H. R. 4

One Hundred Ninth Congress

of the

United States of America 

AT THE SECOND SESSION 

Begun and held at the City of Washington on Tuesday, 

the third day of January, two thousand and six 

An Act 

To provide economic security for all Americans, and for other purposes.

Be it enacted by the Senate and House of Representatives of 

the United States of America in Congress assembled, 

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Pension Protection Act of 2006’’. 

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

(other than so much of title XIV as follows section 1401) is as 

follows:

Sec. 1. Short title and table of contents. 

TITLE I—REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED 

BENEFIT PENSION PLANS 

Subtitle A—Amendments to Employee Retirement Income Security Act of 1974

Sec. 101. Minimum funding standards. 

Sec. 102. Funding rules for single-employer defined benefit pension plans. 

Sec. 103. Benefit limitations under single-employer plans. 

Sec. 104. Special rules for multiple employer plans of certain cooperatives. 

Sec. 105. Temporary relief for certain PBGC settlement plans. 

Sec. 106. Special rules for plans of certain government contractors. 

Sec. 107. Technical and conforming amendments. 

Subtitle B—Amendments to Internal Revenue Code of 1986

Sec. 111. Minimum funding standards. 

Sec. 112. Funding rules for single-employer defined benefit pension plans. 

Sec. 113. Benefit limitations under single-employer plans. 

Sec. 114. Technical and conforming amendments. 

Sec. 115. Modification of transition rule to pension funding requirements. 

Sec. 116. Restrictions on funding of nonqualified deferred compensation plans by 

employers maintaining underfunded or terminated single-employer 

plans. 

TITLE II—FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT 

PLANS AND RELATED PROVISIONS 

Subtitle A—Amendments to Employee Retirement Income Security Act of 1974

Sec. 201. Funding rules for multiemployer defined benefit plans. 

Sec. 202. Additional funding rules for multiemployer plans in endangered or critical 

status. 

Sec. 203. Measures to forestall insolvency of multiemployer plans. 

Sec. 204. Withdrawal liability reforms. 

Sec. 205. Prohibition on retaliation against employers exercising their rights to

petition the Federal Government. 

Sec. 206. Special rule for certain benefits funded under an agreement approved by 

the Pension Benefit Guaranty Corporation. 

Subtitle B—Amendments to Internal Revenue Code of 1986

Sec. 211. Funding rules for multiemployer defined benefit plans. 

Sec. 212. Additional funding rules for multiemployer plans in endangered or critical 

status. 
H. R. 4—2

Sec. 213. Measures to forestall insolvency of multiemployer plans. 

Sec. 214. Exemption from excise taxes for certain multiemployer pension plans. 

Subtitle C—Sunset of Additional Funding Rules 

Sec. 221. Sunset of additional funding rules. 

TITLE III—INTEREST RATE ASSUMPTIONS 

Sec. 301. Extension of replacement of 30-year Treasury rates. 

Sec. 302. Interest rate assumption for determination of lump sum distributions. 

Sec. 303. Interest rate assumption for applying benefit limitations to lump sum distributions. 

TITLE IV—PBGC GUARANTEE AND RELATED PROVISIONS 

Sec. 401. PBGC premiums. 

Sec. 402. Special funding rules for certain plans maintained by commercial airlines. 

Sec. 403. Limitation on PBGC guarantee of shutdown and other benefits. 

Sec. 404. Rules relating to bankruptcy of employer. 

Sec. 405. PBGC premiums for small plans. 

Sec. 406. Authorization for PBGC to pay interest on premium overpayment refunds. 

Sec. 407. Rules for substantial owner benefits in terminated plans. 

Sec. 408. Acceleration of PBGC computation of benefits attributable to recoveries 

from employers. 

Sec. 409. Treatment of certain plans where cessation or change in membership of 

a controlled group. 

Sec. 410. Missing participants. 

Sec. 411. Director of the Pension Benefit Guaranty Corporation. 

Sec. 412. Inclusion of information in the PBGC annual report. 

TITLE V—DISCLOSURE 

Sec. 501. Defined benefit plan funding notice. 

Sec. 502. Access to multiemployer pension plan information. 

Sec. 503. Additional annual reporting requirements. 

Sec. 504. Electronic display of annual report information. 

Sec. 505. Section 4010 filings with the PBGC. 

Sec. 506. Disclosure of termination information to plan participants. 

Sec. 507. Notice of freedom to divest employer securities. 

Sec. 508. Periodic pension benefit statements. 

Sec. 509. Notice to participants or beneficiaries of blackout periods. 

TITLE VI—INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND 

FIDUCIARY RULES 

Subtitle A—Investment Advice 

Sec. 601. Prohibited transaction exemption for provision of investment advice. 

Subtitle B—Prohibited Transactions 

Sec. 611. Prohibited transaction rules relating to financial investments. 

Sec. 612. Correction period for certain transactions involving securities and commodities. 

Subtitle C—Fiduciary and Other Rules 

Sec. 621. Inapplicability of relief from fiduciary liability during suspension of ability of participant or beneficiary to direct investments. 

Sec. 622. Increase in maximum bond amount. 

Sec. 623. Increase in penalties for coercive interference with exercise of ERISA 

rights. 

Sec. 624. Treatment of investment of assets by plan where participant fails to exercise investment election. 

Sec. 625. Clarification of fiduciary rules. 

TITLE VII—BENEFIT ACCRUAL STANDARDS 

Sec. 701. Benefit accrual standards. 

Sec. 702. Regulations relating to mergers and acquisitions. 

TITLE VIII—PENSION RELATED REVENUE PROVISIONS 

Subtitle A—Deduction Limitations 

Sec. 801. Increase in deduction limit for single-employer plans. 

Sec. 802. Deduction limits for multiemployer plans. 
H. R. 4—3

Sec. 803. Updating deduction rules for combination of plans. 

Subtitle B—Certain Pension Provisions Made Permanent 

Sec. 811. Pensions and individual retirement arrangement provisions of Economic 

Growth and Tax Relief Reconciliation Act of 2001 made permanent. 

Sec. 812. Saver’s credit. 

Subtitle C—Improvements in Portability, Distribution, and Contribution Rules 

Sec. 821. Clarifications regarding purchase of permissive service credit. 

Sec. 822. Allow rollover of after-tax amounts in annuity contracts. 

Sec. 823. Clarification of minimum distribution rules for governmental plans. 

Sec. 824. Allow direct rollovers from retirement plans to Roth IRAs. 

Sec. 825. Eligibility for participation in retirement plans. 

Sec. 826. Modifications of rules governing hardships and unforseen financial emergencies. 

Sec. 827. Penalty-free withdrawals from retirement plans for individuals called to 

active duty for at least 179 days. 

Sec. 828. Waiver of 10 percent early withdrawal penalty tax on certain distributions of pension plans for public safety employees. 

Sec. 829. Allow rollovers by nonspouse beneficiaries of certain retirement plan distributions. 

Sec. 830. Direct payment of tax refunds to individual retirement plans. 

Sec. 831. Allowance of additional IRA payments in certain bankruptcy cases. 

Sec. 832. Determination of average compensation for section 415 limits. 

Sec. 833. Inflation indexing of gross income limitations on certain retirement savings incentives. 

Subtitle D—Health and Medical Benefits 

Sec. 841. Use of excess pension assets for future retiree health benefits and collectively bargained retiree health benefits. 

Sec. 842. Transfer of excess pension assets to multiemployer health plan. 

Sec. 843. Allowance of reserve for medical benefits of plans sponsored by bona fide 

associations. 

Sec. 844. Treatment of annuity and life insurance contracts with a long-term care 

insurance feature. 

Sec. 845. Distributions from governmental retirement plans for health and longterm care insurance for public safety officers. 

Subtitle E—United States Tax Court Modernization 

Sec. 851. Cost-of-living adjustments for Tax Court judicial survivor annuities. 

Sec. 852. Cost of life insurance coverage for Tax Court judges age 65 or over. 

Sec. 853. Participation of Tax Court judges in the Thrift Savings Plan. 

Sec. 854. Annuities to surviving spouses and dependent children of special trial 

judges of the Tax Court. 

Sec. 855. Jurisdiction of Tax Court over collection due process cases. 

Sec. 856. Provisions for recall. 

Sec. 857. Authority for special trial judges to hear and decide certain employment 

status cases. 

Sec. 858. Confirmation of authority of Tax Court to apply doctrine of equitable 

recoupment. 

Sec. 859. Tax Court filing fee in all cases commenced by filing petition. 

Sec. 860. Expanded use of Tax Court practice fee for pro se taxpayers. 

Subtitle F—Other Provisions 

Sec. 861. Extension to all governmental plans of current moratorium on application 

of certain nondiscrimination rules applicable to State and local plans. 

Sec. 862. Elimination of aggregate limit for usage of excess funds from black lung 

disability trusts. 

Sec. 863. Treatment of death benefits from corporate-owned life insurance. 

Sec. 864. Treatment of test room supervisors and proctors who assist in the administration of college entrance and placement exams. 

Sec. 865. Grandfather rule for church plans which self-annuitize. 

Sec. 866. Exemption for income from leveraged real estate held by church plans. 

Sec. 867. Church plan rule. 

Sec. 868. Gratuitous transfer for benefits of employees. 

TITLE IX—INCREASE IN PENSION PLAN DIVERSIFICATION AND 

PARTICIPATION AND OTHER PENSION PROVISIONS 

Sec. 901. Defined contribution plans required to provide employees with freedom to 

invest their plan assets. 
H. R. 4—4

Sec. 902. Increasing participation through automatic contribution arrangements. 

Sec. 903. Treatment of eligible combined defined benefit plans and qualified cash 

or deferred arrangements. 

Sec. 904. Faster vesting of employer nonelective contributions. 

Sec. 905. Distributions during working retirement. 

Sec. 906. Treatment of certain pension plans of Indian tribal governments. 

TITLE X—PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION 

Sec. 1001. Regulations on time and order of issuance of domestic relations orders. 

Sec. 1002. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee. 

Sec. 1003. Extension of tier II railroad retirement benefits to surviving former 

spouses pursuant to divorce agreements. 

Sec. 1004. Requirement for additional survivor annuity option. 

TITLE XI—ADMINISTRATIVE PROVISIONS 

Sec. 1101. Employee plans compliance resolution system. 

Sec. 1102. Notice and consent period regarding distributions. 

Sec. 1103. Reporting simplification. 

Sec. 1104. Voluntary early retirement incentive and employment retention plans 

maintained by local educational agencies and other entities. 

Sec. 1105. No reduction in unemployment compensation as a result of pension rollovers. Sec. 1106. Revocation of election relating to treatment as multiemployer plan. 

Sec. 1107. Provisions relating to plan amendments. 

TITLE XII—PROVISIONS RELATING TO EXEMPT ORGANIZATIONS 

Subtitle A—Charitable Giving Incentives 

Sec. 1201. Tax-free distributions from individual retirement plans for charitable 

purposes. 

Sec. 1202. Extension of modification of charitable deduction for contributions of 

food inventory. 

Sec. 1203. Basis adjustment to stock of S corporation contributing property. 

Sec. 1204. Extension of modification of charitable deduction for contributions of 

book inventory. 

Sec. 1205. Modification of tax treatment of certain payments to controlling exempt 

organizations. 

Sec. 1206. Encouragement of contributions of capital gain real property made for 

conservation purposes. 

Sec. 1207. Excise taxes exemption for blood collector organizations. 

Subtitle B—Reforming Exempt Organizations 

PART 1—GENERAL REFORMS

Sec. 1211. Reporting on certain acquisitions of interests in insurance contracts in 

which certain exempt organizations hold an interest. 

Sec. 1212. Increase in penalty excise taxes relating to public charities, social welfare organizations, and private foundations. 

Sec. 1213. Reform of charitable contributions of certain easements in registered 

historic districts and reduced deduction for portion of qualified conservation contribution attributable to rehabilitation credit. 

Sec. 1214. Charitable contributions of taxidermy property. 

Sec. 1215. Recapture of tax benefit for charitable contributions of exempt use property not used for an exempt use. 

Sec. 1216. Limitation of deduction for charitable contributions of clothing and 

household items. 

Sec. 1217. Modification of recordkeeping requirements for certain charitable contributions. 

Sec. 1218. Contributions of fractional interests in tangible personal property. 

Sec. 1219. Provisions relating to substantial and gross overstatements of valuations. 

Sec. 1220. Additional standards for credit counseling organizations. 

Sec. 1221. Expansion of the base of tax on private foundation net investment income. 

Sec. 1222. Definition of convention or association of churches. 

Sec. 1223. Notification requirement for entities not currently required to file. 

Sec. 1224. Disclosure to State officials relating to exempt organizations. 

Sec. 1225. Public disclosure of information relating to unrelated business income 

tax returns. 

Sec. 1226. Study on donor advised funds and supporting organizations. 
H. R. 4—5

PART 2—IMPROVED ACCOUNTABILITY OF DONOR ADVISED FUNDS

Sec. 1231. Excise taxes relating to donor advised funds. 

Sec. 1232. Excess benefit transactions involving donor advised funds and sponsoring organizations. Sec. 1233. Excess business holdings of donor advised funds. 

Sec. 1234. Treatment of charitable contribution deductions to donor advised funds. 

Sec. 1235. Returns of, and applications for recognition by, sponsoring organizations. 

PART 3—IMPROVED ACCOUNTABILITY OF SUPPORTING ORGANIZATIONS

Sec. 1241. Requirements for supporting organizations. 

Sec. 1242. Excess benefit transactions involving supporting organizations. 

Sec. 1243. Excess business holdings of supporting organizations. 

Sec. 1244. Treatment of amounts paid to supporting organizations by private foundations. 

Sec. 1245. Returns of supporting organizations. 

TITLE XIII—OTHER PROVISIONS 

Sec. 1301. Technical corrections relating to mine safety. 

Sec. 1302. Going-to-the-sun road. 

Sec. 1303. Exception to the local furnishing requirement of the tax-exempt bond 

rules. 

Sec. 1304. Qualified tuition programs. 

TITLE XIV—TARIFF PROVISIONS 

Sec. 1401. Short title; table of contents.

TITLE I—REFORM OF FUNDING RULES 

FOR SINGLE-EMPLOYER DEFINED 

BENEFIT PENSION PLANS 

Subtitle A—Amendments to Employee 

Retirement Income Security Act of 1974

SEC. 101. MINIMUM FUNDING STANDARDS. 

(a) REPEAL OF EXISTING FUNDING RULES.—Sections 302 through 

308 of the Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1082 through 1086) are repealed. 

(b) NEW MINIMUM FUNDING STANDARDS.—Part 3 of subtitle 

B of title I of such Act (as amended by subsection (a)) is amended 

by inserting after section 301 the following new section: 

‘‘SEC. 302. MINIMUM FUNDING STANDARDS. 

‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING STANDARD.— ‘‘(1) IN GENERAL.—A plan to which this part applies shall 

satisfy the minimum funding standard applicable to the plan 

for any plan year. 

‘‘(2) MINIMUM FUNDING STANDARD.—For purposes of paragraph (1), a plan shall be treated as satisfying the minimum 

funding standard for a plan year if—

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

a single-employer plan, the employer makes contributions 

to or under the plan for the plan year which, in the aggregate, are not less than the minimum required contribution 

determined under section 303 for the plan for the plan 

year, 

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

a single-employer plan, the employer makes contributions 

to or under the plan for the plan year which are required 

under the terms of the plan, and 
H. R. 4—6

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

make contributions to or under the plan for any plan year 

which, in the aggregate, are sufficient to ensure that the 

plan does not have an accumulated funding deficiency 

under section 304 as of the end of the plan year. 

‘‘(b) LIABILITY FOR CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2), 

the amount of any contribution required by this section 

(including any required installments under paragraphs (3) and 

(4) of section 303(j)) shall be paid by the employer responsible 

for making contributions to or under the plan. 

‘‘(2) JOINT AND SEVERAL LIABILITY WHERE EMPLOYER

MEMBER OF CONTROLLED GROUP.—If the employer referred to 

in paragraph (1) is a member of a controlled group, each 

member of such group shall be jointly and severally liable 

for payment of such contributions. 

‘‘(c) VARIANCE FROM MINIMUM FUNDING STANDARDS.—

‘‘(1) WAIVER IN CASE OF BUSINESS HARDSHIP.—

‘‘(A) IN GENERAL.—If—

‘‘(i) an employer is (or in the case of a multiemployer plan, 10 percent or more of the number of 

employers contributing to or under the plan is) unable 

to satisfy the minimum funding standard for a plan 

year without temporary substantial business hardship 

(substantial business hardship in the case of a multiemployer plan), and 

‘‘(ii) application of the standard would be adverse 

to the interests of plan participants in the aggregate, 

the Secretary of the Treasury may, subject to subparagraph 

(C), waive the requirements of subsection (a) for such year 

with respect to all or any portion of the minimum funding 

standard. The Secretary of the Treasury shall not waive 

the minimum funding standard with respect to a plan 

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

a multiemployer plan) consecutive plan years. 

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

subparagraph (A) for any plan year—

‘‘(i) in the case of a single-employer plan, the minimum required contribution under section 303 for the 

plan year shall be reduced by the amount of the waived 

funding deficiency and such amount shall be amortized 

as required under section 303(e), and 

‘‘(ii) in the case of a multiemployer plan, the 

funding standard account shall be credited under section 304(b)(3)(C) with the amount of the waived 

funding deficiency and such amount shall be amortized 

as required under section 304(b)(2)(C). 

‘‘(C) WAIVER OF AMORTIZED PORTION NOT ALLOWED.—

The Secretary of the Treasury may not waive under 

subparagraph (A) any portion of the minimum funding 

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

attributable to any waived funding deficiency for any preceding plan year. 

‘‘(2) DETERMINATION OF BUSINESS HARDSHIP.—For purposes 

of this subsection, the factors taken into account in determining 

temporary substantial business hardship (substantial business 
H. R. 4—7

hardship in the case of a multiemployer plan) shall include 

(but shall not be limited to) whether or not—

‘‘(A) the employer is operating at an economic loss, 

‘‘(B) there is substantial unemployment or underemployment in the trade or business and in the industry 

concerned, 

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

are depressed or declining, and 

‘‘(D) it is reasonable to expect that the plan will be 

continued only if the waiver is granted. 

‘‘(3) WAIVED FUNDING DEFICIENCY.—For purposes of this 

part, the term ‘waived funding deficiency’ means the portion 

of the minimum funding standard under subsection (a) (determined without regard to the waiver) for a plan year waived 

by the Secretary of the Treasury and not satisfied by employer 

contributions. 

‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EMPLOYER PLANS, CONSULTATIONS.— ‘‘(A) SECURITY MAY BE REQUIRED.— ‘‘(i) IN GENERAL.—Except as provided in subparagraph (C), the Secretary of the Treasury may require 

an employer maintaining a defined benefit plan which 

is a single-employer plan (within the meaning of section 4001(a)(15)) to provide security to such plan as 

a condition for granting or modifying a waiver under 

paragraph (1). 

‘‘(ii) SPECIAL RULES.—Any security provided under 

clause (i) may be perfected and enforced only by the 

Pension Benefit Guaranty Corporation, or at the direction of the Corporation, by a contributing sponsor 

(within the meaning of section 4001(a)(13)), or a 

member of such sponsor’s controlled group (within the 

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

‘‘(B) CONSULTATION WITH THE PENSION BENEFIT GUAR- ANTY CORPORATION.—Except as provided in subparagraph 

(C), the Secretary of the Treasury shall, before granting 

or modifying a waiver under this subsection with respect 

to a plan described in subparagraph (A)(i)—

‘‘(i) provide the Pension Benefit Guaranty Corporation with—

‘‘(I) notice of the completed application for any 

waiver or modification, and 

‘‘(II) an opportunity to comment on such 

application within 30 days after receipt of such 

notice, and 

‘‘(ii) consider—

‘‘(I) any comments of the Corporation under 

clause (i)(II), and 

‘‘(II) any views of any employee organization 

(within the meaning of section 3(4)) representing 

participants in the plan which are submitted in 

writing to the Secretary of the Treasury in connection with such application. 

Information provided to the Corporation under this 

subparagraph shall be considered tax return information 

and subject to the safeguarding and reporting requirements 

of section 6103(p) of the Internal Revenue Code of 1986. 
H. R. 4—8

‘‘(C) EXCEPTION FOR CERTAIN WAIVERS.—

‘‘(i) IN GENERAL.—The preceding provisions of this 

paragraph shall not apply to any plan with respect 

to which the sum of—

‘‘(I) the aggregate unpaid minimum required 

contributions for the plan year and all preceding 

plan years, and 

‘‘(II) the present value of all waiver amortization installments determined for the plan year and 

succeeding plan years under section 303(e)(2), 

is less than $1,000,000. 

‘‘(ii) TREATMENT OF WAIVERS FOR WHICH APPLICA- TIONS ARE PENDING.—The amount described in clause 

(i)(I) shall include any increase in such amount which 

would result if all applications for waivers of the minimum funding standard under this subsection which 

are pending with respect to such plan were denied. 

‘‘(iii) UNPAID MINIMUM REQUIRED CONTRIBUTION.— For purposes of this subparagraph—

‘‘(I) IN GENERAL.—The term ‘unpaid minimum 

required contribution’ means, with respect to any 

plan year, any minimum required contribution 

under section 303 for the plan year which is not 

paid on or before the due date (as determined 

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

‘‘(II) ORDERING RULE.—For purposes of subclause (I), any payment to or under a plan for 

any plan year shall be allocated first to unpaid 

minimum required contributions for all preceding 

plan years on a first-in, first-out basis and then 

to the minimum required contribution under section 303 for the plan year. 

‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER PLANS.— ‘‘(A) APPLICATION MUST BE SUBMITTED BEFORE DATE

21⁄2 MONTHS AFTER CLOSE OF YEAR.—In the case of a singleemployer plan, no waiver may be granted under this subsection with respect to any plan for any plan year unless 

an application therefor is submitted to the Secretary of 

the Treasury not later than the 15th day of the 3rd month 

beginning after the close of such plan year. 

‘‘(B) SPECIAL RULE IF EMPLOYER IS MEMBER OF CON- TROLLED GROUP.—In the case of a single-employer plan, 

if an employer is a member of a controlled group, the 

temporary substantial business hardship requirements of 

paragraph (1) shall be treated as met only if such requirements are met—

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

‘‘(ii) with respect to the controlled group of which 

such employer is a member (determined by treating 

all members of such group as a single employer). 

The Secretary of the Treasury may provide that an analysis 

of a trade or business or industry of a member need not 

be conducted if such Secretary determines such analysis 

is not necessary because the taking into account of such 

member would not significantly affect the determination 

under this paragraph. 

‘‘(6) ADVANCE NOTICE.—
H. R. 4—9

‘‘(A) IN GENERAL.—The Secretary of the Treasury shall, 

before granting a waiver under this subsection, require 

each applicant to provide evidence satisfactory to such Secretary that the applicant has provided notice of the filing 

of the application for such waiver to each affected party 

(as defined in section 4001(a)(21)). Such notice shall include 

a description of the extent to which the plan is funded 

for benefits which are guaranteed under title IV and for 

benefit liabilities. 

‘‘(B) CONSIDERATION OF RELEVANT INFORMATION.—The 

Secretary of the Treasury shall consider any relevant 

information provided by a person to whom notice was given 

under subparagraph (A). 

‘‘(7) RESTRICTION ON PLAN AMENDMENTS.— ‘‘(A) IN GENERAL.—No amendment of a plan which 

increases the liabilities of the plan by reason of any 

increase in benefits, any change in the accrual of benefits, 

or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver 

under this subsection or an extension of time under section 

304(d) is in effect with respect to the plan, or if a plan 

amendment described in subsection (d)(2) has been made 

at any time in the preceding 12 months (24 months in 

the case of a multiemployer plan). If a plan is amended 

in violation of the preceding sentence, any such waiver, 

or extension of time, shall not apply to any plan year 

ending on or after the date on which such amendment 

is adopted. 

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply 

to any plan amendment which—

‘‘(i) the Secretary of the Treasury determines to 

be reasonable and which provides for only de minimis 

increases in the liabilities of the plan, 

‘‘(ii) only repeals an amendment described in subsection (d)(2), or 

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

under part I of subchapter D of chapter 1 of the 

Internal Revenue Code of 1986. 

‘‘(8) CROSS REFERENCE.—For corresponding duties of the 

Secretary of the Treasury with regard to implementation of 

the Internal Revenue Code of 1986, see section 412(c) of such 

Code. 

‘‘(d) MISCELLANEOUS RULES.—

‘‘(1) CHANGE IN METHOD OR YEAR.—If the funding method, 

the valuation date, or a plan year for a plan is changed, 

the change shall take effect only if approved by the Secretary 

of the Treasury. 

‘‘(2) CERTAIN RETROACTIVE PLAN AMENDMENTS.—For purposes of this section, any amendment applying to a plan year 

which—

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

no later than 21⁄2 months after the close of the plan year 

(or, in the case of a multiemployer plan, no later than 

2 years after the close of such plan year), 

‘‘(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year 

to which the amendment applies, and 
H. R. 4—10

‘‘(C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the 

extent required by the circumstances, 

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

to have been made on the first day of such plan year. No 

amendment described in this paragraph which reduces the 

accrued benefits of any participant shall take effect unless 

the plan administrator files a notice with the Secretary of 

the Treasury notifying him of such amendment and such Secretary has approved such amendment, or within 90 days after 

the date on which such notice was filed, failed to disapprove 

such amendment. No amendment described in this subsection 

shall be approved by the Secretary of the Treasury unless 

such Secretary determines that such amendment is necessary 

because of a temporary substantial business hardship (as determined under subsection (c)(2)) or a substantial business hardship (as so determined) in the case of a multiemployer plan 

and that a waiver under subsection (c) (or, in the case of 

a multiemployer plan, any extension of the amortization period 

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

‘‘(3) CONTROLLED GROUP.—For purposes of this section, the 

term ‘controlled group’ means any group treated as a single 

employer under subsection (b), (c), (m), or (o) of section 414 

of the Internal Revenue Code of 1986.’’. 

(c) CLERICAL AMENDMENT.—The table of contents in section 

1 of such Act is amended by striking the items relating to sections 

302 through 308 and inserting the following new item:

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

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to plan years beginning after 2007. 

SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT 

PENSION PLANS. 

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

Retirement Income Security Act of 1974 (as amended by section 

101 of this Act) is amended by inserting after section 302 the 

following new section: 

‘‘SEC. 303. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER 

DEFINED BENEFIT PENSION PLANS. 

‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For purposes of this 

section and section 302(a)(2)(A), except as provided in subsection 

(f), the term ‘minimum required contribution’ means, with respect 

to any plan year of a single-employer plan—

‘‘(1) in any case in which the value of plan assets of the 

plan (as reduced under subsection (f)(4)(B)) is less than the 

funding target of the plan for the plan year, the sum of—

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

year, 

‘‘(B) the shortfall amortization charge (if any) for the 

plan for the plan year determined under subsection (c), 

and 

‘‘(C) the waiver amortization charge (if any) for the 

plan for the plan year as determined under subsection 

(e); or 

‘‘(2) in any case in which the value of plan assets of the 

plan (as reduced under subsection (f)(4)(B)) equals or exceeds 
H. R. 4—11

the funding target of the plan for the plan year, the target 

normal cost of the plan for the plan year reduced (but not 

below zero) by such excess. 

‘‘(b) TARGET NORMAL COST.—For purposes of this section, except 

as provided in subsection (i)(2) with respect to plans in at-risk 

status, the term ‘target normal cost’ means, for any plan year, 

the present value of all benefits which are expected to accrue 

or to be earned under the plan during the plan year. For purposes 

of this subsection, if any benefit attributable to services performed 

in a preceding plan year is increased by reason of any increase 

in compensation during the current plan year, the increase in 

such benefit shall be treated as having accrued during the current 

plan year. 

‘‘(c) SHORTFALL AMORTIZATION CHARGE.— ‘‘(1) IN GENERAL.—For purposes of this section, the shortfall 

amortization charge for a plan for any plan year is the aggregate total (not less than zero) of the shortfall amortization 

installments for such plan year with respect to the shortfall 

amortization bases for such plan year and each of the 6 preceding plan years. 

‘‘(2) SHORTFALL AMORTIZATION INSTALLMENT.—For purposes 

of paragraph (1)—

‘‘(A) DETERMINATION.—The shortfall amortization 

installments are the amounts necessary to amortize the 

shortfall amortization base of the plan for any plan year 

in level annual installments over the 7-plan-year period 

beginning with such plan year. 

‘‘(B) SHORTFALL INSTALLMENT.—The shortfall amortization installment for any plan year in the 7-plan-year period 

under subparagraph (A) with respect to any shortfall 

amortization base is the annual installment determined 

under subparagraph (A) for that year for that base. 

‘‘(C) SEGMENT RATES.—In determining any shortfall 

amortization installment under this paragraph, the plan 

sponsor shall use the segment rates determined under 

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

similar to the rules of subparagraph (B) of subsection (h)(2). 

‘‘(3) SHORTFALL AMORTIZATION BASE.—For purposes of this 

section, the shortfall amortization base of a plan for a plan 

year is—

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

year, minus 

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

rates determined under subparagraph (C) of subsection 

(h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2)) of the aggregate total of 

the shortfall amortization installments and waiver 

amortization installments which have been determined for 

such plan year and any succeeding plan year with respect 

to the shortfall amortization bases and waiver amortization 

bases of the plan for any plan year preceding such plan 

year. 

‘‘(4) FUNDING SHORTFALL.—For purposes of this section, 

the funding shortfall of a plan for any plan year is the excess 

(if any) of—

‘‘(A) the funding target of the plan for the plan year, 

over 
H. R. 4—12

‘‘(B) the value of plan assets of the plan (as reduced 

under subsection (f)(4)(B)) for the plan year which are 

held by the plan on the valuation date. 

‘‘(5) EXEMPTION FROM NEW SHORTFALL AMORTIZATION

BASE.—

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

of plan assets of the plan (as reduced under subsection 

(f)(4)(A)) is equal to or greater than the funding target 

of the plan for the plan year, the shortfall amortization 

base of the plan for such plan year shall be zero. 

‘‘(B) TRANSITION RULE.—

‘‘(i) IN GENERAL.—Except as provided in clauses 

(iii) and (iv), in the case of plan years beginning after 

2007 and before 2011, only the applicable percentage 

of the funding target shall be taken into account under 

paragraph (3)(A) in determining the funding shortfall 

for the plan year for purposes of subparagraph (A). 

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of 

subparagraph (A), the applicable percentage shall be 

determined in accordance with the following table:

‘‘In the case of a plan year The 

applicable 

beginning in calendar year: percentage is 

2008 ..................................................................................... 92

2009 ..................................................................................... 94

2010 ..................................................................................... 96.

‘‘(iii) LIMITATION.—Clause (i) shall not apply with 

respect to any plan year after 2008 unless the shortfall 

amortization base for each of the preceding years beginning after 2007 was zero (determined after application 

of this subparagraph). 

‘‘(iv) TRANSITION RELIEF NOT AVAILABLE FOR NEW

OR DEFICIT REDUCTION PLANS.—Clause (i) shall not 

apply to a plan—

‘‘(I) which was not in effect for a plan year 

beginning in 2007, or 

‘‘(II) which was in effect for a plan year beginning in 2007 and which was subject to section 

302(d) (as in effect for plan years beginning in 

2007), determined after the application of paragraphs (6) and (9) thereof. 

‘‘(6) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF

FUNDING TARGET.—In any case in which the funding shortfall 

of a plan for a plan year is zero, for purposes of determining 

the shortfall amortization charge for such plan year and succeeding plan years, the shortfall amortization bases for all 

preceding plan years (and all shortfall amortization installments determined with respect to such bases) shall be reduced 

to zero. 

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

this section—

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

(i)(1) with respect to plans in at-risk status, the funding target 

of a plan for a plan year is the present value of all benefits 

accrued or earned under the plan as of the beginning of the 

plan year. 
H. R. 4—13

‘‘(2) FUNDING TARGET ATTAINMENT PERCENTAGE.—The 

‘funding target attainment percentage’ of a plan for a plan 

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

‘‘(A) the value of plan assets for the plan year (as 

reduced under subsection (f)(4)(B)), bears to 

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

(determined without regard to subsection (i)(1)). 

‘‘(e) WAIVER AMORTIZATION CHARGE.—

‘‘(1) DETERMINATION OF WAIVER AMORTIZATION CHARGE.—

The waiver amortization charge (if any) for a plan for any 

plan year is the aggregate total of the waiver amortization 

installments for such plan year with respect to the waiver 

amortization bases for each of the 5 preceding plan years. 

‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—For purposes of 

paragraph (1)—

‘‘(A) DETERMINATION.—The waiver amortization 

installments are the amounts necessary to amortize the 

waiver amortization base of the plan for any plan year 

in level annual installments over a period of 5 plan years 

beginning with the succeeding plan year. 

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

installment for any plan year in the 5-year period under 

subparagraph (A) with respect to any waiver amortization 

base is the annual installment determined under subparagraph (A) for that year for that base. 

‘‘(3) INTEREST RATE.—In determining any waiver amortization installment under this subsection, the plan sponsor shall 

use the segment rates determined under subparagraph (C) 

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

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

‘‘(4) WAIVER AMORTIZATION BASE.—The waiver amortization 

base of a plan for a plan year is the amount of the waived 

funding deficiency (if any) for such plan year under section 

302(c). 

‘‘(5) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF

FUNDING TARGET.—In any case in which the funding shortfall 

of a plan for a plan year is zero, for purposes of determining 

the waiver amortization charge for such plan year and succeeding plan years, the waiver amortization bases for all preceding plan years (and all waiver amortization installments 

determined with respect to such bases) shall be reduced to 

zero. 

‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBUTION BY

PREFUNDING BALANCE AND FUNDING STANDARD CARRYOVER BAL- ANCE.— ‘‘(1) ELECTION TO MAINTAIN BALANCES.— ‘‘(A) PREFUNDING BALANCE.—The plan sponsor of a 

single-employer plan may elect to maintain a prefunding 

balance. 

‘‘(B) FUNDING STANDARD CARRYOVER BALANCE.—

‘‘(i) IN GENERAL.—In the case of a single-employer 

plan described in clause (ii), the plan sponsor may 

elect to maintain a funding standard carryover balance, 

until such balance is reduced to zero. 

‘‘(ii) PLANS MAINTAINING FUNDING STANDARD

ACCOUNT IN 2007.—A plan is described in this clause 

if the plan—
H. R. 4—14

‘‘(I) was in effect for a plan year beginning 

in 2007, and 

‘‘(II) had a positive balance in the funding 

standard account under section 302(b) as in effect 

for such plan year and determined as of the end 

of such plan year. 

‘‘(2) APPLICATION OF BALANCES.—A prefunding balance and 

a funding standard carryover balance maintained pursuant to 

this paragraph—

‘‘(A) shall be available for crediting against the minimum required contribution, pursuant to an election under 

paragraph (3), 

‘‘(B) shall be applied as a reduction in the amount 

treated as the value of plan assets for purposes of this 

section, to the extent provided in paragraph (4), and 

‘‘(C) may be reduced at any time, pursuant to an election under paragraph (5). 

‘‘(3) ELECTION TO APPLY BALANCES AGAINST MINIMUM

REQUIRED CONTRIBUTION.— ‘‘(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), in the case of any plan year in which 

the plan sponsor elects to credit against the minimum 

required contribution for the current plan year all or a 

portion of the prefunding balance or the funding standard 

carryover balance for the current plan year (not in excess 

of such minimum required contribution), the minimum 

required contribution for the plan year shall be reduced 

as of the first day of the plan year by the amount so 

credited by the plan sponsor. For purposes of the preceding 

sentence, the minimum required contribution shall be 

determined after taking into account any waiver under 

section 302(c). 

‘‘(B) COORDINATION WITH FUNDING STANDARD CARRY- OVER BALANCE.—To the extent that any plan has a funding 

standard carryover balance greater than zero, no amount 

of the prefunding balance of such plan may be credited 

under this paragraph in reducing the minimum required 

contribution. 

‘‘(C) LIMITATION FOR UNDERFUNDED PLANS.—The preceding provisions of this paragraph shall not apply for 

any plan year if the ratio (expressed as a percentage) 

which—

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

year (as reduced under paragraph (4)(C)), bears to 

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

plan year (determined without regard to subsection 

(i)(1)), 

is less than 80 percent. In the case of plan years beginning 

in 2008, the ratio under this subparagraph may be determined using such methods of estimation as the Secretary 

of the Treasury may prescribe. 

‘‘(4) EFFECT OF BALANCES ON AMOUNTS TREATED AS VALUE

OF PLAN ASSETS.—In the case of any plan maintaining a 

prefunding balance or a funding standard carryover balance 

pursuant to this subsection, the amount treated as the value 

of plan assets shall be deemed to be such amount, reduced 

as provided in the following subparagraphs: 
H. R. 4—15

‘‘(A) APPLICABILITY OF SHORTFALL AMORTIZATION

BASE.—For purposes of subsection (c)(5), the value of plan 

assets is deemed to be such amount, reduced by the amount 

of the prefunding balance, but only if an election under 

paragraph (2) applying any portion of the prefunding balance in reducing the minimum required contribution is 

in effect for the plan year. 

‘‘(B) DETERMINATION OF EXCESS ASSETS, FUNDING

SHORTFALL, AND FUNDING TARGET ATTAINMENT PERCENTAGE.— ‘‘(i) IN GENERAL.—For purposes of subsections (a), 

(c)(4)(B), and (d)(2)(A), the value of plan assets is 

deemed to be such amount, reduced by the amount 

of the prefunding balance and the funding standard 

carryover balance. 

‘‘(ii) SPECIAL RULE FOR CERTAIN BINDING AGREE- MENTS WITH PBGC.—For purposes of subsection 

(c)(4)(B), the value of plan assets shall not be deemed 

to be reduced for a plan year by the amount of the 

specified balance if, with respect to such balance, there 

is in effect for a plan year a binding written agreement 

with the Pension Benefit Guaranty Corporation which 

provides that such balance is not available to reduce 

the minimum required contribution for the plan year. 

For purposes of the preceding sentence, the term ‘specified balance’ means the prefunding balance or the 

funding standard carryover balance, as the case may 

be. 

‘‘(C) AVAILABILITY OF BALANCES IN PLAN YEAR FOR

CREDITING AGAINST MINIMUM REQUIRED CONTRIBUTION.—

For purposes of paragraph (3)(C)(i) of this subsection, the 

value of plan assets is deemed to be such amount, reduced 

by the amount of the prefunding balance. 

‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO DETERMINATIONS OF VALUE OF PLAN ASSETS AND CREDITING AGAINST MINIMUM REQUIRED CONTRIBUTION.— ‘‘(A) IN GENERAL.—The plan sponsor may elect to 

reduce by any amount the balance of the prefunding balance and the funding standard carryover balance for any 

plan year (but not below zero). Such reduction shall be 

effective prior to any determination of the value of plan 

assets for such plan year under this section and application 

of the balance in reducing the minimum required contribution for such plan for such plan year pursuant to an election 

under paragraph (2). 

‘‘(B) COORDINATION BETWEEN PREFUNDING BALANCE

AND FUNDING STANDARD CARRYOVER BALANCE.—To the 

extent that any plan has a funding standard carryover 

balance greater than zero, no election may be made under 

subparagraph (A) with respect to the prefunding balance. 

‘‘(6) PREFUNDING BALANCE.—

‘‘(A) IN GENERAL.—A prefunding balance maintained 

by a plan shall consist of a beginning balance of zero, 

increased and decreased to the extent provided in subparagraphs (B) and (C), and adjusted further as provided in 

paragraph (8). 

‘‘(B) INCREASES.—
H. R. 4—16

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

year beginning after 2008, the prefunding balance of 

a plan shall be increased by the amount elected by 

the plan sponsor for the plan year. Such amount shall 

not exceed the excess (if any) of—

‘‘(I) the aggregate total of employer contributions to the plan for the preceding plan year, 

over—

‘‘(II) the minimum required contribution for 

such preceding plan year. 

‘‘(ii) ADJUSTMENTS FOR INTEREST.—Any excess contributions under clause (i) shall be properly adjusted 

for interest accruing for the periods between the first 

day of the current plan year and the dates on which 

the excess contributions were made, determined by 

using the effective interest rate for the preceding plan 

year and by treating contributions as being first used 

to satisfy the minimum required contribution. 

‘‘(iii) CERTAIN CONTRIBUTIONS NECESSARY TO AVOID

BENEFIT LIMITATIONS DISREGARDED.—The excess 

described in clause (i) with respect to any preceding 

plan year shall be reduced (but not below zero) by 

the amount of contributions an employer would be 

required to make under paragraph (1), (2), or (4) of 

section 206(g) to avoid a benefit limitation which would 

otherwise be imposed under such paragraph for the 

preceding plan year. Any contribution which may be 

taken into account in satisfying the requirements of 

more than 1 of such paragraphs shall be taken into 

account only once for purposes of this clause. 

‘‘(C) DECREASE.—The prefunding balance of a plan 

shall be decreased (but not below zero) by—

‘‘(i) as of the first day of each plan year after 

2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required 

contribution of the plan for the preceding plan year, 

and 

‘‘(ii) as of the time specified in paragraph (5)(A), 

any reduction in such balance elected under paragraph 

(5). 

‘‘(7) FUNDING STANDARD CARRYOVER BALANCE.— ‘‘(A) IN GENERAL.—A funding standard carryover balance maintained by a plan shall consist of a beginning 

balance determined under subparagraph (B), decreased to 

the extent provided in subparagraph (C), and adjusted 

further as provided in paragraph (8). 

‘‘(B) BEGINNING BALANCE.—The beginning balance of 

the funding standard carryover balance shall be the positive balance described in paragraph (1)(B)(ii)(II). 

‘‘(C) DECREASES.—The funding standard carryover balance of a plan shall be decreased (but not below zero) 

by—

‘‘(i) as of the first day of each plan year after 

2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required 

contribution of the plan for the preceding plan year, 

and 
H. R. 4—17

‘‘(ii) as of the time specified in paragraph (5)(A), 

any reduction in such balance elected under paragraph 

(5). 

‘‘(8) ADJUSTMENTS FOR INVESTMENT EXPERIENCE.—In determining the prefunding balance or the funding standard carryover balance of a plan as of the first day of the plan year, 

the plan sponsor shall, in accordance with regulations prescribed by the Secretary of the Treasury, adjust such balance 

to reflect the rate of return on plan assets for the preceding 

plan year. Notwithstanding subsection (g)(3), such rate of 

return shall be determined on the basis of fair market value 

and shall properly take into account, in accordance with such 

regulations, all contributions, distributions, and other plan payments made during such period. 

‘‘(9) ELECTIONS.—Elections under this subsection shall be 

made at such times, and in such form and manner, as shall 

be prescribed in regulations of the Secretary of the Treasury. 

‘‘(g) VALUATION OF PLAN ASSETS AND LIABILITIES.— ‘‘(1) TIMING OF DETERMINATIONS.—Except as otherwise provided under this subsection, all determinations under this section for a plan year shall be made as of the valuation date 

of the plan for such plan year. 

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

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

(B), the valuation date of a plan for any plan year shall 

be the first day of the plan year. 

‘‘(B) EXCEPTION FOR SMALL PLANS.—If, on each day 

during the preceding plan year, a plan had 100 or fewer 

participants, the plan may designate any day during the 

plan year as its valuation date for such plan year and 

succeeding plan years. For purposes of this subparagraph, 

all defined benefit plans which are single-employer plans 

and are maintained by the same employer (or any member 

of such employer’s controlled group) shall be treated as 

1 plan, but only participants with respect to such employer 

or member shall be taken into account. 

‘‘(C) APPLICATION OF CERTAIN RULES IN DETERMINATION

OF PLAN SIZE.—For purposes of this paragraph—

‘‘(i) PLANS NOT IN EXISTENCE IN PRECEDING YEAR.— In the case of the first plan year of any plan, subparagraph (B) shall apply to such plan by taking into 

account the number of participants that the plan is 

reasonably expected to have on days during such first 

plan year. 

‘‘(ii) PREDECESSORS.—Any reference in subparagraph (B) to an employer shall include a reference 

to any predecessor of such employer. 

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

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

(B), the value of plan assets shall be the fair market 

value of the assets. 

‘‘(B) AVERAGING ALLOWED.—A plan may determine the 

value of plan assets on the basis of the averaging of fair 

market values, but only if such method—

‘‘(i) is permitted under regulations prescribed by 

the Secretary of the Treasury, 
H. R. 4—18

‘‘(ii) does not provide for averaging of such values 

over more than the period beginning on the last day 

of the 25th month preceding the month in which the 

valuation date occurs and ending on the valuation 

date (or a similar period in the case of a valuation 

date which is not the 1st day of a month), and 

‘‘(iii) does not result in a determination of the 

value of plan assets which, at any time, is lower than 

90 percent or greater than 110 percent of the fair 

market value of such assets at such time. 

Any such averaging shall be adjusted for contributions 

and distributions (as provided by the Secretary of the 

Treasury). 

‘‘(4) ACCOUNTING FOR CONTRIBUTION RECEIPTS.—For purposes of determining the value of assets under paragraph (3)—

‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—

‘‘(i) an employer makes any contribution to the 

plan after the valuation date for the plan year in 

which the contribution is made, and 

‘‘(ii) the contribution is for a preceding plan year, 

the contribution shall be taken into account as an asset 

of the plan as of the valuation date, except that in the 

case of any plan year beginning after 2008, only the present 

value (determined as of the valuation date) of such contribution may be taken into account. For purposes of the 

preceding sentence, present value shall be determined 

using the effective interest rate for the preceding plan 

year to which the contribution is properly allocable. 

‘‘(B) SPECIAL RULE FOR CURRENT YEAR CONTRIBUTIONS

MADE BEFORE VALUATION DATE.—If any contributions for 

any plan year are made to or under the plan during the 

plan year but before the valuation date for the plan year, 

the assets of the plan as of the valuation date shall not 

include—

‘‘(i) such contributions, and 

‘‘(ii) interest on such contributions for the period 

between the date of the contributions and the valuation 

date, determined by using the effective interest rate 

for the plan year. 

‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.— ‘‘(1) IN GENERAL.—Subject to this subsection, the determination of any present value or other computation under 

this section shall be made on the basis of actuarial assumptions 

and methods—

‘‘(A) each of which is reasonable (taking into account 

the experience of the plan and reasonable expectations), 

and 

‘‘(B) which, in combination, offer the actuary’s best 

estimate of anticipated experience under the plan. 

‘‘(2) INTEREST RATES.—

‘‘(A) EFFECTIVE INTEREST RATE.—For purposes of this 

section, the term ‘effective interest rate’ means, with 

respect to any plan for any plan year, the single rate 

of interest which, if used to determine the present value 

of the plan’s accrued or earned benefits referred to in 

subsection (d)(1), would result in an amount equal to the 

funding target of the plan for such plan year. 
H. R. 4—19

‘‘(B) INTEREST RATES FOR DETERMINING FUNDING TARGET.—For purposes of determining the funding target and 

normal cost of a plan for any plan year, the interest rate 

used in determining the present value of the benefits of 

the plan shall be—

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

to be payable during the 5-year period beginning on 

the first day of the plan year, the first segment rate 

with respect to the applicable month, 

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

to be payable during the 15-year period beginning at 

the end of the period described in clause (i), the second 

segment rate with respect to the applicable month, 

and 

‘‘(iii) in the case of benefits reasonably determined 

to be payable after the period described in clause (ii), 

the third segment rate with respect to the applicable 

month. 

‘‘(C) SEGMENT RATES.—For purposes of this paragraph—

‘‘(i) FIRST SEGMENT RATE.—The term ‘first segment 

rate’ means, with respect to any month, the single 

rate of interest which shall be determined by the Secretary of the Treasury for such month on the basis 

of the corporate bond yield curve for such month, 

taking into account only that portion of such yield 

curve which is based on bonds maturing during the 

5-year period commencing with such month. 

‘‘(ii) SECOND SEGMENT RATE.—The term ‘second 

segment rate’ means, with respect to any month, the 

single rate of interest which shall be determined by 

the Secretary of the Treasury for such month on the 

basis of the corporate bond yield curve for such month, 

taking into account only that portion of such yield 

curve which is based on bonds maturing during the 

15-year period beginning at the end of the period 

described in clause (i). 

‘‘(iii) THIRD SEGMENT RATE.—The term ‘third segment rate’ means, with respect to any month, the 

single rate of interest which shall be determined by 

the Secretary of the Treasury for such month on the 

basis of the corporate bond yield curve for such month, 

taking into account only that portion of such yield 

curve which is based on bonds maturing during periods 

beginning after the period described in clause (ii). 

‘‘(D) CORPORATE BOND YIELD CURVE.—For purposes of 

this paragraph—

‘‘(i) IN GENERAL.—The term ‘corporate bond yield 

curve’ means, with respect to any month, a yield curve 

which is prescribed by the Secretary of the Treasury 

for such month and which reflects the average, for 

the 24-month period ending with the month preceding 

such month, of monthly yields on investment grade 

corporate bonds with varying maturities and that are 

in the top 3 quality levels available. 
H. R. 4—20

‘‘(ii) ELECTION TO USE YIELD CURVE.—Solely for 

purposes of determining the minimum required contribution under this section, the plan sponsor may, 

in lieu of the segment rates determined under subparagraph (C), elect to use interest rates under the corporate bond yield curve. For purposes of the preceding 

sentence such curve shall be determined without 

regard to the 24-month averaging described in clause 

(i). Such election, once made, may be revoked only 

with the consent of the Secretary of the Treasury. 

‘‘(E) APPLICABLE MONTH.—For purposes of this paragraph, the term ‘applicable month’ means, with respect 

to any plan for any plan year, the month which includes 

the valuation date of such plan for such plan year or, 

at the election of the plan sponsor, any of the 4 months 

which precede such month. Any election made under this 

subparagraph shall apply to the plan year for which the 

election is made and all succeeding plan years, unless 

the election is revoked with the consent of the Secretary 

of the Treasury. 

‘‘(F) PUBLICATION REQUIREMENTS.—The Secretary of 

the Treasury shall publish for each month the corporate 

bond yield curve (and the corporate bond yield curve 

reflecting the modification described in section 

205(g)(3)(B)(iii)(I)) for such month and each of the rates 

determined under subparagraph (B) for such month. The 

Secretary of the Treasury shall also publish a description 

of the methodology used to determine such yield curve 

and such rates which is sufficiently detailed to enable 

plans to make reasonable projections regarding the yield 

curve and such rates for future months based on the plan’s 

projection of future interest rates. 

‘‘(G) TRANSITION RULE.— ‘‘(i) IN GENERAL.—Notwithstanding the preceding 

provisions of this paragraph, for plan years beginning 

in 2008 or 2009, the first, second, or third segment 

rate for a plan with respect to any month shall be 

equal to the sum of—

‘‘(I) the product of such rate for such month 

determined without regard to this subparagraph, 

multiplied by the applicable percentage, and 

‘‘(II) the product of the rate determined under 

the rules of section 302(b)(5)(B)(ii)(II) (as in effect 

for plan years beginning in 2007), multiplied by 

a percentage equal to 100 percent minus the 

applicable percentage. 

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of 

clause (i), the applicable percentage is 331⁄3 percent 

for plan years beginning in 2008 and 662⁄3 percent 

for plan years beginning in 2009. 

‘‘(iii) NEW PLANS INELIGIBLE.—Clause (i) shall not 

apply to any plan if the first plan year of the plan 

begins after December 31, 2007. 

‘‘(iv) ELECTION.—The plan sponsor may elect not 

to have this subparagraph apply. Such election, once 

made, may be revoked only with the consent of the 

Secretary of the Treasury. 
H. R. 4—21

‘‘(3) MORTALITY TABLES.—

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

(C) or (D), the Secretary of the Treasury shall by regulation 

prescribe mortality tables to be used in determining any 

present value or making any computation under this section. Such tables shall be based on the actual experience 

of pension plans and projected trends in such experience. 

In prescribing such tables, the Secretary of the Treasury 

shall take into account results of available independent 

studies of mortality of individuals covered by pension plans. 

‘‘(B) PERIODIC REVISION.—The Secretary of the 

Treasury shall (at least every 10 years) make revisions 

in any table in effect under subparagraph (A) to reflect 

the actual experience of pension plans and projected trends 

in such experience. 

‘‘(C) SUBSTITUTE MORTALITY TABLE.— ‘‘(i) IN GENERAL.—Upon request by the plan 

sponsor and approval by the Secretary of the Treasury, 

a mortality table which meets the requirements of 

clause (iii) shall be used in determining any present 

value or making any computation under this section 

during the period of consecutive plan years (not to 

exceed 10) specified in the request. 

‘‘(ii) EARLY TERMINATION OF PERIOD.—Notwithstanding clause (i), a mortality table described in clause 

(i) shall cease to be in effect as of the earliest of—

‘‘(I) the date on which there is a significant 

change in the participants in the plan by reason 

of a plan spinoff or merger or otherwise, or 

‘‘(II) the date on which the plan actuary determines that such table does not meet the requirements of clause (iii). 

‘‘(iii) REQUIREMENTS.—A mortality table meets the 

requirements of this clause if—

‘‘(I) there is a sufficient number of plan participants, and the pension plans have been maintained for a sufficient period of time, to have credible information necessary for purposes of subclause (II), and 

‘‘(II) such table reflects the actual experience 

of the pension plans maintained by the sponsor 

and projected trends in general mortality experience. 

‘‘(iv) ALL PLANS IN CONTROLLED GROUP MUST USE

SEPARATE TABLE.—Except as provided by the Secretary 

of the Treasury, a plan sponsor may not use a mortality 

table under this subparagraph for any plan maintained 

by the plan sponsor unless—

‘‘(I) a separate mortality table is established 

and used under this subparagraph for each other 

plan maintained by the plan sponsor and if the 

plan sponsor is a member of a controlled group, 

each member of the controlled group, and 

‘‘(II) the requirements of clause (iii) are met 

separately with respect to the table so established 

for each such plan, determined by only taking 

into account the participants of such plan, the 
H. R. 4—22

time such plan has been in existence, and the 

actual experience of such plan. 

‘‘(v) DEADLINE FOR SUBMISSION AND DISPOSITION

OF APPLICATION.—

‘‘(I) SUBMISSION.—The plan sponsor shall 

submit a mortality table to the Secretary of the 

Treasury for approval under this subparagraph 

at least 7 months before the 1st day of the period 

described in clause (i). 

‘‘(II) DISPOSITION.—Any mortality table submitted to the Secretary of the Treasury for 

approval under this subparagraph shall be treated 

as in effect as of the 1st day of the period described 

in clause (i) unless the Secretary of the Treasury, 

during the 180-day period beginning on the date 

of such submission, disapproves of such table and 

provides the reasons that such table fails to meet 

the requirements of clause (iii). The 180-day period 

shall be extended upon mutual agreement of the 

Secretary of the Treasury and the plan sponsor. 

‘‘(D) SEPARATE MORTALITY TABLES FOR THE DISABLED.—

Notwithstanding subparagraph (A)—

‘‘(i) IN GENERAL.—The Secretary of the Treasury 

shall establish mortality tables which may be used 

(in lieu of the tables under subparagraph (A)) under 

this subsection for individuals who are entitled to benefits under the plan on account of disability. The Secretary of the Treasury shall establish separate tables 

for individuals whose disabilities occur in plan years 

beginning before January 1, 1995, and for individuals 

whose disabilities occur in plan years beginning on 

or after such date. 

‘‘(ii) SPECIAL RULE FOR DISABILITIES OCCURRING

AFTER 1994.—In the case of disabilities occurring in 

plan years beginning after December 31, 1994, the 

tables under clause (i) shall apply only with respect 

to individuals described in such subclause who are 

disabled within the meaning of title II of the Social 

Security Act and the regulations thereunder. 

‘‘(iii) PERIODIC REVISION.—The Secretary of the 

Treasury shall (at least every 10 years) make revisions 

in any table in effect under clause (i) to reflect the 

actual experience of pension plans and projected trends 

in such experience. 

‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN THE FORM OF

LUMP SUMS OR OTHER OPTIONAL FORMS.—For purposes of determining any present value or making any computation under 

this section, there shall be taken into account—

‘‘(A) the probability that future benefit payments under 

the plan will be made in the form of optional forms of 

benefits provided under the plan (including lump sum distributions, determined on the basis of the plan’s experience 

and other related assumptions), and 

‘‘(B) any difference in the present value of such future 

benefit payments resulting from the use of actuarial 

assumptions, in determining benefit payments in any such 
H. R. 4—23

optional form of benefits, which are different from those 

specified in this subsection. 

‘‘(5) APPROVAL OF LARGE CHANGES IN ACTUARIAL ASSUMPTIONS.—

‘‘(A) IN GENERAL.—No actuarial assumption used to 

determine the funding target for a plan to which this 

paragraph applies may be changed without the approval 

of the Secretary of the Treasury. 

‘‘(B) PLANS TO WHICH PARAGRAPH APPLIES.—This paragraph shall apply to a plan only if—

‘‘(i) the plan is a single-employer plan to which 

title IV applies, 

‘‘(ii) the aggregate unfunded vested benefits as of 

the close of the preceding plan year (as determined 

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

other plans maintained by the contributing sponsors 

(as defined in section 4001(a)(13)) and members of 

such sponsors’ controlled groups (as defined in section 

4001(a)(14)) which are covered by title IV (disregarding 

plans with no unfunded vested benefits) exceed 

$50,000,000, and 

‘‘(iii) the change in assumptions (determined after 

taking into account any changes in interest rate and 

mortality table) results in a decrease in the funding 

shortfall of the plan for the current plan year that 

exceeds $50,000,000, or that exceeds $5,000,000 and 

that is 5 percent or more of the funding target of 

the plan before such change. 

‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.— ‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK STATUS.— ‘‘(A) IN GENERAL.—In the case of a plan which is in 

at-risk status for a plan year, the funding target of the 

plan for the plan year shall be equal to the sum of—

‘‘(i) the present value of all benefits accrued or 

earned under the plan as of the beginning of the plan 

year, as determined by using the additional actuarial 

assumptions described in subparagraph (B), and 

‘‘(ii) in the case of a plan which also has been 

in at-risk status for at least 2 of the 4 preceding 

plan years, a loading factor determined under subparagraph (C). 

‘‘(B) ADDITIONAL ACTUARIAL ASSUMPTIONS.—The actuarial assumptions described in this subparagraph are as 

follows: 

‘‘(i) All employees who are not otherwise assumed 

to retire as of the valuation date but who will be 

eligible to elect benefits during the plan year and the 

10 succeeding plan years shall be assumed to retire 

at the earliest retirement date under the plan but 

not before the end of the plan year for which the 

at-risk funding target and at-risk target normal cost 

are being determined. 

‘‘(ii) All employees shall be assumed to elect the 

retirement benefit available under the plan at the 

assumed retirement age (determined after application 

of clause (i)) which would result in the highest present 

value of benefits. 
H. R. 4—24

‘‘(C) LOADING FACTOR.—The loading factor applied with 

respect to a plan under this paragraph for any plan year 

is the sum of—

‘‘(i) $700, times the number of participants in the 

plan, plus 

‘‘(ii) 4 percent of the funding target (determined 

without regard to this paragraph) of the plan for the 

plan year. 

‘‘(2) TARGET NORMAL COST OF AT-RISK PLANS.—In the case 

of a plan which is in at-risk status for a plan year, the target 

normal cost of the plan for such plan year shall be equal 

to the sum of—

‘‘(A) the present value of all benefits which are expected 

to accrue or be earned under the plan during the plan 

year, determined using the additional actuarial assumptions described in paragraph (1)(B), plus 

‘‘(B) in the case of a plan which also has been in 

at-risk status for at least 2 of the 4 preceding plan years, 

a loading factor equal to 4 percent of the target normal 

cost (determined without regard to this paragraph) of the 

plan for the plan year. 

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

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

target, as determined without regard to this subsection, 

or 

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

target normal cost, as determined without regard to this 

subsection. 

‘‘(4) DETERMINATION OF AT-RISK STATUS.—For purposes of 

this subsection—

‘‘(A) IN GENERAL.—A plan is in at-risk status for a 

plan year if—

‘‘(i) the funding target attainment percentage for 

the preceding plan year (determined under this section 

without regard to this subsection) is less than 80 percent, and 

‘‘(ii) the funding target attainment percentage for 

the preceding plan year (determined under this section 

by using the additional actuarial assumptions 

described in paragraph (1)(B) in computing the funding 

target) is less than 70 percent. 

‘‘(B) TRANSITION RULE.—In the case of plan years beginning in 2008, 2009, and 2010, subparagraph (A)(i) shall 

be applied by substituting the following percentages for 

‘80 percent’: 

‘‘(i) 65 percent in the case of 2008. 

‘‘(ii) 70 percent in the case of 2009. 

‘‘(iii) 75 percent in the case of 2010. 

In the case of plan years beginning in 2008, the funding 

target attainment percentage for the preceding plan year 

under subparagraph (A)(ii) may be determined using such 

methods of estimation as the Secretary of the Treasury 

may provide. 

‘‘(C) SPECIAL RULE FOR EMPLOYEES OFFERED EARLY

RETIREMENT IN 2006.— ‘‘(i) IN GENERAL.—For purposes of subparagraph 

(A)(ii), the additional actuarial assumptions described 
H. R. 4—25

in paragraph (1)(B) shall not be taken into account 

with respect to any employee if—

‘‘(I) such employee is employed by a specified 

automobile manufacturer, 

‘‘(II) such employee is offered a substantial 

amount of additional cash compensation, substantially enhanced retirement benefits under the plan, 

or materially reduced employment duties on the 

condition that by a specified date (not later than 

December 31, 2010) the employee retires (as 

defined under the terms of the plan), 

‘‘(III) such offer is made during 2006 and 

pursuant to a bona fide retirement incentive program and requires, by the terms of the offer, that 

such offer can be accepted not later than a specified 

date (not later than December 31, 2006), and 

‘‘(IV) such employee does not elect to accept 

such offer before the specified date on which the 

offer expires. 

‘‘(ii) SPECIFIED AUTOMOBILE MANUFACTURER.—For 

purposes of clause (i), the term ‘specified automobile 

manufacturer’ means—

‘‘(I) any manufacturer of automobiles, and 

‘‘(II) any manufacturer of automobile parts 

which supplies such parts directly to a manufacturer of automobiles and which, after a transaction 

or series of transactions ending in 1999, ceased 

to be a member of a controlled group which 

included such manufacturer of automobiles. 

‘‘(5) TRANSITION BETWEEN APPLICABLE FUNDING TARGETS

AND BETWEEN APPLICABLE TARGET NORMAL COSTS.—

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

is in at-risk status for a plan year has been in such status 

for a consecutive period of fewer than 5 plan years, the 

applicable amount of the funding target and of the target 

normal cost shall be, in lieu of the amount determined 

without regard to this paragraph, the sum of—

‘‘(i) the amount determined under this section 

without regard to this subsection, plus 

‘‘(ii) the transition percentage for such plan year 

of the excess of the amount determined under this 

subsection (without regard to this paragraph) over the 

amount determined under this section without regard 

to this subsection. 

‘‘(B) TRANSITION PERCENTAGE.—For purposes of 

subparagraph (A), the transition percentage shall be determined in accordance with the following table:

‘‘If the consecutive number of 

years (including the plan year) The 

transition 

the plan is in at-risk status is— percentage 

is—

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

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

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

4 .............................................................................................. 80.
H. R. 4—26

‘‘(C) YEARS BEFORE EFFECTIVE DATE.—For purposes of 

this paragraph, plan years beginning before 2008 shall 

not be taken into account. 

‘‘(6) SMALL PLAN EXCEPTION.—If, on each day during the 

preceding plan year, a plan had 500 or fewer participants, 

the plan shall not be treated as in at-risk status for the plan 

year. For purposes of this paragraph, all defined benefit plans 

(other than multiemployer plans) maintained by the same 

employer (or any member of such employer’s controlled group) 

shall be treated as 1 plan, but only participants with respect 

to such employer or member shall be taken into account and 

the rules of subsection (g)(2)(C) shall apply. 

‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBUTIONS.— ‘‘(1) IN GENERAL.—For purposes of this section, the due 

date for any payment of any minimum required contribution 

for any plan year shall be 81⁄2 months after the close of the 

plan year. 

‘‘(2) INTEREST.—Any payment required under paragraph 

(1) for a plan year that is made on a date other than the 

valuation date for such plan year shall be adjusted for interest 

accruing for the period between the valuation date and the 

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

for such plan year. 

‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION SCHEDULE FOR

UNDERFUNDED PLANS.— ‘‘(A) FAILURE TO TIMELY MAKE REQUIRED INSTALL- MENT.—In any case in which the plan has a funding shortfall for the preceding plan year, the employer maintaining 

the plan shall make the required installments under this 

paragraph and if the employer fails to pay the full amount 

of a required installment for the plan year, then the amount 

of interest charged under paragraph (2) on the underpayment for the period of underpayment shall be determined by using a rate of interest equal to the rate otherwise 

used under paragraph (2) plus 5 percentage points. 

‘‘(B) AMOUNT OF UNDERPAYMENT, PERIOD OF UNDER- PAYMENT.—For purposes of subparagraph (A)—

‘‘(i) AMOUNT.—The amount of the underpayment 

shall be the excess of—

‘‘(I) the required installment, over 

‘‘(II) the amount (if any) of the installment 

contributed to or under the plan on or before the 

due date for the installment. 

‘‘(ii) PERIOD OF UNDERPAYMENT.—The period for 

which any interest is charged under this paragraph 

with respect to any portion of the underpayment shall 

run from the due date for the installment to the date 

on which such portion is contributed to or under the 

plan. 

‘‘(iii) ORDER OF CREDITING CONTRIBUTIONS.—For 

purposes of clause (i)(II), contributions shall be credited 

against unpaid required installments in the order in 

which such installments are required to be paid. 

‘‘(C) NUMBER OF REQUIRED INSTALLMENTS; DUE

DATES.—For purposes of this paragraph—

‘‘(i) PAYABLE IN 4 INSTALLMENTS.—There shall be 

4 required installments for each plan year. 
H. R. 4—27

‘‘(ii) TIME FOR PAYMENT OF INSTALLMENTS.—The 

due dates for required installments are set forth in 

the following table:

‘‘In the case of the following

required installment:

The due date is:

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

2nd .................................................................... July 15

3rd ..................................................................... October 15

4th ..................................................................... January 15 of the

following year. 

‘‘(D) AMOUNT OF REQUIRED INSTALLMENT.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—The amount of any required 

installment shall be 25 percent of the required annual 

payment. 

‘‘(ii) REQUIRED ANNUAL PAYMENT.—For purposes 

of clause (i), the term ‘required annual payment’ means 

the lesser of—

‘‘(I) 90 percent of the minimum required contribution (determined without regard to this subsection) to the plan for the plan year under this 

section, or 

‘‘(II) 100 percent of the minimum required contribution (determined without regard to this subsection or to any waiver under section 302(c)) to 

the plan for the preceding plan year. 

Subclause (II) shall not apply if the preceding plan 

year referred to in such clause was not a year of 

12 months. 

‘‘(E) FISCAL YEARS AND SHORT YEARS.—

‘‘(i) FISCAL YEARS.—In applying this paragraph to 

a plan year beginning on any date other than January 

1, there shall be substituted for the months specified 

in this paragraph, the months which correspond 

thereto. 

‘‘(ii) SHORT PLAN YEAR.—This subparagraph shall 

be applied to plan years of less than 12 months in 

accordance with regulations prescribed by the Secretary of the Treasury. 

‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION WITH QUAR- TERLY CONTRIBUTIONS.—

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

applies shall be treated as failing to pay the full amount 

of any required installment under paragraph (3) to the 

extent that the value of the liquid assets paid in such 

installment is less than the liquidity shortfall (whether 

or not such liquidity shortfall exceeds the amount of such 

installment required to be paid but for this paragraph). 

‘‘(B) PLANS TO WHICH PARAGRAPH APPLIES.—This paragraph shall apply to a plan (other than a plan described 

in subsection (g)(2)(B)) which—

‘‘(i) is required to pay installments under paragraph (3) for a plan year, and 

‘‘(ii) has a liquidity shortfall for any quarter during 

such plan year. 
H. R. 4—28

‘‘(C) PERIOD OF UNDERPAYMENT.—For purposes of paragraph (3)(A), any portion of an installment that is treated 

as not paid under subparagraph (A) shall continue to be 

treated as unpaid until the close of the quarter in which 

the due date for such installment occurs. 

‘‘(D) LIMITATION ON INCREASE.—If the amount of any 

required installment is increased by reason of subparagraph (A), in no event shall such increase exceed the 

amount which, when added to prior installments for the 

plan year, is necessary to increase the funding target 

attainment percentage of the plan for the plan year (taking 

into account the expected increase in funding target due 

to benefits accruing or earned during the plan year) to 

100 percent. 

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

‘‘(i) LIQUIDITY SHORTFALL.—The term ‘liquidity 

shortfall’ means, with respect to any required installment, an amount equal to the excess (as of the last 

day of the quarter for which such installment is made) 

of—

‘‘(I) the base amount with respect to such 

quarter, over 

‘‘(II) the value (as of such last day) of the 

plan’s liquid assets. 

‘‘(ii) BASE AMOUNT.— ‘‘(I) IN GENERAL.—The term ‘base amount’ 

means, with respect to any quarter, an amount 

equal to 3 times the sum of the adjusted disbursements from the plan for the 12 months ending 

on the last day of such quarter. 

‘‘(II) SPECIAL RULE.—If the amount determined 

under subclause (I) exceeds an amount equal to 

2 times the sum of the adjusted disbursements 

from the plan for the 36 months ending on the 

last day of the quarter and an enrolled actuary 

certifies to the satisfaction of the Secretary of the 

Treasury that such excess is the result of nonrecurring circumstances, the base amount with 

respect to such quarter shall be determined without regard to amounts related to those nonrecurring circumstances. 

‘‘(iii) DISBURSEMENTS FROM THE PLAN.—The term 

‘disbursements from the plan’ means all disbursements 

from the trust, including purchases of annuities, payments of single sums and other benefits, and administrative expenses. 

‘‘(iv) ADJUSTED DISBURSEMENTS.—The term 

‘adjusted disbursements’ means disbursements from 

the plan reduced by the product of—

‘‘(I) the plan’s funding target attainment 

percentage for the plan year, and 

‘‘(II) the sum of the purchases of annuities, 

payments of single sums, and such other disbursements as the Secretary of the Treasury shall provide in regulations. 

‘‘(v) LIQUID ASSETS.—The term ‘liquid assets’ 

means cash, marketable securities, and such other 
H. R. 4—29

assets as specified by the Secretary of the Treasury 

in regulations. 

‘‘(vi) QUARTER.—The term ‘quarter’ means, with 

respect to any required installment, the 3-month period 

preceding the month in which the due date for such 

installment occurs. 

‘‘(F) REGULATIONS.—The Secretary of the Treasury may 

prescribe such regulations as are necessary to carry out 

this paragraph. 

‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO MAKE REQUIRED

CONTRIBUTIONS.—

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

subsection applies (as provided under paragraph (2)), if—

‘‘(A) any person fails to make a contribution payment 

required by section 302 and this section before the due 

date for such payment, and 

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

interest), when added to the aggregate unpaid balance 

of all preceding such payments for which payment was 

not made before the due date (including interest), exceeds 

$1,000,000, 

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

determined under paragraph (3) upon all property and rights 

to property, whether real or personal, belonging to such person 

and any other person who is a member of the same controlled 

group of which such person is a member. 

‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—This subsection 

shall apply to a single-employer plan covered under section 

4021 for any plan year for which the funding target attainment 

percentage (as defined in subsection (d)(2)) of such plan is 

less than 100 percent. 

‘‘(3) AMOUNT OF LIEN.—For purposes of paragraph (1), the 

amount of the lien shall be equal to the aggregate unpaid 

balance of contribution payments required under this section 

and section 302 for which payment has not been made before 

the due date. 

‘‘(4) NOTICE OF FAILURE; LIEN.—

‘‘(A) NOTICE OF FAILURE.—A person committing a 

failure described in paragraph (1) shall notify the Pension 

Benefit Guaranty Corporation of such failure within 10 

days of the due date for the required contribution payment. 

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

(1) shall arise on the due date for the required contribution 

payment and shall continue until the last day of the first 

plan year in which the plan ceases to be described in 

paragraph (1)(B). Such lien shall continue to run without 

regard to whether such plan continues to be described 

in paragraph (2) during the period referred to in the preceding sentence. 

‘‘(C) CERTAIN RULES TO APPLY.—Any amount with 

respect to which a lien is imposed under paragraph (1) 

shall be treated as taxes due and owing the United States 

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

(e) of section 4068 shall apply with respect to a lien imposed 

by subsection (a) and the amount with respect to such 

lien. 
H. R. 4—30

‘‘(5) ENFORCEMENT.—Any lien created under paragraph (1) 

may be perfected and enforced only by the Pension Benefit 

Guaranty Corporation, or at the direction of the Pension Benefit 

Guaranty Corporation, by the contributing sponsor (or any 

member of the controlled group of the contributing sponsor). 

‘‘(6) DEFINITIONS.—For purposes of this subsection—

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

payment’ means, in connection with a plan, a contribution 

payment required to be made to the plan, including any 

required installment under paragraphs (3) and (4) of subsection (j). 

‘‘(B) DUE DATE; REQUIRED INSTALLMENT.—The terms 

‘due date’ and ‘required installment’ have the meanings 

given such terms by subsection (j), except that in the case 

of a payment other than a required installment, the due 

date shall be the date such payment is required to be 

made under section 303. 

‘‘(C) CONTROLLED GROUP.—The term ‘controlled group’ 

means any group treated as a single employer under subsections (b), (c), (m), and (o) of section 414 of the Internal 

Revenue Code of 1986. 

‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT ACCOUNTS.— In the case of a qualified transfer (as defined in section 420 of 

the Internal Revenue Code of 1986), any assets so transferred 

shall not, for purposes of this section, be treated as assets in 

the plan.’’. 

(b) CLERICAL AMENDMENT.—The table of sections in section 

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

after the item relating to section 302 the following new item:

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

plans.’’.

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply with respect to plan years beginning after 2007. 

SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS. 

(a) FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT

ACCRUALS UNDER SINGLE-EMPLOYER PLANS.—Section 206 of the 

Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056) 

is amended by adding at the end the following new subsection: 

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

ACCRUALS UNDER SINGLE-EMPLOYER PLANS.—

‘‘(1) FUNDING-BASED LIMITATION ON SHUTDOWN BENEFITS

AND OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS

UNDER SINGLE-EMPLOYER PLANS.—

‘‘(A) IN GENERAL.—If a participant of a defined benefit 

plan which is a single-employer plan is entitled to an 

unpredictable contingent event benefit payable with respect 

to any event occurring during any plan year, the plan 

shall provide that such benefit may not be provided if 

the adjusted funding target attainment percentage for such 

plan year—

‘‘(i) is less than 60 percent, or 

‘‘(ii) would be less than 60 percent taking into 

account such occurrence. 

‘‘(B) EXEMPTION.—Subparagraph (A) shall cease to 

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

first day of the plan year, upon payment by the plan 
H. R. 4—31

sponsor of a contribution (in addition to any minimum 

required contribution under section 303) equal to—

‘‘(i) in the case of subparagraph (A)(i), the amount 

of the increase in the funding target of the plan (under 

section 303) for the plan year attributable to the occurrence referred to in subparagraph (A), and 

‘‘(ii) in the case of subparagraph (A)(ii), the amount 

sufficient to result in a funding target attainment 

percentage of 60 percent. 

‘‘(C) UNPREDICTABLE CONTINGENT EVENT.—For purposes of this paragraph, the term ‘unpredictable contingent 

event benefit’ means any benefit payable solely by reason 

of—

‘‘(i) a plant shutdown (or similar event, as determined by the Secretary of the Treasury), or 

‘‘(ii) an event other than the attainment of any 

age, performance of any service, receipt or derivation 

of any compensation, or occurrence of death or disability. 

‘‘(2) LIMITATIONS ON PLAN AMENDMENTS INCREASING

LIABILITY FOR BENEFITS.— ‘‘(A) IN GENERAL.—No amendment to a defined benefit 

plan which is a single-employer plan which has the effect 

of increasing liabilities of the plan by reason of increases 

in benefits, establishment of new benefits, changing the 

rate of benefit accrual, or changing the rate at which benefits become nonforfeitable may take effect during any plan 

year if the adjusted funding target attainment percentage 

for such plan year is—

‘‘(i) less than 80 percent, or 

‘‘(ii) would be less than 80 percent taking into 

account such amendment. 

‘‘(B) EXEMPTION.—Subparagraph (A) shall cease to 

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

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

of the amendment), upon payment by the plan sponsor 

of a contribution (in addition to any minimum required 

contribution under section 303) equal to—

‘‘(i) in the case of subparagraph (A)(i), the amount 

of the increase in the funding target of the plan (under 

section 303) for the plan year attributable to the 

amendment, and 

‘‘(ii) in the case of subparagraph (A)(ii), the amount 

sufficient to result in an adjusted funding target attainment percentage of 80 percent. 

‘‘(C) EXCEPTION FOR CERTAIN BENEFIT INCREASES.—

Subparagraph (A) shall not apply to any amendment which 

provides for an increase in benefits under a formula which 

is not based on a participant’s compensation, but only 

if the rate of such increase is not in excess of the contemporaneous rate of increase in average wages of participants 

covered by the amendment. 

‘‘(3) LIMITATIONS ON ACCELERATED BENEFIT DISTRIBUTIONS.—‘‘(A) FUNDING PERCENTAGE LESS THAN 60 PERCENT.— A defined benefit plan which is a single-employer plan 

shall provide that, in any case in which the plan’s adjusted 
H. R. 4—32

funding target attainment percentage for a plan year is 

less than 60 percent, the plan may not pay any prohibited 

payment after the valuation date for the plan year. 

‘‘(B) BANKRUPTCY.—A defined benefit plan which is 

a single-employer plan shall provide that, during any period 

in which the plan sponsor is a debtor in a case under 

title 11, United States Code, or similar Federal or State 

law, the plan may not pay any prohibited payment. The 

preceding sentence shall not apply on or after the date 

on which the enrolled actuary of the plan certifies that 

the adjusted funding target attainment percentage of such 

plan is not less than 100 percent. 

‘‘(C) LIMITED PAYMENT IF PERCENTAGE AT LEAST 60

PERCENT BUT LESS THAN 80 PERCENT.— ‘‘(i) IN GENERAL.—A defined benefit plan which 

is a single-employer plan shall provide that, in any 

case in which the plan’s adjusted funding target attainment percentage for a plan year is 60 percent or greater 

but less than 80 percent, the plan may not pay any 

prohibited payment after the valuation date for the 

plan year to the extent the amount of the payment 

exceeds the lesser of—

‘‘(I) 50 percent of the amount of the payment 

which could be made without regard to this subsection, or 

‘‘(II) the present value (determined under guidance prescribed by the Pension Benefit Guaranty 

Corporation, using the interest and mortality 

assumptions under section 205(g)) of the maximum 

guarantee with respect to the participant under 

section 4022. 

‘‘(ii) ONE-TIME APPLICATION.— ‘‘(I) IN GENERAL.—The plan shall also provide 

that only 1 prohibited payment meeting the 

requirements of clause (i) may be made with 

respect to any participant during any period of 

consecutive plan years to which the limitations 

under either subparagraph (A) or (B) or this 

subparagraph applies. 

‘‘(II) TREATMENT OF BENEFICIARIES.—For purposes of this clause, a participant and any beneficiary on his behalf (including an alternate payee, 

as defined in section 206(d)(3)(K)) shall be treated 

as 1 participant. If the accrued benefit of a participant is allocated to such an alternate payee and 

1 or more other persons, the amount under clause 

(i) shall be allocated among such persons in the 

same manner as the accrued benefit is allocated 

unless the qualified domestic relations order (as 

defined in section 206(d)(3)(B)(i)) provides otherwise. 

‘‘(D) EXCEPTION.—This paragraph shall not apply to 

any plan for any plan year if the terms of such plan 

(as in effect for the period beginning on September 1, 

2005, and ending with such plan year) provide for no 

benefit accruals with respect to any participant during 

such period. 
H. R. 4—33

‘‘(E) PROHIBITED PAYMENT.—For purpose of this paragraph, the term ‘prohibited payment’ means—

‘‘(i) any payment, in excess of the monthly amount 

paid under a single life annuity (plus any social security supplements described in the last sentence of section 204(b)(1)(G)), to a participant or beneficiary whose 

annuity starting date (as defined in section 205(h)(2)) 

occurs during any period a limitation under subparagraph (A) or (B) is in effect, 

‘‘(ii) any payment for the purchase of an irrevocable 

commitment from an insurer to pay benefits, and 

‘‘(iii) any other payment specified by the Secretary 

of the Treasury by regulations. 

‘‘(4) LIMITATION ON BENEFIT ACCRUALS FOR PLANS WITH

SEVERE FUNDING SHORTFALLS.—

‘‘(A) IN GENERAL.—A defined benefit plan which is a 

single-employer plan shall provide that, in any case in 

which the plan’s adjusted funding target attainment 

percentage for a plan year is less than 60 percent, benefit 

accruals under the plan shall cease as of the valuation 

date for the plan year. 

‘‘(B) EXEMPTION.—Subparagraph (A) shall cease to 

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

first day of the plan year, upon payment by the plan 

sponsor of a contribution (in addition to any minimum 

required contribution under section 303) equal to the 

amount sufficient to result in an adjusted funding target 

attainment percentage of 60 percent. 

‘‘(5) RULES RELATING TO CONTRIBUTIONS REQUIRED TO AVOID

BENEFIT LIMITATIONS.—

‘‘(A) SECURITY MAY BE PROVIDED.—

‘‘(i) IN GENERAL.—For purposes of this subsection, 

the adjusted funding target attainment percentage 

shall be determined by treating as an asset of the 

plan any security provided by a plan sponsor in a 

form meeting the requirements of clause (ii). 

‘‘(ii) FORM OF SECURITY.—The security required 

under clause (i) shall consist of—

‘‘(I) a bond issued by a corporate surety company that is an acceptable surety for purposes 

of section 412 of this Act, 

‘‘(II) cash, or United States obligations which 

mature in 3 years or less, held in escrow by a 

bank or similar financial institution, or 

‘‘(III) such other form of security as is satisfactory to the Secretary of the Treasury and the parties involved. 

‘‘(iii) ENFORCEMENT.—Any security provided under 

clause (i) may be perfected and enforced at any time 

after the earlier of—

‘‘(I) the date on which the plan terminates, 

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

of the minimum required contribution for any plan 

year beginning after the security is provided, the 

due date for the payment under section 303(j), 

or 
H. R. 4—34

‘‘(III) if the adjusted funding target attainment 

percentage is less than 60 percent for a consecutive 

period of 7 years, the valuation date for the last 

year in the period. 

‘‘(iv) RELEASE OF SECURITY.—The security shall be 

released (and any amounts thereunder shall be 

refunded together with any interest accrued thereon) 

at such time as the Secretary of the Treasury may 

prescribe in regulations, including regulations for partial releases of the security by reason of increases 

in the funding target attainment percentage. 

‘‘(B) PREFUNDING BALANCE OR FUNDING STANDARD

CARRYOVER BALANCE MAY NOT BE USED.—No prefunding 

balance or funding standard carryover balance under section 303(f) may be used under paragraph (1), (2), or (4) 

to satisfy any payment an employer may make under any 

such paragraph to avoid or terminate the application of 

any limitation under such paragraph. 

‘‘(C) DEEMED REDUCTION OF FUNDING BALANCES.— ‘‘(i) IN GENERAL.—Subject to clause (iii), in any 

case in which a benefit limitation under paragraph 

(1), (2), (3), or (4) would (but for this subparagraph 

and determined without regard to paragraph (1)(B), 

(2)(B), or (4)(B)) apply to such plan for the plan year, 

the plan sponsor of such plan shall be treated for 

purposes of this Act as having made an election under 

section 303(f) to reduce the prefunding balance or 

funding standard carryover balance by such amount 

as is necessary for such benefit limitation to not apply 

to the plan for such plan year. 

‘‘(ii) EXCEPTION FOR INSUFFICIENT FUNDING BAL- ANCES.—Clause (i) shall not apply with respect to a 

benefit limitation for any plan year if the application 

of clause (i) would not result in the benefit limitation 

not applying for such plan year. 

‘‘(iii) RESTRICTIONS OF CERTAIN RULES TO COLLEC- TIVELY BARGAINED PLANS.—With respect to any benefit 

limitation under paragraph (1), (2), or (4), clause (i) 

shall only apply in the case of a plan maintained 

pursuant to 1 or more collective bargaining agreements 

between employee representatives and 1 or more 

employers. 

‘‘(6) NEW PLANS.—Paragraphs (1), (2), and (4) shall not 

apply to a plan for the first 5 plan years of the plan. For 

purposes of this paragraph, the reference in this paragraph 

to a plan shall include a reference to any predecessor plan. 

‘‘(7) PRESUMED UNDERFUNDING FOR PURPOSES OF BENEFIT

LIMITATIONS.— ‘‘(A) PRESUMPTION OF CONTINUED UNDERFUNDING.—In 

any case in which a benefit limitation under paragraph 

(1), (2), (3), or (4) has been applied to a plan with respect 

to the plan year preceding the current plan year, the 

adjusted funding target attainment percentage of the plan 

for the current plan year shall be presumed to be equal 

to the adjusted funding target attainment percentage of 

the plan for the preceding plan year until the enrolled 

actuary of the plan certifies the actual adjusted funding 
H. R. 4—35

target attainment percentage of the plan for the current 

plan year. 

‘‘(B) PRESUMPTION OF UNDERFUNDING AFTER 10TH

MONTH.—In any case in which no certification of the 

adjusted funding target attainment percentage for the current plan year is made with respect to the plan before 

the first day of the 10th month of such year, for purposes 

of paragraphs (1), (2), (3), and (4), such first day shall 

be deemed, for purposes of such paragraph, to be the valuation date of the plan for the current plan year and the 

plan’s adjusted funding target attainment percentage shall 

be conclusively presumed to be less than 60 percent as 

of such first day. 

‘‘(C) PRESUMPTION OF UNDERFUNDING AFTER 4TH

MONTH FOR NEARLY UNDERFUNDED PLANS.—In any case 

in which—

‘‘(i) a benefit limitation under paragraph (1), (2), 

(3), or (4) did not apply to a plan with respect to 

the plan year preceding the current plan year, but 

the adjusted funding target attainment percentage of 

the plan for such preceding plan year was not more 

than 10 percentage points greater than the percentage 

which would have caused such paragraph to apply 

to the plan with respect to such preceding plan year, 

and 

‘‘(ii) as of the first day of the 4th month of the 

current plan year, the enrolled actuary of the plan 

has not certified the actual adjusted funding target 

attainment percentage of the plan for the current plan 

year, 

until the enrolled actuary so certifies, such first day shall 

be deemed, for purposes of such paragraph, to be the valuation date of the plan for the current plan year and the 

adjusted funding target attainment percentage of the plan 

as of such first day shall, for purposes of such paragraph, 

be presumed to be equal to 10 percentage points less than 

the adjusted funding target attainment percentage of the 

plan for such preceding plan year. 

‘‘(8) TREATMENT OF PLAN AS OF CLOSE OF PROHIBITED OR

CESSATION PERIOD.—For purposes of applying this part—

‘‘(A) OPERATION OF PLAN AFTER PERIOD.—Unless the 

plan provides otherwise, payments and accruals will 

resume effective as of the day following the close of the 

period for which any limitation of payment or accrual of 

benefits under paragraph (3) or (4) applies. 

‘‘(B) TREATMENT OF AFFECTED BENEFITS.—Nothing in 

this paragraph shall be construed as affecting the plan’s 

treatment of benefits which would have been paid or 

accrued but for this subsection. 

‘‘(9) TERMS RELATING TO FUNDING TARGET ATTAINMENT

PERCENTAGE.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘funding target attainment 

percentage’ has the same meaning given such term by 

section 303(d)(2). 

‘‘(B) ADJUSTED FUNDING TARGET ATTAINMENT PERCENTAGE.—The term ‘adjusted funding target attainment 
H. R. 4—36

percentage’ means the funding target attainment percentage which is determined under subparagraph (A) by 

increasing each of the amounts under subparagraphs (A) 

and (B) of section 303(d)(2) by the aggregate amount of 

purchases of annuities for employees other than highly 

compensated employees (as defined in section 414(q) of 

the Internal Revenue Code of 1986) which were made by 

the plan during the preceding 2 plan years. 

‘‘(C) APPLICATION TO PLANS WHICH ARE FULLY FUNDED

WITHOUT REGARD TO REDUCTIONS FOR FUNDING BALANCES.—

‘‘(i) IN GENERAL.—In the case of a plan for any 

plan year, if the funding target attainment percentage 

is 100 percent or more (determined without regard 

to this subparagraph and without regard to the reduction in the value of assets under section 303(f)(4)), 

the funding target attainment percentage for purposes 

of subparagraphs (A) and (B) shall be determined without regard to such reduction. 

‘‘(ii) TRANSITION RULE.—Clause (i) shall be applied 

to plan years beginning after 2007 and before 2011 

by substituting for ‘100 percent’ the applicable percentage determined in accordance with the following table:

‘‘In the case of a plan year The 

applicable 

beginning in calendar year: percentage is 

2008 ................................................................................. 92

2009 ................................................................................. 94

2010 ................................................................................. 96.

‘‘(iii) LIMITATION.—Clause (ii) shall not apply with 

respect to any plan year after 2008 unless the funding 

target attainment percentage (determined without 

regard to this subparagraph) of the plan for each preceding plan year after 2007 was not less than the 

applicable percentage with respect to such preceding 

plan year determined under clause (ii). 

‘‘(10) SPECIAL RULE FOR 2008.—For purposes of this subsection, in the case of plan years beginning in 2008, the funding 

target attainment percentage for the preceding plan year may 

be determined using such methods of estimation as the Secretary of the Treasury may provide.’’. 

(b) NOTICE REQUIREMENT.—

(1) IN GENERAL.—Section 101 of such Act (29 U.S.C. 1021) 

is amended—

(A) by redesignating subsection (j) as subsection (k); 

and 

(B) by inserting after subsection (i) the following new 

subsection: 

‘‘(j) NOTICE OF FUNDING-BASED LIMITATION ON CERTAIN FORMS

OF DISTRIBUTION.—The plan administrator of a single-employer 

plan shall provide a written notice to plan participants and beneficiaries within 30 days—

‘‘(1) after the plan has become subject to a restriction 

described in paragraph (1) or (3) of section 206(g)), 

‘‘(2) in the case of a plan to which section 206(g)(4) applies, 

after the valuation date for the plan year described in section 

206(g)(4)(B) for which the plan’s adjusted funding target attainment percentage for the plan year is less than 60 percent 
H. R. 4—37

(or, if earlier, the date such percentage is deemed to be less 

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

‘‘(3) at such other time as may be determined by the Secretary of the Treasury. 

The notice required to be provided under this subsection shall 

be in writing, except that such notice may be in electronic or 

other form to the extent that such form is reasonably accessible 

to the recipient.’’. 

(2) ENFORCEMENT.—Section 502(c)(4) of such Act (29 U.S.C. 

1132(c)(4)) is amended by striking ‘‘section 302(b)(7)(F)(iv)’’ and 

inserting ‘‘section 101(j) or 302(b)(7)(F)(iv)’’. 

(c) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007. 

(2) COLLECTIVE BARGAINING EXCEPTION.—In the case of 

a plan maintained pursuant to 1 or more collective bargaining 

agreements between employee representatives and 1 or more 

employers ratified before January 1, 2008, the amendments 

made by this section shall not apply to plan years beginning 

before the earlier of—

(A) the later of—

(i) the date on which the last collective bargaining 

agreement relating to the plan terminates (determined 

without regard to any extension thereof agreed to after 

the date of the enactment of this Act), or 

(ii) the first day of the first plan year to which 

the amendments made by this subsection would (but 

for this subparagraph) apply, or 

(B) January 1, 2010. 

For purposes of subparagraph (A)(i), any plan amendment made 

pursuant to a collective bargaining agreement relating to the 

plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination 

of such collective bargaining agreement. 

SEC. 104. SPECIAL RULES FOR MULTIPLE EMPLOYER PLANS OF CERTAIN COOPERATIVES. 

(a) GENERAL RULE.—Except as provided in this section, if a 

plan in existence on July 26, 2005, was an eligible cooperative 

plan for its plan year which includes such date, the amendments 

made by this subtitle and subtitle B shall not apply to plan years 

beginning before the earlier of—

(1) the first plan year for which the plan ceases to be 

an eligible cooperative plan, or 

(2) January 1, 2017. 

(b) INTEREST RATE.—In applying section 302(b)(5)(B) of the 

Employee Retirement Income Security Act of 1974 and section 

412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect 

before the amendments made by this subtitle and subtitle B) to 

an eligible cooperative plan for plan years beginning after December 

31, 2007, and before the first plan year to which such amendments 

apply, the third segment rate determined under section 

303(h)(2)(C)(iii) of such Act and section 430(h)(2)(C)(iii) of such 

Code (as added by such amendments) shall be used in lieu of 

the interest rate otherwise used. 

(c) ELIGIBLE COOPERATIVE PLAN DEFINED.—For purposes of 

this section, a plan shall be treated as an eligible cooperative 
H. R. 4—38

plan for a plan year if the plan is maintained by more than 1 

employer and at least 85 percent of the employers are—

(1) rural cooperatives (as defined in section 401(k)(7)(B) 

of such Code without regard to clause (iv) thereof), or 

(2) organizations which are—

(A) cooperative organizations described in section 

1381(a) of such Code which are more than 50-percent owned 

by agricultural producers or by cooperatives owned by agricultural producers, or 

(B) more than 50-percent owned, or controlled by, one 

or more cooperative organizations described in subparagraph (A). 

A plan shall also be treated as an eligible cooperative plan for 

any plan year for which it is described in section 210(a) of the 

Employee Retirement Income Security Act of 1974 and is maintained by a rural telephone cooperative association described in 

section 3(40)(B)(v) of such Act. 

SEC. 105. TEMPORARY RELIEF FOR CERTAIN PBGC SETTLEMENT 

PLANS. 

(a) GENERAL RULE.—Except as provided in this section, if a 

plan in existence on July 26, 2005, was a PBGC settlement plan 

as of such date, the amendments made by this subtitle and subtitle 

B shall not apply to plan years beginning before January 1, 2014. 

(b) INTEREST RATE.—In applying section 302(b)(5)(B) of the 

Employee Retirement Income Security Act of 1974 and section 

412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect 

before the amendments made by this subtitle and subtitle B), to 

a PBGC settlement plan for plan years beginning after December 

31, 2007, and before January 1, 2014, the third segment rate 

determined under section 303(h)(2)(C)(iii) of such Act and section 

430(h)(2)(C)(iii) of such Code (as added by such amendments) shall 

be used in lieu of the interest rate otherwise used. 

(c) PBGC SETTLEMENT PLAN.—For purposes of this section, 

the term ‘‘PBGC settlement plan’’ means a defined benefit plan 

(other than a multiemployer plan) to which section 302 of such 

Act and section 412 of such Code apply and—

(1) which was sponsored by an employer which was in 

bankruptcy, giving rise to a claim by the Pension Benefit Guaranty Corporation of not greater than $150,000,000, and the 

sponsorship of which was assumed by another employer that 

was not a member of the same controlled group as the bankrupt 

sponsor and the claim of the Pension Benefit Guaranty Corporation was settled or withdrawn in connection with the assumption of the sponsorship, or 

(2) which, by agreement with the Pension Benefit Guaranty 

Corporation, was spun off from a plan subsequently terminated 

by such Corporation under section 4042 of the Employee Retirement Income Security Act of 1974. 

SEC. 106. SPECIAL RULES FOR PLANS OF CERTAIN GOVERNMENT CONTRACTORS. 

(a) GENERAL RULE.—Except as provided in this section, if a 

plan is an eligible government contractor plan, this subtitle and 

subtitle B shall not apply to plan years beginning before the earliest 

of—

(1) the first plan year for which the plan ceases to be 

an eligible government contractor plan, 
H. R. 4—39

(2) the effective date of the Cost Accounting Standards 

Pension Harmonization Rule, or 

(3) January 1, 2011. 

(b) INTEREST RATE.—In applying section 302(b)(5)(B) of the 

Employee Retirement Income Security Act of 1974 and section 

412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect 

before the amendments made by this subtitle and subtitle B) to 

an eligible government contractor plan for plan years beginning 

after December 31, 2007, and before the first plan year to which 

such amendments apply, the third segment rate determined under 

section 303(h)(2)(C)(iii) of such Act and section 430(h)(2)(C)(iii) of 

such Code (as added by such amendments) shall be used in lieu 

of the interest rate otherwise used. 

(c) ELIGIBLE GOVERNMENT CONTRACTOR PLAN DEFINED.—For 

purposes of this section, a plan shall be treated as an eligible 

government contractor plan if it is maintained by a corporation 

or a member of the same affiliated group (as defined by section 

1504(a) of the Internal Revenue Code of 1986), whose primary 

source of revenue is derived from business performed under contracts with the United States that are subject to the Federal 

Acquisition Regulations (chapter 1 of title 48, CFR) and that are 

also subject to the Defense Federal Acquisition Regulation Supplement (chapter 2 of title 48, CFR), and whose revenue derived 

from such business in the previous fiscal year exceeded 

$5,000,000,000, and whose pension plan costs that are assignable 

under those contracts are subject to sections 412 and 413 of the 

Cost Accounting Standards (48 CFR 9904.412 and 9904.413). 

(d) COST ACCOUNTING STANDARDS PENSION HARMONIZATION

RULE.—The Cost Accounting Standards Board shall review and 

revise sections 412 and 413 of the Cost Accounting Standards 

(48 CFR 9904.412 and 9904.413) to harmonize the minimum 

required contribution under the Employee Retirement Income Security Act of 1974 of eligible government contractor plans and government reimbursable pension plan costs not later than January 1, 

2010. Any final rule adopted by the Cost Accounting Standards 

Board shall be deemed the Cost Accounting Standards Pension 

Harmonization Rule. 

SEC. 107. TECHNICAL AND CONFORMING AMENDMENTS. 

(a) MISCELLANEOUS AMENDMENTS TO TITLE I.—Subtitle B of 

title I of such Act (29 U.S.C. 1021 et seq.) is amended—

(1) in section 101(d)(3), by striking ‘‘section 302(e)’’ and 

inserting ‘‘section 303(j)’’; 

(2) in section 103(d)(8)(B), by striking ‘‘the requirements 

of section 302(c)(3)’’ and inserting ‘‘the applicable requirements 

of sections 303(h) and 304(c)(3)’’; 

(3) in section 103(d), by striking paragraph (11) and 

inserting the following: 

‘‘(11) If the current value of the assets of the plan is 

less than 70 percent of—

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

target (as defined in section 303(d)(1)) of the plan, or 

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

liability (as defined in section 304(c)(6)(D)) under the plan, 

the percentage which such value is of the amount described 

in subparagraph (A) or (B).’’; 
H. R. 4—40

(4) in section 203(a)(3)(C), by striking ‘‘section 302(c)(8)’’ 

and inserting ‘‘section 302(d)(2)’’; 

(5) in section 204(g)(1), by striking ‘‘section 302(c)(8)’’ and 

inserting ‘‘section 302(d)(2)’’; 

(6) in section 204(i)(2)(B), by striking ‘‘section 302(c)(8)’’ 

and inserting ‘‘section 302(d)(2)’’; 

(7) in section 204(i)(3), by striking ‘‘funded current liability 

percentage (within the meaning of section 302(d)(8) of this 

Act)’’ and inserting ‘‘funding target attainment percentage (as 

defined in section 303(d)(2))’’; 

(8) in section 204(i)(4), by striking ‘‘section 302(c)(11)(A), 

without regard to section 302(c)(11)(B)’’ and inserting ‘‘section 

302(b)(1), without regard to section 302(b)(2)’’; 

(9) in section 206(e)(1), by striking ‘‘section 302(d)’’ and 

inserting ‘‘section 303(j)(4)’’, and by striking ‘‘section 302(e)(5)’’ 

and inserting ‘‘section 303(j)(4)(E)(i)’’; 

(10) in section 206(e)(3), by striking ‘‘section 302(e) by 

reason of paragraph (5)(A) thereof’’ and inserting ‘‘section 

303(j)(3) by reason of section 303(j)(4)(A)’’; and 

(11) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by 

striking ‘‘American Jobs Creation Act of 2004’’ and inserting 

‘‘Pension Protection Act of 2006’’. 

(b) MISCELLANEOUS AMENDMENTS TO TITLE IV.—Title IV of 

such Act is amended—

(1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by 

striking ‘‘302(c)(11)(A)’’ and inserting ‘‘302(b)(1)’’, by striking 

‘‘412(c)(11)(A)’’ and inserting ‘‘412(b)(1)’’, by striking 

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

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

(2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by striking 

‘‘302(f)(1)(A) and (B)’’ and inserting ‘‘303(k)(1)(A) and (B)’’, and 

by striking ‘‘412(n)(1)(A) and (B)’’ and inserting ‘‘430(k)(1)(A) 

and (B)’’; 

(3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by striking 

‘‘302(f)(1)(A) and (B)’’ and inserting ‘‘303(k)(1)(A) and (B)’’, and 

by striking ‘‘412(n)(1)(A) and (B)’’ and inserting ‘‘430(k)(1)(A) 

and (B)’’; 

(4) in section 4062(c) (29 U.S.C. 1362(c)), by striking paragraphs (1), (2), and (3) and inserting the following: 

‘‘(1) the sum of the shortfall amortization charge (within 

the meaning of section 303(c)(1) of this Act and 430(d)(1) of 

the Internal Revenue Code of 1986) with respect to the plan 

(if any) for the plan year in which the termination date occurs, 

plus the aggregate total of shortfall amortization installments 

(if any) determined for succeeding plan years under section 

303(c)(2) of this Act and section 430(d)(2) of such Code (which, 

for purposes of this subparagraph, shall include any increase 

in such sum which would result if all applications for waivers 

of the minimum funding standard under section 302(c) of this 

Act and section 412(c) of such Code which are pending with 

respect to such plan were denied and if no additional contributions (other than those already made by the termination date) 

were made for the plan year in which the termination date 

occurs or for any previous plan year), and 

‘‘(2) the sum of the waiver amortization charge (within 

the meaning of section 303(e)(1) of this Act and 430(e)(1) of 

the Internal Revenue Code of 1986) with respect to the plan 
H. R. 4—41

(if any) for the plan year in which the termination date occurs, 

plus the aggregate total of waiver amortization installments 

(if any) determined for succeeding plan years under section 

303(e)(2) of this Act and section 430(e)(2) of such Code,’’; 

(5) in section 4071 (29 U.S.C. 1371), by striking ‘‘302(f)(4)’’ 

and inserting ‘‘303(k)(4)’’; 

(6) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by 

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

striking ‘‘302(a)’’ and inserting ‘‘304(a)’’; 

(7) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by striking 

‘‘303(a)’’ and inserting ‘‘302(c)’’; 

(8) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by striking 

‘‘303(c)’’ and inserting ‘‘302(c)(3)’’; and 

(9) in section 4243(g) (29 U.S.C. 1423(g)), by striking 

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

(c) AMENDMENTS TO REORGANIZATION PLAN NO. 4 OF 1978.—

Section 106(b)(ii) of Reorganization Plan No. 4 of 1978 (ratified 

and affirmed as law by Public Law 98–532 (98 Stat. 2705)) is 

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

striking ‘‘304(a) and (b)(2)(A)’’ and inserting ‘‘304(d)(1), (d)(2), and 

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

‘‘412(c)(2) and 431(d)(1), (d)(2), and (e)(2)(A)’’. 

(d) REPEAL OF EXPIRED AUTHORITY FOR TEMPORARY

VARIANCES.—Section 207 of such Act (29 U.S.C. 1057) is repealed. 

(e) EFFECTIVE DATE.—The amendments made by this section 

shall apply to plan years beginning after 2007. 

Subtitle B—Amendments to Internal 

Revenue Code of 1986

SEC. 111. MINIMUM FUNDING STANDARDS. 

(a) NEW MINIMUM FUNDING STANDARDS.—Section 412 of the 

Internal Revenue Code of 1986 (relating to minimum funding standards) is amended to read as follows: 

‘‘SEC. 412. MINIMUM FUNDING STANDARDS. 

‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING STANDARD.— ‘‘(1) IN GENERAL.—A plan to which this section applies 

shall satisfy the minimum funding standard applicable to the 

plan for any plan year. 

‘‘(2) MINIMUM FUNDING STANDARD.—For purposes of paragraph (1), a plan shall be treated as satisfying the minimum 

funding standard for a plan year if—

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

not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which, in 

the aggregate, are not less than the minimum required 

contribution determined under section 430 for the plan 

for the plan year, 

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

not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which are 

required under the terms of the plan, and 

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

make contributions to or under the plan for any plan year 

which, in the aggregate, are sufficient to ensure that the 
H. R. 4—42

plan does not have an accumulated funding deficiency 

under section 431 as of the end of the plan year. 

‘‘(b) LIABILITY FOR CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2), 

the amount of any contribution required by this section 

(including any required installments under paragraphs (3) and 

(4) of section 430(j)) shall be paid by the employer responsible 

for making contributions to or under the plan. 

‘‘(2) JOINT AND SEVERAL LIABILITY WHERE EMPLOYER

MEMBER OF CONTROLLED GROUP.—If the employer referred to 

in paragraph (1) is a member of a controlled group, each 

member of such group shall be jointly and severally liable 

for payment of such contributions. 

‘‘(c) VARIANCE FROM MINIMUM FUNDING STANDARDS.—

‘‘(1) WAIVER IN CASE OF BUSINESS HARDSHIP.—

‘‘(A) IN GENERAL.—If—

‘‘(i) an employer is (or in the case of a multiemployer plan, 10 percent or more of the number of 

employers contributing to or under the plan is) unable 

to satisfy the minimum funding standard for a plan 

year without temporary substantial business hardship 

(substantial business hardship in the case of a multiemployer plan), and 

‘‘(ii) application of the standard would be adverse 

to the interests of plan participants in the aggregate, 

the Secretary may, subject to subparagraph (C), waive 

the requirements of subsection (a) for such year with 

respect to all or any portion of the minimum funding 

standard. The Secretary shall not waive the minimum 

funding standard with respect to a plan for more than 

3 of any 15 (5 of any 15 in the case of a multiemployer 

plan) consecutive plan years 

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

subparagraph (A) for any plan year—

‘‘(i) in the case of a defined benefit plan which 

is not a multiemployer plan, the minimum required 

contribution under section 430 for the plan year shall 

be reduced by the amount of the waived funding deficiency and such amount shall be amortized as required 

under section 430(e), and 

‘‘(ii) in the case of a multiemployer plan, the 

funding standard account shall be credited under section 431(b)(3)(C) with the amount of the waived 

funding deficiency and such amount shall be amortized 

as required under section 431(b)(2)(C). 

‘‘(C) WAIVER OF AMORTIZED PORTION NOT ALLOWED.—

The Secretary may not waive under subparagraph (A) any 

portion of the minimum funding standard under subsection 

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

funding deficiency for any preceding plan year. 

‘‘(2) DETERMINATION OF BUSINESS HARDSHIP.—For purposes 

of this subsection, the factors taken into account in determining 

temporary substantial business hardship (substantial business 

hardship in the case of a multiemployer plan) shall include 

(but shall not be limited to) whether or not—

‘‘(A) the employer is operating at an economic loss, 
H. R. 4—43

‘‘(B) there is substantial unemployment or underemployment in the trade or business and in the industry 

concerned, 

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

are depressed or declining, and 

‘‘(D) it is reasonable to expect that the plan will be 

continued only if the waiver is granted. 

‘‘(3) WAIVED FUNDING DEFICIENCY.—For purposes of this 

section and part III of this subchapter, the term ‘waived funding 

deficiency’ means the portion of the minimum funding standard 

under subsection (a) (determined without regard to the waiver) 

for a plan year waived by the Secretary and not satisfied 

by employer contributions. 

‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EMPLOYER PLANS, CONSULTATIONS.— ‘‘(A) SECURITY MAY BE REQUIRED.— ‘‘(i) IN GENERAL.—Except as provided in subparagraph (C), the Secretary may require an employer 

maintaining a defined benefit plan which is a singleemployer plan (within the meaning of section 

4001(a)(15) of the Employee Retirement Income Security Act of 1974) to provide security to such plan as 

a condition for granting or modifying a waiver under 

paragraph (1). 

‘‘(ii) SPECIAL RULES.—Any security provided under 

clause (i) may be perfected and enforced only by the 

Pension Benefit Guaranty Corporation, or at the direction of the Corporation, by a contributing sponsor 

(within the meaning of section 4001(a)(13) of the 

Employee Retirement Income Security Act of 1974), 

or a member of such sponsor’s controlled group (within 

the meaning of section 4001(a)(14) of such Act). 

‘‘(B) CONSULTATION WITH THE PENSION BENEFIT GUAR- ANTY CORPORATION.—Except as provided in subparagraph 

(C), the Secretary shall, before granting or modifying a 

waiver under this subsection with respect to a plan 

described in subparagraph (A)(i)—

‘‘(i) provide the Pension Benefit Guaranty Corporation with—

‘‘(I) notice of the completed application for any 

waiver or modification, and 

‘‘(II) an opportunity to comment on such 

application within 30 days after receipt of such 

notice, and 

‘‘(ii) consider—

‘‘(I) any comments of the Corporation under 

clause (i)(II), and 

‘‘(II) any views of any employee organization 

(within the meaning of section 3(4) of the Employee 

Retirement Income Security Act of 1974) representing participants in the plan which are submitted in writing to the Secretary in connection 

with such application. 

Information provided to the Corporation under this 

subparagraph shall be considered tax return information 

and subject to the safeguarding and reporting requirements 

of section 6103(p). 
H. R. 4—44

‘‘(C) EXCEPTION FOR CERTAIN WAIVERS.—

‘‘(i) IN GENERAL.—The preceding provisions of this 

paragraph shall not apply to any plan with respect 

to which the sum of—

‘‘(I) the aggregate unpaid minimum required 

contributions (within the meaning of section 

4971(c)(4)) for the plan year and all preceding 

plan years, and 

‘‘(II) the present value of all waiver amortization installments determined for the plan year and 

succeeding plan years under section 430(e)(2), 

is less than $1,000,000. 

‘‘(ii) TREATMENT OF WAIVERS FOR WHICH APPLICATIONS ARE PENDING.—The amount described in clause 

(i)(I) shall include any increase in such amount which 

would result if all applications for waivers of the minimum funding standard under this subsection which 

are pending with respect to such plan were denied. 

‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER PLANS.—

‘‘(A) APPLICATION MUST BE SUBMITTED BEFORE DATE

21⁄2 MONTHS AFTER CLOSE OF YEAR.—In the case of a defined 

benefit plan which is not a multiemployer plan, no waiver 

may be granted under this subsection with respect to any 

plan for any plan year unless an application therefor is 

submitted to the Secretary not later than the 15th day 

of the 3rd month beginning after the close of such plan 

year. 

‘‘(B) SPECIAL RULE IF EMPLOYER IS MEMBER OF CONTROLLED GROUP.—In the case of a defined benefit plan 

which is not a multiemployer plan, if an employer is a 

member of a controlled group, the temporary substantial 

business hardship requirements of paragraph (1) shall be 

treated as met only if such requirements are met—

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

‘‘(ii) with respect to the controlled group of which 

such employer is a member (determined by treating 

all members of such group as a single employer). 

The Secretary may provide that an analysis of a trade 

or business or industry of a member need not be conducted 

if the Secretary determines such analysis is not necessary 

because the taking into account of such member would 

not significantly affect the determination under this paragraph. 

‘‘(6) ADVANCE NOTICE.—

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

a waiver under this subsection, require each applicant to 

provide evidence satisfactory to the Secretary that the 

applicant has provided notice of the filing of the application 

for such waiver to each affected party (as defined in section 

4001(a)(21) of the Employee Retirement Income Security 

Act of 1974). Such notice shall include a description of 

the extent to which the plan is funded for benefits which 

are guaranteed under title IV of the Employee Retirement 

Income Security Act of 1974 and for benefit liabilities. 

‘‘(B) CONSIDERATION OF RELEVANT INFORMATION.—The 

Secretary shall consider any relevant information provided 
H. R. 4—45

by a person to whom notice was given under subparagraph 

(A). 

‘‘(7) RESTRICTION ON PLAN AMENDMENTS.—

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

increases the liabilities of the plan by reason of any 

increase in benefits, any change in the accrual of benefits, 

or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver 

under this subsection or an extension of time under section 

431(d) is in effect with respect to the plan, or if a plan 

amendment described in subsection (d)(2) has been made 

at any time in the preceding 12 months (24 months in 

the case of a multiemployer plan). If a plan is amended 

in violation of the preceding sentence, any such waiver, 

or extension of time, shall not apply to any plan year 

ending on or after the date on which such amendment 

is adopted. 

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply 

to any plan amendment which—

‘‘(i) the Secretary determines to be reasonable and 

which provides for only de minimis increases in the 

liabilities of the plan, 

‘‘(ii) only repeals an amendment described in subsection (d)(2), or 

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

under part I of subchapter D, of chapter 1. 

‘‘(d) MISCELLANEOUS RULES.— ‘‘(1) CHANGE IN METHOD OR YEAR.—If the funding method, 

the valuation date, or a plan year for a plan is changed, 

the change shall take effect only if approved by the Secretary. 

‘‘(2) CERTAIN RETROACTIVE PLAN AMENDMENTS.—For purposes of this section, any amendment applying to a plan year 

which—

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

no later than 21⁄2 months after the close of the plan year 

(or, in the case of a multiemployer plan, no later than 

2 years after the close of such plan year), 

‘‘(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year 

to which the amendment applies, and 

‘‘(C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the 

extent required by the circumstances, 

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

to have been made on the first day of such plan year. No 

amendment described in this paragraph which reduces the 

accrued benefits of any participant shall take effect unless 

the plan administrator files a notice with the Secretary notifying him of such amendment and the Secretary has approved 

such amendment, or within 90 days after the date on which 

such notice was filed, failed to disapprove such amendment. 

No amendment described in this subsection shall be approved 

by the Secretary unless the Secretary determines that such 

amendment is necessary because of a temporary substantial 

business hardship (as determined under subsection (c)(2)) or 

a substantial business hardship (as so determined) in the case 

of a multiemployer plan and that a waiver under subsection 
H. R. 4—46

(c) (or, in the case of a multiemployer plan, any extension 

of the amortization period under section 431(d)) is unavailable 

or inadequate. 

‘‘(3) CONTROLLED GROUP.—For purposes of this section, the 

term ‘controlled group’ means any group treated as a single 

employer under subsection (b), (c), (m), or (o) of section 414. 

‘‘(e) PLANS TO WHICH SECTION APPLIES.—

‘‘(1) IN GENERAL.—Except as provided in paragraphs (2) 

and (4), this section applies to a plan if, for any plan year 

beginning on or after the effective date of this section for 

such plan under the Employee Retirement Income Security 

Act of 1974—

‘‘(A) such plan included a trust which qualified (or 

was determined by the Secretary to have qualified) under 

section 401(a), or 

‘‘(B) such plan satisfied (or was determined by the 

Secretary to have satisfied) the requirements of section 

403(a). 

‘‘(2) EXCEPTIONS.—This section shall not apply to—

‘‘(A) any profit-sharing or stock bonus plan, 

‘‘(B) any insurance contract plan described in paragraph (3), 

‘‘(C) any governmental plan (within the meaning of 

section 414(d)), 

‘‘(D) any church plan (within the meaning of section 

414(e)) with respect to which the election provided by section 410(d) has not been made, 

‘‘(E) any plan which has not, at any time after September 2, 1974, provided for employer contributions, or 

‘‘(F) any plan established and maintained by a society, 

order, or association described in section 501(c)(8) or (9), 

if no part of the contributions to or under such plan are 

made by employers of participants in such plan. 

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

treated as a qualified plan for purposes of section 401(a) unless 

such plan meets the requirements of section 401(a)(7) as in 

effect on September 1, 1974. 

‘‘(3) CERTAIN INSURANCE CONTRACT PLANS.—A plan is 

described in this paragraph if—

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

of individual insurance contracts, 

‘‘(B) such contracts provide for level annual premium 

payments to be paid extending not later than the retirement age for each individual participating in the plan, 

and commencing with the date the individual became a 

participant in the plan (or, in the case of an increase 

in benefits, commencing at the time such increase becomes 

effective), 

‘‘(C) benefits provided by the plan are equal to the 

benefits provided under each contract at normal retirement 

age under the plan and are guaranteed by an insurance 

carrier (licensed under the laws of a State to do business 

with the plan) to the extent premiums have been paid, 

‘‘(D) premiums payable for the plan year, and all prior 

plan years, under such contracts have been paid before 

lapse or there is reinstatement of the policy, 
H. R. 4—47

‘‘(E) no rights under such contracts have been subject 

to a security interest at any time during the plan year, 

and 

‘‘(F) no policy loans are outstanding at any time during 

the plan year. 

A plan funded exclusively by the purchase of group insurance 

contracts which is determined under regulations prescribed 

by the Secretary to have the same characteristics as contracts 

described in the preceding sentence shall be treated as a plan 

described in this paragraph. 

‘‘(4) CERTAIN TERMINATED MULTIEMPLOYER PLANS.—This 

section applies with respect to a terminated multiemployer 

plan to which section 4021 of the Employee Retirement Income 

Security Act of 1974 applies until the last day of the plan 

year in which the plan terminates (within the meaning of 

section 4041A(a)(2) of such Act).’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007. 

SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT 

PENSION PLANS. 

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

Revenue Code of 1986 (relating to deferred compensation, etc.) 

is amended by adding at the end the following new part: 

‘‘PART III—MINIMUM FUNDING STANDARDS 

FOR SINGLE-EMPLOYER DEFINED BENEFIT 

PENSION PLANS 

‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER 

DEFINED BENEFIT PENSION PLANS. 

‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For purposes of this 

section and section 412(a)(2)(A), except as provided in subsection 

(f), the term ‘minimum required contribution’ means, with respect 

to any plan year of a defined benefit plan which is not a multiemployer plan—

‘‘(1) in any case in which the value of plan assets of the 

plan (as reduced under subsection (f)(4)(B)) is less than the 

funding target of the plan for the plan year, the sum of—

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

year, 

‘‘(B) the shortfall amortization charge (if any) for the 

plan for the plan year determined under subsection (c), 

and 

‘‘(C) the waiver amortization charge (if any) for the 

plan for the plan year as determined under subsection 

(e); 

‘‘(2) in any case in which the value of plan assets of the 

plan (as reduced under subsection (f)(4)(B)) equals or exceeds 

the funding target of the plan for the plan year, the target 

normal cost of the plan for the plan year reduced (but not 

below zero) by such excess. 

‘‘(b) TARGET NORMAL COST.—For purposes of this section, except 

as provided in subsection (i)(2) with respect to plans in at-risk 

status, the term ‘target normal cost’ means, for any plan year, 

the present value of all benefits which are expected to accrue 
H. R. 4—48

or to be earned under the plan during the plan year. For purposes 

of this subsection, if any benefit attributable to services performed 

in a preceding plan year is increased by reason of any increase 

in compensation during the current plan year, the increase in 

such benefit shall be treated as having accrued during the current 

plan year. 

‘‘(c) SHORTFALL AMORTIZATION CHARGE.—

‘‘(1) IN GENERAL.—For purposes of this section, the shortfall 

amortization charge for a plan for any plan year is the aggregate total (not less than zero) of the shortfall amortization 

installments for such plan year with respect to the shortfall 

amortization bases for such plan year and each of the 6 preceding plan years. 

‘‘(2) SHORTFALL AMORTIZATION INSTALLMENT.—For purposes 

of paragraph (1)—

‘‘(A) DETERMINATION.—The shortfall amortization 

installments are the amounts necessary to amortize the 

shortfall amortization base of the plan for any plan year 

in level annual installments over the 7-plan-year period 

beginning with such plan year. 

‘‘(B) SHORTFALL INSTALLMENT.—The shortfall amortization installment for any plan year in the 7-plan-year period 

under subparagraph (A) with respect to any shortfall 

amortization base is the annual installment determined 

under subparagraph (A) for that year for that base. 

‘‘(C) SEGMENT RATES.—In determining any shortfall 

amortization installment under this paragraph, the plan 

sponsor shall use the segment rates determined under 

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

similar to the rules of subparagraph (B) of subsection (h)(2). 

‘‘(3) SHORTFALL AMORTIZATION BASE.—For purposes of this 

section, the shortfall amortization base of a plan for a plan 

year is—

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

year, minus 

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

rates determined under subparagraph (C) of subsection 

(h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2)) of the aggregate total of 

the shortfall amortization installments and waiver 

amortization installments which have been determined for 

such plan year and any succeeding plan year with respect 

to the shortfall amortization bases and waiver amortization 

bases of the plan for any plan year preceding such plan 

year. 

