II 

Calendar No. 561 

109TH CONGRESS 

2D SESSION H. R. 4 

IN THE SENATE OF THE UNITED STATES 

JULY 31, 2006 

Received; deemed read the first time on July 28 (legislative day, July 26), 

2006, pursuant to the order of July 28, 2006 

JULY 31, 2006 

Read the second time and placed on the calendar 

AN ACT 

To provide economic security for all Americans, and for 

other purposes. 

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

5 ‘‘Pension Protection Act of 2006’’. 

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

7 this Act (other than so much of title XIV as follows section 

8 1401) is as follows: 

Sec. 1. Short title and table of contents. 


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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 singleemployer 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. 

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. 


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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. 


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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. 

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 

Long-Term 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. 


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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. 

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. 


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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. 


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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. 

1 TITLE I—REFORM OF FUNDING 

2 RULES FOR SINGLE-EM3 PLOYER DEFINED BENEFIT 

4 PENSION PLANS 

5 Subtitle A—Amendments to Em6 ployee Retirement Income Secu7 rity Act of 1974 

8 SEC. 101. MINIMUM FUNDING STANDARDS. 

9 (a) REPEAL OF EXISTING FUNDING RULES.—Sec10 tions 302 through 308 of the Employee Retirement In11 come Security Act of 1974 (29 U.S.C. 1082 through 

12 1086) are repealed. 


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1 (b) NEW MINIMUM FUNDING STANDARDS.—Part 3 

2 of subtitle B of title I of such Act (as amended by sub3 section (a)) is amended by inserting after section 301 the 

4 following new section: 

5 ‘‘SEC. 302. MINIMUM FUNDING STANDARDS. 

6 ‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING

7 STANDARD.— 

8 ‘‘(1) IN GENERAL.—A plan to which this part 

9 applies shall satisfy the minimum funding standard 

10 applicable to the plan for any plan year. 

11 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur12 poses of paragraph (1), a plan shall be treated as 

13 satisfying the minimum funding standard for a plan 

14 year if— 

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

16 which is a single-employer plan, the employer 

17 makes contributions to or under the plan for 

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

19 less than the minimum required contribution 

20 determined under section 303 for the plan for 

21 the plan year, 

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

23 which is a single-employer plan, the employer 

24 makes contributions to or under the plan for 


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1 the plan year which are required under the 

2 terms of the plan, and 

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

4 the employers make contributions to or under 

5 the plan for any plan year which, in the aggre6 gate, are sufficient to ensure that the plan does 

7 not have an accumulated funding deficiency 

8 under section 304 as of the end of the plan 

9 year. 

10 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.— 

11 ‘‘(1) IN GENERAL.—Except as provided in para12 graph (2), the amount of any contribution required 

13 by this section (including any required installments 

14 under paragraphs (3) and (4) of section 303(j)) 

15 shall be paid by the employer responsible for making 

16 contributions to or under the plan. 

17 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

18 EMPLOYER MEMBER OF CONTROLLED GROUP.—If 

19 the employer referred to in paragraph (1) is a mem20 ber of a controlled group, each member of such 

21 group shall be jointly and severally liable for pay22 ment of such contributions. 

23 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND24 ARDS.— 


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1 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD2 SHIP.— 

3 ‘‘(A) IN GENERAL.—If— 

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

5 a multiemployer plan, 10 percent or more 

6 of the number of employers contributing to 

7 or under the plan is) unable to satisfy the 

8 minimum funding standard for a plan year 

9 without temporary substantial business 

10 hardship (substantial business hardship in 

11 the case of a multiemployer plan), and 

12 ‘‘(ii) application of the standard would 

13 be adverse to the interests of plan partici14 pants in the aggregate, 

15 the Secretary of the Treasury may, subject to 

16 subparagraph (C), waive the requirements of 

17 subsection (a) for such year with respect to all 

18 or any portion of the minimum funding stand19 ard. The Secretary of the Treasury shall not 

20 waive the minimum funding standard with re21 spect to a plan for more than 3 of any 15 (5 

22 of any 15 in the case of a multiemployer plan) 

23 consecutive plan years. 


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

2 granted under subparagraph (A) for any plan 

3 year— 

4 ‘‘(i) in the case of a single-employer 

5 plan, the minimum required contribution 

6 under section 303 for the plan year shall 

7 be reduced by the amount of the waived 

8 funding deficiency and such amount shall 

9 be amortized as required under section 

10 303(e), and 

11 ‘‘(ii) in the case of a multiemployer 

12 plan, the funding standard account shall 

13 be credited under section 304(b)(3)(C) 

14 with the amount of the waived funding de15 ficiency and such amount shall be amor16 tized as required under section 

17 304(b)(2)(C). 

18 ‘‘(C) WAIVER OF AMORTIZED PORTION

19 NOT ALLOWED.—The Secretary of the Treasury 

20 may not waive under subparagraph (A) any 

21 portion of the minimum funding standard 

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

23 attributable to any waived funding deficiency 

24 for any preceding plan year. 


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1 ‘‘(2) DETERMINATION OF BUSINESS HARD2 SHIP.—For purposes of this subsection, the factors 

3 taken into account in determining temporary sub4 stantial business hardship (substantial business 

5 hardship in the case of a multiemployer plan) shall 

6 include (but shall not be limited to) whether or 

7 not— 

8 ‘‘(A) the employer is operating at an eco9 nomic loss, 

10 ‘‘(B) there is substantial unemployment or 

11 underemployment in the trade or business and 

12 in the industry concerned, 

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

14 concerned are depressed or declining, and 

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

16 plan will be continued only if the waiver is 

17 granted. 

18 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur19 poses of this part, the term ‘waived funding defi20 ciency’ means the portion of the minimum funding 

21 standard under subsection (a) (determined without 

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

23 Secretary of the Treasury and not satisfied by em24 ployer contributions. 


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1 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM2 PLOYER PLANS, CONSULTATIONS.— 

3 ‘‘(A) SECURITY MAY BE REQUIRED.— 

4 ‘‘(i) IN GENERAL.—Except as pro5 vided in subparagraph (C), the Secretary 

6 of the Treasury may require an employer 

7 maintaining a defined benefit plan which is 

8 a single-employer plan (within the meaning 

9 of section 4001(a)(15)) to provide security 

10 to such plan as a condition for granting or 

11 modifying a waiver under paragraph (1). 

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

13 provided under clause (i) may be perfected 

14 and enforced only by the Pension Benefit 

15 Guaranty Corporation, or at the direction 

16 of the Corporation, by a contributing spon17 sor (within the meaning of section 

18 4001(a)(13)), or a member of such spon19 sor’s controlled group (within the meaning 

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

21 ‘‘(B) CONSULTATION WITH THE PENSION

22 BENEFIT GUARANTY CORPORATION.—Except as 

23 provided in subparagraph (C), the Secretary of 

24 the Treasury shall, before granting or modi25 fying a waiver under this subsection with reVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 spect to a plan described in subparagraph 

2 (A)(i)— 

3 ‘‘(i) provide the Pension Benefit 

4 Guaranty Corporation with— 

5 ‘‘(I) notice of the completed ap6 plication for any waiver or modifica7 tion, and 

8 ‘‘(II) an opportunity to comment 

9 on such application within 30 days 

10 after receipt of such notice, and 

11 ‘‘(ii) consider— 

12 ‘‘(I) any comments of the Cor13 poration under clause (i)(II), and 

14 ‘‘(II) any views of any employee 

15 organization (within the meaning of 

16 section 3(4)) representing participants 

17 in the plan which are submitted in 

18 writing to the Secretary of the Treas19 ury in connection with such applica20 tion. 

21 Information provided to the Corporation under 

22 this subparagraph shall be considered tax re23 turn information and subject to the safe24 guarding and reporting requirements of section 

25 6103(p) of the Internal Revenue Code of 1986. 


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1 ‘‘(C) EXCEPTION FOR CERTAIN WAIV2 ERS.— 

3 ‘‘(i) IN GENERAL.—The preceding 

4 provisions of this paragraph shall not 

5 apply to any plan with respect to which the 

6 sum of— 

7 ‘‘(I) the aggregate unpaid min8 imum required contributions for the 

9 plan year and all preceding plan 

10 years, and 

11 ‘‘(II) the present value of all 

12 waiver amortization installments de13 termined for the plan year and suc14 ceeding plan years under section 

15 303(e)(2), 

16 is less than $1,000,000. 

17 ‘‘(ii) TREATMENT OF WAIVERS FOR

18 WHICH APPLICATIONS ARE PENDING.—The 

19 amount described in clause (i)(I) shall in20 clude any increase in such amount which 

21 would result if all applications for waivers 

22 of the minimum funding standard under 

23 this subsection which are pending with re24 spect to such plan were denied. 


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1 ‘‘(iii) UNPAID MINIMUM REQUIRED

2 CONTRIBUTION.—For purposes of this sub3 paragraph— 

4 ‘‘(I) IN GENERAL.—The term 

5 ‘unpaid minimum required contribu6 tion’ means, with respect to any plan 

7 year, any minimum required contribu8 tion under section 303 for the plan 

9 year which is not paid on or before 

10 the due date (as determined under 

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

12 ‘‘(II) ORDERING RULE.—For 

13 purposes of subclause (I), any pay14 ment to or under a plan for any plan 

15 year shall be allocated first to unpaid 

16 minimum required contributions for 

17 all preceding plan years on a first-in, 

18 first-out basis and then to the min19 imum required contribution under sec20 tion 303 for the plan year. 

21 ‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER

22 PLANS.— 

23 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 24 ⁄2 MONTHS AFTER CLOSE OF

25 YEAR.—In the case of a single-employer plan, 


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1 no waiver may be granted under this subsection 

2 with respect to any plan for any plan year un3 less an application therefor is submitted to the 

4 Secretary of the Treasury not later than the 

5 15th day of the 3rd month beginning after the 

6 close of such plan year. 

7 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM8 BER OF CONTROLLED GROUP.—In the case of a 

9 single-employer plan, if an employer is a mem10 ber of a controlled group, the temporary sub11 stantial business hardship requirements of 

12 paragraph (1) shall be treated as met only if 

13 such requirements are met— 

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

15 and 

16 ‘‘(ii) with respect to the controlled 

17 group of which such employer is a member 

18 (determined by treating all members of 

19 such group as a single employer). 

20 The Secretary of the Treasury may provide that 

21 an analysis of a trade or business or industry 

22 of a member need not be conducted if such Sec23 retary determines such analysis is not necessary 

24 because the taking into account of such member 


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1 would not significantly affect the determination 

2 under this paragraph. 

3 ‘‘(6) ADVANCE NOTICE.— 

4 ‘‘(A) IN GENERAL.—The Secretary of the 

5 Treasury shall, before granting a waiver under 

6 this subsection, require each applicant to pro7 vide evidence satisfactory to such Secretary that 

8 the applicant has provided notice of the filing of 

9 the application for such waiver to each affected 

10 party (as defined in section 4001(a)(21)). Such 

11 notice shall include a description of the extent 

12 to which the plan is funded for benefits which 

13 are guaranteed under title IV and for benefit li14 abilities. 

15 ‘‘(B) CONSIDERATION OF RELEVANT IN16 FORMATION.—The Secretary of the Treasury 

17 shall consider any relevant information provided 

18 by a person to whom notice was given under 

19 subparagraph (A). 

20 ‘‘(7) RESTRICTION ON PLAN AMENDMENTS.— 

21 ‘‘(A) IN GENERAL.—No amendment of a 

22 plan which increases the liabilities of the plan 

23 by reason of any increase in benefits, any 

24 change in the accrual of benefits, or any change 

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1 able under the plan shall be adopted if a waiver 

2 under this subsection or an extension of time 

3 under section 304(d) is in effect with respect to 

4 the plan, or if a plan amendment described in 

5 subsection (d)(2) has been made at any time in 

6 the preceding 12 months (24 months in the 

7 case of a multiemployer plan). If a plan is 

8 amended in violation of the preceding sentence, 

9 any such waiver, or extension of time, shall not 

10 apply to any plan year ending on or after the 

11 date on which such amendment is adopted. 

12 ‘‘(B) EXCEPTION.—Subparagraph (A) 

13 shall not apply to any plan amendment which— 

14 ‘‘(i) the Secretary of the Treasury de15 termines to be reasonable and which pro16 vides for only de minimis increases in the 

17 liabilities of the plan, 

18 ‘‘(ii) only repeals an amendment de19 scribed in subsection (d)(2), or 

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

21 qualification under part I of subchapter D 

22 of chapter 1 of the Internal Revenue Code 

23 of 1986. 

24 ‘‘(8) CROSS REFERENCE.—For corresponding 

25 duties of the Secretary of the Treasury with regard 


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1 to implementation of the Internal Revenue Code of 

2 1986, see section 412(c) of such Code. 

3 ‘‘(d) MISCELLANEOUS RULES.— 

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

5 funding method, the valuation date, or a plan year 

6 for a plan is changed, the change shall take effect 

7 only if approved by the Secretary of the Treasury. 

8 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND9 MENTS.—For purposes of this section, any amend10 ment applying to a plan year which— 

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

year but no later than 21 12 ⁄2 months after the 

13 close of the plan year (or, in the case of a mul14 tiemployer plan, no later than 2 years after the 

15 close of such plan year), 

16 ‘‘(B) does not reduce the accrued benefit 

17 of any participant determined as of the begin18 ning of the first plan year to which the amend19 ment applies, and 

20 ‘‘(C) does not reduce the accrued benefit of 

21 any participant determined as of the time of 

22 adoption except to the extent required by the 

23 circumstances, 

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

25 deemed to have been made on the first day of such 


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1 plan year. No amendment described in this para2 graph which reduces the accrued benefits of any par3 ticipant shall take effect unless the plan adminis4 trator files a notice with the Secretary of the Treas5 ury notifying him of such amendment and such Sec6 retary has approved such amendment, or within 90 

7 days after the date on which such notice was filed, 

8 failed to disapprove such amendment. No amend9 ment described in this subsection shall be approved 

10 by the Secretary of the Treasury unless such Sec11 retary determines that such amendment is necessary 

12 because of a temporary substantial business hard13 ship (as determined under subsection (c)(2)) or a 

14 substantial business hardship (as so determined) in 

15 the case of a multiemployer plan and that a waiver 

16 under subsection (c) (or, in the case of a multiem17 ployer plan, any extension of the amortization period 

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

19 ‘‘(3) CONTROLLED GROUP.—For purposes of 

20 this section, the term ‘controlled group’ means any 

21 group treated as a single employer under subsection 

22 (b), (c), (m), or (o) of section 414 of the Internal 

23 Revenue Code of 1986.’’. 

24 (c) CLERICAL AMENDMENT.—The table of contents 

25 in section 1 of such Act is amended by striking the items 


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1 relating to sections 302 through 308 and inserting the fol2 lowing new item: 

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

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

4 this section shall apply to plan years beginning after 2007. 

5 SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE6 FINED BENEFIT PENSION PLANS. 

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

8 the Employee Retirement Income Security Act of 1974 (as 

9 amended by section 101 of this Act) is amended by insert10 ing after section 302 the following new section: 

11 ‘‘SEC. 303. MINIMUM FUNDING STANDARDS FOR SINGLE12 EMPLOYER DEFINED BENEFIT PENSION 

13 PLANS. 

14 ‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For 

15 purposes of this section and section 302(a)(2)(A), except 

16 as provided in subsection (f), the term ‘minimum required 

17 contribution’ means, with respect to any plan year of a 

18 single-employer plan— 

19 ‘‘(1) in any case in which the value of plan as20 sets of the plan (as reduced under subsection 

21 (f)(4)(B)) is less than the funding target of the plan 

22 for the plan year, the sum of— 

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

24 the plan year, 


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1 ‘‘(B) the shortfall amortization charge (if 

2 any) for the plan for the plan year determined 

3 under subsection (c), and 

4 ‘‘(C) the waiver amortization charge (if 

5 any) for the plan for the plan year as deter6 mined under subsection (e); or 

7 ‘‘(2) in any case in which the value of plan as8 sets of the plan (as reduced under subsection 

9 (f)(4)(B)) equals or exceeds the funding target of 

10 the plan for the plan year, the target normal cost of 

11 the plan for the plan year reduced (but not below 

12 zero) by such excess. 

13 ‘‘(b) TARGET NORMAL COST.—For purposes of this 

14 section, except as provided in subsection (i)(2) with re15 spect to plans in at-risk status, the term ‘target normal 

16 cost’ means, for any plan year, the present value of all 

17 benefits which are expected to accrue or to be earned 

18 under the plan during the plan year. For purposes of this 

19 subsection, if any benefit attributable to services per20 formed in a preceding plan year is increased by reason 

21 of any increase in compensation during the current plan 

22 year, the increase in such benefit shall be treated as hav23 ing accrued during the current plan year. 

24 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.— 


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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the shortfall amortization charge for a plan for 

3 any plan year is the aggregate total (not less than 

4 zero) of the shortfall amortization installments for 

5 such plan year with respect to the shortfall amorti6 zation bases for such plan year and each of the 6 

7 preceding plan years. 

8 ‘‘(2) SHORTFALL AMORTIZATION INSTALL9 MENT.—For purposes of paragraph (1)— 

10 ‘‘(A) DETERMINATION.—The shortfall am11 ortization installments are the amounts nec12 essary to amortize the shortfall amortization 

13 base of the plan for any plan year in level an14 nual installments over the 7-plan-year period 

15 beginning with such plan year. 

16 ‘‘(B) SHORTFALL INSTALLMENT.—The 

17 shortfall amortization installment for any plan 

18 year in the 7-plan-year period under subpara19 graph (A) with respect to any shortfall amorti20 zation base is the annual installment deter21 mined under subparagraph (A) for that year for 

22 that base. 

23 ‘‘(C) SEGMENT RATES.—In determining 

24 any shortfall amortization installment under 

25 this paragraph, the plan sponsor shall use the 


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1 segment rates determined under subparagraph 

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

3 similar to the rules of subparagraph (B) of sub4 section (h)(2). 

5 ‘‘(3) SHORTFALL AMORTIZATION BASE.—For 

6 purposes of this section, the shortfall amortization 

7 base of a plan for a plan year is— 

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

9 such plan year, minus 

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

11 the segment rates determined under subpara12 graph (C) of subsection (h)(2), applied under 

13 rules similar to the rules of subparagraph (B) 

14 of subsection (h)(2)) of the aggregate total of 

15 the shortfall amortization installments and 

16 waiver amortization installments which have 

17 been determined for such plan year and any 

18 succeeding plan year with respect to the short19 fall amortization bases and waiver amortization 

20 bases of the plan for any plan year preceding 

21 such plan year. 

22 ‘‘(4) FUNDING SHORTFALL.—For purposes of 

23 this section, the funding shortfall of a plan for any 

24 plan year is the excess (if any) of— 


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1 ‘‘(A) the funding target of the plan for the 

2 plan year, over 

3 ‘‘(B) the value of plan assets of the plan 

4 (as reduced under subsection (f)(4)(B)) for the 

5 plan year which are held by the plan on the 

6 valuation date. 

7 ‘‘(5) EXEMPTION FROM NEW SHORTFALL AM8 ORTIZATION BASE.— 

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

10 the value of plan assets of the plan (as reduced 

11 under subsection (f)(4)(A)) is equal to or great12 er than the funding target of the plan for the 

13 plan year, the shortfall amortization base of the 

14 plan for such plan year shall be zero. 

15 ‘‘(B) TRANSITION RULE.— 

16 ‘‘(i) IN GENERAL.—Except as pro17 vided in clauses (iii) and (iv), in the case 

18 of plan years beginning after 2007 and be19 fore 2011, only the applicable percentage 

20 of the funding target shall be taken into 

21 account under paragraph (3)(A) in deter22 mining the funding shortfall for the plan 

23 year for purposes of subparagraph (A). 

24 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

25 purposes of subparagraph (A), the applicaVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ble percentage shall be determined in ac2 cordance 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. 

3 ‘‘(iii) LIMITATION.—Clause (i) shall 

4 not apply with respect to any plan year 

5 after 2008 unless the shortfall amortiza6 tion base for each of the preceding years 

7 beginning after 2007 was zero (determined 

8 after application of this subparagraph). 

9 ‘‘(iv) TRANSITION RELIEF NOT AVAIL10 ABLE FOR NEW OR DEFICIT REDUCTION

11 PLANS.—Clause (i) shall not apply to a 

12 plan— 

13 ‘‘(I) which was not in effect for a 

14 plan year beginning in 2007, or 

15 ‘‘(II) which was in effect for a 

16 plan year beginning in 2007 and 

17 which was subject to section 302(d) 

18 (as in effect for plan years beginning 

19 in 2007), determined after the appli20 cation of paragraphs (6) and (9) 

21 thereof. 

22 ‘‘(6) EARLY DEEMED AMORTIZATION UPON AT23 TAINMENT OF FUNDING TARGET.—In any case in 


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1 which the funding shortfall of a plan for a plan year 

2 is zero, for purposes of determining the shortfall am3 ortization charge for such plan year and succeeding 

4 plan years, the shortfall amortization bases for all 

5 preceding plan years (and all shortfall amortization 

6 installments determined with respect to such bases) 

7 shall be reduced to zero. 

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

9 purposes of this section— 

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

11 subsection (i)(1) with respect to plans in at-risk sta12 tus, the funding target of a plan for a plan year is 

13 the present value of all benefits accrued or earned 

14 under the plan as of the beginning of the plan year. 

15 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT16 AGE.—The ‘funding target attainment percentage’ of 

17 a plan for a plan year is the ratio (expressed as a 

18 percentage) which— 

19 ‘‘(A) the value of plan assets for the plan 

20 year (as reduced under subsection (f)(4)(B)), 

21 bears to 

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

23 plan year (determined without regard to sub24 section (i)(1)). 

25 ‘‘(e) WAIVER AMORTIZATION CHARGE.— 


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1 ‘‘(1) DETERMINATION OF WAIVER AMORTIZA2 TION CHARGE.—The waiver amortization charge (if 

3 any) for a plan for any plan year is the aggregate 

4 total of the waiver amortization installments for 

5 such plan year with respect to the waiver amortiza6 tion bases for each of the 5 preceding plan years. 

7 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.— 

8 For purposes of paragraph (1)— 

9 ‘‘(A) DETERMINATION.—The waiver amor10 tization installments are the amounts necessary 

11 to amortize the waiver amortization base of the 

12 plan for any plan year in level annual install13 ments over a period of 5 plan years beginning 

14 with the succeeding plan year. 

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

16 amortization installment for any plan year in 

17 the 5-year period under subparagraph (A) with 

18 respect to any waiver amortization base is the 

19 annual installment determined under subpara20 graph (A) for that year for that base. 

21 ‘‘(3) INTEREST RATE.—In determining any 

22 waiver amortization installment under this sub23 section, the plan sponsor shall use the segment rates 

24 determined under subparagraph (C) of subsection 


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

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

3 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiv4 er amortization base of a plan for a plan year is the 

5 amount of the waived funding deficiency (if any) for 

6 such plan year under section 302(c). 

7 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT8 TAINMENT OF FUNDING TARGET.—In any case in 

9 which the funding shortfall of a plan for a plan year 

10 is zero, for purposes of determining the waiver am11 ortization charge for such plan year and succeeding 

12 plan years, the waiver amortization bases for all pre13 ceding plan years (and all waiver amortization in14 stallments determined with respect to such bases) 

15 shall be reduced to zero. 

16 ‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBU17 TION BY PREFUNDING BALANCE AND FUNDING STAND18 ARD CARRYOVER BALANCE.— 

19 ‘‘(1) ELECTION TO MAINTAIN BALANCES.— 

20 ‘‘(A) PREFUNDING BALANCE.—The plan 

21 sponsor of a single-employer plan may elect to 

22 maintain a prefunding balance. 

23 ‘‘(B) FUNDING STANDARD CARRYOVER

24 BALANCE.— 


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1 ‘‘(i) IN GENERAL.—In the case of a 

2 single-employer plan described in clause 

3 (ii), the plan sponsor may elect to maintain 

4 a funding standard carryover balance, until 

5 such balance is reduced to zero. 

6 ‘‘(ii) PLANS MAINTAINING FUNDING

7 STANDARD ACCOUNT IN 2007.—A plan is 

8 described in this clause if the plan— 

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

10 beginning in 2007, and 

11 ‘‘(II) had a positive balance in 

12 the funding standard account under 

13 section 302(b) as in effect for such 

14 plan year and determined as of the 

15 end of such plan year. 

16 ‘‘(2) APPLICATION OF BALANCES.—A 

17 prefunding balance and a funding standard carry18 over balance maintained pursuant to this para19 graph— 

20 ‘‘(A) shall be available for crediting against 

21 the minimum required contribution, pursuant to 

22 an election under paragraph (3), 

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

24 amount treated as the value of plan assets for 


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1 purposes of this section, to the extent provided 

2 in paragraph (4), and 

3 ‘‘(C) may be reduced at any time, pursu4 ant to an election under paragraph (5). 

5 ‘‘(3) ELECTION TO APPLY BALANCES AGAINST

6 MINIMUM REQUIRED CONTRIBUTION.— 

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

8 subparagraphs (B) and (C), in the case of any 

9 plan year in which the plan sponsor elects to 

10 credit against the minimum required contribu11 tion for the current plan year all or a portion 

12 of the prefunding balance or the funding stand13 ard carryover balance for the current plan year 

14 (not in excess of such minimum required con15 tribution), the minimum required contribution 

16 for the plan year shall be reduced as of the first 

17 day of the plan year by the amount so credited 

18 by the plan sponsor. For purposes of the pre19 ceding sentence, the minimum required con20 tribution shall be determined after taking into 

21 account any waiver under section 302(c). 

22 ‘‘(B) COORDINATION WITH FUNDING

23 STANDARD CARRYOVER BALANCE.—To the ex24 tent that any plan has a funding standard car25 ryover balance greater than zero, no amount of 


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1 the prefunding balance of such plan may be 

2 credited under this paragraph in reducing the 

3 minimum required contribution. 

4 ‘‘(C) LIMITATION FOR UNDERFUNDED

5 PLANS.—The preceding provisions of this para6 graph shall not apply for any plan year if the 

7 ratio (expressed as a percentage) which— 

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

9 preceding plan year (as reduced under 

10 paragraph (4)(C)), bears to 

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

12 the preceding plan year (determined with13 out regard to subsection (i)(1)), 

14 is less than 80 percent. In the case of plan 

15 years beginning in 2008, the ratio under this 

16 subparagraph may be determined using such 

17 methods of estimation as the Secretary of the 

18 Treasury may prescribe. 

19 ‘‘(4) EFFECT OF BALANCES ON AMOUNTS

20 TREATED AS VALUE OF PLAN ASSETS.—In the case 

21 of any plan maintaining a prefunding balance or a 

22 funding standard carryover balance pursuant to this 

23 subsection, the amount treated as the value of plan 

24 assets shall be deemed to be such amount, reduced 

25 as provided in the following subparagraphs: 


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1 ‘‘(A) APPLICABILITY OF SHORTFALL AM2 ORTIZATION BASE.—For purposes of subsection 

3 (c)(5), the value of plan assets is deemed to be 

4 such amount, reduced by the amount of the 

5 prefunding balance, but only if an election 

6 under paragraph (2) applying any portion of 

7 the prefunding balance in reducing the min8 imum required contribution is in effect for the 

9 plan year. 

10 ‘‘(B) DETERMINATION OF EXCESS ASSETS, 

11 FUNDING SHORTFALL, AND FUNDING TARGET

12 ATTAINMENT PERCENTAGE.— 

13 ‘‘(i) IN GENERAL.—For purposes of 

14 subsections (a), (c)(4)(B), and (d)(2)(A), 

15 the value of plan assets is deemed to be 

16 such amount, reduced by the amount of 

17 the prefunding balance and the funding 

18 standard carryover balance. 

19 ‘‘(ii) SPECIAL RULE FOR CERTAIN

20 BINDING AGREEMENTS WITH PBGC.—For 

21 purposes of subsection (c)(4)(B), the value 

22 of plan assets shall not be deemed to be re23 duced for a plan year by the amount of the 

24 specified balance if, with respect to such 

25 balance, there is in effect for a plan year 


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1 a binding written agreement with the Pen2 sion Benefit Guaranty Corporation which 

3 provides that such balance is not available 

4 to reduce the minimum required contribu5 tion for the plan year. For purposes of the 

6 preceding sentence, the term ‘specified bal7 ance’ means the prefunding balance or the 

8 funding standard carryover balance, as the 

9 case may be. 

10 ‘‘(C) AVAILABILITY OF BALANCES IN PLAN

11 YEAR FOR CREDITING AGAINST MINIMUM RE12 QUIRED CONTRIBUTION.—For purposes of 

13 paragraph (3)(C)(i) of this subsection, the value 

14 of plan assets is deemed to be such amount, re15 duced by the amount of the prefunding balance. 

16 ‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO

17 DETERMINATIONS OF VALUE OF PLAN ASSETS AND

18 CREDITING AGAINST MINIMUM REQUIRED CONTRIBU19 TION.— 

20 ‘‘(A) IN GENERAL.—The plan sponsor may 

21 elect to reduce by any amount the balance of 

22 the prefunding balance and the funding stand23 ard carryover balance for any plan year (but 

24 not below zero). Such reduction shall be effec25 tive prior to any determination of the value of 


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1 plan assets for such plan year under this sec2 tion and application of the balance in reducing 

3 the minimum required contribution for such 

4 plan for such plan year pursuant to an election 

5 under paragraph (2). 

6 ‘‘(B) COORDINATION BETWEEN

7 PREFUNDING BALANCE AND FUNDING STAND8 ARD CARRYOVER BALANCE.—To the extent that 

9 any plan has a funding standard carryover bal10 ance greater than zero, no election may be 

11 made under subparagraph (A) with respect to 

12 the prefunding balance. 

13 ‘‘(6) PREFUNDING BALANCE.— 

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

15 maintained by a plan shall consist of a begin16 ning balance of zero, increased and decreased to 

17 the extent provided in subparagraphs (B) and 

18 (C), and adjusted further as provided in para19 graph (8). 

20 ‘‘(B) INCREASES.— 

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

22 of each plan year beginning after 2008, the 

23 prefunding balance of a plan shall be in24 creased by the amount elected by the plan 


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1 sponsor for the plan year. Such amount 

2 shall not exceed the excess (if any) of— 

3 ‘‘(I) the aggregate total of em4 ployer contributions to the plan for 

5 the preceding plan year, over— 

6 ‘‘(II) the minimum required con7 tribution for such preceding plan year. 

8 ‘‘(ii) ADJUSTMENTS FOR INTEREST.— 

9 Any excess contributions under clause (i) 

10 shall be properly adjusted for interest ac11 cruing for the periods between the first 

12 day of the current plan year and the dates 

13 on which the excess contributions were 

14 made, determined by using the effective in15 terest rate for the preceding plan year and 

16 by treating contributions as being first 

17 used to satisfy the minimum required con18 tribution. 

19 ‘‘(iii) CERTAIN CONTRIBUTIONS NEC20 ESSARY TO AVOID BENEFIT LIMITATIONS

21 DISREGARDED.—The excess described in 

22 clause (i) with respect to any preceding 

23 plan year shall be reduced (but not below 

24 zero) by the amount of contributions an 

25 employer would be required to make under 


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1 paragraph (1), (2), or (4) of section 206(g) 

2 to avoid a benefit limitation which would 

3 otherwise be imposed under such para4 graph for the preceding plan year. Any 

5 contribution which may be taken into ac6 count in satisfying the requirements of 

7 more than 1 of such paragraphs shall be 

8 taken into account only once for purposes 

9 of this clause. 

10 ‘‘(C) DECREASE.—The prefunding balance 

11 of a plan shall be decreased (but not below 

12 zero) by— 

13 ‘‘(i) as of the first day of each plan 

14 year after 2008, the amount of such bal15 ance credited under paragraph (2) (if any) 

16 in reducing the minimum required con17 tribution of the plan for the preceding plan 

18 year, and 

19 ‘‘(ii) as of the time specified in para20 graph (5))(A), any reduction in such bal21 ance elected under paragraph (5). 

22 ‘‘(7) FUNDING STANDARD CARRYOVER BAL23 ANCE.— 

24 ‘‘(A) IN GENERAL.—A funding standard 

25 carryover balance maintained by a plan shall 


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1 consist of a beginning balance determined 

2 under subparagraph (B), decreased to the ex3 tent provided in subparagraph (C), and ad4 justed further as provided in paragraph (8). 

5 ‘‘(B) BEGINNING BALANCE.—The begin6 ning balance of the funding standard carryover 

7 balance shall be the positive balance described 

8 in paragraph (1)(B)(ii)(II). 

9 ‘‘(C) DECREASES.—The funding standard 

10 carryover balance of a plan shall be decreased 

11 (but not below zero) by— 

12 ‘‘(i) as of the first day of each plan 

13 year after 2008, the amount of such bal14 ance credited under paragraph (2) (if any) 

15 in reducing the minimum required con16 tribution of the plan for the preceding plan 

17 year, and 

18 ‘‘(ii) as of the time specified in para19 graph (5))(A), any reduction in such bal20 ance elected under paragraph (5). 

21 ‘‘(8) ADJUSTMENTS FOR INVESTMENT EXPERI22 ENCE.—In determining the prefunding balance or 

23 the funding standard carryover balance of a plan as 

24 of the first day of the plan year, the plan sponsor 

25 shall, in accordance with regulations prescribed by 


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1 the Secretary of the Treasury, adjust such balance 

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

3 preceding plan year. Notwithstanding subsection 

4 (g)(3), such rate of return shall be determined on 

5 the basis of fair market value and shall properly 

6 take into account, in accordance with such regula7 tions, all contributions, distributions, and other plan 

8 payments made during such period. 

9 ‘‘(9) ELECTIONS.—Elections under this sub10 section shall be made at such times, and in such 

11 form and manner, as shall be prescribed in regula12 tions of the Secretary of the Treasury. 

13 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL14 ITIES.— 

15 ‘‘(1) TIMING OF DETERMINATIONS.—Except as 

16 otherwise provided under this subsection, all deter17 minations under this section for a plan year shall be 

18 made as of the valuation date of the plan for such 

19 plan year. 

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

21 section— 

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

23 subparagraph (B), the valuation date of a plan 

24 for any plan year shall be the first day of the 

25 plan year. 


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1 ‘‘(B) EXCEPTION FOR SMALL PLANS.—If, 

2 on each day during the preceding plan year, a 

3 plan had 100 or fewer participants, the plan 

4 may designate any day during the plan year as 

5 its valuation date for such plan year and suc6 ceeding plan years. For purposes of this sub7 paragraph, all defined benefit plans which are 

8 single-employer plans and are maintained by 

9 the same employer (or any member of such em10 ployer’s controlled group) shall be treated as 1 

11 plan, but only participants with respect to such 

12 employer or member shall be taken into ac13 count. 

14 ‘‘(C) APPLICATION OF CERTAIN RULES IN

15 DETERMINATION OF PLAN SIZE.—For purposes 

16 of this paragraph— 

17 ‘‘(i) PLANS NOT IN EXISTENCE IN

18 PRECEDING YEAR.—In the case of the first 

19 plan year of any plan, subparagraph (B) 

20 shall apply to such plan by taking into ac21 count the number of participants that the 

22 plan is reasonably expected to have on 

23 days during such first plan year. 

24 ‘‘(ii) PREDECESSORS.—Any reference 

25 in subparagraph (B) to an employer shall 


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1 include a reference to any predecessor of 

2 such employer. 

3 ‘‘(3) DETERMINATION OF VALUE OF PLAN AS4 SETS.—For purposes of this section— 

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

6 subparagraph (B), the value of plan assets shall 

7 be the fair market value of the assets. 

8 ‘‘(B) AVERAGING ALLOWED.—A plan may 

9 determine the value of plan assets on the basis 

10 of the averaging of fair market values, but only 

11 if such method— 

12 ‘‘(i) is permitted under regulations 

13 prescribed by the Secretary of the Treas14 ury, 

15 ‘‘(ii) does not provide for averaging of 

16 such values over more than the period be17 ginning on the last day of the 25th month 

18 preceding the month in which the valuation 

19 date occurs and ending on the valuation 

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

21 valuation date which is not the 1st day of 

22 a month), and 

23 ‘‘(iii) does not result in a determina24 tion of the value of plan assets which, at 

25 any time, is lower than 90 percent or 


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1 greater than 110 percent of the fair mar2 ket value of such assets at such time. 

3 Any such averaging shall be adjusted for con4 tributions and distributions (as provided by the 

5 Secretary of the Treasury). 

6 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE7 CEIPTS.—For purposes of determining the value of 

8 assets under paragraph (3)— 

9 ‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If— 

10 ‘‘(i) an employer makes any contribu11 tion to the plan after the valuation date for 

12 the plan year in which the contribution is 

13 made, and 

14 ‘‘(ii) the contribution is for a pre15 ceding plan year, 

16 the contribution shall be taken into account as 

17 an asset of the plan as of the valuation date, 

18 except that in the case of any plan year begin19 ning after 2008, only the present value (deter20 mined as of the valuation date) of such con21 tribution may be taken into account. For pur22 poses of the preceding sentence, present value 

23 shall be determined using the effective interest 

24 rate for the preceding plan year to which the 

25 contribution is properly allocable. 


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1 ‘‘(B) SPECIAL RULE FOR CURRENT YEAR

2 CONTRIBUTIONS MADE BEFORE VALUATION

3 DATE.—If any contributions for any plan year 

4 are made to or under the plan during the plan 

5 year but before the valuation date for the plan 

6 year, the assets of the plan as of the valuation 

7 date shall not include— 

8 ‘‘(i) such contributions, and 

9 ‘‘(ii) interest on such contributions for 

10 the period between the date of the con11 tributions and the valuation date, deter12 mined by using the effective interest rate 

13 for the plan year. 

14 ‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.— 

15 ‘‘(1) IN GENERAL.—Subject to this subsection, 

16 the determination of any present value or other com17 putation under this section shall be made on the 

18 basis of actuarial assumptions and methods— 

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

20 into account the experience of the plan and rea21 sonable expectations), and 

22 ‘‘(B) which, in combination, offer the actu23 ary’s best estimate of anticipated experience 

24 under the plan. 

25 ‘‘(2) INTEREST RATES.— 


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1 ‘‘(A) EFFECTIVE INTEREST RATE.—For 

2 purposes of this section, the term ‘effective in3 terest rate’ means, with respect to any plan for 

4 any plan year, the single rate of interest which, 

5 if used to determine the present value of the 

6 plan’s accrued or earned benefits referred to in 

7 subsection (d)(1), would result in an amount 

8 equal to the funding target of the plan for such 

9 plan year. 

10 ‘‘(B) INTEREST RATES FOR DETERMINING

11 FUNDING TARGET.—For purposes of deter12 mining the funding target and normal cost of a 

13 plan for any plan year, the interest rate used in 

14 determining the present value of the benefits of 

15 the plan shall be— 

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

17 determined to be payable during the 5-year 

18 period beginning on the first day of the 

19 plan year, the first segment rate with re20 spect to the applicable month, 

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

22 determined to be payable during the 15- 

23 year period beginning at the end of the pe24 riod described in clause (i), the second segVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00045 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ment rate with respect to the applicable 

2 month, and 

3 ‘‘(iii) in the case of benefits reason4 ably determined to be payable after the pe5 riod described in clause (ii), the third seg6 ment rate with respect to the applicable 

7 month. 

8 ‘‘(C) SEGMENT RATES.—For purposes of 

9 this paragraph— 

10 ‘‘(i) FIRST SEGMENT RATE.—The 

11 term ‘first segment rate’ means, with re12 spect to any month, the single rate of in13 terest which shall be determined by the 

14 Secretary of the Treasury for such month 

15 on the basis of the corporate bond yield 

16 curve for such month, taking into account 

17 only that portion of such yield curve which 

18 is based on bonds maturing during the 5- 

19 year period commencing with such month. 

20 ‘‘(ii) SECOND SEGMENT RATE.—The 

21 term ‘second segment rate’ means, with re22 spect to any month, the single rate of in23 terest which shall be determined by the 

24 Secretary of the Treasury for such month 

25 on the basis of the corporate bond yield 


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1 curve for such month, taking into account 

2 only that portion of such yield curve which 

3 is based on bonds maturing during the 15- 

4 year period beginning at the end of the pe5 riod described in clause (i). 

6 ‘‘(iii) THIRD SEGMENT RATE.—The 

7 term ‘third segment rate’ means, with re8 spect to any month, the single rate of in9 terest which shall be determined by the 

10 Secretary of the Treasury for such month 

11 on the basis of the corporate bond yield 

12 curve for such month, taking into account 

13 only that portion of such yield curve which 

14 is based on bonds maturing during periods 

15 beginning after the period described in 

16 clause (ii). 

17 ‘‘(D) CORPORATE BOND YIELD CURVE.— 

18 For purposes of this paragraph— 

19 ‘‘(i) IN GENERAL.—The term ‘cor20 porate bond yield curve’ means, with re21 spect to any month, a yield curve which is 

22 prescribed by the Secretary of the Treas23 ury for such month and which reflects the 

24 average, for the 24-month period ending 

25 with the month preceding such month, of 


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1 monthly yields on investment grade cor2 porate bonds with varying maturities and 

3 that are in the top 3 quality levels avail4 able. 

5 ‘‘(ii) ELECTION TO USE YIELD

6 CURVE.—Solely for purposes of deter7 mining the minimum required contribution 

8 under this section, the plan sponsor may, 

9 in lieu of the segment rates determined 

10 under subparagraph (C), elect to use inter11 est rates under the corporate bond yield 

12 curve. For purposes of the preceding sen13 tence such curve shall be determined with14 out regard to the 24-month averaging de15 scribed in clause (i). Such election, once 

16 made, may be revoked only with the con17 sent of the Secretary of the Treasury. 

18 ‘‘(E) APPLICABLE MONTH.—For purposes 

19 of this paragraph, the term ‘applicable month’ 

20 means, with respect to any plan for any plan 

21 year, the month which includes the valuation 

22 date of such plan for such plan year or, at the 

23 election of the plan sponsor, any of the 4 

24 months which precede such month. Any election 

25 made under this subparagraph shall apply to 


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1 the plan year for which the election is made and 

2 all succeeding plan years, unless the election is 

3 revoked with the consent of the Secretary of the 

4 Treasury. 

5 ‘‘(F) PUBLICATION REQUIREMENTS.—The 

6 Secretary of the Treasury shall publish for each 

7 month the corporate bond yield curve (and the 

8 corporate bond yield curve reflecting the modi9 fication described in section 

10 205(g)(3)(B)(iii)(I)) for such month and each 

11 of the rates determined under subparagraph 

12 (B) for such month. The Secretary of the 

13 Treasury shall also publish a description of the 

14 methodology used to determine such yield curve 

15 and such rates which is sufficiently detailed to 

16 enable plans to make reasonable projections re17 garding the yield curve and such rates for fu18 ture months based on the plan’s projection of 

19 future interest rates. 

20 ‘‘(G) TRANSITION RULE.— 

21 ‘‘(i) IN GENERAL.—Notwithstanding 

22 the preceding provisions of this paragraph, 

23 for plan years beginning in 2008 or 2009, 

24 the first, second, or third segment rate for 


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1 a plan with respect to any month shall be 

2 equal to the sum of— 

3 ‘‘(I) the product of such rate for 

4 such month determined without re5 gard to this subparagraph, multiplied 

6 by the applicable percentage, and 

7 ‘‘(II) the product of the rate de8 termined under the rules of section 

9 302(b)(5)(B)(ii)(II) (as in effect for 

10 plan years beginning in 2007), multi11 plied by a percentage equal to 100 

12 percent minus the applicable percent13 age. 

14 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

15 purposes of clause (i), the applicable percentage is 331 16 ⁄3 percent for plan years beginning in 2008 and 662 17 ⁄3 percent for plan 

18 years beginning in 2009. 

19 ‘‘(iii) NEW PLANS INELIGIBLE.— 

20 Clause (i) shall not apply to any plan if the 

21 first plan year of the plan begins after De22 cember 31, 2007. 

23 ‘‘(iv) ELECTION.—The plan sponsor 

24 may elect not to have this subparagraph 

25 apply. Such election, once made, may be 


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1 revoked only with the consent of the Sec2 retary of the Treasury. 

3 ‘‘(3) MORTALITY TABLES.— 

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

5 subparagraph (C) or (D), the Secretary of the 

6 Treasury shall by regulation prescribe mortality 

7 tables to be used in determining any present 

8 value or making any computation under this 

9 section. Such tables shall be based on the actual 

10 experience of pension plans and projected 

11 trends in such experience. In prescribing such 

12 tables, the Secretary of the Treasury shall take 

13 into account results of available independent 

14 studies of mortality of individuals covered by 

15 pension plans. 

16 ‘‘(B) PERIODIC REVISION.—The Secretary 

17 of the Treasury shall (at least every 10 years) 

18 make revisions in any table in effect under sub19 paragraph (A) to reflect the actual experience 

20 of pension plans and projected trends in such 

21 experience. 

22 ‘‘(C) SUBSTITUTE MORTALITY TABLE.— 

23 ‘‘(i) IN GENERAL.—Upon request by 

24 the plan sponsor and approval by the Sec25 retary of the Treasury, a mortality table 


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1 which meets the requirements of clause 

2 (iii) shall be used in determining any 

3 present value or making any computation 

4 under this section during the period of 

5 consecutive plan years (not to exceed 10) 

6 specified in the request. 

7 ‘‘(ii) EARLY TERMINATION OF PE8 RIOD.—Notwithstanding clause (i), a mor9 tality table described in clause (i) shall 

10 cease to be in effect as of the earliest of— 

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

12 significant change in the participants 

13 in the plan by reason of a plan spinoff 

14 or merger or otherwise, or 

15 ‘‘(II) the date on which the plan 

16 actuary determines that such table 

17 does not meet the requirements of 

18 clause (iii). 

19 ‘‘(iii) REQUIREMENTS.—A mortality 

20 table meets the requirements of this clause 

21 if— 

22 ‘‘(I) there is a sufficient number 

23 of plan participants, and the pension 

24 plans have been maintained for a suf25 ficient period of time, to have credible 


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1 information necessary for purposes of 

2 subclause (II), and 

3 ‘‘(II) such table reflects the ac4 tual experience of the pension plans 

5 maintained by the sponsor and pro6 jected trends in general mortality ex7 perience. 

8 ‘‘(iv) ALL PLANS IN CONTROLLED

9 GROUP MUST USE SEPARATE TABLE.—Ex10 cept as provided by the Secretary of the 

11 Treasury, a plan sponsor may not use a 

12 mortality table under this subparagraph 

13 for any plan maintained by the plan spon14 sor unless— 

15 ‘‘(I) a separate mortality table is 

16 established and used under this sub17 paragraph for each other plan main18 tained by the plan sponsor and if the 

19 plan sponsor is a member of a con20 trolled group, each member of the 

21 controlled group, and 

22 ‘‘(II) the requirements of clause 

23 (iii) are met separately with respect to 

24 the table so established for each such 

25 plan, determined by only taking into 


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1 account the participants of such plan, 

2 the time such plan has been in exist3 ence, and the actual experience of 

4 such plan. 

5 ‘‘(v) DEADLINE FOR SUBMISSION AND

6 DISPOSITION OF APPLICATION.— 

7 ‘‘(I) SUBMISSION.—The plan 

8 sponsor shall submit a mortality table 

9 to the Secretary of the Treasury for 

10 approval under this subparagraph at 

11 least 7 months before the 1st day of 

12 the period described in clause (i). 

13 ‘‘(II) DISPOSITION.—Any mor14 tality table submitted to the Secretary 

15 of the Treasury for approval under 

16 this subparagraph shall be treated as 

17 in effect as of the 1st day of the pe18 riod described in clause (i) unless the 

19 Secretary of the Treasury, during the 

20 180-day period beginning on the date 

21 of such submission, disapproves of 

22 such table and provides the reasons 

23 that such table fails to meet the re24 quirements of clause (iii). The 180- 

25 day period shall be extended upon muVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00054 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tual agreement of the Secretary of the 

2 Treasury and the plan sponsor. 

3 ‘‘(D) SEPARATE MORTALITY TABLES FOR

4 THE DISABLED.—Notwithstanding subpara5 graph (A)— 

6 ‘‘(i) IN GENERAL.—The Secretary of 

7 the Treasury shall establish mortality ta8 bles which may be used (in lieu of the ta9 bles under subparagraph (A)) under this 

10 subsection for individuals who are entitled 

11 to benefits under the plan on account of 

12 disability. The Secretary of the Treasury 

13 shall establish separate tables for individ14 uals whose disabilities occur in plan years 

15 beginning before January 1, 1995, and for 

16 individuals whose disabilities occur in plan 

17 years beginning on or after such date. 

18 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

19 OCCURRING AFTER 1994.—In the case of 

20 disabilities occurring in plan years begin21 ning after December 31, 1994, the tables 

22 under clause (i) shall apply only with re23 spect to individuals described in such sub24 clause who are disabled within the meaning 


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1 of title II of the Social Security Act and 

2 the regulations thereunder. 

3 ‘‘(iii) PERIODIC REVISION.—The Sec4 retary of the Treasury shall (at least every 

5 10 years) make revisions in any table in ef6 fect under clause (i) to reflect the actual 

7 experience of pension plans and projected 

8 trends in such experience. 

9 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

10 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

11 FORMS.—For purposes of determining any present 

12 value or making any computation under this section, 

13 there shall be taken into account— 

14 ‘‘(A) the probability that future benefit 

15 payments under the plan will be made in the 

16 form of optional forms of benefits provided 

17 under the plan (including lump sum distribu18 tions, determined on the basis of the plan’s ex19 perience and other related assumptions), and 

20 ‘‘(B) any difference in the present value of 

21 such future benefit payments resulting from the 

22 use of actuarial assumptions, in determining 

23 benefit payments in any such optional form of 

24 benefits, which are different from those speci25 fied in this subsection. 


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1 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU2 ARIAL ASSUMPTIONS.— 

3 ‘‘(A) IN GENERAL.—No actuarial assump4 tion used to determine the funding target for a 

5 plan to which this paragraph applies may be 

6 changed without the approval of the Secretary 

7 of the Treasury. 

8 ‘‘(B) PLANS TO WHICH PARAGRAPH AP9 PLIES.—This paragraph shall apply to a plan 

10 only if— 

11 ‘‘(i) the plan is a single-employer plan 

12 to which title IV applies, 

13 ‘‘(ii) the aggregate unfunded vested 

14 benefits as of the close of the preceding 

15 plan year (as determined under section 

16 4006(a)(3)(E)(iii)) of such plan and all 

17 other plans maintained by the contributing 

18 sponsors (as defined in section 

19 4001(a)(13)) and members of such spon20 sors’ controlled groups (as defined in sec21 tion 4001(a)(14)) which are covered by 

22 title IV (disregarding plans with no un23 funded vested benefits) exceed 

24 $50,000,000, and 


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1 ‘‘(iii) the change in assumptions (de2 termined after taking into account any 

3 changes in interest rate and mortality 

4 table) results in a decrease in the funding 

5 shortfall of the plan for the current plan 

6 year that exceeds $50,000,000, or that ex7 ceeds $5,000,000 and that is 5 percent or 

8 more of the funding target of the plan be9 fore such change. 

10 ‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.— 

11 ‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK

12 STATUS.— 

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

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

15 funding target of the plan for the plan year 

16 shall be equal to the sum of— 

17 ‘‘(i) the present value of all benefits 

18 accrued or earned under the plan as of the 

19 beginning of the plan year, as determined 

20 by using the additional actuarial assump21 tions described in subparagraph (B), and 

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

23 has been in at-risk status for at least 2 of 

24 the 4 preceding plan years, a loading fac25 tor determined under subparagraph (C). 


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1 ‘‘(B) ADDITIONAL ACTUARIAL ASSUMP2 TIONS.—The actuarial assumptions described in 

3 this subparagraph are as follows: 

4 ‘‘(i) All employees who are not other5 wise assumed to retire as of the valuation 

6 date but who will be eligible to elect bene7 fits during the plan year and the 10 suc8 ceeding plan years shall be assumed to re9 tire at the earliest retirement date under 

10 the plan but not before the end of the plan 

11 year for which the at-risk funding target 

12 and at-risk target normal cost are being 

13 determined. 

14 ‘‘(ii) All employees shall be assumed 

15 to elect the retirement benefit available 

16 under the plan at the assumed retirement 

17 age (determined after application of clause 

18 (i)) which would result in the highest 

19 present value of benefits. 

20 ‘‘(C) LOADING FACTOR.—The loading fac21 tor applied with respect to a plan under this 

22 paragraph for any plan year is the sum of— 

23 ‘‘(i) $700, times the number of par24 ticipants in the plan, plus 


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

2 (determined without regard to this para3 graph) of the plan for the plan year. 

4 ‘‘(2) TARGET NORMAL COST OF AT-RISK

5 PLANS.—In the case of a plan which is in at-risk 

6 status for a plan year, the target normal cost of the 

7 plan for such plan year shall be equal to the sum 

8 of— 

9 ‘‘(A) the present value of all benefits which 

10 are expected to accrue or be earned under the 

11 plan during the plan year, determined using the 

12 additional actuarial assumptions described in 

13 paragraph (1)(B), plus 

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

15 been in at-risk status for at least 2 of the 4 

16 preceding plan years, a loading factor equal to 

17 4 percent of the target normal cost (determined 

18 without regard to this paragraph) of the plan 

19 for the plan year. 

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

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

22 than the funding target, as determined without 

23 regard to this subsection, or 


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

2 than the target normal cost, as determined 

3 without regard to this subsection. 

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

5 For purposes of this subsection— 

6 ‘‘(A) IN GENERAL.—A plan is in at-risk 

7 status for a plan year if— 

8 ‘‘(i) the funding target attainment 

9 percentage for the preceding plan year (de10 termined under this section without regard 

11 to this subsection) is less than 80 percent, 

12 and 

13 ‘‘(ii) the funding target attainment 

14 percentage for the preceding plan year (de15 termined under this section by using the 

16 additional actuarial assumptions described 

17 in paragraph (1)(B) in computing the 

18 funding target) is less than 70 percent. 

19 ‘‘(B) TRANSITION RULE.—In the case of 

20 plan years beginning in 2008, 2009, and 2010, 

21 subparagraph (A)(i) shall be applied by sub22 stituting the following percentages for ‘80 per23 cent’: 

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

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


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

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

3 funding target attainment percentage for the 

4 preceding plan year under subparagraph (A)(ii) 

5 may be determined using such methods of esti6 mation as the Secretary of the Treasury may 

7 provide. 

8 ‘‘(C) SPECIAL RULE FOR EMPLOYEES OF9 FERED EARLY RETIREMENT IN 2006.— 

10 ‘‘(i) IN GENERAL.—For purposes of 

11 subparagraph (A)(ii), the additional actu12 arial assumptions described in paragraph 

13 (1)(B) shall not be taken into account with 

14 respect to any employee if— 

15 ‘‘(I) such employee is employed 

16 by a specified automobile manufac17 turer, 

18 ‘‘(II) such employee is offered a 

19 substantial amount of additional cash 

20 compensation, substantially enhanced 

21 retirement benefits under the plan, or 

22 materially reduced employment duties 

23 on the condition that by a specified 

24 date (not later than December 31, 


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1 2010) the employee retires (as defined 

2 under the terms of the plan), 

3 ‘‘(III) such offer is made during 

4 2006 and pursuant to a bona fide re5 tirement incentive program and re6 quires, by the terms of the offer, that 

7 such offer can be accepted not later 

8 than a specified date (not later than 

9 December 31, 2006), and 

10 ‘‘(IV) such employee does not 

11 elect to accept such offer before the 

12 specified date on which the offer ex13 pires. 

14 ‘‘(ii) SPECIFIED AUTOMOBILE MANU15 FACTURER.—For purposes of clause (i), 

16 the term ‘specified automobile manufac17 turer’ means— 

18 ‘‘(I) any manufacturer of auto19 mobiles, and 

20 ‘‘(II) any manufacturer of auto21 mobile parts which supplies such parts 

22 directly to a manufacturer of auto23 mobiles and which, after a transaction 

24 or series of transactions ending in 

25 1999, ceased to be a member of a 


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1 controlled group which included such 

2 manufacturer of automobiles. 

3 ‘‘(5) TRANSITION BETWEEN APPLICABLE FUND4 ING TARGETS AND BETWEEN APPLICABLE TARGET

5 NORMAL COSTS.— 

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

7 a plan which is in at-risk status for a plan year 

8 has been in such status for a consecutive period 

9 of fewer than 5 plan years, the applicable 

10 amount of the funding target and of the target 

11 normal cost shall be, in lieu of the amount de12 termined without regard to this paragraph, the 

13 sum of— 

14 ‘‘(i) the amount determined under this 

15 section without regard to this subsection, 

16 plus 

17 ‘‘(ii) the transition percentage for 

18 such plan year of the excess of the amount 

19 determined under this subsection (without 

20 regard to this paragraph) over the amount 

21 determined under this section without re22 gard to this subsection. 

23 ‘‘(B) TRANSITION PERCENTAGE.—For 

24 purposes of subparagraph (A), the transition 


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1 percentage shall be determined in accordance 

2 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. 

3 ‘‘(C) YEARS BEFORE EFFECTIVE DATE.— 

4 For purposes of this paragraph, plan years be5 ginning before 2008 shall not be taken into ac6 count. 

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

8 during the preceding plan year, a plan had 500 or 

9 fewer participants, the plan shall not be treated as 

10 in at-risk status for the plan year. For purposes of 

11 this paragraph, all defined benefit plans (other than 

12 multiemployer plans) maintained by the same em13 ployer (or any member of such employer’s controlled 

14 group) shall be treated as 1 plan, but only partici15 pants with respect to such employer or member shall 

16 be taken into account and the rules of subsection 

17 (g)(2)(C) shall apply. 

18 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU19 TIONS.— 

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, the due date for any payment of any minimum 


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required contribution for any plan year shall be 81 1 ⁄2

2 months after the close of the plan year. 

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

4 paragraph (1) for a plan year that is made on a date 

5 other than the valuation date for such plan year 

6 shall be adjusted for interest accruing for the period 

7 between the valuation date and the payment date, at 

8 the effective rate of interest for the plan for such 

9 plan year. 

10 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

11 SCHEDULE FOR UNDERFUNDED PLANS.— 

12 ‘‘(A) FAILURE TO TIMELY MAKE RE13 QUIRED INSTALLMENT.—In any case in which 

14 the plan has a funding shortfall for the pre15 ceding plan year, the employer maintaining the 

16 plan shall make the required installments under 

17 this paragraph and if the employer fails to pay 

18 the full amount of a required installment for 

19 the plan year, then the amount of interest 

20 charged under paragraph (2) on the under21 payment for the period of underpayment shall 

22 be determined by using a rate of interest equal 

23 to the rate otherwise used under paragraph (2) 

24 plus 5 percentage points. 


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1 ‘‘(B) AMOUNT OF UNDERPAYMENT, PE2 RIOD OF UNDERPAYMENT.—For purposes of 

3 subparagraph (A)— 

4 ‘‘(i) AMOUNT.—The amount of the 

5 underpayment shall be the excess of— 

6 ‘‘(I) the required installment, 

7 over 

8 ‘‘(II) the amount (if any) of the 

9 installment contributed to or under 

10 the plan on or before the due date for 

11 the installment. 

12 ‘‘(ii) PERIOD OF UNDERPAYMENT.— 

13 The period for which any interest is 

14 charged under this paragraph with respect 

15 to any portion of the underpayment shall 

16 run from the due date for the installment 

17 to the date on which such portion is con18 tributed to or under the plan. 

19 ‘‘(iii) ORDER OF CREDITING CON20 TRIBUTIONS.—For purposes of clause 

21 (i)(II), contributions shall be credited 

22 against unpaid required installments in the 

23 order in which such installments are re24 quired to be paid. 


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1 ‘‘(C) NUMBER OF REQUIRED INSTALL2 MENTS; DUE DATES.—For purposes of this 

3 paragraph— 

4 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.— 

5 There shall be 4 required installments for 

6 each plan year. 

7 ‘‘(ii) TIME FOR PAYMENT OF IN8 STALLMENTS.—The due dates for required 

9 installments are set forth in the following 

10 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. 

11 ‘‘(D) AMOUNT OF REQUIRED INSTALL12 MENT.—For purposes of this paragraph— 

13 ‘‘(i) IN GENERAL.—The amount of 

14 any required installment shall be 25 per15 cent of the required annual payment. 

16 ‘‘(ii) REQUIRED ANNUAL PAYMENT.— 

17 For purposes of clause (i), the term ‘re18 quired annual payment’ means the lesser 

19 of— 


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1 ‘‘(I) 90 percent of the minimum 

2 required contribution (determined 

3 without regard to this subsection) to 

4 the plan for the plan year under this 

5 section, or 

6 ‘‘(II) 100 percent of the min7 imum required contribution (deter8 mined without regard to this sub9 section or to any waiver under section 

10 302(c)) to the plan for the preceding 

11 plan year. 

12 Subclause (II) shall not apply if the pre13 ceding plan year referred to in such clause 

14 was not a year of 12 months. 

15 ‘‘(E) FISCAL YEARS AND SHORT YEARS.— 

16 ‘‘(i) FISCAL YEARS.—In applying this 

17 paragraph to a plan year beginning on any 

18 date other than January 1, there shall be 

19 substituted for the months specified in this 

20 paragraph, the months which correspond 

21 thereto. 

22 ‘‘(ii) SHORT PLAN YEAR.—This sub23 paragraph shall be applied to plan years of 

24 less than 12 months in accordance with 


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1 regulations prescribed by the Secretary of 

2 the Treasury. 

3 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

4 WITH QUARTERLY CONTRIBUTIONS.— 

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

6 paragraph applies shall be treated as failing to 

7 pay the full amount of any required installment 

8 under paragraph (3) to the extent that the 

9 value of the liquid assets paid in such install10 ment is less than the liquidity shortfall (wheth11 er or not such liquidity shortfall exceeds the 

12 amount of such installment required to be paid 

13 but for this paragraph). 

14 ‘‘(B) PLANS TO WHICH PARAGRAPH AP15 PLIES.—This paragraph shall apply to a plan 

16 (other than a plan described in subsection 

17 (g)(2)(B)) which— 

18 ‘‘(i) is required to pay installments 

19 under paragraph (3) for a plan year, and 

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

21 quarter during such plan year. 

22 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

23 purposes of paragraph (3)(A), any portion of an 

24 installment that is treated as not paid under 

25 subparagraph (A) shall continue to be treated 


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1 as unpaid until the close of the quarter in 

2 which the due date for such installment occurs. 

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

4 amount of any required installment is increased 

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

6 shall such increase exceed the amount which, 

7 when added to prior installments for the plan 

8 year, is necessary to increase the funding target 

9 attainment percentage of the plan for the plan 

10 year (taking into account the expected increase 

11 in funding target due to benefits accruing or 

12 earned during the plan year) to 100 percent. 

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

14 paragraph— 

15 ‘‘(i) LIQUIDITY SHORTFALL.—The 

16 term ‘liquidity shortfall’ means, with re17 spect to any required installment, an 

18 amount equal to the excess (as of the last 

19 day of the quarter for which such install20 ment is made) of— 

21 ‘‘(I) the base amount with re22 spect to such quarter, over 

23 ‘‘(II) the value (as of such last 

24 day) of the plan’s liquid assets. 

25 ‘‘(ii) BASE AMOUNT.— 


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1 ‘‘(I) IN GENERAL.—The term 

2 ‘base amount’ means, with respect to 

3 any quarter, an amount equal to 3 

4 times the sum of the adjusted dis5 bursements from the plan for the 12 

6 months ending on the last day of such 

7 quarter. 

8 ‘‘(II) SPECIAL RULE.—If the 

9 amount determined under subclause 

10 (I) exceeds an amount equal to 2 

11 times the sum of the adjusted dis12 bursements from the plan for the 36 

13 months ending on the last day of the 

14 quarter and an enrolled actuary cer15 tifies to the satisfaction of the Sec16 retary of the Treasury that such ex17 cess is the result of nonrecurring cir18 cumstances, the base amount with re19 spect to such quarter shall be deter20 mined without regard to amounts re21 lated to those nonrecurring cir22 cumstances. 

23 ‘‘(iii) DISBURSEMENTS FROM THE

24 PLAN.—The term ‘disbursements from the 

25 plan’ means all disbursements from the 


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1 trust, including purchases of annuities, 

2 payments of single sums and other bene3 fits, and administrative expenses. 

4 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

5 The term ‘adjusted disbursements’ means 

6 disbursements from the plan reduced by 

7 the product of— 

8 ‘‘(I) the plan’s funding target at9 tainment percentage for the plan year, 

10 and 

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

12 annuities, payments of single sums, 

13 and such other disbursements as the 

14 Secretary of the Treasury shall pro15 vide in regulations. 

16 ‘‘(v) LIQUID ASSETS.—The term ‘liq17 uid assets’ means cash, marketable securi18 ties, and such other assets as specified by 

19 the Secretary of the Treasury in regula20 tions. 

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

22 means, with respect to any required install23 ment, the 3-month period preceding the 

24 month in which the due date for such in25 stallment occurs. 


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

2 Treasury may prescribe such regulations as are 

3 necessary to carry out this paragraph. 

4 ‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO

5 MAKE REQUIRED CONTRIBUTIONS.— 

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

7 which this subsection applies (as provided under 

8 paragraph (2)), if— 

9 ‘‘(A) any person fails to make a contribu10 tion payment required by section 302 and this 

11 section before the due date for such payment, 

12 and 

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

14 (including interest), when added to the aggre15 gate unpaid balance of all preceding such pay16 ments for which payment was not made before 

17 the due date (including interest), exceeds 

18 $1,000,000, 

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

20 amount determined under paragraph (3) upon all 

21 property and rights to property, whether real or per22 sonal, belonging to such person and any other per23 son who is a member of the same controlled group 

24 of which such person is a member. 


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

2 This subsection shall apply to a single-employer plan 

3 covered under section 4021 for any plan year for 

4 which the funding target attainment percentage (as 

5 defined in subsection (d)(2)) of such plan is less 

6 than 100 percent. 

7 ‘‘(3) AMOUNT OF LIEN.—For purposes of para8 graph (1), the amount of the lien shall be equal to 

9 the aggregate unpaid balance of contribution pay10 ments required under this section and section 302 

11 for which payment has not been made before the due 

12 date. 

13 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

14 ‘‘(A) NOTICE OF FAILURE.—A person 

15 committing a failure described in paragraph (1) 

16 shall notify the Pension Benefit Guaranty Cor17 poration of such failure within 10 days of the 

18 due date for the required contribution payment. 

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

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

21 the required contribution payment and shall 

22 continue until the last day of the first plan year 

23 in which the plan ceases to be described in 

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

25 run without regard to whether such plan conVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00075 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tinues to be described in paragraph (2) during 

2 the period referred to in the preceding sentence. 

3 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

4 amount with respect to which a lien is imposed 

5 under paragraph (1) shall be treated as taxes 

6 due and owing the United States and rules 

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

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

9 a lien imposed by subsection (a) and the 

10 amount with respect to such lien. 

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

12 paragraph (1) may be perfected and enforced only 

13 by the Pension Benefit Guaranty Corporation, or at 

14 the direction of the Pension Benefit Guaranty Cor15 poration, by the contributing sponsor (or any mem16 ber of the controlled group of the contributing spon17 sor). 

18 ‘‘(6) DEFINITIONS.—For purposes of this sub19 section— 

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

21 ‘contribution payment’ means, in connection 

22 with a plan, a contribution payment required to 

23 be made to the plan, including any required in24 stallment under paragraphs (3) and (4) of sub25 section (j). 


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1 ‘‘(B) DUE DATE; REQUIRED INSTALL2 MENT.—The terms ‘due date’ and ‘required in3 stallment’ have the meanings given such terms 

4 by subsection (j), except that in the case of a 

5 payment other than a required installment, the 

6 due date shall be the date such payment is re7 quired to be made under section 303. 

8 ‘‘(C) CONTROLLED GROUP.—The term 

9 ‘controlled group’ means any group treated as 

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

11 (m), and (o) of section 414 of the Internal Rev12 enue Code of 1986. 

13 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT

14 ACCOUNTS.—In the case of a qualified transfer (as de15 fined in section 420 of the Internal Revenue Code of 

16 1986), any assets so transferred shall not, for purposes 

17 of this section, be treated as assets in the plan.’’. 

18 (b) CLERICAL AMENDMENT.—The table of sections 

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

20 amended by inserting after the item relating to section 

21 302 the following new item: 

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

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

23 this section shall apply with respect to plan years begin24 ning after 2007. 


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1 SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EM2 PLOYER PLANS. 

3 (a) FUNDING-BASED LIMITS ON BENEFITS AND

4 BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER

5 PLANS.—Section 206 of the Employee Retirement Income 

6 Security Act of 1974 (29 U.S.C. 1056) is amended by 

7 adding at the end the following new subsection: 

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

9 BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER

10 PLANS.— 

11 ‘‘(1) FUNDING-BASED LIMITATION ON SHUT12 DOWN BENEFITS AND OTHER UNPREDICTABLE CON13 TINGENT EVENT BENEFITS UNDER SINGLE-EM14 PLOYER PLANS.— 

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

16 defined benefit plan which is a single-employer 

17 plan is entitled to an unpredictable contingent 

18 event benefit payable with respect to any event 

19 occurring during any plan year, the plan shall 

20 provide that such benefit may not be provided 

21 if the adjusted funding target attainment per22 centage for such plan year— 

23 ‘‘(i) is less than 60 percent, or 

24 ‘‘(ii) would be less than 60 percent 

25 taking into account such occurrence. 


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1 ‘‘(B) EXEMPTION.—Subparagraph (A) 

2 shall cease to apply with respect to any plan 

3 year, effective as of the first day of the plan 

4 year, upon payment by the plan sponsor of a 

5 contribution (in addition to any minimum re6 quired contribution under section 303) equal 

7 to— 

8 ‘‘(i) in the case of subparagraph 

9 (A)(i), the amount of the increase in the 

10 funding target of the plan (under section 

11 303) for the plan year attributable to the 

12 occurrence referred to in subparagraph 

13 (A), and 

14 ‘‘(ii) in the case of subparagraph 

15 (A)(ii), the amount sufficient to result in a 

16 funding target attainment percentage of 60 

17 percent. 

18 ‘‘(C) UNPREDICTABLE CONTINGENT

19 EVENT.—For purposes of this paragraph, the 

20 term ‘unpredictable contingent event benefit’ 

21 means any benefit payable solely by reason of— 

22 ‘‘(i) a plant shutdown (or similar 

23 event, as determined by the Secretary of 

24 the Treasury), or 


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1 ‘‘(ii) an event other than the attain2 ment of any age, performance of any serv3 ice, receipt or derivation of any compensa4 tion, or occurrence of death or disability. 

5 ‘‘(2) LIMITATIONS ON PLAN AMENDMENTS IN6 CREASING LIABILITY FOR BENEFITS.— 

7 ‘‘(A) IN GENERAL.—No amendment to a 

8 defined benefit plan which is a single-employer 

9 plan which has the effect of increasing liabilities 

10 of the plan by reason of increases in benefits, 

11 establishment of new benefits, changing the 

12 rate of benefit accrual, or changing the rate at 

13 which benefits become nonforfeitable may take 

14 effect during any plan year if the adjusted 

15 funding target attainment percentage for such 

16 plan year is— 

17 ‘‘(i) less than 80 percent, or 

18 ‘‘(ii) would be less than 80 percent 

19 taking into account such amendment. 

20 ‘‘(B) EXEMPTION.—Subparagraph (A) 

21 shall cease to apply with respect to any plan 

22 year, effective as of the first day of the plan 

23 year (or if later, the effective date of the 

24 amendment), upon payment by the plan sponsor 

25 of a contribution (in addition to any minimum 


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1 required contribution under section 303) equal 

2 to— 

3 ‘‘(i) in the case of subparagraph 

4 (A)(i), the amount of the increase in the 

5 funding target of the plan (under section 

6 303) for the plan year attributable to the 

7 amendment, and 

8 ‘‘(ii) in the case of subparagraph 

9 (A)(ii), the amount sufficient to result in 

10 an adjusted funding target attainment per11 centage of 80 percent. 

12 ‘‘(C) EXCEPTION FOR CERTAIN BENEFIT

13 INCREASES.—Subparagraph (A) shall not apply 

14 to any amendment which provides for an in15 crease in benefits under a formula which is not 

16 based on a participant’s compensation, but only 

17 if the rate of such increase is not in excess of 

18 the contemporaneous rate of increase in average 

19 wages of participants covered by the amend20 ment. 

21 ‘‘(3) LIMITATIONS ON ACCELERATED BENEFIT

22 DISTRIBUTIONS.— 

23 ‘‘(A) FUNDING PERCENTAGE LESS THAN

24 60 PERCENT.—A defined benefit plan which is 

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


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1 case in which the plan’s adjusted funding target 

2 attainment percentage for a plan year is less 

3 than 60 percent, the plan may not pay any pro4 hibited payment after the valuation date for the 

5 plan year. 

6 ‘‘(B) BANKRUPTCY.—A defined benefit 

7 plan which is a single-employer plan shall pro8 vide that, during any period in which the plan 

9 sponsor is a debtor in a case under title 11, 

10 United States Code, or similar Federal or State 

11 law, the plan may not pay any prohibited pay12 ment. The preceding sentence shall not apply 

13 on or after the date on which the enrolled actu14 ary of the plan certifies that the adjusted fund15 ing target attainment percentage of such plan 

16 is not less than 100 percent. 

17 ‘‘(C) LIMITED PAYMENT IF PERCENTAGE

18 AT LEAST 60 PERCENT BUT LESS THAN 80 PER19 CENT.— 

20 ‘‘(i) IN GENERAL.—A defined benefit 

21 plan which is a single-employer plan shall 

22 provide that, in any case in which the 

23 plan’s adjusted funding target attainment 

24 percentage for a plan year is 60 percent or 

25 greater but less than 80 percent, the plan 


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1 may not pay any prohibited payment after 

2 the valuation date for the plan year to the 

3 extent the amount of the payment exceeds 

4 the lesser of— 

5 ‘‘(I) 50 percent of the amount of 

6 the payment which could be made 

7 without regard to this subsection, or 

8 ‘‘(II) the present value (deter9 mined under guidance prescribed by 

10 the Pension Benefit Guaranty Cor11 poration, using the interest and mor12 tality assumptions under section 

13 205(g)) of the maximum guarantee 

14 with respect to the participant under 

15 section 4022. 

16 ‘‘(ii) ONE-TIME APPLICATION.— 

17 ‘‘(I) IN GENERAL.—The plan 

18 shall also provide that only 1 prohib19 ited payment meeting the require20 ments of clause (i) may be made with 

21 respect to any participant during any 

22 period of consecutive plan years to 

23 which the limitations under either 

24 subparagraph (A) or (B) or this sub25 paragraph applies. 


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1 ‘‘(II) TREATMENT OF BENE2 FICIARIES.—For purposes of this 

3 clause, a participant and any bene4 ficiary on his behalf (including an al5 ternate payee, as defined in section 

6 206(d)(3)(K)) shall be treated as 1 

7 participant. If the accrued benefit of a 

8 participant is allocated to such an al9 ternate payee and 1 or more other 

10 persons, the amount under clause (i) 

11 shall be allocated among such persons 

12 in the same manner as the accrued 

13 benefit is allocated unless the quali14 fied domestic relations order (as de15 fined in section 206(d)(3)(B)(i)) pro16 vides otherwise. 

17 ‘‘(D) EXCEPTION.—This paragraph shall 

18 not apply to any plan for any plan year if the 

19 terms of such plan (as in effect for the period 

20 beginning on September 1, 2005, and ending 

21 with such plan year) provide for no benefit ac22 cruals with respect to any participant during 

23 such period. 


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1 ‘‘(E) PROHIBITED PAYMENT.—For pur2 pose of this paragraph, the term ‘prohibited 

3 payment’ means— 

4 ‘‘(i) any payment, in excess of the 

5 monthly amount paid under a single life 

6 annuity (plus any social security supple7 ments described in the last sentence of sec8 tion 204(b)(1)(G)), to a participant or ben9 eficiary whose annuity starting date (as de10 fined in section 205(h)(2)) occurs during 

11 any period a limitation under subpara12 graph (A) or (B) is in effect, 

13 ‘‘(ii) any payment for the purchase of 

14 an irrevocable commitment from an insurer 

15 to pay benefits, and 

16 ‘‘(iii) any other payment specified by 

17 the Secretary of the Treasury by regula18 tions. 

19 ‘‘(4) LIMITATION ON BENEFIT ACCRUALS FOR

20 PLANS WITH SEVERE FUNDING SHORTFALLS.— 

21 ‘‘(A) IN GENERAL.—A defined benefit plan 

22 which is a single-employer plan shall provide 

23 that, in any case in which the plan’s adjusted 

24 funding target attainment percentage for a plan 

25 year is less than 60 percent, benefit accruals 


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1 under the plan shall cease as of the valuation 

2 date for the plan year. 

3 ‘‘(B) EXEMPTION.—Subparagraph (A) 

4 shall cease to apply with respect to any plan 

5 year, effective as of the first day of the plan 

6 year, upon payment by the plan sponsor of a 

7 contribution (in addition to any minimum re8 quired contribution under section 303) equal to 

9 the amount sufficient to result in an adjusted 

10 funding target attainment percentage of 60 per11 cent. 

12 ‘‘(5) RULES RELATING TO CONTRIBUTIONS RE13 QUIRED TO AVOID BENEFIT LIMITATIONS.— 

14 ‘‘(A) SECURITY MAY BE PROVIDED.— 

15 ‘‘(i) IN GENERAL.—For purposes of 

16 this subsection, the adjusted funding tar17 get attainment percentage shall be deter18 mined by treating as an asset of the plan 

19 any security provided by a plan sponsor in 

20 a form meeting the requirements of clause 

21 (ii). 

22 ‘‘(ii) FORM OF SECURITY.—The secu23 rity required under clause (i) shall consist 

24 of— 


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1 ‘‘(I) a bond issued by a corporate 

2 surety company that is an acceptable 

3 surety for purposes of section 412 of 

4 this Act, 

5 ‘‘(II) cash, or United States obli6 gations which mature in 3 years or 

7 less, held in escrow by a bank or simi8 lar financial institution, or 

9 ‘‘(III) such other form of security 

10 as is satisfactory to the Secretary of 

11 the Treasury and the parties involved. 

12 ‘‘(iii) ENFORCEMENT.—Any security 

13 provided under clause (i) may be perfected 

14 and enforced at any time after the earlier 

15 of— 

16 ‘‘(I) the date on which the plan 

17 terminates, 

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

19 a payment of the minimum required 

20 contribution for any plan year begin21 ning after the security is provided, the 

22 due date for the payment under sec23 tion 303(j), or 

24 ‘‘(III) if the adjusted funding 

25 target attainment percentage is less 


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1 than 60 percent for a consecutive pe2 riod of 7 years, the valuation date for 

3 the last year in the period. 

4 ‘‘(iv) RELEASE OF SECURITY.—The 

5 security shall be released (and any 

6 amounts thereunder shall be refunded to7 gether with any interest accrued thereon) 

8 at such time as the Secretary of the Treas9 ury may prescribe in regulations, including 

10 regulations for partial releases of the secu11 rity by reason of increases in the funding 

12 target attainment percentage. 

13 ‘‘(B) PREFUNDING BALANCE OR FUNDING

14 STANDARD CARRYOVER BALANCE MAY NOT BE

15 USED.—No prefunding balance or funding 

16 standard carryover balance under section 303(f) 

17 may be used under paragraph (1), (2), or (4) 

18 to satisfy any payment an employer may make 

19 under any such paragraph to avoid or terminate 

20 the application of any limitation under such 

21 paragraph. 

22 ‘‘(C) DEEMED REDUCTION OF FUNDING

23 BALANCES.— 

24 ‘‘(i) IN GENERAL.—Subject to clause 

25 (iii), in any case in which a benefit limitaVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00088 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tion under paragraph (1), (2), (3), or (4) 

2 would (but for this subparagraph and de3 termined without regard to paragraph 

4 (1)(B), (2)(B), or (4)(B)) apply to such 

5 plan for the plan year, the plan sponsor of 

6 such plan shall be treated for purposes of 

7 this Act as having made an election under 

8 section 303(f) to reduce the prefunding 

9 balance or funding standard carryover bal10 ance by such amount as is necessary for 

11 such benefit limitation to not apply to the 

12 plan for such plan year. 

13 ‘‘(ii) EXCEPTION FOR INSUFFICIENT

14 FUNDING BALANCES.—Clause (i) shall not 

15 apply with respect to a benefit limitation 

16 for any plan year if the application of 

17 clause (i) would not result in the benefit 

18 limitation not applying for such plan year. 

19 ‘‘(iii) RESTRICTIONS OF CERTAIN

20 RULES TO COLLECTIVELY BARGAINED

21 PLANS.—With respect to any benefit limi22 tation under paragraph (1), (2), or (4), 

23 clause (i) shall only apply in the case of a 

24 plan maintained pursuant to 1 or more col25 lective bargaining agreements between emVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00089 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ployee representatives and 1 or more em2 ployers. 

3 ‘‘(6) NEW PLANS.—Paragraphs (1), (2) and (4) 

4 shall not apply to a plan for the first 5 plan years 

5 of the plan. For purposes of this paragraph, the ref6 erence in this paragraph to a plan shall include a 

7 reference to any predecessor plan. 

8 ‘‘(7) PRESUMED UNDERFUNDING FOR PUR9 POSES OF BENEFIT LIMITATIONS.— 

10 ‘‘(A) PRESUMPTION OF CONTINUED

11 UNDERFUNDING.—In any case in which a ben12 efit limitation under paragraph (1), (2), (3), or 

13 (4) has been applied to a plan with respect to 

14 the plan year preceding the current plan year, 

15 the adjusted funding target attainment percent16 age of the plan for the current plan year shall 

17 be presumed to be equal to the adjusted fund18 ing target attainment percentage of the plan for 

19 the preceding plan year until the enrolled actu20 ary of the plan certifies the actual adjusted 

21 funding target attainment percentage of the 

22 plan for the current plan year. 

23 ‘‘(B) PRESUMPTION OF UNDERFUNDING

24 AFTER 10TH MONTH.—In any case in which no 

25 certification of the adjusted funding target atVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00090 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tainment percentage for the current plan year 

2 is made with respect to the plan before the first 

3 day of the 10th month of such year, for pur4 poses of paragraphs (1), (2), (3), and (4), such 

5 first day shall be deemed, for purposes of such 

6 paragraph, to be the valuation date of the plan 

7 for the current plan year and the plan’s ad8 justed funding target attainment percentage 

9 shall be conclusively presumed to be less than 

10 60 percent as of such first day. 

11 ‘‘(C) PRESUMPTION OF UNDERFUNDING

12 AFTER 4TH MONTH FOR NEARLY UNDER13 FUNDED PLANS.—In any case in which— 

14 ‘‘(i) a benefit limitation under para15 graph (1), (2), (3), or (4) did not apply to 

16 a plan with respect to the plan year pre17 ceding the current plan year, but the ad18 justed funding target attainment percent19 age of the plan for such preceding plan 

20 year was not more than 10 percentage 

21 points greater than the percentage which 

22 would have caused such paragraph to 

23 apply to the plan with respect to such pre24 ceding plan year, and 


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

2 month of the current plan year, the en3 rolled actuary of the plan has not certified 

4 the actual adjusted funding target attain5 ment percentage of the plan for the cur6 rent plan year, 

7 until the enrolled actuary so certifies, such first 

8 day shall be deemed, for purposes of such para9 graph, to be the valuation date of the plan for 

10 the current plan year and the adjusted funding 

11 target attainment percentage of the plan as of 

12 such first day shall, for purposes of such para13 graph, be presumed to be equal to 10 percent14 age points less than the adjusted funding target 

15 attainment percentage of the plan for such pre16 ceding plan year. 

17 ‘‘(8) TREATMENT OF PLAN AS OF CLOSE OF

18 PROHIBITED OR CESSATION PERIOD.—For purposes 

19 of applying this part— 

20 ‘‘(A) OPERATION OF PLAN AFTER PE21 RIOD.—Unless the plan provides otherwise, pay22 ments and accruals will resume effective as of 

23 the day following the close of the period for 

24 which any limitation of payment or accrual of 

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


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1 ‘‘(B) TREATMENT OF AFFECTED BENE2 FITS.—Nothing in this paragraph shall be con3 strued as affecting the plan’s treatment of ben4 efits which would have been paid or accrued but 

5 for this subsection. 

6 ‘‘(9) TERMS RELATING TO FUNDING TARGET

7 ATTAINMENT PERCENTAGE.—For purposes of this 

8 subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘funding 

10 target attainment percentage’ has the same 

11 meaning given such term by section 303(d)(2). 

12 ‘‘(B) ADJUSTED FUNDING TARGET AT13 TAINMENT PERCENTAGE.—The term ‘adjusted 

14 funding target attainment percentage’ means 

15 the funding target attainment percentage which 

16 is determined under subparagraph (A) by in17 creasing each of the amounts under subpara18 graphs (A) and (B) of section 303(d)(2) by the 

19 aggregate amount of purchases of annuities for 

20 employees other than highly compensated em21 ployees (as defined in section 414(q) of the In22 ternal Revenue Code of 1986) which were made 

23 by the plan during the preceding 2 plan years. 


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1 ‘‘(C) APPLICATION TO PLANS WHICH ARE

2 FULLY FUNDED WITHOUT REGARD TO REDUC3 TIONS FOR FUNDING BALANCES.— 

4 ‘‘(i) IN GENERAL.—In the case of a 

5 plan for any plan year, if the funding tar6 get attainment percentage is 100 percent 

7 or more (determined without regard to this 

8 subparagraph and without regard to the 

9 reduction in the value of assets under sec10 tion 303(f)(4)), the funding target attain11 ment percentage for purposes of subpara12 graphs (A) and (B) shall be determined 

13 without regard to such reduction. 

14 ‘‘(ii) TRANSITION RULE.—Clause (i) 

15 shall be applied to plan years beginning 

16 after 2007 and before 2011 by substituting 

17 for ‘100 percent’ the applicable percentage 

18 determined in accordance with the fol19 lowing table: 

‘‘In the case of a plan year The applicable 

beginning in calendar year: percentage is 

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

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

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

20 ‘‘(iii) LIMITATION.—Clause (ii) shall 

21 not apply with respect to any plan year 

22 after 2008 unless the funding target at23 tainment percentage (determined without 


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1 regard to this subparagraph) of the plan 

2 for each preceding plan year after 2007 

3 was not less than the applicable percentage 

4 with respect to such preceding plan year 

5 determined under clause (ii). 

6 ‘‘(10) SPECIAL RULE FOR 2008.—For purposes 

7 of this subsection, in the case of plan years begin8 ning in 2008, the funding target attainment percent9 age for the preceding plan year may be determined 

10 using such methods of estimation as the Secretary 

11 of the Treasury may provide.’’. 

12 (b) NOTICE REQUIREMENT.— 

13 (1) IN GENERAL.—Section 101 of such Act (29 

14 U.S.C. 1021) is amended— 

15 (A) by redesignating subsection (j) as sub16 section (k); and 

17 (B) by inserting after subsection (i) the 

18 following new subsection: 

19 ‘‘(j) NOTICE OF FUNDING-BASED LIMITATION ON

20 CERTAIN FORMS OF DISTRIBUTION.—The plan adminis21 trator of a single-employer plan shall provide a written no22 tice to plan participants and beneficiaries within 30 

23 days— 


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1 ‘‘(1) after the plan has become subject to a re2 striction described in paragraph (1) or (3) of section 

3 206(g)), 

4 ‘‘(2) in the case of a plan to which section 

5 206(g)(4) applies, after the valuation date for the 

6 plan year described in section 206(g)(4)(B) for 

7 which the plan’s adjusted funding target attainment 

8 percentage for the plan year is less than 60 percent 

9 (or, if earlier, the date such percentage is deemed to 

10 be less than 60 percent under section 206(g)(7)), 

11 and 

12 ‘‘(3) at such other time as may be determined 

13 by the Secretary of the Treasury. 

14 The notice required to be provided under this subsection 

15 shall be in writing, except that such notice may be in elec16 tronic or other form to the extent that such form is rea17 sonably accessible to the recipient.’’. 

18 (2) ENFORCEMENT.—Section 502(c)(4) of such 

19 Act (29 U.S.C. 1132(c)(4)) is amended by striking 

20 ‘‘section 302(b)(7)(F)(iv)’’ and inserting ‘‘section 

21 101(j) or 302(b)(7)(F)(iv)’’. 

22 (c) EFFECTIVE DATES.— 

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

24 this section shall apply to plan years beginning after 

25 December 31, 2007. 


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1 (2) COLLECTIVE BARGAINING EXCEPTION.—In 

2 the case of a plan maintained pursuant to 1 or more 

3 collective bargaining agreements between employee 

4 representatives and 1 or more employers ratified be5 fore January 1, 2008, the amendments made by this 

6 section shall not apply to plan years beginning be7 fore the earlier of— 

8 (A) the later of— 

9 (i) the date on which the last collec10 tive bargaining agreement relating to the 

11 plan terminates (determined without re12 gard to any extension thereof agreed to 

13 after the date of the enactment of this 

14 Act), or 

15 (ii) the first day of the first plan year 

16 to which the amendments made by this 

17 subsection would (but for this subpara18 graph) apply, or 

19 (B) January 1, 2010. 

20 For purposes of subparagraph (A)(i), any plan 

21 amendment made pursuant to a collective bargaining 

22 agreement relating to the plan which amends the 

23 plan solely to conform to any requirement added by 

24 this section shall not be treated as a termination of 

25 such collective bargaining agreement. 


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1 SEC. 104. SPECIAL RULES FOR MULTIPLE EMPLOYER 

2 PLANS OF CERTAIN COOPERATIVES. 

3 (a) GENERAL RULE.—Except as provided in this sec4 tion, if a plan in existence on July 26, 2005, was an eligi5 ble cooperative plan for its plan year which includes such 

6 date, the amendments made by this subtitle and subtitle 

7 B shall not apply to plan years beginning before the earlier 

8 of— 

9 (1) the first plan year for which the plan ceases 

10 to be an eligible cooperative plan, or 

11 (2) January 1, 2017. 

12 (b) INTEREST RATE.—In applying section 

13 302(b)(5)(B) of the Employee Retirement Income Secu14 rity Act of 1974 and section 412(b)(5)(B) of the Internal 

15 Revenue Code of 1986 (as in effect before the amendments 

16 made by this subtitle and subtitle B) to an eligible cooper17 ative plan for plan years beginning after December 31, 

18 2007, and before the first plan year to which such amend19 ments apply, the third segment rate determined under sec20 tion 303(h)(2)(C)(iii) of such Act and section 

21 430(h)(2)(C)(iii) of such Code (as added by such amend22 ments) shall be used in lieu of the interest rate otherwise 

23 used. 

24 (c) ELIGIBLE COOPERATIVE PLAN DEFINED.—For 

25 purposes of this section, a plan shall be treated as an eligi26 ble cooperative plan for a plan year if the plan is mainVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00098 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tained by more than 1 employer and at least 85 percent 

2 of the employers are— 

3 (1) rural cooperatives (as defined in section 

4 401(k)(7)(B) of such Code without regard to clause 

5 (iv) thereof), or 

6 (2) organizations which are— 

7 (A) cooperative organizations described in 

8 section 1381(a) of such Code which are more 

9 than 50-percent owned by agricultural pro10 ducers or by cooperatives owned by agricultural 

11 producers, or 

12 (B) more than 50-percent owned, or con13 trolled by, one or more cooperative organiza14 tions described in subparagraph (A). 

15 A plan shall also be treated as an eligible cooperative plan 

16 for any plan year for which it is described in section 

17 210(a) of the Employee Retirement Income Security Act 

18 of 1974 and is maintained by a rural telephone cooperative 

19 association described in section 3(40)(B)(v) of such Act. 

20 SEC. 105. TEMPORARY RELIEF FOR CERTAIN PBGC SETTLE21 MENT PLANS. 

22 (a) GENERAL RULE.—Except as provided in this sec23 tion, if a plan in existence on July 26, 2005, was a PBGC 

24 settlement plan as of such date, the amendments made 


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1 by this subtitle and subtitle B shall not apply to plan years 

2 beginning before January 1, 2014. 

3 (b) INTEREST RATE.—In applying section 

4 302(b)(5)(B) of the Employee Retirement Income Secu5 rity Act of 1974 and section 412(b)(5)(B) of the Internal 

6 Revenue Code of 1986 (as in effect before the amendments 

7 made by this subtitle and subtitle B), to a PBGC settle8 ment plan for plan years beginning after December 31, 

9 2007, and before January 1, 2014, the third segment rate 

10 determined under section 303(h)(2)(C)(iii) of such Act 

11 and section 430(h)(2)(C)(iii) of such Code (as added by 

12 such amendments) shall be used in lieu of the interest rate 

13 otherwise used. 

14 (c) PBGC SETTLEMENT PLAN.—For purposes of 

15 this section, the term ‘‘PBGC settlement plan’’ means a 

16 defined benefit plan (other than a multiemployer plan) to 

17 which section 302 of such Act and section 412 of such 

18 Code apply and— 

19 (1) which was sponsored by an employer which 

20 was in bankruptcy, giving rise to a claim by the 

21 Pension Benefit Guaranty Corporation of not great22 er than $150,000,000, and the sponsorship of which 

23 was assumed by another employer that was not a 

24 member of the same controlled group as the bank25 rupt sponsor and the claim of the Pension Benefit 


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1 Guaranty Corporation was settled or withdrawn in 

2 connection with the assumption of the sponsorship, 

3 or 

4 (2) which, by agreement with the Pension Ben5 efit Guaranty Corporation, was spun off from a plan 

6 subsequently terminated by such Corporation under 

7 section 4042 of the Employee Retirement Income 

8 Security Act of 1974. 

9 SEC. 106. SPECIAL RULES FOR PLANS OF CERTAIN GOV10 ERNMENT CONTRACTORS. 

11 (a) GENERAL RULE.—Except as provided in this sec12 tion, if a plan is an eligible government contractor plan, 

13 this subtitle and subtitle B shall not apply to plan years 

14 beginning before the earliest of— 

15 (1) the first plan year for which the plan ceases 

16 to be an eligible government contractor plan, 

17 (2) the effective date of the Cost Accounting 

18 Standards Pension Harmonization Rule, or 

19 (3) January 1, 2011. 

20 (b) INTEREST RATE.—In applying section 

21 302(b)(5)(B) of the Employee Retirement Income Secu22 rity Act of 1974 and section 412(b)(5)(B) of the Internal 

23 Revenue Code of 1986 (as in effect before the amendments 

24 made by this subtitle and subtitle B) to an eligible govern25 ment contractor plan for plan years beginning after DeVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00101 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 cember 31, 2007, and before the first plan year to which 

2 such amendments apply, the third segment rate deter3 mined under section 303(h)(2)(C)(iii) of such Act and sec4 tion 430(h)(2)(C)(iii) of such Code (as added by such 

5 amendments) shall be used in lieu of the interest rate oth6 erwise used. 

7 (c) ELIGIBLE GOVERNMENT CONTRACTOR PLAN DE8 FINED.—For purposes of this section, a plan shall be 

9 treated as an eligible government contractor plan if it is 

10 maintained by a corporation or a member of the same af11 filiated group (as defined by section 1504(a) of the Inter12 nal Revenue Code of 1986), whose primary source of rev13 enue is derived from business performed under contracts 

14 with the United States that are subject to the Federal Ac15 quisition Regulations (Chapter 1 of Title 48, C.F.R.) and 

16 that are also subject to the Defense Federal Acquisition 

17 Regulation Supplement (Chapter 2 of Title 48, C.F.R.), 

18 and whose revenue derived from such business in the pre19 vious fiscal year exceeded $5,000,000,000, and whose pen20 sion plan costs that are assignable under those contracts 

21 are subject to sections 412 and 413 of the Cost Account22 ing Standards (48 C.F.R. 9904.412 and 9904.413). 

23 (d) COST ACCOUNTING STANDARDS PENSION HAR24 MONIZATION RULE.—The Cost Accounting Standards 

25 Board shall review and revise sections 412 and 413 of the 


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1 Cost Accounting Standards (48 C.F.R. 9904.412 and 

2 9904.413) to harmonize the minimum required contribu3 tion under the Employee Retirement Income Security Act 

4 of 1974 of eligible government contractor plans and gov5 ernment reimbursable pension plan costs not later than 

6 January 1, 2010. Any final rule adopted by the Cost Ac7 counting Standards Board shall be deemed the Cost Ac8 counting Standards Pension Harmonization Rule. 

9 SEC. 107. TECHNICAL AND CONFORMING AMENDMENTS. 

10 (a) MISCELLANEOUS AMENDMENTS TO TITLE I.— 

11 Subtitle B of title I of such Act (29 U.S.C. 1021 et seq.) 

12 is amended— 

13 (1) in section 101(d)(3), by striking ‘‘section 

14 302(e)’’ and inserting ‘‘section 303(j)’’; 

15 (2) in section 103(d)(8)(B), by striking ‘‘the re16 quirements of section 302(c)(3)’’ and inserting ‘‘the 

17 applicable requirements of sections 303(h) and 

18 304(c)(3)’’; 

19 (3) in section 103(d), by striking paragraph 

20 (11) and inserting the following: 

21 ‘‘(11) If the current value of the assets of the 

22 plan is less than 70 percent of— 

23 ‘‘(A) in the case of a single-employer plan, 

24 the funding target (as defined in section 

25 303(d)(1)) of the plan, or 


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1 ‘‘(B) in the case of a multiemployer plan, 

2 the current liability (as defined in section 

3 304(c)(6)(D)) under the plan, 

4 the percentage which such value is of the amount 

5 described in subparagraph (A) or (B).’’; 

6 (4) in section 203(a)(3)(C), by striking ‘‘section 

7 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

8 (5) in section 204(g)(1), by striking ‘‘section 

9 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

10 (6) in section 204(i)(2)(B), by striking ‘‘section 

11 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

12 (7) in section 204(i)(3), by striking ‘‘funded 

13 current liability percentage (within the meaning of 

14 section 302(d)(8) of this Act)’’ and inserting ‘‘fund15 ing target attainment percentage (as defined in sec16 tion 303(d)(2))’’; 

17 (8) in section 204(i)(4), by striking ‘‘section 

18 302(c)(11)(A), without regard to section 

19 302(c)(11)(B)’’ and inserting ‘‘section 302(b)(1), 

20 without regard to section 302(b)(2)’’; 

21 (9) in section 206(e)(1), by striking ‘‘section 

22 302(d)’’ and inserting ‘‘section 303(j)(4)’’, and by 

23 striking ‘‘section 302(e)(5)’’ and inserting ‘‘section 

24 303(j)(4)(E)(i)’’; 


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1 (10) in section 206(e)(3), by striking ‘‘section 

2 302(e) by reason of paragraph (5)(A) thereof’’ and 

3 inserting ‘‘section 303(j)(3) by reason of section 

4 303(j)(4)(A)’’; and 

5 (11) in sections 101(e)(3), 403(c)(1), and 

6 408(b)(13), by striking ‘‘American Jobs Creation 

7 Act of 2004’’ and inserting ‘‘Pension Protection Act 

8 of 2006’’. 

9 (b) MISCELLANEOUS AMENDMENTS TO TITLE IV.— 

10 Title IV of such Act is amended— 

11 (1) in section 4001(a)(13) (29 U.S.C. 

12 1301(a)(13)), by striking ‘‘302(c)(11)(A)’’ and in13 serting ‘‘302(b)(1)’’, by striking ‘‘412(c)(11)(A)’’ 

14 and inserting ‘‘412(b)(1)’’, by striking 

15 ‘‘302(c)(11)(B)’’ and inserting ‘‘302(b)(2)’’, and by 

16 striking ‘‘412(c)(11)(B)’’ and inserting ‘‘412(b)(2)’’; 

17 (2) in section 4003(e)(1) (29 U.S.C. 

18 1303(e)(1)), by striking ‘‘302(f)(1)(A) and (B)’’ and 

19 inserting ‘‘303(k)(1)(A) and (B)’’, and by striking 

20 ‘‘412(n)(1)(A) and (B)’’ and inserting 

21 ‘‘430(k)(1)(A) and (B)’’; 

22 (3) in section 4010(b)(2) (29 U.S.C. 

23 1310(b)(2)), by striking ‘‘302(f)(1)(A) and (B)’’ and 

24 inserting ‘‘303(k)(1)(A) and (B)’’, and by striking 


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1 ‘‘412(n)(1)(A) and (B)’’ and inserting 

2 ‘‘430(k)(1)(A) and (B)’’; 

3 (4) in section 4062(c) (29 U.S.C. 1362(c)), by 

4 striking paragraphs (1), (2), and (3) and inserting 

5 the following: 

6 ‘‘(1) the sum of the shortfall amortization 

7 charge (within the meaning of section 303(c)(1) of 

8 this Act and 430(d)(1) of the Internal Revenue Code 

9 of 1986) with respect to the plan (if any) for the 

10 plan year in which the termination date occurs, plus 

11 the aggregate total of shortfall amortization install12 ments (if any) determined for succeeding plan years 

13 under section 303(c)(2) of this Act and section 

14 430(d)(2) of such Code (which, for purposes of this 

15 subparagraph, shall include any increase in such 

16 sum which would result if all applications for waiv17 ers of the minimum funding standard under section 

18 302(c) of this Act and section 412(c) of such Code 

19 which are pending with respect to such plan were 

20 denied and if no additional contributions (other than 

21 those already made by the termination date) were 

22 made for the plan year in which the termination 

23 date occurs or for any previous plan year), and 

24 ‘‘(2) the sum of the waiver amortization charge 

25 (within the meaning of section 303(e)(1) of this Act 


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1 and 430(e)(1) of the Internal Revenue Code of 

2 1986) with respect to the plan (if any) for the plan 

3 year in which the termination date occurs, plus the 

4 aggregate total of waiver amortization installments 

5 (if any) determined for succeeding plan years under 

6 section 303(e)(2) of this Act and section 430(e)(2) 

7 of such Code,’’; 

8 (5) in section 4071 (29 U.S.C. 1371), by strik9 ing ‘‘302(f)(4)’’ and inserting ‘‘303(k)(4)’’; 

10 (6) in section 4243(a)(1)(B) (29 U.S.C. 

11 1423(a)(1)(B)), by striking ‘‘302(a)’’ and inserting 

12 ‘‘304(a)’’, and, in clause (i), by striking ‘‘302(a)’’ 

13 and inserting ‘‘304(a)’’; 

14 (7) in section 4243(f)(1) (29 U.S.C. 

15 1423(f)(1)), by striking ‘‘303(a)’’ and inserting 

16 ‘‘302(c)’’; 

17 (8) in section 4243(f)(2) (29 U.S.C. 

18 1423(f)(2)), by striking ‘‘303(c)’’ and inserting 

19 ‘‘302(c)(3)’’; and 

20 (9) in section 4243(g) (29 U.S.C. 1423(g)), by 

21 striking ‘‘302(c)(3)’’ and inserting ‘‘304(c)(3)’’. 

22 (c) AMENDMENTS TO REORGANIZATION PLAN NO. 4 

23 OF 1978.—Section 106(b)(ii) of Reorganization Plan No. 

24 4 of 1978 (ratified and affirmed as law by Public Law 

25 98–532 (98 Stat. 2705)) is amended by striking 


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1 ‘‘302(c)(8)’’ and inserting ‘‘302(d)(2)’’, by striking 

2 ‘‘304(a) and (b)(2)(A)’’ and inserting ‘‘304(d)(1), (d)(2), 

3 and (e)(2)(A)’’, and by striking ‘‘412(c)(8), (e), and 

4 (f)(2)(A)’’ and inserting ‘‘412(c)(2) and 431(d)(1), (d)(2), 

5 and (e)(2)(A)’’. 

6 (d) REPEAL OF EXPIRED AUTHORITY FOR TEM7 PORARY VARIANCES.—Section 207 of such Act (29 U.S.C. 

8 1057) is repealed. 

9 (e) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to plan years beginning after 2007. 

11 Subtitle B—Amendments to 

12 Internal Revenue Code of 1986 

13 SEC. 111. MINIMUM FUNDING STANDARDS. 

14 (a) NEW MINIMUM FUNDING STANDARDS.—Section 

15 412 of the Internal Revenue Code of 1986 (relating to 

16 minimum funding standards) is amended to read as fol17 lows: 

18 ‘‘SEC. 412. MINIMUM FUNDING STANDARDS. 

19 ‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING

20 STANDARD.— 

21 ‘‘(1) IN GENERAL.—A plan to which this sec22 tion applies shall satisfy the minimum funding 

23 standard applicable to the plan for any plan year. 

24 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur25 poses of paragraph (1), a plan shall be treated as 


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1 satisfying the minimum funding standard for a plan 

2 year if— 

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

4 which is not a multiemployer plan, the employer 

5 makes contributions to or under the plan for 

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

7 less than the minimum required contribution 

8 determined under section 430 for the plan for 

9 the plan year, 

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

11 which is not a multiemployer plan, the employer 

12 makes contributions to or under the plan for 

13 the plan year which are required under the 

14 terms of the plan, and 

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

16 the employers make contributions to or under 

17 the plan for any plan year which, in the aggre18 gate, are sufficient to ensure that the plan does 

19 not have an accumulated funding deficiency 

20 under section 431 as of the end of the plan 

21 year. 

22 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.— 

23 ‘‘(1) IN GENERAL.—Except as provided in para24 graph (2), the amount of any contribution required 

25 by this section (including any required installments 


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1 under paragraphs (3) and (4) of section 430(j)) 

2 shall be paid by the employer responsible for making 

3 contributions to or under the plan. 

4 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

5 EMPLOYER MEMBER OF CONTROLLED GROUP.—If 

6 the employer referred to in paragraph (1) is a mem7 ber of a controlled group, each member of such 

8 group shall be jointly and severally liable for pay9 ment of such contributions. 

10 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND11 ARDS.— 

12 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD13 SHIP.— 

14 ‘‘(A) IN GENERAL.—If— 

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

16 a multiemployer plan, 10 percent or more 

17 of the number of employers contributing to 

18 or under the plan is) unable to satisfy the 

19 minimum funding standard for a plan year 

20 without temporary substantial business 

21 hardship (substantial business hardship in 

22 the case of a multiemployer plan), and 

23 ‘‘(ii) application of the standard would 

24 be adverse to the interests of plan partici25 pants in the aggregate, 


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1 the Secretary may, subject to subparagraph 

2 (C), waive the requirements of subsection (a) 

3 for such year with respect to all or any portion 

4 of the minimum funding standard. The Sec5 retary shall not waive the minimum funding 

6 standard with respect to a plan for more than 

7 3 of any 15 (5 of any 15 in the case of a multi8 employer plan) consecutive plan years 

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

10 granted under subparagraph (A) for any plan 

11 year— 

12 ‘‘(i) in the case of a defined benefit 

13 plan which is not a multiemployer plan, 

14 the minimum required contribution under 

15 section 430 for the plan year shall be re16 duced by the amount of the waived funding 

17 deficiency and such amount shall be amor18 tized as required under section 430(e), and 

19 ‘‘(ii) in the case of a multiemployer 

20 plan, the funding standard account shall 

21 be credited under section 431(b)(3)(C) 

22 with the amount of the waived funding de23 ficiency and such amount shall be amor24 tized as required under section 

25 431(b)(2)(C). 


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1 ‘‘(C) WAIVER OF AMORTIZED PORTION

2 NOT ALLOWED.—The Secretary may not waive 

3 under subparagraph (A) any portion of the 

4 minimum funding standard under subsection 

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

6 waived funding deficiency for any preceding 

7 plan year. 

8 ‘‘(2) DETERMINATION OF BUSINESS HARD9 SHIP.—For purposes of this subsection, the factors 

10 taken into account in determining temporary sub11 stantial business hardship (substantial business 

12 hardship in the case of a multiemployer plan) shall 

13 include (but shall not be limited to) whether or 

14 not— 

15 ‘‘(A) the employer is operating at an eco16 nomic loss, 

17 ‘‘(B) there is substantial unemployment or 

18 underemployment in the trade or business and 

19 in the industry concerned, 

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

21 concerned are depressed or declining, and 

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

23 plan will be continued only if the waiver is 

24 granted. 


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1 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur2 poses of this section and part III of this subchapter, 

3 the term ‘waived funding deficiency’ means the por4 tion of the minimum funding standard under sub5 section (a) (determined without regard to the waiv6 er) for a plan year waived by the Secretary and not 

7 satisfied by employer contributions. 

8 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM9 PLOYER PLANS, CONSULTATIONS.— 

10 ‘‘(A) SECURITY MAY BE REQUIRED.— 

11 ‘‘(i) IN GENERAL.—Except as pro12 vided in subparagraph (C), the Secretary 

13 may require an employer maintaining a de14 fined benefit plan which is a single-em15 ployer plan (within the meaning of section 

16 4001(a)(15) of the Employee Retirement 

17 Income Security Act of 1974) to provide 

18 security to such plan as a condition for 

19 granting or modifying a waiver under 

20 paragraph (1). 

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

22 provided under clause (i) may be perfected 

23 and enforced only by the Pension Benefit 

24 Guaranty Corporation, or at the direction 

25 of the Corporation, by a contributing sponVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00113 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 sor (within the meaning of section 

2 4001(a)(13) of the Employee Retirement 

3 Income Security Act of 1974), or a mem4 ber of such sponsor’s controlled group 

5 (within the meaning of section 4001(a)(14) 

6 of such Act). 

7 ‘‘(B) CONSULTATION WITH THE PENSION

8 BENEFIT GUARANTY CORPORATION.—Except as 

9 provided in subparagraph (C), the Secretary 

10 shall, before granting or modifying a waiver 

11 under this subsection with respect to a plan de12 scribed in subparagraph (A)(i)— 

13 ‘‘(i) provide the Pension Benefit 

14 Guaranty Corporation with— 

15 ‘‘(I) notice of the completed ap16 plication for any waiver or modifica17 tion, and 

18 ‘‘(II) an opportunity to comment 

19 on such application within 30 days 

20 after receipt of such notice, and 

21 ‘‘(ii) consider— 

22 ‘‘(I) any comments of the Cor23 poration under clause (i)(II), and 

24 ‘‘(II) any views of any employee 

25 organization (within the meaning of 


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1 section 3(4) of the Employee Retire2 ment Income Security Act of 1974) 

3 representing participants in the plan 

4 which are submitted in writing to the 

5 Secretary in connection with such ap6 plication. 

7 Information provided to the Corporation under 

8 this subparagraph shall be considered tax re9 turn information and subject to the safe10 guarding and reporting requirements of section 

11 6103(p). 

12 ‘‘(C) EXCEPTION FOR CERTAIN WAIV13 ERS.— 

14 ‘‘(i) IN GENERAL.—The preceding 

15 provisions of this paragraph shall not 

16 apply to any plan with respect to which the 

17 sum of— 

18 ‘‘(I) the aggregate unpaid min19 imum required contributions (within 

20 the meaning of section 4971(c)(4)) for 

21 the plan year and all preceding plan 

22 years, and 

23 ‘‘(II) the present value of all 

24 waiver amortization installments de25 termined for the plan year and sucVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00115 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ceeding plan years under section 

2 430(e)(2), 

3 is less than $1,000,000. 

4 ‘‘(ii) TREATMENT OF WAIVERS FOR

5 WHICH APPLICATIONS ARE PENDING.—The 

6 amount described in clause (i)(I) shall in7 clude any increase in such amount which 

8 would result if all applications for waivers 

9 of the minimum funding standard under 

10 this subsection which are pending with re11 spect to such plan were denied. 

12 ‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER

13 PLANS.— 

14 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 15 ⁄2 MONTHS AFTER CLOSE OF

16 YEAR.—In the case of a defined benefit plan 

17 which is not a multiemployer plan, no waiver 

18 may be granted under this subsection with re19 spect to any plan for any plan year unless an 

20 application therefor is submitted to the Sec21 retary not later than the 15th day of the 3rd 

22 month beginning after the close of such plan 

23 year. 

24 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM25 BER OF CONTROLLED GROUP.—In the case of a 


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1 defined benefit plan which is not a multiem2 ployer plan, if an employer is a member of a 

3 controlled group, the temporary substantial 

4 business hardship requirements of paragraph 

5 (1) shall be treated as met only if such require6 ments are met— 

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

8 and 

9 ‘‘(ii) with respect to the controlled 

10 group of which such employer is a member 

11 (determined by treating all members of 

12 such group as a single employer). 

13 The Secretary may provide that an analysis of 

14 a trade or business or industry of a member 

15 need not be conducted if the Secretary deter16 mines such analysis is not necessary because 

17 the taking into account of such member would 

18 not significantly affect the determination under 

19 this paragraph. 

20 ‘‘(6) ADVANCE NOTICE.— 

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

22 before granting a waiver under this subsection, 

23 require each applicant to provide evidence satis24 factory to the Secretary that the applicant has 

25 provided notice of the filing of the application 


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1 for such waiver to each affected party (as de2 fined in section 4001(a)(21) of the Employee 

3 Retirement Income Security Act of 1974). Such 

4 notice shall include a description of the extent 

5 to which the plan is funded for benefits which 

6 are guaranteed under title IV of the Employee 

7 Retirement Income Security Act of 1974 and 

8 for benefit liabilities. 

9 ‘‘(B) CONSIDERATION OF RELEVANT IN10 FORMATION.—The Secretary shall consider any 

11 relevant information provided by a person to 

12 whom notice was given under subparagraph 

13 (A). 

14 ‘‘(7) RESTRICTION ON PLAN AMENDMENTS.— 

15 ‘‘(A) IN GENERAL.—No amendment of a 

16 plan which increases the liabilities of the plan 

17 by reason of any increase in benefits, any 

18 change in the accrual of benefits, or any change 

19 in the rate at which benefits become nonforfeit20 able under the plan shall be adopted if a waiver 

21 under this subsection or an extension of time 

22 under section 431(d) is in effect with respect to 

23 the plan, or if a plan amendment described in 

24 subsection (d)(2) has been made at any time in 

25 the preceding 12 months (24 months in the 


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1 case of a multiemployer plan). If a plan is 

2 amended in violation of the preceding sentence, 

3 any such waiver, or extension of time, shall not 

4 apply to any plan year ending on or after the 

5 date on which such amendment is adopted. 

6 ‘‘(B) EXCEPTION.—Subparagraph (A) 

7 shall not apply to any plan amendment which— 

8 ‘‘(i) the Secretary determines to be 

9 reasonable and which provides for only de 

10 minimis increases in the liabilities of the 

11 plan, 

12 ‘‘(ii) only repeals an amendment de13 scribed in subsection (d)(2), or 

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

15 qualification under part I of subchapter D, 

16 of chapter 1. 

17 ‘‘(d) MISCELLANEOUS RULES.— 

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

19 funding method, the valuation date, or a plan year 

20 for a plan is changed, the change shall take effect 

21 only if approved by the Secretary. 

22 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND23 MENTS.—For purposes of this section, any amend24 ment applying to a plan year which— 


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

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

3 close of the plan year (or, in the case of a mul4 tiemployer plan, no later than 2 years after the 

5 close of such plan year), 

6 ‘‘(B) does not reduce the accrued benefit 

7 of any participant determined as of the begin8 ning of the first plan year to which the amend9 ment applies, and 

10 ‘‘(C) does not reduce the accrued benefit of 

11 any participant determined as of the time of 

12 adoption except to the extent required by the 

13 circumstances, 

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

15 deemed to have been made on the first day of such 

16 plan year. No amendment described in this para17 graph which reduces the accrued benefits of any par18 ticipant shall take effect unless the plan adminis19 trator files a notice with the Secretary notifying him 

20 of such amendment and the Secretary has approved 

21 such amendment, or within 90 days after the date 

22 on which such notice was filed, failed to disapprove 

23 such amendment. No amendment described in this 

24 subsection shall be approved by the Secretary unless 

25 the Secretary determines that such amendment is 


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1 necessary because of a temporary substantial busi2 ness hardship (as determined under subsection 

3 (c)(2)) or a substantial business hardship (as so de4 termined) in the case of a multiemployer plan and 

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

6 of a multiemployer plan, any extension of the amor7 tization period under section 431(d)) is unavailable 

8 or inadequate. 

9 ‘‘(3) CONTROLLED GROUP.—For purposes of 

10 this section, the term ‘controlled group’ means any 

11 group treated as a single employer under subsection 

12 (b), (c), (m), or (o) of section 414. 

13 ‘‘(e) PLANS TO WHICH SECTION APPLIES.— 

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graphs (2) and (4), this section applies to a plan if, 

16 for any plan year beginning on or after the effective 

17 date of this section for such plan under the Em18 ployee Retirement Income Security Act of 1974— 

19 ‘‘(A) such plan included a trust which 

20 qualified (or was determined by the Secretary 

21 to have qualified) under section 401(a), or 

22 ‘‘(B) such plan satisfied (or was deter23 mined by the Secretary to have satisfied) the 

24 requirements of section 403(a). 


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

2 apply to— 

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

4 plan, 

5 ‘‘(B) any insurance contract plan described 

6 in paragraph (3), 

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

8 meaning of section 414(d)), 

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

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

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

12 made, 

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

14 after September 2, 1974, provided for employer 

15 contributions, or 

16 ‘‘(F) any plan established and maintained 

17 by a society, order, or association described in 

18 section 501(c)(8) or (9), if no part of the con19 tributions to or under such plan are made by 

20 employers of participants in such plan. 

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

22 shall be treated as a qualified plan for purposes of 

23 section 401(a) unless such plan meets the require24 ments of section 401(a)(7) as in effect on September 

25 1, 1974. 


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

2 A plan is described in this paragraph if— 

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

4 purchase of individual insurance contracts, 

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

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

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

12 increase becomes effective), 

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

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

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

18 with the plan) to the extent premiums have 

19 been paid, 

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

21 and all prior plan years, under such contracts 

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


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

2 been subject to a security interest at any time 

3 during the plan year, and 

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

5 any time during the plan year. 

6 A plan funded exclusively by the purchase of group 

7 insurance contracts which is determined under regu8 lations prescribed by the Secretary to have the same 

9 characteristics as contracts described in the pre10 ceding sentence shall be treated as a plan described 

11 in this paragraph. 

12 ‘‘(4) CERTAIN TERMINATED MULTIEMPLOYER

13 PLANS.—This section applies with respect to a ter14 minated multiemployer plan to which section 4021 

15 of the Employee Retirement Income Security Act of 

16 1974 applies until the last day of the plan year in 

17 which the plan terminates (within the meaning of 

18 section 4041A(a)(2) of such Act).’’. 

19 (b) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to plan years beginning after De21 cember 31, 2007. 

22 SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DE23 FINED BENEFIT PENSION PLANS. 

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

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1 pensation, etc.) is amended by adding at the end the fol2 lowing new part: 

3 ‘‘PART III—MINIMUM FUNDING STANDARDS FOR 

4 SINGLE-EMPLOYER DEFINED BENEFIT PEN5 SION PLANS 

6 ‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE7 EMPLOYER DEFINED BENEFIT PENSION 

8 PLANS. 

9 ‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For 

10 purposes of this section and section 412(a)(2)(A), except 

11 as provided in subsection (f), the term ‘minimum required 

12 contribution’ means, with respect to any plan year of a 

13 defined benefit plan which is not a multiemployer plan— 

14 ‘‘(1) in any case in which the value of plan as15 sets of the plan (as reduced under subsection 

16 (f)(4)(B)) is less than the funding target of the plan 

17 for the plan year, the sum of— 

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

19 the plan year, 

20 ‘‘(B) the shortfall amortization charge (if 

21 any) for the plan for the plan year determined 

22 under subsection (c), and 

23 ‘‘(C) the waiver amortization charge (if 

24 any) for the plan for the plan year as deter25 mined under subsection (e); 


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1 ‘‘(2) in any case in which the value of plan as2 sets of the plan (as reduced under subsection 

3 (f)(4)(B)) equals or exceeds the funding target of 

4 the plan for the plan year, the target normal cost of 

5 the plan for the plan year reduced (but not below 

6 zero) by such excess. 

7 ‘‘(b) TARGET NORMAL COST.—For purposes of this 

8 section, except as provided in subsection (i)(2) with re9 spect to plans in at-risk status, the term ‘target normal 

10 cost’ means, for any plan year, the present value of all 

11 benefits which are expected to accrue or to be earned 

12 under the plan during the plan year. For purposes of this 

13 subsection, if any benefit attributable to services per14 formed in a preceding plan year is increased by reason 

15 of any increase in compensation during the current plan 

16 year, the increase in such benefit shall be treated as hav17 ing accrued during the current plan year. 

18 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.— 

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, the shortfall amortization charge for a plan for 

21 any plan year is the aggregate total (not less than 

22 zero) of the shortfall amortization installments for 

23 such plan year with respect to the shortfall amorti24 zation bases for such plan year and each of the 6 

25 preceding plan years. 


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1 ‘‘(2) SHORTFALL AMORTIZATION INSTALL2 MENT.—For purposes of paragraph (1)— 

3 ‘‘(A) DETERMINATION.—The shortfall am4 ortization installments are the amounts nec5 essary to amortize the shortfall amortization 

6 base of the plan for any plan year in level an7 nual installments over the 7-plan-year period 

8 beginning with such plan year. 

9 ‘‘(B) SHORTFALL INSTALLMENT.—The 

10 shortfall amortization installment for any plan 

11 year in the 7-plan-year period under subpara12 graph (A) with respect to any shortfall amorti13 zation base is the annual installment deter14 mined under subparagraph (A) for that year for 

15 that base. 

16 ‘‘(C) SEGMENT RATES.—In determining 

17 any shortfall amortization installment under 

18 this paragraph, the plan sponsor shall use the 

19 segment rates determined under subparagraph 

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

21 similar to the rules of subparagraph (B) of sub22 section (h)(2). 

23 ‘‘(3) SHORTFALL AMORTIZATION BASE.—For 

24 purposes of this section, the shortfall amortization 

25 base of a plan for a plan year is— 


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

2 such plan year, minus 

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

4 the segment rates determined under subpara5 graph (C) of subsection (h)(2), applied under 

6 rules similar to the rules of subparagraph (B) 

7 of subsection (h)(2)) of the aggregate total of 

8 the shortfall amortization installments and 

9 waiver amortization installments which have 

10 been determined for such plan year and any 

11 succeeding plan year with respect to the short12 fall amortization bases and waiver amortization 

13 bases of the plan for any plan year preceding 

14 such plan year. 

15 ‘‘(4) FUNDING SHORTFALL.—For purposes of 

16 this section, the funding shortfall of a plan for any 

17 plan year is the excess (if any) of— 

18 ‘‘(A) the funding target of the plan for the 

19 plan year, over 

20 ‘‘(B) the value of plan assets of the plan 

21 (as reduced under subsection (f)(4)(B)) for the 

22 plan year which are held by the plan on the 

23 valuation date. 

24 ‘‘(5) EXEMPTION FROM NEW SHORTFALL AM25 ORTIZATION BASE.— 


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

2 the value of plan assets of the plan (as reduced 

3 under subsection (f)(4)(A)) is equal to or great4 er than the funding target of the plan for the 

5 plan year, the shortfall amortization base of the 

6 plan for such plan year shall be zero. 

7 ‘‘(B) TRANSITION RULE.— 

8 ‘‘(i) IN GENERAL.—Except as pro9 vided in clauses (iii) and (iv), in the case 

10 of plan years beginning after 2007 and be11 fore 2011, only the applicable percentage 

12 of the funding target shall be taken into 

13 account under paragraph (3)(A) in deter14 mining the funding shortfall for the plan 

15 year for purposes of subparagraph (A). 

16 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

17 purposes of subparagraph (A), the applica18 ble percentage shall be determined in ac19 cordance 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. 

20 ‘‘(iii) LIMITATION.—Clause (i) shall 

21 not apply with respect to any plan year 

22 after 2008 unless the shortfall amortiza23 tion base for each of the preceding years 


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1 beginning after 2007 was zero (determined 

2 after application of this subparagraph). 

3 ‘‘(iv) TRANSITION RELIEF NOT AVAIL4 ABLE FOR NEW OR DEFICIT REDUCTION

5 PLANS.—Clause (i) shall not apply to a 

6 plan— 

7 ‘‘(I) which was not in effect for a 

8 plan year beginning in 2007, or 

9 ‘‘(II) which was in effect for a 

10 plan year beginning in 2007 and 

11 which was subject to section 412(l) 

12 (as in effect for plan years beginning 

13 in 2007), determined after the appli14 cation of paragraphs (6) and (9) 

15 thereof. 

16 ‘‘(6) EARLY DEEMED AMORTIZATION UPON AT17 TAINMENT OF FUNDING TARGET.—In any case in 

18 which the funding shortfall of a plan for a plan year 

19 is zero, for purposes of determining the shortfall am20 ortization charge for such plan year and succeeding 

21 plan years, the shortfall amortization bases for all 

22 preceding plan years (and all shortfall amortization 

23 installments determined with respect to such bases) 

24 shall be reduced to zero. 


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

2 purposes of this section— 

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

4 subsection (i)(1) with respect to plans in at-risk sta5 tus, the funding target of a plan for a plan year is 

6 the present value of all benefits accrued or earned 

7 under the plan as of the beginning of the plan year. 

8 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT9 AGE.—The ‘funding target attainment percentage’ of 

10 a plan for a plan year is the ratio (expressed as a 

11 percentage) which— 

12 ‘‘(A) the value of plan assets for the plan 

13 year (as reduced under subsection (f)(4)(B)), 

14 bears to 

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

16 plan year (determined without regard to sub17 section (i)(1)). 

18 ‘‘(e) WAIVER AMORTIZATION CHARGE.— 

19 ‘‘(1) DETERMINATION OF WAIVER AMORTIZA20 TION CHARGE.—The waiver amortization charge (if 

21 any) for a plan for any plan year is the aggregate 

22 total of the waiver amortization installments for 

23 such plan year with respect to the waiver amortiza24 tion bases for each of the 5 preceding plan years. 


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1 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.— 

2 For purposes of paragraph (1)— 

3 ‘‘(A) DETERMINATION.—The waiver amor4 tization installments are the amounts necessary 

5 to amortize the waiver amortization base of the 

6 plan for any plan year in level annual install7 ments over a period of 5 plan years beginning 

8 with the succeeding plan year. 

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

10 amortization installment for any plan year in 

11 the 5-year period under subparagraph (A) with 

12 respect to any waiver amortization base is the 

13 annual installment determined under subpara14 graph (A) for that year for that base. 

15 ‘‘(3) INTEREST RATE.—In determining any 

16 waiver amortization installment under this sub17 section, the plan sponsor shall use the segment rates 

18 determined under subparagraph (C) of subsection 

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

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

21 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiv22 er amortization base of a plan for a plan year is the 

23 amount of the waived funding deficiency (if any) for 

24 such plan year under section 412(c). 


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1 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT2 TAINMENT OF FUNDING TARGET.—In any case in 

3 which the funding shortfall of a plan for a plan year 

4 is zero, for purposes of determining the waiver am5 ortization charge for such plan year and succeeding 

6 plan years, the waiver amortization bases for all pre7 ceding plan years (and all waiver amortization in8 stallments determined with respect to such bases) 

9 shall be reduced to zero. 

10 ‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBU11 TION BY PREFUNDING BALANCE AND FUNDING STAND12 ARD CARRYOVER BALANCE.— 

13 ‘‘(1) ELECTION TO MAINTAIN BALANCES.— 

14 ‘‘(A) PREFUNDING BALANCE.—The plan 

15 sponsor of a defined benefit plan which is not 

16 a multiemployer plan may elect to maintain a 

17 prefunding balance. 

18 ‘‘(B) FUNDING STANDARD CARRYOVER

19 BALANCE.— 

20 ‘‘(i) IN GENERAL.—In the case of a 

21 defined benefit plan (other than a multiem22 ployer plan) described in clause (ii), the 

23 plan sponsor may elect to maintain a fund24 ing standard carryover balance, until such 

25 balance is reduced to zero. 


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1 ‘‘(ii) PLANS MAINTAINING FUNDING

2 STANDARD ACCOUNT IN 2007.—A plan is 

3 described in this clause if the plan— 

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

5 beginning in 2007, and 

6 ‘‘(II) had a positive balance in 

7 the funding standard account under 

8 section 412(b) as in effect for such 

9 plan year and determined as of the 

10 end of such plan year. 

11 ‘‘(2) APPLICATION OF BALANCES.—A 

12 prefunding balance and a funding standard carry13 over balance maintained pursuant to this para14 graph— 

15 ‘‘(A) shall be available for crediting against 

16 the minimum required contribution, pursuant to 

17 an election under paragraph (3), 

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

19 amount treated as the value of plan assets for 

20 purposes of this section, to the extent provided 

21 in paragraph (4), and 

22 ‘‘(C) may be reduced at any time, pursu23 ant to an election under paragraph (5). 

24 ‘‘(3) ELECTION TO APPLY BALANCES AGAINST

25 MINIMUM REQUIRED CONTRIBUTION.— 


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

2 subparagraphs (B) and (C), in the case of any 

3 plan year in which the plan sponsor elects to 

4 credit against the minimum required contribu5 tion for the current plan year all or a portion 

6 of the prefunding balance or the funding stand7 ard carryover balance for the current plan year 

8 (not in excess of such minimum required con9 tribution), the minimum required contribution 

10 for the plan year shall be reduced as of the first 

11 day of the plan year by the amount so credited 

12 by the plan sponsor as of the first day of the 

13 plan year. For purposes of the preceding sen14 tence, the minimum required contribution shall 

15 be determined after taking into account any 

16 waiver under section 412(c). 

