I

104TH CONGRESS

1ST SESSION H. R. 36

To amend the Employee Retirement Income Security Act of 1974 and related

provisions to improve pension plan funding, to limit growth in insurance

exposure, to protect the single-employer plan termination insurance program by clarifying the status of claims of the Pension Benefit Guaranty

Corporation and the treatment of insolvent pension plans, and for other

purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 4, 1995

Mr. FAWELL introduced the following bill; which was referred to the Committee on Economic and Education Opportunities and, in addition, to the

Committee on the Judiciary, 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 the Employee Retirement Income Security Act

of 1974 and related provisions to improve pension plan

funding, to limit growth in insurance exposure, to protect

the single-employer plan termination insurance program

by clarifying the status of claims of the Pension Benefit

Guaranty Corporation and the treatment of insolvent

pension plans, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

3 ‘‘Pension Security Act of 1995’’.

4 (b) TABLE OF CONTENTS.— Sec. 1. Short title and table of contents.

Sec. 2. Amendment of ERISA.

TITLE I—AMENDMENTS TO PENSION PLAN FUNDING

REQUIREMENTS

Sec. 101. Revision of additional funding requirements for plans that are not

multiemployer plans.

Sec. 102. Effective dates.

TITLE II—AMENDMENTS TO TITLE IV OF ERISA

Sec. 201. Limitation on benefits guaranteed.

Sec. 202. Enforcement of minimum funding requirements.

Sec. 203. Recovery ratio payable under Corporation’s guaranty.

Sec. 204. Elimination of the seventh revolving fund.

Sec. 205. Distress termination criteria for banking institutions.

TITLE III—EMPLOYER LIABILITY, LIEN AND PRIORITY

Subtitle A—Amendments to the Employee Retirement Income Security Act of

1974

Sec. 301. Employer liability lien and priority amount.

Sec. 302. Clarification of priorities in conformity with the Employee Retirement

Income Security Act of 1974.

Sec. 303. Liability upon liquidation of contributing sponsor where plan remains

ongoing.

5 SEC. 2. AMENDMENT OF ERISA.

6 The sections of the Employee Retirement Income Se7 curity Act of 1974 which are amended by the subsequent

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

9 sections would read if the Uruguay Round Agreements

10 Act had not been enacted. References to such sections in

11 the subsequent provisions of this Act shall be deemed ref12 erences to such sections as amended by this section. This
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1 section shall be effective as if included in the Uruguay

2 Round Agreements Act.

3 TITLE I—AMENDMENTS TO PEN4 SION PLAN FUNDING RE5 QUIREMENTS

6 SEC. 101. REVISION OF ADDITIONAL FUNDING REQUIRE7 MENTS FOR PLANS THAT ARE NOT MULTIEM8 PLOYER PLANS.

9 (a) ACCUMULATED FUNDING DEFICIENCY.—Section

10 302(a)(2) of the Employee Retirement Income Security

11 Act of 1974 (29 U.S.C. 1082(a)(2)) is amended—

12 (1) by striking ‘‘the excess of the total charges

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

14 that sentence, and inserting ‘‘the largest of—’’; and

15 (2) by adding at the end the following:

16 ‘‘(A) the lesser of—

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

18 the funding standard account for all plan

19 years (beginning with the first plan year to

20 which this section applies) over the total

21 credits to such account for such years, or,

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

23 the alternative minimum funding standard

24 account for such plan years over the total

25 credits to such account for such years; or,
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1 ‘‘(B) if applicable, the underfunding reduc2 tion requirement under subsection (d), or,

3 ‘‘(C) if applicable, the solvency mainte4 nance requirement under subsection (g).’’

5 (b) UNDERFUNDING REDUCTION REQUIREMENT.—

6 Section 302(d) of such Act (29 U.S.C. 1082(d)) is amend7 ed to read as follows:

8 ‘‘(d) UNDERFUNDING REDUCTION REQUIREMENT

9 FOR PLANS THAT ARE NOT MULTIEMPLOYER PLANS.—

10 ‘‘(1) UNDERFUNDING REDUCTION REQUIRE11 MENT.—In the case of a defined benefit plan (other

12 than a multiemployer plan) that has an initial fund13 ing ratio of less than 100 percent for any plan year,

14 the underfunding reduction requirement for such

15 plan year is the sum of:

