Keep Our Pension Promises Act

Bill: 114-s-1631
Sponsor: full_name: Sen. Sanders, Bernard [I-VT]
Introduced: 2015-06-18
Policy area: Labor and Employment
Subjects: Bankruptcy

Employee benefits and pensions

Income tax exclusion

Land transfers

Transfer and inheritance taxes
Latest action: action_date: 2015-06-18
text: Read twice and referred to the Committee on Finance.

Summaries:
action_date: 2015-06-18
action_desc: Introduced in Senate
text: <p><strong>Keep Our Pension Promises Act </strong></p> <p>This bill repeals the elimination of the pension anti-cutback provisions under the Multiemployer Pension Reform Act of 2014. The anti-cutback provisions prohibit reductions in pension benefits to participants in multiemployer pension plans. </p> <p>The bill amends the Employee Retirement Income Security Act of 1974 (ERISA) to allow a plan sponsor of an eligible multiemployer plan to petition the Pension Benefit Guaranty Corporation for a partition of a financially-troubled pension plan. PBGC is required to establish a legacy fund to cover the administrative and benefit costs resulting from a partition.. </p> <p>The bill amends the federal bankruptcy code to assign first claim priority to pension obligations under ERISA. </p> <p>The bill amends the Internal Revenue Code to: (1) impose a limit of $1 million on the exemption of the gain from the exchange of real property in a like kind exchange, (2) prohibit the use of like kind exchanges for collectibles, (3) establish estate valuation rules for certain transfers of nonbusiness assets, and (4) limit estate tax discounts for certain individuals with minority interests in a business acquired from a decedent.</p>

tv_txt: II 114th CONGRESS 1st Session S. 1631 IN THE SENATE OF THE UNITED STATES June 18, 2015 Mr. Sanders (for himself, Mr. Brown , and Ms. Baldwin ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to modify certain provisions relating to multiemployer pensions, and for other purposes.

1. Short title This Act may be cited as the Keep Our Pension Promises Act . 2. Restoring anti-cutback provisions Section 201 of the Multiemployer Pension Reform Act of 2014 (division O of Public Law 113–235 ) and the amendments made by such section are repealed, and the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 shall be applied as if such section and amendments had never been enacted. 3. Partitions of eligible multiemployer plans (a) In general Section 4233 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1413 ), as amended by section 122 of the Multiemployer Pension Reform Act of 2014 (division O of Public Law 113–235 ), is amended to read as follows: 4233. Partitions of eligible multiemployer plans (a) (1) Upon the application by the plan sponsor of an eligible multiemployer plan for a partition of the plan, the corporation may order a partition of the plan in accordance with this section. The corporation shall make a determination regarding the application, in accordance with regulations promulgated by the corporation, not later than 270 days after— (A) the date such application was filed; or (B) if later, the date such application was completed. (2) At least 14 days before submitting an application for partition of a plan under paragraph (1), the plan sponsor of the plan shall notify all participants and beneficiaries of such application, in the form and manner prescribed by regulations issued by the corporation. (b) For purposes of this section, a multiemployer plan is an eligible multiemployer plan if— (1) the plan is in critical status and is projected to become insolvent within the meaning of section 4245— (A) during the current plan year or any of the 14 succeeding plan years; or (B) during the current plan year or any of the 19 succeeding plan years, if the plan has a ratio of inactive participants to active participants that exceeds 2 to 1 and the funded percentage of the plan is less than 80 percent; (2) the corporation determines, after consultation with the Participant and Plan Sponsor Advocate selected under section 4004, that the plan sponsor has taken (or is taking concurrently with an application for partition) all reasonable measures described in section 432(e)(3)(A) of the Internal Revenue Code of 1986, and has made (or is making) benefit adjustments under section 432(e)(8) of such Code to reduce the risk of insolvency; (3) 20 percent or more of the amount by which the liabilities of the plan exceed the value of plan assets is attributable to the service of participants whose employers— (A) withdrew from the plan prior to the date of enactment of the Keep Our Pension Promises Act ; and (B) failed to pay (or are delinquent with respect to paying) the full amount of the employer's withdrawal liability under section 4201(b)(1) or as otherwise determined under an agreement with the plan; (4) the corporation reasonably expects that— (A) a partition of the plan will reduce the corporation’s expected long-term loss with respect to the plan; and (B) a partition of the plan is necessary for the plan to remain or become solvent; and (5) the corporation certifies to Congress that after partition the corporation will continue to have the ability to meet existing financial assistance obligations to other plans (including any liabilities associated with multiemployer plans that are insolvent or that are projected to become insolvent within 10 years). (c) (1) A partition under this section shall consist of a transfer to the plan created by the partition order of benefits to which eligible participants and beneficiaries were entitled under the plan that was partitioned, in an amount not to exceed the amount that would be guaranteed under section 4022A if the plan were insolvent as of the date of the partition order. (2) The corporation's partition order shall provide for an annual transfer by the corporation to the plan created by the partition order of an amount equal to the yearly benefits that would be guaranteed under section 4022A to the eligible participants and beneficiaries if the plan were insolvent as of the date of the partition order. (3) (A) Where practicable, the initial transfer in accordance with paragraph (2) shall be completed at least 60 days prior to the plan year that immediately follows the partition start date. The partition order shall require that the initial transfer be sufficient to satisfy the guaranteed benefits in the first plan year of the partitioned plan. (B) Subsequent transfers in accordance with paragraph (2) shall be completed at least 60 days prior to the first day of each succeeding plan year. (d) (1) (A) The plan created by the partition order is a successor plan to which section 4022A applies. (B) At the discretion of the plan sponsor, the plan created by the partition order may remain a part of the plan that was partitioned or be maintained as a separate plan. (2) (A) The plan sponsor and the administrator of an eligible multiemployer plan prior to the partition shall be the plan sponsor and the administrator, respectively, of the plan created by the partition order, and shall adopt reasonable procedures to reduce administrative expenses and to coordinate benefit payments and communications with the participants and beneficiaries in the plan created by the partition order. (B) Benefit payments equal to the amount of an eligible participant or beneficiary's guaranteed benefits shall be paid to such participant or beneficiary and may be— (i) paid separately by the plan created by the partition order; or (ii) paid in a single, monthly payment by the plan that was partitioned. (3) In the event an employer withdraws from the plan that was partitioned, withdrawal liability shall be computed under section 4201 with respect to both the plan that was partitioned and the plan created by the partition order. (e) In addition to the payment of guaranteed benefits under subsection (d)(2)(B), each eligible participant or beneficiary of the plan created by the partition order shall receive a monthly benefit for each month the benefit is in pay status in an amount that— (1) the corporation, in consultation with the Participant and Plan Sponsor Advocate, determines to be fair to the plan, the participant or beneficiary, the employers, and the corporation; and (2) is at least equal to the lesser of— (A) the monthly nonforfeitable benefit for such participant or beneficiary payable under the plan that was partitioned; or (B) 80 percent of the maximum benefit commencing at age 65 guaranteed under section 4022(a) for participants and beneficiaries in terminated single employer plans, unreduced for early retirement. Such monthly benefit may be combined with the monthly payment under subsection (d)(2)(B)(ii). (f) (1) The corporation shall establish a legacy fund for the purposes of funding the administrative and benefit costs to the corporation arising from partitions under this section, as described in paragraph (2). (2) Any administrative and benefit costs to the corporation arising from a partition ordered under this section in excess of amounts available in such legacy fund shall be paid from the fund for basic benefits guaranteed for multiemployer plans. (g) Only one partition order shall be issued with respect to each eligible multiemployer plan. (h) For purposes of this subsection, the term eligible participant or beneficiary means a participant or beneficiary of an eligible multiemployer plan that is partitioned in accordance with a petition order under this section, and who is an employee or beneficiary of an employee of an employer that is described in subsection (b)(3). (i) Not later than 14 days after the issuance of a partition order under this section, the corporation shall provide notice of such order to the Committee on Finance of the Senate, the Committee on Health, Education, Labor, and Pensions of the Senate, the Committee on Education and the Workforce of the House of Representatives, the Committee on Ways and Means of the House