113TH CONGRESS 

2D SESSION S. 1302 

AN ACT 

To amend the Employee Retirement Income Security Act 

of 1974 and the Internal Revenue Code of 1986 to 

provide for cooperative and small employer charity pension plans. 

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 ‘‘Cooperative and Small Employer Charity Pension Flexi4 bility Act’’. 

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

6 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Congressional findings and declarations of policy. 

Sec. 3. Effective date. 

TITLE I—AMENDMENTS TO EMPLOYEE RETIREMENT INCOME 

SECURITY ACT OF 1974 AND OTHER PROVISIONS 

Sec. 101. Definition of cooperative and small employer charity pension plans. 

Sec. 102. Funding rules applicable to cooperative and small employer charity 

pension plans. 

Sec. 103. Elections. 

Sec. 104. Transparency. 

Sec. 105. Sponsor education and assistance. 

TITLE II—AMENDMENTS TO INTERNAL REVENUE CODE OF 1986 

Sec. 201. Definition of cooperative and small employer charity pension plans. 

Sec. 202. Funding rules applicable to cooperative and small employer charity 

pension plans. 

Sec. 203. Election not to be treated as a CSEC plan. 

7 SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATIONS OF 

8 POLICY. 

9 Congress finds as follows: 

10 (1) Defined benefit pension plans are a cost-ef11 fective way for cooperative associations and charities 

12 to provide their employees with economic security in 

13 retirement. 

14 (2) Many cooperative associations and chari15 table organizations are only able to provide their em16 ployees with defined benefit pension plans because 
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1 those organizations are able to pool their resources 

2 using the multiple employer plan structure. 

3 (3) The pension funding rules should encourage 

4 cooperative associations and charities to continue to 

5 provide their employees with pension benefits. 

6 SEC. 3. EFFECTIVE DATE. 

7 Unless otherwise specified in this Act, the provisions 

8 of this Act shall apply to years beginning after December 

9 31, 2013. 

10 TITLE I—AMENDMENTS TO EM11 PLOYEE RETIREMENT IN12 COME SECURITY ACT OF 1974 

13 AND OTHER PROVISIONS 

14 SEC. 101. DEFINITION OF COOPERATIVE AND SMALL EM15 PLOYER CHARITY PENSION PLANS. 

16 Section 210 of the Employee Retirement Income Se17 curity Act of 1974 (29 U.S.C. 1060) is amended by adding 

18 at the end the following new subsection: 

19 ‘‘(f) COOPERATIVE AND SMALL EMPLOYER CHARITY

20 PENSION PLANS.— 

21 ‘‘(1) IN GENERAL.—For purposes of this title, 

22 except as provided in this subsection, a CSEC plan 

23 is an employee pension benefit plan (other than a 

24 multiemployer plan) that is a defined benefit plan— 
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1 ‘‘(A) to which section 104 of the Pension 

2 Protection Act of 2006 applies, without regard 

3 to— 

4 ‘‘(i) section 104(a)(2) of such Act; 

5 ‘‘(ii) the amendments to such section 

6 104 by section 202(b) of the Preservation 

7 of Access to Care for Medicare Bene8 ficiaries and Pension Relief Act of 2010; 

9 and 

10 ‘‘(iii) paragraph (3)(B); or 

11 ‘‘(B) that, as of June 25, 2010, was main12 tained by more than one employer and all of the 

13 employers were organizations described in sec14 tion 501(c)(3) of the Internal Revenue Code of 

15 1986. 

16 ‘‘(2) AGGREGATION.—All employers that are 

17 treated as a single employer under subsection (b) or 

18 (c) of section 414 of the Internal Revenue Code of 

19 1986 shall be treated as a single employer for pur20 poses of determining if a plan was maintained by 

21 more than one employer under paragraph (1)(B).’’. 
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1 SEC. 102. FUNDING RULES APPLICABLE TO COOPERATIVE 

2 AND SMALL EMPLOYER CHARITY PENSION 

3 PLANS. 

4 (a) IN GENERAL.—Part 3 of title I of the Employee 

5 Retirement Income Security Act of 1974 (29 U.S.C. 1081 

6 et seq.) is amended by adding at the end the following 

7 new section: 

8 ‘‘SEC. 306. MINIMUM FUNDING STANDARDS. 

9 ‘‘(a) GENERAL RULE.—For purposes of section 302, 

10 the term ‘accumulated funding deficiency’ for a CSEC 

11 plan means the excess of the total charges to the funding 

12 standard account for all plan years (beginning with the 

13 first plan year to which section 302 applies) over the total 

14 credits to such account for such years or, if less, the excess 

15 of the total charges to the alternative minimum funding 

16 standard account for such plan years over the total credits 

17 to such account for such years. 

18 ‘‘(b) FUNDING STANDARD ACCOUNT.— 

19 ‘‘(1) ACCOUNT REQUIRED.—Each plan to which 

20 this section applies shall establish and maintain a 

21 funding standard account. Such account shall be 

22 credited and charged solely as provided in this sec23 tion. 

24 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year, 

25 the funding standard account shall be charged with 

26 the sum of— 
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1 ‘‘(A) the normal cost of the plan for the 

2 plan year, 

3 ‘‘(B) the amounts necessary to amortize in 

4 equal annual installments (until fully amor5 tized)— 

6 ‘‘(i) in the case of a plan in existence 

7 on January 1, 1974, the unfunded past 

8 service liability under the plan on the first 

9 day of the first plan year to which section 

10 302 applies, over a period of 40 plan years, 

11 ‘‘(ii) in the case of a plan which comes 

12 into existence after January 1, 1974, but 

13 before the first day of the first plan year 

14 beginning after December 31, 2013, the 

15 unfunded past service liability under the 

16 plan on the first day of the first plan year 

17 to which section 302 applies, over a period 

18 of 30 plan years, 

19 ‘‘(iii) separately, with respect to each 

20 plan year, the net increase (if any) in un21 funded past service liability under the plan 

22 arising from plan amendments adopted in 

23 such year, over a period of 15 plan years, 

24 ‘‘(iv) separately, with respect to each 

25 plan year, the net experience loss (if any) 
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1 under the plan, over a period of 5 plan 

2 years, and 

3 ‘‘(v) separately, with respect to each 

4 plan year, the net loss (if any) resulting 

5 from changes in actuarial assumptions 

6 used under the plan, over a period of 10 

7 plan years, 

8 ‘‘(C) the amount necessary to amortize 

9 each waived funding deficiency (within the 

10 meaning of section 302(c)(3)) for each prior 

11 plan year in equal annual installments (until 

12 fully amortized) over a period of 5 plan years, 

13 ‘‘(D) the amount necessary to amortize in 

14 equal annual installments (until fully amor15 tized) over a period of 5 plan years any amount 

16 credited to the funding standard account under 

17 paragraph (3)(D), 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 

23 302(c)(7)(A)(i)(I) (as in effect on the day be24 fore the enactment of the Pension Protection 

25 Act of 2006). 
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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 15 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 5 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 10 

23 plan years, 
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1 ‘‘(C) the amount of the waived funding de2 ficiency (within the meaning of section 

3 302(c)(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, the excess 

10 (if any) of any debit balance in the funding 

11 standard account (determined without regard to 

12 this subparagraph) over any debit balance in 

13 the alternative minimum funding standard ac14 count. 

15 ‘‘(4) COMBINING AND OFFSETTING AMOUNTS

16 TO BE AMORTIZED.—Under regulations prescribed 

17 by the Secretary of the Treasury, amounts required 

18 to be amortized under paragraph (2) or paragraph 

19 (3), as the case may be— 

20 ‘‘(A) may be combined into one amount 

21 under such paragraph to be amortized over a 

22 period determined on the basis of the remaining 

23 amortization period for all items entering into 

24 such combined amount, and 
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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.— 

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

10 subparagraph (B), the funding standard ac11 count (and items therein) shall be charged or 

12 credited (as determined under regulations pre13 scribed by the Secretary of the Treasury) with 

14 interest at the appropriate rate consistent with 

15 the rate or rates of interest used under the plan 

16 to determine costs. 

17 ‘‘(B) EXCEPTION.—The interest rate used 

18 for purposes of computing the amortization 

19 charge described in subsection (b)(2)(C) or for 

20 purposes of any arrangement under subsection 

21 (d) for any plan year shall be the greater of— 

22 ‘‘(i) 150 percent of the Federal mid23 term rate (as in effect under section 1274 

24 of the Internal Revenue Code of 1986 for 

25 the 1st month of such plan year), or 
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1 ‘‘(ii) the rate of interest determined 

2 under subparagraph (A). 

3 ‘‘(6) AMORTIZATION SCHEDULES IN EFFECT.— 

4 Amortization schedules for amounts described in 

5 paragraphs (2) and (3) that are in effect as of the 

6 last day of the last plan year beginning before Janu7 ary 1, 2014, by reason of section 104 of the Pension 

8 Protection Act of 2006 shall remain in effect pursu9 ant to their terms and this section, except that such 

10 amounts shall not be amortized again under this sec11 tion. 

12 ‘‘(c) SPECIAL RULES.— 

13 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

14 FUNDING METHOD.—For purposes of this section, 

15 normal costs, accrued liability, past service liabilities, 

16 and experience gains and losses shall be determined 

17 under the funding method used to determine costs 

18 under the plan. 

19 ‘‘(2) VALUATION OF ASSETS.— 

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

21 section, the value of the plan’s assets shall be 

22 determined on the basis of any reasonable actu23 arial method of valuation which takes into ac24 count fair market value and which is permitted 
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1 under regulations prescribed by the Secretary of 

2 the Treasury. 

3 ‘‘(B) DEDICATED BOND PORTFOLIO.—The 

4 Secretary of the Treasury may by regulations 

5 provide that the value of any dedicated bond 

6 portfolio of a plan shall be determined by using 

7 the interest rate under section 302(b)(5) (as in 

8 effect on the day before the enactment of the 

9 Pension Protection Act of 2006). 

10 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA11 SONABLE.—For purposes of this section, all costs, li12 abilities, rates of interest, and other factors under 

13 the plan shall be determined on the basis of actu14 arial assumptions and methods— 

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

16 into account the experience of the plan and rea17 sonable expectations), and 

18 ‘‘(B) which, in combination, offer the actu19 ary’s best estimate of anticipated experience 

20 under the plan. 

21 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX22 PERIENCE GAIN OR LOSS.—For purposes of this sec23 tion, if— 
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1 ‘‘(A) a change in benefits under the Social 

2 Security Act or in other retirement benefits cre3 ated under Federal or State law, or 

4 ‘‘(B) a change in the definition of the term 

5 ‘wages’ under section 3121 of the Internal Rev6 enue Code of 1986 or a change in the amount 

7 of such wages taken into account under regula8 tions prescribed for purposes of section 

9 401(a)(5) of such Code, 

10 results in an increase or decrease in accrued liability 

11 under a plan, such increase or decrease shall be 

12 treated as an experience loss or gain. 

13 ‘‘(5) FUNDING METHOD AND PLAN YEAR.— 

14 ‘‘(A) FUNDING METHODS AVAILABLE.—All 

15 funding methods available to CSEC plans under 

16 section 302 (as in effect on the day before the 

17 enactment of the Pension Protection Act of 

18 2006) shall continue to be available under this 

19 section. 

20 ‘‘(B) CHANGES.—If the funding method 

21 for a plan is changed, the new funding method 

22 shall become the funding method used to deter23 mine costs and liabilities under the plan only if 

24 the change is approved by the Secretary of the 

25 Treasury. If the plan year for a plan is 
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1 changed, the new plan year shall become the 

2 plan year for the plan only if the change is ap3 proved by the Secretary of the Treasury. 

4 ‘‘(C) APPROVAL REQUIRED FOR CERTAIN

5 CHANGES IN ASSUMPTIONS BY CERTAIN SIN6 GLE-EMPLOYER PLANS SUBJECT TO ADDI7 TIONAL FUNDING REQUIREMENT.— 

8 ‘‘(i) IN GENERAL.—No actuarial as9 sumption (other than the assumptions de10 scribed in subsection (h)(3)) used to deter11 mine the current liability for a plan to 

12 which this subparagraph applies may be 

13 changed without the approval of the Sec14 retary of the Treasury. 

15 ‘‘(ii) PLANS TO WHICH SUBPARA16 GRAPH APPLIES.—This subparagraph shall 

17 apply to a plan only if— 

18 ‘‘(I) the plan is a CSEC plan, 

19 ‘‘(II) the aggregate unfunded 

20 vested benefits as of the close of the 

21 preceding plan year (as determined 

22 under section 4006(a)(3)(E)(iii)) of 

23 such plan and all other plans main24 tained by the contributing sponsors 

25 (as defined in section 4001(a)(13)) 
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1 and members of such sponsors’ con2 trolled groups (as defined in section 

3 4001(a)(14)) which are covered by 

4 title IV (disregarding plans with no 

5 unfunded vested benefits) exceed 

6 $50,000,000, and 

7 ‘‘(III) the change in assumptions 

8 (determined after taking into account 

9 any changes in interest rate and mor10 tality table) results in a decrease in 

11 the funding shortfall of the plan for 

12 the current plan year that exceeds 

13 $50,000,000, or that exceeds 

14 $5,000,000 and that is 5 percent or 

15 more of the current liability of the 

16 plan before such change. 

