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104TH CONGRESS

1ST SESSION H. R. 37

To amend the Employee Retirement Income Security Act of 1974 to improve

pension plan funding.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 4, 1995

Mr. FAWELL introduced the following bill; which was referred to the

Committee on Economic and Educational Opportunities

A BILL

To amend the Employee Retirement Income Security Act

of 1974 to improve pension plan funding.

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 ‘‘Pension Funding Im5 provement Act of 1995’’.

6 SEC. 2. AMENDMENT OF ERISA.

7 The sections of the Employee Retirement Income Se8 curity Act of 1974 which are amended by the subsequent

9 provisions of this Act are amended so as to read as such

10 sections would read if the Uruguay Round Agreements
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1 Act had not been enacted. References to such sections in

2 the subsequent provisions of this Act shall be deemed ref3 erences to such sections as amended by this section. This

4 section shall be effective as if included in the Uruguay

5 Round Agreements Act.

6 TITLE I—PENSION PLAN

7 FUNDING

8 SEC. 101. AMENDMENTS TO PENSION PLAN FUNDING RE9 QUIREMENTS.

10 Section 302(a)(2) of the Employee Retirement In11 come Security Act of 1974 (29 U.S.C. 1082(a)(2)) is

12 amended by striking ‘‘the excess of the total charges to

13 the funding standard account’’ through the end of that

14 sentence, and inserting ‘‘the largest of—

15 ‘‘(A) the lesser of—

16 ‘‘(i) the excess of the total charges to

17 the funding standard account for all plan

18 years (beginning with the first plan year to

19 which this section applies) over the total

20 credits to such account for such years;

21 ‘‘(ii) the excess of the total charges to

22 the alternative minimum funding standard

23 account for such plan years over the total

24 credits to such account for such years;
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1 ‘‘(B) the excess (if any) of the

2 underfunding reduction requirement (if any) for

3 the plan year applicable under subsection (d)

4 over the amount considered contributed by the

5 employer to or under the plan for the plan year;

6 or

7 ‘‘(C) the excess (if any) of the solvency

8 maintenance requirement (if any) for the plan

9 year applicable under subsection (g) over the

10 amount considered contributed by the employer

11 to or under the plan for the plan year.’’

12 SEC. 102. UNDERFUNDING REDUCTION REQUIREMENT.

13 Subsection (d) of section 302 of the Employee Retire14 ment Income Security Act of 1974 (29 U.S.C. 1082(d))

15 is amended to read as follows:

16 ‘‘(d) UNDERFUNDING REDUCTION REQUIREMENT

17 FOR PLANS THAT ARE NOT MULTIEMPLOYER PLANS.—

18 ‘‘(1) UNDERFUNDING REDUCTION REQUIRE19 MENT.—In the case of a defined benefit plan (other

20 than a multiemployer plan) which has a funded cur21 rent liability percentage of less than 100 percent (as

22 of the first day of the plan year), the underfunding

23 reduction requirement for such plan year is the sum

24 of—

25 ‘‘(A) an amount equal to the product of—
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1 ‘‘(i) the funded current liability per2 centage of the plan (as of such first day),

3 multiplied by

4 ‘‘(ii) 30 percent, reduced by the prod5 uct of—

6 ‘‘(I) .25 multiplied by

7 ‘‘(II) the excess (if any) of the

8 funded current liability percentage of

9 the plan (as of such first day) over 35

10 percent;

11 ‘‘(B) the expected increase in the current

12 liability attributable to benefits accruing during

13 the plan year;

14 ‘‘(C) the amount described in subsection

15 (b)(2)(C) as necessary to amortize any waived

16 funding deficiency; and

17 ‘‘(D) the unpredictable contingent event

18 amount (if any) for such plan year.

19 The underfunding reduction requirement shall not

20 exceed the sum of the amount necessary to increase

21 the funded current liability percentage (as of such

22 first day) to 100 percent and the amount determined

23 under subparagraph (B).

