SEC. 102. EXCISE TAX ON FUNDING NONQUALIFIED DE-
FERRED 
COMPENSATION 
PLANS 
IN 
THE 
EVENT OF A PENSION PLAN TERMINATION 
BASED ON BANKRUPTCY REORGANIZATION 
OR IN THE EVENT OF A CONVERSION TO A 
CASH BALANCE PLAN. 
(a) IN GENERAL.—Chapter 43 of the Internal Rev-
enue Code of 1986 (relating to qualified pension, etc., 
plans) is amended by adding at the end the following new 
section: 
‘‘SEC. 4980H. FUNDING NONQUALIFIED DEFERRED COM-
PENSATION PLANS. 
‘‘(a) IMPOSITION OF TAX IN THE EVENT OF A PEN-
SION PLAN TERMINATION BASED ON BANKRUPTCY RE-
ORGANIZATION OR IN THE EVENT OF A CONVERSION OF 
A PENSION PLAN TO A CASH BALANCE PLAN.— 
‘‘(1) IN GENERAL.—In any case in which a cor-
poration is a plan sponsor of a defined benefit plan 
with respect to which an plan amendment is adopted 
that has the effect of— 
‘‘(A) implementing a distress termination 
of the plan under section 4041(c) of the Em-
ployee Retirement Income Security Act of 1974 
based on bankruptcy reorganization or a termi-
nation of the plan initiated by the Pension Ben-
efit Guaranty Corporation under section 4042
of such Act based on bankruptcy reorganiza-
tion, in any case in which the plan is not suffi-
cient for guaranteed benefits (within the mean-
ing of section 4041(d)(2) of such Act) as of the 
proposed termination date, or 
‘‘(B) converting such plan to a cash bal-
ance plan, in any case in which the amend-
ment— 
‘‘(i) results in a significant reduction 
in the rate of future benefit accruals (with-
in the meaning of section 4980F(e)(1)) of 
participants with at least 10 years of serv-
ice under the plan, or 
‘‘(ii) does not provide for an election 
by affected participants with at least 10 
years of service under the plan (and their 
beneficiaries) to retain coverage under the 
terms of the plan as in effect immediately 
prior to the amendment, 
there is hereby imposed a tax on any failure to meet 
the termination fairness standard of paragraph (2) 
with respect to such plan amendment. 
‘‘(2) TERMINATION
FAIRNESS
STANDARD.—A 
covered deferred compensation plan established or 
maintained by a plan sponsor described in para-
graph (1) meets the termination fairness standard of 
this subsection with respect to a plan amendment 
described in paragraph (1) if, during the 5-year pe-
riod beginning on the date of the adoption of such 
plan amendment— 
‘‘(A) no amount of deferred compensation 
accrues to a disqualified individual under the 
terms of such covered deferred compensation 
plan, irrespective of whether the accrual in de-
ferred compensation is expressed in the form of 
a promise, a guarantee, or any other represen-
tation, and 
‘‘(B) in the case of a covered deferred com-
pensation plan established during or after the 
1-year period preceding the notice date (or any 
amendment to a covered deferred compensation 
plan if such amendment is adopted during or 
after such 1-year period), no distribution of ac-
crued deferred compensation is made under 
such plan (or such amendment) to a disquali-
fied individual. 
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) shall be equal to the amount of 
the accrual described in subsection (a)(2)(A) comprising
the failure or the distribution described in subsection 
(a)(2)(B) comprising the failure. 
‘‘(c) LIABILITY FOR TAX.—The plan sponsor shall be 
liable for the tax imposed by this section. 
‘‘(d) DEFINITIONS.—For purposes of this section— 
‘‘(1) CASH BALANCE PLAN.— 
‘‘(A) IN GENERAL.—The term ‘cash bal-
ance plan’ means a defined benefit plan under 
which the accrued benefit is expressed to par-
ticipants and beneficiaries as an amount other 
than an annual benefit commencing at normal 
retirement age. 
‘‘(B) REGULATIONS TO INCLUDE SIMILAR 
OR
OTHER
HYBRID
PLANS.—The Secretary 
shall issue regulations which provide that a de-
fined benefit plan (or any portion of such a 
plan) which has an effect similar to a plan de-
scribed in subparagraph (A) shall be treated as 
a cash balance plan. Such regulations may pro-
vide that if a plan sponsor represents in com-
munications to participants and beneficiaries 
that a plan amendment results in a plan being 
described in the preceding sentence, such plan 
shall be treated as a cash balance plan.