16 ‘‘(A) an amount equal to the product of—

17 ‘‘(i) the initial unfunded liability of

18 the plan multiplied by

19 ‘‘(ii) 30 percent, reduced by the prod20 uct of—

21 ‘‘(I) .25 multiplied by

22 ‘‘(II) the excess (if any) of the

23 initial funding ratio of the plan over

24 35 percent;
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1 ‘‘(B) the charges to the funding standard

2 account for normal cost under subparagraph

3 (b)(2)(A) and for the amounts necessary to am4 ortize any waived funding deficiencies under

5 subparagraph (b)(2)(C);

6 ‘‘(C) the excess (if any) of—

7 ‘‘(i) the sum of charges to the funding

8 standard account for plans years beginning

9 after December 31, 1998, for net experi10 ence losses under clause (b)(2)(B)(iv) and

11 net losses resulting from changes in actu12 arial assumptions under clause

13 (b)(2)(B)(v) over—

14 ‘‘(ii) the sum of credits to the funding

15 standard account for plan years beginning

16 after December 31, 1998—

17 ‘‘(I) for net experience gains

18 under clause (b)(3)(B)(ii) and net

19 gains resulting from changes in actu20 arial assumptions under clause

21 (b)(3)(B)(iii); and

22 ‘‘(II) for amounts considered con23 tributed by the employer under sub24 paragraph (b)(3)(A) (to the extent

25 they are necessary to avoid an accu-
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1 mulated funding deficiency under sec2 tion 302(b)); and

3 ‘‘(D) the net of—

4 ‘‘(i) charges to the funding standard

5 account for plan years beginning on or be6 fore December 31, 1998, for net experience

7 losses under clause (b)(2)(B)(iv) and net

8 losses resulting from changes in actuarial

9 assumptions under clause (b)(2)(B)(v);

10 and

11 ‘‘(ii) the sum of credits to the funding

12 standard account for plan years beginning

13 on or before December 31, 1998—

14 ‘‘(I) for net experience gains

15 under clause (b)(3)(B)(ii) and net

16 gains resulting from changes in actu17 arial assumptions under clause

18 (b)(3)(B)(iii); and

19 ‘‘(II) amounts considered contrib20 uted by the employer under subpara21 graph (b)(3)(A) (to the extent they

22 are necessary to avoid an accumulated

23 funding deficiency under section

24 302(b)).
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1 ‘‘(2) DEFINITIONS.—For definitions relating to

2 this subsection, see subsection (g)(3).

3 ‘‘(3) APPLICATION TO SMALL PLANS.—For the

4 application of this subsection to small plans, see sub5 section (g)(4).’’

6 (c) SOLVENCY MAINTENANCE REQUIREMENT.—Sec7 tion 302 of such Act is further amended—

8 (1) by redesignating subsection (g) as (h) as

9 subsections (h) and (i), respectively; and

10 (2) by inserting after subsection (f) the follow11 ing new subsection:

12 ‘‘(g) SOLVENCY MAINTENANCE REQUIREMENT FOR

13 PLANS THAT ARE NOT MULTIEMPLOYER PLANS.—

14 ‘‘(1) SOLVENCY MAINTENANCE REQUIRE15 MENT.—In the case of a defined benefit plan (other

16 than a multiemployer plan) that has an initial fund17 ing ratio of less than 100 percent for any plan year,

18 the solvency maintenance requirement for such plan

19 year is (subject to paragraph (2)) the sum of—

20 ‘‘(A) the sum of:

21 ‘‘(i) all disbursements from the plan

22 for the plan year, and

23 ‘‘(ii) an amount equal to the initial

24 unfunded liability of the plan multiplied by
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1 the interest rate used by such plan (deter2 mined under subparagraph (b)(5)(A));

3 ‘‘(B) the charges described in section

4 302(d)(1)(B);

5 ‘‘(C) the amount described in section

6 302(d)(1)(C); and

7 ‘‘(D) the amount described in section

8 302(d)(1)(D).

9 ‘‘(2) LIMITATION ON SOLVENCY MAINTENANCE

10 REQUIREMENT.—For plan years commencing after

11 December 31, 1998, the amount required under

12 paragraph (1) shall not exceed the sum of—

13 ‘‘(A) the amount required under section

14 302(d); and

15 ‘‘(B) the product desired by multiplying—

16 ‘‘(i) the excess (if any) of—

17 ‘‘(I) the amount required under

18 paragraph (1) over

19 ‘‘(II) the amount required under

20 section 302(d); by—

21 ‘‘(ii) the applicable percentage.

