I 

109TH CONGRESS 

1ST SESSION H. R. 2233 

To amend title I of the Employee Retirement Income Security Act of 1974 

and the Internal Revenue Code of 1986 to limit the availability of 

benefits under an employer’s nonqualified deferred compensation plans 

in the event that any of the employer’s defined pension plans are subjected to a distress or PBGC termination in connection with bankruptcy 

reorganization or a conversion to a cash balance plan, to provide appropriate funding restrictions in connection with the maintenance of nonqualified deferred compensation plans, and to provide for appropriate 

disclosure with respect to nonqualified deferred compensation plans. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 10, 2005 

Mr. GEORGE MILLER of California (for himself, Ms. SCHAKOWSKY, Mr. SANDERS, Mr. HINCHEY, Ms. LINDA T. SA ́NCHEZ of California, Mr. 

CUMMINGS, Mr. OWENS, Mr. CONYERS, Mr. DOGGETT, Mr. BROWN of 

Ohio, Mr. PAYNE, Mr. PALLONE, Mr. VAN HOLLEN, Mrs. MCCARTHY, 

Ms. SOLIS, Mr. GRIJALVA, Mr. ABERCROMBIE, Mr. LYNCH, Mr. STARK, 

Ms. WOOLSEY, Mr. TIERNEY, Mr. ANDREWS, Mrs. DAVIS of California, 

Mr. HINOJOSA, and Mr. BISHOP of New York) introduced the following 

bill; which was referred to the Committee on Education and the Workforce, and in addition to the Committee on Ways and Means, for a period 

to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee 

concerned 

A BILL 

To amend title I of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 

1986 to limit the availability of benefits under an employer’s nonqualified deferred compensation plans in the 

event that any of the employer’s defined pension plans 
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are subjected to a distress or PBGC termination in connection with bankruptcy reorganization or a conversion 

to a cash balance plan, to provide appropriate funding 

restrictions in connection with the maintenance of nonqualified deferred compensation plans, and to provide 

for appropriate disclosure with respect to nonqualified 

deferred compensation 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 AND TABLE OF CONTENTS. 

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

5 ‘‘Pension Fairness and Full Disclosure Act of 2005’’. 

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

7 as follows: 

Sec. 1. Short title and table of contents. 

Sec. 2. Findings and purpose. 

TITLE I—FAIRNESS IN PLAN TERMINATIONS AND CONVERSIONS 

Sec. 101. Termination fairness standard for nonqualified deferred compensation 

plans in connection with pension plan terminations based on 

bankruptcy reorganization or in connection with conversions to 

cash balance plans. 

Sec. 102. Excise tax on funding nonqualified deferred compensation plans in 

the event of a pension plan termination based on bankruptcy 

reorganization or in the event of a conversion to a cash balance 

plan. 

TITLE II—FAIRNESS IN FUNDING 

Sec. 201. Prohibition under ERISA against funding nonqualified deferred compensation plans while maintaining underfunded defined benefit 

plans. 

Sec. 202. Excise tax on funding nonqualified deferred compensation plans while 

maintaining underfunded defined benefit plans. 

TITLE III—FAIRNESS IN DISCLOSURE 

Sec. 301. Disclosure with respect to benefits under nonqualified deferred compensation plans. 
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1 SEC. 2. FINDINGS AND PURPOSE. 

2 (a) FINDINGS.—The Congress finds as follows: 

3 (1) The pension system sponsored by private 

4 employers is in a weakened state due to industry5 wide crises, changing market forces, and the pres6 sures of globalization. 

7 (2) Employers increasingly are terminating or 

8 reducing the benefits provided under traditional de9 fined benefit pension plans. 

10 (3) Over 44,000,000 workers, retirees, and 

11 their families depend on defined benefit pension 

12 plans as a critical component of their retirement se13 curity in addition to Social Security. 

14 (4) Defined benefit pension plans are currently 

15 estimated to be underfunded by over 

16 $450,000,000,000, and the Pension Benefit Guar17 anty Corporation, the agency that insures traditional 

18 pensions, had a 2004 deficit of over 

19 $23,000,000,000. 

20 (5) The Congress in enacting the Employee Re21 tirement Income Security Act of 1974 intended em22 ployers to adequately fund their pension plans and 

23 did not intend for the Pension Benefit Guaranty 

24 Corporation to be used as a means for restructuring 

25 companies to escape their unfunded pension liabil26 ities or circumvent collective bargaining obligations. 
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1 (6) Cash balance pension plans were created to 

2 reduce traditional defined benefit pension obligations 

3 without statutory authorization, and adequate stand4 ards do not exist to adequately protect the pensions 

5 of pension plan participants, particularly older par6 ticipants. 

7 (7) Corporate executives often preserve or en8 hance executive pension and other benefits at the 

9 same time the benefits of non-highly paid employees 

10 are reduced. 

