I 

114TH CONGRESS 

2D SESSION H. R. 4822 

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 HOUSE OF REPRESENTATIVES 

MARCH 21, 2016 

Mr. NUNES (for himself, Mr. STEWART, Mr. DUNCAN of South Carolina, Mr. 

ROSS, Mr. ROKITA, Mr. MARCHANT, and Mr. BUCSHON) introduced the 

following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to 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 on the provision of meaningful disclo5 sure under section 4980J of the Internal Revenue 

6 Code of 1986, as added by this Act. 

7 (2) State and local government employee pen8 sion benefit plans have promised pension benefits to 

9 approximately 20,000,000 Americans who are active 

10 employees of these entities. An additional 7,000,000 

11 retirees and their dependents currently receive bene12 fits from State or local government employee pen13 sion benefit plans. The interests of participants in 

14 many of such plans are in the nature of property 

15 rights under State law. 

16 (3) State and local government employee pen17 sion benefit plans are substantially facilitated by the 

18 favorable 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 Sep 11 2014 02:37 Mar 23, 2016 Jkt 059200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4822.IH H4822

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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 soon to be published study has 

24 determined that as of 2014, the present value of the 

25 already promised pension liabilities of the 50 States 


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1 and major municipalities, calculated using the meth2 odology prescribed by this bill, is 

3 $7,019,627,000,000 with unfunded liabilities at 

4 $3,412,587,000,000. These amounts are substan5 tially higher than those reported by pension funds 

6 using the Governmental Accounting Standards 

7 Board’s (GASB) revised standards (total liabilities 

8 of $4,798,075,000,000 and unfunded liabilities of 

9 $1,191,035,000,000). 

10 (9) Some economists and observers have stated 

11 that the extent to which State or local government 

12 employee pension benefit plans are underfunded is 

13 obscured by governmental accounting rules and 

14 practices, particularly as they relate to the valuation 

15 of plan assets and liabilities. This results in a 

16 misstatement of the value of plan assets and an un17 derstatement of plan liabilities, a situation that 

18 poses a significant threat to the soundness of State 

19 and local budgets. 

20 (10) There currently is a lack of meaningful 

21 disclosure regarding the value of State or local gov22 ernment employee pension benefit plan assets and li23 abilities. This lack of meaningful disclosure poses a 

24 direct and serious threat to the financial stability of 

25 such plans and their sponsoring governments, imVerDate Sep 11 2014 02:37 Mar 23, 2016 Jkt 059200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4822.IH H4822

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1 pairs the ability of State and local government tax2 payers and officials to understand the financial obli3 gations of their government, and reduces the likeli4 hood that State and local government processes will 

5 be effective in assuring the prudent management of 

6 their plans. The status quo also constitutes a serious 

7 threat to the future economic health of the Nation 

8 and places an undue burden upon State and local 

9 government taxpayers, who will be called upon to 

10 fully fund existing, and future, pension promises. 

11 (11) State or local government employee pen12 sion benefit plans affect the national public interest 

13 and meaningful disclosure of the value of their as14 sets and liabilities is necessary and desirable in 

15 order to adequately protect plan participants and 

16 their beneficiaries and the general public. Meaning17 ful disclosure would also further efforts to provide 

18 for the general welfare and the free flow of com19 merce. 


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1 SEC. 3. REPORTING OF INFORMATION WITH RESPECT TO 

2 STATE OR LOCAL GOVERNMENT EMPLOYEE 

3 PENSION BENEFIT PLANS TREATED AS A TAX 

4 EXEMPTION, ETC., REQUIREMENT FOR STATE 

5 AND LOCAL BONDS. 

6 (a) IN GENERAL.—Subpart B of part IV of sub7 chapter B of chapter 1 of the Internal Revenue Code of 

8 1986 is amended by adding at the end the following new 

9 section: 

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

11 LOCAL GOVERNMENT EMPLOYEE PENSION 

12 BENEFIT PLANS. 

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

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

15 with respect to any plan maintained with respect to em16 ployees of one or more States or political subdivisions of 

17 one or more States, no specified Federal tax benefit shall 

18 be allowed or made with respect to any specified bond 

19 issued by any such State or political subdivision (or by 

20 any bonding authority acting on behalf, or for the benefit, 

21 of such State or political subdivision) during the non22 compliance period. 

