143
the plan for the plan year under this 
section, or 
‘‘(II) in the case of a plan year 
beginning after 2007, 100 percent of 
the minimum required contribution 
(without regard to any waiver under 
section 412(c)) to the plan for the 
preceding plan year. 
Subclause (II) shall not apply if the pre-
ceding plan year referred to in such clause 
was not a year of 12 months. 
‘‘(E) FISCAL YEARS AND SHORT YEARS.—
‘‘(i) FISCAL YEARS.—In applying this 
paragraph to a plan year beginning on any 
date other than January 1, there shall be 
substituted for the months specified in this 
paragraph, the months which correspond 
thereto. 
‘‘(ii) SHORT PLAN YEAR.—This sub-
paragraph shall be applied to plan years of 
less than 12 months in accordance with 
regulations prescribed by the Secretary. 
‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION 
WITH QUARTERLY CONTRIBUTIONS.—
144
‘‘(A) IN GENERAL.—A plan to which this 
paragraph applies shall be treated as failing to 
pay the full amount of any required installment 
under paragraph (3) to the extent that the 
value of the liquid assets paid in such install-
ment is less than the liquidity shortfall (wheth-
er or not such liquidity shortfall exceeds the 
amount of such installment required to be paid 
but for this paragraph). 
‘‘(B) PLANS
TO
WHICH
PARAGRAPH
AP-
PLIES.—This paragraph shall apply to a plan 
(other than a plan that would be described in 
subsection (f)(2)(B) if ‘100’ were substituted 
for ‘500’ therein) which—
‘‘(i) is required to pay installments 
under paragraph (3) for a plan year, and 
‘‘(ii) has a liquidity shortfall for any 
quarter during such plan year. 
‘‘(C) PERIOD
OF
UNDERPAYMENT.—For 
purposes of paragraph (3)(A), any portion of an 
installment that is treated as not paid under 
subparagraph (A) shall continue to be treated 
as unpaid until the close of the quarter in 
which the due date for such installment occurs.
145
‘‘(D) LIMITATION
ON
INCREASE.—If the 
amount of any required installment is increased 
by reason of subparagraph (A), in no event 
shall such increase exceed the amount which, 
when added to prior installments for the plan 
year, is necessary to increase the funding target 
attainment percentage of the plan for the plan 
year (taking into account the expected increase 
in funding target due to benefits accruing or 
earned during the plan year) to 100 percent. 
‘‘(E) DEFINITIONS.—For purposes of this 
subparagraph: 
‘‘(i) 
LIQUIDITY
SHORTFALL.—The 
term ‘liquidity shortfall’ means, with re-
spect to any required installment, an 
amount equal to the excess (as of the last 
day of the quarter for which such install-
ment is made) of—
‘‘(I) the base amount with re-
spect to such quarter, over 
‘‘(II) the value (as of such last 
day) of the plan’s liquid assets. 
‘‘(ii) BASE AMOUNT.—
‘‘(I) IN
GENERAL.—The term 
‘base amount’ means, with respect to
146
any quarter, an amount equal to 3 
times the sum of the adjusted dis-
bursements from the plan for the 12 
months ending on the last day of such 
quarter. 
‘‘(II) SPECIAL
RULE.—If the 
amount determined under subclause 
(I) exceeds an amount equal to 2 
times the sum of the adjusted dis-
bursements from the plan for the 36 
months ending on the last day of the 
quarter and an enrolled actuary cer-
tifies to the satisfaction of the Sec-
retary that such excess is the result of 
nonrecurring circumstances, the base 
amount with respect to such quarter 
shall be determined without regard to 
amounts related to those nonrecurring 
circumstances. 
‘‘(iii) DISBURSEMENTS
FROM
THE 
PLAN.—The term ‘disbursements from the 
plan’ means all disbursements from the 
trust, including purchases of annuities, 
payments of single sums and other bene-
fits, and administrative expenses.
147
‘‘(iv) ADJUSTED
DISBURSEMENTS.—
The term ‘adjusted disbursements’ means 
disbursements from the plan reduced by 
the product of—
‘‘(I) the plan’s funding target at-
tainment percentage for the plan year, 
and 
‘‘(II) the sum of the purchases of 
annuities, payments of single sums, 
and such other disbursements as the 
Secretary shall provide in regulations. 
‘‘(v) LIQUID ASSETS.—The term ‘liq-
uid assets’ means cash, marketable securi-
ties, and such other assets as specified by 
the Secretary in regulations. 
‘‘(vi) QUARTER.—The term ‘quarter’ 
means, with respect to any required install-
ment, the 3-month period preceding the 
month in which the due date for such in-
stallment occurs. 
‘‘(F) REGULATIONS.—The Secretary may 
prescribe such regulations as are necessary to 
carry out this paragraph. 
‘‘(k) IMPOSITION
OF LIEN WHERE FAILURE
TO 
MAKE REQUIRED CONTRIBUTIONS.—
148
‘‘(1) IN GENERAL.—In the case of a plan to 
which this subsection applies, if—
‘‘(A) any person fails to make a contribu-
tion payment required by section 412 and this 
section before the due date for such payment, 
and 
‘‘(B) the unpaid balance of such payment 
(including interest), when added to the aggre-
gate unpaid balance of all preceding such pay-
ments for which payment was not made before 
the due date (including interest), exceeds 
$1,000,000, 
then there shall be a lien in favor of the plan in the 
amount determined under paragraph (3) upon all 
property and rights to property, whether real or per-
sonal, belonging to such person and any other per-
son who is a member of the same controlled group 
of which such person is a member. 
‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—
This subsection shall apply to a defined benefit plan 
(other than a multiemployer plan) for any plan year 
for which the funding target attainment percentage 
(as defined in subsection (d)(2)) of such plan is less 
than 100 percent. This subsection shall not apply to 
any plan to which section 4021 of the Employee Re-
149
tirement Income Security Act of 1974 does not 
apply (as such section is in effect on the date of the 
enactment of the Pension Protection Act of 2005). 
‘‘(3) AMOUNT OF LIEN.—For purposes of para-
graph (1), the amount of the lien shall be equal to 
the aggregate unpaid balance of contribution pay-
ments required under this section and section 412 
for which payment has not been made before the due 
date. 
‘‘(4) NOTICE OF FAILURE; LIEN.—
‘‘(A) NOTICE
OF
FAILURE.—A person 
committing a failure described in paragraph (1) 
shall notify the Pension Benefit Guaranty Cor-
poration of such failure within 10 days of the 
due date for the required contribution payment. 
‘‘(B) PERIOD OF LIEN.—The lien imposed 
by paragraph (1) shall arise on the due date for 
the required contribution payment and shall 
continue until the last day of the first plan year 
in which the plan ceases to be described in 
paragraph (1)(B). Such lien shall continue to 
run without regard to whether such plan con-
tinues to be described in paragraph (2) during 
the period referred to in the preceding sentence.
150
‘‘(C) CERTAIN
RULES
TO
APPLY.—Any 
amount with respect to which a lien is imposed 
under paragraph (1) shall be treated as taxes 
due and owing the United States and rules 
similar to the rules of subsections (c), (d), and 
(e) of section 4068 of the Employee Retirement 
Income Security Act of 1974 shall apply with 
respect to a lien imposed by subsection (a) and 
the amount with respect to such lien. 