11 (b) PURPOSE.—It is the purpose of this Act to better 

12 protect the retirement benefits afforded to workers and 

13 retirees by protecting the solvency of the Pension Benefit 

14 Guaranty Corporation and ensuring equitable treatment 

15 of corporate executives as compared to treatment provided 

16 to other employees when restructuring employers shift un17 funded pension liabilities onto the Pension Benefit Guar18 anty Corporation or convert to cash balance pension plans 

19 without adequately protecting the retirement security of 

20 older workers. 
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1 TITLE I—FAIRNESS IN PLAN 

2 TERMINATIONS AND CONVER3 SIONS 

4 SEC. 101. TERMINATION FAIRNESS STANDARD FOR NON5 QUALIFIED DEFERRED COMPENSATION 

6 PLANS IN CONNECTION WITH PENSION PLAN 

7 TERMINATIONS BASED ON BANKRUPTCY RE8 ORGANIZATION OR IN CONNECTION WITH 

9 CONVERSIONS TO CASH BALANCE PLANS. 

10 (a) IN GENERAL.—Section 206 of the Employee Re11 tirement Income Security Act of 1974 (29 U.S.C. 1056) 

12 is amended by adding at the end the following new sub13 section: 

14 ‘‘(g) TERMINATION FAIRNESS STANDARD FOR NON15 QUALIFIED DEFERRED COMPENSATION PLANS IN CON16 NECTION WITH PENSION PLAN TERMINATIONS BASED

17 ON BANKRUPTCY REORGANIZATION OR IN CONNECTION

18 WITH CONVERSIONS TO CASH BALANCE PLANS.— 

19 ‘‘(1) IN GENERAL.—In any case in which a cor20 poration is a plan sponsor of a defined benefit plan 

21 with respect to which a plan amendment is adopted 

22 that has the effect of— 

23 ‘‘(A) implementing a distress termination 

24 of the plan under section 4041(c) based on 

25 bankruptcy reorganization or a termination of 
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1 the plan initiated by the Pension Benefit Guar2 anty Corporation under section 4042 based on 

3 bankruptcy reorganization, in any case in which 

4 the plan is not sufficient for guaranteed bene5 fits (within the meaning of section 4041(d)(2)) 

6 as of the proposed termination date, or 

7 ‘‘(B) converting such plan to a cash bal8 ance plan, in any case in which the amend9 ment— 

10 ‘‘(i) results in a significant reduction 

11 in the rate of future benefit accruals (with12 in the meaning of section 204(h)(1)) of 

13 participants with at least 10 years of serv14 ice under the plan, or 

15 ‘‘(ii) does not provide for an election 

16 by affected participants with at least 10 

17 years of service under the plan (and their 

18 beneficiaries) to retain coverage under the 

19 terms of the plan as in effect immediately 

20 prior to the amendment, 

21 any covered deferred compensation plan established 

22 or maintained by such plan sponsor after the date 

23 of the adoption of such plan amendment shall meet 

24 the termination fairness standard of this subsection 

25 with respect to such plan amendment. 
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1 ‘‘(2) TERMINATION FAIRNESS STANDARD.—A 

2 covered deferred compensation plan established or 

3 maintained by a plan sponsor described in para4 graph (1) meets the termination fairness standard of 

5 this subsection with respect to a plan amendment 

6 described in paragraph (1) if, during the 5-year pe7 riod beginning on the date of the adoption of such 

8 plan amendment— 

9 ‘‘(A) no amount of deferred compensation 

10 accrues to a disqualified individual under the 

11 terms of such covered deferred compensation 

12 plan (irrespective of whether the accrual in de13 ferred compensation is expressed in the form of 

14 a promise, a guarantee, or any other represen15 tation), and 

16 ‘‘(B) in the case of a covered deferred com17 pensation plan established during or after the 

18 1-year period preceding the notice date (or any 

19 amendment to a covered deferred compensation 

20 plan if such amendment is adopted during or 

21 after such 1-year period), no distribution of ac22 crued deferred compensation is made under 

23 such plan (or such amendment) to a disquali24 fied individual. 
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1 ‘‘(3) DEFINITIONS.—For purposes of this sub2 section— 

3 ‘‘(A) CASH BALANCE PLAN.— 

4 ‘‘(i) IN GENERAL.—The term ‘cash 

5 balance plan’ means a defined benefit plan 

6 under which the accrued benefit is ex7 pressed to participants and beneficiaries as 

8 an amount other than an annual benefit 

9 commencing at normal retirement age. 

10 ‘‘(ii) REGULATIONS TO INCLUDE SIMI11 LAR OR OTHER HYBRID PLANS.—The Sec12 retary shall issue regulations which provide 

13 that a defined benefit plan (or any portion 

14 of such a plan) which has an effect similar 

15 to a plan described in clause (i) shall be 

16 treated as a cash balance plan. Such regu17 lations may provide that if a plan sponsor 

18 represents in communications to partici19 pants and beneficiaries that a plan amend20 ment results in a plan being described in 

21 the preceding sentence, such plan shall be 

22 treated as a cash balance plan. 

23 ‘‘(B) NOTICE DATE.—The term ‘notice 

24 date’ means, with respect to an amendment de25 scribed in paragraph (1)— 
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1 ‘‘(i) in the case of a distress termi2 nation under section 4041(d), the date of 

3 the advance notice of intent to terminate 

4 provided pursuant to section 4041(a)(2), 

5 ‘‘(ii) in the case of a termination initi6 ated by the Pension Benefit Guaranty Cor7 poration under section 4042, the date of 

8 the application to the court under section 

9 4042(c), and 

10 ‘‘(iii) in the case of a conversion to a 

11 cash balance plan, the date of the adoption 

12 of the amendment. 