‘‘(4) FUNDING SHORTFALL.—For purposes of this section, 

the funding shortfall of a plan for any plan year is the excess 

(if any) of—

‘‘(A) the funding target of the plan for the plan year, 

over 

‘‘(B) the value of plan assets of the plan (as reduced 

under subsection (f)(4)(B)) for the plan year which are 

held by the plan on the valuation date. 

‘‘(5) EXEMPTION FROM NEW SHORTFALL AMORTIZATION

BASE.— ‘‘(A) IN GENERAL.—In any case in which the value 

of plan assets of the plan (as reduced under subsection 
H. R. 4—49

(f)(4)(A)) is equal to or greater than the funding target 

of the plan for the plan year, the shortfall amortization 

base of the plan for such plan year shall be zero. 

‘‘(B) TRANSITION RULE.—

‘‘(i) IN GENERAL.—Except as provided in clauses 

(iii) and (iv), in the case of plan years beginning after 

2007 and before 2011, only the applicable percentage 

of the funding target shall be taken into account under 

paragraph (3)(A) in determining the funding shortfall 

for the plan year for purposes of subparagraph (A). 

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of 

subparagraph (A), the applicable percentage shall be 

determined in accordance with the following table:

‘‘In the case of a plan year The 

applicable 

beginning in calendar year: percentage is 

2008 ................................................................................. 92

2009 ................................................................................. 94

2010 ................................................................................. 96.

‘‘(iii) LIMITATION.—Clause (i) shall not apply with 

respect to any plan year after 2008 unless the shortfall 

amortization base for each of the preceding years beginning after 2007 was zero (determined after application 

of this subparagraph). 

‘‘(iv) TRANSITION RELIEF NOT AVAILABLE FOR NEW

OR DEFICIT REDUCTION PLANS.—Clause (i) shall not 

apply to a plan—

‘‘(I) which was not in effect for a plan year 

beginning in 2007, or 

‘‘(II) which was in effect for a plan year beginning in 2007 and which was subject to section 

412(l) (as in effect for plan years beginning in 

2007), determined after the application of paragraphs (6) and (9) thereof. 

‘‘(6) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF

FUNDING TARGET.—In any case in which the funding shortfall 

of a plan for a plan year is zero, for purposes of determining 

the shortfall amortization charge for such plan year and succeeding plan years, the shortfall amortization bases for all 

preceding plan years (and all shortfall amortization installments determined with respect to such bases) shall be reduced 

to zero. 

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

this section—

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

(i)(1) with respect to plans in at-risk status, the funding target 

of a plan for a plan year is the present value of all benefits 

accrued or earned under the plan as of the beginning of the 

plan year. 

‘‘(2) FUNDING TARGET ATTAINMENT PERCENTAGE.—The 

‘funding target attainment percentage’ of a plan for a plan 

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

‘‘(A) the value of plan assets for the plan year (as 

reduced under subsection (f)(4)(B)), bears to 

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

(determined without regard to subsection (i)(1)). 

‘‘(e) WAIVER AMORTIZATION CHARGE.—
H. R. 4—50

‘‘(1) DETERMINATION OF WAIVER AMORTIZATION CHARGE.—

The waiver amortization charge (if any) for a plan for any 

plan year is the aggregate total of the waiver amortization 

installments for such plan year with respect to the waiver 

amortization bases for each of the 5 preceding plan years. 

‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—For purposes of 

paragraph (1)—

‘‘(A) DETERMINATION.—The waiver amortization 

installments are the amounts necessary to amortize the 

waiver amortization base of the plan for any plan year 

in level annual installments over a period of 5 plan years 

beginning with the succeeding plan year. 

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

installment for any plan year in the 5-year period under 

subparagraph (A) with respect to any waiver amortization 

base is the annual installment determined under subparagraph (A) for that year for that base. 

‘‘(3) INTEREST RATE.—In determining any waiver amortization installment under this subsection, the plan sponsor shall 

use the segment rates determined under subparagraph (C) 

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

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

‘‘(4) WAIVER AMORTIZATION BASE.—The waiver amortization 

base of a plan for a plan year is the amount of the waived 

funding deficiency (if any) for such plan year under section 

412(c). 

‘‘(5) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF

FUNDING TARGET.—In any case in which the funding shortfall 

of a plan for a plan year is zero, for purposes of determining 

the waiver amortization charge for such plan year and succeeding plan years, the waiver amortization bases for all preceding plan years (and all waiver amortization installments 

determined with respect to such bases) shall be reduced to 

zero. 

‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBUTION BY

PREFUNDING BALANCE AND FUNDING STANDARD CARRYOVER BALANCE.—

‘‘(1) ELECTION TO MAINTAIN BALANCES.—

‘‘(A) PREFUNDING BALANCE.—The plan sponsor of a 

defined benefit plan which is not a multiemployer plan 

may elect to maintain a prefunding balance. 

‘‘(B) FUNDING STANDARD CARRYOVER BALANCE.—

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

plan (other than a multiemployer plan) described in 

clause (ii), the plan sponsor may elect to maintain 

a funding standard carryover balance, until such balance is reduced to zero. 

‘‘(ii) PLANS MAINTAINING FUNDING STANDARD

ACCOUNT IN 2007.—A plan is described in this clause 

if the plan—

‘‘(I) was in effect for a plan year beginning 

in 2007, and 

‘‘(II) had a positive balance in the funding 

standard account under section 412(b) as in effect 

for such plan year and determined as of the end 

of such plan year. 
H. R. 4—51

‘‘(2) APPLICATION OF BALANCES.—A prefunding balance and 

a funding standard carryover balance maintained pursuant to 

this paragraph—

‘‘(A) shall be available for crediting against the minimum required contribution, pursuant to an election under 

paragraph (3), 

‘‘(B) shall be applied as a reduction in the amount 

treated as the value of plan assets for purposes of this 

section, to the extent provided in paragraph (4), and 

‘‘(C) may be reduced at any time, pursuant to an election under paragraph (5). 

‘‘(3) ELECTION TO APPLY BALANCES AGAINST MINIMUM

REQUIRED CONTRIBUTION.—

‘‘(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), in the case of any plan year in which 

the plan sponsor elects to credit against the minimum 

required contribution for the current plan year all or a 

portion of the prefunding balance or the funding standard 

carryover balance for the current plan year (not in excess 

of such minimum required contribution), the minimum 

required contribution for the plan year shall be reduced 

as of the first day of the plan year by the amount so 

credited by the plan sponsor as of the first day of the 

plan year. For purposes of the preceding sentence, the 

minimum required contribution shall be determined after 

taking into account any waiver under section 412(c). 

‘‘(B) COORDINATION WITH FUNDING STANDARD CARRYOVER BALANCE.—To the extent that any plan has a funding 

standard carryover balance greater than zero, no amount 

of the prefunding balance of such plan may be credited 

under this paragraph in reducing the minimum required 

contribution. 

‘‘(C) LIMITATION FOR UNDERFUNDED PLANS.—The preceding provisions of this paragraph shall not apply for 

any plan year if the ratio (expressed as a percentage) 

which—

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

year (as reduced under paragraph (4)(C)), bears to 

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

plan year (determined without regard to subsection 

(i)(1)), 

is less than 80 percent. In the case of plan years beginning 

in 2008, the ratio under this subparagraph may be determined using such methods of estimation as the Secretary 

may prescribe. 

‘‘(4) EFFECT OF BALANCES ON AMOUNTS TREATED AS VALUE

OF PLAN ASSETS.—In the case of any plan maintaining a 

prefunding balance or a funding standard carryover balance 

pursuant to this subsection, the amount treated as the value 

of plan assets shall be deemed to be such amount, reduced 

as provided in the following subparagraphs: 

‘‘(A) APPLICABILITY OF SHORTFALL AMORTIZATION

BASE.—For purposes of subsection (c)(5), the value of plan 

assets is deemed to be such amount, reduced by the amount 

of the prefunding balance, but only if an election under 
H. R. 4—52

paragraph (2) applying any portion of the prefunding balance in reducing the minimum required contribution is 

in effect for the plan year. 

‘‘(B) DETERMINATION OF EXCESS ASSETS, FUNDING

SHORTFALL, AND FUNDING TARGET ATTAINMENT PERCENTAGE.—

‘‘(i) IN GENERAL.—For purposes of subsections (a), 

(c)(4)(B), and (d)(2)(A), the value of plan assets is 

deemed to be such amount, reduced by the amount 

of the prefunding balance and the funding standard 

carryover balance. 

‘‘(ii) SPECIAL RULE FOR CERTAIN BINDING AGREEMENTS WITH PBGC.—For purposes of subsection 

(c)(4)(B), the value of plan assets shall not be deemed 

to be reduced for a plan year by the amount of the 

specified balance if, with respect to such balance, there 

is in effect for a plan year a binding written agreement 

with the Pension Benefit Guaranty Corporation which 

provides that such balance is not available to reduce 

the minimum required contribution for the plan year. 

For purposes of the preceding sentence, the term ‘specified balance’ means the prefunding balance or the 

funding standard carryover balance, as the case may 

be. 

‘‘(C) AVAILABILITY OF BALANCES IN PLAN YEAR FOR

CREDITING AGAINST MINIMUM REQUIRED CONTRIBUTION.—

For purposes of paragraph (3)(C)(i) of this subsection, the 

value of plan assets is deemed to be such amount, reduced 

by the amount of the prefunding balance. 

‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO DETERMINATIONS OF VALUE OF PLAN ASSETS AND CREDITING AGAINST MINIMUM REQUIRED CONTRIBUTION.—

‘‘(A) IN GENERAL.—The plan sponsor may elect to 

reduce by any amount the balance of the prefunding balance and the funding standard carryover balance for any 

plan year (but not below zero). Such reduction shall be 

effective prior to any determination of the value of plan 

assets for such plan year under this section and application 

of the balance in reducing the minimum required contribution for such plan for such plan year pursuant to an election 

under paragraph (2). 

‘‘(B) COORDINATION BETWEEN PREFUNDING BALANCE

AND FUNDING STANDARD CARRYOVER BALANCE.—To the 

extent that any plan has a funding standard carryover 

balance greater than zero, no election may be made under 

subparagraph (A) with respect to the prefunding balance. 

‘‘(6) PREFUNDING BALANCE.—

‘‘(A) IN GENERAL.—A prefunding balance maintained 

by a plan shall consist of a beginning balance of zero, 

increased and decreased to the extent provided in subparagraphs (B) and (C), and adjusted further as provided in 

paragraph (8). 

‘‘(B) INCREASES.—

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

year beginning after 2008, the prefunding balance of 

a plan shall be increased by the amount elected by 
H. R. 4—53

the plan sponsor for the plan year. Such amount shall 

not exceed the excess (if any) of—

‘‘(I) the aggregate total of employer contributions to the plan for the preceding plan year, 

over—

‘‘(II) the minimum required contribution for 

such preceding plan year. 

‘‘(ii) ADJUSTMENTS FOR INTEREST.—Any excess contributions under clause (i) shall be properly adjusted 

for interest accruing for the periods between the first 

day of the current plan year and the dates on which 

the excess contributions were made, determined by 

using the effective interest rate for the preceding plan 

year and by treating contributions as being first used 

to satisfy the minimum required contribution. 

‘‘(iii) CERTAIN CONTRIBUTIONS NECESSARY TO AVOID

BENEFIT LIMITATIONS DISREGARDED.—The excess 

described in clause (i) with respect to any preceding 

plan year shall be reduced (but not below zero) by 

the amount of contributions an employer would be 

required to make under paragraph (1), (2), or (4) of 

section 206(g) to avoid a benefit limitation which would 

otherwise be imposed under such paragraph for the 

preceding plan year. Any contribution which may be 

taken into account in satisfying the requirements of 

more than 1 of such paragraphs shall be taken into 

account only once for purposes of this clause. 

‘‘(C) DECREASES.—The prefunding balance of a plan 

shall be decreased (but not below zero) by the sum of—

‘‘(i) as of the first day of each plan year after 

2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required 

contribution of the plan for the preceding plan year, 

and 

‘‘(ii) as of the time specified in paragraph (5)(A), 

any reduction in such balance elected under paragraph 

(5). 

‘‘(7) FUNDING STANDARD CARRYOVER BALANCE.— ‘‘(A) IN GENERAL.—A funding standard carryover balance maintained by a plan shall consist of a beginning 

balance determined under subparagraph (B), decreased to 

the extent provided in subparagraph (C), and adjusted 

further as provided in paragraph (8). 

‘‘(B) BEGINNING BALANCE.—The beginning balance of 

the funding standard carryover balance shall be the positive balance described in paragraph (1)(B)(ii)(II). 

‘‘(C) DECREASES.—The funding standard carryover balance of a plan shall be decreased (but not below zero) 

by—

‘‘(i) as of the first day of each plan year after 

2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required 

contribution of the plan for the preceding plan year, 

and 

‘‘(ii) as of the time specified in paragraph (5)(A), 

any reduction in such balance elected under paragraph 

(5). 
H. R. 4—54

‘‘(8) ADJUSTMENTS FOR INVESTMENT EXPERIENCE.—In determining the prefunding balance or the funding standard carryover balance of a plan as of the first day of the plan year, 

the plan sponsor shall, in accordance with regulations prescribed by the Secretary of the Treasury, adjust such balance 

to reflect the rate of return on plan assets for the preceding 

plan year. Notwithstanding subsection (g)(3), such rate of 

return shall be determined on the basis of fair market value 

and shall properly take into account, in accordance with such 

regulations, all contributions, distributions, and other plan payments made during such period. 

‘‘(9) ELECTIONS.—Elections under this subsection shall be 

made at such times, and in such form and manner, as shall 

be prescribed in regulations of the Secretary. 

‘‘(g) VALUATION OF PLAN ASSETS AND LIABILITIES.— ‘‘(1) TIMING OF DETERMINATIONS.—Except as otherwise provided under this subsection, all determinations under this section for a plan year shall be made as of the valuation date 

of the plan for such plan year. 

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

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

(B), the valuation date of a plan for any plan year shall 

be the first day of the plan year. 

‘‘(B) EXCEPTION FOR SMALL PLANS.—If, on each day 

during the preceding plan year, a plan had 100 or fewer 

participants, the plan may designate any day during the 

plan year as its valuation date for such plan year and 

succeeding plan years. For purposes of this subparagraph, 

all defined benefit plans (other than multiemployer plans) 

maintained by the same employer (or any member of such 

employer’s controlled group) shall be treated as 1 plan, 

but only participants with respect to such employer or 

member shall be taken into account. 

‘‘(C) APPLICATION OF CERTAIN RULES IN DETERMINATION

OF PLAN SIZE.—For purposes of this paragraph—

‘‘(i) PLANS NOT IN EXISTENCE IN PRECEDING YEAR.— In the case of the first plan year of any plan, subparagraph (B) shall apply to such plan by taking into 

account the number of participants that the plan is 

reasonably expected to have on days during such first 

plan year. 

‘‘(ii) PREDECESSORS.—Any reference in subparagraph (B) to an employer shall include a reference 

to any predecessor of such employer. 

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

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

(B), the value of plan assets shall be the fair market 

value of the assets. 

‘‘(B) AVERAGING ALLOWED.—A plan may determine the 

value of plan assets on the basis of the averaging of fair 

market values, but only if such method—

‘‘(i) is permitted under regulations prescribed by 

the Secretary, 

‘‘(ii) does not provide for averaging of such values 

over more than the period beginning on the last day 

of the 25th month preceding the month in which the 
H. R. 4—55

valuation date occurs and ending on the valuation 

date (or a similar period in the case of a valuation 

date which is not the 1st day of a month), and 

‘‘(iii) does not result in a determination of the 

value of plan assets which, at any time, is lower than 

90 percent or greater than 110 percent of the fair 

market value of such assets at such time. 

Any such averaging shall be adjusted for contributions 

and distributions (as provided by the Secretary). 

‘‘(4) ACCOUNTING FOR CONTRIBUTION RECEIPTS.—For purposes of determining the value of assets under paragraph (3)—

‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—

‘‘(i) an employer makes any contribution to the 

plan after the valuation date for the plan year in 

which the contribution is made, and 

‘‘(ii) the contribution is for a preceding plan year, 

the contribution shall be taken into account as an asset 

of the plan as of the valuation date, except that in the 

case of any plan year beginning after 2008, only the present 

value (determined as of the valuation date) of such contribution may be taken into account. For purposes of the 

preceding sentence, present value shall be determined 

using the effective interest rate for the preceding plan 

year to which the contribution is properly allocable. 

‘‘(B) SPECIAL RULE FOR CURRENT YEAR CONTRIBUTIONS

MADE BEFORE VALUATION DATE.—If any contributions for 

any plan year are made to or under the plan during the 

plan year but before the valuation date for the plan year, 

the assets of the plan as of the valuation date shall not 

include—

‘‘(i) such contributions, and 

‘‘(ii) interest on such contributions for the period 

between the date of the contributions and the valuation 

date, determined by using the effective interest rate 

for the plan year. 

‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.—

‘‘(1) IN GENERAL.—Subject to this subsection, the determination of any present value or other computation under 

this section shall be made on the basis of actuarial assumptions 

and methods—

‘‘(A) each of which is reasonable (taking into account 

the experience of the plan and reasonable expectations), 

and 

‘‘(B) which, in combination, offer the actuary’s best 

estimate of anticipated experience under the plan. 

‘‘(2) INTEREST RATES.—

‘‘(A) EFFECTIVE INTEREST RATE.—For purposes of this 

section, the term ‘effective interest rate’ means, with 

respect to any plan for any plan year, the single rate 

of interest which, if used to determine the present value 

of the plan’s accrued or earned benefits referred to in 

subsection (d)(1), would result in an amount equal to the 

funding target of the plan for such plan year. 

‘‘(B) INTEREST RATES FOR DETERMINING FUNDING TARGET.—For purposes of determining the funding target of 
H. R. 4—56

a plan for any plan year, the interest rate used in determining the present value of the liabilities of the plan shall 

be—

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

to be payable during the 5-year period beginning on 

the first day of the plan year, the first segment rate 

with respect to the applicable month, 

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

to be payable during the 15-year period beginning at 

the end of the period described in clause (i), the second 

segment rate with respect to the applicable month, 

and 

‘‘(iii) in the case of benefits reasonably determined 

to be payable after the period described in clause (ii), 

the third segment rate with respect to the applicable 

month. 

‘‘(C) SEGMENT RATES.—For purposes of this paragraph—

‘‘(i) FIRST SEGMENT RATE.—The term ‘first segment 

rate’ means, with respect to any month, the single 

rate of interest which shall be determined by the Secretary for such month on the basis of the corporate 

bond yield curve for such month, taking into account 

only that portion of such yield curve which is based 

on bonds maturing during the 5-year period commencing with such month. 

‘‘(ii) SECOND SEGMENT RATE.—The term ‘second 

segment rate’ means, with respect to any month, the 

single rate of interest which shall be determined by 

the Secretary for such month on the basis of the corporate bond yield curve for such month, taking into 

account only that portion of such yield curve which 

is based on bonds maturing during the 15-year period 

beginning at the end of the period described in clause 

(i). 

‘‘(iii) THIRD SEGMENT RATE.—The term ‘third segment rate’ means, with respect to any month, the 

single rate of interest which shall be determined by 

the Secretary for such month on the basis of the corporate bond yield curve for such month, taking into 

account only that portion of such yield curve which 

is based on bonds maturing during periods beginning 

after the period described in clause (ii). 

‘‘(D) CORPORATE BOND YIELD CURVE.—For purposes of 

this paragraph—

‘‘(i) IN GENERAL.—The term ‘corporate bond yield 

curve’ means, with respect to any month, a yield curve 

which is prescribed by the Secretary for such month 

and which reflects the average, for the 24-month period 

ending with the month preceding such month, of 

monthly yields on investment grade corporate bonds 

with varying maturities and that are in the top 3 

quality levels available. 

‘‘(ii) ELECTION TO USE YIELD CURVE.—Solely for 

purposes of determining the minimum required contribution under this section, the plan sponsor may, 
H. R. 4—57

in lieu of the segment rates determined under subparagraph (C), elect to use interest rates under the corporate bond yield curve. For purposes of the preceding 

sentence such curve shall be determined without 

regard to the 24-month averaging described in clause 

(i). Such election, once made, may be revoked only 

with the consent of the Secretary. 

‘‘(E) APPLICABLE MONTH.—For purposes of this paragraph, the term ‘applicable month’ means, with respect 

to any plan for any plan year, the month which includes 

the valuation date of such plan for such plan year or, 

at the election of the plan sponsor, any of the 4 months 

which precede such month. Any election made under this 

subparagraph shall apply to the plan year for which the 

election is made and all succeeding plan years, unless 

the election is revoked with the consent of the Secretary. 

‘‘(F) PUBLICATION REQUIREMENTS.—The Secretary shall 

publish for each month the corporate bond yield curve 

(and the corporate bond yield curve reflecting the modification described in section 417(e)(3)(D)(i)) for such month 

and each of the rates determined under subparagraph (B) 

for such month. The Secretary shall also publish a description of the methodology used to determine such yield curve 

and such rates which is sufficiently detailed to enable 

plans to make reasonable projections regarding the yield 

curve and such rates for future months based on the plan’s 

projection of future interest rates. 

‘‘(G) TRANSITION RULE.— ‘‘(i) IN GENERAL.—Notwithstanding the preceding 

provisions of this paragraph, for plan years beginning 

in 2008 or 2009, the first, second, or third segment 

rate for a plan with respect to any month shall be 

equal to the sum of—

‘‘(I) the product of such rate for such month 

determined without regard to this subparagraph, 

multiplied by the applicable percentage, and 

‘‘(II) the product of the rate determined under 

the rules of section 412(b)(5)(B)(ii)(II) (as in effect 

for plan years beginning in 2007), multiplied by 

a percentage equal to 100 percent minus the 

applicable percentage. 

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of 

clause (i), the applicable percentage is 331⁄3 percent 

for plan years beginning in 2008 and 662⁄3 percent 

for plan years beginning in 2009. 

‘‘(iii) NEW PLANS INELIGIBLE.—Clause (i) shall not 

apply to any plan if the first plan year of the plan 

begins after December 31, 2007. 

‘‘(iv) ELECTION.—The plan sponsor may elect not 

to have this subparagraph apply. Such election, once 

made, may be revoked only with the consent of the 

Secretary. 

‘‘(3) MORTALITY TABLES.—

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

(C) or (D), the Secretary shall by regulation prescribe mortality tables to be used in determining any present value 

or making any computation under this section. Such tables 
H. R. 4—58

shall be based on the actual experience of pension plans 

and projected trends in such experience. In prescribing 

such tables, the Secretary shall take into account results 

of available independent studies of mortality of individuals 

covered by pension plans. 

‘‘(B) PERIODIC REVISION.—The Secretary shall (at least 

every 10 years) make revisions in any table in effect under 

subparagraph (A) to reflect the actual experience of pension 

plans and projected trends in such experience. 

‘‘(C) SUBSTITUTE MORTALITY TABLE.— ‘‘(i) IN GENERAL.—Upon request by the plan 

sponsor and approval by the Secretary, a mortality 

table which meets the requirements of clause (iii) shall 

be used in determining any present value or making 

any computation under this section during the period 

of consecutive plan years (not to exceed 10) specified 

in the request. 

‘‘(ii) EARLY TERMINATION OF PERIOD.—Notwithstanding clause (i), a mortality table described in clause 

(i) shall cease to be in effect as of the earliest of—

‘‘(I) the date on which there is a significant 

change in the participants in the plan by reason 

of a plan spinoff or merger or otherwise, or 

‘‘(II) the date on which the plan actuary determines that such table does not meet the requirements of clause (iii). 

‘‘(iii) REQUIREMENTS.—A mortality table meets the 

requirements of this clause if—

‘‘(I) there is a sufficient number of plan participants, and the pension plans have been maintained for a sufficient period of time, to have credible information necessary for purposes of subclause (II), and 

‘‘(II) such table reflects the actual experience 

of the pension plans maintained by the sponsor 

and projected trends in general mortality experience. 

‘‘(iv) ALL PLANS IN CONTROLLED GROUP MUST USE

SEPARATE TABLE.—Except as provided by the Secretary, 

a plan sponsor may not use a mortality table under 

this subparagraph for any plan maintained by the 

plan sponsor unless—

‘‘(I) a separate mortality table is established 

and used under this subparagraph for each other 

plan maintained by the plan sponsor and if the 

plan sponsor is a member of a controlled group, 

each member of the controlled group, and 

‘‘(II) the requirements of clause (iii) are met 

separately with respect to the table so established 

for each such plan, determined by only taking 

into account the participants of such plan, the 

time such plan has been in existence, and the 

actual experience of such plan. 

‘‘(v) DEADLINE FOR SUBMISSION AND DISPOSITION

OF APPLICATION.— ‘‘(I) SUBMISSION.—The plan sponsor shall 

submit a mortality table to the Secretary for 
H. R. 4—59

approval under this subparagraph at least 7 

months before the 1st day of the period described 

in clause (i). 

‘‘(II) DISPOSITION.—Any mortality table submitted to the Secretary for approval under this 

subparagraph shall be treated as in effect as of 

the 1st day of the period described in clause (i) 

unless the Secretary, during the 180-day period 

beginning on the date of such submission, disapproves of such table and provides the reasons 

that such table fails to meet the requirements 

of clause (iii). The 180-day period shall be extended 

upon mutual agreement of the Secretary and the 

plan sponsor. 

‘‘(D) SEPARATE MORTALITY TABLES FOR THE DISABLED.— Notwithstanding subparagraph (A)—

‘‘(i) IN GENERAL.—The Secretary shall establish 

mortality tables which may be used (in lieu of the 

tables under subparagraph (A)) under this subsection 

for individuals who are entitled to benefits under the 

plan on account of disability. The Secretary shall establish separate tables for individuals whose disabilities 

occur in plan years beginning before January 1, 1995, 

and for individuals whose disabilities occur in plan 

years beginning on or after such date. 

‘‘(ii) SPECIAL RULE FOR DISABILITIES OCCURRING

AFTER 1994.—In the case of disabilities occurring in 

plan years beginning after December 31, 1994, the 

tables under clause (i) shall apply only with respect 

to individuals described in such subclause who are 

disabled within the meaning of title II of the Social 

Security Act and the regulations thereunder. 

‘‘(iii) PERIODIC REVISION.—The Secretary shall (at 

least every 10 years) make revisions in any table in 

effect under clause (i) to reflect the actual experience 

of pension plans and projected trends in such experience. 

‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN THE FORM OF

LUMP SUMS OR OTHER OPTIONAL FORMS.—For purposes of determining any present value or making any computation under 

this section, there shall be taken into account—

‘‘(A) the probability that future benefit payments under 

the plan will be made in the form of optional forms of 

benefits provided under the plan (including lump sum distributions, determined on the basis of the plan’s experience 

and other related assumptions), and 

‘‘(B) any difference in the present value of such future 

benefit payments resulting from the use of actuarial 

assumptions, in determining benefit payments in any such 

optional form of benefits, which are different from those 

specified in this subsection. 

‘‘(5) APPROVAL OF LARGE CHANGES IN ACTUARIAL ASSUMPTIONS.—

‘‘(A) IN GENERAL.—No actuarial assumption used to 

determine the funding target for a plan to which this 

paragraph applies may be changed without the approval 

of the Secretary. 
H. R. 4—60

‘‘(B) PLANS TO WHICH PARAGRAPH APPLIES.—This paragraph shall apply to a plan only if—

‘‘(i) the plan is a defined benefit plan (other than 

a multiemployer plan) to which title IV of the Employee 

Retirement Income Security Act of 1974 applies, 

‘‘(ii) the aggregate unfunded vested benefits as of 

the close of the preceding plan year (as determined 

under section 4006(a)(3)(E)(iii) of the Employee Retirement Income Security Act of 1974) of such plan and 

all other plans maintained by the contributing sponsors 

(as defined in section 4001(a)(13) of such Act) and 

members of such sponsors’ controlled groups (as 

defined in section 4001(a)(14) of such Act) which are 

covered by title IV (disregarding plans with no 

unfunded vested benefits) exceed $50,000,000, and 

‘‘(iii) the change in assumptions (determined after 

taking into account any changes in interest rate and 

mortality table) results in a decrease in the funding 

shortfall of the plan for the current plan year that 

exceeds $50,000,000, or that exceeds $5,000,000 and 

that is 5 percent or more of the funding target of 

the plan before such change. 

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

‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK STATUS.—

‘‘(A) IN GENERAL.—In the case of a plan which is in 

at-risk status for a plan year, the funding target of the 

plan for the plan year shall be equal to the sum of—

‘‘(i) the present value of all benefits accrued or 

earned under the plan as of the beginning of the plan 

year, as determined by using the additional actuarial 

assumptions described in subparagraph (B), and 

‘‘(ii) in the case of a plan which also has been 

in at-risk status for at least 2 of the 4 preceding 

plan years, a loading factor determined under subparagraph (C). 

‘‘(B) ADDITIONAL ACTUARIAL ASSUMPTIONS.—The actuarial assumptions described in this subparagraph are as 

follows: 

‘‘(i) All employees who are not otherwise assumed 

to retire as of the valuation date but who will be 

eligible to elect benefits during the plan year and the 

10 succeeding plan years shall be assumed to retire 

at the earliest retirement date under the plan but 

not before the end of the plan year for which the 

at-risk funding target and at-risk target normal cost 

are being determined. 

‘‘(ii) All employees shall be assumed to elect the 

retirement benefit available under the plan at the 

assumed retirement age (determined after application 

of clause (i)) which would result in the highest present 

value of benefits. 

‘‘(C) LOADING FACTOR.—The loading factor applied with 

respect to a plan under this paragraph for any plan year 

is the sum of—

‘‘(i) $700, times the number of participants in the 

plan, plus 
H. R. 4—61

‘‘(ii) 4 percent of the funding target (determined 

without regard to this paragraph) of the plan for the 

plan year. 

‘‘(2) TARGET NORMAL COST OF AT-RISK PLANS.—In the case 

of a plan which is in at-risk status for a plan year, the target 

normal cost of the plan for such plan year shall be equal 

to the sum of—

‘‘(A) the present value of all benefits which are expected 

to accrue or be earned under the plan during the plan 

year, determined using the additional actuarial assumptions described in paragraph (1)(B), plus 

‘‘(B) in the case of a plan which also has been in 

at-risk status for at least 2 of the 4 preceding plan years, 

a loading factor equal to 4 percent of the target normal 

cost (determined without regard to this paragraph) of the 

plan for the plan year. 

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

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

target, as determined without regard to this subsection, 

or 

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

target normal cost, as determined without regard to this 

subsection. 

‘‘(4) DETERMINATION OF AT-RISK STATUS.—For purposes of 

this subsection—

‘‘(A) IN GENERAL.—A plan is in at-risk status for a 

plan year if—

‘‘(i) the funding target attainment percentage for 

the preceding plan year (determined under this section 

without regard to this subsection) is less than 80 percent, and 

‘‘(ii) the funding target attainment percentage for 

the preceding plan year (determined under this section 

by using the additional actuarial assumptions 

described in paragraph (1)(B) in computing the funding 

target) is less than 70 percent. 

‘‘(B) TRANSITION RULE.—In the case of plan years beginning in 2008, 2009, and 2010, subparagraph (A)(i) shall 

be applied by substituting the following percentages for 

‘80 percent’: 

‘‘(i) 65 percent in the case of 2008. 

‘‘(ii) 70 percent in the case of 2009. 

‘‘(iii) 75 percent in the case of 2010. 

In the case of plan years beginning in 2008, the funding 

target attainment percentage for the preceding plan year 

under subparagraph (A)(ii) may be determined using such 

methods of estimation as the Secretary may provide. 

‘‘(C) SPECIAL RULE FOR EMPLOYEES OFFERED EARLY

RETIREMENT IN 2006.—

‘‘(i) IN GENERAL.—For purposes of subparagraph 

(A)(ii), the additional actuarial assumptions described 

in paragraph (1)(B) shall not be taken into account 

with respect to any employee if—

‘‘(I) such employee is employed by a specified 

automobile manufacturer, 
H. R. 4—62

‘‘(II) such employee is offered a substantial 

amount of additional cash compensation, substantially enhanced retirement benefits under the plan, 

or materially reduced employment duties on the 

condition that by a specified date (not later than 

December 31, 2010) the employee retires (as 

defined under the terms of the plan), 

‘‘(III) such offer is made during 2006 and 

pursuant to a bona fide retirement incentive program and requires, by the terms of the offer, that 

such offer can be accepted not later than a specified 

date (not later than December 31, 2006), and 

‘‘(IV) such employee does not elect to accept 

such offer before the specified date on which the 

offer expires. 

‘‘(ii) SPECIFIED AUTOMOBILE MANUFACTURER.—For 

purposes of clause (i), the term ‘specified automobile 

manufacturer’ means—

‘‘(I) any manufacturer of automobiles, and 

‘‘(II) any manufacturer of automobile parts 

which supplies such parts directly to a manufacturer of automobiles and which, after a transaction 

or series of transactions ending in 1999, ceased 

to be a member of a controlled group which 

included such manufacturer of automobiles. 

‘‘(5) TRANSITION BETWEEN APPLICABLE FUNDING TARGETS

AND BETWEEN APPLICABLE TARGET NORMAL COSTS.— ‘‘(A) IN GENERAL.—In any case in which a plan which 

is in at-risk status for a plan year has been in such status 

for a consecutive period of fewer than 5 plan years, the 

applicable amount of the funding target and of the target 

normal cost shall be, in lieu of the amount determined 

without regard to this paragraph, the sum of—

‘‘(i) the amount determined under this section 

without regard to this subsection, plus 

‘‘(ii) the transition percentage for such plan year 

of the excess of the amount determined under this 

subsection (without regard to this paragraph) over the 

amount determined under this section without regard 

to this subsection. 

‘‘(B) TRANSITION PERCENTAGE.—For purposes of 

subparagraph (A), the transition percentage shall be determined in accordance with the following table:

‘‘If the consecutive number of 

years (including the plan year) The 

transition 

the plan is in at-risk status is— percentage 

is—

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

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

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

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

‘‘(C) YEARS BEFORE EFFECTIVE DATE.—For purposes of 

this paragraph, plan years beginning before 2008 shall 

not be taken into account. 

‘‘(6) SMALL PLAN EXCEPTION.—If, on each day during the 

preceding plan year, a plan had 500 or fewer participants, 

the plan shall not be treated as in at-risk status for the plan 
H. R. 4—63

year. For purposes of this paragraph, all defined benefit plans 

(other than multiemployer plans) maintained by the same 

employer (or any member of such employer’s controlled group) 

shall be treated as 1 plan, but only participants with respect 

to such employer or member shall be taken into account and 

the rules of subsection (g)(2)(C) shall apply. 

‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—For purposes of this section, the due 

date for any payment of any minimum required contribution 

for any plan year shall be 81⁄2 months after the close of the 

plan year. 

‘‘(2) INTEREST.—Any payment required under paragraph 

(1) for a plan year that is made on a date other than the 

valuation date for such plan year shall be adjusted for interest 

accruing for the period between the valuation date and the 

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

for such plan year. 

‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION SCHEDULE FOR

UNDERFUNDED PLANS.—

‘‘(A) FAILURE TO TIMELY MAKE REQUIRED INSTALLMENT.—In any case in which the plan has a funding shortfall for the preceding plan year, the employer maintaining 

the plan shall make the required installments under this 

paragraph and if the employer fails to pay the full amount 

of a required installment for the plan year, then the amount 

of interest charged under paragraph (2) on the underpayment for the period of underpayment shall be determined by using a rate of interest equal to the rate otherwise 

used under paragraph (2) plus 5 percentage points. 

‘‘(B) AMOUNT OF UNDERPAYMENT, PERIOD OF UNDERPAYMENT.—For purposes of subparagraph (A)—

‘‘(i) AMOUNT.—The amount of the underpayment 

shall be the excess of—

‘‘(I) the required installment, over 

‘‘(II) the amount (if any) of the installment 

contributed to or under the plan on or before the 

due date for the installment. 

‘‘(ii) PERIOD OF UNDERPAYMENT.—The period for 

which any interest is charged under this paragraph 

with respect to any portion of the underpayment shall 

run from the due date for the installment to the date 

on which such portion is contributed to or under the 

plan. 

‘‘(iii) ORDER OF CREDITING CONTRIBUTIONS.—For 

purposes of clause (i)(II), contributions shall be credited 

against unpaid required installments in the order in 

which such installments are required to be paid. 

‘‘(C) NUMBER OF REQUIRED INSTALLMENTS; DUE

DATES.—For purposes of this paragraph—

‘‘(i) PAYABLE IN 4 INSTALLMENTS.—There shall be 

4 required installments for each plan year. 

‘‘(ii) TIME FOR PAYMENT OF INSTALLMENTS.—The 

due dates for required installments are set forth in 

the following table:
H. R. 4—64

‘‘In the case of the following

required installment:

The due date is:

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

2nd .................................................................... July 15

3rd ..................................................................... October 15

4th ..................................................................... January 15 of the

following year. 

‘‘(D) AMOUNT OF REQUIRED INSTALLMENT.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—The amount of any required 

installment shall be 25 percent of the required annual 

payment. 

‘‘(ii) REQUIRED ANNUAL PAYMENT.—For purposes 

of clause (i), the term ‘required annual payment’ means 

the lesser of—

‘‘(I) 90 percent of the minimum required contribution (determined without regard to this subsection) to the plan for the plan year under this 

section, or 

‘‘(II) 100 percent of the minimum required contribution (determined without regard to this subsection or to any waiver under section 302(c)) to 

the plan for the preceding plan year. 

Subclause (II) shall not apply if the preceding plan 

year referred to in such clause was not a year of 

12 months. 

‘‘(E) FISCAL YEARS AND SHORT YEARS.—

‘‘(i) FISCAL YEARS.—In applying this paragraph to 

a plan year beginning on any date other than January 

1, there shall be substituted for the months specified 

in this paragraph, the months which correspond 

thereto. 

‘‘(ii) SHORT PLAN YEAR.—This subparagraph shall 

be applied to plan years of less than 12 months in 

accordance with regulations prescribed by the Secretary. 

‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION WITH QUARTERLY CONTRIBUTIONS.—

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

applies shall be treated as failing to pay the full amount 

of any required installment under paragraph (3) to the 

extent that the value of the liquid assets paid in such 

installment is less than the liquidity shortfall (whether 

or not such liquidity shortfall exceeds the amount of such 

installment required to be paid but for this paragraph). 

‘‘(B) PLANS TO WHICH PARAGRAPH APPLIES.—This paragraph shall apply to a plan (other than a plan described 

in subsection (g)(2)(B)) which—

‘‘(i) is required to pay installments under paragraph (3) for a plan year, and 

‘‘(ii) has a liquidity shortfall for any quarter during 

such plan year. 

‘‘(C) PERIOD OF UNDERPAYMENT.—For purposes of paragraph (3)(A), any portion of an installment that is treated 

as not paid under subparagraph (A) shall continue to be 
H. R. 4—65

treated as unpaid until the close of the quarter in which 

the due date for such installment occurs. 

‘‘(D) LIMITATION ON INCREASE.—If the amount of any 

required installment is increased by reason of subparagraph (A), in no event shall such increase exceed the 

amount which, when added to prior installments for the 

plan year, is necessary to increase the funding target 

attainment percentage of the plan for the plan year (taking 

into account the expected increase in funding target due 

to benefits accruing or earned during the plan year) to 

100 percent. 

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

‘‘(i) LIQUIDITY SHORTFALL.—The term ‘liquidity 

shortfall’ means, with respect to any required installment, an amount equal to the excess (as of the last 

day of the quarter for which such installment is made) 

of—

‘‘(I) the base amount with respect to such 

quarter, over 

‘‘(II) the value (as of such last day) of the 

plan’s liquid assets. 

‘‘(ii) BASE AMOUNT.— ‘‘(I) IN GENERAL.—The term ‘base amount’ 

means, with respect to any quarter, an amount 

equal to 3 times the sum of the adjusted disbursements from the plan for the 12 months ending 

on the last day of such quarter. 

‘‘(II) SPECIAL RULE.—If the amount determined 

under subclause (I) exceeds an amount equal to 

2 times the sum of the adjusted disbursements 

from the plan for the 36 months ending on the 

last day of the quarter and an enrolled actuary 

certifies to the satisfaction of the Secretary that 

such excess is the result of nonrecurring circumstances, the base amount with respect to such 

quarter shall be determined without regard to 

amounts related to those nonrecurring circumstances. 

‘‘(iii) DISBURSEMENTS FROM THE PLAN.—The term 

‘disbursements from the plan’ means all disbursements 

from the trust, including purchases of annuities, payments of single sums and other benefits, and administrative expenses. 

‘‘(iv) ADJUSTED DISBURSEMENTS.—The term 

‘adjusted disbursements’ means disbursements from 

the plan reduced by the product of—

‘‘(I) the plan’s funding target attainment 

percentage for the plan year, and 

‘‘(II) the sum of the purchases of annuities, 

payments of single sums, and such other disbursements as the Secretary shall provide in regulations. 

‘‘(v) LIQUID ASSETS.—The term ‘liquid assets’ 

means cash, marketable securities, and such other 

assets as specified by the Secretary in regulations. 

‘‘(vi) QUARTER.—The term ‘quarter’ means, with 

respect to any required installment, the 3-month period 
H. R. 4—66

preceding the month in which the due date for such 

installment occurs. 

‘‘(F) REGULATIONS.—The Secretary may prescribe such 

regulations as are necessary to carry out this paragraph. 

‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO MAKE REQUIRED

CONTRIBUTIONS.—

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

subsection applies, if—

‘‘(A) any person fails to make a contribution payment 

required by section 412 and this section before the due 

date for such payment, and 

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

interest), when added to the aggregate unpaid balance 

of all preceding such payments for which payment was 

not made before the due date (including interest), exceeds 

$1,000,000, 

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

determined under paragraph (3) upon all property and rights 

to property, whether real or personal, belonging to such person 

and any other person who is a member of the same controlled 

group of which such person is a member. 

‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—This subsection 

shall apply to a defined benefit plan (other than a multiemployer plan) covered under section 4021 of the Employee Retirement Income Security Act of 1974 for any plan year for which 

the funding target attainment percentage (as defined in subsection (d)(2)) of such plan is less than 100 percent. 

‘‘(3) AMOUNT OF LIEN.—For purposes of paragraph (1), the 

amount of the lien shall be equal to the aggregate unpaid 

balance of contribution payments required under this section 

and section 412 for which payment has not been made before 

the due date. 

‘‘(4) NOTICE OF FAILURE; LIEN.—

‘‘(A) NOTICE OF FAILURE.—A person committing a 

failure described in paragraph (1) shall notify the Pension 

Benefit Guaranty Corporation of such failure within 10 

days of the due date for the required contribution payment. 

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

(1) shall arise on the due date for the required contribution 

payment and shall continue until the last day of the first 

plan year in which the plan ceases to be described in 

paragraph (1)(B). Such lien shall continue to run without 

regard to whether such plan continues to be described 

in paragraph (2) during the period referred to in the preceding sentence. 

‘‘(C) CERTAIN RULES TO APPLY.—Any amount with 

respect to which a lien is imposed under paragraph (1) 

shall be treated as taxes due and owing the United States 

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

(e) of section 4068 of the Employee Retirement Income 

Security Act of 1974 shall apply with respect to a lien 

imposed by subsection (a) and the amount with respect 

to such lien. 

‘‘(5) ENFORCEMENT.—Any lien created under paragraph (1) 

may be perfected and enforced only by the Pension Benefit 

Guaranty Corporation, or at the direction of the Pension Benefit 
H. R. 4—67

Guaranty Corporation, by the contributing sponsor (or any 

member of the controlled group of the contributing sponsor). 

‘‘(6) DEFINITIONS.—For purposes of this subsection—

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

payment’ means, in connection with a plan, a contribution 

payment required to be made to the plan, including any 

required installment under paragraphs (3) and (4) of subsection (j). 

‘‘(B) DUE DATE; REQUIRED INSTALLMENT.—The terms 

‘due date’ and ‘required installment’ have the meanings 

given such terms by subsection (j), except that in the case 

of a payment other than a required installment, the due 

date shall be the date such payment is required to be 

made under section 430. 

‘‘(C) CONTROLLED GROUP.—The term ‘controlled group’ 

means any group treated as a single employer under subsections (b), (c), (m), and (o) of section 414. 

‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT ACCOUNTS.—

In the case of a qualified transfer (as defined in section 420), 

any assets so transferred shall not, for purposes of this section, 

be treated as assets in the plan.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply with respect to plan years beginning after December 

31, 2007. 

SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS. 

(a) PROHIBITION OF SHUTDOWN BENEFITS AND OTHER

UNPREDICTABLE CONTINGENT EVENT BENEFITS UNDER SINGLEEMPLOYER PLANS.—

(1) IN GENERAL.—Part III of subchapter D of chapter 1 

of the Internal Revenue Code of 1986 (relating to deferred 

compensation, etc.) is amended—

(A) by striking the heading and inserting the following: 

‘‘PART III—RULES RELATING TO MINIMUM 

FUNDING STANDARDS AND BENEFIT LIMITATIONS

‘‘SUBPART A. MINIMUM FUNDING STANDARDS FOR PENSION PLANS. 

‘‘SUBPART B. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

‘‘Subpart A—Minimum Funding Standards for 

Pension Plans

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

plans.’’,

and 

(B) by adding at the end the following new subpart: 
H. R. 4—68

‘‘Subpart B—Benefit Limitations Under SingleEmployer Plans

‘‘Sec. 436. Funding-based limitation on shutdown benefits and other unpredictable 

contingent event benefits under single-employer plans.

‘‘SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT 

ACCRUALS UNDER SINGLE-EMPLOYER PLANS. 

‘‘(a) GENERAL RULE.—For purposes of section 401(a)(29), a 

defined benefit plan which is a single-employer plan shall be treated 

as meeting the requirements of this section if the plan meets 

the requirements of subsections (b), (c), (d), and (e). 

‘‘(b) FUNDING-BASED LIMITATION ON SHUTDOWN BENEFITS AND

OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS UNDER

SINGLE-EMPLOYER PLANS.—

‘‘(1) IN GENERAL.—If a participant of a defined benefit 

plan which is a single-employer plan is entitled to an unpredictable contingent event benefit payable with respect to any event 

occurring during any plan year, the plan shall provide that 

such benefit may not be provided if the adjusted funding target 

attainment percentage for such plan year—

‘‘(A) is less than 60 percent, or 

‘‘(B) would be less than 60 percent taking into account 

such occurrence. 

‘‘(2) EXEMPTION.—Paragraph (1) shall cease to apply with 

respect to any plan year, effective as of the first day of the 

plan year, upon payment by the plan sponsor of a contribution 

(in addition to any minimum required contribution under section 303) equal to—

‘‘(A) in the case of paragraph (1)(A), the amount of 

the increase in the funding target of the plan (under section 

430) for the plan year attributable to the occurrence 

referred to in paragraph (1), and 

‘‘(B) in the case of paragraph (1)(B), the amount sufficient to result in a funding target attainment percentage 

of 60 percent. 

‘‘(3) UNPREDICTABLE CONTINGENT EVENT.—For purposes of 

this subsection, the term ‘unpredictable contingent event benefit’ means any benefit payable solely by reason of—

‘‘(A) a plant shutdown (or similar event, as determined 

by the Secretary), or 

‘‘(B) any event other than the attainment of any age, 

performance of any service, receipt or derivation of any 

compensation, or occurrence of death or disability. 

‘‘(c) LIMITATIONS ON PLAN AMENDMENTS INCREASING LIABILITY

FOR BENEFITS.—

‘‘(1) IN GENERAL.—No amendment to a defined benefit plan 

which is a single-employer plan which has the effect of 

increasing liabilities of the plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit 

accrual, or changing the rate at which benefits become nonforfeitable may take effect during any plan year if the adjusted 

funding target attainment percentage for such plan year is—

‘‘(A) less than 80 percent, or 

‘‘(B) would be less than 80 percent taking into account 

such amendment. 
H. R. 4—69

‘‘(2) EXEMPTION.—Paragraph (1) shall cease to apply with 

respect to any plan year, effective as of the first day of the 

plan year (or if later, the effective date of the amendment), 

upon payment by the plan sponsor of a contribution (in addition 

to any minimum required contribution under section 430) equal 

to—

‘‘(A) in the case of paragraph (1)(A), the amount of 

the increase in the funding target of the plan (under section 

430) for the plan year attributable to the amendment, 

and 

‘‘(B) in the case of paragraph (1)(B), the amount sufficient to result in an adjusted funding target attainment 

percentage of 80 percent. 

‘‘(3) EXCEPTION FOR CERTAIN BENEFIT INCREASES.—Paragraph (1) shall not apply to any amendment which provides 

for an increase in benefits under a formula which is not based 

on a participant’s compensation, but only if the rate of such 

increase is not in excess of the contemporaneous rate of increase 

in average wages of participants covered by the amendment. 

‘‘(d) LIMITATIONS ON ACCELERATED BENEFIT DISTRIBUTIONS.— ‘‘(1) FUNDING PERCENTAGE LESS THAN 60 PERCENT.—A 

defined benefit plan which is a single-employer plan shall provide that, in any case in which the plan’s adjusted funding 

target attainment percentage for a plan year is less than 60 

percent, the plan may not pay any prohibited payment after 

the valuation date for the plan year. 

‘‘(2) BANKRUPTCY.—A defined benefit plan which is a singleemployer plan shall provide that, during any period in which 

the plan sponsor is a debtor in a case under title 11, United 

States Code, or similar Federal or State law, the plan may 

not pay any prohibited payment. The preceding sentence shall 

not apply on or after the date on which the enrolled actuary 

of the plan certifies that the adjusted funding target attainment 

percentage of such plan is not less than 100 percent. 

‘‘(3) LIMITED PAYMENT IF PERCENTAGE AT LEAST 60 PERCENT

BUT LESS THAN 80 PERCENT.— ‘‘(A) IN GENERAL.—A defined benefit plan which is a 

single-employer plan shall provide that, in any case in 

which the plan’s adjusted funding target attainment 

percentage for a plan year is 60 percent or greater but 

less than 80 percent, the plan may not pay any prohibited 

payment after the valuation date for the plan year to 

the extent the amount of the payment exceeds the lesser 

of—

‘‘(i) 50 percent of the amount of the payment which 

could be made without regard to this section, or 

‘‘(ii) the present value (determined under guidance 

prescribed by the Pension Benefit Guaranty Corporation, using the interest and mortality assumptions 

under section 417(e)) of the maximum guarantee with 

respect to the participant under section 4022 of the 

Employee Retirement Income Security Act of 1974. 

‘‘(B) ONE-TIME APPLICATION.—

‘‘(i) IN GENERAL.—The plan shall also provide that 

only 1 prohibited payment meeting the requirements 

of subparagraph (A) may be made with respect to 

any participant during any period of consecutive plan 
H. R. 4—70

years to which the limitations under either paragraph 

(1) or (2) or this paragraph applies. 

‘‘(ii) TREATMENT OF BENEFICIARIES.—For purposes 

of this subparagraph, a participant and any beneficiary 

on his behalf (including an alternate payee, as defined 

in section 414(p)(8)) shall be treated as 1 participant. 

If the accrued benefit of a participant is allocated to 

such an alternate payee and 1 or more other persons, 

the amount under subparagraph (A) shall be allocated 

among such persons in the same manner as the accrued 

benefit is allocated unless the qualified domestic relations order (as defined in section 414(p)(1)(A)) provides 

otherwise. 

‘‘(4) EXCEPTION.—This subsection shall not apply to any 

plan for any plan year if the terms of such plan (as in effect 

for the period beginning on September 1, 2005, and ending 

with such plan year) provide for no benefit accruals with respect 

to any participant during such period. 

‘‘(5) PROHIBITED PAYMENT.—For purpose of this subsection, 

the term ‘prohibited payment’ means—

‘‘(A) any payment, in excess of the monthly amount 

paid under a single life annuity (plus any social security 

supplements described in the last sentence of section 

411(a)(9)), to a participant or beneficiary whose annuity 

starting date (as defined in section 417(f)(2)) occurs during 

any period a limitation under paragraph (1) or (2) is in 

effect, 

‘‘(B) any payment for the purchase of an irrevocable 

commitment from an insurer to pay benefits, and 

‘‘(C) any other payment specified by the Secretary by 

regulations. 

‘‘(e) LIMITATION ON BENEFIT ACCRUALS FOR PLANS WITH SEVERE

FUNDING SHORTFALLS.—

‘‘(1) IN GENERAL.—A defined benefit plan which is a singleemployer plan shall provide that, in any case in which the 

plan’s adjusted funding target attainment percentage for a 

plan year is less than 60 percent, benefit accruals under the 

plan shall cease as of the valuation date for the plan year. 

‘‘(2) EXEMPTION.—Paragraph (1) shall cease to apply with 

respect to any plan year, effective as of the first day of the 

plan year, upon payment by the plan sponsor of a contribution 

(in addition to any minimum required contribution under section 430) equal to the amount sufficient to result in an adjusted 

funding target attainment percentage of 60 percent. 

‘‘(f) RULES RELATING TO CONTRIBUTIONS REQUIRED TO AVOID

BENEFIT LIMITATIONS.—

‘‘(1) SECURITY MAY BE PROVIDED.—

‘‘(A) IN GENERAL.—For purposes of this section, the 

adjusted funding target attainment percentage shall be 

determined by treating as an asset of the plan any security 

provided by a plan sponsor in a form meeting the requirements of subparagraph (B). 

‘‘(B) FORM OF SECURITY.—The security required under 

subparagraph (A) shall consist of—

‘‘(i) a bond issued by a corporate surety company 

that is an acceptable surety for purposes of section 
H. R. 4—71

412 of the Employee Retirement Income Security Act 

of 1974, 

‘‘(ii) cash, or United States obligations which 

mature in 3 years or less, held in escrow by a bank 

or similar financial institution, or 

‘‘(iii) such other form of security as is satisfactory 

to the Secretary and the parties involved. 

‘‘(C) ENFORCEMENT.—Any security provided under 

subparagraph (A) may be perfected and enforced at any 

time after the earlier of—

‘‘(i) the date on which the plan terminates, 

‘‘(ii) if there is a failure to make a payment of 

the minimum required contribution for any plan year 

beginning after the security is provided, the due date 

for the payment under section 430(j), or 

‘‘(iii) if the adjusted funding target attainment 

percentage is less than 60 percent for a consecutive 

period of 7 years, the valuation date for the last year 

in the period. 

‘‘(D) RELEASE OF SECURITY.—The security shall be 

released (and any amounts thereunder shall be refunded 

together with any interest accrued thereon) at such time 

as the Secretary may prescribe in regulations, including 

regulations for partial releases of the security by reason 

of increases in the funding target attainment percentage. 

‘‘(2) PREFUNDING BALANCE OR FUNDING STANDARD CARRYOVER BALANCE MAY NOT BE USED.—No prefunding balance 

under section 430(f) or funding standard carryover balance 

may be used under subsection (b), (c), or (e) to satisfy any 

payment an employer may make under any such subsection 

to avoid or terminate the application of any limitation under 

such subsection. 

‘‘(3) DEEMED REDUCTION OF FUNDING BALANCES.—

‘‘(A) IN GENERAL.—Subject to subparagraph (C), in any 

case in which a benefit limitation under subsection (b), 

(c), (d), or (e) would (but for this subparagraph and determined without regard to subsection (b)(2), (c)(2), or (e)(2)) 

apply to such plan for the plan year, the plan sponsor 

of such plan shall be treated for purposes of this title 

as having made an election under section 430(f) to reduce 

the prefunding balance or funding standard carryover balance by such amount as is necessary for such benefit limitation to not apply to the plan for such plan year. 

‘‘(B) EXCEPTION FOR INSUFFICIENT FUNDING BALANCES.—Subparagraph (A) shall not apply with respect 

to a benefit limitation for any plan year if the application 

of subparagraph (A) would not result in the benefit limitation not applying for such plan year. 

‘‘(C) RESTRICTIONS OF CERTAIN RULES TO COLLECTIVELY

BARGAINED PLANS.—With respect to any benefit limitation 

under subsection (b), (c), or (e), subparagraph (A) shall 

only apply in the case of a plan maintained pursuant 

to 1 or more collective bargaining agreements between 

employee representatives and 1 or more employers. 

‘‘(g) NEW PLANS.—Subsections (b), (c), and (e) shall not apply 

to a plan for the first 5 plan years of the plan. For purposes 
H. R. 4—72

of this subsection, the reference in this subsection to a plan shall 

include a reference to any predecessor plan. 

‘‘(h) PRESUMED UNDERFUNDING FOR PURPOSES OF BENEFIT

LIMITATIONS.—

‘‘(1) PRESUMPTION OF CONTINUED UNDERFUNDING.—In any 

case in which a benefit limitation under subsection (b), (c), 

(d), or (e) has been applied to a plan with respect to the 

plan year preceding the current plan year, the adjusted funding 

target attainment percentage of the plan for the current plan 

year shall be presumed to be equal to the adjusted funding 

target attainment percentage of the plan for the preceding 

plan year until the enrolled actuary of the plan certifies the 

actual adjusted funding target attainment percentage of the 

plan for the current plan year. 

‘‘(2) PRESUMPTION OF UNDERFUNDING AFTER 10TH MONTH.— In any case in which no certification of the adjusted funding 

target attainment percentage for the current plan year is made 

with respect to the plan before the first day of the 10th month 

of such year, for purposes of subsections (b), (c), (d), and (e), 

such first day shall be deemed, for purposes of such subsection, 

to be the valuation date of the plan for the current plan year 

and the plan’s adjusted funding target attainment percentage 

shall be conclusively presumed to be less than 60 percent 

as of such first day. 

‘‘(3) PRESUMPTION OF UNDERFUNDING AFTER 4TH MONTH

FOR NEARLY UNDERFUNDED PLANS.—In any case in which—

‘‘(A) a benefit limitation under subsection (b), (c), (d), 

or (e) did not apply to a plan with respect to the plan 

year preceding the current plan year, but the adjusted 

funding target attainment percentage of the plan for such 

preceding plan year was not more than 10 percentage 

points greater than the percentage which would have 

caused such subsection to apply to the plan with respect 

to such preceding plan year, and 

‘‘(B) as of the first day of the 4th month of the current 

plan year, the enrolled actuary of the plan has not certified 

the actual adjusted funding target attainment percentage 

of the plan for the current plan year, 

until the enrolled actuary so certifies, such first day shall 

be deemed, for purposes of such subsection, to be the valuation 

date of the plan for the current plan year and the adjusted 

funding target attainment percentage of the plan as of such 

first day shall, for purposes of such subsection, be presumed 

to be equal to 10 percentage points less than the adjusted 

funding target attainment percentage of the plan for such preceding plan year. 

‘‘(i) TREATMENT OF PLAN AS OF CLOSE OF PROHIBITED OR CES- SATION PERIOD.—For purposes of applying this title—

‘‘(1) OPERATION OF PLAN AFTER PERIOD.—Unless the plan 

provides otherwise, payments and accruals will resume effective 

as of the day following the close of the period for which any 

limitation of payment or accrual of benefits under subsection 

(d) or (e) applies. 

‘‘(2) TREATMENT OF AFFECTED BENEFITS.—Nothing in this 

subsection shall be construed as affecting the plan’s treatment 

of benefits which would have been paid or accrued but for 

this section. 
H. R. 4—73

‘‘(j) TERMS RELATING TO FUNDING TARGET ATTAINMENT

PERCENTAGE.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘funding target attainment 

percentage’ has the same meaning given such term by section 

430(d)(2). 

‘‘(2) ADJUSTED FUNDING TARGET ATTAINMENT PERCENT- AGE.—The term ‘adjusted funding target attainment percentage’ 

means the funding target attainment percentage which is determined under paragraph (1) by increasing each of the amounts 

under subparagraphs (A) and (B) of section 430(d)(2) by the 

aggregate amount of purchases of annuities for employees other 

than highly compensated employees (as defined in section 

414(q)) which were made by the plan during the preceding 

2 plan years. 

‘‘(3) APPLICATION TO PLANS WHICH ARE FULLY FUNDED WITHOUT REGARD TO REDUCTIONS FOR FUNDING BALANCES.—

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

year, if the funding target attainment percentage is 100 

percent or more (determined without regard to this paragraph and without regard to the reduction in the value 

of assets under section 430(f)(4)(A)), the funding target 

attainment percentage for purposes of paragraph (1) shall 

be determined without regard to such reduction. 

‘‘(B) TRANSITION RULE.—Subparagraph (A) shall be 

applied to plan years beginning after 2007 and before 2011 

by substituting for ‘100 percent’ the applicable percentage 

determined in accordance with the following table:

‘‘In the case of a plan year The 

applicable 

beginning in calendar year: percentage is 

2008 ............................................................................................ 92

2009 ............................................................................................ 94

2010 ............................................................................................ 96.

‘‘(C) LIMITATION.—Subparagraph (B) shall not apply 

with respect to any plan year after 2008 unless the funding 

target attainment percentage (determined without regard 

to this paragraph) of the plan for each preceding plan 

year after 2007 was not less than the applicable percentage 

with respect to such preceding plan year determined under 

subparagraph (B). 

‘‘(k) SPECIAL RULE FOR 2008.—For purposes of this section, 

in the case of plan years beginning in 2008, the funding target 

attainment percentage for the preceding plan year may be determined using such methods of estimation as the Secretary may 

provide.’’. 

(2) CLERICAL AMENDMENT.—The table of parts for subchapter D of chapter 1 of the Internal Revenue Code of 1986 

is amended by adding at the end the following new item:

‘‘PART III—RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT

LIMITATIONS’’.

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007. 

(2) COLLECTIVE BARGAINING EXCEPTION.—In the case of 

a plan maintained pursuant to 1 or more collective bargaining 

agreements between employee representatives and 1 or more 

employers ratified before January 1, 2008, the amendments 
H. R. 4—74

made by this section shall not apply to plan years beginning 

before the earlier of—

(A) the later of—

(i) the date on which the last collective bargaining 

agreement relating to the plan terminates (determined 

without regard to any extension thereof agreed to after 

the date of the enactment of this Act), or 

(ii) the first day of the first plan year to which 

the amendments made by this subsection would (but 

for this subparagraph) apply, or 

(B) January 1, 2010. 

For purposes of subparagraph (A)(i), any plan amendment made 

pursuant to a collective bargaining agreement relating to the 

plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination 

of such collective bargaining agreement. 

SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS. 

(a) AMENDMENTS RELATED TO QUALIFICATION REQUIREMENTS.— (1) Section 401(a)(29) of the Internal Revenue Code of 

1986 is amended to read as follows: 

‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT-RISK STATUS.— In the case of a defined benefit plan (other than a multiemployer plan) to which the requirements of section 412 apply, 

the trust of which the plan is a part shall not constitute 

a qualified trust under this subsection unless the plan meets 

the requirements of section 436.’’. 

(2) Section 401(a)(32) of such Code is amended—

(A) in subparagraph (A), by striking ‘‘412(m)(5)’’ each 

place it appears and inserting ‘‘section 430(j)(4)’’, and 

(B) in subparagraph (C), by striking ‘‘section 412(m)’’ 

and inserting ‘‘section 430(j)’’. 

(3) Section 401(a)(33) of such Code is amended—

(A) in subparagraph (B)(i), by striking ‘‘funded current 

liability percentage (within the meaning of section 

412(l)(8))’’ and inserting ‘‘funding target attainment 

percentage (as defined in section 430(d)(2))’’, 

(B) in subparagraph (B)(iii), by striking ‘‘subsection 

412(c)(8)’’ and inserting ‘‘section 412(c)(2)’’, and 

(C) in subparagraph (D), by striking ‘‘section 412(c)(11) 

(without regard to subparagraph (B) thereof)’’ and inserting 

‘‘section 412(b)(2) (without regard to subparagraph (B) 

thereof)’’. 

(b) VESTING RULES.—Section 411 of such Code is amended—

(1) by striking ‘‘section 412(c)(8)’’ in subsection (a)(3)(C) 

and inserting ‘‘section 412(c)(2)’’, 

(2) in subsection (b)(1)(F)—

(A) by striking ‘‘paragraphs (2) and (3) of section 412(i)’’ 

in clause (ii) and inserting ‘‘subparagraphs (B) and (C) 

of section 412(e)(3)’’, and 

(B) by striking ‘‘paragraphs (4), (5), and (6) of section 

412(i)’’ and inserting ‘‘subparagraphs (D), (E), and (F) of 

section 412(e)(3)’’, and 

(3) by striking ‘‘section 412(c)(8)’’ in subsection (d)(6)(A) 

and inserting ‘‘section 412(e)(2)’’. 

(c) MERGERS AND CONSOLIDATIONS OF PLANS.—Subclause (I) 

of section 414(l)(2)(B)(i) of such Code is amended to read as follows: 
H. R. 4—75

‘‘(I) the amount determined under section 

431(c)(6)(A)(i) in the case of a multiemployer plan 

(and the sum of the funding shortfall and target 

normal cost determined under section 430 in the 

case of any other plan), over’’. 

(d) TRANSFER OF EXCESS PENSION ASSETS TO RETIREE HEALTH

ACCOUNTS.—

(1) Section 420(e)(2) of such Code is amended to read 

as follows: 

‘‘(2) EXCESS PENSION ASSETS.—The term ‘excess pension 

assets’ means the excess (if any) of—

‘‘(A) the lesser of—

‘‘(i) the fair market value of the plan’s assets 

(reduced by the prefunding balance and funding 

standard carryover balance determined under section 

430(f)), or 

‘‘(ii) the value of plan assets as determined under 

section 430(g)(3) after reduction under section 430(f), 

over 

‘‘(B) 125 percent of the sum of the funding shortfall 

and the target normal cost determined under section 430 

for such plan year.’’. 

(2) Section 420(e)(4) of such Code is amended to read 

as follows: 

‘‘(4) COORDINATION WITH SECTION 430.—In the case of a 

qualified transfer, any assets so transferred shall not, for purposes of this section and section 430, be treated as assets 

in the plan.’’. 

(e) EXCISE TAXES.—

(1) IN GENERAL.—Subsections (a) and (b) of section 4971 

of such Code are amended to read as follows: 

‘‘(a) INITIAL TAX.—If at any time during any taxable year an 

employer maintains a plan to which section 412 applies, there 

is hereby imposed for the taxable year a tax equal to—

‘‘(1) in the case of a single-employer plan, 10 percent of 

the aggregate unpaid minimum required contributions for all 

plan years remaining unpaid as of the end of any plan year 

ending with or within the taxable year, and 

‘‘(2) in the case of a multiemployer plan, 5 percent of 

the accumulated funding deficiency determined under section 

431 as of the end of any plan year ending with or within 

the taxable year. 

‘‘(b) ADDITIONAL TAX.—If—

‘‘(1) a tax is imposed under subsection (a)(1) on any unpaid 

required minimum contribution and such amount remains 

unpaid as of the close of the taxable period, or 

‘‘(2) a tax is imposed under subsection (a)(2) on any accumulated funding deficiency and the accumulated funding deficiency 

is not corrected within the taxable period, 

there is hereby imposed a tax equal to 100 percent of the unpaid 

minimum required contribution or accumulated funding deficiency, 

whichever is applicable, to the extent not so paid or corrected.’’. 

(2) Section 4971(c) of such Code is amended—

(A) by striking ‘‘the last two sentences of section 412(a)’’ 

in paragraph (1) and inserting ‘‘section 431’’, and 

(B) by adding at the end the following new paragraph: 

‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBUTION.—
H. R. 4—76

‘‘(A) IN GENERAL.—The term ‘unpaid minimum 

required contribution’ means, with respect to any plan 

year, any minimum required contribution under section 

430 for the plan year which is not paid on or before the 

due date (as determined under section 430(j)(1)) for the 

plan year. 

‘‘(B) ORDERING RULE.—Any payment to or under a 

plan for any plan year shall be allocated first to unpaid 

minimum required contributions for all preceding plan 

years on a first-in, first-out basis and then to the minimum 

required contribution under section 430 for the plan year.’’. 

(3) Section 4971(e)(1) of such Code is amended by striking 

‘‘section 412(b)(3)(A)’’ and inserting ‘‘section 412(a)(1)(A)’’. 

(4) Section 4971(f)(1) of such Code is amended—

(A) by striking ‘‘section 412(m)(5)’’ and inserting ‘‘section 430(j)(4)’’, and 

(B) by striking ‘‘section 412(m)’’ and inserting ‘‘section 

430(j)’’. 

(5) Section 4972(c)(7) of such Code is amended by striking 

‘‘except to the extent that such contributions exceed the fullfunding limitation (as defined in section 412(c)(7), determined 

without regard to subparagraph (A)(i)(I) thereof)’’ and inserting 

‘‘except, in the case of a multiemployer plan, to the extent 

that such contributions exceed the full-funding limitation (as 

defined in section 431(c)(6))’’. 

(f) REPORTING REQUIREMENTS.—Section 6059(b) of such Code 

is amended—

(1) by striking ‘‘the accumulated funding deficiency (as 

defined in section 412(a))’’ in paragraph (2) and inserting ‘‘the 

minimum required contribution determined under section 430, 

or the accumulated funding deficiency determined under section 

431,’’, and 

(2) by striking paragraph (3)(B) and inserting: 

‘‘(B) the requirements for reasonable actuarial assumptions under section 430(h)(1) or 431(c)(3), whichever are 

applicable, have been complied with.’’. 

SEC. 115. MODIFICATION OF TRANSITION RULE TO PENSION FUNDING 

REQUIREMENTS. 

(a) IN GENERAL.—In the case of a plan that—

(1) was not required to pay a variable rate premium for 

the plan year beginning in 1996, 

(2) has not, in any plan year beginning after 1995, merged 

with another plan (other than a plan sponsored by an employer 

that was in 1996 within the controlled group of the plan 

sponsor), and 

(3) is sponsored by a company that is engaged primarily 

in the interurban or interstate passenger bus service, 

the rules described in subsection (b) shall apply for any plan year 

beginning after December 31, 2007. 

(b) MODIFIED RULES.—The rules described in this subsection 

are as follows: 

(1) For purposes of section 430(j)(3) of the Internal Revenue 

Code of 1986 and section 303(j)(3) of the Employee Retirement 

Income Security Act of 1974, the plan shall be treated as 

not having a funding shortfall for any plan year. 

(2) For purposes of—
H. R. 4—77

(A) determining unfunded vested benefits under section 

4006(a)(3)(E)(iii) of such Act, and 

(B) determining any present value or making any computation under section 412 of such Code or section 302 

of such Act, 

the mortality table shall be the mortality table used by the 

plan. 

(3) Section 430(c)(5)(B) of such Code and section 303(c)(5)(B) 

of such Act (relating to phase-in of funding target for exemption 

from new shortfall amortization base) shall each be applied 

by substituting ‘‘2012’’ for ‘‘2011’’ therein and by substituting 

for the table therein the following:

‘‘In the case of a plan year

beginning in calendar year:

The applicable percentage 

is:

2008 ........................................................................................................... 90 percent

2009 ........................................................................................................... 92 percent

2010 ........................................................................................................... 94 percent

2011 ........................................................................................................... 96 percent. 

(c) DEFINITIONS.—Any term used in this section which is also 

used in section 430 of such Code or section 303 of such Act shall 

have the meaning provided such term in such section. If the same 

term has a different meaning in such Code and such Act, such 

term shall, for purposes of this section, have the meaning provided 

by such Code when applied with respect to such Code and the 

meaning provided by such Act when applied with respect to such 

Act. 

(d) SPECIAL RULE FOR 2006 AND 2007.—

(1) IN GENERAL.—Section 769(c)(3) of the Retirement 

Protection Act of 1994, as added by section 201 of the Pension 

Funding Equity Act of 2004, is amended by striking ‘‘and 2005’’ 

and inserting ‘‘, 2005, 2006, and 2007’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph 

(1) shall apply to plan years beginning after December 31, 

2005. 

(e) CONFORMING AMENDMENT.—

(1) Section 769 of the Retirement Protection Act of 1994 

is amended by striking subsection (c). 

(2) The amendment made by paragraph (1) shall take effect 

on December 31, 2007, and shall apply to plan years beginning 

after such date. 

SEC. 116. RESTRICTIONS ON FUNDING OF NONQUALIFIED DEFERRED 

COMPENSATION PLANS BY EMPLOYERS MAINTAINING 

UNDERFUNDED OR TERMINATED SINGLE-EMPLOYER 

PLANS. 

(a) AMENDMENTS OF INTERNAL REVENUE CODE.—Subsection (b) 

of section 409A of the Internal Revenue Code of 1986 (providing 

rules relating to funding) is amended by redesignating paragraphs 

(3) and (4) as paragraphs (4) and (5), respectively, and by inserting 

after paragraph (2) the following new paragraph: 

‘‘(3) TREATMENT OF EMPLOYER’S DEFINED BENEFIT PLAN

DURING RESTRICTED PERIOD.— ‘‘(A) IN GENERAL.—If—

‘‘(i) during any restricted period with respect to 

a single-employer defined benefit plan, assets are set 
H. R. 4—78

aside or reserved (directly or indirectly) in a trust 

(or other arrangement as determined by the Secretary) 

or transferred to such a trust or other arrangement 

for purposes of paying deferred compensation of an 

applicable covered employee under a nonqualified 

deferred compensation plan of the plan sponsor or 

member of a controlled group which includes the plan 

sponsor, or 

‘‘(ii) a nonqualified deferred compensation plan of 

the plan sponsor or member of a controlled group which 

includes the plan sponsor provides that assets will 

become restricted to the provision of benefits under 

the plan in connection with such restricted period (or 

other similar financial measure determined by the Secretary) with respect to the defined benefit plan, or 

assets are so restricted, 

such assets shall, for purposes of section 83, be treated 

as property transferred in connection with the performance 

of services whether or not such assets are available to 

satisfy claims of general creditors. Clause (i) shall not 

apply with respect to any assets which are so set aside 

before the restricted period with respect to the defined 

benefit plan. 

‘‘(B) RESTRICTED PERIOD.—For purposes of this section, 

the term ‘restricted period’ means, with respect to any 

plan described in subparagraph (A)—

‘‘(i) any period during which the plan is in atrisk status (as defined in section 430(i)); 

‘‘(ii) any period the plan sponsor is a debtor in 

a case under title 11, United States Code, or similar 

Federal or State law, and 

‘‘(iii) the 12-month period beginning on the date 

which is 6 months before the termination date of the 

plan if, as of the termination date, the plan is not 

sufficient for benefit liabilities (within the meaning 

of section 4041 of the Employee Retirement Income 

Security Act of 1974). 

‘‘(C) SPECIAL RULE FOR PAYMENT OF TAXES ON

DEFERRED COMPENSATION INCLUDED IN INCOME.—If an 

employer provides directly or indirectly for the payment 

of any Federal, State, or local income taxes with respect 

to any compensation required to be included in gross 

income by reason of this paragraph—

‘‘(i) interest shall be imposed under subsection 

(a)(1)(B)(i)(I) on the amount of such payment in the 

same manner as if such payment was part of the 

deferred compensation to which it relates, 

‘‘(ii) such payment shall be taken into account 

in determining the amount of the additional tax under 

subsection (a)(1)(B)(i)(II) in the same manner as if 

such payment was part of the deferred compensation 

to which it relates, and 

‘‘(iii) no deduction shall be allowed under this title 

with respect to such payment. 

‘‘(D) OTHER DEFINITIONS.—For purposes of this section—
H. R. 4—79

‘‘(i) APPLICABLE COVERED EMPLOYEE.—The term 

‘applicable covered employee’ means any—

‘‘(I) covered employee of a plan sponsor, 

‘‘(II) covered employee of a member of a controlled group which includes the plan sponsor, and 

‘‘(III) former employee who was a covered 

employee at the time of termination of employment 

with the plan sponsor or a member of a controlled 

group which includes the plan sponsor. 

‘‘(ii) COVERED EMPLOYEE.—The term ‘covered 

employee’ means an individual described in section 

162(m)(3) or an individual subject to the requirements 

of section 16(a) of the Securities Exchange Act of 

1934.’’. 

(b) CONFORMING AMENDMENTS.—Paragraphs (4) and (5) of section 409A(b) of such Code, as redesignated by subsection (a) of 

this subsection, are each amended by striking ‘‘paragraph (1) or 

(2)’’ each place it appears and inserting ‘‘paragraph (1), (2), or 

(3)’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to transfers or other reservation of assets after the 

date of the enactment of this Act. 

TITLE II—FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS 

AND RELATED PROVISIONS 

Subtitle A—Amendments to Employee 

Retirement Income Security Act of 1974

SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT 

PLANS. 

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

Retirement Income Security Act of 1974 (as amended by this Act) 

is amended by inserting after section 303 the following new section: 

‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER PLANS

‘‘SEC. 304. (a) IN GENERAL.—For purposes of section 302, the 

accumulated funding deficiency of a multiemployer plan for any 

plan year is—

‘‘(1) except as provided in paragraph (2), the amount, determined as of the end of the plan year, equal to the excess 

(if any) of the total charges to the funding standard account 

of the plan for all plan years (beginning with the first plan 

year for which this part applies to the plan) over the total 

credits to such account for such years, and 

‘‘(2) if the multiemployer plan is in reorganization for any 

plan year, the accumulated funding deficiency of the plan determined under section 4243. 

‘‘(b) FUNDING STANDARD ACCOUNT.— ‘‘(1) ACCOUNT REQUIRED.—Each multiemployer plan to 

which this part applies shall establish and maintain a funding 
H. R. 4—80

standard account. Such account shall be credited and charged 

solely as provided in this section. 

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

standard account shall be charged with the sum of—

‘‘(A) the normal cost of the plan for the plan year, 

‘‘(B) the amounts necessary to amortize in equal annual 

installments (until fully amortized)—

‘‘(i) in the case of a plan which comes into existence 

on or after January 1, 2008, the unfunded past service 

liability under the plan on the first day of the first 

plan year to which this section applies, over a period 

of 15 plan years, 

‘‘(ii) separately, with respect to each plan year, 

the net increase (if any) in unfunded past service 

liability under the plan arising from plan amendments 

adopted in such year, over a period of 15 plan years, 

‘‘(iii) separately, with respect to each plan year, 

the net experience loss (if any) under the plan, over 

a period of 15 plan years, and 

‘‘(iv) separately, with respect to each plan year, 

the net loss (if any) resulting from changes in actuarial 

assumptions used under the plan, over a period of 

15 plan years, 

‘‘(C) the amount necessary to amortize each waived 

funding deficiency (within the meaning of section 302(c)(3)) 

for each prior plan year in equal annual installments (until 

fully amortized) over a period of 15 plan years, 

‘‘(D) the amount necessary to amortize in equal annual 

installments (until fully amortized) over a period of 5 plan 

years any amount credited to the funding standard account 

under section 302(b)(3)(D) (as in effect on the day before 

the date of the enactment of the Pension Protection Act 

of 2006), and 

‘‘(E) the amount necessary to amortize in equal annual 

installments (until fully amortized) over a period of 20 

years the contributions which would be required to be 

made under the plan but for the provisions of section 

302(c)(7)(A)(i)(I) (as in effect on the day before the date 

of the enactment of the Pension Protection Act of 2006). 

‘‘(3) CREDITS TO ACCOUNT.—For a plan year, the funding 

standard account shall be credited with the sum of—

‘‘(A) the amount considered contributed by the 

employer to or under the plan for the plan year, 

‘‘(B) the amount necessary to amortize in equal annual 

installments (until fully amortized)—

‘‘(i) separately, with respect to each plan year, 

the net decrease (if any) in unfunded past service 

liability under the plan arising from plan amendments 

adopted in such year, over a period of 15 plan years, 

‘‘(ii) separately, with respect to each plan year, 

the net experience gain (if any) under the plan, over 

a period of 15 plan years, and 

‘‘(iii) separately, with respect to each plan year, 

the net gain (if any) resulting from changes in actuarial 

assumptions used under the plan, over a period of 

15 plan years, 
H. R. 4—81

‘‘(C) the amount of the waived funding deficiency 

(within the meaning of section 302(c)(3)) for the plan year, 

and 

‘‘(D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding 

standard account if such plan year follows a plan year 

for which such deficiency was determined under the alternative minimum funding standard under section 305 (as 

in effect on the day before the date of the enactment 

of the Pension Protection Act of 2006), the excess (if any) 

of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit 

balance in the alternative minimum funding standard 

account. 

‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AMORTIZED IN PLAN

YEARS BEFORE 2008.—In the case of any amount amortized 

under section 302(b) (as in effect on the day before the date 

of the enactment of the Pension Protection Act of 2006) over 

any period beginning with a plan year beginning before 2008, 

in lieu of the amortization described in paragraphs (2)(B) and 

(3)(B), such amount shall continue to be amortized under such 

section as so in effect. 

‘‘(5) COMBINING AND OFFSETTING AMOUNTS TO BE AMOR- TIZED.—Under regulations prescribed by the Secretary of the 

Treasury, amounts required to be amortized under paragraph 

(2) or paragraph (3), as the case may be—

‘‘(A) may be combined into one amount under such 

paragraph to be amortized over a period determined on 

the basis of the remaining amortization period for all items 

entering into such combined amount, and 

‘‘(B) may be offset against amounts required to be 

amortized under the other such paragraph, with the 

resulting amount to be amortized over a period determined 

on the basis of the remaining amortization periods for 

all items entering into whichever of the two amounts being 

offset is the greater. 

‘‘(6) INTEREST.—The funding standard account (and items 

therein) shall be charged or credited (as determined under 

regulations prescribed by the Secretary of the Treasury) with 

interest at the appropriate rate consistent with the rate or 

rates of interest used under the plan to determine costs. 

‘‘(7) SPECIAL RULES RELATING TO CHARGES AND CREDITS

TO FUNDING STANDARD ACCOUNT.—For purposes of this part—

‘‘(A) WITHDRAWAL LIABILITY.—Any amount received by 

a multiemployer plan in payment of all or part of an 

employer’s withdrawal liability under part 1 of subtitle 

E of title IV shall be considered an amount contributed 

by the employer to or under the plan. The Secretary of 

the Treasury may prescribe by regulation additional 

charges and credits to a multiemployer plan’s funding 

standard account to the extent necessary to prevent withdrawal liability payments from being unduly reflected as 

advance funding for plan liabilities. 

‘‘(B) ADJUSTMENTS WHEN A MULTIEMPLOYER PLAN

LEAVES REORGANIZATION.—If a multiemployer plan is not 

in reorganization in the plan year but was in reorganization 

in the immediately preceding plan year, any balance in 
H. R. 4—82

the funding standard account at the close of such immediately preceding plan year—

‘‘(i) shall be eliminated by an offsetting credit or 

charge (as the case may be), but 

‘‘(ii) shall be taken into account in subsequent 

plan years by being amortized in equal annual installments (until fully amortized) over 30 plan years. 

The preceding sentence shall not apply to the extent of 

any accumulated funding deficiency under section 4243(a) 

as of the end of the last plan year that the plan was 

in reorganization. 

‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL PROGRAM OR

WITHDRAWAL LIABILITY PAYMENT FUND.—Any amount paid 

by a plan during a plan year to the Pension Benefit Guaranty Corporation pursuant to section 4222 of this Act or 

to a fund exempt under section 501(c)(22) of the Internal 

Revenue Code of 1986 pursuant to section 4223 of this 

Act shall reduce the amount of contributions considered 

received by the plan for the plan year. 

‘‘(D) INTERIM WITHDRAWAL LIABILITY PAYMENTS.—Any 

amount paid by an employer pending a final determination 

of the employer’s withdrawal liability under part 1 of subtitle E of title IV and subsequently refunded to the 

employer by the plan shall be charged to the funding 

standard account in accordance with regulations prescribed 

by the Secretary of the Treasury. 

‘‘(E) ELECTION FOR DEFERRAL OF CHARGE FOR PORTION

OF NET EXPERIENCE LOSS.—If an election is in effect under 

section 302(b)(7)(F) (as in effect on the day before the 

date of the enactment of the Pension Protection Act of 

2006) for any plan year, the funding standard account 

shall be charged in the plan year to which the portion 

of the net experience loss deferred by such election was 

deferred with the amount so deferred (and paragraph 

(2)(B)(iii) shall not apply to the amount so charged). 

‘‘(F) FINANCIAL ASSISTANCE.—Any amount of any financial assistance from the Pension Benefit Guaranty Corporation to any plan, and any repayment of such amount, 

shall be taken into account under this section and section 

302 in such manner as is determined by the Secretary 

of the Treasury. 

‘‘(G) SHORT-TERM BENEFITS.—To the extent that any 

plan amendment increases the unfunded past service 

liability under the plan by reason of an increase in benefits 

which are not payable as a life annuity but are payable 

under the terms of the plan for a period that does not 

exceed 14 years from the effective date of the amendment, 

paragraph (2)(B)(ii) shall be applied separately with respect 

to such increase in unfunded past service liability by substituting the number of years of the period during which 

such benefits are payable for ‘15’. 

‘‘(c) ADDITIONAL RULES.—

‘‘(1) DETERMINATIONS TO BE MADE UNDER FUNDING

METHOD.—For purposes of this part, normal costs, accrued 

liability, past service liabilities, and experience gains and losses 

shall be determined under the funding method used to determine costs under the plan. 
H. R. 4—83

‘‘(2) VALUATION OF ASSETS.—

‘‘(A) IN GENERAL.—For purposes of this part, the value 

of the plan’s assets shall be determined on the basis of 

any reasonable actuarial method of valuation which takes 

into account fair market value and which is permitted 

under regulations prescribed by the Secretary of the 

Treasury. 

‘‘(B) ELECTION WITH RESPECT TO BONDS.—The value 

of a bond or other evidence of indebtedness which is not 

in default as to principal or interest may, at the election 

of the plan administrator, be determined on an amortized 

basis running from initial cost at purchase to par value 

at maturity or earliest call date. Any election under this 

subparagraph shall be made at such time and in such 

manner as the Secretary of the Treasury shall by regulations provide, shall apply to all such evidences of indebtedness, and may be revoked only with the consent of such 

Secretary. 

‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REASONABLE.—For 

purposes of this section, all costs, liabilities, rates of interest, 

and other factors under the plan shall be determined on the 

basis of actuarial assumptions and methods—

‘‘(A) each of which is reasonable (taking into account 

the experience of the plan and reasonable expectations), 

and 

‘‘(B) which, in combination, offer the actuary’s best 

estimate of anticipated experience under the plan. 

‘‘(4) TREATMENT OF CERTAIN CHANGES AS EXPERIENCE GAIN

OR LOSS.—For purposes of this section, if—

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

Act or in other retirement benefits created under Federal 

or State law, or 

‘‘(B) a change in the definition of the term ‘wages’ 

under section 3121 of the Internal Revenue Code of 1986, 

or a change in the amount of such wages taken into account 

under regulations prescribed for purposes of section 

401(a)(5) of such Code, 

results in an increase or decrease in accrued liability under 

a plan, such increase or decrease shall be treated as an experience loss or gain. 

‘‘(5) FULL FUNDING.—If, as of the close of a plan year, 

a plan would (without regard to this paragraph) have an 

accumulated funding deficiency in excess of the full funding 

limitation—

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

with the amount of such excess, and 

‘‘(B) all amounts described in subparagraphs (B), (C), 

and (D) of subsection (b) (2) and subparagraph (B) of subsection (b)(3) which are required to be amortized shall 

be considered fully amortized for purposes of such subparagraphs. 

‘‘(6) FULL-FUNDING LIMITATION.—

‘‘(A) IN GENERAL.—For purposes of paragraph (5), the 

term ‘full-funding limitation’ means the excess (if any) of—

‘‘(i) the accrued liability (including normal cost) 

under the plan (determined under the entry age normal 

funding method if such accrued liability cannot be 
H. R. 4—84

directly calculated under the funding method used for 

the plan), over 

‘‘(ii) the lesser of—

‘‘(I) the fair market value of the plan’s assets, 

or 

‘‘(II) the value of such assets determined under 

paragraph (2). 

‘‘(B) MINIMUM AMOUNT.—

‘‘(i) IN GENERAL.—In no event shall the full-funding 

limitation determined under subparagraph (A) be less 

than the excess (if any) of—

‘‘(I) 90 percent of the current liability of the 

plan (including the expected increase in current 

liability due to benefits accruing during the plan 

year), over 

‘‘(II) the value of the plan’s assets determined 

under paragraph (2). 

‘‘(ii) ASSETS.—For purposes of clause (i), assets 

shall not be reduced by any credit balance in the 

funding standard account. 

‘‘(C) FULL FUNDING LIMITATION.—For purposes of this 

paragraph, unless otherwise provided by the plan, the 

accrued liability under a multiemployer plan shall not 

include benefits which are not nonforfeitable under the 

plan after the termination of the plan (taking into consideration section 411(d)(3) of the Internal Revenue Code of 

1986). 

‘‘(D) CURRENT LIABILITY.—For purposes of this paragraph—

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

means all liabilities to employees and their beneficiaries under the plan. 

‘‘(ii) TREATMENT OF UNPREDICTABLE CONTINGENT

EVENT BENEFITS.—For purposes of clause (i), any benefit contingent on an event other than—

‘‘(I) age, service, compensation, death, or disability, or 

‘‘(II) an event which is reasonably and reliably 

predictable (as determined by the Secretary of the 

Treasury), 

shall not be taken into account until the event on 

which the benefit is contingent occurs. 

‘‘(iii) INTEREST RATE USED.—The rate of interest 

used to determine current liability under this paragraph shall be the rate of interest determined under 

subparagraph (E). 

‘‘(iv) MORTALITY TABLES.—

‘‘(I) COMMISSIONERS’ STANDARD TABLE.—In the 

case of plan years beginning before the first plan 

year to which the first tables prescribed under 

subclause (II) apply, the mortality table used in 

determining current liability under this paragraph 

shall be the table prescribed by the Secretary of 

the Treasury which is based on the prevailing 

commissioners’ standard table (described in section 

807(d)(5)(A) of the Internal Revenue Code of 1986) 
H. R. 4—85

used to determine reserves for group annuity contracts issued on January 1, 1993. 

‘‘(II) SECRETARIAL AUTHORITY.—The Secretary 

of the Treasury may by regulation prescribe for 

plan years beginning after December 31, 1999, 

mortality tables to be used in determining current 

liability under this subsection. Such tables shall 

be based upon the actual experience of pension 

plans and projected trends in such experience. In 

prescribing such tables, such Secretary shall take 

into account results of available independent 

studies of mortality of individuals covered by pension plans. 

‘‘(v) SEPARATE MORTALITY TABLES FOR THE DISABLED.—Notwithstanding clause (iv)—

‘‘(I) IN GENERAL.—The Secretary of the 

Treasury shall establish mortality tables which 

may be used (in lieu of the tables under clause 

(iv)) to determine current liability under this subsection for individuals who are entitled to benefits 

under the plan on account of disability. Such Secretary shall establish separate tables for individuals whose disabilities occur in plan years beginning before January 1, 1995, and for individuals 

whose disabilities occur in plan years beginning 

on or after such date. 

‘‘(II) SPECIAL RULE FOR DISABILITIES OCCURRING AFTER 1994.—In the case of disabilities occurring in plan years beginning after December 31, 

1994, the tables under subclause (I) shall apply 

only with respect to individuals described in such 

subclause who are disabled within the meaning 

of title II of the Social Security Act and the regulations thereunder. 

‘‘(vi) PERIODIC REVIEW.—The Secretary of the 

Treasury shall periodically (at least every 5 years) 

review any tables in effect under this subparagraph 

and shall, to the extent such Secretary determines 

necessary, by regulation update the tables to reflect 

the actual experience of pension plans and projected 

trends in such experience. 

‘‘(E) REQUIRED CHANGE OF INTEREST RATE.—For purposes of determining a plan’s current liability for purposes 

of this paragraph—

‘‘(i) IN GENERAL.—If any rate of interest used under 

the plan under subsection (b)(6) to determine cost is 

not within the permissible range, the plan shall establish a new rate of interest within the permissible range. 

‘‘(ii) PERMISSIBLE RANGE.—For purposes of this 

subparagraph—

‘‘(I) IN GENERAL.—Except as provided in subclause (II), the term ‘permissible range’ means a 

rate of interest which is not more than 5 percent 

above, and not more than 10 percent below, the 

weighted average of the rates of interest on 30-

year Treasury securities during the 4-year period 
H. R. 4—86

ending on the last day before the beginning of 

the plan year. 

‘‘(II) SECRETARIAL AUTHORITY.—If the Secretary of the Treasury finds that the lowest rate 

of interest permissible under subclause (I) is 

unreasonably high, such Secretary may prescribe 

a lower rate of interest, except that such rate 

may not be less than 80 percent of the average 

rate determined under such subclause. 

‘‘(iii) ASSUMPTIONS.—Notwithstanding paragraph 

(3)(A), the interest rate used under the plan shall 

be—

‘‘(I) determined without taking into account 

the experience of the plan and reasonable expectations, but 

‘‘(II) consistent with the assumptions which 

reflect the purchase rates which would be used 

by insurance companies to satisfy the liabilities 

under the plan. 

‘‘(7) ANNUAL VALUATION.— ‘‘(A) IN GENERAL.—For purposes of this section, a determination of experience gains and losses and a valuation 

of the plan’s liability shall be made not less frequently 

than once every year, except that such determination shall 

be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary 

of the Treasury. 

‘‘(B) VALUATION DATE.—

‘‘(i) CURRENT YEAR.—Except as provided in clause 

(ii), the valuation referred to in subparagraph (A) shall 

be made as of a date within the plan year to which 

the valuation refers or within one month prior to the 

beginning of such year. 

‘‘(ii) USE OF PRIOR YEAR VALUATION.—The valuation referred to in subparagraph (A) may be made 

as of a date within the plan year prior to the year 

to which the valuation refers if, as of such date, the 

value of the assets of the plan are not less than 100 

percent of the plan’s current liability (as defined in 

paragraph (6)(D) without regard to clause (iv) thereof). 

‘‘(iii) ADJUSTMENTS.—Information under clause (ii) 

shall, in accordance with regulations, be actuarially 

adjusted to reflect significant differences in participants. 

‘‘(iv) LIMITATION.—A change in funding method to 

use a prior year valuation, as provided in clause (ii), 

may not be made unless as of the valuation date within 

the prior plan year, the value of the assets of the 

plan are not less than 125 percent of the plan’s current 

liability (as defined in paragraph (6)(D) without regard 

to clause (iv) thereof). 

‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS DEEMED MADE.—

For purposes of this section, any contributions for a plan year 

made by an employer after the last day of such plan year, 

but not later than two and one-half months after such day, 

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

purposes of this subparagraph, such two and one-half month 
H. R. 4—87

period may be extended for not more than six months under 

regulations prescribed by the Secretary of the Treasury. 

‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR MULTIEMPLOYER

PLANS.—

‘‘(1) AUTOMATIC EXTENSION UPON APPLICATION BY CERTAIN

PLANS.—

‘‘(A) IN GENERAL.—If the plan sponsor of a multiemployer plan—

‘‘(i) submits to the Secretary of the Treasury an 

application for an extension of the period of years 

required to amortize any unfunded liability described 

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

subsection (b)(4), and 

‘‘(ii) includes with the application a certification 

by the plan’s actuary described in subparagraph (B), 

the Secretary of the Treasury shall extend the amortization 

period for the period of time (not in excess of 5 years) 

specified in the application. Such extension shall be in 

addition to any extension under paragraph (2). 

‘‘(B) CRITERIA.—A certification with respect to a multiemployer plan is described in this subparagraph if the 

plan’s actuary certifies that, based on reasonable assumptions—

‘‘(i) absent the extension under subparagraph (A), 

the plan would have an accumulated funding deficiency 

in the current plan year or any of the 9 succeeding 

plan years, 

‘‘(ii) the plan sponsor has adopted a plan to 

improve the plan’s funding status, 

‘‘(iii) the plan is projected to have sufficient assets 

to timely pay expected benefits and anticipated 

expenditures over the amortization period as extended, 

and 

‘‘(iv) the notice required under paragraph (3)(A) 

has been provided. 

‘‘(C) TERMINATION.—The preceding provisions of this 

paragraph shall not apply with respect to any application 

submitted after December 31, 2014. 

‘‘(2) ALTERNATIVE EXTENSION.—

‘‘(A) IN GENERAL.—If the plan sponsor of a multiemployer plan submits to the Secretary of the Treasury an 

application for an extension of the period of years required 

to amortize any unfunded liability described in any clause 

of subsection (b)(2)(B) or described in subsection (b)(4), 

the Secretary of the Treasury may extend the amortization 

period for a period of time (not in excess of 10 years 

reduced by the number of years of any extension under 

paragraph (1) with respect to such unfunded liability) if 

the Secretary of the Treasury makes the determination 

described in subparagraph (B). Such extension shall be 

in addition to any extension under paragraph (1). 

‘‘(B) DETERMINATION.—The Secretary of the Treasury 

may grant an extension under subparagraph (A) if such 

Secretary determines that—

‘‘(i) such extension would carry out the purposes 

of this Act and would provide adequate protection for 
H. R. 4—88

participants under the plan and their beneficiaries, 

and 

‘‘(ii) the failure to permit such extension would—

‘‘(I) result in a substantial risk to the voluntary continuation of the plan, or a substantial 

curtailment of pension benefit levels or employee 

compensation, and 

‘‘(II) be adverse to the interests of plan participants in the aggregate. 

‘‘(C) ACTION BY SECRETARY OF THE TREASURY.—The 

Secretary of the Treasury shall act upon any application 

for an extension under this paragraph within 180 days 

of the submission of such application. If such Secretary 

rejects the application for an extension under this paragraph, such Secretary shall provide notice to the plan 

detailing the specific reasons for the rejection, including 

references to the criteria set forth above. 

‘‘(3) ADVANCE NOTICE.—

‘‘(A) IN GENERAL.—The Secretary of the Treasury shall, 

before granting an extension under this subsection, require 

each applicant to provide evidence satisfactory to such Secretary that the applicant has provided notice of the filing 

of the application for such extension to each affected party 

(as defined in section 4001(a)(21)) with respect to the 

affected plan. Such notice shall include a description of 

the extent to which the plan is funded for benefits which 

are guaranteed under title IV and for benefit liabilities. 

‘‘(B) CONSIDERATION OF RELEVANT INFORMATION.—The 

Secretary of the Treasury shall consider any relevant 

information provided by a person to whom notice was given 

under paragraph (1).’’. 

(b) SHORTFALL FUNDING METHOD.—

(1) IN GENERAL.—A multiemployer plan meeting the criteria 

of paragraph (2) may adopt, use, or cease using, the shortfall 

funding method and such adoption, use, or cessation of use 

of such method, shall be deemed approved by the Secretary 

of the Treasury under section 302(d)(1) of the Employee Retirement Income Security Act of 1974 and section 412(d)(1) of 

the Internal Revenue Code of 1986. 

(2) CRITERIA.—A multiemployer pension plan meets the 

criteria of this clause if—

(A) the plan has not used the shortfall funding method 

during the 5-year period ending on the day before the 

date the plan is to use the method under paragraph (1); 

and 

(B) the plan is not operating under an amortization 

period extension under section 304(d) of such Act and did 

not operate under such an extension during such 5-year 

period. 

(3) SHORTFALL FUNDING METHOD DEFINED.—For purposes 

of this subsection, the term ‘‘shortfall funding method’’ means 

the shortfall funding method described in Treasury Regulations 

section 1.412(c)(1)–2 (26 CFR 1.412(c)(1)–2). 

(4) BENEFIT RESTRICTIONS TO APPLY.—The benefit restrictions under section 302(c)(7) of such Act and section 412(c)(7) 

of such Code shall apply during any period a multiemployer 
H. R. 4—89

plan is on the shortfall funding method pursuant to this subsection. 

(5) USE OF SHORTFALL METHOD NOT TO PRECLUDE OTHER

OPTIONS.—Nothing in this subsection shall be construed to 

affect a multiemployer plan’s ability to adopt the shortfall 

funding method with the Secretary’s permission under otherwise applicable regulations or to affect a multiemployer plan’s 

right to change funding methods, with or without the Secretary’s consent, as provided in applicable rules and regulations. 

(c) CONFORMING AMENDMENTS.— (1) Section 301 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1081) is amended by striking subsection (d). 

(2) The table of contents in section 1 of such Act (as 

amended by this Act) is amended by inserting after the item 

relating to section 303 the following new item:

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’.

(d) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after 2007. 

(2) SPECIAL RULE FOR CERTAIN AMORTIZATION EXTENSIONS.—If the Secretary of the Treasury grants an extension 

under section 304 of the Employee Retirement Income Security 

Act of 1974 and section 412(e) of the Internal Revenue Code 

of 1986 with respect to any application filed with the Secretary 

of the Treasury on or before June 30, 2005, the extension 

(and any modification thereof) shall be applied and administered under the rules of such sections as in effect before the 

enactment of this Act, including the use of the rate of interest 

determined under section 6621(b) of such Code. 

SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS 

IN ENDANGERED OR CRITICAL STATUS. 

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

Retirement Income Security Act of 1974 (as amended by the preceding provisions of this Act) is amended by inserting after section 

304 the following new section: 

‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN

ENDANGERED STATUS OR CRITICAL STATUS

‘‘SEC. 305. (a) GENERAL RULE.—For purposes of this part, in 

the case of a multiemployer plan in effect on July 16, 2006—

‘‘(1) if the plan is in endangered status—

‘‘(A) the plan sponsor shall adopt and implement a 

funding improvement plan in accordance with the requirements of subsection (c), and 

‘‘(B) the requirements of subsection (d) shall apply 

during the funding plan adoption period and the funding 

improvement period, and 

‘‘(2) if the plan is in critical status—

‘‘(A) the plan sponsor shall adopt and implement a 

rehabilitation plan in accordance with the requirements 

of subsection (e), and 

‘‘(B) the requirements of subsection (f) shall apply 

during the rehabilitation plan adoption period and the 

rehabilitation period. 
H. R. 4—90

‘‘(b) DETERMINATION OF ENDANGERED AND CRITICAL STATUS.—

For purposes of this section—

‘‘(1) ENDANGERED STATUS.—A multiemployer plan is in 

endangered status for a plan year if, as determined by the 

plan actuary under paragraph (3), the plan is not in critical 

status for the plan year and, as of the beginning of the plan 

year, either—

‘‘(A) the plan’s funded percentage for such plan year 

is less than 80 percent, or 

‘‘(B) the plan has an accumulated funding deficiency 

for such plan year, or is projected to have such an accumulated funding deficiency for any of the 6 succeeding plan 

years, taking into account any extension of amortization 

periods under section 304(d). 

For purposes of this section, a plan shall be treated as in 

seriously endangered status for a plan year if the plan is 

described in both subparagraphs (A) and (B). 

‘‘(2) CRITICAL STATUS.—A multiemployer plan is in critical 

status for a plan year if, as determined by the plan actuary 

under paragraph (3), the plan is described in 1 or more of 

the following subparagraphs as of the beginning of the plan 

year: 

‘‘(A) A plan is described in this subparagraph if—

‘‘(i) the funded percentage of the plan is less than 

65 percent, and 

‘‘(ii) the sum of—

‘‘(I) the fair market value of plan assets, plus 

‘‘(II) the present value of the reasonably anticipated employer contributions for the current plan 

year and each of the 6 succeeding plan years, 

assuming that the terms of all collective bargaining agreements pursuant to which the plan 

is maintained for the current plan year continue 

in effect for succeeding plan years, 

is less than the present value of all nonforfeitable 

benefits projected to be payable under the plan during 

the current plan year and each of the 6 succeeding 

plan years (plus administrative expenses for such plan 

years). 

‘‘(B) A plan is described in this subparagraph if—

‘‘(i) the plan has an accumulated funding deficiency 

for the current plan year, not taking into account any 

extension of amortization periods under section 304(d), 

or 

‘‘(ii) the plan is projected to have an accumulated 

funding deficiency for any of the 3 succeeding plan 

years (4 succeeding plan years if the funded percentage 

of the plan is 65 percent or less), not taking into 

account any extension of amortization periods under 

section 304(d). 

‘‘(C) A plan is described in this subparagraph if—

‘‘(i)(I) the plan’s normal cost for the current plan 

year, plus interest (determined at the rate used for 

determining costs under the plan) for the current plan 

year on the amount of unfunded benefit liabilities 

under the plan as of the last date of the preceding 

plan year, exceeds 
H. R. 4—91

‘‘(II) the present value of the reasonably anticipated employer and employee contributions for the current plan year, 

‘‘(ii) the present value, as of the beginning of the 

current plan year, of nonforfeitable benefits of inactive 

participants is greater than the present value of nonforfeitable benefits of active participants, and 

‘‘(iii) the plan has an accumulated funding deficiency for the current plan year, or is projected to 

have such a deficiency for any of the 4 succeeding 

plan years, not taking into account any extension of 

amortization periods under section 304(d). 

‘‘(D) A plan is described in this subparagraph if the 

sum of—

‘‘(i) the fair market value of plan assets, plus 

‘‘(ii) the present value of the reasonably anticipated 

employer contributions for the current plan year and 

each of the 4 succeeding plan years, assuming that 

the terms of all collective bargaining agreements 

pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan 

years, 

is less than the present value of all benefits projected 

to be payable under the plan during the current plan 

year and each of the 4 succeeding plan years (plus administrative expenses for such plan years). 

‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTUARY.—

‘‘(A) IN GENERAL.—Not later than the 90th day of each 

plan year of a multiemployer plan, the plan actuary shall 

certify to the Secretary of the Treasury and to the plan 

sponsor—

‘‘(i) whether or not the plan is in endangered status 

for such plan year and whether or not the plan is 

or will be in critical status for such plan year, and 

‘‘(ii) in the case of a plan which is in a funding 

improvement or rehabilitation period, whether or not 

the plan is making the scheduled progress in meeting 

the requirements of its funding improvement or 

rehabilitation plan. 

‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS AND LIABILITIES.—

‘‘(i) IN GENERAL.—In making the determinations 

and projections under this subsection, the plan actuary 

shall make projections required for the current and 

succeeding plan years of the current value of the assets 

of the plan and the present value of all liabilities 

to participants and beneficiaries under the plan for 

the current plan year as of the beginning of such 

year. The actuary’s projections shall be based on 

reasonable actuarial estimates, assumptions, and 

methods that, except as provided in clause (iii), offer 

the actuary’s best estimate of anticipated experience 

under the plan. The projected present value of liabilities as of the beginning of such year shall be determined based on the most recent of either—
H. R. 4—92

‘‘(I) the actuarial statement required under 

section 103(d) with respect to the most recently 

filed annual report, or 

‘‘(II) the actuarial valuation for the preceding 

plan year. 

‘‘(ii) DETERMINATIONS OF FUTURE CONTRIBUTIONS.—Any actuarial projection of plan assets shall 

assume—

‘‘(I) reasonably anticipated employer contributions for the current and succeeding plan years, 

assuming that the terms of the one or more collective bargaining agreements pursuant to which the 

plan is maintained for the current plan year continue in effect for succeeding plan years, or 

‘‘(II) that employer contributions for the most 

recent plan year will continue indefinitely, but only 

if the plan actuary determines there have been 

no significant demographic changes that would 

make such assumption unreasonable. 

‘‘(iii) PROJECTED INDUSTRY ACTIVITY.—Any projection of activity in the industry or industries covered 

by the plan, including future covered employment and 

contribution levels, shall be based on information provided by the plan sponsor, which shall act reasonably 

and in good faith. 

‘‘(C) PENALTY FOR FAILURE TO SECURE TIMELY ACTU- ARIAL CERTIFICATION.—Any failure of the plan’s actuary 

to certify the plan’s status under this subsection by the 

date specified in subparagraph (A) shall be treated for 

purposes of section 502(c)(2) as a failure or refusal by 

the plan administrator to file the annual report required 

to be filed with the Secretary under section 101(b)(4). 

‘‘(D) NOTICE.— ‘‘(i) IN GENERAL.—In any case in which it is certified under subparagraph (A) that a multiemployer 

plan is or will be in endangered or critical status 

for a plan year, the plan sponsor shall, not later than 

30 days after the date of the certification, provide 

notification of the endangered or critical status to the 

participants and beneficiaries, the bargaining parties, 

the Pension Benefit Guaranty Corporation, and the 

Secretary. 

‘‘(ii) PLANS IN CRITICAL STATUS.—If it is certified 

under subparagraph (A) that a multiemployer plan 

is or will be in critical status, the plan sponsor shall 

include in the notice under clause (i) an explanation 

of the possibility that—

‘‘(I) adjustable benefits (as defined in subsection (e)(8)) may be reduced, and 

‘‘(II) such reductions may apply to participants 

and beneficiaries whose benefit commencement 

date is on or after the date such notice is provided 

for the first plan year in which the plan is in 

critical status. 

‘‘(iii) MODEL NOTICE.—The Secretary shall prescribe a model notice that a multiemployer plan may 

use to satisfy the requirements under clause (ii). 
H. R. 4—93

‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE ADOPTED FOR

MULTIEMPLOYER PLANS IN ENDANGERED STATUS.—

‘‘(1) IN GENERAL.—In any case in which a multiemployer 

plan is in endangered status for a plan year, the plan sponsor, 

in accordance with this subsection—

‘‘(A) shall adopt a funding improvement plan not later 

than 240 days following the required date for the actuarial 

certification of endangered status under subsection 

(b)(3)(A), and 

‘‘(B) within 30 days after the adoption of the funding 

improvement plan—

‘‘(i) shall provide to the bargaining parties 1 or 

more schedules showing revised benefit structures, 

revised contribution structures, or both, which, if 

adopted, may reasonably be expected to enable the 

multiemployer plan to meet the applicable benchmarks 

in accordance with the funding improvement plan, 

including—

‘‘(I) one proposal for reductions in the amount 

of future benefit accruals necessary to achieve the 

applicable benchmarks, assuming no amendments 

increasing contributions under the plan (other 

than amendments increasing contributions necessary to achieve the applicable benchmarks after 

amendments have reduced future benefit accruals 

to the maximum extent permitted by law), and 

‘‘(II) one proposal for increases in contributions 

under the plan necessary to achieve the applicable 

benchmarks, assuming no amendments reducing 

future benefit accruals under the plan, and 

‘‘(ii) may, if the plan sponsor deems appropriate, 

prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to achieving the applicable benchmarks 

in accordance with the funding improvement plan. 

For purposes of this section, the term ‘applicable benchmarks’ means the requirements applicable to the multiemployer plan under paragraph (3) (as modified by paragraph 

(5)). 

‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BEGINS.—Paragraph (1) shall not apply to a plan year if such year is in 

a funding plan adoption period or funding improvement period 

by reason of the plan being in endangered status for a preceding 

plan year. For purposes of this section, such preceding plan 

year shall be the initial determination year with respect to 

the funding improvement plan to which it relates. 

‘‘(3) FUNDING IMPROVEMENT PLAN.—For purposes of this 

section—

‘‘(A) IN GENERAL.—A funding improvement plan is a 

plan which consists of the actions, including options or 

a range of options to be proposed to the bargaining parties, 

formulated to provide, based on reasonably anticipated 

experience and reasonable actuarial assumptions, for the 

attainment by the plan during the funding improvement 

period of the following requirements: 
H. R. 4—94

‘‘(i) INCREASE IN PLAN’S FUNDING PERCENTAGE.—

The plan’s funded percentage as of the close of the 

funding improvement period equals or exceeds a 

percentage equal to the sum of—

‘‘(I) such percentage as of the beginning of 

such period, plus 

‘‘(II) 33 percent of the difference between 100 

percent and the percentage under subclause (I). 

‘‘(ii) AVOIDANCE OF ACCUMULATED FUNDING DEFICIENCIES.—No accumulated funding deficiency for any 

plan year during the funding improvement period 

(taking into account any extension of amortization 

periods under section 304(d)). 

‘‘(B) SERIOUSLY ENDANGERED PLANS.—In the case of 

a plan in seriously endangered status, except as provided 

in paragraph (5), subparagraph (A)(i)(II) shall be applied 

by substituting ‘20 percent’ for ‘33 percent’. 

‘‘(4) FUNDING IMPROVEMENT PERIOD.—For purposes of this 

section—

‘‘(A) IN GENERAL.—The funding improvement period 

for any funding improvement plan adopted pursuant to 

this subsection is the 10-year period beginning on the first 

day of the first plan year of the multiemployer plan beginning after the earlier of—

‘‘(i) the second anniversary of the date of the adoption of the funding improvement plan, or 

‘‘(ii) the expiration of the collective bargaining 

agreements in effect on the due date for the actuarial 

certification of endangered status for the initial determination year under subsection (b)(3)(A) and covering, 

as of such due date, at least 75 percent of the active 

participants in such multiemployer plan. 

‘‘(B) SERIOUSLY ENDANGERED PLANS.—In the case of 

a plan in seriously endangered status, except as provided 

in paragraph (5), subparagraph (A) shall be applied by 

substituting ‘15-year period’ for ‘10-year period’. 

‘‘(C) COORDINATION WITH CHANGES IN STATUS.—

‘‘(i) PLANS NO LONGER IN ENDANGERED STATUS.—

If the plan’s actuary certifies under subsection (b)(3)(A) 

for a plan year in any funding plan adoption period 

or funding improvement period that the plan is no 

longer in endangered status and is not in critical 

status, the funding plan adoption period or funding 

improvement period, whichever is applicable, shall end 

as of the close of the preceding plan year. 

‘‘(ii) PLANS IN CRITICAL STATUS.—If the plan’s 

actuary certifies under subsection (b)(3)(A) for a plan 

year in any funding plan adoption period or funding 

improvement period that the plan is in critical status, 

the funding plan adoption period or funding improvement period, whichever is applicable, shall end as of 

the close of the plan year preceding the first plan 

year in the rehabilitation period with respect to such 

status. 

‘‘(D) PLANS IN ENDANGERED STATUS AT END OF

PERIOD.—If the plan’s actuary certifies under subsection 

(b)(3)(A) for the first plan year following the close of the 
H. R. 4—95

period described in subparagraph (A) that the plan is in 

endangered status, the provisions of this subsection and 

subsection (d) shall be applied as if such first plan year 

were an initial determination year, except that the plan 

may not be amended in a manner inconsistent with the 

funding improvement plan in effect for the preceding plan 

year until a new funding improvement plan is adopted. 

‘‘(5) SPECIAL RULES FOR SERIOUSLY ENDANGERED PLANS

MORE THAN 70 PERCENT FUNDED.—

‘‘(A) IN GENERAL.—If the funded percentage of a plan 

in seriously endangered status was more than 70 percent 

as of the beginning of the initial determination year—

‘‘(i) paragraphs (3)(B) and (4)(B) shall apply only 

if the plan’s actuary certifies, within 30 days after 

the certification under subsection (b)(3)(A) for the initial determination year, that, based on the terms of 

the plan and the collective bargaining agreements in 

effect at the time of such certification, the plan is 

not projected to meet the requirements of paragraph 

(3)(A) (without regard to paragraphs (3)(B) and (4)(B)), 

and 

‘‘(ii) if there is a certification under clause (i), 

the plan may, in formulating its funding improvement 

plan, only take into account the rules of paragraph 

(3)(B) and (4)(B) for plan years in the funding improvement period beginning on or before the date on which 

the last of the collective bargaining agreements 

described in paragraph (4)(A)(ii) expires. 

‘‘(B) SPECIAL RULE AFTER EXPIRATION OF AGREEMENTS.—Notwithstanding subparagraph (A)(ii), if, for any 

plan year ending after the date described in subparagraph 

(A)(ii), the plan actuary certifies (at the time of the annual 

certification under subsection (b)(3)(A) for such plan year) 

that, based on the terms of the plan and collective bargaining agreements in effect at the time of that annual 

certification, the plan is not projected to be able to meet 

the requirements of paragraph (3)(A) (without regard to 

paragraphs (3)(B) and (4)(B)), paragraphs (3)(B) and (4)(B) 

shall continue to apply for such year. 

‘‘(6) UPDATES TO FUNDING IMPROVEMENT PLAN AND SCHEDULES.—

‘‘(A) FUNDING IMPROVEMENT PLAN.—The plan sponsor 

shall annually update the funding improvement plan and 

shall file the update with the plan’s annual report under 

section 104. 

‘‘(B) SCHEDULES.—The plan sponsor shall annually 

update any schedule of contribution rates provided under 

this subsection to reflect the experience of the plan. 

‘‘(C) DURATION OF SCHEDULE.—A schedule of contribution rates provided by the plan sponsor and relied upon 

by bargaining parties in negotiating a collective bargaining 

agreement shall remain in effect for the duration of that 

collective bargaining agreement. 

‘‘(7) IMPOSITION OF DEFAULT SCHEDULE WHERE FAILURE TO

ADOPT FUNDING IMPROVEMENT PLAN.—

‘‘(A) IN GENERAL.—If—
H. R. 4—96

‘‘(i) a collective bargaining agreement providing 

for contributions under a multiemployer plan that was 

in effect at the time the plan entered endangered status 

expires, and 

‘‘(ii) after receiving one or more schedules from 

the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement fail 

to agree on changes to contribution or benefit schedules 

necessary to meet the applicable benchmarks in accordance with the funding improvement plan, 

the plan sponsor shall implement the schedule described 

in paragraph (1)(B)(i)(I) beginning on the date specified 

in subparagraph (B). 

‘‘(B) DATE OF IMPLEMENTATION.—The date specified in 

this subparagraph is the earlier of the date—

‘‘(i) on which the Secretary certifies that the parties 

are at an impasse, or 

‘‘(ii) which is 180 days after the date on which 

the collective bargaining agreement described in 

subparagraph (A) expires. 

‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For purposes of this 

section, the term ‘funding plan adoption period’ means the 

period beginning on the date of the certification under subsection (b)(3)(A) for the initial determination year and ending 

on the day before the first day of the funding improvement 

period. 

‘‘(d) RULES FOR OPERATION OF PLAN DURING ADOPTION AND

IMPROVEMENT PERIODS.— ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PERIOD.—During 

the funding plan adoption period—

‘‘(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect 

to the multiemployer plan that provides for—

‘‘(i) a reduction in the level of contributions for 

any participants, 

‘‘(ii) a suspension of contributions with respect to 

any period of service, or 

‘‘(iii) any new direct or indirect exclusion of 

younger or newly hired employees from plan participation, 

‘‘(B) no amendment of the plan which increases the 

liabilities of the plan by reason of any increase in benefits, 

any change in the accrual of benefits, or any change in 

the rate at which benefits become nonforfeitable under 

the plan may be adopted unless the amendment is required 

as a condition of qualification under part I of subchapter 

D of chapter 1 of the Internal Revenue Code of 1986 or 

to comply with other applicable law, and 

‘‘(C) in the case of a plan in seriously endangered 

status, the plan sponsor shall take all reasonable actions 

which are consistent with the terms of the plan and 

applicable law and which are expected, based on reasonable 

assumptions, to achieve—

‘‘(i) an increase in the plan’s funded percentage, 

and 

‘‘(ii) postponement of an accumulated funding deficiency for at least 1 additional plan year. 
H. R. 4—97

Actions under subparagraph (C) include applications for extensions of amortization periods under section 304(d), use of the 

shortfall funding method in making funding standard account 

computations, amendments to the plan’s benefit structure, 

reductions in future benefit accruals, and other reasonable 

actions consistent with the terms of the plan and applicable 

law. 

‘‘(2) COMPLIANCE WITH FUNDING IMPROVEMENT PLAN.—

‘‘(A) IN GENERAL.—A plan may not be amended after 

the date of the adoption of a funding improvement plan 

so as to be inconsistent with the funding improvement 

plan. 

‘‘(B) NO REDUCTION IN CONTRIBUTIONS.—A plan sponsor 

may not during any funding improvement period accept 

a collective bargaining agreement or participation agreement with respect to the multiemployer plan that provides 

for—

‘‘(i) a reduction in the level of contributions for 

any participants, 

‘‘(ii) a suspension of contributions with respect to 

any period of service, or 

‘‘(iii) any new direct or indirect exclusion of 

younger or newly hired employees from plan participation. 

‘‘(C) SPECIAL RULES FOR BENEFIT INCREASES.—A plan 

may not be amended after the date of the adoption of 

a funding improvement plan so as to increase benefits, 

including future benefit accruals, unless the plan actuary 

certifies that the benefit increase is consistent with the 

funding improvement plan and is paid for out of contributions not required by the funding improvement plan to 

meet the applicable benchmark in accordance with the 

schedule contemplated in the funding improvement plan. 

‘‘(e) REHABILITATION PLAN MUST BE ADOPTED FOR MULTIEM- PLOYER PLANS IN CRITICAL STATUS.— ‘‘(1) IN GENERAL.—In any case in which a multiemployer 

plan is in critical status for a plan year, the plan sponsor, 

in accordance with this subsection—

‘‘(A) shall adopt a rehabilitation plan not later than 

240 days following the required date for the actuarial certification of critical status under subsection (b)(3)(A), and 

‘‘(B) within 30 days after the adoption of the rehabilitation plan—

‘‘(i) shall provide to the bargaining parties 1 or 

more schedules showing revised benefit structures, 

revised contribution structures, or both, which, if 

adopted, may reasonably be expected to enable the 

multiemployer plan to emerge from critical status in 

accordance with the rehabilitation plan, and 

‘‘(ii) may, if the plan sponsor deems appropriate, 

prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to emerging from critical status in accordance with the rehabilitation plan. 