17 ‘‘(6) FULL FUNDING.—If, as of the close of a 

18 plan year, a plan would (without regard to this para19 graph) have an accumulated funding deficiency (de20 termined without regard to the alternative minimum 

21 funding standard account permitted under sub22 section (e)) in excess of the full funding limitation— 

23 ‘‘(A) the funding standard account shall be 

24 credited with the amount of such excess, and 
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1 ‘‘(B) all amounts described in 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 ‘‘(7) FULL-FUNDING LIMITATION.—For pur7 poses of paragraph (6), the term ‘full-funding limita8 tion’ means the excess (if any) of— 

9 ‘‘(A) the accrued liability (including nor10 mal cost) under the plan (determined under the 

11 entry age normal funding method if such ac12 crued liability cannot be directly calculated 

13 under the funding method used for the plan), 

14 over 

15 ‘‘(B) the lesser of— 

16 ‘‘(i) the fair market value of the 

17 plan’s assets, or 

18 ‘‘(ii) the value of such assets deter19 mined under paragraph (2). 

20 ‘‘(C) MINIMUM AMOUNT.— 

21 ‘‘(i) IN GENERAL.—In no event shall 

22 the full-funding limitation determined 

23 under subparagraph (A) be less than the 

24 excess (if any) of— 
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1 ‘‘(I) 90 percent of the current li2 ability (determined without regard to 

3 paragraph (4) of subsection (h)) of 

4 the plan (including the expected in5 crease in such current liability due to 

6 benefits accruing during the plan 

7 year), over 

8 ‘‘(II) the value of the plan’s as9 sets determined under paragraph (2). 

10 ‘‘(ii) ASSETS.—For purposes of clause 

11 (i), assets shall not be reduced by any 

12 credit balance in the funding standard ac13 count. 

14 ‘‘(8) ANNUAL VALUATION.— 

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

16 section, a determination of experience gains and 

17 losses and a valuation of the plan’s liability 

18 shall be made not less frequently than once 

19 every year, except that such determination shall 

20 be made more frequently to the extent required 

21 in particular cases under regulations prescribed 

22 by the Secretary of the Treasury. 

23 ‘‘(B) VALUATION DATE.— 

24 ‘‘(i) CURRENT YEAR.—Except as pro25 vided in clause (ii), the valuation referred 
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1 to in subparagraph (A) shall be made as of 

2 a date within the plan year to which the 

3 valuation refers or within one month prior 

4 to the beginning of such year. 

5 ‘‘(ii) USE OF PRIOR YEAR VALU6 ATION.—The valuation referred to in sub7 paragraph (A) may be made as of a date 

8 within the plan year prior to the year to 

9 which the valuation refers if, as of such 

10 date, the value of the assets of the plan are 

11 not less than 100 percent of the plan’s cur12 rent liability. 

13 ‘‘(iii) ADJUSTMENTS.—Information 

14 under clause (ii) shall, in accordance with 

15 regulations, be actuarially adjusted to re16 flect significant differences in participants. 

17 ‘‘(iv) LIMITATION.—A change in fund18 ing method to use a prior year valuation, 

19 as provided in clause (ii), may not be made 

20 unless as of the valuation date within the 

21 prior plan year, the value of the assets of 

22 the plan are not less than 125 percent of 

23 the plan’s current liability. 

24 ‘‘(9) TIME WHEN CERTAIN CONTRIBUTIONS

25 DEEMED MADE.—For purposes of this section, any 
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1 contributions for a plan year made by an employer 

2 during the period— 

3 ‘‘(A) beginning on the day after the last 

4 day of such plan year, and 

‘‘(B) ending on the day which is 81 5 ⁄2

6 months after the close of the plan year, 

7 shall be deemed to have been made on such last day. 

8 ‘‘(10) ANTICIPATION OF BENEFIT INCREASES

9 EFFECTIVE IN THE FUTURE.—In determining pro10 jected benefits, the funding method of a collectively 

11 bargained CSEC plan described in section 413(a) of 

12 the Internal Revenue Code of 1986 shall anticipate 

13 benefit increases scheduled to take effect during the 

14 term of the collective bargaining agreement applica15 ble to the plan. 

16 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS.—The 

17 period of years required to amortize any unfunded liability 

18 (described in any clause of subsection (b)(2)(B)) of any 

19 plan may be extended by the Secretary of the Treasury 

20 for a period of time (not in excess of 10 years) if such 

21 Secretary determines that such extension would carry out 

22 the purposes of this Act and provide adequate protection 

23 for participants under the plan and their beneficiaries, and 

24 if such Secretary determines that the failure to permit 

25 such extension would result in— 
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1 ‘‘(1) a substantial risk to the voluntary continu2 ation of the plan, or 

3 ‘‘(2) a substantial curtailment of pension ben4 efit levels or employee compensation. 

5 ‘‘(e) ALTERNATIVE MINIMUM FUNDING STAND6 ARD.— 

7 ‘‘(1) IN GENERAL.—A CSEC plan which uses a 

8 funding method that requires contributions in all 

9 years not less than those required under the entry 

10 age normal funding method may maintain an alter11 native minimum funding standard account for any 

12 plan year. Such account shall be credited and 

13 charged solely as provided in this subsection. 

14 ‘‘(2) CHARGES AND CREDITS TO ACCOUNT.— 

15 For a plan year the alternative minimum funding 

16 standard account shall be— 

17 ‘‘(A) charged with the sum of— 

18 ‘‘(i) the lesser of normal cost under 

19 the funding method used under the plan or 

20 normal cost determined under the unit 

21 credit method, 

22 ‘‘(ii) the excess, if any, of the present 

23 value of accrued benefits under the plan 

24 over the fair market value of the assets, 

25 and 
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1 ‘‘(iii) an amount equal to the excess 

2 (if any) of credits to the alternative min3 imum standard account for all prior plan 

4 years over charges to such account for all 

5 such years, and 

6 ‘‘(B) credited with the amount considered 

7 contributed by the employer to or under the 

8 plan for the plan year. 

9 ‘‘(3) INTEREST.—The alternative minimum 

10 funding standard account (and items therein) shall 

11 be charged or credited with interest in the manner 

12 provided under subsection (b)(5) with respect to the 

13 funding standard account. 

14 ‘‘(f) QUARTERLY CONTRIBUTIONS REQUIRED.— 

15 ‘‘(1) IN GENERAL.—If a CSEC plan which has 

16 a funded current liability percentage for the pre17 ceding plan year of less than 100 percent fails to 

18 pay the full amount of a required installment for the 

19 plan year, then the rate of interest charged to the 

20 funding standard account under subsection (b)(5) 

21 with respect to the amount of the underpayment for 

22 the period of the underpayment shall be equal to the 

23 greater of— 

24 ‘‘(A) 175 percent of the Federal mid-term 

25 rate (as in effect under section 1274 of the In-
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1 ternal Revenue Code of 1986 for the 1st month 

2 of such plan year), or 

3 ‘‘(B) the rate of interest used under the 

4 plan in determining costs. 

5 ‘‘(2) AMOUNT OF UNDERPAYMENT, PERIOD OF

6 UNDERPAYMENT.—For purposes of paragraph (1)— 

7 ‘‘(A) AMOUNT.—The amount of the under8 payment shall be the excess of— 

9 ‘‘(i) the required installment, over 

10 ‘‘(ii) the amount (if any) of the in11 stallment contributed to or under the plan 

12 on or before the due date for the install13 ment. 

14 ‘‘(B) PERIOD OF UNDERPAYMENT.—The 

15 period for which interest is charged under this 

16 subsection with regard to any portion of the un17 derpayment shall run from the due date for the 

18 installment to the date on which such portion is 

19 contributed to or under the plan (determined 

20 without regard to subsection (c)(9)). 

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. 
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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 amount re17 quired to be contributed to or under the 

18 plan by the employer for the plan year 

19 under section 302 (without regard to any 

20 waiver under subsection (c) thereof), or 
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1 ‘‘(ii) 100 percent of the amount so re2 quired for the preceding plan year. 

3 Clause (ii) shall not apply if the preceding plan 

4 year was not a year of 12 months. 

5 ‘‘(5) LIQUIDITY REQUIREMENT.— 

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

7 paragraph applies shall be treated as failing to 

8 pay the full amount of any required installment 

9 to the extent that the value of the liquid assets 

10 paid in such installment is less than the liquid11 ity shortfall (whether or not such liquidity 

12 shortfall exceeds the amount of such install13 ment required to be paid but for this para14 graph). 

15 ‘‘(B) PLANS TO WHICH PARAGRAPH AP16 PLIES.—This paragraph shall apply to a CSEC 

17 plan other than a plan described in section 

18 302(d)(6)(A) (as in effect on the day before the 

19 enactment of the Pension Protection Act of 

20 2006) which— 

21 ‘‘(i) is required to pay installments 

22 under this subsection for a plan year, and 

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

24 quarter during such plan year. 
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1 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

2 purposes of paragraph (1), any portion of an 

3 installment that is treated as not paid under 

4 subparagraph (A) shall continue to be treated 

5 as unpaid until the close of the quarter in 

6 which the due date for such installment occurs. 

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

8 amount of any required installment is increased 

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

10 shall such increase exceed the amount which, 

11 when added to prior installments for the plan 

12 year, is necessary to increase the funded cur13 rent liability percentage (taking into account 

14 the expected increase in current liability due to 

15 benefits accruing during the plan year) to 100 

16 percent. 

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

18 paragraph— 

19 ‘‘(i) LIQUIDITY SHORTFALL.—The 

20 term ‘liquidity shortfall’ means, with re21 spect to any required installment, an 

22 amount equal to the excess (as of the last 

23 day of the quarter for which such install24 ment is made) of the base amount with re-
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1 spect to such quarter over the value (as of 

2 such last day) of the plan’s liquid assets. 

3 ‘‘(ii) BASE AMOUNT.— 

4 ‘‘(I) IN GENERAL.—The term 

5 ‘base amount’ means, with respect to 

6 any quarter, an amount equal to 3 

7 times the sum of the adjusted dis8 bursements from the plan for the 12 

9 months ending on the last day of such 

10 quarter. 

11 ‘‘(II) SPECIAL RULE.—If the 

12 amount determined under subclause 

13 (I) exceeds an amount equal to 2 

14 times the sum of the adjusted dis15 bursements from the plan for the 36 

16 months ending on the last day of the 

17 quarter and an enrolled actuary cer18 tifies to the satisfaction of the Sec19 retary of the Treasury that such ex20 cess is the result of nonrecurring cir21 cumstances, the base amount with re22 spect to such quarter shall be deter23 mined without regard to amounts re24 lated to those nonrecurring cir25 cumstances. 
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1 ‘‘(iii) DISBURSEMENTS FROM THE

2 PLAN.—The term ‘disbursements from the 

3 plan’ means all disbursements from the 

4 trust, including purchases of annuities, 

5 payments of single sums and other bene6 fits, and administrative expenses. 

7 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

8 The term ‘adjusted disbursements’ means 

9 disbursements from the plan reduced by 

10 the product of— 

11 ‘‘(I) the plan’s funded current li12 ability percentage for the plan year, 

13 and 

14 ‘‘(II) the sum of the purchases of 

15 annuities, payments of single sums, 

16 and such other disbursements as the 

17 Secretary of the Treasury shall pro18 vide in regulations. 

19 ‘‘(v) LIQUID ASSETS.—The term ‘liq20 uid assets’ means cash, marketable securi21 ties and such other assets as specified by 

22 the Secretary of the Treasury in regula23 tions. 

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

25 means, with respect to any required install-
28 

†S 1302 ES

1 ment, the 3-month period preceding the 

2 month in which the due date for such in3 stallment occurs. 

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

5 Treasury may prescribe such regulations as are 

6 necessary to carry out this paragraph. 

7 ‘‘(6) FISCAL YEARS AND SHORT YEARS.— 

8 ‘‘(A) FISCAL YEARS.—In applying this 

9 subsection to a plan year beginning on any date 

10 other than January 1, there shall be substituted 

11 for the months specified in this subsection, the 

12 months which correspond thereto. 

13 ‘‘(B) SHORT PLAN YEAR.—This subsection 

14 shall be applied to plan years of less than 12 

15 months in accordance with regulations pre16 scribed by the Secretary of the Treasury. 

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

18 MAKE REQUIRED CONTRIBUTIONS.— 

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

20 which this section applies, if— 

21 ‘‘(A) any person fails to make a required 

22 installment under subsection (f) or any other 

23 payment required under this section before the 

24 due date for such installment or other payment, 

25 and 
29 

†S 1302 ES

1 ‘‘(B) the unpaid balance of such install2 ment or other payment (including interest), 

3 when added to the aggregate unpaid balance of 

4 all preceding such installments or other pay5 ments for which payment was not made before 

6 the due date (including interest), exceeds 

7 $1,000,000, 

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

9 amount determined under paragraph (3) upon all 

10 property and rights to property, whether real or per11 sonal, belonging to such person and any other per12 son who is a member of the same controlled group 

13 of which such person is a member. 

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

15 This subsection shall apply to a CSEC plan for any 

16 plan year for which the funded current liability per17 centage of such plan is less than 100 percent. This 

18 subsection shall not apply to any plan to which sec19 tion 4021 does not apply (as such section is in effect 

20 on the date of the enactment of the Retirement Pro21 tection Act of 1994). 

22 ‘‘(3) AMOUNT OF LIEN.—For purposes of para23 graph (1), the amount of the lien shall be equal to 

24 the aggregate unpaid balance of required install-
30 

†S 1302 ES

1 ments and other payments required under this sec2 tion (including interest)— 

3 ‘‘(A) for plan years beginning after 1987, 

4 and 

5 ‘‘(B) for which payment has not been 

6 made before the due date. 

7 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

8 ‘‘(A) NOTICE OF FAILURE.—A person 

9 committing a failure described in paragraph (1) 

10 shall notify the Pension Benefit Guaranty Cor11 poration of such failure within 10 days of the 

12 due date for the required installment or other 

13 payment. 

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

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

16 the required installment or other payment and 

17 shall continue until the last day of the first plan 

18 year in which the plan ceases to be described in 

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

20 run without regard to whether such plan con21 tinues to be described in paragraph (2) during 

22 the period referred to in the preceding sentence. 