13 ‘‘(C) COVERED DEFERRED COMPENSATION

14 PLAN.— 

15 ‘‘(i) IN GENERAL.—The term ‘covered 

16 deferred compensation plan’ means any 

17 plan providing for the deferral of com18 pensation of a disqualified individual, 

19 whether or not— 

20 ‘‘(I) compensation of the dis21 qualified individual which is deferred 

22 under such plan is subject to substan23 tial risk of forfeiture, 

24 ‘‘(II) the disqualified individual’s 

25 rights to the compensation deferred 
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1 under the plan are no greater than 

2 the rights of a general creditor of the 

3 plan sponsor, 

4 ‘‘(III) all amounts set aside (di5 rectly or indirectly) for purposes of 

6 paying the deferred compensation (in7 cluding income), and all income at8 tributable to such amounts, remain 

9 (until made available to the disquali10 fied individual or other beneficiary) 

11 solely the property of the plan sponsor 

12 (without being restricted to the provi13 sion of benefits under the plan), 

14 ‘‘(IV) the amounts referred to in 

15 subclause (III) are available to satisfy 

16 the claims of the plan sponsor’s gen17 eral creditors at all times (not merely 

18 after bankruptcy or insolvency), and 

19 ‘‘(V) some or all of the com20 pensation of the disqualified individual 

21 which is deferred under such plan is 

22 guaranteed by an insurance company, 

23 insurance service, or other similar or24 ganization. 
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1 ‘‘(ii) EXCEPTION FOR QUALIFIED

2 PLANS.—Such term shall not include a 

3 plan that is— 

4 ‘‘(I) described in section 

5 219(g)(5)(A) of the Internal Revenue 

6 Code of 1986, or 

7 ‘‘(II) an eligible deferred com8 pensation plan (as defined in section 

9 457(b) of such Code) of an eligible 

10 employer described in section 

11 457(e)(1)(A) of such Code. 

12 ‘‘(iii) PLAN INCLUDES ARRANGE13 MENTS, ETC.—For purposes of this sub14 paragraph, the term ‘plan’ includes any 

15 agreement or arrangement. 

16 ‘‘(D) DISQUALIFIED INDIVIDUAL.—The 

17 term ‘disqualified individual’ means a director 

18 or executive officer of the plan sponsor. 

19 ‘‘(E) TERMINATION BASED ON BANK20 RUPTCY REORGANIZATION.—A termination of a 

21 plan which is a distress termination under sec22 tion 4041(c) or a termination instituted by the 

23 Pension Benefit Guaranty Corporation under 

24 section 4042 is ‘based on bankruptcy reorga25 nization’ if such termination is based in whole 
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1 or in part on the filing, by or against any per2 son who is a contributing sponsor of such plan 

3 or a member of such sponsor’s controlled group, 

4 of a petition seeking reorganization in a case 

5 under title 11, United States Code, or under 

6 any similar law of a State or political subdivi7 sion of a State (or such a case in which liquida8 tion is sought has been converted to a case in 

9 which reorganization is sought). 

10 ‘‘(F) TITLE IV TERMINOLOGY.—Any term 

11 used in this subsection which is defined in sec12 tion 4001(a) shall have the meaning provided 

13 such term in section 4001(a). 

14 ‘‘(4) SPECIAL RULES.— 

15 ‘‘(A) COORDINATED BENEFITS.—If the 

16 benefits of 2 or more defined benefit plans es17 tablished or maintained by an employer are co18 ordinated in such a manner as to have the ef19 fect of the adoption of an amendment described 

20 in paragraph (1), the sponsor of the defined 

21 benefit plan or plans providing for such coordi22 nation shall be treated as having adopted such 

23 a plan amendment as of the date such coordina24 tion begins. 
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1 ‘‘(B) MULTIPLE AMENDMENTS.—The Sec2 retary shall issue regulations to prevent the 

3 avoidance of the purposes of this subsection 

4 through the use of 2 or more plan amendments 

5 rather than a single amendment. 

6 ‘‘(C) CONTROLLED GROUPS, ETC.—For 

7 purposes of this subsection, all persons treated 

8 as a single employer under subsection (b), (c), 

9 (m), or (o) of section 414 of the Internal Rev10 enue Code of 1986 shall be treated as 1 em11 ployer. 

12 ‘‘(D) TREATMENT OF EARNINGS.—Ref13 erences to deferred compensation shall be treat14 ed as including references to income attrib15 utable to such compensation or such income. 

16 ‘‘(5) COORDINATION.—The Secretary and the 

17 Secretary of the Treasury shall ensure, through the 

18 execution of an interagency memorandum of under19 standing among such Secretaries, that regulations, 

20 rulings, and interpretations issued by such Secre21 taries relating to the same matter over which both 

22 such Secretaries have responsibility under this sub23 section and section 4980H of the Internal Revenue 

24 Code of 1986 are administered so as to have the 

25 same effect at all times. 
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1 ‘‘(6) EFFECT OF WAIVER GRANTED BY SEC2 RETARY OF THE TREASURY.—To the extent that any 

3 requirement of the termination fairness standard of 

4 section 4980H(a)(2) of the Internal Revenue Code 

5 of 1986 is waived by the Secretary of the Treasury 

6 with respect to any disqualified individual under sec7 tion 4980H(g) of such Code in the case of any plan 

8 amendment having the effect of a termination de9 scribed in paragraph (1)(A) of this subsection, such 

10 requirement under the termination fairness standard 

11 of paragraph (2) of this subsection shall not apply 

12 with respect to such individual in the case of such 

13 plan amendment.’’. 

