350 
‘‘(II) the plan year is prior 
to the day described in sub-
paragraph (B)(ii), 
subparagraph (A)(i)(II) shall be 
applied by substituting ‘4⁄5’ for ‘2⁄3’ 
and subparagraph (B) shall be ap-
plied by substituting ‘the 15-year 
period’ for ‘the 10-year period’. 
‘‘(iii) For any plan year fol-
lowing 
the 
year 
described 
in 
clause 
(ii)(II), 
subparagraph 
(A)(i)(II) and subparagraph (B) 
shall apply, except that for each 
plan year ending after such date 
for which the plan actuary cer-
tifies (at the time of the annual 
certification 
under 
subsection 
(a)(1) for such plan year) that the 
plan is not able to attain the in-
crease described in subparagraph 
(A)(i) over the period described in 
subparagraph (B), subparagraph 
(B) shall be applied by sub-
stituting ‘the 15-year period’ for 
‘the 10-year period’.
351 
‘‘(D) REPORTING.—A summary of 
any funding improvement plan or 
modification thereto adopted during 
any plan year, together with annual 
updates regarding the funding ratio 
of the plan, shall be included in the 
annual report for such plan year 
under section 104(a) of the Employee 
Retirement Income Security Act of 
1974 and in the summary annual re-
port described in section 104(b)(3) of 
such Act. 
‘‘(4) DEVELOPMENT
OF
FUNDING
IM-
PROVEMENT PLAN.— 
‘‘(A) ACTIONS
BY
PLAN
SPONSOR 
PENDING
APPROVAL.—Pending the ap-
proval of a funding improvement plan 
under this paragraph, the plan spon-
sor shall take all reasonable actions, 
consistent with the terms of the plan 
and applicable law, necessary to en-
sure— 
‘‘(i) an increase in the plan’s 
funded percentage, and
352 
‘‘(ii) postponement of an accu-
mulated funding deficiency for at 
least 1 additional plan year. 
Such actions include applications for 
extensions of amortization periods 
under section 431(d), use of the short-
fall funding method in making fund-
ing standard account computations, 
amendments to the plan’s benefit 
structure, reductions in future ben-
efit accruals, and other reasonable 
actions consistent with the terms of 
the plan and applicable law. 
‘‘(B) RECOMMENDATIONS
BY
PLAN 
SPONSOR.— 
‘‘(i) IN
GENERAL.—During the 
period of 90 days following the 
date on which a multiemployer 
plan is certified to be in endan-
gered status, the plan sponsor 
shall develop and provide to the 
bargaining 
parties 
alternative 
proposals 
for 
revised 
benefit 
structures, 
contribution 
struc-
tures, or both, which, if adopted
353 
as amendments to the plan, may 
be reasonably expected to meet 
the 
benchmarks 
described 
in 
paragraph (3)(A). Such proposals 
shall include— 
‘‘(I) at least one proposal 
for reductions in the amount 
of future benefit accruals nec-
essary to achieve the bench-
marks, assuming no amend-
ments 
increasing 
contribu-
tions under the plan (other 
than amendments increasing 
contributions 
necessary 
to 
achieve the benchmarks after 
amendments have reduced fu-
ture benefit accruals to the 
maximum extent permitted by 
law), and 
‘‘(II) at least one proposal 
for increases in contributions 
under the plan necessary to 
achieve the benchmarks, as-
suming no amendments re-
354 
ducing future benefit accruals 
under the plan. 
‘‘(ii) REQUESTS
BY
BARGAINING 
PARTIES.—Upon the request of any 
bargaining party who— 
‘‘(I) employs at least 5 per-
cent of the active partici-
pants, or 
‘‘(II) represents as an em-
ployee organization, for pur-
poses of collective bargaining, 
at least 5 percent of the active 
participants, 
the plan sponsor shall provide all 
such parties information as to 
other combinations of increases 
in contributions and reductions 
in future benefit accruals which 
would result in achieving the 
benchmarks. 
‘‘(iii) 
OTHER
INFORMATION.— 
The plan sponsor may, as it 
deems appropriate, prepare and 
provide the bargaining parties 
with additional information relat-
355 
ing to contribution structures or 
benefit structures or other infor-
mation relevant to the funding 
improvement plan. 
‘‘(5) MAINTENANCE
OF
CONTRIBUTIONS 
PENDING
APPROVAL
OF
FUNDING
IMPROVE-
MENT PLAN.—Pending approval of a fund-
ing improvement plan by the bargaining 
parties with respect to a multiemployer 
plan, the multiemployer plan may not be 
amended so as to provide— 
‘‘(A) a reduction in the level of 
contributions for participants who 
are not in pay status, 
‘‘(B) a suspension of contributions 
with respect to any period of service, 
or 
‘‘(C) any new direct or indirect ex-
clusion of younger or newly hired em-
ployees from plan participation. 
