I
106TH CONGRESS
1ST SESSION
H. R. 3047
To amend the Employee Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986 to require plans which adopt amendments
that significantly reduce future benefit accruals to provide participants
with adequate notice of the changes made by such amendments.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 8, 1999
Mr. MATSUI (for himself, Mr. WELLER, Mr. ANDREWS, Mr. BENTSEN, Mr.
GEJDENSON, Mrs. KELLY, and Mr. POMEROY) introduced the following
bill; which was referred to the Committee on Education and the Work-
force, and in addition to the Committee on Ways and Means, for a period
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee
concerned
A BILL
To amend the Employee Retirement Income Security Act
of 1974 and the Internal Revenue Code of 1986 to
require plans which adopt amendments that significantly
reduce future benefit accruals to provide participants
with adequate notice of the changes made by such
amendments.
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 ‘‘Pension Reduction
Disclosure Act of 1999’’.
SEC. 
2. 
NOTICE 
REQUIRED 
FOR 
CERTAIN 
PLAN
AMENDMENTS REDUCING FUTURE BENEFIT
ACCRUALS.
(a) GENERAL
NOTICE
REQUIREMENTS.—Section
204(h) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1054(h)) is amended to read as fol-
lows:
‘‘(h) NOTICE REQUIREMENTS FOR PENSION PLAN
AMENDMENTS REDUCING ACCRUALS.—
‘‘(1) IN
GENERAL.—If an applicable pension
plan is amended so as to provide for a significant re-
duction in the rate of future benefit accrual of 1 or
more applicable individuals, the plan administrator
shall—
‘‘(A) not later than the 45th day before
the effective date of the amendment, provide
the written notice described in paragraph (2) to
each applicable individual (and to each em-
ployee organization representing applicable indi-
viduals), and
‘‘(B) in the case of a large applicable pen-
sion plan—
‘‘(i) include in the notice under para-
graph (2) the additional information de-
scribed in paragraph (3),
‘‘(ii) make available the information
described in paragraph (4) in accordance
with such paragraph, and
‘‘(iii) provide individual benefit state-
ments in accordance with section 105(e).
‘‘(2) BASIC
WRITTEN
NOTICE.—The notice
under paragraph (1) shall include a summary of the
important terms of the amendment, including—
‘‘(A) the effective date of the amendment,
‘‘(B) a statement that the amendment is
expected to significantly reduce the rate of fu-
ture benefit accrual,
‘‘(C) a description of the classes of applica-
ble individuals to whom the amendment applies,
and
‘‘(D) a description of how the amendment
significantly reduces the rate of future benefit
accrual.
‘‘(3) ADDITIONAL
INFORMATION
TO
BE
PRO-
VIDED BY LARGE APPLICABLE PENSION PLANS.—
‘‘(A) IN GENERAL.—The information de-
scribed in this paragraph is—
‘‘(i) a description of the plan’s benefit
formulas (including formulas for deter-
mining early retirement benefits) both be-
fore and after the amendment and an ex-
planation of the effect of the different for-
mulas on applicable individuals,
‘‘(ii) an explanation of the cir-
cumstances (if any) under which (for ap-
propriate categories of applicable individ-
uals) the amendment is reasonably ex-
pected to result in a temporary period
after the effective date of the amendment
during which there are no or minimal ac-
cruals,
‘‘(iii) illustrative examples of normal
or early retirement benefits meeting the re-
quirements of subparagraph (B), and
‘‘(iv) notice of each applicable individ-
ual’s right to request, and of the proce-
dures for requesting, the information re-
quired to be provided under paragraph (4)
and under section 105(e).
‘‘(B) 
ILLUSTRATIVE
EXAMPLES.—Illus-
trative examples meet the requirements of this
subparagraph if such examples illustrate the
adverse effects of the plan amendment. Such
examples shall be prepared by the plan adminis-
trator in accordance with regulations prescribed
by the Secretary of the Treasury, and such reg-
ulations shall require that the examples—
‘‘(i) reflect fairly the different cat-
egories of applicable individuals who are
similarly affected by the plan amendment
after consideration of all relevant factors,
‘‘(ii) show a comparison of benefits
for each such category of applicable indi-
viduals under the plan (as in effect before
and after the effective date) at appropriate
future dates, and
‘‘(iii) illustrate any temporary period
described in subparagraph (A)(ii).