The schedule or schedules described in subparagraph (B)(i) 

shall reflect reductions in future benefit accruals and adjustable 
H. R. 4—98

benefits, and increases in contributions, that the plan sponsor 

determines are reasonably necessary to emerge from critical 

status. One schedule shall be designated as the default schedule 

and such schedule shall assume that there are no increases 

in contributions under the plan other than the increases necessary to emerge from critical status after future benefit 

accruals and other benefits (other than benefits the reduction 

or elimination of which are not permitted under section 204(g)) 

have been reduced to the maximum extent permitted by law. 

‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BEGINS.—Paragraph (1) shall not apply to a plan year if such year is in 

a rehabilitation plan adoption period or rehabilitation period 

by reason of the plan being in critical status for a preceding 

plan year. For purposes of this section, such preceding plan 

year shall be the initial critical year with respect to the 

rehabilitation plan to which it relates. 

‘‘(3) REHABILITATION PLAN.—For purposes of this section—

‘‘(A) IN GENERAL.—A rehabilitation plan is a plan which 

consists of—

‘‘(i) actions, including options or a range of options 

to be proposed to the bargaining parties, formulated, 

based on reasonably anticipated experience and reasonable actuarial assumptions, to enable the plan to cease 

to be in critical status by the end of the rehabilitation 

period and may include reductions in plan expenditures 

(including plan mergers and consolidations), reductions 

in future benefit accruals or increases in contributions, 

if agreed to by the bargaining parties, or any combination of such actions, or 

‘‘(ii) if the plan sponsor determines that, based 

on reasonable actuarial assumptions and upon exhaustion of all reasonable measures, the plan can not 

reasonably be expected to emerge from critical status 

by the end of the rehabilitation period, reasonable 

measures to emerge from critical status at a later 

time or to forestall possible insolvency (within the 

meaning of section 4245). 

A rehabilitation plan must provide annual standards for 

meeting the requirements of such rehabilitation plan. Such 

plan shall also include the schedules required to be provided under paragraph (1)(B)(i) and if clause (ii) applies, 

shall set forth the alternatives considered, explain why 

the plan is not reasonably expected to emerge from critical 

status by the end of the rehabilitation period, and specify 

when, if ever, the plan is expected to emerge from critical 

status in accordance with the rehabilitation plan. 

‘‘(B) UPDATES TO REHABILITATION PLAN AND SCHEDULES.—

‘‘(i) REHABILITATION PLAN.—The plan sponsor shall 

annually update the rehabilitation plan and shall file 

the update with the plan’s annual report under section 

104. 

‘‘(ii) SCHEDULES.—The plan sponsor shall annually 

update any schedule of contribution rates provided 

under this subsection to reflect the experience of the 

plan. 
H. R. 4—99

‘‘(iii) DURATION OF SCHEDULE.—A schedule of contribution rates provided by the plan sponsor and relied 

upon by bargaining parties in negotiating a collective 

bargaining agreement shall remain in effect for the 

duration of that collective bargaining agreement. 

‘‘(C) IMPOSITION OF DEFAULT SCHEDULE WHERE FAILURE

TO ADOPT REHABILITATION PLAN.—

‘‘(i) IN GENERAL.—If—

‘‘(I) a collective bargaining agreement providing for contributions under a multiemployer 

plan that was in effect at the time the plan entered 

critical status expires, and 

‘‘(II) after receiving one or more schedules from 

the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement 

fail to adopt a contribution or benefit schedules 

with terms consistent with the rehabilitation plan 

and the schedule from the plan sponsor under 

paragraph (1)(B)(i), 

the plan sponsor shall implement the default schedule 

described in the last sentence of paragraph (1) beginning on the date specified in clause (ii). 

‘‘(ii) DATE OF IMPLEMENTATION.—The date specified 

in this clause is the earlier of the date—

‘‘(I) on which the Secretary certifies that the 

parties are at an impasse, or 

‘‘(II) which is 180 days after the date on which 

the collective bargaining agreement described in 

clause (i) expires. 

‘‘(4) REHABILITATION PERIOD.—For purposes of this section—

‘‘(A) IN GENERAL.—The rehabilitation period for a plan 

in critical status is the 10-year period beginning on the 

first day of the first plan year of the multiemployer plan 

following the earlier of—

‘‘(i) the second anniversary of the date of the adoption of the rehabilitation plan, or 

‘‘(ii) the expiration of the collective bargaining 

agreements in effect on the date of the due date for 

the actuarial certification of critical status for the initial critical year under subsection (a)(1) and covering, 

as of such date at least 75 percent of the active participants in such multiemployer plan. 

If a plan emerges from critical status as provided under 

subparagraph (B) before the end of such 10-year period, 

the rehabilitation period shall end with the plan year preceding the plan year for which the determination under 

subparagraph (B) is made. 

‘‘(B) EMERGENCE.—A plan in critical status shall 

remain in such status until a plan year for which the 

plan actuary certifies, in accordance with subsection 

(b)(3)(A), that the plan is not projected to have an accumulated funding deficiency for the plan year or any of the 

9 succeeding plan years, without regard to the use of the 

shortfall method and taking into account any extension 

of amortization periods under section 304(d). 
H. R. 4—100

‘‘(5) REHABILITATION PLAN ADOPTION PERIOD.—For purposes 

of this section, the term ‘rehabilitation plan adoption period’ 

means the period beginning on the date of the certification 

under subsection (b)(3)(A) for the initial critical year and ending 

on the day before the first day of the rehabilitation period. 

‘‘(6) LIMITATION ON REDUCTION IN RATES OF FUTURE

ACCRUALS.—Any reduction in the rate of future accruals under 

the default schedule described in paragraph (1)(B)(i) shall not 

reduce the rate of future accruals below—

‘‘(A) a monthly benefit (payable as a single life annuity 

commencing at the participant’s normal retirement age) 

equal to 1 percent of the contributions required to be made 

with respect to a participant, or the equivalent standard 

accrual rate for a participant or group of participants under 

the collective bargaining agreements in effect as of the 

first day of the initial critical year, or 

‘‘(B) if lower, the accrual rate under the plan on such 

first day. 

The equivalent standard accrual rate shall be determined by 

the plan sponsor based on the standard or average contribution 

base units which the plan sponsor determines to be representative for active participants and such other factors as the plan 

sponsor determines to be relevant. Nothing in this paragraph 

shall be construed as limiting the ability of the plan sponsor 

to prepare and provide the bargaining parties with alternative 

schedules to the default schedule that established lower or 

higher accrual and contribution rates than the rates otherwise 

described in this paragraph. 

‘‘(7) AUTOMATIC EMPLOYER SURCHARGE.—

‘‘(A) IMPOSITION OF SURCHARGE.—Each employer otherwise obligated to make contributions for the initial critical 

year shall be obligated to pay to the plan for such year 

a surcharge equal to 5 percent of the contributions otherwise required under the applicable collective bargaining 

agreement (or other agreement pursuant to which the 

employer contributes). For each succeeding plan year in 

which the plan is in critical status for a consecutive period 

of years beginning with the initial critical year, the surcharge shall be 10 percent of the contributions otherwise 

so required. 

‘‘(B) ENFORCEMENT OF SURCHARGE.—The surcharges 

under subparagraph (A) shall be due and payable on the 

same schedule as the contributions on which the surcharges 

are based. Any failure to make a surcharge payment shall 

be treated as a delinquent contribution under section 515 

and shall be enforceable as such. 

‘‘(C) SURCHARGE TO TERMINATE UPON COLLECTIVE BARGAINING AGREEMENT RENEGOTIATION.—The surcharge 

under this paragraph shall cease to be effective with respect 

to employees covered by a collective bargaining agreement 

(or other agreement pursuant to which the employer 

contributes), beginning on the effective date of a collective 

bargaining agreement (or other such agreement) that 

includes terms consistent with a schedule presented by 

the plan sponsor under paragraph (1)(B)(i), as modified 

under subparagraph (B) of paragraph (3). 
H. R. 4—101

‘‘(D) SURCHARGE NOT TO APPLY UNTIL EMPLOYER

RECEIVES NOTICE.—The surcharge under this paragraph 

shall not apply to an employer until 30 days after the 

employer has been notified by the plan sponsor that the 

plan is in critical status and that the surcharge is in 

effect. 

‘‘(E) SURCHARGE NOT TO GENERATE INCREASED BENEFIT

ACCRUALS.—Notwithstanding any provision of a plan to 

the contrary, the amount of any surcharge under this paragraph shall not be the basis for any benefit accrual under 

the plan. 

‘‘(8) BENEFIT ADJUSTMENTS.—

‘‘(A) ADJUSTABLE BENEFITS.—

‘‘(i) IN GENERAL.—Notwithstanding section 204(g), 

the plan sponsor shall, subject to the notice requirements in subparagraph (C), make any reductions to 

adjustable benefits which the plan sponsor deems 

appropriate, based upon the outcome of collective bargaining over the schedule or schedules provided under 

paragraph (1)(B)(i). 

‘‘(ii) EXCEPTION FOR RETIREES.—Except in the case 

of adjustable benefits described in clause (iv)(III), the 

plan sponsor of a plan in critical status shall not reduce 

adjustable benefits of any participant or beneficiary 

whose benefit commencement date is before the date 

on which the plan provides notice to the participant 

or beneficiary under subsection (b)(3)(D) for the initial 

critical year. 

‘‘(iii) PLAN SPONSOR FLEXIBILITY.—The plan 

sponsor shall include in the schedules provided to the 

bargaining parties an allowance for funding the benefits of participants with respect to whom contributions 

are not currently required to be made, and shall reduce 

their benefits to the extent permitted under this title 

and considered appropriate by the plan sponsor based 

on the plan’s then current overall funding status. 

‘‘(iv) ADJUSTABLE BENEFIT DEFINED.—For purposes 

of this paragraph, the term ‘adjustable benefit’ 

means—

‘‘(I) benefits, rights, and features under the 

plan, including post-retirement death benefits, 60-

month guarantees, disability benefits not yet in 

pay status, and similar benefits, 

‘‘(II) any early retirement benefit or retirement-type subsidy (within the meaning of section 

204(g)(2)(A)) and any benefit payment option 

(other than the qualified joint and survivor 

annuity), and 

‘‘(III) benefit increases that would not be 

eligible for a guarantee under section 4022A on 

the first day of initial critical year because the 

increases were adopted (or, if later, took effect) 

less than 60 months before such first day. 

‘‘(B) NORMAL RETIREMENT BENEFITS PROTECTED.—

Except as provided in subparagraph (A)(iv)(III), nothing 

in this paragraph shall be construed to permit a plan 
H. R. 4—102

to reduce the level of a participant’s accrued benefit payable 

at normal retirement age. 

‘‘(C) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—No reduction may be made to 

adjustable benefits under subparagraph (A) unless 

notice of such reduction has been given at least 30 

days before the general effective date of such reduction 

for all participants and beneficiaries to—

‘‘(I) plan participants and beneficiaries, 

‘‘(II) each employer who has an obligation to 

contribute (within the meaning of section 4212(a)) 

under the plan, and 

‘‘(III) each employee organization which, for 

purposes of collective bargaining, represents plan 

participants employed by such an employer. 

‘‘(ii) CONTENT OF NOTICE.—The notice under clause 

(i) shall contain—

‘‘(I) sufficient information to enable participants and beneficiaries to understand the effect 

of any reduction on their benefits, including an 

estimate (on an annual or monthly basis) of any 

affected adjustable benefit that a participant or 

beneficiary would otherwise have been eligible for 

as of the general effective date described in clause 

(i), and 

‘‘(II) information as to the rights and remedies 

of plan participants and beneficiaries as well as 

how to contact the Department of Labor for further 

information and assistance where appropriate. 

‘‘(iii) FORM AND MANNER.—Any notice under clause 

(i)—

‘‘(I) shall be provided in a form and manner 

prescribed in regulations of the Secretary, 

‘‘(II) shall be written in a manner so as to 

be understood by the average plan participant, 

and 

‘‘(III) may be provided in written, electronic, 

or other appropriate form to the extent such form 

is reasonably accessible to persons to whom the 

notice is required to be provided. 

The Secretary shall in the regulations prescribed under 

subclause (I) establish a model notice that a plan 

sponsor may use to meet the requirements of this 

subparagraph. 

‘‘(9) ADJUSTMENTS DISREGARDED IN WITHDRAWAL LIABILITY

DETERMINATION.— ‘‘(A) BENEFIT REDUCTIONS.—Any benefit reductions 

under this subsection shall be disregarded in determining 

a plan’s unfunded vested benefits for purposes of determining an employer’s withdrawal liability under section 

4201. 

‘‘(B) SURCHARGES.—Any surcharges under paragraph 

(7) shall be disregarded in determining an employer’s withdrawal liability under section 4211, except for purposes 

of determining the unfunded vested benefits attributable 

to an employer under section 4211(c)(4) or a comparable 

method approved under section 4211(c)(5). 
H. R. 4—103

‘‘(C) SIMPLIFIED CALCULATIONS.—The Pension Benefit 

Guaranty Corporation shall prescribe simplified methods 

for the application of this paragraph in determining withdrawal liability. 

‘‘(f) RULES FOR OPERATION OF PLAN DURING ADOPTION AND

REHABILITATION PERIOD.—

‘‘(1) COMPLIANCE WITH REHABILITATION PLAN.—

‘‘(A) IN GENERAL.—A plan may not be amended after 

the date of the adoption of a rehabilitation plan under 

subsection (e) so as to be inconsistent with the rehabilitation plan. 

‘‘(B) SPECIAL RULES FOR BENEFIT INCREASES.—A plan 

may not be amended after the date of the adoption of 

a rehabilitation plan under subsection (e) so as to increase 

benefits, including future benefit accruals, unless the plan 

actuary certifies that such increase is paid for out of additional contributions not contemplated by the rehabilitation 

plan, and, after taking into account the benefit increase, 

the multiemployer plan still is reasonably expected to 

emerge from critical status by the end of the rehabilitation 

period on the schedule contemplated in the rehabilitation 

plan. 

‘‘(2) RESTRICTION ON LUMP SUMS AND SIMILAR BENEFITS.—

‘‘(A) IN GENERAL.—Effective on the date the notice 

of certification of the plan’s critical status for the initial 

critical year under subsection (b)(3)(D) is sent, and notwithstanding section 204(g), the plan shall not pay—

‘‘(i) any payment, in excess of the monthly amount 

paid under a single life annuity (plus any social security supplements described in the last sentence of section 204(b)(1)(G)), 

‘‘(ii) any payment for the purchase of an irrevocable 

commitment from an insurer to pay benefits, and 

‘‘(iii) any other payment specified by the Secretary 

of the Treasury by regulations. 

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply 

to a benefit which under section 203(e) may be immediately 

distributed without the consent of the participant or to 

any makeup payment in the case of a retroactive annuity 

starting date or any similar payment of benefits owed 

with respect to a prior period. 

‘‘(3) ADJUSTMENTS DISREGARDED IN WITHDRAWAL LIABILITY

DETERMINATION.—Any benefit reductions under this subsection 

shall be disregarded in determining a plan’s unfunded vested 

benefits for purposes of determining an employer’s withdrawal 

liability under section 4201. 

‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PERIOD.—During 

the rehabilitation plan adoption period—

‘‘(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect 

to the multiemployer plan that provides for—

‘‘(i) a reduction in the level of contributions for 

any participants, 

‘‘(ii) a suspension of contributions with respect to 

any period of service, or 
H. R. 4—104

‘‘(iii) any new direct or indirect exclusion of 

younger or newly hired employees from plan participation, and 

‘‘(B) no amendment of the plan which increases the 

liabilities of the plan by reason of any increase in benefits, 

any change in the accrual of benefits, or any change in 

the rate at which benefits become nonforfeitable under 

the plan may be adopted unless the amendment is required 

as a condition of qualification under part I of subchapter 

D of chapter 1 of the Internal Revenue Code of 1986 or 

to comply with other applicable law. 

‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR DECISIONS.—

If, within 60 days of the due date for adoption of a funding improvement plan or a rehabilitation plan under subsection (e), the plan 

sponsor of a plan in endangered status or a plan in critical status 

has not agreed on a funding improvement plan or rehabilitation 

plan, then any member of the board or group that constitutes 

the plan sponsor may require that the plan sponsor enter into 

an expedited dispute resolution procedure for the development and 

adoption of a funding improvement plan or rehabilitation plan. 

‘‘(h) NONBARGAINED PARTICIPATION.— ‘‘(1) BOTH BARGAINED AND NONBARGAINED EMPLOYEE- PARTICIPANTS.—In the case of an employer that contributes 

to a multiemployer plan with respect to both employees who 

are covered by one or more collective bargaining agreements 

and employees who are not so covered, if the plan is in endangered status or in critical status, benefits of and contributions 

for the nonbargained employees, including surcharges on those 

contributions, shall be determined as if those nonbargained 

employees were covered under the first to expire of the 

employer’s collective bargaining agreements in effect when the 

plan entered endangered or critical status. 

‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In the case of an 

employer that contributes to a multiemployer plan only with 

respect to employees who are not covered by a collective bargaining agreement, this section shall be applied as if the 

employer were the bargaining party, and its participation agreement with the plan were a collective bargaining agreement 

with a term ending on the first day of the plan year beginning 

after the employer is provided the schedule or schedules 

described in subsections (c) and (e). 

‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For purposes of this 

section—

‘‘(1) BARGAINING PARTY.—The term ‘bargaining party’ 

means—

‘‘(A)(i) except as provided in clause (ii), an employer 

who has an obligation to contribute under the plan; or 

‘‘(ii) in the case of a plan described under section 

404(c) of the Internal Revenue Code of 1986, or a continuation of such a plan, the association of employers that 

is the employer settlor of the plan; and 

‘‘(B) an employee organization which, for purposes of 

collective bargaining, represents plan participants 

employed by an employer who has an obligation to contribute under the plan. 

‘‘(2) FUNDED PERCENTAGE.—The term ‘funded percentage’ 

means the percentage equal to a fraction—
H. R. 4—105

‘‘(A) the numerator of which is the value of the plan’s 

assets, as determined under section 304(c)(2), and 

‘‘(B) the denominator of which is the accrued liability 

of the plan, determined using actuarial assumptions 

described in section 304(c)(3). 

‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—The term 

‘accumulated funding deficiency’ has the meaning given such 

term in section 304(a). 

‘‘(4) ACTIVE PARTICIPANT.—The term ‘active participant’ 

means, in connection with a multiemployer plan, a participant 

who is in covered service under the plan. 

‘‘(5) INACTIVE PARTICIPANT.—The term ‘inactive participant’ 

means, in connection with a multiemployer plan, a participant, 

or the beneficiary or alternate payee of a participant, who—

‘‘(A) is not in covered service under the plan, and 

‘‘(B) is in pay status under the plan or has a nonforfeitable right to benefits under the plan. 

‘‘(6) PAY STATUS.—A person is in pay status under a multiemployer plan if—

‘‘(A) at any time during the current plan year, such 

person is a participant or beneficiary under the plan and 

is paid an early, late, normal, or disability retirement benefit under the plan (or a death benefit under the plan 

related to a retirement benefit), or 

‘‘(B) to the extent provided in regulations of the Secretary of the Treasury, such person is entitled to such 

a benefit under the plan. 

‘‘(7) OBLIGATION TO CONTRIBUTE.—The term ‘obligation to 

contribute’ has the meaning given such term under section 

4212(a). 

‘‘(8) ACTUARIAL METHOD.—Notwithstanding any other 

provision of this section, the actuary’s determinations with 

respect to a plan’s normal cost, actuarial accrued liability, and 

improvements in a plan’s funded percentage under this section 

shall be based upon the unit credit funding method (whether 

or not that method is used for the plan’s actuarial valuation). 

‘‘(9) PLAN SPONSOR.—In the case of a plan described under 

section 404(c) of the Internal Revenue Code of 1986, or a 

continuation of such a plan, the term ‘plan sponsor’ means 

the bargaining parties described under paragraph (1). 

‘‘(10) BENEFIT COMMENCEMENT DATE.—The term ‘benefit 

commencement date’ means the annuity starting date (or in 

the case of a retroactive annuity starting date, the date on 

which benefit payments begin).’’. 

(b) ENFORCEMENT.—Section 502 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1132) is amended—

(1) in subsection (a)(6) by striking ‘‘(6), or (7)’’ and inserting 

‘‘(6), (7), or (8)’’; 

(2) by redesignating subsection (c)(8) as subsection (c)(9); 

and 

(3) by inserting after subsection (c)(7) the following new 

paragraph: 

‘‘(8) The Secretary may assess against any plan sponsor 

of a multiemployer plan a civil penalty of not more than $1,100 

per day—

‘‘(A) for each violation by such sponsor of the requirement under section 305 to adopt by the deadline established 
H. R. 4—106

in that section a funding improvement plan or rehabilitation plan with respect to a multiemployer which is in 

endangered or critical status, or 

‘‘(B) in the case of a plan in endangered status which 

is not in seriously endangered status, for failure by the 

plan to meet the applicable benchmarks under section 305 

by the end of the funding improvement period with respect 

to the plan.’’. 

(c) CAUSE OF ACTION TO COMPEL ADOPTION OR IMPLEMENTA- TION OF FUNDING IMPROVEMENT OR REHABILITATION PLAN.—Section 

502(a) of the Employee Retirement Income Security Act of 1974 

is amended by striking ‘‘or’’ at the end of paragraph (8), by striking 

the period at the end of paragraph (9) and inserting ‘‘; or’’ and 

by adding at the end the following: 

‘‘(10) in the case of a multiemployer plan that has been 

certified by the actuary to be in endangered or critical status 

under section 305, if the plan sponsor—

‘‘(A) has not adopted a funding improvement or 

rehabilitation plan under that section by the deadline 

established in such section, or 

‘‘(B) fails to update or comply with the terms of the 

funding improvement or rehabilitation plan in accordance 

with the requirements of such section, 

by an employer that has an obligation to contribute with respect 

to the multiemployer plan or an employee organization that 

represents active participants in the multiemployer plan, for 

an order compelling the plan sponsor to adopt a funding 

improvement or rehabilitation plan or to update or comply 

with the terms of the funding improvement or rehabilitation 

plan in accordance with the requirements of such section and 

the funding improvement or rehabilitation plan.’’. 

(d) NO ADDITIONAL CONTRIBUTIONS REQUIRED.—Section 302(b) 

of the Employee Retirement Income Security Act of 1974, as 

amended by this Act, is amended by adding at the end the following 

new paragraph: 

‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STATUS.—Paragraph (1) shall not apply in the case of a multiemployer plan 

for any plan year in which the plan is in critical status pursuant 

to section 305. This paragraph shall only apply if the plan 

adopts a rehabilitation plan in accordance with section 305(e) 

and complies with the terms of such rehabilitation plan (and 

any updates or modifications of the plan).’’. 

(e) CONFORMING AMENDMENT.—The table of contents in section 

1 of such Act (as amended by the preceding provisions of this 

Act) is amended by inserting after the item relating to section 

304 the following new item:

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered status 

or critical status.’’.

(f) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by this section 

shall apply with respect to plan years beginning after 2007. 

(2) SPECIAL RULE FOR CERTAIN NOTICES.—In any case in 

which a plan’s actuary certifies that it is reasonably expected 

that a multiemployer plan will be in critical status under 

section 305(b)(3) of the Employee Retirement Income Security 

Act of 1974, as added by this section, with respect to the 

first plan year beginning after 2007, the notice required under 
H. R. 4—107

subparagraph (D) of such section may be provided at any time 

after the date of enactment, so long as it is provided on or 

before the last date for providing the notice under such subparagraph. 

(3) SPECIAL RULE FOR CERTAIN RESTORED BENEFITS.—In 

the case of a multiemployer plan—

(A) with respect to which benefits were reduced pursuant to a plan amendment adopted on or after January 

1, 2002, and before June 30, 2005, and 

(B) which, pursuant to the plan document, the trust 

agreement, or a formal written communication from the 

plan sponsor to participants provided before June 30, 2005, 

provided for the restoration of such benefits, 

the amendments made by this section shall not apply to such 

benefit restorations to the extent that any restriction on the 

providing or accrual of such benefits would otherwise apply 

by reason of such amendments. 

SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS. 

(a) ADVANCE DETERMINATION OF IMPENDING INSOLVENCY OVER

5 YEARS.—Section 4245(d)(1) of the Employee Retirement Income 

Security Act of 1974 (29 U.S.C. 1426(d)(1)) is amended—

(1) by striking ‘‘3 plan years’’ the second place it appears 

and inserting ‘‘5 plan years’’; and 

(2) by adding at the end the following new sentence: ‘‘If 

the plan sponsor makes such a determination that the plan 

will be insolvent in any of the next 5 plan years, the plan 

sponsor shall make the comparison under this paragraph at 

least annually until the plan sponsor makes a determination 

that the plan will not be insolvent in any of the next 5 plan 

years.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply with respect to determinations made in plan years 

beginning after 2007. 

SEC. 204. WITHDRAWAL LIABILITY REFORMS. 

(a) UPDATE OF RULES RELATING TO LIMITATIONS ON WITHDRAWAL LIABILITY.—

(1) INCREASE IN LIMITS.—Section 4225(a)(2) of such Act 

(29 U.S.C. 1405(a)(2)) is amended by striking the table contained therein and inserting the following new table:

‘‘If the liquidation or distribution value of the employer after the sale or exchange is— The portion is—

Not more than $5,000,000 ....................................................... 30 percent of the amount. 

More than $5,000,000, but not more than $10,000,000 ........ $1,500,000, plus 35 percent of 

the amount in excess of 

$5,000,000. 

More than $10,000,000, but not more than $15,000,000 ...... $3,250,000, plus 40 percent of 

the amount in excess of 

$10,000,000. 

More than $15,000,000, but not more than $17,500,000 ...... $5,250,000, plus 45 percent of 

the amount in excess of 

$15,000,000. 

More than $17,500,000, but not more than $20,000,000 ...... $6,375,000, plus 50 percent of 

the amount in excess of 

$17,500,000. 
H. R. 4—108

‘‘If the liquidation or distribution value of the employer after the sale or exchange is— The portion is—

More than $20,000,000, but not more than $22,500,000 ...... $7,625,000, plus 60 percent of 

the amount in excess of 

$20,000,000. 

More than $22,500,000, but not more than $25,000,000 ...... $9,125,000, plus 70 percent of 

the amount in excess of 

$22,500,000.

More than $25,000,000 ............................................................ $10,875,000, plus 80 percent of 

the amount in excess of 

$25,000,000.’’. 

(2) PLANS USING ATTRIBUTABLE METHOD.—Section 

4225(a)(1)(B) of such Act (29 U.S.C. 1405(a)(1)(B)) is amended 

to read as follows: 

‘‘(B) in the case of a plan using the attributable method 

of allocating withdrawal liability, the unfunded vested 

benefits attributable to employees of the employer.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to sales occurring on or after January 1, 

2007. 

(b) WITHDRAWAL LIABILITY CONTINUES IF WORK CONTRACTED

OUT.—

(1) IN GENERAL.—Clause (i) of section 4205(b)(2)(A) of such 

Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting ‘‘or to 

an entity or entities owned or controlled by the employer’’ 

after ‘‘to another location’’. 

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply with respect to work transferred on or 

after the date of the enactment of this Act. 

(c) APPLICATION OF RULES TO PLANS PRIMARILY COVERING

EMPLOYEES IN THE BUILDING AND CONSTRUCTION INDUSTRY.—

(1) IN GENERAL.—Section 4210(b) of such Act (29 U.S.C. 

1390(b)) is amended—

(A) by striking paragraph (1); and 

(B) by redesignating paragraphs (2) through (4) as 

paragraphs (1) through (3), respectively. 

(2) FRESH START OPTION.—Section 4211(c)(5) of such Act 

(29 U.S.C. 1391(c)(5)) is amended by adding at the end the 

following new subparagraph: 

‘‘(E) FRESH START OPTION.—Notwithstanding paragraph (1), a plan may be amended to provide that the 

withdrawal liability method described in subsection (b) 

shall be applied by substituting the plan year which is 

specified in the amendment and for which the plan has 

no unfunded vested benefits for the plan year ending before 

September 26, 1980.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply with respect to plan withdrawals occurring 

on or after January 1, 2007. 

(d) PROCEDURES APPLICABLE TO DISPUTES INVOLVING PENSION

PLAN WITHDRAWAL LIABILITY.— (1) IN GENERAL.—Section 4221 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1401) is amended by 

adding at the end the following: 

‘‘(g) PROCEDURES APPLICABLE TO CERTAIN DISPUTES.—

‘‘(1) IN GENERAL.—If—

‘‘(A) a plan sponsor of a plan determines that—
H. R. 4—109

‘‘(i) a complete or partial withdrawal of an 

employer has occurred, or 

‘‘(ii) an employer is liable for withdrawal liability 

payments with respect to such complete or partial withdrawal, and 

‘‘(B) such determination is based in whole or in part 

on a finding by the plan sponsor under section 4212(c) 

that a principal purpose of any transaction which occurred 

after December 31, 1998, and at least 5 years (2 years 

in the case of a small employer) before the date of the 

complete or partial withdrawal was to evade or avoid withdrawal liability under this subtitle, 

then the person against which the withdrawal liability is 

assessed based solely on the application of section 4212(c) may 

elect to use the special rule under paragraph (2) in applying 

subsection (d) of this section and section 4219(c) to such person. 

‘‘(2) SPECIAL RULE.—Notwithstanding subsection (d) and 

section 4219(c), if an electing person contests the plan sponsor’s 

determination with respect to withdrawal liability payments 

under paragraph (1) through an arbitration proceeding pursuant to subsection (a), through an action brought in a court 

of competent jurisdiction for review of such an arbitration decision, or as otherwise permitted by law, the electing person 

shall not be obligated to make the withdrawal liability payments until a final decision in the arbitration proceeding, or 

in court, upholds the plan sponsor’s determination, but only 

if the electing person—

‘‘(A) provides notice to the plan sponsor of its election 

to apply the special rule in this paragraph within 90 days 

after the plan sponsor notifies the electing person of its 

liability by reason of the application of section 4212(c); 

and 

‘‘(B) if a final decision in the arbitration proceeding, 

or in court, of the withdrawal liability dispute has not 

been rendered within 12 months from the date of such 

notice, the electing person provides to the plan, effective 

as of the first day following the 12-month period, a bond 

issued by a corporate surety company that is an acceptable 

surety for purposes of section 412 of this Act, or an amount 

held in escrow by a bank or similar financial institution 

satisfactory to the plan, in an amount equal to the sum 

of the withdrawal liability payments that would otherwise 

be due under subsection (d) and section 4219(c) for the 

12-month period beginning with the first anniversary of 

such notice. Such bond or escrow shall remain in effect 

until there is a final decision in the arbitration proceeding, 

or in court, of the withdrawal liability dispute, at which 

time such bond or escrow shall be paid to the plan if 

such final decision upholds the plan sponsor’s determination. 

‘‘(3) DEFINITION OF SMALL EMPLOYER.—For purposes of this 

subsection—

‘‘(A) IN GENERAL.—The term ‘small employer’ means 

any employer which, for the calendar year in which the 

transaction referred to in paragraph (1)(B) occurred and 

for each of the 3 preceding years, on average—

‘‘(i) employs not more than 500 employees, and 
H. R. 4—110

‘‘(ii) is required to make contributions to the plan 

for not more than 250 employees. 

‘‘(B) CONTROLLED GROUP.—Any group treated as a 

single employer under subsection (b)(1) of section 4001, 

without regard to any transaction that was a basis for 

the plan’s finding under section 4212, shall be treated 

as a single employer for purposes of this subparagraph. 

‘‘(4) ADDITIONAL SECURITY PENDING RESOLUTION OF DISPUTE.—If a withdrawal liability dispute to which this subsection 

applies is not concluded by 12 months after the electing person 

posts the bond or escrow described in paragraph (2), the electing 

person shall, at the start of each succeeding 12-month period, 

provide an additional bond or amount held in escrow equal 

to the sum of the withdrawal liability payments that would 

otherwise be payable to the plan during that period. 

‘‘(5) The liability of the party furnishing a bond or escrow 

under this subsection shall be reduced, upon the payment of 

the bond or escrow to the plan, by the amount thereof.’’. 

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to any person that receives a notification 

under section 4219(b)(1) of the Employee Retirement Income 

Security Act of 1974 on or after the date of enactment of 

this Act with respect to a transaction that occurred after 

December 31, 1998. 

SEC. 205. PROHIBITION ON RETALIATION AGAINST EMPLOYERS EXERCISING THEIR RIGHTS TO PETITION THE FEDERAL 

GOVERNMENT. 

Section 510 of the Employee Retirement Income Security Act 

of 1974 (29 U.S.C. 1140) is amended by inserting before the last 

sentence thereof the following new sentence: ‘‘In the case of a 

multiemployer plan, it shall be unlawful for the plan sponsor or 

any other person to discriminate against any contributing employer 

for exercising rights under this Act or for giving information or 

testifying in any inquiry or proceeding relating to this Act before 

Congress.’’. 

SEC. 206. SPECIAL RULE FOR CERTAIN BENEFITS FUNDED UNDER 

AN AGREEMENT APPROVED BY THE PENSION BENEFIT 

GUARANTY CORPORATION. 

In the case of a multiemployer plan that is a party to an 

agreement that was approved by the Pension Benefit Guaranty 

Corporation prior to June 30, 2005, and that—

(1) increases benefits, and 

(2) provides for special withdrawal liability rules under 

section 4203(f) of the Employee Retirement Income Security 

Act of 1974 (29 U.S.C. 1383), 

the amendments made by sections 201, 202, 211, and 212 of this 

Act shall not apply to the benefit increases under any plan amendment adopted prior to June 30, 2005, that are funded pursuant 

to such agreement if the plan is funded in compliance with such 

agreement (and any amendments thereto). 
H. R. 4—111

Subtitle B—Amendments to Internal 

Revenue Code of 1986

SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT 

PLANS. 

(a) IN GENERAL.—Subpart A of part III of subchapter D of 

chapter 1 of the Internal Revenue Code of 1986 (as added by 

this Act) is amended by inserting after section 430 the following 

new section: 

‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER 

PLANS. 

‘‘(a) IN GENERAL.—For purposes of section 412, the accumulated 

funding deficiency of a multiemployer plan for any plan year is—

‘‘(1) except as provided in paragraph (2), the amount, determined as of the end of the plan year, equal to the excess 

(if any) of the total charges to the funding standard account 

of the plan for all plan years (beginning with the first plan 

year for which this part applies to the plan) over the total 

credits to such account for such years, and 

‘‘(2) if the multiemployer plan is in reorganization for any 

plan year, the accumulated funding deficiency of the plan determined under section 4243 of the Employee Retirement Income 

Security Act of 1974. 

‘‘(b) FUNDING STANDARD ACCOUNT.— ‘‘(1) ACCOUNT REQUIRED.—Each multiemployer plan to 

which this part applies shall establish and maintain a funding 

standard account. Such account shall be credited and charged 

solely as provided in this section. 

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

standard account shall be charged with the sum of—

‘‘(A) the normal cost of the plan for the plan year, 

‘‘(B) the amounts necessary to amortize in equal annual 

installments (until fully amortized)—

‘‘(i) in the case of a plan which comes into existence 

on or after January 1, 2008, the unfunded past service 

liability under the plan on the first day of the first 

plan year to which this section applies, over a period 

of 15 plan years, 

‘‘(ii) separately, with respect to each plan year, 

the net increase (if any) in unfunded past service 

liability under the plan arising from plan amendments 

adopted in such year, over a period of 15 plan years, 

‘‘(iii) separately, with respect to each plan year, 

the net experience loss (if any) under the plan, over 

a period of 15 plan years, and 

‘‘(iv) separately, with respect to each plan year, 

the net loss (if any) resulting from changes in actuarial 

assumptions used under the plan, over a period of 

15 plan years, 

‘‘(C) the amount necessary to amortize each waived 

funding deficiency (within the meaning of section 412(c)(3)) 

for each prior plan year in equal annual installments (until 

fully amortized) over a period of 15 plan years, 

‘‘(D) the amount necessary to amortize in equal annual 

installments (until fully amortized) over a period of 5 plan 
H. R. 4—112

years any amount credited to the funding standard account 

under section 412(b)(3)(D) (as in effect on the day before 

the date of the enactment of the Pension Protection Act 

of 2006), and 

‘‘(E) the amount necessary to amortize in equal annual 

installments (until fully amortized) over a period of 20 

years the contributions which would be required to be 

made under the plan but for the provisions of section 

412(c)(7)(A)(i)(I) (as in effect on the day before the date 

of the enactment of the Pension Protection Act of 2006). 

‘‘(3) CREDITS TO ACCOUNT.—For a plan year, the funding 

standard account shall be credited with the sum of—

‘‘(A) the amount considered contributed by the 

employer to or under the plan for the plan year, 

‘‘(B) the amount necessary to amortize in equal annual 

installments (until fully amortized)—

‘‘(i) separately, with respect to each plan year, 

the net decrease (if any) in unfunded past service 

liability under the plan arising from plan amendments 

adopted in such year, over a period of 15 plan years, 

‘‘(ii) separately, with respect to each plan year, 

the net experience gain (if any) under the plan, over 

a period of 15 plan years, and 

‘‘(iii) separately, with respect to each plan year, 

the net gain (if any) resulting from changes in actuarial 

assumptions used under the plan, over a period of 

15 plan years, 

‘‘(C) the amount of the waived funding deficiency 

(within the meaning of section 412(c)(3)) for the plan year, 

and 

‘‘(D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding 

standard account if such plan year follows a plan year 

for which such deficiency was determined under the alternative minimum funding standard under section 412(g) 

(as in effect on the day before the date of the enactment 

of the Pension Protection Act of 2006), the excess (if any) 

of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit 

balance in the alternative minimum funding standard 

account. 

‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AMORTIZED IN PLAN

YEARS BEFORE 2008.—In the case of any amount amortized 

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

of the enactment of the Pension Protection Act of 2006) over 

any period beginning with a plan year beginning before 2008 

in lieu of the amortization described in paragraphs (2)(B) and 

(3)(B), such amount shall continue to be amortized under such 

section as so in effect. 

‘‘(5) COMBINING AND OFFSETTING AMOUNTS TO BE AMORTIZED.—Under regulations prescribed by the Secretary, amounts 

required to be amortized under paragraph (2) or paragraph 

(3), as the case may be—

‘‘(A) may be combined into one amount under such 

paragraph to be amortized over a period determined on 

the basis of the remaining amortization period for all items 

entering into such combined amount, and 
H. R. 4—113

‘‘(B) may be offset against amounts required to be 

amortized under the other such paragraph, with the 

resulting amount to be amortized over a period determined 

on the basis of the remaining amortization periods for 

all items entering into whichever of the two amounts being 

offset is the greater. 

‘‘(6) INTEREST.—The funding standard account (and items 

therein) shall be charged or credited (as determined under 

regulations prescribed by the Secretary of the Treasury) with 

interest at the appropriate rate consistent with the rate or 

rates of interest used under the plan to determine costs. 

‘‘(7) SPECIAL RULES RELATING TO CHARGES AND CREDITS

TO FUNDING STANDARD ACCOUNT.—For purposes of this part—

‘‘(A) WITHDRAWAL LIABILITY.—Any amount received by 

a multiemployer plan in payment of all or part of an 

employer’s withdrawal liability under part 1 of subtitle 

E of title IV of the Employee Retirement Income Security 

Act of 1974 shall be considered an amount contributed 

by the employer to or under the plan. The Secretary may 

prescribe by regulation additional charges and credits to 

a multiemployer plan’s funding standard account to the 

extent necessary to prevent withdrawal liability payments 

from being unduly reflected as advance funding for plan 

liabilities. 

‘‘(B) ADJUSTMENTS WHEN A MULTIEMPLOYER PLAN

LEAVES REORGANIZATION.—If a multiemployer plan is not 

in reorganization in the plan year but was in reorganization 

in the immediately preceding plan year, any balance in 

the funding standard account at the close of such immediately preceding plan year—

‘‘(i) shall be eliminated by an offsetting credit or 

charge (as the case may be), but 

‘‘(ii) shall be taken into account in subsequent 

plan years by being amortized in equal annual installments (until fully amortized) over 30 plan years. 

The preceding sentence shall not apply to the extent of 

any accumulated funding deficiency under section 4243(a) 

of such Act as of the end of the last plan year that the 

plan was in reorganization. 

‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL PROGRAM OR

WITHDRAWAL LIABILITY PAYMENT FUND.—Any amount paid 

by a plan during a plan year to the Pension Benefit Guaranty Corporation pursuant to section 4222 of such Act 

or to a fund exempt under section 501(c)(22) pursuant 

to section 4223 of such Act shall reduce the amount of 

contributions considered received by the plan for the plan 

year. 

‘‘(D) INTERIM WITHDRAWAL LIABILITY PAYMENTS.—Any 

amount paid by an employer pending a final determination 

of the employer’s withdrawal liability under part 1 of subtitle E of title IV of such Act and subsequently refunded 

to the employer by the plan shall be charged to the funding 

standard account in accordance with regulations prescribed 

by the Secretary. 

‘‘(E) ELECTION FOR DEFERRAL OF CHARGE FOR PORTION

OF NET EXPERIENCE LOSS.—If an election is in effect under 

section 412(b)(7)(F) (as in effect on the day before the 
H. R. 4—114

date of the enactment of the Pension Protection Act of 

2006) for any plan year, the funding standard account 

shall be charged in the plan year to which the portion 

of the net experience loss deferred by such election was 

deferred with the amount so deferred (and paragraph 

(2)(B)(iii) shall not apply to the amount so charged). 

‘‘(F) FINANCIAL ASSISTANCE.—Any amount of any financial assistance from the Pension Benefit Guaranty Corporation to any plan, and any repayment of such amount, 

shall be taken into account under this section and section 

412 in such manner as is determined by the Secretary. 

‘‘(G) SHORT-TERM BENEFITS.—To the extent that any 

plan amendment increases the unfunded past service 

liability under the plan by reason of an increase in benefits 

which are not payable as a life annuity but are payable 

under the terms of the plan for a period that does not 

exceed 14 years from the effective date of the amendment, 

paragraph (2)(B)(ii) shall be applied separately with respect 

to such increase in unfunded past service liability by substituting the number of years of the period during which 

such benefits are payable for ‘15’. 

‘‘(c) ADDITIONAL RULES.—

‘‘(1) DETERMINATIONS TO BE MADE UNDER FUNDING

METHOD.—For purposes of this part, normal costs, accrued 

liability, past service liabilities, and experience gains and losses 

shall be determined under the funding method used to determine costs under the plan. I22 ‘‘(2) VALUATION OF ASSETS.—

‘‘(A) IN GENERAL.—For purposes of this part, the value 

of the plan’s assets shall be determined on the basis of 

any reasonable actuarial method of valuation which takes 

into account fair market value and which is permitted 

under regulations prescribed by the Secretary. 

‘‘(B) ELECTION WITH RESPECT TO BONDS.—The value 

of a bond or other evidence of indebtedness which is not 

in default as to principal or interest may, at the election 

of the plan administrator, be determined on an amortized 

basis running from initial cost at purchase to par value 

at maturity or earliest call date. Any election under this 

subparagraph shall be made at such time and in such 

manner as the Secretary shall by regulations provide, shall 

apply to all such evidences of indebtedness, and may be 

revoked only with the consent of the Secretary. 

‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REASONABLE.—For 

purposes of this section, all costs, liabilities, rates of interest, 

and other factors under the plan shall be determined on the 

basis of actuarial assumptions and methods—

‘‘(A) each of which is reasonable (taking into account 

the experience of the plan and reasonable expectations), 

and 

‘‘(B) which, in combination, offer the actuary’s best 

estimate of anticipated experience under the plan. 

‘‘(4) TREATMENT OF CERTAIN CHANGES AS EXPERIENCE GAIN

OR LOSS.—For purposes of this section, if—

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

Act or in other retirement benefits created under Federal 

or State law, or 
H. R. 4—115

‘‘(B) a change in the definition of the term ‘wages’ 

under section 3121, or a change in the amount of such 

wages taken into account under regulations prescribed for 

purposes of section 401(a)(5), 

results in an increase or decrease in accrued liability under 

a plan, such increase or decrease shall be treated as an experience loss or gain. 

‘‘(5) FULL FUNDING.—If, as of the close of a plan year, 

a plan would (without regard to this paragraph) have an 

accumulated funding deficiency in excess of the full funding 

limitation—

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

with the amount of such excess, and 

‘‘(B) all amounts described in subparagraphs (B), (C), 

and (D) of subsection (b)(2) and subparagraph (B) of subsection (b)(3) which are required to be amortized shall 

be considered fully amortized for purposes of such subparagraphs. 

‘‘(6) FULL-FUNDING LIMITATION.—

‘‘(A) IN GENERAL.—For purposes of paragraph (5), the 

term ‘full-funding limitation’ means the excess (if any) of—

‘‘(i) the accrued liability (including normal cost) 

under the plan (determined under the entry age normal 

funding method if such accrued liability cannot be 

directly calculated under the funding method used for 

the plan), over 

‘‘(ii) the lesser of—

‘‘(I) the fair market value of the plan’s assets, 

or 

‘‘(II) the value of such assets determined under 

paragraph (2). 

‘‘(B) MINIMUM AMOUNT.—

‘‘(i) IN GENERAL.—In no event shall the full-funding 

limitation determined under subparagraph (A) be less 

than the excess (if any) of—

‘‘(I) 90 percent of the current liability of the 

plan (including the expected increase in current 

liability due to benefits accruing during the plan 

year), over 

‘‘(II) the value of the plan’s assets determined 

under paragraph (2). 

‘‘(ii) ASSETS.—For purposes of clause (i), assets 

shall not be reduced by any credit balance in the 

funding standard account. 

‘‘(C) FULL FUNDING LIMITATION.—For purposes of this 

paragraph, unless otherwise provided by the plan, the 

accrued liability under a multiemployer plan shall not 

include benefits which are not nonforfeitable under the 

plan after the termination of the plan (taking into consideration section 411(d)(3)). 

‘‘(D) CURRENT LIABILITY.—For purposes of this paragraph—

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

means all liabilities to employees and their beneficiaries under the plan. 
H. R. 4—116

‘‘(ii) TREATMENT OF UNPREDICTABLE CONTINGENT

EVENT BENEFITS.—For purposes of clause (i), any benefit contingent on an event other than—

‘‘(I) age, service, compensation, death, or disability, or 

‘‘(II) an event which is reasonably and reliably 

predictable (as determined by the Secretary), 

shall not be taken into account until the event on 

which the benefit is contingent occurs. 

‘‘(iii) INTEREST RATE USED.—The rate of interest 

used to determine current liability under this paragraph shall be the rate of interest determined under 

subparagraph (E). 

‘‘(iv) MORTALITY TABLES.— ‘‘(I) COMMISSIONERS’ STANDARD TABLE.—In the 

case of plan years beginning before the first plan 

year to which the first tables prescribed under 

subclause (II) apply, the mortality table used in 

determining current liability under this paragraph 

shall be the table prescribed by the Secretary 

which is based on the prevailing commissioners’ 

standard table (described in section 807(d)(5)(A)) 

used to determine reserves for group annuity contracts issued on January 1, 1993. 

‘‘(II) SECRETARIAL AUTHORITY.—The Secretary 

may by regulation prescribe for plan years beginning after December 31, 1999, mortality tables 

to be used in determining current liability under 

this subsection. Such tables shall be based upon 

the actual experience of pension plans and projected trends in such experience. In prescribing 

such tables, the Secretary shall take into account 

results of available independent studies of mortality of individuals covered by pension plans. 

‘‘(v) SEPARATE MORTALITY TABLES FOR THE DISABLED.—Notwithstanding clause (iv)—

‘‘(I) IN GENERAL.—The Secretary shall establish mortality tables which may be used (in lieu 

of the tables under clause (iv)) to determine current liability under this subsection for individuals 

who are entitled to benefits under the plan on 

account of disability. The Secretary shall establish 

separate tables for individuals whose disabilities 

occur in plan years beginning before January 1, 

1995, and for individuals whose disabilities occur 

in plan years beginning on or after such date. 

‘‘(II) SPECIAL RULE FOR DISABILITIES OCCURRING AFTER 1994.—In the case of disabilities occurring in plan years beginning after December 31, 

1994, the tables under subclause (I) shall apply 

only with respect to individuals described in such 

subclause who are disabled within the meaning 

of title II of the Social Security Act and the regulations thereunder. 

‘‘(vi) PERIODIC REVIEW.—The Secretary shall 

periodically (at least every 5 years) review any tables 

in effect under this subparagraph and shall, to the 
H. R. 4—117

extent such Secretary determines necessary, by regulation update the tables to reflect the actual experience 

of pension plans and projected trends in such experience. 

‘‘(E) REQUIRED CHANGE OF INTEREST RATE.—For purposes of determining a plan’s current liability for purposes 

of this paragraph—

‘‘(i) IN GENERAL.—If any rate of interest used under 

the plan under subsection (b)(6) to determine cost is 

not within the permissible range, the plan shall establish a new rate of interest within the permissible range. 

‘‘(ii) PERMISSIBLE RANGE.—For purposes of this 

subparagraph—

‘‘(I) IN GENERAL.—Except as provided in subclause (II), the term ‘permissible range’ means a 

rate of interest which is not more than 5 percent 

above, and not more than 10 percent below, the 

weighted average of the rates of interest on 30-

year Treasury securities during the 4-year period 

ending on the last day before the beginning of 

the plan year. 

‘‘(II) SECRETARIAL AUTHORITY.—If the Secretary finds that the lowest rate of interest permissible under subclause (I) is unreasonably high, 

the Secretary may prescribe a lower rate of 

interest, except that such rate may not be less 

than 80 percent of the average rate determined 

under such subclause. 

‘‘(iii) ASSUMPTIONS.—Notwithstanding paragraph 

(3)(A), the interest rate used under the plan shall 

be—

‘‘(I) determined without taking into account 

the experience of the plan and reasonable expectations, but 

‘‘(II) consistent with the assumptions which 

reflect the purchase rates which would be used 

by insurance companies to satisfy the liabilities 

under the plan. 

‘‘(7) ANNUAL VALUATION.—

‘‘(A) IN GENERAL.—For purposes of this section, a determination of experience gains and losses and a valuation 

of the plan’s liability shall be made not less frequently 

than once every year, except that such determination shall 

be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary. 

‘‘(B) VALUATION DATE.—

‘‘(i) CURRENT YEAR.—Except as provided in clause 

(ii), the valuation referred to in subparagraph (A) shall 

be made as of a date within the plan year to which 

the valuation refers or within one month prior to the 

beginning of such year. 

‘‘(ii) USE OF PRIOR YEAR VALUATION.—The valuation referred to in subparagraph (A) may be made 

as of a date within the plan year prior to the year 

to which the valuation refers if, as of such date, the 

value of the assets of the plan are not less than 100 
H. R. 4—118

percent of the plan’s current liability (as defined in 

paragraph (6)(D) without regard to clause (iv) thereof). 

‘‘(iii) ADJUSTMENTS.—Information under clause (ii) 

shall, in accordance with regulations, be actuarially 

adjusted to reflect significant differences in participants. 

‘‘(iv) LIMITATION.—A change in funding method to 

use a prior year valuation, as provided in clause (ii), 

may not be made unless as of the valuation date within 

the prior plan year, the value of the assets of the 

plan are not less than 125 percent of the plan’s current 

liability (as defined in paragraph (6)(D) without regard 

to clause (iv) thereof). 

‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS DEEMED MADE.— For purposes of this section, any contributions for a plan year 

made by an employer after the last day of such plan year, 

but not later than two and one-half months after such day, 

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

purposes of this subparagraph, such two and one-half month 

period may be extended for not more than six months under 

regulations prescribed by the Secretary. 

‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR MULTIEMPLOYER

PLANS.—‘‘(1) AUTOMATIC EXTENSION UPON APPLICATION BY CERTAIN

PLANS.—‘‘(A) IN GENERAL.—If the plan sponsor of a multiemployer plan—

‘‘(i) submits to the Secretary an application for 

an extension of the period of years required to amortize 

any unfunded liability described in any clause of subsection (b)(2)(B) or described in subsection (b)(4), and 

‘‘(ii) includes with the application a certification 

by the plan’s actuary described in subparagraph (B), 

the Secretary shall extend the amortization period for the 

period of time (not in excess of 5 years) specified in the 

application. Such extension shall be in addition to any 

extension under paragraph (2). 

‘‘(B) CRITERIA.—A certification with respect to a multiemployer plan is described in this subparagraph if the 

plan’s actuary certifies that, based on reasonable assumptions—

‘‘(i) absent the extension under subparagraph (A), 

the plan would have an accumulated funding deficiency 

in the current plan year or any of the 9 succeeding 

plan years, 

‘‘(ii) the plan sponsor has adopted a plan to 

improve the plan’s funding status, 

‘‘(iii) the plan is projected to have sufficient assets 

to timely pay expected benefits and anticipated 

expenditures over the amortization period as extended, 

and 

‘‘(iv) the notice required under paragraph (3)(A) 

has been provided. 

‘‘(C) TERMINATION.—The preceding provisions of this 

paragraph shall not apply with respect to any application 

submitted after December 31, 2014. 

‘‘(2) ALTERNATIVE EXTENSION.—
H. R. 4—119

‘‘(A) IN GENERAL.—If the plan sponsor of a multiemployer plan submits to the Secretary an application for 

an extension of the period of years required to amortize 

any unfunded liability described in any clause of subsection 

(b)(2)(B) or described in subsection (b)(4), the Secretary 

may extend the amortization period for a period of time 

(not in excess of 10 years reduced by the number of years 

of any extension under paragraph (1) with respect to such 

unfunded liability) if the Secretary makes the determination described in subparagraph (B). Such extension shall 

be in addition to any extension under paragraph (1). 

‘‘(B) DETERMINATION.—The Secretary may grant an 

extension under subparagraph (A) if the Secretary determines that—

‘‘(i) such extension would carry out the purposes 

of this Act and would provide adequate protection for 

participants under the plan and their beneficiaries, 

and 

‘‘(ii) the failure to permit such extension would—

‘‘(I) result in a substantial risk to the voluntary continuation of the plan, or a substantial 

curtailment of pension benefit levels or employee 

compensation, and 

‘‘(II) be adverse to the interests of plan participants in the aggregate. 

‘‘(C) ACTION BY SECRETARY.—The Secretary shall act 

upon any application for an extension under this paragraph 

within 180 days of the submission of such application. 

If the Secretary rejects the application for an extension 

under this paragraph, the Secretary shall provide notice 

to the plan detailing the specific reasons for the rejection, 

including references to the criteria set forth above. 

‘‘(3) ADVANCE NOTICE.—

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

an extension under this subsection, require each applicant 

to provide evidence satisfactory to such Secretary that the 

applicant has provided notice of the filing of the application 

for such extension to each affected party (as defined in 

section 4001(a)(21) of the Employee Retirement Income 

Security Act of 1974) with respect to the affected plan. 

Such notice shall include a description of the extent to 

which the plan is funded for benefits which are guaranteed 

under title IV of such Act and for benefit liabilities. 

‘‘(B) CONSIDERATION OF RELEVANT INFORMATION.—The 

Secretary shall consider any relevant information provided 

by a person to whom notice was given under paragraph 

(1).’’. 

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after 2007. 

(2) SPECIAL RULE FOR CERTAIN AMORTIZATION EXTENSIONS.—If the Secretary of the Treasury grants an extension 

under section 304 of the Employee Retirement Income Security 

Act of 1974 and section 412(e) of the Internal Revenue Code 

of 1986 with respect to any application filed with the Secretary 

of the Treasury on or before June 30, 2005, the extension 
H. R. 4—120

(and any modification thereof) shall be applied and administered under the rules of such sections as in effect before the 

enactment of this Act, including the use of the rate of interest 

determined under section 6621(b) of such Code. 

SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS 

IN ENDANGERED OR CRITICAL STATUS. 

(a) IN GENERAL.—Subpart A of part III of subchapter D of 

chapter 1 of the Internal Revenue Code of 1986 (as amended by 

this Act) is amended by inserting after section 431 the following 

new section: 

‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS 

IN ENDANGERED STATUS OR CRITICAL STATUS. 

‘‘(a) GENERAL RULE.—For purposes of this part, in the case 

of a multiemployer plan in effect on July 16, 2006—

‘‘(1) if the plan is in endangered status—

‘‘(A) the plan sponsor shall adopt and implement a 

funding improvement plan in accordance with the requirements of subsection (c), and 

‘‘(B) the requirements of subsection (d) shall apply 

during the funding plan adoption period and the funding 

improvement period, and 

‘‘(2) if the plan is in critical status—

‘‘(A) the plan sponsor shall adopt and implement a 

rehabilitation plan in accordance with the requirements 

of subsection (e), and 

‘‘(B) the requirements of subsection (f) shall apply 

during the rehabilitation plan adoption period and the 

rehabilitation period. 

‘‘(b) DETERMINATION OF ENDANGERED AND CRITICAL STATUS.— For purposes of this section—

‘‘(1) ENDANGERED STATUS.—A multiemployer plan is in 

endangered status for a plan year if, as determined by the 

plan actuary under paragraph (3), the plan is not in critical 

status for the plan year and, as of the beginning of the plan 

year, either—

‘‘(A) the plan’s funded percentage for such plan year 

is less than 80 percent, or 

‘‘(B) the plan has an accumulated funding deficiency 

for such plan year, or is projected to have such an accumulated funding deficiency for any of the 6 succeeding plan 

years, taking into account any extension of amortization 

periods under section 431(d). 

For purposes of this section, a plan shall be treated as in 

seriously endangered status for a plan year if the plan is 

described in both subparagraphs (A) and (B). 

‘‘(2) CRITICAL STATUS.—A multiemployer plan is in critical 

status for a plan year if, as determined by the plan actuary 

under paragraph (3), the plan is described in 1 or more of 

the following subparagraphs as of the beginning of the plan 

year: 

‘‘(A) A plan is described in this subparagraph if—

‘‘(i) the funded percentage of the plan is less than 

65 percent, and 

‘‘(ii) the sum of—

‘‘(I) the fair market value of plan assets, plus 
H. R. 4—121

‘‘(II) the present value of the reasonably anticipated employer contributions for the current plan 

year and each of the 6 succeeding plan years, 

assuming that the terms of all collective bargaining agreements pursuant to which the plan 

is maintained for the current plan year continue 

in effect for succeeding plan years, 

is less than the present value of all nonforfeitable 

benefits projected to be payable under the plan during 

the current plan year and each of the 6 succeeding 

plan years (plus administrative expenses for such plan 

years). 

‘‘(B) A plan is described in this subparagraph if—

‘‘(i) the plan has an accumulated funding deficiency 

for the current plan year, not taking into account any 

extension of amortization periods under section 431(d), 

or 

‘‘(ii) the plan is projected to have an accumulated 

funding deficiency for any of the 3 succeeding plan 

years (4 succeeding plan years if the funded percentage 

of the plan is 65 percent or less), not taking into 

account any extension of amortization periods under 

section 431(d). 

‘‘(C) A plan is described in this subparagraph if—

‘‘(i)(I) the plan’s normal cost for the current plan 

year, plus interest (determined at the rate used for 

determining costs under the plan) for the current plan 

year on the amount of unfunded benefit liabilities 

under the plan as of the last date of the preceding 

plan year, exceeds 

‘‘(II) the present value of the reasonably anticipated employer and employee contributions for the current plan year, 

‘‘(ii) the present value, as of the beginning of the 

current plan year, of nonforfeitable benefits of inactive 

participants is greater than the present value of nonforfeitable benefits of active participants, and 

‘‘(iii) the plan has an accumulated funding deficiency for the current plan year, or is projected to 

have such a deficiency for any of the 4 succeeding 

plan years, not taking into account any extension of 

amortization periods under section 431(d). 

‘‘(D) A plan is described in this subparagraph if the 

sum of—

‘‘(i) the fair market value of plan assets, plus 

‘‘(ii) the present value of the reasonably anticipated 

employer contributions for the current plan year and 

each of the 4 succeeding plan years, assuming that 

the terms of all collective bargaining agreements 

pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan 

years, 

is less than the present value of all benefits projected 

to be payable under the plan during the current plan 

year and each of the 4 succeeding plan years (plus administrative expenses for such plan years). 

‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTUARY.—
H. R. 4—122

‘‘(A) IN GENERAL.—Not later than the 90th day of each 

plan year of a multiemployer plan, the plan actuary shall 

certify to the Secretary and to the plan sponsor—

‘‘(i) whether or not the plan is in endangered status 

for such plan year and whether or not the plan is 

or will be in critical status for such plan year, and 

‘‘(ii) in the case of a plan which is in a funding 

improvement or rehabilitation period, whether or not 

the plan is making the scheduled progress in meeting 

the requirements of its funding improvement or 

rehabilitation plan. 

‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS AND LIABIL- ITIES.— ‘‘(i) IN GENERAL.—In making the determinations 

and projections under this subsection, the plan actuary 

shall make projections required for the current and 

succeeding plan years of the current value of the assets 

of the plan and the present value of all liabilities 

to participants and beneficiaries under the plan for 

the current plan year as of the beginning of such 

year. The actuary’s projections shall be based on 

reasonable actuarial estimates, assumptions, and 

methods that, except as provided in clause (iii), offer 

the actuary’s best estimate of anticipated experience 

under the plan. The projected present value of liabilities as of the beginning of such year shall be determined based on the most recent of either—

‘‘(I) the actuarial statement required under 

section 103(d) of the Employee Retirement Income 

Security Act of 1974 with respect to the most 

recently filed annual report, or 

‘‘(II) the actuarial valuation for the preceding 

plan year. 

‘‘(ii) DETERMINATIONS OF FUTURE CONTRIBU- TIONS.—Any actuarial projection of plan assets shall 

assume—

‘‘(I) reasonably anticipated employer contributions for the current and succeeding plan years, 

assuming that the terms of the one or more collective bargaining agreements pursuant to which the 

plan is maintained for the current plan year continue in effect for succeeding plan years, or 

‘‘(II) that employer contributions for the most 

recent plan year will continue indefinitely, but only 

if the plan actuary determines there have been 

no significant demographic changes that would 

make such assumption unreasonable. 

‘‘(iii) PROJECTED INDUSTRY ACTIVITY.—Any projection of activity in the industry or industries covered 

by the plan, including future covered employment and 

contribution levels, shall be based on information provided by the plan sponsor, which shall act reasonably 

and in good faith. 

‘‘(C) PENALTY FOR FAILURE TO SECURE TIMELY ACTU- ARIAL CERTIFICATION.—Any failure of the plan’s actuary 

to certify the plan’s status under this subsection by the 

date specified in subparagraph (A) shall be treated for 
H. R. 4—123

purposes of section 502(c)(2) of the Employee Retirement 

Income Security Act of 1974 as a failure or refusal by 

the plan administrator to file the annual report required 

to be filed with the Secretary under section 101(b)(4) of 

such Act. 

‘‘(D) NOTICE.—

‘‘(i) IN GENERAL.—In any case in which it is certified under subparagraph (A) that a multiemployer 

plan is or will be in endangered or critical status 

for a plan year, the plan sponsor shall, not later than 

30 days after the date of the certification, provide 

notification of the endangered or critical status to the 

participants and beneficiaries, the bargaining parties, 

the Pension Benefit Guaranty Corporation, and the 

Secretary of Labor. 

‘‘(ii) PLANS IN CRITICAL STATUS.—If it is certified 

under subparagraph (A) that a multiemployer plan 

is or will be in critical status, the plan sponsor shall 

include in the notice under clause (i) an explanation 

of the possibility that—

‘‘(I) adjustable benefits (as defined in subsection (e)(8)) may be reduced, and 

‘‘(II) such reductions may apply to participants 

and beneficiaries whose benefit commencement 

date is on or after the date such notice is provided 

for the first plan year in which the plan is in 

critical status. 

‘‘(iii) MODEL NOTICE.—The Secretary of Labor shall 

prescribe a model notice that a multiemployer plan 

may use to satisfy the requirements under clause (ii). 

‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE ADOPTED FOR

MULTIEMPLOYER PLANS IN ENDANGERED STATUS.—

‘‘(1) IN GENERAL.—In any case in which a multiemployer 

plan is in endangered status for a plan year, the plan sponsor, 

in accordance with this subsection—

‘‘(A) shall adopt a funding improvement plan not later 

than 240 days following the required date for the actuarial 

certification of endangered status under subsection 

(b)(3)(A), and 

‘‘(B) within 30 days after the adoption of the funding 

improvement plan—

‘‘(i) shall provide to the bargaining parties 1 or 

more schedules showing revised benefit structures, 

revised contribution structures, or both, which, if 

adopted, may reasonably be expected to enable the 

multiemployer plan to meet the applicable benchmarks 

in accordance with the funding improvement plan, 

including—

‘‘(I) one proposal for reductions in the amount 

of future benefit accruals necessary to achieve the 

applicable benchmarks, assuming no amendments 

increasing contributions under the plan (other 

than amendments increasing contributions necessary to achieve the applicable benchmarks after 

amendments have reduced future benefit accruals 

to the maximum extent permitted by law), and 
H. R. 4—124

‘‘(II) one proposal for increases in contributions 

under the plan necessary to achieve the applicable 

benchmarks, assuming no amendments reducing 

future benefit accruals under the plan, and 

‘‘(ii) may, if the plan sponsor deems appropriate, 

prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to achieving the applicable benchmarks 

in accordance with the funding improvement plan. 

For purposes of this section, the term ‘applicable benchmarks’ means the requirements applicable to the multiemployer plan under paragraph (3) (as modified by paragraph 

(5)). 

‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BEGINS.—Paragraph (1) shall not apply to a plan year if such year is in 

a funding plan adoption period or funding improvement period 

by reason of the plan being in endangered status for a preceding 

plan year. For purposes of this section, such preceding plan 

year shall be the initial determination year with respect to 

the funding improvement plan to which it relates. 

‘‘(3) FUNDING IMPROVEMENT PLAN.—For purposes of this 

section—

‘‘(A) IN GENERAL.—A funding improvement plan is a 

plan which consists of the actions, including options or 

a range of options to be proposed to the bargaining parties, 

formulated to provide, based on reasonably anticipated 

experience and reasonable actuarial assumptions, for the 

attainment by the plan during the funding improvement 

period of the following requirements: 

‘‘(i) INCREASE IN PLAN’S FUNDING PERCENTAGE.—

The plan’s funded percentage as of the close of the 

funding improvement period equals or exceeds a 

percentage equal to the sum of—

‘‘(I) such percentage as of the beginning of 

such period, plus 

‘‘(II) 33 percent of the difference between 100 

percent and the percentage under subclause (I). 

‘‘(ii) AVOIDANCE OF ACCUMULATED FUNDING DEFICIENCIES.—No accumulated funding deficiency for any 

plan year during the funding improvement period 

(taking into account any extension of amortization 

periods under section 304(d)). 

‘‘(B) SERIOUSLY ENDANGERED PLANS.—In the case of 

a plan in seriously endangered status, except as provided 

in paragraph (5), subparagraph (A)(i)(II) shall be applied 

by substituting ‘20 percent’ for ‘33 percent’. 

‘‘(4) FUNDING IMPROVEMENT PERIOD.—For purposes of this 

section—

‘‘(A) IN GENERAL.—The funding improvement period 

for any funding improvement plan adopted pursuant to 

this subsection is the 10-year period beginning on the first 

day of the first plan year of the multiemployer plan beginning after the earlier of—

‘‘(i) the second anniversary of the date of the adoption of the funding improvement plan, or 
H. R. 4—125

‘‘(ii) the expiration of the collective bargaining 

agreements in effect on the due date for the actuarial 

certification of endangered status for the initial determination year under subsection (b)(3)(A) and covering, 

as of such due date, at least 75 percent of the active 

participants in such multiemployer plan. 

‘‘(B) SERIOUSLY ENDANGERED PLANS.—In the case of 

a plan in seriously endangered status, except as provided 

in paragraph (5), subparagraph (A) shall be applied by 

substituting ‘15-year period’ for ‘10-year period’. 

‘‘(C) COORDINATION WITH CHANGES IN STATUS.—

‘‘(i) PLANS NO LONGER IN ENDANGERED STATUS.—

If the plan’s actuary certifies under subsection (b)(3)(A) 

for a plan year in any funding plan adoption period 

or funding improvement period that the plan is no 

longer in endangered status and is not in critical 

status, the funding plan adoption period or funding 

improvement period, whichever is applicable, shall end 

as of the close of the preceding plan year. 

‘‘(ii) PLANS IN CRITICAL STATUS.—If the plan’s 

actuary certifies under subsection (b)(3)(A) for a plan 

year in any funding plan adoption period or funding 

improvement period that the plan is in critical status, 

the funding plan adoption period or funding improvement period, whichever is applicable, shall end as of 

the close of the plan year preceding the first plan 

year in the rehabilitation period with respect to such 

status. 

‘‘(D) PLANS IN ENDANGERED STATUS AT END OF

PERIOD.—If the plan’s actuary certifies under subsection 

(b)(3)(A) for the first plan year following the close of the 

period described in subparagraph (A) that the plan is in 

endangered status, the provisions of this subsection and 

subsection (d) shall be applied as if such first plan year 

were an initial determination year, except that the plan 

may not be amended in a manner inconsistent with the 

funding improvement plan in effect for the preceding plan 

year until a new funding improvement plan is adopted. 

‘‘(5) SPECIAL RULES FOR SERIOUSLY ENDANGERED PLANS

MORE THAN 70 PERCENT FUNDED.— ‘‘(A) IN GENERAL.—If the funded percentage of a plan 

in seriously endangered status was more than 70 percent 

as of the beginning of the initial determination year—

‘‘(i) paragraphs (3)(B) and (4)(B) shall apply only 

if the plan’s actuary certifies, within 30 days after 

the certification under subsection (b)(3)(A) for the initial determination year, that, based on the terms of 

the plan and the collective bargaining agreements in 

effect at the time of such certification, the plan is 

not projected to meet the requirements of paragraph 

(3)(A) (without regard to paragraphs (3)(B) and (4)(B)), 

and 

‘‘(ii) if there is a certification under clause (i), 

the plan may, in formulating its funding improvement 

plan, only take into account the rules of paragraph 

(3)(B) and (4)(B) for plan years in the funding improvement period beginning on or before the date on which 
H. R. 4—126

the last of the collective bargaining agreements 

described in paragraph (4)(A)(ii) expires. 

‘‘(B) SPECIAL RULE AFTER EXPIRATION OF AGREEMENTS.—Notwithstanding subparagraph (A)(ii), if, for any 

plan year ending after the date described in subparagraph 

(A)(ii), the plan actuary certifies (at the time of the annual 

certification under subsection (b)(3)(A) for such plan year) 

that, based on the terms of the plan and collective bargaining agreements in effect at the time of that annual 

certification, the plan is not projected to be able to meet 

the requirements of paragraph (3)(A) (without regard to 

paragraphs (3)(B) and (4)(B)), paragraphs (3)(B) and (4)(B) 

shall continue to apply for such year. 

‘‘(6) UPDATES TO FUNDING IMPROVEMENT PLANS AND SCHED- ULES.— ‘‘(A) FUNDING IMPROVEMENT PLAN.—The plan sponsor 

shall annually update the funding improvement plan and 

shall file the update with the plan’s annual report under 

section 104 of the Employee Retirement Income Security 

Act of 1974. 

‘‘(B) SCHEDULES.—The plan sponsor shall annually 

update any schedule of contribution rates provided under 

this subsection to reflect the experience of the plan. 

‘‘(C) DURATION OF SCHEDULE.—A schedule of contribution rates provided by the plan sponsor and relied upon 

by bargaining parties in negotiating a collective bargaining 

agreement shall remain in effect for the duration of that 

collective bargaining agreement. 

‘‘(7) IMPOSITION OF DEFAULT SCHEDULE WHERE FAILURE TO

ADOPT FUNDING IMPROVEMENT PLAN.— ‘‘(A) IN GENERAL.—If—

‘‘(i) a collective bargaining agreement providing 

for contributions under a multiemployer plan that was 

in effect at the time the plan entered endangered status 

expires, and 

‘‘(ii) after receiving one or more schedules from 

the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement fail 

to agree on changes to contribution or benefit schedules 

necessary to meet the applicable benchmarks in accordance with the funding improvement plan, 

the plan sponsor shall implement the schedule described 

in paragraph (1)(B)(i)(I) beginning on the date specified 

in subparagraph (B). 

‘‘(B) DATE OF IMPLEMENTATION.—The date specified in 

this subparagraph is the earlier of the date—

‘‘(i) on which the Secretary of Labor certifies that 

the parties are at an impasse, or 

‘‘(ii) which is 180 days after the date on which 

the collective bargaining agreement described in 

subparagraph (A) expires. 

‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For purposes of this 

section, the term ‘funding plan adoption period’ means the 

period beginning on the date of the certification under subsection (b)(3)(A) for the initial determination year and ending 

on the day before the first day of the funding improvement 

period. 
H. R. 4—127

‘‘(d) RULES FOR OPERATION OF PLAN DURING ADOPTION AND

IMPROVEMENT PERIODS.—

‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PERIOD.—During 

the funding plan adoption period—

‘‘(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect 

to the multiemployer plan that provides for—

‘‘(i) a reduction in the level of contributions for 

any participants, 

‘‘(ii) a suspension of contributions with respect to 

any period of service, or 

‘‘(iii) any new direct or indirect exclusion of 

younger or newly hired employees from plan participation, 

‘‘(B) no amendment of the plan which increases the 

liabilities of the plan by reason of any increase in benefits, 

any change in the accrual of benefits, or any change in 

the rate at which benefits become nonforfeitable under 

the plan may be adopted unless the amendment is required 

as a condition of qualification under part I of subchapter 

D of chapter 1 or to comply with other applicable law, 

and 

‘‘(C) in the case of a plan in seriously endangered 

status, the plan sponsor shall take all reasonable actions 

which are consistent with the terms of the plan and 

applicable law and which are expected, based on reasonable 

assumptions, to achieve—

‘‘(i) an increase in the plan’s funded percentage, 

and 

‘‘(ii) postponement of an accumulated funding deficiency for at least 1 additional plan year. 

Actions under subparagraph (C) include applications for extensions of amortization periods under section 431(d), use of the 

shortfall funding method in making funding standard account 

computations, amendments to the plan’s benefit structure, 

reductions in future benefit accruals, and other reasonable 

actions consistent with the terms of the plan and applicable 

law. 

‘‘(2) COMPLIANCE WITH FUNDING IMPROVEMENT PLAN.— ‘‘(A) IN GENERAL.—A plan may not be amended after 

the date of the adoption of a funding improvement plan 

so as to be inconsistent with the funding improvement 

plan. 

‘‘(B) NO REDUCTION IN CONTRIBUTIONS.—A plan sponsor 

may not during any funding improvement period accept 

a collective bargaining agreement or participation agreement with respect to the multiemployer plan that provides 

for—

‘‘(i) a reduction in the level of contributions for 

any participants, 

‘‘(ii) a suspension of contributions with respect to 

any period of service, or 

‘‘(iii) any new direct or indirect exclusion of 

younger or newly hired employees from plan participation. 

‘‘(C) SPECIAL RULES FOR BENEFIT INCREASES.—A plan 

may not be amended after the date of the adoption of 
H. R. 4—128

a funding improvement plan so as to increase benefits, 

including future benefit accruals, unless the plan actuary 

certifies that the benefit increase is consistent with the 

funding improvement plan and is paid for out of contributions not required by the funding improvement plan to 

meet the applicable benchmark in accordance with the 

schedule contemplated in the funding improvement plan. 

‘‘(e) REHABILITATION PLAN MUST BE ADOPTED FOR MULTIEMPLOYER PLANS IN CRITICAL STATUS.—

‘‘(1) IN GENERAL.—In any case in which a multiemployer 

plan is in critical status for a plan year, the plan sponsor, 

in accordance with this subsection—

‘‘(A) shall adopt a rehabilitation plan not later than 

240 days following the required date for the actuarial certification of critical status under subsection (b)(3)(A), and 

‘‘(B) within 30 days after the adoption of the rehabilitation plan—

‘‘(i) shall provide to the bargaining parties 1 or 

more schedules showing revised benefit structures, 

revised contribution structures, or both, which, if 

adopted, may reasonably be expected to enable the 

multiemployer plan to emerge from critical status in 

accordance with the rehabilitation plan, and 

‘‘(ii) may, if the plan sponsor deems appropriate, 

prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to emerging from critical status in accordance with the rehabilitation plan. 

The schedule or schedules described in subparagraph (B)(i) 

shall reflect reductions in future benefit accruals and adjustable 

benefits, and increases in contributions, that the plan sponsor 

determines are reasonably necessary to emerge from critical 

status. One schedule shall be designated as the default schedule 

and such schedule shall assume that there are no increases 

in contributions under the plan other than the increases necessary to emerge from critical status after future benefit 

accruals and other benefits (other than benefits the reduction 

or elimination of which are not permitted under section 

411(d)(6)) have been reduced to the maximum extent permitted 

by law. 

‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BEGINS.—Paragraph (1) shall not apply to a plan year if such year is in 

a rehabilitation plan adoption period or rehabilitation period 

by reason of the plan being in critical status for a preceding 

plan year. For purposes of this section, such preceding plan 

year shall be the initial critical year with respect to the 

rehabilitation plan to which it relates. 

‘‘(3) REHABILITATION PLAN.—For purposes of this section—

‘‘(A) IN GENERAL.—A rehabilitation plan is a plan which 

consists of—

‘‘(i) actions, including options or a range of options 

to be proposed to the bargaining parties, formulated, 

based on reasonably anticipated experience and reasonable actuarial assumptions, to enable the plan to cease 

to be in critical status by the end of the rehabilitation 

period and may include reductions in plan expenditures 
H. R. 4—129

(including plan mergers and consolidations), reductions 

in future benefit accruals or increases in contributions, 

if agreed to by the bargaining parties, or any combination of such actions, or 

‘‘(ii) if the plan sponsor determines that, based 

on reasonable actuarial assumptions and upon exhaustion of all reasonable measures, the plan can not 

reasonably be expected to emerge from critical status 

by the end of the rehabilitation period, reasonable 

measures to emerge from critical status at a later 

time or to forestall possible insolvency (within the 

meaning of section 4245 of the Employee Retirement 

Income Security Act of 1974). 

A rehabilitation plan must provide annual standards for 

meeting the requirements of such rehabilitation plan. Such 

plan shall also include the schedules required to be provided under paragraph (1)(B)(i) and if clause (ii) applies, 

shall set forth the alternatives considered, explain why 

the plan is not reasonably expected to emerge from critical 

status by the end of the rehabilitation period, and specify 

when, if ever, the plan is expected to emerge from critical 

status in accordance with the rehabilitation plan. 

‘‘(B) UPDATES TO REHABILITATION PLAN AND SCHED- ULES.— ‘‘(i) REHABILITATION PLAN.—The plan sponsor shall 

annually update the rehabilitation plan and shall file 

the update with the plan’s annual report under section 

104 of the Employee Retirement Income Security Act 

of 1974. 

‘‘(ii) SCHEDULES.—The plan sponsor shall annually 

update any schedule of contribution rates provided 

under this subsection to reflect the experience of the 

plan. 

‘‘(iii) DURATION OF SCHEDULE.—A schedule of contribution rates provided by the plan sponsor and relied 

upon by bargaining parties in negotiating a collective 

bargaining agreement shall remain in effect for the 

duration of that collective bargaining agreement. 

‘‘(C) IMPOSITION OF DEFAULT SCHEDULE WHERE FAILURE

TO ADOPT REHABILITATION PLAN.— ‘‘(i) IN GENERAL.—If—

‘‘(I) a collective bargaining agreement providing for contributions under a multiemployer 

plan that was in effect at the time the plan entered 

critical status expires, and 

‘‘(II) after receiving one or more schedules from 

the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement 

fail to adopt a contribution or benefit schedules 

with terms consistent with the rehabilitation plan 

and the schedule from the plan sponsor under 

paragraph (1)(B)(i), 

the plan sponsor shall implement the default schedule 

described in the last sentence of paragraph (1) beginning on the date specified in clause (ii). 

‘‘(ii) DATE OF IMPLEMENTATION.—The date specified 

in this clause is the earlier of the date—
H. R. 4—130

‘‘(I) on which the Secretary of Labor certifies 

that the parties are at an impasse, or 

‘‘(II) which is 180 days after the date on which 

the collective bargaining agreement described in 

clause (i) expires. 

‘‘(4) REHABILITATION PERIOD.—For purposes of this section—

‘‘(A) IN GENERAL.—The rehabilitation period for a plan 

in critical status is the 10-year period beginning on the 

first day of the first plan year of the multiemployer plan 

following the earlier of—

‘‘(i) the second anniversary of the date of the adoption of the rehabilitation plan, or 

‘‘(ii) the expiration of the collective bargaining 

agreements in effect on the date of the due date for 

the actuarial certification of critical status for the initial critical year under subsection (a)(1) and covering, 

as of such date at least 75 percent of the active participants in such multiemployer plan. 

If a plan emerges from critical status as provided under 

subparagraph (B) before the end of such 10-year period, 

the rehabilitation period shall end with the plan year preceding the plan year for which the determination under 

subparagraph (B) is made. 

‘‘(B) EMERGENCE.—A plan in critical status shall 

remain in such status until a plan year for which the 

plan actuary certifies, in accordance with subsection 

(b)(3)(A), that the plan is not projected to have an accumulated funding deficiency for the plan year or any of the 

9 succeeding plan years, without regard to the use of the 

shortfall method and taking into account any extension 

of amortization periods under section 431(d). 

‘‘(5) REHABILITATION PLAN ADOPTION PERIOD.—For purposes 

of this section, the term ‘rehabilitation plan adoption period’ 

means the period beginning on the date of the certification 

under subsection (b)(3)(A) for the initial critical year and ending 

on the day before the first day of the rehabilitation period. 

‘‘(6) LIMITATION ON REDUCTION IN RATES OF FUTURE

ACCRUALS.—Any reduction in the rate of future accruals under 

the default schedule described in paragraph (1)(B)(i) shall not 

reduce the rate of future accruals below—

‘‘(A) a monthly benefit (payable as a single life annuity 

commencing at the participant’s normal retirement age) 

equal to 1 percent of the contributions required to be made 

with respect to a participant, or the equivalent standard 

accrual rate for a participant or group of participants under 

the collective bargaining agreements in effect as of the 

first day of the initial critical year, or 

‘‘(B) if lower, the accrual rate under the plan on such 

first day. 

The equivalent standard accrual rate shall be determined by 

the plan sponsor based on the standard or average contribution 

base units which the plan sponsor determines to be representative for active participants and such other factors as the plan 

sponsor determines to be relevant. Nothing in this paragraph 

shall be construed as limiting the ability of the plan sponsor 

to prepare and provide the bargaining parties with alternative 
H. R. 4—131

schedules to the default schedule that established lower or 

higher accrual and contribution rates than the rates otherwise 

described in this paragraph. 

‘‘(7) AUTOMATIC EMPLOYER SURCHARGE.—

‘‘(A) IMPOSITION OF SURCHARGE.—Each employer otherwise obligated to make a contribution for the initial critical 

year shall be obligated to pay to the plan for such year 

a surcharge equal to 5 percent of the contribution otherwise 

required under the applicable collective bargaining agreement (or other agreement pursuant to which the employer 

contributes). For each succeeding plan year in which the 

plan is in critical status for a consecutive period of years 

beginning with the initial critical year, the surcharge shall 

be 10 percent of the contribution otherwise so required. 

‘‘(B) ENFORCEMENT OF SURCHARGE.—The surcharges 

under subparagraph (A) shall be due and payable on the 

same schedule as the contributions on which the surcharges 

are based. Any failure to make a surcharge payment shall 

be treated as a delinquent contribution under section 515 

of the Employee Retirement Income Security Act of 1974 

and shall be enforceable as such. 

‘‘(C) SURCHARGE TO TERMINATE UPON COLLECTIVE BAR- GAINING AGREEMENT RENEGOTIATION.—The surcharge 

under this paragraph shall cease to be effective with respect 

to employees covered by a collective bargaining agreement 

(or other agreement pursuant to which the employer 

contributes), beginning on the effective date of a collective 

bargaining agreement (or other such agreement) that 

includes terms consistent with a schedule presented by 

the plan sponsor under paragraph (1)(B)(i), as modified 

under subparagraph (B) of paragraph (3). 

‘‘(D) SURCHARGE NOT TO APPLY UNTIL EMPLOYER

RECEIVES NOTICE.—The surcharge under this paragraph 

shall not apply to an employer until 30 days after the 

employer has been notified by the plan sponsor that the 

plan is in critical status and that the surcharge is in 

effect. 

‘‘(E) SURCHARGE NOT TO GENERATE INCREASED BENEFIT

ACCRUALS.—Notwithstanding any provision of a plan to 

the contrary, the amount of any surcharge under this paragraph shall not be the basis for any benefit accrual under 

the plan. 

‘‘(8) BENEFIT ADJUSTMENTS.— ‘‘(A) ADJUSTABLE BENEFITS.— ‘‘(i) IN GENERAL.—Notwithstanding section 204(g), 

the plan sponsor shall, subject to the notice requirement under subparagraph (C), make any reductions 

to adjustable benefits which the plan sponsor deems 

appropriate, based upon the outcome of collective bargaining over the schedule or schedules provided under 

paragraph (1)(B)(i). 

‘‘(ii) EXCEPTION FOR RETIREES.—Except in the case 

of adjustable benefits described in clause (iv)(III), the 

plan sponsor of a plan in critical status shall not reduce 

adjustable benefits of any participant or beneficiary 

whose benefit commencement date is before the date 

on which the plan provides notice to the participant 
H. R. 4—132

or beneficiary under subsection (b)(3)(D) for the initial 

critical year. 

‘‘(iii) PLAN SPONSOR FLEXIBILITY.—The plan 

sponsor shall include in the schedules provided to the 

bargaining parties an allowance for funding the benefits of participants with respect to whom contributions 

are not currently required to be made, and shall reduce 

their benefits to the extent permitted under this title 

and considered appropriate by the plan sponsor based 

on the plan’s then current overall funding status. 

‘‘(iv) ADJUSTABLE BENEFIT DEFINED.—For purposes 

of this paragraph, the term ‘adjustable benefit’ 

means—

‘‘(I) benefits, rights, and features under the 

plan, including post-retirement death benefits, 60-

month guarantees, disability benefits not yet in 

pay status, and similar benefits, 

‘‘(II) any early retirement benefit or retirement-type subsidy (within the meaning of section 

411(d)(6)(B)(i)) and any benefit payment option 

(other than the qualified joint and survivor 

annuity), and 

‘‘(III) benefit increases that would not be 

eligible for a guarantee under section 4022A of 

the Employee Retirement Income Security Act of 

1974 on the first day of initial critical year because 

the increases were adopted (or, if later, took effect) 

less than 60 months before such first day. 

‘‘(B) NORMAL RETIREMENT BENEFITS PROTECTED.—

Except as provided in subparagraph (A)(iv)(III), nothing 

in this paragraph shall be construed to permit a plan 

to reduce the level of a participant’s accrued benefit payable 

at normal retirement age. 

‘‘(C) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—No reduction may be made to 

adjustable benefits under subparagraph (A) unless 

notice of such reduction has been given at least 30 

days before the general effective date of such reduction 

for all participants and beneficiaries to—

‘‘(I) plan participants and beneficiaries, 

‘‘(II) each employer who has an obligation to 

contribute (within the meaning of section 4212(a)) 

under the plan, and 

‘‘(III) each employee organization which, for 

purposes of collective bargaining, represents plan 

participants employed by such an employer. 

‘‘(ii) CONTENT OF NOTICE.—The notice under clause 

(i) shall contain—

‘‘(I) sufficient information to enable participants and beneficiaries to understand the effect 

of any reduction on their benefits, including an 

estimate (on an annual or monthly basis) of any 

affected adjustable benefit that a participant or 

beneficiary would otherwise have been eligible for 

as of the general effective date described in clause 

(i), and 
H. R. 4—133

‘‘(II) information as to the rights and remedies 

of plan participants and beneficiaries as well as 

how to contact the Department of Labor for further 

information and assistance where appropriate. 

‘‘(iii) FORM AND MANNER.—Any notice under clause 

(i)—

‘‘(I) shall be provided in a form and manner 

prescribed in regulations of the Secretary of Labor, 

‘‘(II) shall be written in a manner so as to 

be understood by the average plan participant, 

and 

‘‘(III) may be provided in written, electronic, 

or other appropriate form to the extent such form 

is reasonably accessible to persons to whom the 

notice is required to be provided. 

The Secretary of Labor shall in the regulations prescribed under subclause (I) establish a model notice 

that a plan sponsor may use to meet the requirements 

of this subparagraph. 

‘‘(9) ADJUSTMENTS DISREGARDED IN WITHDRAWAL LIABILITY

DETERMINATION.— ‘‘(A) BENEFIT REDUCTIONS.—Any benefit reductions 

under this subsection shall be disregarded in determining 

a plan’s unfunded vested benefits for purposes of determining an employer’s withdrawal liability under section 

4201 of the Employee Retirement Income Security Act of 

1974. 

‘‘(B) SURCHARGES.—Any surcharges under paragraph 

(7) shall be disregarded in determining an employer’s withdrawal liability under section 4211 of such Act, except 

for purposes of determining the unfunded vested benefits 

attributable to an employer under section 4211(c)(4) of 

such Act or a comparable method approved under section 

4211(c)(5) of such Act. 

‘‘(C) SIMPLIFIED CALCULATIONS.—The Pension Benefit 

Guaranty Corporation shall prescribe simplified methods 

for the application of this paragraph in determining withdrawal liability. 

‘‘(f) RULES FOR OPERATION OF PLAN DURING ADOPTION AND

REHABILITATION PERIOD.— ‘‘(1) COMPLIANCE WITH REHABILITATION PLAN.— ‘‘(A) IN GENERAL.—A plan may not be amended after 

the date of the adoption of a rehabilitation plan under 

subsection (e) so as to be inconsistent with the rehabilitation plan. 

‘‘(B) SPECIAL RULES FOR BENEFIT INCREASES.—A plan 

may not be amended after the date of the adoption of 

a rehabilitation plan under subsection (e) so as to increase 

benefits, including future benefit accruals, unless the plan 

actuary certifies that such increase is paid for out of additional contributions not contemplated by the rehabilitation 

plan, and, after taking into account the benefit increase, 

the multiemployer plan still is reasonably expected to 

emerge from critical status by the end of the rehabilitation 

period on the schedule contemplated in the rehabilitation 

plan. 

‘‘(2) RESTRICTION ON LUMP SUMS AND SIMILAR BENEFITS.—
H. R. 4—134

‘‘(A) IN GENERAL.—Effective on the date the notice 

of certification of the plan’s critical status for the initial 

critical year under subsection (b)(3)(D) is sent, and notwithstanding section 411(d)(6), the plan shall not pay—

‘‘(i) any payment, in excess of the monthly amount 

paid under a single life annuity (plus any social security supplements described in the last sentence of section 411(b)(1)(A)), 

‘‘(ii) any payment for the purchase of an irrevocable 

commitment from an insurer to pay benefits, and 

‘‘(iii) any other payment specified by the Secretary 

by regulations. 

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply 

to a benefit which under section 411(a)(11) may be immediately distributed without the consent of the participant 

or to any makeup payment in the case of a retroactive 

annuity starting date or any similar payment of benefits 

owed with respect to a prior period. 

‘‘(3) ADJUSTMENTS DISREGARDED IN WITHDRAWAL LIABILITY

DETERMINATION.—Any benefit reductions under this subsection 

shall be disregarded in determining a plan’s unfunded vested 

benefits for purposes of determining an employer’s withdrawal 

liability under section 4201 of the Employee Retirement Income 

Security Act of 1974. 

‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PERIOD.—During 

the rehabilitation plan adoption period—

‘‘(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect 

to the multiemployer plan that provides for—

‘‘(i) a reduction in the level of contributions for 

any participants, 

‘‘(ii) a suspension of contributions with respect to 

any period of service, or 

‘‘(iii) any new direct or indirect exclusion of 

younger or newly hired employees from plan participation, and 

‘‘(B) no amendment of the plan which increases the 

liabilities of the plan by reason of any increase in benefits, 

any change in the accrual of benefits, or any change in 

the rate at which benefits become nonforfeitable under 

the plan may be adopted unless the amendment is required 

as a condition of qualification under part I of subchapter 

D of chapter 1 or to comply with other applicable law. 

‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR DECISIONS.— If, within 60 days of the due date for adoption of a funding improvement plan or a rehabilitation plan under subsection (e), the plan 

sponsor of a plan in endangered status or a plan in critical status 

has not agreed on a funding improvement plan or rehabilitation 

plan, then any member of the board or group that constitutes 

the plan sponsor may require that the plan sponsor enter into 

an expedited dispute resolution procedure for the development and 

adoption of a funding improvement plan or rehabilitation plan. 

‘‘(h) NONBARGAINED PARTICIPATION.—

‘‘(1) BOTH BARGAINED AND NONBARGAINED EMPLOYEE- PARTICIPANTS.—In the case of an employer that contributes 

to a multiemployer plan with respect to both employees who 

are covered by one or more collective bargaining agreements 
H. R. 4—135

and employees who are not so covered, if the plan is in endangered status or in critical status, benefits of and contributions 

for the nonbargained employees, including surcharges on those 

contributions, shall be determined as if those nonbargained 

employees were covered under the first to expire of the 

employer’s collective bargaining agreements in effect when the 

plan entered endangered or critical status. 

‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In the case of an 

employer that contributes to a multiemployer plan only with 

respect to employees who are not covered by a collective bargaining agreement, this section shall be applied as if the 

employer were the bargaining party, and its participation agreement with the plan were a collective bargaining agreement 

with a term ending on the first day of the plan year beginning 

after the employer is provided the schedule or schedules 

described in subsections (c) and (e). 

‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For purposes of this 

section—

‘‘(1) BARGAINING PARTY.—The term ‘bargaining party’ 

means—

‘‘(A)(i) except as provided in clause (ii), an employer 

who has an obligation to contribute under the plan; or 

‘‘(ii) in the case of a plan described under section 

404(c), or a continuation of such a plan, the association 

of employers that is the employer settlor of the plan; and 

‘‘(B) an employee organization which, for purposes of 

collective bargaining, represents plan participants 

employed by an employer who has an obligation to contribute under the plan. 

‘‘(2) FUNDED PERCENTAGE.—The term ‘funded percentage’ 

means the percentage equal to a fraction—

‘‘(A) the numerator of which is the value of the plan’s 

assets, as determined under section 431(c)(2), and 

‘‘(B) the denominator of which is the accrued liability 

of the plan, determined using actuarial assumptions 

described in section 431(c)(3). 

‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—The term 

‘accumulated funding deficiency’ has the meaning given such 

term in section 412(a). 

‘‘(4) ACTIVE PARTICIPANT.—The term ‘active participant’ 

means, in connection with a multiemployer plan, a participant 

who is in covered service under the plan. 

‘‘(5) INACTIVE PARTICIPANT.—The term ‘inactive participant’ 

means, in connection with a multiemployer plan, a participant, 

or the beneficiary or alternate payee of a participant, who—

‘‘(A) is not in covered service under the plan, and 

‘‘(B) is in pay status under the plan or has a nonforfeitable right to benefits under the plan. 

‘‘(6) PAY STATUS.—A person is in pay status under a multiemployer plan if—

‘‘(A) at any time during the current plan year, such 

person is a participant or beneficiary under the plan and 

is paid an early, late, normal, or disability retirement benefit under the plan (or a death benefit under the plan 

related to a retirement benefit), or 
H. R. 4—136

‘‘(B) to the extent provided in regulations of the Secretary, such person is entitled to such a benefit under 

the plan. 

‘‘(7) OBLIGATION TO CONTRIBUTE.—The term ‘obligation to 

contribute’ has the meaning given such term under section 

4212(a) of the Employee Retirement Income Security Act of 

1974. 

‘‘(8) ACTUARIAL METHOD.—Notwithstanding any other 

provision of this section, the actuary’s determinations with 

respect to a plan’s normal cost, actuarial accrued liability, and 

improvements in a plan’s funded percentage under this section 

shall be based upon the unit credit funding method (whether 

or not that method is used for the plan’s actuarial valuation). 

‘‘(9) PLAN SPONSOR.—In the case of a plan described under 

section 404(c), or a continuation of such a plan, the term 

‘plan sponsor’ means the bargaining parties described under 

paragraph (1). 

‘‘(10) BENEFIT COMMENCEMENT DATE.—The term ‘benefit 

commencement date’ means the annuity starting date (or in 

the case of a retroactive annuity starting date, the date on 

which benefit payments begin).’’

(b) EXCISE TAXES ON FAILURES RELATING TO MULTIEMPLOYER

PLANS IN ENDANGERED OR CRITICAL STATUS.—

(1) IN GENERAL.—Section 4971 of the Internal Revenue 

Code of 1986 is amended by redesignating subsection (g) as 

subsection (h) and by inserting after subsection (f) the following: 

‘‘(g) MULTIEMPLOYER PLANS IN ENDANGERED OR CRITICAL

STATUS.—

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

‘‘(A) no tax shall be imposed under this section for 

a taxable year with respect to a multiemployer plan if, 

for the plan years ending with or within the taxable year, 

the plan is in critical status pursuant to section 432, and 

‘‘(B) any tax imposed under this subsection for a taxable year with respect to a multiemployer plan if, for the 

plan years ending with or within the taxable year, the 

plan is in endangered status pursuant to section 432 shall 

be in addition to any other tax imposed by this section. 

‘‘(2) FAILURE TO COMPLY WITH FUNDING IMPROVEMENT OR

REHABILITATION PLAN.—

‘‘(A) IN GENERAL.—If any funding improvement plan 

or rehabilitation plan in effect under section 432 with 

respect to a multiemployer plan requires an employer to 

make a contribution to the plan, there is hereby imposed 

a tax on each failure of the employer to make the required 

contribution within the time required under such plan. 

‘‘(B) AMOUNT OF TAX.—The amount of the tax imposed 

by subparagraph (A) shall be equal to the amount of the 

required contribution the employer failed to make in a 

timely manner. 

‘‘(C) LIABILITY FOR TAX.—The tax imposed by subparagraph (A) shall be paid by the employer responsible for 

contributing to or under the rehabilitation plan which fails 

to make the contribution. 

‘‘(3) FAILURE TO MEET REQUIREMENTS FOR PLANS IN ENDANGERED OR CRITICAL STATUS.—If—
H. R. 4—137

‘‘(A) a plan which is in seriously endangered status 

fails to meet the applicable benchmarks by the end of 

the funding improvement period, or 

‘‘(B) a plan which is in critical status either—

‘‘(i) fails to meet the requirements of section 432(e) 

by the end of the rehabilitation period, or 

‘‘(ii) has received a certification under section 

432(b)(3)(A)(ii) for 3 consecutive plan years that the 

plan is not making the scheduled progress in meeting 

its requirements under the rehabilitation plan, 

the plan shall be treated as having an accumulated funding 

deficiency for purposes of this section for the last plan 

year in such funding improvement, rehabilitation, or 3-

consecutive year period (and each succeeding plan year 

until such benchmarks or requirements are met) in an 

amount equal to the greater of the amount of the contributions necessary to meet such benchmarks or requirements 

or the amount of such accumulated funding deficiency without regard to this paragraph. 

‘‘(4) FAILURE TO ADOPT REHABILITATION PLAN.— ‘‘(A) IN GENERAL.—In the case of a multiemployer plan 

which is in critical status, there is hereby imposed a tax 

on the failure of such plan to adopt a rehabilitation plan 

within the time prescribed under section 432. 

‘‘(B) AMOUNT OF TAX.—The amount of the tax imposed 

under subparagraph (A) with respect to any plan sponsor 

for any taxable year shall be the greater of—

‘‘(i) the amount of tax imposed under subsection 

(a) for the taxable year (determined without regard 

to this subsection), or 

‘‘(ii) the amount equal to $1,100 multiplied by the 

number of days during the taxable year which are 

included in the period beginning on the first day of 

the 240-day period described in section 432(e)(1)(A) 

and ending on the day on which the rehabilitation 

plan is adopted. 

‘‘(C) LIABILITY FOR TAX.— ‘‘(i) IN GENERAL.—The tax imposed by subparagraph (A) shall be paid by each plan sponsor. 

‘‘(ii) PLAN SPONSOR.—For purposes of clause (i), 

the term ‘plan sponsor’ in the case of a multiemployer 

plan means the association, committee, joint board of 

trustees, or other similar group of representatives of 

the parties who establish or maintain the plan. 

‘‘(5) WAIVER.—In the case of a failure described in paragraph (2) or (3) which is due to reasonable cause and not 

to willful neglect, the Secretary may waive part or all of the 

tax imposed by this subsection. For purposes of this paragraph, 

reasonable cause includes unanticipated and material market 

fluctuations, the loss of a significant contributing employer, 

or other factors to the extent that the payment of tax under 

this subsection with respect to the failure would be excessive 

or otherwise inequitable relative to the failure involved. 

‘‘(6) TERMS USED IN SECTION 432.—For purposes of this 

subsection, any term used in this subsection which is also 

used in section 432 shall have the meaning given such term 

by section 432.’’. 
H. R. 4—138

(2) CONTROLLED GROUPS.—Section 4971(c)(2) of such Code 

is amended—

(A) by striking ‘‘In the case of a plan other than a 

multiemployer plan, if the’’ and inserting ‘‘If an’’, and 

(B) by striking ‘‘or (f)’’ and inserting ‘‘(f), or (g)’’. 

(c) NO ADDITIONAL CONTRIBUTION REQUIRED.—Section 412(b) 

of the Internal Revenue Code of 1986, as amended by this Act, 

is amended by adding at the end the following new paragraph: 

‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STATUS.—Paragraph (1) shall not apply in the case of a multiemployer plan 

for any plan year in which the plan is in critical status pursuant 

to section 432. This paragraph shall only apply if the plan 

adopts a rehabilitation plan in accordance with section 432(e) 

and complies with such rehabilitation plan (and any modifications of the plan).’’. 

(d) CLERICAL AMENDMENT.—The table of sections for subpart 

A of part III of subchapter D of chapter 1 of such Code is amended 

by adding at the end the following new item:

‘‘Sec. 432. Additional funding rules for multiemployer plans in endangered status 

or critical status.’’.

(e) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by this section 

shall apply with respect to plan years beginning after 2007. 

(2) SPECIAL RULE FOR CERTAIN NOTICES.—In any case in 

which a plan’s actuary certifies that it is reasonably expected 

that a multiemployer plan will be in critical status under 

section 305(b)(3) of the Employee Retirement Income Security 

Act of 1974, as added by this section, with respect to the 

first plan year beginning after 2007, the notice required under 

subparagraph (D) of such section may be provided at any time 

after the date of enactment, so long as it is provided on or 

before the last date for providing the notice under such subparagraph. 

(3) SPECIAL RULE FOR CERTAIN RESTORED BENEFITS.—In 

the case of a multiemployer plan—

(A) with respect to which benefits were reduced pursuant to a plan amendment adopted on or after January 

1, 2002, and before June 30, 2005, and 

(B) which, pursuant to the plan document, the trust 

agreement, or a formal written communication from the 

plan sponsor to participants provided before June 30, 2005, 

provided for the restoration of such benefits, 

the amendments made by this section shall not apply to such 

benefit restorations to the extent that any restriction on the 

providing or accrual of such benefits would otherwise apply 

by reason of such amendments. 

SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS. 

(a) ADVANCE DETERMINATION OF IMPENDING INSOLVENCY OVER

5 YEARS.—Section 418E(d)(1) of the Internal Revenue Code of 1986 

is amended—

(1) by striking ‘‘3 plan years’’ the second place it appears 

and inserting ‘‘5 plan years’’; and 

(2) by adding at the end the following new sentence: ‘‘If 

the plan sponsor makes such a determination that the plan 

will be insolvent in any of the next 5 plan years, the plan 
H. R. 4—139

sponsor shall make the comparison under this paragraph at 

least annually until the plan sponsor makes a determination 

that the plan will not be insolvent in any of the next 5 plan 

years.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply with respect to the determinations made in plan years 

beginning after 2007. 

SEC. 214. EXEMPTION FROM EXCISE TAXES FOR CERTAIN MULTIEMPLOYER PENSION PLANS. 

(a) IN GENERAL.—Notwithstanding any other provision of law, 

no tax shall be imposed under subsection (a) or (b) of section 

4971 of the Internal Revenue Code of 1986 with respect to any 

accumulated funding deficiency of a plan described in subsection 

(b) of this section for any taxable year beginning before the earlier 

of—

(1) the taxable year in which the plan sponsor adopts 

a rehabilitation plan under section 305(e) of the Employee 

Retirement Income Security Act of 1974 and section 432(e) 

of such Code (as added by this Act); or 

(2) the taxable year that contains January 1, 2009. 

(b) PLAN DESCRIBED.—A plan described under this subsection 

is a multiemployer pension plan—

(1) with less than 100 participants; 

(2) with respect to which the contributing employers participated in a Federal fishery capacity reduction program; 

(3) with respect to which employers under the plan participated in the Northeast Fisheries Assistance Program; and 

(4) with respect to which the annual normal cost is less than $100,000 and the plan is experiencing a funding deficiency 

on the date of enactment of this Act. 

Subtitle C—Sunset of Additional Funding 

Rules 

SEC. 221. SUNSET OF ADDITIONAL FUNDING RULES. 

(a) REPORT.—Not later than December 31, 2011, the Secretary 

of Labor, the Secretary of the Treasury, and the Executive Director 

of the Pension Benefit Guaranty Corporation shall conduct a study 

of the effect of the amendments made by this subtitle on the 

operation and funding status of multiemployer plans and shall 

report the results of such study, including any recommendations 

for legislation, to the Congress. 

(b) MATTERS INCLUDED IN STUDY.—The study required under 

subsection (a) shall include—

(1) the effect of funding difficulties, funding rules in effect 

before the date of the enactment of this Act, and the amendments made by this subtitle on small businesses participating 

in multiemployer plans, 

(2) the effect on the financial status of small employers 

of—

(A) funding targets set in funding improvement and 

rehabilitation plans and associated contribution increases, 

(B) funding deficiencies, 

(C) excise taxes, 

(D) withdrawal liability, 
H. R. 4—140

(E) the possibility of alternative schedules and procedures for financially troubled employers, and 

(F) other aspects of the multiemployer system, and 

(3) the role of the multiemployer pension plan system in 

helping small employers to offer pension benefits. 

(c) SUNSET.—

(1) IN GENERAL.—Except as provided in this subsection, 

notwithstanding any other provision of this Act, the provisions 

of, and the amendments made by, sections 201(b), 202, and 

212 shall not apply to plan years beginning after December 

31, 2014. 

(2) FUNDING IMPROVEMENT AND REHABILITATION PLANS.—

If a plan is operating under a funding improvement or 

rehabilitation plan under section 305 of such Act or 432 of 

such Code for its last year beginning before January 1, 2015, 

such plan shall continue to operate under such funding improvement or rehabilitation plan during any period after December 

31, 2014, such funding improvement or rehabilitation plan is 

in effect and all provisions of such Act or Code relating to 

the operation of such funding improvement or rehabilitation 

plan shall continue in effect during such period. 

TITLE III—INTEREST RATE 

ASSUMPTIONS 

SEC. 301. EXTENSION OF REPLACEMENT OF 30-YEAR TREASURY RATES. 

(a) AMENDMENTS OF ERISA.—

(1) DETERMINATION OF RANGE.—Subclause (II) of section 

302(b)(5)(B)(ii) of the Employee Retirement Income Security 

Act of 1974 is amended—

(A) by striking ‘‘2006’’ and inserting ‘‘2008’’, and 

(B) by striking ‘‘AND 2005’’ in the heading and inserting ‘‘, 2005, 2006, AND 2007’’. 

(2) DETERMINATION OF CURRENT LIABILITY.—Subclause (IV) 

of section 302(d)(7)(C)(i) of such Act is amended—

(A) by striking ‘‘or 2005’’ and inserting ‘‘, 2005, 2006, 

or 2007’’, and 

(B) by striking ‘‘AND 2005’’ in the heading and inserting ‘‘, 2005, 2006, AND 2007’’. 

(3) PBGC PREMIUM RATE.—Subclause (V) of section 

4006(a)(3)(E)(iii) of such Act is amended by striking ‘‘2006’’ 

and inserting ‘‘2008’’. 

(b) AMENDMENTS OF INTERNAL REVENUE CODE.— (1) DETERMINATION OF RANGE.—Subclause (II) of section 

412(b)(5)(B)(ii) of the Internal Revenue Code of 1986 is 

amended—

(A) by striking ‘‘2006’’ and inserting ‘‘2008’’, and 

(B) by striking ‘‘AND 2005’’ in the heading and inserting 

‘‘, 2005, 2006, AND 2007’’. 

(2) DETERMINATION OF CURRENT LIABILITY.—Subclause (IV) 

of section 412(l)(7)(C)(i) of such Code is amended—

(A) by striking ‘‘or 2005’’ and inserting ‘‘, 2005, 2006, 

or 2007’’, and 

(B) by striking ‘‘AND 2005’’ in the heading and inserting ‘‘, 2005, 2006, AND 2007’’. 
H. R. 4—141

(c) PLAN AMENDMENTS.—Clause (ii) of section 101(c)(2)(A) of 

the Pension Funding Equity Act of 2004 is amended by striking 

‘‘2006’’ and inserting ‘‘2008’’. 

SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINATION OF 

LUMP SUM DISTRIBUTIONS. 

(a) AMENDMENT TO EMPLOYEE RETIREMENT INCOME SECURITY

ACT OF 1974.—Paragraph (3) of section 205(g) of the Employee 

Retirement Income Security Act of 1974 (29 U.S.C. 1055(g)(3)) is 

amended to read as follows: 

‘‘(3)(A) For purposes of paragraphs (1) and (2), the present 

value shall not be less than the present value calculated by using 

the applicable mortality table and the applicable interest rate. 

‘‘(B) For purposes of subparagraph (A)—

‘‘(i) The term ‘applicable mortality table’ means a mortality 

table, modified as appropriate by the Secretary of the Treasury, 

based on the mortality table specified for the plan year under 

subparagraph (A) of section 303(h)(3) (without regard to 

subparagraph (C) or (D) of such section). 

‘‘(ii) The term ‘applicable interest rate’ means the adjusted 

first, second, and third segment rates applied under rules 

similar to the rules of section 303(h)(2)(C) for the month before 

the date of the distribution or such other time as the Secretary 

of the Treasury may by regulations prescribe. 

‘‘(iii) For purposes of clause (ii), the adjusted first, second, 

and third segment rates are the first, second, and third segment 

rates which would be determined under section 303(h)(2)(C) 

if—

‘‘(I) section 303(h)(2)(D) were applied by substituting 

the average yields for the month described in clause (ii) 

for the average yields for the 24-month period described 

in such section, 

‘‘(II) section 303(h)(2)(G)(i)(II) were applied by substituting ‘section 205(g)(3)(B)(iii)(II)’ for ‘section 

302(b)(5)(B)(ii)(II)’, and 

‘‘(III) the applicable percentage under section 

303(h)(2)(G) were determined in accordance with the following table:

‘‘In the case of plan years

beginning in:

The applicable

percentage is:

2008 ........................................................................ 20 percent

2009 ........................................................................ 40 percent

2010 ........................................................................ 60 percent

2011 ........................................................................ 80 percent.’’. 

(b) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—Paragraph (3) of section 417(e) of the Internal Revenue Code of 1986 

is amended to read as follows: 

‘‘(3) DETERMINATION OF PRESENT VALUE.—

‘‘(A) IN GENERAL.—For purposes of paragraphs (1) and 

(2), the present value shall not be less than the present 

value calculated by using the applicable mortality table 

and the applicable interest rate. 

‘‘(B) APPLICABLE MORTALITY TABLE.—For purposes of 

subparagraph (A), the term ‘applicable mortality table’ 

means a mortality table, modified as appropriate by the 
H. R. 4—142

Secretary, based on the mortality table specified for the 

plan year under subparagraph (A) of section 430(h)(3) 

(without regard to subparagraph (C) or (D) of such section). 

‘‘(C) APPLICABLE INTEREST RATE.—For purposes of 

subparagraph (A), the term ‘applicable interest rate’ means 

the adjusted first, second, and third segment rates applied 

under rules similar to the rules of section 430(h)(2)(C) 

for the month before the date of the distribution or such 

other time as the Secretary may by regulations prescribe. 

‘‘(D) APPLICABLE SEGMENT RATES.—For purposes of 

subparagraph (C), the adjusted first, second, and third 

segment rates are the first, second, and third segment 

rates which would be determined under section 430(h)(2)(C) 

if—

‘‘(i) section 430(h)(2)(D) were applied by substituting the average yields for the month described 

in clause (ii) for the average yields for the 24-month 

period described in such section, 

‘‘(ii) section 430(h)(2)(G)(i)(II) were applied by substituting ‘section 417(e)(3)(A)(ii)(II)’ for ‘section 

412(b)(5)(B)(ii)(II)’, and 

‘‘(iii) the applicable percentage under section 

430(h)(2)(G) were determined in accordance with the 

following table:

‘‘In the case of plan years

beginning in:

The applicable

percentage is:

2008 ........................................................................ 20 percent

2009 ........................................................................ 40 percent

2010 ........................................................................ 60 percent

2011 ........................................................................ 80 percent.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply with respect to plan years beginning after December 

31, 2007. 

SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT 

LIMITATIONS TO LUMP SUM DISTRIBUTIONS. 

(a) IN GENERAL.—Clause (ii) of section 415(b)(2)(E) of the 

Internal Revenue Code of 1986 is amended to read as follows: 

‘‘(ii) For purposes of adjusting any benefit under 

subparagraph (B) for any form of benefit subject to 

section 417(e)(3), the interest rate assumption shall 

not be less than the greatest of—

‘‘(I) 5.5 percent, 

‘‘(II) the rate that provides a benefit of not 

more than 105 percent of the benefit that would 

be provided if the applicable interest rate (as 

defined in section 417(e)(3)) were the interest rate 

assumption, or 

‘‘(III) the rate specified under the plan.’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) 

shall apply to distributions made in years beginning after December 

31, 2005. 
H. R. 4—143

TITLE IV—PBGC GUARANTEE AND 

RELATED PROVISIONS 

SEC. 401. PBGC PREMIUMS. 

(a) VARIABLE-RATE PREMIUMS.— (1) CONFORMING AMENDMENTS RELATED TO FUNDING RULES

FOR SINGLE-EMPLOYER PLANS.—Section 4006(a)(3)(E) of the 

Employee Retirement Income and Security Act of 1974 (29 

U.S.C. 1306(a)(3)(E)) is amended by striking clauses (iii) and 

(iv) and inserting the following: 

‘‘(iii) For purposes of clause (ii), the term ‘unfunded vested 

benefits’ means, for a plan year, the excess (if any) of—

‘‘(I) the funding target of the plan as determined under 

section 303(d) for the plan year by only taking into account 

vested benefits and by using the interest rate described in 

clause (iv), over 

‘‘(II) the fair market value of plan assets for the plan 

year which are held by the plan on the valuation date. 

‘‘(iv) The interest rate used in valuing benefits for purposes 

of subclause (I) of clause (iii) shall be equal to the first, second, 

or third segment rate for the month preceding the month in which 

the plan year begins, which would be determined under section 

303(h)(2)(C) if section 303(h)(2)(D) were applied by using the 

monthly yields for the month preceding the month in which the 

plan year begins on investment grade corporate bonds with varying 

maturities and in the top 3 quality levels rather than the average 

of such yields for a 24-month period.’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall apply with respect to plan years beginning after 2007. 

(b) TERMINATION PREMIUMS.—

(1) REPEAL OF SUNSET PROVISION.—Subparagraph (E) of 

section 4006(a)(7) of such Act is repealed. 

(2) TECHNICAL CORRECTION.—

(A) IN GENERAL.—Section 4006(a)(7)(C)(ii) of such Act 

is amended by striking ‘‘subparagraph (B)(i)(I)’’ and 

inserting ‘‘subparagraph (B)’’. 

(B) EFFECTIVE DATE.—The amendment made by this 

paragraph shall take effect as if included in the provision 

of the Deficit Reduction Act of 2005 to which it relates. 

SEC. 402. SPECIAL FUNDING RULES FOR CERTAIN PLANS MAINTAINED 

BY COMMERCIAL AIRLINES. 

(a) IN GENERAL.—The plan sponsor of an eligible plan may 

elect to either—

(1) have the rules of subsection (b) apply, or 

(2) have section 303 of the Employee Retirement Income 

Security Act of 1974 and section 430 of the Internal Revenue 

Code of 1986 applied to its first taxable year beginning in 

2008 by amortizing the shortfall amortization base for such 

taxable year over a period of 10 plan years (rather than 7 

plan years) beginning with such plan year. 

(b) ALTERNATIVE FUNDING SCHEDULE.—

(1) IN GENERAL.—If an election is made under subsection 

(a)(1) to have this subsection apply to an eligible plan and 

the requirements of paragraphs (2) and (3) are met with respect 

to the plan—
H. R. 4—144

(A) in the case of any applicable plan year beginning 

before January 1, 2008, the plan shall not have an accumulated funding deficiency for purposes of section 302 of the 

Employee Retirement Income Security Act of 1974 and 

sections 412 and 4971 of the Internal Revenue Code of 

1986 if contributions to the plan for the plan year are 

not less than the minimum required contribution determined under subsection (e) for the plan for the plan year, 

and 

(B) in the case of any applicable plan year beginning 

on or after January 1, 2008, the minimum required contribution determined under sections 303 of such Act and 

430 of such Code shall, for purposes of sections 302 and 

303 of such Act and sections 412, 430, and 4971 of such 

Code, be equal to the minimum required contribution determined under subsection (e) for the plan for the plan year. 

(2) ACCRUAL RESTRICTIONS.— (A) IN GENERAL.—The requirements of this paragraph 

are met if, effective as of the first day of the first applicable 

plan year and at all times thereafter while an election 

under this section is in effect, the plan provides that—

(i) the accrued benefit, any death or disability benefit, and any social security supplement described in 

the last sentence of section 411(a)(9) of such Code 

and section 204(b)(1)(G) of such Act, of each participant 

are frozen at the amount of such benefit or supplement 

immediately before such first day, and 

(ii) all other benefits under the plan are eliminated, 

but only to the extent the freezing or elimination of such 

benefits would have been permitted under section 411(d)(6) 

of such Code and section 204(g) of such Act if they had 

been implemented by a plan amendment adopted immediately before such first day. 

(B) INCREASES IN SECTION 415 LIMITS.—If a plan provides that an accrued benefit of a participant which has 

been subject to any limitation under section 415 of such 

Code will be increased if such limitation is increased, the 

plan shall not be treated as meeting the requirements 

of this section unless, effective as of the first day of the 

first applicable plan year (or, if later, the date of the 

enactment of this Act) and at all times thereafter while 

an election under this section is in effect, the plan provides 

that any such increase shall not take effect. A plan shall 

not fail to meet the requirements of section 411(d)(6) of 

such Code and section 204(g) of such Act solely because 

the plan is amended to meet the requirements of this 

subparagraph. 

(3) RESTRICTION ON APPLICABLE BENEFIT INCREASES.— (A) IN GENERAL.—The requirements of this paragraph 

are met if no applicable benefit increase takes effect at 

any time during the period beginning on July 26, 2005, 

and ending on the day before the first day of the first 

applicable plan year. 

(B) APPLICABLE BENEFIT INCREASE.—For purposes of 

this paragraph, the term ‘‘applicable benefit increase’’ 

means, with respect to any plan year, any increase in 
H. R. 4—145

liabilities of the plan by plan amendment (or otherwise 

provided in regulations provided by the Secretary) which, 

but for this paragraph, would occur during the plan year 

by reason of—

(i) any increase in benefits, 

(ii) any change in the accrual of benefits, or 

(iii) any change in the rate at which benefits 

become nonforfeitable under the plan. 

(4) EXCEPTION FOR IMPUTED DISABILITY SERVICE.—Paragraphs (2) and (3) shall not apply to any accrual or increase 

with respect to imputed service provided to a participant during 

any period of the participant’s disability occurring on or after 

the effective date of the plan amendment providing the restrictions under paragraph (2) (or on or after July 26, 2005, in 

the case of the restrictions under paragraph (3)) if the participant—

(A) was receiving disability benefits as of such date, 

or 

(B) was receiving sick pay and subsequently determined to be eligible for disability benefits as of such date. 

(c) DEFINITIONS.—For purposes of this section—

(1) ELIGIBLE PLAN.—The term ‘‘eligible plan’’ means a 

defined benefit plan (other than a multiemployer plan) to which 

sections 302 of such Act and 412 of such Code applies which 

is sponsored by an employer—

(A) which is a commercial airline passenger airline, 

or 

(B) the principal business of which is providing catering 

services to a commercial passenger airline. 

