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this subparagraph if the plan’s actuary certifies
that, based on reasonable assumptions—
‘‘(i) absent the extension under sub-
paragraph (A), the plan would have an ac-
cumulated funding deficiency in the current
plan year or any of the 9 succeeding plan
years,
‘‘(ii) the plan sponsor has adopted a
plan to improve the plan’s funding status,
‘‘(iii) the plan is projected to have suf-
ficient assets to timely pay expected benefits
and anticipated expenditures over the amor-
tization period as extended, and
‘‘(iv) the notice required under para-
graph (3)(A) has been provided.
‘‘(2) ADDITIONAL EXTENSION.—
‘‘(A) IN GENERAL.—If the plan sponsor of
a multiemployer plan submits to the Secretary of
the Treasury an application for an extension of
the period of years required to amortize any un-
funded liability described in any clause of sub-
section (b)(2)(B) or described in subsection
(b)(4), the Secretary of the Treasury may extend
the amortization period for a period of time (not
in excess of 5 years) if the Secretary of the
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Treasury makes the determination described in
subparagraph (B). Such extension shall be in ad-
dition to any extension under paragraph (1).
‘‘(B) 
DETERMINATION.—The 
Secretary
make grant an extension under subparagraph
(A) if the Secretary determines that—
‘‘(i) such extension would carry out the
purposes of this Act and would provide ade-
quate protection for participants under the
plan and their beneficiaries, and
‘‘(ii) the failure to permit such exten-
sion would—
‘‘(I) result in a substantial risk to
the voluntary continuation of the plan,
or a substantial curtailment of pension
benefit levels or employee compensa-
tion, and
‘‘(II) be adverse to the interests of
plan participants in the aggregate.
‘‘(C) ACTION
BY
SECRETARY.—The Sec-
retary of the Treasury shall act upon any appli-
cation for an extension under this paragraph
within 180 days of the submission of such appli-
cation. If the Secretary rejects the application
for an extension under this paragraph, the Sec-
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retary shall provide notice to the plan detailing
the specific reasons for the rejection, including
references to the criteria set forth above.
‘‘(3) ADVANCE NOTICE.—
‘‘(A) IN
GENERAL.—The Secretary of the
Treasury shall, before granting an extension
under this subsection, require each applicant to
provide evidence satisfactory to such Secretary
that the applicant has provided notice of the fil-
ing of the application for such extension to each
affected party (as defined in section 4001(a)(21))
with respect to the affected plan. Such notice
shall include a description of the extent to which
the plan is funded for benefits which are guaran-
teed under title IV and for benefit liabilities.
‘‘(B) CONSIDERATION OF RELEVANT INFOR-
MATION.—The Secretary of the Treasury shall
consider any relevant information provided by a
person to whom notice was given under para-
graph (1).’’.
(b) SHORTFALL FUNDING METHOD.—
(1) IN GENERAL.—A multiemployer plan meet-
ing the criteria of paragraph (2) may adopt, use, or
cease using, the shortfall funding method and such
adoption, use, or cessation of use of such method, shall
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be deemed approved by the Secretary of the Treasury
under section 302(d)(1) of the Employee Retirement
Income Security Act of 1974 and section 412(e)(1) of
the Internal Revenue Code of 1986.
(2) CRITERIA.—A multiemployer pension plan
meets the criteria of this clause if—
(A) the plan has not used the shortfall fund-
ing method during the 5-year period ending on
the day before the date the plan is to use the
method under paragraph (1); and
(B) the plan is not operating under an am-
ortization period extension under section 304(d)
of such Act and did not operate under such an
extension during such 5-year period.
(3) SHORTFALL FUNDING METHOD DEFINED.—
For purposes of this subsection, the term ‘‘shortfall
funding method’’ means the shortfall funding method
described 
in 
Treasury 
Regulations 
section
1.412(c)(1)–2 (26 C.F.R. 1.412(c)(1)–2).
(4) BENEFIT
RESTRICTIONS
TO
APPLY.—The
benefit restrictions under section 302(c)(7) of such Act
and section 412(d)(7) of such Code shall apply during
any period a multiemployer plan is on the shortfall
funding method pursuant to this subsection.
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(5) USE OF SHORTFALL METHOD NOT TO PRE-
CLUDE OTHER OPTIONS.—Nothing in this subsection
shall be construed to affect a multiemployer plan’s
ability to adopt the shortfall funding method with the
Secretary’s permission under otherwise applicable
regulations or to affect a multiemployer plan’s right
to change funding methods, with or without the Sec-
retary’s consent, as provided in applicable rules and
regulations.
(c) CONFORMING AMENDMENTS.—
(1) Section 301 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1081) is
amended by striking subsection (d).
(2) The table of contents in section 1 of such Act
(as amended by this Act) is amended by inserting
after the item relating to section 303 the following
new item:
‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’.
(d) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to plan years beginning after
2006.