14 (b) EFFECTIVE DATE.—The amendment made by 

15 this section shall apply to— 

16 (1) plan amendments adopted on or after May 

17 10, 2005, and 

18 (2) plan amendments adopted before such date 

19 implementing a plan termination as described in sec20 tion 206(g)(1) of the Employee Retirement Income 

21 Security Act of 1974 (as added by this section) 

22 based on a bankruptcy reorganization in a case 

23 under title 11 of the United States Code (or under 

24 any similar law of a State or a political subdivision 

25 of a State) pending on such date. 
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1 SEC. 102. EXCISE TAX ON FUNDING NONQUALIFIED DE2 FERRED COMPENSATION PLANS IN THE 

3 EVENT OF A PENSION PLAN TERMINATION 

4 BASED ON BANKRUPTCY REORGANIZATION 

5 OR IN THE EVENT OF A CONVERSION TO A 

6 CASH BALANCE PLAN. 

7 (a) IN GENERAL.—Chapter 43 of the Internal Rev8 enue Code of 1986 (relating to qualified pension, etc., 

9 plans) is amended by adding at the end the following new 

10 section: 

11 ‘‘SEC. 4980H. FUNDING NONQUALIFIED DEFERRED COM12 PENSATION PLANS. 

13 ‘‘(a) IMPOSITION OF TAX IN THE EVENT OF A PEN14 SION PLAN TERMINATION BASED ON BANKRUPTCY RE15 ORGANIZATION OR IN THE EVENT OF A CONVERSION OF

16 A PENSION PLAN TO A CASH BALANCE PLAN.— 

17 ‘‘(1) IN GENERAL.—In any case in which a cor18 poration is a plan sponsor of a defined benefit plan 

19 with respect to which an plan amendment is adopted 

20 that has the effect of— 

21 ‘‘(A) implementing a distress termination 

22 of the plan under section 4041(c) of the Em23 ployee Retirement Income Security Act of 1974 

24 based on bankruptcy reorganization or a termi25 nation of the plan initiated by the Pension Ben26 efit Guaranty Corporation under section 4042 
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1 of such Act based on bankruptcy reorganiza2 tion, in any case in which the plan is not suffi3 cient for guaranteed benefits (within the mean4 ing of section 4041(d)(2) of such Act) as of the 

5 proposed termination date, or 

6 ‘‘(B) converting such plan to a cash bal7 ance plan, in any case in which the amend8 ment— 

9 ‘‘(i) results in a significant reduction 

10 in the rate of future benefit accruals (with11 in the meaning of section 4980F(e)(1)) of 

12 participants with at least 10 years of serv13 ice under the plan, or 

14 ‘‘(ii) does not provide for an election 

15 by affected participants with at least 10 

16 years of service under the plan (and their 

17 beneficiaries) to retain coverage under the 

18 terms of the plan as in effect immediately 

19 prior to the amendment, 

20 there is hereby imposed a tax on any failure to meet 

21 the termination fairness standard of paragraph (2) 

22 with respect to such plan amendment. 

23 ‘‘(2) TERMINATION FAIRNESS STANDARD.—A 

24 covered deferred compensation plan established or 

25 maintained by a plan sponsor described in para-
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1 graph (1) meets the termination fairness standard of 

2 this subsection with respect to a plan amendment 

3 described in paragraph (1) if, during the 5-year pe4 riod beginning on the date of the adoption of such 

5 plan amendment— 

6 ‘‘(A) no amount of deferred compensation 

7 accrues to a disqualified individual under the 

8 terms of such covered deferred compensation 

9 plan, irrespective of whether the accrual in de10 ferred compensation is expressed in the form of 

11 a promise, a guarantee, or any other represen12 tation, and 

13 ‘‘(B) in the case of a covered deferred com14 pensation plan established during or after the 

15 1-year period preceding the notice date (or any 

16 amendment to a covered deferred compensation 

17 plan if such amendment is adopted during or 

18 after such 1-year period), no distribution of ac19 crued deferred compensation is made under 

20 such plan (or such amendment) to a disquali21 fied individual. 

22 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im23 posed by subsection (a) shall be equal to the amount of 

24 the accrual described in subsection (a)(2)(A) comprising 
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1 the failure or the distribution described in subsection 

2 (a)(2)(B) comprising the failure. 

3 ‘‘(c) LIABILITY FOR TAX.—The plan sponsor shall be 

4 liable for the tax imposed by this section. 

5 ‘‘(d) DEFINITIONS.—For purposes of this section— 

6 ‘‘(1) CASH BALANCE PLAN.— 

7 ‘‘(A) IN GENERAL.—The term ‘cash bal8 ance plan’ means a defined benefit plan under 

9 which the accrued benefit is expressed to par10 ticipants and beneficiaries as an amount other 

11 than an annual benefit commencing at normal 

12 retirement age. 