‘‘(6) BENEFIT RESTRICTIONS PENDING AP-
PROVAL OF FUNDING IMPROVEMENT PLAN.— 
Pending approval of a funding improve-
ment plan by the bargaining parties with 
respect to a multiemployer plan—
356 
‘‘(A) RESTRICTIONS
ON
LUMP
SUM 
AND
SIMILAR
DISTRIBUTIONS.—In any 
case in which the present value of a 
participant’s accrued benefit under 
the plan exceeds $5,000, such benefit 
may not be distributed as an imme-
diate distribution or in any other ac-
celerated form. 
‘‘(B) PROHIBITION
ON
BENEFIT
IN-
CREASES.— 
‘‘(i) IN
GENERAL.—No amend-
ment of the plan which increases 
the liabilities of the plan by rea-
son of any increase in benefits, 
any change in the accrual of ben-
efits, or any change in the rate at 
which benefits become nonforfeit-
able under the plan may be 
adopted. 
‘‘(ii) 
EXCEPTION.—Clause 
(i) 
shall 
not 
apply 
to 
any 
plan 
amendment which is required as 
a condition of qualification under 
part I of subchapter D of chapter 
1 of subtitle A.
357 
‘‘(7) DEFAULT
CRITICAL
STATUS
IF
NO 
FUNDING IMPROVEMENT PLAN ADOPTED.—If 
no plan amendment adopting a funding 
improvement plan has been adopted by 
the end of the 240-day period referred to 
in subsection (b)(1), the plan enters into 
critical status as of the first day of the 
succeeding plan year. 
‘‘(8) RESTRICTIONS UPON APPROVAL OF 
FUNDING IMPROVEMENT PLAN.—Upon adop-
tion of a funding improvement plan with 
respect to a multiemployer plan, the plan 
may not be amended— 
‘‘(A) so as to be inconsistent with 
the funding improvement plan, or 
‘‘(B) so as to increase future ben-
efit accruals, unless the plan actuary 
certifies in advance that, after taking 
into account the proposed increase, 
the plan is reasonably expected to 
meet the the benchmarks described 
in paragraph (3)(A). 
‘‘(c) FUNDING RULES FOR MULTIEMPLOYER 
PLANS IN CRITICAL STATUS.—
358 
‘‘(1) IN
GENERAL.—In any case in 
which a multiemployer plan is in critical 
status for a plan year as described in 
paragraph (2) (or otherwise enters into 
critical status under this section) and no 
rehabilitation plan under this subsection 
with respect to such multiemployer plan 
is in effect for the plan year, the plan 
sponsor shall, in accordance with this 
subsection, 
amend 
the 
multiemployer 
plan to include a rehabilitation plan 
under this subsection. The amendment 
shall be adopted not later than 240 days 
after the date on which the plan enters 
into critical status. 
‘‘(2) 
CRITICAL
STATUS.—A 
multiem-
ployer plan is in critical status for a plan 
year if— 
‘‘(A) the plan is in endangered sta-
tus for the preceding plan year and 
the requirements of subsection (b)(1) 
were not met with respect to the plan 
for such preceding plan year, or
359 
‘‘(B) as determined by the plan ac-
tuary under subsection (a), the plan 
is described in paragraph (3). 
‘‘(3) 
CRITICALITY
DESCRIPTION.—For 
purposes of paragraph (2)(B), a plan is 
described in this paragraph if the plan is 
described in at least one of the following 
subparagraphs: 
‘‘(A) A plan is described in this 
subparagraph if, as of the beginning 
of the current plan year— 
‘‘(i) the funded percentage of 
the plan is less than 65 percent, 
and 
‘‘(ii) the sum of— 
‘‘(I) the market value of 
plan assets, plus 
‘‘(II) the present value of 
the 
reasonably 
anticipated 
employer and employee con-
tributions 
for 
the 
current 
plan year and each of the 6 
succeeding plan years, assum-
ing that the terms of the one 
or more collective bargaining
360 
agreements 
pursuant 
to 
which the plan is maintained 
for the current plan year con-
tinue in effect for succeeding 
plan years, 
is less than the present value of 
all nonforfeitable benefits for all 
participants 
and 
beneficiaries 
projected to be payable under the 
plan during the current plan year 
and each of the 6 succeeding plan 
years 
(plus 
administrative 
ex-
penses for such plan years). 