23 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

24 amount with respect to which a lien is imposed 

25 under paragraph (1) shall be treated as taxes 
31 

†S 1302 ES

1 due and owing the United States and rules 

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

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

4 a lien imposed by subsection (a) and the 

5 amount with respect to such lien. 

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

7 paragraph (1) may be perfected and enforced only 

8 by the Pension Benefit Guaranty Corporation, or at 

9 the direction of the Pension Benefit Guaranty Cor10 poration, by any contributing employer (or any 

11 member of the controlled group of the contributing 

12 employer). 

13 ‘‘(6) DEFINITIONS.—For purposes of this sub14 section— 

15 ‘‘(A) DUE DATE; REQUIRED INSTALL16 MENT.—The terms ‘due date’ and ‘required in17 stallment’ have the meanings given such terms 

18 by subsection (f), except that in the case of a 

19 payment other than a required installment, the 

20 due date shall be the date such payment is re21 quired to be made under this section. 

22 ‘‘(B) CONTROLLED GROUP.—The term 

23 ‘controlled group’ means any group treated as 

24 a single employer under subsections (b), (c), 
32 

†S 1302 ES

1 (m), and (o) of section 414 of the Internal Rev2 enue Code of 1986. 

3 ‘‘(h) CURRENT LIABILITY.—For purposes of this sec4 tion— 

5 ‘‘(1) IN GENERAL.—The term ‘current liability’ 

6 means all liabilities to employees and their bene7 ficiaries under the plan. 

8 ‘‘(2) TREATMENT OF UNPREDICTABLE CONTIN9 GENT EVENT BENEFITS.— 

10 ‘‘(A) IN GENERAL.—For purposes of para11 graph (1), any unpredictable contingent event 

12 benefit shall not be taken into account until the 

13 event on which the benefit is contingent occurs. 

14 ‘‘(B) UNPREDICTABLE CONTINGENT

15 EVENT BENEFIT.—The term ‘unpredictable 

16 contingent event benefit’ means any benefit 

17 contingent on an event other than— 

18 ‘‘(i) age, service, compensation, death, 

19 or disability, or 

20 ‘‘(ii) an event which is reasonably and 

21 reliably predictable (as determined by the 

22 Secretary of the Treasury). 

23 ‘‘(3) INTEREST RATE AND MORTALITY ASSUMP24 TIONS USED.— 
33 

†S 1302 ES

1 ‘‘(A) INTEREST RATE.—The rate of inter2 est used to determine current liability under 

3 this section shall be the third segment rate de4 termined under section 303(h)(2)(C). 

5 ‘‘(B) MORTALITY TABLES.— 

6 ‘‘(i) SECRETARIAL AUTHORITY.—The 

7 Secretary of the Treasury may by regula8 tion prescribe mortality tables to be used 

9 in determining current liability under this 

10 subsection. Such tables shall be based upon 

11 the actual experience of pension plans and 

12 projected trends in such experience. In pre13 scribing such tables, the Secretary of the 

14 Treasury shall take into account results of 

15 available independent studies of mortality 

16 of individuals covered by pension plans. 

17 ‘‘(ii) PERIODIC REVIEW.—The Sec18 retary of the Treasury shall periodically (at 

19 least every 5 years) review any tables in ef20 fect under this subsection and shall, to the 

21 extent the Secretary of the Treasury deter22 mines necessary, by regulation update the 

23 tables to reflect the actual experience of 

24 pension plans and projected trends in such 

25 experience. 
34 

†S 1302 ES

1 ‘‘(C) SEPARATE MORTALITY TABLES FOR

2 THE DISABLED.—Notwithstanding subpara3 graph (B)— 

4 ‘‘(i) IN GENERAL.—In the case of 

5 plan years beginning after December 31, 

6 1995, the Secretary of the Treasury shall 

7 establish mortality tables which may be 

8 used (in lieu of the tables under subpara9 graph (B)) to determine current liability 

10 under this subsection for individuals who 

11 are entitled to benefits under the plan on 

12 account of disability. The Secretary of the 

13 Treasury shall establish separate tables for 

14 individuals whose disabilities occur in plan 

15 years beginning before January 1, 1995, 

16 and for individuals whose disabilities occur 

17 in plan years beginning on or after such 

18 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 
35 

†S 1302 ES

1 of title II of the Social Security Act and 

2 the regulations thereunder. 

3 ‘‘(4) CERTAIN SERVICE DISREGARDED.— 

4 ‘‘(A) IN GENERAL.—In the case of a par5 ticipant to whom this paragraph applies, only 

6 the applicable percentage of the years of service 

7 before such individual became a participant 

8 shall be taken into account in computing the 

9 current liability of the plan. 

10 ‘‘(B) APPLICABLE PERCENTAGE.—For 

11 purposes of this subparagraph, the applicable 

12 percentage shall be determined as follows: 

‘‘If the years of participation 

are: 

The applicable percentage 

is: 

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

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

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

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

5 or more ...................................................... 100. 

13 ‘‘(C) PARTICIPANTS TO WHOM PARAGRAPH

14 APPLIES.—This subparagraph shall apply to 

15 any participant who, at the time of becoming a 

16 participant— 

17 ‘‘(i) has not accrued any other benefit 

18 under any defined benefit plan (whether or 

19 not terminated) maintained by the em20 ployer or a member of the same controlled 

21 group of which the employer is a member, 
36 

†S 1302 ES

1 ‘‘(ii) who first becomes a participant 

2 under the plan in a plan year beginning 

3 after December 31, 1987, and 

4 ‘‘(iii) has years of service greater than 

5 the minimum years of service necessary for 

6 eligibility to participate in the plan. 

7 ‘‘(D) ELECTION.—An employer may elect 

8 not to have this subparagraph apply. Such an 

9 election, once made, may be revoked only with 

10 the consent of the Secretary of the Treasury. 

11 ‘‘(i) FUNDED CURRENT LIABILITY PERCENTAGE.— 

12 For purposes of this section, the term ‘funded current li13 ability percentage’ means, with respect to any plan year, 

14 the percentage which— 

15 ‘‘(1) the value of the plan’s assets determined 

16 under subsection (c)(2), is of 

17 ‘‘(2) the current liability under the plan. 

18 ‘‘(j) FUNDING RESTORATION STATUS.—Notwith19 standing any other provisions of this section— 

20 ‘‘(1) NORMAL COST PAYMENT.— 

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

22 CSEC plan that is in funding restoration status 

23 for a plan year, for purposes of section 302, the 

24 term ‘accumulated funding deficiency’ means, 

25 for such plan year, the greater of— 
37 

†S 1302 ES

1 ‘‘(i) the amount described in sub2 section (a), or 

3 ‘‘(ii) the excess of the normal cost of 

4 the plan for the plan year over the amount 

5 actually contributed to or under the plan 

6 for the plan year. 

7 ‘‘(B) NORMAL COST.—In the case of a 

8 CSEC plan that uses a spread gain funding 

9 method, for purposes of this subsection, the 

10 term ‘normal cost’ means normal cost as deter11 mined under the entry age normal funding 

12 method. 

13 ‘‘(2) PLAN AMENDMENTS.—In the case of a 

14 CSEC plan that is in funding restoration status for 

15 a plan year, no amendment to such plan may take 

16 effect during such plan year if such amendment has 

17 the effect of increasing liabilities of the plan by 

18 means of increases in benefits, establishment of new 

19 benefits, changing the rate of benefit accrual, or 

20 changing the rate at which benefits become non21 forfeitable. This paragraph shall not apply to any 

22 plan amendment that is required to comply with any 

23 applicable law. This paragraph shall cease to apply 

24 with respect to any plan year, effective as of the 

25 first day of the plan year (or if later, the effective 
38 

†S 1302 ES

1 date of the amendment) upon payment by the plan 

2 sponsor of a contribution to the plan (in addition to 

3 any contribution required under this section without 

4 regard to this paragraph) in an amount equal to the 

5 increase in the funding liability of the plan attrib6 utable to the plan amendment. 

7 ‘‘(3) FUNDING RESTORATION PLAN.—The spon8 sor of a CSEC plan shall establish a written funding 

9 restoration plan within 180 days of the receipt by 

10 the plan sponsor of a certification from the plan ac11 tuary that the plan is in funding restoration status 

12 for a plan year. Such funding restoration plan shall 

13 consist of actions that are calculated, based on rea14 sonably anticipated experience and reasonable actu15 arial assumptions, to increase the plan’s funded per16 centage to 100 percent over a period that is not 

17 longer than the greater of 7 years or the shortest 

18 amount of time practicable. Such funding restora19 tion plan shall take into account contributions re20 quired under this section (without regard to this 

21 paragraph). If a plan remains in funding restoration 

22 status for 2 or more years, such funding restoration 

23 plan shall be updated each year after the 1st such 

24 year within 180 days of receipt by the plan sponsor 

25 of a certification from the plan actuary that the plan 
39 

†S 1302 ES

1 remains in funding restoration status for the plan 

2 year. 

3 ‘‘(4) ANNUAL CERTIFICATION BY PLAN ACTU4 ARY.—Not later than the 90th day of each plan year 

5 of a CSEC plan, the plan actuary shall certify to the 

6 plan sponsor whether or not the plan is in funding 

7 restoration status for the plan year, based on the 

8 plan’s funded percentage as of the beginning of the 

9 plan year. For this purpose, the actuary may conclu10 sively rely on an estimate of— 

11 ‘‘(A) the plan’s funding liability, based on 

12 the funding liability of the plan for the pre13 ceding plan year and on reasonable actuarial es14 timates, assumptions, and methods, and 

15 ‘‘(B) the amount of any contributions rea16 sonably anticipated to be made for the pre17 ceding plan year. 

18 Contributions described in subparagraph (B) shall 

19 be taken into account in determining the plan’s 

20 funded percentage as of the beginning of the plan 

21 year. 

22 ‘‘(5) DEFINITIONS.—For purposes of this sub23 section— 

24 ‘‘(A) FUNDING RESTORATION STATUS.—A 

25 CSEC plan shall be treated as in funding res-
40 

†S 1302 ES

1 toration status for a plan year if the plan’s 

2 funded percentage as of the beginning of such 

3 plan year is less than 80 percent. 

4 ‘‘(B) FUNDED PERCENTAGE.—The term 

5 ‘funded percentage’ means the ratio (expressed 

6 as a percentage) which— 

7 ‘‘(i) the value of plan assets (as deter8 mined under subsection (c)(2)), bears to 

9 ‘‘(ii) the plan’s funding liability. 

10 ‘‘(C) FUNDING LIABILITY.—The term 

11 ‘funding liability’ for a plan year means the 

12 present value of all benefits accrued or earned 

13 under the plan as of the beginning of the plan 

14 year, based on the assumptions used by the 

15 plan pursuant to this section, including the in16 terest rate described in subsection (b)(5)(A) 

17 (without regard to subsection (b)(5)(B)). 

18 ‘‘(D) SPREAD GAIN FUNDING METHOD.— 

19 The term ‘spread gain funding method’ has the 

20 meaning given such term under rules and forms 

21 issued by the Secretary of the Treasury.’’. 

22 (b) SEPARATE RULES FOR CSEC PLANS.— 

23 (1) IN GENERAL.—Paragraph (2) of section 

24 302(a) of the Employee Retirement Income Security 

25 Act of 1974 (29 U.S.C. 1082(a)) is amended by 
41 

†S 1302 ES

1 striking ‘‘and’’ at the end of subparagraph (B), by 

2 striking the period at the end of subparagraph (C) 

3 and inserting ‘‘, and’’, and by inserting at the end 

4 thereof the following new subparagraph: 

5 ‘‘(D) in the case of a CSEC plan, the em6 ployers make contributions to or under the plan 

7 for any plan year which, in the aggregate, are 

8 sufficient to ensure that the plan does not have 

9 an accumulated funding deficiency under sec10 tion 306 as of the end of the plan year.’’. 

11 (2) CONFORMING AMENDMENTS.—Section 302 

12 of the Employee Retirement Income Security Act of 

13 1974 (29 U.S.C. 1082) is amended— 

14 (A) by striking ‘‘multiemployer plan’’ the 

15 first place it appears in clause (i) of subsection 

16 (c)(1)(A) and the last place it appears in para17 graph (2) of subsection (d), and inserting ‘‘mul18 tiemployer plan or a CSEC plan’’, 

19 (B) by striking ‘‘303(j)’’ in paragraph (1) 

20 of subsection (b) and inserting ‘‘303(j) or under 

21 section 306(f)’’, 

22 (C)(i) by striking ‘‘and’’ at the end of 

23 clause (i) of subsection (c)(1)(B), 
42 

†S 1302 ES

1 (ii) by striking the period at the end of 

2 clause (ii) of subsection (c)(1)(B), and inserting 

3 ‘‘, and’’, and 

4 (iii) by inserting the following new clause 

5 after clause (ii) of subsection (c)(1)(B): 

6 ‘‘(iii) in the case of a CSEC plan, the 

7 funding standard account shall be credited 

8 under section 306(b)(3)(C) with the 

9 amount of the waived funding deficiency 

10 and such amount shall be amortized as re11 quired under section 306(b)(2)(C).’’, 

12 (D) by striking ‘‘under paragraph (1)’’ in 

13 clause (i) of subsection (c)(4)(A) and inserting 

14 ‘‘under paragraph (1) or for granting an exten15 sion under section 306(d)’’, 

16 (E) by striking ‘‘waiver under this sub17 section’’ in subparagraph (B) of subsection 

18 (c)(4) and inserting ‘‘waiver under this sub19 section or an extension under 306(d)’’, 

20 (F) by striking ‘‘waiver or modification’’ in 

21 subclause (I) of subsection (c)(4)(B)(i) and in22 serting ‘‘waiver, modification, or extension’’, 

23 (G) by striking ‘‘waivers’’ in the heading of 

24 subsection (c)(4)(C) and of clause (ii) of sub-
43 

†S 1302 ES

1 section (c)(4)(C) and inserting ‘‘waivers or ex2 tensions’’, 

3 (H) by striking ‘‘section 304(d)’’ in sub4 paragraph (A) of subsection (c)(7) and in para5 graph (2) of subsection (d) and inserting ‘‘sec6 tion 304(d) or section 306(d)’’, 

7 (I) by striking ‘‘and’’ at the end of sub8 clause (I) of subsection (c)(4)(C)(i) and adding 

9 ‘‘or the accumulated funding deficiency under 

10 section 306, whichever is applicable,’’, 

11 (J) by striking ‘‘303(e)(2),’’ in subclause 

12 (II) of subsection (c)(4)(C)(i) and inserting 

13 ‘‘303(e)(2) or 306(b)(2)(C), whichever is appli14 cable, and’’, 

15 (K) by adding immediately after subclause 

16 (II) of subsection (c)(4)(C)(i) the following new 

17 subclause: 

18 ‘‘(III) the total amounts not paid 

19 by reason of an extension in effect 

20 under section 306(d),’’, 

21 (L) by striking ‘‘for waivers of’’ in clause 

22 (ii) of subsection (c)(4)(C) and inserting ‘‘for 

23 waivers or extensions with respect to’’, and 

24 (M) by striking ‘‘single-employer plan’’ in 

25 subparagraph (A) of subsection (a)(2) and in 
44 

†S 1302 ES

1 clause (i) of subsection (c)(1)(B) and inserting 

2 ‘‘single-employer plan (other than a CSEC 

3 plan)’’. 