Such comparison shall be based on benefits in
the form of a life annuity and on actuarial as-
sumptions each of which is reasonable (and is
so certified by an enrolled actuary) when ap-
plied to all participants in the plan.
‘‘(4) SUPPORTING INFORMATION RELATING TO
CALCULATION OF BENEFITS.—
‘‘(A) IN GENERAL.—Each individual who
receives or who is entitled to receive the infor-
mation described in paragraph (3) may (after
so receiving or becoming so entitled) request
the plan administrator to provide the informa-
tion described in subparagraph (B).
‘‘(B) INFORMATION.—The plan adminis-
trator shall, within 15 days after the date on
which a request under subparagraph (A) is
made, provide to the individual information (in-
cluding benefit formulas and actuarial factors)
which is sufficient—
‘‘(i) to confirm the benefit compari-
sons in the illustrative examples described
in paragraph (3)(B), and
‘‘(ii) to enable the individual to use
the individual’s own personal information
to make calculations of the individual’s
own benefits which are similar to the cal-
culations made in such examples.
Nothing in this subsection shall be construed to
require the plan administrator to provide to an
individual such individual’s personal informa-
tion for purposes of clause (ii).
‘‘(C) TIME LIMITATION ON REQUESTS.—
This paragraph shall apply only to requests
made by an individual before the end of the 12-
month period that begins on the later of the ef-
fective date of the amendment to which it re-
lates or the date the notice described in para-
graph (2) is provided to the individual.
‘‘(5) SANCTIONS.—
‘‘(A) IN
GENERAL.—In the case of any
egregious failure to meet any requirement of
this subsection with respect to any plan amend-
ment, the provisions of the applicable pension
plan shall be applied as if such plan amendment
entitled all applicable individuals to the greater
of—
‘‘(i) the benefits to which they would
have been entitled without regard to such
amendment, or
‘‘(ii) the benefits under the plan with
regard to such amendment.
‘‘(B) EGREGIOUS FAILURE.—For purposes
of subparagraph (A), there is an egregious fail-
ure to meet the requirements of this subsection
if such failure is—
‘‘(i) an intentional failure (including
any failure to promptly provide the re-
quired notice or information after the plan
administrator discovers an unintentional
failure to meet the requirements of this
subsection),
‘‘(ii) a failure to provide most of the
individuals with most of the information
they are entitled to receive under this sub-
section, or
‘‘(iii) a failure which is determined to
be egregious under regulations prescribed
by the Secretary of the Treasury.
‘‘(B) EXCISE TAX.—For excise tax on fail-
ure to meet requirements, see section 4980F of
the Internal Revenue Code of 1986.
‘‘(6) SPECIAL RULES.—
‘‘(A) PLAIN
LANGUAGE.—The notice re-
quired under paragraph (1) shall be written in
a manner calculated to be understood by the av-
erage plan participant.
‘‘(B) NOTICE TO DESIGNEES.—The notice
and information required to be provided under
this subsection may be provided to a person
designated, in writing, by the person to which
it would otherwise be provided.
‘‘(7) ALTERNATIVE METHODS OF COMPLIANCE
WITH
ENHANCED
DISCLOSURE
REQUIREMENTS
IN
CERTAIN
CASES.—The Secretary of the Treasury
shall prescribe such regulations as may be necessary
to carry out this subsection. The Secretary of the
Treasury may—
‘‘(A) prescribe alternative or simplified
methods of complying with paragraphs (3) and
(4) in situations where—
‘‘(i) there is no fundamental change in
the manner in which the accrued benefit of
an applicable individual is determined
under the plan, and
‘‘(ii) such other methods are adequate
to reasonably inform plan participants who
are applicable individuals of the impact of
the reductions,
‘‘(B) reduce the advance notice period in
paragraph (1)(A) from 45 days to 15 days be-
fore the effective date of the amendment for
cases in which compliance with the 45-day ad-
vance notice requirement would be unduly bur-
densome because the amendment is contingent
on a merger, acquisition, disposition, or other
similar transaction involving plan participants
who are applicable individuals or because 45
days advance notice is otherwise impracticable,
‘‘(C) permit the comparison of benefits
under paragraph (3)(B) to be based on a form
of payment other than a life annuity, or
‘‘(D) specify actuarial assumptions that
are deemed to be reasonable for purposes of the
benefit comparisons under paragraph (3)(B).