17 ‘‘(B) COORDINATION WITH FUNDING

18 STANDARD CARRYOVER BALANCE.—To the ex19 tent that any plan has a funding standard car20 ryover balance greater than zero, no amount of 

21 the prefunding balance of such plan may be 

22 credited under this paragraph in reducing the 

23 minimum required contribution. 

24 ‘‘(C) LIMITATION FOR UNDERFUNDED

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1 graph shall not apply for any plan year if the 

2 ratio (expressed as a percentage) which— 

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

4 preceding plan year (as reduced under 

5 paragraph (4)(C)), bears to 

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

7 the preceding plan year (determined with8 out regard to subsection (i)(1)), 

9 is less than 80 percent. In the case of plan 

10 years beginning in 2008, the ratio under this 

11 subparagraph may be determined using such 

12 methods of estimation as the Secretary may 

13 prescribe. 

14 ‘‘(4) EFFECT OF BALANCES ON AMOUNTS

15 TREATED AS VALUE OF PLAN ASSETS.—In the case 

16 of any plan maintaining a prefunding balance or a 

17 funding standard carryover balance pursuant to this 

18 subsection, the amount treated as the value of plan 

19 assets shall be deemed to be such amount, reduced 

20 as provided in the following subparagraphs: 

21 ‘‘(A) APPLICABILITY OF SHORTFALL AM22 ORTIZATION BASE.—For purposes of subsection 

23 (c)(5), the value of plan assets is deemed to be 

24 such amount, reduced by the amount of the 

25 prefunding balance, but only if an election 


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1 under paragraph (2) applying any portion of 

2 the prefunding balance in reducing the min3 imum required contribution is in effect for the 

4 plan year. 

5 ‘‘(B) DETERMINATION OF EXCESS ASSETS, 

6 FUNDING SHORTFALL, AND FUNDING TARGET

7 ATTAINMENT PERCENTAGE.— 

8 ‘‘(i) IN GENERAL.—For purposes of 

9 subsections (a), (c)(4)(B), and (d)(2)(A), 

10 the value of plan assets is deemed to be 

11 such amount, reduced by the amount of 

12 the prefunding balance and the funding 

13 standard carryover balance. 

14 ‘‘(ii) SPECIAL RULE FOR CERTAIN

15 BINDING AGREEMENTS WITH PBGC.—For 

16 purposes of subsection (c)(4)(B), the value 

17 of plan assets shall not be deemed to be re18 duced for a plan year by the amount of the 

19 specified balance if, with respect to such 

20 balance, there is in effect for a plan year 

21 a binding written agreement with the Pen22 sion Benefit Guaranty Corporation which 

23 provides that such balance is not available 

24 to reduce the minimum required contribu25 tion for the plan year. For purposes of the 


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1 preceding sentence, the term ‘specified bal2 ance’ means the prefunding balance or the 

3 funding standard carryover balance, as the 

4 case may be. 

5 ‘‘(C) AVAILABILITY OF BALANCES IN PLAN

6 YEAR FOR CREDITING AGAINST MINIMUM RE7 QUIRED CONTRIBUTION.—For purposes of 

8 paragraph (3)(C)(i) of this subsection, the value 

9 of plan assets is deemed to be such amount, re10 duced by the amount of the prefunding balance. 

11 ‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO

12 DETERMINATIONS OF VALUE OF PLAN ASSETS AND

13 CREDITING AGAINST MINIMUM REQUIRED CONTRIBU14 TION.— 

15 ‘‘(A) IN GENERAL.—The plan sponsor may 

16 elect to reduce by any amount the balance of 

17 the prefunding balance and the funding stand18 ard carryover balance for any plan year (but 

19 not below zero). Such reduction shall be effec20 tive prior to any determination of the value of 

21 plan assets for such plan year under this sec22 tion and application of the balance in reducing 

23 the minimum required contribution for such 

24 plan for such plan year pursuant to an election 

25 under paragraph (2). 


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1 ‘‘(B) COORDINATION BETWEEN

2 PREFUNDING BALANCE AND FUNDING STAND3 ARD CARRYOVER BALANCE.—To the extent that 

4 any plan has a funding standard carryover bal5 ance greater than zero, no election may be 

6 made under subparagraph (A) with respect to 

7 the prefunding balance. 

8 ‘‘(6) PREFUNDING BALANCE.— 

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

10 maintained by a plan shall consist of a begin11 ning balance of zero, increased and decreased to 

12 the extent provided in subparagraphs (B) and 

13 (C), and adjusted further as provided in para14 graph (8). 

15 ‘‘(B) INCREASES.— 

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

17 of each plan year beginning after 2008, the 

18 prefunding balance of a plan shall be in19 creased by the amount elected by the plan 

20 sponsor for the plan year. Such amount 

21 shall not exceed the excess (if any) of— 

22 ‘‘(I) the aggregate total of em23 ployer contributions to the plan for 

24 the preceding plan year, over— 


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1 ‘‘(II) the minimum required con2 tribution for such preceding plan year. 

3 ‘‘(ii) ADJUSTMENTS FOR INTEREST.— 

4 Any excess contributions under clause (i) 

5 shall be properly adjusted for interest ac6 cruing for the periods between the first 

7 day of the current plan year and the dates 

8 on which the excess contributions were 

9 made, determined by using the effective in10 terest rate for the preceding plan year and 

11 by treating contributions as being first 

12 used to satisfy the minimum required con13 tribution. 

14 ‘‘(iii) CERTAIN CONTRIBUTIONS NEC15 ESSARY TO AVOID BENEFIT LIMITATIONS

16 DISREGARDED.—The excess described in 

17 clause (i) with respect to any preceding 

18 plan year shall be reduced (but not below 

19 zero) by the amount of contributions an 

20 employer would be required to make under 

21 paragraph (1), (2), or (4) of section 206(g) 

22 to avoid a benefit limitation which would 

23 otherwise be imposed under such para24 graph for the preceding plan year. Any 

25 contribution which may be taken into acVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00140 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 count in satisfying the requirements of 

2 more than 1 of such paragraphs shall be 

3 taken into account only once for purposes 

4 of this clause. 

5 ‘‘(C) DECREASES.—The prefunding bal6 ance of a plan shall be decreased (but not below 

7 zero) by the sum of— 

8 ‘‘(i) as of the first day of each plan 

9 year after 2008, the amount of such bal10 ance credited under paragraph (2) (if any) 

11 in reducing the minimum required con12 tribution of the plan for the preceding plan 

13 year, and 

14 ‘‘(ii) as of the time specified in para15 graph (5))(A), any reduction in such bal16 ance elected under paragraph (5). 

17 ‘‘(7) FUNDING STANDARD CARRYOVER BAL18 ANCE.— 

19 ‘‘(A) IN GENERAL.—A funding standard 

20 carryover balance maintained by a plan shall 

21 consist of a beginning balance determined 

22 under subparagraph (B), decreased to the ex23 tent provided in subparagraph (C), and ad24 justed further as provided in paragraph (8). 


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1 ‘‘(B) BEGINNING BALANCE.—The begin2 ning balance of the funding standard carryover 

3 balance shall be the positive balance described 

4 in paragraph (1)(B)(ii)(II). 

5 ‘‘(C) DECREASES.—The funding standard 

6 carryover balance of a plan shall be decreased 

7 (but not below zero) by— 

8 ‘‘(i) as of the first day of each plan 

9 year after 2008, the amount of such bal10 ance credited under paragraph (2) (if any) 

11 in reducing the minimum required con12 tribution of the plan for the preceding plan 

13 year, and 

14 ‘‘(ii) as of the time specified in para15 graph (5))(A), any reduction in such bal16 ance elected under paragraph (5). 

17 ‘‘(8) ADJUSTMENTS FOR INVESTMENT EXPERI18 ENCE.—In determining the prefunding balance or 

19 the funding standard carryover balance of a plan as 

20 of the first day of the plan year, the plan sponsor 

21 shall, in accordance with regulations prescribed by 

22 the Secretary of the Treasury, adjust such balance 

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

24 preceding plan year. Notwithstanding subsection 

25 (g)(3), such rate of return shall be determined on 


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1 the basis of fair market value and shall properly 

2 take into account, in accordance with such regula3 tions, all contributions, distributions, and other plan 

4 payments made during such period. 

5 ‘‘(9) ELECTIONS.—Elections under this sub6 section shall be made at such times, and in such 

7 form and manner, as shall be prescribed in regula8 tions of the Secretary. 

9 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL10 ITIES.— 

11 ‘‘(1) TIMING OF DETERMINATIONS.—Except as 

12 otherwise provided under this subsection, all deter13 minations under this section for a plan year shall be 

14 made as of the valuation date of the plan for such 

15 plan year. 

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

17 section— 

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

19 subparagraph (B), the valuation date of a plan 

20 for any plan year shall be the first day of the 

21 plan year. 

22 ‘‘(B) EXCEPTION FOR SMALL PLANS.—If, 

23 on each day during the preceding plan year, a 

24 plan had 100 or fewer participants, the plan 

25 may designate any day during the plan year as 


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1 its valuation date for such plan year and suc2 ceeding plan years. For purposes of this sub3 paragraph, all defined benefit plans (other than 

4 multiemployer plans) maintained by the same 

5 employer (or any member of such employer’s 

6 controlled group) shall be treated as 1 plan, but 

7 only participants with respect to such employer 

8 or member shall be taken into account. 

9 ‘‘(C) APPLICATION OF CERTAIN RULES IN

10 DETERMINATION OF PLAN SIZE.—For purposes 

11 of this paragraph— 

12 ‘‘(i) PLANS NOT IN EXISTENCE IN

13 PRECEDING YEAR.—In the case of the first 

14 plan year of any plan, subparagraph (B) 

15 shall apply to such plan by taking into ac16 count the number of participants that the 

17 plan is reasonably expected to have on 

18 days during such first plan year. 

19 ‘‘(ii) PREDECESSORS.—Any reference 

20 in subparagraph (B) to an employer shall 

21 include a reference to any predecessor of 

22 such employer. 

23 ‘‘(3) DETERMINATION OF VALUE OF PLAN AS24 SETS.—For purposes of this section— 


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

2 subparagraph (B), the value of plan assets shall 

3 be the fair market value of the assets. 

4 ‘‘(B) AVERAGING ALLOWED.—A plan may 

5 determine the value of plan assets on the basis 

6 of the averaging of fair market values, but only 

7 if such method— 

8 ‘‘(i) is permitted under regulations 

9 prescribed by the Secretary, 

10 ‘‘(ii) does not provide for averaging of 

11 such values over more than the period be12 ginning on the last day of the 25th month 

13 preceding the month in which the valuation 

14 date occurs and ending on the valuation 

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

16 valuation date which is not the 1st day of 

17 a month), and 

18 ‘‘(iii) does not result in a determina19 tion of the value of plan assets which, at 

20 any time, is lower than 90 percent or 

21 greater than 110 percent of the fair mar22 ket value of such assets at such time. 

23 Any such averaging shall be adjusted for con24 tributions and distributions (as provided by the 

25 Secretary). 


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1 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE2 CEIPTS.—For purposes of determining the value of 

3 assets under paragraph (3)— 

4 ‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If— 

5 ‘‘(i) an employer makes any contribu6 tion to the plan after the valuation date for 

7 the plan year in which the contribution is 

8 made, and 

9 ‘‘(ii) the contribution is for a pre10 ceding plan year, 

11 the contribution shall be taken into account as 

12 an asset of the plan as of the valuation date, 

13 except that in the case of any plan year begin14 ning after 2008, only the present value (deter15 mined as of the valuation date) of such con16 tribution may be taken into account. For pur17 poses of the preceding sentence, present value 

18 shall be determined using the effective interest 

19 rate for the preceding plan year to which the 

20 contribution is properly allocable. 

21 ‘‘(B) SPECIAL RULE FOR CURRENT YEAR

22 CONTRIBUTIONS MADE BEFORE VALUATION

23 DATE.—If any contributions for any plan year 

24 are made to or under the plan during the plan 

25 year but before the valuation date for the plan 


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1 year, the assets of the plan as of the valuation 

2 date shall not include— 

3 ‘‘(i) such contributions, and 

4 ‘‘(ii) interest on such contributions for 

5 the period between the date of the con6 tributions and the valuation date, deter7 mined by using the effective interest rate 

8 for the plan year. 

9 ‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.— 

10 ‘‘(1) IN GENERAL.—Subject to this subsection, 

11 the determination of any present value or other com12 putation under this section shall be made on the 

13 basis of actuarial assumptions and methods— 

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

15 into account the experience of the plan and rea16 sonable expectations), and 

17 ‘‘(B) which, in combination, offer the actu18 ary’s best estimate of anticipated experience 

19 under the plan. 

20 ‘‘(2) INTEREST RATES.— 

21 ‘‘(A) EFFECTIVE INTEREST RATE.—For 

22 purposes of this section, the term ‘effective in23 terest rate’ means, with respect to any plan for 

24 any plan year, the single rate of interest which, 

25 if used to determine the present value of the 


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1 plan’s accrued or earned benefits referred to in 

2 subsection (d)(1), would result in an amount 

3 equal to the funding target of the plan for such 

4 plan year. 

5 ‘‘(B) INTEREST RATES FOR DETERMINING

6 FUNDING TARGET.—For purposes of deter7 mining the funding target of a plan for any 

8 plan year, the interest rate used in determining 

9 the present value of the liabilities of the plan 

10 shall be— 

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

12 determined to be payable during the 5-year 

13 period beginning on the first day of the 

14 plan year, the first segment rate with re15 spect to the applicable month, 

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

17 determined to be payable during the 15- 

18 year period beginning at the end of the pe19 riod described in clause (i), the second seg20 ment rate with respect to the applicable 

21 month, and 

22 ‘‘(iii) in the case of benefits reason23 ably determined to be payable after the pe24 riod described in clause (ii), the third segVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00148 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ment rate with respect to the applicable 

2 month. 

3 ‘‘(C) SEGMENT RATES.—For purposes of 

4 this paragraph— 

5 ‘‘(i) FIRST SEGMENT RATE.—The 

6 term ‘first segment rate’ means, with re7 spect to any month, the single rate of in8 terest which shall be determined by the 

9 Secretary for such month on the basis of 

10 the corporate bond yield curve for such 

11 month, taking into account only that por12 tion of such yield curve which is based on 

13 bonds maturing during the 5-year period 

14 commencing with such month. 

15 ‘‘(ii) SECOND SEGMENT RATE.—The 

16 term ‘second segment rate’ means, with re17 spect to any month, the single rate of in18 terest which shall be determined by the 

19 Secretary for such month on the basis of 

20 the corporate bond yield curve for such 

21 month, taking into account only that por22 tion of such yield curve which is based on 

23 bonds maturing during the 15-year period 

24 beginning at the end of the period de25 scribed in clause (i). 


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1 ‘‘(iii) THIRD SEGMENT RATE.—The 

2 term ‘third segment rate’ means, with re3 spect to any month, the single rate of in4 terest which shall be determined by the 

5 Secretary for such month on the basis of 

6 the corporate bond yield curve for such 

7 month, taking into account only that por8 tion of such yield curve which is based on 

9 bonds maturing during periods beginning 

10 after the period described in clause (ii). 

11 ‘‘(D) CORPORATE BOND YIELD CURVE.— 

12 For purposes of this paragraph— 

13 ‘‘(i) IN GENERAL.—The term ‘cor14 porate bond yield curve’ means, with re15 spect to any month, a yield curve which is 

16 prescribed by the Secretary for such month 

17 and which reflects the average, for the 24- 

18 month period ending with the month pre19 ceding such month, of monthly yields on 

20 investment grade corporate bonds with 

21 varying maturities and that are in the top 

22 3 quality levels available. 

23 ‘‘(ii) ELECTION TO USE YIELD

24 CURVE.—Solely for purposes of deter25 mining the minimum required contribution 


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1 under this section, the plan sponsor may, 

2 in lieu of the segment rates determined 

3 under subparagraph (C), elect to use inter4 est rates under the corporate bond yield 

5 curve. For purposes of the preceding sen6 tence such curve shall be determined with7 out regard to the 24-month averaging de8 scribed in clause (i). Such election, once 

9 made, may be revoked only with the con10 sent of the Secretary. 

11 ‘‘(E) APPLICABLE MONTH.—For purposes 

12 of this paragraph, the term ‘applicable month’ 

13 means, with respect to any plan for any plan 

14 year, the month which includes the valuation 

15 date of such plan for such plan year or, at the 

16 election of the plan sponsor, any of the 4 

17 months which precede such month. Any election 

18 made under this subparagraph shall apply to 

19 the plan year for which the election is made and 

20 all succeeding plan years, unless the election is 

21 revoked with the consent of the Secretary. 

22 ‘‘(F) PUBLICATION REQUIREMENTS.—The 

23 Secretary shall publish for each month the cor24 porate bond yield curve (and the corporate bond 

25 yield curve reflecting the modification described 


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1 in section 417(e)(3)(D)(i) for such month and 

2 each of the rates determined under subpara3 graph (B) for such month. The Secretary shall 

4 also publish a description of the methodology 

5 used to determine such yield curve and such 

6 rates which is sufficiently detailed to enable 

7 plans to make reasonable projections regarding 

8 the yield curve and such rates for future 

9 months based on the plan’s projection of future 

10 interest rates. 

11 ‘‘(G) TRANSITION RULE.— 

12 ‘‘(i) IN GENERAL.—Notwithstanding 

13 the preceding provisions of this paragraph, 

14 for plan years beginning in 2008 or 2009, 

15 the first, second, or third segment rate for 

16 a plan with respect to any month shall be 

17 equal to the sum of— 

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

19 such month determined without re20 gard to this subparagraph, multiplied 

21 by the applicable percentage, and 

22 ‘‘(II) the product of the rate de23 termined under the rules of section 

24 412(b)(5)(B)(ii)(II) (as in effect for 

25 plan years beginning in 2007), multiVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00152 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 plied by a percentage equal to 100 

2 percent minus the applicable percent3 age. 

4 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

5 purposes of clause (i), the applicable percentage is 331 6 ⁄3 percent for plan years beginning in 2008 and 662 7 ⁄3 percent for plan 

8 years beginning in 2009. 

9 ‘‘(iii) NEW PLANS INELIGIBLE.— 

10 Clause (i) shall not apply to any plan if the 

11 first plan year of the plan begins after De12 cember 31, 2007. 

13 ‘‘(iv) ELECTION.—The plan sponsor 

14 may elect not to have this subparagraph 

15 apply. Such election, once made, may be 

16 revoked only with the consent of the Sec17 retary. 

18 ‘‘(3) MORTALITY TABLES.— 

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

20 subparagraph (C) or (D), the Secretary shall by 

21 regulation prescribe mortality tables to be used 

22 in determining any present value or making any 

23 computation under this section. Such tables 

24 shall be based on the actual experience of pen25 sion plans and projected trends in such experiVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00153 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ence. In prescribing such tables, the Secretary 

2 shall take into account results of available inde3 pendent studies of mortality of individuals cov4 ered by pension plans. 

5 ‘‘(B) PERIODIC REVISION.—The Secretary 

6 shall (at least every 10 years) make revisions in 

7 any table in effect under subparagraph (A) to 

8 reflect the actual experience of pension plans 

9 and projected trends in such experience. 

10 ‘‘(C) SUBSTITUTE MORTALITY TABLE.— 

11 ‘‘(i) IN GENERAL.—Upon request by 

12 the plan sponsor and approval by the Sec13 retary, a mortality table which meets the 

14 requirements of clause (iii) shall be used in 

15 determining any present value or making 

16 any computation under this section during 

17 the period of consecutive plan years (not to 

18 exceed 10) specified in the request. 

19 ‘‘(ii) EARLY TERMINATION OF PE20 RIOD.—Notwithstanding clause (i), a mor21 tality table described in clause (i) shall 

22 cease to be in effect as of the earliest of— 

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

24 significant change in the participants 


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1 in the plan by reason of a plan spinoff 

2 or merger or otherwise, or 

3 ‘‘(II) the date on which the plan 

4 actuary determines that such table 

5 does not meet the requirements of 

6 clause (iii). 

7 ‘‘(iii) REQUIREMENTS.—A mortality 

8 table meets the requirements of this clause 

9 if— 

10 ‘‘(I) there is a sufficient number 

11 of plan participants, and the pension 

12 plans have been maintained for a suf13 ficient period of time, to have credible 

14 information necessary for purposes of 

15 subclause (II), and 

16 ‘‘(II) such table reflects the ac17 tual experience of the pension plans 

18 maintained by the sponsor and pro19 jected trends in general mortality ex20 perience. 

21 ‘‘(iv) ALL PLANS IN CONTROLLED

22 GROUP MUST USE SEPARATE TABLE.—Ex23 cept as provided by the Secretary, a plan 

24 sponsor may not use a mortality table 


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1 under this subparagraph for any plan 

2 maintained by the plan sponsor unless— 

3 ‘‘(I) a separate mortality table is 

4 established and used under this sub5 paragraph for each other plan main6 tained by the plan sponsor and if the 

7 plan sponsor is a member of a con8 trolled group, each member of the 

9 controlled group, and 

10 ‘‘(II) the requirements of clause 

11 (iii) are met separately with respect to 

12 the table so established for each such 

13 plan, determined by only taking into 

14 account the participants of such plan, 

15 the time such plan has been in exist16 ence, and the actual experience of 

17 such plan. 

18 ‘‘(v) DEADLINE FOR SUBMISSION AND

19 DISPOSITION OF APPLICATION.— 

20 ‘‘(I) SUBMISSION.—The plan 

21 sponsor shall submit a mortality table 

22 to the Secretary for approval under 

23 this subparagraph at least 7 months 

24 before the 1st day of the period de25 scribed in clause (i). 


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1 ‘‘(II) DISPOSITION.—Any mor2 tality table submitted to the Secretary 

3 for approval under this subparagraph 

4 shall be treated as in effect as of the 

5 1st day of the period described in 

6 clause (i) unless the Secretary, during 

7 the 180-day period beginning on the 

8 date of such submission, disapproves 

9 of such table and provides the reasons 

10 that such table fails to meet the re11 quirements of clause (iii). The 180- 

12 day period shall be extended upon mu13 tual agreement of the Secretary and 

14 the plan sponsor. 

15 ‘‘(D) SEPARATE MORTALITY TABLES FOR

16 THE DISABLED.—Notwithstanding subpara17 graph (A)— 

18 ‘‘(i) IN GENERAL.—The Secretary 

19 shall establish mortality tables which may 

20 be used (in lieu of the tables under sub21 paragraph (A)) under this subsection for 

22 individuals who are entitled to benefits 

23 under the plan on account of disability. 

24 The Secretary shall establish separate ta25 bles for individuals whose disabilities occur 


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1 in plan years beginning before January 1, 

2 1995, and for individuals whose disabilities 

3 occur in plan years beginning on or after 

4 such date. 

5 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

6 OCCURRING AFTER 1994.—In the case of 

7 disabilities occurring in plan years begin8 ning after December 31, 1994, the tables 

9 under clause (i) shall apply only with re10 spect to individuals described in such sub11 clause who are disabled within the meaning 

12 of title II of the Social Security Act and 

13 the regulations thereunder. 

14 ‘‘(iii) PERIODIC REVISION.—The Sec15 retary shall (at least every 10 years) make 

16 revisions in any table in effect under clause 

17 (i) to reflect the actual experience of pen18 sion plans and projected trends in such ex19 perience. 

20 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

21 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

22 FORMS.—For purposes of determining any present 

23 value or making any computation under this section, 

24 there shall be taken into account— 


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1 ‘‘(A) the probability that future benefit 

2 payments under the plan will be made in the 

3 form of optional forms of benefits provided 

4 under the plan (including lump sum distribu5 tions, determined on the basis of the plan’s ex6 perience and other related assumptions), and 

7 ‘‘(B) any difference in the present value of 

8 such future benefit payments resulting from the 

9 use of actuarial assumptions, in determining 

10 benefit payments in any such optional form of 

11 benefits, which are different from those speci12 fied in this subsection. 

13 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU14 ARIAL ASSUMPTIONS.— 

15 ‘‘(A) IN GENERAL.—No actuarial assump16 tion used to determine the funding target for a 

17 plan to which this paragraph applies may be 

18 changed without the approval of the Secretary. 

19 ‘‘(B) PLANS TO WHICH PARAGRAPH AP20 PLIES.—This paragraph shall apply to a plan 

21 only if— 

22 ‘‘(i) the plan is a defined benefit plan 

23 (other than a multiemployer plan) to which 

24 title IV of the Employee Retirement In25 come Security Act of 1974 applies, 


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1 ‘‘(ii) the aggregate unfunded vested 

2 benefits as of the close of the preceding 

3 plan year (as determined under section 

4 4006(a)(3)(E)(iii) of the Employee Retire5 ment Income Security Act of 1974) of such 

6 plan and all other plans maintained by the 

7 contributing sponsors (as defined in sec8 tion 4001(a)(13) of such Act) and mem9 bers of such sponsors’ controlled groups 

10 (as defined in section 4001(a)(14) of such 

11 Act) which are covered by title IV (dis12 regarding plans with no unfunded vested 

13 benefits) exceed $50,000,000, and 

14 ‘‘(iii) the change in assumptions (de15 termined after taking into account any 

16 changes in interest rate and mortality 

17 table) results in a decrease in the funding 

18 shortfall of the plan for the current plan 

19 year that exceeds $50,000,000, or that ex20 ceeds $5,000,000 and that is 5 percent or 

21 more of the funding target of the plan be22 fore such change. 

23 ‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.— 

24 ‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK

25 STATUS.— 


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

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

3 funding target of the plan for the plan year 

4 shall be equal to the sum of— 

5 ‘‘(i) the present value of all benefits 

6 accrued or earned under the plan as of the 

7 beginning of the plan year, as determined 

8 by using the additional actuarial assump9 tions described in subparagraph (B), and 

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

11 has been in at-risk status for at least 2 of 

12 the 4 preceding plan years, a loading fac13 tor determined under subparagraph (C). 

14 ‘‘(B) ADDITIONAL ACTUARIAL ASSUMP15 TIONS.—The actuarial assumptions described in 

16 this subparagraph are as follows: 

17 ‘‘(i) All employees who are not other18 wise assumed to retire as of the valuation 

19 date but who will be eligible to elect bene20 fits during the plan year and the 10 suc21 ceeding plan years shall be assumed to re22 tire at the earliest retirement date under 

23 the plan but not before the end of the plan 

24 year for which the at-risk funding target 


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1 and at-risk target normal cost are being 

2 determined. 

3 ‘‘(ii) All employees shall be assumed 

4 to elect the retirement benefit available 

5 under the plan at the assumed retirement 

6 age (determined after application of clause 

7 (i)) which would result in the highest 

8 present value of benefits. 

9 ‘‘(C) LOADING FACTOR.—The loading fac10 tor applied with respect to a plan under this 

11 paragraph for any plan year is the sum of— 

12 ‘‘(i) $700, times the number of par13 ticipants in the plan, plus 

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

15 (determined without regard to this para16 graph) of the plan for the plan year. 

17 ‘‘(2) TARGET NORMAL COST OF AT-RISK

18 PLANS.—In the case of a plan which is in at-risk 

19 status for a plan year, the target normal cost of the 

20 plan for such plan year shall be equal to the sum 

21 of— 

22 ‘‘(A) the present value of all benefits which 

23 are expected to accrue or be earned under the 

24 plan during the plan year, determined using the 


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1 additional actuarial assumptions described in 

2 paragraph (1)(B), plus 

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

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

5 preceding plan years, a loading factor equal to 

6 4 percent of the target normal cost (determined 

7 without regard to this paragraph) of the plan 

8 for the plan year. 

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

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

11 than the funding target, as determined without 

12 regard to this subsection, or 

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

14 than the target normal cost, as determined 

15 without regard to this subsection. 

16 ‘‘(4) DETERMINATION OF AT-RISK STATUS.— 

17 For purposes of this subsection— 

18 ‘‘(A) IN GENERAL.—A plan is in at-risk 

19 status for a plan year if— 

20 ‘‘(i) the funding target attainment 

21 percentage for the preceding plan year (de22 termined under this section without regard 

23 to this subsection) is less than 80 percent, 

24 and 


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1 ‘‘(ii) the funding target attainment 

2 percentage for the preceding plan year (de3 termined under this section by using the 

4 additional actuarial assumptions described 

5 in paragraph (1)(B) in computing the 

6 funding target) is less than 70 percent. 

7 ‘‘(B) TRANSITION RULE.—In the case of 

8 plan years beginning in 2008, 2009, and 2010, 

9 subparagraph (A)(i) shall be applied by sub10 stituting the following percentages for ‘80 per11 cent’: 

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

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

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

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

16 funding target attainment percentage for the 

17 preceding plan year under subparagraph (A)(ii) 

18 may be determined using such methods of esti19 mation as the Secretary may provide. 

20 ‘‘(C) SPECIAL RULE FOR EMPLOYEES OF21 FERED EARLY RETIREMENT IN 2006.— 

22 ‘‘(i) IN GENERAL.—For purposes of 

23 subparagraph (A)(ii), the additional actu24 arial assumptions described in paragraph 


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1 (1)(B) shall not be taken into account with 

2 respect to any employee if— 

3 ‘‘(I) such employee is employed 

4 by a specified automobile manufac5 turer, 

6 ‘‘(II) such employee is offered a 

7 substantial amount of additional cash 

8 compensation, substantially enhanced 

9 retirement benefits under the plan, or 

10 materially reduced employment duties 

11 on the condition that by a specified 

12 date (not later than December 31, 

13 2010) the employee retires (as defined 

14 under the terms of the plan), 

15 ‘‘(III) such offer is made during 

16 2006 and pursuant to a bona fide re17 tirement incentive program and re18 quires, by the terms of the offer, that 

19 such offer can be accepted not later 

20 than a specified date (not later than 

21 December 31, 2006), and 

22 ‘‘(IV) such employee does not 

23 elect to accept such offer before the 

24 specified date on which the offer ex25 pires. 


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1 ‘‘(ii) SPECIFIED AUTOMOBILE MANU2 FACTURER.—For purposes of clause (i), 

3 the term ‘specified automobile manufac4 turer’ means— 

5 ‘‘(I) any manufacturer of auto6 mobiles, and 

7 ‘‘(II) any manufacturer of auto8 mobile parts which supplies such parts 

9 directly to a manufacturer of auto10 mobiles and which, after a transaction 

11 or series of transactions ending in 

12 1999, ceased to be a member of a 

13 controlled group which included such 

14 manufacturer of automobiles. 

15 ‘‘(5) TRANSITION BETWEEN APPLICABLE FUND16 ING TARGETS AND BETWEEN APPLICABLE TARGET

17 NORMAL COSTS.— 

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

19 a plan which is in at-risk status for a plan year 

20 has been in such status for a consecutive period 

21 of fewer than 5 plan years, the applicable 

22 amount of the funding target and of the target 

23 normal cost shall be, in lieu of the amount de24 termined without regard to this paragraph, the 

25 sum of— 


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1 ‘‘(i) the amount determined under this 

2 section without regard to this subsection, 

3 plus 

4 ‘‘(ii) the transition percentage for 

5 such plan year of the excess of the amount 

6 determined under this subsection (without 

7 regard to this paragraph) over the amount 

8 determined under this section without re9 gard to this subsection. 

10 ‘‘(B) TRANSITION PERCENTAGE.—For 

11 purposes of subparagraph (A), the transition 

12 percentage shall be determined in accordance 

13 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. 

14 ‘‘(C) YEARS BEFORE EFFECTIVE DATE.— 

15 For purposes of this paragraph, plan years be16 ginning before 2008 shall not be taken into ac17 count. 

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

19 during the preceding plan year, a plan had 500 or 

20 fewer participants, the plan shall not be treated as 

21 in at-risk status for the plan year. For purposes of 

22 this paragraph, all defined benefit plans (other than 


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1 multiemployer plans) maintained by the same em2 ployer (or any member of such employer’s controlled 

3 group) shall be treated as 1 plan, but only partici4 pants with respect to such employer or member shall 

5 be taken into account and the rules of subsection 

6 (g)(2)(C) shall apply. 

7 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU8 TIONS.— 

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, the due date for any payment of any minimum 

required contribution for any plan year shall be 81 11 ⁄2

12 months after the close of the plan year. 

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

14 paragraph (1) for a plan year that is made on a date 

15 other than the valuation date for such plan year 

16 shall be adjusted for interest accruing for the period 

17 between the valuation date and the payment date, at 

18 the effective rate of interest for the plan for such 

19 plan year. 

20 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

21 SCHEDULE FOR UNDERFUNDED PLANS.— 

22 ‘‘(A) FAILURE TO TIMELY MAKE RE23 QUIRED INSTALLMENT.—In any case in which 

24 the plan has a funding shortfall for the pre25 ceding plan year, the employer maintaining the 


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1 plan shall make the required installments under 

2 this paragraph and if the employer fails to pay 

3 the full amount of a required installment for 

4 the plan year, then the amount of interest 

5 charged under paragraph (2) on the under6 payment for the period of underpayment shall 

7 be determined by using a rate of interest equal 

8 to the rate otherwise used under paragraph (2) 

9 plus 5 percentage points. 

10 ‘‘(B) AMOUNT OF UNDERPAYMENT, PE11 RIOD OF UNDERPAYMENT.—For purposes of 

12 subparagraph (A)— 

13 ‘‘(i) AMOUNT.—The amount of the 

14 underpayment shall be the excess of— 

15 ‘‘(I) the required installment, 

16 over 

17 ‘‘(II) the amount (if any) of the 

18 installment contributed to or under 

19 the plan on or before the due date for 

20 the installment. 

21 ‘‘(ii) PERIOD OF UNDERPAYMENT.— 

22 The period for which any interest is 

23 charged under this paragraph with respect 

24 to any portion of the underpayment shall 

25 run from the due date for the installment 


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1 to the date on which such portion is con2 tributed to or under the plan. 

3 ‘‘(iii) ORDER OF CREDITING CON4 TRIBUTIONS.—For purposes of clause 

5 (i)(II), contributions shall be credited 

6 against unpaid required installments in the 

7 order in which such installments are re8 quired to be paid. 

9 ‘‘(C) NUMBER OF REQUIRED INSTALL10 MENTS; DUE DATES.—For purposes of this 

11 paragraph— 

12 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.— 

13 There shall be 4 required installments for 

14 each plan year. 

15 ‘‘(ii) TIME FOR PAYMENT OF IN16 STALLMENTS.—The due dates for required 

17 installments are set forth in the following 

18 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. 

19 ‘‘(D) AMOUNT OF REQUIRED INSTALL20 MENT.—For purposes of this paragraph— 


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1 ‘‘(i) IN GENERAL.—The amount of 

2 any required installment shall be 25 per3 cent of the required annual payment. 

4 ‘‘(ii) REQUIRED ANNUAL PAYMENT.— 

5 For purposes of clause (i), the term ‘re6 quired annual payment’ means the lesser 

7 of— 

8 ‘‘(I) 90 percent of the minimum 

9 required contribution (determined 

10 without regard to this subsection) to 

11 the plan for the plan year under this 

12 section, or 

13 ‘‘(II) 100 percent of the min14 imum required contribution (deter15 mined without regard to this sub16 section or to any waiver under section 

17 302(c)) to the plan for the preceding 

18 plan year. 

19 Subclause (II) shall not apply if the pre20 ceding plan year referred to in such clause 

21 was not a year of 12 months. 

22 ‘‘(E) FISCAL YEARS AND SHORT YEARS.— 

23 ‘‘(i) FISCAL YEARS.—In applying this 

24 paragraph to a plan year beginning on any 

25 date other than January 1, there shall be 


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1 substituted for the months specified in this 

2 paragraph, the months which correspond 

3 thereto. 

4 ‘‘(ii) SHORT PLAN YEAR.—This sub5 paragraph shall be applied to plan years of 

6 less than 12 months in accordance with 

7 regulations prescribed by the Secretary. 

8 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

9 WITH QUARTERLY CONTRIBUTIONS.— 

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

11 paragraph applies shall be treated as failing to 

12 pay the full amount of any required installment 

13 under paragraph (3) to the extent that the 

14 value of the liquid assets paid in such install15 ment is less than the liquidity shortfall (wheth16 er or not such liquidity shortfall exceeds the 

17 amount of such installment required to be paid 

18 but for this paragraph). 

19 ‘‘(B) PLANS TO WHICH PARAGRAPH AP20 PLIES.—This paragraph shall apply to a plan 

21 (other than a plan described in subsection 

22 (g)(2)(B)) which— 

23 ‘‘(i) is required to pay installments 

24 under paragraph (3) for a plan year, and 


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

2 quarter during such plan year. 

3 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

4 purposes of paragraph (3)(A), any portion of an 

5 installment that is treated as not paid under 

6 subparagraph (A) shall continue to be treated 

7 as unpaid until the close of the quarter in 

8 which the due date for such installment occurs. 

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

10 amount of any required installment is increased 

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

12 shall such increase exceed the amount which, 

13 when added to prior installments for the plan 

14 year, is necessary to increase the funding target 

15 attainment percentage of the plan for the plan 

16 year (taking into account the expected increase 

17 in funding target due to benefits accruing or 

18 earned during the plan year) to 100 percent. 

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

20 paragraph— 

21 ‘‘(i) LIQUIDITY SHORTFALL.—The 

22 term ‘liquidity shortfall’ means, with re23 spect to any required installment, an 

24 amount equal to the excess (as of the last 


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1 day of the quarter for which such install2 ment is made) of— 

3 ‘‘(I) the base amount with re4 spect to such quarter, over 

5 ‘‘(II) the value (as of such last 

6 day) of the plan’s liquid assets. 

7 ‘‘(ii) BASE AMOUNT.— 

8 ‘‘(I) IN GENERAL.—The term 

9 ‘base amount’ means, with respect to 

10 any quarter, an amount equal to 3 

11 times the sum of the adjusted dis12 bursements from the plan for the 12 

13 months ending on the last day of such 

14 quarter. 

15 ‘‘(II) SPECIAL RULE.—If the 

16 amount determined under subclause 

17 (I) exceeds an amount equal to 2 

18 times the sum of the adjusted dis19 bursements from the plan for the 36 

20 months ending on the last day of the 

21 quarter and an enrolled actuary cer22 tifies to the satisfaction of the Sec23 retary that such excess is the result of 

24 nonrecurring circumstances, the base 

25 amount with respect to such quarter 


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1 shall be determined without regard to 

2 amounts related to those nonrecurring 

3 circumstances. 

4 ‘‘(iii) DISBURSEMENTS FROM THE

5 PLAN.—The term ‘disbursements from the 

6 plan’ means all disbursements from the 

7 trust, including purchases of annuities, 

8 payments of single sums and other bene9 fits, and administrative expenses. 

10 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

11 The term ‘adjusted disbursements’ means 

12 disbursements from the plan reduced by 

13 the product of— 

14 ‘‘(I) the plan’s funding target at15 tainment percentage for the plan year, 

16 and 

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

18 annuities, payments of single sums, 

19 and such other disbursements as the 

20 Secretary shall provide in regulations. 

21 ‘‘(v) LIQUID ASSETS.—The term ‘liq22 uid assets’ means cash, marketable securi23 ties, and such other assets as specified by 

24 the Secretary in regulations. 


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1 ‘‘(vi) QUARTER.—The term ‘quarter’ 

2 means, with respect to any required install3 ment, the 3-month period preceding the 

4 month in which the due date for such in5 stallment occurs. 

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

7 prescribe such regulations as are necessary to 

8 carry out this paragraph. 

9 ‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO

10 MAKE REQUIRED CONTRIBUTIONS.— 

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

12 which this subsection applies, if— 

13 ‘‘(A) any person fails to make a contribu14 tion payment required by section 412 and this 

15 section before the due date for such payment, 

16 and 

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

18 (including interest), when added to the aggre19 gate unpaid balance of all preceding such pay20 ments for which payment was not made before 

21 the due date (including interest), exceeds 

22 $1,000,000, 

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

24 amount determined under paragraph (3) upon all 

25 property and rights to property, whether real or perVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00176 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 sonal, belonging to such person and any other per2 son who is a member of the same controlled group 

3 of which such person is a member. 

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

5 This subsection shall apply to a defined benefit plan 

6 (other than a multiemployer plan) covered under 

7 section 4021 of the Employee Retirement Income 

8 Security Act of 1974 for any plan year for which the 

9 funding target attainment percentage (as defined in 

10 subsection (d)(2)) of such plan is less than 100 per11 cent. 

12 ‘‘(3) AMOUNT OF LIEN.—For purposes of para13 graph (1), the amount of the lien shall be equal to 

14 the aggregate unpaid balance of contribution pay15 ments required under this section and section 412 

16 for which payment has not been made before the due 

17 date. 

18 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

19 ‘‘(A) NOTICE OF FAILURE.—A person 

20 committing a failure described in paragraph (1) 

21 shall notify the Pension Benefit Guaranty Cor22 poration of such failure within 10 days of the 

23 due date for the required contribution payment. 

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

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


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1 the required contribution payment and shall 

2 continue until the last day of the first plan year 

3 in which the plan ceases to be described in 

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

5 run without regard to whether such plan con6 tinues to be described in paragraph (2) during 

7 the period referred to in the preceding sentence. 

8 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

9 amount with respect to which a lien is imposed 

10 under paragraph (1) shall be treated as taxes 

11 due and owing the United States and rules 

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

13 (e) of section 4068 of the Employee Retirement 

14 Income Security Act of 1974 shall apply with 

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

16 the amount with respect to such lien. 

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

18 paragraph (1) may be perfected and enforced only 

19 by the Pension Benefit Guaranty Corporation, or at 

20 the direction of the Pension Benefit Guaranty Cor21 poration, by the contributing sponsor (or any mem22 ber of the controlled group of the contributing spon23 sor). 

24 ‘‘(6) DEFINITIONS.—For purposes of this sub25 section— 


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

2 ‘contribution payment’ means, in connection 

3 with a plan, a contribution payment required to 

4 be made to the plan, including any required in5 stallment under paragraphs (3) and (4) of sub6 section (j). 

7 ‘‘(B) DUE DATE; REQUIRED INSTALL8 MENT.—The terms ‘due date’ and ‘required in9 stallment’ have the meanings given such terms 

10 by subsection (j), except that in the case of a 

11 payment other than a required installment, the 

12 due date shall be the date such payment is re13 quired to be made under section 430. 

14 ‘‘(C) CONTROLLED GROUP.—The term 

15 ‘controlled group’ means any group treated as 

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

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

18 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT

19 ACCOUNTS.—In the case of a qualified transfer (as de20 fined in section 420), any assets so transferred shall not, 

21 for purposes of this section, be treated as assets in the 

22 plan.’’. 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply with respect to plan years begin25 ning after December 31, 2007. 


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1 SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EM2 PLOYER PLANS. 

3 (a) PROHIBITION OF SHUTDOWN BENEFITS AND

4 OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS

5 UNDER SINGLE-EMPLOYER PLANS.— 

6 (1) IN GENERAL.—Part III of subchapter D of 

7 chapter 1 of the Internal Revenue Code of 1986 (re8 lating to deferred compensation, etc.) is amended— 

9 (A) by striking the heading and inserting 

10 the following: 

11 ‘‘PART III—RULES RELATING TO MINIMUM FUND12 ING STANDARDS AND BENEFIT LIMITATIONS 

‘‘SUBPART A. MINIMUM FUNDING STANDARDS FOR PENSION PLANS. 

‘‘SUBPART B. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS. 

13 ‘‘Subpart A—Minimum Funding Standards for 

14 Pension Plans 

‘‘Sec. 430. Minimum funding standards for single-employer defined benefit pension plans.’’, and 

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

16 subpart: 

17 ‘‘Subpart B—Benefit Limitations Under Single18 Employer Plans 

‘‘Sec. 436. Funding-based limitation on shutdown benefits and other unpredictable contingent event benefits under single-employer plans. 


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1 ‘‘SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND BEN2 EFIT ACCRUALS UNDER SINGLE-EMPLOYER 

3 PLANS. 

4 ‘‘(a) GENERAL RULE.—For purposes of section 

5 401(a)(29), a defined benefit plan which is a single-em6 ployer plan shall be treated as meeting the requirements 

7 of this section if the plan meets the requirements of sub8 sections (b), (c), (d), and (e). 

9 ‘‘(b) FUNDING-BASED LIMITATION ON SHUTDOWN

10 BENEFITS AND OTHER UNPREDICTABLE CONTINGENT

11 EVENT BENEFITS UNDER SINGLE-EMPLOYER PLANS.— 

12 ‘‘(1) IN GENERAL.—If a participant of a de13 fined benefit plan which is a single-employer plan is 

14 entitled to an unpredictable contingent event benefit 

15 payable with respect to any event occurring during 

16 any plan year, the plan shall provide that such ben17 efit may not be provided if the adjusted funding tar18 get attainment percentage for such plan year— 

19 ‘‘(A) is less than 60 percent, or 

20 ‘‘(B) would be less than 60 percent taking 

21 into account such occurrence. 

22 ‘‘(2) EXEMPTION.—Paragraph (1) shall cease 

23 to apply with respect to any plan year, effective as 

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

25 the plan sponsor of a contribution (in addition to 


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1 any minimum required contribution under section 

2 303) equal to— 

3 ‘‘(A) in the case of paragraph (1)(A), the 

4 amount of the increase in the funding target of 

5 the plan (under section 430) for the plan year 

6 attributable to the occurrence referred to in 

7 paragraph (1), and 

8 ‘‘(B) in the case of paragraph (1)(B), the 

9 amount sufficient to result in a funding target 

10 attainment percentage of 60 percent. 

11 ‘‘(3) UNPREDICTABLE CONTINGENT EVENT.— 

12 For purposes of this subsection, the term ‘unpredict13 able contingent event benefit’ means any benefit 

14 payable solely by reason of— 

15 ‘‘(A) a plant shutdown (or similar event, as 

16 determined by the Secretary), or 

17 ‘‘(B) any event other than the attainment 

18 of any age, performance of any service, receipt 

19 or derivation of any compensation, or occur20 rence of death or disability. 

21 ‘‘(c) LIMITATIONS ON PLAN AMENDMENTS INCREAS22 ING LIABILITY FOR BENEFITS.— 

23 ‘‘(1) IN GENERAL.—No amendment to a de24 fined benefit plan which is a single-employer plan 

25 which has the effect of increasing liabilities of the 


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1 plan by reason of increases in benefits, establish2 ment of new benefits, changing the rate of benefit 

3 accrual, or changing the rate at which benefits be4 come nonforfeitable may take effect during any plan 

5 year if the adjusted funding target attainment per6 centage for such plan year is— 

7 ‘‘(A) less than 80 percent, or 

8 ‘‘(B) would be less than 80 percent taking 

9 into account such amendment. 

10 ‘‘(2) EXEMPTION.—Paragraph (1) shall cease 

11 to apply with respect to any plan year, effective as 

12 of the first day of the plan year (or if later, the ef13 fective date of the amendment), upon payment by 

14 the plan sponsor of a contribution (in addition to 

15 any minimum required contribution under section 

16 430) equal to— 

17 ‘‘(A) in the case of paragraph (1)(A), the 

18 amount of the increase in the funding target of 

19 the plan (under section 430) for the plan year 

20 attributable to the amendment, and 

21 ‘‘(B) in the case of paragraph (1)(B), the 

22 amount sufficient to result in an adjusted fund23 ing target attainment percentage of 80 percent. 

24 ‘‘(3) EXCEPTION FOR CERTAIN BENEFIT IN25 CREASES.—Paragraph (1) shall not apply to any 


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1 amendment which provides for an increase in bene2 fits under a formula which is not based on a partici3 pant’s compensation, but only if the rate of such in4 crease is not in excess of the contemporaneous rate 

5 of increase in average wages of participants covered 

6 by the amendment. 

7 ‘‘(d) LIMITATIONS ON ACCELERATED BENEFIT DIS8 TRIBUTIONS.— 

9 ‘‘(1) FUNDING PERCENTAGE LESS THAN 60

10 PERCENT.—A defined benefit plan which is a single11 employer plan shall provide that, in any case in 

12 which the plan’s adjusted funding target attainment 

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

14 the plan may not pay any prohibited payment after 

15 the valuation date for the plan year. 

16 ‘‘(2) BANKRUPTCY.—A defined benefit plan 

17 which is a single-employer plan shall provide that, 

18 during any period in which the plan sponsor is a 

19 debtor in a case under title 11, United States Code, 

20 or similar Federal or State law, the plan may not 

21 pay any prohibited payment. The preceding sentence 

22 shall not apply on or after the date on which the en23 rolled actuary of the plan certifies that the adjusted 

24 funding target attainment percentage of such plan is 

25 not less than 100 percent. 


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1 ‘‘(3) LIMITED PAYMENT IF PERCENTAGE AT

2 LEAST 60 PERCENT BUT LESS THAN 80 PERCENT.— 

3 ‘‘(A) IN GENERAL.—A defined benefit plan 

4 which is a single-employer plan shall provide 

5 that, in any case in which the plan’s adjusted 

6 funding target attainment percentage for a plan 

7 year is 60 percent or greater but less than 80 

8 percent, the plan may not pay any prohibited 

9 payment after the valuation date for the plan 

10 year to the extent the amount of the payment 

11 exceeds the lesser of— 

12 ‘‘(i) 50 percent of the amount of the 

13 payment which could be made without re14 gard to this section, or 

15 ‘‘(ii) the present value (determined 

16 under guidance prescribed by the Pension 

17 Benefit Guaranty Corporation, using the 

18 interest and mortality assumptions under 

19 section 417(e)) of the maximum guarantee 

20 with respect to the participant under sec21 tion 4022 of the Employee Retirement In22 come Security Act of 1974. 

23 ‘‘(B) ONE-TIME APPLICATION.— 

24 ‘‘(i) IN GENERAL.—The plan shall 

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1 ment meeting the requirements of subpara2 graph (A) may be made with respect to 

3 any participant during any period of con4 secutive plan years to which the limitations 

5 under either paragraph (1) or (2) or this 

6 paragraph applies. 

7 ‘‘(ii) TREATMENT OF BENE8 FICIARIES.—For purposes of this subpara9 graph, a participant and any beneficiary 

10 on his behalf (including an alternate payee, 

11 as defined in section 414(p)(8)) shall be 

12 treated as 1 participant. If the accrued 

13 benefit of a participant is allocated to such 

14 an alternate payee and 1 or more other 

15 persons, the amount under subparagraph 

16 (A) shall be allocated among such persons 

17 in the same manner as the accrued benefit 

18 is allocated unless the qualified domestic 

19 relations order (as defined in section 

20 414(p)(1)(A)) provides otherwise. 

21 ‘‘(4) EXCEPTION.—This subsection shall not 

22 apply to any plan for any plan year if the terms of 

23 such plan (as in effect for the period beginning on 

24 September 1, 2005, and ending with such plan year) 


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1 provide for no benefit accruals with respect to any 

2 participant during such period. 

3 ‘‘(5) PROHIBITED PAYMENT.—For purpose of 

4 this subsection, the term ‘prohibited payment’ 

5 means— 

6 ‘‘(A) any payment, in excess of the month7 ly amount paid under a single life annuity (plus 

8 any social security supplements described in the 

9 last sentence of section 411(a)(9)), to a partici10 pant or beneficiary whose annuity starting date 

11 (as defined in section 417(f)(2)) occurs during 

12 any period a limitation under paragraph (1) or 

13 (2) is in effect, 

14 ‘‘(B) any payment for the purchase of an 

15 irrevocable commitment from an insurer to pay 

16 benefits, and 

17 ‘‘(C) any other payment specified by the 

18 Secretary by regulations. 

19 ‘‘(e) LIMITATION ON BENEFIT ACCRUALS FOR PLANS

20 WITH SEVERE FUNDING SHORTFALLS.— 

21 ‘‘(1) IN GENERAL.—A defined benefit plan 

22 which is a single-employer plan shall provide that, in 

23 any case in which the plan’s adjusted funding target 

24 attainment percentage for a plan year is less than 


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1 60 percent, benefit accruals under the plan shall 

2 cease as of the valuation date for the plan year. 

3 ‘‘(2) EXEMPTION.—Paragraph (1) shall cease 

4 to apply with respect to any plan year, effective as 

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

6 the plan sponsor of a contribution (in addition to 

7 any minimum required contribution under section 

8 430) equal to the amount sufficient to result in an 

9 adjusted funding target attainment percentage of 60 

10 percent. 

11 ‘‘(f) RULES RELATING TO CONTRIBUTIONS RE12 QUIRED TO AVOID BENEFIT LIMITATIONS.— 

13 ‘‘(1) SECURITY MAY BE PROVIDED.— 

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

15 section, the adjusted funding target attainment 

16 percentage shall be determined by treating as 

17 an asset of the plan any security provided by a 

18 plan sponsor in a form meeting the require19 ments of subparagraph (B). 

20 ‘‘(B) FORM OF SECURITY.—The security 

21 required under subparagraph (A) shall consist 

22 of— 

23 ‘‘(i) a bond issued by a corporate sur24 ety company that is an acceptable surety 

25 for purposes of section 412 of the EmVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00188 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ployee Retirement Income Security Act of 

2 1974, 

3 ‘‘(ii) cash, or United States obliga4 tions which mature in 3 years or less, held 

5 in escrow by a bank or similar financial in6 stitution, or 

7 ‘‘(iii) such other form of security as is 

8 satisfactory to the Secretary and the par9 ties involved. 

10 ‘‘(C) ENFORCEMENT.—Any security pro11 vided under subparagraph (A) may be perfected 

12 and enforced at any time after the earlier of— 

13 ‘‘(i) the date on which the plan termi14 nates, 

15 ‘‘(ii) if there is a failure to make a 

16 payment of the minimum required con17 tribution for any plan year beginning after 

18 the security is provided, the due date for 

19 the payment under section 430(j), or 

20 ‘‘(iii) if the adjusted funding target 

21 attainment percentage is less than 60 per22 cent for a consecutive period of 7 years, 

23 the valuation date for the last year in the 

24 period. 


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1 ‘‘(D) RELEASE OF SECURITY.—The secu2 rity shall be released (and any amounts there3 under shall be refunded together with any inter4 est accrued thereon) at such time as the Sec5 retary may prescribe in regulations, including 

6 regulations for partial releases of the security 

7 by reason of increases in the funding target at8 tainment percentage. 

9 ‘‘(2) PREFUNDING BALANCE OR FUNDING

10 STANDARD CARRYOVER BALANCE MAY NOT BE

11 USED.—No prefunding balance under section 430(f) 

12 or funding standard carryover balance may be used 

13 under subsection (b), (c), or (e) to satisfy any pay14 ment an employer may make under any such sub15 section to avoid or terminate the application of any 

16 limitation under such subsection. 

17 ‘‘(3) DEEMED REDUCTION OF FUNDING BAL18 ANCES.— 

19 ‘‘(A) IN GENERAL.—Subject to subpara20 graph (C), in any case in which a benefit limita21 tion under subsection (b), (c), (d), or (e) would 

22 (but for this subparagraph and determined 

23 without regard to subsection (b)(2), (c)(2), or 

24 (e)(2)) apply to such plan for the plan year, the 

25 plan sponsor of such plan shall be treated for 


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1 purposes of this title as having made an elec2 tion under section 430(f) to reduce the 

3 prefunding balance or funding standard carry4 over balance by such amount as is necessary for 

5 such benefit limitation to not apply to the plan 

6 for such plan year. 

7 ‘‘(B) EXCEPTION FOR INSUFFICIENT

8 FUNDING BALANCES.—Subparagraph (A) shall 

9 not apply with respect to a benefit limitation 

10 for any plan year if the application of subpara11 graph (A) would not result in the benefit limita12 tion not applying for such plan year. 

13 ‘‘(C) RESTRICTIONS OF CERTAIN RULES

14 TO COLLECTIVELY BARGAINED PLANS.—With 

15 respect to any benefit limitation under sub16 section (b), (c), or (e), subparagraph (A) shall 

17 only apply in the case of a plan maintained pur18 suant to 1 or more collective bargaining agree19 ments between employee representatives and 1 

20 or more employers. 

21 ‘‘(g) NEW PLANS.—Subsections (b), (c), and (e) shall 

22 not apply to a plan for the first 5 plan years of the plan. 

23 For purposes of this subsection, the reference in this sub24 section to a plan shall include a reference to any prede25 cessor plan. 


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1 ‘‘(h) PRESUMED UNDERFUNDING FOR PURPOSES OF

2 BENEFIT LIMITATIONS.— 

3 ‘‘(1) PRESUMPTION OF CONTINUED UNDER4 FUNDING.—In any case in which a benefit limitation 

5 under subsection (b), (c), (d), or (e) has been ap6 plied to a plan with respect to the plan year pre7 ceding the current plan year, the adjusted funding 

8 target attainment percentage of the plan for the cur9 rent plan year shall be presumed to be equal to the 

10 adjusted funding target attainment percentage of 

11 the plan for the preceding plan year until the en12 rolled actuary of the plan certifies the actual ad13 justed funding target attainment percentage of the 

14 plan for the current plan year. 

15 ‘‘(2) PRESUMPTION OF UNDERFUNDING AFTER

16 10TH MONTH.—In any case in which no certification 

17 of the adjusted funding target attainment percent18 age for the current plan year is made with respect 

19 to the plan before the first day of the 10th month 

20 of such year, for purposes of subsections (b), (c), 

21 (d), and (e), such first day shall be deemed, for pur22 poses of such subsection, to be the valuation date of 

23 the plan for the current plan year and the plan’s ad24 justed funding target attainment percentage shall be 


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1 conclusively presumed to be less than 60 percent as 

2 of such first day. 

3 ‘‘(3) PRESUMPTION OF UNDERFUNDING AFTER

4 4TH MONTH FOR NEARLY UNDERFUNDED PLANS.— 

5 In any case in which— 

6 ‘‘(A) a benefit limitation under subsection 

7 (b), (c), (d), or (e) did not apply to a plan with 

8 respect to the plan year preceding the current 

9 plan year, but the adjusted funding target at10 tainment percentage of the plan for such pre11 ceding plan year was not more than 10 percent12 age points greater than the percentage which 

13 would have caused such subsection to apply to 

14 the plan with respect to such preceding plan 

15 year, and 

16 ‘‘(B) as of the first day of the 4th month 

17 of the current plan year, the enrolled actuary of 

18 the plan has not certified the actual adjusted 

19 funding target attainment percentage of the 

20 plan for the current plan year, 

21 until the enrolled actuary so certifies, such first day 

22 shall be deemed, for purposes of such subsection, to 

23 be the valuation date of the plan for the current 

24 plan year and the adjusted funding target attain25 ment percentage of the plan as of such first day 


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1 shall, for purposes of such subsection, be presumed 

2 to be equal to 10 percentage points less than the ad3 justed funding target attainment percentage of the 

4 plan for such preceding plan year. 

5 ‘‘(i) TREATMENT OF PLAN AS OF CLOSE OF PROHIB6 ITED OR CESSATION PERIOD.—For purposes of applying 

7 this title— 

8 ‘‘(1) OPERATION OF PLAN AFTER PERIOD.— 

9 Unless the plan provides otherwise, payments and 

10 accruals will resume effective as of the day following 

11 the close of the period for which any limitation of 

12 payment or accrual of benefits under subsection (d) 

13 or (e) applies. 

14 ‘‘(2) TREATMENT OF AFFECTED BENEFITS.— 

15 Nothing in this subsection shall be construed as af16 fecting the plan’s treatment of benefits which would 

17 have been paid or accrued but for this section. 

18 ‘‘(j) TERMS RELATING TO FUNDING TARGET AT19 TAINMENT PERCENTAGE.—For purposes of this section— 

20 ‘‘(1) IN GENERAL.—The term ‘funding target 

21 attainment percentage’ has the same meaning given 

22 such term by section 430(d)(2). 

23 ‘‘(2) ADJUSTED FUNDING TARGET ATTAINMENT

24 PERCENTAGE.—The term ‘adjusted funding target 

25 attainment percentage’ means the funding target atVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00194 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tainment percentage which is determined under 

2 paragraph (1) by increasing each of the amounts 

3 under subparagraphs (A) and (B) of section 

4 430(d)(2) by the aggregate amount of purchases of 

5 annuities for employees other than highly com6 pensated employees (as defined in section 414(q)) 

7 which were made by the plan during the preceding 

8 2 plan years. 

9 ‘‘(3) APPLICATION TO PLANS WHICH ARE

10 FULLY FUNDED WITHOUT REGARD TO REDUCTIONS

11 FOR FUNDING BALANCES.— 

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

13 for any plan year, if the funding target attain14 ment percentage is 100 percent or more (deter15 mined without regard to this paragraph and 

16 without regard to the reduction in the value of 

17 assets under section 430(f)(4)(A)), the funding 

18 target attainment percentage for purposes of 

19 paragraph (1) shall be determined without re20 gard to such reduction. 

21 ‘‘(B) TRANSITION RULE.—Subparagraph 

22 (A) shall be applied to plan years beginning 

23 after 2007 and before 2011 by substituting for 

24 ‘100 percent’ the applicable percentage deter25 mined in accordance with the following table: 


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‘‘In the case of a plan year The applicable 

beginning in calendar year: percentage is 

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

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

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

1 ‘‘(C) LIMITATION.—Subparagraph (B) 

2 shall not apply with respect to any plan year 

3 after 2008 unless the funding target attainment 

4 percentage (determined without regard to this 

5 paragraph) of the plan for each preceding plan 

6 year after 2007 was not less than the applicable 

7 percentage with respect to such preceding plan 

8 year determined under subparagraph (B). 

9 ‘‘(k) SPECIAL RULE FOR 2008.—For purposes of this 

10 section, in the case of plan years beginning in 2008, the 

11 funding target attainment percentage for the preceding 

12 plan year may be determined using such methods of esti13 mation as the Secretary may provide.’’. 

14 (2) CLERICAL AMENDMENT.—The table of 

15 parts for subchapter D of chapter 1 of the Internal 

16 Revenue Code of 1986 is amended by adding at the 

17 end the following new item: 

‘‘PART III—RULES RELATING TO MINIMUM FUNDING STANDARDS AND

BENEFIT LIMITATIONS’’. 

18 (b) EFFECTIVE DATE.— 

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

20 this section shall apply to plan years beginning after 

21 December 31, 2007. 


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1 (2) COLLECTIVE BARGAINING EXCEPTION.—In 

2 the case of a plan maintained pursuant to 1 or more 

3 collective bargaining agreements between employee 

4 representatives and 1 or more employers ratified be5 fore January 1, 2008, the amendments made by this 

6 section shall not apply to plan years beginning be7 fore the earlier of— 

8 (A) the later of— 

9 (i) the date on which the last collec10 tive bargaining agreement relating to the 

11 plan terminates (determined without re12 gard to any extension thereof agreed to 

13 after the date of the enactment of this 

14 Act), or 

15 (ii) the first day of the first plan year 

16 to which the amendments made by this 

17 subsection would (but for this subpara18 graph) apply, or 

19 (B) January 1, 2010. 

20 For purposes of subparagraph (A)(i), any plan 

21 amendment made pursuant to a collective bargaining 

22 agreement relating to the plan which amends the 

23 plan solely to conform to any requirement added by 

24 this section shall not be treated as a termination of 

25 such collective bargaining agreement. 


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1 SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS. 

2 (a) AMENDMENTS RELATED TO QUALIFICATION RE3 QUIREMENTS.— 

4 (1) Section 401(a)(29) of the Internal Revenue 

5 Code of 1986 is amended to read as follows: 

6 ‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT7 RISK STATUS.—In the case of a defined benefit plan 

8 (other than a multiemployer plan) to which the re9 quirements of section 412 apply, the trust of which 

10 the plan is a part shall not constitute a qualified 

11 trust under this subsection unless the plan meets the 

12 requirements of section 436.’’. 

13 (2) Section 401(a)(32) of such Code is amend14 ed— 

15 (A) in subparagraph (A), by striking 

16 ‘‘412(m)(5)’’ each place it appears and insert17 ing ‘‘section 430(j)(4)’’, and 

18 (B) in subparagraph (C), by striking ‘‘sec19 tion 412(m)’’ and inserting ‘‘section 430(j)’’. 

20 (3) Section 401(a)(33) of such Code is amend21 ed— 

22 (A) in subparagraph (B)(i), by striking 

23 ‘‘funded current liability percentage (within the 

24 meaning of section 412(l)(8))’’ and inserting 

25 ‘‘funding target attainment percentage (as de26 fined in section 430(d)(2))’’, 


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1 (B) in subparagraph (B)(iii), by striking 

2 ‘‘subsection 412(c)(8)’’ and inserting ‘‘section 

3 412(c)(2)’’, and 

4 (C) in subparagraph (D), by striking ‘‘sec5 tion 412(c)(11) (without regard to subpara6 graph (B) thereof)’’ and inserting ‘‘section 

7 412(b)(2) (without regard to subparagraph (B) 

8 thereof)’’. 

9 (b) VESTING RULES.—Section 411 of such Code is 

10 amended— 

11 (1) by striking ‘‘section 412(c)(8)’’ in sub12 section (a)(3)(C) and inserting ‘‘section 412(c)(2)’’, 

13 (2) in subsection (b)(1)(F)— 

14 (A) by striking ‘‘paragraphs (2) and (3) of 

15 section 412(i)’’ in clause (ii) and inserting 

16 ‘‘subparagraphs (B) and (C) of section 

17 412(e)(3)’’, and 

18 (B) by striking ‘‘paragraphs (4), (5), and 

19 (6) of section 412(i)’’ and inserting ‘‘subpara20 graphs (D), (E), and (F) of section 412(e)(3)’’, 

21 and 

22 (3) by striking ‘‘section 412(c)(8)’’ in sub23 section (d)(6)(A) and inserting ‘‘section 412(e)(2)’’. 


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1 (c) MERGERS AND CONSOLIDATIONS OF PLANS.— 

2 Subclause (I) of section 414(l)(2)(B)(i) of such Code is 

3 amended to read as follows: 

4 ‘‘(I) the amount determined 

5 under section 431(c)(6)(A)(i) in the 

6 case of a multiemployer plan (and the 

7 sum of the funding shortfall and tar8 get normal cost determined under sec9 tion 430 in the case of any other 

10 plan), over’’. 

11 (d) TRANSFER OF EXCESS PENSION ASSETS TO RE12 TIREE HEALTH ACCOUNTS.— 

13 (1) Section 420(e)(2) of such Code is amended 

14 to read as follows: 

15 ‘‘(2) EXCESS PENSION ASSETS.—The term ‘ex16 cess pension assets’ means the excess (if any) of— 

17 ‘‘(A) the lesser of— 

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

19 plan’s assets (reduced by the prefunding 

20 balance and funding standard carryover 

21 balance determined under section 430(f)), 

22 or 

23 ‘‘(ii) the value of plan assets as deter24 mined under section 430(g)(3) after reduc25 tion under section 430(f), over 


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1 ‘‘(B) 125 percent of the sum of the fund2 ing shortfall and the target normal cost deter3 mined under section 430 for such plan year.’’. 

4 (2) Section 420(e)(4) of such Code is amended 

5 to read as follows: 

6 ‘‘(4) COORDINATION WITH SECTION 430.—In 

7 the case of a qualified transfer, any assets so trans8 ferred shall not, for purposes of this section and sec9 tion 430, be treated as assets in the plan.’’. 

10 (e) EXCISE TAXES.— 

11 (1) IN GENERAL.—Subsections (a) and (b) of 

12 section 4971 of such Code are amended to read as 

13 follows: 

14 ‘‘(a) INITIAL TAX.—If at any time during any taxable 

15 year an employer maintains a plan to which section 412 

16 applies, there is hereby imposed for the taxable year a tax 

17 equal to— 

18 ‘‘(1) in the case of a single-employer plan, 10 

19 percent of the aggregate unpaid minimum required 

20 contributions for all plan years remaining unpaid as 

21 of the end of any plan year ending with or within 

22 the taxable year, and 

23 ‘‘(2) in the case of a multiemployer plan, 5 per24 cent of the accumulated funding deficiency deterVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00201 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 mined under section 431 as of the end of any plan 

2 year ending with or within the taxable year. 

3 ‘‘(b) ADDITIONAL TAX.—If— 

4 ‘‘(1) a tax is imposed under subsection (a)(1) 

5 on any unpaid required minimum contribution and 

6 such amount remains unpaid as of the close of the 

7 taxable period, or 

8 ‘‘(2) a tax is imposed under subsection (a)(2) 

9 on any accumulated funding deficiency and the accu10 mulated funding deficiency is not corrected within 

11 the taxable period, 

12 there is hereby imposed a tax equal to 100 percent of the 

13 unpaid minimum required contribution or accumulated 

14 funding deficiency, whichever is applicable, to the extent 

15 not so paid or corrected.’’. 

16 (2) Section 4971(c) of such Code is amended— 

17 (A) by striking ‘‘the last two sentences of 

18 section 412(a)’’ in paragraph (1) and inserting 

19 ‘‘section 431’’, and 

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

21 paragraph: 

22 ‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBU23 TION.— 

24 ‘‘(A) IN GENERAL.—The term ‘unpaid 

25 minimum required contribution’ means, with reVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00202 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 spect to any plan year, any minimum required 

2 contribution under section 430 for the plan 

3 year which is not paid on or before the due date 

4 (as determined under section 430(j)(1)) for the 

5 plan year. 

6 ‘‘(B) ORDERING RULE.—Any payment to 

7 or under a plan for any plan year shall be allo8 cated first to unpaid minimum required con9 tributions for all preceding plan years on a 

10 first-in, first-out basis and then to the min11 imum required contribution under section 430 

12 for the plan year.’’. 

13 (3) Section 4971(e)(1) of such Code is amended 

14 by striking ‘‘section 412(b)(3)(A)’’ and inserting 

15 ‘‘section 412(a)(1)(A)’’. 

16 (4) Section 4971(f)(1) of such Code is amend17 ed— 

18 (A) by striking ‘‘section 412(m)(5)’’ and 

19 inserting ‘‘section 430(j)(4)’’, and 

20 (B) by striking ‘‘section 412(m)’’ and in21 serting ‘‘section 430(j)’’. 

22 (5) Section 4972(c)(7) of such Code is amended 

23 by striking ‘‘except to the extent that such contribu24 tions exceed the full-funding limitation (as defined in 

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1 paragraph (A)(i)(I) thereof)’’ and inserting ‘‘except, 

2 in the case of a multiemployer plan, to the extent 

3 that such contributions exceed the full-funding limi4 tation (as defined in section 431(c)(6))’’. 

5 (f) REPORTING REQUIREMENTS.—Section 6059(b) of 

6 such Code is amended— 

7 (1) by striking ‘‘the accumulated funding defi8 ciency (as defined in section 412(a))’’ in paragraph 

9 (2) and inserting ‘‘the minimum required contribu10 tion determined under section 430, or the accumu11 lated funding deficiency determined under section 

12 431,’’, and 

13 (2) by striking paragraph (3)(B) and inserting: 

14 ‘‘(B) the requirements for reasonable actu15 arial assumptions under section 430(h)(1) or 

16 431(c)(3), whichever are applicable, have been 

17 complied with.’’. 

18 SEC. 115. MODIFICATION OF TRANSITION RULE TO PEN19 SION FUNDING REQUIREMENTS. 

20 (a) IN GENERAL.—In the case of a plan that— 

21 (1) was not required to pay a variable rate pre22 mium for the plan year beginning in 1996, 

23 (2) has not, in any plan year beginning after 

24 1995, merged with another plan (other than a plan 


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1 sponsored by an employer that was in 1996 within 

2 the controlled group of the plan sponsor); and 

3 (3) is sponsored by a company that is engaged 

4 primarily in the interurban or interstate passenger 

5 bus service, 

6 the rules described in subsection (b) shall apply for any 

7 plan year beginning after December 31, 2007. 

8 (b) MODIFIED RULES.—The rules described in this 

9 subsection are as follows: 

10 (1) For purposes of section 430(j)(3) of the In11 ternal Revenue Code of 1986 and section 303(j)(3) 

12 of the Employee Retirement Income Security Act of 

13 1974, the plan shall be treated as not having a fund14 ing shortfall for any plan year. 

15 (2) For purposes of— 

16 (A) determining unfunded vested benefits 

17 under section 4006(a)(3)(E)(iii) of such Act, 

18 and 

19 (B) determining any present value or mak20 ing any computation under section 412 of such 

21 Code or section 302 of such Act, 

22 the mortality table shall be the mortality table used 

23 by the plan. 

24 (3) Section 430(c)(5)(B) of such Code and sec25 tion 303(c)(5)(B) of such Act (relating to phase-in 


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1 of funding target for exemption from new shortfall 

2 amortization base) shall each be applied by sub3 stituting ‘‘2012’’ for ‘‘2011’’ therein and by sub4 stituting 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. 

5 (c) DEFINITIONS.—Any term used in this section 

6 which is also used in section 430 of such Code or section 

7 303 of such Act shall have the meaning provided such 

8 term in such section. If the same term has a different 

9 meaning in such Code and such Act, such term shall, for 

10 purposes of this section, have the meaning provided by 

11 such Code when applied with respect to such Code and 

12 the meaning provided by such Act when applied with re13 spect to such Act. 

14 (d) SPECIAL RULE FOR 2006 AND 2007.— 

15 (1) IN GENERAL.—Section 769(c)(3) of the Re16 tirement Protection Act of 1994, as added by section 

17 201 of the Pension Funding Equity Act of 2004, is 

18 amended by striking ‘‘and 2005’’ and inserting ‘‘, 

19 2005, 2006, and 2007’’. 


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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall apply to plan years beginning 

3 after December 31, 2005. 

4 (e) CONFORMING AMENDMENT.— 

5 (1) Section 769 of the Retirement Protection 

6 Act of 1994 is amended by striking subsection (c). 

7 (2) The amendment made by paragraph (1) 

8 shall take effect on December 31, 2007, and shall 

9 apply to plan years beginning after such date. 

10 SEC. 116. RESTRICTIONS ON FUNDING OF NONQUALIFIED 

11 DEFERRED COMPENSATION PLANS BY EM12 PLOYERS MAINTAINING UNDERFUNDED OR 

13 TERMINATED SINGLE-EMPLOYER PLANS. 

14 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

15 Subsection (b) of section 409A of the Internal Revenue 

16 Code of 1986 (providing rules relating to funding) is 

17 amended by redesignating paragraphs (3) and (4) as para18 graphs (4) and (5), respectively, and by inserting after 

19 paragraph (2) the following new paragraph: 

20 ‘‘(3) TREATMENT OF EMPLOYER’S DEFINED

21 BENEFIT PLAN DURING RESTRICTED PERIOD.— 

22 ‘‘(A) IN GENERAL.—If– 

23 ‘‘(i) during any restricted period with 

24 respect to a single-employer defined benefit 

25 plan, assets are set aside or reserved (diVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00207 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 rectly or indirectly) in a trust (or other ar2 rangement as determined by the Secretary) 

3 or transferred to such a trust or other ar4 rangement for purposes of paying deferred 

5 compensation of an applicable covered em6 ployee under a nonqualified deferred com7 pensation plan of the plan sponsor or 

8 member of a controlled group which in9 cludes the plan sponsor, or 

10 ‘‘(ii) a nonqualified deferred com11 pensation plan of the plan sponsor or 

12 member of a controlled group which in13 cludes the plan sponsor provides that as14 sets will become restricted to the provision 

15 of benefits under the plan in connection 

16 with such restricted period (or other simi17 lar financial measure determined by the 

18 Secretary) with respect to the defined ben19 efit plan, or assets are so restricted, 

20 such assets shall, for purposes of section 83, be 

21 treated as property transferred in connection 

22 with the performance of services whether or not 

23 such assets are available to satisfy claims of 

24 general creditors. Clause (i) shall not apply with 

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1 fore the restricted period with respect to the de2 fined benefit plan. 

3 ‘‘(B) RESTRICTED PERIOD.—For purposes 

4 of this section, the term ‘restricted period’ 

5 means, with respect to any plan described in 

6 subparagraph (A)— 

7 ‘‘(i) any period during which the plan 

8 is in at-risk status (as defined in section 

9 430(i)); 

10 ‘‘(ii) any period the plan sponsor is a 

11 debtor in a case under title 11, United 

12 States Code, or similar Federal or State 

13 law, and 

14 ‘‘(iii) the 12-month period beginning 

15 on the date which is 6 months before the 

16 termination date of the plan if, as of the 

17 termination date, the plan is not sufficient 

18 for benefit liabilities (within the meaning 

19 of section 4041 of the Employee Retire20 ment Income Security Act of 1974). 

21 ‘‘(C) SPECIAL RULE FOR PAYMENT OF

22 TAXES ON DEFERRED COMPENSATION IN23 CLUDED IN INCOME.—If an employer provides 

24 directly or indirectly for the payment of any 

25 Federal, State, or local income taxes with reVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00209 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 spect to any compensation required to be in2 cluded in gross income by reason of this para3 graph— 

4 ‘‘(i) interest shall be imposed under 

5 subsection (a)(1)(B)(i)(I) on the amount of 

6 such payment in the same manner as if 

7 such payment was part of the deferred 

8 compensation to which it relates, 

9 ‘‘(ii) such payment shall be taken into 

10 account in determining the amount of the 

11 additional tax under subsection 

12 (a)(1)(B)(i)(II) in the same manner as if 

13 such payment was part of the deferred 

14 compensation to which it relates, and 

15 ‘‘(iii) no deduction shall be allowed 

16 under this title with respect to such pay17 ment. 

18 ‘‘(D) OTHER DEFINITIONS.—For purposes 

19 of this section— 

20 ‘‘(i) APPLICABLE COVERED EM21 PLOYEE.—The term ‘applicable covered 

22 employee’ means any— 

23 ‘‘(I) covered employee of a plan 

24 sponsor, 


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1 ‘‘(II) covered employee of a mem2 ber of a controlled group which in3 cludes the plan sponsor, and 

4 ‘‘(III) former employee who was 

5 a covered employee at the time of ter6 mination of employment with the plan 

7 sponsor or a member of a controlled 

8 group which includes the plan spon9 sor. 

10 ‘‘(ii) COVERED EMPLOYEE.—The term 

11 ‘covered employee’ means an individual de12 scribed in section 162(m)(3) or an indi13 vidual subject to the requirements of sec14 tion 16(a) of the Securities Exchange Act 

15 of 1934.’’. 

16 (b) CONFORMING AMENDMENTS.—Paragraphs (4) 

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

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

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

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

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

22 this section shall apply to transfers or other reservation 

23 of assets after the date of the enactment of this Act. 


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1 TITLE II—FUNDING RULES FOR 

2 MULTIEMPLOYER DEFINED 

3 BENEFIT PLANS AND RE4 LATED PROVISIONS 

5 Subtitle A—Amendments to Em6 ployee Retirement Income Secu7 rity Act of 1974 

8 SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED 

9 BENEFIT PLANS. 

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

11 the Employee Retirement Income Security Act of 1974 (as 

12 amended by this Act) is amended by inserting after section 

13 303 the following new section: 

14 ‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER

15 PLANS

16 ‘‘SEC. 304. (a) IN GENERAL.—For purposes of sec17 tion 302, the accumulated funding deficiency of a multi18 employer plan for any plan year is— 

19 ‘‘(1) except as provided in paragraph (2), the 

20 amount, determined as of the end of the plan year, 

21 equal to the excess (if any) of the total charges to 

22 the funding standard account of the plan for all plan 

23 years (beginning with the first plan year for which 

24 this part applies to the plan) over the total credits 

25 to such account for such years, and 


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1 ‘‘(2) if the multiemployer plan is in reorganiza2 tion for any plan year, the accumulated funding de3 ficiency of the plan determined under section 4243. 

4 ‘‘(b) FUNDING STANDARD ACCOUNT.— 

5 ‘‘(1) ACCOUNT REQUIRED.—Each multiem6 ployer plan to which this part applies shall establish 

7 and maintain a funding standard account. Such ac8 count shall be credited and charged solely as pro9 vided in this section. 

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

11 the funding standard account shall be charged with 

12 the sum of— 

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

14 plan year, 

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

16 equal annual installments (until fully amor17 tized)— 

18 ‘‘(i) in the case of a plan which comes 

19 into existence on or after January 1, 2008, 

20 the unfunded past service liability under 

21 the plan on the first day of the first plan 

22 year to which this section applies, over a 

23 period of 15 plan years, 

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

25 plan year, the net increase (if any) in unVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00213 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 funded past service liability under the plan 

2 arising from plan amendments adopted in 

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

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

5 plan year, the net experience loss (if any) 

6 under the plan, over a period of 15 plan 

7 years, and 

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

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

10 from changes in actuarial assumptions 

11 used under the plan, over a period of 15 

12 plan years, 

13 ‘‘(C) the amount necessary to amortize 

14 each waived funding deficiency (within the 

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

16 plan year in equal annual installments (until 

17 fully amortized) over a period of 15 plan years, 

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

19 equal annual installments (until fully amor20 tized) over a period of 5 plan years any amount 

21 credited to the funding standard account under 

22 section 302(b)(3)(D) (as in effect on the day 

23 before the date of the enactment of the Pension 

24 Protection Act of 2006), and 


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1 ‘‘(E) the amount necessary to amortize in 

2 equal annual installments (until fully amor3 tized) over a period of 20 years the contribu4 tions which would be required to be made under 

5 the plan but for the provisions of section 

6 302(c)(7)(A)(i)(I) (as in effect on the day be7 fore the date of the enactment of the Pension 

8 Protection Act of 2006). 

9 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year, 

10 the funding standard account shall be credited with 

11 the sum of— 

12 ‘‘(A) the amount considered contributed by 

13 the employer to or under the plan for the plan 

14 year, 

15 ‘‘(B) the amount necessary to amortize in 

16 equal annual installments (until fully amor17 tized)— 

18 ‘‘(i) separately, with respect to each 

19 plan year, the net decrease (if any) in un20 funded past service liability under the plan 

21 arising from plan amendments adopted in 

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

23 ‘‘(ii) separately, with respect to each 

24 plan year, the net experience gain (if any) 


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1 under the plan, over a period of 15 plan 

2 years, and 

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

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

5 from changes in actuarial assumptions 

6 used under the plan, over a period of 15 

7 plan years, 

8 ‘‘(C) the amount of the waived funding de9 ficiency (within the meaning of section 

10 302(c)(3)) for the plan year, and 

11 ‘‘(D) in the case of a plan year for which 

12 the accumulated funding deficiency is deter13 mined under the funding standard account if 

14 such plan year follows a plan year for which 

15 such deficiency was determined under the alter16 native minimum funding standard under section 

17 305 (as in effect on the day before the date of 

18 the enactment of the Pension Protection Act of 

19 2006), the excess (if any) of any debit balance 

20 in the funding standard account (determined 

21 without regard to this subparagraph) over any 

22 debit balance in the alternative minimum fund23 ing standard account. 

24 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AM25 ORTIZED IN PLAN YEARS BEFORE 2008.—In the case 


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1 of any amount amortized under section 302(b) (as 

2 in effect on the day before the date of the enactment 

3 of the Pension Protection Act of 2006) over any pe4 riod beginning with a plan year beginning before 

5 2008, in lieu of the amortization described in para6 graphs (2)(B) and (3)(B), such amount shall con7 tinue to be amortized under such section as so in ef8 fect. 

9 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS

10 TO BE AMORTIZED.—Under regulations prescribed 

11 by the Secretary of the Treasury, amounts required 

12 to be amortized under paragraph (2) or paragraph 

13 (3), as the case may be— 

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

15 under such paragraph to be amortized over a 

16 period determined on the basis of the remaining 

17 amortization period for all items entering into 

18 such combined amount, and 

19 ‘‘(B) may be offset against amounts re20 quired to be amortized under the other such 

21 paragraph, with the resulting amount to be am22 ortized over a period determined on the basis of 

23 the remaining amortization periods for all items 

24 entering into whichever of the two amounts 

25 being offset is the greater. 


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1 ‘‘(6) INTEREST.—The funding standard ac2 count (and items therein) shall be charged or cred3 ited (as determined under regulations prescribed by 

4 the Secretary of the Treasury) with interest at the 

5 appropriate rate consistent with the rate or rates of 

6 interest used under the plan to determine costs. 

7 ‘‘(7) SPECIAL RULES RELATING TO CHARGES

8 AND CREDITS TO FUNDING STANDARD ACCOUNT.— 

9 For purposes of this part— 

10 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

11 amount received by a multiemployer plan in 

12 payment of all or part of an employer’s with13 drawal liability under part 1 of subtitle E of 

14 title IV shall be considered an amount contrib15 uted by the employer to or under the plan. The 

16 Secretary of the Treasury may prescribe by reg17 ulation additional charges and credits to a mul18 tiemployer plan’s funding standard account to 

19 the extent necessary to prevent withdrawal li20 ability payments from being unduly reflected as 

21 advance funding for plan liabilities. 

22 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM23 PLOYER PLAN LEAVES REORGANIZATION.—If a 

24 multiemployer plan is not in reorganization in 

25 the plan year but was in reorganization in the 


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1 immediately preceding plan year, any balance in 

2 the funding standard account at the close of 

3 such immediately preceding plan year— 

4 ‘‘(i) shall be eliminated by an offset5 ting credit or charge (as the case may be), 

6 but 

7 ‘‘(ii) shall be taken into account in 

8 subsequent plan years by being amortized 

9 in equal annual installments (until fully 

10 amortized) over 30 plan years. 

11 The preceding sentence shall not apply to the 

12 extent of any accumulated funding deficiency 

13 under section 4243(a) as of the end of the last 

14 plan year that the plan was in reorganization. 

15 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

16 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

17 FUND.—Any amount paid by a plan during a 

18 plan year to the Pension Benefit Guaranty Cor19 poration pursuant to section 4222 of this Act or 

20 to a fund exempt under section 501(c)(22) of 

21 the Internal Revenue Code of 1986 pursuant to 

22 section 4223 of this Act shall reduce the 

23 amount of contributions considered received by 

24 the plan for the plan year. 


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1 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

2 PAYMENTS.—Any amount paid by an employer 

3 pending a final determination of the employer’s 

4 withdrawal liability under part 1 of subtitle E 

5 of title IV and subsequently refunded to the 

6 employer by the plan shall be charged to the 

7 funding standard account in accordance with 

8 regulations prescribed by the Secretary of the 

9 Treasury. 

10 ‘‘(E) ELECTION FOR DEFERRAL OF

11 CHARGE FOR PORTION OF NET EXPERIENCE

12 LOSS.—If an election is in effect under section 

13 302(b)(7)(F) (as in effect on the day before the 

14 date of the enactment of the Pension Protection 

15 Act of 2006) for any plan year, the funding 

16 standard account shall be charged in the plan 

17 year to which the portion of the net experience 

18 loss deferred by such election was deferred with 

19 the amount so deferred (and paragraph 

20 (2)(B)(iii) shall not apply to the amount so 

21 charged). 

22 ‘‘(F) FINANCIAL ASSISTANCE.—Any 

23 amount of any financial assistance from the 

24 Pension Benefit Guaranty Corporation to any 

25 plan, and any repayment of such amount, shall 


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1 be taken into account under this section and 

2 section 302 in such manner as is determined by 

3 the Secretary of the Treasury. 

4 ‘‘(G) SHORT-TERM BENEFITS.—To the ex5 tent that any plan amendment increases the un6 funded past service liability under the plan by 

7 reason of an increase in benefits which are not 

8 payable as a life annuity but are payable under 

9 the terms of the plan for a period that does not 

10 exceed 14 years from the effective date of the 

11 amendment, paragraph (2)(B)(ii) shall be ap12 plied separately with respect to such increase in 

13 unfunded past service liability by substituting 

14 the number of years of the period during which 

15 such benefits are payable for ‘15’. 

16 ‘‘(c) ADDITIONAL RULES.— 

17 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

18 FUNDING METHOD.—For purposes of this part, nor19 mal costs, accrued liability, past service liabilities, 

20 and experience gains and losses shall be determined 

21 under the funding method used to determine costs 

22 under the plan. 

23 ‘‘(2) VALUATION OF ASSETS.— 

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

25 part, the value of the plan’s assets shall be deVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00221 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 termined on the basis of any reasonable actu2 arial method of valuation which takes into ac3 count fair market value and which is permitted 

4 under regulations prescribed by the Secretary of 

5 the Treasury. 

6 ‘‘(B) ELECTION WITH RESPECT TO

7 BONDS.—The value of a bond or other evidence 

8 of indebtedness which is not in default as to 

9 principal or interest may, at the election of the 

10 plan administrator, be determined on an amor11 tized basis running from initial cost at purchase 

12 to par value at maturity or earliest call date. 

13 Any election under this subparagraph shall be 

14 made at such time and in such manner as the 

15 Secretary of the Treasury shall by regulations 

16 provide, shall apply to all such evidences of in17 debtedness, and may be revoked only with the 

18 consent of such Secretary. 

19 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA20 SONABLE.—For purposes of this section, all costs, li21 abilities, rates of interest, and other factors under 

22 the plan shall be determined on the basis of actu23 arial assumptions and methods— 


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

2 into account the experience of the plan and rea3 sonable expectations), and 

4 ‘‘(B) which, in combination, offer the actu5 ary’s best estimate of anticipated experience 

6 under the plan. 

7 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX8 PERIENCE GAIN OR LOSS.—For purposes of this sec9 tion, if— 

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

11 Security Act or in other retirement benefits cre12 ated under Federal or State law, or 

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

14 ‘wages’ under section 3121 of the Internal Rev15 enue Code of 1986, or a change in the amount 

16 of such wages taken into account under regula17 tions prescribed for purposes of section 

18 401(a)(5) of such Code, 

19 results in an increase or decrease in accrued liability 

20 under a plan, such increase or decrease shall be 

21 treated as an experience loss or gain. 

22 ‘‘(5) FULL FUNDING.—If, as of the close of a 

23 plan year, a plan would (without regard to this para24 graph) have an accumulated funding deficiency in 

25 excess of the full funding limitation— 


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

2 credited with the amount of such excess, and 

3 ‘‘(B) all amounts described in subpara4 graphs (B), (C), and (D) of subsection (b) (2) 

5 and subparagraph (B) of subsection (b)(3) 

6 which are required to be amortized shall be con7 sidered fully amortized for purposes of such 

8 subparagraphs. 

9 ‘‘(6) FULL-FUNDING LIMITATION.— 

10 ‘‘(A) IN GENERAL.—For purposes of para11 graph (5), the term ‘full-funding limitation’ 

12 means the excess (if any) of— 

13 ‘‘(i) the accrued liability (including 

14 normal cost) under the plan (determined 

15 under the entry age normal funding meth16 od if such accrued liability cannot be di17 rectly calculated under the funding method 

18 used for the plan), over 

19 ‘‘(ii) the lesser of— 

20 ‘‘(I) the fair market value of the 

21 plan’s assets, or 

22 ‘‘(II) the value of such assets de23 termined under paragraph (2). 

24 ‘‘(B) MINIMUM AMOUNT.— 


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

2 the full-funding limitation determined 

3 under subparagraph (A) be less than the 

4 excess (if any) of— 

5 ‘‘(I) 90 percent of the current li6 ability of the plan (including the ex7 pected increase in current liability due 

8 to benefits accruing during the plan 

9 year), over 

10 ‘‘(II) the value of the plan’s as11 sets determined under paragraph (2). 

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

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

14 credit balance in the funding standard ac15 count. 

16 ‘‘(C) FULL FUNDING LIMITATION.—For 

17 purposes of this paragraph, unless otherwise 

18 provided by the plan, the accrued liability under 

19 a multiemployer plan shall not include benefits 

20 which are not nonforfeitable under the plan 

21 after the termination of the plan (taking into 

22 consideration section 411(d)(3) of the Internal 

23 Revenue Code of 1986). 

24 ‘‘(D) CURRENT LIABILITY.—For purposes 

25 of this paragraph— 


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1 ‘‘(i) IN GENERAL.—The term ‘current 

2 liability’ means all liabilities to employees 

3 and their beneficiaries under the plan. 

4 ‘‘(ii) TREATMENT OF UNPREDICTABLE

5 CONTINGENT EVENT BENEFITS.—For pur6 poses of clause (i), any benefit contingent 

7 on an event other than— 

8 ‘‘(I) age, service, compensation, 

9 death, or disability, or 

10 ‘‘(II) an event which is reason11 ably and reliably predictable (as deter12 mined by the Secretary of the Treas13 ury), 

14 shall not be taken into account until the 

15 event on which the benefit is contingent oc16 curs. 

17 ‘‘(iii) INTEREST RATE USED.—The 

18 rate of interest used to determine current 

19 liability under this paragraph shall be the 

20 rate of interest determined under subpara21 graph (E). 

22 ‘‘(iv) MORTALITY TABLES.— 

23 ‘‘(I) COMMISSIONERS’ STANDARD

24 TABLE.—In the case of plan years be25 ginning before the first plan year to 


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1 which the first tables prescribed under 

2 subclause (II) apply, the mortality 

3 table used in determining current li4 ability under this paragraph shall be 

5 the table prescribed by the Secretary 

6 of the Treasury which is based on the 

7 prevailing commissioners’ standard 

8 table (described in section 

9 807(d)(5)(A) of the Internal Revenue 

10 Code of 1986) used to determine re11 serves for group annuity contracts 

12 issued on January 1, 1993. 

13 ‘‘(II) SECRETARIAL AUTHOR14 ITY.—The Secretary of the Treasury 

15 may by regulation prescribe for plan 

16 years beginning after December 31, 

17 1999, mortality tables to be used in 

18 determining current liability under 

19 this subsection. Such tables shall be 

20 based upon the actual experience of 

21 pension plans and projected trends in 

22 such experience. In prescribing such 

23 tables, such Secretary shall take into 

24 account results of available indeVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00227 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 pendent studies of mortality of indi2 viduals covered by pension plans. 

3 ‘‘(v) SEPARATE MORTALITY TABLES

4 FOR THE DISABLED.—Notwithstanding 

5 clause (iv)— 

6 ‘‘(I) IN GENERAL.—The Sec7 retary of the Treasury shall establish 

8 mortality tables which may be used 

9 (in lieu of the tables under clause (iv)) 

10 to determine current liability under 

11 this subsection for individuals who are 

12 entitled to benefits under the plan on 

13 account of disability. Such Secretary 

14 shall establish separate tables for indi15 viduals whose disabilities occur in 

16 plan years beginning before January 

17 1, 1995, and for individuals whose 

18 disabilities occur in plan years begin19 ning on or after such date. 

20 ‘‘(II) SPECIAL RULE FOR DIS21 ABILITIES OCCURRING AFTER 1994.— 

22 In the case of disabilities occurring in 

23 plan years beginning after December 

24 31, 1994, the tables under subclause 

25 (I) shall apply only with respect to inVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00228 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 dividuals described in such subclause 

2 who are disabled within the meaning 

3 of title II of the Social Security Act 

4 and the regulations thereunder. 

5 ‘‘(vi) PERIODIC REVIEW.—The Sec6 retary of the Treasury shall periodically (at 

7 least every 5 years) review any tables in ef8 fect under this subparagraph and shall, to 

9 the extent such Secretary determines nec10 essary, by regulation update the tables to 

11 reflect the actual experience of pension 

12 plans and projected trends in such experi13 ence. 

14 ‘‘(E) REQUIRED CHANGE OF INTEREST

15 RATE.—For purposes of determining a plan’s 

16 current liability for purposes of this para17 graph— 

18 ‘‘(i) IN GENERAL.—If any rate of in19 terest used under the plan under sub20 section (b)(6) to determine cost is not 

21 within the permissible range, the plan shall 

22 establish a new rate of interest within the 

23 permissible range. 

24 ‘‘(ii) PERMISSIBLE RANGE.—For pur25 poses of this subparagraph— 


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1 ‘‘(I) IN GENERAL.—Except as 

2 provided in subclause (II), the term 

3 ‘permissible range’ means a rate of in4 terest which is not more than 5 per5 cent above, and not more than 10 per6 cent below, the weighted average of 

7 the rates of interest on 30-year Treas8 ury securities during the 4-year period 

9 ending on the last day before the be10 ginning of the plan year. 

11 ‘‘(II) SECRETARIAL AUTHOR12 ITY.—If the Secretary of the Treasury 

13 finds that the lowest rate of interest 

14 permissible under subclause (I) is un15 reasonably high, such Secretary may 

16 prescribe a lower rate of interest, ex17 cept that such rate may not be less 

18 than 80 percent of the average rate 

19 determined under such subclause. 

20 ‘‘(iii) ASSUMPTIONS.—Notwith21 standing paragraph (3)(A), the interest 

22 rate used under the plan shall be— 

23 ‘‘(I) determined without taking 

24 into account the experience of the 

25 plan and reasonable expectations, but 


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1 ‘‘(II) consistent with the assump2 tions which reflect the purchase rates 

3 which would be used by insurance 

4 companies to satisfy the liabilities 

5 under the plan. 

6 ‘‘(7) ANNUAL VALUATION.— 

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

8 section, a determination of experience gains and 

9 losses and a valuation of the plan’s liability 

10 shall be made not less frequently than once 

11 every year, except that such determination shall 

12 be made more frequently to the extent required 

13 in particular cases under regulations prescribed 

14 by the Secretary of the Treasury. 

15 ‘‘(B) VALUATION DATE.— 

16 ‘‘(i) CURRENT YEAR.—Except as pro17 vided in clause (ii), the valuation referred 

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

19 a date within the plan year to which the 

20 valuation refers or within one month prior 

21 to the beginning of such year. 

22 ‘‘(ii) USE OF PRIOR YEAR VALU23 ATION.—The valuation referred to in sub24 paragraph (A) may be made as of a date 

25 within the plan year prior to the year to 


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1 which the valuation refers if, as of such 

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

3 not less than 100 percent of the plan’s cur4 rent liability (as defined in paragraph 

5 (6)(D) without regard to clause (iv) there6 of). 

7 ‘‘(iii) ADJUSTMENTS.—Information 

8 under clause (ii) shall, in accordance with 

9 regulations, be actuarially adjusted to re10 flect significant differences in participants. 

11 ‘‘(iv) LIMITATION.—A change in fund12 ing method to use a prior year valuation, 

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

14 unless as of the valuation date within the 

15 prior plan year, the value of the assets of 

16 the plan are not less than 125 percent of 

17 the plan’s current liability (as defined in 

18 paragraph (6)(D) without regard to clause 

19 (iv) thereof). 

20 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

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

22 contributions for a plan year made by an employer 

23 after the last day of such plan year, but not later 

24 than two and one-half months after such day, shall 

25 be deemed to have been made on such last day. For 


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1 purposes of this subparagraph, such two and one2 half month period may be extended for not more 

3 than six months under regulations prescribed by the 

4 Secretary of the Treasury. 

5 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

6 MULTIEMPLOYER PLANS.— 

7 ‘‘(1) AUTOMATIC EXTENSION UPON APPLICA8 TION BY CERTAIN PLANS.— 

9 ‘‘(A) IN GENERAL.—If the plan sponsor of 

10 a multiemployer plan— 

11 ‘‘(i) submits to the Secretary of the 

12 Treasury an application for an extension of 

13 the period of years required to amortize 

14 any unfunded liability described in any 

15 clause of subsection (b)(2)(B) or described 

16 in subsection (b)(4), and 

17 ‘‘(ii) includes with the application a 

18 certification by the plan’s actuary de19 scribed in subparagraph (B), 

20 the Secretary of the Treasury shall extend the 

21 amortization period for the period of time (not 

22 in excess of 5 years) specified in the applica23 tion. Such extension shall be in addition to any 

24 extension under paragraph (2). 


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1 ‘‘(B) CRITERIA.—A certification with re2 spect to a multiemployer plan is described in 

3 this subparagraph if the plan’s actuary certifies 

4 that, based on reasonable assumptions— 

5 ‘‘(i) absent the extension under sub6 paragraph (A), the plan would have an ac7 cumulated funding deficiency in the cur8 rent plan year or any of the 9 succeeding 

9 plan years, 

10 ‘‘(ii) the plan sponsor has adopted a 

11 plan to improve the plan’s funding status, 

12 ‘‘(iii) the plan is projected to have suf13 ficient assets to timely pay expected bene14 fits and anticipated expenditures over the 

15 amortization period as extended, and 

16 ‘‘(iv) the notice required under para17 graph (3)(A) has been provided. 

18 ‘‘(C) TERMINATION.—The preceding provi19 sions of this paragraph shall not apply with re20 spect to any application submitted after Decem21 ber 31, 2014. 

22 ‘‘(2) ALTERNATIVE EXTENSION.— 

23 ‘‘(A) IN GENERAL.—If the plan sponsor of 

24 a multiemployer plan submits to the Secretary 

25 of the Treasury an application for an extension 


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1 of the period of years required to amortize any 

2 unfunded liability described in any clause of 

3 subsection (b)(2)(B) or described in subsection 

4 (b)(4), the Secretary of the Treasury may ex5 tend the amortization period for a period of 

6 time (not in excess of 10 years reduced by the 

7 number of years of any extension under para8 graph (1) with respect to such unfunded liabil9 ity) if the Secretary of the Treasury makes the 

10 determination described in subparagraph (B). 

11 Such extension shall be in addition to any ex12 tension under paragraph (1). 

13 ‘‘(B) DETERMINATION.—The Secretary of 

14 the Treasury may grant an extension under 

15 subparagraph (A) if such Secretary determines 

16 that— 

17 ‘‘(i) such extension would carry out 

18 the purposes of this Act and would provide 

19 adequate protection for participants under 

20 the plan and their beneficiaries, and 

21 ‘‘(ii) the failure to permit such exten22 sion would— 

23 ‘‘(I) result in a substantial risk 

24 to the voluntary continuation of the 

25 plan, or a substantial curtailment of 


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1 pension benefit levels or employee 

2 compensation, and 

3 ‘‘(II) be adverse to the interests 

4 of plan participants in the aggregate. 

5 ‘‘(C) ACTION BY SECRETARY OF THE

6 TREASURY.—The Secretary of the Treasury 

7 shall act upon any application for an extension 

8 under this paragraph within 180 days of the 

9 submission of such application. If such Sec10 retary rejects the application for an extension 

11 under this paragraph, such Secretary shall pro12 vide notice to the plan detailing the specific rea13 sons for the rejection, including references to 

14 the criteria set forth above. 

15 ‘‘(3) ADVANCE NOTICE.— 

16 ‘‘(A) IN GENERAL.—The Secretary of the 

17 Treasury shall, before granting an extension 

18 under this subsection, require each applicant to 

19 provide evidence satisfactory to such Secretary 

20 that the applicant has provided notice of the fil21 ing of the application for such extension to each 

22 affected party (as defined in section 

23 4001(a)(21)) with respect to the affected plan. 

24 Such notice shall include a description of the 

25 extent to which the plan is funded for benefits 


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1 which are guaranteed under title IV and for 

2 benefit liabilities. 

3 ‘‘(B) CONSIDERATION OF RELEVANT IN4 FORMATION.—The Secretary of the Treasury 

5 shall consider any relevant information provided 

6 by a person to whom notice was given under 

7 paragraph (1).’’. 

8 (b) SHORTFALL FUNDING METHOD.— 

9 (1) IN GENERAL.—A multiemployer plan meet10 ing the criteria of paragraph (2) may adopt, use, or 

11 cease using, the shortfall funding method and such 

12 adoption, use, or cessation of use of such method, 

13 shall be deemed approved by the Secretary of the 

14 Treasury under section 302(d)(1) of the Employee 

15 Retirement Income Security Act of 1974 and section 

16 412(d)(1) of the Internal Revenue Code of 1986. 

17 (2) CRITERIA.—A multiemployer pension plan 

18 meets the criteria of this clause if— 

19 (A) the plan has not used the shortfall 

20 funding method during the 5-year period ending 

21 on the day before the date the plan is to use 

22 the method under paragraph (1); and 

23 (B) the plan is not operating under an am24 ortization period extension under section 304(d) 


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1 of such Act and did not operate under such an 

2 extension during such 5-year period. 

3 (3) SHORTFALL FUNDING METHOD DEFINED.— 

4 For purposes of this subsection, the term ‘‘shortfall 

5 funding method’’ means the shortfall funding meth6 od described in Treasury Regulations section 

7 1.412(c)(1)–2 (26 C.F.R. 1.412(c)(1)–2). 

8 (4) BENEFIT RESTRICTIONS TO APPLY.—The 

9 benefit restrictions under section 302(c)(7) of such 

10 Act and section 412(c)(7) of such Code shall apply 

11 during any period a multiemployer plan is on the 

12 shortfall funding method pursuant to this sub13 section. 

14 (5) USE OF SHORTFALL METHOD NOT TO PRE15 CLUDE OTHER OPTIONS.—Nothing in this subsection 

16 shall be construed to affect a multiemployer plan’s 

17 ability to adopt the shortfall funding method with 

18 the Secretary’s permission under otherwise applica19 ble regulations or to affect a multiemployer plan’s 

20 right to change funding methods, with or without 

21 the Secretary’s consent, as provided in applicable 

22 rules and regulations. 

23 (c) CONFORMING AMENDMENTS.— 


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1 (1) Section 301 of the Employee Retirement In2 come Security Act of 1974 (29 U.S.C. 1081) is 

3 amended by striking subsection (d). 

4 (2) The table of contents in section 1 of such 

5 Act (as amended by this Act) is amended by insert6 ing after the item relating to section 303 the fol7 lowing new item: 

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’. 

8 (d) EFFECTIVE DATE.— 

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

10 this section shall apply to plan years beginning after 

11 2007. 

12 (2) SPECIAL RULE FOR CERTAIN AMORTIZATION

13 EXTENSIONS.—If the Secretary of the Treasury 

14 grants an extension under section 304 of the Em15 ployee Retirement Income Security Act of 1974 and 

16 section 412(e) of the Internal Revenue Code of 1986 

17 with respect to any application filed with the Sec18 retary of the Treasury on or before June 30, 2005, 

19 the extension (and any modification thereof) shall be 

20 applied and administered under the rules of such 

21 sections as in effect before the enactment of this 

22 Act, including the use of the rate of interest deter23 mined under section 6621(b) of such Code. 


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1 SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEM2 PLOYER PLANS IN ENDANGERED OR CRIT3 ICAL STATUS. 

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

5 the Employee Retirement Income Security Act of 1974 (as 

6 amended by the preceding provisions of this Act) is 

7 amended by inserting after section 304 the following new 

8 section: 

9 ‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER

10 PLANS IN ENDANGERED STATUS OR CRITICAL STATUS

11 ‘‘SEC. 305. (a) GENERAL RULE.—For purposes of 

12 this part, in the case of a multiemployer plan in effect 

13 on July 16, 2006— 

14 ‘‘(1) if the plan is in endangered status— 

15 ‘‘(A) the plan sponsor shall adopt and im16 plement a funding improvement plan in accord17 ance with the requirements of subsection (c), 

18 and 

19 ‘‘(B) the requirements of subsection (d) 

20 shall apply during the funding plan adoption 

21 period and the funding improvement period, 

22 and 

23 ‘‘(2) if the plan is in critical status— 

24 ‘‘(A) the plan sponsor shall adopt and im25 plement a rehabilitation plan in accordance with 

26 the requirements of subsection (e), and 


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1 ‘‘(B) the requirements of subsection (f) 

2 shall apply during the rehabilitation plan adop3 tion period and the rehabilitation period. 

4 ‘‘(b) DETERMINATION OF ENDANGERED AND CRIT5 ICAL STATUS.—For purposes of this section— 

6 ‘‘(1) ENDANGERED STATUS.—A multiemployer 

7 plan is in endangered status for a plan year if, as 

8 determined by the plan actuary under paragraph 

9 (3), the plan is not in critical status for the plan 

10 year and, as of the beginning of the plan year, ei11 ther— 

12 ‘‘(A) the plan’s funded percentage for such 

13 plan year is less than 80 percent, or 

14 ‘‘(B) the plan has an accumulated funding 

15 deficiency for such plan year, or is projected to 

16 have such an accumulated funding deficiency 

17 for any of the 6 succeeding plan years, taking 

18 into account any extension of amortization peri19 ods under section 304(d). 

20 For purposes of this section, a plan shall be treated 

21 as in seriously endangered status for a plan year if 

22 the plan is described in both subparagraphs (A) and 

23 (B). 

24 ‘‘(2) CRITICAL STATUS.—A multiemployer plan 

25 is in critical status for a plan year if, as determined 


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1 by the plan actuary under paragraph (3), the plan 

2 is described in 1 or more of the following subpara3 graphs as of the beginning of the plan year: 

4 ‘‘(A) A plan is described in this subpara5 graph if— 

6 ‘‘(i) the funded percentage of the plan 

7 is less than 65 percent, and 

8 ‘‘(ii) the sum of— 

9 ‘‘(I) the fair market value of plan 

10 assets, plus 

11 ‘‘(II) the present value of the 

12 reasonably anticipated employer con13 tributions for the current plan year 

14 and each of the 6 succeeding plan 

15 years, assuming that the terms of all 

16 collective bargaining agreements pur17 suant to which the plan is maintained 

18 for the current plan year continue in 

19 effect for succeeding plan years, 

20 is less than the present value of all non21 forfeitable benefits projected to be payable 

22 under the plan during the current plan 

23 year and each of the 6 succeeding plan 

24 years (plus administrative expenses for 

25 such plan years). 


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1 ‘‘(B) A plan is described in this subpara2 graph if— 

3 ‘‘(i) the plan has an accumulated 

4 funding deficiency for the current plan 

5 year, not taking into account any extension 

6 of amortization periods under section 

7 304(d), or 

8 ‘‘(ii) the plan is projected to have an 

9 accumulated funding deficiency for any of 

10 the 3 succeeding plan years (4 succeeding 

11 plan years if the funded percentage of the 

12 plan is 65 percent or less), not taking into 

13 account any extension of amortization peri14 ods under section 304(d). 

15 ‘‘(C) A plan is described in this subpara16 graph if— 

17 ‘‘(i)(I) the plan’s normal cost for the 

18 current plan year, plus interest (deter19 mined at the rate used for determining 

20 costs under the plan) for the current plan 

21 year on the amount of unfunded benefit li22 abilities under the plan as of the last date 

23 of the preceding plan year, exceeds 


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1 ‘‘(II) the present value of the reason2 ably anticipated employer and employee 

3 contributions for the current plan year, 

4 ‘‘(ii) the present value, as of the be5 ginning of the current plan year, of non6 forfeitable benefits of inactive participants 

7 is greater than the present value of non8 forfeitable benefits of active participants, 

9 and 

10 ‘‘(iii) the plan has an accumulated 

11 funding deficiency for the current plan 

12 year, or is projected to have such a defi13 ciency for any of the 4 succeeding plan 

14 years, not taking into account any exten15 sion of amortization periods under section 

16 304(d). 

17 ‘‘(D) A plan is described in this subpara18 graph if the sum of— 

19 ‘‘(i) the fair market value of plan as20 sets, plus 

21 ‘‘(ii) the present value of the reason22 ably anticipated employer contributions for 

23 the current plan year and each of the 4 

24 succeeding plan years, assuming that the 

25 terms of all collective bargaining agreeVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00244 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ments pursuant to which the plan is main2 tained for the current plan year continue 

3 in effect for succeeding plan years, 

4 is less than the present value of all benefits pro5 jected to be payable under the plan during the 

6 current plan year and each of the 4 succeeding 

7 plan years (plus administrative expenses for 

8 such plan years). 

9 ‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTU10 ARY.— 

11 ‘‘(A) IN GENERAL.—Not later than the 

12 90th day of each plan year of a multiemployer 

13 plan, the plan actuary shall certify to the Sec14 retary of the Treasury and to the plan spon15 sor— 

16 ‘‘(i) whether or not the plan is in en17 dangered status for such plan year and 

18 whether or not the plan is or will be in 

19 critical status for such plan year, and 

20 ‘‘(ii) in the case of a plan which is in 

21 a funding improvement or rehabilitation 

22 period, whether or not the plan is making 

23 the scheduled progress in meeting the re24 quirements of its funding improvement or 

25 rehabilitation plan. 


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1 ‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS

2 AND LIABILITIES.— 

3 ‘‘(i) IN GENERAL.—In making the de4 terminations and projections under this 

5 subsection, the plan actuary shall make 

6 projections required for the current and 

7 succeeding plan years of the current value 

8 of the assets of the plan and the present 

9 value of all liabilities to participants and 

10 beneficiaries under the plan for the current 

11 plan year as of the beginning of such year. 

12 The actuary’s projections shall be based on 

13 reasonable actuarial estimates, assump14 tions, and methods that, except as pro15 vided in clause (iii), offer the actuary’s 

16 best estimate of anticipated experience 

17 under the plan. The projected present 

18 value of liabilities as of the beginning of 

19 such year shall be determined based on the 

20 most recent of either— 

21 ‘‘(I) the actuarial statement re22 quired under section 103(d) with re23 spect to the most recently filed annual 

24 report, or 


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1 ‘‘(II) the actuarial valuation for 

2 the preceding plan year. 

3 ‘‘(ii) DETERMINATIONS OF FUTURE

4 CONTRIBUTIONS.—Any actuarial projection 

5 of plan assets shall assume— 

6 ‘‘(I) reasonably anticipated em7 ployer contributions for the current 

8 and succeeding plan years, assuming 

9 that the terms of the one or more col10 lective bargaining agreements pursu11 ant to which the plan is maintained 

12 for the current plan year continue in 

13 effect for succeeding plan years, or 

14 ‘‘(II) that employer contributions 

15 for the most recent plan year will con16 tinue indefinitely, but only if the plan 

17 actuary determines there have been no 

18 significant demographic changes that 

19 would make such assumption unrea20 sonable. 

21 ‘‘(iii) PROJECTED INDUSTRY ACTIV22 ITY.—Any projection of activity in the in23 dustry or industries covered by the plan, 

24 including future covered employment and 

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1 mation provided by the plan sponsor, 

2 which shall act reasonably and in good 

3 faith. 

4 ‘‘(C) PENALTY FOR FAILURE TO SECURE

5 TIMELY ACTUARIAL CERTIFICATION.—Any fail6 ure of the plan’s actuary to certify the plan’s 

7 status under this subsection by the date speci8 fied in subparagraph (A) shall be treated for 

9 purposes of section 502(c)(2) as a failure or re10 fusal by the plan administrator to file the an11 nual report required to be filed with the Sec12 retary under section 101(b)(4). 

13 ‘‘(D) NOTICE.— 

14 ‘‘(i) IN GENERAL.—In any case in 

15 which it is certified under subparagraph 

16 (A) that a multiemployer plan is or will be 

17 in endangered or critical status for a plan 

18 year, the plan sponsor shall, not later than 

19 30 days after the date of the certification, 

20 provide notification of the endangered or 

21 critical status to the participants and bene22 ficiaries, the bargaining parties, the Pen23 sion Benefit Guaranty Corporation, and 

24 the Secretary. 


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1 ‘‘(ii) PLANS IN CRITICAL STATUS.—If 

2 it is certified under subparagraph (A) that 

3 a multiemployer plan is or will be in crit4 ical status, the plan sponsor shall include 

5 in the notice under clause (i) an expla6 nation of the possibility that— 

7 ‘‘(I) adjustable benefits (as de8 fined in subsection (e)(8)) may be re9 duced, and 

10 ‘‘(II) such reductions may apply 

11 to participants and beneficiaries 

12 whose benefit commencement date is 

13 on or after the date such notice is 

14 provided for the first plan year in 

15 which the plan is in critical status. 

16 ‘‘(iii) MODEL NOTICE.—The Secretary 

17 shall prescribe a model notice that a multi18 employer plan may use to satisfy the re19 quirements under clause (ii). 

20 ‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE

21 ADOPTED FOR MULTIEMPLOYER PLANS IN ENDANGERED

22 STATUS.— 

23 ‘‘(1) IN GENERAL.—In any case in which a 

24 multiemployer plan is in endangered status for a 


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1 plan year, the plan sponsor, in accordance with this 

2 subsection— 

3 ‘‘(A) shall adopt a funding improvement 

4 plan not later than 240 days following the re5 quired date for the actuarial certification of en6 dangered status under subsection (b)(3)(A), 

7 and 

8 ‘‘(B) within 30 days after the adoption of 

9 the funding improvement plan— 

10 ‘‘(i) shall provide to the bargaining 

11 parties 1 or more schedules showing re12 vised benefit structures, revised contribu13 tion structures, or both, which, if adopted, 

14 may reasonably be expected to enable the 

15 multiemployer plan to meet the applicable 

16 benchmarks in accordance with the fund17 ing improvement plan, including— 

18 ‘‘(I) one proposal for reductions 

19 in the amount of future benefit accru20 als necessary to achieve the applicable 

21 benchmarks, assuming no amend22 ments increasing contributions under 

23 the plan (other than amendments in24 creasing contributions necessary to 

25 achieve the applicable benchmarks 


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1 after amendments have reduced fu2 ture benefit accruals to the maximum 

3 extent permitted by law), and 

4 ‘‘(II) one proposal for increases 

5 in contributions under the plan nec6 essary to achieve the applicable bench7 marks, assuming no amendments re8 ducing future benefit accruals under 

9 the plan, and 

10 ‘‘(ii) may, if the plan sponsor deems 

11 appropriate, prepare and provide the bar12 gaining parties with additional information 

13 relating to contribution rates or benefit re14 ductions, alternative schedules, or other in15 formation relevant to achieving the appli16 cable benchmarks in accordance with the 

17 funding improvement plan. 

18 For purposes of this section, the term ‘applica19 ble benchmarks’ means the requirements appli20 cable to the multiemployer plan under para21 graph (3) (as modified by paragraph (5)). 

22 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

23 BEGINS.—Paragraph (1) shall not apply to a plan 

24 year if such year is in a funding plan adoption pe25 riod or funding improvement period by reason of the 


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1 plan being in endangered status for a preceding plan 

2 year. For purposes of this section, such preceding 

3 plan year shall be the initial determination year with 

4 respect to the funding improvement plan to which it 

5 relates. 

6 ‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur7 poses of this section— 

8 ‘‘(A) IN GENERAL.—A funding improve9 ment plan is a plan which consists of the ac10 tions, including options or a range of options to 

11 be proposed to the bargaining parties, formu12 lated to provide, based on reasonably antici13 pated experience and reasonable actuarial as14 sumptions, for the attainment by the plan dur15 ing the funding improvement period of the fol16 lowing requirements: 

17 ‘‘(i) INCREASE IN PLAN’S FUNDING

18 PERCENTAGE.—The plan’s funded percent19 age as of the close of the funding improve20 ment period equals or exceeds a percentage 

21 equal to the sum of— 

22 ‘‘(I) such percentage as of the 

23 beginning of such period, plus 


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1 ‘‘(II) 33 percent of the difference 

2 between 100 percent and the percent3 age under subclause (I). 

4 ‘‘(ii) AVOIDANCE OF ACCUMULATED

5 FUNDING DEFICIENCIES.—No accumulated 

6 funding deficiency for any plan year during 

7 the funding improvement period (taking 

8 into account any extension of amortization 

9 periods under section 304(d)). 

10 ‘‘(B) SERIOUSLY ENDANGERED PLANS.— 

11 In the case of a plan in seriously endangered 

12 status, except as provided in paragraph (5), 

13 subparagraph (A)(i)(II) shall be applied by sub14 stituting ‘20 percent’ for ‘33 percent’. 

15 ‘‘(4) FUNDING IMPROVEMENT PERIOD.—For 

16 purposes of this section— 

17 ‘‘(A) IN GENERAL.—The funding improve18 ment period for any funding improvement plan 

19 adopted pursuant to this subsection is the 10- 

20 year period beginning on the first day of the 

21 first plan year of the multiemployer plan begin22 ning after the earlier of— 

23 ‘‘(i) the second anniversary of the 

24 date of the adoption of the funding im25 provement plan, or 


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1 ‘‘(ii) the expiration of the collective 

2 bargaining agreements in effect on the due 

3 date for the actuarial certification of en4 dangered status for the initial determina5 tion year under subsection (b)(3)(A) and 

6 covering, as of such due date, at least 75 

7 percent of the active participants in such 

8 multiemployer plan. 

9 ‘‘(B) SERIOUSLY ENDANGERED PLANS.— 

10 In the case of a plan in seriously endangered 

11 status, except as provided in paragraph (5), 

12 subparagraph (A) shall be applied by sub13 stituting ‘15-year period’ for ‘10-year period’. 

14 ‘‘(C) COORDINATION WITH CHANGES IN

15 STATUS.— 

16 ‘‘(i) PLANS NO LONGER IN ENDAN17 GERED STATUS.—If the plan’s actuary cer18 tifies under subsection (b)(3)(A) for a plan 

19 year in any funding plan adoption period 

20 or funding improvement period that the 

21 plan is no longer in endangered status and 

22 is not in critical status, the funding plan 

23 adoption period or funding improvement 

24 period, whichever is applicable, shall end as 

25 of the close of the preceding plan year. 


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1 ‘‘(ii) PLANS IN CRITICAL STATUS.—If 

2 the plan’s actuary certifies under sub3 section (b)(3)(A) for a plan year in any 

4 funding plan adoption period or funding 

5 improvement period that the plan is in 

6 critical status, the funding plan adoption 

7 period or funding improvement period, 

8 whichever is applicable, shall end as of the 

9 close of the plan year preceding the first 

10 plan year in the rehabilitation period with 

11 respect to such status. 

12 ‘‘(D) PLANS IN ENDANGERED STATUS AT

13 END OF PERIOD.—If the plan’s actuary certifies 

14 under subsection (b)(3)(A) for the first plan 

15 year following the close of the period described 

16 in subparagraph (A) that the plan is in endan17 gered status, the provisions of this subsection 

18 and subsection (d) shall be applied as if such 

19 first plan year were an initial determination 

20 year, except that the plan may not be amended 

21 in a manner inconsistent with the funding im22 provement plan in effect for the preceding plan 

23 year until a new funding improvement plan is 

24 adopted. 


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1 ‘‘(5) SPECIAL RULES FOR SERIOUSLY ENDAN2 GERED PLANS MORE THAN 70 PERCENT FUNDED.— 

3 ‘‘(A) IN GENERAL.—If the funded percent4 age of a plan in seriously endangered status 

5 was more than 70 percent as of the beginning 

6 of the initial determination year— 

7 ‘‘(i) paragraphs (3)(B) and (4)(B) 

8 shall apply only if the plan’s actuary cer9 tifies, within 30 days after the certification 

10 under subsection (b)(3)(A) for the initial 

11 determination year, that, based on the 

12 terms of the plan and the collective bar13 gaining agreements in effect at the time of 

14 such certification, the plan is not projected 

15 to meet the requirements of paragraph 

16 (3)(A) (without regard to paragraphs 

17 (3)(B) and (4)(B)), and 

18 ‘‘(ii) if there is a certification under 

19 clause (i), the plan may, in formulating its 

20 funding improvement plan, only take into 

21 account the rules of paragraph (3)(B) and 

22 (4)(B) for plan years in the funding im23 provement period beginning on or before 

24 the date on which the last of the collective 


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1 bargaining agreements described in para2 graph (4)(A)(ii) expires. 

3 ‘‘(B) SPECIAL RULE AFTER EXPIRATION

4 OF AGREEMENTS.—Notwithstanding subpara5 graph (A)(ii), if, for any plan year ending after 

6 the date described in subparagraph (A)(ii), the 

7 plan actuary certifies (at the time of the annual 

8 certification under subsection (b)(3)(A) for such 

9 plan year) that, based on the terms of the plan 

10 and collective bargaining agreements in effect 

11 at the time of that annual certification, the plan 

12 is not projected to be able to meet the require13 ments of paragraph (3)(A) (without regard to 

14 paragraphs (3)(B) and (4)(B)), paragraphs 

15 (3)(B) and (4)(B) shall continue to apply for 

16 such year. 

17 ‘‘(6) UPDATES TO FUNDING IMPROVEMENT

18 PLAN AND SCHEDULES.— 

19 ‘‘(A) FUNDING IMPROVEMENT PLAN.—The 

20 plan sponsor shall annually update the funding 

21 improvement plan and shall file the update with 

22 the plan’s annual report under section 104. 

23 ‘‘(B) SCHEDULES.—The plan sponsor shall 

24 annually update any schedule of contribution 


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•HR 4 PCS 

1 rates provided under this subsection to reflect 

2 the experience of the plan. 

3 ‘‘(C) DURATION OF SCHEDULE.—A sched4 ule of contribution rates provided by the plan 

5 sponsor and relied upon by bargaining parties 

6 in negotiating a collective bargaining agreement 

7 shall remain in effect for the duration of that 

8 collective bargaining agreement. 

9 ‘‘(7) IMPOSITION OF DEFAULT SCHEDULE

10 WHERE FAILURE TO ADOPT FUNDING IMPROVEMENT

11 PLAN.— 

12 ‘‘(A) IN GENERAL.—If— 

13 ‘‘(i) a collective bargaining agreement 

14 providing for contributions under a multi15 employer plan that was in effect at the 

16 time the plan entered endangered status 

17 expires, and 

18 ‘‘(ii) after receiving one or more 

19 schedules from the plan sponsor under 

20 paragraph (1)(B), the bargaining parties 

21 with respect to such agreement fail to 

22 agree on changes to contribution or benefit 

23 schedules necessary to meet the applicable 

24 benchmarks in accordance with the fund25 ing improvement plan, 


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1 the plan sponsor shall implement the schedule 

2 described in paragraph (1)(B)(i)(I) beginning 

3 on the date specified in subparagraph (B). 

4 ‘‘(B) DATE OF IMPLEMENTATION.—The 

5 date specified in this subparagraph is the ear6 lier of the date— 

7 ‘‘(i) on which the Secretary certifies 

8 that the parties are at an impasse, or 

9 ‘‘(ii) which is 180 days after the date 

10 on which the collective bargaining agree11 ment described in subparagraph (A) ex12 pires. 

13 ‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For 

14 purposes of this section, the term ‘funding plan 

15 adoption period’ means the period beginning on the 

16 date of the certification under subsection (b)(3)(A) 

17 for the initial determination year and ending on the 

18 day before the first day of the funding improvement 

19 period. 

20 ‘‘(d) RULES FOR OPERATION OF PLAN DURING

21 ADOPTION AND IMPROVEMENT PERIODS.— 

22 ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PE23 RIOD.—During the funding plan adoption period— 

24 ‘‘(A) the plan sponsor may not accept a 

25 collective bargaining agreement or participation 


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•HR 4 PCS 

1 agreement with respect to the multiemployer 

2 plan that provides for— 

3 ‘‘(i) a reduction in the level of con4 tributions for any participants, 

5 ‘‘(ii) a suspension of contributions 

6 with respect to any period of service, or 

7 ‘‘(iii) any new direct or indirect exclu8 sion of younger or newly hired employees 

9 from plan participation, 

10 ‘‘(B) no amendment of the plan which in11 creases the liabilities of the plan by reason of 

12 any increase in benefits, any change in the ac13 crual of benefits, or any change in the rate at 

14 which benefits become nonforfeitable under the 

15 plan may be adopted unless the amendment is 

16 required as a condition of qualification under 

17 part I of subchapter D of chapter 1 of the In18 ternal Revenue Code of 1986 or to comply with 

19 other applicable law, and 

20 ‘‘(C) in the case of a plan in seriously en21 dangered status, the plan sponsor shall take all 

22 reasonable actions which are consistent with the 

23 terms of the plan and applicable law and which 

24 are expected, based on reasonable assumptions, 

25 to achieve— 


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•HR 4 PCS 

1 ‘‘(i) an increase in the plan’s funded 

2 percentage, and 

3 ‘‘(ii) postponement of an accumulated 

4 funding deficiency for at least 1 additional 

5 plan year. 

6 Actions under subparagraph (C) include applications 

7 for extensions of amortization periods under section 

8 304(d), use of the shortfall funding method in mak9 ing funding standard account computations, amend10 ments to the plan’s benefit structure, reductions in 

11 future benefit accruals, and other reasonable actions 

12 consistent with the terms of the plan and applicable 

13 law. 

14 ‘‘(2) COMPLIANCE WITH FUNDING IMPROVE15 MENT PLAN.— 

16 ‘‘(A) IN GENERAL.—A plan may not be 

17 amended after the date of the adoption of a 

18 funding improvement plan so as to be incon19 sistent with the funding improvement plan. 

20 ‘‘(B) NO REDUCTION IN CONTRIBU21 TIONS.—A plan sponsor may not during any 

22 funding improvement period accept a collective 

23 bargaining agreement or participation agree24 ment with respect to the multiemployer plan 

25 that provides for— 


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1 ‘‘(i) a reduction in the level of con2 tributions for any participants, 

3 ‘‘(ii) a suspension of contributions 

4 with respect to any period of service, or 

5 ‘‘(iii) any new direct or indirect exclu6 sion of younger or newly hired employees 

7 from plan participation. 

8 ‘‘(C) SPECIAL RULES FOR BENEFIT IN9 CREASES.—A plan may not be amended after 

10 the date of the adoption of a funding improve11 ment plan so as to increase benefits, including 

12 future benefit accruals, unless the plan actuary 

13 certifies that the benefit increase is consistent 

14 with the funding improvement plan and is paid 

15 for out of contributions not required by the 

16 funding improvement plan to meet the applica17 ble benchmark in accordance with the schedule 

18 contemplated in the funding improvement plan. 

