197 
retirement benefit (including any early retirement subsidy 
that is fully or partially included or reflected in an employ-
ee’s opening balance or other transition benefits) shall be 
disregarded. 
‘‘(viii) A plan under which the accrued benefit payable 
under the plan upon distribution (or any portion thereof) 
is expressed as the balance of a hypothetical account main-
tained for the participant shall not be treated as failing 
to meet the requirements of clause (i) solely because interest 
accruing on such balance is taken into account. 
‘‘(ix) A plan shall not be treated as failing to meet 
the requirements of this subparagraph solely because the 
plan provides allowable offsets against those benefits under 
the plan which are attributable to employer contributions, 
based on benefits which are provided under title II of the 
Social Security Act, the Railroad Retirement Act of 1974, 
another plan described in section 401(a) of the Internal 
Revenue Code of 1986 maintained by the same employer, 
or under any retirement program for officers or employees 
of the Federal Government or of the government of any 
State or political subdivision thereof. For purposes of this 
clause, allowable offsets based on such benefits consist of off-
sets equal to all or part of the actual benefit payment 
amounts, reasonable projections or estimations of such ben-
efit payment amounts, or actuarial equivalents of such ac-
198 
tual benefit payment amounts, projections, or estimations 
(determined on the basis of reasonable actuarial assump-
tions). 
‘‘(x) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan 
provides a disparity in contributions or benefits with re-
spect to which the requirements of section 401(l) of the In-
ternal Revenue Code of 1986 are met. 
‘‘(xi)(I) A plan shall not be treated as failing to meet 
the requirements of this subparagraph solely because the 
plan provides for pre-retirement indexing of accrued bene-
fits under the plan. 
‘‘(II) For purposes of this clause, the term ‘pre-retire-
ment indexing’ means, in connection with an accrued ben-
efit, the periodic adjustment of the accrued benefit by means 
of the application of a recognized index or methodology so 
as to protect the economic value of the benefit against infla-
tion prior to distribution.’’. 
(2) DETERMINATIONS OF ACCRUED BENEFIT AS 
BALANCE OF BENEFIT ACCOUNT.—Section 203 of such 
Act (29 U.S.C. 1053) is amended by adding at the 
end the following new subsection: 
‘‘(f)(1) A defined benefit plan under which the accrued 
benefit payable under the plan upon distribution (or any 
portion thereof) is expressed as the balance of a hypothetical
199 
account maintained for the participant shall not be treated 
as failing to meet the requirements of subsection (a)(2) and 
section 205(g) solely because of the amount actually made 
available for such distribution under the terms of the plan, 
in any case in which the applicable interest rate that would 
be used under the terms of the plan to project the amount 
of the participant’s account balance to normal retirement 
age is not greater than a market rate of return. 
‘‘(2) The Secretary of the Treasury may provide by 
regulation for rules governing the calculation of a market 
rate of return for purposes of paragraph (1) and for permis-
sible methods of crediting interest to the account (including 
variable interest rates) resulting in effective rates of return 
meeting the requirements of paragraph (1).’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to periods beginning on or after June 
29, 2005. 
TITLE VIII—DEDUCTION 
LIMITATIONS 
SEC. 801. [See introduced bill, page 299, line 1 through page 305, line 20.] 
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as 
the ‘‘Pension Protection Act of 2005’’. 
(b) TABLE OF CONTENTS.—The table of con-
tents for this Act is as follows: 
Sec. 1. Short title and table of contents.
200 
TITLE I—REFORM OF FUNDING RULES FOR SINGLE- 
EMPLOYER DEFINED BENEFIT PENSION PLANS 
Subtitle A—Amendments to Employee Retirement Income 
Security Act of 1974 
Sec. 101. Minimum funding standards. 
Sec. 102. Funding rules for single-employer defined benefit 
pension plans. 
Sec. 103. Benefit limitations under single-employer plans. 
Sec. 104. Technical and conforming amendments. 
Subtitle B—Amendments to Internal Revenue Code of 1986 
Sec. 111. Minimum funding standards. 
Sec. 112. Funding rules for single-employer defined benefit 
pension plans. 
Sec. 113. Benefit limitations under single-employer plans. 
Sec. 114. Technical and conforming amendments. 
Subtitle C—Other Provisions 
Sec. 121. Modification of transition rule to pension funding re-
quirements. 