‘‘(5) ENFORCEMENT.—Any lien created under 
paragraph (1) may be perfected and enforced only 
by the Pension Benefit Guaranty Corporation, or at 
the direction of the Pension Benefit Guaranty Cor-
poration, by the contributing sponsor (or any mem-
ber of the controlled group of the contributing spon-
sor). 
‘‘(6) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) CONTRIBUTION PAYMENT.—The term 
‘contribution payment’ means, in connection 
with a plan, a contribution payment required to 
be made to the plan, including any required in-
stallment under paragraphs (3) and (4) of sub-
section (i).
151
‘‘(B) DUE
DATE; 
REQUIRED
INSTALL-
MENT.—The terms ‘due date’ and ‘required in-
stallment’ have the meanings given such terms 
by subsection (j), except that in the case of a 
payment other than a required installment, the 
due date shall be the date such payment is re-
quired to be made under section 430. 
‘‘(C) CONTROLLED
GROUP.—The term 
‘controlled group’ means any group treated as 
a single employer under subsections (b), (c), 
(m), and (o) of section 414. 
‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT 
ACCOUNTS.—In the case of a qualified transfer (as de-
fined in section 420), any assets so transferred shall not, 
for purposes of this section, be treated as assets in the 
plan.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning after December 31, 2006. 
SEC. 
113. 
BENEFIT 
LIMITATIONS 
UNDER 
SINGLE-EM-
PLOYER PLANS. 
(a) PROHIBITION
OF SHUTDOWN BENEFITS
AND 
OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS 
UNDER SINGLE-EMPLOYER PLANS.—
152
(1) IN GENERAL.—Part III of subchapter D of 
chapter 1 of the Internal Revenue Code of 1986 (re-
lating to deferred compensation, etc.) is amended—
(A) by striking the heading and inserting 
the following: 
‘‘PART III—RULES RELATING TO MINIMUM FUND-
ING STANDARDS AND BENEFIT LIMITATIONS
‘‘Subpart A. Minimum funding standards for pension plans. 
‘‘Subpart B. Benefit limitations under single-employer plans.
‘‘Subpart A—Minimum Funding Standards for 
Pension Plans
‘‘Sec. 430. Minimum funding standards for single-employer defined benefit pen-
sion plans.’’, and
(B) by adding at the end the following new 
subpart: 
‘‘Subpart B—Benefit Limitations Under Single-
employer Plans
‘‘Sec. 436. Funding-based limitation on shutdown benefits and other unpredict-
able contingent event benefits under single-employer plans.
‘‘SEC. 436. FUNDING-BASED LIMITATION ON SHUTDOWN 
BENEFITS AND OTHER UNPREDICTABLE CON-
TINGENT EVENT BENEFITS UNDER SINGLE-
EMPLOYER PLANS. 
‘‘(a) IN GENERAL.—No defined benefit plan (other 
than a multiemployer plan) may provide benefits to which 
participants are entitled solely by reason of the occurrence
153
of a plant shutdown or any other unpredictable contingent 
event occurring during any plan year if the funding target 
attainment percentage as of the valuation date of the plan 
for such plan year—
‘‘(1) is less than 80 percent, or 
‘‘(2) would be less than 80 percent taking into 
account such occurrence. 
‘‘(b) EXEMPTION.—Subsection (a) shall cease to 
apply with respect to any plan year, effective as of the 
first date of the plan year, upon payment by the plan 
sponsor of a contribution (in addition to any minimum re-
quired contribution under section 430) equal to—
‘‘(1) in the case of subsection (a)(1), the 
amount of the increase in the funding target of the 
plan (under section 430) for the plan year attrib-
utable to the occurrence referred to in subsection 
(a), and 
‘‘(2) in the case of subsection (a)(2), the 
amount sufficient to result in a funding target at-
tainment percentage of 80 percent. 
Rules similar to the rules of section 437(f) shall apply for 
purposes of this subsection. 
‘‘(c) UNPREDICTABLE CONTINGENT EVENT.—For 
purposes of this section, the term ‘unpredictable contin-
gent event’ means an event other than—
154
‘‘(1) attainment of any age, performance of any 
service, receipt or derivation of any compensation, or 
the occurrence of death or disability, or 
‘‘(2) an event which is reasonably and reliably 
predictable (as determined by the Secretary). 
‘‘(d) NEW PLANS.—Subsection (a) shall not apply to 
a plan for the first 5 plan years of the plan. For purposes 
of this subsection, the reference in this subsection to a 
plan shall include a reference to any predecessor plan. 
‘‘(e) DEEMED
REDUCTION
OF
FUNDING
BAL-
ANCES.—A rule similar to the rule of section 437(h) shall 
apply for purposes of this section.’’. 
(2) CLERICAL
AMENDMENT.—The table of 
parts for suchapter D of chapter 1 of the Internal 
Revenue Code of 1986 is amended by adding at the 
end the following new item:
‘‘PART IIIlRULES RELATING TO MINIMUM FUNDING STANDARDS AND 
BENEFIT LIMITATIONS’’.
(b) OTHER LIMITS ON BENEFITS AND BENEFIT AC-
CRUALS.—
(1) IN GENERAL.—Subpart B of part III of 
subchapter D of chapter 1 of such Code is amended 
by adding at the end the following:
155
‘‘SEC. 437. FUNDING-BASED LIMITS ON BENEFITS AND BEN-
EFIT ACCRUALS UNDER SINGLE-EMPLOYER 
PLANS. 
‘‘(a) LIMITATIONS ON PLAN AMENDMENTS INCREAS-
ING LIABILITY FOR BENEFITS.—
‘‘(1) IN GENERAL.—No amendment to a de-
fined benefit plan (other than a multiemployer plan) 
which has the effect of increasing liabilities of the 
plan by reason of increases in benefits, establish-
ment of new benefits, changing the rate of benefit 
accrual, or changing the rate at which benefits be-
come nonforfeitable to the plan may take effect dur-
ing any plan year if the funding target attainment 
percentage as of the valuation date of the plan for 
such plan year is—
‘‘(A) less than 80 percent, or 
‘‘(B) would be less than 80 percent taking 
into account such amendment. 
For purposes of this paragraph, any increase in ben-
efits under the plan by reason of an increase in the 
benefit rate provided under the plan or on the basis 
of an increase in compensation shall be treated as 
effected by plan amendment. 
‘‘(2) EXEMPTION.—Paragraph (1) shall cease 
to apply with respect to any plan year, effective as 
of the first date of the plan year (or if later, the ef-
156
fective date of the amendment), upon payment by 
the plan sponsor of a contribution (in addition to 
any minimum required contribution under section 
430) equal to—
‘‘(A) in the case of paragraph (1)(A), the 
amount of the increase in the funding target of 
the plan (under section 430) for the plan year 
attributable to the amendment, and 
‘‘(B) in the case of paragraph (1)(B), the 
amount sufficient to result in a funding target 
attainment percentage of 80 percent. 
