Consolidated Omnibus Budget Reconciliation Act of 1985
PL 99-272 (H.R.3128), enacted 04/07/1986

100 STAT. 82 
PUBLIC LAW 99-272—APR. 7, 1986 
Public Law 99-272 
• ? 
99th Congress 
An Act 
Apr. 7, 1986 
To provide for reconciliation pursuant to section 2 of the first co.:Q,current 
r
T
T p 31281 
resolution on the budget for fiscal year 1986 (S. Con. Res. 32, Ninety-ninth 
Congress). 
Be it enacted by the Senate and House of Representatives of the 
Consolidated 
United States of America in Congress assembled, 
Omnibus Budget 
Reconciliation 
Act of 1985. 
SHORT TITLE 
SECTION 1. This Act may be cited as the "Consolidated Omnibus 
Budget Reconciliation Act of 1985". 
TABLE OF CONTENTS 
Title I. Agriculture programs. 
Title II. Armed services and defense-related programs. 
Title III. Housing and community development programs. 
Title IV. Transportation and related programs. 
Title V. Corporation for Public Broadcasting and Federal Communications Commis-
sion. 
Title VI. Maritime, coastal zone, and related programs. 
Title VII. Energy and related programs. 
Title VIII. Outer Continental Shelf and related programs. 
Title IX. Medicare, Medicaid, and Maternal and Child Health programs. 
Title X. Private health insurance coverage. 
Title XI. Single-employer plan termination insurance system amendments. 
Title XII. Income security and related programs. 
Title XIII. Revenues, trade, and related programs. 
Title XIV. Revenue sharing. 
Title XV. Civil service, postal service, and governmental affairs generally. 
Title XVI. Higher education programs. 
Title XVII. Graduate Medical Education Council and technical amendments to the 
Public Health Service Act. 
Title XVIII. Small business programs. 
Title XIX. Veterans' programs. 
Title XX. Miscellaneous provisions. 
\^ 
TITLE I—AGRICULTURE PROGRAMS 
Subtitle A—Agricultural Program Savings 
SEC. 1001. AGRICULTURAL PROGRAM SAVINGS. 
The expenditures and outlays resulting from the provisions of title 
XI (relating to the export sales of dairy products) and title XIII 
(relating to emergency disaster loans and loan authorizations under 
the Agricultural Credit Insurance Fund) of the Food Security Act of 
99 Stat. 1465, 
1985 (H.R. 2100, 99th Congress) shall be counted for purposes of 
1^18- 
determining savings under the Consolidated Omnibus Budget Rec-
onciliation Act of 1985 as having been enacted under this Act. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 83 
Subtitle B—Tobacco Program Improvements 
SEC. 1101. FINDINGS AND PURPOSES. 
7 USC 1445 note. 
(a) FINDINGS.—Congress finds that— 
(1) the maintenance of a viable tobacco price support and state and local 
production adjustment program is in the interests of tobacco governments. 
producers, purchasers of tobacco, persons employed directly or 
indirectly by the tobacco industry, and the localities and States 
whose economies and tax bases are dependent on the tobacco 
industry; 
(2) the present tobacco price support program is in jeopardy 
and in need of reform; 
(3) under present law, the levels of price support for tobacco 
have resulted in market prices for tobacco that are not competi-
tive on the world market; 
(4) as a consequence, extremely large quantities of domestic 
tobacco have been put under loan and placed in the inventories 
of the producer-owned cooperative marketing associations that 
administer the tobacco price support program; 
(5) the increased inventories have led to a significant increase 
in the assessments producers are required to pay to maintain 
the tobacco price support program on a "no net cost" basis; 
(6) such increasingly large assessments are creating a severe 
hardship on producers; 
(7) the existence of such large inventories poses a threat to the 
orderly marketing of future crops of tobacco; 
(8) inventories of producer associations must be significantly 
reduced or the tobacco price support program will collapse; 
(9) the Commodity Credit Corporation is threatened with 
substantial losses on disposition of these inventories should the 
tobacco price support program collapse; 
(10) it is imperative that such excess inventories of tobacco be 
disposed of, under the supervision of the Secretary of Agri-
culture, in a manner that— 
(A) will not disrupt the orderly marketing of new tobacco 
crops; 
(B) will minimize any losses to the Federal Government; 
and 
(C) will be fair and equitable to all tobacco producers and 
purchasers; 
(11) the mutual cooperation of tobacco producers, tobacco 
purchasers, producer associations, and the Secretary of Agri-
culture is necessary— 
(A) to restore the tobacco price support program to a 
stable condition; and 
(B) to prevent substantial losses to taxpayers that would 
result from the collapse of the program; 
(12) restoration of stability to the tobacco price support pro- Commerce and 
gram through a sharing of the cost of that program by pur- trade, 
chasers of tobacco along with producers of tobacco is necessary 
to prevent undue burdens on, or obstruction of, interstate and 
foreign commerce in tobacco; and 
(13) the system of grading tobacco should be thoroughly re-
viewed to ensure that grades are assigned to tobacco that 
properly state the quality of such tobacco. 
