

6 credited to the funding standard account under 

7 section 302(b)(3)(D) (as in effect on the day 

8 before the date of the enactment of this sec9 tion), and 

10 ‘‘(E) the amount necessary to amortize in 

11 equal annual installments (until fully amor12 tized) over a period of 20 years the contribu13 tions which would be required to be made under 

14 the plan but for the provisions of section 

15 302(c)(7)(A)(i)(I) (as in effect on the day be16 fore the date of the enactment of this section). 

17 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year, 

18 the funding standard account shall be credited with 

19 the sum of— 

20 ‘‘(A) the amount considered contributed by 

21 the employer to or under the plan for the plan 

22 year, 

23 ‘‘(B) the amount necessary to amortize in 

24 equal annual installments (until fully amor25 tized)— 
273 

•S 1953 PCS 

1 ‘‘(i) separately, with respect to each 

2 plan year, the net decrease (if any) in un3 funded past service liability under the plan 

4 arising from plan amendments adopted in 

5 such year, over a period of 30 plan years, 

6 ‘‘(ii) separately, with respect to each 

7 plan year, the net experience gain (if any) 

8 under the plan, over a period of 15 plan 

9 years, and 

10 ‘‘(iii) separately, with respect to each 

11 plan year, the net gain (if any) resulting 

12 from changes in actuarial assumptions 

13 used under the plan, over a period of 30 

14 plan years, 

15 ‘‘(C) the amount of the waived funding de16 ficiency (within the meaning of section 

17 302(c)(3)) for the plan year, and 

18 ‘‘(D) in the case of a plan year for which 

19 the accumulated funding deficiency is deter20 mined under the funding standard account if 

21 such plan year follows a plan year for which 

22 such deficiency was determined under the alter23 native minimum funding standard under section 

24 305 (as in effect on the day before the date of 

25 the enactment of this section), the excess (if 
274 

•S 1953 PCS 

1 any) of any debit balance in the funding stand2 ard account (determined without regard to this 

3 subparagraph) over any debit balance in the al4 ternative minimum funding standard account. 

5 ‘‘(4) COMBINING AND OFFSETTING AMOUNTS

6 TO BE AMORTIZED.—Under regulations prescribed 

7 by the Secretary of the Treasury, amounts required 

8 to be amortized under paragraph (2) or paragraph 

9 (3), as the case may be— 

10 ‘‘(A) may be combined into one amount 

11 under such paragraph to be amortized over a 

12 period determined on the basis of the remaining 

13 amortization period for all items entering into 

14 such combined amount, and 

15 ‘‘(B) may be offset against amounts re16 quired to be amortized under the other such 

17 paragraph, with the resulting amount to be am18 ortized over a period determined on the basis of 

19 the remaining amortization periods for all items 

20 entering into whichever of the two amounts 

21 being offset is the greater. 

22 ‘‘(5) INTEREST.—The funding standard ac23 count (and items therein) shall be charged or cred24 ited (as determined under regulations prescribed by 

25 the Secretary of the Treasury) with interest at the 
275 

•S 1953 PCS 

1 appropriate rate consistent with the rate or rates of 

2 interest used under the plan to determine costs. 

3 ‘‘(6) CERTAIN AMORTIZATION CHARGES AND

4 CREDITS.—In the case of a plan which, immediately 

5 before the date of the enactment of the Multiem6 ployer Pension Plan Amendments Act of 1980, was 

7 a multiemployer plan (within the meaning of section 

8 3(37) as in effect immediately before such date)— 

9 ‘‘(A) any amount described in paragraph 

10 (2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this sub11 section which arose in a plan year beginning be12 fore such date shall be amortized in equal an13 nual installments (until fully amortized) over 40 

14 plan years, beginning with the plan year in 

15 which the amount arose; 

16 ‘‘(B) any amount described in paragraph 

17 (2)(B)(iv) or (3)(B)(ii) of this subsection which 

18 arose in a plan year beginning before such date 

19 shall be amortized in equal annual installments 

20 (until fully amortized) over 20 plan years, be21 ginning with the plan year in which the amount 

22 arose; 

23 ‘‘(C) any change in past service liability 

24 which arises during the period of 3 plan years 

25 beginning on or after such date, and results 
276 

•S 1953 PCS 

1 from a plan amendment adopted before such 

2 date, shall be amortized in equal annual install3 ments (until fully amortized) over 40 plan 

4 years, beginning with the plan year in which the 

5 change arises; and 

6 ‘‘(D) any change in past service liability 

7 which arises during the period of 2 plan years 

8 beginning on or after such date, and results 

9 from the changing of a group of participants 

10 from one benefit level to another benefit level 

11 under a schedule of plan benefits which— 

12 ‘‘(i) was adopted before such date, 

13 and 

14 ‘‘(ii) was effective for any plan partici15 pant before the beginning of the first plan 

16 year beginning on or after such date, 

17 shall be amortized in equal annual installments 

18 (until fully amortized) over 40 plan years, be19 ginning with the plan year in which the change 

20 arises. 

21 ‘‘(7) SPECIAL RULES.—For purposes of this 

22 section— 

23 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

24 amount received by a multiemployer plan in 

25 payment of all or part of an employer’s with-
277 

•S 1953 PCS 

1 drawal liability under part 1 of subtitle E of 

2 title IV shall be considered an amount contrib3 uted by the employer to or under the plan. The 

4 Secretary of the Treasury may prescribe by reg5 ulation additional charges and credits to a mul6 tiemployer plan’s funding standard account to 

7 the extent necessary to prevent withdrawal li8 ability payments from being unduly reflected as 

9 advance funding for plan liabilities. 

10 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM11 PLOYER PLAN LEAVES REORGANIZATION.—If a 

12 multiemployer plan is not in reorganization in 

13 the plan year but was in reorganization in the 

14 immediately preceding plan year, any balance in 

15 the funding standard account at the close of 

16 such immediately preceding plan year— 

17 ‘‘(i) shall be eliminated by an offset18 ting credit or charge (as the case may be), 

19 but 

20 ‘‘(ii) shall be taken into account in 

21 subsequent plan years by being amortized 

22 in equal annual installments (until fully 

23 amortized) over 30 plan years. 

24 The preceding sentence shall not apply to the 

25 extent of any accumulated funding deficiency 
278 

•S 1953 PCS 

1 under section 4243(a) as of the end of the last 

2 plan year that the plan was in reorganization. 

3 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

4 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

5 FUND.—Any amount paid by a plan during a 

6 plan year to the Pension Benefit Guaranty Cor7 poration pursuant to section 4222 or to a fund 

8 exempt under section 501(c)(22) of the Internal 

9 Revenue Code of 1986 pursuant to section 

10 4223 shall reduce the amount of contributions 

11 considered received by the plan for the plan 

12 year. 

13 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

14 PAYMENTS.—Any amount paid by an employer 

15 pending a final determination of the employer’s 

16 withdrawal liability under part 1 of subtitle E 

17 of title IV and subsequently refunded to the 

18 employer by the plan shall be charged to the 

19 funding standard account in accordance with 

20 regulations prescribed by the Secretary of the 

21 Treasury. 

22 ‘‘(E) ELECTION FOR DEFERRAL OF

23 CHARGE FOR PORTION OF NET EXPERIENCE

24 LOSS.—If an election is in effect under section 

25 302(b)(7)(F) (as in effect on the day before the 
279 

•S 1953 PCS 

1 date of the enactment of this section) for any 

2 plan year, the funding standard account shall 

3 be charged in the plan year to which the por4 tion of the net experience loss was deferred in 

5 the same manner as required under such sec6 tion (and paragraph (2)(B)(iv) shall not apply 

7 to the amount so charged). 

8 ‘‘(F) FINANCIAL ASSISTANCE.—Any 

9 amount of any financial assistance from the 

10 Pension Benefit Guaranty Corporation to any 

11 plan, and any repayment of such amount, shall 

12 be taken into account under this section and 

13 section 302 in such manner as determined by 

14 the Secretary of the Treasury. 

15 ‘‘(c) SPECIAL RULES.— 

16 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

17 FUNDING METHOD.—For purposes of this section, 

18 normal costs, accrued liability, past service liabilities, 

19 and experience gains and losses shall be determined 

20 under the funding method used to determine costs 

21 under the plan. 

22 ‘‘(2) VALUATION OF ASSETS.— 

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

24 section, the value of the plan’s assets shall be 

25 determined on the basis of any reasonable actu-
280 

•S 1953 PCS 

1 arial method of valuation which takes into ac2 count fair market value and which is permitted 

3 under regulations prescribed by the Secretary of 

4 the Treasury. 

5 ‘‘(B) ELECTION WITH RESPECT TO

6 BONDS.—The value of a bond or other evidence 

7 of indebtedness which is not in default as to 

8 principal or interest may, at the election of the 

9 plan administrator, be determined on an amor10 tized basis running from initial cost at purchase 

11 to par value at maturity or earliest call date. 

12 Any election under this subparagraph shall be 

13 made at such time and in such manner as the 

14 Secretary of the Treasury shall by regulations 

15 provide, shall apply to all such evidences of in16 debtedness, and may be revoked only with the 

17 consent of such Secretary. 

18 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA19 SONABLE.—For purposes of this section, all costs, li20 abilities, rates of interest, and other factors under 

21 the plan shall be determined on the basis of actu22 arial assumptions and methods— 

23 ‘‘(A) which, in the aggregate, are reason24 able (taking into account the experience of the 

25 plan and reasonable expectations), and 
281 

•S 1953 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 
282 

•S 1953 PCS 

1 ‘‘(B) all amounts described in paragraphs 

2 (2)(B), (C), and (D) and (3)(B) of subsection 

3 (b) which are required to be amortized shall be 

4 considered fully amortized for purposes of such 

5 paragraphs. 

6 ‘‘(6) FULL-FUNDING LIMITATION.— 

7 ‘‘(A) IN GENERAL.—For purposes of para8 graph (5), the term ‘full-funding limitation’ 

9 means the excess (if any) of— 

10 ‘‘(i) the accrued liability (including 

11 normal cost) under the plan (determined 

12 under the entry age normal funding meth13 od if such accrued liability cannot be di14 rectly calculated under the funding method 

15 used for the plan), over 

16 ‘‘(ii) the lesser of— 

17 ‘‘(I) the fair market value of the 

18 plan’s assets, or 

19 ‘‘(II) the value of such assets de20 termined under paragraph (2). 

21 For purposes of subparagraph (A), unless oth22 erwise provided by the plan, the accrued liabil23 ity under a plan shall not include benefits which 

24 are not nonforfeitable under the plan after the 

25 termination of the plan (taking into consider-
283 

•S 1953 PCS 

1 ation section 411(d)(3)) of the Internal Rev2 enue Code of 1986). 

3 ‘‘(B) MINIMUM AMOUNT.— 

4 ‘‘(i) IN GENERAL.—In no event shall 

5 the full-funding limitation determined 

6 under subparagraph (A) be less than the 

7 excess (if any) of— 

8 ‘‘(I) 90 percent of the current li9 ability of the plan (including the ex10 pected increase in current liability due 

11 to benefits accruing during the plan 

12 year), over 

13 ‘‘(II) the value of the plan’s as14 sets determined under paragraph (2). 

15 ‘‘(ii) ASSETS.—For purposes of clause 

16 (i), assets shall not be reduced by any 

17 credit balance in the funding standard ac18 count. 

19 ‘‘(C) CURRENT LIABILITY.—For purposes 

20 of this paragraph— 

21 ‘‘(i) IN GENERAL.—The term ‘current 

22 liability’ means all liabilities to employees 

23 and their beneficiaries under the plan. 

24 ‘‘(ii) TREATMENT OF UNPREDICTABLE

25 CONTINGENT EVENT BENEFITS.—For pur-
284 

•S 1953 PCS 

1 poses of clause (i), any benefit contingent 

2 on an event other than— 

3 ‘‘(I) age, service, compensation, 

4 death, or disability, or 

5 ‘‘(II) an event which is reason6 ably and reliably predictable (as deter7 mined by the Secretary of the Treas8 ury), 

9 shall not be taken into account until the 

10 event on which the benefit is contingent oc11 curs. 

12 ‘‘(iii) INTEREST RATE USED.—The 

13 rate of interest used to determine current 

14 liability under this paragraph shall be the 

15 rate of interest determined under subpara16 graph (D). 

17 ‘‘(iv) MORTALITY TABLES.— 

18 ‘‘(I) COMMISSIONERS’ STANDARD

19 TABLE.—In the case of plan years be20 ginning before the first plan year to 

21 which the first tables prescribed under 

22 subclause (II) apply, the mortality 

23 table used in determining current li24 ability under this paragraph shall be 

25 the table prescribed by the Secretary 
285 

•S 1953 PCS 

1 of the Treasury which is based on the 

2 prevailing commissioners’ standard 

3 table (described in section 

4 807(d)(5)(A) of the Internal Revenue 

5 Code of 1986) used to determine re6 serves for group annuity contracts 

7 issued on January 1, 1993. 

8 ‘‘(II) SECRETARIAL AUTHOR9 ITY.—The Secretary of the Treasury 

10 may by regulation prescribe for plan 

11 years beginning after December 31, 

12 1999, mortality tables to be used in 

13 determining current liability under 

14 this subsection. Such tables shall be 

15 based upon the actual experience of 

16 pension plans and projected trends in 

17 such experience. In prescribing such 

18 tables, the Secretary of the Treasury 

19 shall take into account results of 

20 available independent studies of mor21 tality of individuals covered by pen22 sion plans. 

23 ‘‘(v) SEPARATE MORTALITY TABLES

24 FOR THE DISABLED.—Notwithstanding 

25 clause (iv)— 
286 

•S 1953 PCS 

1 ‘‘(I) IN GENERAL.—The Sec2 retary of the Treasury shall establish 

3 mortality tables which may be used 

4 (in lieu of the tables under clause (ii)) 

5 to determine current liability under 

6 this subsection for individuals who are 

7 entitled to benefits under the plan on 

8 account of disability. The Secretary of 

9 the Treasury shall establish separate 

10 tables for individuals whose disabil11 ities occur in plan years beginning be12 fore January 1, 1995, and for individ13 uals whose disabilities occur in plan 

14 years beginning on or after such date. 

15 ‘‘(II) SPECIAL RULE FOR DIS16 ABILITIES OCCURRING AFTER 1994.— 

17 In the case of disabilities occurring in 

18 plan years beginning after December 

19 31, 1994, the tables under subclause 

20 (I) shall apply only with respect to in21 dividuals described in such subclause 

22 who are disabled within the meaning 

23 of title II of the Social Security Act 

24 and the regulations thereunder. 
287 

•S 1953 PCS 

1 ‘‘(vi) PERIODIC REVIEW.—The Sec2 retary of the Treasury shall periodically (at 

3 least every 5 years) review any tables in ef4 fect under this subparagraph and shall, to 

5 the extent such Secretary determines nec6 essary, update the tables to reflect the ac7 tual experience of pension plans and pro8 jected trends in such experience. 

9 ‘‘(D) REQUIRED CHANGE OF INTEREST

10 RATE.—For purposes of determining a plan’s 

11 current liability for purposes of this para12 graph— 

13 ‘‘(i) IN GENERAL.—If any rate of in14 terest used under the plan under sub15 section (b)(5) to determine cost is not 

16 within the permissible range, the plan shall 

17 establish a new rate of interest within the 

18 permissible range. 

19 ‘‘(ii) PERMISSIBLE RANGE.—For pur20 poses of this subparagraph— 

21 ‘‘(I) IN GENERAL.—Except as 

22 provided in subclause (II), the term 

23 ‘permissible range’ means a rate of in24 terest which is not more than 5 per25 cent above, and not more than 10 per-
288 

•S 1953 PCS 

1 cent below, the weighted average of 

2 the rates of interest on 30-year Treas3 ury securities during the 4-year period 

4 ending on the last day before the be5 ginning of the plan year. 

6 ‘‘(II) SECRETARIAL AUTHOR7 ITY.—If the Secretary of the Treasury 

8 finds that the lowest rate of interest 

9 permissible under subclause (I) is un10 reasonably high, such Secretary may 

11 prescribe a lower rate of interest, ex12 cept that such rate may not be less 

13 than 80 percent of the average rate 

14 determined under such subclause. 

15 ‘‘(iii) ASSUMPTIONS.—Notwith16 standing paragraph (3)(A), the interest 

17 rate used under the plan shall be— 

18 ‘‘(I) determined without taking 

19 into account the experience of the 

20 plan and reasonable expectations, but 

21 ‘‘(II) consistent with the assump22 tions which reflect the purchase rates 

23 which would be used by insurance 

24 companies to satisfy the liabilities 

25 under the plan. 
289 

•S 1953 PCS 

1 ‘‘(7) ANNUAL VALUATION.— 

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

3 section, a determination of experience gains and 

4 losses and a valuation of the plan’s liability 

5 shall be made not less frequently than once 

6 every year, except that such determination shall 

7 be made more frequently to the extent required 

8 in particular cases under regulations prescribed 

9 by the Secretary of the Treasury. 

10 ‘‘(B) VALUATION DATE.— 

11 ‘‘(i) CURRENT YEAR.—Except as pro12 vided in clause (ii), the valuation referred 

13 to in subparagraph (A) shall be made as of 

14 a date within the plan year to which the 

15 valuation refers or within one month prior 

16 to the beginning of such year. 

17 ‘‘(ii) USE OF PRIOR YEAR VALU18 ATION.—The valuation referred to in sub19 paragraph (A) may be made as of a date 

20 within the plan year prior to the year to 

21 which the valuation refers if, as of such 

22 date, the value of the assets of the plan are 

23 not less than 100 percent of the plan’s cur24 rent liability (as defined in paragraph 
290 

•S 1953 PCS 

1 (6)(C) without regard to clause (iv) there2 of). 

3 ‘‘(iii) ADJUSTMENTS.—Information 

4 under clause (ii) shall, in accordance with 

5 regulations, be actuarially adjusted to re6 flect significant differences in participants. 

7 ‘‘(iv) LIMITATION.—A change in fund8 ing method to use a prior year valuation, 

9 as provided in clause (ii), may not be made 

10 unless as of the valuation date within the 

11 prior plan year, the value of the assets of 

12 the plan are not less than 125 percent of 

13 the plan’s current liability (as defined in 

14 paragraph (6)(C) without regard to clause 

15 (iv) thereof). 

16 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

17 DEEMED MADE.—For purposes of this section, any 

18 contributions for a plan year made by an employer 

19 after the last day of such plan year, but not later 

20 than two and one-half months after such day, shall 

21 be deemed to have been made on such last day. For 

22 purposes of this subparagraph, such two and one23 half month period may be extended for not more 

24 than six months under regulations prescribed by the 

25 Secretary of the Treasury.’’. 
291 

•S 1953 PCS 

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

2 in section 1 of such Act, as amended by this Act, is 

3 amended by inserting after the item relating to section 

4 302 the following new item: 

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

plans. 

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’. 

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

6 this section shall apply to plan years beginning after De7 cember 31, 2006. 

8 SEC. 313. LIMITATION ON BENEFIT IMPROVEMENTS BY SIN9 GLE-EMPLOYER PLANS WHICH ARE UNDER10 FUNDED OR MAINTAINED BY FINANCIALLY 

11 WEAK OR BANKRUPT EMPLOYERS. 

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

13 the Employee Retirement Income Security Act of 1974 (as 

14 amended by sections 311 and 312 of this Act) is amended 

15 by inserting after section 304 the following new section: 

16 ‘‘LIMITATIONS ON BENEFIT IMPROVEMENTS BY SINGLE17 EMPLOYER PLANS WHICH ARE UNDERFUNDED OR

18 MAINTAINED BY FINANCIALLY WEAK OR BANKRUPT

19 EMPLOYERS

20 ‘‘SEC. 305. (a) BENEFIT LIMITATION REQUIRE21 MENT.—Except as provided in subsection (f)(5), a defined 

22 benefit plan which is a single-employer plan to which sec23 tion 302 applies shall meet the requirements of sub24 sections (b), (c), and (d). 
292 

•S 1953 PCS 

1 ‘‘(b) LIMITATIONS ON BENEFIT INCREASES.— 

2 ‘‘(1) IN GENERAL.—A plan meets the require3 ments of this subsection for any plan year if the 

4 plan provides that if the plan’s adjusted funded tar5 get liability percentage for the preceding plan year 

6 is less than 80 percent, any applicable benefit in7 crease shall not take effect during the plan year 

8 until the plan has met the additional funding re9 quirements of paragraph (2). 

10 ‘‘(2) ADDITIONAL FUNDING REQUIREMENTS.— 

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

12 this paragraph are met with respect to any ap13 plicable benefit increase for any plan year if the 

14 plan sponsor, in addition to any other contribu15 tion required under section 303, contributes to 

16 or under the plan an amount (if any) which, 

17 when added to the portion of the minimum re18 quired contribution for the plan year described 

19 in subparagraphs (B) and (C) of section 

20 303(a)(1), is sufficient to result in the adjusted 

21 funded target liability percentage of the plan 

22 for the plan year being equal to 80 percent. 

23 ‘‘(B) BENEFIT INCREASES COUNTED FOR

24 PURPOSES OF FUNDED PERCENTAGE.—For 

25 purposes of subparagraph (A), the adjusted 
293 

•S 1953 PCS 

1 funded target liability percentage shall be deter2 mined by taking into account all increases in li3 abilities of the plan which would have been 

4 taken into account in determining such percent5 age if the applicable benefit increase had taken 

6 effect as of the beginning of the plan year. 

7 ‘‘(C) PAYMENTS AFTER VALUATION

8 DATE.—In the case of any contribution required 

9 by this subsection which is made after the first 

10 day of the plan year, the amount of the con11 tribution shall be adjusted in the same manner 

12 as it would be under section 303(i)(2) if it were 

13 a minimum required contribution for the plan 

14 year. 

15 ‘‘(D) TREATMENT OF PAYMENT IN COM16 PUTING MINIMUM REQUIRED CONTRIBUTION.— 

17 If any applicable benefit increase to which this 

18 subsection applies for any plan year is required 

19 to be taken into account in determining the 

20 minimum required contribution under section 

21 303 for the plan year, any payment required by 

22 this paragraph with respect to the applicable 

23 benefit increase shall, for purposes of deter24 mining the amount of such minimum required 

25 contribution, be treated in the same manner as 
294 

•S 1953 PCS 

1 a contribution for a preceding plan year is 

2 treated under section 303(g)(2)(C)(i). 

3 ‘‘(3) APPLICABLE BENEFIT INCREASE.—For 

4 purposes of this subsection— 

5 ‘‘(A) IN GENERAL.—The term ‘applicable 

6 benefit increase’ means, with respect to any 

7 plan year, any increase in liabilities of the plan 

8 by plan amendment (or otherwise as provided in 

9 regulations prescribed by the Secretary of the 

10 Treasury) which, but for this subsection, would 

11 occur during the plan year by reason of— 

12 ‘‘(i) any increase in benefits, 

13 ‘‘(ii) any change in the accrual of ben14 efits, or 

15 ‘‘(iii) any change in the rate at which 

16 benefits become nonforfeitable under the 

17 plan. 

18 ‘‘(B) EXCEPTION FOR CERTAIN BENEFIT

19 INCREASES.—In the case of a plan maintained 

20 pursuant to 1 or more collective bargaining 

21 agreements between employee representatives 

22 and 1 or more plan sponsors, such term shall 

23 not include any increase in liabilities of the plan 

24 by reason of any increase in benefits pursuant 

25 to, and for individuals covered by, the agree-
295 

•S 1953 PCS 

1 ments under a formula which is not based on 

2 a participant’s compensation, but only if the 

3 rate of such increase is not in excess of the con4 temporaneous rate of increase in average wages 

5 of participants covered by the amendment. 

6 ‘‘(C) EXCEPTION FOR COLLECTIVELY BAR7 GAINED INCREASES NEGOTIATED BEFORE

8 UNDERFUNDING OCCURS.—In the case of a 

9 plan maintained pursuant to 1 or more collec10 tive bargaining agreements between employee 

11 representatives and 1 or more plan sponsors 

12 and ratified in a plan year with respect to 

13 which the adjusted funded target liability per14 centage was at least 80 percent, such term shall 

15 not include any increase or change described in 

16 subparagraph (A) pursuant to, and for individ17 uals covered by, the agreements which takes ef18 fect in any plan year beginning after the plan 

19 year in which the agreements are ratified and 

20 before the earlier of— 

21 ‘‘(i) the date on which the last of such 

22 collective bargaining agreement terminates 

23 (determined without regard to any exten24 sion thereof), or 
296 

•S 1953 PCS 

1 ‘‘(ii) the date which is 3 years after 

2 the date on which this subsection would 

3 otherwise apply but for this subparagraph. 

4 ‘‘(D) EXCEPTIONS.—Such term shall not 

5 include any increase in liabilities— 

6 ‘‘(i) by reason of a plan amendment if 

7 such amendment is required as a condition 

8 of qualification under this part, or 

9 ‘‘(ii) which is specified in regulations 

10 prescribed by the Secretary of the Treas11 ury. 

12 ‘‘(4) SPECIAL RULE FOR PLANS IN BANK13 RUPTCY.—In the case of any period during which 

14 the plan sponsor is in bankruptcy— 

15 ‘‘(A) paragraphs (1) and (2)(A) shall be 

16 applied by substituting ‘100 percent’ for ‘80 

17 percent’, and 

18 ‘‘(B) the exceptions under subparagraphs 

19 (B) and (C) of paragraph (3) shall not apply. 

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— 
297 

•S 1953 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 303, 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 

14 303(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-
298 

•S 1953 PCS 

1 ments described in the last sentence of sec2 tion 204(b)(1)(G)), to a participant or ben3 eficiary whose annuity starting date (as de4 fined in section 205(h)(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 of the Treasury by regula11 tions. 

12 ‘‘(B) EXCEPTION FOR CERTAIN PAY13 MENTS.—In the case of any prohibited period 

14 described in paragraph (3)(A), the term ‘pro15 hibited payment’ shall not include any payment 

16 if the amount of the payment does not exceed 

17 the lesser of— 

18 ‘‘(i) 50 percent of the amount of the 

19 payment which could be made without re20 gard to this subsection, or 

21 ‘‘(ii) the present value (determined 

22 under guidance prescribed by the Pension 

23 Benefit Guaranty Corporation, using the 

24 interest and mortality assumptions under 

25 section 205(g)) of the maximum guarantee 
299 

•S 1953 PCS 

1 with respect to the participant under sec2 tion 4022. 

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 206(d)(3)(K)) 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 206(d)(3)(B)(i)) 

16 provides otherwise. 

17 ‘‘(3) PROHIBITED PERIOD.—For purposes of 

18 paragraph (1), the term ‘prohibited period’ means— 

19 ‘‘(A) except as provided in paragraph (5), 

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 
300 

•S 1953 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 

7 303(j)(5)(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) RULES RELATING TO REQUIRED CON17 TRIBUTIONS.— 

18 ‘‘(A) SECURITY MAY BE PROVIDED.— 

19 ‘‘(i) IN GENERAL.—A plan sponsor 

20 shall not be treated as failing to meet the 

21 requirements of paragraph (1) if the plan 

22 sponsor provides security in a form meet23 ing the requirements of clause (ii) for any 

24 portion of the amount required to be con25 tributed under paragraph (1) but which is 
301 

•S 1953 PCS 

1 not so contributed. Such security shall be 

2 provided no later than the due date of the 

3 contribution to which it relates or such 

4 earlier date as the Secretary of Treasury 

5 may prescribe. 

6 ‘‘(ii) FORM OF SECURITY.—The secu7 rity required under clause (i) shall consist 

8 of— 

9 ‘‘(I) a bond issued by a corporate 

10 surety company that is an acceptable 

11 surety for purposes of section 412, 

12 ‘‘(II) cash, or United States obli13 gations which mature in 3 years or 

14 less, held in escrow by a bank or simi15 lar financial institution, or 

16 ‘‘(III) such other form of security 

17 as is satisfactory to the Secretary of 

18 the Treasury and the parties involved. 

19 ‘‘(iii) ENFORCEMENT.—Any security 

20 provided under clause (i) may be perfected 

21 and enforced at any time after the earlier 

22 of— 

23 ‘‘(I) the date on which the plan 

24 terminates, 
302 

•S 1953 PCS 

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

2 a payment of the minimum required 

3 contribution for any plan year begin4 ning after the security is provided, the 

5 due date for the payment under sec6 tion 303(i), or 

7 ‘‘(III) if the adjusted funded tar8 get liability percentage is less than 60 

9 percent for a consecutive period of 7 

10 years, the valuation date for the last 

11 year in the period. 

12 ‘‘(iv) RELEASE OF SECURITY.—The 

13 security shall be released (and any 

14 amounts thereunder shall be refunded to15 gether with any interest accrued thereon) 

16 at the end of the prohibited period for the 

17 failure to which the security relates. The 

18 Secretary of the Treasury may prescribe 

19 regulations for partial releases of the secu20 rity by reason of increases in the adjusted 

21 funded target liability percentage. 

22 ‘‘(v) SECURITY NOT TREATED AS

23 PLAN ASSET.—Any security under this 

24 subparagraph shall not be taken into ac25 count in determining the value of the 
303 

•S 1953 PCS 

1 plan’s assets except to the extent provided 

2 in clause (i). 

3 ‘‘(B) TREATMENT AS UNPAID MINIMUM

4 REQUIRED CONTRIBUTION.—The amount of any 

5 required contribution which a plan sponsor fails 

6 to make under paragraph (1) by the close of 

7 the plan year to which the contribution relates 

8 shall be treated as an unpaid minimum required 

9 contribution for purposes of subsection (j) and 

10 (k) of section 303 and for purposes of section 

11 4971 of the Internal Revenue Code of 1986. 

12 ‘‘(5) SATISFACTION OF REQUIREMENT BEFORE

13 CLOSE OF PLAN YEAR.—If, before the close of the 

14 current plan year— 

15 ‘‘(A) the plan sponsor makes the contribu16 tion required to be made under paragraph (1), 

17 or 

18 ‘‘(B) the plan’s enrolled actuary certifies 

19 that, as of the valuation date for the plan year, 

20 the adjusted funded target liability percentage 

21 of the plan is at least 60 percent, 

22 this subsection shall be applied as if no prohibited 

23 period had begun as of the beginning of such year 

24 and the plan shall, under rules described by the Sec25 retary of the Treasury, restore any payments not 
304 

•S 1953 PCS 

1 made during the prohibited period in effect before 

2 the application of this paragraph. 

3 ‘‘(d) FREEZE ON PLAN BENEFITS.— 

4 ‘‘(1) IN GENERAL.—The requirements of this 

5 subsection are met if the plan provides that, not6 withstanding any other provision of the plan, during 

7 a freeze period— 

8 ‘‘(A) the accrued benefit, any death or dis9 ability benefit, and any social security supple10 ment described in the last sentence of section 

11 204(b)(1)(G) of each participant are frozen at 

12 the amount of such benefit or supplement im13 mediately before the freeze period, and 

14 ‘‘(B) all other benefits provided under the 

15 plan are eliminated, 

16 but only to the extent the freezing or elimination of 

17 such benefits would have been permitted under sec18 tion 204(g) if they had been implemented by a plan 

19 amendment adopted immediately before the freeze 

20 period. 

21 ‘‘(2) FREEZE PERIOD.—For purposes of para22 graph (1), the term ‘freeze period’ means any period 

23 treated as a prohibited period under subsection 

24 (c)(3)(A). A rule similar to the rule of subsection 

25 (c)(5) shall apply for purposes of this subsection. 
305 

•S 1953 PCS 

1 ‘‘(3) COLLECTIVELY BARGAINED PLANS.—In 

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

3 collective bargaining agreements between employee 

4 representatives and 1 or more plan sponsors and 

5 ratified in a plan year with respect to which the 

6 funded target liability percentage as of the valuation 

7 date was at least 60 percent, this subsection shall 

8 not be applied to benefits pursuant to, and individ9 uals covered by, such agreement for plan years be10 ginning before the earlier of— 

11 ‘‘(A) the date on which the last of such 

12 collective bargaining agreements terminates (de13 termined without regard to any extension there14 of), or 

15 ‘‘(B) the date which is 3 years after the 

16 date the freeze period would otherwise begin 

17 under this subsection. 

18 ‘‘(e) DEFINITIONS AND RULES RELATING TO APPLI19 CATION OF LIMITATIONS.—For purposes of this section— 

20 ‘‘(1) FUNDED TARGET LIABILITY PERCENT21 AGE.— 

22 ‘‘(A) IN GENERAL.—The term ‘funded tar23 get liability percentage’ means, with respect to 

24 any plan year, the percentage equal to a frac25 tion— 
306 

•S 1953 PCS 

1 ‘‘(i) the numerator of which is the 

2 value of assets of the plan determined 

3 under section 303(g)(2) for the plan year, 

4 and 

5 ‘‘(ii) the denominator of which is the 

6 target liability for the plan year. 

7 ‘‘(B) ADJUSTED FUNDED TARGET LIABIL8 ITY PERCENTAGE.—The term ‘adjusted funded 

9 target liability percentage’ means the funded 

10 target liability percentage which is determined 

11 under subparagraph (A) by increasing each of 

12 the amounts under clauses (i) and (ii) of sub13 paragraph (A) by the aggregate amount of pur14 chases of annuities, payments of single sums, 

15 and such other disbursements as the Secretary 

16 of the Treasury shall prescribe in regulations, 

17 which were made by the plan during the pre18 ceding 2 plan years. 

19 ‘‘(2) CERTIFICATION.—A certification by an en20 rolled actuary under this section shall be made in 

21 such form and manner as the Secretary of the 

22 Treasury may prescribe and shall be based on the 

23 information available to the enrolled actuary. The 

24 enrolled actuary shall notify the plan administrator 

25 of any change in the funded target liability percent-
307 

•S 1953 PCS 

1 age if the actual target liability or asset value differs 

2 from that used for the certification. 

3 ‘‘(3) CONTRIBUTIONS INCLUDED IN ASSETS.— 

4 In making a certification under paragraph (2) for 

5 purposes of this section, the determination of wheth6 er and to what extent contributions are to be taken 

7 into account in computing the fair market value of 

8 the assets of the plan shall be made in the same 

9 manner as under section 303(g)(2)(C), except that 

10 contributions in excess of the minimum required 

11 contribution for any preceding plan year shall not be 

12 taken into account unless made before the date of 

13 the certification. 

14 ‘‘(4) TREATMENT OF PLAN AS OF CLOSE OF

15 PROHIBITED OR FREEZE PERIOD.—For purposes of 

16 applying this part— 

17 ‘‘(A) OPERATION OF PLAN AFTER PE18 RIOD.—Unless the plan provides otherwise, the 

19 accrual and payment of benefits which were 

20 prohibited, frozen, or eliminated under sub21 section (c) or (d) shall resume, effective as of 

22 the day following the close of a prohibited or 

23 freeze period under subsection (c) or (d), which24 ever is applicable. 
308 

•S 1953 PCS 

1 ‘‘(B) TREATMENT OF AFFECTED BENE2 FITS.—Nothing in this paragraph shall be con3 strued as affecting the plan’s treatment of ben4 efits prohibited, frozen, or eliminated during 

5 the prohibited or freeze period. 

6 ‘‘(f) OTHER DEFINITIONS AND RULES.—For pur7 poses of this section— 

8 ‘‘(1) COORDINATION WITH MINIMUM REQUIRED

9 CONTRIBUTIONS.—Any contribution by a plan spon10 sor for a plan year shall be allocated first to any 

11 minimum required contribution under section 303 

12 for any plan year the valuation date of which occurs 

13 on or before the date of the contribution by the plan 

14 sponsor until all such minimum required contribu15 tions are fully made and then to the contributions 

16 required under subsection (b), (c), or (d). 

17 ‘‘(2) TERMS USED IN SECTION 303.—Any term 

18 used in this section which is also used in section 303 

19 shall have the meaning given such term by section 

20 303. 

21 ‘‘(3) BANKRUPTCY.—A plan sponsor is in bank22 ruptcy during any period the plan sponsor is a debt23 or in a case under title 11, United States Code, or 

24 similar Federal or State law. 
309 

•S 1953 PCS 

1 ‘‘(4) PLAN SPONSOR.—The term ‘plan sponsor’ 

2 means the employer referred to in section 302(b) 

3 (without regard to paragraph (2)). 

4 ‘‘(5) PLANS IN EXISTENCE LESS THAN 5

5 YEARS.—This section (other than subsection (c)) 

6 shall not apply to a plan for each of the plan’s first 

7 5 plan years. For purposes of this paragraph, plan 

8 years of any predecessor plan shall be taken into ac9 count. Notwithstanding this paragraph, subsections 

10 (b) and (d) shall apply during any period the plan 

11 sponsor is in bankruptcy. 

12 ‘‘(6) COORDINATION WITH OTHER REQUIRE13 MENTS.—A plan to which this section applies shall 

14 not be treated as failing to meet any other require15 ment of this Act merely because the plan does not 

16 make a payment required under the plan because 

17 the plan is prohibited from making the payment by 

18 reason of this section. 

19 ‘‘(7) YEARS BEFORE EFFECTIVE DATE.—No 

20 plan year beginning before 2007 shall be taken into 

21 account in determining whether this section applies 

22 to any plan year beginning after 2006.’’. 

23 (b) CONFORMING AMENDMENTS.— 
310 

•S 1953 PCS 

1 (1) Section 204 of such Act (29 U.S.C.1054) is 

2 amended by striking subsection (i) and by redesig3 nating subsection (j) as subsection (i). 

4 (2) Section 206 of such Act (29 U.S.C.1056) is 

5 amended by striking subsection (e). 

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

7 in section 1 of such Act, as amended by this Act, is 

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

‘‘Sec. 305.Limitations on benefit improvements by single-employer plans 

which are underfunded or maintained by financially weak 

employers.’’. 

9 (d) EFFECTIVE DATE.— 

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

11 this section shall apply to plan years beginning after 

12 December 31, 2006. 

13 (2) COLLECTIVE BARGAINING EXCEPTION.—In 

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

15 collective bargaining agreements between employee 

16 representatives and 1 or more employers ratified be17 fore the date of the enactment of this Act, the 

18 amendments made by this subsection shall not apply 

19 to plan years beginning before the earlier of— 

20 (A) the later of— 

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

23 plan terminates (determined without re24 gard to any extension thereof agreed to 
311 

•S 1953 PCS 

1 after the date of the enactment of this 

2 Act), or 

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

4 to which the amendments made by this 

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

7 (B) January 1, 2009. 

8 For purposes of clause (i), any plan amendment 

9 made pursuant to a collective bargaining agreement 

10 relating to the plan which amends the plan solely to 

11 conform to any requirement added by this subsection 

12 shall not be treated as a termination of such collec13 tive bargaining agreement. 