19 ‘‘(e) REHABILITATION PLAN MUST BE ADOPTED

20 FOR MULTIEMPLOYER PLANS IN CRITICAL STATUS.— 

21 ‘‘(1) IN GENERAL.—In any case in which a 

22 multiemployer plan is in critical status for a plan 

23 year, the plan sponsor, in accordance with this sub24 section— 


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1 ‘‘(A) shall adopt a rehabilitation plan not 

2 later than 240 days following the required date 

3 for the actuarial certification of critical status 

4 under subsection (b)(3)(A), and 

5 ‘‘(B) within 30 days after the adoption of 

6 the rehabilitation plan— 

7 ‘‘(i) shall provide to the bargaining 

8 parties 1 or more schedules showing re9 vised benefit structures, revised contribu10 tion structures, or both, which, if adopted, 

11 may reasonably be expected to enable the 

12 multiemployer plan to emerge from critical 

13 status in accordance with the rehabilitation 

14 plan, and 

15 ‘‘(ii) may, if the plan sponsor deems 

16 appropriate, prepare and provide the bar17 gaining parties with additional information 

18 relating to contribution rates or benefit re19 ductions, alternative schedules, or other in20 formation relevant to emerging from crit21 ical status in accordance with the rehabili22 tation plan. 

23 The schedule or schedules described in subparagraph 

24 (B)(i) shall reflect reductions in future benefit ac25 cruals and adjustable benefits, and increases in conVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00263 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tributions, that the plan sponsor determines are rea2 sonably necessary to emerge from critical status. 

3 One schedule shall be designated as the default 

4 schedule and such schedule shall assume that there 

5 are no increases in contributions under the plan 

6 other than the increases necessary to emerge from 

7 critical status after future benefit accruals and other 

8 benefits (other than benefits the reduction or elimi9 nation of which are not permitted under section 

10 204(g)) have been reduced to the maximum extent 

11 permitted by law. 

12 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

13 BEGINS.—Paragraph (1) shall not apply to a plan 

14 year if such year is in a rehabilitation plan adoption 

15 period or rehabilitation period by reason of the plan 

16 being in critical status for a preceding plan year. 

17 For purposes of this section, such preceding plan 

18 year shall be the initial critical year with respect to 

19 the rehabilitation plan to which it relates. 

20 ‘‘(3) REHABILITATION PLAN.—For purposes of 

21 this section— 

22 ‘‘(A) IN GENERAL.—A rehabilitation plan 

23 is a plan which consists of— 

24 ‘‘(i) actions, including options or a 

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1 gaining parties, formulated, based on rea2 sonably anticipated experience and reason3 able actuarial assumptions, to enable the 

4 plan to cease to be in critical status by the 

5 end of the rehabilitation period and may 

6 include reductions in plan expenditures (in7 cluding plan mergers and consolidations), 

8 reductions in future benefit accruals or in9 creases in contributions, if agreed to by the 

10 bargaining parties, or any combination of 

11 such actions, or 

12 ‘‘(ii) if the plan sponsor determines 

13 that, based on reasonable actuarial as14 sumptions and upon exhaustion of all rea15 sonable measures, the plan can not reason16 ably be expected to emerge from critical 

17 status by the end of the rehabilitation pe18 riod, reasonable measures to emerge from 

19 critical status at a later time or to forestall 

20 possible insolvency (within the meaning of 

21 section 4245). 

22 A rehabilitation plan must provide annual 

23 standards for meeting the requirements of such 

24 rehabilitation plan. Such plan shall also include 

25 the schedules required to be provided under 


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1 paragraph (1)(B)(i) and if clause (ii) applies, 

2 shall set forth the alternatives considered, ex3 plain why the plan is not reasonably expected to 

4 emerge from critical status by the end of the re5 habilitation period, and specify when, if ever, 

6 the plan is expected to emerge from critical sta7 tus in accordance with the rehabilitation plan. 

8 ‘‘(B) UPDATES TO REHABILITATION PLAN

9 AND SCHEDULES.— 

10 ‘‘(i) REHABILITATION PLAN.—The 

11 plan sponsor shall annually update the re12 habilitation plan and shall file the update 

13 with the plan’s annual report under section 

14 104. 

15 ‘‘(ii) SCHEDULES.—The plan sponsor 

16 shall annually update any schedule of con17 tribution rates provided under this sub18 section to reflect the experience of the 

19 plan. 

20 ‘‘(iii) DURATION OF SCHEDULE.—A 

21 schedule of contribution rates provided by 

22 the plan sponsor and relied upon by bar23 gaining parties in negotiating a collective 

24 bargaining agreement shall remain in efVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00266 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 fect for the duration of that collective bar2 gaining agreement. 

3 ‘‘(C) IMPOSITION OF DEFAULT SCHEDULE

4 WHERE FAILURE TO ADOPT REHABILITATION

5 PLAN.— 

6 ‘‘(i) IN GENERAL.—If— 

7 ‘‘(I) a collective bargaining agree8 ment providing for contributions 

9 under a multiemployer plan that was 

10 in effect at the time the plan entered 

11 critical status expires, and 

12 ‘‘(II) after receiving one or more 

13 schedules from the plan sponsor under 

14 paragraph (1)(B), the bargaining par15 ties with respect to such agreement 

16 fail to adopt a contribution or benefit 

17 schedules with terms consistent with 

18 the rehabilitation plan and the sched19 ule from the plan sponsor under para20 graph (1)(B)(i), 

21 the plan sponsor shall implement the de22 fault schedule described in the last sen23 tence of paragraph (1) beginning on the 

24 date specified in clause (ii). 


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1 ‘‘(ii) DATE OF IMPLEMENTATION.— 

2 The date specified in this clause is the ear3 lier of the date— 

4 ‘‘(I) on which the Secretary cer5 tifies that the parties are at an im6 passe, or 

7 ‘‘(II) which is 180 days after the 

8 date on which the collective bar9 gaining agreement described in clause 

10 (i) expires. 

11 ‘‘(4) REHABILITATION PERIOD.—For purposes 

12 of this section— 

13 ‘‘(A) IN GENERAL.—The rehabilitation pe14 riod for a plan in critical status is the 10-year 

15 period beginning on the first day of the first 

16 plan year of the multiemployer plan following 

17 the earlier of— 

18 ‘‘(i) the second anniversary of the 

19 date of the adoption of the rehabilitation 

20 plan, or 

21 ‘‘(ii) the expiration of the collective 

22 bargaining agreements in effect on the 

23 date of the due date for the actuarial cer24 tification of critical status for the initial 

25 critical year under subsection (a)(1) and 


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1 covering, as of such date at least 75 per2 cent of the active participants in such mul3 tiemployer plan. 

4 If a plan emerges from critical status as pro5 vided under subparagraph (B) before the end of 

6 such 10-year period, the rehabilitation period 

7 shall end with the plan year preceding the plan 

8 year for which the determination under sub9 paragraph (B) is made. 

10 ‘‘(B) EMERGENCE.—A plan in critical sta11 tus shall remain in such status until a plan 

12 year for which the plan actuary certifies, in ac13 cordance with subsection (b)(3)(A), that the 

14 plan is not projected to have an accumulated 

15 funding deficiency for the plan year or any of 

16 the 9 succeeding plan years, without regard to 

17 the use of the shortfall method and taking into 

18 account any extension of amortization periods 

19 under section 304(d). 

20 ‘‘(5) REHABILITATION PLAN ADOPTION PE21 RIOD.—For purposes of this section, the term ‘reha22 bilitation plan adoption period’ means the period be23 ginning on the date of the certification under sub24 section (b)(3)(A) for the initial critical year and endVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00269 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ing on the day before the first day of the rehabilita2 tion period. 

3 ‘‘(6) LIMITATION ON REDUCTION IN RATES OF

4 FUTURE ACCRUALS.—Any reduction in the rate of 

5 future accruals under the default schedule described 

6 in paragraph (1)(B)(i) shall not reduce the rate of 

7 future accruals below— 

8 ‘‘(A) a monthly benefit (payable as a single 

9 life annuity commencing at the participant’s 

10 normal retirement age) equal to 1 percent of 

11 the contributions required to be made with re12 spect to a participant, or the equivalent stand13 ard accrual rate for a participant or group of 

14 participants under the collective bargaining 

15 agreements in effect as of the first day of the 

16 initial critical year, or 

17 ‘‘(B) if lower, the accrual rate under the 

18 plan on such first day. 

19 The equivalent standard accrual rate shall be deter20 mined by the plan sponsor based on the standard or 

21 average contribution base units which the plan spon22 sor determines to be representative for active partici23 pants and such other factors as the plan sponsor de24 termines to be relevant. Nothing in this paragraph 

25 shall be construed as limiting the ability of the plan 


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1 sponsor to prepare and provide the bargaining par2 ties with alternative schedules to the default sched3 ule that established lower or higher accrual and con4 tribution rates than the rates otherwise described in 

5 this paragraph. 

6 ‘‘(7) AUTOMATIC EMPLOYER SURCHARGE.— 

7 ‘‘(A) IMPOSITION OF SURCHARGE.—Each 

8 employer otherwise obligated to make contribu9 tions for the initial critical year shall be obli10 gated to pay to the plan for such year a sur11 charge equal to 5 percent of the contributions 

12 otherwise required under the applicable collec13 tive bargaining agreement (or other agreement 

14 pursuant to which the employer contributes). 

15 For each succeeding plan year in which the 

16 plan is in critical status for a consecutive period 

17 of years beginning with the initial critical year, 

18 the surcharge shall be 10 percent of the con19 tributions otherwise so required. 

20 ‘‘(B) ENFORCEMENT OF SURCHARGE.— 

21 The surcharges under subparagraph (A) shall 

22 be due and payable on the same schedule as the 

23 contributions on which the surcharges are 

24 based. Any failure to make a surcharge pay25 ment shall be treated as a delinquent contribuVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00271 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tion under section 515 and shall be enforceable 

2 as such. 

3 ‘‘(C) SURCHARGE TO TERMINATE UPON

4 COLLECTIVE BARGAINING AGREEMENT RENEGO5 TIATION.—The surcharge under this paragraph 

6 shall cease to be effective with respect to em7 ployees covered by a collective bargaining agree8 ment (or other agreement pursuant to which 

9 the employer contributes), beginning on the ef10 fective date of a collective bargaining agreement 

11 (or other such agreement) that includes terms 

12 consistent with a schedule presented by the 

13 plan sponsor under paragraph (1)(B)(i), as 

14 modified under subparagraph (B) of paragraph 

15 (3). 

16 ‘‘(D) SURCHARGE NOT TO APPLY UNTIL

17 EMPLOYER RECEIVES NOTICE.—The surcharge 

18 under this paragraph shall not apply to an em19 ployer until 30 days after the employer has 

20 been notified by the plan sponsor that the plan 

21 is in critical status and that the surcharge is in 

22 effect. 

23 ‘‘(E) SURCHARGE NOT TO GENERATE IN24 CREASED BENEFIT ACCRUALS.—Notwith25 standing any provision of a plan to the conVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00272 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 trary, the amount of any surcharge under this 

2 paragraph shall not be the basis for any benefit 

3 accrual under the plan. 

4 ‘‘(8) BENEFIT ADJUSTMENTS.— 

5 ‘‘(A) ADJUSTABLE BENEFITS.— 

6 ‘‘(i) IN GENERAL.—Notwithstanding 

7 section 204(g), the plan sponsor shall, sub8 ject to the notice requirements in subpara9 graph (C), make any reductions to adjust10 able benefits which the plan sponsor deems 

11 appropriate, based upon the outcome of 

12 collective bargaining over the schedule or 

13 schedules provided under paragraph 

14 (1)(B)(i). 

15 ‘‘(ii) EXCEPTION FOR RETIREES.— 

16 Except in the case of adjustable benefits 

17 described in clause (iv)(III), the plan spon18 sor of a plan in critical status shall not re19 duce adjustable benefits of any participant 

20 or beneficiary whose benefit commence21 ment date is before the date on which the 

22 plan provides notice to the participant or 

23 beneficiary under subsection (b)(3)(D) for 

24 the initial critical year. 


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1 ‘‘(iii) PLAN SPONSOR FLEXIBILITY.— 

2 The plan sponsor shall include in the 

3 schedules provided to the bargaining par4 ties an allowance for funding the benefits 

5 of participants with respect to whom con6 tributions are not currently required to be 

7 made, and shall reduce their benefits to 

8 the extent permitted under this title and 

9 considered appropriate by the plan sponsor 

10 based on the plan’s then current overall 

11 funding status. 

12 ‘‘(iv) ADJUSTABLE BENEFIT DE13 FINED.—For purposes of this paragraph, 

14 the term ‘adjustable benefit’ means— 

15 ‘‘(I) benefits, rights, and features 

16 under the plan, including post-retire17 ment death benefits, 60-month guar18 antees, disability benefits not yet in 

19 pay status, and similar benefits, 

20 ‘‘(II) any early retirement benefit 

21 or retirement-type subsidy (within the 

22 meaning of section 204(g)(2)(A)) and 

23 any benefit payment option (other 

24 than the qualified joint-and survivor 

25 annuity), and 


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1 ‘‘(III) benefit increases that 

2 would not be eligible for a guarantee 

3 under section 4022A on the first day 

4 of initial critical year because the in5 creases were adopted (or, if later, took 

6 effect) less than 60 months before 

7 such first day. 

8 ‘‘(B) NORMAL RETIREMENT BENEFITS

9 PROTECTED.—Except as provided in subpara10 graph (A)(iv)(III), nothing in this paragraph 

11 shall be construed to permit a plan to reduce 

12 the level of a participant’s accrued benefit pay13 able at normal retirement age. 

14 ‘‘(C) NOTICE REQUIREMENTS.— 

15 ‘‘(i) IN GENERAL.—No reduction may 

16 be made to adjustable benefits under sub17 paragraph (A) unless notice of such reduc18 tion has been given at least 30 days before 

19 the general effective date of such reduction 

20 for all participants and beneficiaries to— 

21 ‘‘(I) plan participants and bene22 ficiaries, 

23 ‘‘(II) each employer who has an 

24 obligation to contribute (within the 


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1 meaning of section 4212(a)) under the 

2 plan, and 

3 ‘‘(III) each employee organization 

4 which, for purposes of collective bar5 gaining, represents plan participants 

6 employed by such an employer. 

7 ‘‘(ii) CONTENT OF NOTICE.—The no8 tice under clause (i) shall contain— 

9 ‘‘(I) sufficient information to en10 able participants and beneficiaries to 

11 understand the effect of any reduction 

12 on their benefits, including an esti13 mate (on an annual or monthly basis) 

14 of any affected adjustable benefit that 

15 a participant or beneficiary would oth16 erwise have been eligible for as of the 

17 general effective date described in 

18 clause (i), and 

19 ‘‘(II) information as to the rights 

20 and remedies of plan participants and 

21 beneficiaries as well as how to contact 

22 the Department of Labor for further 

23 information and assistance where ap24 propriate. 


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1 ‘‘(iii) FORM AND MANNER.—Any no2 tice under clause (i)— 

3 ‘‘(I) shall be provided in a form 

4 and manner prescribed in regulations 

5 of the Secretary, 

6 ‘‘(II) shall be written in a man7 ner so as to be understood by the av8 erage plan participant, and 

9 ‘‘(III) may be provided in writ10 ten, electronic, or other appropriate 

11 form to the extent such form is rea12 sonably accessible to persons to whom 

13 the notice is required to be provided. 

14 The Secretary shall in the regulations pre15 scribed under subclause (I) establish a 

16 model notice that a plan sponsor may use 

17 to meet the requirements of this subpara18 graph. 

19 ‘‘(9) ADJUSTMENTS DISREGARDED IN WITH20 DRAWAL LIABILITY DETERMINATION.— 

21 ‘‘(A) BENEFIT REDUCTIONS.—Any benefit 

22 reductions under this subsection shall be dis23 regarded in determining a plan’s unfunded vest24 ed benefits for purposes of determining an em25 ployer’s withdrawal liability under section 4201. 


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1 ‘‘(B) SURCHARGES.—Any surcharges 

2 under paragraph (7) shall be disregarded in de3 termining an employer’s withdrawal liability 

4 under section 4211, except for purposes of de5 termining the unfunded vested benefits attrib6 utable to an employer under section 4211(c)(4) 

7 or a comparable method approved under section 

8 4211(c)(5). 

9 ‘‘(C) SIMPLIFIED CALCULATIONS.—The 

10 Pension Benefit Guaranty Corporation shall 

11 prescribe simplified methods for the application 

12 of this paragraph in determining withdrawal li13 ability. 

14 ‘‘(f) RULES FOR OPERATION OF PLAN DURING

15 ADOPTION AND REHABILITATION PERIOD.— 

16 ‘‘(1) COMPLIANCE WITH REHABILITATION

17 PLAN.— 

18 ‘‘(A) IN GENERAL.—A plan may not be 

19 amended after the date of the adoption of a re20 habilitation plan under subsection (e) so as to 

21 be inconsistent with the rehabilitation plan. 

22 ‘‘(B) SPECIAL RULES FOR BENEFIT IN23 CREASES.—A plan may not be amended after 

24 the date of the adoption of a rehabilitation plan 

25 under subsection (e) so as to increase benefits, 


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1 including future benefit accruals, unless the 

2 plan actuary certifies that such increase is paid 

3 for out of additional contributions not con4 templated by the rehabilitation plan, and, after 

5 taking into account the benefit increase, the 

6 multiemployer plan still is reasonably expected 

7 to emerge from critical status by the end of the 

8 rehabilitation period on the schedule con9 templated in the rehabilitation plan. 

10 ‘‘(2) RESTRICTION ON LUMP SUMS AND SIMI11 LAR BENEFITS.— 

12 ‘‘(A) IN GENERAL.—Effective on the date 

13 the notice of certification of the plan’s critical 

14 status for the initial critical year under sub15 section (b)(3)(D) is sent, and notwithstanding 

16 section 204(g), the plan shall not pay— 

17 ‘‘(i) any payment, in excess of the 

18 monthly amount paid under a single life 

19 annuity (plus any social security supple20 ments described in the last sentence of sec21 tion 204(b)(1)(G)), 

22 ‘‘(ii) any payment for the purchase of 

23 an irrevocable commitment from an insurer 

24 to pay benefits, and 


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1 ‘‘(iii) any other payment specified by 

2 the Secretary of the Treasury by regula3 tions. 

4 ‘‘(B) EXCEPTION.—Subparagraph (A) 

5 shall not apply to a benefit which under section 

6 203(e) may be immediately distributed without 

7 the consent of the participant or to any makeup 

8 payment in the case of a retroactive annuity 

9 starting date or any similar payment of benefits 

10 owed with respect to a prior period. 

11 ‘‘(3) ADJUSTMENTS DISREGARDED IN WITH12 DRAWAL LIABILITY DETERMINATION.—Any benefit 

13 reductions under this subsection shall be disregarded 

14 in determining a plan’s unfunded vested benefits for 

15 purposes of determining an employer’s withdrawal li16 ability under section 4201. 

17 ‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE18 RIOD.—During the rehabilitation plan adoption pe19 riod— 

20 ‘‘(A) the plan sponsor may not accept a 

21 collective bargaining agreement or participation 

22 agreement with respect to the multiemployer 

23 plan that provides for— 

24 ‘‘(i) a reduction in the level of con25 tributions for any participants, 


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1 ‘‘(ii) a suspension of contributions 

2 with respect to any period of service, or 

3 ‘‘(iii) any new direct or indirect exclu4 sion of younger or newly hired employees 

5 from plan participation, and 

6 ‘‘(B) no amendment of the plan which in7 creases the liabilities of the plan by reason of 

8 any increase in benefits, any change in the ac9 crual of benefits, or any change in the rate at 

10 which benefits become nonforfeitable under the 

11 plan may be adopted unless the amendment is 

12 required as a condition of qualification under 

13 part I of subchapter D of chapter 1 of the In14 ternal Revenue Code of 1986 or to comply with 

15 other applicable law. 

16 ‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR

17 DECISIONS.—If, within 60 days of the due date for adop18 tion of a funding improvement plan or a rehabilitation 

19 plan under subsection (e), the plan sponsor of a plan in 

20 endangered status or a plan in critical status has not 

21 agreed on a funding improvement plan or rehabilitation 

22 plan, then any member of the board or group that con23 stitutes the plan sponsor may require that the plan spon24 sor enter into an expedited dispute resolution procedure 


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1 for the development and adoption of a funding improve2 ment plan or rehabilitation plan. 

3 ‘‘(h) NONBARGAINED PARTICIPATION.— 

4 ‘‘(1) BOTH BARGAINED AND NONBARGAINED

5 EMPLOYEE-PARTICIPANTS.—In the case of an em6 ployer that contributes to a multiemployer plan with 

7 respect to both employees who are covered by one or 

8 more collective bargaining agreements and employ9 ees who are not so covered, if the plan is in endan10 gered status or in critical status, benefits of and 

11 contributions for the nonbargained employees, in12 cluding surcharges on those contributions, shall be 

13 determined as if those nonbargained employees were 

14 covered under the first to expire of the employer’s 

15 collective bargaining agreements in effect when the 

16 plan entered endangered or critical status. 

17 ‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In 

18 the case of an employer that contributes to a multi19 employer plan only with respect to employees who 

20 are not covered by a collective bargaining agreement, 

21 this section shall be applied as if the employer were 

22 the bargaining party, and its participation agree23 ment with the plan were a collective bargaining 

24 agreement with a term ending on the first day of the 

25 plan year beginning after the employer is provided 


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1 the schedule or schedules described in subsections 

2 (c) and (e). 

3 ‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For pur4 poses of this section— 

5 ‘‘(1) BARGAINING PARTY.—The term ‘bar6 gaining party’ means— 

7 ‘‘(A)(i) except as provided in clause (ii), an 

8 employer who has an obligation to contribute 

9 under the plan; or 

10 ‘‘(ii) in the case of a plan described under 

11 section 404(c) of the Internal Revenue Code of 

12 1986, or a continuation of such a plan, the as13 sociation of employers that is the employer set14 tlor of the plan; and 

15 ‘‘(B) an employee organization which, for 

16 purposes of collective bargaining, represents 

17 plan participants employed by an employer who 

18 has an obligation to contribute under the plan. 

19 ‘‘(2) FUNDED PERCENTAGE.—The term ‘fund20 ed percentage’ means the percentage equal to a frac21 tion— 

22 ‘‘(A) the numerator of which is the value 

23 of the plan’s assets, as determined under sec24 tion 304(c)(2), and 


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1 ‘‘(B) the denominator of which is the ac2 crued liability of the plan, determined using ac3 tuarial assumptions described in section 

4 304(c)(3). 

5 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.— 

6 The term ‘accumulated funding deficiency’ has the 

7 meaning given such term in section 304(a). 

8 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active 

9 participant’ means, in connection with a multiem10 ployer plan, a participant who is in covered service 

11 under the plan. 

12 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac13 tive participant’ means, in connection with a multi14 employer plan, a participant, or the beneficiary or 

15 alternate payee of a participant, who— 

16 ‘‘(A) is not in covered service under the 

17 plan, and 

18 ‘‘(B) is in pay status under the plan or has 

19 a nonforfeitable right to benefits under the 

20 plan. 

21 ‘‘(6) PAY STATUS.—A person is in pay status 

22 under a multiemployer plan if— 

23 ‘‘(A) at any time during the current plan 

24 year, such person is a participant or beneficiary 

25 under the plan and is paid an early, late, norVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00284 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 mal, or disability retirement benefit under the 

2 plan (or a death benefit under the plan related 

3 to a retirement benefit), or 

4 ‘‘(B) to the extent provided in regulations 

5 of the Secretary of the Treasury, such person 

6 is entitled to such a benefit under the plan. 

7 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term 

8 ‘obligation to contribute’ has the meaning given such 

9 term under section 4212(a). 

10 ‘‘(8) ACTUARIAL METHOD.—Notwithstanding 

11 any other provision of this section, the actuary’s de12 terminations with respect to a plan’s normal cost, 

13 actuarial accrued liability, and improvements in a 

14 plan’s funded percentage under this section shall be 

15 based upon the unit credit funding method (whether 

16 or not that method is used for the plan’s actuarial 

17 valuation). 

18 ‘‘(9) PLAN SPONSOR.—In the case of a plan de19 scribed under section 404(c) of the Internal Revenue 

20 Code of 1986, or a continuation of such a plan, the 

21 term ‘plan sponsor’ means the bargaining parties de22 scribed under paragraph (1). 

23 ‘‘(10) BENEFIT COMMENCEMENT DATE.—The 

24 term ‘benefit commencement date’ means the annu25 ity starting date (or in the case of a retroactive anVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00285 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 nuity starting date, the date on which benefit pay2 ments begin).’’. 

3 (b) ENFORCEMENT.—Section 502 of the Employee 

4 Retirement Income Security Act of 1974 (29 U.S.C. 1132) 

5 is amended— 

6 (1) in subsection (a)(6) by striking ‘‘(6), or 

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

8 (2) by redesignating subsection (c)(8) as sub9 section (c)(9); and 

10 (3) by inserting after subsection (c)(7) the fol11 lowing new paragraph: 

12 ‘‘(8) The Secretary may assess against any plan 

13 sponsor of a multiemployer plan a civil penalty of 

14 not more than $1,100 per day— 

15 ‘‘(A) for each violation by such sponsor of 

16 the requirement under section 305 to adopt by 

17 the deadline established in that section a fund18 ing improvement plan or rehabilitation plan 

19 with respect to a multiemployer which is in en20 dangered or critical status, or 

21 ‘‘(B) in the case of a plan in endangered 

22 status which is not in seriously endangered sta23 tus, for failure by the plan to meet the applica24 ble benchmarks under section 305 by the end of 


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1 the funding improvement period with respect to 

2 the plan.’’. 

3 (c) CAUSE OF ACTION TO COMPEL ADOPTION OR IM4 PLEMENTATION OF FUNDING IMPROVEMENT OR REHA5 BILITATION PLAN.—Section 502(a) of the Employee Re6 tirement Income Security Act of 1974 is amended by 

7 striking ‘‘or’’ at the end of paragraph (8), by striking the 

8 period at the end of paragraph (9) and inserting ‘‘; or’’ 

9 and by adding at the end the following: 

10 ‘‘(10) in the case of a multiemployer plan that 

11 has been certified by the actuary to be in endan12 gered or critical status under section 305, if the plan 

13 sponsor— 

14 ‘‘(A) has not adopted a funding improve15 ment or rehabilitation plan under that section 

16 by the deadline established in such section, or 

17 ‘‘(B) fails to update or comply with the 

18 terms of the funding improvement or rehabilita19 tion plan in accordance with the requirements 

20 of such section, 

21 by an employer that has an obligation to contribute 

22 with respect to the multiemployer plan or an em23 ployee organization that represents active partici24 pants in the multiemployer plan, for an order com25 pelling the plan sponsor to adopt a funding improveVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00287 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ment or rehabilitation plan or to update or comply 

2 with the terms of the funding improvement or reha3 bilitation plan in accordance with the requirements 

4 of such section and the funding improvement or re5 habilitation plan.’’. 

6 (d) NO ADDITIONAL CONTRIBUTIONS REQUIRED.— 

7 Section 302(b) of the Employee Retirement Income Secu8 rity Act of 1974, as amended by this Act, is amended by 

9 adding at the end the following new paragraph: 

10 ‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STA11 TUS.—Paragraph (1) shall not apply in the case of 

12 a multiemployer plan for any plan year in which the 

13 plan is in critical status pursuant to section 305. 

14 This paragraph shall only apply if the plan adopts 

15 a rehabilitation plan in accordance with section 

16 305(e) and complies with the terms of such rehabili17 tation plan (and any updates or modifications of the 

18 plan).’’. 

19 (e) CONFORMING AMENDMENT.—The table of con20 tents in section 1 of such Act (as amended by the pre21 ceding provisions of this Act) is amended by inserting 

22 after the item relating to section 304 the following new 

23 item: 

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered status or critical status.’’. 

24 (f) EFFECTIVE DATES.— 


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

2 this section shall apply with respect to plan years be3 ginning after 2007. 

4 (2) SPECIAL RULE FOR CERTAIN NOTICES.—In 

5 any case in which a plan’s actuary certifies that it 

6 is reasonably expected that a multiemployer plan will 

7 be in critical status under section 305(b)(3) of the 

8 Employee Retirement Income Security Act of 1974, 

9 as added by this section, with respect to the first 

10 plan year beginning after 2007, the notice required 

11 under subparagraph (D) of such section may be pro12 vided at any time after the date of enactment, so 

13 long as it is provided on or before the last date for 

14 providing the notice under such subparagraph. 

15 (3) SPECIAL RULE FOR CERTAIN RESTORED

16 BENEFITS.—In the case of a multiemployer plan— 

17 (A) with respect to which benefits were re18 duced pursuant to a plan amendment adopted 

19 on or after January 1, 2002, and before June 

20 30, 2005, and 

21 (B) which, pursuant to the plan document, 

22 the trust agreement, or a formal written com23 munication from the plan sponsor to partici24 pants provided before June 30, 2005, provided 

25 for the restoration of such benefits, 


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1 the amendments made by this section shall not apply 

2 to such benefit restorations to the extent that any 

3 restriction on the providing or accrual of such bene4 fits would otherwise apply by reason of such amend5 ments. 

6 SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MUL7 TIEMPLOYER PLANS. 

8 (a) ADVANCE DETERMINATION OF IMPENDING IN9 SOLVENCY OVER 5 YEARS.—Section 4245(d)(1) of the 

10 Employee Retirement Income Security Act of 1974 (29 

11 U.S.C. 1426(d)(1)) is amended— 

12 (1) by striking ‘‘3 plan years’’ the second place 

13 it appears and inserting ‘‘5 plan years’’; and 

14 (2) by adding at the end the following new sen15 tence: ‘‘If the plan sponsor makes such a determina16 tion that the plan will be insolvent in any of the next 

17 5 plan years, the plan sponsor shall make the com18 parison under this paragraph at least annually until 

19 the plan sponsor makes a determination that the 

20 plan will not be insolvent in any of the next 5 plan 

21 years.’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply with respect to determinations 

24 made in plan years beginning after 2007. 


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1 SEC. 204. WITHDRAWAL LIABILITY REFORMS. 

2 (a) UPDATE OF RULES RELATING TO LIMITATIONS

3 ON WITHDRAWAL LIABILITY.— 

4 (1) INCREASE IN LIMITS.—Section 4225(a)(2) 

5 of such Act (29 U.S.C. 1405(a)(2)) is amended by 

6 striking the table contained therein and inserting the 

7 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. 

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.’’. 

8 (2) PLANS USING ATTRIBUTABLE METHOD.— 

9 Section 4225(a)(1)(B) of such Act (29 U.S.C. 

10 1405(a)(1)(B)) is amended to read as follows: 

11 ‘‘(B) in the case of a plan using the attrib12 utable method of allocating withdrawal liability, 


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1 the unfunded vested benefits attributable to em2 ployees of the employer.’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to sales occurring on 

5 or after January 1, 2007. 

6 (b) WITHDRAWAL LIABILITY CONTINUES IF WORK

7 CONTRACTED OUT.— 

8 (1) IN GENERAL.—Clause (i) of section 

9 4205(b)(2)(A) of such Act (29 U.S.C. 

10 1385(b)(2)(A)) is amended by inserting ‘‘or to an 

11 entity or entities owned or controlled by the em12 ployer’’ after ‘‘to another location’’. 

13 (2) EFFECTIVE DATE.—The amendment made 

14 by this subsection shall apply with respect to work 

15 transferred on or after the date of the enactment of 

16 this Act. 

17 (c) APPLICATION OF RULES TO PLANS PRIMARILY

18 COVERING EMPLOYEES IN THE BUILDING AND CON19 STRUCTION INDUSTRY.— 

20 (1) IN GENERAL.—Section 4210(b) of such Act 

21 (29 U.S.C. 1390(b)) is amended— 

22 (A) by striking paragraph (1); and 

23 (B) by redesignating paragraphs (2) 

24 through (4) as paragraphs (1) through (3), re25 spectively. 


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1 (2) FRESH START OPTION.—Section 4211(c)(5) 

2 of such Act (29 U.S.C. 1391(c)(5)) is amended by 

3 adding at the end the following new subparagraph: 

4 ‘‘(E) FRESH START OPTION.—Notwith5 standing paragraph (1), a plan may be amend6 ed to provide that the withdrawal liability meth7 od described in subsection (b) shall be applied 

8 by substituting the plan year which is specified 

9 in the amendment and for which the plan has 

10 no unfunded vested benefits for the plan year 

11 ending before September 26, 1980.’’. 

12 (3) EFFECTIVE DATE.—The amendments made 

13 by this subsection shall apply with respect to plan 

14 withdrawals occurring on or after January 1, 2007. 

15 (d) PROCEDURES APPLICABLE TO DISPUTES IN16 VOLVING PENSION PLAN WITHDRAWAL LIABILITY.— 

17 (1) IN GENERAL.—Section 4221 of Employee 

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

19 1401) is amended by adding at the end the fol20 lowing: 

21 ‘‘(g) PROCEDURES APPLICABLE TO CERTAIN DIS22 PUTES.— 

23 ‘‘(1) IN GENERAL.—If— 

24 ‘‘(A) a plan sponsor of a plan determines 

25 that— 


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1 ‘‘(i) a complete or partial withdrawal 

2 of an employer has occurred, or 

3 ‘‘(ii) an employer is liable for with4 drawal liability payments with respect to 

5 such complete or partial withdrawal, and 

6 ‘‘(B) such determination is based in whole 

7 or in part on a finding by the plan sponsor 

8 under section 4212(c) that a principal purpose 

9 of any transaction which occurred after Decem10 ber 31, 1998, and at least 5 years (2 years in 

11 the case of a small employer) before the date of 

12 the complete or partial withdrawal was to evade 

13 or avoid withdrawal liability under this subtitle, 

14 then the person against which the withdrawal liabil15 ity is assessed based solely on the application of sec16 tion 4212(c) may elect to use the special rule under 

17 paragraph (2) in applying subsection (d) of this sec18 tion and section 4219(c) to such person. 

19 ‘‘(2) SPECIAL RULE.—Notwithstanding sub20 section (d) and section 4219(c), if an electing person 

21 contests the plan sponsor’s determination with re22 spect to withdrawal liability payments under para23 graph (1) through an arbitration proceeding pursu24 ant to subsection (a), through an action brought in 

25 a court of competent jurisdiction for review of such 


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1 an arbitration decision, or as otherwise permitted by 

2 law, the electing person shall not be obligated to 

3 make the withdrawal liability payments until a final 

4 decision in the arbitration proceeding, or in court, 

5 upholds the plan sponsor’s determination, but only if 

6 the electing person— 

7 ‘‘(A) provides notice to the plan sponsor of 

8 its election to apply the special rule in this 

9 paragraph within 90 days after the plan spon10 sor notifies the electing person of its liability by 

11 reason of the application of section 4212(c); 

12 and 

13 ‘‘(B) if a final decision in the arbitration 

14 proceeding, or in court, of the withdrawal liabil15 ity dispute has not been rendered within 12 

16 months from the date of such notice, the elect17 ing person provides to the plan, effective as of 

18 the first day following the 12-month period, a 

19 bond issued by a corporate surety company that 

20 is an acceptable surety for purposes of section 

21 412 of this Act, or an amount held in escrow 

22 by a bank or similar financial institution satis23 factory to the plan, in an amount equal to the 

24 sum of the withdrawal liability payments that 

25 would otherwise be due under subsection (d) 


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1 and section 4219(c) for the 12-month period 

2 beginning with the first anniversary of such no3 tice. Such bond or escrow shall remain in effect 

4 until there is a final decision in the arbitration 

5 proceeding, or in court, of the withdrawal liabil6 ity dispute, at which time such bond or escrow 

7 shall be paid to the plan if such final decision 

8 upholds the plan sponsor’s determination. 

9 ‘‘(3) DEFINITION OF SMALL EMPLOYER.—For 

10 purposes of this subsection— 

11 ‘‘(A) IN GENERAL.—The term ‘small em12 ployer’ means any employer which, for the cal13 endar year in which the transaction referred to 

14 in paragraph (1)(B) occurred and for each of 

15 the 3 preceding years, on average— 

16 ‘‘(i) employs not more than 500 em17 ployees, and 

18 ‘‘(ii) is required to make contributions 

19 to the plan for not more than 250 employ20 ees. 

21 ‘‘(B) CONTROLLED GROUP.—Any group 

22 treated as a single employer under subsection 

23 (b)(1) of section 4001, without regard to any 

24 transaction that was a basis for the plan’s find25 ing under section 4212, shall be treated as a 


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1 single employer for purposes of this subpara2 graph. 

3 ‘‘(4) ADDITIONAL SECURITY PENDING RESOLU4 TION OF DISPUTE.—If a withdrawal liability dispute 

5 to which this subsection applies is not concluded by 

6 12 months after the electing person posts the bond 

7 or escrow described in paragraph (2), the electing 

8 person shall, at the start of each succeeding 12- 

9 month period, provide an additional bond or amount 

10 held in escrow equal to the sum of the withdrawal 

11 liability payments that would otherwise be payable to 

12 the plan during that period. 

13 ‘‘(5) The liability of the party furnishing a bond 

14 or escrow under this subsection shall be reduced, 

15 upon the payment of the bond or escrow to the plan, 

16 by the amount thereof.’’ 

17 (2) EFFECTIVE DATE.—The amendments made 

18 by this subsection shall apply to any person that re19 ceives a notification under section 4219(b)(1) of the 

20 Employee Retirement Income Security Act of 1974 

21 on or after the date of enactment of this Act with 

22 respect to a transaction that occurred after Decem23 ber 31, 1998. 


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1 SEC. 205. PROHIBITION ON RETALIATION AGAINST EM2 PLOYERS EXERCISING THEIR RIGHTS TO PE3 TITION THE FEDERAL GOVERNMENT. 

4 Section 510 of the Employee Retirement Income Se5 curity Act of 1974 (29 U.S.C. 1140) is amended by insert6 ing before the last sentence thereof the following new sen7 tence:‘‘In the case of a multiemployer plan, it shall be un8 lawful for the plan sponsor or any other person to dis9 criminate against any contributing employer for exercising 

10 rights under this Act or for giving information or testi11 fying in any inquiry or proceeding relating to this Act be12 fore Congress.’’ 

13 SEC. 206. SPECIAL RULE FOR CERTAIN BENEFITS FUNDED 

14 UNDER AN AGREEMENT APPROVED BY THE 

15 PENSION BENEFIT GUARANTY CORPORA16 TION. 

17 In the case of a multiemployer plan that is a party 

18 to an agreement that was approved by the Pension Benefit 

19 Guaranty Corporation prior to June 30, 2005, and that— 

20 (1) increases benefits, and 

21 (2) provides for special withdrawal liability 

22 rules under section 4203(f) of the Employee Retire23 ment Income Security Act of 1974 (29 U.S.C. 

24 1383), 

25 the amendments made by sections 201, 202, 211, and 212 

26 of this Act shall not apply to the benefit increases under 


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1 any plan amendment adopted prior to June 30, 2005, that 

2 are funded pursuant to such agreement if the plan is fund3 ed in compliance with such agreement (and any amend4 ments thereto). 

5 Subtitle B—Amendments to 

6 Internal Revenue Code of 1986 

7 SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED 

8 BENEFIT PLANS. 

9 (a) IN GENERAL.—Subpart A of part III of sub10 chapter D of chapter 1 of the Internal Revenue Code of 

11 1986 (as added by this Act) is amended by inserting after 

12 section 430 the following new section: 

13 ‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEM14 PLOYER PLANS. 

15 ‘‘(a) IN GENERAL.—For purposes of section 412, the 

16 accumulated funding deficiency of a multiemployer plan 

17 for any plan year is— 

18 ‘‘(1) except as provided in paragraph (2), the 

19 amount, determined as of the end of the plan year, 

20 equal to the excess (if any) of the total charges to 

21 the funding standard account of the plan for all plan 

22 years (beginning with the first plan year for which 

23 this part applies to the plan) over the total credits 

24 to such account for such years, and 


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1 ‘‘(2) if the multiemployer plan is in reorganiza2 tion for any plan year, the accumulated funding de3 ficiency of the plan determined under section 4243 

4 of the Employee Retirement Income Security Act of 

5 1974. 

6 ‘‘(b) FUNDING STANDARD ACCOUNT.— 

7 ‘‘(1) ACCOUNT REQUIRED.—Each multiem8 ployer plan to which this part applies shall establish 

9 and maintain a funding standard account. Such ac10 count shall be credited and charged solely as pro11 vided in this section. 

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

13 the funding standard account shall be charged with 

14 the sum of— 

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

16 plan year, 

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

18 equal annual installments (until fully amor19 tized)— 

20 ‘‘(i) in the case of a plan which comes 

21 into existence on or after January 1, 2008, 

22 the unfunded past service liability under 

23 the plan on the first day of the first plan 

24 year to which this section applies, over a 

25 period of 15 plan years, 


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1 ‘‘(ii) separately, with respect to each 

2 plan year, the net increase (if any) in un3 funded past service liability under the plan 

4 arising from plan amendments adopted in 

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

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

7 plan year, the net experience loss (if any) 

8 under the plan, over a period of 15 plan 

9 years, and 

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

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

12 from changes in actuarial assumptions 

13 used under the plan, over a period of 15 

14 plan years, 

15 ‘‘(C) the amount necessary to amortize 

16 each waived funding deficiency (within the 

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

18 plan year in equal annual installments (until 

19 fully amortized) over a period of 15 plan years, 

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

21 equal annual installments (until fully amor22 tized) over a period of 5 plan years any amount 

23 credited to the funding standard account under 

24 section 412(b)(3)(D) (as in effect on the day 


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1 before the date of the enactment of the Pension 

2 Protection Act of 2006), and 

3 ‘‘(E) the amount necessary to amortize in 

4 equal annual installments (until fully amor5 tized) over a period of 20 years the contribu6 tions which would be required to be made under 

7 the plan but for the provisions of section 

8 412(c)(7)(A)(i)(I) (as in effect on the day be9 fore the date of the enactment of the Pension 

10 Protection Act of 2006). 

11 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year, 

12 the funding standard account shall be credited with 

13 the sum of— 

14 ‘‘(A) the amount considered contributed by 

15 the employer to or under the plan for the plan 

16 year, 

17 ‘‘(B) the amount necessary to amortize in 

18 equal annual installments (until fully amor19 tized)— 

20 ‘‘(i) separately, with respect to each 

21 plan year, the net decrease (if any) in un22 funded past service liability under the plan 

23 arising from plan amendments adopted in 

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


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1 ‘‘(ii) separately, with respect to each 

2 plan year, the net experience gain (if any) 

3 under the plan, over a period of 15 plan 

4 years, and 

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

6 plan year, the net gain (if any) resulting 

7 from changes in actuarial assumptions 

8 used under the plan, over a period of 15 

9 plan years, 

10 ‘‘(C) the amount of the waived funding de11 ficiency (within the meaning of section 

12 412(c)(3)) for the plan year, and 

13 ‘‘(D) in the case of a plan year for which 

14 the accumulated funding deficiency is deter15 mined under the funding standard account if 

16 such plan year follows a plan year for which 

17 such deficiency was determined under the alter18 native minimum funding standard under section 

19 412(g) (as in effect on the day before the date 

20 of the enactment of the Pension Protection Act 

21 of 2006), the excess (if any) of any debit bal22 ance in the funding standard account (deter23 mined without regard to this subparagraph) 

24 over any debit balance in the alternative min25 imum funding standard account. 


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1 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AM2 ORTIZED IN PLAN YEARS BEFORE 2008.—In the case 

3 of any amount amortized under section 412(b) (as 

4 in effect on the day before the date of the enactment 

5 of the Pension Protection Act of 2006) over any pe6 riod beginning with a plan year beginning before 

7 2008 in lieu of the amortization described in para8 graphs (2)(B) and (3)(B), such amount shall con9 tinue to be amortized under such section as so in ef10 fect. 

11 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS

12 TO BE AMORTIZED.—Under regulations prescribed 

13 by the Secretary, amounts required to be amortized 

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

15 may be— 

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

17 under such paragraph to be amortized over a 

18 period determined on the basis of the remaining 

19 amortization period for all items entering into 

20 such combined amount, and 

21 ‘‘(B) may be offset against amounts re22 quired to be amortized under the other such 

23 paragraph, with the resulting amount to be am24 ortized over a period determined on the basis of 

25 the remaining amortization periods for all items 


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1 entering into whichever of the two amounts 

2 being offset is the greater. 

3 ‘‘(6) INTEREST.—The funding standard ac4 count (and items therein) shall be charged or cred5 ited (as determined under regulations prescribed by 

6 the Secretary of the Treasury) with interest at the 

7 appropriate rate consistent with the rate or rates of 

8 interest used under the plan to determine costs. 

9 ‘‘(7) SPECIAL RULES RELATING TO CHARGES

10 AND CREDITS TO FUNDING STANDARD ACCOUNT.— 

11 For purposes of this part— 

12 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

13 amount received by a multiemployer plan in 

14 payment of all or part of an employer’s with15 drawal liability under part 1 of subtitle E of 

16 title IV of the Employee Retirement Income Se17 curity Act of 1974 shall be considered an 

18 amount contributed by the employer to or 

19 under the plan. The Secretary may prescribe by 

20 regulation additional charges and credits to a 

21 multiemployer plan’s funding standard account 

22 to the extent necessary to prevent withdrawal li23 ability payments from being unduly reflected as 

24 advance funding for plan liabilities. 


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1 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM2 PLOYER PLAN LEAVES REORGANIZATION.—If a 

3 multiemployer plan is not in reorganization in 

4 the plan year but was in reorganization in the 

5 immediately preceding plan year, any balance in 

6 the funding standard account at the close of 

7 such immediately preceding plan year— 

8 ‘‘(i) shall be eliminated by an offset9 ting credit or charge (as the case may be), 

10 but 

11 ‘‘(ii) shall be taken into account in 

12 subsequent plan years by being amortized 

13 in equal annual installments (until fully 

14 amortized) over 30 plan years. 

15 The preceding sentence shall not apply to the 

16 extent of any accumulated funding deficiency 

17 under section 4243(a) of such Act as of the end 

18 of the last plan year that the plan was in reor19 ganization. 

20 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

21 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

22 FUND.—Any amount paid by a plan during a 

23 plan year to the Pension Benefit Guaranty Cor24 poration pursuant to section 4222 of such Act 

25 or to a fund exempt under section 501(c)(22) 


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1 pursuant to section 4223 of such Act shall re2 duce the amount of contributions considered re3 ceived by the plan for the plan year. 

4 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

5 PAYMENTS.—Any amount paid by an employer 

6 pending a final determination of the employer’s 

7 withdrawal liability under part 1 of subtitle E 

8 of title IV of such Act and subsequently re9 funded to the employer by the plan shall be 

10 charged to the funding standard account in ac11 cordance with regulations prescribed by the 

12 Secretary. 

13 ‘‘(E) ELECTION FOR DEFERRAL OF

14 CHARGE FOR PORTION OF NET EXPERIENCE

15 LOSS.—If an election is in effect under section 

16 412(b)(7)(F) (as in effect on the day before the 

17 date of the enactment of the Pension Protection 

18 Act of 2006) for any plan year, the funding 

19 standard account shall be charged in the plan 

20 year to which the portion of the net experience 

21 loss deferred by such election was deferred with 

22 the amount so deferred (and paragraph 

23 (2)(B)(iii) shall not apply to the amount so 

24 charged). 


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1 ‘‘(F) FINANCIAL ASSISTANCE.—Any 

2 amount of any financial assistance from the 

3 Pension Benefit Guaranty Corporation to any 

4 plan, and any repayment of such amount, shall 

5 be taken into account under this section and 

6 section 412 in such manner as is determined by 

7 the Secretary. 

8 ‘‘(G) SHORT-TERM BENEFITS.—To the ex9 tent that any plan amendment increases the un10 funded past service liability under the plan by 

11 reason of an increase in benefits which are not 

12 payable as a life annuity but are payable under 

13 the terms of the plan for a period that does not 

14 exceed 14 years from the effective date of the 

15 amendment, paragraph (2)(B)(ii) shall be ap16 plied separately with respect to such increase in 

17 unfunded past service liability by substituting 

18 the number of years of the period during which 

19 such benefits are payable for ‘15’. 

20 ‘‘(c) ADDITIONAL RULES.— 

21 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

22 FUNDING METHOD.—For purposes of this part, nor23 mal costs, accrued liability, past service liabilities, 

24 and experience gains and losses shall be determined 


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1 under the funding method used to determine costs 

2 under the plan. 

3 ‘‘(2) VALUATION OF ASSETS.— 

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

5 part, the value of the plan’s assets shall be de6 termined on the basis of any reasonable actu7 arial method of valuation which takes into ac8 count fair market value and which is permitted 

9 under regulations prescribed by the Secretary. 

10 ‘‘(B) ELECTION WITH RESPECT TO

11 BONDS.—The value of a bond or other evidence 

12 of indebtedness which is not in default as to 

13 principal or interest may, at the election of the 

14 plan administrator, be determined on an amor15 tized basis running from initial cost at purchase 

16 to par value at maturity or earliest call date. 

17 Any election under this subparagraph shall be 

18 made at such time and in such manner as the 

19 Secretary shall by regulations provide, shall 

20 apply to all such evidences of indebtedness, and 

21 may be revoked only with the consent of the 

22 Secretary. 

23 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA24 SONABLE.—For purposes of this section, all costs, li25 abilities, rates of interest, and other factors under 


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1 the plan shall be determined on the basis of actu2 arial assumptions and methods— 

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

4 into account the experience of the plan and rea5 sonable expectations), and 

6 ‘‘(B) which, in combination, offer the actu7 ary’s best estimate of anticipated experience 

8 under the plan. 

9 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX10 PERIENCE GAIN OR LOSS.—For purposes of this sec11 tion, if— 

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

13 Security Act or in other retirement benefits cre14 ated under Federal or State law, or 

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

16 ‘wages’ under section 3121, or a change in the 

17 amount of such wages taken into account under 

18 regulations prescribed for purposes of section 

19 401(a)(5), 

20 results in an increase or decrease in accrued liability 

21 under a plan, such increase or decrease shall be 

22 treated as an experience loss or gain. 

23 ‘‘(5) FULL FUNDING.—If, as of the close of a 

24 plan year, a plan would (without regard to this paraVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00310 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 graph) have an accumulated funding deficiency in 

2 excess of the full funding limitation— 

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

4 credited with the amount of such excess, and 

5 ‘‘(B) all amounts described in subpara6 graphs (B), (C), and (D) of subsection (b) (2) 

7 and subparagraph (B) of subsection (b)(3) 

8 which are required to be amortized shall be con9 sidered fully amortized for purposes of such 

10 subparagraphs. 

11 ‘‘(6) FULL-FUNDING LIMITATION.— 

12 ‘‘(A) IN GENERAL.—For purposes of para13 graph (5), the term ‘full-funding limitation’ 

14 means the excess (if any) of— 

15 ‘‘(i) the accrued liability (including 

16 normal cost) under the plan (determined 

17 under the entry age normal funding meth18 od if such accrued liability cannot be di19 rectly calculated under the funding method 

20 used for the plan), over 

21 ‘‘(ii) the lesser of— 

22 ‘‘(I) the fair market value of the 

23 plan’s assets, or 

24 ‘‘(II) the value of such assets de25 termined under paragraph (2). 


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1 ‘‘(B) MINIMUM AMOUNT.— 

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

3 the full-funding limitation determined 

4 under subparagraph (A) be less than the 

5 excess (if any) of— 

6 ‘‘(I) 90 percent of the current li7 ability of the plan (including the ex8 pected increase in current liability due 

9 to benefits accruing during the plan 

10 year), over 

11 ‘‘(II) the value of the plan’s as12 sets determined under paragraph (2). 

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

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

15 credit balance in the funding standard ac16 count. 

17 ‘‘(C) FULL FUNDING LIMITATION.—For 

18 purposes of this paragraph, unless otherwise 

19 provided by the plan, the accrued liability under 

20 a multiemployer plan shall not include benefits 

21 which are not nonforfeitable under the plan 

22 after the termination of the plan (taking into 

23 consideration section 411(d)(3)). 

24 ‘‘(D) CURRENT LIABILITY.—For purposes 

25 of this paragraph— 


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1 ‘‘(i) IN GENERAL.—The term ‘current 

2 liability’ means all liabilities to employees 

3 and their beneficiaries under the plan. 

4 ‘‘(ii) TREATMENT OF UNPREDICTABLE

5 CONTINGENT EVENT BENEFITS.—For pur6 poses of clause (i), any benefit contingent 

7 on an event other than— 

8 ‘‘(I) age, service, compensation, 

9 death, or disability, or 

10 ‘‘(II) an event which is reason11 ably and reliably predictable (as deter12 mined by the Secretary), 

13 shall not be taken into account until the 

14 event on which the benefit is contingent oc15 curs. 

16 ‘‘(iii) INTEREST RATE USED.—The 

17 rate of interest used to determine current 

18 liability under this paragraph shall be the 

19 rate of interest determined under subpara20 graph (E). 

21 ‘‘(iv) MORTALITY TABLES.— 

22 ‘‘(I) COMMISSIONERS’ STANDARD

23 TABLE.—In the case of plan years be24 ginning before the first plan year to 

25 which the first tables prescribed under 


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1 subclause (II) apply, the mortality 

2 table used in determining current li3 ability under this paragraph shall be 

4 the table prescribed by the Secretary 

5 which is based on the prevailing com6 missioners’ standard table (described 

7 in section 807(d)(5)(A)) used to de8 termine reserves for group annuity 

9 contracts issued on January 1, 1993. 

10 ‘‘(II) SECRETARIAL AUTHOR11 ITY.—The Secretary may by regula12 tion prescribe for plan years beginning 

13 after December 31, 1999, mortality 

14 tables to be used in determining cur15 rent liability under this subsection. 

16 Such tables shall be based upon the 

17 actual experience of pension plans and 

18 projected trends in such experience. 

19 In prescribing such tables, the Sec20 retary shall take into account results 

21 of available independent studies of 

22 mortality of individuals covered by 

23 pension plans. 


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1 ‘‘(v) SEPARATE MORTALITY TABLES

2 FOR THE DISABLED.—Notwithstanding 

3 clause (iv)— 

4 ‘‘(I) IN GENERAL.—The Sec5 retary shall establish mortality tables 

6 which may be used (in lieu of the ta7 bles under clause (iv)) to determine 

8 current liability under this subsection 

9 for individuals who are entitled to 

10 benefits under the plan on account of 

11 disability. The Secretary shall estab12 lish separate tables for individuals 

13 whose disabilities occur in plan years 

14 beginning before January 1, 1995, 

15 and for individuals whose disabilities 

16 occur in plan years beginning on or 

17 after such date. 

18 ‘‘(II) SPECIAL RULE FOR DIS19 ABILITIES OCCURRING AFTER 1994.— 

20 In the case of disabilities occurring in 

21 plan years beginning after December 

22 31, 1994, the tables under subclause 

23 (I) shall apply only with respect to in24 dividuals described in such subclause 

25 who are disabled within the meaning 


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1 of title II of the Social Security Act 

2 and the regulations thereunder. 

3 ‘‘(vi) PERIODIC REVIEW.—The Sec4 retary shall periodically (at least every 5 

5 years) review any tables in effect under 

6 this subparagraph and shall, to the extent 

7 such Secretary determines necessary, by 

8 regulation update the tables to reflect the 

9 actual experience of pension plans and pro10 jected trends in such experience. 

11 ‘‘(E) REQUIRED CHANGE OF INTEREST

12 RATE.—For purposes of determining a plan’s 

13 current liability for purposes of this para14 graph— 

15 ‘‘(i) IN GENERAL.—If any rate of in16 terest used under the plan under sub17 section (b)(6) to determine cost is not 

18 within the permissible range, the plan shall 

19 establish a new rate of interest within the 

20 permissible range. 

21 ‘‘(ii) PERMISSIBLE RANGE.—For pur22 poses of this subparagraph— 

23 ‘‘(I) IN GENERAL.—Except as 

24 provided in subclause (II), the term 

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1 terest which is not more than 5 per2 cent above, and not more than 10 per3 cent below, the weighted average of 

4 the rates of interest on 30-year Treas5 ury securities during the 4-year period 

6 ending on the last day before the be7 ginning of the plan year. 

8 ‘‘(II) SECRETARIAL AUTHOR9 ITY.—If the Secretary finds that the 

10 lowest rate of interest permissible 

11 under subclause (I) is unreasonably 

12 high, the Secretary may prescribe a 

13 lower rate of interest, except that 

14 such rate may not be less than 80 

15 percent of the average rate deter16 mined under such subclause. 

17 ‘‘(iii) ASSUMPTIONS.—Notwith18 standing paragraph (3)(A), the interest 

19 rate used under the plan shall be— 

20 ‘‘(I) determined without taking 

21 into account the experience of the 

22 plan and reasonable expectations, but 

23 ‘‘(II) consistent with the assump24 tions which reflect the purchase rates 

25 which would be used by insurance 


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1 companies to satisfy the liabilities 

2 under the plan. 

3 ‘‘(7) ANNUAL VALUATION.— 

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

5 section, a determination of experience gains and 

6 losses and a valuation of the plan’s liability 

7 shall be made not less frequently than once 

8 every year, except that such determination shall 

9 be made more frequently to the extent required 

10 in particular cases under regulations prescribed 

11 by the Secretary. 

12 ‘‘(B) VALUATION DATE.— 

13 ‘‘(i) CURRENT YEAR.—Except as pro14 vided in clause (ii), the valuation referred 

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

16 a date within the plan year to which the 

17 valuation refers or within one month prior 

18 to the beginning of such year. 

19 ‘‘(ii) USE OF PRIOR YEAR VALU20 ATION.—The valuation referred to in sub21 paragraph (A) may be made as of a date 

22 within the plan year prior to the year to 

23 which the valuation refers if, as of such 

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

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1 rent liability (as defined in paragraph 

2 (6)(D) without regard to clause (iv) there3 of). 

4 ‘‘(iii) ADJUSTMENTS.—Information 

5 under clause (ii) shall, in accordance with 

6 regulations, be actuarially adjusted to re7 flect significant differences in participants. 

8 ‘‘(iv) LIMITATION.—A change in fund9 ing method to use a prior year valuation, 

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

11 unless as of the valuation date within the 

12 prior plan year, the value of the assets of 

13 the plan are not less than 125 percent of 

14 the plan’s current liability (as defined in 

15 paragraph (6)(D) without regard to clause 

16 (iv) thereof). 

17 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

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

19 contributions for a plan year made by an employer 

20 after the last day of such plan year, but not later 

21 than two and one-half months after such day, shall 

22 be deemed to have been made on such last day. For 

23 purposes of this subparagraph, such two and one24 half month period may be extended for not more 


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1 than six months under regulations prescribed by the 

2 Secretary. 

3 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

4 MULTIEMPLOYER PLANS.— 

5 ‘‘(1) AUTOMATIC EXTENSION UPON APPLICA6 TION BY CERTAIN PLANS.— 

7 ‘‘(A) IN GENERAL.—If the plan sponsor of 

8 a multiemployer plan— 

9 ‘‘(i) submits to the Secretary an appli10 cation for an extension of the period of 

11 years required to amortize any unfunded 

12 liability described in any clause of sub13 section (b)(2)(B) or described in subsection 

14 (b)(4), and 

15 ‘‘(ii) includes with the application a 

16 certification by the plan’s actuary de17 scribed in subparagraph (B), 

18 the Secretary shall extend the amortization pe19 riod for the period of time (not in excess of 5 

20 years) specified in the application. Such exten21 sion shall be in addition to any extension under 

22 paragraph (2). 

23 ‘‘(B) CRITERIA.—A certification with re24 spect to a multiemployer plan is described in 


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1 this subparagraph if the plan’s actuary certifies 

2 that, based on reasonable assumptions— 

3 ‘‘(i) absent the extension under sub4 paragraph (A), the plan would have an ac5 cumulated funding deficiency in the cur6 rent plan year or any of the 9 succeeding 

7 plan years, 

8 ‘‘(ii) the plan sponsor has adopted a 

9 plan to improve the plan’s funding status, 

10 ‘‘(iii) the plan is projected to have suf11 ficient assets to timely pay expected bene12 fits and anticipated expenditures over the 

13 amortization period as extended, and 

14 ‘‘(iv) the notice required under para15 graph (3)(A) has been provided. 

16 ‘‘(C) TERMINATION.—The preceding provi17 sions of this paragraph shall not apply with re18 spect to any application submitted after Decem19 ber 31, 2014. 

20 ‘‘(2) ALTERNATIVE EXTENSION.— 

21 ‘‘(A) IN GENERAL.—If the plan sponsor of 

22 a multiemployer plan submits to the Secretary 

23 an application for an extension of the period of 

24 years required to amortize any unfunded liabil25 ity described in any clause of subsection 


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1 (b)(2)(B) or described in subsection (b)(4), the 

2 Secretary may extend the amortization period 

3 for a period of time (not in excess of 10 years 

4 reduced by the number of years of any exten5 sion under paragraph (1) with respect to such 

6 unfunded liability) if the Secretary makes the 

7 determination described in subparagraph (B). 

8 Such extension shall be in addition to any ex9 tension under paragraph (1). 

10 ‘‘(B) DETERMINATION.—The Secretary 

11 may grant an extension under subparagraph 

12 (A) if the Secretary determines that— 

13 ‘‘(i) such extension would carry out 

14 the purposes of this Act and would provide 

15 adequate protection for participants under 

16 the plan and their beneficiaries, and 

17 ‘‘(ii) the failure to permit such exten18 sion would— 

19 ‘‘(I) result in a substantial risk 

20 to the voluntary continuation of the 

21 plan, or a substantial curtailment of 

22 pension benefit levels or employee 

23 compensation, and 

24 ‘‘(II) be adverse to the interests 

25 of plan participants in the aggregate. 


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1 ‘‘(C) ACTION BY SECRETARY.—The Sec2 retary shall act upon any application for an ex3 tension under this paragraph within 180 days 

4 of the submission of such application. If the 

5 Secretary rejects the application for an exten6 sion under this paragraph, the Secretary shall 

7 provide notice to the plan detailing the specific 

8 reasons for the rejection, including references to 

9 the criteria set forth above. 

10 ‘‘(3) ADVANCE NOTICE.— 

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

12 before granting an extension under this sub13 section, require each applicant to provide evi14 dence satisfactory to such Secretary that the 

15 applicant has provided notice of the filing of the 

16 application for such extension to each affected 

17 party (as defined in section 4001(a)(21) of the 

18 Employee Retirement Income Security Act of 

19 1974) with respect to the affected plan. Such 

20 notice shall include a description of the extent 

21 to which the plan is funded for benefits which 

22 are guaranteed under title IV of such Act and 

23 for benefit liabilities. 

24 ‘‘(B) CONSIDERATION OF RELEVANT IN25 FORMATION.—The Secretary shall consider any 


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1 relevant information provided by a person to 

2 whom notice was given under paragraph (1).’’. 

3 (b) EFFECTIVE DATE.— 

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

5 this section shall apply to plan years beginning after 

6 2007. 

7 (2) SPECIAL RULE FOR CERTAIN AMORTIZATION

8 EXTENSIONS.—If the Secretary of the Treasury 

9 grants an extension under section 304 of the Em10 ployee Retirement Income Security Act of 1974 and 

11 section 412(e) of the Internal Revenue Code of 1986 

12 with respect to any application filed with the Sec13 retary of the Treasury on or before June 30, 2005, 

14 the extension (and any modification thereof) shall be 

15 applied and administered under the rules of such 

16 sections as in effect before the enactment of this 

17 Act, including the use of the rate of interest deter18 mined under section 6621(b) of such Code. 

19 SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEM20 PLOYER PLANS IN ENDANGERED OR CRIT21 ICAL STATUS. 

22 (a) IN GENERAL.—Subpart A of part III of sub23 chapter D of chapter 1 of the Internal Revenue Code of 

24 1986 (as amended by this Act) is amended by inserting 

25 after section 431 the following new section: 


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1 ‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEM2 PLOYER PLANS IN ENDANGERED STATUS OR 

3 CRITICAL STATUS. 

4 ‘‘(a) GENERAL RULE.—For purposes of this part, in 

5 the case of a multiemployer plan in effect on July 16, 

6 2006 — 

7 ‘‘(1) if the plan is in endangered status— 

8 ‘‘(A) the plan sponsor shall adopt and im9 plement a funding improvement plan in accord10 ance with the requirements of subsection (c), 

11 and 

12 ‘‘(B) the requirements of subsection (d) 

13 shall apply during the funding plan adoption 

14 period and the funding improvement period, 

15 and 

16 ‘‘(2) if the plan is in critical status— 

17 ‘‘(A) the plan sponsor shall adopt and im18 plement a rehabilitation plan in accordance with 

19 the requirements of subsection (e), and 

20 ‘‘(B) the requirements of subsection (f) 

21 shall apply during the rehabilitation plan adop22 tion period and the rehabilitation period. 

23 ‘‘(b) DETERMINATION OF ENDANGERED AND CRIT24 ICAL STATUS.—For purposes of this section— 

25 ‘‘(1) ENDANGERED STATUS.—A multiemployer 

26 plan is in endangered status for a plan year if, as 


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1 determined by the plan actuary under paragraph 

2 (3), the plan is not in critical status for the plan 

3 year and, as of the beginning of the plan year, ei4 ther— 

5 ‘‘(A) the plan’s funded percentage for such 

6 plan year is less than 80 percent, or 

7 ‘‘(B) the plan has an accumulated funding 

8 deficiency for such plan year, or is projected to 

9 have such an accumulated funding deficiency 

10 for any of the 6 succeeding plan years, taking 

11 into account any extension of amortization peri12 ods under section 431(d). 

13 For purposes of this section, a plan shall be treated 

14 as in seriously endangered status for a plan year if 

15 the plan is described in both subparagraphs (A) and 

16 (B). 

17 ‘‘(2) CRITICAL STATUS.—A multiemployer plan 

18 is in critical status for a plan year if, as determined 

19 by the plan actuary under paragraph (3), the plan 

20 is described in 1 or more of the following subpara21 graphs as of the beginning of the plan year: 

22 ‘‘(A) A plan is described in this subpara23 graph if— 

24 ‘‘(i) the funded percentage of the plan 

25 is less than 65 percent, and 


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1 ‘‘(ii) the sum of— 

2 ‘‘(I) the fair market value of plan 

3 assets, plus 

4 ‘‘(II) the present value of the 

5 reasonably anticipated employer con6 tributions for the current plan year 

7 and each of the 6 succeeding plan 

8 years, assuming that the terms of all 

9 collective bargaining agreements pur10 suant to which the plan is maintained 

11 for the current plan year continue in 

12 effect for succeeding plan years, 

13 is less than the present value of all non14 forfeitable benefits projected to be payable 

15 under the plan during the current plan 

16 year and each of the 6 succeeding plan 

17 years (plus administrative expenses for 

18 such plan years). 

19 ‘‘(B) A plan is described in this subpara20 graph if— 

21 ‘‘(i) the plan has an accumulated 

22 funding deficiency for the current plan 

23 year, not taking into account any extension 

24 of amortization periods under section 

25 431(d), or 


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1 ‘‘(ii) the plan is projected to have an 

2 accumulated funding deficiency for any of 

3 the 3 succeeding plan years (4 succeeding 

4 plan years if the funded percentage of the 

5 plan is 65 percent or less), not taking into 

6 account any extension of amortization peri7 ods under section 431(d). 

8 ‘‘(C) A plan is described in this subpara9 graph if— 

10 ‘‘(i)(I) the plan’s normal cost for the 

11 current plan year, plus interest (deter12 mined at the rate used for determining 

13 costs under the plan) for the current plan 

14 year on the amount of unfunded benefit li15 abilities under the plan as of the last date 

16 of the preceding plan year, exceeds 

17 ‘‘(II) the present value of the reason18 ably anticipated employer and employee 

19 contributions for the current plan year, 

20 ‘‘(ii) the present value, as of the be21 ginning of the current plan year, of non22 forfeitable benefits of inactive participants 

23 is greater than the present value of non24 forfeitable benefits of active participants, 

25 and 


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1 ‘‘(iii) the plan has an accumulated 

2 funding deficiency for the current plan 

3 year, or is projected to have such a defi4 ciency for any of the 4 succeeding plan 

5 years, not taking into account any exten6 sion of amortization periods under section 

7 431(d). 

8 ‘‘(D) A plan is described in this subpara9 graph if the sum of— 

10 ‘‘(i) the fair market value of plan as11 sets, plus 

12 ‘‘(ii) the present value of the reason13 ably anticipated employer contributions for 

14 the current plan year and each of the 4 

15 succeeding plan years, assuming that the 

16 terms of all collective bargaining agree17 ments pursuant to which the plan is main18 tained for the current plan year continue 

19 in effect for succeeding plan years, 

20 is less than the present value of all benefits pro21 jected to be payable under the plan during the 

22 current plan year and each of the 4 succeeding 

23 plan years (plus administrative expenses for 

24 such plan years). 


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1 ‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTU2 ARY.— 

3 ‘‘(A) IN GENERAL.—Not later than the 

4 90th day of each plan year of a multiemployer 

5 plan, the plan actuary shall certify to the Sec6 retary and to the plan sponsor— 

7 ‘‘(i) whether or not the plan is in en8 dangered status for such plan year and 

9 whether or not the plan is or will be in 

10 critical status for such plan year, and 

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

12 a funding improvement or rehabilitation 

13 period, whether or not the plan is making 

14 the scheduled progress in meeting the re15 quirements of its funding improvement or 

16 rehabilitation plan. 

17 ‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS

18 AND LIABILITIES.— 

19 ‘‘(i) IN GENERAL.—In making the de20 terminations and projections under this 

21 subsection, the plan actuary shall make 

22 projections required for the current and 

23 succeeding plan years of the current value 

24 of the assets of the plan and the present 

25 value of all liabilities to participants and 


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1 beneficiaries under the plan for the current 

2 plan year as of the beginning of such year. 

3 The actuary’s projections shall be based on 

4 reasonable actuarial estimates, assump5 tions, and methods that, except as pro6 vided in clause (iii), offer the actuary’s 

7 best estimate of anticipated experience 

8 under the plan. The projected present 

9 value of liabilities as of the beginning of 

10 such year shall be determined based on the 

11 most recent of either— 

12 ‘‘(I) the actuarial statement re13 quired under section 103(d) of the 

14 Employee Retirement Income Security 

15 Act of 1974 with respect to the most 

16 recently filed annual report, or 

17 ‘‘(II) the actuarial valuation for 

18 the preceding plan year. 

19 ‘‘(ii) DETERMINATIONS OF FUTURE

20 CONTRIBUTIONS.—Any actuarial projection 

21 of plan assets shall assume— 

22 ‘‘(I) reasonably anticipated em23 ployer contributions for the current 

24 and succeeding plan years, assuming 

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1 lective bargaining agreements pursu2 ant to which the plan is maintained 

3 for the current plan year continue in 

4 effect for succeeding plan years, or 

5 ‘‘(II) that employer contributions 

6 for the most recent plan year will con7 tinue indefinitely, but only if the plan 

8 actuary determines there have been no 

9 significant demographic changes that 

10 would make such assumption unrea11 sonable. 

12 ‘‘(iii) PROJECTED INDUSTRY ACTIV13 ITY.—Any projection of activity in the in14 dustry or industries covered by the plan, 

15 including future covered employment and 

16 contribution levels, shall be based on infor17 mation provided by the plan sponsor, 

18 which shall act reasonably and in good 

19 faith. 

20 ‘‘(C) PENALTY FOR FAILURE TO SECURE

21 TIMELY ACTUARIAL CERTIFICATION.—Any fail22 ure of the plan’s actuary to certify the plan’s 

23 status under this subsection by the date speci24 fied in subparagraph (A) shall be treated for 

25 purposes of section 502(c)(2) of the Employee 


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1 Retirement Income Security Act of 1974 as a 

2 failure or refusal by the plan administrator to 

3 file the annual report required to be filed with 

4 the Secretary under section 101(b)(4) of such 

5 Act. 

6 ‘‘(D) NOTICE.— 

7 ‘‘(i) IN GENERAL.—In any case in 

8 which it is certified under subparagraph 

9 (A) that a multiemployer plan is or will be 

10 in endangered or critical status for a plan 

11 year, the plan sponsor shall, not later than 

12 30 days after the date of the certification, 

13 provide notification of the endangered or 

14 critical status to the participants and bene15 ficiaries, the bargaining parties, the Pen16 sion Benefit Guaranty Corporation, and 

17 the Secretary of Labor. 

18 ‘‘(ii) PLANS IN CRITICAL STATUS.—If 

19 it is certified under subparagraph (A) that 

20 a multiemployer plan is or will be in crit21 ical status, the plan sponsor shall include 

22 in the notice under clause (i) an expla23 nation of the possibility that— 


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1 ‘‘(I) adjustable benefits (as de2 fined in subsection (e)(8)) may be re3 duced, and 

4 ‘‘(II) such reductions may apply 

5 to participants and beneficiaries 

6 whose benefit commencement date is 

7 on or after the date such notice is 

8 provided for the first plan year in 

9 which the plan is in critical status. 

10 ‘‘(iii) MODEL NOTICE.—The Secretary 

11 of Labor shall prescribe a model notice 

12 that a multiemployer plan may use to sat13 isfy the requirements under clause (ii). 

14 ‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE

15 ADOPTED FOR MULTIEMPLOYER PLANS IN ENDANGERED

16 STATUS.— 

17 ‘‘(1) IN GENERAL.—In any case in which a 

18 multiemployer plan is in endangered status for a 

19 plan year, the plan sponsor, in accordance with this 

20 subsection— 

21 ‘‘(A) shall adopt a funding improvement 

22 plan not later than 240 days following the re23 quired date for the actuarial certification of en24 dangered status under subsection (b)(3)(A), 

25 and 


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1 ‘‘(B) within 30 days after the adoption of 

2 the funding improvement plan— 

3 ‘‘(i) shall provide to the bargaining 

4 parties 1 or more schedules showing re5 vised benefit structures, revised contribu6 tion structures, or both, which, if adopted, 

7 may reasonably be expected to enable the 

8 multiemployer plan to meet the applicable 

9 benchmarks in accordance with the fund10 ing improvement plan, including— 

11 ‘‘(I) one proposal for reductions 

12 in the amount of future benefit accru13 als necessary to achieve the applicable 

14 benchmarks, assuming no amend15 ments increasing contributions under 

16 the plan (other than amendments in17 creasing contributions necessary to 

18 achieve the applicable benchmarks 

19 after amendments have reduced fu20 ture benefit accruals to the maximum 

21 extent permitted by law), and 

22 ‘‘(II) one proposal for increases 

23 in contributions under the plan nec24 essary to achieve the applicable bench25 marks, assuming no amendments reVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00335 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ducing future benefit accruals under 

2 the plan, and 

3 ‘‘(ii) may, if the plan sponsor deems 

4 appropriate, prepare and provide the bar5 gaining parties with additional information 

6 relating to contribution rates or benefit re7 ductions, alternative schedules, or other in8 formation relevant to achieving the appli9 cable benchmarks in accordance with the 

10 funding improvement plan. 

11 For purposes of this section, the term ‘applica12 ble benchmarks’ means the requirements appli13 cable to the multiemployer plan under para14 graph (3) (as modified by paragraph (5)). 

15 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

16 BEGINS.—Paragraph (1) shall not apply to a plan 

17 year if such year is in a funding plan adoption pe18 riod or funding improvement period by reason of the 

19 plan being in endangered status for a preceding plan 

20 year. For purposes of this section, such preceding 

21 plan year shall be the initial determination year with 

22 respect to the funding improvement plan to which it 

23 relates. 

24 ‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur25 poses of this section— 


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1 ‘‘(A) IN GENERAL.—A funding improve2 ment plan is a plan which consists of the ac3 tions, including options or a range of options to 

4 be proposed to the bargaining parties, formu5 lated to provide, based on reasonably antici6 pated experience and reasonable actuarial as7 sumptions, for the attainment by the plan dur8 ing the funding improvement period of the fol9 lowing requirements: 

10 ‘‘(i) INCREASE IN PLAN’S FUNDING

11 PERCENTAGE.—The plan’s funded percent12 age as of the close of the funding improve13 ment period equals or exceeds a percentage 

14 equal to the sum of— 

15 ‘‘(I) such percentage as of the 

16 beginning of such period, plus 

17 ‘‘(II) 33 percent of the difference 

18 between 100 percent and the percent19 age under subclause (I). 

20 ‘‘(ii) AVOIDANCE OF ACCUMULATED

21 FUNDING DEFICIENCIES.—No accumulated 

22 funding deficiency for any plan year during 

23 the funding improvement period (taking 

24 into account any extension of amortization 

25 periods under section 304(d)). 


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1 ‘‘(B) SERIOUSLY ENDANGERED PLANS.— 

2 In the case of a plan in seriously endangered 

3 status, except as provided in paragraph (5), 

4 subparagraph (A)(i)(II) shall be applied by sub5 stituting ‘20 percent’ for ‘33 percent’. 

6 ‘‘(4) FUNDING IMPROVEMENT PERIOD.—For 

7 purposes of this section— 

8 ‘‘(A) IN GENERAL.—The funding improve9 ment period for any funding improvement plan 

10 adopted pursuant to this subsection is the 10- 

11 year period beginning on the first day of the 

12 first plan year of the multiemployer plan begin13 ning after the earlier of— 

14 ‘‘(i) the second anniversary of the 

15 date of the adoption of the funding im16 provement plan, or 

17 ‘‘(ii) the expiration of the collective 

18 bargaining agreements in effect on the due 

19 date for the actuarial certification of en20 dangered status for the initial determina21 tion year under subsection (b)(3)(A) and 

22 covering, as of such due date, at least 75 

23 percent of the active participants in such 

24 multiemployer plan. 


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1 ‘‘(B) SERIOUSLY ENDANGERED PLANS.— 

2 In the case of a plan in seriously endangered 

3 status, except as provided in paragraph (5), 

4 subparagraph (A) shall be applied by sub5 stituting ‘15-year period’ for ‘10-year period’. 

6 ‘‘(C) COORDINATION WITH CHANGES IN

7 STATUS.— 

8 ‘‘(i) PLANS NO LONGER IN ENDAN9 GERED STATUS.—If the plan’s actuary cer10 tifies under subsection (b)(3)(A) for a plan 

11 year in any funding plan adoption period 

12 or funding improvement period that the 

13 plan is no longer in endangered status and 

14 is not in critical status, the funding plan 

15 adoption period or funding improvement 

16 period, whichever is applicable, shall end as 

17 of the close of the preceding plan year. 

18 ‘‘(ii) PLANS IN CRITICAL STATUS.—If 

19 the plan’s actuary certifies under sub20 section (b)(3)(A) for a plan year in any 

21 funding plan adoption period or funding 

22 improvement period that the plan is in 

23 critical status, the funding plan adoption 

24 period or funding improvement period, 

25 whichever is applicable, shall end as of the 


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1 close of the plan year preceding the first 

2 plan year in the rehabilitation period with 

3 respect to such status. 

4 ‘‘(D) PLANS IN ENDANGERED STATUS AT

5 END OF PERIOD.—If the plan’s actuary certifies 

6 under subsection (b)(3)(A) for the first plan 

7 year following the close of the period described 

8 in subparagraph (A) that the plan is in endan9 gered status, the provisions of this subsection 

10 and subsection (d) shall be applied as if such 

11 first plan year were an initial determination 

12 year, except that the plan may not be amended 

13 in a manner inconsistent with the funding im14 provement plan in effect for the preceding plan 

15 year until a new funding improvement plan is 

16 adopted. 

17 ‘‘(5) SPECIAL RULES FOR SERIOUSLY ENDAN18 GERED PLANS MORE THAN 70 PERCENT FUNDED.— 

19 ‘‘(A) IN GENERAL.—If the funded percent20 age of a plan in seriously endangered status 

21 was more than 70 percent as of the beginning 

22 of the initial determination year— 

23 ‘‘(i) paragraphs (3)(B) and (4)(B) 

24 shall apply only if the plan’s actuary cer25 tifies, within 30 days after the certification 


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1 under subsection (b)(3)(A) for the initial 

2 determination year, that, based on the 

3 terms of the plan and the collective bar4 gaining agreements in effect at the time of 

5 such certification, the plan is not projected 

6 to meet the requirements of paragraph 

7 (3)(A) (without regard to paragraphs 

8 (3)(B) and (4)(B)), and 

9 ‘‘(ii) if there is a certification under 

10 clause (i), the plan may, in formulating its 

11 funding improvement plan, only take into 

12 account the rules of paragraph (3)(B) and 

13 (4)(B) for plan years in the funding im14 provement period beginning on or before 

15 the date on which the last of the collective 

16 bargaining agreements described in para17 graph (4)(A)(ii) expires. 

18 ‘‘(B) SPECIAL RULE AFTER EXPIRATION

19 OF AGREEMENTS.—Notwithstanding subpara20 graph (A)(ii), if, for any plan year ending after 

21 the date described in subparagraph (A)(ii), the 

22 plan actuary certifies (at the time of the annual 

23 certification under subsection (b)(3)(A) for such 

24 plan year) that, based on the terms of the plan 

25 and collective bargaining agreements in effect 


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1 at the time of that annual certification, the plan 

2 is not projected to be able to meet the require3 ments of paragraph (3)(A) (without regard to 

4 paragraphs (3)(B) and (4)(B)), paragraphs 

5 (3)(B) and (4)(B) shall continue to apply for 

6 such year. 

7 ‘‘(6) UPDATES TO FUNDING IMPROVEMENT

8 PLANS AND SCHEDULES.— 

9 ‘‘(A) FUNDING IMPROVEMENT PLAN.—The 

10 plan sponsor shall annually update the funding 

11 improvement plan and shall file the update with 

12 the plan’s annual report under section 104 of 

13 the Employee Retirement Income Security Act 

14 of 1974. 

15 ‘‘(B) SCHEDULES.—The plan sponsor shall 

16 annually update any schedule of contribution 

17 rates provided under this subsection to reflect 

18 the experience of the plan. 

19 ‘‘(C) DURATION OF SCHEDULE.—A sched20 ule of contribution rates provided by the plan 

21 sponsor and relied upon by bargaining parties 

22 in negotiating a collective bargaining agreement 

23 shall remain in effect for the duration of that 

24 collective bargaining agreement. 


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1 ‘‘(7) IMPOSITION OF DEFAULT SCHEDULE

2 WHERE FAILURE TO ADOPT FUNDING IMPROVEMENT

3 PLAN.— 

4 ‘‘(A) IN GENERAL.—If— 

5 ‘‘(i) a collective bargaining agreement 

6 providing for contributions under a multi7 employer plan that was in effect at the 

8 time the plan entered endangered status 

9 expires, and 

10 ‘‘(ii) after receiving one or more 

11 schedules from the plan sponsor under 

12 paragraph (1)(B), the bargaining parties 

13 with respect to such agreement fail to 

14 agree on changes to contribution or benefit 

15 schedules necessary to meet the applicable 

16 benchmarks in accordance with the fund17 ing improvement plan, 

18 the plan sponsor shall implement the schedule 

19 described in paragraph (1)(B)(i)(I) beginning 

20 on the date specified in subparagraph (B). 

21 ‘‘(B) DATE OF IMPLEMENTATION.—The 

22 date specified in this subparagraph is the ear23 lier of the date— 


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1 ‘‘(i) on which the Secretary of Labor 

2 certifies that the parties are at an impasse, 

3 or 

4 ‘‘(ii) which is 180 days after the date 

5 on which the collective bargaining agree6 ment described in subparagraph (A) ex7 pires. 

8 ‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For 

9 purposes of this section, the term ‘funding plan 

10 adoption period’ means the period beginning on the 

11 date of the certification under subsection (b)(3)(A) 

12 for the initial determination year and ending on the 

13 day before the first day of the funding improvement 

14 period. 

15 ‘‘(d) RULES FOR OPERATION OF PLAN DURING

16 ADOPTION AND IMPROVEMENT PERIODS.— 

17 ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PE18 RIOD.—During the funding plan adoption period— 

19 ‘‘(A) the plan sponsor may not accept a 

20 collective bargaining agreement or participation 

21 agreement with respect to the multiemployer 

22 plan that provides for— 

23 ‘‘(i) a reduction in the level of con24 tributions for any participants, 


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1 ‘‘(ii) a suspension of contributions 

2 with respect to any period of service, or 

3 ‘‘(iii) any new direct or indirect exclu4 sion of younger or newly hired employees 

5 from plan participation, 

6 ‘‘(B) no amendment of the plan which in7 creases the liabilities of the plan by reason of 

8 any increase in benefits, any change in the ac9 crual of benefits, or any change in the rate at 

10 which benefits become nonforfeitable under the 

11 plan may be adopted unless the amendment is 

12 required as a condition of qualification under 

13 part I of subchapter D of chapter 1 or to com14 ply with other applicable law, and 

15 ‘‘(C) in the case of a plan in seriously en16 dangered status, the plan sponsor shall take all 

17 reasonable actions which are consistent with the 

18 terms of the plan and applicable law and which 

19 are expected, based on reasonable assumptions, 

20 to achieve— 

21 ‘‘(i) an increase in the plan’s funded 

22 percentage, and 

23 ‘‘(ii) postponement of an accumulated 

24 funding deficiency for at least 1 additional 

25 plan year. 


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1 Actions under subparagraph (C) include applications 

2 for extensions of amortization periods under section 

3 431(d), use of the shortfall funding method in mak4 ing funding standard account computations, amend5 ments to the plan’s benefit structure, reductions in 

6 future benefit accruals, and other reasonable actions 

7 consistent with the terms of the plan and applicable 

8 law. 

9 ‘‘(2) COMPLIANCE WITH FUNDING IMPROVE10 MENT PLAN.— 

11 ‘‘(A) IN GENERAL.—A plan may not be 

12 amended after the date of the adoption of a 

13 funding improvement plan so as to be incon14 sistent with the funding improvement plan. 

15 ‘‘(B) NO REDUCTION IN CONTRIBU16 TIONS.—A plan sponsor may not during any 

17 funding improvement period accept a collective 

18 bargaining agreement or participation agree19 ment with respect to the multiemployer plan 

20 that provides for— 

21 ‘‘(i) a reduction in the level of con22 tributions for any participants, 

23 ‘‘(ii) a suspension of contributions 

24 with respect to any period of service, or 


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1 ‘‘(iii) any new direct or indirect exclu2 sion of younger or newly hired employees 

3 from plan participation. 

4 ‘‘(C) SPECIAL RULES FOR BENEFIT IN5 CREASES.—A plan may not be amended after 

6 the date of the adoption of a funding improve7 ment plan so as to increase benefits, including 

8 future benefit accruals, unless the plan actuary 

9 certifies that the benefit increase is consistent 

10 with the funding improvement plan and is paid 

11 for out of contributions not required by the 

12 funding improvement plan to meet the applica13 ble benchmark in accordance with the schedule 

14 contemplated in the funding improvement plan. 

15 ‘‘(e) REHABILITATION PLAN MUST BE ADOPTED

16 FOR MULTIEMPLOYER PLANS IN CRITICAL STATUS.— 

17 ‘‘(1) IN GENERAL.—In any case in which a 

18 multiemployer plan is in critical status for a plan 

19 year, the plan sponsor, in accordance with this sub20 section— 

21 ‘‘(A) shall adopt a rehabilitation plan not 

22 later than 240 days following the required date 

23 for the actuarial certification of critical status 

24 under subsection (b)(3)(A), and 


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1 ‘‘(B) within 30 days after the adoption of 

2 the rehabilitation plan— 

3 ‘‘(i) shall provide to the bargaining 

4 parties 1 or more schedules showing re5 vised benefit structures, revised contribu6 tion structures, or both, which, if adopted, 

7 may reasonably be expected to enable the 

8 multiemployer plan to emerge from critical 

9 status in accordance with the rehabilitation 

10 plan, and 

11 ‘‘(ii) may, if the plan sponsor deems 

12 appropriate, prepare and provide the bar13 gaining parties with additional information 

14 relating to contribution rates or benefit re15 ductions, alternative schedules, or other in16 formation relevant to emerging from crit17 ical status in accordance with the rehabili18 tation plan. 

19 The schedule or schedules described in subparagraph 

20 (B)(i) shall reflect reductions in future benefit ac21 cruals and adjustable benefits, and increases in con22 tributions, that the plan sponsor determines are rea23 sonably necessary to emerge from critical status. 

24 One schedule shall be designated as the default 

25 schedule and such schedule shall assume that there 


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1 are no increases in contributions under the plan 

2 other than the increases necessary to emerge from 

3 critical status after future benefit accruals and other 

4 benefits (other than benefits the reduction or elimi5 nation of which are not permitted under section 

6 411(d)(6)) have been reduced to the maximum ex7 tent permitted by law. 

8 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

9 BEGINS.—Paragraph (1) shall not apply to a plan 

10 year if such year is in a rehabilitation plan adoption 

11 period or rehabilitation period by reason of the plan 

12 being in critical status for a preceding plan year. 

13 For purposes of this section, such preceding plan 

14 year shall be the initial critical year with respect to 

15 the rehabilitation plan to which it relates. 

16 ‘‘(3) REHABILITATION PLAN.—For purposes of 

17 this section— 

18 ‘‘(A) IN GENERAL.—A rehabilitation plan 

19 is a plan which consists of— 

20 ‘‘(i) actions, including options or a 

21 range of options to be proposed to the bar22 gaining parties, formulated, based on rea23 sonably anticipated experience and reason24 able actuarial assumptions, to enable the 

25 plan to cease to be in critical status by the 


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1 end of the rehabilitation period and may 

2 include reductions in plan expenditures (in3 cluding plan mergers and consolidations), 

4 reductions in future benefit accruals or in5 creases in contributions, if agreed to by the 

6 bargaining parties, or any combination of 

7 such actions, or 

8 ‘‘(ii) if the plan sponsor determines 

9 that, based on reasonable actuarial as10 sumptions and upon exhaustion of all rea11 sonable measures, the plan can not reason12 ably be expected to emerge from critical 

13 status by the end of the rehabilitation pe14 riod, reasonable measures to emerge from 

15 critical status at a later time or to forestall 

16 possible insolvency (within the meaning of 

17 section 4245 of the Employee Retirement 

18 Income Security Act of 1974). 

19 A rehabilitation plan must provide annual 

20 standards for meeting the requirements of such 

21 rehabilitation plan. Such plan shall also include 

22 the schedules required to be provided under 

23 paragraph (1)(B)(i) and if clause (ii) applies, 

24 shall set forth the alternatives considered, ex25 plain why the plan is not reasonably expected to 


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1 emerge from critical status by the end of the re2 habilitation period, and specify when, if ever, 

3 the plan is expected to emerge from critical sta4 tus in accordance with the rehabilitation plan. 

5 ‘‘(B) UPDATES TO REHABILITATION PLAN

6 AND SCHEDULES.— 

7 ‘‘(i) REHABILITATION PLAN.—The 

8 plan sponsor shall annually update the re9 habilitation plan and shall file the update 

10 with the plan’s annual report under section 

11 104 of the Employee Retirement Income 

12 Security Act of 1974. 

13 ‘‘(ii) SCHEDULES.—The plan sponsor 

14 shall annually update any schedule of con15 tribution rates provided under this sub16 section to reflect the experience of the 

17 plan. 

18 ‘‘(iii) DURATION OF SCHEDULE.—A 

19 schedule of contribution rates provided by 

20 the plan sponsor and relied upon by bar21 gaining parties in negotiating a collective 

22 bargaining agreement shall remain in ef23 fect for the duration of that collective bar24 gaining agreement. 


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1 ‘‘(C) IMPOSITION OF DEFAULT SCHEDULE

2 WHERE FAILURE TO ADOPT REHABILITATION

3 PLAN.— 

4 ‘‘(i) IN GENERAL.—If— 

5 ‘‘(I) a collective bargaining agree6 ment providing for contributions 

7 under a multiemployer plan that was 

8 in effect at the time the plan entered 

9 critical status expires, and 

10 ‘‘(II) after receiving one or more 

11 schedules from the plan sponsor under 

12 paragraph (1)(B), the bargaining par13 ties with respect to such agreement 

14 fail to adopt a contribution or benefit 

15 schedules with terms consistent with 

16 the rehabilitation plan and the sched17 ule from the plan sponsor under para18 graph (1)(B)(i), 

19 the plan sponsor shall implement the de20 fault schedule described in the last sen21 tence of paragraph (1) beginning on the 

22 date specified in clause (ii). 

23 ‘‘(ii) DATE OF IMPLEMENTATION.— 

24 The date specified in this clause is the ear25 lier of the date— 


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1 ‘‘(I) on which the Secretary of 

2 Labor certifies that the parties are at 

3 an impasse, or 

4 ‘‘(II) which is 180 days after the 

5 date on which the collective bar6 gaining agreement described in clause 

7 (i) expires. 

8 ‘‘(4) REHABILITATION PERIOD.—For purposes 

9 of this section— 

10 ‘‘(A) IN GENERAL.—The rehabilitation pe11 riod for a plan in critical status is the 10-year 

12 period beginning on the first day of the first 

13 plan year of the multiemployer plan following 

14 the earlier of— 

15 ‘‘(i) the second anniversary of the 

16 date of the adoption of the rehabilitation 

17 plan, or 

18 ‘‘(ii) the expiration of the collective 

19 bargaining agreements in effect on the 

20 date of the due date for the actuarial cer21 tification of critical status for the initial 

22 critical year under subsection (a)(1) and 

23 covering, as of such date at least 75 per24 cent of the active participants in such mul25 tiemployer plan. 


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1 If a plan emerges from critical status as pro2 vided under subparagraph (B) before the end of 

3 such 10-year period, the rehabilitation period 

4 shall end with the plan year preceding the plan 

5 year for which the determination under sub6 paragraph (B) is made. 

7 ‘‘(B) EMERGENCE.—A plan in critical sta8 tus shall remain in such status until a plan 

9 year for which the plan actuary certifies, in ac10 cordance with subsection (b)(3)(A), that the 

11 plan is not projected to have an accumulated 

12 funding deficiency for the plan year or any of 

13 the 9 succeeding plan years, without regard to 

14 the use of the shortfall method and taking into 

15 account any extension of amortization periods 

16 under section 431(d). 

17 ‘‘(5) REHABILITATION PLAN ADOPTION PE18 RIOD.—For purposes of this section, the term ‘reha19 bilitation plan adoption period’ means the period be20 ginning on the date of the certification under sub21 section (b)(3)(A) for the initial critical year and end22 ing on the day before the first day of the rehabilita23 tion period. 

24 ‘‘(6) LIMITATION ON REDUCTION IN RATES OF

25 FUTURE ACCRUALS.—Any reduction in the rate of 


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1 future accruals under the default schedule described 

2 in paragraph (1)(B)(i) shall not reduce the rate of 

3 future accruals below— 

4 ‘‘(A) a monthly benefit (payable as a single 

5 life annuity commencing at the participant’s 

6 normal retirement age) equal to 1 percent of 

7 the contributions required to be made with re8 spect to a participant, or the equivalent stand9 ard accrual rate for a participant or group of 

10 participants under the collective bargaining 

11 agreements in effect as of the first day of the 

12 initial critical year, or 

13 ‘‘(B) if lower, the accrual rate under the 

14 plan on such first day. 

15 The equivalent standard accrual rate shall be deter16 mined by the plan sponsor based on the standard or 

17 average contribution base units which the plan spon18 sor determines to be representative for active partici19 pants and such other factors as the plan sponsor de20 termines to be relevant. Nothing in this paragraph 

21 shall be construed as limiting the ability of the plan 

22 sponsor to prepare and provide the bargaining par23 ties with alternative schedules to the default sched24 ule that established lower or higher accrual and conVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00355 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tribution rates than the rates otherwise described in 

2 this paragraph. 

3 ‘‘(7) AUTOMATIC EMPLOYER SURCHARGE.— 

4 ‘‘(A) IMPOSITION OF SURCHARGE.—Each 

5 employer otherwise obligated to make a con6 tribution for the initial critical year shall be ob7 ligated to pay to the plan for such year a sur8 charge equal to 5 percent of the contribution 

9 otherwise required under the applicable collec10 tive bargaining agreement (or other agreement 

11 pursuant to which the employer contributes). 

12 For each succeeding plan year in which the 

13 plan is in critical status for a consecutive period 

14 of years beginning with the initial critical year, 

15 the surcharge shall be 10 percent of the con16 tribution otherwise so required. 

17 ‘‘(B) ENFORCEMENT OF SURCHARGE.— 

18 The surcharges under subparagraph (A) shall 

19 be due and payable on the same schedule as the 

20 contributions on which the surcharges are 

21 based. Any failure to make a surcharge pay22 ment shall be treated as a delinquent contribu23 tion under section 515 of the Employee Retire24 ment Income Security Act of 1974 and shall be 

25 enforceable as such. 


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1 ‘‘(C) SURCHARGE TO TERMINATE UPON

2 COLLECTIVE BARGAINING AGREEMENT RENEGO3 TIATION.—The surcharge under this paragraph 

4 shall cease to be effective with respect to em5 ployees covered by a collective bargaining agree6 ment (or other agreement pursuant to which 

7 the employer contributes), beginning on the ef8 fective date of a collective bargaining agreement 

9 (or other such agreement) that includes terms 

10 consistent with a schedule presented by the 

11 plan sponsor under paragraph (1)(B)(i), as 

12 modified under subparagraph (B) of paragraph 

13 (3). 

14 ‘‘(D) SURCHARGE NOT TO APPLY UNTIL

15 EMPLOYER RECEIVES NOTICE.—The surcharge 

16 under this paragraph shall not apply to an em17 ployer until 30 days after the employer has 

18 been notified by the plan sponsor that the plan 

19 is in critical status and that the surcharge is in 

20 effect. 

21 ‘‘(E) SURCHARGE NOT TO GENERATE IN22 CREASED BENEFIT ACCRUALS.—Notwith23 standing any provision of a plan to the con24 trary, the amount of any surcharge under this 


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1 paragraph shall not be the basis for any benefit 

2 accrual under the plan. 

3 ‘‘(8) BENEFIT ADJUSTMENTS.— 

4 ‘‘(A) ADJUSTABLE BENEFITS.— 

5 ‘‘(i) IN GENERAL.—Notwithstanding 

6 section 204(g), the plan sponsor shall, sub7 ject to the notice requirement under sub8 paragraph (C), make any reductions to ad9 justable benefits which the plan sponsor 

10 deems appropriate, based upon the out11 come of collective bargaining over the 

12 schedule or schedules provided under para13 graph (1)(B)(i). 

14 ‘‘(ii) EXCEPTION FOR RETIREES.— 

15 Except in the case of adjustable benefits 

16 described in clause (iv)(III), the plan spon17 sor of a plan in critical status shall not re18 duce adjustable benefits of any participant 

19 or beneficiary whose benefit commence20 ment date is before the date on which the 

21 plan provides notice to the participant or 

22 beneficiary under subsection (b)(3)(D) for 

23 the initial critical year. 

24 ‘‘(iii) PLAN SPONSOR FLEXIBILITY.— 

25 The plan sponsor shall include in the 


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1 schedules provided to the bargaining par2 ties an allowance for funding the benefits 

3 of participants with respect to whom con4 tributions are not currently required to be 

5 made, and shall reduce their benefits to 

6 the extent permitted under this title and 

7 considered appropriate by the plan sponsor 

8 based on the plan’s then current overall 

9 funding status. 

10 ‘‘(iv) ADJUSTABLE BENEFIT DE11 FINED.—For purposes of this paragraph, 

12 the term ‘adjustable benefit’ means— 

13 ‘‘(I) benefits, rights, and features 

14 under the plan, including post-retire15 ment death benefits, 60-month guar16 antees, disability benefits not yet in 

17 pay status, and similar benefits, 

18 ‘‘(II) any early retirement benefit 

19 or retirement-type subsidy (within the 

20 meaning of section 411(d)(6)(B)(i)) 

21 and any benefit payment option (other 

22 than the qualified joint-and survivor 

23 annuity), and 

24 ‘‘(III) benefit increases that 

25 would not be eligible for a guarantee 


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1 under section 4022A of the Employee 

2 Retirement Income Security Act of 

3 1974 on the first day of initial critical 

4 year because the increases were 

5 adopted (or, if later, took effect) less 

6 than 60 months before such first day. 

7 ‘‘(B) NORMAL RETIREMENT BENEFITS

8 PROTECTED.—Except as provided in subpara9 graph (A)(iv)(III), nothing in this paragraph 

10 shall be construed to permit a plan to reduce 

11 the level of a participant’s accrued benefit pay12 able at normal retirement age. 

13 ‘‘(C) NOTICE REQUIREMENTS.— 

14 ‘‘(i) IN GENERAL.—No reduction may 

15 be made to adjustable benefits under sub16 paragraph (A) unless notice of such reduc17 tion has been given at least 30 days before 

18 the general effective date of such reduction 

19 for all participants and beneficiaries to— 

20 ‘‘(I) plan participants and bene21 ficiaries, 

22 ‘‘(II) each employer who has an 

23 obligation to contribute (within the 

24 meaning of section 4212(a)) under the 

25 plan, and 


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1 ‘‘(III) each employee organization 

2 which, for purposes of collective bar3 gaining, represents plan participants 

4 employed by such an employer. 

5 ‘‘(ii) CONTENT OF NOTICE.—The no6 tice under clause (i) shall contain— 

7 ‘‘(I) sufficient information to en8 able participants and beneficiaries to 

9 understand the effect of any reduction 

10 on their benefits, including an esti11 mate (on an annual or monthly basis) 

12 of any affected adjustable benefit that 

13 a participant or beneficiary would oth14 erwise have been eligible for as of the 

15 general effective date described in 

16 clause (i), and 

17 ‘‘(II) information as to the rights 

18 and remedies of plan participants and 

19 beneficiaries as well as how to contact 

20 the Department of Labor for further 

21 information and assistance where ap22 propriate. 

23 ‘‘(iii) FORM AND MANNER.—Any no24 tice under clause (i)— 


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1 ‘‘(I) shall be provided in a form 

2 and manner prescribed in regulations 

3 of the Secretary of Labor, 

4 ‘‘(II) shall be written in a man5 ner so as to be understood by the av6 erage plan participant, and 

7 ‘‘(III) may be provided in writ8 ten, electronic, or other appropriate 

9 form to the extent such form is rea10 sonably accessible to persons to whom 

11 the notice is required to be provided. 

12 The Secretary of Labor shall in the regula13 tions prescribed under subclause (I) estab14 lish a model notice that a plan sponsor 

15 may use to meet the requirements of this 

16 subparagraph. 

17 ‘‘(9) ADJUSTMENTS DISREGARDED IN WITH18 DRAWAL LIABILITY DETERMINATION.— 

19 ‘‘(A) BENEFIT REDUCTIONS.—Any benefit 

20 reductions under this subsection shall be dis21 regarded in determining a plan’s unfunded vest22 ed benefits for purposes of determining an em23 ployer’s withdrawal liability under section 4201 

24 of the Employee Retirement Income Security 

25 Act of 1974. 


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1 ‘‘(B) SURCHARGES.—Any surcharges 

2 under paragraph (7) shall be disregarded in de3 termining an employer’s withdrawal liability 

4 under section 4211 of such Act, except for pur5 poses of determining the unfunded vested bene6 fits attributable to an employer under section 

7 4211(c)(4) of such Act or a comparable method 

8 approved under section 4211(c)(5) of such Act. 

9 ‘‘(C) SIMPLIFIED CALCULATIONS.—The 

10 Pension Benefit Guaranty Corporation shall 

11 prescribe simplified methods for the application 

12 of this paragraph in determining withdrawal li13 ability. 

14 ‘‘(f) RULES FOR OPERATION OF PLAN DURING

15 ADOPTION AND REHABILITATION PERIOD.— 

16 ‘‘(1) COMPLIANCE WITH REHABILITATION

17 PLAN.— 

18 ‘‘(A) IN GENERAL.—A plan may not be 

19 amended after the date of the adoption of a re20 habilitation plan under subsection (e) so as to 

21 be inconsistent with the rehabilitation plan. 

22 ‘‘(B) SPECIAL RULES FOR BENEFIT IN23 CREASES.—A plan may not be amended after 

24 the date of the adoption of a rehabilitation plan 

25 under subsection (e) so as to increase benefits, 


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1 including future benefit accruals, unless the 

2 plan actuary certifies that such increase is paid 

3 for out of additional contributions not con4 templated by the rehabilitation plan, and, after 

5 taking into account the benefit increase, the 

6 multiemployer plan still is reasonably expected 

7 to emerge from critical status by the end of the 

8 rehabilitation period on the schedule con9 templated in the rehabilitation plan. 

10 ‘‘(2) RESTRICTION ON LUMP SUMS AND SIMI11 LAR BENEFITS.— 

12 ‘‘(A) IN GENERAL.—Effective on the date 

13 the notice of certification of the plan’s critical 

14 status for the initial critical year under sub15 section (b)(3)(D) is sent, and notwithstanding 

16 section 411(d)(6), the plan shall not pay— 

17 ‘‘(i) any payment, in excess of the 

18 monthly amount paid under a single life 

19 annuity (plus any social security supple20 ments described in the last sentence of sec21 tion 411(b)(1)(A)), 

22 ‘‘(ii) any payment for the purchase of 

23 an irrevocable commitment from an insurer 

24 to pay benefits, and 


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1 ‘‘(iii) any other payment specified by 

2 the Secretary by regulations. 

3 ‘‘(B) EXCEPTION.—Subparagraph (A) 

4 shall not apply to a benefit which under section 

5 411(a)(11) may be immediately distributed 

6 without the consent of the participant or to any 

7 makeup payment in the case of a retroactive 

8 annuity starting date or any similar payment of 

9 benefits owed with respect to a prior period. 

10 ‘‘(3) ADJUSTMENTS DISREGARDED IN WITH11 DRAWAL LIABILITY DETERMINATION.—Any benefit 

12 reductions under this subsection shall be disregarded 

13 in determining a plan’s unfunded vested benefits for 

14 purposes of determining an employer’s withdrawal li15 ability under section 4201 of the Employee Retire16 ment Income Security Act of 1974. 

17 ‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE18 RIOD.—During the rehabilitation plan adoption pe19 riod— 

20 ‘‘(A) the plan sponsor may not accept a 

21 collective bargaining agreement or participation 

22 agreement with respect to the multiemployer 

23 plan that provides for— 

24 ‘‘(i) a reduction in the level of con25 tributions for any participants, 


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1 ‘‘(ii) a suspension of contributions 

2 with respect to any period of service, or 

3 ‘‘(iii) any new direct or indirect exclu4 sion of younger or newly hired employees 

5 from plan participation, and 

6 ‘‘(B) no amendment of the plan which in7 creases the liabilities of the plan by reason of 

8 any increase in benefits, any change in the ac9 crual of benefits, or any change in the rate at 

10 which benefits become nonforfeitable under the 

11 plan may be adopted unless the amendment is 

12 required as a condition of qualification under 

13 part I of subchapter D of chapter 1 or to com14 ply with other applicable law. 

15 ‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR

16 DECISIONS.—If, within 60 days of the due date for adop17 tion of a funding improvement plan or a rehabilitation 

18 plan under subsection (e), the plan sponsor of a plan in 

19 endangered status or a plan in critical status has not 

20 agreed on a funding improvement plan or rehabilitation 

21 plan, then any member of the board or group that con22 stitutes the plan sponsor may require that the plan spon23 sor enter into an expedited dispute resolution procedure 

24 for the development and adoption of a funding improve25 ment plan or rehabilitation plan. 


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1 ‘‘(h) NONBARGAINED PARTICIPATION.— 

2 ‘‘(1) BOTH BARGAINED AND NONBARGAINED

3 EMPLOYEE-PARTICIPANTS.—In the case of an em4 ployer that contributes to a multiemployer plan with 

5 respect to both employees who are covered by one or 

6 more collective bargaining agreements and employ7 ees who are not so covered, if the plan is in endan8 gered status or in critical status, benefits of and 

9 contributions for the nonbargained employees, in10 cluding surcharges on those contributions, shall be 

11 determined as if those nonbargained employees were 

12 covered under the first to expire of the employer’s 

13 collective bargaining agreements in effect when the 

14 plan entered endangered or critical status. 

15 ‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In 

16 the case of an employer that contributes to a multi17 employer plan only with respect to employees who 

18 are not covered by a collective bargaining agreement, 

19 this section shall be applied as if the employer were 

20 the bargaining party, and its participation agree21 ment with the plan were a collective bargaining 

22 agreement with a term ending on the first day of the 

23 plan year beginning after the employer is provided 

24 the schedule or schedules described in subsections 

25 (c) and (e). 


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1 ‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For pur2 poses of this section— 

3 ‘‘(1) BARGAINING PARTY.—The term ‘bar4 gaining party’ means— 

5 ‘‘(A)(i) except as provided in clause (ii), an 

6 employer who has an obligation to contribute 

7 under the plan; or 

8 ‘‘(ii) in the case of a plan described under 

9 section 404(c), or a continuation of such a plan, 

10 the association of employers that is the em11 ployer settlor of the plan; and 

12 ‘‘(B) an employee organization which, for 

13 purposes of collective bargaining, represents 

14 plan participants employed by an employer who 

15 has an obligation to contribute under the plan. 

16 ‘‘(2) FUNDED PERCENTAGE.—The term ‘fund17 ed percentage’ means the percentage equal to a frac18 tion— 

19 ‘‘(A) the numerator of which is the value 

20 of the plan’s assets, as determined under sec21 tion 431(c)(2), and 

22 ‘‘(B) the denominator of which is the ac23 crued liability of the plan, determined using ac24 tuarial assumptions described in section 

25 431(c)(3). 


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1 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.— 

2 The term ‘accumulated funding deficiency’ has the 

3 meaning given such term in section 412(a). 

4 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active 

5 participant’ means, in connection with a multiem6 ployer plan, a participant who is in covered service 

7 under the plan. 

8 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac9 tive participant’ means, in connection with a multi10 employer plan, a participant, or the beneficiary or 

11 alternate payee of a participant, who— 

12 ‘‘(A) is not in covered service under the 

13 plan, and 

14 ‘‘(B) is in pay status under the plan or has 

15 a nonforfeitable right to benefits under the 

16 plan. 

17 ‘‘(6) PAY STATUS.—A person is in pay status 

18 under a multiemployer plan if— 

19 ‘‘(A) at any time during the current plan 

20 year, such person is a participant or beneficiary 

21 under the plan and is paid an early, late, nor22 mal, or disability retirement benefit under the 

23 plan (or a death benefit under the plan related 

24 to a retirement benefit), or 


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1 ‘‘(B) to the extent provided in regulations 

2 of the Secretary, such person is entitled to such 

3 a benefit under the plan. 

4 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term 

5 ‘obligation to contribute’ has the meaning given such 

6 term under section 4212(a) of the Employee Retire7 ment Income Security Act of 1974. 

8 ‘‘(8) ACTUARIAL METHOD.—Notwithstanding 

9 any other provision of this section, the actuary’s de10 terminations with respect to a plan’s normal cost, 

11 actuarial accrued liability, and improvements in a 

12 plan’s funded percentage under this section shall be 

13 based upon the unit credit funding method (whether 

14 or not that method is used for the plan’s actuarial 

15 valuation). 

16 ‘‘(9) PLAN SPONSOR.—In the case of a plan de17 scribed under section 404(c), or a continuation of 

18 such a plan, the term ‘plan sponsor’ means the bar19 gaining parties described under paragraph (1). 

20 ‘‘(10) BENEFIT COMMENCEMENT DATE.—The 

21 term ‘benefit commencement date’ means the annu22 ity starting date (or in the case of a retroactive an23 nuity starting date, the date on which benefit pay24 ments begin).’’ 


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1 (b) EXCISE TAXES ON FAILURES RELATING TO MUL2 TIEMPLOYER PLANS IN ENDANGERED OR CRITICAL STA3 TUS.— 

4 (1) IN GENERAL.—Section 4971 of the Internal 

5 Revenue Code of 1986 is amended by redesignating 

6 subsection (g) as subsection (h) and by inserting 

7 after subsection (f) the following: 

8 ‘‘(g) MULTIEMPLOYER PLANS IN ENDANGERED OR

9 CRITICAL STATUS.— 

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

11 subsection— 

12 ‘‘(A) no tax shall be imposed under this 

13 section for a taxable year with respect to a mul14 tiemployer plan if, for the plan years ending 

15 with or within the taxable year, the plan is in 

16 critical status pursuant to section 432, and 

17 ‘‘(B) any tax imposed under this sub18 section for a taxable year with respect to a mul19 tiemployer plan if, for the plan years ending 

20 with or within the taxable year, the plan is in 

21 endangered status pursuant to section 432 shall 

22 be in addition to any other tax imposed by this 

23 section. 

24 ‘‘(2) FAILURE TO COMPLY WITH FUNDING IM25 PROVEMENT OR REHABILITATION PLAN.— 


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1 ‘‘(A) IN GENERAL.—If any funding im2 provement plan or rehabilitation plan in effect 

3 under section 432 with respect to a multiem4 ployer plan requires an employer to make a 

5 contribution to the plan, there is hereby im6 posed a tax on each failure of the employer to 

7 make the required contribution within the time 

8 required under such plan. 

9 ‘‘(B) AMOUNT OF TAX.—The amount of 

10 the tax imposed by subparagraph (A) shall be 

11 equal to the amount of the required contribu12 tion the employer failed to make in a timely 

13 manner. 

14 ‘‘(C) LIABILITY FOR TAX.—The tax im15 posed by subparagraph (A) shall be paid by the 

16 employer responsible for contributing to or 

17 under the rehabilitation plan which fails to 

18 make the contribution. 

19 ‘‘(3) FAILURE TO MEET REQUIREMENTS FOR

20 PLANS IN ENDANGERED OR CRITICAL STATUS.—If— 

21 ‘‘(A) a plan which is in seriously endan22 gered status fails to meet the applicable bench23 marks by the end of the funding improvement 

24 period, or 


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1 ‘‘(B) a plan which is in critical status ei2 ther— 

3 ‘‘(i) fails to meet the requirements of 

4 section 432(e) by the end of the rehabilita5 tion period, or 

6 ‘‘(ii) has received a certification under 

7 section 432(b)(3)(A)(ii) for 3 consecutive 

8 plan years that the plan is not making the 

9 scheduled progress in meeting its require10 ments under the rehabilitation plan, 

11 the plan shall be treated as having an accumu12 lated funding deficiency for purposes of this 

13 section for the last plan year in such funding 

14 improvement, rehabilitation, or 3-consecutive 

15 year period (and each succeeding plan year 

16 until such benchmarks or requirements are 

17 met) in an amount equal to the greater of the 

18 amount of the contributions necessary to meet 

19 such benchmarks or requirements or the 

20 amount of such accumulated funding deficiency 

21 without regard to this paragraph. 

22 ‘‘(4) FAILURE TO ADOPT REHABILITATION

23 PLAN.— 

24 ‘‘(A) IN GENERAL.—In the case of a multi25 employer plan which is in critical status, there 


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1 is hereby imposed a tax on the failure of such 

2 plan to adopt a rehabilitation plan within the 

3 time prescribed under section 432. 

4 ‘‘(B) AMOUNT OF TAX.—The amount of 

5 the tax imposed under subparagraph (A) with 

6 respect to any plan sponsor for any taxable year 

7 shall be the greater of— 

8 ‘‘(i) the amount of tax imposed under 

9 subsection (a) for the taxable year (deter10 mined without regard to this subsection), 

11 or 

12 ‘‘(ii) the amount equal to $1,100 mul13 tiplied by the number of days during the 

14 taxable year which are included in the pe15 riod beginning on the first day of the 240- 

16 day period described in section 

17 432(e)(1)(A) and ending on the day on 

18 which the rehabilitation plan is adopted. 

19 ‘‘(C) LIABILITY FOR TAX.— 

20 ‘‘(i) IN GENERAL.—The tax imposed 

21 by subparagraph (A) shall be paid by each 

22 plan sponsor. 

23 ‘‘(ii) PLAN SPONSOR.—For purposes 

24 of clause (i), the term ‘plan sponsor’ in the 

25 case of a multiemployer plan means the asVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00374 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 sociation, committee, joint board of trust2 ees, or other similar group of representa3 tives of the parties who establish or main4 tain the plan. 

5 ‘‘(5) WAIVER.—In the case of a failure de6 scribed in paragraph (2) or (3) which is due to rea7 sonable cause and not to willful neglect, the Sec8 retary may waive part or all of the tax imposed by 

9 this subsection. For purposes of this paragraph, rea10 sonable cause includes unanticipated and material 

11 market fluctuations, the loss of a significant contrib12 uting employer, or other factors to the extent that 

13 the payment of tax under this subsection with re14 spect to the failure would be excessive or otherwise 

15 inequitable relative to the failure involved. 

16 ‘‘(6) TERMS USED IN SECTION 432.—For pur17 poses of this subsection, any term used in this sub18 section which is also used in section 432 shall have 

19 the meaning given such term by section 432.’’. 

20 (2) CONTROLLED GROUPS.—Section 4971(c)(2) 

21 of such Code is amended— 

22 (A) by striking ‘‘In the case of a plan 

23 other than a multiemployer plan, if the’’ and in24 serting ‘‘If an’’, and 


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1 (B) by striking ‘‘or (f)’’ and inserting ‘‘(f), 

2 or (g)’’. 

3 (c) NO ADDITIONAL CONTRIBUTION REQUIRED.— 

4 Section 412(b) of the Internal Revenue Code of 1986, as 

5 amended by this Act, is amended by adding at the end 

6 the following new paragraph: 

7 ‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STA8 TUS.—Paragraph (1) shall not apply in the case of 

9 a multiemployer plan for any plan year in which the 

10 plan is in critical status pursuant to section 432. 

11 This paragraph shall only apply if the plan adopts 

12 a rehabilitation plan in accordance with section 

13 432(e) and complies with such rehabilitation plan 

14 (and any modifications of the plan).’’. 

15 (d) CLERICAL AMENDMENT.—The table of sections 

16 for subpart A of part III of subchapter D of chapter 1 

17 of such Code is amended by adding at the end the fol18 lowing new item: 

‘‘Sec. 432. Additional funding rules for multiemployer plans in endangered status or critical status.’’. 

19 (e) EFFECTIVE DATES.— 

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

21 this section shall apply with respect to plan years be22 ginning after 2007. 

23 (2) SPECIAL RULE FOR CERTAIN NOTICES.—In 

24 any case in which a plan’s actuary certifies that it 


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1 is reasonably expected that a multiemployer plan will 

2 be in critical status under section 305(b)(3) of the 

3 Employee Retirement Income Security Act of 1974, 

4 as added by this section, with respect to the first 

5 plan year beginning after 2007, the notice required 

6 under subparagraph (D) of such section may be pro7 vided at any time after the date of enactment, so 

8 long as it is provided on or before the last date for 

9 providing the notice under such subparagraph. 

10 (3) SPECIAL RULE FOR CERTAIN RESTORED

11 BENEFITS.—In the case of a multiemployer plan— 

12 (A) with respect to which benefits were re13 duced pursuant to a plan amendment adopted 

14 on or after January 1, 2002, and before June 

15 30, 2005, and 

16 (B) which, pursuant to the plan document, 

17 the trust agreement, or a formal written com18 munication from the plan sponsor to partici19 pants provided before June 30, 2005, provided 

20 for the restoration of such benefits, 

21 the amendments made by this section shall not apply 

22 to such benefit restorations to the extent that any 

23 restriction on the providing or accrual of such bene24 fits would otherwise apply by reason of such amend25 ments. 


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1 SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MUL2 TIEMPLOYER PLANS. 

3 (a) ADVANCE DETERMINATION OF IMPENDING IN4 SOLVENCY OVER 5 YEARS.—Section 418E(d)(1) of the 

5 Internal Revenue Code of 1986 is amended— 

6 (1) by striking ‘‘3 plan years’’ the second place 

7 it appears and inserting ‘‘5 plan years’’; and 

8 (2) by adding at the end the following new sen9 tence: ‘‘If the plan sponsor makes such a determina10 tion that the plan will be insolvent in any of the next 

11 5 plan years, the plan sponsor shall make the com12 parison under this paragraph at least annually until 

13 the plan sponsor makes a determination that the 

14 plan will not be insolvent in any of the next 5 plan 

15 years.’’. 

16 (b) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply with respect to the determinations 

18 made in plan years beginning after 2007. 

19 SEC. 214. EXEMPTION FROM EXCISE TAXES FOR CERTAIN 

20 MULTIEMPLOYER PENSION PLANS. 

21 (a) IN GENERAL.—Notwithstanding any other provi22 sion of law, no tax shall be imposed under subsection (a) 

23 or (b) of section 4971 of the Internal Revenue Code of 

24 1986 with respect to any accumulated funding deficiency 

25 of a plan described in subsection (b) of this section for 

26 any taxable year beginning before the earlier of— 


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1 (1) the taxable year in which the plan sponsor 

2 adopts a rehabilitation plan under section 305(e) of 

3 the Employee Retirement Income Security Act of 

4 1974 and section 432(e) of such Code (as added by 

5 this Act); or 

6 (2) the taxable year that contains January 1, 

7 2009. 

8 (b) PLAN DESCRIBED.—A plan described under this 

9 subsection is a multiemployer pension plan— 

10 (1) with less than 100 participants; 

11 (2) with respect to which the contributing em12 ployers participated in a Federal fishery capacity re13 duction program; 

14 (3) with respect to which employers under the 

15 plan participated in the Northeast Fisheries Assist16 ance Program; and 

17 (4) with respect to which the annual normal 

18 cost is less than $100,000 and the plan is experi19 encing a funding deficiency on the date of enactment 

20 of this Act. 

21 Subtitle C—Sunset of Additional 

22 Funding Rules 

23 SEC. 221. SUNSET OF ADDITIONAL FUNDING RULES. 

24 (a) REPORT.—Not later than December 31, 2011, 

25 the Secretary of Labor, the Secretary of the Treasury, and 


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1 the Executive Director of the Pension Benefit Guaranty 

2 Corporation shall conduct a study of the effect of the 

3 amendments made by this subtitle on the operation and 

4 funding status of multiemployer plans and shall report the 

5 results of such study, including any recommendations for 

6 legislation, to the Congress. 

7 (b) MATTERS INCLUDED IN STUDY.—The study re8 quired under subsection (a) shall include— 

9 (1) the effect of funding difficulties, funding 

10 rules in effect before the date of the enactment of 

11 this Act, and the amendments made by this subtitle 

12 on small businesses participating in multiemployer 

13 plans, 

14 (2) the effect on the financial status of small 

15 employers of— 

16 (A) funding targets set in funding im17 provement and rehabilitation plans and associ18 ated contribution increases, 

19 (B) funding deficiencies, 

20 (C) excise taxes, 

21 (D) withdrawal liability, 

22 (E) the possibility of alternatives schedules 

23 and procedures for financially-troubled employ24 ers, and 


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1 (F) other aspects of the multiemployer sys2 tem, and 

3 (3) the role of the multiemployer pension plan 

4 system in helping small employers to offer pension 

5 benefits. 

6 (c) SUNSET.— 

7 (1) IN GENERAL.—Except as provided in this 

8 subsection, notwithstanding any other provision of 

9 this Act, the provisions of, and the amendments 

10 made by, sections 201(b), 202, and 212 shall not 

11 apply to plan years beginning after December 31, 

12 2014. 

13 (2) FUNDING IMPROVEMENT AND REHABILITA14 TION PLANS.—If a plan is operating under a fund15 ing improvement or rehabilitation plan under section 

16 305 of such Act or 432 of such Code for its last 

17 year beginning before January 1, 2015, such plan 

18 shall continue to operate under such funding im19 provement or rehabilitation plan during any period 

20 after December 31, 2014, such funding improvement 

21 or rehabilitation plan is in effect and all provisions 

22 of such Act or Code relating to the operation of such 

23 funding improvement or rehabilitation plan shall 

24 continue in effect during such period. 


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1 TITLE III—INTEREST RATE 

2 ASSUMPTIONS 

3 SEC. 301. EXTENSION OF REPLACEMENT OF 30-YEAR 

4 TREASURY RATES. 

5 (a) AMENDMENTS OF ERISA.— 

6 (1) DETERMINATION OF RANGE.—Subclause 

7 (II) of section 302(b)(5)(B)(ii) of the Employee Re8 tirement Income Security Act of 1974 is amended— 

9 (A) by striking ‘‘2006’’ and inserting 

10 ‘‘2008’’, and 

11 (B) by striking ‘‘AND 2005’’ in the heading 

12 and inserting ‘‘, 2005, 2006, AND 2007’’. 

13 (2) DETERMINATION OF CURRENT LIABILITY.— 

14 Subclause (IV) of section 302(d)(7)(C)(i) of such 

15 Act is amended— 

16 (A) by striking ‘‘or 2005’’ and inserting ‘‘, 

17 2005, 2006, or 2007’’, and 

18 (B) by striking ‘‘AND 2005’’ in the heading 

19 and inserting ‘‘, 2005, 2006, AND 2007’’. 

20 (3) PBGC PREMIUM RATE.—Subclause (V) of 

21 section 4006(a)(3)(E)(iii) of such Act is amended by 

22 striking ‘‘2006’’ and inserting ‘‘2008’’. 

23 (b) AMENDMENTS OF INTERNAL REVENUE CODE.— 


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1 (1) DETERMINATION OF RANGE.—Subclause 

2 (II) of section 412(b)(5)(B)(ii) of the Internal Rev3 enue Code of 1986 is amended— 

4 (A) by striking ‘‘2006’’ and inserting 

5 ‘‘2008’’, and 

6 (B) by striking ‘‘AND 2005’’ in the heading 

7 and inserting ‘‘, 2005, 2006, AND 2007’’. 

8 (2) DETERMINATION OF CURRENT LIABILITY.— 

9 Subclause (IV) of section 412(l)(7)(C)(i) of such 

10 Code is amended— 

11 (A) by striking ‘‘or 2005’’ and inserting ‘‘, 

12 2005, 2006, or 2007’’, and 

13 (B) by striking ‘‘AND 2005’’ in the heading 

14 and inserting ‘‘, 2005, 2006, AND 2007’’. 

15 (c) PLAN AMENDMENTS.—Clause (ii) of section 

16 101(c)(2)(A) of the Pension Funding Equity Act of 2004 

17 is amended by striking ‘‘2006’’ and inserting ‘‘2008’’. 

18 SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINA19 TION OF LUMP SUM DISTRIBUTIONS. 

20 (a) AMENDMENT TO EMPLOYEE RETIREMENT IN21 COME SECURITY ACT OF 1974.—Paragraph (3) of section 

22 205(g) of the Employee Retirement Income Security Act 

23 of 1974 (29 U.S.C. 1055(g)(3)) is amended to read as 

24 follows: 


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1 ‘‘(3)(A) For purposes of paragraphs (1) and (2), the 

2 present value shall not be less than the present value cal3 culated by using the applicable mortality table and the ap4 plicable interest rate. 

5 ‘‘(B) For purposes of subparagraph (A)— 

6 ‘‘(i) The term ‘applicable mortality table’ means 

7 a mortality table, modified as appropriate by the 

8 Secretary of the Treasury, based on the mortality 

9 table specified for the plan year under subparagraph 

10 (A) of section 303(h)(3) (without regard to subpara11 graph (C) or (D) of such section). 

12 ‘‘(ii) The term ‘applicable interest rate’ means 

13 the adjusted first, second, and third segment rates 

14 applied under rules similar to the rules of section 

15 303(h)(2)(C) for the month before the date of the 

16 distribution or such other time as the Secretary of 

17 the Treasury may by regulations prescribe. 

18 ‘‘(iii) For purposes of clause (ii), the adjusted 

19 first, second, and third segment rates are the first, 

20 second, and third segment rates which would be de21 termined under section 303(h)(2)(C) if— 

22 ‘‘(I) section 303(h)(2)(D) were applied by 

23 substituting the average yields for the month 

24 described in clause (ii) for the average yields for 

25 the 24-month period described in such section, 


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1 ‘‘(II) section 303(h)(2)(G)(i)(II) were ap2 plied by substituting ‘section 

3 205(g)(3)(B)(iii)(II)’ for ‘section 

4 302(b)(5)(B)(ii)(II)’, and 

5 ‘‘(III) the applicable percentage under sec6 tion 303(h)(2)(G) were determined in accord7 ance 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.’’. 

8 (b) AMENDMENT TO INTERNAL REVENUE CODE OF

9 1986.—Paragraph (3) of section 417(e) of the Internal 

10 Revenue Code of 1986 is amended to read as follows: 

11 ‘‘(3) DETERMINATION OF PRESENT VALUE.— 

12 ‘‘(A) IN GENERAL.—For purposes of para13 graphs (1) and (2), the present value shall not 

14 be less than the present value calculated by 

15 using the applicable mortality table and the ap16 plicable interest rate. 

17 ‘‘(B) APPLICABLE MORTALITY TABLE.— 

18 For purposes of subparagraph (A), the term 

19 ‘applicable mortality table’ means a mortality 

20 table, modified as appropriate by the Secretary, 

21 based on the mortality table specified for the 


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1 plan year under subparagraph (A) of section 

2 430(h)(3) (without regard to subparagraph (C) 

3 or (D) of such section). 