(b) PURPOSES.—The purposes of this subtitle are— 
100 STAT. 84 
PUBLIC LAW 99-272—APR, 7, 1986 
(1) to encourage cooperation among tobacco producers, to-
bacco purchasers, and the Secretary of Agriculture in reducing 
tobacco price support levels, assessment costs, the size of inven-
tories of producer associations, and the exposure of taxpayers to 
large budget outlays; 
(2) to adjust the method by which price support levels and 
production quotas are calculated to reflect actual market 
conditions; 
(3) to facilitate the purchase and sale of Flue-cured and 
Burley tobacco presently in the inventories of producer associa-
tions through which producers of Flue-cured and Burley tobacco 
are provided price support; 
(4) to provide that purchasers and producers of domestic 
tobacco share equally in the cost of maintaining the tobacco 
price support program at no net cost to the taxpayers; and 
(5) to expedite reform of the system of grading tobacco so that 
grades assigned to tobacco more accurately reflect the quality of 
such tobacco. 
SEC. 1102. PRICE SUPPORT ADJUSTMENTS. 
(a) IN GENERAL.—Effective for the 1985 and subsequent crops of 
tobacco, section 106(f) of the Agricultural Act of 1949 (7 U.S.C. 
99 Stat. 818. 
1445(f)) is amended by striking out paragraphs (4) and (5) and 
inserting in lieu thereof the following new paragraphs: 
"(4) For the 1985 and 1986 crops of Burley tobacco, the 
support level shall be $1,488 per pound. 
"(5) For the 1986 crop of Flue-cured tobacco, the support level 
shall be $1,438 per pound. 
"(6)(A) Except as provided in subparagraph (B), for the 1986 
and each subsequent crop of any kind of tobacco (other than 
Flue-cured and Burley tobacco) for which marketing quotas are 
in effect or are not disapproved by producers, the support level 
shall be the level in cents per pound at which the immediately 
preceding crop was supported, plus or minus, respectively, the 
amount by which— 
"(i) the support level for the crop for which the deter-
mination is being made, as determined under subsection (b); 
is greater or less than 
"(ii) the support level for the immediately preceding crop, 
as determined under subsection (b), 
as that difference may be adjusted by the Secretary under 
subsection (d) if the support level under clause (i) is greater than 
the support level under clause (ii). 
"(B) Notwithstanding subparagraph (A) and subsection (d), if 
requested by the board of directors of an association through 
which price support for the respective kind of tobacco specified 
in subparagraph (A) is made available to producers, the Sec-
retary may reduce the support level for such kind of tobacco to 
the extent requested by the association to more accurately 
reflect the market value and improve the marketability of such 
tobacco. 
"(7)(A) For the 1987 and each subsequent crop of Flue-cured 
and Burley tobacco for which marketing quotas are in effect or 
are not disapproved by producers, the support level shall be the 
level in cents per pound at which the immediately preceding 
crop was supported, plus or minus, respectively, an adjustment 
of not less than 65 percent nor more than 100 percent of the 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 85 
total, as determined by the Secretary after taking into consider-
ation the supply of the kind of tobacco involved in relation to 
demand, of— 
"(i) 66.7 percent of the amount by which— 
"(I) the average price received by producers for Flue-
cured and Burley tobacco, respectively, on the United 
States auction markets, as determined by the Sec-
retary, during the 5 marketing years immediately 
preceding the marketing year for which the determina-
tion is being made, excluding the year in which the 
average price was the highest and the year in which 
the average price was the lowest in such period, is 
greater or less than 
"(II) the average price received by producers for Flue-
cured and Burley tobacco, respectively, on the United 
States auction markets, as determined by the Sec-
retary, during the 5 marketing years immediately 
preceding the marketing year prior to the marketing 
year for which the determination is being made, 
excluding the year in which the average price was the 
highest and the year in which the average price was 
the lowest in such period; and 
"(ii) 33.3 percent of the change, expressed as a cost per 
pound of tobacco, in the index of prices paid by tobacco 
producers from January 1 to December 31 of the calendar 
year immediately preceding the year in which the deter-
mination is made. 
"(B) For purposes of subparagraph (A)— 
"(i) the average market price for Burley tobacco for the 
1985 marketing year shall be reduced by $0,039 per pound; 
"(ii) the average market price for Burley tobacco for the 
1984 and each prior applicable marketing year shall be 
reduced by $0.30 per pound; 
"(iii) the average market price for Flue-cured tobacco for 
the 1985 marketing year shall be reduced by $0.25 per 
pound; 
"(iv) the average market price for Flue-cured tobacco for 
the 1984 and each prior applicable marketing year shall be 
reduced by $0.30 per pound; and 
"(v) the index of prices paid by tobacco producers shall 
include items representing general, variable costs of 
producing tobacco, as determined by the Secretary, but 
shall not include the cost of land, risk, overhead, manage-
ment, purchase or leasing of quotas, marketing contribu-
tions or assessments, and other costs not directly related to 
the production of tobacco.". 
(b) CERTAIN GRADES OF FLUE-CURED TOBACCO.—Effective for 
the 
1986 and subsequent crops of tobacco, section 106 of the Agricultural 
Act of 1949 (7 U.S.C. 1445) is further amended by striking out 
subsection (g). 
SEC. 1103. DETERMINATION OF MARKETING QUOTAS FOR FLUE-CURED 
AND BURLEY TOBACCO. 
(a) DEFINITIONS.—Section 3010?) of the Agricultural Adjustment 
Act of 1938 (7 U.S.C. 1301(b)) is amended— 
(1) by adding at the end of paragraph (14) the following new 
subparagraphs: 
100 STAT. 86 
PUBLIC LAW 99-272—APR. 7, 1986 
"(C) 'Reserve stock level', in the case of Flue-cured tobacco, shall 
be the greater of— 
"(i) 100,000,000 pounds (farm sales weight); or 
"(ii) 15 percent of the national marketing quota for Flue-cured 
tobacco for the marketing year immediately preceding the 
marketing year for which the level is being determined. 
