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‘‘(2) PREFUNDING BALANCE.—
‘‘(A) BEGINNING BALANCE.—The beginning
balance of a prefunding balance maintained by
a plan shall be zero, except that if a plan was
in effect for a plan year beginning in 2006 and
had a positive balance in the funding standard
account under section 412(b) (as in effect for
such plan year) as of the end of such plan year,
the beginning balance for the plan for its first
plan year beginning after 2006 shall be such
positive balance.
‘‘(B) INCREASES.—
‘‘(i) IN GENERAL.—As of the first day
of each plan year beginning after 2007, the
prefunding balance of a plan shall be in-
creased by the excess (if any) of—
‘‘(I) the aggregate amount of em-
ployer contributions to the plan for the
preceding plan year, over
‘‘(II) the minimum required con-
tribution for the preceding plan year.
‘‘(ii) ADJUSTMENTS FOR INTEREST.—
Any excess contributions under clause (i)
shall be properly adjusted for interest accru-
ing for the periods between the first day of
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the current plan year and the dates on
which the excess contributions were made,
determined by using the effective interest
rate for the preceding plan year and by
treating contributions as being first used to
satisfy the minimum required contribution.
‘‘(iii) CERTAIN
CONTRIBUTIONS
DIS-
REGARDED.—Any contribution which is re-
quired to be made under section 436 in ad-
dition to any contribution required under
this section shall not be taken into account
for purposes of clause (i).
‘‘(C) DECREASES.—As of the first day of
each plan year after 2007, the prefunding bal-
ance of a plan shall be decreased (but not below
zero) by the amount of the balance credited
under paragraph (1) against the minimum re-
quired contribution of the plan for the preceding
plan year.
‘‘(D) ADJUSTMENTS FOR INVESTMENT EX-
PERIENCE.—In determining the prefunding bal-
ance of a plan as of the first day of the plan
year, the plan sponsor shall, in accordance with
regulations prescribed by the Secretary, adjust
such balance to reflect the rate of return on plan
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assets for the preceding plan year. Notwith-
standing 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 regulations, all contribu-
tions, distributions, and other plan payments
made during such period.
‘‘(3) LIMITATION FOR UNDERFUNDED PLANS.—
‘‘(A) IN GENERAL.—If the ratio (expressed
as a percentage) for any plan year which—
‘‘(i) the value of plan assets for the
preceding plan year, 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, the preceding provisions
of this subsection shall not apply unless employ-
ers liable for contributions to the plan under sec-
tion 412(c) make contributions to the plan for
the plan year in an aggregate amount not less
than the amount determined under subpara-
graph (B). Any contribution required by this
subparagraph may not be reduced by any credit
otherwise allowable under paragraph (1).
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‘‘(B) APPLICABLE
AMOUNT.—The amount
determined under this subparagraph for any
plan year is the greater of—
‘‘(i) the target normal cost of the plan
for the plan year, or
‘‘(ii) 25 percent of the minimum re-
quired contribution under subsection (a) for
the plan year without regard to this sub-
section.
‘‘(4) REDUCTION IN VALUE OF ASSETS.—Solely
for purposes of applying subsections (a) and
(c)(4)(A)(ii) in determining the minimum required
contribution under this section, the value of the plan
assets otherwise determined without regard to this
paragraph shall be reduced by the amount of the
prefunding balance under this subsection.
‘‘(g) VALUATION OF PLAN ASSETS AND LIABILITIES.—
‘‘(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—
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‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the valuation date of a plan
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 des-
ignate any day during the plan year as its valu-
ation date for such plan year and succeeding
plan years. For purposes of this subparagraph,
all defined benefit plans (other than multiem-
ployer plans) maintained by the same employer
(or any member of such employer’s controlled
group) shall be treated as 1 plan, but only em-
ployees of 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 PRE-
CEDING YEAR.—In the case of the first plan
year of any plan, subparagraph (B) shall
apply to such plan by taking into account
the number of participants that the plan is
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reasonably expected to have on days during
such first plan year.
‘‘(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 any reasonable actuarial method of valuation
providing for the averaging of fair market val-
ues, but only if such method—
‘‘(i) is permitted under regulations
prescribed by the Secretary, and
‘‘(ii) does not provide for averaging of
such values over more than the period be-
ginning on the last day of the 12th month
preceding the valuation date 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).
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‘‘(4) 
ACCOUNTING
FOR
CONTRIBUTION
RE-
CEIPTS.—For purposes of determining the value of as-
sets 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, ex-
cept that in the case of any plan year beginning
after 2007, only the present value (determined as
of the valuation date) of such contribution may
be taken into account. For purposes of the pre-
ceding sentence, present value shall be deter-
mined using the effective interest 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
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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 contribu-
tions and the valuation date, determined 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
‘‘(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 inter-
est 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
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accrued or earned benefits referred to in sub-
section (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 determining
the funding target of a plan for any plan year,
the interest rate used in determining the present
value of the benefits 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,
‘‘(ii) in the case of benefits reasonably
determined to be payable during the 15-year
period beginning at the end of the period
described in clause (i), the second segment
rate with respect to the applicable month,
and
‘‘(iii) in the case of benefits reasonably
determined to be payable after the period
described in clause (ii), the third segment
rate with respect to the applicable month.