22 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes

23 of paragraph (2)(B)(ii), the applicable percentage is:

‘‘For plan years The applicable

commencing after: percentage is:

December 31, 1998 ........................................... 20 percent

December 31, 1999 ........................................... 40 percent

December 31, 2000 ........................................... 60 percent
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December 31, 2001 ........................................... 80 percent

December 31, 2002 ........................................... 100 percent.

1 ‘‘(4) DEFINITIONS.—For purposes of this sub2 section and subsection (d)—

3 ‘‘(A) INITIAL UNFUNDED LIABILITY.—The

4 term ‘initial unfunded liability’ means the ex5 cess (if any) of the amount necessary to satisfy

6 the initial termination liability of the plan over

7 the initial value of assets of the plan.

8 ‘‘(B) INITIAL FUNDING RATIO.—The term

9 ‘initial funding ratio’ means the ratio of (i) the

10 initial value of assets of the plan to (ii) the

11 amount necessary to satisfy the initial termi12 nation liability of the plan.

13 ‘‘(C) INITIAL TERMINATION LIABILITY.—

14 The term ‘initial termination liability’ means all

15 liabilities with respect to employees and their

16 beneficiaries under the plan in the meaning of

17 section 401(a)(2) of the Internal Revenue Code

18 of 1986 as of the first day of the plan year.

19 ‘‘(D) INITIAL VALUE OF ASSETS.—The

20 term ‘initial value of assets’ means the value of

21 the assets of the plan determined under section

22 302(c)(2) as of the first day of the plan year.

23 ‘‘(E) DISBURSEMENTS FROM THE PLAN.—
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1 ‘‘(i) IN GENERAL.—The term ‘dis2 bursements from the plan’ means benefit

3 payments, including purchases of annuities

4 or payment of lump sums in satisfaction of

5 liabilities, administrative expenditures or

6 any other disbursements from the plan or

7 its trust.

8 ‘‘(ii) SPECIAL RULE FOR PURCHASES

9 OF ANNUITIES AND PAYMENT OF LUMP

10 SUMS.—In determining the applicable

11 amounts attributable to purchases of annu12 ities or the payment of lump sums under

13 clause (i), the actual purchase or lump

14 sum amounts paid by the plan or trust

15 shall be multiplied by the excess (if any) of

16 one over the initial funding ratio of the

17 plan.

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

19 ‘‘(A) PLANS WITH 100 OR FEWER PARTICI20 PANTS.—This subsection and subsection (d)

21 shall not apply to any plan for any plan year

22 if on each day during the preceding plan year

23 such plan had no more than 100 participants.

24 ‘‘(B) PLANS WITH MORE THAN 100 BUT

25 NOT MORE THAN 150 PARTICIPANTS.—In the
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1 case of a plan to which subparagraph (A) does

2 not apply and which on each day during the

3 preceding year had no more than 150 partici4 pants, the additional amounts required by the

5 underfunding reduction requirement under sub6 section (d) or the solvency maintenance require7 ment under this subsection shall be equal to the

8 product of—

9 ‘‘(i) the excess of such requirements

10 (determined without regard to this sub11 paragraph) over the funding deficiency (if

12 any) under subsection 302(b), multiplied

13 by;

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

15 of participants in excess of 100 on any

16 such day.’’

17 ‘‘(C) AGGREGATION OF PLANS.—For pur18 poses of this paragraph, all defined benefit

19 plans maintained by the same employer (or any

20 member of such employer’s controlled group)

21 shall be treated as 1 plan, but only employees

22 of such employer or member shall be taken into

23 account.’’

24 (d) CONFORMING AMENDMENTS.—
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1 (1) Section 302(b)(5)(B) of such Act (29

2 U.S.C. 1082(b)(5)(B)) is amended by striking ‘‘and

3 for purposes of determining a plan’s required con4 tribution under section 302(d)’’ and inserting

5 ‘‘under section 302(c)(7)(B)’’.

6 (2) Section 302(c)(7)(B) of such Act (29

7 U.S.C. 1082(c)(7)(B)) is amended by striking ‘‘has

8 the meaning given such term by subsection

9 302(d)(7) (without regard to subparagraph (D)

10 thereof)’’ and inserting ‘‘means all liabilities with re11 spect to employees and their beneficiaries under the

12 plan within the meaning of applicable Federal law

13 determined by using the interest rate under section

14 302(b)(5)(B)’’.