14 SEC. 314. TECHNICAL AND CONFORMING AMENDMENTS. 

15 (a) MISCELLANEOUS AMENDMENTS TO TITLE I.— 

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

17 is amended— 

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

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

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

21 (i) and inserting the following: 

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

23 percentage which the amount determined 

24 under section 304(c)(6)(A)(ii) bears to the 

25 amount determined under section 
312 

•S 1953 PCS 

1 304(c)(6)(C), is at least 100 percent (and, 

2 if not, the actual 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)(1) 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 target liability (as defined in section 303(c)) 

13 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)(C)) 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(f)(2)’’; 

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

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

23 (7) in sections 101(e)(3), 403(c)(1), and 

24 408(b)(13), by striking ‘‘American Jobs Creation 
313 

•S 1953 PCS 

1 Act of 2004’’ and inserting ‘‘National Employee 

2 Savings and Trust Equity Guarantee Act of 2005’’. 

3 (b) MISCELLANEOUS AMENDMENTS TO TITLE IV.— 

4 Title IV of such Act is amended— 

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

6 1301(a)(13)), by striking ‘‘302(c)(11)(A)’’ and in7 serting ‘‘302(b)(1)’’, by striking ‘‘412(c)(11)(A)’’ 

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

9 ‘‘302(c)(11)(B)’’ and inserting ‘‘302(b)(2)’’, and by 

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

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

12 1303(e)(1)), by striking ‘‘302(f)(1)(A) and (B)’’ and 

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

14 ‘‘412(n)(1)(A) and (B)’’ and inserting 

15 ‘‘430(k)(1)(A) and (B)’’; 

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

17 1310(b)(2)), by striking ‘‘302(f)(1)(A) and (B)’’ and 

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

19 ‘‘412(n)(1)(A) and (B)’’ and inserting 

20 ‘‘430(k)(1)(A) and (B)’’; 

21 (4) in section 4062(c) (29 U.S.C. 1362(c)), by 

22 striking paragraphs (1), (2), and (3) and inserting 

23 the following: 

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

25 the sum of unpaid minimum required contributions 
314 

•S 1953 PCS 

1 (within the meaning of section 4971(c)(4) of the In2 ternal Revenue Code of 1986) with respect to the 

3 plan (if any) for the plan year in which the termi4 nation date occurs and all preceding plan years 

5 (which, for purposes of this subparagraph, shall in6 clude any increase in such sum which would result 

7 if no additional contributions (other than those al8 ready made by the termination date) were made for 

9 the plan year in which the termination date occurs 

10 or for any previous plan year), or 

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

12 outstanding balance of the accumulated funding de13 ficiencies (within the meaning of section 304(a) of 

14 this Act and section 431(a) of the Internal Revenue 

15 Code of 1986) of the plan (if any) (which, for pur16 poses of this subparagraph, shall include the amount 

17 of any increase in such accumulated funding defi18 ciencies of the plan which would result if all pending 

19 applications for waivers of the minimum funding 

20 standard under section 302(c) of this Act or section 

21 412(d) of such Code and for extensions of the amor22 tization period under section 302(d) of this Act or 

23 section 412(e) of such Code with respect to such 

24 plan were denied and if no additional contributions 

25 (other than those already made by the termination 
315 

•S 1953 PCS 

1 date) were made for the plan year in which the ter2 mination date occurs or for any previous plan year), 

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

4 the sum of the amortization payments described in 

5 subparagraph (B) or (C) of section 303(a)(1) of this 

6 Act or subparagraph (B) or (C) of section 430(a)(1) 

7 of the Internal Revenue Code of 1986 which were 

8 determined for the plan year in which the termi9 nation date occurs or any preceding plan year, but 

10 are properly allocable to any succeeding plan year, 

11 or 

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

13 outstanding balance of the amount of waived fund14 ing deficiencies of the plan waived before such date 

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

16 such Code (if any), and 

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

18 outstanding balance of the amount of decreases in 

19 the minimum funding standard allowed before such 

20 date under section 302(d) of this Act or section 

21 431(e) of such Code (if any);’’; 

22 (5) in section 4071 (29 U.S.C. 1371), by strik23 ing ‘‘302(f)(4)’’ and inserting ‘‘303(k)(4)’’; 
316 

•S 1953 PCS 

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

2 1423(a)(1)(B)), by striking ‘‘302(a)’’ each place it 

3 appears and inserting ‘‘304(a)’’; 

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

5 1423(f)(1)), by striking ‘‘303(a)’’ and inserting 

6 ‘‘302(c)’’; 

7 (8) in section 4243(f)(2) (29 U.S.C. 

8 1423(f)(2)), by striking ‘‘303(c)’’ and inserting 

9 ‘‘302(c)(3)’’; and 

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

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

12 (c) AMENDMENTS TO REORGANIZATION PLAN NO. 4 

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

14 4 of 1978 (ratified and affirmed as law by Public Law 

15 98–532 (98 Stat. 2705)) is amended by striking 

16 ‘‘302(c)(8)’’ and inserting ‘‘302(f)(2)’’, by striking 

17 ‘‘304(a) and (b)(2)(A)’’ and inserting ‘‘302(d) and 

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

19 ‘‘412(g)(2) ’’. 

20 (d) REPEAL OF EXPIRED AUTHORITY FOR TEM21 PORARY VARIANCES.—Section 207 of such Act (29 U.S.C. 

22 1057) is repealed. 

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

24 this section shall apply to plan years beginning after De25 cember 31, 2006. 
317 

•S 1953 PCS 

1 PART III—INTEREST RATE ASSUMPTIONS AND 

2 DEDUCTIBLE AMOUNTS FOR 2006 

3 SEC. 321. EXTENSION OF REPLACEMENT OF 30-YEAR 

4 TREASURY RATES. 

5 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

6 (1) DETERMINATION OF RANGE.—Subclause 

7 (II) of section 412(b)(5)(B)(ii) of the Internal Rev8 enue Code of 1986 is amended— 

9 (A) by striking ‘‘2006’’ and inserting 

10 ‘‘2007’’, and 

11 (B) by striking ‘‘AND 2005’’ in the heading 

12 and inserting ‘‘, 2005, AND 2006’’. 

13 (2) DETERMINATION OF CURRENT LIABILITY.— 

14 Subclause (IV) of section 412(l)(7)(C)(i) of such 

15 Code is amended— 

16 (A) by striking ‘‘or 2005’’ and inserting ‘‘, 

17 2005, or 2006’’, and 

18 (B) by striking ‘‘AND 2005’’ in the heading 

19 and inserting ‘‘, 2005, AND 2006’’. 

20 (b) AMENDMENTS OF ERISA.— 

21 (1) DETERMINATION OF RANGE.—Subclause 

22 (II) of section 302(b)(5)(B)(ii) of the Employee Re23 tirement Income Security Act of 1974 is amended— 

24 (A) by striking ‘‘2006’’ and inserting 

25 ‘‘2007’’, and 
318 

•S 1953 PCS 

1 (B) by striking ‘‘AND 2005’’ in the heading 

2 and inserting ‘‘, 2005, AND 2006’’. 

3 (2) DETERMINATION OF CURRENT LIABILITY.— 

4 Subclause (IV) of section 302(d)(7)(C)(i) of such 

5 Act is amended— 

6 (A) by striking ‘‘or 2005’’ and inserting ‘‘, 

7 2005, or 2006’’, and 

8 (B) by striking ‘‘AND 2005’’ in the heading 

9 and inserting ‘‘, 2005, AND 2006’’. 

10 (3) PBGC PREMIUM RATE.—Subclause (V) of 

11 section 4006(a)(3)(E)(iii) of such Act is amended by 

12 striking ‘‘2006’’ and inserting ‘‘2007’’. 

13 (c) PLAN AMENDMENTS.—Clause (ii) of section 

14 101(c)(2)(A) of the Pension Funding Equity Act of 2004 

15 is amended by striking ‘‘2006’’ and inserting ‘‘2007’’. 

16 SEC. 322. DEDUCTION LIMITS FOR PLAN CONTRIBUTIONS. 

17 (a) IN GENERAL.—Clause (i) of section 404(a)(1)(D) 

18 of the Internal Revenue Code of 1986 (relating to special 

19 rule in case of certain plans) is amended by striking ‘‘sec20 tion 412(l)’’ and inserting ‘‘section 412(l)(8)(A), except 

21 that section 412(l)(8)(A) shall be applied for purposes of 

22 this clause by substituting ‘180 percent (130 percent in 

23 the case of a multiemployer plan) of current liability’ for 

24 ‘the current liability’ in clause (i).’’ 
319 

•S 1953 PCS 

1 (b) CONFORMING AMENDMENT.—Section 404(a)(1) 

2 of the Internal Revenue Code of 1986 is amended by strik3 ing subparagraph (F). 

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

5 this section shall apply to years beginning after December 

6 31, 2005. 

7 SEC. 323. UPDATING DEDUCTION RULES FOR COMBINA8 TION OF PLANS. 

9 (a) IN GENERAL.—Subparagraph (C) of section 

10 404(a)(7) of the Internal Revenue Code of 1986 (relating 

11 to limitation on deductions where combination of defined 

12 contribution plan and defined benefit plan) is amended by 

13 adding after clause (ii) the following new clause: 

14 ‘‘(iii) LIMITATION.—In the case of 

15 employer contributions to 1 or more de16 fined contribution plans, this paragraph 

17 shall only apply to the extent that such 

18 contributions exceed 6 percent of the com19 pensation otherwise paid or accrued during 

20 the taxable year to the beneficiaries under 

21 such plans. For purposes of this clause, 

22 amounts carried over from preceding tax23 able years under subparagraph (B) shall 

24 be treated as employer contributions to 1 

25 or more defined contributions to the extent 
320 

•S 1953 PCS 

1 attributable to employer contributions to 

2 such plans in such preceding taxable 

3 years.’’ 

4 (b) CONFORMING AMENDMENT.—Subparagraph (A) 

5 of section 4972(c)(6) of such Code (relating to nondeduct6 ible contributions) is amended to read as follows: 

7 ‘‘(A) so much of the contributions to 1 or 

8 more defined contribution plans which are not 

9 deductible when contributed solely because of 

10 section 404(a)(7) as does not exceed the 

11 amount of contributions described in section 

12 401(m)(4)(A), or’’. 

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

14 this section shall apply to contributions for taxable years 

15 beginning after December 31, 2005. 

16 Subtitle B—Related Provisions 

17 SEC. 331. REPLACEMENT OF 30-YEAR TREASURY RATE FOR 

18 CALCULATING LUMP-SUM DISTRIBUTIONS. 

19 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

20 Section 417(e)(3)(A) of the Internal Revenue Code of 

21 1986 (relating to determination of present value) is 

22 amended— 

23 (1) by striking ‘‘and the applicable interest 

24 rate.’’ in clause (i) and inserting ‘‘and by using— 
321 

•S 1953 PCS 

1 ‘‘(I) the phase-in yield curve 

2 method in the case of plan years be3 ginning in 2007, 2008, 2009, and 

4 2010, and 

5 ‘‘(II) the yield curve method for 

6 years beginning after 2010.’’; and 

7 (2) by striking subclause (II) of clause (ii) and 

8 inserting: 

9 ‘‘(II) YIELD CURVE METHOD.— 

10 The term ‘yield curve method’ has the 

11 meaning given such term by section 

12 430(h)(2)(B). 

13 ‘‘(III) PHASE-IN YIELD CURVE

14 METHOD.—The term ‘phase in yield 

15 curve method’ has the meaning given 

16 the term by section 430(h)(2)(C), ex17 cept that the annual rate of interest 

18 on 30-year Treasury securities shall 

19 be substituted for the interest rate 

20 under section 430(h)(2)(C)(i)(II) and 

21 the applicable percentage determined 

22 under subclause (IV) shall be sub23 stituted for the applicable percentage 

24 used under such section. 
322 

•S 1953 PCS 

1 ‘‘(IV) APPLICABLE PERCENT2 AGE.—For purposes of subclause 

3 (III), the applicable percentage shall 

4 be determined in accordance with the 

5 following table: 

In the case of years The applicable 

beginning in— percentage is—

2007 ......................................................................................... 20

2008 ......................................................................................... 40

2009 ......................................................................................... 60

2010 ......................................................................................... 80.’’. 

6 (b) AMENDMENTS OF ERISA.—Section 205(g)(3)(A) 

7 of the Employee Retirement Income Security Act of 1974 

8 (29 U.S.C. 1055(g)(3)) is amended— 

9 (1) by striking ‘‘and the applicable interest 

10 rate.’’ in clause (i) and inserting ‘‘and by using— 

11 ‘‘(I) the phase-in yield curve 

12 method in the case of plan years be13 ginning in 2007, 2008, 2009, and 

14 2010, and 

15 ‘‘(II) the yield curve method for 

16 years beginning after 2010.’’; and 

17 (2) by striking subclause (II) of clause (ii) and 

18 inserting: 

19 ‘‘(II) YIELD CURVE METHOD.— 

20 The term ‘yield curve method’ has the 

21 meaning given such term by section 

22 303(h)(2)(B). 
323 

•S 1953 PCS 

1 ‘‘(III) PHASE-IN YIELD CURVE

2 METHOD.—The term ‘phase in yield 

3 curve method’ has the meaning given 

4 the term by section 303(h)(2)(C), ex5 cept that the annual rate of interest 

6 on 30-year Treasury securities shall 

7 be substituted for the interest rate 

8 under section 303(h)(2)(C)(i)(II) and 

9 the applicable percentage determined 

10 under subclause (IV) shall be sub11 stituted for the applicable percentage 

12 used under such section. 

13 ‘‘(IV) APPLICABLE PERCENT14 AGE.—For purposes of subclause 

15 (III), the applicable percentage shall 

16 be determined in accordance with the 

17 following table: 

In the case of years The applicable 

beginning in— percentage is—

2007 ......................................................................................... 20

2008 ......................................................................................... 40

2009 ......................................................................................... 60

2010 ......................................................................................... 80.’’. 

18 (c) EFFECTIVE DATES.— 

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

20 this section shall apply to plan years beginning after 

21 December 31, 2006. 
324 

•S 1953 PCS 

1 (2) SPECIAL RULE FOR CERTAIN OPTIONAL

2 BENEFITS.—If— 

3 (A) for the last plan year of a plan begin4 ning in 2003, the plan provides that the appli5 cable interest rate under section 417(e)(3) of 

6 the Internal Revenue Code of 1986 and section 

7 205(g)(3) of Employee Retirement Income Se8 curity Act of 1974 shall be used for purposes 

9 of determining the amount of a benefit (other 

10 than the accrued benefit) to which such sections 

11 417(e)(3) and 205(g)(3) do not apply, and 

12 (B) such plan is amended to provide that 

13 a rate other than the applicable interest rate 

14 shall be used for such purposes and the first 

15 plan year for which such amendment is effective 

16 begins no later than January 1, 2007, 

17 such plan shall not fail to meet the requirements of 

18 section 411(d)(6) of the Internal Revenue Code of 

19 1986 and section 204(g) of Employee Retirement 

20 Income Security Act of 1974 by reason of such 

21 amendment. 
325 

•S 1953 PCS 

1 SEC. 332. INTEREST RATE ASSUMPTION FOR APPLYING 

2 BENEFIT LIMITATIONS TO LUMP SUM DIS3 TRIBUTIONS. 

4 (a) IN GENERAL.—Clause (ii) of section 

5 415(b)(2)(E) of the Internal Revenue Code of 1986 is 

6 amended to read as follows: 

7 ‘‘(ii) For purposes of adjusting any 

8 benefit under subparagraph (B) for any 

9 form of benefit subject to section 

10 417(e)(3), clause (i) shall be applied by 

11 substituting ‘5.5 percent’ for ‘5 percent’.’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 subsection (a) shall apply to years beginning after Decem14 ber 31, 2005. 

15 SEC. 333. RESTRICTIONS ON FUNDING OF NONQUALIFIED 

16 DEFERRED COMPENSATION PLANS BY EM17 PLOYERS MAINTAINING UNDERFUNDED OR 

18 TERMINATED SINGLE-EMPLOYER PLANS. 

19 (a) AMENDMENTS OF ERISA.— 

20 (1) IN GENERAL.—Part 3 of subtitle A of title 

21 I of the Employee Retirement Income Security Act 

22 of 1974 (29 U.S.C. 1081 et seq.), as amended by 

23 this Act, is amended by adding at the end the fol24 lowing new section: 
326 

•S 1953 PCS 

1 ‘‘RESTRICTIONS ON FUNDING OF NONQUALIFIED

2 DEFERRED COMPENSATION PLANS

3 ‘‘SEC. 306. (a) RESTRICTIONS.—During any re4 stricted period— 

5 ‘‘(1) a plan sponsor of a defined benefit plan 

6 which is a single-employer plan, and 

7 ‘‘(2) any member of a controlled group which 

8 includes such sponsor, 

9 may not directly or indirectly transfer assets, and may not 

10 directly or indirectly otherwise reserve assets, in a trust 

11 (or other arrangement determined by the Secretary of the 

12 Treasury) for purposes of paying deferred compensation 

13 of an applicable covered employee under a nonqualified de14 ferred compensation plan of such plan sponsor or member. 

15 ‘‘(b) NOTICE AND ACCESS.— 

16 ‘‘(1) NOTICE RELATING TO RESTRICTED PE17 RIOD.—The plan administrator of a plan described 

18 in subsection (a)(1) shall notify each plan sponsor of 

19 the plan within a reasonable period of time after the 

20 occurrence of an event which results in a restricted 

21 period with respect to the plan. Such notice shall in22 clude information— 

23 ‘‘(A) as to the duration of the restricted 

24 period, and 
327 

•S 1953 PCS 

1 ‘‘(B) the restrictions under subsection (a) 

2 which apply during the restricted period to the 

3 plan sponsor and any member of a controlled 

4 group which includes such sponsor. 

5 ‘‘(2) NOTICE OF EXISTENCE OF, AND TRANS6 FERS TO, NONQUALIFIED DEFERRED COMPENSATION

7 PLANS.— 

8 ‘‘(A) INITIAL NOTICE.—Within 30 days of 

9 receipt of a notice under paragraph (1), each 

10 plan sponsor shall notify the plan administrator 

11 of the plan described in subsection (a)(1)— 

12 ‘‘(i) of nonqualified deferred com13 pensation plans maintained by the plan 

14 sponsor or any member of a controlled 

15 group which includes such sponsor, and 

16 ‘‘(ii) the amount of any assets trans17 ferred or otherwise reserved by the plan 

18 sponsor or such member in violation of 

19 subsection (a) during any portion of the 

20 restricted period occurring on or before the 

21 date the plan sponsor provides such notice. 

22 ‘‘(B) ADDITIONAL NOTICES.—If, after the 

23 date on which notice is provided under subpara24 graph (A) and during any portion of the re25 maining restricted period specified in the notice 
328 

•S 1953 PCS 

1 provided under paragraph (1), the plan sponsor 

2 of a plan described in subsection (a)(1) or a 

3 member of a controlled group which includes 

4 such sponsor— 

5 ‘‘(i) transfers or reserves assets in vio6 lation of subsection (a), 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 subsection (a)(1) 

11 of 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 this section. 

19 ‘‘(c) RESTRICTED PERIOD.—For purposes of this 

20 section, the term ‘restricted period’ means, with respect 

21 to any plan described in subsection (a)(1)— 

22 ‘‘(1) any prohibited period determined under 

23 subparagraph (A) or (B) of section 305(c)(3), except 

24 that in making such determination— 
329 

•S 1953 PCS 

1 ‘‘(A) both subsection (c)(1) and (c)(3)(A) 

2 of section 305 shall be applied by substituting 

3 ‘80 percent’ for ‘60 percent’ each place it ap4 pears, and 

5 ‘‘(B) section 305(c)(5) shall apply. 

6 ‘‘(2) the 12-month period beginning on the date 

7 which is 6 months before the termination date of the 

8 plan if, as of the termination date, the plan is not 

9 sufficient for benefit liabilities (within the meaning 

10 of section 4041). 

11 ‘‘(d) NONQUALIFIED DEFERRED COMPENSATION

12 PLAN.—For purposes of this section— 

13 ‘‘(1) IN GENERAL.—The term ‘nonqualified de14 ferred compensation plan’ means any plan that pro15 vides for the deferral of compensation, other than— 

16 ‘‘(A) a qualified employer plan, and 

17 ‘‘(B) any bona fide vacation leave, sick 

18 leave, compensatory time, disability pay, or 

19 death benefit plan. 

20 ‘‘(2) QUALIFIED EMPLOYER PLAN.—The term 

21 ‘qualified employer plan’ means— 

22 ‘‘(A) any plan, contract, pension, account, 

23 or trust described in subparagraph (A) or (B) 

24 of section 219(g)(5) of the Internal Revenue 
330 

•S 1953 PCS 

1 Code of 1986 (without regard to subparagraph 

2 (A)(iii)), 

3 ‘‘(B) any eligible deferred compensation 

4 plan (within the meaning of section 457(b) of 

5 such Code), and 

6 ‘‘(C) any plan described in section 415(m) 

7 of such Code. 

8 ‘‘(3) PLAN INCLUDES ARRANGEMENTS, ETC.— 

9 The term ‘plan’ includes any agreement or arrange10 ment, including an agreement or arrangement that 

11 includes one person. 

12 ‘‘(e) OTHER DEFINITIONS.—For purposes of this 

13 section— 

14 ‘‘(1) APPLICABLE COVERED EMPLOYEE.— 

15 ‘‘(A) IN GENERAL.—The term ‘applicable 

16 covered employee’ mean any— 

17 ‘‘(i) covered employee of a plan spon18 sor, 

19 ‘‘(ii) covered employee of a member of 

20 a controlled group which includes the plan 

21 sponsor, and 

22 ‘‘(iii) former employee who was a cov23 ered employee at the time of termination of 

24 employment with the plan sponsor or a 
331 

•S 1953 PCS 

1 member of a controlled group which in2 cludes the plan sponsor. 

3 ‘‘(B) COVERED EMPLOYEE.—The term 

4 ‘covered employee’ has the meaning given such 

5 term by section 162(m)(3) of the Internal Rev6 enue Code of 1986. 

7 ‘‘(2) CONTROLLED GROUP.—The term ‘con8 trolled group’ has the meaning given such term by 

9 section 302(f)(3).’’. 

10 (2) ENFORCEMENT.— 

11 (A) IN GENERAL.—Section 502(a) of the 

12 Employee Retirement Income Security Act (29 

13 U.S.C. 1132(a)) is amended— 

14 (i) by striking ‘‘or’’ at the end of 

15 paragraph (8), by striking the period at 

16 the end of paragraph (9) and inserting ‘‘; 

17 or’’, and by adding at the end the following 

18 new paragraph: 

19 ‘‘(10) by a fiduciary of a defined benefit plan 

20 which is a single-employer plan against— 

21 ‘‘(A) a plan sponsor, a member of a con22 trolled group which includes the plan sponsor, 

23 an applicable covered employee, or a person 

24 holding assets which are part of a nonqualified 
332 

•S 1953 PCS 

1 deferred compensation plan to recover on behalf 

2 of the plan— 

3 ‘‘(i) assets which were set aside or 

4 transferred in violation of section 306 (and 

5 any earnings properly allocable to the as6 sets); or 

7 ‘‘(ii) amounts equivalent to the assets 

8 and earnings described in clause (i); or 

9 ‘‘(B) a plan sponsor, or a member of a 

10 controlled group which includes the plan spon11 sor, to compel the production of records the fi12 duciary is entitled to under section 306.’’; and 

13 (ii) by adding at the end the following 

14 new flush sentence: 

15 ‘‘For purposes of paragraph (10), any term used in such 

16 paragraph which is also used in section 306 shall have 

17 the meaning given such term by section 306.’’. 

18 (B) MANDATORY AWARDING OF FEES.— 

19 Section 502(g) of such Act (29 U.S.C. 1132(g)) 

20 is amended by adding at the end the following 

21 new paragraph: 

22 ‘‘(3) ACTIONS TO RECOVER ASSETS TRANS23 FERRED TO NONQUALIFIED DEFERRED COMPENSA24 TION PLANS.—If, in any action under subsection 

25 (a)(10) by a fiduciary for or on behalf of a plan to 
333 

•S 1953 PCS 

1 enforce section 306, a judgement is awarded in favor 

2 of the plan, the court shall, in addition to any other 

3 amount, award the plan reasonable attorney’s fees 

4 and costs of the action, to be paid by the defend5 ant’’. 

6 (3) CLERICAL AMENDMENT.—The table of con7 tents in section 1 of such Act, as amended by this 

8 Act, is amended by adding at the end the following 

9 new item: 

‘‘Sec. 306. Restrictions on funding of nonqualified deferred compensation 

plans.’’. 

10 (b) AMENDMENTS OF INTERNAL REVENUE CODE.— 

11 (1) IN GENERAL.—Subsection (b) of section 

12 409A of the Internal Revenue Code of 1986 (pro13 viding rules relating to funding) is amended by re14 designating paragraphs (3) and (4) as paragraphs 

15 (4) and (5), respectively, and by inserting after 

16 paragraph (2) the following new paragraph: 

17 ‘‘(3) EMPLOYERS OF UNDERFUNDED OR TERMI18 NATED DEFINED BENEFIT PLANS.—If, during any 

19 restricted period— 

20 ‘‘(A) a plan sponsor of a defined benefit 

21 plan which is a single-employer plan, or 

22 ‘‘(B) any member of a controlled group 

23 which includes such sponsor, 
334 

•S 1953 PCS 

1 directly or indirectly transfers assets, or directly or 

2 indirectly otherwise reserves assets, in a trust (or 

3 other arrangement determined by the Secretary) for 

4 purposes of paying deferred compensation of an ap5 plicable covered employee under a nonqualified de6 ferred compensation plan of the plan sponsor or 

7 member, such assets shall for purposes of section 83 

8 be treated as property transferred in connection with 

9 the performance of services whether or not such as10 sets are available to satisfy claims of general credi11 tors. For purposes of this paragraph, any term used 

12 in this paragraph which is also used in section 

13 4980K(h) shall have the meaning given such term 

14 by such section.’’. 

15 (2) REQUIREMENT TO PROVIDE NOTICE OF

16 EVENT RESULTING IN RESTRICTED PERIOD.— 

17 (A) IN GENERAL.—Section 4980K of the 

18 Internal Revenue Code of 1986 (as amended by 

19 section 403) is amended— 

20 (i) in subsection (a), by striking ‘‘sub21 section (e), (f), or (g)’’ and inserting ‘‘sub22 section (e), (f), (g), or (h)’’; 

23 (ii) by amending subsection (b)(1) to 

24 read as follows: 
335 

•S 1953 PCS 

1 ‘‘(1) AMOUNT OF TAX.—The amount of tax im2 posed by subsection (a) on any failure— 

3 ‘‘(A) under subsection (e), (f), or (g) with 

4 respect to any participant or beneficiary shall 

5 be $100 for each day in the noncompliance pe6 riod with respect to the failure; and 

7 ‘‘(B) under subsection (h) shall be $1000 

8 for each day in the noncompliance period with 

9 respect to the failure.’’; 

10 (iii) in subsection (c)— 

11 (I) by striking ‘‘subsection (e), 

12 (f), or (g)’’ each place it appears and 

13 inserting ‘‘subsection (e), (f), (g), or 

14 (h)’’; and 

15 (II) in paragraph (3)(C), by 

16 striking ‘‘(f) and (g)’’ and inserting 

17 ‘‘(f), (g), and (h)’’; and 

18 (iv) by adding at the end the fol19 lowing: 

20 ‘‘(h) REQUIREMENT TO PROVIDE NOTICE OF EVENT

21 RESULTING IN RESTRICTED PERIOD.— 

22 ‘‘(1) IN GENERAL.—A plan administrator of a 

23 defined benefit plan which is a single-employer plan 

24 shall provide to each plan sponsor of the plan within 

25 a reasonable period of time after the occurrence of 
336 

•S 1953 PCS 

1 an event which results in a restricted period with re2 spect to plan a notice that includes— 

3 ‘‘(A) information as to the duration of the 

4 restricted period, and 

5 ‘‘(B) the restrictions under section 306 of 

6 the Employee Retirement Income Security Act 

7 of 1974 and section 409A(b)(3) during the re8 stricted period. 

9 ‘‘(2) NOTICE OF EXISTENCE OF, AND TRANS10 FERS TO, NONQUALIFIED DEFERRED COMPENSATION

11 PLANS.— 

12 ‘‘(A) INITIAL NOTICE.—Within 30 days of 

13 receipt of a notice under paragraph (1), each 

14 plan sponsor shall notify the plan administrator 

15 of the plan— 

16 ‘‘(i) of nonqualified deferred com17 pensation plans maintained by the plan 

18 sponsor or any member of a controlled 

19 group which includes such sponsor, and 

20 ‘‘(ii) the amount of any assets trans21 ferred or otherwise reserved by the plan 

22 sponsor or such member in violation of sec23 tion 306 of such Act or section 409A(b)(3) 

24 during any portion of the restricted period 
337 

•S 1953 PCS 

1 occurring on or before the date the plan 

2 sponsor provides such notice. 

3 ‘‘(B) ADDITIONAL NOTICES.—If, after the 

4 date on which notice is provided under subpara5 graph (A) and during any portion of the re6 maining restricted period specified in the notice 

7 provided under paragraph (1), the plan sponsor 

8 of a defined benefit plan which is a single-em9 ployer plan or a member of a controlled group 

10 which includes such sponsor— 

11 ‘‘(i) transfers or reserves assets in vio12 lation of section 306 of such Act or section 

13 409A(b)(3), or 

14 ‘‘(ii) establishes a new nonqualified 

15 deferred compensation plan, 

16 the plan sponsor shall notify the plan adminis17 trator of the plan of such transfer, reservation, 

18 or establishment within 3 days of the date of 

19 such action. 

20 ‘‘(3) ACCESS TO FINANCIAL DATA.—Any fidu21 ciary of the plan shall have access to the financial 

22 records of a plan sponsor or any member of a con23 trolled group which includes such sponsor to deter24 mine if assets were transferred or otherwise reserved 
338 

•S 1953 PCS 

1 in violation of section 306 of such Act or section 

2 409A(b)(3). 

3 ‘‘(4) FORM AND MANNER.—The Secretary may 

4 prescribe the form and manner of a notice required 

5 under this section. Such a notice shall be written in 

6 a manner calculated to be understood by the average 

7 plan participant and may be delivered in written, 

8 electronic, or other appropriate form to the extent 

9 that such form is reasonably accessible to the recipi10 ent. 

11 ‘‘(5) DEFINITIONS.—For purposes of this para12 graph, any term used in this subsection which is also 

13 used in section 306 of such Act shall have the mean14 ing given such term by such section.’’. 

15 (3) CONFORMING AMENDMENTS.—Paragraphs 

16 (4) and (5) of section 409A(b) of such Code, as re17 designated by subsection (a) of this subsection, are 

18 each amended by striking ‘‘paragraph (1) or (2)’’ 

19 each place it appears and inserting ‘‘paragraph (1), 

20 (2), or (3)’’. 

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

22 this section shall apply to transfers or other reservation 

23 of assets after December 31, 2006. 
339 

•S 1953 PCS 

1 SEC. 334. SPECIAL FUNDING RULES FOR PLANS MAIN2 TAINED BY COMMERCIAL AIRLINES THAT 

3 ARE AMENDED TO CEASE FUTURE BENEFIT 

4 ACCRUALS. 

5 (a) IN GENERAL.—If an eligible plan elects to have 

6 this section apply— 

7 (1) in the case of any applicable plan year be8 ginning before January 1, 2007, the plan shall not 

9 have an accumulated funding deficiency for purposes 

10 of sections 412 and 4971 of the Internal Revenue 

11 Code of 1986 and section 302 of the Employee Re12 tirement Income Security Act of 1974 if contribu13 tions to the plan for the plan year are not less than 

14 the minimum required contribution determined 

15 under subsection (d) for the plan for the plan year, 

16 and 

17 (2) in the case of any applicable plan year be18 ginning on or after January 1, 2007, the minimum 

19 required contribution determined under section 430 

20 of such Code and 303 of such Act shall, for purposes 

21 of sections 412, 430, and 4971 of such Code and 

22 sections 302 and 303 of such Act, be equal to the 

23 minimum required contribution determined under 

24 subsection (d) for the plan for the plan year. 

25 (b) ELIGIBLE PLAN.—For purposes of this section— 
340 

•S 1953 PCS 

1 (1) IN GENERAL.—The term ‘‘eligible plan’’ 

2 means a defined benefit plan (other than a multiem3 ployer plan) to which section 412 of such Code and 

4 302 of such Act applies— 

5 (A) which is sponsored by an employer 

6 which is a commercial passenger airline, and 

7 (B) with respect to which the requirements 

8 of paragraphs (2) and (3) are met. 

9 (2) ACCRUAL RESTRICTIONS.—The require10 ments of this paragraph are met if, effective as of 

11 the first day of the first applicable plan year and at 

12 all times thereafter, the plan provides that— 

13 (A) the accrued benefit, any death or dis14 ability benefit, and any social security supple15 ment described in the last sentence of section 

16 411(a)(9) of such Code and section 

17 204(b)(1)(G) of such Act, of each participant 

18 are frozen at the amount of such benefit or 

19 supplement immediately before such first day, 

20 and 

21 (B) all other benefits under the plan are 

22 eliminated, 

23 but only to the extent the freezing or elimination of 

24 such benefits would have been permitted under sec25 tion 411(d)(6) of such Code and section 204(g) of 
341 

•S 1953 PCS 

1 such Act if they had been implemented by a plan 

2 amendment adopted immediately before such first 

3 day. 

4 (3) RESTRICTION ON APPLICABLE BENEFIT IN5 CREASES.—The requirements of this paragraph are 

6 met if no applicable benefit increase (as defined in 

7 section 436(b)(3) of such Code and section 

8 305(b)(3) of such Act, but determined without re9 gard to subparagraph (B) or (C) thereof) takes ef10 fect at any time during the period beginning on July 

11 26, 2005, and ending on the day before the first day 

12 of the first applicable plan year. 

13 (c) ELECTIONS AND RELATED TERMS.— 

14 (1) IN GENERAL.—A plan sponsor shall make 

15 the election under subsection (a) at such time and 

16 in such manner as the Secretary of the Treasury 

17 may prescribe. Such election, once made, may be re18 voked only with the consent of the Secretary. 

19 (2) YEARS FOR WHICH ELECTION MADE.— 

20 (A) IN GENERAL.—The plan sponsor may 

21 select the first plan year to which the election 

22 under subsection (a) applies from among plan 

23 years ending after the date of the election. The 

24 election shall apply to such plan year and all 

25 subsequent years. 
342 

•S 1953 PCS 

1 (B) ELECTION OF NEW PLAN YEAR.—The 

2 plan sponsor may specify a new plan year in the 

3 election under subsection (a) and the plan year 

4 of the plan may be changed to such new plan 

5 year without the approval of the Secretary of 

6 the Treasury. 

7 (3) APPLICABLE PLAN YEAR.—The term ‘‘ap8 plicable plan year’’ means each plan year to which 

9 the election under subsection (a) applies under para10 graph (1). 

11 (d) MINIMUM REQUIRED CONTRIBUTION.— 

12 (1) IN GENERAL.—In the case of any applicable 

13 plan year during the amortization period, the min14 imum required contribution shall be the amount nec15 essary to amortize the unfunded liability of the plan, 

16 determined as of the first day of the plan year, in 

17 equal annual installments (until fully amortized) 

18 over the remainder of the amortization period. Such 

19 amount shall be separately determined for each ap20 plicable plan year. 

21 (2) YEARS AFTER AMORTIZATION PERIOD.—In 

22 the case of any plan year beginning after the close 

23 of the amortization period, section 412(a)(2)(A) of 

24 such Code and section 302(a)(2)(A) of such Act 

25 shall apply to such plan, but the prefunding balance 
343 

•S 1953 PCS 

1 as of the first day of the first plan year beginning 

2 after the close of the amortization period under sec3 tion 430(e) of such Code and section 303(e) of such 

4 Act shall be zero. 

5 (3) DEFINITIONS.—For purposes of this sec6 tion— 

7 (A) UNFUNDED LIABILITY.—The term 

8 ‘‘unfunded liability’’ means the unfunded ac9 crued liability under the plan, determined under 

10 the unit credit funding method. 

11 (B) AMORTIZATION PERIOD.—The term 

12 ‘‘amortization period’’ means the 14-plan year 

13 period beginning with the first applicable plan 

14 year. 

15 (4) OTHER RULES.—In determining the min16 imum required contribution and amortization 

17 amount under this subsection— 

18 (A) the provisions of section 412(c)(3) of 

19 such Code and section 302(c)(3) of such Act, as 

20 in effect before the date of enactment of this 

21 section, shall apply, 

22 (B) the rate of interest under section 

23 412(b)(5)(A) of such Code and section 

24 302(b)(5)(A) of such Act, as so in effect, shall 
344 

•S 1953 PCS 

1 be used for all calculations requiring an interest 

2 rate, and 

3 (C) the value of plan assets shall be equal 

4 to their fair market value. 

5 (e) FUNDING STANDARD ACCOUNT AND

6 PREFUNDING BALANCE.—Any amortization bases or 

7 credit balances in the funding standard account under sec8 tion 412 of such Code or section 302 of such Act, and 

9 any prefunding balance under section 430 of such Code 

10 or section 303 of such Act, as of the day before the first 

11 day of the first applicable plan year, shall be reduced to 

12 zero. 

13 (f) AMENDMENTS TO OTHER PROVISIONS.— 

14 (1) QUALIFICATION REQUIREMENT.—Section 

15 401(a) of the Internal Revenue Code of 1986, as 

16 amended by this Act, is amended by inserting after 

17 paragraph (33) the following new paragraph: 

18 ‘‘(34) SUCCESSOR PLANS TO CERTAIN PLANS.— 

19 If a plan to which section 334 of the National Em20 ployee Savings and Trust Equity Guarantee Act of 

21 2005 applies is maintained by an employer that es22 tablishes or maintains 1 or more other defined ben23 efit plans (other than any multiemployer plan), and 

24 such other plans in combination provide benefit ac25 cruals to any substantial number of successor em-
345 

•S 1953 PCS 

1 ployees, the Secretary may, in the Secretary’s discre2 tion, determine that any trust of which any other 

3 such plan is a part does not constitute a qualified 

4 trust under this subsection unless all benefit obliga5 tions of the plan to which section 334 of the Na6 tional Employee Savings and Trust Equity Guar7 antee Act of 2005 applies have been satisfied. For 

8 purposes of this paragraph, the term ‘successor em9 ployee’ means any employee who is or was covered 

10 by the plan to which section 334 of the National 

11 Employee Savings and Trust Equity Guarantee Act 

12 of 2005 applies and any employee who performs sub13 stantially the same type of work with respect to the 

14 same business operations as an employee covered by 

15 such plan.’’ 

16 (2) PBGC LIABILITY LIMITED.—Section 4022 

17 of the Employee Retirement Income Security Act of 

18 1974, as amended by this Act, is amended by adding 

19 at the end the following new subsection: 

20 ‘‘(h) SPECIAL RULE FOR PLANS ELECTING CERTAIN

21 FUNDING REQUIREMENTS.—If any plan makes an elec22 tion under section 334 of the National Employee Savings 

23 and Trust Equity Guarantee Act of 2005, then this sec24 tion and section 4044(a)(3) shall be applied by treating 
346 

•S 1953 PCS 

1 the first day of the first applicable plan year as the termi2 nation date of the plan.’’ 

3 (3) LIMITATION ON DEDUCTIONS UNDER CER4 TAIN PLANS.—Section 404(a)(7)(C)(iv) of the Inter5 nal Revenue Code of 1986, as added by this Act, is 

6 amended by adding at the end the following new 

7 sentence: ‘‘This clause shall not apply to any plan 

8 for a plan year if an election under section 334 of 

9 the National Employee Savings and Trust Equity 

10 Guarantee Act of 2005 is in effect for such year.’’ 

11 (4) NOTICE.—In the case of a plan amendment 

12 adopted in order to comply with this section, any no13 tice required under section 4980F(e) of such Code 

14 or section 204(h) of such Act shall be subject to the 

15 timing rules applicable to multiemployer plans under 

16 Treasury Regulation section 54.4980F–1 Q/A–9 (or 

17 any successor provision). This subsection shall not 

18 apply to any plan unless such plan is maintained 

19 pursuant to one or more collective bargaining agree20 ments between employee representatives and one or 

21 more employers. 

22 (g) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to plan years ending after the date 

24 of the enactment of this Act. 
347 

•S 1953 PCS 

1 SEC. 335. 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— 
348 

•S 1953 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. 
349 

•S 1953 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 Subtitle C—Other Provisions 

8 SEC. 341. TREATMENT OF CASH BALANCE AND OTHER HY9 BRID DEFINED BENEFIT PENSION PLANS. 

10 (a) APPLICATION OF AGE DISCRIMINATION PROHIBI11 TIONS.— 

12 (1) AMENDMENT OF INTERNAL REVENUE

13 CODE.—Section 411(b) of the Internal Revenue 

14 Code of 1986 (relating to accrued benefit require15 ments) is amended by adding at the end the fol16 lowing: 

17 ‘‘(5) SPECIAL RULE FOR CASH BALANCE AND

18 OTHER HYBRID DEFINED BENEFIT PLANS.— 

19 ‘‘(A) IN GENERAL.—A qualified cash bal20 ance plan shall not be treated as violating the 

21 requirements of paragraph (1)(H) merely be22 cause it may reasonably be expected that the 

23 period over which interest credits will be made 

24 to a participant’s accumulation account (or its 

25 equivalent) is longer for a younger participant. 
350 

•S 1953 PCS 

1 This paragraph shall not apply to any plan if 

2 the rate of any pay credit or interest credit to 

3 such an account under the plan decreases by 

4 reason of the participant’s attainment of any 

5 age. 