24 ‘‘(2) UNPREDICTABLE CONTINGENT EVENT

25 AMOUNT.—
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1 ‘‘(A) IN GENERAL.—The unpredictable

2 contingent event amount with respect to a plan

3 for any plan year is an amount equal to the

4 greater of—

5 ‘‘(i) the applicable percentage of the

6 product of—

7 ‘‘(I) 100 percent, reduced (but

8 not below zero) by the funded current

9 liability percentage for the plan year,

10 multiplied by

11 ‘‘(II) the amount of unpredict12 able contingent event benefits paid

13 during the plan year, including (ex14 cept as provided by the Secretary) any

15 payment for the purchase of an annu16 ity contract for a participant or bene17 ficiary with respect to such benefits,

18 or

19 ‘‘(ii) the amount which would be de20 termined for the plan year if the unpredict21 able contingent event benefit liabilities

22 were amortized in equal annual install23 ments over 7 plan years (beginning with

24 the plan year in which such event occurs).

25 ‘‘(B) APPLICABLE PERCENTAGE.—
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In the case of plan The applicable

years beginning in: percentage is:

1991 and 1992 ........................................... 5

1993 ........................................................... 10

1994 ........................................................... 15

1995 ........................................................... 20

1996 ........................................................... 30

1997 ........................................................... 40

1998 ........................................................... 50

1999 ........................................................... 60

2000 ........................................................... 70

2001 ........................................................... 80

2002 ........................................................... 90

2003 and thereafter ................................... 100

1 ‘‘(C) PARAGRAPH NOT TO APPLY TO EX2 ISTING BENEFITS.—This paragraph shall not

3 apply to unpredictable contingent event benefits

4 (and liabilities attributable thereto) for which

5 the event occurred before the first plan year be6 ginning after December 31, 1990.

7 ‘‘(D) SPECIAL RULE FOR FIRST YEAR OF

8 AMORTIZATION.—Unless the employer elects

9 otherwise, the amount determined under sub10 paragraph (A) for the plan year in which the

11 event occurs shall be equal to 150 percent of

12 the amount determined under subparagraph

13 (A)(i). The amount under subparagraph (A)(ii)

14 for subsequent plan years in the amortization

15 period shall be adjusted in the manner provided

16 by the Secretary to reflect the application of

17 this subparagraph.

18 ‘‘(3) CURRENT LIABILITY.—For purposes of

19 this subsection and subsection (g)—
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1 ‘‘(A) IN GENERAL.—The term ‘‘current li2 ability’’ means all liabilities to employees and

3 their beneficiaries under the plan.

4 ‘‘(B) TREATMENT OF UNPREDICTABLE

5 CONTINGENT EVENT BENEFITS.—

6 ‘‘(i) IN GENERAL.—For purposes of

7 subparagraph (A), any unpredictable con8 tingent event benefit shall not be taken

9 into account until the event on which the

10 benefit is contingent occurs.

11 ‘‘(ii) UNPREDICTABLE CONTINGENT

12 EVENT BENEFIT.—The term ‘unpredictable

13 contingent event benefit’ means any benefit

14 contingent on an event other than—

15 ‘‘(I) age, service, compensation,

16 death, or disability, or

17 ‘‘(II) an event which is reason18 ably and reliably predictable (as deter19 mined by the Secretary).

20 ‘‘(C) INTEREST RATES USED.—The rate of

21 interest used to determine current liability shall

22 be the rate of interest used under subsection

23 (b)(5); except that the permissible range under

24 subparagraph (B)(ii) of subsection (b)(5) shall
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1 not exceed 100 percent of the weighted average

2 referred to in such subparagraph.

3 ‘‘(D) CERTAIN SERVICE DISREGARDED.—

4 ‘‘(i) IN GENERAL.—In the case of a

5 participant to whom this subparagraph ap6 plies, only the applicable percentage of the

7 years of service before such individual be8 came a participant shall be taken into ac9 count in computing the current liability of

10 the plan.