15 (3) Section 307 of such Act (29 U.S.C. 1085b)

16 is amended—

17 (A) by striking ‘‘current liability’’, ‘‘funded

18 current liability percentage’’, ‘‘unfunded current

19 liability’’, and ‘‘302(d)’’ each place they appear

20 and inserting ‘‘initial termination liability’’,

21 ‘‘initial funding ratio’’, ‘‘initial unfunded liabil22 ity’’, and ‘‘302(g)’’, respectively; and

23 (B) in subsection (f), by striking ‘‘except’’

24 and all that follows and inserting ‘‘except that

25 in computing initial unfunded liability there
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1 shall not be taken into account an amount

2 equal to the initial unfunded liability of the

3 plan as of the beginning of the first plan year

4 beginning after December 31, 1987 (determined

5 without regard to any plan amendment increas6 ing liabilities adopted after October 16, 1987),

7 reduced by an amount equal to the product of

8 the amount necessary to amortize such pre9 1988 initial unfunded liability in equal annual

10 installments over a period of 18 plan years (be11 ginning with the first plan year beginning after

12 December 31, 1988) multiplied by the number

13 of years (but not more than 18) beginning since

14 December 31, 1988.’’.

15 SEC. 102. EFFECTIVE DATES.

16 The amendments made by this subtitle shall be effec17 tive for plan years beginning after December 31, 1998.

18 TITLE II—AMENDMENTS TO

19 TITLE IV OF ERISA

20 SEC. 201. LIMITATION ON BENEFITS GUARANTEED.

21 (a) IN GENERAL.—Section 4022(b) of the Employee

22 Retirement Income Security Act of 1974 (29 U.S.C.

23 1322(b)) is amended by adding after paragraph (7) the

24 following new paragraph:
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1 ‘‘(8)(A) Benefits under a new plan or any increase

2 in benefits under a plan resulting from a plan amendment,

3 which new plan or amendment was adopted or became ef4 fective after December 31, 1996, shall be disregarded, un5 less—

6 ‘‘(i) the plan was fully funded for vested bene7 fits for the plan year that the new plan or amend8 ment was adopted or became effective, whichever is

9 later, or became fully funded for vested benefits in

10 a subsequent plan year; and

11 ‘‘(ii) the new plan or amendment was adopted

12 or effective, whichever is later, at least one year

13 prior to the date of plan termination.

14 ‘‘(B) For purposes of this paragraph, a plan is ‘fully

15 funded for vested benefits’ for any plan year if such plan

16 has no unfunded vested benefits (within the meaning of

17 section 4006(a)(3)(E)(iii)) as of the last day of such plan

18 year.

19 ‘‘(C)(i) Except as provided in clause (ii), paragraph

20 (7) and subparagraphs (B) and (C) of paragraph (5) shall

21 not apply to benefits disregarded under subparagraph (A).

22 ‘‘(ii) This paragraph shall not apply, and paragraph

23 (7) and subparagraphs (B) and (C) of paragraph (5) shall

24 apply to any new plan or plan amendment resulting from
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1 a collective bargaining agreement or amendment thereto

2 entered and ratified on or prior to December 31, 1996.’’.

3 (b) NO GUARANTY FOR NEW UNPREDICTABLE CON4 TINGENT EVENT BENEFITS.—Subsection (b) of section

5 4022 of such Act (as amended by subsection (b) of this

6 section) is further amended by adding at the end the fol7 lowing new paragraph:

8 ‘‘(9)(A) Notwithstanding paragraph (8), any unpre9 dictable contingent event benefit (or any increase in such

10 a benefit) created by any plan provision or amendment

11 adopted or effective after December 31, 1996, shall not

12 be guaranteed.

13 ‘‘(B) For purposes of this section, an ‘unpredictable

14 contingent event benefit’ means any benefit contingent on

15 an event other than—

16 ‘‘(i) age, service, compensation, death or dis17 ability, or

18 ‘‘(ii) an event which is reasonably and reliably

19 predictable (as determined under regulations pre20 scribed by the corporation).’’.

21 (c) CONFORMING AMENDMENT.—Section 4022(b)(1)

22 of such Act (29 U.S.C. 1322(b)(1)) is amended by insert23 ing ‘‘, (8), or (9)’’ after ‘‘paragraph (7)’’.

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

25 this section shall be effective on December 31, 1996.
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1 SEC. 202. ENFORCEMENT OF MINIMUM FUNDING REQUIRE2 MENTS.