4 ‘‘(C) APPLICABLE INTEREST RATE.—For 

5 purposes of subparagraph (A), the term ‘appli6 cable interest rate’ means the adjusted first, 

7 second, and third segment rates applied under 

8 rules similar to the rules of section 

9 430(h)(2)(C) for the month before the date of 

10 the distribution or such other time as the Sec11 retary may by regulations prescribe. 

12 ‘‘(D) APPLICABLE SEGMENT RATES.—For 

13 purposes of subparagraph (C), the adjusted 

14 first, second, and third segment rates are the 

15 first, second, and third segment rates which 

16 would be determined under section 

17 430(h)(2)(C) if— 

18 ‘‘(i) section 430(h)(2)(D) were applied 

19 by substituting the average yields for the 

20 month described in clause (ii) for the aver21 age yields for the 24-month period de22 scribed in such section, 

23 ‘‘(ii) section 430(h)(2)(G)(i)(II) were 

24 applied by substituting ‘section 


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1 417(e)(3)(A)(ii)(II)’ for ‘section 

2 412(b)(5)(B)(ii)(II)’, and 

3 ‘‘(iii) the applicable percentage under 

4 section 430(h)(2)(G) were determined in 

5 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.’’. 

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

7 this section shall apply with respect to plan years begin8 ning after December 31, 2007. 

9 SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING 

10 BENEFIT LIMITATIONS TO LUMP SUM DIS11 TRIBUTIONS. 

12 (a) IN GENERAL.—Clause (ii) of section 

13 415(b)(2)(E) of the Internal Revenue Code of 1986 is 

14 amended to read as follows: 

15 ‘‘(ii) For purposes of adjusting any 

16 benefit under subparagraph (B) for any 

17 form of benefit subject to section 

18 417(e)(3), the interest rate assumption 

19 shall not be less than the greatest of— 

20 ‘‘(I) 5.5 percent, 


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1 ‘‘(II) the rate that provides a 

2 benefit of not more than 105 percent 

3 of the benefit that would be provided 

4 if the applicable interest rate (as de5 fined in section 417(e)(3)) were the 

6 interest rate assumption, or 

7 ‘‘(III) the rate specified under 

8 the plan.’’. 

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

10 subsection (a) shall apply to distributions made in years 

11 beginning after December 31, 2005. 

12 TITLE IV—PBGC GUARANTEE 

13 AND RELATED PROVISIONS 

14 SEC. 401. PBGC PREMIUMS. 

15 (a) VARIABLE-RATE PREMIUMS.— 

16 (1) CONFORMING AMENDMENTS RELATED TO

17 FUNDING RULES FOR SINGLE-EMPLOYER PLANS.— 

18 Section 4006(a)(3)(E) of the Employee Retirement 

19 Income and Security Act of 1974 (29 U.S.C. 

20 1306(a)(3)(E)) is amended by striking clauses (iii) 

21 and (iv) and inserting the following: 

22 ‘‘(iii) For purposes of clause (ii), the term ‘unfunded 

23 vested benefits’ means, for a plan year, the excess (if any) 

24 of— 


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1 ‘‘(I) the funding target of the plan as deter2 mined under section 303(d) for the plan year by 

3 only taking into account vested benefits and by 

4 using the interest rate described in clause (iv), over 

5 ‘‘(II) the fair market value of plan assets for 

6 the plan year which are held by the plan on the 

7 valuation date. 

8 ‘‘(iv) The interest rate used in valuing benefits for 

9 purposes of subclause (I) of clause (iii) shall be equal to 

10 the first, second, or third segment rate for the month pre11 ceding the month in which the plan year begins, which 

12 would be determined under section 303(h)(2)(C) if section 

13 303(h)(2)(D) were applied by using the monthly yields for 

14 the month preceding the month in which the plan year 

15 begins on investment grade corporate bonds with varying 

16 maturities and in the top 3 quality levels rather than the 

17 average of such yields for a 24-month period.’’. 

18 (2) EFFECTIVE DATE.—The amendments made 

19 by paragraph (1) shall apply with respect to plan 

20 years beginning after 2007. 

21 (b) TERMINATION PREMIUMS.— 

22 (1) REPEAL OF SUNSET PROVISION.—Subpara23 graph (E) of section 4006(a)(7) of such Act is re24 pealed. 

25 (2) TECHNICAL CORRECTION.— 


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1 (A) IN GENERAL.—Section 

2 4006(a)(7)(C)(ii) of such Act is amended by 

3 striking ‘‘subparagraph (B)(i)(I)’’ and inserting 

4 ‘‘subparagraph (B)’’. 

5 (B) EFFECTIVE DATE.—The amendment 

6 made by this paragraph shall take effect as if 

7 included in the provision of the Deficit Reduc8 tion Act of 2005 to which it relates. 

9 SEC. 402. SPECIAL FUNDING RULES FOR CERTAIN PLANS 

10 MAINTAINED BY COMMERCIAL AIRLINES. 

11 (a) IN GENERAL.—The plan sponsor of an eligible 

12 plan may elect to either— 

13 (1) have the rules of subsection (b) apply, or 

14 (2) have section 303 of the Employee Retire15 ment Income Security Act of 1974 and section 430 

16 of the Internal Revenue Code of 1986 applied to its 

17 first taxable year beginning in 2008 by amortizing 

18 the shortfall amortization base for such taxable year 

19 over a period of 10 plan years (rather than 7 plan 

20 years) beginning with such plan year. 

21 (b) ALTERNATIVE FUNDING SCHEDULE.— 

22 (1) IN GENERAL.—If an election is made under 

23 subsection (a)(1) to have this subsection apply to an 

24 eligible plan and the requirements of paragraphs (2) 

25 and (3) are met with respect to the plan— 


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1 (A) in the case of any applicable plan year 

2 beginning before January 1, 2008, the plan 

3 shall not have an accumulated funding defi4 ciency for purposes of section 302 of the Em5 ployee Retirement Income Security Act of 1974 

6 and sections 412 and 4971 of the Internal Rev7 enue Code of 1986 if contributions to the plan 

8 for the plan year are not less than the min9 imum required contribution determined under 

10 subsection (e) for the plan for the plan year, 

11 and 

12 (B) in the case of any applicable plan year 

13 beginning on or after January 1, 2008, the 

14 minimum required contribution determined 

15 under sections 303 of such Act and 430 of such 

16 Code shall, for purposes of sections 302 and 

17 303 of such Act and sections 412, 430, and 

18 4971 of such Code, be equal to the minimum 

19 required contribution determined under sub20 section (e) for the plan for the plan year. 

21 (2) ACCRUAL RESTRICTIONS.— 

22 (A) IN GENERAL.—The requirements of 

23 this paragraph are met if, effective as of the 

24 first day of the first applicable plan year and at 


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1 all times thereafter while an election under this 

2 section is in effect, the plan provides that— 

3 (i) the accrued benefit, any death or 

4 disability benefit, and any social security 

5 supplement described in the last sentence 

6 of section 411(a)(9) of such Code and sec7 tion 204(b)(1)(G) of such Act, of each par8 ticipant are frozen at the amount of such 

9 benefit or supplement immediately before 

10 such first day, and 

11 (ii) all other benefits under the plan 

12 are eliminated, 

13 but only to the extent the freezing or elimi14 nation of such benefits would have been per15 mitted under section 411(d)(6) of such Code 

16 and section 204(g) of such Act if they had been 

17 implemented by a plan amendment adopted im18 mediately before such first day. 

19 (B) INCREASES IN SECTION 415 LIMITS.— 

20 If a plan provides that an accrued benefit of a 

21 participant which has been subject to any limi22 tation under section 415 of such Code will be 

23 increased if such limitation is increased, the 

24 plan shall not be treated as meeting the re25 quirements of this section unless, effective as of 


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1 the first day of the first applicable plan year 

2 (or, if later, the date of the enactment of this 

3 Act) and at all times thereafter while an elec4 tion under this section is in effect, the plan pro5 vides that any such increase shall not take ef6 fect. A plan shall not fail to meet the require7 ments of section 411(d)(6) of such Code and 

8 section 204(g) of such Act solely because the 

9 plan is amended to meet the requirements of 

10 this subparagraph. 

11 (3) RESTRICTION ON APPLICABLE BENEFIT IN12 CREASES.— 

13 (A) IN GENERAL.—The requirements of 

14 this paragraph are met if no applicable benefit 

15 increase takes effect at any time during the pe16 riod beginning on July 26, 2005, and ending on 

17 the day before the first day of the first applica18 ble plan year. 

19 (B) APPLICABLE BENEFIT INCREASE.— 

20 For purposes of this paragraph, the term ‘‘ap21 plicable benefit increase’’ means, with respect to 

22 any plan year, any increase in liabilities of the 

23 plan by plan amendment (or otherwise provided 

24 in regulations provided by the Secretary) which, 


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1 but for this paragraph, would occur during the 

2 plan year by reason of— 

3 (i) any increase in benefits, 

4 (ii) any change in the accrual of bene5 fits, or 

6 (iii) any change in the rate at which 

7 benefits become nonforfeitable under the 

8 plan. 

9 (4) EXCEPTION FOR IMPUTED DISABILITY

10 SERVICE.—Paragraphs (2) and (3) shall not apply 

11 to any accrual or increase with respect to imputed 

12 service provided to a participant during any period 

13 of the participant’s disability occurring on or after 

14 the effective date of the plan amendment providing 

15 the restrictions under paragraph (2) (or on or after 

16 July 26, 2005, in the case of the restrictions under 

17 paragraph (3)) if the participant— 

18 (A) was receiving disability benefits as of 

19 such date, or 

20 (B) was receiving sick pay and subse21 quently determined to be eligible for disability 

22 benefits as of such date. 

23 (c) DEFINITIONS.—For purposes of this section— 

24 (1) ELIGIBLE PLAN.—The term ‘‘eligible plan’’ 

25 means a defined benefit plan (other than a multiemVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00394 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ployer plan) to which sections 302 of such Act and 

2 412 of such Code applies which is sponsored by an 

3 employer— 

4 (A) which is a commercial airline pas5 senger airline, or 

6 (B) the principal business of which is pro7 viding catering services to a commercial pas8 senger airline. 

9 (2) APPLICABLE PLAN YEAR.—The term ‘‘ap10 plicable plan year’’ means each plan year to which 

11 the election under subsection (a)(1) applies under 

12 subsection (d)(1)(A). 

13 (d) ELECTIONS AND RELATED TERMS.— 

14 (1) YEARS FOR WHICH ELECTION MADE.— 

15 (A) ALTERNATIVE FUNDING SCHEDULE.— 

16 If an election under subsection (a)(1) was made 

17 with respect to an eligible plan, the plan spon18 sor may select either a plan year beginning in 

19 2006 or a plan year beginning in 2007 as the 

20 first plan year to which such election applies. 

21 The election shall apply to such plan year and 

22 all subsequent years. The election shall be 

23 made— 


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1 (i) not later than December 31, 2006, 

2 in the case of an election for a plan year 

3 beginning in 2006, or 

4 (ii) not later than December 31, 

5 2007, in the case of an election for a plan 

6 year beginning in 2007. 

7 (B) 10 YEAR AMORTIZATION.—An election 

8 under subsection (a)(2) shall be made not later 

9 than December 31, 2007. 

10 (C) ELECTION OF NEW PLAN YEAR FOR

11 ALTERNATIVE FUNDING SCHEDULE.—In the 

12 case of an election under subsection (a)(1), the 

13 plan sponsor may specify a new plan year in 

14 such election and the plan year of the plan may 

15 be changed to such new plan year without the 

16 approval of the Secretary of the Treasury. 

17 (2) MANNER OF ELECTION.—A plan sponsor 

18 shall make any election under subsection (a) in such 

19 manner as the Secretary of the Treasury may pre20 scribe. Such election, once made, may be revoked 

21 only with the consent of such Secretary. 

22 (e) MINIMUM REQUIRED CONTRIBUTION.—In the 

23 case of an eligible plan with respect to which an election 

24 is made under subsection (a)(1)— 


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1 (1) IN GENERAL.—In the case of any applicable 

2 plan year during the amortization period, the min3 imum required contribution shall be the amount nec4 essary to amortize the unfunded liability of the plan, 

5 determined as of the first day of the plan year, in 

6 equal annual installments (until fully amortized) 

7 over the remainder of the amortization period. Such 

8 amount shall be separately determined for each ap9 plicable plan year. 

10 (2) YEARS AFTER AMORTIZATION PERIOD.—In 

11 the case of any plan year beginning after the end of 

12 the amortization period, section 302(a)(2)(A) of 

13 such Act and section 412(a)(2)(A) of such Code 

14 shall apply to such plan, but the prefunding balance 

15 and funding standard carryover balance as of the 

16 first day of the first of such years under section 

17 303(f) of such Act and section 430(f) of such Code 

18 shall be zero. 

19 (3) DEFINITIONS.—For purposes of this sec20 tion— 

21 (A) UNFUNDED LIABILITY.—The term 

22 ‘‘unfunded liability’’ means the unfunded ac23 crued liability under the plan, determined under 

24 the unit credit funding method. 


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1 (B) AMORTIZATION PERIOD.—The term 

2 ‘‘amortization period’’ means the 17-plan year 

3 period beginning with the first applicable plan 

4 year. 

5 (4) OTHER RULES.—In determining the min6 imum required contribution and amortization 

7 amount under this subsection— 

8 (A) the provisions of section 302(c)(3) of 

9 such Act and section 412(c)(3) of such Code, as 

10 in effect before the date of enactment of this 

11 section, shall apply, 

12 (B) a rate of interest of 8.85 percent shall 

13 be used for all calculations requiring an interest 

14 rate, and 

15 (C) the value of plan assets shall be equal 

16 to their fair market value. 

17 (5) SPECIAL RULE FOR CERTAIN PLAN SPIN18 OFFS.—For purposes of subsection (b), if, with re19 spect to any eligible plan to which this subsection 

20 applies— 

21 (A) any applicable plan year includes the 

22 date of the enactment of this Act, 

23 (B) a plan was spun off from the eligible 

24 plan during the plan year but before such date 

25 of enactment, 


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1 the minimum required contribution under paragraph 

2 (1) for the eligible plan for such applicable plan year 

3 shall be an aggregate amount determined as if the 

4 plans were a single plan for that plan year (based 

5 on the full 12-month plan year in effect prior to the 

6 spin-off). The employer shall designate the allocation 

7 of such aggregate amount between such plans for 

8 the applicable plan year. 

9 (f) SPECIAL RULES FOR CERTAIN BALANCES AND

10 WAIVERS.—In the case of an eligible plan with respect to 

11 which an election is made under subsection (a)(1)— 

12 (1) FUNDING STANDARD ACCOUNT AND CREDIT

13 BALANCES.—Any charge or credit in the funding 

14 standard account under section 302 of such Act or 

15 section 412 of such Code, and any prefunding bal16 ance or funding standard carryover balance under 

17 section 303 of such Act or section 430 of such Code, 

18 as of the day before the first day of the first applica19 ble plan year, shall be reduced to zero. 

20 (2) WAIVED FUNDING DEFICIENCIES.—Any 

21 waived funding deficiency under sections 302 and 

22 303 of such Act or section 412 of such Code, as in 

23 effect before the date of enactment of this section, 

24 shall be deemed satisfied as of the first day of the 

25 first applicable plan year and the amount of such 


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1 waived funding deficiency shall be taken into ac2 count in determining the plan’s unfunded liability 

3 under subsection (e)(3)(A). In the case of a plan 

4 amendment adopted to satisfy the requirements of 

5 subsection (b)(2), the plan shall not be deemed to 

6 violate section 304(b) of such Act or section 412(f) 

7 of such Code, as so in effect, by reason of such 

8 amendment or any increase in benefits provided to 

9 such plan’s participants under a separate plan that 

10 is a defined contribution plan or a multiemployer 

11 plan. 

12 (g) OTHER RULES FOR PLANS MAKING ELECTION

13 UNDER THIS SECTION.— 

14 (1) SUCCESSOR PLANS TO CERTAIN PLANS.— 

15 If— 

16 (A) an election under paragraph (1) or (2) 

17 of subsection (a) is in effect with respect to any 

18 eligible plan, and 

19 (B) the eligible plan is maintained by an 

20 employer that establishes or maintains 1 or 

21 more other defined benefit plans (other than 

22 any multiemployer plan), and such other plans 

23 in combination provide benefit accruals to any 

24 substantial number of successor employees, 


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1 the Secretary of the Treasury may, in the Sec2 retary’s discretion, determine that any trust of 

3 which any other such plan is a part does not con4 stitute a qualified trust under section 401(a) of the 

5 Internal Revenue Code of 1986 unless all benefit ob6 ligations of the eligible plan have been satisfied. For 

7 purposes of this paragraph, the term ‘‘successor em8 ployee’’ means any employee who is or was covered 

9 by the eligible plan and any employees who perform 

10 substantially the same type of work with respect to 

11 the same business operations as an employee covered 

12 by such eligible plan. 

13 (2) SPECIAL RULES FOR TERMINATIONS.— 

14 (A) PBGC LIABILITY LIMITED.—Section 

15 4022 of the Employee Retirement Income Secu16 rity Act of 1974, as amended by this Act, is 

17 amended by adding at the end the following 

18 new subsection: 

19 ‘‘(h) SPECIAL RULE FOR PLANS ELECTING CERTAIN

20 FUNDING REQUIREMENTS.—If any plan makes an elec21 tion under section 402(a)(1) of the Pension Protection Act 

22 of 2006 and is terminated effective before the end of the 

23 10-year period beginning on the first day of the first appli24 cable plan year— 

25 ‘‘(1) this section shall be applied— 


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1 ‘‘(A) by treating the first day of the first 

2 applicable plan year as the termination date of 

3 the plan, and 

4 ‘‘(B) by determining the amount of guar5 anteed benefits on the basis of plan assets and 

6 liabilities as of such assumed termination date, 

7 and 

8 ‘‘(2) notwithstanding section 4044(a), plan as9 sets shall first be allocated to pay the amount, if 

10 any, by which— 

11 ‘‘(A) the amount of guaranteed benefits 

12 under this section (determined without regard 

13 to paragraph (1) and on the basis of plan as14 sets and liabilities as of the actual date of plan 

15 termination), exceeds 

16 ‘‘(B) the amount determined under para17 graph (1).’’. 

18 (B) TERMINATION PREMIUM.—In applying 

19 section 4006(a)(7)(A) of the Employee Retire20 ment Income Security Act of 1974 to an eligible 

21 plan during any period in which an election 

22 under subsection (a)(1) is in effect— 

23 (i) ‘‘$2,500’’ shall be substituted for 

24 ‘‘$1,250’’ in such section if such plan ter25 minates during the 5-year period beginning 


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1 on the first day of the first applicable plan 

2 year with respect to such plan, and 

3 (ii) such section shall be applied with4 out regard to subparagraph (B) of section 

5 8101(d)(2) of the Deficit Reduction Act of 

6 2005 (relating to special rule for plans ter7 minated in bankruptcy). 

8 The substitution described in clause (i) shall 

9 not apply with respect to any plan if the Sec10 retary of Labor determines that such plan ter11 minated as a result of extraordinary cir12 cumstances such as a terrorist attack or other 

13 similar event. 

14 (3) LIMITATION ON DEDUCTIONS UNDER CER15 TAIN PLANS.—Section 404(a)(7)(C)(iv) of the Inter16 nal Revenue Code of 1986, as added by this Act, 

17 shall not apply with respect to any taxable year of 

18 a plan sponsor of an eligible plan if any applicable 

19 plan year with respect to such plan ends with or 

20 within such taxable year. 

21 (4) NOTICE.—In the case of a plan amendment 

22 adopted in order to comply with this section, any no23 tice required under section 204(h) of such Act or 

24 section 4980F(e) of such Code shall be provided 

25 within 15 days of the effective date of such plan 


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1 amendment. This subsection shall not apply to any 

2 plan unless such plan is maintained pursuant to one 

3 or more collective bargaining agreements between 

4 employee representatives and 1 or more employers. 

5 (h) EXCLUSION OF CERTAIN EMPLOYEES FROM

6 MINIMUM COVERAGE REQUIREMENTS.— 

7 (1) IN GENERAL.—Section 410(b)(3) of such 

8 Code is amended by striking the last sentence and 

9 inserting the following: ‘‘For purposes of subpara10 graph (B), management pilots who are not rep11 resented in accordance with title II of the Railway 

12 Labor Act shall be treated as covered by a collective 

13 bargaining agreement described in such subpara14 graph if the management pilots manage the flight 

15 operations of air pilots who are so represented and 

16 the management pilots are, pursuant to the terms of 

17 the agreement, included in the group of employees 

18 benefitting under the trust described in such sub19 paragraph. Subparagraph (B) shall not apply in the 

20 case of a plan which provides contributions or bene21 fits for employees whose principal duties are not cus22 tomarily performed aboard an aircraft in flight 

23 (other than management pilots described in the pre24 ceding sentence).’’ 


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1 (2) EFFECTIVE DATE.—The amendment made 

2 by this subsection shall apply to years beginning be3 fore, on, or after the date of the enactment of this 

4 Act. 

5 (i) EXTENSION OF SPECIAL RULE FOR ADDITIONAL

6 FUNDING REQUIREMENTS.—In the case of an employer 

7 which is a commercial passenger airline, section 

8 302(d)(12) of the Employee Retirement Income Security 

9 Act of 1974 and section 412(l)(12) of the Internal Rev10 enue Code of 1986, as in effect before the date of the en11 actment of this Act, shall each be applied— 

12 (1) by substituting ‘‘December 28, 2007’’ for 

13 ‘‘December 28, 2005’’ in subparagraph (D)(i) there14 of, and 

15 (2) without regard to subparagraph (D)(ii). 

16 (j) EFFECTIVE DATE.—Except as otherwise provided 

17 in this section, the provisions of and amendments made 

18 by this section shall apply to plan years ending after the 

19 date of the enactment of this Act. 

20 SEC. 403. LIMITATION ON PBGC GUARANTEE OF SHUT21 DOWN AND OTHER BENEFITS. 

22 (a) IN GENERAL.—Section 4022(b) of the Employee 

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

24 1322(b)) is amended by adding at the end the following: 


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1 ‘‘(8) If an unpredictable contingent event ben2 efit (as defined in section 206(g)(1)) is payable by 

3 reason of the occurrence of any event, this section 

4 shall be applied as if a plan amendment had been 

5 adopted on the date such event occurred.’’. 

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

7 this section shall apply to benefits that become payable 

8 as a result of an event which occurs after July 26, 2005. 

9 SEC. 404. RULES RELATING TO BANKRUPTCY OF EM10 PLOYER. 

11 (a) GUARANTEE.—Section 4022 of the Employee Re12 tirement Income Security Act of 1974 (29 U.S.C. 1322) 

13 is amended by adding at the end the following: 

14 ‘‘(g) BANKRUPTCY FILING SUBSTITUTED FOR TER15 MINATION DATE.—If a contributing sponsor of a plan has 

16 filed or has had filed against such person a petition seek17 ing liquidation or reorganization in a case under title 11, 

18 United States Code, or under any similar Federal law or 

19 law of a State or political subdivision, and the case has 

20 not been dismissed as of the termination date of the plan, 

21 then this section shall be applied by treating the date such 

22 petition was filed as the termination date of the plan.’’. 

23 (b) ALLOCATION OF ASSETS AMONG PRIORITY

24 GROUPS IN BANKRUPTCY PROCEEDINGS.—Section 4044 

25 of the Employee Retirement Income Security Act of 1974 


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1 (29 U.S.C. 1344) is amended by adding at the end the 

2 following: 

3 ‘‘(e) BANKRUPTCY FILING SUBSTITUTED FOR TER4 MINATION DATE.—If a contributing sponsor of a plan has 

5 filed or has had filed against such person a petition seek6 ing liquidation or reorganization in a case under title 11, 

7 United States Code, or under any similar Federal law or 

8 law of a State or political subdivision, and the case has 

9 not been dismissed as of the termination date of the plan, 

10 then subsection (a)(3) shall be applied by treating the date 

11 such petition was filed as the termination date of the 

12 plan.’’. 

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

14 section shall apply with respect to proceedings initiated 

15 under title 11, United States Code, or under any similar 

16 Federal law or law of a State or political subdivision, on 

17 or after the date that is 30 days after the date of enact18 ment of this Act. 

19 SEC. 405. PBGC PREMIUMS FOR SMALL PLANS. 

20 (a) SMALL PLANS.—Paragraph (3) of section 

21 4006(a) of the Employee Retirement Income Security Act 

22 of 1974 (29 U.S.C. 1306(a)) is amended— 

23 (1) by striking ‘‘The additional’’ in subpara24 graph (E)(i) and inserting ‘‘Except as provided in 

25 subparagraph (H), the additional’’, and 


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1 (2) by inserting after subparagraph (G) the fol2 lowing new subparagraph: 

3 ‘‘(H)(i) In the case of an employer who has 25 or 

4 fewer employees on the first day of the plan year, the addi5 tional premium determined under subparagraph (E) for 

6 each participant shall not exceed $5 multiplied by the 

7 number of participants in the plan as of the close of the 

8 preceding plan year. 

9 ‘‘(ii) For purposes of clause (i), whether an employer 

10 has 25 or fewer employees on the first day of the plan 

11 year is determined by taking into consideration all of the 

12 employees of all members of the contributing sponsor’s 

13 controlled group. In the case of a plan maintained by two 

14 or more contributing sponsors, the employees of all con15 tributing sponsors and their controlled groups shall be ag16 gregated for purposes of determining whether the 25-or17 fewer-employees limitation has been satisfied.’’ 

18 (b) EFFECTIVE DATES.—The amendment made by 

19 this section shall apply to plan years beginning after De20 cember 31, 2006. 

21 SEC. 406. AUTHORIZATION FOR PBGC TO PAY INTEREST ON 

22 PREMIUM OVERPAYMENT REFUNDS. 

23 (a) IN GENERAL.—Section 4007(b) of the Employ24 ment Retirement Income Security Act of 1974 (29 U.S.C. 

25 1307(b)) is amended— 


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1 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, 

2 and 

3 (2) by inserting at the end the following new 

4 paragraph: 

5 ‘‘(2) The corporation is authorized to pay, subject to 

6 regulations prescribed by the corporation, interest on the 

7 amount of any overpayment of premium refunded to a des8 ignated payor. Interest under this paragraph shall be cal9 culated at the same rate and in the same manner as inter10 est is calculated for underpayments under paragraph (1).’’ 

11 (b) EFFECTIVE DATE.—The amendments made by 

12 subsection (a) shall apply to interest accruing for periods 

13 beginning not earlier than the date of the enactment of 

14 this Act. 

15 SEC. 407. RULES FOR SUBSTANTIAL OWNER BENEFITS IN 

16 TERMINATED PLANS. 

17 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.— 

18 Section 4022(b)(5) of the Employee Retirement Income 

19 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended 

20 to read as follows: 

21 ‘‘(5)(A) For purposes of this paragraph, the term 

22 ‘majority owner’ means an individual who, at any time 

23 during the 60-month period ending on the date the deter24 mination is being made— 


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1 ‘‘(i) owns the entire interest in an unincor2 porated trade or business, 

3 ‘‘(ii) in the case of a partnership, is a partner 

4 who owns, directly or indirectly, 50 percent or more 

5 of either the capital interest or the profits interest 

6 in such partnership, or 

7 ‘‘(iii) in the case of a corporation, owns, directly 

8 or indirectly, 50 percent or more in value of either 

9 the voting stock of that corporation or all the stock 

10 of that corporation. 

11 For purposes of clause (iii), the constructive ownership 

12 rules of section 1563(e) of the Internal Revenue Code of 

13 1986 (other than paragraph (3)(C) thereof) shall apply, 

14 including the application of such rules under section 

15 414(c) of such Code. 

16 ‘‘(B) In the case of a participant who is a majority 

17 owner, the amount of benefits guaranteed under this sec18 tion shall equal the product of— 

19 ‘‘(i) a fraction (not to exceed 1) the numerator 

20 of which is the number of years from the later of the 

21 effective date or the adoption date of the plan to the 

22 termination date, and the denominator of which is 

23 10, and 


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1 ‘‘(ii) the amount of benefits that would be guar2 anteed under this section if the participant were not 

3 a majority owner.’’ 

4 (b) MODIFICATION OF ALLOCATION OF ASSETS.— 

5 (1) Section 4044(a)(4)(B) of the Employee Re6 tirement Income Security Act of 1974 (29 U.S.C. 

7 1344(a)(4)(B)) is amended by striking ‘‘section 

8 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’. 

9 (2) Section 4044(b) of such Act (29 U.S.C. 

10 1344(b)) is amended— 

11 (A) by striking ‘‘(5)’’ in paragraph (2) and 

12 inserting ‘‘(4), (5),’’, and 

13 (B) by redesignating paragraphs (3) 

14 through (6) as paragraphs (4) through (7), re15 spectively, and by inserting after paragraph (2) 

16 the following new paragraph: 

17 ‘‘(3) If assets available for allocation under 

18 paragraph (4) of subsection (a) are insufficient to 

19 satisfy in full the benefits of all individuals who are 

20 described in that paragraph, the assets shall be allo21 cated first to benefits described in subparagraph (A) 

22 of that paragraph. Any remaining assets shall then 

23 be allocated to benefits described in subparagraph 

24 (B) of that paragraph. If assets allocated to such 

25 subparagraph (B) are insufficient to satisfy in full 


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1 the benefits described in that subparagraph, the as2 sets shall be allocated pro rata among individuals on 

3 the basis of the present value (as of the termination 

4 date) of their respective benefits described in that 

5 subparagraph.’’ 

6 (c) CONFORMING AMENDMENTS.— 

7 (1) Section 4021 of the Employee Retirement 

8 Income Security Act of 1974 (29 U.S.C. 1321) is 

9 amended— 

10 (A) in subsection (b)(9), by striking ‘‘as 

11 defined in section 4022(b)(6)’’, and 

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

13 subsection: 

14 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub15 stantial owner’ means an individual who, at any time dur16 ing the 60-month period ending on the date the determina17 tion is being made— 

18 ‘‘(1) owns the entire interest in an unincor19 porated trade or business, 

20 ‘‘(2) in the case of a partnership, is a partner 

21 who owns, directly or indirectly, more than 10 per22 cent of either the capital interest or the profits inter23 est in such partnership, or 

24 ‘‘(3) in the case of a corporation, owns, directly 

25 or indirectly, more than 10 percent in value of either 


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1 the voting stock of that corporation or all the stock 

2 of that corporation. 

3 For purposes of paragraph (3), the constructive ownership 

4 rules of section 1563(e) of the Internal Revenue Code of 

5 1986 (other than paragraph (3)(C) thereof) shall apply, 

6 including the application of such rules under section 

7 414(c) of such Code.’’ 

8 (2) Section 4043(c)(7) of such Act (29 U.S.C. 

9 1343(c)(7)) is amended by striking ‘‘section 

10 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’. 

11 (d) EFFECTIVE DATES.— 

12 (1) IN GENERAL.—Except as provided in para13 graph (2), the amendments made by this section 

14 shall apply to plan terminations— 

15 (A) under section 4041(c) of the Employee 

16 Retirement Income Security Act of 1974 (29 

17 U.S.C. 1341(c)) with respect to which notices 

18 of intent to terminate are provided under sec19 tion 4041(a)(2) of such Act (29 U.S.C. 

20 1341(a)(2)) after December 31, 2005, and 

21 (B) under section 4042 of such Act (29 

22 U.S.C. 1342) with respect to which notices of 

23 determination are provided under such section 

24 after such date. 


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1 (2) CONFORMING AMENDMENTS.—The amend2 ments made by subsection (c) shall take effect on 

3 January 1, 2006. 

4 SEC. 408. ACCELERATION OF PBGC COMPUTATION OF BEN5 EFITS ATTRIBUTABLE TO RECOVERIES FROM 

6 EMPLOYERS. 

7 (a) MODIFICATION OF AVERAGE RECOVERY PER8 CENTAGE OF OUTSTANDING AMOUNT OF BENEFIT LI9 ABILITIES PAYABLE BY CORPORATION TO PARTICIPANTS

10 AND BENEFICIARIES.—Section 4022(c)(3)(B)(ii) of the 

11 Employee Retirement Income Security Act of 1974 (29 

12 U.S.C. 1322(c)(3)(B)(ii)) is amended to read as follows: 

13 ‘‘(ii) notices of intent to terminate 

14 were provided (or in the case of a termi15 nation by the corporation, a notice of de16 termination under section 4042 was 

17 issued) during the 5-Federal fiscal year pe18 riod ending with the third fiscal year pre19 ceding the fiscal year in which occurs the 

20 date of the notice of intent to terminate 

21 (or the notice of determination under sec22 tion 4042) with respect to the plan termi23 nation for which the recovery ratio is being 

24 determined.’’ 


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1 (b) VALUATION OF SECTION 4062(c) LIABILITY FOR

2 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

3 PARTICIPANTS AND BENEFICIARIES.— 

4 (1) SINGLE-EMPLOYER PLAN BENEFITS GUAR5 ANTEED.—Section 4022(c)(3)(A) of the Employee 

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

7 13) is amended to read as follows: 

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

9 subparagraph (C), the term ‘recovery ratio’ 

10 means the ratio which— 

11 ‘‘(i) the sum of the values of all recov12 eries under section 4062, 4063, or 4064, 

13 determined by the corporation in connec14 tion with plan terminations described 

15 under subparagraph (B), bears to 

16 ‘‘(ii) the sum of all unfunded benefit 

17 liabilities under such plans as of the termi18 nation date in connection with any such 

19 prior termination.’’. 

20 (2) ALLOCATION OF ASSETS.—Section 4044 of 

21 the Employee Retirement Income Security Act of 

22 1974 (29 U.S.C. 1362) is amended by adding at the 

23 end the following new subsection: 


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1 ‘‘(e) VALUATION OF SECTION 4062(c) LIABILITY FOR

2 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

3 PARTICIPANTS AND BENEFICIARIES.— 

4 ‘‘(1) IN GENERAL.—In the case of a terminated 

5 plan, the value of the recovery of liability under sec6 tion 4062(c) allocable as a plan asset under this sec7 tion for purposes of determining the amount of ben8 efits payable by the corporation shall be determined 

9 by multiplying— 

10 ‘‘(A) the amount of liability under section 

11 4062(c) as of the termination date of the plan, 

12 by 

13 ‘‘(B) the applicable section 4062(c) recov14 ery ratio. 

15 ‘‘(2) SECTION 4062(c) RECOVERY RATIO.—For 

16 purposes of this subsection— 

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

18 subparagraph (C), the term ‘section 4062(c) re19 covery ratio’ means the ratio which— 

20 ‘‘(i) the sum of the values of all recov21 eries under section 4062(c) determined by 

22 the corporation in connection with plan 

23 terminations described under subparagraph 

24 (B), bears to 


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1 ‘‘(ii) the sum of all the amounts of li2 ability under section 4062(c) with respect 

3 to such plans as of the termination date in 

4 connection with any such prior termi5 nation. 

6 ‘‘(B) PRIOR TERMINATIONS.—A plan ter7 mination described in this subparagraph is a 

8 termination with respect to which— 

9 ‘‘(i) the value of recoveries under sec10 tion 4062(c) have been determined by the 

11 corporation, and 

12 ‘‘(ii) notices of intent to terminate 

13 were provided (or in the case of a termi14 nation by the corporation, a notice of de15 termination under section 4042 was 

16 issued) during the 5-Federal fiscal year pe17 riod ending with the third fiscal year pre18 ceding the fiscal year in which occurs the 

19 date of the notice of intent to terminate 

20 (or the notice of determination under sec21 tion 4042) with respect to the plan termi22 nation for which the recovery ratio is being 

23 determined. 

24 ‘‘(C) EXCEPTION.—In the case of a termi25 nated plan with respect to which the outVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00417 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 standing amount of benefit liabilities exceeds 

2 $20,000,000, the term ‘section 4062(c) recovery 

3 ratio’ means, with respect to the termination of 

4 such plan, the ratio of— 

5 ‘‘(i) the value of the recoveries on be6 half of the plan under section 4062(c), to 

7 ‘‘(ii) the amount of the liability owed 

8 under section 4062(c) as of the date of 

9 plan termination to the trustee appointed 

10 under section 4042 (b) or (c). 

11 ‘‘(3) SUBSECTION NOT TO APPLY.—This sub12 section shall not apply with respect to the deter13 mination of— 

14 ‘‘(A) whether the amount of outstanding 

15 benefit liabilities exceeds $20,000,000, or 

16 ‘‘(B) the amount of any liability under sec17 tion 4062 to the corporation or the trustee ap18 pointed under section 4042 (b) or (c). 

19 ‘‘(4) DETERMINATIONS.—Determinations under 

20 this subsection shall be made by the corporation. 

21 Such determinations shall be binding unless shown 

22 by clear and convincing evidence to be unreason23 able.’’ 

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

25 this section shall apply for any termination for which noVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00418 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tices of intent to terminate are provided (or in the case 

2 of a termination by the corporation, a notice of determina3 tion under section 4042 under the Employee Retirement 

4 Income Security Act of 1974 is issued) on or after the 

5 date which is 30 days after the date of enactment of this 

6 section. 

7 SEC. 409. TREATMENT OF CERTAIN PLANS WHERE CES8 SATION OR CHANGE IN MEMBERSHIP OF A 

9 CONTROLLED GROUP. 

10 (a) IN GENERAL.—Section 4041(b) of the Employee 

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

12 1341(b)) is amended by adding at the end the following 

13 new paragraph: 

14 ‘‘(5) SPECIAL RULE FOR CERTAIN PLANS

15 WHERE CESSATION OR CHANGE IN MEMBERSHIP OF

16 A CONTROLLED GROUP.— 

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

18 subparagraph (B), if— 

19 ‘‘(i) there is transaction or series of 

20 transactions which result in a person ceas21 ing to be a member of a controlled group, 

22 and 

23 ‘‘(ii) such person immediately before 

24 the transaction or series of transactions 

25 maintained a single-employer plan which is 


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1 a defined benefit plan which is fully fund2 ed, 

3 then the interest rate used in determining 

4 whether the plan is sufficient for benefit liabil5 ities or to otherwise assess plan liabilities for 

6 purposes of this subsection or section 

7 4042(a)(4) shall be not less than the interest 

8 rate used in determining whether the plan is 

9 fully funded. 

10 ‘‘(B) LIMITATIONS.—Subparagraph (A) 

11 shall not apply to any transaction or series of 

12 transactions unless— 

13 ‘‘(i) any employer maintaining the 

14 plan immediately before or after such 

15 transaction or series of transactions— 

16 ‘‘(I) has an outstanding senior 

17 unsecured debt instrument which is 

18 rated investment grade by each of the 

19 nationally recognized statistical rating 

20 organizations for corporate bonds that 

21 has issued a credit rating for such in22 strument, or 

23 ‘‘(II) if no such debt instrument 

24 of such employer has been rated by 

25 such an organization but 1 or more of 


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1 such organizations has made an issuer 

2 credit rating for such employer, all 

3 such organizations which have so 

4 rated the employer have rated such 

5 employer investment grade, and 

6 ‘‘(ii) the employer maintaining the 

7 plan after the transaction or series of 

8 transactions employs at least 20 percent of 

9 the employees located in the United States 

10 who were employed by such employer im11 mediately before the transaction or series 

12 of transactions. 

13 ‘‘(C) FULLY FUNDED.—For purposes of 

14 subparagraph (A), a plan shall be treated as 

15 fully funded with respect to any transaction or 

16 series of transactions if— 

17 ‘‘(i) in the case of a transaction or se18 ries of transactions which occur in a plan 

19 year beginning before January 1, 2008, 

20 the funded current liability percentage de21 termined under section 302(d) for the plan 

22 year is at least 100 percent, and 

23 ‘‘(ii) in the case of a transaction or 

24 series of transactions which occur in a plan 

25 year beginning on or after such date, the 


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1 funding target attainment percentage de2 termined under section 303 is, as of the 

3 valuation date for such plan year, at least 

4 100 percent. 

5 ‘‘(D) 2 YEAR LIMITATION.—Subparagraph 

6 (A) shall not apply to any transaction or series 

7 of transaction if the plan referred to in sub8 paragraph (A)(ii) is terminated under section 

9 4041(c) or 4042 after the close of the 2-year 

10 period beginning on the date on which the first 

11 such transaction occurs.’’ 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to any transaction or series of 

14 transactions occurring on and after the date of the enact15 ment of this Act. 

16 SEC. 410. MISSING PARTICIPANTS. 

17 (a) IN GENERAL.—Section 4050 of the Employee Re18 tirement Income Security Act of 1974 (29 U.S.C. 1350) 

19 is amended by redesignating subsection (c) as subsection 

20 (e) and by inserting after subsection (b) the following new 

21 subsections: 

22 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation 

23 shall prescribe rules similar to the rules in subsection (a) 

24 for multiemployer plans covered by this title that termi25 nate under section 4041A. 


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1 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.— 

2 ‘‘(1) TRANSFER TO CORPORATION.—The plan 

3 administrator of a plan described in paragraph (4) 

4 may elect to transfer a missing participant’s benefits 

5 to the corporation upon termination of the plan. 

6 ‘‘(2) INFORMATION TO THE CORPORATION.—To 

7 the extent provided in regulations, the plan adminis8 trator of a plan described in paragraph (4) shall, 

9 upon termination of the plan, provide the corpora10 tion information with respect to benefits of a miss11 ing participant if the plan transfers such benefits— 

12 ‘‘(A) to the corporation, or 

13 ‘‘(B) to an entity other than the corpora14 tion or a plan described in paragraph (4)(B)(ii). 

15 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben16 efits of a missing participant were transferred to the 

17 corporation under paragraph (1), the corporation 

18 shall, upon location of the participant or beneficiary, 

19 pay to the participant or beneficiary the amount 

20 transferred (or the appropriate survivor benefit) ei21 ther— 

22 ‘‘(A) in a single sum (plus interest), or 

23 ‘‘(B) in such other form as is specified in 

24 regulations of the corporation. 


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1 ‘‘(4) PLANS DESCRIBED.—A plan is described 

2 in this paragraph if— 

3 ‘‘(A) the plan is a pension plan (within the 

4 meaning of section 3(2))— 

5 ‘‘(i) to which the provisions of this 

6 section do not apply (without regard to 

7 this subsection), and 

8 ‘‘(ii) which is not a plan described in 

9 paragraphs (2) through (11) of section 

10 4021(b), and 

11 ‘‘(B) at the time the assets are to be dis12 tributed upon termination, the plan— 

13 ‘‘(i) has missing participants, and 

14 ‘‘(ii) has not provided for the transfer 

15 of assets to pay the benefits of all missing 

16 participants to another pension plan (with17 in the meaning of section 3(2)). 

18 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.— 

19 Subsections (a)(1) and (a)(3) shall not apply to a 

20 plan described in paragraph (4).’’. 

21 (b) CONFORMING AMENDMENTS.—Section 206(f) of 

22 such Act (29 U.S.C. 1056(f)) is amended— 

23 (1) by striking ‘‘title IV’’ and inserting ‘‘section 

24 4050’’; and 

25 (2) by striking ‘‘the plan shall provide that,’’. 


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

2 this section shall apply to distributions made after final 

3 regulations implementing subsections (c) and (d) of sec4 tion 4050 of the Employee Retirement Income Security 

5 Act of 1974 (as added by subsection (a)), respectively, are 

6 prescribed. 

7 SEC. 411. DIRECTOR OF THE PENSION BENEFIT GUARANTY 

8 CORPORATION. 

9 (a) IN GENERAL.—Title IV of the Employee Retire10 ment Income Security Act of 1974 (29 U.S.C. 1301 et 

11 seq.) is amended— 

12 (1) by striking the second sentence of section 

13 4002(a) and inserting the following: ‘‘In carrying 

14 out its functions under this title, the corporation 

15 shall be administered by a Director, who shall be ap16 pointed by the President, by and with the advice and 

17 consent of the Senate, and who shall act in accord18 ance with the policies established by the board.’’; 

19 and 

20 (2) in section 4003(b), by— 

21 (A) striking ‘‘under this title, any mem22 ber’’ and inserting ‘‘under this title, the Direc23 tor, any member’’; and 


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1 (B) striking ‘‘designated by the chairman’’ 

2 and inserting ‘‘designated by the Director or 

3 chairman’’. 

4 (b) COMPENSATION OF DIRECTOR.—Section 5314 of 

5 title 5, United States Code, is amended by adding at the 

6 end the following new item: 

7 ‘‘Director, Pension Benefit Guaranty Corporation.’’. 

8 (c) JURISDICTION OF NOMINATION.— 

9 (1) IN GENERAL.—The Committee on Finance 

10 of the Senate and the Committee on Health, Edu11 cation, Labor, and Pensions of the Senate shall have 

12 joint jurisdiction over the nomination of a person 

13 nominated by the President to fill the position of Di14 rector of the Pension Benefit Guaranty Corporation 

15 under section 4002 of the Employee Retirement In16 come Security Act of 1974 (29 U.S.C. 1302) (as 

17 amended by this Act), and if one committee votes to 

18 order reported such a nomination, the other shall re19 port within 30 calendar days, or be automatically 

20 discharged. 

21 (2) RULEMAKING OF THE SENATE.—This sub22 section is enacted by Congress— 

23 (A) as an exercise of rulemaking power of 

24 the Senate, and as such it is deemed a part of 

25 the rules of the Senate, but applicable only with 


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1 respect to the procedure to be followed in the 

2 Senate in the case of a nomination described in 

3 such sentence, and it supersedes other rules 

4 only to the extent that it is inconsistent with 

5 such rules; and 

6 (B) with full recognition of the constitu7 tional right of the Senate to change the rules 

8 (so far as relating to the procedure of the Sen9 ate) at any time, in the same manner and to 

10 the same extent as in the case of any other rule 

11 of the Senate. 

12 (d) TRANSITION.—The term of the individual serving 

13 as Executive Director of the Pension Benefit Guaranty 

14 Corporation on the date of enactment of this Act shall ex15 pire on such date of enactment. Such individual, or any 

16 other individual, may serve as interim Director of such 

17 Corporation until an individual is appointed as Director 

18 of such Corporation under section 4002 of the Employee 

19 Retirement Income Security Act of 1974 (29 U.S.C. 1302) 

20 (as amended by this Act). 

21 SEC. 412. INCLUSION OF INFORMATION IN THE PBGC AN22 NUAL REPORT. 

23 Section 4008 of the Employee Retirement Income Se24 curity Act of 1974 (29 U.S.C. 1308) is amended by— 


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1 (1) striking ‘‘As soon as practicable’’ and in2 serting ‘‘(a) As soon as practicable’’; and 

3 (2) adding at the end the following: 

4 ‘‘(b) The report under subsection (a) shall include— 

5 ‘‘(1) a summary of the Pension Insurance Mod6 eling System microsimulation model, including the 

7 specific simulation parameters, specific initial values, 

8 temporal parameters, and policy parameters used to 

9 calculate the financial statements for the corpora10 tion; 

11 ‘‘(2) a comparison of— 

12 ‘‘(A) the average return on investments 

13 earned with respect to assets invested by the 

14 corporation for the year to which the report re15 lates; and 

16 ‘‘(B) an amount equal to 60 percent of the 

17 average return on investment for such year in 

18 the Standard & Poor’s 500 Index, plus 40 per19 cent of the average return on investment for 

20 such year in the Lehman Aggregate Bond 

21 Index (or in a similar fixed income index); and 

22 ‘‘(3) a statement regarding the deficit or sur23 plus for such year that the corporation would have 

24 had if the corporation had earned the return deVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00428 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 scribed in paragraph (2)(B) with respect to assets 

2 invested by the corporation.’’. 

3 TITLE V—DISCLOSURE 

4 SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE. 

5 (a) IN GENERAL.—Section 101(f) of the Employee 

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

7 1021(f)) is amended to read as follows: 

8 ‘‘(f) DEFINED BENEFIT PLAN FUNDING NOTICES.— 

9 ‘‘(1) IN GENERAL.—The administrator of a de10 fined benefit plan to which title IV applies shall for 

11 each plan year provide a plan funding notice to the 

12 Pension Benefit Guaranty Corporation, to each plan 

13 participant and beneficiary, to each labor organiza14 tion representing such participants or beneficiaries, 

15 and, in the case of a multiemployer plan, to each 

16 employer that has an obligation to contribute to the 

17 plan. 

18 ‘‘(2) INFORMATION CONTAINED IN NOTICES.— 

19 ‘‘(A) IDENTIFYING INFORMATION.—Each 

20 notice required under paragraph (1) shall con21 tain identifying information, including the name 

22 of the plan, the address and phone number of 

23 the plan administrator and the plan’s principal 

24 administrative officer, each plan sponsor’s emVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00429 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ployer identification number, and the plan num2 ber of the plan. 

3 ‘‘(B) SPECIFIC INFORMATION.—A plan 

4 funding notice under paragraph (1) shall in5 clude— 

6 ‘‘(i)(I) in the case of a single-employer 

7 plan, a statement as to whether the plan’s 

8 funding target attainment percentage (as 

9 defined in section 303(d)(2)) for the plan 

10 year to which the notice relates, and for 

11 the 2 preceding plan years, is at least 100 

12 percent (and, if not, the actual percent13 ages), or 

14 ‘‘(II) in the case of a multiemployer 

15 plan, a statement as to whether the plan’s 

16 funded percentage (as defined in section 

17 305(i)) for the plan year to which the no18 tice relates, and for the 2 preceding plan 

19 years, is at least 100 percent (and, if not, 

20 the actual percentages), 

21 ‘‘(ii)(I) in the case of a single-em22 ployer plan, a statement of— 

23 ‘‘(aa) the total assets (separately 

24 stating the prefunding balance and 

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1 ance) and liabilities of the plan, deter2 mined in the same manner as under 

3 section 303, for the plan year for 

4 which the latest annual report filed 

5 under section 104(a) was filed and for 

6 the 2 preceding plan years, as re7 ported in the annual report for each 

8 such plan year, and 

9 ‘‘(bb) the value of the plan’s as10 sets and liabilities for the plan year to 

11 which the notice relates as of the last 

12 day of the plan year to which the no13 tice relates determined using the asset 

14 valuation under subclause (II) of sec15 tion 4006(a)(3)(E)(iii) and the inter16 est rate under section 

17 4006(a)(3)(E)(iv), and 

18 ‘‘(II) in the case of a multiemployer 

19 plan, a statement of the value of the plan’s 

20 assets and liabilities for the plan year to 

21 which the notice relates as the last day of 

22 such plan year and the preceding 2 plan 

23 years, 

24 ‘‘(iii) a statement of the number of 

25 participants who are— 


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1 ‘‘(I) retired or separated from 

2 service and are receiving benefits, 

3 ‘‘(II) retired or separated partici4 pants entitled to future benefits, and 

5 ‘‘(III) active participants under 

6 the plan, 

7 ‘‘(iv) a statement setting forth the 

8 funding policy of the plan and the asset al9 location of investments under the plan (ex10 pressed as percentages of total assets) as 

11 of the end of the plan year to which the 

12 notice relates, 

13 ‘‘(v) in the case of a multiemployer 

14 plan, whether the plan was in critical or 

15 endangered status under section 305 for 

16 such plan year and, if so— 

17 ‘‘(I) a statement describing how 

18 a person may obtain a copy of the 

19 plan’s funding improvement or reha20 bilitation plan, as appropriate, adopt21 ed under section 305 and the actu22 arial and financial data that dem23 onstrate any action taken by the plan 

24 toward fiscal improvement, and 


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1 ‘‘(II) a summary of any funding 

2 improvement plan, rehabilitation plan, 

3 or modification thereof adopted under 

4 section 305 during the plan year to 

5 which the notice relates, 

6 ‘‘(vi) in the case of any plan amend7 ment, scheduled benefit increase or reduc8 tion, or other known event taking effect in 

9 the current plan year and having a mate10 rial effect on plan liabilities or assets for 

11 the year (as defined in regulations by the 

12 Secretary), an explanation of the amend13 ment, schedule increase or reduction, or 

14 event, and a projection to the end of such 

15 plan year of the effect of the amendment, 

16 scheduled increase or reduction, or event 

17 on plan liabilities, 

18 ‘‘(vii)(I) in the case of a single-em19 ployer plan, a summary of the rules gov20 erning termination of single-employer plans 

21 under subtitle C of title IV, or 

22 ‘‘(II) in the case of a multiemployer 

23 plan, a summary of the rules governing re24 organization or insolvency, including the 

25 limitations on benefit payments, 


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1 ‘‘(viii) a general description of the 

2 benefits under the plan which are eligible 

3 to be guaranteed by the Pension Benefit 

4 Guaranty Corporation, along with an ex5 planation of the limitations on the guar6 antee and the circumstances under which 

7 such limitations apply, 

8 ‘‘(ix) a statement that a person may 

9 obtain a copy of the annual report of the 

10 plan filed under section 104(a) upon re11 quest, through the Internet website of the 

12 Department of Labor, or through an 

13 Intranet website maintained by the appli14 cable plan sponsor (or plan administrator 

15 on behalf of the plan sponsor), and 

16 ‘‘(x) if applicable, a statement that 

17 each contributing sponsor, and each mem18 ber of the contributing sponsor’s controlled 

19 group, of the single-employer plan was re20 quired to provide the information under 

21 section 4010 for the plan year to which the 

22 notice relates. 

23 ‘‘(C) OTHER INFORMATION.—Each notice 

24 under paragraph (1) shall include— 


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1 ‘‘(i) in the case of a multiemployer 

2 plan, a statement that the plan adminis3 trator shall provide, upon written request, 

4 to any labor organization representing plan 

5 participants and beneficiaries and any em6 ployer that has an obligation to contribute 

7 to the plan, a copy of the annual report 

8 filed with the Secretary under section 

9 104(a), and 

10 ‘‘(ii) any additional information which 

11 the plan administrator elects to include to 

12 the extent not inconsistent with regulations 

13 prescribed by the Secretary. 

14 ‘‘(3) TIME FOR PROVIDING NOTICE.— 

15 ‘‘(A) IN GENERAL.—Any notice under 

16 paragraph (1) shall be provided not later than 

17 120 days after the end of the plan year to 

18 which the notice relates. 

19 ‘‘(B) EXCEPTION FOR SMALL PLANS.—In 

20 the case of a small plan (as such term is used 

21 under section 303(g)(2)(B)) any notice under 

22 paragraph (1) shall be provided upon filing of 

23 the annual report under section 104(a). 

24 ‘‘(4) FORM AND MANNER.—Any notice under 

25 paragraph (1)— 


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1 ‘‘(A) shall be provided in a form and man2 ner prescribed in regulations of the Secretary, 

3 ‘‘(B) shall be written in a manner so as to 

4 be understood by the average plan participant, 

5 and 

6 ‘‘(C) may be provided in written, elec7 tronic, or other appropriate form to the extent 

8 such form is reasonably accessible to persons to 

9 whom the notice is required to be provided.’’. 

10 (b) REPEAL OF NOTICE TO PARTICIPANTS OF FUND11 ING STATUS.— 

12 (1) IN GENERAL.—Title IV of such Act (29 

13 U.S.C. 1301 et seq.) is amended by striking section 

14 4011. 

15 (2) CLERICAL AMENDMENT.—Section 1 of such 

16 Act is amended in the table of contents by striking 

17 the item relating to section 4011. 

18 (c) MODEL NOTICE.—Not later than 1 year after the 

19 date of the enactment of this Act, the Secretary of Labor 

20 shall publish a model version of the notice required by sec21 tion 101(f) of the Employee Retirement Income Security 

22 Act of 1974. The Secretary of Labor may promulgate any 

23 interim final rules as the Secretary determines appropriate 

24 to carry out the provisions of this subsection. 

25 (d) EFFECTIVE DATE.— 


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

2 this section shall apply to plan years beginning after 

3 December 31, 2007, except that the amendment 

4 made by subsection (b) shall apply to plan years be5 ginning after December 31, 2006. 

6 (2) TRANSITION RULE.—Any requirement 

7 under section 101(f) of the Employee Retirement In8 come Security Act of 1974 (as amended by this sec9 tion) to report the funding target attainment per10 centage or funded percentage of a plan with respect 

11 to any plan year beginning before January 1, 2008, 

12 shall be treated as met if the plan reports— 

13 (A) in the case of a plan year beginning in 

14 2006, the funded current liability percentage 

15 (as defined in section 302(d)(8) of such Act) of 

16 the plan for such plan year, and 

17 (B) in the case of a plan year beginning in 

18 2007, the funding target attainment percentage 

19 or funded percentage as determined using such 

20 methods of estimation as the Secretary of the 

21 Treasury may provide. 

22 SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN IN23 FORMATION. 

24 (a) FINANCIAL INFORMATION WITH RESPECT TO

25 MULTIEMPLOYER PLANS.— 


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

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

3 1021), as amended by section 103, is amended— 

4 (A) by redesignating subsection (k) as sub5 section (l); and 

6 (B) by inserting after subsection (j) the 

7 following new subsection: 

8 ‘‘(k) MULTIEMPLOYER PLAN INFORMATION MADE

9 AVAILABLE ON REQUEST.— 

10 ‘‘(1) IN GENERAL.—Each administrator of a 

11 multiemployer plan shall, upon written request, fur12 nish to any plan participant or beneficiary, employee 

13 representative, or any employer that has an obliga14 tion to contribute to the plan— 

15 ‘‘(A) a copy of any periodic actuarial re16 port (including any sensitivity testing) received 

17 by the plan for any plan year which has been 

18 in the plan’s possession for at least 30 days, 

19 ‘‘(B) a copy of any quarterly, semi-annual, 

20 or annual financial report prepared for the plan 

21 by any plan investment manager or advisor or 

22 other fiduciary which has been in the plan’s 

23 possession for at least 30 days, and 

24 ‘‘(C) a copy of any application filed with 

25 the Secretary of the Treasury requesting an exVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00438 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tension under section 304 of this Act or section 

2 431(d) of the Internal Revenue Code of 1986 

3 and the determination of such Secretary pursu4 ant to such application. 

5 ‘‘(2) COMPLIANCE.—Information required to be 

6 provided under paragraph (1) — 

7 ‘‘(A) shall be provided to the requesting 

8 participant, beneficiary, or employer within 30 

9 days after the request in a form and manner 

10 prescribed in regulations of the Secretary, 

11 ‘‘(B) may be provided in written, elec12 tronic, or other appropriate form to the extent 

13 such form is reasonably accessible to persons to 

14 whom the information is required to be pro15 vided, and 

16 ‘‘(C) shall not— 

17 ‘‘(i) include any individually identifi18 able information regarding any plan partic19 ipant, beneficiary, employee, fiduciary, or 

20 contributing employer, or 

21 ‘‘(ii) reveal any proprietary informa22 tion regarding the plan, any contributing 

23 employer, or entity providing services to 

24 the plan. 


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1 ‘‘(3) LIMITATIONS.—In no case shall a partici2 pant, beneficiary, or employer be entitled under this 

3 subsection to receive more than one copy of any re4 port or application described in paragraph (1) dur5 ing any one 12-month period. The administrator 

6 may make a reasonable charge to cover copying, 

7 mailing, and other costs of furnishing copies of in8 formation pursuant to paragraph (1). The Secretary 

9 may by regulations prescribe the maximum amount 

10 which will constitute a reasonable charge under the 

11 preceding sentence.’’. 

12 (2) ENFORCEMENT.—Section 502(c)(4) of such 

13 Act (29 U.S.C. 1132(c)(4)) is amended by striking 

14 ‘‘section 101(j)’’ and inserting ‘‘subsection (j) or (k) 

15 of section 101’’. 

16 (3) REGULATIONS.—The Secretary shall pre17 scribe regulations under section 101(k)(2) of the 

18 Employee Retirement Income Security Act of 1974 

19 (as added by paragraph (1)) not later than 1 year 

20 after the date of the enactment of this Act. 

21 (b) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY

22 TO MULTIEMPLOYER PLANS.— 

23 (1) IN GENERAL.—Section 101 of such Act (as 

24 amended by subsection (a)) is amended— 


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1 (A) by redesignating subsection (l) as sub2 section (m); and 

3 (B) by inserting after subsection (k) the 

4 following new subsection: 

5 ‘‘(l) NOTICE OF POTENTIAL WITHDRAWAL LIABIL6 ITY.— 

7 ‘‘(1) IN GENERAL.—The plan sponsor or ad8 ministrator of a multiemployer plan shall, upon writ9 ten request, furnish to any employer who has an ob10 ligation to contribute to the plan a notice of— 

11 ‘‘(A) the estimated amount which would be 

12 the amount of such employer’s withdrawal li13 ability under part 1 of subtitle E of title IV if 

14 such employer withdrew on the last day of the 

15 plan year preceding the date of the request, and 

16 ‘‘(B) an explanation of how such estimated 

17 liability amount was determined, including the 

18 actuarial assumptions and methods used to de19 termine the value of the plan liabilities and as20 sets, the data regarding employer contributions, 

21 unfunded vested benefits, annual changes in the 

22 plan’s unfunded vested benefits, and the appli23 cation of any relevant limitations on the esti24 mated withdrawal liability. 


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1 For purposes of subparagraph (B), the term ‘em2 ployer contribution’ means, in connection with a par3 ticipant, a contribution made by an employer as an 

4 employer of such participant. 

5 ‘‘(2) COMPLIANCE.—Any notice required to be 

6 provided under paragraph (1)— 

7 ‘‘(A) shall be provided in a form and man8 ner prescribed in regulations of the Secretary to 

9 the requesting employer within— 

10 ‘‘(i) 180 days after the request, or 

11 ‘‘(ii) subject to regulations of the Sec12 retary, such longer time as may be nec13 essary in the case of a plan that deter14 mines withdrawal liability based on any 

15 method described under paragraph (4) or 

16 (5) of section 4211(c); and 

17 ‘‘(B) may be provided in written, elec18 tronic, or other appropriate form to the extent 

19 such form is reasonably accessible to employers 

20 to whom the information is required to be pro21 vided. 

22 ‘‘(3) LIMITATIONS.—In no case shall an em23 ployer be entitled under this subsection to receive 

24 more than one notice described in paragraph (1) 

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1 quired to provide such notice may make a reasonable 

2 charge to cover copying, mailing, and other costs of 

3 furnishing such notice pursuant to paragraph (1). 

4 The Secretary may by regulations prescribe the max5 imum amount which will constitute a reasonable 

6 charge under the preceding sentence.’’. 

7 (2) ENFORCEMENT.—Section 502(c)(4) of such 

8 Act (29 U.S.C. 1132(c)(4)) is amended by striking 

9 ‘‘section 101(j) or (k)’’ and inserting ‘‘subsection (j), 

10 (k), or (l) of section 101’’. 

11 (c) NOTICE OF AMENDMENT REDUCING FUTURE AC12 CRUALS.— 

13 (1) AMENDMENT OF ERISA.—Section 204(h)(1) 

14 of such Act (29 U.S.C. 1054(h)(1)) is amended by 

15 inserting at the end before the period the following: 

16 ‘‘and to each employer who has an obligation to con17 tribute to the plan.’’. 

18 (2) AMENDMENT OF INTERNAL REVENUE

19 CODE.—Section 4980F(e)(1) of such Code is amend20 ed by adding at the end before the period the fol21 lowing: ‘‘and to each employer who has an obligation 

22 to contribute to the plan.’’. 

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

24 this section shall apply to plan years beginning after De25 cember 31, 2007. 


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1 SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIRE2 MENTS. 

3 (a) ADDITIONAL ANNUAL REPORTING REQUIRE4 MENTS WITH RESPECT TO DEFINED BENEFIT PLANS.— 

5 (1) IN GENERAL.—Section 103 of the Employee 

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

7 1023) is amended— 

8 (A) in subsection (a)(1)(B), by striking 

9 ‘‘subsections (d) and (e)’’ and inserting ‘‘sub10 sections (d), (e), and (f)’’; and 

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

12 subsection: 

13 ‘‘(f) ADDITIONAL INFORMATION WITH RESPECT TO

14 DEFINED BENEFIT PLANS.— 

15 ‘‘(1) LIABILITIES UNDER 2 OR MORE PLANS.— 

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

17 any liabilities to participants or their bene18 ficiaries under a defined benefit plan as of the 

19 end of a plan year consist (in whole or in part) 

20 of liabilities to such participants and bene21 ficiaries under 2 or more pension plans as of 

22 immediately before such plan year, an annual 

23 report under this section for such plan year 

24 shall include the funded percentage of each of 

25 such 2 or more pension plans as of the last day 

26 of such plan year and the funded percentage of 


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1 the plan with respect to which the annual re2 port is filed as of the last day of such plan 

3 year. 

4 ‘‘(B) FUNDED PERCENTAGE.—For pur5 poses of this paragraph, the term ‘funded per6 centage’— 

7 ‘‘(i) in the case of a single-employer 

8 plan, means the funding target attainment 

9 percentage, as defined in section 

10 303(d)(2), and 

11 ‘‘(ii) in the case of a multiemployer 

12 plan, has the meaning given such term in 

13 section 305(i)(2). 

14 ‘‘(2) ADDITIONAL INFORMATION FOR MULTIEM15 PLOYER PLANS.—With respect to any defined ben16 efit plan which is a multiemployer plan, an annual 

17 report under this section for a plan year shall in18 clude, in addition to the information required under 

19 paragraph (1), the following, as of the end of the 

20 plan year to which the report relates: 

21 ‘‘(A) The number of employers obligated to 

22 contribute to the plan. 

23 ‘‘(B) A list of the employers that contrib24 uted more than 5 percent of the total contribu25 tions to the plan during such plan year. 


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1 ‘‘(C) The number of participants under the 

2 plan on whose behalf no contributions were 

3 made by an employer as an employer of the 

4 participant for such plan year and for each of 

5 the 2 preceding plan years. 

6 ‘‘(D) The ratios of— 

7 ‘‘(i) the number of participants under 

8 the plan on whose behalf no employer had 

9 an obligation to make an employer con10 tribution during the plan year, to 

11 ‘‘(ii) the number of participants under 

12 the plan on whose behalf no employer had 

13 an obligation to make an employer con14 tribution during each of the 2 preceding 

15 plan years. 

16 ‘‘(E) Whether the plan received an amorti17 zation extension under section 304(d) of this 

18 Act or section 431(d) of the Internal Revenue 

19 Code of 1986 for such plan year and, if so, the 

20 amount of the difference between the minimum 

21 required contribution for the year and the min22 imum required contribution which would have 

23 been required without regard to the extension, 

24 and the period of such extension. 


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1 ‘‘(F) Whether the plan used the shortfall 

2 funding method (as such term is used in section 

3 305) for such plan year and, if so, the amount 

4 of the difference between the minimum required 

5 contribution for the year and the minimum re6 quired contribution which would have been re7 quired without regard to the use of such meth8 od, and the period of use of such method. 

9 ‘‘(G) Whether the plan was in critical or 

10 endangered status under section 305 for such 

11 plan year, and if so, a summary of any funding 

12 improvement or rehabilitation plan (or modi13 fication thereto) adopted during the plan year, 

14 and the funded percentage of the plan. 

15 ‘‘(H) The number of employers that with16 drew from the plan during the preceding plan 

17 year and the aggregate amount of withdrawal 

18 liability assessed, or estimated to be assessed, 

19 against such withdrawn employers. 

20 ‘‘(I) In the case of a multiemployer plan 

21 that has merged with another plan or to which 

22 assets and liabilities have been transferred, the 

23 actuarial valuation of the assets and liabilities 

24 of each affected plan during the year preceding 

25 the effective date of the merger or transfer, 


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1 based upon the most recent data available as of 

2 the day before the first day of the plan year, or 

3 other valuation method performed under stand4 ards and procedures as the Secretary may pre5 scribe by regulation.’’. 

6 (2) GUIDANCE BY SECRETARY OF LABOR.—Not 

7 later than 1 year after the date of enactment of this 

8 Act, the Secretary of Labor shall publish guidance 

9 to assist multiemployer defined benefit plans to— 

10 (A) identify and enumerate plan partici11 pants for whom there is no employer with an 

12 obligation to make an employer contribution 

13 under the plan; and 

14 (B) report such information under section 

15 103(f)(2)(D) of the Employee Retirement In16 come Security Act of 1974 (as added by this 

17 section). 

18 (b) ADDITIONAL INFORMATION IN ANNUAL ACTU19 ARIAL STATEMENT REGARDING PLAN RETIREMENT PRO20 JECTIONS.—Section 103(d) of such Act (29 U.S.C. 

21 1023(d)) is amended— 

22 (1) by redesignating paragraphs (12) and (13) 

23 as paragraphs (13) and (14), respectively; and 

24 (2) by inserting after paragraph (11) the fol25 lowing new paragraph: 


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1 ‘‘(12) A statement explaining the actuarial as2 sumptions and methods used in projecting future re3 tirements and forms of benefit distributions under 

4 the plan.’’. 

5 (c) REPEAL OF SUMMARY ANNUAL REPORT RE6 QUIREMENT FOR DEFINED BENEFIT PLANS.— 

7 (1) IN GENERAL.—Section 104(b)(3) of such 

8 Act (29 U.S.C. 1024(b)(3)) is amended by inserting 

9 ‘‘(other than an administrator of a defined benefit 

10 plan to which the requirements of section 103(f) ap11 plies)’’ after ‘‘the administrators’’. 

12 (2) CONFORMING AMENDMENTS.—Section 

13 101(a)(2) of such Act (29 U.S.C. 1021(a)(2)) is 

14 amended by inserting ‘‘subsection (f) and’’ before 

15 ‘‘sections 104(b)(3) and 105(a) and (c)’’. 

16 (d) FURNISHING SUMMARY PLAN INFORMATION TO

17 EMPLOYERS AND EMPLOYEE REPRESENTATIVES OF

18 MULTIEMPLOYER PLANS.—Section 104 of such Act (29 

19 U.S.C. 1024) is amended— 

20 (1) in the header, by striking ‘‘PARTICI21 PANTS’’ and inserting ‘‘PARTICIPANTS AND CER22 TAIN EMPLOYERS’’; 

23 (2) redesignating subsection (d) as subsection 

24 (e); and 

25 (3) inserting after subsection (c) the following: 


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1 ‘‘(d) FURNISHING SUMMARY PLAN INFORMATION TO

2 EMPLOYERS AND EMPLOYEE REPRESENTATIVES OF

3 MULTIEMPLOYER PLANS.— 

4 ‘‘(1) IN GENERAL.—With respect to a multiem5 ployer plan subject to this section, within 30 days 

6 after the due date under subsection (a)(1) for the 

7 filing of the annual report for the fiscal year of the 

8 plan, the administrators shall furnish to each em9 ployee organization and to each employer with an 

10 obligation to contribute to the plan a report that 

11 contains— 

12 ‘‘(A) a description of the contribution 

13 schedules and benefit formulas under the plan, 

14 and any modification to such schedules and for15 mulas, during such plan year; 

16 ‘‘(B) the number of employers obligated to 

17 contribute to the plan; 

18 ‘‘(C) a list of the employers that contrib19 uted more than 5 percent of the total contribu20 tions to the plan during such plan year; 

21 ‘‘(D) the number of participants under the 

22 plan on whose behalf no contributions were 

23 made by an employer as an employer of the 

24 participant for such plan year and for each of 

25 the 2 preceding plan years; 


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1 ‘‘(E) whether the plan was in critical or 

2 endangered status under section 305 for such 

3 plan year and, if so, include— 

4 ‘‘(i) a list of the actions taken by the 

5 plan to improve its funding status; and 

6 ‘‘(ii) a statement describing how a 

7 person may obtain a copy of the plan’s im8 provement or rehabilitation plan, as appli9 cable, adopted under section 305 and the 

10 actuarial and financial data that dem11 onstrate any action taken by the plan to12 ward fiscal improvement; 

13 ‘‘(F) the number of employers that with14 drew from the plan during the preceding plan 

15 year and the aggregate amount of withdrawal 

16 liability assessed, or estimated to be assessed, 

17 against such withdrawn employers, as reported 

18 on the annual report for the plan year to which 

19 the report under this subsection relates; 

20 ‘‘(G) in the case of a multiemployer plan 

21 that has merged with another plan or to which 

22 assets and liabilities have been transferred, the 

23 actuarial valuation of the assets and liabilities 

24 of each affected plan during the year preceding 

25 the effective date of the merger or transfer, 


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1 based upon the most recent data available as of 

2 the day before the first day of the plan year, or 

3 other valuation method performed under stand4 ards and procedures as the Secretary may pre5 scribe by regulation; 

6 ‘‘(H) a description as to whether the 

7 plan— 

8 ‘‘(i) sought or received an amortiza9 tion extension under section 304(d) of this 

10 Act or section 431(d) of the Internal Rev11 enue Code of 1986 for such plan year; or 

12 ‘‘(ii) used the shortfall funding meth13 od (as such term is used in section 305) 

14 for such plan year; and 

15 ‘‘(I) notification of the right under this 

16 section of the recipient to a copy of the annual 

17 report filed with the Secretary under subsection 

18 (a), summary plan description, summary of any 

19 material modification of the plan, upon written 

20 request, but that— 

21 ‘‘(i) in no case shall a recipient be en22 titled to receive more than one copy of any 

23 such document described during any one 

24 12-month period; and 


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1 ‘‘(ii) the administrator may make a 

2 reasonable charge to cover copying, mail3 ing, and other costs of furnishing copies of 

4 information pursuant to this subpara5 graph. 

6 ‘‘(2) EFFECT OF SUBSECTION.—Nothing in this 

7 subsection waives any other provision under this title 

8 requiring plan administrators to provide, upon re9 quest, information to employers that have an obliga10 tion to contribute under the plan.’’. 

11 (e) MODEL FORM.—Not later than 1 year after the 

12 date of the enactment of this Act, the Secretary of Labor 

13 shall publish a model form for providing the statements, 

14 schedules, and other material required to be provided 

15 under section 101(f) of the Employee Retirement Income 

16 Security Act of 1974, as amended by this section. The 

17 Secretary of Labor may promulgate any interim final rules 

18 as the Secretary determines appropriate to carry out the 

19 provisions of this subsection. 

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

21 this section shall apply to plan years beginning after De22 cember 31, 2007. 


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1 SEC. 504. ELECTRONIC DISPLAY OF ANNUAL REPORT IN2 FORMATION. 

3 (a) ELECTRONIC DISPLAY OF INFORMATION.—Sec4 tion 104(b) of such Act (29 U.S.C. 1024(b)) is amended 

5 by adding at the end the following: 

6 ‘‘(5) Identification and basic plan information and ac7 tuarial information included in the annual report for any 

8 plan year shall be filed with the Secretary in an electronic 

9 format which accommodates display on the Internet, in ac10 cordance with regulations which shall be prescribed by the 

11 Secretary. The Secretary shall provide for display of such 

12 information included in the annual report, within 90 days 

13 after the date of the filing of the annual report, on an 

14 Internet website maintained by the Secretary and other 

15 appropriate media. Such information shall also be dis16 played on any Intranet website maintained by the plan 

17 sponsor (or by the plan administrator on behalf of the plan 

18 sponsor) for the purpose of communicating with employees 

19 and not the public, in accordance with regulations which 

20 shall be prescribed by the Secretary.’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to plan years beginning after De23 cember 31, 2007. 

24 SEC. 505. SECTION 4010 FILINGS WITH THE PBGC. 

25 (a) CHANGE IN CRITERIA FOR PERSONS REQUIRED

26 TO PROVIDE INFORMATION TO PBGC.—Section 4010(b) 


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1 of the Employee Retirement Income Security Act of 1974 

2 (29 U.S.C. 1310(b)) is amended by striking paragraph (1) 

3 and inserting the following: 

4 ‘‘(1) the funding target attainment percentage 

5 (as defined in subsection (d)) at the end of the pre6 ceding plan year of a plan maintained by the con7 tributing sponsor or any member of its controlled 

8 group is less than 80 percent;’’. 

9 (b) ADDITIONAL INFORMATION REQUIRED.—Section 

10 4010 of the Employee Retirement Income Security Act of 

11 1974 (29 U.S.C. 1310) is amended by adding at the end 

12 the following new subsection: 

13 ‘‘(d) ADDITIONAL INFORMATION REQUIRED.— 

14 ‘‘(1) IN GENERAL.—The information submitted 

15 to the corporation under subsection (a) shall in16 clude— 

17 ‘‘(A) the amount of benefit liabilities under 

18 the plan determined using the assumptions used 

19 by the corporation in determining liabilities; 

20 ‘‘(B) the funding target of the plan deter21 mined as if the plan has been in at-risk status 

22 for at least 5 plan years; and 

23 ‘‘(C) the funding target attainment per24 centage of the plan. 


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1 ‘‘(2) DEFINITIONS.—For purposes of this sub2 section: 

3 ‘‘(A) FUNDING TARGET.—The term ‘fund4 ing target’ has the meaning provided under sec5 tion 303(d)(1). 

6 ‘‘(B) FUNDING TARGET ATTAINMENT PER7 CENTAGE.—The term ‘funding target attain8 ment percentage’ has the meaning provided 

9 under section 302(d)(2). 

10 ‘‘(C) AT-RISK STATUS.—The term ‘at-risk 

11 status’ has the meaning provided in section 

12 303(i)(4). 

13 ‘‘(e) NOTICE TO CONGRESS.—The corporation shall, 

14 on an annual basis, submit to the Committee on Health, 

15 Education, Labor, and Pensions and the Committee on Fi16 nance of the Senate and the Committee on Education and 

17 the Workforce and the Committee on Ways and Means 

18 of the House of Representatives, a summary report in the 

19 aggregate of the information submitted to the corporation 

20 under this section.’’. 

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

22 this section shall apply with respect to years beginning 

23 after 2007. 


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1 SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO 

2 PLAN PARTICIPANTS. 

3 (a) DISTRESS TERMINATIONS.— 

4 (1) IN GENERAL.—Section 4041(c)(2) of the 

5 Employee Retirement Income Security Act of 1974 

6 (29 U.S.C. 1341(c)(2)) is amended by adding at the 

7 end the following: 

8 ‘‘(D) DISCLOSURE OF TERMINATION IN9 FORMATION.— 

10 ‘‘(i) IN GENERAL.—A plan adminis11 trator that has filed a notice of intent to 

12 terminate under subsection (a)(2) shall 

13 provide to an affected party any informa14 tion provided to the corporation under sub15 section (a)(2) not later than 15 days 

16 after— 

17 ‘‘(I) receipt of a request from the 

18 affected party for the information; or 

19 ‘‘(II) the provision of new infor20 mation to the corporation relating to 

21 a previous request. 

22 ‘‘(ii) CONFIDENTIALITY.— 

23 ‘‘(I) IN GENERAL.—The plan ad24 ministrator shall not provide informa25 tion under clause (i) in a form that 

26 includes any information that may diVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00457 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 rectly or indirectly be associated with, 

2 or otherwise identify, an individual 

3 participant or beneficiary. 

4 ‘‘(II) LIMITATION.—A court may 

5 limit disclosure under this subpara6 graph of confidential information de7 scribed in section 552(b) of title 5, 

8 United States Code, to any authorized 

9 representative of the participants or 

10 beneficiaries that agrees to ensure the 

11 confidentiality of such information. 

12 ‘‘(iii) FORM AND MANNER OF INFOR13 MATION; CHARGES.— 

14 ‘‘(I) FORM AND MANNER.—The 

15 corporation may prescribe the form 

16 and manner of the provision of infor17 mation under this subparagraph, 

18 which shall include delivery in written, 

19 electronic, or other appropriate form 

20 to the extent that such form is rea21 sonably accessible to individuals to 

22 whom the information is required to 

23 be provided. 

24 ‘‘(II) REASONABLE CHARGES.—A 

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1 sonable fee for any information pro2 vided under this subparagraph in 

3 other than electronic form. 

4 ‘‘(iv) AUTHORIZED REPRESENTA5 TIVE.—For purposes of this subparagraph, 

6 the term ‘authorized representative’ means 

7 any employee organization representing 

8 participants in the pension plan.’’. 

9 (2) CONFORMING AMENDMENT.—Section 

10 4041(c)(1) of the Employee Retirement Income Se11 curity Act of 1974 (29 U.S.C. 1341(c)(1)) is amend12 ed in subparagraph (C) by striking ‘‘subparagraph 

13 (B)’’ and inserting ‘‘subparagraphs (B) and (D)’’. 

14 (b) INVOLUNTARY TERMINATIONS.— 

15 (1) IN GENERAL.—Section 4042(c) of the Em16 ployee Retirement Income Security Act of 1974 (29 

17 U.S.C. 1342(c)) is amended by— 

18 (A) striking ‘‘(c) If the’’ and inserting 

19 ‘‘(c)(1) If the’’; 

20 (B) redesignating paragraph (3) as para21 graph (2); and 

22 (C) adding at the end the following: 

23 ‘‘(3) DISCLOSURE OF TERMINATION INFORMA24 TION.— 

25 ‘‘(A) IN GENERAL.— 


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1 ‘‘(i) INFORMATION FROM PLAN SPON2 SOR OR ADMINISTRATOR.—A plan sponsor 

3 or plan administrator of a single-employer 

4 plan that has received a notice from the 

5 corporation of a determination that the 

6 plan should be terminated under this sec7 tion shall provide to an affected party any 

8 information provided to the corporation in 

9 connection with the plan termination. 

10 ‘‘(ii) INFORMATION FROM CORPORA11 TION.—The corporation shall provide a 

12 copy of the administrative record, includ13 ing the trusteeship decision record of a ter14 mination of a plan described under clause 

15 (i). 

16 ‘‘(B) TIMING OF DISCLOSURE.—The plan 

17 sponsor, plan administrator, or the corporation, 

18 as applicable, shall provide the information de19 scribed in subparagraph (A) not later than 15 

20 days after— 

21 ‘‘(i) receipt of a request from an af22 fected party for such information; or 

23 ‘‘(ii) in the case of information de24 scribed under subparagraph (A)(i), the 

25 provision of any new information to the 


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1 corporation relating to a previous request 

2 by an affected party. 

3 ‘‘(C) CONFIDENTIALITY.— 

4 ‘‘(i) IN GENERAL.—The plan adminis5 trator and plan sponsor shall not provide 

6 information under subparagraph (A)(i) in 

7 a form which includes any information that 

8 may directly or indirectly be associated 

9 with, or otherwise identify, an individual 

10 participant or beneficiary. 

11 ‘‘(ii) LIMITATION.—A court may limit 

12 disclosure under this paragraph of con13 fidential information described in section 

14 552(b) of title 5, United States Code, to 

15 authorized representatives (within the 

16 meaning of section 4041(c)(2)(D)(iv)) of 

17 the participants or beneficiaries that agree 

18 to ensure the confidentiality of such infor19 mation. 

20 ‘‘(D) FORM AND MANNER OF INFORMA21 TION; CHARGES.— 

22 ‘‘(i) FORM AND MANNER.—The cor23 poration may prescribe the form and man24 ner of the provision of information under 

25 this paragraph, which shall include delivery 


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1 in written, electronic, or other appropriate 

2 form to the extent that such form is rea3 sonably accessible to individuals to whom 

4 the information is required to be provided. 

5 ‘‘(ii) REASONABLE CHARGES.—A plan 

6 sponsor may charge a reasonable fee for 

7 any information provided under this para8 graph in other than electronic form.’’. 

9 (c) EFFECTIVE DATE.— 

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

11 this section shall apply to any plan termination 

12 under title IV of the Employee Retirement Income 

13 Security Act of 1974 (29 U.S.C. 1301 et seq.) with 

14 respect to which the notice of intent to terminate (or 

15 in the case of a termination by the Pension Benefit 

16 Guaranty Corporation, a notice of determination 

17 under section 4042 of such Act (29 U.S.C. 1342)) 

18 occurs after the date of enactment of this Act. 

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

20 4041(c)(2)(D) or 4042(c)(3) of the Employee Re21 tirement Income Security Act of 1974 (as added by 

22 this section) would otherwise be required to be pro23 vided before the 90th day after the date of the en24 actment of this Act, such notice shall not be re25 quired to be provided until such 90th day. 


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1 SEC. 507. NOTICE OF FREEDOM TO DIVEST EMPLOYER SE2 CURITIES. 

3 (a) IN GENERAL.—Section 101 of the Employee Re4 tirement Income Security Act of 1974 (29 U.S.C. 1021), 

5 as amended by this Act, is amended by redesignating sub6 section (m) as subsection (n) and by inserting after sub7 section (l) the following: 

8 ‘‘(m) NOTICE OF RIGHT TO DIVEST.—Not later than 

9 30 days before the first date on which an applicable indi10 vidual of an applicable individual account plan is eligible 

11 to exercise the right under section 204(j) to direct the pro12 ceeds from the divestment of employer securities with re13 spect to any type of contribution, the administrator shall 

14 provide to such individual a notice— 

15 ‘‘(1) setting forth such right under such sec16 tion, and 

17 ‘‘(2) describing the importance of diversifying 

18 the investment of retirement account assets. 

19 The notice required by this subsection shall be written in 

20 a manner calculated to be understood by the average plan 

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

22 other appropriate form to the extent that such form is rea23 sonably accessible to the recipient.’’ 

24 (b) PENALTIES.—Section 502(c)(7) of the Employee 

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


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1 1132(c)(7)) is amended by striking ‘‘section 101(i)’’ and 

2 inserting ‘‘subsection (i) or (m) of section 101’’. 

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

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

5 this subsection, prescribe a model notice for purposes of 

6 satisfying the requirements of the amendments made by 

7 this section. 

8 (d) EFFECTIVE DATES.— 

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

10 this section shall apply to plan years beginning after 

11 December 31, 2006. 

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

13 101(m) of the Employee Retirement Income Secu14 rity Act of 1974 (as added by this section) would 

15 otherwise be required to be provided before the 90th 

16 day after the date of the enactment of this Act, such 

17 notice shall not be required to be provided until such 

18 90th day. 

19 SEC. 508. PERIODIC PENSION BENEFIT STATEMENTS. 

20 (a) AMENDMENTS OF ERISA.— 

21 (1) IN GENERAL.—Section 105(a) of the Em22 ployee Retirement Income Security Act of 1974 (29 

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

24 ‘‘(a) REQUIREMENTS TO PROVIDE PENSION BEN25 EFIT STATEMENTS.— 


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1 ‘‘(1) REQUIREMENTS.— 

2 ‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The 

3 administrator of an individual account plan 

4 (other than a one-participant retirement plan 

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

6 a pension benefit statement— 

7 ‘‘(i) at least once each calendar quar8 ter to a participant or beneficiary who has 

9 the right to direct the investment of assets 

10 in his or her account under the plan, 

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

12 to a participant or beneficiary who has his 

13 or her own account under the plan but 

14 does not have the right to direct the invest15 ment of assets in that account, and 

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

17 beneficiary not described in clause (i) or 

18 (ii). 

19 ‘‘(B) DEFINED BENEFIT PLAN.—The ad20 ministrator of a defined benefit plan (other 

21 than a one-participant retirement plan de22 scribed in section 101(i)(8)(B)) shall furnish a 

23 pension benefit statement— 

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

25 each participant with a nonforfeitable acVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00465 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 crued benefit and who is employed by the 

2 employer maintaining the plan at the time 

3 the statement is to be furnished, and 

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

5 the plan upon written request. 

6 Information furnished under clause (i) to a par7 ticipant may be based on reasonable estimates 

8 determined under regulations prescribed by the 

9 Secretary, in consultation with the Pension 

10 Benefit Guaranty Corporation. 

11 ‘‘(2) STATEMENTS.— 

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

13 statement under paragraph (1)— 

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

15 latest available information— 

16 ‘‘(I) the total benefits accrued, 

17 and 

18 ‘‘(II) the nonforfeitable pension 

19 benefits, if any, which have accrued, 

20 or the earliest date on which benefits 

21 will become nonforfeitable, 

22 ‘‘(ii) shall include an explanation of 

23 any permitted disparity under section 

24 401(l) of the Internal Revenue Code of 

25 1986 or any floor-offset arrangement that 


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1 may be applied in determining any accrued 

2 benefits described in clause (i), 

3 ‘‘(iii) shall be written in a manner cal4 culated to be understood by the average 

5 plan participant, and 

6 ‘‘(iv) may be delivered in written, elec7 tronic, or other appropriate form to the ex8 tent such form is reasonably accessible to 

9 the participant or beneficiary. 

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

11 case of an individual account plan, any pension 

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

13 paragraph (1)(A) shall include— 

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

15 which assets in the individual account have 

16 been allocated, determined as of the most 

17 recent valuation date under the plan, in18 cluding the value of any assets held in the 

19 form of employer securities, without regard 

20 to whether such securities were contributed 

21 by the plan sponsor or acquired at the di22 rection of the plan or of the participant or 

23 beneficiary, and 

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

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


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1 ‘‘(I) an explanation of any limita2 tions or restrictions on any right of 

3 the participant or beneficiary under 

4 the plan to direct an investment, 

5 ‘‘(II) an explanation, written in a 

6 manner calculated to be understood 

7 by the average plan participant, of the 

8 importance, for the long-term retire9 ment security of participants and 

10 beneficiaries, of a well-balanced and 

11 diversified investment portfolio, in12 cluding a statement of the risk that 

13 holding more than 20 percent of a 

14 portfolio in the security of one entity 

15 (such as employer securities) may not 

16 be adequately diversified, and 

17 ‘‘(III) a notice directing the par18 ticipant or beneficiary to the Internet 

19 website of the Department of Labor 

20 for sources of information on indi21 vidual investing and diversification. 

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

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


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1 ‘‘(i) updates the information described 

2 in such paragraph which is provided in the 

3 pension benefit statement, or 

4 ‘‘(ii) provides in a separate statement 

5 such information as is necessary to enable 

6 a participant or beneficiary to determine 

7 their nonforfeitable vested benefits. 

8 ‘‘(3) DEFINED BENEFIT PLANS.— 

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

10 of a defined benefit plan, the requirements of 

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

12 with respect to a participant if at least once 

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

15 benefit statement and the ways in which the 

16 participant may obtain such statement. Such 

17 notice may be delivered in written, electronic, or 

18 other appropriate form to the extent such form 

19 is reasonably accessible to the participant. 

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

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

24 the Internal Revenue Code of 1986) under the 

25 plan need not be taken into account in deterVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00469 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 mining the 3-year period under paragraph 

2 (1)(B)(i).’’ 

3 (2) CONFORMING AMENDMENTS.— 

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

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

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

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

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

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

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

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

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

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

17 or section 105(a)’’. 

18 (b) MODEL STATEMENTS.— 

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

20 shall, within 1 year after the date of the enactment 

21 of this section, develop 1 or more model benefit 

22 statements that are written in a manner calculated 

23 to be understood by the average plan participant and 

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1 plying with the requirements of section 105 of the 

2 Employee Retirement Income Security Act of 1974. 

3 (2) INTERIM FINAL RULES.—The Secretary of 

4 Labor may promulgate any interim final rules as the 

5 Secretary determines appropriate to carry out the 

6 provisions of this subsection. 

7 (c) EFFECTIVE DATE.— 

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

9 this section shall apply to plan years beginning after 

10 December 31, 2006. 

11 (2) SPECIAL RULE FOR COLLECTIVELY BAR12 GAINED AGREEMENTS.—In the case of a plan main13 tained pursuant to 1 or more collective bargaining 

14 agreements between employee representatives and 1 

15 or more employers ratified on or before the date of 

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

17 applied to benefits pursuant to, and individuals cov18 ered by, any such agreement by substituting for 

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

20 (A) the later of— 

21 (i) December 31, 2007, or 

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

23 collective bargaining agreements termi24 nates (determined without regard to any 


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

3 (B) December 31, 2008. 

4 SEC. 509. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF 

5 BLACKOUT PERIODS. 

6 (a) IN GENERAL.—Section 101(i)(8)(B) of the Em7 ployee Retirement Income Security Act of 1974 (29 

8 U.S.C. 1021(i)(8)(B)) is amended by striking clauses (i) 

9 through (iv), by redesignating clause (v) as clause (ii), and 

10 by inserting before clause (ii), as so redesignated, the fol11 lowing new clause: 

12 ‘‘(i) on the first day of the plan 

13 year— 

14 ‘‘(I) covered only one individual 

15 (or the individual and the individual’s 

16 spouse) and the individual (or the in17 dividual and the individual’s spouse) 

18 owned 100 percent of the plan spon19 sor (whether or not incorporated), or 

20 ‘‘(II) covered only one or more 

21 partners (or partners and their 

22 spouses) in the plan sponsor, and’’. 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this subsection shall take effect as if included in the proviVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00472 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 sions of section 306 of Public Law 107–204 (116 Stat. 

2 745 et seq.). 

3 TITLE VI—INVESTMENT ADVICE, 

4 PROHIBITED TRANSACTIONS, 

5 AND FIDUCIARY RULES 

6 Subtitle A—Investment Advice 

7 SEC. 601. PROHIBITED TRANSACTION EXEMPTION FOR 

8 PROVISION OF INVESTMENT ADVICE. 

9 (a) AMENDMENTS TO THE EMPLOYEE RETIREMENT

10 INCOME SECURITY ACT OF 1974.— 

11 (1) EXEMPTION FROM PROHIBITED TRANS12 ACTIONS.—Section 408(b) of the Employee Retire13 ment Income Security Act of 1974 (29 U.S.C. 

14 1108(b)) is amended by adding at the end the fol15 lowing new paragraph: 

16 ‘‘(14) Any transaction in connection with the 

17 provision of investment advice described in section 

18 3(21)(A)(ii) to a participant or beneficiary of an in19 dividual account plan that permits such participant 

20 or beneficiary to direct the investment of assets in 

21 their individual account, if— 

22 ‘‘(A) the transaction is— 

23 ‘‘(i) the provision of the investment 

24 advice to the participant or beneficiary of 

25 the plan with respect to a security or other 


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1 property available as an investment under 

2 the plan, 

3 ‘‘(ii) the acquisition, holding, or sale 

4 of a security or other property available as 

5 an investment under the plan pursuant to 

6 the investment advice, or 

7 ‘‘(iii) the direct or indirect receipt of 

8 fees or other compensation by the fiduciary 

9 adviser or an affiliate thereof (or any em10 ployee, agent, or registered representative 

11 of the fiduciary adviser or affiliate) in con12 nection with the provision of the advice or 

13 in connection with an acquisition, holding, 

14 or sale of a security or other property 

15 available as an investment under the plan 

16 pursuant to the investment advice; and 

17 ‘‘(B) the requirements of subsection (g) 

18 are met.’’. 

19 (2) REQUIREMENTS.—Section 408 of such Act 

20 is amended further by adding at the end the fol21 lowing new subsection: 

22 ‘‘(g) PROVISION OF INVESTMENT ADVICE TO PARTIC23 IPANT AND BENEFICIARIES.— 

24 ‘‘(1) IN GENERAL.—The prohibitions provided 

25 in section 406 shall not apply to transactions deVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00474 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 scribed in subsection (b)(14) if the investment advice 

2 provided by a fiduciary adviser is provided under an 

3 eligible investment advice arrangement. 

4 ‘‘(2) ELIGIBLE INVESTMENT ADVICE ARRANGE5 MENT.—For purposes of this subsection, the term 

6 ‘eligible investment advice arrangement’ means an 

7 arrangement— 

8 ‘‘(A) which either— 

9 ‘‘(i) provides that any fees (including 

10 any commission or other compensation) re11 ceived by the fiduciary adviser for invest12 ment advice or with respect to the sale, 

13 holding, or acquisition of any security or 

14 other property for purposes of investment 

15 of plan assets do not vary depending on 

16 the basis of any investment option selected, 

17 or 

18 ‘‘(ii) uses a computer model under an 

19 investment advice program meeting the re20 quirements of paragraph (3) in connection 

21 with the provision of investment advice by 

22 a fiduciary adviser to a participant or ben23 eficiary, and 


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1 ‘‘(B) with respect to which the require2 ments of paragraph (4), (5), (6), (7), (8), and 

3 (9) are met. 

4 ‘‘(3) INVESTMENT ADVICE PROGRAM USING

5 COMPUTER MODEL.— 

6 ‘‘(A) IN GENERAL.—An investment advice 

7 program meets the requirements of this para8 graph if the requirements of subparagraphs 

9 (B), (C), and (D) are met. 

10 ‘‘(B) COMPUTER MODEL.—The require11 ments of this subparagraph are met if the in12 vestment advice provided under the investment 

13 advice program is provided pursuant to a com14 puter model that— 

15 ‘‘(i) applies generally accepted invest16 ment theories that take into account the 

17 historic returns of different asset classes 

18 over defined periods of time, 

19 ‘‘(ii) utilizes relevant information 

20 about the participant, which may include 

21 age, life expectancy, retirement age, risk 

22 tolerance, other assets or sources of in23 come, and preferences as to certain types 

24 of investments, 


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1 ‘‘(iii) utilizes prescribed objective cri2 teria to provide asset allocation portfolios 

3 comprised of investment options available 

4 under the plan, 

5 ‘‘(iv) operates in a manner that is not 

6 biased in favor of investments offered by 

7 the fiduciary adviser or a person with a 

8 material affiliation or contractual relation9 ship with the fiduciary adviser, and 

10 ‘‘(v) takes into account all investment 

11 options under the plan in specifying how a 

12 participant’s account balance should be in13 vested and is not inappropriately weighted 

14 with respect to any investment option. 

15 ‘‘(C) CERTIFICATION.— 

16 ‘‘(i) IN GENERAL.—The requirements 

17 of this subparagraph are met with respect 

18 to any investment advice program if an eli19 gible investment expert certifies, prior to 

20 the utilization of the computer model and 

21 in accordance with rules prescribed by the 

22 Secretary, that the computer model meets 

23 the requirements of subparagraph (B). 

24 ‘‘(ii) RENEWAL OF CERTIFI25 CATIONS.—If, as determined under regulaVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00477 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tions prescribed by the Secretary, there are 

2 material modifications to a computer 

3 model, the requirements of this subpara4 graph are met only if a certification de5 scribed in clause (i) is obtained with re6 spect to the computer model as so modi7 fied. 

8 ‘‘(iii) ELIGIBLE INVESTMENT EX9 PERT.—The term ‘eligible investment ex10 pert’ means any person— 

11 ‘‘(I) which meets such require12 ments as the Secretary may provide, 

13 and 

14 ‘‘(II) does not bear any material 

15 affiliation or contractual relationship 

16 with any investment adviser or a re17 lated person thereof (or any employee, 

18 agent, or registered representative of 

19 the investment adviser or related per20 son). 

21 ‘‘(D) EXCLUSIVITY OF RECOMMENDA22 TION.—The requirements of this subparagraph 

23 are met with respect to any investment advice 

24 program if— 


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1 ‘‘(i) the only investment advice pro2 vided under the program is the advice gen3 erated by the computer model described in 

4 subparagraph (B), and 

5 ‘‘(ii) any transaction described in sub6 section (b)(14)(B)(ii) occurs solely at the 

7 direction of the participant or beneficiary. 

8 Nothing in the preceding sentence shall pre9 clude the participant or beneficiary from re10 questing investment advice other than that de11 scribed in subparagraph (A), but only if such 

12 request has not been solicited by any person 

13 connected with carrying out the arrangement. 

14 ‘‘(4) EXPRESS AUTHORIZATION BY SEPARATE

15 FIDUCIARY.—The requirements of this paragraph 

16 are met with respect to an arrangement if the ar17 rangement is expressly authorized by a plan fidu18 ciary other than the person offering the investment 

19 advice program, any person providing investment op20 tions under the plan, or any affiliate of either. 

21 ‘‘(5) ANNUAL AUDIT.—The requirements of this 

22 paragraph are met if an independent auditor, who 

23 has appropriate technical training or experience and 

24 proficiency and so represents in writing— 


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1 ‘‘(A) conducts an annual audit of the ar2 rangement for compliance with the require3 ments of this subsection, and 

4 ‘‘(B) following completion of the annual 

5 audit, issues a written report to the fiduciary 

6 who authorized use of the arrangement which 

7 presents its specific findings regarding compli8 ance of the arrangement with the requirements 

9 of this subsection. 

10 For purposes of this paragraph, an auditor is con11 sidered independent if it is not related to the person 

12 offering the arrangement to the plan and is not re13 lated to any person providing investment options 

14 under the plan. 

15 ‘‘(6) DISCLOSURE.—The requirements of this 

16 paragraph are met if— 

17 ‘‘(A) the fiduciary adviser provides to a 

18 participant or a beneficiary before the initial 

19 provision of the investment advice with regard 

20 to any security or other property offered as an 

21 investment option, a written notification (which 

22 may consist of notification by means of elec23 tronic communication)— 

24 ‘‘(i) of the role of any party that has 

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1 tionship with the financial adviser in the 

2 development of the investment advice pro3 gram and in the selection of investment 

4 options available under the plan, 

5 ‘‘(ii) of the past performance and his6 torical rates of return of the investment 

7 options available under the plan, 

8 ‘‘(iii) of all fees or other compensation 

9 relating to the advice that the fiduciary ad10 viser or any affiliate thereof is to receive 

11 (including compensation provided by any 

12 third party) in connection with the provi13 sion of the advice or in connection with the 

14 sale, acquisition, or holding of the security 

15 or other property, 

16 ‘‘(iv) of any material affiliation or 

17 contractual relationship of the fiduciary 

18 adviser or affiliates thereof in the security 

19 or other property, 

20 ‘‘(v) the manner, and under what cir21 cumstances, any participant or beneficiary 

22 information provided under the arrange23 ment will be used or disclosed, 

24 ‘‘(vi) of the types of services provided 

25 by the fiduciary adviser in connection with 


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1 the provision of investment advice by the 

2 fiduciary adviser, 

3 ‘‘(vii) that the adviser is acting as a 

4 fiduciary of the plan in connection with the 

5 provision of the advice, and 

6 ‘‘(viii) that a recipient of the advice 

7 may separately arrange for the provision of 

8 advice by another adviser, that could have 

9 no material affiliation with and receive no 

10 fees or other compensation in connection 

11 with the security or other property, and 

12 ‘‘(B) at all times during the provision of 

13 advisory services to the participant or bene14 ficiary, the fiduciary adviser— 

15 ‘‘(i) maintains the information de16 scribed in subparagraph (A) in accurate 

17 form and in the manner described in para18 graph (8), 

19 ‘‘(ii) provides, without charge, accu20 rate information to the recipient of the ad21 vice no less frequently than annually, 

22 ‘‘(iii) provides, without charge, accu23 rate information to the recipient of the ad24 vice upon request of the recipient, and 


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1 ‘‘(iv) provides, without charge, accu2 rate information to the recipient of the ad3 vice concerning any material change to the 

4 information required to be provided to the 

5 recipient of the advice at a time reasonably 

6 contemporaneous to the change in informa7 tion. 

8 ‘‘(7) OTHER CONDITIONS.—The requirements 

9 of this paragraph are met if— 

10 ‘‘(A) the fiduciary adviser provides appro11 priate disclosure, in connection with the sale, 

12 acquisition, or holding of the security or other 

13 property, in accordance with all applicable secu14 rities laws, 

15 ‘‘(B) the sale, acquisition, or holding oc16 curs solely at the direction of the recipient of 

17 the advice, 

18 ‘‘(C) the compensation received by the fi19 duciary adviser and affiliates thereof in connec20 tion with the sale, acquisition, or holding of the 

21 security or other property is reasonable, and 

22 ‘‘(D) the terms of the sale, acquisition, or 

23 holding of the security or other property are at 

24 least as favorable to the plan as an arm’s 

25 length transaction would be. 


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1 ‘‘(8) STANDARDS FOR PRESENTATION OF IN2 FORMATION.— 

3 ‘‘(A) IN GENERAL.—The requirements of 

4 this paragraph are met if the notification re5 quired to be provided to participants and bene6 ficiaries under paragraph (6)(A) is written in a 

7 clear and conspicuous manner and in a manner 

8 calculated to be understood by the average plan 

9 participant and is sufficiently accurate and 

10 comprehensive to reasonably apprise such par11 ticipants and beneficiaries of the information 

12 required to be provided in the notification. 

13 ‘‘(B) MODEL FORM FOR DISCLOSURE OF

14 FEES AND OTHER COMPENSATION.—The Sec15 retary shall issue a model form for the disclo16 sure of fees and other compensation required in 

17 paragraph (6)(A)(iii) which meets the require18 ments of subparagraph (A). 

19 ‘‘(9) MAINTENANCE FOR 6 YEARS OF EVIDENCE

20 OF COMPLIANCE.—The requirements of this para21 graph are met if a fiduciary adviser who has pro22 vided advice referred to in paragraph (1) maintains, 

23 for a period of not less than 6 years after the provi24 sion of the advice, any records necessary for deter25 mining whether the requirements of the preceding 


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1 provisions of this subsection and of subsection 

2 (b)(14) have been met. A transaction prohibited 

3 under section 406 shall not be considered to have oc4 curred solely because the records are lost or de5 stroyed prior to the end of the 6-year period due to 

6 circumstances beyond the control of the fiduciary 

7 adviser. 

8 ‘‘(10) EXEMPTION FOR PLAN SPONSOR AND

9 CERTAIN OTHER FIDUCIARIES.— 

10 ‘‘(A) IN GENERAL.—Subject to subpara11 graph (B), a plan sponsor or other person who 

12 is a fiduciary (other than a fiduciary adviser) 

13 shall not be treated as failing to meet the re14 quirements of this part solely by reason of the 

15 provision of investment advice referred to in 

16 section 3(21)(A)(ii) (or solely by reason of con17 tracting for or otherwise arranging for the pro18 vision of the advice), if— 

19 ‘‘(i) the advice is provided by a fidu20 ciary adviser pursuant to an eligible invest21 ment advice arrangement between the plan 

22 sponsor or other fiduciary and the fidu23 ciary adviser for the provision by the fidu24 ciary adviser of investment advice referred 

25 to in such section, 


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1 ‘‘(ii) the terms of the eligible invest2 ment advice arrangement require compli3 ance by the fiduciary adviser with the re4 quirements of this subsection, and 

5 ‘‘(iii) the terms of the eligible invest6 ment advice arrangement include a written 

7 acknowledgment by the fiduciary adviser 

8 that the fiduciary adviser is a fiduciary of 

9 the plan with respect to the provision of 

10 the advice. 

11 ‘‘(B) CONTINUED DUTY OF PRUDENT SE12 LECTION OF ADVISER AND PERIODIC REVIEW.— 

13 Nothing in subparagraph (A) shall be construed 

14 to exempt a plan sponsor or other person who 

15 is a fiduciary from any requirement of this part 

16 for the prudent selection and periodic review of 

17 a fiduciary adviser with whom the plan sponsor 

18 or other person enters into an eligible invest19 ment advice arrangement for the provision of 

20 investment advice referred to in section 

21 3(21)(A)(ii). The plan sponsor or other person 

22 who is a fiduciary has no duty under this part 

23 to monitor the specific investment advice given 

24 by the fiduciary adviser to any particular recipi25 ent of the advice. 


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1 ‘‘(C) AVAILABILITY OF PLAN ASSETS FOR

2 PAYMENT FOR ADVICE.—Nothing in this part 

3 shall be construed to preclude the use of plan 

4 assets to pay for reasonable expenses in pro5 viding investment advice referred to in section 

6 3(21)(A)(ii). 

7 ‘‘(11) DEFINITIONS.—For purposes of this sub8 section and subsection (b)(14)— 

9 ‘‘(A) FIDUCIARY ADVISER.—The term ‘fi10 duciary adviser’ means, with respect to a plan, 

11 a person who is a fiduciary of the plan by rea12 son of the provision of investment advice re13 ferred to in section 3(21)(A)(ii) by the person 

14 to the participant or beneficiary of the plan and 

15 who is— 

16 ‘‘(i) registered as an investment ad17 viser under the Investment Advisers Act of 

18 1940 (15 U.S.C. 80b–1 et seq.) or under 

19 the laws of the State in which the fiduciary 

20 maintains its principal office and place of 

21 business, 

22 ‘‘(ii) a bank or similar financial insti23 tution referred to in section 408(b)(4) or a 

24 savings association (as defined in section 

25 3(b)(1) of the Federal Deposit Insurance 


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1 Act (12 U.S.C. 1813(b)(1)), but only if the 

2 advice is provided through a trust depart3 ment of the bank or similar financial insti4 tution or savings association which is sub5 ject to periodic examination and review by 

6 Federal or State banking authorities, 

7 ‘‘(iii) an insurance company qualified 

8 to do business under the laws of a State, 

9 ‘‘(iv) a person registered as a broker 

10 or dealer under the Securities Exchange 

11 Act of 1934 (15 U.S.C. 78a et seq.), 

12 ‘‘(v) an affiliate of a person described 

13 in any of clauses (i) through (iv), or 

14 ‘‘(vi) an employee, agent, or registered 

15 representative of a person described in 

16 clauses (i) through (v) who satisfies the re17 quirements of applicable insurance, bank18 ing, and securities laws relating to the pro19 vision of the advice. 

20 For purposes of this part, a person who devel21 ops the computer model described in paragraph 

22 (3)(B) or markets the investment advice pro23 gram or computer model shall be treated as a 

24 person who is a fiduciary of the plan by reason 

25 of the provision of investment advice referred to 


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1 in section 3(21)(A)(ii) to the participant or ben2 eficiary and shall be treated as a fiduciary ad3 viser for purposes of this subsection and sub4 section (b)(14), except that the Secretary may 

5 prescribe rules under which only 1 fiduciary ad6 viser may elect to be treated as a fiduciary with 

7 respect to the plan. 

8 ‘‘(B) AFFILIATE.—The term ‘affiliate’ of 

9 another entity means an affiliated person of the 

10 entity (as defined in section 2(a)(3) of the In11 vestment Company Act of 1940 (15 U.S.C. 

12 80a-2(a)(3))). 

13 ‘‘(C) REGISTERED REPRESENTATIVE.— 

14 The term ‘registered representative’ of another 

15 entity means a person described in section 

16 3(a)(18) of the Securities Exchange Act of 

17 1934 (15 U.S.C. 78c(a)(18)) (substituting the 

18 entity for the broker or dealer referred to in 

19 such section) or a person described in section 

20 202(a)(17) of the Investment Advisers Act of 

21 1940 (15 U.S.C. 80b-2(a)(17)) (substituting 

22 the entity for the investment adviser referred to 

23 in such section).’’. 

24 (3) EFFECTIVE DATE.—The amendments made 

25 by this subsection shall apply with respect to advice 


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1 referred to in section 3(21)(A)(ii) of the Employee 

2 Retirement Income Security Act of 1974 provided 

3 after December 31, 2006. 

4 (b) AMENDMENTS TO INTERNAL REVENUE CODE OF

5 1986.— 

6 (1) EXEMPTION FROM PROHIBITED TRANS7 ACTIONS.—Subsection (d) of section 4975 of the In8 ternal Revenue Code of 1986 (relating to exemption 

9 from tax on prohibited transactions) is amended— 

10 (A) in paragraph (15), by striking ‘‘or’’ at 

11 the end; 

12 (B) in paragraph (16), by striking the pe13 riod at the end and inserting ‘‘;or’’; and 

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

15 paragraph: 

16 ‘‘(17) Any transaction in connection with the 

17 provision of investment advice described in sub18 section (e)(3)(B) to a participant or beneficiary in a 

19 plan and that permits such participant or bene20 ficiary to direct the investment of plan assets in an 

21 individual account, if— 

22 ‘‘(A) the transaction is— 

23 ‘‘(i) the provision of the investment 

24 advice to the participant or beneficiary of 

25 the plan with respect to a security or other 


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1 property available as an investment under 

2 the plan, 

3 ‘‘(ii) the acquisition, holding, or sale 

4 of a security or other property available as 

5 an investment under the plan pursuant to 

6 the investment advice, or 

7 ‘‘(iii) the direct or indirect receipt of 

8 fees or other compensation by the fiduciary 

9 adviser or an affiliate thereof (or any em10 ployee, agent, or registered representative 

11 of the fiduciary adviser or affiliate) in con12 nection with the provision of the advice or 

13 in connection with an acquisition, holding, 

14 or sale of a security or other property 

15 available as an investment under the plan 

16 pursuant to the investment advice; and 

17 ‘‘(B) the requirements of subsection (f)(8) 

18 are met.’’. 

19 (2) REQUIREMENTS.—Subsection (f) of such 

20 section 4975 (relating to other definitions and spe21 cial rules) is amended by adding at the end the fol22 lowing new paragraph: 

23 ‘‘(8) PROVISION OF INVESTMENT ADVICE TO

24 PARTICIPANT AND BENEFICIARIES.— 


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1 ‘‘(A) IN GENERAL.—The prohibitions pro2 vided in subsection (c) shall not apply to trans3 actions described in subsection (b)(14) if the in4 vestment advice provided by a fiduciary adviser 

5 is provided under an eligible investment advice 

6 arrangement. 

7 ‘‘(B) ELIGIBLE INVESTMENT ADVICE AR8 RANGEMENT.—For purposes of this paragraph, 

9 the term ‘eligible investment advice arrange10 ment’ means an arrangement— 

11 ‘‘(i) which either— 

12 ‘‘(I) provides that any fees (in13 cluding any commission or other com14 pensation) received by the fiduciary 

15 adviser for investment advice or with 

16 respect to the sale, holding, or acqui17 sition of any security or other prop18 erty for purposes of investment of 

19 plan assets do not vary depending on 

20 the basis of any investment option se21 lected, or 

22 ‘‘(II) uses a computer model 

23 under an investment advice program 

24 meeting the requirements of subpara25 graph (C) in connection with the proVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00492 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 vision of investment advice by a fidu2 ciary adviser to a participant or bene3 ficiary, and 

4 ‘‘(ii) with respect to which the re5 quirements of subparagraphs (D), (E), 

6 (F), (G), (H), and (I) are met. 

7 ‘‘(C) INVESTMENT ADVICE PROGRAM

8 USING COMPUTER MODEL.— 

9 ‘‘(i) IN GENERAL.—An investment ad10 vice program meets the requirements of 

11 this subparagraph if the requirements of 

12 clauses (ii), (iii), and (iv) are met. 

13 ‘‘(ii) COMPUTER MODEL.—The re14 quirements of this clause are met if the in15 vestment advice provided under the invest16 ment advice program is provided pursuant 

17 to a computer model that— 

18 ‘‘(I) applies generally accepted 

19 investment theories that take into ac20 count the historic returns of different 

21 asset classes over defined periods of 

22 time, 

23 ‘‘(II) utilizes relevant information 

24 about the participant, which may in25 clude age, life expectancy, retirement 


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1 age, risk tolerance, other assets or 

2 sources of income, and preferences as 

3 to certain types of investments, 

4 ‘‘(III) utilizes prescribed objective 

5 criteria to provide asset allocation 

6 portfolios comprised of investment op7 tions available under the plan, 

8 ‘‘(IV) operates in a manner that 

9 is not biased in favor of investments 

10 offered by the fiduciary adviser or a 

11 person with a material affiliation or 

12 contractual relationship with the fidu13 ciary adviser, and 

14 ‘‘(V) takes into account all in15 vestment options under the plan in 

16 specifying how a participant’s account 

17 balance should be invested and is not 

18 inappropriately weighted with respect 

19 to any investment option. 

20 ‘‘(iii) CERTIFICATION.— 

21 ‘‘(I) IN GENERAL.—The require22 ments of this clause are met with re23 spect to any investment advice pro24 gram if an eligible investment expert 

25 certifies, prior to the utilization of the 


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1 computer model and in accordance 

2 with rules prescribed by the Secretary 

3 of Labor, that the computer model 

4 meets the requirements of clause (ii). 

5 ‘‘(II) RENEWAL OF CERTIFI6 CATIONS.—If, as determined under 

7 regulations prescribed by the Sec8 retary of Labor, there are material 

9 modifications to a computer model, 

10 the requirements of this clause are 

11 met only if a certification described in 

12 subclause (I) is obtained with respect 

13 to the computer model as so modified. 

14 ‘‘(III) ELIGIBLE INVESTMENT

15 EXPERT.—The term ‘eligible invest16 ment expert’ means any person which 

17 meets such requirements as the Sec18 retary of Labor may provide and 

19 which does not bear any material af20 filiation or contractual relationship 

21 with any investment adviser or a re22 lated person thereof (or any employee, 

23 agent, or registered representative of 

24 the investment adviser or related per25 son). 


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1 ‘‘(iv) EXCLUSIVITY OF RECOMMENDA2 TION.—The requirements of this clause are 

3 met with respect to any investment advice 

4 program if— 

5 ‘‘(I) the only investment advice 

6 provided under the program is the ad7 vice generated by the computer model 

8 described in clause (ii), and 

9 ‘‘(II) any transaction described in 

10 subsection (b)(14)(B)(ii) occurs solely 

11 at the direction of the participant or 

12 beneficiary. 

13 Nothing in the preceding sentence shall 

14 preclude the participant or beneficiary 

15 from requesting investment advice other 

16 than that described in clause (i), but only 

17 if such request has not been solicited by 

18 any person connected with carrying out the 

19 arrangement. 

20 ‘‘(D) EXPRESS AUTHORIZATION BY SEPA21 RATE FIDUCIARY.—The requirements of this 

22 subparagraph are met with respect to an ar23 rangement if the arrangement is expressly au24 thorized by a plan fiduciary other than the per25 son offering the investment advice program, any 


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1 person providing investment options under the 

2 plan, or any affiliate of either. 

3 ‘‘(E) AUDITS.— 

4 ‘‘(i) IN GENERAL.—The requirements 

5 of this subparagraph are met if an inde6 pendent auditor, who has appropriate tech7 nical training or experience and proficiency 

8 and so represents in writing— 

9 ‘‘(I) conducts an annual audit of 

10 the arrangement for compliance with 

11 the requirements of this paragraph, 

12 and 

13 ‘‘(II) following completion of the 

14 annual audit, issues a written report 

15 to the fiduciary who authorized use of 

16 the arrangement which presents its 

17 specific findings regarding compliance 

18 of the arrangement with the require19 ments of this paragraph. 

20 ‘‘(ii) SPECIAL RULE FOR INDIVIDUAL

21 RETIREMENT AND SIMILAR PLANS.—In the 

22 case of a plan described in subparagraphs 

23 (B) through (F) (and so much of subpara24 graph (G) as relates to such subpara25 graphs) of subsection (e)(1), in lieu of the 


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1 requirements of clause (i), audits of the ar2 rangement shall be conducted at such 

3 times and in such manner as the Secretary 

4 of Labor may prescribe. 

5 ‘‘(iii) INDEPENDENT AUDITOR.—For 

6 purposes of this subparagraph, an auditor 

7 is considered independent if it is not re8 lated to the person offering the arrange9 ment to the plan and is not related to any 

10 person providing investment options under 

11 the plan. 

12 ‘‘(F) DISCLOSURE.—The requirements of 

13 this subparagraph are met if— 

14 ‘‘(i) the fiduciary adviser provides to a 

15 participant or a beneficiary before the ini16 tial provision of the investment advice with 

17 regard to any security or other property of18 fered as an investment option, a written 

19 notification (which may consist of notifica20 tion by means of electronic communica21 tion)— 

22 ‘‘(I) of the role of any party that 

23 has a material affiliation or contrac24 tual relationship with the financial ad25 viser in the development of the investVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00498 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ment advice program and in the selec2 tion of investment options available 

3 under the plan, 

4 ‘‘(II) of the past performance 

5 and historical rates of return of the 

6 investment options available under the 

7 plan, 

8 ‘‘(III) of all fees or other com9 pensation relating to the advice that 

10 the fiduciary adviser or any affiliate 

11 thereof is to receive (including com12 pensation provided by any third 

13 party) in connection with the provi14 sion of the advice or in connection 

15 with the sale, acquisition, or holding 

16 of the security or other property, 

17 ‘‘(IV) of any material affiliation 

18 or contractual relationship of the fidu19 ciary adviser or affiliates thereof in 

20 the security or other property, 

21 ‘‘(V) the manner, and under 

22 what circumstances, any participant 

23 or beneficiary information provided 

24 under the arrangement will be used or 

25 disclosed, 


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1 ‘‘(VI) of the types of services 

2 provided by the fiduciary adviser in 

3 connection with the provision of in4 vestment advice by the fiduciary ad5 viser, 

6 ‘‘(VII) that the adviser is acting 

7 as a fiduciary of the plan in connec8 tion with the provision of the advice, 

9 and 

10 ‘‘(VIII) that a recipient of the 

11 advice may separately arrange for the 

12 provision of advice by another adviser, 

13 that could have no material affiliation 

14 with and receive no fees or other com15 pensation in connection with the secu16 rity or other property, and 

17 ‘‘(ii) at all times during the provision 

18 of advisory services to the participant or 

19 beneficiary, the fiduciary adviser— 

20 ‘‘(I) maintains the information 

21 described in clause (i) in accurate 

22 form and in the manner described in 

23 subparagraph (H), 

24 ‘‘(II) provides, without charge, 

25 accurate information to the recipient 


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•HR 4 PCS 

1 of the advice no less frequently than 

2 annually, 

3 ‘‘(III) provides, without charge, 

4 accurate information to the recipient 

5 of the advice upon request of the re6 cipient, and 

7 ‘‘(IV) provides, without charge, 

8 accurate information to the recipient 

9 of the advice concerning any material 

10 change to the information required to 

11 be provided to the recipient of the ad12 vice at a time reasonably contempora13 neous to the change in information. 

14 ‘‘(G) OTHER CONDITIONS.—The require15 ments of this subparagraph are met if— 

16 ‘‘(i) the fiduciary adviser provides ap17 propriate disclosure, in connection with the 

18 sale, acquisition, or holding of the security 

19 or other property, in accordance with all 

20 applicable securities laws, 

21 ‘‘(ii) the sale, acquisition, or holding 

22 occurs solely at the direction of the recipi23 ent of the advice, 

24 ‘‘(iii) the compensation received by the 

25 fiduciary adviser and affiliates thereof in 


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•HR 4 PCS 

1 connection with the sale, acquisition, or 

2 holding of the security or other property is 

3 reasonable, and 

4 ‘‘(iv) the terms of the sale, acquisi5 tion, or holding of the security or other 

6 property are at least as favorable to the 

7 plan as an arm’s length transaction would 

8 be. 

9 ‘‘(H) STANDARDS FOR PRESENTATION OF

10 INFORMATION.— 

11 ‘‘(i) IN GENERAL.—The requirements 

12 of this subparagraph are met if the notifi13 cation required to be provided to partici14 pants and beneficiaries under subpara15 graph (F)(i) is written in a clear and con16 spicuous manner and in a manner cal17 culated to be understood by the average 

18 plan participant and is sufficiently accu19 rate and comprehensive to reasonably ap20 prise such participants and beneficiaries of 

21 the information required to be provided in 

22 the notification. 

23 ‘‘(ii) MODEL FORM FOR DISCLOSURE

24 OF FEES AND OTHER COMPENSATION.— 

25 The Secretary of Labor shall issue a model 


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1 form for the disclosure of fees and other 

2 compensation required in subparagraph 

3 (F)(i)(III) which meets the requirements 

4 of clause (i). 

5 ‘‘(I) MAINTENANCE FOR 6 YEARS OF EVI6 DENCE OF COMPLIANCE.—The requirements of 

7 this subparagraph are met if a fiduciary adviser 

8 who has provided advice referred to in subpara9 graph (A) maintains, for a period of not less 

10 than 6 years after the provision of the advice, 

11 any records necessary for determining whether 

12 the requirements of the preceding provisions of 

13 this paragraph and of subsection (d)(17) have 

14 been met. A transaction prohibited under sec15 tion 406 shall not be considered to have oc16 curred solely because the records are lost or de17 stroyed prior to the end of the 6-year period 

18 due to circumstances beyond the control of the 

19 fiduciary adviser. 

20 ‘‘(J) DEFINITIONS.—For purposes of this 

21 paragraph and subsection (d)(17)— 

22 ‘‘(i) FIDUCIARY ADVISER.—The term 

23 ‘fiduciary adviser’ means, with respect to a 

24 plan, a person who is a fiduciary of the 

25 plan by reason of the provision of investVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00503 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ment advice by the person to the partici2 pant or beneficiary of the plan and who 

3 is— 

4 ‘‘(I) registered as an investment 

5 adviser under the Investment Advisers 

6 Act of 1940 (15 U.S.C. 80b–1 et seq.) 

7 or under the laws of the State in 

8 which the fiduciary maintains its prin9 cipal office and place of business, 

10 ‘‘(II) a bank or similar financial 

11 institution referred to in section 

12 408(b)(4) or a savings association (as 

13 defined in section 3(b)(1) of the Fed14 eral Deposit Insurance Act (12 U.S.C. 

15 1813(b)(1)), but only if the advice is 

16 provided through a trust department 

17 of the bank or similar financial insti18 tution or savings association which is 

19 subject to periodic examination and 

20 review by Federal or State banking 

21 authorities, 

22 ‘‘(III) an insurance company 

23 qualified to do business under the 

24 laws of a State, 


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1 ‘‘(IV) a person registered as a 

2 broker or dealer under the Securities 

3 Exchange Act of 1934 (15 U.S.C. 78a 

4 et seq.), 

5 ‘‘(V) an affiliate of a person de6 scribed in any of subclauses (I) 

7 through (IV), or 

8 ‘‘(VI) an employee, agent, or reg9 istered representative of a person de10 scribed in subclauses (I) through (V) 

11 who satisfies the requirements of ap12 plicable insurance, banking, and secu13 rities laws relating to the provision of 

14 the advice. 

15 For purposes of this title, a person who de16 velops the computer model described in 

17 subparagraph (C)(ii) or markets the in18 vestment advice program or computer 

19 model shall be treated as a person who is 

20 a fiduciary of the plan by reason of the 

21 provision of investment advice referred to 

22 in subsection (e)(3)(B) to the participant 

23 or beneficiary and shall be treated as a fi24 duciary adviser for purposes of this para25 graph and subsection (d)(17), except that 


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1 the Secretary of Labor may prescribe rules 

2 under which only 1 fiduciary adviser may 

3 elect to be treated as a fiduciary with re4 spect to the plan. 

5 ‘‘(ii) AFFILIATE.—The term ‘affiliate’ 

6 of another entity means an affiliated per7 son of the entity (as defined in section 

8 2(a)(3) of the Investment Company Act of 

9 1940 (15 U.S.C. 80a-2(a)(3))). 

10 ‘‘(iii) REGISTERED REPRESENTA11 TIVE.—The term ‘registered representa12 tive’ of another entity means a person de13 scribed in section 3(a)(18) of the Securi14 ties Exchange Act of 1934 (15 U.S.C. 

15 78c(a)(18)) (substituting the entity for the 

16 broker or dealer referred to in such sec17 tion) or a person described in section 

18 202(a)(17) of the Investment Advisers Act 

19 of 1940 (15 U.S.C. 80b-2(a)(17)) (sub20 stituting the entity for the investment ad21 viser referred to in such section).’’. 

22 (3) DETERMINATION OF FEASIBILITY OF APPLI23 CATION OF COMPUTER MODEL INVESTMENT ADVICE

24 PROGRAMS FOR INDIVIDUAL RETIREMENT AND SIMI25 LAR PLANS.— 


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1 (A) SOLICITATION OF INFORMATION.—As 

2 soon as practicable after the date of the enact3 ment of this Act, the Secretary of Labor, in 

4 consultation with the Secretary of the Treasury, 

5 shall— 

6 (i) solicit information as to the feasi7 bility of the application of computer model 

8 investment advice programs for plans de9 scribed in subparagraphs (B) through (F) 

10 (and so much of subparagraph (G) as re11 lates to such subparagraphs) of section 

12 4975(e)(1) of the Internal Revenue Code 

13 of 1986, including soliciting information 

14 from— 

15 (I) at least the top 50 trustees of 

16 such plans, determined on the basis of 

17 assets held by such trustees, and 

18 (II) other persons offering com19 puter model investment advice pro20 grams based on nonproprietary prod21 ucts, and 

22 (ii) shall on the basis of such informa23 tion make the determination under sub24 paragraph (B). 


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1 The information solicited by the Secretary of 

2 Labor under clause (i) from persons described 

3 in subclauses (I) and (II) of clause (i) shall in4 clude information on computer modeling capa5 bilities of such persons with respect to the cur6 rent year and preceding year, including such ca7 pabilities for investment accounts maintained 

8 by such persons. 

9 (B) DETERMINATION OF FEASIBILITY.— 

10 The Secretary of Labor, in consultation with 

11 the Secretary of the Treasury, shall, on the 

12 basis of information received under subpara13 graph (A), determine whether there is any com14 puter model investment advice program which 

15 may be utilized by a plan described in subpara16 graph (A)(i) to provide investment advice to the 

17 account beneficiary of the plan which— 

18 (i) utilizes relevant information about 

19 the account beneficiary, which may include 

20 age, life expectancy, retirement age, risk 

21 tolerance, other assets or sources of in22 come, and preferences as to certain types 

23 of investments, 

24 (ii) takes into account the full range 

25 of investments, including equities and 


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1 bonds, in determining the options for the 

2 investment portfolio of the account bene3 ficiary, and 

4 (iii) allows the account beneficiary, in 

5 directing the investment of assets, suffi6 cient flexibility in obtaining advice to 

7 evaluate and select investment options. 

8 The Secretary of Labor shall report the results 

9 of such determination to the committees of 

10 Congress referred to in subparagraph (D)(ii) 

11 not later than December 31, 2007. 