(2) SPECIAL RULE FOR CERTAIN AMORTIZATION
EXTENSIONS.—If the Secretary of the Treasury grants
an extension under section 304 of the Employee Re-
tirement Income Security Act of 1974 and section
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412(e) of the Internal Revenue Code of 1986 with re-
spect to any application filed with the Secretary of
the Treasury on or before June 30, 2005, the exten-
sion (and any modification thereof) shall be applied
and administered under the rules of such sections as
in effect before the enactment of this Act, including
the use of the rate of interest determined under section
6621(b) of such Code.
SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEM-
PLOYER PLANS IN ENDANGERED OR CRIT-
ICAL STATUS.
(a) IN GENERAL.—Part 3 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974 (as
amended by the preceding provisions of this Act) is amend-
ed by inserting after section 304 the following new section:
‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER
PLANS IN ENDANGERED STATUS OR CRITICAL STATUS
‘‘SEC. 305. (a) GENERAL RULE.—For purposes of this
part, in the case of a multiemployer plan—
‘‘(1) if the plan is in endangered status—
‘‘(A) the plan sponsor shall adopt and im-
plement a funding improvement plan in accord-
ance with the requirements of subsection (c), and
‘‘(B) the requirements of subsection (d) shall
apply during the funding plan adoption period
and the funding improvement period, and
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‘‘(2) if the plan is in critical status—
‘‘(A) the plan sponsor shall adopt and im-
plement a rehabilitation plan in accordance with
the requirements of subsection (e), and
‘‘(B) the requirements of subsection (f) shall
apply during the rehabilitation plan adoption
period and the rehabilitation period.
‘‘(b) DETERMINATION OF ENDANGERED AND CRITICAL
STATUS.—For purposes of this section—
‘‘(1) ENDANGERED
STATUS.—A multiemployer
plan is in endangered status for a plan year if, as
determined by the plan actuary under paragraph (3),
the plan is not in critical status for the plan year
and either—
‘‘(A) the plan’s funded percentage for such
plan year is less than 80 percent, or
‘‘(B) the plan has an accumulated funding
deficiency for such plan year, or is projected to
have such an accumulated funding deficiency for
any of the 6 succeeding plan years, taking into
account any extension of amortization periods
under section 304(d).
For purposes of this section, a plan described in sub-
paragraph (B) shall be treated as in seriously endan-
gered status.
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‘‘(2) CRITICAL STATUS.—A multiemployer plan
is in critical status for a plan year if, as determined
by the plan actuary under paragraph (3), the plan is
described in 1 or more of the following subparagraphs
as of the beginning of the plan year:
‘‘(A) A plan is described in this subpara-
graph if—
‘‘(i) the funded percentage of the plan
is less than 65 percent, and
‘‘(ii) the sum of—
‘‘(I) the market value of plan as-
sets, plus
‘‘(II) the present value of the rea-
sonably anticipated employer contribu-
tions for the current plan year and
each of the 5 succeeding plan years, as-
suming that the terms of all collective
bargaining agreements pursuant to
which the plan is maintained for the
current plan year continue in effect for
succeeding plan years,
is less than the present value of all benefits
projected to be payable under the plan dur-
ing the current plan year and each of the
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5 succeeding plan years (plus administra-
tive expenses for such plan years).
‘‘(B) A plan is described in this subpara-
graph if—
‘‘(i) the plan has an accumulated
funding deficiency for the current plan
year, not taking into account any extension
of 
amortization 
periods 
under 
section
304(d), or
‘‘(ii) the plan is projected to have an
accumulated funding deficiency for any of
the 3 succeeding plan years (4 succeeding
plan years if the funded percentage of the
plan is 65 percent or less), not taking into
account any extension of amortization peri-
ods under section 304(d).
‘‘(C) A plan is described in this subpara-
graph if—
‘‘(i)(I) the plan’s normal cost for the
current plan year, plus interest (determined
at the rate used for determining costs under
the plan) for the current plan year on the
amount of unfunded benefit liabilities under
the plan as of the last date of the preceding
plan year, exceeds
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‘‘(II) the present value of the reason-
ably anticipated employer contributions for
the current plan year,
‘‘(ii) the present value of nonforfeitable
benefits of inactive participants is greater
than the present value of nonforfeitable ben-
efits of active participants, and
‘‘(iii) the plan has an accumulated
funding deficiency for the current plan
year, or is projected to have such a defi-
ciency for any of the 4 succeeding plan
years, not taking into account any exten-
sion of amortization periods under section
304(d).
‘‘(D) A plan is described in this subpara-
graph if the sum of—
‘‘(i) the market value of plan assets,
plus
‘‘(ii) the present value of the reason-
ably anticipated employer contributions for
the current plan year and each of the 4 suc-
ceeding plan years, assuming that the terms
of all collective bargaining agreements pur-
suant to which the plan is maintained for
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the current plan year continue in effect for
succeeding plan years,
is less than the present value of all benefits pro-
jected to be payable under the plan during the
current plan year and each of the 4 succeeding
plan years (plus administrative expenses for
such plan years).