3 (a) IN GENERAL.—Paragraph (1) of section 4003(e)

4 of Employee Retirement Income Security Act of 1974 (29

5 U.S.C. 1303(e)(1)) is amended by inserting after ‘‘title’’

6 the following: ‘‘and, in the case of a plan to which this

7 title applies under section 4021, section 302’’.

8 (b) EFFECTIVE DATE.—The amendments made by

9 this section shall be effective for installments and other

10 payments required under section 302 of the Employee Re11 tirement Income Security Act of 1974 due on or after the

12 date of the enactment of this Act.

13 SEC. 203. RECOVERY RATIO PAYABLE UNDER CORPORA14 TION’S GUARANTY.

15 (a) IN GENERAL.—Section 4022(c)(3)(B) of the Em16 ployee Retirement Income Security Act of 1974 (29

17 U.S.C. 1322(c)(3)(B)) is amended—

18 (1) by redesignating clauses (i) and (ii) as

19 clauses (ii) and (iii) respectively; and

20 (2) by inserting before clause (ii) (as so redesig21 nated) the following new clause:

22 ‘‘(i) the outstanding amount of benefit li23 abilities does not exceed $20,000,000,’’.

24 (b) TERMINATIONS.—Clause (iii) of section

25 4022(c)(3)(B) of such Act (29 U.S.C. 1322(c)(3)(B)), as

26 redesignated by subsection (a), is amended—
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1 (1) by inserting ‘‘, or proceedings were insti2 tuted under section 4042,’’ after ‘‘provided’’; and

3 (2) by striking ‘‘in which occurs the date of the

4 notice of intent to terminate with respect to the plan

5 termination’’.

6 (c) CONFORMING AMENDMENTS.—Clause (i) of sec7 tion 9312(b)(3)(B) of the Pension Protection Act is

8 amended—

9 (1) by inserting ‘‘, or proceedings were insti10 tuted under section 4042,’’ after ‘‘provided’’; and

11 (2) by striking ‘‘1990’’ and inserting ‘‘1994’’.

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

13 this section shall take effect as if included in section

14 9312(b)(3) of the Pension Protection Act (Public Law

15 100–203; 101 Stat. 1330–362).

16 SEC. 204. ELIMINATION OF THE SEVENTH REVOLVING

17 FUND.

18 (a) TRANSFER.—Effective September 30, 1997, all

19 assets and liabilities of the fund described in section

20 4005(f)(1) of the Employee Retirement Income Security

21 Act of 1974 (as in effect before the amendments made

22 by this section) shall be transferred to the fund established

23 pursuant to section 4005(a) of such Act with respect to

24 basic benefits guaranteed under section 4022 of such Act.
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1 (b) REPEAL.—Section 4005 of the Employee Retire2 ment Income Security Act of 1974 (29 U.S.C. 1305) is

3 amended—

4 (1) by striking subsection (f); and

5 (2) by redesignating subsections (g) and (h) as

6 subsections (f) and (g), respectively.

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

8 this section shall apply with respect to fiscal years begin9 ning after September 30, 1997.

10 SEC. 205. DISTRESS TERMINATION CRITERIA FOR CERTAIN

11 FINANCIAL INSTITUTIONS.

12 (a) IN GENERAL.—Subclause (I) of section

13 4041(c)(2)(B)(i) of the Employee Retirement Income Se14 curity Act of 1974 (29 U.S.C. 1341(c)(2)(B)(i)(I)) is

15 amended by inserting ‘‘Federal law or’’ before ‘‘law of a

16 State’’.

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

18 this section shall apply to plan terminations under section

19 4041 of the Employee Retirement Income Security Act of

20 1974 with respect to which notices of intent to terminate

21 under section 4041(a)(2) of such Act are provided on or

22 after the date of the enactment of this Act.
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1 TITLE III—EMPLOYER

2 LIABILITY, LIEN AND PRIORITY

3 SEC. 301. EMPLOYER LIABILITY LIEN AND PRIORITY

4 AMOUNT.

5 (a) REVISED LIMITATIONS ON LIEN AND TAX PRIOR6 ITY AMOUNT.—Section 4068(a) of the Employee Retire7 ment Income Security Act of 1974 (29 U.S.C. 1368(a))

8 is amended—

9 (1) by striking ‘‘If any person liable to the cor10 poration’’ and inserting ‘‘(1) Subject to paragraphs