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

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

25 respect to any State or political subdivision in connection 

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1 ginning on the date that the Secretary notifies such State 

2 or political subdivision of such failure and ending on the 

3 date that such failure is cured (as determined by the Sec4 retary). 

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

6 the term ‘specified bond’ means— 

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

8 of section 103, 

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

10 meaning of section 54A, and 

11 ‘‘(3) any build America bond within the mean12 ing of section 54AA. 

13 ‘‘(d) SPECIFIED FEDERAL TAX BENEFIT.—For pur14 poses of this section, the term ‘specified Federal tax ben15 efit’ means— 

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

17 under section 103 (relating to interest on State and 

18 local bonds), 

19 ‘‘(2) any credit allowed under section 54A (re20 lating to credit to holders of qualified tax credit 

21 bonds), 

22 ‘‘(3) any credit allowed under section 54AA (re23 lating to build America bonds), and 


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

2 under section 6431 (relating to credit for qualified 

3 bonds allowed to issuer).’’. 

4 (b) REPORTING REQUIREMENTS.—Chapter 43 of 

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

6 new section: 

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

8 EMPLOYEE PENSION BENEFIT PLANS TO 

9 MEET REPORTING REQUIREMENTS. 

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

11 149A, the requirements of this subsection are as follows: 

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

13 State or local government employee pension benefit 

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

15 manner as shall be prescribed by the Secretary, a re16 port for each plan year beginning on or after Janu17 ary 1, 2017, setting forth the following information 

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

19 sponsor as of the end of such plan year: 

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

21 shall include a statement as to the current li22 ability of the plan, the amount of plan assets 

23 available to meet that liability, the amount of 

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

25 funding percentage of the plan. 


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

2 plan sponsor for the plan year, indicating which 

3 are or are not taken into account under sub4 paragraph (A). 

5 ‘‘(C) Alternative projections which shall be 

6 specified in regulations of the Secretary for 

7 each of the next 60 plan years following the 

8 plan year of the cash flows associated with the 

9 current liability, together with a statement of 

10 the assumptions used in connection with such 

11 projections. The Secretary shall specify in such 

12 regulations the projection assumptions to be 

13 used as necessary to achieve comparability 

14 across plans. 

15 ‘‘(D) A statement of the actuarial assump16 tions used for the plan year, including the rate 

17 of return on investment of plan assets and as18 sumptions as to such other matters as the Sec19 retary may prescribe by regulation. 

20 ‘‘(E) A statement of the number of partici21 pants who are each of the following— 

22 ‘‘(i) those who are retired or sepa23 rated from service and are receiving bene24 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 ‘‘(I) A statement of the current cost of the 

21 plan for the plan year. 

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

23 a State or local government employee pension ben24 efit plan shall make the filing required under para25 graph (1) for each plan year not later than 210 days 


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

2 as may be required by regulations prescribed by the 

3 Secretary in order to reduce duplicative filing). 

4 ‘‘(b) ADDITIONAL REPORTING REQUIREMENTS.— 

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

6 subsection are as follows: 

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

8 in which, in determining the information filed in the 

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

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

11 using a standard other than fair market value, 

12 or 

13 ‘‘(B) the interest rate or rates used to de14 termine the value of liabilities or as the dis15 count value for liabilities are not the interest 

16 rates described in paragraph (3), the plan spon17 sor shall include in the annual report filed for 

18 such plan year pursuant to subsection (a) the 

19 supplementary report for such plan year de20 scribed in paragraph (2) of this subsection. 

