II 

108TH CONGRESS 

2D SESSION S. 2282 

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

Internal Revenue Code of 1986 to temporarily replace the 30-year Treasury rate with a rate based on long-term corporate bonds for certain 

pension plan funding requirements and other provisions, and for other 

purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 5, 2004 

Mr. KENNEDY (for himself, Mr. BAUCUS, and Mr. DASCHLE) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Employee Retirement Income Security Act 

of 1974 and the Internal Revenue Code of 1986 to 

temporarily replace the 30-year Treasury rate with a 

rate based on long-term corporate bonds for certain pension plan funding requirements and other provisions, 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, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fairness in Pension 

5 Stability Act’’. 
2 

•S 2282 IS 

1 TITLE I—PENSION FUNDING 

2 SEC. 101. TEMPORARY REPLACEMENT OF 30-YEAR TREAS3 URY RATE. 

4 (a) EMPLOYEE RETIREMENT INCOME SECURITY ACT

5 OF 1974.— 

6 (1) DETERMINATION OF PERMISSIBLE

7 RANGE.— 

8 (A) IN GENERAL.—Clause (ii) of section 

9 302(b)(5)(B) of the Employee Retirement In10 come Security Act of 1974 is amended by re11 designating subclause (II) as subclause (III) 

12 and by inserting after subclause (I) the fol13 lowing new subclause: 

14 ‘‘(II) SPECIAL RULE FOR YEARS 2004

15 AND 2005.—In the case of plan years be16 ginning after December 31, 2003, and be17 fore January 1, 2006, the term ‘permissible 

18 range’ means a rate of interest which is not 

19 above, and not more than 10 percent below, 

20 the weighted average of the rates of interest 

21 on amounts invested conservatively in long22 term corporate bonds during the 4-year pe23 riod ending on the last day before the begin24 ning of the plan year. Such rates shall be 

25 determined by the Secretary of the Treas-
3 

•S 2282 IS 

1 ury on the basis of 2 or more indices that 

2 are selected periodically by the Secretary of 

3 the Treasury and that are in the top 3 qual4 ity levels available. The Secretary of the 

5 Treasury shall make the permissible range, 

6 and the indices and methodology used to 

7 determine the average rate, publicly avail8 able.’’. 

9 (B) SECRETARIAL AUTHORITY.—Subclause 

10 (III) of section 302(b)(5)(B)(ii) of such Act, as 

11 redesignated by subparagraph (A), is amend12 ed— 

13 (i) by inserting ‘‘or (II)’’ after ‘‘sub14 clause (I)’’ the first place it appears, and 

15 (ii) by striking ‘‘subclause (I)’’ the 

16 second place it appears and inserting 

17 ‘‘such subclause’’. 

18 (C) CONFORMING AMENDMENT.—Sub19 clause (I) of section 302(b)(5)(B)(ii) of such 

20 Act is amended by inserting ‘‘or (III)’’ after 

21 ‘‘subclause (II)’’. 

22 (2) DETERMINATION OF CURRENT LIABILITY.— 

23 Clause (i) of section 302(d)(7)(C) of such Act is 

24 amended by adding at the end the following new 

25 subclause: 
4 

•S 2282 IS 

1 ‘‘(IV) SPECIAL RULE FOR 2004

2 AND 2005.—For plan years beginning 

3 in 2004 or 2005, notwithstanding 

4 subclause (I), the rate of interest used 

5 to determine current liability under 

6 this subsection shall be the rate of in7 terest under subsection (b)(5).’’. 

8 (3) CONFORMING AMENDMENT.—Paragraph (7) 

9 of section 302(e) of such Act is amended to read as 

10 follows: 

11 ‘‘(7) SPECIAL RULE FOR 2002.—In any case in 

12 which the interest rate used to determine current li13 ability is determined under subsection 

14 (d)(7)(C)(i)(III), for purposes of applying para15 graphs (1) and (4)(B)(ii) for plan years beginning in 

16 2002, the current liability for the preceding plan 

17 year shall be redetermined using 120 percent as the 

18 specified percentage determined under subsection 

19 (d)(7)(C)(i)(II).’’. 

20 (4) PBGC.—Clause (iii) of section 

21 4006(a)(3)(E) of such Act is amended by adding at 

22 the end the following new subclause: 

23 ‘‘(V) In the case of plan years beginning after 

24 December 31, 2003, and before January 1, 2006, 

25 the annual yield taken into account under subclause 
5 

•S 2282 IS 

1 (II) shall be the annual rate of interest determined 

2 by the Secretary of the Treasury on amounts in3 vested conservatively in long-term corporate bonds 

4 for the month preceding the month in which the 

5 plan year begins. For purposes of the preceding sen6 tence, the Secretary of the Treasury shall determine 

7 such rate of interest on the basis of 2 or more indi8 ces that are selected periodically by the Secretary of 

9 the Treasury and that are in the top 3 quality levels 

10 available. The Secretary of the Treasury shall make 

11 the permissible range, and the indices and method12 ology used to determine the rate, publicly avail13 able.’’. 

14 (b) INTERNAL REVENUE CODE OF 1986.— 

15 (1) DETERMINATION OF PERMISSIBLE

16 RANGE.— 

17 (A) IN GENERAL.—Clause (ii) of section 

18 412(b)(5)(B) of the Internal Revenue Code of 

19 1986 is amended by redesignating subclause 

20 (II) as subclause (III) and by inserting after 

21 subclause (I) the following new subclause: 

22 ‘‘(II) SPECIAL RULE FOR YEARS

23 2004 AND 2005.—In the case of plan 

24 years beginning after December 31, 

25 2003, and before January 1, 2006, 
6 

•S 2282 IS 

1 the term ‘permissible range’ means a 

2 rate of interest which is not above, 

3 and not more than 10 percent below, 

4 the weighted average of the rates of 

5 interest on amounts invested conserv6 atively in long-term corporate bonds 

7 during the 4-year period ending on 

8 the last day before the beginning of 

9 the plan year. Such rates shall be de10 termined by the Secretary on the 

11 basis of 2 or more indices that are se12 lected periodically by the Secretary 

13 and that are in the top 3 quality lev14 els available. The Secretary shall 

15 make the permissible range, and the 

16 indices and methodology used to de17 termine the average rate, publicly 

18 available.’’. 

19 (B) SECRETARIAL AUTHORITY.—Subclause 

20 (III) of section 412(b)(5)(B)(ii) of such Code, 

21 as redesignated by subparagraph (A), is amend22 ed— 

23 (i) by inserting ‘‘or (II)’’ after ‘‘sub24 clause (I)’’ the first place it appears, and 
7 

•S 2282 IS 

1 (ii) by striking ‘‘subclause (I)’’ the 

2 second place it appears and inserting 

3 ‘‘such subclause’’. 

4 (C) CONFORMING AMENDMENT.—Sub5 clause (I) of section 412(b)(5)(B)(ii) of such 

6 Code is amended by inserting ‘‘or (III)’’ after 

7 ‘‘subclause (II)’’. 

8 (2) DETERMINATION OF CURRENT LIABILITY.— 

9 Clause (i) of section 412(l)(7)(C) of such Code is 

10 amended by adding at the end the following new 

11 subclause: 

12 ‘‘(IV) SPECIAL RULE FOR 2004

13 AND 2005.—For plan years beginning 

14 in 2004 or 2005, notwithstanding 

15 subclause (I), the rate of interest used 

16 to determine current liability under 

17 this subsection shall be the rate of in18 terest under subsection (b)(5).’’. 