11 (2) and (3), if any person liable to the corporation’’;

12 (2) by striking ‘‘section 4062’’ and inserting

13 ‘‘section 4062(a)(1)’’;

14 (3) by striking the comma after ‘‘belonging to

15 such person’’ and inserting a period;

16 (4) by striking ‘‘except that such lien’’ and in17 serting the following:

18 ‘‘(2) In the case of plan terminations under sec19 tion 4041 with respect to which notices of intent to

20 terminate under section 4041(a)(2) are provided be21 fore January 1, 1997, and plan terminations with

22 respect to which proceedings are instituted by the

23 corporation before January 1, 1997, the lien estab24 lished under paragraph (1)’’; and
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1 (5) by adding at the end the following new

2 paragraph:

3 ‘‘(3)(A) In the case of plan terminations under

4 section 4041 with respect to which notices of intent

5 to terminate under section 4041(a)(2) are provided

6 on or after January 1, 1997, and plan terminations

7 with respect to which proceedings are instituted by

8 the corporation on or after January 1, 1997, the lien

9 established under paragraph (1) may not be in an

10 amount in excess of the sum of—

11 ‘‘(i) the amount of benefits attributable to

12 the occurrence of unpredictable contingent

13 events valued as of the date of plan termination

14 arising at any time during the 3 years preced15 ing the date of plan termination (to the extent

16 not funded prior to plan termination), plus

17 ‘‘(ii) the greater of—

18 ‘‘(I) 30 percent of the collective net

19 worth of all persons described in section

20 4062(a), or

21 ‘‘(II) the currently applicable percent22 age of the excess of the amount of un23 funded benefit liabilities under the plan as

24 of the date of plan termination over the

25 amount described in clause (i).
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1 ‘‘(B) For purposes of this paragraph—

2 ‘‘(i) the term ‘currently applicable percent3 age’ means—

4 ‘‘(I) with respect to plan terminations

5 initiated in calendar year 1997, 10 per6 cent,

7 ‘‘(II) with respect to plan termi8 nations initiated in any calendar year after

9 1997 and before 2017, the percentage de10 termined under this clause with respect to

11 plan terminations initiated in the preceding

12 calendar year, plus 2 percent, and

13 ‘‘(III) with respect to plan termi14 nations initiated in calendar years after

15 2016, 50 percent.

16 ‘‘(ii) The term ‘amount of benefits attrib17 utable to the occurrence of unpredictable con18 tingent events’ means, with respect to any plan,

19 the present value of unpredictable contingent

20 event benefits (within the meaning of section

21 302(d)(7)(B)(ii)), determined as of the termi22 nation date on the basis of assumptions pre23 scribed by the corporation for purposes of sec24 tion 4044.
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1 ‘‘(C) In applying subparagraph (A), the cor2 poration may disregard subclause (I) of clause (ii)

3 thereof if the corporation determines, in its sole dis4 cretion, that disregarding such subclause (I) is cost5 effective.’’.

6 (b) CONFORMING AND CLARIFYING AMENDMENTS

7 RELATING TO AMOUNT ENTITLED TO PRIORITY TREAT8 MENT IN CASES OF INSOLVENCY.—Section 4068(c)(2) of

9 such Act (29 U.S.C. 1368(c)(2)) is amended by inserting

10 ‘‘(A)’’ after ‘‘(2)’’ and by adding at the end the following

11 new subparagraph:

12 ‘‘(B) Subparagraph (A) shall apply—

13 ‘‘(i) in the case of terminations described in

14 paragraph (2) of subsection (a), only with respect to

15 so much of the liability as does not exceed the

16 amount determined under such paragraph (2), and

17 ‘‘(ii) in the case of terminations described in

18 paragraph (3) of subsection (a), only with respect to

19 so much of the liability as does not exceed the

20 amount determined under such paragraph (3).’’.