"(D) 'Reserve stock level', in the case of Burley tobacco, shall be 
the greater o
f
—
-
"(i) 50,000,000 pounds (farm sales weight); or 
"(ii) 15 percent of the national marketing quota for Burley 
tobacco for the marketing year immediately preceding the 
marketing year for which the level is being determined."; and 
(2) by adding at the end thereof the following new paragraph: 
"(17) 'Domestic manufacturer of cigarettes' means a person that 
produces and sells more than 1 percent of the cigarettes produced 
and sold in the United States.". 
(b) FLUE-CURED TOBACCO.—Section 317(a)(1) of such Act (7 U.S.C. 
1314c(a)(l)) is amended— 
(1) by striking out " 'National marketing quota' " in the first 
sentence and inserting in lieu thereof "(A) Except as provided in 
subparagraph (B), 'national marketing quota' "; and 
(2) by adding at the end thereof the following new 
suljparagraphs: 
"(B) For the 1986 and each subsequent crop of Flue-cured tobacco, 
'national marketing quota' for a marketing year means the quantity 
of Flue-cured tobacco, as determined by the Secretary, that is not 
more than 103 percent nor less than 97 percent of the total o
f
— 
"(i) the aggregate of the quantities of Flue-cured tobacco that 
domestic manufecturers of cigarettes estimate the manufactur-
ers intend to purchase on the United States auction markets or 
from producers during the marketing year, as compiled and 
Post, p. 88. 
determined under section 320A; 
Exports. 
"(jj) ^jjg average annual quantity of Flue-cured tobacco ex-
ported from the United States during the 3 marketing years 
immediately preceding the marketing year for which the deter-
mination is being made; and 
Loans. 
"(iii) the quantity, if any, of Flue-cured tobacco that the 
Secretary, in the discretion of the Secretary, determines is 
necessary to increase or decrease the inventory of the producer-
owned cooperative marketing association that has entered into 
a loan agreement with the Commodity Credit Corporation to 
make price support available to producers of Flue-cured tobacco 
to establish or maintain such inventory at the reserve stock 
level for Flue-cured tobacco. 
"(C) Notwithstanding any other provision of law— 
"(i) the national marketing quota for Flue-cured tobacco for 
each of the 1986 through 1989 marketing years for such tobacco 
shall not be less than 94 percent of the national marketing 
quota for such tobacco for the preceding marketing year; and 
"(ii) the national marketing quota for Flue-cured tobacco for 
each of the 1990 through 1993 marketing years for such tobacco 
shall not be less than 90 percent of the national marketing 
quota for such tobacco for the preceding marketing year.". 
(c) BURLEY TOBACCO.—Section 319 of such Act (7 U.S.C. 1314e) is 
amended— 
(1) in subsection (c)— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 87 
(A) by striking out "The national marketing quota" in the 
first sentence and inserting in lieu thereof "(1) Except as 
provided in paragraph (3), the national marketing quota"; 
(B) by striking out the second sentence; 
(C) by designating the third sentence as paragraph (2); 
and 
(D) by adding at the end thereof the following new 
paragraphs: 
"(3)(A) For the 1986 and each subsequent crop of Burley tobacco, 
the national marketing quota for any marketing year shall be the 
quantity of Burley tobacco, as determined by the Secretary, that is 
not more than 103 percent nor less than 97 percent of the total o
f
— 
"(i) the aggregate of the quantities of Burley tobacco that 
domestic manufacturers of cigarettes estimate the manufactur-
ers intend to purchase on the United States auction markets or 
from producers during the marketing year, as compiled and 
determined under section 320A; 
"(ii) the average annual quantity of Burley tobacco exported Exports, 
from the United States during the 3 marketing years imme-
diately preceding the marketing year for which the determina-
tion is being made; and 
"(iii) the quantity, if any, of Burley tobacco that the Loans. 
Secretary, in the discretion of the Secretary, determines 
is necessary to increase or decrease the inventories of the 
producer-owned cooperative marketing associations that have 
entered into loan agreements with the Commodity Credit Corpora-
tion to make price support available to producers of Burley 
tobacco to establish or maintain such inventories, in the aggre-
gate, at the reserve stock level for Burley tobacco. 
"(B) In determining the quantity of Burley tobacco necessary to 
establish or maintain the inventories of the producer associations at 
the reserve stock level under subparagraph (AKiii)— 
"(i) the Secretary shall provide for initially attaining the 
reserve stock level over a period of 5 years; and 
"(ii) any downward adjustment in such inventories of Burley 
tobacco may not exceed the greater o
f
— 
"(I) 35,000,000 pounds; or 
"(II) 50 percent of the quantity by which— 
"(aa) the total inventories of Burley tobacco of the 
producer-owned cooperative marketing associations 
that have entered into loan agreements with the 
Commodity Credit Corporation to make price support 
available to producers of Burley tobacco; exceed 
"(bb) the reserve stock level for Burley tobacco. 
