I 
113TH CONGRESS 
1ST SESSION H. R. 1628 
To amend the Internal Revenue Code of 1986 to provide for reporting and 
disclosure by State and local public employee retirement pension plans. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 18, 2013 
Mr. NUNES (for himself, Mr. RYAN of Wisconsin, and Mr. ISSA) introduced 
the following bill; which was referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
for reporting and disclosure by State and local public 
employee retirement pension plans. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Public Employee Pen-
sion Transparency Act’’. 
SEC. 2. FINDINGS. 
The Congress finds the following: 
(1) Pursuant to clauses 1 and 3 of section 8 of 
article I of the Constitution of the United States, 
the Congress has the authority to condition the con-
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tinuation of certain specified Federal tax benefits 
upon State or local government employee pension 
benefit plans on the provision of meaningful disclo-
sure under section 4980J of the Internal Revenue 
Code of 1986, as added by this Act. 
(2) State and local government employee pen-
sion benefit plans have promised pension benefits to 
approximately 20,000,000 Americans who are active 
employees of these entities. An additional 7,000,000 
retirees and their dependents currently receive bene-
fits from State or local government employee pen-
sion benefit plans. The interests of participants in 
many of such plans are in the nature of property 
rights under State law. 
(3) State and local government employee pen-
sion benefit plans are substantially facilitated by the 
favorable tax treatment of participants and bene-
ficiaries, investment earnings, and employee con-
tributions with respect to such plans provided by the 
Federal Government under the Internal Revenue 
Code of 1986. 
(4) The investment of State or local govern-
ment employee pension benefit plan assets, the dis-
tribution of benefits under such plans, and other re-
lated financial activities are facilitated through the 
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use of instrumentalities of, and substantially affect, 
interstate commerce. These activities, which are 
interstate in nature and have a substantial impact 
on the national economy, affect capital formation, 
regional growth and decline, the national markets 
for insurance, and the markets for securities and the 
trading of securities of State and local governments. 
(5) The financial status of State or local gov-
ernment employee pension benefit plans also has a 
direct impact on the national markets for insurance 
and trading of securities of State and local govern-
ments. 
(6) State or local government employee pension 
benefit plans additionally have a substantial impact 
on interstate commerce as a consequence of the 
interstate movement of participants. 
(7) State or local government employee pension 
benefit plans are becoming a large financial burden 
on certain State and local governments and have al-
ready resulted in tax increases and the reduction of 
services. 
(8) In fact, a recent study published in the 
Journal of Economic Perspectives found that the 
present value of the already promised pension liabil-
ities of the 50 States amount to $5,170,000,000,000 
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and that these pension plans are unfunded by 
$3,230,000,000,000. Another study determined that 
the total unfunded liability for all municipal plans in 
the United States is $574,000,000,000. 
(9) Some economists and observers have stated 
that the extent to which State or local government 
employee pension benefit plans are underfunded is 
obscured by governmental accounting rules and 
practices, particularly as they relate to the valuation 
of plan assets and liabilities. This results in a 
misstatement of the value of plan assets and an un-
derstatement of plan liabilities, a situation that 
poses a significant threat to the soundness of State 
and local budgets. 
(10) There currently is a lack of meaningful 
disclosure regarding the value of State or local gov-
ernment employee pension benefit plan assets and li-
abilities. This lack of meaningful disclosure poses a 
direct and serious threat to the financial stability of 
such plans and their sponsoring governments, im-
pairs the ability of State and local government tax-
payers and officials to understand the financial obli-
gations of their government, and reduces the likeli-
hood that State and local government processes will 
be effective in assuring the prudent management of 
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their plans. The status quo also constitutes a serious 
threat to the future economic health of the Nation 
and places an undue burden upon State and local 
government taxpayers, who will be called upon to 
fully fund existing, and future, pension promises. 
(11) State or local government employee pen-
sion benefit plans affect the national public interest 
and meaningful disclosure of the value of their as-
sets and liabilities is necessary and desirable in 
order to adequately protect plan participants and 
their beneficiaries and the general public. Meaning-
ful disclosure would also further efforts to provide 
for the general welfare and the free flow of com-
merce. 
SEC. 3. REPORTING OF INFORMATION WITH RESPECT TO 
STATE OR LOCAL GOVERNMENT EMPLOYEE 
PENSION BENEFIT PLANS TREATED AS A TAX 
EXEMPTION, ETC., REQUIREMENT FOR STATE 
AND LOCAL BONDS. 
