I 

109TH CONGRESS 

2D SESSION H. R. 4884 

To amend the Internal Revenue Code of 1986 to include in gross income 

the value of assets set aside under an employer nonqualified deferred 

compensation plan when the employer defined benefit plan has a funding 

target attainment percentage of less than 80 percent. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 7, 2006 

Mr. KENNEDY of Minnesota introduced the following bill; which was referred 

to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to include 

in gross income the value of assets set aside under an 

employer nonqualified deferred compensation plan when 

the employer defined benefit plan has a funding target 

attainment percentage of less than 80 percent. 

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 ‘‘No Special Deals for 

5 Executives Act of 2006’’. 


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1 SEC. 2. TREATMENT OF NONQUALIFIED DEFERRED COM2 PENSATION PLANS WHEN EMPLOYER DE3 FINED BENEFIT PLAN HAS FUNDING TARGET 

4 ATTAINMENT PERCENTAGE OF LESS THAN 80 

5 PERCENT. 

6 (a) IN GENERAL.—Subsection (b) of section 409A of 

7 the Internal Revenue Code of 1986 (providing rules relat8 ing to funding) is amended by redesignating paragraphs 

9 (3) and (4) as paragraphs (4) and (5), respectively, and 

10 by inserting after paragraph (2) the following new para11 graph: 

12 ‘‘(3) WHEN EMPLOYER’S DEFINED BENEFIT

13 PLAN HAS FUNDING TARGET ATTAINMENT PERCENT14 AGE OF LESS THAN 80 PERCENT.—If— 

15 ‘‘(A) as of the valuation date of a defined 

16 benefit plan to which section 412 applies for the 

17 plan year which includes any portion of a period 

18 in which the plan has a funding target attain19 ment percentage less than 80 percent— 

20 ‘‘(i) assets are set aside (directly or 

21 indirectly) in a trust (or other arrange22 ment determined by the Secretary), or 

23 ‘‘(ii) transferred to such a trust or 

24 other arrangement, 

25 for purposes of paying deferred compensation 

26 under a nonqualified deferred compensation 


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1 plan of the employer maintaining the defined 

2 benefit plan, or 

3 ‘‘(B) a nonqualified deferred compensation 

4 plan of the employer provides that assets will 

5 become restricted to the provision of benefits 

6 under the plan in connection with such funding 

7 target attainment percentage of less than 80 

8 percent (or other similar financial measure de9 termined by the Secretary) of the defined ben10 efit plan, or assets are so restricted, 

11 such assets shall for purposes of section 83 be treat12 ed as property transferred in connection with the 

13 performance of services whether or not such assets 

14 are available to satisfy claims of general creditors. 

15 Subparagraph (A) shall not apply with respect to 

16 any assets which are so set aside before the defined 

17 benefit plan has a funding target attainment per18 centage of less than 80 percent.’’. 

19 (b) FUNDING TARGET ATTAINMENT PERCENTAGE.— 

20 Section 409A(d) of such Code is amended by adding at 

21 the end the following new paragraph: 

22 ‘‘(7) FUNDING TARGET ATTAINMENT PERCENT23 AGE.— 


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1 ‘‘(A) IN GENERAL.—The ‘funding target 

2 attainment percentage’ of a plan for a plan year 

3 is the ratio (expressed as a percentage) which— 

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

5 plan year (determined without regard to 

6 accumulated credits in excess of accumu7 lated charges to the funding standard ac8 count under section 412), bears to 

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

10 the plan year. 

11 ‘‘(B) FUNDING TARGET.—Funding target 

12 of a plan for a plan year is the present value 

13 of all liabilities to participants and their bene14 ficiaries under the plan for the plan year.’’. 

15 (c) CONFORMING AMENDMENTS.—Paragraphs (4) 

16 and (5) of section 409A(b) of such Code, as redesignated 

17 by subsection (a) of this subsection, are each amended by 

18 striking ‘‘paragraph (1) or (2)’’ each place it appears and 

19 inserting ‘‘paragraph (1), (2), or (3)’’. 

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

21 this section shall apply to transfers or reservations of as22 sets after December 31, 2005. 

23 (e) SPECIAL RULE FOR 2006.—For purposes of de24 termining if a plan has a funding target attainment per25 centage of less than 80 percent (within the meaning of 


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1 section 409A of such Code, as added by this section) for 

2 any plan year beginning in 2006, such section shall be ap3 plied by substituting the plan’s modified funded current 

4 liability percentage for the plan’s funding target attain5 ment percentage. For purposes of the preceding sentence, 

6 the term ‘‘modified funded current liability percentage’’ 

7 means the funded current liability percentage (as defined 

8 in section 412(l)(8) of such Code), reduced as described 

9 in subparagraph (E) thereof. 

Æ 


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