21 (c) CLARIFICATION OF PBGC CLAIM.—Section

22 4068(c)(2) of such Act (29 U.S.C. 1368(c)(2)) is amend23 ed—

24 (1) by striking ‘‘the lien imposed under sub25 section (a)’’ and inserting ‘‘the liability to the cor-
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1 poration under section 4062(a)(1), 4063, or 4064’’;

2 and

3 (2) by inserting ‘‘which is’’ after ‘‘tax’’, and by

4 inserting ‘‘and assigned priority’’ after ‘‘United

5 States’’.

6 (d) EFFECTIVE DATES.—

7 (1) Section 4068(a)(2) of the Employee Retire8 ment Income Security Act of 1974 (as amended by

9 subsection (a)) and section 4068(c)(2)(B)(i) of such

10 Act (as amended by subsection (b)) shall be effective

11 with respect to plan terminations under section 4041

12 of such Act with respect to which notices of intent

13 to terminate under section 4041(a)(2) of such Act

14 are provided before January 1, 1997, and plan ter15 minations with respect to which proceedings are in16 stituted by the Pension Benefit Guaranty Corpora17 tion under section 4042 of such Act before January

18 1, 1997.

19 (2) Section 4068(a)(3) of the Employee Retire20 ment Income Security Act of 1974 (as amended by

21 subsection (a)) and section 4068(c)(2)(B)(ii) of such

22 Act (as amended by subsection (b)) shall be effective

23 with respect to plan terminations under section 4041

24 of such Act with respect to which notices of intent

25 to terminate under section 4041(a)(2) of such Act
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1 are provided on or after January 1, 1997, and plan

2 terminations with respect to which proceedings are

3 instituted by the Pension Benefit Guaranty Corpora4 tion under section 4042 of such Act on or after Jan5 uary 1, 1997.

6 (3) The amendment made by subsection (a)(2)

7 shall be effective as if included in the enactment of

8 section 11011(a) of the Single-Employer Pension

9 Plan Amendments Act of 1986 (Public Law 99–272;

10 100 Stat. 253).

11 (4) The amendment made by subsection (c)

12 shall be effective as if included in the enactment of

13 section 9312(b)(2)(B) of the Pension Protection Act

14 (Public Law 100–203, 101 Stat. 1330–361).

15 SEC. 302. CLARIFICATION OF PRIORITIES IN CONFORMITY

16 WITH THE EMPLOYEE RETIREMENT INCOME

17 SECURITY ACT OF 1974.

18 (a) PRIORITY AS EXPENSES ARISING BEFORE COM19 MENCEMENT OF CASE.—Paragraph (7) of section 507(a)

20 of title 11 of the United States Code is amended—

21 (1) in subparagraph (F), by striking ‘‘or’’ at

22 the end;

23 (2) in subparagraph (G), by striking the period

24 at the end and inserting a semicolon; and
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1 (3) by adding after subparagraph (G) the fol2 lowing:

3 ‘‘(H) unpaid contributions (including inter4 est) to pension plans for plan years beginning

5 after December 31, 1987, which are attrib6 utable to the period prior to the date of the fil7 ing of the petition and treated as taxes owing

8 to the United States under section

9 412(n)(4)(C) of the Internal Revenue Code of

10 1986; or

11 ‘‘(I) liability (including interest) arising

12 under section 4062(a)(1), 4063, or 4064 of the

13 Employee Retirement Income Security Act of

14 1974 to the extent it is treated as a tax under

15 section 4068(c)(2) of such Act, if the date of

16 pension plan termination is on or prior to the

17 date of the filing of the petition.

18 For purposes of subparagraph (I), the date of plan termi19 nation, the amount of the liability, and the extent to which

20 the liability is treated as a tax shall be determined in ac21 cordance with the provisions of the Employee Retirement

22 Income Security Act of 1974 and the regulations promul23 gated thereunder.’’.
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1 (b) PRIORITY AS ADMINISTRATIVE EXPENSES ARIS2 ING AFTER COMMENCEMENT OF CASE.—Section 503(b)

3 of such title 11 is amended—

4 (1) in paragraph (5), by striking ‘‘and’’ at the

5 end;

6 (2) in paragraph (6), by striking the period and

7 inserting ‘‘; and’’; and

8 (3) by adding at the end the following:

9 ‘‘(7)(A) unpaid contributions (including inter10 est) to pension plans for plan years beginning after

11 December 31, 1987, which are attributable to the

12 period beginning on the date of the filing of the peti13 tion and treated as taxes owing to the United States

14 under section 412(n)(4)(C) of the Internal Revenue

15 Code of 1986; and

16 ‘‘(B) liability (including interest) arising under

17 section 4062(a)(1), 4063, or 4064 of the Employee

18 Retirement Income Security Act of 1974 to the ex19 tent it is treated as a tax under section 4068(c)(2)

20 of such Act, if the date of pension plan termination

21 is after the date of the filing of the petition.