12 (C) APPLICATION OF COMPUTER MODEL

13 INVESTMENT ADVICE PROGRAM.— 

14 (i) CERTIFICATION REQUIRED FOR

15 USE OF COMPUTER MODEL.— 

16 (I) RESTRICTION ON USE.—Sub17 clause (II) of section 4975(f)(8)(B)(i) 

18 of the Internal Revenue Code of 1986 

19 shall not apply to a plan described in 

20 subparagraph (A)(i). 

21 (II) RESTRICTION LIFTED IF

22 MODEL CERTIFIED.—If the Secretary 

23 of Labor determines under subpara24 graph (B) or (D) that there is a com25 puter model investment advice proVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00509 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 gram described in subparagraph (B), 

2 subclause (I) shall cease to apply as of 

3 the date of such determination. 

4 (ii) CLASS EXEMPTION IF NO INITIAL

5 CERTIFICATION BY SECRETARY.—If the 

6 Secretary of Labor determines under sub7 paragraph (B) that there is no computer 

8 model investment advice program described 

9 in subparagraph (B), the Secretary of 

10 Labor shall grant a class exemption from 

11 treatment as a prohibited transaction 

12 under section 4975(c) of the Internal Rev13 enue Code of 1986 to any transaction de14 scribed in section 4975(d)(17)(A) of such 

15 Code with respect to plans described in 

16 subparagraph (A)(i), subject to such condi17 tions as set forth in such exemption as are 

18 in the interests of the plan and its account 

19 beneficiary and protective of the rights of 

20 the account beneficiary and as are nec21 essary to— 

22 (I) ensure the requirements of 

23 sections 4975(d)(17) and 4975(f)(8) 

24 (other than subparagraph (C) thereof) 


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1 of the Internal Revenue Code of 1986 

2 are met, and 

3 (II) ensure the investment advice 

4 provided under the investment advice 

5 program utilizes prescribed objective 

6 criteria to provide asset allocation 

7 portfolios comprised of securities or 

8 other property available as invest9 ments under the plan. 

10 If the Secretary of Labor solicits any infor11 mation under subparagraph (A) from a 

12 person and such person does not provide 

13 such information within 60 days after the 

14 solicitation, then, unless such failure was 

15 due to reasonable cause and not wilful ne16 glect, such person shall not be entitled to 

17 utilize the class exemption under this 

18 clause. 

19 (D) SUBSEQUENT DETERMINATION.— 

20 (i) IN GENERAL.—If the Secretary of 

21 Labor initially makes a determination de22 scribed in subparagraph (C)(ii), the Sec23 retary may subsequently determine that 

24 there is a computer model investment ad25 vice program described in subparagraph 


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1 (B). If the Secretary makes such subse2 quent determination, then the class exemp3 tion described in subparagraph (C)(ii) shall 

4 cease to apply after the later of— 

5 (I) the date which is 2 years 

6 after such subsequent determination, 

7 or 

8 (II) the date which is 3 years 

9 after the first date on which such ex10 emption took effect. 

11 (ii) REQUESTS FOR DETERMINA12 TION.—Any person may request the Sec13 retary of Labor to make a determination 

14 under this subparagraph with respect to 

15 any computer model investment advice pro16 gram, and the Secretary of Labor shall 

17 make a determination with respect to such 

18 request within 90 days. If the Secretary of 

19 Labor makes a determination that such 

20 program is not described in subparagraph 

21 (B), the Secretary shall, within 10 days of 

22 such determination, notify the Committee 

23 on Ways and Means and the Committee on 

24 Education and the Workforce of the House 

25 of Representatives and the Committee on 


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1 Finance and the Committee on Health, 

2 Education, Labor, and Pensions of the 

3 Senate of such determination and the rea4 sons for such determination. 

5 (E) EFFECTIVE DATE.—The provisions of 

6 this paragraph shall take effect on the date of 

7 the enactment of this Act. 

8 (4) EFFECTIVE DATE.—Except as provided in 

9 this subsection, the amendments made by this sub10 section shall apply with respect to advice referred to 

11 in section 4975(c)(3)(B) of the Internal Revenue 

12 Code of 1986 provided after December 31, 2006. 

13 (c) COORDINATION WITH EXISTING EXEMPTIONS.— 

14 Any exemption under section 408(b) of the Employee Re15 tirement Income Security Act of 1974 and section 4975(d) 

16 of the Internal Revenue Code of 1986 provided by the 

17 amendments made by this section shall not in any manner 

18 alter existing individual or class exemptions, provided by 

19 statute or administrative action. 

20 Subtitle B—Prohibited 

21 Transactions 

22 SEC. 611. PROHIBITED TRANSACTION RULES RELATING TO 

23 FINANCIAL INVESTMENTS. 

24 (a) EXEMPTION FOR BLOCK TRADING.— 


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1 (1) AMENDMENTS TO EMPLOYEE RETIREMENT

2 INCOME SECURITY ACT OF 1974.—Section 408(b) of 

3 such Act (29 U.S.C. 1108(b)), as amended by sec4 tion 601, is amended by adding at the end the fol5 lowing new paragraph: 

6 ‘‘(15)(A) Any transaction involving the pur7 chase or sale of securities, or other property (as de8 termined by the Secretary), between a plan and a 

9 party in interest (other than a fiduciary described in 

10 section 3(21)(A)) with respect to a plan if— 

11 ‘‘(i) the transaction involves a block trade, 

12 ‘‘(ii) at the time of the transaction, the in13 terest of the plan (together with the interests of 

14 any other plans maintained by the same plan 

15 sponsor), does not exceed 10 percent of the ag16 gregate size of the block trade, 

17 ‘‘(iii) the terms of the transaction, includ18 ing the price, are at least as favorable to the 

19 plan as an arm’s length transaction, and 

20 ‘‘(iv) the compensation associated with the 

21 purchase and sale is not greater than the com22 pensation associated with an arm’s length 

23 transaction with an unrelated party. 

24 ‘‘(B) For purposes of this paragraph, the term 

25 ‘block trade’ means any trade of at least 10,000 


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1 shares or with a market value of at least $200,000 

2 which will be allocated across two or more unrelated 

3 client accounts of a fiduciary.’’. 

4 (2) AMENDMENTS TO INTERNAL REVENUE

5 CODE OF 1986.— 

6 (A) IN GENERAL.—Subsection (d) of sec7 tion 4975 of the Internal Revenue Code of 1986 

8 (relating to exemptions), as amended by section 

9 601, is amended by striking ‘‘or’’ at the end of 

10 paragraph (16), by striking the period at the 

11 end of paragraph (17) and inserting ‘‘, or’’, and 

12 by adding at the end the following new para13 graph: 

14 ‘‘(18) any transaction involving the purchase or 

15 sale of securities, or other property (as determined 

16 by the Secretary of Labor), between a plan and a 

17 party in interest (other than a fiduciary described in 

18 subsection (e)(3)(B)) with respect to a plan if— 

19 ‘‘(A) the transaction involves a block trade, 

20 ‘‘(B) at the time of the transaction, the in21 terest of the plan (together with the interests of 

22 any other plans maintained by the same plan 

23 sponsor), does not exceed 10 percent of the ag24 gregate size of the block trade, 


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1 ‘‘(C) the terms of the transaction, includ2 ing the price, are at least as favorable to the 

3 plan as an arm’s length transaction, and 

4 ‘‘(D) the compensation associated with the 

5 purchase and sale is not greater than the com6 pensation associated with an arm’s length 

7 transaction with an unrelated party.’’. 

8 (B) SPECIAL RULE RELATING TO BLOCK

9 TRADE.—Subsection (f) of section 4975 of such 

10 Code (relating to other definitions and special 

11 rules), as amended by section 601, is amended 

12 by adding at the end the following new para13 graph: 

14 ‘‘(9) BLOCK TRADE.—The term ‘block trade’ 

15 means any trade of at least 10,000 shares or with 

16 a market value of at least $200,000 which will be al17 located across two or more unrelated client accounts 

18 of a fiduciary.’’. 

19 (b) BONDING RELIEF.—Section 412(a) of such Act 

20 (29 U.S.C. 1112(a)) is amended— 

21 (1) by redesignating paragraph (2) as para22 graph (3), 

23 (2) by striking ‘‘and’’ at the end of paragraph 

24 (1), and 


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1 (3) by inserting after paragraph (1) the fol2 lowing new paragraph: 

3 ‘‘(2) no bond shall be required of any entity 

4 which is registered as a broker or a dealer under 

5 section 15(b) of the Securities Exchange Act of 

6 1934 (15 U.S.C. 78o(b)) if the broker or dealer is 

7 subject to the fidelity bond requirements of a self8 regulatory organization (within the meaning of sec9 tion 3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).’’. 

10 (c) EXEMPTION FOR ELECTRONIC COMMUNICATION

11 NETWORK.— 

12 (1) AMENDMENTS TO EMPLOYEE RETIREMENT

13 INCOME SECURITY ACT OF 1974.—Section 408(b) of 

14 such Act, as amended by subsection (a), is amended 

15 by adding at the end the following: 

16 ‘‘(16) Any transaction involving the purchase or 

17 sale of securities, or other property (as determined 

18 by the Secretary), between a plan and a party in in19 terest if— 

20 ‘‘(A) the transaction is executed through 

21 an electronic communication network, alter22 native trading system, or similar execution sys23 tem or trading venue subject to regulation and 

24 oversight by— 


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1 ‘‘(i) the applicable Federal regulating 

2 entity, or 

3 ‘‘(ii) such foreign regulatory entity as 

4 the Secretary may determine by regulation, 

5 ‘‘(B) either— 

6 ‘‘(i) the transaction is effected pursu7 ant to rules designed to match purchases 

8 and sales at the best price available 

9 through the execution system in accord10 ance with applicable rules of the Securities 

11 and Exchange Commission or other rel12 evant governmental authority, or 

13 ‘‘(ii) neither the execution system nor 

14 the parties to the transaction take into ac15 count the identity of the parties in the exe16 cution of trades, 

17 ‘‘(C) the price and compensation associ18 ated with the purchase and sale are not greater 

19 than the price and compensation associated 

20 with an arm’s length transaction with an unre21 lated party, 

22 ‘‘(D) if the party in interest has an owner23 ship interest in the system or venue described 

24 in subparagraph (A), the system or venue has 

25 been authorized by the plan sponsor or other 


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1 independent fiduciary for transactions described 

2 in this paragraph, and 

3 ‘‘(E) not less than 30 days prior to the ini4 tial transaction described in this paragraph exe5 cuted through any system or venue described in 

6 subparagraph (A), a plan fiduciary is provided 

7 written or electronic notice of the execution of 

8 such transaction through such system or 

9 venue.’’. 

10 (2) AMENDMENTS TO INTERNAL REVENUE

11 CODE OF 1986.—Subsection (d) of section 4975 of 

12 the Internal Revenue Code of 1986 (relating to ex13 emptions), as amended by subsection (a), is amend14 ed by striking ‘‘or’’ at the end of paragraph (17), by 

15 striking the period at the end of paragraph (18) and 

16 inserting ‘‘, or’’, and by adding at the end the fol17 lowing new paragraph: 

18 ‘‘(19) any transaction involving the purchase or 

19 sale of securities, or other property (as determined 

20 by the Secretary of Labor), between a plan and a 

21 party in interest if— 

22 ‘‘(A) the transaction is executed through 

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1 tem or trading venue subject to regulation and 

2 oversight by— 

3 ‘‘(i) the applicable Federal regulating 

4 entity, or 

5 ‘‘(ii) such foreign regulatory entity as 

6 the Secretary of Labor may determine by 

7 regulation, 

8 ‘‘(B) either— 

9 ‘‘(i) the transaction is effected pursu10 ant to rules designed to match purchases 

11 and sales at the best price available 

12 through the execution system in accord13 ance with applicable rules of the Securities 

14 and Exchange Commission or other rel15 evant governmental authority, or 

16 ‘‘(ii) neither the execution system nor 

17 the parties to the transaction take into ac18 count the identity of the parties in the exe19 cution of trades, 

20 ‘‘(C) the price and compensation associ21 ated with the purchase and sale are not greater 

22 than the price and compensation associated 

23 with an arm’s length transaction with an unre24 lated party, 


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1 ‘‘(D) if the party in interest has an owner2 ship interest in the system or venue described 

3 in subparagraph (A), the system or venue has 

4 been authorized by the plan sponsor or other 

5 independent fiduciary for transactions described 

6 in this paragraph, and 

7 ‘‘(E) not less than 30 days prior to the ini8 tial transaction described in this paragraph exe9 cuted through any system or venue described in 

10 subparagraph (A), a plan fiduciary is provided 

11 written or electronic notice of the execution of 

12 such transaction through such system or 

13 venue.’’. 

14 (d) EXEMPTION FOR SERVICE PROVIDERS.— 

15 (1) AMENDMENTS TO EMPLOYEE RETIREMENT

16 INCOME SECURITY ACT OF 1974.—Section 408(b) of 

17 such Act (29 U.S.C. 1106), as amended by sub18 section (c), is amended by adding at the end the fol19 lowing new paragraph: 

20 ‘‘(17)(A) Transactions described in subpara21 graphs (A), (B), and (D) of section 406(a)(1) be22 tween a plan and a person that is a party in interest 

23 other than a fiduciary (or an affiliate) who has or 

24 exercises any discretionary authority or control with 

25 respect to the investment of the plan assets involved 


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1 in the transaction or renders investment advice 

2 (within the meaning of section 3(21)(A)(ii)) with re3 spect to those assets, solely by reason of providing 

4 services to the plan or solely by reason of a relation5 ship to such a service provider described in subpara6 graph (F), (G), (H), or (I) of section 3(14), or both, 

7 but only if in connection with such transaction the 

8 plan receives no less, nor pays no more, than ade9 quate consideration. 

10 ‘‘(B) For purposes of this paragraph, the term 

11 ‘adequate consideration’ means— 

12 ‘‘(i) in the case of a security for which 

13 there is a generally recognized market— 

14 ‘‘(I) the price of the security pre15 vailing on a national securities ex16 change which is registered under sec17 tion 6 of the Securities Exchange Act 

18 of 1934, taking into account factors 

19 such as the size of the transaction and 

20 marketability of the security, or 

21 ‘‘(II) if the security is not traded 

22 on such a national securities ex23 change, a price not less favorable to 

24 the plan than the offering price for 

25 the security as established by the curVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00522 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 rent bid and asked prices quoted by 

2 persons independent of the issuer and 

3 of the party in interest, taking into 

4 account factors such as the size of the 

5 transaction and marketability of the 

6 security, and 

7 ‘‘(ii) in the case of an asset other than 

8 a security for which there is a generally 

9 recognized market, the fair market value of 

10 the asset as determined in good faith by a 

11 fiduciary or fiduciaries in accordance with 

12 regulations prescribed by the Secretary.’’. 

13 (2) AMENDMENT TO INTERNAL REVENUE CODE

14 OF 1986.— 

15 (A) IN GENERAL.—Subsection (d) of sec16 tion 4975 of the Internal Revenue Code of 1986 

17 (relating to exemptions), as amended by sub18 section (c), is amended by striking ‘‘or’’ at the 

19 end of paragraph (18), by striking the period at 

20 the end of paragraph (19) and inserting ‘‘, or’’, 

21 and by adding at the end the following new 

22 paragraph: 

23 ‘‘(20) transactions described in subparagraphs 

24 (A), (B), and (D) of subsection (c)(1) between a 

25 plan and a person that is a party in interest other 


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1 than a fiduciary (or an affiliate) who has or exer2 cises any discretionary authority or control with re3 spect to the investment of the plan assets involved 

4 in the transaction or renders investment advice 

5 (within the meaning of subsection (e)(3)(B)) with 

6 respect to those assets, solely by reason of providing 

7 services to the plan or solely by reason of a relation8 ship to such a service provider described in subpara9 graph (F), (G), (H), or (I) of subsection (e)(2), or 

10 both, but only if in connection with such transaction 

11 the plan receives no less, nor pays no more, than 

12 adequate consideration.’’. 

13 (B) SPECIAL RULE RELATING TO SERVICE

14 PROVIDERS.—Subsection (f) of section 4975 of 

15 such Code (relating to other definitions and 

16 special rules), as amended by subsection (a), is 

17 amended by adding at the end the following 

18 new paragraph: 

19 ‘‘(10) ADEQUATE CONSIDERATION.—The term 

20 ‘adequate consideration’ means— 

21 ‘‘(A) in the case of a security for which 

22 there is a generally recognized market— 

23 ‘‘(i) the price of the security pre24 vailing on a national securities exchange 

25 which is registered under section 6 of the 


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1 Securities Exchange Act of 1934, taking 

2 into account factors such as the size of the 

3 transaction and marketability of the secu4 rity, or 

5 ‘‘(ii) if the security is not traded on 

6 such a national securities exchange, a price 

7 not less favorable to the plan than the of8 fering price for the security as established 

9 by the current bid and asked prices quoted 

10 by persons independent of the issuer and 

11 of the party in interest, taking into ac12 count factors such as the size of the trans13 action and marketability of the security, 

14 and 

15 ‘‘(B) in the case of an asset other than a 

16 security for which there is a generally recog17 nized market, the fair market value of the asset 

18 as determined in good faith by a fiduciary or fi19 duciaries in accordance with regulations pre20 scribed by the Secretary of Labor.’’. 

21 (e) RELIEF FOR FOREIGN EXCHANGE TRANS22 ACTIONS.— 

23 (1) AMENDMENTS TO EMPLOYEE RETIREMENT

24 INCOME SECURITY ACT OF 1974.—Section 408(b) of 

25 such Act (29 U.S.C. 1108(b)), as amended by subVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00525 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 section (d), is amended by adding at the end the fol2 lowing new paragraph: 

3 ‘‘(18) FOREIGN EXCHANGE TRANSACTIONS.— 

4 Any foreign exchange transactions, between a bank 

5 or broker-dealer (or any affiliate of either), and a 

6 plan (as defined in section 3(3)) with respect to 

7 which such bank or broker-dealer (or affiliate) is a 

8 trustee, custodian, fiduciary, or other party in inter9 est, if— 

10 ‘‘(A) the transaction is in connection with 

11 the purchase, holding, or sale of securities or 

12 other investment assets (other than a foreign 

13 exchange transaction unrelated to any other in14 vestment in securities or other investment as15 sets), 

16 ‘‘(B) at the time the foreign exchange 

17 transaction is entered into, the terms of the 

18 transaction are not less favorable to the plan 

19 than the terms generally available in com20 parable arm’s length foreign exchange trans21 actions between unrelated parties, or the terms 

22 afforded by the bank or broker-dealer (or any 

23 affiliate of either) in comparable arm’s-length 

24 foreign exchange transactions involving unre25 lated parties, 


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1 ‘‘(C) the exchange rate used by such bank 

2 or broker-dealer (or affiliate) for a particular 

3 foreign exchange transaction does not deviate 

4 by more or less than 3 percent from the inter5 bank bid and asked rates for transactions of 

6 comparable size and maturity at the time of the 

7 transaction as displayed on an independent 

8 service that reports rates of exchange in the 

9 foreign currency market for such currency, and 

10 ‘‘(D) the bank or broker-dealer (or any af11 filiate of either) does not have investment dis12 cretion, or provide investment advice, with re13 spect to the transaction.’’. 

14 (2) AMENDMENT TO INTERNAL REVENUE CODE

15 OF 1986.—Subsection (d) of section 4975 of the In16 ternal Revenue Code of 1986 (relating to exemp17 tions), as amended by subsection (d), is amended by 

18 striking ‘‘or’’ at the end of paragraph (19), by strik19 ing the period at the end of paragraph (20) and in20 serting ‘‘, or’’, and by adding at the end the fol21 lowing new paragraph: 

22 ‘‘(21) any foreign exchange transactions, be23 tween a bank or broker-dealer (or any affiliate of ei24 ther) and a plan (as defined in this section) with re25 spect to which such bank or broker-dealer (or affilVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00527 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 iate) is a trustee, custodian, fiduciary, or other party 

2 in interest person, if— 

3 ‘‘(A) the transaction is in connection with 

4 the purchase, holding, or sale of securities or 

5 other investment assets (other than a foreign 

6 exchange transaction unrelated to any other in7 vestment in securities or other investment as8 sets), 

9 ‘‘(B) at the time the foreign exchange 

10 transaction is entered into, the terms of the 

11 transaction are not less favorable to the plan 

12 than the terms generally available in com13 parable arm’s length foreign exchange trans14 actions between unrelated parties, or the terms 

15 afforded by the bank or broker-dealer (or any 

16 affiliate of either) in comparable arm’s-length 

17 foreign exchange transactions involving unre18 lated parties, 

19 ‘‘(C) the exchange rate used by such bank 

20 or broker-dealer (or affiliate) for a particular 

21 foreign exchange transaction does not deviate 

22 by more or less than 3 percent from the inter23 bank bid and asked rates for transactions of 

24 comparable size and maturity at the time of the 

25 transaction as displayed on an independent 


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1 service that reports rates of exchange in the 

2 foreign currency market for such currency, and 

3 ‘‘(D) the bank or broker-dealer (or any af4 filiate of either) does not have investment dis5 cretion, or provide investment advice, with re6 spect to the transaction.’’. 

7 (f) DEFINITION OF PLAN ASSET VEHICLE.—Section 

8 3 of such Act (29 U.S.C. 1002) is amended by adding 

9 at the end the following new paragraph: 

10 ‘‘(42) the term ‘plan assets’ means plan assets as de11 fined by such regulations as the Secretary may prescribe, 

12 except that under such regulations the assets of any entity 

13 shall not be treated as plan assets if, immediately after 

14 the most recent acquisition of any equity interest in the 

15 entity, less than 25 percent of the total value of each class 

16 of equity interest in the entity is held by benefit plan in17 vestors. For purposes of determinations pursuant to this 

18 paragraph, the value of any equity interest held by a per19 son (other than such a benefit plan investor) who has dis20 cretionary authority or control with respect to the assets 

21 of the entity or any person who provides investment advice 

22 for a fee (direct or indirect) with respect to such assets, 

23 or any affiliate of such a person, shall be disregarded for 

24 purposes of calculating the 25 percent threshold. An entity 

25 shall be considered to hold plan assets only to the extent 


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1 of the percentage of the equity interest held by benefit 

2 plan investors. For purposes of this paragraph, the term 

3 ‘benefit plan investor’ means an employee benefit plan 

4 subject to part 4, any plan to which section 4975 of the 

5 Internal Revenue Code of 1986 applies, and any entity 

6 whose underlying assets include plan assets by reason of 

7 a plan’s investment in such entity.’’. 

8 (g) EXEMPTION FOR CROSS TRADING.— 

9 (1) AMENDMENTS TO EMPLOYEE RETIREMENT

10 INCOME SECURITY ACT OF 1974.—Section 408(b) of 

11 such Act (29 U.S.C. 1108(b)), as amended by sub12 section (e), is amended by adding at the end the fol13 lowing new paragraph: 

14 ‘‘(19) CROSS TRADING.—Any transaction de15 scribed in sections 406(a)(1)(A) and 406(b)(2) in16 volving the purchase and sale of a security between 

17 a plan and any other account managed by the same 

18 investment manager, if— 

19 ‘‘(A) the transaction is a purchase or sale, 

20 for no consideration other than cash payment 

21 against prompt delivery of a security for which 

22 market quotations are readily available, 

23 ‘‘(B) the transaction is effected at the 

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1 rity (within the meaning of section 270.17a– 

2 7(b) of title 17, Code of Federal Regulations), 

3 ‘‘(C) no brokerage commission, fee (except 

4 for customary transfer fees, the fact of which is 

5 disclosed pursuant to subparagraph (D)), or 

6 other remuneration is paid in connection with 

7 the transaction, 

8 ‘‘(D) a fiduciary (other than the invest9 ment manager engaging in the cross-trades or 

10 any affiliate) for each plan participating in the 

11 transaction authorizes in advance of any cross12 trades (in a document that is separate from any 

13 other written agreement of the parties) the in14 vestment manager to engage in cross trades at 

15 the investment manager’s discretion, after such 

16 fiduciary has received disclosure regarding the 

17 conditions under which cross trades may take 

18 place (but only if such disclosure is separate 

19 from any other agreement or disclosure involv20 ing the asset management relationship), includ21 ing the written policies and procedures of the 

22 investment manager described in subparagraph 

23 (H), 

24 ‘‘(E) each plan participating in the trans25 action has assets of at least $100,000,000, exVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00531 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 cept that if the assets of a plan are invested in 

2 a master trust containing the assets of plans 

3 maintained by employers in the same controlled 

4 group (as defined in section 407(d)(7)), the 

5 master trust has assets of at least 

6 $100,000,000, 

7 ‘‘(F) the investment manager provides to 

8 the plan fiduciary who authorized cross trading 

9 under subparagraph (D) a quarterly report de10 tailing all cross trades executed by the invest11 ment manager in which the plan participated 

12 during such quarter, including the following in13 formation, as applicable: (i) the identity of each 

14 security bought or sold; (ii) the number of 

15 shares or units traded, (iii) the parties involved 

16 in the cross-trade; and (iv) trade price and the 

17 method used to establish the trade price, 

18 ‘‘(G) the investment manager does not 

19 base its fee schedule on the plan‘s consent to 

20 cross trading, and no other service (other than 

21 the investment opportunities and cost savings 

22 available through a cross trade) is conditioned 

23 on the plan’s consent to cross trading, 

24 ‘‘(H) the investment manager has adopted, 

25 and cross-trades are effected in accordance 


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1 with, written cross-trading policies and proce2 dures that are fair and equitable to all accounts 

3 participating in the cross-trading program, and 

4 that include a description of the manager’s 

5 pricing policies and procedures, and the man6 ager’s policies and procedures for allocating 

7 cross trades in an objective manner among ac8 counts participating in the cross-trading pro9 gram, and 

10 ‘‘(I) the investment manager has des11 ignated an individual responsible for periodi12 cally reviewing such purchases and sales to en13 sure compliance with the written policies and 

14 procedures described in subparagraph (H), and 

15 following such review, the individual shall issue 

16 an annual written report no later than 90 days 

17 following the period to which it relates signed 

18 under penalty of perjury to the plan fiduciary 

19 who authorized cross trading under subpara20 graph (D) describing the steps performed dur21 ing the course of the review, the level of compli22 ance, and any specific instances of non-compli23 ance. 

24 The written report under subparagraph (I) shall also 

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1 nate participation in the investment manager’s 

2 cross-trading program at any time.’’. 

3 (2) AMENDMENTS OF INTERNAL REVENUE

4 CODE OF 1986.—Subsection (d) of section 4975 of 

5 the Internal Revenue Code of 1986 (relating to ex6 emptions), as amended by subsection (e), is amended 

7 by striking ‘‘or’’ at the end of paragraph (20), by 

8 striking the period at the end of paragraph (21) and 

9 inserting ‘‘, or’’, and by adding at the end the fol10 lowing new paragraph: 

11 ‘‘(22) any transaction described in subsection 

12 (c)(1)(A) involving the purchase and sale of a secu13 rity between a plan and any other account managed 

14 by the same investment manager, if— 

15 ‘‘(A) the transaction is a purchase or sale, 

16 for no consideration other than cash payment 

17 against prompt delivery of a security for which 

18 market quotations are readily available, 

19 ‘‘(B) the transaction is effected at the 

20 independent current market price of the secu21 rity (within the meaning of section 270.17a– 

22 7(b) of title 17, Code of Federal Regulations), 

23 ‘‘(C) no brokerage commission, fee (except 

24 for customary transfer fees, the fact of which is 

25 disclosed pursuant to subparagraph (D)), or 


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1 other remuneration is paid in connection with 

2 the transaction, 

3 ‘‘(D) a fiduciary (other than the invest4 ment manager engaging in the cross-trades or 

5 any affiliate) for each plan participating in the 

6 transaction authorizes in advance of any cross7 trades (in a document that is separate from any 

8 other written agreement of the parties) the in9 vestment manager to engage in cross trades at 

10 the investment manager’s discretion, after such 

11 fiduciary has received disclosure regarding the 

12 conditions under which cross trades may take 

13 place (but only if such disclosure is separate 

14 from any other agreement or disclosure involv15 ing the asset management relationship), includ16 ing the written policies and procedures of the 

17 investment manager described in subparagraph 

18 (H), 

19 ‘‘(E) each plan participating in the trans20 action has assets of at least $100,000,000, ex21 cept that if the assets of a plan are invested in 

22 a master trust containing the assets of plans 

23 maintained by employers in the same controlled 

24 group (as defined in section 407(d)(7) of the 

25 Employee Retirement Income Security Act of 


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1 1974), the master trust has assets of at least 

2 $100,000,000, 

3 ‘‘(F) the investment manager provides to 

4 the plan fiduciary who authorized cross trading 

5 under subparagraph (D) a quarterly report de6 tailing all cross trades executed by the invest7 ment manager in which the plan participated 

8 during such quarter, including the following in9 formation, as applicable: (i) the identity of each 

10 security bought or sold; (ii) the number of 

11 shares or units traded, (iii) the parties involved 

12 in the cross-trade; and (iv) trade price and the 

13 method used to establish the trade price, 

14 ‘‘(G) the investment manager does not 

15 base its fee schedule on the plan‘s consent to 

16 cross trading, and no other service (other than 

17 the investment opportunities and cost savings 

18 available through a cross trade) is conditioned 

19 on the plan’s consent to cross trading, 

20 ‘‘(H) the investment manager has adopted, 

21 and cross-trades are effected in accordance 

22 with, written cross-trading policies and proce23 dures that are fair and equitable to all accounts 

24 participating in the cross-trading program, and 

25 that include a description of the manager’s 


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1 pricing policies and procedures, and the man2 ager’s policies and procedures for allocating 

3 cross trades in an objective manner among ac4 counts participating in the cross-trading pro5 gram, and 

6 ‘‘(I) the investment manager has des7 ignated an individual responsible for periodi8 cally reviewing such purchases and sales to en9 sure compliance with the written policies and 

10 procedures described in subparagraph (H), and 

11 following such review, the individual shall issue 

12 an annual written report no later than 90 days 

13 following the period to which it relates signed 

14 under penalty of perjury to the plan fiduciary 

15 who authorized cross trading under subpara16 graph (D) describing the steps performed dur17 ing the course of the review, the level of compli18 ance, and any specific instances of non-compli19 ance. 

20 The written report shall also notify the plan fidu21 ciary of the plan’s right to terminate participation in 

22 the investment manager’s cross-trading program at 

23 any time.’’. 

24 (3) REGULATIONS.—No later than 180 days 

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1 retary of Labor, after consultation with the Securi2 ties and Exchange Commission, shall issue regula3 tions regarding the content of policies and proce4 dures required to be adopted by an investment man5 ager under section 408(b)(19) of the Employee Re6 tirement Income Security Act of 1974. 

7 (h) EFFECTIVE DATES.— 

8 (1) IN GENERAL.—Except as provided in para9 graph (2), the amendments made by this section 

10 shall apply to transactions occurring after the date 

11 of the enactment of this Act. 

12 (2) BONDING RULE.—The amendments made 

13 by subsection (b) shall apply to plan years beginning 

14 after such date. 

15 SEC. 612. CORRECTION PERIOD FOR CERTAIN TRANS16 ACTIONS INVOLVING SECURITIES AND COM17 MODITIES. 

18 (a) AMENDMENT OF EMPLOYEE RETIREMENT IN19 COME SECURITY ACT OF 1974.—Section 408(b) of the 

20 Employee Retirement Income Security Act of 1974 (29 

21 U.S.C. 1108(b)), as amended by sections 601 and 611, 

22 is further amended by adding at the end the following new 

23 paragraph: 

24 ‘‘(20)(A) Except as provided in subparagraphs 

25 (B) and (C), a transaction described in section 


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1 406(a) in connection with the acquisition, holding, 

2 or disposition of any security or commodity, if the 

3 transaction is corrected before the end of the correc4 tion period. 

5 ‘‘(B) Subparagraph (A) does not apply to any 

6 transaction between a plan and a plan sponsor or its 

7 affiliates that involves the acquisition or sale of an 

8 employer security (as defined in section 407(d)(1)) 

9 or the acquisition, sale, or lease of employer real 

10 property (as defined in section 407(d)(2)). 

11 ‘‘(C) In the case of any fiduciary or other party 

12 in interest (or any other person knowingly partici13 pating in such transaction), subparagraph (A) does 

14 not apply to any transaction if, at the time the 

15 transaction occurs, such fiduciary or party in inter16 est (or other person) knew (or reasonably should 

17 have known) that the transaction would (without re18 gard to this paragraph) constitute a violation of sec19 tion 406(a). 

20 ‘‘(D) For purposes of this paragraph, the term 

21 ‘correction period’ means, in connection with a fidu22 ciary or party in interest (or other person knowingly 

23 participating in the transaction), the 14-day period 

24 beginning on the date on which such fiduciary or 

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1 sonably should have discovered, that the transaction 

2 would (without regard to this paragraph) constitute 

3 a violation of section 406(a). 

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

5 ‘‘(i) The term ‘security’ has the meaning 

6 given such term by section 475(c)(2) of the In7 ternal Revenue Code of 1986 (without regard to 

8 subparagraph (F)(iii) and the last sentence 

9 thereof). 

10 ‘‘(ii) The term ‘commodity’ has the mean11 ing given such term by section 475(e)(2) of 

12 such Code (without regard to subparagraph 

13 (D)(iii) thereof). 

14 ‘‘(iii) The term ‘correct’ means, with re15 spect to a transaction— 

16 ‘‘(I) to undo the transaction to the ex17 tent possible and in any case to make good 

18 to the plan or affected account any losses 

19 resulting from the transaction, and 

20 ‘‘(II) to restore to the plan or affected 

21 account any profits made through the use 

22 of assets of the plan.’’. 

23 (b) AMENDMENT OF INTERNAL REVENUE CODE OF

24 1986.— 


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1 (1) IN GENERAL.—Subsection (d) of section 

2 4975 of the Internal Revenue Code of 1986 (relating 

3 to exemptions), as amended by sections 601 and 

4 611, is amended by striking ‘‘or’’ at the end of para5 graph (21), by striking the period at the end of 

6 paragraph (22) and inserting ‘‘, or’’, and by adding 

7 at the end the following new paragraph: 

8 ‘‘(23) except as provided in subsection (f)(11), 

9 a transaction described in subparagraph (A), (B), 

10 (C), or (D) of subsection (c)(1) in connection with 

11 the acquisition, holding, or disposition of any secu12 rity or commodity, if the transaction is corrected be13 fore the end of the correction period.’’. 

14 (2) SPECIAL RULES RELATING TO CORRECTION

15 PERIOD.—Subsection (f) of section 4975 of such 

16 Code (relating to other definitions and special rules), 

17 as amended by sections 601 and 611, is amended by 

18 adding at the end the following new paragraph: 

19 ‘‘(11) CORRECTION PERIOD.— 

20 ‘‘(A) IN GENERAL.—For purposes of sub21 section (d)(23), the term ‘correction period’ 

22 means the 14-day period beginning on the date 

23 on which the disqualified person discovers, or 

24 reasonably should have discovered, that the 

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1 graph and subsection (d)(23)) constitute a pro2 hibited transaction. 

3 ‘‘(B) EXCEPTIONS.— 

4 ‘‘(i) EMPLOYER SECURITIES.—Sub5 section (d)(23) does not apply to any 

6 transaction between a plan and a plan 

7 sponsor or its affiliates that involves the 

8 acquisition or sale of an employer security 

9 (as defined in section 407(d)(1)) or the ac10 quisition, sale, or lease of employer real 

11 property (as defined in section 407(d)(2)). 

12 ‘‘(ii) KNOWING PROHIBITED TRANS13 ACTION.—In the case of any disqualified 

14 person, subsection (d)(23) does not apply 

15 to a transaction if, at the time the trans16 action is entered into, the disqualified per17 son knew (or reasonably should have 

18 known) that the transaction would (with19 out regard to this paragraph) constitute a 

20 prohibited transaction. 

21 ‘‘(C) ABATEMENT OF TAX WHERE THERE

22 IS A CORRECTION.—If a transaction is not 

23 treated as a prohibited transaction by reason of 

24 subsection (d)(23), then no tax under sub25 section (a) and (b) shall be assessed with reVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00542 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 spect to such transaction, and if assessed the 

2 assessment shall be abated, and if collected 

3 shall be credited or refunded as an overpay4 ment. 

5 ‘‘(D) DEFINITIONS.—For purposes of this 

6 paragraph and subsection (d)(23)— 

7 ‘‘(i) SECURITY.—The term ‘security’ 

8 has the meaning given such term by sec9 tion 475(c)(2) (without regard to subpara10 graph (F)(iii) and the last sentence there11 of). 

12 ‘‘(ii) COMMODITY.—The term ‘com13 modity’ has the meaning given such term 

14 by section 475(e)(2) (without regard to 

15 subparagraph (D)(iii) thereof). 

16 ‘‘(iii) CORRECT.—The term ‘correct’ 

17 means, with respect to a transaction— 

18 ‘‘(I) to undo the transaction to 

19 the extent possible and in any case to 

20 make good to the plan or affected ac21 count any losses resulting from the 

22 transaction, and 

23 ‘‘(II) to restore to the plan or af24 fected account any profits made 


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1 through the use of assets of the 

2 plan.’’. 

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

4 this section shall apply to any transaction which the fidu5 ciary or disqualified person discovers, or reasonably should 

6 have discovered, after the date of the enactment of this 

7 Act constitutes a prohibited transaction. 

8 Subtitle C—Fiduciary and Other 

9 Rules 

10 SEC. 621. INAPPLICABILITY OF RELIEF FROM FIDUCIARY 

11 LIABILITY DURING SUSPENSION OF ABILITY 

12 OF PARTICIPANT OR BENEFICIARY TO DI13 RECT INVESTMENTS. 

14 (a) IN GENERAL.—Section 404(c) of the Employee 

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

16 1104(c)) is amended— 

17 (1) in paragraph (1)— 

18 (A) by redesignating subparagraphs (A) 

19 and (B) as clauses (i) and (ii), respectively, and 

20 by inserting ‘‘(A)’’ after ‘‘(c)(1)’’, 

21 (B) in subparagraph (A)(ii) (as redesig22 nated by paragraph (1)), by inserting before the 

23 period the following: ‘‘, except that this clause 

24 shall not apply in connection with such partici25 pant or beneficiary for any blackout period durVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00544 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ing which the ability of such participant or ben2 eficiary to direct the investment of the assets in 

3 his or her account is suspended by a plan spon4 sor or fiduciary’’, and 

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

6 subparagraphs: 

7 ‘‘(B) If a person referred to in subparagraph (A)(ii) 

8 meets the requirements of this title in connection with au9 thorizing and implementing the blackout period, any per10 son who is otherwise a fiduciary shall not be liable under 

11 this title for any loss occurring during such period. 

12 ‘‘(C) For purposes of this paragraph, the term ‘black13 out period’ has the meaning given such term by section 

14 101(i)(7).’’; and 

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

16 ‘‘(4)(A) In any case in which a qualified change 

17 in investment options occurs in connection with an 

18 individual account plan, a participant or beneficiary 

19 shall not be treated for purposes of paragraph (1) 

20 as not exercising control over the assets in his ac21 count in connection with such change if the require22 ments of subparagraph (C) are met in connection 

23 with such change. 

24 ‘‘(B) For purposes of subparagraph (A), the 

25 term ‘qualified change in investment options’ means, 


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1 in connection with an individual account plan, a 

2 change in the investment options offered to the par3 ticipant or beneficiary under the terms of the plan, 

4 under which— 

5 ‘‘(i) the account of the participant or bene6 ficiary is reallocated among one or more re7 maining or new investment options which are 

8 offered in lieu of one or more investment op9 tions offered immediately prior to the effective 

10 date of the change, and 

11 ‘‘(ii) the stated characteristics of the re12 maining or new investment options provided 

13 under clause (i), including characteristics relat14 ing to risk and rate of return, are, as of imme15 diately after the change, reasonably similar to 

16 those of the existing investment options as of 

17 immediately before the change. 

18 ‘‘(C) The requirements of this subparagraph 

19 are met in connection with a qualified change in in20 vestment options if— 

21 ‘‘(i) at least 30 days and no more than 60 

22 days prior to the effective date of the change, 

23 the plan administrator furnishes written notice 

24 of the change to the participants and bene25 ficiaries, including information comparing the 


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1 existing and new investment options and an ex2 planation that, in the absence of affirmative in3 vestment instructions from the participant or 

4 beneficiary to the contrary, the account of the 

5 participant or beneficiary will be invested in the 

6 manner described in subparagraph (B), 

7 ‘‘(ii) the participant or beneficiary has not 

8 provided to the plan administrator, in advance 

9 of the effective date of the change, affirmative 

10 investment instructions contrary to the change, 

11 and 

12 ‘‘(iii) the investments under the plan of the 

13 participant or beneficiary as in effect imme14 diately prior to the effective date of the change 

15 were the product of the exercise by such partici16 pant or beneficiary of control over the assets of 

17 the account within the meaning of paragraph 

18 (1).’’. 

19 (b) EFFECTIVE DATE.— 

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

21 this section shall apply to plan years beginning after 

22 December 31, 2007. 

23 (2) SPECIAL RULE FOR COLLECTIVELY BAR24 GAINED AGREEMENTS.—In the case of a plan main25 tained pursuant to 1 or more collective bargaining 


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1 agreements between employee representatives and 1 

2 or more employers ratified on or before the date of 

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

4 applied to benefits pursuant to, and individuals cov5 ered by, any such agreement by substituting for 

6 ‘‘December 31, 2007’’ the earlier of— 

7 (A) the later of— 

8 (i) December 31, 2008, or 

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

10 collective bargaining agreements termi11 nates (determined without regard to any 

12 extension thereof after such date of enact13 ment), or 

14 (B) December 31, 2009. 

15 SEC. 622. INCREASE IN MAXIMUM BOND AMOUNT. 

16 (a) IN GENERAL.—Section 412(a) of the Employee 

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

18 1112), as amended by section 611(b), is amended by add19 ing at the end the following: ‘‘In the case of a plan that 

20 holds employer securities (within the meaning of section 

21 407(d)(1)), this subsection shall be applied by substituting 

22 ‘$1,000,000’ for ‘$500,000’ each place it appears.’’ 

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

24 this section shall apply to plan years beginning after De25 cember 31, 2007. 


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1 SEC. 623. INCREASE IN PENALTIES FOR COERCIVE INTER2 FERENCE WITH EXERCISE OF ERISA RIGHTS. 

3 (a) IN GENERAL.—Section 511 of the Employment 

4 Retirement Income Security Act of 1974 (29 U.S.C. 1141) 

5 is amended— 

6 (1) by striking ‘‘$10,000’’ and inserting 

7 ‘‘$100,000’’, and 

8 (2) by striking ‘‘one year’’ and inserting ‘‘10 

9 years’’. 

10 (b) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to violations occurring on and after 

12 the date of the enactment of this Act. 

13 SEC. 624. TREATMENT OF INVESTMENT OF ASSETS BY PLAN 

14 WHERE PARTICIPANT FAILS TO EXERCISE IN15 VESTMENT ELECTION. 

16 (a) IN GENERAL.—Section 404(c) of the Employee 

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

18 1104(c)), as amended by section 622, is amended by add19 ing at the end the following new paragraph: 

20 ‘‘(5) DEFAULT INVESTMENT ARRANGE21 MENTS.— 

22 ‘‘(A) IN GENERAL.—For purposes of para23 graph (1), a participant in an individual ac24 count plan meeting the notice requirements of 

25 subparagraph (B) shall be treated as exercising 

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1 spect to the amount of contributions and earn2 ings which, in the absence of an investment 

3 election by the participant, are invested by the 

4 plan in accordance with regulations prescribed 

5 by the Secretary. The regulations under this 

6 subparagraph shall provide guidance on the ap7 propriateness of designating default investments 

8 that include a mix of asset classes consistent 

9 with capital preservation or long-term capital 

10 appreciation, or a blend of both. 

11 ‘‘(B) NOTICE REQUIREMENTS.— 

12 ‘‘(i) IN GENERAL.—The requirements 

13 of this subparagraph are met if each par14 ticipant— 

15 ‘‘(I) receives, within a reasonable 

16 period of time before each plan year, 

17 a notice explaining the employee’s 

18 right under the plan to designate how 

19 contributions and earnings will be in20 vested and explaining how, in the ab21 sence of any investment election by 

22 the participant, such contributions 

23 and earnings will be invested, and 

24 ‘‘(II) has a reasonable period of 

25 time after receipt of such notice and 


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1 before the beginning of the plan year 

2 to make such designation. 

3 ‘‘(ii) FORM OF NOTICE.—The require4 ments of clauses (i) and (ii) of section 

5 401(k)(12)(D) of the Internal Revenue 

6 Code of 1986 shall apply with respect to 

7 the notices described in this subpara8 graph.’’. 

9 (b) EFFECTIVE DATE.— 

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

11 this section shall apply to plan years beginning after 

12 December 31, 2006. 

13 (2) REGULATIONS.—Final regulations under 

14 section 404(c)(5)(A) of the Employee Retirement In15 come Security Act of 1974 (as added by this section) 

16 shall be issued no later than 6 months after the date 

17 of the enactment of this Act. 

18 SEC. 625. CLARIFICATION OF FIDUCIARY RULES. 

19 (a) IN GENERAL.—Not later than 1 year after the 

20 date of the enactment of this Act, the Secretary of Labor 

21 shall issue final regulations clarifying that the selection 

22 of an annuity contract as an optional form of distribution 

23 from an individual account plan to a participant or bene24 ficiary— 


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1 (1) is not subject to the safest available annuity 

2 standard under Interpretive Bulletin 95–1 (29 

3 C.F.R. 2509.95–1), and 

4 (2) is subject to all otherwise applicable fidu5 ciary standards. 

6 (b) EFFECTIVE DATE.—This section shall take effect 

7 on the date of enactment of this Act. 

8 TITLE VII—BENEFIT ACCRUAL 

9 STANDARDS 

10 SEC. 701. BENEFIT ACCRUAL STANDARDS. 

11 (a) AMENDMENTS TO THE EMPLOYEE RETIREMENT

12 INCOME SECURITY ACT OF 1974.— 

13 (1) RULES RELATING TO REDUCTION IN RATE

14 OF BENEFIT ACCRUAL.—Section 204(b) of the Em15 ployee Retirement Income Security Act of 1974 (29 

16 U.S.C. 1054(b)) is amended by adding at the end 

17 the following new paragraph: 

18 ‘‘(5) SPECIAL RULES RELATING TO AGE.— 

19 ‘‘(A) COMPARISON TO SIMILARLY SITU20 ATED YOUNGER INDIVIDUAL.— 

21 ‘‘(i) IN GENERAL.—A plan shall not 

22 be treated as failing to meet the require23 ments of paragraph (1)(H)(i) if a partici24 pant’s accrued benefit, as determined as of 

25 any date under the terms of the plan, 


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1 would be equal to or greater than that of 

2 any similarly situated, younger individual 

3 who is or could be a participant. 

4 ‘‘(ii) SIMILARLY SITUATED.—For pur5 poses of this subparagraph, a participant 

6 is similarly situated to any other individual 

7 if such participant is identical to such 

8 other individual in every respect (including 

9 period of service, compensation, position, 

10 date of hire, work history, and any other 

11 respect) except for age. 

12 ‘‘(iii) DISREGARD OF SUBSIDIZED

13 EARLY RETIREMENT BENEFITS.—In deter14 mining the accrued benefit as of any date 

15 for purposes of this clause, the subsidized 

16 portion of any early retirement benefit or 

17 retirement-type subsidy shall be dis18 regarded. 

19 ‘‘(iv) ACCRUED BENEFIT.—For pur20 poses of this subparagraph, the accrued 

21 benefit may, under the terms of the plan, 

22 be expressed as an annuity payable at nor23 mal retirement age, the balance of a hypo24 thetical account, or the current value of 


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1 the accumulated percentage of the employ2 ee’s final average compensation. 

3 ‘‘(B) APPLICABLE DEFINED BENEFIT

4 PLANS.— 

5 ‘‘(i) INTEREST CREDITS.— 

6 ‘‘(I) IN GENERAL.—An applicable 

7 defined benefit plan shall be treated 

8 as failing to meet the requirements of 

9 paragraph (1)(H) unless the terms of 

10 the plan provide that any interest 

11 credit (or an equivalent amount) for 

12 any plan year shall be at a rate which 

13 is not greater than a market rate of 

14 return. A plan shall not be treated as 

15 failing to meet the requirements of 

16 this subclause merely because the plan 

17 provides for a reasonable minimum 

18 guaranteed rate of return or for a 

19 rate of return that is equal to the 

20 greater of a fixed or variable rate of 

21 return. 

22 ‘‘(II) PRESERVATION OF CAP23 ITAL.—An interest credit (or an 

24 equivalent amount) of less than zero 

25 shall in no event result in the account 


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1 balance or similar amount being less 

2 than the aggregate amount of con3 tributions credited to the account. 

4 ‘‘(III) MARKET RATE OF RE5 TURN.—The Secretary of the Treas6 ury may provide by regulation for 

7 rules governing the calculation of a 

8 market rate of return for purposes of 

9 subclause (I) and for permissible 

10 methods of crediting interest to the 

11 account (including fixed or variable 

12 interest rates) resulting in effective 

13 rates of return meeting the require14 ments of subclause (I). 

15 ‘‘(ii) SPECIAL RULE FOR PLAN CON16 VERSIONS.—If, after June 29, 2005, an 

17 applicable plan amendment is adopted, the 

18 plan shall be treated as failing to meet the 

19 requirements of paragraph (1)(H) unless 

20 the requirements of clause (iii) are met 

21 with respect to each individual who was a 

22 participant in the plan immediately before 

23 the adoption of the amendment. 

24 ‘‘(iii) RATE OF BENEFIT ACCRUAL.— 

25 Subject to clause (iv), the requirements of 


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1 this clause are met with respect to any 

2 participant if the accrued benefit of the 

3 participant under the terms of the plan as 

4 in effect after the amendment is not less 

5 than the sum of— 

6 ‘‘(I) the participant’s accrued 

7 benefit for years of service before the 

8 effective date of the amendment, de9 termined under the terms of the plan 

10 as in effect before the amendment, 

11 plus 

12 ‘‘(II) the participant’s accrued 

13 benefit for years of service after the 

14 effective date of the amendment, de15 termined under the terms of the plan 

16 as in effect after the amendment. 

17 ‘‘(iv) SPECIAL RULES FOR EARLY RE18 TIREMENT SUBSIDIES.—For purposes of 

19 clause (iii)(I), the plan shall credit the ac20 cumulation account or similar amount with 

21 the amount of any early retirement benefit 

22 or retirement-type subsidy for the plan 

23 year in which the participant retires if, as 

24 of such time, the participant has met the 

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1 ments under the plan for entitlement to 

2 such benefit or subsidy. 

3 ‘‘(v) APPLICABLE PLAN AMEND4 MENT.—For purposes of this subpara5 graph— 

6 ‘‘(I) IN GENERAL.—The term 

7 ‘applicable plan amendment’ means 

8 an amendment to a defined benefit 

9 plan which has the effect of con10 verting the plan to an applicable de11 fined benefit plan. 

12 ‘‘(II) SPECIAL RULE FOR CO13 ORDINATED BENEFITS.—If the bene14 fits of 2 or more defined benefit plans 

15 established or maintained by an em16 ployer are coordinated in such a man17 ner as to have the effect of the adop18 tion of an amendment described in 

19 subclause (I), the sponsor of the de20 fined benefit plan or plans providing 

21 for such coordination shall be treated 

22 as having adopted such a plan amend23 ment as of the date such coordination 

24 begins. 


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1 ‘‘(III) MULTIPLE AMEND2 MENTS.—The Secretary of the Treas3 ury shall issue regulations to prevent 

4 the avoidance of the purposes of this 

5 subparagraph through the use of 2 or 

6 more plan amendments rather than a 

7 single amendment. 

8 ‘‘(IV) APPLICABLE DEFINED

9 BENEFIT PLAN.—For purposes of this 

10 subparagraph, the term ‘applicable de11 fined benefit plan’ has the meaning 

12 given such term by section 203(f)(3). 

13 ‘‘(vi) TERMINATION REQUIRE14 MENTS.—An applicable defined benefit 

15 plan shall not be treated as meeting the re16 quirements of clause (i) unless the plan 

17 provides that, upon the termination of the 

18 plan— 

19 ‘‘(I) if the interest credit rate (or 

20 an equivalent amount) under the plan 

21 is a variable rate, the rate of interest 

22 used to determine accrued benefits 

23 under the plan shall be equal to the 

24 average of the rates of interest used 

25 under the plan during the 5-year peVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00558 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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•HR 4 PCS 

1 riod ending on the termination date, 

2 and 

3 ‘‘(II) the interest rate and mor4 tality table used to determine the 

5 amount of any benefit under the plan 

6 payable in the form of an annuity 

7 payable at normal retirement age 

8 shall be the rate and table specified 

9 under the plan for such purpose as of 

10 the termination date, except that if 

11 such interest rate is a variable rate, 

12 the interest rate shall be determined 

13 under the rules of subclause (I). 

14 ‘‘(C) CERTAIN OFFSETS PERMITTED.—A 

15 plan shall not be treated as failing to meet the 

16 requirements of paragraph (1)(H)(i) solely be17 cause the plan provides offsets against benefits 

18 under the plan to the extent such offsets are al19 lowable in applying the requirements of section 

20 401(a) of the Internal Revenue Code of 1986. 

21 ‘‘(D) PERMITTED DISPARITIES IN PLAN

22 CONTRIBUTIONS OR BENEFITS.—A plan shall 

23 not be treated as failing to meet the require24 ments of paragraph (1)(H) solely because the 

25 plan provides a disparity in contributions or 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 benefits with respect to which the requirements 

2 of section 401(l) of the Internal Revenue Code 

3 of 1986 are met. 

4 ‘‘(E) INDEXING PERMITTED.— 

5 ‘‘(i) IN GENERAL.—A plan shall not 

6 be treated as failing to meet the require7 ments of paragraph (1)(H) solely because 

8 the plan provides for indexing of accrued 

9 benefits under the plan. 

10 ‘‘(ii) PROTECTION AGAINST LOSS.— 

11 Except in the case of any benefit provided 

12 in the form of a variable annuity, clause (i) 

13 shall not apply with respect to any index14 ing which results in an accrued benefit less 

15 than the accrued benefit determined with16 out regard to such indexing. 

17 ‘‘(iii) INDEXING.—For purposes of 

18 this subparagraph, the term ‘indexing’ 

19 means, in connection with an accrued ben20 efit, the periodic adjustment of the accrued 

21 benefit by means of the application of a 

22 recognized investment index or method23 ology. 

24 ‘‘(F) EARLY RETIREMENT BENEFIT OR RE25 TIREMENT-TYPE SUBSIDY.—For purposes of 


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•HR 4 PCS 

1 this paragraph, the terms ‘early retirement ben2 efit’ and ‘retirement-type subsidy’ have the 

3 meaning given such terms in subsection 

4 (g)(2)(A). 

5 ‘‘(G) BENEFIT ACCRUED TO DATE.—For 

6 purposes of this paragraph, any reference to the 

7 accrued benefit shall be a reference to such ben8 efit accrued to date.’’. 

9 (2) DETERMINATIONS OF ACCRUED BENEFIT AS

10 BALANCE OF BENEFIT ACCOUNT OR EQUIVALENT

11 AMOUNTS.—Section 203 of such Act (29 U.S.C. 

12 1053) is amended by adding at the end the following 

13 new subsection: 

14 ‘‘(f) SPECIAL RULES FOR PLANS COMPUTING AC15 CRUED BENEFITS BY REFERENCE TO HYPOTHETICAL AC16 COUNT BALANCE OR EQUIVALENT AMOUNTS.— 

17 ‘‘(1) IN GENERAL.—An applicable defined ben18 efit plan shall not be treated as failing to meet— 

19 ‘‘(A) subject to paragraph (2), the require20 ments of subsection (a)(2), or 

21 ‘‘(B) the requirements of section 204(c) or 

22 section 205(g) with respect to contributions 

23 other than employee contributions, 

24 solely because the present value of the accrued ben25 efit (or any portion thereof) of any participant is, 


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•HR 4 PCS 

1 under the terms of the plan, equal to the amount ex2 pressed as the balance in the hypothetical account 

3 described in paragraph (3) or as an accumulated 

4 percentage of the participant’s final average com5 pensation. 

6 ‘‘(2) 3-YEAR VESTING.—In the case of an appli7 cable defined benefit plan, such plan shall be treated 

8 as meeting the requirements of subsection (a)(2) 

9 only if an employee who has completed at least 3 

10 years of service has a nonforfeitable right to 100 

11 percent of the employee’s accrued benefit derived 

12 from employer contributions. 

13 ‘‘(3) APPLICABLE DEFINED BENEFIT PLAN AND

14 RELATED RULES.—For purposes of this sub15 section— 

16 ‘‘(A) IN GENERAL.—The term ‘applicable 

17 defined benefit plan’ means a defined benefit 

18 plan under which the accrued benefit (or any 

19 portion thereof) is calculated as the balance of 

20 a hypothetical account maintained for the par21 ticipant or as an accumulated percentage of the 

22 participant’s final average compensation. 

23 ‘‘(B) REGULATIONS TO INCLUDE SIMILAR

24 PLANS.—The Secretary of the Treasury shall 

25 issue regulations which include in the definition 


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•HR 4 PCS 

1 of an applicable defined benefit plan any de2 fined benefit plan (or any portion of such a 

3 plan) which has an effect similar to an applica4 ble defined benefit plan.’’. 

5 (b) AMENDMENTS TO THE INTERNAL REVENUE

6 CODE OF 1986.— 

7 (1) RULES RELATING TO REDUCTION IN RATE

8 OF BENEFIT ACCRUAL.—Subsection (b) of section 

9 411 of the Internal Revenue Code of 1986 is amend10 ed by adding at the end the following new para11 graph: 

12 ‘‘(5) SPECIAL RULES RELATING TO AGE.— 

13 ‘‘(A) COMPARISON TO SIMILARLY SITU14 ATED YOUNGER INDIVIDUAL.— 

15 ‘‘(i) IN GENERAL.—A plan shall not 

16 be treated as failing to meet the require17 ments of paragraph (1)(H)(i) if a partici18 pant’s accrued benefit, as determined as of 

19 any date under the terms of the plan, 

20 would be equal to or greater than that of 

21 any similarly situated, younger individual 

22 who is or could be a participant. 

23 ‘‘(ii) SIMILARLY SITUATED.—For pur24 poses of this subparagraph, a participant 

25 is similarly situated to any other individual 


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•HR 4 PCS 

1 if such participant is identical to such 

2 other individual in every respect (including 

3 period of service, compensation, position, 

4 date of hire, work history, and any other 

5 respect) except for age. 

6 ‘‘(iii) DISREGARD OF SUBSIDIZED

7 EARLY RETIREMENT BENEFITS.—In deter8 mining the accrued benefit as of any date 

9 for purposes of this clause, the subsidized 

10 portion of any early retirement benefit or 

11 retirement-type subsidy shall be dis12 regarded. 

13 ‘‘(iv) ACCRUED BENEFIT.—For pur14 poses of this subparagraph, the accrued 

15 benefit may, under the terms of the plan, 

16 be expressed as an annuity payable at nor17 mal retirement age, the balance of a hypo18 thetical account, or the current value of 

19 the accumulated percentage of the employ20 ee’s final average compensation. 

21 ‘‘(B) APPLICABLE DEFINED BENEFIT

22 PLANS.— 

23 ‘‘(i) INTEREST CREDITS.— 

24 ‘‘(I) IN GENERAL.—An applicable 

25 defined benefit plan shall be treated 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 as failing to meet the requirements of 

2 paragraph (1)(H) unless the terms of 

3 the plan provide that any interest 

4 credit (or an equivalent amount) for 

5 any plan year shall be at a rate which 

6 is not greater than a market rate of 

7 return. A plan shall not be treated as 

8 failing to meet the requirements of 

9 this subclause merely because the plan 

10 provides for a reasonable minimum 

11 guaranteed rate of return or for a 

12 rate of return that is equal to the 

13 greater of a fixed or variable rate of 

14 return. 

15 ‘‘(II) PRESERVATION OF CAP16 ITAL.—An interest credit (or an 

17 equivalent amount) of less than zero 

18 shall in no event result in the account 

19 balance or similar amount being less 

20 than the aggregate amount of con21 tributions credited to the account. 

22 ‘‘(III) MARKET RATE OF RE23 TURN.—The Secretary may provide by 

24 regulation for rules governing the cal25 culation of a market rate of return for 


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•HR 4 PCS 

1 purposes of subclause (I) and for per2 missible methods of crediting interest 

3 to the account (including fixed or 

4 variable interest rates) resulting in ef5 fective rates of return meeting the re6 quirements of subclause (I). 

7 ‘‘(ii) SPECIAL RULE FOR PLAN CON8 VERSIONS.—If, after June 29, 2005, an 

9 applicable plan amendment is adopted, the 

10 plan shall be treated as failing to meet the 

11 requirements of paragraph (1)(H) unless 

12 the requirements of clause (iii) are met 

13 with respect to each individual who was a 

14 participant in the plan immediately before 

15 the adoption of the amendment. 

16 ‘‘(iii) RATE OF BENEFIT ACCRUAL.— 

17 Subject to clause (iv), the requirements of 

18 this clause are met with respect to any 

19 participant if the accrued benefit of the 

20 participant under the terms of the plan as 

21 in effect after the amendment is not less 

22 than the sum of— 

23 ‘‘(I) the participant’s accrued 

24 benefit for years of service before the 

25 effective date of the amendment, deVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00566 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 termined under the terms of the plan 

2 as in effect before the amendment, 

3 plus 

4 ‘‘(II) the participant’s accrued 

5 benefit for years of service after the 

6 effective date of the amendment, de7 termined under the terms of the plan 

8 as in effect after the amendment. 

9 ‘‘(iv) SPECIAL RULES FOR EARLY RE10 TIREMENT SUBSIDIES.—For purposes of 

11 clause (iii)(I), the plan shall credit the ac12 cumulation account or similar amount with 

13 the amount of any early retirement benefit 

14 or retirement-type subsidy for the plan 

15 year in which the participant retires if, as 

16 of such time, the participant has met the 

17 age, years of service, and other require18 ments under the plan for entitlement to 

19 such benefit or subsidy. 

20 ‘‘(v) APPLICABLE PLAN AMEND21 MENT.—For purposes of this subpara22 graph— 

23 ‘‘(I) IN GENERAL.—The term 

24 ‘applicable plan amendment’ means 

25 an amendment to a defined benefit 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 plan which has the effect of con2 verting the plan to an applicable de3 fined benefit plan. 

4 ‘‘(II) SPECIAL RULE FOR CO5 ORDINATED BENEFITS.—If the bene6 fits of 2 or more defined benefit plans 

7 established or maintained by an em8 ployer are coordinated in such a man9 ner as to have the effect of the adop10 tion of an amendment described in 

11 subclause (I), the sponsor of the de12 fined benefit plan or plans providing 

13 for such coordination shall be treated 

14 as having adopted such a plan amend15 ment as of the date such coordination 

16 begins. 

17 ‘‘(III) MULTIPLE AMEND18 MENTS.—The Secretary shall issue 

19 regulations to prevent the avoidance 

20 of the purposes of this subparagraph 

21 through the use of 2 or more plan 

22 amendments rather than a single 

23 amendment. 

24 ‘‘(IV) APPLICABLE DEFINED

25 BENEFIT PLAN.—For purposes of this 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 subparagraph, the term ‘applicable de2 fined benefit plan’ has the meaning 

3 given such term by section 

4 411(a)(13). 

5 ‘‘(vi) TERMINATION REQUIRE6 MENTS.—An applicable defined benefit 

7 plan shall not be treated as meeting the re8 quirements of clause (i) unless the plan 

9 provides that, upon the termination of the 

10 plan— 

11 ‘‘(I) if the interest credit rate (or 

12 an equivalent amount) under the plan 

13 is a variable rate, the rate of interest 

14 used to determine accrued benefits 

15 under the plan shall be equal to the 

16 average of the rates of interest used 

17 under the plan during the 5-year pe18 riod ending on the termination date, 

19 and 

20 ‘‘(II) the interest rate and mor21 tality table used to determine the 

22 amount of any benefit under the plan 

23 payable in the form of an annuity 

24 payable at normal retirement age 

25 shall be the rate and table specified 


ccoleman on PROD1PC71 with BILLS
570 

•HR 4 PCS 

1 under the plan for such purpose as of 

2 the termination date, except that if 

3 such interest rate is a variable rate, 

4 the interest rate shall be determined 

5 under the rules of subclause (I). 

6 ‘‘(C) CERTAIN OFFSETS PERMITTED.—A 

7 plan shall not be treated as failing to meet the 

8 requirements of paragraph (1)(H)(i) solely be9 cause the plan provides offsets against benefits 

10 under the plan to the extent such offsets are al11 lowable in applying the requirements of section 

12 401(a). 

13 ‘‘(D) PERMITTED DISPARITIES IN PLAN

14 CONTRIBUTIONS OR BENEFITS.—A plan shall 

15 not be treated as failing to meet the require16 ments of paragraph (1)(H) solely because the 

17 plan provides a disparity in contributions or 

18 benefits with respect to which the requirements 

19 of section 401(l) are met. 

20 ‘‘(E) INDEXING PERMITTED.— 

21 ‘‘(i) IN GENERAL.—A plan shall not 

22 be treated as failing to meet the require23 ments of paragraph (1)(H) solely because 

24 the plan provides for indexing of accrued 

25 benefits under the plan. 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 ‘‘(ii) PROTECTION AGAINST LOSS.— 

2 Except in the case of any benefit provided 

3 in the form of a variable annuity, clause (i) 

4 shall not apply with respect to any index5 ing which results in an accrued benefit less 

6 than the accrued benefit determined with7 out regard to such indexing. 

8 ‘‘(iii) INDEXING.—For purposes of 

9 this subparagraph, the term ‘indexing’ 

10 means, in connection with an accrued ben11 efit, the periodic adjustment of the accrued 

12 benefit by means of the application of a 

13 recognized investment index or method14 ology. 

15 ‘‘(F) EARLY RETIREMENT BENEFIT OR RE16 TIREMENT-TYPE SUBSIDY.—For purposes of 

17 this paragraph, the terms ‘early retirement ben18 efit’ and ‘retirement-type subsidy’ have the 

19 meaning given such terms in subsection 

20 (d)(6)(B)(i). 

21 ‘‘(G) BENEFIT ACCRUED TO DATE.—For 

22 purposes of this paragraph, any reference to the 

23 accrued benefit shall be a reference to such ben24 efit accrued to date.’’. 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 (2) DETERMINATIONS OF ACCRUED BENEFIT AS

2 BALANCE OF BENEFIT ACCOUNT OR EQUIVALENT

3 AMOUNTS.—Subsection (a) of section 411 of such 

4 Code is amended by adding at the end the following 

5 new paragraph: 

6 ‘‘(13) SPECIAL RULES FOR PLANS COMPUTING

7 ACCRUED BENEFITS BY REFERENCE TO HYPO8 THETICAL ACCOUNT BALANCE OR EQUIVALENT

9 AMOUNTS.— 

10 ‘‘(A) IN GENERAL.—An applicable defined 

11 benefit plan shall not be treated as failing to 

12 meet— 

13 ‘‘(i) subject to paragraph (2), the re14 quirements of subsection (a)(2), or 

15 ‘‘(ii) the requirements of subsection 

16 (c) or section 417(e) with respect to con17 tributions other than employee contribu18 tions, 

19 solely because the present value of the accrued 

20 benefit (or any portion thereof) of any partici21 pant is, under the terms of the plan, equal to 

22 the amount expressed as the balance in the hy23 pothetical account described in paragraph (3) 

24 or as an accumulated percentage of the partici25 pant’s final average compensation. 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 ‘‘(B) 3-YEAR VESTING.—In the case of an 

2 applicable defined benefit plan, such plan shall 

3 be treated as meeting the requirements of sub4 section (a)(2) only if an employee who has com5 pleted at least 3 years of service has a non6 forfeitable right to 100 percent of the employ7 ee’s accrued benefit derived from employer con8 tributions. 

9 ‘‘(C) APPLICABLE DEFINED BENEFIT PLAN

10 AND RELATED RULES.—For purposes of this 

11 subsection— 

12 ‘‘(i) IN GENERAL.—The term ‘applica13 ble defined benefit plan’ means a defined 

14 benefit plan under which the accrued ben15 efit (or any portion thereof) is calculated 

16 as the balance of a hypothetical account 

17 maintained for the participant or as an ac18 cumulated percentage of the participant’s 

19 final average compensation. 

20 ‘‘(ii) REGULATIONS TO INCLUDE SIMI21 LAR PLANS.—The Secretary shall issue 

22 regulations which include in the definition 

23 of an applicable defined benefit plan any 

24 defined benefit plan (or any portion of 


ccoleman on PROD1PC71 with BILLS
574 

•HR 4 PCS 

1 such a plan) which has an effect similar to 

2 an applicable defined benefit plan.’’. 

3 (c) AMENDMENTS TO AGE DISCRIMINATION IN EM4 PLOYMENT ACT.—Section 4(i) of the Age Discrimination 

5 in Employment Act of 1967 (29 U.S.C. 623(i)) is amend6 ed by adding at the end the following new paragraph: 

7 ‘‘(10) SPECIAL RULES RELATING TO AGE.— 

8 ‘‘(A) COMPARISON TO SIMILARLY SITU9 ATED YOUNGER INDIVIDUAL.— 

10 ‘‘(i) IN GENERAL.—A plan shall not 

11 be treated as failing to meet the require12 ments of paragraph (1) if a participant’s 

13 accrued benefit, as determined as of any 

14 date under the terms of the plan, would be 

15 equal to or greater than that of any simi16 larly situated, younger individual who is or 

17 could be a participant. 

18 ‘‘(ii) SIMILARLY SITUATED.—For pur19 poses of this subparagraph, a participant 

20 is similarly situated to any other individual 

21 if such participant is identical to such 

22 other individual in every respect (including 

23 period of service, compensation, position, 

24 date of hire, work history, and any other 

25 respect) except for age. 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 ‘‘(iii) DISREGARD OF SUBSIDIZED

2 EARLY RETIREMENT BENEFITS.—In deter3 mining the accrued benefit as of any date 

4 for purposes of this clause, the subsidized 

5 portion of any early retirement benefit or 

6 retirement-type subsidy shall be dis7 regarded. 

8 ‘‘(iv) ACCRUED BENEFIT.—For pur9 poses of this subparagraph, the accrued 

10 benefit may, under the terms of the plan, 

11 be expressed as an annuity payable at nor12 mal retirement age, the balance of a hypo13 thetical account, or the current value of 

14 the accumulated percentage of the employ15 ee’s final average compensation. 

16 ‘‘(B) APPLICABLE DEFINED BENEFIT

17 PLANS.— 

18 ‘‘(i) INTEREST CREDITS.— 

19 ‘‘(I) IN GENERAL.—An applicable 

20 defined benefit plan shall be treated 

21 as failing to meet the requirements of 

22 paragraph (1) unless the terms of the 

23 plan provide that any interest credit 

24 (or an equivalent amount) for any 

25 plan year shall be at a rate which is 


ccoleman on PROD1PC71 with BILLS
576 

•HR 4 PCS 

1 not greater than a market rate of re2 turn. A plan shall not be treated as 

3 failing to meet the requirements of 

4 this subclause merely because the plan 

5 provides for a reasonable minimum 

6 guaranteed rate of return or for a 

7 rate of return that is equal to the 

8 greater of a fixed or variable rate of 

9 return. 

10 ‘‘(II) PRESERVATION OF CAP11 ITAL.—An interest credit (or an 

12 equivalent amount) of less than zero 

13 shall in no event result in the account 

14 balance or similar amount being less 

15 than the aggregate amount of con16 tributions credited to the account. 

17 ‘‘(III) MARKET RATE OF RE18 TURN.—The Secretary of the Treas19 ury may provide by regulation for 

20 rules governing the calculation of a 

21 market rate of return for purposes of 

22 subclause (I) and for permissible 

23 methods of crediting interest to the 

24 account (including fixed or variable 

25 interest rates) resulting in effective 


ccoleman on PROD1PC71 with BILLS
577 

•HR 4 PCS 

1 rates of return meeting the require2 ments of subclause (I). 

3 ‘‘(ii) SPECIAL RULE FOR PLAN CON4 VERSIONS.—If, after June 29, 2005, an 

5 applicable plan amendment is adopted, the 

6 plan shall be treated as failing to meet the 

7 requirements of paragraph (1)(H) unless 

8 the requirements of clause (iii) are met 

9 with respect to each individual who was a 

10 participant in the plan immediately before 

11 the adoption of the amendment. 

12 ‘‘(iii) RATE OF BENEFIT ACCRUAL.— 

13 Subject to clause (iv), the requirements of 

14 this clause are met with respect to any 

15 participant if the accrued benefit of the 

16 participant under the terms of the plan as 

17 in effect after the amendment is not less 

18 than the sum of— 

19 ‘‘(I) the participant’s accrued 

20 benefit for years of service before the 

21 effective date of the amendment, de22 termined under the terms of the plan 

23 as in effect before the amendment, 

24 plus 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 ‘‘(II) the participant’s accrued 

2 benefit for years of service after the 

3 effective date of the amendment, de4 termined under the terms of the plan 

5 as in effect after the amendment. 

6 ‘‘(iv) SPECIAL RULES FOR EARLY RE7 TIREMENT SUBSIDIES.—For purposes of 

8 clause (iii)(I), the plan shall credit the ac9 cumulation account or similar amount with 

10 the amount of any early retirement benefit 

11 or retirement-type subsidy for the plan 

12 year in which the participant retires if, as 

13 of such time, the participant has met the 

14 age, years of service, and other require15 ments under the plan for entitlement to 

16 such benefit or subsidy. 

17 ‘‘(v) APPLICABLE PLAN AMEND18 MENT.—For purposes of this subpara19 graph— 

20 ‘‘(I) IN GENERAL.—The term 

21 ‘applicable plan amendment’ means 

22 an amendment to a defined benefit 

23 plan which has the effect of con24 verting the plan to an applicable de25 fined benefit plan. 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 ‘‘(II) SPECIAL RULE FOR CO2 ORDINATED BENEFITS.—If the bene3 fits of 2 or more defined benefit plans 

4 established or maintained by an em5 ployer are coordinated in such a man6 ner as to have the effect of the adop7 tion of an amendment described in 

8 subclause (I), the sponsor of the de9 fined benefit plan or plans providing 

10 for such coordination shall be treated 

11 as having adopted such a plan amend12 ment as of the date such coordination 

13 begins. 

14 ‘‘(III) MULTIPLE AMEND15 MENTS.—The Secretary of the Treas16 ury shall issue regulations to prevent 

17 the avoidance of the purposes of this 

18 subparagraph through the use of 2 or 

19 more plan amendments rather than a 

20 single amendment. 

21 ‘‘(IV) APPLICABLE DEFINED

22 BENEFIT PLAN.—For purposes of this 

23 subparagraph, the term ‘applicable de24 fined benefit plan’ has the meaning 

25 given such term by section 203(f)(3) 


ccoleman on PROD1PC71 with BILLS
580 

•HR 4 PCS 

1 of the Employee Retirement Income 

2 Security Act of 1974. 

3 ‘‘(vi) TERMINATION REQUIRE4 MENTS.—An applicable defined benefit 

5 plan shall not be treated as meeting the re6 quirements of clause (i) unless the plan 

7 provides that, upon the termination of the 

8 plan— 

9 ‘‘(I) if the interest credit rate (or 

10 an equivalent amount) under the plan 

11 is a variable rate, the rate of interest 

12 used to determine accrued benefits 

13 under the plan shall be equal to the 

14 average of the rates of interest used 

15 under the plan during the 5-year pe16 riod ending on the termination date, 

17 and 

18 ‘‘(II) the interest rate and mor19 tality table used to determine the 

20 amount of any benefit under the plan 

21 payable in the form of an annuity 

22 payable at normal retirement age 

23 shall be the rate and table specified 

24 under the plan for such purpose as of 

25 the termination date, except that if 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 such interest rate is a variable rate, 

2 the interest rate shall be determined 

3 under the rules of subclause (I). 

4 ‘‘(C) CERTAIN OFFSETS PERMITTED.—A 

5 plan shall not be treated as failing to meet the 

6 requirements of paragraph (1) solely because 

7 the plan provides offsets against benefits under 

8 the plan to the extent such offsets are allowable 

9 in applying the requirements of section 401(a) 

10 of the Internal Revenue Code of 1986. 

11 ‘‘(D) PERMITTED DISPARITIES IN PLAN

12 CONTRIBUTIONS OR BENEFITS.—A plan shall 

13 not be treated as failing to meet the require14 ments of paragraph (1) solely because the plan 

15 provides a disparity in contributions or benefits 

16 with respect to which the requirements of sec17 tion 401(l) of the Internal Revenue Code of 

18 1986 are met. 

19 ‘‘(E) INDEXING PERMITTED.— 

20 ‘‘(i) IN GENERAL.—A plan shall not 

21 be treated as failing to meet the require22 ments of paragraph (1) solely because the 

23 plan provides for indexing of accrued bene24 fits under the plan. 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 ‘‘(ii) PROTECTION AGAINST LOSS.— 

2 Except in the case of any benefit provided 

3 in the form of a variable annuity, clause (i) 

4 shall not apply with respect to any index5 ing which results in an accrued benefit less 

6 than the accrued benefit determined with7 out regard to such indexing. 

8 ‘‘(iii) INDEXING.—For purposes of 

9 this subparagraph, the term ‘indexing’ 

10 means, in connection with an accrued ben11 efit, the periodic adjustment of the accrued 

12 benefit by means of the application of a 

13 recognized investment index or method14 ology. 

15 ‘‘(F) EARLY RETIREMENT BENEFIT OR RE16 TIREMENT-TYPE SUBSIDY.—For purposes of 

17 this paragraph, the terms ‘early retirement ben18 efit’ and ‘retirement-type subsidy’ have the 

19 meaning given such terms in section 

20 203(g)(2)(A) of the Employee Retirement In21 come Security Act of 1974. 

22 ‘‘(G) BENEFIT ACCRUED TO DATE.—For 

23 purposes of this paragraph, any reference to the 

24 accrued benefit shall be a reference to such ben25 efit accrued to date.’’. 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 (d) NO INFERENCE.—Nothing in the amendments 

2 made by this section shall be construed to create an infer3 ence with respect to— 

4 (1) the treatment of applicable defined benefit 

5 plans or conversions to applicable defined benefit 

6 plans under sections 204(b)(1)(H) of the Employee 

7 Retirement Income Security Act of 1974, 4(i)(1) of 

8 the Age Discrimination in Employment Act of 1967, 

9 and 411(b)(1)(H) of the Internal Revenue Code of 

10 1986, as in effect before such amendments, or 

11 (2) the determination of whether an applicable 

12 defined benefit plan fails to meet the requirements 

13 of sections 203(a)(2), 204(c), or 204(g) of the Em14 ployee Retirement Income Security Act of 1974 or 

15 sections 411(a)(2), 411(c), or 417(e) of such Code, 

16 as in effect before such amendments, solely because 

17 the present value of the accrued benefit (or any por18 tion thereof) of any participant is, under the terms 

19 of the plan, equal to the amount expressed as the 

20 balance in a hypothetical account or as an accumu21 lated percentage of the participant’s final average 

22 compensation. 

23 For purposes of this subsection, the term ‘‘applicable de24 fined benefit plan’’ has the meaning given such term by 

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1 curity Act of 1974 and section 411(a)(13)(C) of such 

2 Code, as in effect after such amendments. 

3 (e) EFFECTIVE DATE.— 

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

5 this section shall apply to periods beginning on or 

6 after June 29, 2005. 

7 (2) PRESENT VALUE OF ACCRUED BENEFIT.— 

8 The amendments made by subsections (a)(2) and 

9 (b)(2) shall apply to distributions made after the 

10 date of the enactment of this Act. 

11 (3) VESTING AND INTEREST CREDIT REQUIRE12 MENTS.—In the case of a plan in existence on June 

13 29, 2005, the requirements of clause (i) of section 

14 411(b)(5)(B) of the Internal Revenue Code of 1986, 

15 clause (i) of section 204(b)(5)(B) of the Employee 

16 Retirement Income Security Act of 1974, and clause 

17 (i) of section 4(i)(10)(B) of the Age Discrimination 

18 in Employment Act of 1967 (as added by this Act) 

19 and the requirements of 203(f)(2) of the Employee 

20 Retirement Income Security Act of 1974 and section 

21 411(a)(13)(B) of the Internal Revenue Code of 1986 

22 (as so added) shall, for purposes of applying the 

23 amendments made by subsections (a) and (b), apply 

24 to years beginning after December 31, 2007, unless 

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1 quirements for any period after June 29, 2005, and 

2 before the first year beginning after December 31, 

3 2007. 

4 (4) SPECIAL RULE FOR COLLECTIVELY BAR5 GAINED PLANS.—In the case of a plan maintained 

6 pursuant to 1 or more collective bargaining agree7 ments between employee representatives and 1 or 

8 more employers ratified on or before the date of the 

9 enactment of this Act, the requirements described in 

10 paragraph (3) shall, for purposes of applying the 

11 amendments made by subsections (a) and (b), not 

12 apply to plan years beginning before— 

13 (A) the earlier of— 

14 (i) the date on which the last of such 

15 collective bargaining agreements termi16 nates (determined without regard to any 

17 extension thereof on or after such date of 

18 enactment), or 

19 (ii) January 1, 2008, or 

20 (B) January 1, 2010. 

21 (5) CONVERSIONS.—The requirements of clause 

22 (ii) of section 411(b)(5)(B) of the Internal Revenue 

23 Code of 1986, clause (ii) of section 204(b)(5)(B) of 

24 the Employee Retirement Income Security Act of 

25 1974, and clause (ii) of section 4(i)(10)(B) of the 


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1 Age Discrimination in Employment Act of 1967 (as 

2 added by this Act), shall apply to plan amendments 

3 adopted after, and taking effect after, June 29, 

4 2005, except that the plan sponsor may elect to have 

5 such amendments apply to plan amendments adopt6 ed before, and taking effect after, such date. 

7 SEC. 702. REGULATIONS RELATING TO MERGERS AND AC8 QUISITIONS. 

9 The Secretary of the Treasury or his delegate shall, 

10 not later than 12 months after the date of the enactment 

11 of this Act, prescribe regulations for the application of the 

12 amendments made by, and the provisions of, this title in 

13 cases where the conversion of a plan to an applicable de14 fined benefit plan is made with respect to a group of em15 ployees who become employees by reason of a merger, ac16 quisition, or similar transaction. 

17 TITLE VIII—PENSION RELATED 

18 REVENUE PROVISIONS 

19 Subtitle A—Deduction Limitations 

20 SEC. 801. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EM21 PLOYER PLANS. 

22 (a) IN GENERAL.—Section 404 of the Internal Rev23 enue Code of 1986 (relating to deduction for contributions 

24 of an employer to an employees’ trust or annuity plan and 


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1 compensation under a deferred payment plan) is amend2 ed— 

3 (1) in subsection (a)(1)(A), by inserting ‘‘in the 

4 case of a defined benefit plan other than a multiem5 ployer plan, in an amount determined under sub6 section (o), and in the case of any other plan’’ after 

7 ‘‘section 501(a),’’, and 

8 (2) by inserting at the end the following new 

9 subsection: 

10 ‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER

11 PLANS.—For purposes of subsection (a)(1)(A)— 

12 ‘‘(1) IN GENERAL.—In the case of a defined 

13 benefit plan to which subsection (a)(1)(A) applies 

14 (other than a multiemployer plan), the amount de15 termined under this subsection for any taxable year 

16 shall be equal to the greater of— 

17 ‘‘(A) the sum of the amounts determined 

18 under paragraph (2) with respect to each plan 

19 year ending with or within the taxable year, or 

20 ‘‘(B) the sum of the minimum required 

21 contributions under section 430 for such plan 

22 years. 

23 ‘‘(2) DETERMINATION OF AMOUNT.— 


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1 ‘‘(A) IN GENERAL.—The amount deter2 mined under this paragraph for any plan year 

3 shall be equal to the excess (if any) of— 

4 ‘‘(i) the sum of— 

5 ‘‘(I) the funding target for the 

6 plan year, 

7 ‘‘(II) the target normal cost for 

8 the plan year, and 

9 ‘‘(III) the cushion amount for the 

10 plan year, over 

11 ‘‘(ii) the value (determined under sec12 tion 430(g)(2)) of the assets of the plan 

13 which are held by the plan as of the valu14 ation date for the plan year. 

15 ‘‘(B) SPECIAL RULE FOR CERTAIN EM16 PLOYERS.—If section 430(i) does not apply to 

17 a plan for a plan year, the amount determined 

18 under subparagraph (A)(i) for the plan year 

19 shall in no event be less than the sum of— 

20 ‘‘(i) the funding target for the plan 

21 year (determined as if section 430(i) ap22 plied to the plan), plus 

23 ‘‘(ii) the target normal cost for the 

24 plan year (as so determined). 


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1 ‘‘(3) CUSHION AMOUNT.—For purposes of para2 graph (2)(A)(i)(III)— 

3 ‘‘(A) IN GENERAL.—The cushion amount 

4 for any plan year is the sum of— 

5 ‘‘(i) 50 percent of the funding target 

6 for the plan year, and 

7 ‘‘(ii) the amount by which the funding 

8 target for the plan year would increase if 

9 the plan were to take into account— 

10 ‘‘(I) increases in compensation 

11 which are expected to occur in suc12 ceeding plan years, or 

13 ‘‘(II) if the plan does not base 

14 benefits for service to date on com15 pensation, increases in benefits which 

16 are expected to occur in succeeding 

17 plan years (determined on the basis of 

18 the average annual increase in bene19 fits over the 6 immediately preceding 

20 plan years). 

21 ‘‘(B) LIMITATIONS.— 

22 ‘‘(i) IN GENERAL.—In making the 

23 computation under subparagraph (A)(ii), 

24 the plan’s actuary shall assume that the 


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1 limitations under subsection (l) and section 

2 415(b) shall apply. 

3 ‘‘(ii) EXPECTED INCREASES.—In the 

4 case of a plan year during which a plan is 

5 covered under section 4021 of the Em6 ployee Retirement Income Security Act of 

7 1974, the plan’s actuary may, notwith8 standing subsection (l), take into account 

9 increases in the limitations which are ex10 pected to occur in succeeding plan years. 

11 ‘‘(4) SPECIAL RULES FOR PLANS WITH 100 OR

12 FEWER PARTICIPANTS.— 

13 ‘‘(A) IN GENERAL.—For purposes of deter14 mining the amount under paragraph (3) for any 

15 plan year, in the case of a plan which has 100 

16 or fewer participants for the plan year, the li17 ability of the plan attributable to benefit in18 creases for highly compensated employees (as 

19 defined in section 414(q)) resulting from a plan 

20 amendment which is made or becomes effective, 

21 whichever is later, within the last 2 years shall 

22 not be taken into account in determining the 

23 target liability. 

24 ‘‘(B) RULE FOR DETERMINING NUMBER

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1 mining the number of plan participants, all de2 fined benefit plans maintained by the same em3 ployer (or any member of such employer’s con4 trolled group (within the meaning of section 

5 412(f)(4))) shall be treated as one plan, but 

6 only participants of such member or employer 

7 shall be taken into account. 

8 ‘‘(5) SPECIAL RULE FOR TERMINATING

9 PLANS.—In the case of a plan which, subject to sec10 tion 4041 of the Employee Retirement Income Secu11 rity Act of 1974, terminates during the plan year, 

12 the amount determined under paragraph (2) shall in 

13 no event be less than the amount required to make 

14 the plan sufficient for benefit liabilities (within the 

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

16 ‘‘(6) ACTUARIAL ASSUMPTIONS.—Any computa17 tion under this subsection for any plan year shall 

18 use the same actuarial assumptions which are used 

19 for the plan year under section 430. 

20 ‘‘(7) DEFINITIONS.—Any term used in this sub21 section which is also used in section 430 shall have 

22 the same meaning given such term by section 430.’’. 

23 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

24 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

25 DEFINED BENEFIT PLANS.—Section 404(a)(7)(C) of 


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1 such Code, as amended by this Act, is amended by adding 

2 at the end the following new clause: 

3 ‘‘(iv) GUARANTEED PLANS.—In apply4 ing this paragraph, any single-employer 

5 plan covered under section 4021 of the 

6 Employee Retirement Income Security Act 

7 of 1974 shall not be taken into account.’’. 

8 (c) TECHNICAL AND CONFORMING AMENDMENTS.— 

9 (1) The last sentence of section 404(a)(1)(A) of 

10 such Code is amended by striking ‘‘section 412’’ 

11 each place it appears and inserting ‘‘section 431’’. 

12 (2) Section 404(a)(1)(B) of such Code is 

13 amended— 

14 (A) by striking ‘‘In the case of a plan’’ and 

15 inserting ‘‘In the case of a multiemployer plan’’, 

16 (B) by striking ‘‘section 412(c)(7)’’ each 

17 place it appears and inserting ‘‘section 

18 431(c)(6)’’, 

19 (C) by striking ‘‘section 412(c)(7)(B)’’ and 

20 inserting ‘‘section 431(c)(6)(A)(ii)’’, 

21 (D) by striking ‘‘section 412(c)(7)(A)’’ and 

22 inserting ‘‘section 431(c)(6)(A)(i)’’, and 

23 (E) by striking ‘‘section 412’’ and insert24 ing ‘‘section 431’’. 


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1 (3) Section 404(a)(7) of such Code, as amended 

2 by this Act, is amended— 

3 (A) by adding at the end of subparagraph 

4 (A) the following new sentence: ‘‘In the case of 

5 a defined benefit plan which is a single em6 ployer plan, the amount necessary to satisfy the 

7 minimum funding standard provided by section 

8 412 shall not be less than the plan’s funding 

9 shortfall determined under section 430.’’, and 

10 (B) by striking subparagraph (D) and in11 serting: 

12 ‘‘(D) INSURANCE CONTRACT PLANS.—For 

13 purposes of this paragraph, a plan described in 

14 section 412(e)(3) shall be treated as a defined 

15 benefit plan.’’. 

16 (4) Section 404A(g)(3)(A) of such Code is 

17 amended by striking ‘‘paragraphs (3) and (7) of sec18 tion 412(c)’’ and inserting ‘‘paragraphs (3) and (6) 

19 of section 431(c)’’. 

20 (d) SPECIAL RULE FOR 2006 AND 2007.— 

21 (1) IN GENERAL.—Clause (i) of section 

22 404(a)(1)(D) of the Internal Revenue Code of 1986 

23 (relating to special rule in case of certain plans) is 

24 amended by striking ‘‘section 412(l)’’ and inserting 

25 ‘‘section 412(l)(8)(A), except that section 


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1 412(l)(8)(A) shall be applied for purposes of this 

2 clause by substituting ‘150 percent (140 percent in 

3 the case of a multiemployer plan) of current liability’ 

4 for ‘the current liability’ in clause (i).’’ 

5 (2) CONFORMING AMENDMENT.—Section 

6 404(a)(1) of the Internal Revenue Code of 1986 is 

7 amended by striking subparagraph (F). 

8 (e) EFFECTIVE DATES.— 

9 (1) IN GENERAL.—Except as provided in para10 graph (2), the amendments made by this section 

11 shall apply to years beginning after December 31, 

12 2007. 

13 (2) SPECIAL RULES.—The amendments made 

14 by subsection (d) shall apply to years beginning 

15 after December 31, 2005. 

16 SEC. 802. DEDUCTION LIMITS FOR MULTIEMPLOYER 

17 PLANS. 

18 (a) INCREASE IN DEDUCTION.—Section 

19 404(a)(1)(D) of the Internal Revenue Code of 1986, as 

20 amended by this Act, is amended to read as follows: 

21 ‘‘(D) AMOUNT DETERMINED ON BASIS OF

22 UNFUNDED CURRENT LIABILITY.—In the case 

23 of a defined benefit plan which is a multiem24 ployer plan, except as provided in regulations, 

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1 itations of this paragraph shall not be less than 

2 the excess (if any) of— 

3 ‘‘(i) 140 percent of the current liabil4 ity of the plan determined under section 

5 431(c)(6)(C), over 

6 ‘‘(ii) the value of the plan’s assets de7 termined under section 431(c)(2).’’. 

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

9 subsection (a) shall apply to years beginning after Decem10 ber 31, 2007. 

11 SEC. 803. UPDATING DEDUCTION RULES FOR COMBINA12 TION OF PLANS. 

13 (a) IN GENERAL.—Subparagraph (C) of section 

14 404(a)(7) of the Internal Revenue Code of 1986 (relating 

15 to limitation on deductions where combination of defined 

16 contribution plan and defined benefit plan) is amended by 

17 adding after clause (ii) the following new clause: 

18 ‘‘(iii) LIMITATION.—In the case of 

19 employer contributions to 1 or more de20 fined contribution plans, this paragraph 

21 shall only apply to the extent that such 

22 contributions exceed 6 percent of the com23 pensation otherwise paid or accrued during 

24 the taxable year to the beneficiaries under 

25 such plans. For purposes of this clause, 


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1 amounts carried over from preceding tax2 able years under subparagraph (B) shall 

3 be treated as employer contributions to 1 

4 or more defined contributions to the extent 

5 attributable to employer contributions to 

6 such plans in such preceding taxable 

7 years.’’. 

8 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

9 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

10 DEFINED BENEFIT PLANS.—Section 404(a)(7)(C) of 

11 such Code, as amended by this Act, is amended by adding 

12 at the end the following new clause: 

13 ‘‘(v) MULTIEMPLOYER PLANS.—In ap14 plying this paragraph, any multiemployer 

15 plan shall not be taken into account.’’. 

16 (c) CONFORMING AMENDMENT.—Subparagraph (A) 

17 of section 4972(c)(6) of such Code (relating to nondeduct18 ible contributions) is amended to read as follows: 

19 ‘‘(A) so much of the contributions to 1 or 

20 more defined contribution plans which are not 

21 deductible when contributed solely because of 

22 section 404(a)(7) as does not exceed the 

23 amount of contributions described in section 

24 401(m)(4)(A), or’’. 


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

2 this section shall apply to contributions for taxable years 

3 beginning after December 31, 2005. 

4 Subtitle B—Certain Pension 

5 Provisions Made Permanent 

6 SEC. 811. PENSIONS AND INDIVIDUAL RETIREMENT AR7 RANGEMENT PROVISIONS OF ECONOMIC 

8 GROWTH AND TAX RELIEF RECONCILIATION 

9 ACT OF 2001 MADE PERMANENT. 

10 Title IX of the Economic Growth and Tax Relief Rec11 onciliation Act of 2001 shall not apply to the provisions 

12 of, and amendments made by, subtitles A through F of 

13 title VI of such Act (relating to pension and individual 

14 retirement arrangement provisions). 

15 SEC. 812. SAVER’S CREDIT. 

16 Section 25B of the Internal Revenue Code of 1986 

17 (relating to elective deferrals and IRA contributions by 

18 certain individuals) is amended by striking subsection (h). 


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1 Subtitle C—Improvements in Port2 ability, Distribution, and Con3 tribution Rules 

4 SEC. 821. CLARIFICATIONS REGARDING PURCHASE OF PER5 MISSIVE SERVICE CREDIT. 

6 (a) IN GENERAL.—Section 415(n) of the Internal 

7 Revenue Code of 1986 (relating to special rules for the 

8 purchase of permissive service credit) is amended— 

9 (1) by striking ‘‘an employee’’ in paragraph (1) 

10 and inserting ‘‘a participant’’, and 

11 (2) by adding at the end of paragraph (3)(A) 

12 the following new flush sentence: 

13 ‘‘Such term may include service credit for peri14 ods for which there is no performance of serv15 ice, and, notwithstanding clause (ii), may in16 clude service credited in order to provide an in17 creased benefit for service credit which a partic18 ipant is receiving under the plan.’’. 

19 (b) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE

20 TRANSFERS.—Section 415(n)(3) of such Code is amended 

21 by adding at the end the following new subparagraph: 

22 ‘‘(D) SPECIAL RULES FOR TRUSTEE-TO23 TRUSTEE TRANSFERS.—In the case of a trust24 ee-to-trustee transfer to which section 

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1 out regard to whether the transfer is made be2 tween plans maintained by the same em3 ployer)— 

4 ‘‘(i) the limitations of subparagraph 

5 (B) shall not apply in determining whether 

6 the transfer is for the purchase of permis7 sive service credit, and 

8 ‘‘(ii) the distribution rules applicable 

9 under this title to the defined benefit gov10 ernmental plan to which any amounts are 

11 so transferred shall apply to such amounts 

12 and any benefits attributable to such 

13 amounts.’’. 

14 (c) NONQUALIFIED SERVICE.—Section 415(n)(3) of 

15 such Code is amended— 

16 (1) by striking ‘‘permissive service credit attrib17 utable to nonqualified service’’ each place it appears 

18 in subparagraph (B) and inserting ‘‘nonqualified 

19 service credit’’, 

20 (2) by striking so much of subparagraph (C) as 

21 precedes clause (i) and inserting: 

22 ‘‘(C) NONQUALIFIED SERVICE CREDIT.— 

23 For purposes of subparagraph (B), the term 

24 ‘nonqualified service credit’ means permissive 


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1 service credit other than that allowed with re2 spect to—’’, and 

3 (3) by striking ‘‘elementary or secondary edu4 cation (through grade 12), as determined under 

5 State law’’ in subparagraph (C)(ii) and inserting 

6 ‘‘elementary or secondary education (through grade 

7 12), or a comparable level of education, as deter8 mined under the applicable law of the jurisdiction in 

9 which the service was performed’’. 

10 (d) EFFECTIVE DATES.— 

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

12 subsections (a) and (c) shall take effect as if in13 cluded in the amendments made by section 1526 of 

14 the Taxpayer Relief Act of 1997. 

15 (2) SUBSECTION (b).—The amendments made 

16 by subsection (b) shall take effect as if included in 

17 the amendments made by section 647 of the Eco18 nomic Growth and Tax Relief Reconciliation Act of 

19 2001. 

20 SEC. 822. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN 

21 ANNUITY CONTRACTS. 

22 (a) IN GENERAL.—Subparagraph (A) of section 

23 402(c)(2) (relating to the maximum amount which may 

24 be rolled over) is amended— 


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1 (1) by striking ‘‘which is part of a plan which 

2 is a defined contribution plan and which agrees to 

3 separately account’’ and inserting ‘‘or to an annuity 

4 contract described in section 403(b) and such trust 

5 or contract provides for separate accounting’’; and 

6 (2) by inserting ‘‘(and earnings thereon)’’ after 

7 ‘‘so transferred’’. 

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

9 subsection (a) shall apply to taxable years beginning after 

10 December 31, 2006. 

11 SEC. 823. CLARIFICATION OF MINIMUM DISTRIBUTION 

12 RULES FOR GOVERNMENTAL PLANS. 

13 The Secretary of the Treasury shall issue regulations 

14 under which a governmental plan (as defined in section 

15 414(d) of the Internal Revenue Code of 1986) shall, for 

16 all years to which section 401(a)(9) of such Code applies 

17 to such plan, be treated as having complied with such sec18 tion 401(a)(9) if such plan complies with a reasonable 

19 good faith interpretation of such section 401(a)(9). 

20 SEC. 824. ALLOW DIRECT ROLLOVERS FROM RETIREMENT 

21 PLANS TO ROTH IRAS. 

22 (a) IN GENERAL.—Subsection (e) of section 408A of 

23 the Internal Revenue Code of 1986 (defining qualified roll24 over contribution) is amended to read as follows: 


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1 ‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 

2 purposes of this section, the term ‘qualified rollover con3 tribution’ means a rollover contribution— 

4 ‘‘(1) to a Roth IRA from another such account, 

5 ‘‘(2) from an eligible retirement plan, but only 

6 if— 

7 ‘‘(A) in the case of an individual retire8 ment plan, such rollover contribution meets the 

9 requirements of section 408(d)(3), and 

10 ‘‘(B) in the case of any eligible retirement 

11 plan (as defined in section 402(c)(8)(B) other 

12 than clauses (i) and (ii) thereof), such rollover 

13 contribution meets the requirements of section 

14 402(c), 403(b)(8), or 457(e)(16), as applicable. 

15 For purposes of section 408(d)(3)(B), there shall be dis16 regarded any qualified rollover contribution from an indi17 vidual retirement plan (other than a Roth IRA) to a Roth 

18 IRA.’’. 

19 (b) CONFORMING AMENDMENTS.— 

20 (1) Section 408A(c)(3)(B) of such Code, as in 

21 effect before the Tax Increase Prevention and Rec22 onciliation Act of 2005, is amended— 

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1 ment plan (as defined by section 

2 402(c)(8)(B))’’, and 

3 (B) in the heading by striking ‘‘IRA’’ the 

4 first place it appears and inserting ‘‘ELIGIBLE

5 RETIREMENT PLAN’’. 

6 (2) Section 408A(d)(3) of such Code is amend7 ed— 

8 (A) in subparagraph (A), by striking ‘‘sec9 tion 408(d)(3)’’ inserting ‘‘sections 402(c), 

10 403(b)(8), 408(d)(3), and 457(e)(16)’’, 

11 (B) in subparagraph (B), by striking ‘‘in12 dividual retirement plan’’ and inserting ‘‘eligible 

13 retirement plan (as defined by section 

14 402(c)(8)(B))’’, 

15 (C) in subparagraph (D), by inserting ‘‘or 

16 6047’’ after ‘‘408(i)’’, 

17 (D) in subparagraph (D), by striking ‘‘or 

18 both’’ and inserting ‘‘persons subject to section 

19 6047(d)(1), or all of the foregoing persons’’, 

20 and 

21 (E) in the heading, by striking ‘‘IRA’’ the 

22 first place it appears and inserting ‘‘ELIGIBLE

23 RETIREMENT PLAN’’. 


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

2 this section shall apply to distributions after December 31, 

3 2007. 

4 SEC. 825. ELIGIBILITY FOR PARTICIPATION IN RETIRE5 MENT PLANS. 

6 An individual shall not be precluded from partici7 pating in an eligible deferred compensation plan by reason 

8 of having received a distribution under section 457(e)(9) 

9 of the Internal Revenue Code of 1986, as in effect prior 

10 to the enactment of the Small Business Job Protection 

11 Act of 1996. 

12 SEC. 826. MODIFICATIONS OF RULES GOVERNING HARD13 SHIPS AND UNFORSEEN FINANCIAL EMER14 GENCIES. 

15 Within 180 days after the date of the enactment of 

16 this Act, the Secretary of the Treasury shall modify the 

17 rules for determining whether a participant has had a 

18 hardship for purposes of section 401(k)(2)(B)(i)(IV) of 

19 the Internal Revenue Code of 1986 to provide that if an 

20 event (including the occurrence of a medical expense) 

21 would constitute a hardship under the plan if it occurred 

22 with respect to the participant’s spouse or dependent (as 

23 defined in section 152 of such Code), such event shall, to 

24 the extent permitted under a plan, constitute a hardship 

25 if it occurs with respect to a person who is a beneficiary 


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1 under the plan with respect to the participant. The Sec2 retary of the Treasury shall issue similar rules for pur3 poses of determining whether a participant has had— 

4 (1) a hardship for purposes of section 

5 403(b)(11)(B) of such Code; or 

6 (2) an unforeseen financial emergency for pur7 poses of sections 409A(a)(2)(A)(vi), 

8 409A(a)(2)(B)(ii), and 457(d)(1)(A)(iii) of such 

9 Code. 

10 SEC. 827. PENALTY-FREE WITHDRAWALS FROM RETIRE11 MENT PLANS FOR INDIVIDUALS CALLED TO 

12 ACTIVE DUTY FOR AT LEAST 179 DAYS. 

13 (a) IN GENERAL.—Paragraph (2) of section 72(t) of 

14 the Internal Revenue Code of 1986 (relating to 10-percent 

15 additional tax on early distributions from qualified retire16 ment plans) is amended by adding at the end the following 

17 new subparagraph: 

18 ‘‘(G) DISTRIBUTIONS FROM RETIREMENT

19 PLANS TO INDIVIDUALS CALLED TO ACTIVE

20 DUTY.— 

21 ‘‘(i) IN GENERAL.—Any qualified re22 servist distribution. 

23 ‘‘(ii) AMOUNT DISTRIBUTED MAY BE

24 REPAID.—Any individual who receives a 

25 qualified reservist distribution may, at any 


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1 time during the 2-year period beginning on 

2 the day after the end of the active duty pe3 riod, make one or more contributions to an 

4 individual retirement plan of such indi5 vidual in an aggregate amount not to ex6 ceed the amount of such distribution. The 

7 dollar limitations otherwise applicable to 

8 contributions to individual retirement plans 

9 shall not apply to any contribution made 

10 pursuant to the preceding sentence. No de11 duction shall be allowed for any contribu12 tion pursuant to this clause. 

13 ‘‘(iii) QUALIFIED RESERVIST DIS14 TRIBUTION.—For purposes of this sub15 paragraph, the term ‘qualified reservist 

16 distribution’ means any distribution to an 

17 individual if— 

18 ‘‘(I) such distribution is from an 

19 individual retirement plan, or from 

20 amounts attributable to employer con21 tributions made pursuant to elective 

22 deferrals described in subparagraph 

23 (A) or (C) of section 402(g)(3) or sec24 tion 501(c)(18)(D)(iii), 


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1 ‘‘(II) such individual was (by rea2 son of being a member of a reserve 

3 component (as defined in section 101 

4 of title 37, United States Code)) or5 dered or called to active duty for a pe6 riod in excess of 179 days or for an 

7 indefinite period, and 

8 ‘‘(III) such distribution is made 

9 during the period beginning on the 

10 date of such order or call and ending 

11 at the close of the active duty period. 

12 ‘‘(iv) APPLICATION OF SUBPARA13 GRAPH.—This subparagraph applies to in14 dividuals ordered or called to active duty 

15 after September 11, 2001, and before De16 cember 31, 2007. In no event shall the 2- 

17 year period referred to in clause (ii) end 

18 before the date which is 2 years after the 

19 date of the enactment of this subpara20 graph.’’. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Section 401(k)(2)(B)(i) of such Code is 

23 amended by striking ‘‘or’’ at the end of subclause 

24 (III), by striking ‘‘and’’ at the end of subclause (IV) 


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1 and inserting ‘‘or’’, and by inserting after subclause 

2 (IV) the following new subclause: 

3 ‘‘(V) in the case of a qualified re4 servist distribution (as defined in sec5 tion 72(t)(2)(G)(iii)), the date on 

6 which a period referred to in sub7 clause (III) of such section begins, 

8 and’’. 

9 (2) Section 403(b)(7)(A)(ii) of such Code is 

10 amended by inserting ‘‘(unless such amount is a dis11 tribution to which section 72(t)(2)(G) applies)’’ after 

12 ‘‘distributee’’. 

13 (3) Section 403(b)(11) of such Code is amend14 ed by striking ‘‘or’’ at the end of subparagraph (A), 

15 by striking the period at the end of subparagraph 

16 (B) and inserting ‘‘, or’’, and by inserting after sub17 paragraph (B) the following new subparagraph: 

18 ‘‘(C) for distributions to which section 

19 72(t)(2)(G) applies.’’. 

20 (c) EFFECTIVE DATE; WAIVER OF LIMITATIONS.— 

21 (1) EFFECTIVE DATE.—The amendment made 

22 by this section shall apply to distributions after Sep23 tember 11, 2001. 

24 (2) WAIVER OF LIMITATIONS.—If refund or 

25 credit of any overpayment of tax resulting from the 


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1 amendments made by this section is prevented at 

2 any time before the close of the 1-year period begin3 ning on the date of the enactment of this Act by the 

4 operation of any law or rule of law (including res ju5 dicata), such refund or credit may nevertheless be 

6 made or allowed if claim therefor is filed before the 

7 close of such period. 

8 SEC. 828. WAIVER OF 10 PERCENT EARLY WITHDRAWAL 

9 PENALTY TAX ON CERTAIN DISTRIBUTIONS 

10 OF PENSION PLANS FOR PUBLIC SAFETY EM11 PLOYEES. 

12 (a) IN GENERAL.—Section 72(t) of the Internal Rev13 enue Code of 1986 (relating to subsection not to apply 

14 to certain distributions) is amended by adding at the end 

15 the following new paragraph: 

16 ‘‘(10) DISTRIBUTIONS TO QUALIFIED PUBLIC

17 SAFETY EMPLOYEES IN GOVERNMENTAL PLANS.— 

18 ‘‘(A) IN GENERAL.—In the case of a dis19 tribution to a qualified public safety employee 

20 from a governmental plan (within the meaning 

21 of section 414(d)) which is a defined benefit 

22 plan, paragraph (2)(A)(v) shall be applied by 

23 substituting ‘age 50’ for ‘age 55’. 

24 ‘‘(B) QUALIFIED PUBLIC SAFETY EM25 PLOYEE.—For purposes of this paragraph, the 


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1 term ‘qualified public safety employee’ means 

2 any employee of a State or political subdivision 

3 of a State who provides police protection, fire4 fighting services, or emergency medical services 

5 for any area within the jurisdiction of such 

6 State or political subdivision.’’ 

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

8 this section shall apply to distributions after the date of 

9 the enactment of this Act. 

10 SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENE11 FICIARIES OF CERTAIN RETIREMENT PLAN 

12 DISTRIBUTIONS. 

13 (a) IN GENERAL.— 

14 (1) QUALIFIED PLANS.—Section 402(c) of the 

15 Internal Revenue Code of 1986 (relating to rollovers 

16 from exempt trusts) is amended by adding at the 

17 end the following new paragraph: 

18 ‘‘(11) DISTRIBUTIONS TO INHERITED INDI19 VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE20 FICIARY.— 

21 ‘‘(A) IN GENERAL.—If, with respect to any 

22 portion of a distribution from an eligible retire23 ment plan of a deceased employee, a direct 

24 trustee-to-trustee transfer is made to an indi25 vidual retirement plan described in clause (i) or 


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1 (ii) of paragraph (8)(B) established for the pur2 poses of receiving the distribution on behalf of 

3 an individual who is a designated beneficiary 

4 (as defined by section 401(a)(9)(E)) of the em5 ployee and who is not the surviving spouse of 

6 the employee— 

7 ‘‘(i) the transfer shall be treated as an 

8 eligible rollover distribution for purposes of 

9 this subsection, 

10 ‘‘(ii) the individual retirement plan 

11 shall be treated as an inherited individual 

12 retirement account or individual retirement 

13 annuity (within the meaning of section 

14 408(d)(3)(C)) for purposes of this title, 

15 and 

16 ‘‘(iii) section 401(a)(9)(B) (other than 

17 clause (iv) thereof) shall apply to such 

18 plan. 

19 ‘‘(B) CERTAIN TRUSTS TREATED AS BENE20 FICIARIES.—For purposes of this paragraph, to 

21 the extent provided in rules prescribed by the 

22 Secretary, a trust maintained for the benefit of 

23 one or more designated beneficiaries shall be 

24 treated in the same manner as a trust des25 ignated beneficiary.’’. 


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1 (2) SECTION 403(a) PLANS.—Subparagraph 

2 (B) of section 403(a)(4) of such Code (relating to 

3 rollover amounts) is amended by inserting ‘‘and 

4 (11)’’ after ‘‘(7)’’. 

5 (3) SECTION 403(b) PLANS.—Subparagraph 

6 (B) of section 403(b)(8) of such Code (relating to 

7 rollover amounts) is amended by striking ‘‘and (9)’’ 

8 and inserting ‘‘, (9), and (11)’’. 

9 (4) SECTION 457 PLANS.—Subparagraph (B) 

10 of section 457(e)(16) of such Code (relating to roll11 over amounts) is amended by striking ‘‘and (9)’’ and 

12 inserting ‘‘, (9), and (11)’’. 

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

14 this section shall apply to distributions after December 31, 

15 2006. 

16 SEC. 830. DIRECT PAYMENT OF TAX REFUNDS TO INDI17 VIDUAL RETIREMENT PLANS. 

18 (a) IN GENERAL.—The Secretary of the Treasury (or 

19 the Secretary’s delegate) shall make available a form (or 

20 modify existing forms) for use by individuals to direct that 

21 a portion of any refund of overpayment of tax imposed 

22 by chapter 1 of the Internal Revenue Code of 1986 be 

23 paid directly to an individual retirement plan (as defined 

24 in section 7701(a)(37) of such Code) of such individual. 


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1 (b) EFFECTIVE DATE.—The form required by sub2 section (a) shall be made available for taxable years begin3 ning after December 31, 2006. 

4 SEC. 831. ALLOWANCE OF ADDITIONAL IRA PAYMENTS IN 

5 CERTAIN BANKRUPTCY CASES. 

6 (a) ALLOWANCE OF CONTRIBUTIONS.—Section 

7 219(b)(5) of the Internal Revenue Code of 1986 (relating 

8 to deductible amount) is amended by redesignating sub9 paragraph (C) as subparagraph (D) and by inserting after 

10 subparagraph (B) the following new subparagraph: 

11 ‘‘(C) CATCHUP CONTRIBUTIONS FOR CER12 TAIN INDIVIDUALS.— 

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

14 applicable individual who elects to make a 

15 qualified retirement contribution in addi16 tion to the deductible amount determined 

17 under subparagraph (A)— 

18 ‘‘(I) the deductible amount for 

19 any taxable year shall be increased by 

20 an amount equal to 3 times the appli21 cable amount determined under sub22 paragraph (B) for such taxable year, 

23 and 

24 ‘‘(II) subparagraph (B) shall not 

25 apply. 


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1 ‘‘(ii) APPLICABLE INDIVIDUAL.—For 

2 purposes of this subparagraph, the term 

3 ‘applicable individual’ means, with respect 

4 to any taxable year, any individual who 

5 was a qualified participant in a qualified 

6 cash or deferred arrangement (as defined 

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

8 in clause (iii) under which the employer 

9 matched at least 50 percent of the employ10 ee’s contributions to such arrangement 

11 with stock of such employer. 

12 ‘‘(iii) EMPLOYER DESCRIBED.—An 

13 employer is described in this clause if, in 

14 any taxable year preceding the taxable year 

15 described in clause (ii)— 

16 ‘‘(I) such employer (or any con17 trolling corporation of such employer) 

18 was a debtor in a case under title 11 

19 of the United States Code, or similar 

20 Federal or State law, and 

21 ‘‘(II) such employer (or any other 

22 person) was subject to an indictment 

23 or conviction resulting from business 

24 transactions related to such case. 


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1 ‘‘(iv) QUALIFIED PARTICIPANT.—For 

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

3 participant’ means any applicable indi4 vidual who was a participant in the cash or 

5 deferred arrangement described in such 

6 clause on the date that is 6 months before 

7 the filing of the case described in clause 

8 (iii). 

9 ‘‘(v) TERMINATION.—This subpara10 graph shall not apply to taxable years be11 ginning after December 31, 2009.’’ 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2006. 

15 SEC. 832. DETERMINATION OF AVERAGE COMPENSATION 

16 FOR SECTION 415 LIMITS. 

17 (a) IN GENERAL.—Section 415(b)(3) of the Internal 

18 Revenue Code of 1986 is amended by striking ‘‘both was 

19 an active participant in the plan and’’. 

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

21 this section shall apply to years beginning after December 

22 31, 2005. 


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1 SEC. 833. INFLATION INDEXING OF GROSS INCOME LIMITA2 TIONS ON CERTAIN RETIREMENT SAVINGS 

3 INCENTIVES. 

4 (a) SAVER’S CREDIT.—Subsection (b) of section 25B 

5 of the Internal Revenue Code of 1986 is amended to read 

6 as follows: 

7 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 

8 this section— 

9 ‘‘(1) JOINT RETURNS.—In the case of a joint 

10 return, the applicable percentage is— 

11 ‘‘(A) if the adjusted gross income of the 

12 taxpayer is not over $30,000, 50 percent, 

13 ‘‘(B) if the adjusted gross income of the 

14 taxpayer is over $30,000 but not over $32,500, 

15 20 percent, 

16 ‘‘(C) if the adjusted gross income of the 

17 taxpayer is over $32,500 but not over $50,000, 

18 10 percent, and 

19 ‘‘(D) if the adjusted gross income of the 

20 taxpayer is over $50,000, zero percent. 

21 ‘‘(2) OTHER RETURNS.—In the case of— 

22 ‘‘(A) a head of household, the applicable 

23 percentage shall be determined under para24 graph (1) except that such paragraph shall be 

25 applied by substituting for each dollar amount 

26 therein (as adjusted under paragraph (3)) a 


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1 dollar amount equal to 75 percent of such dol2 lar amount, and 

3 ‘‘(B) any taxpayer not described in para4 graph (1) or subparagraph (A), the applicable 

5 percentage shall be determined under para6 graph (1) except that such paragraph shall be 

7 applied by substituting for each dollar amount 

8 therein (as adjusted under paragraph (3)) a 

9 dollar amount equal to 50 percent of such dol10 lar amount. 

11 ‘‘(3) INFLATION ADJUSTMENT.—In the case of 

12 any taxable year beginning in a calendar year after 

13 2006, each of the dollar amount in paragraph (1) 

14 shall be increased by an amount equal to— 

15 ‘‘(A) such dollar amount, multiplied by 

16 ‘‘(B) the cost-of-living adjustment deter17 mined under section 1(f)(3) for the calendar 

18 year in which the taxable year begins, deter19 mined by substituting ‘calendar year 2005’ for 

20 ‘calendar year 1992’ in subparagraph (B) 

21 thereof. 

22 Any increase determined under the preceding sen23 tence shall be rounded to the nearest multiple of 

24 $500.’’. 


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1 (b) DEDUCTION OF RETIREMENT CONTRIBUTIONS

2 FOR ACTIVE PARTICIPANTS.—Section 219(g) of such 

3 Code is amended by adding at the end the following new 

4 paragraph: 

5 ‘‘(8) INFLATION ADJUSTMENT.—In the case of 

6 any taxable year beginning in a calendar year after 

7 2006, the dollar amount in the last row of the table 

8 contained in paragraph (3)(B)(i), the dollar amount 

9 in the last row of the table contained in paragraph 

10 (3)(B)(ii), and the dollar amount contained in para11 graph (7)(A), shall each be increased by an amount 

12 equal to— 

13 ‘‘(A) such dollar amount, multiplied by 

14 ‘‘(B) the cost-of-living adjustment deter15 mined under section 1(f)(3) for the calendar 

16 year in which the taxable year begins, deter17 mined by substituting ‘calendar year 2005’ for 

18 ‘calendar year 1992’ in subparagraph (B) 

19 thereof. 

20 Any increase determined under the preceding sen21 tence shall be rounded to the nearest multiple of 

22 $1,000.’’. 

23 (c) CONTRIBUTION LIMITATION FOR ROTH IRAS.— 

24 Section 408A(c)(3) of such Code is amended by adding 

25 at the end the following new subparagraph: 


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1 ‘‘(C) INFLATION ADJUSTMENT.—In the 

2 case of any taxable year beginning in a calendar 

3 year after 2006, the dollar amounts in sub4 clauses (I) and (II) of subparagraph (C)(ii) 

5 shall each be increased by an amount equal 

6 to— 

7 ‘‘(i) such dollar amount, multiplied by 

8 ‘‘(ii) the cost-of-living adjustment de9 termined under section 1(f)(3) for the cal10 endar year in which the taxable year be11 gins, determined by substituting ‘calendar 

12 year 2005’ for ‘calendar year 1992’ in sub13 paragraph (B) thereof. 

14 Any increase determined under the preceding 

15 sentence shall be rounded to the nearest mul16 tiple of $1,000.’’. 

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

18 this section shall apply to taxable years beginning after 

19 2006. 


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1 Subtitle D—Health and Medical 

2 Benefits 

3 SEC. 841. USE OF EXCESS PENSION ASSETS FOR FUTURE 

4 RETIREE HEALTH BENEFITS AND COLLEC5 TIVELY BARGAINED RETIREE HEALTH BENE6 FITS. 

7 (a) IN GENERAL.—Section 420 of the Internal Rev8 enue Code of 1986 (relating to transfers of excess pension 

9 assets to retiree health accounts) is amended by adding 

10 at the end the following new subsection: 

11 ‘‘(f) QUALIFIED TRANSFERS TO COVER FUTURE RE12 TIREE HEALTH COSTS AND COLLECTIVELY BARGAINED

13 RETIREE HEALTH BENEFITS.— 

14 ‘‘(1) IN GENERAL.—An employer maintaining a 

15 defined benefit plan (other than a multiemployer 

16 plan) may, in lieu of a qualified transfer, elect for 

17 any taxable year to have the plan make— 

18 ‘‘(A) a qualified future transfer, or 

19 ‘‘(B) a collectively bargained transfer. 

20 Except as provided in this subsection, a qualified fu21 ture transfer and a collectively bargained transfer 

22 shall be treated for purposes of this title and the 

23 Employee Retirement Income Security Act of 1974 

24 as if it were a qualified transfer. 


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1 ‘‘(2) QUALIFIED FUTURE AND COLLECTIVELY

2 BARGAINED TRANSFERS.—For purposes of this sub3 section— 

4 ‘‘(A) IN GENERAL.—The terms ‘qualified 

5 future transfer’ and ‘collectively bargained 

6 transfer’ mean a transfer which meets all of the 

7 requirements for a qualified transfer, except 

8 that— 

9 ‘‘(i) the determination of excess pen10 sion assets shall be made under subpara11 graph (B), 

12 ‘‘(ii) the limitation on the amount 

13 transferred shall be determined under sub14 paragraph (C), 

15 ‘‘(iii) the minimum cost requirements 

16 of subsection (c)(3) shall be modified as 

17 provided under subparagraph (D), and 

18 ‘‘(iv) in the case of a collectively bar19 gained transfer, the requirements of sub20 paragraph (E) shall be met with respect to 

21 the transfer. 

22 ‘‘(B) EXCESS PENSION ASSETS.— 

23 ‘‘(i) IN GENERAL.—In determining ex24 cess pension assets for purposes of this 

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1 plied by substituting ‘120 percent’ for ‘125 

2 percent’. 

3 ‘‘(ii) REQUIREMENT TO MAINTAIN

4 FUNDED STATUS.—If, as of any valuation 

5 date of any plan year in the transfer pe6 riod, the amount determined under sub7 section (e)(2)(B) (after application of 

8 clause (i)) exceeds the amount determined 

9 under subsection (e)(2)(A), either— 

10 ‘‘(I) the employer maintaining 

11 the plan shall make contributions to 

12 the plan in an amount not less than 

13 the amount required to reduce such 

14 excess to zero as of such date, or 

15 ‘‘(II) there is transferred from 

16 the health benefits account to the plan 

17 an amount not less than the amount 

18 required to reduce such excess to zero 

19 as of such date. 

20 ‘‘(C) LIMITATION ON AMOUNT TRANS21 FERRED.—Notwithstanding subsection (b)(3), 

22 the amount of the excess pension assets which 

23 may be transferred— 

24 ‘‘(i) in the case of a qualified future 

25 transfer shall be equal to the sum of— 


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1 ‘‘(I) if the transfer period in2 cludes the taxable year of the trans3 fer, the amount determined under 

4 subsection (b)(3) for such taxable 

5 year, plus 

6 ‘‘(II) in the case of all other tax7 able years in the transfer period, the 

8 sum of the qualified current retiree 

9 health liabilities which the plan rea10 sonably estimates, in accordance with 

11 guidance issued by the Secretary, will 

12 be incurred for each of such years, 

13 and 

14 ‘‘(ii) in the case of a collectively bar15 gained transfer, shall not exceed the 

16 amount which is reasonably estimated, in 

17 accordance with the provisions of the col18 lective bargaining agreement and generally 

19 accepted accounting principles, to be the 

20 amount the employer maintaining the plan 

21 will pay (whether directly or through reim22 bursement) out of such account during the 

23 collectively bargained cost maintenance pe24 riod for collectively bargained retiree 

25 health liabilities. 


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1 ‘‘(D) MINIMUM COST REQUIREMENTS.— 

2 ‘‘(i) IN GENERAL.—The requirements 

3 of subsection (c)(3) shall be treated as met 

4 if— 

5 ‘‘(I) in the case of a qualified fu6 ture transfer, each group health plan 

7 or arrangement under which applica8 ble health benefits are provided pro9 vides applicable health benefits during 

10 the period beginning with the first 

11 year of the transfer period and ending 

12 with the last day of the 4th year fol13 lowing the transfer period such that 

14 the annual average amount of such 

15 the applicable employer cost during 

16 such period is not less than the appli17 cable employer cost determined under 

18 subsection (c)(3)(A) with respect to 

19 the transfer, and 

20 ‘‘(II) in the case of a collectively 

21 bargained transfer, each collectively 

22 bargained group health plan under 

23 which collectively bargained health 

24 benefits are provided provides that the 

25 collectively bargained employer cost 


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1 for each taxable year during the col2 lectively bargained cost maintenance 

3 period shall not be less than the 

4 amount specified by the collective bar5 gaining agreement. 

6 ‘‘(ii) ELECTION TO MAINTAIN BENE7 FITS FOR FUTURE TRANSFERS.—An em8 ployer may elect, in lieu of the require9 ments of clause (i)(I), to meet the require10 ments of subsection (c)(3) by meeting the 

11 requirements of such subsection (as in ef12 fect before the amendments made by sec13 tion 535 of the Tax Relief Extension Act 

14 of 1999) for each of the years described in 

15 the period under clause (i)(I). 

16 ‘‘(iii) COLLECTIVELY BARGAINED EM17 PLOYER COST.—For purposes of this sub18 paragraph, the term ‘collectively bargained 

19 employer cost’ means the average cost per 

20 covered individual of providing collectively 

21 bargained retiree health benefits as deter22 mined in accordance with the applicable 

23 collective bargaining agreement. Such 

24 agreement may provide for an appropriate 

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1 ployer cost to take into account any por2 tion of the collectively bargained retiree 

3 health benefits that is provided or financed 

4 by a government program or other source. 

5 ‘‘(E) SPECIAL RULES FOR COLLECTIVELY

6 BARGAINED TRANSFERS.— 

7 ‘‘(i) IN GENERAL.—A collectively bar8 gained transfer shall only include a trans9 fer which— 

10 ‘‘(I) is made in accordance with a 

11 collective bargaining agreement, 

12 ‘‘(II) before the transfer, the em13 ployer designates, in a written notice 

14 delivered to each employee organiza15 tion that is a party to the collective 

16 bargaining agreement, as a collectively 

17 bargained transfer in accordance with 

18 this section, and 

19 ‘‘(III) involves a plan maintained 

20 by an employer which, in its taxable 

21 year ending in 2005, provided health 

22 benefits or coverage to retirees and 

23 their spouses and dependents under 

24 all of the benefit plans maintained by 

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1 gate cost (including administrative ex2 penses) of such benefits or coverage 

3 which would have been allowable as a 

4 deduction to the employer (if such 

5 benefits or coverage had been pro6 vided directly by the employer and the 

7 employer used the cash receipts and 

8 disbursements method of accounting) 

9 is at least 5 percent of the gross re10 ceipts of the employer (determined in 

11 accordance with the last sentence of 

12 subsection (c)(2)(E)(ii)(II)) for such 

13 taxable year, or a plan maintained by 

14 a successor to such employer. 

15 ‘‘(ii) USE OF ASSETS.—Any assets 

16 transferred to a health benefits account in 

17 a collectively bargained transfer (and any 

18 income allocable thereto) shall be used only 

19 to pay collectively bargained retiree health 

20 liabilities (other than liabilities of key em21 ployees not taken into account under para22 graph (6)(B)(iii)) for the taxable year of 

23 the transfer or for any subsequent taxable 

24 year during the collectively bargained cost 


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1 maintenance period (whether directly or 

2 through reimbursement). 

3 ‘‘(3) COORDINATION WITH OTHER TRANS4 FERS.—In applying subsection (b)(3) to any subse5 quent transfer during a taxable year in a transfer 

6 period or collectively bargained cost maintenance pe7 riod, qualified current retiree health liabilities shall 

8 be reduced by any such liabilities taken into account 

9 with respect to the qualified future transfer or col10 lectively bargained transfer to which such period re11 lates. 

12 ‘‘(4) SPECIAL DEDUCTION RULES FOR COLLEC13 TIVELY BARGAINED TRANSFERS.—In the case of a 

14 collectively bargained transfer— 

15 ‘‘(A) the limitation under subsection 

16 (d)(1)(C) shall not apply, and 

17 ‘‘(B) notwithstanding subsection (d)(2), an 

18 employer may contribute an amount to a health 

19 benefits account or welfare benefit fund (as de20 fined in section 419(e)(1)) with respect to col21 lectively bargained retiree health liabilities for 

22 which transferred assets are required to be used 

23 under subsection (c)(1)(B), and the deduct24 ibility of any such contribution shall be gov25 erned by the limits applicable to the deductVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00628 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ibility of contributions to a welfare benefit fund 

2 under a collective bargaining agreement (as de3 termined under section 419A(f)(5)(A)) without 

4 regard to whether such contributions are made 

5 to a health benefits account or welfare benefit 

6 fund and without regard to the provisions of 

7 section 404 or the other provisions of this sec8 tion. 

9 The Secretary shall provide rules to ensure that the 

10 application of this paragraph does not result in a de11 duction being allowed more than once for the same 

12 contribution or for 2 or more contributions or ex13 penditures relating to the same collectively bar14 gained retiree health liabilities. 

