129
‘‘(A) the funding target of the plan for the 
plan year, over 
‘‘(B) the value of plan assets of the plan 
(as reduced under subsection (f)(4)(B)) for the 
plan year which are held by the plan on the 
valuation date. 
‘‘(5) EXEMPTION FROM NEW SHORTFALL AM-
ORTIZATION BASE.—
‘‘(A) IN GENERAL.—In any case in which 
the value of plan assets of the plan (as reduced 
under subsection (f)(4)(A)) is equal to or great-
er than the funding target of the plan for the 
plan year, the shortfall amortization base of the 
plan for such plan year shall be zero. 
‘‘(B) TRANSITION RULE.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (iii) and (iv), in the case 
of plan years beginning after 2007 and be-
fore 2011, only the applicable percentage 
of the funding target shall be taken into 
account under paragraph (3)(A) in deter-
mining the funding shortfall for the plan 
year for purposes of subparagraph (A). 
‘‘(ii) APPLICABLE PERCENTAGE.—For 
purposes of subparagraph (A), the applica-
130
ble percentage shall be determined in ac-
cordance with the following table:
‘‘In the case of a plan year 
The applicable 
beginning in calendar year: 
percentage is 
2008 ...................................................................................................
2009 ...................................................................................................
2010 ...................................................................................................
96.
‘‘(iii) LIMITATION.—Clause (i) shall 
not apply with respect to any plan year 
after 2008 unless the shortfall amortiza-
tion base for each of the preceding years 
beginning after 2007 was zero (determined 
after application of this subparagraph). 
‘‘(iv) TRANSITION RELIEF NOT AVAIL-
ABLE FOR NEW OR DEFICIT REDUCTION 
PLANS.—Clause (i) shall not apply to a 
plan—
‘‘(I) which was not in effect for a 
plan year beginning in 2007, or 
‘‘(II) which was in effect for a 
plan year beginning in 2007 and 
which was subject to section 412(l) 
(as in effect for plan years beginning 
in 2007), determined after the appli-
cation of paragraphs (6) and (9) 
thereof. 
‘‘(6) EARLY DEEMED AMORTIZATION UPON AT-
TAINMENT OF FUNDING TARGET.—In any case in
131
which the funding shortfall of a plan for a plan year 
is zero, for purposes of determining the shortfall am-
ortization charge for such plan year and succeeding 
plan years, the shortfall amortization bases for all 
preceding plan years (and all shortfall amortization 
installments determined with respect to such bases) 
shall be reduced to zero. 
‘‘(d) RULES RELATING TO FUNDING TARGET.—For 
purposes of this section—
‘‘(1) FUNDING TARGET.—Except as provided in 
subsection (i)(1) with respect to plans in at-risk sta-
tus, the funding target of a plan for a plan year is 
the present value of all benefits accrued or earned 
under the plan as of the beginning of the plan year. 
‘‘(2) FUNDING TARGET ATTAINMENT PERCENT-
AGE.—The ‘funding target attainment percentage’ of 
a plan for a plan year is the ratio (expressed as a 
percentage) which—
‘‘(A) the value of plan assets for the plan 
year (as reduced under subsection (f)(4)(B)), 
bears to 
‘‘(B) the funding target of the plan for the 
plan year (determined without regard to sub-
section (i)(1)). 
‘‘(e) WAIVER AMORTIZATION CHARGE.—
132
‘‘(1) DETERMINATION
OF
WAIVER
AMORTIZA-
TION CHARGE.—The waiver amortization charge (if 
any) for a plan for any plan year is the aggregate 
total of the waiver amortization installments for 
such plan year with respect to the waiver amortiza-
tion bases for each of the 5 preceding plan years. 
‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—
For purposes of paragraph (1)—
‘‘(A) DETERMINATION.—The waiver amor-
tization installments are the amounts necessary 
to amortize the waiver amortization base of the 
plan for any plan year in level annual install-
ments over a period of 5 plan years beginning 
with the succeeding plan year. 
‘‘(B) WAIVER INSTALLMENT.—The waiver 
amortization installment for any plan year in 
the 5-year period under subparagraph (A) with 
respect to any waiver amortization base is the 
annual installment determined under subpara-
graph (A) for that year for that base. 
