384 
‘‘(3)(A) For purposes of paragraphs (1) and (2), the 
present value shall not be less than the present value cal-
culated by using the applicable mortality table and the ap-
plicable interest rate. 
‘‘(B) For purposes of subparagraph (A)— 
‘‘(i) The term ‘applicable mortality table’ means 
a mortality table, modified as appropriate by the 
Secretary of the Treasury, based on the mortality 
table specified for the plan year under subparagraph 
(A) of section 303(h)(3) (without regard to subpara-
graph (C) or (D) of such section). 
‘‘(ii) The term ‘applicable interest rate’ means 
the adjusted first, second, and third segment rates 
applied under rules similar to the rules of section 
303(h)(2)(C) for the month before the date of the 
distribution or such other time as the Secretary of 
the Treasury may by regulations prescribe. 
‘‘(iii) For purposes of clause (ii), the adjusted 
first, second, and third segment rates are the first, 
second, and third segment rates which would be de-
termined under section 303(h)(2)(C) if— 
‘‘(I) section 303(h)(2)(D) were applied by 
substituting the average yields for the month 
described in clause (ii) for the average yields for 
the 24-month period described in such section, 
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385 
‘‘(II) section 303(h)(2)(G)(i)(II) were ap-
plied 
by 
substituting 
‘section 
205(g)(3)(B)(iii)(II)’ 
for 
‘section 
302(b)(5)(B)(ii)(II)’, and 
‘‘(III) the applicable percentage under sec-
tion 303(h)(2)(G) were determined in accord-
ance with the following table: 
In the case of plan years beginning in: 
The applicable 
percentage is:
2008 .......................................................................
20 percent
2009 .......................................................................
40 percent
2010 .......................................................................
60 percent
2011 .......................................................................
80 percent.’’. 
(b) AMENDMENT TO INTERNAL REVENUE CODE OF 
1986.—Paragraph (3) of section 417(e) of the Internal 
Revenue Code of 1986 is amended to read as follows: 
‘‘(3) DETERMINATION OF PRESENT VALUE.— 
‘‘(A) IN GENERAL.—For purposes of para-
graphs (1) and (2), the present value shall not 
be less than the present value calculated by 
using the applicable mortality table and the ap-
plicable interest rate. 
‘‘(B) APPLICABLE
MORTALITY
TABLE.— 
For purposes of subparagraph (A), the term 
‘applicable mortality table’ means a mortality 
table, modified as appropriate by the Secretary, 
based on the mortality table specified for the 
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386 
plan year under subparagraph (A) of section 
430(h)(3) (without regard to subparagraph (C) 
or (D) of such section). 
‘‘(C) APPLICABLE
INTEREST
RATE.—For 
purposes of subparagraph (A), the term ‘appli-
cable interest rate’ means the adjusted first, 
second, and third segment rates applied under 
rules 
similar 
to 
the 
rules 
of 
section 
430(h)(2)(C) for the month before the date of 
the distribution or such other time as the Sec-
retary may by regulations prescribe. 
‘‘(D) APPLICABLE SEGMENT RATES.—For 
purposes of subparagraph (C), the adjusted 
first, second, and third segment rates are the 
first, second, and third segment rates which 
would 
be 
determined 
under 
section 
430(h)(2)(C) if— 
‘‘(i) section 430(h)(2)(D) were applied 
by substituting the average yields for the 
month described in clause (ii) for the aver-
age yields for the 24-month period de-
scribed in such section, 
‘‘(ii) section 430(h)(2)(G)(i)(II) were 
applied 
by 
substituting 
‘section 
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387 
417(e)(3)(A)(ii)(II)’ 
for 
‘section 
412(b)(5)(B)(ii)(II)’, and 
‘‘(iii) the applicable percentage under 
section 430(h)(2)(G) were determined in 
accordance with the following table: 
In the case of plan years beginning in: 
The applicable 
percentage is:
2008 .......................................................................
20 percent
2009 .......................................................................
40 percent
2010 .......................................................................
60 percent
2011 .......................................................................
80 percent.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning after December 31, 2007. 
SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING 
BENEFIT LIMITATIONS TO LUMP SUM DIS-
TRIBUTIONS. 
(a) 
IN
GENERAL.—Clause 
(ii) 
of 
section 
415(b)(2)(E) of the Internal Revenue Code of 1986 is 
amended to read as follows: 
‘‘(ii) For purposes of adjusting any 
benefit under subparagraph (B) for any 
form 
of 
benefit 
subject 
to 
section 
417(e)(3), the interest rate assumption 
shall not be less than the greatest of— 
‘‘(I) 5.5 percent, 
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388 
‘‘(II) the rate that provides a 
benefit of not more than 105 percent 
of the benefit that would be provided 
if the applicable interest rate (as de-
fined in section 417(e)(3)) were the 
interest rate assumption, or 
‘‘(III) the rate specified under 
the plan.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to distributions made in years 
beginning after December 31, 2005. 
TITLE IV—PBGC GUARANTEE 
AND RELATED PROVISIONS 
SEC. 401. PBGC PREMIUMS. 
(a) VARIABLE-RATE PREMIUMS.— 
(1) CONFORMING
AMENDMENTS
RELATED
TO 
FUNDING RULES FOR SINGLE-EMPLOYER PLANS.— 
Section 4006(a)(3)(E) of the Employee Retirement 
Income and Security Act of 1974 (29 U.S.C. 
1306(a)(3)(E)) is amended by striking clauses (iii) 
and (iv) and inserting the following: 
‘‘(iii) For purposes of clause (ii), the term ‘unfunded 
vested benefits’ means, for a plan year, the excess (if any) 
of— 
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389 
‘‘(I) the funding target of the plan as deter-
mined under section 303(d) for the plan year by 
only taking into account vested benefits and by 
using the interest rate described in clause (iv), over 
‘‘(II) the fair market value of plan assets for 
the plan year which are held by the plan on the 
valuation date. 
‘‘(iv) The interest rate used in valuing benefits for 
purposes of subclause (I) of clause (iii) shall be equal to 
the first, second, or third segment rate for the month pre-
ceding the month in which the plan year begins, which 
would be determined under section 303(h)(2)(C) if section 
303(h)(2)(D) were applied by using the monthly yields for 
the month preceding the month in which the plan year 
begins on investment grade corporate bonds with varying 
maturities and in the top 3 quality levels rather than the 
average of such yields for a 24-month period.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply with respect to plan 
years beginning after 2007. 
(b) TERMINATION PREMIUMS.— 
(1) REPEAL OF SUNSET PROVISION.—Subpara-
graph (E) of section 4006(a)(7) of such Act is re-
pealed. 
(2) TECHNICAL CORRECTION.— 
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