4 (3) BENEFIT RESTRICTIONS.—Subsection (g) of 

5 section 206 of the Employee Retirement Income Se6 curity Act of 1974 (29 U.S.C. 1056) is amended by 

7 adding at the end thereof the following new para8 graph: 

9 ‘‘(12) CSEC PLANS.—This subsection shall not 

10 apply to a CSEC plan (as defined in section 

11 210(f)).’’. 

12 (4) BENEFIT INCREASES.—Paragraph (3) of 

13 section 204(i) of the Employee Retirement Income 

14 Security Act of 1974 (29 U.S.C. 1054(i)) is amend15 ed by striking ‘‘multiemployer plans’’ and inserting 

16 ‘‘multiemployer plans or CSEC plans’’. 

17 (5) SECTION 103.—Subparagraph (B) of section 

18 103(d)(8) of the Employee Retirement Income Secu19 rity Act of 1974 (29 U.S.C. 1023(d)(8)) is amended 

20 by striking ‘‘303(h) and 304(c)(3)’’ and inserting 

21 ‘‘303(h), 304(c)(3), and 306(c)(3)’’. 

22 (6) SECTION 502.—Subsection (c) of section 

23 502 of the Employee Retirement Income Security 

24 Act of 1974 is amended— 
45 

†S 1302 ES

1 (A) by redesignating the last paragraph as 

2 paragraph (11), and 

3 (B) by adding at the end the following new 

4 paragraph: 

5 ‘‘(12) The Secretary may assess a civil penalty 

6 against any sponsor of a CSEC plan of up to $100 

7 a day from the date of the plan sponsor’s failure to 

8 comply with the requirements of section 306(j)(3) to 

9 establish or update a funding restoration plan.’’. 

10 (7) SECTION 4003.—Subparagraph (B) of sec11 tion 4003(e)(1) of the Employee Retirement Income 

12 Security Act of 1974 (29 U.S.C. 1303(e)(1)) is 

13 amended by striking ‘‘303(k)(1)(A) and (B) of this 

14 Act or section 430(k)(1)(A) and (B) of the Internal 

15 Revenue Code of 1986’’ and inserting ‘‘303(k)(1)(A) 

16 and (B) or 306(g)(1)(A) and (B) of this Act or sec17 tion 430(k)(1)(A) and (B) or 433(g)(1)(A) and (B) 

18 of the Internal Revenue Code of 1986’’. 

19 (8) SECTION 4010.—Paragraph (2) of section 

20 4010(b) of the Employee Retirement Income Secu21 rity Act of 1974 (29 U.S.C. 1310(b)) is amended by 

22 striking ‘‘303(k)(1)(A) and (B) of this Act or sec23 tion 430(k)(1)(A) and (B) of the Internal Revenue 

24 Code of 1986’’ and inserting ‘‘303(k)(1)(A) and (B) 

25 or 306(g)(1)(A) and (B) of this Act or section 
46 

†S 1302 ES

1 430(k)(1)(A) and (B) or 433(g)(1)(A) and (B) of 

2 the Internal Revenue Code of 1986’’. 

3 (9) SECTION 4071.—Section 4071 of the Em4 ployee Retirement Income Security Act of 1974 (29 

5 U.S.C. 1371) is amended by striking ‘‘section 

6 303(k)(4)’’ and inserting ‘‘section 303(k)(4) or 

7 306(g)(4)’’. 

8 SEC. 103. ELECTIONS. 

9 (a) ELECTION NOT TO BE TREATED AS A CSEC 

10 PLAN.—Subsection (f) of section 210 of the Employee Re11 tirement Income Security Act of 1974, as added by section 

12 101, is amended by adding at the end the following new 

13 paragraph: 

14 ‘‘(3) ELECTION.— 

15 ‘‘(A) IN GENERAL.—If a plan falls within 

16 the definition of a CSEC plan under this sub17 section (without regard to this paragraph), such 

18 plan shall be a CSEC plan unless the plan 

19 sponsor elects not later than the close of the 

20 first plan year of the plan beginning after De21 cember 31, 2013, not to be treated as a CSEC 

22 plan. An election under the preceding sentence 

23 shall take effect for such plan year and, once 

24 made, may be revoked only with the consent of 

25 the Secretary of the Treasury. 
47 

†S 1302 ES

1 ‘‘(B) SPECIAL RULE.—If a plan described 

2 in subparagraph (A) is treated as a CSEC plan, 

3 section 104 of the Pension Protection Act of 

4 2006, as amended by the Preservation of Ac5 cess to Care for Medicare Beneficiaries and 

6 Pension Relief Act of 2010, shall cease to apply 

7 to such plan as of the first date as of which 

8 such plan is treated as a CSEC plan.’’. 

9 (b) ELECTION TO CEASE TO BE TREATED AS AN

10 ELIGIBLE CHARITY PLAN.—Subsection (d) of section 104 

11 of the Pension Protection Act of 2006, as added by section 

12 202 of the Preservation of Access to Care for Medicare 

13 Beneficiaries and Pension Relief Act of 2010, is amend14 ed— 

15 (1) by striking ‘‘For purposes of’’ and inserting 

16 ‘‘(1) IN GENERAL.—For purposes of’’, and 

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

18 ‘‘(2) ELECTION NOT TO BE AN ELIGIBLE CHAR19 ITY PLAN.—A plan sponsor may elect for a plan to 

20 cease to be treated as an eligible charity plan for 

21 plan years beginning after December 31, 2013. Such 

22 election shall be made at such time and in such form 

23 and manner as shall be prescribed by the Secretary 

24 of the Treasury. Any such election may be revoked 
48 

†S 1302 ES

1 only with the consent of the Secretary of the Treas2 ury. 

3 ‘‘(3) ELECTION TO USE FUNDING OPTIONS

4 AVAILABLE TO OTHER PLAN SPONSORS.— 

5 ‘‘(A) A plan sponsor that makes the elec6 tion described in paragraph (2) may elect for a 

7 plan to apply the rules described in subpara8 graphs (B), (C), and (D) for plan years begin9 ning after December 31, 2013. Such election 

10 shall be made at such time and in such form 

11 and manner as shall be prescribed by the Sec12 retary of the Treasury. Any such election may 

13 be revoked only with the consent of the Sec14 retary of the Treasury. 

15 ‘‘(B) Under the rules described in this sub16 paragraph, for the first plan year beginning 

17 after December 31, 2013, a plan has— 

18 ‘‘(i) an 11-year shortfall amortization 

19 base, 

20 ‘‘(ii) a 12-year shortfall amortization 

21 base, and 

22 ‘‘(iii) a 7-year shortfall amortization 

23 base. 

24 ‘‘(C) Under the rules described in this sub25 paragraph, section 303(c)(2)(A) and (B) of the 
49 

†S 1302 ES

1 Employee Retirement Income Security Act of 

2 1974, and section 430(c)(2)(A) and (B) of the 

3 Internal Revenue Code of 1986 shall be applied 

4 by— 

5 ‘‘(i) in the case of an 11-year shortfall 

6 amortization base, substituting ‘11-plan7 year period’ for ‘7-plan-year period’ wher8 ever such phrase appears, and 

9 ‘‘(ii) in the case of a 12-year shortfall 

10 amortization base, substituting ‘12-plan11 year period’ for ‘7-plan-year period’ wher12 ever such phrase appears. 

13 ‘‘(D) Under the rules described in this sub14 paragraph, section 303(c)(7) of the Employee 

15 Retirement Income Security Act of 1974 and 

16 section 430(c)(7) of the Internal Revenue Code 

17 of 1986 shall apply to a plan for which an elec18 tion has been made under subparagraph (A). 

19 Such provisions shall apply in the following 

20 manner: 

21 ‘‘(i) The first plan year beginning 

22 after December 31, 2013, shall be treated 

23 as an election year, and no other plan 

24 years shall be so treated. 
50 

†S 1302 ES

1 ‘‘(ii) All references in section 

2 303(c)(7) of such Act and section 

3 430(c)(7) of such Code to ‘February 28, 

4 2010’ or ‘March 1, 2010’ shall be treated 

5 as references to ‘February 28, 2013’ or 

6 ‘March 1, 2013’, respectively. 

7 ‘‘(E) For purposes of this paragraph, the 

8 11-year amortization base is an amount, deter9 mined for the first plan year beginning after 

10 December 31, 2013, equal to the unamortized 

11 principal amount of the shortfall amortization 

12 base (as defined in section 303(c)(3) of the Em13 ployee Retirement Income Security Act of 1974 

14 and section 430(c)(3) of the Internal Revenue 

15 Code of 1986) that would have applied to the 

16 plan for the first plan beginning after Decem17 ber 31, 2009, if— 

18 ‘‘(i) the plan had never been an eligi19 ble charity plan, 

20 ‘‘(ii) the plan sponsor had made the 

21 election described in section 

22 303(c)(2)(D)(i) of the Employee Retire23 ment Income Security Act of 1974 and in 

24 section 430(c)(2)(D)(i) of the Internal 

25 Revenue Code of 1986 to have section 
51 

†S 1302 ES

1 303(c)(2)(D)(i) of such Act and section 

2 430(c)(2)(D)(iii) of such Code apply with 

3 respect to the shortfall amortization base 

4 for the first plan year beginning after De5 cember 31, 2009, and 

6 ‘‘(iii) no event had occurred under 

7 paragraph (6) or (7) of section 303(c) of 

8 such Act or paragraph (6) or (7) of section 

9 430(c) of such Code that, as of the first 

10 day of the first plan year beginning after 

11 December 31, 2013, would have modified 

12 the shortfall amortization base or the 

13 shortfall amortization installments with re14 spect to the first plan year beginning after 

15 December 31, 2009. 

16 ‘‘(F) For purposes of this paragraph, the 

17 12-year amortization base is an amount, deter18 mined for the first plan year beginning after 

19 December 31, 2013, equal to the unamortized 

20 principal amount of the shortfall amortization 

21 base (as defined in section 303(c)(3) of the Em22 ployee Retirement Income Security Act of 1974 

23 and section 430(c)(3) of the Internal Revenue 

24 Code of 1986) that would have applied to the 
52 

†S 1302 ES

1 plan for the first plan beginning after Decem2 ber 31, 2010, if— 

3 ‘‘(i) the plan had never been an eligi4 ble charity plan, 

5 ‘‘(ii) the plan sponsor had made the 

6 election described in section 

7 303(c)(2)(D)(i) of the Employee Retire8 ment Income Security Act of 1974 and in 

9 section 430(c)(2)(D)(i) of the Internal 

10 Revenue Code of 1986 to have section 

11 303(c)(2)(D)(i) of such Act and section 

12 430(c)(2)(D)(iii) of such Code apply with 

13 respect to the shortfall amortization base 

14 for the first plan year beginning after De15 cember 31, 2010, and 

16 ‘‘(iii) no event had occurred under 

17 paragraph (6) or (7) of section 303(c) of 

18 such Act or paragraph (6) or (7) of section 

19 430(c) of such Code that, as of the first 

20 day of the first plan year beginning after 

21 December 31, 2013, would have modified 

22 the shortfall amortization base or the 

23 shortfall amortization installments with re24 spect to the first plan year beginning after 

25 December 31, 2010. 
53 

†S 1302 ES

1 ‘‘(G) For purposes of this paragraph, the 

2 7-year shortfall amortization base is an amount, 

3 determined for the first plan year beginning 

4 after December 31, 2013, equal to— 

5 ‘‘(i) the shortfall amortization base for 

6 the first plan year beginning after Decem7 ber 31, 2013, without regard to this para8 graph, minus 

9 ‘‘(ii) the sum of the 11-year shortfall 

10 amortization base and the 12-year shortfall 

11 amortization base. 

12 ‘‘(4) RETROACTIVE ELECTION.—Not later than 

13 December 31, 2014, a plan sponsor may make a 

14 one-time, irrevocable, retroactive election to not be 

15 treated as an eligible charity plan. Such election 

16 shall be effective for plan years beginning after De17 cember 31, 2007, and shall be made by providing 

18 reasonable notice to the Secretary of the Treasury.’’. 