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter B of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
section: 
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‘‘SEC. 149A. REPORTING WITH RESPECT TO STATE OR 
LOCAL GOVERNMENT EMPLOYEE PENSION 
BENEFIT PLANS. 
‘‘(a) IN GENERAL.—In the case of a failure to satisfy 
any requirement of subsection (a) or (b) of section 4980J 
with respect to any plan maintained with respect to em-
ployees of one or more States or political subdivisions of 
one or more States, no specified Federal tax benefit shall 
be allowed or made with respect to any specified bond 
issued by any such State or political subdivision (or by 
any bonding authority acting on behalf, or for the benefit, 
of such State or political subdivision) during the non-
compliance period. 
‘‘(b) NONCOMPLIANCE PERIOD.—For purposes of 
this section, the term ‘noncompliance period’ means, with 
respect to any State or political subdivision in connection 
with any failure described in subsection (a), the period be-
ginning on the date that the Secretary notifies such State 
or political subdivision of such failure and ending on the 
date that such failure is cured (as determined by the Sec-
retary). 
‘‘(c) SPECIFIED BOND.—For purposes of this section, 
the term ‘specified bond’ means— 
‘‘(1) any State or local bond within the meaning 
of section 103, 
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‘‘SEC. 4980J. FAILURE OF STATE OR LOCAL GOVERNMENT 
EMPLOYEE PENSION BENEFIT PLANS TO 
MEET REPORTING REQUIREMENTS. 
‘‘(a) ANNUAL REPORT.—For purposes of section 
149A, the requirements of this subsection are as follows: 
‘‘(1) IN
GENERAL.—The plan sponsor of a 
State or local government employee pension benefit 
plan shall file with the Secretary, in such form and 
manner as shall be prescribed by the Secretary, a re-
port for each plan year beginning on or after Janu-
ary 1, 2014, setting forth the following information 
with respect to the plan, as determined by the plan 
sponsor as of the end of such plan year: 
‘‘(A) A schedule of funding status, which 
shall include a statement as to the current li-
ability of the plan, the amount of plan assets 
available to meet that liability, the amount of 
the net unfunded liability (if any), and the 
funding percentage of the plan. 
‘‘(B) A schedule of contributions by the 
plan sponsor for the plan year, indicating which 
are or are not taken into account under sub-
paragraph (A). 
‘‘(C) Alternative projections which shall be 
specified in regulations of the Secretary for 
each of the next 60 plan years following the 
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plan year of the cash flows associated with the 
current liability, together with a statement of 
the assumptions used in connection with such 
projections. The Secretary shall specify in such 
regulations the projection assumptions to be 
used as necessary to achieve comparability 
across plans. 
‘‘(D) A statement of the actuarial assump-
tions used for the plan year, including the rate 
of return on investment of plan assets and as-
sumptions as to such other matters as the Sec-
retary may prescribe by regulation. 
‘‘(E) A statement of the number of partici-
pants who are each of the following— 
‘‘(i) those who are retired or sepa-
rated from service and are receiving bene-
fits, 
‘‘(ii) those who are retired or sepa-
rated and are entitled to future benefits, 
and 
‘‘(iii) those who are active under the 
plan. 
‘‘(F) A statement of the plan’s investment 
returns, including the rate of return, for the 
plan year and the 5 preceding plan years. 
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‘‘(G) A statement of the degree to which, 
and manner in which, the plan sponsor expects 
to eliminate any unfunded current liability that 
may exist for the plan year and the extent to 
which the plan sponsor has followed the plan’s 
funding policy for each of the preceding 5 plan 
years. The Secretary shall prescribe by regula-
tion the specific criteria to be used for meeting 
the requirements of this paragraph. 
‘‘(H) A statement of the amount of pen-
sion obligation bonds outstanding. 
‘‘(I) A statement of the current cost of the 
plan for the plan year. 
‘‘(2) TIMING OF REPORT.—The plan sponsor of 
a State or local government employee pension ben-
efit plan shall make the filing required under para-
graph (1) for each plan year not later than 210 days 
after the end of such plan year (or within such time 
as may be required by regulations prescribed by the 
Secretary in order to reduce duplicative filing). 
‘‘(b) ADDITIONAL REPORTING REQUIREMENTS.— 
For purposes of section 149A, the requirements of this 
subsection are as follows: 
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‘‘(1) SUPPLEMENTARY REPORTS.—In any case 
in which, in determining the information filed in the 
annual report for a plan year under subsection (a)— 
‘‘(A) the value of plan assets is determined 
using a standard other than fair market value, 
or 
‘‘(B) the interest rate or rates used to de-
termine the value of liabilities or as the dis-
count value for liabilities are not the interest 
rates described in paragraph (3), the plan spon-
sor shall include in the annual report filed for 
such plan year pursuant to subsection (a) the 
supplementary report for such plan year de-
scribed in paragraph (2) of this subsection. 
