557 
ments under the plan for entitlement to 
such benefit or subsidy. 
‘‘(v) 
APPLICABLE
PLAN
AMEND-
MENT.—For purposes of this subpara-
graph— 
‘‘(I) IN
GENERAL.—The term 
‘applicable plan amendment’ means 
an amendment to a defined benefit 
plan which has the effect of con-
verting the plan to an applicable de-
fined benefit plan. 
‘‘(II) SPECIAL
RULE
FOR
CO-
ORDINATED BENEFITS.—If the bene-
fits of 2 or more defined benefit plans 
established or maintained by an em-
ployer are coordinated in such a man-
ner as to have the effect of the adop-
tion of an amendment described in 
subclause (I), the sponsor of the de-
fined benefit plan or plans providing 
for such coordination shall be treated 
as having adopted such a plan amend-
ment as of the date such coordination 
begins. 
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ccoleman on PROD1PC71 with BILLS
558 
‘‘(III) 
MULTIPLE
AMEND-
MENTS.—The Secretary of the Treas-
ury shall issue regulations to prevent 
the avoidance of the purposes of this 
subparagraph through the use of 2 or 
more plan amendments rather than a 
single amendment. 
‘‘(IV) 
APPLICABLE
DEFINED 
BENEFIT PLAN.—For purposes of this 
subparagraph, the term ‘applicable de-
fined benefit plan’ has the meaning 
given such term by section 203(f)(3). 
‘‘(vi) 
TERMINATION
REQUIRE-
MENTS.—An applicable defined benefit 
plan shall not be treated as meeting the re-
quirements of clause (i) unless the plan 
provides that, upon the termination of the 
plan— 
‘‘(I) if the interest credit rate (or 
an equivalent amount) under the plan 
is a variable rate, the rate of interest 
used to determine accrued benefits 
under the plan shall be equal to the 
average of the rates of interest used 
under the plan during the 5-year pe-
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ccoleman on PROD1PC71 with BILLS
559 
riod ending on the termination date, 
and 
‘‘(II) the interest rate and mor-
tality table used to determine the 
amount of any benefit under the plan 
payable in the form of an annuity 
payable at normal retirement age 
shall be the rate and table specified 
under the plan for such purpose as of 
the termination date, except that if 
such interest rate is a variable rate, 
the interest rate shall be determined 
under the rules of subclause (I). 
‘‘(C) CERTAIN
OFFSETS
PERMITTED.—A 
plan shall not be treated as failing to meet the 
requirements of paragraph (1)(H)(i) solely be-
cause the plan provides offsets against benefits 
under the plan to the extent such offsets are al-
lowable in applying the requirements of section 
401(a) of the Internal Revenue Code of 1986. 
‘‘(D) PERMITTED
DISPARITIES
IN
PLAN 
CONTRIBUTIONS
OR
BENEFITS.—A plan shall 
not be treated as failing to meet the require-
ments of paragraph (1)(H) solely because the 
plan provides a disparity in contributions or 
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ccoleman on PROD1PC71 with BILLS
560 
benefits with respect to which the requirements 
of section 401(l) of the Internal Revenue Code 
of 1986 are met. 
‘‘(E) INDEXING PERMITTED.— 
‘‘(i) IN GENERAL.—A plan shall not 
be treated as failing to meet the require-
ments of paragraph (1)(H) solely because 
the plan provides for indexing of accrued 
benefits under the plan. 
‘‘(ii) PROTECTION
AGAINST
LOSS.— 
Except in the case of any benefit provided 
in the form of a variable annuity, clause (i) 
shall not apply with respect to any index-
ing which results in an accrued benefit less 
than the accrued benefit determined with-
out regard to such indexing. 
‘‘(iii) INDEXING.—For purposes of 
this subparagraph, the term ‘indexing’ 
means, in connection with an accrued ben-
efit, the periodic adjustment of the accrued 
benefit by means of the application of a 
recognized investment index or method-
ology. 
‘‘(F) EARLY RETIREMENT BENEFIT OR RE-
TIREMENT-TYPE
SUBSIDY.—For purposes of 
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ccoleman on PROD1PC71 with BILLS
561 
this paragraph, the terms ‘early retirement ben-
efit’ and ‘retirement-type subsidy’ have the 
meaning given such terms in subsection 
(g)(2)(A). 