19 (c) DEEMED ELECTION.—For purposes of the Inter20 nal Revenue Code of 1986, sections 4(b)(2) and 

21 4021(b)(3) of the Employee Retirement Income Security 

22 Act of 1974, and all other purposes, a plan shall be 

23 deemed to have made an irrevocable election under section 

24 410(d) of the Internal Revenue Code of 1986 if— 
54 

†S 1302 ES

1 (1) the plan was established before January 1, 

2 2014; 

3 (2) the plan falls within the definition of a 

4 CSEC plan; 

5 (3) the plan sponsor does not make an election 

6 under section 210(f)(3)(A) of the Employee Retire7 ment Income Security Act of 1974 and section 

8 414(y)(3)(A) of the Internal Revenue Code of 1986, 

9 as added by this Act; and 

10 (4) the plan, plan sponsor, administrator, or fi11 duciary remits one or more premium payments for 

12 the plan to the Pension Benefit Guaranty Corpora13 tion for a plan year beginning after December 31, 

14 2013. 

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

16 this section shall apply as of the date of enactment of this 

17 Act. 

18 SEC. 104. TRANSPARENCY. 

19 (a) NOTICE TO PARTICIPANTS.— 

20 (1) IN GENERAL.—Paragraph (2) of section 

21 101(f) of the Employee Retirement Income Security 

22 Act of 1974 (29 U.S.C. 1021(f)) is amended by add23 ing at the end the following new subparagraph: 
55 

†S 1302 ES

1 ‘‘(E) EFFECT OF CSEC PLAN RULES ON

2 PLAN FUNDING.—In the case of a CSEC plan, 

3 each notice under paragraph (1) shall include— 

4 ‘‘(i) a statement that different rules 

5 apply to CSEC plans than apply to single6 employer plans, 

7 ‘‘(ii) for the first 2 plan years begin8 ning after December 31, 2013, a statement 

9 that, as a result of changes in the law 

10 made by the Cooperative and Small Em11 ployer Charity Pension Flexibility Act, the 

12 contributions to the plan may have 

13 changed, and 

14 ‘‘(iii) in the case of a CSEC plan that 

15 is in funding restoration status for the 

16 plan year, a statement that the plan is in 

17 funding restoration status for such plan 

18 year. 

19 A copy of the statement required under clause 

20 (iii) shall be provided to the Secretary, the Sec21 retary of the Treasury, and the Director of the 

22 Pension Benefit Guaranty Corporation.’’. 

23 (2) MODEL NOTICE.—The Secretary of Labor 

24 may modify the model notice required to be pub25 lished under section 501(c) of the Pension Protec-
56 

†S 1302 ES

1 tion Act of 2006 to include the information de2 scribed in section 101(f)(2)(E) of the Employee Re3 tirement Income Security Act of 1974, as added by 

4 this subsection. 

5 (b) NOTICE OF FAILURE TO MEET MINIMUM FUND6 ING STANDARDS.— 

7 (1) PENDING WAIVERS.—Paragraph (2) of sec8 tion 101(d) of the Employee Retirement Income Se9 curity Act of 1974 (29 U.S.C. 1021(d)) is amended 

10 by striking ‘‘303’’ and inserting ‘‘303 or 306’’. 

11 (2) DEFINITIONS.—Paragraph (3) of section 

12 101(d) of the Employee Retirement Income Security 

13 Act of 1974 (21 U.S.C. 1021(d)) is amended by 

14 striking ‘‘303(j)’’ and inserting ‘‘303(j) or 306(f), 

15 whichever is applicable’’. 

16 (c) ADDITIONAL REPORTING REQUIREMENTS.—Sec17 tion 103 of the Employee Retirement Income Security Act 

18 of 1974 (29 U.S.C. 1023) is amended by adding at the 

19 end the following new subsection: 

20 ‘‘(g) ADDITIONAL INFORMATION WITH RESPECT TO

21 MULTIPLE EMPLOYER PLANS.—With respect to any mul22 tiple employer plan, an annual report under this section 

23 for a plan year shall include a list of participating employ24 ers and a good faith estimate of the percentage of total 
57 

†S 1302 ES

1 contributions made by such participating employers dur2 ing the plan year.’’. 

3 SEC. 105. SPONSOR EDUCATION AND ASSISTANCE. 

4 (a) DEFINITION.—In this section, the term ‘‘CSEC 

5 plan’’ has the meaning given that term in subsection (f)(1) 

6 of section 210 of the Employee Retirement Income Secu7 rity Act of 1974 (29 U.S.C. 1060(f)(1)) (as added by this 

8 Act). 

9 (b) EDUCATION.—The Participant and Plan Sponsor 

10 Advocate established under section 4004 of the Employee 

11 Retirement Income Security Act of 1974 (29 U.S.C. 1304) 

12 shall make itself available to assist CSEC plan sponsors 

13 and participants as part of the duties it performs under 

14 the general supervision of the Board of Directors under 

15 section 4004(b) of such Act (29 U.S.C. 1304(b)). 

16 TITLE II—AMENDMENTS TO IN17 TERNAL REVENUE CODE OF 

18 1986 

19 SEC. 201. DEFINITION OF COOPERATIVE AND SMALL EM20 PLOYER CHARITY PENSION PLANS. 

21 Section 414 of the Internal Revenue Code of 1986 

22 is amended by adding at the end the following new sub23 section: 

24 ‘‘(y) COOPERATIVE AND SMALL EMPLOYER CHARITY

25 PENSION PLANS.— 
58 

†S 1302 ES

1 ‘‘(1) IN GENERAL.—For purposes of this title, 

2 except as provided in this subsection, a CSEC plan 

3 is a defined benefit plan (other than a multiemployer 

4 plan)— 

5 ‘‘(A) to which section 104 of the Pension 

6 Protection Act of 2006 applies, without regard 

7 to— 

8 ‘‘(i) section 104(a)(2) of such Act; 

9 ‘‘(ii) the amendments to such section 

10 104 by section 202(b) of the Preservation 

11 of Access to Care for Medicare Bene12 ficiaries and Pension Relief Act of 2010; 

13 and 

14 ‘‘(iii) paragraph (3)(B); or 

15 ‘‘(B) that, as of June 25, 2010, was main16 tained by more than one employer and all of the 

17 employers were organizations described in sec18 tion 501(c)(3). 

19 ‘‘(2) AGGREGATION.—All employers that are 

20 treated as a single employer under subsection (b) or 

21 (c) shall be treated as a single employer for purposes 

22 of determining if a plan was maintained by more 

23 than one employer under paragraph (1)(B).’’. 
59 

†S 1302 ES

1 SEC. 202. FUNDING RULES APPLICABLE TO COOPERATIVE 

2 AND SMALL EMPLOYER CHARITY PENSION 

3 PLANS. 

4 (a) IN GENERAL.—Subpart A of part III of sub5 chapter D of chapter 1 of subtitle A of the Internal Rev6 enue Code of 1986 is amended by adding at the end the 

7 following new section: 

8 ‘‘SEC. 433. MINIMUM FUNDING STANDARDS. 

9 ‘‘(a) GENERAL RULE.—For purposes of section 412, 

10 the term ‘accumulated funding deficiency’ for a CSEC 

11 plan means the excess of the total charges to the funding 

12 standard account for all plan years (beginning with the 

13 first plan year to which section 412 applies) over the total 

14 credits to such account for such years or, if less, the excess 

15 of the total charges to the alternative minimum funding 

16 standard account for such plan years over the total credits 

17 to such account for such years. 

18 ‘‘(b) FUNDING STANDARD ACCOUNT.— 

19 ‘‘(1) ACCOUNT REQUIRED.—Each plan to which 

20 this section applies shall establish and maintain a 

21 funding standard account. Such account shall be 

22 credited and charged solely as provided in this sec23 tion. 

24 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year, 

25 the funding standard account shall be charged with 

26 the sum of— 
60 

†S 1302 ES

1 ‘‘(A) the normal cost of the plan for the 

2 plan year, 

3 ‘‘(B) the amounts necessary to amortize in 

4 equal annual installments (until fully amor5 tized)— 

6 ‘‘(i) in the case of a plan in existence 

7 on January 1, 1974, the unfunded past 

8 service liability under the plan on the first 

9 day of the first plan year to which section 

10 412 applies, over a period of 40 plan years, 

11 ‘‘(ii) in the case of a plan which comes 

12 into existence after January 1, 1974, but 

13 before the first day of the first plan year 

14 beginning after December 31, 2013, the 

15 unfunded past service liability under the 

16 plan on the first day of the first plan year 

17 to which section 412 applies, over a period 

18 of 30 plan years, 

19 ‘‘(iii) separately, with respect to each 

20 plan year, the net increase (if any) in un21 funded past service liability under the plan 

22 arising from plan amendments adopted in 

23 such year, over a period of 15 plan years, 

24 ‘‘(iv) separately, with respect to each 

25 plan year, the net experience loss (if any) 
61 

†S 1302 ES

1 under the plan, over a period of 5 plan 

2 years, and 

3 ‘‘(v) separately, with respect to each 

4 plan year, the net loss (if any) resulting 

5 from changes in actuarial assumptions 

6 used under the plan, over a period of 10 

7 plan years, 

8 ‘‘(C) the amount necessary to amortize 

9 each waived funding deficiency (within the 

10 meaning of section 412(c)(3)) for each prior 

11 plan year in equal annual installments (until 

12 fully amortized) over a period of 5 plan years, 

13 ‘‘(D) the amount necessary to amortize in 

14 equal annual installments (until fully amor15 tized) over a period of 5 plan years any amount 

16 credited to the funding standard account under 

17 paragraph (3)(D), 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 enactment of the Pension Protection 

25 Act of 2006). 
62 

†S 1302 ES

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 15 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 5 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 10 

23 plan years, 
63 

†S 1302 ES

1 ‘‘(C) the amount of the waived funding de2 ficiency (within the meaning of section 

3 412(c)(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, the excess 

10 (if any) of any debit balance in the funding 

11 standard account (determined without regard to 

12 this subparagraph) over any debit balance in 

13 the alternative minimum funding standard ac14 count. 

15 ‘‘(4) COMBINING AND OFFSETTING AMOUNTS

16 TO BE AMORTIZED.—Under regulations prescribed 

17 by the Secretary, amounts required to be amortized 

18 under paragraph (2) or paragraph (3), as the case 

19 may be— 

20 ‘‘(A) may be combined into one amount 

21 under such paragraph to be amortized over a 

22 period determined on the basis of the remaining 

23 amortization period for all items entering into 

24 such combined amount, and 
64 

†S 1302 ES

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.— 

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

10 subparagraph (B), the funding standard ac11 count (and items therein) shall be charged or 

12 credited (as determined under regulations pre13 scribed by the Secretary) with interest at the 

14 appropriate rate consistent with the rate or 

15 rates of interest used under the plan to deter16 mine costs. 

17 ‘‘(B) EXCEPTION.—The interest rate used 

18 for purposes of computing the amortization 

19 charge described in subsection (b)(2)(C) or for 

20 purposes of any arrangement under subsection 

21 (d) for any plan year shall be the greater of— 

22 ‘‘(i) 150 percent of the Federal mid23 term rate (as in effect under section 1274 

24 for the 1st month of such plan year), or 
65 

†S 1302 ES

1 ‘‘(ii) the rate of interest determined 

2 under subparagraph (A). 

3 ‘‘(6) AMORTIZATION SCHEDULES IN EFFECT.— 

4 Amortization schedules for amounts described in 

5 paragraphs (2) and (3) that are in effect as of the 

6 last day of the last plan year beginning before Janu7 ary 1, 2014, by reason of section 104 of the Pension 

8 Protection Act of 2006 shall remain in effect pursu9 ant to their terms and this section, except that such 

10 amounts shall not be amortized again under this sec11 tion. 

12 ‘‘(c) SPECIAL RULES.— 

13 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

14 FUNDING METHOD.—For purposes of this section, 

15 normal costs, accrued liability, past service liabilities, 

16 and experience gains and losses shall be determined 

17 under the funding method used to determine costs 

18 under the plan. 

19 ‘‘(2) VALUATION OF ASSETS.— 

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

21 section, the value of the plan’s assets shall be 

22 determined on the basis of any reasonable actu23 arial method of valuation which takes into ac24 count fair market value and which is permitted 

25 under regulations prescribed by the Secretary. 
66 

†S 1302 ES

1 ‘‘(B) DEDICATED BOND PORTFOLIO.—The 

2 Secretary may by regulations provide that the 

3 value of any dedicated bond portfolio of a plan 

4 shall be determined by using the interest rate 

5 under section 412(b)(5) (as in effect on the day 

6 before the enactment of the Pension Protection 

7 Act of 2006). 

8 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA9 SONABLE.—For purposes of this section, all costs, li10 abilities, rates of interest, and other factors under 

11 the plan shall be determined on the basis of actu12 arial assumptions and methods— 

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

14 into account the experience of the plan and rea15 sonable expectations), and 

16 ‘‘(B) which, in combination, offer the actu17 ary’s best estimate of anticipated experience 

18 under the plan. 

19 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX20 PERIENCE GAIN OR LOSS.—For purposes of this sec21 tion, if— 

22 ‘‘(A) a change in benefits under the Social 

23 Security Act or in other retirement benefits cre24 ated under Federal or State law, or 
67 

†S 1302 ES

1 ‘‘(B) a change in the definition of the term 

2 ‘wages’ under section 3121 or a change in the 

3 amount of such wages taken into account under 

4 regulations prescribed for purposes of section 

5 401(a)(5), 

6 results in an increase or decrease in accrued liability 

7 under a plan, such increase or decrease shall be 

8 treated as an experience loss or gain. 

9 ‘‘(5) FUNDING METHOD AND PLAN YEAR.— 

10 ‘‘(A) FUNDING METHODS AVAILABLE.—All 

11 funding methods available to CSEC plans under 

12 section 412 (as in effect on the day before the 

13 enactment of the Pension Protection Act of 

14 2006) shall continue to be available under this 

15 section. 