15 ‘‘(5) TRANSFER PERIOD.—For purposes of this 

16 subsection, the term ‘transfer period’ means, with 

17 respect to any transfer, a period of consecutive tax18 able years (not less than 2) specified in the election 

19 under paragraph (1) which begins and ends during 

20 the 10-taxable-year period beginning with the tax21 able year of the transfer. 

22 ‘‘(6) TERMS RELATING TO COLLECTIVELY BAR23 GAINED TRANSFERS.—For purposes of this sub24 section— 


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1 ‘‘(A) COLLECTIVELY BARGAINED COST

2 MAINTENANCE PERIOD.—The term ‘collectively 

3 bargained cost maintenance period’ means, with 

4 respect to each covered retiree and his covered 

5 spouse and dependents, the shorter of— 

6 ‘‘(i) the remaining lifetime of such 

7 covered retiree and his covered spouse and 

8 dependents, or 

9 ‘‘(ii) the period of coverage provided 

10 by the collectively bargained health plan 

11 (determined as of the date of the collec12 tively bargained transfer) with respect to 

13 such covered retiree and his covered spouse 

14 and dependents. 

15 ‘‘(B) COLLECTIVELY BARGAINED RETIREE

16 HEALTH LIABILITIES.— 

17 ‘‘(i) IN GENERAL.—The term ‘collec18 tively bargained retiree health liabilities’ 

19 means the present value, as of the begin20 ning of a taxable year and determined in 

21 accordance with the applicable collective 

22 bargaining agreement, of all collectively 

23 bargained health benefits (including ad24 ministrative expenses) for such taxable 

25 year and all subsequent taxable years durVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00630 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ing the collectively bargained cost mainte2 nance period. 

3 ‘‘(ii) REDUCTION FOR AMOUNTS PRE4 VIOUSLY SET ASIDE.—The amount deter5 mined under clause (i) shall be reduced by 

6 the value (as of the close of the plan year 

7 preceding the year of the collectively bar8 gained transfer) of the assets in all health 

9 benefits accounts or welfare benefit funds 

10 (as defined in section 419(e)(1)) set aside 

11 to pay for the collectively bargained retiree 

12 health liabilities. 

13 ‘‘(iii) KEY EMPLOYEES EXCLUDED.— 

14 If an employee is a key employee (within 

15 the meaning of section 416(I)(1)) with re16 spect to any plan year ending in a taxable 

17 year, such employee shall not be taken into 

18 account in computing collectively bargained 

19 retiree health liabilities for such taxable 

20 year or in calculating collectively bargained 

21 employer cost under subsection (c)(3)(C). 

22 ‘‘(C) COLLECTIVELY BARGAINED HEALTH

23 BENEFITS.—The term ‘collectively bargained 

24 health benefits’ means health benefits or cov25 erage which are provided to— 


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1 ‘‘(i) retired employees who, imme2 diately before the collectively bargained 

3 transfer, are entitled to receive such bene4 fits upon retirement and who are entitled 

5 to pension benefits under the plan, and 

6 their spouses and dependents, and 

7 ‘‘(ii) if specified by the provisions of 

8 the collective bargaining agreement gov9 erning the collectively bargained transfer, 

10 active employees who, following their re11 tirement, are entitled to receive such bene12 fits and who are entitled to pension bene13 fits under the plan, and their spouses and 

14 dependents. 

15 ‘‘(D) COLLECTIVELY BARGAINED HEALTH

16 PLAN.—The term ‘collectively bargained health 

17 plan’ means a group health plan or arrange18 ment for retired employees and their spouses 

19 and dependents that is maintained pursuant to 

20 1 or more collective bargaining agreements.’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to transfers after the date of the 

23 enactment of this Act. 


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1 SEC. 842. TRANSFER OF EXCESS PENSION ASSETS TO MUL2 TIEMPLOYER HEALTH PLAN. 

3 (a) IN GENERAL.—Section 420 of the Internal Rev4 enue Code of 1986 is amended— 

5 (1) by striking ‘‘(other than a multiemployer 

6 plan)’’ in subsection (a), and 

7 (2) by adding at the end of subsection (e) the 

8 following new paragraph: 

9 ‘‘(5) APPLICATION TO MULTIEMPLOYER

10 PLANS.—In the case of a multiemployer plan, this 

11 section shall be applied to any such plan— 

12 ‘‘(A) by treating any reference in this sec13 tion to an employer as a reference to all em14 ployers maintaining the plan (or, if appropriate, 

15 the plan sponsor), and 

16 ‘‘(B) in accordance with such modifications 

17 of this section (and the provisions of this title 

18 relating to this section) as the Secretary deter19 mines appropriate to reflect the fact the plan is 

20 not maintained by a single employer.’’ 

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

22 this section shall apply to transfers made in taxable years 

23 beginning after December 31, 2006. 


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1 SEC. 843. ALLOWANCE OF RESERVE FOR MEDICAL BENE2 FITS OF PLANS SPONSORED BY BONA FIDE 

3 ASSOCIATIONS. 

4 (a) IN GENERAL.—Section 419A(c) of the Internal 

5 Revenue Code of 1986 (relating to account limit) is 

6 amended by adding at the end the following new para7 graph: 

8 ‘‘(6) ADDITIONAL RESERVE FOR MEDICAL BEN9 EFITS OF BONA FIDE ASSOCIATION PLANS.— 

10 ‘‘(A) IN GENERAL.—An applicable account 

11 limit for any taxable year may include a reserve 

12 in an amount not to exceed 35 percent of the 

13 sum of— 

14 ‘‘(i) the qualified direct costs, and 

15 ‘‘(ii) the change in claims incurred 

16 but unpaid, 

17 for such taxable year with respect to medical 

18 benefits (other than post-retirement medical 

19 benefits). 

20 ‘‘(B) APPLICABLE ACCOUNT LIMIT.—For 

21 purposes of this subsection, the term ‘applicable 

22 account limit’ means an account limit for a 

23 qualified asset account with respect to medical 

24 benefits provided through a plan maintained by 

25 a bona fide association (as defined in section 


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1 2791(d)(3) of the Public Health Service Act 

2 (42 U.S.C. 300gg–91(d)(3))’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2006. 

6 SEC. 844. TREATMENT OF ANNUITY AND LIFE INSURANCE 

7 CONTRACTS WITH A LONG-TERM CARE IN8 SURANCE FEATURE. 

9 (a) EXCLUSION FROM GROSS INCOME.—Subsection 

10 (e) of section 72 of the Internal Revenue Code of 1986 

11 (relating to amounts not received as annuities) is amended 

12 by redesignating paragraph (11) as paragraph (12) and 

13 by inserting after paragraph (10) the following new para14 graph: 

15 ‘‘(11) SPECIAL RULES FOR CERTAIN COMBINA16 TION CONTRACTS PROVIDING LONG-TERM CARE IN17 SURANCE.—Notwithstanding paragraphs (2), (5)(C), 

18 and (10), in the case of any charge against the cash 

19 value of an annuity contract or the cash surrender 

20 value of a life insurance contract made as payment 

21 for coverage under a qualified long-term care insur22 ance contract which is part of or a rider on such an23 nuity or life insurance contract— 


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1 ‘‘(A) the investment in the contract shall 

2 be reduced (but not below zero) by such charge, 

3 and 

4 ‘‘(B) such charge shall not be includible in 

5 gross income.’’. 

6 (b) TAX-FREE EXCHANGES AMONG CERTAIN INSUR7 ANCE POLICIES.— 

8 (1) ANNUITY CONTRACTS CAN INCLUDE QUALI9 FIED LONG-TERM CARE INSURANCE RIDERS.—Para10 graph (2) of section 1035(b) of such Code is amend11 ed by adding at the end the following new sentence: 

12 ‘‘For purposes of the preceding sentence, a contract 

13 shall not fail to be treated as an annuity contract 

14 solely because a qualified long-term care insurance 

15 contract is a part of or a rider on such contract.’’. 

16 (2) LIFE INSURANCE CONTRACTS CAN INCLUDE

17 QUALIFIED LONG-TERM CARE INSURANCE RIDERS.— 

18 Paragraph (3) of section 1035(b) of such Code is 

19 amended by adding at the end the following new 

20 sentence: ‘‘For purposes of the preceding sentence, 

21 a contract shall not fail to be treated as a life insur22 ance contract solely because a qualified long-term 

23 care insurance contract is a part of or a rider on 

24 such contract.’’. 


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1 (3) EXPANSION OF TAX-FREE EXCHANGES OF

2 LIFE INSURANCE, ENDOWMENT, AND ANNUITY CON3 TRACTS FOR LONG-TERM CARE CONTRACTS.—Sub4 section (a) of section 1035 of such Code (relating to 

5 certain exchanges of insurance policies) is amend6 ed— 

7 (A) in paragraph (1) by inserting ‘‘or for 

8 a qualified long-term care insurance contract’’ 

9 before the semicolon at the end, 

10 (B) in paragraph (2) by inserting ‘‘, or (C) 

11 for a qualified long-term care insurance con12 tract’’ before the semicolon at the end, and 

13 (C) in paragraph (3) by inserting ‘‘or for 

14 a qualified long-term care insurance contract’’ 

15 before the period at the end. 

16 (4) TAX-FREE EXCHANGES OF QUALIFIED

17 LONG-TERM CARE INSURANCE CONTRACT.—Sub18 section (a) of section 1035 of such Code (relating to 

19 certain exchanges of insurance policies) is amended 

20 by striking ‘‘or’’ at the end of paragraph (2), by 

21 striking the period at the end of paragraph (3) and 

22 inserting ‘‘; or’’, and by inserting after paragraph 

23 (3) the following new paragraph: 


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1 ‘‘(4) a qualified long-term care insurance con2 tract for a qualified long-term care insurance con3 tract.’’. 

4 (c) TREATMENT OF COVERAGE PROVIDED AS PART

5 OF A LIFE INSURANCE OR ANNUITY CONTRACT.—Sub6 section (e) of section 7702B of such Code (relating to 

7 treatment of qualified long-term care insurance) is amend8 ed to read as follows: 

9 ‘‘(e) TREATMENT OF COVERAGE PROVIDED AS PART

10 OF A LIFE INSURANCE OR ANNUITY CONTRACT.—Except 

11 as otherwise provided in regulations prescribed by the Sec12 retary, in the case of any long-term care insurance cov13 erage (whether or not qualified) provided by a rider on 

14 or as part of a life insurance contract or an annuity con15 tract— 

16 ‘‘(1) IN GENERAL.—This title shall apply as if 

17 the portion of the contract providing such coverage 

18 is a separate contract. 

19 ‘‘(2) DENIAL OF DEDUCTION UNDER SECTION

20 213.—No deduction shall be allowed under section 

21 213(a) for any payment made for coverage under a 

22 qualified long-term care insurance contract if such 

23 payment is made as a charge against the cash sur24 render value of a life insurance contract or the cash 

25 value of an annuity contract. 


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1 ‘‘(3) PORTION DEFINED.—For purposes of this 

2 subsection, the term ‘portion’ means only the terms 

3 and benefits under a life insurance contract or annu4 ity contract that are in addition to the terms and 

5 benefits under the contract without regard to long6 term care insurance coverage. 

7 ‘‘(4) ANNUITY CONTRACTS TO WHICH PARA8 GRAPH (1) DOES NOT APPLY.—For purposes of this 

9 subsection, none of the following shall be treated as 

10 an annuity contract: 

11 ‘‘(A) A trust described in section 401(a) 

12 which is exempt from tax under section 501(a). 

13 ‘‘(B) A contract— 

14 ‘‘(i) purchased by a trust described in 

15 subparagraph (A), 

16 ‘‘(ii) purchased as part of a plan de17 scribed in section 403(a), 

18 ‘‘(iii) described in section 403(b), 

19 ‘‘(iv) provided for employees of a life 

20 insurance company under a plan described 

21 in section 818(a)(3), or 

22 ‘‘(v) from an individual retirement ac23 count or an individual retirement annuity. 


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1 ‘‘(C) A contract purchased by an employer 

2 for the benefit of the employee (or the employ3 ee’s spouse). 

4 Any dividend described in section 404(k) which is 

5 received by a participant or beneficiary shall, for 

6 purposes of this paragraph, be treated as paid under 

7 a separate contract to which subparagraph (B)(i) 

8 applies.’’. 

9 (d) INFORMATION REPORTING.— 

10 (1) Subpart B of part III of subchapter A of 

11 chapter 61 of such Code (relating to information 

12 concerning transactions with other persons) is 

13 amended by adding at the end the following new sec14 tion: 

15 ‘‘SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED 

16 LONG-TERM CARE INSURANCE CONTRACTS 

17 UNDER COMBINED ARRANGEMENTS. 

18 ‘‘(a) REQUIREMENT OF REPORTING.—Any person 

19 who makes a charge against the cash value of an annuity 

20 contract, or the cash surrender value of a life insurance 

21 contract, which is excludible from gross income under sec22 tion 72(e)(11) shall make a return, according to the forms 

23 or regulations prescribed by the Secretary, setting forth— 


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1 ‘‘(1) the amount of the aggregate of such 

2 charges against each such contract for the calendar 

3 year, 

4 ‘‘(2) the amount of the reduction in the invest5 ment in each such contract by reason of such 

6 charges, and 

7 ‘‘(3) the name, address, and TIN of the indi8 vidual who is the holder of each such contract. 

9 ‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS

10 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 

11 Every person required to make a return under subsection 

12 (a) shall furnish to each individual whose name is required 

13 to be set forth in such return a written statement show14 ing— 

15 ‘‘(1) the name, address, and phone number of 

16 the information contact of the person making the 

17 payments, and 

18 ‘‘(2) the information required to be shown on 

19 the return with respect to such individual. 

20 The written statement required under the preceding sen21 tence shall be furnished to the individual on or before Jan22 uary 31 of the year following the calendar year for which 

23 the return under subsection (a) was required to be made.’’. 

24 (2) PENALTY FOR FAILURE TO FILE.— 


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1 (A) RETURN.—Subparagraph (B) of sec2 tion 6724(d)(1) of such Code is amended by 

3 striking ‘‘or’’ at the end of clause (xvii), by 

4 striking ‘‘and’’ at the end of clause (xviii) and 

5 inserting ‘‘or’’, and by adding at the end the 

6 following new clause: 

7 ‘‘(xix) section 6050U (relating to 

8 charges or payments for qualified long9 term care insurance contracts under com10 bined arrangements), and’’. 

11 (B) STATEMENT.—Paragraph (2) of sec12 tion 6724(d) of such Code is amended by strik13 ing ‘‘or’’ at the end of subparagraph (AA), by 

14 striking the period at the end of subparagraph 

15 (BB), and by inserting after subparagraph 

16 (BB) the following new subparagraph: 

17 ‘‘(CC) section 6050U (relating to charges 

18 or payments for qualified long-term care insur19 ance contracts under combined arrange20 ments).’’. 

21 (3) CLERICAL AMENDMENT.—The table of sec22 tions for subpart B of part III of subchapter A of 

23 such chapter 61 of such Code is amended by adding 

24 at the end the following new item: 

‘‘Sec. 6050U. Charges or payments for qualified long-term care insurance contracts under combined arrangements.’’. 


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1 (e) TREATMENT OF POLICY ACQUISITION EX2 PENSES.—Subsection (e) of section 848 of such Code (re3 lating to classification of contracts) is amended by adding 

4 at the end the following new paragraph: 

5 ‘‘(6) TREATMENT OF CERTAIN QUALIFIED

6 LONG-TERM CARE INSURANCE CONTRACT ARRANGE7 MENTS.—An annuity or life insurance contract 

8 which includes a qualified long-term care insurance 

9 contract as a part of or a rider on such annuity or 

10 life insurance contract shall be treated as a specified 

11 insurance contract not described in subparagraph 

12 (A) or (B) of subsection (c)(1).’’. 

13 (f) TECHNICAL AMENDMENT.—Paragraph (1) of sec14 tion 7702B(e) of such Code (as in effect before amend15 ment by subsection (c)) is amended by striking ‘‘section’’ 

16 and inserting ‘‘title’’. 

17 (g) EFFECTIVE DATES.— 

18 (1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the amendments made by 

20 this section shall apply to contracts issued after De21 cember 31, 1996, but only with respect to taxable 

22 years beginning after December 31, 2009. 

23 (2) TAX-FREE EXCHANGES.—The amendments 

24 made by subsection (b) shall apply with respect to 

25 exchanges occurring after December 31, 2009. 


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1 (3) INFORMATION REPORTING.—The amend2 ments made by subsection (d) shall apply to charges 

3 made after December 31, 2009. 

4 (4) POLICY ACQUISITION EXPENSES.—The 

5 amendment made by subsection (e) shall apply to 

6 specified policy acquisition expenses determined for 

7 taxable years beginning after December 31, 2009. 

8 (5) TECHNICAL AMENDMENT.—The amendment 

9 made by subsection (f) shall take effect as if in10 cluded in section 321(a) of the Health Insurance 

11 Portability and Accountability Act of 1996. 

12 SEC. 845. DISTRIBUTIONS FROM GOVERNMENTAL RETIRE13 MENT PLANS FOR HEALTH AND LONG-TERM 

14 CARE INSURANCE FOR PUBLIC SAFETY OFFI15 CERS. 

16 (a) IN GENERAL.—Section 402 of the Internal Rev17 enue Code of 1986 (relating to taxability of beneficiary 

18 of employees’ trust) is amended by adding at the end the 

19 following new subsection: 

20 ‘‘(l) DISTRIBUTIONS FROM GOVERNMENTAL PLANS

21 FOR HEALTH AND LONG-TERM CARE INSURANCE.— 

22 ‘‘(1) IN GENERAL.—In the case of an employee 

23 who is an eligible retired public safety officer who 

24 makes the election described in paragraph (6) with 

25 respect to any taxable year of such employee, gross 


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1 income of such employee for such taxable year does 

2 not include any distribution from an eligible retire3 ment plan to the extent that the aggregate amount 

4 of such distributions does not exceed the amount 

5 paid by such employee for qualified health insurance 

6 premiums of the employee, his spouse, or dependents 

7 (as defined in section 152) for such taxable year. 

8 ‘‘(2) LIMITATION.—The amount which may be 

9 excluded from gross income for the taxable year by 

10 reason of paragraph (1) shall not exceed $3,000. 

11 ‘‘(3) DISTRIBUTIONS MUST OTHERWISE BE IN12 CLUDIBLE.— 

13 ‘‘(A) IN GENERAL.—An amount shall be 

14 treated as a distribution for purposes of para15 graph (1) only to the extent that such amount 

16 would be includible in gross income without re17 gard to paragraph (1). 

18 ‘‘(B) APPLICATION OF SECTION 72.—Not19 withstanding section 72, in determining the ex20 tent to which an amount is treated as a dis21 tribution for purposes of subparagraph (A), the 

22 aggregate amounts distributed from an eligible 

23 retirement plan in a taxable year (up to the 

24 amount excluded under paragraph (1)) shall be 

25 treated as includible in gross income (without 


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1 regard to subparagraph (A)) to the extent that 

2 such amount does not exceed the aggregate 

3 amount which would have been so includible if 

4 all amounts distributed from all eligible retire5 ment plans were treated as 1 contract for pur6 poses of determining the inclusion of such dis7 tribution under section 72. Proper adjustments 

8 shall be made in applying section 72 to other 

9 distributions in such taxable year and subse10 quent taxable years. 

11 ‘‘(4) DEFINITIONS.—For purposes of this sub12 section— 

13 ‘‘(A) ELIGIBLE RETIREMENT PLAN.—For 

14 purposes of paragraph (1), the term ‘eligible re15 tirement plan’ means a governmental plan 

16 (within the meaning of section 414(d)) which is 

17 described in clause (iii), (iv), (v), or (vi) of sub18 section (c)(8)(B). 

19 ‘‘(B) ELIGIBLE RETIRED PUBLIC SAFETY

20 OFFICER.—The term ‘eligible retired public 

21 safety officer’ means an individual who, by rea22 son of disability or attainment of normal retire23 ment age, is separated from service as a public 

24 safety officer with the employer who maintains 


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1 the eligible retirement plan from which distribu2 tions subject to paragraph (1) are made. 

3 ‘‘(C) PUBLIC SAFETY OFFICER.—The term 

4 ‘public safety officer’ shall have the same mean5 ing given such term by section 1204(9)(A) of 

6 the Omnibus Crime Control and Safe Streets 

7 Act of 1968 (42 U.S.C. 3796b(9)(A)). 

8 ‘‘(D) QUALIFIED HEALTH INSURANCE

9 PREMIUMS.—The term ‘qualified health insur10 ance premiums’ means premiums for coverage 

11 for the eligible retired public safety officer, his 

12 spouse, and dependents, by an accident or 

13 health insurance plan or qualified long-term 

14 care insurance contract (as defined in section 

15 7702B(b)). 

16 ‘‘(5) SPECIAL RULES.—For purposes of this 

17 subsection— 

18 ‘‘(A) DIRECT PAYMENT TO INSURER RE19 QUIRED.—Paragraph (1) shall only apply to a 

20 distribution if payment of the premiums is 

21 made directly to the provider of the accident or 

22 health insurance plan or qualified long-term 

23 care insurance contract by deduction from a 

24 distribution from the eligible retirement plan. 


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1 ‘‘(B) RELATED PLANS TREATED AS 1.—All 

2 eligible retirement plans of an employer shall be 

3 treated as a single plan. 

4 ‘‘(6) ELECTION DESCRIBED.— 

5 ‘‘(A) IN GENERAL.—For purposes of para6 graph (1), an election is described in this para7 graph if the election is made by an employee 

8 after separation from service with respect to 

9 amounts not distributed from an eligible retire10 ment plan to have amounts from such plan dis11 tributed in order to pay for qualified health in12 surance premiums. 

13 ‘‘(B) SPECIAL RULE.—A plan shall not be 

14 treated as violating the requirements of section 

15 401, or as engaging in a prohibited transaction 

16 for purposes of section 503(b), merely because 

17 it provides for an election with respect to 

18 amounts that are otherwise distributable under 

19 the plan or merely because of a distribution 

20 made pursuant to an election described in sub21 paragraph (A). 

22 ‘‘(7) COORDINATION WITH MEDICAL EXPENSE

23 DEDUCTION.—The amounts excluded from gross in24 come under paragraph (1) shall not be taken into 

25 account under section 213. 


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1 ‘‘(8) COORDINATION WITH DEDUCTION FOR

2 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN3 DIVIDUALS.—The amounts excluded from gross in4 come under paragraph (1) shall not be taken into 

5 account under section 162(l).’’. 

6 (b) CONFORMING AMENDMENTS.— 

7 (1) Section 403(a) of such Code (relating to 

8 taxability of beneficiary under a qualified annuity 

9 plan) is amended by inserting after paragraph (1) 

10 the following new paragraph: 

11 ‘‘(2) SPECIAL RULE FOR HEALTH AND LONG12 TERM CARE INSURANCE.—To the extent provided in 

13 section 402(l), paragraph (1) shall not apply to the 

14 amount distributed under the contract which is oth15 erwise includible in gross income under this sub16 section.’’. 

17 (2) Section 403(b) of such Code (relating to 

18 taxability of beneficiary under annuity purchased by 

19 section 501(c)(3) organization or public school) is 

20 amended by inserting after paragraph (1) the fol21 lowing new paragraph: 

22 ‘‘(2) SPECIAL RULE FOR HEALTH AND LONG23 TERM CARE INSURANCE.—To the extent provided in 

24 section 402(l), paragraph (1) shall not apply to the 

25 amount distributed under the contract which is othVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00649 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 erwise includible in gross income under this sub2 section.’’. 

3 (3) Section 457(a) of such Code (relating to 

4 year of inclusion in gross income) is amended by 

5 adding at the end the following new paragraph: 

6 ‘‘(3) SPECIAL RULE FOR HEALTH AND LONG7 TERM CARE INSURANCE.—In the case of a plan of 

8 an eligible employer described in subsection 

9 (e)(1)(A), to the extent provided in section 402(l), 

10 paragraph (1) shall not apply to amounts otherwise 

11 includible in gross income under this subsection.’’. 

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

13 this section shall apply to distributions in taxable years 

14 beginning after December 31, 2006. 

15 Subtitle E—United States Tax 

16 Court Modernization 

17 SEC. 851. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT 

18 JUDICIAL SURVIVOR ANNUITIES. 

19 (a) IN GENERAL.—Subsection (s) of section 7448 of 

20 the Internal Revenue Code of 1986 (relating to annuities 

21 to surviving spouses and dependent children of judges) is 

22 amended to read as follows: 

23 ‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each 

24 time that an increase is made under section 8340(b) of 

25 title 5, United States Code, in annuities payable under 


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1 subchapter III of chapter 83 of that title, each annuity 

2 payable from the survivors annuity fund under this section 

3 shall be increased at the same time by the same percent4 age by which annuities are increased under such section 

5 8340(b).’’. 

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

7 this section shall apply with respect to increases made 

8 under section 8340(b) of title 5, United States Code, in 

9 annuities payable under subchapter III of chapter 83 of 

10 that title, taking effect after the date of the enactment 

11 of this Act. 

12 SEC. 852. COST OF LIFE INSURANCE COVERAGE FOR TAX 

13 COURT JUDGES AGE 65 OR OVER. 

14 Section 7472 of the Internal Revenue Code of 1986 

15 (relating to expenditures) is amended by inserting after 

16 the first sentence the following new sentence: ‘‘Notwith17 standing any other provision of law, the Tax Court is au18 thorized to pay on behalf of its judges, age 65 or over, 

19 any increase in the cost of Federal Employees’ Group Life 

20 Insurance imposed after the date of the enactment of the 

21 Pension Protection Act of 2006, including any expenses 

22 generated by such payments, as authorized by the chief 

23 judge in a manner consistent with such payments author24 ized by the Judicial Conference of the United States purVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00651 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 suant to section 604(a)(5) of title 28, United States 

2 Code.’’ 

3 SEC. 853. PARTICIPATION OF TAX COURT JUDGES IN THE 

4 THRIFT SAVINGS PLAN. 

5 (a) IN GENERAL.—Section 7447 of the Internal Rev6 enue Code of 1986 (relating to retirement of judges) is 

7 amended by adding at the end the following new sub8 section: 

9 ‘‘(j) THRIFT SAVINGS PLAN.— 

10 ‘‘(1) ELECTION TO CONTRIBUTE.— 

11 ‘‘(A) IN GENERAL.—A judge of the Tax 

12 Court may elect to contribute to the Thrift Sav13 ings Fund established by section 8437 of title 

14 5, United States Code. 

15 ‘‘(B) PERIOD OF ELECTION.—An election 

16 may be made under this paragraph only during 

17 a period provided under section 8432(b) of title 

18 5, United States Code, for individuals subject to 

19 chapter 84 of such title. 

20 ‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.— 

21 Except as otherwise provided in this subsection, the 

22 provisions of subchapters III and VII of chapter 84 

23 of title 5, United States Code, shall apply with re24 spect to a judge who makes an election under para25 graph (1). 


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1 ‘‘(3) SPECIAL RULES.— 

2 ‘‘(A) AMOUNT CONTRIBUTED.—The 

3 amount contributed by a judge to the Thrift 

4 Savings Fund in any pay period shall not ex5 ceed the maximum percentage of such judge’s 

6 basic pay for such period as allowable under 

7 section 8440f of title 5, United States Code. 

8 Basic pay does not include any retired pay paid 

9 pursuant to this section. 

10 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

11 JUDGE.—No contributions may be made for the 

12 benefit of a judge under section 8432(c) of title 

13 5, United States Code. 

14 ‘‘(C) APPLICABILITY OF SECTION 8433(b) 

15 OF TITLE 5 WHETHER OR NOT JUDGE RE16 TIRES.—Section 8433(b) of title 5, United 

17 States Code, applies with respect to a judge 

18 who makes an election under paragraph (1) and 

19 who either— 

20 ‘‘(i) retires under subsection (b), or 

21 ‘‘(ii) ceases to serve as a judge of the 

22 Tax Court but does not retire under sub23 section (b). 


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1 Retirement under subsection (b) is a separation 

2 from service for purposes of subchapters III 

3 and VII of chapter 84 of that title. 

4 ‘‘(D) APPLICABILITY OF SECTION

5 8351(b)(5) OF TITLE 5.—The provisions of sec6 tion 8351(b)(5) of title 5, United States Code, 

7 shall apply with respect to a judge who makes 

8 an election under paragraph (1). 

9 ‘‘(E) EXCEPTION.—Notwithstanding sub10 paragraph (C), if any judge retires under this 

11 section, or resigns without having met the age 

12 and service requirements set forth under sub13 section (b)(2), and such judge’s nonforfeitable 

14 account balance is less than an amount that the 

15 Executive Director of the Federal Retirement 

16 Thrift Investment Board prescribes by regula17 tion, the Executive Director shall pay the non18 forfeitable account balance to the participant in 

19 a single payment.’’. 

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

21 this section shall take effect on the date of the enactment 

22 of this Act, except that United States Tax Court judges 

23 may only begin to participate in the Thrift Savings Plan 

24 at the next open season beginning after such date. 


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1 SEC. 854. ANNUITIES TO SURVIVING SPOUSES AND DE2 PENDENT CHILDREN OF SPECIAL TRIAL 

3 JUDGES OF THE TAX COURT. 

4 (a) DEFINITIONS.—Section 7448(a) of the Internal 

5 Revenue Code of 1986 (relating to definitions), as amend6 ed by this Act, is amended by redesignating paragraphs 

7 (5), (6), (7), and (8) as paragraphs (7), (8), (9), and (10), 

8 respectively, and by inserting after paragraph (4) the fol9 lowing new paragraphs: 

10 ‘‘(5) The term ‘special trial judge’ means a ju11 dicial officer appointed pursuant to section 7443A, 

12 including any individual receiving an annuity under 

13 chapters 83 or 84 of title 5, United States Code, 

14 whether or not performing judicial duties under sec15 tion 7443B. 

16 ‘‘(6) The term ‘special trial judge’s salary’ 

17 means the salary of a special trial judge received 

18 under section 7443A(d), any amount received as an 

19 annuity under chapters 83 or 84 of title 5, United 

20 States Code, and compensation received under sec21 tion 7443B.’’. 

22 (b) ELECTION.—Subsection (b) of section 7448 of 

23 such Code (relating to annuities to surviving spouses and 

24 dependent children of judges) is amended— 

25 (1) by striking the subsection heading and in26 serting the following: 


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1 ‘‘(b) ELECTION.— 

2 ‘‘(1) JUDGES.—’’, 

3 (2) by moving the text 2 ems to the right, and 

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

5 paragraph: 

6 ‘‘(2) SPECIAL TRIAL JUDGES.—Any special trial 

7 judge may by written election filed with the chief 

8 judge bring himself or herself within the purview of 

9 this section. Such election shall be filed not later 

10 than the later of 6 months after— 

11 ‘‘(A) 6 months after the date of the enact12 ment of this paragraph, 

13 ‘‘(B) the date the judge takes office, or 

14 ‘‘(C) the date the judge marries.’’. 

15 (c) CONFORMING AMENDMENTS.— 

16 (1) The heading of section 7448 of such Code 

17 is amended by inserting ‘‘AND SPECIAL TRIAL

18 JUDGES’’ after ‘‘JUDGES’’. 

19 (2) The item relating to section 7448 in the 

20 table of sections for part I of subchapter C of chap21 ter 76 of such Code is amended by inserting ‘‘and 

22 special trial judges’’ after ‘‘judges’’. 

23 (3) Subsections (c)(1), (d), (f), (g), (h), (j), 

24 (m), (n), and (u) of section 7448 of such Code, as 

25 amended by this Act, are each amended— 


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1 (A) by inserting ‘‘or special trial judge’’ 

2 after ‘‘judge’’ each place it appears other than 

3 in the phrase ‘‘chief judge’’, and 

4 (B) by inserting ‘‘or special trial judge’s’’ 

5 after ‘‘judge’s’’ each place it appears. 

6 (4) Section 7448(c) of such Code is amended— 

7 (A) in paragraph (1), by striking ‘‘Tax 

8 Court judges’’ and inserting ‘‘Tax Court judi9 cial officers’’, 

10 (B) in paragraph (2)— 

11 (i) in subparagraph (A), by inserting 

12 ‘‘and section 7443A(d)’’ after ‘‘(a)(4)’’, 

13 and 

14 (ii) in subparagraph (B), by striking 

15 ‘‘subsection (a)(4)’’ and inserting ‘‘sub16 sections (a)(4) and (a)(6)’’. 

17 (5) Section 7448(j)(1) of such Code is amend18 ed— 

19 (A) in subparagraph (A), by striking 

20 ‘‘service or retired’’ and inserting ‘‘service, re21 tired’’, and by inserting ‘‘, or receiving any an22 nuity under chapters 83 or 84 of title 5, United 

23 States Code,’’ after ‘‘section 7447’’, and 


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1 (B) in the last sentence, by striking ‘‘sub2 sections (a) (6) and (7)’’ and inserting ‘‘para3 graphs (8) and (9) of subsection (a)’’. 

4 (6) Section 7448(m)(1) of such Code, as 

5 amended by this Act, is amended by inserting ‘‘or 

6 any annuity under chapters 83 or 84 of title 5, 

7 United States Code’’ after ‘‘7447(d)’’. 

8 (7) Section 7448(n) of such Code is amended 

9 by inserting ‘‘his years of service pursuant to any 

10 appointment under section 7443A,’’ after ‘‘of the 

11 Tax Court,’’. 

12 (8) Section 3121(b)(5)(E) of such Code is 

13 amended by inserting ‘‘or special trial judge’’ before 

14 ‘‘of the United States Tax Court’’. 

15 (9) Section 210(a)(5)(E) of the Social Security 

16 Act is amended by inserting ‘‘or special trial judge’’ 

17 before ‘‘of the United States Tax Court’’. 

18 SEC. 855. JURISDICTION OF TAX COURT OVER COLLECTION 

19 DUE PROCESS CASES. 

20 (a) IN GENERAL.—Paragraph (1) of section 6330(d) 

21 of the Internal Revenue Code of 1986 (relating to pro22 ceeding after hearing) is amended to read as follows: 

23 ‘‘(1) JUDICIAL REVIEW OF DETERMINATION.— 

24 The person may, within 30 days of a determination 

25 under this section, appeal such determination to the 


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1 Tax Court (and the Tax Court shall have jurisdic2 tion with respect to such matter).’’. 

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

4 this section shall apply to determinations made after the 

5 date which is 60 days after the date of the enactment of 

6 this Act. 

7 SEC. 856. PROVISIONS FOR RECALL. 

8 (a) IN GENERAL.—Part I of subchapter C of chapter 

9 76 of the Internal Revenue Code of 1986 is amended by 

10 inserting after section 7443A the following new section: 

11 ‘‘SEC. 7443B. RECALL OF SPECIAL TRIAL JUDGES OF THE 

12 TAX COURT. 

13 ‘‘(a) RECALLING OF RETIRED SPECIAL TRIAL

14 JUDGES.—Any individual who has retired pursuant to the 

15 applicable provisions of title 5, United States Code, upon 

16 reaching the age and service requirements established 

17 therein, may at or after retirement be called upon by the 

18 chief judge of the Tax Court to perform such judicial du19 ties with the Tax Court as may be requested of such indi20 vidual for any period or periods specified by the chief 

21 judge; except that in the case of any such individual— 

22 ‘‘(1) the aggregate of such periods in any 1 cal23 endar year shall not (without such individual’s con24 sent) exceed 90 calendar days, and 


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1 ‘‘(2) such individual shall be relieved of per2 forming such duties during any period in which ill3 ness or disability precludes the performance of such 

4 duties. 

5 Any act, or failure to act, by an individual performing ju6 dicial duties pursuant to this subsection shall have the 

7 same force and effect as if it were the act (or failure to 

8 act) of a special trial judge of the Tax Court. 

9 ‘‘(b) COMPENSATION.—For the year in which a pe10 riod of recall occurs, the special trial judge shall receive, 

11 in addition to the annuity provided under the applicable 

12 provisions of title 5, United States Code, an amount equal 

13 to the difference between that annuity and the current sal14 ary of the office to which the special trial judge is recalled. 

15 ‘‘(c) RULEMAKING AUTHORITY.—The provisions of 

16 this section may be implemented under such rules as may 

17 be promulgated by the Tax Court.’’ 

18 (b) CONFORMING AMENDMENT.—The table of sec19 tions for part I of subchapter C of chapter 76 of such 

20 Code is amended by inserting after the item relating to 

21 section 7443A the following new item: 

‘‘Sec. 7443B. Recall of special trial judges of the Tax Court.’’. 


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1 SEC. 857. AUTHORITY FOR SPECIAL TRIAL JUDGES TO 

2 HEAR AND DECIDE CERTAIN EMPLOYMENT 

3 STATUS CASES. 

4 (a) IN GENERAL.—Section 7443A(b) of the Internal 

5 Revenue Code of 1986 (relating to proceedings which may 

6 be assigned to special trial judges) is amended by striking 

7 ‘‘and’’ at the end of paragraph (4), by redesignating para8 graph (5) as paragraph (6), and by inserting after para9 graph (4) the following new paragraph: 

10 ‘‘(5) any proceeding under section 7436(c), 

11 and’’. 

12 (b) CONFORMING AMENDMENT.—Section 7443A(c) 

13 of such Code is amended by striking ‘‘or (4)’’ and insert14 ing ‘‘(4), or (5)’’. 

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

16 this section shall apply to any proceeding under section 

17 7436(c) of the Internal Revenue Code of 1986 with re18 spect to which a decision has not become final (as deter19 mined under section 7481 of such Code) before the date 

20 of the enactment of this Act. 

21 SEC. 858. CONFIRMATION OF AUTHORITY OF TAX COURT 

22 TO APPLY DOCTRINE OF EQUITABLE 

23 RECOUPMENT. 

24 (a) CONFIRMATION OF AUTHORITY OF TAX COURT

25 TO APPLY DOCTRINE OF EQUITABLE RECOUPMENT.— 

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1 lating to jurisdiction over other years and quarters) is 

2 amended by adding at the end the following new sentence: 

3 ‘‘Notwithstanding the preceding sentence, the Tax Court 

4 may apply the doctrine of equitable recoupment to the 

5 same extent that it is available in civil tax cases before 

6 the district courts of the United States and the United 

7 States Court of Federal Claims.’’. 

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

9 this section shall apply to any action or proceeding in the 

10 United States Tax Court with respect to which a decision 

11 has not become final (as determined under section 7481 

12 of the Internal Revenue Code of 1986) as of the date of 

13 the enactment of this Act. 

14 SEC. 859. TAX COURT FILING FEE IN ALL CASES COM15 MENCED BY FILING PETITION. 

16 (a) IN GENERAL.—Section 7451 of the Internal Rev17 enue Code of 1986 (relating to fee for filing a Tax Court 

18 petition) is amended by striking all that follows ‘‘petition’’ 

19 and inserting a period. 

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

21 this section shall take effect on the date of the enactment 

22 of this Act. 


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1 SEC. 860. EXPANDED USE OF TAX COURT PRACTICE FEE 

2 FOR PRO SE TAXPAYERS. 

3 (a) IN GENERAL.—Section 7475(b) of the Internal 

4 Revenue Code of 1986 (relating to use of fees) is amended 

5 by inserting before the period at the end ‘‘and to provide 

6 services to pro se taxpayers’’. 

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

8 this section shall take effect on the date of the enactment 

9 of this Act. 

10 Subtitle F—Other Provisions 

11 SEC. 861. EXTENSION TO ALL GOVERNMENTAL PLANS OF 

12 CURRENT MORATORIUM ON APPLICATION OF 

13 CERTAIN NONDISCRIMINATION RULES APPLI14 CABLE TO STATE AND LOCAL PLANS. 

15 (a) IN GENERAL.— 

16 (1) Subparagraph (G) of section 401(a)(5) and 

17 subparagraph (G) of section 401(a)(26) of the Inter18 nal Revenue Code of 1986 are each amended by 

19 striking ‘‘section 414(d))’’ and all that follows and 

20 inserting ‘‘section 414(d)).’’. 

21 (2) Subparagraph (G) of section 401(k)(3) of 

22 such Code and paragraph (2) of section 1505(d) of 

23 the Taxpayer Relief Act of 1997 (Public Law 105– 

24 34; 111 Stat. 1063) are each amended by striking 

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1 ical subdivision thereof (or agency or instrumentality 

2 thereof)’’. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) The heading of subparagraph (G) of section 

5 401(a)(5) of the Internal Revenue Code of 1986 is 

6 amended by striking ‘‘STATE AND LOCAL GOVERN7 MENTAL’’ and inserting ‘‘GOVERNMENTAL’’. 

8 (2) The heading of subparagraph (G) of section 

9 401(a)(26) of such Code is amended by striking 

10 ‘‘EXCEPTION FOR STATE AND LOCAL’’ and inserting 

11 ‘‘EXCEPTION FOR’’. 

12 (3) Section 401(k)(3)(G) of such Code is 

13 amended by inserting ‘‘GOVERNMENTAL PLAN.—’’ 

14 after ‘‘(G)’’. 

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

16 this section shall apply to any year beginning after the 

17 date of the enactment of this Act. 

18 SEC. 862. ELIMINATION OF AGGREGATE LIMIT FOR USAGE 

19 OF EXCESS FUNDS FROM BLACK LUNG DIS20 ABILITY TRUSTS. 

21 (a) IN GENERAL.—So much of section 501(c)(21)(C) 

22 of the Internal Revenue Code of 1986 (relating to black 

23 lung disability trusts) as precedes the last sentence is 

24 amended to read as follows: 


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1 ‘‘(C) Payments described in subparagraph 

2 (A)(i)(IV) may be made from such trust during 

3 a taxable year only to the extent that the aggre4 gate amount of such payments during such tax5 able year does not exceed the excess (if any), as 

6 of the close of the preceding taxable year, of— 

7 ‘‘(i) the fair market value of the as8 sets of the trust, over 

9 ‘‘(ii) 110 percent of the present value 

10 of the liability described in subparagraph 

11 (A)(i)(I) of such person.’’. 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2006. 

15 SEC. 863. TREATMENT OF DEATH BENEFITS FROM COR16 PORATE-OWNED LIFE INSURANCE. 

17 (a) IN GENERAL.—Section 101 of the Internal Rev18 enue Code of 1986 (relating to certain death benefits) is 

19 amended by adding at the end the following new sub20 section: 

21 ‘‘(j) TREATMENT OF CERTAIN EMPLOYER-OWNED

22 LIFE INSURANCE CONTRACTS.— 

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1 holder by reason of paragraph (1) of subsection (a) 

2 shall not exceed an amount equal to the sum of the 

3 premiums and other amounts paid by the policy4 holder for the contract. 

5 ‘‘(2) EXCEPTIONS.—In the case of an employer6 owned life insurance contract with respect to which 

7 the notice and consent requirements of paragraph 

8 (4) are met, paragraph (1) shall not apply to any of 

9 the following: 

10 ‘‘(A) EXCEPTIONS BASED ON INSURED’S

11 STATUS.—Any amount received by reason of 

12 the death of an insured who, with respect to an 

13 applicable policyholder— 

14 ‘‘(i) was an employee at any time dur15 ing the 12-month period before the in16 sured’s death, or 

17 ‘‘(ii) is, at the time the contract is 

18 issued— 

19 ‘‘(I) a director, 

20 ‘‘(II) a highly compensated em21 ployee within the meaning of section 

22 414(q) (without regard to paragraph 

23 (1)(B)(ii) thereof), or 

24 ‘‘(III) a highly compensated indi25 vidual within the meaning of section 


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1 105(h)(5), except that ‘35 percent’ 

2 shall be substituted for ‘25 percent’ in 

3 subparagraph (C) thereof. 

4 ‘‘(B) EXCEPTION FOR AMOUNTS PAID TO

5 INSURED’S HEIRS.—Any amount received by 

6 reason of the death of an insured to the ex7 tent— 

8 ‘‘(i) the amount is paid to a member 

9 of the family (within the meaning of sec10 tion 267(c)(4)) of the insured, any indi11 vidual who is the designated beneficiary of 

12 the insured under the contract (other than 

13 the applicable policyholder), a trust estab14 lished for the benefit of any such member 

15 of the family or designated beneficiary, or 

16 the estate of the insured, or 

17 ‘‘(ii) the amount is used to purchase 

18 an equity (or capital or profits) interest in 

19 the applicable policyholder from any person 

20 described in clause (i). 

21 ‘‘(3) EMPLOYER-OWNED LIFE INSURANCE CON22 TRACT.— 

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

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1 ance contract’ means a life insurance contract 

2 which— 

3 ‘‘(i) is owned by a person engaged in 

4 a trade or business and under which such 

5 person (or a related person described in 

6 subparagraph (B)(ii)) is directly or indi7 rectly a beneficiary under the contract, and 

8 ‘‘(ii) covers the life of an insured who 

9 is an employee with respect to the trade or 

10 business of the applicable policyholder on 

11 the date the contract is issued. 

12 For purposes of the preceding sentence, if cov13 erage for each insured under a master contract 

14 is treated as a separate contract for purposes of 

15 sections 817(h), 7702, and 7702A, coverage for 

16 each such insured shall be treated as a separate 

17 contract. 

18 ‘‘(B) APPLICABLE POLICYHOLDER.—For 

19 purposes of this subsection— 

20 ‘‘(i) IN GENERAL.—The term ‘applica21 ble policyholder’ means, with respect to 

22 any employer-owned life insurance con23 tract, the person described in subpara24 graph (A)(i) which owns the contract. 


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1 ‘‘(ii) RELATED PERSONS.—The term 

2 ‘applicable policyholder’ includes any per3 son which— 

4 ‘‘(I) bears a relationship to the 

5 person described in clause (i) which is 

6 specified in section 267(b) or 

7 707(b)(1), or 

8 ‘‘(II) is engaged in trades or 

9 businesses with such person which are 

10 under common control (within the 

11 meaning of subsection (a) or (b) of 

12 section 52). 

13 ‘‘(4) NOTICE AND CONSENT REQUIREMENTS.— 

14 The notice and consent requirements of this para15 graph are met if, before the issuance of the contract, 

16 the employee— 

17 ‘‘(A) is notified in writing that the applica18 ble policyholder intends to insure the employee’s 

19 life and the maximum face amount for which 

20 the employee could be insured at the time the 

21 contract was issued, 

22 ‘‘(B) provides written consent to being in23 sured under the contract and that such cov24 erage may continue after the insured terminates 

25 employment, and 


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1 ‘‘(C) is informed in writing that an appli2 cable policyholder will be a beneficiary of any 

3 proceeds payable upon the death of the em4 ployee. 

5 ‘‘(5) DEFINITIONS.—For purposes of this sub6 section— 

7 ‘‘(A) EMPLOYEE.—The term ‘employee’ in8 cludes an officer, director, and highly com9 pensated employee (within the meaning of sec10 tion 414(q)). 

11 ‘‘(B) INSURED.—The term ‘insured’ 

12 means, with respect to an employer-owned life 

13 insurance contract, an individual covered by the 

14 contract who is a United States citizen or resi15 dent. In the case of a contract covering the 

16 joint lives of 2 individuals, references to an in17 sured include both of the individuals.’’. 

18 (b) REPORTING REQUIREMENTS.—Subpart A of part 

19 III of subchapter A of chapter 61 of the Internal Revenue 

20 Code of 1986 (relating to information concerning persons 

21 subject to special provisions) is amended by inserting after 

22 section 6039H the following new section: 


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1 ‘‘SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO 

2 EMPLOYER-OWNED LIFE INSURANCE CON3 TRACTS. 

4 ‘‘(a) IN GENERAL.—Every applicable policyholder 

5 owning 1 or more employer-owned life insurance contracts 

6 issued after the date of the enactment of this section shall 

7 file a return (at such time and in such manner as the 

8 Secretary shall by regulations prescribe) showing for each 

9 year such contracts are owned— 

10 ‘‘(1) the number of employees of the applicable 

11 policyholder at the end of the year, 

12 ‘‘(2) the number of such employees insured 

13 under such contracts at the end of the year, 

14 ‘‘(3) the total amount of insurance in force at 

15 the end of the year under such contracts, 

16 ‘‘(4) the name, address, and taxpayer identifica17 tion number of the applicable policyholder and the 

18 type of business in which the policyholder is en19 gaged, and 

20 ‘‘(5) that the applicable policyholder has a valid 

21 consent for each insured employee (or, if all such 

22 consents are not obtained, the number of insured 

23 employees for whom such consent was not obtained). 

24 ‘‘(b) RECORDKEEPING REQUIREMENT.—Each appli25 cable policyholder owning 1 or more employer-owned life 

26 insurance contracts during any year shall keep such 


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1 records as may be necessary for purposes of determining 

2 whether the requirements of this section and section 

3 101(j) are met. 

4 ‘‘(c) DEFINITIONS.—Any term used in this section 

5 which is used in section 101(j) shall have the same mean6 ing given such term by section 101(j).’’. 

7 (c) CONFORMING AMENDMENTS.— 

8 (1) Paragraph (1) of section 101(a) of the In9 ternal Revenue Code of 1986 is amended by striking 

10 ‘‘and subsection (f)’’ and inserting ‘‘subsection (f), 

11 and subsection (j)’’. 

12 (2) The table of sections for subpart A of part 

13 III of subchapter A of chapter 61 of such Code is 

14 amended by inserting after the item relating to sec15 tion 6039H the following new item: 

‘‘Sec. 6039I. Returns and records with respect to employer-owned life insurance 

contracts.’’. 

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

17 this section shall apply to life insurance contracts issued 

18 after the date of the enactment of this Act, except for a 

19 contract issued after such date pursuant to an exchange 

20 described in section 1035 of the Internal Revenue Code 

21 of 1986 for a contract issued on or prior to that date. 

22 For purposes of the preceding sentence, any material in23 crease in the death benefit or other material change shall 

24 cause the contract to be treated as a new contract except 


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1 that, in the case of a master contract (within the meaning 

2 of section 264(f)(4)(E) of such Code), the addition of cov3 ered lives shall be treated as a new contract only with re4 spect to such additional covered lives. 

5 SEC. 864. TREATMENT OF TEST ROOM SUPERVISORS AND 

6 PROCTORS WHO ASSIST IN THE ADMINISTRA7 TION OF COLLEGE ENTRANCE AND PLACE8 MENT EXAMS. 

9 (a) IN GENERAL.—Section 530 of the Revenue Rec10 onciliation Act of 1978 is amended by adding at the end 

11 the following new subsection: 

12 ‘‘(f) TREATMENT OF TEST ROOM SUPERVISORS AND

13 PROCTORS WHO ASSIST IN THE ADMINISTRATION OF

14 COLLEGE ENTRANCE AND PLACEMENT EXAMS.— 

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

16 described in paragraph (2) who is providing services 

17 as a test proctor or room supervisor by assisting in 

18 the administration of college entrance or placement 

19 examinations, this section shall be applied to such 

20 services performed after December 31, 2006 (and 

21 remuneration paid for such services) without regard 

22 to subsection (a)(3) thereof. 

23 ‘‘(2) APPLICABILITY.—An individual is de24 scribed in this paragraph if the individual— 


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1 ‘‘(A) is providing the services described in 

2 subsection (a) to an organization described in 

3 section 501(c), and exempt from tax under sec4 tion 501(a), of the Internal Revenue Code of 

5 1986, and 

6 ‘‘(B) is not otherwise treated as an em7 ployee of such organization for purposes of sub8 title C of such Code (relating to employment 

9 taxes).’’. 

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

11 this section shall apply to remuneration for services per12 formed after December 31, 2006. 

13 SEC. 865. GRANDFATHER RULE FOR CHURCH PLANS 

14 WHICH SELF-ANNUITIZE. 

15 (a) IN GENERAL.—In the case of any plan year end16 ing after the date of the enactment of this Act, annuity 

17 payments provided with respect to any account maintained 

18 for a participant or beneficiary under a qualified church 

19 plan shall not fail to satisfy the requirements of section 

20 401(a)(9) of the Internal Revenue Code of 1986 merely 

21 because the payments are not made under an annuity con22 tract purchased from an insurance company if such pay23 ments would not fail such requirements if provided with 

24 respect to a retirement income account described in sec25 tion 403(b)(9) of such Code. 


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1 (b) QUALIFIED CHURCH PLAN.—For purposes of 

2 this section, the term ‘‘qualified church plan’’ means any 

3 money purchase pension plan described in section 401(a) 

4 of such Code which— 

5 (1) is a church plan (as defined in section 

6 414(e) of such Code) with respect to which the elec7 tion provided by section 410(d) of such Code has not 

8 been made, and 

9 (2) was in existence on April 17, 2002. 

10 SEC. 866. EXEMPTION FOR INCOME FROM LEVERAGED 

11 REAL ESTATE HELD BY CHURCH PLANS. 

12 (a) IN GENERAL.—Section 514(c)(9)(C) of the Inter13 nal Revenue Code of 1986 is amended by striking ‘‘or’’ 

14 after clause (ii), by striking the period at the end of clause 

15 (iii) and inserting ‘‘; or’’, and by inserting after clause (iii) 

16 the following: 

17 ‘‘(iv) a retirement income account de18 scribed in section 403(b)(9).’’. 

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

20 subsection (a) shall apply to taxable years beginning on 

21 or after the date of enactment of this Act. 

22 SEC. 867. CHURCH PLAN RULE. 

23 (a) IN GENERAL.—Paragraph (11) of section 415(b) 

24 of the Internal Revenue Code of 1986 is amended by add25 ing at the end the following: ‘‘Subparagraph (B) of paraVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00675 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 graph (1) shall not apply to a plan maintained by an orga2 nization described in section 3121(w)(3)(A) except with 

3 respect to highly compensated benefits. For purposes of 

4 this paragraph, the term ‘highly compensated benefits’ 

5 means any benefits accrued for an employee in any year 

6 on or after the first year in which such employee is a high7 ly compensated employee (as defined in section 414(q)) 

8 of the organization described in section 3121(w)(3)(A). 

9 For purposes of applying paragraph (1)(B) to highly com10 pensated benefits, all benefits of the employee otherwise 

11 taken into account (without regard to this paragraph) 

12 shall be taken into account.’’. 

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

14 this section shall apply to years beginning after December 

15 31, 2006. 

16 SEC. 868. GRATUITOUS TRANSFER FOR BENEFITS OF EM17 PLOYEES. 

18 (a) IN GENERAL.—Subparagraph (E) of section 

19 664(g)(3) of the Internal Revenue Code of 1986 is amend20 ed by inserting ‘‘(determined on the basis of fair market 

21 value of securities when allocated to participants)’’ after 

22 ‘‘paragraph (7)’’. 

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

24 this section shall take effect on the date of the enactment 

25 of this Act. 


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1 TITLE IX—INCREASE IN PEN2 SION PLAN DIVERSIFICATION 

3 AND PARTICIPATION AND 

4 OTHER PENSION PROVISIONS 

5 SEC. 901. DEFINED CONTRIBUTION PLANS REQUIRED TO 

6 PROVIDE EMPLOYEES WITH FREEDOM TO IN7 VEST THEIR PLAN ASSETS. 

8 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

9 (1) QUALIFICATION REQUIREMENT.—Section 

10 401(a) of the Internal Revenue Code of 1986 (relat11 ing to qualified pension, profit-sharing, and stock 

12 bonus plans) is amended by inserting after para13 graph (34) the following new paragraph: 

14 ‘‘(35) DIVERSIFICATION REQUIREMENTS FOR

15 CERTAIN DEFINED CONTRIBUTION PLANS.— 

16 ‘‘(A) IN GENERAL.—A trust which is part 

17 of an applicable defined contribution plan shall 

18 not be treated as a qualified trust unless the 

19 plan meets the diversification requirements of 

20 subparagraphs (B), (C), and (D). 

21 ‘‘(B) EMPLOYEE CONTRIBUTIONS AND

22 ELECTIVE DEFERRALS INVESTED IN EMPLOYER

23 SECURITIES.—In the case of the portion of an 

24 applicable individual’s account attributable to 

25 employee contributions and elective deferrals 


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1 which is invested in employer securities, a plan 

2 meets the requirements of this subparagraph if 

3 the applicable individual may elect to direct the 

4 plan to divest any such securities and to rein5 vest an equivalent amount in other investment 

6 options meeting the requirements of subpara7 graph (D). 

8 ‘‘(C) EMPLOYER CONTRIBUTIONS IN9 VESTED IN EMPLOYER SECURITIES.—In the 

10 case of the portion of the account attributable 

11 to employer contributions other than elective 

12 deferrals which is invested in employer securi13 ties, a plan meets the requirements of this sub14 paragraph if each applicable individual who— 

15 ‘‘(i) is a participant who has com16 pleted at least 3 years of service, or 

17 ‘‘(ii) is a beneficiary of a participant 

18 described in clause (i) or of a deceased 

19 participant, 

20 may elect to direct the plan to divest any such 

21 securities and to reinvest an equivalent amount 

22 in other investment options meeting the re23 quirements of subparagraph (D). 

24 ‘‘(D) INVESTMENT OPTIONS.— 


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1 ‘‘(i) IN GENERAL.—The requirements 

2 of this subparagraph are met if the plan 

3 offers not less than 3 investment options, 

4 other than employer securities, to which an 

5 applicable individual may direct the pro6 ceeds from the divestment of employer se7 curities pursuant to this paragraph, each 

8 of which is diversified and has materially 

9 different risk and return characteristics. 

10 ‘‘(ii) TREATMENT OF CERTAIN RE11 STRICTIONS AND CONDITIONS.— 

12 ‘‘(I) TIME FOR MAKING INVEST13 MENT CHOICES.—A plan shall not be 

14 treated as failing to meet the require15 ments of this subparagraph merely be16 cause the plan limits the time for di17 vestment and reinvestment to peri18 odic, reasonable opportunities occur19 ring no less frequently than quarterly. 

20 ‘‘(II) CERTAIN RESTRICTIONS

21 AND CONDITIONS NOT ALLOWED.— 

22 Except as provided in regulations, a 

23 plan shall not meet the requirements 

24 of this subparagraph if the plan im25 poses restrictions or conditions with 


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1 respect to the investment of employer 

2 securities which are not imposed on 

3 the investment of other assets of the 

4 plan. This subclause shall not apply to 

5 any restrictions or conditions imposed 

6 by reason of the application of securi7 ties laws. 

8 ‘‘(E) APPLICABLE DEFINED CONTRIBU9 TION PLAN.—For purposes of this paragraph— 

10 ‘‘(i) IN GENERAL.—The term ‘applica11 ble defined contribution plan’ means any 

12 defined contribution plan which holds any 

13 publicly traded employer securities. 

14 ‘‘(ii) EXCEPTION FOR CERTAIN

15 ESOPS.—Such term does not include an 

16 employee stock ownership plan if— 

17 ‘‘(I) there are no contributions to 

18 such plan (or earnings thereunder) 

19 which are held within such plan and 

20 are subject to subsection (k) or (m), 

21 and 

22 ‘‘(II) such plan is a separate plan 

23 for purposes of section 414(l) with re24 spect to any other defined benefit plan 

25 or defined contribution plan mainVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00680 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tained by the same employer or em2 ployers. 

3 ‘‘(iii) EXCEPTION FOR ONE PARTICI4 PANT PLANS.—Such term does not include 

5 a one-participant retirement plan. 

6 ‘‘(iv) ONE-PARTICIPANT RETIREMENT

7 PLAN.—For purposes of clause (iii), the 

8 term ‘one-participant retirement plan’ 

9 means a retirement plan that— 

10 ‘‘(I) on the first day of the plan 

11 year covered only one individual (or 

12 the individual and the individual’s 

13 spouse) and the individual owned 100 

14 percent of the plan sponsor (whether 

15 or not incorporated), or covered only 

16 one or more partners (or partners and 

17 their spouses) in the plan sponsor, 

18 ‘‘(II) meets the minimum cov19 erage requirements of section 410(b) 

20 without being combined with any 

21 other plan of the business that covers 

22 the employees of the business, 

23 ‘‘(III) does not provide benefits 

24 to anyone except the individual (and 


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1 the individual’s spouse) or the part2 ners (and their spouses), 

3 ‘‘(IV) does not cover a business 

4 that is a member of an affiliated serv5 ice group, a controlled group of cor6 porations, or a group of businesses 

7 under common control, and 

8 ‘‘(V) does not cover a business 

9 that uses the services of leased em10 ployees (within the meaning of section 

11 414(n)). 

12 For purposes of this clause, the term ‘part13 ner’ includes a 2-percent shareholder (as 

14 defined in section 1372(b)) of an S cor15 poration. 

16 ‘‘(F) CERTAIN PLANS TREATED AS HOLD17 ING PUBLICLY TRADED EMPLOYER SECURI18 TIES.— 

19 ‘‘(i) IN GENERAL.—Except as pro20 vided in regulations or in clause (ii), a plan 

21 holding employer securities which are not 

22 publicly traded employer securities shall be 

23 treated as holding publicly traded employer 

24 securities if any employer corporation, or 

25 any member of a controlled group of corVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00682 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 porations which includes such employer 

2 corporation, has issued a class of stock 

3 which is a publicly traded employer secu4 rity. 

5 ‘‘(ii) EXCEPTION FOR CERTAIN CON6 TROLLED GROUPS WITH PUBLICLY TRAD7 ED SECURITIES.—Clause (i) shall not 

8 apply to a plan if— 

9 ‘‘(I) no employer corporation, or 

10 parent corporation of an employer 

11 corporation, has issued any publicly 

12 traded employer security, and 

13 ‘‘(II) no employer corporation, or 

14 parent corporation of an employer 

15 corporation, has issued any special 

16 class of stock which grants particular 

17 rights to, or bears particular risks for, 

18 the holder or issuer with respect to 

19 any corporation described in clause (i) 

20 which has issued any publicly traded 

21 employer security. 

22 ‘‘(iii) DEFINITIONS.—For purposes of 

23 this subparagraph, the term— 

24 ‘‘(I) ‘controlled group of corpora25 tions’ has the meaning given such 


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1 term by section 1563(a), except that 

2 ‘50 percent’ shall be substituted for 

3 ‘80 percent’ each place it appears, 

4 ‘‘(II) ‘employer corporation’ 

5 means a corporation which is an em6 ployer maintaining the plan, and 

7 ‘‘(III) ‘parent corporation’ has 

8 the meaning given such term by sec9 tion 424(e). 

10 ‘‘(G) OTHER DEFINITIONS.—For purposes 

11 of this paragraph— 

12 ‘‘(i) APPLICABLE INDIVIDUAL.—The 

13 term ‘applicable individual’ means— 

14 ‘‘(I) any participant in the plan, 

15 and 

16 ‘‘(II) any beneficiary who has an 

17 account under the plan with respect to 

18 which the beneficiary is entitled to ex19 ercise the rights of a participant. 

20 ‘‘(ii) ELECTIVE DEFERRAL.—The 

21 term ‘elective deferral’ means an employer 

22 contribution described in section 

23 402(g)(3)(A). 

24 ‘‘(iii) EMPLOYER SECURITY.—The 

25 term ‘employer security’ has the meaning 


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1 given such term by section 407(d)(1) of 

2 the Employee Retirement Income Security 

3 Act of 1974. 

4 ‘‘(iv) EMPLOYEE STOCK OWNERSHIP

5 PLAN.—The term ‘employee stock owner6 ship plan’ has the meaning given such 

7 term by section 4975(e)(7). 

8 ‘‘(v) PUBLICLY TRADED EMPLOYER

9 SECURITIES.—The term ‘publicly traded 

10 employer securities’ means employer secu11 rities which are readily tradable on an es12 tablished securities market. 

13 ‘‘(vi) YEAR OF SERVICE.—The term 

14 ‘year of service’ has the meaning given 

15 such term by section 411(a)(5). 

16 ‘‘(H) TRANSITION RULE FOR SECURITIES

17 ATTRIBUTABLE TO EMPLOYER CONTRIBU18 TIONS.— 

19 ‘‘(i) RULES PHASED IN OVER 3

20 YEARS.— 

21 ‘‘(I) IN GENERAL.—In the case 

22 of the portion of an account to which 

23 subparagraph (C) applies and which 

24 consists of employer securities ac25 quired in a plan year beginning before 


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1 January 1, 2007, subparagraph (C) 

2 shall only apply to the applicable per3 centage of such securities. This sub4 paragraph shall be applied separately 

5 with respect to each class of securi6 ties. 

7 ‘‘(II) EXCEPTION FOR CERTAIN

8 PARTICIPANTS AGED 55 OR OVER.— 

9 Subclause (I) shall not apply to an 

10 applicable individual who is a partici11 pant who has attained age 55 and 

12 completed at least 3 years of service 

13 before the first plan year beginning 

14 after December 31, 2005. 

15 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

16 purposes of clause (i), the applicable per17 centage shall be determined as follows: ‘‘Plan year to which The applicable 

subparagraph (C) applies: percentage is: 

1st ...................................................................................................... 33

2d....................................................................................................... 66

3d and following ................................................................................. 100.’’. 

18 (2) CONFORMING AMENDMENTS.— 

19 (A) Section 401(a)(28)(B) of such Code 

20 (relating to additional requirements relating to 

21 employee stock ownership plans) is amended by 

22 adding at the end the following new clause: 


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1 ‘‘(v) EXCEPTION.—This subparagraph 

2 shall not apply to an applicable defined 

3 contribution plan (as defined in paragraph 

4 (35)(E)).’’ 

5 (B) Section 409(h)(7) of such Code is 

6 amended by inserting ‘‘or subparagraph (B) or 

7 (C) of section 401(a)(35)’’ before the period at 

8 the end. 

9 (C) Section 4980(c)(3)(A) of such Code is 

10 amended by striking ‘‘if—’’ and all that follows 

11 and inserting ‘‘if the requirements of subpara12 graphs (B), (C), and (D) are met.’’ 

13 (b) AMENDMENTS OF ERISA.— 

14 (1) IN GENERAL.—Section 204 of the Employee 

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

16 1054) is amended by redesignating subsection (j) as 

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

18 the following new subsection: 

19 ‘‘(j) DIVERSIFICATION REQUIREMENTS FOR CERTAIN

20 INDIVIDUAL ACCOUNT PLANS.— 

21 ‘‘(1) IN GENERAL.—An applicable individual ac22 count plan shall meet the diversification require23 ments of paragraphs (2), (3), and (4). 

24 ‘‘(2) EMPLOYEE CONTRIBUTIONS AND ELEC25 TIVE DEFERRALS INVESTED IN EMPLOYER SECURIVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00687 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 TIES.—In the case of the portion of an applicable in2 dividual’s account attributable to employee contribu3 tions and elective deferrals which is invested in em4 ployer securities, a plan meets the requirements of 

5 this paragraph if the applicable individual may elect 

6 to direct the plan to divest any such securities and 

7 to reinvest an equivalent amount in other investment 

8 options meeting the requirements of paragraph (4). 

9 ‘‘(3) EMPLOYER CONTRIBUTIONS INVESTED IN

10 EMPLOYER SECURITIES.—In the case of the portion 

11 of the account attributable to employer contributions 

12 other than elective deferrals which is invested in em13 ployer securities, a plan meets the requirements of 

14 this paragraph if each applicable individual who— 

15 ‘‘(A) is a participant who has completed at 

16 least 3 years of service, or 

17 ‘‘(B) is a beneficiary of a participant de18 scribed in subparagraph (A) or of a deceased 

19 participant, 

20 may elect to direct the plan to divest any such secu21 rities and to reinvest an equivalent amount in other 

22 investment options meeting the requirements of 

23 paragraph (4). 

24 ‘‘(4) INVESTMENT OPTIONS.— 


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1 ‘‘(A) IN GENERAL.—The requirements of 

2 this paragraph are met if the plan offers not 

3 less than 3 investment options, other than em4 ployer securities, to which an applicable indi5 vidual may direct the proceeds from the divest6 ment of employer securities pursuant to this 

7 subsection, each of which is diversified and has 

8 materially different risk and return characteris9 tics. 

10 ‘‘(B) TREATMENT OF CERTAIN RESTRIC11 TIONS AND CONDITIONS.— 

12 ‘‘(i) TIME FOR MAKING INVESTMENT

13 CHOICES.—A plan shall not be treated as 

14 failing to meet the requirements of this 

15 paragraph merely because the plan limits 

16 the time for divestment and reinvestment 

17 to periodic, reasonable opportunities occur18 ring no less frequently than quarterly. 

19 ‘‘(ii) CERTAIN RESTRICTIONS AND

20 CONDITIONS NOT ALLOWED.—Except as 

21 provided in regulations, a plan shall not 

22 meet the requirements of this paragraph if 

23 the plan imposes restrictions or conditions 

24 with respect to the investment of employer 

25 securities which are not imposed on the inVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00689 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 vestment of other assets of the plan. This 

2 subparagraph shall not apply to any re3 strictions or conditions imposed by reason 

4 of the application of securities laws. 

5 ‘‘(5) APPLICABLE INDIVIDUAL ACCOUNT

6 PLAN.—For purposes of this subsection— 

7 ‘‘(A) IN GENERAL.—The term ‘applicable 

8 individual account plan’ means any individual 

9 account plan (as defined in section 3(34)) which 

10 holds any publicly traded employer securities. 

11 ‘‘(B) EXCEPTION FOR CERTAIN ESOPS.— 

12 Such term does not include an employee stock 

13 ownership plan if— 

14 ‘‘(i) there are no contributions to such 

15 plan (or earnings thereunder) which are 

16 held within such plan and are subject to 

17 subsection (k) or (m) of section 401 of the 

18 Internal Revenue Code of 1986, and 

19 ‘‘(ii) such plan is a separate plan (for 

20 purposes of section 414(l) of such Code) 

21 with respect to any other defined benefit 

22 plan or individual account plan maintained 

23 by the same employer or employers. 

24 ‘‘(C) EXCEPTION FOR ONE PARTICIPANT

25 PLANS.—Such term shall not include a one-parVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00690 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ticipant retirement plan (as defined in section 

2 101(i)(8)(B)). 

3 ‘‘(D) CERTAIN PLANS TREATED AS HOLD4 ING PUBLICLY TRADED EMPLOYER SECURI5 TIES.— 

6 ‘‘(i) IN GENERAL.—Except as pro7 vided in regulations or in clause (ii), a plan 

8 holding employer securities which are not 

9 publicly traded employer securities shall be 

10 treated as holding publicly traded employer 

11 securities if any employer corporation, or 

12 any member of a controlled group of cor13 porations which includes such employer 

14 corporation, has issued a class of stock 

15 which is a publicly traded employer secu16 rity. 

17 ‘‘(ii) EXCEPTION FOR CERTAIN CON18 TROLLED GROUPS WITH PUBLICLY TRAD19 ED SECURITIES.—Clause (i) shall not 

20 apply to a plan if— 

21 ‘‘(I) no employer corporation, or 

22 parent corporation of an employer 

23 corporation, has issued any publicly 

24 traded employer security, and 


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1 ‘‘(II) no employer corporation, or 

2 parent corporation of an employer 

3 corporation, has issued any special 

4 class of stock which grants particular 

5 rights to, or bears particular risks for, 

6 the holder or issuer with respect to 

7 any corporation described in clause (i) 

8 which has issued any publicly traded 

9 employer security. 

10 ‘‘(iii) DEFINITIONS.—For purposes of 

11 this subparagraph, the term— 

12 ‘‘(I) ‘controlled group of corpora13 tions’ has the meaning given such 

14 term by section 1563(a) of the Inter15 nal Revenue Code of 1986, except 

16 that ‘50 percent’ shall be substituted 

17 for ‘80 percent’ each place it appears, 

18 ‘‘(II) ‘employer corporation’ 

19 means a corporation which is an em20 ployer maintaining the plan, and 

21 ‘‘(III) ‘parent corporation’ has 

22 the meaning given such term by sec23 tion 424(e) of such Code. 

24 ‘‘(6) OTHER DEFINITIONS.—For purposes of 

25 this paragraph— 


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1 ‘‘(A) APPLICABLE INDIVIDUAL.—The term 

2 ‘applicable individual’ means— 

3 ‘‘(i) any participant in the plan, and 

4 ‘‘(ii) any beneficiary who has an ac5 count under the plan with respect to which 

6 the beneficiary is entitled to exercise the 

7 rights of a participant. 

8 ‘‘(B) ELECTIVE DEFERRAL.—The term 

9 ‘elective deferral’ means an employer contribu10 tion described in section 402(g)(3)(A) of the In11 ternal Revenue Code of 1986. 

12 ‘‘(C) EMPLOYER SECURITY.—The term 

13 ‘employer security’ has the meaning given such 

14 term by section 407(d)(1). 

15 ‘‘(D) EMPLOYEE STOCK OWNERSHIP

16 PLAN.—The term ‘employee stock ownership 

17 plan’ has the meaning given such term by sec18 tion 4975(e)(7) of such Code. 

19 ‘‘(E) PUBLICLY TRADED EMPLOYER SECU20 RITIES.—The term ‘publicly traded employer 

21 securities’ means employer securities which are 

22 readily tradable on an established securities 

23 market. 


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1 ‘‘(F) YEAR OF SERVICE.—The term ‘year 

2 of service’ has the meaning given such term by 

3 section 203(b)(2). 

4 ‘‘(7) TRANSITION RULE FOR SECURITIES AT5 TRIBUTABLE TO EMPLOYER CONTRIBUTIONS.— 

6 ‘‘(A) RULES PHASED IN OVER 3 YEARS.— 

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

8 portion of an account to which paragraph 

9 (3) applies and which consists of employer 

10 securities acquired in a plan year begin11 ning before January 1, 2007, paragraph 

12 (3) shall only apply to the applicable per13 centage of such securities. This subpara14 graph shall be applied separately with re15 spect to each class of securities. 

16 ‘‘(ii) EXCEPTION FOR CERTAIN PAR17 TICIPANTS AGED 55 OR OVER.—Clause (i) 

18 shall not apply to an applicable individual 

19 who is a participant who has attained age 

20 55 and completed at least 3 years of serv21 ice before the first plan year beginning 

22 after December 31, 2005. 

23 ‘‘(B) APPLICABLE PERCENTAGE.—For 

24 purposes of subparagraph (A), the applicable 

25 percentage shall be determined as follows: 


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‘‘Plan year to which The applicable 

paragraph (3) applies: percentage is: 

1st ...................................................................................................... 33

2d....................................................................................................... 66

3d....................................................................................................... 100.’’. 

1 (2) CONFORMING AMENDMENT.—Section 

2 407(b)(3) of such Act (29 U.S.C. 1107(b)(3)) is 

3 amended by adding at the end the following: 

4 ‘‘(D) For diversification requirements for quali5 fying employer securities held in certain individual 

6 account plans, see section 204(j).’’. 

7 (c) EFFECTIVE DATES.— 

8 (1) IN GENERAL.—Except as provided in para9 graphs (2) and (3), the amendments made by this 

10 section shall apply to plan years beginning after De11 cember 31, 2006. 

12 (2) SPECIAL RULE FOR COLLECTIVELY BAR13 GAINED AGREEMENTS.—In the case of a plan main14 tained pursuant to 1 or more collective bargaining 

15 agreements between employee representatives and 1 

16 or more employers ratified on or before the date of 

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

18 applied to benefits pursuant to, and individuals cov19 ered by, any such agreement by substituting for 

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

21 (A) the later of— 

22 (i) December 31, 2007, or 


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

2 collective bargaining agreements termi3 nates (determined without regard to any 

4 extension thereof after such date of enact5 ment), or 

6 (B) December 31, 2008. 

7 (3) SPECIAL RULE FOR CERTAIN EMPLOYER SE8 CURITIES HELD IN AN ESOP.— 

9 (A) IN GENERAL.—In the case of employer 

10 securities to which this paragraph applies, the 

11 amendments made by this section shall apply to 

12 plan years beginning after the earlier of— 

13 (i) December 31, 2007, or 

14 (ii) the first date on which the fair 

15 market value of such securities exceeds the 

16 guaranteed minimum value described in 

17 subparagraph (B)(ii). 

18 (B) APPLICABLE SECURITIES.—This para19 graph shall apply to employer securities which 

20 are attributable to employer contributions other 

21 than elective deferrals, and which, on Sep22 tember 17, 2003— 

23 (i) consist of preferred stock, and 

24 (ii) are within an employee stock own25 ership plan (as defined in section 


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1 4975(e)(7) of the Internal Revenue Code 

2 of 1986), the terms of which provide that 

3 the value of the securities cannot be less 

4 than the guaranteed minimum value speci5 fied by the plan on such date. 

6 (C) COORDINATION WITH TRANSITION

7 RULE.—In applying section 401(a)(35)(H) of 

8 the Internal Revenue Code of 1986 and section 

9 204(j)(7) of the Employee Retirement Income 

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

11 to employer securities to which this paragraph 

12 applies, the applicable percentage shall be de13 termined without regard to this paragraph. 

14 SEC. 902. INCREASING PARTICIPATION THROUGH AUTO15 MATIC CONTRIBUTION ARRANGEMENTS. 

16 (a) IN GENERAL.—Section 401(k) of the Internal 

17 Revenue Code of 1986 (relating to cash or deferred ar18 rangement) is amended by adding at the end the following 

19 new paragraph: 

20 ‘‘(13) ALTERNATIVE METHOD FOR AUTOMATIC

21 CONTRIBUTION ARRANGEMENTS TO MEET NON22 DISCRIMINATION REQUIREMENTS.— 

23 ‘‘(A) IN GENERAL.—A qualified automatic 

24 contribution arrangement shall be treated as 


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1 meeting the requirements of paragraph 

2 (3)(A)(ii). 

3 ‘‘(B) QUALIFIED AUTOMATIC CONTRIBU4 TION ARRANGEMENT.—For purposes of this 

5 paragraph, the term ‘qualified automatic con6 tribution arrangement’ means any cash or de7 ferred arrangement which meets the require8 ments of subparagraphs (C) through (E). 

9 ‘‘(C) AUTOMATIC DEFERRAL.— 

10 ‘‘(i) IN GENERAL.—The requirements 

11 of this subparagraph are met if, under the 

12 arrangement, each employee eligible to 

13 participate in the arrangement is treated 

14 as having elected to have the employer 

15 make elective contributions in an amount 

16 equal to a qualified percentage of com17 pensation. 

18 ‘‘(ii) ELECTION OUT.—The election 

19 treated as having been made under clause 

20 (i) shall cease to apply with respect to any 

21 employee if such employee makes an af22 firmative election— 

23 ‘‘(I) to not have such contribu24 tions made, or 


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1 ‘‘(II) to make elective contribu2 tions at a level specified in such af3 firmative election. 

4 ‘‘(iii) QUALIFIED PERCENTAGE.—For 

5 purposes of this subparagraph, the term 

6 ‘qualified percentage’ means, with respect 

7 to any employee, any percentage deter8 mined under the arrangement if such per9 centage is applied uniformly, does not ex10 ceed 10 percent, and is at least— 

11 ‘‘(I) 3 percent during the period 

12 ending on the last day of the first 

13 plan year which begins after the date 

14 on which the first elective contribution 

15 described in clause (i) is made with 

16 respect to such employee, 

17 ‘‘(II) 4 percent during the first 

18 plan year following the plan year de19 scribed in subclause (I), 

20 ‘‘(III) 5 percent during the sec21 ond plan year following the plan year 

22 described in subclause (I), and 

23 ‘‘(IV) 6 percent during any sub24 sequent plan year. 


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1 ‘‘(iv) AUTOMATIC DEFERRAL FOR

2 CURRENT EMPLOYEES NOT REQUIRED.— 

3 Clause (i) may be applied without taking 

4 into account any employee who— 

5 ‘‘(I) was eligible to participate in 

6 the arrangement (or a predecessor ar7 rangement) immediately before the 

8 date on which such arrangement be9 comes a qualified automatic contribu10 tion arrangement (determined after 

11 application of this clause), and 

12 ‘‘(II) had an election in effect on 

13 such date either to participate in the 

14 arrangement or to not participate in 

15 the arrangement. 

16 ‘‘(D) MATCHING OR NONELECTIVE CON17 TRIBUTIONS.— 

18 ‘‘(i) IN GENERAL.—The requirements 

19 of this subparagraph are met if, under the 

20 arrangement, the employer— 

21 ‘‘(I) makes matching contribu22 tions on behalf of each employee who 

23 is not a highly compensated employee 

24 in an amount equal to the sum of 100 

25 percent of the elective contributions of 


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1 the employee to the extent that such 

2 contributions do not exceed 1 percent 

3 of compensation plus 50 percent of so 

4 much of such compensation as exceeds 

5 1 percent but does not exceed 6 per6 cent of compensation, or 

7 ‘‘(II) is required, without regard 

8 to whether the employee makes an 

9 elective contribution or employee con10 tribution, to make a contribution to a 

11 defined contribution plan on behalf of 

12 each employee who is not a highly 

13 compensated employee and who is eli14 gible to participate in the arrange15 ment in an amount equal to at least 

16 3 percent of the employee’s compensa17 tion. 

18 ‘‘(ii) APPLICATION OF RULES FOR

19 MATCHING CONTRIBUTIONS.—The rules of 

20 clauses (ii) and (iii) of paragraph (12)(B) 

21 shall apply for purposes of clause (i)(I). 

22 ‘‘(iii) WITHDRAWAL AND VESTING RE23 STRICTIONS.—An arrangement shall not be 

24 treated as meeting the requirements of 

25 clause (i) unless, with respect to employer 


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1 contributions (including matching con2 tributions) taken into account in deter3 mining whether the requirements of clause 

4 (i) are met— 

5 ‘‘(I) any employee who has com6 pleted at least 2 years of service 

7 (within the meaning of section 

8 411(a)) has a nonforfeitable right to 

9 100 percent of the employee’s accrued 

10 benefit derived from such employer 

11 contributions, and 

12 ‘‘(II) the requirements of sub13 paragraph (B) of paragraph (2) are 

14 met with respect to all such employer 

15 contributions. 

16 ‘‘(iv) APPLICATION OF CERTAIN

17 OTHER RULES.—The rules of subpara18 graphs (E)(ii) and (F) of paragraph (12) 

19 shall apply for purposes of subclauses (I) 

20 and (II) of clause (i). 

21 ‘‘(E) NOTICE REQUIREMENTS.— 

22 ‘‘(i) IN GENERAL.—The requirements 

23 of this subparagraph are met if, within a 

24 reasonable period before each plan year, 

25 each employee eligible to participate in the 


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1 arrangement for such year receives written 

2 notice of the employee’s rights and obliga3 tions under the arrangement which— 

4 ‘‘(I) is sufficiently accurate and 

5 comprehensive to apprise the employee 

6 of such rights and obligations, and 

7 ‘‘(II) is written in a manner cal8 culated to be understood by the aver9 age employee to whom the arrange10 ment applies. 

11 ‘‘(ii) TIMING AND CONTENT REQUIRE12 MENTS.—A notice shall not be treated as 

13 meeting the requirements of clause (i) with 

14 respect to an employee unless— 

15 ‘‘(I) the notice explains the em16 ployee’s right under the arrangement 

17 to elect not to have elective contribu18 tions made on the employee’s behalf 

19 (or to elect to have such contributions 

20 made at a different percentage), 

21 ‘‘(II) in the case of an arrange22 ment under which the employee may 

23 elect among 2 or more investment op24 tions, the notice explains how con25 tributions made under the arrangeVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00703 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ment will be invested in the absence of 

2 any investment election by the em3 ployee, and 

4 ‘‘(III) the employee has a reason5 able period of time after receipt of the 

6 notice described in subclauses (I) and 

7 (II) and before the first elective con8 tribution is made to make either such 

9 election.’’. 

10 (b) MATCHING CONTRIBUTIONS.—Section 401(m) of 

11 such Code (relating to nondiscrimination test for matching 

12 contributions and employee contributions) is amended by 

13 redesignating paragraph (12) as paragraph (13) and by 

14 inserting after paragraph (11) the following new para15 graph: 

16 ‘‘(12) ALTERNATIVE METHOD FOR AUTOMATIC

17 CONTRIBUTION ARRANGEMENTS.—A defined con18 tribution plan shall be treated as meeting the re19 quirements of paragraph (2) with respect to match20 ing contributions if the plan— 

21 ‘‘(A) is a qualified automatic contribution 

22 arrangement (as defined in subsection (k)(13)), 

23 and 

24 ‘‘(B) meets the requirements of paragraph 

25 (11)(B).’’. 


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1 (c) EXCLUSION FROM DEFINITION OF TOP-HEAVY

2 PLANS.— 

3 (1) ELECTIVE CONTRIBUTION RULE.—Clause 

4 (i) of section 416(g)(4)(H) of such Code is amended 

5 by inserting ‘‘or 401(k)(13)’’ after ‘‘section 

6 401(k)(12)’’. 

7 (2) MATCHING CONTRIBUTION RULE.—Clause 

8 (ii) of section 416(g)(4)(H) of such Code is amended 

9 by inserting ‘‘or 401(m)(12)’’ after ‘‘section 

10 401(m)(11)’’. 

11 (d) TREATMENT OF WITHDRAWALS OF CONTRIBU12 TIONS DURING FIRST 90 DAYS.— 

13 (1) IN GENERAL.—Section 414 of the Internal 

14 Revenue Code of 1986 is amended by adding at the 

15 end the following new subsection: 

16 ‘‘(w) SPECIAL RULES FOR CERTAIN WITHDRAWALS

17 FROM ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGE18 MENTS.— 

19 ‘‘(1) IN GENERAL.—If an eligible automatic 

20 contribution arrangement allows an employee to 

21 elect to make permissible withdrawals— 

22 ‘‘(A) the amount of any such withdrawal 

23 shall be includible in the gross income of the 

24 employee for the taxable year of the employee 

25 in which the distribution is made, 


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1 ‘‘(B) no tax shall be imposed under section 

2 72(t) with respect to the distribution, and 

3 ‘‘(C) the arrangement shall not be treated 

4 as violating any restriction on distributions 

5 under this title solely by reason of allowing the 

6 withdrawal. 

7 In the case of any distribution to an employee by 

8 reason of an election under this paragraph, employer 

9 matching contributions shall be forfeited or subject 

10 to such other treatment as the Secretary may pre11 scribe. 

12 ‘‘(2) PERMISSIBLE WITHDRAWAL.—For pur13 poses of this subsection— 

14 ‘‘(A) IN GENERAL.—The term ‘permissible 

15 withdrawal’ means any withdrawal from an eli16 gible automatic contribution arrangement meet17 ing the requirements of this paragraph which— 

18 ‘‘(i) is made pursuant to an election 

19 by an employee, and 

20 ‘‘(ii) consists of elective contributions 

21 described in paragraph (3)(B) (and earn22 ings attributable thereto). 

23 ‘‘(B) TIME FOR MAKING ELECTION.—Sub24 paragraph (A) shall not apply to an election by 

25 an employee unless the election is made no later 


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1 than the date which is 90 days after the date 

2 of the first elective contribution with respect to 

3 the employee under the arrangement. 

4 ‘‘(C) AMOUNT OF DISTRIBUTION.—Sub5 paragraph (A) shall not apply to any election by 

6 an employee unless the amount of any distribu7 tion by reason of the election is equal to the 

8 amount of elective contributions made with re9 spect to the first payroll period to which the eli10 gible automatic contribution arrangement ap11 plies to the employee and any succeeding pay12 roll period beginning before the effective date of 

13 the election (and earnings attributable thereto). 

14 ‘‘(3) ELIGIBLE AUTOMATIC CONTRIBUTION AR15 RANGEMENT.—For purposes of this subsection, the 

16 term ‘eligible automatic contribution arrangement’ 

17 means an arrangement under an applicable employer 

18 plan— 

19 ‘‘(A) under which a participant may elect 

20 to have the employer make payments as con21 tributions under the plan on behalf of the par22 ticipant, or to the participant directly in cash, 

23 ‘‘(B) under which the participant is treated 

24 as having elected to have the employer make 

25 such contributions in an amount equal to a uniVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00707 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 form percentage of compensation provided 

2 under the plan until the participant specifically 

3 elects not to have such contributions made (or 

4 specifically elects to have such contributions 

5 made at a different percentage), 

6 ‘‘(C) under which, in the absence of an in7 vestment election by the participant, contribu8 tions described in subparagraph (B) are in9 vested in accordance with regulations prescribed 

10 by the Secretary of Labor under section 

11 404(c)(5) of the Employee Retirement Income 

12 Security Act of 1974, and 

13 ‘‘(D) which meets the requirements of 

14 paragraph (4). 

15 ‘‘(4) NOTICE REQUIREMENTS.— 

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

17 a plan containing an arrangement described in 

18 paragraph (3) shall, within a reasonable period 

19 before each plan year, give to each employee to 

20 whom an arrangement described in paragraph 

21 (3) applies for such plan year notice of the em22 ployee’s rights and obligations under the ar23 rangement which— 


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1 ‘‘(i) is sufficiently accurate and com2 prehensive to apprise the employee of such 

3 rights and obligations, and 

4 ‘‘(ii) is written in a manner calculated 

5 to be understood by the average employee 

6 to whom the arrangement applies. 

7 ‘‘(B) TIME AND FORM OF NOTICE.—A no8 tice shall not be treated as meeting the require9 ments of subparagraph (A) with respect to an 

10 employee unless— 

11 ‘‘(i) the notice includes an explanation 

12 of the employee’s right under the arrange13 ment to elect not to have elective contribu14 tions made on the employee’s behalf (or to 

15 elect to have such contributions made at a 

16 different percentage), 

17 ‘‘(ii) the employee has a reasonable 

18 period of time after receipt of the notice 

19 described in clause (i) and before the first 

20 elective contribution is made to make such 

21 election, and 

22 ‘‘(iii) the notice explains how contribu23 tions made under the arrangement will be 

24 invested in the absence of any investment 

25 election by the employee. 


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1 ‘‘(5) APPLICABLE EMPLOYER PLAN.—For pur2 poses of this subsection, the term ‘applicable em3 ployer plan’ means— 

4 ‘‘(A) an employees’ trust described in sec5 tion 401(a) which is exempt from tax under 

6 section 501(a), 

7 ‘‘(B) a plan under which amounts are con8 tributed by an individual’s employer for an an9 nuity contract described in section 403(b), and 

10 ‘‘(C) an eligible deferred compensation 

11 plan described in section 457(b) which is main12 tained by an eligible employer described in sec13 tion 457(e)(1)(A). 

14 ‘‘(6) SPECIAL RULE.—A withdrawal described 

15 in paragraph (1) (subject to the limitation of para16 graph (2)(C)) shall not be taken into account for 

17 purposes of section 401(k)(3).’’. 

18 (2) VESTING CONFORMING AMENDMENTS.— 

19 (A) Section 411(a)(3)(G) of such Code is 

20 amended by inserting ‘‘an erroneous automatic 

21 contribution under section 414(w),’’ after 

22 ‘‘402(g)(2)(A),’’. 

23 (B) The heading of section 411(a)(3)(G) of 

24 such Code is amended by inserting ‘‘OR ERROVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00710 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 NEOUS AUTOMATIC CONTRIBUTION’’ before 

2 the period. 

3 (C) Section 401(k)(8)(E) of such Code is 

4 amended by inserting ‘‘an erroneous automatic 

5 contribution under section 414(w),’’ after 

6 ‘‘402(g)(2)(A),’’. 

7 (D) The heading of section 401(k)(8)(E) 

8 of such Code is amended by inserting ‘‘OR ER9 RONEOUS AUTOMATIC CONTRIBUTION’’ be10 fore the period. 

11 (E) Section 203(a)(3)(F) of the Employee 

12 Retirement Income Security Act of 1974 (29 

13 U.S.C. 1053(a)(3)(F)) is amended by inserting 

14 ‘‘an erroneous automatic contribution under 

15 section 414(w) of such Code,’’ after 

16 ‘‘402(g)(2)(A) of such Code,’’. 

17 (e) EXCESS CONTRIBUTIONS.— 

18 (1) EXPANSION OF CORRECTIVE DISTRIBUTION

19 PERIOD FOR AUTOMATIC CONTRIBUTION ARRANGE20 MENTS.—Subsection (f) of section 4979 of the Inter21 nal Revenue Code of 1986 is amended— 

22 (A) by inserting ‘‘(6 months in the case of 

23 an excess contribution or excess aggregate con24 tribution to an eligible automatic contribution 

25 arrangement (as defined in section 


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414(w)(3)))’’ after ‘‘21 1 ⁄2 months’’ in paragraph 

2 (1), and 

(B) by striking ‘‘21 3 ⁄2 MONTHS OF’’ in the 

4 heading and inserting ‘‘SPECIFIED PERIOD

5 AFTER’’. 

6 (2) YEAR OF INCLUSION.—Paragraph (2) of 

7 section 4979(f) of such Code is amended to read as 

8 follows: 

9 ‘‘(2) YEAR OF INCLUSION.—Any amount dis10 tributed as provided in paragraph (1) shall be treat11 ed as earned and received by the recipient in the re12 cipient’s taxable year in which such distributions 

13 were made.’’. 

14 (3) SIMPLIFICATION OF ALLOCABLE EARN15 INGS.— 

16 (A) SECTION 4979.—Paragraph (1) of sec17 tion 4979(f) of such Code is amended by adding 

18 ‘‘through the end of the plan year for which the 

19 contribution was made’’ after ‘‘thereto’’. 

20 (B) SECTION 401(k) AND 401(M).— 

21 (i) Clause (i) of section 401(k)(8)(A) 

22 of such Code is amended by adding 

23 ‘‘through the end of such year’’ after 

24 ‘‘such contributions’’. 


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1 (ii) Subparagraph (A) of section 

2 401(m)(6) of such Code is amended by 

3 adding ‘‘through the end of such year’’ 

4 after ‘‘to such contributions’’. 

5 (f) PREEMPTION OF CONFLICTING STATE REGULA6 TION.— 

7 (1) IN GENERAL.—Section 514 of the Employee 

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

9 1144) is amended by adding at the end the following 

10 new subsection: 

11 ‘‘(e)(1) Notwithstanding any other provision of this 

12 section, this title shall supersede any law of a State which 

13 would directly or indirectly prohibit or restrict the inclu14 sion in any plan of an automatic contribution arrange15 ment. The Secretary may prescribe regulations which 

16 would establish minimum standards that such an arrange17 ment would be required to satisfy in order for this sub18 section to apply in the case of such arrangement. 

19 ‘‘(2) For purposes of this subsection, the term ‘auto20 matic contribution arrangement’ means an arrange21 ment—— 

22 ‘‘(A) under which a participant may elect to 

23 have the plan sponsor make payments as contribu24 tions under the plan on behalf of the participant, or 

25 to the participant directly in cash, 


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1 ‘‘(B) under which a participant is treated as 

2 having elected to have the plan sponsor make such 

3 contributions in an amount equal to a uniform per4 centage of compensation provided under the plan 

5 until the participant specifically elects not to have 

6 such contributions made (or specifically elects to 

7 have such contributions made at a different percent8 age), and 

9 ‘‘(C) under which such contributions are in10 vested in accordance with regulations prescribed by 

11 the Secretary under section 404(c)(5). 

12 ‘‘(3)(A) The plan administrator of an automatic con13 tribution arrangement shall, within a reasonable period 

14 before such plan year, provide to each participant to whom 

15 the arrangement applies for such plan year notice of the 

16 participant’s rights and obligations under the arrange17 ment which— 

18 ‘‘(i) is sufficiently accurate and comprehensive 

19 to apprise the participant of such rights and obliga20 tions, and 

21 ‘‘(ii) is written in a manner calculated to be un22 derstood by the average participant to whom the ar23 rangement applies. 


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1 ‘‘(B) A notice shall not be treated as meeting the re2 quirements of subparagraph (A) with respect to a partici3 pant unless— 

4 ‘‘(i) the notice includes an explanation of the 

5 participant’s right under the arrangement not to 

6 have elective contributions made on the participant’s 

7 behalf (or to elect to have such contributions made 

8 at a different percentage), 

9 ‘‘(ii) the participant has a reasonable period of 

10 time, after receipt of the notice described in clause 

11 (i) and before the first elective contribution is made, 

12 to make such election, and 

13 ‘‘(iii) the notice explains how contributions 

14 made under the arrangement will be invested in the 

15 absence of any investment election by the partici16 pant.’’. 

17 (2) ENFORCEMENT.—Section 502(c)(4) of such 

18 Act (29 U.S.C. 1132(c)(4)) is amended by striking 

19 ‘‘or section 302(b)(7)(F)(vi)’’ inserting ‘‘, section 

20 302(b)(7)(F)(vi), or section 514(e)(3)’’. 

21 (g) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to plan years beginning after De23 cember 31, 2007, except that the amendments made by 

24 subsection (f) shall take effect on the date of the enact25 ment of this Act. 


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1 SEC. 903. TREATMENT OF ELIGIBLE COMBINED DEFINED 

2 BENEFIT PLANS AND QUALIFIED CASH OR 

3 DEFERRED ARRANGEMENTS. 

4 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

5 Section 414 of the Internal Revenue Code of 1986, as 

6 amended by this Act, is amended by adding at the end 

7 the following new subsection: 

8 ‘‘(x) SPECIAL RULES FOR ELIGIBLE COMBINED DE9 FINED BENEFIT PLANS AND QUALIFIED CASH OR DE10 FERRED ARRANGEMENTS.— 

11 ‘‘(1) GENERAL RULE.—Except as provided in 

12 this subsection, the requirements of this title shall 

13 be applied to any defined benefit plan or applicable 

14 defined contribution plan which are part of an eligi15 ble combined plan in the same manner as if each 

16 such plan were not a part of the eligible combined 

17 plan. 

18 ‘‘(2) ELIGIBLE COMBINED PLAN.—For pur19 poses of this subsection— 

20 ‘‘(A) IN GENERAL.—The term ‘eligible 

21 combined plan’ means a plan— 

22 ‘‘(i) which is maintained by an em23 ployer which, at the time the plan is estab24 lished, is a small employer, 


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1 ‘‘(ii) which consists of a defined ben2 efit plan and an applicable defined con3 tribution plan, 

4 ‘‘(iii) the assets of which are held in 

5 a single trust forming part of the plan and 

6 are clearly identified and allocated to the 

7 defined benefit plan and the applicable de8 fined contribution plan to the extent nec9 essary for the separate application of this 

10 title under paragraph (1), and 

11 ‘‘(iv) with respect to which the ben12 efit, contribution, vesting, and non13 discrimination requirements of subpara14 graphs (B), (C), (D), (E), and (F) are 

15 met. 

16 For purposes of this subparagraph, the term 

17 ‘small employer’ has the meaning given such 

18 term by section 4980D(d)(2), except that such 

19 section shall be applied by substituting ‘500’ for 

20 ‘50’ each place it appears. 

21 ‘‘(B) BENEFIT REQUIREMENTS.— 

22 ‘‘(i) IN GENERAL.—The benefit re23 quirements of this subparagraph are met 

24 with respect to the defined benefit plan 

25 forming part of the eligible combined plan 


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1 if the accrued benefit of each participant 

2 derived from employer contributions, when 

3 expressed as an annual retirement benefit, 

4 is not less than the applicable percentage 

5 of the participant’s final average pay. For 

6 purposes of this clause, final average pay 

7 shall be determined using the period of 

8 consecutive years (not exceeding 5) during 

9 which the participant had the greatest ag10 gregate compensation from the employer. 

11 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

12 purposes of clause (i), the applicable per13 centage is the lesser of— 

14 ‘‘(I) 1 percent multiplied by the 

15 number of years of service with the 

16 employer, or 

17 ‘‘(II) 20 percent. 

18 ‘‘(iii) SPECIAL RULE FOR APPLICABLE

19 DEFINED BENEFIT PLANS.—If the defined 

20 benefit plan under clause (i) is an applica21 ble defined benefit plan as defined in sec22 tion 411(a)(13)(B) which meets the inter23 est credit requirements of section 

24 411(b)(5)(B)(i), the plan shall be treated 

25 as meeting the requirements of clause (i) 


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1 with respect to any plan year if each par2 ticipant receives a pay credit for the year 

3 which is not less than the percentage of 

4 compensation determined in accordance 

5 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. 

6 ‘‘(iv) YEARS OF SERVICE.—For pur7 poses of this subparagraph, years of serv8 ice shall be determined under the rules of 

9 paragraphs (4), (5), and (6) of section 

10 411(a), except that the plan may not dis11 regard any year of service because of a 

12 participant making, or failing to make, any 

13 elective deferral with respect to the quali14 fied cash or deferred arrangement to which 

15 subparagraph (C) applies. 

16 ‘‘(C) CONTRIBUTION REQUIREMENTS.— 

17 ‘‘(i) IN GENERAL.—The contribution 

18 requirements of this subparagraph with re19 spect to any applicable defined contribu20 tion plan forming part of an eligible com21 bined plan are met if— 

22 ‘‘(I) the qualified cash or de23 ferred arrangement included in such 


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1 plan constitutes an automatic con2 tribution arrangement, and 

3 ‘‘(II) the employer is required to 

4 make matching contributions on be5 half of each employee eligible to par6 ticipate in the arrangement in an 

7 amount equal to 50 percent of the 

8 elective contributions of the employee 

9 to the extent such elective contribu10 tions do not exceed 4 percent of com11 pensation. 

12 Rules similar to the rules of clauses (ii) 

13 and (iii) of section 401(k)(12)(B) shall 

14 apply for purposes of this clause. 

15 ‘‘(ii) NONELECTIVE CONTRIBU16 TIONS.—An applicable defined contribution 

17 plan shall not be treated as failing to meet 

18 the requirements of clause (i) because the 

19 employer makes nonelective contributions 

20 under the plan but such contributions shall 

21 not be taken into account in determining 

22 whether the requirements of clause (i)(II) 

23 are met. 


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1 ‘‘(D) VESTING REQUIREMENTS.—The vest2 ing requirements of this subparagraph are met 

3 if— 

4 ‘‘(i) in the case of a defined benefit 

5 plan forming part of an eligible combined 

6 plan an employee who has completed at 

7 least 3 years of service has a nonforfeitable 

8 right to 100 percent of the employee’s ac9 crued benefit under the plan derived from 

10 employer contributions, and 

11 ‘‘(ii) in the case of an applicable de12 fined contribution plan forming part of eli13 gible combined plan— 

14 ‘‘(I) an employee has a non15 forfeitable right to any matching con16 tribution made under the qualified 

17 cash or deferred arrangement included 

18 in such plan by an employer with re19 spect to any elective contribution, in20 cluding matching contributions in ex21 cess of the contributions required 

22 under subparagraph (C)(i)(II), and 

23 ‘‘(II) an employee who has com24 pleted at least 3 years of service has 

25 a nonforfeitable right to 100 percent 


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1 of the employee’s accrued benefit de2 rived under the arrangement from 

3 nonelective contributions of the em4 ployer. 

5 For purposes of this subparagraph, the 

6 rules of section 411 shall apply to the ex7 tent not inconsistent with this subpara8 graph. 

9 ‘‘(E) UNIFORM PROVISION OF CONTRIBU10 TIONS AND BENEFITS.—In the case of a defined 

11 benefit plan or applicable defined contribution 

12 plan forming part of an eligible combined plan, 

13 the requirements of this subparagraph are met 

14 if all contributions and benefits under each 

15 such plan, and all rights and features under 

16 each such plan, must be provided uniformly to 

17 all participants. 

18 ‘‘(F) REQUIREMENTS MUST BE MET WITH19 OUT TAKING INTO ACCOUNT SOCIAL SECURITY

20 AND SIMILAR CONTRIBUTIONS AND BENEFITS

21 OR OTHER PLANS.— 

22 ‘‘(i) IN GENERAL.—The requirements 

23 of this subparagraph are met if the re24 quirements of clauses (ii) and (iii) are met. 


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1 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

2 CONTRIBUTIONS.—The requirements of 

3 this clause are met if— 

4 ‘‘(I) the requirements of subpara5 graphs (B) and (C) are met without 

6 regard to section 401(l), and 

7 ‘‘(II) the requirements of sections 

8 401(a)(4) and 410(b) are met with re9 spect to both the applicable defined 

10 contribution plan and defined benefit 

11 plan forming part of an eligible com12 bined plan without regard to section 

13 401(l). 

14 ‘‘(iii) OTHER PLANS AND ARRANGE15 MENTS.—The requirements of this clause 

16 are met if the applicable defined contribu17 tion plan and defined benefit plan forming 

18 part of an eligible combined plan meet the 

19 requirements of sections 401(a)(4) and 

20 410(b) without being combined with any 

21 other plan. 

22 ‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR

23 QUALIFIED CASH OR DEFERRED ARRANGEMENT.— 

24 ‘‘(A) IN GENERAL.—A qualified cash or 

25 deferred arrangement which is included in an 


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1 applicable defined contribution plan forming 

2 part of an eligible combined plan shall be treat3 ed as meeting the requirements of section 

4 401(k)(3)(A)(ii) if the requirements of para5 graph (2)(C) are met with respect to such ar6 rangement. 

7 ‘‘(B) MATCHING CONTRIBUTIONS.—In ap8 plying section 401(m)(11) to any matching con9 tribution with respect to a contribution to which 

10 paragraph (2)(C) applies, the contribution re11 quirement of paragraph (2)(C) and the notice 

12 requirements of paragraph (5)(B) shall be sub13 stituted for the requirements otherwise applica14 ble under clauses (i) and (ii) of section 

15 401(m)(11)(A). 

16 ‘‘(4) SATISFACTION OF TOP-HEAVY RULES.—A 

17 defined benefit plan and applicable defined contribu18 tion plan forming part of an eligible combined plan 

19 for any plan year shall be treated as meeting the re20 quirements of section 416 for the plan year. 

21 ‘‘(5) AUTOMATIC CONTRIBUTION ARRANGE22 MENT.—For purposes of this subsection— 

23 ‘‘(A) IN GENERAL.—A qualified cash or 

24 deferred arrangement shall be treated as an 


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1 automatic contribution arrangement if the ar2 rangement— 

3 ‘‘(i) provides that each employee eligi4 ble to participate in the arrangement is 

5 treated as having elected to have the em6 ployer make elective contributions in an 

7 amount equal to 4 percent of the employ8 ee’s compensation unless the employee spe9 cifically elects not to have such contribu10 tions made or to have such contributions 

11 made at a different rate, and 

12 ‘‘(ii) meets the notice requirements 

13 under subparagraph (B). 

14 ‘‘(B) NOTICE REQUIREMENTS.— 

15 ‘‘(i) IN GENERAL.—The requirements 

16 of this subparagraph are met if the re17 quirements of clauses (ii) and (iii) are met. 

18 ‘‘(ii) REASONABLE PERIOD TO MAKE

19 ELECTION.—The requirements of this 

20 clause are met if each employee to whom 

21 subparagraph (A)(i) applies— 

22 ‘‘(I) receives a notice explaining 

23 the employee’s right under the ar24 rangement to elect not to have elective 

25 contributions made on the employee’s 


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1 behalf or to have the contributions 

2 made at a different rate, and 

3 ‘‘(II) has a reasonable period of 

4 time after receipt of such notice and 

5 before the first elective contribution is 

6 made to make such election. 

7 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

8 AND OBLIGATIONS.—The requirements of 

9 this clause are met if each employee eligi10 ble to participate in the arrangement is, 

11 within a reasonable period before any year, 

12 given notice of the employee’s rights and 

13 obligations under the arrangement. 

14 The requirements of clauses (i) and (ii) of sec15 tion 401(k)(12)(D) shall be met with respect to 

16 the notices described in clauses (ii) and (iii) of 

17 this subparagraph. 

18 ‘‘(6) COORDINATION WITH OTHER REQUIRE19 MENTS.— 

20 ‘‘(A) TREATMENT OF SEPARATE PLANS.— 

21 Section 414(k) shall not apply to an eligible 

22 combined plan. 

23 ‘‘(B) REPORTING.—An eligible combined 

24 plan shall be treated as a single plan for pur25 poses of sections 6058 and 6059. 


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1 ‘‘(7) APPLICABLE DEFINED CONTRIBUTION

2 PLAN.—For purposes of this subsection— 

3 ‘‘(A) IN GENERAL.—The term ‘applicable 

4 defined contribution plan’ means a defined con5 tribution plan which includes a qualified cash or 

6 deferred arrangement. 

7 ‘‘(B) QUALIFIED CASH OR DEFERRED AR8 RANGEMENT.—The term ‘qualified cash or de9 ferred arrangement’ has the meaning given 

10 such term by section 401(k)(2).’’. 

11 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

12 INCOME SECURITY ACT OF 1974.— 

13 (1) IN GENERAL.—Section 210 of the Employee 

14 Retirement Income Security Act of 1974 is amended 

15 by adding at the end the following new subsection: 

16 ‘‘(e) SPECIAL RULES FOR ELIGIBLE COMBINED DE17 FINED BENEFIT PLANS AND QUALIFIED CASH OR DE18 FERRED ARRANGEMENTS.— 

19 ‘‘(1) GENERAL RULE.—Except as provided in 

20 this subsection, this Act shall be applied to any de21 fined benefit plan or applicable individual account 

22 plan which are part of an eligible combined plan in 

23 the same manner as if each such plan were not a 

24 part of the eligible combined plan. 


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1 ‘‘(2) ELIGIBLE COMBINED PLAN.—For pur2 poses of this subsection— 

3 ‘‘(A) IN GENERAL.—The term ‘eligible 

4 combined plan’ means a plan— 

5 ‘‘(i) which is maintained by an em6 ployer which, at the time the plan is estab7 lished, is a small employer, 

8 ‘‘(ii) which consists of a defined ben9 efit plan and an applicable individual ac10 count plan each of which qualifies under 

11 section 401(a) of the Internal Revenue 

12 Code of 1986, 

13 ‘‘(iii) the assets of which are held in 

14 a single trust forming part of the plan and 

15 are clearly identified and allocated to the 

16 defined benefit plan and the applicable in17 dividual account plan to the extent nec18 essary for the separate application of this 

19 Act under paragraph (1), and 

20 ‘‘(iv) with respect to which the ben21 efit, contribution, vesting, and non22 discrimination requirements of subpara23 graphs (B), (C), (D), (E), and (F) are 

24 met. 


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1 For purposes of this subparagraph, the term 

2 ‘small employer’ has the meaning given such 

3 term by section 4980D(d)(2) of the Internal 

4 Revenue Code of 1986, except that such section 

5 shall be applied by substituting ‘500’ for ‘50’ 

6 each place it appears. 

7 ‘‘(B) BENEFIT REQUIREMENTS.— 

8 ‘‘(i) IN GENERAL.—The benefit re9 quirements of this subparagraph are met 

10 with respect to the defined benefit plan 

11 forming part of the eligible combined plan 

12 if the accrued benefit of each participant 

13 derived from employer contributions, when 

14 expressed as an annual retirement benefit, 

15 is not less than the applicable percentage 

16 of the participant’s final average pay. For 

17 purposes of this clause, final average pay 

18 shall be determined using the period of 

19 consecutive years (not exceeding 5) during 

20 which the participant had the greatest ag21 gregate compensation from the employer. 

22 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

23 purposes of clause (i), the applicable per24 centage is the lesser of— 


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1 ‘‘(I) 1 percent multiplied by the 

2 number of years of service with the 

3 employer, or 

4 ‘‘(II) 20 percent. 

5 ‘‘(iii) SPECIAL RULE FOR APPLICABLE

6 DEFINED BENEFIT PLANS.—If the defined 

7 benefit plan under clause (i) is an applica8 ble defined benefit plan as defined in sec9 tion 203(f)(3)(B) which meets the interest 

10 credit requirements of section 

11 204(b)(5)(B)(i), the plan shall be treated 

12 as meeting the requirements of clause (i) 

13 with respect to any plan year if each par14 ticipant receives pay credit for the year 

15 which is not less than the percentage of 

16 compensation determined in accordance 

17 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. 

18 ‘‘(iv) YEARS OF SERVICE.—For pur19 poses of this subparagraph, years of serv20 ice shall be determined under the rules of 

21 paragraphs (1), (2), and (3) of section 

22 203(b), except that the plan may not disVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00730 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 regard any year of service because of a 

2 participant making, or failing to make, any 

3 elective deferral with respect to the quali4 fied cash or deferred arrangement to which 

5 subparagraph (C) applies. 

6 ‘‘(C) CONTRIBUTION REQUIREMENTS.— 

7 ‘‘(i) IN GENERAL.—The contribution 

8 requirements of this subparagraph with re9 spect to any applicable individual account 

10 plan forming part of an eligible combined 

11 plan are met if— 

12 ‘‘(I) the qualified cash or de13 ferred arrangement included in such 

14 plan constitutes an automatic con15 tribution arrangement, and 

16 ‘‘(II) the employer is required to 

17 make matching contributions on be18 half of each employee eligible to par19 ticipate in the arrangement in an 

20 amount equal to 50 percent of the 

21 elective contributions of the employee 

22 to the extent such elective contribu23 tions do not exceed 4 percent of com24 pensation. 


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1 Rules similar to the rules of clauses (ii) 

2 and (iii) of section 401(k)(12)(B) of the 

3 Internal Revenue Code of 1986 shall apply 

4 for purposes of this clause. 

5 ‘‘(ii) NONELECTIVE CONTRIBU6 TIONS.—An applicable individual account 

7 plan shall not be treated as failing to meet 

8 the requirements of clause (i) because the 

9 employer makes nonelective contributions 

10 under the plan but such contributions shall 

11 not be taken into account in determining 

12 whether the requirements of clause (i)(II) 

13 are met. 

14 ‘‘(D) VESTING REQUIREMENTS.—The vest15 ing requirements of this subparagraph are met 

16 if— 

17 ‘‘(i) in the case of a defined benefit 

18 plan forming part of an eligible combined 

19 plan an employee who has completed at 

20 least 3 years of service has a nonforfeitable 

21 right to 100 percent of the employee’s ac22 crued benefit under the plan derived from 

23 employer contributions, and 


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1 ‘‘(ii) in the case of an applicable indi2 vidual account plan forming part of eligible 

3 combined plan— 

4 ‘‘(I) an employee has a non5 forfeitable right to any matching con6 tribution made under the qualified 

7 cash or deferred arrangement included 

8 in such plan by an employer with re9 spect to any elective contribution, in10 cluding matching contributions in ex11 cess of the contributions required 

12 under subparagraph (C)(i)(II), and 

13 ‘‘(II) an employee who has com14 pleted at least 3 years of service has 

15 a nonforfeitable right to 100 percent 

16 of the employee’s accrued benefit de17 rived under the arrangement from 

18 nonelective contributions of the em19 ployer. 

20 For purposes of this subparagraph, the 

21 rules of section 203 shall apply to the ex22 tent not inconsistent with this subpara23 graph. 

24 ‘‘(E) UNIFORM PROVISION OF CONTRIBU25 TIONS AND BENEFITS.—In the case of a defined 


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1 benefit plan or applicable individual account 

2 plan forming part of an eligible combined plan, 

3 the requirements of this subparagraph are met 

4 if all contributions and benefits under each 

5 such plan, and all rights and features under 

6 each such plan, must be provided uniformly to 

7 all participants. 

8 ‘‘(F) REQUIREMENTS MUST BE MET WITH9 OUT TAKING INTO ACCOUNT SOCIAL SECURITY

10 AND SIMILAR CONTRIBUTIONS AND BENEFITS

11 OR OTHER PLANS.— 

12 ‘‘(i) IN GENERAL.—The requirements 

13 of this subparagraph are met if the re14 quirements of clauses (ii) and (iii) are met. 

15 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

16 CONTRIBUTIONS.—The requirements of 

17 this clause are met if— 

18 ‘‘(I) the requirements of subpara19 graphs (B) and (C) are met without 

20 regard to section 401(l) of the Inter21 nal Revenue Code of 1986, and 

22 ‘‘(II) the requirements of sections 

23 401(a)(4) and 410(b) of the Internal 

24 Revenue Code of 1986 are met with 

25 respect to both the applicable defined 


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1 contribution plan and defined benefit 

2 plan forming part of an eligible com3 bined plan without regard to section 

4 401(l) of the Internal Revenue Code 

5 of 1986. 

6 ‘‘(iii) OTHER PLANS AND ARRANGE7 MENTS.—The requirements of this clause 

8 are met if the applicable defined contribu9 tion plan and defined benefit plan forming 

10 part of an eligible combined plan meet the 

11 requirements of sections 401(a)(4) and 

12 410(b) of the Internal Revenue Code of 

13 1986 without being combined with any 

14 other plan. 

15 ‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR

16 QUALIFIED CASH OR DEFERRED ARRANGEMENT.— 

17 ‘‘(A) IN GENERAL.—A qualified cash or 

18 deferred arrangement which is included in an 

19 applicable individual account plan forming part 

20 of an eligible combined plan shall be treated as 

21 meeting the requirements of section 

22 401(k)(3)(A)(ii) of the Internal Revenue Code 

23 of 1986 if the requirements of paragraph (2) 

24 are met with respect to such arrangement. 


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1 ‘‘(B) MATCHING CONTRIBUTIONS.—In ap2 plying section 401(m)(11) of such Code to any 

3 matching contribution with respect to a con4 tribution to which paragraph (2)(C) applies, the 

5 contribution requirement of paragraph (2)(C) 

6 and the notice requirements of paragraph 

7 (5)(B) shall be substituted for the requirements 

8 otherwise applicable under clauses (i) and (ii) of 

9 section 401(m)(11)(A) of such Code. 

10 ‘‘(4) AUTOMATIC CONTRIBUTION ARRANGE11 MENT.—For purposes of this subsection— 

12 ‘‘(A) IN GENERAL.—A qualified cash or 

13 deferred arrangement shall be treated as an 

14 automatic contribution arrangement if the ar15 rangement— 

16 ‘‘(i) provides that each employee eligi17 ble to participate in the arrangement is 

18 treated as having elected to have the em19 ployer make elective contributions in an 

20 amount equal to 4 percent of the employ21 ee’s compensation unless the employee spe22 cifically elects not to have such contribu23 tions made or to have such contributions 

24 made at a different rate, and 


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1 ‘‘(ii) meets the notice requirements 

2 under subparagraph (B). 

3 ‘‘(B) NOTICE REQUIREMENTS.— 

4 ‘‘(i) IN GENERAL.—The requirements 

5 of this subparagraph are met if the re6 quirements of clauses (ii) and (iii) are met. 

7 ‘‘(ii) REASONABLE PERIOD TO MAKE

8 ELECTION.—The requirements of this 

9 clause are met if each employee to whom 

10 subparagraph (A)(i) applies— 

11 ‘‘(I) receives a notice explaining 

12 the employee’s right under the ar13 rangement to elect not to have elective 

14 contributions made on the employee’s 

15 behalf or to have the contributions 

16 made at a different rate, and 

17 ‘‘(II) has a reasonable period of 

18 time after receipt of such notice and 

19 before the first elective contribution is 

20 made to make such election. 

21 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

22 AND OBLIGATIONS.—The requirements of 

23 this clause are met if each employee eligi24 ble to participate in the arrangement is, 

25 within a reasonable period before any year, 


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1 given notice of the employee’s rights and 

2 obligations under the arrangement. 

3 The requirements of this subparagraph shall 

4 not be treated as met unless the requirements 

5 of clauses (i) and (ii) of section 401(k)(12)(D) 

6 of the Internal Revenue Code of 1986 are met 

7 with respect to the notices described in clauses 

8 (ii) and (iii) of this subparagraph. 

9 ‘‘(5) COORDINATION WITH OTHER REQUIRE10 MENTS.— 

11 ‘‘(A) TREATMENT OF SEPARATE PLANS.— 

12 The except clause in section 3(35) shall not 

13 apply to an eligible combined plan. 

14 ‘‘(B) REPORTING.—An eligible combined 

15 plan shall be treated as a single plan for pur16 poses of section 103. 

17 ‘‘(6) APPLICABLE INDIVIDUAL ACCOUNT

18 PLAN.—For purposes of this subsection— 

19 ‘‘(A) IN GENERAL.—The term ‘applicable 

20 individual account plan’ means an individual ac21 count plan which includes a qualified cash or 

22 deferred arrangement. 

23 ‘‘(B) QUALIFIED CASH OR DEFERRED AR24 RANGEMENT.—The term ‘qualified cash or de25 ferred arrangement’ has the meaning given 


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1 such term by section 401(k)(2) of the Internal 

2 Revenue Code of 1986.’’. 

3 (2) CONFORMING CHANGES.— 

4 (A) The heading for section 210 of such 

5 Act is amended to read as follows: 

6 ‘‘SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPE7 CIAL RULES.’’. 

8 (B) The table of contents in section 1 of 

9 such Act is amended by striking the item relat10 ing to section 210 and inserting the following 

11 new item: 

‘‘Sec. 210. Multiple employer plans and other special rules.’’. 

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

13 this section shall apply to plan years beginning after De14 cember 31, 2009. 

15 SEC. 904. FASTER VESTING OF EMPLOYER NONELECTIVE 

16 CONTRIBUTIONS. 

17 (a) AMENDMENTS TO THE INTERNAL REVENUE

18 CODE OF 1986.— 

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

20 411(a) of the Internal Revenue Code of 1986 (relat21 ing to employer contributions) is amended to read as 

22 follows: 

23 ‘‘(2) EMPLOYER CONTRIBUTIONS.— 

24 ‘‘(A) DEFINED BENEFIT PLANS.— 


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1 ‘‘(i) IN GENERAL.—In the case of a 

2 defined benefit plan, a plan satisfies the 

3 requirements of this paragraph if it satis4 fies the requirements of clause (ii) or (iii). 

5 ‘‘(ii) 5-YEAR VESTING.—A plan satis6 fies the requirements of this clause if an 

7 employee who has completed at least 5 

8 years of service has a nonforfeitable right 

9 to 100 percent of the employee’s accrued 

10 benefit derived from employer contribu11 tions. 

12 ‘‘(iii) 3 TO 7 YEAR VESTING.—A plan 

13 satisfies the requirements of this clause if 

14 an employee has a nonforfeitable right to 

15 a percentage of the employee’s accrued 

16 benefit derived from employer contribu17 tions determined under the following table: 

The nonforfeitable 

‘‘ Years of service: percentage is: 

3 ......................................................................................................... 20

4 ......................................................................................................... 40

5 ......................................................................................................... 60

6 ......................................................................................................... 80

7 or more ........................................................................................... 100. 

18 ‘‘(B) DEFINED CONTRIBUTION PLANS.— 

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

20 defined contribution plan, a plan satisfies 

21 the requirements of this paragraph if it 


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1 satisfies the requirements of clause (ii) or 

2 (iii). 

3 ‘‘(ii) 3-YEAR VESTING.—A plan satis4 fies the requirements of this clause if an 

5 employee who has completed at least 3 

6 years of service has a nonforfeitable right 

7 to 100 percent of the employee’s accrued 

8 benefit derived from employer contribu9 tions. 

10 ‘‘(iii) 2 TO 6 YEAR VESTING.—A plan 

11 satisfies the requirements of this clause if 

12 an employee has a nonforfeitable right to 

13 a percentage of the employee’s accrued 

14 benefit derived from employer contribu15 tions determined under the following table: 

The nonforfeitable 

‘‘ Years of service: percentage is: 

2 ......................................................................................................... 20

3 ......................................................................................................... 40

4 ......................................................................................................... 60

5 ......................................................................................................... 80

6 or more ........................................................................................... 100.’’. 

16 (2) CONFORMING AMENDMENT.—Section 

17 411(a) of such Code (relating to general rule for 

18 minimum vesting standards) is amended by striking 

19 paragraph (12). 

20 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

21 INCOME SECURITY ACT OF 1974.— 


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

2 203(a) of the Employee Retirement Income Security 

3 Act of 1974 (29 U.S.C. 1053(a)(2)) is amended to 

4 read as follows: 

5 ‘‘(2)(A)(i) In the case of a defined benefit plan, 

6 a plan satisfies the requirements of this paragraph 

7 if it satisfies the requirements of clause (ii) or (iii). 

8 ‘‘(ii) A plan satisfies the requirements of this 

9 clause if an employee who has completed at least 5 

10 years of service has a nonforfeitable right to 100 

11 percent of the employee’s accrued benefit derived 

12 from employer contributions. 

13 ‘‘(iii) A plan satisfies the requirements of this 

14 clause if an employee has a nonforfeitable right to 

15 a percentage of the employee’s accrued benefit de16 rived from employer contributions determined under 

17 the following table: 

The nonforfeitable 

‘‘ Years of service: percentage is: 

3 ......................................................................................................... 20

4 ......................................................................................................... 40

5 ......................................................................................................... 60

6 ......................................................................................................... 80

7 or more ........................................................................................... 100. 

18 ‘‘(B)(i) In the case of an individual account 

19 plan, a plan satisfies the requirements of this para20 graph if it satisfies the requirements of clause (ii) or 

21 (iii). 


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1 ‘‘(ii) A plan satisfies the requirements of this 

2 clause if an employee who has completed at least 3 

3 years of service has a nonforfeitable right to 100 

4 percent of the employee’s accrued benefit derived 

5 from employer contributions. 

6 ‘‘(iii) A plan satisfies the requirements of this 

7 clause if an employee has a nonforfeitable right to 

8 a percentage of the employee’s accrued benefit de9 rived from employer contributions determined under 

10 the following table: 

The nonforfeitable 

‘‘ Years of service: percentage is: 

2 ......................................................................................................... 20

3 ......................................................................................................... 40

4 ......................................................................................................... 60

5 ......................................................................................................... 80

6 or more ........................................................................................... 100.’’. 

11 (2) CONFORMING AMENDMENT.—Section 

12 203(a) of such Act is amended by striking para13 graph (4). 

14 (c) EFFECTIVE DATES.— 

15 (1) IN GENERAL.—Except as provided in para16 graphs (2) and (4), the amendments made by this 

17 section shall apply to contributions for plan years 

18 beginning after December 31, 2006. 

19 (2) COLLECTIVE BARGAINING AGREEMENTS.— 

20 In the case of a plan maintained pursuant to one or 

21 more collective bargaining agreements between em22 ployee representatives and one or more employers 


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1 ratified before the date of the enactment of this Act, 

2 the amendments made by this section shall not apply 

3 to contributions on behalf of employees covered by 

4 any such agreement for plan years beginning before 

5 the earlier of— 

6 (A) the later of— 

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

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

10 extension thereof on or after such date of 

11 the enactment); or 

12 (ii) January 1, 2007; or 

13 (B) January 1, 2009. 

14 (3) SERVICE REQUIRED.—With respect to any 

15 plan, the amendments made by this section shall not 

16 apply to any employee before the date that such em17 ployee has 1 hour of service under such plan in any 

18 plan year to which the amendments made by this 

19 section apply. 

20 (4) SPECIAL RULE FOR STOCK OWNERSHIP

21 PLANS.—Notwithstanding paragraph (1) or (2), in 

22 the case of an employee stock ownership plan (as de23 fined in section 4975(e)(7) of the Internal Revenue 

24 Code of 1986) which had outstanding on September 

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1 ing qualifying employer securities (as defined in sec2 tion 4975(e)(8) of such Code), the amendments 

3 made by this section shall not apply to any plan year 

4 beginning before the earlier of— 

5 (A) the date on which the loan is fully re6 paid, or 

7 (B) the date on which the loan was, as of 

8 September 26, 2005, scheduled to be fully re9 paid. 

10 SEC. 905. DISTRIBUTIONS DURING WORKING RETIREMENT. 

11 (a) AMENDMENT TO THE EMPLOYEE RETIREMENT

12 INCOME SECURITY ACT OF 1974.—Subparagraph (A) of 

13 section 3(2) of the Employee Retirement Income Security 

14 Act of 1974 (29 U.S.C. 1002(2)) is amended by adding 

15 at the end the following new sentence: ‘‘A distribution 

16 from a plan, fund, or program shall not be treated as 

17 made in a form other than retirement income or as a dis18 tribution prior to termination of covered employment sole19 ly because such distribution is made to an employee who 

20 has attained age 62 and who is not separated from em21 ployment at the time of such distribution.’’. 

22 (b) AMENDMENT TO THE INTERNAL REVENUE CODE

23 OF 1986.—Subsection (a) of section 401 of the Internal 

24 Revenue Code of 1986 (as amended by this Act) is amendVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00745 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ed by inserting after paragraph (35) the following new 

2 paragraph: 

3 ‘‘(36) DISTRIBUTIONS DURING WORKING RE4 TIREMENT.—A trust forming part of a pension plan 

5 shall not be treated as failing to constitute a quali6 fied trust under this section solely because the plan 

7 provides that a distribution may be made from such 

8 trust to an employee who has attained age 62 and 

9 who is not separated from employment at the time 

10 of such distribution.’’. 

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

12 this section shall apply to distributions in plan years be13 ginning after December 31, 2006. 

14 SEC. 906. TREATMENT OF CERTAIN PENSION PLANS OF IN15 DIAN TRIBAL GOVERNMENTS. 

16 (a) DEFINITION OF GOVERNMENT PLAN TO INCLUDE

17 CERTAIN PENSION PLANS OF INDIAN TRIBAL GOVERN18 MENTS.— 

19 (1) AMENDMENT TO INTERNAL REVENUE CODE

20 OF 1986.—Section 414(d) of the Internal Revenue 

21 Code of 1986 (defining governmental plan) is 

22 amended by adding at the end the following: ‘‘The 

23 term ‘governmental plan’ includes a plan which is 

24 established and maintained by an Indian tribal gov25 ernment (as defined in section 7701(a)(40)), a subVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00746 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 division of an Indian tribal government (determined 

2 in accordance with section 7871(d)), or an agency or 

3 instrumentality of either, and all of the participants 

4 of which are employees of such entity substantially 

5 all of whose services as such an employee are in the 

6 performance of essential governmental functions but 

7 not in the performance of commercial activities 

8 (whether or not an essential government function).’’. 

