411
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not 
a majority owner.’’
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 
1344(a)(4)(B)) is amended by striking ‘‘section 
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’. 
(2) Section 4044(b) of such Act (29 U.S.C. 
1344(b)) is amended—
(A) by striking ‘‘(5)’’ in paragraph (2) and 
inserting ‘‘(4), (5),’’, and 
(B) 
by 
redesignating 
paragraphs 
(3) 
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2) 
the following new paragraph: 
‘‘(3) If assets available for allocation under 
paragraph (4) of subsection (a) are insufficient to 
satisfy in full the benefits of all individuals who are 
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A) 
of that paragraph. Any remaining assets shall then 
be allocated to benefits described in subparagraph 
(B) of that paragraph. If assets allocated to such 
subparagraph (B) are insufficient to satisfy in full
412
the benefits described in that subparagraph, the as-
sets shall be allocated pro rata among individuals on 
the basis of the present value (as of the termination 
date) of their respective benefits described in that 
subparagraph.’’
(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1321) is 
amended—
(A) in subsection (b)(9), by striking ‘‘as 
defined in section 4022(b)(6)’’, and 
(B) by adding at the end the following new 
subsection: 
‘‘(d) For purposes of subsection (b)(9), the term ‘sub-
stantial owner’ means an individual who, at any time dur-
ing the 60-month period ending on the date the determina-
tion is being made—
‘‘(1) owns the entire interest in an unincor-
porated trade or business, 
‘‘(2) in the case of a partnership, is a partner 
who owns, directly or indirectly, more than 10 per-
cent of either the capital interest or the profits inter-
est in such partnership, or 
‘‘(3) in the case of a corporation, owns, directly 
or indirectly, more than 10 percent in value of either
413
the voting stock of that corporation or all the stock 
of that corporation. 
For purposes of paragraph (3), the constructive ownership 
rules of section 1563(e) of the Internal Revenue Code of 
1986 (other than paragraph (3)(C) thereof) shall apply, 
including the application of such rules under section 
414(c) of such Code.’’
(2) Section 4043(c)(7) of such Act (29 U.S.C. 
1343(c)(7)) 
is 
amended 
by 
striking 
‘‘section 
4022(b)(6)’’ and inserting ‘‘section 4021(d)’’. 
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to plan terminations—
(A) under section 4041(c) of the Employee 
Retirement Income Security Act of 1974 (29 
U.S.C. 1341(c)) with respect to which notices 
of intent to terminate are provided under sec-
tion 4041(a)(2) of such Act (29 U.S.C. 
1341(a)(2)) after December 31, 2005, and 
(B) under section 4042 of such Act (29 
U.S.C. 1342) with respect to which notices of 
determination are provided under such section 
after such date.
414
(2) CONFORMING AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on 
January 1, 2006. 
SEC. 408. ACCELERATION OF PBGC COMPUTATION OF BEN-
EFITS ATTRIBUTABLE TO RECOVERIES FROM 
EMPLOYERS. 
(a) MODIFICATION OF AVERAGE RECOVERY PER-
CENTAGE OF OUTSTANDING AMOUNT OF BENEFIT LI-
ABILITIES PAYABLE BY CORPORATION TO PARTICIPANTS 
AND BENEFICIARIES.—Section 4022(c)(3)(B)(ii) of the 
Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1322(c)(3)(B)(ii)) is amended to read as follows: 
‘‘(ii) notices of intent to terminate 
were provided (or in the case of a termi-
nation by the corporation, a notice of de-
termination 
under 
section 
4042 
was 
issued) during the 5-Federal fiscal year pe-
riod ending with the third fiscal year pre-
ceding the fiscal year in which occurs the 
date of the notice of intent to terminate 
(or the notice of determination under sec-
tion 4042) with respect to the plan termi-
nation for which the recovery ratio is being 
determined.’’
415
(b) VALUATION OF SECTION 4062(c) LIABILITY FOR 
DETERMINING AMOUNTS PAYABLE BY CORPORATION TO 
PARTICIPANTS AND BENEFICIARIES.—
(1) SINGLE-EMPLOYER PLAN BENEFITS GUAR-
ANTEED.—Section 4022(c)(3)(A) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
13) is amended to read as follows: 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (C), the term ‘recovery ratio’ 
means the ratio which—
‘‘(i) the sum of the values of all recov-
eries under section 4062, 4063, or 4064, 
determined by the corporation in connec-
tion with plan terminations described 
under subparagraph (B), bears to 
‘‘(ii) the sum of all unfunded benefit 
liabilities under such plans as of the termi-
nation date in connection with any such 
prior termination.’’. 
(2) ALLOCATION OF ASSETS.—Section 4044 of 
the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1362) is amended by adding at the 
end the following new subsection: