SEC. 2. SAFE HARBOR IN EVENT OF REDUCTION IN FUTURE
BENEFIT ACCRUALS WHERE PLAN PROVIDES
NOTICE AND ELECTION TO CONTINUE BEN-
EFIT ACCRUALS UNDER FORMER PLAN IN-
STEAD OF AMENDED PLAN.
(a) IN GENERAL.—Paragraph (1) of section 411(b)
of the Internal Revenue Code of 1986 (relating to defined
benefit plans) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(I) SAFE HARBOR UPON REDUCTION IN
FUTURE BENEFIT ACCRUALS.—
‘‘(i) IN GENERAL.—An applicable pen-
sion plan that adopts an amendment which
has the effect of reducing the rate of fu-
ture benefit accrual of 1 or more partici-
pants shall be treated as not meeting the
requirements of this paragraph unless such
plan provides each participant who is, as of
the date of the adoption of the plan
amendment, a fully vested participant
with—
‘‘(I) written notice which meets
the requirements of section 4980F,
and
‘‘(II) an election to continue to
accrue benefits under such plan, de-
termined under the terms of such plan
as in effect immediately before the ef-
fective date of such plan amendment.
‘‘(ii) 
PROTECTED
ACCRUED
BEN-
EFIT.—For purposes of clause (i), an ac-
crued benefit shall include any early retire-
ment benefit or retirement-type subsidy
(within 
the 
meaning 
of 
subsection
(d)(6)(B)(i)), but only with respect to a
participant who satisfies (either before or
after the effective date of the amendment)
the conditions for the benefit or subsidy
under the terms of the plan as in effect
immediately before such date.
‘‘(iii) TIMING OF ELECTION.—Except
as provided in regulations, the election re-
quired by clause (i)(II) shall be provided at
least 90 days before the effective date of
the amendment.
‘‘(iv) EXEMPTION UPON SHOWING OF
DISTRESS
CRITERIA.—This subparagraph
shall not apply with respect to any plan
amendment if the plan sponsor, prior to
the date of the adoption of the amend-
ment, demonstrates to the satisfaction of
the Secretary that, under regulations of
the Secretary, requirements—
‘‘(I) applicable with respect to
the adoption of the plan amendment,
and
‘‘(II) similar to the requirements
of clause (i), (ii), or (iii) of section
4041(c)(2)(B) of the Employee Re-
tirement Income Security Act of 1974
applicable with respect to a distress
termination,
are met by each employer required (under
the terms of the plan as in effect imme-
diately before the adoption of the plan
amendment) to make contributions under
the plan.
‘‘(v) FULLY VESTED PARTICIPANT.—
For purposes of this subparagraph, the
term ‘fully vested participant’ means a
participant who under the plan has a non-
forfeitable right to the participant’s entire
accrued benefit.
‘‘(vi) APPLICABLE PENSION PLAN.—
The 
term 
‘applicable 
pension 
plan’
means—
‘‘(I) a defined benefit plan, or
‘‘(II) an individual account plan
which is subject to the funding stand-
ards of section 412,
which had 100 or more active participants
who had accrued a benefit under the plan
(whether or not vested) as of the last day
of the plan year preceding the plan year in
which the plan amendment becomes effec-
tive. Such term shall not include any gov-
ernmental plan (within the meaning of sec-
tion 414(d)) or any church plan (within
the meaning of section 414(e)) with re-
spect to which the election provided by sec-
tion 410(d) has not been made.’’.
(b) EXCISE TAX ON FAILURE TO OFFER ELEC-
TION.—
(1) IN GENERAL.—Chapter 43 of subtitle D of
the Internal Revenue Code of 1986 (as amended by
section 2 of this Act) is amended further by adding
at the end the following new section:
‘‘SEC. 4980G. FAILURE TO OFFER ELECTION TO CONTINUE
BENEFIT ACCRUALS UNDER FORMER APPLI-
CABLE PENSION PLAN IN EVENT OF REDUC-
TIONS IN FUTURE BENEFIT ACCRUALS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
a tax on the failure of any applicable pension plan to meet
the requirements of subsection (d).
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) shall be 50 percent of the
lesser of—
‘‘(A) the reduction in the future employer
benefit cost for the plan attributable to the plan
amendment referred to in subsection (d) (deter-
mined, as provided in regulations of the Sec-
retary, as of the date of the adoption of such
plan amendment), or
‘‘(B) the amount of the excess pension as-
sets in such plan, determined as of the effective
date of the amendment.
‘‘(2) FUTURE EMPLOYER BENEFIT COST.—For
purposes of paragraph (1)(A), the term ‘future em-
ployer benefit cost’ for a plan means the present
value of future accruals, by current participants and
beneficiaries, of benefits derived from employer con-
tributions (within the meaning of section 411(c)(1)).
‘‘(3) EXCESS PENSION ASSETS.—For purposes
of paragraph (1), the term ‘excess pension assets’
has the meaning given to such term by section
420(e)(2).
‘‘(c) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
‘‘(1) In the case of a plan other than a multi-
employer plan, the employer.
‘‘(2) In the case of a multiemployer plan, the
plan.
For purposes of the preceding sentence, all multiemployer
plans of which the same trust forms a part shall be treated
as 1 plan. For purposes of this paragraph, if not all per-
sons who are treated as a single employer for purposes
of this section have the same taxable year, the taxable
years taken into account shall be determined under prin-
ciples similar to the principles of section 1561.
‘‘(d) ELECTION TO CONTINUE BENEFIT ACCRUALS
UNDER FORMER APPLICABLE PENSION PLAN IN EVENT
OF REDUCTIONS IN FUTURE BENEFIT ACCRUALS.—In
the case that an applicable pension plan adopts an amend-
ment which has the effect of reducing the rate of future
benefit accrual of 1 or more participants, the requirements
of this subsection are met if the plan administrator pro-
vides each fully vested participant with—
‘‘(1) applicable with respect to the adoption of
the plan amendment, and
‘‘(2) similar to the requirements of clause (i),
(ii), or (iii) of section 4041(c)(2)(B) of the Employee
Retirement Income Security Act of 1974 applicable
with respect to a distress termination,
are met by each employer required (under the terms of
the plan as in effect immediately before the adoption of
the plan amendment) to make contributions under the
plan.
‘‘(h) DEFINITIONS.—For purposes of this section—
‘‘(1) APPLICABLE
PENSION
PLAN.—The term
‘applicable pension plan’ means—
‘‘(A) a defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 412,
which had 100 or more active participants who
had accrued a benefit under the plan (whether
or not vested) as of the last day of the plan
year preceding the plan year in which the plan
amendment becomes effective. Such term shall
not include any governmental plan (within the
meaning of section 414(d)) or any church plan
(within the meaning of section 414(e)) with re-
spect to which the election provided by section
410(d) has not been made.
‘‘(2) FULLY VESTED PARTICIPANT.—The term
‘fully vested participant’ means a participant who
has under the plan a nonforfeitable right to the par-
ticipant’s entire accrued benefit.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter 43 of subtitle D of such Code (as
amended by section 2 of this Act) is amended fur-
ther by adding at the end the following new item:
‘‘Sec. 4980G. Failure to offer election to continue benefit accruals under former
applicable pension plan in event of reductions in future benefit
accruals.’’.
SEC. 3. EFFECTIVE DATES.
(a) IN GENERAL.—The amendments made by this
Act shall apply to plans and plan amendments taking ef-
fect after 60 days after the date of the enactment of this
Act.
(b) SPECIAL RULE.—The period for providing any
notice required by the amendments made by this Act shall
not end before the date which is 90 days after the date
of the enactment of this Act.
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