II

106TH CONGRESS

1ST SESSION S. 659

To amend the Internal Revenue Code of 1986 to require pension plans

to provide adequate notice to individuals whose future benefit accruals

are being significantly reduced, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 18, 1999

Mr. MOYNIHAN (for himself, Mr. ROBB, and Mr. KERREY) introduced the

following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to require

pension plans to provide adequate notice to individuals

whose future benefit accruals are being significantly reduced, and for other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Pension Right to Know

5 Act’’.
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1 SEC. 2. NOTICE REQUIREMENTS FOR LARGE PENSION

2 PLANS SIGNIFICANTLY REDUCING FUTURE

3 PENSION BENEFIT ACCRUALS.

4 (a) PLAN REQUIREMENT.—Section 401(a) of the In5 ternal Revenue Code of 1986 (relating to qualified pen6 sion, profit-sharing, and stock bonus plans) is amended

7 by inserting after paragraph (34) the following new para8 graph:

9 ‘‘(35) NOTICE REQUIREMENTS FOR LARGE DE10 FINED BENEFIT PLANS SIGNIFICANTLY REDUCING

11 FUTURE BENEFIT ACCRUALS.—

12 ‘‘(A) IN GENERAL.—If a large defined ben13 efit plan adopts an amendment which has the

14 effect of significantly reducing the rate of fu15 ture benefit accrual of 1 or more participants,

16 a trust which is part of such plan shall not con17 stitute a qualified trust under this section un18 less, after adoption of such amendment and not

19 less than 15 days before its effective date, the

20 plan administrator provides—

21 ‘‘(i) a written statement of benefit

22 change described in subparagraph (B) to

23 each applicable individual, and

24 ‘‘(ii) a written notice setting forth the

25 plan amendment and its effective date to
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1 each employee organization representing

2 participants in the plan.

3 Any such notice may be provided to a person

4 designated, in writing, by the person to which

5 it would otherwise be provided. The plan ad6 ministrator shall not be treated as failing to

7 meet the requirements of this subparagraph

8 merely because the statement or notice is pro9 vided before the adoption of the plan amend10 ment if no material modification of the amend11 ment occurs before the amendment is adopted.

12 ‘‘(B) STATEMENT OF BENEFIT CHANGE.—

13 A statement of benefit change described in this

14 subparagraph shall—

15 ‘‘(i) be written in a manner calculated

16 to be understood by the average plan par17 ticipant, and

18 ‘‘(ii) include the information described

19 in subparagraph (C).

20 ‘‘(C) INFORMATION CONTAINED IN STATE21 MENT OF BENEFIT CHANGE.—The information

22 described in this subparagraph includes the fol23 lowing:

24 ‘‘(i) Notice setting forth the plan

25 amendment and its effective date.
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1 ‘‘(ii) A comparison of the following

2 amounts under the plan with respect to an

3 applicable individual, determined both with

4 and without regard to the plan amend5 ment:

6 ‘‘(I) The accrued benefit and the

7 present value of the accrued benefit as

8 of the effective date.

9 ‘‘(II) The projected accrued ben10 efit and the projected present value of

11 the accrued benefit as of the date

12 which is 3 years, 5 years, and 10

13 years from the effective date and as of

14 the normal retirement age.

15 ‘‘(iii) A table of all annuity factors

16 used to calculate benefits under the plan,

17 presented in the form provided in section

18 72 and the regulations thereunder.

19 Benefits described in clause (ii) shall be stated

20 separately and shall be calculated by using the

21 applicable mortality table and the applicable in22 terest rate under section 417(e)(3)(A).

23 ‘‘(D) LARGE DEFINED BENEFIT PLAN; AP24 PLICABLE INDIVIDUAL.—For purposes of this

25 paragraph—
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1 ‘‘(i) LARGE DEFINED BENEFIT

2 PLAN.—The term ‘large defined benefit

3 plan’ means any defined benefit plan which

4 had 1,000 or more participants who had

5 accrued a benefit under the plan (whether

6 or not vested) as of the last day of the

7 plan year preceding the plan year in which

8 the plan amendment becomes effective.