21 ‘‘(2) USE OF PRESCRIBED VALUATION METHOD

22 AND INTEREST RATES.—A supplementary report for 

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

24 subsection shall include the information specified as 

25 required in the annual report under subparagraphs 


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1 (A), (F), (G) and (I) of subsection (a)(1), deter2 mined as of the end of such plan year by valuing 

3 plan assets at fair market value and by using the in4 terest rates described in paragraph (3) to value li5 abilities and as the discount value for liabilities. 

6 ‘‘(3) INTEREST RATES BASED ON U.S. TREAS7 URY OBLIGATION YIELD CURVE RATE.— 

8 ‘‘(A) IN GENERAL.—The interest rates de9 scribed in this subsection are, with respect to 

10 any day, the rates of interest which shall be de11 termined by the Secretary for such day on the 

12 basis of the U.S. Treasury obligation yield 

13 curve for such day. 

14 ‘‘(B) U.S. TREASURY OBLIGATION YIELD

15 CURVE.—For purposes of this subsection, the 

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

17 means, with respect to any day, a yield curve 

18 which shall be prescribed by the Secretary for 

19 such day on interest-bearing obligations of the 

20 United States. 

21 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur22 poses of this section— 

23 ‘‘(1) STATE OR LOCAL GOVERNMENT EM24 PLOYEE PENSION BENEFIT PLAN.—The terms ‘State 

25 or local government employee pension benefit plan’ 


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

2 than a defined contribution plan (within the mean3 ing of section 414(i)), which was heretofore or is 

4 hereafter established or maintained, in whole or in 

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

6 or any agency or instrumentality of a State or polit7 ical subdivision of a State, to the extent that by its 

8 express terms or as a result of surrounding cir9 cumstances such plan, fund, or program— 

10 ‘‘(A) provides retirement income to em11 ployees, or 

12 ‘‘(B) results in a deferral of income by em13 ployees for periods extending to the termination 

14 of covered employment or beyond, regardless of 

15 the method of calculating the contributions 

16 made to the plan, the method of calculating the 

17 benefits under the plan, or the method of dis18 tributing benefits from the plan. 

19 ‘‘(2) FUNDING PERCENTAGE.—The term ‘fund20 ing percentage’ for a plan year means the ratio (ex21 pressed as a percentage) which— 

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

23 of the plan year bears to 

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

25 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) PRESENT VALUE.— 

6 ‘‘(A) IN GENERAL.—The present value of 

7 an accrued benefit shall be determined by dis8 counting its future cash flows in accordance 

9 with subsection (b)(3). The present value of all 

10 benefits accrued for a participant shall be cal11 culated as the sum of the present value of the 

12 accrued benefit for each exit event multiplied by 

13 the probability of the associated exit event. 

14 ‘‘(B) EXIT EVENT.—An ‘exit event’ occurs 

15 when the employment of a plan participant ter16 minates. For each currently employed plan par17 ticipant as of the measurement date, there are 

18 one or more potential future exit events. Each 

19 exit event is associated with a termination date, 

20 a cause of termination (e.g., retirement, death, 

21 disability, quit, etc.), a contractual benefit, and 

22 a probability that the participant will exit em23 ployment via the particular event. 

24 ‘‘(5) ACCRUED BENEFIT.— 


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1 ‘‘(A) IN GENERAL.—An ‘accrued benefit’ is 

2 determined for each exit event as the projected 

3 benefit multiplied by service earned as of the 

4 measurement date divided by service projected 

5 to be earned by the event date. For participants 

6 retired or separated from service as of the 

7 measurement date, the accrued benefit equals 

8 the projected benefit. 

9 ‘‘(B) PROJECTED BENEFIT.—As of the 

10 measurement date, a ‘projected benefit’ (con11 sisting of future cash flows) is calculated for 

12 each possible exit event using service projected 

13 to be earned to the event date and salary as of 

14 the measurement date. Such projected benefit 

15 shall reflect any cost-of-living adjustments pay16 able in the future based on the law in effect as 

17 of the measurement date. 