11 ‘‘(ii) APPLICABLE PERCENTAGE.—For

12 purposes of clause (i), the applicable per13 centage shall be determined as follows:

If the years of The applicable

participation are: percentage is:

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

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

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

4 ......................................................... 80

5 or more ............................................ 100

14 ‘‘(iii) PARTICIPANTS TO WHOM THIS

15 SUBPARAGRAPH APPLIES.—This subpara16 graph shall apply to any participant who,

17 at the time of becoming a participant—

18 ‘‘(I) has not accrued any other

19 benefit under any defined benefit plan

20 (whether or not terminated) main21 tained by the employer or a member
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1 of the same controlled group of which

2 the employer is a member,

3 ‘‘(II) who first becomes a partici4 pant under the plan in a plan year be5 ginning after December 31, 1989, and

6 ‘‘(III) has years of service great7 er than the minimum years of service

8 necessary for eligibility to participate

9 in the plan.

10 ‘‘(iv) ELECTION.—An employer may

11 elect not to have this subparagraph apply.

12 Such an election, once made, may be re13 voked only with the consent of the Sec14 retary.

15 ‘‘(4) OTHER DEFINITIONS.—For purposes of

16 this subsection and subsection (o)—

17 ‘‘(A) UNFUNDED CURRENT LIABILITY.—

18 The term ‘unfunded current liability’ means,

19 with respect to any plan year, the excess (if

20 any) of—

21 ‘‘(i) the current liability under the

22 plan, over

23 ‘‘(ii) the value of the plan assets de24 termined under subsection (c)(2), reduced
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1 by any credit balance in the funding stand2 ard account.

3 ‘‘(B) FUNDED CURRENT LIABILITY PER4 CENTAGE.—The term ‘funded current liability

5 percentage’ means, with respect to any plan

6 year, the percentage which—

7 ‘‘(i) the amount determined under

8 subparagraph (A)(ii), is of

9 ‘‘(ii) the current liability under the

10 plan.

11 ‘‘(5) SPECIAL RULES FOR SMALL PLANS.—

12 ‘‘(A) PLANS WITH 100 OR FEWER PARTICI13 PANTS.—This subsection and subsection (g)

14 shall not apply to any plan for any plan year

15 if on each day during the preceding plan year

16 such plan had no more than 100 participants.

17 ‘‘(B) PLANS WITH MORE THAN 100 BUT

18 NOT MORE THAN 150 PARTICIPANTS.—In the

19 case of a plan to which subparagraph (A) does

20 not apply and which on each day during the

21 preceding year had no more than 150 partici22 pants, the additional amounts required by the

23 underfunding reduction requirement under this

24 subsection or the solvency maintenance require-
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1 ment under subsection (g) shall be equal to the

2 product of—

3 ‘‘(i) the excess of such requirements

4 (determined without regard to this sub5 paragraph) over the funding deficiency (if

6 any) under subsection (b), multiplied by,

7 ‘‘(ii) 2 percent for the highest number

8 of participants in excess of 100 on any

9 such day.

10 ‘‘(C) AGGREGATION OF PLANS.—For pur11 poses of this paragraph, all defined benefit

12 plans maintained by the same employer (or any

13 member of such employer’s controlled group)

14 shall be treated as 1 plan, but only employees

15 of such employer or member shall be taken into

16 account.

17 ‘‘(D) CONTROLLED GROUP.—For purposes

18 of this paragraph, the term ‘controlled group’

19 means any group treated as a single employer

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

21 414.’’

22 SEC. 103. SOLVENCY MAINTENANCE REQUIREMENTS.

23 Section 302 of the Employee Retirement Income Se24 curity Act of 1974 (29 U.S.C. 1082) is amended—
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1 (1) by redesignating subsections (g) and (h) as

2 subsections (h) and (i), respectively, and

3 (2) by inserting after subsection (f) the follow4 ing new subsection:

5 ‘‘(g) SOLVENCY MAINTENANCE REQUIREMENT FOR

6 PLANS THAT ARE NOT MULTIEMPLOYER PLANS.—

7 ‘‘(1) SOLVENCY MAINTENANCE REQUIRE8 MENT.—In the case of a defined benefit plan (other

9 than a multiemployer plan) which has a funded cur10 rent liability percentage of less than 100 percent (as

11 of the first day of the plan year), the solvency main12 tenance requirement for such plan year is the sum

13 of—

14 ‘‘(A) the sum of:

15 ‘‘(i) all disbursements from the plan

16 for the plan year, and

17 ‘‘(ii) an amount equal to the unfunded

18 current liability of the plan (as of such

19 first day) multiplied by the interest rate

20 used by such plan to determine current li21 ability,

22 ‘‘(B) the amount determined under sub23 section (d)(1)(B), and

24 ‘‘(C) the amount determined under sub25 section (d)(1)(C).
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1 The solvency maintenance requirement shall not ex2 ceed the sum of the amount necessary to increase

3 the funded liability percentage (as of such first day)

4 to 100 percent and the amount determined under

5 subparagraph (B).