13 ‘‘(B) REGULATIONS TO INCLUDE SIMILAR

14 OR OTHER HYBRID PLANS.—The Secretary 

15 shall issue regulations which provide that a de16 fined benefit plan (or any portion of such a 

17 plan) which has an effect similar to a plan de18 scribed in subparagraph (A) shall be treated as 

19 a cash balance plan. Such regulations may pro20 vide that if a plan sponsor represents in com21 munications to participants and beneficiaries 

22 that a plan amendment results in a plan being 

23 described in the preceding sentence, such plan 

24 shall be treated as a cash balance plan. 
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1 ‘‘(2) NOTICE DATE.—The term ‘notice date’ 

2 means with respect to an amendment described in 

3 subsection (a)(1)— 

4 ‘‘(A) in the case of a distress termination 

5 under section 4041(d) of the Employee Retire6 ment Income Security Act of 1974, the date of 

7 the advance notice of intent to terminate pro8 vided pursuant to section 4041(a)(2) of such 

9 Act, 

10 ‘‘(B) in the case of a termination initiated 

11 by the Pension Benefit Guaranty Corporation 

12 under section 4042 of such Act, the date of the 

13 application to the court under section 4042(c) 

14 of such Act, and 

15 ‘‘(C) in the case of a conversion to a cash 

16 balance plan, the date of the adoption of the 

17 amendment. 

18 ‘‘(3) COVERED DEFERRED COMPENSATION

19 PLAN.— 

20 ‘‘(A) IN GENERAL.—The term ‘covered de21 ferred compensation plan’ means any plan pro22 viding for the deferral of compensation of a dis23 qualified individual, whether or not— 

24 ‘‘(i) compensation of the disqualified 

25 individual which is deferred under such 
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1 plan is subject to substantial risk of for2 feiture, 

3 ‘‘(ii) the disqualified individual’s 

4 rights to the compensation deferred under 

5 the plan are no greater than the rights of 

6 a general creditor of the plan sponsor, 

7 ‘‘(iii) all amounts set aside (directly or 

8 indirectly) for purposes of paying the de9 ferred compensation, and all income attrib10 utable to such amounts, remain (until 

11 made available to the participant or other 

12 beneficiary) solely the property of the 

13 (without being restricted to the provision 

14 of benefits under the plan), 

15 ‘‘(iv) the amounts referred to in 

16 clause (iii) are available to satisfy the 

17 claims of the plan sponsor’s general credi18 tors at all times (not merely after bank19 ruptcy or insolvency), and 

20 ‘‘(v) some or all of the compensation 

21 of the disqualified individual which is de22 ferred under such plan is guaranteed by an 

23 insurance company, insurance service, or 

24 other similar organization. 
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1 ‘‘(B) EXCEPTION FOR QUALIFIED

2 PLANS.—Such term shall not include a plan 

3 that is— 

4 ‘‘(i) described in section 219(g)(5)(A), 

5 or 

6 ‘‘(ii) an eligible deferred compensation 

7 plan (as defined in section 457(b)) of an 

8 eligible employer described in section 

9 457(e)(1)(A). 

10 ‘‘(C) PLAN INCLUDES ARRANGEMENTS, 

11 ETC.—For purposes of this paragraph, the term 

12 ‘plan’ includes any agreement or arrangement. 

13 ‘‘(4) DISQUALIFIED INDIVIDUAL.—The term 

14 ‘disqualified individual’ means a director or executive 

15 officer of the plan sponsor. 

16 ‘‘(5) TERMINATION BASED ON BANKRUPTCY

17 REORGANIZATION.—A termination of a plan which is 

18 a distress termination under section 4041(c) of the 

19 Employee Retirement Income Security Act of 1974 

20 or a termination instituted by the Pension Benefit 

21 Guaranty Corporation under section 4042 of such 

22 Act is ‘based on bankruptcy reorganization’ if such 

23 termination is based in whole or in part on the fil24 ing, by or against any person who is a contributing 

25 sponsor of such plan or a member of such sponsor’s 
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1 controlled group, of a petition seeking reorganization 

2 in a case under title 11, United States Code, or 

3 under any similar law of a State or political subdivi4 sion of a State (or such a case in which liquidation 

5 is sought has been converted to a case in which reor6 ganization is sought). 

7 ‘‘(6) TITLE IV TERMINOLOGY.—Any term used 

8 in this section which is defined in section 4001(a) of 

9 the Employee Retirement Income Security Act of 

10 1974 shall have the meaning provided such term in 

11 such section 4001(a). 

12 ‘‘(e) SPECIAL RULES.— 

13 ‘‘(1) COORDINATED BENEFITS.—If the benefits 

14 of 2 or more defined benefit plans established or 

15 maintained by an employer are coordinated in such 

16 a manner as to have the effect of the adoption of an 

17 amendment described in subsection (a)(1), the spon18 sor of the defined benefit plan or plans providing for 

19 such coordination shall be treated as having adopted 

20 such a plan amendment as of the date such coordi21 nation begins. 

22 ‘‘(2) MULTIPLE AMENDMENTS.—The Secretary 

23 shall issue regulations to prevent the avoidance of 

24 the purposes of this section through the use of 2 or 
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1 more plan amendments rather than a single amend2 ment. 

3 ‘‘(3) CONTROLLED GROUPS, ETC.—For pur4 poses of this section, all persons treated as a single 

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

6 section 414 shall be treated as 1 employer. 