18 ‘‘(6) MEASUREMENT DATE.—The term ‘meas19 urement date’ means the date as of which the value 

20 of the pension obligation is determined (sometimes 

21 referred to as the ‘valuation date’). 

22 ‘‘(7) CURRENT COST.—The term ‘current cost’ 

23 of a plan for a plan year means the present value 

24 as of the end of the plan year of all benefits accrued 

25 or earned under the plan during the plan year. 


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1 ‘‘(8) PLAN SPONSOR.—The term ‘plan sponsor’ 

2 means, in connection with a State or local govern3 ment employee pension benefit plan, the State, polit4 ical subdivision of a State, or agency or instrumen5 tality of a State or a political subdivision of a State 

6 which establishes or maintains the plan. 

7 ‘‘(9) PARTICIPANT.— 

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

9 means, in connection with a State or local gov10 ernment employee pension benefit plan, an indi11 vidual— 

12 ‘‘(i) who is an employee or former em13 ployee of a State, political subdivision of a 

14 State, or agency or instrumentality of a 

15 State or a political subdivision of a State 

16 which is the plan sponsor of such plan, and 

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

18 receive a benefit of any type from such 

19 plan or whose beneficiaries may be eligible 

20 to receive any such benefit. 

21 ‘‘(B) BENEFICIARY.—The term ‘bene22 ficiary’ means a person designated by a partici23 pant, or by the terms of the plan, who is or 

24 may become entitled to a benefit thereunder. 


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1 ‘‘(10) PLAN YEAR.—The term ‘plan year’ 

2 means, in connection with a plan, the calendar or 

3 fiscal year on which the records of the plan are kept. 

4 ‘‘(11) STATE.—The term ‘State’ includes any 

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

6 the Commonwealth of Puerto Rico, the United 

7 States Virgin Islands, American Samoa, Guam, and 

8 the Commonwealth of the Northern Mariana Is9 lands. 

10 ‘‘(12) FAIR MARKET VALUE.—The term ‘fair 

11 market value’ has the meaning of such term under 

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

13 430(g)(3)(B)). 

14 ‘‘(d) MODEL REPORTING STATEMENT.—The Sec15 retary shall develop model reporting statements for pur16 poses of subsections (a) and (b). Plan sponsors of State 

17 or local government employee pension plans may elect, in 

18 such form and manner as shall be prescribed by the Sec19 retary, to utilize the applicable model reporting statement 

20 for purposes of complying with requirements of such sub21 sections. 

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

23 Secretary shall create and maintain a public Web site, 

24 with searchable capabilities, for purposes of posting the 

25 information received by the Secretary pursuant to subVerDate Sep 11 2014 02:37 Mar 23, 2016 Jkt 059200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H4822.IH H4822

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1 sections (a) and (b). Any such information received by the 

2 Secretary (including any updates to such information re3 ceived by the Secretary) shall be posted on the Web site 

4 not later than 60 days after receipt and shall not be treat5 ed as return information for purposes of this title.’’. 

6 (c) CLERICAL AMENDMENTS.— 

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

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

9 amended by adding at the end the following new 

10 item: 

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

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

12 Code is amended by adding at the end the following 

13 new item: 

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

plans to meet reporting requirements.’’. 

14 SEC. 4. GENERAL PROVISIONS AND RULES OF CONSTRUC15 TION. 

16 (a) LIMITATIONS ON FEDERAL RESPONSIBILITIES

17 RELATING TO PLAN OBLIGATIONS AND LIABILITIES.— 

18 The United States shall not be liable for any obligation 

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

20 local government employee pension plan. Nothing in this 

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

22 provision of law shall be construed to provide Federal Gov23 ernment funds to diminish or meet any current or future 


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

2 employee pension plan. The preceding sentence shall also 

3 apply to the Federal Reserve. 

4 (b) NO FEDERAL FUNDING STANDARDS.—Nothing 

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

6 be construed to alter existing funding standards for State 

7 or local government employee pension plans or to require 

8 Federal funding standards for such plans. 

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

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

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

12 in such section. 

Æ 


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