‘‘(b) FUNDING-BASED
LIMITATION
ON
CERTAIN 
FORMS OF DISTRIBUTION.—
‘‘(1) IN
GENERAL.—A defined benefit plan 
(other than a multiemployer plan) shall provide that, 
in any case in which the plan’s funding target at-
tainment percentage as of the valuation date of the 
plan for a plan year is less than 80 percent, the plan 
may not after such date pay any payment described 
in section 401(a)(32)(B). 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to any plan for any plan year if the terms of 
such plan (as in effect for the period beginning on 
June 29, 2005, and ending with such plan year)
157
provide for no benefit accruals with respect to any 
participant during such period. 
‘‘(c) LIMITATIONS
ON BENEFIT ACCRUALS
FOR 
PLANS WITH SEVERE FUNDING SHORTFALLS.—A de-
fined benefit plan (other than a multiemployer plan) shall 
provide that, in any case in which the plan’s funding tar-
get attainment percentage as of the valuation date of the 
plan for a plan year is less than 60 percent, all future 
benefit accruals under the plan shall cease as of such date. 
‘‘(d) NEW PLANS.—Subsections (a) and (c) shall not 
apply to a plan for the first 5 plan years of the plan. For 
purposes of this subsection, the reference in this sub-
section to a plan shall include a reference to any prede-
cessor plan. 
‘‘(e) PRESUMED UNDERFUNDING FOR PURPOSES OF 
BENEFIT LIMITATIONS BASED ON PRIOR YEAR’S FUND-
ING STATUS.—
‘‘(1) PRESUMPTION
OF
CONTINUED
UNDER-
FUNDING.—In any case in which a benefit limitation 
under subsection (a), (b), or (c) has been applied to 
a plan with respect to the plan year preceding the 
current plan year, the funding target attainment 
percentage of the plan as of the valuation date of 
the plan for the current plan year shall be presumed 
to be equal to the funding target attainment per-
158
centage of the plan as of the valuation date of the 
plan for the preceding plan year until the enrolled 
actuary of the plan certifies the actual funding tar-
get attainment percentage of the plan as of the valu-
ation date of the plan for the current plan year. 
‘‘(2) PRESUMPTION OF UNDERFUNDING AFTER 
10TH MONTH.—In any case in which no such certifi-
cation is made with respect to the plan before the 
first day of the 10th month of the current plan year, 
for purposes of subsections (a), (b), and (c), the 
plan’s funding target attainment percentage shall be 
conclusively presumed to be less than 60 percent as 
of the first day of such 10th month, and such day 
shall be deemed, for purposes of such subsections, to 
be the valuation date of the plan for the current 
plan year. 
‘‘(3) PRESUMPTION OF UNDERFUNDING AFTER 
4TH MONTH FOR NEARLY UNDERFUNDED PLANS.—
In any case in which—
‘‘(A) a benefit limitation under subsection 
(a), (b), or (c) did not apply to a plan with re-
spect to the plan year preceding the current 
plan year, but the funding target attainment 
percentage of the plan for such preceding plan 
year was not more than 10 percentage points
159
greater than the percentage which would have 
caused such subsection to apply to the plan 
with respect to such preceding plan year, and 
‘‘(B) as of the first day of the 4th month 
of the current plan year, the enrolled actuary of 
the plan has not certified the actual funding 
target attainment percentage of the plan as of 
the valuation date of the plan for the current 
plan year, 
until the enrolled actuary so certifies, such first day 
shall be deemed, for purposes of such subsection, to 
be the valuation date of the plan for the current 
plan year and the funding target attainment per-
centage of the plan as of such first day shall, for 
purposes of such subsection, be presumed to be 
equal to 10 percentage points less than the funding 
target attainment percentage of the plan as of the 
valuation date of the plan for such preceding plan 
year. 
‘‘(f) RESTORATION BY PLAN AMENDMENT OF BENE-
FITS OR BENEFIT ACCRUAL.—In any case in which a pro-
hibition under subsection (b) of a payment described in 
subsection (b)(1) or a cessation of benefit accruals under 
subsection (c) is applied to a plan with respect to any plan 
year and such prohibition or cessation, as the case may
160
be, ceases to apply to any subsequent plan year, the plan 
may provide for the resumption of such benefit payment 
or such benefit accrual only by means of the adoption of 
a plan amendment after the valuation date of the plan 
for such subsequent plan year. The preceding sentence 
shall not apply to a prohibition or cessation required by 
reason of subsection (e). 
‘‘(g) FUNDING
TARGET
ATTAINMENT
PERCENT-
AGE.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘funding target attainment percent-
age’ means, with respect to any plan for any plan 
year, the ratio (expressed as a percentage) which—
‘‘(A) the value of plan assets for the plan 
year (as determined under section 430(g)) re-
duced by the pre-funding balance and the fund-
ing standard carryover balance (within the 
meaning of section 430(f)), bears to 
‘‘(B) the funding target of the plan for the 
plan 
year 
(as 
determined 
under 
section 
430(d)(1), but without regard to section 
430(i)(1)). 
‘‘(2) APPLICATION
TO
PLANS
WHICH
ARE 
FULLY FUNDED WITHOUT REGARD TO REDUCTIONS 
FOR FUNDING BALANCES.—
161
‘‘(A) IN GENERAL.—In the case of a plan 
for any plan year, if the funding target attain-
ment percentage is 100 percent or more (deter-
mined without regard to this subparagraph and 
without regard to the reduction under para-
graph (1)(A) for the pre-funding balance and 
the funding standard carryover balance), para-
graph (1) shall be applied without regard to 
such reduction. 
‘‘(B) TRANSITION
RULE.—Subparagraph 
(A) shall be applied to plan years beginning 
after 2006 and before 2011 by substituting for 
‘100 percent’ the applicable percentage deter-
mined in accordance with 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. 
‘‘(C) 
LIMITATION.—Subparagraph 
(B) 
shall not apply with respect to any plan year 
after 2007 unless the funding target attainment 
percentage (determined without regard to this 
paragraph and without regard to the reduction 
under paragraph (1)(A) for the pre-funding bal-
ance and the funding standard carryover bal-
162
ance) of the plan for each preceding plan year 
after 2006 was not less than the applicable per-
centage with respect to such preceding plan 
year determined under subparagraph (B). 
‘‘(h) DEEMED
REDUCTION
OF
FUNDING
BAL-
ANCES.—In the case of a plan maintained pursuant to 1 
or more collective bargaining agreements between em-
ployee representatives and 1 or more employers—
‘‘(1) IN GENERAL.—In any case in which a ben-
efit limitation under subsection (a), (b), or (c) would 
(but for this subsection and determined without re-
gard to subsection (a)(2)) apply to such plan for the 
plan year, the plan sponsor of such plan shall be 
treated for purposes of this title as having made an 
election under section 430(f)(5) to reduce the bal-
ance of the pre-funding balance and the funding 
standard carryover balance for the plan year (in a 
manner consistent with the requirements of section 
430(f)(5)(B)) by such amount as is necessary for 
such benefit limitation to not apply to the plan for 
such plan year. 