9 ‘‘(ii) APPLICABLE INDIVIDUAL.—The

10 term ‘applicable individual’ means—

11 ‘‘(I) each participant in the plan,

12 and

13 ‘‘(II) each beneficiary who is an

14 alternate payee (within the meaning

15 of section 414(p)(8)) under an appli16 cable qualified domestic relations

17 order (within the meaning of section

18 414(p)(1)(A)).

19 ‘‘(E) ACCRUED BENEFIT; PROJECTED RE20 TIREMENT BENEFIT.—For purposes of this

21 paragraph—

22 ‘‘(i) PRESENT VALUE OF ACCRUED

23 BENEFIT.—The present value of an ac24 crued benefit of any applicable individual

25 shall be calculated as if the accrued benefit
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1 were in the form of a single life annuity

2 commencing at the participant’s normal re3 tirement age (and by taking into account

4 any early retirement subsidy).

5 ‘‘(ii) PROJECTED ACCRUED BEN6 EFIT.—

7 ‘‘(I) IN GENERAL.—The pro8 jected accrued benefit of any applica9 ble individual shall be calculated as if

10 the benefit were payable in the form

11 of a single life annuity commencing at

12 the participant’s normal retirement

13 age (and by taking into account any

14 early retirement subsidy).

15 ‘‘(II) COMPENSATION AND

16 OTHER ASSUMPTIONS.—Such benefit

17 shall be calculated by assuming that

18 compensation and all other benefit

19 factors would increase for each plan

20 year beginning after the effective date

21 of the plan amendment at a rate equal

22 to the median average of the CPI in23 crease percentage (as defined in sec24 tion 215(i) of the Social Security Act)

25 for the 5 calendar years immediately
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1 preceding the calendar year before the

2 calendar year in which such effective

3 date occurs.

4 ‘‘(III) BENEFIT FACTORS.—For

5 purposes of subclause (II), the term

6 ‘benefit factors’ means social security

7 benefits and all other relevant factors

8 under section 411(b)(1)(A) used to

9 compute benefits under the plan

10 which had increased from the 2d plan

11 year preceding the plan year in which

12 the effective date of the plan amend13 ment occurs to the 1st such preceding

14 plan year.

15 ‘‘(iii) NORMAL RETIREMENT AGE.—

16 The term ‘normal retirement age’ means

17 the later of—

18 ‘‘(I) the date determined under

19 section 411(a)(8), or

20 ‘‘(II) the date a plan participant

21 attains age 62.’’

22 (b) AMENDMENTS TO ERISA.—

23 (1) BENEFIT STATEMENT REQUIREMENT.—Sec24 tion 204(h) of the Employee Retirement Income Se-
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1 curity Act of 1974 (29 U.S.C. 1054(h)) is amended

2 by adding at the end the following new paragraphs:

3 ‘‘(3)(A) If paragraph (1) applies to the adop4 tion of a plan amendment by a large defined benefit

5 plan, the plan administrator shall, after adoption of

6 such amendment and not less than 15 days before

7 its effective date, provide with the notice under para8 graph (1) a written statement of benefit change de9 scribed in subparagraph (B) to each applicable indi10 vidual.

11 ‘‘(B) A statement of benefit change described in

12 this subparagraph shall—

13 ‘‘(i) be written in a manner calculated to

14 be understood by the average plan participant,

15 and

16 ‘‘(ii) include the information described in

17 subparagraph (C).

18 ‘‘(C) The information described in this subpara19 graph includes the following:

20 ‘‘(i) A comparison of the following amounts

21 under the plan with respect to an applicable in22 dividual, determined both with and without re23 gard to the plan amendment:
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1 ‘‘(I) The accrued benefit and the

2 present value of the accrued benefit as of

3 the effective date.

4 ‘‘(II) The projected accrued benefit

5 and the projected present value of the ac6 crued benefit as of the date which is 3

7 years, 5 years, and 10 years from the ef8 fective date and as of the normal retire9 ment age.

