II 

112TH CONGRESS 

1ST SESSION S. 347 

To amend the Internal Revenue Code of 1986 to provide for reporting and 

disclosure by State and local public employee retirement pension plans. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 15, 2011 

Mr. BURR (for himself, Mr. THUNE, Mr. COBURN, Mr. ISAKSON, Mr. ENSIGN, 

Mr. GRASSLEY, and Mr. KYL) introduced the following bill; which was 

read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for reporting and disclosure by State and local public 

employee retirement pension plans. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Public Employee Pen5 sion Transparency Act’’. 

6 SEC. 2. FINDINGS. 

7 The Congress finds the following: 

8 (1) Pursuant to clauses 1 and 3 of section 8 of 

9 article I of the Constitution of the United States, 


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1 the Congress has the authority to condition the con2 tinuation of certain specified Federal tax benefits 

3 upon State or local government employee pension 

4 benefit plans provision of meaningful disclosure 

5 under section 4980J of the Internal Revenue Code 

6 of 1986, as added by this Act. 

7 (2) State or local government employee pension 

8 benefit plans have promised pension benefits to ap9 proximately 20 million Americans who are active em10 ployees of these entities. An additional 7 million re11 tirees and their dependents currently receive benefits 

12 from State or local government employee pension 

13 benefit plans. The interests of participants in many 

14 of such plans are in the nature of property rights 

15 under State law. 

16 (3) State or local government employee pension 

17 benefit plans are substantially facilitated by the fa18 vorable tax treatment of participants and bene19 ficiaries, investment earnings, and employee con20 tributions with respect to such plans provided by the 

21 Federal Government under the Internal Revenue 

22 Code of 1986. 

23 (4) The investment of State or local govern24 ment employee pension benefit plan assets, the dis25 tribution of benefits under such plans, and other reVerDate Mar 15 2010 03:15 Feb 16, 2011 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S347.IS S347

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1 lated financial activities are facilitated through the 

2 use of instrumentalities of, and substantially affect, 

3 interstate commerce. These activities, which are 

4 interstate in nature and have a substantial impact 

5 on the national economy, affect capital formation, 

6 regional growth and decline, the national markets 

7 for insurance, and the markets for securities and the 

8 trading of securities of State and local governments. 

9 (5) The financial status of State or local gov10 ernment employee pension benefit plans also has a 

11 direct impact on the national markets for insurance 

12 and trading of securities of State and local govern13 ments. 

14 (6) State or local government employee pension 

15 benefit plans additionally have a substantial impact 

16 on interstate commerce as a consequence of the 

17 interstate movement of participants. 

18 (7) State or local government employee pension 

19 benefit plans are becoming a large financial burden 

20 on certain State and local governments and have al21 ready resulted in tax increases and the reduction of 

22 services. 

23 (8) In fact, a recent study published in the 

24 Journal of Economic Perspectives found that the 

25 present value of the already-promised pension liabilVerDate Mar 15 2010 03:15 Feb 16, 2011 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S347.IS S347

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1 ities of the 50 States amount to $5.17 trillion and 

2 that these pension plans are unfunded by $3.23 tril3 lion. Another study determined that the total un4 funded liability for all municipal plans in the United 

5 States is $574 billion. 

6 (9) Some economists and observers have stated 

7 that the extent to which State or local government 

8 employee pension benefit plans are underfunded is 

9 obscured by governmental accounting rules and 

10 practices, particularly as they relate to the valuation 

11 of plan assets and liabilities. This results in a 

12 misstatement of the value of plan assets and an un13 derstatement of plan liabilities, a situation that 

14 poses a significant threat to the soundness of State 

15 and local budgets. 

16 (10) There currently is a lack of meaningful 

17 disclosure regarding the value of State or local gov18 ernment employee pension benefit plan assets and li19 abilities. This lack of meaningful disclosure poses a 

20 direct and serious threat to the financial stability of 

21 such plans and their sponsoring governments, im22 pairs the ability of State and local government tax23 payers and officials to understand the financial obli24 gations of their government, and reduces the likeli25 hood that State and local government processes will 


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1 be effective in assuring the prudent management of 

2 their plans. The status quo also constitutes a serious 

3 threat to the future economic health of the Nation 

4 and places an undue burden upon State and local 

5 government taxpayers, who will be called upon to 

6 fully fund existing, and future, pension promises. 