‘‘(2) EXCEPTION FOR INSUFFICIENT FUNDING 
BALANCES.—Paragraph (1) shall not apply with re-
spect to a benefit limitation for any plan year if the
163
application of paragraph (1) would not result in the 
benefit limitation not applying for such plan year.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for such subpart is amended by adding at the 
end the following new item:
‘‘Sec. 437. Funding-based limits on benefits and benefit accruals under single-
employer plans.’’.
(c) EFFECTIVE DATE.—
(1) SHUTDOWN BENEFITS.—Except as provided 
in paragraph (3), the amendments made by sub-
section (a) shall apply with respect to plant shut-
downs, or other unpredictable contingent events, oc-
curring after December 31, 2006. 
(2) OTHER BENEFITS.—Except as provided in 
paragraph (3), the amendments made by subsection 
(b) shall apply with respect to plan years beginning 
after December 31, 2006. 
(3) COLLECTIVE BARGAINING EXCEPTION.—In 
the case of a plan maintained pursuant to 1 or more 
collective bargaining agreements between employee 
representatives and 1 or more employers ratified be-
fore the date of the enactment of this Act, the 
amendments made by this subsection shall not apply 
to plan years beginning before the earlier of—
(A) the later of—
164
(i) the date on which the last collec-
tive bargaining agreement relating to the 
plan terminates (determined without re-
gard to any extension thereof agreed to 
after the date of the enactment of this 
Act), or 
(ii) the first day of the first plan year 
to which the amendments made by this 
subsection would (but for this subpara-
graph) apply, or 
(B) January 1, 2009. 
For purposes of clause (i), any plan amendment 
made pursuant to a collective bargaining agreement 
relating to the plan which amends the plan solely to 
conform to any requirement added by this subsection 
shall not be treated as a termination of such collec-
tive bargaining agreement. 
(d) SPECIAL RULE FOR 2007.—For purposes of ap-
plying subsection (e) of section 437 of such Code (as 
added by this section) to current plan years (within the 
meaning of such subsection) beginning in 2007, the modi-
fied funded current liability percentage of the plan for the 
preceding year shall be substituted for the funding target 
attainment percentage of the plan for the preceding year. 
For purposes of the preceding sentence, the term ‘‘modi-
165
fied funded current liability percentage’’ means the funded 
current liability percentage (as defined in section 412(l)(8) 
of such Code), reduced as described in subparagraph (E) 
thereof in the case of a plan with a funded current liability 
percentage (as so defined and before such reduction) 
which is less than 100 percent. 
SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS. 
(a) AMENDMENTS RELATED TO QUALIFICATION RE-
QUIREMENTS.—
(1) Section 401(a)(29) of the Internal Revenue 
Code of 1986 is amended to read as follows: 
‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT-
RISK STATUS.—In the case of a defined benefit plan 
(other than a multiemployer plan) to which the re-
quirements of section 412 apply, the trust of which 
the plan is a part shall not constitute a qualified 
trust under this subsection unless the plan meets the 
requirements of sections 436 and 437.’’. 
(2) Section 401(a)(32) of such Code is amend-
ed—
(A) in subparagraph (A), by striking 
‘‘412(m)(5)’’ each place it appears and insert-
ing ‘‘430(j)(4)’’, and 
(B) in subparagraph (C), by striking ‘‘sec-
tion 412(m) by reason of paragraph (5)(A)
166
thereof’’ and inserting ‘‘section 430(j)(3) by 
reason of section 430(j)(4)(A)’’. 
(3) Section 401(a)(33) of such Code is amend-
ed—
(A) in subparagraph (B)(i), by striking 
‘‘funded current liability percentage (as defined 
in section 412(l)(8))’’ and inserting ‘‘funding 
target attainment percentage (as defined in sec-
tion 430(d)(2))’’, 
(B) in subparagraph (B)(iii), by striking 
‘‘subsection 412(c)(8)’’ and inserting ‘‘section 
412(d)(2)’’, and 
(C) in subparagraph (D), by striking ‘‘sec-
tion 412(c)(11) (without regard to subpara-
graph (B) thereof)’’ and inserting ‘‘section 
412(b) (without regard to paragraph (2) there-
of)’’. 
(b) VESTING RULES.—Section 411 of such Code is 
amended—
(1) by striking ‘‘section 412(c)(8)’’ in sub-
section (a)(3)(C) and inserting ‘‘section 412(d)(2)’’, 
(2) in subsection (b)(1)(F)—
(A) by striking ‘‘paragraphs (2) and (3) of 
section 412(i)’’ in clause (ii) and inserting
167
‘‘subparagraphs 
(B) 
and 
(C) 
of 
section 
412(e)(3)’’, and 
(B) by striking ‘‘paragraphs (4), (5), and 
(6) of section 412(i)’’ and inserting ‘‘subpara-
graphs (D), (E), and (F) of section 412(e)(3)’’, 
and 
(3) by striking ‘‘section 412(c)(8)’’ in sub-
section (d)(6)(A) and inserting ‘‘section 412(d)(2)’’. 
(c) MERGERS AND CONSOLIDATIONS OF PLANS.—
Subclause (I) of section 414(l)(2)(B)(i) of such Code is 
amended to read as follows: 
‘‘(I) 
the 
amount 
determined 
under section 431(c)(6)(A)(i) in the 
case of a multiemployer plan (and the 
sum of the target liability amount and 
target normal cost determined under 
section 430 in the case of any other 
plan), over’’. 
(d) TRANSFER OF EXCESS PENSION ASSETS TO RE-
TIREE HEALTH ACCOUNTS.—
(1) Section 420(e)(2) of such Code is amended 
to read as follows: 
‘‘(2) EXCESS PENSION ASSETS.—The term ‘ex-
cess pension assets’ means the excess (if any) of—
‘‘(A) the lesser of—
168
‘‘(i) the fair market value of the 
plan’s assets (reduced by the pre-funding 
balance and the funding standard carry-
over balance, as determined under section 
430(f)), or 
‘‘(ii) the value of plan assets as deter-
mined under section 430(g)(3) (reduced by 
the pre-funding balance and the funding 
standard carryover balance, as determined 
under section 430(f)), over 
‘‘(B) 125 percent of the sum of the target 
liability amount and the target normal cost de-
termined under section 430 for such plan 
year.’’. 
(2) Section 420(e)(4) of such Code is amended 
to read as follows: 
‘‘(4) COORDINATION
WITH
SECTION
430.—In 
the case of a qualified transfer, any assets so trans-
ferred shall not, for purposes of this section, be 
treated as assets in the plan.’’. 
(e) EXCISE TAXES.—
(1) IN GENERAL.—Subsections (a) and (b) of 
section 4971 of such Code are amended to read as 
follows:
169
‘‘(a) INITIAL TAX.—If at any time during any taxable 
year an employer maintains a plan to which section 412 
applies, there is hereby imposed for the taxable year a tax 
equal to—
‘‘(1) in the case of a defined benefit plan which 
is not a multiemployer plan, 10 percent of the aggre-
gate unpaid minimum required contributions for all 
plan years remaining unpaid as of the end of any 
plan year ending with or within the taxable year, 
and 
‘‘(2) in the case of a multiemployer plan, 5 per-
cent of the accumulated funding deficiency deter-
mined under section 431 as of the end of any plan 
year ending with or within the taxable year. 