‘‘(B) A plan is described in this 
subparagraph if, as of the beginning 
of the current plan year, the sum of— 
‘‘(i) the market value of plan 
assets, plus 
‘‘(ii) the present value of the 
reasonably anticipated employer 
and employee contributions for 
the current plan year and each of 
the 4 succeeding plan years, as-
suming that the terms of the one 
or 
more 
collective 
bargaining
361 
agreements pursuant to which 
the plan is maintained for the 
current plan year remain in effect 
for succeeding plan years, 
is less than the present value of all 
nonforfeitable benefits for all partici-
pants and beneficiaries projected to 
be payable under the plan during the 
current plan year and each of the 4 
succeeding plan years (plus adminis-
trative expenses for such plan years). 
‘‘(C) A plan is described in this 
subparagraph if— 
‘‘(i) as of the beginning of the 
current plan year, the funded per-
centage of the plan is less than 65 
percent, and 
‘‘(ii) the plan has an accumu-
lated funding deficiency for the 
current plan year or is projected 
to have an accumulated funding 
deficiency for any of the 4 suc-
ceeding plan years, not taking 
into account any extension of am-
362 
ortization periods under section 
431(d). 
‘‘(D) A plan is described in this 
subparagraph if— 
‘‘(i)(I) the plan’s normal cost 
for the current plan year, plus in-
terest (determined at the rate 
used for determining cost under 
the plan) for the current plan 
year on the amount of unfunded 
benefit liabilities under the plan 
as of the last date of the pre-
ceding plan year, exceeds 
‘‘(II) the present value, as of 
the beginning of the current plan 
year, of the reasonably antici-
pated 
employer 
and 
employee 
contributions for the current plan 
year, 
‘‘(ii) the present value, as of 
the beginning of the current plan 
year, of nonforfeitable benefits of 
inactive participants is greater 
than the present value, as of the 
beginning of the current plan
363 
year, of nonforfeitable benefits of 
active participants, and 
‘‘(iii) the plan is projected to 
have an accumulated funding de-
ficiency for the current plan year 
or any of the 4 succeeding plan 
years, not taking into account any 
extension of amortization periods 
under section 431(d). 
‘‘(E) A plan is described in this 
subparagraph if— 
‘‘(i) the funded percentage of 
the plan is greater than 65 per-
cent for the current plan year, 
and 
‘‘(ii) the plan is projected to 
have an accumulated funding de-
ficiency during any of the suc-
ceeding 3 plan years, not taking 
into account any extension of am-
ortization periods under section 
431(d). 
‘‘(4) REHABILITATION PLAN.— 
‘‘(A) IN GENERAL.—A rehabilitation 
plan shall consist of—
364 
‘‘(i) amendments to the plan 
providing (under reasonable actu-
arial assumptions) for measures, 
agreed to by the bargaining par-
ties, to increase contributions, re-
duce plan expenditures (includ-
ing plan mergers and consolida-
tions), or reduce future benefit 
accruals, or to take any combina-
tion of such actions, determined 
necessary to cause the plan to 
cease, during the rehabilitation 
period, to be in critical status, or 
‘‘(ii) reasonable measures to 
forestall 
possible 
insolvency 
(within the meaning of section 
418E) if the plan sponsor deter-
mines that, upon exhaustion of all 
reasonable measures, the plan 
would not cease during the reha-
bilitation period to be in critical 
status. 
‘‘(B) REHABILITATION PERIOD.—The 
rehabilitation period for any rehabili-
tation plan adopted pursuant to this
365 
subsection is the 10-year period be-
ginning on the earlier of— 
‘‘(i) the second anniversary of 
the date of the adoption of the re-
habilitation plan, or 
‘‘(ii) the first day of the first 
plan year of the multiemployer 
plan following the plan year in 
which occurs the first date, after 
the date of the plan’s entry into 
critical status, as of which collec-
tive bargaining agreements cov-
ering at least 75 percent of active 
participants 
in 
such 
multiem-
ployer plan (determined as of 
such date of entry) have expired. 
‘‘(C) REPORTING.—A summary of 
any rehabilitation plan or modifica-
tion thereto adopted during any plan 
year, together with annual updates 
regarding the funding ratio of the 
plan, shall be included in the annual 
report for such plan year under sec-
tion 104(a) of the Employee Retire-
ment Income Security Act of 1974 and
366 
in the summary annual report de-
scribed in section 104(b)(3). 