7 (11) State or local government employee pen8 sion benefit plans are affected with a national public 

9 interest and meaningful disclosure of the value of 

10 their assets and liabilities is necessary and desirable 

11 in order to adequately protect plan participants and 

12 their beneficiaries and the general public. Meaning13 ful disclosure would also further efforts to provide 

14 for the general welfare and the free flow of com15 merce. 

16 SEC. 3. REPORTING OF INFORMATION WITH RESPECT TO 

17 STATE OR LOCAL GOVERNMENT EMPLOYEE 

18 PENSION BENEFIT PLANS TREATED AS A TAX 

19 EXEMPTION, ETC., REQUIREMENT FOR STATE 

20 AND LOCAL BONDS. 

21 (a) IN GENERAL.—Subpart B of part IV of sub22 chapter B of chapter 1 of the Internal Revenue Code of 

23 1986 (relating to requirements applicable to all State and 

24 local bonds) is amended by adding at the end the following 

25 new section: 


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1 ‘‘SEC. 149A. REPORTING WITH RESPECT TO STATE OR 

2 LOCAL GOVERNMENT EMPLOYEE PENSION 

3 BENEFIT PLANS. 

4 ‘‘(a) IN GENERAL.—In the case of a failure to satisfy 

5 any requirement of subsection (a) or (b) of section 4980J 

6 (relating to failure of State or local government employee 

7 pension benefit plans to meet reporting requirements) with 

8 respect to any plan maintained with respect to employees 

9 of one or more States or political subdivisions of one or 

10 more States, no specified Federal tax benefit shall be al11 lowed or made with respect to any specified bond issued 

12 by any such State or political subdivision (or by any bond13 ing authority acting on behalf, or for the benefit, of such 

14 State or political subdivision) during the noncompliance 

15 period. 

16 ‘‘(b) NONCOMPLIANCE PERIOD.—For purposes of 

17 this section, the term ‘noncompliance period’ means, with 

18 respect to any State or political subdivision in connection 

19 with any failure, the period beginning on the date that 

20 the Secretary notifies such State or political subdivision 

21 of such failure and ending on the date that such failure 

22 is cured (as determined by the Secretary). 

23 ‘‘(c) SPECIFIED BOND.—For purposes of this section, 

24 the term ‘specified bond’ means— 

25 ‘‘(1) any State or local bond within the meaning 

26 of section 103, 


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1 ‘‘(2) any qualified tax credit bond within the 

2 meaning of section 54A, and 

3 ‘‘(3) any build America bond within the mean4 ing of section 54AA. 

5 ‘‘(d) SPECIFIED FEDERAL TAX BENEFIT.—For pur6 poses of this section, the term ‘specified Federal tax ben7 efit’ means— 

8 ‘‘(1) any exemption from gross income allowed 

9 under section 103 (relating to interest on State and 

10 local bonds), 

11 ‘‘(2) any credit allowed under section 54A (re12 lating to credit to holders of qualified tax credit 

13 bonds), 

14 ‘‘(3) any credit allowed under section 54AA (re15 lating to build America bonds), and 

16 ‘‘(4) any credit or payment allowed or made 

17 under section 6431 (relating to credit for qualified 

18 bonds allowed to issuer).’’. 

19 (b) REPORTING REQUIREMENTS.—Chapter 43 of 

20 such Code is amended by adding at the end the following 

21 new section: 


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1 ‘‘SEC. 4980J. FAILURE OF STATE OR LOCAL GOVERNMENT 

2 EMPLOYEE PENSION BENEFIT PLANS TO 

3 MEET REPORTING REQUIREMENTS. 

4 ‘‘(a) ANNUAL REPORT.—For purposes of section 

5 149A, the requirements of this subsection are as follows: 

6 ‘‘(1) IN GENERAL.—The plan sponsor of a 

7 State or local government employee pension benefit 

8 plan shall file with the Secretary, in such form and 

9 manner as shall be prescribed by the Secretary, a re10 port for each plan year beginning on or after Janu11 ary 1, 2011, setting forth the following information 

12 with respect to the plan, as determined by the plan 

13 sponsor as of the end of such plan year: 

14 ‘‘(A) A schedule of funding status, which 

15 shall include a statement as to the current li16 ability of the plan, the amount of plan assets 

17 available to meet that liability, the amount of 

18 the net unfunded liability (if any), and the 

19 funding percentage of the plan. 