‘‘(b) ADDITIONAL TAX.—If—
‘‘(1) a tax is imposed under subsection (a)(1) 
on any unpaid required minimum contribution and 
such amount remains unpaid as of the close of the 
taxable period, or 
‘‘(2) a tax is imposed under subsection (a)(2) 
on any accumulated funding deficiency and the accu-
mulated funding deficiency is not corrected within 
the taxable period, 
there is hereby imposed a tax equal to 100 percent of the 
unpaid minimum required contribution or accumulated
170
funding deficiency, whichever is applicable, to the extent 
not so paid or corrected.’’. 
(2) Section 4971(c) of such Code is amended—
(A) by striking ‘‘the last two sentences of 
section 412(a)’’ in paragraph (1) and inserting 
‘‘section 431’’, and 
(B) by adding at the end the following new 
paragraph: 
‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBU-
TION.—
‘‘(A) IN
GENERAL.—The term ‘unpaid 
minimum required contribution’ means, with re-
spect to any plan year, any minimum required 
contribution under section 430 for the plan 
year which is not paid on or before the due date 
(as determined under section 430(j)(1)) for the 
plan year. 
‘‘(B) ORDERING RULE.—Any payment to 
or under a plan for any plan year shall be allo-
cated first to unpaid minimum required con-
tributions for all preceding plan years in the 
order in which such contributions became due 
and then to the minimum required contribution 
under section 430 for the plan year.’’.
171
(3) Section 4971(e)(1) of such Code is amended 
by striking ‘‘section 412(b)(3)(A)’’ and inserting 
‘‘section 412(a)(2)’’. 
(4) Section 4971(f)(1) of such Code is amend-
ed—
(A) by striking ‘‘section 412(m)(5)’’ and 
inserting ‘‘section 430(j)(4)’’, and 
(B) by striking ‘‘section 412(m)’’ and in-
serting ‘‘section 430(j)(3)’’. 
(5) Section 4972(c)(7) of such Code is amended 
by striking ‘‘except to the extent that such contribu-
tions exceed the full-funding limitation (as defined in 
section 412(c)(7), determined without regard to sub-
paragraph (A)(i)(I) thereof)’’ and inserting ‘‘except, 
in the case of a multiemployer plan, to the extent 
that such contributions exceed the full-funding limi-
tation (as defined in section 431(c)(6))’’. 
(f) REPORTING REQUIREMENTS.—Section 6059(b) of 
such Code is amended—
(1) by striking ‘‘the accumulated funding defi-
ciency (as defined in section 412(a))’’ in paragraph 
(2) and inserting ‘‘the minimum required contribu-
tion determined under section 430, or the accumu-
lated funding deficiency determined under section 
431,’’, and
172
(2) by striking paragraph (3)(B) and inserting: 
‘‘(B) the requirements for reasonable actu-
arial assumptions under section 430(h)(1) or 
431(c)(3), whichever are applicable, have been 
complied with,’’. 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning after December 
31, 2006. 
Subtitle C—Other Provisions 
SEC. 121. MODIFICATION OF TRANSITION RULE TO PEN-
SION FUNDING REQUIREMENTS. 
(a) IN GENERAL.—In the case of a plan that—
(1) was not required to pay a variable rate pre-
mium for the plan year beginning in 1996, 
(2) has not, in any plan year beginning after 
1995, merged with another plan (other than a plan 
sponsored by an employer that was in 1996 within 
the controlled group of the plan sponsor); and 
(3) is sponsored by a company that is engaged 
primarily in the interurban or interstate passenger 
bus service, 
the rules described in subsection (b) shall apply for any 
plan year beginning after December 31, 2006. 
(b) MODIFIED RULES.—The rules described in this 
subsection are as follows:
173
(1) For purposes of section 430(j)(3) of the In-
ternal Revenue Code of 1986 and section 303(j)(3) 
of the Employee Retirement Income Security Act of 
1974, the plan shall be treated as not having a fund-
ing shortfall for any plan year. 
(2) For purposes of—
(A) determining unfunded vested benefits 
under section 4006(a)(3)(E)(iii) of such Act, 
and 
(B) determining any present value or mak-
ing any computation under section 412 of such 
Code or section 302 of such Act, 
the mortality table shall be the mortality table used 
by the plan. 
(3) Section 430(c)(5)(B) of such Code and sec-
tion 303(c)(5)(B) of such Act (relating to phase-in 
of funding target for exemption from new shortfall 
amortization base) shall each be applied by sub-
stituting ‘‘2012’’ for ‘‘2011’’ therein and by sub-
stituting for the table therein the following:
In the case of a plan year beginning in calendar 
year: 
The appli-
cable per-
centage is: 
2007 ..............................................................................................
90 percent
2008 ..............................................................................................
92 percent
2009 ..............................................................................................
94 percent
2010 ..............................................................................................
96 percent
2011 ..............................................................................................
98 percent.
174
(c) DEFINITIONS.—Any term used in this section 
which is also used in section 430 of such Code or section 
303 of such Act shall have the meaning provided such 
term in such section. If the same term has a different 
meaning in such Code and such Act, such term shall, for 
purposes of this section, have the meaning provided by 
such Code when applied with respect to such Code and 
the meaning provided by such Act when applied with re-
spect to such Act. 
(d) SPECIAL RULE FOR 2006.—
(1) IN GENERAL.—Section 769(c)(3) of the Re-
tirement Protection Act of 1994, as added by section 
201 of the Pension Funding Equity Act of 2004, is 
amended by striking ‘‘and 2005’’ and inserting ‘‘, 
2005, and 2006’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to plan years beginning 
after December 31, 2005. 
(e) CONFORMING AMENDMENT.—
(1) Section 769 of the Retirement Protection 
Act of 1994 is amended by striking subsection (c). 
(2) The amendment made by paragraph (1) 
shall take effect on December 31, 2006, and shall 
apply to plan years beginning after such date.
175
SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COM-
PENSATION PLANS WHEN EMPLOYER DE-
FINED BENEFIT PLAN IN AT-RISK STATUS. 
(a) IN GENERAL.—Subsection (b) of section 409A of 
the Internal Revenue Code of 1986 (providing rules relat-
ing to funding) is amended by redesignating paragraphs 
(3) and (4) as paragraphs (4) and (5), respectively, and 
by inserting after paragraph (2) the following new para-
graph: 
‘‘(3) EMPLOYER’S DEFINED BENEFIT PLAN IN 
AT-RISK STATUS.—If—
‘‘(A) during any period in which a defined 
benefit plan to which section 412 applies is in 
an at-risk status (as defined in section 
430(i)(3)), assets are set aside (directly or indi-
rectly) in a trust (or other arrangement deter-
mined by the Secretary), or transferred to such 
a trust or other arrangement, for purposes of 
paying deferred compensation under a non-
qualified deferred compensation plan of the em-
ployer maintaining the defined benefit plan, or 
‘‘(B) a nonqualified deferred compensation 
plan of the employer provides that assets will 
become restricted to the provision of benefits 
under the plan in connection with such at-risk 
status (or other similar financial measure deter-
176
mined by the Secretary) of the defined benefit 
plan, or assets are so restricted, 
such assets shall for purposes of section 83 be treat-
ed as property transferred in connection with the 
performance of services whether or not such assets 
are available to satisfy claims of general creditors. 
