105
(f)(4)(B)) is less than the funding target of the plan 
for the plan year, the sum of—
‘‘(A) the target normal cost of the plan for 
the plan year, 
‘‘(B) the shortfall amortization charge (if 
any) for the plan for the plan year determined 
under subsection (c), and 
‘‘(C) the waiver amortization charge (if 
any) for the plan for the plan year as deter-
mined under subsection (e); 
‘‘(2) in any case in which the value of plan as-
sets of the plan (as reduced under subsection 
(f)(4)(B)) exceeds the funding target of the plan for 
the plan year, the target normal cost of the plan for 
the plan year reduced by such excess; or 
‘‘(3) in any other case, the target normal cost 
of the plan for the plan year. 
‘‘(b) TARGET NORMAL COST.—For purposes of this 
section, except as provided in subsection (i)(2) with re-
spect to plans in at-risk status, the term ‘target normal 
cost’ means, for any plan year, the present value of all 
benefits which are expected to accrue or to be earned 
under the plan during the plan year. For purposes of this 
subsection, if any benefit attributable to services per-
formed in a preceding plan year is increased by reason
106
of any increase in compensation during the current plan 
year, the increase in such benefit shall be treated as hav-
ing accrued during the current plan year. 
‘‘(c) SHORTFALL AMORTIZATION CHARGE.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the shortfall amortization charge for a plan for 
any plan year is the aggregate total of the shortfall 
amortization installments for such plan year with re-
spect to the shortfall amortization bases for such 
plan year and each of the 6 preceding plan years. 
‘‘(2) 
SHORTFALL
AMORTIZATION
INSTALL-
MENT.—The plan sponsor shall determine, with re-
spect to the shortfall amortization base of the plan 
for any plan year, the amounts necessary to amor-
tize such shortfall amortization base, in level annual 
installments over a period of 7 plan years beginning 
with such plan year. For purposes of paragraph (1), 
the annual installment of such amortization for each 
plan year in such 7-plan-year period is the shortfall 
amortization installment for such plan year with re-
spect to such shortfall amortization base. In deter-
mining any shortfall amortization installment under 
this paragraph, the plan sponsor shall use the seg-
ment rates determined under subparagraph (C) of
107
subsection (h)(2), applied under rules similar to the 
rules of subparagraph (B) of subsection (h)(2). 
‘‘(3) SHORTFALL
AMORTIZATION
BASE.—For 
purposes of this section, the shortfall amortization 
base of a plan for a plan year is the excess (if any) 
of—
‘‘(A) the funding shortfall of such plan for 
such plan year, over 
‘‘(B) the sum of— 
‘‘(i) the present value (determined 
using the segment rates determined under 
subparagraph (C) of subsection (h)(2), ap-
plied under rules similar to the rules of 
subparagraph (B) of subsection (h)(2)) of 
the aggregate total of the shortfall amorti-
zation installments, for such plan year and 
the 5 succeeding plan years, which have 
been determined with respect to the short-
fall amortization bases of the plan for each 
of the 6 plan years preceding such plan 
year, and 
‘‘(ii) the present value (as so deter-
mined) of the aggregate total of the waiver 
amortization installments for such plan 
year and the 5 succeeding plan years,
108
which have been determined with respect 
to the waiver amortization bases of the 
plan for each of the 5 plan years preceding 
such plan year. 
‘‘(4) FUNDING SHORTFALL.—For purposes of 
this section, the funding shortfall of a plan for any 
plan year is the excess (if any) of—
‘‘(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.—In the case of a 
non-deficit reduction plan, subparagraph 
(A) shall be applied to plan years begin-
109
ning after 2006 and before 2011 by sub-
stituting, for the funding target of the plan 
for the plan year, the applicable percentage 
of such funding target determined under 
the following table:
‘‘In the case of a plan year beginning in calendar 
year: 
The appli-
cable per-
centage is: 
2007 ..............................................................................................
92 percent
2008 ..............................................................................................
94 percent
2009 ..............................................................................................
96 percent
2010 ..............................................................................................
98 percent. 
‘‘(ii) LIMITATION.—Clause (i) shall 
not apply with respect to any plan year 
after 2007 unless the ratio (expressed as a 
percentage) which—
‘‘(I) the value of plan assets for 
each preceding plan year after 2006 
(as 
reduced 
under 
subsection 
(f)(4)(A)), bears to 
‘‘(II) the funding target of the 
plan for such preceding plan year (de-
termined without regard to subsection 
(i)(1)), 
is not less than the applicable percentage 
with respect to such preceding plan deter-
mined under clause (i).
110
‘‘(iii) 
NON-DEFICIT
REDUCTION 
PLAN.—For purposes of clause (i), the 
term ‘non-deficit reduction plan’ means 
any plan—
‘‘(I) to which this part (as in ef-
fect on the day before the date of the 
enactment of the Pension Protection 
Act of 2005) applied for the plan year 
beginning in 2006, and 
‘‘(II) to which section 412(d) (as 
so in effect) did not apply for such 
plan year. 
‘‘(6) 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 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-
111
tus, the funding target of a plan for a plan year is 
the present value of all liabilities to participants and 
their beneficiaries under the plan for 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.—
‘‘(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.—
The plan sponsor shall determine, with respect to 
the waiver amortization base of the plan for any 
plan year, the amounts necessary to amortize such 
waiver amortization base, in level annual install-
112
ments over a period of 5 plan years beginning with 
the succeeding plan year. For purposes of paragraph 
(1), the annual installment of such amortization for 
each plan year in such 5-plan year period is the 
waiver amortization installment for such plan year 
with respect to such waiver amortization 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 
(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 base for all pre-
ceding plan years shall be reduced to zero.