‘‘(5) DEVELOPMENT OF REHABILITATION 
PLAN.— 
‘‘(A) PROPOSALS
BY
PLAN
SPON-
SOR.— 
‘‘(i) IN
GENERAL.—Within 90 
days after the date of entry into 
critical status (or the date as of 
which the requirements of sub-
section (b)(1) are not met with re-
spect to the plan), the plan spon-
sor shall propose to all bargaining 
parties a range of alternative 
schedules of increases in con-
tributions and reductions in fu-
ture benefit accruals that would 
serve to carry out a rehabilitation 
plan under this subsection. 
‘‘(ii) PROPOSAL
ASSUMING
NO 
CONTRIBUTION
INCREASES.—Such 
proposals shall include, as one of 
the proposed schedules, a sched-
ule of those reductions in future 
benefit accruals that would be
367 
necessary to cause the plan to 
cease to be in critical status if 
there were no further increases 
in rates of contribution to the 
plan. 
‘‘(iii) PROPOSAL
WHERE
CON-
TRIBUTIONS ARE NECESSARY.—If the 
plan sponsor determines that the 
plan will not cease to be in crit-
ical status during the rehabilita-
tion period unless the plan is 
amended to provide for an in-
crease in contributions, the plan 
sponsor’s proposals shall include 
a schedule of those increases in 
contribution rates that would be 
necessary to cause the plan to 
cease to be in critical status if fu-
ture benefit accruals were re-
duced to the maximum extent 
permitted by law. 
‘‘(B) 
REQUESTS
FOR
ADDITIONAL 
SCHEDULES.—Upon the request of any 
bargaining party who—
368 
‘‘(i) employs at least 5 percent 
of the active participants, or 
‘‘(ii) represents as an em-
ployee organization, for purposes 
of collective bargaining, at least 5 
percent of active participants, 
the plan sponsor shall include among 
the proposed schedules such sched-
ules of increases in contributions and 
reductions in future benefit accruals 
as may be specified by the bargaining 
parties. 
‘‘(C) SUBSEQUENT
AMENDMENTS.— 
Upon the adoption of a schedule of 
increases in contributions or reduc-
tions in future benefit accruals as 
part of the rehabilitation plan, the 
plan sponsor may amend the plan 
thereafter to update the schedule to 
adjust for any experience of the plan 
contrary to past actuarial assump-
tions, except that such an amendment 
may be made not more than once in 
any 3-year period.
369 
‘‘(D) ALLOCATION OF REDUCTIONS IN 
FUTURE
BENEFIT
ACCRUALS.—Any 
schedule containing reductions in fu-
ture benefit accruals forming a part 
of a rehabilitation plan shall be appli-
cable with respect to any group of ac-
tive participants who are employed 
by any bargaining party (as an em-
ployer obligated to contribute under 
the plan) in proportion to the extent 
to which increases in contributions 
under such schedule apply to such 
bargaining party. 
‘‘(E) LIMITATION ON REDUCTION IN 
RATES
OF
FUTURE
ACCRUALS.—Any 
schedule proposed under this para-
graph shall not reduce the rate of fu-
ture accruals below the lower of— 
‘‘(i) a monthly benefit equal to 
1 percent of the contributions re-
quired to be made with respect to 
a participant or the equivalent 
standard accrual rate for a partic-
ipant or group of participants 
under the collective bargaining
370 
agreements in effect as of the first 
day of the plan year in which the 
plan enters critical status, or 
‘‘(ii) if lower, the accrual rate 
under the plan on such date. 
The equivalent standard accrual rate 
shall be determined by the trustees 
based on the standard or average 
contribution base units that they de-
termine to be representative for ac-
tive participants and such other fac-
tors as they determine to be relevant. 
‘‘(6) MAINTENANCE
OF
CONTRIBUTIONS 
AND
RESTRICTIONS
ON
BENEFITS
PENDING 
ADOPTION
OF
REHABILITATION
PLAN.—The 
rules of paragraphs (5) and (6) of sub-
section (b) shall apply for purposes of 
this subsection by substituting the term 
‘rehabilitation plan’ for ‘funding improve-
ment plan’. 
‘‘(7) RESTRICTIONS UPON APPROVAL OF 
REHABILITATION
PLAN.—Upon adoption of 
a rehabilitation plan with respect to a 
multiemployer plan, the plan may not be 
amended—
371 
‘‘(A) so as to be inconsistent with 
the rehabilitation plan, or 
‘‘(B) so as to increase future ben-
efit accruals, unless the plan actuary 
certifies in advance that, after taking 
into account the proposed increase, 
the plan is reasonably expected to 
cease to be in critical status. 