‘‘(3) INTEREST
RATE.—In determining any 
waiver amortization installment under this sub-
section, the plan sponsor shall use the segment rates 
determined under subparagraph (C) of subsection
133
(h)(2), applied under rules similar to the rules of 
subparagraph (B) of subsection (h)(2). 
‘‘(4) WAIVER AMORTIZATION BASE.—The waiv-
er amortization base of a plan for a plan year is the 
amount of the waived funding deficiency (if any) for 
such plan year under section 412(c). 
‘‘(5) EARLY DEEMED AMORTIZATION UPON AT-
TAINMENT OF FUNDING TARGET.—In any case in 
which the funding shortfall of a plan for a plan year 
is zero, for purposes of determining the waiver am-
ortization charge for such plan year and succeeding 
plan years, the waiver amortization bases for all pre-
ceding plan years (and all waiver amortization in-
stallments determined with respect to such bases) 
shall be reduced to zero. 
‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBU-
TION BY PREFUNDING BALANCE AND FUNDING STAND-
ARD CARRYOVER BALANCE.—
‘‘(1) ELECTION TO MAINTAIN BALANCES.—
‘‘(A) PREFUNDING
BALANCE.—The plan 
sponsor of a defined benefit plan which is not 
a multiemployer plan may elect to maintain a 
prefunding balance. 
‘‘(B) FUNDING
STANDARD
CARRYOVER 
BALANCE.—
134
‘‘(i) IN GENERAL.—In the case of a 
defined benefit plan (other than a multiem-
ployer plan) described in clause (ii), the 
plan sponsor may elect to maintain a fund-
ing standard carryover balance, until such 
balance is reduced to zero. 
‘‘(ii) PLANS
MAINTAINING
FUNDING 
STANDARD ACCOUNT IN 2007.—A plan is 
described in this clause if the plan—
‘‘(I) was in effect for a plan year 
beginning in 2007, and 
‘‘(II) had a positive balance in 
the funding standard account under 
section 412(b) as in effect for such 
plan year and determined as of the 
end of such plan year. 
‘‘(2) 
APPLICATION
OF
BALANCES.—A 
prefunding balance and a funding standard carry-
over balance maintained pursuant to this para-
graph—
‘‘(A) shall be available for crediting against 
the minimum required contribution, pursuant to 
an election under paragraph (3), 
‘‘(B) shall be applied as a reduction in the 
amount treated as the value of plan assets for
135
purposes of this section, to the extent provided 
in paragraph (4), and 
‘‘(C) may be reduced at any time, pursu-
ant to an election under paragraph (5). 
‘‘(3) ELECTION TO APPLY BALANCES AGAINST 
MINIMUM REQUIRED CONTRIBUTION.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraphs (B) and (C), in the case of any 
plan year in which the plan sponsor elects to 
credit against the minimum required contribu-
tion for the current plan year all or a portion 
of the prefunding balance or the funding stand-
ard carryover balance for the current plan year 
(not in excess of such minimum required con-
tribution), the minimum required contribution 
for the plan year shall be reduced as of the first 
day of the plan year by the amount so credited 
by the plan sponsor as of the first day of the 
plan year. For purposes of the preceding sen-
tence, the minimum required contribution shall 
be determined after taking into account any 
waiver under section 412(c). 
‘‘(B) 
COORDINATION
WITH
FUNDING 
STANDARD CARRYOVER BALANCE.—To the ex-
tent that any plan has a funding standard car-
136
ryover balance greater than zero, no amount of 
the prefunding balance of such plan may be 
credited under this paragraph in reducing the 
minimum required contribution. 
‘‘(C) LIMITATION
FOR
UNDERFUNDED 
PLANS.—The preceding provisions of this para-
graph shall not apply for any plan year if the 
ratio (expressed as a percentage) which—
‘‘(i) the value of plan assets for the 
preceding plan year (as reduced under 
paragraph (4)(C)), bears to 
‘‘(ii) the funding target of the plan for 
the preceding plan year (determined with-
out regard to subsection (i)(1)), 
is less than 80 percent. In the case of plan 
years beginning in 2008, the ratio under this 
subparagraph may be determined using such 
methods of estimation as the Secretary may 
prescribe. 