19 (3) CONFORMING AMENDMENT.—Paragraph (7) 

20 of section 412(m) of such Code is amended to read 

21 as follows: 

22 ‘‘(7) SPECIAL RULE FOR 2002.—In any case in 

23 which the interest rate used to determine current li24 ability is determined under subsection 

25 (l)(7)(C)(i)(III), for purposes of applying paragraphs 
8 

•S 2282 IS 

1 (1) and (4)(B)(ii) for plan years beginning in 2002, 

2 the current liability for the preceding plan year shall 

3 be redetermined using 120 percent as the specified 

4 percentage determined under subsection 

5 (l)(7)(C)(i)(II).’’. 

6 (4) LIMITATION ON CERTAIN ASSUMPTIONS.— 

7 Section 415(b)(2)(E)(ii) of such Code is amended by 

8 inserting ‘‘, except that in the case of plan years be9 ginning in 2004 or 2005, ‘5.5 percent’ shall be sub10 stituted for ‘5 percent’ in clause (i)’’ before the pe11 riod at the end. 

12 (5) ELECTION TO DISREGARD MODIFICATION

13 FOR DEDUCTION PURPOSES.—Section 404(a)(1) of 

14 such Code is amended by adding at the end the fol15 lowing new subparagraph: 

16 ‘‘(F) ELECTION TO DISREGARD MODIFIED

17 INTEREST RATE.—An employer may elect to 

18 disregard subsections (b)(5)(B)(ii)(II) and 

19 (l)(7)(C)(i)(IV) of section 412 solely for pur20 poses of determining the interest rate used in 

21 calculating the maximum amount of the deduc22 tion allowable under this section for contribu23 tions to a plan to which this paragraph ap24 plies.’’. 
9 

•S 2282 IS 

1 (c) PROVISIONS RELATING TO PLAN AMEND2 MENTS.— 

3 (1) IN GENERAL.—If this subsection applies to 

4 any plan or annuity contract amendment— 

5 (A) such plan or contract shall be treated 

6 as being operated in accordance with the terms 

7 of the plan or contract during the period de8 scribed in paragraph (2)(B)(i), and 

9 (B) except as provided by the Secretary of 

10 the Treasury, such plan shall not fail to meet 

11 the requirements of section 411(d)(6) of the In12 ternal Revenue Code of 1986 and section 

13 204(g) of the Employee Retirement Income Se14 curity Act of 1974 by reason of such amend15 ment. 

16 (2) AMENDMENTS TO WHICH SECTION AP17 PLIES.— 

18 (A) IN GENERAL.—This subsection shall 

19 apply to any amendment to any plan or annuity 

20 contract which is made— 

21 (i) pursuant to any amendment made 

22 by this section, and 

23 (ii) on or before the last day of the 

24 first plan year beginning on or after Janu25 ary 1, 2006. 
10 

•S 2282 IS 

1 (B) CONDITIONS.—This subsection shall 

2 not apply to any plan or annuity contract 

3 amendment unless— 

4 (i) during the period beginning on the 

5 date the amendment described in subpara6 graph (A)(i) takes effect and ending on the 

7 date described in subparagraph (A)(ii) (or, 

8 if earlier, the date the plan or contract 

9 amendment is adopted), the plan or con10 tract is operated as if such plan or con11 tract amendment were in effect; and 

12 (ii) such plan or contract amendment 

13 applies retroactively for such period. 

14 (d) EFFECTIVE DATE.— 

15 (1) IN GENERAL.—Except as provided in para16 graphs (2) and (3), the amendments made by this 

17 section shall apply to plan years beginning after De18 cember 31, 2003. 

19 (2) LOOKBACK RULES.—For purposes of apply20 ing subsections (d)(9)(B)(ii) and (e)(1) of section 

21 302 of the Employee Retirement Income Security 

22 Act of 1974 and subsections (l)(9)(B)(ii) and (m)(1) 

23 of section 412 of the Internal Revenue Code of 1986 

24 to plan years beginning after December 31, 2003, 

25 the amendments made by this section may be ap-
11 

•S 2282 IS 

1 plied as if such amendments had been in effect for 

2 all prior plan years. The Secretary of the Treasury 

3 may prescribe simplified assumptions which may be 

4 used in applying the amendments made by this sec5 tion to such prior plan years. 

6 (3) TRANSITION RULE FOR SECTION 415 LIMI7 TATION.—In the case of any participant or bene8 ficiary receiving a distribution after December 31, 

9 2003 and before January 1, 2005, the amount pay10 able under any form of benefit subject to section 

11 417(e)(3) of the Internal Revenue Code of 1986 and 

12 subject to adjustment under section 415(b)(2)(B) of 

13 such Code shall not, solely by reason of the amend14 ment made by subsection (b)(4), be less than the 

15 amount that would have been so payable had the 

16 amount payable been determined using the applica17 ble interest rate in effect as of the last day of the 

18 last plan year beginning before January 1, 2004. 

19 SEC. 102. ELECTION OF ALTERNATIVE DEFICIT REDUCTION 

20 CONTRIBUTION. 

21 (a) AMENDMENT OF ERISA.—Section 302(d) of the 

22 Employee Retirement Income Security Act of 1974 (29 

23 U.S.C. 1082(d)) is amended by adding at the end the fol24 lowing new paragraph: 

25 ‘‘(12) ELECTION FOR CERTAIN PLANS.— 
12 

•S 2282 IS 

1 ‘‘(A) IN GENERAL.—In the case of a de2 fined benefit plan established and maintained 

3 by an applicable employer, if this subsection did 

4 not apply to the plan for the plan year begin5 ning in 2000 (determined without regard to 

6 paragraph (6)), then, at the election of the em7 ployer, the increased amount under paragraph 

8 (1) for any applicable plan year shall be the 

9 greater of— 

10 ‘‘(i) 20 percent of the increased 

11 amount under paragraph (1) determined 

12 without regard to this paragraph, or 

13 ‘‘(ii) the increased amount which 

14 would be determined under paragraph (1) 

15 if the deficit reduction contribution under 

16 paragraph (2) for the applicable plan year 

17 were determined without regard to sub18 paragraphs (A), (B), and (D) of paragraph 

19 (2). 

20 ‘‘(B) RESTRICTIONS ON BENEFIT IN21 CREASES.—No amendment which increases the 

22 liabilities of the plan by reason of any increase 

23 in benefits, any change in the accrual of bene24 fits, or any change in the rate at which benefits 

25 become nonforfeitable under the plan shall be 
13 

•S 2282 IS 

1 adopted during any applicable plan year, un2 less— 

3 ‘‘(i) the funded current liability per4 centage (as defined in paragraph (8)(B)) 

5 as of the end of such plan year is projected 

6 (taking into account the effect of the 

7 amendment) to be at least 75 percent, 

8 ‘‘(ii) the amendment provides for an 

9 increase in benefits under a formula which 

10 is not based on a participant’s compensa11 tion, but only if the rate of such increase 

12 is not in excess of the contemporaneous 

13 rate of increase in average wages of par14 ticipants covered by the amendment, 

15 ‘‘(iii) the amendment is required by a 

16 collective bargaining agreement which is in 

17 effect on the date of enactment of this sub18 paragraph, or 

19 ‘‘(iv) the amendment is otherwise de20 scribed in subparagraph (A) or (C) of sec21 tion 304(b)(2). 

