I

103D CONGRESS

1ST SESSION H. R. 2584

To amend the Internal Revenue Code of 1986 to provide equity in medical

benefits for retirees in multiemployer plans.

IN THE HOUSE OF REPRESENTATIVES

JULY 1, 1993

Mr. FOGLIETTA (for himself and Mr. BORSKI) introduced the following bill;

which was referred jointly to the Committees on Ways and Means and

Education and Labor

A BILL

To amend the Internal Revenue Code of 1986 to provide

equity in medical benefits for retirees in multiemployer plans.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Multiemployer Retirees

5 Medical Equity Benefits Act of 1993’’.

6 SEC. 2. USE OF MULTIEMPLOYER PLAN CONTRIBUTIONS

7 AND ASSETS FOR RETIREE HEALTH BENE8 FITS.

9 (a) GENERAL RULE.—Section 401 of the Internal

10 Revenue Code of 1986 is amended by redesignating sub-
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1 section (o) as subsection (p) and by inserting after sub2 section (n) the following new subsection:

3 ‘‘(o) USE OF MULTIEMPLOYER PLAN CONTRIBU4 TIONS FOR RETIREE HEALTH BENEFITS.—

5 ‘‘(1) IN GENERAL.—Amounts contributed to a

6 multiemployer pension plan shall be treated for all

7 purposes of this title as if they had been contributed

8 directly by the contributing employers, pursuant to

9 the designation of such employers, to a related re10 tiree medical benefits plan if—

11 ‘‘(A) the trustees of the multiemployer

12 pension plan elect to transfer such amounts to

13 such related retiree medical benefit plan;

14 ‘‘(B) such transfer is effected within 1

15 year after the close of the transfer year;

16 ‘‘(C) the amount transferred does not ex17 ceed the permissible amount; and

18 ‘‘(D) the amounts transferred in accord19 ance with this subsection are used exclusively to

20 provide health benefits for individuals (and

21 their beneficiaries) who have begun receiving

22 benefits under the related pension plan.

23 ‘‘(2) DEFINITIONS.—For the purpose of this

24 subsection—
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1 ‘‘(A) PERMISSIBLE AMOUNT.—The term

2 ‘permissible amount’ means the excess of the

3 amount of contributions made to the pension

4 plan for the transfer year, over the amount of

5 contributions required to avoid a funding defi6 ciency for the transfer year under section 412.

7 ‘‘(B) RETIREE MEDICAL BENEFIT PLAN.—

8 The term ‘retiree medical benefit plan’ means

9 either—

10 ‘‘(i) a trust described in section

11 501(c)(9) at least a portion of the benefits

12 of which are provided with respect to re13 tired participants, or

14 ‘‘(ii) a section 401(h) account.

15 ‘‘(C) RELATED.—A retiree medical benefit

16 plan is related to a pension plan if at least 75

17 percent of those it covers are persons who have

18 begun receiving benefits under the pension plan

19 or are beneficiaries of such persons.

20 ‘‘(D) MULTIEMPLOYER PLAN.—The term

21 ‘multiemployer plan’ has the meaning given

22 such term by section 414(f).

23 ‘‘(E) TRANSFER YEAR.—The term ‘trans24 fer year’ means the plan year for which the
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1 transferred contributions were made to the mul2 tiemployer pension plan.’’

3 (b) MODIFICATIONS TO SECTION 420.—

4 (1) Section 420(a) of such Code is amended to

5 read as follows:

6 ‘‘(a) GENERAL RULE.—If there is a qualified trans7 fer of any excess pension assets of a defined benefit plan

8 to a health benefits account which is part of such plan—

9 ‘‘(1) a trust which is part of such plan shall not

10 be treated as failing to meet the requirements of

11 subsection (a) or (h) of section 401 solely by reason

12 of such transfer or any other action authorized

13 under this section;

14 ‘‘(2) no amount shall be includible in the gross

15 income of an employer maintaining the plan solely

16 by reason of such transfer;

17 ‘‘(3) such transfer shall not be treated—

18 ‘‘(A) as an employer reversion for purposes

19 of section 4980, or

20 ‘‘(B) as a prohibited transaction for pur21 poses of section 4975 or section 406 of the Em22 ployee Retirement Income Security Act, and

23 ‘‘(4) the limitations of subsection (d) shall

24 apply to an employer maintaining the plan.’’
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1 (2) Section 420(b)(3) of such Code is amended

2 to read as follows:

3 ‘‘(3) LIMITATION ON AMOUNT TRANSFERRED.—

4 The amount of excess pension assets which may be

5 transferred in a qualified transfer shall not exceed

6 the amount which is reasonably estimated to be re7 quired to be paid (whether directly or through reim8 bursement) during the taxable year of the transfer

9 for qualified current retiree health liabilities.’’

10 (3) Section 420(c)(1)(B)(ii)(II) of such Code is

11 amended to read as follows:

12 ‘‘(II) shall be treated as an em13 ployer reversion for purposes of sec14 tion 4980 (without regard to sub15 section (d) thereof) to the extent the

16 original transfer satisfied obligations

17 of an employer to provide retiree

18 health benefits (whether directly or

19 through an employer welfare benefit

20 plan sponsored by the employer).’’