‘‘(4) EFFECT
OF
BALANCES
ON
AMOUNTS 
TREATED AS VALUE OF PLAN ASSETS.—In the case 
of any plan maintaining a prefunding balance or a 
funding standard carryover balance pursuant to this 
subsection, the amount treated as the value of plan
137
assets shall be deemed to be such amount, reduced 
as provided in the following subparagraphs: 
‘‘(A) APPLICABILITY OF SHORTFALL AM-
ORTIZATION BASE.—For purposes of subsection 
(c)(5), the value of plan assets is deemed to be 
such amount, reduced by the amount of the 
prefunding balance, but only if an election 
under paragraph (2) applying any portion of 
the prefunding balance in reducing the min-
imum required contribution is in effect for the 
plan year. 
‘‘(B) DETERMINATION OF EXCESS ASSETS, 
FUNDING SHORTFALL, AND FUNDING TARGET 
ATTAINMENT PERCENTAGE.—
‘‘(i) IN
GENERAL.—For purposes of 
subsections (a), (c)(4)(B), and (d)(2)(A), 
the value of plan assets is deemed to be 
such amount, reduced by the amount of 
the prefunding balance and the funding 
standard carryover balance. 
‘‘(ii) SPECIAL
RULE
FOR
CERTAIN 
BINDING AGREEMENTS WITH PBGC.—For 
purposes of subsection (c)(4)(B), the value 
of plan assets shall not be deemed to be re-
duced for a plan year by the amount of the
138
specified balance if, with respect to such 
balance, there is in effect for a plan year 
a binding written agreement with the Pen-
sion Benefit Guaranty Corporation which 
provides that such balance is not available 
to reduce the minimum required contribu-
tion for the plan year. For purposes of the 
preceding sentence, the term ‘specified bal-
ance’ means the prefunding balance or the 
funding standard carryover balance, as the 
case may be. 
‘‘(C) AVAILABILITY OF BALANCES IN PLAN 
YEAR FOR CREDITING AGAINST MINIMUM RE-
QUIRED
CONTRIBUTION.—For 
purposes 
of 
paragraph (3)(C)(i) of this subsection, the value 
of plan assets is deemed to be such amount, re-
duced by the amount of the prefunding balance. 
‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO 
DETERMINATIONS OF VALUE OF PLAN ASSETS AND 
CREDITING AGAINST MINIMUM REQUIRED CONTRIBU-
TION.—
‘‘(A) IN GENERAL.—The plan sponsor may 
elect to reduce by any amount the balance of 
the prefunding balance and the funding stand-
ard carryover balance for any plan year (but
139
not below zero). Such reduction shall be effec-
tive prior to any determination of the value of 
plan assets for such plan year under this sec-
tion and application of the balance in reducing 
the minimum required contribution for such 
plan for such plan year pursuant to an election 
under paragraph (2). 
‘‘(B) 
COORDINATION
BETWEEN 
PREFUNDING BALANCE AND FUNDING STAND-
ARD CARRYOVER BALANCE.—To the extent that 
any plan has a funding standard carryover bal-
ance greater than zero, no election may be 
made under subparagraph (A) with respect to 
the prefunding balance. 
‘‘(6) PREFUNDING BALANCE.—
‘‘(A) IN GENERAL.—A prefunding balance 
maintained by a plan shall consist of a begin-
ning balance of zero, increased and decreased to 
the extent provided in subparagraphs (B) and 
(C), and adjusted further as provided in para-
graph (8). 
‘‘(B) INCREASES.—
‘‘(i) IN GENERAL.—As of the first day 
of each plan year beginning after 2008, the 
prefunding balance of a plan shall be in-
140
creased by the amount elected by the plan 
sponsor for the plan year. Such amount 
shall not exceed the excess (if any) of—
‘‘(I) the aggregate total of em-
ployer contributions to the plan for 
the preceding plan year, over—
‘‘(II) the minimum required con-
tribution for such preceding plan year. 
‘‘(ii) ADJUSTMENTS FOR INTEREST.—
Any excess contributions under clause (i) 
shall be properly adjusted for interest ac-
cruing for the periods between the first 
day of the current plan year and the dates 
on which the excess contributions were 
made, determined by using the effective in-
terest rate for the preceding plan year and 
by treating contributions as being first 
used to satisfy the minimum required con-
tribution. 