‘‘(2) USE OF PRESCRIBED VALUATION METHOD 
AND INTEREST RATES.—A supplementary report for 
a plan year filed for a plan year pursuant to this 
subsection shall include the information specified as 
required in the annual report under subparagraphs 
(A), (F), (G) and (I) of subsection (a)(1), deter-
mined as of the end of such plan year by valuing 
plan assets at fair market value and by using the in-
terest rates described in paragraph (3) to value li-
abilities and as the discount value for liabilities. 
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‘‘(3) INTEREST RATES BASED ON U.S. TREAS-
URY OBLIGATION YIELD CURVE RATE.— 
‘‘(A) IN GENERAL.—The interest rates de-
scribed in this subsection are, with respect to 
any day, the rates of interest which shall be de-
termined by the Secretary for such day on the 
basis of the U.S. Treasury obligation yield 
curve for such day. 
‘‘(B) U.S. TREASURY OBLIGATION YIELD 
CURVE.—For purposes of this subsection, the 
term ‘U.S. Treasury obligation yield curve’ 
means, with respect to any day, a yield curve 
which shall be prescribed by the Secretary for 
such day on interest-bearing obligations of the 
United States. 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) STATE
OR
LOCAL
GOVERNMENT
EM-
PLOYEE PENSION BENEFIT PLAN.—The terms ‘State 
or local government employee pension benefit plan’ 
and ‘plan’ mean any plan, fund, or program, other 
than a defined contribution plan (within the mean-
ing of section 414(i)), which was heretofore or is 
hereafter established or maintained, in whole or in 
part, by a State, a political subdivision of a State, 
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or any agency or instrumentality of a State or polit-
ical subdivision of a State, to the extent that by its 
express terms or as a result of surrounding cir-
cumstances such plan, fund, or program— 
‘‘(A) provides retirement income to em-
ployees, or 
‘‘(B) results in a deferral of income by em-
ployees for periods extending to the termination 
of covered employment or beyond, regardless of 
the method of calculating the contributions 
made to the plan, the method of calculating the 
benefits under the plan, or the method of dis-
tributing benefits from the plan. 
‘‘(2) FUNDING PERCENTAGE.—The term ‘fund-
ing percentage’ for a plan year means the ratio (ex-
pressed as a percentage) which— 
‘‘(A) the value of plan assets as of the end 
of the plan year bears to 
‘‘(B) the current liability of the plan for 
the plan year. 
‘‘(3) CURRENT LIABILITY.—The term ‘current 
liability’ of a plan for a plan year means the present 
value of all benefits accrued or earned under the 
plan as of the end of the plan year. 
‘‘(4) PRESENT VALUE.— 
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‘‘(A) IN GENERAL.—The present value of 
an accrued benefit shall be determined by dis-
counting its future cash flows in accordance 
with subsection (b)(3). The present value of all 
benefits accrued for a participant shall be cal-
culated as the sum of the present value of the 
accrued benefit for each exit event multiplied by 
the probability of the associated exit event. 
‘‘(B) EXIT EVENT.—An ‘exit event’ occurs 
when the employment of a plan participant ter-
minates. For each currently employed plan par-
ticipant as of the measurement date, there are 
one or more potential future exit events. Each 
exit event is associated with a termination date, 
a cause of termination (e.g., retirement, death, 
disability, quit, etc.), a contractual benefit, and 
a probability that the participant will exit em-
ployment via the particular event. 
‘‘(5) ACCRUED BENEFIT.— 
‘‘(A) IN GENERAL.—An ‘accrued benefit’ is 
determined for each exit event as the projected 
benefit multiplied by service earned as of the 
measurement date divided by service projected 
to be earned by the event date. For participants 
retired or separated from service as of the 
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measurement date, the accrued benefit equals 
the projected benefit. 
‘‘(B) PROJECTED
BENEFIT.—As of the 
measurement date, a ‘projected benefit’ (con-
sisting of future cash flows) is calculated for 
each possible exit event using service projected 
to be earned to the event date and salary as of 
the measurement date. Such projected benefit 
shall reflect any cost-of-living adjustments pay-
able in the future based on the law in effect as 
of the measurement date. 