22 If a plan is amended during any applicable plan 

23 year in violation of the preceding sentence, any 

24 election under this paragraph shall not apply to 
14 

•S 2282 IS 

1 any applicable plan year ending on or after the 

2 date on which such amendment is adopted. 

3 ‘‘(C) APPLICABLE EMPLOYER.—For pur4 poses of this paragraph, the term ‘applicable 

5 employer’ means an employer which is— 

6 ‘‘(i) a commercial passenger airline, 

7 ‘‘(ii) primarily engaged in the produc8 tion or manufacture of a steel mill product 

9 or the mining or processing of iron ore pel10 lets, or 

11 ‘‘(iii) an organization described in sec12 tion 501(c)(5) of the Internal Revenue 

13 Code of 1986 and which established the 

14 plan to which this paragraph applies on 

15 June 30, 1955. 

16 ‘‘(D) APPLICABLE PLAN YEAR.—For pur17 poses of this paragraph— 

18 ‘‘(i) IN GENERAL.—The term ‘applica19 ble plan year’ means any plan year begin20 ning after December 27, 2003, and before 

21 December 28, 2005, for which the em22 ployer elects the application of this para23 graph. 

24 ‘‘(ii) LIMITATION ON NUMBER OF

25 YEARS WHICH MAY BE ELECTED.—An elec-
15 

•S 2282 IS 

1 tion may not be made under this para2 graph with respect to more than 2 plan 

3 years. 

4 ‘‘(E) NOTICE REQUIREMENTS FOR PLANS

5 ELECTING ALTERNATIVE DEFICIT REDUCTION

6 CONTRIBUTIONS.— 

7 ‘‘(i) IN GENERAL.—If an employer 

8 elects an alternative deficit reduction con9 tribution under this paragraph and section 

10 412(l)(12) of the Internal Revenue Code of 

11 1986 for any year, the employer shall pro12 vide, within 30 days (120 days in the case 

13 of an employer described in subparagraph 

14 (C)(ii)) of filing the election for such year, 

15 written notice of the election to partici16 pants and beneficiaries and to the Pension 

17 Benefit Guaranty Corporation. 

18 ‘‘(ii) NOTICE TO PARTICIPANTS AND

19 BENEFICIARIES.—The notice under clause 

20 (i) to participants and beneficiaries shall 

21 include with respect to any election— 

22 ‘‘(I) the due date of the alter23 native deficit reduction contribution 

24 and the amount by which such con25 tribution was reduced from the 
16 

•S 2282 IS 

1 amount which would have been owed 

2 if the election were not made, and 

3 ‘‘(II) a description of the benefits 

4 under the plan which are eligible to be 

5 guaranteed by the Pension Benefit 

6 Guaranty Corporation and an expla7 nation of the limitations on the guar8 antee and the circumstances under 

9 which such limitations apply, includ10 ing the maximum guaranteed monthly 

11 benefits which the Pension Benefit 

12 Guaranty Corporation would pay if 

13 the plan terminated while under14 funded. 

15 ‘‘(iii) NOTICE TO PBGC.—The notice 

16 under clause (i) to the Pension Benefit 

17 Guaranty Corporation shall include— 

18 ‘‘(I) the information described in 

19 clause (ii)(I), 

20 ‘‘(II) the number of years it will 

21 take to restore the plan to full fund22 ing if the employer only makes the re23 quired contributions, and 

24 ‘‘(III) information as to how the 

25 amount by which the plan is under-
17 

•S 2282 IS 

1 funded compares with the capitaliza2 tion of the employer making the elec3 tion. 

4 ‘‘(F) ELECTION.—An election under this 

5 paragraph shall be made at such time and in 

6 such manner as the Secretary of the Treasury 

7 may prescribe.’’ 

8 (b) AMENDMENT OF 1986 CODE.—Section 412(l) of 

9 the Internal Revenue Code of 1986 (relating to applica10 bility of subsection) is amended by adding at the end the 

11 following new paragraph: 

12 ‘‘(12) ELECTION FOR CERTAIN PLANS.— 

13 ‘‘(A) IN GENERAL.—In the case of a de14 fined benefit plan established and maintained 

15 by an applicable employer, if this subsection did 

16 not apply to the plan for the plan year begin17 ning in 2000 (determined without regard to 

18 paragraph (6)), then, at the election of the em19 ployer, the increased amount under paragraph 

20 (1) for any applicable plan year shall be the 

21 greater of— 

22 ‘‘(i) 20 percent of the increased 

23 amount under paragraph (1) determined 

24 without regard to this paragraph, or 
18 

•S 2282 IS 

1 ‘‘(ii) the increased amount which 

2 would be determined under paragraph (1) 

3 if the deficit reduction contribution under 

4 paragraph (2) for the applicable plan year 

5 were determined without regard to sub6 paragraphs (A), (B), and (D) of paragraph 

7 (2). 

8 ‘‘(B) RESTRICTIONS ON BENEFIT IN9 CREASES.—No amendment which increases the 

10 liabilities of the plan by reason of any increase 

11 in benefits, any change in the accrual of bene12 fits, or any change in the rate at which benefits 

13 become nonforfeitable shall be adopted during 

14 any applicable plan year, unless— 

15 ‘‘(i) the funded current liability per16 centage (as defined in paragraph (8)(B)) 

17 as of the end of such plan year is projected 

18 (taking into account the effect of the 

19 amendment) to be at least 75 percent, 

20 ‘‘(ii) the amendment provides for an 

21 increase in benefits under a formula which 

22 is not based on a participant’s compensa23 tion, but only if the rate of such increase 

24 is not in excess of the contemporaneous 
19 

•S 2282 IS 

1 rate of increase in average wages of partici2 pants covered by the amendment, 

3 ‘‘(iii) the amendment is required by a 

4 collective bargaining agreement which is in 

5 effect on the date of enactment of this sub6 paragraph, or 

7 ‘‘(iv) the amendment is otherwise de8 scribed in subparagraph (A) or (C) of sub9 section (f)(2). 

10 If a plan is amended during any applicable plan 

11 year in violation of the preceding sentence, any 

12 election under this paragraph shall not apply to 

13 any applicable plan year ending on or after the 

14 date on which such amendment is adopted. 

15 ‘‘(C) APPLICABLE EMPLOYER.—For pur16 poses of this paragraph, the term ‘applicable 

17 employer’ means an employer which is— 

18 ‘‘(i) a commercial passenger airline, 

19 ‘‘(ii) primarily engaged in the produc20 tion or manufacture of a steel mill product 

21 or the mining or processing of iron ore pel22 lets, or 

23 ‘‘(iii) an organization described in sec24 tion 501(c)(5) and which established the 
20 

•S 2282 IS 

1 plan to which this paragraph applies on 

2 June 30, 1955. 

3 ‘‘(D) APPLICABLE PLAN YEAR.—For pur4 poses of this paragraph— 

5 ‘‘(i) IN GENERAL.—The term ‘applica6 ble plan year’ means any plan year begin7 ning after December 27, 2003, and before 

8 December 28, 2005, for which the em9 ployer elects the application of this para10 graph. 

11 ‘‘(ii) LIMITATION ON NUMBER OF

12 YEARS WHICH MAY BE ELECTED.—An elec13 tion may not be made under this para14 graph with respect to more than 2 plan 

15 years. 