6 ‘‘(2) LIMITATION ON SOLVENCY MAINTENANCE

7 REQUIREMENT.—

8 ‘‘(A) IN GENERAL.—The amount required

9 under paragraph (1) for any plan year shall not

10 exceed the sum of—

11 ‘‘(i) the amount required under sub12 section (d); and

13 ‘‘(ii) the product of—

14 ‘‘(I) the excess (if any) of the

15 amount required under paragraph (1)

16 over the amount required under sub17 section (d); multiplied by

18 ‘‘(II) the applicable percentage,

19 ‘‘(B) APPLICABLE PERCENTAGE.—For

20 purposes of subparagraph (A), the applicable

21 percentage is:

‘‘For plan years The applicable

beginning in: percentage is:

1995 ................................................... 20 percent

1996 ................................................... 40 percent

1997 ................................................... 60 percent

1998 ................................................... 80 percent

1999 or thereafter .............................. 100 percent.

22 ‘‘(3) DISBURSEMENTS FROM THE PLAN.—
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1 ‘‘(A) IN GENERAL.—The term ‘disburse2 ments from the plan’ means benefit payments,

3 including purchases of annuities or payment of

4 lump sums in satisfaction of liabilities, adminis5 trative expenditures or any other disbursements

6 from the plan or its trust.

7 ‘‘(B) SPECIAL RULE FOR PURCHASES OF

8 ANNUITIES AND PAYMENT OF LUMP SUMS.—In

9 determining the applicable amounts attributable

10 to purchases of annuities or the payment of

11 lump sums under clause (i), the actual purchase

12 or lump sum amounts paid by the plan or trust

13 shall be multiplied by the excess (if any) of one

14 over the initial funding ratio of the plan.’’

15 SEC. 104. TRANSITION USE OF CREDIT BALANCES FROM

16 PLAN YEARS BEFORE 1996.

17 At the election of the employer maintaining a defined

18 benefit plan subject to the requirements of section 302 of

19 the Employee Retirement Income Security Act of 1974,

20 the amounts required under sections 302(d) and 302(g)

21 of such Act, as amended by this Act, may be reduced by

22 the net of (1) the sum of credits to the funding standard

23 account for plan years beginning on or before December

24 31, 1995, arising under clauses (ii) and (iii) of section

25 302(b)(3)(B) of such Act and for amounts considered con-
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1 tributed by the employer under section 302(b)(3)(A) of

2 such Act (to the extent necessary to avoid an accumulated

3 funding deficiency under section 302(f) of such Act) and

4 (2) charges to the funding standard account for plan years

5 beginning on or before December 31, 1995, arising under

6 clauses (iv) and (v) of section 302(b)(2)(B) of such Act.

7 SEC. 105. EFFECTIVE DATES.

8 The amendments made by this title shall apply to

9 plan years beginning after December 31, 1995.

10 TITLE II—REQUIRED SECURITY

11 FOR CERTAIN PLAN AMEND12 MENTS

13 SEC. 201. INCREASE IN REQUIRED FUNDING PERCENTAGE.

14 (a) IN GENERAL.—Paragraph (2) of section 307(a)

15 of the Employee Retirement Income Security Act of 1974

16 (29 U.S.C. 1085b(a)(2)) is amended by striking ‘‘60 per17 cent’’ and inserting ‘‘90 percent’’.

18 (b) CONFORMING AMENDMENT.—Subsection (d) of

19 section 302 of such Act (29 U.S.C. 1082(d)) is amended

20 by striking ‘‘60 percent’’ and inserting ‘‘90 percent’’.