‘‘(8) APPLICABLE INDIVIDUAL.—For purposes
of this subsection, the term ‘applicable individual’
means, with respect to any plan amendment—
‘‘(A) each participant in the plan, and
‘‘(B) each beneficiary who is an alternate
payee 
(within 
the 
meaning 
of 
section
206(d)(3)(K)) under a qualified domestic rela-
tions order (within the meaning of section
206(d)(3)(B)(i)),
whose future benefit accruals under the plan may
reasonably be expected to be reduced by such plan
amendment.
‘‘(9) TERMS RELATING TO PLANS.—For pur-
poses of this subsection—
‘‘(A) APPLICABLE
PENSION
PLAN.—The
term ‘applicable pension plan’ means—
‘‘(i) a defined benefit plan, or
‘‘(ii) an individual account plan which
is subject to the funding standards of sec-
tion 302.
‘‘(B) 
LARGE
APPLICABLE
PENSION
PLAN.—The term ‘large applicable pension
plan’ means an applicable pension plan which
had 100 or more active participants as of the
last day of the plan year preceding the plan
year in which the plan amendment becomes ef-
fective.’’
(b) INDIVIDUAL STATEMENTS.—Section 105 of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1025) is amended by adding at the end the fol-
lowing new subsection:
‘‘(e)(1) The plan administrator of a large applicable
pension plan shall furnish an individual statement de-
scribed in paragraph (2) to each individual—
‘‘(A) who receives, or is entitled to receive,
under section 204(h) the information described in
paragraph (3) thereof from such administrator, and
‘‘(B) who requests in writing such a statement
from such administrator.
‘‘(2) The statement described in this paragraph is a
statement which provides information which is substan-
tially the same as the information in the illustrative exam-
ples described in section 204(h)(3)(B) but which is based
on data specific to the requesting individual and, if the
individual so requests, information as of 1 other future
date not included in such examples.
‘‘(3) Paragraph (1) shall apply only to requests made
before the end of the 12-month period that begins on the
later of the effective date of the amendment to which it
relates or the date the notice described in section
204(h)(2) is provided. In no case shall an individual be
entitled under this subsection to receive more than one
such statement with respect to an amendment.
‘‘(4) Notwithstanding section 502(c)(1), the state-
ment required by paragraph (1) shall be treated as timely
furnished if furnished on or before—
‘‘(A) the date which is 90 days after the effec-
tive date of the plan amendment to which it relates,
or
‘‘(B) such later date as may be permitted by
the Secretary of Labor.
‘‘(5) Any term used in this subsection which is used
in section 204(h) shall have the meaning given such term
by such section.
‘‘(6) A statement under this subsection shall not be
taken into account for purposes of subsection (b).’’
SEC. 3. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY
DEFINED BENEFIT PLANS SIGNIFICANTLY
REDUCING FUTURE BENEFIT ACCRUALS.
(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. 4980F. FAILURE OF DEFINED BENEFIT PLANS REDUC-
ING BENEFIT ACCRUALS TO SATISFY NOTICE
REQUIREMENTS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
a tax on the failure of a plan administrator of an applica-
ble pension plan to meet the requirements of subsection
(e) with respect to any applicable individual.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect
to any applicable individual shall be $100 for each
day in the noncompliance period with respect to such
failure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes
of this section, the term ‘noncompliance period’
means, with respect to any failure, the period begin-
ning on the date the failure first occurs and ending
on the date the failure is corrected.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) OVERALL
LIMITATION
FOR
UNINTEN-
TIONAL FAILURES.—
‘‘(A) IN GENERAL.—In the case of failures
that are due to reasonable cause and not to
willful neglect, the tax imposed by subsection
(a) for failures during the taxable year of the
employer (or, in the case of a multiemployer
plan, the taxable year of the trust forming part
of the plan) shall not exceed $500,000
($1,000,000 in the case of a large applicable
pension plan).