"(C) Notwithstanding any other provision of law— 
"(i) the national marketing quota for Burley tobacco for each 
of the 1986 through 1989 marketing years for such tobacco shall 
not be less than 94 percent of the national marketing quota for 
such tobacco for the preceding marketing year; and 
"(ii) the national marketing quota for Burley tobacco for each 
of the 1990 through 1993 marketing years for such tobacco shall 
not be less than 90 percent of the national marketing quota for 
such tobacco for the preceding marketing year."; and 
(2) by inserting ", except in the case of Burley tobacco," after 
"Provided, That" in the fourth sentence of subsection (e). 
100 STAT. 88 
PUBLIC LAW 99-272—APR. 7, 1986 
(d) PURCHASE INTENTIONS.—Effective for the 1986 and each subse-
quent crop of tobacco, such Act is amended by inserting after section 
320 (7 U.S.C. 13140 the following new section: 
7 u s e 1314g. 
Classified 
information. 
Law 
enforcement 
and crime. 
SUBMISSION OF PURCHASE INTENTIONS BY CIGARETTE 
MANUFACTURERS 
"SEC. 320A. (a)(1) Not later than December 1 of any marketing 
year with respect to Flue-cured tobacco (or, in the case of the 1986 
crop, 14 days after the date of enactment of the Consolidated 
Omnibus Budget Reconciliation Act of 1985) and January 15 of any 
marketing year with respect to Burley tobacco (or, in the case of the 
1986 crop, 14 days after the date of enactment of such Act or 
January 15, 1986, whichever is later), each domestic manufacturer 
of cigarettes shall submit to the Secretary a statement, by kind, of 
the quantity of Flue-cured tobacco and Burley tobacco (for which a 
national marketing quota is in effect or for which the Secretary has 
proclaimed a national marketing quota for the next succeeding 
marketing year) that the manufacturer intends to purchase, directly 
or indirectly, on the United States auction markets or from produc-
ers during the next succeeding marketing year (hereafter in this 
section referred to as the 'quantity of intended purchases'). 
"(2) The Secretary shall aggregate the quantities of intended 
purchases in a manner that will not allow the identification of the 
quantity of intended purchases of any manufacturer. 
"(b) If any domestic manufacturer of cigarettes fails to submit to 
the Secretary a statement of the quantity of intended purchases of 
the manufacturer, as required by this section, the Secretary shall 
establish the quantity of intended purchases to be attributed to such 
manufacturer for purposes of this Act, based on— 
"(1) the quantity of intended purchases submitted by such 
manufacturer under this section for the marketing year imme-
diately preceding the marketing year for which the determina-
tion is being made; or 
"(2) if such manufacturer did not submit a statement of the 
quantity of intended purchases of the manufacturer for the 
marketing year immediately preceding the marketing year for 
which the determination is being made, the most recent 
information available to the Secretary. 
"(c)(1) All information relating to the quantity of intended pur-
chases that is submitted by domestic manufacturers of cigarettes 
under this section shall be kept confidential by all officers and 
employees of the Department of Agriculture. 
"(2) Such information may only be disclosed by such officers or 
employees in a suit or administrative hearing— 
"(A)(i) brought at the direction, or on the request, of the 
Secretary; or 
"(ii) to which the Secretary or any officer of the United States 
is a party; and 
"(B) involving enforcement of this Act. 
"(3) Nothing in this section shall be considered to prohibit the 
publication, by direction of the Secretary, of the name of any person 
violating this Act, together with a statement of the particular 
provisions of the Act violated by such person. 
"(4) Any officer or employee of the Department of Agriculture 
who violates this subsection, on conviction, shall be— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 89 
"(A) subject to a fine of not more than $1,000 or to imprison-
ment for not more than 1 year, or to both; and 
"(B) removed from office. 
"(d) Notwithstanding any other provision of law, a statement of 
the quantity of intended purchases that is submitted under this 
section shall be exempt from disclosure under section 552 of title 5, 
United States Code.". 
SEC. 1104. MARKETING QUOTA ANNOUNCEMENT DATE; PROCLAMATION OF 
QUOTAS FOR FLUE-CURED AND BURLEY TOBACCO. 
(a) IN GENERAL.—Section 312 of the Agricultural Adjustment Act 
of 1938 (7 U.S.C. 1312) is amended— 
(1) by striking out "and February 1 of any marketing year 
with respect to other kinds of tobacco" in the matter preceding 
clause (1) of subsection (a) and inserting in lieu thereof "Feb-
ruary 1 of any marketing year with respect to Burley tobacco, 
and March 1 of any marketing year with respect to other kinds 
of tobacco"; and 
(2) by striking out "and not later than the first day of 
February with respect to other kinds of tobacco" in the first 
sentence of subsection (b) and inserting in lieu thereof ", not 
later than the first day of February with respect to Burley 
tobacco, and not later than the first day of March with respect 
to other kinds of tobacco". 
(b) DARK AIR-CURED AND FIRE-CURED TOBACCO.—Section 319(b) of 
such Act (7 U.S.C. 1313e(b)) is amended by striking out "February 1" 7 USC I3l4e. 
each place it appears in the fourth paragraph and inserting in lieu 
thereof "March 1". 
(c) PROCLAMATION OF QUOTA FOR FLUE-CURED TOBACCO.—Section 
317(d) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314c(d)) 
is amended by adding at the end thereof the following new sen-
tences: "Notwithstanding any other provision of law, for the 1986 
marketing year, the Secretary shall proclaim the national market-
ing quota for Flue-cured tobacco not later than 21 days after the 
date of enactment of the Consolidated Omnibus Budget Reconcili-
ation Act of 1985. Any proclamation with respect to the national 
marketing quota for the 1986 marketing year for Flue-cured tobacco 
made by the Secretary prior to such date of enactment shall become 
void on enactment of such Act.". 