Sec. 122. Treatment of nonqualified deferred compensation 
plans when employer defined benefit plan in at- 
risk status. 
TITLE II—FUNDING RULES FOR MULTIEMPLOYER 
DEFINED BENEFIT PLANS 
Subtitle A—Amendments to Employee Retirement Income 
Security Act of 1974 
Sec. 201. Funding rules for multiemployer defined benefit 
plans. 
Sec. 202. Additional funding rules for multiemployer plans in 
endangered or critical status. 
Sec. 203. Measures to forestall insolvency of multiemployer 
plans. 
Sec. 204. Withdrawal liability reforms. 
Sec. 205. Removal of restrictions with respect to procedures 
applicable to disputes involving withdrawal li-
ability. 
Subtitle B—Amendments to Internal Revenue Code of 1986 
Sec. 211. Funding rules for multiemployer defined benefit 
plans. 
Sec. 212. Additional funding rules for multiemployer plans in 
endangered or critical status. 
Sec. 213. Measures to forestall insolvency of multiemployer 
plans. 
TITLE III—OTHER PROVISIONS 
Sec. 301. Interest rate for 2006 funding requirements.
201 
Sec. 302. Interest rate assumption for determination of lump 
sum distributions. 
Sec. 303. Interest rate assumption for applying benefit limita-
tions to lump sum distributions. 
Sec. 304. Distributions during working retirement. 
Sec. 305. Other amendments relating to prohibited trans-
actions. 
Sec. 306. Correction period for certain transactions involving 
securities and commodities. 
Sec. 307. Government Accountability Office pension funding 
report. 
TITLE IV—IMPROVEMENTS IN PBGC GUARANTEE 
PROVISIONS 
Sec. 401. Increases in PBGC premiums. 
TITLE V—DISCLOSURE 
Sec. 501. Defined benefit plan funding notices. 
Sec. 502. Additional disclosure requirements. 
Sec. 503. Section 4010 filings with the PBGC. 
TITLE VI—INVESTMENT ADVICE 
Sec. 601. Amendments to Employee Retirement Income Secu-
rity Act of 1974 providing prohibited transaction 
exemption for provision of investment advice. 
Sec. 602. Amendments to Internal Revenue Code of 1986 pro-
viding prohibited transaction exemption for pro-
vision of investment advice. 
TITLE VII—BENEFIT ACCRUAL STANDARDS 
Sec. 701. Improvements in benefit accrual standards. 
TITLE VIII—DEDUCTION LIMITATIONS 
Sec. 801. Increase in deduction limits. 
Sec. 802. Updating deduction rules for combination of plans. 
TITLE IX—ENHANCED RETIREMENTS SAVINGS AND 
DEFINED CONTRIBUTION PLANS 
Sec. 901. Pensions and individual retirement arrangement pro-
visions of Economic Growth and Tax Relief Rec-
onciliation Act of 2001 made permanent. 
Sec. 902. Saver’s credit. 
Sec. 903. Increasing participation through automatic contribu-
tion arrangements. 
Sec. 904. Penalty-free withdrawals from retirement plans for 
individuals called to active duty for at least 179 
days. 
Sec. 905. Waiver of 10 percent early withdrawal penalty tax on 
certain distributions of pension plans for public 
safety employees.
202 
Sec. 906. Combat zone compensation taken into account for 
purposes of determining limitation and deduct-
ibility of contributions to individual retirement 
plans. 
Sec. 907. Direct payment of tax refunds to individual retire-
ment plans. 
Sec. 908. IRA eligibility for the disabled. 
Sec. 909. Allow rollovers by nonspouse beneficiaries of certain 
retirement plan distributions. 
TITLE X—PROVISIONS TO ENHANCE HEALTH CARE 
AFFORDABILITY 
Sec. 1001. Treatment of annuity and life insurance contracts 
with a long-term care insurance feature. 
Sec. 1002. Disposition of unused health benefits in cafeteria 
plans and flexible spending arrangements. 
Sec. 1003. Distributions from governmental retirement plans 
for health and long-term care insurance for pub-
lic safety officers. 
TITLE I—REFORM OF FUNDING 
RULES 
FOR 
SINGLE-EM-
PLOYER 
DEFINED 
BENEFIT 
PENSION PLANS 
Subtitle A—Amendments to Em-
ployee Retirement Income Secu-
rity Act of 1974 
SEC. 101. MINIMUM FUNDING STANDARDS. 