16 ‘‘(B) CHANGES.—If the funding method 

17 for a plan is changed, the new funding method 

18 shall become the funding method used to deter19 mine costs and liabilities under the plan only if 

20 the change is approved by the Secretary. If the 

21 plan year for a plan is changed, the new plan 

22 year shall become the plan year for the plan 

23 only if the change is approved by the Secretary. 

24 ‘‘(C) APPROVAL REQUIRED FOR CERTAIN

25 CHANGES IN ASSUMPTIONS BY CERTAIN SIN-
68 

†S 1302 ES

1 GLE-EMPLOYER PLANS SUBJECT TO ADDI2 TIONAL FUNDING REQUIREMENT.— 

3 ‘‘(i) IN GENERAL.—No actuarial as4 sumption (other than the assumptions de5 scribed in subsection (h)(3)) used to deter6 mine the current liability for a plan to 

7 which this subparagraph applies may be 

8 changed without the approval of the Sec9 retary. 

10 ‘‘(ii) PLANS TO WHICH SUBPARA11 GRAPH APPLIES.—This subparagraph shall 

12 apply to a plan only if— 

13 ‘‘(I) the plan is a CSEC plan, 

14 ‘‘(II) the aggregate unfunded 

15 vested benefits as of the close of the 

16 preceding plan year (as determined 

17 under section 4006(a)(3)(E)(iii) of the 

18 Employee Retirement Income Security 

19 Act of 1974) of such plan and all 

20 other plans maintained by the contrib21 uting sponsors (as defined in section 

22 4001(a)(13) of such Act) and mem23 bers of such sponsors’ controlled 

24 groups (as defined in section 

25 4001(a)(14) of such Act) which are 
69 

†S 1302 ES

1 covered by title IV (disregarding plans 

2 with no unfunded vested benefits) ex3 ceed $50,000,000, and 

4 ‘‘(III) the change in assumptions 

5 (determined after taking into account 

6 any changes in interest rate and mor7 tality table) results in a decrease in 

8 the funding shortfall of the plan for 

9 the current plan year that exceeds 

10 $50,000,000, or that exceeds 

11 $5,000,000 and that is 5 percent or 

12 more of the current liability of the 

13 plan before such change. 

14 ‘‘(6) FULL FUNDING.—If, as of the close of a 

15 plan year, a plan would (without regard to this para16 graph) have an accumulated funding deficiency (de17 termined without regard to the alternative minimum 

18 funding standard account permitted under sub19 section (e)) in excess of the full funding limitation— 

20 ‘‘(A) the funding standard account shall be 

21 credited with the amount of such excess, and 

22 ‘‘(B) all amounts described in paragraphs 

23 (2)(B), (C), and (D) and (3)(B) of subsection 

24 (b) which are required to be amortized shall be 
70 

†S 1302 ES

1 considered fully amortized for purposes of such 

2 paragraphs. 

3 ‘‘(7) FULL-FUNDING LIMITATION.—For pur4 poses of paragraph (6), the term ‘full-funding limita5 tion’ means the excess (if any) of— 

6 ‘‘(A) the accrued liability (including nor7 mal cost) under the plan (determined under the 

8 entry age normal funding method if such ac9 crued liability cannot be directly calculated 

10 under the funding method used for the plan), 

11 over 

12 ‘‘(B) the lesser of— 

13 ‘‘(i) the fair market value of the 

14 plan’s assets, or 

15 ‘‘(ii) the value of such assets deter16 mined under paragraph (2). 

17 ‘‘(C) MINIMUM AMOUNT.— 

18 ‘‘(i) IN GENERAL.—In no event shall 

19 the full-funding limitation determined 

20 under subparagraph (A) be less than the 

21 excess (if any) of— 

22 ‘‘(I) 90 percent of the current li23 ability (determined without regard to 

24 paragraph (4) of subsection (h)) of 

25 the plan (including the expected in-
71 

†S 1302 ES

1 crease in such current liability due to 

2 benefits accruing during the plan 

3 year), over 

4 ‘‘(II) the value of the plan’s as5 sets determined under paragraph (2). 

6 ‘‘(ii) ASSETS.—For purposes of clause 

7 (i), assets shall not be reduced by any 

8 credit balance in the funding standard ac9 count. 

10 ‘‘(8) ANNUAL VALUATION.— 

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

12 section, a determination of experience gains and 

13 losses and a valuation of the plan’s liability 

14 shall be made not less frequently than once 

15 every year, except that such determination shall 

16 be made more frequently to the extent required 

17 in particular cases under regulations prescribed 

18 by the Secretary. 

19 ‘‘(B) VALUATION DATE.— 

20 ‘‘(i) CURRENT YEAR.—Except as pro21 vided in clause (ii), the valuation referred 

22 to in subparagraph (A) shall be made as of 

23 a date within the plan year to which the 

24 valuation refers or within one month prior 

25 to the beginning of such year. 
72 

†S 1302 ES

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. 

9 ‘‘(iii) ADJUSTMENTS.—Information 

10 under clause (ii) shall, in accordance with 

11 regulations, be actuarially adjusted to re12 flect significant differences in participants. 

13 ‘‘(iv) LIMITATION.—A change in fund14 ing method to use a prior year valuation, 

15 as provided in clause (ii), may not be made 

16 unless as of the valuation date within the 

17 prior plan year, the value of the assets of 

18 the plan are not less than 125 percent of 

19 the plan’s current liability. 

20 ‘‘(9) TIME WHEN CERTAIN CONTRIBUTIONS

21 DEEMED MADE.—For purposes of this section, any 

22 contributions for a plan year made by an employer 

23 during the period— 

24 ‘‘(A) beginning on the day after the last 

25 day of such plan year, and 
73 

†S 1302 ES

‘‘(B) ending on the day which is 81 1 ⁄2

2 months after the close of the plan year, 

3 shall be deemed to have been made on such last day. 

4 ‘‘(10) ANTICIPATION OF BENEFIT INCREASES

5 EFFECTIVE IN THE FUTURE.—In determining pro6 jected benefits, the funding method of a collectively 

7 bargained CSEC plan described in section 413(a) 

8 shall anticipate benefit increases scheduled to take 

9 effect during the term of the collective bargaining 

10 agreement applicable to the plan. 

11 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS.—The 

12 period of years required to amortize any unfunded liability 

13 (described in any clause of subsection (b)(2)(B)) of any 

14 plan may be extended by the Secretary for a period of 

15 time (not in excess of 10 years) if the Secretary deter16 mines that such extension would carry out the purposes 

17 of the Employee Retirement Income Security Act of 1974 

18 and provide adequate protection for participants under the 

19 plan and their beneficiaries, and if the Secretary deter20 mines that the failure to permit such extension would re21 sult in— 

22 ‘‘(1) a substantial risk to the voluntary continu23 ation of the plan, or 

24 ‘‘(2) a substantial curtailment of pension ben25 efit levels or employee compensation. 
74 

†S 1302 ES

1 ‘‘(e) ALTERNATIVE MINIMUM FUNDING STAND2 ARD.— 

3 ‘‘(1) IN GENERAL.—A CSEC plan which uses a 

4 funding method that requires contributions in all 

5 years not less than those required under the entry 

6 age normal funding method may maintain an alter7 native minimum funding standard account for any 

8 plan year. Such account shall be credited and 

9 charged solely as provided in this subsection. 

10 ‘‘(2) CHARGES AND CREDITS TO ACCOUNT.— 

11 For a plan year the alternative minimum funding 

12 standard account shall be— 

13 ‘‘(A) charged with the sum of— 

14 ‘‘(i) the lesser of normal cost under 

15 the funding method used under the plan or 

16 normal cost determined under the unit 

17 credit method, 

18 ‘‘(ii) the excess, if any, of the present 

19 value of accrued benefits under the plan 

20 over the fair market value of the assets, 

21 and 

22 ‘‘(iii) an amount equal to the excess 

23 (if any) of credits to the alternative min24 imum standard account for all prior plan 
75 

†S 1302 ES

1 years over charges to such account for all 

2 such years, and 

3 ‘‘(B) credited with the amount considered 

4 contributed by the employer to or under the 

5 plan for the plan year. 

6 ‘‘(3) INTEREST.—The alternative minimum 

7 funding standard account (and items therein) shall 

8 be charged or credited with interest in the manner 

9 provided under subsection (b)(5) with respect to the 

10 funding standard account. 

11 ‘‘(f) QUARTERLY CONTRIBUTIONS REQUIRED.— 

12 ‘‘(1) IN GENERAL.—If a CSEC plan which has 

13 a funded current liability percentage for the pre14 ceding plan year of less than 100 percent fails to 

15 pay the full amount of a required installment for the 

16 plan year, then the rate of interest charged to the 

17 funding standard account under subsection (b)(5) 

18 with respect to the amount of the underpayment for 

19 the period of the underpayment shall be equal to the 

20 greater of— 

21 ‘‘(A) 175 percent of the Federal mid-term 

22 rate (as in effect under section 1274 for the 1st 

23 month of such plan year), or 

24 ‘‘(B) the rate of interest used under the 

25 plan in determining costs. 
76 

†S 1302 ES

1 ‘‘(2) AMOUNT OF UNDERPAYMENT, PERIOD OF

2 UNDERPAYMENT.—For purposes of paragraph (1)— 

3 ‘‘(A) AMOUNT.—The amount of the under4 payment shall be the excess of— 

5 ‘‘(i) the required installment, over 

6 ‘‘(ii) the amount (if any) of the in7 stallment contributed to or under the plan 

8 on or before the due date for the install9 ment. 

10 ‘‘(B) PERIOD OF UNDERPAYMENT.—The 

11 period for which interest is charged under this 

12 subsection with regard to any portion of the un13 derpayment shall run from the due date for the 

14 installment to the date on which such portion is 

15 contributed to or under the plan (determined 

16 without regard to subsection (c)(9)). 

17 ‘‘(C) ORDER OF CREDITING CONTRIBU18 TIONS.—For purposes of subparagraph (A)(ii), 

19 contributions shall be credited against unpaid 

20 required installments in the order in which such 

21 installments are required to be paid. 

22 ‘‘(3) NUMBER OF REQUIRED INSTALLMENTS; 

23 DUE DATES.—For purposes of this subsection— 
77 

†S 1302 ES

1 ‘‘(A) PAYABLE IN 4 INSTALLMENTS.— 

2 There shall be 4 required installments for each 

3 plan year. 

4 ‘‘(B) TIME FOR PAYMENT OF INSTALL5 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. 

6 ‘‘(4) AMOUNT OF REQUIRED INSTALLMENT.— 

7 For purposes of this subsection— 

8 ‘‘(A) IN GENERAL.—The amount of any 

9 required installment shall be 25 percent of the 

10 required annual payment. 

11 ‘‘(B) REQUIRED ANNUAL PAYMENT.—For 

12 purposes of subparagraph (A), the term ‘re13 quired annual payment’ means the lesser of— 

14 ‘‘(i) 90 percent of the amount re15 quired to be contributed to or under the 

16 plan by the employer for the plan year 

17 under section 412 (without regard to any 

18 waiver under subsection (c) thereof), or 

19 ‘‘(ii) 100 percent of the amount so re20 quired for the preceding plan year. 
78 

†S 1302 ES

1 Clause (ii) shall not apply if the preceding plan 

2 year was not a year of 12 months. 

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 CSEC 

15 plan other than a plan described in section 

16 412(l)(6)(A) (as in effect on the day before the 

17 enactment of the Pension Protection Act of 

18 2006) which— 

19 ‘‘(i) is required to pay installments 

20 under this subsection for a plan year, and 

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

22 quarter during such plan year. 

23 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

24 purposes of paragraph (1), any portion of an 

25 installment that is treated as not paid under 
79 

†S 1302 ES

1 subparagraph (A) shall continue to be treated 

2 as unpaid until the close of the quarter in 

3 which the due date for such installment occurs. 

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

5 amount of any required installment is increased 

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

7 shall such increase exceed the amount which, 

8 when added to prior installments for the plan 

9 year, is necessary to increase the funded cur10 rent liability percentage (taking into account 

11 the expected increase in current liability due to 

12 benefits accruing during the plan year) to 100 

13 percent. 

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.— 
80 

†S 1302 ES

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, 
81 

†S 1302 ES

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 current li8 ability percentage for the plan year, 

9 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 ‘‘(F) REGULATIONS.—The Secretary may 

24 prescribe such regulations as are necessary to 

25 carry out this paragraph. 
82 

†S 1302 ES

1 ‘‘(6) FISCAL YEARS AND SHORT YEARS.— 

2 ‘‘(A) FISCAL YEARS.—In applying this 

3 subsection to a plan year beginning on any date 

4 other than January 1, there shall be substituted 

5 for the months specified in this subsection, the 

6 months which correspond thereto. 

7 ‘‘(B) SHORT PLAN YEAR.—This subsection 

8 shall be applied to plan years of less than 12 

9 months in accordance with regulations pre10 scribed by the Secretary. 

11 ‘‘(g) IMPOSITION OF LIEN WHERE FAILURE TO

12 MAKE REQUIRED CONTRIBUTIONS.— 

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

14 which this section applies, if— 

15 ‘‘(A) any person fails to make a required 

16 installment under subsection (f) or any other 

17 payment required under this section before the 

18 due date for such installment or other payment, 

19 and 

20 ‘‘(B) the unpaid balance of such install21 ment or other payment (including interest), 

22 when added to the aggregate unpaid balance of 

23 all preceding such installments or other pay24 ments for which payment was not made before 
83 

†S 1302 ES

1 the due date (including interest), exceeds 

2 $1,000,000, 

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

4 amount determined under paragraph (3) upon all 

5 property and rights to property, whether real or per6 sonal, belonging to such person and any other per7 son who is a member of the same controlled group 

8 of which such person is a member. 

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

10 This subsection shall apply to a CSEC plan for any 

11 plan year for which the funded current liability per12 centage of such plan is less than 100 percent. This 

13 subsection shall not apply to any plan to which sec14 tion 4021 of the Employee Retirement Income Secu15 rity Act of 1974 does not apply (as such section is 

16 in effect on the date of the enactment of the Retire17 ment Protection Act of 1994). 

18 ‘‘(3) AMOUNT OF LIEN.—For purposes of para19 graph (1), the amount of the lien shall be equal to 

20 the aggregate unpaid balance of required install21 ments and other payments required under this sec22 tion (including interest)— 

23 ‘‘(A) for plan years beginning after 1987, 

24 and 
84 

†S 1302 ES

1 ‘‘(B) for which payment has not been 

2 made before the due date. 

3 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

4 ‘‘(A) NOTICE OF FAILURE.—A person 

5 committing a failure described in paragraph (1) 

6 shall notify the Pension Benefit Guaranty Cor7 poration of such failure within 10 days of the 

8 due date for the required installment or other 

9 payment. 

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

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

12 the required installment or other payment and 

13 shall continue until the last day of the first plan 

14 year in which the plan ceases to be described in 

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

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

18 the period referred to in the preceding sentence. 

19 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

20 amount with respect to which a lien is imposed 

21 under paragraph (1) shall be treated as taxes 

22 due and owing the United States and rules 

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

24 (e) of section 4068 of the Employee Retirement 

25 Income Security Act of 1974 shall apply with 
85 

†S 1302 ES

1 respect to a lien imposed by subsection (a) and 

2 the amount with respect to such lien. 

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

4 paragraph (1) may be perfected and enforced only 

5 by the Pension Benefit Guaranty Corporation, or at 

6 the direction of the Pension Benefit Guaranty Cor7 poration, by any contributing employer (or any 

8 member of the controlled group of the contributing 

9 employer). 

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

12 ‘‘(A) DUE DATE; REQUIRED INSTALL13 MENT.—The terms ‘due date’ and ‘required in14 stallment’ have the meanings given such terms 

15 by subsection (f), except that in the case of a 

16 payment other than a required installment, the 

17 due date shall be the date such payment is re18 quired to be made under this section. 

19 ‘‘(B) CONTROLLED GROUP.—The term 

20 ‘controlled group’ means any group treated as 

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

22 (m), and (o) of section 414. 

23 ‘‘(h) CURRENT LIABILITY.—For purposes of this sec24 tion— 
86 

†S 1302 ES

1 ‘‘(1) IN GENERAL.—The term ‘current liability’ 

2 means all liabilities to employees and their bene3 ficiaries under the plan. 

4 ‘‘(2) TREATMENT OF UNPREDICTABLE CONTIN5 GENT EVENT BENEFITS.— 

6 ‘‘(A) IN GENERAL.—For purposes of para7 graph (1), any unpredictable contingent event 

8 benefit shall not be taken into account until the 

9 event on which the benefit is contingent occurs. 

10 ‘‘(B) UNPREDICTABLE CONTINGENT

11 EVENT BENEFIT.—The term ‘unpredictable 

12 contingent event benefit’ means any benefit 

13 contingent on an event other than— 

14 ‘‘(i) age, service, compensation, death, 

15 or disability, or 

16 ‘‘(ii) an event which is reasonably and 

17 reliably predictable (as determined by the 

18 Secretary). 

19 ‘‘(3) INTEREST RATE AND MORTALITY ASSUMP20 TIONS USED.— 

21 ‘‘(A) INTEREST RATE.—The rate of inter22 est used to determine current liability under 

23 this section shall be the third segment rate de24 termined under section 430(h)(2)(C). 

25 ‘‘(B) MORTALITY TABLES.— 
87 

†S 1302 ES

1 ‘‘(i) SECRETARIAL AUTHORITY.—The 

2 Secretary may by regulation prescribe mor3 tality tables to be used in determining cur4 rent liability under this subsection. Such 

5 tables shall be based upon the actual expe6 rience of pension plans and projected 

7 trends in such experience. In prescribing 

8 such tables, the Secretary shall take into 

9 account results of available independent 

10 studies of mortality of individuals covered 

11 by pension plans. 

12 ‘‘(ii) PERIODIC REVIEW.—The Sec13 retary shall periodically (at least every 5 

14 years) review any tables in effect under 

15 this subsection and shall, to the extent the 

16 Secretary determines necessary, by regula17 tion update the tables to reflect the actual 

18 experience of pension plans and projected 

19 trends in such experience. 

20 ‘‘(C) SEPARATE MORTALITY TABLES FOR

21 THE DISABLED.—Notwithstanding subpara22 graph (B)— 

23 ‘‘(i) IN GENERAL.—In the case of 

24 plan years beginning after December 31, 

25 1995, the Secretary shall establish mor-
88 

†S 1302 ES

1 tality tables which may be used (in lieu of 

2 the tables under subparagraph (B)) to de3 termine current liability under this sub4 section for individuals who are entitled to 

5 benefits under the plan on account of dis6 ability. The Secretary shall establish sepa7 rate tables for individuals whose disabil8 ities occur in plan years beginning before 

9 January 1, 1995, and for individuals 

10 whose disabilities occur in plan years be11 ginning on or after such date. 

12 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

13 OCCURRING AFTER 1994.—In the case of 

14 disabilities occurring in plan years begin15 ning after December 31, 1994, the tables 

16 under clause (i) shall apply only with re17 spect to individuals described in such sub18 clause who are disabled within the meaning 

19 of title II of the Social Security Act and 

20 the regulations thereunder. 

21 ‘‘(4) CERTAIN SERVICE DISREGARDED.— 

22 ‘‘(A) IN GENERAL.—In the case of a par23 ticipant to whom this paragraph applies, only 

24 the applicable percentage of the years of service 

25 before such individual became a participant 
89 

†S 1302 ES

1 shall be taken into account in computing the 

2 current liability of the plan. 

3 ‘‘(B) APPLICABLE PERCENTAGE.—For 

4 purposes of this subparagraph, the applicable 

5 percentage shall be determined as follows: 

‘‘If the years of participation 

are: 

The applicable percentage 

is: 

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

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

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

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

5 or more ...................................................... 100. 

6 ‘‘(C) PARTICIPANTS TO WHOM PARAGRAPH

7 APPLIES.—This subparagraph shall apply to 

8 any participant who, at the time of becoming a 

9 participant— 

10 ‘‘(i) has not accrued any other benefit 

11 under any defined benefit plan (whether or 

12 not terminated) maintained by the em13 ployer or a member of the same controlled 

14 group of which the employer is a member, 

15 ‘‘(ii) who first becomes a participant 

16 under the plan in a plan year beginning 

17 after December 31, 1987, and 

18 ‘‘(iii) has years of service greater than 

19 the minimum years of service necessary for 

20 eligibility to participate in the plan. 
90 

†S 1302 ES

1 ‘‘(D) ELECTION.—An employer may elect 

2 not to have this subparagraph apply. Such an 

3 election, once made, may be revoked only with 

4 the consent of the Secretary. 

5 ‘‘(i) FUNDED CURRENT LIABILITY PERCENTAGE.— 

6 For purposes of this section, the term ‘funded current li7 ability percentage’ means, with respect to any plan year, 

8 the percentage which— 

9 ‘‘(1) the value of the plan’s assets determined 

10 under subsection (c)(2), is of 

11 ‘‘(2) the current liability under the plan. 

12 ‘‘(j) FUNDING RESTORATION STATUS.—Notwith13 standing any other provisions of this section— 

14 ‘‘(1) NORMAL COST PAYMENT.— 

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

16 CSEC plan that is in funding restoration status 

17 for a plan year, for purposes of section 412, the 

18 term ‘accumulated funding deficiency’ means, 

19 for such plan year, the greater of— 

20 ‘‘(i) the amount described in sub21 section (a), or 

22 ‘‘(ii) the excess of the normal cost of 

23 the plan for the plan year over the amount 

24 actually contributed to or under the plan 

25 for the plan year. 
91 

†S 1302 ES

1 ‘‘(B) NORMAL COST.—In the case of a 

2 CSEC plan that uses a spread gain funding 

3 method, for purposes of this subsection, the 

4 term ‘normal cost’ means normal cost as deter5 mined under the entry age normal funding 

6 method. 

7 ‘‘(2) PLAN AMENDMENTS.—In the case of a 

8 CSEC plan that is in funding restoration status for 

9 a plan year, no amendment to such plan may take 

10 effect during such plan year if such amendment has 

11 the effect of increasing liabilities of the plan by 

12 means of increases in benefits, establishment of new 

13 benefits, changing the rate of benefit accrual, or 

14 changing the rate at which benefits become non15 forfeitable. This paragraph shall not apply to any 

16 plan amendment that is required to comply with any 

17 applicable law. This paragraph shall cease to apply 

18 with respect to any plan year, effective as of the 

19 first day of the plan year (or if later, the effective 

20 date of the amendment) upon payment by the plan 

21 sponsor of a contribution to the plan (in addition to 

22 any contribution required under this section without 

23 regard to this paragraph) in an amount equal to the 

24 increase in the funding liability of the plan attrib25 utable to the plan amendment. 
92 

†S 1302 ES

1 ‘‘(3) FUNDING RESTORATION PLAN.—The spon2 sor of a CSEC plan shall establish a written funding 

3 restoration plan within 180 days of the receipt by 

4 the plan sponsor of a certification from the plan ac5 tuary that the plan is in funding restoration status 

6 for a plan year. Such funding restoration plan shall 

7 consist of actions that are calculated, based on rea8 sonably anticipated experience and reasonable actu9 arial assumptions, to increase the plan’s funded per10 centage to 100 percent over a period that is not 

11 longer than the greater of 7 years or the shortest 

12 amount of time practicable. Such funding restora13 tion plan shall take into account contributions re14 quired under this section (without regard to this 

15 paragraph). If a plan remains in funding restoration 

16 status for 2 or more years, such funding restoration 

17 plan shall be updated each year after the 1st such 

18 year within 180 days of receipt by the plan sponsor 

19 of a certification from the plan actuary that the plan 

20 remains in funding restoration status for the plan 

21 year. 

22 ‘‘(4) ANNUAL CERTIFICATION BY PLAN ACTU23 ARY.—Not later than the 90th day of each plan year 

24 of a CSEC plan, the plan actuary shall certify to the 

25 plan sponsor whether or not the plan is in funding 
93 

†S 1302 ES

1 restoration status for the plan year, based on the 

2 plan’s funded percentage as of the beginning of the 

3 plan year. For this purpose, the actuary may conclu4 sively rely on an estimate of— 

5 ‘‘(A) the plan’s funding liability, based on 

6 the funding liability of the plan for the pre7 ceding plan year and on reasonable actuarial es8 timates, assumptions, and methods, and 

9 ‘‘(B) the amount of any contributions rea10 sonably anticipated to be made for the pre11 ceding plan year. 

12 Contributions described in subparagraph (B) shall 

13 be taken into account in determining the plan’s 

14 funded percentage as of the beginning of the plan 

15 year. 

16 ‘‘(5) DEFINITIONS.—For purposes of this sub17 section— 

18 ‘‘(A) FUNDING RESTORATION STATUS.—A 

19 CSEC plan shall be treated as in funding res20 toration status for a plan year if the plan’s 

21 funded percentage as of the beginning of such 

22 plan year is less than 80 percent. 

23 ‘‘(B) FUNDED PERCENTAGE.—The term 

24 ‘funded percentage’ means the ratio (expressed 

25 as a percentage) which— 
94 

†S 1302 ES

1 ‘‘(i) the value of plan assets (as deter2 mined under subsection (c)(2)), bears to 

3 ‘‘(ii) the plan’s funding liability. 

4 ‘‘(C) FUNDING LIABILITY.—The term 

5 ‘funding liability’ for a plan year means the 

6 present value of all benefits accrued or earned 

7 under the plan as of the beginning of the plan 

8 year, based on the assumptions used by the 

9 plan pursuant to this section, including the in10 terest rate described in subsection (b)(5)(A) 

11 (without regard to subsection (b)(5)(B)). 

12 ‘‘(D) SPREAD GAIN FUNDING METHOD.— 

13 The term ‘spread gain funding method’ has the 

14 meaning given such term under rules and forms 

15 issued by the Secretary. 

16 ‘‘(E) PLAN SPONSOR.—The term ‘plan 

17 sponsor’ means, with respect to a CSEC plan, 

18 the association, committee, joint board of trust19 ees, or other similar group of representatives of 

20 the parties who establish or maintain the 

21 plan.’’. 

22 (b) CSEC PLANS.—Section 413 of the Internal Rev23 enue Code of 1986 is amended by adding at the end the 

24 following new subsection: 
95 

†S 1302 ES

1 ‘‘(d) CSEC PLANS.—Notwithstanding any other pro2 vision of this section, in the case of a CSEC plan— 

3 ‘‘(1) FUNDING.—The requirements of section 

4 412 shall be determined as if all participants in the 

5 plan were employed by a single employer. 

6 ‘‘(2) APPLICATION OF PROVISIONS.—Para7 graphs (1), (2), (3), and (5) of subsection (c) shall 

8 apply. 