‘‘(6) MEASUREMENT DATE.—The term ‘meas-
urement date’ means the date as of which the value 
of the pension obligation is determined (sometimes 
referred to as the ‘valuation date’). 
‘‘(7) CURRENT COST.—The term ‘current cost’ 
of a plan for a plan year means the present value 
as of the end of the plan year of all benefits accrued 
or earned under the plan during the plan year. 
‘‘(8) PLAN SPONSOR.—The term ‘plan sponsor’ 
means, in connection with a State or local govern-
ment employee pension benefit plan, the State, polit-
ical subdivision of a State, or agency or instrumen-
tality of a State or a political subdivision of a State 
which establishes or maintains the plan. 
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‘‘(9) PARTICIPANT.— 
‘‘(A) IN GENERAL.—The term ‘participant’ 
means, in connection with a State or local gov-
ernment employee pension benefit plan, an indi-
vidual— 
‘‘(i) who is an employee or former em-
ployee of a State, political subdivision of a 
State, or agency or instrumentality of a 
State or a political subdivision of a State 
which is the plan sponsor of such plan, and 
‘‘(ii) who is or may become eligible to 
receive a benefit of any type from such 
plan or whose beneficiaries may be eligible 
to receive any such benefit. 
‘‘(B) BENEFICIARY.—The term ‘bene-
ficiary’ means a person designated by a partici-
pant, or by the terms of the plan, who is or 
may become entitled to a benefit thereunder. 
‘‘(10) PLAN
YEAR.—The term ‘plan year’ 
means, in connection with a plan, the calendar or 
fiscal year on which the records of the plan are kept. 
‘‘(11) STATE.—The term ‘State’ includes any 
State of the United States, the District of Columbia, 
the Commonwealth of Puerto Rico, the United 
States Virgin Islands, American Samoa, Guam, and 
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the Commonwealth of the Northern Mariana Is-
lands. 
‘‘(12) FAIR MARKET VALUE.—The term ‘fair 
market value’ has the meaning of such term under 
section 430(g)(3)(A) (without regard to section 
430(g)(3)(B)). 
‘‘(d) MODEL REPORTING STATEMENT.—The Sec-
retary shall develop model reporting statements for pur-
poses of subsections (a) and (b). Plan sponsors of State 
or local government employee pension plans may elect, in 
such form and manner as shall be prescribed by the Sec-
retary, to utilize the applicable model reporting statement 
for purposes of complying with requirements of such sub-
sections. 
‘‘(e) TRANSPARENCY OF INFORMATION FILED.—The 
Secretary shall create and maintain a public Web site, 
with searchable capabilities, for purposes of posting the 
information received by the Secretary pursuant to sub-
sections (a) and (b). Any such information received by the 
Secretary (including any updates to such information re-
ceived by the Secretary) shall be posted on the Web site 
not later than 60 days after receipt and shall not be treat-
ed as return information for purposes of this title.’’. 
(c) CLERICAL AMENDMENTS.— 
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(1) The table of sections for subpart B of part 
IV of subchapter B of chapter 1 of such Code is 
amended by adding at the end the following new 
item: 
‘‘Sec. 149A. Reporting with respect to State or local government employee pen-
sion benefit plans.’’. 
(2) The table of sections for chapter 43 of such 
Code is amended by adding at the end the following 
new item: 
‘‘Sec. 4980J. Failure of State or local government employee pension benefit 
plans to meet reporting requirements.’’. 
SEC. 4. GENERAL PROVISIONS AND RULES OF CONSTRUC-
TION. 
(a) LIMITATIONS
ON FEDERAL RESPONSIBILITIES 
RELATING TO PLAN OBLIGATIONS AND LIABILITIES.— 
The United States shall not be liable for any obligation 
related to any current or future shortfall in any State or 
local government employee pension plan. Nothing in this 
Act (or any amendment made by this Act) or any other 
provision of law shall be construed to provide Federal Gov-
ernment funds to diminish or meet any current or future 
shortfall in, or obligation of, any State or local government 
employee pension plan. The preceding sentence shall also 
apply to the Federal Reserve. 
(b) NO FEDERAL FUNDING STANDARDS.—Nothing 
in this Act (or any amendment made by this Act) shall 
be construed to alter existing funding standards for State 
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or local government employee pension plans or to require 
Federal funding standards for such plans. 
(c) DEFINITIONS.—Terms used in this section which 
are also used in section 4980J of the Internal Revenue 
Code of 1986 shall have the same meaning as when used 
in such section. 
Æ 
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