[See section 101 of the bill as reported by 
the Committee on Education and the Work-
force.] 
SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE-
FINED BENEFIT PENSION PLANS. 
[See section 102 of the bill as reported by 
the Committee on Education and the Work-
force.]
203 
SEC. 
103. 
BENEFIT 
LIMITATIONS 
UNDER 
SINGLE-EM-
PLOYER PLANS. 
[See section 103 of the bill as reported by 
the Committee on Education and the Work-
force.] 
SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS. 
[See section 104 of the bill as reported by 
the Committee on Education and the Work-
force.] 
Subtitle B—Amendments to 
Internal Revenue Code of 1986 
SEC. 111. MINIMUM FUNDING STANDARDS. 
(a) NEW MINIMUM FUNDING STANDARDS.— 
Section 412 of the Internal Revenue Code of 
1986 (relating to minimum funding standards) 
is amended to read as follows: 
‘‘SEC. 412. MINIMUM FUNDING STANDARDS. 
‘‘(a) REQUIREMENT TO MEET MINIMUM FUND-
ING STANDARD.— 
‘‘(1) IN GENERAL.—A plan to which this 
section applies shall satisfy the minimum 
funding standard applicable to the plan 
for any plan year. 
‘‘(2) MINIMUM FUNDING STANDARD.—For 
purposes of paragraph (1), a plan shall be
204 
treated as satisfying the minimum fund-
ing standard for a plan year if— 
‘‘(A) in the case of a defined ben-
efit plan which is not a multiem-
ployer plan, the employer makes con-
tributions to or under the plan for 
the plan year which, in the aggregate, 
are not less than the minimum re-
quired 
contribution 
determined 
under section 430 for the plan for the 
plan year, 
‘‘(B) in the case of a money pur-
chase plan which is not a multiem-
ployer plan, the employer makes con-
tributions to or under the plan for 
the plan year which are required 
under the terms of the plan, and 
‘‘(C) in the case of a multiem-
ployer plan, the employers make con-
tributions to or under the plan for 
any plan year which, in the aggre-
gate, are sufficient to ensure that the 
plan does not have an accumulated 
funding deficiency under section 431 
as of the end of the plan year.
205 
‘‘(b) LIABILITY FOR CONTRIBUTIONS.— 
‘‘(1) IN GENERAL.—Except as provided 
in paragraph (2), the amount of any con-
tribution required by this section (includ-
ing any required installments under 
paragraphs (3) and (4) of section 430(j)) 
shall be paid by the employer responsible 
for making contributions to or under the 
plan. 
‘‘(2) 
JOINT
AND
SEVERAL
LIABILITY 
WHERE EMPLOYER MEMBER OF CONTROLLED 
GROUP.—In the case of a defined benefit 
plan which is not a multiemployer plan, 
if the employer referred to in paragraph 
(1) is a member of a controlled group, 
each member of such group shall be joint-
ly and severally liable for payment of 
such contributions. 
‘‘(c) VARIANCE
FROM
MINIMUM
FUNDING 
STANDARDS.— 
‘‘(1) WAIVER IN CASE OF BUSINESS HARD-
SHIP.— 
‘‘(A) IN GENERAL.—If— 
‘‘(i) an employer is (or in the 
case of a multiemployer plan, 10
206 
percent or more of the number of 
employers 
contributing 
to 
or 
under the plan is) unable to sat-
isfy the minimum funding stand-
ard for a plan year without tem-
porary substantial business hard-
ship (substantial business hard-
ship in the case of a multiem-
ployer plan), and 
‘‘(ii) application of the stand-
ard would be adverse to the inter-
ests of plan participants in the ag-
gregate, 
the Secretary may, subject to sub-
paragraph (C), waive the require-
ments of subsection (a) for such year 
with respect to all or any portion of 
the minimum funding standard. The 
Secretary shall not waive the min-
imum funding standard with respect 
to a plan for more than 3 of any 15 (5 
of any 15 in the case of a multiem-
ployer plan) consecutive plan years.