6 ‘‘(B) QUALIFIED CASH BALANCE PLAN.— 

7 For purposes of this paragraph— 

8 ‘‘(i) IN GENERAL.—The term ‘quali9 fied cash balance plan’ means a cash bal10 ance plan which meets the vesting require11 ment under clause (ii) and the interest 

12 credit requirement under clause (iii). 

13 ‘‘(ii) VESTING REQUIREMENTS.—A 

14 plan meets the requirements of this clause 

15 if an employee who has completed at least 

16 3 years of service has a nonforfeitable 

17 right to 100 percent of the employee’s ac18 crued benefit derived from employer con19 tributions. 

20 ‘‘(iii) INTEREST CREDITS.—A plan 

21 meets the requirements of this clause if the 

22 terms of the plan provide that any interest 

23 credit (or equivalent amount) for any plan 

24 year shall be at a rate which— 
351 

•S 1953 PCS 

1 ‘‘(I) is not less than the applica2 ble Federal mid-term interest rate (as 

3 determined under section 1274(d)(1)), 

4 and 

5 ‘‘(II) is not greater than the 

6 greater of the rate determined under 

7 subclause (I) or a rate equal to the 

8 rate of interest on amounts invested 

9 conservatively in long-term investment 

10 grade corporate bonds. 

11 ‘‘(iv) DETERMINATION OF RATES.— 

12 For purposes of clause (iii)(II), the rate of 

13 interest on amounts invested conservatively 

14 in long-term investment grade corporate 

15 bonds shall be determined by the Secretary 

16 on the basis of 2 or more indices that are 

17 selected periodically by the Secretary. The 

18 Secretary shall make publicly available the 

19 indices and methodology used to determine 

20 the rate. 

21 ‘‘(v) VARIABLE RATE OF INTEREST.— 

22 If the interest credit rate under the plan is 

23 a variable rate, the plan shall provide that, 

24 upon the termination of the plan, the rate 

25 of interest used to determine accrued bene-
352 

•S 1953 PCS 

1 fits under the plan shall be equal to the av2 erage of the rates of interest used under 

3 the plan during the 5-year period ending 

4 on the termination date. 

5 ‘‘(C) CASH BALANCE PLAN.—For purposes 

6 of this paragraph, the term ‘cash balance plan’ 

7 means a defined benefit plan under which— 

8 ‘‘(i) the accrued benefit is determined 

9 by reference to the balance of a hypo10 thetical accumulation account, and 

11 ‘‘(ii) pay credits and interest credits 

12 are credited to such account. 

13 ‘‘(D) REGULATIONS TO INCLUDE SIMILAR

14 OR OTHER HYBRID PLANS.— 

15 ‘‘(i) CASH BALANCE PLAN.—The Sec16 retary shall issue regulations which include 

17 in the definition of cash balance plan any 

18 defined benefit plan (or any portion of 

19 such a plan) which has an effect similar to 

20 a cash balance plan. Such regulations may 

21 provide that if a plan sponsor represents in 

22 communications to participants and bene23 ficiaries that a plan amendment results in 

24 a plan being described in the preceding 
353 

•S 1953 PCS 

1 sentence, such plan shall be treated as a 

2 cash balance plan. 

3 ‘‘(ii) QUALIFIED CASH BALANCE

4 PLAN.—The Secretary may in the regula5 tions issued under clause (i) provide for 

6 the treatment of a cash balance plan as a 

7 qualified cash balance plan in cases where 

8 the cash balance plan has an effect similar 

9 to a qualified cash balance plan.’’. 

10 (2) AMENDMENT OF ERISA.—Section 204(b) of 

11 the Employee Retirement Income Security Act of 

12 1974 (29 U.S.C. 1054(b)) is amended by adding at 

13 the end the following: 

14 ‘‘(5) SPECIAL RULE FOR CASH BALANCE AND

15 OTHER HYBRID DEFINED BENEFIT PLANS.— 

16 ‘‘(A) IN GENERAL.—A qualified cash bal17 ance plan shall not be treated as violating the 

18 requirements of paragraph (1)(H) merely be19 cause it may reasonably be expected that the 

20 period over which interest credits will be made 

21 to a participant’s accumulation account (or its 

22 equivalent) is longer for a younger participant. 

23 This paragraph shall not apply to any plan if 

24 the rate of any pay credit or interest credit to 

25 such an account under the plan decreases by 
354 

•S 1953 PCS 

1 reason of the participant’s attainment of any 

2 age. 

3 ‘‘(B) QUALIFIED CASH BALANCE PLAN.— 

4 For purposes of this paragraph— 

5 ‘‘(i) IN GENERAL.—The term ‘quali6 fied cash balance plan’ means a cash bal7 ance plan which meets the vesting require8 ment under clause (ii) and the interest 

9 credit requirement under clause (iii). 

10 ‘‘(ii) VESTING REQUIREMENTS.—A 

11 plan meets the requirements of this clause 

12 if an employee who has completed at least 

13 3 years of service has a nonforfeitable 

14 right to 100 percent of the employee’s ac15 crued benefit derived from employer con16 tributions. 

17 ‘‘(iii) INTEREST CREDITS.—A plan 

18 meets the requirements of this clause if the 

19 terms of the plan provide that any interest 

20 credit (or equivalent amount) for any plan 

21 year shall be at a rate which— 

22 ‘‘(I) is not less than the applica23 ble Federal mid-term interest rate (as 

24 determined under section 1274(d)(1) 
355 

•S 1953 PCS 

1 of the Internal Revenue Code of 

2 1986), 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 of the Treasury on the basis of 2 or more 

15 indices that are selected periodically by the 

16 Secretary of the Treasury. The Secretary 

17 of the Treasury shall make publicly avail18 able the indices and methodology used to 

19 determine the rate. 

20 ‘‘(v) VARIABLE RATE OF INTEREST.— 

21 If the interest credit rate under the plan is 

22 a variable rate, the plan shall provide that, 

23 upon the termination of the plan, the rate 

24 of interest used to determine accrued bene25 fits under the plan shall be equal to the av-
356 

•S 1953 PCS 

1 erage of the rates of interest used under 

2 the plan during the 5-year period ending 

3 on the termination date. 

4 ‘‘(C) CASH BALANCE PLAN.—For purposes 

5 of this paragraph, the term ‘cash balance plan’ 

6 means a defined benefit plan under which— 

7 ‘‘(i) the accrued benefit is determined 

8 by reference to the balance of a hypo9 thetical accumulation account, and 

10 ‘‘(ii) pay credits and interest credits 

11 are credited to such account. 

12 ‘‘(D) REGULATIONS TO INCLUDE SIMILAR

13 OR OTHER HYBRID PLANS.— 

14 ‘‘(i) CASH BALANCE PLAN.—The Sec15 retary of the Treasury shall issue regula16 tions which include in the definition of 

17 cash balance plan any defined benefit plan 

18 (or any portion of such a plan) which has 

19 an effect similar to a cash balance plan. 

20 Such regulations may provide that if a 

21 plan sponsor represents in communications 

22 to participants and beneficiaries that a 

23 plan amendment results in a plan being 

24 described in the preceding sentence, such 
357 

•S 1953 PCS 

1 plan shall be treated as a cash balance 

2 plan. 

3 ‘‘(ii) QUALIFIED CASH BALANCE

4 PLAN.—The Secretary of the Treasury 

5 may in the regulations issued under clause 

6 (i) provide for the treatment of a cash bal7 ance plan as a qualified cash balance plan 

8 in cases where the cash balance plan has 

9 an effect similar to a qualified cash bal10 ance plan.’’. 

11 (b) RULES APPLICABLE TO ACCRUED BENEFITS

12 UNDER CONVERTED PLANS.— 

13 (1) AMENDMENT OF INTERNAL REVENUE

14 CODE.—Section 411(d) of the Internal Revenue 

15 Code of 1986 (relating to special rules) is amended 

16 by adding at the end the following new paragraph: 

17 ‘‘(7) TREATMENT OF CONVERSIONS TO CASH

18 BALANCE OR OTHER HYBRID PLANS.— 

19 ‘‘(A) IN GENERAL.—For purposes of para20 graph (6)(A), an applicable plan amendment 

21 shall be treated as reducing the accrued benefit 

22 of a participant if, under the terms of the plan 

23 as in effect after the amendment, the accrued 

24 benefit of any participant who was a participant 

25 as of the effective date of the amendment may 
358 

•S 1953 PCS 

1 at any time be less than the accrued benefit de2 termined under the method under subparagraph 

3 (B), (C), or (D) which is specified in the plan 

4 and applies uniformly to all participants. An 

5 applicable plan amendment shall in no event be 

6 treated as meeting the requirements of any 

7 such subparagraph if the conversion described 

8 in subparagraph (G)(i) is into a cash balance 

9 plan other than a qualified cash balance plan 

10 (as defined in subsection (b)(5)(B)). 

11 ‘‘(B) NO WEARAWAY.— 

12 ‘‘(i) IN GENERAL.—The accrued ben13 efit determined under this subparagraph is 

14 the sum of— 

15 ‘‘(I) the participant’s accrued 

16 benefit for years of service before the 

17 effective date of the amendment, de18 termined under the terms of the plan 

19 as in effect before the amendment, 

20 plus 

21 ‘‘(II) except as provided in clause 

22 (ii), the participant’s accrued benefit 

23 for years of service after the effective 

24 date of the amendment, determined 
359 

•S 1953 PCS 

1 under the terms of the plan as in ef2 fect after the amendment. 

3 ‘‘(ii) REQUIRED AMOUNTS FOR CER4 TAIN PERIODS.—Notwithstanding clause 

5 (i)(II), the plan shall provide that either— 

6 ‘‘(I) the accrued benefit of all 

7 participants for each of the first 5 

8 plan years to which the amendment 

9 applies shall be equal to the greater of 

10 the accrued benefit determined under 

11 the terms of the plan as in effect both 

12 before and after the amendment, or 

13 ‘‘(II) the accrued benefit for peri14 ods after the effective date of the 

15 amendment of all participants who, as 

16 of the effective date of the amend17 ment, had attained the age of 40 and 

18 had a combined age and years of serv19 ice under the plan of not less than 55 

20 shall be determined under either of 

21 the methods described in clause (iii) 

22 which is selected by the plan and 

23 which is specified in the amendment. 
360 

•S 1953 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 
361 

•S 1953 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 
362 

•S 1953 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 
363 

•S 1953 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 
364 

•S 1953 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 
365 

•S 1953 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— 
366 

•S 1953 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 
367 

•S 1953 PCS 

1 or retirement-type subsidy (within the meaning 

2 of paragraph (6)(B)(i)).’’. 

3 (2) AMENDMENT OF ERISA.—Section 204(g) of 

4 the Employee Retirement Income Security Act of 

5 1974 (29 U.S.C. 1054(g)) is amended by adding at 

6 the end the following new paragraph: 

7 ‘‘(6) TREATMENT OF CONVERSIONS TO CASH

8 BALANCE OR OTHER HYBRID PLANS.— 

9 ‘‘(A) IN GENERAL.—For purposes of para10 graph (1), an applicable plan amendment shall 

11 be treated as reducing the accrued benefit of a 

12 participant if, under the terms of the plan as in 

13 effect after the amendment, the accrued benefit 

14 of any participant who was a participant as of 

15 the effective date of the amendment may at any 

16 time be less than the accrued benefit deter17 mined under the method under subparagraph 

18 (B), (C), or (D) which is specified in the plan 

19 and applies uniformly to all participants. An 

20 applicable plan amendment shall in no event be 

21 treated as meeting the requirements of any 

22 such subparagraph if the conversion described 

23 in subparagraph (G)(i) is into a cash balance 

24 plan other than a qualified cash balance plan 

25 (as defined in subsection (b)(5)(B)). 
368 

•S 1953 PCS 

1 ‘‘(B) NO WEARAWAY.— 

2 ‘‘(i) IN GENERAL.—The accrued ben3 efit determined under this subparagraph is 

4 the sum of— 

5 ‘‘(I) the participant’s accrued 

6 benefit for years of service before the 

7 effective date of the amendment, de8 termined under the terms of the plan 

9 as in effect before the amendment, 

10 plus 

11 ‘‘(II) except as provided in clause 

12 (ii), the participant’s accrued benefit 

13 for years of service after the effective 

14 date of the amendment, determined 

15 under the terms of the plan as in ef16 fect after the amendment. 

17 ‘‘(ii) REQUIRED AMOUNTS FOR CER18 TAIN PERIODS.—Notwithstanding clause 

19 (i)(II), the plan shall provide that either— 

20 ‘‘(I) the accrued benefit of all 

21 participants for each of the first 5 

22 plan years to which the amendment 

23 applies shall be equal to the greater of 

24 the accrued benefit determined under 
369 

•S 1953 PCS 

1 the terms of the plan as in effect both 

2 before and after the amendment, or 

3 ‘‘(II) the accrued benefit for peri4 ods after the effective date of the 

5 amendment of all participants who, as 

6 of the effective date of the amend7 ment, had attained the age of 40 and 

8 had a combined age and years of serv9 ice under the plan of not less than 55 

10 shall be determined under either of 

11 the methods described in clause (iii) 

12 which is selected by the plan and 

13 which is specified in the amendment. 

14 ‘‘(iii) APPLICABLE METHOD.—For 

15 purposes of clause (ii)(II), the plan shall 

16 select 1 of the following methods: 

17 ‘‘(I) The accrued benefit shall be 

18 equal to the greater of the accrued 

19 benefit determined under the terms of 

20 the plan as in effect both before and 

21 after the amendment. 

22 ‘‘(II) At the election of the par23 ticipant, the accrued benefit shall be 

24 determined under the terms of the 
370 

•S 1953 PCS 

1 plan as in effect either before or after 

2 the amendment. 

3 ‘‘(C) GREATER OF OLD OR NEW OR ELEC4 TION OF EITHER.—The accrued benefit deter5 mined under this subparagraph is the accrued 

6 benefit determined under 1 of the following 

7 methods which is selected by the plan and 

8 which is specified in the amendment: 

9 ‘‘(i) The accrued benefit shall be equal 

10 to the greater of the accrued benefit deter11 mined under the terms of the plan as in ef12 fect both before and after the amendment. 

13 ‘‘(ii) At the election of the participant, 

14 the accrued benefit shall be determined 

15 under the terms of the plan as in effect ei16 ther before or after the amendment. 

17 ‘‘(D) METHOD PRESCRIBED BY SEC18 RETARY.—The accrued benefit determined 

19 under this subparagraph shall be determined 

20 under regulations prescribed by the Secretary of 

21 the Treasury which require a plan to provide a 

22 credit of additional amounts or increases in ini23 tial account balances in amounts substantially 

24 equivalent to the benefits that would be re-
371 

•S 1953 PCS 

1 quired to be provided to meet the requirements 

2 of subparagraphs (B) or (C). 

3 ‘‘(E) INCLUSION OF PRIOR ACCRUED BEN4 EFIT INTO INITIAL ACCOUNT BALANCE.— 

5 ‘‘(i) IN GENERAL.—If, for purposes of 

6 subparagraphs (B), (C), or (D), an appli7 cable plan amendment provides that an 

8 amount will be initially credited to a par9 ticipant’s accumulation account (or its 

10 equivalent) on the effective date of the 

11 amendment with respect to the partici12 pant’s accrued benefit for periods before 

13 such date, the requirements of such sub14 paragraph shall be treated as met with re15 spect to such accrued benefit if the amount 

16 initially credited is not less than the 

17 present value of the participant’s accrued 

18 benefit determined by using the applicable 

19 mortality table and the lower of the appli20 cable interest rate under section 

21 205(g)(3)(A), or the interest rate used to 

22 credit interest under the plan, as of such 

23 date. 

24 ‘‘(ii) ADJUSTMENTS FOR CERTAIN

25 SUBSIDIZED BENEFITS.—For purposes of 
372 

•S 1953 PCS 

1 subparagraph (B), if any early retirement 

2 benefit or retirement-type subsidy (within 

3 the meaning of paragraph (2)(A)) is not 

4 included in the initial account balance 

5 under clause (i), the plan shall credit the 

6 accumulation account with the amount of 

7 such benefit or subsidy for the plan year in 

8 which the participant retires if, as of such 

9 time, the participant has met the age, 

10 years of service, and other requirements 

11 under the plan for entitlement to such ben12 efit or subsidy. 

13 ‘‘(F) REQUIREMENTS WHERE PARTICIPANT

14 OFFERED CHOICE.—If a plan provides a partici15 pant with an election described in subparagraph 

16 (B)(iii)(II) or (C)(ii), the following rules shall 

17 apply: 

18 ‘‘(i) NOTICE.—The plan shall not be 

19 treated as meeting the requirements of ei20 ther such subparagraph unless the plan 

21 provides the participant a notice of the 

22 right to make such election which includes 

23 information (meeting such requirements as 

24 may be prescribed by the Secretary of the 

25 Treasury)— 
373 

•S 1953 PCS 

1 ‘‘(I) by which the participant 

2 may project benefits under the for3 mulas from which the participant may 

4 choose and may model the impact of 

5 any such choice, and 

6 ‘‘(II) with respect to cir7 cumstances under which a participant 

8 may not receive the projected accrued 

9 benefits by reason of a plan termi10 nation or otherwise. 

11 ‘‘(ii) SIGNIFICANT REDUCTION OF

12 RATE OF ACCRUAL.—The plan shall pro13 vide that if, during any of the first 5 plan 

14 years during which such an election is in 

15 effect, the plan adopts an amendment 

16 which results in a significant reduction in 

17 the rate of future benefit accrual (within 

18 the meaning of subsection (h)), the ac19 crued benefit of the participant shall be de20 termined as if the participant had made 

21 the election which resulted in the greatest 

22 accrued benefit. 

23 ‘‘(iii) BENEFITS MUST NOT BE CON24 TINGENT ON ELECTION.—The plan shall 

25 not be treated as meeting the requirements 
374 

•S 1953 PCS 

1 of either such subparagraph if any other 

2 benefit is conditioned (directly or indi3 rectly) on such election. 

4 ‘‘(G) APPLICABLE PLAN AMENDMENT.— 

5 For purposes of this paragraph— 

6 ‘‘(i) IN GENERAL.—The term ‘applica7 ble plan amendment’ means an amendment 

8 to a defined benefit plan which has the ef9 fect of converting the plan to a cash bal10 ance plan. 

11 ‘‘(ii) SPECIAL RULE FOR COORDI12 NATED BENEFITS.—If the benefits of 2 or 

13 more defined benefit plans established or 

14 maintained by an employer are coordinated 

15 in such a manner as to have the effect of 

16 the adoption of an amendment described in 

17 clause (i), the sponsor of the defined ben18 efit plan or plans providing for such co19 ordination shall be treated as having 

20 adopted such a plan amendment as of the 

21 date such coordination begins. 

22 ‘‘(iii) MULTIPLE AMENDMENTS.—The 

23 Secretary of the Treasury shall issue regu24 lations to prevent the avoidance of the pur25 poses of this paragraph through the use of 
375 

•S 1953 PCS 

1 2 or more plan amendments rather than a 

2 single amendment. 

3 ‘‘(iv) CASH BALANCE PLAN.—For pur4 poses of this paragraph, the term ‘cash 

5 balance plan’ has the meaning given such 

6 term by subsection (b)(5)(C). 

7 ‘‘(v) COORDINATION WITH ACCRUAL

8 RULES.—If a plan amendment is treated 

9 as meeting the requirements of this para10 graph with respect to any participant be11 cause such participant is eligible to con12 tinue to accrue benefits in the same man13 ner as under the terms of the plan in ef14 fect before the amendment, the Secretary 

15 of the Treasury shall prescribe regulations 

16 under which the plan shall not be treated 

17 as failing to meet the requirements of sub18 paragraph (A), (B), or (C) of subsection 

19 (b)(1) if the requirements of this para20 graph are met. 

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 
376 

•S 1953 PCS 

1 or retirement-type subsidy (within the meaning 

2 of paragraph (2)(A)).’’. 

3 (c) ASSUMPTIONS USED IN COMPUTING PRESENT

4 VALUE OF ACCRUED BENEFIT.— 

5 (1) AMENDMENT OF INTERNAL REVENUE

6 CODE.—Section 417(e)(3) of such Code is amend7 ed— 

8 (A) by striking ‘‘or (B)’’ in subparagraph 

9 (A)(i) and inserting ‘‘, (B), or (C)’’, and 

10 (B) by adding at the end the following new 

11 subparagraph: 

12 ‘‘(C) PRESENT VALUE OF ACCRUED BEN13 EFIT UNDER CASH BALANCE PLAN.—Except as 

14 provided in regulations prescribed by the Sec15 retary, in the case of a qualified cash balance 

16 plan (as defined in section 411(b)(5)(B)), the 

17 present value of the accrued benefit of any par18 ticipant shall, for purposes of paragraphs (1) 

19 and (2), be equal to the balance in the partici20 pant’s accumulation account (or its equivalent) 

21 as of the time the present value determination 

22 is being made.’’ 

23 (2) AMENDMENT OF ERISA.—Section 205(g)(3) 

24 of such Act (29 U.S.C. 1055(g)(3)), is amended— 
377 

•S 1953 PCS 

1 (A) by striking ‘‘or (B)’’ in subparagraph 

2 (A)(i) and inserting ‘‘, (B), or (C)’’, and 

3 (B) by adding at the end the following new 

4 subparagraph: 

5 ‘‘(C) PRESENT VALUE OF ACCRUED BEN6 EFIT UNDER CASH BALANCE PLAN.—Except as 

7 provided in regulations prescribed by the Sec8 retary of the Treasury, in the case of a quali9 fied cash balance plan (as defined in section 

10 204(b)(5)(B)), the present value of the accrued 

11 benefit of any participant shall, for purposes of 

12 paragraphs (1) and (2), be equal to the balance 

13 in the participant’s accumulation account (or 

14 its equivalent) as of the time the present value 

15 determination is being made.’’. 

16 (d) NO INFERENCE.—Nothing in the amendments 

17 made by this section shall be construed to infer the proper 

18 treatment of cash balance plans or conversions to cash bal19 ance plans under sections 411(b)(1)(H) and 417(e) of the 

20 Internal Revenue Code of 1986 and 204(b)(1)(H) and 

21 205(g)(3) of the Employee Retirement Income Security 

22 Act of 1974, as in effect before such amendments. 

23 (e) EFFECTIVE DATES.— 

24 (1) AGE DISCRIMINATION AND LUMP-SUM DIS25 TRIBUTIONS.— 
378 

•S 1953 PCS 

1 (A) IN GENERAL.—The amendments made 

2 by subsections (a) and (c) shall apply to periods 

3 after July 26, 2005. 

4 (B) VESTING AND INTEREST CREDIT RE5 QUIREMENTS.—In the case of a plan in exist6 ence on July 26, 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 26, 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 
379 

•S 1953 PCS 

1 amendments made by subsections (a) and (c), 

2 not apply to plan years beginning before the 

3 earlier of— 

4 (i) the later of— 

5 (I) the date on which the last of 

6 such collective bargaining agreements 

7 terminates (determined without re8 gard to any extension thereof on or 

9 after such date of enactment), or 

10 (II) January 1, 2007, or 

11 (ii) January 1, 2009. 

12 (2) CONVERSIONS.—The amendments made by 

13 subsection (b) shall apply to plan amendments 

14 adopted after, and taking effect after, July 26, 

15 2005, except that the plan sponsor may elect to have 

16 such amendments apply to plan amendments adopt17 ed before, and taking effect after, such date. 

18 SEC. 342. TREATMENT OF ELIGIBLE COMBINED DEFINED 

19 BENEFIT PLANS AND QUALIFIED CASH OR 

20 DEFERRED ARRANGEMENTS. 

21 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

22 Section 414 of the Internal Revenue Code of 1986, as 

23 amended by this Act, is amended by adding at the end 

24 the following new subsection: 
380 

•S 1953 PCS 

1 ‘‘(x) SPECIAL RULES FOR ELIGIBLE COMBINED DE2 FINED BENEFIT PLANS AND QUALIFIED CASH OR DE3 FERRED ARRANGEMENTS.— 

4 ‘‘(1) GENERAL RULE.—Except as provided in 

5 this subsection, the requirements of this title shall 

6 be applied to any defined benefit plan or applicable 

7 defined contribution plan which are part of an eligi8 ble combined plan in the same manner as if each 

9 such plan were not a part of the eligible combined 

10 plan. 

11 ‘‘(2) ELIGIBLE COMBINED PLAN.—For pur12 poses of this subsection— 

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

14 combined plan’ means a plan— 

15 ‘‘(i) which consists of a defined ben16 efit plan and an applicable defined con17 tribution plan, 

18 ‘‘(ii) the assets of which are held in a 

19 single trust forming part of the plan and 

20 are clearly identified and allocated to the 

21 defined benefit plan and the applicable de22 fined contribution plan to the extent nec23 essary for the separate application of this 

24 title under paragraph (1), and 
381 

•S 1953 PCS 

1 ‘‘(iii) with respect to which the ben2 efit, contribution, vesting, and non3 discrimination requirements of subpara4 graphs (B), (C), (D), (E), and (F) are 

5 met. 

6 ‘‘(B) BENEFIT REQUIREMENTS.— 

7 ‘‘(i) IN GENERAL.—The benefit re8 quirements of this subparagraph are met 

9 with respect to the defined benefit plan 

10 forming part of the eligible combined plan 

11 if the accrued benefit of each participant 

12 derived from employer contributions, when 

13 expressed as an annual retirement benefit, 

14 is not less than the applicable percentage 

15 of the participant’s final average pay. For 

16 purposes of this clause, final average pay 

17 shall be determined using the period of 

18 consecutive years (not exceeding 5) during 

19 which the participant had the greatest ag20 gregate compensation from the employer. 

21 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

22 purposes of clause (i), the applicable per23 centage is the lesser of— 
382 

•S 1953 PCS 

1 ‘‘(I) 1 percent multiplied by the 

2 number of years of service with the 

3 employer, or 

4 ‘‘(II) 20 percent. 

5 ‘‘(iii) SPECIAL RULE FOR CASH BAL6 ANCE PLANS.—If the defined benefit plan 

7 under clause (i) is a qualified cash balance 

8 plan (within the meaning of section 

9 411(b)(5)), the plan shall be treated as 

10 meeting the requirements of clause (i) with 

11 respect to any plan year if each participant 

12 receives pay credit for the year which is 

13 not less than the percentage of compensa14 tion determined in accordance with the fol15 lowing table: 

‘‘If the participant’s age as of the 

beginning of the year is— The percentage is—

30 or less .................................................................................. 2

Over 30 but less than 40 ......................................................... 4

40 or over but less than 50 ..................................................... 6

50 or over ................................................................................. 8. 

16 ‘‘(iv) YEARS OF SERVICE.—For pur17 poses of this subparagraph, years of serv18 ice shall be determined under the rules of 

19 paragraphs (4), (5), and (6) of section 

20 411(a), except that the plan may not dis21 regard any year of service because of a 

22 participant making, or failing to make, any 
383 

•S 1953 PCS 

1 elective deferral with respect to the quali2 fied cash or deferred arrangement to which 

3 subparagraph (C) applies. 

4 ‘‘(C) CONTRIBUTION REQUIREMENTS.— 

5 ‘‘(i) IN GENERAL.—The contribution 

6 requirements of this subparagraph with re7 spect to any applicable defined contribu8 tion plan forming part of eligible combined 

9 plan are met if— 

10 ‘‘(I) the qualified cash or de11 ferred arrangement included in such 

12 plan constitutes an automatic con13 tribution arrangement, and 

14 ‘‘(II) the employer is required to 

15 make matching contributions on be16 half of each employee eligible to par17 ticipate in the arrangement in an 

18 amount equal to 50 percent of the 

19 elective contributions of the employee 

20 to the extent such elective contribu21 tions do not exceed 4 percent of com22 pensation. 

23 Rules similar to the rules of clauses (ii) 

24 and (iii) of section 401(k)(12)(B) shall 

25 apply for purposes of this clause. 
384 

•S 1953 PCS 

1 ‘‘(ii) NONELECTIVE CONTRIBU2 TIONS.—An applicable defined contribution 

3 plan shall not be treated as failing to meet 

4 the requirements of clause (i) because the 

5 employer makes nonelective contributions 

6 under the plan but such contributions shall 

7 not be taken into account in determining 

8 whether the requirements of clause (i)(II) 

9 are met. 

10 ‘‘(D) VESTING REQUIREMENTS.—The vest11 ing requirements of this subparagraph are met 

12 if— 

13 ‘‘(i) in the case of a defined benefit 

14 plan forming part of an eligible combined 

15 plan an employee who has completed at 

16 least 3 years of service has a nonforfeitable 

17 right to 100 percent of the employee’s ac18 crued benefit under the plan derived from 

19 employer contributions, and 

20 ‘‘(ii) in the case of an applicable de21 fined contribution plan forming part of eli22 gible combined plan— 

23 ‘‘(I) an employee has a non24 forfeitable right to any matching con25 tribution made under the qualified 
385 

•S 1953 PCS 

1 cash or deferred arrangement included 

2 in such plan by an employer with re3 spect to any elective contribution, in4 cluding matching contributions in ex5 cess of the contributions required 

6 under subparagraph (C)(i)(II), and 

7 ‘‘(II) an employee who has com8 pleted at least 3 years of service has 

9 a nonforfeitable right to 100 percent 

10 of the employee’s accrued benefit de11 rived under the arrangement from 

12 nonelective contributions of the em13 ployer. 

14 For purposes of this subparagraph, the 

15 rules of section 411 shall apply to the ex16 tent not inconsistent with this subpara17 graph. 

18 ‘‘(E) UNIFORM PROVISION OF BENE19 FITS.—In the case of a defined benefit plan or 

20 applicable defined contribution plan forming 

21 part of an eligible combined plan, the require22 ments of this subparagraph are met if all bene23 fits under each such plan, and all rights and 

24 features under each such plan, must be pro25 vided uniformly to all participants. 
386 

•S 1953 PCS 

1 ‘‘(F) REQUIREMENTS MUST BE MET WITH2 OUT TAKING INTO ACCOUNT SOCIAL SECURITY

3 AND SIMILAR CONTRIBUTIONS AND BENEFITS

4 OR OTHER PLANS.— 

5 ‘‘(i) IN GENERAL.—The requirements 

6 of this subparagraph are met if the re7 quirements of clauses (ii) and (iii) are met. 

8 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

9 CONTRIBUTIONS.—The requirements of 

10 this clasue are met if— 

11 ‘‘(I) the requirements of subpara12 graphs (B) and (C) are met without 

13 regard to section 401(l), and 

14 ‘‘(II) the requirements of sections 

15 401(a)(4) and 410(b) are met with re16 spect to both the applicable defined 

17 contribution plan and defined benefit 

18 plan forming part of an eligible com19 bined plan without regard to section 

20 401(l). 

21 ‘‘(iii) OTHER PLANS AND ARRANGE22 MENTS.—The requirements of this clause 

23 are met if the applicable defined contribu24 tion plan and defined benefit plan forming 

25 part of an eligible combined plan meet the 
387 

•S 1953 PCS 

1 requirements of sections 401(a)(4) and 

2 410(b) without being combined with any 

3 other plan. 

4 ‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR

5 QUALIFIED CASH OR DEFERRED ARRANGEMENT.— 

6 ‘‘(A) IN GENERAL.—A qualified cash or 

7 deferred arrangement which is included in an 

8 applicable defined contribution plan forming 

9 part of an eligible combined plan shall be treat10 ed as meeting the requirements of section 

11 401(k)(3)(A)(ii) if the requirements of para12 graph (2)(C) are met with respect to such ar13 rangement. 

14 ‘‘(B) MATCHING CONTRIBUTIONS.—In ap15 plying section 401(m)(11) to any matching con16 tribution with respect to a contribution to which 

17 paragraph (2)(C) applies, the contribution re18 quirement of paragraph (2)(C) and the notice 

19 requirements of paragraph (5)(B) shall be sub20 stituted for the requirements otherwise applica21 ble under clauses (i) and (ii) of section 

22 401(m)(11)(A). 

23 ‘‘(4) SATISFACTION OF TOP-HEAVY RULES.—A 

24 defined benefit plan and applicable defined contribu25 tion plan forming part of an eligible combined plan 
388 

•S 1953 PCS 

1 for any plan year shall be treated as meeting the re2 quirements of section 416 for the plan year. 

3 ‘‘(5) AUTOMATIC CONTRIBUTION ARRANGE4 MENT.—For purposes of this subsection— 

5 ‘‘(A) IN GENERAL.—A qualified cash or 

6 deferred arrangement shall be treated as an 

7 automatic contribution arrangement if the ar8 rangement— 

9 ‘‘(i) provides that each employee eligi10 ble to participate in the arrangement is 

11 treated as having elected to have the em12 ployer make elective contributions in an 

13 amount equal to 4 percent of the employ14 ee’s compensation unless the employee spe15 cifically elects not to have such contribu16 tions made or to have such contributions 

17 made at a different rate, and 

18 ‘‘(ii) meets the notice requirements 

19 under subparagraph (B). 

20 ‘‘(B) NOTICE REQUIREMENTS.— 

21 ‘‘(i) IN GENERAL.—The requirements 

22 of this subparagraph are met if the re23 quirements of clauses (ii) and (iii) are met. 

24 ‘‘(ii) REASONABLE PERIOD TO MAKE

25 ELECTION.—The requirements of this 
389 

•S 1953 PCS 

1 clause are met if each employee to whom 

2 subparagraph (A)(i) applies— 

3 ‘‘(I) receives a notice explaining 

4 the employee’s right under the ar5 rangement to elect not to have elective 

6 contributions made on the employee’s 

7 behalf or to have the contributions 

8 made at a different rate, and 

9 ‘‘(II) has a reasonable period of 

10 time after receipt of such notice and 

11 before the first elective contribution is 

12 made to make such election. 

13 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

14 AND OBLIGATIONS.—The requirements of 

15 this clause are met if each employee eligi16 ble to participate in the arrangement is, 

17 within a reasonable period before any year, 

18 given notice of the employee’s rights and 

19 obligations under the arrangement. 

20 The requirements of clauses (i) and (ii) of sec21 tion 401(k)(12)(D) shall be met with respect to 

22 the notices described in clauses (ii) and (iii) of 

23 this subparagraph. 

24 ‘‘(6) COORDINATION WITH OTHER REQUIRE25 MENTS.— 
390 

•S 1953 PCS 

1 ‘‘(A) TREATMENT OF SEPARATE PLANS.— 

2 Section 414(k) shall not apply to an eligible 

3 combined plan. 

4 ‘‘(B) REPORTING.—An eligible combined 

5 plan shall be treated as a single plan for pur6 poses of sections 6058 and 6059. 

7 ‘‘(7) APPLICABLE DEFINED CONTRIBUTION

8 PLAN.—For purposes of this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘applicable 

10 defined contribution plan’ means a defined con11 tribution plan which includes a qualified cash or 

12 deferred arrangement. 

13 ‘‘(B) QUALIFIED CASH OR DEFERRED AR14 RANGEMENT.—The term ‘qualified cash or de15 ferred arrangement’ has the meaning given 

16 such term by section 401(k)(2).’’. 

17 (b) AMENDMENTS OF ERISA.— 

18 (1) IN GENERAL.—Section 210 of the Employee 

19 Retirement Income Security Act of 1974 is amended 

20 by adding at the end the following new subsection: 

21 ‘‘(e) SPECIAL RULES FOR ELIGIBLE COMBINED DE22 FINED BENEFIT PLANS AND QUALIFIED CASH OR DE23 FERRED ARRANGEMENTS.— 

24 ‘‘(1) GENERAL RULE.—Except as provided in 

25 this subsection, this Act shall be applied to any de-
391 

•S 1953 PCS 

1 fined benefit plan or applicable individual account 

2 plan which are part of an eligible combined plan in 

3 the same manner as if each such plan were not a 

4 part of the eligible combined plan. 

5 ‘‘(2) ELIGIBLE COMBINED PLAN.—For pur6 poses of this subsection— 

7 ‘‘(A) IN GENERAL.—The term ‘eligible 

8 combined plan’ means a plan— 

9 ‘‘(i) which consists of a defined ben10 efit plan and an applicable individual ac11 count plan each of which qualifies under 

12 section 401(a) of the Internal Revenue 

13 Code of 1986, 

14 ‘‘(ii) the assets of which are held in a 

15 single trust forming part of the plan and 

16 are clearly identified and allocated to the 

17 defined benefit plan and the applicable in18 dividual account plan to the extent nec19 essary for the separate application of this 

20 Act under paragraph (1), and 

21 ‘‘(iii) with respect to which the ben22 efit, contribution, vesting, and non23 discrimination requirements of subpara24 graphs (B), (C), (D), (E), and (F) are 

25 met. 
392 

•S 1953 PCS 

1 ‘‘(B) BENEFIT REQUIREMENTS.— 

2 ‘‘(i) IN GENERAL.—The benefit re3 quirements of this subparagraph are met 

4 with respect to the defined benefit plan 

5 forming part of the eligible combined plan 

6 if the accrued benefit of each participant 

7 derived from employer contributions, when 

8 expressed as an annual retirement benefit, 

9 is not less than the applicable percentage 

10 of the participant’s final average pay. For 

11 purposes of this clause, final average pay 

12 shall be determined using the period of 

13 consecutive years (not exceeding 5) during 

14 which the participant had the greatest ag15 gregate compensation from the employer. 

16 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

17 purposes of clause (i), the applicable per18 centage is the lesser of— 

19 ‘‘(I) 1 percent multiplied by the 

20 number of years of service with the 

21 employer, or 

22 ‘‘(II) 20 percent. 

23 ‘‘(iii) SPECIAL RULE FOR CASH BAL24 ANCE PLANS.—If the defined benefit plan 

25 under clause (i) is a qualified cash balance 
393 

•S 1953 PCS 

1 plan (within the meaning of section 

2 204(b)(5)), the plan shall be treated as 

3 meeting the requirements of clause (i) with 

4 respect to any plan year if each participant 

5 receives pay credit for the year which is 

6 not less than the percentage of compensa7 tion determined in accordance with the fol8 lowing table: 

‘‘If the participant’s age as of the 

beginning of the year is— The percentage is—

30 or less .................................................................................. 2

Over 30 but less than 40 ......................................................... 4

40 or over but less than 50 ..................................................... 6

50 or over ................................................................................. 8. 

9 ‘‘(iv) YEARS OF SERVICE.—For pur10 poses of this subparagraph, years of serv11 ice shall be determined under the rules of 

12 paragraphs (1), (2), and (3) of section 

13 203(b), except that the plan may not dis14 regard any year of service because of a 

15 participant making, or failing to make, any 

16 elective deferral with respect to the quali17 fied cash or deferred arrangement to which 

18 subparagraph (C) applies. 

19 ‘‘(C) CONTRIBUTION REQUIREMENTS.— 

20 ‘‘(i) IN GENERAL.—The contribution 

21 requirements of this subparagraph with re22 spect to any applicable individual account 
394 

•S 1953 PCS 

1 plan forming part of eligible combined plan 

2 are met if— 

3 ‘‘(I) the qualified cash or de4 ferred arrangement included in such 

5 plan constitutes an automatic con6 tribution arrangement, and 

7 ‘‘(II) the employer is required to 

8 make matching contributions on be9 half of each employee eligible to par10 ticipate in the arrangement in an 

11 amount equal to 50 percent of the 

12 elective contributions of the employee 

13 to the extent such elective contribu14 tions do not exceed 4 percent of com15 pensation. 

