Pension Fund Integrity Act of 2016

To amend the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 to provide for salary reductions for certain employees of a pension plan in critical or declining status that reduces participant benefits, and for other purposes. 1. Short title This Act may be cited as the Pension Fund Integrity Act of 2016 2. Executive salaries (a) Amendments to Internal Revenue Code of 1986 (1) In general Subparagraph (C) of section 432(e)(9) (iii) In the case of a systemically important plan (as defined in subparagraph (H)(v)(III)), effective on the date the benefit suspension goes into effect, the annual compensation of each employee of the plan is reduced to the lesser of— (I) the annual compensation of the employee for the plan year in which the benefit suspension is approved under subparagraph (G) (determined as of the date of such approval), reduced by the reduction percentage of so much of such annual compensation as exceeds $100,000, or (II) the average annual compensation of the employee for the 3 plan years immediately preceding the year in which the benefit suspension is approved under subparagraph (G), reduced by the reduction percentage of so much of such average annual compensation as exceeds $100,000, and will not be increased (including by means of a bonus, performance-based compensation, or otherwise) as long as the benefit suspension remains in effect. For purposes of the preceding sentence, the term reduction percentage . (2) Tax on prohibited transactions (A) In general Paragraph (1) of section 4975(c) of such Code is amended— (i) by striking or (ii) by striking the period at the end of subparagraph (F) and inserting ; or (iii) by adding at the end the following new subparagraph: (G) notwithstanding subsection (d)(2), payment by a systemically important plan (as defined in section 432(e)(9)(H)(v)(III)) of— (i) any compensation (including a bonus or performance-based compensation) in excess of the amount determined under section 432(e)(9)(C)(iii) to any employee of the plan with respect to which a benefit suspension is in effect under section 432(e)(9), or (ii) in the case of any nonemployee who was an employee of the plan during any of the 3 plan years immediately preceding the year in which the benefit suspension is approved under section 432(e)(9)(G), any compensation to such individual (as an independent contractor or otherwise and including any bonus or performance-based compensation) in excess of the amount that would be determined under section 432(e)(9)(C)(iii) if the individual were an employee at the time of payment of such compensation. . (B) Liability for tax Subsection (a) of section 4975 of such Code is amended by inserting before the period the following: , except that any tax imposed by this subsection by reason of subsection (c)(1)(G) shall be paid by the plan sponsor (C) Liability for additional taxes Subsection (b) of section 4975 of such Code is amended by inserting before the period the following: , except that any tax imposed by this subsection by reason of subsection (c)(1)(G) shall be paid by the plan sponsor (D) Clerical amendments The headings of subsections (a) and (b) of section 4975 of such Code are each amended by striking on disqualified person (b) Amendments to Employee Retirement Income Security Act of 1974 (1) In general Subparagraph (C) of section 305(e)(9) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1085(e)(9)(C) (iii) In the case of a systemically important plan (as defined in subparagraph (H)(v)(III)), effective on the date the benefit suspension goes into effect, the annual compensation of each employee of the plan is reduced to the lesser of— (I) the annual compensation of the employee for the plan year in which the benefit suspension is approved under subparagraph (G) (determined as of the date of such approval), reduced by the reduction percentage of so much of such annual compensation as exceeds $100,000, or (II) the average annual compensation of the employee for the 3 plan years immediately preceding the year in which the benefit suspension is approved under subparagraph (G), reduced by the reduction percentage of so much of such average annual compensation as exceeds $100,000, and will not be increased (including by means of a bonus, performance-based compensation, or otherwise) as long as the benefit suspension remains in effect. For purposes of the preceding sentence, the term reduction percentage . (2) Prohibited transactions Paragraph (1) of section 406(a) of such Act ( 29 U.S.C. 1106(a)(1) (A) by striking or (B) by striking the period at the end of subparagraph (E) and inserting ; or (C) by adding at the end the following new subparagraph: (F) notwithstanding section 408(b)(2), payment by a systemically important plan (as defined in section 305(e)(9)(H)(v)(III)) of— (i) any compensation (including a bonus or performance-based compensation) in excess of the amount determined under section 305(e)(9)(C)(iii) to any employee of the plan with respect to which a benefit suspension is in effect under section 305(e)(9), or (ii) in the case of any nonemployee who was an employee of the plan during any of the 3 plan years immediately preceding the year in which the benefit suspension is approved under section 305(e)(9)(G), any compensation to such individual (as an independent contractor or otherwise and including any bonus or performance-based compensation) in excess of the amount that would be determined under section 305(e)(9)(C)(iii) if the individual were an employee at the time of payment of such compensation. . (c) Effective dates (1) In general The amendments made by subsections (a)(1) and (b)(1) shall apply to suspensions of benefits under section 432(e)(9)(G) 29 U.S.C. 1085(e)(9)(G) (2) Prohibited transactions The amendments made by subsections (a)(2), (b)(2), and (b)(3) shall apply to any transaction made after the date of the enactment of this Act. 3. Prohibition of lobbying expenses (a) Amendments to Internal Revenue Code of 1986 (1) In general Paragraph (1) of section 4975(c) (A) by striking or (B) by striking the period at the end of subparagraph (G) and inserting ; or (C) by adding at the end the following new subparagraph: (H) payment by the plan of any amount for the engagement of any person other than an employee of the plan in connection with any activity described in section 162(e)(1) during any period in which the plan is in endangered status under section 432(b)(1), in critical status under section 432(b)(2), or in critical and declining status under section 432(b)(6). . (2) Liability of plan sponsor Subsections (a) and (b) of section 4975 of such Code, as amended by section 1(a), are each amended by striking subsection (c)(1)(G) subparagraph (G) or (H) of subsection (c)(1) (b) Amendments to Employee Retirement Income Security Act of 1974 (1) In general Paragraph (1) of section 406(a) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1106(a)(1) (A) by striking or (B) by striking the period at the end of subparagraph (F) and inserting ; or (C) by adding at the end the following new subparagraph: (G) payment by the plan of any amount for the engagement of any person other than an employee of the plan in connection with any activity described in section 162(e)(1) . (2) Liability of plan sponsor Subsection (c) of section 409 of such Act ( 29 U.S.C. 1109(c) 4975(c)(1)(G) subparagraph (G) or (H) of section 4975(c)(1) (c) Effective date The amendments made by this section shall apply to transactions made after the date of the enactment of this Act.

Summary: Pension Fund Integrity Act of 2016 This bill amends the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA) to require salary reductions for certain employees of systemically important multiemployer pension plans that are in critical or declining status and that reduce participant benefits. When a benefit suspension is in effect, any compensation paid to employees of a plan that exceeds the amounts specified in this bill is a prohibited transaction that is subject to a tax to be paid by the plan sponsor. If a plan is in endangered, critical, or critical and declining status, payments for lobbying and political expenses for any person other than an employee of the plan are prohibited transactions and subject to a tax to be paid by the plan sponsor.