16 ‘‘(E) ELECTION.—An election under this 

17 paragraph shall be made at such time and in 

18 such manner as the Secretary may prescribe.’’ 

19 (c) EFFECT OF ELECTION.—An election under sec20 tion 412(l)(12) of the Internal Revenue Code of 1986 or 

21 section 302(d)(12) of the Employee Retirement Income 

22 Security Act of 1974 (as added by this section) with re23 spect to a plan shall not invalidate any obligation (pursu24 ant to a collective bargaining agreement in effect on the 

25 date of the election) to provide benefits, to change the ac-
21 

•S 2282 IS 

1 crual of benefits, or to change the rate at which benefits 

2 become nonforfeitable under the plan . 

3 (d) PENALTY FOR FAILING TO PROVIDE NOTICE.— 

4 Section 502(c)(3) of the Employee Retirement Income Se5 curity Act of 1974 (29 U.S.C. 1132(c)(3)) is amended by 

6 inserting ‘‘or who fails to meet the requirements of section 

7 302(d)(12)(E) with respect to any person’’ after 

8 ‘‘101(e)(2) with respect to any person’’. 

9 SEC. 103. MULTIEMPLOYER PLAN FUNDING NOTICES. 

10 (a) IN GENERAL.—Section 101 of the Employee Re11 tirement Income Security Act of 1974 (29 U.S.C. 1021) 

12 is amended by inserting after subsection (e) the following 

13 new subsection: 

14 ‘‘(f) MULTIEMPLOYER DEFINED BENEFIT PLAN

15 FUNDING NOTICES.— 

16 ‘‘(1) IN GENERAL.—The administrator of a de17 fined benefit plan which is a multiemployer plan 

18 shall for each plan year provide a plan funding no19 tice to each plan participant and beneficiary, to each 

20 labor organization representing such participants or 

21 beneficiaries, to each employer that has an obliga22 tion to contribute under the plan, and to the Pen23 sion Benefit Guaranty Corporation. 

24 ‘‘(2) INFORMATION CONTAINED IN NOTICES.— 
22 

•S 2282 IS 

1 ‘‘(A) IDENTIFYING INFORMATION.—Each 

2 notice required under paragraph (1) shall con3 tain identifying information, including the name 

4 of the plan, the address and phone number of 

5 the plan administrator and the plan’s principal 

6 administrative officer, each plan sponsor’s em7 ployer identification number, and the plan num8 ber of the plan. 

9 ‘‘(B) SPECIFIC INFORMATION.—A plan 

10 funding notice under paragraph (1) shall in11 clude— 

12 ‘‘(i) a statement as to whether the 

13 plan’s funded current liability percentage 

14 (as defined in section 302(d)(8)(B)) for 

15 the plan year to which the notice relates is 

16 at least 100 percent (and, if not, the actual 

17 percentage); 

18 ‘‘(ii) a statement of the value of the 

19 plan’s assets, the amount of benefit pay20 ments, and the ratio of the assets to the 

21 payments for the plan year to which the 

22 notice relates; 

23 ‘‘(iii) a summary of the rules gov24 erning insolvent multiemployer plans, in25 cluding the limitations on benefit payments 
23 

•S 2282 IS 

1 and any potential benefit reductions and 

2 suspensions (and the potential effects of 

3 such limitations, reductions, and suspen4 sions on the plan); and 

5 ‘‘(iv) a general description of the ben6 efits under the plan which are eligible to be 

7 guaranteed by the Pension Benefit Guar8 anty Corporation, along with an expla9 nation of the limitations on the guarantee 

10 and the circumstances under which such 

11 limitations apply. 

12 ‘‘(C) OTHER INFORMATION.—Each notice 

13 under paragraph (1) shall include any addi14 tional information which the plan administrator 

15 elects to include to the extent not inconsistent 

16 with regulations prescribed by the Secretary. 

17 ‘‘(3) TIME FOR PROVIDING NOTICE.—Any no18 tice under paragraph (1) shall be provided no later 

19 than two months after the deadline (including exten20 sions) for filing the annual report for the plan year 

21 to which the notice relates. 

22 ‘‘(4) FORM AND MANNER.—Any notice under 

23 paragraph (1)— 

24 ‘‘(A) shall be provided in a form and man25 ner prescribed in regulations of the Secretary, 
24 

•S 2282 IS 

1 ‘‘(B) shall be written in a manner so as to 

2 be understood by the average plan participant, 

3 and 

4 ‘‘(C) may be provided in written, elec5 tronic, or other appropriate form to the extent 

6 such form is reasonably accessible to persons to 

7 whom the notice is required to be provided.’’ 

8 (b) PENALTIES.—Section 502(c)(1) of the Employee 

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

10 1132(c)(1)) is amended by striking ‘‘or section 101(e)(1)’’ 

11 and inserting ‘‘, section 101(e)(1), or section 101(f)’’. 

12 (c) REGULATIONS AND MODEL NOTICE.—The Sec13 retary of Labor shall, not later than 1 year after the date 

14 of the enactment of this Act, issue regulations (including 

15 a model notice) necessary to implement the amendments 

16 made by this section. 

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

18 this section shall apply to plan years beginning after De19 cember 31, 2004. 

20 SEC. 104. AMORTIZATION HIATUS FOR NET EXPERIENCE 

21 LOSSES IN MULTIEMPLOYER PLANS. 

22 (a) EMPLOYEE RETIREMENT INCOME SECURITY ACT

23 OF 1974.— 

24 (1) IN GENERAL.—Section 302(b)(7) of the 

25 Employee Retirement Income Security Act of 1974 
25 

•S 2282 IS 

1 (29 U.S.C.1082(b)(7)) is amended by adding at the 

2 end the following new subparagraph: 

3 ‘‘(F) AMORTIZATION HIATUS.— 

4 ‘‘(i) ELECTION TO AMORTIZE.— 

5 ‘‘(I) IN GENERAL.—If the 15- 

6 year amortization period under para7 graph (2)(B)(iv) with respect to the 

8 net experience loss of an eligible mul9 tiemployer plan would, but for this 

10 subparagraph, begin in any plan year 

11 beginning after June 30, 2002, and 

12 before July 1, 2006, the plan may 

13 elect, with respect to 80 percent of 

14 such net experience loss, to have such 

15 period begin in any plan year selected 

16 by the plan from either of the 2 im17 mediately succeeding plan years. 

18 ‘‘(II) LIMITATION.—Notwith19 standing clause (i), a plan may elect 

20 to have this subparagraph apply to 

21 the amortization of net experience 

22 losses with respect to only 2 plan 

23 years beginning after June 30, 2002, 

24 and before July 1, 2006. 
26 

•S 2282 IS 

1 ‘‘(ii) RESTRICTIONS ON BENEFIT IN2 CREASES.—An amendment which increases 

3 the liabilities of the plan by reason of any 

4 increase in benefits, any change in the ac5 crual of benefits, or any change in the rate 

6 at which benefits become nonforfeitable 

7 under the plan shall not take effect for any 

8 plan year in the hiatus period. The pre9 ceding sentence shall not apply to a plan 

10 amendment described in subparagraph (A) 

11 or (C) of section 304(b)(2). 