207 
‘‘(B) EFFECTS
OF
WAIVER.—If a 
waiver is granted under subpara-
graph (A) for any plan year— 
‘‘(i) in the case of a defined 
benefit plan which is not a multi-
employer plan, the minimum re-
quired contribution under section 
430 for the plan year shall be re-
duced by the amount of the 
waived funding deficiency and 
such amount shall be amortized 
as required under section 430(e), 
and 
‘‘(ii) in the case of a multiem-
ployer plan, the funding standard 
account shall be credited under 
section 
431(b)(3)(C) 
with 
the 
amount of the waived funding de-
ficiency and such amount shall be 
amortized as required under sec-
tion 431(b)(2)(C). 
‘‘(C) WAIVER
OF
AMORTIZED
POR-
TION
NOT
ALLOWED.—The Secretary 
may not waive under subparagraph 
(A) any portion of the minimum fund-
208 
ing standard under subsection (a) for 
a plan year which is attributable to 
any waived funding deficiency for 
any preceding plan year. 
‘‘(2) DETERMINATION OF BUSINESS HARD-
SHIP.—For purposes of this subsection, 
the factors taken into account in deter-
mining temporary substantial business 
hardship (substantial business hardship 
in the case of a multiemployer plan) shall 
include (but shall not be limited to) 
whether or not— 
‘‘(A) the employer is operating at 
an economic loss, 
‘‘(B) there is substantial unem-
ployment or underemployment in the 
trade or business and in the industry 
concerned, 
‘‘(C) the sales and profits of the 
industry concerned are depressed or 
declining, and 
‘‘(D) it is reasonable to expect 
that the plan will be continued only if 
the waiver is granted.
209 
‘‘(3) WAIVED FUNDING DEFICIENCY.—For 
purposes of this section and part III of 
this subchapter, the term ‘waived funding 
deficiency’ means the portion of the min-
imum funding standard under subsection 
(a) (determined without regard to the 
waiver) for a plan year waived by the 
Secretary and not satisfied by employer 
contributions. 
‘‘(4) SECURITY FOR WAIVERS FOR SINGLE- 
EMPLOYER PLANS, CONSULTATIONS.— 
‘‘(A) SECURITY MAY BE REQUIRED.— 
‘‘(i) IN
GENERAL.—Except as 
provided in subparagraph (C), the 
Secretary may require an em-
ployer maintaining a defined ben-
efit plan which is not a multiem-
ployer plan to provide security to 
such plan as a condition for 
granting or modifying a waiver 
under paragraph (1). 
‘‘(ii) SPECIAL RULES.—Any secu-
rity provided under clause (i) may 
be perfected and enforced only by 
the 
Pension 
Benefit 
Guaranty
210 
Corporation, or at the direction of 
the Corporation, by a contrib-
uting sponsor (within the mean-
ing of section 4001(a)(13) of the 
Employee Retirement Income Se-
curity Act of 1974), or a member 
of 
such 
sponsor’s 
controlled 
group (within the meaning of sec-
tion 4001(a)(14) of such Act). 
‘‘(B) CONSULTATION WITH THE PEN-
SION
BENEFIT
GUARANTY
CORPORA-
TION.—Except as provided in subpara-
graph (C), the Secretary shall, before 
granting or modifying a waiver under 
this subsection with respect to a plan 
described in subparagraph (A)(i)— 
‘‘(i) provide the Pension Ben-
efit Guaranty Corporation with— 
‘‘(I) notice of the com-
pleted 
application 
for 
any 
waiver or modification, and 
‘‘(II) an opportunity to 
comment on such application 
within 30 days after receipt of 
such notice, and
211 
‘‘(ii) consider— 
‘‘(I) any comments of the 
Corporation 
under 
clause 
(i)(II), and 
‘‘(II) any views of any em-
ployee organization (within 
the meaning of section 3(4) of 
the Employee Retirement In-
come Security Act of 1974) 
representing participants in 
the plan which are submitted 
in writing to the Secretary in 
connection with such applica-
tion. 
Information provided to the Corpora-
tion under this subparagraph shall be 
considered tax return information 
and subject to the safeguarding and 
reporting 
requirements 
of 
section 
6103(p). 
‘‘(C) EXCEPTION FOR CERTAIN WAIV-
ERS.— 
‘‘(i) 
IN
GENERAL.—The 
pre-
ceding provisions of this para-
graph shall not apply to any plan
212 
with respect to which the sum 
of— 
‘‘(I) the aggregate unpaid 
minimum required contribu-
tion (within the meaning of 
section 4971(c)(4)) for the plan 
year and all preceding plan 
years, and 
‘‘(II) the present value of 
all waiver amortization in-
stallments determined for the 
plan 
year 
and 
succeeding 
plan 
years 
under 
section 
430(e)(2), 
is less than $1,000,000. 