Subparagraph (A) shall not apply with respect to 
any assets which are so set aside before the defined 
benefit plan is in at-risk status.’’. 
(b) CONFORMING AMENDMENTS.—Paragraphs (4) 
and (5) of section 409A(b) of such Code, as redesignated 
by subsection (a) of this subsection, are each amended by 
striking ‘‘paragraph (1) or (2)’’ each place it appears and 
inserting ‘‘paragraph (1), (2), or (3)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transfers or reservations of as-
sets after December 31, 2005. 
(d) SPECIAL RULE FOR 2006.—For purposes of de-
termining if a plan is in at-risk status (within the meaning 
of section 409A of such Code, as added by this section) 
for any plan year beginning in 2006, such section shall 
be applied by substituting the plan’s modified funded cur-
rent liability percentage for the plan’s funding target at-
tainment percentage. For purposes of the preceding sen-
tence, the term ‘‘modified funded current liability percent-
177
age’’ means the funded current liability percentage (as de-
fined in section 412(l)(8) of such Code), reduced as de-
scribed in subparagraph (E) thereof. 
TITLE II—FUNDING RULES FOR 
MULTIEMPLOYER 
DEFINED 
BENEFIT PLANS 
Subtitle A—Amendments to Em-
ployee Retirement Income Secu-
rity Act of 1974
SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED 
BENEFIT PLANS. 
(a) IN GENERAL.—Part 3 of subtitle B of title I of 
the Employee Retirement Income Security Act of 1974 (as 
amended by section 102) is amended further by inserting 
after section 303 the following new section: 
‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER 
PLANS 
‘‘SEC. 304. (a) IN GENERAL.—For purposes of sec-
tion 302, the accumulated funding deficiency of a multi-
employer plan for any plan year is—
‘‘(1) except as provided in paragraph (2), the 
amount, determined as of the end of the plan year, 
equal to the excess (if any) of the total charges to 
the funding standard account of the plan for all plan 
years (beginning with the first plan year for which
178
this part applies to the plan) over the total credits 
to such account for such years, and 
‘‘(2) if the multiemployer plan is in reorganiza-
tion for any plan year, the accumulated funding de-
ficiency of the plan determined under section 4243. 
‘‘(b) FUNDING STANDARD ACCOUNT.—
‘‘(1) ACCOUNT
REQUIRED.—Each multiem-
ployer plan to which this part applies shall establish 
and maintain a funding standard account. Such ac-
count shall be credited and charged solely as pro-
vided in this section. 
‘‘(2) CHARGES TO ACCOUNT.—For a plan year, 
the funding standard account shall be charged with 
the sum of—
‘‘(A) the normal cost of the plan for the 
plan year, 
‘‘(B) the amounts necessary to amortize in 
equal annual installments (until fully amor-
tized)—
‘‘(i) in the case of a plan in existence 
on January 1, 1974, the unfunded past 
service liability under the plan on the first 
day of the first plan year to which this 
part applies, over a period of 40 plan 
years,
179
‘‘(ii) in the case of a plan which comes 
into existence after January 1, 1974, the 
unfunded past service liability under the 
plan on the first day of the first plan year 
to which this part applies, over a period of 
15 plan years, 
‘‘(iii) separately, with respect to each 
plan year, the net increase (if any) in un-
funded past service liability under the plan 
arising from plan amendments adopted in 
such year, over a period of 15 plan years, 
‘‘(iv) separately, with respect to each 
plan year, the net experience loss (if any) 
under the plan, over a period of 15 plan 
years, and 
‘‘(v) separately, with respect to each 
plan year, the net loss (if any) resulting 
from changes in actuarial assumptions 
used under the plan, over a period of 15 
plan years, 
‘‘(C) the amount necessary to amortize 
each waived funding deficiency (within the 
meaning of section 302(c)(3)) for each prior 
plan year in equal annual installments (until 
fully amortized) over a period of 15 plan years,
180
‘‘(D) the amount necessary to amortize in 
equal annual installments (until fully amor-
tized) over a period of 5 plan years any amount 
credited to the funding standard account under 
section 302(b)(3)(D) (as in effect on the day 
before the date of the enactment of the Pension 
Protection Act of 2005), and 
‘‘(E) the amount necessary to amortize in 
equal annual installments (until fully amor-
tized) over a period of 20 years the contribu-
tions which would be required to be made under 
the plan but for the provisions of section 
302(c)(7)(A)(i)(I) (as in effect on the day be-
fore the date of the enactment of the Pension 
Protection Act of 2005). 
‘‘(3) CREDITS TO ACCOUNT.—For a plan year, 
the funding standard account shall be credited with 
the sum of—
‘‘(A) the amount considered contributed by 
the employer to or under the plan for the plan 
year, 
‘‘(B) the amount necessary to amortize in 
equal annual installments (until fully amor-
tized)—
181
‘‘(i) separately, with respect to each 
plan year, the net decrease (if any) in un-
funded past service liability under the plan 
arising from plan amendments adopted in 
such year, over a period of 15 plan years, 
‘‘(ii) separately, with respect to each 
plan year, the net experience gain (if any) 
under the plan, over a period of 15 plan 
years, and 
‘‘(iii) separately, with respect to each 
plan year, the net gain (if any) resulting 
from changes in actuarial assumptions 
used under the plan, over a period of 15 
plan years, 
‘‘(C) the amount of the waived funding de-
ficiency 
(within 
the 
meaning 
of 
section 
302(c)(3)) for the plan year, and 
‘‘(D) in the case of a plan year for which 
the accumulated funding deficiency is deter-
mined under the funding standard account if 
such plan year follows a plan year for which 
such deficiency was determined under the alter-
native minimum funding standard under section 
305 (as in effect on the day before the date of 
the enactment of the Pension Protection Act of
182
2005), the excess (if any) of any debit balance 
in the funding standard account (determined 
without regard to this subparagraph) over any 
debit balance in the alternative minimum fund-
ing standard account. 
‘‘(4) SPECIAL
RULES
FOR
CERTAIN
PRE-2007 
AMORTIZATIONS.—
‘‘(A) IN
GENERAL.—In the case of any 
amount amortized under section 302(b) (as in 
effect on the day before the date of the enact-
ment of the Pension Protection Act of 2005) 
over any period beginning with a plan year be-
ginning before 2007, in lieu of the amortization 
described in paragraphs (2)(B) and (3)(B), 
such amount shall continue to be amortized 
under such section as so in effect. 
‘‘(B) INTEREST
RATE.—For purposes of 
amortizations under section 302(b) (as in effect 
on the day before the date of the enactment of 
the Pension Protection Act of 2005), in the 
case of any waiver under section 303 (as so in 
effect) or extension under section 304 (as so in 
effect) with respect to which application has 
been made before June 30, 2005, the interest 
rate under section 303(a)(2) (as so in effect) or
183
section 304(a) (as so in effect), as the case may 
be, shall apply. 