(2) APPLICABLE PLAN YEAR.—The term ‘‘applicable plan 

year’’ means each plan year to which the election under subsection (a)(1) applies under subsection (d)(1)(A). 

(d) ELECTIONS AND RELATED TERMS.—

(1) YEARS FOR WHICH ELECTION MADE.—

(A) ALTERNATIVE FUNDING SCHEDULE.—If an election 

under subsection (a)(1) was made with respect to an eligible 

plan, the plan sponsor may select either a plan year beginning in 2006 or a plan year beginning in 2007 as the 

first plan year to which such election applies. The election 

shall apply to such plan year and all subsequent years. 

The election shall be made—

(i) not later than December 31, 2006, in the case 

of an election for a plan year beginning in 2006, or 

(ii) not later than December 31, 2007, in the case 

of an election for a plan year beginning in 2007. 

(B) 10 YEAR AMORTIZATION.—An election under subsection (a)(2) shall be made not later than December 31, 

2007. 

(C) ELECTION OF NEW PLAN YEAR FOR ALTERNATIVE

FUNDING SCHEDULE.—In the case of an election under subsection (a)(1), the plan sponsor may specify a new plan 

year in such election and the plan year of the plan may 

be changed to such new plan year without the approval 

of the Secretary of the Treasury. 

(2) MANNER OF ELECTION.—A plan sponsor shall make any 

election under subsection (a) in such manner as the Secretary 
H. R. 4—146

of the Treasury may prescribe. Such election, once made, may 

be revoked only with the consent of such Secretary. 

(e) MINIMUM REQUIRED CONTRIBUTION.—In the case of an 

eligible plan with respect to which an election is made under 

subsection (a)(1)—

(1) IN GENERAL.—In the case of any applicable plan year 

during the amortization period, the minimum required contribution shall be the amount necessary to amortize the 

unfunded liability of the plan, determined as of the first day 

of the plan year, in equal annual installments (until fully 

amortized) over the remainder of the amortization period. Such 

amount shall be separately determined for each applicable plan 

year. 

(2) YEARS AFTER AMORTIZATION PERIOD.—In the case of 

any plan year beginning after the end of the amortization 

period, section 302(a)(2)(A) of such Act and section 412(a)(2)(A) 

of such Code shall apply to such plan, but the prefunding 

balance and funding standard carryover balance as of the first 

day of the first of such years under section 303(f) of such 

Act and section 430(f) of such Code shall be zero. 

(3) DEFINITIONS.—For purposes of this section—

(A) UNFUNDED LIABILITY.—The term ‘‘unfunded 

liability’’ means the unfunded accrued liability under the 

plan, determined under the unit credit funding method. 

(B) AMORTIZATION PERIOD.—The term ‘‘amortization 

period’’ means the 17-plan year period beginning with the 

first applicable plan year. 

(4) OTHER RULES.—In determining the minimum required 

contribution and amortization amount under this subsection—

(A) the provisions of section 302(c)(3) of such Act and 

section 412(c)(3) of such Code, as in effect before the date 

of enactment of this section, shall apply, 

(B) a rate of interest of 8.85 percent shall be used 

for all calculations requiring an interest rate, and 

(C) the value of plan assets shall be equal to their 

fair market value. 

(5) SPECIAL RULE FOR CERTAIN PLAN SPINOFFS.—For purposes of subsection (b), if, with respect to any eligible plan 

to which this subsection applies—

(A) any applicable plan year includes the date of the 

enactment of this Act, 

(B) a plan was spun off from the eligible plan during 

the plan year but before such date of enactment, 

the minimum required contribution under paragraph (1) for 

the eligible plan for such applicable plan year shall be an 

aggregate amount determined as if the plans were a single 

plan for that plan year (based on the full 12-month plan year 

in effect prior to the spin-off). The employer shall designate 

the allocation of such aggregate amount between such plans 

for the applicable plan year. 

(f) SPECIAL RULES FOR CERTAIN BALANCES AND WAIVERS.—

In the case of an eligible plan with respect to which an election 

is made under subsection (a)(1)—

(1) FUNDING STANDARD ACCOUNT AND CREDIT BALANCES.— Any charge or credit in the funding standard account under 

section 302 of such Act or section 412 of such Code, and any 

prefunding balance or funding standard carryover balance 
H. R. 4—147

under section 303 of such Act or section 430 of such Code, 

as of the day before the first day of the first applicable plan 

year, shall be reduced to zero. 

(2) WAIVED FUNDING DEFICIENCIES.—Any waived funding 

deficiency under sections 302 and 303 of such Act or section 

412 of such Code, as in effect before the date of enactment 

of this section, shall be deemed satisfied as of the first day 

of the first applicable plan year and the amount of such waived 

funding deficiency shall be taken into account in determining 

the plan’s unfunded liability under subsection (e)(3)(A). In the 

case of a plan amendment adopted to satisfy the requirements 

of subsection (b)(2), the plan shall not be deemed to violate 

section 304(b) of such Act or section 412(f) of such Code, as 

so in effect, by reason of such amendment or any increase 

in benefits provided to such plan’s participants under a separate 

plan that is a defined contribution plan or a multiemployer 

plan. 

(g) OTHER RULES FOR PLANS MAKING ELECTION UNDER THIS

SECTION.—

(1) SUCCESSOR PLANS TO CERTAIN PLANS.—If—

(A) an election under paragraph (1) or (2) of subsection 

(a) is in effect with respect to any eligible plan, and 

(B) the eligible plan is maintained by an employer 

that establishes or maintains 1 or more other defined benefit plans (other than any multiemployer plan), and such 

other plans in combination provide benefit accruals to any 

substantial number of successor employees, 

the Secretary of the Treasury may, in the Secretary’s discretion, 

determine that any trust of which any other such plan is 

a part does not constitute a qualified trust under section 401(a) 

of the Internal Revenue Code of 1986 unless all benefit obligations of the eligible plan have been satisfied. For purposes 

of this paragraph, the term ‘‘successor employee’’ means any 

employee who is or was covered by the eligible plan and any 

employees who perform substantially the same type of work 

with respect to the same business operations as an employee 

covered by such eligible plan. 

(2) SPECIAL RULES FOR TERMINATIONS.— (A) PBGC LIABILITY LIMITED.—Section 4022 of the 

Employee Retirement Income Security Act of 1974, as 

amended by this Act, is amended by adding at the end 

the following new subsection: 

‘‘(h) SPECIAL RULE FOR PLANS ELECTING CERTAIN FUNDING

REQUIREMENTS.—If any plan makes an election under section 

402(a)(1) of the Pension Protection Act of 2006 and is terminated 

effective before the end of the 10-year period beginning on the 

first day of the first applicable plan year—

‘‘(1) this section shall be applied—

‘‘(A) by treating the first day of the first applicable 

plan year as the termination date of the plan, and 

‘‘(B) by determining the amount of guaranteed benefits 

on the basis of plan assets and liabilities as of such 

assumed termination date, and 

‘‘(2) notwithstanding section 4044(a), plan assets shall first 

be allocated to pay the amount, if any, by which—

‘‘(A) the amount of guaranteed benefits under this section (determined without regard to paragraph (1) and on 
H. R. 4—148

the basis of plan assets and liabilities as of the actual 

date of plan termination), exceeds 

‘‘(B) the amount determined under paragraph (1).’’. 

(B) TERMINATION PREMIUM.—In applying section 

4006(a)(7)(A) of the Employee Retirement Income Security 

Act of 1974 to an eligible plan during any period in which 

an election under subsection (a)(1) is in effect—

(i) ‘‘$2,500’’ shall be substituted for ‘‘$1,250’’ in 

such section if such plan terminates during the 5-

year period beginning on the first day of the first 

applicable plan year with respect to such plan, and 

(ii) such section shall be applied without regard 

to subparagraph (B) of section 8101(d)(2) of the Deficit 

Reduction Act of 2005 (relating to special rule for plans 

terminated in bankruptcy). 

The substitution described in clause (i) shall not apply 

with respect to any plan if the Secretary of Labor determines that such plan terminated as a result of extraordinary circumstances such as a terrorist attack or other 

similar event. 

(3) LIMITATION ON DEDUCTIONS UNDER CERTAIN PLANS.— Section 404(a)(7)(C)(iv) of the Internal Revenue Code of 1986, 

as added by this Act, shall not apply with respect to any 

taxable year of a plan sponsor of an eligible plan if any 

applicable plan year with respect to such plan ends with or 

within such taxable year. 

(4) NOTICE.—In the case of a plan amendment adopted 

in order to comply with this section, any notice required under 

section 204(h) of such Act or section 4980F(e) of such Code 

shall be provided within 15 days of the effective date of such 

plan amendment. This subsection shall not apply to any plan 

unless such plan is maintained pursuant to one or more collective bargaining agreements between employee representatives 

and 1 or more employers. 

(h) EXCLUSION OF CERTAIN EMPLOYEES FROM MINIMUM COV- ERAGE REQUIREMENTS.— (1) IN GENERAL.—Section 410(b)(3) of such Code is amended 

by striking the last sentence and inserting the following: ‘‘For 

purposes of subparagraph (B), management pilots who are not 

represented in accordance with title II of the Railway Labor 

Act shall be treated as covered by a collective bargaining agreement described in such subparagraph if the management pilots 

manage the flight operations of air pilots who are so represented 

and the management pilots are, pursuant to the terms of the 

agreement, included in the group of employees benefitting 

under the trust described in such subparagraph. Subparagraph 

(B) shall not apply in the case of a plan which provides contributions or benefits for employees whose principal duties are not 

customarily performed aboard an aircraft in flight (other than 

management pilots described in the preceding sentence).’’

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to years beginning before, on, or after the 

date of the enactment of this Act. 

(i) EXTENSION OF SPECIAL RULE FOR ADDITIONAL FUNDING

REQUIREMENTS.—In the case of an employer which is a commercial 

passenger airline, section 302(d)(12) of the Employee Retirement 

Income Security Act of 1974 and section 412(l)(12) of the Internal 
H. R. 4—149

Revenue Code of 1986, as in effect before the date of the enactment 

of this Act, shall each be applied—

(1) by substituting ‘‘December 28, 2007’’ for ‘‘December 

28, 2005’’ in subparagraph (D)(i) thereof, and 

(2) without regard to subparagraph (D)(ii). 

(j) EFFECTIVE DATE.—Except as otherwise provided in this section, the provisions of and amendments made by this section shall 

apply to plan years ending after the date of the enactment of 

this Act. 

SEC. 403. LIMITATION ON PBGC GUARANTEE OF SHUTDOWN AND 

OTHER BENEFITS. 

(a) IN GENERAL.—Section 4022(b) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1322(b)) is amended by 

adding at the end the following: 

‘‘(8) If an unpredictable contingent event benefit (as defined 

in section 206(g)(1)) is payable by reason of the occurrence 

of any event, this section shall be applied as if a plan amendment had been adopted on the date such event occurred.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to benefits that become payable as a result of an 

event which occurs after July 26, 2005. 

SEC. 404. RULES RELATING TO BANKRUPTCY OF EMPLOYER. 

(a) GUARANTEE.—Section 4022 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1322) is amended by adding 

at the end the following: 

‘‘(g) BANKRUPTCY FILING SUBSTITUTED FOR TERMINATION

DATE.—If a contributing sponsor of a plan has filed or has had 

filed against such person a petition seeking liquidation or reorganization in a case under title 11, United States Code, or under 

any similar Federal law or law of a State or political subdivision, 

and the case has not been dismissed as of the termination date 

of the plan, then this section shall be applied by treating the 

date such petition was filed as the termination date of the plan.’’. 

(b) ALLOCATION OF ASSETS AMONG PRIORITY GROUPS IN BANKRUPTCY PROCEEDINGS.—Section 4044 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1344) is amended by adding 

at the end the following: 

‘‘(e) BANKRUPTCY FILING SUBSTITUTED FOR TERMINATION

DATE.—If a contributing sponsor of a plan has filed or has had 

filed against such person a petition seeking liquidation or reorganization in a case under title 11, United States Code, or under 

any similar Federal law or law of a State or political subdivision, 

and the case has not been dismissed as of the termination date 

of the plan, then subsection (a)(3) shall be applied by treating 

the date such petition was filed as the termination date of the 

plan.’’. 

(c) EFFECTIVE DATE.—The amendments made this section shall 

apply with respect to proceedings initiated under title 11, United 

States Code, or under any similar Federal law or law of a State 

or political subdivision, on or after the date that is 30 days after 

the date of enactment of this Act. 

SEC. 405. PBGC PREMIUMS FOR SMALL PLANS. 

(a) SMALL PLANS.—Paragraph (3) of section 4006(a) of the 

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

1306(a)) is amended—
H. R. 4—150

(1) by striking ‘‘The additional’’ in subparagraph (E)(i) and 

inserting ‘‘Except as provided in subparagraph (H), the additional’’, and 

(2) by inserting after subparagraph (G) the following new 

subparagraph: 

‘‘(H)(i) In the case of an employer who has 25 or fewer 

employees on the first day of the plan year, the additional premium 

determined under subparagraph (E) for each participant shall not 

exceed $5 multiplied by the number of participants in the plan 

as of the close of the preceding plan year. 

‘‘(ii) For purposes of clause (i), whether an employer has 25 

or fewer employees on the first day of the plan year is determined 

by taking into consideration all of the employees of all members 

of the contributing sponsor’s controlled group. In the case of a 

plan maintained by two or more contributing sponsors, the 

employees of all contributing sponsors and their controlled groups 

shall be aggregated for purposes of determining whether the 25-

or-fewer-employees limitation has been satisfied.’’

(b) EFFECTIVE DATES.—The amendment made by this section 

shall apply to plan years beginning after December 31, 2006. 

SEC. 406. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM 

OVERPAYMENT REFUNDS. 

(a) IN GENERAL.—Section 4007(b) of the Employment Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is amended—

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

(2) by inserting at the end the following new paragraph: 

‘‘(2) The corporation is authorized to pay, subject to regulations 

prescribed by the corporation, interest on the amount of any overpayment of premium refunded to a designated payor. Interest under 

this paragraph shall be calculated at the same rate and in the 

same manner as interest is calculated for underpayments under 

paragraph (1).’’

(b) EFFECTIVE DATE.—The amendments made by subsection 

(a) shall apply to interest accruing for periods beginning not earlier 

than the date of the enactment of this Act. 

SEC. 407. RULES FOR SUBSTANTIAL OWNER BENEFITS IN TERMINATED 

PLANS. 

(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—Section 

4022(b)(5) of the Employee Retirement Income Security Act of 1974 

(29 U.S.C. 1322(b)(5)) is amended to read as follows: 

‘‘(5)(A) For purposes of this paragraph, the term ‘majority 

owner’ means an individual who, at any time during the 60-month 

period ending on the date the determination is being made—

‘‘(i) owns the entire interest in an unincorporated trade 

or business, 

‘‘(ii) in the case of a partnership, is a partner who owns, 

directly or indirectly, 50 percent or more of either the capital 

interest or the profits interest in such partnership, or 

‘‘(iii) in the case of a corporation, owns, directly or 

indirectly, 50 percent or more in value of either the voting 

stock of that corporation or all the stock of that corporation. 

For purposes of clause (iii), the constructive ownership rules of 

section 1563(e) of the Internal Revenue Code of 1986 (other than 

paragraph (3)(C) thereof) shall apply, including the application of 

such rules under section 414(c) of such Code. 
H. R. 4—151

‘‘(B) In the case of a participant who is a majority owner, 

the amount of benefits guaranteed under this section shall equal 

the product of—

‘‘(i) a fraction (not to exceed 1) the numerator of which 

is the number of years from the later of the effective date 

or the adoption date of the plan to the termination date, and 

the denominator of which is 10, and 

‘‘(ii) the amount of benefits that would be guaranteed under 

this section if the participant were not a majority owner.’’

(b) MODIFICATION OF ALLOCATION OF ASSETS.— (1) Section 4044(a)(4)(B) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is 

amended by striking ‘‘section 4022(b)(5)’’ and inserting ‘‘section 

4022(b)(5)(B)’’. 

(2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 

amended—

(A) by striking ‘‘(5)’’ in paragraph (2) and inserting 

‘‘(4), (5),’’, and 

(B) by redesignating paragraphs (3) through (6) as 

paragraphs (4) through (7), respectively, and by inserting 

after paragraph (2) the following new paragraph: 

‘‘(3) If assets available for allocation under paragraph (4) 

of subsection (a) are insufficient to satisfy in full the benefits 

of all individuals who are described in that paragraph, the 

assets shall be allocated first to benefits described in subparagraph (A) of that paragraph. Any remaining assets shall then 

be allocated to benefits described in subparagraph (B) of that 

paragraph. If assets allocated to such subparagraph (B) are 

insufficient to satisfy in full the benefits described in that 

subparagraph, the assets shall be allocated pro rata among 

individuals on the basis of the present value (as of the termination date) of their respective benefits described in that 

subparagraph.’’. 

(c) CONFORMING AMENDMENTS.—

(1) Section 4021 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1321) is amended—

(A) in subsection (b)(9), by striking ‘‘as defined in section 4022(b)(6)’’, and 

(B) by adding at the end the following new subsection: 

‘‘(d) For purposes of subsection (b)(9), the term ‘substantial 

owner’ means an individual who, at any time during the 60-month 

period ending on the date the determination is being made—

‘‘(1) owns the entire interest in an unincorporated trade 

or business, 

‘‘(2) in the case of a partnership, is a partner who owns, 

directly or indirectly, more than 10 percent of either the capital 

interest or the profits interest in such partnership, or 

‘‘(3) in the case of a corporation, owns, directly or indirectly, 

more than 10 percent in value of either the voting stock of 

that corporation or all the stock of that corporation. 

For purposes of paragraph (3), the constructive ownership rules 

of section 1563(e) of the Internal Revenue Code of 1986 (other 

than paragraph (3)(C) thereof) shall apply, including the application 

of such rules under section 414(c) of such Code.’’. 

(2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 

is amended by striking ‘‘section 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’. 
H. R. 4—152

(d) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to plan terminations—

(A) under section 4041(c) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1341(c)) with 

respect to which notices of intent to terminate are provided 

under section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) 

after December 31, 2005, and 

(B) under section 4042 of such Act (29 U.S.C. 1342) 

with respect to which notices of determination are provided 

under such section after such date. 

(2) CONFORMING AMENDMENTS.—The amendments made by 

subsection (c) shall take effect on January 1, 2006. 

SEC. 408. ACCELERATION OF PBGC COMPUTATION OF BENEFITS 

ATTRIBUTABLE TO RECOVERIES FROM EMPLOYERS. 

(a) MODIFICATION OF AVERAGE RECOVERY PERCENTAGE OF OUT- STANDING AMOUNT OF BENEFIT LIABILITIES PAYABLE BY CORPORA- TION TO PARTICIPANTS AND BENEFICIARIES.—Section 4022(c)(3)(B)(ii) 

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

1322(c)(3)(B)(ii)) is amended to read as follows: 

‘‘(ii) notices of intent to terminate were provided 

(or in the case of a termination by the corporation, 

a notice of determination under section 4042 was 

issued) during the 5-Federal fiscal year period ending 

with the third fiscal year preceding the fiscal year 

in which occurs the date of the notice of intent to 

terminate (or the notice of determination under section 

4042) with respect to the plan termination for which 

the recovery ratio is being determined.’’

(b) VALUATION OF SECTION 4062(c) LIABILITY FOR DETERMINING

AMOUNTS PAYABLE BY CORPORATION TO PARTICIPANTS AND BENE- FICIARIES.—

(1) SINGLE-EMPLOYER PLAN BENEFITS GUARANTEED.—Section 4022(c)(3)(A) of the Employee Retirement Income Security 

Act of 1974 (29 U.S.C. 13) is amended to read as follows: 

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

(C), the term ‘recovery ratio’ means the ratio which—

‘‘(i) the sum of the values of all recoveries under 

section 4062, 4063, or 4064, determined by the corporation in connection with plan terminations described 

under subparagraph (B), bears to 

‘‘(ii) the sum of all unfunded benefit liabilities 

under such plans as of the termination date in connection with any such prior termination.’’. 

(2) ALLOCATION OF ASSETS.—Section 4044 of the Employee 

Retirement Income Security Act of 1974 (29 U.S.C. 1362) is 

amended by adding at the end the following new subsection: 

‘‘(e) VALUATION OF SECTION 4062(c) LIABILITY FOR DETERMINING

AMOUNTS PAYABLE BY CORPORATION TO PARTICIPANTS AND BENEFICIARIES.—

‘‘(1) IN GENERAL.—In the case of a terminated plan, the 

value of the recovery of liability under section 4062(c) allocable 

as a plan asset under this section for purposes of determining 

the amount of benefits payable by the corporation shall be 

determined by multiplying—
H. R. 4—153

‘‘(A) the amount of liability under section 4062(c) as 

of the termination date of the plan, by 

‘‘(B) the applicable section 4062(c) recovery ratio. 

‘‘(2) SECTION 4062(c) RECOVERY RATIO.—For purposes of 

this subsection—

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

(C), the term ‘section 4062(c) recovery ratio’ means the 

ratio which—

‘‘(i) the sum of the values of all recoveries under 

section 4062(c) determined by the corporation in 

connection with plan terminations described under 

subparagraph (B), bears to 

‘‘(ii) the sum of all the amounts of liability under 

section 4062(c) with respect to such plans as of the 

termination date in connection with any such prior 

termination. 

‘‘(B) PRIOR TERMINATIONS.—A plan termination 

described in this subparagraph is a termination with 

respect to which—

‘‘(i) the value of recoveries under section 4062(c) 

have been determined by the corporation, and 

‘‘(ii) notices of intent to terminate were provided 

(or in the case of a termination by the corporation, 

a notice of determination under section 4042 was 

issued) during the 5-Federal fiscal year period ending 

with the third fiscal year preceding the fiscal year 

in which occurs the date of the notice of intent to 

terminate (or the notice of determination under section 

4042) with respect to the plan termination for which 

the recovery ratio is being determined. 

‘‘(C) EXCEPTION.—In the case of a terminated plan 

with respect to which the outstanding amount of benefit 

liabilities exceeds $20,000,000, the term ‘section 4062(c) 

recovery ratio’ means, with respect to the termination of 

such plan, the ratio of—

‘‘(i) the value of the recoveries on behalf of the 

plan under section 4062(c), to 

‘‘(ii) the amount of the liability owed under section 

4062(c) as of the date of plan termination to the trustee 

appointed under section 4042 (b) or (c). 

‘‘(3) SUBSECTION NOT TO APPLY.—This subsection shall not 

apply with respect to the determination of—

‘‘(A) whether the amount of outstanding benefit liabilities exceeds $20,000,000, or 

‘‘(B) the amount of any liability under section 4062 

to the corporation or the trustee appointed under section 

4042 (b) or (c). 

‘‘(4) DETERMINATIONS.—Determinations under this subsection shall be made by the corporation. Such determinations 

shall be binding unless shown by clear and convincing evidence 

to be unreasonable.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply for any termination for which notices of intent to terminate are provided (or in the case of a termination by the corporation, 

a notice of determination under section 4042 under the Employee 

Retirement Income Security Act of 1974 is issued) on or after 
H. R. 4—154

the date which is 30 days after the date of enactment of this 

section. 

SEC. 409. TREATMENT OF CERTAIN PLANS WHERE CESSATION OR 

CHANGE IN MEMBERSHIP OF A CONTROLLED GROUP. 

(a) IN GENERAL.—Section 4041(b) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1341(b)) is amended by 

adding at the end the following new paragraph: 

‘‘(5) SPECIAL RULE FOR CERTAIN PLANS WHERE CESSATION

OR CHANGE IN MEMBERSHIP OF A CONTROLLED GROUP.—

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

(B), if—

‘‘(i) there is transaction or series of transactions 

which result in a person ceasing to be a member of 

a controlled group, and 

‘‘(ii) such person immediately before the transaction or series of transactions maintained a singleemployer plan which is a defined benefit plan which 

is fully funded, 

then the interest rate used in determining whether the 

plan is sufficient for benefit liabilities or to otherwise assess 

plan liabilities for purposes of this subsection or section 

4042(a)(4) shall be not less than the interest rate used 

in determining whether the plan is fully funded. 

‘‘(B) LIMITATIONS.—Subparagraph (A) shall not apply 

to any transaction or series of transactions unless—

‘‘(i) any employer maintaining the plan immediately before or after such transaction or series of 

transactions—

‘‘(I) has an outstanding senior unsecured debt 

instrument which is rated investment grade by 

each of the nationally recognized statistical rating 

organizations for corporate bonds that has issued 

a credit rating for such instrument, or 

‘‘(II) if no such debt instrument of such 

employer has been rated by such an organization 

but 1 or more of such organizations has made 

an issuer credit rating for such employer, all such 

organizations which have so rated the employer 

have rated such employer investment grade, and 

‘‘(ii) the employer maintaining the plan after the 

transaction or series of transactions employs at least 

20 percent of the employees located in the United 

States who were employed by such employer immediately before the transaction or series of transactions. 

‘‘(C) FULLY FUNDED.—For purposes of subparagraph 

(A), a plan shall be treated as fully funded with respect 

to any transaction or series of transactions if—

‘‘(i) in the case of a transaction or series of transactions which occur in a plan year beginning before 

January 1, 2008, the funded current liability percentage determined under section 302(d) for the plan year 

is at least 100 percent, and 

‘‘(ii) in the case of a transaction or series of transactions which occur in a plan year beginning on or 
H. R. 4—155

after such date, the funding target attainment percentage determined under section 303 is, as of the valuation 

date for such plan year, at least 100 percent. 

‘‘(D) 2 YEAR LIMITATION.—Subparagraph (A) shall not 

apply to any transaction or series of transactions if the 

plan referred to in subparagraph (A)(ii) is terminated under 

section 4041(c) or 4042 after the close of the 2-year period 

beginning on the date on which the first such transaction 

occurs.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to any transaction or series of transactions occurring 

on and after the date of the enactment of this Act. 

SEC. 410. MISSING PARTICIPANTS. 

(a) IN GENERAL.—Section 4050 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating subsection (c) as subsection (e) and by inserting after subsection (b) the following new subsections: 

‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall prescribe 

rules similar to the rules in subsection (a) for multiemployer plans 

covered by this title that terminate under section 4041A. 

‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

‘‘(1) TRANSFER TO CORPORATION.—The plan administrator 

of a plan described in paragraph (4) may elect to transfer 

a missing participant’s benefits to the corporation upon termination of the plan. 

‘‘(2) INFORMATION TO THE CORPORATION.—To the extent 

provided in regulations, the plan administrator of a plan 

described in paragraph (4) shall, upon termination of the plan, 

provide the corporation information with respect to benefits 

of a missing participant if the plan transfers such benefits—

‘‘(A) to the corporation, or 

‘‘(B) to an entity other than the corporation or a plan 

described in paragraph (4)(B)(ii). 

‘‘(3) PAYMENT BY THE CORPORATION.—If benefits of a 

missing participant were transferred to the corporation under 

paragraph (1), the corporation shall, upon location of the participant or beneficiary, pay to the participant or beneficiary the 

amount transferred (or the appropriate survivor benefit) 

either—

‘‘(A) in a single sum (plus interest), or 

‘‘(B) in such other form as is specified in regulations 

of the corporation. 

‘‘(4) PLANS DESCRIBED.—A plan is described in this paragraph if—

‘‘(A) the plan is a pension plan (within the meaning 

of section 3(2))—

‘‘(i) to which the provisions of this section do not 

apply (without regard to this subsection), and 

‘‘(ii) which is not a plan described in paragraphs 

(2) through (11) of section 4021(b), and 

‘‘(B) at the time the assets are to be distributed upon 

termination, the plan—

‘‘(i) has missing participants, and 

‘‘(ii) has not provided for the transfer of assets 

to pay the benefits of all missing participants to 
H. R. 4—156

another pension plan (within the meaning of section 

3(2)). 

‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—Subsections (a)(1) 

and (a)(3) shall not apply to a plan described in paragraph 

(4).’’. 

(b) CONFORMING AMENDMENTS.—Section 206(f) of such Act (29 

U.S.C. 1056(f)) is amended—

(1) by striking ‘‘title IV’’ and inserting ‘‘section 4050’’; and 

(2) by striking ‘‘the plan shall provide that,’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions made after final regulations implementing subsections (c) and (d) of section 4050 of the Employee 

Retirement Income Security Act of 1974 (as added by subsection 

(a)), respectively, are prescribed. 

SEC. 411. DIRECTOR OF THE PENSION BENEFIT GUARANTY CORPORATION. 

(a) IN GENERAL.—Title IV of the Employee Retirement Income 

Security Act of 1974 (29 U.S.C. 1301 et seq.) is amended—

(1) by striking the second sentence of section 4002(a) and 

inserting the following: ‘‘In carrying out its functions under 

this title, the corporation shall be administered by a Director, 

who shall be appointed by the President, by and with the 

advice and consent of the Senate, and who shall act in accordance with the policies established by the board.’’; and 

(2) in section 4003(b), by—

(A) striking ‘‘under this title, any member’’ and 

inserting ‘‘under this title, the Director, any member’’; and 

(B) striking ‘‘designated by the chairman’’ and inserting 

‘‘designated by the Director or chairman’’. 

(b) COMPENSATION OF DIRECTOR.—Section 5314 of title 5, 

United States Code, is amended by adding at the end the following 

new item: 

‘‘Director, Pension Benefit Guaranty Corporation.’’. 

(c) JURISDICTION OF NOMINATION.—

(1) IN GENERAL.—The Committee on Finance of the Senate 

and the Committee on Health, Education, Labor, and Pensions 

of the Senate shall have joint jurisdiction over the nomination 

of a person nominated by the President to fill the position 

of Director of the Pension Benefit Guaranty Corporation under 

section 4002 of the Employee Retirement Income Security Act 

of 1974 (29 U.S.C. 1302) (as amended by this Act), and if 

one committee votes to order reported such a nomination, the 

other shall report within 30 calendar days, or be automatically 

discharged. 

(2) RULEMAKING OF THE SENATE.—This subsection is 

enacted by Congress—

(A) as an exercise of rulemaking power of the Senate, 

and as such it is deemed a part of the rules of the Senate, 

but applicable only with respect to the procedure to be 

followed in the Senate in the case of a nomination described 

in such sentence, and it supersedes other rules only to 

the extent that it is inconsistent with such rules; and 

(B) with full recognition of the constitutional right 

of the Senate to change the rules (so far as relating to 

the procedure of the Senate) at any time, in the same 
H. R. 4—157

manner and to the same extent as in the case of any 

other rule of the Senate. 

(d) TRANSITION.—The term of the individual serving as Executive Director of the Pension Benefit Guaranty Corporation on the 

date of enactment of this Act shall expire on such date of enactment. 

Such individual, or any other individual, may serve as interim 

Director of such Corporation until an individual is appointed as 

Director of such Corporation under section 4002 of the Employee 

Retirement Income Security Act of 1974 (29 U.S.C. 1302) (as 

amended by this Act). 

SEC. 412. INCLUSION OF INFORMATION IN THE PBGC ANNUAL REPORT. 

Section 4008 of the Employee Retirement Income Security Act 

of 1974 (29 U.S.C. 1308) is amended by—

(1) striking ‘‘As soon as practicable’’ and inserting ‘‘(a) 

As soon as practicable’’; and 

(2) adding at the end the following: 

‘‘(b) The report under subsection (a) shall include—

‘‘(1) a summary of the Pension Insurance Modeling System 

microsimulation model, including the specific simulation parameters, specific initial values, temporal parameters, and policy 

parameters used to calculate the financial statements for the 

corporation; 

‘‘(2) a comparison of—

‘‘(A) the average return on investments earned with 

respect to assets invested by the corporation for the year 

to which the report relates; and 

‘‘(B) an amount equal to 60 percent of the average 

return on investment for such year in the Standard & 

Poor’s 500 Index, plus 40 percent of the average return 

on investment for such year in the Lehman Aggregate 

Bond Index (or in a similar fixed income index); and 

‘‘(3) a statement regarding the deficit or surplus for such 

year that the corporation would have had if the corporation 

had earned the return described in paragraph (2)(B) with 

respect to assets invested by the corporation.’’. 

TITLE V—DISCLOSURE 

SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE. 

(a) IN GENERAL.—Section 101(f) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1021(f)) is amended to 

read as follows: 

‘‘(f) DEFINED BENEFIT PLAN FUNDING NOTICES.— ‘‘(1) IN GENERAL.—The administrator of a defined benefit 

plan to which title IV applies shall for each plan year provide 

a plan funding notice to the Pension Benefit Guaranty Corporation, to each plan participant and beneficiary, to each labor 

organization representing such participants or beneficiaries, 

and, in the case of a multiemployer plan, to each employer 

that has an obligation to contribute to the plan. 

‘‘(2) INFORMATION CONTAINED IN NOTICES.—

‘‘(A) IDENTIFYING INFORMATION.—Each notice required 

under paragraph (1) shall contain identifying information, 

including the name of the plan, the address and phone 

number of the plan administrator and the plan’s principal 
H. R. 4—158

administrative officer, each plan sponsor’s employer identification number, and the plan number of the plan. 

‘‘(B) SPECIFIC INFORMATION.—A plan funding notice 

under paragraph (1) shall include—

‘‘(i)(I) in the case of a single-employer plan, a statement as to whether the plan’s funding target attainment percentage (as defined in section 303(d)(2)) for 

the plan year to which the notice relates, and for 

the 2 preceding plan years, is at least 100 percent 

(and, if not, the actual percentages), or 

‘‘(II) in the case of a multiemployer plan, a statement as to whether the plan’s funded percentage (as 

defined in section 305(i)) for the plan year to which 

the notice relates, and for the 2 preceding plan years, 

is at least 100 percent (and, if not, the actual percentages), 

‘‘(ii)(I) in the case of a single-employer plan, a 

statement of—

‘‘(aa) the total assets (separately stating the 

prefunding balance and the funding standard 

carryover balance) and liabilities of the plan, determined in the same manner as under section 303, 

for the plan year for which the latest annual report 

filed under section 104(a) was filed and for the 

2 preceding plan years, as reported in the annual 

report for each such plan year, and 

‘‘(bb) the value of the plan’s assets and liabilities for the plan year to which the notice relates 

as of the last day of the plan year to which the 

notice relates determined using the asset valuation 

under subclause (II) of section 4006(a)(3)(E)(iii) 

and the interest rate under section 

4006(a)(3)(E)(iv), and 

‘‘(II) in the case of a multiemployer plan, a statement of the value of the plan’s assets and liabilities 

for the plan year to which the notice relates as the 

last day of such plan year and the preceding 2 plan 

years, 

‘‘(iii) a statement of the number of participants 

who are—

‘‘(I) retired or separated from service and are 

receiving benefits, 

‘‘(II) retired or separated participants entitled 

to future benefits, and 

‘‘(III) active participants under the plan, 

‘‘(iv) a statement setting forth the funding policy 

of the plan and the asset allocation of investments 

under the plan (expressed as percentages of total 

assets) as of the end of the plan year to which the 

notice relates, 

‘‘(v) in the case of a multiemployer plan, whether 

the plan was in critical or endangered status under 

section 305 for such plan year and, if so—

‘‘(I) a statement describing how a person may 

obtain a copy of the plan’s funding improvement 

or rehabilitation plan, as appropriate, adopted 

under section 305 and the actuarial and financial 
H. R. 4—159

data that demonstrate any action taken by the 

plan toward fiscal improvement, and 

‘‘(II) a summary of any funding improvement 

plan, rehabilitation plan, or modification thereof 

adopted under section 305 during the plan year 

to which the notice relates, 

‘‘(vi) in the case of any plan amendment, scheduled 

benefit increase or reduction, or other known event 

taking effect in the current plan year and having a 

material effect on plan liabilities or assets for the 

year (as defined in regulations by the Secretary), an 

explanation of the amendment, schedule increase or 

reduction, or event, and a projection to the end of 

such plan year of the effect of the amendment, scheduled increase or reduction, or event on plan liabilities, 

‘‘(vii)(I) in the case of a single-employer plan, a 

summary of the rules governing termination of singleemployer plans under subtitle C of title IV, or 

‘‘(II) in the case of a multiemployer plan, a summary of the rules governing reorganization or insolvency, including the limitations on benefit payments, 

‘‘(viii) a general description of the benefits under 

the plan which are eligible to be guaranteed by the 

Pension Benefit Guaranty Corporation, along with an 

explanation of the limitations on the guarantee and 

the circumstances under which such limitations apply, 

‘‘(ix) a statement that a person may obtain a copy 

of the annual report of the plan filed under section 

104(a) upon request, through the Internet website of 

the Department of Labor, or through an Intranet 

website maintained by the applicable plan sponsor (or 

plan administrator on behalf of the plan sponsor), and 

‘‘(x) if applicable, a statement that each contributing sponsor, and each member of the contributing 

sponsor’s controlled group, of the single-employer plan 

was required to provide the information under section 

4010 for the plan year to which the notice relates. 

‘‘(C) OTHER INFORMATION.—Each notice under paragraph (1) shall include—

‘‘(i) in the case of a multiemployer plan, a statement that the plan administrator shall provide, upon 

written request, to any labor organization representing 

plan participants and beneficiaries and any employer 

that has an obligation to contribute to the plan, a 

copy of the annual report filed with the Secretary 

under section 104(a), and 

‘‘(ii) any additional information which the plan 

administrator elects to include to the extent not inconsistent with regulations prescribed by the Secretary. 

‘‘(3) TIME FOR PROVIDING NOTICE.—

‘‘(A) IN GENERAL.—Any notice under paragraph (1) 

shall be provided not later than 120 days after the end 

of the plan year to which the notice relates. 

‘‘(B) EXCEPTION FOR SMALL PLANS.—In the case of a 

small plan (as such term is used under section 303(g)(2)(B)) 

any notice under paragraph (1) shall be provided upon 

filing of the annual report under section 104(a). 
H. R. 4—160

‘‘(4) FORM AND MANNER.—Any notice under paragraph (1)—

‘‘(A) shall be provided in a form and manner prescribed 

in regulations of the Secretary, 

‘‘(B) shall be written in a manner so as to be understood 

by the average plan participant, and 

‘‘(C) may be provided in written, electronic, or other 

appropriate form to the extent such form is reasonably 

accessible to persons to whom the notice is required to 

be provided.’’. 

(b) REPEAL OF NOTICE TO PARTICIPANTS OF FUNDING STATUS.—

(1) IN GENERAL.—Title IV of such Act (29 U.S.C. 1301 

et seq.) is amended by striking section 4011. 

(2) CLERICAL AMENDMENT.—Section 1 of such Act is 

amended in the table of contents by striking the item relating 

to section 4011. 

(c) MODEL NOTICE.—Not later than 1 year after the date of 

the enactment of this Act, the Secretary of Labor shall publish 

a model version of the notice required by section 101(f) of the 

Employee Retirement Income Security Act of 1974. The Secretary 

of Labor may promulgate any interim final rules as the Secretary 

determines appropriate to carry out the provisions of this subsection. 

(d) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007, 

except that the amendment made by subsection (b) shall apply 

to plan years beginning after December 31, 2006. 

(2) TRANSITION RULE.—Any requirement under section 

101(f) of the Employee Retirement Income Security Act of 1974 

(as amended by this section) to report the funding target attainment percentage or funded percentage of a plan with respect 

to any plan year beginning before January 1, 2008, shall be 

treated as met if the plan reports—

(A) in the case of a plan year beginning in 2006, 

the funded current liability percentage (as defined in section 302(d)(8) of such Act) of the plan for such plan year, 

and 

(B) in the case of a plan year beginning in 2007, 

the funding target attainment percentage or funded 

percentage as determined using such methods of estimation 

as the Secretary of the Treasury may provide. 

SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN INFORMATION. 

(a) FINANCIAL INFORMATION WITH RESPECT TO MULTIEMPLOYER

PLANS.—

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

Income Security Act of 1974 (29 U.S.C. 1021), as amended 

by section 103, is amended—

(A) by redesignating subsection (k) as subsection (l); 

and 

(B) by inserting after subsection (j) the following new 

subsection: 

‘‘(k) MULTIEMPLOYER PLAN INFORMATION MADE AVAILABLE ON

REQUEST.—

‘‘(1) IN GENERAL.—Each administrator of a multiemployer 

plan shall, upon written request, furnish to any plan participant 
H. R. 4—161

or beneficiary, employee representative, or any employer that 

has an obligation to contribute to the plan—

‘‘(A) a copy of any periodic actuarial report (including 

any sensitivity testing) received by the plan for any plan 

year which has been in the plan’s possession for at least 

30 days, 

‘‘(B) a copy of any quarterly, semi-annual, or annual 

financial report prepared for the plan by any plan investment manager or advisor or other fiduciary which has 

been in the plan’s possession for at least 30 days, and 

‘‘(C) a copy of any application filed with the Secretary 

of the Treasury requesting an extension under section 304 

of this Act or section 431(d) of the Internal Revenue Code 

of 1986 and the determination of such Secretary pursuant 

to such application. 

‘‘(2) COMPLIANCE.—Information required to be provided 

under paragraph (1)—

‘‘(A) shall be provided to the requesting participant, 

beneficiary, or employer within 30 days after the request 

in a form and manner prescribed in regulations of the 

Secretary, 

‘‘(B) may be provided in written, electronic, or other 

appropriate form to the extent such form is reasonably 

accessible to persons to whom the information is required 

to be provided, and 

‘‘(C) shall not—

‘‘(i) include any individually identifiable information regarding any plan participant, beneficiary, 

employee, fiduciary, or contributing employer, or 

‘‘(ii) reveal any proprietary information regarding 

the plan, any contributing employer, or entity providing services to the plan. 

‘‘(3) LIMITATIONS.—In no case shall a participant, beneficiary, or employer be entitled under this subsection to receive 

more than one copy of any report or application described 

in paragraph (1) during any one 12-month period. The administrator may make a reasonable charge to cover copying, mailing, 

and other costs of furnishing copies of information pursuant 

to paragraph (1). The Secretary may by regulations prescribe 

the maximum amount which will constitute a reasonable charge 

under the preceding sentence.’’. 

(2) ENFORCEMENT.—Section 502(c)(4) of such Act (29 U.S.C. 

1132(c)(4)) is amended by striking ‘‘section 101(j)’’ and inserting 

‘‘subsection (j) or (k) of section 101’’. 

(3) REGULATIONS.—The Secretary shall prescribe regulations under section 101(k)(2) of the Employee Retirement 

Income Security Act of 1974 (as added by paragraph (1)) not 

later than 1 year after the date of the enactment of this Act. 

(b) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY TO MULTIEM- PLOYER PLANS.—

(1) IN GENERAL.—Section 101 of such Act (as amended 

by subsection (a)) is amended—

(A) by redesignating subsection (l) as subsection (m); 

and 

(B) by inserting after subsection (k) the following new 

subsection: 

‘‘(l) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY.—
H. R. 4—162

‘‘(1) IN GENERAL.—The plan sponsor or administrator of 

a multiemployer plan shall, upon written request, furnish to 

any employer who has an obligation to contribute to the plan 

a notice of—

‘‘(A) the estimated amount which would be the amount 

of such employer’s withdrawal liability under part 1 of 

subtitle E of title IV if such employer withdrew on the 

last day of the plan year preceding the date of the request, 

and 

‘‘(B) an explanation of how such estimated liability 

amount was determined, including the actuarial assumptions and methods used to determine the value of the 

plan liabilities and assets, the data regarding employer 

contributions, unfunded vested benefits, annual changes 

in the plan’s unfunded vested benefits, and the application 

of any relevant limitations on the estimated withdrawal 

liability. 

For purposes of subparagraph (B), the term ‘employer contribution’ means, in connection with a participant, a contribution 

made by an employer as an employer of such participant. 

‘‘(2) COMPLIANCE.—Any notice required to be provided 

under paragraph (1)—

‘‘(A) shall be provided in a form and manner prescribed 

in regulations of the Secretary to the requesting employer 

within—

‘‘(i) 180 days after the request, or 

‘‘(ii) subject to regulations of the Secretary, such 

longer time as may be necessary in the case of a 

plan that determines withdrawal liability based on 

any method described under paragraph (4) or (5) of 

section 4211(c); and 

‘‘(B) may be provided in written, electronic, or other 

appropriate form to the extent such form is reasonably 

accessible to employers to whom the information is required 

to be provided. 

‘‘(3) LIMITATIONS.—In no case shall an employer be entitled 

under this subsection to receive more than one notice described 

in paragraph (1) during any one 12-month period. The person 

required to provide such notice may make a reasonable charge 

to cover copying, mailing, and other costs of furnishing such 

notice pursuant to paragraph (1). The Secretary may by regulations prescribe the maximum amount which will constitute 

a reasonable charge under the preceding sentence.’’. 

(2) ENFORCEMENT.—Section 502(c)(4) of such Act (29 U.S.C. 

1132(c)(4)) is amended by striking ‘‘section 101(j) or (k)’’ and 

inserting ‘‘subsection (j), (k), or (l) of section 101’’. 

(c) NOTICE OF AMENDMENT REDUCING FUTURE ACCRUALS.— (1) AMENDMENT OF ERISA.—Section 204(h)(1) of such Act 

(29 U.S.C. 1054(h)(1)) is amended by inserting at the end 

before the period the following: ‘‘and to each employer who 

has an obligation to contribute to the plan’’. 

(2) AMENDMENT OF INTERNAL REVENUE CODE.—Section 

4980F(e)(1) of such Code is amended by adding at the end 

before the period the following: ‘‘and to each employer who 

has an obligation to contribute to the plan’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007. 
H. R. 4—163

SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIREMENTS. 

(a) ADDITIONAL ANNUAL REPORTING REQUIREMENTS WITH

RESPECT TO DEFINED BENEFIT PLANS.—

(1) IN GENERAL.—Section 103 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1023) is amended—

(A) in subsection (a)(1)(B), by striking ‘‘subsections (d) 

and (e)’’ and inserting ‘‘subsections (d), (e), and (f)’’; and 

(B) by adding at the end the following new subsection: 

‘‘(f) ADDITIONAL INFORMATION WITH RESPECT TO DEFINED BENEFIT PLANS.—

‘‘(1) LIABILITIES UNDER 2 OR MORE PLANS.—

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

to participants or their beneficiaries under a defined benefit 

plan as of the end of a plan year consist (in whole or 

in part) of liabilities to such participants and beneficiaries 

under 2 or more pension plans as of immediately before 

such plan year, an annual report under this section for 

such plan year shall include the funded percentage of each 

of such 2 or more pension plans as of the last day of 

such plan year and the funded percentage of the plan 

with respect to which the annual report is filed as of 

the last day of such plan year. 

‘‘(B) FUNDED PERCENTAGE.—For purposes of this paragraph, the term ‘funded percentage’—

‘‘(i) in the case of a single-employer plan, means 

the funding target attainment percentage, as defined 

in section 303(d)(2), and 

‘‘(ii) in the case of a multiemployer plan, has the 

meaning given such term in section 305(i)(2). 

‘‘(2) ADDITIONAL INFORMATION FOR MULTIEMPLOYER

PLANS.—With respect to any defined benefit plan which is a 

multiemployer plan, an annual report under this section for 

a plan year shall include, in addition to the information 

required under paragraph (1), the following, as of the end 

of the plan year to which the report relates: 

‘‘(A) The number of employers obligated to contribute 

to the plan. 

‘‘(B) A list of the employers that contributed more 

than 5 percent of the total contributions to the plan during 

such plan year. 

‘‘(C) The number of participants under the plan on 

whose behalf no contributions were made by an employer 

as an employer of the participant for such plan year and 

for each of the 2 preceding plan years. 

‘‘(D) The ratios of—

‘‘(i) the number of participants under the plan 

on whose behalf no employer had an obligation to 

make an employer contribution during the plan year, 

to 

‘‘(ii) the number of participants under the plan 

on whose behalf no employer had an obligation to 

make an employer contribution during each of the 

2 preceding plan years. 

‘‘(E) Whether the plan received an amortization extension under section 304(d) of this Act or section 431(d) 

of the Internal Revenue Code of 1986 for such plan year 
H. R. 4—164

and, if so, the amount of the difference between the minimum required contribution for the year and the minimum 

required contribution which would have been required 

without regard to the extension, and the period of such 

extension. 

‘‘(F) Whether the plan used the shortfall funding 

method (as such term is used in section 305) for such 

plan year and, if so, the amount of the difference between 

the minimum required contribution for the year and the 

minimum required contribution which would have been 

required without regard to the use of such method, and 

the period of use of such method. 

‘‘(G) Whether the plan was in critical or endangered 

status under section 305 for such plan year, and if so, 

a summary of any funding improvement or rehabilitation 

plan (or modification thereto) adopted during the plan year, 

and the funded percentage of the plan. 

‘‘(H) The number of employers that withdrew from 

the plan during the preceding plan year and the aggregate 

amount of withdrawal liability assessed, or estimated to 

be assessed, against such withdrawn employers. 

‘‘(I) In the case of a multiemployer plan that has 

merged with another plan or to which assets and liabilities 

have been transferred, the actuarial valuation of the assets 

and liabilities of each affected plan during the year preceding the effective date of the merger or transfer, based 

upon the most recent data available as of the day before 

the first day of the plan year, or other valuation method 

performed under standards and procedures as the Secretary may prescribe by regulation.’’. 

(2) GUIDANCE BY SECRETARY OF LABOR.—Not later than 

1 year after the date of enactment of this Act, the Secretary 

of Labor shall publish guidance to assist multiemployer defined 

benefit plans to—

(A) identify and enumerate plan participants for whom 

there is no employer with an obligation to make an 

employer contribution under the plan; and 

(B) report such information under section 103(f)(2)(D) 

of the Employee Retirement Income Security Act of 1974 

(as added by this section). 

(b) ADDITIONAL INFORMATION IN ANNUAL ACTUARIAL STATEMENT REGARDING PLAN RETIREMENT PROJECTIONS.—Section 103(d) 

of such Act (29 U.S.C. 1023(d)) is amended—

(1) by redesignating paragraphs (12) and (13) as paragraphs 

(13) and (14), respectively; and 

(2) by inserting after paragraph (11) the following new 

paragraph: 

‘‘(12) A statement explaining the actuarial assumptions 

and methods used in projecting future retirements and forms 

of benefit distributions under the plan.’’. 

(c) REPEAL OF SUMMARY ANNUAL REPORT REQUIREMENT FOR

DEFINED BENEFIT PLANS.—

(1) IN GENERAL.—Section 104(b)(3) of such Act (29 U.S.C. 

1024(b)(3)) is amended by inserting ‘‘(other than an administrator of a defined benefit plan to which the requirements 

of section 103(f) applies)’’ after ‘‘the administrators’’. 
H. R. 4—165

(2) CONFORMING AMENDMENT.—Section 101(a)(2) of such 

Act (29 U.S.C. 1021(a)(2)) is amended by inserting ‘‘subsection 

(f) and’’ before ‘‘sections 104(b)(3) and 105(a) and (c)’’. 

(d) FURNISHING SUMMARY PLAN INFORMATION TO EMPLOYERS

AND EMPLOYEE REPRESENTATIVES OF MULTIEMPLOYER PLANS.—Section 104 of such Act (29 U.S.C. 1024) is amended—

(1) in the header, by striking ‘‘PARTICIPANTS’’ and inserting 

‘‘PARTICIPANTS AND CERTAIN EMPLOYERS’’; 

(2) by redesignating subsection (d) as subsection (e); and 

(3) by inserting after subsection (c) the following: 

‘‘(d) FURNISHING SUMMARY PLAN INFORMATION TO EMPLOYERS

AND EMPLOYEE REPRESENTATIVES OF MULTIEMPLOYER PLANS.—

‘‘(1) IN GENERAL.—With respect to a multiemployer plan 

subject to this section, within 30 days after the due date under 

subsection (a)(1) for the filing of the annual report for the 

fiscal year of the plan, the administrators shall furnish to 

each employee organization and to each employer with an 

obligation to contribute to the plan a report that contains—

‘‘(A) a description of the contribution schedules and 

benefit formulas under the plan, and any modification to 

such schedules and formulas, during such plan year; 

‘‘(B) the number of employers obligated to contribute 

to the plan; 

‘‘(C) a list of the employers that contributed more than 

5 percent of the total contributions to the plan during 

such plan year; 

‘‘(D) the number of participants under the plan on 

whose behalf no contributions were made by an employer 

as an employer of the participant for such plan year and 

for each of the 2 preceding plan years; 

‘‘(E) whether the plan was in critical or endangered 

status under section 305 for such plan year and, if so, 

include—

‘‘(i) a list of the actions taken by the plan to 

improve its funding status; and 

‘‘(ii) a statement describing how a person may 

obtain a copy of the plan’s improvement or rehabilitation plan, as applicable, adopted under section 305 

and the actuarial and financial data that demonstrate 

any action taken by the plan toward fiscal improvement; 

‘‘(F) the number of employers that withdrew from the 

plan during the preceding plan year and the aggregate 

amount of withdrawal liability assessed, or estimated to 

be assessed, against such withdrawn employers, as reported 

on the annual report for the plan year to which the report 

under this subsection relates; 

‘‘(G) in the case of a multiemployer plan that has 

merged with another plan or to which assets and liabilities 

have been transferred, the actuarial valuation of the assets 

and liabilities of each affected plan during the year preceding the effective date of the merger or transfer, based 

upon the most recent data available as of the day before 

the first day of the plan year, or other valuation method 

performed under standards and procedures as the Secretary may prescribe by regulation; 

‘‘(H) a description as to whether the plan—
H. R. 4—166

‘‘(i) sought or received an amortization extension 

under section 304(d) of this Act or section 431(d) of 

the Internal Revenue Code of 1986 for such plan year; 

or 

‘‘(ii) used the shortfall funding method (as such 

term is used in section 305) for such plan year; and 

‘‘(I) notification of the right under this section of the 

recipient to a copy of the annual report filed with the 

Secretary under subsection (a), summary plan description, 

summary of any material modification of the plan, upon 

written request, but that—

‘‘(i) in no case shall a recipient be entitled to 

receive more than one copy of any such document 

described during any one 12-month period; and 

‘‘(ii) the administrator may make a reasonable 

charge to cover copying, mailing, and other costs of 

furnishing copies of information pursuant to this 

subparagraph. 

‘‘(2) EFFECT OF SUBSECTION.—Nothing in this subsection 

waives any other provision under this title requiring plan 

administrators to provide, upon request, information to 

employers that have an obligation to contribute under the 

plan.’’. 

(e) MODEL FORM.—Not later than 1 year after the date of 

the enactment of this Act, the Secretary of Labor shall publish 

a model form for providing the statements, schedules, and other 

material required to be provided under section 101(f) of the 

Employee Retirement Income Security Act of 1974, as amended 

by this section. The Secretary of Labor may promulgate any interim 

final rules as the Secretary determines appropriate to carry out 

the provisions of this subsection. 

(f) EFFECTIVE DATE.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007. 

SEC. 504. ELECTRONIC DISPLAY OF ANNUAL REPORT INFORMATION. 

(a) ELECTRONIC DISPLAY OF INFORMATION.—Section 104(b) of 

such Act (29 U.S.C. 1024(b)) is amended by adding at the end 

the following: 

‘‘(5) Identification and basic plan information and actuarial 

information included in the annual report for any plan year shall 

be filed with the Secretary in an electronic format which accommodates display on the Internet, in accordance with regulations which 

shall be prescribed by the Secretary. The Secretary shall provide 

for display of such information included in the annual report, within 

90 days after the date of the filing of the annual report, on an 

Internet website maintained by the Secretary and other appropriate 

media. Such information shall also be displayed on any Intranet 

website maintained by the plan sponsor (or by the plan administrator on behalf of the plan sponsor) for the purpose of communicating with employees and not the public, in accordance with 

regulations which shall be prescribed by the Secretary.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to plan years beginning after December 31, 2007. 
H. R. 4—167

SEC. 505. SECTION 4010 FILINGS WITH THE PBGC. 

(a) CHANGE IN CRITERIA FOR PERSONS REQUIRED TO PROVIDE

INFORMATION TO PBGC.—Section 4010(b) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1310(b)) is amended 

by striking paragraph (1) and inserting the following: 

‘‘(1) the funding target attainment percentage (as defined 

in subsection (d)) at the end of the preceding plan year of 

a plan maintained by the contributing sponsor or any member 

of its controlled group is less than 80 percent;’’. 

(b) ADDITIONAL INFORMATION REQUIRED.—Section 4010 of the 

Employee Retirement Income Security Act of 1974 (29 U.S.C. 1310) 

is amended by adding at the end the following new subsection: 

‘‘(d) ADDITIONAL INFORMATION REQUIRED.—

‘‘(1) IN GENERAL.—The information submitted to the corporation under subsection (a) shall include—

‘‘(A) the amount of benefit liabilities under the plan 

determined using the assumptions used by the corporation 

in determining liabilities; 

‘‘(B) the funding target of the plan determined as if 

the plan has been in at-risk status for at least 5 plan 

years; and 

‘‘(C) the funding target attainment percentage of the 

plan. 

‘‘(2) DEFINITIONS.—For purposes of this subsection: 

‘‘(A) FUNDING TARGET.—The term ‘funding target’ has 

the meaning provided under section 303(d)(1). 

‘‘(B) FUNDING TARGET ATTAINMENT PERCENTAGE.—The 

term ‘funding target attainment percentage’ has the 

meaning provided under section 302(d)(2). 

‘‘(C) AT-RISK STATUS.—The term ‘at-risk status’ has 

the meaning provided in section 303(i)(4). 

‘‘(e) NOTICE TO CONGRESS.—The corporation shall, on an annual 

basis, submit to the Committee on Health, Education, Labor, and 

Pensions and the Committee on Finance of the Senate and the 

Committee on Education and the Workforce and the Committee 

on Ways and Means of the House of Representatives, a summary 

report in the aggregate of the information submitted to the corporation under this section.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply with respect to years beginning after 2007. 

SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO PLAN 

PARTICIPANTS. 

(a) DISTRESS TERMINATIONS.— (1) IN GENERAL.—Section 4041(c)(2) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)(2)) is 

amended by adding at the end the following: 

‘‘(D) DISCLOSURE OF TERMINATION INFORMATION.— ‘‘(i) IN GENERAL.—A plan administrator that has 

filed a notice of intent to terminate under subsection 

(a)(2) shall provide to an affected party any information 

provided to the corporation under subsection (a)(2) not 

later than 15 days after—

‘‘(I) receipt of a request from the affected party 

for the information; or 

‘‘(II) the provision of new information to the 

corporation relating to a previous request. 
H. R. 4—168

‘‘(ii) CONFIDENTIALITY.—

‘‘(I) IN GENERAL.—The plan administrator 

shall not provide information under clause (i) in 

a form that includes any information that may 

directly or indirectly be associated with, or otherwise identify, an individual participant or beneficiary. 

‘‘(II) LIMITATION.—A court may limit disclosure 

under this subparagraph of confidential information described in section 552(b) of title 5, United 

States Code, to any authorized representative of 

the participants or beneficiaries that agrees to 

ensure the confidentiality of such information. 

‘‘(iii) FORM AND MANNER OF INFORMATION; 

CHARGES.—

‘‘(I) FORM AND MANNER.—The corporation may 

prescribe the form and manner of the provision 

of information under this subparagraph, which 

shall include delivery in written, electronic, or 

other appropriate form to the extent that such 

form is reasonably accessible to individuals to 

whom the information is required to be provided. 

‘‘(II) REASONABLE CHARGES.—A plan administrator may charge a reasonable fee for any 

information provided under this subparagraph in 

other than electronic form. 

‘‘(iv) AUTHORIZED REPRESENTATIVE.—For purposes 

of this subparagraph, the term ‘authorized representative’ means any employee organization representing 

participants in the pension plan.’’. 

(2) CONFORMING AMENDMENT.—Section 4041(c)(1) of the 

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

1341(c)(1)) is amended in subparagraph (C) by striking 

‘‘subparagraph (B)’’ and inserting ‘‘subparagraphs (B) and (D)’’. 

(b) INVOLUNTARY TERMINATIONS.—

(1) IN GENERAL.—Section 4042(c) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1342(c)) is 

amended by—

(A) striking ‘‘(c) If the’’ and inserting ‘‘(c)(1) If the’’; 

(B) redesignating paragraph (3) as paragraph (2); and 

(C) adding at the end the following: 

‘‘(3) DISCLOSURE OF TERMINATION INFORMATION.—

‘‘(A) IN GENERAL.—

‘‘(i) INFORMATION FROM PLAN SPONSOR OR ADMINISTRATOR.—A plan sponsor or plan administrator of a 

single-employer plan that has received a notice from 

the corporation of a determination that the plan should 

be terminated under this section shall provide to an 

affected party any information provided to the corporation in connection with the plan termination. 

‘‘(ii) INFORMATION FROM CORPORATION.—The corporation shall provide a copy of the administrative 

record, including the trusteeship decision record of a 

termination of a plan described under clause (i). 
H. R. 4—169

‘‘(B) TIMING OF DISCLOSURE.—The plan sponsor, plan 

administrator, or the corporation, as applicable, shall provide the information described in subparagraph (A) not 

later than 15 days after—

‘‘(i) receipt of a request from an affected party 

for such information; or 

‘‘(ii) in the case of information described under 

subparagraph (A)(i), the provision of any new information to the corporation relating to a previous request 

by an affected party. 

‘‘(C) CONFIDENTIALITY.—

‘‘(i) IN GENERAL.—The plan administrator and plan 

sponsor shall not provide information under subparagraph (A)(i) in a form which includes any information 

that may directly or indirectly be associated with, or 

otherwise identify, an individual participant or beneficiary. 

‘‘(ii) LIMITATION.—A court may limit disclosure 

under this paragraph of confidential information 

described in section 552(b) of title 5, United States 

Code, to authorized representatives (within the 

meaning of section 4041(c)(2)(D)(iv)) of the participants 

or beneficiaries that agree to ensure the confidentiality 

of such information. 

‘‘(D) FORM AND MANNER OF INFORMATION; CHARGES.—

‘‘(i) FORM AND MANNER.—The corporation may prescribe the form and manner of the provision of information under this paragraph, which shall include delivery 

in written, electronic, or other appropriate form to 

the extent that such form is reasonably accessible to 

individuals to whom the information is required to 

be provided. 

‘‘(ii) REASONABLE CHARGES.—A plan sponsor may 

charge a reasonable fee for any information provided 

under this paragraph in other than electronic form.’’. 

(c) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to any plan termination under title IV of the 

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

1301 et seq.) with respect to which the notice of intent to 

terminate (or in the case of a termination by the Pension 

Benefit Guaranty Corporation, a notice of determination under 

section 4042 of such Act (29 U.S.C. 1342)) occurs after the 

date of enactment of this Act. 

(2) TRANSITION RULE.—If notice under section 4041(c)(2)(D) 

or 4042(c)(3) of the Employee Retirement Income Security Act 

of 1974 (as added by this section) would otherwise be required 

to be provided before the 90th day after the date of the enactment of this Act, such notice shall not be required to be provided 

until such 90th day. 

SEC. 507. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES. 

(a) IN GENERAL.—Section 101 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1021), as amended by 

this Act, is amended by redesignating subsection (m) as subsection 

(n) and by inserting after subsection (l) the following: 
H. R. 4—170

‘‘(m) NOTICE OF RIGHT TO DIVEST.—Not later than 30 days 

before the first date on which an applicable individual of an 

applicable individual account plan is eligible to exercise the right 

under section 204(j) to direct the proceeds from the divestment 

of employer securities with respect to any type of contribution, 

the administrator shall provide to such individual a notice—

‘‘(1) setting forth such right under such section, and 

‘‘(2) describing the importance of diversifying the investment of retirement account assets. 

The notice required by this subsection shall be written in a manner 

calculated to be understood by the average plan participant and 

may be delivered in written, electronic, or other appropriate form 

to the extent that such form is reasonably accessible to the 

recipient.’’. 

(b) PENALTIES.—Section 502(c)(7) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1132(c)(7)) is amended 

by striking ‘‘section 101(i)’’ and inserting ‘‘subsection (i) or (m) 

of section 101’’. 

(c) MODEL NOTICE.—The Secretary of the Treasury shall, within 

180 days after the date of the enactment of this subsection, prescribe 

a model notice for purposes of satisfying the requirements of the 

amendments made by this section. 

(d) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2006. 

(2) TRANSITION RULE.—If notice under section 101(m) of 

the Employee Retirement Income Security Act of 1974 (as added 

by this section) would otherwise be required to be provided 

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

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

such 90th day. 

SEC. 508. PERIODIC PENSION BENEFIT STATEMENTS. 

(a) AMENDMENTS OF ERISA.—

(1) IN GENERAL.—Section 105(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1025(a)) is 

amended to read as follows: 

‘‘(a) REQUIREMENTS TO PROVIDE PENSION BENEFIT STATEMENTS.—

‘‘(1) REQUIREMENTS.—

‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The administrator of 

an individual account plan (other than a one-participant 

retirement plan described in section 101(i)(8)(B)) shall furnish a pension benefit statement—

‘‘(i) at least once each calendar quarter to a participant or beneficiary who has the right to direct the 

investment of assets in his or her account under the 

plan, 

‘‘(ii) at least once each calendar year to a participant or beneficiary who has his or her own account 

under the plan but does not have the right to direct 

the investment of assets in that account, and 

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

not described in clause (i) or (ii). 
H. R. 4—171

‘‘(B) DEFINED BENEFIT PLAN.—The administrator of a 

defined benefit plan (other than a one-participant retirement plan described in section 101(i)(8)(B)) shall furnish 

a pension benefit statement—

‘‘(i) at least once every 3 years to each participant 

with a nonforfeitable accrued benefit and who is 

employed by the employer maintaining the plan at 

the time the statement is to be furnished, and 

‘‘(ii) to a participant or beneficiary of the plan 

upon written request. 

Information furnished under clause (i) to a participant 

may be based on reasonable estimates determined under 

regulations prescribed by the Secretary, in consultation 

with the Pension Benefit Guaranty Corporation. 

‘‘(2) STATEMENTS.—

‘‘(A) IN GENERAL.—A pension benefit statement under 

paragraph (1)—

‘‘(i) shall indicate, on the basis of the latest available information—

‘‘(I) the total benefits accrued, and 

‘‘(II) the nonforfeitable pension benefits, if any, 

which have accrued, or the earliest date on which 

benefits will become nonforfeitable, 

‘‘(ii) shall include an explanation of any permitted 

disparity under section 401(l) of the Internal Revenue 

Code of 1986 or any floor-offset arrangement that may 

be applied in determining any accrued benefits 

described in clause (i), 

‘‘(iii) shall be written in a manner calculated to 

be understood by the average plan participant, and 

‘‘(iv) may be delivered in written, electronic, or 

other appropriate form to the extent such form is 

reasonably accessible to the participant or beneficiary. 

‘‘(B) ADDITIONAL INFORMATION.—In the case of an individual account plan, any pension benefit statement under 

clause (i) or (ii) of paragraph (1)(A) shall include—

‘‘(i) the value of each investment to which assets 

in the individual account have been allocated, determined as of the most recent valuation date under the 

plan, including the value of any assets held in the 

form of employer securities, without regard to whether 

such securities were contributed by the plan sponsor 

or acquired at the direction of the plan or of the participant or beneficiary, and 

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

under paragraph (1)(A)(i)—

‘‘(I) an explanation of any limitations or 

restrictions on any right of the participant or beneficiary under the plan to direct an investment, 

‘‘(II) an explanation, written in a manner calculated to be understood by the average plan 

participant, of the importance, for the long-term 

retirement security of participants and beneficiaries, of a well-balanced and diversified investment portfolio, including a statement of the risk 

that holding more than 20 percent of a portfolio 
H. R. 4—172

in the security of one entity (such as employer 

securities) may not be adequately diversified, and 

‘‘(III) a notice directing the participant or beneficiary to the Internet website of the Department 

of Labor for sources of information on individual 

investing and diversification. 

‘‘(C) ALTERNATIVE NOTICE.—The requirements of 

subparagraph (A)(i)(II) are met if, at least annually and 

in accordance with requirements of the Secretary, the 

plan—

‘‘(i) updates the information described in such 

paragraph which is provided in the pension benefit 

statement, or 

‘‘(ii) provides in a separate statement such information as is necessary to enable a participant or beneficiary to determine their nonforfeitable vested benefits. 

‘‘(3) DEFINED BENEFIT PLANS.— ‘‘(A) ALTERNATIVE NOTICE.—In the case of a defined 

benefit plan, the requirements of paragraph (1)(B)(i) shall 

be treated as met with respect to a participant if at least 

once each year the administrator provides to the participant 

notice of the availability of the pension benefit statement 

and the ways in which the participant may obtain such 

statement. Such notice may be delivered in written, electronic, or other appropriate form to the extent such form 

is reasonably accessible to the participant. 

‘‘(B) YEARS IN WHICH NO BENEFITS ACCRUE.—The Secretary may provide that years in which no employee or 

former employee benefits (within the meaning of section 

410(b) of the Internal Revenue Code of 1986) under the 

plan need not be taken into account in determining the 

3-year period under paragraph (1)(B)(i).’’. 

(2) CONFORMING AMENDMENTS.— (A) Section 105 of the Employee Retirement Income 

Security Act of 1974 (29 U.S.C. 1025) is amended by 

striking subsection (d). 

(B) Section 105(b) of such Act (29 U.S.C. 1025(b)) is 

amended to read as follows: 

‘‘(b) LIMITATION ON NUMBER OF STATEMENTS.—In no case shall 

a participant or beneficiary of a plan be entitled to more than 

1 statement described in subparagraph (A)(iii) or (B)(ii) of subsection 

(a)(1), whichever is applicable, in any 12-month period.’’. 

(C) Section 502(c)(1) of such Act (29 U.S.C. 1132(c)(1)) 

is amended by striking ‘‘or section 101(f)’’ and inserting 

‘‘section 101(f), or section 105(a)’’. 

(b) MODEL STATEMENTS.— (1) IN GENERAL.—The Secretary of Labor shall, within 1 

year after the date of the enactment of this section, develop 

1 or more model benefit statements that are written in a 

manner calculated to be understood by the average plan participant and that may be used by plan administrators in complying 

with the requirements of section 105 of the Employee Retirement Income Security Act of 1974. 

(2) INTERIM FINAL RULES.—The Secretary of Labor may 

promulgate any interim final rules as the Secretary determines 

appropriate to carry out the provisions of this subsection. 
H. R. 4—173

(c) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2006. 

(2) SPECIAL RULE FOR COLLECTIVELY BARGAINED AGREEMENTS.—In the case of a plan maintained pursuant to 1 or 

more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before 

the date of the enactment of this Act, paragraph (1) shall 

be applied to benefits pursuant to, and individuals covered 

by, any such agreement by substituting for ‘‘December 31, 

2006’’ the earlier of—

(A) the later of—

(i) December 31, 2007, or 

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

bargaining agreements terminates (determined without 

regard to any extension thereof after such date of 

enactment), or 

(B) December 31, 2008. 

SEC. 509. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT 

PERIODS. 

(a) IN GENERAL.—Section 101(i)(8)(B) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021(i)(8)(B)) is 

amended by striking clauses (i) through (iv), by redesignating clause 

(v) as clause (ii), and by inserting before clause (ii), as so redesignated, the following new clause: 

‘‘(i) on the first day of the plan year—

‘‘(I) covered only one individual (or the individual and the individual’s spouse) and the individual (or the individual and the individual’s 

spouse) owned 100 percent of the plan sponsor 

(whether or not incorporated), or 

‘‘(II) covered only one or more partners (or 

partners and their spouses) in the plan sponsor, 

and’’. 

(b) EFFECTIVE DATE.—The amendments made by this subsection shall take effect as if included in the provisions of section 

306 of Public Law 107–204 (116 Stat. 745 et seq.). 

TITLE VI—INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND FIDUCIARY RULES 

Subtitle A—Investment Advice 

SEC. 601. PROHIBITED TRANSACTION EXEMPTION FOR PROVISION OF 

INVESTMENT ADVICE. 

(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(1) EXEMPTION FROM PROHIBITED TRANSACTIONS.—Section 

408(b) of the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1108(b)) is amended by adding at the end 

the following new paragraph: 
H. R. 4—174

‘‘(14) Any transaction in connection with the provision of 

investment advice described in section 3(21)(A)(ii) to a participant or beneficiary of an individual account plan that permits 

such participant or beneficiary to direct the investment of assets 

in their individual account, if—

‘‘(A) the transaction is—

‘‘(i) the provision of the investment advice to the 

participant or beneficiary of the plan with respect to 

a security or other property available as an investment 

under the plan, 

‘‘(ii) the acquisition, holding, or sale of a security 

or other property available as an investment under 

the plan pursuant to the investment advice, or 

‘‘(iii) the direct or indirect receipt of fees or other 

compensation by the fiduciary adviser or an affiliate 

thereof (or any employee, agent, or registered representative of the fiduciary adviser or affiliate) in 

connection with the provision of the advice or in 

connection with an acquisition, holding, or sale of a 

security or other property available as an investment 

under the plan pursuant to the investment advice; 

and 

‘‘(B) the requirements of subsection (g) are met.’’. 

(2) REQUIREMENTS.—Section 408 of such Act is amended 

further by adding at the end the following new subsection: 

‘‘(g) PROVISION OF INVESTMENT ADVICE TO PARTICIPANT AND

BENEFICIARIES.—

‘‘(1) IN GENERAL.—The prohibitions provided in section 406 

shall not apply to transactions described in subsection (b)(14) 

if the investment advice provided by a fiduciary adviser is 

provided under an eligible investment advice arrangement. 

‘‘(2) ELIGIBLE INVESTMENT ADVICE ARRANGEMENT.—For purposes of this subsection, the term ‘eligible investment advice 

arrangement’ means an arrangement—

‘‘(A) which either—

‘‘(i) provides that any fees (including any commission or other compensation) received by the fiduciary 

adviser for investment advice or with respect to the 

sale, holding, or acquisition of any security or other 

property for purposes of investment of plan assets do 

not vary depending on the basis of any investment 

option selected, or 

‘‘(ii) uses a computer model under an investment 

advice program meeting the requirements of paragraph 

(3) in connection with the provision of investment 

advice by a fiduciary adviser to a participant or beneficiary, and 

‘‘(B) with respect to which the requirements of paragraph (4), (5), (6), (7), (8), and (9) are met. 

‘‘(3) INVESTMENT ADVICE PROGRAM USING COMPUTER

MODEL.—

‘‘(A) IN GENERAL.—An investment advice program 

meets the requirements of this paragraph if the requirements of subparagraphs (B), (C), and (D) are met. 

‘‘(B) COMPUTER MODEL.—The requirements of this 

subparagraph are met if the investment advice provided 
H. R. 4—175

under the investment advice program is provided pursuant 

to a computer model that—

‘‘(i) applies generally accepted investment theories 

that take into account the historic returns of different 

asset classes over defined periods of time, 

‘‘(ii) utilizes relevant information about the participant, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of 

income, and preferences as to certain types of investments, 

‘‘(iii) utilizes prescribed objective criteria to provide 

asset allocation portfolios comprised of investment 

options available under the plan, 

‘‘(iv) operates in a manner that is not biased in 

favor of investments offered by the fiduciary adviser 

or a person with a material affiliation or contractual 

relationship with the fiduciary adviser, and 

‘‘(v) takes into account all investment options 

under the plan in specifying how a participant’s 

account balance should be invested and is not inappropriately weighted with respect to any investment 

option. 

‘‘(C) CERTIFICATION.— ‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met with respect to any investment 

advice program if an eligible investment expert certifies, prior to the utilization of the computer model 

and in accordance with rules prescribed by the Secretary, that the computer model meets the requirements of subparagraph (B). 

‘‘(ii) RENEWAL OF CERTIFICATIONS.—If, as determined under regulations prescribed by the Secretary, 

there are material modifications to a computer model, 

the requirements of this subparagraph are met only 

if a certification described in clause (i) is obtained 

with respect to the computer model as so modified. 

‘‘(iii) ELIGIBLE INVESTMENT EXPERT.—The term 

‘eligible investment expert’ means any person—

‘‘(I) which meets such requirements as the 

Secretary may provide, and 

‘‘(II) does not bear any material affiliation or 

contractual relationship with any investment 

adviser or a related person thereof (or any 

employee, agent, or registered representative of 

the investment adviser or related person). 

‘‘(D) EXCLUSIVITY OF RECOMMENDATION.—The requirements of this subparagraph are met with respect to any 

investment advice program if—

‘‘(i) the only investment advice provided under the 

program is the advice generated by the computer model 

described in subparagraph (B), and 

‘‘(ii) any transaction described in subsection 

(b)(14)(B)(ii) occurs solely at the direction of the participant or beneficiary. 

Nothing in the preceding sentence shall preclude the 

participant or beneficiary from requesting investment 

advice other than that described in subparagraph (A), but 
H. R. 4—176

only if such request has not been solicited by any person 

connected with carrying out the arrangement. 

‘‘(4) EXPRESS AUTHORIZATION BY SEPARATE FIDUCIARY.—The 

requirements of this paragraph are met with respect to an 

arrangement if the arrangement is expressly authorized by 

a plan fiduciary other than the person offering the investment 

advice program, any person providing investment options under 

the plan, or any affiliate of either. 

‘‘(5) ANNUAL AUDIT.—The requirements of this paragraph 

are met if an independent auditor, who has appropriate technical training or experience and proficiency and so represents 

in writing—

‘‘(A) conducts an annual audit of the arrangement for 

compliance with the requirements of this subsection, and 

‘‘(B) following completion of the annual audit, issues 

a written report to the fiduciary who authorized use of 

the arrangement which presents its specific findings 

regarding compliance of the arrangement with the requirements of this subsection. 

For purposes of this paragraph, an auditor is considered independent if it is not related to the person offering the arrangement to the plan and is not related to any person providing 

investment options under the plan. 

‘‘(6) DISCLOSURE.—The requirements of this paragraph are 

met if—

‘‘(A) the fiduciary adviser provides to a participant 

or a beneficiary before the initial provision of the investment advice with regard to any security or other property 

offered as an investment option, a written notification 

(which may consist of notification by means of electronic 

communication)—

‘‘(i) of the role of any party that has a material 

affiliation or contractual relationship with the financial 

adviser in the development of the investment advice 

program and in the selection of investment options 

available under the plan, 

‘‘(ii) of the past performance and historical rates 

of return of the investment options available under 

the plan, 

‘‘(iii) of all fees or other compensation relating 

to the advice that the fiduciary adviser or any affiliate 

thereof is to receive (including compensation provided 

by any third party) in connection with the provision 

of the advice or in connection with the sale, acquisition, 

or holding of the security or other property, 

‘‘(iv) of any material affiliation or contractual relationship of the fiduciary adviser or affiliates thereof 

in the security or other property, 

‘‘(v) the manner, and under what circumstances, 

any participant or beneficiary information provided 

under the arrangement will be used or disclosed, 

‘‘(vi) of the types of services provided by the fiduciary adviser in connection with the provision of investment advice by the fiduciary adviser, 

‘‘(vii) that the adviser is acting as a fiduciary of 

the plan in connection with the provision of the advice, 

and 
H. R. 4—177

‘‘(viii) that a recipient of the advice may separately 

arrange for the provision of advice by another adviser, 

that could have no material affiliation with and receive 

no fees or other compensation in connection with the 

security or other property, and 

‘‘(B) at all times during the provision of advisory services to the participant or beneficiary, the fiduciary 

adviser—

‘‘(i) maintains the information described in 

subparagraph (A) in accurate form and in the manner 

described in paragraph (8), 

‘‘(ii) provides, without charge, accurate information 

to the recipient of the advice no less frequently than 

annually, 

‘‘(iii) provides, without charge, accurate information to the recipient of the advice upon request of 

the recipient, and 

‘‘(iv) provides, without charge, accurate information to the recipient of the advice concerning any material change to the information required to be provided 

to the recipient of the advice at a time reasonably 

contemporaneous to the change in information. 

‘‘(7) OTHER CONDITIONS.—The requirements of this paragraph are met if—

‘‘(A) the fiduciary adviser provides appropriate disclosure, in connection with the sale, acquisition, or holding 

of the security or other property, in accordance with all 

applicable securities laws, 

‘‘(B) the sale, acquisition, or holding occurs solely at 

the direction of the recipient of the advice, 

‘‘(C) the compensation received by the fiduciary adviser 

and affiliates thereof in connection with the sale, acquisition, or holding of the security or other property is reasonable, and 

‘‘(D) the terms of the sale, acquisition, or holding of 

the security or other property are at least as favorable 

to the plan as an arm’s length transaction would be. 

‘‘(8) STANDARDS FOR PRESENTATION OF INFORMATION.— ‘‘(A) IN GENERAL.—The requirements of this paragraph 

are met if the notification required to be provided to participants and beneficiaries under paragraph (6)(A) is written 

in a clear and conspicuous manner and in a manner calculated to be understood by the average plan participant 

and is sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of the 

information required to be provided in the notification. 

‘‘(B) MODEL FORM FOR DISCLOSURE OF FEES AND OTHER

COMPENSATION.—The Secretary shall issue a model form 

for the disclosure of fees and other compensation required 

in paragraph (6)(A)(iii) which meets the requirements of 

subparagraph (A). 

‘‘(9) MAINTENANCE FOR 6 YEARS OF EVIDENCE OF COMPLIANCE.—The requirements of this paragraph are met if a fiduciary adviser who has provided advice referred to in paragraph 

(1) maintains, for a period of not less than 6 years after the 

provision of the advice, any records necessary for determining 

whether the requirements of the preceding provisions of this 
H. R. 4—178

subsection and of subsection (b)(14) have been met. A transaction prohibited under section 406 shall not be considered 

to have occurred solely because the records are lost or destroyed 

prior to the end of the 6-year period due to circumstances 

beyond the control of the fiduciary adviser. 

‘‘(10) EXEMPTION FOR PLAN SPONSOR AND CERTAIN OTHER

FIDUCIARIES.—

‘‘(A) IN GENERAL.—Subject to subparagraph (B), a plan 

sponsor or other person who is a fiduciary (other than 

a fiduciary adviser) shall not be treated as failing to meet 

the requirements of this part solely by reason of the provision of investment advice referred to in section 3(21)(A)(ii) 

(or solely by reason of contracting for or otherwise 

arranging for the provision of the advice), if—

‘‘(i) the advice is provided by a fiduciary adviser 

pursuant to an eligible investment advice arrangement 

between the plan sponsor or other fiduciary and the 

fiduciary adviser for the provision by the fiduciary 

adviser of investment advice referred to in such section, 

‘‘(ii) the terms of the eligible investment advice 

arrangement require compliance by the fiduciary 

adviser with the requirements of this subsection, and 

‘‘(iii) the terms of the eligible investment advice 

arrangement include a written acknowledgment by the 

fiduciary adviser that the fiduciary adviser is a fiduciary of the plan with respect to the provision of the 

advice. 

‘‘(B) CONTINUED DUTY OF PRUDENT SELECTION OF

ADVISER AND PERIODIC REVIEW.—Nothing in subparagraph 

(A) shall be construed to exempt a plan sponsor or other 

person who is a fiduciary from any requirement of this 

part for the prudent selection and periodic review of a 

fiduciary adviser with whom the plan sponsor or other 

person enters into an eligible investment advice arrangement for the provision of investment advice referred to 

in section 3(21)(A)(ii). The plan sponsor or other person 

who is a fiduciary has no duty under this part to monitor 

the specific investment advice given by the fiduciary 

adviser to any particular recipient of the advice. 

‘‘(C) AVAILABILITY OF PLAN ASSETS FOR PAYMENT FOR

ADVICE.—Nothing in this part shall be construed to preclude the use of plan assets to pay for reasonable expenses 

in providing investment advice referred to in section 

3(21)(A)(ii). 

‘‘(11) DEFINITIONS.—For purposes of this subsection and 

subsection (b)(14)—

‘‘(A) FIDUCIARY ADVISER.—The term ‘fiduciary adviser’ 

means, with respect to a plan, a person who is a fiduciary 

of the plan by reason of the provision of investment advice 

referred to in section 3(21)(A)(ii) by the person to the 

participant or beneficiary of the plan and who is—

‘‘(i) registered as an investment adviser under the 

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

seq.) or under the laws of the State in which the 

fiduciary maintains its principal office and place of 

business, 
H. R. 4—179

‘‘(ii) a bank or similar financial institution referred 

to in section 408(b)(4) or a savings association (as 

defined in section 3(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)), but only if the advice 

is provided through a trust department of the bank 

or similar financial institution or savings association 

which is subject to periodic examination and review 

by Federal or State banking authorities, 

‘‘(iii) an insurance company qualified to do business 

under the laws of a State, 

‘‘(iv) a person registered as a broker or dealer 

under the Securities Exchange Act of 1934 (15 U.S.C. 

78a et seq.), 

‘‘(v) an affiliate of a person described in any of 

clauses (i) through (iv), or 

‘‘(vi) an employee, agent, or registered representative of a person described in clauses (i) through (v) 

who satisfies the requirements of applicable insurance, 

banking, and securities laws relating to the provision 

of the advice. 

For purposes of this part, a person who develops the computer model described in paragraph (3)(B) or markets the 

investment advice program or computer model shall be 

treated as a person who is a fiduciary of the plan by 

reason of the provision of investment advice referred to 

in section 3(21)(A)(ii) to the participant or beneficiary and 

shall be treated as a fiduciary adviser for purposes of 

this subsection and subsection (b)(14), except that the Secretary may prescribe rules under which only 1 fiduciary 

adviser may elect to be treated as a fiduciary with respect 

to the plan. 

‘‘(B) AFFILIATE.—The term ‘affiliate’ of another entity 

means an affiliated person of the entity (as defined in 

section 2(a)(3) of the Investment Company Act of 1940 

(15 U.S.C. 80a–2(a)(3))). 

‘‘(C) REGISTERED REPRESENTATIVE.—The term ‘registered representative’ of another entity means a person 

described in section 3(a)(18) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78c(a)(18)) (substituting the entity 

for the broker or dealer referred to in such section) or 

a person described in section 202(a)(17) of the Investment 

Advisers Act of 1940 (15 U.S.C. 80b-2(a)(17)) (substituting 

the entity for the investment adviser referred to in such 

section).’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply with respect to advice referred to in section 

3(21)(A)(ii) of the Employee Retirement Income Security Act 

of 1974 provided after December 31, 2006. 

(b) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—

(1) EXEMPTION FROM PROHIBITED TRANSACTIONS.—Subsection (d) of section 4975 of the Internal Revenue Code of 

1986 (relating to exemption from tax on prohibited transactions) 

is amended—

(A) in paragraph (15), by striking ‘‘or’’ at the end; 

(B) in paragraph (16), by striking the period at the 

end and inserting ‘‘;or’’; and 

(C) by adding at the end the following new paragraph: 
H. R. 4—180

‘‘(17) Any transaction in connection with the provision of 

investment advice described in subsection (e)(3)(B) to a participant or beneficiary in a plan and that permits such participant 

or beneficiary to direct the investment of plan assets in an 

individual account, if—

‘‘(A) the transaction is—

‘‘(i) the provision of the investment advice to the 

participant or beneficiary of the plan with respect to 

a security or other property available as an investment 

under the plan, 

‘‘(ii) the acquisition, holding, or sale of a security 

or other property available as an investment under 

the plan pursuant to the investment advice, or 

‘‘(iii) the direct or indirect receipt of fees or other 

compensation by the fiduciary adviser or an affiliate 

thereof (or any employee, agent, or registered representative of the fiduciary adviser or affiliate) in 

connection with the provision of the advice or in 

connection with an acquisition, holding, or sale of a 

security or other property available as an investment 

under the plan pursuant to the investment advice; 

and 

‘‘(B) the requirements of subsection (f)(8) are met.’’. 

(2) REQUIREMENTS.—Subsection (f) of such section 4975 

(relating to other definitions and special rules) is amended 

by adding at the end the following new paragraph: 

‘‘(8) PROVISION OF INVESTMENT ADVICE TO PARTICIPANT AND

BENEFICIARIES.— I24 ‘‘(A) IN GENERAL.—The prohibitions 

provided in subsection (c) shall not apply to transactions 

described in subsection (b)(14) if the investment advice provided 

by a fiduciary adviser is provided under an eligible investment 

advice arrangement. 

‘‘(B) ELIGIBLE INVESTMENT ADVICE ARRANGEMENT.—For 

purposes of this paragraph, the term ‘eligible investment 

advice arrangement’ means an arrangement—

‘‘(i) which either—

‘‘(I) provides that any fees (including any 

commission or other compensation) received by the 

fiduciary adviser for investment advice or with 

respect to the sale, holding, or acquisition of any 

security or other property for purposes of investment of plan assets do not vary depending on 

the basis of any investment option selected, or 

‘‘(II) uses a computer model under an investment advice program meeting the requirements 

of subparagraph (C) in connection with the provision of investment advice by a fiduciary adviser 

to a participant or beneficiary, and 

‘‘(ii) with respect to which the requirements of 

subparagraphs (D), (E), (F), (G), (H), and (I) are met. 

‘‘(C) INVESTMENT ADVICE PROGRAM USING COMPUTER

MODEL.—

‘‘(i) IN GENERAL.—An investment advice program 

meets the requirements of this subparagraph if the 

requirements of clauses (ii), (iii), and (iv) are met. 

‘‘(ii) COMPUTER MODEL.—The requirements of this 

clause are met if the investment advice provided under 
H. R. 4—181

the investment advice program is provided pursuant 

to a computer model that—

‘‘(I) applies generally accepted investment 

theories that take into account the historic returns 

of different asset classes over defined periods of 

time, 

‘‘(II) utilizes relevant information about the 

participant, which may include age, life expectancy, retirement age, risk tolerance, other assets 

or sources of income, and preferences as to certain 

types of investments, 

‘‘(III) utilizes prescribed objective criteria to 

provide asset allocation portfolios comprised of 

investment options available under the plan, 

‘‘(IV) operates in a manner that is not biased 

in favor of investments offered by the fiduciary 

adviser or a person with a material affiliation or 

contractual relationship with the fiduciary adviser, 

and 

‘‘(V) takes into account all investment options 

under the plan in specifying how a participant’s 

account balance should be invested and is not 

inappropriately weighted with respect to any 

investment option. 

‘‘(iii) CERTIFICATION.— ‘‘(I) IN GENERAL.—The requirements of this 

clause are met with respect to any investment 

advice program if an eligible investment expert 

certifies, prior to the utilization of the computer 

model and in accordance with rules prescribed by 

the Secretary of Labor, that the computer model 

meets the requirements of clause (ii). 

‘‘(II) RENEWAL OF CERTIFICATIONS.—If, as 

determined under regulations prescribed by the 

Secretary of Labor, there are material modifications to a computer model, the requirements of 

this clause are met only if a certification described 

in subclause (I) is obtained with respect to the 

computer model as so modified. 

‘‘(III) ELIGIBLE INVESTMENT EXPERT.—The 

term ‘eligible investment expert’ means any person 

which meets such requirements as the Secretary 

of Labor may provide and which does not bear 

any material affiliation or contractual relationship 

with any investment adviser or a related person 

thereof (or any employee, agent, or registered representative of the investment adviser or related 

person). 

‘‘(iv) EXCLUSIVITY OF RECOMMENDATION.—The 

requirements of this clause are met with respect to 

any investment advice program if—

‘‘(I) the only investment advice provided under 

the program is the advice generated by the computer model described in clause (ii), and 

‘‘(II) any transaction described in subsection 

(b)(14)(B)(ii) occurs solely at the direction of the 

participant or beneficiary. 
H. R. 4—182

Nothing in the preceding sentence shall preclude the 

participant or beneficiary from requesting investment 

advice other than that described in clause (i), but only 

if such request has not been solicited by any person 

connected with carrying out the arrangement. 

‘‘(D) EXPRESS AUTHORIZATION BY SEPARATE FIDUCIARY.—The requirements of this subparagraph are met 

with respect to an arrangement if the arrangement is 

expressly authorized by a plan fiduciary other than the 

person offering the investment advice program, any person 

providing investment options under the plan, or any affiliate of either. 

‘‘(E) AUDITS.— ‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if an independent auditor, who 

has appropriate technical training or experience and 

proficiency and so represents in writing—

‘‘(I) conducts an annual audit of the arrangement for compliance with the requirements of this 

paragraph, and 

‘‘(II) following completion of the annual audit, 

issues a written report to the fiduciary who authorized use of the arrangement which presents its 

specific findings regarding compliance of the 

arrangement with the requirements of this paragraph. 

‘‘(ii) SPECIAL RULE FOR INDIVIDUAL RETIREMENT

AND SIMILAR PLANS.—In the case of a plan described 

in subparagraphs (B) through (F) (and so much of 

subparagraph (G) as relates to such subparagraphs) 

of subsection (e)(1), in lieu of the requirements of clause 

(i), audits of the arrangement shall be conducted at 

such times and in such manner as the Secretary of 

Labor may prescribe. 

‘‘(iii) INDEPENDENT AUDITOR.—For purposes of this 

subparagraph, an auditor is considered independent 

if it is not related to the person offering the arrangement to the plan and is not related to any person 

providing investment options under the plan. 

‘‘(F) DISCLOSURE.—The requirements of this subparagraph are met if—

‘‘(i) the fiduciary adviser provides to a participant 

or a beneficiary before the initial provision of the 

investment advice with regard to any security or other 

property offered as an investment option, a written 

notification (which may consist of notification by means 

of electronic communication)—

‘‘(I) of the role of any party that has a material 

affiliation or contractual relationship with the 

financial adviser in the development of the investment advice program and in the selection of investment options available under the plan, 

‘‘(II) of the past performance and historical 

rates of return of the investment options available 

under the plan, 

‘‘(III) of all fees or other compensation relating 

to the advice that the fiduciary adviser or any 
H. R. 4—183

affiliate thereof is to receive (including compensation provided by any third party) in connection 

with the provision of the advice or in connection 

with the sale, acquisition, or holding of the security 

or other property, 

‘‘(IV) of any material affiliation or contractual 

relationship of the fiduciary adviser or affiliates 

thereof in the security or other property, 

‘‘(V) the manner, and under what circumstances, any participant or beneficiary 

information provided under the arrangement will 

be used or disclosed, 

‘‘(VI) of the types of services provided by the 

fiduciary adviser in connection with the provision 

of investment advice by the fiduciary adviser, 

‘‘(VII) that the adviser is acting as a fiduciary 

of the plan in connection with the provision of 

the advice, and 

‘‘(VIII) that a recipient of the advice may separately arrange for the provision of advice by 

another adviser, that could have no material affiliation with and receive no fees or other compensation in connection with the security or other property, and 

‘‘(ii) at all times during the provision of advisory 

services to the participant or beneficiary, the fiduciary 

adviser—

‘‘(I) maintains the information described in 

clause (i) in accurate form and in the manner 

described in subparagraph (H), 

‘‘(II) provides, without charge, accurate 

information to the recipient of the advice no less 

frequently than annually, 

‘‘(III) provides, without charge, accurate 

information to the recipient of the advice upon 

request of the recipient, and 

‘‘(IV) provides, without charge, accurate 

information to the recipient of the advice concerning any material change to the information 

required to be provided to the recipient of the 

advice at a time reasonably contemporaneous to 

the change in information. 

‘‘(G) OTHER CONDITIONS.—The requirements of this 

subparagraph are met if—

‘‘(i) the fiduciary adviser provides appropriate 

disclosure, in connection with the sale, acquisition, or 

holding of the security or other property, in accordance 

with all applicable securities laws, 

‘‘(ii) the sale, acquisition, or holding occurs solely 

at the direction of the recipient of the advice, 

‘‘(iii) the compensation received by the fiduciary 

adviser and affiliates thereof in connection with the 

sale, acquisition, or holding of the security or other 

property is reasonable, and 
H. R. 4—184

‘‘(iv) the terms of the sale, acquisition, or holding 

of the security or other property are at least as favorable to the plan as an arm’s length transaction would 

be. 

‘‘(H) STANDARDS FOR PRESENTATION OF INFORMATION.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if the notification required to 

be provided to participants and beneficiaries under 

subparagraph (F)(i) is written in a clear and conspicuous manner and in a manner calculated to be 

understood by the average plan participant and is sufficiently accurate and comprehensive to reasonably 

apprise such participants and beneficiaries of the 

information required to be provided in the notification. 

‘‘(ii) MODEL FORM FOR DISCLOSURE OF FEES AND

OTHER COMPENSATION.—The Secretary of Labor shall 

issue a model form for the disclosure of fees and other 

compensation required in subparagraph (F)(i)(III) 

which meets the requirements of clause (i). 

‘‘(I) MAINTENANCE FOR 6 YEARS OF EVIDENCE OF COMPLI- ANCE.—The requirements of this subparagraph are met 

if a fiduciary adviser who has provided advice referred 

to in subparagraph (A) maintains, for a period of not less 

than 6 years after the provision of the advice, any records 

necessary for determining whether the requirements of 

the preceding provisions of this paragraph and of subsection 

(d)(17) have been met. A transaction prohibited under section 406 shall not be considered to have occurred solely 

because the records are lost or destroyed prior to the end 

of the 6-year period due to circumstances beyond the control 

of the fiduciary adviser. 

‘‘(J) DEFINITIONS.—For purposes of this paragraph and 

subsection (d)(17)—

‘‘(i) FIDUCIARY ADVISER.—The term ‘fiduciary 

adviser’ means, with respect to a plan, a person who 

is a fiduciary of the plan by reason of the provision 

of investment advice by the person to the participant 

or beneficiary of the plan and who is—

‘‘(I) registered as an investment adviser under 

the Investment Advisers Act of 1940 (15 U.S.C. 

80b–1 et seq.) or under the laws of the State 

in which the fiduciary maintains its principal office 

and place of business, 

‘‘(II) a bank or similar financial institution 

referred to in section 408(b)(4) or a savings association (as defined in section 3(b)(1) of the Federal 

Deposit Insurance Act (12 U.S.C. 1813(b)(1)), but 

only if the advice is provided through a trust 

department of the bank or similar financial institution or savings association which is subject to periodic examination and review by Federal or State 

banking authorities, 

‘‘(III) an insurance company qualified to do 

business under the laws of a State, 

‘‘(IV) a person registered as a broker or dealer 

under the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.), 
H. R. 4—185

‘‘(V) an affiliate of a person described in any 

of subclauses (I) through (IV), or 

‘‘(VI) an employee, agent, or registered representative of a person described in subclauses 

(I) through (V) who satisfies the requirements of 

applicable insurance, banking, and securities laws 

relating to the provision of the advice. 

For purposes of this title, a person who develops the 

computer model described in subparagraph (C)(ii) or 

markets the investment advice program or computer 

model shall be treated as a person who is a fiduciary 

of the plan by reason of the provision of investment 

advice referred to in subsection (e)(3)(B) to the participant or beneficiary and shall be treated as a fiduciary 

adviser for purposes of this paragraph and subsection 

(d)(17), except that the Secretary of Labor may prescribe rules under which only 1 fiduciary adviser may 

elect to be treated as a fiduciary with respect to the 

plan. 

‘‘(ii) AFFILIATE.—The term ‘affiliate’ of another 

entity means an affiliated person of the entity (as 

defined in section 2(a)(3) of the Investment Company 

Act of 1940 (15 U.S.C. 80a–2(a)(3))). 

‘‘(iii) REGISTERED REPRESENTATIVE.—The term ‘registered representative’ of another entity means a person described in section 3(a)(18) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) (substituting the entity for the broker or dealer referred 

to in such section) or a person described in section 

202(a)(17) of the Investment Advisers Act of 1940 (15 

U.S.C. 80b-2(a)(17)) (substituting the entity for the 

investment adviser referred to in such section).’’. 

(3) DETERMINATION OF FEASIBILITY OF APPLICATION OF COM- PUTER MODEL INVESTMENT ADVICE PROGRAMS FOR INDIVIDUAL

RETIREMENT AND SIMILAR PLANS.— (A) SOLICITATION OF INFORMATION.—As soon as practicable after the date of the enactment of this Act, the 

Secretary of Labor, in consultation with the Secretary of 

the Treasury, shall—

(i) solicit information as to the feasibility of the 

application of computer model investment advice programs for plans described in subparagraphs (B) 

through (F) (and so much of subparagraph (G) as 

relates to such subparagraphs) of section 4975(e)(1) 

of the Internal Revenue Code of 1986, including soliciting information from—

(I) at least the top 50 trustees of such plans, 

determined on the basis of assets held by such 

trustees, and 

(II) other persons offering computer model 

investment advice programs based on nonproprietary products, and 

(ii) shall on the basis of such information make 

the determination under subparagraph (B). 

The information solicited by the Secretary of Labor under 

clause (i) from persons described in subclauses (I) and 

(II) of clause (i) shall include information on computer 
H. R. 4—186

modeling capabilities of such persons with respect to the 

current year and preceding year, including such capabilities 

for investment accounts maintained by such persons. 

(B) DETERMINATION OF FEASIBILITY.—The Secretary of 

Labor, in consultation with the Secretary of the Treasury, 

shall, on the basis of information received under subparagraph (A), determine whether there is any computer model 

investment advice program which may be utilized by a 

plan described in subparagraph (A)(i) to provide investment 

advice to the account beneficiary of the plan which—

(i) utilizes relevant information about the account 

beneficiary, which may include age, life expectancy, 

retirement age, risk tolerance, other assets or sources 

of income, and preferences as to certain types of investments, 

(ii) takes into account the full range of investments, including equities and bonds, in determining 

the options for the investment portfolio of the account 

beneficiary, and 

(iii) allows the account beneficiary, in directing 

the investment of assets, sufficient flexibility in 

obtaining advice to evaluate and select investment 

options. 

The Secretary of Labor shall report the results of such 

determination to the committees of Congress referred to 

in subparagraph (D)(ii) not later than December 31, 2007. 

(C) APPLICATION OF COMPUTER MODEL INVESTMENT

ADVICE PROGRAM.—

(i) CERTIFICATION REQUIRED FOR USE OF COMPUTER

MODEL.—

(I) RESTRICTION ON USE.—Subclause (II) of section 4975(f)(8)(B)(i) of the Internal Revenue Code 

of 1986 shall not apply to a plan described in 

subparagraph (A)(i). 

(II) RESTRICTION LIFTED IF MODEL CERTIFIED.—If the Secretary of Labor determines 

under subparagraph (B) or (D) that there is a 

computer model investment advice program 

described in subparagraph (B), subclause (I) shall 

cease to apply as of the date of such determination. 

(ii) CLASS EXEMPTION IF NO INITIAL CERTIFICATION

BY SECRETARY.—If the Secretary of Labor determines 

under subparagraph (B) that there is no computer 

model investment advice program described in 

subparagraph (B), the Secretary of Labor shall grant 

a class exemption from treatment as a prohibited transaction under section 4975(c) of the Internal Revenue 

Code of 1986 to any transaction described in section 

4975(d)(17)(A) of such Code with respect to plans 

described in subparagraph (A)(i), subject to such conditions as set forth in such exemption as are in the 

interests of the plan and its account beneficiary and 

protective of the rights of the account beneficiary and 

as are necessary to—
H. R. 4—187

(I) ensure the requirements of sections 

4975(d)(17) and 4975(f)(8) (other than subparagraph (C) thereof) of the Internal Revenue Code 

of 1986 are met, and 

(II) ensure the investment advice provided 

under the investment advice program utilizes prescribed objective criteria to provide asset allocation 

portfolios comprised of securities or other property 

available as investments under the plan. 

If the Secretary of Labor solicits any information under 

subparagraph (A) from a person and such person does 

not provide such information within 60 days after the 

solicitation, then, unless such failure was due to 

reasonable cause and not wilful neglect, such person 

shall not be entitled to utilize the class exemption 

under this clause. 

(D) SUBSEQUENT DETERMINATION.—

(i) IN GENERAL.—If the Secretary of Labor initially 

makes a determination described in subparagraph 

(C)(ii), the Secretary may subsequently determine that 

there is a computer model investment advice program 

described in subparagraph (B). If the Secretary makes 

such subsequent determination, then the class exemption described in subparagraph (C)(ii) shall cease to 

apply after the later of—

(I) the date which is 2 years after such subsequent determination, or 

(II) the date which is 3 years after the first 

date on which such exemption took effect. 

(ii) REQUESTS FOR DETERMINATION.—Any person 

may request the Secretary of Labor to make a determination under this subparagraph with respect to any 

computer model investment advice program, and the 

Secretary of Labor shall make a determination with 

respect to such request within 90 days. If the Secretary 

of Labor makes a determination that such program 

is not described in subparagraph (B), the Secretary 

shall, within 10 days of such determination, notify 

the Committee on Ways and Means and the Committee 

on Education and the Workforce of the House of Representatives and the Committee on Finance and the 

Committee on Health, Education, Labor, and Pensions 

of the Senate of such determination and the reasons 

for such determination. 

(E) EFFECTIVE DATE.—The provisions of this paragraph 

shall take effect on the date of the enactment of this 

Act. 

(4) EFFECTIVE DATE.—Except as provided in this subsection, 

the amendments made by this subsection shall apply with 

respect to advice referred to in section 4975(c)(3)(B) of the 

Internal Revenue Code of 1986 provided after December 31, 

2006. 

(c) COORDINATION WITH EXISTING EXEMPTIONS.—Any exemption under section 408(b) of the Employee Retirement Income Security Act of 1974 and section 4975(d) of the Internal Revenue Code 

of 1986 provided by the amendments made by this section shall 
H. R. 4—188

not in any manner alter existing individual or class exemptions, 

provided by statute or administrative action. 

Subtitle B—Prohibited Transactions 

SEC. 611. PROHIBITED TRANSACTION RULES RELATING TO FINANCIAL 

INVESTMENTS. 

(a) EXEMPTION FOR BLOCK TRADING.—

(1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C. 

1108(b)), as amended by section 601, is amended by adding 

at the end the following new paragraph: 

‘‘(15)(A) Any transaction involving the purchase or sale 

of securities, or other property (as determined by the Secretary), 

between a plan and a party in interest (other than a fiduciary 

described in section 3(21)(A)) with respect to a plan if—

‘‘(i) the transaction involves a block trade, 

‘‘(ii) at the time of the transaction, the interest of 

the plan (together with the interests of any other plans 

maintained by the same plan sponsor), does not exceed 

10 percent of the aggregate size of the block trade, 

‘‘(iii) the terms of the transaction, including the price, 

are at least as favorable to the plan as an arm’s length 

transaction, and 

‘‘(iv) the compensation associated with the purchase 

and sale is not greater than the compensation associated 

with an arm’s length transaction with an unrelated party. 

‘‘(B) For purposes of this paragraph, the term ‘block trade’ 

means any trade of at least 10,000 shares or with a market 

value of at least $200,000 which will be allocated across two 

or more unrelated client accounts of a fiduciary.’’. 

(2) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—

(A) IN GENERAL.—Subsection (d) of section 4975 of 

the Internal Revenue Code of 1986 (relating to exemptions), 

as amended by section 601, is amended by striking ‘‘or’’ 

at the end of paragraph (16), by striking the period at 

the end of paragraph (17) and inserting ‘‘, or’’, and by 

adding at the end the following new paragraph: 

‘‘(18) any transaction involving the purchase or sale of 

securities, or other property (as determined by the Secretary 

of Labor), between a plan and a party in interest (other than 

a fiduciary described in subsection (e)(3)(B)) with respect to 

a plan if—

‘‘(A) the transaction involves a block trade, 

‘‘(B) at the time of the transaction, the interest of 

the plan (together with the interests of any other plans 

maintained by the same plan sponsor), does not exceed 

10 percent of the aggregate size of the block trade, 

‘‘(C) the terms of the transaction, including the price, 

are at least as favorable to the plan as an arm’s length 

transaction, and 

‘‘(D) the compensation associated with the purchase 

and sale is not greater than the compensation associated 

with an arm’s length transaction with an unrelated party.’’. 

(B) SPECIAL RULE RELATING TO BLOCK TRADE.—Subsection (f) of section 4975 of such Code (relating to other 
H. R. 4—189

definitions and special rules), as amended by section 601, 

is amended by adding at the end the following new paragraph: 

‘‘(9) BLOCK TRADE.—The term ‘block trade’ means any trade 

of at least 10,000 shares or with a market value of at least 

$200,000 which will be allocated across two or more unrelated 

client accounts of a fiduciary.’’. 

(b) BONDING RELIEF.—Section 412(a) of such Act (29 U.S.C. 

1112(a)) is amended—

(1) by redesignating paragraph (2) as paragraph (3), 

(2) by striking ‘‘and’’ at the end of paragraph (1), and 

(3) by inserting after paragraph (1) the following new paragraph: 

‘‘(2) no bond shall be required of any entity which is registered as a broker or a dealer under section 15(b) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) if the broker 

or dealer is subject to the fidelity bond requirements of a 

self-regulatory organization (within the meaning of section 

3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).’’. 

(c) EXEMPTION FOR ELECTRONIC COMMUNICATION NETWORK.— (1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—Section 408(b) of such Act, as amended 

by subsection (a), is amended by adding at the end the following: 

‘‘(16) Any transaction involving the purchase or sale of 

securities, or other property (as determined by the Secretary), 

between a plan and a party in interest if—

‘‘(A) the transaction is executed through an electronic 

communication network, alternative trading system, or 

similar execution system or trading venue subject to regulation and oversight by—

‘‘(i) the applicable Federal regulating entity, or 

‘‘(ii) such foreign regulatory entity as the Secretary 

may determine by regulation, 

‘‘(B) either—

‘‘(i) the transaction is effected pursuant to rules 

designed to match purchases and sales at the best 

price available through the execution system in accordance with applicable rules of the Securities and 

Exchange Commission or other relevant governmental 

authority, or 

‘‘(ii) neither the execution system nor the parties 

to the transaction take into account the identity of 

the parties in the execution of trades, 

‘‘(C) the price and compensation associated with the 

purchase and sale are not greater than the price and compensation associated with an arm’s length transaction with 

an unrelated party, 

‘‘(D) if the party in interest has an ownership interest 

in the system or venue described in subparagraph (A), 

the system or venue has been authorized by the plan 

sponsor or other independent fiduciary for transactions 

described in this paragraph, and 

‘‘(E) not less than 30 days prior to the initial transaction described in this paragraph executed through any 

system or venue described in subparagraph (A), a plan 

fiduciary is provided written or electronic notice of the 
H. R. 4—190

execution of such transaction through such system or 

venue.’’. 

(2) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—

Subsection (d) of section 4975 of the Internal Revenue Code 

of 1986 (relating to exemptions), as amended by subsection 

(a), is amended by striking ‘‘or’’ at the end of paragraph (17), 

by striking the period at the end of paragraph (18) and inserting 

‘‘, or’’, and by adding at the end the following new paragraph: 

‘‘(19) any transaction involving the purchase or sale of 

securities, or other property (as determined by the Secretary 

of Labor), between a plan and a party in interest if—

‘‘(A) the transaction is executed through an electronic 

communication network, alternative trading system, or 

similar execution system or trading venue subject to regulation and oversight by—

‘‘(i) the applicable Federal regulating entity, or 

‘‘(ii) such foreign regulatory entity as the Secretary 

of Labor may determine by regulation, 

‘‘(B) either—

‘‘(i) the transaction is effected pursuant to rules 

designed to match purchases and sales at the best 

price available through the execution system in accordance with applicable rules of the Securities and 

Exchange Commission or other relevant governmental 

authority, or 

‘‘(ii) neither the execution system nor the parties 

to the transaction take into account the identity of 

the parties in the execution of trades, 

‘‘(C) the price and compensation associated with the 

purchase and sale are not greater than the price and compensation associated with an arm’s length transaction with 

an unrelated party, 

‘‘(D) if the party in interest has an ownership interest 

in the system or venue described in subparagraph (A), 

the system or venue has been authorized by the plan 

sponsor or other independent fiduciary for transactions 

described in this paragraph, and 

‘‘(E) not less than 30 days prior to the initial transaction described in this paragraph executed through any 

system or venue described in subparagraph (A), a plan 

fiduciary is provided written or electronic notice of the 

execution of such transaction through such system or 

venue.’’. 

(d) EXEMPTION FOR SERVICE PROVIDERS.— (1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C. 1106), 

as amended by subsection (c), is amended by adding at the 

end the following new paragraph: 

‘‘(17)(A) Transactions described in subparagraphs (A), (B), 

and (D) of section 406(a)(1) between a plan and a person that 

is a party in interest other than a fiduciary (or an affiliate) 

who has or exercises any discretionary authority or control 

with respect to the investment of the plan assets involved 

in the transaction or renders investment advice (within the 

meaning of section 3(21)(A)(ii)) with respect to those assets, 

solely by reason of providing services to the plan or solely 

by reason of a relationship to such a service provider described 
H. R. 4—191

in subparagraph (F), (G), (H), or (I) of section 3(14), or both, 

but only if in connection with such transaction the plan receives 

no less, nor pays no more, than adequate consideration. 

‘‘(B) For purposes of this paragraph, the term ‘adequate 

consideration’ means—

‘‘(i) in the case of a security for which there is 

a generally recognized market—

‘‘(I) the price of the security prevailing on a 

national securities exchange which is registered 

under section 6 of the Securities Exchange Act 

of 1934, taking into account factors such as the 

size of the transaction and marketability of the 

security, or 

‘‘(II) if the security is not traded on such a 

national securities exchange, a price not less favorable to the plan than the offering price for the 

security as established by the current bid and 

asked prices quoted by persons independent of the 

issuer and of the party in interest, taking into 

account factors such as the size of the transaction 

and marketability of the security, and 

‘‘(ii) in the case of an asset other than a security 

for which there is a generally recognized market, the 

fair market value of the asset as determined in good 

faith by a fiduciary or fiduciaries in accordance with 

regulations prescribed by the Secretary.’’. 

(2) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.— (A) IN GENERAL.—Subsection (d) of section 4975 of 

the Internal Revenue Code of 1986 (relating to exemptions), 

as amended by subsection (c), is amended by striking ‘‘or’’ 

at the end of paragraph (18), by striking the period at 

the end of paragraph (19) and inserting ‘‘, or’’, and by 

adding at the end the following new paragraph: 

‘‘(20) transactions described in subparagraphs (A), (B), and 

(D) of subsection (c)(1) between a plan and a person that 

is a party in interest other than a fiduciary (or an affiliate) 

who has or exercises any discretionary authority or control 

with respect to the investment of the plan assets involved 

in the transaction or renders investment advice (within the 

meaning of subsection (e)(3)(B)) with respect to those assets, 

solely by reason of providing services to the plan or solely 

by reason of a relationship to such a service provider described 

in subparagraph (F), (G), (H), or (I) of subsection (e)(2), or 

both, but only if in connection with such transaction the plan 

receives no less, nor pays no more, than adequate consideration.’’. 

(B) SPECIAL RULE RELATING TO SERVICE PROVIDERS.— Subsection (f) of section 4975 of such Code (relating to 

other definitions and special rules), as amended by subsection (a), is amended by adding at the end the following 

new paragraph: 

‘‘(10) ADEQUATE CONSIDERATION.—The term ‘adequate 

consideration’ means—

‘‘(A) in the case of a security for which there is a 

generally recognized market—

‘‘(i) the price of the security prevailing on a 

national securities exchange which is registered under 
H. R. 4—192

section 6 of the Securities Exchange Act of 1934, taking 

into account factors such as the size of the transaction 

and marketability of the security, or 

‘‘(ii) if the security is not traded on such a national 

securities exchange, a price not less favorable to the 

plan than the offering price for the security as established by the current bid and asked prices quoted 

by persons independent of the issuer and of the party 

in interest, taking into account factors such as the 

size of the transaction and marketability of the security, and 

‘‘(B) in the case of an asset other than a security 

for which there is a generally recognized market, the fair 

market value of the asset as determined in good faith 

by a fiduciary or fiduciaries in accordance with regulations 

prescribed by the Secretary of Labor.’’. 

(e) RELIEF FOR FOREIGN EXCHANGE TRANSACTIONS.— (1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C. 

1108(b)), as amended by subsection (d), is amended by adding 

at the end the following new paragraph: 

‘‘(18) FOREIGN EXCHANGE TRANSACTIONS.—Any foreign 

exchange transactions, between a bank or broker-dealer (or 

any affiliate of either), and a plan (as defined in section 3(3)) 

with respect to which such bank or broker-dealer (or affiliate) 

is a trustee, custodian, fiduciary, or other party in interest, 

if—

‘‘(A) the transaction is in connection with the purchase, 

holding, or sale of securities or other investment assets 

(other than a foreign exchange transaction unrelated to 

any other investment in securities or other investment 

assets), 

‘‘(B) at the time the foreign exchange transaction is 

entered into, the terms of the transaction are not less 

favorable to the plan than the terms generally available 

in comparable arm’s length foreign exchange transactions 

between unrelated parties, or the terms afforded by the 

bank or broker-dealer (or any affiliate of either) in comparable arm’s-length foreign exchange transactions 

involving unrelated parties, 

‘‘(C) the exchange rate used by such bank or brokerdealer (or affiliate) for a particular foreign exchange transaction does not deviate by more or less than 3 percent 

from the interbank bid and asked rates for transactions 

of comparable size and maturity at the time of the transaction as displayed on an independent service that reports 

rates of exchange in the foreign currency market for such 

currency, and 

‘‘(D) the bank or broker-dealer (or any affiliate of 

either) does not have investment discretion, or provide 

investment advice, with respect to the transaction.’’. 

(2) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—

Subsection (d) of section 4975 of the Internal Revenue Code 

of 1986 (relating to exemptions), as amended by subsection 

(d), is amended by striking ‘‘or’’ at the end of paragraph (19), 

by striking the period at the end of paragraph (20) and inserting 

‘‘, or’’, and by adding at the end the following new paragraph: 
H. R. 4—193

‘‘(21) any foreign exchange transactions, between a bank 

or broker-dealer (or any affiliate of either) and a plan (as 

defined in this section) with respect to which such bank or 

broker-dealer (or affiliate) is a trustee, custodian, fiduciary, 

or other party in interest person, if—

‘‘(A) the transaction is in connection with the purchase, 

holding, or sale of securities or other investment assets 

(other than a foreign exchange transaction unrelated to 

any other investment in securities or other investment 

assets), 

‘‘(B) at the time the foreign exchange transaction is 

entered into, the terms of the transaction are not less 

favorable to the plan than the terms generally available 

in comparable arm’s length foreign exchange transactions 

between unrelated parties, or the terms afforded by the 

bank or broker-dealer (or any affiliate of either) in comparable arm’s-length foreign exchange transactions 

involving unrelated parties, 

‘‘(C) the exchange rate used by such bank or brokerdealer (or affiliate) for a particular foreign exchange transaction does not deviate by more or less than 3 percent 

from the interbank bid and asked rates for transactions 

of comparable size and maturity at the time of the transaction as displayed on an independent service that reports 

rates of exchange in the foreign currency market for such 

currency, and 

‘‘(D) the bank or broker-dealer (or any affiliate of 

either) does not have investment discretion, or provide 

investment advice, with respect to the transaction.’’. 

(f) DEFINITION OF PLAN ASSET VEHICLE.—Section 3 of such 

Act (29 U.S.C. 1002) is amended by adding at the end the following 

new paragraph: 

‘‘(42) the term ‘plan assets’ means plan assets as defined by 

such regulations as the Secretary may prescribe, except that under 

such regulations the assets of any entity shall not be treated as 

plan assets if, immediately after the most recent acquisition of 

any equity interest in the entity, less than 25 percent of the total 

value of each class of equity interest in the entity is held by 

benefit plan investors. For purposes of determinations pursuant 

to this paragraph, the value of any equity interest held by a person 

(other than such a benefit plan investor) who has discretionary 

authority or control with respect to the assets of the entity or 

any person who provides investment advice for a fee (direct or 

indirect) with respect to such assets, or any affiliate of such a 

person, shall be disregarded for purposes of calculating the 25 

percent threshold. An entity shall be considered to hold plan assets 

only to the extent of the percentage of the equity interest held 

by benefit plan investors. For purposes of this paragraph, the term 

‘benefit plan investor’ means an employee benefit plan subject to 

part 4, any plan to which section 4975 of the Internal Revenue 

Code of 1986 applies, and any entity whose underlying assets 

include plan assets by reason of a plan’s investment in such entity.’’. 

(g) EXEMPTION FOR CROSS TRADING.—

(1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C. 