12 ‘‘(iii) BENEFIT INCREASES ATTRIB13 UTABLE TO INCREASES IN CONTRIBU14 TIONS.—Clause (ii) shall not apply to an 

15 increase in benefits for a group of partici16 pants resulting solely from an increase in 

17 the contributions made on their behalf 

18 (and not from any action taken to amend 

19 the terms of the plan), but only if the 

20 plan’s actuary certifies that the amount of 

21 the increase in contributions scheduled 

22 under the terms of the plan for any year 

23 will in the aggregate exceed the increase in 

24 the charges to the funding standard ac-
27 

•S 2282 IS 

1 count for such year attributable to the cor2 responding scheduled increase in benefits. 

3 ‘‘(iv) ELIGIBLE MULTIEMPLOYER

4 PLAN.—For purposes of this subpara5 graph, the term ‘eligible multiemployer 

6 plan’ means a multiemployer plan— 

7 ‘‘(I) which had a net investment 

8 loss for the last plan year of the plan 

9 ending before April 1, 2003, of at 

10 least 4 percent, and 

11 ‘‘(II) with respect to which the 

12 plan’s actuary certifies (not taking 

13 into account the application of this 

14 subparagraph) that the plan is pro15 jected to have an accumulated funding 

16 deficiency (within the meaning of sub17 section (a)(2)) for any plan year be18 ginning after December 31, 2002, and 

19 on or before December 31, 2008. 

20 For purposes of subclause (I), a plan’s net 

21 investment loss shall be determined in the 

22 manner specified in guidance provided by 

23 the Secretary of the Treasury on the basis 

24 of the actual fair market value of the as25 sets of the plan. In making the projection 
28 

•S 2282 IS 

1 under subclause (II), the actuary shall use 

2 the actuarial assumptions and methods 

3 used in the plan valuation for the last plan 

4 year of the plan ending before the date of 

5 the enactment of this subparagraph, with 

6 the interest rate used in such assumptions 

7 applied to the fair market value of the as8 sets, and take into account contribution 

9 rates, benefit levels, and all other relevant 

10 facts and circumstances in effect as of the 

11 valuation date for such last plan year. 

12 ‘‘(v) EXCEPTION TO TREATMENT OF

13 ELIGIBLE MULTIEMPLOYER PLAN.—In no 

14 event shall a plan be treated as an eligible 

15 multiemployer plan under clause (iv) if— 

16 ‘‘(I) for any taxable year begin17 ning during the 10-year period pre18 ceding the first plan year for which an 

19 election is made under clause (i), any 

20 employer required to contribute to the 

21 plan failed to timely pay any excise 

22 tax imposed under section 4971 of the 

23 Internal Revenue Code of 1986 with 

24 respect to the plan, or 
29 

•S 2282 IS 

1 ‘‘(II) with respect to any of the 

2 plan years beginning after June 30, 

3 1993, and before the first plan year 

4 for which an election is made under 

5 clause (i), a waiver was granted under 

6 section 303 of this Act or section 

7 412(d) of the Internal Revenue Code 

8 of 1986 with respect to the plan or an 

9 extension of an amortization period 

10 was granted under section 304 of this 

11 Act or section 412(e) of such Code 

12 with respect to the plan. 

13 ‘‘(vi) HIATUS PERIOD.—For purposes 

14 of this subparagraph, the term ‘hiatus pe15 riod’ means any period during which the 

16 amortization of a net experience loss is 

17 suspended by reason of this subparagraph. 

18 ‘‘(vii) INTEREST ACCRUED DURING HI19 ATUS.—Interest shall accrue (at the rate 

20 specified for multiemployer plans under 

21 section 304(a)) during a hiatus period on 

22 the portion of the net experience loss the 

23 amortization of which is suspended during 

24 such period by reason of this subpara25 graph. Such interest shall be added to the 
30 

•S 2282 IS 

1 amount of such portion of the net experi2 ence loss in determining the amount to be 

3 amortized at the end of the hiatus period. 

4 ‘‘(viii) NOTICE.—If a plan elects an 

5 amortization hiatus under this subpara6 graph and section 412(b)(7)(F) of the In7 ternal Revenue Code of 1986 for any plan 

8 year, the plan administrator shall provide, 

9 within 30 days of filing the election for 

10 such year, written notice of the election to 

11 participants and beneficiaries, to each 

12 labor organization representing such par13 ticipants or beneficiaries, and to each em14 ployer that has an obligation to contribute 

15 under the plan. Such notice shall include 

16 with respect to any election the amount of 

17 the net experience loss to be deferred and 

18 the period of the deferral. Such notice shall 

19 also include— 

20 ‘‘(I) a description of the max21 imum guaranteed monthly benefits for 

22 which the Pension Benefit Guaranty 

23 Corporation would provide financial 

24 assistance if the plan became insol25 vent, and 
31 

•S 2282 IS 

1 ‘‘(II) such other information as 

2 the plan administrator elects to the 

3 extent the inclusion of such informa4 tion is not inconsistent with regula5 tions prescribed by the Secretary. 

6 ‘‘(ix) ELECTION.—An election under 

7 this subparagraph shall be made at such 

8 time and in such manner as the Secretary 

9 of the Treasury may prescribe.’’ 

10 (2) PENALTY.—Section 502(c)(4) of such Act 

11 (29 U.S.C. 1132(c)(4)) is amended to read as fol12 lows: 

13 ‘‘(4) The Secretary may assess a civil penalty of 

14 not more than $1,000 a day for each violation by 

15 any person of section 302(b)(7)(F)(viii).’’ 

16 (b) INTERNAL REVENUE CODE OF 1986.— 

17 (1) IN GENERAL.—Section 412(b)(7) of the In18 ternal Revenue Code of 1986 (relating to special 

19 rules for multiemployer plans) is amended by adding 

20 at the end the following new subparagraph: 

21 ‘‘(F) AMORTIZATION HIATUS.— 

22 ‘‘(i) ELECTION TO AMORTIZE.— 

23 ‘‘(I) IN GENERAL.—If the 15- 

24 year amortization period under para25 graph (2)(B)(iv) with respect to the 
32 

•S 2282 IS 

1 net experience loss of an eligible mul2 tiemployer plan would, but for this 

3 subparagraph, begin in any plan year 

4 beginning after June 30, 2002, and 

5 before July 1, 2006, the plan may 

6 elect, with respect to 80 percent of 

7 such net experience loss, to have such 

8 period begin in any plan year selected 

9 by the plan from either of the 2 im10 mediately succeeding plan years. 

11 ‘‘(II) LIMITATION.—Notwith12 standing clause (i), a plan may elect 

13 to have this subparagraph apply to 

14 the amortization of net experience 

15 losses with respect to only 2 plan 

16 years beginning after June 30, 2002, 

17 and before July 1, 2006. 

18 ‘‘(ii) RESTRICTIONS ON BENEFIT IN19 CREASES.—An amendment which increases 

20 the liabilities of the plan by reason of any 

21 increase in benefits, any change in the ac22 crual of benefits, or any change in the rate 

23 at which benefits become nonforfeitable 

24 under the plan shall not take effect for any 

25 plan year in the hiatus period. The pre-
33 

•S 2282 IS 

1 ceding sentence shall not apply to a plan 

2 amendment described in subparagraph (A) 

3 or (C) of subsection (f)(2). 

4 ‘‘(iii) BENEFIT INCREASES ATTRIB5 UTABLE TO INCREASES IN CONTRIBU6 TIONS.—Clause (ii) shall not apply to an 

7 increase in benefits for a group of partici8 pants resulting solely from an increase in 

9 the contributions made on their behalf 

10 (and not from any action taken to amend 

11 the terms of the plan), but only if the 

12 plan’s actuary certifies that the amount of 

13 the increase in contributions scheduled 

14 under the terms of the plan for any year 

15 will in the aggregate exceed the increase in 

16 the charges to the funding standard ac17 count for such year attributable to the cor18 responding scheduled increase in benefits. 