7 ‘‘(4) TREATMENT OF EARNINGS.—References to 

8 deferred compensation shall be treated as including 

9 references to income attributable to such compensa10 tion or such income. 

11 ‘‘(f) COORDINATION.—The Secretary and the Sec12 retary of Labor shall ensure, through the execution of an 

13 interagency memorandum of understanding among such 

14 Secretaries, that regulations, rulings, and interpretations 

15 issued by such Secretaries relating to the same matter 

16 over which both such Secretaries have responsibility under 

17 this section and section 206(g) of the Employee Retire18 ment Income Security Act of 1974 are administered so 

19 as to have the same effect at all times. 

20 ‘‘(g) WAIVER.— 

21 ‘‘(1) IN GENERAL.—In the case of any plan 

22 amendment having the effect of a termination de23 scribed in subsection (a)(1)(A), the Secretary may 

24 waive the application of any requirement of the ter25 mination fairness standard of subsection (a)(2) with 
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1 respect to any disqualified individual who first com2 mences service for the plan sponsor after the notice 

3 date with respect to such plan amendment. The Sec4 retary may grant any such waiver in the case of any 

5 such plan amendment with respect to any such dis6 qualified individual only after consultation with the 

7 Pension Benefit Guaranty Corporation. The Sec8 retary shall promptly notify the Secretary of Labor 

9 of any such waiver granted by the Secretary. 

10 ‘‘(2) REQUIREMENTS FOR WAIVER.—A waiver 

11 may be granted under paragraph (1) only— 

12 ‘‘(A) upon the filing with the Secretary by 

13 the plan sponsor of an application for such 

14 waiver, in such form and manner as shall be 

15 prescribed in regulations of the Secretary, 

16 ‘‘(B) upon a showing, to the satisfaction of 

17 the Secretary, that such waiver is a business 

18 necessity for the plan sponsor, as determined 

19 under such regulations, and is in the interest of 

20 plan participants and beneficiaries, as deter21 mined under such regulations, and 

22 ‘‘(C) after the participants, in such form 

23 and manner as shall be provided in such regula24 tions, have been notified of the filing of the ap25 plication for the waiver and have been provided 
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1 a reasonable opportunity to provide in advance 

2 comments to the Secretary regarding the pro3 posed waiver.’’. 

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

5 for chapter 43 of such Code is amended by adding at the 

6 end the following new item: 

‘‘Sec. 4980H. Funding nonqualified deferred compensation plans.’’. 

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

8 this section shall apply to— 

9 (1) plan amendments adopted on or after May 

10 10, 2005, and 

11 (2) plan amendments adopted before such date 

12 implementing a plan termination as described in sec13 tion 4980H(a)(1)(A) of the Internal Revenue Code 

14 of 1986 (as added by this section) based on a bank15 ruptcy reorganization in a case under title 11 of the 

16 United States Code (or under any similar law of a 

17 State or a political subdivision of a State) pending 

18 on such date. 
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1 TITLE II—FAIRNESS IN FUNDING 

2 SEC. 201. PROHIBITION UNDER ERISA AGAINST FUNDING 

3 NONQUALIFIED DEFERRED COMPENSATION 

4 PLANS WHILE MAINTAINING UNDERFUNDED 

5 DEFINED BENEFIT PLANS. 

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

7 the Employee Retirement Income Security Act of 1974 is 

8 amended— 

9 (1) by redesignating section 308 as section 309; 

10 and 

11 (2) by inserting after section 307 the following 

12 new section: 

13 ‘‘FUNDING REQUIREMENTS WITH RESPECT TO UNDER14 FUNDED SINGLE-EMPLOYER DEFINED BENEFIT

15 PLAN VIOLATED BY FUNDING OF COVERED DE16 FERRED COMPENSATION PLAN

17 ‘‘SEC. 308. (a) In any case in which, as of the valu18 ation date for any plan year of a defined benefit plan 

19 which is a single-employer plan, the funded current liabil20 ity percentage of such plan is less than 75 percent, during 

21 the period beginning with such date and ending imme22 diately before the valuation date for the following plan 

23 year— 

24 ‘‘(1) the plan sponsor of such defined benefit 

25 plan (or any member of the plan sponsor’s controlled 
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1 group) may not contribute to a covered deferred 

2 compensation plan maintained by the plan sponsor 

3 (or any such member), and 

4 ‘‘(2) a disqualified individual may not accrue 

5 any amount of deferred compensation under the 

6 terms of any covered deferred compensation plan 

7 maintained by the plan sponsor of such defined ben8 efit plan (or by any member of the plan sponsor’s 

9 controlled group), irrespective of whether the accrual 

10 in deferred compensation is expressed in the form of 

11 a promise, a guarantee, or any other representation. 

12 ‘‘(b) For purposes of this section— 

13 ‘‘(1) The term ‘funded current liability percent14 age’ has the meaning provided in section 

15 302(d)(8)(B). 

16 ‘‘(2) The term ‘covered deferred compensation 

17 plan’ has the meaning provided in section 

18 206(g)(3)(C). 

19 ‘‘(3) The term ‘disqualifed individual’ has the 

20 meaning provided in section 206(g)(3)(D). 

21 ‘‘(4) The term ‘controlled group’ has the mean22 ing provided in section 302(c)(11)(B)(ii). 