1108(b)), as amended by subsection (e), is amended by adding 

at the end the following new paragraph: 
H. R. 4—194

‘‘(19) CROSS TRADING.—Any transaction described in sections 406(a)(1)(A) and 406(b)(2) involving the purchase and 

sale of a security between a plan and any other account managed by the same investment manager, if—

‘‘(A) the transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery 

of a security for which market quotations are readily available, 

‘‘(B) the transaction is effected at the independent current market price of the security (within the meaning of 

section 270.17a–7(b) of title 17, Code of Federal Regulations), 

‘‘(C) no brokerage commission, fee (except for customary transfer fees, the fact of which is disclosed pursuant 

to subparagraph (D)), or other remuneration is paid in 

connection with the transaction, 

‘‘(D) a fiduciary (other than the investment manager 

engaging in the cross-trades or any affiliate) for each plan 

participating in the transaction authorizes in advance of 

any cross-trades (in a document that is separate from any 

other written agreement of the parties) the investment 

manager to engage in cross trades at the investment manager’s discretion, after such fiduciary has received disclosure regarding the conditions under which cross trades 

may take place (but only if such disclosure is separate 

from any other agreement or disclosure involving the asset 

management relationship), including the written policies 

and procedures of the investment manager described in 

subparagraph (H), 

‘‘(E) each plan participating in the transaction has assets of at least $100,000,000, except that if the assets 

of a plan are invested in a master trust containing the 

assets of plans maintained by employers in the same controlled group (as defined in section 407(d)(7)), the master 

trust has assets of at least $100,000,000, 

‘‘(F) the investment manager provides to the plan fiduciary who authorized cross trading under subparagraph 

(D) a quarterly report detailing all cross trades executed 

by the investment manager in which the plan participated 

during such quarter, including the following information, 

as applicable: (i) the identity of each security bought or 

sold; (ii) the number of shares or units traded; (iii) the 

parties involved in the cross-trade; and (iv) trade price 

and the method used to establish the trade price, 

‘‘(G) the investment manager does not base its fee 

schedule on the plan’s consent to cross trading, and no 

other service (other than the investment opportunities and 

cost savings available through a cross trade) is conditioned 

on the plan’s consent to cross trading, 

‘‘(H) the investment manager has adopted, and crosstrades are effected in accordance with, written cross-trading 

policies and procedures that are fair and equitable to all 

accounts participating in the cross-trading program, and 

that include a description of the manager’s pricing policies 

and procedures, and the manager’s policies and procedures 

for allocating cross trades in an objective manner among 

accounts participating in the cross-trading program, and 
H. R. 4—195

‘‘(I) the investment manager has designated an individual responsible for periodically reviewing such purchases 

and sales to ensure compliance with the written policies 

and procedures described in subparagraph (H), and following such review, the individual shall issue an annual 

written report no later than 90 days following the period 

to which it relates signed under penalty of perjury to 

the plan fiduciary who authorized cross trading under 

subparagraph (D) describing the steps performed during 

the course of the review, the level of compliance, and any 

specific instances of non-compliance. 

The written report under subparagraph (I) shall also notify 

the plan fiduciary of the plan’s right to terminate participation 

in the investment manager’s cross-trading program at any 

time.’’. 

(2) AMENDMENTS OF INTERNAL REVENUE CODE OF 1986.— Subsection (d) of section 4975 of the Internal Revenue Code 

of 1986 (relating to exemptions), as amended by subsection 

(e), is amended by striking ‘‘or’’ at the end of paragraph (20), 

by striking the period at the end of paragraph (21) and inserting 

‘‘, or’’, and by adding at the end the following new paragraph: 

‘‘(22) any transaction described in subsection (c)(1)(A) 

involving the purchase and sale of a security between a plan 

and any other account managed by the same investment manager, if—

‘‘(A) the transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery 

of a security for which market quotations are readily available, 

‘‘(B) the transaction is effected at the independent current market price of the security (within the meaning of 

section 270.17a–7(b) of title 17, Code of Federal Regulations), 

‘‘(C) no brokerage commission, fee (except for customary transfer fees, the fact of which is disclosed pursuant 

to subparagraph (D)), or other remuneration is paid in 

connection with the transaction, 

‘‘(D) a fiduciary (other than the investment manager 

engaging in the cross-trades or any affiliate) for each plan 

participating in the transaction authorizes in advance of 

any cross-trades (in a document that is separate from any 

other written agreement of the parties) the investment 

manager to engage in cross trades at the investment manager’s discretion, after such fiduciary has received disclosure regarding the conditions under which cross trades 

may take place (but only if such disclosure is separate 

from any other agreement or disclosure involving the asset 

management relationship), including the written policies 

and procedures of the investment manager described in 

subparagraph (H), 

‘‘(E) each plan participating in the transaction has 

assets of at least $100,000,000, except that if the assets 

of a plan are invested in a master trust containing the 

assets of plans maintained by employers in the same controlled group (as defined in section 407(d)(7) of the 

Employee Retirement Income Security Act of 1974), the 

master trust has assets of at least $100,000,000, 
H. R. 4—196

‘‘(F) the investment manager provides to the plan fiduciary who authorized cross trading under subparagraph 

(D) a quarterly report detailing all cross trades executed 

by the investment manager in which the plan participated 

during such quarter, including the following information, 

as applicable: (i) the identity of each security bought or 

sold; (ii) the number of shares or units traded; (iii) the 

parties involved in the cross-trade; and (iv) trade price 

and the method used to establish the trade price, 

‘‘(G) the investment manager does not base its fee 

schedule on the plan’s consent to cross trading, and no 

other service (other than the investment opportunities and 

cost savings available through a cross trade) is conditioned 

on the plan’s consent to cross trading, 

‘‘(H) the investment manager has adopted, and crosstrades are effected in accordance with, written cross-trading 

policies and procedures that are fair and equitable to all 

accounts participating in the cross-trading program, and 

that include a description of the manager’s pricing policies 

and procedures, and the manager’s policies and procedures 

for allocating cross trades in an objective manner among 

accounts participating in the cross-trading program, and 

‘‘(I) the investment manager has designated an individual responsible for periodically reviewing such purchases 

and sales to ensure compliance with the written policies 

and procedures described in subparagraph (H), and following such review, the individual shall issue an annual 

written report no later than 90 days following the period 

to which it relates signed under penalty of perjury to 

the plan fiduciary who authorized cross trading under 

subparagraph (D) describing the steps performed during 

the course of the review, the level of compliance, and any 

specific instances of non-compliance. 

The written report shall also notify the plan fiduciary of the 

plan’s right to terminate participation in the investment manager’s cross-trading program at any time.’’. 

(3) REGULATIONS.—No later than 180 days after the date 

of the enactment of this Act, the Secretary of Labor, after 

consultation with the Securities and Exchange Commission, 

shall issue regulations regarding the content of policies and 

procedures required to be adopted by an investment manager 

under section 408(b)(19) of the Employee Retirement Income 

Security Act of 1974. 

(h) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to transactions 

occurring after the date of the enactment of this Act. 

(2) BONDING RULE.—The amendments made by subsection 

(b) shall apply to plan years beginning after such date. 

SEC. 612. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS 

INVOLVING SECURITIES AND COMMODITIES. 

(a) AMENDMENT OF EMPLOYEE RETIREMENT INCOME SECURITY

ACT OF 1974.—Section 408(b) of the Employee Retirement Income 

Security Act of 1974 (29 U.S.C. 1108(b)), as amended by sections 

601 and 611, is further amended by adding at the end the following 

new paragraph: 
H. R. 4—197

‘‘(20)(A) Except as provided in subparagraphs (B) and (C), 

a transaction described in section 406(a) in connection with 

the acquisition, holding, or disposition of any security or commodity, if the transaction is corrected before the end of the 

correction period. 

‘‘(B) Subparagraph (A) does not apply to any transaction 

between a plan and a plan sponsor or its affiliates that involves 

the acquisition or sale of an employer security (as defined 

in section 407(d)(1)) or the acquisition, sale, or lease of employer 

real property (as defined in section 407(d)(2)). 

‘‘(C) In the case of any fiduciary or other party in interest 

(or any other person knowingly participating in such transaction), subparagraph (A) does not apply to any transaction 

if, at the time the transaction occurs, such fiduciary or party 

in interest (or other person) knew (or reasonably should have 

known) that the transaction would (without regard to this 

paragraph) constitute a violation of section 406(a). 

‘‘(D) For purposes of this paragraph, the term ‘correction 

period’ means, in connection with a fiduciary or party in interest 

(or other person knowingly participating in the transaction), 

the 14-day period beginning on the date on which such fiduciary 

or party in interest (or other person) discovers, or reasonably 

should have discovered, that the transaction would (without 

regard to this paragraph) constitute a violation of section 406(a). 

‘‘(E) For purposes of this paragraph—

‘‘(i) The term ‘security’ has the meaning given such 

term by section 475(c)(2) of the Internal Revenue Code 

of 1986 (without regard to subparagraph (F)(iii) and the 

last sentence thereof). 

‘‘(ii) The term ‘commodity’ has the meaning given such 

term by section 475(e)(2) of such Code (without regard 

to subparagraph (D)(iii) thereof). 

‘‘(iii) The term ‘correct’ means, with respect to a transaction—

‘‘(I) to undo the transaction to the extent possible 

and in any case to make good to the plan or affected 

account any losses resulting from the transaction, and 

‘‘(II) to restore to the plan or affected account 

any profits made through the use of assets of the 

plan.’’. 

(b) AMENDMENT OF INTERNAL REVENUE CODE OF 1986.—

(1) IN GENERAL.—Subsection (d) of section 4975 of the 

Internal Revenue Code of 1986 (relating to exemptions), as 

amended by sections 601 and 611, is amended by striking 

‘‘or’’ at the end of paragraph (21), by striking the period at 

the end of paragraph (22) and inserting ‘‘, or’’, and by adding 

at the end the following new paragraph: 

‘‘(23) except as provided in subsection (f)(11), a transaction 

described in subparagraph (A), (B), (C), or (D) of subsection 

(c)(1) in connection with the acquisition, holding, or disposition 

of any security or commodity, if the transaction is corrected 

before the end of the correction period.’’. 

(2) SPECIAL RULES RELATING TO CORRECTION PERIOD.—Subsection (f) of section 4975 of such Code (relating to other definitions and special rules), as amended by sections 601 and 611, 

is amended by adding at the end the following new paragraph: 

‘‘(11) CORRECTION PERIOD.—
H. R. 4—198

‘‘(A) IN GENERAL.—For purposes of subsection (d)(23), 

the term ‘correction period’ means the 14-day period beginning on the date on which the disqualified person discovers, 

or reasonably should have discovered, that the transaction 

would (without regard to this paragraph and subsection 

(d)(23)) constitute a prohibited transaction. 

‘‘(B) EXCEPTIONS.—

‘‘(i) EMPLOYER SECURITIES.—Subsection (d)(23) 

does not apply to any transaction between a plan and 

a plan sponsor or its affiliates that involves the acquisition or sale of an employer security (as defined in 

section 407(d)(1)) or the acquisition, sale, or lease of 

employer real property (as defined in section 407(d)(2)). 

‘‘(ii) KNOWING PROHIBITED TRANSACTION.—In the 

case of any disqualified person, subsection (d)(23) does 

not apply to a transaction if, at the time the transaction 

is entered into, the disqualified person knew (or reasonably should have known) that the transaction would 

(without regard to this paragraph) constitute a prohibited transaction. 

‘‘(C) ABATEMENT OF TAX WHERE THERE IS A CORRECTION.—If a transaction is not treated as a prohibited transaction by reason of subsection (d)(23), then no tax under 

subsections (a) and (b) shall be assessed with respect to 

such transaction, and if assessed the assessment shall be 

abated, and if collected shall be credited or refunded as 

an overpayment. 

‘‘(D) DEFINITIONS.—For purposes of this paragraph and 

subsection (d)(23)—

‘‘(i) SECURITY.—The term ‘security’ has the 

meaning given such term by section 475(c)(2) (without 

regard to subparagraph (F)(iii) and the last sentence 

thereof). 

‘‘(ii) COMMODITY.—The term ‘commodity’ has the 

meaning given such term by section 475(e)(2) (without 

regard to subparagraph (D)(iii) thereof). 

‘‘(iii) CORRECT.—The term ‘correct’ means, with 

respect to a transaction—

‘‘(I) to undo the transaction to the extent possible and in any case to make good to the plan 

or affected account any losses resulting from the 

transaction, and 

‘‘(II) to restore to the plan or affected account 

any profits made through the use of assets of the 

plan.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to any transaction which the fiduciary or disqualified 

person discovers, or reasonably should have discovered, after the 

date of the enactment of this Act constitutes a prohibited transaction. 
H. R. 4—199

Subtitle C—Fiduciary and Other Rules 

SEC. 621. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY 

DURING SUSPENSION OF ABILITY OF PARTICIPANT OR 

BENEFICIARY TO DIRECT INVESTMENTS. 

(a) IN GENERAL.—Section 404(c) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended—

(1) in paragraph (1)—

(A) by redesignating subparagraphs (A) and (B) as 

clauses (i) and (ii), respectively, and by inserting ‘‘(A)’’ 

after ‘‘(c)(1)’’, 

(B) in subparagraph (A)(ii) (as redesignated by paragraph (1)), by inserting before the period the following: 

‘‘, except that this clause shall not apply in connection 

with such participant or beneficiary for any blackout period 

during which the ability of such participant or beneficiary 

to direct the investment of the assets in his or her account 

is suspended by a plan sponsor or fiduciary’’, and 

(C) by adding at the end the following new subparagraphs: 

‘‘(B) If a person referred to in subparagraph (A)(ii) meets the 

requirements of this title in connection with authorizing and implementing the blackout period, any person who is otherwise a fiduciary shall not be liable under this title for any loss occurring 

during such period. 

‘‘(C) For purposes of this paragraph, the term ‘blackout period’ 

has the meaning given such term by section 101(i)(7).’’; and 

(2) by adding at the end the following: 

‘‘(4)(A) In any case in which a qualified change in investment options occurs in connection with an individual account 

plan, a participant or beneficiary shall not be treated for purposes of paragraph (1) as not exercising control over the assets 

in his account in connection with such change if the requirements of subparagraph (C) are met in connection with such 

change. 

‘‘(B) For purposes of subparagraph (A), the term ‘qualified 

change in investment options’ means, in connection with an 

individual account plan, a change in the investment options 

offered to the participant or beneficiary under the terms of 

the plan, under which—

‘‘(i) the account of the participant or beneficiary is 

reallocated among one or more remaining or new investment options which are offered in lieu of one or more 

investment options offered immediately prior to the effective date of the change, and 

‘‘(ii) the stated characteristics of the remaining or new 

investment options provided under clause (i), including 

characteristics relating to risk and rate of return, are, 

as of immediately after the change, reasonably similar 

to those of the existing investment options as of immediately before the change. 

‘‘(C) The requirements of this subparagraph are met in 

connection with a qualified change in investment options if—

‘‘(i) at least 30 days and no more than 60 days prior 

to the effective date of the change, the plan administrator 

furnishes written notice of the change to the participants 
H. R. 4—200

and beneficiaries, including information comparing the 

existing and new investment options and an explanation 

that, in the absence of affirmative investment instructions 

from the participant or beneficiary to the contrary, the 

account of the participant or beneficiary will be invested 

in the manner described in subparagraph (B), 

‘‘(ii) the participant or beneficiary has not provided 

to the plan administrator, in advance of the effective date 

of the change, affirmative investment instructions contrary 

to the change, and 

‘‘(iii) the investments under the plan of the participant 

or beneficiary as in effect immediately prior to the effective 

date of the change were the product of the exercise by 

such participant or beneficiary of control over the assets 

of the account within the meaning of paragraph (1).’’. 

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007. 

(2) SPECIAL RULE FOR COLLECTIVELY BARGAINED AGREEMENTS.—In the case of a plan maintained pursuant to 1 or 

more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before 

the date of the enactment of this Act, paragraph (1) shall 

be applied to benefits pursuant to, and individuals covered 

by, any such agreement by substituting for ‘‘December 31, 

2007’’ the earlier of—

(A) the later of—

(i) December 31, 2008, or 

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

bargaining agreements terminates (determined without 

regard to any extension thereof after such date of 

enactment), or 

(B) December 31, 2009. 

SEC. 622. INCREASE IN MAXIMUM BOND AMOUNT. 

(a) IN GENERAL.—Section 412(a) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1112), as amended by 

section 611(b), is amended by adding at the end the following: 

‘‘In the case of a plan that holds employer securities (within the 

meaning of section 407(d)(1)), this subsection shall be applied by 

substituting ‘$1,000,000’ for ‘$500,000’ each place it appears.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to plan years beginning after December 31, 2007. 

SEC. 623. INCREASE IN PENALTIES FOR COERCIVE INTERFERENCE 

WITH EXERCISE OF ERISA RIGHTS. 

(a) IN GENERAL.—Section 511 of the Employment Retirement 

Income Security Act of 1974 (29 U.S.C. 1141) is amended—

(1) by striking ‘‘$10,000’’ and inserting ‘‘$100,000’’, and 

(2) by striking ‘‘one year’’ and inserting ‘‘10 years’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to violations occurring on and after the date of the 

enactment of this Act. 
H. R. 4—201

SEC. 624. TREATMENT OF INVESTMENT OF ASSETS BY PLAN WHERE 

PARTICIPANT FAILS TO EXERCISE INVESTMENT ELECTION. 

(a) IN GENERAL.—Section 404(c) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1104(c)), as amended by 

section 622, is amended by adding at the end the following new 

paragraph: 

‘‘(5) DEFAULT INVESTMENT ARRANGEMENTS.—

‘‘(A) IN GENERAL.—For purposes of paragraph (1), a 

participant in an individual account plan meeting the notice 

requirements of subparagraph (B) shall be treated as exercising control over the assets in the account with respect 

to the amount of contributions and earnings which, in 

the absence of an investment election by the participant, 

are invested by the plan in accordance with regulations 

prescribed by the Secretary. The regulations under this 

subparagraph shall provide guidance on the appropriateness of designating default investments that include a mix 

of asset classes consistent with capital preservation or longterm capital appreciation, or a blend of both. 

‘‘(B) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if each participant—

‘‘(I) receives, within a reasonable period of time 

before each plan year, a notice explaining the 

employee’s right under the plan to designate how 

contributions and earnings will be invested and 

explaining how, in the absence of any investment 

election by the participant, such contributions and 

earnings will be invested, and 

‘‘(II) has a reasonable period of time after 

receipt of such notice and before the beginning 

of the plan year to make such designation. 

‘‘(ii) FORM OF NOTICE.—The requirements of 

clauses (i) and (ii) of section 401(k)(12)(D) of the 

Internal Revenue Code of 1986 shall apply with respect 

to the notices described in this subparagraph.’’. 

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2006. 

(2) REGULATIONS.—Final regulations under section 

404(c)(5)(A) of the Employee Retirement Income Security Act 

of 1974 (as added by this section) shall be issued no later 

than 6 months after the date of the enactment of this Act. 

SEC. 625. CLARIFICATION OF FIDUCIARY RULES. 

(a) IN GENERAL.—Not later than 1 year after the date of the 

enactment of this Act, the Secretary of Labor shall issue final 

regulations clarifying that the selection of an annuity contract 

as an optional form of distribution from an individual account 

plan to a participant or beneficiary—

(1) is not subject to the safest available annuity standard 

under Interpretive Bulletin 95–1 (29 CFR 2509.95–1), and 

(2) is subject to all otherwise applicable fiduciary standards. 

(b) EFFECTIVE DATE.—This section shall take effect on the 

date of enactment of this Act. 
H. R. 4—202

TITLE VII—BENEFIT ACCRUAL 

STANDARDS 

SEC. 701. BENEFIT ACCRUAL STANDARDS. 

(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—

(1) RULES RELATING TO REDUCTION IN RATE OF BENEFIT

ACCRUAL.—Section 204(b) of the Employee Retirement Income 

Security Act of 1974 (29 U.S.C. 1054(b)) is amended by adding 

at the end the following new paragraph: 

‘‘(5) SPECIAL RULES RELATING TO AGE.— ‘‘(A) COMPARISON TO SIMILARLY SITUATED YOUNGER

INDIVIDUAL.— ‘‘(i) IN GENERAL.—A plan shall not be treated as 

failing to meet the requirements of paragraph (1)(H)(i) 

if a participant’s accrued benefit, as determined as 

of any date under the terms of the plan, would be 

equal to or greater than that of any similarly situated, 

younger individual who is or could be a participant. 

‘‘(ii) SIMILARLY SITUATED.—For purposes of this 

subparagraph, a participant is similarly situated to 

any other individual if such participant is identical 

to such other individual in every respect (including 

period of service, compensation, position, date of hire, 

work history, and any other respect) except for age. 

‘‘(iii) DISREGARD OF SUBSIDIZED EARLY RETIREMENT

BENEFITS.—In determining the accrued benefit as of 

any date for purposes of this clause, the subsidized 

portion of any early retirement benefit or retirementtype subsidy shall be disregarded. 

‘‘(iv) ACCRUED BENEFIT.—For purposes of this 

subparagraph, the accrued benefit may, under the 

terms of the plan, be expressed as an annuity payable 

at normal retirement age, the balance of a hypothetical 

account, or the current value of the accumulated 

percentage of the employee’s final average compensation. 

‘‘(B) APPLICABLE DEFINED BENEFIT PLANS.— ‘‘(i) INTEREST CREDITS.— ‘‘(I) IN GENERAL.—An applicable defined benefit plan shall be treated as failing to meet the 

requirements of paragraph (1)(H) unless the terms 

of the plan provide that any interest credit (or 

an equivalent amount) for any plan year shall 

be at a rate which is not greater than a market 

rate of return. A plan shall not be treated as 

failing to meet the requirements of this subclause 

merely because the plan provides for a reasonable 

minimum guaranteed rate of return or for a rate 

of return that is equal to the greater of a fixed 

or variable rate of return. 

‘‘(II) PRESERVATION OF CAPITAL.—An interest 

credit (or an equivalent amount) of less than zero 

shall in no event result in the account balance 

or similar amount being less than the aggregate 

amount of contributions credited to the account. 
H. R. 4—203

‘‘(III) MARKET RATE OF RETURN.—The Secretary of the Treasury may provide by regulation 

for rules governing the calculation of a market 

rate of return for purposes of subclause (I) and 

for permissible methods of crediting interest to 

the account (including fixed or variable interest 

rates) resulting in effective rates of return meeting 

the requirements of subclause (I). 

‘‘(ii) SPECIAL RULE FOR PLAN CONVERSIONS.—If, 

after June 29, 2005, an applicable plan amendment 

is adopted, the plan shall be treated as failing to meet 

the requirements of paragraph (1)(H) unless the 

requirements of clause (iii) are met with respect to 

each individual who was a participant in the plan 

immediately before the adoption of the amendment. 

‘‘(iii) RATE OF BENEFIT ACCRUAL.—Subject to clause 

(iv), the requirements of this clause are met with 

respect to any participant if the accrued benefit of 

the participant under the terms of the plan as in 

effect after the amendment is not less than the sum 

of—

‘‘(I) the participant’s accrued benefit for years 

of service before the effective date of the amendment, determined under the terms of the plan 

as in effect before the amendment, plus 

‘‘(II) the participant’s accrued benefit for years 

of service after the effective date of the amendment, determined under the terms of the plan 

as in effect after the amendment. 

‘‘(iv) SPECIAL RULES FOR EARLY RETIREMENT SUBSIDIES.—For purposes of clause (iii)(I), the plan shall 

credit the accumulation account or similar amount with 

the amount of any early retirement benefit or retirement-type subsidy for the plan year in which the 

participant retires if, as of such time, the participant 

has met the age, years of service, and other requirements under the plan for entitlement to such benefit 

or subsidy. 

‘‘(v) APPLICABLE PLAN AMENDMENT.—For purposes 

of this subparagraph—

‘‘(I) IN GENERAL.—The term ‘applicable plan 

amendment’ means an amendment to a defined 

benefit plan which has the effect of converting 

the plan to an applicable defined benefit plan. 

‘‘(II) SPECIAL RULE FOR COORDINATED BENEFITS.—If the benefits of 2 or more defined benefit 

plans established or maintained by an employer 

are coordinated in such a manner as to have the 

effect of the adoption of an amendment described 

in subclause (I), the sponsor of the defined benefit 

plan or plans providing for such coordination shall 

be treated as having adopted such a plan amendment as of the date such coordination begins. 

‘‘(III) MULTIPLE AMENDMENTS.—The Secretary 

of the Treasury shall issue regulations to prevent 

the avoidance of the purposes of this subparagraph 
H. R. 4—204

through the use of 2 or more plan amendments 

rather than a single amendment. 

‘‘(IV) APPLICABLE DEFINED BENEFIT PLAN.—For 

purposes of this subparagraph, the term ‘applicable 

defined benefit plan’ has the meaning given such 

term by section 203(f)(3). 

‘‘(vi) TERMINATION REQUIREMENTS.—An applicable 

defined benefit plan shall not be treated as meeting 

the requirements of clause (i) unless the plan provides 

that, upon the termination of the plan—

‘‘(I) if the interest credit rate (or an equivalent 

amount) under the plan is a variable rate, the 

rate of interest used to determine accrued benefits 

under the plan shall be equal to the average of 

the rates of interest used under the plan during 

the 5-year period ending on the termination date, 

and 

‘‘(II) the interest rate and mortality table used 

to determine the amount of any benefit under the 

plan payable in the form of an annuity payable 

at normal retirement age shall be the rate and 

table specified under the plan for such purpose 

as of the termination date, except that if such 

interest rate is a variable rate, the interest rate 

shall be determined under the rules of subclause 

(I). 

‘‘(C) CERTAIN OFFSETS PERMITTED.—A plan shall not 

be treated as failing to meet the requirements of paragraph 

(1)(H)(i) solely because the plan provides offsets against 

benefits under the plan to the extent such offsets are 

allowable in applying the requirements of section 401(a) 

of the Internal Revenue Code of 1986. 

‘‘(D) PERMITTED DISPARITIES IN PLAN CONTRIBUTIONS

OR BENEFITS.—A plan shall not be treated as failing to 

meet the requirements of paragraph (1)(H) solely because 

the plan provides a disparity in contributions or benefits 

with respect to which the requirements of section 401(l) 

of the Internal Revenue Code of 1986 are met. 

‘‘(E) INDEXING PERMITTED.—

‘‘(i) IN GENERAL.—A plan shall not be treated as 

failing to meet the requirements of paragraph (1)(H) 

solely because the plan provides for indexing of accrued 

benefits under the plan. 

‘‘(ii) PROTECTION AGAINST LOSS.—Except in the 

case of any benefit provided in the form of a variable 

annuity, clause (i) shall not apply with respect to any 

indexing which results in an accrued benefit less than 

the accrued benefit determined without regard to such 

indexing. 

‘‘(iii) INDEXING.—For purposes of this subparagraph, the term ‘indexing’ means, in connection with 

an accrued benefit, the periodic adjustment of the 

accrued benefit by means of the application of a recognized investment index or methodology. 

‘‘(F) EARLY RETIREMENT BENEFIT OR RETIREMENT-TYPE

SUBSIDY.—For purposes of this paragraph, the terms ‘early 
H. R. 4—205

retirement benefit’ and ‘retirement-type subsidy’ have the 

meaning given such terms in subsection (g)(2)(A). 

‘‘(G) BENEFIT ACCRUED TO DATE.—For purposes of this 

paragraph, any reference to the accrued benefit shall be 

a reference to such benefit accrued to date.’’. 

(2) DETERMINATIONS OF ACCRUED BENEFIT AS BALANCE OF

BENEFIT ACCOUNT OR EQUIVALENT AMOUNTS.—Section 203 of 

such Act (29 U.S.C. 1053) is amended by adding at the end 

the following new subsection: 

‘‘(f) SPECIAL RULES FOR PLANS COMPUTING ACCRUED BENEFITS

BY REFERENCE TO HYPOTHETICAL ACCOUNT BALANCE OR EQUIVA- LENT AMOUNTS.— ‘‘(1) IN GENERAL.—An applicable defined benefit plan shall 

not be treated as failing to meet—

‘‘(A) subject to paragraph (2), the requirements of subsection (a)(2), or 

‘‘(B) the requirements of section 204(c) or section 205(g) 

with respect to contributions other than employee contributions, 

solely because the present value of the accrued benefit (or 

any portion thereof) of any participant is, under the terms 

of the plan, equal to the amount expressed as the balance 

in the hypothetical account described in paragraph (3) or as 

an accumulated percentage of the participant’s final average 

compensation. 

‘‘(2) 3-YEAR VESTING.—In the case of an applicable defined 

benefit plan, such plan shall be treated as meeting the requirements of subsection (a)(2) only if an employee who has completed at least 3 years of service has a nonforfeitable right 

to 100 percent of the employee’s accrued benefit derived from 

employer contributions. 

‘‘(3) APPLICABLE DEFINED BENEFIT PLAN AND RELATED

RULES.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘applicable defined benefit 

plan’ means a defined benefit plan under which the accrued 

benefit (or any portion thereof) is calculated as the balance 

of a hypothetical account maintained for the participant 

or as an accumulated percentage of the participant’s final 

average compensation. 

‘‘(B) REGULATIONS TO INCLUDE SIMILAR PLANS.—The 

Secretary of the Treasury shall issue regulations which 

include in the definition of an applicable defined benefit 

plan any defined benefit plan (or any portion of such a 

plan) which has an effect similar to an applicable defined 

benefit plan.’’. 

(b) AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.—

(1) RULES RELATING TO REDUCTION IN RATE OF BENEFIT

ACCRUAL.—Subsection (b) of section 411 of the Internal Revenue 

Code of 1986 is amended by adding at the end the following 

new paragraph: 

‘‘(5) SPECIAL RULES RELATING TO AGE.—

‘‘(A) COMPARISON TO SIMILARLY SITUATED YOUNGER

INDIVIDUAL.—

‘‘(i) IN GENERAL.—A plan shall not be treated as 

failing to meet the requirements of paragraph (1)(H)(i) 

if a participant’s accrued benefit, as determined as 

of any date under the terms of the plan, would be 
H. R. 4—206

equal to or greater than that of any similarly situated, 

younger individual who is or could be a participant. 

‘‘(ii) SIMILARLY SITUATED.—For purposes of this 

subparagraph, a participant is similarly situated to 

any other individual if such participant is identical 

to such other individual in every respect (including 

period of service, compensation, position, date of hire, 

work history, and any other respect) except for age. 

‘‘(iii) DISREGARD OF SUBSIDIZED EARLY RETIREMENT

BENEFITS.—In determining the accrued benefit as of 

any date for purposes of this clause, the subsidized 

portion of any early retirement benefit or retirementtype subsidy shall be disregarded. 

‘‘(iv) ACCRUED BENEFIT.—For purposes of this 

subparagraph, the accrued benefit may, under the 

terms of the plan, be expressed as an annuity payable 

at normal retirement age, the balance of a hypothetical 

account, or the current value of the accumulated 

percentage of the employee’s final average compensation. 

‘‘(B) APPLICABLE DEFINED BENEFIT PLANS.— ‘‘(i) INTEREST CREDITS.— ‘‘(I) IN GENERAL.—An applicable defined benefit plan shall be treated as failing to meet the 

requirements of paragraph (1)(H) unless the terms 

of the plan provide that any interest credit (or 

an equivalent amount) for any plan year shall 

be at a rate which is not greater than a market 

rate of return. A plan shall not be treated as 

failing to meet the requirements of this subclause 

merely because the plan provides for a reasonable 

minimum guaranteed rate of return or for a rate 

of return that is equal to the greater of a fixed 

or variable rate of return. 

‘‘(II) PRESERVATION OF CAPITAL.—An interest 

credit (or an equivalent amount) of less than zero 

shall in no event result in the account balance 

or similar amount being less than the aggregate 

amount of contributions credited to the account. 

‘‘(III) MARKET RATE OF RETURN.—The Secretary may provide by regulation for rules governing the calculation of a market rate of return 

for purposes of subclause (I) and for permissible 

methods of crediting interest to the account 

(including fixed or variable interest rates) resulting 

in effective rates of return meeting the requirements of subclause (I). 

‘‘(ii) SPECIAL RULE FOR PLAN CONVERSIONS.—If, 

after June 29, 2005, an applicable plan amendment 

is adopted, the plan shall be treated as failing to meet 

the requirements of paragraph (1)(H) unless the 

requirements of clause (iii) are met with respect to 

each individual who was a participant in the plan 

immediately before the adoption of the amendment. 

‘‘(iii) RATE OF BENEFIT ACCRUAL.—Subject to clause 

(iv), the requirements of this clause are met with 

respect to any participant if the accrued benefit of 
H. R. 4—207

the participant under the terms of the plan as in 

effect after the amendment is not less than the sum 

of—

‘‘(I) the participant’s accrued benefit for years 

of service before the effective date of the amendment, determined under the terms of the plan 

as in effect before the amendment, plus 

‘‘(II) the participant’s accrued benefit for years 

of service after the effective date of the amendment, determined under the terms of the plan 

as in effect after the amendment. 

‘‘(iv) SPECIAL RULES FOR EARLY RETIREMENT SUB- SIDIES.—For purposes of clause (iii)(I), the plan shall 

credit the accumulation account or similar amount with 

the amount of any early retirement benefit or retirement-type subsidy for the plan year in which the 

participant retires if, as of such time, the participant 

has met the age, years of service, and other requirements under the plan for entitlement to such benefit 

or subsidy. 

‘‘(v) APPLICABLE PLAN AMENDMENT.—For purposes 

of this subparagraph—

‘‘(I) IN GENERAL.—The term ‘applicable plan 

amendment’ means an amendment to a defined 

benefit plan which has the effect of converting 

the plan to an applicable defined benefit plan. 

‘‘(II) SPECIAL RULE FOR COORDINATED BENE- FITS.—If the benefits of 2 or more defined benefit 

plans established or maintained by an employer 

are coordinated in such a manner as to have the 

effect of the adoption of an amendment described 

in subclause (I), the sponsor of the defined benefit 

plan or plans providing for such coordination shall 

be treated as having adopted such a plan amendment as of the date such coordination begins. 

‘‘(III) MULTIPLE AMENDMENTS.—The Secretary 

shall issue regulations to prevent the avoidance 

of the purposes of this subparagraph through the 

use of 2 or more plan amendments rather than 

a single amendment. 

‘‘(IV) APPLICABLE DEFINED BENEFIT PLAN.—For 

purposes of this subparagraph, the term ‘applicable 

defined benefit plan’ has the meaning given such 

term by section 411(a)(13). 

‘‘(vi) TERMINATION REQUIREMENTS.—An applicable 

defined benefit plan shall not be treated as meeting 

the requirements of clause (i) unless the plan provides 

that, upon the termination of the plan—

‘‘(I) if the interest credit rate (or an equivalent 

amount) under the plan is a variable rate, the 

rate of interest used to determine accrued benefits 

under the plan shall be equal to the average of 

the rates of interest used under the plan during 

the 5-year period ending on the termination date, 

and 

‘‘(II) the interest rate and mortality table used 

to determine the amount of any benefit under the 
H. R. 4—208

plan payable in the form of an annuity payable 

at normal retirement age shall be the rate and 

table specified under the plan for such purpose 

as of the termination date, except that if such 

interest rate is a variable rate, the interest rate 

shall be determined under the rules of subclause 

(I). 

‘‘(C) CERTAIN OFFSETS PERMITTED.—A plan shall not 

be treated as failing to meet the requirements of paragraph 

(1)(H)(i) solely because the plan provides offsets against 

benefits under the plan to the extent such offsets are 

allowable in applying the requirements of section 401(a). 

‘‘(D) PERMITTED DISPARITIES IN PLAN CONTRIBUTIONS

OR BENEFITS.—A plan shall not be treated as failing to 

meet the requirements of paragraph (1)(H) solely because 

the plan provides a disparity in contributions or benefits 

with respect to which the requirements of section 401(l) 

are met. 

‘‘(E) INDEXING PERMITTED.— ‘‘(i) IN GENERAL.—A plan shall not be treated as 

failing to meet the requirements of paragraph (1)(H) 

solely because the plan provides for indexing of accrued 

benefits under the plan. 

‘‘(ii) PROTECTION AGAINST LOSS.—Except in the 

case of any benefit provided in the form of a variable 

annuity, clause (i) shall not apply with respect to any 

indexing which results in an accrued benefit less than 

the accrued benefit determined without regard to such 

indexing. 

‘‘(iii) INDEXING.—For purposes of this subparagraph, the term ‘indexing’ means, in connection with 

an accrued benefit, the periodic adjustment of the 

accrued benefit by means of the application of a recognized investment index or methodology. 

‘‘(F) EARLY RETIREMENT BENEFIT OR RETIREMENT-TYPE

SUBSIDY.—For purposes of this paragraph, the terms ‘early 

retirement benefit’ and ‘retirement-type subsidy’ have the 

meaning given such terms in subsection (d)(6)(B)(i). 

‘‘(G) BENEFIT ACCRUED TO DATE.—For purposes of this 

paragraph, any reference to the accrued benefit shall be 

a reference to such benefit accrued to date.’’. 

(2) DETERMINATIONS OF ACCRUED BENEFIT AS BALANCE OF

BENEFIT ACCOUNT OR EQUIVALENT AMOUNTS.—Subsection (a) 

of section 411 of such Code is amended by adding at the 

end the following new paragraph: 

‘‘(13) SPECIAL RULES FOR PLANS COMPUTING ACCRUED BENE- FITS BY REFERENCE TO HYPOTHETICAL ACCOUNT BALANCE OR

EQUIVALENT AMOUNTS.— ‘‘(A) IN GENERAL.—An applicable defined benefit plan 

shall not be treated as failing to meet—

‘‘(i) subject to paragraph (2), the requirements of 

subsection (a)(2), or 

‘‘(ii) the requirements of subsection (c) or section 

417(e) with respect to contributions other than 

employee contributions, 

solely because the present value of the accrued benefit 

(or any portion thereof) of any participant is, under the 
H. R. 4—209

terms of the plan, equal to the amount expressed as the 

balance in the hypothetical account described in paragraph 

(3) or as an accumulated percentage of the participant’s 

final average compensation. 

‘‘(B) 3-YEAR VESTING.—In the case of an applicable 

defined benefit plan, such plan shall be treated as meeting 

the requirements of subsection (a)(2) only if an employee 

who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s accrued 

benefit derived from employer contributions. 

‘‘(C) APPLICABLE DEFINED BENEFIT PLAN AND RELATED

RULES.—For purposes of this subsection—

‘‘(i) IN GENERAL.—The term ‘applicable defined 

benefit plan’ means a defined benefit plan under which 

the accrued benefit (or any portion thereof) is calculated as the balance of a hypothetical account maintained for the participant or as an accumulated 

percentage of the participant’s final average compensation. 

‘‘(ii) REGULATIONS TO INCLUDE SIMILAR PLANS.— The Secretary shall issue regulations which include 

in the definition of an applicable defined benefit plan 

any defined benefit plan (or any portion of such a 

plan) which has an effect similar to an applicable 

defined benefit plan.’’. 

(c) AMENDMENTS TO AGE DISCRIMINATION IN EMPLOYMENT

ACT.—Section 4(i) of the Age Discrimination in Employment Act 

of 1967 (29 U.S.C. 623(i)) is amended by adding at the end the 

following new paragraph: 

‘‘(10) SPECIAL RULES RELATING TO AGE.— ‘‘(A) COMPARISON TO SIMILARLY SITUATED YOUNGER

INDIVIDUAL.— ‘‘(i) IN GENERAL.—A plan shall not be treated as 

failing to meet the requirements of paragraph (1) if 

a participant’s accrued benefit, as determined as of 

any date under the terms of the plan, would be equal 

to or greater than that of any similarly situated, 

younger individual who is or could be a participant. 

‘‘(ii) SIMILARLY SITUATED.—For purposes of this 

subparagraph, a participant is similarly situated to 

any other individual if such participant is identical 

to such other individual in every respect (including 

period of service, compensation, position, date of hire, 

work history, and any other respect) except for age. 

‘‘(iii) DISREGARD OF SUBSIDIZED EARLY RETIREMENT

BENEFITS.—In determining the accrued benefit as of 

any date for purposes of this clause, the subsidized 

portion of any early retirement benefit or retirementtype subsidy shall be disregarded. 

‘‘(iv) ACCRUED BENEFIT.—For purposes of this 

subparagraph, the accrued benefit may, under the 

terms of the plan, be expressed as an annuity payable 

at normal retirement age, the balance of a hypothetical 

account, or the current value of the accumulated 

percentage of the employee’s final average compensation. 

‘‘(B) APPLICABLE DEFINED BENEFIT PLANS.—
H. R. 4—210

‘‘(i) INTEREST CREDITS.—

‘‘(I) IN GENERAL.—An applicable defined benefit plan shall be treated as failing to meet the 

requirements of paragraph (1) unless the terms 

of the plan provide that any interest credit (or 

an equivalent amount) for any plan year shall 

be at a rate which is not greater than a market 

rate of return. A plan shall not be treated as 

failing to meet the requirements of this subclause 

merely because the plan provides for a reasonable 

minimum guaranteed rate of return or for a rate 

of return that is equal to the greater of a fixed 

or variable rate of return. 

‘‘(II) PRESERVATION OF CAPITAL.—An interest 

credit (or an equivalent amount) of less than zero 

shall in no event result in the account balance 

or similar amount being less than the aggregate 

amount of contributions credited to the account. 

‘‘(III) MARKET RATE OF RETURN.—The Secretary of the Treasury may provide by regulation 

for rules governing the calculation of a market 

rate of return for purposes of subclause (I) and 

for permissible methods of crediting interest to 

the account (including fixed or variable interest 

rates) resulting in effective rates of return meeting 

the requirements of subclause (I). 

‘‘(ii) SPECIAL RULE FOR PLAN CONVERSIONS.—If, 

after June 29, 2005, an applicable plan amendment 

is adopted, the plan shall be treated as failing to meet 

the requirements of paragraph (1)(H) unless the 

requirements of clause (iii) are met with respect to 

each individual who was a participant in the plan 

immediately before the adoption of the amendment. 

‘‘(iii) RATE OF BENEFIT ACCRUAL.—Subject to clause 

(iv), the requirements of this clause are met with 

respect to any participant if the accrued benefit of 

the participant under the terms of the plan as in 

effect after the amendment is not less than the sum 

of—

‘‘(I) the participant’s accrued benefit for years 

of service before the effective date of the amendment, determined under the terms of the plan 

as in effect before the amendment, plus 

‘‘(II) the participant’s accrued benefit for years 

of service after the effective date of the amendment, determined under the terms of the plan 

as in effect after the amendment. 

‘‘(iv) SPECIAL RULES FOR EARLY RETIREMENT SUBSIDIES.—For purposes of clause (iii)(I), the plan shall 

credit the accumulation account or similar amount with 

the amount of any early retirement benefit or retirement-type subsidy for the plan year in which the 

participant retires if, as of such time, the participant 

has met the age, years of service, and other requirements under the plan for entitlement to such benefit 

or subsidy. 
H. R. 4—211

‘‘(v) APPLICABLE PLAN AMENDMENT.—For purposes 

of this subparagraph—

‘‘(I) IN GENERAL.—The term ‘applicable plan 

amendment’ means an amendment to a defined 

benefit plan which has the effect of converting 

the plan to an applicable defined benefit plan. 

‘‘(II) SPECIAL RULE FOR COORDINATED BENEFITS.—If the benefits of 2 or more defined benefit 

plans established or maintained by an employer 

are coordinated in such a manner as to have the 

effect of the adoption of an amendment described 

in subclause (I), the sponsor of the defined benefit 

plan or plans providing for such coordination shall 

be treated as having adopted such a plan amendment as of the date such coordination begins. 

‘‘(III) MULTIPLE AMENDMENTS.—The Secretary 

of the Treasury shall issue regulations to prevent 

the avoidance of the purposes of this subparagraph 

through the use of 2 or more plan amendments 

rather than a single amendment. 

‘‘(IV) APPLICABLE DEFINED BENEFIT PLAN.—For 

purposes of this subparagraph, the term ‘applicable 

defined benefit plan’ has the meaning given such 

term by section 203(f)(3) of the Employee Retirement Income Security Act of 1974. 

‘‘(vi) TERMINATION REQUIREMENTS.—An applicable 

defined benefit plan shall not be treated as meeting 

the requirements of clause (i) unless the plan provides 

that, upon the termination of the plan—

‘‘(I) if the interest credit rate (or an equivalent 

amount) under the plan is a variable rate, the 

rate of interest used to determine accrued benefits 

under the plan shall be equal to the average of 

the rates of interest used under the plan during 

the 5-year period ending on the termination date, 

and 

‘‘(II) the interest rate and mortality table used 

to determine the amount of any benefit under the 

plan payable in the form of an annuity payable 

at normal retirement age shall be the rate and 

table specified under the plan for such purpose 

as of the termination date, except that if such 

interest rate is a variable rate, the interest rate 

shall be determined under the rules of subclause 

(I). 

‘‘(C) CERTAIN OFFSETS PERMITTED.—A plan shall not 

be treated as failing to meet the requirements of paragraph 

(1) solely because the plan provides offsets against benefits 

under the plan to the extent such offsets are allowable 

in applying the requirements of section 401(a) of the 

Internal Revenue Code of 1986. 

‘‘(D) PERMITTED DISPARITIES IN PLAN CONTRIBUTIONS

OR BENEFITS.—A plan shall not be treated as failing to 

meet the requirements of paragraph (1) solely because the 

plan provides a disparity in contributions or benefits with 

respect to which the requirements of section 401(l) of the 

Internal Revenue Code of 1986 are met. 
H. R. 4—212

‘‘(E) INDEXING PERMITTED.—

‘‘(i) IN GENERAL.—A plan shall not be treated as 

failing to meet the requirements of paragraph (1) solely 

because the plan provides for indexing of accrued benefits under the plan. 

‘‘(ii) PROTECTION AGAINST LOSS.—Except in the 

case of any benefit provided in the form of a variable 

annuity, clause (i) shall not apply with respect to any 

indexing which results in an accrued benefit less than 

the accrued benefit determined without regard to such 

indexing. 

‘‘(iii) INDEXING.—For purposes of this subparagraph, the term ‘indexing’ means, in connection with 

an accrued benefit, the periodic adjustment of the 

accrued benefit by means of the application of a recognized investment index or methodology. 

‘‘(F) EARLY RETIREMENT BENEFIT OR RETIREMENT-TYPE

SUBSIDY.—For purposes of this paragraph, the terms ‘early 

retirement benefit’ and ‘retirement-type subsidy’ have the 

meaning given such terms in section 203(g)(2)(A) of the 

Employee Retirement Income Security Act of 1974. 

‘‘(G) BENEFIT ACCRUED TO DATE.—For purposes of this 

paragraph, any reference to the accrued benefit shall be 

a reference to such benefit accrued to date.’’. 

(d) NO INFERENCE.—Nothing in the amendments made by this 

section shall be construed to create an inference with respect to—

(1) the treatment of applicable defined benefit plans or 

conversions to applicable defined benefit plans under sections 

204(b)(1)(H) of the Employee Retirement Income Security Act 

of 1974, 4(i)(1) of the Age Discrimination in Employment Act 

of 1967, and 411(b)(1)(H) of the Internal Revenue Code of 

1986, as in effect before such amendments, or 

(2) the determination of whether an applicable defined 

benefit plan fails to meet the requirements of sections 203(a)(2), 

204(c), or 204(g) of the Employee Retirement Income Security 

Act of 1974 or sections 411(a)(2), 411(c), or 417(e) of such 

Code, as in effect before such amendments, solely because the 

present value of the accrued benefit (or any portion thereof) 

of any participant is, under the terms of the plan, equal to 

the amount expressed as the balance in a hypothetical account 

or as an accumulated percentage of the participant’s final average compensation. 

For purposes of this subsection, the term ‘‘applicable defined benefit 

plan’’ has the meaning given such term by section 203(f)(3) of 

the Employee Retirement Income Security Act of 1974 and section 

411(a)(13)(C) of such Code, as in effect after such amendments. 

(e) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section 

shall apply to periods beginning on or after June 29, 2005. 

(2) PRESENT VALUE OF ACCRUED BENEFIT.—The amendments made by subsections (a)(2) and (b)(2) shall apply to 

distributions made after the date of the enactment of this 

Act. 

(3) VESTING AND INTEREST CREDIT REQUIREMENTS.—In the 

case of a plan in existence on June 29, 2005, the requirements 

of clause (i) of section 411(b)(5)(B) of the Internal Revenue 

Code of 1986, clause (i) of section 204(b)(5)(B) of the Employee 
H. R. 4—213

Retirement Income Security Act of 1974, and clause (i) of section 

4(i)(10)(B) of the Age Discrimination in Employment Act of 

1967 (as added by this Act) and the requirements of 203(f)(2) 

of the Employee Retirement Income Security Act of 1974 and 

section 411(a)(13)(B) of the Internal Revenue Code of 1986 

(as so added) shall, for purposes of applying the amendments 

made by subsections (a) and (b), apply to years beginning 

after December 31, 2007, unless the plan sponsor elects the 

application of such requirements for any period after June 

29, 2005, and before the first year beginning after December 

31, 2007. 

(4) SPECIAL RULE FOR COLLECTIVELY BARGAINED PLANS.—

In the case of a plan maintained pursuant to 1 or more collective 

bargaining agreements between employee representatives and 

1 or more employers ratified on or before the date of the 

enactment of this Act, the requirements described in paragraph 

(3) shall, for purposes of applying the amendments made by 

subsections (a) and (b), not apply to plan years beginning 

before—

(A) the earlier of—

(i) the date on which the last of such collective 

bargaining agreements terminates (determined without 

regard to any extension thereof on or after such date 

of enactment), or 

(ii) January 1, 2008, or 

(B) January 1, 2010. 

(5) CONVERSIONS.—The requirements of clause (ii) of section 411(b)(5)(B) of the Internal Revenue Code of 1986, clause 

(ii) of section 204(b)(5)(B) of the Employee Retirement Income 

Security Act of 1974, and clause (ii) of section 4(i)(10)(B) of 

the Age Discrimination in Employment Act of 1967 (as added 

by this Act), shall apply to plan amendments adopted after, 

and taking effect after, June 29, 2005, except that the plan 

sponsor may elect to have such amendments apply to plan 

amendments adopted before, and taking effect after, such date. 

SEC. 702. REGULATIONS RELATING TO MERGERS AND ACQUISITIONS. 

The Secretary of the Treasury or his delegate shall, not later 

than 12 months after the date of the enactment of this Act, prescribe 

regulations for the application of the amendments made by, and 

the provisions of, this title in cases where the conversion of a 

plan to an applicable defined benefit plan is made with respect 

to a group of employees who become employees by reason of a 

merger, acquisition, or similar transaction. 

TITLE VIII—PENSION RELATED 

REVENUE PROVISIONS 

Subtitle A—Deduction Limitations 

SEC. 801. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EMPLOYER 

PLANS. 

(a) IN GENERAL.—Section 404 of the Internal Revenue Code 

of 1986 (relating to deduction for contributions of an employer 
H. R. 4—214

to an employees’ trust or annuity plan and compensation under 

a deferred payment plan) is amended—

(1) in subsection (a)(1)(A), by inserting ‘‘in the case of 

a defined benefit plan other than a multiemployer plan, in 

an amount determined under subsection (o), and in the case 

of any other plan’’ after ‘‘section 501(a),’’, and 

(2) by inserting at the end the following new subsection: 

‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER PLANS.—For purposes of subsection (a)(1)(A)—

‘‘(1) IN GENERAL.—In the case of a defined benefit plan 

to which subsection (a)(1)(A) applies (other than a multiemployer plan), the amount determined under this subsection 

for any taxable year shall be equal to the greater of—

‘‘(A) the sum of the amounts determined under paragraph (2) with respect to each plan year ending with or 

within the taxable year, or 

‘‘(B) the sum of the minimum required contributions 

under section 430 for such plan years. 

‘‘(2) DETERMINATION OF AMOUNT.— ‘‘(A) IN GENERAL.—The amount determined under this 

paragraph for any plan year shall be equal to the excess 

(if any) of—

‘‘(i) the sum of—

‘‘(I) the funding target for the plan year, 

‘‘(II) the target normal cost for the plan year, 

and 

‘‘(III) the cushion amount for the plan year, 

over 

‘‘(ii) the value (determined under section 430(g)(2)) 

of the assets of the plan which are held by the plan 

as of the valuation date for the plan year. 

‘‘(B) SPECIAL RULE FOR CERTAIN EMPLOYERS.—If section 

430(i) does not apply to a plan for a plan year, the amount 

determined under subparagraph (A)(i) for the plan year 

shall in no event be less than the sum of—

‘‘(i) the funding target for the plan year (determined as if section 430(i) applied to the plan), plus 

‘‘(ii) the target normal cost for the plan year (as 

so determined). 

‘‘(3) CUSHION AMOUNT.—For purposes of paragraph 

(2)(A)(i)(III)—

‘‘(A) IN GENERAL.—The cushion amount for any plan 

year is the sum of—

‘‘(i) 50 percent of the funding target for the plan 

year, and 

‘‘(ii) the amount by which the funding target for 

the plan year would increase if the plan were to take 

into account—

‘‘(I) increases in compensation which are 

expected to occur in succeeding plan years, or 

‘‘(II) if the plan does not base benefits for 

service to date on compensation, increases in benefits which are expected to occur in succeeding plan 

years (determined on the basis of the average 

annual increase in benefits over the 6 immediately 

preceding plan years). 

‘‘(B) LIMITATIONS.—
H. R. 4—215

‘‘(i) IN GENERAL.—In making the computation 

under subparagraph (A)(ii), the plan’s actuary shall 

assume that the limitations under subsection (l) and 

section 415(b) shall apply. 

‘‘(ii) EXPECTED INCREASES.—In the case of a plan 

year during which a plan is covered under section 

4021 of the Employee Retirement Income Security Act 

of 1974, the plan’s actuary may, notwithstanding subsection (l), take into account increases in the limitations which are expected to occur in succeeding plan 

years. 

‘‘(4) SPECIAL RULES FOR PLANS WITH 100 OR FEWER PARTICIPANTS.—

‘‘(A) IN GENERAL.—For purposes of determining the 

amount under paragraph (3) for any plan year, in the 

case of a plan which has 100 or fewer participants for 

the plan year, the liability of the plan attributable to benefit 

increases for highly compensated employees (as defined 

in section 414(q)) resulting from a plan amendment which 

is made or becomes effective, whichever is later, within 

the last 2 years shall not be taken into account in determining the target liability. 

‘‘(B) RULE FOR DETERMINING NUMBER OF PARTICIPANTS.—For purposes of determining the number of plan 

participants, all defined benefit plans maintained by the 

same employer (or any member of such employer’s controlled group (within the meaning of section 412(f)(4))) 

shall be treated as one plan, but only participants of such 

member or employer shall be taken into account. 

‘‘(5) SPECIAL RULE FOR TERMINATING PLANS.—In the case 

of a plan which, subject to section 4041 of the Employee Retirement Income Security Act of 1974, terminates during the plan 

year, the amount determined under paragraph (2) shall in 

no event be less than the amount required to make the plan 

sufficient for benefit liabilities (within the meaning of section 

4041(d) of such Act). 

‘‘(6) ACTUARIAL ASSUMPTIONS.—Any computation under this 

subsection for any plan year shall use the same actuarial 

assumptions which are used for the plan year under section 

430. 

‘‘(7) DEFINITIONS.—Any term used in this subsection which 

is also used in section 430 shall have the same meaning given 

such term by section 430.’’. 

(b) EXCEPTION FROM LIMITATION ON DEDUCTION WHERE COMBINATION OF DEFINED CONTRIBUTION AND DEFINED BENEFIT

PLANS.—Section 404(a)(7)(C) of such Code, as amended by this 

Act, is amended by adding at the end the following new clause: 

‘‘(iv) GUARANTEED PLANS.—In applying this paragraph, any single-employer plan covered under section 

4021 of the Employee Retirement Income Security Act 

of 1974 shall not be taken into account.’’. 

(c) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) The last sentence of section 404(a)(1)(A) of such Code 

is amended by striking ‘‘section 412’’ each place it appears 

and inserting ‘‘section 431’’. 

(2) Section 404(a)(1)(B) of such Code is amended—
H. R. 4—216

(A) by striking ‘‘In the case of a plan’’ and inserting 

‘‘In the case of a multiemployer plan’’, 

(B) by striking ‘‘section 412(c)(7)’’ each place it appears 

and inserting ‘‘section 431(c)(6)’’, 

(C) by striking ‘‘section 412(c)(7)(B)’’ and inserting ‘‘section 431(c)(6)(A)(ii)’’, 

(D) by striking ‘‘section 412(c)(7)(A)’’ and inserting ‘‘section 431(c)(6)(A)(i)’’, and 

(E) by striking ‘‘section 412’’ and inserting ‘‘section 

431’’. 

(3) Section 404(a)(7) of such Code, as amended by this 

Act, is amended—

(A) by adding at the end of subparagraph (A) the 

following new sentence: ‘‘In the case of a defined benefit 

plan which is a single employer plan, the amount necessary 

to satisfy the minimum funding standard provided by section 412 shall not be less than the plan’s funding shortfall 

determined under section 430.’’, and 

(B) by striking subparagraph (D) and inserting: 

‘‘(D) INSURANCE CONTRACT PLANS.—For purposes of this 

paragraph, a plan described in section 412(e)(3) shall be 

treated as a defined benefit plan.’’. 

(4) Section 404A(g)(3)(A) of such Code is amended by 

striking ‘‘paragraphs (3) and (7) of section 412(c)’’ and inserting 

‘‘paragraphs (3) and (6) of section 431(c)’’. 

(d) SPECIAL RULE FOR 2006 AND 2007.—

(1) IN GENERAL.—Clause (i) of section 404(a)(1)(D) of the 

Internal Revenue Code of 1986 (relating to special rule in 

case of certain plans) is amended by striking ‘‘section 412(l)’’ 

and inserting ‘‘section 412(l)(8)(A), except that section 

412(l)(8)(A) shall be applied for purposes of this clause by 

substituting ‘150 percent (140 percent in the case of a multiemployer plan) of current liability’ for ‘the current liability’ in 

clause (i).’’. 

(2) CONFORMING AMENDMENT.—Section 404(a)(1) of the 

Internal Revenue Code of 1986 is amended by striking subparagraph (F). 

(e) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to years beginning after December 31, 2007. 

(2) SPECIAL RULES.—The amendments made by subsection 

(d) shall apply to years beginning after December 31, 2005. 

SEC. 802. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS. 

(a) INCREASE IN DEDUCTION.—Section 404(a)(1)(D) of the 

Internal Revenue Code of 1986, as amended by this Act, is amended 

to read as follows: 

‘‘(D) AMOUNT DETERMINED ON BASIS OF UNFUNDED CURRENT LIABILITY.—In the case of a defined benefit plan which 

is a multiemployer plan, except as provided in regulations, 

the maximum amount deductible under the limitations of 

this paragraph shall not be less than the excess (if any) 

of—

‘‘(i) 140 percent of the current liability of the plan 

determined under section 431(c)(6)(C), over 
H. R. 4—217

‘‘(ii) the value of the plan’s assets determined 

under section 431(c)(2).’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) 

shall apply to years beginning after December 31, 2007. 

SEC. 803. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS. 

(a) IN GENERAL.—Subparagraph (C) of section 404(a)(7) of the 

Internal Revenue Code of 1986 (relating to limitation on deductions 

where combination of defined contribution plan and defined benefit 

plan) is amended by adding after clause (ii) the following new 

clause: 

‘‘(iii) LIMITATION.—In the case of employer contributions to 1 or more defined contribution plans, 

this paragraph shall only apply to the extent that 

such contributions exceed 6 percent of the compensation otherwise paid or accrued during the taxable year 

to the beneficiaries under such plans. For purposes 

of this clause, amounts carried over from preceding 

taxable years under subparagraph (B) shall be treated 

as employer contributions to 1 or more defined contributions to the extent attributable to employer contributions to such plans in such preceding taxable 

years.’’. 

(b) EXCEPTION FROM LIMITATION ON DEDUCTION WHERE COMBINATION OF DEFINED CONTRIBUTION AND DEFINED BENEFIT

PLANS.—Section 404(a)(7)(C) of such Code, as amended by this 

Act, is amended by adding at the end the following new clause: 

‘‘(v) MULTIEMPLOYER PLANS.—In applying this 

paragraph, any multiemployer plan shall not be taken 

into account.’’. 

(c) CONFORMING AMENDMENT.—Subparagraph (A) of section 

4972(c)(6) of such Code (relating to nondeductible contributions) 

is amended to read as follows: 

‘‘(A) so much of the contributions to 1 or more defined 

contribution plans which are not deductible when contributed solely because of section 404(a)(7) as does not exceed 

the amount of contributions described in section 

401(m)(4)(A), or’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to contributions for taxable years beginning after 

December 31, 2005. 

Subtitle B—Certain Pension Provisions 

Made Permanent 

SEC. 811. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT 

PROVISIONS OF ECONOMIC GROWTH AND TAX RELIEF 

RECONCILIATION ACT OF 2001 MADE PERMANENT. 

Title IX of the Economic Growth and Tax Relief Reconciliation 

Act of 2001 shall not apply to the provisions of, and amendments 

made by, subtitles A through F of title VI of such Act (relating 

to pension and individual retirement arrangement provisions). 
H. R. 4—218

SEC. 812. SAVER’S CREDIT. 

Section 25B of the Internal Revenue Code of 1986 (relating 

to elective deferrals and IRA contributions by certain individuals) 

is amended by striking subsection (h). 

Subtitle C—Improvements in Portability, 

Distribution, and Contribution Rules 

SEC. 821. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE 

SERVICE CREDIT. 

(a) IN GENERAL.—Section 415(n) of the Internal Revenue Code 

of 1986 (relating to special rules for the purchase of permissive 

service credit) is amended—

(1) by striking ‘‘an employee’’ in paragraph (1) and inserting 

‘‘a participant’’, and 

(2) by adding at the end of paragraph (3)(A) the following 

new flush sentence: 

‘‘Such term may include service credit for periods for which 

there is no performance of service, and, notwithstanding 

clause (ii), may include service credited in order to provide 

an increased benefit for service credit which a participant 

is receiving under the plan.’’. 

(b) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE TRANSFERS.—Section 415(n)(3) of such Code is amended by adding at the end 

the following new subparagraph: 

‘‘(D) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE TRANS- FERS.—In the case of a trustee-to-trustee transfer to which 

section 403(b)(13)(A) or 457(e)(17)(A) applies (without 

regard to whether the transfer is made between plans 

maintained by the same employer)—

‘‘(i) the limitations of subparagraph (B) shall not 

apply in determining whether the transfer is for the 

purchase of permissive service credit, and 

‘‘(ii) the distribution rules applicable under this 

title to the defined benefit governmental plan to which 

any amounts are so transferred shall apply to such 

amounts and any benefits attributable to such 

amounts.’’. 

(c) NONQUALIFIED SERVICE.—Section 415(n)(3) of such Code 

is amended—

(1) by striking ‘‘permissive service credit attributable to 

nonqualified service’’ each place it appears in subparagraph 

(B) and inserting ‘‘nonqualified service credit’’, 

(2) by striking so much of subparagraph (C) as precedes 

clause (i) and inserting: 

‘‘(C) NONQUALIFIED SERVICE CREDIT.—For purposes of 

subparagraph (B), the term ‘nonqualified service credit’ 

means permissive service credit other than that allowed 

with respect to—’’, and 

(3) by striking ‘‘elementary or secondary education (through 

grade 12), as determined under State law’’ in subparagraph 

(C)(ii) and inserting ‘‘elementary or secondary education 

(through grade 12), or a comparable level of education, as 

determined under the applicable law of the jurisdiction in which 

the service was performed’’. 
H. R. 4—219

(d) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by subsections 

(a) and (c) shall take effect as if included in the amendments 

made by section 1526 of the Taxpayer Relief Act of 1997. 

(2) SUBSECTION (b).—The amendments made by subsection 

(b) shall take effect as if included in the amendments made 

by section 647 of the Economic Growth and Tax Relief Reconciliation Act of 2001. 

SEC. 822. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY 

CONTRACTS. 

(a) IN GENERAL.—Subparagraph (A) of section 402(c)(2) 

(relating to the maximum amount which may be rolled over) is 

amended—

(1) by striking ‘‘which is part of a plan which is a defined 

contribution plan and which agrees to separately account’’ and 

inserting ‘‘or to an annuity contract described in section 403(b) 

and such trust or contract provides for separate accounting’’; 

and 

(2) by inserting ‘‘(and earnings thereon)’’ after ‘‘so transferred’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) 

shall apply to taxable years beginning after December 31, 2006. 

SEC. 823. CLARIFICATION OF MINIMUM DISTRIBUTION RULES FOR 

GOVERNMENTAL PLANS. 

The Secretary of the Treasury shall issue regulations under 

which a governmental plan (as defined in section 414(d) of the 

Internal Revenue Code of 1986) shall, for all years to which section 

401(a)(9) of such Code applies to such plan, be treated as having 

complied with such section 401(a)(9) if such plan complies with 

a reasonable good faith interpretation of such section 401(a)(9). 

SEC. 824. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO 

ROTH IRAS. 

(a) IN GENERAL.—Subsection (e) of section 408A of the Internal 

Revenue Code of 1986 (defining qualified rollover contribution) is 

amended to read as follows: 

‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For purposes of this 

section, the term ‘qualified rollover contribution’ means a rollover 

contribution—

‘‘(1) to a Roth IRA from another such account, 

‘‘(2) from an eligible retirement plan, but only if—

‘‘(A) in the case of an individual retirement plan, such 

rollover contribution meets the requirements of section 

408(d)(3), and 

‘‘(B) in the case of any eligible retirement plan (as 

defined in section 402(c)(8)(B) other than clauses (i) and 

(ii) thereof), such rollover contribution meets the requirements of section 402(c), 403(b)(8), or 457(e)(16), as 

applicable. 

For purposes of section 408(d)(3)(B), there shall be disregarded 

any qualified rollover contribution from an individual retirement 

plan (other than a Roth IRA) to a Roth IRA.’’. 

(b) CONFORMING AMENDMENTS.— (1) Section 408A(c)(3)(B) of such Code, as in effect before 

the Tax Increase Prevention and Reconciliation Act of 2005, 

is amended—
H. R. 4—220

(A) in the text by striking ‘‘individual retirement plan’’ 

and inserting ‘‘an eligible retirement plan (as defined by 

section 402(c)(8)(B))’’, and 

(B) in the heading by striking ‘‘IRA’’ the first place 

it appears and inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

(2) Section 408A(d)(3) of such Code is amended—

(A) in subparagraph (A), by striking ‘‘section 408(d)(3)’’ 

inserting ‘‘sections 402(c), 403(b)(8), 408(d)(3), and 

457(e)(16)’’, 

(B) in subparagraph (B), by striking ‘‘individual retirement plan’’ and inserting ‘‘eligible retirement plan (as 

defined by section 402(c)(8)(B))’’, 

(C) in subparagraph (D), by inserting ‘‘or 6047’’ after 

‘‘408(i)’’, 

(D) in subparagraph (D), by striking ‘‘or both’’ and 

inserting ‘‘persons subject to section 6047(d)(1), or all of 

the foregoing persons’’, and 

(E) in the heading, by striking ‘‘IRA’’ the first place 

it appears and inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions after December 31, 2007. 

SEC. 825. ELIGIBILITY FOR PARTICIPATION IN RETIREMENT PLANS. 

An individual shall not be precluded from participating in an 

eligible deferred compensation plan by reason of having received 

a distribution under section 457(e)(9) of the Internal Revenue Code 

of 1986, as in effect prior to the enactment of the Small Business 

Job Protection Act of 1996. 

SEC. 826. MODIFICATIONS OF RULES GOVERNING HARDSHIPS AND 

UNFORSEEN FINANCIAL EMERGENCIES. 

Within 180 days after the date of the enactment of this Act, 

the Secretary of the Treasury shall modify the rules for determining 

whether a participant has had a hardship for purposes of section 

401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide 

that if an event (including the occurrence of a medical expense) 

would constitute a hardship under the plan if it occurred with 

respect to the participant’s spouse or dependent (as defined in 

section 152 of such Code), such event shall, to the extent permitted 

under a plan, constitute a hardship if it occurs with respect to 

a person who is a beneficiary under the plan with respect to 

the participant. The Secretary of the Treasury shall issue similar 

rules for purposes of determining whether a participant has had—

(1) a hardship for purposes of section 403(b)(11)(B) of such 

Code; or 

(2) an unforeseen financial emergency for purposes of sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii), and 457(d)(1)(A)(iii) of 

such Code. 

SEC. 827. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS 

FOR INDIVIDUALS CALLED TO ACTIVE DUTY FOR AT 

LEAST 179 DAYS. 

(a) IN GENERAL.—Paragraph (2) of section 72(t) of the Internal 

Revenue Code of 1986 (relating to 10-percent additional tax on 

early distributions from qualified retirement plans) is amended 

by adding at the end the following new subparagraph: 

‘‘(G) DISTRIBUTIONS FROM RETIREMENT PLANS TO

INDIVIDUALS CALLED TO ACTIVE DUTY.—
H. R. 4—221

‘‘(i) IN GENERAL.—Any qualified reservist distribution. 

‘‘(ii) AMOUNT DISTRIBUTED MAY BE REPAID.—Any 

individual who receives a qualified reservist distribution may, at any time during the 2-year period beginning on the day after the end of the active duty period, 

make one or more contributions to an individual retirement plan of such individual in an aggregate amount 

not to exceed the amount of such distribution. The 

dollar limitations otherwise applicable to contributions 

to individual retirement plans shall not apply to any 

contribution made pursuant to the preceding sentence. 

No deduction shall be allowed for any contribution 

pursuant to this clause. 

‘‘(iii) QUALIFIED RESERVIST DISTRIBUTION.—For 

purposes of this subparagraph, the term ‘qualified 

reservist distribution’ means any distribution to an 

individual if—

‘‘(I) such distribution is from an individual 

retirement plan, or from amounts attributable to 

employer contributions made pursuant to elective 

deferrals described in subparagraph (A) or (C) of 

section 402(g)(3) or section 501(c)(18)(D)(iii), 

‘‘(II) such individual was (by reason of being 

a member of a reserve component (as defined in 

section 101 of title 37, United States Code)) 

ordered or called to active duty for a period in 

excess of 179 days or for an indefinite period, 

and 

‘‘(III) such distribution is made during the 

period beginning on the date of such order or call 

and ending at the close of the active duty period. 

‘‘(iv) APPLICATION OF SUBPARAGRAPH.—This 

subparagraph applies to individuals ordered or called 

to active duty after September 11, 2001, and before 

December 31, 2007. In no event shall the 2-year period 

referred to in clause (ii) end before the date which 

is 2 years after the date of the enactment of this 

subparagraph.’’. 

(b) CONFORMING AMENDMENTS.—

(1) Section 401(k)(2)(B)(i) of such Code is amended by 

striking ‘‘or’’ at the end of subclause (III), by striking ‘‘and’’ 

at the end of subclause (IV) and inserting ‘‘or’’, and by inserting 

after subclause (IV) the following new subclause: 

‘‘(V) in the case of a qualified reservist distribution (as defined in section 72(t)(2)(G)(iii)), the 

date on which a period referred to in subclause 

(III) of such section begins, and’’. 

(2) Section 403(b)(7)(A)(ii) of such Code is amended by 

inserting ‘‘(unless such amount is a distribution to which section 

72(t)(2)(G) applies)’’ after ‘‘distributee’’. 

(3) Section 403(b)(11) of such Code is amended by striking 

‘‘or’’ at the end of subparagraph (A), by striking the period 

at the end of subparagraph (B) and inserting ‘‘, or’’, and by 

inserting after subparagraph (B) the following new subparagraph: 
H. R. 4—222

‘‘(C) for distributions to which section 72(t)(2)(G) 

applies.’’. 

(c) EFFECTIVE DATE; WAIVER OF LIMITATIONS.—

(1) EFFECTIVE DATE.—The amendment made by this section 

shall apply to distributions after September 11, 2001. 

(2) WAIVER OF LIMITATIONS.—If refund or credit of any 

overpayment of tax resulting from the amendments made by 

this section is prevented at any time before the close of the 

1-year period beginning on the date of the enactment of this 

Act by the operation of any law or rule of law (including 

res judicata), such refund or credit may nevertheless be made 

or allowed if claim therefor is filed before the close of such 

period. 

SEC. 828. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX 

ON CERTAIN DISTRIBUTIONS OF PENSION PLANS FOR 

PUBLIC SAFETY EMPLOYEES. 

(a) IN GENERAL.—Section 72(t) of the Internal Revenue Code 

of 1986 (relating to subsection not to apply to certain distributions) 

is amended by adding at the end the following new paragraph: 

‘‘(10) DISTRIBUTIONS TO QUALIFIED PUBLIC SAFETY

EMPLOYEES IN GOVERNMENTAL PLANS.— ‘‘(A) IN GENERAL.—In the case of a distribution to a 

qualified public safety employee from a governmental plan 

(within the meaning of section 414(d)) which is a defined 

benefit plan, paragraph (2)(A)(v) shall be applied by substituting ‘age 50’ for ‘age 55’. 

‘‘(B) QUALIFIED PUBLIC SAFETY EMPLOYEE.—For purposes of this paragraph, the term ‘qualified public safety 

employee’ means any employee of a State or political subdivision of a State who provides police protection, firefighting services, or emergency medical services for any 

area within the jurisdiction of such State or political subdivision.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to distributions after the date of the enactment of 

this Act. 

SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF CERTAIN RETIREMENT PLAN DISTRIBUTIONS. 

(a) IN GENERAL.— (1) QUALIFIED PLANS.—Section 402(c) of the Internal Revenue Code of 1986 (relating to rollovers from exempt trusts) 

is amended by adding at the end the following new paragraph: 

‘‘(11) DISTRIBUTIONS TO INHERITED INDIVIDUAL RETIREMENT

PLAN OF NONSPOUSE BENEFICIARY.— ‘‘(A) IN GENERAL.—If, with respect to any portion of 

a distribution from an eligible retirement plan of a deceased 

employee, a direct trustee-to-trustee transfer is made to 

an individual retirement plan described in clause (i) or 

(ii) of paragraph (8)(B) established for the purposes of 

receiving the distribution on behalf of an individual who 

is a designated beneficiary (as defined by section 

401(a)(9)(E)) of the employee and who is not the surviving 

spouse of the employee—

‘‘(i) the transfer shall be treated as an eligible 

rollover distribution for purposes of this subsection, 
H. R. 4—223

‘‘(ii) the individual retirement plan shall be treated 

as an inherited individual retirement account or individual retirement annuity (within the meaning of section 408(d)(3)(C)) for purposes of this title, and 

‘‘(iii) section 401(a)(9)(B) (other than clause (iv) 

thereof) shall apply to such plan. 

‘‘(B) CERTAIN TRUSTS TREATED AS BENEFICIARIES.—For 

purposes of this paragraph, to the extent provided in rules 

prescribed by the Secretary, a trust maintained for the 

benefit of one or more designated beneficiaries shall be 

treated in the same manner as a trust designated beneficiary.’’. 

(2) SECTION 403(a) PLANS.—Subparagraph (B) of section 

403(a)(4) of such Code (relating to rollover amounts) is amended 

by inserting ‘‘and (11)’’ after ‘‘(7)’’. 

(3) SECTION 403(b) PLANS.—Subparagraph (B) of section 

403(b)(8) of such Code (relating to rollover amounts) is amended 

by striking ‘‘and (9)’’ and inserting ‘‘, (9), and (11)’’. 

(4) SECTION 457 PLANS.—Subparagraph (B) of section 

457(e)(16) of such Code (relating to rollover amounts) is 

amended by striking ‘‘and (9)’’ and inserting ‘‘, (9), and (11)’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions after December 31, 2006. 

SEC. 830. DIRECT PAYMENT OF TAX REFUNDS TO INDIVIDUAL RETIREMENT PLANS. 

(a) IN GENERAL.—The Secretary of the Treasury (or the Secretary’s delegate) shall make available a form (or modify existing 

forms) for use by individuals to direct that a portion of any refund 

of overpayment of tax imposed by chapter 1 of the Internal Revenue 

Code of 1986 be paid directly to an individual retirement plan 

(as defined in section 7701(a)(37) of such Code) of such individual. 

(b) EFFECTIVE DATE.—The form required by subsection (a) shall 

be made available for taxable years beginning after December 31, 

2006. 

SEC. 831. ALLOWANCE OF ADDITIONAL IRA PAYMENTS IN CERTAIN 

BANKRUPTCY CASES. 

(a) ALLOWANCE OF CONTRIBUTIONS.—Section 219(b)(5) of the 

Internal Revenue Code of 1986 (relating to deductible amount) 

is amended by redesignating subparagraph (C) as subparagraph 

(D) and by inserting after subparagraph (B) the following new 

subparagraph: 

‘‘(C) CATCHUP CONTRIBUTIONS FOR CERTAIN INDIVID- UALS.— ‘‘(i) IN GENERAL.—In the case of an applicable individual who elects to make a qualified retirement contribution in addition to the deductible amount determined under subparagraph (A)—

‘‘(I) the deductible amount for any taxable year 

shall be increased by an amount equal to 3 times 

the applicable amount determined under subparagraph (B) for such taxable year, and 

‘‘(II) subparagraph (B) shall not apply. 

‘‘(ii) APPLICABLE INDIVIDUAL.—For purposes of this 

subparagraph, the term ‘applicable individual’ means, 

with respect to any taxable year, any individual who 

was a qualified participant in a qualified cash or 
H. R. 4—224

deferred arrangement (as defined in section 401(k)) 

of an employer described in clause (iii) under which 

the employer matched at least 50 percent of the 

employee’s contributions to such arrangement with 

stock of such employer. 

‘‘(iii) EMPLOYER DESCRIBED.—An employer is 

described in this clause if, in any taxable year preceding the taxable year described in clause (ii)—

‘‘(I) such employer (or any controlling corporation of such employer) was a debtor in a case 

under title 11 of the United States Code, or similar 

Federal or State law, and 

‘‘(II) such employer (or any other person) was 

subject to an indictment or conviction resulting 

from business transactions related to such case. 

‘‘(iv) QUALIFIED PARTICIPANT.—For purposes of 

clause (ii), the term ‘qualified participant’ means any 

applicable individual who was a participant in the 

cash or deferred arrangement described in such clause 

on the date that is 6 months before the filing of the 

case described in clause (iii). 

‘‘(v) TERMINATION.—This subparagraph shall not 

apply to taxable years beginning after December 31, 

2009.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2006. 

SEC. 832. DETERMINATION OF AVERAGE COMPENSATION FOR SECTION 

415 LIMITS. 

(a) IN GENERAL.—Section 415(b)(3) of the Internal Revenue 

Code of 1986 is amended by striking ‘‘both was an active participant 

in the plan and’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to years beginning after December 31, 2005. 

SEC. 833. INFLATION INDEXING OF GROSS INCOME LIMITATIONS ON 

CERTAIN RETIREMENT SAVINGS INCENTIVES. 

(a) SAVER’S CREDIT.—Subsection (b) of section 25B of the 

Internal Revenue Code of 1986 is amended to read as follows: 

‘‘(b) APPLICABLE PERCENTAGE.—For purposes of this section—

‘‘(1) JOINT RETURNS.—In the case of a joint return, the 

applicable percentage is—

‘‘(A) if the adjusted gross income of the taxpayer is 

not over $30,000, 50 percent, 

‘‘(B) if the adjusted gross income of the taxpayer is 

over $30,000 but not over $32,500, 20 percent, 

‘‘(C) if the adjusted gross income of the taxpayer is 

over $32,500 but not over $50,000, 10 percent, and 

‘‘(D) if the adjusted gross income of the taxpayer is 

over $50,000, zero percent. 

‘‘(2) OTHER RETURNS.—In the case of—

‘‘(A) a head of household, the applicable percentage 

shall be determined under paragraph (1) except that such 

paragraph shall be applied by substituting for each dollar 

amount therein (as adjusted under paragraph (3)) a dollar 

amount equal to 75 percent of such dollar amount, and 
H. R. 4—225

‘‘(B) any taxpayer not described in paragraph (1) or 

subparagraph (A), the applicable percentage shall be determined under paragraph (1) except that such paragraph 

shall be applied by substituting for each dollar amount 

therein (as adjusted under paragraph (3)) a dollar amount 

equal to 50 percent of such dollar amount. 

‘‘(3) INFLATION ADJUSTMENT.—In the case of any taxable 

year beginning in a calendar year after 2006, each of the 

dollar amounts in paragraph (1) shall be increased by an 

amount equal to—

‘‘(A) such dollar amount, multiplied by 

‘‘(B) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable 

year begins, determined by substituting ‘calendar year 

2005’ for ‘calendar year 1992’ in subparagraph (B) thereof. 

Any increase determined under the preceding sentence shall 

be rounded to the nearest multiple of $500.’’. 

(b) DEDUCTION OF RETIREMENT CONTRIBUTIONS FOR ACTIVE

PARTICIPANTS.—Section 219(g) of such Code is amended by adding 

at the end the following new paragraph: 

‘‘(8) INFLATION ADJUSTMENT.—In the case of any taxable 

year beginning in a calendar year after 2006, the dollar amount 

in the last row of the table contained in paragraph (3)(B)(i), 

the dollar amount in the last row of the table contained in 

paragraph (3)(B)(ii), and the dollar amount contained in paragraph (7)(A), shall each be increased by an amount equal to—

‘‘(A) such dollar amount, multiplied by 

‘‘(B) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable 

year begins, determined by substituting ‘calendar year 

2005’ for ‘calendar year 1992’ in subparagraph (B) thereof. 

Any increase determined under the preceding sentence shall 

be rounded to the nearest multiple of $1,000.’’. 

(c) CONTRIBUTION LIMITATION FOR ROTH IRAS.—Section 

408A(c)(3) of such Code is amended by adding at the end the 

following new subparagraph: 

‘‘(C) INFLATION ADJUSTMENT.—In the case of any taxable year beginning in a calendar year after 2006, the 

dollar amounts in subclauses (I) and (II) of subparagraph 

(C)(ii) shall each be increased by an amount equal to—

‘‘(i) such dollar amount, multiplied by 

‘‘(ii) the cost-of-living adjustment determined 

under section 1(f)(3) for the calendar year in which 

the taxable year begins, determined by substituting 

‘calendar year 2005’ for ‘calendar year 1992’ in 

subparagraph (B) thereof. 

Any increase determined under the preceding sentence 

shall be rounded to the nearest multiple of $1,000.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after 2006. 
H. R. 4—226

Subtitle D—Health and Medical Benefits 

SEC. 841. USE OF EXCESS PENSION ASSETS FOR FUTURE RETIREE 

HEALTH BENEFITS AND COLLECTIVELY BARGAINED 

RETIREE HEALTH BENEFITS. 

(a) IN GENERAL.—Section 420 of the Internal Revenue Code 

of 1986 (relating to transfers of excess pension assets to retiree 

health accounts) is amended by adding at the end the following 

new subsection: 

‘‘(f) QUALIFIED TRANSFERS TO COVER FUTURE RETIREE HEALTH

COSTS AND COLLECTIVELY BARGAINED RETIREE HEALTH BENEFITS.— ‘‘(1) IN GENERAL.—An employer maintaining a defined benefit plan (other than a multiemployer plan) may, in lieu of 

a qualified transfer, elect for any taxable year to have the 

plan make—

‘‘(A) a qualified future transfer, or 

‘‘(B) a collectively bargained transfer. 

Except as provided in this subsection, a qualified future transfer 

and a collectively bargained transfer shall be treated for purposes of this title and the Employee Retirement Income Security 

Act of 1974 as if it were a qualified transfer. 

‘‘(2) QUALIFIED FUTURE AND COLLECTIVELY BARGAINED

TRANSFERS.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The terms ‘qualified future transfer’ 

and ‘collectively bargained transfer’ mean a transfer which 

meets all of the requirements for a qualified transfer, 

except that—

‘‘(i) the determination of excess pension assets 

shall be made under subparagraph (B), 

‘‘(ii) the limitation on the amount transferred shall 

be determined under subparagraph (C), 

‘‘(iii) the minimum cost requirements of subsection 

(c)(3) shall be modified as provided under subparagraph (D), and 

‘‘(iv) in the case of a collectively bargained transfer, 

the requirements of subparagraph (E) shall be met 

with respect to the transfer. 

‘‘(B) EXCESS PENSION ASSETS.— ‘‘(i) IN GENERAL.—In determining excess pension 

assets for purposes of this subsection, subsection (e)(2) 

shall be applied by substituting ‘120 percent’ for ‘125 

percent’. 

‘‘(ii) REQUIREMENT TO MAINTAIN FUNDED STATUS.—

If, as of any valuation date of any plan year in the 

transfer period, the amount determined under subsection (e)(2)(B) (after application of clause (i)) exceeds 

the amount determined under subsection (e)(2)(A), 

either—

‘‘(I) the employer maintaining the plan shall 

make contributions to the plan in an amount not 

less than the amount required to reduce such 

excess to zero as of such date, or 

‘‘(II) there is transferred from the health benefits account to the plan an amount not less than 

the amount required to reduce such excess to zero 

as of such date. 
H. R. 4—227

‘‘(C) LIMITATION ON AMOUNT TRANSFERRED.—Notwithstanding subsection (b)(3), the amount of the excess pension 

assets which may be transferred—

‘‘(i) in the case of a qualified future transfer shall 

be equal to the sum of—

‘‘(I) if the transfer period includes the taxable 

year of the transfer, the amount determined under 

subsection (b)(3) for such taxable year, plus 

‘‘(II) in the case of all other taxable years 

in the transfer period, the sum of the qualified 

current retiree health liabilities which the plan 

reasonably estimates, in accordance with guidance 

issued by the Secretary, will be incurred for each 

of such years, and 

‘‘(ii) in the case of a collectively bargained transfer, 

shall not exceed the amount which is reasonably estimated, in accordance with the provisions of the collective bargaining agreement and generally accepted 

accounting principles, to be the amount the employer 

maintaining the plan will pay (whether directly or 

through reimbursement) out of such account during 

the collectively bargained cost maintenance period for 

collectively bargained retiree health liabilities. 

‘‘(D) MINIMUM COST REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of subsection 

(c)(3) shall be treated as met if—

‘‘(I) in the case of a qualified future transfer, 

each group health plan or arrangement under 

which applicable health benefits are provided provides applicable health benefits during the period 

beginning with the first year of the transfer period 

and ending with the last day of the 4th year following the transfer period such that the annual 

average amount of such the applicable employer 

cost during such period is not less than the 

applicable employer cost determined under subsection (c)(3)(A) with respect to the transfer, and 

‘‘(II) in the case of a collectively bargained 

transfer, each collectively bargained group health 

plan under which collectively bargained health 

benefits are provided provides that the collectively 

bargained employer cost for each taxable year 

during the collectively bargained cost maintenance 

period shall not be less than the amount specified 

by the collective bargaining agreement. 

‘‘(ii) ELECTION TO MAINTAIN BENEFITS FOR FUTURE

TRANSFERS.—An employer may elect, in lieu of the 

requirements of clause (i)(I), to meet the requirements 

of subsection (c)(3) by meeting the requirements of 

such subsection (as in effect before the amendments 

made by section 535 of the Tax Relief Extension Act 

of 1999) for each of the years described in the period 

under clause (i)(I). 

‘‘(iii) COLLECTIVELY BARGAINED EMPLOYER COST.—

For purposes of this subparagraph, the term ‘collectively bargained employer cost’ means the average cost 
H. R. 4—228

per covered individual of providing collectively bargained retiree health benefits as determined in accordance with the applicable collective bargaining agreement. Such agreement may provide for an appropriate 

reduction in the collectively bargained employer cost 

to take into account any portion of the collectively 

bargained retiree health benefits that is provided or 

financed by a government program or other source. 

‘‘(E) SPECIAL RULES FOR COLLECTIVELY BARGAINED

TRANSFERS.—

‘‘(i) IN GENERAL.—A collectively bargained transfer 

shall only include a transfer which—

‘‘(I) is made in accordance with a collective 

bargaining agreement, 

‘‘(II) before the transfer, the employer designates, in a written notice delivered to each 

employee organization that is a party to the collective bargaining agreement, as a collectively bargained transfer in accordance with this section, 

and 

‘‘(III) involves a plan maintained by an 

employer which, in its taxable year ending in 2005, 

provided health benefits or coverage to retirees 

and their spouses and dependents under all of 

the benefit plans maintained by the employer, but 

only if the aggregate cost (including administrative 

expenses) of such benefits or coverage which would 

have been allowable as a deduction to the employer 

(if such benefits or coverage had been provided 

directly by the employer and the employer used 

the cash receipts and disbursements method of 

accounting) is at least 5 percent of the gross 

receipts of the employer (determined in accordance 

with the last sentence of subsection (c)(2)(E)(ii)(II)) 

for such taxable year, or a plan maintained by 

a successor to such employer. 

‘‘(ii) USE OF ASSETS.—Any assets transferred to 

a health benefits account in a collectively bargained 

transfer (and any income allocable thereto) shall be 

used only to pay collectively bargained retiree health 

liabilities (other than liabilities of key employees not 

taken into account under paragraph (6)(B)(iii)) for the 

taxable year of the transfer or for any subsequent 

taxable year during the collectively bargained cost 

maintenance period (whether directly or through 

reimbursement). 

‘‘(3) COORDINATION WITH OTHER TRANSFERS.—In applying 

subsection (b)(3) to any subsequent transfer during a taxable 

year in a transfer period or collectively bargained cost maintenance period, qualified current retiree health liabilities shall 

be reduced by any such liabilities taken into account with 

respect to the qualified future transfer or collectively bargained 

transfer to which such period relates. 

‘‘(4) SPECIAL DEDUCTION RULES FOR COLLECTIVELY BARGAINED TRANSFERS.—In the case of a collectively bargained 

transfer—
H. R. 4—229

‘‘(A) the limitation under subsection (d)(1)(C) shall not 

apply, and 

‘‘(B) notwithstanding subsection (d)(2), an employer 

may contribute an amount to a health benefits account 

or welfare benefit fund (as defined in section 419(e)(1)) 

with respect to collectively bargained retiree health liabilities for which transferred assets are required to be used 

under subsection (c)(1)(B), and the deductibility of any 

such contribution shall be governed by the limits applicable 

to the deductibility of contributions to a welfare benefit 

fund under a collective bargaining agreement (as determined under section 419A(f)(5)(A)) without regard to 

whether such contributions are made to a health benefits 

account or welfare benefit fund and without regard to 

the provisions of section 404 or the other provisions of 

this section. 

The Secretary shall provide rules to ensure that the application 

of this paragraph does not result in a deduction being allowed 

more than once for the same contribution or for 2 or more 

contributions or expenditures relating to the same collectively 

bargained retiree health liabilities. 

‘‘(5) TRANSFER PERIOD.—For purposes of this subsection, 

the term ‘transfer period’ means, with respect to any transfer, 

a period of consecutive taxable years (not less than 2) specified 

in the election under paragraph (1) which begins and ends 

during the 10-taxable-year period beginning with the taxable 

year of the transfer. 

‘‘(6) TERMS RELATING TO COLLECTIVELY BARGAINED TRANSFERS.—For purposes of this subsection—

‘‘(A) COLLECTIVELY BARGAINED COST MAINTENANCE

PERIOD.—The term ‘collectively bargained cost maintenance 

period’ means, with respect to each covered retiree and 

his covered spouse and dependents, the shorter of—

‘‘(i) the remaining lifetime of such covered retiree 

and his covered spouse and dependents, or 

‘‘(ii) the period of coverage provided by the collectively bargained health plan (determined as of the 

date of the collectively bargained transfer) with respect 

to such covered retiree and his covered spouse and 

dependents. 

‘‘(B) COLLECTIVELY BARGAINED RETIREE HEALTH LIABILITIES.—

‘‘(i) IN GENERAL.—The term ‘collectively bargained 

retiree health liabilities’ means the present value, as 

of the beginning of a taxable year and determined 

in accordance with the applicable collective bargaining 

agreement, of all collectively bargained health benefits 

(including administrative expenses) for such taxable 

year and all subsequent taxable years during the collectively bargained cost maintenance period. 

‘‘(ii) REDUCTION FOR AMOUNTS PREVIOUSLY SET

ASIDE.—The amount determined under clause (i) shall 

be reduced by the value (as of the close of the plan 

year preceding the year of the collectively bargained 

transfer) of the assets in all health benefits accounts 

or welfare benefit funds (as defined in section 419(e)(1)) 
H. R. 4—230

set aside to pay for the collectively bargained retiree 

health liabilities. 

‘‘(iii) KEY EMPLOYEES EXCLUDED.—If an employee 

is a key employee (within the meaning of section 

416(I)(1)) with respect to any plan year ending in a 

taxable year, such employee shall not be taken into 

account in computing collectively bargained retiree 

health liabilities for such taxable year or in calculating 

collectively bargained employer cost under subsection 

(c)(3)(C). 

‘‘(C) COLLECTIVELY BARGAINED HEALTH BENEFITS.—The 

term ‘collectively bargained health benefits’ means health 

benefits or coverage which are provided to—

‘‘(i) retired employees who, immediately before the 

collectively bargained transfer, are entitled to receive 

such benefits upon retirement and who are entitled 

to pension benefits under the plan, and their spouses 

and dependents, and 

‘‘(ii) if specified by the provisions of the collective 

bargaining agreement governing the collectively bargained transfer, active employees who, following their 

retirement, are entitled to receive such benefits and 

who are entitled to pension benefits under the plan, 

and their spouses and dependents. 

‘‘(D) COLLECTIVELY BARGAINED HEALTH PLAN.—The 

term ‘collectively bargained health plan’ means a group 

health plan or arrangement for retired employees and their 

spouses and dependents that is maintained pursuant to 

1 or more collective bargaining agreements.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to transfers after the date of the enactment of this 

Act. 

SEC. 842. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER 

HEALTH PLAN. 

(a) IN GENERAL.—Section 420 of the Internal Revenue Code 

of 1986 is amended—

(1) by striking ‘‘(other than a multiemployer plan)’’ in subsection (a), and 

(2) by adding at the end of subsection (e) the following 

new paragraph: 

‘‘(5) APPLICATION TO MULTIEMPLOYER PLANS.—In the case 

of a multiemployer plan, this section shall be applied to any 

such plan—

‘‘(A) by treating any reference in this section to an 

employer as a reference to all employers maintaining the 

plan (or, if appropriate, the plan sponsor), and 

‘‘(B) in accordance with such modifications of this section (and the provisions of this title relating to this section) 

as the Secretary determines appropriate to reflect the fact 

the plan is not maintained by a single employer.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to transfers made in taxable years beginning after 

December 31, 2006. 
H. R. 4—231

SEC. 843. ALLOWANCE OF RESERVE FOR MEDICAL BENEFITS OF PLANS 

SPONSORED BY BONA FIDE ASSOCIATIONS. 

(a) IN GENERAL.—Section 419A(c) of the Internal Revenue Code 

of 1986 (relating to account limit) is amended by adding at the 

end the following new paragraph: 

‘‘(6) ADDITIONAL RESERVE FOR MEDICAL BENEFITS OF BONA

FIDE ASSOCIATION PLANS.—

‘‘(A) IN GENERAL.—An applicable account limit for any 

taxable year may include a reserve in an amount not 

to exceed 35 percent of the sum of—

‘‘(i) the qualified direct costs, and 

‘‘(ii) the change in claims incurred but unpaid, 

for such taxable year with respect to medical benefits (other 

than post-retirement medical benefits). 

‘‘(B) APPLICABLE ACCOUNT LIMIT.—For purposes of this 

subsection, the term ‘applicable account limit’ means an 

account limit for a qualified asset account with respect 

to medical benefits provided through a plan maintained 

by a bona fide association (as defined in section 2791(d)(3) 

of the Public Health Service Act (42 U.S.C. 300gg–

91(d)(3)).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2006. 

SEC. 844. TREATMENT OF ANNUITY AND LIFE INSURANCE CONTRACTS 

WITH A LONG-TERM CARE INSURANCE FEATURE. 

(a) EXCLUSION FROM GROSS INCOME.—Subsection (e) of section 

72 of the Internal Revenue Code of 1986 (relating to amounts 

not received as annuities) is amended by redesignating paragraph 

(11) as paragraph (12) and by inserting after paragraph (10) the 

following new paragraph: 

‘‘(11) SPECIAL RULES FOR CERTAIN COMBINATION CONTRACTS

PROVIDING LONG-TERM CARE INSURANCE.—Notwithstanding 

paragraphs (2), (5)(C), and (10), in the case of any charge 

against the cash value of an annuity contract or the cash 

surrender value of a life insurance contract made as payment 

for coverage under a qualified long-term care insurance contract 

which is part of or a rider on such annuity or life insurance 

contract—

‘‘(A) the investment in the contract shall be reduced 

(but not below zero) by such charge, and 

‘‘(B) such charge shall not be includible in gross 

income.’’. 

(b) TAX-FREE EXCHANGES AMONG CERTAIN INSURANCE POLICIES.— (1) ANNUITY CONTRACTS CAN INCLUDE QUALIFIED LONG- TERM CARE INSURANCE RIDERS.—Paragraph (2) of section 

1035(b) of such Code is amended by adding at the end the 

following new sentence: ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as an annuity 

contract solely because a qualified long-term care insurance 

contract is a part of or a rider on such contract.’’. 

(2) LIFE INSURANCE CONTRACTS CAN INCLUDE QUALIFIED

LONG-TERM CARE INSURANCE RIDERS.—Paragraph (3) of section 

1035(b) of such Code is amended by adding at the end the 

following new sentence: ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as a life insurance 
H. R. 4—232

contract solely because a qualified long-term care insurance 

contract is a part of or a rider on such contract.’’. 

(3) EXPANSION OF TAX-FREE EXCHANGES OF LIFE INSURANCE, 

ENDOWMENT, AND ANNUITY CONTRACTS FOR LONG-TERM CARE

CONTRACTS.—Subsection (a) of section 1035 of such Code 

(relating to certain exchanges of insurance policies) is 

amended—

(A) in paragraph (1) by inserting ‘‘or for a qualified 

long-term care insurance contract’’ before the semicolon 

at the end, 

(B) in paragraph (2) by inserting ‘‘, or (C) for a qualified 

long-term care insurance contract’’ before the semicolon 

at the end, and 

(C) in paragraph (3) by inserting ‘‘or for a qualified 

long-term care insurance contract’’ before the period at 

the end. 

(4) TAX-FREE EXCHANGES OF QUALIFIED LONG-TERM CARE

INSURANCE CONTRACT.—Subsection (a) of section 1035 of such 

Code (relating to certain exchanges of insurance policies) is 

amended by striking ‘‘or’’ at the end of paragraph (2), by 

striking the period at the end of paragraph (3) and inserting 

‘‘; or’’, and by inserting after paragraph (3) the following new 

paragraph: 

‘‘(4) a qualified long-term care insurance contract for a 

qualified long-term care insurance contract.’’. 

(c) TREATMENT OF COVERAGE PROVIDED AS PART OF A LIFE

INSURANCE OR ANNUITY CONTRACT.—Subsection (e) of section 7702B 

of such Code (relating to treatment of qualified long-term care 

insurance) is amended to read as follows: 

‘‘(e) TREATMENT OF COVERAGE PROVIDED AS PART OF A LIFE

INSURANCE OR ANNUITY CONTRACT.—Except as otherwise provided 

in regulations prescribed by the Secretary, in the case of any 

long-term care insurance coverage (whether or not qualified) provided by a rider on or as part of a life insurance contract or 

an annuity contract—

‘‘(1) IN GENERAL.—This title shall apply as if the portion 

of the contract providing such coverage is a separate contract. 

‘‘(2) DENIAL OF DEDUCTION UNDER SECTION 213.—No deduction shall be allowed under section 213(a) for any payment 

made for coverage under a qualified long-term care insurance 

contract if such payment is made as a charge against the 

cash surrender value of a life insurance contract or the cash 

value of an annuity contract. 

‘‘(3) PORTION DEFINED.—For purposes of this subsection, 

the term ‘portion’ means only the terms and benefits under 

a life insurance contract or annuity contract that are in addition 

to the terms and benefits under the contract without regard 

to long-term care insurance coverage. 

‘‘(4) ANNUITY CONTRACTS TO WHICH PARAGRAPH (1) DOES

NOT APPLY.—For purposes of this subsection, none of the following shall be treated as an annuity contract: 

‘‘(A) A trust described in section 401(a) which is exempt 

from tax under section 501(a). 

‘‘(B) A contract—

‘‘(i) purchased by a trust described in subparagraph (A), 
H. R. 4—233

‘‘(ii) purchased as part of a plan described in section 403(a), 

‘‘(iii) described in section 403(b), 

‘‘(iv) provided for employees of a life insurance 

company under a plan described in section 818(a)(3), 

or 

‘‘(v) from an individual retirement account or an 

individual retirement annuity. 

‘‘(C) A contract purchased by an employer for the benefit of the employee (or the employee’s spouse). 

Any dividend described in section 404(k) which is received 

by a participant or beneficiary shall, for purposes of this paragraph, be treated as paid under a separate contract to which 

subparagraph (B)(i) applies.’’. 

(d) INFORMATION REPORTING.— (1) Subpart B of part III of subchapter A of chapter 61 

of such Code (relating to information concerning transactions 

with other persons) is amended by adding at the end the 

following new section: 

‘‘SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED LONG-TERM 

CARE INSURANCE CONTRACTS UNDER COMBINED 

ARRANGEMENTS. 

‘‘(a) REQUIREMENT OF REPORTING.—Any person who makes a 

charge against the cash value of an annuity contract, or the cash 

surrender value of a life insurance contract, which is excludible 

from gross income under section 72(e)(11) shall make a return, 

according to the forms or regulations prescribed by the Secretary, 

setting forth—

‘‘(1) the amount of the aggregate of such charges against 

each such contract for the calendar year, 

‘‘(2) the amount of the reduction in the investment in 

each such contract by reason of such charges, and 

‘‘(3) the name, address, and TIN of the individual who 

is the holder of each such contract. 

‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS WITH RESPECT

TO WHOM INFORMATION IS REQUIRED.—Every person required to 

make a return under subsection (a) shall furnish to each individual 

whose name is required to be set forth in such return a written 

statement showing—

‘‘(1) the name, address, and phone number of the information contact of the person making the payments, and 

‘‘(2) the information required to be shown on the return 

with respect to such individual. 

The written statement required under the preceding sentence shall 

be furnished to the individual on or before January 31 of the 

year following the calendar year for which the return under subsection (a) was required to be made.’’. 

(2) PENALTY FOR FAILURE TO FILE.— (A) RETURN.—Subparagraph (B) of section 6724(d)(1) 

of such Code is amended by striking ‘‘or’’ at the end of 

clause (xvii), by striking ‘‘and’’ at the end of clause (xviii) 

and inserting ‘‘or’’, and by adding at the end the following 

new clause: 

‘‘(xix) section 6050U (relating to charges or payments for qualified long-term care insurance contracts 

under combined arrangements), and’’. 
H. R. 4—234

(B) STATEMENT.—Paragraph (2) of section 6724(d) of 

such Code is amended by striking ‘‘or’’ at the end of 

subparagraph (AA), by striking the period at the end of 

subparagraph (BB), and by inserting after subparagraph 

(BB) the following new subparagraph: 

‘‘(CC) section 6050U (relating to charges or payments 

for qualified long-term care insurance contracts under combined arrangements).’’. 

(3) CLERICAL AMENDMENT.—The table of sections for subpart B of part III of subchapter A of such chapter 61 of such 

Code is amended by adding at the end the following new 

item:

‘‘Sec. 6050U. Charges or payments for qualified long-term care insurance contracts 

under combined arrangements.’’.

(e) TREATMENT OF POLICY ACQUISITION EXPENSES.—Subsection 

(e) of section 848 of such Code (relating to classification of contracts) 

is amended by adding at the end the following new paragraph: 

‘‘(6) TREATMENT OF CERTAIN QUALIFIED LONG-TERM CARE

INSURANCE CONTRACT ARRANGEMENTS.—An annuity or life 

insurance contract which includes a qualified long-term care 

insurance contract as a part of or a rider on such annuity 

or life insurance contract shall be treated as a specified insurance contract not described in subparagraph (A) or (B) of subsection (c)(1).’’. 

(f) TECHNICAL AMENDMENT.—Paragraph (1) of section 7702B(e) 

of such Code (as in effect before amendment by subsection (c)) 

is amended by striking ‘‘section’’ and inserting ‘‘title’’. 

(g) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to 

contracts issued after December 31, 1996, but only with respect 

to taxable years beginning after December 31, 2009. 

(2) TAX-FREE EXCHANGES.—The amendments made by subsection (b) shall apply with respect to exchanges occurring 

after December 31, 2009. 

(3) INFORMATION REPORTING.—The amendments made by 

subsection (d) shall apply to charges made after December 

31, 2009. 

(4) POLICY ACQUISITION EXPENSES.—The amendment made 

by subsection (e) shall apply to specified policy acquisition 

expenses determined for taxable years beginning after 

December 31, 2009. 

(5) TECHNICAL AMENDMENT.—The amendment made by 

subsection (f) shall take effect as if included in section 321(a) 

of the Health Insurance Portability and Accountability Act of 

1996. 

SEC. 845. DISTRIBUTIONS FROM GOVERNMENTAL RETIREMENT PLANS 

FOR HEALTH AND LONG-TERM CARE INSURANCE FOR 

PUBLIC SAFETY OFFICERS. 

(a) IN GENERAL.—Section 402 of the Internal Revenue Code 

of 1986 (relating to taxability of beneficiary of employees’ trust) 

is amended by adding at the end the following new subsection: 

‘‘(l) DISTRIBUTIONS FROM GOVERNMENTAL PLANS FOR HEALTH

AND LONG-TERM CARE INSURANCE.— ‘‘(1) IN GENERAL.—In the case of an employee who is an 

eligible retired public safety officer who makes the election 
H. R. 4—235

described in paragraph (6) with respect to any taxable year 

of such employee, gross income of such employee for such 

taxable year does not include any distribution from an eligible 

retirement plan to the extent that the aggregate amount of 

such distributions does not exceed the amount paid by such 

employee for qualified health insurance premiums of the 

employee, his spouse, or dependents (as defined in section 152) 

for such taxable year. 

‘‘(2) LIMITATION.—The amount which may be excluded from 

gross income for the taxable year by reason of paragraph (1) 

shall not exceed $3,000. 

‘‘(3) DISTRIBUTIONS MUST OTHERWISE BE INCLUDIBLE.—

‘‘(A) IN GENERAL.—An amount shall be treated as a 

distribution for purposes of paragraph (1) only to the extent 

that such amount would be includible in gross income 

without regard to paragraph (1). 

‘‘(B) APPLICATION OF SECTION 72.—Notwithstanding 

section 72, in determining the extent to which an amount 

is treated as a distribution for purposes of subparagraph 

(A), the aggregate amounts distributed from an eligible 

retirement plan in a taxable year (up to the amount 

excluded under paragraph (1)) shall be treated as includible 

in gross income (without regard to subparagraph (A)) to 

the extent that such amount does not exceed the aggregate 

amount which would have been so includible if all amounts 

distributed from all eligible retirement plans were treated 

as 1 contract for purposes of determining the inclusion 

of such distribution under section 72. Proper adjustments 

shall be made in applying section 72 to other distributions 

in such taxable year and subsequent taxable years. 

‘‘(4) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ELIGIBLE RETIREMENT PLAN.—For purposes of 

paragraph (1), the term ‘eligible retirement plan’ means 

a governmental plan (within the meaning of section 414(d)) 

which is described in clause (iii), (iv), (v), or (vi) of subsection (c)(8)(B). 

‘‘(B) ELIGIBLE RETIRED PUBLIC SAFETY OFFICER.—The 

term ‘eligible retired public safety officer’ means an individual who, by reason of disability or attainment of normal 

retirement age, is separated from service as a public safety 

officer with the employer who maintains the eligible retirement plan from which distributions subject to paragraph 

(1) are made. 

‘‘(C) PUBLIC SAFETY OFFICER.—The term ‘public safety 

officer’ shall have the same meaning given such term by 

section 1204(9)(A) of the Omnibus Crime Control and Safe 

Streets Act of 1968 (42 U.S.C. 3796b(9)(A)). 

‘‘(D) QUALIFIED HEALTH INSURANCE PREMIUMS.—The 

term ‘qualified health insurance premiums’ means premiums for coverage for the eligible retired public safety 

officer, his spouse, and dependents, by an accident or health 

insurance plan or qualified long-term care insurance contract (as defined in section 7702B(b)). 

‘‘(5) SPECIAL RULES.—For purposes of this subsection—

‘‘(A) DIRECT PAYMENT TO INSURER REQUIRED.—Paragraph (1) shall only apply to a distribution if payment 

of the premiums is made directly to the provider of the 
H. R. 4—236

accident or health insurance plan or qualified long-term 

care insurance contract by deduction from a distribution 

from the eligible retirement plan. 

‘‘(B) RELATED PLANS TREATED AS 1.—All eligible retirement plans of an employer shall be treated as a single 

plan. 

‘‘(6) ELECTION DESCRIBED.—

‘‘(A) IN GENERAL.—For purposes of paragraph (1), an 

election is described in this paragraph if the election is 

made by an employee after separation from service with 

respect to amounts not distributed from an eligible retirement plan to have amounts from such plan distributed 

in order to pay for qualified health insurance premiums. 

‘‘(B) SPECIAL RULE.—A plan shall not be treated as 

violating the requirements of section 401, or as engaging 

in a prohibited transaction for purposes of section 503(b), 

merely because it provides for an election with respect 

to amounts that are otherwise distributable under the plan 

or merely because of a distribution made pursuant to an 

election described in subparagraph (A). 

‘‘(7) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.—

The amounts excluded from gross income under paragraph 

(1) shall not be taken into account under section 213. 

‘‘(8) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.—The amounts 

excluded from gross income under paragraph (1) shall not be 

taken into account under section 162(l).’’. 

(b) CONFORMING AMENDMENTS.—

(1) Section 403(a) of such Code (relating to taxability of 

beneficiary under a qualified annuity plan) is amended by 

inserting after paragraph (1) the following new paragraph: 

‘‘(2) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—To the extent provided in section 402(l), paragraph 

(1) shall not apply to the amount distributed under the contract 

which is otherwise includible in gross income under this subsection.’’. 

(2) Section 403(b) of such Code (relating to taxability of 

beneficiary under annuity purchased by section 501(c)(3) 

organization or public school) is amended by inserting after 

paragraph (1) the following new paragraph: 

‘‘(2) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—To the extent provided in section 402(l), paragraph 

(1) shall not apply to the amount distributed under the contract 

which is otherwise includible in gross income under this subsection.’’. 

(3) Section 457(a) of such Code (relating to year of inclusion 

in gross income) is amended by adding at the end the following 

new paragraph: 

‘‘(3) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—In the case of a plan of an eligible employer described 

in subsection (e)(1)(A), to the extent provided in section 402(l), 

paragraph (1) shall not apply to amounts otherwise includible 

in gross income under this subsection.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions in taxable years beginning after 

December 31, 2006. 
H. R. 4—237

Subtitle E—United States Tax Court 

Modernization 

SEC. 851. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL 

SURVIVOR ANNUITIES. 

(a) IN GENERAL.—Subsection (s) of section 7448 of the Internal 

Revenue Code of 1986 (relating to annuities to surviving spouses 

and dependent children of judges) is amended to read as follows: 

‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each time that an 

increase is made under section 8340(b) of title 5, United States 

Code, in annuities payable under subchapter III of chapter 83 

of that title, each annuity payable from the survivors annuity 

fund under this section shall be increased at the same time by 

the same percentage by which annuities are increased under such 

section 8340(b).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply with respect to increases made under section 8340(b) 

of title 5, United States Code, in annuities payable under subchapter 

III of chapter 83 of that title, taking effect after the date of the 

enactment of this Act. 

SEC. 852. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT 

JUDGES AGE 65 OR OVER. 

Section 7472 of the Internal Revenue Code of 1986 (relating 

to expenditures) is amended by inserting after the first sentence 

the following new sentence: ‘‘Notwithstanding any other provision 

of law, the Tax Court is authorized to pay on behalf of its judges, 

age 65 or over, any increase in the cost of Federal Employees’ 

Group Life Insurance imposed after the date of the enactment 

of the Pension Protection Act of 2006, including any expenses generated by such payments, as authorized by the chief judge in 

a manner consistent with such payments authorized by the Judicial 

Conference of the United States pursuant to section 604(a)(5) of 

title 28, United States Code.’’. 

SEC. 853. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT 

SAVINGS PLAN. 

(a) IN GENERAL.—Section 7447 of the Internal Revenue Code 

of 1986 (relating to retirement of judges) is amended by adding 

at the end the following new subsection: 

‘‘(j) THRIFT SAVINGS PLAN.—

‘‘(1) ELECTION TO CONTRIBUTE.—

‘‘(A) IN GENERAL.—A judge of the Tax Court may elect 

to contribute to the Thrift Savings Fund established by 

section 8437 of title 5, United States Code. 

‘‘(B) PERIOD OF ELECTION.—An election may be made 

under this paragraph only during a period provided under 

section 8432(b) of title 5, United States Code, for individuals subject to chapter 84 of such title. 

‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—Except as 

otherwise provided in this subsection, the provisions of subchapters III and VII of chapter 84 of title 5, United States 

Code, shall apply with respect to a judge who makes an election 

under paragraph (1). 

‘‘(3) SPECIAL RULES.—
H. R. 4—238

‘‘(A) AMOUNT CONTRIBUTED.—The amount contributed 

by a judge to the Thrift Savings Fund in any pay period 

shall not exceed the maximum percentage of such judge’s 

basic pay for such period as allowable under section 8440f 

of title 5, United States Code. Basic pay does not include 

any retired pay paid pursuant to this section. 

‘‘(B) CONTRIBUTIONS FOR BENEFIT OF JUDGE.—No contributions may be made for the benefit of a judge under 

section 8432(c) of title 5, United States Code. 

‘‘(C) APPLICABILITY OF SECTION 8433(b) OF TITLE 5

WHETHER OR NOT JUDGE RETIRES.—Section 8433(b) of title 

5, United States Code, applies with respect to a judge 

who makes an election under paragraph (1) and who 

either—

‘‘(i) retires under subsection (b), or 

‘‘(ii) ceases to serve as a judge of the Tax Court 

but does not retire under subsection (b). 

Retirement under subsection (b) is a separation from 

service for purposes of subchapters III and VII of chapter 

84 of that title. 

‘‘(D) APPLICABILITY OF SECTION 8351(b)(5) OF TITLE 5.—

The provisions of section 8351(b)(5) of title 5, United States 

Code, shall apply with respect to a judge who makes an 

election under paragraph (1). 

‘‘(E) EXCEPTION.—Notwithstanding subparagraph (C), 

if any judge retires under this section, or resigns without 

having met the age and service requirements set forth 

under subsection (b)(2), and such judge’s nonforfeitable 

account balance is less than an amount that the Executive 

Director of the Federal Retirement Thrift Investment Board 

prescribes by regulation, the Executive Director shall pay 

the nonforfeitable account balance to the participant in 

a single payment.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall take effect on the date of the enactment of this Act, except 

that United States Tax Court judges may only begin to participate 

in the Thrift Savings Plan at the next open season beginning 

after such date. 

SEC. 854. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF SPECIAL TRIAL JUDGES OF THE TAX COURT. 

(a) DEFINITIONS.—Section 7448(a) of the Internal Revenue Code 

of 1986 (relating to definitions), as amended by this Act, is amended 

by redesignating paragraphs (5), (6), (7), and (8) as paragraphs 

(7), (8), (9), and (10), respectively, and by inserting after paragraph 

(4) the following new paragraphs: 

‘‘(5) The term ‘special trial judge’ means a judicial officer 

appointed pursuant to section 7443A, including any individual 

receiving an annuity under chapter 83 or 84 of title 5, United 

States Code, whether or not performing judicial duties under 

section 7443B. 

‘‘(6) The term ‘special trial judge’s salary’ means the salary 

of a special trial judge received under section 7443A(d), any 

amount received as an annuity under chapter 83 or 84 of 

title 5, United States Code, and compensation received under 

section 7443B.’’. 
H. R. 4—239

(b) ELECTION.—Subsection (b) of section 7448 of such Code 

(relating to annuities to surviving spouses and dependent children 

of judges) is amended—

(1) by striking the subsection heading and inserting the 

following: 

‘‘(b) ELECTION.—

‘‘(1) JUDGES.—’’, 

(2) by moving the text 2 ems to the right, and 

(3) by adding at the end the following new paragraph: 

‘‘(2) SPECIAL TRIAL JUDGES.—Any special trial judge may 

by written election filed with the chief judge bring himself 

or herself within the purview of this section. Such election 

shall be filed not later than the later of 6 months after—

‘‘(A) 6 months after the date of the enactment of this 

paragraph, 

‘‘(B) the date the judge takes office, or 

‘‘(C) the date the judge marries.’’. 

(c) CONFORMING AMENDMENTS.—

(1) The heading of section 7448 of such Code is amended 

by inserting ‘‘AND SPECIAL TRIAL JUDGES’’ after ‘‘JUDGES’’. 

(2) The item relating to section 7448 in the table of sections 

for part I of subchapter C of chapter 76 of such Code is amended 

by inserting ‘‘and special trial judges’’ after ‘‘judges’’. 

(3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n), and 

(u) of section 7448 of such Code, as amended by this Act, 

are each amended—

(A) by inserting ‘‘or special trial judge’’ after ‘‘judge’’ 

each place it appears other than in the phrase ‘‘chief judge’’, 

and 

(B) by inserting ‘‘or special trial judge’s’’ after ‘‘judge’s’’ 

each place it appears. 

(4) Section 7448(c) of such Code is amended—

(A) in paragraph (1), by striking ‘‘Tax Court judges’’ 

and inserting ‘‘Tax Court judicial officers’’, and 

(B) in paragraph (2)—

(i) in subparagraph (A), by inserting ‘‘and section 

7443A(d)’’ after ‘‘(a)(4)’’, and 

(ii) in subparagraph (B), by striking ‘‘subsection 

(a)(4)’’ and inserting ‘‘subsection (a)(4) and (a)(6)’’. 

(5) Section 7448(j)(1) of such Code is amended—

(A) in subparagraph (A), by striking ‘‘service or retired’’ 

and inserting ‘‘service, retired’’, and by inserting ‘‘, or 

receiving any annuity under chapter 83 or 84 of title 5, 

United States Code,’’ after ‘‘section 7447’’, and 

(B) in the last sentence, by striking ‘‘subsections (a) 

(6) and (7)’’ and inserting ‘‘paragraphs (8) and (9) of subsection (a)’’. 

(6) Section 7448(m)(1) of such Code, as amended by this 

Act, is amended by inserting ‘‘or any annuity under chapter 

83 or 84 of title 5, United States Code’’ after ‘‘7447(d)’’. 

(7) Section 7448(n) of such Code is amended by inserting 

‘‘his years of service pursuant to any appointment under section 

7443A,’’ after ‘‘of the Tax Court,’’. 

(8) Section 3121(b)(5)(E) of such Code is amended by 

inserting ‘‘or special trial judge’’ before ‘‘of the United States 

Tax Court’’. 
H. R. 4—240

(9) Section 210(a)(5)(E) of the Social Security Act is 

amended by inserting ‘‘or special trial judge’’ before ‘‘of the 

United States Tax Court’’. 

SEC. 855. JURISDICTION OF TAX COURT OVER COLLECTION DUE 

PROCESS CASES. 

(a) IN GENERAL.—Paragraph (1) of section 6330(d) of the 

Internal Revenue Code of 1986 (relating to proceeding after hearing) 

is amended to read as follows: 

‘‘(1) JUDICIAL REVIEW OF DETERMINATION.—The person may, 

within 30 days of a determination under this section, appeal 

such determination to the Tax Court (and the Tax Court shall 

have jurisdiction with respect to such matter).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to determinations made after the date which is 60 

days after the date of the enactment of this Act. 

SEC. 856. PROVISIONS FOR RECALL. 

(a) IN GENERAL.—Part I of subchapter C of chapter 76 of 

the Internal Revenue Code of 1986 is amended by inserting after 

section 7443A the following new section: 

‘‘SEC. 7443B. RECALL OF SPECIAL TRIAL JUDGES OF THE TAX COURT. 

‘‘(a) RECALLING OF RETIRED SPECIAL TRIAL JUDGES.—Any individual who has retired pursuant to the applicable provisions of 

title 5, United States Code, upon reaching the age and service 

requirements established therein, may at or after retirement be 

called upon by the chief judge of the Tax Court to perform such 

judicial duties with the Tax Court as may be requested of such 

individual for any period or periods specified by the chief judge; 

except that in the case of any such individual—

‘‘(1) the aggregate of such periods in any 1 calendar year 

shall not (without such individual’s consent) exceed 90 calendar 

days, and 

‘‘(2) such individual shall be relieved of performing such 

duties during any period in which illness or disability precludes 

the performance of such duties. 

Any act, or failure to act, by an individual performing judicial 

duties pursuant to this subsection shall have the same force and 

effect as if it were the act (or failure to act) of a special trial 

judge of the Tax Court. 

‘‘(b) COMPENSATION.—For the year in which a period of recall 

occurs, the special trial judge shall receive, in addition to the 

annuity provided under the applicable provisions of title 5, United 

States Code, an amount equal to the difference between that 

annuity and the current salary of the office to which the special 

trial judge is recalled. 

‘‘(c) RULEMAKING AUTHORITY.—The provisions of this section 

may be implemented under such rules as may be promulgated 

by the Tax Court.’’. 