9 (2) AMENDMENT TO EMPLOYEE RETIREMENT

10 INCOME SECURITY ACT OF 1974.— 

11 (A) Section 3(32) of the Employee Retire12 ment Income Security Act of 1974 (29 U.S.C. 

13 1002(32)) is amended by adding at the end the 

14 following: ‘‘The term ‘governmental plan’ in15 cludes a plan which is established and main16 tained by an Indian tribal government (as de17 fined in section 7701(a)(40) of the Internal 

18 Revenue Code of 1986), a subdivision of an In19 dian tribal government (determined in accord20 ance with section 7871(d) of such Code), or an 

21 agency or instrumentality of either, and all of 

22 the participants of which are employees of such 

23 entity substantially all of whose services as such 

24 an employee are in the performance of essential 

25 governmental functions but not in the performVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00747 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ance of commercial activities (whether or not an 

2 essential government function)’’. 

3 (B) Section 4021(b)(2) of such Act is 

4 amended by adding at the end the following: 

5 ‘‘or which is described in the last sentence of 

6 section 3(32)’’. 

7 (b) CLARIFICATION THAT TRIBAL GOVERNMENTS

8 ARE SUBJECT TO THE SAME PENSION PLAN RULES AND

9 REGULATIONS APPLIED TO STATE AND OTHER LOCAL

10 GOVERNMENTS AND THEIR POLICE AND FIRE11 FIGHTERS.— 

12 (1) AMENDMENTS TO INTERNAL REVENUE

13 CODE OF 1986.— 

14 (A) POLICE AND FIREFIGHTERS.—Sub15 paragraph (H) section 415(b)(2) of the Internal 

16 Revenue Code of 1986 (defining participant) is 

17 amended— 

18 (i) in clause (i), by striking ‘‘State or 

19 political subdivision’’ and inserting ‘‘State, 

20 Indian tribal government (as defined in 

21 section 7701(a)(40)), or any political sub22 division’’; and 

23 (ii) in clause (ii)(I), by striking ‘‘State 

24 or political subdivision’’ each place it ap25 pears and inserting ‘‘State, Indian tribal 


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1 government (as so defined), or any political 

2 subdivision’’. 

3 (B) STATE AND LOCAL GOVERNMENT

4 PLANS.— 

5 (i) IN GENERAL.—Subparagraph (A) 

6 of section 415(b)(10) of such Code (relat7 ing to limitation to equal accrued benefit) 

8 is amended by inserting ‘‘or a govern9 mental plan described in the last sentence 

10 of section 414(d) (relating to plans of In11 dian tribal governments),’’ after ‘‘fore12 going,’’. 

13 (ii) CONFORMING AMENDMENT.—The 

14 heading of paragraph (1) of section 415(b) 

15 of such Code is amended by striking ‘‘SPE16 CIAL RULE FOR STATE AND’’ and inserting 

17 ‘‘SPECIAL RULE FOR STATE, INDIAN TRIB18 AL, AND’’. 

19 (C) GOVERNMENT PICK UP CONTRIBU20 TIONS.—Paragraph (2) of section 414(h) of 

21 such Code (relating to designation by units of 

22 government) is amended by inserting ‘‘or a gov23 ernmental plan described in the last sentence of 

24 section 414(d) (relating to plans of Indian trib25 al governments),’’ after ‘‘foregoing,’’. 


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1 (2) AMENDMENTS TO EMPLOYEE RETIREMENT

2 INCOME SECURITY ACT OF 1974.—Section 4021(b) of 

3 the Employee Retirement Income Security Act of 

4 1974 (29 U.S.C. 1321(b)) is amended— 

5 (A) in paragraph (12), by striking ‘‘or’’ at 

6 the end; 

7 (B) in paragraph (13), by striking ‘‘plan.’’ 

8 and inserting ‘‘plan; or’’; and 

9 (C) by adding at the end the following: 

10 ‘‘(14) established and maintained by an Indian 

11 tribal government (as defined in section 7701(a)(40) 

12 of the Internal Revenue Code of 1986), a subdivision 

13 of an Indian tribal government (determined in ac14 cordance with section 7871(d) of such Code), or an 

15 agency or instrumentality of either, and all of the 

16 participants of which are employees of such entity 

17 substantially all of whose services as such an em18 ployee are in the performance of essential govern19 mental functions but not in the performance of com20 mercial activities (whether or not an essential gov21 ernment function).’’. 

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

23 this section shall apply to any year beginning on or after 

24 the date of the enactment of this Act. 


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1 TITLE X—PROVISIONS RELAT2 ING TO SPOUSAL PENSION 

3 PROTECTION 

4 SEC. 1001. REGULATIONS ON TIME AND ORDER OF 

5 ISSUANCE OF DOMESTIC RELATIONS OR6 DERS. 

7 Not later than 1 year after the date of the enactment 

8 of this Act, the Secretary of Labor shall issue regulations 

9 under section 206(d)(3) of the Employee Retirement Secu10 rity Act of 1974 and section 414(p) of the Internal Rev11 enue Code of 1986 which clarify that— 

12 (1) a domestic relations order otherwise meet13 ing the requirements to be a qualified domestic rela14 tions order, including the requirements of section 

15 206(d)(3)(D) of such Act and section 414(p)(3) of 

16 such Code, shall not fail to be treated as a qualified 

17 domestic relations order solely because— 

18 (A) the order is issued after, or revises, an19 other domestic relations order or qualified do20 mestic relations order; or 

21 (B) of the time at which it is issued; and 

22 (2) any order described in paragraph (1) shall 

23 be subject to the same requirements and protections 

24 which apply to qualified domestic relations orders, 


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1 including the provisions of section 206(d)(3)(H) of 

2 such Act and section 414(p)(7) of such Code. 

3 SEC. 1002. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL4 ROAD RETIREMENT ANNUITIES INDE5 PENDENT OF ACTUAL ENTITLEMENT OF EM6 PLOYEE. 

7 (a) IN GENERAL.—Section 2 of the Railroad Retire8 ment Act of 1974 (45 U.S.C. 231a) is amended— 

9 (1) in subsection (c)(4)(i), by striking ‘‘(A) is 

10 entitled to an annuity under subsection (a)(1) and 

11 (B)’’; and 

12 (2) in subsection (e)(5), by striking ‘‘or di13 vorced wife’’ the second place it appears. 

14 (b) EFFECTIVE DATE.—The amendments made by 

15 this section shall take effect 1 year after the date of the 

16 enactment of this Act. 

17 SEC. 1003. EXTENSION OF TIER II RAILROAD RETIREMENT 

18 BENEFITS TO SURVIVING FORMER SPOUSES 

19 PURSUANT TO DIVORCE AGREEMENTS. 

20 (a) IN GENERAL.—Section 5 of the Railroad Retire21 ment Act of 1974 (45 U.S.C. 231d) is amended by adding 

22 at the end the following: 

23 ‘‘(d) Notwithstanding any other provision of law, the 

24 payment of any portion of an annuity computed under sec25 tion 3(b) to a surviving former spouse in accordance with 


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1 a court decree of divorce, annulment, or legal separation 

2 or the terms of any court-approved property settlement 

3 incident to any such court decree shall not be terminated 

4 upon the death of the individual who performed the service 

5 with respect to which such annuity is so computed unless 

6 such termination is otherwise required by the terms of 

7 such court decree.’’ 

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

9 this section shall take effect 1 year after the date of the 

10 enactment of this Act. 

11 SEC. 1004. REQUIREMENT FOR ADDITIONAL SURVIVOR AN12 NUITY OPTION. 

13 (a) AMENDMENTS TO INTERNAL REVENUE CODE.— 

14 (1) ELECTION OF SURVIVOR ANNUITY.—Section 

15 417(a)(1)(A) of the Internal Revenue Code of 1986 

16 is amended— 

17 (A) in clause (i), by striking ‘‘, and’’ and 

18 inserting a comma; 

19 (B) by redesignating clause (ii) as clause 

20 (iii); and 

21 (C) by inserting after clause (i) the fol22 lowing: 

23 ‘‘(ii) if the participant elects a waiver 

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1 tional survivor annuity at any time during the 

2 applicable election period, and’’. 

3 (2) DEFINITION.—Section 417 of such Code is 

4 amended by adding at the end the following: 

5 ‘‘(g) DEFINITION OF QUALIFIED OPTIONAL SUR6 VIVOR ANNUITY.— 

7 ‘‘(1) IN GENERAL.—For purposes of this sec8 tion, the term ‘qualified optional survivor annuity’ 

9 means an annuity— 

10 ‘‘(A) for the life of the participant with a 

11 survivor annuity for the life of the spouse which 

12 is equal to the applicable percentage of the 

13 amount of the annuity which is payable during 

14 the joint lives of the participant and the spouse, 

15 and 

16 ‘‘(B) which is the actuarial equivalent of a 

17 single annuity for the life of the participant. 

18 Such term also includes any annuity in a form hav19 ing the effect of an annuity described in the pre20 ceding sentence. 

21 ‘‘(2) APPLICABLE PERCENTAGE.— 

22 ‘‘(A) IN GENERAL.—For purposes of para23 graph (1), if the survivor annuity percentage— 

24 ‘‘(i) is less than 75 percent, the appli25 cable percentage is 75 percent, and 


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1 ‘‘(ii) is greater than or equal to 75 

2 percent, the applicable percentage is 50 

3 percent. 

4 ‘‘(B) SURVIVOR ANNUITY PERCENTAGE.— 

5 For purposes of subparagraph (A), the term 

6 ‘survivor annuity percentage’ means the per7 centage which the survivor annuity under the 

8 plan’s qualified joint and survivor annuity bears 

9 to the annuity payable during the joint lives of 

10 the participant and the spouse.’’. 

11 (3) NOTICE.—Section 417(a)(3)(A)(i) of such 

12 Code is amended by inserting ‘‘and of the qualified 

13 optional survivor annuity’’ after ‘‘annuity’’. 

14 (b) AMENDMENTS TO ERISA.— 

15 (1) ELECTION OF SURVIVOR ANNUITY.—Section 

16 205(c)(1)(A) of the Employee Retirement Income 

17 Security Act of 1974 (29 U.S.C. 1055(c)(1)(A)) is 

18 amended— 

19 (A) in clause (i), by striking ‘‘, and’’ and 

20 inserting a comma; 

21 (B) by redesignating clause (ii) as clause 

22 (iii); and 

23 (C) by inserting after clause (i) the fol24 lowing: 


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1 ‘‘(ii) if the participant elects a waiver 

2 under clause (i), may elect the qualified op3 tional survivor annuity at any time during the 

4 applicable election period, and’’. 

5 (2) DEFINITION.—Section 205(d) of such Act 

6 (29 U.S.C. 1055(d)) is amended— 

7 (A) by inserting ‘‘(1)’’ after ‘‘(d)’’; 

8 (B) by redesignating paragraphs (1) and 

9 (2) as subparagraphs (A) and (B), respectively; 

10 and 

11 (C) by adding at the end the following: 

12 ‘‘(2)(A) For purposes of this section, the term ‘quali13 fied optional survivor annuity’ means an annuity— 

14 ‘‘(i) for the life of the participant with a sur15 vivor annuity for the life of the spouse which is 

16 equal to the applicable percentage of the amount of 

17 the annuity which is payable during the joint lives 

18 of the participant and the spouse, and 

19 ‘‘(ii) which is the actuarial equivalent of a sin20 gle annuity for the life of the participant. 

21 Such term also includes any annuity in a form having the 

22 effect of an annuity described in the preceding sentence. 

23 ‘‘(B)(i) For purposes of subparagraph (A), if the sur24 vivor annuity percentage— 


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1 ‘‘(I) is less than 75 percent, the applicable per2 centage is 75 percent, and 

3 ‘‘(II) is greater than or equal to 75 percent, the 

4 applicable percentage is 50 percent. 

5 ‘‘(ii) For purposes of clause (i), the term ‘survivor 

6 annuity percentage’ means the percentage which the sur7 vivor annuity under the plan’s qualified joint and survivor 

8 annuity bears to the annuity payable during the joint lives 

9 of the participant and the spouse.’’. 

10 (3) NOTICE.—Section 205(c)(3)(A)(i) of such 

11 Act (29 U.S.C. 1055(c)(3)(A)(i)) is amended by in12 serting ‘‘and of the qualified optional survivor annu13 ity’’ after ‘‘annuity’’. 

14 (c) EFFECTIVE DATES.— 

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

16 this section shall apply to plan years beginning after 

17 December 31, 2007. 

18 (2) SPECIAL RULE FOR COLLECTIVELY BAR19 GAINED PLANS.—In the case of a plan maintained 

20 pursuant to 1 or more collective bargaining agree21 ments between employee representatives and 1 or 

22 more employers ratified on or before the date of the 

23 enactment of this Act, the amendments made by this 

24 section shall not apply to plan years beginning be25 fore the earlier of— 


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1 (A) the later of— 

2 (i) January 1, 2008, or 

3 (ii) the date on which the last collec4 tive bargaining agreement related to the 

5 plan terminates (determined without re6 gard to any extension thereof after the 

7 date of enactment of this Act), or 

8 (B) January 1, 2009. 

9 TITLE XI—ADMINISTRATIVE 

10 PROVISIONS 

11 SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION 

12 SYSTEM. 

13 (a) IN GENERAL.—The Secretary of the Treasury 

14 shall have full authority to establish and implement the 

15 Employee Plans Compliance Resolution System (or any 

16 successor program) and any other employee plans correc17 tion policies, including the authority to waive income, ex18 cise, or other taxes to ensure that any tax, penalty, or 

19 sanction is not excessive and bears a reasonable relation20 ship to the nature, extent, and severity of the failure. 

21 (b) IMPROVEMENTS.—The Secretary of the Treasury 

22 shall continue to update and improve the Employee Plans 

23 Compliance Resolution System (or any successor pro24 gram), giving special attention to— 


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1 (1) increasing the awareness and knowledge of 

2 small employers concerning the availability and use 

3 of the program; 

4 (2) taking into account special concerns and 

5 circumstances that small employers face with respect 

6 to compliance and correction of compliance failures; 

7 (3) extending the duration of the self-correction 

8 period under the Self-Correction Program for signifi9 cant compliance failures; 

10 (4) expanding the availability to correct insig11 nificant compliance failures under the Self-Correc12 tion Program during audit; and 

13 (5) assuring that any tax, penalty, or sanction 

14 that is imposed by reason of a compliance failure is 

15 not excessive and bears a reasonable relationship to 

16 the nature, extent, and severity of the failure. 

17 SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DIS18 TRIBUTIONS. 

19 (a) EXPANSION OF PERIOD.— 

20 (1) AMENDMENT OF INTERNAL REVENUE

21 CODE.— 

22 (A) IN GENERAL.—Section 417(a)(6)(A) of 

23 the Internal Revenue Code of 1986 is amended 

24 by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 


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1 (B) MODIFICATION OF REGULATIONS.— 

2 The Secretary of the Treasury shall modify the 

3 regulations under sections 402(f), 411(a)(11), 

4 and 417 of the Internal Revenue Code of 1986 

5 by substituting ‘‘180 days’’ for ‘‘90 days’’ each 

6 place it appears in Treasury Regulations sec7 tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)– 

8 1(b). 

9 (2) AMENDMENT OF ERISA.— 

10 (A) IN GENERAL.—Section 205(c)(7)(A) of 

11 the Employee Retirement Income Security Act 

12 of 1974 (29 U.S.C. 1055(c)(7)(A)) is amended 

13 by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 

14 (B) MODIFICATION OF REGULATIONS.— 

15 The Secretary of the Treasury shall modify the 

16 regulations under part 2 of subtitle B of title 

17 I of the Employee Retirement Income Security 

18 Act of 1974 relating to sections 203(e) and 205 

19 of such Act by substituting ‘‘180 days’’ for ‘‘90 

20 days’’ each place it appears. 

21 (3) EFFECTIVE DATE.—The amendments and 

22 modifications made or required by this subsection 

23 shall apply to years beginning after December 31, 

24 2006. 

25 (b) NOTIFICATION OF RIGHT TO DEFER.— 


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1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall modify the regulations under section 

3 411(a)(11) of the Internal Revenue Code of 1986 

4 and under section 205 of the Employee Retirement 

5 Income Security Act of 1974 to provide that the de6 scription of a participant’s right, if any, to defer re7 ceipt of a distribution shall also describe the con8 sequences of failing to defer such receipt. 

9 (2) EFFECTIVE DATE.— 

10 (A) IN GENERAL.—The modifications re11 quired by paragraph (1) shall apply to years be12 ginning after December 31, 2006. 

13 (B) REASONABLE NOTICE.—A plan shall 

14 not be treated as failing to meet the require15 ments of section 411(a)(11) of such Code or 

16 section 205 of such Act with respect to any de17 scription of consequences described in para18 graph (1) made within 90 days after the Sec19 retary of the Treasury issues the modifications 

20 required by paragraph (1) if the plan adminis21 trator makes a reasonable attempt to comply 

22 with such requirements. 

23 SEC. 1103. REPORTING SIMPLIFICATION. 

24 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

25 OWNERS AND THEIR SPOUSES.— 


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1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall modify the requirements for filing annual 

3 returns with respect to one-participant retirement 

4 plans to ensure that such plans with assets of 

5 $250,000 or less as of the close of the plan year 

6 need not file a return for that year. 

7 (2) ONE-PARTICIPANT RETIREMENT PLAN DE8 FINED.—For purposes of this subsection, the term 

9 ‘‘one-participant retirement plan’’ means a retire10 ment plan with respect to which the following re11 quirements are met: 

12 (A) on the first day of the plan year— 

13 (i) the plan covered only one indi14 vidual (or the individual and the individ15 ual’s spouse) and the individual owned 100 

16 percent of the plan sponsor (whether or 

17 not incorporated), or 

18 (ii) the plan covered only one or more 

19 partners (or partners and their spouses) in 

20 the plan sponsor; 

21 (B) the plan meets the minimum coverage 

22 requirements of section 410(b) of the Internal 

23 Revenue Code of 1986 without being combined 

24 with any other plan of the business that covers 

25 the employees of the business; 


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1 (C) the plan does not provide benefits to 

2 anyone except the individual (and the individ3 ual’s spouse) or the partners (and their 

4 spouses); 

5 (D) the plan does not cover a business that 

6 is a member of an affiliated service group, a 

7 controlled group of corporations, or a group of 

8 businesses under common control; and 

9 (E) the plan does not cover a business that 

10 uses the services of leased employees (within 

11 the meaning of section 414(n) of such Code). 

12 For purposes of this paragraph, the term ‘‘partner’’ 

13 includes a 2-percent shareholder (as defined in sec14 tion 1372(b) of such Code) of an S corporation. 

15 (3) OTHER DEFINITIONS.—Terms used in para16 graph (2) which are also used in section 414 of the 

17 Internal Revenue Code of 1986 shall have the re18 spective meanings given such terms by such section. 

19 (4) EFFECTIVE DATE.—The provisions of this 

20 subsection shall apply to plan years beginning on or 

21 after January 1, 2007. 

22 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

23 PLANS WITH FEWER THAN 25 PARTICIPANTS.—In the 

24 case of plan years beginning after December 31, 2006, the 

25 Secretary of the Treasury and the Secretary of Labor shall 


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1 provide for the filing of a simplified annual return for any 

2 retirement plan which covers less than 25 participants on 

3 the first day of a plan year and which meets the require4 ments described in subparagraphs (B), (D), and (E) of 

5 subsection (a)(2). 

6 SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE 

7 AND EMPLOYMENT RETENTION PLANS MAIN8 TAINED BY LOCAL EDUCATIONAL AGENCIES 

9 AND OTHER ENTITIES. 

10 (a) VOLUNTARY EARLY RETIREMENT INCENTIVE

11 PLANS.— 

12 (1) TREATMENT AS PLAN PROVIDING SEVER13 ANCE PAY.—Section 457(e)(11) of the Internal Rev14 enue Code of 1986 (relating to certain plans ex15 cluded) is amended by adding at the end the fol16 lowing new subparagraph: 

17 ‘‘(D) CERTAIN VOLUNTARY EARLY RETIRE18 MENT INCENTIVE PLANS.— 

19 ‘‘(i) IN GENERAL.—If an applicable 

20 voluntary early retirement incentive plan— 

21 ‘‘(I) makes payments or supple22 ments as an early retirement benefit, 

23 a retirement-type subsidy, or a benefit 

24 described in the last sentence of sec25 tion 411(a)(9), and 


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1 ‘‘(II) such payments or supple2 ments are made in coordination with 

3 a defined benefit plan which is de4 scribed in section 401(a) and includes 

5 a trust exempt from tax under section 

6 501(a) and which is maintained by an 

7 eligible employer described in para8 graph (1)(A) or by an education asso9 ciation described in clause (ii)(II), 

10 such applicable plan shall be treated for 

11 purposes of subparagraph (A)(i) as a bona 

12 fide severance pay plan with respect to 

13 such payments or supplements to the ex14 tent such payments or supplements could 

15 otherwise have been provided under such 

16 defined benefit plan (determined as if sec17 tion 411 applied to such defined benefit 

18 plan). 

19 ‘‘(ii) APPLICABLE VOLUNTARY EARLY

20 RETIREMENT INCENTIVE PLAN.—For pur21 poses of this subparagraph, the term ‘ap22 plicable voluntary early retirement incen23 tive plan’ means a voluntary early retire24 ment incentive plan maintained by— 


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1 ‘‘(I) a local educational agency 

2 (as defined in section 9101 of the Ele3 mentary and Secondary Education 

4 Act of 1965 (20 U.S.C. 7801)), or 

5 ‘‘(II) an education association 

6 which principally represents employees 

7 of 1 or more agencies described in 

8 subclause (I) and which is described 

9 in section 501(c) (5) or (6) and ex10 empt from tax under section 501(a).’’ 

11 (2) AGE DISCRIMINATION IN EMPLOYMENT

12 ACT.—Section 4(l)(1) of the Age Discrimination in 

13 Employment Act of 1967 (29 U.S.C. 623(l)(1)) is 

14 amended— 

15 (A) by inserting ‘‘(A)’’ after ‘‘(1)’’, 

16 (B) by redesignating subparagraphs (A) 

17 and (B) as clauses (i) and (ii), respectively, 

18 (C) by redesignating clauses (i) and (ii) of 

19 subparagraph (B) (as in effect before the 

20 amendments made by subparagraph (B)) as 

21 subclauses (I) and (II), respectively, and 

22 (D) by adding at the end the following: 

23 ‘‘(B) A voluntary early retirement incentive 

24 plan that— 

25 ‘‘(i) is maintained by— 


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1 ‘‘(I) a local educational agency (as de2 fined in section 9101 of the Elementary 

3 and Secondary Education Act of 1965 (20 

4 U.S.C. 7801), or 

5 ‘‘(II) an education association which 

6 principally represents employees of 1 or 

7 more agencies described in subclause (I) 

8 and which is described in section 501(c) 

9 (5) or (6) of the Internal Revenue Code of 

10 1986 and exempt from taxation under sec11 tion 501(a) of such Code, and 

12 ‘‘(ii) makes payments or supplements de13 scribed in subclauses (I) and (II) of subpara14 graph (A)(ii) in coordination with a defined 

15 benefit plan (as so defined) maintained by an 

16 eligible employer described in section 

17 457(e)(1)(A) of such Code or by an education 

18 association described in clause (i)(II), 

19 shall be treated solely for purposes of subparagraph 

20 (A)(ii) as if it were a part of the defined benefit plan 

21 with respect to such payments or supplements. Pay22 ments or supplements under such a voluntary early 

23 retirement incentive plan shall not constitute sever24 ance pay for purposes of paragraph (2).’’. 

25 (b) EMPLOYMENT RETENTION PLANS.— 


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1 (1) IN GENERAL.—Section 457(f)(2) of the In2 ternal Revenue Code of 1986 (relating to exceptions) 

3 is amended by striking ‘‘and’’ at the end of subpara4 graph (D), by striking the period at the end of sub5 paragraph (E) and inserting ‘‘, and’’, and by adding 

6 at the end the following: 

7 ‘‘(F) that portion of any applicable employ8 ment retention plan described in paragraph (4) 

9 with respect to any participant.’’ 

10 (2) DEFINITIONS AND RULES RELATING TO EM11 PLOYMENT RETENTION PLANS.—Section 457(f) of 

12 such Code is amended by adding at the end the fol13 lowing new paragraph: 

14 ‘‘(4) EMPLOYMENT RETENTION PLANS.—For 

15 purposes of paragraph (2)(F)— 

16 ‘‘(A) IN GENERAL.—The portion of an ap17 plicable employment retention plan described in 

18 this paragraph with respect to any participant 

19 is that portion of the plan which provides bene20 fits payable to the participant not in excess of 

21 twice the applicable dollar limit determined 

22 under subsection (e)(15). 

23 ‘‘(B) OTHER RULES.— 

24 ‘‘(i) LIMITATION.—Paragraph (2)(F) 

25 shall only apply to the portion of the plan 


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1 described in subparagraph (A) for years 

2 preceding the year in which such portion is 

3 paid or otherwise made available to the 

4 participant. 

5 ‘‘(ii) TREATMENT.—A plan shall not 

6 be treated for purposes of this title as pro7 viding for the deferral of compensation for 

8 any year with respect to the portion of the 

9 plan described in subparagraph (A). 

10 ‘‘(C) APPLICABLE EMPLOYMENT RETEN11 TION PLAN.—The term ‘applicable employment 

12 retention plan’ means an employment retention 

13 plan maintained by— 

14 ‘‘(i) a local educational agency (as de15 fined in section 9101 of the Elementary 

16 and Secondary Education Act of 1965 (20 

17 U.S.C. 7801), or 

18 ‘‘(ii) an education association which 

19 principally represents employees of 1 or 

20 more agencies described in clause (i) and 

21 which is described in section 501(c) (5) or 

22 (6) and exempt from taxation under sec23 tion 501(a). 

24 ‘‘(D) EMPLOYMENT RETENTION PLAN.— 

25 The term ‘employment retention plan’ means a 


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1 plan to pay, upon termination of employment, 

2 compensation to an employee of a local edu3 cational agency or education association de4 scribed in subparagraph (C) for purposes of— 

5 ‘‘(i) retaining the services of the em6 ployee, or 

7 ‘‘(ii) rewarding such employee for the 

8 employee’s service with 1 or more such 

9 agencies or associations.’’. 

10 (c) COORDINATION WITH ERISA.—Section 3(2)(B) 

11 of the Employee Retirement Income Security Act of 1974 

12 (29 U.S.C. 1002(2)(B)) is amended by adding at the end 

13 the following: ‘‘An applicable voluntary early retirement 

14 incentive plan (as defined in section 457(e)(11)(D)(ii) of 

15 the Internal Revenue Code of 1986) making payments or 

16 supplements described in section 457(e)(11)(D)(i) of such 

17 Code, and an applicable employment retention plan (as de18 fined in section 457(f)(4)(C) of such Code) making pay19 ments of benefits described in section 457(f)(4)(A) of such 

20 Code, shall, for purposes of this title, be treated as a wel21 fare plan (and not a pension plan) with respect to such 

22 payments and supplements.’’ 

23 (d) EFFECTIVE DATES.— 


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

2 this Act shall take effect on the date of the enact3 ment of this Act. 

4 (2) TAX AMENDMENTS.—The amendments 

5 made by subsections (a)(1) and (b) shall apply to 

6 taxable years ending after the date of the enactment 

7 of this Act. 

8 (3) ERISA AMENDMENTS.—The amendment 

9 made by subsection (c) shall apply to plan years 

10 ending after the date of the enactment of this Act. 

11 (4) CONSTRUCTION.—Nothing in the amend12 ments made by this section shall alter or affect the 

13 construction of the Internal Revenue Code of 1986, 

14 the Employee Retirement Income Security Act of 

15 1974, or the Age Discrimination in Employment Act 

16 of 1967 as applied to any plan, arrangement, or con17 duct to which such amendments do not apply. 

18 SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSA19 TION AS A RESULT OF PENSION ROLLOVERS. 

20 (a) IN GENERAL.—Section 3304(a) of the Internal 

21 Revenue Code of 1986 (relating to requirements for State 

22 unemployment laws) is amended by adding at the end the 

23 following new flush sentence: 

24 ‘‘Compensation shall not be reduced under paragraph (15) 

25 for any pension, retirement or retired pay, annuity, or 


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1 similar payment which is not includible in gross income 

2 of the individual for the taxable year in which paid because 

3 it was part of a rollover distribution.’’. 

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

5 this section shall apply to weeks beginning on or after the 

6 date of the enactment of this Act. 

7 SEC. 1106. REVOCATION OF ELECTION RELATING TO 

8 TREATMENT AS MULTIEMPLOYER PLAN. 

9 (a) AMENDMENT TO ERISA.—Section 3(37) of the 

10 Employee Retirement Income Security Act of 1974 is 

11 amended by adding at the end the following new subpara12 graph (G): 

13 ‘‘(G)(i) Within 1 year after the enactment of 

14 the Pension Protection Act of 2006— 

15 ‘‘(I) an election under subparagraph (E) 

16 may be revoked, pursuant to procedures pre17 scribed by the Pension Benefit Guaranty Cor18 poration, if, for each of the 3 plan years prior 

19 to the date of the enactment of that Act, the 

20 plan would have been a multiemployer plan but 

21 for the election under subparagraph (E), and 

22 ‘‘(II) a plan that meets the criteria in 

23 clauses (i) and (ii) of subparagraph (A) of this 

24 paragraph or that is described in clause (vi) 

25 may, pursuant to procedures prescribed by the 


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1 Pension Benefit Guaranty Corporation, elect to 

2 be a multiemployer plan, if— 

3 ‘‘(aa) for each of the 3 plan years im4 mediately before the date of the enactment 

5 of the Pension Protection Act of 2006, the 

6 plan has met those criteria or is so de7 scribed, 

8 ‘‘(bb) substantially all of the plan’s 

9 employer contributions for each of those 

10 plan years were made or required to be 

11 made by organizations that were exempt 

12 from tax under section 501 of the Internal 

13 Revenue Code of 1986, and 

14 ‘‘(cc) the plan was established prior to 

15 September 2, 1974. 

16 ‘‘(ii) An election under this paragraph shall be 

17 effective for all purposes under this Act and under 

18 the Internal Revenue Code of 1986, starting with 

19 the first plan year ending after the date of the en20 actment of the Pension Protection Act of 2006. 

21 ‘‘(iii) Once made, an election under this para22 graph shall be irrevocable, except that a plan de23 scribed in subclause (i)(II) shall cease to be a multi24 employer plan as of the plan year beginning imme25 diately after the first plan year for which the majorVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00773 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 ity of its employer contributions were made or re2 quired to be made by organizations that were not ex3 empt from tax under section 501 of the Internal 

4 Revenue Code of 1986. 

5 ‘‘(iv) The fact that a plan makes an election 

6 under clause (i)(II) does not imply that the plan was 

7 not a multiemployer plan prior to the date of the 

8 election or would not be a multiemployer plan with9 out regard to the election. 

10 ‘‘(v)(I) No later than 30 days before an election 

11 is made under this paragraph, the plan adminis12 trator shall provide notice of the pending election to 

13 each plan participant and beneficiary, each labor or14 ganization representing such participants or bene15 ficiaries, and each employer that has an obligation 

16 to contribute to the plan, describing the principal 

17 differences between the guarantee programs under 

18 title IV and the benefit restrictions under this title 

19 for single employer and multiemployer plans, along 

20 with such other information as the plan adminis21 trator chooses to include. 

22 ‘‘(II) Within 180 days after the date of enact23 ment of the Pension Protection Act of 2006, the 

24 Secretary shall prescribe a model notice under this 

25 subparagraph. 


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1 ‘‘(III) A plan administrator’s failure to provide 

2 the notice required under this subparagraph shall be 

3 treated for purposes of section 502(c)(2) as a failure 

4 or refusal by the plan administrator to file the an5 nual report required to be filed with the Secretary 

6 under section 101(b)(4). 

7 ‘‘(vi) A plan is described in this clause if it is 

8 a plan— 

9 ‘‘(I) that was established in Chicago, Illi10 nois, on August 12, 1881; and 

11 ‘‘(II) sponsored by an organization de12 scribed in section 501(c)(5) of the Internal Rev13 enue Code of 1986 and exempt from tax under 

14 section 501(a) of such Code.’’. 

15 (b) AMENDMENT TO INTERNAL REVENUE CODE.— 

16 Subsection (f) of section 414 of the Internal Revenue Code 

17 of 1986 is amended by adding at the end the following 

18 new paragraph (6): 

19 ‘‘(6) ELECTION WITH REGARD TO MULTIEM20 PLOYER STATUS.— 

21 ‘‘(A) Within 1 year after the enactment of 

22 the Pension Protection Act of 2006— 

23 ‘‘(i) An election under paragraph (5) 

24 may be revoked, pursuant to procedures 

25 prescribed by the Pension Benefit GuarVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00775 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 anty Corporation, if, for each of the 3 plan 

2 years prior to the date of the enactment of 

3 that Act, the plan would have been a mul4 tiemployer plan but for the election under 

5 paragraph (5), and 

6 ‘‘(ii) a plan that meets the criteria in 

7 subparagraph (A) and (B) of paragraph 

8 (1) of this subsection or that is described 

9 in subparagraph (E) may, pursuant to pro10 cedures prescribed by the Pension Benefit 

11 Guaranty Corporation, elect to be a multi12 employer plan, if— 

13 ‘‘(I) for each of the 3 plan years 

14 immediately before the date of enact15 ment of the Pension Protection Act of 

16 2006, the plan has met those criteria 

17 or is so described, 

18 ‘‘(II) substantially all of the 

19 plan’s employer contributions for each 

20 of those plan years were made or re21 quired to be made by organizations 

22 that were exempt from tax under sec23 tion 501, and 

24 ‘‘(III) the plan was established 

25 prior to September 2, 1974. 


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1 ‘‘(B) An election under this paragraph 

2 shall be effective for all purposes under this Act 

3 and under the Employee Retirement Income Se4 curity Act of 1974, starting with the first plan 

5 year ending after the date of the enactment of 

6 the Pension Protection Act of 2006. 

7 ‘‘(C) Once made, an election under this 

8 paragraph shall be irrevocable, except that a 

9 plan described in subparagraph (A)(ii) shall 

10 cease to be a multiemployer plan as of the plan 

11 year beginning immediately after the first plan 

12 year for which the majority of its employer con13 tributions were made or required to be made by 

14 organizations that were not exempt from tax 

15 under section 501. 

16 ‘‘(D) The fact that a plan makes an elec17 tion under subparagraph (A)(ii) does not imply 

18 that the plan was not a multiemployer plan 

19 prior to the date of the election or would not be 

20 a multiemployer plan without regard to the 

21 election. 

22 ‘‘(E) A plan is described in this subpara23 graph if it is a plan— 

24 ‘‘(i) that was established in Chicago, 

25 Illinois, on August 12, 1881; and 


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1 ‘‘(ii) sponsored by an organization de2 scribed in section 501(c)(5) and exempt 

3 from tax under section 501(a).’’. 

4 SEC. 1107. PROVISIONS RELATING TO PLAN AMENDMENTS. 

5 (a) IN GENERAL.—If this section applies to any pen6 sion plan or contract amendment— 

7 (1) such pension plan or contract shall be treat8 ed as being operated in accordance with the terms 

9 of the plan during the period described in subsection 

10 (b)(2)(A), and 

11 (2) except as provided by the Secretary of the 

12 Treasury, such pension plan shall not fail to meet 

13 the requirements of section 411(d)(6) of the Internal 

14 Revenue Code of 1986 and section 204(g) of the 

15 Employee Retirement Income Security Act of 1974 

16 by reason of such amendment. 

17 (b) AMENDMENTS TO WHICH SECTION APPLIES.— 

18 (1) IN GENERAL.—This section shall apply to 

19 any amendment to any pension plan or annuity con20 tract which is made— 

21 (A) pursuant to any amendment made by 

22 this Act or pursuant to any regulation issued by 

23 the Secretary of the Treasury or the Secretary 

24 of Labor under this Act, and 


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1 (B) on or before the last day of the first 

2 plan year beginning on or after January 1, 

3 2009. 

4 In the case of a governmental plan (as defined in 

5 section 414(d) of the Internal Revenue Code of 

6 1986), this paragraph shall be applied by sub7 stituting ‘‘2011’’ for ‘‘2009’’. 

8 (2) CONDITIONS.—This section shall not apply 

9 to any amendment unless— 

10 (A) during the period— 

11 (i) beginning on the date the legisla12 tive or regulatory amendment described in 

13 paragraph (1)(A) takes effect (or in the 

14 case of a plan or contract amendment not 

15 required by such legislative or regulatory 

16 amendment, the effective date specified by 

17 the plan), and 

18 (ii) ending on the date described in 

19 paragraph (1)(B) (or, if earlier, the date 

20 the plan or contract amendment is adopt21 ed), the plan or contract is operated as if 

22 such plan or contract amendment were in 

23 effect; and 

24 (B) such plan or contract amendment ap25 plies retroactively for such period. 


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1 TITLE XII—PROVISIONS RELAT2 ING TO EXEMPT ORGANIZA3 TIONS 

4 Subtitle A—Charitable Giving 

5 Incentives 

6 SEC. 1201. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL 

7 RETIREMENT PLANS FOR CHARITABLE PUR8 POSES. 

9 (a) IN GENERAL.—Subsection (d) of section 408 (re10 lating to individual retirement accounts) is amended by 

11 adding at the end the following new paragraph: 

12 ‘‘(8) DISTRIBUTIONS FOR CHARITABLE PUR13 POSES.— 

14 ‘‘(A) IN GENERAL.—So much of the aggre15 gate amount of qualified charitable distributions 

16 with respect to a taxpayer made during any 

17 taxable year which does not exceed $100,000 

18 shall not be includible in gross income of such 

19 taxpayer for such taxable year. 

20 ‘‘(B) QUALIFIED CHARITABLE DISTRIBU21 TION.—For purposes of this paragraph, the 

22 term ‘qualified charitable distribution’ means 

23 any distribution from an individual retirement 

24 plan (other than a plan described in subsection 

25 (k) or (p))— 


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1 ‘‘(i) which is made directly by the 

2 trustee to an organization described in sec3 tion 170(b)(1)(A) (other than any organi4 zation described in section 509(a)(3) or 

5 any fund or account described in section 

6 4966(d)(2)), and 

7 ‘‘(ii) which is made on or after the 

8 date that the individual for whose benefit 

9 the plan is maintained has attained age 

701 10 ⁄2. 

11 A distribution shall be treated as a qualified 

12 charitable distribution only to the extent that 

13 the distribution would be includible in gross in14 come without regard to subparagraph (A). 

15 ‘‘(C) CONTRIBUTIONS MUST BE OTHER16 WISE DEDUCTIBLE.—For purposes of this para17 graph, a distribution to an organization de18 scribed in subparagraph (B)(i) shall be treated 

19 as a qualified charitable distribution only if a 

20 deduction for the entire distribution would be 

21 allowable under section 170 (determined with22 out regard to subsection (b) thereof and this 

23 paragraph). 

24 ‘‘(D) APPLICATION OF SECTION 72.—Not25 withstanding section 72, in determining the exVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00781 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tent to which a distribution is a qualified chari2 table distribution, the entire amount of the dis3 tribution shall be treated as includible in gross 

4 income without regard to subparagraph (A) to 

5 the extent that such amount does not exceed 

6 the aggregate amount which would have been so 

7 includible if all amounts distributed from all in8 dividual retirement plans were treated as 1 con9 tract under paragraph (2)(A) for purposes of 

10 determining the inclusion of such distribution 

11 under section 72. Proper adjustments shall be 

12 made in applying section 72 to other distribu13 tions in such taxable year and subsequent tax14 able years. 

15 ‘‘(E) DENIAL OF DEDUCTION.—Qualified 

16 charitable distributions which are not includible 

17 in gross income pursuant to subparagraph (A) 

18 shall not be taken into account in determining 

19 the deduction under section 170. 

20 ‘‘(F) TERMINATION.—This paragraph shall 

21 not apply to distributions made in taxable years 

22 beginning after December 31, 2007.’’. 

23 (b) MODIFICATIONS RELATING TO INFORMATION RE24 TURNS BY CERTAIN TRUSTS.— 


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1 (1) RETURNS.—Section 6034 (relating to re2 turns by trusts described in section 4947(a)(2) or 

3 claiming charitable deductions under section 642(c)) 

4 is amended to read as follows: 

5 ‘‘SEC. 6034. RETURNS BY CERTAIN TRUSTS. 

6 ‘‘(a) SPLIT-INTEREST TRUSTS.—Every trust de7 scribed in section 4947(a)(2) shall furnish such informa8 tion with respect to the taxable year as the Secretary may 

9 by forms or regulations require. 

10 ‘‘(b) TRUSTS CLAIMING CERTAIN CHARITABLE DE11 DUCTIONS.— 

12 ‘‘(1) IN GENERAL.—Every trust not required to 

13 file a return under subsection (a) but claiming a de14 duction under section 642(c) for the taxable year 

15 shall furnish such information with respect to such 

16 taxable year as the Secretary may by forms or regu17 lations prescribe, including— 

18 ‘‘(A) the amount of the deduction taken 

19 under section 642(c) within such year, 

20 ‘‘(B) the amount paid out within such year 

21 which represents amounts for which deductions 

22 under section 642(c) have been taken in prior 

23 years, 


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1 ‘‘(C) the amount for which such deductions 

2 have been taken in prior years but which has 

3 not been paid out at the beginning of such year, 

4 ‘‘(D) the amount paid out of principal in 

5 the current and prior years for the purposes de6 scribed in section 642(c), 

7 ‘‘(E) the total income of the trust within 

8 such year and the expenses attributable thereto, 

9 and 

10 ‘‘(F) a balance sheet showing the assets, li11 abilities, and net worth of the trust as of the 

12 beginning of such year. 

13 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 

14 apply to a trust for any taxable year if— 

15 ‘‘(A) all the net income for such year, de16 termined under the applicable principles of the 

17 law of trusts, is required to be distributed cur18 rently to the beneficiaries, or 

19 ‘‘(B) the trust is described in section 

20 4947(a)(1).’’. 

21 (2) INCREASE IN PENALTY RELATING TO FIL22 ING OF INFORMATION RETURN BY SPLIT-INTEREST

23 TRUSTS.—Paragraph (2) of section 6652(c) (relating 

24 to returns by exempt organizations and by certain 


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1 trusts) is amended by adding at the end the fol2 lowing new subparagraph: 

3 ‘‘(C) SPLIT-INTEREST TRUSTS.—In the 

4 case of a trust which is required to file a return 

5 under section 6034(a), subparagraphs (A) and 

6 (B) of this paragraph shall not apply and para7 graph (1) shall apply in the same manner as if 

8 such return were required under section 6033, 

9 except that— 

10 ‘‘(i) the 5 percent limitation in the 

11 second sentence of paragraph (1)(A) shall 

12 not apply, 

13 ‘‘(ii) in the case of any trust with 

14 gross income in excess of $250,000, the 

15 first sentence of paragraph (1)(A) shall be 

16 applied by substituting ‘$100’ for ‘$20’, 

17 and the second sentence thereof shall be 

18 applied by substituting ‘$50,000’ for 

19 ‘$10,000’, and 

20 ‘‘(iii) the third sentence of paragraph 

21 (1)(A) shall be disregarded. 

22 In addition to any penalty imposed on the trust 

23 pursuant to this subparagraph, if the person re24 quired to file such return knowingly fails to file 

25 the return, such penalty shall also be imposed 


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1 on such person who shall be personally liable 

2 for such penalty.’’. 

3 (3) CONFIDENTIALITY OF NONCHARITABLE

4 BENEFICIARIES.—Subsection (b) of section 6104 

5 (relating to inspection of annual information re6 turns) is amended by adding at the end the fol7 lowing new sentence: ‘‘In the case of a trust which 

8 is required to file a return under section 6034(a), 

9 this subsection shall not apply to information re10 garding beneficiaries which are not organizations de11 scribed in section 170(c).’’. 

12 (4) CLERICAL AMENDMENT.—The item in the 

13 table of sections for subpart A of part III of sub14 chapter A of chapter 61 relating to section 6034 is 

15 amended to read as follows: 

‘‘Sec. 6034. Returns by certain trusts.’’. 

16 (c) EFFECTIVE DATES.— 

17 (1) SUBSECTION (a).—The amendment made 

18 by subsection (a) shall apply to distributions made 

19 in taxable years beginning after December 31, 2005. 

20 (2) SUBSECTION (b).—The amendments made 

21 by subsection (b) shall apply to returns for taxable 

22 years beginning after December 31, 2006. 


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1 SEC. 1202. EXTENSION OF MODIFICATION OF CHARITABLE 

2 DEDUCTION FOR CONTRIBUTIONS OF FOOD 

3 INVENTORY. 

4 (a) IN GENERAL.—Section 170(e)(3)(C)(iv) (relating 

5 to termination) is amended by striking ‘‘2005’’ and insert6 ing ‘‘2007’’. 

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

8 this section shall apply to contributions made after De9 cember 31, 2005. 

10 SEC. 1203. BASIS ADJUSTMENT TO STOCK OF S CORPORA11 TION CONTRIBUTING PROPERTY. 

12 (a) IN GENERAL.—Paragraph (2) of section 1367(a) 

13 (relating to adjustments to basis of stock of shareholders, 

14 etc.) is amended by adding at the end the following new 

15 flush sentence: 

16 ‘‘The decrease under subparagraph (B) by reason of 

17 a charitable contribution (as defined in section 

18 170(c)) of property shall be the amount equal to the 

19 shareholder’s pro rata share of the adjusted basis of 

20 such property. The preceding sentence shall not 

21 apply to contributions made in taxable years begin22 ning after December 31, 2007.’’. 

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

24 this section shall apply to contributions made in taxable 

25 years beginning after December 31, 2005. 


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1 SEC. 1204. EXTENSION OF MODIFICATION OF CHARITABLE 

2 DEDUCTION FOR CONTRIBUTIONS OF BOOK 

3 INVENTORY. 

4 (a) IN GENERAL.—Section 170(e)(3)(D)(iv) (relating 

5 to termination) is amended by striking ‘‘2005’’ and insert6 ing ‘‘2007’’. 

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

8 this section shall apply to contributions made after De9 cember 31, 2005. 

10 SEC. 1205. MODIFICATION OF TAX TREATMENT OF CERTAIN 

11 PAYMENTS TO CONTROLLING EXEMPT ORGA12 NIZATIONS. 

13 (a) IN GENERAL.—Paragraph (13) of section 512(b) 

14 (relating to special rules for certain amounts received from 

15 controlled entities) is amended by redesignating subpara16 graph (E) as subparagraph (F) and by inserting after sub17 paragraph (D) the following new subparagraph: 

18 ‘‘(E) PARAGRAPH TO APPLY ONLY TO CER19 TAIN EXCESS PAYMENTS.— 

20 ‘‘(i) IN GENERAL.—Subparagraph (A) 

21 shall apply only to the portion of a quali22 fying specified payment received or accrued 

23 by the controlling organization that ex24 ceeds the amount which would have been 

25 paid or accrued if such payment met the 

26 requirements prescribed under section 482. 


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1 ‘‘(ii) ADDITION TO TAX FOR VALU2 ATION MISSTATEMENTS.—The tax imposed 

3 by this chapter on the controlling organiza4 tion shall be increased by an amount equal 

5 to 20 percent of the larger of— 

6 ‘‘(I) such excess determined with7 out regard to any amendment or sup8 plement to a return of tax, or 

9 ‘‘(II) such excess determined 

10 with regard to all such amendments 

11 and supplements. 

12 ‘‘(iii) QUALIFYING SPECIFIED PAY13 MENT.—The term ‘qualifying specified 

14 payment’ means a specified payment which 

15 is made pursuant to— 

16 ‘‘(I) a binding written contract in 

17 effect on the date of the enactment of 

18 this subparagraph, or 

19 ‘‘(II) a contract which is a re20 newal, under substantially similar 

21 terms, of a contract described in sub22 clause (I). 

23 ‘‘(iv) TERMINATION.—This subpara24 graph shall not apply to payments received 

25 or accrued after December 31, 2007.’’. 


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1 (b) REPORTING.— 

2 (1) IN GENERAL.—Section 6033 (relating to re3 turns by exempt organizations) is amended by redes4 ignating subsection (h) as subsection (i) and by in5 serting after subsection (g) the following new sub6 section: 

7 ‘‘(h) CONTROLLING ORGANIZATIONS.—Each control8 ling organization (within the meaning of section 

9 512(b)(13)) which is subject to the requirements of sub10 section (a) shall include on the return required under sub11 section (a)— 

12 ‘‘(1) any interest, annuities, royalties, or rents 

13 received from each controlled entity (within the 

14 meaning of section 512(b)(13)), 

15 ‘‘(2) any loans made to each such controlled en16 tity, and 

17 ‘‘(3) any transfers of funds between such con18 trolling organization and each such controlled enti19 ty.’’. 

20 (2) REPORT TO CONGRESS.—Not later than 

21 January 1, 2009, the Secretary of the Treasury 

22 shall submit to the Committee on Finance of the 

23 Senate and the Committee on Ways and Means of 

24 the House of Representatives a report on the effec25 tiveness of the Internal Revenue Service in adminVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00790 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 istering the amendments made by subsection (a) and 

2 on the extent to which payments by controlled enti3 ties (within the meaning of section 512(b)(13) of the 

4 Internal Revenue Code of 1986) to controlling orga5 nizations (within the meaning of section 512(b)(13) 

6 of such Code) meet the requirements under section 

7 482 of such Code. Such report shall include the re8 sults of any audit of any controlling organization or 

9 controlled entity and recommendations relating to 

10 the tax treatment of payments from controlled enti11 ties to controlling organizations. 

12 (c) EFFECTIVE DATE.— 

13 (1) SUBSECTION (a).—The amendments made 

14 by subsection (a) shall apply to payments received or 

15 accrued after December 31, 2005. 

16 (2) SUBSECTION (b).—The amendments made 

17 by subsection (b) shall apply to returns the due date 

18 (determined without regard to extensions) of which 

19 is after the date of the enactment of this Act. 

20 SEC. 1206. ENCOURAGEMENT OF CONTRIBUTIONS OF CAP21 ITAL GAIN REAL PROPERTY MADE FOR CON22 SERVATION PURPOSES. 

23 (a) IN GENERAL.— 

24 (1) INDIVIDUALS.—Paragraph (1) of section 

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1 ed by redesignating subparagraphs (E) and (F) as 

2 subparagraphs (F) and (G), respectively, and by in3 serting after subparagraph (D) the following new 

4 subparagraph: 

5 ‘‘(E) CONTRIBUTIONS OF QUALIFIED CON6 SERVATION CONTRIBUTIONS.— 

7 ‘‘(i) IN GENERAL.—Any qualified con8 servation contribution (as defined in sub9 section (h)(1)) shall be allowed to the ex10 tent the aggregate of such contributions 

11 does not exceed the excess of 50 percent of 

12 the taxpayer’s contribution base over the 

13 amount of all other charitable contribu14 tions allowable under this paragraph. 

15 ‘‘(ii) CARRYOVER.—If the aggregate 

16 amount of contributions described in clause 

17 (i) exceeds the limitation of clause (i), such 

18 excess shall be treated (in a manner con19 sistent with the rules of subsection (d)(1)) 

20 as a charitable contribution to which clause 

21 (i) applies in each of the 15 succeeding 

22 years in order of time. 

23 ‘‘(iii) COORDINATION WITH OTHER

24 SUBPARAGRAPHS.—For purposes of apply25 ing this subsection and subsection (d)(1), 


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1 contributions described in clause (i) shall 

2 not be treated as described in subpara3 graph (A), (B), (C), or (D) and such sub4 paragraphs shall apply without regard to 

5 such contributions. 

6 ‘‘(iv) SPECIAL RULE FOR CONTRIBU7 TION OF PROPERTY USED IN AGRICULTURE

8 OR LIVESTOCK PRODUCTION.— 

9 ‘‘(I) IN GENERAL.—If the indi10 vidual is a qualified farmer or rancher 

11 for the taxable year for which the con12 tribution is made, clause (i) shall be 

13 applied by substituting ‘100 percent’ 

14 for ‘50 percent’. 

15 ‘‘(II) EXCEPTION.—Subclause (I) 

16 shall not apply to any contribution of 

17 property made after the date of the 

18 enactment of this subparagraph which 

19 is used in agriculture or livestock pro20 duction (or available for such produc21 tion) unless such contribution is sub22 ject to a restriction that such property 

23 remain available for such production. 

24 This subparagraph shall be applied 

25 separately with respect to property to 


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1 which subclause (I) does not apply by 

2 reason of the preceding sentence prior 

3 to its application to property to which 

4 subclause (I) does apply. 

5 ‘‘(v) DEFINITION.—For purposes of 

6 clause (iv), the term ‘qualified farmer or 

7 rancher’ means a taxpayer whose gross in8 come from the trade or business of farm9 ing (within the meaning of section 

10 2032A(e)(5)) is greater than 50 percent of 

11 the taxpayer’s gross income for the taxable 

12 year. 

13 ‘‘(vi) TERMINATION.—This subpara14 graph shall not apply to any contribution 

15 made in taxable years beginning after De16 cember 31, 2007.’’. 

17 (2) CORPORATIONS.—Paragraph (2) of section 

18 170(b) is amended to read as follows: 

19 ‘‘(2) CORPORATIONS.—In the case of a corpora20 tion— 

21 ‘‘(A) IN GENERAL.—The total deductions 

22 under subsection (a) for any taxable year (other 

23 than for contributions to which subparagraph 

24 (B) applies) shall not exceed 10 percent of the 

25 taxpayer’s taxable income. 


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1 ‘‘(B) QUALIFIED CONSERVATION CON2 TRIBUTIONS BY CERTAIN CORPORATE FARMERS

3 AND RANCHERS.— 

4 ‘‘(i) IN GENERAL.—Any qualified con5 servation contribution (as defined in sub6 section (h)(1))— 

7 ‘‘(I) which is made by a corpora8 tion which, for the taxable year during 

9 which the contribution is made, is a 

10 qualified farmer or rancher (as de11 fined in paragraph (1)(E)(v)) and the 

12 stock of which is not readily tradable 

13 on an established securities market at 

14 any time during such year, and 

15 ‘‘(II) which, in the case of con16 tributions made after the date of the 

17 enactment of this subparagraph, is a 

18 contribution of property which is used 

19 in agriculture or livestock production 

20 (or available for such production) and 

21 which is subject to a restriction that 

22 such property remain available for 

23 such production, 

24 shall be allowed to the extent the aggregate 

25 of such contributions does not exceed the 


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1 excess of the taxpayer’s taxable income 

2 over the amount of charitable contributions 

3 allowable under subparagraph (A). 

4 ‘‘(ii) CARRYOVER.—If the aggregate 

5 amount of contributions described in clause 

6 (i) exceeds the limitation of clause (i), such 

7 excess shall be treated (in a manner con8 sistent with the rules of subsection (d)(2)) 

9 as a charitable contribution to which clause 

10 (i) applies in each of the 15 succeeding 

11 years in order of time. 

12 ‘‘(iii) TERMINATION.—This subpara13 graph shall not apply to any contribution 

14 made in taxable years beginning after De15 cember 31, 2007. 

16 ‘‘(C) TAXABLE INCOME.—For purposes of 

17 this paragraph, taxable income shall be com18 puted without regard to— 

19 ‘‘(i) this section, 

20 ‘‘(ii) part VIII (except section 248), 

21 ‘‘(iii) any net operating loss carryback 

22 to the taxable year under section 172, 

23 ‘‘(iv) section 199, and 

24 ‘‘(v) any capital loss carryback to the 

25 taxable year under section 1212(a)(1).’’. 


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1 (b) CONFORMING AMENDMENTS.— 

2 (1) Paragraph (2) of section 170(d) is amended 

3 by striking ‘‘subsection (b)(2)’’ each place it appears 

4 and inserting ‘‘subsection (b)(2)(A)’’. 

5 (2) Section 545(b)(2) is amended by striking 

6 ‘‘and (D)’’ and inserting ‘‘(D), and (E)’’. 

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

8 this section shall apply to contributions made in taxable 

9 years beginning after December 31, 2005. 

10 SEC. 1207. EXCISE TAXES EXEMPTION FOR BLOOD COL11 LECTOR ORGANIZATIONS. 

12 (a) EXEMPTION FROM IMPOSITION OF SPECIAL

13 FUELS TAX.—Section 4041(g) (relating to other exemp14 tions) is amended by striking ‘‘and’’ at the end of para15 graph (3), by striking the period in paragraph (4) and 

16 inserting ‘‘; and’’, and by inserting after paragraph (4) 

17 the following new paragraph: 

18 ‘‘(5) with respect to the sale of any liquid to a 

19 qualified blood collector organization (as defined in 

20 section 7701(a)(49)) for such organization’s exclu21 sive use in the collection, storage, or transportation 

22 of blood.’’. 

23 (b) EXEMPTION FROM MANUFACTURERS EXCISE

24 TAX.— 


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1 (1) IN GENERAL.—Section 4221(a) (relating to 

2 certain tax-free sales) is amended by striking ‘‘or’’ 

3 at the end of paragraph (4), by adding ‘‘or’’ at the 

4 end of paragraph (5), and by inserting after para5 graph (5) the following new paragraph: 

6 ‘‘(6) to a qualified blood collector organization 

7 (as defined in section 7701(a)(49)) for such organi8 zation’s exclusive use in the collection, storage, or 

9 transportation of blood,’’. 

10 (2) NO EXEMPTION WITH RESPECT TO VAC11 CINES AND RECREATIONAL EQUIPMENT.—Section 

12 4221(a) is amended by adding at the end the fol13 lowing new sentence: ‘‘In the case of taxes imposed 

14 by subchapter C or D, paragraph (6) shall not 

15 apply.’’. 

16 (3) CONFORMING AMENDMENTS.— 

17 (A) The second sentence of section 

18 4221(a) is amended by striking ‘‘Paragraphs 

19 (4) and (5)’’ and inserting ‘‘Paragraphs (4), 

20 (5), and (6)’’. 

21 (B) Section 6421(c) is amended by strik22 ing ‘‘or (5)’’ and inserting ‘‘(5), or (6)’’. 

23 (c) EXEMPTION FROM COMMUNICATION EXCISE

24 TAX.— 


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1 (1) IN GENERAL.—Section 4253 (relating to ex2 emptions) is amended by redesignating subsection 

3 (k) as subsection (l) and inserting after subsection 

4 (j) the following new subsection: 

5 ‘‘(k) EXEMPTION FOR QUALIFIED BLOOD COL6 LECTOR ORGANIZATIONS.—Under regulations provided by 

7 the Secretary, no tax shall be imposed under section 4251 

8 on any amount paid by a qualified blood collector organi9 zation (as defined in section 7701(a)(49)) for services or 

10 facilities furnished to such organization.’’. 

11 (2) CONFORMING AMENDMENT.—Section 

12 4253(l), as redesignated by paragraph (1), is 

13 amended by striking ‘‘or (j)’’ and inserting ‘‘(j), or 

14 (k)’’. 

15 (d) EXEMPTION FROM TAX ON HEAVY VEHICLES.— 

16 Section 4483 is amended by redesignating subsection (h) 

17 as subsection (i) and by inserting after subsection (g) the 

18 following new subsection: 

19 ‘‘(h) EXEMPTION FOR VEHICLES USED IN BLOOD

20 COLLECTION.— 

21 ‘‘(1) IN GENERAL.—No tax shall be imposed by 

22 section 4481 on the use of any qualified blood col23 lector vehicle by a qualified blood collector organiza24 tion. 


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1 ‘‘(2) QUALIFIED BLOOD COLLECTOR VEHI2 CLE.—For purposes of this subsection, the term 

3 ‘qualified blood collector vehicle’ means a vehicle at 

4 least 80 percent of the use of which during the prior 

5 taxable period was by a qualified blood collector or6 ganization in the collection, storage, or transpor7 tation of blood. 

8 ‘‘(3) SPECIAL RULE FOR VEHICLES FIRST

9 PLACED IN SERVICE IN A TAXABLE PERIOD.—In the 

10 case of a vehicle first placed in service in a taxable 

11 period, a vehicle shall be treated as a qualified blood 

12 collector vehicle for such taxable period if such quali13 fied blood collector organization certifies to the Sec14 retary that the organization reasonably expects at 

15 least 80 percent of the use of such vehicle by the or16 ganization during such taxable period will be in the 

17 collection, storage, or transportation of blood. 

18 ‘‘(4) QUALIFIED BLOOD COLLECTOR ORGANIZA19 TION.—The term ‘qualified blood collector organiza20 tion’ has the meaning given such term by section 

21 7701(a)(49).’’. 

22 (e) CREDIT OR REFUND FOR CERTAIN TAXES ON

23 SALES AND SERVICES.— 

24 (1) DEEMED OVERPAYMENT.— 


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1 (A) IN GENERAL.—Section 6416(b)(2) is 

2 amended by redesignating subparagraphs (E) 

3 and (F) as subparagraphs (F) and (G), respec4 tively, and by inserting after subparagraph (D) 

5 the following new subparagraph: 

6 ‘‘(E) sold to a qualified blood collector or7 ganization (as defined in section 7701(a)(49)) 

8 for such organization’s exclusive use in the col9 lection, storage, or transportation of blood;’’. 

10 (B) NO CREDIT OR REFUND FOR VACCINES

11 OR RECREATIONAL EQUIPMENT.—Section 

12 6416(b)(2) is amended by adding at the end the 

13 following new sentence: ‘‘In the case of taxes 

14 imposed by subchapter C or D of chapter 32, 

15 subparagraph (E) shall not apply.’’. 

16 (C) CONFORMING AMENDMENTS.—Section 

17 6416(b)(2) is amended— 

18 (i) by striking ‘‘Subparagraphs (C) 

19 and (D)’’ in the second sentence and in20 serting ‘‘Subparagraphs (C), (D), and 

21 (E)’’. 

22 (ii) by striking ‘‘(B), (C), and (D)’’ 

23 and inserting ‘‘(B), (C), (D), and (E)’’. 

24 (2) SALES OF TIRES.—Section 6416(b)(4)(B) is 

25 amended by striking ‘‘or’’ at the end of clause (i), 


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

2 inserting ‘‘, or’’, and by adding after clause (ii) the 

3 following: 

4 ‘‘(iii) sold to a qualified blood collector 

5 organization for its exclusive use in con6 nection with a vehicle the organization cer7 tifies will be primarily used in the collec8 tion, storage, or transportation of blood.’’. 

9 (f) DEFINITION OF QUALIFIED BLOOD COLLECTOR

10 ORGANIZATION.—Section 7701(a) is amended by inserting 

11 at the end the following new paragraph: 

12 ‘‘(49) QUALIFIED BLOOD COLLECTOR ORGANI13 ZATION.—The term ‘qualified blood collector organi14 zation’ means an organization which is— 

15 ‘‘(A) described in section 501(c)(3) and ex16 empt from tax under section 501(a), 

17 ‘‘(B) primarily engaged in the activity of 

18 the collection of human blood, 

19 ‘‘(C) registered with the Secretary for pur20 poses of excise tax exemptions, and 

21 ‘‘(D) registered by the Food and Drug Ad22 ministration to collect blood.’’. 

23 (g) EFFECTIVE DATE.— 

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

25 this section shall take effect on January 1, 2007. 


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1 (2) SUBSECTION (d).—The amendment made 

2 by subsection (d) shall apply to taxable periods be3 ginning on or after July 1, 2007. 

4 Subtitle B—Reforming Exempt 

5 Organizations 

6 PART 1—GENERAL REFORMS 

7 SEC. 1211. REPORTING ON CERTAIN ACQUISITIONS OF IN8 TERESTS IN INSURANCE CONTRACTS IN 

9 WHICH CERTAIN EXEMPT ORGANIZATIONS 

10 HOLD AN INTEREST. 

11 (a) REPORTING REQUIREMENTS.— 

12 (1) IN GENERAL.—Subpart B of part III of 

13 subchapter A of chapter 61 (relating to information 

14 concerning transactions with other persons), as 

15 amended by this Act, is amended by adding at the 

16 end the following new section: 

17 ‘‘SEC. 6050V. RETURNS RELATING TO APPLICABLE INSUR18 ANCE CONTRACTS IN WHICH CERTAIN EX19 EMPT ORGANIZATIONS HOLD INTERESTS. 

20 ‘‘(a) IN GENERAL.—Each applicable exempt organi21 zation which makes a reportable acquisition shall make the 

22 return described in subsection (c). 

23 ‘‘(b) TIME FOR MAKING RETURN.—Any applicable 

24 exempt organization required to make a return under subVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00803 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 section (a) shall file such return at such time as may be 

2 established by the Secretary. 

3 ‘‘(c) FORM AND MANNER OF RETURNS.—A return 

4 is described in this subsection if such return— 

5 ‘‘(1) is in such form as the Secretary pre6 scribes, 

7 ‘‘(2) contains the name, address, and taxpayer 

8 identification number of the applicable exempt orga9 nization and the issuer of the applicable insurance 

10 contract, and 

11 ‘‘(3) contains such other information as the 

12 Secretary may prescribe. 

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

14 ‘‘(1) REPORTABLE ACQUISITION.—The term 

15 ‘reportable acquisition’ means the acquisition by an 

16 applicable exempt organization of a direct or indirect 

17 interest in any applicable insurance contract in any 

18 case in which such acquisition is a part of a struc19 tured transaction involving a pool of such contracts. 

20 ‘‘(2) APPLICABLE INSURANCE CONTRACT.— 

21 ‘‘(A) IN GENERAL.—The term ‘applicable 

22 insurance contract’ means any life insurance, 

23 annuity, or endowment contract with respect to 

24 which both an applicable exempt organization 

25 and a person other than an applicable exempt 


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1 organization have directly or indirectly held an 

2 interest in the contract (whether or not at the 

3 same time). 

4 ‘‘(B) EXCEPTIONS.—Such term shall not 

5 include a life insurance, annuity, or endowment 

6 contract if— 

7 ‘‘(i) all persons directly or indirectly 

8 holding any interest in the contract (other 

9 than applicable exempt organizations) have 

10 an insurable interest in the insured under 

11 the contract independent of any interest of 

12 an applicable exempt organization in the 

13 contract, 

14 ‘‘(ii) the sole interest in the contract 

15 of an applicable exempt organization or 

16 each person other than an applicable ex17 empt organization is as a named bene18 ficiary, or 

19 ‘‘(iii) the sole interest in the contract 

20 of each person other than an applicable ex21 empt organization is— 

22 ‘‘(I) as a beneficiary of a trust 

23 holding an interest in the contract, 

24 but only if the person’s designation as 

25 such beneficiary was made without 


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1 consideration and solely on a purely 

2 gratuitous basis, or 

3 ‘‘(II) as a trustee who holds an 

4 interest in the contract in a fiduciary 

5 capacity solely for the benefit of appli6 cable exempt organizations or persons 

7 otherwise described in subclause (I) or 

8 clause (i) or (ii). 

9 ‘‘(3) APPLICABLE EXEMPT ORGANIZATION.— 

10 The term ‘applicable exempt organization’ means— 

11 ‘‘(A) an organization described in section 

12 170(c), 

13 ‘‘(B) an organization described in section 

14 168(h)(2)(A)(iv), or 

15 ‘‘(C) an organization not described in 

16 paragraph (1) or (2) which is described in sec17 tion 2055(a) or section 2522(a). 

18 ‘‘(e) TERMINATION.—This section shall not apply to 

19 reportable acquisitions occurring after the date which is 

20 2 years after the date of the enactment of this section.’’. 

21 (2) CONFORMING AMENDMENT.—The table of 

22 sections for subpart B of part III of subchapter A 

23 of chapter 61 is amended by adding at the end the 

24 following new item: 

‘‘Sec. 6050V. Returns relating to applicable insurance contracts in which certain exempt organizations hold interests.’’. 


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1 (b) PENALTIES.— 

2 (1) IN GENERAL.—Subparagraph (B) of section 

3 6724(d)(1), as amended by this Act, is amended by 

4 redesignating clauses (xiv) through (xix) as clauses 

5 (xv) through (xx) and by inserting after clause (xiii) 

6 the following new clause: 

7 ‘‘(xiv) section 6050V (relating to re8 turns relating to applicable insurance con9 tracts in which certain exempt organiza10 tions hold interests),’’. 

11 (2) INTENTIONAL DISREGARD.—Section 

12 6721(e)(2) is amended by striking ‘‘or’’ at the end 

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

14 of subparagraph (C) and inserting ‘‘or’’, and by add15 ing at the end the following new subparagraph: 

16 ‘‘(D) in the case of a return required to be 

17 filed under section 6050V, 10 percent of the 

18 value of the benefit of any contract with respect 

19 to which information is required to be included 

20 on the return, and’’. 

21 (c) STUDY.— 

22 (1) IN GENERAL.—The Secretary of the Treas23 ury shall undertake a study on— 

24 (A) the use by tax exempt organizations of 

25 applicable insurance contracts (as defined under 


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1 section 6050V(d)(2) of the Internal Revenue 

2 Code of 1986, as added by subsection (a)) for 

3 the purpose of sharing the benefits of the orga4 nization’s insurable interest in individuals in5 sured under such contracts with investors, and 

6 (B) whether such activities are consistent 

7 with the tax exempt status of such organiza8 tions. 

9 (2) REPORT.—Not later than 30 months after 

10 the date of the enactment of this Act, the Secretary 

11 of the Treasury shall report on the study conducted 

12 under paragraph (1) to the Committee on Finance 

13 of the Senate and the Committee on Ways and 

14 Means of the House of Representatives. 

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

16 this section shall apply to acquisitions of contracts after 

17 the date of enactment of this Act. 

18 SEC. 1212. INCREASE IN PENALTY EXCISE TAXES RELATING 

19 TO PUBLIC CHARITIES, SOCIAL WELFARE OR20 GANIZATIONS, AND PRIVATE FOUNDATIONS. 

21 (a) TAXES ON SELF-DEALING AND EXCESS BENEFIT

22 TRANSACTIONS.— 

23 (1) IN GENERAL.—Section 4941(a) (relating to 

24 initial taxes) is amended— 


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1 (A) in paragraph (1), by striking ‘‘5 per2 cent’’ and inserting ‘‘10 percent’’, and 

(B) in paragraph (2), by striking ‘‘21 3 ⁄2

4 percent’’ and inserting ‘‘5 percent’’. 

5 (2) INCREASED LIMITATION FOR MANAGERS ON

6 SELF-DEALING.—Section 4941(c)(2) is amended by 

7 striking ‘‘$10,000’’ each place it appears in the text 

8 and heading thereof and inserting ‘‘$20,000’’. 

9 (3) INCREASED LIMITATION FOR MANAGERS ON

10 EXCESS BENEFIT TRANSACTIONS.—Section 

11 4958(d)(2) is amended by striking ‘‘$10,000’’ and 

12 inserting ‘‘$20,000’’. 

13 (b) TAXES ON FAILURE TO DISTRIBUTE INCOME.— 

14 Section 4942(a) (relating to initial tax) is amended by 

15 striking ‘‘15 percent’’ and inserting ‘‘30 percent’’. 

16 (c) TAXES ON EXCESS BUSINESS HOLDINGS.—Sec17 tion 4943(a)(1) (relating to imposition) is amended by 

18 striking ‘‘5 percent’’ and inserting ‘‘10 percent’’. 

19 (d) TAXES ON INVESTMENTS WHICH JEOPARDIZE

20 CHARITABLE PURPOSE.— 

21 (1) IN GENERAL.—Section 4944(a) (relating to 

22 initial taxes) is amended by striking ‘‘5 percent’’ 

23 both places it appears and inserting ‘‘10 percent’’. 

24 (2) INCREASED LIMITATION FOR MANAGERS.— 

25 Section 4944(d)(2) is amended— 


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1 (A) by striking ‘‘$5,000,’’ and inserting 

2 ‘‘$10,000,’’, and 

3 (B) by striking ‘‘$10,000.’’ and inserting 

4 ‘‘$20,000.’’. 

5 (e) TAXES ON TAXABLE EXPENDITURES.— 

6 (1) IN GENERAL.—Section 4945(a) (relating to 

7 initial taxes) is amended— 

8 (A) in paragraph (1), by striking ‘‘10 per9 cent’’ and inserting ‘‘20 percent’’, and 

(B) in paragraph (2), by striking ‘‘21 10 ⁄2

11 percent’’ and inserting ‘‘5 percent’’. 

12 (2) INCREASED LIMITATION FOR MANAGERS.— 

13 Section 4945(c)(2) is amended— 

14 (A) by striking ‘‘$5,000,’’ and inserting 

15 ‘‘$10,000,’’, and 

16 (B) by striking ‘‘$10,000.’’ and inserting 

17 ‘‘$20,000.’’. 

18 (f) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to taxable years beginning after 

20 the date of the enactment of this Act. 


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1 SEC. 1213. REFORM OF CHARITABLE CONTRIBUTIONS OF 

2 CERTAIN EASEMENTS IN REGISTERED HIS3 TORIC DISTRICTS AND REDUCED DEDUCTION 

4 FOR PORTION OF QUALIFIED CONSERVATION 

5 CONTRIBUTION ATTRIBUTABLE TO REHA6 BILITATION CREDIT. 

7 (a) SPECIAL RULES WITH RESPECT TO BUILDINGS

8 IN REGISTERED HISTORIC DISTRICTS.— 

9 (1) IN GENERAL.—Paragraph (4) of section 

10 170(h) (relating to definition of conservation pur11 pose) is amended by redesignating subparagraph (B) 

12 as subparagraph (C) and by inserting after subpara13 graph (A) the following new subparagraph: 

14 ‘‘(B) SPECIAL RULES WITH RESPECT TO

15 BUILDINGS IN REGISTERED HISTORIC DIS16 TRICTS.—In the case of any contribution of a 

17 qualified real property interest which is a re18 striction with respect to the exterior of a build19 ing described in subparagraph (C)(ii), such con20 tribution shall not be considered to be exclu21 sively for conservation purposes unless— 

22 ‘‘(i) such interest— 

23 ‘‘(I) includes a restriction which 

24 preserves the entire exterior of the 

25 building (including the front, sides, 

26 rear, and height of the building), and 


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1 ‘‘(II) prohibits any change in the 

2 exterior of the building which is incon3 sistent with the historical character of 

4 such exterior, 

5 ‘‘(ii) the donor and donee enter into a 

6 written agreement certifying, under pen7 alty of perjury, that the donee— 

8 ‘‘(I) is a qualified organization 

9 (as defined in paragraph (3)) with a 

10 purpose of environmental protection, 

11 land conservation, open space preser12 vation, or historic preservation, and 

13 ‘‘(II) has the resources to man14 age and enforce the restriction and a 

15 commitment to do so, and 

16 ‘‘(iii) in the case of any contribution 

17 made in a taxable year beginning after the 

18 date of the enactment of this subpara19 graph, the taxpayer includes with the tax20 payer’s return for the taxable year of the 

21 contribution— 

22 ‘‘(I) a qualified appraisal (within 

23 the meaning of subsection (f)(11)(E)) 

24 of the qualified property interest, 


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1 ‘‘(II) photographs of the entire 

2 exterior of the building, and 

3 ‘‘(III) a description of all restric4 tions on the development of the build5 ing.’’. 

6 (b) DISALLOWANCE OF DEDUCTION FOR STRUC7 TURES AND LAND IN REGISTERED HISTORIC DIS8 TRICTS.—Subparagraph (C) of section 170(h)(4), as re9 designated by subsection (a), is amended— 

10 (1) by striking ‘‘any building, structure, or land 

11 area which’’, 

12 (2) by inserting ‘‘any building, structure, or 

13 land area which’’ before ‘‘is listed’’ in clause (i), and 

14 (3) by inserting ‘‘any building which’’ before ‘‘is 

15 located’’ in clause (ii). 

16 (c) FILING FEE FOR CERTAIN CONTRIBUTIONS.— 

17 Subsection (f) of section 170 (relating to disallowance of 

18 deduction in certain cases and special rules) is amended 

19 by adding at the end the following new paragraph: 

20 ‘‘(13) CONTRIBUTIONS OF CERTAIN INTERESTS

21 IN BUILDINGS LOCATED IN REGISTERED HISTORIC

22 DISTRICTS.— 

23 ‘‘(A) IN GENERAL.—No deduction shall be 

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1 payer includes with the return for the taxable 

2 year of the contribution a $500 filing fee. 

3 ‘‘(B) CONTRIBUTION DESCRIBED.—A con4 tribution is described in this subparagraph if 

5 such contribution is a qualified conservation 

6 contribution (as defined in subsection (h)) 

7 which is a restriction with respect to the exte8 rior of a building described in subsection 

9 (h)(4)(C)(ii) and for which a deduction is 

10 claimed in excess of $10,000. 

11 ‘‘(C) DEDICATION OF FEE.—Any fee col12 lected under this paragraph shall be used for 

13 the enforcement of the provisions of subsection 

14 (h).’’. 

15 (d) REDUCED DEDUCTION FOR PORTION OF QUALI16 FIED CONSERVATION CONTRIBUTION ATTRIBUTABLE TO

17 THE REHABILITATION CREDIT.—Subsection (f) of section 

18 170, as amended by subsection (c), is amended by adding 

19 at the end the following new paragraph: 

20 ‘‘(14) REDUCTION FOR AMOUNTS ATTRIB21 UTABLE TO REHABILITATION CREDIT.—In the case 

22 of any qualified conservation contribution (as de23 fined in subsection (h)), the amount of the deduction 

24 allowed under this section shall be reduced by an 


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1 amount which bears the same ratio to the fair mar2 ket value of the contribution as— 

3 ‘‘(A) the sum of the credits allowed to the 

4 taxpayer under section 47 for the 5 preceding 

5 taxable years with respect to any building which 

6 is a part of such contribution, bears to 

7 ‘‘(B) the fair market value of the building 

8 on the date of the contribution.’’. 

9 (e) EFFECTIVE DATES.— 

10 (1) SPECIAL RULES FOR BUILDINGS IN REG11 ISTERED HISTORIC DISTRICTS.—The amendments 

12 made by subsection (a) shall apply to contributions 

13 made after July 25, 2006. 

14 (2) DISALLOWANCE OF DEDUCTION FOR STRUC15 TURES AND LAND; REDUCTION FOR REHABILITA16 TION CREDIT.—The amendments made by sub17 sections (b) and (d) shall apply to contributions 

18 made after the date of the enactment of this Act. 

19 (3) FILING FEE.—The amendment made by 

20 subsection (c) shall apply to contributions made 180 

21 days after the date of the enactment of this Act. 

22 SEC. 1214. CHARITABLE CONTRIBUTIONS OF TAXIDERMY 

23 PROPERTY. 

24 (a) DENIAL OF LONG-TERM CAPITAL GAIN.—Sub25 paragraph (B) of section 170(e)(1) is amended by striking 


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1 ‘‘or’’ at the end of clause (ii), by inserting ‘‘or’’ at the 

2 end of clause (iii), and by inserting after clause (iii) the 

3 following new clause: 

4 ‘‘(iv) of any taxidermy property which 

5 is contributed by the person who prepared, 

6 stuffed, or mounted the property or by any 

7 person who paid or incurred the cost of 

8 such preparation, stuffing, or mounting,’’. 

9 (b) TREATMENT OF BASIS.—Subsection (f) of section 

10 170, as amended by this Act, is amended by adding at 

11 the end the following new paragraph: 

12 ‘‘(15) SPECIAL RULE FOR TAXIDERMY PROP13 ERTY.— 

14 ‘‘(A) BASIS.—For purposes of this section 

15 and notwithstanding section 1012, in the case 

16 of a charitable contribution of taxidermy prop17 erty which is made by the person who prepared, 

18 stuffed, or mounted the property or by any per19 son who paid or incurred the cost of such prep20 aration, stuffing, or mounting, only the cost of 

21 the preparing, stuffing, or mounting shall be in22 cluded in the basis of such property. 

23 ‘‘(B) TAXIDERMY PROPERTY.—For pur24 poses of this section, the term ‘taxidermy prop25 erty’ means any work of art which— 


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1 ‘‘(i) is the reproduction or preserva2 tion of an animal, in whole or in part, 

3 ‘‘(ii) is prepared, stuffed, or mounted 

4 for purposes of recreating one or more 

5 characteristics of such animal, and 

6 ‘‘(iii) contains a part of the body of 

7 the dead animal.’’. 

8 (c) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to contributions made after July 

10 25, 2006. 

11 SEC. 1215. RECAPTURE OF TAX BENEFIT FOR CHARITABLE 

12 CONTRIBUTIONS OF EXEMPT USE PROPERTY 

13 NOT USED FOR AN EXEMPT USE. 

14 (a) RECAPTURE OF DEDUCTION ON CERTAIN SALES

15 OF EXEMPT USE PROPERTY.— 

16 (1) IN GENERAL.—Clause (i) of section 

17 170(e)(1)(B) (related to certain contributions of or18 dinary income and capital gain property) is amended 

19 to read as follows: 

20 ‘‘(i) of tangible personal property— 

21 ‘‘(I) if the use by the donee is 

22 unrelated to the purpose or function 

23 constituting the basis for its exemp24 tion under section 501 (or, in the case 

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1 pose or function described in sub2 section (c)), or 

3 ‘‘(II) which is applicable property 

4 (as defined in paragraph (7)(C)) 

5 which is sold, exchanged, or otherwise 

6 disposed of by the donee before the 

7 last day of the taxable year in which 

8 the contribution was made and with 

9 respect to which the donee has not 

10 made a certification in accordance 

11 with paragraph (7)(D),’’. 

12 (2) DISPOSITIONS AFTER CLOSE OF TAXABLE

13 YEAR.—Section 170(e) is amended by adding at the 

14 end the following new paragraph: 

15 ‘‘(7) RECAPTURE OF DEDUCTION ON CERTAIN

16 DISPOSITIONS OF EXEMPT USE PROPERTY.— 

17 ‘‘(A) IN GENERAL.—In the case of an ap18 plicable disposition of applicable property, there 

19 shall be included in the income of the donor of 

20 such property for the taxable year of such 

21 donor in which the applicable disposition occurs 

22 an amount equal to the excess (if any) of— 

23 ‘‘(i) the amount of the deduction al24 lowed to the donor under this section with 

25 respect to such property, over 


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1 ‘‘(ii) the donor’s basis in such prop2 erty at the time such property was contrib3 uted. 

4 ‘‘(B) APPLICABLE DISPOSITION.—For pur5 poses of this paragraph, the term ‘applicable 

6 disposition’ means any sale, exchange, or other 

7 disposition by the donee of applicable prop8 erty— 

9 ‘‘(i) after the last day of the taxable 

10 year of the donor in which such property 

11 was contributed, and 

12 ‘‘(ii) before the last day of the 3-year 

13 period beginning on the date of the con14 tribution of such property, 

15 unless the donee makes a certification in ac16 cordance with subparagraph (D). 

17 ‘‘(C) APPLICABLE PROPERTY.—For pur18 poses of this paragraph, the term ‘applicable 

19 property’ means charitable deduction property 

20 (as defined in section 6050L(a)(2)(A))— 

21 ‘‘(i) which is tangible personal prop22 erty the use of which is identified by the 

23 donee as related to the purpose or function 

24 constituting the basis of the donee’s ex25 emption under section 501, and 


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1 ‘‘(ii) for which a deduction in excess 

2 of the donor’s basis is allowed. 

3 ‘‘(D) CERTIFICATION.—A certification 

4 meets the requirements of this subparagraph if 

5 it is a written statement which is signed under 

6 penalty of perjury by an officer of the donee or7 ganization and— 

8 ‘‘(i) which— 

9 ‘‘(I) certifies that the use of the 

10 property by the donee was related to 

11 the purpose or function constituting 

12 the basis for the donee’s exemption 

13 under section 501, and 

14 ‘‘(II) describes how the property 

15 was used and how such use furthered 

16 such purpose or function, or 

17 ‘‘(ii) which— 

18 ‘‘(I) states the intended use of 

19 the property by the donee at the time 

20 of the contribution, and 

21 ‘‘(II) certifies that such intended 

22 use has become impossible or infeasi23 ble to implement.’’. 


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1 (b) REPORTING REQUIREMENTS.—Paragraph (1) of 

2 section 6050L(a) (relating to returns relating to certain 

3 dispositions of donated property) is amended— 

4 (1) by striking ‘‘2 years’’ and inserting ‘‘3 

5 years’’, and 

6 (2) by striking ‘‘and’’ at the end of subpara7 graph (D), by striking the period at the end of sub8 paragraph (E) and inserting a comma, and by in9 serting at the end the following: 

10 ‘‘(F) a description of the donee’s use of the 

11 property, and 

12 ‘‘(G) a statement indicating whether the 

13 use of the property was related to the purpose 

14 or function constituting the basis for the 

15 donee’s exemption under section 501. 

16 In any case in which the donee indicates that the 

17 use of applicable property (as defined in section 

18 170(e)(7)(C)) was related to the purpose or function 

19 constituting the basis for the exemption of the donee 

20 under section 501 under subparagraph (G), the 

21 donee shall include with the return the certification 

22 described in section 170(e)(7)(D) if such certifi23 cation is made under section 170(e)(7).’’. 

24 (c) PENALTY.— 


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1 (1) IN GENERAL.—Part I of subchapter B of 

2 chapter 68 (relating to assessable penalties) is 

3 amended by inserting after section 6720A the fol4 lowing new section: 

5 ‘‘SEC. 6720B. FRAUDULENT IDENTIFICATION OF EXEMPT 

6 USE PROPERTY. 

7 ‘‘In addition to any criminal penalty provided by law, 

8 any person who identifies applicable property (as defined 

9 in section 170(e)(7)(C)) as having a use which is related 

10 to a purpose or function constituting the basis for the 

11 donee’s exemption under section 501 and who knows that 

12 such property is not intended for such a use shall pay a 

13 penalty of $10,000.’’. 

14 (2) CLERICAL AMENDMENT.—The table of sec15 tions for part I of subchapter B of chapter 68 is 

16 amended by adding after the item relating to section 

17 6720A the following new item: 

‘‘Sec. 6720B. Fraudulent identification of exempt use property.’’. 

18 (d) EFFECTIVE DATE.— 

19 (1) RECAPTURE.—The amendments made by 

20 subsection (a) shall apply to contributions after Sep21 tember 1, 2006. 

22 (2) REPORTING.—The amendments made by 

23 subsection (b) shall apply to returns filed after Sep24 tember 1, 2006. 


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1 (3) PENALTY.—The amendments made by sub2 section (c) shall apply to identifications made after 

3 the date of the enactment of this Act. 

4 SEC. 1216. LIMITATION OF DEDUCTION FOR CHARITABLE 

5 CONTRIBUTIONS OF CLOTHING AND HOUSE6 HOLD ITEMS. 

7 (a) IN GENERAL.—Subsection (f) of section 170, as 

8 amended by this Act, is amended by adding at the end 

9 the following new paragraph: 

10 ‘‘(16) CONTRIBUTIONS OF CLOTHING AND

11 HOUSEHOLD ITEMS.— 

12 ‘‘(A) IN GENERAL.—In the case of an indi13 vidual, partnership, or corporation, no deduc14 tion shall be allowed under subsection (a) for 

15 any contribution of clothing or a household item 

16 unless such clothing or household item is in 

17 good used condition or better. 

18 ‘‘(B) ITEMS OF MINIMAL VALUE.—Not19 withstanding subparagraph (A), the Secretary 

20 may by regulation deny a deduction under sub21 section (a) for any contribution of clothing or a 

22 household item which has minimal monetary 

23 value. 

24 ‘‘(C) EXCEPTION FOR CERTAIN PROP25 ERTY.—Subparagraphs (A) and (B) shall not 


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1 apply to any contribution of a single item of 

2 clothing or a household item for which a deduc3 tion of more than $500 is claimed if the tax4 payer includes with the taxpayer’s return a 

5 qualified appraisal with respect to the property. 

6 ‘‘(D) HOUSEHOLD ITEMS.—For purposes 

7 of this paragraph— 

8 ‘‘(i) IN GENERAL.—The term ‘house9 hold items’ includes furniture, furnishings, 

10 electronics, appliances, linens, and other 

11 similar items. 

12 ‘‘(ii) EXCLUDED ITEMS.—Such term 

13 does not include— 

14 ‘‘(I) food, 

15 ‘‘(II) paintings, antiques, and 

16 other objects of art, 

17 ‘‘(III) jewelry and gems, and 

18 ‘‘(IV) collections. 

19 ‘‘(E) SPECIAL RULE FOR PASS-THRU ENTI20 TIES.—In the case of a partnership or S cor21 poration, this paragraph shall be applied at the 

22 entity level, except that the deduction shall be 

23 denied at the partner or shareholder level.’’. 


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

2 this section shall apply to contributions made after the 

3 date of enactment of this Act. 

4 SEC. 1217. MODIFICATION OF RECORDKEEPING REQUIRE5 MENTS FOR CERTAIN CHARITABLE CON6 TRIBUTIONS. 

7 (a) RECORDKEEPING REQUIREMENT.—Subsection 

8 (f) of section 170, as amended by this Act, is amended 

9 by adding at the end the following new paragraph: 

10 ‘‘(17) RECORDKEEPING.—No deduction shall be 

11 allowed under subsection (a) for any contribution of 

12 a cash, check, or other monetary gift unless the 

13 donor maintains as a record of such contribution a 

14 bank record or a written communication from the 

15 donee showing the name of the donee organization, 

16 the date of the contribution, and the amount of the 

17 contribution.’’. 

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

19 this section shall apply to contributions made in taxable 

20 years beginning after the date of the enactment of this 

21 Act. 

22 SEC. 1218. CONTRIBUTIONS OF FRACTIONAL INTERESTS IN 

23 TANGIBLE PERSONAL PROPERTY. 

24 (a) INCOME TAX.—Section 170 (relating to chari25 table, etc., contributions and gifts) is amended by redesigVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00825 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 nating subsection (o) as subsection (p) and by inserting 

2 after subsection (n) the following new subsection: 

3 ‘‘(o) SPECIAL RULES FOR FRACTIONAL GIFTS.— 

4 ‘‘(1) DENIAL OF DEDUCTION IN CERTAIN

5 CASES.— 

6 ‘‘(A) IN GENERAL.—No deduction shall be 

7 allowed for a contribution of an undivided por8 tion of a taxpayer’s entire interest in tangible 

9 personal property unless all interest in the 

10 property is held immediately before such con11 tribution by— 

12 ‘‘(i) the taxpayer, or 

13 ‘‘(ii) the taxpayer and the donee. 

14 ‘‘(B) EXCEPTIONS.—The Secretary may, 

15 by regulation, provide for exceptions to sub16 paragraph (A) in cases where all persons who 

17 hold an interest in the property make propor18 tional contributions of an undivided portion of 

19 the entire interest held by such persons. 

20 ‘‘(2) VALUATION OF SUBSEQUENT GIFTS.—In 

21 the case of any additional contribution, the fair mar22 ket value of such contribution shall be determined by 

23 using the lesser of— 


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1 ‘‘(A) the fair market value of the property 

2 at the time of the initial fractional contribution, 

3 or 

4 ‘‘(B) the fair market value of the property 

5 at the time of the additional contribution. 

6 ‘‘(3) RECAPTURE OF DEDUCTION IN CERTAIN

7 CASES; ADDITION TO TAX.— 

8 ‘‘(A) RECAPTURE.—The Secretary shall 

9 provide for the recapture of the amount of any 

10 deduction allowed under this section (plus inter11 est) with respect to any contribution of an undi12 vided portion of a taxpayer’s entire interest in 

13 tangible personal property— 

14 ‘‘(i) in any case in which the donor 

15 does not contribute all of the remaining in16 terest in such property to the donee (or, if 

17 such donee is no longer in existence, to any 

18 person described in section 170(c)) before 

19 the earlier of— 

20 ‘‘(I) the date that is 10 years 

21 after the date of the initial fractional 

22 contribution, or 

23 ‘‘(II) the date of the death of the 

24 donor, and 


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1 ‘‘(ii) in any case in which the donee 

2 has not, during the period beginning on 

3 the date of the initial fractional contribu4 tion and ending on the date described in 

5 clause (i)— 

6 ‘‘(I) had substantial physical pos7 session of the property, and 

8 ‘‘(II) used the property in a use 

9 which is related to a purpose or func10 tion constituting the basis for the or11 ganizations’ exemption under section 

12 501. 

13 ‘‘(B) ADDITION TO TAX.—The tax imposed 

14 under this chapter for any taxable year for 

15 which there is a recapture under subparagraph 

16 (A) shall be increased by 10 percent of the 

17 amount so recaptured. 

18 ‘‘(4) DEFINITIONS.—For purposes of this sub19 section— 

20 ‘‘(A) ADDITIONAL CONTRIBUTION.—The 

21 term ‘additional contribution’ means any chari22 table contribution by the taxpayer of any inter23 est in property with respect to which the tax24 payer has previously made an initial fractional 

25 contribution. 


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1 ‘‘(B) INITIAL FRACTIONAL CONTRIBU2 TION.—The term ‘initial fractional contribution’ 

3 means, with respect to any taxpayer, the first 

4 charitable contribution of an undivided portion 

5 of the taxpayer’s entire interest in any tangible 

6 personal property.’’. 

7 (b) ESTATE TAX.—Section 2055 (relating to trans8 fers for public, charitable, and religious uses) is amended 

9 by redesignating subsection (g) as subsection (h) and by 

10 inserting after subsection (f) the following new subsection: 

11 ‘‘(g) VALUATION OF SUBSEQUENT GIFTS.— 

12 ‘‘(1) IN GENERAL.—In the case of any addi13 tional contribution, the fair market value of such 

14 contribution shall be determined by using the lesser 

15 of— 

16 ‘‘(A) the fair market value of the property 

17 at the time of the initial fractional contribution, 

18 or 

19 ‘‘(B) the fair market value of the property 

20 at the time of the additional contribution. 

21 ‘‘(2) DEFINITIONS.—For purposes of this para22 graph— 

23 ‘‘(A) ADDITIONAL CONTRIBUTION.—The 

24 term ‘additional contribution’ means a bequest, 

25 legacy, devise, or transfer described in subVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00829 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 section (a) of any interest in a property with re2 spect to which the decedent had previously 

3 made an initial fractional contribution. 

4 ‘‘(B) INITIAL FRACTIONAL CONTRIBU5 TION.—The term ‘initial fractional contribution’ 

6 means, with respect to any decedent, any chari7 table contribution of an undivided portion of 

8 the decedent’s entire interest in any tangible 

9 personal property for which a deduction was al10 lowed under section 170.’’. 

11 (c) GIFT TAX.—Section 2522 (relating to charitable 

12 and similar gifts) is amended by redesignating subsection 

13 (e) as subsection (f) and by inserting after subsection (d) 

14 the following new subsection: 

15 ‘‘(e) SPECIAL RULES FOR FRACTIONAL GIFTS.— 

16 ‘‘(1) DENIAL OF DEDUCTION IN CERTAIN

17 CASES.— 

18 ‘‘(A) IN GENERAL.—No deduction shall be 

19 allowed for a contribution of an undivided por20 tion of a taxpayer’s entire interest in tangible 

21 personal property unless all interest in the 

22 property is held immediately before such con23 tribution by— 

24 ‘‘(i) the taxpayer, or 

25 ‘‘(ii) the taxpayer and the donee. 


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1 ‘‘(B) EXCEPTIONS.—The Secretary may, 

2 by regulation, provide for exceptions to sub3 paragraph (A) in cases where all persons who 

4 hold an interest in the property make propor5 tional contributions of an undivided portion of 

6 the entire interest held by such persons. 

7 ‘‘(2) VALUATION OF SUBSEQUENT GIFTS.—In 

8 the case of any additional contribution, the fair mar9 ket value of such contribution shall be determined by 

10 using the lesser of— 

11 ‘‘(A) the fair market value of the property 

12 at the time of the initial fractional contribution, 

13 or 

14 ‘‘(B) the fair market value of the property 

15 at the time of the additional contribution. 

16 ‘‘(3) RECAPTURE OF DEDUCTION IN CERTAIN

17 CASES; ADDITION TO TAX.— 

18 ‘‘(A) IN GENERAL.—The Secretary shall 

19 provide for the recapture of an amount equal to 

20 any deduction allowed under this section (plus 

21 interest) with respect to any contribution of an 

22 undivided portion of a taxpayer’s entire interest 

23 in tangible personal property— 

24 ‘‘(i) in any case in which the donor 

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1 terest in such property to the donee (or, if 

2 such donee is no longer in existence, to any 

3 person described in section 170(c)) before 

4 the earlier of— 

5 ‘‘(I) the date that is 10 years 

6 after the date of the initial fractional 

7 contribution, or 

8 ‘‘(II) the date of the death of the 

9 donor, and 

10 ‘‘(ii) in any case in which the donee 

11 has not, during the period beginning on 

12 the date of the initial fractional contribu13 tion and ending on the date described in 

14 clause (i)— 

15 ‘‘(I) had substantial physical pos16 session of the property, and 

17 ‘‘(II) used the property in a use 

18 which is related to a purpose or func19 tion constituting the basis for the or20 ganizations’ exemption under section 

21 501. 

22 ‘‘(B) ADDITION TO TAX.—The tax imposed 

23 under this chapter for any taxable year for 

24 which there is a recapture under subparagraph 


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1 (A) shall be increased by 10 percent of the 

2 amount so recaptured. 

3 ‘‘(4) DEFINITIONS.—For purposes of this sub4 section— 

5 ‘‘(A) ADDITIONAL CONTRIBUTION.—The 

6 term ‘additional contribution’ means any gift 

7 for which a deduction is allowed under sub8 section (a) or (b) of any interest in a property 

9 with respect to which the donor has previously 

10 made an initial fractional contribution. 

11 ‘‘(B) INITIAL FRACTIONAL CONTRIBU12 TION.—The term ‘initial fractional contribution’ 

13 means, with respect to any donor, the first gift 

14 of an undivided portion of the donor’s entire in15 terest in any tangible personal property for 

16 which a deduction is allowed under subsection 

17 (a) or (b).’’. 

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

19 this section shall apply to contributions, bequests, and 

20 gifts made after the date of the enactment of this Act. 

21 SEC. 1219. PROVISIONS RELATING TO SUBSTANTIAL AND 

22 GROSS OVERSTATEMENTS OF VALUATIONS. 

23 (a) MODIFICATION OF THRESHOLDS FOR SUBSTAN24 TIAL AND GROSS VALUATION MISSTATEMENTS.— 


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1 (1) SUBSTANTIAL VALUATION

2 MISSTATEMENT.— 

3 (A) INCOME TAXES.—Subparagraph (A) of 

4 section 6662(e)(1) (relating to substantial valu5 ation misstatement under chapter 1) is amend6 ed by striking ‘‘200 percent’’ and inserting 

7 ‘‘150 percent’’. 

8 (B) ESTATE AND GIFT TAXES.—Paragraph 

9 (1) of section 6662(g) is amended by striking 

10 ‘‘50 percent’’ and inserting ‘‘65 percent’’. 

11 (2) GROSS VALUATION MISSTATEMENT.— 

12 (A) INCOME TAXES.—Clauses (i) and (ii) 

13 of section 6662(h)(2)(A) (relating to increase in 

14 penalty in case of gross valuation 

15 misstatements) are amended to read as follows: 

16 ‘‘(i) in paragraph (1)(A), ‘200 per17 cent’ for ‘150 percent’, 

18 ‘‘(ii) in paragraph (1)(B)(i)— 

19 ‘‘(I) ‘400 percent’ for ‘200 per20 cent’, and 

21 ‘‘(II) ‘25 percent’ for ‘50 per22 cent’, and’’. 

23 (B) ESTATE AND GIFT TAXES.—Subpara24 graph (C) of section 6662(h)(2) is amended by 


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1 striking ‘‘ ‘25 percent’ for ‘50 percent’ ’’ and in2 serting ‘‘ ‘40 percent’ for ‘65 percent’ ’’. 

3 (3) ELIMINATION OF REASONABLE CAUSE EX4 CEPTION FOR GROSS MISSTATEMENTS.—Section 

5 6664(c)(2) (relating to reasonable cause exception 

6 for underpayments) is amended by striking ‘‘para7 graph (1) shall not apply unless’’ and inserting 

8 ‘‘paragraph (1) shall not apply. The preceding sen9 tence shall not apply to a substantial valuation over10 statement under chapter 1 if’’. 

11 (b) PENALTY ON APPRAISERS WHOSE APPRAISALS

12 RESULT IN SUBSTANTIAL OR GROSS VALUATION

13 MISSTATEMENTS.— 

14 (1) IN GENERAL.—Part I of subchapter B of 

15 chapter 68 (relating to assessable penalties) is 

16 amended by inserting after section 6695 the fol17 lowing new section: 

18 ‘‘SEC. 6695A. SUBSTANTIAL AND GROSS VALUATION 

19 MISSTATEMENTS ATTRIBUTABLE TO INCOR20 RECT APPRAISALS. 

21 ‘‘(a) IMPOSITION OF PENALTY.—If— 

22 ‘‘(1) a person prepares an appraisal of the 

23 value of property and such person knows, or reason24 ably should have known, that the appraisal would be 


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1 used in connection with a return or a claim for re2 fund, and 

3 ‘‘(2) the claimed value of the property on a re4 turn or claim for refund which is based on such ap5 praisal results in a substantial valuation 

6 misstatement under chapter 1 (within the meaning 

7 of section 6662(e)), or a gross valuation 

8 misstatement (within the meaning of section 

9 6662(h)), with respect to such property, then such 

10 person shall pay a penalty in the amount determined 

11 under subsection (b). 

12 ‘‘(b) AMOUNT OF PENALTY.—The amount of the 

13 penalty imposed under subsection (a) on any person with 

14 respect to an appraisal shall be equal to the lesser of— 

15 ‘‘(1) the greater of— 

16 ‘‘(A) 10 percent of the amount of the un17 derpayment (as defined in section 6664(a)) at18 tributable to the misstatement described in sub19 section (a)(2), or 

20 ‘‘(B) $1,000, or 

21 ‘‘(2) 125 percent of the gross income received 

22 by the person described in subsection (a)(1) from 

23 the preparation of the appraisal. 

24 ‘‘(c) EXCEPTION.—No penalty shall be imposed 

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1 faction of the Secretary that the value established in the 

2 appraisal was more likely than not the proper value.’’. 

3 (2) RULES APPLICABLE TO PENALTY.—Section 

4 6696 (relating to rules applicable with respect to 

5 sections 6694 and 6695) is amended— 

6 (A) by striking ‘‘6694 and 6695’’ each 

7 place it appears in the text and heading thereof 

8 and inserting ‘‘6694, 6695, and 6695A’’, and 

9 (B) by striking ‘‘6694 or 6695’’ each place 

10 it appears in the text and inserting ‘‘6694, 

11 6695, or 6695A’’. 

12 (3) CONFORMING AMENDMENT.—The table of 

13 sections for part I of subchapter B of chapter 68 is 

14 amended by striking the item relating to section 

15 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.’’. 

16 (c) QUALIFIED APPRAISERS AND APPRAISALS.— 

17 (1) IN GENERAL.—Subparagraph (E) of section 

18 170(f)(11) is amended to read as follows: 

19 ‘‘(E) QUALIFIED APPRAISAL AND AP20 PRAISER.—For purposes of this paragraph— 

21 ‘‘(i) QUALIFIED APPRAISAL.—The 

22 term ‘qualified appraisal’ means, with re23 spect to any property, an appraisal of such 

24 property which— 


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1 ‘‘(I) is treated for purposes of 

2 this paragraph as a qualified ap3 praisal under regulations or other 

4 guidance prescribed by the Secretary, 

5 and 

6 ‘‘(II) is conducted by a qualified 

7 appraiser in accordance with generally 

8 accepted appraisal standards and any 

9 regulations or other guidance pre10 scribed under subclause (I). 

11 ‘‘(ii) QUALIFIED APPRAISER.—Except 

12 as provided in clause (iii), the term ‘quali13 fied appraiser’ means an individual who— 

14 ‘‘(I) has earned an appraisal des15 ignation from a recognized profes16 sional appraiser organization or has 

17 otherwise met minimum education 

18 and experience requirements set forth 

19 in regulations prescribed by the Sec20 retary, 

21 ‘‘(II) regularly performs apprais22 als for which the individual receives 

23 compensation, and 

24 ‘‘(III) meets such other require25 ments as may be prescribed by the 


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1 Secretary in regulations or other guid2 ance. 

3 ‘‘(iii) SPECIFIC APPRAISALS.—An in4 dividual shall not be treated as a qualified 

5 appraiser with respect to any specific ap6 praisal unless— 

7 ‘‘(I) the individual demonstrates 

8 verifiable education and experience in 

9 valuing the type of property subject to 

10 the appraisal, and 

11 ‘‘(II) the individual has not been 

12 prohibited from practicing before the 

13 Internal Revenue Service by the Sec14 retary under section 330(c) of title 

15 31, United States Code, at any time 

16 during the 3-year period ending on 

17 the date of the appraisal.’’. 

18 (2) REASONABLE CAUSE EXCEPTION.—Sub19 paragraphs (B) and (C) of section 6664(c)(3) are 

20 amended to read as follows: 

21 ‘‘(B) QUALIFIED APPRAISAL.—The term 

22 ‘qualified appraisal’ has the meaning given such 

23 term by section 170(f)(11)(E)(i). 


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1 ‘‘(C) QUALIFIED APPRAISER.—The term 

2 ‘qualified appraiser’ has the meaning given such 

3 term by section 170(f)(11)(E)(ii).’’. 

4 (d) DISCIPLINARY ACTIONS AGAINST APPRAISERS.— 

5 Section 330(c) of title 31, United States Code, is amended 

6 by striking ‘‘with respect to whom a penalty has been as7 sessed under section 6701(a) of the Internal Revenue 

8 Code of 1986’’. 

9 (e) EFFECTIVE DATES.— 

10 (1) MISSTATEMENT PENALTIES.—Except as 

11 provided in paragraph (3), the amendments made by 

12 subsection (a) shall apply to returns filed after the 

13 date of the enactment of this Act. 

14 (2) APPRAISER PROVISIONS.—Except as pro15 vided in paragraph (3), the amendments made by 

16 subsections (b), (c), and (d) shall apply to appraisals 

17 prepared with respect to returns or submissions filed 

18 after the date of the enactment of this Act. 

19 (3) SPECIAL RULE FOR CERTAIN EASE20 MENTS.—In the case of a contribution of a qualified 

21 real property interest which is a restriction with re22 spect to the exterior of a building described in sec23 tion 170(h)(4)(C)(ii) of the Internal Revenue Code 

24 of 1986, and an appraisal with respect to the con25 tribution, the amendments made by subsections (a) 


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1 and (b) shall apply to returns filed after July 25, 

2 2006. 

3 SEC. 1220. ADDITIONAL STANDARDS FOR CREDIT COUN4 SELING ORGANIZATIONS. 

5 (a) IN GENERAL.—Section 501 (relating to exemp6 tion from tax on corporations, certain trusts, etc.) is 

7 amended by redesignating subsection (q) as subsection (r) 

8 and by inserting after subsection (p) the following new 

9 subsection: 

10 ‘‘(q) SPECIAL RULES FOR CREDIT COUNSELING OR11 GANIZATIONS.— 

12 ‘‘(1) IN GENERAL.—An organization with re13 spect to which the provision of credit counseling 

14 services is a substantial purpose shall not be exempt 

15 from tax under subsection (a) unless such organiza16 tion is described in paragraph (3) or (4) of sub17 section (c) and such organization is organized and 

18 operated in accordance with the following require19 ments: 

20 ‘‘(A) The organization— 

21 ‘‘(i) provides credit counseling services 

22 tailored to the specific needs and cir23 cumstances of consumers, 

24 ‘‘(ii) makes no loans to debtors (other 

25 than loans with no fees or interest) and 


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1 does not negotiate the making of loans on 

2 behalf of debtors, 

3 ‘‘(iii) provides services for the purpose 

4 of improving a consumer’s credit record, 

5 credit history, or credit rating only to the 

6 extent that such services are incidental to 

7 providing credit counseling services, and 

8 ‘‘(iv) does not charge any separately 

9 stated fee for services for the purpose of 

10 improving any consumer’s credit record, 

11 credit history, or credit rating. 

12 ‘‘(B) The organization does not refuse to 

13 provide credit counseling services to a consumer 

14 due to the inability of the consumer to pay, the 

15 ineligibility of the consumer for debt manage16 ment plan enrollment, or the unwillingness of 

17 the consumer to enroll in a debt management 

18 plan. 

19 ‘‘(C) The organization establishes and im20 plements a fee policy which— 

21 ‘‘(i) requires that any fees charged to 

22 a consumer for services are reasonable, 

23 ‘‘(ii) allows for the waiver of fees if 

24 the consumer is unable to pay, and 


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1 ‘‘(iii) except to the extent allowed by 

2 State law, prohibits charging any fee based 

3 in whole or in part on a percentage of the 

4 consumer’s debt, the consumer’s payments 

5 to be made pursuant to a debt manage6 ment plan, or the projected or actual sav7 ings to the consumer resulting from enroll8 ing in a debt management plan. 

9 ‘‘(D) At all times the organization has a 

10 board of directors or other governing body— 

11 ‘‘(i) which is controlled by persons 

12 who represent the broad interests of the 

13 public, such as public officials acting in 

14 their capacities as such, persons having 

15 special knowledge or expertise in credit or 

16 financial education, and community lead17 ers, 

18 ‘‘(ii) not more than 20 percent of the 

19 voting power of which is vested in persons 

20 who are employed by the organization or 

21 who will benefit financially, directly or in22 directly, from the organization’s activities 

23 (other than through the receipt of reason24 able directors’ fees or the repayment of 

25 consumer debt to creditors other than the 


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1 credit counseling organization or its affili2 ates), and 

3 ‘‘(iii) not more than 49 percent of the 

4 voting power of which is vested in persons 

5 who are employed by the organization or 

6 who will benefit financially, directly or in7 directly, from the organization’s activities 

8 (other than through the receipt of reason9 able directors’ fees). 

10 ‘‘(E) The organization does not own more 

11 than 35 percent of— 

12 ‘‘(i) the total combined voting power 

13 of any corporation (other than a corpora14 tion which is an organization described in 

15 subsection (c)(3) and exempt from tax 

16 under subsection (a)) which is in the trade 

17 or business of lending money, repairing 

18 credit, or providing debt management plan 

19 services, payment processing, or similar 

20 services, 

21 ‘‘(ii) the profits interest of any part22 nership (other than a partnership which is 

23 an organization described in subsection 

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1 ness of lending money, repairing credit, or 

2 providing debt management plan services, 

3 payment processing, or similar services, 

4 and 

5 ‘‘(iii) the beneficial interest of any 

6 trust or estate (other than a trust which is 

7 an organization described in subsection 

8 (c)(3) and exempt from tax under sub9 section (a)) which is in the trade or busi10 ness of lending money, repairing credit, or 

11 providing debt management plan services, 

12 payment processing, or similar services. 

13 ‘‘(F) The organization receives no amount 

14 for providing referrals to others for debt man15 agement plan services, and pays no amount to 

16 others for obtaining referrals of consumers. 

17 ‘‘(2) ADDITIONAL REQUIREMENTS FOR ORGANI18 ZATIONS DESCRIBED IN SUBSECTION (c)(3).— 

19 ‘‘(A) IN GENERAL.—In addition to the re20 quirements under paragraph (1), an organiza21 tion with respect to which the provision of cred22 it counseling services is a substantial purpose 

23 and which is described in paragraph (3) of sub24 section (c) shall not be exempt from tax under 

25 subsection (a) unless such organization is orgaVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00845 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 nized and operated in accordance with the fol2 lowing requirements: 

3 ‘‘(i) The organization does not solicit 

4 contributions from consumers during the 

5 initial counseling process or while the con6 sumer is receiving services from the orga7 nization. 

8 ‘‘(ii) The aggregate revenues of the 

9 organization which are from payments of 

10 creditors of consumers of the organization 

11 and which are attributable to debt manage12 ment plan services do not exceed the appli13 cable percentage of the total revenues of 

14 the organization. 

15 ‘‘(B) APPLICABLE PERCENTAGE.— 

16 ‘‘(i) IN GENERAL.—For purposes of 

17 subparagraph (A)(ii), the applicable per18 centage is 50 percent. 

19 ‘‘(ii) TRANSITION RULE.—Notwith20 standing clause (i), in the case of an orga21 nization with respect to which the provi22 sion of credit counseling services is a sub23 stantial purpose and which is described in 

24 paragraph (3) of subsection (c) and ex25 empt from tax under subsection (a) on the 


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1 date of the enactment of this subsection, 

2 the applicable percentage is— 

3 ‘‘(I) 80 percent for the first tax4 able year of such organization begin5 ning after the date which is 1 year 

6 after the date of the enactment of this 

7 subsection, and 

8 ‘‘(II) 70 percent for the second 

9 such taxable year beginning after such 

10 date, and 

11 ‘‘(III) 60 percent for the third 

12 such taxable year beginning after such 

13 date. 

14 ‘‘(3) ADDITIONAL REQUIREMENT FOR ORGANI15 ZATIONS DESCRIBED IN SUBSECTION (c)(4).—In ad16 dition to the requirements under paragraph (1), an 

17 organization with respect to which the provision of 

18 credit counseling services is a substantial purpose 

19 and which is described in paragraph (4) of sub20 section (c) shall not be exempt from tax under sub21 section (a) unless such organization notifies the Sec22 retary, in such manner as the Secretary may by reg23 ulations prescribe, that it is applying for recognition 

24 as a credit counseling organization. 


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1 ‘‘(4) CREDIT COUNSELING SERVICES; DEBT

2 MANAGEMENT PLAN SERVICES.—For purposes of 

3 this subsection— 

4 ‘‘(A) CREDIT COUNSELING SERVICES.— 

5 The term ‘credit counseling services’ means— 

6 ‘‘(i) the providing of educational infor7 mation to the general public on budgeting, 

8 personal finance, financial literacy, saving 

9 and spending practices, and the sound use 

10 of consumer credit, 

11 ‘‘(ii) the assisting of individuals and 

12 families with financial problems by pro13 viding them with counseling, or 

14 ‘‘(iii) a combination of the activities 

15 described in clauses (i) and (ii). 

16 ‘‘(B) DEBT MANAGEMENT PLAN SERV17 ICES.—The term ‘debt management plan serv18 ices’ means services related to the repayment, 

19 consolidation, or restructuring of a consumer’s 

20 debt, and includes the negotiation with creditors 

21 of lower interest rates, the waiver or reduction 

22 of fees, and the marketing and processing of 

23 debt management plans.’’. 

24 (b) DEBT MANAGEMENT PLAN SERVICES TREATED

25 AS AN UNRELATED BUSINESS.—Section 513 (relating to 


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1 unrelated trade or business) is amended by adding at the 

2 end the following: 

3 ‘‘(j) DEBT MANAGEMENT PLAN SERVICES.—The 

4 term ‘unrelated trade or business’ includes the provision 

5 of debt management plan services (as defined in section 

6 501(q)(4)(B)) by any organization other than an organiza7 tion which meets the requirements of section 501(q).’’. 

8 (c) EFFECTIVE DATE.— 

9 (1) IN GENERAL.—Except as provided in para10 graph (2), the amendments made by this section 

11 shall apply to taxable years beginning after the date 

12 of the enactment of this Act. 

13 (2) TRANSITION RULE FOR EXISTING ORGANI14 ZATIONS.—In the case of any organization described 

15 in paragraph (3) or (4) section 501(c) of the Inter16 nal Revenue Code of 1986 and with respect to which 

17 the provision of credit counseling services is a sub18 stantial purpose on the date of the enactment of this 

19 Act, the amendments made by this section shall 

20 apply to taxable years beginning after the date 

21 which is 1 year after the date of the enactment of 

22 this Act. 

23 SEC. 1221. EXPANSION OF THE BASE OF TAX ON PRIVATE 

24 FOUNDATION NET INVESTMENT INCOME. 

25 (a) GROSS INVESTMENT INCOME.— 


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

2 4940(c) (relating to gross investment income) is 

3 amended by adding at the end the following new 

4 sentence: ‘‘Such term shall also include income from 

5 sources similar to those in the preceding sentence.’’. 

6 (2) CONFORMING AMENDMENT.—Subsection (e) 

7 of section 509 (relating to gross investment income) 

8 is amended by adding at the end the following new 

9 sentence: ‘‘Such term shall also include income from 

10 sources similar to those in the preceding sentence.’’. 

11 (b) CAPITAL GAIN NET INCOME.—Paragraph (4) of 

12 section 4940(c) (relating to capital gains and losses) is 

13 amended— 

14 (1) in subparagraph (A), by striking ‘‘used for 

15 the production of interest, dividends, rents, and roy16 alties’’ and inserting ‘‘used for the production of 

17 gross investment income (as defined in paragraph 

18 (2))’’, 

19 (2) in subparagraph (C), by inserting ‘‘or 

20 carrybacks’’ after ‘‘carryovers’’, and 

21 (3) by adding at the end the following new sub22 paragraph: 

23 ‘‘(D) Except to the extent provided by reg24 ulation, under rules similar to the rules of sec25 tion 1031 (including the exception under subVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00850 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 section (a)(2) thereof), no gain or loss shall be 

2 taken into account with respect to any portion 

3 of property used for a period of not less than 

4 1 year for a purpose or function constituting 

5 the basis of the private foundation’s exemption 

6 if the entire property is exchanged immediately 

7 following such period solely for property of like 

8 kind which is to be used primarily for a purpose 

9 or function constituting the basis for such foun10 dation’s exemption.’’. 

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

12 this section shall apply to taxable years beginning after 

13 the date of the enactment of this Act. 

14 SEC. 1222. DEFINITION OF CONVENTION OR ASSOCIATION 

15 OF CHURCHES. 

16 Section 7701 (relating to definitions) is amended by 

17 redesignating subsection (o) as subsection (p) and by in18 serting after subsection (n) the following new subsection: 

19 ‘‘(o) CONVENTION OR ASSOCIATION OF CHURCH20 ES.—For purposes of this title, any organization which is 

21 otherwise a convention or association of churches shall not 

22 fail to so qualify merely because the membership of such 

23 organization includes individuals as well as churches or be24 cause individuals have voting rights in such organiza25 tion.’’. 


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1 SEC. 1223. NOTIFICATION REQUIREMENT FOR ENTITIES 

2 NOT CURRENTLY REQUIRED TO FILE. 

3 (a) IN GENERAL.—Section 6033 (relating to returns 

4 by exempt organizations), as amended by this Act, is 

5 amended by redesignating subsection (i) as subsection (j) 

6 and by inserting after subsection (h) the following new 

7 subsection: 

8 ‘‘(i) ADDITIONAL NOTIFICATION REQUIREMENTS.— 

9 Any organization the gross receipts of which in any tax10 able year result in such organization being referred to in 

11 subsection (a)(3)(A)(ii) or (a)(3)(B)— 

12 ‘‘(1) shall furnish annually, in electronic form, 

13 and at such time and in such manner as the Sec14 retary may by regulations prescribe, information set15 ting forth— 

16 ‘‘(A) the legal name of the organization, 

17 ‘‘(B) any name under which such organiza18 tion operates or does business, 

19 ‘‘(C) the organization’s mailing address 

20 and Internet web site address (if any), 

21 ‘‘(D) the organization’s taxpayer identifica22 tion number, 

23 ‘‘(E) the name and address of a principal 

24 officer, and 


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1 ‘‘(F) evidence of the continuing basis for 

2 the organization’s exemption from the filing re3 quirements under subsection (a)(1), and 

4 ‘‘(2) upon the termination of the existence of 

5 the organization, shall furnish notice of such termi6 nation.’’. 

7 (b) LOSS OF EXEMPT STATUS FOR FAILURE TO FILE

8 RETURN OR NOTICE.—Section 6033 (relating to returns 

9 by exempt organizations), as amended by subsection (a), 

10 is amended by redesignating subsection (j) as subsection 

11 (k) and by inserting after subsection (i) the following new 

12 subsection: 

13 ‘‘(j) LOSS OF EXEMPT STATUS FOR FAILURE TO

14 FILE RETURN OR NOTICE.— 

15 ‘‘(1) IN GENERAL.—If an organization de16 scribed in subsection (a)(1) or (i) fails to file an an17 nual return or notice required under either sub18 section for 3 consecutive years, such organization’s 

19 status as an organization exempt from tax under 

20 section 501(a) shall be considered revoked on and 

21 after the date set by the Secretary for the filing of 

22 the third annual return or notice. The Secretary 

23 shall publish and maintain a list of any organization 

24 the status of which is so revoked. 


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1 ‘‘(2) APPLICATION NECESSARY FOR REINSTATE2 MENT.—Any organization the tax-exempt status of 

3 which is revoked under paragraph (1) must apply in 

4 order to obtain reinstatement of such status regard5 less of whether such organization was originally re6 quired to make such an application. 

7 ‘‘(3) RETROACTIVE REINSTATEMENT IF REA8 SONABLE CAUSE SHOWN FOR FAILURE.—If, upon 

9 application for reinstatement of status as an organi10 zation exempt from tax under section 501(a), an or11 ganization described in paragraph (1) can show to 

12 the satisfaction of the Secretary evidence of reason13 able cause for the failure described in such para14 graph, the organization’s exempt status may, in the 

15 discretion of the Secretary, be reinstated effective 

16 from the date of the revocation under such para17 graph.’’. 

18 (c) NO DECLARATORY JUDGMENT RELIEF.—Section 

19 7428(b) (relating to limitations) is amended by adding at 

20 the end the following new paragraph: 

21 ‘‘(4) NONAPPLICATION FOR CERTAIN REVOCA22 TIONS.—No action may be brought under this sec23 tion with respect to any revocation of status de24 scribed in section 6033(j)(1).’’. 


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1 (d) NO MONETARY PENALTY FOR FAILURE TO NO2 TIFY.—Section 6652(c)(1) (relating to annual returns 

3 under section 6033 or 6012(a)(6)) is amended by adding 

4 at the end the following new subparagraph: 

5 ‘‘(E) NO PENALTY FOR CERTAIN ANNUAL

6 NOTICES.—This paragraph shall not apply with 

7 respect to any notice required under section 

8 6033(i).’’. 

9 (e) SECRETARIAL OUTREACH REQUIREMENTS.— 

10 (1) NOTICE REQUIREMENT.—The Secretary of 

11 the Treasury shall notify in a timely manner every 

12 organization described in section 6033(i) of the In13 ternal Revenue Code of 1986 (as added by this sec14 tion) of the requirement under such section 6033(i) 

15 and of the penalty established under section 6033(j) 

16 of such Code— 

17 (A) by mail, in the case of any organiza18 tion the identity and address of which is in19 cluded in the list of exempt organizations main20 tained by the Secretary, and 

21 (B) by Internet or other means of out22 reach, in the case of any other organization. 

23 (2) LOSS OF STATUS PENALTY FOR FAILURE TO

24 FILE RETURN.—The Secretary of the Treasury shall 

25 publicize, in a timely manner in appropriate forms 


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1 and instructions and through other appropriate 

2 means, the penalty established under section 6033(j) 

3 of such Code for the failure to file a return under 

4 subsection (a)(1) or (i) of section 6033 of such 

5 Code. 

6 (f) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to notices and returns with respect 

8 to annual periods beginning after 2006. 

9 SEC. 1224. DISCLOSURE TO STATE OFFICIALS RELATING TO 

10 EXEMPT ORGANIZATIONS. 

11 (a) IN GENERAL.—Subsection (c) of section 6104 is 

12 amended by striking paragraph (2) and inserting the fol13 lowing new paragraphs: 

14 ‘‘(2) DISCLOSURE OF PROPOSED ACTIONS RE15 LATED TO CHARITABLE ORGANIZATIONS.— 

16 ‘‘(A) SPECIFIC NOTIFICATIONS.—In the 

17 case of an organization to which paragraph (1) 

18 applies, the Secretary may disclose to the ap19 propriate State officer— 

20 ‘‘(i) a notice of proposed refusal to 

21 recognize such organization as an organi22 zation described in section 501(c)(3) or a 

23 notice of proposed revocation of such orga24 nization’s recognition as an organization 

25 exempt from taxation, 


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1 ‘‘(ii) the issuance of a letter of pro2 posed deficiency of tax imposed under sec3 tion 507 or chapter 41 or 42, and 

4 ‘‘(iii) the names, addresses, and tax5 payer identification numbers of organiza6 tions which have applied for recognition as 

7 organizations described in section 

8 501(c)(3). 

9 ‘‘(B) ADDITIONAL DISCLOSURES.—Returns 

10 and return information of organizations with 

11 respect to which information is disclosed under 

12 subparagraph (A) may be made available for in13 spection by or disclosed to an appropriate State 

14 officer. 

15 ‘‘(C) PROCEDURES FOR DISCLOSURE.—In16 formation may be inspected or disclosed under 

17 subparagraph (A) or (B) only— 

18 ‘‘(i) upon written request by an ap19 propriate State officer, and 

20 ‘‘(ii) for the purpose of, and only to 

21 the extent necessary in, the administration 

22 of State laws regulating such organiza23 tions. 

24 Such information may only be inspected by or 

25 disclosed to a person other than the appropriate 


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1 State officer if such person is an officer or em2 ployee of the State and is designated by the ap3 propriate State officer to receive the returns or 

4 return information under this paragraph on be5 half of the appropriate State officer. 

6 ‘‘(D) DISCLOSURES OTHER THAN BY RE7 QUEST.—The Secretary may make available for 

8 inspection or disclose returns and return infor9 mation of an organization to which paragraph 

10 (1) applies to an appropriate State officer of 

11 any State if the Secretary determines that such 

12 returns or return information may constitute 

13 evidence of noncompliance under the laws with14 in the jurisdiction of the appropriate State offi15 cer. 

16 ‘‘(3) DISCLOSURE WITH RESPECT TO CERTAIN

17 OTHER EXEMPT ORGANIZATIONS.—Upon written re18 quest by an appropriate State officer, the Secretary 

19 may make available for inspection or disclosure re20 turns and return information of any organization de21 scribed in section 501(c) (other than organizations 

22 described in paragraph (1) or (3) thereof) for the 

23 purpose of, and only to the extent necessary in, the 

24 administration of State laws regulating the solicita25 tion or administration of the charitable funds or 


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1 charitable assets of such organizations. Such infor2 mation may only be inspected by or disclosed to a 

3 person other than the appropriate State officer if 

4 such person is an officer or employee of the State 

5 and is designated by the appropriate State officer to 

6 receive the returns or return information under this 

7 paragraph on behalf of the appropriate State officer. 

8 ‘‘(4) USE IN CIVIL JUDICIAL AND ADMINISTRA9 TIVE PROCEEDINGS.—Returns and return informa10 tion disclosed pursuant to this subsection may be 

11 disclosed in civil administrative and civil judicial pro12 ceedings pertaining to the enforcement of State laws 

13 regulating such organizations in a manner pre14 scribed by the Secretary similar to that for tax ad15 ministration proceedings under section 6103(h)(4). 

16 ‘‘(5) NO DISCLOSURE IF IMPAIRMENT.—Re17 turns and return information shall not be disclosed 

18 under this subsection, or in any proceeding described 

19 in paragraph (4), to the extent that the Secretary 

20 determines that such disclosure would seriously im21 pair Federal tax administration. 

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

24 ‘‘(A) RETURN AND RETURN INFORMA25 TION.—The terms ‘return’ and ‘return informaVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00859 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 tion’ have the respective meanings given to such 

2 terms by section 6103(b). 

3 ‘‘(B) APPROPRIATE STATE OFFICER.—The 

4 term ‘appropriate State officer’ means— 

5 ‘‘(i) the State attorney general, 

6 ‘‘(ii) the State tax officer, 

7 ‘‘(iii) in the case of an organization to 

8 which paragraph (1) applies, any other 

9 State official charged with overseeing orga10 nizations of the type described in section 

11 501(c)(3), and 

12 ‘‘(iv) in the case of an organization to 

13 which paragraph (3) applies, the head of 

14 an agency designated by the State attorney 

15 general as having primary responsibility 

16 for overseeing the solicitation of funds for 

17 charitable purposes.’’. 

18 (b) CONFORMING AMENDMENTS.— 

19 (1) Paragraph (2) of section 6103(a) is amend20 ed by inserting ‘‘or section 6104(c)’’ after ‘‘this sec21 tion’’. 

22 (2) Subparagraph (A) of section 6103(p)(3) is 

23 amended by inserting ‘‘and section 6104(c)’’ after 

24 ‘‘section’’ in the first sentence. 


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1 (3) Paragraph (4) of section 6103(p) is amend2 ed— 

3 (A) in the matter preceding subparagraph 

4 (A), by inserting ‘‘, any appropriate State offi5 cer (as defined in section 6104(c)),’’ before ‘‘or 

6 any other person’’, 

7 (B) in subparagraph (F)(i), by inserting 

8 ‘‘any appropriate State officer (as defined in 

9 section 6104(c)),’’ before ‘‘or any other per10 son’’, and 

11 (C) in the matter following subparagraph 

12 (F), by inserting ‘‘, an appropriate State officer 

13 (as defined in section 6104(c)),’’ after ‘‘includ14 ing an agency’’ each place it appears. 