‘‘(iii) CERTAIN CONTRIBUTIONS NEC-
ESSARY TO AVOID BENEFIT LIMITATIONS 
DISREGARDED.—The excess described in 
clause (i) with respect to any preceding 
plan year shall be reduced (but not below 
zero) by the amount of contributions an
141
employer would be required to make under 
paragraph (1), (2), or (4) of section 206(g) 
to avoid a benefit limitation which would 
otherwise be imposed under such para-
graph for the preceding plan year. Any 
contribution which may be taken into ac-
count in satisfying the requirements of 
more than 1 of such paragraphs shall be 
taken into account only once for purposes 
of this clause. 
‘‘(C) DECREASES.—The prefunding bal-
ance of a plan shall be decreased (but not below 
zero) by the sum of—
‘‘(i) as of the first day of each plan 
year after 2008, the amount of such bal-
ance credited under paragraph (2) (if any) 
in reducing the minimum required con-
tribution of the plan for the preceding plan 
year, and 
‘‘(ii) as of the time specified in para-
graph (5))(A), any reduction in such bal-
ance elected under paragraph (5). 
‘‘(7) FUNDING
STANDARD
CARRYOVER
BAL-
ANCE.—
142
‘‘(A) IN
GENERAL.—A funding standard 
carryover balance maintained by a plan shall 
consist of a beginning balance determined 
under subparagraph (B), decreased to the ex-
tent provided in subparagraph (C), and ad-
justed further as provided in paragraph (8). 
‘‘(B) BEGINNING
BALANCE.—The begin-
ning balance of the funding standard carryover 
balance shall be the positive balance described 
in paragraph (1)(B)(ii)(II). 
‘‘(C) DECREASES.—The funding standard 
carryover balance of a plan shall be decreased 
(but not below zero) by—
‘‘(i) as of the first day of each plan 
year after 2008, the amount of such bal-
ance credited under paragraph (2) (if any) 
in reducing the minimum required con-
tribution of the plan for the preceding plan 
year, and 
‘‘(ii) as of the time specified in para-
graph (5))(A), any reduction in such bal-
ance elected under paragraph (5). 
‘‘(8) ADJUSTMENTS FOR INVESTMENT EXPERI-
ENCE.—In determining the prefunding balance or 
the funding standard carryover balance of a plan as
143
of the first day of the plan year, the plan sponsor 
shall, in accordance with regulations prescribed by 
the Secretary of the Treasury, adjust such balance 
to reflect the rate of return on plan assets for the 
preceding plan year. Notwithstanding subsection 
(g)(3), such rate of return shall be determined on 
the basis of fair market value and shall properly 
take into account, in accordance with such regula-
tions, all contributions, distributions, and other plan 
payments made during such period. 
‘‘(9) ELECTIONS.—Elections under this sub-
section shall be made at such times, and in such 
form and manner, as shall be prescribed in regula-
tions of the Secretary. 
‘‘(g) VALUATION
OF PLAN ASSETS
AND LIABIL-
ITIES.—
‘‘(1) TIMING OF DETERMINATIONS.—Except as 
otherwise provided under this subsection, all deter-
minations under this section for a plan year shall be 
made as of the valuation date of the plan for such 
plan year. 
‘‘(2) VALUATION DATE.—For purposes of this 
section—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the valuation date of a plan
144
for any plan year shall be the first day of the 
plan year. 
‘‘(B) EXCEPTION FOR SMALL PLANS.—If, 
on each day during the preceding plan year, a 
plan had 100 or fewer participants, the plan 
may designate any day during the plan year as 
its valuation date for such plan year and suc-
ceeding plan years. For purposes of this sub-
paragraph, all defined benefit plans (other than 
multiemployer plans) maintained by the same 
employer (or any member of such employer’s 
controlled group) shall be treated as 1 plan, but 
only participants with respect to such employer 
or member shall be taken into account. 
‘‘(C) APPLICATION OF CERTAIN RULES IN 
DETERMINATION OF PLAN SIZE.—For purposes 
of this paragraph—
‘‘(i) PLANS
NOT
IN
EXISTENCE
IN 
PRECEDING YEAR.—In the case of the first 
plan year of any plan, subparagraph (B) 
shall apply to such plan by taking into ac-
count the number of participants that the 
plan is reasonably expected to have on 
days during such first plan year.
145
‘‘(ii) PREDECESSORS.—Any reference 
in subparagraph (B) to an employer shall 
include a reference to any predecessor of 
such employer. 
‘‘(3) DETERMINATION OF VALUE OF PLAN AS-
SETS.—For purposes of this section—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the value of plan assets shall 
be the fair market value of the assets. 