(b) CONFORMING AMENDMENT.—The table of sections for part 

I of subchapter C of chapter 76 of such Code is amended by 

inserting after the item relating to section 7443A the following 

new item:

‘‘Sec. 7443B. Recall of special trial judges of the Tax Court.’’.
H. R. 4—241

SEC. 857. AUTHORITY FOR SPECIAL TRIAL JUDGES TO HEAR AND 

DECIDE CERTAIN EMPLOYMENT STATUS CASES. 

(a) IN GENERAL.—Section 7443A(b) of the Internal Revenue 

Code of 1986 (relating to proceedings which may be assigned to 

special trial judges) is amended by striking ‘‘and’’ at the end of 

paragraph (4), by redesignating paragraph (5) as paragraph (6), 

and by inserting after paragraph (4) the following new paragraph: 

‘‘(5) any proceeding under section 7436(c), and’’. 

(b) CONFORMING AMENDMENT.—Section 7443A(c) of such Code 

is amended by striking ‘‘or (4)’’ and inserting ‘‘(4), or (5)’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to any proceeding under section 7436(c) of the Internal 

Revenue Code of 1986 with respect to which a decision has not 

become final (as determined under section 7481 of such Code) 

before the date of the enactment of this Act. 

SEC. 858. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY 

DOCTRINE OF EQUITABLE RECOUPMENT. 

(a) CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY

DOCTRINE OF EQUITABLE RECOUPMENT.—Section 6214(b) of the 

Internal Revenue Code of 1986 (relating to jurisdiction over other 

years and quarters) is amended by adding at the end the following 

new sentence: ‘‘Notwithstanding the preceding sentence, the Tax 

Court may apply the doctrine of equitable recoupment to the same 

extent that it is available in civil tax cases before the district 

courts of the United States and the United States Court of Federal 

Claims.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to any action or proceeding in the United States Tax 

Court with respect to which a decision has not become final (as 

determined under section 7481 of the Internal Revenue Code of 

1986) as of the date of the enactment of this Act. 

SEC. 859. TAX COURT FILING FEE IN ALL CASES COMMENCED BY 

FILING PETITION. 

(a) IN GENERAL.—Section 7451 of the Internal Revenue Code 

of 1986 (relating to fee for filing a Tax Court petition) is amended 

by striking all that follows ‘‘petition’’ and inserting a period. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall take effect on the date of the enactment of this Act. 

SEC. 860. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO 

SE TAXPAYERS. 

(a) IN GENERAL.—Section 7475(b) of the Internal Revenue Code 

of 1986 (relating to use of fees) is amended by inserting before 

the period at the end ‘‘and to provide services to pro se taxpayers’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall take effect on the date of the enactment of this Act. 

Subtitle F—Other Provisions 

SEC. 861. EXTENSION TO ALL GOVERNMENTAL PLANS OF CURRENT 

MORATORIUM ON APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE TO STATE AND 

LOCAL PLANS. 

(a) IN GENERAL.—
H. R. 4—242

(1) Subparagraph (G) of section 401(a)(5) and subparagraph 

(G) of section 401(a)(26) of the Internal Revenue Code of 1986 

are each amended by striking ‘‘section 414(d))’’ and all that 

follows and inserting ‘‘section 414(d)).’’. 

(2) Subparagraph (G) of section 401(k)(3) of such Code 

and paragraph (2) of section 1505(d) of the Taxpayer Relief 

Act of 1997 (Public Law 105–34; 111 Stat. 1063) are each 

amended by striking ‘‘maintained by a State or local government or political subdivision thereof (or agency or instrumentality thereof)’’. 

(b) CONFORMING AMENDMENTS.— (1) The heading of subparagraph (G) of section 401(a)(5) 

of the Internal Revenue Code of 1986 is amended by striking 

‘‘STATE AND LOCAL GOVERNMENTAL’’ and inserting ‘‘GOVERN- MENTAL’’. 

(2) The heading of subparagraph (G) of section 401(a)(26) 

of such Code is amended by striking ‘‘EXCEPTION FOR STATE

AND LOCAL’’ and inserting ‘‘EXCEPTION FOR’’. 

(3) Section 401(k)(3)(G) of such Code is amended by 

inserting ‘‘GOVERNMENTAL PLAN.—’’ after ‘‘(G)’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to any year beginning after the date of the enactment 

of this Act. 

SEC. 862. ELIMINATION OF AGGREGATE LIMIT FOR USAGE OF EXCESS 

FUNDS FROM BLACK LUNG DISABILITY TRUSTS. 

(a) IN GENERAL.—So much of section 501(c)(21)(C) of the 

Internal Revenue Code of 1986 (relating to black lung disability 

trusts) as precedes the last sentence is amended to read as follows: 

‘‘(C) Payments described in subparagraph (A)(i)(IV) 

may be made from such trust during a taxable year only 

to the extent that the aggregate amount of such payments 

during such taxable year does not exceed the excess (if 

any), as of the close of the preceding taxable year, of—

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

trust, over 

‘‘(ii) 110 percent of the present value of the liability 

described in subparagraph (A)(i)(I) of such person.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2006. 

SEC. 863. TREATMENT OF DEATH BENEFITS FROM CORPORATE-OWNED 

LIFE INSURANCE. 

(a) IN GENERAL.—Section 101 of the Internal Revenue Code 

of 1986 (relating to certain death benefits) is amended by adding 

at the end the following new subsection: 

‘‘(j) TREATMENT OF CERTAIN EMPLOYER-OWNED LIFE INSURANCE

CONTRACTS.— ‘‘(1) GENERAL RULE.—In the case of an employer-owned 

life insurance contract, the amount excluded from gross income 

of an applicable policyholder by reason of paragraph (1) of 

subsection (a) shall not exceed an amount equal to the sum 

of the premiums and other amounts paid by the policyholder 

for the contract. 

‘‘(2) EXCEPTIONS.—In the case of an employer-owned life 

insurance contract with respect to which the notice and consent 

requirements of paragraph (4) are met, paragraph (1) shall 

not apply to any of the following: 
H. R. 4—243

‘‘(A) EXCEPTIONS BASED ON INSURED’S STATUS.—Any 

amount received by reason of the death of an insured 

who, with respect to an applicable policyholder—

‘‘(i) was an employee at any time during the 12-

month period before the insured’s death, or 

‘‘(ii) is, at the time the contract is issued—

‘‘(I) a director, 

‘‘(II) a highly compensated employee within 

the meaning of section 414(q) (without regard to 

paragraph (1)(B)(ii) thereof), or 

‘‘(III) a highly compensated individual within 

the meaning of section 105(h)(5), except that ‘35 

percent’ shall be substituted for ‘25 percent’ in 

subparagraph (C) thereof. 

‘‘(B) EXCEPTION FOR AMOUNTS PAID TO INSURED’S

HEIRS.—Any amount received by reason of the death of 

an insured to the extent—

‘‘(i) the amount is paid to a member of the family 

(within the meaning of section 267(c)(4)) of the insured, 

any individual who is the designated beneficiary of 

the insured under the contract (other than the 

applicable policyholder), a trust established for the benefit of any such member of the family or designated 

beneficiary, or the estate of the insured, or 

‘‘(ii) the amount is used to purchase an equity 

(or capital or profits) interest in the applicable policyholder from any person described in clause (i). 

‘‘(3) EMPLOYER-OWNED LIFE INSURANCE CONTRACT.— ‘‘(A) IN GENERAL.—For purposes of this subsection, the 

term ‘employer-owned life insurance contract’ means a life 

insurance contract which—

‘‘(i) is owned by a person engaged in a trade or 

business and under which such person (or a related 

person described in subparagraph (B)(ii)) is directly 

or indirectly a beneficiary under the contract, and 

‘‘(ii) covers the life of an insured who is an 

employee with respect to the trade or business of the 

applicable policyholder on the date the contract is 

issued. 

For purposes of the preceding sentence, if coverage for 

each insured under a master contract is treated as a separate contract for purposes of sections 817(h), 7702, and 

7702A, coverage for each such insured shall be treated 

as a separate contract. 

‘‘(B) APPLICABLE POLICYHOLDER.—For purposes of this 

subsection—

‘‘(i) IN GENERAL.—The term ‘applicable policyholder’ means, with respect to any employer-owned 

life insurance contract, the person described in 

subparagraph (A)(i) which owns the contract. 

‘‘(ii) RELATED PERSONS.—The term ‘applicable 

policyholder’ includes any person which—

‘‘(I) bears a relationship to the person 

described in clause (i) which is specified in section 

267(b) or 707(b)(1), or 

‘‘(II) is engaged in trades or businesses with 

such person which are under common control 
H. R. 4—244

(within the meaning of subsection (a) or (b) of 

section 52). 

‘‘(4) NOTICE AND CONSENT REQUIREMENTS.—The notice and 

consent requirements of this paragraph are met if, before the 

issuance of the contract, the employee—

‘‘(A) is notified in writing that the applicable policyholder intends to insure the employee’s life and the maximum face amount for which the employee could be insured 

at the time the contract was issued, 

‘‘(B) provides written consent to being insured under 

the contract and that such coverage may continue after 

the insured terminates employment, and 

‘‘(C) is informed in writing that an applicable policyholder will be a beneficiary of any proceeds payable upon 

the death of the employee. 

‘‘(5) DEFINITIONS.—For purposes of this subsection—

‘‘(A) EMPLOYEE.—The term ‘employee’ includes an 

officer, director, and highly compensated employee (within 

the meaning of section 414(q)). 

‘‘(B) INSURED.—The term ‘insured’ means, with respect 

to an employer-owned life insurance contract, an individual 

covered by the contract who is a United States citizen 

or resident. In the case of a contract covering the joint 

lives of 2 individuals, references to an insured include 

both of the individuals.’’. 

(b) REPORTING REQUIREMENTS.—Subpart A of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 

(relating to information concerning persons subject to special provisions) is amended by inserting after section 6039H the following 

new section: 

‘‘SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO EMPLOYEROWNED LIFE INSURANCE CONTRACTS. 

‘‘(a) IN GENERAL.—Every applicable policyholder owning 1 or 

more employer-owned life insurance contracts issued after the date 

of the enactment of this section shall file a return (at such time 

and in such manner as the Secretary shall by regulations prescribe) 

showing for each year such contracts are owned—

‘‘(1) the number of employees of the applicable policyholder 

at the end of the year, 

‘‘(2) the number of such employees insured under such 

contracts at the end of the year, 

‘‘(3) the total amount of insurance in force at the end 

of the year under such contracts, 

‘‘(4) the name, address, and taxpayer identification number 

of the applicable policyholder and the type of business in which 

the policyholder is engaged, and 

‘‘(5) that the applicable policyholder has a valid consent 

for each insured employee (or, if all such consents are not 

obtained, the number of insured employees for whom such 

consent was not obtained). 

‘‘(b) RECORDKEEPING REQUIREMENT.—Each applicable policyholder owning 1 or more employer-owned life insurance contracts 

during any year shall keep such records as may be necessary 

for purposes of determining whether the requirements of this section 

and section 101(j) are met. 
H. R. 4—245

‘‘(c) DEFINITIONS.—Any term used in this section which is used 

in section 101(j) shall have the same meaning given such term 

by section 101(j).’’. 

(c) CONFORMING AMENDMENTS.—

(1) Paragraph (1) of section 101(a) of the Internal Revenue 

Code of 1986 is amended by striking ‘‘and subsection (f)’’ and 

inserting ‘‘subsection (f), and subsection (j)’’. 

(2) The table of sections for subpart A of part III of subchapter A of chapter 61 of such Code is amended by inserting 

after the item relating to section 6039H the following new 

item:

‘‘Sec. 6039I. Returns and records with respect to employer-owned life insurance 

contracts.’’.

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to life insurance contracts issued after the date of 

the enactment of this Act, except for a contract issued after such 

date pursuant to an exchange described in section 1035 of the 

Internal Revenue Code of 1986 for a contract issued on or prior 

to that date. For purposes of the preceding sentence, any material 

increase in the death benefit or other material change shall cause 

the contract to be treated as a new contract except that, in the 

case of a master contract (within the meaning of section 264(f)(4)(E) 

of such Code), the addition of covered lives shall be treated as 

a new contract only with respect to such additional covered lives. 

SEC. 864. TREATMENT OF TEST ROOM SUPERVISORS AND PROCTORS 

WHO ASSIST IN THE ADMINISTRATION OF COLLEGE 

ENTRANCE AND PLACEMENT EXAMS. 

(a) IN GENERAL.—Section 530 of the Revenue Reconciliation 

Act of 1978 is amended by adding at the end the following new 

subsection: 

‘‘(f) TREATMENT OF TEST ROOM SUPERVISORS AND PROCTORS

WHO ASSIST IN THE ADMINISTRATION OF COLLEGE ENTRANCE AND

PLACEMENT EXAMS.—

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

in paragraph (2) who is providing services as a test proctor 

or room supervisor by assisting in the administration of college 

entrance or placement examinations, this section shall be 

applied to such services performed after December 31, 2006 

(and remuneration paid for such services) without regard to 

subsection (a)(3) thereof. 

‘‘(2) APPLICABILITY.—An individual is described in this 

paragraph if the individual—

‘‘(A) is providing the services described in subsection 

(a) to an organization described in section 501(c), and 

exempt from tax under section 501(a), of the Internal Revenue Code of 1986, and 

‘‘(B) is not otherwise treated as an employee of such 

organization for purposes of subtitle C of such Code 

(relating to employment taxes).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to remuneration for services performed after December 

31, 2006. 
H. R. 4—246

SEC. 865. GRANDFATHER RULE FOR CHURCH PLANS WHICH SELFANNUITIZE. 

(a) IN GENERAL.—In the case of any plan year ending after 

the date of the enactment of this Act, annuity payments provided 

with respect to any account maintained for a participant or beneficiary under a qualified church plan shall not fail to satisfy the 

requirements of section 401(a)(9) of the Internal Revenue Code 

of 1986 merely because the payments are not made under an 

annuity contract purchased from an insurance company if such 

payments would not fail such requirements if provided with respect 

to a retirement income account described in section 403(b)(9) of 

such Code. 

(b) QUALIFIED CHURCH PLAN.—For purposes of this section, 

the term ‘‘qualified church plan’’ means any money purchase pension plan described in section 401(a) of such Code which—

(1) is a church plan (as defined in section 414(e) of such 

Code) with respect to which the election provided by section 

410(d) of such Code has not been made, and 

(2) was in existence on April 17, 2002. 

SEC. 866. EXEMPTION FOR INCOME FROM LEVERAGED REAL ESTATE 

HELD BY CHURCH PLANS. 

(a) IN GENERAL.—Section 514(c)(9)(C) of the Internal Revenue 

Code of 1986 is amended by striking ‘‘or’’ after clause (ii), by 

striking the period at the end of clause (iii) and inserting ‘‘; or’’, 

and by inserting after clause (iii) the following: 

‘‘(iv) a retirement income account described in section 403(b)(9).’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) 

shall apply to taxable years beginning on or after the date of 

enactment of this Act. 

SEC. 867. CHURCH PLAN RULE. 

(a) IN GENERAL.—Paragraph (11) of section 415(b) of the 

Internal Revenue Code of 1986 is amended by adding at the end 

the following: ‘‘Subparagraph (B) of paragraph (1) shall not apply 

to a plan maintained by an organization described in section 

3121(w)(3)(A) except with respect to highly compensated benefits. 

For purposes of this paragraph, the term ‘highly compensated benefits’ means any benefits accrued for an employee in any year on 

or after the first year in which such employee is a highly compensated employee (as defined in section 414(q)) of the organization 

described in section 3121(w)(3)(A). For purposes of applying paragraph (1)(B) to highly compensated benefits, all benefits of the 

employee otherwise taken into account (without regard to this paragraph) shall be taken into account.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to years beginning after December 31, 2006. 

SEC. 868. GRATUITOUS TRANSFER FOR BENEFITS OF EMPLOYEES. 

(a) IN GENERAL.—Subparagraph (E) of section 664(g)(3) of the 

Internal Revenue Code of 1986 is amended by inserting ‘‘(determined on the basis of fair market value of securities when allocated 

to participants)’’ after ‘‘paragraph (7)’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall take effect on the date of the enactment of this Act. 
H. R. 4—247

TITLE IX—INCREASE IN PENSION PLAN 

DIVERSIFICATION AND PARTICIPATION AND OTHER PENSION PROVISIONS 

SEC. 901. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE 

EMPLOYEES WITH FREEDOM TO INVEST THEIR PLAN 

ASSETS. 

(a) AMENDMENTS OF INTERNAL REVENUE CODE.—

(1) QUALIFICATION REQUIREMENT.—Section 401(a) of the 

Internal Revenue Code of 1986 (relating to qualified pension, 

profit-sharing, and stock bonus plans) is amended by inserting 

after paragraph (34) the following new paragraph: 

‘‘(35) DIVERSIFICATION REQUIREMENTS FOR CERTAIN DEFINED

CONTRIBUTION PLANS.—

‘‘(A) IN GENERAL.—A trust which is part of an 

applicable defined contribution plan shall not be treated 

as a qualified trust unless the plan meets the diversification 

requirements of subparagraphs (B), (C), and (D). 

‘‘(B) EMPLOYEE CONTRIBUTIONS AND ELECTIVE DEFERRALS INVESTED IN EMPLOYER SECURITIES.—In the case of 

the portion of an applicable individual’s account attributable to employee contributions and elective deferrals 

which is invested in employer securities, a plan meets 

the requirements of this subparagraph if the applicable 

individual may elect to direct the plan to divest any such 

securities and to reinvest an equivalent amount in other 

investment options meeting the requirements of subparagraph (D). 

‘‘(C) EMPLOYER CONTRIBUTIONS INVESTED IN EMPLOYER

SECURITIES.—In the case of the portion of the account 

attributable to employer contributions other than elective 

deferrals which is invested in employer securities, a plan 

meets the requirements of this subparagraph if each 

applicable individual who—

‘‘(i) is a participant who has completed at least 

3 years of service, or 

‘‘(ii) is a beneficiary of a participant described in 

clause (i) or of a deceased participant, 

may elect to direct the plan to divest any such securities 

and to reinvest an equivalent amount in other investment 

options meeting the requirements of subparagraph (D). 

‘‘(D) INVESTMENT OPTIONS.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if the plan offers not less than 

3 investment options, other than employer securities, 

to which an applicable individual may direct the proceeds from the divestment of employer securities pursuant to this paragraph, each of which is diversified 

and has materially different risk and return characteristics. 

‘‘(ii) TREATMENT OF CERTAIN RESTRICTIONS AND

CONDITIONS.—
H. R. 4—248

‘‘(I) TIME FOR MAKING INVESTMENT CHOICES.—

A plan shall not be treated as failing to meet 

the requirements of this subparagraph merely 

because the plan limits the time for divestment 

and reinvestment to periodic, reasonable 

opportunities occurring no less frequently than 

quarterly. 

‘‘(II) CERTAIN RESTRICTIONS AND CONDITIONS

NOT ALLOWED.—Except as provided in regulations, 

a plan shall not meet the requirements of this 

subparagraph if the plan imposes restrictions or 

conditions with respect to the investment of 

employer securities which are not imposed on the 

investment of other assets of the plan. This subclause shall not apply to any restrictions or conditions imposed by reason of the application of securities laws. 

‘‘(E) APPLICABLE DEFINED CONTRIBUTION PLAN.—For 

purposes of this paragraph—

‘‘(i) IN GENERAL.—The term ‘applicable defined contribution plan’ means any defined contribution plan 

which holds any publicly traded employer securities. 

‘‘(ii) EXCEPTION FOR CERTAIN ESOPS.—Such term 

does not include an employee stock ownership plan 

if—

‘‘(I) there are no contributions to such plan 

(or earnings thereunder) which are held within 

such plan and are subject to subsection (k) or 

(m), and 

‘‘(II) such plan is a separate plan for purposes 

of section 414(l) with respect to any other defined 

benefit plan or defined contribution plan maintained by the same employer or employers. 

‘‘(iii) EXCEPTION FOR ONE PARTICIPANT PLANS.—

Such term does not include a one-participant retirement plan. 

‘‘(iv) ONE-PARTICIPANT RETIREMENT PLAN.—For 

purposes of clause (iii), the term ‘one-participant retirement plan’ means a retirement plan that—

‘‘(I) on the first day of the plan year covered 

only one individual (or the individual and the 

individual’s spouse) and the individual owned 100 

percent of the plan sponsor (whether or not incorporated), or covered only one or more partners 

(or partners and their spouses) in the plan sponsor, 

‘‘(II) meets the minimum coverage requirements of section 410(b) without being combined 

with any other plan of the business that covers 

the employees of the business, 

‘‘(III) does not provide benefits to anyone 

except the individual (and the individual’s spouse) 

or the partners (and their spouses), 

‘‘(IV) does not cover a business that is a 

member of an affiliated service group, a controlled 

group of corporations, or a group of businesses 

under common control, and 
H. R. 4—249

‘‘(V) does not cover a business that uses the 

services of leased employees (within the meaning 

of section 414(n)). 

For purposes of this clause, the term ‘partner’ includes 

a 2-percent shareholder (as defined in section 1372(b)) 

of an S corporation. 

‘‘(F) CERTAIN PLANS TREATED AS HOLDING PUBLICLY

TRADED EMPLOYER SECURITIES.—

‘‘(i) IN GENERAL.—Except as provided in regulations or in clause (ii), a plan holding employer securities which are not publicly traded employer securities 

shall be treated as holding publicly traded employer 

securities if any employer corporation, or any member 

of a controlled group of corporations which includes 

such employer corporation, has issued a class of stock 

which is a publicly traded employer security. 

‘‘(ii) EXCEPTION FOR CERTAIN CONTROLLED GROUPS

WITH PUBLICLY TRADED SECURITIES.—Clause (i) shall 

not apply to a plan if—

‘‘(I) no employer corporation, or parent corporation of an employer corporation, has issued 

any publicly traded employer security, and 

‘‘(II) no employer corporation, or parent corporation of an employer corporation, has issued 

any special class of stock which grants particular 

rights to, or bears particular risks for, the holder 

or issuer with respect to any corporation described 

in clause (i) which has issued any publicly traded 

employer security. 

‘‘(iii) DEFINITIONS.—For purposes of this subparagraph, the term—

‘‘(I) ‘controlled group of corporations’ has the 

meaning given such term by section 1563(a), except 

that ‘50 percent’ shall be substituted for ‘80 percent’ each place it appears, 

‘‘(II) ‘employer corporation’ means a corporation which is an employer maintaining the plan, 

and 

‘‘(III) ‘parent corporation’ has the meaning 

given such term by section 424(e). 

‘‘(G) OTHER DEFINITIONS.—For purposes of this paragraph—

‘‘(i) APPLICABLE INDIVIDUAL.—The term ‘applicable 

individual’ means—

‘‘(I) any participant in the plan, and 

‘‘(II) any beneficiary who has an account under 

the plan with respect to which the beneficiary 

is entitled to exercise the rights of a participant. 

‘‘(ii) ELECTIVE DEFERRAL.—The term ‘elective 

deferral’ means an employer contribution described in 

section 402(g)(3)(A). 

‘‘(iii) EMPLOYER SECURITY.—The term ‘employer 

security’ has the meaning given such term by section 

407(d)(1) of the Employee Retirement Income Security 

Act of 1974. 
H. R. 4—250

‘‘(iv) EMPLOYEE STOCK OWNERSHIP PLAN.—The 

term ‘employee stock ownership plan’ has the meaning 

given such term by section 4975(e)(7). 

‘‘(v) PUBLICLY TRADED EMPLOYER SECURITIES.—The 

term ‘publicly traded employer securities’ means 

employer securities which are readily tradable on an 

established securities market. 

‘‘(vi) YEAR OF SERVICE.—The term ‘year of service’ 

has the meaning given such term by section 411(a)(5). 

‘‘(H) TRANSITION RULE FOR SECURITIES ATTRIBUTABLE

TO EMPLOYER CONTRIBUTIONS.—

‘‘(i) RULES PHASED IN OVER 3 YEARS.—

‘‘(I) IN GENERAL.—In the case of the portion 

of an account to which subparagraph (C) applies 

and which consists of employer securities acquired 

in a plan year beginning before January 1, 2007, 

subparagraph (C) shall only apply to the applicable 

percentage of such securities. This subparagraph 

shall be applied separately with respect to each 

class of securities. 

‘‘(II) EXCEPTION FOR CERTAIN PARTICIPANTS

AGED 55 OR OVER.—Subclause (I) shall not apply 

to an applicable individual who is a participant 

who has attained age 55 and completed at least 

3 years of service before the first plan year beginning after December 31, 2005. 

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of 

clause (i), the applicable percentage shall be determined as follows:

‘‘Plan year to which The 

applicable 

subparagraph (C) applies: percentage is:

1st ........................................................................................... 33

2d ............................................................................................ 66

3d and following .................................................................... 100.’’.

(2) CONFORMING AMENDMENTS.—

(A) Section 401(a)(28)(B) of such Code (relating to additional requirements relating to employee stock ownership 

plans) is amended by adding at the end the following 

new clause: 

‘‘(v) EXCEPTION.—This subparagraph shall not 

apply to an applicable defined contribution plan (as 

defined in paragraph (35)(E)).’’. 

(B) Section 409(h)(7) of such Code is amended by 

inserting ‘‘or subparagraph (B) or (C) of section 401(a)(35)’’ 

before the period at the end. 

(C) Section 4980(c)(3)(A) of such Code is amended by 

striking ‘‘if—’’ and all that follows and inserting ‘‘if the 

requirements of subparagraphs (B), (C), and (D) are met.’’. 

(b) AMENDMENTS OF ERISA.—

(1) IN GENERAL.—Section 204 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1054) is amended by 

redesignating subsection (j) as subsection (k) and by inserting 

after subsection (i) the following new subsection: 

‘‘(j) DIVERSIFICATION REQUIREMENTS FOR CERTAIN INDIVIDUAL

ACCOUNT PLANS.—
H. R. 4—251

‘‘(1) IN GENERAL.—An applicable individual account plan 

shall meet the diversification requirements of paragraphs (2), 

(3), and (4). 

‘‘(2) EMPLOYEE CONTRIBUTIONS AND ELECTIVE DEFERRALS

INVESTED IN EMPLOYER SECURITIES.—In the case of the portion 

of an applicable individual’s account attributable to employee 

contributions and elective deferrals which is invested in 

employer securities, a plan meets the requirements of this 

paragraph if the applicable individual may elect to direct the 

plan to divest any such securities and to reinvest an equivalent 

amount in other investment options meeting the requirements 

of paragraph (4). 

‘‘(3) EMPLOYER CONTRIBUTIONS INVESTED IN EMPLOYER

SECURITIES.—In the case of the portion of the account attributable to employer contributions other than elective deferrals 

which is invested in employer securities, a plan meets the 

requirements of this paragraph if each applicable individual 

who—

‘‘(A) is a participant who has completed at least 3 

years of service, or 

‘‘(B) is a beneficiary of a participant described in 

subparagraph (A) or of a deceased participant, 

may elect to direct the plan to divest any such securities and 

to reinvest an equivalent amount in other investment options 

meeting the requirements of paragraph (4). 

‘‘(4) INVESTMENT OPTIONS.—

‘‘(A) IN GENERAL.—The requirements of this paragraph 

are met if the plan offers not less than 3 investment 

options, other than employer securities, to which an 

applicable individual may direct the proceeds from the 

divestment of employer securities pursuant to this subsection, each of which is diversified and has materially 

different risk and return characteristics. 

‘‘(B) TREATMENT OF CERTAIN RESTRICTIONS AND CONDITIONS.—

‘‘(i) TIME FOR MAKING INVESTMENT CHOICES.—A 

plan shall not be treated as failing to meet the requirements of this paragraph merely because the plan limits 

the time for divestment and reinvestment to periodic, 

reasonable opportunities occurring no less frequently 

than quarterly. 

‘‘(ii) CERTAIN RESTRICTIONS AND CONDITIONS NOT

ALLOWED.—Except as provided in regulations, a plan 

shall not meet the requirements of this paragraph 

if the plan imposes restrictions or conditions with 

respect to the investment of employer securities which 

are not imposed on the investment of other assets 

of the plan. This subparagraph shall not apply to any 

restrictions or conditions imposed by reason of the 

application of securities laws. 

‘‘(5) APPLICABLE INDIVIDUAL ACCOUNT PLAN.—For purposes 

of this subsection—

‘‘(A) IN GENERAL.—The term ‘applicable individual 

account plan’ means any individual account plan (as 

defined in section 3(34)) which holds any publicly traded 

employer securities. 
H. R. 4—252

‘‘(B) EXCEPTION FOR CERTAIN ESOPS.—Such term does 

not include an employee stock ownership plan if—

‘‘(i) there are no contributions to such plan (or 

earnings thereunder) which are held within such plan 

and are subject to subsection (k) or (m) of section 

401 of the Internal Revenue Code of 1986, and 

‘‘(ii) such plan is a separate plan (for purposes 

of section 414(l) of such Code) with respect to any 

other defined benefit plan or individual account plan 

maintained by the same employer or employers. 

‘‘(C) EXCEPTION FOR ONE PARTICIPANT PLANS.—Such 

term shall not include a one-participant retirement plan 

(as defined in section 101(i)(8)(B)). 

‘‘(D) CERTAIN PLANS TREATED AS HOLDING PUBLICLY

TRADED EMPLOYER SECURITIES.—

‘‘(i) IN GENERAL.—Except as provided in regulations or in clause (ii), a plan holding employer securities which are not publicly traded employer securities 

shall be treated as holding publicly traded employer 

securities if any employer corporation, or any member 

of a controlled group of corporations which includes 

such employer corporation, has issued a class of stock 

which is a publicly traded employer security. 

‘‘(ii) EXCEPTION FOR CERTAIN CONTROLLED GROUPS

WITH PUBLICLY TRADED SECURITIES.—Clause (i) shall 

not apply to a plan if—

‘‘(I) no employer corporation, or parent corporation of an employer corporation, has issued 

any publicly traded employer security, and 

‘‘(II) no employer corporation, or parent corporation of an employer corporation, has issued 

any special class of stock which grants particular 

rights to, or bears particular risks for, the holder 

or issuer with respect to any corporation described 

in clause (i) which has issued any publicly traded 

employer security. 

‘‘(iii) DEFINITIONS.—For purposes of this subparagraph, the term—

‘‘(I) ‘controlled group of corporations’ has the 

meaning given such term by section 1563(a) of 

the Internal Revenue Code of 1986, except that 

‘50 percent’ shall be substituted for ‘80 percent’ 

each place it appears, 

‘‘(II) ‘employer corporation’ means a corporation which is an employer maintaining the plan, 

and 

‘‘(III) ‘parent corporation’ has the meaning 

given such term by section 424(e) of such Code. 

‘‘(6) OTHER DEFINITIONS.—For purposes of this paragraph—

‘‘(A) APPLICABLE INDIVIDUAL.—The term ‘applicable 

individual’ means—

‘‘(i) any participant in the plan, and 

‘‘(ii) any beneficiary who has an account under 

the plan with respect to which the beneficiary is entitled to exercise the rights of a participant. 
H. R. 4—253

‘‘(B) ELECTIVE DEFERRAL.—The term ‘elective deferral’ 

means an employer contribution described in section 

402(g)(3)(A) of the Internal Revenue Code of 1986. 

‘‘(C) EMPLOYER SECURITY.—The term ‘employer security’ has the meaning given such term by section 407(d)(1). 

‘‘(D) EMPLOYEE STOCK OWNERSHIP PLAN.—The term 

‘employee stock ownership plan’ has the meaning given 

such term by section 4975(e)(7) of such Code. 

‘‘(E) PUBLICLY TRADED EMPLOYER SECURITIES.—The 

term ‘publicly traded employer securities’ means employer 

securities which are readily tradable on an established 

securities market. 

‘‘(F) YEAR OF SERVICE.—The term ‘year of service’ has 

the meaning given such term by section 203(b)(2). 

‘‘(7) TRANSITION RULE FOR SECURITIES ATTRIBUTABLE TO

EMPLOYER CONTRIBUTIONS.—

‘‘(A) RULES PHASED IN OVER 3 YEARS.—

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

an account to which paragraph (3) applies and which 

consists of employer securities acquired in a plan year 

beginning before January 1, 2007, paragraph (3) shall 

only apply to the applicable percentage of such securities. This subparagraph shall be applied separately 

with respect to each class of securities. 

‘‘(ii) EXCEPTION FOR CERTAIN PARTICIPANTS AGED

55 OR OVER.—Clause (i) shall not apply to an applicable 

individual who is a participant who has attained age 

55 and completed at least 3 years of service before 

the first plan year beginning after December 31, 2005. 

‘‘(B) APPLICABLE PERCENTAGE.—For purposes of 

subparagraph (A), the applicable percentage shall be determined as follows:

‘‘Plan year to which The 

applicable 

paragraph (3) applies: percentage is:

1st .................................................................................................. 33

2d ................................................................................................... 66

3d ................................................................................................... 100.’’.

(2) CONFORMING AMENDMENT.—Section 407(b)(3) of such 

Act (29 U.S.C. 1107(b)(3)) is amended by adding at the end 

the following: 

‘‘(D) For diversification requirements for qualifying 

employer securities held in certain individual account plans, 

see section 204(j).’’. 

(c) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraphs (2) 

and (3), the amendments made by this section shall apply 

to plan years beginning after December 31, 2006. 

(2) SPECIAL RULE FOR COLLECTIVELY BARGAINED AGREEMENTS.—In the case of a plan maintained pursuant to 1 or 

more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before 

the date of the enactment of this Act, paragraph (1) shall 

be applied to benefits pursuant to, and individuals covered 

by, any such agreement by substituting for ‘‘December 31, 

2006’’ the earlier of—

(A) the later of—
H. R. 4—254

(i) December 31, 2007, or 

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

bargaining agreements terminates (determined without 

regard to any extension thereof after such date of 

enactment), or 

(B) December 31, 2008. 

(3) SPECIAL RULE FOR CERTAIN EMPLOYER SECURITIES HELD

IN AN ESOP.—

(A) IN GENERAL.—In the case of employer securities 

to which this paragraph applies, the amendments made 

by this section shall apply to plan years beginning after 

the earlier of—

(i) December 31, 2007, or 

(ii) the first date on which the fair market value 

of such securities exceeds the guaranteed minimum 

value described in subparagraph (B)(ii). 

(B) APPLICABLE SECURITIES.—This paragraph shall 

apply to employer securities which are attributable to 

employer contributions other than elective deferrals, and 

which, on September 17, 2003—

(i) consist of preferred stock, and 

(ii) are within an employee stock ownership plan 

(as defined in section 4975(e)(7) of the Internal Revenue Code of 1986), the terms of which provide that 

the value of the securities cannot be less than the 

guaranteed minimum value specified by the plan on 

such date. 

(C) COORDINATION WITH TRANSITION RULE.—In 

applying section 401(a)(35)(H) of the Internal Revenue Code 

of 1986 and section 204(j)(7) of the Employee Retirement 

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

to employer securities to which this paragraph applies, 

the applicable percentage shall be determined without 

regard to this paragraph. 

SEC. 902. INCREASING PARTICIPATION THROUGH AUTOMATIC CONTRIBUTION ARRANGEMENTS. 

(a) IN GENERAL.—Section 401(k) of the Internal Revenue Code 

of 1986 (relating to cash or deferred arrangement) is amended 

by adding at the end the following new paragraph: 

‘‘(13) ALTERNATIVE METHOD FOR AUTOMATIC CONTRIBUTION

ARRANGEMENTS TO MEET NONDISCRIMINATION REQUIREMENTS.— ‘‘(A) IN GENERAL.—A qualified automatic contribution 

arrangement shall be treated as meeting the requirements 

of paragraph (3)(A)(ii). 

‘‘(B) QUALIFIED AUTOMATIC CONTRIBUTION ARRANGE- MENT.—For purposes of this paragraph, the term ‘qualified 

automatic contribution arrangement’ means any cash or 

deferred arrangement which meets the requirements of 

subparagraphs (C) through (E). 

‘‘(C) AUTOMATIC DEFERRAL.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if, under the arrangement, each 

employee eligible to participate in the arrangement 

is treated as having elected to have the employer make 

elective contributions in an amount equal to a qualified 

percentage of compensation. 
H. R. 4—255

‘‘(ii) ELECTION OUT.—The election treated as 

having been made under clause (i) shall cease to apply 

with respect to any employee if such employee makes 

an affirmative election—

‘‘(I) to not have such contributions made, or 

‘‘(II) to make elective contributions at a level 

specified in such affirmative election. 

‘‘(iii) QUALIFIED PERCENTAGE.—For purposes of this 

subparagraph, the term ‘qualified percentage’ means, 

with respect to any employee, any percentage determined under the arrangement if such percentage is 

applied uniformly, does not exceed 10 percent, and 

is at least—

‘‘(I) 3 percent during the period ending on 

the last day of the first plan year which begins 

after the date on which the first elective contribution described in clause (i) is made with respect 

to such employee, 

‘‘(II) 4 percent during the first plan year following the plan year described in subclause (I), 

‘‘(III) 5 percent during the second plan year 

following the plan year described in subclause (I), 

and 

‘‘(IV) 6 percent during any subsequent plan 

year. 

‘‘(iv) AUTOMATIC DEFERRAL FOR CURRENT

EMPLOYEES NOT REQUIRED.—Clause (i) may be applied 

without taking into account any employee who—

‘‘(I) was eligible to participate in the arrangement (or a predecessor arrangement) immediately 

before the date on which such arrangement 

becomes a qualified automatic contribution 

arrangement (determined after application of this 

clause), and 

‘‘(II) had an election in effect on such date 

either to participate in the arrangement or to not 

participate in the arrangement. 

‘‘(D) MATCHING OR NONELECTIVE CONTRIBUTIONS.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if, under the arrangement, the 

employer—

‘‘(I) makes matching contributions on behalf 

of each employee who is not a highly compensated 

employee in an amount equal to the sum of 100 

percent of the elective contributions of the 

employee to the extent that such contributions 

do not exceed 1 percent of compensation plus 50 

percent of so much of such compensation as 

exceeds 1 percent but does not exceed 6 percent 

of compensation, or 

‘‘(II) is required, without regard to whether 

the employee makes an elective contribution or 

employee contribution, to make a contribution to 

a defined contribution plan on behalf of each 

employee who is not a highly compensated 

employee and who is eligible to participate in the 
H. R. 4—256

arrangement in an amount equal to at least 3 

percent of the employee’s compensation. 

‘‘(ii) APPLICATION OF RULES FOR MATCHING CONTRIBUTIONS.—The rules of clauses (ii) and (iii) of paragraph (12)(B) shall apply for purposes of clause (i)(I). 

‘‘(iii) WITHDRAWAL AND VESTING RESTRICTIONS.—

An arrangement shall not be treated as meeting the 

requirements of clause (i) unless, with respect to 

employer contributions (including matching contributions) taken into account in determining whether the 

requirements of clause (i) are met—

‘‘(I) any employee who has completed at least 

2 years of service (within the meaning of section 

411(a)) has a nonforfeitable right to 100 percent 

of the employee’s accrued benefit derived from such 

employer contributions, and 

‘‘(II) the requirements of subparagraph (B) of 

paragraph (2) are met with respect to all such 

employer contributions. 

‘‘(iv) APPLICATION OF CERTAIN OTHER RULES.—The 

rules of subparagraphs (E)(ii) and (F) of paragraph 

(12) shall apply for purposes of subclauses (I) and 

(II) of clause (i). 

‘‘(E) NOTICE REQUIREMENTS.— ‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if, within a reasonable period 

before each plan year, each employee eligible to participate in the arrangement for such year receives written 

notice of the employee’s rights and obligations under 

the arrangement which—

‘‘(I) is sufficiently accurate and comprehensive 

to apprise the employee of such rights and obligations, and 

‘‘(II) is written in a manner calculated to be 

understood by the average employee to whom the 

arrangement applies. 

‘‘(ii) TIMING AND CONTENT REQUIREMENTS.—A 

notice shall not be treated as meeting the requirements 

of clause (i) with respect to an employee unless—

‘‘(I) the notice explains the employee’s right 

under the arrangement to elect not to have elective 

contributions made on the employee’s behalf (or 

to elect to have such contributions made at a different percentage), 

‘‘(II) in the case of an arrangement under 

which the employee may elect among 2 or more 

investment options, the notice explains how contributions made under the arrangement will be 

invested in the absence of any investment election 

by the employee, and 

‘‘(III) the employee has a reasonable period 

of time after receipt of the notice described in 

subclauses (I) and (II) and before the first elective 

contribution is made to make either such election.’’. 

(b) MATCHING CONTRIBUTIONS.—Section 401(m) of such Code 

(relating to nondiscrimination test for matching contributions and 

employee contributions) is amended by redesignating paragraph 
H. R. 4—257

(12) as paragraph (13) and by inserting after paragraph (11) the 

following new paragraph: 

‘‘(12) ALTERNATIVE METHOD FOR AUTOMATIC CONTRIBUTION

ARRANGEMENTS.—A defined contribution plan shall be treated 

as meeting the requirements of paragraph (2) with respect 

to matching contributions if the plan—

‘‘(A) is a qualified automatic contribution arrangement 

(as defined in subsection (k)(13)), and 

‘‘(B) meets the requirements of paragraph (11)(B).’’. 

(c) EXCLUSION FROM DEFINITION OF TOP-HEAVY PLANS.— (1) ELECTIVE CONTRIBUTION RULE.—Clause (i) of section 

416(g)(4)(H) of such Code is amended by inserting ‘‘or 

401(k)(13)’’ after ‘‘section 401(k)(12)’’. 

(2) MATCHING CONTRIBUTION RULE.—Clause (ii) of section 

416(g)(4)(H) of such Code is amended by inserting ‘‘or 

401(m)(12)’’ after ‘‘section 401(m)(11)’’. 

(d) TREATMENT OF WITHDRAWALS OF CONTRIBUTIONS DURING

FIRST 90 DAYS.— (1) IN GENERAL.—Section 414 of the Internal Revenue Code 

of 1986 is amended by adding at the end the following new 

subsection: 

‘‘(w) SPECIAL RULES FOR CERTAIN WITHDRAWALS FROM ELIGIBLE

AUTOMATIC CONTRIBUTION ARRANGEMENTS.— ‘‘(1) IN GENERAL.—If an eligible automatic contribution 

arrangement allows an employee to elect to make permissible 

withdrawals—

‘‘(A) the amount of any such withdrawal shall be 

includible in the gross income of the employee for the 

taxable year of the employee in which the distribution 

is made, 

‘‘(B) no tax shall be imposed under section 72(t) with 

respect to the distribution, and 

‘‘(C) the arrangement shall not be treated as violating 

any restriction on distributions under this title solely by 

reason of allowing the withdrawal. 

In the case of any distribution to an employee by reason of 

an election under this paragraph, employer matching contributions shall be forfeited or subject to such other treatment as 

the Secretary may prescribe. 

‘‘(2) PERMISSIBLE WITHDRAWAL.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘permissible withdrawal’ 

means any withdrawal from an eligible automatic contribution arrangement meeting the requirements of this paragraph which—

‘‘(i) is made pursuant to an election by an 

employee, and 

‘‘(ii) consists of elective contributions described in 

paragraph (3)(B) (and earnings attributable thereto). 

‘‘(B) TIME FOR MAKING ELECTION.—Subparagraph (A) 

shall not apply to an election by an employee unless the 

election is made no later than the date which is 90 days 

after the date of the first elective contribution with respect 

to the employee under the arrangement. 

‘‘(C) AMOUNT OF DISTRIBUTION.—Subparagraph (A) 

shall not apply to any election by an employee unless 

the amount of any distribution by reason of the election 
H. R. 4—258

is equal to the amount of elective contributions made with 

respect to the first payroll period to which the eligible 

automatic contribution arrangement applies to the 

employee and any succeeding payroll period beginning 

before the effective date of the election (and earnings attributable thereto). 

‘‘(3) ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGEMENT.—

For purposes of this subsection, the term ‘eligible automatic 

contribution arrangement’ means an arrangement under an 

applicable employer plan—

‘‘(A) under which a participant may elect to have the 

employer make payments as contributions under the plan 

on behalf of the participant, or to the participant directly 

in cash, 

‘‘(B) under which the participant is treated as having 

elected to have the employer make such contributions in 

an amount equal to a uniform percentage of compensation 

provided under the plan until the participant specifically 

elects not to have such contributions made (or specifically 

elects to have such contributions made at a different 

percentage), 

‘‘(C) under which, in the absence of an investment 

election by the participant, contributions described in 

subparagraph (B) are invested in accordance with regulations prescribed by the Secretary of Labor under section 

404(c)(5) of the Employee Retirement Income Security Act 

of 1974, and 

‘‘(D) which meets the requirements of paragraph (4). 

‘‘(4) NOTICE REQUIREMENTS.— ‘‘(A) IN GENERAL.—The administrator of a plan containing an arrangement described in paragraph (3) shall, 

within a reasonable period before each plan year, give 

to each employee to whom an arrangement described in 

paragraph (3) applies for such plan year notice of the 

employee’s rights and obligations under the arrangement 

which—

‘‘(i) is sufficiently accurate and comprehensive to 

apprise the employee of such rights and obligations, 

and 

‘‘(ii) is written in a manner calculated to be understood by the average employee to whom the arrangement applies. 

‘‘(B) TIME AND FORM OF NOTICE.—A notice shall not 

be treated as meeting the requirements of subparagraph 

(A) with respect to an employee unless—

‘‘(i) the notice includes an explanation of the 

employee’s right under the arrangement to elect not 

to have elective contributions made on the employee’s 

behalf (or to elect to have such contributions made 

at a different percentage), 

‘‘(ii) the employee has a reasonable period of time 

after receipt of the notice described in clause (i) and 

before the first elective contribution is made to make 

such election, and 

‘‘(iii) the notice explains how contributions made 

under the arrangement will be invested in the absence 

of any investment election by the employee. 
H. R. 4—259

‘‘(5) APPLICABLE EMPLOYER PLAN.—For purposes of this subsection, the term ‘applicable employer plan’ means—

‘‘(A) an employees’ trust described in section 401(a) 

which is exempt from tax under section 501(a), 

‘‘(B) a plan under which amounts are contributed by 

an individual’s employer for an annuity contract described 

in section 403(b), and 

‘‘(C) an eligible deferred compensation plan described 

in section 457(b) which is maintained by an eligible 

employer described in section 457(e)(1)(A). 

‘‘(6) SPECIAL RULE.—A withdrawal described in paragraph 

(1) (subject to the limitation of paragraph (2)(C)) shall not 

be taken into account for purposes of section 401(k)(3).’’. 

(2) VESTING CONFORMING AMENDMENTS.—

(A) Section 411(a)(3)(G) of such Code is amended by 

inserting ‘‘an erroneous automatic contribution under section 414(w),’’ after ‘‘402(g)(2)(A),’’. 

(B) The heading of section 411(a)(3)(G) of such Code 

is amended by inserting ‘‘OR ERRONEOUS AUTOMATIC CONTRIBUTION’’ before the period. 

(C) Section 401(k)(8)(E) of such Code is amended by 

inserting ‘‘an erroneous automatic contribution under section 414(w),’’ after ‘‘402(g)(2)(A),’’. 

(D) The heading of section 401(k)(8)(E) of such Code 

is amended by inserting ‘‘OR ERRONEOUS AUTOMATIC CONTRIBUTION’’ before the period. 

(E) Section 203(a)(3)(F) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1053(a)(3)(F)) is 

amended by inserting ‘‘an erroneous automatic contribution 

under section 414(w) of such Code,’’ after ‘‘402(g)(2)(A) of 

such Code,’’. 

(e) EXCESS CONTRIBUTIONS.—

(1) EXPANSION OF CORRECTIVE DISTRIBUTION PERIOD FOR

AUTOMATIC CONTRIBUTION ARRANGEMENTS.—Subsection (f) of 

section 4979 of the Internal Revenue Code of 1986 is amended—

(A) by inserting ‘‘(6 months in the case of an excess 

contribution or excess aggregate contribution to an eligible 

automatic contribution arrangement (as defined in section 

414(w)(3)))’’ after ‘‘21⁄2 months’’ in paragraph (1), and 

(B) by striking ‘‘21⁄2 MONTHS OF’’ in the heading and 

inserting ‘‘SPECIFIED PERIOD AFTER’’. 

(2) YEAR OF INCLUSION.—Paragraph (2) of section 4979(f) 

of such Code is amended to read as follows: 

‘‘(2) YEAR OF INCLUSION.—Any amount distributed as provided in paragraph (1) shall be treated as earned and received 

by the recipient in the recipient’s taxable year in which such 

distributions were made.’’. 

(3) SIMPLIFICATION OF ALLOCABLE EARNINGS.—

(A) SECTION 4979.—Paragraph (1) of section 4979(f) of 

such Code is amended by adding ‘‘through the end of the 

plan year for which the contribution was made’’ after 

‘‘thereto’’. 

(B) SECTION 401(k) AND 401(m).—

(i) Clause (i) of section 401(k)(8)(A) of such Code 

is amended by adding ‘‘through the end of such year’’ 

after ‘‘such contributions’’. 
H. R. 4—260

(ii) Subparagraph (A) of section 401(m)(6) of such 

Code is amended by adding ‘‘through the end of such 

year’’ after ‘‘to such contributions’’. 

(f) PREEMPTION OF CONFLICTING STATE REGULATION.—

(1) IN GENERAL.—Section 514 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1144) is amended by 

adding at the end the following new subsection: 

‘‘(e)(1) Notwithstanding any other provision of this section, this 

title shall supersede any law of a State which would directly or 

indirectly prohibit or restrict the inclusion in any plan of an automatic contribution arrangement. The Secretary may prescribe regulations which would establish minimum standards that such an 

arrangement would be required to satisfy in order for this subsection 

to apply in the case of such arrangement. 

‘‘(2) For purposes of this subsection, the term ‘automatic contribution arrangement’ means an arrangement—

‘‘(A) under which a participant may elect to have the plan 

sponsor make payments as contributions under the plan on 

behalf of the participant, or to the participant directly in cash, 

‘‘(B) under which a participant is treated as having elected 

to have the plan sponsor make such contributions in an amount 

equal to a uniform percentage of compensation provided under 

the plan until the participant specifically elects not to have 

such contributions made (or specifically elects to have such 

contributions made at a different percentage), and 

‘‘(C) under which such contributions are invested in accordance with regulations prescribed by the Secretary under section 

404(c)(5). 

‘‘(3)(A) The plan administrator of an automatic contribution 

arrangement shall, within a reasonable period before such plan 

year, provide to each participant to whom the arrangement applies 

for such plan year notice of the participant’s rights and obligations 

under the arrangement which—

‘‘(i) is sufficiently accurate and comprehensive to apprise 

the participant of such rights and obligations, and 

‘‘(ii) is written in a manner calculated to be understood 

by the average participant to whom the arrangement applies. 

‘‘(B) A notice shall not be treated as meeting the requirements 

of subparagraph (A) with respect to a participant unless—

‘‘(i) the notice includes an explanation of the participant’s 

right under the arrangement not to have elective contributions 

made on the participant’s behalf (or to elect to have such 

contributions made at a different percentage), 

‘‘(ii) the participant has a reasonable period of time, after 

receipt of the notice described in clause (i) and before the 

first elective contribution is made, to make such election, and 

‘‘(iii) the notice explains how contributions made under 

the arrangement will be invested in the absence of any investment election by the participant.’’. 

(2) ENFORCEMENT.—Section 502(c)(4) of such Act (29 U.S.C. 

1132(c)(4)) is amended by striking ‘‘or section 302(b)(7)(F)(vi)’’ 

inserting ‘‘, section 302(b)(7)(F)(vi), or section 514(e)(3)’’. 

(g) EFFECTIVE DATE.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007, except 

that the amendments made by subsection (f) shall take effect on 

the date of the enactment of this Act. 
H. R. 4—261

SEC. 903. TREATMENT OF ELIGIBLE COMBINED DEFINED BENEFIT 

PLANS AND QUALIFIED CASH OR DEFERRED ARRANGEMENTS. 

(a) AMENDMENTS OF INTERNAL REVENUE CODE.—Section 414 

of the Internal Revenue Code of 1986, as amended by this Act, 

is amended by adding at the end the following new subsection: 

‘‘(x) SPECIAL RULES FOR ELIGIBLE COMBINED DEFINED BENEFIT

PLANS AND QUALIFIED CASH OR DEFERRED ARRANGEMENTS.— ‘‘(1) GENERAL RULE.—Except as provided in this subsection, 

the requirements of this title shall be applied to any defined 

benefit plan or applicable defined contribution plan which are 

part of an eligible combined plan in the same manner as 

if each such plan were not a part of the eligible combined 

plan. 

‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘eligible combined plan’ 

means a plan—

‘‘(i) which is maintained by an employer which, 

at the time the plan is established, is a small employer, 

‘‘(ii) which consists of a defined benefit plan and 

an applicable defined contribution plan, 

‘‘(iii) the assets of which are held in a single trust 

forming part of the plan and are clearly identified 

and allocated to the defined benefit plan and the 

applicable defined contribution plan to the extent necessary for the separate application of this title under 

paragraph (1), and 

‘‘(iv) with respect to which the benefit, contribution, vesting, and nondiscrimination requirements of 

subparagraphs (B), (C), (D), (E), and (F) are met. 

For purposes of this subparagraph, the term ‘small 

employer’ has the meaning given such term by section 

4980D(d)(2), except that such section shall be applied by 

substituting ‘500’ for ‘50’ each place it appears. 

‘‘(B) BENEFIT REQUIREMENTS.—

‘‘(i) IN GENERAL.—The benefit requirements of this 

subparagraph are met with respect to the defined benefit plan forming part of the eligible combined plan 

if the accrued benefit of each participant derived from 

employer contributions, when expressed as an annual 

retirement benefit, is not less than the applicable 

percentage of the participant’s final average pay. For 

purposes of this clause, final average pay shall be 

determined using the period of consecutive years (not 

exceeding 5) during which the participant had the 

greatest aggregate compensation from the employer. 

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of 

clause (i), the applicable percentage is the lesser of—

‘‘(I) 1 percent multiplied by the number of 

years of service with the employer, or 

‘‘(II) 20 percent. 

‘‘(iii) SPECIAL RULE FOR APPLICABLE DEFINED BEN- EFIT PLANS.—If the defined benefit plan under clause 

(i) is an applicable defined benefit plan as defined 

in section 411(a)(13)(B) which meets the interest credit 

requirements of section 411(b)(5)(B)(i), the plan shall 
H. R. 4—262

be treated as meeting the requirements of clause (i) 

with respect to any plan year if each participant 

receives a pay credit for the year which is not less 

than the percentage of compensation determined in 

accordance with the following table:

‘‘If the participant’s age as of the 

beginning of the year is— The 

percentage 

is—

30 or less ................................................................................ 2

Over 30 but less than 40 ....................................................... 4

40 or over but less than 50 ................................................... 6

50 or over ............................................................................... 8.

‘‘(iv) YEARS OF SERVICE.—For purposes of this 

subparagraph, years of service shall be determined 

under the rules of paragraphs (4), (5), and (6) of section 

411(a), except that the plan may not disregard any 

year of service because of a participant making, or 

failing to make, any elective deferral with respect to 

the qualified cash or deferred arrangement to which 

subparagraph (C) applies. 

‘‘(C) CONTRIBUTION REQUIREMENTS.— ‘‘(i) IN GENERAL.—The contribution requirements 

of this subparagraph with respect to any applicable 

defined contribution plan forming part of an eligible 

combined plan are met if—

‘‘(I) the qualified cash or deferred arrangement 

included in such plan constitutes an automatic 

contribution arrangement, and 

‘‘(II) the employer is required to make 

matching contributions on behalf of each employee 

eligible to participate in the arrangement in an 

amount equal to 50 percent of the elective contributions of the employee to the extent such elective 

contributions do not exceed 4 percent of compensation. 

Rules similar to the rules of clauses (ii) and (iii) of 

section 401(k)(12)(B) shall apply for purposes of this 

clause. 

‘‘(ii) NONELECTIVE CONTRIBUTIONS.—An applicable 

defined contribution plan shall not be treated as failing 

to meet the requirements of clause (i) because the 

employer makes nonelective contributions under the 

plan but such contributions shall not be taken into 

account in determining whether the requirements of 

clause (i)(II) are met. 

‘‘(D) VESTING REQUIREMENTS.—The vesting requirements of this subparagraph are met if—

‘‘(i) in the case of a defined benefit plan forming 

part of an eligible combined plan an employee who 

has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s 

accrued benefit under the plan derived from employer 

contributions, and 

‘‘(ii) in the case of an applicable defined contribution plan forming part of eligible combined plan—

‘‘(I) an employee has a nonforfeitable right 

to any matching contribution made under the 
H. R. 4—263

qualified cash or deferred arrangement included 

in such plan by an employer with respect to any 

elective contribution, including matching contributions in excess of the contributions required under 

subparagraph (C)(i)(II), and 

‘‘(II) an employee who has completed at least 

3 years of service has a nonforfeitable right to 

100 percent of the employee’s accrued benefit 

derived under the arrangement from nonelective 

contributions of the employer. 

For purposes of this subparagraph, the rules of section 

411 shall apply to the extent not inconsistent with 

this subparagraph. 

‘‘(E) UNIFORM PROVISION OF CONTRIBUTIONS AND BENEFITS.—In the case of a defined benefit plan or applicable 

defined contribution plan forming part of an eligible combined plan, the requirements of this subparagraph are 

met if all contributions and benefits under each such plan, 

and all rights and features under each such plan, must 

be provided uniformly to all participants. 

‘‘(F) REQUIREMENTS MUST BE MET WITHOUT TAKING INTO

ACCOUNT SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS AND

BENEFITS OR OTHER PLANS.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if the requirements of clauses 

(ii) and (iii) are met. 

‘‘(ii) SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS.—The requirements of this clause are met if—

‘‘(I) the requirements of subparagraphs (B) and 

(C) are met without regard to section 401(l), and 

‘‘(II) the requirements of sections 401(a)(4) and 

410(b) are met with respect to both the applicable 

defined contribution plan and defined benefit plan 

forming part of an eligible combined plan without 

regard to section 401(l). 

‘‘(iii) OTHER PLANS AND ARRANGEMENTS.—The 

requirements of this clause are met if the applicable 

defined contribution plan and defined benefit plan 

forming part of an eligible combined plan meet the 

requirements of sections 401(a)(4) and 410(b) without 

being combined with any other plan. 

‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR QUALIFIED

CASH OR DEFERRED ARRANGEMENT.—

‘‘(A) IN GENERAL.—A qualified cash or deferred 

arrangement which is included in an applicable defined 

contribution plan forming part of an eligible combined plan 

shall be treated as meeting the requirements of section 

401(k)(3)(A)(ii) if the requirements of paragraph (2)(C) are 

met with respect to such arrangement. 

‘‘(B) MATCHING CONTRIBUTIONS.—In applying section 

401(m)(11) to any matching contribution with respect to 

a contribution to which paragraph (2)(C) applies, the contribution requirement of paragraph (2)(C) and the notice 

requirements of paragraph (5)(B) shall be substituted for 

the requirements otherwise applicable under clauses (i) 

and (ii) of section 401(m)(11)(A). 
H. R. 4—264

‘‘(4) SATISFACTION OF TOP-HEAVY RULES.—A defined benefit 

plan and applicable defined contribution plan forming part 

of an eligible combined plan for any plan year shall be treated 

as meeting the requirements of section 416 for the plan year. 

‘‘(5) AUTOMATIC CONTRIBUTION ARRANGEMENT.—For purposes of this subsection—

‘‘(A) IN GENERAL.—A qualified cash or deferred 

arrangement shall be treated as an automatic contribution 

arrangement if the arrangement—

‘‘(i) provides that each employee eligible to participate in the arrangement is treated as having elected 

to have the employer make elective contributions in 

an amount equal to 4 percent of the employee’s compensation unless the employee specifically elects not 

to have such contributions made or to have such contributions made at a different rate, and 

‘‘(ii) meets the notice requirements under subparagraph (B). 

‘‘(B) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if the requirements of clauses 

(ii) and (iii) are met. 

‘‘(ii) REASONABLE PERIOD TO MAKE ELECTION.—The 

requirements of this clause are met if each employee 

to whom subparagraph (A)(i) applies—

‘‘(I) receives a notice explaining the employee’s 

right under the arrangement to elect not to have 

elective contributions made on the employee’s 

behalf or to have the contributions made at a 

different rate, and 

‘‘(II) has a reasonable period of time after 

receipt of such notice and before the first elective 

contribution is made to make such election. 

‘‘(iii) ANNUAL NOTICE OF RIGHTS AND OBLIGATIONS.—The requirements of this clause are met if 

each employee eligible to participate in the arrangement is, within a reasonable period before any year, 

given notice of the employee’s rights and obligations 

under the arrangement. 

The requirements of clauses (i) and (ii) of section 

401(k)(12)(D) shall be met with respect to the notices 

described in clauses (ii) and (iii) of this subparagraph. 

‘‘(6) COORDINATION WITH OTHER REQUIREMENTS.—

‘‘(A) TREATMENT OF SEPARATE PLANS.—Section 414(k) 

shall not apply to an eligible combined plan. 

‘‘(B) REPORTING.—An eligible combined plan shall be 

treated as a single plan for purposes of sections 6058 

and 6059. 

‘‘(7) APPLICABLE DEFINED CONTRIBUTION PLAN.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘applicable defined contribution plan’ means a defined contribution plan which 

includes a qualified cash or deferred arrangement. 

‘‘(B) QUALIFIED CASH OR DEFERRED ARRANGEMENT.—

The term ‘qualified cash or deferred arrangement’ has the 

meaning given such term by section 401(k)(2).’’. 
H. R. 4—265

(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(1) IN GENERAL.—Section 210 of the Employee Retirement 

Income Security Act of 1974 is amended by adding at the 

end the following new subsection: 

‘‘(e) SPECIAL RULES FOR ELIGIBLE COMBINED DEFINED BENEFIT

PLANS AND QUALIFIED CASH OR DEFERRED ARRANGEMENTS.—

‘‘(1) GENERAL RULE.—Except as provided in this subsection, 

this Act shall be applied to any defined benefit plan or 

applicable individual account plan which are part of an eligible 

combined plan in the same manner as if each such plan were 

not a part of the eligible combined plan. 

‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘eligible combined plan’ 

means a plan—

‘‘(i) which is maintained by an employer which, 

at the time the plan is established, is a small employer, 

‘‘(ii) which consists of a defined benefit plan and 

an applicable individual account plan each of which 

qualifies under section 401(a) of the Internal Revenue 

Code of 1986, 

‘‘(iii) the assets of which are held in a single trust 

forming part of the plan and are clearly identified 

and allocated to the defined benefit plan and the 

applicable individual account plan to the extent necessary for the separate application of this Act under 

paragraph (1), and 

‘‘(iv) with respect to which the benefit, contribution, vesting, and nondiscrimination requirements of 

subparagraphs (B), (C), (D), (E), and (F) are met. 

For purposes of this subparagraph, the term ‘small 

employer’ has the meaning given such term by section 

4980D(d)(2) of the Internal Revenue Code of 1986, except 

that such section shall be applied by substituting ‘500’ 

for ‘50’ each place it appears. 

‘‘(B) BENEFIT REQUIREMENTS.— ‘‘(i) IN GENERAL.—The benefit requirements of this 

subparagraph are met with respect to the defined benefit plan forming part of the eligible combined plan 

if the accrued benefit of each participant derived from 

employer contributions, when expressed as an annual 

retirement benefit, is not less than the applicable 

percentage of the participant’s final average pay. For 

purposes of this clause, final average pay shall be 

determined using the period of consecutive years (not 

exceeding 5) during which the participant had the 

greatest aggregate compensation from the employer. 

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of 

clause (i), the applicable percentage is the lesser of—

‘‘(I) 1 percent multiplied by the number of 

years of service with the employer, or 

‘‘(II) 20 percent. 

‘‘(iii) SPECIAL RULE FOR APPLICABLE DEFINED BEN- EFIT PLANS.—If the defined benefit plan under clause 

(i) is an applicable defined benefit plan as defined 

in section 203(f)(3)(B) which meets the interest credit 
H. R. 4—266

requirements of section 204(b)(5)(B)(i), the plan shall 

be treated as meeting the requirements of clause (i) 

with respect to any plan year if each participant 

receives pay credit for the year which is not less than 

the percentage of compensation determined in accordance with the following table:

‘‘If the participant’s age as of the 

beginning of the year is— The 

percentage 

is—

30 or less ................................................................................ 2

Over 30 but less than 40 ....................................................... 4

40 or over but less than 50 ................................................... 6

50 or over ............................................................................... 8.

‘‘(iv) YEARS OF SERVICE.—For purposes of this 

subparagraph, years of service shall be determined 

under the rules of paragraphs (1), (2), and (3) of section 

203(b), except that the plan may not disregard any 

year of service because of a participant making, or 

failing to make, any elective deferral with respect to 

the qualified cash or deferred arrangement to which 

subparagraph (C) applies. 

‘‘(C) CONTRIBUTION REQUIREMENTS.—

‘‘(i) IN GENERAL.—The contribution requirements 

of this subparagraph with respect to any applicable 

individual account plan forming part of an eligible 

combined plan are met if—

‘‘(I) the qualified cash or deferred arrangement 

included in such plan constitutes an automatic 

contribution arrangement, and 

‘‘(II) the employer is required to make 

matching contributions on behalf of each employee 

eligible to participate in the arrangement in an 

amount equal to 50 percent of the elective contributions of the employee to the extent such elective 

contributions do not exceed 4 percent of compensation. 

Rules similar to the rules of clauses (ii) and (iii) of 

section 401(k)(12)(B) of the Internal Revenue Code of 

1986 shall apply for purposes of this clause. 

‘‘(ii) NONELECTIVE CONTRIBUTIONS.—An applicable 

individual account plan shall not be treated as failing 

to meet the requirements of clause (i) because the 

employer makes nonelective contributions under the 

plan but such contributions shall not be taken into 

account in determining whether the requirements of 

clause (i)(II) are met. 

‘‘(D) VESTING REQUIREMENTS.—The vesting requirements of this subparagraph are met if—

‘‘(i) in the case of a defined benefit plan forming 

part of an eligible combined plan an employee who 

has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s 

accrued benefit under the plan derived from employer 

contributions, and 

‘‘(ii) in the case of an applicable individual account 

plan forming part of eligible combined plan—
H. R. 4—267

‘‘(I) an employee has a nonforfeitable right 

to any matching contribution made under the 

qualified cash or deferred arrangement included 

in such plan by an employer with respect to any 

elective contribution, including matching contributions in excess of the contributions required under 

subparagraph (C)(i)(II), and 

‘‘(II) an employee who has completed at least 

3 years of service has a nonforfeitable right to 

100 percent of the employee’s accrued benefit 

derived under the arrangement from nonelective 

contributions of the employer. 

For purposes of this subparagraph, the rules of section 

203 shall apply to the extent not inconsistent with 

this subparagraph. 

‘‘(E) UNIFORM PROVISION OF CONTRIBUTIONS AND BENEFITS.—In the case of a defined benefit plan or applicable 

individual account plan forming part of an eligible combined plan, the requirements of this subparagraph are 

met if all contributions and benefits under each such plan, 

and all rights and features under each such plan, must 

be provided uniformly to all participants. 

‘‘(F) REQUIREMENTS MUST BE MET WITHOUT TAKING INTO

ACCOUNT SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS AND

BENEFITS OR OTHER PLANS.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if the requirements of clauses 

(ii) and (iii) are met. 

‘‘(ii) SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS.—The requirements of this clause are met if—

‘‘(I) the requirements of subparagraphs (B) and 

(C) are met without regard to section 401(l) of 

the Internal Revenue Code of 1986, and 

‘‘(II) the requirements of sections 401(a)(4) and 

410(b) of the Internal Revenue Code of 1986 are 

met with respect to both the applicable defined 

contribution plan and defined benefit plan forming 

part of an eligible combined plan without regard 

to section 401(l) of the Internal Revenue Code 

of 1986. 

‘‘(iii) OTHER PLANS AND ARRANGEMENTS.—The 

requirements of this clause are met if the applicable 

defined contribution plan and defined benefit plan 

forming part of an eligible combined plan meet the 

requirements of sections 401(a)(4) and 410(b) of the 

Internal Revenue Code of 1986 without being combined 

with any other plan. 

‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR QUALIFIED

CASH OR DEFERRED ARRANGEMENT.—

‘‘(A) IN GENERAL.—A qualified cash or deferred 

arrangement which is included in an applicable individual 

account plan forming part of an eligible combined plan 

shall be treated as meeting the requirements of section 

401(k)(3)(A)(ii) of the Internal Revenue Code of 1986 if 

the requirements of paragraph (2) are met with respect 

to such arrangement. 
H. R. 4—268

‘‘(B) MATCHING CONTRIBUTIONS.—In applying section 

401(m)(11) of such Code to any matching contribution with 

respect to a contribution to which paragraph (2)(C) applies, 

the contribution requirement of paragraph (2)(C) and the 

notice requirements of paragraph (5)(B) shall be substituted 

for the requirements otherwise applicable under clauses 

(i) and (ii) of section 401(m)(11)(A) of such Code. 

‘‘(4) AUTOMATIC CONTRIBUTION ARRANGEMENT.—For purposes of this subsection—

‘‘(A) IN GENERAL.—A qualified cash or deferred 

arrangement shall be treated as an automatic contribution 

arrangement if the arrangement—

‘‘(i) provides that each employee eligible to participate in the arrangement is treated as having elected 

to have the employer make elective contributions in 

an amount equal to 4 percent of the employee’s compensation unless the employee specifically elects not 

to have such contributions made or to have such contributions made at a different rate, and 

‘‘(ii) meets the notice requirements under subparagraph (B). 

‘‘(B) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of this 

subparagraph are met if the requirements of clauses 

(ii) and (iii) are met. 

‘‘(ii) REASONABLE PERIOD TO MAKE ELECTION.—The 

requirements of this clause are met if each employee 

to whom subparagraph (A)(i) applies—

‘‘(I) receives a notice explaining the employee’s 

right under the arrangement to elect not to have 

elective contributions made on the employee’s 

behalf or to have the contributions made at a 

different rate, and 

‘‘(II) has a reasonable period of time after 

receipt of such notice and before the first elective 

contribution is made to make such election. 

‘‘(iii) ANNUAL NOTICE OF RIGHTS AND OBLIGATIONS.—The requirements of this clause are met if 

each employee eligible to participate in the arrangement is, within a reasonable period before any year, 

given notice of the employee’s rights and obligations 

under the arrangement. 

The requirements of this subparagraph shall not be treated 

as met unless the requirements of clauses (i) and (ii) of 

section 401(k)(12)(D) of the Internal Revenue Code of 1986 

are met with respect to the notices described in clauses 

(ii) and (iii) of this subparagraph. 

‘‘(5) COORDINATION WITH OTHER REQUIREMENTS.—

‘‘(A) TREATMENT OF SEPARATE PLANS.—The except 

clause in section 3(35) shall not apply to an eligible combined plan. 

‘‘(B) REPORTING.—An eligible combined plan shall be 

treated as a single plan for purposes of section 103. 

‘‘(6) APPLICABLE INDIVIDUAL ACCOUNT PLAN.—For purposes 

of this subsection—
H. R. 4—269

‘‘(A) IN GENERAL.—The term ‘applicable individual 

account plan’ means an individual account plan which 

includes a qualified cash or deferred arrangement. 

‘‘(B) QUALIFIED CASH OR DEFERRED ARRANGEMENT.—

The term ‘qualified cash or deferred arrangement’ has the 

meaning given such term by section 401(k)(2) of the 

Internal Revenue Code of 1986.’’. 

(2) CONFORMING CHANGES.—

(A) The heading for section 210 of such Act is amended 

to read as follows: 

‘‘SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPECIAL RULES.’’. 

(B) The table of contents in section 1 of such Act 

is amended by striking the item relating to section 210 

and inserting the following new item:

‘‘Sec. 210. Multiple employer plans and other special rules.’’.

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2009. 

SEC. 904. FASTER VESTING OF EMPLOYER NONELECTIVE CONTRIBUTIONS. 

(a) AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.—

(1) IN GENERAL.—Paragraph (2) of section 411(a) of the 

Internal Revenue Code of 1986 (relating to employer contributions) is amended to read as follows: 

‘‘(2) EMPLOYER CONTRIBUTIONS.— ‘‘(A) DEFINED BENEFIT PLANS.— ‘‘(i) IN GENERAL.—In the case of a defined benefit 

plan, a plan satisfies the requirements of this paragraph if it satisfies the requirements of clause (ii) 

or (iii). 

‘‘(ii) 5-YEAR VESTING.—A plan satisfies the requirements of this clause if an employee who has completed 

at least 5 years of service has a nonforfeitable right 

to 100 percent of the employee’s accrued benefit derived 

from employer contributions. 

‘‘(iii) 3 TO 7 YEAR VESTING.—A plan satisfies the 

requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee’s 

accrued benefit derived from employer contributions 

determined under the following table:

‘‘Years of service: The 

nonforfeitable 

percentage is:

3 .............................................................................................. 20

4 .............................................................................................. 40

5 .............................................................................................. 60

6 .............................................................................................. 80

7 or more ................................................................................ 100.

‘‘(B) DEFINED CONTRIBUTION PLANS.—

‘‘(i) IN GENERAL.—In the case of a defined contribution plan, a plan satisfies the requirements of this 

paragraph if it satisfies the requirements of clause 

(ii) or (iii). 

‘‘(ii) 3-YEAR VESTING.—A plan satisfies the requirements of this clause if an employee who has completed 

at least 3 years of service has a nonforfeitable right 
H. R. 4—270

to 100 percent of the employee’s accrued benefit derived 

from employer contributions. 

‘‘(iii) 2 TO 6 YEAR VESTING.—A plan satisfies the 

requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee’s 

accrued benefit derived from employer contributions 

determined under the following table:

‘‘Years of service: The 

nonforfeitable 

percentage is:

2 .............................................................................................. 20

3 .............................................................................................. 40

4 .............................................................................................. 60

5 .............................................................................................. 80

6 or more ................................................................................ 100.’’.

(2) CONFORMING AMENDMENT.—Section 411(a) of such Code 

(relating to general rule for minimum vesting standards) is 

amended by striking paragraph (12). 

(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(1) IN GENERAL.—Paragraph (2) of section 203(a) of the 

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

1053(a)(2)) is amended to read as follows: 

‘‘(2)(A)(i) In the case of a defined benefit plan, a plan 

satisfies the requirements of this paragraph if it satisfies the 

requirements of clause (ii) or (iii). 

‘‘(ii) A plan satisfies the requirements of this clause if 

an employee who has completed at least 5 years of service 

has a nonforfeitable right to 100 percent of the employee’s 

accrued benefit derived from employer contributions. 

‘‘(iii) A plan satisfies the requirements of this clause if 

an employee has a nonforfeitable right to a percentage of the 

employee’s accrued benefit derived from employer contributions 

determined under the following table:

‘‘Years of service: The 

nonforfeitable 

percentage is:

3 .............................................................................................. 20

4 .............................................................................................. 40

5 .............................................................................................. 60

6 .............................................................................................. 80

7 or more ................................................................................ 100.

‘‘(B)(i) In the case of an individual account plan, a plan 

satisfies the requirements of this paragraph if it satisfies the 

requirements of clause (ii) or (iii). 

‘‘(ii) A plan satisfies the requirements of this clause if 

an employee who has completed at least 3 years of service 

has a nonforfeitable right to 100 percent of the employee’s 

accrued benefit derived from employer contributions. 

‘‘(iii) A plan satisfies the requirements of this clause if 

an employee has a nonforfeitable right to a percentage of the 

employee’s accrued benefit derived from employer contributions 

determined under the following table:

‘‘Years of service: The 

nonforfeitable 

percentage is:

2 .............................................................................................. 20

3 .............................................................................................. 40

4 .............................................................................................. 60
H. R. 4—271

‘‘Years of service: The 

nonforfeitable 

percentage is:

5 .............................................................................................. 80

6 or more ................................................................................ 100.’’.

(2) CONFORMING AMENDMENT.—Section 203(a) of such Act 

is amended by striking paragraph (4). 

(c) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraphs (2) 

and (4), the amendments made by this section shall apply 

to contributions for plan years beginning after December 31, 

2006. 

(2) COLLECTIVE BARGAINING AGREEMENTS.—In the case of 

a plan maintained pursuant to one or more collective bargaining 

agreements between employee representatives and one or more 

employers ratified before the date of the enactment of this 

Act, the amendments made by this section shall not apply 

to contributions on behalf of employees covered by any such 

agreement for plan years beginning before the earlier of—

(A) the later of—

(i) the date on which the last of such collective 

bargaining agreements terminates (determined without 

regard to any extension thereof on or after such date 

of the enactment); or 

(ii) January 1, 2007; or 

(B) January 1, 2009. 

(3) SERVICE REQUIRED.—With respect to any plan, the 

amendments made by this section shall not apply to any 

employee before the date that such employee has 1 hour of 

service under such plan in any plan year to which the amendments made by this section apply. 

(4) SPECIAL RULE FOR STOCK OWNERSHIP PLANS.—Notwithstanding paragraph (1) or (2), in the case of an employee 

stock ownership plan (as defined in section 4975(e)(7) of the 

Internal Revenue Code of 1986) which had outstanding on 

September 26, 2005, a loan incurred for the purpose of acquiring 

qualifying employer securities (as defined in section 4975(e)(8) 

of such Code), the amendments made by this section shall 

not apply to any plan year beginning before the earlier of—

(A) the date on which the loan is fully repaid, or 

(B) the date on which the loan was, as of September 

26, 2005, scheduled to be fully repaid. 

SEC. 905. DISTRIBUTIONS DURING WORKING RETIREMENT. 

(a) AMENDMENT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Subparagraph (A) of section 3(2) of the 

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

1002(2)) is amended by adding at the end the following new sentence: ‘‘A distribution from a plan, fund, or program shall not 

be treated as made in a form other than retirement income or 

as a distribution prior to termination of covered employment solely 

because such distribution is made to an employee who has attained 

age 62 and who is not separated from employment at the time 

of such distribution.’’. 

(b) AMENDMENT TO THE INTERNAL REVENUE CODE OF 1986.—

Subsection (a) of section 401 of the Internal Revenue Code of 

1986 (as amended by this Act) is amended by inserting after paragraph (35) the following new paragraph: 
H. R. 4—272

‘‘(36) DISTRIBUTIONS DURING WORKING RETIREMENT.—A 

trust forming part of a pension plan shall not be treated as 

failing to constitute a qualified trust under this section solely 

because the plan provides that a distribution may be made 

from such trust to an employee who has attained age 62 and 

who is not separated from employment at the time of such 

distribution.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions in plan years beginning after December 

31, 2006. 

SEC. 906. TREATMENT OF CERTAIN PENSION PLANS OF INDIAN TRIBAL 

GOVERNMENTS. 

(a) DEFINITION OF GOVERNMENT PLAN TO INCLUDE CERTAIN

PENSION PLANS OF INDIAN TRIBAL GOVERNMENTS.—

(1) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—

Section 414(d) of the Internal Revenue Code of 1986 (defining 

governmental plan) is amended by adding at the end the following: ‘‘The term ‘governmental plan’ includes a plan which 

is established and maintained by an Indian tribal government 

(as defined in section 7701(a)(40)), a subdivision of an Indian 

tribal government (determined in accordance with section 

7871(d)), or an agency or instrumentality of either, and all 

of the participants of which are employees of such entity 

substantially all of whose services as such an employee are 

in the performance of essential governmental functions but 

not in the performance of commercial activities (whether or 

not an essential government function).’’. 

(2) AMENDMENT TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(A) Section 3(32) of the Employee Retirement Income 

Security Act of 1974 (29 U.S.C. 1002(32)) is amended by 

adding at the end the following: ‘‘The term ‘governmental 

plan’ includes a plan which is established and maintained 

by an Indian tribal government (as defined in section 

7701(a)(40) of the Internal Revenue Code of 1986), a subdivision of an Indian tribal government (determined in 

accordance with section 7871(d) of such Code), or an agency 

or instrumentality of either, and all of the participants 

of which are employees of such entity substantially all 

of whose services as such an employee are in the performance of essential governmental functions but not in the 

performance of commercial activities (whether or not an 

essential government function)’’. 

(B) Section 4021(b)(2) of such Act is amended by adding 

at the end the following: ‘‘or which is described in the 

last sentence of section 3(32)’’. 

(b) CLARIFICATION THAT TRIBAL GOVERNMENTS ARE SUBJECT

TO THE SAME PENSION PLAN RULES AND REGULATIONS APPLIED

TO STATE AND OTHER LOCAL GOVERNMENTS AND THEIR POLICE

AND FIREFIGHTERS.—

(1) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—

(A) POLICE AND FIREFIGHTERS.—Subparagraph (H) section 415(b)(2) of the Internal Revenue Code of 1986 

(defining participant) is amended—
H. R. 4—273

(i) in clause (i), by striking ‘‘State or political subdivision’’ and inserting ‘‘State, Indian tribal government (as defined in section 7701(a)(40)), or any political 

subdivision’’; and 

(ii) in clause (ii)(I), by striking ‘‘State or political 

subdivision’’ each place it appears and inserting ‘‘State, 

Indian tribal government (as so defined), or any political subdivision’’. 

(B) STATE AND LOCAL GOVERNMENT PLANS.—

(i) IN GENERAL.—Subparagraph (A) of section 

415(b)(10) of such Code (relating to limitation to equal 

accrued benefit) is amended by inserting ‘‘or a governmental plan described in the last sentence of section 

414(d) (relating to plans of Indian tribal governments),’’ 

after ‘‘foregoing,’’. 

(ii) CONFORMING AMENDMENT.—The heading of 

paragraph (1) of section 415(b) of such Code is amended 

by striking ‘‘SPECIAL RULE FOR STATE AND’’ and 

inserting ‘‘SPECIAL RULE FOR STATE, INDIAN TRIBAL, AND’’. 

(C) GOVERNMENT PICK UP CONTRIBUTIONS.—Paragraph 

(2) of section 414(h) of such Code (relating to designation 

by units of government) is amended by inserting ‘‘or a 

governmental plan described in the last sentence of section 

414(d) (relating to plans of Indian tribal governments),’’ 

after ‘‘foregoing,’’. 

(2) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Section 4021(b) of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1321(b)) is amended—

(A) in paragraph (12), by striking ‘‘or’’ at the end; 

(B) in paragraph (13), by striking ‘‘plan.’’ and inserting 

‘‘plan; or’’; and 

(C) by adding at the end the following: 

‘‘(14) established and maintained by an Indian tribal 

government (as defined in section 7701(a)(40) of the Internal 

Revenue Code of 1986), a subdivision of an Indian tribal government (determined in accordance with section 7871(d) of such 

Code), or an agency or instrumentality of either, and all of 

the participants of which are employees of such entity substantially all of whose services as such an employee are in the 

performance of essential governmental functions but not in 

the performance of commercial activities (whether or not an 

essential government function).’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to any year beginning on or after the date of the 

enactment of this Act. 

TITLE X—PROVISIONS RELATING TO 

SPOUSAL PENSION PROTECTION 

SEC. 1001. REGULATIONS ON TIME AND ORDER OF ISSUANCE OF 

DOMESTIC RELATIONS ORDERS. 

Not later than 1 year after the date of the enactment of this 

Act, the Secretary of Labor shall issue regulations under section 

206(d)(3) of the Employee Retirement Security Act of 1974 and 
H. R. 4—274

section 414(p) of the Internal Revenue Code of 1986 which clarify 

that—

(1) a domestic relations order otherwise meeting the 

requirements to be a qualified domestic relations order, 

including the requirements of section 206(d)(3)(D) of such Act 

and section 414(p)(3) of such Code, shall not fail to be treated 

as a qualified domestic relations order solely because—

(A) the order is issued after, or revises, another 

domestic relations order or qualified domestic relations 

order; or 

(B) of the time at which it is issued; and 

(2) any order described in paragraph (1) shall be subject 

to the same requirements and protections which apply to qualified domestic relations orders, including the provisions of section 206(d)(3)(H) of such Act and section 414(p)(7) of such 

Code. 

SEC. 1002. ENTITLEMENT OF DIVORCED SPOUSES TO RAILROAD 

RETIREMENT ANNUITIES INDEPENDENT OF ACTUAL 

ENTITLEMENT OF EMPLOYEE. 

(a) IN GENERAL.—Section 2 of the Railroad Retirement Act 

of 1974 (45 U.S.C. 231a) is amended—

(1) in subsection (c)(4)(i), by striking ‘‘(A) is entitled to 

an annuity under subsection (a)(1) and (B)’’; and 

(2) in subsection (e)(5), by striking ‘‘or divorced wife’’ the 

second place it appears. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall take effect 1 year after the date of the enactment of this 

Act. 

SEC. 1003. EXTENSION OF TIER II RAILROAD RETIREMENT BENEFITS 

TO SURVIVING FORMER SPOUSES PURSUANT TO 

DIVORCE AGREEMENTS. 

(a) IN GENERAL.—Section 5 of the Railroad Retirement Act 

of 1974 (45 U.S.C. 231d) is amended by adding at the end the 

following: 

‘‘(d) Notwithstanding any other provision of law, the payment 

of any portion of an annuity computed under section 3(b) to a 

surviving former spouse in accordance with a court decree of divorce, 

annulment, or legal separation or the terms of any court-approved 

property settlement incident to any such court decree shall not 

be terminated upon the death of the individual who performed 

the service with respect to which such annuity is so computed 

unless such termination is otherwise required by the terms of 

such court decree.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall take effect 1 year after the date of the enactment of this 

Act. 

SEC. 1004. REQUIREMENT FOR ADDITIONAL SURVIVOR ANNUITY 

OPTION. 

(a) AMENDMENTS TO INTERNAL REVENUE CODE.—

(1) ELECTION OF SURVIVOR ANNUITY.—Section 417(a)(1)(A) 

of the Internal Revenue Code of 1986 is amended—

(A) in clause (i), by striking ‘‘, and’’ and inserting 

a comma; 

(B) by redesignating clause (ii) as clause (iii); and 

(C) by inserting after clause (i) the following: 
H. R. 4—275

‘‘(ii) if the participant elects a waiver under clause 

(i), may elect the qualified optional survivor annuity at 

any time during the applicable election period, and’’. 

(2) DEFINITION.—Section 417 of such Code is amended by 

adding at the end the following: 

‘‘(g) DEFINITION OF QUALIFIED OPTIONAL SURVIVOR ANNUITY.—

‘‘(1) IN GENERAL.—For purposes of this section, the term 

‘qualified optional survivor annuity’ means an annuity—

‘‘(A) for the life of the participant with a survivor 

annuity for the life of the spouse which is equal to the 

applicable percentage of the amount of the annuity which 

is payable during the joint lives of the participant and 

the spouse, and 

‘‘(B) which is the actuarial equivalent of a single 

annuity for the life of the participant. 

Such term also includes any annuity in a form having the 

effect of an annuity described in the preceding sentence. 

‘‘(2) APPLICABLE PERCENTAGE.—

‘‘(A) IN GENERAL.—For purposes of paragraph (1), if 

the survivor annuity percentage—

‘‘(i) is less than 75 percent, the applicable percentage is 75 percent, and 

‘‘(ii) is greater than or equal to 75 percent, the 

applicable percentage is 50 percent. 

‘‘(B) SURVIVOR ANNUITY PERCENTAGE.—For purposes of 

subparagraph (A), the term ‘survivor annuity percentage’ 

means the percentage which the survivor annuity under 

the plan’s qualified joint and survivor annuity bears to 

the annuity payable during the joint lives of the participant 

and the spouse.’’. 

(3) NOTICE.—Section 417(a)(3)(A)(i) of such Code is 

amended by inserting ‘‘and of the qualified optional survivor 

annuity’’ after ‘‘annuity’’. 

(b) AMENDMENTS TO ERISA.—

(1) ELECTION OF SURVIVOR ANNUITY.—Section 205(c)(1)(A) 

of the Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1055(c)(1)(A)) is amended—

(A) in clause (i), by striking ‘‘, and’’ and inserting 

a comma; 

(B) by redesignating clause (ii) as clause (iii); and 

(C) by inserting after clause (i) the following: 

‘‘(ii) if the participant elects a waiver under clause 

(i), may elect the qualified optional survivor annuity at 

any time during the applicable election period, and’’. 

(2) DEFINITION.—Section 205(d) of such Act (29 U.S.C. 

1055(d)) is amended—

(A) by inserting ‘‘(1)’’ after ‘‘(d)’’; 

(B) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; and 

(C) by adding at the end the following: 

‘‘(2)(A) For purposes of this section, the term ‘qualified optional 

survivor annuity’ means an annuity—

‘‘(i) for the life of the participant with a survivor annuity 

for the life of the spouse which is equal to the applicable 

percentage of the amount of the annuity which is payable 

during the joint lives of the participant and the spouse, and 
H. R. 4—276

‘‘(ii) which is the actuarial equivalent of a single annuity 

for the life of the participant. 

Such term also includes any annuity in a form having the effect 

of an annuity described in the preceding sentence. 

‘‘(B)(i) For purposes of subparagraph (A), if the survivor annuity 

percentage—

‘‘(I) is less than 75 percent, the applicable percentage is 

75 percent, and 

‘‘(II) is greater than or equal to 75 percent, the applicable 

percentage is 50 percent. 

‘‘(ii) For purposes of clause (i), the term ‘survivor annuity 

percentage’ means the percentage which the survivor annuity under 

the plan’s qualified joint and survivor annuity bears to the annuity 

payable during the joint lives of the participant and the spouse.’’. 

(3) NOTICE.—Section 205(c)(3)(A)(i) of such Act (29 U.S.C. 

1055(c)(3)(A)(i)) is amended by inserting ‘‘and of the qualified 

optional survivor annuity’’ after ‘‘annuity’’. 

(c) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this section 

shall apply to plan years beginning after December 31, 2007. 

(2) SPECIAL RULE FOR COLLECTIVELY BARGAINED PLANS.—

In the case of a plan maintained pursuant to 1 or more collective 

bargaining agreements between employee representatives and 

1 or more employers ratified on or before the date of the 

enactment of this Act, the amendments made by this section 

shall not apply to plan years beginning before the earlier of—

(A) the later of—

(i) January 1, 2008, or 

(ii) the date on which the last collective bargaining 

agreement related to the plan terminates (determined 

without regard to any extension thereof after the date 

of enactment of this Act), or 

(B) January 1, 2009. 

TITLE XI—ADMINISTRATIVE 

PROVISIONS 

SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM. 

(a) IN GENERAL.—The Secretary of the Treasury shall have 

full authority to establish and implement the Employee Plans 

Compliance Resolution System (or any successor program) and any 

other employee plans correction policies, including the authority 

to waive income, excise, or other taxes to ensure that any tax, 

penalty, or sanction is not excessive and bears a reasonable relationship to the nature, extent, and severity of the failure. 

(b) IMPROVEMENTS.—The Secretary of the Treasury shall continue to update and improve the Employee Plans Compliance Resolution System (or any successor program), giving special attention 

to—

(1) increasing the awareness and knowledge of small 

employers concerning the availability and use of the program; 

(2) taking into account special concerns and circumstances 

that small employers face with respect to compliance and correction of compliance failures; 
H. R. 4—277

(3) extending the duration of the self-correction period 

under the Self-Correction Program for significant compliance 

failures; 

(4) expanding the availability to correct insignificant 

compliance failures under the Self-Correction Program during 

audit; and 

(5) assuring that any tax, penalty, or sanction that is 

imposed by reason of a compliance failure is not excessive 

and bears a reasonable relationship to the nature, extent, and 

severity of the failure. 

SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS. 

(a) EXPANSION OF PERIOD.—

(1) AMENDMENT OF INTERNAL REVENUE CODE.—

(A) IN GENERAL.—Section 417(a)(6)(A) of the Internal 

Revenue Code of 1986 is amended by striking ‘‘90-day’’ 

and inserting ‘‘180-day’’. 

(B) MODIFICATION OF REGULATIONS.—The Secretary of 

the Treasury shall modify the regulations under sections 

402(f), 411(a)(11), and 417 of the Internal Revenue Code 

of 1986 by substituting ‘‘180 days’’ for ‘‘90 days’’ each place 

it appears in Treasury Regulations sections 1.402(f)–1, 

1.411(a)–11(c), and 1.417(e)–1(b). 

(2) AMENDMENT OF ERISA.—

(A) IN GENERAL.—Section 205(c)(7)(A) of the Employee 

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

1055(c)(7)(A)) is amended by striking ‘‘90-day’’ and inserting 

‘‘180-day’’. 

(B) MODIFICATION OF REGULATIONS.—The Secretary of 

the Treasury shall modify the regulations under part 2 

of subtitle B of title I of the Employee Retirement Income 

Security Act of 1974 relating to sections 203(e) and 205 

of such Act by substituting ‘‘180 days’’ for ‘‘90 days’’ each 

place it appears. 

(3) EFFECTIVE DATE.—The amendments and modifications 

made or required by this subsection shall apply to years beginning after December 31, 2006. 

(b) NOTIFICATION OF RIGHT TO DEFER.—

(1) IN GENERAL.—The Secretary of the Treasury shall 

modify the regulations under section 411(a)(11) of the Internal 

Revenue Code of 1986 and under section 205 of the Employee 

Retirement Income Security Act of 1974 to provide that the 

description of a participant’s right, if any, to defer receipt 

of a distribution shall also describe the consequences of failing 

to defer such receipt. 

(2) EFFECTIVE DATE.—

(A) IN GENERAL.—The modifications required by paragraph (1) shall apply to years beginning after December 

31, 2006. 

(B) REASONABLE NOTICE.—A plan shall not be treated 

as failing to meet the requirements of section 411(a)(11) 

of such Code or section 205 of such Act with respect to 

any description of consequences described in paragraph 

(1) made within 90 days after the Secretary of the Treasury 

issues the modifications required by paragraph (1) if the 
H. R. 4—278

plan administrator makes a reasonable attempt to comply 

with such requirements. 

SEC. 1103. REPORTING SIMPLIFICATION. 

(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR OWNERS AND

THEIR SPOUSES.—

(1) IN GENERAL.—The Secretary of the Treasury shall 

modify the requirements for filing annual returns with respect 

to one-participant retirement plans to ensure that such plans 

with assets of $250,000 or less as of the close of the plan 

year need not file a return for that year. 

(2) ONE-PARTICIPANT RETIREMENT PLAN DEFINED.—For purposes of this subsection, the term ‘‘one-participant retirement 

plan’’ means a retirement plan with respect to which the following requirements are met: 

(A) on the first day of the plan year—

(i) the plan covered only one individual (or the 

individual and the individual’s spouse) and the individual owned 100 percent of the plan sponsor (whether 

or not incorporated), or 

(ii) the plan covered only one or more partners 

(or partners and their spouses) in the plan sponsor; 

(B) the plan meets the minimum coverage requirements of section 410(b) of the Internal Revenue Code of 

1986 without being combined with any other plan of the 

business that covers the employees of the business; 

(C) the plan does not provide benefits to anyone except 

the individual (and the individual’s spouse) or the partners 

(and their spouses); 

(D) the plan does not cover a business that is a member 

of an affiliated service group, a controlled group of corporations, or a group of businesses under common control; 

and 

(E) the plan does not cover a business that uses the 

services of leased employees (within the meaning of section 

414(n) of such Code). 

For purposes of this paragraph, the term ‘‘partner’’ includes 

a 2-percent shareholder (as defined in section 1372(b) of such 

Code) of an S corporation. 

(3) OTHER DEFINITIONS.—Terms used in paragraph (2) 

which are also used in section 414 of the Internal Revenue 

Code of 1986 shall have the respective meanings given such 

terms by such section. 

(4) EFFECTIVE DATE.—The provisions of this subsection 

shall apply to plan years beginning on or after January 1, 

2007. 

(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR PLANS WITH

FEWER THAN 25 PARTICIPANTS.—In the case of plan years beginning 

after December 31, 2006, the Secretary of the Treasury and the 

Secretary of Labor shall provide for the filing of a simplified annual 

return for any retirement plan which covers less than 25 participants on the first day of a plan year and which meets the requirements described in subparagraphs (B), (D), and (E) of subsection 

(a)(2). 
H. R. 4—279

SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE AND EMPLOYMENT RETENTION PLANS MAINTAINED BY LOCAL EDUCATIONAL AGENCIES AND OTHER ENTITIES. 

(a) VOLUNTARY EARLY RETIREMENT INCENTIVE PLANS.—

(1) TREATMENT AS PLAN PROVIDING SEVERANCE PAY.—Section 457(e)(11) of the Internal Revenue Code of 1986 (relating 

to certain plans excluded) is amended by adding at the end 

the following new subparagraph: 

‘‘(D) CERTAIN VOLUNTARY EARLY RETIREMENT INCENTIVE PLANS.—

‘‘(i) IN GENERAL.—If an applicable voluntary early 

retirement incentive plan—

‘‘(I) makes payments or supplements as an 

early retirement benefit, a retirement-type subsidy, or a benefit described in the last sentence 

of section 411(a)(9), and 

‘‘(II) such payments or supplements are made 

in coordination with a defined benefit plan which 

is described in section 401(a) and includes a trust 

exempt from tax under section 501(a) and which 

is maintained by an eligible employer described 

in paragraph (1)(A) or by an education association 

described in clause (ii)(II), 

such applicable plan shall be treated for purposes of 

subparagraph (A)(i) as a bona fide severance pay plan 

with respect to such payments or supplements to the 

extent such payments or supplements could otherwise 

have been provided under such defined benefit plan 

(determined as if section 411 applied to such defined 

benefit plan). 

‘‘(ii) APPLICABLE VOLUNTARY EARLY RETIREMENT

INCENTIVE PLAN.—For purposes of this subparagraph, 

the term ‘applicable voluntary early retirement incentive plan’ means a voluntary early retirement incentive 

plan maintained by—

‘‘(I) a local educational agency (as defined in 

section 9101 of the Elementary and Secondary 

Education Act of 1965 (20 U.S.C. 7801)), or 

‘‘(II) an education association which principally 

represents employees of 1 or more agencies 

described in subclause (I) and which is described 

in section 501(c) (5) or (6) and exempt from tax 

under section 501(a).’’. 

(2) AGE DISCRIMINATION IN EMPLOYMENT ACT.—Section 

4(l)(1) of the Age Discrimination in Employment Act of 1967 

(29 U.S.C. 623(l)(1)) is amended—

(A) by inserting ‘‘(A)’’ after ‘‘(1)’’, 

(B) by redesignating subparagraphs (A) and (B) as 

clauses (i) and (ii), respectively, 

(C) by redesignating clauses (i) and (ii) of subparagraph 

(B) (as in effect before the amendments made by subparagraph (B)) as subclauses (I) and (II), respectively, and 

(D) by adding at the end the following: 

‘‘(B) A voluntary early retirement incentive plan that—

‘‘(i) is maintained by—
H. R. 4—280

‘‘(I) a local educational agency (as defined in section 9101 of the Elementary and Secondary Education 

Act of 1965 (20 U.S.C. 7801), or 

‘‘(II) an education association which principally 

represents employees of 1 or more agencies described 

in subclause (I) and which is described in section 501(c) 

(5) or (6) of the Internal Revenue Code of 1986 and 

exempt from taxation under section 501(a) of such 

Code, and 

‘‘(ii) makes payments or supplements described in subclauses (I) and (II) of subparagraph (A)(ii) in coordination 

with a defined benefit plan (as so defined) maintained 

by an eligible employer described in section 457(e)(1)(A) 

of such Code or by an education association described in 

clause (i)(II), 

shall be treated solely for purposes of subparagraph (A)(ii) 

as if it were a part of the defined benefit plan with respect 

to such payments or supplements. Payments or supplements 

under such a voluntary early retirement incentive plan shall 

not constitute severance pay for purposes of paragraph (2).’’. 

(b) EMPLOYMENT RETENTION PLANS.— (1) IN GENERAL.—Section 457(f)(2) of the Internal Revenue 

Code of 1986 (relating to exceptions) is amended by striking 

‘‘and’’ at the end of subparagraph (D), by striking the period 

at the end of subparagraph (E) and inserting ‘‘, and’’, and 

by adding at the end the following: 

‘‘(F) that portion of any applicable employment retention plan described in paragraph (4) with respect to any 

participant.’’. 

(2) DEFINITIONS AND RULES RELATING TO EMPLOYMENT

RETENTION PLANS.—Section 457(f) of such Code is amended 

by adding at the end the following new paragraph: 

‘‘(4) EMPLOYMENT RETENTION PLANS.—For purposes of paragraph (2)(F)—

‘‘(A) IN GENERAL.—The portion of an applicable employment retention plan described in this paragraph with 

respect to any participant is that portion of the plan which 

provides benefits payable to the participant not in excess 

of twice the applicable dollar limit determined under subsection (e)(15). 

‘‘(B) OTHER RULES.— ‘‘(i) LIMITATION.—Paragraph (2)(F) shall only apply 

to the portion of the plan described in subparagraph 

(A) for years preceding the year in which such portion 

is paid or otherwise made available to the participant. 

‘‘(ii) TREATMENT.—A plan shall not be treated for 

purposes of this title as providing for the deferral of 

compensation for any year with respect to the portion 

of the plan described in subparagraph (A). 

‘‘(C) APPLICABLE EMPLOYMENT RETENTION PLAN.—The 

term ‘applicable employment retention plan’ means an 

employment retention plan maintained by—

‘‘(i) a local educational agency (as defined in section 

9101 of the Elementary and Secondary Education Act 

of 1965 (20 U.S.C. 7801), or 

‘‘(ii) an education association which principally represents employees of 1 or more agencies described in 
H. R. 4—281

clause (i) and which is described in section 501(c) (5) 

or (6) and exempt from taxation under section 501(a). 

‘‘(D) EMPLOYMENT RETENTION PLAN.—The term 

‘employment retention plan’ means a plan to pay, upon 

termination of employment, compensation to an employee 

of a local educational agency or education association 

described in subparagraph (C) for purposes of—

‘‘(i) retaining the services of the employee, or 

‘‘(ii) rewarding such employee for the employee’s 

service with 1 or more such agencies or associations.’’. 

(c) COORDINATION WITH ERISA.—Section 3(2)(B) of the 

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

1002(2)(B)) is amended by adding at the end the following: ‘‘An 

applicable voluntary early retirement incentive plan (as defined 

in section 457(e)(11)(D)(ii) of the Internal Revenue Code of 1986) 

making payments or supplements described in section 

457(e)(11)(D)(i) of such Code, and an applicable employment retention plan (as defined in section 457(f)(4)(C) of such Code) making 

payments of benefits described in section 457(f)(4)(A) of such Code, 

shall, for purposes of this title, be treated as a welfare plan (and 

not a pension plan) with respect to such payments and supplements.’’. 

(d) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by this Act shall 

take effect on the date of the enactment of this Act. 

(2) TAX AMENDMENTS.—The amendments made by subsections (a)(1) and (b) shall apply to taxable years ending after 

the date of the enactment of this Act. 

(3) ERISA AMENDMENTS.—The amendment made by subsection (c) shall apply to plan years ending after the date 

of the enactment of this Act. 

(4) CONSTRUCTION.—Nothing in the amendments made by 

this section shall alter or affect the construction of the Internal 

Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, or the Age Discrimination in Employment 

Act of 1967 as applied to any plan, arrangement, or conduct 

to which such amendments do not apply. 

SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSATION AS 

A RESULT OF PENSION ROLLOVERS. 

(a) IN GENERAL.—Section 3304(a) of the Internal Revenue Code 

of 1986 (relating to requirements for State unemployment laws) 

is amended by adding at the end the following new flush sentence: 

‘‘Compensation shall not be reduced under paragraph (15) for any 

pension, retirement or retired pay, annuity, or similar payment 

which is not includible in gross income of the individual for the 

taxable year in which paid because it was part of a rollover distribution.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to weeks beginning on or after the date of the enactment 

of this Act. 

SEC. 1106. REVOCATION OF ELECTION RELATING TO TREATMENT AS 

MULTIEMPLOYER PLAN. 

(a) AMENDMENT TO ERISA.—Section 3(37) of the Employee 

Retirement Income Security Act of 1974 is amended by adding 

at the end the following new subparagraph (G): 
H. R. 4—282

‘‘(G)(i) Within 1 year after the enactment of the Pension 

Protection Act of 2006—

‘‘(I) an election under subparagraph (E) may be 

revoked, pursuant to procedures prescribed by the Pension 

Benefit Guaranty Corporation, if, for each of the 3 plan 

years prior to the date of the enactment of that Act, the 

plan would have been a multiemployer plan but for the 

election under subparagraph (E), and 

‘‘(II) a plan that meets the criteria in clauses (i) and 

(ii) of subparagraph (A) of this paragraph or that is 

described in clause (vi) may, pursuant to procedures prescribed by the Pension Benefit Guaranty Corporation, elect 

to be a multiemployer plan, if—

‘‘(aa) for each of the 3 plan years immediately 

before the date of the enactment of the Pension Protection Act of 2006, the plan has met those criteria or 

is so described, 

‘‘(bb) substantially all of the plan’s employer contributions for each of those plan years were made 

or required to be made by organizations that were 

exempt from tax under section 501 of the Internal 

Revenue Code of 1986, and 

‘‘(cc) the plan was established prior to September 

2, 1974. 

‘‘(ii) An election under this paragraph shall be effective 

for all purposes under this Act and under the Internal Revenue 

Code of 1986, starting with the first plan year ending after 

the date of the enactment of the Pension Protection Act of 

2006. 

‘‘(iii) Once made, an election under this paragraph shall 

be irrevocable, except that a plan described in subclause (i)(II) 

shall cease to be a multiemployer plan as of the plan year 

beginning immediately after the first plan year for which the 

majority of its employer contributions were made or required 

to be made by organizations that were not exempt from tax 

under section 501 of the Internal Revenue Code of 1986. 

‘‘(iv) The fact that a plan makes an election under clause 

(i)(II) does not imply that the plan was not a multiemployer 

plan prior to the date of the election or would not be a multiemployer plan without regard to the election. 

‘‘(v)(I) No later than 30 days before an election is made 

under this paragraph, the plan administrator shall provide 

notice of the pending election to each plan participant and 

beneficiary, each labor organization representing such participants or beneficiaries, and each employer that has an obligation 

to contribute to the plan, describing the principal differences 

between the guarantee programs under title IV and the benefit 

restrictions under this title for single employer and multiemployer plans, along with such other information as the plan 

administrator chooses to include. 

‘‘(II) Within 180 days after the date of enactment of the 

Pension Protection Act of 2006, the Secretary shall prescribe 

a model notice under this subparagraph. 

‘‘(III) A plan administrator’s failure to provide the notice 

required under this subparagraph shall be treated for purposes 
H. R. 4—283

of section 502(c)(2) as a failure or refusal by the plan administrator to file the annual report required to be filed with the 

Secretary under section 101(b)(4). 

‘‘(vi) A plan is described in this clause if it is a plan—

‘‘(I) that was established in Chicago, Illinois, on August 

12, 1881; and 

‘‘(II) sponsored by an organization described in section 

501(c)(5) of the Internal Revenue Code of 1986 and exempt 

from tax under section 501(a) of such Code.’’. 

(b) AMENDMENT TO INTERNAL REVENUE CODE.—Subsection (f) 

of section 414 of the Internal Revenue Code of 1986 is amended 

by adding at the end the following new paragraph (6): 

‘‘(6) ELECTION WITH REGARD TO MULTIEMPLOYER STATUS.— ‘‘(A) Within 1 year after the enactment of the Pension 

Protection Act of 2006—

‘‘(i) An election under paragraph (5) may be 

revoked, pursuant to procedures prescribed by the Pension Benefit Guaranty Corporation, if, for each of the 

3 plan years prior to the date of the enactment of 

that Act, the plan would have been a multiemployer 

plan but for the election under paragraph (5), and 

‘‘(ii) a plan that meets the criteria in subparagraph 

(A) and (B) of paragraph (1) of this subsection or that 

is described in subparagraph (E) may, pursuant to 

procedures prescribed by the Pension Benefit Guaranty 

Corporation, elect to be a multiemployer plan, if—

‘‘(I) for each of the 3 plan years immediately 

before the date of enactment of the Pension Protection Act of 2006, the plan has met those criteria 

or is so described, 

‘‘(II) substantially all of the plan’s employer 

contributions for each of those plan years were 

made or required to be made by organizations 

that were exempt from tax under section 501, and 

‘‘(III) the plan was established prior to September 2, 1974. 

‘‘(B) An election under this paragraph shall be effective 

for all purposes under this Act and under the Employee 

Retirement Income Security Act of 1974, starting with the 

first plan year ending after the date of the enactment 

of the Pension Protection Act of 2006. 

‘‘(C) Once made, an election under this paragraph shall 

be irrevocable, except that a plan described in subparagraph (A)(ii) shall cease to be a multiemployer plan as 

of the plan year beginning immediately after the first plan 

year for which the majority of its employer contributions 

were made or required to be made by organizations that 

were not exempt from tax under section 501. 

‘‘(D) The fact that a plan makes an election under 

subparagraph (A)(ii) does not imply that the plan was 

not a multiemployer plan prior to the date of the election 

or would not be a multiemployer plan without regard to 

the election. 

‘‘(E) A plan is described in this subparagraph if it 

is a plan—

‘‘(i) that was established in Chicago, Illinois, on 

August 12, 1881; and 
H. R. 4—284

‘‘(ii) sponsored by an organization described in section 501(c)(5) and exempt from tax under section 

501(a).’’. 

SEC. 1107. PROVISIONS RELATING TO PLAN AMENDMENTS. 

(a) IN GENERAL.—If this section applies to any pension plan 

or contract amendment—

(1) such pension plan or contract shall be treated as being 

operated in accordance with the terms of the plan during the 

period described in subsection (b)(2)(A), and 

(2) except as provided by the Secretary of the Treasury, 

such pension plan shall not fail to meet the requirements 

of section 411(d)(6) of the Internal Revenue Code of 1986 and 

section 204(g) of the Employee Retirement Income Security 

Act of 1974 by reason of such amendment. 

(b) AMENDMENTS TO WHICH SECTION APPLIES.—

(1) IN GENERAL.—This section shall apply to any amendment to any pension plan or annuity contract which is made—

(A) pursuant to any amendment made by this Act 

or pursuant to any regulation issued by the Secretary 

of the Treasury or the Secretary of Labor under this Act, 

and 

(B) on or before the last day of the first plan year 

beginning on or after January 1, 2009. 

In the case of a governmental plan (as defined in section 

414(d) of the Internal Revenue Code of 1986), this paragraph 

shall be applied by substituting ‘‘2011’’ for ‘‘2009’’. 

(2) CONDITIONS.—This section shall not apply to any 

amendment unless—

(A) during the period—

(i) beginning on the date the legislative or regulatory amendment described in paragraph (1)(A) takes 

effect (or in the case of a plan or contract amendment 

not required by such legislative or regulatory amendment, the effective date specified by the plan), and 

(ii) ending on the date described in paragraph 

(1)(B) (or, if earlier, the date the plan or contract 

amendment is adopted), the plan or contract is operated as if such plan or contract amendment were in 

effect; and 

(B) such plan or contract amendment applies retroactively for such period. 

TITLE XII—PROVISIONS RELATING TO 

EXEMPT ORGANIZATIONS 

Subtitle A—Charitable Giving Incentives 

SEC. 1201. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 

PLANS FOR CHARITABLE PURPOSES. 

(a) IN GENERAL.—Subsection (d) of section 408 (relating to 

individual retirement accounts) is amended by adding at the end 

the following new paragraph: 

‘‘(8) DISTRIBUTIONS FOR CHARITABLE PURPOSES.—
H. R. 4—285

‘‘(A) IN GENERAL.—So much of the aggregate amount 

of qualified charitable distributions with respect to a taxpayer made during any taxable year which does not exceed 

$100,000 shall not be includible in gross income of such 

taxpayer for such taxable year. 

‘‘(B) QUALIFIED CHARITABLE DISTRIBUTION.—For purposes of this paragraph, the term ‘qualified charitable distribution’ means any distribution from an individual retirement plan (other than a plan described in subsection (k) 

or (p))—

‘‘(i) which is made directly by the trustee to an 

organization described in section 170(b)(1)(A) (other 

than any organization described in section 509(a)(3) 

or any fund or account described in section 4966(d)(2)), 

and 

‘‘(ii) which is made on or after the date that the 

individual for whose benefit the plan is maintained 

has attained age 701⁄2. 

A distribution shall be treated as a qualified charitable 

distribution only to the extent that the distribution would 

be includible in gross income without regard to subparagraph (A). 

‘‘(C) CONTRIBUTIONS MUST BE OTHERWISE DEDUCTIBLE.—For purposes of this paragraph, a distribution to 

an organization described in subparagraph (B)(i) shall be 

treated as a qualified charitable distribution only if a 

deduction for the entire distribution would be allowable 

under section 170 (determined without regard to subsection 

(b) thereof and this paragraph). 

‘‘(D) APPLICATION OF SECTION 72.—Notwithstanding 

section 72, in determining the extent to which a distribution 

is a qualified charitable distribution, the entire amount 

of the distribution shall be treated as includible in gross 

income without regard to subparagraph (A) to the extent 

that such amount does not exceed the aggregate amount 

which would have been so includible if all amounts distributed from all individual retirement plans were treated 

as 1 contract under paragraph (2)(A) for purposes of determining the inclusion of such distribution under section 

72. Proper adjustments shall be made in applying section 

72 to other distributions in such taxable year and subsequent taxable years. 

‘‘(E) DENIAL OF DEDUCTION.—Qualified charitable distributions which are not includible in gross income pursuant to subparagraph (A) shall not be taken into account 

in determining the deduction under section 170. 

‘‘(F) TERMINATION.—This paragraph shall not apply 

to distributions made in taxable years beginning after 

December 31, 2007.’’. 

(b) MODIFICATIONS RELATING TO INFORMATION RETURNS BY

CERTAIN TRUSTS.—

(1) RETURNS.—Section 6034 (relating to returns by trusts 

described in section 4947(a)(2) or claiming charitable deductions 

under section 642(c)) is amended to read as follows: 
H. R. 4—286

‘‘SEC. 6034. RETURNS BY CERTAIN TRUSTS. 

‘‘(a) SPLIT-INTEREST TRUSTS.—Every trust described in section 

4947(a)(2) shall furnish such information with respect to the taxable 

year as the Secretary may by forms or regulations require. 

‘‘(b) TRUSTS CLAIMING CERTAIN CHARITABLE DEDUCTIONS.—

‘‘(1) IN GENERAL.—Every trust not required to file a return 

under subsection (a) but claiming a deduction under section 

642(c) for the taxable year shall furnish such information with 

respect to such taxable year as the Secretary may by forms 

or regulations prescribe, including—

‘‘(A) the amount of the deduction taken under section 

642(c) within such year, 

‘‘(B) the amount paid out within such year which represents amounts for which deductions under section 642(c) 

have been taken in prior years, 

‘‘(C) the amount for which such deductions have been 

taken in prior years but which has not been paid out 

at the beginning of such year, 

‘‘(D) the amount paid out of principal in the current 

and prior years for the purposes described in section 642(c), 

‘‘(E) the total income of the trust within such year 

and the expenses attributable thereto, and 

‘‘(F) a balance sheet showing the assets, liabilities, 

and net worth of the trust as of the beginning of such 

year. 

‘‘(2) EXCEPTIONS.—Paragraph (1) shall not apply to a trust 

for any taxable year if—

‘‘(A) all the net income for such year, determined under 

the applicable principles of the law of trusts, is required 

to be distributed currently to the beneficiaries, or 

‘‘(B) the trust is described in section 4947(a)(1).’’. 

(2) INCREASE IN PENALTY RELATING TO FILING OF INFORMATION RETURN BY SPLIT-INTEREST TRUSTS.—Paragraph (2) of section 6652(c) (relating to returns by exempt organizations and 

by certain trusts) is amended by adding at the end the following 

new subparagraph: 

‘‘(C) SPLIT-INTEREST TRUSTS.—In the case of a trust 

which is required to file a return under section 6034(a), 

subparagraphs (A) and (B) of this paragraph shall not 

apply and paragraph (1) shall apply in the same manner 

as if such return were required under section 6033, except 

that—

‘‘(i) the 5 percent limitation in the second sentence 

of paragraph (1)(A) shall not apply, 

‘‘(ii) in the case of any trust with gross income 

in excess of $250,000, the first sentence of paragraph 

(1)(A) shall be applied by substituting ‘$100’ for ‘$20’, 

and the second sentence thereof shall be applied by 

substituting ‘$50,000’ for ‘$10,000’, and 

‘‘(iii) the third sentence of paragraph (1)(A) shall 

be disregarded. 

In addition to any penalty imposed on the trust pursuant 

to this subparagraph, if the person required to file such 

return knowingly fails to file the return, such penalty shall 

also be imposed on such person who shall be personally 

liable for such penalty.’’. 
H. R. 4—287

(3) CONFIDENTIALITY OF NONCHARITABLE BENEFICIARIES.—

Subsection (b) of section 6104 (relating to inspection of annual 

information returns) is amended by adding at the end the 

following new sentence: ‘‘In the case of a trust which is required 

to file a return under section 6034(a), this subsection shall 

not apply to information regarding beneficiaries which are not 

organizations described in section 170(c).’’. 

(4) CLERICAL AMENDMENT.—The item in the table of sections for subpart A of part III of subchapter A of chapter 

61 relating to section 6034 is amended to read as follows:

‘‘Sec. 6034. Returns by certain trusts.’’.

(c) EFFECTIVE DATES.—

(1) SUBSECTION (a).—The amendment made by subsection 

(a) shall apply to distributions made in taxable years beginning 

after December 31, 2005. 

(2) SUBSECTION (b).—The amendments made by subsection 

(b) shall apply to returns for taxable years beginning after 

December 31, 2006. 

SEC. 1202. EXTENSION OF MODIFICATION OF CHARITABLE DEDUCTION 

FOR CONTRIBUTIONS OF FOOD INVENTORY. 

(a) IN GENERAL.—Section 170(e)(3)(C)(iv) (relating to termination) is amended by striking ‘‘2005’’ and inserting ‘‘2007’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to contributions made after December 31, 2005. 

SEC. 1203. BASIS ADJUSTMENT TO STOCK OF S CORPORATION 

CONTRIBUTING PROPERTY. 

(a) IN GENERAL.—Paragraph (2) of section 1367(a) (relating 

to adjustments to basis of stock of shareholders, etc.) is amended 

by adding at the end the following new flush sentence: 

‘‘The decrease under subparagraph (B) by reason of a charitable 

contribution (as defined in section 170(c)) of property shall 

be the amount equal to the shareholder’s pro rata share of 

the adjusted basis of such property. The preceding sentence 

shall not apply to contributions made in taxable years beginning 

after December 31, 2007.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to contributions made in taxable years beginning after 

December 31, 2005. 

SEC. 1204. EXTENSION OF MODIFICATION OF CHARITABLE DEDUCTION 

FOR CONTRIBUTIONS OF BOOK INVENTORY. 

(a) IN GENERAL.—Section 170(e)(3)(D)(iv) (relating to termination) is amended by striking ‘‘2005’’ and inserting ‘‘2007’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to contributions made after December 31, 2005. 

SEC. 1205. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS 

TO CONTROLLING EXEMPT ORGANIZATIONS. 

(a) IN GENERAL.—Paragraph (13) of section 512(b) (relating 

to special rules for certain amounts received from controlled entities) 

is amended by redesignating subparagraph (E) as subparagraph 

(F) and by inserting after subparagraph (D) the following new 

subparagraph: 

‘‘(E) PARAGRAPH TO APPLY ONLY TO CERTAIN EXCESS

PAYMENTS.—
H. R. 4—288

‘‘(i) IN GENERAL.—Subparagraph (A) shall apply 

only to the portion of a qualifying specified payment 

received or accrued by the controlling organization that 

exceeds the amount which would have been paid or 

accrued if such payment met the requirements prescribed under section 482. 

‘‘(ii) ADDITION TO TAX FOR VALUATION

MISSTATEMENTS.—The tax imposed by this chapter on 

the controlling organization shall be increased by an 

amount equal to 20 percent of the larger of—

‘‘(I) such excess determined without regard to 

any amendment or supplement to a return of tax, 

or 

‘‘(II) such excess determined with regard to 

all such amendments and supplements. 

‘‘(iii) QUALIFYING SPECIFIED PAYMENT.—The term 

‘qualifying specified payment’ means a specified payment which is made pursuant to—

‘‘(I) a binding written contract in effect on 

the date of the enactment of this subparagraph, 

or 

‘‘(II) a contract which is a renewal, under 

substantially similar terms, of a contract described 

in subclause (I). 

‘‘(iv) TERMINATION.—This subparagraph shall not 

apply to payments received or accrued after December 

31, 2007.’’. 

(b) REPORTING.— (1) IN GENERAL.—Section 6033 (relating to returns by 

exempt organizations) is amended by redesignating subsection 

(h) as subsection (i) and by inserting after subsection (g) the 

following new subsection: 

‘‘(h) CONTROLLING ORGANIZATIONS.—Each controlling organization (within the meaning of section 512(b)(13)) which is subject 

to the requirements of subsection (a) shall include on the return 

required under subsection (a)—

‘‘(1) any interest, annuities, royalties, or rents received 

from each controlled entity (within the meaning of section 

512(b)(13)), 

‘‘(2) any loans made to each such controlled entity, and 

‘‘(3) any transfers of funds between such controlling 

organization and each such controlled entity.’’. 