‘‘(2) NOTICE
DATE.—The term ‘notice date’ 
means with respect to an amendment described in 
subsection (a)(1)— 
‘‘(A) in the case of a distress termination 
under section 4041(d) of the Employee Retire-
ment Income Security Act of 1974, the date of 
the advance notice of intent to terminate pro-
vided pursuant to section 4041(a)(2) of such 
Act, 
‘‘(B) in the case of a termination initiated 
by the Pension Benefit Guaranty Corporation 
under section 4042 of such Act, the date of the 
application to the court under section 4042(c) 
of such Act, and 
‘‘(C) in the case of a conversion to a cash 
balance plan, the date of the adoption of the 
amendment. 
‘‘(3) 
COVERED
DEFERRED
COMPENSATION 
PLAN.— 
‘‘(A) IN GENERAL.—The term ‘covered de-
ferred compensation plan’ means any plan pro-
viding for the deferral of compensation of a dis-
qualified individual, whether or not— 
‘‘(i) compensation of the disqualified 
individual which is deferred under such
plan is subject to substantial risk of for-
feiture, 
‘‘(ii) 
the 
disqualified 
individual’s 
rights to the compensation deferred under 
the plan are no greater than the rights of 
a general creditor of the plan sponsor, 
‘‘(iii) all amounts set aside (directly or 
indirectly) for purposes of paying the de-
ferred compensation, and all income attrib-
utable to such amounts, remain (until 
made available to the participant or other 
beneficiary) solely the property of the 
(without being restricted to the provision 
of benefits under the plan), 
‘‘(iv) the amounts referred to in 
clause (iii) are available to satisfy the 
claims of the plan sponsor’s general credi-
tors at all times (not merely after bank-
ruptcy or insolvency), and 
‘‘(v) some or all of the compensation 
of the disqualified individual which is de-
ferred under such plan is guaranteed by an 
insurance company, insurance service, or 
other similar organization.
‘‘(B) 
EXCEPTION
FOR
QUALIFIED 
PLANS.—Such term shall not include a plan 
that is— 
‘‘(i) described in section 219(g)(5)(A), 
or 
‘‘(ii) an eligible deferred compensation 
plan (as defined in section 457(b)) of an 
eligible employer described in section 
457(e)(1)(A). 
‘‘(C) PLAN
INCLUDES
ARRANGEMENTS, 
ETC.—For purposes of this paragraph, the term 
‘plan’ includes any agreement or arrangement. 
‘‘(4) DISQUALIFIED
INDIVIDUAL.—The term 
‘disqualified individual’ means a director or executive 
officer of the plan sponsor. 
‘‘(5) TERMINATION
BASED
ON
BANKRUPTCY 
REORGANIZATION.—A termination of a plan which is 
a distress termination under section 4041(c) of the 
Employee Retirement Income Security Act of 1974 
or a termination instituted by the Pension Benefit 
Guaranty Corporation under section 4042 of such 
Act is ‘based on bankruptcy reorganization’ if such 
termination is based in whole or in part on the fil-
ing, by or against any person who is a contributing 
sponsor of such plan or a member of such sponsor’s
controlled group, of a petition seeking reorganization 
in a case under title 11, United States Code, or 
under any similar law of a State or political subdivi-
sion of a State (or such a case in which liquidation 
is sought has been converted to a case in which reor-
ganization is sought). 
‘‘(6) TITLE IV TERMINOLOGY.—Any term used 
in this section which is defined in section 4001(a) of 
the Employee Retirement Income Security Act of 
1974 shall have the meaning provided such term in 
such section 4001(a). 
‘‘(e) SPECIAL RULES.— 
‘‘(1) COORDINATED BENEFITS.—If the benefits 
of 2 or more defined benefit plans established or 
maintained by an employer are coordinated in such 
a manner as to have the effect of the adoption of an 
amendment described in subsection (a)(1), the spon-
sor of the defined benefit plan or plans providing for 
such coordination shall be treated as having adopted 
such a plan amendment as of the date such coordi-
nation begins. 
‘‘(2) MULTIPLE AMENDMENTS.—The Secretary 
shall issue regulations to prevent the avoidance of 
the purposes of this section through the use of 2 or