‘‘(B) TAXABLE
YEARS
IN
THE
CASE
OF
CERTAIN CONTROLLED GROUPS.—For purposes
of this paragraph, if all persons who are treated
as a single employer for purposes of this section
do not have the same taxable year, the taxable
years taken into account shall be determined
under principles similar to the principles of sec-
tion 1561.
‘‘(2) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent
that the payment of such tax would be excessive rel-
ative to the failure involved.
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
‘‘(1) In the case of a plan other than a multi-
employer plan, the employer.
‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) NOTICE REQUIREMENTS FOR PENSION PLAN
AMENDMENTS REDUCING ACCRUALS.—
‘‘(1) IN
GENERAL.—If an applicable pension
plan is amended so as to provide for a significant re-
duction in the rate of future benefit accrual of 1 or
more applicable individuals, the plan administrator
shall—
‘‘(A) not later than the 45th day before
the effective date of the amendment, provide
the written notice described in paragraph (2) to
each applicable individual (and to each em-
ployee organization (as defined in section 3(4)
of the Employee Retirement Income Security
Act of 1974) representing applicable individ-
uals), and
‘‘(B) in the case of a large applicable pen-
sion plan—
‘‘(i) include in the notice under para-
graph (2) the additional information de-
scribed in paragraph (3), and
‘‘(ii) make available the information
described in paragraph (4) in accordance
with such paragraph.
‘‘(2) BASIC
WRITTEN
NOTICE.—The notice
under paragraph (1) shall include a summary of the
important terms of the amendment, including—
‘‘(A) the effective date of the amendment,
‘‘(B) a statement that the amendment is
expected to significantly reduce the rate of fu-
ture benefit accrual,
‘‘(C) a description of the classes of applica-
ble individuals to whom the amendment applies,
and
‘‘(D) a description of how the amendment
significantly reduces the rate of future benefit
accrual.
‘‘(3) ADDITIONAL
INFORMATION
TO
BE
PRO-
VIDED BY LARGE APPLICABLE PENSION PLANS.—
‘‘(A) IN GENERAL.—The information de-
scribed in this paragraph is—
‘‘(i) a description of the plan’s benefit
formulas (including formulas for deter-
examples shall be prepared by the plan adminis-
trator in accordance with regulations prescribed
by the Secretary, and such regulations shall re-
quire that the examples—
‘‘(i) reflect fairly the different cat-
egories of applicable individuals who are
similarly affected by the plan amendment
after consideration of all relevant factors,
‘‘(ii) show a comparison of benefits
for each such category of applicable indi-
viduals under the plan (as in effect before
and after the effective date) at appropriate
future dates, and
‘‘(iii) illustrate any temporary period
described in subparagraph (A)(ii).
Such comparison shall be based on benefits in
the form of a life annuity and on actuarial as-
sumptions each of which is reasonable (and is
so certified by an enrolled actuary) when ap-
plied to all participants in the plan.
‘‘(4) SUPPORTING INFORMATION RELATING TO
CALCULATION OF BENEFITS.—
‘‘(A) IN GENERAL.—Each individual who
receives or who is entitled to receive the infor-
mation described in paragraph (3) may (after
so receiving or becoming so entitled) request
the plan administrator to provide the informa-
tion described in subparagraph (B).
‘‘(B) INFORMATION.—The plan adminis-
trator shall, within 15 days after the date on
which a request under subparagraph (A) is
made, provide to the individual information (in-
cluding benefit formulas and actuarial factors)
which is sufficient—
‘‘(i) to confirm the benefit compari-
sons in the illustrative examples described
in paragraph (3)(B), and
‘‘(ii) to enable the individual to use
the individual’s own personal information
to make calculations of the individual’s
own benefits which are similar to the cal-
culations made in such examples.
Nothing in this subsection shall be construed to
require the plan administrator to provide to an
individual such individual’s personal informa-
tion for purposes of clause (ii).
‘‘(C) TIME LIMITATION ON REQUESTS.—
This paragraph shall apply only to requests
made during the 12-month period that begins
on the later of the effective date of the amend-
ment to which it relates or the date the notice
described in paragraph (2) is provided.