(d) PROCLAMATION OF QUOTA FOR BURLEY TOBACCO.—Section 319(a) 
of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314e(a)) is 
amended by adding at the end thereof the following new sentences: 
"Notwithstanding any other provision of law, for the 1986 market-
ing year, the Secretary shall proclaim the national marketing quota 
for Burley tobacco not later than 21 days after the date of enactment 
of the Consolidated Omnibus Budget Reconciliation Act of 1985 or 
February 1, 1986, whichever is later. Any proclamation with respect 
to the national marketing quota for the 1986 marketing year for 
Burley tobacco made by the Secretary prior to such date of enact-
ment shall become void on enactment of such Act.". 
SEC. 1105. REDUCTION IN EXCESS TOBACCO NOT SUBJECT TO MARKETING 
PENALTY. 
(a) PENALTY ON EXCESS TOBACCO.—Effective for the 1986 
and 
subsequent crops of tobacco, the Agricultural Adjustment Act of 
1938 is amended— 
100 STAT. 90 
PUBLIC LAW 99-272—APR. 7, 1986 
Ante, p. 
7 use 1314 h. 
Loans. 
Ante, p. 
(1) by striking out "110" in section 317(g)(1) (7 U.S.C. 
1314c(g)(l)) and inserting in lieu thereof "103"; and 
(2) by striking out "110" in section 319(i)(l) (7 U.S.C. 
1314e(i)(l)) and inserting in lieu thereof "103". 
(b) PRICE SUPPORT ON EXCESS TOBACCO.—Effective for the 1986 and 
subsequent crops of tobacco, section 106(c)(1) of the Agricultural Act 
of 1949 (7 U.S.C. 1445(c)(1)) is amended by striking out "110" and 
inserting in lieu thereof "103". 
SEC. 1106. PURCHASE REQUIREMENTS; PENALTY. 
(a) IN GENERAL.—Effective for the 1986 and subsequent crops of 
tobacco, the Agricultural Adjustment Act of 1938 (as amended by 
section 1103(d)) is further amended by inserting after section 320A 
the following new section: 
"PURCHASE REQUIREMENTS; PENALTY 
"SEC. 320B. (a)(1) At the conclusion of each marketing year, on or 
before a date prescribed by the Secretary, each domestic manufac-
turer of cigarettes shall submit to the Secretary a statement, by 
kind, of the quantity of Flue-cured and Burley quota tobacco pur-
chased, directly or indirectly, by such manufacturer during such 
marketing year. 
"(2) The statement shall include, but not be limited to, the quan-
tity of each such kind of tobacco purchased by the manufacturer on 
the United States auction markets, from producers, and from the 
inventories of tobacco from the 1985 and subsequent crops of the 
producer-owned cooperative marketing associations that have en-
tered into loan agreements with the Commodity Credit Corporation 
to make price support available to producers of Flue-cured or Burley 
tobacco. 
"(b)(1) Except as otherwise provided in this subsection, any domes-
tic manufacturer of cigarettes that fails, as determined by the 
Secretary after notice and opportunity for a hearing, to purchase 
during a marketing year on the United States auction markets, 
from producers, or from the inventories of tobacco from the 1985 and 
subsequent crops of the producer associations described in subsec-
tion (a)(2) a quantity of Flue-cured quota tobacco and a quantity of 
Burley quota tobacco equal to at least 90 percent of the quantity of 
the intended purchases of Flue-cured tobacco and Burley tobacco, 
respectively, submitted by such manufacturer or established by the 
Secretary for such manufacturer for that marketing year under 
section 320A (as that quantity may be reduced under paragraph (2)) 
shall be subject to a penalty as prescribed in subsection (c). 
"(2)(A) If the total quantity of Flue-cured or Burley quota tobacco, 
respectively, marketed by producers at auction in the United States 
during the marketing year in question is less than the national 
marketing quota (including any adjustments for overmarketings or 
undermarketings) for that kind of tobacco for that marketing year, 
the quantity of intended purchases of each domestic manufacturer 
of cigarettes, for purposes of paragraph (1), shall be reduced by a 
percentage equal to the percentage by which the total quantity 
marketed at auction in the United States during the marketing year 
is less than the national marketing quota (including any adjust-
ments for overmarketings or undermarketings) for that kind of 
tobacco for the marketing year. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 91 
"(B) For purposes of this section, the term 'marketed' shall include 
disposition of tobacco by consigning the tobacco to a producer 
association described in subsection (a)(2) for a price support advance. 
"(c) The amount of any penalty to be imposed on a manufacturer 
under this section shall be determined by multiplying— 
"(1) twice the per pound assessment (as determined under 
section 106A or 106B of the Agricultural Act of 1949 (7 U.S.C. 
1445-1 or 1445-2)) for the kind of tobacco involved; by 
Post, pp. 92, 94. 
"(2) the quantity by which— 
"(A) the purchases by such manufacturer on the United 
States auction markets, from producers, or from the inven-
tories of tobacco from the 1985 and subsequent crops of the 
producer associations described in subsection (a)(2) of Flue-
cured and Burley quota tobacco, respectively, for the 
marketing year; are less than 
"(B) 90 percent of the quantity of intended purchases of 
such kinds of tobacco, respectively, submitted by the manu-
facturer or established by the Secretary for such manufac-
turer for that marketing year under section 320A (as that 
Ante, p. 88. 
quantity may be reduced under subsection (b)(2)). 