9 ‘‘(3) DEDUCTION LIMITATIONS.—Each applica10 ble limitation provided by section 404(a) shall be de11 termined as if all participants in the plan were em12 ployed by a single employer. The amounts contrib13 uted to or under the plan by each employer who 

14 maintains the plan (for the portion of the taxable 

15 year included within a plan year) shall be considered 

16 not to exceed such applicable limitation if the antici17 pated employer contributions for such plan year of 

18 all employers (determined in a reasonable manner 

19 not inconsistent with regulations prescribed by the 

20 Secretary) do not exceed such limitation. If such an21 ticipated contributions exceed such limitation, the 

22 portion of each such employer’s contributions which 

23 is not deductible under section 404 shall be deter24 mined in accordance with regulations prescribed by 

25 the Secretary. 
96 

†S 1302 ES

1 ‘‘(4) ALLOCATIONS.—Allocations of amounts 

2 under paragraph (3) and subsection (c)(5) among 

3 the employers maintaining the plan shall not be in4 consistent with the regulations prescribed for this 

5 purpose by the Secretary.’’. 

6 (c) SEPARATE RULES FOR CSEC PLANS.— 

7 (1) IN GENERAL.—Paragraph (2) of section 

8 412(a) of the Internal Revenue Code of 1986 is 

9 amended by striking ‘‘and’’ at the end of subpara10 graph (B), by striking the period at the end of sub11 paragraph (C) and inserting ‘‘, and’’, and by insert12 ing at the end thereof the following new subpara13 graph: 

14 ‘‘(D) in the case of a CSEC plan, the em15 ployers make contributions to or under the plan 

16 for any plan year which, in the aggregate, are 

17 sufficient to ensure that the plan does not have 

18 an accumulated funding deficiency under sec19 tion 433 as of the end of the plan year.’’. 

20 (2) CONFORMING AMENDMENTS.—Section 412 

21 of such Code is amended— 

22 (A) by striking ‘‘multiemployer plan’’ in 

23 paragraph (A) of subsection (a)(2), in clause (i) 

24 of subsection (c)(1)(B), the first place it ap25 pears in clause (i) of subsection (c)(1)(A), and 
97 

†S 1302 ES

1 the last place it appears in paragraph (2) of 

2 subsection (d), and inserting ‘‘multiemployer 

3 plan or a CSEC plan’’, 

4 (B) by striking ‘‘430(j)’’ in paragraph (1) 

5 of subsection (b) and inserting ‘‘430(j) or under 

6 section 433(f)’’, 

7 (C)(i) by striking ‘‘and’’ at the end of 

8 clause (i) of subsection (c)(1)(B), 

9 (ii) by striking the period at the end of 

10 clause (ii) of subsection (c)(1)(B) and inserting 

11 ‘‘, and’’, and 

12 (iii) by inserting the following new clause 

13 after clause (ii) of subsection (c)(1)(B): 

14 ‘‘(iii) in the case of a CSEC plan, the 

15 funding standard account shall be credited 

16 under section 433(b)(3)(C) with the 

17 amount of the waived funding deficiency 

18 and such amount shall be amortized as re19 quired under section 433(b)(2)(C).’’, 

20 (D) by striking ‘‘under paragraph (1)’’ in 

21 clause (i) of subsection (c)(4)(A) and inserting 

22 ‘‘under paragraph (1) or for granting an exten23 sion under section 433(d)’’, 

24 (E) by striking ‘‘waiver under this sub25 section’’ in subparagraph (B) of subsection 
98 

†S 1302 ES

1 (c)(4) and inserting ‘‘waiver under this sub2 section or an extension under 433(d)’’, 

3 (F) by striking ‘‘waiver or modification’’ in 

4 subclause (I) of subsection (c)(4)(B)(i) and in5 serting ‘‘waiver, modification, or extension’’, 

6 (G) by striking ‘‘waivers’’ in the heading of 

7 subsection (c)(4)(C) and of clause (ii) of sub8 section (c)(4)(C) and inserting ‘‘waivers or ex9 tensions’’, 

10 (H) by striking ‘‘section 431(d)’’ in sub11 paragraph (A) of subsection (c)(7) and in para12 graph (2) of subsection (d) and inserting ‘‘sec13 tion 431(d) or section 433(d)’’, 

14 (I) by striking ‘‘and’’ at the end of sub15 clause (I) of subsection (c)(4)(C)(i) and insert16 ing ‘‘or the accumulated funding deficiency 

17 under section 433, whichever is applicable,’’, 

18 (J) by striking ‘‘430(e)(2),’’ in subclause 

19 (II) of subsection (c)(4)(C)(i) and inserting 

20 ‘‘430(e)(2) or 433(b)(2)(C), whichever is appli21 cable, and’’, 

22 (K) by adding immediately after subclause 

23 (II) of subsection (c)(4)(C)(i) the following new 

24 subclause: 
99 

†S 1302 ES

1 ‘‘(III) the total amounts not paid 

2 by reason of an extension in effect 

3 under section 433(d),’’, and 

4 (L) by striking ‘‘for waivers of’’ in clause 

5 (ii) of subsection (c)(4)(C) and inserting ‘‘for 

6 waivers or extensions with respect to’’. 

7 (3) BENEFIT RESTRICTIONS.— 

8 (A) IN GENERAL.—Paragraph (29) of sec9 tion 401(a) of such Code is amended by strik10 ing ‘‘multiemployer plan’’ and inserting ‘‘multi11 employer plan or a CSEC plan’’. 

12 (B) CONFORMING CHANGE.—Subsection 

13 (a) of section 436 of such Code is amended by 

14 striking ‘‘single-employer plan’’ and inserting 

15 ‘‘single-employer plan (other than a CSEC 

16 plan)’’. 

17 (4) BENEFIT INCREASES.—Subparagraph (C) 

18 of section 401(a)(33) of such Code is amended by 

19 striking ‘‘multiemployer plans’’ and inserting ‘‘multi20 employer plans or CSEC plans’’. 

21 (5) LIQUIDITY SHORTFALLS.— 

22 (A) IN GENERAL.—Subparagraph (A) of 

23 section 401(a)(32) of such Code is amended by 

24 striking ‘‘430(j)(4)’’ each place it appears and 

25 inserting ‘‘430(j)(4) or 433(f)(5)’’. 
100 

†S 1302 ES

1 (B) PERIOD OF SHORTFALL.—Subpara2 graph (C) of section 401(a)(32) of such Code is 

3 amended by striking ‘‘430(j)(3) by reason of 

4 section 430(j)(4)(A) thereof’’ and inserting 

5 ‘‘430(j)(3) or 433(f) by reason of section 

6 430(j)(4)(A) or 433(f)(5), respectively’’. 

7 (6) DEDUCTION LIMITS.—Subsection (o) of sec8 tion 404 of such Code is amended by adding at the 

9 end the following new paragraph: 

10 ‘‘(8) CSEC PLANS.—Solely for purposes of this 

11 subsection, a CSEC plan shall be treated as though 

12 section 430 applied to such plan and the minimum 

13 required contribution for any plan year shall be the 

14 amount described in section 412(a)(2)(D).’’. 

15 (7) SECTION 420.—Paragraph (5) of section 

16 420(e) of such Code is amended by striking ‘‘section 

17 430’’ each place it appears and inserting ‘‘sections 

18 430 and 433’’. 

19 (8) COORDINATION WITH SECTION 4971.— 

20 (A) Subsection (a) of section 4971 of such 

21 Code is amended by striking ‘‘and’’ at the end 

22 of paragraph (1), by striking the period at the 

23 end of paragraph (2) and inserting ‘‘, and’’, 

24 and by adding at the end thereof the following 

25 new paragraph: 
101 

†S 1302 ES

1 ‘‘(3) in the case of a CSEC plan, 10 percent of 

2 the CSEC accumulated funding deficiency as of the 

3 end of the plan year ending with or within the tax4 able year.’’. 

5 (B) Subsection (b) of section 4971 of such 

6 Code is amended— 

7 (i) by striking ‘‘or’’ at the end of 

8 paragraph (1), by adding ‘‘or’’ at the end 

9 of paragraph (2), and by inserting imme10 diately after paragraph (2) the following 

11 new paragraph: 

12 ‘‘(3) a tax is imposed under subsection (a)(3) 

13 on any CSEC accumulated funding deficiency and 

14 the CSEC accumulated funding deficiency is not cor15 rected within the taxable period,’’, and 

16 (ii) by striking ‘‘minimum required 

17 contributions or accumulated funding defi18 ciency’’ and inserting ‘‘minimum required 

19 contribution, accumulated funding defi20 ciency, or CSEC accumulated funding defi21 ciency’’. 

22 (C) Subsection (c) of section 4971 of such 

23 Code is amended— 

24 (i) by striking ‘‘accumulated funding 

25 deficiency’’ each place it appears in para-
102 

†S 1302 ES

1 graph (2) and inserting ‘‘accumulated 

2 funding deficiency or CSEC accumulated 

3 funding deficiency’’, 

4 (ii) by striking ‘‘accumulated funding 

5 deficiency or unpaid minimum required 

6 contribution’’ each place it appears in 

7 paragraph (3) and inserting ‘‘accumulated 

8 funding deficiency, CSEC accumulated 

9 funding deficiency, or unpaid minimum re10 quired contribution’’, and 

11 (iii) by adding at the end the fol12 lowing new paragraph: 

13 ‘‘(5) CSEC ACCUMULATED FUNDING DEFI14 CIENCY.—The term ‘CSEC accumulated funding de15 ficiency’ means the accumulated funding deficiency 

16 determined under section 433.’’. 

17 (D) Paragraph (1) of section 4971(d) of 

18 such Code is amended by striking ‘‘accumulated 

19 funding deficiency or unpaid minimum required 

20 contribution’’ and inserting ‘‘accumulated fund21 ing deficiency, CSEC accumulated funding defi22 ciency, or unpaid minimum required contribu23 tion’’. 

24 (E) Subsection (f) of section 4971 of such 

25 Code is amended— 
103 

†S 1302 ES

1 (i) by striking ‘‘430(j)(4)’’ in para2 graph (1) and inserting ‘‘430(j)(4) or 

3 433(f)’’, 

4 (ii) by striking ‘‘430(j)’’ in paragraph 

5 (1)(B) and inserting ‘‘430(j) or 433(f), 

6 whichever is applicable’’, and 

7 (iii) by striking ‘‘412(m)(5)’’ in para8 graph (3)(A) and inserting ‘‘430(j) or 

9 433(f), whichever is applicable’’. 

10 (9) EXCISE TAX ON FAILURE TO ADOPT FUND11 ING RESTORATION PLAN.—Section 4971 of such 

12 Code is amended by redesignating subsection (h) as 

13 subsection (i), and by inserting after subsection (g) 

14 the following new subsection: 

15 ‘‘(h) FAILURE OF A CSEC PLAN SPONSOR TO

16 ADOPT FUNDING RESTORATION PLAN.— 

17 ‘‘(1) IN GENERAL.—In the case of a CSEC plan 

18 that is in funding restoration status (within the 

19 meaning of section 433(j)(5)(A)), there is hereby im20 posed a tax on the failure of such plan to adopt a 

21 funding restoration plan within the time prescribed 

22 under section 433(j)(3). 

23 ‘‘(2) AMOUNT OF TAX.—The amount of the tax 

24 imposed under paragraph (1) with respect to any 

25 plan sponsor for any taxable year shall be the 
104 

†S 1302 ES

1 amount equal to $100 multiplied by the number of 

2 days during the taxable year which are included in 

3 the period beginning on the day following the close 

4 of the 180-day period described in section 433(j)(3) 

5 and ending on the day on which the funding restora6 tion plan is adopted. 

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

8 failure described in paragraph (1) which the Sec9 retary determines is due to reasonable cause and not 

10 to willful neglect, the Secretary may waive a portion 

11 or all of the tax imposed by such paragraph. 

12 ‘‘(4) LIABILITY FOR TAX.—The tax imposed by 

13 paragraph (1) shall be paid by the plan sponsor 

14 (within the meaning of section 433(j)(5)(E)).’’. 

15 (10) REPORTING.— 

16 (A) IN GENERAL.—Paragraph (2) of sec17 tion 6059(b) of such Code is amended by strik18 ing ‘‘430,’’ and inserting ‘‘430, the accumulated 

19 funding deficiency under section 433,’’. 

20 (B) ASSUMPTIONS.—Subparagraph (B) of 

21 section 6059(b)(3) of such Code is amended by 

22 striking ‘‘430(h)(1) or 431(c)(3)’’ and inserting 

23 ‘‘430(h)(1), 431(c)(3), or 433(c)(3)’’. 
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†S 1302 ES

1 SEC. 203. ELECTION NOT TO BE TREATED AS A CSEC PLAN. 

2 (a) IN GENERAL.—Section 414(y) of the Internal 

3 Revenue Code of 1986, as added by section 201, is amend4 ed by adding at the end the following new paragraph: 

5 ‘‘(3) ELECTION.— 

6 ‘‘(A) IN GENERAL.—If a plan falls within 

7 the definition of a CSEC plan under this sub8 section (without regard to this paragraph), such 

9 plan shall be a CSEC plan unless the plan 

10 sponsor elects not later than the close of the 

11 first plan year of the plan beginning after De12 cember 31, 2013, not to be treated as a CSEC 

13 plan. An election under the preceding sentence 

14 shall take effect for such plan year and, once 

15 made, may be revoked only with the consent of 

16 the Secretary. 

17 ‘‘(B) SPECIAL RULE.—If a plan described 

18 in subparagraph (A) is treated as a CSEC plan, 

19 section 104 of the Pension Protection Act of 

20 2006, as amended by the Preservation of Ac21 cess to Care for Medicare Beneficiaries and 

22 Pension Relief Act of 2010, shall cease to apply 

23 to such plan as of the first date as of which 

24 such plan is treated as a CSEC plan.’’. 
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†S 1302 ES

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

2 this section shall apply as of the date of enactment of this 

3 Act. 

Passed the Senate January 28, 2014. 

Attest: 

Secretary. 

113TH CONGRESS 

2D SESSION S. 1302 

AN ACT 

To amend the Employee Retirement Income Secuployer charity pension plans. of 1986 to provide for cooperative and small em- rity Act of 1974 and the Internal Revenue Code