‘‘(ii) TREATMENT
OF
WAIVERS 
FOR WHICH APPLICATIONS ARE PEND-
ING.—The amount described in 
clause (i)(I) shall include any in-
crease in such amount which 
would result if all applications for 
waivers of the minimum funding 
standard under this subsection 
which are pending with respect 
to such plan were denied.
213 
‘‘(5) SPECIAL
RULES
FOR
SINGLE-EM-
PLOYER PLANS.— 
‘‘(A) APPLICATION
MUST
BE
SUB-
MITTED BEFORE DATE 21⁄2 MONTHS AFTER 
CLOSE OF YEAR.—In the case of a de-
fined benefit plan which is not a mul-
tiemployer plan, no waiver may be 
granted under this subsection with 
respect to any plan for any plan year 
unless an application therefor is sub-
mitted to the Secretary not later than 
the 15th day of the 3rd month begin-
ning after the close of such plan year. 
‘‘(B) SPECIAL RULE IF EMPLOYER IS 
MEMBER
OF
CONTROLLED
GROUP.—In 
the case of a defined benefit plan 
which is not a multiemployer plan, if 
an employer is a member of a con-
trolled group, the temporary substan-
tial business hardship requirements 
of paragraph (1) shall be treated as 
met only if such requirements are 
met— 
‘‘(i) with respect to such em-
ployer, and
214 
‘‘(ii) with respect to the con-
trolled group of which such em-
ployer is a member (determined 
by treating all members of such 
group as a single employer). 
The Secretary may provide that an 
analysis of a trade or business or in-
dustry of a member need not be con-
ducted if the Secretary determines 
such analysis is not necessary be-
cause the taking into account of such 
member would not significantly affect 
the determination under this para-
graph. 
‘‘(6) ADVANCE NOTICE.— 
‘‘(A) IN
GENERAL.—The Secretary 
shall, before granting a waiver under 
this subsection, require each appli-
cant to provide evidence satisfactory 
to the Secretary that the applicant 
has provided notice of the filing of 
the application for such waiver to to 
each affected party (as defined in sec-
tion 4001(a)(21) of the Employee Re-
tirement 
Income 
Security 
Act 
of
215 
1974). Such notice shall include a de-
scription of the extent to which the 
plan is funded for benefits which are 
guaranteed under title IV and for 
benefit liabilities. 
‘‘(B) CONSIDERATION
OF
RELEVANT 
INFORMATION.—The 
Secretary 
shall 
consider any relevant information 
provided by a person to whom notice 
was given under subparagraph (A). 
‘‘(7) RESTRICTION
ON
PLAN
AMEND-
MENTS.— 
‘‘(A) IN GENERAL.—No amendment 
of a plan which increases the liabil-
ities of the plan by reason of any in-
crease in benefits, any change in the 
accrual of benefits, or any change in 
the rate at which benefits become 
nonforfeitable under the plan shall be 
adopted if a waiver under this sub-
section or an extension of time under 
section 431(d) is in effect with respect 
to the plan, or if a plan amendment 
described in subsection (d)(2) has 
been made at any time in the pre-
216 
ceding 12 months (24 months in the 
case of a multiemployer plan). If a 
plan is amended in violation of the 
preceding sentence, any such waiver, 
or extension of time, shall not apply 
to any plan year ending on or after 
the date on which such amendment is 
adopted. 
‘‘(B) 
EXCEPTION.—Paragraph 
(1) 
shall not apply to any plan amend-
ment which— 
‘‘(i) the Secretary determines 
to be reasonable and which pro-
vides for only de minimis in-
creases in the liabilities of the 
plan, 
‘‘(ii) only repeals an amend-
ment 
described 
in 
subsection 
(d)(2), or 
‘‘(iii) is required as a condi-
tion of qualification under part I 
of subchapter D, of chapter 1. 
‘‘(d) MISCELLANEOUS RULES.— 
‘‘(1) CHANGE
IN
METHOD
OR
YEAR.—If 
the funding method, the valuation date,
217 
or a plan year for a plan is changed, the 
change shall take effect only if approved 
by the Secretary. 