‘‘(5) COMBINING
AND
OFFSETTING
AMOUNTS 
TO BE AMORTIZED.—Under regulations prescribed 
by the Secretary of the Treasury, amounts required 
to be amortized under paragraph (2) or paragraph 
(3), as the case may be—
‘‘(A) may be combined into one amount 
under such paragraph to be amortized over a 
period determined on the basis of the remaining 
amortization period for all items entering into 
such combined amount, and 
‘‘(B) may be offset against amounts re-
quired to be amortized under the other such 
paragraph, with the resulting amount to be am-
ortized over a period determined on the basis of 
the remaining amortization periods for all items 
entering into whichever of the two amounts 
being offset is the greater. 
‘‘(6) INTEREST.—Except as provided in sub-
section (c)(9), the funding standard account (and 
items therein) shall be charged or credited (as deter-
mined under regulations prescribed by the Secretary 
of the Treasury) with interest at the appropriate
184
rate consistent with the rate or rates of interest used 
under the plan to determine costs. 
‘‘(7) CERTAIN
AMORTIZATION
CHARGES
AND 
CREDITS.—In the case of a plan which, immediately 
before the date of the enactment of the Multiem-
ployer Pension Plan Amendments Act of 1980, was 
a multiemployer plan (within the meaning of section 
3(37) as in effect immediately before such date)—
‘‘(A) any amount described in paragraph 
(2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this sub-
section which arose in a plan year beginning be-
fore such date shall be amortized in equal an-
nual installments (until fully amortized) over 40 
plan years, beginning with the plan year in 
which the amount arose, 
‘‘(B) any amount described in paragraph 
(2)(B)(iv) or (3)(B)(ii) of this subsection which 
arose in a plan year beginning before such date 
shall be amortized in equal annual installments 
(until fully amortized) over 20 plan years, be-
ginning with the plan year in which the amount 
arose, 
‘‘(C) any change in past service liability 
which arises during the period of 3 plan years 
beginning on or after such date, and results
185
from a plan amendment adopted before such 
date, shall be amortized in equal annual install-
ments (until fully amortized) over 40 plan 
years, beginning with the plan year in which the 
change arises, and 
‘‘(D) any change in past service liability 
which arises during the period of 2 plan years 
beginning on or after such date, and results 
from the changing of a group of participants 
from one benefit level to another benefit level 
under a schedule of plan benefits which—
‘‘(i) was adopted before such date, 
and 
‘‘(ii) was effective for any plan partici-
pant before the beginning of the first plan 
year beginning on or after such date, 
shall be amortized in equal annual installments 
(until fully amortized) over 40 plan years, be-
ginning with the plan year in which the change 
arises. 
‘‘(8) SPECIAL RULES RELATING TO CHARGES 
AND CREDITS TO FUNDING STANDARD ACCOUNT.—
For purposes of this section—
‘‘(A) 
WITHDRAWAL
LIABILITY.—Any 
amount received by a multiemployer plan in
186
payment of all or part of an employer’s with-
drawal liability under part 1 of subtitle E of 
title IV shall be considered an amount contrib-
uted by the employer to or under the plan. The 
Secretary of the Treasury may prescribe by reg-
ulation additional charges and credits to a mul-
tiemployer plan’s funding standard account to 
the extent necessary to prevent withdrawal li-
ability payments from being unduly reflected as 
advance funding for plan liabilities. 
‘‘(B) ADJUSTMENTS
WHEN
A
MULTIEM-
PLOYER PLAN LEAVES REORGANIZATION.—If a 
multiemployer plan is not in reorganization in 
the plan year but was in reorganization in the 
immediately preceding plan year, any balance in 
the funding standard account at the close of 
such immediately preceding plan year—
‘‘(i) shall be eliminated by an offset-
ting credit or charge (as the case may be), 
but 
‘‘(ii) shall be taken into account in 
subsequent plan years by being amortized 
in equal annual installments (until fully 
amortized) over 30 plan years.
187
The preceding sentence shall not apply to the 
extent of any accumulated funding deficiency 
under section 4243(a) as of the end of the last 
plan year that the plan was in reorganization. 
‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL 
PROGRAM OR WITHDRAWAL LIABILITY PAYMENT 
FUND.—Any amount paid by a plan during a 
plan year to the Pension Benefit Guaranty Cor-
poration pursuant to section 4222 of this Act or 
to a fund exempt under section 501(c)(22) of 
the Internal Revenue Code of 1986 pursuant to 
section 4223 of this Act shall reduce the 
amount of contributions considered received by 
the plan for the plan year. 
‘‘(D) INTERIM
WITHDRAWAL
LIABILITY 
PAYMENTS.—Any amount paid by an employer 
pending a final determination of the employer’s 
withdrawal liability under part 1 of subtitle E 
of title IV and subsequently refunded to the 
employer by the plan shall be charged to the 
funding standard account in accordance with 
regulations prescribed by the Secretary of the 
Treasury. 
‘‘(E) 
ELECTION
FOR
DEFERRAL
OF 
CHARGE
FOR
PORTION
OF
NET
EXPERIENCE
188
LOSS.—If an election is in effect under section 
302(b)(7)(F) (as in effect on the day before the 
date of the enactment of the Pension Protection 
Act of 2005) for any plan year, the funding 
standard account shall be charged in the plan 
year to which the portion of the net experience 
loss deferred by such election was deferred with 
the amount so deferred (and paragraph 
(2)(B)(iv) shall not apply to the amount so 
charged). 
‘‘(F) 
FINANCIAL
ASSISTANCE.—Any 
amount of any financial assistance from the 
Pension Benefit Guaranty Corporation to any 
plan, and any repayment of such amount, shall 
be taken into account under this section and 
section 302 in such manner as is determined by 
the Secretary of the Treasury. 
‘‘(G) SHORT-TERM BENEFITS.—To the ex-
tent that any plan amendment increases the un-
funded past service liability under the plan by 
reason of an increase in benefits which are pay-
able under the plan during a period that does 
not exceed 14 years, paragraph (2)(B)(iii) shall 
be applied separately with respect to such in-
crease in unfunded past service liability by sub-
189
stituting the number of years of the period dur-
ing which such benefits are payable for ‘15’. 
‘‘(c) ADDITIONAL RULES.—
‘‘(1) DETERMINATIONS
TO
BE
MADE
UNDER 
FUNDING METHOD.—For purposes of this section, 
normal costs, accrued liability, past service liabilities, 
and experience gains and losses shall be determined 
under the funding method used to determine costs 
under the plan. 
‘‘(2) VALUATION OF ASSETS.—
‘‘(A) IN GENERAL.—For purposes of this 
section, the value of the plan’s assets shall be 
determined on the basis of any reasonable actu-
arial method of valuation which takes into ac-
count fair market value and which is permitted 
under regulations prescribed by the Secretary of 
the Treasury. 
‘‘(B) 
ELECTION
WITH
RESPECT
TO 
BONDS.—The value of a bond or other evidence 
of indebtedness which is not in default as to 
principal or interest may, at the election of the 
plan administrator, be determined on an amor-
tized basis running from initial cost at purchase 
to par value at maturity or earliest call date. 