"(d)(1) An amount equivalent to the penalty collected by the 
Secretary under this section shall be transmitted by the Secretary to 
the appropriate producer-owned cooperative marketing association 
that has entered into a loan agreement with the Commodity Credit 
Corporation to make price support available to producers of Flue-
cured or Burley tobacco, as the case may be. 
"(2) Each association to which amounts are transmitted by the 
Secretary under this section shall deposit such amounts in the No 
Net Cost Fund or Account of such association in accordance with 
section 106A or 106B of the Agricultural Act of 1949. 
"(e) The limitations on disclosure set forth in subsections (c) and 
(d) of section 320A shall apply to information submitted by domestic 
manufacturers of cigarettes under this section with respect to the 
quantity of purchases of Flue-cured and Burley quota tobacco during 
a marketing year. Any officer or employee of the Department of 
Agriculture who violates such limitations on disclosure shall be 
subject to the penalties set forth in section 320A(c)(4). 
"(f) As used in this section, the term 'quota tobacco' means any 
kind of tobacco for which marketing quotas are in effect or for which 
marketing quotas are not disapproved by producers.". 
(b) CONFORMING AMENDMENT.—Effective for the 1986 and subse-
quent crops of tobacco, the last sentence of section 372(b) of the 
Agricultural Adjustment Act of 1938 (7 U.S.C. 1372(b)) is amended 
by striking out "The" and inserting in lieu thereof "Except as 
provided in section 320B, the". 
Ante, p. 90. 
SEC. 
1
1
0
7
. 
LEASE 
AND 
TRANSFER 
OF 
BURLEY 
TOBACCO 
QUOTAS. 
Effective with respect to the 1985 and subsequent crops of Burley 
tobacco, the fourth proviso of section 319(g) of the Agricultural 
Adjustment Act of 1938 (7 U.S.C. 1314e(g)) is amended by inserting 
after "July 1 of that crop year" the following: "or, if such record of 
the transfer is filed with the county committee after July 1, the 
county committee determines with the concurrence of the State 
committee that all interested parties agreed to such lease and 
transfer before July 1 and that the failure to file such record of the 
transfer did not result from gross negligence on the part of any 
party to such lease and transfer". 
100 STAT. 92 
PUBLIC LAW 99-272—APR. 7, 1986 
SEC. 1108. ASSESSMENTS TO NO NET COST FUNDS OR ACCOUNTS. 
(a) No NET COST FUND.—Effective for the 1986 and subsequent 
crops of tobacco, section 106A of the Agricultural Act of 1949 (7 
U.S.C. 1445-1) is amended— 
(1) in subsection (a)— 
(A) by striking out "and" at the end of paragraph (5); 
(B) by redesignating paragraph (6) as paragraph (7); and 
(C) by inserting after paragraph (5) the following new 
paragraph: 
"(6) the term 'purchaser' means any person who purchases in 
the United States, either directly or indirectly for the account of 
such person or another person. Flue-cured or Burley quota 
tobacco; and"; 
(2) by inserting "or paid by or on behalf of purchasers" after 
"producer-members" in the second sentence of subsection (c); 
(3) in subsection (d)— 
(A) by striking out "and" at the end of clause (i) of 
paragraph (1)(A); 
(B) by inserting after clause (ii) of paragraph (1)(A) the 
following new clause: 
"(iii) each purchaser of Flue-cured and Burley quota 
tobacco shall pay to the appropriate association, for 
deposit in the Fund of the association, an assessment, 
in an amount determined from time to time by the 
association with the approval of the Secretary, with 
respect to purchases ojf all such kind of tobacco mar-
keted by a producer from a farm (including purchases 
of such tobacco from the 1986 and subsequent crops 
from the association); and"; 
(C) by striking out "The" in the last sentence of para-
graph (1) and inserting in lieu thereof the following: "The 
amount of producer contributions and purchaser assess-
ments shall be determined in such a manner that producers 
and purchasers share equally, to the maximum extent prac-
ticable, in maintaining the Fund of an association. In 
making such determination with respect to the assessment 
of a purchaser, only 1985 and subsequent crops of Flue-
cured and Burley quota tobacco shall be taken into account. 