20 ‘‘(B) A schedule of contributions by the 

21 plan sponsor for the plan year, indicating which 

22 are or are not taken into account under sub23 paragraph (A). 

24 ‘‘(C) Alternative projections which shall be 

25 specified in regulations of the Secretary for 

26 each of the next 20 plan years following the 


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1 plan year relating to the amount of annual con2 tributions, the fair market value of plan assets, 

3 current liability, the funding percentage, and 

4 such other matters as the Secretary may specify 

5 in such regulations, together with a statement 

6 of the assumptions and methods used in con7 nection with such projections, including as8 sumptions related to funding policy, plan 

9 changes, future workforce projections, future 

10 investment returns, and such other matters as 

11 the Secretary may specify in such regulations. 

12 The Secretary shall specify in such regulations 

13 the projection assumptions and methods to be 

14 used as necessary to achieve comparability 

15 across plans. 

16 ‘‘(D) A statement of the actuarial assump17 tions used for the plan year, including the rate 

18 of return on investment of plan assets and as19 sumptions as to such other matters as the Sec20 retary may prescribe by regulation. 

21 ‘‘(E) A statement of the number of partici22 pants who are each of the following— 

23 ‘‘(i) those who are retired or sepa24 rated from service and are receiving bene25 fits, 


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1 ‘‘(ii) those who are retired or sepa2 rated and are entitled to future benefits, 

3 and 

4 ‘‘(iii) those who are active under the 

5 plan. 

6 ‘‘(F) A statement of the plan’s investment 

7 returns, including the rate of return, for the 

8 plan year and the 5 preceding plan years. 

9 ‘‘(G) A statement of the degree to which, 

10 and manner in which, the plan sponsor expects 

11 to eliminate any unfunded current liability that 

12 may exist for the plan year and the extent to 

13 which the plan sponsor has followed the plan’s 

14 funding policy for each of the preceding 5 plan 

15 years. The Secretary shall prescribe by regula16 tion the specific criteria to be used for meeting 

17 the requirements of this paragraph. 

18 ‘‘(H) A statement of the amount of pen19 sion obligation bonds outstanding. 

20 ‘‘(2) TIMING OF REPORT.—The plan sponsor of 

21 a State or local government employee pension ben22 efit plan shall make the filing required under para23 graph (1) for each plan year not later than 210 days 

24 after the end of such plan year (or within such time 


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1 as may be required by regulations prescribed by the 

2 Secretary in order to reduce duplicative filing). 

3 ‘‘(b) ADDITIONAL REPORTING REQUIREMENTS.— 

4 For purposes of section 149A, the requirements of this 

5 subsection are as follows: 

6 ‘‘(1) SUPPLEMENTARY REPORTS.—In any case 

7 in which, in determining the information filed in the 

8 annual report for a plan year under subsection (a)— 

9 ‘‘(A) the value of plan assets is determined 

10 using a standard other than fair market value, 

11 or 

12 ‘‘(B) the interest rate or rates used to de13 termine the value of liabilities or as the dis14 count value for liabilities are not the interest 

15 rates described in paragraph (3), 

16 the plan sponsor shall include in the annual report 

17 filed for such plan year pursuant to subsection (a) 

18 the supplementary report for such plan year de19 scribed in paragraph (2) of this subsection. 

20 ‘‘(2) USE OF PRESCRIBED VALUATION METHOD

21 AND INTEREST RATES.—A supplementary report for 

22 a plan year filed for a plan year pursuant to this 

23 subsection shall include the information specified as 

24 required in the annual report under subparagraphs 

25 (A), (C), (F), and (G) of subsection (a)(1), deterVerDate Mar 15 2010 03:15 Feb 16, 2011 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S347.IS S347

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1 mined as of the end of such plan year by valuing 

2 plan assets at fair market value and by using the in3 terest rates described in paragraph (3) to value li4 abilities and as the discount value for liabilities. 