‘‘(G) BENEFIT ACCRUED TO DATE.—For 
purposes of this paragraph, any reference to the 
accrued benefit shall be a reference to such ben-
efit accrued to date.’’. 
(2) DETERMINATIONS OF ACCRUED BENEFIT AS 
BALANCE
OF
BENEFIT
ACCOUNT
OR
EQUIVALENT 
AMOUNTS.—Section 203 of such Act (29 U.S.C. 
1053) is amended by adding at the end the following 
new subsection: 
‘‘(f) SPECIAL RULES FOR PLANS COMPUTING AC-
CRUED BENEFITS BY REFERENCE TO HYPOTHETICAL AC-
COUNT BALANCE OR EQUIVALENT AMOUNTS.— 
‘‘(1) IN GENERAL.—An applicable defined ben-
efit plan shall not be treated as failing to meet— 
‘‘(A) subject to paragraph (2), the require-
ments of subsection (a)(2), or 
‘‘(B) the requirements of section 204(c) or 
section 205(g) with respect to contributions 
other than employee contributions, 
solely because the present value of the accrued ben-
efit (or any portion thereof) of any participant is, 
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ccoleman on PROD1PC71 with BILLS
562 
under the terms of the plan, equal to the amount ex-
pressed as the balance in the hypothetical account 
described in paragraph (3) or as an accumulated 
percentage of the participant’s final average com-
pensation. 
‘‘(2) 3-YEAR VESTING.—In the case of an appli-
cable defined benefit plan, such plan shall be treated 
as meeting the requirements of subsection (a)(2) 
only if an employee who has completed at least 3 
years of service has a nonforfeitable right to 100 
percent of the employee’s accrued benefit derived 
from employer contributions. 
‘‘(3) APPLICABLE DEFINED BENEFIT PLAN AND 
RELATED
RULES.—For purposes of this sub-
section— 
‘‘(A) IN GENERAL.—The term ‘applicable 
defined benefit plan’ means a defined benefit 
plan under which the accrued benefit (or any 
portion thereof) is calculated as the balance of 
a hypothetical account maintained for the par-
ticipant or as an accumulated percentage of the 
participant’s final average compensation. 
‘‘(B) REGULATIONS TO INCLUDE SIMILAR 
PLANS.—The Secretary of the Treasury shall 
issue regulations which include in the definition 
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ccoleman on PROD1PC71 with BILLS
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of an applicable defined benefit plan any de-
fined benefit plan (or any portion of such a 
plan) which has an effect similar to an applica-
ble defined benefit plan.’’. 
(b) AMENDMENTS
TO
THE INTERNAL REVENUE 
CODE OF 1986.— 
(1) RULES RELATING TO REDUCTION IN RATE 
OF BENEFIT ACCRUAL.—Subsection (b) of section 
411 of the Internal Revenue Code of 1986 is amend-
ed by adding at the end the following new para-
graph: 
‘‘(5) SPECIAL RULES RELATING TO AGE.— 
‘‘(A) COMPARISON
TO
SIMILARLY
SITU-
ATED YOUNGER INDIVIDUAL.— 
‘‘(i) IN GENERAL.—A plan shall not 
be treated as failing to meet the require-
ments of paragraph (1)(H)(i) if a partici-
pant’s accrued benefit, as determined as of 
any date under the terms of the plan, 
would be equal to or greater than that of 
any similarly situated, younger individual 
who is or could be a participant. 
‘‘(ii) SIMILARLY SITUATED.—For pur-
poses of this subparagraph, a participant 
is similarly situated to any other individual 
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ccoleman on PROD1PC71 with BILLS
564 
if such participant is identical to such 
other individual in every respect (including 
period of service, compensation, position, 
date of hire, work history, and any other 
respect) except for age. 
‘‘(iii) DISREGARD
OF
SUBSIDIZED 
EARLY RETIREMENT BENEFITS.—In deter-
mining the accrued benefit as of any date 
for purposes of this clause, the subsidized 
portion of any early retirement benefit or 
retirement-type 
subsidy 
shall 
be 
dis-
regarded. 
‘‘(iv) ACCRUED
BENEFIT.—For pur-
poses of this subparagraph, the accrued 
benefit may, under the terms of the plan, 
be expressed as an annuity payable at nor-
mal retirement age, the balance of a hypo-
thetical account, or the current value of 
the accumulated percentage of the employ-
ee’s final average compensation. 