16 Rules similar to the rules of clauses (ii) 

17 and (iii) of section 401(k)(12)(B) of the 

18 Internal Revenue Code of 1986 shall apply 

19 for purposes of this clause. 

20 ‘‘(ii) NONELECTIVE CONTRIBU21 TIONS.—An applicable individual account 

22 plan shall not be treated as failing to meet 

23 the requirements of clause (i) because the 

24 employer makes nonelective contributions 

25 under the plan but such contributions shall 
395 

•S 1953 PCS 

1 not be taken into account in determining 

2 whether the requirements of clause (i)(II) 

3 are met. 

4 ‘‘(D) VESTING REQUIREMENTS.—The vest5 ing requirements of this subparagraph are met 

6 if— 

7 ‘‘(i) in the case of a defined benefit 

8 plan forming part of an eligible combined 

9 plan an employee who has completed at 

10 least 3 years of service has a nonforfeitable 

11 right to 100 percent of the employee’s ac12 crued benefit under the plan derived from 

13 employer contributions, and 

14 ‘‘(ii) in the case of an applicable indi15 vidual account plan forming part of eligible 

16 combined plan— 

17 ‘‘(I) an employee has a non18 forfeitable right to any matching con19 tribution made under the qualified 

20 cash or deferred arrangement included 

21 in such plan by an employer with re22 spect to any elective contribution, in23 cluding matching contributions in ex24 cess of the contributions required 

25 under subparagraph (C)(i)(II), and 
396 

•S 1953 PCS 

1 ‘‘(II) an employee who has com2 pleted at least 3 years of service has 

3 a nonforfeitable right to 100 percent 

4 of the employee’s accrued benefit de5 rived under the arrangement from 

6 nonelective contributions of the em7 ployer. 

8 For purposes of this subparagraph, the 

9 rules of section 203 shall apply to the ex10 tent not inconsistent with this subpara11 graph. 

12 ‘‘(E) UNIFORM PROVISION OF BENE13 FITS.—In the case of a defined benefit plan or 

14 applicable individual account plan forming part 

15 of an eligible combined plan, the requirements 

16 of this subparagraph are met if all benefits 

17 under each such plan, and all rights and fea18 tures under each such plan, must be provided 

19 uniformly to all participants. 

20 ‘‘(F) REQUIREMENTS MUST BE MET WITH21 OUT TAKING INTO ACCOUNT SOCIAL SECURITY

22 AND SIMILAR CONTRIBUTIONS AND BENEFITS

23 OR OTHER PLANS.— 
397 

•S 1953 PCS 

1 ‘‘(i) IN GENERAL.—The requirements 

2 of this subparagraph are met if the re3 quirements of clauses (ii) and (iii) are met. 

4 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

5 CONTRIBUTIONS.—The requirements of 

6 this clasue are met if— 

7 ‘‘(I) the requirements of subpara8 graphs (B) and (C) are met without 

9 regard to section 401(l) of the Inter10 nal Revenue Code of 1986, and 

11 ‘‘(II) the requirements of sections 

12 401(a)(4) and 410(b) of the Internal 

13 Revenue Code of 1986 are met with 

14 respect to both the applicable defined 

15 contribution plan and defined benefit 

16 plan forming part of an eligible com17 bined plan without regard to section 

18 401(l) of the Internal Revenue Code 

19 of 1986. 

20 ‘‘(iii) OTHER PLANS AND ARRANGE21 MENTS.—The requirements of this clause 

22 are met if the applicable defined contribu23 tion plan and defined benefit plan forming 

24 part of an eligible combined plan meet the 

25 requirements of sections 401(a)(4) and 
398 

•S 1953 PCS 

1 410(b) of the Internal Revenue Code of 

2 1986 without being combined with any 

3 other plan. 

4 ‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR

5 QUALIFIED CASH OR DEFERRED ARRANGEMENT.— 

6 ‘‘(A) IN GENERAL.—A qualified cash or 

7 deferred arrangement which is included in an 

8 applicable individual account plan forming part 

9 of an eligible combined plan shall be treated as 

10 meeting the requirements of section 

11 401(k)(3)(A)(ii) of the Internal Revenue Code 

12 of 1986 if the requirements of subparagraph 

13 (C) are met with respect to such arrangement. 

14 ‘‘(B) MATCHING CONTRIBUTIONS.—In ap15 plying section 401(m)(11) of such Code to any 

16 matching contribution with respect to a con17 tribution to which paragraph (2)(C) applies, the 

18 contribution requirement of paragraph (2)(C) 

19 and the notice requirements of paragraph 

20 (5)(B) shall be substituted for the requirements 

21 otherwise applicable under clauses (i) and (ii) of 

22 section 401(m)(11)(A) of such Code. 

23 ‘‘(4) AUTOMATIC CONTRIBUTION ARRANGE24 MENT.—For purposes of this subsection— 
399 

•S 1953 PCS 

1 ‘‘(A) IN GENERAL.—A qualified cash or 

2 deferred arrangement shall be treated as an 

3 automatic contribution arrangement if the ar4 rangement— 

5 ‘‘(i) provides that each employee eligi6 ble to participate in the arrangement is 

7 treated as having elected to have the em8 ployer make elective contributions in an 

9 amount equal to 4 percent of the employ10 ee’s compensation unless the employee spe11 cifically elects not to have such contribu12 tions made or to have such contributions 

13 made at a different rate, and 

14 ‘‘(ii) meets the notice requirements 

15 under subparagraph (B). 

16 ‘‘(B) NOTICE REQUIREMENTS.— 

17 ‘‘(i) IN GENERAL.—The requirements 

18 of this subparagraph are met if the re19 quirements of clauses (ii) and (iii) are met. 

20 ‘‘(ii) REASONABLE PERIOD TO MAKE

21 ELECTION.—The requirements of this 

22 clause are met if each employee to whom 

23 subparagraph (A)(i) applies— 

24 ‘‘(I) receives a notice explaining 

25 the employee’s right under the ar-
400 

•S 1953 PCS 

1 rangement to elect not to have elective 

2 contributions made on the employee’s 

3 behalf or to have the contributions 

4 made at a different rate, and 

5 ‘‘(II) has a reasonable period of 

6 time after receipt of such notice and 

7 before the first elective contribution is 

8 made to make such election. 

9 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

10 AND OBLIGATIONS.—The requirements of 

11 this clause are met if each employee eligi12 ble to participate in the arrangement is, 

13 within a reasonable period before any year, 

14 given notice of the employee’s rights and 

15 obligations under the arrangement. 

16 The requirements of clauses (i) and (ii) of sec17 tion 401(k)(12)(D) of the Internal Revenue 

18 Code of 1986 shall be met with respect to the 

19 notices described in clauses (ii) and (iii) of this 

20 subparagraph. 

21 ‘‘(5) COORDINATION WITH OTHER REQUIRE22 MENTS.— 

23 ‘‘(A) TREATMENT OF SEPARATE PLANS.— 

24 Section 414(k) of the Internal Revenue Code of 
401 

•S 1953 PCS 

1 1986 shall not apply to an eligible combined 

2 plan. 

3 ‘‘(B) REPORTING.—An eligible combined 

4 plan shall be treated as a single plan for pur5 poses of section 103. 

6 ‘‘(6) APPLICABLE INDIVIDUAL ACCOUNT

7 PLAN.—For purposes of this subsection— 

8 ‘‘(A) IN GENERAL.—The term ‘applicable 

9 individual account plan’ means an individual ac10 count plan which includes a qualified cash or 

11 deferred arrangement. 

12 ‘‘(B) QUALIFIED CASH OR DEFERRED AR13 RANGEMENT.—The term ‘qualified cash or de14 ferred arrangement’ has the meaning given 

15 such term by section 401(k)(2) of the Internal 

16 Revenue Code of 1986.’’. 

17 (2) CONFORMING CHANGES.— 

18 (A) The heading for section 210 of such 

19 Act is amended to read as follows: 

20 ‘‘MULTIPLE EMPLOYER PLANS AND OTHER SPECIAL

21 RULES’’. 

22 (B) The table of contents in section 1 of 

23 such Act is amended by striking the item relat24 ing to section 210 and inserting the following 

25 new item: 

‘‘Sec. 210. Multiple employer plans and other special rules.’’. 
402 

•S 1953 PCS 

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

2 this section shall apply to plan years beginning after De3 cember 31, 2006. 

4 Subtitle D—Studies 

5 SEC. 351. JOINT STUDY ON REVITALIZING DEFINED BEN6 EFIT PLANS. 

7 (a) STUDY.—As soon as practicable after the date of 

8 the enactment of this Act, the Secretary of the Treasury, 

9 the Secretary of Labor, and the Executive Director of the 

10 Pension Benefit Guaranty Corporation shall jointly under11 take a study on ways to revitalize interest in defined ben12 efit plans among employers. In conducting such study, the 

13 Secretaries and the Executive Director shall consider— 

14 (1) ways to encourage the establishment of de15 fined benefit plans by small- and mid-sized employ16 ers, 

17 (2) ways to encourage the continued mainte18 nance of defined benefit plans by larger employers, 

19 and 

20 (3) legislative proposals to accomplish the objec21 tives described in paragraphs (1) and (2). 

22 (b) REPORT.—Not later than 2 years after the date 

23 of the enactment of this Act, the Secretaries and the Exec24 utive Director shall report the results of the study, to25 gether with any recommendations for legislative changes, 
403 

•S 1953 PCS 

1 to the Committees on Ways and Means and Education and 

2 the Workforce of the House of Representatives and the 

3 Committees on Finance and Health, Education, Labor, 

4 and Pensions of the Senate. 

5 SEC. 352. STUDY ON FLOOR-OFFSET ESOPS. 

6 (a) STUDY.—As soon as practicable after the date of 

7 the enactment of this Act, the Secretary of the Treasury 

8 and the Pension Benefit Guaranty Corporation shall un9 dertake a study to determine the number of floor-offset 

10 employee stock ownership plans still in existence and the 

11 extent to which such plans pose a risk to plan participants 

12 or beneficiaries and to the Corporation. Such study shall 

13 consider legislative proposals to address such risks. 

14 (b) REPORT.—Not later than 1 year after the date 

15 of the enactment of this Act, the Secretary and the Cor16 poration shall report the results of the study, together 

17 with any recommendations for legislative changes, to the 

18 Committees on Ways and Means and Education and the 

19 Workforce of the House of Representatives and the Com20 mittees on Finance and Health, Education, Labor, and 

21 Pensions of the Senate. 
404 

•S 1953 PCS 

1 TITLE IV—DISCLOSURE AND 

2 BENEFIT STATEMENT RE3 QUIREMENTS FOR SINGLE4 EMPLOYER DEFINED BEN5 EFIT PLANS 

6 SEC. 401. ACTUARIAL REPORTS AND SUMMARY ANNUAL RE7 PORTS. 

8 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

9 (1) ACTUARIAL REPORT.—Section 6059(b) of 

10 the Internal Revenue Code of 1986 (relating to actu11 arial reports), as amended by this Act, is amended 

12 by— 

13 (A) redesignating paragraphs (4) and (5) 

14 as paragraphs (5) and (6), respectively; and 

15 (B) inserting after paragraph (3) the fol16 lowing: 

17 ‘‘(4) in the case of a single-employer plan, as of 

18 the valuation date to which the report relates— 

19 ‘‘(A) the fair market value of the plan as20 sets; 

21 ‘‘(B) the target liability and the target 

22 normal cost, as determined under section 430; 

23 and 

24 ‘‘(C) the at risk-liability amount and the 

25 at-risk normal cost (determined as if section 
405 

•S 1953 PCS 

1 430(f) applied to the plan and the plan sponsor 

2 were a financially-weak employer for the plan 

3 year and the 4 immediately preceding plan 

4 years);’’. 

5 (2) EXCISE TAX.—Chapter 43 of the Internal 

6 Revenue Code of 1986 (relating to qualified pension, 

7 etc., plans), as amended by this Act, is amended by 

8 adding at the end the following new section: 

9 ‘‘SEC. 4980K. FAILURE OF CERTAIN PENSION PLANS TO 

10 PROVIDE REQUIRED NOTICES. 

11 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

12 a tax on the failure of a defined benefit plan which is a 

13 single-employer plan to meet the requirements of sub14 section (e). 

15 ‘‘(b) AMOUNT OF TAX.— 

16 ‘‘(1) IN GENERAL.—The amount of the tax im17 posed by subsection (a) on any failure with respect 

18 to any person required to receive a notice shall be 

19 $100 for each day in the noncompliance period with 

20 respect to the failure. 

21 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

22 of this section, the term ‘noncompliance period’ 

23 means, with respect to any failure, the period begin24 ning on the date the failure first occurs and ending 
406 

•S 1953 PCS 

1 on the date the statement to which the failure re2 lates is provided or the failure is otherwise corrected. 

3 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 

4 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

5 DISCOVERED AND REASONABLE DILIGENCE EXER6 CISED.—No tax shall be imposed by subsection (a) 

7 on any failure during any period for which it is es8 tablished to the satisfaction of the Secretary that 

9 any person subject to liability for tax under sub10 section (d) did not know that the failure existed and 

11 exercised reasonable diligence to meet the require12 ments of subsection (e). 

13 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR14 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

15 by subsection (a) on any failure if— 

16 ‘‘(A) any person subject to liability for the 

17 tax under subsection (d) exercised reasonable 

18 diligence to meet the requirements of subsection 

19 (e), and 

20 ‘‘(B) such person provides the statement 

21 described in subsection (e) during the 30-day 

22 period beginning on the first date such person 

23 knew, or exercising reasonable diligence should 

24 have known, that such failure existed. 
407 

•S 1953 PCS 

1 ‘‘(3) OVERALL LIMITATION FOR UNINTEN2 TIONAL FAILURES.— 

3 ‘‘(A) IN GENERAL.—If the person subject 

4 to liability for tax under subsection (d) exer5 cised reasonable diligence to meet the require6 ments of subsection (e), the tax imposed by 

7 subsection (a) for failures during the taxable 

8 year of the employer shall not exceed $500,000. 

9 ‘‘(B) TAXABLE YEARS IN THE CASE OF

10 CERTAIN CONTROLLED GROUPS.—For purposes 

11 of this paragraph, if all persons who are treated 

12 as a single employer for purposes of this section 

13 do not have the same taxable year, the taxable 

14 years taken into account shall be determined 

15 under principles similar to the principles of sec16 tion 1561. 

17 ‘‘(4) WAIVER BY SECRETARY.—In the case of a 

18 failure which is due to reasonable cause and not to 

19 willful neglect, the Secretary may waive part or all 

20 of the tax imposed by subsection (a) to the extent 

21 that the payment of such tax would be excessive or 

22 otherwise inequitable relative to the failure involved. 

23 ‘‘(d) LIABILITY FOR TAX.—The employer shall be lia24 ble for the tax imposed by subsection (a). 
408 

•S 1953 PCS 

1 ‘‘(e) REQUIREMENT TO PROVIDE SUMMARY ANNUAL

2 REPORT.— 

3 ‘‘(1) IN GENERAL.—Not later than the date 

4 prescribed by the Secretary, the administrator of a 

5 defined benefit plan which is a single-employer plan 

6 shall furnish a summary annual report described in 

7 paragraph (2). 

8 ‘‘(2) CONTENT OF STATEMENT.—A summary 

9 annual report furnished under paragraph (1) shall 

10 include the following information: 

11 ‘‘(A) A statement of the assets and liabil12 ities of the plan aggregated by categories and 

13 valued at their current value, and the same 

14 data displayed in comparative form for the end 

15 the previous fiscal year of the plan. 

16 ‘‘(B) A statement of the receipts and dis17 bursements during the preceding 12-month pe18 riod aggregated by general sources and applica19 tions. 

20 ‘‘(C) A statement of the funded target li21 ability percentage, as defined in section 436(e), 

22 of the plan for such fiscal year and for the 2 

23 preceding fiscal years. 

24 ‘‘(D) A statement of whether or not the 

25 plan sponsor was a financially-weak employer 
409 

•S 1953 PCS 

1 (as determined under section 430(f)) during 

2 each of the fiscal years described in subpara3 graph (C). 

4 ‘‘(E) The limits on the guarantee of the 

5 Pension Benefit Guaranty Corporation under 

6 title IV of the Employee Retirement Income Se7 curity Act of 1974 if the plan is terminated 

8 while underfunded. 

9 ‘‘(F) Such other material (including the 

10 percentage determined under section 

11 103(d)(11) of the Employee Retirement Income 

12 Security Act of 1974) as is necessary to fairly 

13 summarize the latest return under section 

14 6058. 

15 ‘‘(3) FORM AND MANNER.—The Secretary of 

16 Labor may prescribe the form and manner of the 

17 summary annual report under this subsection and 

18 any additional information required to be included in 

19 such report. Such notice shall be written in a man20 ner calculated to be understood by the average plan 

21 participant and may be delivered in written, elec22 tronic, or other appropriate form to the extent that 

23 such form is reasonably accessible to the recipient.’’. 

24 (3) AGGREGATION.—Section 414(t) of such 

25 Code, as amended by this Act, is amended by strik-
410 

•S 1953 PCS 

1 ing ‘‘4980I, or 4980J’’ and inserting ‘‘4980I, 

2 4980J, or 4980K’’. 

3 (4) CLERICAL AMENDMENT.—The table of sec4 tions for chapter 43 of such Code, as amended by 

5 this Act, is amended by adding at the end the fol6 lowing new item: 

‘‘Sec. 4980K. Failure of certain pension plans to provide required notices.’’. 

7 (b) AMENDMENTS OF ERISA.— 

8 (1) ACTUARIAL STATEMENT.— 

9 (A) ADDITIONAL INFORMATION RE10 QUIRED.—Section 103(d)(3) of the Employee 

11 Retirement Income Security Act of 1974 (29 

12 U.S.C. 1023(d)(3)) is amended to read as fol13 lows: 

14 ‘‘(3) The following information applicable to the 

15 plan year in which the report is filed: 

16 ‘‘(A) An identification of benefits not in17 cluded in the calculation; a statement of the 

18 other facts and actuarial assumptions and 

19 methods used to determine costs, and a jus20 tification for any change in actuarial assump21 tions or cost methods; and the minimum con22 tribution required under section 302. 
411 

•S 1953 PCS 

1 ‘‘(B) In the case of a multiemployer plan, 

2 the normal costs and the accrued liabilities of 

3 the plan. 

4 ‘‘(C) In the case of a single-employer plan, 

5 the following information as of the valuation 

6 date for the plan year to which the report re7 lates: 

8 ‘‘(i) The fair market value of the plan as9 sets. 

10 ‘‘(ii) The target liability and the target 

11 normal cost, as determined under section 303. 

12 ‘‘(iii) The at risk-liability and the at-risk 

13 normal cost (determined as if section 303(f) ap14 plied to the plan and the plan sponsor were a 

15 financially-weak employer for the plan year and 

16 the 4 immediately preceding plan years). 

17 ‘‘(iv) Any other information as prescribed 

18 by the Secretary.’’. 

19 (B) TIME FOR FILING ACTUARIAL STATE20 MENT.—Section 103 of such Act (29 U.S.C. 

21 1023) is amended by adding at the end the fol22 lowing: 

23 ‘‘(f) SUBMISSION DATE OF ACTUARIAL STATE24 MENT.—In the case of a plan that is subject to section 

25 303(j), the actuarial statement described under subsection 
412 

•S 1953 PCS 

1 (d) shall be submitted to the Secretary not later than the 

2 date that is the fifteenth day of the second month fol3 lowing the close of the applicable plan year. If a contribu4 tion is made to such a plan after the submission of such 

5 actuarial statement but before the submission of the an6 nual report under section 104(a), the plan shall submit 

7 an amended actuarial statement with such annual re8 port.’’. 

9 (2) SUMMARY ANNUAL REPORT TO PLAN PAR10 TICIPANTS.— 

11 (A) IN GENERAL.—Section 104(b)(3) of 

12 the Employee Retirement Income Security Act 

13 of 1974 (29 U.S.C. 1024(b)(3)) is amended to 

14 read as follows: 

15 ‘‘(3) SUMMARY ANNUAL REPORT.—Within 15 days 

16 after the due date under subsection (a)(1) for the filing 

17 of the annual report for the fiscal year of the plan, the 

18 plan administrator shall furnish to each participant, and 

19 to each beneficiary receiving benefits under the plan, a 

20 copy of the following information: 

21 ‘‘(A) GENERAL INFORMATION.—The statements 

22 and schedules, for such fiscal year, described in sub23 paragraphs (A) and (B) of section 103(b)(3) and 

24 such other material (including the percentage deter-
413 

•S 1953 PCS 

1 mined under section 103(d)(11)) as is necessary to 

2 fairly summarize the latest annual report. 

3 ‘‘(B) ADDITIONAL INFORMATION FOR SINGLE4 EMPLOYER PLANS.—In the case of a defined benefit 

5 plan that is a single-employer plan— 

6 ‘‘(i) a statement of the funded target liabil7 ity percentage, as defined in section 305(e), of 

8 the plan for such fiscal year and for the 2 pre9 ceding fiscal years; 

10 ‘‘(ii) a statement of whether or not the 

11 plan sponsor was a financially-weak employer 

12 (as determined under section 303(f)) during 

13 each of the fiscal years described in clause (i); 

14 ‘‘(iii) the limits on the guarantee of the 

15 Pension Benefit Guaranty Corporation under 

16 title IV if the plan is terminated while under17 funded. 

18 ‘‘(C) FORM AND MANNER OF REPORT.—The 

19 Secretary may prescribe the form and manner of the 

20 summary annual report under this subsection and 

21 any additional information required to be included in 

22 such report. Such notice shall be written in a man23 ner calculated to be understood by the average plan 

24 participant and may be delivered in written, elec-
414 

•S 1953 PCS 

1 tronic, or other appropriate form to the extent that 

2 such form is reasonably accessible to the recipient.’’. 

3 (B) PENALTY.—Section 502(c)(7) of the 

4 Employee Retirement Income Security Act of 

5 1974 (29 U.S.C. 1132(c)(7)), as amended by 

6 this Act, is amended by striking ‘‘or section 

7 104(d)’’ and inserting ‘‘or subsection (b)(3) or 

8 (d) of section 104’’. 

9 (c) REPEAL OF PROVISIONS.— 

10 (1) FREEDOM OF INFORMATION ACT EXEMP11 TION.—Subsection (c) of section 4010 of the Em12 ployee Retirement Income Security Act (29 U.S.C. 

13 1310(c)) is repealed. 

14 (2) NOTICE TO PARTICIPANTS.—Section 4011 

15 of the Employee Retirement Income Security Act of 

16 1974 (29 U.S.C. 1311) is repealed. 

17 (3) CONFORMING AMENDMENT.—The table of 

18 sections for title IV of the Employee Retirement In19 come Security Act of 1974 is amended by striking 

20 the item relating to section 4011. 

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

22 this section shall apply to plan years beginning after De23 cember 31, 2006. 
415 

•S 1953 PCS 

1 SEC. 402. NOTICE OF FUNDING BENEFIT LIMITATIONS AND 

2 RESTRICTIONS ON BENEFIT INCREASES. 

3 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

4 (1) EXCISE TAX.—Section 4980K of the Inter5 nal Revenue Code, as added by section 401, is 

6 amended— 

7 (A) in subsection (a), by striking ‘‘sub8 section (e)’’ and inserting ‘‘subsection (e) or 

9 (f)’’; 

10 (B) in subsection (c)— 

11 (i) by striking ‘‘subsection (e)’’ each 

12 place it appears and inserting ‘‘subsection 

13 (e) or (f)’’; and 

14 (ii) in paragraph (3), by adding at the 

15 end the following: 

16 ‘‘(C) SEPARATE APPLICATION.—This para17 graph shall be applied separately for failures to 

18 meet the requirements of subsections (e) and 

19 (f).’’; and 

20 (C) by adding at the end the following: 

21 ‘‘(f) REQUIREMENT TO PROVIDE NOTICE ON BEN22 EFIT LIMITATIONS.— 

23 ‘‘(1) IN GENERAL.—The plan administrator of 

24 a pension plan that becomes subject to any benefit 

25 limitation or restriction under section 436 shall pro26 vide— 
416 

•S 1953 PCS 

1 ‘‘(A) a written notice to plan participants 

2 and beneficiaries of the limitation or restriction 

3 within a reasonable time before it takes effect; 

4 and 

5 ‘‘(B) a written notice of the date on which 

6 the limitation or restriction ceases to apply 

7 within a reasonable time before such date. 

8 ‘‘(2) CHANGE IN TIME OF NOTICE.—The Sec9 retary may prescribe that a notice under paragraph 

10 (1) may be given within a reasonable period of time 

11 after the effective date or date of cessation of any 

12 benefit limitation or restriction if providing such no13 tice before such date is not practicable due to events 

14 that were unforeseeable or circumstances beyond the 

15 control of the plan administrator. 

16 ‘‘(3) FORM AND MANNER OF NOTICE.—The 

17 Secretary may prescribe the form and manner of the 

18 notice under this subsection. Such notice shall be 

19 written in a manner calculated to be understood by 

20 the average plan participant and may be delivered in 

21 written, electronic, or other appropriate form to the 

22 extent that such form is reasonably accessible to the 

23 recipient.’’. 

24 (b) AMENDMENTS OF ERISA.— 
417 

•S 1953 PCS 

1 (1) IN GENERAL.—Section 101 of the Employee 

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

3 1021), as amended by this Act, is amended by— 

4 (A) redesignating subsection (l) as sub5 section (m); and 

6 (B) inserting after subsection (k) the fol7 lowing: 

8 ‘‘(l) NOTICE OF FUNDING BENEFIT LIMITATIONS

9 AND RESTRICTIONS ON BENEFIT INCREASES.— 

10 ‘‘(1) IN GENERAL.—The plan administrator of 

11 a single-employer plan that becomes subject to any 

12 benefit limitation or restriction under section 305 

13 shall provide— 

14 ‘‘(A) a written notice to plan participants 

15 and beneficiaries of the limitation or restriction 

16 within a reasonable time before it takes effect; 

17 and 

18 ‘‘(B) a written notice of the date on which 

19 the limitation or restriction ceases to apply 

20 within a reasonable time before such date. 

21 ‘‘(2) CHANGE IN TIME OF NOTICE.—The Sec22 retary of Treasury may prescribe that a notice under 

23 paragraph (1) may be given within a reasonable pe24 riod of time after the effective date or date of ces25 sation of any benefit limitation or restriction if pro-
418 

•S 1953 PCS 

1 viding such notice before such date is not practicable 

2 due to events that were unforeseeable or cir3 cumstances beyond the control of the plan adminis4 trator. 

5 ‘‘(3) FORM AND MANNER OF NOTICE.—The 

6 Secretary of Treasury may prescribe the form and 

7 manner of the notice under this subsection. Such no8 tice shall be written in a manner calculated to be un9 derstood by the average plan participant and may be 

10 delivered in written, electronic, or other appropriate 

11 form to the extent that such form is reasonably ac12 cessible to the recipient.’’. 

13 (2) PENALTY.—Section 502(c)(7) of the Em14 ployee Retirement Income Security Act of 1974 (29 

15 U.S.C. 1132(c)(7)), as amended by this Act, is 

16 amended by striking ‘‘subsection (i) or (j)’’ and in17 serting ‘‘subsection (i), (j), or (l)’’. 

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

19 this section shall apply to plan years beginning after De20 cember 31, 2006. 

21 SEC. 403. NOTICE OF BANKRUPTCY FILING. 

22 (a) AMENDMENT OF INTERNAL REVENUE CODE.— 

23 (1) IN GENERAL.—Section 4980K of the Inter24 nal Revenue Code, as amended by section 402, is 

25 amended— 
419 

•S 1953 PCS 

1 (A) in subsection (a), by striking ‘‘sub2 section (e) or (f)’’ and inserting ‘‘subsection (e), 

3 (f), or (g)’’; 

4 (B) in subsection (c)— 

5 (i) by striking ‘‘subsection (e) or (f)’’ 

6 each place it appears and inserting ‘‘sub7 section (e), (f), or (g)’’; and 

8 (ii) in paragraph (3)(C), by striking 

9 ‘‘(e) and (f)’’ and inserting ‘‘(e), (f), and 

10 (g)’’; and 

11 (C) by adding at the end the following: 

12 ‘‘(g) REQUIREMENT TO NOTICE OF BANKRUPTCY

13 FILING.— 

14 ‘‘(1) NOTICE TO PLAN ADMINISTRATOR.—A 

15 contributing sponsor of a defined benefit plan which 

16 is a single-employer plan shall provide a written no17 tice to the plan administrator when such sponsor 

18 files (or within a reasonable time after such sponsor 

19 has had filed against such sponsor) a petition seek20 ing liquidation or reorganization in a case under title 

21 11, United States Code, or under any similar Fed22 eral law or law of a State or political subdivision of 

23 a State. 

24 ‘‘(2) NOTICE TO PARTICIPANTS.—The plan ad25 ministrator of a plan described in paragraph (1) 
420 

•S 1953 PCS 

1 shall, within a reasonable time after such adminis2 trator receives a notice provided under paragraph 

3 (1) or otherwise has reason to know that the plan 

4 sponsor has filed (or has had filed against the spon5 sor) a petition described under paragraph (1), pro6 vide to participants and beneficiaries of the plan a 

7 written notice of— 

8 ‘‘(A) the filing of such petition; and 

9 ‘‘(B) the limits on the guarantee of the 

10 Pension Benefit Guaranty Corporation under 

11 title IV of the Employee Retirement Income Se12 curity Act of 1974 if the plan is terminated 

13 while underfunded, taking into account the fil14 ing of such petition. 

15 ‘‘(3) FORM AND MANNER.—The Secretary of 

16 Labor may prescribe the form and manner of the 

17 notice under this subsection. Such notice shall be 

18 written in a manner calculated to be understood by 

19 the average plan participant and may be delivered in 

20 written, electronic, or other appropriate form to the 

21 extent that such form is reasonably accessible to the 

22 recipient.’’. 

23 (b) AMENDMENT OF ERISA.— 
421 

•S 1953 PCS 

1 (1) IN GENERAL.—Section 101 of the Employee 

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

3 1021), as amended by this Act, is amended by— 

4 (A) redesignating subsection (m) as sub5 section (n); and 

6 (B) inserting after subsection (l) the fol7 lowing: 

8 ‘‘(m) NOTICE OF BANKRUPTCY FILING.— 

9 ‘‘(1) NOTICE TO PLAN ADMINISTRATOR.—A 

10 contributing sponsor of a defined benefit plan that 

11 is a single-employer plan shall provide a written no12 tice to the plan administrator when such sponsor 

13 files (or within a reasonable time after such sponsor 

14 has had filed against such sponsor) a petition seek15 ing liquidation or reorganization in a case under title 

16 11, United States Code, or under any similar Fed17 eral law or law of a State or political subdivision of 

18 a State. 

19 ‘‘(2) NOTICE TO PARTICIPANTS.—The plan ad20 ministrator of a defined benefit plan that is a single21 employer plan shall, within a reasonable time after 

22 such administrator receives a notice provided under 

23 paragraph (1) or otherwise has reason to know that 

24 the plan sponsor has filed (or has had filed against 

25 the sponsor) a petition described under paragraph 
422 

•S 1953 PCS 

1 (1), provide to participants and beneficiaries of the 

2 plan a written notice of— 

3 ‘‘(A) the filing of such petition; and 

4 ‘‘(B) the limits on the guarantee of the 

5 Pension Benefit Guaranty Corporation under 

6 title IV if the plan is terminated while under7 funded, taking into account the filing of such 

8 petition. 

9 ‘‘(3) FORM AND MANNER OF NOTICE.—The 

10 Secretary may prescribe the form and manner of the 

11 notice under this subsection. Such notice shall be 

12 written in a manner calculated to be understood by 

13 the average plan participant and may be delivered in 

14 written, electronic, or other appropriate form to the 

15 extent that such form is reasonably accessible to the 

16 recipient.’’. 

17 (2) PENALTY.—Section 502(c)(7) of the Em18 ployee Retirement Income Security Act of 1974 (29 

19 U.S.C. 1132(c)(7)), as amended by this Act, is 

20 amended by striking ‘‘(j), or (l)’’ and inserting ‘‘(j), 

21 (l), or (m)’’. 

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

23 this section shall apply to plan years beginning after De24 cember 31, 2006. 
423 

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1 TITLE V—IMPROVEMENTS IN 

2 FUNDING RULES FOR MULTI3 EMPLOYER DEFINED BENE4 FITS PENSION PLANS AND RE5 LATED PROVISIONS 

6 SEC. 501. DEDUCTION LIMITS FOR MULTIEMPLOYER 

7 PLANS. 

8 (a) INCREASE IN DEDUCTION.—Section 

9 404(a)(1)(D) of the Internal Revenue Code of 1986, as 

10 amended by this Act, is amended to read as follows: 

11 ‘‘(D) AMOUNT DETERMINED ON BASIS OF

12 UNFUNDED CURRENT LIABILITY.— 

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

14 defined benefit plan which is a multiem15 ployer plan, except as provided in regula16 tions, the maximum amount deductible 

17 under the limitations of this paragraph 

18 shall not be less than the unfunded current 

19 liability of the plan. 

20 ‘‘(ii) UNFUNDED CURRENT LIABIL21 ITY.—For purposes of clause (i), the term 

22 ‘unfunded current liability’ means the ex23 cess (if any) of— 
424 

•S 1953 PCS 

1 ‘‘(I) 130 percent of the current 

2 liability of the plan determined under 

3 section 431(c)(6)(C), over 

4 ‘‘(II) the value of the plan’s as5 sets determined under section 

6 431(c)(2).’’. 

7 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

8 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

9 DEFINED BENEFIT PLANS.— 

10 (1) IN GENERAL.—Section 404(a)(7)(C) of such 

11 Code, as amended by this Act, is amended by adding 

12 at the end the following new clause: 

13 ‘‘(v) MULTIEMPLOYER PLANS.—In ap14 plying this paragraph, any multiemployer 

15 plan shall not be taken into account.’’. 

16 (2) CONFORMING AMENDMENT.—Section 

17 404(a)(7)(A) of such Code is amended by striking 

18 the last sentence. 

19 (c) EFFECTIVE DATES.— 

20 (1) DEDUCTION LIMIT.—The amendment made 

21 by subsection (a) shall apply to years beginning after 

22 December 31, 2006. 

23 (2) EXCEPTION.—The amendments made by 

24 subsection (b) shall apply to years beginning after 

25 December 31, 2005. 
425 

•S 1953 PCS 

1 SEC. 502. MULTIEMPLOYER DEFINED BENEFIT PLAN FUND2 ING NOTICES. 

3 (a) AMENDMENT OF INTERNAL REVENUE CODE.— 

4 (1) IN GENERAL.—Chapter 43 of the Internal 

5 Revenue Code of 1986 (relating to qualified pension, 

6 etc., plans), as amended by this Act, is amended by 

7 adding at the end the following new section: 

8 ‘‘SEC. 4980L. FAILURE OF MULTIEMPLOYER DEFINED BEN9 EFIT PLANS TO PROVIDE FUNDING NOTICE. 

10 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

11 a tax on the failure of a multiemployer defined benefit 

12 plan to meet the requirements of subsection (e) with re13 spect to any participant or beneficiary, labor organization 

14 representing such participants or beneficiaries, employer 

15 that has an obligation to contribute under the plan, and 

16 to the Pension Benefit Guaranty Corporation. 

17 ‘‘(b) AMOUNT OF TAX.— 

18 ‘‘(1) IN GENERAL.—The amount of the tax im19 posed by subsection (a) on any failure with respect 

20 to any recipient described under subsection (a) shall 

21 be $100 for each day in the noncompliance period 

22 with respect to the failure. 

23 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

24 of this section, the term ‘noncompliance period’ 

25 means, with respect to any failure, the period begin26 ning on the date the failure first occurs and ending 
426 

•S 1953 PCS 

1 on the date the statement to which the failure re2 lates is provided or the failure is otherwise corrected. 

3 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 

4 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

5 DISCOVERED AND REASONABLE DILIGENCE EXER6 CISED.—No tax shall be imposed by subsection (a) 

7 on any failure during any period for which it is es8 tablished to the satisfaction of the Secretary that 

9 any person subject to liability for tax under sub10 section (d) did not know that the failure existed and 

11 exercised reasonable diligence to meet the require12 ments of subsection (e). 

13 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR14 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

15 by subsection (a) on any failure if— 

16 ‘‘(A) any person subject to liability for the 

17 tax under subsection (d) exercised reasonable 

18 diligence to meet the requirements of subsection 

19 (e), and 

20 ‘‘(B) such person provides the statement 

21 described in subsection (e) during the 30-day 

22 period beginning on the first date such person 

23 knew, or exercising reasonable diligence should 

24 have known, that such failure existed. 
427 

•S 1953 PCS 

1 ‘‘(3) OVERALL LIMITATION FOR UNINTEN2 TIONAL FAILURES.—If the person subject to liability 

3 for tax under subsection (d) exercised reasonable 

4 diligence to meet the requirements of subsection (e), 

5 the tax imposed by subsection (a) for failures during 

6 the taxable year of the trust forming part of the 

7 plan shall not exceed $500,000. For purposes of the 

8 preceding sentence, all multiemployer plans of which 

9 the same trust forms a part shall be treated as 1 

10 plan. 

11 ‘‘(4) WAIVER BY SECRETARY.—In the case of a 

12 failure which is due to reasonable cause and not to 

13 willful neglect, the Secretary may waive part or all 

14 of the tax imposed by subsection (a) to the extent 

15 that the payment of such tax would be excessive or 

16 otherwise inequitable relative to the failure involved. 

17 ‘‘(d) LIABILITY FOR TAX.—The plan shall be liable 

18 for the tax imposed by subsection (a). 

19 ‘‘(e) PLAN FUNDING NOTICE.— 

20 ‘‘(1) IN GENERAL.—The administrator of a de21 fined benefit plan which is a multiemployer plan 

22 shall for each plan year provide a plan funding no23 tice to each affected party and the Pension Benefit 

24 Guaranty Corporation. 

25 ‘‘(2) INFORMATION CONTAINED IN NOTICES.— 
428 

•S 1953 PCS 

1 ‘‘(A) IDENTIFYING INFORMATION.—Each 

2 notice required under paragraph (1) shall con3 tain identifying information, including the name 

4 of the plan, the address and phone number of 

5 the plan administrator and the plan’s principal 

6 administrative officer, each plan sponsor’s em7 ployer identification number, and the plan num8 ber of the plan. 

9 ‘‘(B) SPECIFIC INFORMATION.—A plan 

10 funding notice under paragraph (1) shall in11 clude— 

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

13 percentage which the amount determined 

14 under section 431(c)(6)(A)(ii) bears to the 

15 amount determined under section 

16 431(c)6)(C) is at least 100 percent (and, if 

17 not, the actual percentage); 

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

19 plan’s assets, the amount of benefit pay20 ments, and the ratio of the assets to the 

21 payments for the plan year to which the 

22 notice relates; 

23 ‘‘(iii) a summary of the rules gov24 erning insolvent multiemployer plans, in25 cluding the limitations on benefit payments 
429 

•S 1953 PCS 

1 and any potential benefit reductions and 

2 suspensions (and the potential effects of 

3 such limitations, reductions, and suspen4 sions on the plan); and 

5 ‘‘(iv) a general description of the ben6 efits under the plan which are eligible to be 

7 guaranteed by the Pension Benefit Guar8 anty Corporation under title IV of the Em9 ployee Retirement Income Security Act of 

10 1974, along with an explanation of the lim11 itations on the guarantee and the cir12 cumstances under which such limitations 

13 apply. 