of Representatives, and to all eligible participants or beneficiaries whose guaranteed benefits will be paid directly or indirectly by the plan created by the partition order. . (b) Effective date The amendments made by subsection (a) shall apply with respect to plan years beginning after the date of enactment of this Act. (c) Transfers to legacy fund The Secretary of the Treasury shall from time to time transfer from the general fund of the Treasury to the legacy fund established under section 4233(f)(1) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1413(f)(1) ) (as amended by subsection (a)) amounts equal to the increase in revenues to the Treasury by reason of the amendments made by sections 6 and 7 of this Act. (d) Transfers between funds of the PBGC Section 4005 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1305 ) is amended by adding at the end the following: (i) (1) An eighth fund is established under section 4233(f) and credited with the amounts described in section 3(c) of the Keep Our Pension Promises Act . (2) Notwithstanding subsection (g), the corporation may transfer amounts into the legacy fund established under section 4233(f)(1) from other funds established under this section, as the corporation determines appropriate. . 4. Employer withdrawals relating to multiemployer plans The matter preceding paragraph (1) of section 4225(b) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1405(b) ) is amended by inserting , including an employer undergoing liquidation under chapter 7 of title 11, United States Code, or similar provisions of State law, after dissolution, . 5. Priorities of claims in bankruptcy (a) In general Section 507(a) of title 11, United States Code is amended— (1) by redesignating paragraphs (1) through 10 as paragraphs (2) through (11), respectively; (2) by inserting before paragraph (2) (as redesignated) the following: (1) First, withdrawal liability determined under part 1 of subtitle E of title IV of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1381 et seq. ). . (3) in the matter preceding subparagraph (A) of paragraph (2) (as redesignated), by striking First: and inserting Second: ; (4) in paragraph (3) (as redesignated), by striking Second, and inserting Third, ; (5) in paragraph (4) (as redesignated), by striking Third, and inserting Fourth, ; (6) in the matter preceding subparagraph (A) of paragraph (5) (as redesignated), by striking Fourth, and inserting Fifth, ; (7) in the matter preceding subparagraph (A) of paragraph (6) (as redesignated), by striking Fifth, and inserting Sixth, ; (8) in the matter preceding subparagraph (A) of paragraph (7) (as redesignated), by striking Sixth, and inserting Seventh, ; (9) in paragraph (8) (as redesignated), by striking Seventh, and inserting Eighth, ; (10) in the matter preceding subparagraph (A) of paragraph (9) (as redesignated), by striking Eighth, and inserting Ninth, ; (11) in paragraph (10) (as redesignated), by striking Ninth, and inserting Tenth, ; and (12) in paragraph (11) (as redesignated), by striking Tenth, and inserting Eleventh, . (b) Technical and conforming amendments (1) Section 502(i) of title 11, United States Code, is amended by striking section 507(a)(8) and inserting section 507(a)(9) . (2) Section 503(b)(1)(B)(i) of title 11, United States Code, is amended by striking section 507(a)(8) and inserting section 507(a)(9) . (3) Section 507(d) of title 11, United States Code, is amended by striking (a)(1), (a)(4), (a)(5), (a)(6), (a)(7), (a)(8), or (a)(9) and inserting (a)(2), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9), or (a)(10) . (4) Section 523(A) of title 11, United States Code, is amended by striking section 507(a)(3) or 507(a)(8) and inserting section 507(a)(4) or 507(a)(9) . (5) Section 724 of title 11, United States Code, is amended— (A) in subsection (b)(2), by striking section 507(a)(1)(C) or 507(a)(2) and inserting section 507(a)(2)(C) or 507(a)(3) ; and (B) in subsection (f)— (i) in paragraph (1), by striking section 507(a)(4) and inserting section 507(a)(5) ; and (ii) in paragraph (2), by striking section 507(a)(5) and inserting section 507(a)(6) . (6) Section 726(b) of title 11, United States Code, is amended by striking paragraph (1), (2), (3), (4), (5), (6), (7), (8), (9), or (10) of section 507(a) and inserting paragraphs (2) through (11) of section 507(a) . (7) Section 752(a) of title 11, United States Code, is amended by striking section 507(a)(2) and inserting section 507(a)(3) . (8) Section 766 of title 11, United States Code, is amended— (A) in subsection (h), by striking section 507(a)(2) and inserting section 507(a)(3) ; and (B) in subsection (i)— (i) in paragraph (1), by striking section 507(a)(2) and inserting section 507(a)(3) ; and (ii) in paragraph (2), by striking section 507(a)(2) and inserting section 507(a)(3) . (9) Section 901 of title 11, United States Code, is amended by striking 507(a)(2) and inserting 507(a)(3) . (10) Section 943(b)(5) of title 11, United