‘‘(B) 
APPLICABLE
DEFINED
BENEFIT 
PLANS.— 
‘‘(i) INTEREST CREDITS.— 
‘‘(I) IN GENERAL.—An applicable 
defined benefit plan shall be treated 
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ccoleman on PROD1PC71 with BILLS
565 
as failing to meet the requirements of 
paragraph (1)(H) unless the terms of 
the plan provide that any interest 
credit (or an equivalent amount) for 
any plan year shall be at a rate which 
is not greater than a market rate of 
return. A plan shall not be treated as 
failing to meet the requirements of 
this subclause merely because the plan 
provides for a reasonable minimum 
guaranteed rate of return or for a 
rate of return that is equal to the 
greater of a fixed or variable rate of 
return. 
‘‘(II) PRESERVATION
OF
CAP-
ITAL.—An interest credit (or an 
equivalent amount) of less than zero 
shall in no event result in the account 
balance or similar amount being less 
than the aggregate amount of con-
tributions credited to the account. 
‘‘(III) MARKET
RATE
OF
RE-
TURN.—The Secretary may provide by 
regulation for rules governing the cal-
culation of a market rate of return for 
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ccoleman on PROD1PC71 with BILLS
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purposes of subclause (I) and for per-
missible methods of crediting interest 
to the account (including fixed or 
variable interest rates) resulting in ef-
fective rates of return meeting the re-
quirements of subclause (I). 
‘‘(ii) SPECIAL RULE FOR PLAN CON-
VERSIONS.—If, after June 29, 2005, an 
applicable plan amendment is adopted, the 
plan shall be treated as failing to meet the 
requirements of paragraph (1)(H) unless 
the requirements of clause (iii) are met 
with respect to each individual who was a 
participant in the plan immediately before 
the adoption of the amendment. 
‘‘(iii) RATE OF BENEFIT ACCRUAL.— 
Subject to clause (iv), the requirements of 
this clause are met with respect to any 
participant if the accrued benefit of the 
participant under the terms of the plan as 
in effect after the amendment is not less 
than the sum of— 
‘‘(I) the participant’s accrued 
benefit for years of service before the 
effective date of the amendment, de-
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ccoleman on PROD1PC71 with BILLS
567 
termined under the terms of the plan 
as in effect before the amendment, 
plus 
‘‘(II) the participant’s accrued 
benefit for years of service after the 
effective date of the amendment, de-
termined under the terms of the plan 
as in effect after the amendment. 
‘‘(iv) SPECIAL RULES FOR EARLY RE-
TIREMENT
SUBSIDIES.—For purposes of 
clause (iii)(I), the plan shall credit the ac-
cumulation account or similar amount with 
the amount of any early retirement benefit 
or retirement-type subsidy for the plan 
year in which the participant retires if, as 
of such time, the participant has met the 
age, years of service, and other require-
ments under the plan for entitlement to 
such benefit or subsidy. 
‘‘(v) 
APPLICABLE
PLAN
AMEND-
MENT.—For purposes of this subpara-
graph— 
‘‘(I) IN
GENERAL.—The term 
‘applicable plan amendment’ means 
an amendment to a defined benefit 
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ccoleman on PROD1PC71 with BILLS
568 
plan which has the effect of con-
verting the plan to an applicable de-
fined benefit plan. 
‘‘(II) SPECIAL
RULE
FOR
CO-
ORDINATED BENEFITS.—If the bene-
fits of 2 or more defined benefit plans 
established or maintained by an em-
ployer are coordinated in such a man-
ner as to have the effect of the adop-
tion of an amendment described in 
subclause (I), the sponsor of the de-
fined benefit plan or plans providing 
for such coordination shall be treated 
as having adopted such a plan amend-
ment as of the date such coordination 
begins. 
‘‘(III) 
MULTIPLE
AMEND-
MENTS.—The Secretary shall issue 
regulations to prevent the avoidance 
of the purposes of this subparagraph 
through the use of 2 or more plan 
amendments rather than a single 
amendment. 
‘‘(IV) 
APPLICABLE
DEFINED 
BENEFIT PLAN.—For purposes of this 
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