5 ‘‘(3) INTEREST RATES BASED ON U.S. TREAS6 URY OBLIGATION YIELD CURVE RATE.— 

7 ‘‘(A) IN GENERAL.—The interest rates de8 scribed in this subsection are— 

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

10 determined to be payable during the 5-year 

11 period beginning on the first day of the 

12 plan year, the first segment rate with re13 spect to the applicable month, 

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

15 determined to be payable during the 15- 

16 year period beginning at the end of the pe17 riod described in subparagraph (A), the 

18 second segment rate with respect to the 

19 applicable month, and 

20 ‘‘(iii) in the case of benefits reason21 ably determined to be payable after the pe22 riod described in clause (ii), the third seg23 ment rate with respect to the applicable 

24 month. 


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1 ‘‘(B) SEGMENT RATES.—For purposes of 

2 this paragraph— 

3 ‘‘(i) FIRST SEGMENT RATE.—The 

4 term ‘first segment rate’ means, with re5 spect to any month, the single rate of in6 terest which shall be determined by the 

7 Secretary for such month on the basis of 

8 the U.S. Treasury obligation yield curve 

9 for such month, taking into account only 

10 that portion of such yield curve which is 

11 based on obligations maturing during the 

12 5-year period commencing with such 

13 month. 

14 ‘‘(ii) SECOND SEGMENT RATE.—The 

15 term ‘second segment rate’ means, with re16 spect to any month, the single rate of in17 terest which shall be determined by the 

18 Secretary for such month on the basis of 

19 the U.S. Treasury obligation yield curve 

20 for such month, taking into account only 

21 that portion of such yield curve which is 

22 based on obligations maturing during the 

23 15-year period beginning at the end of the 

24 period described 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 U.S. Treasury obligation yield curve 

7 for such month, taking into account only 

8 that portion of such yield curve which is 

9 based on obligations maturing during peri10 ods beginning after the period described in 

11 clause (ii). 

12 ‘‘(C) U.S. TREASURY OBLIGATION YIELD

13 CURVE.—For purposes of this subsection, the 

14 term ‘U.S. Treasury obligation yield curve’ 

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

16 which shall be prescribed by the Secretary for 

17 such month and which reflects the average, for 

18 the 24-month period ending with the month 

19 preceding such month, of monthly yields on in20 terest-bearing obligations of the United States. 

21 ‘‘(c) DEFINITIONS.—For purposes of this section— 

22 ‘‘(1) STATE OR LOCAL GOVERNMENT EM23 PLOYEE PENSION BENEFIT PLAN.—The terms ‘State 

24 or local government employee pension benefit plan’ 

25 and ‘plan’ mean any plan, fund, or program, other 


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1 than a defined contribution plan (within the mean2 ing of section 414(i)), which was heretofore or is 

3 hereafter established or maintained, in whole or in 

4 part, by a State, a political subdivision of a State, 

5 or any agency or instrumentality of a State or polit6 ical subdivision of a State, to the extent that by its 

7 express terms or as a result of surrounding cir8 cumstances such plan, fund, or program— 

9 ‘‘(A) provides retirement income to em10 ployees, or 

11 ‘‘(B) results in a deferral of income by em12 ployees for periods extending to the termination 

13 of covered employment or beyond, regardless of 

14 the method of calculating the contributions 

15 made to the plan, the method of calculating the 

16 benefits under the plan, or the method of dis17 tributing benefits from the plan. 

18 ‘‘(2) FUNDING PERCENTAGE.—The term ‘fund19 ing percentage’ for a plan year means the ratio (ex20 pressed as a percentage) which— 

21 ‘‘(A) the value of plan assets as of the end 

22 of the plan year bears to 

23 ‘‘(B) the current liability of the plan for 

24 the plan year. 


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1 ‘‘(3) CURRENT LIABILITY.—The term ‘current 

2 liability’ of a plan for a plan year means the present 

3 value of all benefits accrued or earned under the 

4 plan as of the end of the plan year. 

5 ‘‘(4) PLAN SPONSOR.—The term ‘plan sponsor’ 

6 means, in connection with a State or local govern7 ment employee pension benefit plan, the State, polit8 ical subdivision of a State, or agency or instrumen9 tality of a State or a political subdivision of a State 

10 which establishes or maintains the plan. 