The"; 
(D) by inserting "and assessments" after "contributions" 
in the last sentence of paragraph (1); 
(E) by striking out paragraph (2) and inserting in lieu 
thereof the following new paragraph: 
"(2) require that any producer contribution or purchaser 
assessment due under paragraph (1) shall be collected— 
"(A) from the person who acquired the tobacco involved 
from the producer, except that if the tobacco is marketed by 
sale, an amount equal to the producer contribution may be 
deducted by the purchaser from the price paid to such 
producer; 
"(B) if the tobacco involved is marketed by a producer 
through a warehouseman or agent, from such warehouse-
man or agent, who may— 
"(i) deduct an amount equal to the producer contribu-
tion from the price paid to the producer; and 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 93 
"(ii) add an amount equal to the purchaser assess-
ment to the price paid by the purchaser; and 
"(C) if the tobacco involved is marketed by a producer 
directly to any person outside the United States, from the 
producer, who may add an amount equal to the purchaser 
assessment to the price paid by the purchaser;"; 
(F) by striking out "producers who contribute" in the 
proviso of paragraph (3) and inserting in lieu thereof 
"producers and purchasers who contribute or pay"; 
(G) by striking out "and" at the end of paragraph (5); 
(H) by inserting "effective for the 1982 through 1985 crops 
of quota tobacco," after the paragraph designation in para-
graph (6); 
(I) by striking out the period at the end of paragraph (6) 
and inserting in lieu thereof "; and"; and 
(J) by inserting after paragraph (6) the following new 
paragraph: 
"(7) effective for the 1986 and subsequent crops of quota Loans, 
tobacco, provide, in loan agreements between the Corporation 
and an association, that if the Secretary determines that the 
amount in the Fund or the net gains referred to in paragraph (5) 
exceeds the amounts necessary for the purposes specified in this 
section, the association, with the approval of the Secretary, may 
suspend the payment and collection of contributions and assess-
ments under this section on terms and conditions established by 
the association, with the approval of the Secretary."; and 
(4) by adding at the end thereof the following new subsection: 
"(h)(1)(A) Each person who fails to collect any contribution or 
assessment as required by subsection (d)(2) and remit such contribu-
tion or assessment to the association, at such time and in such 
manner as may be prescribed by the Secretary, shall be liable, in 
addition to any amount due, to a marketing penalty at a rate equal 
to 75 percent of the average market price (calculated to the nearest 
whole cent) for the kind of tobacco involved for the immediately 
preceding year on the quantity of tobacco as to which the failure 
occurs. 
"(B) The Secretary may reduce any such marketing penalty in 
such amount as the Secretary determines equitable in any case in 
which the Secretary determines that the failure was unintentional 
or without knowledge on the part of the person concerned. 
"(C) Any penalty provided for under this paragraph shall be 
assessed by the Secretary after notice and opportunity for a hearing. 
"(2)(A) Any person against whom a penalty is assessed under this Courts, U.S. 
subsection may obtain review of such penalty in an appropriate 
district court of the United States by filing a civil action in such 
court not later than 30 days after such penalty is imposed. 
"(B) The Secretary shall promptly file in such court a certified 
copy of the record on which the penalty is based. 
"(3) The district courts of the United States shall have jurisdiction Courts, U.S. 
to review and enforce any penalty imposed under this subsection. 
"(4) An amount equivalent to any penalty collected by the Sec-
retary under this subsection shall be transmitted by the Secretary to 
the appropriate association, for deposit in the Fund of such 
association. 
"(5) The remedies provided in this subsection shall be in addition 
to, and not exclusive of, other remedies that may be available.". 
100 STAT. 94 
PUBLIC LAW 99-272—APR. 7, 1986 
(b) No NET COST ACCOUNT.—Effective for the 1986 and subsequent 
crops of tobacco, section 106B of the Agricultural Act of 1949 (7 
U.S.C. 1445-2) is amended— 
(1) in subsection (a)— 
(A) by striking out "and" at the end of paragraph (6); 
(B) by striking out the period at the end of paragraph (7) 
and inserting in lieu thereof "; and"; and 
(C) by adding at the end thereof the following new 
paragraph: 
"(8) the term 'purchaser' means any person who purchases in 
the United States, either directly or indirectly for the account of 
such person or another person. Flue-cured or Burley quota 
tobacco."; 
(2) by inserting "and purchasers" after "producers" in subsec-
tion (c)(1); 
(3) in subsection (d)— 
(A) by inserting at the end of paragraph (1) the following 
new sentence: "The Secretary shall also require (in lieu of 
Ante, p. 92. 
any requirement under section 106A(d)(l)) that each pur-
chaser of Flue-cured and Burley quota tobacco shall pay to 
the Corporation, for deposit in the Account of such associa-
tion, an assessment, as determined under paragraph (2) and 
collected under paragraph (3), with respect to purchases of 
all such kind of tobacco marketed by a producer from a 
farm (including purchases of such tobacco from the 1986 
and subsequent crops from the association)."; 
(B) by striking out "area. Such amount" in paragraph 
(2)(A) and inserting in lieu thereof "area and the amount of 
the assessment to be paid by purchasers of tobacco. The 
amount of the assessment to be paid by producers and 
purchasers shall be determined in such a manner that 
producers and purchasers share equally, to the maximum 
extent practicable, in maintaining the Account of an 
association. In making such determination with respect to 
the assessment of a purchaser, only 1985 and subsequent 
crops of Flue-cured and Burley quota tobacco shall be taken 
into account. The amount of the assessment"; 
(C) by inserting at the end of paragraph (2)(A) the follow-
Loans. 
ing: "Notwithstanding the foregoing provisions of this para-
graph, the amount of any assessment that is determined by 
the Secretary for the 1986 and subsequent crops of Burley 
quota tobacco shall be determined without regard to any 
net losses that the Corporation may sustain under the loan 
agreements of the Corporation with such association with 
respect to the 1983 crop of such tobacco."; and 
(D) by amending paragraph (3) to read as follows: 
Marketing. 
"(3)(A) Except as provided in subparagraphs (B) and (C), any 
assessment to be paid by a producer or a purchaser under paragraph 
(1) shall be collected from the person who acquired the tobacco 
involved from such producer, except that if the tobacco is marketed 
by sale, an amount equal to the producer assessment may be 
deducted by the purchaser from the price paid to such producer. 
Marketing. 