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

15 under paragraph (1) shall include any addi16 tional information which the plan administrator 

17 elects to include to the extent not inconsistent 

18 with regulations prescribed by the Secretary of 

19 Labor. 

20 ‘‘(3) TIME FOR PROVIDING NOTICE.—Any no21 tice under paragraph (1) shall be provided not later 

22 than 2 months after the deadline (including exten23 sions) for filing the return described under section 

24 6058 for the plan year to which the notice relates. 
430 

•S 1953 PCS 

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

2 paragraph (1)— 

3 ‘‘(A) shall be provided in a form and man4 ner prescribed in regulations of the Secretary of 

5 Labor, 

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

7 be understood by the average plan participant, 

8 and 

9 ‘‘(C) may be provided in written, elec10 tronic, or other appropriate form to the extent 

11 such form is reasonably accessible to the recipi12 ent.’’. 

13 (2) CLERICAL AMENDMENT.—The table of sec14 tions for chapter 43 of such Code, as amended by 

15 this Act, is amended by adding at the end the fol16 lowing new item: 

‘‘Sec. 4980L. Failure of multiemployer defined benefit plans to provide funding 

notice.’’. 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 this section shall take effect on the date of enactment of 

19 this Act. 

20 SEC. 503. TRANSFER OF EXCESS PENSION ASSETS TO MUL21 TIEMPLOYER HEALTH PLAN. 

22 (a) IN GENERAL.—Section 420(e) of the Internal 

23 Revenue Code of 1986 (relating to definitions and special 
431 

•S 1953 PCS 

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

2 paragraph: 

3 ‘‘(5) APPLICATION TO MULTIEMPLOYER

4 PLAN.—In the case of any plan to which section 

5 404(c) applies (or any successor plan primarily cov6 ering employees in the building and construction in7 dustry)— 

8 ‘‘(A) the prohibition under subsection (a) 

9 on the application of this section to a multiem10 ployer plan shall not apply, and 

11 ‘‘(B) this section shall be applied to any 

12 such plan— 

13 ‘‘(i) by treating any reference in this 

14 section to an employer as a reference to all 

15 employers maintaining the plan (or, if ap16 propriate, the plan sponsor), and 

17 ‘‘(ii) in accordance with such modi18 fications of this section (and the provisions 

19 of this title and the Employee Retirement 

20 Income Security Act of 1974 relating to 

21 this section) as the Secretary determines 

22 appropriate to reflect the fact the plan is 

23 not maintained by a single employer.’’ 
432 

•S 1953 PCS 

1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to transfers made in taxable years 

3 beginning after December 31, 2004. 

4 SEC. 504. ADMINISTRATIVE PROVISIONS. 

5 (a) AUTHORITY OF THE SECRETARY OF THE TREAS6 URY.—The Secretary of the Treasury shall have the au7 thority to prescribe rules applicable to the statements re8 quired under section 4980K(f) of the Internal Revenue 

9 Code of 1986 (as added by this Act) and section 101(l) 

10 of the Employee Retirement Income Security Act of 1974 

11 (as added by this Act). 

12 (b) AUTHORITY OF THE SECRETARY OF LABOR.— 

13 The Secretary of Labor shall have the authority to pre14 scribe rules applicable to the statements required under— 

15 (1) section 4980K(g) of the Internal Revenue 

16 Code of 1986 (as added by this Act) and section 

17 101(m) of the Employee Retirement Income Secu18 rity Act of 1974 (as added by this Act); and 

19 (2) section 4980L of such Code (as added by 

20 this Act). 
433 

•S 1953 PCS 

1 TITLE VI—PBGC PREMIUM AND 

2 GUARANTEE PROVISIONS 

3 SEC. 601. INCREASES IN PBGC PREMIUMS FOR SINGLE-EM4 PLOYER PLANS. 

5 (a) FLAT-RATE PREMIUMS.—Section 4006(a)(3) of 

6 the Employee Retirement Income Security Act of 1974 

7 (29 U.S.C. 1306(a)(3)) is amended— 

8 (1) in subparagraph (A)(i), by inserting ‘‘(or 

9 for plan years beginning after December 31, 2005, 

10 the amount determined under subparagraph (F))’’ 

11 after ‘‘$19’’; and 

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

13 ‘‘(F) AMOUNT OF FLAT-RATE PREMIUM.— 

14 ‘‘(i) IN GENERAL.—The amount de15 termined under this subparagraph is the 

16 greater of $30 or in the case of plan years 

17 beginning after December 31, 2006, the 

18 adjusted amount determined under clause 

19 (ii). 

20 ‘‘(ii) ADJUSTED AMOUNT.—The ad21 justed amount determined under this 

22 clause is the product derived by multi23 plying $30 by the ratio of— 

24 ‘‘(I) the contribution and benefit 

25 base (determined under section 230 of 
434 

•S 1953 PCS 

1 the Social Security Act) in effect in 

2 the calendar year in which the plan 

3 year begins, to 

4 ‘‘(II) the contribution and benefit 

5 base in effect in 2006. 

6 ‘‘(iii) ROUNDING.—If the amount de7 termined under clause (ii) is not a multiple 

8 of $1, such product shall be rounded to the 

9 nearest multiple of $1.’’. 

10 (b) RISK-BASED PREMIUMS.— 

11 (1) YEARS BEFORE NEW FUNDING RULES TAKE

12 EFFECT.—Section 4006(a)(3)(E) of the Employee 

13 Retirement Income Security Act (29 U.S.C. 

14 1306(a)(3)(E)) is amended— 

15 (A) in clause (ii), by striking ‘‘unfunded 

16 vested benefits’’ and inserting ‘‘unfunded cur17 rent liability ’’; and 

18 (B) in clause (iii)— 

19 (i) by striking subclause (I) and in20 serting: 

21 ‘‘(I) Except as provided in sub22 clause (II) or (III), the term ‘un23 funded current liability’ has the mean24 ing given such term by section 

25 302(d)(8)(A).’’, and 
435 

•S 1953 PCS 

1 (ii) by striking ‘‘vested’’ before ‘‘bene2 fits’’ in subclause (II). 

3 (2) YEARS TO WHICH NEW FUNDING RULES

4 APPLY.—Section 4006(a)(3)(E) of the Employee Re5 tirement Income Security Act (29 U.S.C. 

6 1306(a)(3)(E)) is amended— 

7 (A) in clause (ii), by striking ‘‘unfunded 

8 current liability’’ and inserting ‘‘unfunded tar9 get liability (as determined under section 303)’’; 

10 and 

11 (B) by striking clauses (iii) and (iv). 

12 (c) EFFECTIVE DATES.— 

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

14 subsections (a) and (b)(1) shall apply to plan years 

15 beginning after December 31, 2005. 

16 (2) NEW RULES.—The amendments made by 

17 subsection (b)(2) shall apply to plan years beginning 

18 after December 31, 2006. 

19 SEC. 602. RULES RELATING TO BANKRUPTCY OF EM20 PLOYER. 

21 (a) GUARANTEE.—Section 4022 of the Employee Re22 tirement Income Security Act of 1974 (29 U.S.C. 1322), 

23 as amended by this Act, is amended by adding at the end 

24 the following: 
436 

•S 1953 PCS 

1 ‘‘(i) BANKRUPTCY FILING SUBSTITUTED FOR TER2 MINATION DATE.—If a contributing sponsor of a plan has 

3 filed or has had filed against such person a petition seek4 ing liquidation or reorganization in a case under title 11, 

5 United States Code, or under any similar Federal law or 

6 law of a State or political subdivision, and the case has 

7 not been dismissed as of the termination date, then this 

8 section shall be applied by treating the date such petition 

9 was filed as the date of plan termination.’’. 

10 (b) ALLOCATION OF ASSETS AMONG PRIORITY

11 GROUPS IN BANKRUPTCY PROCEEDINGS.—Section 4044 

12 of the Employee Retirement Income Security Act of 1974 

13 (29 U.S.C. 1344) is amended by adding at the end the 

14 following: 

15 ‘‘(e) BANKRUPTCY FILING SUBSTITUTED FOR TER16 MINATION DATE.—If a contributing sponsor of a plan has 

17 filed or has had filed against such person a petition seek18 ing liquidation or reorganization in a case under title 11, 

19 United States Code, or under any similar Federal law or 

20 law of a State or political subdivision, and the case has 

21 not been dismissed as of the termination date, then sub22 section (a)(3) shall be applied by treating the date such 

23 petition was filed as the termination date of the plan.’’. 

24 (c) EFFECTIVE DATE.—The amendments made this 

25 section shall apply with respect to proceedings initiated 
437 

•S 1953 PCS 

1 under title 11, United States Code, or under any similar 

2 Federal law or law of a State or political subdivision, on 

3 or after the date that is 30 days after the date of enact4 ment of this Act. 

5 SEC. 603. LIMITATION ON PBGC GUARANTEE OF SHUT6 DOWN AND OTHER BENEFITS. 

7 (a) IN GENERAL.—Section 4022(b) of the Employee 

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

9 1322(b)) is amended by adding at the end the following: 

10 ‘‘(8) If a benefit is payable by reason of— 

11 ‘‘(A) a plant shutdown or similar event; or 

12 ‘‘(B) any event other than attainment of 

13 any age, performance of any service, receipt or 

14 derivation of any compensation, or the occur15 rence of death or disability, 

16 this section shall be applied as if a plan amendment 

17 had been adopted on the date such event occurred 

18 that provides for the payment of such benefit.’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 this section shall apply to benefits that become payable 

21 as a result of an event that occurs after July 26, 2005. 

22 SEC. 604. PBGC PREMIUMS FOR NEW PLANS OF SMALL EM23 PLOYERS. 

24 (a) IN GENERAL.—Subparagraph (A) of section 

25 4006(a)(3) of the Employee Retirement Income Security 
438 

•S 1953 PCS 

1 Act of 1974 (29 U.S.C. 1306(a)(3)(A)), as amended by 

2 this Act, is amended— 

3 (1) in clause (i), by inserting ‘‘other than a new 

4 single-employer plan (as defined in subparagraph 

5 (G)) maintained by a small employer (as so de6 fined),’’ after ‘‘single-employer plan,’’, 

7 (2) in clause (iii), by striking the period at the 

8 end and inserting ‘‘, and’’, and 

9 (3) by adding at the end the following new 

10 clause: 

11 ‘‘(iv) in the case of a new single-employer plan 

12 (as defined in subparagraph (G)) maintained by a 

13 small employer (as so defined) for the plan year, $5 

14 for each individual who is a participant in such plan 

15 during the plan year.’’ 

16 (b) DEFINITION OF NEW SINGLE-EMPLOYER

17 PLAN.—Section 4006(a)(3) of the Employee Retirement 

18 Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is 

19 amended by adding at the end the following new subpara20 graph: 

21 ‘‘(G)(i) For purposes of this paragraph, a single-em22 ployer plan maintained by a contributing sponsor shall be 

23 treated as a new single-employer plan for each of its first 

24 5 plan years if, during the 36-month period ending on the 

25 date of the adoption of such plan, the sponsor or any 
439 

•S 1953 PCS 

1 member of such sponsor’s controlled group (or any prede2 cessor of either) did not establish or maintain a plan to 

3 which this title applies with respect to which benefits were 

4 accrued for substantially the same employees as are in the 

5 new single-employer plan. 

6 ‘‘(ii)(I) For purposes of this paragraph, the term 

7 ‘small employer’ means an employer which on the first day 

8 of any plan year has, in aggregation with all members of 

9 the controlled group of such employer, 100 or fewer em10 ployees. 

11 ‘‘(II) In the case of a plan maintained by two or more 

12 contributing sponsors that are not part of the same con13 trolled group, the employees of all contributing sponsors 

14 and controlled groups of such sponsors shall be aggregated 

15 for purposes of determining whether any contributing 

16 sponsor is a small employer.’’ 

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

18 this section shall apply to plans first effective after Decem19 ber 31, 2005. 

20 SEC. 605. PBGC PREMIUMS FOR SMALL AND NEW PLANS. 

21 (a) NEW PLANS.—Subparagraph (E) of section 

22 4006(a)(3) of the Employee Retirement Income Security 

23 Act of 1974 (29 U.S.C. 1306(a)(3)(E)), as amended by 

24 this Act, is amended by adding at the end the following 

25 new clause: 
440 

•S 1953 PCS 

1 ‘‘(iii) In the case of a new defined benefit plan, the 

2 amount determined under clause (ii) for any plan year 

3 shall be an amount equal to the product of the amount 

4 determined under clause (ii) and the applicable percent5 age. For purposes of this clause, the term ‘applicable per6 centage’ means— 

7 ‘‘(I) 0 percent, for the first plan year. 

8 ‘‘(II) 20 percent, for the second plan year. 

9 ‘‘(III) 40 percent, for the third plan year. 

10 ‘‘(IV) 60 percent, for the fourth plan year. 

11 ‘‘(V) 80 percent, for the fifth plan year. 

12 For purposes of this clause, a defined benefit plan (as de13 fined in section 3(35)) maintained by a contributing spon14 sor shall be treated as a new defined benefit plan for each 

15 of its first 5 plan years if, during the 36-month period 

16 ending on the date of the adoption of the plan, the sponsor 

17 and each member of any controlled group including the 

18 sponsor (or any predecessor of either) did not establish 

19 or maintain a plan to which this title applies with respect 

20 to which benefits were accrued for substantially the same 

21 employees as are in the new plan.’’ 

22 (b) SMALL PLANS.—Paragraph (3) of section 

23 4006(a) of the Employee Retirement Income Security Act 

24 of 1974 (29 U.S.C. 1306(a)), as amended by this Act, is 

25 amended— 
441 

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1 (1) by striking ‘‘The’’ in subparagraph (E)(i) 

2 and inserting ‘‘Except as provided in subparagraph 

3 (H), the’’, and 

4 (2) by inserting after subparagraph (G) the fol5 lowing new subparagraph: 

6 ‘‘(H)(i) In the case of an employer who has 25 or 

7 fewer employees on the first day of the plan year, the addi8 tional premium determined under subparagraph (E) for 

9 each participant shall not exceed $5 multiplied by the 

10 number of participants in the plan as of the close of the 

11 preceding plan year. 

12 ‘‘(ii) For purposes of clause (i), whether an employer 

13 has 25 or fewer employees on the first day of the plan 

14 year is determined by taking into consideration all of the 

15 employees of all members of the contributing sponsor’s 

16 controlled group. In the case of a plan maintained by two 

17 or more contributing sponsors, the employees of all con18 tributing sponsors and their controlled groups shall be ag19 gregated for purposes of determining whether the 25-or20 fewer-employees limitation has been satisfied.’’ 

21 (c) EFFECTIVE DATES.— 

22 (1) SUBSECTION (a).—The amendments made 

23 by subsection (a) shall apply to plans first effective 

24 after December 31, 2005. 
442 

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1 (2) SUBSECTION (b).—The amendments made 

2 by subsection (b) shall apply to plan years beginning 

3 after December 31, 2005. 

4 SEC. 606. AUTHORIZATION FOR PBGC TO PAY INTEREST ON 

5 PREMIUM OVERPAYMENT REFUNDS. 

6 (a) IN GENERAL.—Section 4007(b) of the Employ7 ment Retirement Income Security Act of 1974 (29 U.S.C. 

8 1307(b)) is amended— 

9 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, 

10 and 

11 (2) by inserting at the end the following new 

12 paragraph: 

13 ‘‘(2) The corporation is authorized to pay, subject to 

14 regulations prescribed by the corporation, interest on the 

15 amount of any overpayment of premium refunded to a des16 ignated payor. Interest under this paragraph shall be cal17 culated at the same rate and in the same manner as inter18 est is calculated for underpayments under paragraph (1).’’ 

19 (b) EFFECTIVE DATE.—The amendments made by 

20 subsection (a) shall apply to interest accruing for periods 

21 beginning not earlier than the date of the enactment of 

22 this Act. 
443 

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1 SEC. 607. RULES FOR SUBSTANTIAL OWNER BENEFITS IN 

2 TERMINATED PLANS. 

3 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.— 

4 Section 4022(b)(5) of the Employee Retirement Income 

5 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended 

6 to read as follows: 

7 ‘‘(5)(A) For purposes of this paragraph, the term 

8 ‘majority owner’ means an individual who, at any time 

9 during the 60-month period ending on the date the deter10 mination is being made— 

11 ‘‘(i) owns the entire interest in an unincor12 porated trade or business, 

13 ‘‘(ii) in the case of a partnership, is a partner 

14 who owns, directly or indirectly, 50 percent or more 

15 of either the capital interest or the profits interest 

16 in such partnership, or 

17 ‘‘(iii) in the case of a corporation, owns, directly 

18 or indirectly, 50 percent or more in value of either 

19 the voting stock of that corporation or all the stock 

20 of that corporation. 

21 ‘‘(B) In the case of a participant who is a majority 

22 owner, the amount of benefits guaranteed under this sec23 tion shall equal the product of— 

24 ‘‘(i) a fraction (not to exceed 1) the numerator 

25 of which is the number of years from the later of the 

26 effective date or the adoption date of the original 
444 

•S 1953 PCS 

1 plan to the termination date, and the denominator 

2 of which is 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 ‘‘(C) For purposes of this paragraph, the constructive 

7 ownership rules of section 1563(e) of the Internal Revenue 

8 Code of 1986 (other than paragraph (3)(C) thereof) shall 

9 apply, including the application of such rules under section 

10 414(c) of such Code.’’. 

11 (b) MODIFICATION OF ALLOCATION OF ASSETS.— 

12 (1) Section 4044(a)(4)(B) of the Employee Re13 tirement Income Security Act of 1974 (29 U.S.C. 

14 1344(a)(4)(B)) is amended by striking ‘‘section 

15 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’. 

16 (2) Section 4044(b) of such Act (29 U.S.C. 

17 1344(b)) is amended— 

18 (A) by striking ‘‘(5)’’ in paragraph (2) and 

19 inserting ‘‘(4), (5),’’, and 

20 (B) by redesignating paragraphs (3) 

21 through (6) as paragraphs (4) through (7), re22 spectively, and by inserting after paragraph (2) 

23 the following new paragraph: 

24 ‘‘(3) If assets available for allocation under 

25 paragraph (4) of subsection (a) are insufficient to 
445 

•S 1953 PCS 

1 satisfy in full the benefits of all individuals who are 

2 described in that paragraph, the assets shall be allo3 cated first to benefits described in subparagraph (A) 

4 of that paragraph. Any remaining assets shall then 

5 be allocated to benefits described in subparagraph 

6 (B) of that paragraph. If assets allocated to such 

7 subparagraph (B) are insufficient to satisfy in full 

8 the benefits described in that subparagraph, the as9 sets shall be allocated pro rata among individuals on 

10 the basis of the present value (as of the termination 

11 date) of their respective benefits described in that 

12 subparagraph.’’ 

13 (c) CONFORMING AMENDMENTS.— 

14 (1) Section 4021 of the Employee Retirement 

15 Income Security Act of 1974 (29 U.S.C. 1321) is 

16 amended— 

17 (A) in subsection (b)(9), by striking ‘‘as 

18 defined in section 4022(b)(6)’’, and 

19 (B) by adding at the end the following new 

20 subsection: 

21 ‘‘(d)(1) For purposes of subsection (b)(9), the term 

22 ‘substantial owner’ means an individual who, at any time 

23 during the 60-month period ending on the date the deter24 mination is being made— 
446 

•S 1953 PCS 

1 ‘‘(A) owns the entire interest in an unincor2 porated trade or business, 

3 ‘‘(B) in the case of a partnership, is a partner 

4 who owns, directly or indirectly, more than 10 per5 cent of either the capital interest or the profits inter6 est in such partnership, or 

7 ‘‘(C) in the case of a corporation, owns, directly 

8 or indirectly, more than 10 percent in value of either 

9 the voting stock of that corporation or all the stock 

10 of that corporation. 

11 ‘‘(2) For purposes of this subsection, the constructive 

12 ownership rules of section 1563(e) of the Internal Revenue 

13 Code of 1986 (other than paragraph (3)(C) thereof) shall 

14 apply, including the application of such rules under section 

15 414(c) of such Code.’’ 

16 (2) Section 4043(c)(7) of such Act (29 U.S.C. 

17 1343(c)(7)) is amended by striking ‘‘section 

18 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’. 

19 (d) EFFECTIVE DATES.— 

20 (1) IN GENERAL.—Except as provided in para21 graph (2), the amendments made by this section 

22 shall apply to plan terminations— 

23 (A) under section 4041(c) of the Employee 

24 Retirement Income Security Act of 1974 (29 

25 U.S.C. 1341(c)) with respect to which notices 
447 

•S 1953 PCS 

1 of intent to terminate are provided under sec2 tion 4041(a)(2) of such Act (29 U.S.C. 

3 1341(a)(2)) after December 31, 2005, and 

4 (B) under section 4042 of such Act (29 

5 U.S.C. 1342) with respect to which proceedings 

6 are instituted by the corporation after such 

7 date. 

8 (2) CONFORMING AMENDMENTS.—The amend9 ments made by subsection (c) shall take effect on 

10 January 1, 2006. 

11 SEC. 608. ACCELERATION OF PBGC COMPUTATION OF BEN12 EFITS ATTRIBUTABLE TO RECOVERIES FROM 

13 EMPLOYERS. 

14 (a) MODIFICATION OF AVERAGE RECOVERY PER15 CENTAGE OF OUTSTANDING AMOUNT OF BENEFIT LI16 ABILITIES PAYABLE BY CORPORATION TO PARTICIPANTS

17 AND BENEFICIARIES.—Section 4022(c)(3)(B)(ii) of the 

18 Employee Retirement Income Security Act of 1974 (29 

19 U.S.C. 1322(c)(3)(B)(ii)) is amended to read as follows: 

20 ‘‘(ii) notices of intent to terminate 

21 were provided (or in the case of a termi22 nation by the corporation, a notice of de23 termination under section 4042 was 

24 issued) during the 5-Federal fiscal year pe25 riod ending with the third fiscal year pre-
448 

•S 1953 PCS 

1 ceding the fiscal year in which occurs the 

2 date of the notice of intent to terminate 

3 (or the notice of determination under sec4 tion 4042) with respect to the plan termi5 nation for which the recovery ratio is being 

6 determined.’’ 

7 (b) VALUATION OF SECTION 4062(c) LIABILITY FOR

8 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

9 PARTICIPANTS AND BENEFICIARIES.— 

10 (1) SINGLE-EMPLOYER PLAN BENEFITS GUAR11 ANTEED.—Section 4022(c)(3)(A) of the Employee 

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

13 13) is amended to read as follows: 

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

15 subparagraph (C), the term ‘recovery ratio’ 

16 means the ratio which— 

17 ‘‘(i) the sum of the values of all recov18 eries under section 4062, 4063, or 4064, 

19 determined by the corporation in connec20 tion with plan terminations described 

21 under subparagraph (B), bears to 

22 ‘‘(ii) the sum of all unfunded benefit 

23 liabilities under such plans as of the termi24 nation date in connection with any such 

25 prior termination.’’. 
449 

•S 1953 PCS 

1 (2) ALLOCATION OF ASSETS.—Section 4044 of 

2 the Employee Retirement Income Security Act of 

3 1974 (29 U.S.C. 1362) is amended by adding at the 

4 end the following new subsection: 

5 ‘‘(e) VALUATION OF SECTION 4062(c) LIABILITY FOR

6 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

7 PARTICIPANTS AND BENEFICIARIES.— 

8 ‘‘(1) IN GENERAL.—In the case of a terminated 

9 plan, the value of the recovery of liability under sec10 tion 4062(c) allocable as a plan asset under this sec11 tion for purposes of determining the amount of ben12 efits payable by the corporation shall be determined 

13 by multiplying— 

14 ‘‘(A) the amount of liability under section 

15 4062(c) as of the termination date of the plan, 

16 by 

17 ‘‘(B) the applicable section 4062(c) recov18 ery ratio. 

19 ‘‘(2) SECTION 4062(c) RECOVERY RATIO.—For 

20 purposes of this subsection— 

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

22 subparagraph (C), the term ‘section 4062(c) re23 covery ratio’ means the ratio which— 

24 ‘‘(i) the sum of the values of all recov25 eries under section 4062(c) determined by 
450 

•S 1953 PCS 

1 the corporation in connection with plan 

2 terminations described under subparagraph 

3 (B), bears to 

4 ‘‘(ii) the sum of all the amounts of li5 ability under section 4062(c) with respect 

6 to such plans as of the termination date in 

7 connection with any such prior termi8 nation. 

9 ‘‘(B) PRIOR TERMINATIONS.—A plan ter10 mination described in this subparagraph is a 

11 termination with respect to which— 

12 ‘‘(i) the value of recoveries under sec13 tion 4062(c) have been determined by the 

14 corporation, and 

15 ‘‘(ii) notices of intent to terminate 

16 were provided (or in the case of a termi17 nation by the corporation, a notice of de18 termination under section 4042 was 

19 issued) during the 5-Federal fiscal year pe20 riod ending with the third fiscal year pre21 ceding the fiscal year in which occurs the 

22 date of the notice of intent to terminate 

23 (or the notice of determination under sec24 tion 4042) with respect to the plan termi-
451 

•S 1953 PCS 

1 nation for which the recovery ratio is being 

2 determined. 

3 ‘‘(C) EXCEPTION.—In the case of a termi4 nated plan with respect to which the out5 standing amount of benefit liabilities exceeds 

6 $20,000,000, the term ‘section 4062(c) recovery 

7 ratio’ means, with respect to the termination of 

8 such plan, the ratio of— 

9 ‘‘(i) the value of the recoveries on be10 half of the plan under section 4062(c), to 

11 ‘‘(ii) the amount of the liability owed 

12 under section 4062(c) as of the date of 

13 plan termination to the trustee appointed 

14 under section 4042 (b) or (c). 

15 ‘‘(3) SUBSECTION NOT TO APPLY.—This sub16 section shall not apply with respect to the deter17 mination of— 

18 ‘‘(A) whether the amount of outstanding 

19 benefit liabilities exceeds $20,000,000, or 

20 ‘‘(B) the amount of any liability under sec21 tion 4062 to the corporation or the trustee ap22 pointed under section 4042 (b) or (c). 

23 ‘‘(4) DETERMINATIONS.—Determinations under 

24 this subsection shall be made by the corporation. 

25 Such determinations shall be binding unless shown 
452 

•S 1953 PCS 

1 by clear and convincing evidence to be unreason2 able.’’ 

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

4 this section shall apply for any termination for which no5 tices of intent to terminate are provided (or in the case 

6 of a termination by the corporation, a notice of determina7 tion under section 4042 under the Employee Retirement 

8 Income Security Act of 1974 is issued) on or after the 

9 date which is 30 days after the date of enactment of this 

10 section. 

11 TITLE VII—PROVISIONS RELAT12 ING TO SPOUSAL PENSION 

13 PROTECTION 

14 SEC. 701. JOINT STUDY OF APPLICATION OF SPOUSAL CON15 SENT RULES TO DEFINED CONTRIBUTION 

16 PLANS. 

17 (a) STUDY.—The Secretary of Labor and the Sec18 retary of the Treasury shall jointly conduct a study of the 

19 feasibility and desirability of extending the application of 

20 the requirements of section 205 of the Employee Retire21 ment Income Security Act of 1974 and sections 

22 401(a)(11) and 417 of the Internal Revenue Code of 1986 

23 (relating to spousal consent requirements) to defined con24 tribution plans to which such requirements do not apply. 

25 Such study shall include consideration of— 
453 

•S 1953 PCS 

1 (1) any modifications of such requirements that 

2 are necessary to apply such requirements to such 

3 plans, and 

4 (2) the feasibility of providing notice and spous5 al consent in 1 or more electronic forms that are ca6 pable of authentication. 

7 (b) REPORT.—Not later than 2 years after the date 

8 of the enactment of this Act, the Secretaries shall report 

9 the results of the study, together with any recommenda10 tions for legislative changes, to the Committees on Ways 

11 and Means and Education and the Workforce of the 

12 House of Representatives and the Committees on Finance 

13 and Health, Education, Labor, and Pensions of the Sen14 ate. 

15 SEC. 702. REGULATIONS ON TIME AND ORDER OF 

16 ISSUANCE OF DOMESTIC RELATIONS OR17 DERS. 

18 Not later than 1 year after the date of the enactment 

19 of this Act, the Secretary of Labor shall issue regulations 

20 under section 206(d)(3) of the Employee Retirement Secu21 rity Act of 1974 and section 414(p) of the Internal Rev22 enue Code of 1986 which clarify that— 

23 (1) a domestic relations order otherwise meet24 ing the requirements to be a qualified domestic rela25 tions order, including the requirements of section 
454 

•S 1953 PCS 

1 206(d)(3)(D) of such Act and section 414(p)(3) of 

2 such Code, shall not fail to be treated as a qualified 

3 domestic relations order solely because— 

4 (A) the order is issued after, or revises, an5 other domestic relations order or qualified do6 mestic relations order; or 

7 (B) of the time at which it is issued; and 

8 (2) any order described in paragraph (1) shall 

9 be subject to the same requirements and protections 

10 which apply to qualified domestic relations orders, 

11 including the provisions of section 206(d)(3)(H) of 

12 such Act and section 414(p)(7) of such Code. 

13 SEC. 703. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL14 ROAD RETIREMENT ANNUITIES INDE15 PENDENT OF ACTUAL ENTITLEMENT OF EM16 PLOYEE. 

17 (a) IN GENERAL.—Section 2 of the Railroad Retire18 ment Act of 1974 (45 U.S.C. 231a) is amended— 

19 (1) in subsection (c)(4)(i), by striking ‘‘(A) is 

20 entitled to an annuity under subsection (a)(1) and 

21 (B)’’; and 

22 (2) in subsection (e)(5), by striking ‘‘or di23 vorced wife’’ the second place it appears. 
455 

•S 1953 PCS 

1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall take effect 1 year after the date of the 

3 enactment of this Act. 

4 SEC. 704. EXTENSION OF TIER II RAILROAD RETIREMENT 

5 BENEFITS TO SURVIVING FORMER SPOUSES 

6 PURSUANT TO DIVORCE AGREEMENTS. 

7 (a) IN GENERAL.—Section 5 of the Railroad Retire8 ment Act of 1974 (45 U.S.C. 231d) is amended by adding 

9 at the end the following: 

10 ‘‘(d) Notwithstanding any other provision of law, the 

11 payment of any portion of an annuity computed under sec12 tion 3(b) to a surviving former spouse in accordance with 

13 a court decree of divorce, annulment, or legal separation 

14 or the terms of any court-approved property settlement 

15 incident to any such court decree shall not be terminated 

16 upon the death of the individual who performed the service 

17 with respect to which such annuity is so computed unless 

18 such termination is otherwise required by the terms of 

19 such court decree.’’ 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 this section shall take effect 1 year after the date of the 

22 enactment of this Act. 

23 SEC. 705. REQUIREMENT FOR ADDITIONAL SURVIVOR AN24 NUITY OPTION. 

25 (a) AMENDMENTS TO INTERNAL REVENUE CODE.— 
456 

•S 1953 PCS 

1 (1) ELECTION OF SURVIVOR ANNUITY.—Section 

2 417(a)(1)(A) of the Internal Revenue Code of 1986 

3 is amended— 

4 (A) in clause (i), by striking ‘‘, and’’ and 

5 inserting a comma; 

6 (B) by redesignating clause (ii) as clause 

7 (iii); and 

8 (C) by inserting after clause (i) the fol9 lowing: 

10 ‘‘(ii) if the participant elects a waiver 

11 under clause (i), may elect the qualified op12 tional survivor annuity at any time during the 

13 applicable election period, and’’. 

14 (2) DEFINITION.—Section 417 of such Code is 

15 amended by adding at the end the following: 

16 ‘‘(g) DEFINITION OF QUALIFIED OPTIONAL SUR17 VIVOR ANNUITY.— 

18 ‘‘(1) IN GENERAL.—For purposes of this sec19 tion, the term ‘qualified optional survivor annuity’ 

20 means an annuity— 

21 ‘‘(A) for the life of the participant with a 

22 survivor annuity for the life of the spouse which 

23 is equal to the applicable percentage of the 

24 amount of the annuity which is payable during 
457 

•S 1953 PCS 

1 the joint lives of the participant and the spouse, 

2 and 

3 ‘‘(B) which is the actuarial equivalent of a 

4 single annuity for the life of the participant. 

5 Such term also includes any annuity in a form hav6 ing the effect of an annuity described in the pre7 ceding sentence. 

8 ‘‘(2) APPLICABLE PERCENTAGE.— 

9 ‘‘(A) IN GENERAL.—For purposes of para10 graph (1), if the survivor annuity percentage— 

11 ‘‘(i) is less than 75 percent, the appli12 cable percentage is 75 percent, and 

13 ‘‘(ii) is greater than or equal to 75 

14 percent, the applicable percentage is 50 

15 percent. 

16 ‘‘(B) SURVIVOR ANNUITY PERCENTAGE.— 

17 For purposes of subparagraph (A), the term 

18 ‘survivor annuity percentage’ means the per19 centage which the survivor annuity under the 

20 plan’s qualified joint and survivor annuity bears 

21 to the annuity payable during the joint lives of 

22 the participant and the spouse.’’ 

23 (3) NOTICE.—Section 417(a)(3)(A)(i) of such 

24 Code is amended by inserting ‘‘and of the qualified 

25 optional survivor annuity’’ after ‘‘annuity’’. 
458 

•S 1953 PCS 

1 (b) AMENDMENTS TO ERISA.— 

2 (1) ELECTION OF SURVIVOR ANNUITY.—Section 

3 205(c)(1)(A) of the Employee Retirement Income 

4 Security Act of 1974 (29 U.S.C. 1055(c)(1)(A)) is 

5 amended— 

6 (A) in clause (i), by striking ‘‘, and’’ and 

7 inserting a comma; 

8 (B) by redesignating clause (ii) as clause 

9 (iii); and 

10 (C) by inserting after clause (i) the fol11 lowing: 

12 ‘‘(ii) if the participant elects a waiver 

13 under clause (i), may elect the qualified op14 tional survivor annuity at any time during the 

15 applicable election period, and’’. 

16 (2) DEFINITION.—Section 205(d) of such Act 

17 (29 U.S.C. 1055(d)) is amended— 

18 (A) by inserting ‘‘(1)’’ after ‘‘(d)’’; 

19 (B) by redesignating paragraphs (1) and 

20 (2) as subparagraphs (A) and (B), respectively; 

21 and 

22 (C) by adding at the end the following: 

23 ‘‘(2)(A) For purposes of this section, the term ‘quali24 fied optional survivor annuity’ means an annuity— 
459 

•S 1953 PCS 

1 ‘‘(i) for the life of the participant with a sur2 vivor annuity for the life of the spouse which is 

3 equal to the applicable percentage of the amount of 

4 the annuity which is payable during the joint lives 

5 of the participant and the spouse, and 

6 ‘‘(ii) which is the actuarial equivalent of a sin7 gle annuity for the life of the participant. 

8 Such term also includes any annuity in a form having the 

9 effect of an annuity described in the preceding sentence. 

10 ‘‘(B)(i) For purposes of subparagraph (A), if the sur11 vivor annuity percentage— 

12 ‘‘(I) is less than 75 percent, the applicable per13 centage is 75 percent, and 

14 ‘‘(II) is greater than or equal to 75 percent, the 

15 applicable percentage is 50 percent. 

16 ‘‘(ii) For purposes of clause (i), the term ‘survivor 

17 annuity percentage’ means the percentage which the sur18 vivor annuity under the plan’s qualified joint and survivor 

19 annuity bears to the annuity payable during the joint lives 

20 of the participant and the spouse.’’ 

21 (3) NOTICE.—Section 205(c)(3)(A)(i) of such 

22 Act (29 U.S.C. 1055(c)(3)(A)(i)) is amended by in23 serting ‘‘and of the qualified optional survivor annu24 ity’’ after ‘‘annuity’’. 

25 (c) EFFECTIVE DATES.— 
460 

•S 1953 PCS 

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

2 this section shall apply to plan years beginning after 

3 December 31, 2005. 

4 (2) SPECIAL RULE FOR COLLECTIVELY BAR5 GAINED PLANS.—In the case of a plan maintained 

6 pursuant to 1 or more collective bargaining agree7 ments between employee representatives and 1 or 

8 more employers ratified on or before the date of the 

9 enactment of this Act, the amendments made by this 

10 section shall apply to the first plan year beginning 

11 on or after the earlier of— 

12 (A) the later of— 

13 (i) January 1, 2006, or 

14 (ii) the date on which the last of such 

15 collective bargaining agreements termi16 nates (determined without regard to any 

17 extension thereof after the date of enact18 ment of this Act), or 

19 (B) January 1, 2007. 
461 

•S 1953 PCS 

1 TITLE VIII—IMPROVEMENTS IN 

2 PORTABILITY AND DISTRIBU3 TION RULES 

4 SEC. 801. CLARIFICATIONS REGARDING PURCHASE OF PER5 MISSIVE SERVICE CREDIT. 

6 (a) IN GENERAL.—Section 415(n) of the Internal 

7 Revenue Code of 1986 (relating to special rules for the 

8 purchase of permissive service credit) is amended— 

9 (1) by striking ‘‘an employee’’ in paragraph (1) 

10 and inserting ‘‘a participant’’, and 

11 (2) by adding at the end of paragraph (3)(A) 

12 the following new flush sentence: 

13 ‘‘Such term may include service credit for peri14 ods for which there is no performance of serv15 ice, and notwithstanding clause (ii), may in16 clude service credited in order to provide an in17 creased benefit for service credit which a partic18 ipant is receiving under the plan.’’ 

19 (b) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE

20 TRANSFERS.—Section 415(n)(3) of such Code is amended 

21 by adding at the end the following new subparagraph: 

22 ‘‘(D) SPECIAL RULES FOR TRUSTEE-TO23 TRUSTEE TRANSFERS.—In the case of a trust24 ee-to-trustee transfer to which section 

25 403(b)(13)(A) or 457(e)(17)(A) applies (with-
462 

•S 1953 PCS 

1 out regard to whether the transfer is made be2 tween plans maintained by the same em3 ployer)— 

4 ‘‘(i) the limitations of subparagraph 

5 (B) shall not apply in determining whether 

6 the transfer is for the purchase of permis7 sive service credit, and 

8 ‘‘(ii) the distribution rules applicable 

9 under this title to the defined benefit gov10 ernmental plan to which any amounts are 

11 so transferred shall apply to such amounts 

12 and any benefits attributable to such 

13 amounts.’’ 

14 (c) NONQUALIFIED SERVICE.—Section 415(n)(3) of 

15 such Code is amended— 

16 (1) by striking ‘‘permissive service credit attrib17 utable to nonqualified service’’ each place it appears 

18 in subparagraph (B) and inserting ‘‘nonqualified 

19 service credit’’, 

20 (2) by striking so much of subparagraph (C) as 

21 precedes clause (i) and inserting: 

22 ‘‘(C) NONQUALIFIED SERVICE CREDIT.— 

23 For purposes of subparagraph (B), the term 

24 ‘nonqualified service credit’ means permissive 
463 

•S 1953 PCS 

1 service credit other than that allowed with re2 spect to—’’, and 

3 (3) by striking ‘‘elementary or secondary edu4 cation (through grade 12), as determined under 

5 State law’’ and inserting ‘‘elementary or secondary 

6 education (through grade 12), or a comparable level 

7 of education, as determined under the applicable law 

8 of the jurisdiction in which the service was per9 formed’’. 

10 (d) EFFECTIVE DATES.— 

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

12 subsections (a) and (c) shall take effect as if in13 cluded in the amendments made by section 1526 of 

14 the Taxpayer Relief Act of 1997. 

15 (2) SUBSECTION (b).—The amendments made 

16 by subsection (b) shall take effect as if included in 

17 the amendments made by section 647 of the Eco18 nomic Growth and Tax Relief Reconciliation Act of 

19 2001. 