‘‘(2) 
CERTAIN
RETROACTIVE
PLAN 
AMENDMENTS.—For purposes of this sec-
tion, any amendment applying to a plan 
year which— 
‘‘(A) is adopted after the close of 
such plan year but no later than 21⁄2 
months after the close of the plan 
year (or, in the case of a multiem-
ployer plan, no later than 2 years 
after the close of such plan year), 
‘‘(B) does not reduce the accrued 
benefit of any participant determined 
as of the beginning of the first plan 
year to which the amendment ap-
plies, and 
‘‘(C) does not reduce the accrued 
benefit of any participant determined 
as of the time of adoption except to 
the 
extent 
required 
by 
the 
cir-
cumstances, 
shall, at the election of the plan adminis-
trator, be deemed to have been made on
218 
the first day of such plan year. No 
amendment described in this paragraph 
which reduces the accrued benefits of 
any participant shall take effect unless 
the plan administrator files a notice with 
the Secretary notifying him of such 
amendment and the Secretary has ap-
proved such amendment, or within 90 
days after the date on which such notice 
was filed, failed to disapprove such 
amendment. No amendment described in 
this subsection shall be approved by the 
Secretary unless the Secretary deter-
mines that such amendment is necessary 
because of a substantial business hard-
ship (as determined under subsection 
(c)(2)) and that a waiver under sub-
section (c) (or, in the case of a multiem-
ployer plan, any extension of the amorti-
zation period under section 431(d)) is un-
available or inadequate. 
‘‘(3) CONTROLLED
GROUP.—For pur-
poses of this section, the term ‘controlled 
group’ means any group treated as a sin-
219 
gle employer under subsection (b), (c), 
(m), or (o) of section 414. 
‘‘(e) PLANS TO WHICH SECTION APPLIES.— 
‘‘(1) IN GENERAL.—Except as provided 
in paragraph (2), this section applies to a 
plan if, for any plan year beginning after 
December 31, 2006— 
‘‘(A) such plan included a trust 
which qualified (or was determined 
by the Secretary to have qualified) 
under section 401(a), or 
‘‘(B) such plan satisfied (or was 
determined by the Secretary to have 
satisfied) the requirements of section 
403(a). 
‘‘(2) EXCEPTIONS.—This section shall 
not apply to— 
‘‘(A) any profit-sharing or stock 
bonus plan, 
‘‘(B) any insurance contract plan 
described in paragraph (3), 
‘‘(C) any governmental plan (with-
in the meaning of section 414(d)), 
‘‘(D) any church plan (within the 
meaning of section 414(e)) with re-
220 
spect to which the election provided 
by section 410(d) has not been made, 
‘‘(E) any plan which has not, at 
any time after September 2, 1974, pro-
vided for employer contributions, or 
‘‘(F) any plan established and 
maintained by a society, order, or as-
sociation 
described 
in 
section 
501(c)(8) or (9), if no part of the con-
tributions to or under such plan are 
made by employers of participants in 
such plan. 
No plan described in subparagraph (C), 
(D), or (F) shall be treated as a qualified 
plan for purposes of section 401(a) unless 
such plan meets the requirements of sec-
tion 401(a)(7) as in effect on September 1, 
1974. 
‘‘(3) 
CERTAIN
INSURANCE
CONTRACT 
PLANS.—A plan is described in this para-
graph if— 
‘‘(A) the plan is funded exclusively 
by the purchase of individual insur-
ance contracts,
221 
‘‘(B) such contracts provide for 
level annual premium payments to be 
paid extending not later than the re-
tirement age for each individual par-
ticipating in the plan, and com-
mencing with the date the individual 
became a participant in the plan (or, 
in the case of an increase in benefits, 
commencing at the time such in-
crease becomes effective), 
‘‘(C) benefits provided by the plan 
are equal to the benefits provided 
under each contract at normal retire-
ment age under the plan and are 
guaranteed by an insurance carrier 
(licensed under the laws of a State to 
do business with the plan) to the ex-
tent premiums have been paid, 
‘‘(D) premiums payable for the 
plan year, and all prior plan years, 
under such contracts have been paid 
before lapse or there is reinstatement 
of the policy, 
‘‘(E) no rights under such con-
tracts have been subject to a security
222 
interest at any time during the plan 
year, and 
‘‘(F) no policy loans are out-
standing at any time during the plan 
year. 