21 SEC. 202. INCREASE IN AMOUNT OF REQUIRED SECURITY.

22 (a) IN GENERAL.—Subsection (c) of section 307 of

23 the Employee Retirement Income Security Act of 1974

24 (29 U.S.C. 1085b(c)) is amended to read as follows:
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1 ‘‘(c) AMOUNT OF SECURITY.—The security shall be

2 in an amount equal to the excess (if any) of—

3 ‘‘(1) the amount of additional plan assets which

4 would be necessary to increase the funded current li5 ability percentage under the plan to 90 percent, in6 cluding the amount of the unfunded current liability

7 under the plan attributable to the plan amendment,

8 over

9 ‘‘(2) $1,000,000.’’

10 (b) CONFORMING AMENDMENT.—Subsection (f) of

11 section 307 of such Act is amended by striking ‘‘, except

12 that’’ and all that follows and inserting a period.

13 SEC. 203. PROVISIONS MADE APPLICABLE TO MULTIEM14 PLOYER PLANS.

15 Paragraph (1) of section 307(a) of the Employee Re16 tirement Income Security Act of 1974 (29 U.S.C.

17 1085b(a)(1)) is amended by striking ‘‘(other than a multi18 employer plan)’’.

19 SEC. 204. CRIMINAL PENALTY MADE APPLICABLE.

20 Section 501 of the Employee Retirement Income Se21 curity Act of 1974 (29 U.S.C. 1131) is amended by insert22 ing ‘‘or of section 307’’ after ‘‘this subtitle’’.

23 SEC. 205. EFFECTIVE DATE.

24 The amendments made by this title shall apply to

25 plan amendments adopted after 1995.
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1 TITLE III—MISCELLANEOUS

2 PROVISIONS

3 SEC. 301. REPORTS BY PENSION BENEFIT GUARANTY COR4 PORATION AND CONGRESSIONAL BUDGET

5 OFFICE.

6 Effective with respect to fiscal years ending after

7 September 30, 1995, section 4008 of the Employee Retire8 ment Income Security Act of 1974 is amended by—

9 (1) striking ‘‘five’’ in the second sentence of

10 such section and inserting ‘‘five, ten, twenty and

11 thirty’’,

12 (2) adding at the end thereof the following new

13 sentences: ‘‘The actuarial evaluation shall set forth

14 alternative premium schedules to assure that the as15 sets of the corporation equal or exceed its liabilities

16 during such periods. For any fiscal year that it

17 deems appropriate, the Congressional Budget Office

18 may transmit a separate report that analyzes and

19 comments upon the actuarial evaluation prepared by

20 the corporation (and premium schedules contained

21 therein).’’

22 SEC. 302. CERTAIN INFORMATION REQUIRED TO BE FUR23 NISHED TO PBGC.

24 (a) GENERAL RULE.—Subtitle A of title IV of the

25 Employee Retirement Income Security Act of 1974 (29
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1 U.S.C. 1301 et seq.) is amended by adding at the end

2 the following new section:

3 ‘‘SEC. 4010. AUTHORITY TO REQUIRE CERTAIN INFORMA4 TION.

5 ‘‘(a) GENERAL RULE.—For plans described in sub6 section (b), the corporation may require that a plan spon7 sor or members of a sponsor’s controlled group provide

8 the corporation with such records, documents, or other in9 formation that the corporation deems necessary to deter10 mine the liabilities and assets of plans covered by this title,

11 or the financial condition of sponsors or members of spon12 sors’ controlled groups maintaining plans covered by this

13 title.

14 ‘‘(b) DESCRIPTION OF PLANS.—For purposes of sub15 section (a), a plan is described in this subsection if—

16 ‘‘(1) the underfunding under such plan exceeds

17 $10,000,000;

18 ‘‘(2) the number of participants under such

19 plan is greater than 2,000; or

20 ‘‘(3) minimum funding waivers in excess of

21 $1,000,000 have been granted with respect to such

22 plan.

23 For purposes of this section, all plans maintained by the

24 same sponsor (or any member of such sponsor’s controlled

25 group) shall be treated as 1 plan. For purposes of this
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1 subsection, determinations of liabilities and assets shall be

2 made in the same manner as under section 4006.’’

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

4 contained in section 1 of such Act is amended by inserting

5 after the item relating to section 4009 the following new

6 item:

‘‘Sec. 4010. Authority to require certain information.’’

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