(2) REPORT TO CONGRESS.—Not later than January 1, 2009, 

the Secretary of the Treasury shall submit to the Committee 

on Finance of the Senate and the Committee on Ways and 

Means of the House of Representatives a report on the effectiveness of the Internal Revenue Service in administering the 

amendments made by subsection (a) and on the extent to which 

payments by controlled entities (within the meaning of section 

512(b)(13) of the Internal Revenue Code of 1986) to controlling 

organizations (within the meaning of section 512(b)(13) of such 

Code) meet the requirements under section 482 of such Code. 

Such report shall include the results of any audit of any controlling organization or controlled entity and recommendations 

relating to the tax treatment of payments from controlled entities to controlling organizations. 

(c) EFFECTIVE DATE.—
H. R. 4—289

(1) SUBSECTION (a).—The amendments made by subsection 

(a) shall apply to payments received or accrued after December 

31, 2005. 

(2) SUBSECTION (b).—The amendments made by subsection 

(b) shall apply to returns the due date (determined without 

regard to extensions) of which is after the date of the enactment 

of this Act. 

SEC. 1206. ENCOURAGEMENT OF CONTRIBUTIONS OF CAPITAL GAIN 

REAL PROPERTY MADE FOR CONSERVATION PURPOSES. 

(a) IN GENERAL.—

(1) INDIVIDUALS.—Paragraph (1) of section 170(b) (relating 

to percentage limitations) is amended by redesignating subparagraphs (E) and (F) as subparagraphs (F) and (G), respectively, 

and by inserting after subparagraph (D) the following new 

subparagraph: 

‘‘(E) CONTRIBUTIONS OF QUALIFIED CONSERVATION CONTRIBUTIONS.—

‘‘(i) IN GENERAL.—Any qualified conservation contribution (as defined in subsection (h)(1)) shall be 

allowed to the extent the aggregate of such contributions does not exceed the excess of 50 percent of the 

taxpayer’s contribution base over the amount of all 

other charitable contributions allowable under this 

paragraph. 

‘‘(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the limitation 

of clause (i), such excess shall be treated (in a manner 

consistent with the rules of subsection (d)(1)) as a 

charitable contribution to which clause (i) applies in 

each of the 15 succeeding years in order of time. 

‘‘(iii) COORDINATION WITH OTHER SUBPARAGRAPHS.—For purposes of applying this subsection and 

subsection (d)(1), contributions described in clause (i) 

shall not be treated as described in subparagraph (A), 

(B), (C), or (D) and such subparagraphs shall apply 

without regard to such contributions. 

‘‘(iv) SPECIAL RULE FOR CONTRIBUTION OF PROPERTY

USED IN AGRICULTURE OR LIVESTOCK PRODUCTION.—

‘‘(I) IN GENERAL.—If the individual is a qualified farmer or rancher for the taxable year for 

which the contribution is made, clause (i) shall 

be applied by substituting ‘100 percent’ for ‘50 

percent’. 

‘‘(II) EXCEPTION.—Subclause (I) shall not apply 

to any contribution of property made after the 

date of the enactment of this subparagraph which 

is used in agriculture or livestock production (or 

available for such production) unless such contribution is subject to a restriction that such property remain available for such production. This 

subparagraph shall be applied separately with 

respect to property to which subclause (I) does 

not apply by reason of the preceding sentence prior 

to its application to property to which subclause 

(I) does apply. 
H. R. 4—290

‘‘(v) DEFINITION.—For purposes of clause (iv), the 

term ‘qualified farmer or rancher’ means a taxpayer 

whose gross income from the trade or business of 

farming (within the meaning of section 2032A(e)(5)) 

is greater than 50 percent of the taxpayer’s gross 

income for the taxable year. 

‘‘(vi) TERMINATION.—This subparagraph shall not 

apply to any contribution made in taxable years beginning after December 31, 2007.’’. 

(2) CORPORATIONS.—Paragraph (2) of section 170(b) is 

amended to read as follows: 

‘‘(2) CORPORATIONS.—In the case of a corporation—

‘‘(A) IN GENERAL.—The total deductions under subsection (a) for any taxable year (other than for contributions 

to which subparagraph (B) applies) shall not exceed 10 

percent of the taxpayer’s taxable income. 

‘‘(B) QUALIFIED CONSERVATION CONTRIBUTIONS BY CER- TAIN CORPORATE FARMERS AND RANCHERS.— ‘‘(i) IN GENERAL.—Any qualified conservation contribution (as defined in subsection (h)(1))—

‘‘(I) which is made by a corporation which, 

for the taxable year during which the contribution 

is made, is a qualified farmer or rancher (as 

defined in paragraph (1)(E)(v)) and the stock of 

which is not readily tradable on an established 

securities market at any time during such year, 

and 

‘‘(II) which, in the case of contributions made 

after the date of the enactment of this subparagraph, is a contribution of property which is used 

in agriculture or livestock production (or available 

for such production) and which is subject to a 

restriction that such property remain available for 

such production, 

shall be allowed to the extent the aggregate of such 

contributions does not exceed the excess of the taxpayer’s taxable income over the amount of charitable 

contributions allowable under subparagraph (A). 

‘‘(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the limitation 

of clause (i), such excess shall be treated (in a manner 

consistent with the rules of subsection (d)(2)) as a 

charitable contribution to which clause (i) applies in 

each of the 15 succeeding years in order of time. 

‘‘(iii) TERMINATION.—This subparagraph shall not 

apply to any contribution made in taxable years beginning after December 31, 2007. 

‘‘(C) TAXABLE INCOME.—For purposes of this paragraph, 

taxable income shall be computed without regard to—

‘‘(i) this section, 

‘‘(ii) part VIII (except section 248), 

‘‘(iii) any net operating loss carryback to the taxable year under section 172, 

‘‘(iv) section 199, and 

‘‘(v) any capital loss carryback to the taxable year 

under section 1212(a)(1).’’. 

(b) CONFORMING AMENDMENTS.—
H. R. 4—291

(1) Paragraph (2) of section 170(d) is amended by striking 

‘‘subsection (b)(2)’’ each place it appears and inserting ‘‘subsection (b)(2)(A)’’. 

(2) Section 545(b)(2) is amended by striking ‘‘and (D)’’ and 

inserting ‘‘(D), and (E)’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to contributions made in taxable years beginning after 

December 31, 2005. 

SEC. 1207. EXCISE TAXES EXEMPTION FOR BLOOD COLLECTOR 

ORGANIZATIONS. 

(a) EXEMPTION FROM IMPOSITION OF SPECIAL FUELS TAX.—

Section 4041(g) (relating to other exemptions) is amended by 

striking ‘‘and’’ at the end of paragraph (3), by striking the period 

in paragraph (4) and inserting ‘‘; and’’, and by inserting after 

paragraph (4) the following new paragraph: 

‘‘(5) with respect to the sale of any liquid to a qualified 

blood collector organization (as defined in section 7701(a)(49)) 

for such organization’s exclusive use in the collection, storage, 

or transportation of blood.’’. 

(b) EXEMPTION FROM MANUFACTURERS EXCISE TAX.— (1) IN GENERAL.—Section 4221(a) (relating to certain taxfree sales) is amended by striking ‘‘or’’ at the end of paragraph 

(4), by adding ‘‘or’’ at the end of paragraph (5), and by inserting 

after paragraph (5) the following new paragraph: 

‘‘(6) to a qualified blood collector organization (as defined 

in section 7701(a)(49)) for such organization’s exclusive use 

in the collection, storage, or transportation of blood,’’. 

(2) NO EXEMPTION WITH RESPECT TO VACCINES AND REC- REATIONAL EQUIPMENT.—Section 4221(a) is amended by adding 

at the end the following new sentence: ‘‘In the case of taxes 

imposed by subchapter C or D, paragraph (6) shall not apply.’’. 

(3) CONFORMING AMENDMENTS.— (A) The second sentence of section 4221(a) is amended 

by striking ‘‘Paragraphs (4) and (5)’’ and inserting ‘‘Paragraphs (4), (5), and (6)’’. 

(B) Section 6421(c) is amended by striking ‘‘or (5)’’ 

and inserting ‘‘(5), or (6)’’. 

(c) EXEMPTION FROM COMMUNICATION EXCISE TAX.— (1) IN GENERAL.—Section 4253 (relating to exemptions) is 

amended by redesignating subsection (k) as subsection (l) and 

inserting after subsection (j) the following new subsection: 

‘‘(k) EXEMPTION FOR QUALIFIED BLOOD COLLECTOR ORGANIZA- TIONS.—Under regulations provided by the Secretary, no tax shall 

be imposed under section 4251 on any amount paid by a qualified 

blood collector organization (as defined in section 7701(a)(49)) for 

services or facilities furnished to such organization.’’. 

(2) CONFORMING AMENDMENT.—Section 4253(l), as redesignated by paragraph (1), is amended by striking ‘‘or (j)’’ and 

inserting ‘‘(j), or (k)’’. 

(d) EXEMPTION FROM TAX ON HEAVY VEHICLES.—Section 4483 

is amended by redesignating subsection (h) as subsection (i) and 

by inserting after subsection (g) the following new subsection: 

‘‘(h) EXEMPTION FOR VEHICLES USED IN BLOOD COLLECTION.— ‘‘(1) IN GENERAL.—No tax shall be imposed by section 4481 

on the use of any qualified blood collector vehicle by a qualified 

blood collector organization. 
H. R. 4—292

‘‘(2) QUALIFIED BLOOD COLLECTOR VEHICLE.—For purposes 

of this subsection, the term ‘qualified blood collector vehicle’ 

means a vehicle at least 80 percent of the use of which during 

the prior taxable period was by a qualified blood collector 

organization in the collection, storage, or transportation of 

blood. 

‘‘(3) SPECIAL RULE FOR VEHICLES FIRST PLACED IN SERVICE

IN A TAXABLE PERIOD.—In the case of a vehicle first placed 

in service in a taxable period, a vehicle shall be treated as 

a qualified blood collector vehicle for such taxable period if 

such qualified blood collector organization certifies to the Secretary that the organization reasonably expects at least 80 

percent of the use of such vehicle by the organization during 

such taxable period will be in the collection, storage, or 

transportation of blood. 

‘‘(4) QUALIFIED BLOOD COLLECTOR ORGANIZATION.—The 

term ‘qualified blood collector organization’ has the meaning 

given such term by section 7701(a)(49).’’. 

(e) CREDIT OR REFUND FOR CERTAIN TAXES ON SALES AND

SERVICES.—

(1) DEEMED OVERPAYMENT.— (A) IN GENERAL.—Section 6416(b)(2) is amended by 

redesignating subparagraphs (E) and (F) as subparagraphs 

(F) and (G), respectively, and by inserting after subparagraph (D) the following new subparagraph: 

‘‘(E) sold to a qualified blood collector organization 

(as defined in section 7701(a)(49)) for such organization’s 

exclusive use in the collection, storage, or transportation 

of blood;’’. 

(B) NO CREDIT OR REFUND FOR VACCINES OR REC- REATIONAL EQUIPMENT.—Section 6416(b)(2) is amended by 

adding at the end the following new sentence: ‘‘In the 

case of taxes imposed by subchapter C or D of chapter 

32, subparagraph (E) shall not apply.’’. 

(C) CONFORMING AMENDMENTS.—Section 6416(b)(2) is 

amended—

(i) by striking ‘‘Subparagraphs (C) and (D)’’ in the 

second sentence and inserting ‘‘Subparagraphs (C), (D), 

and (E)’’. 

(ii) by striking ‘‘(B), (C), and (D)’’ and inserting 

‘‘(B), (C), (D), and (E)’’. 

(2) SALES OF TIRES.—Section 6416(b)(4)(B) is amended by 

striking ‘‘or’’ at the end of clause (i), by striking the period 

at the end of clause (ii) and inserting ‘‘, or’’, and by adding 

after clause (ii) the following: 

‘‘(iii) sold to a qualified blood collector organization 

for its exclusive use in connection with a vehicle the 

organization certifies will be primarily used in the 

collection, storage, or transportation of blood.’’. 

(f) DEFINITION OF QUALIFIED BLOOD COLLECTOR ORGANIZATION.—Section 7701(a) is amended by inserting at the end the 

following new paragraph: 

‘‘(49) QUALIFIED BLOOD COLLECTOR ORGANIZATION.—The 

term ‘qualified blood collector organization’ means an organization which is—

‘‘(A) described in section 501(c)(3) and exempt from 

tax under section 501(a), 
H. R. 4—293

‘‘(B) primarily engaged in the activity of the collection 

of human blood, 

‘‘(C) registered with the Secretary for purposes of excise 

tax exemptions, and 

‘‘(D) registered by the Food and Drug Administration 

to collect blood.’’. 

(g) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section 

shall take effect on January 1, 2007. 

(2) SUBSECTION (d).—The amendment made by subsection 

(d) shall apply to taxable periods beginning on or after July 

1, 2007. 

Subtitle B—Reforming Exempt 

Organizations 

PART 1—GENERAL REFORMS 

SEC. 1211. REPORTING ON CERTAIN ACQUISITIONS OF INTERESTS IN 

INSURANCE CONTRACTS IN WHICH CERTAIN EXEMPT 

ORGANIZATIONS HOLD AN INTEREST. 

(a) REPORTING REQUIREMENTS.— (1) IN GENERAL.—Subpart B of part III of subchapter A 

of chapter 61 (relating to information concerning transactions 

with other persons), as amended by this Act, is amended by 

adding at the end the following new section: 

‘‘SEC. 6050V. RETURNS RELATING TO APPLICABLE INSURANCE CONTRACTS IN WHICH CERTAIN EXEMPT ORGANIZATIONS 

HOLD INTERESTS. 

‘‘(a) IN GENERAL.—Each applicable exempt organization which 

makes a reportable acquisition shall make the return described 

in subsection (c). 

‘‘(b) TIME FOR MAKING RETURN.—Any applicable exempt 

organization required to make a return under subsection (a) shall 

file such return at such time as may be established by the Secretary. 

‘‘(c) FORM AND MANNER OF RETURNS.—A return is described 

in this subsection if such return—

‘‘(1) is in such form as the Secretary prescribes, 

‘‘(2) contains the name, address, and taxpayer identification 

number of the applicable exempt organization and the issuer 

of the applicable insurance contract, and 

‘‘(3) contains such other information as the Secretary may 

prescribe. 

‘‘(d) DEFINITIONS.—For purposes of this section—

‘‘(1) REPORTABLE ACQUISITION.—The term ‘reportable 

acquisition’ means the acquisition by an applicable exempt 

organization of a direct or indirect interest in any applicable 

insurance contract in any case in which such acquisition is 

a part of a structured transaction involving a pool of such 

contracts. 

‘‘(2) APPLICABLE INSURANCE CONTRACT.—

‘‘(A) IN GENERAL.—The term ‘applicable insurance contract’ means any life insurance, annuity, or endowment 

contract with respect to which both an applicable exempt 

organization and a person other than an applicable exempt 
H. R. 4—294

organization have directly or indirectly held an interest 

in the contract (whether or not at the same time). 

‘‘(B) EXCEPTIONS.—Such term shall not include a life 

insurance, annuity, or endowment contract if—

‘‘(i) all persons directly or indirectly holding any 

interest in the contract (other than applicable exempt 

organizations) have an insurable interest in the 

insured under the contract independent of any interest 

of an applicable exempt organization in the contract, 

‘‘(ii) the sole interest in the contract of an 

applicable exempt organization or each person other 

than an applicable exempt organization is as a named 

beneficiary, or 

‘‘(iii) the sole interest in the contract of each person 

other than an applicable exempt organization is—

‘‘(I) as a beneficiary of a trust holding an 

interest in the contract, but only if the person’s 

designation as such beneficiary was made without 

consideration and solely on a purely gratuitous 

basis, or 

‘‘(II) as a trustee who holds an interest in 

the contract in a fiduciary capacity solely for the 

benefit of applicable exempt organizations or persons otherwise described in subclause (I) or clause 

(i) or (ii). 

‘‘(3) APPLICABLE EXEMPT ORGANIZATION.—The term 

‘applicable exempt organization’ means—

‘‘(A) an organization described in section 170(c), 

‘‘(B) an organization described in section 

168(h)(2)(A)(iv), or 

‘‘(C) an organization not described in paragraph (1) 

or (2) which is described in section 2055(a) or section 

2522(a). 

‘‘(e) TERMINATION.—This section shall not apply to reportable 

acquisitions occurring after the date which is 2 years after the 

date of the enactment of this section.’’. 

(2) CONFORMING AMENDMENT.—The table of sections for 

subpart B of part III of subchapter A of chapter 61 is amended 

by adding at the end the following new item:

‘‘Sec. 6050V. Returns relating to applicable insurance contracts in which certain exempt organizations hold interests.’’.

(b) PENALTIES.— (1) IN GENERAL.—Subparagraph (B) of section 6724(d)(1), 

as amended by this Act, is amended by redesignating clauses 

(xiv) through (xix) as clauses (xv) through (xx) and by inserting 

after clause (xiii) the following new clause: 

‘‘(xiv) section 6050V (relating to returns relating 

to applicable insurance contracts in which certain 

exempt organizations hold interests),’’. 

(2) INTENTIONAL DISREGARD.—Section 6721(e)(2) is 

amended by striking ‘‘or’’ at the end of subparagraph (B), by 

striking ‘‘and’’ at the end of subparagraph (C) and inserting 

‘‘or’’, and by adding at the end the following new subparagraph: 

‘‘(D) in the case of a return required to be filed under 

section 6050V, 10 percent of the value of the benefit of 

any contract with respect to which information is required 

to be included on the return, and’’. 
H. R. 4—295

(c) STUDY.—

(1) IN GENERAL.—The Secretary of the Treasury shall 

undertake a study on—

(A) the use by tax exempt organizations of applicable 

insurance contracts (as defined under section 6050V(d)(2) 

of the Internal Revenue Code of 1986, as added by subsection (a)) for the purpose of sharing the benefits of the 

organization’s insurable interest in individuals insured 

under such contracts with investors, and 

(B) whether such activities are consistent with the 

tax exempt status of such organizations. 

(2) REPORT.—Not later than 30 months after the date of 

the enactment of this Act, the Secretary of the Treasury shall 

report on the study conducted under paragraph (1) to the 

Committee on Finance of the Senate and the Committee on 

Ways and Means of the House of Representatives. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to acquisitions of contracts after the date of enactment 

of this Act. 

SEC. 1212. INCREASE IN PENALTY EXCISE TAXES RELATING TO PUBLIC 

CHARITIES, SOCIAL WELFARE ORGANIZATIONS, AND PRIVATE FOUNDATIONS. 

(a) TAXES ON SELF-DEALING AND EXCESS BENEFIT TRANSACTIONS.—

(1) IN GENERAL.—Section 4941(a) (relating to initial taxes) 

is amended—

(A) in paragraph (1), by striking ‘‘5 percent’’ and 

inserting ‘‘10 percent’’, and 

(B) in paragraph (2), by striking ‘‘21⁄2 percent’’ and 

inserting ‘‘5 percent’’. 

(2) INCREASED LIMITATION FOR MANAGERS ON SELFDEALING.—Section 4941(c)(2) is amended by striking ‘‘$10,000’’ 

each place it appears in the text and heading thereof and 

inserting ‘‘$20,000’’. 

(3) INCREASED LIMITATION FOR MANAGERS ON EXCESS BENEFIT TRANSACTIONS.—Section 4958(d)(2) is amended by striking 

‘‘$10,000’’ and inserting ‘‘$20,000’’. 

(b) TAXES ON FAILURE TO DISTRIBUTE INCOME.—Section 4942(a) 

(relating to initial tax) is amended by striking ‘‘15 percent’’ and 

inserting ‘‘30 percent’’. 

(c) TAXES ON EXCESS BUSINESS HOLDINGS.—Section 4943(a)(1) 

(relating to imposition) is amended by striking ‘‘5 percent’’ and 

inserting ‘‘10 percent’’. 

(d) TAXES ON INVESTMENTS WHICH JEOPARDIZE CHARITABLE

PURPOSE.—

(1) IN GENERAL.—Section 4944(a) (relating to initial taxes) 

is amended by striking ‘‘5 percent’’ both places it appears and 

inserting ‘‘10 percent’’. 

(2) INCREASED LIMITATION FOR MANAGERS.—Section 

4944(d)(2) is amended—

(A) by striking ‘‘$5,000,’’ and inserting ‘‘$10,000,’’, and 

(B) by striking ‘‘$10,000.’’ and inserting ‘‘$20,000.’’. 

(e) TAXES ON TAXABLE EXPENDITURES.—

(1) IN GENERAL.—Section 4945(a) (relating to initial taxes) 

is amended—
H. R. 4—296

(A) in paragraph (1), by striking ‘‘10 percent’’ and 

inserting ‘‘20 percent’’, and 

(B) in paragraph (2), by striking ‘‘21⁄2 percent’’ and 

inserting ‘‘5 percent’’. 

(2) INCREASED LIMITATION FOR MANAGERS.—Section 

4945(c)(2) is amended—

(A) by striking ‘‘$5,000,’’ and inserting ‘‘$10,000,’’, and 

(B) by striking ‘‘$10,000.’’ and inserting ‘‘$20,000.’’. 

(f) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after the date of the enactment of this Act. 

SEC. 1213. REFORM OF CHARITABLE CONTRIBUTIONS OF CERTAIN 

EASEMENTS IN REGISTERED HISTORIC DISTRICTS AND 

REDUCED DEDUCTION FOR PORTION OF QUALIFIED 

CONSERVATION CONTRIBUTION ATTRIBUTABLE TO 

REHABILITATION CREDIT. 

(a) SPECIAL RULES WITH RESPECT TO BUILDINGS IN REGISTERED

HISTORIC DISTRICTS.—

(1) IN GENERAL.—Paragraph (4) of section 170(h) (relating 

to definition of conservation purpose) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting 

after subparagraph (A) the following new subparagraph: 

‘‘(B) SPECIAL RULES WITH RESPECT TO BUILDINGS IN

REGISTERED HISTORIC DISTRICTS.—In the case of any contribution of a qualified real property interest which is a 

restriction with respect to the exterior of a building 

described in subparagraph (C)(ii), such contribution shall 

not be considered to be exclusively for conservation purposes unless—

‘‘(i) such interest—

‘‘(I) includes a restriction which preserves the 

entire exterior of the building (including the front, 

sides, rear, and height of the building), and 

‘‘(II) prohibits any change in the exterior of 

the building which is inconsistent with the historical character of such exterior, 

‘‘(ii) the donor and donee enter into a written 

agreement certifying, under penalty of perjury, that 

the donee—

‘‘(I) is a qualified organization (as defined in 

paragraph (3)) with a purpose of environmental 

protection, land conservation, open space preservation, or historic preservation, and 

‘‘(II) has the resources to manage and enforce 

the restriction and a commitment to do so, and 

‘‘(iii) in the case of any contribution made in a 

taxable year beginning after the date of the enactment 

of this subparagraph, the taxpayer includes with the 

taxpayer’s return for the taxable year of the contribution—

‘‘(I) a qualified appraisal (within the meaning 

of subsection (f)(11)(E)) of the qualified property 

interest, 

‘‘(II) photographs of the entire exterior of the 

building, and 
H. R. 4—297

‘‘(III) a description of all restrictions on the 

development of the building.’’. 

(b) DISALLOWANCE OF DEDUCTION FOR STRUCTURES AND LAND

IN REGISTERED HISTORIC DISTRICTS.—Subparagraph (C) of section 

170(h)(4), as redesignated by subsection (a), is amended—

(1) by striking ‘‘any building, structure, or land area which’’, 

(2) by inserting ‘‘any building, structure, or land area 

which’’ before ‘‘is listed’’ in clause (i), and 

(3) by inserting ‘‘any building which’’ before ‘‘is located’’ 

in clause (ii). 

(c) FILING FEE FOR CERTAIN CONTRIBUTIONS.—Subsection (f) 

of section 170 (relating to disallowance of deduction in certain 

cases and special rules) is amended by adding at the end the 

following new paragraph: 

‘‘(13) CONTRIBUTIONS OF CERTAIN INTERESTS IN BUILDINGS

LOCATED IN REGISTERED HISTORIC DISTRICTS.—

‘‘(A) IN GENERAL.—No deduction shall be allowed with 

respect to any contribution described in subparagraph (B) 

unless the taxpayer includes with the return for the taxable 

year of the contribution a $500 filing fee. 

‘‘(B) CONTRIBUTION DESCRIBED.—A contribution is 

described in this subparagraph if such contribution is a 

qualified conservation contribution (as defined in subsection (h)) which is a restriction with respect to the exterior of a building described in subsection (h)(4)(C)(ii) and 

for which a deduction is claimed in excess of $10,000. 

‘‘(C) DEDICATION OF FEE.—Any fee collected under this 

paragraph shall be used for the enforcement of the provisions of subsection (h).’’. 

(d) REDUCED DEDUCTION FOR PORTION OF QUALIFIED CONSERVATION CONTRIBUTION ATTRIBUTABLE TO THE REHABILITATION

CREDIT.—Subsection (f) of section 170, as amended by subsection 

(c), is amended by adding at the end the following new paragraph: 

‘‘(14) REDUCTION FOR AMOUNTS ATTRIBUTABLE TO

REHABILITATION CREDIT.—In the case of any qualified conservation contribution (as defined in subsection (h)), the amount 

of the deduction allowed under this section shall be reduced 

by an amount which bears the same ratio to the fair market 

value of the contribution as—

‘‘(A) the sum of the credits allowed to the taxpayer 

under section 47 for the 5 preceding taxable years with 

respect to any building which is a part of such contribution, 

bears to 

‘‘(B) the fair market value of the building on the date 

of the contribution.’’. 

(e) EFFECTIVE DATES.—

(1) SPECIAL RULES FOR BUILDINGS IN REGISTERED HISTORIC

DISTRICTS.—The amendments made by subsection (a) shall 

apply to contributions made after July 25, 2006. 

(2) DISALLOWANCE OF DEDUCTION FOR STRUCTURES AND

LAND; REDUCTION FOR REHABILITATION CREDIT.—The amendments made by subsections (b) and (d) shall apply to contributions made after the date of the enactment of this Act. 

(3) FILING FEE.—The amendment made by subsection (c) 

shall apply to contributions made 180 days after the date 

of the enactment of this Act. 
H. R. 4—298

SEC. 1214. CHARITABLE CONTRIBUTIONS OF TAXIDERMY PROPERTY. 

(a) DENIAL OF LONG-TERM CAPITAL GAIN.—Subparagraph (B) 

of section 170(e)(1) is amended by striking ‘‘or’’ at the end of 

clause (ii), by inserting ‘‘or’’ at the end of clause (iii), and by 

inserting after clause (iii) the following new clause: 

‘‘(iv) of any taxidermy property which is contributed by the person who prepared, stuffed, or mounted 

the property or by any person who paid or incurred 

the cost of such preparation, stuffing, or mounting,’’. 

(b) TREATMENT OF BASIS.—Subsection (f) of section 170, as 

amended by this Act, is amended by adding at the end the following 

new paragraph: 

‘‘(15) SPECIAL RULE FOR TAXIDERMY PROPERTY.—

‘‘(A) BASIS.—For purposes of this section and notwithstanding section 1012, in the case of a charitable contribution of taxidermy property which is made by the person 

who prepared, stuffed, or mounted the property or by any 

person who paid or incurred the cost of such preparation, 

stuffing, or mounting, only the cost of the preparing, 

stuffing, or mounting shall be included in the basis of 

such property. 

‘‘(B) TAXIDERMY PROPERTY.—For purposes of this section, the term ‘taxidermy property’ means any work of 

art which—

‘‘(i) is the reproduction or preservation of an 

animal, in whole or in part, 

‘‘(ii) is prepared, stuffed, or mounted for purposes 

of recreating one or more characteristics of such 

animal, and 

‘‘(iii) contains a part of the body of the dead 

animal.’’. 

(c) EFFECTIVE DATE.—The amendment made by this section 

shall apply to contributions made after July 25, 2006. 

SEC. 1215. RECAPTURE OF TAX BENEFIT FOR CHARITABLE CONTRIBUTIONS OF EXEMPT USE PROPERTY NOT USED FOR AN 

EXEMPT USE. 

(a) RECAPTURE OF DEDUCTION ON CERTAIN SALES OF EXEMPT

USE PROPERTY.—

(1) IN GENERAL.—Clause (i) of section 170(e)(1)(B) (related 

to certain contributions of ordinary income and capital gain 

property) is amended to read as follows: 

‘‘(i) of tangible personal property—

‘‘(I) if the use by the donee is unrelated to 

the purpose or function constituting the basis for 

its exemption under section 501 (or, in the case 

of a governmental unit, to any purpose or function 

described in subsection (c)), or 

‘‘(II) which is applicable property (as defined 

in paragraph (7)(C)) which is sold, exchanged, or 

otherwise disposed of by the donee before the last 

day of the taxable year in which the contribution 

was made and with respect to which the donee 

has not made a certification in accordance with 

paragraph (7)(D),’’. 
H. R. 4—299

(2) DISPOSITIONS AFTER CLOSE OF TAXABLE YEAR.—Section 

170(e) is amended by adding at the end the following new 

paragraph: 

‘‘(7) RECAPTURE OF DEDUCTION ON CERTAIN DISPOSITIONS

OF EXEMPT USE PROPERTY.—

‘‘(A) IN GENERAL.—In the case of an applicable disposition of applicable property, there shall be included in the 

income of the donor of such property for the taxable year 

of such donor in which the applicable disposition occurs 

an amount equal to the excess (if any) of—

‘‘(i) the amount of the deduction allowed to the 

donor under this section with respect to such property, 

over 

‘‘(ii) the donor’s basis in such property at the time 

such property was contributed. 

‘‘(B) APPLICABLE DISPOSITION.—For purposes of this 

paragraph, the term ‘applicable disposition’ means any sale, 

exchange, or other disposition by the donee of applicable 

property—

‘‘(i) after the last day of the taxable year of the 

donor in which such property was contributed, and 

‘‘(ii) before the last day of the 3-year period beginning on the date of the contribution of such property, 

unless the donee makes a certification in accordance with 

subparagraph (D). 

‘‘(C) APPLICABLE PROPERTY.—For purposes of this paragraph, the term ‘applicable property’ means charitable 

deduction property (as defined in section 6050L(a)(2)(A))—

‘‘(i) which is tangible personal property the use 

of which is identified by the donee as related to the 

purpose or function constituting the basis of the donee’s 

exemption under section 501, and 

‘‘(ii) for which a deduction in excess of the donor’s 

basis is allowed. 

‘‘(D) CERTIFICATION.—A certification meets the requirements of this subparagraph if it is a written statement 

which is signed under penalty of perjury by an officer 

of the donee organization and—

‘‘(i) which—

‘‘(I) certifies that the use of the property by 

the donee was related to the purpose or function 

constituting the basis for the donee’s exemption 

under section 501, and 

‘‘(II) describes how the property was used and 

how such use furthered such purpose or function, 

or 

‘‘(ii) which—

‘‘(I) states the intended use of the property 

by the donee at the time of the contribution, and 

‘‘(II) certifies that such intended use has 

become impossible or infeasible to implement.’’. 

(b) REPORTING REQUIREMENTS.—Paragraph (1) of section 

6050L(a) (relating to returns relating to certain dispositions of 

donated property) is amended—

(1) by striking ‘‘2 years’’ and inserting ‘‘3 years’’, and 
H. R. 4—300

(2) by striking ‘‘and’’ at the end of subparagraph (D), by 

striking the period at the end of subparagraph (E) and inserting 

a comma, and by inserting at the end the following: 

‘‘(F) a description of the donee’s use of the property, 

and 

‘‘(G) a statement indicating whether the use of the 

property was related to the purpose or function constituting 

the basis for the donee’s exemption under section 501. 

In any case in which the donee indicates that the use of 

applicable property (as defined in section 170(e)(7)(C)) was 

related to the purpose or function constituting the basis for 

the exemption of the donee under section 501 under subparagraph (G), the donee shall include with the return the certification described in section 170(e)(7)(D) if such certification is 

made under section 170(e)(7).’’. 

(c) PENALTY.— (1) IN GENERAL.—Part I of subchapter B of chapter 68 

(relating to assessable penalties) is amended by inserting after 

section 6720A the following new section: 

‘‘SEC. 6720B. FRAUDULENT IDENTIFICATION OF EXEMPT USE PROPERTY. 

‘‘In addition to any criminal penalty provided by law, any 

person who identifies applicable property (as defined in section 

170(e)(7)(C)) as having a use which is related to a purpose or 

function constituting the basis for the donee’s exemption under 

section 501 and who knows that such property is not intended 

for such a use shall pay a penalty of $10,000.’’. 

(2) CLERICAL AMENDMENT.—The table of sections for part 

I of subchapter B of chapter 68 is amended by adding after 

the item relating to section 6720A the following new item:

‘‘Sec. 6720B. Fraudulent identification of exempt use property.’’.

(d) EFFECTIVE DATE.— (1) RECAPTURE.—The amendments made by subsection (a) 

shall apply to contributions after September 1, 2006. 

(2) REPORTING.—The amendments made by subsection (b) 

shall apply to returns filed after September 1, 2006. 

(3) PENALTY.—The amendments made by subsection (c) 

shall apply to identifications made after the date of the enactment of this Act. 

SEC. 1216. LIMITATION OF DEDUCTION FOR CHARITABLE CONTRIBUTIONS OF CLOTHING AND HOUSEHOLD ITEMS. 

(a) IN GENERAL.—Subsection (f) of section 170, as amended 

by this Act, is amended by adding at the end the following new 

paragraph: 

‘‘(16) CONTRIBUTIONS OF CLOTHING AND HOUSEHOLD

ITEMS.—‘‘(A) IN GENERAL.—In the case of an individual, partnership, or corporation, no deduction shall be allowed under 

subsection (a) for any contribution of clothing or a household item unless such clothing or household item is in 

good used condition or better. 

‘‘(B) ITEMS OF MINIMAL VALUE.—Notwithstanding 

subparagraph (A), the Secretary may by regulation deny 

a deduction under subsection (a) for any contribution of 
H. R. 4—301

clothing or a household item which has minimal monetary 

value. 

‘‘(C) EXCEPTION FOR CERTAIN PROPERTY.—Subparagraphs (A) and (B) shall not apply to any contribution 

of a single item of clothing or a household item for which 

a deduction of more than $500 is claimed if the taxpayer 

includes with the taxpayer’s return a qualified appraisal 

with respect to the property. 

‘‘(D) HOUSEHOLD ITEMS.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—The term ‘household items’ 

includes furniture, furnishings, electronics, appliances, 

linens, and other similar items. 

‘‘(ii) EXCLUDED ITEMS.—Such term does not 

include—

‘‘(I) food, 

‘‘(II) paintings, antiques, and other objects of 

art, 

‘‘(III) jewelry and gems, and 

‘‘(IV) collections. 

‘‘(E) SPECIAL RULE FOR PASS-THRU ENTITIES.—In the 

case of a partnership or S corporation, this paragraph 

shall be applied at the entity level, except that the deduction shall be denied at the partner or shareholder level.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to contributions made after the date of enactment of 

this Act. 

SEC. 1217. MODIFICATION OF RECORDKEEPING REQUIREMENTS FOR 

CERTAIN CHARITABLE CONTRIBUTIONS. 

(a) RECORDKEEPING REQUIREMENT.—Subsection (f) of section 

170, as amended by this Act, is amended by adding at the end 

the following new paragraph: 

‘‘(17) RECORDKEEPING.—No deduction shall be allowed 

under subsection (a) for any contribution of a cash, check, 

or other monetary gift unless the donor maintains as a record 

of such contribution a bank record or a written communication 

from the donee showing the name of the donee organization, 

the date of the contribution, and the amount of the contribution.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to contributions made in taxable years beginning after 

the date of the enactment of this Act. 

SEC. 1218. CONTRIBUTIONS OF FRACTIONAL INTERESTS IN TANGIBLE 

PERSONAL PROPERTY. 

(a) INCOME TAX.—Section 170 (relating to charitable, etc., contributions and gifts) is amended by redesignating subsection (o) 

as subsection (p) and by inserting after subsection (n) the following 

new subsection: 

‘‘(o) SPECIAL RULES FOR FRACTIONAL GIFTS.—

‘‘(1) DENIAL OF DEDUCTION IN CERTAIN CASES.—

‘‘(A) IN GENERAL.—No deduction shall be allowed for 

a contribution of an undivided portion of a taxpayer’s entire 

interest in tangible personal property unless all interest 

in the property is held immediately before such contribution 

by—

‘‘(i) the taxpayer, or 
H. R. 4—302

‘‘(ii) the taxpayer and the donee. 

‘‘(B) EXCEPTIONS.—The Secretary may, by regulation, 

provide for exceptions to subparagraph (A) in cases where 

all persons who hold an interest in the property make 

proportional contributions of an undivided portion of the 

entire interest held by such persons. 

‘‘(2) VALUATION OF SUBSEQUENT GIFTS.—In the case of any 

additional contribution, the fair market value of such contribution shall be determined by using the lesser of—

‘‘(A) the fair market value of the property at the time 

of the initial fractional contribution, or 

‘‘(B) the fair market value of the property at the time 

of the additional contribution. 

‘‘(3) RECAPTURE OF DEDUCTION IN CERTAIN CASES; ADDITION

TO TAX.—

‘‘(A) RECAPTURE.—The Secretary shall provide for the 

recapture of the amount of any deduction allowed under 

this section (plus interest) with respect to any contribution 

of an undivided portion of a taxpayer’s entire interest in 

tangible personal property—

‘‘(i) in any case in which the donor does not contribute all of the remaining interest in such property 

to the donee (or, if such donee is no longer in existence, 

to any person described in section 170(c)) before the 

earlier of—

‘‘(I) the date that is 10 years after the date 

of the initial fractional contribution, or 

‘‘(II) the date of the death of the donor, and 

‘‘(ii) in any case in which the donee has not, during 

the period beginning on the date of the initial fractional 

contribution and ending on the date described in clause 

(i)—

‘‘(I) had substantial physical possession of the 

property, and 

‘‘(II) used the property in a use which is 

related to a purpose or function constituting the 

basis for the organizations’ exemption under section 501. 

‘‘(B) ADDITION TO TAX.—The tax imposed under this 

chapter for any taxable year for which there is a recapture 

under subparagraph (A) shall be increased by 10 percent 

of the amount so recaptured. 

‘‘(4) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ADDITIONAL CONTRIBUTION.—The term ‘additional 

contribution’ means any charitable contribution by the taxpayer of any interest in property with respect to which 

the taxpayer has previously made an initial fractional contribution. 

‘‘(B) INITIAL FRACTIONAL CONTRIBUTION.—The term ‘initial fractional contribution’ means, with respect to any 

taxpayer, the first charitable contribution of an undivided 

portion of the taxpayer’s entire interest in any tangible 

personal property.’’. 

(b) ESTATE TAX.—Section 2055 (relating to transfers for public, 

charitable, and religious uses) is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) 

the following new subsection: 
H. R. 4—303

‘‘(g) VALUATION OF SUBSEQUENT GIFTS.—

‘‘(1) IN GENERAL.—In the case of any additional contribution, the fair market value of such contribution shall be determined by using the lesser of—

‘‘(A) the fair market value of the property at the time 

of the initial fractional contribution, or 

‘‘(B) the fair market value of the property at the time 

of the additional contribution. 

‘‘(2) DEFINITIONS.—For purposes of this paragraph—

‘‘(A) ADDITIONAL CONTRIBUTION.—The term ‘additional 

contribution’ means a bequest, legacy, devise, or transfer 

described in subsection (a) of any interest in a property 

with respect to which the decedent had previously made 

an initial fractional contribution. 

‘‘(B) INITIAL FRACTIONAL CONTRIBUTION.—The term ‘initial fractional contribution’ means, with respect to any 

decedent, any charitable contribution of an undivided portion of the decedent’s entire interest in any tangible personal property for which a deduction was allowed under 

section 170.’’. 

(c) GIFT TAX.—Section 2522 (relating to charitable and similar 

gifts) is amended by redesignating subsection (e) as subsection 

(f) and by inserting after subsection (d) the following new subsection: 

‘‘(e) SPECIAL RULES FOR FRACTIONAL GIFTS.—

‘‘(1) DENIAL OF DEDUCTION IN CERTAIN CASES.—

‘‘(A) IN GENERAL.—No deduction shall be allowed for 

a contribution of an undivided portion of a taxpayer’s entire 

interest in tangible personal property unless all interest 

in the property is held immediately before such contribution 

by—

‘‘(i) the taxpayer, or 

‘‘(ii) the taxpayer and the donee. 

‘‘(B) EXCEPTIONS.—The Secretary may, by regulation, 

provide for exceptions to subparagraph (A) in cases where 

all persons who hold an interest in the property make 

proportional contributions of an undivided portion of the 

entire interest held by such persons. 

‘‘(2) VALUATION OF SUBSEQUENT GIFTS.—In the case of any 

additional contribution, the fair market value of such contribution shall be determined by using the lesser of—

‘‘(A) the fair market value of the property at the time 

of the initial fractional contribution, or 

‘‘(B) the fair market value of the property at the time 

of the additional contribution. 

‘‘(3) RECAPTURE OF DEDUCTION IN CERTAIN CASES; ADDITION

TO TAX.—

‘‘(A) IN GENERAL.—The Secretary shall provide for the 

recapture of an amount equal to any deduction allowed 

under this section (plus interest) with respect to any contribution of an undivided portion of a taxpayer’s entire 

interest in tangible personal property—

‘‘(i) in any case in which the donor does not contribute all of the remaining interest in such property 

to the donee (or, if such donee is no longer in existence, 

to any person described in section 170(c)) before the 

earlier of—
H. R. 4—304

‘‘(I) the date that is 10 years after the date 

of the initial fractional contribution, or 

‘‘(II) the date of the death of the donor, and 

‘‘(ii) in any case in which the donee has not, during 

the period beginning on the date of the initial fractional 

contribution and ending on the date described in clause 

(i)—

‘‘(I) had substantial physical possession of the 

property, and 

‘‘(II) used the property in a use which is 

related to a purpose or function constituting the 

basis for the organizations’ exemption under section 501. 

‘‘(B) ADDITION TO TAX.—The tax imposed under this 

chapter for any taxable year for which there is a recapture 

under subparagraph (A) shall be increased by 10 percent 

of the amount so recaptured. 

‘‘(4) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ADDITIONAL CONTRIBUTION.—The term ‘additional 

contribution’ means any gift for which a deduction is 

allowed under subsection (a) or (b) of any interest in a 

property with respect to which the donor has previously 

made an initial fractional contribution. 

‘‘(B) INITIAL FRACTIONAL CONTRIBUTION.—The term ‘initial fractional contribution’ means, with respect to any 

donor, the first gift of an undivided portion of the donor’s 

entire interest in any tangible personal property for which 

a deduction is allowed under subsection (a) or (b).’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to contributions, bequests, and gifts made after the 

date of the enactment of this Act. 

SEC. 1219. PROVISIONS RELATING TO SUBSTANTIAL AND GROSS OVERSTATEMENTS OF VALUATIONS. 

(a) MODIFICATION OF THRESHOLDS FOR SUBSTANTIAL AND GROSS

VALUATION MISSTATEMENTS.— (1) SUBSTANTIAL VALUATION MISSTATEMENT.— (A) INCOME TAXES.—Subparagraph (A) of section 

6662(e)(1) (relating to substantial valuation misstatement 

under chapter 1) is amended by striking ‘‘200 percent’’ 

and inserting ‘‘150 percent’’. 

(B) ESTATE AND GIFT TAXES.—Paragraph (1) of section 

6662(g) is amended by striking ‘‘50 percent’’ and inserting 

‘‘65 percent’’. 

(2) GROSS VALUATION MISSTATEMENT.— (A) INCOME TAXES.—Clauses (i) and (ii) of section 

6662(h)(2)(A) (relating to increase in penalty in case of 

gross valuation misstatements) are amended to read as 

follows: 

‘‘(i) in paragraph (1)(A), ‘200 percent’ for ‘150 percent’, 

‘‘(ii) in paragraph (1)(B)(i)—

‘‘(I) ‘400 percent’ for ‘200 percent’, and 

‘‘(II) ‘25 percent’ for ‘50 percent’, and’’. 

(B) ESTATE AND GIFT TAXES.—Subparagraph (C) of section 6662(h)(2) is amended by striking ‘‘ ‘25 percent’ for 

‘50 percent’ ’’ and inserting ‘‘ ‘40 percent’ for ‘65 percent’ ’’. 
H. R. 4—305

(3) ELIMINATION OF REASONABLE CAUSE EXCEPTION FOR

GROSS MISSTATEMENTS.—Section 6664(c)(2) (relating to reasonable cause exception for underpayments) is amended by striking 

‘‘paragraph (1) shall not apply unless’’ and inserting ‘‘paragraph 

(1) shall not apply. The preceding sentence shall not apply 

to a substantial valuation overstatement under chapter 1 if’’. 

(b) PENALTY ON APPRAISERS WHOSE APPRAISALS RESULT IN

SUBSTANTIAL OR GROSS VALUATION MISSTATEMENTS.—

(1) IN GENERAL.—Part I of subchapter B of chapter 68 

(relating to assessable penalties) is amended by inserting after 

section 6695 the following new section: 

‘‘SEC. 6695A. SUBSTANTIAL AND GROSS VALUATION MISSTATEMENTS 

ATTRIBUTABLE TO INCORRECT APPRAISALS. 

‘‘(a) IMPOSITION OF PENALTY.—If—

‘‘(1) a person prepares an appraisal of the value of property 

and such person knows, or reasonably should have known, 

that the appraisal would be used in connection with a return 

or a claim for refund, and 

‘‘(2) the claimed value of the property on a return or claim 

for refund which is based on such appraisal results in a substantial valuation misstatement under chapter 1 (within the 

meaning of section 6662(e)), or a gross valuation misstatement 

(within the meaning of section 6662(h)), with respect to such 

property, then such person shall pay a penalty in the amount 

determined under subsection (b). 

‘‘(b) AMOUNT OF PENALTY.—The amount of the penalty imposed 

under subsection (a) on any person with respect to an appraisal 

shall be equal to the lesser of—

‘‘(1) the greater of—

‘‘(A) 10 percent of the amount of the underpayment 

(as defined in section 6664(a)) attributable to the 

misstatement described in subsection (a)(2), or 

‘‘(B) $1,000, or 

‘‘(2) 125 percent of the gross income received by the person 

described in subsection (a)(1) from the preparation of the 

appraisal. 

‘‘(c) EXCEPTION.—No penalty shall be imposed under subsection 

(a) if the person establishes to the satisfaction of the Secretary 

that the value established in the appraisal was more likely than 

not the proper value.’’. 

(2) RULES APPLICABLE TO PENALTY.—Section 6696 (relating 

to rules applicable with respect to sections 6694 and 6695) 

is amended—

(A) by striking ‘‘6694 and 6695’’ each place it appears 

in the text and heading thereof and inserting ‘‘6694, 6695, 

and 6695A’’, and 

(B) by striking ‘‘6694 or 6695’’ each place it appears 

in the text and inserting ‘‘6694, 6695, or 6695A’’. 

(3) CONFORMING AMENDMENT.—The table of sections for 

part I of subchapter B of chapter 68 is amended by striking 

the item relating to section 6696 and inserting the following 

new items:

‘‘Sec. 6695A. Substantial and gross valuation misstatements attributable to incorrect appraisals. ‘‘Sec. 6696. Rules applicable with respect to sections 6694, 6695, and 6695A.’’.

(c) QUALIFIED APPRAISERS AND APPRAISALS.—
H. R. 4—306

(1) IN GENERAL.—Subparagraph (E) of section 170(f)(11) 

is amended to read as follows: 

‘‘(E) QUALIFIED APPRAISAL AND APPRAISER.—For purposes of this paragraph—

‘‘(i) QUALIFIED APPRAISAL.—The term ‘qualified 

appraisal’ means, with respect to any property, an 

appraisal of such property which—

‘‘(I) is treated for purposes of this paragraph 

as a qualified appraisal under regulations or other 

guidance prescribed by the Secretary, and 

‘‘(II) is conducted by a qualified appraiser in 

accordance with generally accepted appraisal 

standards and any regulations or other guidance 

prescribed under subclause (I). 

‘‘(ii) QUALIFIED APPRAISER.—Except as provided in 

clause (iii), the term ‘qualified appraiser’ means an 

individual who—

‘‘(I) has earned an appraisal designation from 

a recognized professional appraiser organization 

or has otherwise met minimum education and 

experience requirements set forth in regulations 

prescribed by the Secretary, 

‘‘(II) regularly performs appraisals for which 

the individual receives compensation, and 

‘‘(III) meets such other requirements as may 

be prescribed by the Secretary in regulations or 

other guidance. 

‘‘(iii) SPECIFIC APPRAISALS.—An individual shall 

not be treated as a qualified appraiser with respect 

to any specific appraisal unless—

‘‘(I) the individual demonstrates verifiable education and experience in valuing the type of property subject to the appraisal, and 

‘‘(II) the individual has not been prohibited 

from practicing before the Internal Revenue 

Service by the Secretary under section 330(c) of 

title 31, United States Code, at any time during 

the 3-year period ending on the date of the 

appraisal.’’. 

(2) REASONABLE CAUSE EXCEPTION.—Subparagraphs (B) 

and (C) of section 6664(c)(3) are amended to read as follows: 

‘‘(B) QUALIFIED APPRAISAL.—The term ‘qualified 

appraisal’ has the meaning given such term by section 

170(f)(11)(E)(i). 

‘‘(C) QUALIFIED APPRAISER.—The term ‘qualified 

appraiser’ has the meaning given such term by section 

170(f)(11)(E)(ii).’’. 

(d) DISCIPLINARY ACTIONS AGAINST APPRAISERS.—Section 330(c) 

of title 31, United States Code, is amended by striking ‘‘with respect 

to whom a penalty has been assessed under section 6701(a) of 

the Internal Revenue Code of 1986’’. 

(e) EFFECTIVE DATES.—

(1) MISSTATEMENT PENALTIES.—Except as provided in paragraph (3), the amendments made by subsection (a) shall apply 

to returns filed after the date of the enactment of this Act. 

(2) APPRAISER PROVISIONS.—Except as provided in paragraph (3), the amendments made by subsections (b), (c), and 
H. R. 4—307

(d) shall apply to appraisals prepared with respect to returns 

or submissions filed after the date of the enactment of this 

Act. 

(3) SPECIAL RULE FOR CERTAIN EASEMENTS.—In the case 

of a contribution of a qualified real property interest which 

is a restriction with respect to the exterior of a building 

described in section 170(h)(4)(C)(ii) of the Internal Revenue 

Code of 1986, and an appraisal with respect to the contribution, 

the amendments made by subsections (a) and (b) shall apply 

to returns filed after July 25, 2006. 

SEC. 1220. ADDITIONAL STANDARDS FOR CREDIT COUNSELING 

ORGANIZATIONS. 

(a) IN GENERAL.—Section 501 (relating to exemption from tax 

on corporations, certain trusts, etc.) is amended by redesignating 

subsection (q) as subsection (r) and by inserting after subsection 

(p) the following new subsection: 

‘‘(q) SPECIAL RULES FOR CREDIT COUNSELING ORGANIZATIONS.—

‘‘(1) IN GENERAL.—An organization with respect to which 

the provision of credit counseling services is a substantial purpose shall not be exempt from tax under subsection (a) unless 

such organization is described in paragraph (3) or (4) of subsection (c) and such organization is organized and operated 

in accordance with the following requirements: 

‘‘(A) The organization—

‘‘(i) provides credit counseling services tailored to 

the specific needs and circumstances of consumers, 

‘‘(ii) makes no loans to debtors (other than loans 

with no fees or interest) and does not negotiate the 

making of loans on behalf of debtors, 

‘‘(iii) provides services for the purpose of improving 

a consumer’s credit record, credit history, or credit 

rating only to the extent that such services are incidental to providing credit counseling services, and 

‘‘(iv) does not charge any separately stated fee 

for services for the purpose of improving any consumer’s credit record, credit history, or credit rating. 

‘‘(B) The organization does not refuse to provide credit 

counseling services to a consumer due to the inability of 

the consumer to pay, the ineligibility of the consumer for 

debt management plan enrollment, or the unwillingness 

of the consumer to enroll in a debt management plan. 

‘‘(C) The organization establishes and implements a 

fee policy which—

‘‘(i) requires that any fees charged to a consumer 

for services are reasonable, 

‘‘(ii) allows for the waiver of fees if the consumer 

is unable to pay, and 

‘‘(iii) except to the extent allowed by State law, 

prohibits charging any fee based in whole or in part 

on a percentage of the consumer’s debt, the consumer’s 

payments to be made pursuant to a debt management 

plan, or the projected or actual savings to the consumer 

resulting from enrolling in a debt management plan. 

‘‘(D) At all times the organization has a board of directors or other governing body—
H. R. 4—308

‘‘(i) which is controlled by persons who represent 

the broad interests of the public, such as public officials 

acting in their capacities as such, persons having special knowledge or expertise in credit or financial education, and community leaders, 

‘‘(ii) not more than 20 percent of the voting power 

of which is vested in persons who are employed by 

the organization or who will benefit financially, directly 

or indirectly, from the organization’s activities (other 

than through the receipt of reasonable directors’ fees 

or the repayment of consumer debt to creditors other 

than the credit counseling organization or its affiliates), 

and 

‘‘(iii) not more than 49 percent of the voting power 

of which is vested in persons who are employed by 

the organization or who will benefit financially, directly 

or indirectly, from the organization’s activities (other 

than through the receipt of reasonable directors’ fees). 

‘‘(E) The organization does not own more than 35 percent of—

‘‘(i) the total combined voting power of any corporation (other than a corporation which is an organization 

described in subsection (c)(3) and exempt from tax 

under subsection (a)) which is in the trade or business 

of lending money, repairing credit, or providing debt 

management plan services, payment processing, or 

similar services, 

‘‘(ii) the profits interest of any partnership (other 

than a partnership which is an organization described 

in subsection (c)(3) and exempt from tax under subsection (a)) which is in the trade or business of lending 

money, repairing credit, or providing debt management 

plan services, payment processing, or similar services, 

and 

‘‘(iii) the beneficial interest of any trust or estate 

(other than a trust which is an organization described 

in subsection (c)(3) and exempt from tax under subsection (a)) which is in the trade or business of lending 

money, repairing credit, or providing debt management 

plan services, payment processing, or similar services. 

‘‘(F) The organization receives no amount for providing 

referrals to others for debt management plan services, and 

pays no amount to others for obtaining referrals of consumers. 

‘‘(2) ADDITIONAL REQUIREMENTS FOR ORGANIZATIONS

DESCRIBED IN SUBSECTION (c)(3).—

‘‘(A) IN GENERAL.—In addition to the requirements 

under paragraph (1), an organization with respect to which 

the provision of credit counseling services is a substantial 

purpose and which is described in paragraph (3) of subsection (c) shall not be exempt from tax under subsection 

(a) unless such organization is organized and operated 

in accordance with the following requirements: 

‘‘(i) The organization does not solicit contributions 

from consumers during the initial counseling process 

or while the consumer is receiving services from the 

organization. 
H. R. 4—309

‘‘(ii) The aggregate revenues of the organization 

which are from payments of creditors of consumers 

of the organization and which are attributable to debt 

management plan services do not exceed the applicable 

percentage of the total revenues of the organization. 

‘‘(B) APPLICABLE PERCENTAGE.—

‘‘(i) IN GENERAL.—For purposes of subparagraph 

(A)(ii), the applicable percentage is 50 percent. 

‘‘(ii) TRANSITION RULE.—Notwithstanding clause 

(i), in the case of an organization with respect to which 

the provision of credit counseling services is a substantial purpose and which is described in paragraph (3) 

of subsection (c) and exempt from tax under subsection 

(a) on the date of the enactment of this subsection, 

the applicable percentage is—

‘‘(I) 80 percent for the first taxable year of 

such organization beginning after the date which 

is 1 year after the date of the enactment of this 

subsection, and 

‘‘(II) 70 percent for the second such taxable 

year beginning after such date, and 

‘‘(III) 60 percent for the third such taxable 

year beginning after such date. 

‘‘(3) ADDITIONAL REQUIREMENT FOR ORGANIZATIONS

DESCRIBED IN SUBSECTION (c)(4).—In addition to the requirements under paragraph (1), an organization with respect to 

which the provision of credit counseling services is a substantial 

purpose and which is described in paragraph (4) of subsection 

(c) shall not be exempt from tax under subsection (a) unless 

such organization notifies the Secretary, in such manner as 

the Secretary may by regulations prescribe, that it is applying 

for recognition as a credit counseling organization. 

‘‘(4) CREDIT COUNSELING SERVICES; DEBT MANAGEMENT PLAN

SERVICES.—For purposes of this subsection—

‘‘(A) CREDIT COUNSELING SERVICES.—The term ‘credit 

counseling services’ means—

‘‘(i) the providing of educational information to 

the general public on budgeting, personal finance, 

financial literacy, saving and spending practices, and 

the sound use of consumer credit, 

‘‘(ii) the assisting of individuals and families with 

financial problems by providing them with counseling, 

or 

‘‘(iii) a combination of the activities described in 

clauses (i) and (ii). 

‘‘(B) DEBT MANAGEMENT PLAN SERVICES.—The term 

‘debt management plan services’ means services related 

to the repayment, consolidation, or restructuring of a consumer’s debt, and includes the negotiation with creditors 

of lower interest rates, the waiver or reduction of fees, 

and the marketing and processing of debt management 

plans.’’. 

(b) DEBT MANAGEMENT PLAN SERVICES TREATED AS AN UNRELATED BUSINESS.—Section 513 (relating to unrelated trade or business) is amended by adding at the end the following: 

‘‘(j) DEBT MANAGEMENT PLAN SERVICES.—The term ‘unrelated 

trade or business’ includes the provision of debt management plan 
H. R. 4—310

services (as defined in section 501(q)(4)(B)) by any organization 

other than an organization which meets the requirements of section 

501(q).’’. 

(c) EFFECTIVE DATE.— (1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to taxable years 

beginning after the date of the enactment of this Act. 

(2) TRANSITION RULE FOR EXISTING ORGANIZATIONS.—In the 

case of any organization described in paragraph (3) or (4) of 

section 501(c) of the Internal Revenue Code of 1986 and with 

respect to which the provision of credit counseling services 

is a substantial purpose on the date of the enactment of this 

Act, the amendments made by this section shall apply to taxable 

years beginning after the date which is 1 year after the date 

of the enactment of this Act. 

SEC. 1221. EXPANSION OF THE BASE OF TAX ON PRIVATE FOUNDATION 

NET INVESTMENT INCOME. 

(a) GROSS INVESTMENT INCOME.— (1) IN GENERAL.—Paragraph (2) of section 4940(c) (relating 

to gross investment income) is amended by adding at the end 

the following new sentence: ‘‘Such term shall also include 

income from sources similar to those in the preceding sentence.’’. 

(2) CONFORMING AMENDMENT.—Subsection (e) of section 

509 (relating to gross investment income) is amended by adding 

at the end the following new sentence: ‘‘Such term shall also 

include income from sources similar to those in the preceding 

sentence.’’. 

(b) CAPITAL GAIN NET INCOME.—Paragraph (4) of section 

4940(c) (relating to capital gains and losses) is amended—

(1) in subparagraph (A), by striking ‘‘used for the production of interest, dividends, rents, and royalties’’ and inserting 

‘‘used for the production of gross investment income (as defined 

in paragraph (2))’’, 

(2) in subparagraph (C), by inserting ‘‘or carrybacks’’ after 

‘‘carryovers’’, and 

(3) by adding at the end the following new subparagraph: 

‘‘(D) Except to the extent provided by regulation, under 

rules similar to the rules of section 1031 (including the 

exception under subsection (a)(2) thereof), no gain or loss 

shall be taken into account with respect to any portion 

of property used for a period of not less than 1 year for 

a purpose or function constituting the basis of the private 

foundation’s exemption if the entire property is exchanged 

immediately following such period solely for property of 

like kind which is to be used primarily for a purpose 

or function constituting the basis for such foundation’s 

exemption.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after the date of the enactment of this Act. 

SEC. 1222. DEFINITION OF CONVENTION OR ASSOCIATION OF 

CHURCHES. 

Section 7701 (relating to definitions) is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection: 
H. R. 4—311

‘‘(o) CONVENTION OR ASSOCIATION OF CHURCHES.—For purposes 

of this title, any organization which is otherwise a convention 

or association of churches shall not fail to so qualify merely because 

the membership of such organization includes individuals as well 

as churches or because individuals have voting rights in such 

organization.’’. 

SEC. 1223. NOTIFICATION REQUIREMENT FOR ENTITIES NOT CURRENTLY REQUIRED TO FILE. 

(a) IN GENERAL.—Section 6033 (relating to returns by exempt 

organizations), as amended by this Act, is amended by redesignating 

subsection (i) as subsection (j) and by inserting after subsection 

(h) the following new subsection: 

‘‘(i) ADDITIONAL NOTIFICATION REQUIREMENTS.—Any organization the gross receipts of which in any taxable year result in 

such organization being referred to in subsection (a)(3)(A)(ii) or 

(a)(3)(B)—

‘‘(1) shall furnish annually, in electronic form, and at such 

time and in such manner as the Secretary may by regulations 

prescribe, information setting forth—

‘‘(A) the legal name of the organization, 

‘‘(B) any name under which such organization operates 

or does business, 

‘‘(C) the organization’s mailing address and Internet 

web site address (if any), 

‘‘(D) the organization’s taxpayer identification number, 

‘‘(E) the name and address of a principal officer, and 

‘‘(F) evidence of the continuing basis for the organization’s exemption from the filing requirements under subsection (a)(1), and 

‘‘(2) upon the termination of the existence of the organization, shall furnish notice of such termination.’’. 

(b) LOSS OF EXEMPT STATUS FOR FAILURE TO FILE RETURN

OR NOTICE.—Section 6033 (relating to returns by exempt organizations), as amended by subsection (a), is amended by redesignating 

subsection (j) as subsection (k) and by inserting after subsection 

(i) the following new subsection: 

‘‘(j) LOSS OF EXEMPT STATUS FOR FAILURE TO FILE RETURN

OR NOTICE.—

‘‘(1) IN GENERAL.—If an organization described in subsection (a)(1) or (i) fails to file an annual return or notice 

required under either subsection for 3 consecutive years, such 

organization’s status as an organization exempt from tax under 

section 501(a) shall be considered revoked on and after the 

date set by the Secretary for the filing of the third annual 

return or notice. The Secretary shall publish and maintain 

a list of any organization the status of which is so revoked. 

‘‘(2) APPLICATION NECESSARY FOR REINSTATEMENT.—Any 

organization the tax-exempt status of which is revoked under 

paragraph (1) must apply in order to obtain reinstatement 

of such status regardless of whether such organization was 

originally required to make such an application. 

‘‘(3) RETROACTIVE REINSTATEMENT IF REASONABLE CAUSE

SHOWN FOR FAILURE.—If, upon application for reinstatement 

of status as an organization exempt from tax under section 

501(a), an organization described in paragraph (1) can show 

to the satisfaction of the Secretary evidence of reasonable cause 
H. R. 4—312

for the failure described in such paragraph, the organization’s 

exempt status may, in the discretion of the Secretary, be 

reinstated effective from the date of the revocation under such 

paragraph.’’. 

(c) NO DECLARATORY JUDGMENT RELIEF.—Section 7428(b) 

(relating to limitations) is amended by adding at the end the following new paragraph: 

‘‘(4) NONAPPLICATION FOR CERTAIN REVOCATIONS.—No 

action may be brought under this section with respect to any 

revocation of status described in section 6033(j)(1).’’. 

(d) NO MONETARY PENALTY FOR FAILURE TO NOTIFY.—Section 

6652(c)(1) (relating to annual returns under section 6033 or 

6012(a)(6)) is amended by adding at the end the following new 

subparagraph: 

‘‘(E) NO PENALTY FOR CERTAIN ANNUAL NOTICES.—This 

paragraph shall not apply with respect to any notice 

required under section 6033(i).’’. 

(e) SECRETARIAL OUTREACH REQUIREMENTS.— (1) NOTICE REQUIREMENT.—The Secretary of the Treasury 

shall notify in a timely manner every organization described 

in section 6033(i) of the Internal Revenue Code of 1986 (as 

added by this section) of the requirement under such section 

6033(i) and of the penalty established under section 6033(j) 

of such Code—

(A) by mail, in the case of any organization the identity 

and address of which is included in the list of exempt 

organizations maintained by the Secretary, and 

(B) by Internet or other means of outreach, in the 

case of any other organization. 

(2) LOSS OF STATUS PENALTY FOR FAILURE TO FILE

RETURN.—The Secretary of the Treasury shall publicize, in 

a timely manner in appropriate forms and instructions and 

through other appropriate means, the penalty established under 

section 6033(j) of such Code for the failure to file a return 

under subsection (a)(1) or (i) of section 6033 of such Code. 

(f) EFFECTIVE DATE.—The amendments made by this section 

shall apply to notices and returns with respect to annual periods 

beginning after 2006. 

SEC. 1224. DISCLOSURE TO STATE OFFICIALS RELATING TO EXEMPT 

ORGANIZATIONS. 

(a) IN GENERAL.—Subsection (c) of section 6104 is amended 

by striking paragraph (2) and inserting the following new paragraphs: 

‘‘(2) DISCLOSURE OF PROPOSED ACTIONS RELATED TO CHARI- TABLE ORGANIZATIONS.— ‘‘(A) SPECIFIC NOTIFICATIONS.—In the case of an 

organization to which paragraph (1) applies, the Secretary 

may disclose to the appropriate State officer—

‘‘(i) a notice of proposed refusal to recognize such 

organization as an organization described in section 

501(c)(3) or a notice of proposed revocation of such 

organization’s recognition as an organization exempt 

from taxation, 

‘‘(ii) the issuance of a letter of proposed deficiency 

of tax imposed under section 507 or chapter 41 or 

42, and 
H. R. 4—313

‘‘(iii) the names, addresses, and taxpayer identification numbers of organizations which have applied for 

recognition as organizations described in section 

501(c)(3). 

‘‘(B) ADDITIONAL DISCLOSURES.—Returns and return 

information of organizations with respect to which information is disclosed under subparagraph (A) may be made 

available for inspection by or disclosed to an appropriate 

State officer. 

‘‘(C) PROCEDURES FOR DISCLOSURE.—Information may 

be inspected or disclosed under subparagraph (A) or (B) 

only—

‘‘(i) upon written request by an appropriate State 

officer, and 

‘‘(ii) for the purpose of, and only to the extent 

necessary in, the administration of State laws regulating such organizations. 

Such information may only be inspected by or disclosed 

to a person other than the appropriate State officer if 

such person is an officer or employee of the State and 

is designated by the appropriate State officer to receive 

the returns or return information under this paragraph 

on behalf of the appropriate State officer. 

‘‘(D) DISCLOSURES OTHER THAN BY REQUEST.—The Secretary may make available for inspection or disclose returns 

and return information of an organization to which paragraph (1) applies to an appropriate State officer of any 

State if the Secretary determines that such returns or 

return information may constitute evidence of noncompliance under the laws within the jurisdiction of the appropriate State officer. 

‘‘(3) DISCLOSURE WITH RESPECT TO CERTAIN OTHER EXEMPT

ORGANIZATIONS.—Upon written request by an appropriate State 

officer, the Secretary may make available for inspection or 

disclosure returns and return information of any organization 

described in section 501(c) (other than organizations described 

in paragraph (1) or (3) thereof) for the purpose of, and only 

to the extent necessary in, the administration of State laws 

regulating the solicitation or administration of the charitable 

funds or charitable assets of such organizations. Such information may only be inspected by or disclosed to a person other 

than the appropriate State officer if such person is an officer 

or employee of the State and is designated by the appropriate 

State officer to receive the returns or return information under 

this paragraph on behalf of the appropriate State officer. 

‘‘(4) USE IN CIVIL JUDICIAL AND ADMINISTRATIVE PRO- CEEDINGS.—Returns and return information disclosed pursuant 

to this subsection may be disclosed in civil administrative and 

civil judicial proceedings pertaining to the enforcement of State 

laws regulating such organizations in a manner prescribed 

by the Secretary similar to that for tax administration proceedings under section 6103(h)(4). 

‘‘(5) NO DISCLOSURE IF IMPAIRMENT.—Returns and return 

information shall not be disclosed under this subsection, or 

in any proceeding described in paragraph (4), to the extent 

that the Secretary determines that such disclosure would seriously impair Federal tax administration. 
H. R. 4—314

‘‘(6) DEFINITIONS.—For purposes of this subsection—

‘‘(A) RETURN AND RETURN INFORMATION.—The terms 

‘return’ and ‘return information’ have the respective 

meanings given to such terms by section 6103(b). 

‘‘(B) APPROPRIATE STATE OFFICER.—The term ‘appropriate State officer’ means—

‘‘(i) the State attorney general, 

‘‘(ii) the State tax officer, 

‘‘(iii) in the case of an organization to which paragraph (1) applies, any other State official charged with 

overseeing organizations of the type described in section 501(c)(3), and 

‘‘(iv) in the case of an organization to which paragraph (3) applies, the head of an agency designated 

by the State attorney general as having primary 

responsibility for overseeing the solicitation of funds 

for charitable purposes.’’. 

(b) CONFORMING AMENDMENTS.— (1) Paragraph (2) of section 6103(a) is amended by inserting 

‘‘or section 6104(c)’’ after ‘‘this section’’. 

(2) Subparagraph (A) of section 6103(p)(3) is amended by 

inserting ‘‘and section 6104(c)’’ after ‘‘section’’ in the first sentence. 

(3) Paragraph (4) of section 6103(p) is amended—

(A) in the matter preceding subparagraph (A), by 

inserting ‘‘, any appropriate State officer (as defined in 

section 6104(c)),’’ before ‘‘or any other person’’, 

(B) in subparagraph (F)(i), by inserting ‘‘any appropriate State officer (as defined in section 6104(c)),’’ before 

‘‘or any other person’’, and 

(C) in the matter following subparagraph (F), by 

inserting ‘‘, an appropriate State officer (as defined in section 6104(c)),’’ after ‘‘including an agency’’ each place it 

appears. 

(4) The heading for paragraph (1) of section 6104(c) is 

amended by inserting ‘‘FOR CHARITABLE ORGANIZATIONS’’ after ‘‘RULE’’. 

(5) Paragraph (2) of section 7213(a) is amended by inserting 

‘‘or under section 6104(c)’’ after ‘‘6103’’. 

(6) Paragraph (2) of section 7213A(a) is amended by 

inserting ‘‘or under section 6104(c)’’ after ‘‘7213(a)(2)’’. 

(7) Paragraph (2) of section 7431(a) is amended by inserting 

‘‘or in violation of section 6104(c)’’ after ‘‘6103’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the date of the enactment of this Act but 

shall not apply to requests made before such date. 

SEC. 1225. PUBLIC DISCLOSURE OF INFORMATION RELATING TO UNRELATED BUSINESS INCOME TAX RETURNS. 

(a) IN GENERAL.—Subparagraph (A) of section 6104(d)(1) is 

amended by redesignating clauses (ii) and (iii) as clauses (iii) and 

(iv), respectively, and by inserting after clause (i) the following 

new clause: 

‘‘(ii) any annual return filed under section 6011 

which relates to any tax imposed by section 511 

(relating to imposition of tax on unrelated business 

income of charitable, etc., organizations) by such 
H. R. 4—315

organization, but only if such organization is described 

in section 501(c)(3),’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to returns filed after the date of the enactment of 

this Act. 

SEC. 1226. STUDY ON DONOR ADVISED FUNDS AND SUPPORTING 

ORGANIZATIONS. 

(a) STUDY.—The Secretary of the Treasury shall undertake 

a study on the organization and operation of donor advised funds 

(as defined in section 4966(d)(2) of the Internal Revenue Code 

of 1986, as added by this Act) and of organizations described in 

section 509(a)(3) of such Code. The study shall specifically consider—

(1) whether the deductions allowed for the income, gift, 

or estate taxes for charitable contributions to sponsoring 

organizations (as defined in section 4966(d)(1) of such Code, 

as added by this Act) of donor advised funds or to organizations 

described in section 509(a)(3) of such Code are appropriate 

in consideration of—

(A) the use of contributed assets (including the type, 

extent, and timing of such use), or 

(B) the use of the assets of such organizations for 

the benefit of the person making the charitable contribution 

(or a person related to such person), 

(2) whether donor advised funds should be required to 

distribute for charitable purposes a specified amount (whether 

based on the income or assets of the fund) in order to ensure 

that the sponsoring organization with respect to such donor 

advised fund is operating consistent with the purposes or functions constituting the basis for its exemption under section 

501, or its status as an organization described in section 509(a), 

of such Code, 

(3) whether the retention by donors to organizations 

described in paragraph (1) of rights or privileges with respect 

to amounts transferred to such organizations (including 

advisory rights or privileges with respect to the making of 

grants or the investment of assets) is consistent with the treatment of such transfers as completed gifts that qualify for a 

deduction for income, gift, or estate taxes, and 

(4) whether the issues raised by paragraphs (1), (2), and 

(3) are also issues with respect to other forms of charities 

or charitable donations. 

(b) REPORT.—Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury shall submit to 

the Committee on Finance of the Senate and the Committee on 

Ways and Means of the House of Representatives a report on 

the study conducted under subsection (a) and make such recommendations as the Secretary of the Treasury considers appropriate. 

PART 2—IMPROVED ACCOUNTABILITY OF 

DONOR ADVISED FUNDS 

SEC. 1231. EXCISE TAXES RELATING TO DONOR ADVISED FUNDS. 

(a) IN GENERAL.—Chapter 42 (relating to private foundations 

and certain other tax-exempt organizations), as amended by the 
H. R. 4—316

Tax Increase Prevention and Reconciliation Act of 2005, is amended 

by adding at the end the following new subchapter: 

‘‘Subchapter G—Donor Advised Funds

‘‘Sec. 4966. Taxes on taxable distributions. 

‘‘Sec. 4967. Taxes on prohibited benefits.

‘‘SEC. 4966. TAXES ON TAXABLE DISTRIBUTIONS. 

‘‘(a) IMPOSITION OF TAXES.— ‘‘(1) ON THE SPONSORING ORGANIZATION.—There is hereby 

imposed on each taxable distribution a tax equal to 20 percent 

of the amount thereof. The tax imposed by this paragraph 

shall be paid by the sponsoring organization with respect to 

the donor advised fund. 

‘‘(2) ON THE FUND MANAGEMENT.—There is hereby imposed 

on the agreement of any fund manager to the making of a 

distribution, knowing that it is a taxable distribution, a tax 

equal to 5 percent of the amount thereof. The tax imposed 

by this paragraph shall be paid by any fund manager who 

agreed to the making of the distribution. 

‘‘(b) SPECIAL RULES.—For purposes of subsection (a)—

‘‘(1) JOINT AND SEVERAL LIABILITY.—If more than one person is liable under subsection (a)(2) with respect to the making 

of a taxable distribution, all such persons shall be jointly and 

severally liable under such paragraph with respect to such 

distribution. 

‘‘(2) LIMIT FOR MANAGEMENT.—With respect to any one 

taxable distribution, the maximum amount of the tax imposed 

by subsection (a)(2) shall not exceed $10,000. 

‘‘(c) TAXABLE DISTRIBUTION.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘taxable distribution’ means 

any distribution from a donor advised fund—

‘‘(A) to any natural person, or 

‘‘(B) to any other person if—

‘‘(i) such distribution is for any purpose other than 

one specified in section 170(c)(2)(B), or 

‘‘(ii) the sponsoring organization does not exercise 

expenditure responsibility with respect to such distribution in accordance with section 4945(h). 

‘‘(2) EXCEPTIONS.—Such term shall not include any distribution from a donor advised fund—

‘‘(A) to any organization described in section 

170(b)(1)(A) (other than a disqualified supporting organization), 

‘‘(B) to the sponsoring organization of such donor 

advised fund, or 

‘‘(C) to any other donor advised fund. 

‘‘(d) DEFINITIONS.—For purposes of this subchapter—

‘‘(1) SPONSORING ORGANIZATION.—The term ‘sponsoring 

organization’ means any organization which—

‘‘(A) is described in section 170(c) (other than in paragraph (1) thereof, and without regard to paragraph (2)(A) 

thereof), 

‘‘(B) is not a private foundation (as defined in section 

509(a)), and 

‘‘(C) maintains 1 or more donor advised funds. 

‘‘(2) DONOR ADVISED FUND.—
H. R. 4—317

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

(B) or (C), the term ‘donor advised fund’ means a fund 

or account—

‘‘(i) which is separately identified by reference to 

contributions of a donor or donors, 

‘‘(ii) which is owned and controlled by a sponsoring 

organization, and 

‘‘(iii) with respect to which a donor (or any person 

appointed or designated by such donor) has, or reasonably expects to have, advisory privileges with respect 

to the distribution or investment of amounts held in 

such fund or account by reason of the donor’s status 

as a donor. 

‘‘(B) EXCEPTIONS.—The term ‘donor advised fund’ shall 

not include any fund or account—

‘‘(i) which makes distributions only to a single 

identified organization or governmental entity, or 

‘‘(ii) with respect to which a person described in 

subparagraph (A)(iii) advises as to which individuals 

receive grants for travel, study, or other similar purposes, if—

‘‘(I) such person’s advisory privileges are performed exclusively by such person in the person’s 

capacity as a member of a committee all of the 

members of which are appointed by the sponsoring 

organization, 

‘‘(II) no combination of persons described in 

subparagraph (A)(iii) (or persons related to such 

persons) control, directly or indirectly, such committee, and 

‘‘(III) all grants from such fund or account 

are awarded on an objective and nondiscriminatory 

basis pursuant to a procedure approved in advance 

by the board of directors of the sponsoring 

organization, and such procedure is designed to 

ensure that all such grants meet the requirements 

of paragraph (1), (2), or (3) of section 4945(g). 

‘‘(C) SECRETARIAL AUTHORITY.—The Secretary may 

exempt a fund or account not described in subparagraph 

(B) from treatment as a donor advised fund—

‘‘(i) if such fund or account is advised by a committee not directly or indirectly controlled by the donor 

or any person appointed or designated by the donor 

for the purpose of advising with respect to distributions 

from such fund (and any related parties), or 

‘‘(ii) if such fund benefits a single identified charitable purpose. 

‘‘(3) FUND MANAGER.—The term ‘fund manager’ means, with 

respect to any sponsoring organization—

‘‘(A) an officer, director, or trustee of such sponsoring 

organization (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of 

the sponsoring organization), and 

‘‘(B) with respect to any act (or failure to act), the 

employees of the sponsoring organization having authority 

or responsibility with respect to such act (or failure to 

act). 
H. R. 4—318

‘‘(4) DISQUALIFIED SUPPORTING ORGANIZATION.—

‘‘(A) IN GENERAL.—The term ‘disqualified supporting 

organization’ means, with respect to any distribution—

‘‘(i) any type III supporting organization (as 

defined in section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as 

defined in section 4943(f)(5)(B)), and 

‘‘(ii) any organization which is described in 

subparagraph (B) or (C) if—

‘‘(I) the donor or any person designated by 

the donor for the purpose of advising with respect 

to distributions from a donor advised fund (and 

any related parties) directly or indirectly controls 

a supported organization (as defined in section 

509(f)(3)) of such organization, or 

‘‘(II) the Secretary determines by regulations 

that a distribution to such organization otherwise 

is inappropriate. 

‘‘(B) TYPE I AND TYPE II SUPPORTING ORGANIZATIONS.—

An organization is described in this subparagraph if the 

organization meets the requirements of subparagraphs (A) 

and (C) of section 509(a)(3) and is—

‘‘(i) operated, supervised, or controlled by one or 

more organizations described in paragraph (1) or (2) 

of section 509(a), or 

‘‘(ii) supervised or controlled in connection with 

one or more such organizations. 

‘‘(C) FUNCTIONALLY INTEGRATED TYPE III SUPPORTING

ORGANIZATIONS.—An organization is described in this 

subparagraph if the organization is a functionally 

integrated type III supporting organization (as defined 

under section 4943(f)(5)(B)). 

‘‘SEC. 4967. TAXES ON PROHIBITED BENEFITS. 

‘‘(a) IMPOSITION OF TAXES.—

‘‘(1) ON THE DONOR, DONOR ADVISOR, OR RELATED PERSON.—

There is hereby imposed on the advice of any person described 

in subsection (d) to have a sponsoring organization make a 

distribution from a donor advised fund which results in such 

person or any other person described in subsection (d) receiving, 

directly or indirectly, a more than incidental benefit as a result 

of such distribution, a tax equal to 125 percent of such benefit. 

The tax imposed by this paragraph shall be paid by any person 

described in subsection (d) who advises as to the distribution 

or who receives such a benefit as a result of the distribution. 

‘‘(2) ON THE FUND MANAGEMENT.—There is hereby imposed 

on the agreement of any fund manager to the making of a 

distribution, knowing that such distribution would confer a 

benefit described in paragraph (1), a tax equal to 10 percent 

of the amount of such benefit. The tax imposed by this paragraph shall be paid by any fund manager who agreed to the 

making of the distribution. 

‘‘(b) EXCEPTION.—No tax shall be imposed under this section 

with respect to any distribution if a tax has been imposed with 

respect to such distribution under section 4958. 

‘‘(c) SPECIAL RULES.—For purposes of subsection (a)—
H. R. 4—319

‘‘(1) JOINT AND SEVERAL LIABILITY.—If more than one person is liable under paragraph (1) or (2) of subsection (a) with 

respect to a distribution described in subsection (a), all such 

persons shall be jointly and severally liable under such paragraph with respect to such distribution. 

‘‘(2) LIMIT FOR MANAGEMENT.—With respect to any one 

distribution described in subsection (a), the maximum amount 

of the tax imposed by subsection (a)(2) shall not exceed $10,000. 

‘‘(d) PERSON DESCRIBED.—A person is described in this subsection if such person is described in section 4958(f)(7) with respect 

to a donor advised fund.’’. 

(b) CONFORMING AMENDMENTS.—

(1) Section 4963 is amended by inserting ‘‘4966, 4967,’’ 

after ‘‘4958,’’ each place it appears in subsections (a) and (c). 

(2) The table of subchapters for chapter 42 is amended 

by adding at the end the following new item:

‘‘SUBCHAPTER G—DONOR ADVISED FUNDS’’.

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after the date of the enactment of this Act. 

SEC. 1232. EXCESS BENEFIT TRANSACTIONS INVOLVING DONOR 

ADVISED FUNDS AND SPONSORING ORGANIZATIONS. 

(a) DISQUALIFIED PERSONS.— (1) IN GENERAL.—Paragraph (1) of section 4958(f) is 

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

by striking the period at the end of subparagraph (C) and 

inserting a comma, and by adding after subparagraph (C) the 

following new subparagraphs: 

‘‘(D) which involves a donor advised fund (as defined 

in section 4966(d)(2)), any person who is described in paragraph (7) with respect to such donor advised fund (as 

so defined), and 

‘‘(E) which involves a sponsoring organization (as 

defined in section 4966(d)(1)), any person who is described 

in paragraph (8) with respect to such sponsoring organization (as so defined).’’. 

(2) DONORS, DONOR ADVISORS, AND INVESTMENT ADVISORS

TREATED AS DISQUALIFIED PERSONS.—Section 4958(f) is amended 

by adding at the end the following new paragraphs: 

‘‘(7) DONORS AND DONOR ADVISORS.—For purposes of paragraph (1)(E), a person is described in this paragraph if such 

person—

‘‘(A) is described in section 4966(d)(2)(A)(iii), 

‘‘(B) is a member of the family of an individual 

described in subparagraph (A), or 

‘‘(C) is a 35-percent controlled entity (as defined in 

paragraph (3) by substituting ‘persons described in 

subparagraph (A) or (B) of paragraph (7)’ for ‘persons 

described in subparagraph (A) or (B) of paragraph (1)’ 

in subparagraph (A)(i) thereof). 

‘‘(8) INVESTMENT ADVISORS.—For purposes of paragraph 

(1)(F)—

‘‘(A) IN GENERAL.—A person is described in this paragraph if such person—

‘‘(i) is an investment advisor, 
H. R. 4—320

‘‘(ii) is a member of the family of an individual 

described in clause (i), or 

‘‘(iii) is a 35-percent controlled entity (as defined 

in paragraph (3) by substituting ‘persons described 

in clause (i) or (ii) of paragraph (8)(A)’ for ‘persons 

described in subparagraph (A) or (B) of paragraph 

(1)’ in subparagraph (A)(i) thereof). 

‘‘(B) INVESTMENT ADVISOR DEFINED.—For purposes of 

subparagraph (A), the term ‘investment advisor’ means, 

with respect to any sponsoring organization (as defined 

in section 4966(d)(1)), any person (other than an employee 

of such organization) compensated by such organization 

for managing the investment of, or providing investment 

advice with respect to, assets maintained in donor advised 

funds (as defined in section 4966(d)(2)) owned by such 

organization.’’. 

(b) CERTAIN TRANSACTIONS TREATED AS EXCESS BENEFIT TRANSACTIONS.—

(1) IN GENERAL.—Section 4958(c) is amended by redesignating paragraph (2) as paragraph (3) and by inserting after 

paragraph (1) the following new paragraph: 

‘‘(2) SPECIAL RULES FOR DONOR ADVISED FUNDS.—In the 

case of any donor advised fund (as defined in section 

4966(d)(2))—

‘‘(A) the term ‘excess benefit transaction’ includes any 

grant, loan, compensation, or other similar payment from 

such fund to a person described in subsection (f)(7) with 

respect to such fund, and 

‘‘(B) the term ‘excess benefit’ includes, with respect 

to any transaction described in subparagraph (A), the 

amount of any such grant, loan, compensation, or other 

similar payment.’’. 

(2) SPECIAL RULE FOR CORRECTION OF TRANSACTION.—Section 4958(f)(6) is amended by inserting ‘‘, except that in the 

case of any correction of an excess benefit transaction described 

in subsection (c)(2), no amount repaid in a manner prescribed 

by the Secretary may be held in any donor advised fund’’ 

after ‘‘standards’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to transactions occurring after the date of the enactment 

of this Act. 

SEC. 1233. EXCESS BUSINESS HOLDINGS OF DONOR ADVISED FUNDS. 

(a) IN GENERAL.—Section 4943 is amended by adding at the 

end the following new subsection: 

‘‘(e) APPLICATION OF TAX TO DONOR ADVISED FUNDS.—

‘‘(1) IN GENERAL.—For purposes of this section, a donor 

advised fund (as defined in section 4966(d)(2)) shall be treated 

as a private foundation. 

‘‘(2) DISQUALIFIED PERSON.—In applying this section to any 

donor advised fund (as so defined), the term ‘disqualified person’ 

means, with respect to the donor advised fund, any person 

who is—

‘‘(A) described in section 4966(d)(2)(A)(iii), 

‘‘(B) a member of the family of an individual described 

in subparagraph (A), or 
H. R. 4—321

‘‘(C) a 35-percent controlled entity (as defined in section 

4958(f)(3) by substituting ‘persons described in subparagraph (A) or (B) of section 4943(e)(2)’ for ‘persons described 

in subparagraph (A) or (B) of paragraph (1)’ in subparagraph (A)(i) thereof). 

‘‘(3) PRESENT HOLDINGS.—For purposes of this subsection, 

rules similar to the rules of paragraphs (4), (5), and (6) of 

subsection (c) shall apply to donor advised funds (as so defined), 

except that—

‘‘(A) ‘the date of the enactment of this subsection’ shall 

be substituted for ‘May 26, 1969’ each place it appears 

in paragraphs (4), (5), and (6), and 

‘‘(B) ‘January 1, 2007’ shall be substituted for ‘January 

1, 1970’ in paragraph (4)(E).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after the date of the enactment of this Act. 

SEC. 1234. TREATMENT OF CHARITABLE CONTRIBUTION DEDUCTIONS 

TO DONOR ADVISED FUNDS. 

(a) INCOME.—Section 170(f) (relating to disallowance of deduction in certain cases and special rules), as amended by this Act, 

is amended by adding at the end the following new paragraph: 

‘‘(18) CONTRIBUTIONS TO DONOR ADVISED FUNDS.—A deduction otherwise allowed under subsection (a) for any contribution 

to a donor advised fund (as defined in section 4966(d)(2)) shall 

only be allowed if—

‘‘(A) the sponsoring organization (as defined in section 

4966(d)(1)) with respect to such donor advised fund is not—

‘‘(i) described in paragraph (3), (4), or (5) of subsection (c), or 

‘‘(ii) a type III supporting organization (as defined 

in section 4943(f)(5)(A)) which is not a functionally 

integrated type III supporting organization (as defined 

in section 4943(f)(5)(B)), and 

‘‘(B) the taxpayer obtains a contemporaneous written 

acknowledgment (determined under rules similar to the 

rules of paragraph (8)(C)) from the sponsoring organization 

(as so defined) of such donor advised fund that such 

organization has exclusive legal control over the assets 

contributed.’’. 

(b) ESTATE.—Section 2055(e) is amended by adding at the end 

the following new paragraph: 

‘‘(5) CONTRIBUTIONS TO DONOR ADVISED FUNDS.—A deduction otherwise allowed under subsection (a) for any contribution 

to a donor advised fund (as defined in section 4966(d)(2)) shall 

only be allowed if—

‘‘(A) the sponsoring organization (as defined in section 

4966(d)(1)) with respect to such donor advised fund is not—

‘‘(i) described in paragraph (3) or (4) of subsection 

(a), or 

‘‘(ii) a type III supporting organization (as defined 

in section 4943(f)(5)(A)) which is not a functionally 

integrated type III supporting organization (as defined 

in section 4943(f)(5)(B)), and 

‘‘(B) the taxpayer obtains a contemporaneous written 

acknowledgment (determined under rules similar to the 
H. R. 4—322

rules of section 170(f)(8)(C)) from the sponsoring organization (as so defined) of such donor advised fund that such 

organization has exclusive legal control over the assets 

contributed.’’. 

(c) GIFT.—Section 2522(c) is amended by adding at the end 

the following new paragraph: 

‘‘(5) CONTRIBUTIONS TO DONOR ADVISED FUNDS.—A deduction otherwise allowed under subsection (a) for any contribution 

to a donor advised fund (as defined in section 4966(d)(2)) shall 

only be allowed if—

‘‘(A) the sponsoring organization (as defined in section 

4966(d)(1)) with respect to such donor advised fund is not—

‘‘(i) described in paragraph (3) or (4) of subsection 

(a), or 

‘‘(ii) a type III supporting organization (as defined 

in section 4943(f)(5)(A)) which is not a functionally 

integrated type III supporting organization (as defined 

in section 4943(f)(5)(B)), and 

‘‘(B) the taxpayer obtains a contemporaneous written 

acknowledgment (determined under rules similar to the 

rules of section 170(f)(8)(C)) from the sponsoring organization (as so defined) of such donor advised fund that such 

organization has exclusive legal control over the assets 

contributed.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to contributions made after the date which is 180 

days after the date of the enactment of this Act. 

SEC. 1235. RETURNS OF, AND APPLICATIONS FOR RECOGNITION BY, 

SPONSORING ORGANIZATIONS. 

(a) MATTERS INCLUDED ON RETURNS.—

(1) IN GENERAL.—Section 6033, as amended by this Act, 

is amended by redesignating subsection (k) as subsection (l) 

and by inserting after subsection (j) the following new subsection: 

‘‘(k) ADDITIONAL PROVISIONS RELATING TO SPONSORING

ORGANIZATIONS.—Every organization described in section 4966(d)(1) 

shall, on the return required under subsection (a) for the taxable 

year—

‘‘(1) list the total number of donor advised funds (as defined 

in section 4966(d)(2)) it owns at the end of such taxable year, 

‘‘(2) indicate the aggregate value of assets held in such 

funds at the end of such taxable year, and 

‘‘(3) indicate the aggregate contributions to and grants 

made from such funds during such taxable year.’’. 

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to returns filed for taxable years ending 

after the date of the enactment of this Act. 

(b) MATTERS INCLUDED ON EXEMPT STATUS APPLICATION.—

(1) IN GENERAL.—Section 508 is amended by adding at 

the end the following new subsection: 

‘‘(f) ADDITIONAL PROVISIONS RELATING TO SPONSORING

ORGANIZATIONS.—A sponsoring organization (as defined in section 

4966(d)(1)) shall give notice to the Secretary (in such manner as 

the Secretary may provide) whether such organization maintains 

or intends to maintain donor advised funds (as defined in section 
H. R. 4—323

4966(d)(2)) and the manner in which such organization plans to 

operate such funds.’’. 

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to organizations applying for tax-exempt 

status after the date of the enactment of this Act. 

PART 3—IMPROVED ACCOUNTABILITY OF 

SUPPORTING ORGANIZATIONS 

SEC. 1241. REQUIREMENTS FOR SUPPORTING ORGANIZATIONS. 

(a) TYPES OF SUPPORTING ORGANIZATIONS.—Subparagraph (B) 

of section 509(a)(3) is amended to read as follows: 

‘‘(B) is—

‘‘(i) operated, supervised, or controlled by one or 

more organizations described in paragraph (1) or (2), 

‘‘(ii) supervised or controlled in connection with 

one or more such organizations, or 

‘‘(iii) operated in connection with one or more such 

organizations, and’’. 

(b) REQUIREMENTS FOR SUPPORTING ORGANIZATIONS.—Section 

509 (relating to private foundation defined) is amended by adding 

at the end the following new subsection: 

‘‘(f) REQUIREMENTS FOR SUPPORTING ORGANIZATIONS.— ‘‘(1) TYPE III SUPPORTING ORGANIZATIONS.—For purposes 

of subsection (a)(3)(B)(iii), an organization shall not be considered to be operated in connection with any organization 

described in paragraph (1) or (2) of subsection (a) unless such 

organization meets the following requirements: 

‘‘(A) RESPONSIVENESS.—For each taxable year beginning after the date of the enactment of this subsection, 

the organization provides to each supported organization 

such information as the Secretary may require to ensure 

that such organization is responsive to the needs or 

demands of the supported organization. 

‘‘(B) FOREIGN SUPPORTED ORGANIZATIONS.— ‘‘(i) IN GENERAL.—The organization is not operated 

in connection with any supported organization that 

is not organized in the United States. 

‘‘(ii) TRANSITION RULE FOR EXISTING ORGANIZA- TIONS.—If the organization is operated in connection 

with an organization that is not organized in the 

United States on the date of the enactment of this 

subsection, clause (i) shall not apply until the first 

day of the third taxable year of the organization beginning after the date of the enactment of this subsection. 

‘‘(2) ORGANIZATIONS CONTROLLED BY DONORS.— ‘‘(A) IN GENERAL.—For purposes of subsection (a)(3)(B), 

an organization shall not be considered to be—

‘‘(i) operated, supervised, or controlled by any 

organization described in paragraph (1) or (2) of subsection (a), or 

‘‘(ii) operated in connection with any organization 

described in paragraph (1) or (2) of subsection (a), 

if such organization accepts any gift or contribution from 

any person described in subparagraph (B). 

‘‘(B) PERSON DESCRIBED.—A person is described in this 

subparagraph if, with respect to a supported organization 
H. R. 4—324

of an organization described in subparagraph (A), such 

person is—

‘‘(i) a person (other than an organization described 

in paragraph (1), (2), or (4) of section 509(a)) who 

directly or indirectly controls, either alone or together 

with persons described in clauses (ii) and (iii), the 

governing body of such supported organization, 

‘‘(ii) a member of the family (determined under 

section 4958(f)(4)) of an individual described in clause 

(i), or 

‘‘(iii) a 35-percent controlled entity (as defined in 

section 4958(f)(3) by substituting ‘persons described 

in clause (i) or (ii) of section 509(f)(2)(B)’ for ‘persons 

described in subparagraph (A) or (B) of paragraph 

(1)’ in subparagraph (A)(i) thereof). 

‘‘(3) SUPPORTED ORGANIZATION.—For purposes of this subsection, the term ‘supported organization’ means, with respect 

to an organization described in subsection (a)(3), an organization described in paragraph (1) or (2) of subsection (a)—

‘‘(A) for whose benefit the organization described in 

subsection (a)(3) is organized and operated, or 

‘‘(B) with respect to which the organization performs 

the functions of, or carries out the purposes of.’’. 

(c) CHARITABLE TRUSTS WHICH ARE TYPE III SUPPORTING

ORGANIZATIONS.—For purposes of section 509(a)(3)(B)(iii) of the 

Internal Revenue Code of 1986, an organization which is a trust 

shall not be considered to be operated in connection with any 

organization described in paragraph (1) or (2) of section 509(a) 

of such Code solely because—

(1) it is a charitable trust under State law, 

(2) the supported organization (as defined in section 

509(f)(3) of such Code) is a beneficiary of such trust, and 

(3) the supported organization (as so defined) has the power 

to enforce the trust and compel an accounting. 

(d) PAYOUT REQUIREMENTS FOR TYPE III SUPPORTING ORGANIZATIONS.—

(1) IN GENERAL.—The Secretary of the Treasury shall 

promulgate new regulations under section 509 of the Internal 

Revenue Code of 1986 on payments required by type III supporting organizations which are not functionally integrated type 

III supporting organizations. Such regulations shall require 

such organizations to make distributions of a percentage of 

either income or assets to supported organizations (as defined 

in section 509(f)(3) of such Code) in order to ensure that a 

significant amount is paid to such organizations. 

(2) TYPE III SUPPORTING ORGANIZATION; FUNCTIONALLY

INTEGRATED TYPE III SUPPORTING ORGANIZATION.—For purposes 

of paragraph (1), the terms ‘‘type III supporting organization’’ 

and ‘‘functionally integrated type III supporting organization’’ 

have the meanings given such terms under subparagraphs 

(A) and (B) section 4943(f)(5) of the Internal Revenue Code 

of 1986 (as added by this Act), respectively. 

(e) EFFECTIVE DATES.—

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

(a) and (b) shall take effect on the date of the enactment 

of this Act. 
H. R. 4—325

(2) CHARITABLE TRUSTS WHICH ARE TYPE III SUPPORTING

ORGANIZATIONS.—Subsection (c) shall take effect—

(A) in the case of trusts operated in connection with 

an organization described in paragraph (1) or (2) of section 

509(a) of the Internal Revenue Code of 1986 on the date 

of the enactment of this Act, on the date that is one 

year after the date of the enactment of this Act, and 

(B) in the case of any other trust, on the date of 

the enactment of this Act. 

SEC. 1242. EXCESS BENEFIT TRANSACTIONS INVOLVING SUPPORTING 

ORGANIZATIONS. 

(a) DISQUALIFIED PERSONS.—Paragraph (1) of section 4958(f), 

as amended by this Act, is amended by redesignating subparagraphs 

(D) and (E) as subparagraphs (E) and (F), respectively, and by 

adding after subparagraph (C) the following new subparagraph: 

‘‘(D) any person who is described in subparagraph (A), 

(B), or (C) with respect to an organization described in 

section 509(a)(3) and organized and operated exclusively 

for the benefit of, to perform the functions of, or to carry 

out the purposes of the applicable tax-exempt organization.’’. 

(b) CERTAIN TRANSACTIONS TREATED AS EXCESS BENEFIT TRANS- ACTIONS.—Section 4958(c), as amended by this Act, is amended 

by redesignating paragraph (3) as paragraph (4) and by inserting 

after paragraph (2) the following new paragraph: 

‘‘(3) SPECIAL RULES FOR SUPPORTING ORGANIZATIONS.— ‘‘(A) IN GENERAL.—In the case of any organization 

described in section 509(a)(3)—

‘‘(i) the term ‘excess benefit transaction’ includes—

‘‘(I) any grant, loan, compensation, or other 

similar payment provided by such organization to 

a person described in subparagraph (B), and 

‘‘(II) any loan provided by such organization 

to a disqualified person (other than an organization described in paragraph (1), (2), or (4) of section 

509(a)), and 

‘‘(ii) the term ‘excess benefit’ includes, with respect 

to any transaction described in clause (i), the amount 

of any such grant, loan, compensation, or other similar 

payment. 

‘‘(B) PERSON DESCRIBED.—A person is described in this 

subparagraph if such person is—

‘‘(i) a substantial contributor to such organization, 

‘‘(ii) a member of the family (determined under 

section 4958(f)(4)) of an individual described in clause 

(i), or 

‘‘(iii) a 35-percent controlled entity (as defined in 

section 4958(f)(3) by substituting ‘persons described 

in clause (i) or (ii) of section 4958(c)(3)(B)’ for ‘persons 

described in subparagraph (A) or (B) of paragraph 

(1)’ in subparagraph (A)(i) thereof). 

‘‘(C) SUBSTANTIAL CONTRIBUTOR.—For purposes of this 

paragraph—

‘‘(i) IN GENERAL.—The term ‘substantial contributor’ means any person who contributed or bequeathed 

an aggregate amount of more than $5,000 to the 
H. R. 4—326

organization, if such amount is more than 2 percent 

of the total contributions and bequests received by 

the organization before the close of the taxable year 

of the organization in which the contribution or bequest 

is received by the organization from such person. In 

the case of a trust, such term also means the creator 

of the trust. Rules similar to the rules of subparagraphs 

(B) and (C) of section 507(d)(2) shall apply for purposes 

of this subparagraph. 

‘‘(ii) EXCEPTION.—Such term shall not include any 

organization described in paragraph (1), (2), or (4) of 

section 509(a).’’. 

(c) EFFECTIVE DATES.— (1) SUBSECTION (a).—The amendments made by subsection 

(a) shall apply to transactions occurring after the date of the 

enactment of this Act. 

(2) SUBSECTION (b).—The amendments made by subsection 

(a) shall apply to transactions occurring after July 25, 2006. 

SEC. 1243. EXCESS BUSINESS HOLDINGS OF SUPPORTING ORGANIZATIONS. 

(a) IN GENERAL.—Section 4943, as amended by this Act, is 

amended by adding at the end the following new subsection: 

‘‘(f) APPLICATION OF TAX TO SUPPORTING ORGANIZATIONS.— ‘‘(1) IN GENERAL.—For purposes of this section, an organization which is described in paragraph (3) shall be treated as 

a private foundation. 

‘‘(2) EXCEPTION.—The Secretary may exempt the excess 

business holdings of any organization from the application of 

this subsection if the Secretary determines that such holdings 

are consistent with the purpose or function constituting the 

basis for its exemption under section 501. 

‘‘(3) ORGANIZATIONS DESCRIBED.—An organization is 

described in this paragraph if such organization is—

‘‘(A) a type III supporting organization (other than 

a functionally integrated type III supporting organization), 

or 

‘‘(B) an organization which meets the requirements 

of subparagraphs (A) and (C) of section 509(a)(3) and which 

is supervised or controlled in connection with one or more 

organizations described in paragraph (1) or (2) of section 

509(a), but only if such organization accepts any gift or 

contribution from any person described in section 

509(f)(2)(B). 

‘‘(4) DISQUALIFIED PERSON.— ‘‘(A) IN GENERAL.—In applying this section to any 

organization described in paragraph (3), the term ‘disqualified person’ means, with respect to the organization—

‘‘(i) any person who was, at any time during the 

5-year period ending on the date described in subsection (a)(2)(A), in a position to exercise substantial 

influence over the affairs of the organization, 

‘‘(ii) any member of the family (determined under 

section 4958(f)(4)) of an individual described in clause 

(i), 

‘‘(iii) any 35-percent controlled entity (as defined 

in section 4958(f)(3) by substituting ‘persons described 
H. R. 4—327

in clause (i) or (ii) of section 4943(f)(4)(A)’ for ‘persons 

described in subparagraph (A) or (B) of paragraph 

(1)’ in subparagraph (A)(i) thereof), 

‘‘(iv) any person described in section 4958(c)(3)(B), 

and 

‘‘(v) any organization—

‘‘(I) which is effectively controlled (directly or 

indirectly) by the same person or persons who 

control the organization in question, or 

‘‘(II) substantially all of the contributions to 

which were made (directly or indirectly) by the 

same person or persons described in subparagraph 

(B) or a member of the family (within the meaning 

of section 4946(d)) of such a person. 

‘‘(B) PERSONS DESCRIBED.—A person is described in 

this subparagraph if such person is—

‘‘(i) a substantial contributor to the organization 

(as defined in section 4958(c)(3)(C)), 

‘‘(ii) an officer, director, or trustee of the organization (or an individual having powers or responsibilities 

similar to those of the officers, directors, or trustees 

of the organization), or 

‘‘(iii) an owner of more than 20 percent of—

‘‘(I) the total combined voting power of a corporation, 

‘‘(II) the profits interest of a partnership, or 

‘‘(III) the beneficial interest of a trust or 

unincorporated enterprise, 

which is a substantial contributor (as so defined) to 

the organization. 

‘‘(5) TYPE III SUPPORTING ORGANIZATION; FUNCTIONALLY

INTEGRATED TYPE III SUPPORTING ORGANIZATION.—For purposes 

of this subsection—

‘‘(A) TYPE III SUPPORTING ORGANIZATION.—The term 

‘type III supporting organization’ means an organization 

which meets the requirements of subparagraphs (A) and 

(C) of section 509(a)(3) and which is operated in connection 

with one or more organizations described in paragraph 

(1) or (2) of section 509(a). 

‘‘(B) FUNCTIONALLY INTEGRATED TYPE III SUPPORTING

ORGANIZATION.—The term ‘functionally integrated type III 

supporting organization’ means a type III supporting 

organization which is not required under regulations established by the Secretary to make payments to supported 

organizations (as defined under section 509(f)(3)) due to 

the activities of the organization related to performing 

the functions of, or carrying out the purposes of, such 

supported organizations. 

‘‘(6) SPECIAL RULE FOR CERTAIN HOLDINGS OF TYPE III SUPPORTING ORGANIZATIONS.—For purposes of this subsection, the 

term ‘excess business holdings’ shall not include any holdings 

of a type III supporting organization in any business enterprise 

if, as of November 18, 2005, the holdings were held (and at 

all times thereafter, are held) for the benefit of the community 

pursuant to the direction of a State attorney general or a 

State official with jurisdiction over such organization. 
H. R. 4—328

‘‘(7) PRESENT HOLDINGS.—For purposes of this subsection, 

rules similar to the rules of paragraphs (4), (5), and (6) of 

subsection (c) shall apply to organizations described in section 

509(a)(3), except that—

‘‘(A) ‘the date of the enactment of this subsection’ shall 

be substituted for ‘May 26, 1969’ each place it appears 

in paragraphs (4), (5), and (6), and 

‘‘(B) ‘January 1, 2007’ shall be substituted for ‘January 

1, 1970’ in paragraph (4)(E).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after the date of the enactment of this Act. 

SEC. 1244. TREATMENT OF AMOUNTS PAID TO SUPPORTING ORGANIZATIONS BY PRIVATE FOUNDATIONS. 

(a) QUALIFYING DISTRIBUTIONS.—Paragraph (4) of section 

4942(g) is amended to read as follows: 

‘‘(4) LIMITATION ON DISTRIBUTIONS BY NONOPERATING PRIVATE FOUNDATIONS TO SUPPORTING ORGANIZATIONS.—

‘‘(A) IN GENERAL.—For purposes of this section, the 

term ‘qualifying distribution’ shall not include any amount 

paid by a private foundation which is not an operating 

foundation to—

‘‘(i) any type III supporting organization (as 

defined in section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as 

defined in section 4943(f)(5)(B)), and 

‘‘(ii) any organization which is described in 

subparagraph (B) or (C) if—

‘‘(I) a disqualified person of the private foundation directly or indirectly controls such organization or a supported organization (as defined in 

section 509(f)(3)) of such organization, or 

‘‘(II) the Secretary determines by regulations 

that a distribution to such organization otherwise 

is inappropriate. 

‘‘(B) TYPE I AND TYPE II SUPPORTING ORGANIZATIONS.—

An organization is described in this subparagraph if the 

organization meets the requirements of subparagraphs (A) 

and (C) of section 509(a)(3) and is—

‘‘(i) operated, supervised, or controlled by one or 

more organizations described in paragraph (1) or (2) 

of section 509(a), or 

‘‘(ii) supervised or controlled in connection with 

one or more such organizations. 

‘‘(C) FUNCTIONALLY INTEGRATED TYPE III SUPPORTING

ORGANIZATIONS.—An organization is described in this 

subparagraph if the organization is a functionally 

integrated type III supporting organization (as defined 

under section 4943(f)(5)(B)).’’. 

(b) TAXABLE EXPENDITURES.—Subparagraph (A) of section 

4945(d)(4) is amended to read as follows: 

‘‘(A) such organization—

‘‘(i) is described in paragraph (1) or (2) of section 

509(a), 
H. R. 4—329

‘‘(ii) is an organization described in section 

509(a)(3) (other than an organization described in 

clause (i) or (ii) of section 4942(g)(4)(A)), or 

‘‘(iii) is an exempt operating foundation (as defined 

in section 4940(d)(2)), or’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions and expenditures after the date of 

the enactment of this Act. 

SEC. 1245. RETURNS OF SUPPORTING ORGANIZATIONS. 

(a) REQUIREMENT TO FILE RETURN.—Subparagraph (B) of section 6033(a)(3) is amended by inserting ‘‘(other than an organization 

described in section 509(a)(3))’’ after ‘‘paragraph (1)’’. 

(b) MATTERS INCLUDED ON RETURNS.—Section 6033, as 

amended by this Act, is amended by redesignating subsection (l) 

as subsection (m) and by inserting after subsection (k) the following 

new subsection: 

‘‘(l) ADDITIONAL PROVISIONS RELATING TO SUPPORTING

ORGANIZATIONS.—Every organization described in section 509(a)(3) 

shall, on the return required under subsection (a)—

‘‘(1) list the supported organizations (as defined in section 

509(f)(3)) with respect to which such organization provides support, 

‘‘(2) indicate whether the organization meets the requirements of clause (i), (ii), or (iii) of section 509(a)(3)(B), and 

‘‘(3) certify that the organization meets the requirements 

of section 509(a)(3)(C).’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to returns filed for taxable years ending after the 

date of the enactment of this Act. 

TITLE XIII—OTHER PROVISIONS 

SEC. 1301. TECHNICAL CORRECTIONS RELATING TO MINE SAFETY. 

Section 110 of the Federal Mine Safety and Health Act of 

1977 (30 U.S.C. 820), as amended by the Mine Improvement and 

New Emergency Response Act of 2006 (Public Law 109–236), is 

amended—

(1) by striking subsection (d); and 

(2) in subsection (a)—

(A) by striking ‘‘(1)(1) The operator’’ and inserting ‘‘(1) 

The operator’’; 

(B) in the paragraph (2) added by section 8(a)(1)(B) 

of the Mine Improvement and New Emergency Response 

Act of 2006 (Public Law 109–236)—

(i) by striking ‘‘paragraph (1)’’ and inserting ‘‘subsection (a)(1)’’; and 

(ii) by redesignating such paragraph as subsection 

(d) and transferring such subsection so as to appear 

after subsection (c); and 

(3) in subsection (b)—

(A) by striking ‘‘Any operator’’ and inserting ‘‘(1) Any 

operator’’; and 

(B) in the second sentence, as added by section 8(a)(2) 

of the Mine Improvement and New Emergency Response 
H. R. 4—330

Act of 2006 (Public Law 109–236), by striking ‘‘Violations’’ 

and inserting the following: 

‘‘(2) Violations’’. 

SEC. 1302. GOING-TO-THE-SUN ROAD. 

(a) IN GENERAL.—Section 1940 of the Safe, Accountable, 

Flexible, Efficient Transportation Equity Act: A Legacy for Users 

(119 Stat. 1511) is amended—

(1) in subsection (a)—

(A) by striking paragraphs (1) and (2); 

(B) by redesignating paragraphs (3) through (5) as 

paragraphs (1) through (3), respectively; and (C) by striking ‘‘$10,000,000’’ each place that it appears and inserting ‘‘$16,666,666’’; and 

(2) by adding at the end the following: 

‘‘(c) CONTRACT AUTHORITY.—Except as otherwise provided in 

this section, funds authorized to be appropriated under this section 

shall be available for obligation in the same manner as if the 

funds were apportioned under chapter 1 of title 23, United States 

Code.’’. 

(b) RESCISSION.—Section 10212 of the Safe, Accountable, 

Flexible, Efficient Transportation Equity Act: A Legacy for Users 

(119 Stat. 1937) is amended by striking ‘‘$8,543,000,000’’ each place 

it appears and inserting ‘‘$8,593,000,000’’. 

SEC. 1303. EXCEPTION TO THE LOCAL FURNISHING REQUIREMENT 

OF THE TAX-EXEMPT BOND RULES. 

(a) SNETTISHAM HYDROELECTRIC FACILITY.—For purposes of 

determining whether any private activity bond issued before May 

31, 2006, and used to finance the acquisition of the Snettisham 

hydroelectric facility is a qualified bond for purposes of section 

142(a)(8) of the Internal Revenue Code of 1986, the electricity 

furnished by such facility to the City of Hoonah, Alaska, shall 

not be taken into account for purposes of section 142(f)(1) of such 

Code. 

(b) LAKE DOROTHY HYDROELECTRIC FACILITY.—For purposes 

of determining whether any private activity bond issued before 

May 31, 2006, and used to finance the Lake Dorothy hydroelectric 

facility is a qualified bond for purposes of section 142(a)(8) of 

the Internal Revenue Code of 1986, the electricity furnished by 

such facility to the City of Hoonah, Alaska, shall not be taken 

into account for purposes of paragraphs (1) and (3) of section 142(f) 

of such Code. 

(c) DEFINITIONS.—For purposes of this section—

(1) LAKE DOROTHY HYDROELECTRIC FACILITY.—The term 

‘‘Lake Dorothy hydroelectric facility’’ means the hydroelectric 

facility located approximately 10 miles south of Juneau, Alaska, 

and commonly referred to as the ‘‘Lake Dorothy project’’. 

(2) SNETTISHAM HYDROELECTRIC FACILITY.—The term 

‘‘Snettisham hydroelectric facility’’ means the hydroelectric 

project described in section 1804 of the Small Business Job 

Protection Act of 1996. 

SEC. 1304. QUALIFIED TUITION PROGRAMS. 

(a) PERMANENT EXTENSION OF MODIFICATIONS.—Section 901 

of the Economic Growth and Tax Relief Reconciliation Act of 2001 

(relating to sunset provisions) shall not apply to section 402 of 

such Act (relating to modifications to qualified tuition programs). 
H. R. 4—331

(b) REGULATORY AUTHORITY TO PREVENT ABUSE.—Section 529 

(relating to qualified tuition programs) is amended by adding at 

the end the following new subsection: 

‘‘(f) REGULATIONS.—Notwithstanding any other provision of this 

section, the Secretary shall prescribe such regulations as may be 

necessary or appropriate to carry out the purposes of this section 

and to prevent abuse of such purposes, including regulations under 

chapters 11, 12, and 13 of this title.’’. 

TITLE XIV—TARIFF PROVISIONS 

SEC. 1401. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This title may be cited as the ‘‘Miscellaneous 

Trade and Technical Corrections Act of 2006’’. 

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

is as follows:

TITLE XIV—TARIFF PROVISIONS 

Sec. 1401. Short title; table of contents. 

Sec. 1402. Reference. 

Subtitle A—Temporary Duty Suspensions and Reductions 

CHAPTER 1—NEW DUTY SUSPENSIONS AND REDUCTIONS

Sec. 1411. Certain non-knit gloves designed for use by auto mechanics. 

Sec. 1412. Certain microphones for use in automotive interiors. 

Sec. 1413. Acrylic or modacrylic synthetic filament tow. 

Sec. 1414. Acrylic or modacrylic synthetic staple fibers, carded, combed, or otherwise processed for spinning. 

Sec. 1415. Nitrocellulose. 

Sec. 1416. Potassium sorbate. 

Sec. 1417. Sorbic acid. 

Sec. 1418. Certain capers. 

Sec. 1419. Certain pepperoncini prepared or preserved otherwise than by vinegar 

or acetic acid. 

Sec. 1420. Certain capers. 

Sec. 1421. Certain pepperoncini prepared or preserved by vinegar or acetic acid in 

concentrations at 0.5 percent or greater. 

Sec. 1422. Certain pepperoncini prepared or preserved otherwise than by vinegar 

or acetic acid in concentrations less than 0.5 percent. 

Sec. 1423. Chloral. 

Sec. 1424. Imidacloprid technical (imidacloprid). 

Sec. 1425. Triadimefon. 

Sec. 1426. Polyethylene HE1878. 

Sec. 1427. Thiacloprid. 

Sec. 1428. Pyrimethanil. 

Sec. 1429. Foramsulfuron. 

Sec. 1430. Fenamidone. 

Sec. 1431. Cyclanilide technical. 

Sec. 1432. Para-benzoquinone. 

Sec. 1433. O-Anisidine. 

Sec. 1434. 2,4-Xylidine. 

Sec. 1435. Crotonaldehyde. 

Sec. 1436. Butanedioic acid, dimethyl ester, polymer with 4-hydroxy-2,2,6,6,-

tetramethyl-1-piperidineethanol. 

Sec. 1437. Mixtures of CAS Nos. 106990-43-6 and 65447-77-0. 

Sec. 1438. MCPA. 

Sec. 1439. Bronate advanced. 

Sec. 1440. Bromoxynil octanoate tech. 

Sec. 1441. Bromoxynil meo. 

Sec. 1442. Hydraulic control units. 

Sec. 1443. Shield asy-steering gear. 

Sec. 1444. 2,4-Dichloroaniline. 

Sec. 1445. 2-Acetylbutyrolactone. 

Sec. 1446. Alkylketone. 

Sec. 1447. Cyfluthrin (baythroid). 
H. R. 4—332

Sec. 1448. Beta-cyfluthrin. 

Sec. 1449. Cyclopropane-1,1-dicarboxylic acid, dimethyl ester. 

Sec. 1450. Spiroxamine. 

Sec. 1451. Spiromesifen. 

Sec. 1452. 4-Chlorobenzaldehyde. 

Sec. 1453. Oxadiazon. 

Sec. 1454. NAHP. 

Sec. 1455. Phosphorus thiochloride. 

Sec. 1456. Trifloxystrobin. 

Sec. 1457. Phosphoric acid, lanthanum salt, cerium terbium-doped. 

Sec. 1458. Lutetium oxide. 

Sec. 1459. ACM. 

Sec. 1460. Permethrin. 

Sec. 1461. Thidiazuron. 

Sec. 1462. Flutolanil. 

Sec. 1463. Resmethrin. 

Sec. 1464. Clothianidin. 

Sec. 1465. Certain master cylinder assembles. 

Sec. 1466. Certain transaxles. 

Sec. 1467. Converter asy. 

Sec. 1468. Module and bracket asy-power steering. 

Sec. 1469. Unit asy-battery hi volt. 

Sec. 1470. Certain articles of natural cork. 

Sec. 1471. Glyoxylic acid. 

Sec. 1472. Cyclopentanone. 

Sec. 1473. Mesotrione technical. 

Sec. 1474. Malonic acid-dinitrile 50% NMP. 

Sec. 1475. Formulations of NOA 446510. 

Sec. 1476. DEMBB distilled-ISO tank. 

Sec. 1477. Methylionone. 

Sec. 1478. Certain acrylic fiber tow. 

Sec. 1479. Certain acrylic fiber tow. 

Sec. 1480. MKH 6561 isocyanate. 

Sec. 1481. Endosulfan. 

Sec. 1482. Tetraconazole. 

Sec. 1483. M-alcohol. 

Sec. 1484. Certain machines for use in the assembly of motorcycle wheels. 

Sec. 1485. Deltamethrin. 

Sec. 1486. Palm fatty acid distillate. 

Sec. 1487. 4-Methoxy-2-methyldiphenylamine. 

Sec. 1488. 2-Methylhydroquinone. 

Sec. 1489. 1-Fluoro-2-nitrobenzene. 

Sec. 1490. Cosmetic bags with a flexible outer surface of reinforced or laminated 

polyvinyl chloride (PVC). 

Sec. 1491. Mixtures of methyl 4-iodo-2-[3-(4-methoxy-6-methyl-1,3,5-triazin-2-

yl)ureidosulfonyl]benzoate, sodium salt (iodosulfuron methyl, sodium 

salt). 

Sec. 1492. Ethyl 4,5-dihydro-5,5-diphenyl-1,2-oxazole-3-carboxylate (isoxadifenethyl). 

Sec. 1493. (5-cyclopropyl-4-isoxazolyl)[2-(methylsulfonyl)–4-

(trifluoromethyl)phenyl]methanone (isoxaflutole). 

Sec. 1494. Methyl 2-[(4,6-dimethoxypyrimidin-2-ylcarbamoyl)sulfamoyl]-α-

(methanesulfonamido)-p-toluate (mesosulfuron-methyl) whether or not 

mixed with application adjuvants. 