23 ‘‘(c) To the extent that a waiver is granted by the 

24 Secretary of the Treasury under section 4980H(b)(2) of 

25 the Internal Revenue Code of 1986 with respect to any 
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1 contribution described in subsection (a)(1) or any accrual 

2 described in subsection (a)(2), the requirements of sub3 section (a) shall not apply with respect to such contribu4 tion or accrual.’’. 

5 (b) CLERICAL AMENDMENT.—The table of contents 

6 in section 1 of such Act is amended by striking the item 

7 relating to section 308 and inserting the following new 

8 items: 

‘‘Sec. 308. Funding requirements with respect to underfunded single-employer 

defined benefit plan violated by funding of covered deferred 

compensation plan. 

‘‘Sec. 309. Effective dates.’’. 

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

10 this section shall apply with respect to plan years begin11 ning on or after January 1, 2006. 

12 SEC. 202. EXCISE TAX ON FUNDING NONQUALIFIED DE13 FERRED COMPENSATION PLANS WHILE 

14 MAINTAINING UNDERFUNDED DEFINED BEN15 EFIT PLANS. 

16 (a) IN GENERAL.—Section 4980H of the Internal 

17 Revenue Code of 1986 (as added by section 102 of this 

18 Act) is amended— 

19 (1) by redesignating subsections (b) through (g) 

20 as subsections (c) through (h), respectively; and 

21 (2) by inserting after subsection (a) the fol22 lowing new subsection: 
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1 ‘‘(b) IMPOSITION OF TAX ON FUNDING OF COVERED

2 DEFERRED COMPENSATION PLAN WHILE MAINTAINING

3 UNDERFUNDED DEFINED BENEFIT PLAN.— 

4 ‘‘(1) IN GENERAL.—In any case in which, as of 

5 the valuation date for any plan year of a defined 

6 benefit plan which is a single-employer plan, the 

7 funded current liability percentage of such plan is 

8 less than 75 percent, there is hereby imposed a tax 

9 on— 

10 ‘‘(A) the contribution by the plan sponsor 

11 of such defined benefit plan (or any member of 

12 the plan sponsor’s controlled group), during the 

13 period beginning with such date and ending the 

14 the valuation date for the following plan year, 

15 of any amount to a covered deferred compensa16 tion plan maintained by the plan sponsor (or 

17 any such member), and 

18 ‘‘(B) the accrual, during such period, of 

19 any amount of deferred compensation to a dis20 qualified individual under the terms of any cov21 ered deferred compensation plan maintained by 

22 the plan sponsor of such defined benefit plan, 

23 irrespective of whether the accrual in deferred 

24 compensation is expressed in the form of a 
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1 promise, a guarantee, or any other representa2 tion. 

3 ‘‘(2) WAIVER.— 

4 ‘‘(A) IN GENERAL.—The Secretary may 

5 waive the imposition of a tax under this sub6 section on any contribution described in para7 graph (1)(A) or any accrual described in para8 graph (1)(B). The Secretary may grant any 

9 such waiver only after consultation with the 

10 Pension Benefit Guaranty Corporation. The 

11 Secretary shall promptly notify the Secretary of 

12 Labor of any such waiver granted by the Sec13 retary. 

14 ‘‘(B) REQUIREMENTS FOR WAIVER.—A 

15 waiver may be granted under subparagraph (A) 

16 only— 

17 ‘‘(i) upon the filing with the Secretary 

18 by the plan sponsor of an application for 

19 such waiver, in such form and manner as 

20 shall be prescribed in regulations of the 

21 Secretary, 

22 ‘‘(ii) upon a showing, to the satisfac23 tion of the Secretary, that such waiver is 

24 a business necessity for the plan sponsor, 

25 as determined under such regulations, and 
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1 is in the interest of plan participants and 

2 beneficiaries, as determined under such 

3 regulations, and 

4 ‘‘(iii) after the participants, in such 

5 form and manner as shall be provided in 

6 such regulations, have been notified of the 

7 filing of the application for the waiver and 

8 have been provided a reasonable oppor9 tunity to provide in advance comments to 

10 the Secretary regarding the proposed waiv11 er.’’; and 

12 (3) in subsection (c) (as redesignated by para13 graph (1))— 

14 (A) by striking ‘‘The amount of the tax’’ 

15 and inserting the following: 

16 ‘‘(1) SUBSECTION (a).—The amount of the 

17 tax’’; and 

18 (B) by adding at the end the following new 

19 paragraph: 

20 ‘‘(2) SUBSECTION (b).—The amount of the tax 

21 imposed by subsection (b) shall be equal to the sum 

22 of— 

23 ‘‘(A) the amount of any contribution de24 scribed in subsection (b)(1), plus 
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1 ‘‘(B) the amount of any accrual described 

2 in subsection (b)(2).’’; and 

3 (4) in subsection (d) (as redesignated by para4 graph (1)), by striking ‘‘the tax’’ and inserting ‘‘any 

5 tax’’. 

6 (b) CONFORMING AMENDMENT.—Section 206(g)(6) 

7 of the Employee Retirement Income Security Act of 1974 

8 (as added by section 101 of this Act) is amended by strik9 ing ‘‘section 4980H(g)’’ and inserting ‘‘section 

10 4980H(h)’’. 