States Code, is amended by striking section 507(a)(2) and inserting section 507(a)(3) . (11) Section 1123(a)(1) of title 11, United States Code, is amended by striking section 507(a)(2), 507(a)(3), or 507(a)(8) and inserting section 507(a)(3), 507(a)(4), or 507(a)(9) . (12) Section 1129(a)(9) of title 11, United States Code, is amended— (A) in subparagraph (A), by striking section 507(a)(3) or 507(a)(4) and inserting section 507(a)(4) or 507(a)(5) ; (B) in the matter preceding clause (i) of subparagraph (B), by striking section 507(a)(1), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7) and inserting section 507(a)(2), 507(a)(5), 507(a)(6), 507(a)(7), or 507(a)(8) ; (C) in the matter preceding clause (i) of subparagraph (C), by striking section 507(a)(8) and inserting section 507(a)(9) ; and (D) in subparagraph (D), by striking section 507(a)(8) and inserting section 507(a)(9) . (13) Section 1222(a)(4) of title 11, United States Code, is amended by striking section 507(a)(1)(B) and inserting 507(a)(2)(B) . (14) Section 1226(b)(1) of title 11, United States Code, is amended by striking section 507(a)(2) and inserting section 507(a)(3) . (15) Section 1322(a)(4) of title 11, United States Code, is amended by striking section 507(a)(1)(B) and inserting section 507(a)(2)(B) . (16) Section 1326(b)(1) of title 11, United States Code, is amended by striking section 507(a)(2) and inserting section 507(a)(3) . (17) Section 1328(a)(2) of title 11, United States Code, is amended by striking section 507(a)(8)(C) and inserting section 507(a)(9)(C) . 6. Limitation of nonrecognition of like-kind exchanges (a) In general Paragraph (2) of section 1031(a) of the Internal Revenue Code of 1986 is amended— (1) by redesignating subparagraphs (A), (B), (C), (D), (E), and (F) as clauses (i), (ii), (iii), (iv), (v), and (vi), and by moving such clauses 2 ems to the right, (2) by moving the flush language after the first sentence 2 ems to the right, (3) by striking (2) Exception .—This subsection and inserting “(2) Exceptions .— (A) Excluded property This subsection , and (4) by adding at the end the following new subparagraph: (B) Dollar limitation for exchanges of real property (i) In general Paragraph (1) shall not apply so much of the gain which, but for such paragraph, would be recognized by the taxpayer with respect to real property exchanged during the taxable year as exceeds $1,000,000. (ii) Special rules for partnerships and S-corporations In the case of a pass-through entity, clause (i) shall be applied at both the entity and at the partner or owner level. (iii) Aggregation rules For purposes of this subparagraph— (I) Family members Individuals who are spouses or who bear any of the relationships described in section 152(d)(2) to each other shall be treated as 1 taxpayer (without regard to whether spouses file a joint return). (II) Corporations and other entities All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as 1 person. (iv) Adjustment for inflation In the case of exchanges completed in a taxable year beginning after December 31, 2016, the $1,000,000 amount in clause (i) shall be increased by an amount equal to— (I) such dollar amount, multiplied by (II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2015 for calendar year 1992 in subparagraph (B) thereof. If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000. . (b) Exclusion of art and collectibles Subparagraph (A) of section 1031(a)(2) of the Internal Revenue Code of 1986, as amended by subsection (a), is amended— (1) by striking or at the end of clause (v), (2) by striking the period at the end of clause (vi) and inserting , or , and (3) by inserting after clause (vi) the following new clause: (vii) any collectible (within the meaning of section 408(m), without regard to paragraph (3) thereof). . (c) Regulatory authority Subsection (f) of section 1031 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (5) Rules relating to dollar limitation The Secretary shall prescribe such guidance as is necessary for applying subsection (a)(2)(B)(i) in the case of the exchange of multiple pieces of real property by related persons. . (d) Conforming amendments (1) Subsection (b) of section 1031 of the Internal Revenue Code of 1986 is amended— (A) by striking in kind .—If an exchange and inserting “ in kind .— (1) In general If an exchange , and (B) by adding at the end the following new paragraph: (2) Coordination with subsection (a)(2)(B) In the case of an exchange to which paragraph (1) applies— (A) paragraph (1) shall be applied before the application of subsection (a)(2)(B), and (B) subsection (a)(2)(B) shall be applied— (i) as if such exchange were within the provisions of subsection (a), and (ii) by increasing the basis of the property disposed of by the taxpayer in such exchange by the amount of any gain determined under paragraph (1). . (2) Subsection (d) of section 1031 of such Code is amended by striking in the amount of gain and inserting in the amount of gain (including any gain recognized by reason of subsection (a)(2)(B)(i)) . (3) Subsection (i) of section 1031 of such Code is amended by striking (a)(2)(B) and inserting (a)(2)(A)(ii) . (e) Effective date The amendments made by this section shall apply to exchanges completed in taxable years beginning after December 31, 2015. 