‘‘(5) SPECIAL RULES.—
‘‘(A) PLAIN
LANGUAGE.—The notice re-
quired under paragraph (1) shall be written in
a manner calculated to be understood by the av-
erage plan participant.
‘‘(B) NOTICE TO DESIGNEES.—The notice
or information required to be provided under
this subsection may be provided to a person
designated, in writing, by the person to which
it would otherwise be provided.
‘‘(6) ALTERNATIVE METHODS OF COMPLIANCE
WITH
ENHANCED
DISCLOSURE
REQUIREMENTS
IN
CERTAIN CASES.—The Secretary shall prescribe such
regulations as may be necessary to carry out this
subsection. The Secretary may—
‘‘(A) prescribe alternative or simplified
methods of complying with paragraphs (3) and
(4) in situations where—
‘‘(i) there is no fundamental change in
the manner in which the accrued benefit of
an applicable individual is determined
under the plan, and
‘‘(ii) such other methods are adequate
to reasonably inform plan participants who
are applicable individuals of the impact of
the reductions,
‘‘(B) reduce the advance notice period in
paragraph (1)(A) from 45 days to 15 days be-
fore the effective date of the amendment for
cases in which compliance with the 45-day ad-
vance notice requirement would be unduly bur-
densome because the amendment is contingent
on a merger, acquisition, disposition, or other
similar transaction involving plan participants
who are applicable individuals or because 45
days advance notice is otherwise impracticable,
‘‘(C) permit the comparison of benefits
under paragraph (3)(B)(i) to be based on a
form of payment other than a life annuity, or
‘‘(D) specify actuarial assumptions that
are deemed to be reasonable for purposes of the
benefit comparisons under paragraph (3)(B)(i).
‘‘(7) APPLICABLE INDIVIDUAL.—For purposes
of this subsection, the term ‘applicable individual’
means, with respect to any plan amendment—
‘‘(A) each participant in the plan, and
‘‘(B) each beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under a qualified domestic relations order
(within the meaning of section 414(p)(1)),
whose future benefit accruals under the plan may
reasonably be expected to be reduced by such plan
amendment.
‘‘(8) TERMS RELATING TO PLANS.—For pur-
poses of this subsection—
‘‘(A) APPLICABLE
PENSION
PLAN.—The
term ‘applicable pension plan’ means—
‘‘(i) a defined benefit plan, or
‘‘(ii) an individual account plan which
is subject to the funding standards of sec-
tion 412.
Such term shall not include any governmental
plan (within the meaning of section 414(d)) or
any church plan (within the meaning of section
414(e)) with respect to which the election pro-
vided by section 410(d) has not been made.
‘‘(B) 
LARGE
APPLICABLE
PENSION
PLAN.—The term ‘large applicable pension
plan’ means an applicable pension plan which
had 100 or more active participants as of the
last day of the plan year preceding the plan
year in which the plan amendment becomes ef-
fective.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for chapter 43 of such Code is amended by adding
at the end the following new item:
‘‘Sec. 4980F. Failure of defined benefit plans reducing benefit ac-
cruals to satisfy notice requirements.’’
SEC. 4. EFFECTIVE DATES.
(a) IN GENERAL.—The amendments made by this
Act shall apply to plan amendments taking effect after the
date of the enactment of this Act.
(b) SPECIAL RULES.—
(1) IN GENERAL.—The amendments made by
this Act shall not apply to any plan amendment for
which there was written notice before July 12, 1999,
which was reasonably expected to notify substan-
tially all of the plan participants or their representa-
tives of the nature and effective date of the amend-
ment.
(2) TRANSITION.—Until such time as the Sec-
retary of the Treasury issues regulations under sec-
tions 4980F(e)(3) and (4) of the Internal Revenue
Code of 1986 and section 204(h)(3) and (4) of the
Employee Retirement Income Security Act of 1974
(as added by the amendments made by this section),
a plan shall be treated as meeting the requirements
of such sections if it makes a good faith effort to
comply with such requirements.
(3) NOTICE AND INFORMATION NOT REQUIRED
TO BE FURNISHED BEFORE 120TH DAY AFTER EN-
ACTMENT.—The period for providing any notice or
information required by the amendments made by
this section shall not end before the date which is
120 days after the date of the enactment of this Act.
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