11 ‘‘(5) PARTICIPANT.— 

12 ‘‘(A) IN GENERAL.—The term ‘participant’ 

13 means, in connection with a State or local gov14 ernment employee pension benefit plan, an indi15 vidual— 

16 ‘‘(i) who is an employee or former em17 ployee of a State, political subdivision of a 

18 State, or agency or instrumentality of a 

19 State or a political subdivision of a State 

20 which is the plan sponsor of such plan, and 

21 ‘‘(ii) who is or may become eligible to 

22 receive a benefit of any type from such 

23 plan or whose beneficiaries may be eligible 

24 to receive any such benefit. 


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1 ‘‘(B) BENEFICIARY.—The term ‘bene2 ficiary’ means a person designated by a partici3 pant, or by the terms of the plan, who is or 

4 may become entitled to a benefit thereunder. 

5 ‘‘(6) PLAN YEAR.—The term ‘plan year’ means, 

6 in connection with a plan, the calendar or fiscal year 

7 on which the records of the plan are kept. 

8 ‘‘(7) STATE.—The term ‘State’ includes any 

9 State of the United States, the District of Columbia, 

10 the Commonwealth of Puerto Rico, the Virgin Is11 lands, American Samoa, Guam, and the Common12 wealth of the Northern Mariana Islands. 

13 ‘‘(8) FAIR MARKET VALUE.—The term ‘fair 

14 market value’ has the meaning of such term under 

15 section 430(g)(3)(A) (without regard to section 

16 430(g)(3)(B)). 

17 ‘‘(d) MODEL REPORTING STATEMENT.—The Sec18 retary shall develop model reporting statements for pur19 poses of subsections (a) and (b). Plan sponsors of State 

20 or local government employee pension plans may elect, in 

21 such form and manner as shall be prescribed by the Sec22 retary, to utilize the applicable model reporting statement 

23 for purposes of complying with requirements of such sub24 sections. 


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1 ‘‘(e) TRANSPARENCY OF INFORMATION FILED.—The 

2 Secretary shall create and maintain a public website, with 

3 searchable capabilities, for purposes of posting the infor4 mation received by the Secretary pursuant to subsections 

5 (a) and (b). Any such information received by the Sec6 retary (including any updates to such information received 

7 by the Secretary) shall be posted on the website not later 

8 than 60 days after receipt and shall not be treated as re9 turn information for purposes of this title.’’. 

10 (c) CLERICAL AMENDMENTS.— 

11 (1) The table of sections for subpart B of part 

12 IV of subchapter B of chapter 1 of such Code is 

13 amended by adding at the end the following new 

14 item: 

‘‘Sec. 149A. Reporting with respect to State or local government employee pension benefit plans.’’. 

15 (2) The table of sections for chapter 43 of such 

16 Code is amended by adding at the end the following 

17 new item: 

‘‘Sec. 4980J. Failure of State or local government employee pension benefit 

plans to meet reporting requirements.’’. 

18 SEC. 4. GENERAL PROVISIONS AND RULES OF CONSTRUC19 TION. 

20 (a) LIMITATIONS ON FEDERAL RESPONSIBILITIES

21 RELATING TO PLAN OBLIGATIONS AND LIABILITIES.— 

22 The United States shall not be liable for any obligation 

23 related to any current or future shortfall in any State or 


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1 local government employee pension plan. Nothing in this 

2 Act (or any amendment made by this Act) or any other 

3 provision of law shall be construed to provide Federal Gov4 ernment funds to diminish or meet any current or future 

5 shortfall in, or obligation of, any State or local government 

6 employee pension plan. The preceding sentence shall also 

7 apply to the Federal Reserve. 

8 (b) NO FEDERAL FUNDING STANDARDS.—Nothing 

9 in this Act (or any amendment made by this Act) shall 

10 be construed to alter existing funding standards for State 

11 or local government employee pension plans or to require 

12 Federal funding standards for such plans. 

13 (c) DEFINITIONS.—Terms used in this section which 

14 are also used in section 4980J of the Internal Revenue 

15 Code of 1986 shall have the same meaning as when used 

16 in such section. 

Æ 


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