7. Valuation rules for certain transfers of nonbusiness assets; limitation on minority discounts (a) In general Section 2031 of the Internal Revenue Code of 1986 is amended by redesignating subsection (d) as subsection (f) and by inserting after subsection (c) the following new subsections: (d) Valuation rules for certain transfers of nonbusiness assets For purposes of this chapter and chapter 12— (1) In general In the case of the transfer of any interest in an entity other than an interest which is actively traded (within the meaning of section 1092)— (A) the value of any nonbusiness assets held by the entity with respect to such interest shall be determined as if the transferor had transferred such assets directly to the transferee (and no valuation discount shall be allowed with respect to such nonbusiness assets), and (B) such nonbusiness assets shall not be taken into account in determining the value of the interest in the entity. (2) Nonbusiness assets For purposes of this subsection— (A) In general The term nonbusiness asset means any asset which is not used in the active conduct of 1 or more trades or businesses. (B) Exception for certain passive assets Except as provided in subparagraph (C), a passive asset shall not be treated for purposes of subparagraph (A) as used in the active conduct of a trade or business unless— (i) the asset is property described in paragraph (1) or (4) of section 1221(a) or is a hedge with respect to such property, or (ii) the asset is real property used in the active conduct of 1 or more real property trades or businesses (within the meaning of section 469(c)(7)(C)) in which the transferor materially participates and with respect to which the transferor meets the requirements of section 469(c)(7)(B)(ii). For purposes of clause (ii), material participation shall be determined under the rules of section 469(h), except that section 469(h)(3) shall be applied without regard to the limitation to farming activity. (C) Exception for working capital Any asset (including a passive asset) which is held as a part of the reasonably required working capital needs of a trade or business shall be treated as used in the active conduct of a trade or business. (3) Passive asset For purposes of this subsection, the term passive asset means any— (A) cash or cash equivalents, (B) except to the extent provided by the Secretary, stock in a corporation or any other equity, profits, or capital interest in any entity, (C) evidence of indebtedness, option, forward or futures contract, notional principal contract, or derivative, (D) asset described in clause (iii), (iv), or (v) of section 351(e)(1)(B), (E) annuity, (F) real property used in 1 or more real property trades or businesses (as defined in section 469(c)(7)(C)), (G) asset (other than a patent, trademark, or copyright) which produces royalty income, (H) commodity, (I) collectible (within the meaning of section 401(m)), or (J) any other asset specified in regulations prescribed by the Secretary. (4) Look-thru rules (A) In general If a nonbusiness asset of an entity consists of a 10-percent interest in any other entity, this subsection shall be applied by disregarding the 10-percent interest and by treating the entity as holding directly its ratable share of the assets of the other entity. This subparagraph shall be applied successively to any 10-percent interest of such other entity in any other entity. (B) 10-percent interest The term 10-percent interest means— (i) in the case of an interest in a corporation, ownership of at least 10 percent (by vote or value) of the stock in such corporation, (ii) in the case of an interest in a partnership, ownership of at least 10 percent of the capital or profits interest in the partnership, and (iii) in any other case, ownership of at least 10 percent of the beneficial interests in the entity. (5) Coordination with subsection (b) Subsection (b) shall apply after the application of this subsection. (e) Limitation on minority discounts For purposes of this chapter and chapter 12, in the case of the transfer of any interest in an entity other than an interest which is actively traded (within the meaning of section 1092), no discount shall be allowed by reason of the fact that the transferee does not have control of such entity if the transferor, the transferee, and members of the family (as defined in section 2032A(e)(2)) of the transferor and transferee— (1) have control of such entity, or (2) own the majority of the ownership interests (by value) in such entity. . (b) Effective date The amendments made by this section shall apply to transfers after the date of the enactment of this Act.