‘‘(B) AVERAGING ALLOWED.—A plan may 
determine the value of plan assets on the basis 
of the averaging of fair market values, but only 
if such method—
‘‘(i) is permitted under regulations 
prescribed by the Secretary, 
‘‘(ii) does not provide for averaging of 
such values over more than the period be-
ginning on the last day of the 25th month 
preceding the month in which the valuation 
date occurs and ending on the valuation 
date (or a similar period in the case of a 
valuation date which is not the 1st day of 
a month), and 
‘‘(iii) does not result in a determina-
tion of the value of plan assets which, at
146
any time, is lower than 90 percent or 
greater than 110 percent of the fair mar-
ket value of such assets at such time. 
Any such averaging shall be adjusted for con-
tributions and distributions (as provided by the 
Secretary). 
‘‘(4) ACCOUNTING
FOR
CONTRIBUTION
RE-
CEIPTS.—For purposes of determining the value of 
assets under paragraph (3)—
‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—
‘‘(i) an employer makes any contribu-
tion to the plan after the valuation date for 
the plan year in which the contribution is 
made, and 
‘‘(ii) the contribution is for a pre-
ceding plan year, 
the contribution shall be taken into account as 
an asset of the plan as of the valuation date, 
except that in the case of any plan year begin-
ning after 2008, only the present value (deter-
mined as of the valuation date) of such con-
tribution may be taken into account. For pur-
poses of the preceding sentence, present value 
shall be determined using the effective interest
147
rate for the preceding plan year to which the 
contribution is properly allocable. 
‘‘(B) SPECIAL RULE FOR CURRENT YEAR 
CONTRIBUTIONS
MADE
BEFORE
VALUATION 
DATE.—If any contributions for any plan year 
are made to or under the plan during the plan 
year but before the valuation date for the plan 
year, the assets of the plan as of the valuation 
date shall not include—
‘‘(i) such contributions, and 
‘‘(ii) interest on such contributions for 
the period between the date of the con-
tributions and the valuation date, deter-
mined by using the effective interest rate 
for the plan year. 
‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.—
‘‘(1) IN GENERAL.—Subject to this subsection, 
the determination of any present value or other com-
putation under this section shall be made on the 
basis of actuarial assumptions and methods—
‘‘(A) each of which is reasonable (taking 
into account the experience of the plan and rea-
sonable expectations), and
148
‘‘(B) which, in combination, offer the actu-
ary’s best estimate of anticipated experience 
under the plan. 
‘‘(2) INTEREST RATES.—
‘‘(A) EFFECTIVE
INTEREST
RATE.—For 
purposes of this section, the term ‘effective in-
terest rate’ means, with respect to any plan for 
any plan year, the single rate of interest which, 
if used to determine the present value of the 
plan’s accrued or earned benefits referred to in 
subsection (d)(1), would result in an amount 
equal to the funding target of the plan for such 
plan year. 
‘‘(B) INTEREST RATES FOR DETERMINING 
FUNDING
TARGET.—For purposes of deter-
mining the funding target of a plan for any 
plan year, the interest rate used in determining 
the present value of the liabilities of the plan 
shall be—
‘‘(i) in the case of benefits reasonably 
determined to be payable during the 5-year 
period beginning on the first day of the 
plan year, the first segment rate with re-
spect to the applicable month,
149
‘‘(ii) in the case of benefits reasonably 
determined to be payable during the 15-
year period beginning at the end of the pe-
riod described in clause (i), the second seg-
ment rate with respect to the applicable 
month, and 
‘‘(iii) in the case of benefits reason-
ably determined to be payable after the pe-
riod described in clause (ii), the third seg-
ment rate with respect to the applicable 
month. 
‘‘(C) SEGMENT RATES.—For purposes of 
this paragraph—
‘‘(i) FIRST
SEGMENT
RATE.—The 
term ‘first segment rate’ means, with re-
spect to any month, the single rate of in-
terest which shall be determined by the 
Secretary for such month on the basis of 
the corporate bond yield curve for such 
month, taking into account only that por-
tion of such yield curve which is based on 
bonds maturing during the 5-year period 
commencing with such month. 