19 ‘‘(iv) ELIGIBLE MULTIEMPLOYER

20 PLAN.—For purposes of this subpara21 graph, the term ‘eligible multiemployer 

22 plan’ means a multiemployer plan— 

23 ‘‘(I) which had a net investment 

24 loss for the last plan year of the plan 
34 

•S 2282 IS 

1 ending before April 1, 2003, of at least 

2 4 percent, and 

3 ‘‘(II) with respect to which the 

4 plan’s actuary certifies (not taking 

5 into account the application of this 

6 subparagraph) that the plan is pro7 jected to have an accumulated funding 

8 deficiency (within the meaning of sub9 section (a)) for any plan year begin10 ning after December 31, 2002, and on 

11 or before December 31, 2008. 

12 For purposes of subclause (I), a plan’s net 

13 investment loss shall be determined in the 

14 manner specified in guidance provided by 

15 the Secretary of the Treasury on the basis 

16 of the actual fair market value of the as17 sets of the plan. In making the projection 

18 under subclause (II), the actuary shall use 

19 the actuarial assumptions and methods 

20 used in the plan valuation for the last plan 

21 year of the plan ending before the date of 

22 the enactment of this subparagraph, with 

23 the interest rate used in such assumptions 

24 applied to the fair market value of the as25 sets, and take into account contribution 
35 

•S 2282 IS 

1 rates, benefit levels, and all other relevant 

2 facts and circumstances in effect as of the 

3 valuation date for such last plan year. 

4 ‘‘(v) EXCEPTION TO TREATMENT OF

5 ELIGIBLE MULTIEMPLOYER PLAN.—In no 

6 event shall a plan be treated as an eligible 

7 multiemployer plan under clause (iv) if— 

8 ‘‘(I) for any taxable year begin9 ning during the 10-year period pre10 ceding the first plan year for which an 

11 election is made under clause (i), any 

12 employer required to contribute to the 

13 plan failed to timely pay any excise 

14 tax imposed under section 4971 with 

15 respect to the plan, or 

16 ‘‘(II) with respect to any of the 

17 plan years beginning after June 30, 

18 1993, and before the first plan year 

19 for which an election is made under 

20 clause (i), a waiver was granted under 

21 section 412(d) or section 303 of the 

22 Employee Retirement Income Security 

23 Act of 1974 with respect to the plan 

24 or an extension of an amortization pe25 riod was granted under subsection (e) 
36 

•S 2282 IS 

1 or section 304 of such Act with re2 spect to the plan. 

3 ‘‘(vi) HIATUS PERIOD.—For purposes 

4 of this subparagraph, the term ‘hiatus pe5 riod’ means any period during which the 

6 amortization of a net experience loss is 

7 suspended by reason of this subparagraph. 

8 ‘‘(vii) INTEREST ACCRUED DURING HI9 ATUS.—Interest shall accrue (at the rate 

10 specified for multiemployer plans under 

11 section 412(e)) during a hiatus period on 

12 the portion of the net experience loss the 

13 amortization of which is suspended during 

14 such period by reason of this subpara15 graph. Such interest shall be added to the 

16 amount of such portion of the net experi17 ence loss in determining the amount to be 

18 amortized at the end of the hiatus period. 

19 ‘‘(viii) ELECTION.—An election under 

20 this subparagraph shall be made at such 

21 time and in such manner as the Secretary 

22 may prescribe.’’ 

23 (2) QUALIFICATION REQUIREMENT.—Section 

24 401(a) of such Code is amended by inserting after 

25 paragraph (34) the following new paragraph: 
37 

•S 2282 IS 

1 ‘‘(35) BENEFIT INCREASES IN CERTAIN MULTI2 EMPLOYER PLANS.—A trust which is part of a plan 

3 shall not constitute a qualified trust under this sec4 tion if the plan adopts an amendment during a hia5 tus period (within the meaning of section 

6 412(b)(7)(F)(vi)) which the plan is prohibited from 

7 adopting by reason of section 412(b)(7)(F)(ii).’’. 

8 TITLE II—OTHER PROVISIONS 

9 SEC. 201. 2-YEAR EXTENSION OF TRANSITION RULE TO 

10 PENSION FUNDING REQUIREMENTS. 

11 (a) IN GENERAL.—Section 769(c) of the Retirement 

12 Protection Act of 1994, as added by section 1508 of the 

13 Taxpayer Relief Act of 1997, is amended— 

14 (1) by inserting ‘‘except as provided in para15 graph (3),’’ before ‘‘the transition rules’’, and 

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

17 ‘‘(3) SPECIAL RULES.—In the case of plan years be18 ginning in 2004 and 2005, the following transition rules 

19 shall apply in lieu of the transition rules described in para20 graph (2): 

21 ‘‘(A) For purposes of section 412(l)(9)(A) 

22 of the Internal Revenue Code of 1986 and sec23 tion 302(d)(9)(A) of the Employee Retirement 

24 Income Security Act of 1974, the funded cur-
38 

•S 2282 IS 

1 rent liability percentage for any plan year shall 

2 be treated as not less than 90 percent. 

3 ‘‘(B) For purposes of section 412(m) of 

4 the Internal Revenue Code of 1986 and section 

5 302(e) of the Employee Retirement Income Se6 curity Act of 1974, the funded current liability 

7 percentage for any plan year shall be treated as 

8 not less than 100 percent. 

9 ‘‘(C) For purposes of determining un10 funded vested benefits under section 

11 4006(a)(3)(E)(iii) of the Employee Retirement 

12 Income Security Act of 1974, the mortality 

13 table shall be the mortality table used by the 

14 plan.’’ 

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

16 this section shall apply to plan years beginning after De17 cember 31, 2003. 

18 SEC. 202. PROCEDURES APPLICABLE TO DISPUTES INVOLV19 ING PENSION PLAN WITHDRAWAL LIABILITY. 

20 (a) IN GENERAL.—Section 4221 of the Employee Re21 tirement Income Security Act of 1974 (29 U.S.C. 1401) 

22 is amended by adding at the end the following new sub23 section: 

24 ‘‘(f) PROCEDURES APPLICABLE TO CERTAIN DIS25 PUTES.— 
39 

•S 2282 IS 

1 ‘‘(1) IN GENERAL.—If— 

2 ‘‘(A) a plan sponsor of a plan determines 

3 that— 

4 ‘‘(i) a complete or partial withdrawal 

5 of an employer has occurred, or 

6 ‘‘(ii) an employer is liable for with7 drawal liability payments with respect to 

8 the complete or partial withdrawal of an 

9 employer from the plan, 

10 ‘‘(B) such determination is based in whole 

11 or in part on a finding by the plan sponsor 

12 under section 4212(c) that a principal purpose 

13 of a transaction that occurred before January 

14 1, 1999, was to evade or avoid withdrawal li15 ability under this subtitle, and 

16 ‘‘(C) such transaction occurred at least 5 

17 years before the date of the complete or partial 

18 withdrawal, 

19 then the special rules under paragraph (2) shall be 

20 used in applying subsections (a) and (d) of this sec21 tion and section 4219(c) to the employer. 