‘‘(8) 
IMPLEMENTATION
OF
DEFAULT 
SCHEDULE UPON FAILURE TO ADOPT REHA-
BILITATION
PLAN.—If 
the 
plan 
is 
not 
amended by the end of the 240-day period 
after entry into critical status to include 
a rehabilitation plan, the plan sponsor 
shall amend the plan to implement the 
schedule required by paragraph (5)(A)(ii). 
‘‘(9) DEEMED
WITHDRAWAL.—Upon the 
failure of any employer who has an obli-
gation to contribute under the plan to 
make contributions in compliance with 
the schedule adopted under paragraph 
(4) as part of the rehabilitation plan, the 
failure of the employer may, at the dis-
cretion of the plan sponsor, be treated as 
a withdrawal by the employer from the
372 
plan under section 4203 of the Employee 
Retirement Income Security Act of 1974 
or a partial withdrawal by the employer 
under section 4205 of such Act. 
‘‘(d) DEFINITIONS.—For purposes of this 
section— 
‘‘(1) 
BARGAINING
PARTY.—The 
term 
‘bargaining party’ means, in connection 
with a multiemployer plan— 
‘‘(A) an employer who has an obli-
gation to contribute under the plan, 
and 
‘‘(B) an employee organization 
which, for purposes of collective bar-
gaining, represents plan participants 
employed by such an employer. 
‘‘(2) FUNDED
PERCENTAGE.—The term 
‘funded percentage’ means the percent-
age expressed as a ratio of which— 
‘‘(A) the numerator of which is 
the value of the plan’s assets, as de-
termined under section 431(c)(2), and 
‘‘(B) the denominator of which is 
the accrued liability of the plan.
373 
‘‘(3) 
ACCUMULATED
FUNDING
DEFI-
CIENCY.—The term ‘accumulated funding 
deficiency’ has the meaning provided 
such term in section 431(a). 
‘‘(4) ACTIVE
PARTICIPANT.—The term 
‘active participant’ means, in connection 
with a multiemployer plan, a participant 
who is in covered service under the plan. 
‘‘(5) INACTIVE PARTICIPANT.—The term 
‘inactive participant’ means, in connec-
tion with a multiemployer plan, a partici-
pant who— 
‘‘(A) is not in covered service 
under the plan, and 
‘‘(B) is in pay status under the 
plan or has a nonforfeitable right to 
benefits under the plan. 
‘‘(6) PAY STATUS.—A person is in ‘pay 
status’ under a multiemployer plan if— 
‘‘(A) at any time during the cur-
rent plan year, such person is a par-
ticipant or beneficiary under the plan 
and is paid an early, late, normal, or 
disability retirement benefit under 
the plan (or a death benefit under the
374 
plan related to a retirement benefit), 
or 
‘‘(B) to the extent provided in reg-
ulations of the Secretary, such person 
is entitled to such a benefit under the 
plan. 
‘‘(7) OBLIGATION TO CONTRIBUTE.—The 
term ‘obligation to contribute’ has the 
meaning provided such term under sec-
tion 4212(a) of the Employee Retirement 
Income Security Act of 1974. 
‘‘(8) ENTRY
INTO
CRITICAL
STATUS.—A 
plan shall be treated as entering into crit-
ical status as of the date that such plan is 
certified to be in critical status under 
subsection (a)(1), is presumed to be in 
critical status under subsection (a)(3), or 
enters into critical status under sub-
section (b)(7).’’. 
(b) CLERICAL AMENDMENT.—The table of 
sections for subpart A of part III of sub-
chapter D of chapter 1 of such Code is amend-
ed by adding at the end the following new 
item: 
‘‘Sec. 432. Additional funding rules for multiemployer plans in 
endangered status or critical status.’’.
375 
(c) 
EFFECTIVE
DATE.—The 
amendment 
made by this section shall apply with respect 
to plan years beginning after December 31, 
2005. 
(d) SPECIAL RULE FOR 2006.—In the case of 
any plan year beginning in 2006, any ref-
erence in section 432 of the Internal Revenue 
Code of 1986 (as added by this section) to sec-
tion 431 of such Code (as added by this Act) 
shall be treated as a reference to the cor-
responding provision of such Code as in effect 
for plan years beginning in such year. 
SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MUL-
TIEMPLOYER PLANS. 
(a) ADVANCE DETERMINATION OF IMPENDING 
INSOLVENCY OVER 5 YEARS.—Section 418E(d)(1) 
of the Internal Revenue Code of 1986 is 
amended— 
(1) by striking ‘‘3 plan years’’ the sec-
ond place it appears and inserting ‘‘5 
plan years’’, and 
(2) by adding at the end the following 
new sentence: ‘‘If the plan sponsor makes 
such a determination that the plan will 
be insolvent in any of the next 5 plan