‘‘(ii) SECOND
SEGMENT
RATE.—The 
term ‘second segment rate’ means, with re-
150
spect to any month, the single rate of in-
terest which shall be determined by the 
Secretary for such month on the basis of 
the corporate bond yield curve for such 
month, taking into account only that por-
tion of such yield curve which is based on 
bonds maturing during the 15-year period 
beginning at the end of the period de-
scribed in clause (i). 
‘‘(iii) THIRD
SEGMENT
RATE.—The 
term ‘third segment rate’ means, with re-
spect to any month, the single rate of in-
terest which shall be determined by the 
Secretary for such month on the basis of 
the corporate bond yield curve for such 
month, taking into account only that por-
tion of such yield curve which is based on 
bonds maturing during periods beginning 
after the period described in clause (ii). 
‘‘(D) CORPORATE BOND YIELD CURVE.—
For purposes of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘cor-
porate bond yield curve’ means, with re-
spect to any month, a yield curve which is 
prescribed by the Secretary for such month
151
and which reflects the average, for the 24-
month period ending with the month pre-
ceding such month, of monthly yields on 
investment grade corporate bonds with 
varying maturities and that are in the top 
3 quality levels available. 
‘‘(ii) 
ELECTION
TO
USE
YIELD 
CURVE.—Solely for purposes of deter-
mining the minimum required contribution 
under this section, the plan sponsor may, 
in lieu of the segment rates determined 
under subparagraph (C), elect to use inter-
est rates under the corporate bond yield 
curve. For purposes of the preceding sen-
tence such curve shall be determined with-
out regard to the 24-month averaging de-
scribed in clause (i). Such election, once 
made, may be revoked only with the con-
sent of the Secretary. 
‘‘(E) APPLICABLE MONTH.—For purposes 
of this paragraph, the term ‘applicable month’ 
means, with respect to any plan for any plan 
year, the month which includes the valuation 
date of such plan for such plan year or, at the 
election of the plan sponsor, any of the 4
152
months which precede such month. Any election 
made under this subparagraph shall apply to 
the plan year for which the election is made and 
all succeeding plan years, unless the election is 
revoked with the consent of the Secretary. 
‘‘(F) PUBLICATION REQUIREMENTS.—The 
Secretary shall publish for each month the cor-
porate bond yield curve (and the corporate bond 
yield curve reflecting the modification described 
in section 417(e)(3)(D)(i) for such month and 
each of the rates determined under subpara-
graph (B) for such month. The Secretary shall 
also publish a description of the methodology 
used to determine such yield curve and such 
rates which is sufficiently detailed to enable 
plans to make reasonable projections regarding 
the yield curve and such rates for future 
months based on the plan’s projection of future 
interest rates. 
‘‘(G) TRANSITION RULE.—
‘‘(i) IN
GENERAL.—Notwithstanding 
the preceding provisions of this paragraph, 
for plan years beginning in 2008 or 2009, 
the first, second, or third segment rate for
153
a plan with respect to any month shall be 
equal to the sum of—
‘‘(I) the product of such rate for 
such month determined without re-
gard to this subparagraph, multiplied 
by the applicable percentage, and 
‘‘(II) the product of the rate de-
termined under the rules of section 
412(b)(5)(B)(ii)(II) (as in effect for 
plan years beginning in 2007), multi-
plied by a percentage equal to 100 
percent minus the applicable percent-
age. 
‘‘(ii) APPLICABLE PERCENTAGE.—For 
purposes of clause (i), the applicable per-
centage is 331⁄3 percent for plan years be-
ginning in 2008 and 662⁄3 percent for plan 
years beginning in 2009. 
‘‘(iii) 
NEW
PLANS
INELIGIBLE.—
Clause (i) shall not apply to any plan if the 
first plan year of the plan begins after De-
cember 31, 2007. 
‘‘(iv) ELECTION.—The plan sponsor 
may elect not to have this subparagraph 
apply. Such election, once made, may be
154
revoked only with the consent of the Sec-
retary. 
‘‘(3) MORTALITY TABLES.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (C) or (D), the Secretary shall by 
regulation prescribe mortality tables to be used 
in determining any present value or making any 
computation under this section. Such tables 
shall be based on the actual experience of pen-
sion plans and projected trends in such experi-
ence. In prescribing such tables, the Secretary 
shall take into account results of available inde-
pendent studies of mortality of individuals cov-
ered by pension plans. 