15 (4) The heading for paragraph (1) of section 

16 6104(c) is amended by inserting ‘‘FOR CHARITABLE

17 ORGANIZATIONS’’ after ‘‘RULE’’. 

18 (5) Paragraph (2) of section 7213(a) is amend19 ed by inserting ‘‘or under section 6104(c)’’ after 

20 ‘‘6103’’. 

21 (6) Paragraph (2) of section 7213A(a) is 

22 amended by inserting ‘‘or under section 6104(c)’’ 

23 after ‘‘7213(a)(2)’’. 


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1 (7) Paragraph (2) of section 7431(a) is amend2 ed by inserting ‘‘ or in violation of section 6104(c)’’ 

3 after ‘‘6103’’. 

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

5 this section shall take effect on the date of the enactment 

6 of this Act but shall not apply to requests made before 

7 such date. 

8 SEC. 1225. PUBLIC DISCLOSURE OF INFORMATION RELAT9 ING TO UNRELATED BUSINESS INCOME TAX 

10 RETURNS. 

11 (a) IN GENERAL.—Subparagraph (A) of section 

12 6104(d)(1) is amended by redesignating clauses (ii) and 

13 (iii) as clauses (iii) and (iv), respectively, and by inserting 

14 after clause (i) the following new clause: 

15 ‘‘(ii) any annual return filed under 

16 section 6011 which relates to any tax im17 posed by section 511 (relating to imposi18 tion of tax on unrelated business income of 

19 charitable, etc., organizations) by such or20 ganization, but only if such organization is 

21 described in section 501(c)(3),’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to returns filed after the date of 

24 the enactment of this Act. 


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1 SEC. 1226. STUDY ON DONOR ADVISED FUNDS AND SUP2 PORTING ORGANIZATIONS. 

3 (a) STUDY.—The Secretary of the Treasury shall un4 dertake a study on the organization and operation of 

5 donor advised funds (as defined in section 4966(d)(2) of 

6 the Internal Revenue Code of 1986, as added by this Act) 

7 and of organizations described in section 509(a)(3) of such 

8 Code. The study shall specifically consider— 

9 (1) whether the deductions allowed for the in10 come, gift, or estate taxes for charitable contribu11 tions to sponsoring organizations (as defined in sec12 tion 4966(d)(1) of such Code, as added by this Act) 

13 of donor advised funds or to organizations described 

14 in section 509(a)(3) of such Code are appropriate in 

15 consideration of— 

16 (A) the use of contributed assets (including 

17 the type, extent, and timing of such use), or 

18 (B) the use of the assets of such organiza19 tions for the benefit of the person making the 

20 charitable contribution (or a person related to 

21 such person), 

22 (2) whether donor advised funds should be re23 quired to distribute for charitable purposes a speci24 fied amount (whether based on the income or assets 

25 of the fund) in order to ensure that the sponsoring 

26 organization with respect to such donor advised fund 


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1 is operating consistent with the purposes or func2 tions constituting the basis for its exemption under 

3 section 501, or its status as an organization de4 scribed in section 509(a), of such Code, 

5 (3) whether the retention by donors to organi6 zations described in paragraph (1) of rights or privi7 leges with respect to amounts transferred to such or8 ganizations (including advisory rights or privileges 

9 with respect to the making of grants or the invest10 ment of assets) is consistent with the treatment of 

11 such transfers as completed gifts that qualify for a 

12 deduction for income, gift, or estate taxes, and 

13 (4) whether the issues raised by paragraphs 

14 (1), (2), and (3) are also issues with respect to other 

15 forms of charities or charitable donations. 

16 (b) REPORT.—Not later than 1 year after the date 

17 of the enactment of this Act, the Secretary of the Treasury 

18 shall submit to the Committee on Finance of the Senate 

19 and the Committee on Ways and Means of the House of 

20 Representatives a report on the study conducted under 

21 subsection (a) and make such recommendations as the 

22 Secretary of the Treasury considers appropriate. 


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1 PART 2—IMPROVED ACCOUNTABILITY OF DONOR 

2 ADVISED FUNDS 

3 SEC. 1231. EXCISE TAXES RELATING TO DONOR ADVISED 

4 FUNDS. 

5 (a) IN GENERAL.—Chapter 42 (relating to private 

6 foundations and certain other tax-exempt organizations), 

7 as amended by the Tax Increase Prevention and Reconcili8 ation Act of 2005, is amended by adding at the end the 

9 following new subchapter: 

10 ‘‘Subchapter G—Donor Advised Funds 

‘‘Sec. 4966. Taxes on taxable distributions. 

‘‘Sec. 4967. Taxes on prohibited benefits. 

11 ‘‘SEC. 4966. TAXES ON TAXABLE DISTRIBUTIONS. 

12 ‘‘(a) IMPOSITION OF TAXES.— 

13 ‘‘(1) ON THE SPONSORING ORGANIZATION.— 

14 There is hereby imposed on each taxable distribution 

15 a tax equal to 20 percent of the amount thereof. The 

16 tax imposed by this paragraph shall be paid by the 

17 sponsoring organization with respect to the donor 

18 advised fund. 

19 ‘‘(2) ON THE FUND MANAGEMENT.—There is 

20 hereby imposed on the agreement of any fund man21 ager to the making of a distribution, knowing that 

22 it is a taxable distribution, a tax equal to 5 percent 

23 of the amount thereof. The tax imposed by this 


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1 paragraph shall be paid by any fund manager who 

2 agreed to the making of the distribution. 

3 ‘‘(b) SPECIAL RULES.—For purposes of subsection 

4 (a)— 

5 ‘‘(1) JOINT AND SEVERAL LIABILITY.—If more 

6 than one person is liable under subsection (a)(2) 

7 with respect to the making of a taxable distribution, 

8 all such persons shall be jointly and severally liable 

9 under such paragraph with respect to such distribu10 tion. 

11 ‘‘(2) LIMIT FOR MANAGEMENT.—With respect 

12 to any one taxable distribution, the maximum 

13 amount of the tax imposed by subsection (a)(2) shall 

14 not exceed $10,000. 

15 ‘‘(c) TAXABLE DISTRIBUTION.—For purposes of this 

16 section— 

17 ‘‘(1) IN GENERAL.—The term ‘taxable distribu18 tion’ means any distribution from a donor advised 

19 fund— 

20 ‘‘(A) to any natural person, or 

21 ‘‘(B) to any other person if— 

22 ‘‘(i) such distribution is for any pur23 pose other than one specified in section 

24 170(c)(2)(B), or 


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1 ‘‘(ii) the sponsoring organization does 

2 not exercise expenditure responsibility with 

3 respect to such distribution in accordance 

4 with section 4945(h). 

5 ‘‘(2) EXCEPTIONS.—Such term shall not in6 clude any distribution from a donor advised fund— 

7 ‘‘(A) to any organization described in sec8 tion 170(b)(1)(A) (other than a disqualified 

9 supporting organization), 

10 ‘‘(B) to the sponsoring organization of 

11 such donor advised fund, or 

12 ‘‘(C) to any other donor advised fund. 

13 ‘‘(d) DEFINITIONS.—For purposes of this sub14 chapter— 

15 ‘‘(1) SPONSORING ORGANIZATION.—The term 

16 ‘sponsoring organization’ means any organization 

17 which— 

18 ‘‘(A) is described in section 170(c) (other 

19 than in paragraph (1) thereof, and without re20 gard to paragraph (2)(A) thereof), 

21 ‘‘(B) is not a private foundation (as de22 fined in section 509(a)), and 

23 ‘‘(C) maintains 1 or more donor advised 

24 funds. 

25 ‘‘(2) DONOR ADVISED FUND.— 


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

2 subparagraph (B) or (C), the term ‘donor ad3 vised fund’ means a fund or account— 

4 ‘‘(i) which is separately identified by 

5 reference to contributions of a donor or do6 nors, 

7 ‘‘(ii) which is owned and controlled by 

8 a sponsoring organization, and 

9 ‘‘(iii) with respect to which a donor 

10 (or any person appointed or designated by 

11 such donor) has, or reasonably expects to 

12 have, advisory privileges with respect to 

13 the distribution or investment of amounts 

14 held in such fund or account by reason of 

15 the donor’s status as a donor. 

16 ‘‘(B) EXCEPTIONS.—The term ‘donor ad17 vised fund’ shall not include any fund or ac18 count— 

19 ‘‘(i) which makes distributions only to 

20 a single identified organization or govern21 mental entity, or 

22 ‘‘(ii) with respect to which a person 

23 described in subparagraph (A)(iii) advises 

24 as to which individuals receive grants for 


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1 travel, study, or other similar purposes, 

2 if— 

3 ‘‘(I) such person’s advisory privi4 leges are performed exclusively by 

5 such person in the person’s capacity 

6 as a member of a committee all of the 

7 members of which are appointed by 

8 the sponsoring organization, 

9 ‘‘(II) no combination of persons 

10 described in subparagraph (A)(iii) (or 

11 persons related to such persons) con12 trol, directly or indirectly, such com13 mittee, and 

14 ‘‘(III) all grants from such fund 

15 or account are awarded on an objec16 tive and nondiscriminatory basis pur17 suant to a procedure approved in ad18 vance by the board of directors of the 

19 sponsoring organization, and such 

20 procedure is designed to ensure that 

21 all such grants meet the requirements 

22 of paragraphs (1), (2), or (3) of sec23 tion 4945(g). 

24 ‘‘(C) SECRETARIAL AUTHORITY.—The Sec25 retary may exempt a fund or account not deVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00869 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 scribed in subparagraph (B) from treatment as 

2 a donor advised fund— 

3 ‘‘(i) if such fund or account is advised 

4 by a committee not directly or indirectly 

5 controlled by the donor or any person ap6 pointed or designated by the donor for the 

7 purpose of advising with respect to dis8 tributions from such fund (and any related 

9 parties), or 

10 ‘‘(ii) if such fund benefits a single 

11 identified charitable purpose. 

12 ‘‘(3) FUND MANAGER.—The term ‘fund man13 ager’ means, with respect to any sponsoring organi14 zation— 

15 ‘‘(A) an officer, director, or trustee of such 

16 sponsoring organization (or an individual hav17 ing powers or responsibilities similar to those of 

18 officers, directors, or trustees of the sponsoring 

19 organization), and 

20 ‘‘(B) with respect to any act (or failure to 

21 act), the employees of the sponsoring organiza22 tion having authority or responsibility with re23 spect to such act (or failure to act). 

24 ‘‘(4) DISQUALIFIED SUPPORTING ORGANIZA25 TION.— 


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1 ‘‘(A) IN GENERAL.—The term ‘disqualified 

2 supporting organization’ means, with respect to 

3 any distribution— 

4 ‘‘(i) any type III supporting organiza5 tion (as defined in section 4943(f)(5)(A)) 

6 which is not a functionally integrated type 

7 III supporting organization (as defined in 

8 section 4943(f)(5)(B)), and 

9 ‘‘(ii) any organization which is de10 scribed in subparagraph (B) or (C) if— 

11 ‘‘(I) the donor or any person des12 ignated by the donor for the purpose 

13 of advising with respect to distribu14 tions from a donor advised fund (and 

15 any related parties) directly or indi16 rectly controls a supported organiza17 tion (as defined in section 509(f)(3)) 

18 of such organization, or 

19 ‘‘(II) the Secretary determines by 

20 regulations that a distribution to such 

21 organization otherwise is inappro22 priate. 

23 ‘‘(B) TYPE I AND TYPE II SUPPORTING OR24 GANIZATIONS.—An organization is described in 

25 this subparagraph if the organization meets the 


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1 requirements of subparagraphs (A) and (C) of 

2 section 509(a)(3) and is— 

3 ‘‘(i) operated, supervised, or controlled 

4 by one or more organizations described in 

5 paragraph (1) or (2) of section 509(a), or 

6 ‘‘(ii) supervised or controlled in con7 nection with one or more such organiza8 tions. 

9 ‘‘(C) FUNCTIONALLY INTEGRATED TYPE

10 III SUPPORTING ORGANIZATIONS.—An organiza11 tion is described in this subparagraph if the or12 ganization is a functionally integrated type III 

13 supporting organization (as defined under sec14 tion 4943(f)(5)(B)). 

15 ‘‘SEC. 4967. TAXES ON PROHIBITED BENEFITS. 

16 ‘‘(a) IMPOSITION OF TAXES.— 

17 ‘‘(1) ON THE DONOR, DONOR ADVISOR, OR RE18 LATED PERSON.—There is hereby imposed on the 

19 advice of any person described in subsection (d) to 

20 have a sponsoring organization make a distribution 

21 from a donor advised fund which results in such per22 son or any other person described in subsection (d) 

23 receiving, directly or indirectly, a more than inci24 dental benefit as a result of such distribution, a tax 

25 equal to 125 percent of such benefit. The tax imVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00872 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 posed by this paragraph shall be paid by any person 

2 described in subsection (d) who advises as to the dis3 tribution or who receives such a benefit as a result 

4 of the distribution. 

5 ‘‘(2) ON THE FUND MANAGEMENT.—There is 

6 hereby imposed on the agreement of any fund man7 ager to the making of a distribution, knowing that 

8 such distribution would confer a benefit described in 

9 paragraph (1), a tax equal to 10 percent of the 

10 amount of such benefit. The tax imposed by this 

11 paragraph shall be paid by any fund manager who 

12 agreed to the making of the distribution. 

13 ‘‘(b) EXCEPTION.—No tax shall be imposed under 

14 this section with respect to any distribution if a tax has 

15 been imposed with respect to such distribution under sec16 tion 4958. 

17 ‘‘(c) SPECIAL RULES.—For purposes of subsection 

18 (a)— 

19 ‘‘(1) JOINT AND SEVERAL LIABILITY.—If more 

20 than one person is liable under paragraph (1) or (2) 

21 of subsection (a) with respect to a distribution de22 scribed in subsection (a), all such persons shall be 

23 jointly and severally liable under such paragraph 

24 with respect to such distribution. 


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1 ‘‘(2) LIMIT FOR MANAGEMENT.—With respect 

2 to any one distribution described in subsection (a), 

3 the maximum amount of the tax imposed by sub4 section (a)(2) shall not exceed $10,000. 

5 ‘‘(d) PERSON DESCRIBED.—A person is described in 

6 this subsection if such person is described in section 

7 4958(f)(7) with respect to a donor advised fund.’’. 

8 (b) CONFORMING AMENDMENTS.— 

9 (1) Section 4963 is amended by inserting 

10 ‘‘4966, 4967,’’ after ‘‘4958,’’ each place it appears 

11 in subsections (a) and (c). 

12 (2) The table of subchapters for chapter 42 is 

13 amended by adding at the end the following new 

14 item: 

‘‘SUBCHAPTER G. DONOR ADVISED FUNDS’’. 

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

16 this section shall apply to taxable years beginning after 

17 the date of the enactment of this Act. 

18 SEC. 1232. EXCESS BENEFIT TRANSACTIONS INVOLVING 

19 DONOR ADVISED FUNDS AND SPONSORING 

20 ORGANIZATIONS. 

21 (a) DISQUALIFIED PERSONS.— 

22 (1) IN GENERAL.—Paragraph (1) of section 

23 4958(f) is amended by striking ‘‘and’’ at the end of 

24 subparagraph (B), by striking the period at the end 

25 of subparagraph (C) and inserting a comma, and by 


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1 adding after subparagraph (C) the following new 

2 subparagraphs: 

3 ‘‘(D) which involves a donor advised fund 

4 (as defined in section 4966(d)(2)), any person 

5 who is described in paragraph (7) with respect 

6 to such donor advised fund (as so defined), and 

7 ‘‘(E) which involves a sponsoring organiza8 tion (as defined in section 4966(d)(1)), any per9 son who is described in paragraph (8) with re10 spect to such sponsoring organization (as so de11 fined).’’. 

12 (2) DONORS, DONOR ADVISORS, AND INVEST13 MENT ADVISORS TREATED AS DISQUALIFIED PER14 SONS.—Section 4958(f) is amended by adding at the 

15 end the following new paragraphs: 

16 ‘‘(7) DONORS AND DONOR ADVISORS.—For pur17 poses of paragraph (1)(E), a person is described in 

18 this paragraph if such person— 

19 ‘‘(A) is described in section 

20 4966(d)(2)(A)(iii), 

21 ‘‘(B) is a member of the family of an indi22 vidual described in subparagraph (A), or 

23 ‘‘(C) is a 35-percent controlled entity (as 

24 defined in paragraph (3) by substituting ‘per25 sons described in subparagraph (A) or (B) of 


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1 paragraph (7)’ for ‘persons described in sub2 paragraph (A) or (B) of paragraph (1)’ in sub3 paragraph (A)(i) thereof). 

4 ‘‘(8) INVESTMENT ADVISORS.—For purposes of 

5 paragraph (1)(F)— 

6 ‘‘(A) IN GENERAL.—A person is described 

7 in this paragraph if such person— 

8 ‘‘(i) is an investment advisor, 

9 ‘‘(ii) is a member of the family of an 

10 individual described in clause (i), or 

11 ‘‘(iii) is a 35-percent controlled entity 

12 (as defined in paragraph (3) by sub13 stituting ‘persons described in clause (i) or 

14 (ii) of paragraph (8)(A)’ for ‘persons de15 scribed in subparagraph (A) or (B) of 

16 paragraph (1)’ in subparagraph (A)(i) 

17 thereof). 

18 ‘‘(B) INVESTMENT ADVISOR DEFINED.— 

19 For purposes of subparagraph (A), the term 

20 ‘investment advisor’ means, with respect to any 

21 sponsoring organization (as defined in section 

22 4966(d)(1)), any person (other than an em23 ployee of such organization) compensated by 

24 such organization for managing the investment 

25 of, or providing investment advice with respect 


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1 to, assets maintained in donor advised funds 

2 (as defined in section 4966(d)(2)) owned by 

3 such organization.’’. 

4 (b) CERTAIN TRANSACTIONS TREATED AS EXCESS

5 BENEFIT TRANSACTIONS.— 

6 (1) IN GENERAL.—Section 4958(c) is amended 

7 by redesignating paragraph (2) as paragraph (3) 

8 and by inserting after paragraph (1) the following 

9 new paragraph: 

10 ‘‘(2) SPECIAL RULES FOR DONOR ADVISED

11 FUNDS.—In the case of any donor advised fund (as 

12 defined in section 4966(d)(2))— 

13 ‘‘(A) the term ‘excess benefit transaction’ 

14 includes any grant, loan, compensation, or other 

15 similar payment from such fund to a person de16 scribed in subsection (f)(7) with respect to such 

17 fund, and 

18 ‘‘(B) the term ‘excess benefit’ includes, 

19 with respect to any transaction described in 

20 subparagraph (A), the amount of any such 

21 grant, loan, compensation, or other similar pay22 ment.’’. 

23 (2) SPECIAL RULE FOR CORRECTION OF TRANS24 ACTION.—Section 4958(f)(6) is amended by insert25 ing ‘‘, except that in the case of any correction of 


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1 an excess benefit transaction described in subsection 

2 (c)(2), no amount repaid in a manner prescribed by 

3 the Secretary may be held in any donor advised 

4 fund’’ after ‘‘standards’’. 

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

6 this section shall apply to transactions occurring after the 

7 date of the enactment of this Act. 

8 SEC. 1233. EXCESS BUSINESS HOLDINGS OF DONOR AD9 VISED FUNDS. 

10 (a) IN GENERAL.—Section 4943 is amended by add11 ing at the end the following new subsection: 

12 ‘‘(e) APPLICATION OF TAX TO DONOR ADVISED

13 FUNDS.— 

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, a donor advised fund (as defined in section 

16 4966(d)(2)) shall be treated as a private foundation. 

17 ‘‘(2) DISQUALIFIED PERSON.—In applying this 

18 section to any donor advised fund (as so defined), 

19 the term ‘disqualified person’ means, with respect to 

20 the donor advised fund, any person who is— 

21 ‘‘(A) described in section 

22 4966(d)(2)(A)(iii), 

23 ‘‘(B) a member of the family of an indi24 vidual described in subparagraph (A), or 


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1 ‘‘(C) a 35-percent controlled entity (as de2 fined in section 4958(f)(3) by substituting ‘per3 sons described in subparagraph (A) or (B) of 

4 section 4943(e)(2)’ for ‘persons described in 

5 subparagraph (A) or (B) of paragraph (1)’ in 

6 subparagraph (A)(i) thereof). 

7 ‘‘(3) PRESENT HOLDINGS.—For purposes of 

8 this subsection, rules similar to the rules of para9 graphs (4), (5), and (6) of subsection (c) shall apply 

10 to donor advised funds (as so defined), except that— 

11 ‘‘(A) ‘the date of the enactment of this 

12 subsection’ shall be substituted for ‘May 26, 

13 1969’ each place it appears in paragraphs (4), 

14 (5), and (6), and 

15 ‘‘(B) ‘January 1, 2007’ shall be sub16 stituted for ‘January 1, 1970’ in paragraph 

17 (4)(E).’’. 

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

19 this section shall apply to taxable years beginning after 

20 the date of the enactment of this Act. 

21 SEC. 1234. TREATMENT OF CHARITABLE CONTRIBUTION 

22 DEDUCTIONS TO DONOR ADVISED FUNDS. 

23 (a) INCOME.—Section 170(f) (relating to disallow24 ance of deduction in certain cases and special rules), as 


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1 amended by this Act, is amended by adding at the end 

2 the following new paragraph: 

3 ‘‘(18) CONTRIBUTIONS TO DONOR ADVISED

4 FUNDS.—A deduction otherwise allowed under sub5 section (a) for any contribution to a donor advised 

6 fund (as defined in section 4966(d)(2)) shall only be 

7 allowed if— 

8 ‘‘(A) the sponsoring organization (as de9 fined in section 4966(d)(1)) with respect to 

10 such donor advised fund is not— 

11 ‘‘(i) described in paragraph (3), (4), 

12 or (5) of subsection (c), or 

13 ‘‘(ii) a type III supporting organiza14 tion (as defined in section 4943(f)(5)(A)) 

15 which is not a functionally integrated type 

16 III supporting organization (as defined in 

17 section 4943(f)(5)(B)), and 

18 ‘‘(B) the taxpayer obtains a contempora19 neous written acknowledgment (determined 

20 under rules similar to the rules of paragraph 

21 (8)(C)) from the sponsoring organization (as so 

22 defined) of such donor advised fund that such 

23 organization has exclusive legal control over the 

24 assets contributed.’’. 


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1 (b) ESTATE.—Section 2055(e) is amended by adding 

2 at the end the following new paragraph: 

3 ‘‘(5) CONTRIBUTIONS TO DONOR ADVISED

4 FUNDS.—A deduction otherwise allowed under sub5 section (a) for any contribution to a donor advised 

6 fund (as defined in section 4966(d)(2)) shall only be 

7 allowed if— 

8 ‘‘(A) the sponsoring organization (as de9 fined in section 4966(d)(1)) with respect to 

10 such donor advised fund is not— 

11 ‘‘(i) described in paragraph (3) or (4) 

12 of subsection (a), or 

13 ‘‘(ii) a type III supporting organiza14 tion (as defined in section 4943(f)(5)(A)) 

15 which is not a functionally integrated type 

16 III supporting organization (as defined in 

17 section 4943(f)(5)(B)), and 

18 ‘‘(B) the taxpayer obtains a contempora19 neous written acknowledgment (determined 

20 under rules similar to the rules of section 

21 170(f)(8)(C)) from the sponsoring organization 

22 (as so defined) of such donor advised fund that 

23 such organization has exclusive legal control 

24 over the assets contributed.’’. 


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1 (c) GIFT.—Section 2522(c) is amended by adding at 

2 the end the following new paragraph: 

3 ‘‘(5) CONTRIBUTIONS TO DONOR ADVISED

4 FUNDS.—A deduction otherwise allowed under sub5 section (a) for any contribution to a donor advised 

6 fund (as defined in section 4966(d)(2)) shall only be 

7 allowed if— 

8 ‘‘(A) the sponsoring organization (as de9 fined in section 4966(d)(1)) with respect to 

10 such donor advised fund is not— 

11 ‘‘(i) described in paragraph (3) or (4) 

12 of subsection (a), or 

13 ‘‘(ii) a type III supporting organiza14 tion (as defined in section 4943(f)(5)(A)) 

15 which is not a functionally integrated type 

16 III supporting organization (as defined in 

17 section 4943(f)(5)(B)), and 

18 ‘‘(B) the taxpayer obtains a contempora19 neous written acknowledgment (determined 

20 under rules similar to the rules of section 

21 170(f)(8)(C)) from the sponsoring organization 

22 (as so defined) of such donor advised fund that 

23 such organization has exclusive legal control 

24 over the assets contributed.’’. 


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

2 this section shall apply to contributions made after the 

3 date which is 180 days after the date of the enactment 

4 of this Act. 

5 SEC. 1235. RETURNS OF, AND APPLICATIONS FOR RECOGNI6 TION BY, SPONSORING ORGANIZATIONS. 

7 (a) MATTERS INCLUDED ON RETURNS.— 

8 (1) IN GENERAL.—Section 6033, as amended 

9 by this Act, is amended by redesignating subsection 

10 (k) as subsection (l) and by inserting after sub11 section (j) the following new subsection: 

12 ‘‘(k) ADDITIONAL PROVISIONS RELATING TO SPON13 SORING ORGANIZATIONS.—Every organization described 

14 in section 4966(d)(1) shall, on the return required under 

15 subsection (a) for the taxable year— 

16 ‘‘(1) list the total number of donor advised 

17 funds (as defined in section 4966(d)(2)) it owns at 

18 the end of such taxable year, 

19 ‘‘(2) indicate the aggregate value of assets held 

20 in such funds at the end of such taxable year, and 

21 ‘‘(3) indicate the aggregate contributions to and 

22 grants made from such funds during such taxable 

23 year.’’. 

24 (2) EFFECTIVE DATE.—The amendments made 

25 by this subsection shall apply to returns filed for 


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1 taxable years ending after the date of the enactment 

2 of this Act. 

3 (b) MATTERS INCLUDED ON EXEMPT STATUS APPLI4 CATION.— 

5 (1) IN GENERAL.—Section 508 is amended by 

6 adding at the end the following new subsection: 

7 ‘‘(f) ADDITIONAL PROVISIONS RELATING TO SPON8 SORING ORGANIZATIONS.—A sponsoring organization (as 

9 defined in section 4966(d)(1)) shall give notice to the Sec10 retary (in such manner as the Secretary may provide) 

11 whether such organization maintains or intends to main12 tain donor advised funds (as defined in section 

13 4966(d)(2)) and the manner in which such organization 

14 plans to operate such funds.’’. 

15 (2) EFFECTIVE DATE.—The amendment made 

16 by this subsection shall apply to organizations apply17 ing for tax-exempt status after the date of the enact18 ment of this Act. 

19 PART 3—IMPROVED ACCOUNTABILITY OF 

20 SUPPORTING ORGANIZATIONS 

21 SEC. 1241. REQUIREMENTS FOR SUPPORTING ORGANIZA22 TIONS. 

23 (a) TYPES OF SUPPORTING ORGANIZATIONS.—Sub24 paragraph (B) of section 509(a)(3) is amended to read 

25 as follows: 


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1 ‘‘(B) is— 

2 ‘‘(i) operated, supervised, or controlled 

3 by one or more organizations described in 

4 paragraph (1) or (2), 

5 ‘‘(ii) supervised or controlled in con6 nection with one or more such organiza7 tions, or 

8 ‘‘(iii) operated in connection with one 

9 or more such organizations, and’’. 

10 (b) REQUIREMENTS FOR SUPPORTING ORGANIZA11 TIONS.—Section 509 (relating to private foundation de12 fined) is amended by adding at the end the following new 

13 subsection: 

14 ‘‘(f) REQUIREMENTS FOR SUPPORTING ORGANIZA15 TIONS.— 

16 ‘‘(1) TYPE III SUPPORTING ORGANIZATIONS.— 

17 For purposes of subsection (a)(3)(B)(iii), an organi18 zation shall not be considered to be operated in con19 nection with any organization described in para20 graph (1) or (2) of subsection (a) unless such orga21 nization meets the following requirements: 

22 ‘‘(A) RESPONSIVENESS.—For each taxable 

23 year beginning after the date of the enactment 

24 of this subsection, the organization provides to 

25 each supported organization such information 


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1 as the Secretary may require to ensure that 

2 such organization is responsive to the needs or 

3 demands of the supported organization. 

4 ‘‘(B) FOREIGN SUPPORTED ORGANIZA5 TIONS.— 

6 ‘‘(i) IN GENERAL.—The organization 

7 is not operated in connection with any sup8 ported organization that is not organized 

9 in the United States. 

10 ‘‘(ii) TRANSITION RULE FOR EXISTING

11 ORGANIZATIONS.—If the organization is 

12 operated in connection with an organiza13 tion that is not organized in the United 

14 States on the date of the enactment of this 

15 subsection, clause (i) shall not apply until 

16 the first day of the third taxable year of 

17 the organization beginning after the date 

18 of the enactment of this subsection. 

19 ‘‘(2) ORGANIZATIONS CONTROLLED BY DO20 NORS.— 

21 ‘‘(A) IN GENERAL.—For purposes of sub22 section (a)(3)(B), an organization shall not be 

23 considered to be— 


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1 ‘‘(i) operated, supervised, or controlled 

2 by any organization described in paragraph 

3 (1) or (2) of subsection (a), or 

4 ‘‘(ii) operated in connection with any 

5 organization described in paragraph (1) or 

6 (2) of subsection (a), 

7 if such organization accepts any gift or con8 tribution from any person described in subpara9 graph (B). 

10 ‘‘(B) PERSON DESCRIBED.—A person is 

11 described in this subparagraph if, with respect 

12 to a supported organization of an organization 

13 described in subparagraph (A), such person 

14 is— 

15 ‘‘(i) a person (other than an organiza16 tion described in paragraph (1), (2), or (4) 

17 of section 509(a)) who directly or indi18 rectly controls, either alone or together 

19 with persons described in clauses (ii) and 

20 (iii), the governing body of such supported 

21 organization, 

22 ‘‘(ii) a member of the family (deter23 mined under section 4958(f)(4)) of an in24 dividual described in clause (i), or 


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1 ‘‘(iii) a 35-percent controlled entity 

2 (as defined in section 4958(f)(3) by sub3 stituting ‘persons described in clause (i) or 

4 (ii) of section 509(f)(2)(B)’ for ‘persons 

5 described in subparagraph (A) or (B) of 

6 paragraph (1)’ in subparagraph (A)(i) 

7 thereof). 

8 ‘‘(3) SUPPORTED ORGANIZATION.—For pur9 poses of this subsection, the term ‘supported organi10 zation’ means, with respect to an organization de11 scribed in subsection (a)(3), an organization de12 scribed in paragraph (1) or (2) of subsection (a)— 

13 ‘‘(A) for whose benefit the organization de14 scribed in subsection (a)(3) is organized and 

15 operated, or 

16 ‘‘(B) with respect to which the organiza17 tion performs the functions of, or carries out 

18 the purposes of.’’. 

19 (c) CHARITABLE TRUSTS WHICH ARE TYPE III SUP20 PORTING ORGANIZATIONS.—For purposes of section 

21 509(a)(3)(B)(iii) of the Internal Revenue Code of 1986, 

22 an organization which is a trust shall not be considered 

23 to be operated in connection with any organization de24 scribed in paragraph (1) or (2) of section 509(a) of such 

25 Code solely because— 


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1 (1) it is a charitable trust under State law, 

2 (2) the supported organization (as defined in 

3 section 509(f)(3) of such Code) is a beneficiary of 

4 such trust, and 

5 (3) the supported organization (as so defined) 

6 has the power to enforce the trust and compel an ac7 counting. 

8 (d) PAYOUT REQUIREMENTS FOR TYPE III SUP9 PORTING ORGANIZATIONS.— 

10 (1) IN GENERAL.—The Secretary of the Treas11 ury shall promulgate new regulations under section 

12 509 of the Internal Revenue Code of 1986 on pay13 ments required by type III supporting organizations 

14 which are not functionally integrated type III sup15 porting organizations. Such regulations shall require 

16 such organizations to make distributions of a per17 centage of either income or assets to supported orga18 nizations (as defined in section 509(f)(3) of such 

19 Code) in order to ensure that a significant amount 

20 is paid to such organizations. 

21 (2) TYPE III SUPPORTING ORGANIZATION; 

22 FUNCTIONALLY INTEGRATED TYPE III SUPPORTING

23 ORGANIZATION.—For purposes of paragraph (1), the 

24 terms ‘‘type III supporting organization’’ and ‘‘func25 tionally integrated type III supporting organization’’ 


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1 have the meanings given such terms under subpara2 graphs (A) and (B) section 4943(f)(5) of the Inter3 nal Revenue Code of 1986 (as added by this Act), 

4 respectively. 

5 (e) EFFECTIVE DATES.— 

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

7 subsections (a) and (b) shall take effect on the date 

8 of the enactment of this Act. 

9 (2) CHARITABLE TRUSTS WHICH ARE TYPE III

10 SUPPORTING ORGANIZATIONS.—Subsection (c) shall 

11 take effect— 

12 (A) in the case of trusts operated in con13 nection with an organization described in para14 graph (1) or (2) of section 509(a) of the Inter15 nal Revenue Code of 1986 on the date of the 

16 enactment of this Act, on the date that is one 

17 year after the date of the enactment of this Act, 

18 and 

19 (B) in the case of any other trust, on the 

20 date of the enactment of this Act. 

21 SEC. 1242. EXCESS BENEFIT TRANSACTIONS INVOLVING 

22 SUPPORTING ORGANIZATIONS. 

23 (a) DISQUALIFIED PERSONS.—Paragraph (1) of sec24 tion 4958(f), as amended by this Act, is amended by re25 designating subparagraphs (D) and (E) as subparagraphs 


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1 (E) and (F), respectively, and by adding after subpara2 graph (C) the following new subparagraph: 

3 ‘‘(D) any person who is described in sub4 paragraph (A), (B), or (C) with respect to an 

5 organization described in section 509(a)(3) and 

6 organized and operated exclusively for the ben7 efit of, to perform the functions of, or to carry 

8 out the purposes of the applicable tax-exempt 

9 organization.’’. 

10 (b) CERTAIN TRANSACTIONS TREATED AS EXCESS

11 BENEFIT TRANSACTIONS.—Section 4958(c), as amended 

12 by this Act, is amended by redesignating paragraph (3) 

13 as paragraph (4) and by inserting after paragraph (2) the 

14 following new paragraph: 

15 ‘‘(3) SPECIAL RULES FOR SUPPORTING ORGANI16 ZATIONS.— 

17 ‘‘(A) IN GENERAL.—In the case of any or18 ganization described in section 509(a)(3)— 

19 ‘‘(i) the term ‘excess benefit trans20 action’ includes— 

21 ‘‘(I) any grant, loan, compensa22 tion, or other similar payment pro23 vided by such organization to a person 

24 described in subparagraph (B), and 


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1 ‘‘(II) any loan provided by such 

2 organization to a disqualified person 

3 (other than an organization described 

4 in paragraph (1), (2), or (4) of section 

5 509(a)), and 

6 ‘‘(ii) the term ‘excess benefit’ includes, 

7 with respect to any transaction described 

8 in clause (i), the amount of any such 

9 grant, loan, compensation, or other similar 

10 payment. 

11 ‘‘(B) PERSON DESCRIBED.—A person is 

12 described in this subparagraph if such person 

13 is— 

14 ‘‘(i) a substantial contributor to such 

15 organization, 

16 ‘‘(ii) a member of the family (deter17 mined under section 4958(f)(4)) of an in18 dividual described in clause (i), or 

19 ‘‘(iii) a 35-percent controlled entity 

20 (as defined in section 4958(f)(3) by sub21 stituting ‘persons described in clause (i) or 

22 (ii) of section 4958(c)(3)(B)’ for ‘persons 

23 described in subparagraph (A) or (B) of 

24 paragraph (1)’ in subparagraph (A)(i) 

25 thereof). 


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1 ‘‘(C) SUBSTANTIAL CONTRIBUTOR.—For 

2 purposes of this paragraph— 

3 ‘‘(i) IN GENERAL.—The term ‘sub4 stantial contributor’ means any person who 

5 contributed or bequeathed an aggregate 

6 amount of more than $5,000 to the organi7 zation, if such amount is more than 2 per8 cent of the total contributions and be9 quests received by the organization before 

10 the close of the taxable year of the organi11 zation in which the contribution or bequest 

12 is received by the organization from such 

13 person. In the case of a trust, such term 

14 also means the creator of the trust. Rules 

15 similar to the rules of subparagraphs (B) 

16 and (C) of section 507(d)(2) shall apply 

17 for purposes of this subparagraph. 

18 ‘‘(ii) EXCEPTION.—Such term shall 

19 not include any organization described in 

20 paragraph (1), (2), or (4) of section 

21 509(a).’’. 

22 (c) EFFECTIVE DATES.— 

23 (1) SUBSECTION (a).—The amendments made 

24 by subsection (a) shall apply to transactions occur25 ring after the date of the enactment of this Act. 


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1 (2) SUBSECTION (b).—The amendments made 

2 by subsection (a) shall apply to transactions occur3 ring after July 25, 2006. 

4 SEC. 1243. EXCESS BUSINESS HOLDINGS OF SUPPORTING 

5 ORGANIZATIONS. 

6 (a) IN GENERAL.—Section 4943, as amended by this 

7 Act, is amended by adding at the end the following new 

8 subsection: 

9 ‘‘(f) APPLICATION OF TAX TO SUPPORTING ORGANI10 ZATIONS.— 

11 ‘‘(1) IN GENERAL.—For purposes of this sec12 tion, an organization which is described in para13 graph (3) shall be treated as a private foundation. 

14 ‘‘(2) EXCEPTION.—The Secretary may exempt 

15 the excess business holdings of any organization 

16 from the application of this subsection if the Sec17 retary determines that such holdings are consistent 

18 with the purpose or function constituting the basis 

19 for its exemption under section 501. 

20 ‘‘(3) ORGANIZATIONS DESCRIBED.—An organi21 zation is described in this paragraph if such organi22 zation is— 

23 ‘‘(A) a type III supporting organization 

24 (other than a functionally integrated type III 

25 supporting organization), or 


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1 ‘‘(B) an organization which meets the re2 quirements of subparagraphs (A) and (C) of 

3 section 509(a)(3) and which is supervised or 

4 controlled in connection with or one or more or5 ganizations described in paragraph (1) or (2) of 

6 section 509(a), but only if such organization ac7 cepts any gift or contribution from any person 

8 described in section 509(f)(2)(B). 

9 ‘‘(4) DISQUALIFIED PERSON.— 

10 ‘‘(A) IN GENERAL.—In applying this sec11 tion to any organization described in paragraph 

12 (3), the term ‘disqualified person’ means, with 

13 respect to the organization— 

14 ‘‘(i) any person who was, at any time 

15 during the 5-year period ending on the 

16 date described in subsection (a)(2)(A), in a 

17 position to exercise substantial influence 

18 over the affairs of the organization, 

19 ‘‘(ii) any member of the family (deter20 mined under section 4958(f)(4)) of an in21 dividual described in clause (i), 

22 ‘‘(iii) any 35-percent controlled entity 

23 (as defined in section 4958(f)(3) by sub24 stituting ‘persons described in clause (i) or 

25 (ii) of section 4943(f)(4)(A)’ for ‘persons 


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1 described in subparagraph (A) or (B) of 

2 paragraph (1)’ in subparagraph (A)(i) 

3 thereof), 

4 ‘‘(iv) any person described in section 

5 4958(c)(3)(B), and 

6 ‘‘(v) any organization— 

7 ‘‘(I) which is effectively con8 trolled (directly or indirectly) by the 

9 same person or persons who control 

10 the organization in question, or 

11 ‘‘(II) substantially all of the con12 tributions to which were made (di13 rectly or indirectly) by the same per14 son or persons described in subpara15 graph (B) or a member of the family 

16 (within the meaning of section 

17 4946(d)) of such a person. 

18 ‘‘(B) PERSONS DESCRIBED.—A person is 

19 described in this subparagraph if such person 

20 is— 

21 ‘‘(i) a substantial contributor to the 

22 organization (as defined in section 

23 4958(c)(3)(C)), 

24 ‘‘(ii) an officer, director, or trustee of 

25 the organization (or an individual having 


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1 powers or responsibilities similar to those 

2 of the officers, directors, or trustees of the 

3 organization), or 

4 ‘‘(iii) an owner of more than 20 per5 cent of— 

6 ‘‘(I) the total combined voting 

7 power of a corporation, 

8 ‘‘(II) the profits interest of a 

9 partnership, or 

10 ‘‘(III) the beneficial interest of a 

11 trust or unincorporated enterprise, 

12 which is a substantial contributor (as so 

13 defined) to the organization. 

14 ‘‘(5) TYPE III SUPPORTING ORGANIZATION; 

15 FUNCTIONALLY INTEGRATED TYPE III SUPPORTING

16 ORGANIZATION.—For purposes of this subsection— 

17 ‘‘(A) TYPE III SUPPORTING ORGANIZA18 TION.—The term ‘type III supporting organiza19 tion’ means an organization which meets the re20 quirements of subparagraphs (A) and (C) of 

21 section 509(a)(3) and which is operated in con22 nection with one or more organizations de23 scribed in paragraph (1) or (2) of section 

24 509(a). 


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1 ‘‘(B) FUNCTIONALLY INTEGRATED TYPE

2 III SUPPORTING ORGANIZATION.—The term 

3 ‘functionally integrated type III supporting or4 ganization’ means a type III supporting organi5 zation which is not required under regulations 

6 established by the Secretary to make payments 

7 to supported organizations (as defined under 

8 section 509(f)(3)) due to the activities of the 

9 organization related to performing the functions 

10 of, or carrying out the purposes of, such sup11 ported organizations. 

12 ‘‘(6) SPECIAL RULE FOR CERTAIN HOLDINGS

13 OF TYPE III SUPPORTING ORGANIZATIONS.—For 

14 purposes of this subsection, the term ‘excess busi15 ness holdings’ shall not include any holdings of a 

16 type III supporting organization in any business en17 terprise if, as of November 18, 2005, the holdings 

18 were held (and at all times thereafter, are held) for 

19 the benefit of the community pursuant to the direc20 tion of a State attorney general or a State official 

21 with jurisdiction over such organization. 

22 ‘‘(7) PRESENT HOLDINGS.—For purposes of 

23 this subsection, rules similar to the rules of para24 graphs (4), (5), and (6) of subsection (c) shall apply 


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1 to organizations described in section 509(a)(3), ex2 cept that— 

3 ‘‘(A) ‘the date of the enactment of this 

4 subsection’ shall be substituted for ‘May 26, 

5 1969’ each place it appears in paragraphs (4), 

6 (5), and (6), and 

7 ‘‘(B) ‘January 1, 2007’ shall be sub8 stituted for ‘January 1, 1970’ in paragraph 

9 (4)(E).’’. 

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

11 this section shall apply to taxable years beginning after 

12 the date of the enactment of this Act. 

13 SEC. 1244. TREATMENT OF AMOUNTS PAID TO SUPPORTING 

14 ORGANIZATIONS BY PRIVATE FOUNDATIONS. 

15 (a) QUALIFYING DISTRIBUTIONS.—Paragraph (4) of 

16 section 4942(g) is amended to read as follows: 

17 ‘‘(4) LIMITATION ON DISTRIBUTIONS BY NON18 OPERATING PRIVATE FOUNDATIONS TO SUPPORTING

19 ORGANIZATIONS.— 

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

21 section, the term ‘qualifying distribution’ shall 

22 not include any amount paid by a private foun23 dation which is not an operating foundation 

24 to— 


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1 ‘‘(i) any type III supporting organiza2 tion (as defined in section 4943(f)(5)(A)) 

3 which is not a functionally integrated type 

4 III supporting organization (as defined in 

5 section 4943(f)(5)(B)), and 

6 ‘‘(ii) any organization which is de7 scribed in subparagraph (B) or (C) if— 

8 ‘‘(I) a disqualified person of the 

9 private foundation directly or indi10 rectly controls such organization or a 

11 supported organization (as defined in 

12 section 509(f)(3)) of such organiza13 tion, or 

14 ‘‘(II) the Secretary determines by 

15 regulations that a distribution to such 

16 organization otherwise is inappro17 priate. 

18 ‘‘(B) TYPE I AND TYPE II SUPPORTING OR19 GANIZATIONS.—An organization is described in 

20 this subparagraph if the organization meets the 

21 requirements of subparagraphs (A) and (C) of 

22 section 509(a)(3) and is— 

23 ‘‘(i) operated, supervised, or controlled 

24 by one or more organizations described in 

25 paragraph (1) or (2) of section 509(a), or 


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1 ‘‘(ii) supervised or controlled in con2 nection with one or more such organiza3 tions. 

4 ‘‘(C) FUNCTIONALLY INTEGRATED TYPE

5 III SUPPORTING ORGANIZATIONS.—An organiza6 tion is described in this subparagraph if the or7 ganization is a functionally integrated type III 

8 supporting organization (as defined under sec9 tion 4943(f)(5)(B)).’’. 

10 (b) TAXABLE EXPENDITURES.—Subparagraph (A) 

11 of section 4945(d)(4) is amended to read as follows: 

12 ‘‘(A) such organization— 

13 ‘‘(i) is described in paragraph (1) or 

14 (2) of section 509(a), 

15 ‘‘(ii) is an organization described in 

16 section 509(a)(3) (other than an organiza17 tion described in clause (i) or (ii) of section 

18 4942(g)(4)(A)), or 

19 ‘‘(iii) is an exempt operating founda20 tion (as defined in section 4940(d)(2)), 

21 or’’. 

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

23 this section shall apply to distributions and expenditures 

24 after the date of the enactment of this Act. 


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1 SEC. 1245. RETURNS OF SUPPORTING ORGANIZATIONS. 

2 (a) REQUIREMENT TO FILE RETURN.—Subpara3 graph (B) of section 6033(a)(3) is amended by inserting 

4 ‘‘(other than an organization described in section 

5 509(a)(3))’’ after ‘‘paragraph (1)’’. 

6 (b) MATTERS INCLUDED ON RETURNS.—Section 

7 6033, as amended by this Act, is amended by redesig8 nating subsection (l) as subsection (m) and by inserting 

9 after subsection (k) the following new subsection: 

10 ‘‘(l) ADDITIONAL PROVISIONS RELATING TO SUP11 PORTING ORGANIZATIONS.—Every organization described 

12 in section 509(a)(3) shall, on the return required under 

13 subsection (a)— 

14 ‘‘(1) list the supported organizations (as de15 fined in section 509(f)(3)) with respect to which 

16 such organization provides support, 

17 ‘‘(2) indicate whether the organization meets 

18 the requirements of clause (i), (ii), or (iii) of section 

19 509(a)(3)(B), and 

20 ‘‘(3) certify that the organization meets the re21 quirements of section 509(a)(3)(C).’’. 

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

23 this section shall apply to returns filed for taxable years 

24 ending after the date of the enactment of this Act. 


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1 TITLE XIII—OTHER PROVISIONS 

2 SEC. 1301. TECHNICAL CORRECTIONS RELATING TO MINE 

3 SAFETY. 

4 Section 110 of the Federal Mine Safety and Health 

5 Act of 1977 (30 U.S.C. 820), as amended by the Mine 

6 Improvement and New Emergency Response Act of 2006 

7 (Public Law 109–236), is amended— 

8 (1) by striking subsection (d); and 

9 (2) in subsection (a)— 

10 (A) by striking ‘‘(1)(1) The operator’’ and 

11 inserting ‘‘(1) The operator’’; 

12 (B) in the paragraph (2) added by section 

13 8(a)(1)(B) of the Mine Improvement and New 

14 Emergency Response Act of 2006 (Public Law 

15 109–236)— 

16 (i) by striking ‘‘paragraph (1)’’ and 

17 inserting ‘‘subsection (a)(1)’’; and 

18 (ii) by redesignating such paragraph 

19 as subsection (d) and transferring such 

20 subsection so as to appear after subsection 

21 (c); and 

22 (3) in subsection (b)— 

23 (A) by striking ‘‘Any operator’’ and insert24 ing ‘‘(1) Any operator’’; and 


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1 (B) in the second sentence, as added by 

2 section 8(a)(2) of the Mine Improvement and 

3 New Emergency Response Act of 2006 (Public 

4 Law 109–236), by striking ‘‘Violations’’ and in5 serting the following: 

6 ‘‘(2) Violations’’. 

7 SEC. 1302. GOING-TO-THE-SUN ROAD. 

8 (a) IN GENERAL.—Section 1940 of the Safe, Ac9 countable, Flexible, Efficient Transportation Equity Act: 

10 A Legacy for Users (119 Stat. 1511) is amended— 

11 (1) in subsection (a)— 

12 (A) by striking paragraphs (1) and (2); 

13 (B) by redesignating paragraphs (3) 

14 through (5) as paragraphs (1) through (3), re15 spectively; and 

16 (C) by striking ‘‘$10,000,000’’ each place 

17 that it appears and inserting ‘‘$16,666,666’’; 

18 and 

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

20 ‘‘(c) CONTRACT AUTHORITY.—Except as otherwise 

21 provided in this section, funds authorized to be appro22 priated under this section shall be available for obligation 

23 in the same manner as if the funds were apportioned 

24 under chapter 1 of title 23, United States Code.’’. 


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1 (b) RESCISSION.—Section 10212 of the Safe, Ac2 countable, Flexible, Efficient Transportation Equity Act: 

3 A Legacy for Users (119 Stat. 1937) is amended by strik4 ing ‘‘$8,543,000,000’’ each place it appears and inserting 

5 ‘‘$8,593,000,000’’. 

6 SEC. 1303. EXCEPTION TO THE LOCAL FURNISHING RE7 QUIREMENT OF THE TAX-EXEMPT BOND 

8 RULES. 

9 (a) SNETTISHAM HYDROELECTRIC FACILITY.—For 

10 purposes of determining whether any private activity bond 

11 issued before May 31, 2006, and used to finance the ac12 quisition of the Snettisham hydroelectric facility is a quali13 fied bond for purposes of section 142(a)(8) of the Internal 

14 Revenue Code of 1986, the electricity furnished by such 

15 facility to the City of Hoonah, Alaska, shall not be taken 

16 into account for purposes of section 142(f)(1) of such 

17 Code. 

18 (b) LAKE DOROTHY HYDROELECTRIC FACILITY.— 

19 For purposes of determining whether any private activity 

20 bond issued before May 31, 2006, and used to finance the 

21 Lake Dorothy hydroelectric facility is a qualified bond for 

22 purposes of section 142(a)(8) of the Internal Revenue 

23 Code of 1986, the electricity furnished by such facility to 

24 the City of Hoonah, Alaska, shall not be taken into acVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00905 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 count for purposes of paragraphs (1) and (3) of section 

2 142(f) of such Code. 

3 (c) DEFINITIONS.—For purposes of this section— 

4 (1) LAKE DOROTHY HYDROELECTRIC FACIL5 ITY.—The term ‘‘Lake Dorothy hydroelectric facil6 ity’’ means the hydroelectric facility located approxi7 mately 10 miles south of Juneau, Alaska, and com8 monly referred to as the ‘‘Lake Dorothy project’’. 

9 (2) SNETTISHAM HYDROELECTRIC FACILITY.— 

10 The term ‘‘Snettisham hydroelectric facility’’ means 

11 the hydroelectric project described in section 1804 of 

12 the Small Business Job Protection Act of 1996. 

13 SEC. 1304. QUALIFIED TUITION PROGRAMS. 

14 (a) PERMANENT EXTENSION OF MODIFICATIONS.— 

15 Section 901 of the Economic Growth and Tax Relief Rec16 onciliation Act of 2001 (relating to sunset provisions) shall 

17 not apply to section 402 of such Act (relating to modifica18 tions to qualified tuition programs). 

19 (b) REGULATORY AUTHORITY TO PREVENT

20 ABUSE.—Section 529 (relating to qualified tuition pro21 grams) is amended by adding at the end the following new 

22 subsection: 

23 ‘‘(f) REGULATIONS.—Notwithstanding any other pro24 vision of this section, the Secretary shall prescribe such 

25 regulations as may be necessary or appropriate to carry 


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1 out the purposes of this section and to prevent abuse of 

2 such purposes, including regulations under chapters 11, 

3 12, and 13 of this title.’’. 

4 TITLE XIV—TARIFF PROVISIONS 

5 SEC. 1401. SHORT TITLE; TABLE OF CONTENTS. 

6 (a) SHORT TITLE.—This title may be cited as the 

7 ‘‘Miscellaneous Trade and Technical Corrections Act of 

8 2006’’. 

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

10 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. 


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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). 

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. 


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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. 

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. 


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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. 

Sec. 1581. Triasulfuron technical. 

Sec. 1582. Brodifacoum technical. 

Sec. 1583. Pymetrozine technical. 


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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. 


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1 SEC. 1402. REFERENCE. 

2 Except as otherwise expressly provided, whenever in 

3 this title an amendment or repeal is expressed in terms 

4 of an amendment to, or repeal of, a chapter, subchapter, 

5 note, additional U.S. note, heading, subheading, or other 

6 provision, the reference shall be considered to be made to 

7 a chapter, subchapter, note, additional U.S. note, heading, 

8 subheading, or other provision of the Harmonized Tariff 

9 Schedule of the United States (19 U.S.C. 3007). 

10 Subtitle A—Temporary Duty 

11 Suspensions and Reductions 

12 CHAPTER 1—NEW DUTY SUSPENSIONS 

13 AND REDUCTIONS 

14 SEC. 1411. CERTAIN NON-KNIT GLOVES DESIGNED FOR USE 

15 BY AUTO MECHANICS. 

16 (a) IN GENERAL.—Subchapter II of chapter 99 is 

17 amended by inserting in numerical sequence the following 

18 new headings: 


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‘‘ 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 ’’. 

1 (b) AMENDMENT TO U.S. NOTES.—Subchapter II of 

2 chapter 99 is amended by adding at the end of the U.S. 

3 Notes to such subchapter the following new U.S. Note: 

4 ‘‘18. For purposes of headings 9902.14.01, 

5 9902.14.02, 9902.14.03, 9902.14.04, and 9902.14.05, the 

6 term ‘mechanics’ work gloves’ means gloves, of man-made 

7 fibers, having synthetic leather palms and fingers; 

8 fourchettes of synthetic leather or of fabric of nylon or 

9 elastomeric yarn; backs comprising either one layer of 

10 knitted fabric of elastomeric yarn or three layers, with the 

11 outer layer of knitted fabric of elastomeric yarn, the center 

12 layer of foam and the inner layer of tricot fabric; the fore13 going, whether or not including an thermoplastic rubber 

14 logo or pad on the back; and elastic wrist straps with 

15 molded thermoplastic rubber hook-and-loop enclosures.’’. 


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1 SEC. 1412. CERTAIN MICROPHONES FOR USE IN AUTO2 MOTIVE INTERIORS. 

3 Subchapter II of chapter 99 is amended by inserting 

4 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

5 SEC. 1413. ACRYLIC OR MODACRYLIC SYNTHETIC FILA6 MENT TOW. 

7 Subchapter II of chapter 99 is amended by inserting 

8 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 ’’. 


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1 SEC. 1414. ACRYLIC OR MODACRYLIC SYNTHETIC STAPLE 

2 FIBERS, CARDED, COMBED, OR OTHERWISE 

3 PROCESSED FOR SPINNING. 

4 Subchapter II of chapter 99 is amended by inserting 

5 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 ’’. 

6 SEC. 1415. NITROCELLULOSE. 

7 Subchapter II of chapter 99 is amended by inserting 

8 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 ’’. 

9 SEC. 1416. POTASSIUM SORBATE. 

10 Subchapter II of chapter 99 is amended by inserting 

11 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

12 SEC. 1417. SORBIC ACID. 

13 Subchapter II of chapter 99 is amended by inserting 

14 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 ’’. 


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1 SEC. 1418. CERTAIN CAPERS. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1419. CERTAIN PEPPERONCINI PREPARED OR PRE5 SERVED OTHERWISE THAN BY VINEGAR OR 

6 ACETIC ACID. 

7 Subchapter II of chapter 99 is amended by inserting 

8 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 ’’. 

9 SEC. 1420. CERTAIN CAPERS. 

10 Subchapter II of chapter 99 is amended by inserting 

11 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 ’’. 


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1 SEC. 1421. CERTAIN PEPPERONCINI PREPARED OR PRE2 SERVED BY VINEGAR OR ACETIC ACID IN 

3 CONCENTRATIONS AT 0.5 PERCENT OR 

4 GREATER. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1422. CERTAIN PEPPERONCINI PREPARED OR PRE8 SERVED OTHERWISE THAN BY VINEGAR OR 

9 ACETIC ACID IN CONCENTRATIONS LESS 

10 THAN 0.5 PERCENT. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 

13 SEC. 1423. CHLORAL. 

14 Subchapter II of chapter 99 is amended by inserting 

15 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 ’’. 

16 SEC. 1424. IMIDACLOPRID TECHNICAL (IMIDACLOPRID). 

17 Subchapter II of chapter 99 is amended by inserting 

18 in numerical sequence the following new heading: 


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‘‘ 9902.10.32 1-[(6-Chloro-3- 

pyrdinyl)methyl]-N-nitro-2- 

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 ’’. 

1 SEC. 1425. TRIADIMEFON. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1426. POLYETHYLENE HE1878. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 9902.10.34 Polyethylene HE1878 (CAS 

No. 25087–34–7), with lbutene as comonomer (provided for in subheading 

3901.20.50) ......................... 3.6% No change No change On or before 

12/31/2009 ’’. 

7 SEC. 1427. THIACLOPRID. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

10 SEC. 1428. PYRIMETHANIL. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1429. FORAMSULFURON. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1430. FENAMIDONE. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 9902.10.38 (5S)–3,5-Dihydro-5- methyl2-(methylthio)- 5-phenyl-3- 

(phenylamino)- 4H-imidazol4-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 ’’. 

7 SEC. 1431. CYCLANILIDE TECHNICAL. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 


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1 SEC. 1432. PARA-BENZOQUINONE. 

2 Subchapter II of chapter 99 is amended by inserting 

3 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

4 SEC. 1433. O-ANISIDINE. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1434. 2,4-XYLIDINE. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1435. CROTONALDEHYDE. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1436. BUTANEDIOIC ACID, DIMETHYL ESTER, POLY2 MER WITH 4-HYDROXY-2,2,6,6,-TETRAMETHYL3 1-PIPERIDINEETHANOL. 

4 Subchapter II of chapter 99 is amended by inserting 

5 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 ’’. 

6 SEC. 1437. MIXTURES OF CAS NOS. 106990-43-6 AND 65447-77- 

7 0. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 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- 

pentamethyl-4-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 ’’. 

10 SEC. 1438. MCPA. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1439. BRONATE ADVANCED. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1440. BROMOXYNIL OCTANOATE TECH. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1441. BROMOXYNIL MEO. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

10 SEC. 1442. HYDRAULIC CONTROL UNITS. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1443. SHIELD ASY-STEERING GEAR. 

2 Subchapter II of chapter 99 is amended by inserting 

3 in numerical sequence the following new heading: 

‘‘ 9902.10.63 Steering gear assemblies for 

single-pinion constant-ratio 

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 ’’. 

4 SEC. 1444. 2,4-DICHLOROANILINE. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1445. 2-ACETYLBUTYROLACTONE. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1446. ALKYLKETONE. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1447. CYFLUTHRIN (BAYTHROID). 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1448. BETA-CYFLUTHRIN. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 9902.10.68 Reaction mixture comprising 

the enantiomeric pair (R)-αcyano-4-fluoro-3- 

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)-αcyano-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 ’’. 

7 SEC. 1449. CYCLOPROPANE-1,1-DICARBOXYLIC ACID, DI8 METHYL ESTER. 

9 Subchapter II of chapter 99 is amended by inserting 

10 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1450. SPIROXAMINE. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1451. SPIROMESIFEN. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1452. 4-CHLOROBENZALDEHYDE. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1453. OXADIAZON. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new heading: 


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‘‘ 9902.10.73 5-tert-butyl-3-(2,4-dichloro5-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 ’’. 

1 SEC. 1454. NAHP. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1455. PHOSPHORUS THIOCHLORIDE. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1456. TRIFLOXYSTROBIN. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 9902.10.76. Methyl (E)-methoxyimino- 

{(E)-α-[1-(α,α,α-trifluorom-tolyl)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 ’’. 

10 SEC. 1457. PHOSPHORIC ACID, LANTHANUM SALT, CERIUM 

11 TERBIUM-DOPED. 

12 Subchapter II of chapter 99 is amended by inserting 

13 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1458. LUTETIUM OXIDE. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1459. ACM. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1460. PERMETHRIN. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1461. THIDIAZURON. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1462. FLUTOLANIL. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1463. RESMETHRIN. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 9902.10.83 [5-(Phenylmethyl)–3- 

furanyl]methyl 2,2-dimethyl3-(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 ’’. 

7 SEC. 1464. CLOTHIANIDIN. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 9902.10.84 (E)–1-(2-Chloro-1,3-thiazol5-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 ’’. 

10 SEC. 1465. CERTAIN MASTER CYLINDER ASSEMBLES. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1466. CERTAIN TRANSAXLES. 

2 Subchapter II of chapter 99 is amended by inserting 

3 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

4 SEC. 1467. CONVERTER ASY. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1468. MODULE AND BRACKET ASY-POWER STEERING. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 


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1 SEC. 1469. UNIT ASY-BATTERY HI VOLT. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1470. CERTAIN ARTICLES OF NATURAL CORK. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1471. GLYOXYLIC ACID. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

10 SEC. 1472. CYCLOPENTANONE. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1473. MESOTRIONE TECHNICAL. 

2 (a) CALENDAR YEAR 2006.—Subchapter II of chap3 ter 99 is amended by inserting in numerical sequence the 

4 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 ’’. 

5 (b) CALENDAR YEAR 2007.— 

6 (1) IN GENERAL.—Heading 9902.11.03, as 

7 added by subsection (a), is amended— 

8 (A) by striking ‘‘6.04%’’ and inserting 

9 ‘‘6.08%’’; and 

10 (B) by striking ‘‘12/31/2006’’ and insert11 ing ‘‘12/31/2007’’. 

12 (2) EFFECTIVE DATE.—The amendments made 

13 by paragraph (1) shall take effect on January 1, 

14 2007. 

15 (c) CALENDAR YEARS 2008 AND 2009.— 

16 (1) IN GENERAL.—Heading 9902.11.03, as 

17 added by subsection (a) and amended by subsection 

18 (b), is further amended— 

19 (A) by striking ‘‘6.08%’’ and inserting 

20 ‘‘6.11%’’; and 

21 (B) by striking ‘‘12/31/2007’’ and insert22 ing ‘‘12/31/2009’’. 


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1 (2) EFFECTIVE DATE.—The amendments made 

2 by paragraph (1) shall take effect on January 1, 

3 2008. 

4 SEC. 1474. MALONIC ACID-DINITRILE 50% NMP. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1475. FORMULATIONS OF NOA 446510. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

10 SEC. 1476. DEMBB DISTILLED-ISO TANK. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 

13 SEC. 1477. METHYLIONONE. 

14 Subchapter II of chapter 99 is amended by inserting 

15 in numerical sequence the following new heading: 


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‘‘ 9902.11.10 3-Methyl-4-(2,6,6- 

trimethylcyclohex-2-enyl)but3-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 ’’. 

1 SEC. 1478. CERTAIN ACRYLIC FIBER TOW. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1479. CERTAIN ACRYLIC FIBER TOW. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 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 ’’. 


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1 SEC. 1480. MKH 6561 ISOCYANATE. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1481. ENDOSULFAN. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 9902.11.14 6,7,8,9,10,10- 

Hexachlorohexahydromethano-2,4,3-benzodioxathiepin3-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 ’’. 

7 SEC. 1482. TETRACONAZOLE. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1483. M-ALCOHOL. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1484. CERTAIN MACHINES FOR USE IN THE ASSEMBLY 

2 OF MOTORCYCLE WHEELS. 

3 Subchapter II of chapter 99 is amended by inserting 

4 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 ’’. 

5 SEC. 1485. DELTAMETHRIN. 

6 Subchapter II of chapter 99 is amended by inserting 

7 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 ’’. 

8 SEC. 1486. PALM FATTY ACID DISTILLATE. 

9 Subchapter II of chapter 99 is amended by inserting 

10 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 ’’. 

11 SEC. 1487. 4-METHOXY-2-METHYLDIPHENYLAMINE. 

12 Subchapter II of chapter 99 is amended by inserting 

13 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 ’’. 


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1 SEC. 1488. 2-METHYLHYDROQUINONE. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1489. 1-FLUORO-2-NITROBENZENE. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

7 SEC. 1490. COSMETIC BAGS WITH A FLEXIBLE OUTER SUR8 FACE OF REINFORCED OR LAMINATED POLY9 VINYL CHLORIDE (PVC). 

10 Subchapter II of chapter 99 is amended by inserting 

11 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 ’’. 


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1 SEC. 1491. MIXTURES OF METHYL 4-IODO-2-[3-(4-METHOXY-6- 

2 METHYL-1,3,5-TRIAZIN-2- 

3 YL)UREIDOSULFONYL]BENZOATE, SODIUM 

4 SALT (IODOSULFURON METHYL, SODIUM 

5 SALT). 

6 Subchapter II of chapter 99 is amended by inserting 

7 in numerical sequence the following new heading: 

‘‘ 9902.11.44 Mixtures of methyl 4-iodo-2- 

[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 ’’. 

8 SEC. 1492. ETHYL 4,5-DIHYDRO-5,5-DIPHENYL-1,2-OXAZOLE9 3-CARBOXYLATE (ISOXADIFEN-ETHYL). 

10 Subchapter II of chapter 99 is amended by inserting 

11 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 ’’. 

12 SEC. 1493. (5-CYCLOPROPYL-4-ISOXAZOLYL)[2- 

13 (METHYLSULFONYL)–4- 

14 (TRIFLUOROMETHYL)PHENYL]METHANONE 

15 (ISOXAFLUTOLE). 

16 Subchapter II of chapter 99 is amended by inserting 

17 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1494. METHYL 2-[(4,6-DIMETHOXYPYRIMIDIN-2- 

2 YLCARBAMOYL)SULFAMOYL]-α3 (METHANESULFONAMIDO)-P-TOLUATE 

4 (MESOSULFURON-METHYL) WHETHER OR 

5 NOT MIXED WITH APPLICATION ADJUVANTS. 

6 Subchapter II of chapter 99 is amended by inserting 

7 in numerical sequence the following new heading: 

‘‘ 9902.11.48 Methyl 2-[(4,6- 

dimethoxypyrimidin-2- 

ylcarbamoyl)sulfamoyl]-α- 

(methanesulfonamido)-ptoluate (Mesosulfuron-methyl) (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 ’’. 

8 SEC. 1495. MIXTURES OF FORAMSULFURON AND 

9 IODOSULFURON-METHYL-SODIUM. 

10 Subchapter II of chapter 99 is amended by inserting 

11 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 ’’. 


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1 SEC. 1496. VULCUREN UPKA 1988. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1497. VULLCANOX 41010 NA/LG. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

7 SEC. 1498. VULKAZON AFS/LG. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1499. P-ANISALDEHYDE. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 

13 SEC. 1500. 1,2-PENTANEDIOL. 

14 Subchapter II of chapter 99 is amended by inserting 

15 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1501. AGRUMEX. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1502. COHEDUR RL. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1503. FORMULATIONS OF PROSULFURON. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 9902.11.64 Mixtures of Prosulfuron (1- 

(4-methoxy-6-methyl-1,3,5- 

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 ’’. 

10 SEC. 1504. LEWATIT. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1505. PARA-CHLOROPHENOL. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1506. CYPERMETHRIN. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1507. ION-EXCHANGE RESIN POWDER. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 


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1 SEC. 1508. ION-EXCHANGE RESIN POWDER. 

2 Subchapter II of chapter 99 is amended by inserting 

3 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

4 SEC. 1509. DESMODUR E 14. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 9902.11.80 1,2,3-Propanetriol, polymer 

with 2,4-diisocyanato-1- 

methylbenzene, 2-ethyl-2- 

(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 ’’. 

7 SEC. 1510. DESMODUR VP LS 2253. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 9902.11.82 Hexane, 1,6-diisocyanato-, 

homopolymer, 3,5-dimethyl1H-pyrazole-blocked (CAS 

No. 163206–31–3) (provided 

for in subheading 

3911.90.90) ......................... Free No change No change On or before 

12/31/2009 ’’. 

10 SEC. 1511. DESMODUR R-E. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1512. WALOCEL MW 3000 PFV. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1513. TSME. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

7 SEC. 1514. WALOCEL VP-M 20660. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1515. XAMA 2. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1516. XAMA 7. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1517. CERTAIN CASES FOR TOYS. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1518. CERTAIN CASES FOR TOYS. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 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 ’’. 


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1 SEC. 1519. ANILINE 2.5-DISULFONIC ACID. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1520. 1,4-BENZENEDICARBOXYLIC ACID, POLYMER 

5 WITH N,N′-BIS(2-AMINOETHYL)–1,2- 

6 ETHANEDIAMINE, CYCLIZED, 

7 METHOSULFATE. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1521. SULFUR BLUE 7. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1522. FORMALDEHYDE, REACTION PRODUCTS WITH 

2 1,4-BENZENEDIOL AND M3 PHENYLENEDIAMINE, SULFURIZED. 

4 Subchapter II of chapter 99 is amended by inserting 

5 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 ’’. 

6 SEC. 1523. ISOCYANATOSULFONYL. 

7 Subchapter II of chapter 99 is amended by inserting 

8 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 ’’. 

9 SEC. 1524. ISOCYANATOSULFONYL. 

10 Subchapter II of chapter 99 is amended by inserting 

11 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 ’’. 

12 SEC. 1525. GEMIFLOXACIN, GEMIFLOXACIN MESYLATE, AND 

13 GEMIFLOXACIN MESYLATE SESQUIHYDRATE. 

14 Subchapter II of chapter 99 is amended by inserting 

15 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1526. BUTRALIN. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1527. SPIRODICLOFEN. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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-en4-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 ’’. 

7 SEC. 1528. PROPAMOCARB HCL (PREVICUR). 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 


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1 SEC. 1529. DESMODUR IL. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1530. CHLOROACETONE. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1531. IPN (ISOPHTHALONITRILE). 

8 (a) CALENDAR YEAR 2006.—Subchapter II of chap9 ter 99 is amended by inserting in numerical sequence the 

10 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 ’’. 

11 (b) CALENDAR YEAR 2007.— 

12 (1) IN GENERAL.—Heading 9902.12.06, as 

13 added by subsection (a), is amended— 

14 (A) by striking ‘‘3.04%’’ and inserting 

15 ‘‘3.23%’’; and 

16 (B) by striking ‘‘On or before 12/31/2006’’ 

17 and inserting ‘‘On or before 12/31/2007’’. 


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1 (2) EFFECTIVE DATE.—The amendments made 

2 by paragraph (1) shall take effect on January 1, 

3 2007. 

4 (c) CALENDAR YEARS 2008 AND 2009.— 

5 (1) IN GENERAL.—Heading 9902.12.06, as 

6 added by subsection (a) and amended by subsection 

7 (b), is further amended— 

8 (A) by striking ‘‘3.23%’’ and inserting 

9 ‘‘3.4%’’; and 

10 (B) by striking ‘‘On or before 12/31/2007’’ 

11 and inserting ‘‘On or before 12/31/2009’’. 

12 (2) EFFECTIVE DATE.—The amendments made 

13 by paragraph (1) shall take effect on January 1, 

14 2008. 

15 SEC. 1532. NOA 446510 TECHNICAL. 

16 Subchapter II of chapter 99 is amended by inserting 

17 in numerical sequence the following new heading: 

‘‘ 9902.12.07 4-Chloro-N-[2-[3-methoxy-4- 

(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 ’’. 

18 SEC. 1533. HEXYTHIAZOX TECHNICAL. 

19 Subchapter II of chapter 99 is amended by inserting 

20 in numerical sequence the following new heading: 


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‘‘ 9902.12.08 trans-5-(4-Chlorophenyl)-Ncyclohexyl-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 ’’. 

1 SEC. 1534. CRELAN (SELF-BLOCKED CYCLOALIPHATIC 

2 POLYURETDIONE). 

3 Subchapter II of chapter 99 is amended by inserting 

4 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 ’’. 

5 SEC. 1535. ASPIRIN. 

6 Subchapter II of chapter 99 is amended by inserting 

7 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 ’’. 

8 SEC. 1536. DESMODUR BL XP 2468. 

9 Subchapter II of chapter 99 is amended by inserting 

10 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 ’’. 


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1 SEC. 1537. DESMODUR RF-E. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1538. DESMODUR HL. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1539. D-MANNOSE. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1540. CERTAIN CAMEL HAIR. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1541. WASTE OF CAMEL HAIR. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1542. CERTAIN CAMEL HAIR. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1543. WOVEN FABRIC OF VICUNA HAIR. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1544. CERTAIN CAMEL HAIR. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 

13 SEC. 1545. NOILS OF CAMEL HAIR. 

14 Subchapter II of chapter 99 is amended by inserting 

15 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1546. CHLOROACETIC ACID, ETHYL ESTER. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1547. CHLOROACETIC ACID, SODIUM SALT. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1548. LOW EXPANSION LABORATORY GLASS. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 9902.12.39 Laboratory, hygienic, or 

pharmaceutical glassware, 

whether or not graduated or 

calibrated, of low expansion 

borosilicate glass or aluminoborosilicate 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 ’’. 

10 SEC. 1549. STOPPERS, LIDS, AND OTHER CLOSURES. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new heading: 


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‘‘ 9902.12.40 Stoppers, lids, and other closures of low expansion 

borosilicate glass or aluminoborosilicate 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 ’’. 

1 SEC. 1550. PIGMENT YELLOW 213. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1551. INDOXACARB. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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] 

oxadiazine-4a (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 ’’. 

7 SEC. 1552. DIMETHYL CARBONATE. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 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 ’’. 


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1 SEC. 1553. 5-CHLORO-1-INDANONE (EK179). 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1554. MIXTURES OF FAMOXADONE AND CYMOXANIL. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1555. DECANEDIOIC ACID, BIS(2,2,6,6-TETRAMETHYL-4- 

8 PIPERIDINYL) ESTER. 

9 Subchapter II of chapter 99 is amended by inserting 

10 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 ’’. 

11 SEC. 1556. ACID BLUE 80. 

12 Subchapter II of chapter 99 is amended by inserting 

13 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 ’’. 


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1 SEC. 1557. PIGMENT BROWN 25. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1558. FORMULATIONS OF AZOXYSTROBIN. 

5 (a) CALENDAR YEAR 2006.—Subchapter II of chap6 ter 99 is amended by inserting in numerical sequence the 

7 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 ’’. 

8 (b) CALENDAR YEAR 2007.— 

9 (1) IN GENERAL.—Heading 9902.12.51, as 

10 added by subsection (a), is amended— 

11 (A) by striking ‘‘6.14%’’ and inserting 

12 ‘‘6.15%’’; and 

13 (B) by striking ‘‘On or before 12/31/2006’’ 

14 and inserting ‘‘On or before 12/31/2007’’. 

15 (2) EFFECTIVE DATE.—The amendments made 

16 by paragraph (1) shall take effect on January 1, 

17 2007. 

18 (c) CALENDAR YEARS 2008 AND 2009.— 


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1 (1) IN GENERAL.—Heading 9902.12.51, as 

2 added by subsection (a) and amended by subsection 

3 (b), is further amended— 

4 (A) by striking ‘‘6.15%’’ and inserting 

5 ‘‘6.17%’’; and 

6 (B) by striking ‘‘On or before 12/31/2007’’ 

7 and inserting ‘‘On or before 12/31/2009’’. 

8 (2) EFFECTIVE DATE.—The amendments made 

9 by paragraph (1) shall take effect on January 1, 

10 2008. 

11 SEC. 1559. FORMULATIONS OF PINOXADEN/CLOQUINTOCET. 

12 (a) CALENDAR YEARS 2006 AND 2007.—Subchapter 

13 II of chapter 99 is amended by inserting in numerical se14 quence the following new heading: 

‘‘ 9902.12.52 Mixtures of 8(2,6-diethyl-ptolyl)–1,2,4,5-tetrahydro-7- 

oxo-7H-pyrazolo[[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 ’’. 

15 (b) CALENDAR YEARS 2008 AND 2009.— 

16 (1) IN GENERAL.—Heading 9902.12.52, as 

17 added by subsection (a), is further amended— 

18 (A) by striking ‘‘Free’’ and inserting 

19 ‘‘1.74%’’; and 


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1 (B) by striking ‘‘On or before 12/31/2007’’ 

2 and inserting ‘‘On or before 12/31/2009’’. 

3 (2) EFFECTIVE DATE.—The amendments made 

4 by paragraph (1) shall take effect on January 1, 

5 2008. 

6 SEC. 1560. MIXTURES OF DIFENOCONAZOLE/MEFENOXAM. 

7 Subchapter II of chapter 99 is amended by inserting 

8 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 ’’. 

9 SEC. 1561. FLUDIOXINIL TECHNICAL. 

10 Subchapter II of chapter 99 is amended by inserting 

11 in numerical sequence the following new heading: 

‘‘ 9902.12.54 1H-Pyrrole-3-carbonitrile, 4- 

(2,2-difluoro-1,3-benzodioxol4-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 ’’. 

12 SEC. 1562. MIXTURES OF CLODINAFOP-PROPARGYL. 

13 Subchapter II of chapter 99 is amended by inserting 

14 in numerical sequence the following new heading: 


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‘‘ 9902.12.55 Mixtures of propionic acid, 

2-(4-((5-chloro-3-fluoro-2- 

pyridynyl)oxy)phenoxy-2- 

propynyl ester, (clodinafoppropargyl) (CAS No. 

105512–06–9) (provided for 

in subheading 3808.30.15) .. 1.7% No change No change On or before 

12/31/2009 ’’. 

1 SEC. 1563. AVERMECTIN B, 1,4′′-DEOXY-4′′-METHYLAMINO-, 

2 (4′′R)-, BENZOATE. 

3 Subchapter II of chapter 99 is amended by inserting 

4 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 ’’. 

5 SEC. 1564. CLOQUINTOCET-MEXYL. 

6 Subchapter II of chapter 99 is amended by inserting 

7 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

8 SEC. 1565. METALAXYL-M TECHNICAL. 

9 Subchapter II of chapter 99 is amended by inserting 

10 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 ’’. 


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1 SEC. 1566. CYPROCONAZOLE TECHNICAL. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1567. PINOXADEN TECHNICAL. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1568. MIXTURES OF TRALKOXYDIM. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1569. CERTAIN CHEMICALS. 

11 Subchapter II of chapter 99 is amended by inserting 

12 in numerical sequence the following new headings: 


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‘‘ 9902.12.72 Mixtures of zinc 

dialkyldithiophosphate (CAS 

No. 6990–43–8) with an 

elastomer binder of ethylenepropylene-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-propylenediene 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-dichlorophenyl)-N,N-dimethylurea 

(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-propylenediene 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 -12H-dibenzo 

[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 (oxy1,2-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 

9902.12.79 1,3-Dihydro-3,3-bis (4-hydroxy-m-tolyl)-2H-indol-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 ’’. 


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1 SEC. 1570. MIXTURES OF ( ≤ )–(CIS AND TRANS)–1-[[2-(2,4- 

2 DICHLOROPHENYL)–4-PROPYL-1,3-DIOXOLAN3 2-YL]-METHYL]-1H-1,2,4-TRIAZOLE. 

4 (a) IN GENERAL.—Subchapter II of chapter 99 is 

5 amended by inserting in numerical sequence the following 

6 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 ’’. 

7 (b) CONFORMING AMENDMENT.—Subchapter II of 

8 chapter 99 is amended by striking heading 9902.32.04. 

9 SEC. 1571. PARAQUAT DICHLORIDE. 

10 (a) IN GENERAL.—Subchapter II of chapter 99 is 

11 amended by inserting in numerical sequence the following 

12 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 ’’. 

13 (b) CALENDAR YEAR 2007.— 

14 (1) IN GENERAL.—Heading 9902.13.06, as 

15 added by subsection (a), is amended— 

16 (A) by striking ‘‘3.59%’’ and inserting 

17 ‘‘4.02%’’; and 


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1 (B) by striking ‘‘On or before 12/31/2006’’ 

2 and inserting ‘‘On or before 12/31/2007’’. 

3 (2) EFFECTIVE DATE.—The amendments made 

4 by paragraph (1) shall take effect on January 1, 

5 2007. 

6 (c) CALENDAR YEARS 2008 AND 2009.— 

7 (1) IN GENERAL.—Heading 9902.13.06, as 

8 added by subsection (a) and amended by subsection 

9 (b), is further amended— 

10 (A) by striking ‘‘4.02%’’ and inserting 

11 ‘‘4.41%’’; and 

12 (B) by striking ‘‘On or before 12/31/2007’’ 

13 and inserting ‘‘On or before 12/31/2009’’. 

14 (2) EFFECTIVE DATE.—The amendments made 

15 by paragraph (1) shall take effect on January 1, 

16 2008. 

17 SEC. 1572. CERTAIN BASKETBALLS. 

18 Subchapter II of chapter 99 is amended by inserting 

19 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

20 SEC. 1573. CERTAIN LEATHER BASKETBALLS. 

21 Subchapter II of chapter 99 is amended by inserting 

22 in numerical sequence the following new heading: 


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‘‘ 9902.13.08 Leather basketballs (provided for in subheading 

9506.62.80) ......................... Free No change No change On or before 

12/31/2009 ’’. 

1 SEC. 1574. CERTAIN RUBBER BASKETBALLS. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1575. CERTAIN VOLLEYBALLS. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1576. 4-CHLORO-3-[[3-(4-METHOXYPHENYL)–1,3- 

8 DIOXOPROPYL]-AMINO]-DODECYL ESTER. 

9 Subchapter II of chapter 99 is amended by inserting 

10 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 ’’. 

11 SEC. 1577. LINURON. 

12 Subchapter II of chapter 99 is amended by inserting 

13 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 ’’. 


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1 SEC. 1578. N,N-DIMETHYLPIPERIDINIUM CHLORIDE 

2 (MEPIQUAT CHLORIDE). 

3 Subchapter II of chapter 99 is amended by inserting 

4 in numerical sequence the following new heading: 

‘‘ 9902.13.25 N,N-Dimethylpiperidinium 

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 ’’. 

5 SEC. 1579. DIURON. 

6 Subchapter II of chapter 99 is amended by inserting 

7 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 ’’. 

8 SEC. 1580. FORMULATED PRODUCT KROVAR I DF. 

9 Subchapter II of chapter 99 is amended by inserting 

10 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 ’’. 

11 SEC. 1581. TRIASULFURON TECHNICAL. 

12 Subchapter II of chapter 99 is amended by inserting 

13 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1582. BRODIFACOUM TECHNICAL. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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-hydroxy-2H-1-benzopyran2-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 ’’. 

4 SEC. 1583. PYMETROZINE TECHNICAL. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

7 SEC. 1584. FORMULATIONS OF THIAMETHOXAM, 

8 DIFENOCONAZOLE, FLUDIOXINIL, AND 

9 MEFENOXAM. 

10 Subchapter II of chapter 99 is amended by inserting 

11 in numerical sequence the following new heading: 


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‘‘ 9902.13.31 Formulations of 3-[(2- 

chloro-5- 

thiazolyl)methyl]tetrahydro5-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); 

1H-Pyrrole-3-carbonitrile, 4- 

(2,2-difluoro-1,3-benzodioxol4-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 ’’. 

1 SEC. 1585. TRIFLOXYSULFURON-SODIUM TECHNICAL. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1586. 2 BENZYLTHIO-3-ETHYL SULFONYL PYRIDINE. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1587. 2-AMINO-4-METHOXY-6-METHYL-1,3,5-TRIAZINE. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1588. FORMULATED PRODUCTS CONTAINING MIX2 TURES OF THE ACTIVE INGREDIENT 2- 

3 CHLORO-N-[[(4-METHOXY-6-METHYL-1,3,5- 

4 TRIAZIN-2YL) AMINO]CARBONYL] 

5 BENZENESULFONAMIDE AND APPLICATION 

6 ADJUVANTS. 

7 Subchapter II of chapter 99 is amended by inserting 

8 in numerical sequence the following new heading: 

‘‘ 9902.13.43 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 

(Chlorosulfuon) (CAS No. 

64902–72–3) (provided for 

in subheading 3808.30.15) .. Free No change No change On or before 

12/31/2009 ’’. 

9 SEC. 1589. 2-METHYL-4-METHOXY-6-METHYLAMINO-1,3,5-TRI10 AZINE. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1590. MIXTURES OF SODIUM-2-CHLORO-6-[(4,6 

2 DIMETHOXYPYRIMIDIN-2-YL)THIO]BENZOATE 

3 AND APPLICATION ADJUVANTS 

4 (PYRITHIOBAC-SODIUM). 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 9902.13.45 Mixtures of sodium-2-chloro6-[(4,6 dimethoxypyrimidin2-yl)thio]benzoate (CAS No. 

123343–16–8) and application adjuvants (Pyrithiobacsodium) (provided for in 

subheading 3808.30.15) ...... 3.5% No change No change On or before 

12/31/2009 ’’. 

7 SEC. 1591. CERTAIN DECORATIVE PLATES, DECORATIVE 

8 SCULPTURES, DECORATIVE PLAQUES, AND 

9 ARCHITECTURAL MINIATURES. 

10 Subchapter II of chapter 99 is amended by inserting 

11 in numerical sequence the following new heading: 

‘‘ 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 12/31/2009 ’’. 

12 SEC. 1592. CERTAIN MUSIC BOXES. 

13 Subchapter II of chapter 99 is amended by inserting 

14 in numerical sequence the following new heading: 


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‘‘ 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 ’’. 

1 SEC. 1593. 2-METHYL-4-CHLOROPHENOXYACETIC ACID. 

2 Subchapter II of chapter 99 is amended by inserting 

3 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 ’’. 

4 SEC. 1594. PHENMEDIPHAM. 

5 Subchapter II of chapter 99 is amended by inserting 

6 in numerical sequence the following new heading: 

‘‘ 9902.13.76 3- 

Methylcarbonylaminophenyl3-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 ’’. 

7 SEC. 1595. DESMEDIPHAM. 

8 Subchapter II of chapter 99 is amended by inserting 

9 in numerical sequence the following new heading: 

‘‘ 9902.13.77 3- 

EthoxycarbonylaminophenylN-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 ’’. 


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1 SEC. 1596. CERTAIN FOOTWEAR WITH OPEN TOES OR 

2 HEELS. 

3 Subchapter II of chapter 99 is amended by inserting 

4 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 ’’. 

5 SEC. 1597. CERTAIN WORK FOOTWEAR. 

6 Subchapter II of chapter 99 is amended by inserting 

7 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 ’’. 

8 SEC. 1598. CERTAIN REFRACTING AND REFLECTING TELE9 SCOPES. 

10 Subchapter II of chapter 99 is amended by inserting 

11 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 ’’. 


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1 SEC. 1600. CERTAIN WORK FOOTWEAR. 

2 Subchapter II of chapter 99 is amended by inserting 

3 in numerical sequence the following new heading: 

‘‘ 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 ’’. 

4 SEC. 1601. CERTAIN FOOTWEAR FOR MEN. 

5 Subchapter II of chapter 99 is amended by inserting 

6 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 ’’. 

7 SEC. 1602. CERTAIN RUBBER OR PLASTIC FOOTWEAR. 

8 Subchapter II of chapter 99 is amended by inserting 

9 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 ’’. 

10 SEC. 1604. ZINC DIMETHYLDITHIOCARBAMATE. 

11 Subchapter II of chapter 99 is amended by inserting 

12 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 ’’. 


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1 SEC. 1605. CERTAIN LIQUID CRYSTAL DEVICE (LCD) PANEL 

2 ASSEMBLIES. 

3 Subchapter II of chapter 99 is amended by inserting 

4 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 ’’. 

5 SEC. 1606. CERTAIN WATERTUBE BOILERS AND REACTOR 

6 VESSEL HEADS. 

7 (a) WATERTUBE BOILERS.—Subchapter II of chap8 ter 99 is amended by inserting in numerical sequence the 

9 following new heading: 

‘‘ 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 ’’. 

10 (b) REACTOR VESSEL HEADS.—Subchapter II of 

11 chapter 99 is amended by inserting in numerical sequence 

12 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 ’’. 


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1 CHAPTER 2—EXISTING DUTY 

2 SUSPENSIONS AND REDUCTIONS 

3 SEC. 1611. EXTENSION OF CERTAIN EXISTING DUTY SUS4 PENSIONS AND REDUCTIONS. 

5 (a) EXISTING DUTY SUSPENSIONS AND REDUC6 TION.—Each of the following headings is amended by 

7 striking the date in the effective period column and insert8 ing ‘‘12/31/2009’’: 

9 (1) Heading 9902.39.08 (relating to 

10 ORGASOL polyamide powders). 

11 (2) Heading 9902.30.90 (relating to 3-amino12 2′-(sulfato-ethyl sulfonyl) ethyl benzamide). 

13 (3) Heading 9902.32.91 (relating to MUB 738 

14 INT). 

15 (4) Heading 9902.30.31 (relating to 5-amino16 N-(2-hydroxyethyl)–2,3-xylenesulfonamide). 

17 (5) Heading 9902.01.83 (relating to Ethoprop). 

18 (6) Heading 9902.01.73 (relating to Fosetyl19 Al). 

20 (7) Heading 9902.03.38 (relating to Flufenacet 

21 (FOE hydroxy)). 

22 (8) Heading 9902.02.02 (relating to 

23 Methidathion Technical). 

24 (9) Heading 9902.02.12 (relating to 

25 difenoconazole). 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 (10) Heading 9902.02.09 (relating to Lambda2 Cyhalothrin). 

3 (11) Heading 9902.02.08 (relating to 

4 cyprodinil). 

5 (12) Heading 9902.02.04 (relating to Wakil 

6 XL). 

7 (13) Heading 9902.02.06 (relating to 

8 Azoxystrobin Technical). 

9 (14) Heading 9902.02.05 (relating to 

10 mucochloric acid). 

11 (15) Heading 9902.03.06 (relating to high te12 nacity multiple (folded) or cabled yarn of viscose 

13 rayon). 

14 (16) Heading 9902.05.07 (relating to high te15 nacity single yarn of viscose rayon with a decitex 

16 equal to or greater than 1,000). 

17 (17) Heading 9902.38.31 (relating to Vulkalent 

18 E/C). 

19 (18) Heading 9902.01.71 (relating to 

20 hexanedioic acid, polymer with 1,3- 

21 benzenedimethanamine). 

22 (19) Heading 9902.29.93 (relating to 

23 Trinexapac-ethyl). 

24 (20) Heading 9902.38.52 (relating to formula25 tions of triasulfuron). 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 (21) Heading 9902.39.30 (relating to certain 

2 ion-exchange resins). 

3 (22) Heading 9902.32.82 (relating to 2,6 

4 Dichlorotoluene). 

5 (23) Heading 9902.02.33 (relating to Ion ex6 change resin comprising a compolymer of styrene 

7 crosslinked with ethenylbenzene, aminophosphonic 

8 acid sodium form). 

9 (24) Heading 9902.02.32 (relating toIon ex10 change resin comprising a copolymer of styrene 

11 crosslinked with divinylbenzene, iminodiacetic acid, 

12 sodium form)). 

13 (25) Heading 9902.01.78 (relating to certain 

14 bags for toys). 

15 (26) Heading 9902.01.81 (relating to cases for 

16 certain children’s products). 

17 (27) Heading 9902.01.80 (relating to certain 

18 children’s products). 

19 (28) Heading 9902.29.34 (relating to certain 

20 light absorbing photo dyes). 

21 (29) Heading 9902.85.04 (relating to certain 

22 R-core transformers). 

23 (30) Heading 9902.03.04 (relating to reduced 

24 vat blue 43). 


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•HR 4 PCS 

1 (31) Heading 9902.03.03 (relating to sulfur 

2 black 1). 

3 (32) Heading 9902.01.22 (relating to DMSIP). 

4 (33) Heading 9902.29.35 (relating to 2-(Me5 thoxycarbonyl)benzylsulfonamide). 

6 (34) Heading 9902.02.52 (relating to 

7 Imidacloprid pesticides). 

8 (35) Heading 9902.38.15 (relating to Baytron 

9 C-R). 

10 (36) Heading 9902.29.87 (relating to 3,4- 

11 Ethylenedioxythiophene). 

12 (37) Heading 9902.01.90 (relating to certain 

13 filament yarns). 

14 (38) Heading 9902.01.91 (relating to certain 

15 filament yarns). 

16 (39) Heading 9902.71.08 (relating to certain 

17 semi-manufactured forms of gold). 

18 (40) Heading 9902.04.10 (relating to Crotonic 

19 Acid). 

20 (41) Heading 9902.04.09 (relating to 3,6,9- 

21 Trioxaundecanedioic acid). 

22 (42) Heading 9902.02.51 (relating to benzoic 

23 acid, 2-amino-4-[[(2,5- 

24 dichlorophenyl)amino]carbonyl]-, methyl ester). 


ccoleman on PROD1PC71 with BILLS
978 

•HR 4 PCS 

1 (43) Heading 9902.32.73 (relating to Solvent 

2 blue 124). 

3 (44) Heading 9902.32.55 (relating to Methyl 

4 thioglycolate (MTG)). 

5 (45) Heading 9902.01.48 (relating to Ethyl 

6 pyruvate). 

7 (46) Heading 9902.04.11 (relating to 1,3- 

8 Benzenedicarboxamide, N, N′-Bis (2,2,6,6- 

9 tetramethyl-4-piperidinyl)-). 

10 (47) Heading 9902.04.07 (relating to reaction 

11 products of phosphorus trichloride with 1,1′-biphenyl 

12 and 2,4-bis(1,1-dimethylethyl)phenol). 

13 (48) Heading 9902.04.05 (relating to prepara14 tions based on ethanediamide, N-(2-ethoxyphenyl)- 

15 N′-(4-isodecylphenyl)-). 

16 (49) Heading 9902.04.06 (relating to 1-Acetyl17 4-(3-dodecyl-2,5-dioxo-1-pyrrolidinyl)–2,2,6,6- 

18 tetramethylpiperidine). 

19 (50) Heading 9902.04.12 (relating to 3- 

20 Dodecyl-1-(2,2,6,6-tetramethyl-4-piperidinyl)–2,5- 

21 pyrrolidinedione). 

22 (51) Heading 9902.29.70 (relating to 

23 Tetraacetylethylenediamine). 

24 (52) Heading 9902.34.01 (relating to sodium 

25 petroleum sulfonate). 


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•HR 4 PCS 

1 (53) Heading 9902.02.75 (relating to esters 

2 and sodium esters of parahydroxybenzoic acid). 

3 (54) Heading 9902.30.16 (relating to Diclofop 

4 methyl). 

5 (55) Heading 9902.33.61 (relating to ((3- 

6 ((Dimethylamino)carbonyl)–2-pyridinyl)sulfonyl) car7 bamic acid, phenyl ester). 

8 (56) Heading 9902.01.45 (relating to 

9 Esfenvalerate). 

10 (57) Heading 9902.05.01 (relating to Methyl 2- 

11 [[[[[4-(dimethylamino)–6- (2,2,2-trifluoroethoxy)- 

12 1,3,5-triazin-2-yl]-amino]carbonyl]amino]sulfonyl]-3- 

13 methylbenzoate and application adjuvants). 

14 (58) Heading 9902.01.44 (relating to Benzyl 

15 carbazate). 

16 (59) Heading 9902.05.14 (relating to 

17 Pyromellitic Dianhydride). 

18 (60) Heading 9902.05.13 (relating to 4,4’- 

19 Oxydiphthalic Anhydride). 

20 (61) Heading 9902.05.12 (relating to 4,4’- 

21 Oxydianiline). 

22 (62) Heading 9902.05.11 (relating to 3,3’,4,4’- 

23 Biphenyltetracarboxylic Dianhydride). 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 (63) Heading 9902.29.80 (relating to 1-[[2- 

2 (2,4- dichlorophenyl)–4-propyl-1,3-dioxolan-2-yl]- 

3 methyl]-1H-1,2,4-triazole). 

4 (64) Heading 9902.05.19 (relating to 

5 ethofumesate). 

6 (65) Heading 9902.02.60 (relating to Nemacur 

7 VL). 

8 (66) Heading 9902.03.77 (relating to 

9 thiophanate methyl). 

10 (67) Heading 9902.84.14 (relating to ceiling 

11 fans). 

12 (b) OTHER MODIFICATIONS.— 

13 (1) 2-CHLOROBENZYL CHLORIDE.—Heading 

14 9902.01.56 is amended— 

15 (A) by striking ‘‘2903.69.70’’ and inserting 

16 ‘‘2903.69.80’’; and 

17 (B) by striking ‘‘12/31/2006’’ and insert18 ing ‘‘12/31/2009’’. 

19 (2) TRIETHYLENE GLYCOL BIS[3-(3-TERT20 BUTYL-4-HYDROXY-5-METHYLPHENYL)PROPIONATE]

21 .—Heading 9902.01.88 is amended— 

22 (A) by striking ‘‘Free’’ and inserting 

23 ‘‘4.1%’’; and 

24 (B) by striking ‘‘12/31/2006’’ and insert25 ing ‘‘12/31/2009’’. 


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1 (3) FORMULATIONS OF TRIASULFURON AND

2 DICAMBA.—Heading 9902.38.21 is amended— 

3 (A) in the article description column— 

4 (i) by inserting ‘‘(Triasulfuron)’’ be5 fore ‘‘(CAS No. 82097-50-5)’’; and 

6 (ii) by inserting ‘‘(Dicamba)’’ before 

7 ‘‘(CAS No. 1918-00-9)’’; and 

8 (B) by striking ‘‘12/31/2003’’ and insert9 ing ‘‘12/31/2009’’. 

10 (4) 11-AMINOUNDECANOIC ACID.—Heading 

11 9902.32.49 is amended— 

12 (A) by striking ‘‘Free’’ and inserting 

13 ‘‘2.3%’’; and 

14 (B) by striking ‘‘12/31/2006’’ and insert15 ing ‘‘12/31/2009’’. 

16 (5) PHBA.—Heading 9902.29.03 is amend17 ed— 

18 (A) by striking ‘‘Free’’ and inserting 

19 ‘‘3.1%’’; and 

20 (B) by striking ‘‘12/31/2006’’ and insert21 ing ‘‘12/31/2009’’. 

22 (6) ACETAMIPRID TECHNICAL.—Heading 

23 9902.03.92 is amended— 

24 (A) by striking ‘‘Free’’ and inserting 

25 ‘‘2.5%’’; and 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 (B) by striking ‘‘12/31/2006’’ and insert2 ing ‘‘12/31/2009’’. 

3 (7) BAYTRON AND BAYTRON P.—Heading 

4 9902.39.15 is amended— 

5 (A) by inserting ‘‘, whether or not con6 taining binder resin and organic solvent’’ before 

7 ‘‘(CAS No.’’; and 

8 (B) by striking ‘‘12/31/2006’’ and insert9 ing ‘‘12/31/2009’’. 

10 (8) IPRODIONE.—Heading 9902.01.51 is 

11 amended— 

12 (A) by striking ‘‘4.1%’’ and inserting 

13 ‘‘2.0%’’; and 

14 (B) by striking ‘‘12/31/2006’’ and insert15 ing ‘‘12/31/2009’’. 

16 (9) ETHANEDIAMIDE, N-(2-ETHOXYPHENYL)-N′- 

17 (2-ETHYLPHENYL)-).—Heading 9902.04.13 is 

18 amended— 

19 (A) by striking ‘‘2924.29.76’’ and inserting 

20 ‘‘2924.29.71’’; and 

21 (B) by striking ‘‘12/31/2006’’ and insert22 ing ‘‘12/31/2009’’. 

23 (10) THIAMETHOXAM TECHNICAL.—Heading 

24 9902.03.11 is amended— 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 (A) by striking ‘‘3.2%’’ and inserting 

2 ‘‘3.0%’’; and 

3 (B) by striking ‘‘12/31/2006’’ and insert4 ing ‘‘12/31/2009’’. 

5 (11) 1,3-BIS(4-AMINOPHENOXY)BENZENE

6 (RODA).—Heading 9902.05.15 is amended— 

7 (A) by inserting ‘‘(RODA)’’ after ‘‘ben8 zene’’; and 

9 (B) by striking ‘‘12/31/2006’’ and insert10 ing ‘‘12/31/2009’’. 

11 (12) MIXTURES OF N-[[(4,6- 

12 DIMETHOXYPYRIMIDIN-2-YL)AMINO]CARBONYL]-3- 

13 (ETHYLSULFONYL)–2-PYRIDINESULFONAMIDE AND

14 APPLICATION ADJUVANTS.—Heading 9902.33.60 is 

15 amended— 

16 (A) by striking the article description and 

17 inserting the following: ‘‘Mixtures of N-[[(4,6- 

18 dimethoxypyrimidin-2-yl)amino]carbonyl]-3- 

19 (ethylsulfonyl)–2-pyridinesulfonamide and appli20 cation adjuvants (CAS No. 122931–48–0) (pro21 vided for in subheading 3808.30.15)’’; and 

22 (B) by striking ‘‘12/31/2003’’ and insert23 ing ‘‘12/31/2009’’. 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 Subtitle B—Other Tariff Provisions 

2 CHAPTER 1—LIQUIDATION OR 

3 RELIQUIDATION OF CERTAIN ENTRIES 

4 SEC. 1621. CERTAIN TRAMWAY CARS AND ASSOCIATED 

5 SPARE PARTS. 

6 (a) IN GENERAL.—The Commissioner of the Bureau 

7 of Customs and Border Protection of the Department of 

8 Homeland Security shall admit free of duty 3 tramway 

9 cars (provided for in subheading 8603.10.00 of the Har10 monized Tariff Schedule of the United States) manufac11 tured in Ostrava, Czech Republic, for the use by the city 

12 of Portland, Oregon, and imported pursuant to a contract 

13 with the city of Portland, Oregon, and associated spare 

14 parts for such tramway cars (provided for in applicable 

15 subheadings of heading 8607 or other headings of the 

16 Harmonized Tariff Schedule of the United States) im17 ported pursuant to such contract, the foregoing to be en18 tered into the customs territory of the United States by 

19 not later than December 31, 2006. 

20 (b) RELIQUIDATION; REFUND OF AMOUNTS

21 OWED.—If the liquidation of the entry of any of the tram22 way cars or associated spare parts described in subsection 

23 (a) becomes final before the date of the enactment of this 

24 Act, the Commissioner of the Bureau of Customs and BorVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00984 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

1 der Protection, notwithstanding any other provision of 

2 law, shall— 

3 (1) within 15 days after such date, reliquidate 

4 the entry in accordance with the provisions of this 

5 section; and 

6 (2) at the time of such reliquidation, make the 

7 appropriate refund of any duty paid with respect to 

8 the entry. 

9 SEC. 1622. RELIQUIDATION OF CERTAIN ENTRIES OF CAN10 DLES. 

11 (a) RELIQUIDATION OF ENTRIES.—Notwithstanding 

12 sections 514 and 520 of the Tariff Act of 1930 (19 U.S.C. 

13 1514 and 1520) or any other provision of law, the Bureau 

14 of Customs and Border Protection shall, not later than 

15 90 days after the date of the enactment of this Act— 

16 (1) reliquidate the entries listed in subsection 

17 (b) without assessment of antidumping duties or in18 terest; and 

19 (2) refund any antidumping duties and interest 

20 which were previously paid on such entries. 

21 (b) AFFECTED ENTRIES.—The entries referred to in 

22 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 


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Entry number Date of entry Port 

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 

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 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

Entry number Date of entry Port 

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 

1 SEC. 1623. CERTAIN ENTRIES OF ROLLER CHAIN. 

2 (a) LIQUIDATION OR RELIQUIDATION OF ENTRIES.— 

3 Notwithstanding sections 514 and 520 of the Tariff Act 

4 of 1930 (19 U.S.C. 1514 and 1520) or any other provision 

5 of law, the Bureau of Customs and Border Protection 

6 shall, not later than 90 days after the date of enactment 

7 of this Act, liquidate or reliquidate the entries listed in 

8 subsection (b) without assessment of interest and shall re9 fund any interest which was previously paid. 

10 (b) AFFECTED ENTRIES.—The entries referred to in 

11 subsections (a) and (b) are the following: 


ccoleman on PROD1PC71 with BILLS
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•HR 4 PCS 

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 

1 SEC. 1624. CERTAIN ENTRIES OF SOUNDSPA CLOCK RA2 DIOS. 

3 (a) IN GENERAL.—Notwithstanding section 514 of 

4 the Tariff Act of 1930 (19 U.S.C. 1514) or any other pro5 vision of law, the Bureau of Customs and Border Protec6 tion shall, not later than 90 days after the date of the 

7 enactment of this Act— 

8 (1) reliquidate each entry described in sub9 section (c) containing any merchandise which, on the 


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1 date of original liquidation, was classified under sub2 heading 8527.19.50 of the Harmonized Tariff 

3 Schedule of the United States; and 

4 (2) make such reliquidation at the rate of duty 

5 that would have been applicable to such merchandise 

6 if the merchandise had been liquidated under sub7 heading 8527.19.10 of such Schedule on the date of 

8 entry of the merchandise. 

9 (b) REFUND OF AMOUNTS OWED.—Any amounts 

10 owed by the United States under subsection (a) shall be 

11 refunded with interest. 

12 (c) AFFECTED ENTRIES.—The entries referred to in 

13 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 


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Entry number 

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 

1 CHAPTER 2—MISCELLANEOUS 

2 PROVISIONS 

3 SEC. 1631. VESSEL REPAIR DUTIES. 

4 (a) EXEMPTION.—Section 466(h) of the Tariff Act 

5 of 1930 (19 U.S.C. 1466(h)) is amended by striking para6 graph (4) and inserting the following: 

7 ‘‘(4) the cost of equipment, repair parts, and 

8 materials that are installed on a vessel documented 

9 under the laws of the United States and engaged in 

10 the foreign or coasting trade, if the installation is 

11 done by members of the regular crew of such vessel 

12 while the vessel is on the high seas, in foreign wa13 ters, or in a foreign port, and does not involve for14 eign shipyard repairs by foreign labor.’’. 

15 (b) AMENDMENT TO HTS.—The U.S. Notes to sub16 chapter XVIII of chapter 98 of the Harmonized Tariff 


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1 Schedule of the United States are amended by amending 

2 U.S. Note 2 to read as follows: 

3 ‘‘2. Notwithstanding the provisions of subheadings 

4 9818.00.03 through 9818.00.07, no duty shall apply to 

5 the cost of equipment, repair parts, and materials that are 

6 installed in a vessel documented under the laws of the 

7 United States and engaged in the foreign or coasting 

8 trade, if the installation is done by members of the regular 

9 crew of such vessel while the vessel is on the high seas, 

10 in foreign waters, or in a foreign port and does not involve 

11 foreign shipyard repairs by foreign labor. Declaration and 

12 entry shall not be required with respect to such installa13 tion, equipment, parts, and materials.’’. 

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

15 this section apply to vessel equipment, repair parts, and 

16 materials installed on or after April 25, 2001. 

17 SEC. 1632. SUSPENSION OF NEW SHIPPER REVIEW PROVI18 SION. 

19 (a) SUSPENSION OF THE AVAILABILITY OF BONDS

20 TO NEW SHIPPERS.—Clause (iii) of section 751(a)(2)(B) 

21 of the Tariff Act of 1930 (19 U.S.C. 1675(a)(2)(B)(iii)) 

22 shall not be effective during the period beginning on April 

23 1, 2006, and ending on June 30, 2009. 

24 (b) REPORT ON THE IMPACT OF THE SUSPENSION.— 

25 Not later than December 31, 2008, the Secretary of the 


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1 Treasury, in consultation with the Secretary of Commerce, 

2 the United States Trade Representative, and the Sec3 retary of Homeland Security, shall submit to the Com4 mittee on Ways and Means of the House of Representa5 tives and the Committee on Finance of the Senate a report 

6 containing— 

7 (1) recommendations on whether the suspension 

8 of section 751(a)(2)(B)(iii) of the Tariff Act of 1930 

9 should be extended beyond the date provided in sub10 section (a); and 

11 (2) an assessment of the effectiveness of any 

12 administrative measure that was implemented to ad13 dress the difficulties that necessitated the suspension 

14 under subsection (a), including— 

15 (A) any problem in the collection of anti16 dumping duties on imports from new shippers; 

17 and 

18 (B) any burden imposed on legitimate 

19 trade and commerce by the suspension of bonds 

20 to new shippers. 

21 (c) REPORT ON COLLECTION PROBLEMS AND ANAL22 YSIS OF PROPOSED SOLUTIONS.— 

23 (1) REPORT.—Not later than 180 days after 

24 the date of the enactment of this Act, the Secretary 

25 of the Treasury, in consultation with the Secretary 


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1 of Homeland Security and the Secretary of Com2 merce, shall submit to the Committee on Ways and 

3 Means of the House of Representatives and the 

4 Committee on Finance of the Senate a report de5 scribing— 

6 (A) any major problem experienced in the 

7 collection of duties during the 4 most recent fis8 cal years for which data are available, including 

9 any fraudulent activity intended to avoid pay10 ment of duties; and 

11 (B) an estimate of the total amount of du12 ties that were uncollected during the most re13 cent fiscal year for which data are available, in14 cluding, with respect to each product, a descrip15 tion of why the duties were uncollected. 

16 (2) RECOMMENDATIONS.—The report shall in17 clude— 

18 (A) recommendations on any additional ac19 tion needed to address problems related to the 

20 collection of duties; and 

21 (B) for each recommendation— 

22 (i) an analysis of how the rec23 ommendation would address the specific 

24 problem; and 


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1 (ii) an assessment of the impact that 

2 implementing the recommendation would 

3 have on international trade and commerce 

4 (including any additional costs imposed on 

5 United States businesses). 

6 SEC. 1633. EXTENSION AND MODIFICATION OF DUTY SUS7 PENSION ON WOOL PRODUCTS; WOOL RE8 SEARCH FUND; WOOL DUTY REFUNDS. 

9 (a) EXTENSION OF TEMPORARY DUTY REDUC10 TIONS.—Each of the following headings of the Har11 monized Tariff Schedule of the United States is amended 

12 by striking the date in the effective period column and 

13 inserting ‘‘12/31/2009’’: 

14 (1) Heading 9902.51.11 (relating to fabrics of 

15 worsted wool). 

16 (2) Heading 9902.51.13 (relating to yarn of 

17 combed wool). 

18 (3) Heading 9902.51.14 (relating to wool fiber, 

19 waste, garnetted stock, combed wool, or wool top). 

20 (4) Heading 9902.51.15 (relating to fabrics of 

21 combed wool). 

22 (5) Heading 9902.51.16 (relating to fabrics of 

23 combed wool). 

24 (b) EXTENSION OF DUTY REFUNDS AND WOOL RE25 SEARCH TRUST FUND.— 


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1 (1) IN GENERAL.—Section 4002(c) of the Wool 

2 Suit and Textile Trade Extension Act of 2004 (Pub3 lic Law 108–429; 118 Stat. 2603 (7 U.S.C. 7101 

4 note)) is amended— 

5 (A) in paragraph (3)— 

6 (i) by striking ‘‘2 additional pay7 ments’’ and inserting ‘‘annual additional 

8 payments’’; and 

9 (ii) by adding at the end the fol10 lowing: 

11 ‘‘(C) Each subsequent annual payment to 

12 be made after January 1 of each subsequent 

13 year, but on or before April 15 of such year 

14 through calendar year 2010.’’; and 

15 (B) in paragraph (6)— 

16 (i) in subparagraph (A), by striking 

17 ‘‘through 2007’’ and inserting ‘‘through 

18 2009’’; and 

19 (ii) by adding at the end the fol20 lowing: 

21 ‘‘(C) ELIGIBLE MANUFACTURERS.—Only 

22 manufacturers who weave worsted wool fabric 

23 in the United States shall be eligible for a grant 

24 under this paragraph.’’. 


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1 (2) SUNSET.—Section 506(f) of the Trade and 

2 Development Act of 2000 (Public 106–200; 114 

3 Stat. 303), as amended by section 4002(c)(5) of the 

4 Wool Suit and Textile Trade Extension Act of 2004 

5 (Public 108–429; 118 Stat. 2603), is amended by 

6 striking ‘‘2008’’ and inserting ‘‘2010’’. 

7 SEC. 1634. AUTHORITIES RELATING TO DR–CAFTA AGREE8 MENT. 

9 (a) AUTHORITY TO IMPLEMENT CERTAIN AMEND10 MENTS TO DR–CAFTA AGREEMENT WITH NICARAGUA, 

11 EL SALVADOR, HONDURAS, AND GUATEMALA.— 

12 (1) PROCLAMATION AUTHORITY.—The Presi13 dent is authorized to proclaim modifications to the 

14 Harmonized Tariff Schedule of the United States as 

15 necessary to carry out amendments proposed by the 

16 United States and the CAFTA–DR countries to the 

17 Agreement, the terms of which are contained in the 

18 letters of understanding described in paragraph (2). 

19 (2) LETTERS OF UNDERSTANDING.—The let20 ters of understanding referred to in paragraph (1) 

21 are the following: 

22 (A) The letter of March 24, 2006, from 

23 Nicaraguan Vice Minister of Trade Julio Teran 

24 to United States Special Textile Negotiator 

25 Scott Quesenberry. 


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1 (B) The letter of March 27, 2006, from 

2 United States Special Textile Negotiator Scott 

3 Quesenberry to Nicaraguan Vice Minister of 

4 Trade Julio Teran. 

5 (C) The letter of January 27, 2006, from 

6 El Salvadoran Vice Minister of Economy 

7 Eduardo Ayala to United States Special Textile 

8 Negotiator Scott Quesenberry. 

9 (D) The letter of January 27, 2006, from 

10 United States Special Textile Negotiator Scott 

11 Quesenberry to El Salvadoran Vice Minister of 

12 Economy Eduardo Ayala. 

13 (E) The letter of March 7, 2006, from 

14 Honduran Vice Minister of Foreign Trade 

15 Jorge Rosa to United States Special Textile 

16 Negotiator Scott Quesenberry. 

17 (F) The letter of March 7, 2006, from 

18 United States Special Textile Negotiator Scott 

19 Quesenberry to Honduran Vice Minister of For20 eign Trade Jorge Rosa. 

21 (G) The letter of June 23, 2006, from 

22 Guatemalan Minister of Economy Marcio 

23 Cuevas Quezada to United States Special Tex24 tile Negotiator Scott Quesenberry. 


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1 (H) The letter of June 23, 2006, from 

2 United States Special Textile Negotiator Scott 

3 Quesenberry to Guatemalan Minister of Econ4 omy Marcio Cuevas Quezada. 

5 (3) SUNSET.—The authority of the President to 

6 proclaim modifications pursuant to paragraph (1) 

7 expires on December 31, 2007. 

8 (b) AUTHORITY TO IMPLEMENT CERTAIN AMEND9 MENTS TO DR–CAFTA AGREEMENT WITH COSTA RICA

10 AND THE DOMINICAN REPUBLIC.— 

11 (1) PROCLAMATION AUTHORITY.—The Presi12 dent is authorized to proclaim modifications to the 

13 Harmonized Tariff Schedule of the United States as 

14 necessary to carry out amendments proposed by the 

15 United States, Costa Rica, and the Dominican Re16 public to the Agreement, the terms of which are con17 tained in the letters of understanding described in 

18 paragraph (2). 

19 (2) LETTERS OF UNDERSTANDING.— 

20 (A) IN GENERAL.—The letters of under21 standing referred to in paragraph (1) are let22 ters of understanding exchanged between the 

23 countries described in paragraph (1) relating to 

24 the rules of origin for articles containing pocket 

25 bag fabric described in subparagraph (B). 


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1 (B) POCKET BAG FABRIC DESCRIBED.— 

2 For purposes of subparagraph (A), the term 

3 ‘‘pocket bag fabric’’ means pocket bag fabric 

4 used in an apparel article classifiable under 

5 chapter 61 or 62 of the Harmonized Tariff 

6 Schedule of the United States that contains a 

7 pocket or pockets. 

8 (3) CONSULTATION AND LAYOVER REQUIRE9 MENTS.—Any modification proclaimed by the Presi10 dent pursuant to paragraph (1) shall be subject to 

11 the consultation and layover provisions of section 

12 104 of the Dominican Republic–Central America– 

13 United States Free Trade Agreement Implementa14 tion Act (Public Law 109–53; 19 U.S.C. 4014). 

15 (4) CONGRESSIONAL DISAPPROVAL.— 

16 (A) IN GENERAL.—Any modification pro17 claimed by the President pursuant to paragraph 

18 (1) shall not be effective if a joint resolution de19 scribed in subparagraph (B) is enacted into 

20 law. 

21 (B) JOINT RESOLUTION DESCRIBED.—For 

22 purposes of subparagraph (A), the term ‘‘joint 

23 resolution’’ means a joint resolution of Con24 gress, the sole matter after the resolving clause 

25 of which is as follows: ‘‘That the Congress disVerDate Aug 31 2005 00:22 Aug 01, 2006 Jkt 049200 PO 00000 Frm 00999 Fmt 6652 Sfmt 6201 E:\BILLS\H4.PCS H4

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1 approves the modification proclaimed by the 

2 President contained in the report submitted to 

3 the Committee on Finance of the Senate and 

4 the Committee on Ways and Means of the 

5 House of Representatives pursuant to section 

6 104(2) of the Dominican Republic–Central 

7 America–United States Free Trade Agreement 

8 Implementation Act (Public Law 109–53; 19 

9 U.S.C. 4014(2)) on llllllllll.’’, 

10 with the blank space being filled with the ap11 propriate date. 

12 (5) SUNSET.—The authority of the President to 

13 proclaim modifications pursuant to paragraph (1) 

14 expires on December 31, 2007. 

15 (c) AUTHORITY RELATING TO NICARAGUAN TARIFF

16 PREFERENCE LEVEL UNDER DR–CAFTA AGREE17 MENT.— 

18 (1) CERTIFICATE OF ELIGIBILITY.—The Com19 missioner of Customs may require an importer to 

20 submit at the time the importer files a claim for 

21 preferential tariff treatment under Annex 3.28 of 

22 the Agreement a certificate of eligibility, properly 

23 completed and signed, or transmitted pursuant to an 

24 authorized electronic data interchange system, by an 

25 authorized official of the Government of Nicaragua 


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1 for purposes of implementing the tariff preference 

2 level for Nicaragua provided in Annex 3.28 of the 

3 Agreement. 

4 (2) ENFORCEMENT OF COMMITMENTS.—The 

5 President is authorized to proclaim a reduction in 

6 the overall limit in the tariff preference level for 

7 Nicaragua provided in Annex 3.28 of the Agreement 

8 if the President determines that Nicaragua has 

9 failed to comply with a commitment under an agree10 ment between the United States and Nicaragua with 

11 regard to the administration of such tariff pref12 erence level. 

13 (3) EFFECTIVE DATE.—Paragraph (1) applies 

14 with respect to entries made on or after April 1, 

15 2006. 

16 (d) TECHNICAL CORRECTION RELATING TO CO-PRO17 DUCTION OF CERTAIN TEXTILE AND APPAREL GOODS.— 

18 Section 205(a)(2) of the Dominican Republic–Central 

19 America–United States Free Trade Agreement Implemen20 tation Act (19 U.S.C. 4034(a)(2)) is amended by inserting 

21 after ‘‘with respect to that country’’ the following: ‘‘or any 

22 other CAFTA–DR country’’. 

23 (e) REPORTING REQUIREMENTS ON CERTAIN NEGO24 TIATIONS AND AMENDMENTS TO DR–CAFTA AGREE25 MENT.— 


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1 (1) IN GENERAL.—Not later than 30 days after 

2 the date of the enactment of this Act, and at least 

3 quarterly thereafter, the United States Trade Rep4 resentative shall submit to the appropriate congres5 sional committees a report on the status of negotia6 tions and amendments proposed by the United 

7 States, Nicaragua, El Salvador, Honduras, Guate8 mala, Costa Rica, and the Dominican Republic to 

9 the Agreement regarding any change to the rule of 

10 origin or alteration of the tariff treatment of socks 

11 described in paragraph (2) or any technical correc12 tion described in paragraph (3). In addition, the 

13 United States Trade Representative shall provide to 

14 the appropriate congressional committees copies of 

15 any amendments to be proposed by the United 

16 States before the amendments are offered and copies 

17 of any amendments received by the United States 

18 relating to such negotiations. 

19 (2) SOCKS DESCRIBED.—For purposes of para20 graph (1), the term ‘‘socks’’ means articles classifi21 able under subheading 6111.20.6050, 6111.30.5050, 

22 6111.90.5050, 6115.91.00, 6115.92.60, 6115.92.90, 

23 6115.93.60, 6115.93.90, 6115.99.14, or 6115.99.18 

24 of the Harmonized Tariff Schedule of the United 

25 States. 


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1 (3) TECHNICAL CORRECTIONS DESCRIBED.— 

2 Technical corrections referred to in paragraph (1) 

3 are the following: 

4 (A) Clarification of references to ‘‘elas5 tomeric yarns’’ contained in the notes, sub6 heading notes, additional U.S. notes, and statis7 tical notes to chapters 50 to 63 (section XI) of 

8 the Harmonized Tariff Schedule of the United 

9 States. 

10 (B) Clarification of the ability to apply 

11 short supply provisions to sewing thread, nar12 row elastics, and visible linings. 

13 (C) Treatment of women’s and girls’ woven 

14 sleep bottoms under Annex 4.1 of the Agree15 ment. 

16 (D) Addition of a rule of origin for wom17 en’s and girls’ woven sleep bottoms to reflect 

18 the rule of origin provided for in subheading 

19 6207.11.00 of the Harmonized Tariff Schedule 

20 of the United States and contained in Annex 

21 4.1 of the Agreement. 

22 (E) Provision of women’s and girls sleep 

23 bottoms under Annex 4.1–A of the Agreement. 

24 (4) DEFINITION.—In this subsection, the term 

25 ‘‘appropriate congressional committees’’ means the 


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1 Committee on Ways and Means of the House of 

2 Representatives and the Committee on Finance of 

3 the Senate 

4 (5) SUNSET.—The requirements of paragraph 

5 (1) expire on the date on which any change is made 

6 to the rule of origin pursuant to article 3.25 of the 

7 Agreement for any good described in paragraph (2), 

8 or December 31, 2007, whichever occurs later. 

9 (f) DEFINITIONS.—In this section: 

10 (1) AGREEMENT.—The term ‘‘Agreement’’ has 

11 the meaning given the term in section 3(1) of the 

12 Dominican Republic–Central America–United States 

13 Free Trade Agreement Implementation Act (Public 

14 Law 109–53; 19 U.S.C. 4002(1)). 

15 (2) CAFTA–DR COUNTRY.—The term 

16 ‘‘CAFTA–DR country’’ has the meaning given the 

17 term in section 3(2) of the Dominican Republic– 

18 Central America–United States Free Trade Agree19 ment Implementation Act (Public Law 109–53; 19 

20 U.S.C. 4002(2)). 

21 SEC. 1635. TECHNICAL AMENDMENTS TO CUSTOMS MOD22 ERNIZATION. 

23 (a) ENTRY OF MERCHANDISE.—Section 484(a) of 

24 the Tariff Act of 1930 (19 U.S.C. 1484(a)) is amended— 


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1 (1) in paragraph (1), by amending subpara2 graph (A) to read as follows: 

3 ‘‘(A) make entry therefor by filing with the 

4 Bureau of Customs and Border Protection such 

5 documentation or, pursuant to an authorized 

6 electronic data interchange system, such infor7 mation as is necessary to enable the Bureau of 

8 Customs and Border Protection to determine 

9 whether the merchandise may be released from 

10 custody of the Bureau of Customs and Border 

11 Protection;’’; and 

12 (2) in paragraph (2)(A), in the second sentence, 

13 by inserting after ‘‘covering’’ the following: ‘‘mer14 chandise released under a special delivery permit 

15 pursuant to section 448(b) and’’. 

16 (b) REFUNDS AND ERRORS.—Section 520(a) of the 

17 Tariff Act of 1930 (19 U.S.C. 1520(a)) is amended— 

18 (1) in paragraph (1), by striking the semicolon 

19 at the end and inserting a period; 

20 (2) in paragraph (2), by striking ‘‘; and’’ at the 

21 end and inserting a period; and 

22 (3) in paragraph (4)— 

23 (A) by inserting ‘‘an importer of record de24 clares or’’ before ‘‘it is ascertained’’; and 


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1 (B) by striking ‘‘by reason of clerical 

2 error’’. 

3 (c) ENTRY FROM WAREHOUSE.—Section 557(a) of 

4 the Tariff Act of 1930 (19 U.S.C. 1557(a)) is amended— 

5 (1) in paragraph (1)— 

6 (A) in the second sentence, by inserting 

7 after ‘‘the date of importation’’ the following: ‘‘, 

8 or such longer period of time as the Bureau of 

9 Customs and Border Protection may at its dis10 cretion permit upon proper request being filed 

11 and good cause shown’’; and 

12 (B) in subparagraph (A), by inserting after 

13 ‘‘the date of importation’’ the following: ‘‘or 

14 such longer period of time as the Bureau of 

15 Customs and Border Protection may at its dis16 cretion permit upon proper request being filed 

17 and good cause shown’’; and 

18 (2) in paragraph (2), by inserting after ‘‘the 

19 date of importation’’ the following: ‘‘, or such longer 

20 period of time as the Bureau of Customs and Border 

21 Protection may at its discretion permit upon proper 

22 request being filed and good cause shown,’’. 

23 (d) ABANDONED GOODS.—Section 559 of the Tariff 

24 Act of 1930 (19 U.S.C. 1559) is amended by inserting 

25 after ‘‘the date of importation’’ each place it appears the 


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1 following: ‘‘, or such longer period of time as the Bureau 

2 of Customs and Border Protection may at its discretion 

3 permit upon proper request being filed and good cause 

4 shown’’. 

5 (e) MANIPULATION IN WAREHOUSE.—Section 562 of 

6 the Tariff Act of 1930 (19 U.S.C. 1562) is amended— 

7 (1) by amending the first sentence to read as 

8 follows: ‘‘Merchandise shall only be withdrawn from 

9 a bonded warehouse in such quantity and in such 

10 condition as the Secretary of the Treasury shall by 

11 regulation prescribe.’’; and 

12 (2) in the second sentence, by striking ‘‘All 

13 merchandise so withdrawn’’ and all that follows 

14 through ‘‘except that upon permission therefor’’ and 

15 inserting ‘‘Upon permission’’. 

16 (f) OTHER TECHNICAL AMENDMENTS.—(1) Section 

17 629(e) of the Tariff Act of 1930 (19 U.S.C. 1629(e)) is 

18 amended by striking ‘‘insuring’’ and inserting ‘‘ensuring’’. 

19 (2) Section 135(f)(2)(B) of the Trade Act of 1974, 

20 as amended by section 2004(i)(1) of the Miscellaneous 

21 Trade and Technical Corrections Act of 2004, is amended 

22 by striking ‘‘their establishment’’ and insert ‘‘its establish23 ment’’. 


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1 (3) Section 245(a) of the Trade Act of 1974 (19 

2 U.S.C. 2317(a)) is amended by striking ‘‘, other than sub3 chapter D’’. 

4 (4) Section 291(2) of the Trade Act of 1974 (19 

5 U.S.C. 2401(2)) is amended— 

6 (A) by striking ‘‘1001(5)’’ and inserting 

7 ‘‘1001(e)’’; and 

8 (B) by striking ‘‘1308(5)’’ and inserting 

9 ‘‘1308(e)’’. 

10 (5) Section 13031(e)(6)(C)(i) of the Consolidated 

11 Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 

12 58c(e)(6)(C)(i)) is amended by striking ‘‘commonly know’’ 

13 and inserting ‘‘commonly known’’. 

14 (6) Section 2107(a)(4) of the Bipartisan Trade Pro15 motion Authority Act of 2002 (19 U.S.C. 3807(a)(4)) is 

16 amended— 

17 (A) by striking ‘‘paragraph (2)(A)’’ and insert18 ing ‘‘paragraphs (2)(A)’’; and 

19 (B) by striking ‘‘paragraph (2)(B)’’ and insert20 ing ‘‘paragraphs (2)(B)’’. 

21 (7) Section 514(c)(3) of the Tariff Act of 1930 (19 

22 U.S.C. 1514(c)(3)) is amended by moving the last 2 sen23 tences 2 ems to the left as flush left text. 


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1 Subtitle C—Effective Date 

2 SEC. 1641. EFFECTIVE DATE. 

3 Except as otherwise provided in this title, the amend4 ments made by this title shall apply with respect to goods 

5 entered, or withdrawn from warehouse for consumption, 

6 on or after the 15th day after the date of the enactment 

7 of this Act. 

Passed the House of Representatives July 28, 2006. 

Attest: KAREN L. HAAS, 

Clerk. 


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Calendar No. 561 

109TH CONGRESS 

2D SESSION H. R. 4 

AN ACT 

To provide economic security for all Americans, and 

for other purposes. 

JULY 31, 2006 

Received; deemed read the first time on July 28 (legisla28, 2006 tive day, July 26), 2006, pursuant to the order of July 

JULY 31, 2006 

Read the second time and placed on the calendar 


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