20 SEC. 802. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN 

21 ANNUITY CONTRACTS. 

22 (a) IN GENERAL.—Subparagraph (A) of section 

23 402(c)(2) (relating to the maximum amount which may 

24 be rolled over) is amended— 
464 

•S 1953 PCS 

1 (1) by striking ‘‘which is part of a plan which 

2 is a defined contribution plan and which agrees to 

3 separately account’’ and inserting ‘‘or to an annuity 

4 contract described in section 403(b) and such trust 

5 or contract provides for separate accounting’’; and 

6 (2) by inserting ‘‘(and earnings thereon)’’ after 

7 ‘‘so transferred’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 subsection (a) shall apply to taxable years beginning after 

10 December 31, 2005. 

11 SEC. 803. CLARIFICATION OF MINIMUM DISTRIBUTION 

12 RULES FOR GOVERNMENTAL PLANS. 

13 The Secretary of the Treasury shall issue regulations 

14 under which a governmental plan (as defined in section 

15 414(d) of the Internal Revenue Code of 1986) shall, for 

16 all years to which section 401(a)(9) of such Code applies 

17 to such plan, be treated as having complied with such sec18 tion 401(a)(9) if such plan complies with a reasonable 

19 good faith interpretation of such section 401(a)(9). 

20 SEC. 804. WAIVER OF 10 PERCENT EARLY WITHDRAWAL 

21 PENALTY TAX ON CERTAIN DISTRIBUTIONS 

22 OF PENSION PLANS FOR PUBLIC SAFETY EM23 PLOYEES. 

24 (a) IN GENERAL.—Section 72(t) of the Internal Rev25 enue Code of 1986 (relating to subsection not to apply 
465 

•S 1953 PCS 

1 to certain distributions) is amended by adding at the end 

2 the following new paragraph: 

3 ‘‘(10) DISTRIBUTIONS TO QUALIFIED PUBLIC

4 SAFETY EMPLOYEES IN GOVERNMENTAL PLANS.— 

5 ‘‘(A) IN GENERAL.—In the case of a dis6 tribution to a qualified public safety employee 

7 from a governmental plan (within the meaning 

8 of section 414(d)) which is a defined benefit 

9 plan, paragraph (2)(A)(v) shall be applied by 

10 substituting ‘age 50’ for ‘age 55’. 

11 ‘‘(B) QUALIFIED PUBLIC SAFETY EM12 PLOYEE.—For purposes of this paragraph, the 

13 term ‘qualified public safety employee’ means 

14 any employee of a State or political subdivision 

15 of a State who provides police protection, fire16 fighting services, or emergency medical services 

17 for any area within the jurisdiction of such 

18 State or political subdivision.’’ 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 this section shall apply to distributions after the date of 

21 the enactment of this Act. 

22 SEC. 805. ALLOW ROLLOVERS BY NONSPOUSE BENE23 FICIARIES OF CERTAIN RETIREMENT PLAN 

24 DISTRIBUTIONS. 

25 (a) IN GENERAL.— 
466 

•S 1953 PCS 

1 (1) QUALIFIED PLANS.—Section 402(c) of the 

2 Internal Revenue Code of 1986 (relating to rollovers 

3 from exempt trusts) is amended by adding at the 

4 end the following new paragraph: 

5 ‘‘(11) DISTRIBUTIONS TO INHERITED INDI6 VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE7 FICIARY.— 

8 ‘‘(A) IN GENERAL.—If, with respect to any 

9 portion of a distribution from an eligible retire10 ment plan of a deceased employee, a direct 

11 trustee-to-trustee transfer is made to an indi12 vidual retirement plan described in clause (i) or 

13 (ii) of paragraph (8)(B) established for the pur14 poses of receiving the distribution on behalf of 

15 an individual who is a designated beneficiary 

16 (as defined by section 401(a)(9)(E)) of the em17 ployee and who is not the surviving spouse of 

18 the employee— 

19 ‘‘(i) the transfer shall be treated as an 

20 eligible rollover distribution for purposes of 

21 this subsection, 

22 ‘‘(ii) the individual retirement plan 

23 shall be treated as an inherited individual 

24 retirement account or individual retirement 

25 annuity (within the meaning of section 
467 

•S 1953 PCS 

1 408(d)(3)(C)) for purposes of this title, 

2 and 

3 ‘‘(iii) section 401(a)(9)(B) (other than 

4 clause (iv) thereof) shall apply to such 

5 plan. 

6 ‘‘(B) CERTAIN TRUSTS TREATED AS BENE7 FICIARIES.—For purposes of this paragraph, to 

8 the extent provided in rules prescribed by the 

9 Secretary, a trust maintained for the benefit of 

10 one or more designated beneficiaries shall be 

11 treated in the same manner as a designated 

12 beneficiary.’’ 

13 (2) SECTION 403(a) PLANS.—Subparagraph 

14 (B) of section 403(a)(4) of such Code (relating to 

15 rollover amounts) is amended by striking ‘‘and (9)’’ 

16 and inserting ‘‘, (9), and (11)’’. 

17 (3) SECTION 403(b) PLANS.—Subparagraph 

18 (B) of section 403(b)(8) of such Code (relating to 

19 rollover amounts) is amended by striking ‘‘and (9)’’ 

20 and inserting ‘‘, (9), and (11)’’. 

21 (4) SECTION 457 PLANS.—Subparagraph (B) of 

22 section 457(e)(16) of such Code (relating to rollover 

23 amounts) is amended by striking ‘‘and (9)’’ and in24 serting ‘‘, (9), and (11)’’. 
468 

•S 1953 PCS 

1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to distributions after December 31, 

3 2005. 

4 SEC. 806. FASTER VESTING OF EMPLOYER NONELECTIVE 

5 CONTRIBUTIONS. 

6 (a) AMENDMENTS TO THE INTERNAL REVENUE

7 CODE OF 1986.— 

8 (1) IN GENERAL.—Paragraph (2) of section 

9 411(a) of the Internal Revenue Code of 1986 (relat10 ing to employer contributions) is amended to read as 

11 follows: 

12 ‘‘(2) EMPLOYER CONTRIBUTIONS.— 

13 ‘‘(A) DEFINED BENEFIT PLANS.— 

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

15 defined benefit plan, a plan satisfies the 

16 requirements of this paragraph if it satis17 fies the requirements of clause (ii) or (iii). 

18 ‘‘(ii) 5-YEAR VESTING.—A plan satis19 fies the requirements of this clause if an 

20 employee who has completed at least 5 

21 years of service has a nonforfeitable right 

22 to 100 percent of the employee’s accrued 

23 benefit derived from employer contribu24 tions. 
469 

•S 1953 PCS 

1 ‘‘(iii) 3 TO 7 YEAR VESTING.—A plan 

2 satisfies the requirements of this clause if 

3 an employee has a nonforfeitable right to 

4 a percentage of the employee’s accrued 

5 benefit derived from employer contribu6 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. 

7 ‘‘(B) DEFINED CONTRIBUTION PLANS.— 

8 ‘‘(i) IN GENERAL.—In the case of a 

9 defined contribution plan, a plan satisfies 

10 the requirements of this paragraph if it 

11 satisfies the requirements of clause (ii) or 

12 (iii). 

13 ‘‘(ii) 3-YEAR VESTING.—A plan satis14 fies the requirements of this clause if an 

15 employee who has completed at least 3 

16 years of service has a nonforfeitable right 

17 to 100 percent of the employee’s accrued 

18 benefit derived from employer contribu19 tions. 

20 ‘‘(iii) 2 TO 6 YEAR VESTING.—A plan 

21 satisfies the requirements of this clause if 

22 an employee has a nonforfeitable right to 
470 

•S 1953 PCS 

1 a percentage of the employee’s accrued 

2 benefit derived from employer contribu3 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.’’. 

4 (2) CONFORMING AMENDMENT.—Section 

5 411(a) of such Code (relating to general rule for 

6 minimum vesting standards) is amended by striking 

7 paragraph (12). 

8 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

9 INCOME SECURITY ACT OF 1974.— 

10 (1) IN GENERAL.—Paragraph (2) of section 

11 203(a) of the Employee Retirement Income Security 

12 Act of 1974 (29 U.S.C. 1053(a)(2)) is amended to 

13 read as follows: 

14 ‘‘(2)(A)(i) In the case of a defined benefit plan, 

15 a plan satisfies the requirements of this paragraph 

16 if it satisfies the requirements of clause (ii) or (iii). 

17 ‘‘(ii) A plan satisfies the requirements of this 

18 clause if an employee who has completed at least 5 

19 years of service has a nonforfeitable right to 100 

20 percent of the employee’s accrued benefit derived 

21 from employer contributions. 
471 

•S 1953 PCS 

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: 

3 ........................................................................................... 20

4 ........................................................................................... 40

5 ........................................................................................... 60

6 ........................................................................................... 80

7 or more ............................................................................. 100. 

6 ‘‘(B)(i) In the case of an individual account 

7 plan, a plan satisfies the requirements of this para8 graph if it satisfies the requirements of clause (ii) or 

9 (iii). 

10 ‘‘(ii) A plan satisfies the requirements of this 

11 clause if an employee who has completed at least 3 

12 years of service has a nonforfeitable right to 100 

13 percent of the employee’s accrued benefit derived 

14 from employer contributions. 

15 ‘‘(iii) A plan satisfies the requirements of this 

16 clause if an employee has a nonforfeitable right to 

17 a percentage of the employee’s accrued benefit de18 rived from employer contributions determined under 

19 the following table: 

The nonforfeitable 

‘‘Years of service: percentage is: 

2 ........................................................................................... 20

3 ........................................................................................... 40

4 ........................................................................................... 60
472 

•S 1953 PCS 

5 ........................................................................................... 80

6 or more ............................................................................. 100.’’. 

1 (2) CONFORMING AMENDMENT.—Section 

2 203(a) of such Act is amended by striking para3 graph (4). 

4 (c) EFFECTIVE DATES.— 

5 (1) IN GENERAL.—Except as provided in para6 graph (2), the amendments made by this section 

7 shall apply to contributions for plan years beginning 

8 after December 31, 2005. 

9 (2) COLLECTIVE BARGAINING AGREEMENTS.— 

10 In the case of a plan maintained pursuant to one or 

11 more collective bargaining agreements between em12 ployee representatives and one or more employers 

13 ratified before the date of the enactment of this Act, 

14 the amendments made by this section shall not apply 

15 to contributions on behalf of employees covered by 

16 any such agreement for plan years beginning before 

17 the earlier of— 

18 (A) the later of— 

19 (i) the date on which the last of such 

20 collective bargaining agreements termi21 nates (determined without regard to any 

22 extension thereof on or after such date of 

23 the enactment); or 

24 (ii) January 1, 2006; or 
473 

•S 1953 PCS 

1 (B) January 1, 2008. 

2 (3) SERVICE REQUIRED.—With respect to any 

3 plan, the amendments made by this section shall not 

4 apply to any employee before the date that such em5 ployee has 1 hour of service under such plan in any 

6 plan year to which the amendments made by this 

7 section apply. 

8 SEC. 807. ALLOW DIRECT ROLLOVERS FROM RETIREMENT 

9 PLANS TO ROTH IRAS. 

10 (a) IN GENERAL.—Subsection (e) of section 408A of 

11 the Internal Revenue Code of 1986 (defining qualified roll12 over contribution) is amended to read as follows: 

13 ‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 

14 purposes of this section, the term ‘qualified rollover con15 tribution’ means a rollover contribution— 

16 ‘‘(1) to a Roth IRA from another such account, 

17 ‘‘(2) from an eligible retirement plan, but only 

18 if— 

19 ‘‘(A) in the case of an individual retire20 ment plan, such rollover contribution meets the 

21 requirements of section 408(d)(3), and 

22 ‘‘(B) in the case of any eligible retirement 

23 plan (as defined in section 402(c)(8)(B) other 

24 than clauses (i) and (ii) thereof), such rollover 
474 

•S 1953 PCS 

1 contribution meets the requirements of section 

2 402(c), 403(b)(8), or 457(e)(16), as applicable. 

3 For purposes of section 408(d)(3)(B), there shall be dis4 regarded any qualified rollover contribution from an indi5 vidual retirement plan (other than a Roth IRA) to a Roth 

6 IRA.’’ 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 408A(c)(3)(B) of such Code is 

9 amended— 

10 (A) in the text by striking ‘‘individual re11 tirement plan’’ and inserting ‘‘an eligible retire12 ment plan (as defined by section 

13 402(c)(8)(B))’’, and 

14 (B) in the heading by striking ‘‘IRA’’ and 

15 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

16 (2) Section 408A(d)(3) of such Code is amend17 ed— 

18 (A) in subparagraph (A), by striking ‘‘sec19 tion 408(d)(3)’’ inserting ‘‘sections 402(c), 

20 403(b)(8), 408(d)(3), and 457(e)(16)’’, 

21 (B) in subparagraph (B), by striking ‘‘in22 dividual retirement plan’’ and inserting ‘‘eligible 

23 retirement plan (as defined by section 

24 402(c)(8)(B))’’, 
475 

•S 1953 PCS 

1 (C) in subparagraph (D), by inserting ‘‘or 

2 6047’’ after ‘‘408(i)’’, 

3 (D) in subparagraph (D), by striking ‘‘or 

4 both’’ and inserting ‘‘persons subject to section 

5 6047(d)(1), or all of the foregoing persons’’, 

6 and 

7 (E) in the heading, by striking ‘‘IRA’’ and 

8 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

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

10 this section shall apply to distributions after December 31, 

11 2005. 

12 SEC. 808. ELIMINATION OF HIGHER PENALTY ON CERTAIN 

13 SIMPLE PLAN DISTRIBUTIONS. 

14 (a) IN GENERAL.—Subsection (t) of section 72 of the 

15 Internal Revenue Code of 1986 (relating to 10-percent ad16 ditional tax on early distributions from qualified retire17 ment plans), as amended by section 804, is amended by 

18 striking paragraph (6) and redesignating paragraphs (7), 

19 (8), (9), and (10) as paragraphs (6), (7), (8), and (9), 

20 respectively. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Section 72(t)(2)(E) of such Code is amend23 ed by striking ‘‘paragraph (7)’’ and inserting ‘‘para24 graph (6)’’. 
476 

•S 1953 PCS 

1 (2) Section 72(t)(2)(F) of such Code is amend2 ed by striking ‘‘paragraph (8)’’ and inserting ‘‘para3 graph (7)’’. 

4 (3) Section 408(d)(3)(G) of such Code is 

5 amended by striking ‘‘applies’’ and inserting ‘‘ap6 plied on the day before the date of the enactment of 

7 the National Employee Savings and Trust Equity 

8 Guarantee Act of 2005)’’. 

9 (4) Section 457(a)(2) of such Code is amended 

10 by striking ‘‘section 72(t)(9)’’ and inserting ‘‘section 

11 72(t)(8)’’. 

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

13 this section shall apply to years beginning after December 

14 31, 2005. 

15 SEC. 809. SIMPLE PLAN PORTABILITY. 

16 (a) REPEAL OF LIMITATION.—Paragraph (3) of sec17 tion 408(d) of the Internal Revenue Code of 1986 (relat18 ing to rollover contributions), as amended by this Act, is 

19 amended by striking subparagraph (G) and redesignating 

20 subparagraphs (H) and (I) as subparagraphs (G) and (H), 

21 respectively. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to years beginning after December 

24 31, 2005. 
477 

•S 1953 PCS 

1 SEC. 810. ELIGIBILITY FOR PARTICIPATION IN RETIRE2 MENT PLANS. 

3 An individual shall not be precluded from partici4 pating in an eligible deferred compensation plan by reason 

5 of having received a distribution under section 457(e)(9) 

6 of the Internal Revenue Code of 1986, as in effect prior 

7 to the enactment of the Small Business Job Protection 

8 Act of 1996. 

9 SEC. 811. TRANSFERS TO THE PBGC. 

10 (a) MANDATORY DISTRIBUTIONS TO PBGC.—Clause 

11 (i) of section 401(a)(31)(B) of the Internal Revenue Code 

12 of 1986 (relating to general rule for certain mandatory 

13 distributions) is amended by inserting ‘‘to the Pension 

14 Benefit Guaranty Corporation in accordance with section 

15 4050(e) of the Employee Retirement Income Security Act 

16 of 1974 or’’ after ‘‘such transfer’’. 

17 (b) TAX TREATMENT OF DISTRIBUTIONS.—Subpara18 graph (B) of section 401(a)(31) of such Code is amended 

19 by adding at the end the following new clause: 

20 ‘‘(iii) INCOME TAX TREATMENT OF

21 TRANSFERS TO PBGC.—For purposes of 

22 determining the income tax treatment re23 lating to transfers to the Pension Benefit 

24 Guaranty Corporation under clause (i)— 

25 ‘‘(I) the transfer of amounts to 

26 the Pension Benefit Guaranty Cor-
478 

•S 1953 PCS 

1 poration pursuant to clause (i) shall 

2 be treated as a transfer to an indi3 vidual retirement plan under such 

4 clause, and 

5 ‘‘(II) the distribution of such 

6 amounts from the Pension Benefit 

7 Guaranty Corporation shall be treated 

8 as a distribution from an individual 

9 retirement plan.’’ 

10 (c) MISSING PARTICIPANTS AND BENEFICIARIES.— 

11 Section 4050 of the Employee Retirement Income Security 

12 Act of 1974 (29 U.S.C. 1350), as amended by section 812, 

13 is amended by redesignating subsection (e) as subsection 

14 (g) and by inserting after subsection (d) the following new 

15 subsections: 

16 ‘‘(e) INVOLUNTARY CASHOUTS.— 

17 ‘‘(1) PAYMENT BY THE CORPORATION.—If ben18 efits under a plan described in paragraph (3) were 

19 transferred to the corporation under section 

20 401(a)(31)(B) of the Internal Revenue Code of 

21 1986, the corporation shall, upon application filed by 

22 the participant or beneficiary with the corporation in 

23 such form and manner as may be prescribed in regu24 lations of the corporation, pay to the participant or 
479 

•S 1953 PCS 

1 beneficiary the amount transferred (or the appro2 priate survivor benefit) either— 

3 ‘‘(A) in a single sum (plus interest), or 

4 ‘‘(B) in such other form as is specified in 

5 regulations of the corporation. 

6 ‘‘(2) INFORMATION TO THE CORPORATION.—To 

7 the extent provided in regulations, the plan adminis8 trator of a plan described in paragraph (3) shall, 

9 upon a transfer of benefits to the corporation under 

10 section 401(a)(31)(B) of such Code, provide the cor11 poration information with respect to benefits of the 

12 participant or beneficiary so transferred. 

13 ‘‘(3) PLANS DESCRIBED.—A plan is described 

14 in this paragraph if the plan is a pension plan (with15 in the meaning of section 3(2))— 

16 ‘‘(A) which provides for mandatory dis17 tributions under section 401(a)(31)(B) of the 

18 Internal Revenue Code of 1986, and 

19 ‘‘(B) which is not a plan described in para20 graphs (2) through (11) of section 4021(b). 

21 ‘‘(4) CERTAIN PROVISIONS NOT TO APPLY.— 

22 Subsections (a)(1) and (a)(3) shall not apply to a 

23 plan described in paragraph (3). 

24 ‘‘(f) AUTHORITY TO CHARGE FEE.—The corporation 

25 may charge a reasonable fee for costs incurred in connec-
480 

•S 1953 PCS 

1 tion with the transfer and management of amounts trans2 ferred to the corporation under this section. Such fee may 

3 be imposed on the transferor and may be deducted from 

4 amounts so transferred.’’ 

5 (d) EFFECTIVE DATES.— 

6 (1) INTERNAL REVENUE CODE PROVISIONS.— 

7 The amendments made by subsections (a) and (b) 

8 shall take effect as if included in the amendments 

9 made by section 657 of the Economic Growth and 

10 Tax Relief Reconciliation Act of 2001. 

11 (2) EMPLOYEE RETIREMENT INCOME SECURITY

12 ACT OF 1974 PROVISIONS.—The amendments made 

13 by subsection (c) shall apply to distributions made 

14 after final regulations implementing subsections (e) 

15 and (f) of section 4050 of the Employee Retirement 

16 Income Security Act of 1974 (as added by sub17 section (c)) are prescribed. 

18 (3) REGULATIONS.—The Pension Benefit Guar19 anty Corporation shall issue regulations necessary to 

20 carry out the amendments made by subsection (c) 

21 not later than December 31, 2006. 

22 SEC. 812. MISSING PARTICIPANTS. 

23 (a) IN GENERAL.—Section 4050 of the Employee Re24 tirement Income Security Act of 1974 (29 U.S.C. 1350) 

25 is amended by redesignating subsection (c) as subsection 
481 

•S 1953 PCS 

1 (e) and by inserting after subsection (b) the following new 

2 subsections: 

3 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation 

4 shall prescribe rules similar to the rules in subsection (a) 

5 for multiemployer plans covered by this title that termi6 nate under section 4041A. 

7 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.— 

8 ‘‘(1) TRANSFER TO CORPORATION.—The plan 

9 administrator of a plan described in paragraph (4) 

10 may elect to transfer a missing participant’s benefits 

11 to the corporation upon termination of the plan. 

12 ‘‘(2) INFORMATION TO THE CORPORATION.—To 

13 the extent provided in regulations, the plan adminis14 trator of a plan described in paragraph (4) shall, 

15 upon termination of the plan, provide the corpora16 tion information with respect to benefits of a miss17 ing participant if the plan transfers such benefits— 

18 ‘‘(A) to the corporation, or 

19 ‘‘(B) to an entity other than the corpora20 tion or a plan described in paragraph (4)(B)(ii). 

21 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben22 efits of a missing participant were transferred to the 

23 corporation under paragraph (1), the corporation 

24 shall, upon location of the participant or beneficiary, 

25 pay to the participant or beneficiary the amount 
482 

•S 1953 PCS 

1 transferred (or the appropriate survivor benefit) ei2 ther— 

3 ‘‘(A) in a single sum (plus interest), or 

4 ‘‘(B) in such other form as is specified in 

5 regulations of the corporation. 

6 ‘‘(4) PLANS DESCRIBED.—A plan is described 

7 in this paragraph if— 

8 ‘‘(A) the plan is a pension plan (within the 

9 meaning of section 3(2))— 

10 ‘‘(i) to which the provisions of this 

11 section do not apply (without regard to 

12 this subsection), and 

13 ‘‘(ii) which is not a plan described in 

14 paragraphs (2) through (11) of section 

15 4021(b), and 

16 ‘‘(B) at the time the assets are to be dis17 tributed upon termination, the plan— 

18 ‘‘(i) has missing participants, and 

19 ‘‘(ii) has not provided for the transfer 

20 of assets to pay the benefits of all missing 

21 participants to another pension plan (with22 in the meaning of section 3(2)). 

23 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.— 

24 Subsections (a)(1) and (a)(3) shall not apply to a 

25 plan described in paragraph (4).’’ 
483 

•S 1953 PCS 

1 (b) CONFORMING AMENDMENTS.—Section 206(f) of 

2 such Act (29 U.S.C. 1056(f)) is amended— 

3 (1) by striking ‘‘title IV’’ and inserting ‘‘section 

4 4050’’; and 

5 (2) by striking ‘‘the plan shall provide that,’’. 

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

7 this section shall apply to distributions made after final 

8 regulations implementing subsections (c) and (d) of sec9 tion 4050 of the Employee Retirement Income Security 

10 Act of 1974 (as added by subsection (a)), respectively, are 

11 prescribed. 

12 TITLE IX—ADMINISTRATIVE 

13 PROVISIONS 

14 SEC. 901. EMPLOYEE PLANS COMPLIANCE RESOLUTION 

15 SYSTEM. 

16 (a) IN GENERAL.—The Secretary of the Treasury 

17 shall have full authority to establish and implement the 

18 Employee Plans Compliance Resolution System (or any 

19 successor program) and any other employee plans correc20 tion policies, including the authority to waive income, ex21 cise, or other taxes to ensure that any tax, penalty, or 

22 sanction is not excessive and bears a reasonable relation23 ship to the nature, extent, and severity of the failure. 

24 (b) IMPROVEMENTS.—The Secretary of the Treasury 

25 shall continue to update and improve the Employee Plans 
484 

•S 1953 PCS 

1 Compliance Resolution System (or any successor pro2 gram), giving special attention to— 

3 (1) increasing the awareness and knowledge of 

4 small employers concerning the availability and use 

5 of the program; 

6 (2) taking into account special concerns and 

7 circumstances that small employers face with respect 

8 to compliance and correction of compliance failures; 

9 (3) extending the duration of the self-correction 

10 period under the Self-Correction Program for signifi11 cant compliance failures; 

12 (4) expanding the availability to correct insig13 nificant compliance failures under the Self-Correc14 tion Program during audit; and 

15 (5) assuring that any tax, penalty, or sanction 

16 that is imposed by reason of a compliance failure is 

17 not excessive and bears a reasonable relationship to 

18 the nature, extent, and severity of the failure. 

19 SEC. 902. EXTENSION TO ALL GOVERNMENTAL PLANS OF 

20 MORATORIUM ON APPLICATION OF CERTAIN 

21 NONDISCRIMINATION RULES APPLICABLE TO 

22 STATE AND LOCAL PLANS. 

23 (a) IN GENERAL.—The following provisions are each 

24 amended by striking ‘‘maintained by a State or local gov-
485 

•S 1953 PCS 

1 ernment or political subdivision thereof (or agency or in2 strumentality thereof)’’: 

3 (1) Section 401(a)(5)(G) of the Internal Rev4 enue Code of 1986. 

5 (2) Section 401(a)(26)(H) of such Code. 

6 (3) Section 401(k)(3)(G) of such Code. 

7 (4) Section 1505(d)(2) of the Taxpayer Relief 

8 Act of 1997. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) The heading for section 401(a)(5)(G) of 

11 such Code is amended to read as follows: ‘‘GOVERN12 MENTAL PLANS.—’’. 

13 (2) The heading for section 401(a)(26)(H) of 

14 such Code is amended to read as follows: ‘‘EXCEP15 TION FOR GOVERNMENTAL PLANS.—’’. 

16 (3) Section 401(k)(3)(G) of such Code is 

17 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’ 

18 after ‘‘(G)’’. 

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

20 this section shall apply to plan years beginning after De21 cember 31, 2005. 

22 SEC. 903. NOTICE AND CONSENT PERIOD REGARDING DIS23 TRIBUTIONS. 

24 (a) EXPANSION OF PERIOD.— 
486 

•S 1953 PCS 

1 (1) AMENDMENT OF INTERNAL REVENUE

2 CODE.— 

3 (A) IN GENERAL.—Section 417(a)(6)(A) of 

4 the Internal Revenue Code of 1986 is amended 

5 by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 

6 (B) MODIFICATION OF REGULATIONS.— 

7 The Secretary of the Treasury shall modify the 

8 regulations under sections 402(f), 411(a)(11), 

9 and 417 of the Internal Revenue Code of 1986 

10 by substituting ‘‘180 days’’ for ‘‘90 days’’ each 

11 place it appears in Treasury Regulations sec12 tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)– 

13 1(b). 

14 (2) AMENDMENT OF ERISA.— 

15 (A) IN GENERAL.—Section 205(c)(7)(A) of 

16 the Employee Retirement Income Security Act 

17 of 1974 (29 U.S.C. 1055(c)(7)(A)) is amended 

18 by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 

19 (B) MODIFICATION OF REGULATIONS.— 

20 The Secretary of the Treasury shall modify the 

21 regulations under part 2 of subtitle B of title 

22 I of the Employee Retirement Income Security 

23 Act of 1974 relating to sections 203(e) and 205 

24 of such Act by substituting ‘‘180 days’’ for ‘‘90 

25 days’’ each place it appears. 
487 

•S 1953 PCS 

1 (3) EFFECTIVE DATE.—The amendments and 

2 modifications made or required by this subsection 

3 shall apply to years beginning after December 31, 

4 2005. 

5 (b) NOTIFICATION OF RIGHT TO DEFER.— 

6 (1) IN GENERAL.—The Secretary of the Treas7 ury shall modify the regulations under section 

8 411(a)(11) of the Internal Revenue Code of 1986 

9 and under section 205 of the Employee Retirement 

10 Income Security Act of 1974 to provide that the de11 scription of a participant’s right, if any, to defer re12 ceipt of a distribution shall also describe the con13 sequences of failing to defer such receipt. 

14 (2) EFFECTIVE DATE.— 

15 (A) IN GENERAL.—The modifications re16 quired by paragraph (1) shall apply to years be17 ginning after December 31, 2005. 

18 (B) REASONABLE NOTICE.—A plan shall 

19 not be treated as failing to meet the require20 ments of section 411(a)(11) of such Code or 

21 section 205 of such Act with respect to any de22 scription of consequences described in para23 graph (1) made within 90 days after the Sec24 retary of the Treasury issues the modifications 

25 required by paragraph (1) if the plan adminis-
488 

•S 1953 PCS 

1 trator makes a reasonable attempt to comply 

2 with such requirements. 

3 SEC. 904. REPORTING SIMPLIFICATION. 

4 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

5 OWNERS AND THEIR SPOUSES.— 

6 (1) IN GENERAL.—The Secretary of the Treas7 ury and the Secretary of Labor shall modify the re8 quirements for filing annual returns with respect to 

9 one-participant retirement plans to ensure that such 

10 plans with assets of $250,000 or less as of the close 

11 of the plan year need not file a return for that year. 

12 (2) ONE-PARTICIPANT RETIREMENT PLAN DE13 FINED.—For purposes of this subsection, the term 

14 ‘‘one-participant retirement plan’’ means a retire15 ment plan with respect to which the following re16 quirements are met: 

17 (A) on the first day of the plan year— 

18 (i) the plan covered only one indi19 vidual (or the individual and the individ20 ual’s spouse) and the individual owned 100 

21 percent of the plan sponsor (whether or 

22 not incorporated), or 

23 (ii) the plan covered only one or more 

24 partners (or partners and their spouses) in 

25 the plan sponsor; 
489 

•S 1953 PCS 

1 (B) the plan meets the minimum coverage 

2 requirements of section 410(b) of the Internal 

3 Revenue Code of 1986 without being combined 

4 with any other plan of the business that covers 

5 the employees of the business; 

6 (C) the plan does not provide benefits to 

7 anyone except the individual (and the individ8 ual’s spouse) or the partners (and their 

9 spouses); 

10 (D) the plan does not cover a business that 

11 is a member of an affiliated service group, a 

12 controlled group of corporations, or a group of 

13 businesses under common control; and 

14 (E) the plan does not cover a business that 

15 uses the services of leased employees (within 

16 the meaning of section 414(n) of such Code). 

17 For purposes of this paragraph, the term ‘‘partner’’ 

18 includes a 2-percent shareholder (as defined in sec19 tion 1372(b) of such Code) of an S corporation. 

20 (3) OTHER DEFINITIONS.—Terms used in para21 graph (2) which are also used in section 414 of the 

22 Internal Revenue Code of 1986 shall have the re23 spective meanings given such terms by such section. 
490 

•S 1953 PCS 

1 (4) EFFECTIVE DATE.—The provisions of this 

2 subsection shall apply to plan years beginning on or 

3 after January 1, 2006. 

4 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

5 PLANS WITH FEWER THAN 25 PARTICIPANTS.—In the 

6 case of plan years beginning after December 31, 2006, the 

7 Secretary of the Treasury, in consultation with the Sec8 retary of Labor, shall provide for the filing of a simplified 

9 annual return for any retirement plan which covers less 

10 than 25 participants on the first day of a plan year and 

11 which meets the requirements described in subparagraphs 

12 (B), (D), and (E) of subsection (a)(2). 

13 SEC. 905. VOLUNTARY EARLY RETIREMENT INCENTIVE AND 

14 EMPLOYMENT RETENTION PLANS MAIN15 TAINED BY LOCAL EDUCATIONAL AGENCIES 

16 AND OTHER ENTITIES. 

17 (a) VOLUNTARY EARLY RETIREMENT INCENTIVE

18 PLANS.— 

19 (1) TREATMENT AS PLAN PROVIDING SEVER20 ANCE PAY.—Section 457(e)(11) of the Internal Rev21 enue Code of 1986 (relating to certain plans ex22 cluded) is amended by adding at the end the fol23 lowing new subparagraph: 

24 ‘‘(D) CERTAIN VOLUNTARY EARLY RETIRE25 MENT INCENTIVE PLANS.— 
491 

•S 1953 PCS 

1 ‘‘(i) IN GENERAL.—If an applicable 

2 voluntary early retirement incentive plan— 

3 ‘‘(I) makes payments or supple4 ments as an early retirement benefit, 

5 a retirement-type subsidy, or a benefit 

6 described in the last sentence of sec7 tion 411(a)(9), and 

8 ‘‘(II) such payments or supple9 ments are made in coordination with 

10 a defined benefit plan which is de11 scribed in section 401(a) and includes 

12 a trust exempt from tax under section 

13 501(a) and which is maintained by an 

14 eligible employer described in para15 graph (1)(A) or by an education asso16 ciation described in clause (ii)(II), 

17 such applicable plan shall be treated for 

18 purposes of subparagraph (A)(i) as a bona 

19 fide severance pay plan with respect to 

20 such payments or supplements to the ex21 tent such payments or supplements could 

22 otherwise have been provided under such 

23 defined benefit plan (determined as if sec24 tion 411 applied to such defined benefit 

25 plan). 
492 

•S 1953 PCS 

1 ‘‘(ii) APPLICABLE VOLUNTARY EARLY

2 RETIREMENT INCENTIVE PLAN.—For pur3 poses of this subparagraph, the term ‘ap4 plicable voluntary early retirement incen5 tive plan’ means a voluntary early retire6 ment incentive plan maintained by— 

7 ‘‘(I) a local educational agency 

8 (as defined in section 9101 of the Ele9 mentary and Secondary Education 

10 Act of 1965 (20 U.S.C. 7801)), or 

11 ‘‘(II) an education association 

12 which principally represents employees 

13 of 1 or more agencies described in 

14 subclause (I) and which is described 

15 in section 501(c) (5) or (6) and ex16 empt from tax under section 501(a).’’ 

17 (2) AGE DISCRIMINATION IN EMPLOYMENT

18 ACT.—Section 4(l)(1) of the Age Discrimination in 

19 Employment Act of 1967 (29 U.S.C. 623(l)(1)) is 

20 amended— 

21 (A) by inserting ‘‘(A)’’ after ‘‘(1)’’, 

22 (B) by redesignating subparagraphs (A) 

23 and (B) as clauses (i) and (ii), respectively, 

24 (C) by redesignating clauses (i) and (ii) of 

25 subparagraph (B) (as in effect before the 
493 

•S 1953 PCS 

1 amendments made by subparagraph (B)) as 

2 subclauses (I) and (II), respectively, and 

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

4 ‘‘(B) A voluntary early retirement incentive 

5 plan that— 

6 ‘‘(i) is maintained by— 

7 ‘‘(I) a local educational agency (as de8 fined in section 9101 of the Elementary 

9 and Secondary Education Act of 1965 (20 

10 U.S.C. 7801), or 

11 ‘‘(II) an education association which 

12 principally represents employees of 1 or 

13 more agencies described in subclause (I) 

14 and which is described in section 501(c) 

15 (5) or (6) of the Internal Revenue Code of 

16 1986 and exempt from taxation under sec17 tion 501(a) of such Code, and 

18 ‘‘(ii) makes payments or supplements de19 scribed in subclauses (I) and (II) of subpara20 graph (A)(ii) in coordination with a defined 

21 benefit plan (as so defined) maintained by an 

22 eligible employer described in section 

23 457(e)(1)(A) of such Code or by an education 

24 association described in clause (i)(II), 
494 

•S 1953 PCS 

1 shall be treated solely for purposes of subparagraph 

2 (A)(ii) as if it were a part of the defined benefit plan 

3 with respect to such payments or supplements. Pay4 ments or supplements under such a voluntary early 

5 retirement incentive plan shall not constitute sever6 ance pay for purposes of section 4(l)(2) of the Age 

7 Discrimination in Employment Act (29 U.S.C. 

8 623(l)(2)).’’ 

9 (b) EMPLOYMENT RETENTION PLANS.— 

10 (1) IN GENERAL.—Section 457(f)(2) of the In11 ternal Revenue Code of 1986 (relating to exceptions) 

12 is amended by striking ‘‘and’’ at the end of subpara13 graph (D), by striking the period at the end of sub14 paragraph (E) and inserting ‘‘, and’’, and by adding 

15 at the end the following: 

16 ‘‘(F) that portion of any applicable employ17 ment retention plan described in paragraph (4) 

18 with respect to any participant.’’ 

19 (2) DEFINITIONS AND RULES RELATING TO EM20 PLOYMENT RETENTION PLANS.—Section 457(f) of 

21 such Code is amended by adding at the end the fol22 lowing new paragraph: 

23 ‘‘(4) EMPLOYMENT RETENTION PLANS.—For 

24 purposes of paragraph (2)(F)— 
495 

•S 1953 PCS 

1 ‘‘(A) IN GENERAL.—The portion of an ap2 plicable employment retention plan described in 

3 this paragraph with respect to any participant 

4 is that portion of the plan which provides bene5 fits payable to the participant not in excess of 

6 twice the applicable dollar limit determined 

7 under subsection (e)(15). 

8 ‘‘(B) OTHER RULES.— 

9 ‘‘(i) LIMITATION.—Paragraph (2)(F) 

10 shall only apply to the portion of the plan 

11 described in subparagraph (A) for years 

12 preceding the year in which such portion is 

13 paid or otherwise made available to the 

14 participant. 

15 ‘‘(ii) TREATMENT.—A plan shall not 

16 be treated for purposes of this title as pro17 viding for the deferral of compensation for 

18 any year with respect to the portion of the 

19 plan described in subparagraph (A). 

20 ‘‘(C) APPLICABLE EMPLOYMENT RETEN21 TION PLAN.—The term ‘applicable employment 

22 retention plan’ means an employment retention 

23 plan maintained by— 

24 ‘‘(i) a local educational agency (as de25 fined in section 9101 of the Elementary 
496 

•S 1953 PCS 

1 and Secondary Education Act of 1965 (20 

2 U.S.C. 7801), or 

3 ‘‘(ii) an education association which 

4 principally represents employees of 1 or 

5 more agencies described in clause (i) and 

6 which is described in section 501(c) (5) or 

7 (6) and exempt from taxation under sec8 tion 501(a). 

9 ‘‘(D) EMPLOYMENT RETENTION PLAN.— 

10 The term ‘employment retention plan’ means a 

11 plan to pay, upon termination of employment, 

12 compensation to an employee of a local edu13 cational agency or education association de14 scribed in subparagraph (C) for purposes of— 

15 ‘‘(i) retaining the services of the em16 ployee, or 

17 ‘‘(ii) rewarding such employee for the 

18 employee’s service with 1 or more such 

19 agencies or associations.’’ 

20 (c) COORDINATION WITH ERISA.—Section 3(2)(B) 

21 of the Employee Retirement Income Security Act of 1974 

22 (29 U.S.C. 1002(2)(B)) is amended by adding at the end 

23 the following: ‘‘An applicable voluntary early retirement 

24 incentive plan (as defined in section 457(e)(11)(D)(ii) of 

25 the Internal Revenue Code of 1986) making payments or 
497 

•S 1953 PCS 

1 supplements described in section 457(e)(11)(D)(i) of such 

2 Code, and an applicable employment retention plan (as de3 fined in section 457(f)(4)(C) of such Code) making pay4 ments of benefits described in section 457(f)(4)(A) of such 

5 Code, shall, for purposes of this title, be treated as a wel6 fare plan (and not a pension plan) with respect to such 

7 payments and supplements.’’ 

8 (d) EFFECTIVE DATES.— 

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

10 this Act shall take effect on the date of the enact11 ment of this Act. 

12 (2) TAX AMENDMENTS.—The amendments 

13 made by subsections (a)(1) and (b) shall apply to 

14 taxable years ending after the date of the enactment 

15 of this Act. 

16 (3) ERISA AMENDMENTS.—The amendment 

17 made by subsection (c) shall apply to plan years 

18 ending after the date of the enactment of this Act. 