21 (4) Section 420(c)(3) of such Code is amended

22 by adding at the end thereof the following new sub23 paragraph:

24 ‘‘(E) SPECIAL RULE FOR PLANS MAIN25 TAINED BY MORE THAN 1 EMPLOYER.—For the
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1 purposes of this section, in the case of a plan

2 maintained by more than 1 employer (as de3 fined in section 414(b) or (c)), the term ‘em4 ployer’ shall include an employee welfare benefit

5 plan providing retiree medical benefits and em6 ployers not subject to income tax for purposes

7 of subsections (c)(3) and (e)(1)(A). For pur8 poses of subsections (b)(3), (b)(5), (c)(3),

9 (d)(1), and (e)(1), the term ‘taxable year’ shall

10 also include the plan year of an employee wel11 fare benefit plan providing medical benefits

12 and, subject to regulations of the Secretary

13 based upon section 413(b), (c), and 404, the

14 taxable year of any employer contribution to

15 such a plan.’’

16 (5) Section 420(d)(2) of such Code is amended

17 to read as follows:

18 ‘‘(2) NO CONTRIBUTIONS ALLOWED.—An em19 ployer may not contribute after December 31, 1991,

20 any amount to a health benefits account with respect

21 to qualified retiree health liabilities for which trans22 ferred assets are required to be used under sub23 section (c)(1). An employer may not contribute after

24 December 31, 1990, to any welfare benefit plan (as

25 defined in section 419(e)(1)) with respect to quali-
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1 fied current retiree health liabilities for which trans2 ferred assets are required to be used under sub3 section (c)(1). For purposes of this section, a con4 tribution to a welfare benefit plan (as defined in sec5 tion 419(e)(1) which is not allocated to specific ben6 efits shall be allocated to current benefits for em7 ployees who have not retired, to reserves to the ex8 tent allowed under section 419, and then to qualified

9 retiree health liabilities.’’

10 (6) Section 420(e)(1)(A) of such Code is

11 amended to read as follows:

12 ‘‘(A) IN GENERAL.—The term ‘qualified

13 current retiree health liabilities’ means, with re14 spect to any taxable year, the aggregate

15 amounts (including administrative expenses)

16 which would have been allowable as a deduction

17 to the employer (whether or not subject to in18 come tax) for such taxable year with respect to

19 applicable health benefits provided during the

20 taxable year if—

21 ‘‘(i) such benefits were provided di22 rectly by the employer, and

23 ‘‘(ii) the employer used the cash re24 ceipts and disbursements method of ac25 counting.’’
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1 (c) AMENDMENT TO ERISA.—Section 403 of the

2 Employee Retirement Income Security Act of 1974 is

3 amended by adding at the end thereof the following new

4 subsection:

5 ‘‘(d) USE OF MULTIEMPLOYER PLAN CONTRIBU6 TIONS FOR RETIREES HEALTH BENEFITS.—

7 ‘‘(1) IN GENERAL.—Amounts contributed to a

8 multiemployer pension plan shall be treated for all

9 purposes as if they had been contributed directly by

10 the contributing employers, pursuant to the designa11 tion of such employers, to a related retiree medical

12 benefit plan if—

13 ‘‘(A) the trustees of the multiemployer

14 pension plan elect to transfer such amounts to

15 such related retiree medical benefit plan;

16 ‘‘(B) such transfer is effected within 1

17 year after the close of the transfer year;

18 ‘‘(C) the amount transferred does not ex19 ceed the permissible amount; and

20 ‘‘(D) amounts transferred in accordance

21 with this section are used exclusively to provide

22 health benefits for individuals (and their bene23 ficiaries) who have begun receiving benefits

24 under the related pension plan.
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1 ‘‘(2) DEFINITIONS.—For the purposes of this

2 subsection—

3 ‘‘(A) PERMISSIBLE AMOUNT.—The term

4 ‘permissible amount’ means the excess of the

5 amount of contributions made to the pension

6 plan for the transfer year over the amount of

7 contributions required to avoid a funding defi8 ciency for the transfer year under section 412

9 of the Internal Revenue Code of 1986.

10 ‘‘(B) RETIREE MEDICAL BENEFIT PLAN.—

11 The term ‘retiree medical benefit plan’ means

12 either—

13 ‘‘(i) a trust described in section

14 501(c)(9) of such Code at least a portion

15 of the benefits of which are provided with

16 respect to retired participants, or

17 ‘‘(ii) an Internal Revenue Code sec18 tion 401(h) account.

19 ‘‘(C) RELATED.—A retiree medical benefit

20 plan is related to a pension plan if at least 75

21 percent of those it covers are persons who have

22 begun receiving benefits under the pension plan

23 or are beneficiaries of such persons.
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1 ‘‘(D) MULTIEMPLOYER.—The term ‘multi2 employer plan’ has the meaning given such

3 term by section 3(37).

4 ‘‘(E) TRANSFER YEAR.—The term ‘trans5 fer year’ means the plan year for which the

6 transferred contributions were made to the mul7 tiemployer pension plan.’’

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

9 this section shall apply to taxable years beginnning after

10 December 31, 1992.

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