22 ‘‘(2) SPECIAL RULES.— 

23 ‘‘(A) DETERMINATION.—Notwithstanding 

24 subsection (a)(3)— 
40 

•S 2282 IS 

1 ‘‘(i) a determination by the plan spon2 sor under paragraph (1)(B) shall not be 

3 presumed to be correct, and 

4 ‘‘(ii) the plan sponsor shall have the 

5 burden to establish, by a preponderance of 

6 the evidence, the elements of the claim 

7 under section 4212(c) that a principal pur8 pose of the transaction was to evade or 

9 avoid withdrawal liability under this sub10 title. 

11 Nothing in this subparagraph shall affect the 

12 burden of establishing any other element of a 

13 claim for withdrawal liability under this sub14 title. 

15 ‘‘(B) PROCEDURE.—Notwithstanding sub16 section (d) and section 4219(c), if an employer 

17 contests the plan sponsor’s determination under 

18 paragraph (1) through an arbitration pro19 ceeding pursuant to subsection (a), or through 

20 a claim brought in a court of competent juris21 diction, the employer shall not be obligated to 

22 make any withdrawal liability payments until a 

23 final decision in the arbitration proceeding, or 

24 in court, upholds the plan sponsor’s determina25 tion.’’. 
41 

•S 2282 IS 

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

2 this section shall apply to any employer that receives a 

3 notification under section 4219(b)(1) of the Employee Re4 tirement Income Security Act of 1974 (29 U.S.C. 

5 1399(b)(1)) after October 31, 2003. 

6 SEC. 203. EXTENSION OF TRANSFERS OF EXCESS PENSION 

7 ASSETS TO RETIREE HEALTH ACCOUNTS. 

8 (a) AMENDMENT OF INTERNAL REVENUE CODE OF

9 1986.—Paragraph (5) of section 420(b) of the Internal 

10 Revenue Code of 1986 (relating to expiration) is amended 

11 by striking ‘‘December 31, 2005’’ and inserting ‘‘Decem12 ber 31, 2013’’. 

13 (b) AMENDMENTS OF ERISA.— 

14 (1) Section 101(e)(3) of the Employee Retire15 ment Income Security Act of 1974 (29 U.S.C. 

16 1021(e)(3)) is amended by striking ‘‘Tax Relief Ex17 tension Act of 1999’’ and inserting ‘‘Fairness in 

18 Pension Stability Act’’. 

19 (2) Section 403(c)(1) of such Act (29 U.S.C. 

20 1103(c)(1)) is amended by striking ‘‘Tax Relief Ex21 tension Act of 1999’’ and inserting ‘‘Fairness in 

22 Pension Stability Act’’. 

23 (3) Paragraph (13) of section 408(b) of such 

24 Act (29 U.S.C. 1108(b)(3)) is amended— 
42 

•S 2282 IS 

1 (A) by striking ‘‘January 1, 2006’’ and in2 serting ‘‘January 1, 2014’’, and 

3 (B) by striking ‘‘Tax Relief Extension Act 

4 of 1999’’ and inserting ‘‘Fairness in Pension 

5 Stability Act’’. 

6 SEC. 204. CLARIFICATION OF EXEMPTION FROM TAX FOR 

7 SMALL PROPERTY AND CASUALTY INSUR8 ANCE COMPANIES. 

9 (a) IN GENERAL.—Section 501(c)(15)(A) of the In10 ternal Revenue Code of 1986 is amended to read as fol11 lows: 

12 ‘‘(A) Insurance companies (as defined in section 

13 816(a)) other than life (including interinsurers and 

14 reciprocal underwriters) if— 

15 ‘‘(i)(I) the gross receipts for the taxable 

16 year do not exceed $600,000, and 

17 ‘‘(II) more than 50 percent of such gross 

18 receipts consist of premiums, or 

19 ‘‘(ii) in the case of a mutual insurance 

20 company— 

21 ‘‘(I) the gross receipts of which for 

22 the taxable year do not exceed $150,000, 

23 and 

24 ‘‘(II) more than 35 percent of such 

25 gross receipts consist of premiums. 
43 

•S 2282 IS 

1 Clause (ii) shall not apply to a company if any em2 ployee of the company, or a member of the employ3 ee’s family (as defined in section 2032A(e)(2)), is an 

4 employee of another company exempt from taxation 

5 by reason of this paragraph (or would be so exempt 

6 but for this sentence).’’. 

7 (b) CONTROLLED GROUP RULE.—Section 

8 501(c)(15)(C) of the Internal Revenue Code of 1986 is 

9 amended by inserting ‘‘, except that in applying section 

10 831(b)(2)(B)(ii) for purposes of this subparagraph, sub11 paragraphs (B) and (C) of section 1563(b)(2) shall be dis12 regarded’’ before the period at the end. 

13 (c) DEFINITION OF INSURANCE COMPANY FOR SEC14 TION 831.—Section 831 of the Internal Revenue Code of 

15 1986 is amended by redesignating subsection (c) as sub16 section (d) and by inserting after subsection (b) the fol17 lowing new subsection: 

18 ‘‘(c) INSURANCE COMPANY DEFINED.—For purposes 

19 of this section, the term ‘insurance company’ has the 

20 meaning given to such term by section 816(a)).’’. 

21 (d) CONFORMING AMENDMENT.—Clause (i) of sec22 tion 831(b)(2)(A) of the Internal Revenue Code of 1986 

23 is amended by striking ‘‘exceed $350,000 but’’. 

24 (e) EFFECTIVE DATE.— 
44 

•S 2282 IS 

1 (1) IN GENERAL.—The amendments made by 

2 this section shall apply to taxable years beginning 

3 after December 31, 2003. 

4 (2) TRANSITION RULE FOR COMPANIES IN

5 BANKRUPTCY.—In the case of a company or associa6 tion which— 

7 (A) for the taxable year which includes 

8 April 1, 2004, meets the requirements of sec9 tion 501(c)(15)(A) of the Internal Revenue 

10 Code of 1986, as in effect for the taxable year 

11 beginning before January 1, 2004, and 

12 (B) on April 1, 2004, is in a receivership, 

13 foreclosure, or similar proceeding under the su14 pervision of a State court, 

15 the amendments made by this section shall apply to 

16 taxable years beginning after the earlier of the date 

17 such proceeding ends or December 31, 2007. 

18 SEC. 205. REPEAL OF REDUCTION OF DEDUCTIONS FOR 

19 MUTUAL LIFE INSURANCE COMPANIES. 

20 (a) IN GENERAL.—Section 809 of the Internal Rev21 enue Code of 1986 (relating to reductions in certain de22 duction of mutual life insurance companies) is hereby re23 pealed. 

24 (b) CONFORMING AMENDMENTS.— 
45 

•S 2282 IS 

1 (1) Subsections (a)(2)(B) and (b)(1)(B) of sec2 tion 807 of such Code are each amended by striking 

3 ‘‘the sum of (i)’’ and by striking ‘‘plus (ii) any ex4 cess described in section 809(a)(2) for the taxable 

5 year,’’. 

6 (2)(A) The last sentence of section 807(d)(1) of 

7 such Code is amended by striking ‘‘section 

8 809(b)(4)(B)’’ and inserting ‘‘paragraph (6)’’. 