10 ‘‘(ii) A table of all annuity factors used to

11 calculate benefits under the plan, presented in

12 the form provided in section 72 of the Internal

13 Revenue Code of 1986 and the regulations

14 thereunder.

15 Benefits described in clause (i) shall be stated sepa16 rately and shall be calculated by using the applicable

17 mortality table and the applicable interest rate

18 under section 417(e)(3)(A) of such Code.

19 ‘‘(D) For purposes of this paragraph—

20 ‘‘(i) The term ‘large defined benefit plan’

21 means any defined benefit plan which had

22 1,000 or more participants who had accrued a

23 benefit under the plan (whether or not vested)

24 as of the last day of the plan year preceding the
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1 plan year in which the plan amendment be2 comes effective.

3 ‘‘(ii) The term ‘applicable individual’

4 means an individual described in subparagraph

5 (A) or (B) of paragraph (1).

6 ‘‘(E) For purposes of this paragraph—

7 ‘‘(i) The present value of an accrued ben8 efit of any applicable individual shall be cal9 culated as if the accrued benefit were in the

10 form of a single life annuity commencing at the

11 participant’s normal retirement age (and by

12 taking into account any early retirement sub13 sidy).

14 ‘‘(ii)(I) The projected accrued benefit of

15 any applicable individual shall be calculated as

16 if the benefit were payable in the form of a sin17 gle life annuity commencing at the participant’s

18 normal retirement age (and by taking into ac19 count any early retirement subsidy).

20 ‘‘(II) Such benefit shall be calculated by

21 assuming that compensation and all other ben22 efit factors would increase for each plan year

23 beginning after the effective date of the plan

24 amendment at a rate equal to the median aver25 age of the CPI increase percentage (as defined
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1 in section 215(i) of the Social Security Act) for

2 the 5 calendar years immediately preceding the

3 calendar year before the calendar year in which

4 such effective date occurs.

5 ‘‘(III) For purposes of subclause (II), the

6 term ‘benefit factors’ means social security ben7 efits and all other relevant factors under section

8 204(b)(1)(A) used to compute benefits under

9 the plan which had increased from the 2d plan

10 year preceding the plan year in which the effec11 tive date of the plan amendment occurs to the

12 1st such preceding plan year.

13 ‘‘(iii) The term ‘normal retirement age’

14 means the later of—

15 ‘‘(I) the date determined under sec16 tion 3(24), or

17 ‘‘(II) the date a plan participant at18 tains age 62.

19 ‘‘(4) A plan administrator shall not be treated

20 as failing to meet the requirements of this sub21 section merely because the notice or statement is

22 provided before the adoption of the plan amendment

23 if no material modification of the amendment occurs

24 before the amendment is adopted.’’
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1 (2) CONFORMING AMENDMENT.—Section

2 204(h)(1) of such Act (29 U.S.C. 1054(h)(1)) is

3 amended by inserting ‘‘(including any written state4 ment of benefit change if required by paragraph

5 (3))’’ after ‘‘written notice’’.

6 (c) EFFECTIVE DATES.—

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

8 this section shall apply to plan amendments taking

9 effect in plan years beginning on or after the earlier

10 of—

11 (A) the later of—

12 (i) January 1, 1999, or

13 (ii) the date on which the last of the

14 collective bargaining agreements pursuant

15 to which the plan is maintained terminates

16 (determined without regard to any exten17 sion thereof after the date of the enact18 ment of this Act), or

19 (B) January 1, 2001.

20 (2) EXCEPTION WHERE NOTICE GIVEN.—The

21 amendments made by this section shall not apply to

22 any plan amendment for which written notice was

23 given to participants or their representatives before

24 March 17, 1999, without regard to whether the

25 amendment was adopted before such date.
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1 (3) SPECIAL RULE.—The period for providing

2 any notice required by, or any notice the contents of

3 which are changed by, the amendments made by this

4 Act shall not end before the date which is 6 months

5 after the date of the enactment of this Act.

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