A plan funded exclusively by the pur-
chase of group insurance contracts which 
is determined under regulations pre-
scribed by the Secretary to have the same 
characteristics as contracts described in 
the preceding sentence shall be treated 
as a plan described in this paragraph.’’. 
(b) EFFECTIVE
DATE.—The amendments 
made by this section shall apply to plan years 
beginning after December 31, 2006. 
SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DE-
FINED BENEFIT PENSION PLANS. 
(a) IN GENERAL.—Subchapter D of chapter 
1 of the Internal Revenue Code of 1986 (relat-
ing to deferred compensation, etc.) is amend-
ed by adding at the end the following new 
part:
223 
‘‘PART III—MINIMUM FUNDING STANDARDS FOR 
SINGLE-EMPLOYER DEFINED BENEFIT PEN-
SION PLANS 
‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE- 
EMPLOYER 
DEFINED 
BENEFIT 
PENSION 
PLANS. 
‘‘(a) MINIMUM REQUIRED CONTRIBUTION.— 
For purposes of this section and section 
412(a)(2)(A), except as provided in subsection 
(f), the term ‘minimum required contribution’ 
means, with respect to any plan year of a de-
fined benefit plan which is not a multiem-
ployer plan— 
‘‘(1) in any case in which the value of 
plan assets of the plan (as reduced under 
subsection (f)(4)(B)) is less than the fund-
ing 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 sub-
section (c), and 
‘‘(C) 
the 
waiver 
amortization 
charge (if any) for the plan for the
224 
plan year as determined under sub-
section (e); 
‘‘(2) in any case in which the value of 
plan assets 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 nor-
mal cost of the plan for the plan year. 
‘‘(b) TARGET NORMAL COST.—For purposes 
of this section, except as provided in sub-
section (i)(2) with respect to plans in at-risk 
status, the term ‘target normal cost’ means, 
for any plan year, the present value of all ben-
efits 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 performed in a pre-
ceding plan year is increased by reason of any 
increase in compensation during the current 
plan year, the increase in such benefit shall 
be treated as having accrued during the cur-
rent plan year. 
‘‘(c) SHORTFALL AMORTIZATION CHARGE.—
225 
‘‘(1) IN GENERAL.—For purposes of this 
section, the shortfall amortization charge 
for a plan for any plan year is the aggre-
gate total of the shortfall amortization in-
stallments for such plan year with re-
spect to the shortfall amortization bases 
for such plan year and each of the 6 pre-
ceding plan years. 
‘‘(2) SHORTFALL AMORTIZATION INSTALL-
MENT.—The plan sponsor shall determine, 
with respect to the shortfall amortization 
base of the plan for any plan year, the 
amounts necessary to amortize such 
shortfall amortization base, in level an-
nual installments over a period of 7 plan 
years beginning with such plan year. For 
purposes of paragraph (1), the annual in-
stallment of such amortization for each 
plan year in such 7-plan-year period is 
the shortfall amortization installment for 
such plan year with respect to such 
shortfall amortization base. In deter-
mining any shortfall amortization install-
ment under this paragraph, the plan 
sponsor shall use the segment rates de-
226 
termined under subparagraph (C) of sub-
section (h)(2), applied under rules similar 
to the rules of subparagraph (B) of sub-
section (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 (deter-
mined using the segment rates de-
termined under subparagraph (C) 
of 
subsection 
(h)(2), 
applied 
under rules similar to the rules of 
subparagraph (B) of subsection 
(h)(2)) of the aggregate total of 
the shortfall amortization install-
ments, for such plan year and the 
5 succeeding plan years, which 
have been determined with re-
spect to the shortfall amortization 
bases of the plan for each of the 6
227 
plan years preceding such plan 
year, and 
‘‘(ii) the present value (as so 
determined) of the aggregate total 
of the waiver amortization install-
ments for such plan year and the 
5 succeeding plan years, which 
have been determined with re-
spect to the waiver amortization 
bases of the plan for each of the 5 
plan years preceding such plan 
year. 
In any case in which the value of plan 
assets of the plan (as reduced under 
subsection (f)(4)(A)) is equal to or 
greater 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. 
‘‘(4) FUNDING SHORTFALL.— 
‘‘(A) IN GENERAL.—For purposes of 
this section, except as provided in 
subparagraph (B), the funding short-
fall of a plan for any plan year is the 
excess (if any) of—