19 (4) CONSTRUCTION.—Nothing in the amend20 ments made by this section shall alter or affect the 

21 construction of the Internal Revenue Code of 1986, 

22 the Employee Retirement Income Security Act of 

23 1974, or the Age Discrimination in Employment Act 

24 of 1967 as applied to any plan, arrangement, or con25 duct to which such amendments do not apply. 
498 

•S 1953 PCS 

1 SEC. 906. NO REDUCTION IN UNEMPLOYMENT COMPENSA2 TION AS A RESULT OF PENSION ROLLOVERS. 

3 (a) IN GENERAL.—Section 3304(a) of the Internal 

4 Revenue Code of 1986 (relating to requirements for State 

5 unemployment laws) is amended by adding at the end the 

6 following new flush sentence: 

7 ‘‘Compensation shall not be reduced under paragraph (15) 

8 for any pension, retirement or retired pay, annuity, or 

9 similar payment which is not includible in gross income 

10 of the individual for the taxable year in which paid because 

11 it was part of a rollover distribution.’’ 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply to weeks beginning on or after the 

14 date of the enactment of this Act. 

15 SEC. 907. WITHHOLDING ON DISTRIBUTIONS FROM GOV16 ERNMENTAL SECTION 457 PLANS. 

17 (a) IN GENERAL.—Section 641(f) of the Economic 

18 Growth and Tax Relief Reconciliation Act of 2001 is 

19 amended by adding at the end the following new para20 graph: 

21 ‘‘(4) TRANSITION RULE FOR CERTAIN GOVERN22 MENTAL PLANS.—In the case of distributions from 

23 an eligible deferred compensation plan of an em24 ployer described in section 457(e)(1)(A) of the Inter25 nal Revenue Code of 1986 which are made after De-
499 

•S 1953 PCS 

1 cember 31, 2001, and which are part of a series of 

2 distributions which— 

3 ‘‘(A) began before January 1, 2002, and 

4 ‘‘(B) are payable for 10 years or less, the 

5 Internal Revenue Code of 1986 may be applied 

6 to such distributions without regard to the 

7 amendments made by subsection (a)(1)(D).’’ 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 subsection (a) shall take effect as if included in the provi10 sions of section 641 of the Economic Growth and Tax Re11 lief Reconciliation Act of 2001. 

12 SEC. 908. CLARIFICATION OF TREATMENT OF DEFINED 

13 BENEFIT PLANS OF INDIAN TRIBAL GOVERN14 MENTS. 

15 (a) DEFINITION OF GOVERNMENTAL PLAN.— 

16 (1) AMENDMENT TO INTERNAL REVENUE CODE

17 OF 1986.—Section 414(d) of the Internal Revenue 

18 Code of 1986 (definition of governmental plan) is 

19 amended by adding at the end the following: ‘‘The 

20 term ‘governmental plan’ includes a defined benefit 

21 plan established or maintained for its employees by 

22 an Indian tribal government (as defined in section 

23 7701(a)(40)), a subdivision of an Indian tribal gov24 ernment (determined in accordance with section 

25 7871(d)), an agency or instrumentality (or subdivi-
500 

•S 1953 PCS 

1 sion) of an Indian tribal government, or an entity 

2 established under Federal, State, or tribal law which 

3 is wholly owned or controlled by any of the fore4 going.’’. 

5 (2) AMENDMENT TO EMPLOYEE RETIREMENT

6 INCOME SECURITY ACT OF 1974.—Section 3(32) of 

7 the Employee Retirement Income Security Act of 

8 1974 (29 U.S.C. 1002(32)) is amended by adding at 

9 the end the following: ‘‘The term ‘governmental 

10 plan’ includes a defined benefit plan established or 

11 maintained for its employees by an Indian tribal 

12 government (as defined in section 7701(a)(40) of the 

13 Internal Revenue Code of 1986), a subdivision of an 

14 Indian tribal government (determined in accordance 

15 with section 7871(d) of such Code), an agency or in16 strumentality (or subdivision) of an Indian tribal 

17 government, or an entity established under Federal, 

18 State, or tribal law that is wholly owned or con19 trolled by any of the foregoing.’’. 

20 (b) CLARIFICATION THAT TRIBAL GOVERNMENTS

21 ARE SUBJECT TO THE SAME PLAN RULES AND REGULA22 TIONS APPLIED TO STATE AND OTHER LOCAL GOVERN23 MENTS AND THEIR POLICE AND FIREFIGHTERS.— 

24 (1) AMENDMENTS TO INTERNAL REVENUE

25 CODE OF 1986.— 
501 

•S 1953 PCS 

1 (A) POLICE AND FIREFIGHTERS.—Sub2 paragraph (H) of section 415(b)(2) of such 

3 Code (defining participant) is amended— 

4 (i) in clause (i), by striking ‘‘State or 

5 political subdivision’’ and inserting ‘‘State, 

6 Indian tribal government (as defined in 

7 section 7701(a)(40)), or any political sub8 division’’; and 

9 (ii) in clause (ii)(I), by striking ‘‘State 

10 or political subdivision’’ each place it ap11 pears and inserting ‘‘State, Indian tribal 

12 government (as so defined), or any political 

13 subdivision thereof’’. 

14 (B) STATE AND LOCAL GOVERNMENT

15 PLANS.— 

16 (i) IN GENERAL.—Subparagraph (A) 

17 of section 415(b)(10) of such Code (relat18 ing to limitation to equal accrued benefit) 

19 is amended— 

20 (I) by inserting ‘‘, Indian tribal 

21 government (as defined in section 

22 7701(a)(40)),’’ after ‘‘State’’; 

23 (II) by inserting ‘‘any’’ before 

24 ‘‘political subdivision’’; and 
502 

•S 1953 PCS 

1 (III) by inserting ‘‘any of’’ before 

2 ‘‘the foregoing’’. 

3 (ii) CONFORMING AMENDMENT.—The 

4 heading of paragraph (10) of section 

5 415(b) of such Code is amended by strik6 ing ‘‘SPECIAL RULE FOR STATE AND’’ and 

7 inserting ‘‘SPECIAL RULE FOR STATE, IN8 DIAN TRIBAL, AND’’. 

9 (C) GOVERNMENT PICKUP CONTRIBU10 TIONS.—Paragraph (2) of section 414(h) of 

11 such Code (relating to designation by units of 

12 government) is amended by adding at the end 

13 the following new sentence: ‘‘This paragraph 

14 shall also apply to any defined benefit plan 

15 maintained by any Indian tribal government (as 

16 defined in section 7701(a)(40)) or political sub17 division thereof, or an agency or instrumentality 

18 of either’’ . 

19 (2) AMENDMENTS TO EMPLOYEE RETIREMENT

20 INCOME SECURITY ACT OF 1974.—Section 4021(b) of 

21 the Employee Retirement Income Security Act of 

22 1974 (29 U.S.C. 1321(b)) is amended— 

23 (A) in paragraph (12), by striking ‘‘or’’ at 

24 the end; 
503 

•S 1953 PCS 

1 (B) in paragraph (13), by striking ‘‘plan.’’ 

2 and inserting ‘‘plan; or’’; and 

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

4 ‘‘(14) which is a defined benefit plan estab5 lished and maintained for its employees by an Indian 

6 tribal government (as defined in section 7701(a)(40) 

7 of the Internal Revenue Code of 1986), a subdivision 

8 of an Indian tribal government (determined in ac9 cordance with section 7871(d) of such Code), an 

10 agency or instrumentality of an Indian tribal govern11 ment or subdivision thereof, or an entity established 

12 under Federal, State, or tribal law that is wholly 

13 owned or controlled by any of the foregoing.’’. 

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

15 this section shall apply to any year beginning before, on, 

16 or after the date of the enactment of this Act. 

17 SEC. 909. TREATMENT OF DEFINED BENEFIT PLAN AS GOV18 ERNMENTAL PLAN. 

19 (a) IN GENERAL.—For purposes of the Internal Rev20 enue Code of 1986 and the Employee Retirement Income 

21 Security Act of 1974, an eligible defined benefit plan shall 

22 be treated as a governmental plan (within the meaning 

23 of section 414(d) of such Code and section 3(32) of such 

24 Act). 
504 

•S 1953 PCS 

1 (b) ELIGIBLE DEFINED BENEFIT PLAN.—For pur2 poses of this section, an eligible defined benefit plan is 

3 a defined benefit plan maintained by a nonprofit corpora4 tion which was— 

5 (1) incorporated on September 16, 1998, under 

6 a State nonprofit corporation statute; and 

7 (2) organized for the express purpose of sup8 porting the missions and goals of a public corpora9 tion which— 

10 (A) was created by a State statute effective 

11 on July 1, 1995; 

12 (B) is a governmental entity under State 

13 law; and 

14 (C) is a member of the nonprofit corpora15 tion. 

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

17 this section shall apply to any year beginning before, on, 

18 or after the date of the enactment of this Act. 

19 SEC. 910. PROVISIONS RELATING TO PLAN AMENDMENTS. 

20 (a) IN GENERAL.—If this section applies to any plan 

21 or contract amendment— 

22 (1) such plan or contract shall be treated as 

23 being operated in accordance with the terms of the 

24 plan during the period described in subsection 

25 (b)(2)(A), and 
505 

•S 1953 PCS 

1 (2) except as provided by the Secretary of the 

2 Treasury, such plan shall not fail to meet the re3 quirements of section 411(d)(6) of the Internal Rev4 enue Code of 1986 and section 204(g) of the Em5 ployee Retirement Income Security Act of 1974 by 

6 reason of such amendment. 

7 (b) AMENDMENTS TO WHICH SECTION APPLIES.— 

8 (1) IN GENERAL.—This section shall apply to 

9 any amendment to any plan or annuity contract 

10 which is made— 

11 (A) pursuant to any amendment made by 

12 this Act or the Economic Growth and Tax Re13 lief Reconciliation Act of 2001, or pursuant to 

14 any regulation issued by the Secretary of the 

15 Treasury or the Secretary of Labor under such 

16 Acts, and 

17 (B) on or before the last day of the first 

18 plan year beginning on or after January 1, 

19 2007, or such later date as the Secretary of the 

20 Treasury may prescribe. 

21 In the case of a governmental plan (as defined in 

22 section 414(d) of the Internal Revenue Code of 

23 1986), subparagraph (B) shall be applied by sub24 stituting the date which is 2 years after the date 

25 otherwise applied under subparagraph (B). 
506 

•S 1953 PCS 

1 (2) CONDITIONS.—This section shall not apply 

2 to any amendment unless— 

3 (A) during the period— 

4 (i) beginning on the date the legisla5 tive or regulatory amendment described in 

6 paragraph (1)(A) takes effect (or in the 

7 case of a plan or contract amendment not 

8 required by such legislative or regulatory 

9 amendment, the effective date specified by 

10 the plan), and 

11 (ii) ending on the date described in 

12 paragraph (1)(B) (or, if earlier, the date 

13 the plan or contract amendment is adopt14 ed), 

15 the plan or contract is operated as if such plan 

16 or contract amendment were in effect; and 

17 (B) such plan or contract amendment ap18 plies retroactively for such period. 

19 TITLE X—UNITED STATES TAX 

20 COURT MODERNIZATION 

21 SEC. 1000. AMENDMENT OF 1986 CODE. 

22 Except as otherwise expressly provided, whenever in 

23 this title an amendment or repeal is expressed in terms 

24 of an amendment to, or repeal of, a section or other provi25 sion, the reference shall be considered to be made to a 
507 

•S 1953 PCS 

1 section or other provision of the Internal Revenue Code 

2 of 1986. 

3 Subtitle A—Tax Court Pension and 

4 Compensation 

5 SEC. 1001. ANNUITIES FOR SURVIVORS OF TAX COURT 

6 JUDGES WHO ARE ASSASSINATED. 

7 (a) ELIGIBILITY IN CASE OF DEATH BY ASSASSINA8 TION.—Subsection (h) of section 7448 (relating to annu9 ities to surviving spouses and dependent children of 

10 judges) is amended to read as follows: 

11 ‘‘(h) ENTITLEMENT TO ANNUITY.— 

12 ‘‘(1) IN GENERAL.— 

13 ‘‘(A) ANNUITY TO SURVIVING SPOUSE.—If 

14 a judge described in paragraph (2) is survived 

15 by a surviving spouse but not by a dependent 

16 child, there shall be paid to such surviving 

17 spouse an annuity beginning with the day of the 

18 death of the judge or following the surviving 

19 spouse’s attainment of the age of 50 years, 

20 whichever is the later, in an amount computed 

21 as provided in subsection (m). 

22 ‘‘(B) ANNUITY TO CHILD.—If such a judge 

23 is survived by a surviving spouse and a depend24 ent child or children, there shall be paid to such 

25 surviving spouse an immediate annuity in an 
508 

•S 1953 PCS 

1 amount computed as provided in subsection 

2 (m), and there shall also be paid to or on behalf 

3 of each such child an immediate annuity equal 

4 to the lesser of— 

5 ‘‘(i) 10 percent of the average annual 

6 salary of such judge (determined in accord7 ance with subsection (m)), or 

8 ‘‘(ii) 20 percent of such average an9 nual salary, divided by the number of such 

10 children. 

11 ‘‘(C) ANNUITY TO SURVIVING DEPENDENT

12 CHILDREN.—If such a judge leaves no surviving 

13 spouse but leaves a surviving dependent child or 

14 children, there shall be paid to or on behalf of 

15 each such child an immediate annuity equal to 

16 the lesser of— 

17 ‘‘(i) 20 percent of the average annual 

18 salary of such judge (determined in accord19 ance with subsection (m)), or 

20 ‘‘(ii) 40 percent of such average an21 nual salary, divided by the number of such 

22 children. 

23 ‘‘(2) COVERED JUDGES.—Paragraph (1) applies 

24 to any judge electing under subsection (b)— 
509 

•S 1953 PCS 

1 ‘‘(A) who dies while a judge after having 

2 rendered at least 5 years of civilian service com3 puted as prescribed in subsection (n), for the 

4 last 5 years of which the salary deductions pro5 vided for by subsection (c)(1) or the deposits 

6 required by subsection (d) have actually been 

7 made or the salary deductions required by the 

8 civil service retirement laws have actually been 

9 made, or 

10 ‘‘(B) who dies by assassination after hav11 ing rendered less than 5 years of civilian service 

12 computed as prescribed in subsection (n) if, for 

13 the period of such service, the salary deductions 

14 provided for by subsection (c)(1) or the deposits 

15 required by subsection (d) have actually been 

16 made. 

17 ‘‘(3) TERMINATION OF ANNUITY.— 

18 ‘‘(A) IN THE CASE OF A SURVIVING

19 SPOUSE.—The annuity payable to a surviving 

20 spouse under this subsection shall be terminable 

21 upon such surviving spouse’s death or such sur22 viving spouse’s remarriage before attaining age 

23 55. 

24 ‘‘(B) IN THE CASE OF A CHILD.—The an25 nuity payable to a child under this subsection 
510 

•S 1953 PCS 

1 shall be terminable upon (i) the child attaining 

2 the age of 18 years, (ii) the child’s marriage, or 

3 (iii) the child’s death, whichever first occurs, ex4 cept that if such child is incapable of self-sup5 port by reason of mental or physical disability 

6 the child’s annuity shall be terminable only 

7 upon death, marriage, or recovery from such 

8 disability. 

9 ‘‘(C) IN THE CASE OF A DEPENDENT

10 CHILD AFTER DEATH OF SURVIVING SPOUSE.— 

11 In case of the death of a surviving spouse of a 

12 judge leaving a dependent child or children of 

13 the judge surviving such spouse, the annuity of 

14 such child or children shall be recomputed and 

15 paid as provided in paragraph (1)(C). 

16 ‘‘(D) RECOMPUTATION.—In any case in 

17 which the annuity of a dependent child is termi18 nated under this subsection, the annuities of 

19 any remaining dependent child or children, 

20 based upon the service of the same judge, shall 

21 be recomputed and paid as though the child 

22 whose annuity was so terminated had not sur23 vived such judge. 

24 ‘‘(4) SPECIAL RULE FOR ASSASSINATED

25 JUDGES.—In the case of a survivor or survivors of 
511 

•S 1953 PCS 

1 a judge described in paragraph (2)(B), there shall be 

2 deducted from the annuities otherwise payable under 

3 this section an amount equal to— 

4 ‘‘(A) the amount of salary deductions pro5 vided for by subsection (c)(1) that would have 

6 been made if such deductions had been made 

7 for 5 years of civilian service computed as pre8 scribed in subsection (n) before the judge’s 

9 death, reduced by 

10 ‘‘(B) the amount of such salary deductions 

11 that were actually made before the date of the 

12 judge’s death.’’ 

13 (b) DEFINITION OF ASSASSINATION.—Section 

14 7448(a) (relating to definitions) is amended by adding at 

15 the end the following new paragraph: 

16 ‘‘(8) The terms ‘assassinated’ and ‘assassina17 tion’ mean the killing of a judge that is motivated 

18 by the performance by that judge of his or her offi19 cial duties.’’ 

20 (c) DETERMINATION OF ASSASSINATION.—Sub21 section (i) of section 7448 is amended— 

22 (1) by striking the subsection heading and in23 serting the following: 

24 ‘‘(i) DETERMINATIONS BY CHIEF JUDGE.— 

25 ‘‘(1) DEPENDENCY AND DISABILITY.—’’, 
512 

•S 1953 PCS 

1 (2) by moving the text 2 ems to the right, and 

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

3 paragraph: 

4 ‘‘(2) ASSASSINATION.—The chief judge shall 

5 determine whether the killing of a judge was an as6 sassination, subject to review only by the Tax Court. 

7 The head of any Federal agency that investigates 

8 the killing of a judge shall provide information to 

9 the chief judge that would assist the chief judge in 

10 making such a determination.’’ 

11 (d) COMPUTATION OF ANNUITIES.—Subsection (m) 

12 of section 7448 is amended— 

13 (1) by striking the subsection heading and in14 serting the following: 

15 ‘‘(m) COMPUTATION OF ANNUITIES.— 

16 ‘‘(1) IN GENERAL.—’’, 

17 (2) by moving the text 2 ems to the right, and 

18 (3) by adding at the end the following new 

19 paragraph: 

20 ‘‘(2) ASSASSINATED JUDGES.—In the case of a 

21 judge who is assassinated and who has served less 

22 than 3 years, the annuity of the surviving spouse of 

23 such judge shall be based upon the average annual 

24 salary received by such judge for judicial service.’’ 
513 

•S 1953 PCS 

1 (e) OTHER BENEFITS.—Section 7448 is amended by 

2 adding at the end the following: 

3 ‘‘(u) OTHER BENEFITS.—In the case of a judge who 

4 is assassinated, an annuity shall be paid under this section 

5 notwithstanding a survivor’s eligibility for or receipt of 

6 benefits under chapter 81 of title 5, United States Code, 

7 except that the annuity for which a surviving spouse is 

8 eligible under this section shall be reduced to the extent 

9 that the total benefits paid under this section and chapter 

10 81 of that title for any year would exceed the current sal11 ary for that year of the office of the judge.’’ 

12 SEC. 1002. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT 

13 JUDICIAL SURVIVOR ANNUITIES. 

14 (a) IN GENERAL.—Subsection (s) of section 7448 

15 (relating to annuities to surviving spouses and dependent 

16 children of judges) is amended to read as follows: 

17 ‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each 

18 time that an increase is made under section 8340(b) of 

19 title 5, United States Code, in annuities payable under 

20 subchapter III of chapter 83 of that title, each annuity 

21 payable from the survivors annuity fund under this section 

22 shall be increased at the same time by the same percent23 age by which annuities are increased under such section 

24 8340(b).’’ 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply with respect to increases made 

3 under section 8340(b) of title 5, United States Code, in 

4 annuities payable under subchapter III of chapter 83 of 

5 that title, taking effect after the date of the enactment 

6 of this Act. 

7 SEC. 1003. LIFE INSURANCE COVERAGE FOR TAX COURT 

8 JUDGES. 

9 (a) IN GENERAL.—Section 7447 (relating to retire10 ment of judges) is amended by adding at the end the fol11 lowing new subsection: 

12 ‘‘(j) LIFE INSURANCE COVERAGE.—For purposes of 

13 chapter 87 of title 5, United States Code (relating to life 

14 insurance), any individual who is serving as a judge of 

15 the Tax Court or who is retired under this section is 

16 deemed to be an employee who is continuing in active em17 ployment.’’ 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 this section shall apply to any individual serving as a judge 

20 of the United States Tax Court or to any retired judge 

21 of the United States Tax Court on the date of the enact22 ment of this Act. 
515 

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1 SEC. 1004. COST OF LIFE INSURANCE COVERAGE FOR TAX 

2 COURT JUDGES AGE 65 OR OVER. 

3 Section 7472 (relating to expenditures) is amended 

4 by inserting after the first sentence the following new sen5 tence: ‘‘Notwithstanding any other provision of law, the 

6 Tax Court is authorized to pay on behalf of its judges, 

7 age 65 or over, any increase in the cost of Federal Em8 ployees’ Group Life Insurance imposed after April 24, 

9 1999, including any expenses generated by such payments, 

10 as authorized by the chief judge in a manner consistent 

11 with such payments authorized by the Judicial Conference 

12 of the United States pursuant to section 604(a)(5) of title 

13 28, United States Code.’’ 

14 SEC. 1005. MODIFICATION OF TIMING OF LUMP-SUM PAY15 MENT OF JUDGES’ ACCRUED ANNUAL LEAVE. 

16 (a) IN GENERAL.—Section 7443 (relating to mem17 bership of the Tax Court) is amended by adding at the 

18 end the following new subsection: 

19 ‘‘(h) LUMP-SUM PAYMENT OF JUDGES’ ACCRUED

20 ANNUAL LEAVE.—Notwithstanding the provisions of sec21 tions 5551 and 6301 of title 5, United States Code, when 

22 an individual subject to the leave system provided in chap23 ter 63 of that title is appointed by the President to be 

24 a judge of the Tax Court, the individual shall be entitled 

25 to receive, upon appointment to the Tax Court, a lump26 sum payment from the Tax Court of the accumulated and 
516 

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1 accrued current annual leave standing to the individual’s 

2 credit as certified by the agency from which the individual 

3 resigned.’’ 

4 (b) EFFECTIVE DATE.—The amendment made by 

5 this section shall apply to any judge of the United States 

6 Tax Court who has an outstanding leave balance on the 

7 date of the enactment of this Act and to any individual 

8 appointed by the President to serve as a judge of the 

9 United States Tax Court after such date. 

10 SEC. 1006. PARTICIPATION OF TAX COURT JUDGES IN THE 

11 THRIFT SAVINGS PLAN. 

12 (a) IN GENERAL.—Section 7447 (relating to retire13 ment of judges), as amended by this Act, is amended by 

14 adding at the end the following new subsection: 

15 ‘‘(k) THRIFT SAVINGS PLAN.— 

16 ‘‘(1) ELECTION TO CONTRIBUTE.— 

17 ‘‘(A) IN GENERAL.—A judge of the Tax 

18 Court may elect to contribute to the Thrift Sav19 ings Fund established by section 8437 of title 

20 5, 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 judge who makes an election under para6 graph (1). 

7 ‘‘(3) SPECIAL RULES.— 

8 ‘‘(A) AMOUNT CONTRIBUTED.—The 

9 amount contributed by a judge to the Thrift 

10 Savings Fund in any pay period shall not ex11 ceed the maximum percentage of such judge’s 

12 basic pay for such period as allowable under 

13 section 8440f of title 5, United States Code. 

14 Basic pay does not include any retired pay paid 

15 pursuant to this section. 

16 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

17 JUDGE.—No contributions may be made for the 

18 benefit of a judge under section 8432(c) of title 

19 5, United States Code. 

20 ‘‘(C) APPLICABILITY OF SECTION 8433(b) 

21 OF TITLE 5 WHETHER OR NOT JUDGE RE22 TIRES.—Section 8433(b) of title 5, United 

23 States Code, applies with respect to a judge 

24 who makes an election under paragraph (1) and 

25 who either— 
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1 ‘‘(i) retires under subsection (b), or 

2 ‘‘(ii) ceases to serve as a judge of the 

3 Tax Court but does not retire under sub4 section (b). 

5 Retirement under subsection (b) is a separation 

6 from service for purposes of subchapters III 

7 and VII of chapter 84 of that title. 

8 ‘‘(D) APPLICABILITY OF SECTION

9 8351(b)(5) OF TITLE 5.—The provisions of sec10 tion 8351(b)(5) of title 5, United States Code, 

11 shall apply with respect to a judge who makes 

12 an election under paragraph (1). 

13 ‘‘(E) EXCEPTION.—Notwithstanding sub14 paragraph (C), if any judge retires under this 

15 section, or resigns without having met the age 

16 and service requirements set forth under sub17 section (b)(2), and such judge’s nonforfeitable 

18 account balance is less than an amount that the 

19 Executive Director of the Office of Personnel 

20 Management prescribes by regulation, the Exec21 utive Director shall pay the nonforfeitable ac22 count balance to the participant in a single pay23 ment.’’ 

24 (b) EFFECTIVE DATE.—The amendment made by 

25 this section shall take effect on the date of the enactment 
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1 of this Act, except that United States Tax Court judges 

2 may only begin to participate in the Thrift Savings Plan 

3 at the next open season beginning after such date. 

4 SEC. 1007. EXEMPTION OF TEACHING COMPENSATION OF 

5 RETIRED JUDGES FROM LIMITATION ON 

6 OUTSIDE EARNED INCOME. 

7 (a) IN GENERAL.—Section 7447 (relating to retire8 ment of judges), as amended by this Act, is amended by 

9 adding at the end the following new subsection: 

10 ‘‘(l) TEACHING COMPENSATION OF RETIRED

11 JUDGES.—For purposes of the limitation under section 

12 501(a) of the Ethics in Government Act of 1978 (5 U.S.C. 

13 App.), any compensation for teaching approved under sec14 tion 502(a)(5) of such Act shall not be treated as outside 

15 earned income when received by a judge of the Tax Court 

16 who has retired under subsection (b) for teaching per17 formed during any calendar year for which such a judge 

18 has met the requirements of subsection (c), as certified 

19 by the chief judge of the Tax Court.’’ 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 this section shall apply to any individual serving as a re22 tired judge of the United States Tax Court on or after 

23 the date of the enactment of this Act. 
520 

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1 SEC. 1008. GENERAL PROVISIONS RELATING TO MAG2 ISTRATE JUDGES OF THE TAX COURT. 

3 (a) TITLE OF SPECIAL TRIAL JUDGE CHANGED TO

4 MAGISTRATE JUDGE OF THE TAX COURT.—The heading 

5 of section 7443A is amended to read as follows: 

6 ‘‘SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.’’

7 (b) APPOINTMENT, TENURE, AND REMOVAL.—Sub8 section (a) of section 7443A is amended to read as follows: 

9 ‘‘(a) APPOINTMENT, TENURE, AND REMOVAL.— 

10 ‘‘(1) APPOINTMENT.—The chief judge may, 

11 from time to time, appoint and reappoint magistrate 

12 judges of the Tax Court for a term of 8 years. The 

13 magistrate judges of the Tax Court shall proceed 

14 under such rules as may be promulgated by the Tax 

15 Court. 

16 ‘‘(2) REMOVAL.—Removal of a magistrate 

17 judge of the Tax Court during the term for which 

18 he or she is appointed shall be only for incom19 petency, misconduct, neglect of duty, or physical or 

20 mental disability, but the office of a magistrate 

21 judge of the Tax Court shall be terminated if the 

22 judges of the Tax Court determine that the services 

23 performed by the magistrate judge of the Tax Court 

24 are no longer needed. Removal shall not occur unless 

25 a majority of all the judges of the Tax Court concur 

26 in the order of removal. Before any order of removal 
521 

•S 1953 PCS 

1 shall be entered, a full specification of the charges 

2 shall be furnished to the magistrate judge of the Tax 

3 Court, and he or she shall be accorded by the judges 

4 of the Tax Court an opportunity to be heard on the 

5 charges.’’ 

6 (c) SALARY.—Section 7443A(d) (relating to salary) 

7 is amended by striking ‘‘90’’ and inserting ‘‘92’’. 

8 (d) EXEMPTION FROM FEDERAL LEAVE PROVI9 SIONS.—Section 7443A is amended by adding at the end 

10 the following new subsection: 

11 ‘‘(f) EXEMPTION FROM FEDERAL LEAVE PROVI12 SIONS.— 

13 ‘‘(1) IN GENERAL.—A magistrate judge of the 

14 Tax Court appointed under this section shall be ex15 empt from the provisions of subchapter I of chapter 

16 63 of title 5, United States Code. 

17 ‘‘(2) TREATMENT OF UNUSED LEAVE.— 

18 ‘‘(A) AFTER SERVICE AS MAGISTRATE

19 JUDGE.—If an individual who is exempted 

20 under paragraph (1) from the subchapter re21 ferred to in such paragraph was previously sub22 ject to such subchapter and, without a break in 

23 service, again becomes subject to such sub24 chapter on completion of the individual’s service 

25 as a magistrate judge, the unused annual leave 
522 

•S 1953 PCS 

1 and sick leave standing to the individual’s cred2 it when such individual was exempted from this 

3 subchapter is deemed to have remained to the 

4 individual’s credit. 

5 ‘‘(B) COMPUTATION OF ANNUITY.—In 

6 computing an annuity under section 8339 of 

7 title 5, United States Code, the total service of 

8 an individual specified in subparagraph (A) who 

9 retires on an immediate annuity or dies leaving 

10 a survivor or survivors entitled to an annuity 

11 includes, without regard to the limitations im12 posed by subsection (f) of such section 8339, 

13 the days of unused sick leave standing to the 

14 individual’s credit when such individual was ex15 empted from subchapter I of chapter 63 of title 

16 5, United States Code, except that these days 

17 will not be counted in determining average pay 

18 or annuity eligibility. 

19 ‘‘(C) LUMP SUM PAYMENT.—Any accumu20 lated and current accrued annual leave or vaca21 tion balances credited to a magistrate judge as 

22 of the date of the enactment of this subsection 

23 shall be paid in a lump sum at the time of sepa24 ration from service pursuant to the provisions 

25 and restrictions set forth in section 5551 of 
523 

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1 title 5, United States Code, and related provi2 sions referred to in such section.’’ 

3 (e) CONFORMING AMENDMENTS.— 

4 (1) The heading of subsection (b) of section 

5 7443A is amended by striking ‘‘SPECIAL TRIAL

6 JUDGES’’ and inserting ‘‘Magistrate Judges of the 

7 Tax Court’’. 

8 (2) Section 7443A(b) is amended by striking 

9 ‘‘special trial judges of the court’’ and inserting 

10 ‘‘magistrate judges of the Tax Court’’. 

11 (3) Subsections (c) and (d) of section 7443A 

12 are amended by striking ‘‘special trial judge’’ and 

13 inserting ‘‘magistrate judge of the Tax Court’’ each 

14 place it appears. 

15 (4) Section 7443A(e) is amended by striking 

16 ‘‘special trial judges’’ and inserting ‘‘magistrate 

17 judges of the Tax Court’’. 

18 (5) Section 7456(a) is amended by striking 

19 ‘‘special trial judge’’ each place it appears and in20 serting ‘‘magistrate judge’’. 

21 (6) Subsection (c) of section 7471 is amend22 ed— 

23 (A) by striking the subsection heading and 

24 inserting ‘‘MAGISTRATE JUDGES OF THE TAX

25 COURT.—’’, and 
524 

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1 (B) by striking ‘‘special trial judges’’ and 

2 inserting ‘‘magistrate judges’’. 

3 SEC. 1009. ANNUITIES TO SURVIVING SPOUSES AND DE4 PENDENT CHILDREN OF MAGISTRATE 

5 JUDGES OF THE TAX COURT. 

6 (a) DEFINITIONS.—Section 7448(a) (relating to defi7 nitions), as amended by this Act, is amended by redesig8 nating paragraphs (5), (6), (7), and (8) as paragraphs (7), 

9 (8), (9), and (10), respectively, and by inserting after 

10 paragraph (4) the following new paragraphs: 

11 ‘‘(5) The term ‘magistrate judge’ means a judi12 cial officer appointed pursuant to section 7443A, in13 cluding any individual receiving an annuity under 

14 section 7443B, or chapters 83 or 84, as the case 

15 may be, of title 5, United States Code, whether or 

16 not performing judicial duties under section 7443C. 

17 ‘‘(6) The term ‘magistrate judge’s salary’ 

18 means the salary of a magistrate judge received 

19 under section 7443A(d), any amount received as an 

20 annuity under section 7443B, or chapters 83 or 84, 

21 as the case may be, of title 5, United States Code, 

22 and compensation received under section 7443C.’’ 

23 (b) ELECTION.—Subsection (b) of section 7448 (re24 lating to annuities to surviving spouses and dependent 

25 children of judges) is amended— 
525 

•S 1953 PCS 

1 (1) by striking the subsection heading and in2 serting the following: 

3 ‘‘(b) ELECTION.— 

4 ‘‘(1) JUDGES.—’’, 

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) MAGISTRATE JUDGES.—Any magistrate 

9 judge may by written election filed with the chief 

10 judge bring himself or herself within the purview of 

11 this section. Such election shall be filed not later 

12 than the later of 6 months after— 

13 ‘‘(A) 6 months after the date of the enact14 ment of this paragraph, 

15 ‘‘(B) the date the judge takes office, or 

16 ‘‘(C) the date the judge marries.’’ 

17 (c) CONFORMING AMENDMENTS.— 

18 (1) The heading of section 7448 is amended by 

19 inserting ‘‘AND MAGISTRATE JUDGES’’ after 

20 ‘‘JUDGES’’. 

21 (2) The item relating to section 7448 in the 

22 table of sections for part I of subchapter C of chap23 ter 76 is amended by inserting ‘‘and magistrate 

24 judges’’ after ‘‘judges’’. 
526 

•S 1953 PCS 

1 (3) Subsections (c)(1), (d), (f), (g), (h), (j), 

2 (m), (n), and (u) of section 7448, as amended by 

3 this Act, are each amended— 

4 (A) by inserting ‘‘or magistrate judge’’ 

5 after ‘‘judge’’ each place it appears other than 

6 in the phrase ‘‘chief judge’’, and 

7 (B) by inserting ‘‘or magistrate judge’s’’ 

8 after ‘‘judge’s’’ each place it appears. 

9 (4) Section 7448(c) is amended— 

10 (A) in paragraph (1), by striking ‘‘Tax 

11 Court judges’’ and inserting ‘‘Tax Court judi12 cial officers’’, 

13 (B) in paragraph (2)— 

14 (i) in subparagraph (A), by inserting 

15 ‘‘and section 7443A(d)’’ after ‘‘(a)(4)’’, 

16 and 

17 (ii) in subparagraph (B), by striking 

18 ‘‘subsection (a)(4)’’ and inserting ‘‘sub19 sections (a)(4) and (a)(6)’’. 

20 (5) Section 7448(g) is amended by inserting 

21 ‘‘or section 7443B’’ after ‘‘section 7447’’ each place 

22 it appears, and by inserting ‘‘or an annuity’’ after 

23 ‘‘retired pay’’. 

24 (6) Section 7448(j)(1) is amended— 
527 

•S 1953 PCS 

1 (A) in subparagraph (A), by striking 

2 ‘‘service or retired’’ and inserting ‘‘service, re3 tired’’, and by inserting ‘‘, or receiving any an4 nuity under section 7443B or chapters 83 or 84 

5 of title 5, United States Code,’’ after ‘‘section 

6 7447’’, and 

7 (B) in the last sentence, by striking ‘‘sub8 sections (a) (6) and (7)’’ and inserting ‘‘para9 graphs (8) and (9) of subsection (a)’’. 

10 (7) Section 7448(m)(1), as amended by this 

11 Act, is amended— 

12 (A) by inserting ‘‘or any annuity under 

13 section 7443B or chapters 83 or 84 of title 5, 

14 United States Code’’ after ‘‘7447(d)’’, and 

15 (B) by inserting ‘‘or 7443B(m)(1)(B) after 

16 ‘‘7447(f)(4)’’. 

17 (8) Section 7448(n) is amended by inserting 

18 ‘‘his years of service pursuant to any appointment 

19 under section 7443A,’’ after ‘‘of the Tax Court,’’. 

20 (9) Section 3121(b)(5)(E) is amended by in21 serting ‘‘or magistrate judge’’ before ‘‘of the United 

22 States Tax Court’’. 

23 (10) Section 210(a)(5)(E) of the Social Secu24 rity Act is amended by inserting ‘‘or magistrate 

25 judge’’ before ‘‘of the United States Tax Court’’. 
528 

•S 1953 PCS 

1 SEC. 1010. RETIREMENT AND ANNUITY PROGRAM. 

2 (a) RETIREMENT AND ANNUITY PROGRAM.—Part I 

3 of subchapter C of chapter 76 is amended by inserting 

4 after section 7443A the following new section: 

5 ‘‘SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF 

6 THE TAX COURT. 

7 ‘‘(a) RETIREMENT BASED ON YEARS OF SERVICE.— 

8 A magistrate judge of the Tax Court to whom this section 

9 applies and who retires from office after attaining the age 

10 of 65 years and serving at least 14 years, whether continu11 ously or otherwise, as such magistrate judge shall, subject 

12 to subsection (f), be entitled to receive, during the remain13 der of the magistrate judge’s lifetime, an annuity equal 

14 to the salary being received at the time the magistrate 

15 judge leaves office. 

16 ‘‘(b) RETIREMENT UPON FAILURE OF REAPPOINT17 MENT.—A magistrate judge of the Tax Court to whom 

18 this section applies who is not reappointed following the 

19 expiration of the term of office of such magistrate judge 

20 and who retires upon the completion of the term shall, 

21 subject to subsection (f), be entitled to receive, upon at22 taining the age of 65 years and during the remainder of 

23 such magistrate judge’s lifetime, an annuity equal to that 

24 portion of the salary being received at the time the mag25 istrate judge leaves office which the aggregate number of 

26 years of service, not to exceed 14, bears to 14, if— 
529 

•S 1953 PCS 

1 ‘‘(1) such magistrate judge has served at least 

2 1 full term as a magistrate judge, and 

3 ‘‘(2) not earlier than 9 months before the date 

4 on which the term of office of such magistrate judge 

5 expires, and not later than 6 months before such 

6 date, such magistrate judge notified the chief judge 

7 of the Tax Court in writing that such magistrate 

8 judge was willing to accept reappointment to the po9 sition in which such magistrate judge was serving. 

10 ‘‘(c) SERVICE OF AT LEAST 8 YEARS.—A magistrate 

11 judge of the Tax Court to whom this section applies and 

12 who retires after serving at least 8 years, whether continu13 ously or otherwise, as such a magistrate judge shall, sub14 ject to subsection (f), be entitled to receive, upon attaining 

15 the age of 65 years and during the remainder of the mag16 istrate judge’s lifetime, an annuity equal to that portion 

17 of the salary being received at the time the magistrate 

18 judge leaves office which the aggregate number of years 

19 of service, not to exceed 14, bears to 14. Such annuity 

shall be reduced by 1 20 ⁄6 of 1 percent for each full month 

21 such magistrate judge was under the age of 65 at the time 

22 the magistrate judge left office, except that such reduction 

23 shall not exceed 20 percent. 

24 ‘‘(d) RETIREMENT FOR DISABILITY.—A magistrate 

25 judge of the Tax Court to whom this section applies, who 
530 

•S 1953 PCS 

1 has served at least 5 years, whether continuously or other2 wise, as such a magistrate judge and who retires or is re3 moved from office upon the sole ground of mental or phys4 ical disability shall, subject to subsection (f), be entitled 

5 to receive, during the remainder of the magistrate judge’s 

6 lifetime, an annuity equal to 40 percent of the salary being 

7 received at the time of retirement or removal or, in the 

8 case of a magistrate judge who has served for at least 10 

9 years, an amount equal to that proportion of the salary 

10 being received at the time of retirement or removal which 

11 the aggregate number of years of service, not to exceed 

12 14, bears to 14. 