9 (B) Subsection (d) of section 807 of such Code 

10 is amended by adding at the end the following new 

11 paragraph: 

12 ‘‘(6) STATUTORY RESERVES.—The term ‘statu13 tory reserves’ means the aggregate amount set forth 

14 in the annual statement with respect to items de15 scribed in section 807(c). Such term shall not in16 clude any reserve attributable to a deferred and un17 collected premium if the establishment of such re18 serve is not permitted under section 811(c).’’ 

19 (3) Subsection (c) of section 808 of such Code 

20 is amended to read as follows: 

21 ‘‘(c) AMOUNT OF DEDUCTION.—The deduction for 

22 policyholder dividends for any taxable year shall be an 

23 amount equal to the policyholder dividends paid or accrued 

24 during the taxable year.’’ 
46 

•S 2282 IS 

1 (4) Subparagraph (A) of section 812(b)(3) of 

2 such Code is amended by striking ‘‘sections 808 and 

3 809’’ and inserting ‘‘section 808’’. 

4 (5) Subsection (c) of section 817 of such Code 

5 is amended by striking ‘‘(other than section 809)’’. 

6 (6) Subsection (c) of section 842 of such Code 

7 is amended by striking paragraph (3) and by redes8 ignating paragraph (4) as paragraph (3). 

9 (7) The table of sections for subpart C of part 

10 I of subchapter L of chapter 1 of such Code is 

11 amended by striking the item relating to section 

12 809. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2004. 

16 SEC. 206. CONFIRMATION OF ANTITRUST STATUS OF GRAD17 UATE MEDICAL RESIDENT MATCHING PRO18 GRAMS. 

19 (a) FINDINGS AND PURPOSES.— 

20 (1) FINDINGS.—Congress makes the following 

21 findings: 

22 (A) For over 50 years, most United States 

23 medical school seniors and the large majority of 

24 graduate medical education programs (popu25 larly known as ‘‘residency programs’’) have cho-
47 

•S 2282 IS 

1 sen to use a matching program to match med2 ical students with residency programs to which 

3 they have applied. These matching programs 

4 have been an integral part of an educational 

5 system that has produced the finest physicians 

6 and medical researchers in the world. 

7 (B) Before such matching programs were 

8 instituted, medical students often felt pressure, 

9 at an unreasonably early stage of their medical 

10 education, to seek admission to, and accept of11 fers from, residency programs. As a result, 

12 medical students often made binding commit13 ments before they were in a position to make an 

14 informed decision about a medical specialty or 

15 a residency program and before residency pro16 grams could make an informed assessment of 

17 students’ qualifications. This situation was inef18 ficient, chaotic, and unfair and it often led to 

19 placements that did not serve the interests of 

20 either medical students or residency programs. 

21 (C) The original matching program, now 

22 operated by the independent non-profit Na23 tional Resident Matching Program and popu24 larly known as ‘‘the Match,’’ was developed and 

25 implemented more than 50 years ago in re-
48 

•S 2282 IS 

1 sponse to widespread student complaints about 

2 the prior process. This Program includes on its 

3 board of directors individuals nominated by 

4 medical student organizations as well as by 

5 major medical education and hospital associa6 tions. 

7 (D) The Match uses a computerized math8 ematical algorithm, as students had rec9 ommended, to analyze the preferences of stu10 dents and residency programs and match stu11 dents with their highest preferences from 

12 among the available positions in residency pro13 grams that listed them. Students thus obtain a 

14 residency position in the most highly ranked 

15 program on their list that has ranked them suf16 ficiently high among its preferences. Each year, 

17 about 85 percent of participating United States 

18 medical students secure a place in one of their 

19 top 3 residency program choices. 

20 (E) Antitrust lawsuits challenging the 

21 matching process, regardless of their merit or 

22 lack thereof, have the potential to undermine 

23 this highly efficient, pro-competitive, and long24 standing process. The costs of defending such 

25 litigation would divert the scarce resources of 
49 

•S 2282 IS 

1 our country’s teaching hospitals and medical 

2 schools from their crucial missions of patient 

3 care, physician training, and medical research. 

4 In addition, such costs may lead to abandonment 

5 of the matching process, which has effectively 

6 served the interests of medical students, teach7 ing hospitals, and patients for over half a cen8 tury. 

9 (2) PURPOSES.—It is the purpose of this sec10 tion to— 

11 (A) confirm that the antitrust laws do not 

12 prohibit sponsoring, conducting, or partici13 pating in a graduate medical education resi14 dency matching program, or agreeing to do so; 

15 and 

16 (B) ensure that those who sponsor, con17 duct or participate in such matching programs 

18 are not subjected to the burden and expense of 

19 defending against litigation that challenges such 

20 matching programs under the antitrust laws. 

21 (b) APPLICATION OF ANTITRUST LAWS TO GRAD22 UATE MEDICAL EDUCATION RESIDENCY MATCHING PRO23 GRAMS.— 

24 (1) DEFINITIONS.—In this subsection: 
50 

•S 2282 IS 

1 (A) ANTITRUST LAWS.—The term ‘‘anti2 trust laws’’— 

3 (i) has the meaning given such term 

4 in subsection (a) of the first section of the 

5 Clayton Act (15 U.S.C. 12(a)), except that 

6 such term includes section 5 of the Federal 

7 Trade Commission Act (15 U.S.C. 45) to 

8 the extent such section 5 applies to unfair 

9 methods of competition; and 

10 (ii) includes any State law similar to 

11 the laws referred to in clause (i). 

12 (B) GRADUATE MEDICAL EDUCATION PRO13 GRAM.—The term ‘‘graduate medical education 

14 program’’ means— 

15 (i) a residency program for the med16 ical education and training of individuals 

17 following graduation from medical school; 

18 (ii) a program, known as a specialty 

19 or subspecialty fellowship program, that 

20 provides more advanced training; and 

21 (iii) an institution or organization 

22 that operates, sponsors or participates in 

23 such a program. 

24 (C) GRADUATE MEDICAL EDUCATION RESI25 DENCY MATCHING PROGRAM.—The term ‘‘grad-
51 

•S 2282 IS 

1 uate medical education residency matching pro2 gram’’ means a program (such as those con3 ducted by the National Resident Matching Pro4 gram) that, in connection with the admission of 

5 students to graduate medical education pro6 grams, uses an algorithm and matching rules to 

7 match students in accordance with the pref8 erences of students and the preferences of grad9 uate medical education programs. 

10 (D) STUDENT.—The term ‘‘student’’ 

11 means any individual who seeks to be admitted 

12 to a graduate medical education program. 

13 (2) CONFIRMATION OF ANTITRUST STATUS.—It 

14 shall not be unlawful under the antitrust laws to 

15 sponsor, conduct, or participate in a graduate med16 ical education residency matching program, or to 

17 agree to sponsor, conduct, or participate in such a 

18 program. Evidence of any of the conduct described 

19 in the preceding sentence shall not be admissible in 

20 Federal court to support any claim or action alleging 

21 a violation of the antitrust laws. 

22 (3) APPLICABILITY.—Nothing in this section 

23 shall be construed to exempt from the antitrust laws 

24 any agreement on the part of 2 or more graduate 

25 medical education programs to fix the amount of the 
52 

•S 2282 IS 

1 stipend or other benefits received by students par2 ticipating in such programs. 

3 (c) EFFECTIVE DATE.—This section shall take effect 

4 on the date of enactment of this Act, shall apply to con5 duct whether it occurs prior to, on, or after such date of 

6 enactment, and shall apply to all judicial and administra7 tive actions or other proceedings pending on such date of 

8 enactment. 

Æ