407 
then subsection (a)(3) shall be applied by treating the date 
such petition was filed as the termination date of the 
plan.’’. 
(c) EFFECTIVE DATE.—The amendments made this 
section shall apply with respect to proceedings initiated 
under title 11, United States Code, or under any similar 
Federal law or law of a State or political subdivision, on 
or after the date that is 30 days after the date of enact-
ment of this Act. 
SEC. 405. PBGC PREMIUMS FOR SMALL PLANS. 
(a) SMALL
PLANS.—Paragraph (3) of section 
4006(a) of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1306(a)) is amended— 
(1) by striking ‘‘The additional’’ in subpara-
graph (E)(i) and inserting ‘‘Except as provided in 
subparagraph (H), the additional’’, and 
(2) by inserting after subparagraph (G) the fol-
lowing new subparagraph: 
‘‘(H)(i) In the case of an employer who has 25 or 
fewer employees on the first day of the plan year, the addi-
tional premium determined under subparagraph (E) for 
each participant shall not exceed $5 multiplied by the 
number of participants in the plan as of the close of the 
preceding plan year. 
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408 
‘‘(ii) For purposes of clause (i), whether an employer 
has 25 or fewer employees on the first day of the plan 
year is determined by taking into consideration all of the 
employees of all members of the contributing sponsor’s 
controlled group. In the case of a plan maintained by two 
or more contributing sponsors, the employees of all con-
tributing sponsors and their controlled groups shall be ag-
gregated for purposes of determining whether the 25-or- 
fewer-employees limitation has been satisfied.’’ 
(b) EFFECTIVE DATES.—The amendment made by 
this section shall apply to plan years beginning after De-
cember 31, 2006. 
SEC. 406. AUTHORIZATION FOR PBGC TO PAY INTEREST ON 
PREMIUM OVERPAYMENT REFUNDS. 
(a) IN GENERAL.—Section 4007(b) of the Employ-
ment Retirement Income Security Act of 1974 (29 U.S.C. 
1307(b)) is amended— 
(1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, 
and 
(2) by inserting at the end the following new 
paragraph: 
‘‘(2) The corporation is authorized to pay, subject to 
regulations prescribed by the corporation, interest on the 
amount of any overpayment of premium refunded to a des-
ignated payor. Interest under this paragraph shall be cal-
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409 
culated at the same rate and in the same manner as inter-
est is calculated for underpayments under paragraph (1).’’ 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to interest accruing for periods 
beginning not earlier than the date of the enactment of 
this Act. 
SEC. 407. RULES FOR SUBSTANTIAL OWNER BENEFITS IN 
TERMINATED PLANS. 
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.— 
Section 4022(b)(5) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended 
to read as follows: 
‘‘(5)(A) For purposes of this paragraph, the term 
‘majority owner’ means an individual who, at any time 
during the 60-month period ending on the date the deter-
mination is being made— 
‘‘(i) owns the entire interest in an unincor-
porated trade or business, 
‘‘(ii) in the case of a partnership, is a partner 
who owns, directly or indirectly, 50 percent or more 
of either the capital interest or the profits interest 
in such partnership, or 
‘‘(iii) in the case of a corporation, owns, directly 
or indirectly, 50 percent or more in value of either 
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410 
the voting stock of that corporation or all the stock 
of that corporation. 
For purposes of clause (iii), the constructive ownership 
rules of section 1563(e) of the Internal Revenue Code of 
1986 (other than paragraph (3)(C) thereof) shall apply, 
including the application of such rules under section 
414(c) of such Code. 
‘‘(B) In the case of a participant who is a majority 
owner, the amount of benefits guaranteed under this sec-
tion shall equal the product of— 
‘‘(i) a fraction (not to exceed 1) the numerator 
of which is the number of years from the later of the 
effective date or the adoption date of the plan to the 
termination date, and the denominator of which is 
10, and 
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not 
a majority owner.’’ 
(b) MODIFICATION OF ALLOCATION OF ASSETS.— 
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 
1344(a)(4)(B)) is amended by striking ‘‘section 
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’. 
(2) Section 4044(b) of such Act (29 U.S.C. 
1344(b)) is amended— 
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411 
(A) by striking ‘‘(5)’’ in paragraph (2) and 
inserting ‘‘(4), (5),’’, and 
(B) 
by 
redesignating 
paragraphs 
(3) 
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2) 
the following new paragraph: 
‘‘(3) If assets available for allocation under 
paragraph (4) of subsection (a) are insufficient to 
satisfy in full the benefits of all individuals who are 
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A) 
of that paragraph. Any remaining assets shall then 
be allocated to benefits described in subparagraph 
(B) of that paragraph. If assets allocated to such 
subparagraph (B) are insufficient to satisfy in full 
the benefits described in that subparagraph, the as-
sets shall be allocated pro rata among individuals on 
the basis of the present value (as of the termination 
date) of their respective benefits described in that 
subparagraph.’’ 
(c) CONFORMING AMENDMENTS.— 
(1) Section 4021 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1321) is 
amended— 
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