13 ‘‘(e) COST-OF-LIVING ADJUSTMENTS.—A magistrate 

14 judge of the Tax Court who is entitled to an annuity under 

15 this section is also entitled to a cost-of-living adjustment 

16 in such annuity, calculated and payable in the same man17 ner as adjustments under section 8340(b) of title 5, 

18 United States Code, except that any such annuity, as in19 creased under this subsection, may not exceed the salary 

20 then payable for the position from which the magistrate 

21 judge retired or was removed. 

22 ‘‘(f) ELECTION; ANNUITY IN LIEU OF OTHER ANNU23 ITIES.— 

24 ‘‘(1) IN GENERAL.—A magistrate judge of the 

25 Tax Court shall be entitled to an annuity under this 
531 

•S 1953 PCS 

1 section if the magistrate judge elects an annuity 

2 under this section by notifying the chief judge of the 

3 Tax Court not later than the later of— 

4 ‘‘(A) 5 years after the magistrate judge of 

5 the Tax Court begins judicial service, or 

6 ‘‘(B) 5 years after the date of the enact7 ment of this subsection. 

8 Such notice shall be given in accordance with proce9 dures prescribed by the Tax Court. 

10 ‘‘(2) ANNUITY IN LIEU OF OTHER ANNUITY.— 

11 A magistrate judge who elects to receive an annuity 

12 under this section shall not be entitled to receive— 

13 ‘‘(A) any annuity to which such magistrate 

14 judge would otherwise have been entitled under 

15 subchapter III of chapter 83, or under chapter 

16 84 (except for subchapters III and VII), of title 

17 5, United States Code, for service performed as 

18 a magistrate or otherwise, 

19 ‘‘(B) an annuity or salary in senior status 

20 or retirement under section 371 or 372 of title 

21 28, United States Code, 

22 ‘‘(C) retired pay under section 7447, or 

23 ‘‘(D) retired pay under section 7296 of 

24 title 38, United States Code. 
532 

•S 1953 PCS 

1 ‘‘(3) COORDINATION WITH TITLE 5.—A mag2 istrate judge of the Tax Court who elects to receive 

3 an annuity under this section— 

4 ‘‘(A) shall not be subject to deductions and 

5 contributions otherwise required by section 

6 8334(a) of title 5, United States Code, 

7 ‘‘(B) shall be excluded from the operation 

8 of chapter 84 (other than subchapters III and 

9 VII) of such title 5, and 

10 ‘‘(C) is entitled to a lump-sum credit under 

11 section 8342(a) or 8424 of such title 5, as the 

12 case may be. 

13 ‘‘(g) CALCULATION OF SERVICE.—For purposes of 

14 calculating an annuity under this section— 

15 ‘‘(1) service as a magistrate judge of the Tax 

16 Court to whom this section applies may be credited, 

17 and 

18 ‘‘(2) each month of service shall be credited as 

1 19 ⁄12 of a year, and the fractional part of any month 

20 shall not be credited. 

21 ‘‘(h) COVERED POSITIONS AND SERVICE.—This sec22 tion applies to any magistrate judge of the Tax Court or 

23 special trial judge of the Tax Court appointed under this 

24 subchapter, but only with respect to service as such a mag25 istrate judge or special trial judge after a date not earlier 
533 

•S 1953 PCS 

than 91 1 ⁄2 years before the date of the enactment of this 

2 subsection. 

3 ‘‘(i) PAYMENTS PURSUANT TO COURT ORDER.— 

4 ‘‘(1) IN GENERAL.—Payments under this sec5 tion which would otherwise be made to a magistrate 

6 judge of the Tax Court based upon his or her service 

7 shall be paid (in whole or in part) by the chief judge 

8 of the Tax Court to another person if and to the ex9 tent expressly provided for in the terms of any court 

10 decree of divorce, annulment, or legal separation, or 

11 the terms of any court order or court-approved prop12 erty settlement agreement incident to any court de13 cree of divorce, annulment, or legal separation. Any 

14 payment under this paragraph to a person bars re15 covery by any other person. 

16 ‘‘(2) REQUIREMENTS FOR PAYMENT.—Para17 graph (1) shall apply only to payments made by the 

18 chief judge of the Tax Court after the date of re19 ceipt by the chief judge of written notice of such de20 cree, order, or agreement, and such additional infor21 mation as the chief judge may prescribe. 

22 ‘‘(3) COURT DEFINED.—For purposes of this 

23 subsection, the term ‘court’ means any court of any 

24 State, the District of Columbia, the Commonwealth 

25 of Puerto Rico, Guam, the Northern Mariana Is-
534 

•S 1953 PCS 

1 lands, or the Virgin Islands, and any Indian tribal 

2 court or courts of Indian offense. 

3 ‘‘(j) DEDUCTIONS, CONTRIBUTIONS, AND DEPOS4 ITS.— 

5 ‘‘(1) DEDUCTIONS.—Beginning with the next 

6 pay period after the chief judge of the Tax Court re7 ceives a notice under subsection (f) that a mag8 istrate judge of the Tax Court has elected an annu9 ity under this section, the chief judge shall deduct 

10 and withhold 1 percent of the salary of such mag11 istrate judge. Amounts shall be so deducted and 

12 withheld in a manner determined by the chief judge. 

13 Amounts deducted and withheld under this sub14 section shall be deposited in the Treasury of the 

15 United States to the credit of the Tax Court Judi16 cial Officers’ Retirement Fund. Deductions under 

17 this subsection from the salary of a magistrate judge 

18 shall terminate upon the retirement of the mag19 istrate judge or upon completion of 14 years of serv20 ice for which contributions under this section have 

21 been made, whether continuously or otherwise, as 

22 calculated under subsection (g), whichever occurs 

23 first. 

24 ‘‘(2) CONSENT TO DEDUCTIONS; DISCHARGE OF

25 CLAIMS.—Each magistrate judge of the Tax Court 
535 

•S 1953 PCS 

1 who makes an election under subsection (f) shall be 

2 deemed to consent and agree to the deductions from 

3 salary which are made under paragraph (1). Pay4 ment of such salary less such deductions (and any 

5 deductions made under section 7448) is a full and 

6 complete discharge and acquittance of all claims and 

7 demands for all services rendered by such magistrate 

8 judge during the period covered by such payment, 

9 except the right to those benefits to which the mag10 istrate judge is entitled under this section (and sec11 tion 7448). 

12 ‘‘(k) DEPOSITS FOR PRIOR SERVICE.—Each mag13 istrate judge of the Tax Court who makes an election 

14 under subsection (f) may deposit, for service performed 

15 before such election for which contributions may be made 

16 under this section, an amount equal to 1 percent of the 

17 salary received for that service. Credit for any period cov18 ered by that service may not be allowed for purposes of 

19 an annuity under this section until a deposit under this 

20 subsection has been made for that period. 

21 ‘‘(l) INDIVIDUAL RETIREMENT RECORDS.—The 

22 amounts deducted and withheld under subsection (j), and 

23 the amounts deposited under subsection (k), shall be cred24 ited to individual accounts in the name of each magistrate 

25 judge of the Tax Court from whom such amounts are re-
536 

•S 1953 PCS 

1 ceived, for credit to the Tax Court Judicial Officers’ Re2 tirement Fund. 

3 ‘‘(m) ANNUITIES AFFECTED IN CERTAIN CASES.— 

4 ‘‘(1) 1-YEAR FORFEITURE FOR FAILURE TO

5 PERFORM JUDICIAL DUTIES.—Subject to paragraph 

6 (3), any magistrate judge of the Tax Court who re7 tires under this section and who fails to perform ju8 dicial duties required of such individual by section 

9 7443C shall forfeit all rights to an annuity under 

10 this section for a 1-year period which begins on the 

11 1st day on which such individual fails to perform 

12 such duties. 

13 ‘‘(2) PERMANENT FORFEITURE OF RETIRED

14 PAY WHERE CERTAIN NON-GOVERNMENT SERVICES

15 PERFORMED.—Subject to paragraph (3), any mag16 istrate judge of the Tax Court who retires under this 

17 section and who thereafter performs (or supervises 

18 or directs the performance of) legal or accounting 

19 services in the field of Federal taxation for the indi20 vidual’s client, the individual’s employer, or any of 

21 such employer’s clients, shall forfeit all rights to an 

22 annuity under this section for all periods beginning 

23 on or after the first day on which the individual per24 forms (or supervises or directs the performance of) 

25 such services. The preceding sentence shall not apply 
537 

•S 1953 PCS 

1 to any civil office or employment under the Govern2 ment of the United States. 

3 ‘‘(3) FORFEITURES NOT TO APPLY WHERE IN4 DIVIDUAL ELECTS TO FREEZE AMOUNT OF ANNU5 ITY.— 

6 ‘‘(A) IN GENERAL.—If a magistrate judge 

7 of the Tax Court makes an election under this 

8 paragraph— 

9 ‘‘(i) paragraphs (1) and (2) (and sec10 tion 7443C) shall not apply to such mag11 istrate judge beginning on the date such 

12 election takes effect, and 

13 ‘‘(ii) the annuity payable under this 

14 section to such magistrate judge, for peri15 ods beginning on or after the date such 

16 election takes effect, shall be equal to the 

17 annuity to which such magistrate judge is 

18 entitled on the day before such effective 

19 date. 

20 ‘‘(B) ELECTION REQUIREMENTS.—An elec21 tion under subparagraph (A)— 

22 ‘‘(i) may be made by a magistrate 

23 judge of the Tax Court eligible for retire24 ment under this section, and 
538 

•S 1953 PCS 

1 ‘‘(ii) shall be filed with the chief judge 

2 of the Tax Court. 

3 Such an election, once it takes effect, shall be 

4 irrevocable. 

5 ‘‘(C) EFFECTIVE DATE OF ELECTION.— 

6 Any election under subparagraph (A) shall take 

7 effect on the first day of the first month fol8 lowing the month in which the election is made. 

9 ‘‘(4) ACCEPTING OTHER EMPLOYMENT.—Any 

10 magistrate judge of the Tax Court who retires under 

11 this section and thereafter accepts compensation for 

12 civil office or employment under the United States 

13 Government (other than for the performance of 

14 functions as a magistrate judge of the Tax Court 

15 under section 7443C) shall forfeit all rights to an 

16 annuity under this section for the period for which 

17 such compensation is received. For purposes of this 

18 paragraph, the term ‘compensation’ includes retired 

19 pay or salary received in retired status. 

20 ‘‘(n) LUMP-SUM PAYMENTS.— 

21 ‘‘(1) ELIGIBILITY.— 

22 ‘‘(A) IN GENERAL.—Subject to paragraph 

23 (2), an individual who serves as a magistrate 

24 judge of the Tax Court and— 
539 

•S 1953 PCS 

1 ‘‘(i) who leaves office and is not re2 appointed as a magistrate judge of the Tax 

3 Court for at least 31 consecutive days, 

4 ‘‘(ii) who files an application with the 

5 chief judge of the Tax Court for payment 

6 of a lump-sum credit, 

7 ‘‘(iii) is not serving as a magistrate 

8 judge of the Tax Court at the time of fil9 ing of the application, and 

10 ‘‘(iv) will not become eligible to re11 ceive an annuity under this section within 

12 31 days after filing the application, 

13 is entitled to be paid the lump-sum credit. Pay14 ment of the lump-sum credit voids all rights to 

15 an annuity under this section based on the serv16 ice on which the lump-sum credit is based, until 

17 that individual resumes office as a magistrate 

18 judge of the Tax Court. 

19 ‘‘(B) PAYMENT TO SURVIVORS.—Lump20 sum benefits authorized by subparagraphs (C), 

21 (D), and (E) of this paragraph shall be paid to 

22 the person or persons surviving the magistrate 

23 judge of the Tax Court and alive on the date 

24 title to the payment arises, in the order of prec25 edence set forth in subsection (o) of section 376 
540 

•S 1953 PCS 

1 of title 28, United States Code, and in accord2 ance with the last 2 sentences of paragraph (1) 

3 of that subsection. For purposes of the pre4 ceding sentence, the term ‘judicial official’ as 

5 used in subsection (o) of such section 376 shall 

6 be deemed to mean ‘magistrate judge of the 

7 Tax Court’ and the terms ‘Administrative Of8 fice of the United States Courts’ and ‘Director 

9 of the Administrative Office of the United 

10 States Courts’ shall be deemed to mean ‘chief 

11 judge of the Tax Court’. 

12 ‘‘(C) PAYMENT UPON DEATH OF JUDGE

13 BEFORE RECEIPT OF ANNUITY.—If a mag14 istrate judge of the Tax Court dies before re15 ceiving an annuity under this section, the lump16 sum credit shall be paid. 

17 ‘‘(D) PAYMENT OF ANNUITY REMAIN18 DER.—If all annuity rights under this section 

19 based on the service of a deceased magistrate 

20 judge of the Tax Court terminate before the 

21 total annuity paid equals the lump-sum credit, 

22 the difference shall be paid. 

23 ‘‘(E) PAYMENT UPON DEATH OF JUDGE

24 DURING RECEIPT OF ANNUITY.—If a magistrate 

25 judge of the Tax Court who is receiving an an-
541 

•S 1953 PCS 

1 nuity under this section dies, any accrued annu2 ity benefits remaining unpaid shall be paid. 

3 ‘‘(F) PAYMENT UPON TERMINATION.—Any 

4 accrued annuity benefits remaining unpaid on 

5 the termination, except by death, of the annuity 

6 of a magistrate judge of the Tax Court shall be 

7 paid to that individual. 

8 ‘‘(G) PAYMENT UPON ACCEPTING OTHER

9 EMPLOYMENT.—Subject to paragraph (2), a 

10 magistrate judge of the Tax Court who forfeits 

11 rights to an annuity under subsection (m)(4) 

12 before the total annuity paid equals the lump13 sum credit shall be entitled to be paid the dif14 ference if the magistrate judge of the Tax 

15 Court files an application with the chief judge 

16 of the Tax Court for payment of that dif17 ference. A payment under this subparagraph 

18 voids all rights to an annuity on which the pay19 ment is based. 

20 ‘‘(2) SPOUSES AND FORMER SPOUSES.— 

21 ‘‘(A) IN GENERAL.—Payment of the lump22 sum credit under paragraph (1)(A) or a pay23 ment under paragraph (1)(G)— 

24 ‘‘(i) may be made only if any current 

25 spouse and any former spouse of the mag-
542 

•S 1953 PCS 

1 istrate judge of the Tax Court are notified 

2 of the magistrate judge’s application, and 

3 ‘‘(ii) shall be subject to the terms of 

4 a court decree of divorce, annulment, or 

5 legal separation, or any court or court ap6 proved property settlement agreement inci7 dent to such decree, if— 

8 ‘‘(I) the decree, order, or agree9 ment expressly relates to any portion 

10 of the lump-sum credit or other pay11 ment involved, and 

12 ‘‘(II) payment of the lump-sum 

13 credit or other payment would extin14 guish entitlement of the magistrate 

15 judge’s spouse or former spouse to 

16 any portion of an annuity under sub17 section (i). 

18 ‘‘(B) NOTIFICATION.—Notification of a 

19 spouse or former spouse under this paragraph 

20 shall be made in accordance with such proce21 dures as the chief judge of the Tax Court shall 

22 prescribe. The chief judge may provide under 

23 such procedures that subparagraph (A)(i) may 

24 be waived with respect to a spouse or former 

25 spouse if the magistrate judge establishes to the 
543 

•S 1953 PCS 

1 satisfaction of the chief judge that the where2 abouts of such spouse or former spouse cannot 

3 be determined. 

4 ‘‘(C) RESOLUTION OF 2 OR MORE OR5 DERS.—The chief judge shall prescribe proce6 dures under which this paragraph shall be ap7 plied in any case in which the chief judge re8 ceives 2 or more orders or decrees described in 

9 subparagraph (A). 

10 ‘‘(3) DEFINITION.—For purposes of this sub11 section, the term ‘lump-sum credit’ means the 

12 unrefunded amount consisting of— 

13 ‘‘(A) retirement deductions made under 

14 this section from the salary of a magistrate 

15 judge of the Tax Court, 

16 ‘‘(B) amounts deposited under subsection 

17 (k) by a magistrate judge of the Tax Court cov18 ering earlier service, and 

19 ‘‘(C) interest on the deductions and depos20 its which, for any calendar year, shall be equal 

21 to the overall average yield to the Tax Court 

22 Judicial Officers’ Retirement Fund during the 

23 preceding fiscal year from all obligations pur24 chased by the Secretary during such fiscal year 
544 

•S 1953 PCS 

1 under subsection (o); but does not include inter2 est— 

3 ‘‘(i) if the service covered thereby ag4 gregates 1 year or less, or 

5 ‘‘(ii) for the fractional part of a 

6 month in the total service. 

7 ‘‘(o) TAX COURT JUDICIAL OFFICERS’ RETIREMENT

8 FUND.— 

9 ‘‘(1) ESTABLISHMENT.—There is established in 

10 the Treasury a fund which shall be known as the 

11 ‘Tax Court Judicial Officers’ Retirement Fund’. 

12 Amounts in the Fund are authorized to be appro13 priated for the payment of annuities, refunds, and 

14 other payments under this section. 

15 ‘‘(2) INVESTMENT OF FUND.—The Secretary 

16 shall invest, in interest bearing securities of the 

17 United States, such currently available portions of 

18 the Tax Court Judicial Officers’ Retirement Fund as 

19 are not immediately required for payments from the 

20 Fund. The income derived from these investments 

21 constitutes a part of the Fund. 

22 ‘‘(3) UNFUNDED LIABILITY.— 

23 ‘‘(A) IN GENERAL.—There are authorized 

24 to be appropriated to the Tax Court Judicial 

25 Officers’ Retirement Fund amounts required to 
545 

•S 1953 PCS 

1 reduce to zero the unfunded liability of the 

2 Fund. 

3 ‘‘(B) UNFUNDED LIABILITY.—For pur4 poses of subparagraph (A), the term ‘unfunded 

5 liability’ means the estimated excess, deter6 mined on an annual basis in accordance with 

7 the provisions of section 9503 of title 31, 

8 United States Code, of the present value of all 

9 benefits payable from the Tax Court Judicial 

10 Officers’ Retirement Fund over the sum of— 

11 ‘‘(i) the present value of deductions to 

12 be withheld under this section from the fu13 ture basic pay of magistrate judges of the 

14 Tax Court, plus 

15 ‘‘(ii) the balance in the Fund as of the 

16 date the unfunded liability is determined. 

17 ‘‘(p) PARTICIPATION IN THRIFT SAVINGS PLAN.— 

18 ‘‘(1) ELECTION TO CONTRIBUTE.— 

19 ‘‘(A) IN GENERAL.—A magistrate judge of 

20 the Tax Court who elects to receive an annuity 

21 under this section or under section 611 of the 

22 National Employee Savings and Trust Equity 

23 Guarantee Act of 2005 may elect to contribute 

24 an amount of such individual’s basic pay to the 
546 

•S 1953 PCS 

1 Thrift Savings Fund established by section 

2 8437 of title 5, United States Code. 

3 ‘‘(B) PERIOD OF ELECTION.—An election 

4 may be made under this paragraph only during 

5 a period provided under section 8432(b) of title 

6 5, United States Code, for individuals subject to 

7 chapter 84 of such title. 

8 ‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.— 

9 Except as otherwise provided in this subsection, the 

10 provisions of subchapters III and VII of chapter 84 

11 of title 5, United States Code, shall apply with re12 spect to a magistrate judge who makes an election 

13 under paragraph (1). 

14 ‘‘(3) SPECIAL RULES.— 

15 ‘‘(A) AMOUNT CONTRIBUTED.—The 

16 amount contributed by a magistrate judge to 

17 the Thrift Savings Fund in any pay period shall 

18 not exceed the maximum percentage of such 

19 judge’s basic pay for such pay period as allow20 able under section 8440f of title 5, United 

21 States Code. 

22 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

23 JUDGE.—No contributions may be made for the 

24 benefit of a magistrate judge under section 

25 8432(c) of title 5, United States Code. 
547 

•S 1953 PCS 

1 ‘‘(C) APPLICABILITY OF SECTION 8433(b) 

2 OF TITLE 5.—Section 8433(b) of title 5, United 

3 States Code, applies with respect to a mag4 istrate judge who makes an election under para5 graph (1) and— 

6 ‘‘(i) who retires entitled to an imme7 diate annuity under this section (including 

8 a disability annuity under subsection (d) of 

9 this section) or section 611 of the National 

10 Employee Savings and Trust Equity Guar11 antee Act of 2005, 

12 ‘‘(ii) who retires before attaining age 

13 65 but is entitled, upon attaining age 65, 

14 to an annuity under this section or section 

15 611 of the National Employee Savings and 

16 Trust Equity Guarantee Act of 2005, or 

17 ‘‘(iii) who retires before becoming en18 titled to an immediate annuity, or an an19 nuity upon attaining age 65, under this 

20 section or section 611 of the National Em21 ployee Savings and Trust Equity Guar22 antee Act of 2005. 

23 ‘‘(D) SEPARATION FROM SERVICE.—With 

24 respect to a magistrate judge to whom this sub25 section applies, retirement under this section or 
548 

•S 1953 PCS 

1 section 611 of the National Employee Savings 

2 and Trust Equity Guarantee Act of 2005 is a 

3 separation from service for purposes of sub4 chapters III and VII of chapter 84 of title 5, 

5 United States Code. 

6 ‘‘(4) DEFINITIONS.—For purposes of this sub7 section, the terms ‘retirement’ and ‘retire’ include 

8 removal from office under section 7443A(a)(2) on 

9 the sole ground of mental or physical disability. 

10 ‘‘(5) OFFSET.—In the case of a magistrate 

11 judge who receives a distribution from the Thrift 

12 Savings Fund and who later receives an annuity 

13 under this section, that annuity shall be offset by an 

14 amount equal to the amount which represents the 

15 Government’s contribution to that person’s Thrift 

16 Savings Account, without regard to earnings attrib17 utable to that amount. Where such an offset would 

18 exceed 50 percent of the annuity to be received in 

19 the first year, the offset may be divided equally over 

20 the first 2 years in which that person receives the 

21 annuity. 

22 ‘‘(6) EXCEPTION.—Notwithstanding clauses (i) 

23 and (ii) of paragraph (3)(C), if any magistrate judge 

24 retires under circumstances making such magistrate 

25 judge eligible to make an election under subsection 
549 

•S 1953 PCS 

1 (b) of section 8433 of title 5, United States Code, 

2 and such magistrate judge’s nonforfeitable account 

3 balance is less than an amount that the Executive 

4 Director of the Office of Personnel Management pre5 scribes by regulation, the Executive Director shall 

6 pay the nonforfeitable account balance to the partici7 pant in a single payment.’’ 

8 (b) CONFORMING AMENDMENT.—The table of sec9 tions for part I of subchapter C of chapter 76 is amended 

10 by inserting after the item relating to section 7443A the 

11 following new item: 

‘‘Sec. 7443B. Retirement for magistrate judges of the Tax Court.’’. 

12 SEC. 1011. INCUMBENT MAGISTRATE JUDGES OF THE TAX 

13 COURT. 

14 (a) RETIREMENT ANNUITY UNDER TITLE 5 AND

15 SECTION 7443B OF THE INTERNAL REVENUE CODE OF

16 1986.—A magistrate judge of the United States Tax 

17 Court in active service on the date of the enactment of 

18 this Act shall, subject to subsection (b), be entitled, in lieu 

19 of the annuity otherwise provided under the amendments 

20 made by this title, to— 

21 (1) an annuity under subchapter III of chapter 

22 83, or under chapter 84 (except for subchapters III 

23 and VII), of title 5, United States Code, as the case 

24 may be, for creditable service before the date on 
550 

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1 which service would begin to be credited for pur2 poses of paragraph (2), and 

3 (2) an annuity calculated under subsection (b) 

4 or (c) and subsection (g) of section 7443B of the In5 ternal Revenue Code of 1986, as added by this Act, 

6 for any service as a magistrate judge of the United 

7 States Tax Court or special trial judge of the United 

8 States Tax Court but only with respect to service as 

9 such a magistrate judge or special trial judge after 

a date not earlier than 91 10 ⁄2 years prior to the date 

11 of the enactment of this Act (as specified in the elec12 tion pursuant to subsection (b)) for which deduc13 tions and deposits are made under subsections (j) 

14 and (k) of such section 7443B, as applicable, with15 out regard to the minimum number of years of serv16 ice as such a magistrate judge of the United States 

17 Tax Court, except that— 

18 (A) in the case of a magistrate judge who 

19 retired with less than 8 years of service, the an20 nuity under subsection (c) of such section 

21 7443B shall be equal to that proportion of the 

22 salary being received at the time the magistrate 

23 judge leaves office which the years of service 

24 bears to 14, subject to a reduction in accord25 ance with subsection (c) of such section 7443B 
551 

•S 1953 PCS 

1 if the magistrate judge is under age 65 at the 

2 time he or she leaves office, and 

3 (B) the aggregate amount of the annuity 

4 initially payable on retirement under this sub5 section may not exceed the rate of pay for the 

6 magistrate judge which is in effect on the day 

7 before the retirement becomes effective. 

8 (b) FILING OF NOTICE OF ELECTION.—A magistrate 

9 judge of the United States Tax Court shall be entitled to 

10 an annuity under this section only if the magistrate judge 

11 files a notice of that election with the chief judge of the 

12 United States Tax Court specifying the date on which 

13 service would begin to be credited under section 7443B 

14 of the Internal Revenue Code of 1986, as added by this 

15 Act, in lieu of chapter 83 or chapter 84 of title 5, United 

16 States Code. Such notice shall be filed in accordance with 

17 such procedures as the chief judge of the United States 

18 Tax Court shall prescribe. 

19 (c) LUMP-SUM CREDIT UNDER TITLE 5.—A mag20 istrate judge of the United States Tax Court who makes 

21 an election under subsection (b) shall be entitled to a 

22 lump-sum credit under section 8342 or 8424 of title 5, 

23 United States Code, as the case may be, for any service 

24 which is covered under section 7443B of the Internal Rev25 enue Code of 1986, as added by this Act, pursuant to that 
552 

•S 1953 PCS 

1 election, and with respect to which any contributions were 

2 made by the magistrate judge under the applicable provi3 sions of title 5, United States Code. 

4 (d) RECALL.—With respect to any magistrate judge 

5 of the United States Tax Court receiving an annuity under 

6 this section who is recalled to serve under section 7443C 

7 of the Internal Revenue Code of 1986, as added by this 

8 Act— 

9 (1) the amount of compensation which such re10 called magistrate judge receives under such section 

11 7443C shall be calculated on the basis of the annu12 ity received under this section, and 

13 (2) such recalled magistrate judge of the United 

14 States Tax Court may serve as a reemployed annu15 itant to the extent otherwise permitted under title 5, 

16 United States Code. 

17 Section 7443B(m)(4) of the Internal Revenue Code of 

18 1986, as added by this Act, shall not apply with respect 

19 to service as a reemployed annuitant described in para20 graph (2). 

21 SEC. 1012. PROVISIONS FOR RECALL. 

22 (a) IN GENERAL.—Part I of subchapter C of chapter 

23 76, as amended by this Act, is amended by inserting after 

24 section 7443B the following new section: 
553 

•S 1953 PCS 

1 ‘‘SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX 

2 COURT. 

3 ‘‘(a) RECALLING OF RETIRED MAGISTRATE

4 JUDGES.—Any individual who has retired pursuant to sec5 tion 7443B or the applicable provisions of title 5, United 

6 States Code, upon reaching the age and service require7 ments established therein, may at or after retirement be 

8 called upon by the chief judge of the Tax Court to perform 

9 such judicial duties with the Tax Court as may be re10 quested of such individual for any period or periods speci11 fied by the chief judge; except that in the case of any such 

12 individual— 

13 ‘‘(1) the aggregate of such periods in any 1 cal14 endar year shall not (without such individual’s con15 sent) exceed 90 calendar days, and 

16 ‘‘(2) such individual shall be relieved of per17 forming such duties during any period in which ill18 ness or disability precludes the performance of such 

19 duties. 

20 Any act, or failure to act, by an individual performing ju21 dicial duties pursuant to this subsection shall have the 

22 same force and effect as if it were the act (or failure to 

23 act) of a magistrate judge of the Tax Court. 

24 ‘‘(b) COMPENSATION.—For the year in which a pe25 riod of recall occurs, the magistrate judge shall receive, 

26 in addition to the annuity provided under the provisions 
554 

•S 1953 PCS 

1 of section 7443B or under the applicable provisions of title 

2 5, United States Code, an amount equal to the difference 

3 between that annuity and the current salary of the office 

4 to which the magistrate judge is recalled. The annuity of 

5 the magistrate judge who completes that period of service, 

6 who is not recalled in a subsequent year, and who retired 

7 under section 7443B, shall be equal to the salary in effect 

8 at the end of the year in which the period of recall oc9 curred for the office from which such individual retired. 

10 ‘‘(c) RULEMAKING AUTHORITY.—The provisions of 

11 this section may be implemented under such rules as may 

12 be promulgated by the Tax Court.’’ 

13 (b) CONFORMING AMENDMENT.—The table of sec14 tions for part I of subchapter C of chapter 76, as amended 

15 by this Act, is amended by inserting after the item relating 

16 to section 7443B the following new item: 

‘‘Sec. 7443C. Recall of magistrate judges of the Tax Court.’’. 

17 SEC. 1013. EFFECTIVE DATE. 

18 Except as otherwise provided, the amendments made 

19 by this subtitle shall take effect on the date of the enact20 ment of this Act. 
555 

•S 1953 PCS 

1 Subtitle B—Tax Court Procedure 

2 SEC. 1021. JURISDICTION OF TAX COURT OVER COLLEC3 TION DUE PROCESS CASES. 

4 (a) IN GENERAL.—Paragraph (1) of section 6330(d) 

5 (relating to proceeding after hearing) is amended to read 

6 as follows: 

7 ‘‘(1) JUDICIAL REVIEW OF DETERMINATION.— 

8 The person may, within 30 days of a determination 

9 under this section, appeal such determination to the 

10 Tax Court (and the Tax Court shall have jurisdic11 tion with respect to such matter).’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply to determinations made after the 

14 date which is 60 days after the date of the enactment of 

15 this Act. 

16 SEC. 1022. AUTHORITY FOR MAGISTRATE JUDGES TO HEAR 

17 AND DECIDE CERTAIN EMPLOYMENT STATUS 

18 CASES. 

19 (a) IN GENERAL.—Section 7443A(b) (relating to 

20 proceedings which may be assigned to magistrate judges) 

21 is amended by striking ‘‘and’’ at the end of paragraph (4), 

22 by redesignating paragraph (5) as paragraph (6), and by 

23 inserting after paragraph (4) the following new paragraph: 

24 ‘‘(5) any proceeding under section 7436(c), 

25 and’’. 
556 

•S 1953 PCS 

1 (b) CONFORMING AMENDMENT.—Section 7443A(c) 

2 is amended by striking ‘‘or (4)’’ and inserting ‘‘(4), or 

3 (5)’’. 

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

5 this section shall apply to any proceeding under section 

6 7436(c) of the Internal Revenue Code of 1986 with re7 spect to which a decision has not become final (as deter8 mined under section 7481 of such Code) before the date 

9 of the enactment of this Act. 

10 SEC. 1023. CONFIRMATION OF AUTHORITY OF TAX COURT 

11 TO APPLY DOCTRINE OF EQUITABLE 

12 RECOUPMENT. 

13 (a) CONFIRMATION OF AUTHORITY OF TAX COURT

14 TO APPLY DOCTRINE OF EQUITABLE RECOUPMENT.— 

15 Section 6214(b) (relating to jurisdiction over other years 

16 and quarters) is amended by adding at the end the fol17 lowing new sentence: ‘‘Notwithstanding the preceding sen18 tence, the Tax Court may apply the doctrine of equitable 

19 recoupment to the same extent that it is available in civil 

20 tax cases before the district courts of the United States 

21 and the United States Court of Federal Claims.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to any action or proceeding in the 

24 United States Tax Court with respect to which a decision 

25 has not become final (as determined under section 7481 
557 

•S 1953 PCS 

1 of the Internal Revenue Code of 1986) as of the date of 

2 the enactment of this Act. 

3 SEC. 1024. TAX COURT FILING FEE IN ALL CASES COM4 MENCED BY FILING PETITION. 

5 (a) IN GENERAL.—Section 7451 (relating to fee for 

6 filing a Tax Court petition) is amended by striking all that 

7 follows ‘‘petition’’ and inserting a period. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall take effect on the date of the enactment 

10 of this Act. 

11 SEC. 1025. AMENDMENTS TO APPOINT EMPLOYEES. 

12 (a) IN GENERAL.—Subsection (a) of section 7471 

13 (relating to Tax Court employees) is amended to read as 

14 follows: 

15 ‘‘(a) APPOINTMENT AND COMPENSATION.— 

16 ‘‘(1) CLERK.—The Tax Court may appoint a 

17 clerk without regard to the provisions of title 5, 

18 United States Code, governing appointments in the 

19 competitive service. The clerk shall serve at the 

20 pleasure of the Tax Court. 

21 ‘‘(2) LAW CLERKS AND SECRETARIES.— 

22 ‘‘(A) IN GENERAL.—The judges and spe23 cial trial judges of the Tax Court may appoint 

24 law clerks and secretaries, in such numbers as 

25 the Tax Court may approve, without regard to 
558 

•S 1953 PCS 

1 the provisions of title 5, United States Code, 

2 governing appointments in the competitive serv3 ice. Any such law clerk or secretary shall serve 

4 at the pleasure of the appointing judge. 

5 ‘‘(B) EXEMPTION FROM FEDERAL LEAVE

6 PROVISIONS.—A law clerk appointed under this 

7 subsection shall be exempt from the provisions 

8 of subchapter I of chapter 63 of title 5, United 

9 States Code. Any unused sick leave or annual 

10 leave standing to the employee’s credit as of the 

11 effective date of this subsection shall remain 

12 credited to the employee and shall be available 

13 to the employee upon separation from the Fed14 eral Government. 

15 ‘‘(3) OTHER EMPLOYEES.—The Tax Court may 

16 appoint necessary employees without regard to the 

17 provisions of title 5, United States Code, governing 

18 appointments in the competitive service. Such em19 ployees shall be subject to removal by the Tax 

20 Court. 

21 ‘‘(4) PAY.—The Tax Court may fix and adjust 

22 the compensation for the clerk and other employees 

23 of the Tax Court without regard to the provisions of 

24 chapter 51, subchapter III of chapter 53, or section 

25 5373 of title 5, United States Code. To the max-
559 

•S 1953 PCS 

1 imum extent feasible, the Tax Court shall com2 pensate employees at rates consistent with those for 

3 employees holding comparable positions in the judi4 cial branch. 

5 ‘‘(5) PROGRAMS.—The Tax Court may establish 

6 programs for employee evaluations, incentive awards, 

7 flexible work schedules, premium pay, and resolution 

8 of employee grievances. 

9 ‘‘(6) DISCRIMINATION PROHIBITED.—The Tax 

10 Court shall— 

11 ‘‘(A) prohibit discrimination on the basis 

12 of race, color, religion, age, sex, national origin, 

13 political affiliation, marital status, or handi14 capping condition; and 

15 ‘‘(B) promulgate procedures for resolving 

16 complaints of discrimination by employees and 

17 applicants for employment. 

18 ‘‘(7) EXPERTS AND CONSULTANTS.—The Tax 

19 Court may procure the services of experts and con20 sultants under section 3109 of title 5, United States 

21 Code. 

22 ‘‘(8) RIGHTS TO CERTAIN APPEALS RE23 SERVED.—Notwithstanding any other provision of 

24 law, an individual who is an employee of the Tax 

25 Court on the day before the effective date of this 
560 

•S 1953 PCS 

1 subsection and who, as of that day, was entitled 

2 to— 

3 ‘‘(A) appeal a reduction in grade or re4 moval to the Merit Systems Protection Board 

5 under chapter 43 of title 5, United States Code, 

6 ‘‘(B) appeal an adverse action to the Merit 

7 Systems Protection Board under chapter 75 of 

8 title 5, United States Code, 

9 ‘‘(C) appeal a prohibited personnel practice 

10 described under section 2302(b) of title 5, 

11 United States Code, to the Merit Systems Pro12 tection Board under chapter 77 of that title, 

13 ‘‘(D) make an allegation of a prohibited 

14 personnel practice described under section 

15 2302(b) of title 5, United States Code, with the 

16 Office of Special Counsel under chapter 12 of 

17 that title for action in accordance with that 

18 chapter, or 

19 ‘‘(E) file an appeal with the Equal Em20 ployment Opportunity Commission under part 

21 1614 of title 29 of the Code of Federal Regula22 tions, 

23 shall be entitled to file such appeal or make such an 

24 allegation so long as the individual remains an em25 ployee of the Tax Court. 
561 

•S 1953 PCS 

1 ‘‘(9) COMPETITIVE STATUS.—Notwithstanding 

2 any other provision of law, any employee of the Tax 

3 Court who has completed at least 1 year of contin4 uous service under a non-temporary appointment 

5 with the Tax Court acquires a competitive status for 

6 appointment to any position in the competitive serv7 ice for which the employee possesses the required 

8 qualifications. 

9 ‘‘(10) MERIT SYSTEM PRINCIPLES; PROHIBITED

10 PERSONNEL PRACTICES; AND PREFERENCE ELIGI11 BLES.—Any personnel management system of the 

12 Tax Court shall— 

13 ‘‘(A) include the principles set forth in sec14 tion 2301(b) of title 5, United States Code; 

15 ‘‘(B) prohibit personnel practices prohib16 ited under section 2302(b) of title 5, United 

17 States Code; and 

18 ‘‘(C) in the case of any individual who 

19 would be a preference eligible in the executive 

20 branch, the Tax Court will provide preference 

21 for that individual in a manner and to an ex22 tent consistent with preference accorded to 

23 preference eligibles in the executive branch.’’. 

24 (b) EFFECTIVE DATE.—The amendments made by 

25 this section shall take effect on the date the United States 
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1 Tax Court adopts a personnel management system after 

2 the date of the enactment of this Act. 

3 SEC. 1026. EXPANDED USE OF TAX COURT PRACTICE FEE 

4 FOR PRO SE TAXPAYERS. 

5 (a) IN GENERAL.—Section 7475(b) (relating to use 

6 of fees) is amended by inserting before the period at the 

7 end ‘‘and to provide services to pro se taxpayers’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall take effect on the date of the enactment 

10 of this Act. 

11 TITLE XI—OTHER PROVISIONS 

12 SEC. 1101. TRANSFER OF EXCESS FUNDS FROM BLACK 

13 LUNG DISABILITY TRUSTS TO UNITED MINE 

14 WORKERS OF AMERICA COMBINED BENEFIT 

15 FUND. 

16 (a) IN GENERAL.—So much of section 501(c)(21)(C) 

17 of the Internal Revenue Code of 1986 (relating to black 

18 lung disability trusts) as precedes the last sentence is 

19 amended to read as follows: 

20 ‘‘(C) Payments described in subparagraph 

21 (A)(i)(IV) may be made from such trust during 

22 a taxable year only to the extent that the aggre23 gate amount of such payments during such tax24 able year does not exceed the excess (if any), as 

25 of the close of the preceding taxable year, of— 
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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 National 

17 Employee Savings and Trust Equity Guarantee Act 

18 of 2005. The Secretary shall adjust the amount 

19 transferred for any year to the extent necessary to 

20 correct errors in any 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 
564 

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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. 1102. 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: 
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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-
566 

•S 1953 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 
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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 
568 

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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)). 
569 

•S 1953 PCS 

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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•S 1953 PCS 

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)’’. 
571 

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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. 276 

109TH CONGRESS 

1ST SESSION S. 1953 

[Report No. 109–174] 

A BILL 

To amend the Internal Revenue Code of 1986 and 

pension plans, and for other purposes. adequate access to, and information about, their quately diversified and by providing workers with are funded and that pension assets are adeican workers by ensuring that pension benefits 1974 to protect the retirement security of Amerthe Employee Retirement Income Security Act of 

NOVEMBER 2, 2005 

Read twice and placed on the calendar