22 For purposes of paragraph (7)(B), the date of plan termi23 nation, the amount of the liability, and the extent to which

24 the liability is treated as a tax shall be determined in ac25 cordance with the provisions of the Employee Retirement
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1 Income Security Act of 1974 and the regulations promul2 gated thereunder.’’.

3 (c) NOTICE REQUIRED WHERE FEDERALLY IN4 SURED PENSION PLAN IS ADMINISTERED BY THE DEBT5 OR OR ITS AFFILIATE.—Rule 2002(j) of the Bankruptcy

6 Rules (11 U.S.C. Appendix) is amended by inserting be7 fore the period at the end the following: ‘‘; (5) to the Pen8 sion Benefit Guaranty Corporation in any case in which

9 the debtor or an affiliate of the debtor maintains a pension

10 plan to which title IV of the Employee Retirement Income

11 Security Act of 1974 applies.’’.

12 (d) EFFECTIVE DATE.—Sections 507(a)(7)(H) and

13 503(b)(7)(A) of title 11 of the United States Code (as

14 amended by this section) shall be effective as if included

15 in section 9304(e) of the Pension Protection Act (Public

16 Law 100–203; 101 Stat. 1330–348). Sections

17 507(a)(7)(I) and 503(b)(7)(B) of such title (as amended

18 by this section) shall be effective with respect to cases

19 under such title which commence on or after the date of

20 the enactment of this Act or cases under such title which

21 are pending on the date of the enactment of this Act and

22 in which claims for liability have not been resolved as of

23 such date.
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1 SEC. 303. LIABILITY UPON LIQUIDATION OF CONTRIBUTING

2 SPONSOR WHERE PLAN REMAINS ONGOING.

3 (a) IN GENERAL.—Section 4062 of the Employee Re4 tirement Income Security Act of 1974 (29 U.S.C. 1362)

5 is amended by adding at the end the following new sub6 section:

7 ‘‘(f) LIABILITY ON LIQUIDATION OF CONTRIBUTING

8 SPONSOR.—

9 ‘‘(1) IN GENERAL.—In any case in which all or

10 substantially all of the assets of a person who is a

11 contributing sponsor of a single-employer plan are

12 liquidated in a case under title 11, United States

13 Code, or under any similar Federal law or law of a

14 State or political subdivision of a State, and in the

15 course of such liquidation another member of such

16 person’s controlled group remains a contributing

17 sponsor of the plan or is liable for payment of con18 tributions or installments under section 302(c)(11)

19 of this Act, such person shall be deemed liable under

20 subsection (b) as if such plan had terminated under

21 section 4041(c) in the course of such liquidation and

22 as if the termination date were the date determined

23 by the corporation as the date on which the liquida24 tion was initiated.

25 ‘‘(2) APPLICABILITY OF OTHER PROVISIONS.—

26 Any provision of this Act or any other provision of
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1 law that applies to liability under this section upon

2 termination of a plan shall apply in the same man3 ner and to the same extent to the liability estab4 lished under this subsection. For purposes of this

5 paragraph, the date referred to in paragraph (1)

6 shall be deemed the date of plan termination.

7 ‘‘(3) TRANSFER OF LIABILITY PAYMENTS TO

8 THE ONGOING PLAN.—The corporation shall pay to

9 the plan amounts collected by the corporation in sat10 isfaction of any liability established under this sub11 section in connection with such plan.

12 ‘‘(4) REGULATIONS.—The corporation may pre13 scribe regulations under this subsection. Such regu14 lations may—

15 ‘‘(A) prescribe rules governing—

16 ‘‘(i) the basis upon which the plan will

17 continue as an ongoing plan maintained by

18 other members of the controlled group,

19 ‘‘(ii) the determination of whether a

20 liquidation referred to in this subsection

21 has occurred, and

22 ‘‘(iii) the assignment of the corpora23 tion’s claim to liability payments under

24 this subsection to other members of the

25 controlled group as a means of collecting
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1 such payments, subject to the transfer of

2 such payments to the plan, and

3 ‘‘(B) provide alternative arrangements for

4 making liability payments under this sub5 section.’’.

6 (b) CONFORMING AMENDMENT.—Section 4062(a)(1)

7 of such Act (29 U.S.C. 1362(a)(1)) is amended by striking

8 ‘‘subsection (b)’’ and inserting ‘‘subsections (b) and (f)’’.

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

10 this section shall be effective for liquidations initiated on

11 or after the date of the enactment of this Act.

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