Any election under this subparagraph shall be
190
made at such time and in such manner as the 
Secretary of the Treasury shall by regulations 
provide, shall apply to all such evidences of in-
debtedness, and may be revoked only with the 
consent of such Secretary. 
‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA-
SONABLE.—For purposes of this section, all costs, li-
abilities, rates of interest, and other factors under 
the plan shall be determined on the basis of actu-
arial 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. 
‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX-
PERIENCE GAIN OR LOSS.—For purposes of this sec-
tion, if—
‘‘(A) a change in benefits under the Social 
Security Act or in other retirement benefits cre-
ated under Federal or State law, or 
‘‘(B) a change in the definition of the term 
‘wages’ under section 3121 of the Internal Rev-
enue Code of 1986, or a change in the amount
191
of such wages taken into account under regula-
tions 
prescribed 
for 
purposes 
of 
section 
401(a)(5) of such Code, 
results in an increase or decrease in accrued liability 
under a plan, such increase or decrease shall be 
treated as an experience loss or gain. 
‘‘(5) FULL FUNDING.—If, as of the close of a 
plan year, a plan would (without regard to this para-
graph) have an accumulated funding deficiency in 
excess of the full funding limitation—
‘‘(A) the funding standard account shall be 
credited with the amount of such excess, and 
‘‘(B) all amounts described in subpara-
graphs (B), (C), and (D) of subsection (b)(2) 
and subparagraph (B) of subsection (b)(3) 
which are required to be amortized shall be con-
sidered fully amortized for purposes of such 
subparagraphs. 
‘‘(6) FULL-FUNDING LIMITATION.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (5), the term ‘full-funding limitation’ 
means the excess (if any) of—
‘‘(i) the accrued liability (including 
normal cost) under the plan (determined 
under the entry age normal funding meth-
192
od if such accrued liability cannot be di-
rectly calculated under the funding method 
used for the plan), over 
‘‘(ii) the lesser of—
‘‘(I) the fair market value of the 
plan’s assets, or 
‘‘(II) the value of such assets de-
termined under paragraph (2). 
‘‘(B) MINIMUM AMOUNT.—
‘‘(i) IN GENERAL.—In no event shall 
the 
full-funding 
limitation 
determined 
under subparagraph (A) be less than the 
excess (if any) of—
‘‘(I) 90 percent of the current li-
ability of the plan (including the ex-
pected increase in current liability due 
to benefits accruing during the plan 
year), over 
‘‘(II) the value of the plan’s as-
sets determined under paragraph (2). 
‘‘(ii) ASSETS.—For purposes of clause 
(i), assets shall not be reduced by any 
credit balance in the funding standard ac-
count.
193
‘‘(C) FULL
FUNDING
LIMITATION.—For 
purposes of this paragraph, unless otherwise 
provided by the plan, the accrued liability under 
a multiemployer plan shall not include benefits 
which are not nonforfeitable under the plan 
after the termination of the plan (taking into 
consideration section 411(d)(3) of the Internal 
Revenue Code of 1986). 
‘‘(D) CURRENT LIABILITY.—For purposes 
of this paragraph—
‘‘(i) IN GENERAL.—The term ‘current 
liability’ means all liabilities to employees 
and their beneficiaries under the plan. 
‘‘(ii) TREATMENT OF UNPREDICTABLE 
CONTINGENT EVENT BENEFITS.—For pur-
poses of clause (i), any benefit contingent 
on an event other than—
‘‘(I) age, service, compensation, 
death, or disability, or 
‘‘(II) an event which is reason-
ably and reliably predictable (as deter-
mined by the Secretary of the Treas-
ury),
194
shall not be taken into account until the 
event on which the benefit is contingent oc-
curs. 
‘‘(iii) INTEREST
RATE
USED.—The 
rate of interest used to determine current 
liability under this paragraph shall be the 
rate of interest determined under subpara-
graph (E). 
‘‘(iv) MORTALITY TABLES.—
‘‘(I) COMMISSIONERS’ STANDARD 
TABLE.—In the case of plan years be-
ginning before the first plan year to 
which the first tables prescribed under 
subclause (II) apply, the mortality 
table used in determining current li-
ability under this paragraph shall be 
the table prescribed by the Secretary 
of the Treasury which is based on the 
prevailing 
commissioners’ 
standard 
table 
(described 
in 
section 
807(d)(5)(A) of the Internal Revenue 
Code of 1986) used to determine re-
serves for group annuity contracts 
issued on January 1, 1993.
195
‘‘(II) 
SECRETARIAL
AUTHOR-
ITY.—The Secretary of the Treasury 
may by regulation prescribe for plan 
years beginning after December 31, 
1999, mortality tables to be used in 
determining current liability under 
this subsection. Such tables shall be 
based upon the actual experience of 
pension plans and projected trends in 
such experience. In prescribing such 
tables, such Secretary shall take into 
account results of available inde-
pendent studies of mortality of indi-
viduals covered by pension plans. 
‘‘(v) SEPARATE
MORTALITY
TABLES 
FOR
THE
DISABLED.—Notwithstanding 
clause (iv)—
‘‘(I) IN GENERAL.—In the case 
of plan years beginning after Decem-
ber 31, 1995, the Secretary of the 
Treasury shall establish mortality ta-
bles which may be used (in lieu of the 
tables under clause (iv)) to determine 
current liability under this subsection 
for individuals who are entitled to
196
benefits under the plan on account of 
disability. Such Secretary shall estab-
lish separate tables for individuals 
whose disabilities occur in plan years 
beginning before January 1, 1995, 
and for individuals whose disabilities 
occur in plan years beginning on or 
after such date. 
‘‘(II) SPECIAL
RULE
FOR
DIS-
ABILITIES OCCURRING AFTER 1994.—
In the case of disabilities occurring in 
plan years beginning after December 
31, 1994, the tables under subclause 
(I) shall apply only with respect to in-
dividuals described in such subclause 
who are disabled within the meaning 
of title II of the Social Security Act 
and the regulations thereunder. 
‘‘(vi) PERIODIC
REVIEW.—The Sec-
retary of the Treasury shall periodically (at 
least every 5 years) review any tables in ef-
fect under this subparagraph and shall, to 
the extent such Secretary determines nec-
essary, by regulation update the tables to 
reflect the actual experience of pension
197
plans and projected trends in such experi-
ence. 
‘‘(E) REQUIRED
CHANGE
OF
INTEREST 
RATE.—For purposes of determining a plan’s 
current liability for purposes of this para-
graph—
‘‘(i) IN GENERAL.—If any rate of in-
terest used under the plan under sub-
section (b)(6) to determine cost is not 
within the permissible range, the plan shall 
establish a new rate of interest within the 
permissible range. 
‘‘(ii) PERMISSIBLE RANGE.—For pur-
poses of this subparagraph—
‘‘(I) IN
GENERAL.—Except as 
provided in subclause (II), the term 
‘permissible range’ means a rate of in-
terest which is not more than 5 per-
cent above, and not more than 10 per-
cent below, the weighted average of 
the rates of interest on 30-year Treas-
ury securities during the 4-year period 
ending on the last day before the be-
ginning of the plan year.