‘‘(3) ANNUAL
CERTIFICATION
BY
PLAN
ACTU-
ARY.—
‘‘(A) IN GENERAL.—During the 90-day pe-
riod beginning on the first day of each plan year
of a multiemployer plan, the plan actuary shall
certify to the Secretary of the Treasury—
‘‘(i) whether or not the plan is in en-
dangered status for such plan year and
whether or not the plan is in critical status
for such plan year, and
‘‘(ii) in the case of a plan which is in
a funding improvement or rehabilitation
period, whether or not the plan is making
the scheduled progress in meeting the re-
quirements of its funding improvement or
rehabilitation plan.
‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS
AND LIABILITIES.—
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‘‘(i) IN GENERAL.—In making the de-
terminations and projections under this
subsection, the plan actuary shall make pro-
jections required for the current and suc-
ceeding plan years, using reasonable actu-
arial estimates, assumptions, and methods,
of the current value of the assets of the plan
and the present value of all liabilities to
participants and beneficiaries under the
plan for the current plan year as of the be-
ginning of such year. The projected present
value of liabilities as of the beginning of
such year shall be determined based on the
actuarial statement required under section
103(d) with respect to the most recently
filed annual report or the actuarial valu-
ation for the preceding plan year.
‘‘(ii) DETERMINATIONS
OF
FUTURE
CONTRIBUTIONS.—Any actuarial projection
of plan assets shall assume—
‘‘(I) reasonably anticipated em-
ployer contributions for the current
and succeeding plan years, assuming
that the terms of the one or more col-
lective bargaining agreements pursuant
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to which the plan is maintained for the
current plan year continue in effect for
succeeding plan years, or
‘‘(II) that employer contributions
for the most recent plan year will con-
tinue indefinitely, but only if the plan
actuary determines there have been no
significant demographic changes that
would make such assumption unrea-
sonable.
‘‘(C) PENALTY
FOR
FAILURE
TO
SECURE
TIMELY
ACTUARIAL
CERTIFICATION.—Any fail-
ure of the plan’s actuary to certify the plan’s
status under this subsection by the date specified
in subparagraph (A) shall be treated for pur-
poses of section 502(c)(2) as a failure or refusal
by the plan administrator to file the annual re-
port required to be filed with the Secretary under
section 101(b)(4).
‘‘(D) NOTICE.—In any case in which a
multiemployer plan is certified to be in endan-
gered or critical status under subparagraph (A),
the plan sponsor shall, not later than 30 days
after the date of the certification, provide notifi-
cation of the endangered or critical status to the
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participants and beneficiaries, the bargaining
parties, the Pension Benefit Guaranty Corpora-
tion, the Secretary of the Treasury, and the Sec-
retary.
‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE ADOPT-
ED FOR MULTIEMPLOYER PLANS IN ENDANGERED STA-
TUS.—
‘‘(1) IN GENERAL.—In any case in which a mul-
tiemployer plan is in endangered status for a plan
year, the plan sponsor, in accordance with this
subsection—
‘‘(A) shall adopt a funding improvement
plan not later than 240 days following the re-
quired date for the actuarial certification of en-
dangered status under subsection (b)(3)(A), and
‘‘(B) within 30 days after the adoption of
the funding improvement plan—
‘‘(i) in the case of a plan in seriously
endangered status, shall provide to the bar-
gaining parties 1 or more schedules showing
revised benefit structures, revised contribu-
tion structures, or both, which, if adopted,
may reasonably be expected to enable the
multiemployer plan to meet the applicable
requirements under paragraph (3) in ac-
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cordance with the funding improvement
plan, including a description of the reduc-
tions in future benefit accruals and in-
creases in contributions that the plan spon-
sor determines are reasonably necessary to
meet the applicable requirements if the plan
sponsor assumes that there are no increases
in contributions under the plan other than
the increases necessary to meet the applica-
ble requirements after future benefit accru-
als have been reduced to the maximum ex-
tent permitted by law, and
‘‘(ii) may, if the plan sponsor deems
appropriate, prepare and provide the bar-
gaining parties with additional information
relating to contribution rates or benefit re-
ductions, alternative schedules, or other in-
formation relevant to achieving the require-
ments under paragraph (3) in accordance
with the funding improvement plan.
‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BE-
GINS.—Paragraph (1) shall not apply to a plan year
if such year is in a funding plan adoption period or
funding improvement period by reason of the plan
being in endangered status for a preceding plan year.
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For purposes of this section, such preceding plan year
shall be the initial determination year with respect to
the funding improvement plan to which it relates.
‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur-
poses of this section—
‘‘(A) IN
GENERAL.—A funding improve-
ment plan is a plan which consists of the ac-
tions, including options or a range of options to
be proposed to the bargaining parties, which,
under reasonable actuarial assumptions, will re-
sult in the plan meeting the requirements of this
paragraph.
‘‘(B) PLANS OTHER THAN SERIOUSLY EN-
DANGERED PLANS.—In the case of plan not in
seriously endangered status, the requirements of
this paragraph are met if the plan’s funded per-
centage as of the close of the funding improve-
ment period exceeds the lesser of 80 percent or a
percentage equal to the sum of—
‘‘(i) such percentage as of the begin-
ning of such period, plus
‘‘(ii) 10 percent of the percentage
under clause (i).