‘‘(B) PERIODIC REVISION.—The Secretary 
shall (at least every 10 years) make revisions in 
any table in effect under subparagraph (A) to 
reflect the actual experience of pension plans 
and projected trends in such experience. 
‘‘(C) SUBSTITUTE MORTALITY TABLE.—
‘‘(i) IN GENERAL.—Upon request by 
the plan sponsor and approval by the Sec-
retary, a mortality table which meets the 
requirements of clause (iii) shall be used in 
determining any present value or making
155
any computation under this section during 
the period of consecutive plan years (not to 
exceed 10) specified in the request. 
‘‘(ii) EARLY
TERMINATION
OF
PE-
RIOD.—Notwithstanding clause (i), a mor-
tality table described in clause (i) shall 
cease to be in effect as of the earliest of—
‘‘(I) the date on which there is a 
significant change in the participants 
in the plan by reason of a plan spinoff 
or merger or otherwise, or 
‘‘(II) the date on which the plan 
actuary determines that such table 
does not meet the requirements of 
clause (iii). 
‘‘(iii) REQUIREMENTS.—A mortality 
table meets the requirements of this clause 
if—
‘‘(I) there is a sufficient number 
of plan participants, and the pension 
plans have been maintained for a suf-
ficient period of time, to have credible 
information necessary for purposes of 
subclause (II), and
156
‘‘(II) such table reflects the ac-
tual experience of the pension plans 
maintained by the sponsor and pro-
jected trends in general mortality ex-
perience. 
‘‘(iv) ALL
PLANS
IN
CONTROLLED 
GROUP MUST USE SEPARATE TABLE.—Ex-
cept as provided by the Secretary, a plan 
sponsor may not use a mortality table 
under this subparagraph for any plan 
maintained by the plan sponsor unless—
‘‘(I) a separate mortality table is 
established and used under this sub-
paragraph for each other plan main-
tained by the plan sponsor and if the 
plan sponsor is a member of a con-
trolled group, each member of the 
controlled group, and 
‘‘(II) the requirements of clause 
(iii) are met separately with respect to 
the table so established for each such 
plan, determined by only taking into 
account the participants of such plan, 
the time such plan has been in exist-
157
ence, and the actual experience of 
such plan. 
‘‘(v) DEADLINE FOR SUBMISSION AND 
DISPOSITION OF APPLICATION.—
‘‘(I) 
SUBMISSION.—The 
plan 
sponsor shall submit a mortality table 
to the Secretary for approval under 
this subparagraph at least 7 months 
before the 1st day of the period de-
scribed in clause (i). 
‘‘(II) DISPOSITION.—Any mor-
tality table submitted to the Secretary 
for approval under this subparagraph 
shall be treated as in effect as of the 
1st day of the period described in 
clause (i) unless the Secretary, during 
the 180-day period beginning on the 
date of such submission, disapproves 
of such table and provides the reasons 
that such table fails to meet the re-
quirements of clause (iii). The 180-
day period shall be extended upon mu-
tual agreement of the Secretary and 
the plan sponsor.
158
‘‘(D) SEPARATE MORTALITY TABLES FOR 
THE
DISABLED.—Notwithstanding 
subpara-
graph (A)—
‘‘(i) IN
GENERAL.—The Secretary 
shall establish mortality tables which may 
be used (in lieu of the tables under sub-
paragraph (A)) under this subsection for 
individuals who are entitled to benefits 
under the plan on account of disability. 
The Secretary shall establish separate ta-
bles for individuals whose disabilities occur 
in plan years beginning before January 1, 
1995, and for individuals whose disabilities 
occur in plan years beginning on or after 
such date. 
‘‘(ii) SPECIAL RULE FOR DISABILITIES 
OCCURRING AFTER 1994.—In the case of 
disabilities occurring in plan years begin-
ning after December 31, 1994, the tables 
under clause (i) shall apply only with re-
spect to individuals described in such sub-
clause who are disabled within the meaning 
of title II of the Social Security Act and 
the regulations thereunder.
159
‘‘(iii) PERIODIC REVISION.—The Sec-
retary shall (at least every 10 years) make 
revisions in any table in effect under clause 
(i) to reflect the actual experience of pen-
sion plans and projected trends in such ex-
perience. 
‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN 
THE FORM OF LUMP SUMS OR OTHER OPTIONAL 
FORMS.—For purposes of determining any present 
value or making any computation under this section, 
there shall be taken into account—
‘‘(A) the probability that future benefit 
payments under the plan will be made in the 
form of optional forms of benefits provided 
under the plan (including lump sum distribu-
tions, determined on the basis of the plan’s ex-
perience and other related assumptions), and 
‘‘(B) any difference in the present value of 
such future benefit payments resulting from the 
use of actuarial assumptions, in determining 
benefit payments in any such optional form of 
benefits, which are different from those speci-
fied in this subsection. 
‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU-
ARIAL ASSUMPTIONS.—
160
‘‘(A) IN GENERAL.—No actuarial assump-
tion used to determine the funding target for a 
plan to which this paragraph applies may be 
changed without the approval of the Secretary. 
‘‘(B) PLANS
TO
WHICH
PARAGRAPH
AP-
PLIES.—This paragraph shall apply to a plan 
only if—
‘‘(i) the plan is a defined benefit plan 
(other than a multiemployer plan) to which 
title IV of the Employee Retirement In-
come Security Act of 1974 applies, 
‘‘(ii) the aggregate unfunded vested 
benefits as of the close of the preceding 
plan year (as determined under section 
4006(a)(3)(E)(iii) of the Employee Retire-
ment Income Security Act of 1974) of such 
plan and all other plans maintained by the 
contributing sponsors (as defined in sec-
tion 4001(a)(13) of such Act) and mem-
bers of such sponsors’ controlled groups 
(as defined in section 4001(a)(14) of such 
Act) which are covered by title IV (dis-
regarding plans with no unfunded vested 
benefits) exceed $50,000,000, and
161
‘‘(iii) the change in assumptions (de-
termined after taking into account any 
changes in interest rate and mortality 
table) results in a decrease in the funding 
shortfall of the plan for the current plan 
year that exceeds $50,000,000, or that ex-
ceeds $5,000,000 and that is 5 percent or 
more of the funding target of the plan be-
fore such change. 
‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.—
‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK 
STATUS.—
‘‘(A) IN GENERAL.—In the case of a plan 
which is in at-risk status for a plan year, the 
funding target of the plan for the plan year 
shall be equal to the sum of—
‘‘(i) the present value of all benefits 
accrued or earned under the plan as of the 
beginning of the plan year, as determined 
by using the additional actuarial assump-
tions described in subparagraph (B), and 
‘‘(ii) in the case of a plan which also 
has been in at-risk status for at least 2 of 
the 4 preceding plan years, a loading fac-
tor determined under subparagraph (C).
162
‘‘(B) ADDITIONAL
ACTUARIAL
ASSUMP-
TIONS.—The actuarial assumptions described in 
this subparagraph are as follows: 
‘‘(i) All employees who are not other-
wise assumed to retire as of the valuation 
date but who will be eligible to elect bene-
fits during the plan year and the 10 suc-
ceeding plan years shall be assumed to re-
tire at the earliest retirement date under 
the plan but not before the end of the plan 
year for which the at-risk funding target 
and at-risk target normal cost are being 
determined. 
‘‘(ii) All employees shall be assumed 
to elect the retirement benefit available 
under the plan at the assumed retirement 
age (determined after application of clause 
(i)) which would result in the highest 
present value of benefits. 
‘‘(C) LOADING FACTOR.—The loading fac-
tor applied with respect to a plan under this 
paragraph for any plan year is the sum of—
‘‘(i) $700, times the number of par-
ticipants in the plan, plus
163
‘‘(ii) 4 percent of the funding target 
(determined without regard to this para-
graph) of the plan for the plan year. 
‘‘(2) TARGET
NORMAL
COST
OF
AT-RISK 
PLANS.—In the case of a plan which is in at-risk 
status for a plan year, the target normal cost of the 
plan for such plan year shall be equal to the sum 
of—
‘‘(A) the present value of all benefits which 
are expected to accrue or be earned under the 
plan during the plan year, determined using the 
additional actuarial assumptions described in 
paragraph (1)(B), plus 
‘‘(B) in the case of a plan which also has 
been in at-risk status for at least 2 of the 4 
preceding plan years, a loading factor equal to 
4 percent of the target normal cost (determined 
without regard to this paragraph) of the plan 
for the plan year. 
‘‘(3) MINIMUM AMOUNT.—In no event shall—
‘‘(A) the at-risk funding target be less 
than the funding target, as determined without 
regard to this subsection, or