Sec. 1495. Mixtures of foramsulfuron and iodosulfuron-methyl-sodium. 

Sec. 1496. Vulcuren UPKA 1988. 

Sec. 1497. Vullcanox 41010 NA/LG. 

Sec. 1498. Vulkazon AFS/LG. 

Sec. 1499. P-Anisaldehyde. 

Sec. 1500. 1,2-Pentanediol. 

Sec. 1501. Agrumex. 

Sec. 1502. Cohedur RL. 

Sec. 1503. Formulations of prosulfuron. 

Sec. 1504. Lewatit. 

Sec. 1505. Para-Chlorophenol. 

Sec. 1506. Cypermethrin. 

Sec. 1507. Ion-exchange resin powder. 

Sec. 1508. Ion-exchange resin powder. 

Sec. 1509. Desmodur E 14. 

Sec. 1510. Desmodur VP LS 2253. 

Sec. 1511. Desmodur R-E. 

Sec. 1512. Walocel MW 3000 PFV. 
H. R. 4—333

Sec. 1513. TSME. 

Sec. 1514. Walocel VP-M 20660. 

Sec. 1515. Xama 2. 

Sec. 1516. Xama 7. 

Sec. 1517. Certain cases for toys. 

Sec. 1518. Certain cases for toys. 

Sec. 1519. Aniline 2.5-disulfonic acid. 

Sec. 1520. 1,4-benzenedicarboxylic acid, polymer with n,n′-bis(2-aminoethyl)–1,2-

ethanediamine, cyclized, methosulfate. 

Sec. 1521. Sulfur blue 7. 

Sec. 1522. Formaldehyde, reaction products with 1,4-benzenediol and mphenylenediamine, sulfurized. 

Sec. 1523. Isocyanatosulfonyl. 

Sec. 1524. Isocyanatosulfonyl. 

Sec. 1525. Gemifloxacin, gemifloxacin mesylate, and gemifloxacin mesylate 

sesquihydrate. 

Sec. 1526. Butralin. 

Sec. 1527. Spirodiclofen. 

Sec. 1528. Propamocarb HCL (PREVICUR). 

Sec. 1529. Desmodur IL. 

Sec. 1530. Chloroacetone. 

Sec. 1531. IPN (isophthalonitrile). 

Sec. 1532. NOA 446510 technical. 

Sec. 1533. Hexythiazox technical. 

Sec. 1534. Crelan (self-blocked cycloaliphatic polyuretdione). 

Sec. 1535. Aspirin. 

Sec. 1536. Desmodur BL XP 2468. 

Sec. 1537. Desmodur RF-E. 

Sec. 1538. Desmodur HL. 

Sec. 1539. D-Mannose. 

Sec. 1540. Certain camel hair. 

Sec. 1541. Waste of camel hair. 

Sec. 1542. Certain camel hair. 

Sec. 1543. Woven fabric of vicuna hair. 

Sec. 1544. Certain camel hair. 

Sec. 1545. Noils of camel hair. 

Sec. 1546. Chloroacetic acid, ethyl ester. 

Sec. 1547. Chloroacetic acid, sodium salt. 

Sec. 1548. Low expansion laboratory glass. 

Sec. 1549. Stoppers, lids, and other closures. 

Sec. 1550. Pigment yellow 213. 

Sec. 1551. Indoxacarb. 

Sec. 1552. Dimethyl carbonate. 

Sec. 1553. 5-Chloro-1-indanone (EK179). 

Sec. 1554. Mixtures of famoxadone and cymoxanil. 

Sec. 1555. Decanedioic acid, bis(2,2,6,6-tetramethyl-4-piperidinyl) ester. 

Sec. 1556. Acid blue 80. 

Sec. 1557. Pigment brown 25. 

Sec. 1558. Formulations of azoxystrobin. 

Sec. 1559. Formulations of pinoxaden/cloquintocet. 

Sec. 1560. Mixtures of difenoconazole/mefenoxam. 

Sec. 1561. Fludioxinil technical. 

Sec. 1562. Mixtures of clodinafop-propargyl. 

Sec. 1563. Avermectin b, 1,4′′-deoxy-4′′-methylamino-, (4′′r)-, benzoate. 

Sec. 1564. Cloquintocet-mexyl. 

Sec. 1565. Metalaxyl-M technical. 

Sec. 1566. Cyproconazole technical. 

Sec. 1567. Pinoxaden technical. 

Sec. 1568. Mixtures of tralkoxydim. 

Sec. 1569. Certain chemicals. 

Sec. 1570. Mixtures of ( ± )–(cis and trans)–1-[[2-(2,4-dichlorophenyl)–4-propyl-1,3-

dioxolan-2-yl]-methyl]-1h-1,2,4-triazole. 

Sec. 1571. Paraquat dichloride. 

Sec. 1572. Certain basketballs. 

Sec. 1573. Certain leather basketballs. 

Sec. 1574. Certain rubber basketballs. 

Sec. 1575. Certain volleyballs. 

Sec. 1576. 4-Chloro-3-[[3-(4-methoxyphenyl)–1,3-dioxopropyl]-amino]-dodecyl ester. 

Sec. 1577. Linuron. 

Sec. 1578. N,N-Dimethylpiperidinium chloride (mepiquat chloride). 

Sec. 1579. Diuron. 

Sec. 1580. Formulated product Krovar I DF. 
H. R. 4—334

Sec. 1581. Triasulfuron technical. 

Sec. 1582. Brodifacoum technical. 

Sec. 1583. Pymetrozine technical. 

Sec. 1584. Formulations of thiamethoxam, difenoconazole, fludioxinil, and 

mefenoxam. 

Sec. 1585. Trifloxysulfuron-sodium technical. 

Sec. 1586. 2 Benzylthio-3-ethyl sulfonyl pyridine. 

Sec. 1587. 2-Amino-4-methoxy-6-methyl-1,3,5-triazine. 

Sec. 1588. Formulated products containing mixtures of the active ingredient 2-

chloro-n-[[(4-methoxy-6-methyl-1,3,5-triazin-2yl) amino]carbonyl] 

benzenesulfonamide and application adjuvants. 

Sec. 1589. 2-methyl-4-methoxy-6-methylamino-1,3,5-triazine. 

Sec. 1590. Mixtures of sodium-2-chloro-6-[(4,6 dimethoxypyrimidin-2-

yl)thio]benzoate and application adjuvants (pyrithiobac-sodium). 

Sec. 1591. Certain decorative plates, decorative sculptures, decorative plaques, and 

architectural miniatures. 

Sec. 1592. Certain music boxes. 

Sec. 1593. 2-Methyl-4-chlorophenoxyacetic acid. 

Sec. 1594. Phenmedipham. 

Sec. 1595. Desmedipham. 

Sec. 1596. Certain footwear with open toes or heels. 

Sec. 1597. Certain work footwear. 

Sec. 1598. Certain refracting and reflecting telescopes. 

Sec. 1600. Certain work footwear. 

Sec. 1601. Certain footwear for men. 

Sec. 1602. Certain rubber or plastic footwear. 

Sec. 1604. Zinc dimethyldithiocarbamate. 

Sec. 1605. Certain liquid crystal device (LCD) panel assemblies. 

Sec. 1606. Certain watertube boilers and reactor vessel heads. 

CHAPTER 2—EXISTING DUTY SUSPENSIONS AND REDUCTIONS

Sec. 1611. Extension of certain existing duty suspensions and reductions. 

Subtitle B—Other Tariff Provisions 

CHAPTER 1—LIQUIDATION OR RELIQUIDATION OF CERTAIN ENTRIES

Sec. 1621. Certain tramway cars and associated spare parts. 

Sec. 1622. Reliquidation of certain entries of candles. 

Sec. 1623. Certain entries of roller chain. 

Sec. 1624. Certain entries of soundspa clock radios. 

CHAPTER 2—MISCELLANEOUS PROVISIONS

Sec. 1631. Vessel repair duties. 

Sec. 1632. Suspension of new shipper review provision. 

Sec. 1633. Extension and modification of duty suspension on wool products; wool 

research fund; wool duty refunds. 

Sec. 1634. Authorities relating to DR–CAFTA Agreement. 

Sec. 1635. Technical amendments to Customs modernization. 

Subtitle C—Effective Date 

Sec. 1641. Effective date.

SEC. 1402. REFERENCE. 

Except as otherwise expressly provided, whenever in this title 

an amendment or repeal is expressed in terms of an amendment 

to, or repeal of, a chapter, subchapter, note, additional U.S. note, 

heading, subheading, or other provision, the reference shall be 

considered to be made to a chapter, subchapter, note, additional 

U.S. note, heading, subheading, or other provision of the Harmonized Tariff Schedule of the United States (19 U.S.C. 3007). 
H. R. 4—335

Subtitle A—Temporary Duty Suspensions 

and Reductions 

CHAPTER 1—NEW DUTY SUSPENSIONS AND 

REDUCTIONS 

SEC. 1411. CERTAIN NON-KNIT GLOVES DESIGNED FOR USE BY AUTO 

MECHANICS. 

(a) IN GENERAL.—Subchapter II of chapter 99 is amended by 

inserting in numerical sequence the following new headings:

‘‘ 9902.14.01 Mechanics’ work gloves, 

valued not over $3.50 per 

pair (provided for in subheading 6216.00.58) ......... 2.8% No change No change On or before 

12/31/2009

9902.14.02 Mechanics’ work gloves, 

valued over $3.50 but not 

over $3.70 per pair (provided for in subheading 

6216.00.58) ........................ 2.8% No change No change On or before 

12/31/2009 ’’. 

9902.14.03 Mechanics’ work gloves, 

valued over $3.70 but not 

over $4.99 per pair (provided for in subheading 

6216.00.58) ........................ 2.8% No change No change On or before 

12/31/2009 ’’. 

9902.14.04 Mechanics’ work gloves, 

valued over $4.99 but not 

over $7.72 per pair (provided for in subheading 

6216.00.58) ........................ 2.8% No change No change On or before 

12/31/2009 ’’. 

9902.14.05 Mechanics’ work gloves, 

valued over $7.72 per pair 

(provided for in subheading 6216.00.58) ......... 2.8% No change No change On or before 

12/31/2009 ’’. 

(b) AMENDMENT TO U.S. NOTES.—Subchapter II of chapter 99 

is amended by adding at the end of the U.S. Notes to such subchapter the following new U.S. Note: 

‘‘18. For purposes of headings 9902.14.01, 9902.14.02, 

9902.14.03, 9902.14.04, and 9902.14.05, the term ‘mechanics’ work 

gloves’ means gloves, of man-made fibers, having synthetic leather 

palms and fingers; fourchettes of synthetic leather or of fabric 

of nylon or elastomeric yarn; backs comprising either one layer 

of knitted fabric of elastomeric yarn or three layers, with the 

outer layer of knitted fabric of elastomeric yarn, the center layer 

of foam and the inner layer of tricot fabric; the foregoing, whether 

or not including an thermoplastic rubber logo or pad on the back; 

and elastic wrist straps with molded thermoplastic rubber hookand-loop enclosures.’’. 

SEC. 1412. CERTAIN MICROPHONES FOR USE IN AUTOMOTIVE INTERIORS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—336

‘‘ 9902.10.17 Unidirectional (cardioid) 

electret condenser microphone modules for use in 

motor vehicles provided 

for in headings 8701 

through 8705 (other than 

such modules designed for 

handheld, microphone 

stand, or lapel use), the 

foregoing each including 

wire leads for external 

connection, whether or not 

including a multi-pin 

board level type connector 

but not including a battery compartment; having 

a typical frequency response of 250 Hertz 

through 7,000 Hertz with 

no more than a 20 decibel 

deviation in that frequency range and an electrostatic discharge immunity of 4,000 V (contact) 

and 8,000 V (air); and capable of operation and 

storage in the temperature range of -40°C 

through 85°C and a humidity of not over 95 percent (provided for in subheading 8518.10.80) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1413. ACRYLIC OR MODACRYLIC SYNTHETIC FILAMENT TOW. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.21 Synthetic filament tow: 

acrylic or modacrylic (provided for in subheading 

5501.30.00) ........................ 6.8% No change No change On or before 

12/31/2009 ’’. 

SEC. 1414. ACRYLIC OR MODACRYLIC SYNTHETIC STAPLE FIBERS, 

CARDED, COMBED, OR OTHERWISE PROCESSED FOR 

SPINNING. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.22 Synthetic staple fibers, 

carded, combed, or otherwise processed for spinning: acrylic or modacrylic 

(provided for in subheading 5506.30.00) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1415. NITROCELLULOSE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.23 Cellulose nitrates (nitrocellulose, including collodions) (CAS 9004-70-0) 

(provided for in subheading 3912.20.00) ......... 4.4% No change No change On or before 

12/31/2009 ’’. 

SEC. 1416. POTASSIUM SORBATE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—337

‘‘ 9902.10.24 Potassium sorbate (CAS 

No. 24634–61–5) (provided for in subheading 

2916.19.10) ........................ 1.4% No change No change On or before 

12/31/2009 ’’. 

SEC. 1417. SORBIC ACID. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.25 Sorbic acid (CAS No. 110–

44–1) (provided for in subheading 2916.19.20) ......... 1.9% No change No change On or before 

12/31/2009 ’’. 

SEC. 1418. CERTAIN CAPERS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.26 Capers, prepared or preserved by vinegar other 

than such goods in immediate containers each 

holding 3.4 kg or less 

(provided for in subheading 2001.90.20) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1419. CERTAIN PEPPERONCINI PREPARED OR PRESERVED 

OTHERWISE THAN BY VINEGAR OR ACETIC ACID. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.27 Pepperoncini, prepared or 

preserved otherwise than 

by vinegar, not frozen 

(provided for in subheading 2005.90.55) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1420. CERTAIN CAPERS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.28 Capers, prepared or preserved by vinegar in immediate containers each 

holding more than 3.4 kg 

(provided for in subheading 2001.90.10) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1421. CERTAIN PEPPERONCINI PREPARED OR PRESERVED BY 

VINEGAR OR ACETIC ACID IN CONCENTRATIONS AT 0.5 

PERCENT OR GREATER. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.29 Pepperoncini, prepared or 

preserved by vinegar (provided for in subheading 

2001.90.38) ........................ 2.2% No change No change On or before 

12/31/2009 ’’. 
H. R. 4—338

SEC. 1422. CERTAIN PEPPERONCINI PREPARED OR PRESERVED 

OTHERWISE THAN BY VINEGAR OR ACETIC ACID IN CONCENTRATIONS LESS THAN 0.5 PERCENT. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.30 Giardiniera, prepared or 

preserved otherwise than 

by vinegar, not frozen 

(provided for in subheading 2005.90.55) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1423. CHLORAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.31 Trichloroacetaldehyde 

(CAS No. 75–87–6) (provided for in subheading 

2913.00.50) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1424. IMIDACLOPRID TECHNICAL (IMIDACLOPRID). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.32 1-[(6-Chloro-3-

pyrdinyl)methyl]-N-nitro2-imidazolidinimine 

(Imidacloprid) (CAS No. 

138261–41–3) (provided 

for in subheading 

2933.39.27) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1425. TRIADIMEFON. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.33 1-(4-Chlorophenoxy)–3,3-

dimethyl-1-(1H-1,2,4-

triazol-1-y1)–2-butanone 

(CAS No. 43121–43–3) 

(Triadimefon) (provided 

for in subheading 

2933.99.22) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1426. POLYETHYLENE HE1878. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.34 Polyethylene HE1878 

(CAS No. 25087–34–7), 

with l-butene as comonomer (provided for in subheading 3901.20.50) ......... 3.6% No change No change On or before 

12/31/2009 ’’. 

SEC. 1427. THIACLOPRID. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—339

‘‘ 9902.10.35 (Z)-[3-[(6-chloro-3-

pyridinyl)methyl]-2-

thiazolidinylidene]cyanamide (thiacloprid) 

(CAS No. 111988–49–9) 

(provided for in subheading 2934.10.10) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1428. PYRIMETHANIL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.36 4,6-Dimethyl-N-phenyl-2-

pyrimidinamine 

(pyrimethanil) (CAS No. 

53112–28–0) (provided for 

in subheading 2933.59.15) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1429. FORAMSULFURON. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.37 Foramsulfuron (Benzamide, 2-(((((4,6-

dimethoxy-2-

pyrimidinyl)amino) carbonyl)amino)sulfonyl)–4-

(formylamino)- N,N-dimethyl-,) (CAS No. 

173159–57–4), in bulk or 

put up in forms or packaging for retail sale (provided for in subheading 

2935.00.75 or 3808.30.15) 2.6% No change No change On or before 

12/31/2009 ’’. 

SEC. 1430. FENAMIDONE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.38 (5S)–3,5-Dihydro-5- methyl-2-(methylthio)- 5-

phenyl-3-(phenylamino)- 

4H-imidazol-4-one 

(Fenamidone) (CAS No. 

161326–34–7) (provided 

for in subheading 

2933.29.35) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1431. CYCLANILIDE TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.39 1-(2,4-

Dichlorophenylaminocarbonyl)cyclopropanecarboxylic acid 

(Cyclanilide) (CAS No. 

113136–77–9) (provided 

for in subheading 

2924.29.47) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1432. PARA-BENZOQUINONE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—340

‘‘ 9902.10.40 1,4-Benzoquinone (CAS 

No. 106–51–4) (provided 

for in subheading 

2914.69.90) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1433. O-ANISIDINE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.41 o-Anisidine (CAS No. 90–

04–4) (provided for in subheading 2922.22.10) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1434. 2,4-XYLIDINE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.43 2,4-Xylidine (CAS No. 95–

68–1) (provided for in subheading 2921.49.10) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1435. CROTONALDEHYDE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.44 Crotonaldehyde (2-

butenaldehyde) (CAS No. 

4170–30–3) (provided for 

in subheading 2912.19.50) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1436. BUTANEDIOIC ACID, DIMETHYL ESTER, POLYMER WITH 4-

HYDROXY-2,2,6,6,-TETRAMETHYL-1-PIPERIDINEETHANOL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.47 Butanedioic acid, dimethyl ester, polymer 

with 4-hydroxy-2,2,6,6,-

tetramethyl-1-

piperidineethanol (CAS 

No. 65447–77–0) (provided for in subheading 

3907.99.00) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1437. MIXTURES OF CAS NOS. 106990-43-6 AND 65447-77-0. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—341

‘‘ 9902.10.48 1,3,5-Triazine-2,4,6-triamine, N,N′′′-[1,2-

ethanediylbis[[[4,6-

bis[butyl (1,2,2,6,6-

pentamethyl-4-

piperidinyl)amino]-1,3,5-

triazine-2-yl]imino]-3,1-

propanediyl]]bis[N′,N′′-

dibutyl-N′,N′′-

bis(1,2,2,6,6-pentamethyl4-piperidinyl)- (CAS No. 

106990–43–6) and 

Butanedioic acid, 

dimethylester polymer 

with 4-hyroxy-2,2,6,6-

tetramethyl-1-piperdine 

ethanol (CAS No. 65447–

77–0) (Provided for in 

subheading 3812.30.90) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1438. MCPA. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.54 2-Ethylhexyl (4-chloro-2-

methylphenoxy)acetate 

(CAS No. 29450–45–1) 

(provided for in subheading 2918.90.20) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1439. BRONATE ADVANCED. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.55 Formulations of 2,6-

dibromo-4-cyanophenyl octanoate (CAS No. 1689–

99–2), 2, 6-dibromo-4-

cyanophenyl heptanoate 

(CAS No. 56634–95–8), 

and 2-ethylhexyl (4-

chloro-2-

methylphenoxy)acetate 

(CAS No. 29450–45–1) 

(provided for in subheading 3808.30.15) ......... 2.8% No change No change On or before 

12/31/2009 ’’. 

SEC. 1440. BROMOXYNIL OCTANOATE TECH. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.56 2,6-dibromo-4-

cyanophenyl octanoate 

(CAS No. 1689–99–2) 

(provided for in subheading 2926.90.25) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1441. BROMOXYNIL MEO. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—342

‘‘ 9902.10.57 2,6-Dibromo-4-

cyanophenyl octanoate/

heptanoate (CAS Nos. 

1689–99–2 and 56634–95–

8) (provided for in subheading 3808.30.15) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1442. HYDRAULIC CONTROL UNITS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.62 Hydraulic control units 

designed for use in braking systems of hybrid 

motor vehicles of heading 

8703 (provided for in subheading 9032.89.60) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1443. SHIELD ASY-STEERING GEAR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.63 Steering gear assemblies 

for single-pinion constantratio electronic power assisted steering systems 

rated at 80 amperes at 

12V, the foregoing designed for use in hybrid 

motor vehicles of heading 

8703 (provided for in subheading 8708.99.73) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1444. 2,4-DICHLOROANILINE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.64 2,4-Dichloroaniline (CAS 

No. 554–00–7) (provided 

for in subheading 

2921.42.18) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1445. 2-ACETYLBUTYROLACTONE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.65 2-Acetylbutyrolactone 

(CAS No. 517–23–7) (provided for in subheading 

2932.29.50) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1446. ALKYLKETONE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.66 1-(4-Chlorophenyl)–4, 4-

dimethyl-3-pentanone 

(CAS No. 66346–01–8) 

(provided for in subheading 2914.70.40) ......... Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—343

SEC. 1447. CYFLUTHRIN (BAYTHROID). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.67 Cyano(4-fluoro-3-

phenoxyphenyl)methyl 3-

(2,2-dichloroethenyl)–2,2-

dimethylcyclopropanecarboxylate (Cyfluthrin, excluding β-Cyfluthrin) 

(CAS No. 68359–37–5) 

(provided for in subheading 2926.90.30) ......... 3.5% No change No change On or before 

12/31/2009 ’’. 

SEC. 1448. BETA-CYFLUTHRIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.68 Reaction mixture comprising the enantiomeric 

pair (R)-α-cyano-4-fluoro3-phenoxybenzyl (1S,3S)–

3-(2,2-dichlorovinyl)–2,2-

dimethylcyclopropanecarboxylate and (S)-α-cyano-4-

fluoro-3-phenoxybenzyl 

(1R,3R)–3-(2,2-

dichlorovinyl)–2,2-

dimethylcyclopropanecarboxylate in ratio 1:2 with 

the enantiomeric pair (R)-

α-cyano-4-fluoro-3-

phenoxybenzyl (1S,3R)–3-

(2,2-dichlorovinyl)–2,2-

dimethylcyclopropanecarboxylate and (S)-α-cyano-4-

fluoro-3-phenoxybenzyl 

(1R,3S)–3-(2,2-

dichlorovinyl)–2,2-

dimethylcyclopropanecarboxylate (β-Cyfluthrin) 

(CAS No. 68359–37–5) 

(provided for in subheading 2926.90.30) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1449. CYCLOPROPANE-1,1-DICARBOXYLIC ACID, DIMETHYL ESTER. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.69 Cyclopropane-1,1-

dicarboxylic acid, dimethyl ester (CAS No. 

6914–71–2) (provided for 

in subheading 2917.20.00) 1.8% No change No change On or before 

12/31/2009 ’’. 

SEC. 1450. SPIROXAMINE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.70 8-(1,1-Dimethylethyl)-Nethyl-N-propyl-1,4-

dioxaspiro[4,5]decane-2-

methanamine (CAS 

118134–30–8) (provided 

for in subheading 

2932.99.90) ........................ Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—344

SEC. 1451. SPIROMESIFEN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.71 3,3-Dimethylbutanoic 

acid, 2-oxo-3-(2,4,6-

trimethylphenyl)–1-

oxaspiro[4.4]non-3-en-yl 

ester (CAS 283594–90–1) 

(provided for in subheading 2932.29.10) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1452. 4-CHLOROBENZALDEHYDE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.72 4-Chlorobenzaldehyde 

(CAS No. 104–88–1) (provided for in subheading 

2913.00.40) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1453. OXADIAZON. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.73 5-tert-butyl-3-(2,4-

dichloro-5-

isopropoxyphenyl)–1,3,4-

oxadiazol-2(3H)-one 

(Oxadiazon) (CAS No. 

19666–30–9) (provided for 

in subheading 2934.99.11) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1454. NAHP. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.74 2-(1,1-Dimethylethyl)–5-

hydroxypyrimidine, sodium salt (CAS No. 

146237–62–9) (provided 

for in subheading 

2933.59.70) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1455. PHOSPHORUS THIOCHLORIDE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.75 Phosphorus Thiochloride 

(CAS No. 3982–91–0) 

(provided for in subheading 2851.00.00) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1456. TRIFLOXYSTROBIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—345

‘‘ 9902.10.76. Methyl (E)-methoxyimino-

{(E)-α-[1-(α,α,α-trifluoromtolyl)ethylideneaminooxy]-

o-tolyl}acetate 

(Trifloxystrobin) (CAS No. 

141517–21–7) (provided 

for in subheading 

2929.90.20) ........................ 2.4% No change No change On or before 

12/31/2009 ’’. 

SEC. 1457. PHOSPHORIC ACID, LANTHANUM SALT, CERIUM TERBIUMDOPED. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.77 Phosphoric acid, lanthanum salt, cerium terbium-doped (CAS No. 

95823–34–0) (provided for 

in subheading 2846.90.80) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1458. LUTETIUM OXIDE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.78 Lutetium oxide (CAS No. 

12032–20–1) (provided for 

in subheading 2846.90.80) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1459. ACM. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.79 (3-Acetoxy-3-cyanopropyl) 

methylphosphinic acid, 

butyl ester (CAS No. 

167004–78–6) (provided 

for in subheading 

2931.00.90) ........................ 0.7% No change No change On or before 

12/31/2009 ’’. 

SEC. 1460. PERMETHRIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.80 (3-Phenoxyphenyl)methyl 

3-(2,2-dichloroethenyl)–

2,2-

dimethylcyclopropanecarboxylate (Permethrin) (CAS 

No. 52645–53–1) (provided for in subheading 

2916.20.50) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1461. THIDIAZURON. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—346

‘‘ 9902.10.81 N-Phenyl-N -(1,2,3-

thiadiazol-5-yl)urea 

(Thidiazuron) CAS No. 

51707–55–2), whether or 

not mixed with application adjuvants (provided 

for in subheading 

2934.99.15 or 3808.30.15) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1462. FLUTOLANIL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.82 N-[3-(1-

Methylethoxy)phenyl]-2-

(trifluoromethyl)benzamide (Flutolanil) 

(CAS No. 66332–96–5) 

(provided for in subheading 2924.29.47) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1463. RESMETHRIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.83 [5-(Phenylmethyl)–3-

furanyl]methyl 2,2-dimethyl-3-(2-methyl-1-propenyl) 

cyclopropanecarboxylate 

(Resmethrin) (CAS No. 

10453–86–8) (provided for 

in subheading 2932.19.10) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1464. CLOTHIANIDIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.84 (E)–1-(2-Chloro-1,3-

thiazol-5-ylmethyl)–3-

methyl-2-nitroguanidine 

(Clothianidin) (CAS No. 

210880–92–5) (provided 

for in subheading 

2934.10.90) ........................ 5.4% No change No change On or before 

12/31/2009 ’’. 

SEC. 1465. CERTAIN MASTER CYLINDER ASSEMBLES. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.92 Master cylinder assemblies for braking systems, 

not incorporating a vacuum booster, the foregoing 

designed for use in hybrid 

motor vehicles of heading 

8703 (provided for in subheading 8708.39.50) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1466. CERTAIN TRANSAXLES. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—347

‘‘ 9902.10.93 Transaxles, each incorporating an integral electronic controller, the foregoing designed for use in 

hybrid motor vehicles of 

heading 8703 (provided 

for in subheading 

8708.40.20) ........................ 1.5% No change No change On or before 

12/31/2009 ’’. 

SEC. 1467. CONVERTER ASY. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.94 Static converters capable 

of converting 300 V direct 

current to 12 V direct current, designed for use in 

hybrid motor vehicles of 

heading 8703 (provided 

for in subheading 

8504.40.95) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1468. MODULE AND BRACKET ASY-POWER STEERING. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.95 Controllers for electronic 

power assisted steering 

systems, rated at 80 amperes at 12 V, designed 

for use in hybrid motor 

vehicles of heading 8703 

(provided for in subheading 8537.10.90) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1469. UNIT ASY-BATTERY HI VOLT. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.96 Nickel metal-hydride storage batteries, exceeding 

300 V, the foregoing designed for use in hybrid 

motor vehicles of heading 

8703 (provided for in subheading 8507.80.80) ......... 2.8% No change No change On or before 

12/31/2009 ’’. 

SEC. 1470. CERTAIN ARTICLES OF NATURAL CORK. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.99 Articles of natural cork, 

not elsewhere specified or 

included (provided for in 

subheading 4503.90.60) .... 6% No change No change On or before 

12/31/2009 ’’. 

SEC. 1471. GLYOXYLIC ACID. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—348

‘‘ 9902.11.01 Glyoxylic acid (CAS No. 

298–12–4) (provided for in 

subheading 2918.30.90) .... 1.6% No change No change On or before 

12/31/2009 ’’. 

SEC. 1472. CYCLOPENTANONE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.02 Cyclopentanone (CAS No. 

120–92–3) (provided for in 

subheading 2914.29.50) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1473. MESOTRIONE TECHNICAL. 

(a) CALENDAR YEAR 2006.—Subchapter II of chapter 99 is 

amended by inserting in numerical sequence the following new 

heading:

‘‘ 9902.11.03 2-[4-(Methylsulfonyl)–2-

nitrobenzoyl]-1,3-

cyclohexanedione 

(Mesotrione) (CAS No. 

104206–82–8) (provided 

for in subheading 

2930.90.10) ........................ 6.04% No change No change On or before 

12/31/2006 ’’. 

(b) CALENDAR YEAR 2007.—

(1) IN GENERAL.—Heading 9902.11.03, as added by subsection (a), is amended—

(A) by striking ‘‘6.04%’’ and inserting ‘‘6.08%’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2007’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2007. 

(c) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.11.03, as added by subsection (a) and amended by subsection (b), is further amended—

(A) by striking ‘‘6.08%’’ and inserting ‘‘6.11%’’; and 

(B) by striking ‘‘12/31/2007’’ and inserting ‘‘12/31/2009’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2008. 

SEC. 1474. MALONIC ACID-DINITRILE 50% NMP. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.04 50% solution of 

malononitrile in methyl-2-

pyrrolidone solvent (CAS 

Nos. 109–77–3 and 872–

50–4) (provided for in subheading 3824.90.9190) ..... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1475. FORMULATIONS OF NOA 446510. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—349

‘‘ 9902.11.05 Formulations of NOA 

446510 which include 

NOA 446510 Technical, 2-

(4-chloro-phenyl)-N-[2-(3-

methoxy-4-prop-2-ynyloxyphenyl)ethyl]-2-prop-2-

ynyloxyacetamide (CAS 

No. 374726–62–2) (provided for in subheading 

3808.20.15) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1476. DEMBB DISTILLED-ISO TANK. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.06 2-Bromo-1,3-diethyl-5-

methylbenzene (CAS No. 

314084–61–2) (DEMBB) 

(provided for in subheading 2903.69.80) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1477. METHYLIONONE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.10 3-Methyl-4-(2,6,6-

trimethylcyclohex-2-

enyl)but-3-en-2-one 

(Methylionone) (CAS No. 

1335–46–2) (provided for 

in subheading 2914.23.00) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1478. CERTAIN ACRYLIC FIBER TOW. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.11 Acrylic fiber tow 

(polyacrylonitrile tow) 

containing by weight a 

minimum of 92 percent 

acrylonitrile, not more 

than 0.1 percent zinc and 

from 4 to 8 percent water, 

imported in the form of 

from 1 to 12 sub-bundles 

crimped together, each 

containing 24,000 filaments (plus or minus 0.06 

percent) and with average 

filament denier of 1.5 

decitex (plus or minus 

0.08 percent) (provided for 

in subheading 5501.30.00) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1479. CERTAIN ACRYLIC FIBER TOW. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—350

‘‘ 9902.11.12 Acrylic fiber tow 

(polyacrylonitrile tow) 

containing by weight a 

minimum of 92 percent 

acrylonitrile, not more 

than 0.1 percent zinc and 

from 2 to 8 percent water, 

imported in the form of 6 

sub-bundles crimped together, each containing 

45,000 filaments (plus or 

minus 0.06 percent) and 

with average filament denier of either 1.48 decitex 

(plus or minus 0.08 percent) or 1.32 decitex (plus 

or minus 0.09 percent) 

(provided for in subheading 5501.30.00) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1480. MKH 6561 ISOCYANATE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.13 2-(Carbomethoxy) 

benzenesulfonyl 

isocyanate (CAS No. 

74222–95–0) (provided for 

in subheading 2930.90.29) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1481. ENDOSULFAN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.14 6,7,8,9,10,10- 

Hexachlorohexahydromethano-2,4,3-

benzodioxathiepin-3-oxide 

(Endosulfan) (CAS No. 

115–29–7) (provided for in 

subheading 2920.90.50 or 

3808.10.50) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1482. TETRACONAZOLE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.15 1-[2-(2,4-dichlorophenyl)–

3-(1,1,2,2-

tetrafluoroethoxy)propyl]-

1H-1,2,4-triazole 

(Tetraconazole) (CAS No. 

112281–77–3) (provided 

for in subheading 

2933.99.22) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1483. M-ALCOHOL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.16 2-(2,4-Dichlorophenyl)–3-

(1H-1,2,4-triazol-1-

yl)propanol (CAS No. 

112281–82–0) (provided 

for in subheading 

2933.99.82) ........................ 1% No change No change On or before 

12/31/2009 ’’. 
H. R. 4—351

SEC. 1484. CERTAIN MACHINES FOR USE IN THE ASSEMBLY OF MOTORCYCLE WHEELS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.17 Wheel spoke tightening 

machines (provided for in 

subheading 8479.89.98), 

for use with wheels of vehicles of heading 8711 ...... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1485. DELTAMETHRIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.26 (S)-α-Cyano-3-

phenoxybenzyl (1R,3R)–3-

(2,2-dibromovinyl)–2,2-

dimethylcyclopropanecarboxylate (Deltamethrin) 

(CAS No. 52918–63–5) 

(provided for in subheading 2926.90.30) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1486. PALM FATTY ACID DISTILLATE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.32 Monocarboxylic fatty acids 

derived from palm oil 

(provided for in subheading 3823.19.20) ......... 1% No change No change On or before 

12/31/2009 ’’. 

SEC. 1487. 4-METHOXY-2-METHYLDIPHENYLAMINE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.35 4-Methoxy-2-

methyldiphenylamine 

(CAS No. 41317–15–1) 

(provided for in subheading 2922.29.60) ......... 1.1% No change No change On or before 

12/31/2009 ’’. 

SEC. 1488. 2-METHYLHYDROQUINONE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.36 2-Methylhydroquinone 

(CAS No. 95–71–6) (provided for in subheading 

2907.29.90) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1489. 1-FLUORO-2-NITROBENZENE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—352

‘‘ 9902.11.37 1-Fluoro-2-nitrobenzene 

(CAS No. 1493–27–2) 

(provided for in subheading 2904.90.30) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1490. COSMETIC BAGS WITH A FLEXIBLE OUTER SURFACE OF 

REINFORCED OR LAMINATED POLYVINYL CHLORIDE 

(PVC). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.43 Vanity cases that are of a 

soft sided construction, of 

reinforced or laminated 

polyvinyl chloride plastics, 

and are of a kind normally carried in the pocket or in the handbag and 

used to contain and apply 

cosmetic preparations 

(provided for in subheading 4202.12.20) ......... 13.3% No change No change On or before 

12/31/2009 ’’. 

SEC. 1491. MIXTURES OF METHYL 4-IODO-2-[3-(4-METHOXY-6-METHYL1,3,5-TRIAZIN-2-YL)UREIDOSULFONYL]BENZOATE, 

SODIUM SALT (IODOSULFURON METHYL, SODIUM SALT). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.44 Mixtures of methyl 4-iodo2-[3-(4-methoxy-6-methyl1,3,5- triazin-2-yl) 

ureidosulfonyl] benzoate, 

sodium salt (Iodosulfuron 

methyl, sodium salt) (CAS 

No. 144550–36–7) and application adjuvants (provided for in subheading 

3808.30.15) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1492. ETHYL 4,5-DIHYDRO-5,5-DIPHENYL-1,2-OXAZOLE-3-

CARBOXYLATE (ISOXADIFEN-ETHYL). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.45 Ethyl 4,5-dihydro-5,5-diphenyl-1,2-oxazole-3-

carboxylate (Isoxadifenethyl) (CAS No. 163520–

33–0) (provided for in subheading 2934.99.39) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1493. (5-CYCLOPROPYL-4-ISOXAZOLYL)[2-(METHYLSULFONYL)–4-

(TRIFLUOROMETHYL)PHENYL]METHANONE 

(ISOXAFLUTOLE). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—353

‘‘ 9902.11.46 (5-cyclopropyl-4-

isoxazolyl)[2-

(methylsulfonyl)–4-

(trifluoromethyl) 

phenyl]methanone 

(Isoxaflutole) (CAS No. 

141112–29–0) (provided 

for in subheading 

2934.99.15) ........................ 4.8% No change No change On or before 

12/31/2009 ’’. 

SEC. 1494. METHYL 2-[(4,6-DIMETHOXYPYRIMIDIN-2-

YLCARBAMOYL)SULFAMOYL]-α-

(METHANESULFONAMIDO)-P-TOLUATE (MESOSULFURONMETHYL) WHETHER OR NOT MIXED WITH APPLICATION 

ADJUVANTS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.48 Methyl 2-[(4,6-

dimethoxypyrimidin-2-

ylcarbamoyl)sulfamoyl]-α-

(methanesulfonamido)-ptoluate (Mesosulfuronmethyl) (CAS No. 208465–

21–8) whether or not 

mixed with application 

adjuvants (provided for in 

subheading 2935.00.75 or 

3808.30.15) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1495. MIXTURES OF FORAMSULFURON AND IODOSULFURONMETHYL-SODIUM. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.49 Mixtures of N,N-dimethyl2[3-(4,6-

dimethoxypyrimidin-2-yl) 

ureidosulfonyl]-4- 

formylaminobenzamide 

(Foramsulfuron) (CAS No. 

173159–57–4), methyl 4-

iodo-2-[3-(4-methoxy-6-methyl-1,3,5-triazin-2-yl) 

ureidosulfonyl]benzoate, sodium salt (Iodosulfuronmethyl-sodium) (CAS No. 

144550–36–7) and application adjuvants (provided for 

in subheading 3808.30.15) ... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1496. VULCUREN UPKA 1988. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.54 1,6-Bis(N,N’-

dibenzylthiocarbamoyldithio)hexane (CAS No. 

151900–44–6) (provided 

for in subheading 

2930.20.20) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1497. VULLCANOX 41010 NA/LG. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—354

‘‘ 9902.11.55 N-Isopropyl-N’-phenyl-pphenylenediamine (CAS 

No. 101–72–4) (provided 

for in subheading 

2921.51.50) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1498. VULKAZON AFS/LG. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.56 Pentaerythritolbis(tetrahydrobenzaldehyde 

acetal) (CAS No. 6600–

31–3) (provided for in subheading 2932.99.90) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1499. P-ANISALDEHYDE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.57 P-Anisaldehyde (CAS No. 

123–11–5) (Benzoldehyde, 

4-methoxy-) (provided for 

in subheading 2912.49.10) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1500. 1,2-PENTANEDIOL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.60 1,2-Pentanediol (CAS No. 

5343–92–0) (provided for 

in subheading 2905.39.90) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1501. AGRUMEX. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following:

‘‘ 9902.11.62 o-tert-Butylcyclohexyl acetate, cis form (CAS No. 

20298–69–9) (Agrumex) 

(Cyclohexanol, 2-(1,1-dimethyl-) (provided for in 

subheading 2915.39.45) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1502. COHEDUR RL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.63 Mixtures of resorcinol 

(CAS No. 108–46–3), 

hexamethylolmelamine 

ether (CAS No. 3089–11–

0) and dibutyl phthalate 

(CAS No. 84–74–2) (provided for in subheading 

3824.90.28) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1503. FORMULATIONS OF PROSULFURON. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—355

‘‘ 9902.11.64 Mixtures of Prosulfuron 

(1-(4-methoxy-6-methyl1,3,5-triazin-2-yl)–3-[2-

(3,3,3-trifluoropropyl)-

phenylsulfonyl]urea ) 

(CAS No. 94125–34–5) 

and application adjuvants 

(provided for in subheading 3808.30.15) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1504. LEWATIT. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.71 Ion-exchange resins (cationic H form), consisting 

of copolymers of acrylic 

acid and diethylene glycol 

divinyl ether (CAS No. 

359785–58–3) (provided 

for in subheading 

3914.00.60) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1505. PARA-CHLOROPHENOL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.72 para-Chlorophenol (CAS 

No. 106–48–9) (provided 

for in subheading 

2908.10.60) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1506. CYPERMETHRIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.74 Cyano(3-

phenoxyphenyl)methyl 3-

(2,2-dichloroethenyl)–2,2-

dimethylcyclopropanecarboxylate (Cypermethrin) 

(CAS No. 52315–07–8) 

(provided for in subheading 2926.90.30) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1507. ION-EXCHANGE RESIN POWDER. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.78 Ion-exchange resin powder comprised of a copolymer of methacrylic acid 

cross-linked with 

divinylbenzene, in the hydrogen ionic form, of a 

nominal partical size between 0.025mm and 0.150 

mm, dried to less than 5% 

moisture (CAS No. 50602–

21–6)(provided for in subheading 3914.00.60) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1508. ION-EXCHANGE RESIN POWDER. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—356

‘‘ 9902.11.79 Ion-exchange resin powder comprised of a copolymer of methacrylic acid 

cross-linked with 

divinylbenzene, in the potassium ionic form, of a 

nominal particle size between 0.025mm and 0.150 

mm, dried to less than 

10% moisture (CAS No. 

65405–55–2) (provided for 

in subheading 3914.00.60) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1509. DESMODUR E 14. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.80 1,2,3-Propanetriol, polymer with 2,4-diisocyanato1-methylbenzene, 2-ethyl2-(hydroxymethyl)–1,3-

propanediol, 

methyloxirane and 

oxirane (CAS No. 127821–

00–5) (provided for in subheading 3909.50.50) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1510. DESMODUR VP LS 2253. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.82 Hexane, 1,6-diisocyanato-, 

homopolymer, 3,5-dimethyl-1H-pyrazoleblocked (CAS No. 163206–

31–3) (provided for in subheading 3911.90.90) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1511. DESMODUR R-E. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.83 4,4′, 4′′-TT Desmodur R-E 

in solvent (CAS No. 2422–

91–5) in solvent (provided 

for in subheading 

3824.90.28) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1512. WALOCEL MW 3000 PFV. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.84 Methyl hydroxyethyl cellulose products containing 

30% or greater content of 

2-hydroxyethyl methyl 

ether cellulose (‘‘MHEC’’ ) 

reaction products with 

glyoxal (CAS No. 68441–

63–4) (provided for in subheading 3912.39.00) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1513. TSME. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—357

‘‘ 9902.11.85 ortho/para-Toluenesulfonic 

acid, methyl ester (TSME) 

(CAS Nos. 23373–38–8 

and 80–48–8) (provided 

for in subheading 

2904.10.32) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1514. WALOCEL VP-M 20660. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.86 Methyl Hydroxyethyl Cellulose with a 77% or 

greater content of 2-hydroxyethyl methyl ether 

cellulose (CAS No. 9032–

42–2) (provided for in subheading 3912.39.00) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1515. XAMA 2. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.87 Trimethylopropane tris(3-

aziridinylpropanoate) 

(CAS No. 52234–82–9) 

(provided for in subheading 2933.99.97) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1516. XAMA 7. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.88 Polyfunctional aziridine 

(CAS No. 57116–45–7) 

(provided for in subheading 2933.99.97) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1517. CERTAIN CASES FOR TOYS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.90 Cases or containers (provided for in subheading 

4202.92.90 and not including goods described in 

heading 9902.01.81), specially shaped or fitted for, 

and with labeling, logo or 

other descriptive information on the exterior of the 

case or container indicating its intention to be 

used for, electronic drawing toys or electronic 

games of heading 9503 or 

9504 ................................... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1518. CERTAIN CASES FOR TOYS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—358

‘‘ 9902.11.91 Cases or containers (provided for in subheadings 

4402.12.80 or 4202.92.90), 

having one or more molded plastic holders, clips or 

fasteners, for holding a 

doll or dolls, whether or 

not the case or container 

is also capable of holding 

other goods ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1519. ANILINE 2.5-DISULFONIC ACID. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.92 Aniline 2,5- disulfonic acid 

(CAS No. 98–44–2) (1,4-

Benzenedisnlfonic acid, 2-

amino-) (provided for in 

subheading 2921.42.90) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1520. 1,4-BENZENEDICARBOXYLIC ACID, POLYMER WITH N,N′-

BIS(2-AMINOETHYL)–1,2-ETHANEDIAMINE, CYCLIZED, 

METHOSULFATE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.93 1,4-Benzenedicarboxylic 

acid, polymer With N,N′-

Bis(2-aminoethyl)–1,2-

ethanediamine, cyclized, 

methosulfate (CAS No. 

68187–22–4) (provided for 

in subheading 3908.90.70) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1521. SULFUR BLUE 7. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.94 4-[(4-Amino-3-

methylphenyl)amino]phenol, reaction 

products with sodium sulfide (Sulfur Blue 7) (CAS 

No. 1327–57–7) (provided 

for in subheading 

3204.19.50) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1522. FORMALDEHYDE, REACTION PRODUCTS WITH 1,4-BENZENEDIOL AND M-PHENYLENEDIAMINE, SULFURIZED. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.95 Formaldehyde, reaction 

products with 1,4-benzenediol and mphenylenediamine, 

sulfurized (CAS No. 

110392–46–6) (provided 

for in subheading 

3204.19.50) ........................ Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—359

SEC. 1523. ISOCYANATOSULFONYL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.96 2-

(Isocyanatosulfonyl)benzoic acid, ethyl ester 

(CAS No. 77375–79–2) 

(provided for in subheading 2930.90.29) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1524. ISOCYANATOSULFONYL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.97 2-

(Isocyanatosulfonyl)benzoic acid, methyl 

ester (CAS No. 74222–95–

0) (provided for in subheading 2930.90.29) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1525. GEMIFLOXACIN, GEMIFLOXACIN MESYLATE, AND 

GEMIFLOXACIN MESYLATE SESQUIHYDRATE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.99 Gemifloxacin (CAS No. 

175463–14–6); 

gemifloxacin mesylate 

(CAS No. 210353–53–0 or 

204519–65–3); and 

gemifloxacin mesylate 

sesquihydrate (CAS No. 

210353–56–3 ) (the foregoing provided for in subheading 2933.99.46) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1526. BUTRALIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.01 Butralin (CAS No. 33629-

47-9) (Benzenamine, 4-

(1,1-dimethylethyl)-N- (1-

methylpropyl)-2,6-dintro-) 

(provided for in subheading 2921.43.90) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1527. SPIRODICLOFEN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.02 2,2-Dimethylbutanoic 

acid, 3-(2,4-

dichlorophenyl)–2-oxo-1-

oxaspiro(4.5)dec-3-en-4-yl 

ester (Spirodiclofen) (CAS 

No. 148477–71–8) (provided for in subheading 

2932.29.10) ........................ Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—360

SEC. 1528. PROPAMOCARB HCL (PREVICUR). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.03 Mixtures of propyl 3-

(dimethylamino) 

propylcarbamate 

monohydrochloride 

(Propamocarb hydrochloride) (CAS No. 25606–

41–1) and application adjuvants (provided for in 

subheading 3808.20.50) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1529. DESMODUR IL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.04 Poly(toluene diisocyanate) 

(CAS No. 26006–20–2) 

dissolved in organic solvents (provided for in subheading 3911.90.45) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1530. CHLOROACETONE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.05 1-Chloro-2-propanone 

(CAS No. 78–95–5) (provided for in subheading 

2914.70.90) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1531. IPN (ISOPHTHALONITRILE). 

(a) CALENDAR YEAR 2006.—Subchapter II of chapter 99 is 

amended by inserting in numerical sequence the following new 

heading:

‘‘ 9902.12.06 1,3-Benzenedicarbonitrile 

(CAS No. 626–17–5) (provided for in subheading 

2926.90.48) ........................ 3.04% No change No change On or before 

12/31/2006 ’’. 

(b) CALENDAR YEAR 2007.—

(1) IN GENERAL.—Heading 9902.12.06, as added by subsection (a), is amended—

(A) by striking ‘‘3.04%’’ and inserting ‘‘3.23%’’; and 

(B) by striking ‘‘On or before 12/31/2006’’ and inserting 

‘‘On or before 12/31/2007’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2007. 

(c) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.12.06, as added by subsection (a) and amended by subsection (b), is further amended—

(A) by striking ‘‘3.23%’’ and inserting ‘‘3.4%’’; and 

(B) by striking ‘‘On or before 12/31/2007’’ and inserting 

‘‘On or before 12/31/2009’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2008. 
H. R. 4—361

SEC. 1532. NOA 446510 TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.07 4-Chloro-N-[2-[3-methoxy4-(2-

propynyloxy)phenyl]ethyl]-α-(2-

propynyloxy)benzeneacetamide 

(Mandipropamid) (CAS 

No. 374726–62–2) (provided for in subheading 

2924.29.47) ........................ 1.2% No change No change On or before 

12/31/2009 ’’. 

SEC. 1533. HEXYTHIAZOX TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.08 trans-5-(4-Chlorophenyl)-

N-cyclohexyl-4-methyl-2-

oxothiazolidine-3-

carboxamide (Hexythiazox 

Technical) (CAS No. 

78587–05–0) (provided for 

in subheading 2934.10.10) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1534. CRELAN (SELF-BLOCKED CYCLOALIPHATIC 

POLYURETDIONE). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.10 2-Oxepanone polymer 

with 1,4-butanediol and 5-

isocyanato-1-

(isocyanatomethyl)–1,3,3-

trimethylcyclohexane, 2-

ethyl-1-hexanol-blocked 

(CAS No. 189020–69–7) 

(provided for in subheading 3909.50.50) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1535. ASPIRIN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.11 o-Acetylsalicylic acid (aspirin) (CAS No. 50–78–2) 

(provided for in subheading 2918.22.10) ......... 3.0% No change No change On or before 

12/31/2009 ’’. 

SEC. 1536. DESMODUR BL XP 2468. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.12 Copolymer of methyl ethyl 

ketoxime and 

toluenediisocyanate (CAS 

No. 352462–03–4) (provided for in subheading 

3911.90.45) ........................ Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—362

SEC. 1537. DESMODUR RF-E. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.17 Mixtures of tris(4-

isocyanatophenyl)thiophosphate (CAS No. 

4151–51–3) and ethyl acetate and 

monochlorobenzene as solvents (provided for in subheading 3824.90.28) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1538. DESMODUR HL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.18 Benzene, 1,3-

diisocyanatomethyl-, polymer with 1,6-

diisocyanatohexane (CAS 

No. 63368–95–6) dissolved 

in n-butyl acetate (provided for in subheading 

3911.90.45) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1539. D-MANNOSE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.19 D-Mannose (CAS No. 

3458–28–4) (provided for 

in subheading 2940.00.60) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1540. CERTAIN CAMEL HAIR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.20 Camel hair, processed beyond the degreased or carbonized condition (provided for in subheading 

5102.19.90) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1541. WASTE OF CAMEL HAIR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.21 Waste of camel hair (provided for in subheading 

5103.20.00) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1542. CERTAIN CAMEL HAIR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.22 Camel hair carded or 

combed (provided for in 

subheading 5105.39.00) .... Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—363

SEC. 1543. WOVEN FABRIC OF VICUNA HAIR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.23 Woven fabrics containing 

85 percent or more by 

weight of vicuna hair (provided for in subheadings 

5111.11.70, 5111.19.60, 

5112.11.60, or 5112.19.95) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1544. CERTAIN CAMEL HAIR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.24 Camel hair, not processed 

in any manner beyond the 

degreased or carbonized 

condition (provided for in 

subheading 5102.19.20) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1545. NOILS OF CAMEL HAIR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.25 Noils of camel hair (provided for in subheading 

5103.10.00) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1546. CHLOROACETIC ACID, ETHYL ESTER. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.33 Chloroacetic acid, ethyl 

ester (CAS No. 105–39–5) 

(provided for in subheading 2915.40.50) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1547. CHLOROACETIC ACID, SODIUM SALT. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.34 Chloroacetic acid, sodium 

salt (CAS No. 3926–62–3) 

(provided for in subheading 2915.40.50) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1548. LOW EXPANSION LABORATORY GLASS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—364

‘‘ 9902.12.39 Laboratory, hygienic, or 

pharmaceutical glassware, 

whether or not graduated 

or calibrated, of low expansion borosilicate glass 

or alumino-borosilicate 

glass, having a linear coefficient of expansion not 

exceeding 3.3 x 107 per 

Kelvin within a temperature range of 0 to 300° C 

(provided for in subheading 7017.20.00) ......... 3.6% No change No change On or before 

12/31/2009 ’’. 

SEC. 1549. STOPPERS, LIDS, AND OTHER CLOSURES. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.40 Stoppers, lids, and other 

closures of low expansion 

borosilicate glass or 

alumino-borosilicate glass, 

having a linear coefficient 

of expansion not exceeding 3.3 x 107 per Kelvin 

within a temperature 

range of 0 to 300° C, produced by automatic machine (provided for in subheading 7010.20.20) or 

produced by hand (provided for in subheading 

7010.20.30) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1550. PIGMENT YELLOW 213. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.41 1,4- Benzenedicarboxylic 

acid, 2-[[2-oxo-1-[[1,2,3,4- 

tetrahydro-7-methoxy-2,3- 

dioxo-6-quinoxalinyl) 

amino]carbonyl] 

propyl]azo]-, dimethyl 

ester (Pigment Yellow 

213) (CAS No. 220198–

21–0) (provided for in subheading 3204.17.60) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1551. INDOXACARB. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.42 (4aS) -7-Chloro-2, 5-

dihydro-2- [[(methoxycarbonyl)[4-

(trifluoromethoxy) phenyl] 

amino] carbonyl]-indeno 

[1,2-e][1,3,4] oxadiazine4a (3H)-carboxylic acid 

methyl ester (CAS No. 

173584–44–6) (provided 

for in subheading 

2934.99.16) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1552. DIMETHYL CARBONATE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—365

‘‘ 9902.12.43 Dimethyl carbonate (CAS 

No. 616–38–6) (provided 

for in subheading 

2920.90.50) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1553. 5-CHLORO-1-INDANONE (EK179). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.44 5-Chloro-1-indanone (CAS 

No. 42348–86–7) (provided for in subheading 

2914.39.90) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1554. MIXTURES OF FAMOXADONE AND CYMOXANIL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.45 Mixtures of 5-methyl-5-(4-

phenoxyphenyl)–3-

(phenylamino)–2,4-

oxazolidinedione] 

(famoxadone) (CAS No. 

131807–57–3), 2-cyano-N-

[(ethylamino)carbonyl]-2-

(methoxyimino)acetamide 

(Cymoxanil) (CAS No. 

57966–95–7) and application adjuvants (provided 

for in subheading 

3808.20.15) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1555. DECANEDIOIC ACID, BIS(2,2,6,6-TETRAMETHYL-4-

PIPERIDINYL) ESTER. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.47 Decanedioic acid, 

bis(2,2,6,6-tetramethyl-4-

piperidinyl) ester (CAS 

No. 52829–07–9) (provided for in subheading 

2933.39.91) ........................ Free No change No change On or Before 

12/31/2009 ’’. 

SEC. 1556. ACID BLUE 80. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.49 Acid Blue 80 (CAS No. 

4474–24–2) (provided for 

in subheading 3204.12.50) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1557. PIGMENT BROWN 25. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.50 Pigment Brown 25 (CAS 

No. 6992–11–6) (provided 

for in subheading 

3204.17.04) ........................ Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—366

SEC. 1558. FORMULATIONS OF AZOXYSTROBIN. 

(a) CALENDAR YEAR 2006.—Subchapter II of chapter 99 is 

amended by inserting in numerical sequence the following new 

heading:

‘‘ 9902.12.51 Mixtures of benzeneacetic 

acid, (α E)- 2-[[6-(2-

cyanophenoxy)–4-

pyrimidinyl]oxy]-α-

(methoxymethylene)-, 

methyl ester 

(Azoxystrobin) (CAS No. 

131860–33–8) and application adjuvants (provided 

for in subheading 

3808.20.15) ........................ 6.14% No change No change On or before 

12/31/2006 ’’. 

(b) CALENDAR YEAR 2007.—

(1) IN GENERAL.—Heading 9902.12.51, as added by subsection (a), is amended—

(A) by striking ‘‘6.14%’’ and inserting ‘‘6.15%’’; and 

(B) by striking ‘‘On or before 12/31/2006’’ and inserting 

‘‘On or before 12/31/2007’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2007. 

(c) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.12.51, as added by subsection (a) and amended by subsection (b), is further amended—

(A) by striking ‘‘6.15%’’ and inserting ‘‘6.17%’’; and 

(B) by striking ‘‘On or before 12/31/2007’’ and inserting 

‘‘On or before 12/31/2009’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2008. 

SEC. 1559. FORMULATIONS OF PINOXADEN/CLOQUINTOCET. 

(a) CALENDAR YEARS 2006 AND 2007.—Subchapter II of chapter 

99 is amended by inserting in numerical sequence the following 

new heading:

‘‘ 9902.12.52 Mixtures of 8(2,6-diethylp-tolyl)–1,2,4,5-

tetrahydro-7-oxo-7Hpyrazolo[[1,2-d][1,4,5] 

oxadiazepin-9-yl 2,2-

dimethylpropionate 

(Pinoxaden) (CAS No. 

243973–20–8), acetic acid, 

[5-chloro-8-quinolinyl]oxy]-, 1-methylhexyl 

ester (Cloquintocet) (CAS 

No. 99607–70–2) and application adjuvants (provided for in subheading 

3808.30.15) ........................ Free No change No change On or before 

12/31/2007 ’’. 

(b) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.12.52, as added by subsection (a), is further amended—

(A) by striking ‘‘Free’’ and inserting ‘‘1.74%’’; and 

(B) by striking ‘‘On or before 12/31/2007’’ and inserting 

‘‘On or before 12/31/2009’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2008. 
H. R. 4—367

SEC. 1560. MIXTURES OF DIFENOCONAZOLE/MEFENOXAM. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.53 Mixtures of 1H-1,2,4-triazole, 1-((2-

chlorophenoxy)phenyl)–4-

methyl-1,3-dioxolan-2-

yl)methyl)- 

(Difenoconazole) (CAS No. 

119446–68–3), (R,S)–2-

((2,6-dimethylphenyl) 

methoxyacetylamino) propionic acid, methyl ester 

(Mefenoxam) (CAS Nos. 

70630–17–0, and 69516–

34–3) and application adjuvants (provided for in 

subheading 3808.20.15) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1561. FLUDIOXINIL TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.54 1H-Pyrrole-3-carbonitrile, 

4-(2,2-difluoro-1,3-

benzodioxol-4-yl)- 

(fludioxinil) (CAS No. 

131341–86–1) (provided 

for in subheading 

2934.99.12) ........................ 1.6% No change No change On or before 

12/31/2009 ’’. 

SEC. 1562. MIXTURES OF CLODINAFOP-PROPARGYL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.55 Mixtures of propionic acid, 

2-(4-((5-chloro-3-fluoro-2-

pyridynyl)oxy)phenoxy-2-

propynyl ester, 

(clodinafop-propargyl) 

(CAS No. 105512–06–9) 

(provided for in subheading 3808.30.15) ......... 1.7% No change No change On or before 

12/31/2009 ’’. 

SEC. 1563. AVERMECTIN B, 1,4′′-DEOXY-4′′-METHYLAMINO-, (4′′R)-, BENZOATE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.56 Avermectin B, 1,4′′-deoxy4′′-methylamino-, (4′′R)-, 

benzoate (CAS No. 

155569–91–8) (provided 

for in subheading 

3824.90.91 or 2932.29.50) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1564. CLOQUINTOCET-MEXYL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—368

‘‘ 9902.12.57 Acetic acid, 5-chloro-8-

quinolinoxy-, 1-

methylhexyl ester 

(Cloquintocet-mexyl) (CAS 

No. 99607–70–2) (provided for in subheading 

2933.49.30) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1565. METALAXYL-M TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.58 (R,S)–2-((2,6-

Dimethylphenyl) 

methoxyacetylamino) propionic acid, methyl ester 

(Metalaxyl-M and LMetalaxylfenoxam) (CAS 

Nos. 70630–17–0 and 

69516–34–3) (provided for 

in subheading 2924.29.47) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1566. CYPROCONAZOLE TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.59 [α-(4-Chlorophenyl)-α-(1-

cyclopropylethyl)–1H-1–

1,2,4-triazole-1-ethanol 

(Cyproconazole) (CAS No. 

94361–06–5) (provided for 

in subheading 2934.99.12) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1567. PINOXADEN TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.60 8-(2,6-Diethyl-4-

methylphenyl)–1,2,4,5-

tetrahydro-7-oxo-7Hpyrazolo[1,2-

d][1,4,5]oxadiazepin-9-yl 

2,2-dimethylpropanoate 

(Pinoxaden) (CAS No. 

243973–20–8) (provided 

for in subheading 

2934.99.15) ........................ 1.8% No change No change On or before 

12/31/2009 ’’. 

SEC. 1568. MIXTURES OF TRALKOXYDIM. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.61 Mixtures of 2-[1-

(ethoxyimino)propyl]-3-hydroxy-5-(2,4,6-

trimethylphenyl)–2-cyclohexen-1-one 

(Tralkoxydim) (CAS No. 

87820–88–0) as the active 

ingredient and application 

adjuvants (provided for in 

subheading 3808.30.15) .... Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—369

SEC. 1569. CERTAIN CHEMICALS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new headings:

‘‘ 9902.12.72 Mixtures of zinc 

dialkyldithiophosphate 

(CAS No. 6990–43–8) 

with an elastomer 

binder of ethylene-propylene-diene monomer 

and ethyl vinyl acetate, 

dispersing agents and 

silica (provided for in 

subheading 3812.10.50) Free No change No change On or before 12/

31/2009

9902.12.73 Mixtures of 

dithiocarbamate, thiazole, thiuram and thiourea with an elastomer 

binder of ethylene-propylene-diene monomer 

and ethyl vinyl acetate, 

and dispersing agents 

(provided for in subheading 3812.10.50) .... Free No change No change On or before 12/

31/2009

9902.12.74 Mixtures of 

caprolactam disulfide 

(CAS No. 23847–08–7) 

with an elastomer 

binder of ethylene-propylene-diene monomer 

and ethyl vinyl acetate, 

and dispersing agents 

(provided for in subheading 3812.10.50) .... Free No change No change On or before 12/

31/2009

9902.12.75 Mixtures of N′-(3,4-

dichloro-phenyl)-N,Ndimethylurea (CAS No. 

330–54–1) with acrylate rubber (provided 

for in subheading 

3812.10.50) ................... Free No change No change On or before 12/

31/2009

9902.12.76 Mixtures of zinc 

dicyanato diamine 

(CAS No. 122012–52–

6) with an elastomer 

binder of ethylene-propylene-diene monomer 

and ethyl vinyl acetate, 

and dispersing agents 

(provided for in subheading 3812.10.50) .... Free No change No change On or before 12/

31/2009

9902.12.77 4,8-Dicyclohexyl -6–

2,10-dimethyl -12Hdibenzo [d,g][1,3,2] 

dioxaphosphocin (CAS 

No. 73912–21–7) (provided for in subheading 

2920.90.50) ................... Free No change No change On or before 12/

31/2009

9902.12.78 Mixtures of 

benzenesulfonic acid, 

dodecyl-, with 2-

aminoethanol (CAS No. 

26836–07–7) and Poly 

(oxy-1,2-ethanediyl), α-

[1-oxo-9- octadecenyl]-

w-hydroxy-, (9Z) (CAS 

No. 9004–96–0) (provided for in subheading 

3402.90.50) ................... Free No change No change On or before 12/

31/2009
H. R. 4—370

9902.12.79 1,3- Dihydro-3,3-bis (4-

hydroxy-m-tolyl) -2Hindol-2-one (CAS No. 

47465–97–4) (provided 

for in subheading 

2933.79.08) ................... Free No change No change On or before 12/

31/2009 ’’. 

SEC. 1570. MIXTURES OF (≤)–(CIS AND TRANS)–1-[[2-(2,4-

DICHLOROPHENYL)–4-PROPYL-1,3-DIOXOLAN-2-YL]-

METHYL]-1H-1,2,4-TRIAZOLE. 

(a) IN GENERAL.—Subchapter II of chapter 99 is amended by 

inserting in numerical sequence the following new heading:

‘‘ 9902.12.80 Mixtures of ( ± )–(cis and 

trans)–1-[[2-(2,4-

Dichlorophenyl)–4-propyl1,3-dioxolan-2-yl]-methyl]-

1H-1,2,4-triazole (CAS No. 

60207–90–1) and application adjuvants (provided 

for in subheading 

3808.20.15) ........................ 1.1% No change No change On or before 

12/31/2009 ’’. 

(b) CONFORMING AMENDMENT.—Subchapter II of chapter 99 

is amended by striking heading 9902.32.04. 

SEC. 1571. PARAQUAT DICHLORIDE. 

(a) IN GENERAL.—Subchapter II of chapter 99 is amended by 

inserting in numerical sequence the following new heading:

‘‘ 9902.13.06 Paraquat dichloride 

(1,1’dimethyl-4,4’-

bipyridinium dichloride) 

(CAS No. 1910–42–5) 

(provided for in subheading 2933.39.23) ......... 3.59% No change No change On or before 

12/31/2006 ’’. 

(b) CALENDAR YEAR 2007.—

(1) IN GENERAL.—Heading 9902.13.06, as added by subsection (a), is amended—

(A) by striking ‘‘3.59%’’ and inserting ‘‘4.02%’’; and 

(B) by striking ‘‘On or before 12/31/2006’’ and inserting 

‘‘On or before 12/31/2007’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2007. 

(c) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.13.06, as added by subsection (a) and amended by subsection (b), is further amended—

(A) by striking ‘‘4.02%’’ and inserting ‘‘4.41%’’; and 

(B) by striking ‘‘On or before 12/31/2007’’ and inserting 

‘‘On or before 12/31/2009’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall take effect on January 1, 2008. 

SEC. 1572. CERTAIN BASKETBALLS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—371

‘‘ 9902.13.07 Basketballs, having an external surface other than 

leather, rubber, or synthetic (provided for in 

subheading 9506.62.80) .... 0.9% No change No change On or before 

12/31/2009 ’’. 

SEC. 1573. CERTAIN LEATHER BASKETBALLS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.08 Leather basketballs (provided for in subheading 

9506.62.80) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1574. CERTAIN RUBBER BASKETBALLS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.09 Rubber basketballs (provided for in subheading 

9506.62.80) ........................ 1.5% No change No change On or before 

12/31/2009 ’’. 

SEC. 1575. CERTAIN VOLLEYBALLS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.10 Volleyballs (provided for 

in subheading 9506.62.80) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1576. 4-CHLORO-3-[[3-(4-METHOXYPHENYL)–1,3-DIOXOPROPYL]-

AMINO]-DODECYL ESTER. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.11 4-Chloro-3-[[3-(4-

methoxyphenyl)–1,3-

dioxopropyl]-amino]-

dodecyl ester (CAS No. 

33942–96–0) (provided for 

in subheading 2924.29.71) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1577. LINURON. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.24 3-(3,4-Dichlorophenyl)–1-

methoxy-1-methylurea 

(CAS No. 330–55–2) 

(Linuron) (provided for in 

subheading 2924.21.16) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1578. N,N-DIMETHYLPIPERIDINIUM CHLORIDE (MEPIQUAT CHLORIDE). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—372

‘‘ 9902.13.25 N,NDimethylpiperidinium 

chloride (Mepiquat chloride) (CAS No. 24307–26–

4) (provided for in subheading 2933.39.25) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1579. DIURON. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.26 Formulations of 3-(3,4-

dichlorophenyl)–1,1-

dimethylurea (CAS No. 

330–54–1) (Diuron) and 

application adjuvants 

(provided for in subheading 3808.30.15) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1580. FORMULATED PRODUCT KROVAR I DF. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.27 Formulations containing 

5-bromo-3-sec-butyl-6-

methyluracil (Bromacil) 

(CAS No. 314–40–9), 3-

(3,4-Dichlorophenyl)–1,1-

dimethylurea (Diuron) 

(CAS No. 330–54–1), and 

application adjuvants 

(provided for in subheading 3808.30.15) ......... 2.5% No change No change On or before 

12/31/2009 ’’. 

SEC. 1581. TRIASULFURON TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.28 3-(6-Methoxy-4-methyl1,3,5-triazin-2-yl)–1-[2-(2-

chloroethoxy) 

phenylsulfonyl]urea 

(Triasulfuron) (CAS No. 

82097–50–5) (provided for 

in subheading 2935.00.75) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1582. BRODIFACOUM TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.29 3-[3-(4’-Bromo[1,1’-

biphenyl]-4-yl)–1,2,3,4-

tetrahydro-1-

naphthalenyl]-4-hydroxy2H-1-benzopyran- 2-one 

(Brodifacoum) (CAS No. 

56073–10–0) (provided for 

in subheading 2932.29.10) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1583. PYMETROZINE TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—373

‘‘ 9902.13.30 1,2,4-Triazin-3(2H)-one, 

4,5-dihydro-6-methyl-4-

[(3-

pyridinylmethylene)amino]- (Pymetrozine) 

(CAS No. 123312–89–0) 

(provided for in subheading 2933.69.60) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1584. FORMULATIONS OF THIAMETHOXAM, DIFENOCONAZOLE, 

FLUDIOXINIL, AND MEFENOXAM. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.31 Formulations of 3-[(2-

chloro-5-

thiazolyl)methyl]tetrahydro-5-

methyl-N-nitro-1,3,5-

oxadiazin-4-imine) 

(Thiamethoxam) (CAS No. 

153719–23–4 ); 1H-1,2,4-

triazole, 1-[[2-[2-chloro-4-

(4-chlorophenoxy)phenyl]-

4-methyl- 1,3-dioxolan-2-

yl]methyl]- 

(Difenoconazole) (CAS No. 

119446–68–3); 1HPyrrole-3-carbonitrile, 4-

(2,2-difluoro-1,3-

benzodioxol-4-yl)- 

(Fludioxinil) (CAS No. 

131341–86–1); and (R,S)–

2-[(2,6-

dimethylphenylmethoxy)acetylamino]-propionic 

acid methyl ester 

(Mefenoxam) (CAS Nos. 

70630–17–0 and 69516–

34–3) (provided for in subheading 3808.20.15) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1585. TRIFLOXYSULFURON-SODIUM TECHNICAL. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.32 N-[[(4,6-Dimethoxy-2-

pyrimidinyl)amino]carbonyl]-3-(2,2,2-

trifluoroethoxy)–2-

pyridinesulfonamide 

monosodium salt (CAS 

No. 199119–58–9) 

(trifloxysulfuron-sodium) 

(provided for in subheading 2935.00.75) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1586. 2 BENZYLTHIO-3-ETHYL SULFONYL PYRIDINE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.41 2-Benzylthio-3-ethyl 

sulfonyl pyridine (CAS 

No. 175729–82–5) (provided for in subheading 

2933.39.61) ........................ Free No change No change On or before 

12/31/2009 ’’. 
H. R. 4—374

SEC. 1587. 2-AMINO-4-METHOXY-6-METHYL-1,3,5-TRIAZINE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.42 2-Amino-4-methoxy-6-

methyl-1,3,5-triazine (CAS 

No. 1668–54–8) (provided 

for in subheading 

2933.69.60) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1588. FORMULATED PRODUCTS CONTAINING MIXTURES OF THE 

ACTIVE INGREDIENT 2-CHLORO-N-[[(4-METHOXY-6-

METHYL-1,3,5-TRIAZIN-2YL) AMINO]CARBONYL] 

BENZENESULFONAMIDE AND APPLICATION ADJUVANTS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.43 Formulated products containing mixtures of the active ingredient 2-chloro-N-

[[(4-methoxy-6-methyl1,3,5-triazin-2yl) 

amino]carbonyl] 

benzenesulfonamide and 

application adjuvants 

(Chlorosulfuon) (CAS No. 

64902–72–3) (provided for 

in subheading 3808.30.15) Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1589. 2-METHYL-4-METHOXY-6-METHYLAMINO-1,3,5-TRIAZINE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.44 2-Methyl-4-methoxy-6-

methylamino-1,3,5-triazine (CAS No. 5248–39–

5) (provided for in subheading 2933.69.60) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1590. MIXTURES OF SODIUM-2-CHLORO-6-[(4,6 

DIMETHOXYPYRIMIDIN-2-YL)THIO]BENZOATE AND 

APPLICATION ADJUVANTS (PYRITHIOBAC-SODIUM). 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.45 Mixtures of sodium-2-

chloro-6-[(4,6 

dimethoxypyrimidin-2-

yl)thio]benzoate (CAS No. 

123343–16–8) and application adjuvants 

(Pyrithiobac-sodium) (provided for in subheading 

3808.30.15) ........................ 3.5% No change No change On or before 

12/31/2009 ’’. 

SEC. 1591. CERTAIN DECORATIVE PLATES, DECORATIVE SCULPTURES, 

DECORATIVE PLAQUES, AND ARCHITECTURAL MINIATURES. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—375

‘‘ 9902.13.46 Decorative plates, whether or not with decorative 

rim or attached sculpture; 

decorative sculptures, 

each with plate or plaque 

attached, and decorative 

plaques each not over 7.65 

cm in thickness; architectural miniatures, whether 

or not put up in sets; all 

the foregoing of resin materials and containing agglomerated stone, put up 

for mail order retail sale, 

whether for wall or tabletop display and each 

weighing not over 1.36 kg 

together with their retail 

packaging (provided for in 

subheading 3926.40.00) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1592. CERTAIN MUSIC BOXES. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.47 Music boxes with mechanical musical movements, 

presented in the immediate packaging for shipment to the ultimate purchaser, and each weighing 

not over 6 kg together 

with retail packaging 

(provided for in subheading 9208.10.00) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1593. 2-METHYL-4-CHLOROPHENOXYACETIC ACID. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.60 2-Methyl-4-

chlorophenoxyacetic acid 

(CAS No. 94–74–6) (provided for in subheading 

2918.90.20) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1594. PHENMEDIPHAM. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.76 3-

Methylcarbonylaminophenyl-3-methyl-carbanilate 

(Phenmedipham) (CAS 

No. 13684–63–4) in bulk 

or mixed with application 

adjuvants (provided for in 

subheadings 2924.29.47 

and 3808.30.15) ................. Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1595. DESMEDIPHAM. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—376

‘‘ 9902.13.77 3-

Ethoxycarbonylaminophenyl-N-phenylcarbamate 

(Desmedipham) (CAS No. 

13684–56–5) in bulk or 

mixed with application 

adjuvants (provided for in 

subheadings 2924.29.43 

and 3808.30.15) ................. Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1596. CERTAIN FOOTWEAR WITH OPEN TOES OR HEELS. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.78 Footwear with outer soles 

of rubber or plastics and 

uppers of vegetable fibers, 

with open toes or open 

heels, other than house 

slippers (provided for in 

subheading 6404.19.25) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1597. CERTAIN WORK FOOTWEAR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.85 House slippers with outer 

soles of rubber, plastics, 

leather or composition 

leather and uppers of 

leather, valued not over 

$2.50/pair (provided for in 

subheading 6403.99.75); 

Sports footwear; tennis 

shoes, basketball shoes, 

gym shoes, training shoes 

and the like, all the foregoing with outer soles of 

rubber or plastics and uppers of textile materials 

for women (provided for in 

subheading 6404.11.20) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1598. CERTAIN REFRACTING AND REFLECTING TELESCOPES. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.86 Refracting telescopes with 

50 mm or smaller objective lenses and reflecting 

telescopes with 76 mm or 

smaller mirrors, and parts 

and accessories thereof 

(provided for in subheading 9005.80.40 or 

9005.90.80) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1600. CERTAIN WORK FOOTWEAR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:
H. R. 4—377

‘‘ 9902.13.90 Welt footwear with outer 

soles of rubber, plastics, 

leather or composition 

leather and uppers of pigskin, incorporating a protective metal toe-cap (provided for in subheading 

6403.40.30) ........................ Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1601. CERTAIN FOOTWEAR FOR MEN. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.91 Other footwear with uppers of vegetable fibers, 

for men (provided for in 

subheading 6405.20.30) .... 4.5% No change No change On or before 

12/31/2009 ’’. 

SEC. 1602. CERTAIN RUBBER OR PLASTIC FOOTWEAR. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.92 Other footwear with uppers of vegetable fibers, 

other than such footwear 

for men or women (provided for in subheading 

6405.20.30) ........................ 6.5% No change No change On or before 

12/31/2009 ’’. 

SEC. 1604. ZINC DIMETHYLDITHIOCARBAMATE. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.97 Zinc 

dimethyldithiocarbamate 

(Ziram) (CAS No. 137–30–

4) (provided for in subheading 3808.20.28) ......... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1605. CERTAIN LIQUID CRYSTAL DEVICE (LCD) PANEL ASSEMBLIES. 

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.85.21 Liquid Crystal Device 

(LCD) panel assemblies 

for use in LCD direct view 

televisions (provided for in 

subheading 9013.80.90) .... Free No change No change On or before 

12/31/2009 ’’. 

SEC. 1606. CERTAIN WATERTUBE BOILERS AND REACTOR VESSEL 

HEADS. 

(a) WATERTUBE BOILERS.—Subchapter II of chapter 99 is 

amended by inserting in numerical sequence the following new 

heading:
H. R. 4—378

‘‘ 9902.84.01 Watertube boilers with a 

steam production exceeding 45 t per hour, for use 

in nuclear facilities entered after 12/31/2008 and 

on or before 12/31/2010 if 

the contract for the purchase of such watertube 

boilers was entered into 

on or before 7/31/2006 

(provided for in subheading 8402.11.00) ......... Free No change No change On or before 

12/31/2010 ’’. 

(b) REACTOR VESSEL HEADS.—Subchapter II of chapter 99 is 

amended by inserting in numerical sequence the following new 

heading:

‘‘ 9902.84.04 Reactor vessel heads and 

pressurizers for nuclear 

reactors entered after 12/

31/2008 and on or before 

12/31/2010 if the contract 

for the purchase of such 

heads and pressurizers 

was entered into on or before 7/31/2006 (provided 

for in subheading 

8401.40.00) ........................ Free No change No change On or before 

12/31/2010 ’’. 

CHAPTER 2—EXISTING DUTY SUSPENSIONS AND 

REDUCTIONS 

SEC. 1611. EXTENSION OF CERTAIN EXISTING DUTY SUSPENSIONS AND 

REDUCTIONS. 

(a) EXISTING DUTY SUSPENSIONS AND REDUCTION.—Each of the 

following headings is amended by striking the date in the effective 

period column and inserting ‘‘12/31/2009’’: 

(1) Heading 9902.39.08 (relating to ORGASOL polyamide 

powders). 

(2) Heading 9902.30.90 (relating to 3-amino-2′-(sulfatoethyl sulfonyl) ethyl benzamide). 

(3) Heading 9902.32.91 (relating to MUB 738 INT). 

(4) Heading 9902.30.31 (relating to 5-amino-N-(2-hydroxyethyl)–2,3-xylenesulfonamide). 

(5) Heading 9902.01.83 (relating to Ethoprop). 

(6) Heading 9902.01.73 (relating to Fosetyl-Al). 

(7) Heading 9902.03.38 (relating to Flufenacet (FOE 

hydroxy)). 

(8) Heading 9902.02.02 (relating to Methidathion Technical). 

(9) Heading 9902.02.12 (relating to difenoconazole). 

(10) Heading 9902.02.09 (relating to Lambda-Cyhalothrin). 

(11) Heading 9902.02.08 (relating to cyprodinil). 

(12) Heading 9902.02.04 (relating to Wakil XL). 

(13) Heading 9902.02.06 (relating to Azoxystrobin Technical). 

(14) Heading 9902.02.05 (relating to mucochloric acid). 

(15) Heading 9902.03.06 (relating to high tenacity multiple 

(folded) or cabled yarn of viscose rayon). 

(16) Heading 9902.05.07 (relating to high tenacity single 

yarn of viscose rayon with a decitex equal to or greater than 

1,000). 
H. R. 4—379

(17) Heading 9902.38.31 (relating to Vulkalent E/C). 

(18) Heading 9902.01.71 (relating to hexanedioic acid, 

polymer with 1,3-benzenedimethanamine). 

(19) Heading 9902.29.93 (relating to Trinexapac-ethyl). 

(20) Heading 9902.38.52 (relating to formulations of 

triasulfuron). 

(21) Heading 9902.39.30 (relating to certain ion-exchange 

resins). 

(22) Heading 9902.32.82 (relating to 2,6 Dichlorotoluene). 

(23) Heading 9902.02.33 (relating to Ion exchange resin 

comprising a compolymer of styrene crosslinked with 

ethenylbenzene, aminophosphonic acid sodium form). 

(24) Heading 9902.02.32 (relating toIon exchange resin 

comprising a copolymer of styrene crosslinked with 

divinylbenzene, iminodiacetic acid, sodium form)). 

(25) Heading 9902.01.78 (relating to certain bags for toys). 

(26) Heading 9902.01.81 (relating to cases for certain children’s products). 

(27) Heading 9902.01.80 (relating to certain children’s products). 

(28) Heading 9902.29.34 (relating to certain light absorbing 

photo dyes). 

(29) Heading 9902.85.04 (relating to certain R-core transformers). 

(30) Heading 9902.03.04 (relating to reduced vat blue 43). 

(31) Heading 9902.03.03 (relating to sulfur black 1). 

(32) Heading 9902.01.22 (relating to DMSIP). 

(33) Heading 9902.29.35 (relating to 2-(Methoxycarbonyl)benzylsulfonamide). 

(34) Heading 9902.02.52 (relating to Imidacloprid pesticides). 

(35) Heading 9902.38.15 (relating to Baytron C-R). 

(36) Heading 9902.29.87 (relating to 3,4-

Ethylenedioxythiophene). 

(37) Heading 9902.01.90 (relating to certain filament 

yarns). 

(38) Heading 9902.01.91 (relating to certain filament 

yarns). 

(39) Heading 9902.71.08 (relating to certain semi-manufactured forms of gold). 

(40) Heading 9902.04.10 (relating to Crotonic Acid). 

(41) Heading 9902.04.09 (relating to 3,6,9-

Trioxaundecanedioic acid). 

(42) Heading 9902.02.51 (relating to benzoic acid, 2-amino4-[[(2,5-dichlorophenyl)amino]carbonyl]-, methyl ester). 

(43) Heading 9902.32.73 (relating to Solvent blue 124). 

(44) Heading 9902.32.55 (relating to Methyl thioglycolate 

(MTG)). 

(45) Heading 9902.01.48 (relating to Ethyl pyruvate). 

(46) Heading 9902.04.11 (relating to 1,3-

Benzenedicarboxamide, N, N′-Bis (2,2,6,6-tetramethyl-4-

piperidinyl)-). 

(47) Heading 9902.04.07 (relating to reaction products of 

phosphorus trichloride with 1,1′-biphenyl and 2,4-bis(1,1-

dimethylethyl)phenol). 

(48) Heading 9902.04.05 (relating to preparations based 

on ethanediamide, N-(2-ethoxyphenyl)-N′-(4-isodecylphenyl)-). 
H. R. 4—380

(49) Heading 9902.04.06 (relating to 1-Acetyl-4-(3-dodecyl2,5-dioxo-1-pyrrolidinyl)–2,2,6,6-tetramethylpiperidine). 

(50) Heading 9902.04.12 (relating to 3-Dodecyl-1-(2,2,6,6-

tetramethyl-4-piperidinyl)–2,5-pyrrolidinedione). 

(51) Heading 9902.29.70 (relating to 

Tetraacetylethylenediamine). 

(52) Heading 9902.34.01 (relating to sodium petroleum 

sulfonate). 

(53) Heading 9902.02.75 (relating to esters and sodium 

esters of parahydroxybenzoic acid). 

(54) Heading 9902.30.16 (relating to Diclofop methyl). 

(55) Heading 9902.33.61 (relating to ((3-

((Dimethylamino)carbonyl)–2-pyridinyl)sulfonyl) carbamic acid, 

phenyl ester). 

(56) Heading 9902.01.45 (relating to Esfenvalerate). 

(57) Heading 9902.05.01 (relating to Methyl 2-[[[[[4-

(dimethylamino)–6- (2,2,2-trifluoroethoxy)-1,3,5-triazin-2-yl]-

amino]carbonyl]amino]sulfonyl]-3-methylbenzoate and application adjuvants). 

(58) Heading 9902.01.44 (relating to Benzyl carbazate). 

(59) Heading 9902.05.14 (relating to Pyromellitic 

Dianhydride). 

(60) Heading 9902.05.13 (relating to 4,4’-Oxydiphthalic 

Anhydride). 

(61) Heading 9902.05.12 (relating to 4,4’-Oxydianiline). 

(62) Heading 9902.05.11 (relating to 3,3’,4,4’-

Biphenyltetracarboxylic Dianhydride). 

(63) Heading 9902.29.80 (relating to 1-[[2-(2,4- 

dichlorophenyl)–4-propyl-1,3-dioxolan-2-yl]-methyl]-1H-1,2,4-

triazole). 

(64) Heading 9902.05.19 (relating to ethofumesate). 

(65) Heading 9902.02.60 (relating to Nemacur VL). 

(66) Heading 9902.03.77 (relating to thiophanate methyl). 

(67) Heading 9902.84.14 (relating to ceiling fans). 

(b) OTHER MODIFICATIONS.— (1) 2-CHLOROBENZYL CHLORIDE.—Heading 9902.01.56 is 

amended—

(A) by striking ‘‘2903.69.70’’ and inserting ‘‘2903.69.80’’; 

and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(2) TRIETHYLENE GLYCOL BIS[3-(3-TERT-BUTYL-4-HYDROXY-5- METHYLPHENYL)PROPIONATE] .—Heading 9902.01.88 is 

amended—

(A) by striking ‘‘Free’’ and inserting ‘‘4.1%’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(3) FORMULATIONS OF TRIASULFURON AND DICAMBA.— Heading 9902.38.21 is amended—

(A) in the article description column—

(i) by inserting ‘‘(Triasulfuron)’’ before ‘‘(CAS No. 

82097-50-5)’’; and 

(ii) by inserting ‘‘(Dicamba)’’ before ‘‘(CAS No. 

1918-00-9)’’; and 

(B) by striking ‘‘12/31/2003’’ and inserting ‘‘12/31/2009’’. 

(4) 11-AMINOUNDECANOIC ACID.—Heading 9902.32.49 is 

amended—

(A) by striking ‘‘Free’’ and inserting ‘‘2.3%’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 
H. R. 4—381

(5) PHBA.—Heading 9902.29.03 is amended—

(A) by striking ‘‘Free’’ and inserting ‘‘3.1%’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(6) ACETAMIPRID TECHNICAL.—Heading 9902.03.92 is 

amended—

(A) by striking ‘‘Free’’ and inserting ‘‘2.5%’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(7) BAYTRON AND BAYTRON P.—Heading 9902.39.15 is 

amended—

(A) by inserting ‘‘, whether or not containing binder 

resin and organic solvent’’ before ‘‘(CAS No.’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(8) IPRODIONE.—Heading 9902.01.51 is amended—

(A) by striking ‘‘4.1%’’ and inserting ‘‘2.0%’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(9) ETHANEDIAMIDE, N-(2-ETHOXYPHENYL)-N′-(2-

ETHYLPHENYL)-).—Heading 9902.04.13 is amended—

(A) by striking ‘‘2924.29.76’’ and inserting ‘‘2924.29.71’’; 

and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(10) THIAMETHOXAM TECHNICAL.—Heading 9902.03.11 is 

amended—

(A) by striking ‘‘3.2%’’ and inserting ‘‘3.0%’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(11) 1,3-BIS(4-AMINOPHENOXY)BENZENE (RODA).—Heading 

9902.05.15 is amended—

(A) by inserting ‘‘(RODA)’’ after ‘‘benzene’’; and 

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’. 

(12) MIXTURES OF N-[[(4,6-DIMETHOXYPYRIMIDIN-2-

YL)AMINO]CARBONYL]-3-(ETHYLSULFONYL)–2-

PYRIDINESULFONAMIDE AND APPLICATION ADJUVANTS.—Heading 

9902.33.60 is amended—

(A) by striking the article description and inserting 

the following: ‘‘Mixtures of N-[[(4,6-dimethoxypyrimidin-2-

yl)amino]carbonyl]-3-(ethylsulfonyl)–2-pyridinesulfonamide 

and application adjuvants (CAS No. 122931–48–0) (provided for in subheading 3808.30.15)’’; and 

(B) by striking ‘‘12/31/2003’’ and inserting ‘‘12/31/2009’’. 

Subtitle B—Other Tariff Provisions 

CHAPTER 1—LIQUIDATION OR RELIQUIDATION OF 

CERTAIN ENTRIES 

SEC. 1621. CERTAIN TRAMWAY CARS AND ASSOCIATED SPARE PARTS. 

(a) IN GENERAL.—The Commissioner of the Bureau of Customs 

and Border Protection of the Department of Homeland Security 

shall admit free of duty 3 tramway cars (provided for in subheading 

8603.10.00 of the Harmonized Tariff Schedule of the United States) 

manufactured in Ostrava, Czech Republic, for the use by the city 

of Portland, Oregon, and imported pursuant to a contract with 

the city of Portland, Oregon, and associated spare parts for such 

tramway cars (provided for in applicable subheadings of heading 

8607 or other headings of the Harmonized Tariff Schedule of the 

United States) imported pursuant to such contract, the foregoing 
H. R. 4—382

to be entered into the customs territory of the United States by 

not later than December 31, 2006. 

(b) RELIQUIDATION; REFUND OF AMOUNTS OWED.— If the liquidation of the entry of any of the tramway cars or associated 

spare parts described in subsection (a) becomes final before the 

date of the enactment of this Act, the Commissioner of the Bureau 

of Customs and Border Protection, notwithstanding any other provision of law, shall—

(1) within 15 days after such date, reliquidate the entry 

in accordance with the provisions of this section; and 

(2) at the time of such reliquidation, make the appropriate 

refund of any duty paid with respect to the entry. 

SEC. 1622. RELIQUIDATION OF CERTAIN ENTRIES OF CANDLES. 

(a) RELIQUIDATION OF ENTRIES.—Notwithstanding sections 514 

and 520 of the Tariff Act of 1930 (19 U.S.C. 1514 and 1520) 

or any other provision of law, the Bureau of Customs and Border 

Protection shall, not later than 90 days after the date of the enactment of this Act—

(1) reliquidate the entries listed in subsection (b) without 

assessment of antidumping duties or interest; and 

(2) refund any antidumping duties and interest which were 

previously paid on such entries. 

(b) AFFECTED ENTRIES.—The entries referred to in subsection 

(a) are the following:

Entry number Date of entry Port

110–3447557–3 03/18/00 Los Angeles 

110–3447591–2 03/19/00 Los Angeles 

110–3447595–3 03/19/00 Los Angeles 

110–1201638–1 03/21/00 Detroit 

110–1201639–9 03/21/00 Detroit 

110–1201640–7 03/21/00 Detroit 

110–3447613–4 03/21/00 Los Angeles 

110–1201697–7 03/23/00 Detroit 

110–1201695–1 03/23/00 Detroit 

110–1201696–9 03/23/00 Detroit 

110–1201756–1 03/27/00 Detroit 

110–1201757–9 03/27/00 Detroit 

110–1201758–7 03/27/00 Detroit 

110–1740905–2 03/30/00 Los Angeles 

110–1740943–3 03/30/00 Los Angeles 

110–1201845–2 03/31/00 Detroit 

110–1201813–0 04/03/00 Detroit 

110–1201814–8 04/03/00 Detroit 

110–1201815–5 04/03/00 Detroit 

110–1201875–9 04/04/00 Detroit 

110–1201868–4 04/04/00 Detroit 

110–1201858–5 04/04/00 Detroit 

110–3447959–1 04/11/00 Los Angeles 

110–3447958–3 04/11/00 Los Angeles 

110–3759536–9 04/12/00 Detroit 

110–3759561–7 04/12/00 Detroit 

110–3759542–7 04/12/00 Detroit 

110–3759540–1 04/12/00 Detroit 

110–3447977–3 04/12/00 Los Angeles 

110–3759539–3 04/12/00 Detroit 

110–3448045–8 04/14/00 Los Angeles 

110–3448046–6 04/14/00 Los Angeles 

110–3448110–0 04/20/00 Los Angeles 

110–3759670–6 04/25/00 Detroit 

110–3759673–0 04/25/00 Detroit 

110–3759669–8 04/25/00 Detroit 

110–3759667–2 04/25/00 Detroit 
H. R. 4—383

Entry number Date of entry Port

110–3759671–4 04/25/00 Detroit 

110–3759668–0 04/25/00 Detroit 

110–3448241–3 04/27/00 Los Angeles 

110–3448247–0 04/27/00 Los Angeles 

110–3448276–9 04/28/00 Memphis 

110–3448274–4 04/28/00 Memphis 

110–3448282–7 05/04/00 Memphis 

101–4081779–1 05/07/00 Memphis 

101–4088945–1 05/23/00 Memphis 

101–4089954–3 05/23/00 Memphis 

101–4088960–0 05/23/00 Memphis 

101–4092192–4 05/25/00 Memphis 

101–4089312–3 05/26/00 Detroit 

101–4089942–7 05/26/00 Detroit 

101–4089893–2 05/26/00 Detroit 

101–4092221–1 05/26/00 Memphis 

101–4089697–7 05/26/00 Los Angeles 

101–4092215–3 05/26/00 Memphis 

101–4086053–6 05/26/00 Los Angeles 

101–4122700–8 07/27/00 Los Angeles 

101–4122707–3 07/27/00 Los Angeles 

101–4122712–3 07/27/00 Los Angeles 

101–4127147–7 08/03/00 Los Angeles 

101–4132485–4 08/09/00 Norfolk 

101–4129989–0 08/11/00 Detroit 

101–4130345–2 08/17/00 Detroit 

101–4129976–7 08/23/00 Detroit 

101–4149476–4 09/06/00 Los Angeles 

101–4149483–0 09/06/00 Los Angeles 

101–4149493–9 09/06/00 Los Angeles 

101–4148595–2 09/08/00 Detroit 

101–4153301–7 09/18/00 Detroit 

101–4154523–5 09/14/00 Los Angeles 

101–4153389–2 09/18/00 Detroit 

101–4157161–1 09/20/00 Norfolk 

101–4153333–0 09/21/00 Detroit 

101–4155542–4 09/26/00 Detroit 

101–4166291–5 10/07/00 Los Angeles 

101–4167325–0 10/09/00 Detroit 

101–4167363–1 10/12/00 Detroit 

101–4164567–0 10/13/00 Norfolk 

101–4168049–5 10/14/00 Los Angeles 

101–4172904–5 10/21/00 Los Angeles 

101–4175579–2 10/30/00 Los Angeles 

101–4183996–8 11/07/00 Detroit 

101–4183234–4 11/09/00 Detroit 

101–4183251–8 11/09/00 Detroit 

101–4183253–4 11/09/00 Detroit 

101–4183257–5 11/09/00 Detroit 

101–4183264–1 11/09/00 Detroit 

101–4183264–1 11/09/00 Detroit 

101–4184811–8 11/13/00 Los Angeles 

101–4184819–1 11/13/00 Los Angeles 

101–4189001–1 11/14/00 Tampa 

101–4185526–1 11/16/00 Detroit 

101–4185535–2 11/16/00 Detroit 

101–4186580–7 11/20/00 Detroit 

101–4189830–3 11/20/00 Detroit 

101–4189774–3 11/21/00 Detroit 

101–4191183–3 11/24/00 Los Angeles 

101–4191188–2 11/24/00 Los Angeles 

101–4191193–2 11/24/00 Los Angeles 

101–4194796–9 11/29/00 Detroit 

101–4194801–7 11/29/00 Detroit 

101–4196383–4 12/01/00 Los Angeles 

101–4196389–1 12/01/00 Los Angeles 

101–4199308–8 12/13/00 Detroit 
H. R. 4—384

SEC. 1623. CERTAIN ENTRIES OF ROLLER CHAIN. 

(a) LIQUIDATION OR RELIQUIDATION OF ENTRIES.—Notwithstanding sections 514 and 520 of the Tariff Act of 1930 (19 U.S.C. 

1514 and 1520) or any other provision of law, the Bureau of Customs 

and Border Protection shall, not later than 90 days after the date 

of enactment of this Act, liquidate or reliquidate the entries listed 

in subsection (b) without assessment of interest and shall refund 

any interest which was previously paid. 

(b) AFFECTED ENTRIES.—The entries referred to in subsections 

(a) and (b) are the following:

Entry number Date of entry Port

858442975 08/21/85 Chicago 

868558147 01/28/86 Chicago 

868565499 03/14/86 Chicago 

858440922 07/31/85 Chicago 

868565499 03/14/86 Chicago 

868558147 01/28/86 Chicago 

858442975 08/21/85 Chicago 

858440922 07/31/85 Chicago 

847648353 06/18/84 Chicago 

858268324 01/04/85 Chicago 

858264302 11/08/84 Chicago 

858265107 11/19/84 Chicago 

847650150 07/18/84 Chicago 

847412877 05/09/84 Chicago 

837078386 03/21/83 Chicago 

837077691 02/07/83 Chicago 

837077701 02/07/83 Chicago 

826735834 01/13/82 Chicago 

826736309 01/18/82 Chicago 

821020081 02/12/82 Chicago 

821020052 02/17/82 Chicago 

821026768 04/13/82 Chicago 

827119569 06/18/82 Chicago 

837075114 10/06/82 Chicago 

826727088 10/14/81 Chicago 

837124777 05/19/83 Chicago 

847405240 11/28/83 Chicago 

837127606 08/18/83 Chicago 

837125132 06/08/83 Chicago 

847406100 12/22/83 Chicago 

847404034 11/02/83 Chicago 

837128090 09/07/83 Chicago 

837126762 08/05/83 Chicago 

837125569 06/22/83 Chicago 

837078991 04/12/83 Chicago 

837129222 10/03/83 Chicago 

847406414 12/29/83 Chicago 

847408014 01/31/84 Chicago 

868569204 07/03/86 Chicago 

868730813 08/14/86 Chicago 

SEC. 1624. CERTAIN ENTRIES OF SOUNDSPA CLOCK RADIOS. 

(a) IN GENERAL.—Notwithstanding section 514 of the Tariff 

Act of 1930 (19 U.S.C. 1514) or any other provision of law, the 

Bureau of Customs and Border Protection shall, not later than 

90 days after the date of the enactment of this Act—

(1) reliquidate each entry described in subsection (c) containing any merchandise which, on the date of original liquidation, was classified under subheading 8527.19.50 of the Harmonized Tariff Schedule of the United States; and 

(2) make such reliquidation at the rate of duty that would 

have been applicable to such merchandise if the merchandise 
H. R. 4—385

had been liquidated under subheading 8527.19.10 of such 

Schedule on the date of entry of the merchandise. 

(b) REFUND OF AMOUNTS OWED.—Any amounts owed by the 

United States under subsection (a) shall be refunded with interest. 

(c) AFFECTED ENTRIES.—The entries referred to in subsection 

(a) are as follows:

Entry number

110–1199345–7

110–1199542–9

110–1199558–5

110–1201694–4

110–3759754–8

110–3759785–2

101–4082299–9

101–4088073–2

101–4089053–3

101–4120875–0

101–4133671–8

101–4138302–5

101–4145092–3

101–4148477–3

101–4153108–6

101–4159322–7

101–4158601–5

101–4163243–9

101–4164448–3

101–4168318–4

101–4172197–6

101–4172489–7

101–4193123–7

101–4264820–2

101–4271724–7

101–4277850–4

101–4287672–0

101–4301588–0

101–4306238–7

101–4306235–3

101–6011727–0

101–6012796–4

101–6015492–7

101–6021099–2

101–6026903–0

101–6024120–3

101–6028079–7

101–6027052–5

101–6036728–9

101–6048069–4

101–6079830–1

101–6082949–4

101–6115954–5

101–6119379–1

101–6127048–2

101–6150035–9

101–6148556–9

101–6172630–1

101–6172406–6

101–6186497–9

101–4208407–7

101–6035939–3

CHAPTER 2—MISCELLANEOUS PROVISIONS 

SEC. 1631. VESSEL REPAIR DUTIES. 

(a) EXEMPTION.—Section 466(h) of the Tariff Act of 1930 (19 

U.S.C. 1466(h)) is amended by striking paragraph (4) and inserting 

the following: 
H. R. 4—386

‘‘(4) the cost of equipment, repair parts, and materials 

that are installed on a vessel documented under the laws 

of the United States and engaged in the foreign or coasting 

trade, if the installation is done by members of the regular 

crew of such vessel while the vessel is on the high seas, in 

foreign waters, or in a foreign port, and does not involve foreign 

shipyard repairs by foreign labor.’’. 

(b) AMENDMENT TO HTS.—The U.S. Notes to subchapter XVIII 

of chapter 98 of the Harmonized Tariff Schedule of the United 

States are amended by amending U.S. Note 2 to read as follows: 

‘‘2. Notwithstanding the provisions of subheadings 9818.00.03 

through 9818.00.07, no duty shall apply to the cost of equipment, 

repair parts, and materials that are installed in a vessel documented 

under the laws of the United States and engaged in the foreign 

or coasting trade, if the installation is done by members of the 

regular crew of such vessel while the vessel is on the high seas, 

in foreign waters, or in a foreign port and does not involve foreign 

shipyard repairs by foreign labor. Declaration and entry shall not 

be required with respect to such installation, equipment, parts, 

and materials.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

apply to vessel equipment, repair parts, and materials installed 

on or after April 25, 2001.

SEC. 1632. SUSPENSION OF NEW SHIPPER REVIEW PROVISION. 

(a) SUSPENSION OF THE AVAILABILITY OF BONDS TO NEW SHIPPERS.—Clause (iii) of section 751(a)(2)(B) of the Tariff Act of 1930 

(19 U.S.C. 1675(a)(2)(B)(iii)) shall not be effective during the period 

beginning on April 1, 2006, and ending on June 30, 2009. 

(b) REPORT ON THE IMPACT OF THE SUSPENSION.—Not later 

than December 31, 2008, the Secretary of the Treasury, in consultation with the Secretary of Commerce, the United States Trade 

Representative, and the Secretary of Homeland Security, shall 

submit to the Committee on Ways and Means of the House of 

Representatives and the Committee on Finance of the Senate a 

report containing—

(1) recommendations on whether the suspension of section 

751(a)(2)(B)(iii) of the Tariff Act of 1930 should be extended 

beyond the date provided in subsection (a); and 

(2) an assessment of the effectiveness of any administrative 

measure that was implemented to address the difficulties that 

necessitated the suspension under subsection (a), including—

(A) any problem in the collection of antidumping duties 

on imports from new shippers; and 

(B) any burden imposed on legitimate trade and commerce by the suspension of bonds to new shippers. 

(c) REPORT ON COLLECTION PROBLEMS AND ANALYSIS OF PROPOSED SOLUTIONS.—

(1) REPORT.—Not later than 180 days after the date of 

the enactment of this Act, the Secretary of the Treasury, in 

consultation with the Secretary of Homeland Security and the 

Secretary of Commerce, shall submit to the Committee on Ways 

and Means of the House of Representatives and the Committee 

on Finance of the Senate a report describing—

(A) any major problem experienced in the collection 

of duties during the 4 most recent fiscal years for which 
H. R. 4—387

data are available, including any fraudulent activity 

intended to avoid payment of duties; and 

(B) an estimate of the total amount of duties that 

were uncollected during the most recent fiscal year for 

which data are available, including, with respect to each 

product, a description of why the duties were uncollected. 

(2) RECOMMENDATIONS.—The report shall include—

(A) recommendations on any additional action needed 

to address problems related to the collection of duties; 

and 

(B) for each recommendation—

(i) an analysis of how the recommendation would 

address the specific problem; and 

(ii) an assessment of the impact that implementing 

the recommendation would have on international trade 

and commerce (including any additional costs imposed 

on United States businesses).

SEC. 1633. EXTENSION AND MODIFICATION OF DUTY SUSPENSION ON 

WOOL PRODUCTS; WOOL RESEARCH FUND; WOOL DUTY 

REFUNDS. 

(a) EXTENSION OF TEMPORARY DUTY REDUCTIONS.—Each of the 

following headings of the Harmonized Tariff Schedule of the United 

States is amended by striking the date in the effective period 

column and inserting ‘‘12/31/2009’’: 

(1) Heading 9902.51.11 (relating to fabrics of worsted wool). 

(2) Heading 9902.51.13 (relating to yarn of combed wool). 

(3) Heading 9902.51.14 (relating to wool fiber, waste, 

garnetted stock, combed wool, or wool top). 

(4) Heading 9902.51.15 (relating to fabrics of combed wool). 

(5) Heading 9902.51.16 (relating to fabrics of combed wool). 

(b) EXTENSION OF DUTY REFUNDS AND WOOL RESEARCH TRUST

FUND.—

(1) IN GENERAL.—Section 4002(c) of the Wool Suit and 

Textile Trade Extension Act of 2004 (Public Law 108–429; 

118 Stat. 2603 (7 U.S.C. 7101 note)) is amended—

(A) in paragraph (3)—

(i) by striking ‘‘2 additional payments’’ and 

inserting ‘‘annual additional payments’’; and 

(ii) by adding at the end the following: 

‘‘(C) Each subsequent annual payment to be made after 

January 1 of each subsequent year, but on or before April 

15 of such year through calendar year 2010.’’; and 

(B) in paragraph (6)—

(i) in subparagraph (A), by striking ‘‘through 2007’’ 

and inserting ‘‘through 2009’’; and 

(ii) by adding at the end the following: 

‘‘(C) ELIGIBLE MANUFACTURERS.—Only manufacturers 

who weave worsted wool fabric in the United States shall 

be eligible for a grant under this paragraph.’’. 

(2) SUNSET.—Section 506(f) of the Trade and Development 

Act of 2000 (Public 106–200; 114 Stat. 303), as amended by 

section 4002(c)(5) of the Wool Suit and Textile Trade Extension 

Act of 2004 (Public 108–429; 118 Stat. 2603), is amended by 

striking ‘‘2008’’ and inserting ‘‘2010’’.
H. R. 4—388

SEC. 1634. AUTHORITIES RELATING TO DR–CAFTA AGREEMENT. 

(a) AUTHORITY TO IMPLEMENT CERTAIN AMENDMENTS TO DR–

CAFTA AGREEMENT WITH NICARAGUA, EL SALVADOR, HONDURAS, AND GUATEMALA.— (1) PROCLAMATION AUTHORITY.—The President is authorized to proclaim modifications to the Harmonized Tariff 

Schedule of the United States as necessary to carry out amendments proposed by the United States and the CAFTA–DR countries to the Agreement, the terms of which are contained in 

the letters of understanding described in paragraph (2). 

(2) LETTERS OF UNDERSTANDING.—The letters of understanding referred to in paragraph (1) are the following: 

(A) The letter of March 24, 2006, from Nicaraguan 

Vice Minister of Trade Julio Teran to United States Special 

Textile Negotiator Scott Quesenberry. 

(B) The letter of March 27, 2006, from United States 

Special Textile Negotiator Scott Quesenberry to Nicaraguan 

Vice Minister of Trade Julio Teran. 

(C) The letter of January 27, 2006, from El Salvadoran 

Vice Minister of Economy Eduardo Ayala to United States 

Special Textile Negotiator Scott Quesenberry. 

(D) The letter of January 27, 2006, from United States 

Special Textile Negotiator Scott Quesenberry to El Salvadoran Vice Minister of Economy Eduardo Ayala. 

(E) The letter of March 7, 2006, from Honduran Vice 

Minister of Foreign Trade Jorge Rosa to United States 

Special Textile Negotiator Scott Quesenberry. 

(F) The letter of March 7, 2006, from United States 

Special Textile Negotiator Scott Quesenberry to Honduran 

Vice Minister of Foreign Trade Jorge Rosa. 

(G) The letter of June 23, 2006, from Guatemalan 

Minister of Economy Marcio Cuevas Quezada to United 

States Special Textile Negotiator Scott Quesenberry. 

(H) The letter of June 23, 2006, from United States 

Special Textile Negotiator Scott Quesenberry to Guatemalan Minister of Economy Marcio Cuevas Quezada. 

(3) SUNSET.—The authority of the President to proclaim 

modifications pursuant to paragraph (1) expires on December 

31, 2007. 

(b) AUTHORITY TO IMPLEMENT CERTAIN AMENDMENTS TO DR–

CAFTA AGREEMENT WITH COSTA RICA AND THE DOMINICAN

REPUBLIC.—

(1) PROCLAMATION AUTHORITY.—The President is authorized to proclaim modifications to the Harmonized Tariff 

Schedule of the United States as necessary to carry out amendments proposed by the United States, Costa Rica, and the 

Dominican Republic to the Agreement, the terms of which 

are contained in the letters of understanding described in paragraph (2). 

(2) LETTERS OF UNDERSTANDING.—

(A) IN GENERAL.—The letters of understanding referred 

to in paragraph (1) are letters of understanding exchanged 

between the countries described in paragraph (1) relating 

to the rules of origin for articles containing pocket bag 

fabric described in subparagraph (B). 

(B) POCKET BAG FABRIC DESCRIBED.—For purposes of 

subparagraph (A), the term ‘‘pocket bag fabric’’ means 
H. R. 4—389

pocket bag fabric used in an apparel article classifiable 

under chapter 61 or 62 of the Harmonized Tariff Schedule 

of the United States that contains a pocket or pockets. 

(3) CONSULTATION AND LAYOVER REQUIREMENTS.—Any 

modification proclaimed by the President pursuant to paragraph (1) shall be subject to the consultation and layover provisions of section 104 of the Dominican Republic–Central 

America–United States Free Trade Agreement Implementation 

Act (Public Law 109–53; 19 U.S.C. 4014). 

(4) CONGRESSIONAL DISAPPROVAL.—

(A) IN GENERAL.—Any modification proclaimed by the 

President pursuant to paragraph (1) shall not be effective 

if a joint resolution described in subparagraph (B) is 

enacted into law. 

(B) JOINT RESOLUTION DESCRIBED.—For purposes of 

subparagraph (A), the term ‘‘joint resolution’’ means a joint 

resolution of Congress, the sole matter after the resolving 

clause of which is as follows: ‘‘That the Congress disapproves the modification proclaimed by the President contained in the report submitted to the Committee on Finance 

of the Senate and the Committee on Ways and Means 

of the House of Representatives pursuant to section 104(2) 

of the Dominican Republic—Central America—United 

States Free Trade Agreement Implementation Act (Public 

Law 109–53; 19 U.S.C. 4014(2)) on llllllllll.’’, 

with the blank space being filled with the appropriate 

date. 

(5) SUNSET.—The authority of the President to proclaim 

modifications pursuant to paragraph (1) expires on December 

31, 2007. 

(c) AUTHORITY RELATING TO NICARAGUAN TARIFF PREFERENCE

LEVEL UNDER DR–CAFTA AGREEMENT.—

(1) CERTIFICATE OF ELIGIBILITY.—The Commissioner of Customs may require an importer to submit at the time the 

importer files a claim for preferential tariff treatment under 

Annex 3.28 of the Agreement a certificate of eligibility, properly 

completed and signed, or transmitted pursuant to an authorized 

electronic data interchange system, by an authorized official 

of the Government of Nicaragua for purposes of implementing 

the tariff preference level for Nicaragua provided in Annex 

3.28 of the Agreement. 

(2) ENFORCEMENT OF COMMITMENTS.—The President is 

authorized to proclaim a reduction in the overall limit in the 

tariff preference level for Nicaragua provided in Annex 3.28 

of the Agreement if the President determines that Nicaragua 

has failed to comply with a commitment under an agreement 

between the United States and Nicaragua with regard to the 

administration of such tariff preference level. 

(3) EFFECTIVE DATE.—Paragraph (1) applies with respect 

to entries made on or after April 1, 2006. 

(d) TECHNICAL CORRECTION RELATING TO CO-PRODUCTION OF

CERTAIN TEXTILE AND APPAREL GOODS.—Section 205(a)(2) of the 

Dominican Republic–Central America–United States Free Trade 

Agreement Implementation Act (19 U.S.C. 4034(a)(2)) is amended 

by inserting after ‘‘with respect to that country’’ the following: 

‘‘or any other CAFTA–DR country’’. 
H. R. 4—390

(e) REPORTING REQUIREMENTS ON CERTAIN NEGOTIATIONS AND

AMENDMENTS TO DR–CAFTA AGREEMENT.—

(1) IN GENERAL.—Not later than 30 days after the date 

of the enactment of this Act, and at least quarterly thereafter, 

the United States Trade Representative shall submit to the 

appropriate congressional committees a report on the status 

of negotiations and amendments proposed by the United States, 

Nicaragua, El Salvador, Honduras, Guatemala, Costa Rica, and 

the Dominican Republic to the Agreement regarding any change 

to the rule of origin or alteration of the tariff treatment of 

socks described in paragraph (2) or any technical correction 

described in paragraph (3). In addition, the United States Trade 

Representative shall provide to the appropriate congressional 

committees copies of any amendments to be proposed by the 

United States before the amendments are offered and copies 

of any amendments received by the United States relating 

to such negotiations. 

(2) SOCKS DESCRIBED.—For purposes of paragraph (1), the 

term ‘‘socks’’ means articles classifiable under subheading 

6111.20.6050, 6111.30.5050, 6111.90.5050, 6115.91.00, 

6115.92.60, 6115.92.90, 6115.93.60, 6115.93.90, 6115.99.14, or 

6115.99.18 of the Harmonized Tariff Schedule of the United 

States. 

(3) TECHNICAL CORRECTIONS DESCRIBED.—Technical corrections referred to in paragraph (1) are the following: 

(A) Clarification of references to ‘‘elastomeric yarns’’ 

contained in the notes, subheading notes, additional U.S. 

notes, and statistical notes to chapters 50 to 63 (section 

XI) of the Harmonized Tariff Schedule of the United States. 

(B) Clarification of the ability to apply short supply 

provisions to sewing thread, narrow elastics, and visible 

linings. 

(C) Treatment of women’s and girls’ woven sleep bottoms under Annex 4.1 of the Agreement. 

(D) Addition of a rule of origin for women’s and girls’ 

woven sleep bottoms to reflect the rule of origin provided 

for in subheading 6207.11.00 of the Harmonized Tariff 

Schedule of the United States and contained in Annex 

4.1 of the Agreement. 

(E) Provision of women’s and girls’ sleep bottoms under 

Annex 4.1–A of the Agreement. 

(4) DEFINITION.—In this subsection, the term ‘‘appropriate 

congressional committees’’ means the Committee on Ways and 

Means of the House of Representatives and the Committee 

on Finance of the Senate. 

(5) SUNSET.—The requirements of paragraph (1) expire on 

the date on which any change is made to the rule of origin 

pursuant to article 3.25 of the Agreement for any good described 

in paragraph (2), or December 31, 2007, whichever occurs later. 

(f) DEFINITIONS.—In this section: 

(1) AGREEMENT.—The term ‘‘Agreement’’ has the meaning 

given the term in section 3(1) of the Dominican Republic–

Central America–United States Free Trade Agreement 

Implementation Act (Public Law 109–53; 19 U.S.C. 4002(1)). 

(2) CAFTA–DR COUNTRY.—The term ‘‘CAFTA–DR country’’ 

has the meaning given the term in section 3(2) of the Dominican 
H. R. 4—391

Republic–Central America–United States Free Trade Agreement Implementation Act (Public Law 109–53; 19 U.S.C. 

4002(2)). 

SEC. 1635. TECHNICAL AMENDMENTS TO CUSTOMS MODERNIZATION. 

(a) ENTRY OF MERCHANDISE.—Section 484(a) of the Tariff Act 

of 1930 (19 U.S.C. 1484(a)) is amended—

(1) in paragraph (1), by amending subparagraph (A) to 

read as follows: 

‘‘(A) make entry therefor by filing with the Bureau 

of Customs and Border Protection such documentation or, 

pursuant to an authorized electronic data interchange 

system, such information as is necessary to enable the 

Bureau of Customs and Border Protection to determine 

whether the merchandise may be released from custody 

of the Bureau of Customs and Border Protection;’’; and 

(2) in paragraph (2)(A), in the second sentence, by inserting 

after ‘‘covering’’ the following: ‘‘merchandise released under a 

special delivery permit pursuant to section 448(b) and’’. 

(b) REFUNDS AND ERRORS.—Section 520(a) of the Tariff Act 

of 1930 (19 U.S.C. 1520(a)) is amended—

(1) in paragraph (1), by striking the semicolon at the end 

and inserting a period; 

(2) in paragraph (2), by striking ‘‘; and’’ at the end and 

inserting a period; and 

(3) in paragraph (4)—

(A) by inserting ‘‘an importer of record declares or’’ 

before ‘‘it is ascertained’’; and 

(B) by striking ‘‘by reason of clerical error’’. 

(c) ENTRY FROM WAREHOUSE.—Section 557(a) of the Tariff Act 

of 1930 (19 U.S.C. 1557(a)) is amended—

(1) in paragraph (1)—

(A) in the second sentence, by inserting after ‘‘the 

date of importation’’ the following: ‘‘, or such longer period 

of time as the Bureau of Customs and Border Protection 

may at its discretion permit upon proper request being 

filed and good cause shown’’; and 

(B) in subparagraph (A), by inserting after ‘‘the date 

of importation’’ the following: ‘‘or such longer period of 

time as the Bureau of Customs and Border Protection 

may at its discretion permit upon proper request being 

filed and good cause shown’’; and 

(2) in paragraph (2), by inserting after ‘‘the date of importation’’ the following: ‘‘, or such longer period of time as the 

Bureau of Customs and Border Protection may at its discretion 

permit upon proper request being filed and good cause shown,’’. 

(d) ABANDONED GOODS.—Section 559 of the Tariff Act of 1930 

(19 U.S.C. 1559) is amended by inserting after ‘‘the date of importation’’ each place it appears the following: ‘‘, or such longer period 

of time as the Bureau of Customs and Border Protection may 

at its discretion permit upon proper request being filed and good 

cause shown’’. 

(e) MANIPULATION IN WAREHOUSE.—Section 562 of the Tariff 

Act of 1930 (19 U.S.C. 1562) is amended—

(1) by amending the first sentence to read as follows: ‘‘Merchandise shall only be withdrawn from a bonded warehouse 
H. R. 4—392

in such quantity and in such condition as the Secretary of 

the Treasury shall by regulation prescribe.’’; and 

(2) in the second sentence, by striking ‘‘All merchandise 

so withdrawn’’ and all that follows through ‘‘except that upon 

permission therefor’’ and inserting ‘‘Upon permission’’. 

(f) OTHER TECHNICAL AMENDMENTS.—(1) Section 629(e) of the 

Tariff Act of 1930 (19 U.S.C. 1629(e)) is amended by striking 

‘‘insuring’’ and inserting ‘‘ensuring’’. 

(2) Section 135(f)(2)(B) of the Trade Act of 1974, as amended 

by section 2004(i)(1) of the Miscellaneous Trade and Technical 

Corrections Act of 2004, is amended by striking ‘‘their establishment’’ and insert ‘‘its establishment’’. 

(3) Section 245(a) of the Trade Act of 1974 (19 U.S.C. 2317(a)) 

is amended by striking ‘‘, other than subchapter D’’. 

(4) Section 291(2) of the Trade Act of 1974 (19 U.S.C. 2401(2)) 

is amended—

(A) by striking ‘‘1001(5)’’ and inserting ‘‘1001(e)’’; and 

(B) by striking ‘‘1308(5)’’ and inserting ‘‘1308(e)’’. 

(5) Section 13031(e)(6)(C)(i) of the Consolidated Omnibus 

Budget Reconciliation Act of 1985 (19 U.S.C. 58c(e)(6)(C)(i)) is 

amended by striking ‘‘commonly know’’ and inserting ‘‘commonly 

known’’. 

(6) Section 2107(a)(4) of the Bipartisan Trade Promotion 

Authority Act of 2002 (19 U.S.C. 3807(a)(4)) is amended—

(A) by striking ‘‘paragraph (2)(A)’’ and inserting ‘‘paragraphs (2)(A)’’; and 

(B) by striking ‘‘paragraph (2)(B)’’ and inserting ‘‘paragraphs (2)(B)’’. 

(7) Section 514(c)(3) of the Tariff Act of 1930 (19 U.S.C. 

1514(c)(3)) is amended by moving the last 2 sentences 2 ems to 

the left as flush left text.
H. R. 4—393

Subtitle C—Effective Date 

SEC. 1641. EFFECTIVE DATE. 

Except as otherwise provided in this title, the amendments 

made by this title shall apply with respect to goods entered, or 

withdrawn from warehouse for consumption, on or after the 15th 

day after the date of the enactment of this Act.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.