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

12 this section shall apply with respect to plan years begin13 ning on or after January 1, 2006. 

14 TITLE III—FAIRNESS IN 

15 DISCLOSURE 

16 SEC. 301. DISCLOSURE WITH RESPECT TO BENEFITS 

17 UNDER NONQUALIFIED DEFERRED COM18 PENSATION PLANS. 

19 (a) IN GENERAL.—Section 101 of the Employee Re20 tirement Income Security Act of 1974 (29 U.S.C. 1021) 

21 is amended— 

22 (1) by redesignating subsection (j) as sub23 section (k); and 

24 (2) by inserting after subsection (i) the fol25 lowing new subsection: 
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1 ‘‘(j) DISCLOSURE WITH RESPECT TO BENEFITS

2 UNDER COVERED DEFERRED COMPENSATION PLANS.— 

3 ‘‘(1) IN GENERAL.—In any case in which— 

4 ‘‘(A) an amendment to a pension plan is 

5 adopted which has the effect of— 

6 ‘‘(i) eliminating future benefit accru7 als under the plan, 

8 ‘‘(ii) converting the plan to a cash bal9 ance plan in a case described in section 

10 206(g)(1)(B), 

11 ‘‘(iii) reducing the rate of future ben12 efit accruals under the plan (in the case of 

13 a defined benefit plan), or 

14 ‘‘(iv) reducing future employer con15 tributions under the plan (in the case of a 

16 defined contribution plan), or 

17 ‘‘(B) the plan administrator of a pension 

18 plan has filed under section 4041(a)(2) a notice 

19 of intent to terminate such plan in a distress 

20 termination under section 4041(c) based on 

21 bankruptcy reorganization or, in advance of fil22 ing such a notice, has filed a motion with the 

23 court in the proceedings relating to such bank24 ruptcy reorganization seeking approval to com-
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1 mence proceedings for such a distress termi2 nation, 

3 the plan administrator shall provide to each plan 

4 participant and beneficiary a notice under this sub5 section with respect to each covered deferred com6 pensation plan maintained by the plan sponsor of 

7 the pension plan (and each member of the plan 

8 sponsor’s controlled group). 

9 ‘‘(2) NOTICE.—A notice required under this 

10 subsection with respect to a covered deferred com11 pensation plan shall set forth, in language calculated 

12 to be understood by the average pension plan partic13 ipant— 

14 ‘‘(A) a complete summary description of 

15 the terms of the covered deferred compensation 

16 plan, 

17 ‘‘(B) the actuarial present value of the 

18 benefit liabilities of the covered deferred com19 pensation plan, as of the most recent valuation 

20 date of such plan, 

21 ‘‘(C) any additional cost to the plan spon22 sor (or to the member of the plan sponsor’s 

23 controlled group), for the preceding plan year of 

24 such plan, of maintaining such covered deferred 

25 compensation plan, including tax expenditures 
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1 attributable to the maintenance of such plan 

2 (or, if not known on the date of the notice, a 

3 reasonable estimation thereof), and 

4 ‘‘(D) in any case described in paragraph 

5 (1)(B)— 

6 ‘‘(i) a statement that the notice of in7 tent to terminate or motion has been filed, 

8 and 

9 ‘‘(ii) a statement of the extent to 

10 which the actuarial present value of benefit 

11 liabilities of the pension plan referred to in 

12 paragraph (1)(B) is expected to be reduced 

13 by reason of the termination. 

14 ‘‘(3) TIMING OF NOTICE.—A notice under this 

15 subsection shall be provided— 

16 ‘‘(A) not later than 15 days after— 

17 ‘‘(i) the date of the adoption of the 

18 amendment described in paragraph (1)(A), 

19 or 

20 ‘‘(ii) the date of the notice of intent to 

21 terminate described in paragraph (1)(B), 

22 (as the case may be), and 

23 ‘‘(B) in the same manner as is provided 

24 under section 104(b)(1) with respect to sum-
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1 mary descriptions of plan modifications or 

2 changes. 

3 ‘‘(4) DEFINITIONS.—For purposes of this sub4 section— 

5 ‘‘(A) The term ‘cash balance plan’ has the 

6 meaning provided in section 206(g)(3)(A). 

7 ‘‘(B) The term ‘covered deferred com8 pensation plan’ has the meaning provided in 

9 section 206(g)(3)(C). 

10 ‘‘(C) The term ‘controlled group’ has the 

11 meaning provided in section 302(c)(11)(B)(ii). 

12 ‘‘(D) Whether a termination of a plan 

13 which is a distress termination under section 

14 4041(c) is ‘based on bankruptcy reorganization’ 

15 shall be determined as provided in section 

16 206(g)(3)(E).’’. 

17 (b) ENFORCEMENT.—Section 502(c)(1) of such Act 

18 (29 U.S.C. 1132(c)(1)) is amended by striking ‘‘or section 

19 101(e)(1)’’ and inserting ‘‘or subsection (e)(1) or (j)(1) 

20 of section 101’’. 

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

22 this section shall apply with respect to— 

23 (1) plan amendments adopted on or after Janu24 ary 1, 2006, and 
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1 (2) notices of intent to terminate or motions 

2 (described in section 101(j)(1)(B) of the Employee 

3 Retirement Income Security Act of 1974 (as added 

4 by this section)) filed on or after such date. 

Æ