"(B) If tobacco of the kind for which an Account is established is 
marketed by a producer through a warehouseman or agent, both the 
producer and the purchaser assessment shall be collected from such 
warehouseman or agent, who may— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 95 
"(i) deduct an amount equal to the producer assessment from 
the price paid to the producer; and 
"(ii) add an amount equal to the purchaser assessment to the 
price paid by the purchaser. 
"(C) If tobacco of the kind for which an Account is established is Marketing, 
marketed by a producer directly to any person outside the United 
States, both the producer and the purchaser assessment shall be 
collected from the producer, who may add an amount equal to the 
purchaser assessment to the price paid by the purchaser."; and 
(4) by adding at the end thereof the following new subsection: 
"(j)(l)(A) Each person who fails to collect any assessment as 
required by subsection (d)(3) and remit such assessment to the 
Corporation, at such time and in such manner as may be prescribed 
by the Secretary, shall be liable, in addition to any amount due, to a 
marketing penalty at a rate equal to 75 percent of the average 
market price (calculated to the nearest whole cent) for the kind of 
tobacco involved for the immediately preceding year on the quantity 
of tobacco as to which the failure occurs. 
"(B) The Secretary may reduce any such marketing penalty in 
such amount as the Secretary determines equitable in any case in 
which the Secretary determines that the failure was unintentional 
or without knowledge on the part of the person concerned. 
"(C) Any penalty provided for under this paragraph shall be 
assessed by the Secretary after notice and opportunity for a hearing. 
"(2)(A) Any person against whom a penalty is assessed under this Courts, U.S. 
subsection may obtain review of such penalty in an appropriate 
district court of the United States by filing a civil action in such 
court not later than 30 days after such penalty is imposed. 
"(B) The Secretary shall promptly file in such court a certified 
copy of the record on which the penalty is based. 
"(3) The district courts of the United States shall have jurisdiction 
Courts, U.S. 
to review and enforce any penalty imposed under this subsection. 
"(4) An amount equivalent to any penalty collected by the Sec-
retary under this subsection shall be transmitted by the Secretary to 
the Corporation, for deposit in the Account of the appropriate 
association. 
"(5) The remedies provided in this subsection shall be in addition 
to, and not exclusive of, other remedies that may be available.". 
(c) IMPLEMENTATION.—The Secretary of Agriculture shall imple- 
7 use 1301 note, 
ment sections 1102 through 1109, and the amendments made by 
such sections, without regard to the provisions requiring notice and 
other procedures for public participation in rulemaking contained in 
section 553 of title 5, United States Code, or in any directive of the 
Secretary. 
(d) CONFORMING AMENDMENT.—The section heading of section 
106A of the Agricultural Act of 1949 (7 U.S.C. 1445-1) is amended to 
read as follows: 
"PRODUCER CONTRIBUTIONS AND PURCHASER ASSESSMENTS FOR NO NET 
COST TOBACCO F U N D " . 
SEC. 1109. PURCHASE OF INVENTORY STOCK. 
Notwithstanding any other provision of law, in order to reduce or 
eliminate the excessive inventories of Flue-cured and Burley tobacco 
held by associations from the 1976 through 1984 crops, and in order 
to provide for the orderly disposition of such excessive inventories of 
tobacco in a manner that will not disrupt the orderly marketing of 
7 use 1445-3. 
100 STAT. 96 
PUBLIC LAW 99-272—APR. 7, 1986 
Corporations. 
Loans. 
Loans. 
new tobacco crops and will minimize any losses to the Federal 
Government: 
(a) SALE OF INVENTORY STOCK.—(1) The producer-owned coopera-
tive marketing association that has entered into a loan agreement 
with the Commodity Credit Corporation to make price support 
available to producers of Flue-cured tobacco shall offer to sell the 
stocks of Flue-cured tobacco of the association from the 1976 
through 1984 crops as provided in this section. 
(2) Each producer-owned cooperative marketing association that 
has entered into a loan agreement with the Commodity Credit 
Corporation to make price support available to producers of Burley 
tobacco shall offer to sell its stocks of Burley tobacco from the 1982 
and 1984 crops as provided in this section. 
(3)(A)(i) Not later than 30 days after the date of enactment of this 
subtitle, the Commodity Credit Corporation shall acquire title to the 
Burley tobacco from the 1983 crop that is pledged as security for 
loans on such tobacco by calling the loans on such tobacco. 
(ii) The Corporation shall, then, offer such tobacco for sale at such 
times, in such quantities, and subject to such conditions as the 
Corporation considers appropriate. 
(B) If the Commodity Credit Corporation has not sold all of the 
stocks of the 1983 crop of Burley tobacco within 2 years from the 
date the Corporation calls the loans on such tobacco, the Corpora-
tion may offer to sell to domestic manufacturers of cigarettes the 
remaining stocks of such tobacco as provided in this section. 
(b) SALE PRICES.—(1)(A) The stocks of Flue-cured tobacco from the 
1976 through 1984 crops shall be offered for sale at the base prices, 
including carrying charges, in effect as of the date of the offer, 
reduced by— 
(i) 90 percent for Flue-cured tobacco from the 1976 through 
1981 crops; and 
(ii) 10 percent for Flue-cured tobacco from the 1982 through 
1984 crops. 
(B) The purchasers of the stocks of Flue-cured tobacco from the 
1976 through 1984 crops shall pay the full carrying charges that 
have accrued to such tobacco from the date of the offer made under 
this section to the date that such tobacco is removed from the 
inventory of the association. 
(2)(A) The stocks of Burley tobacco from the 1982 crop shall be 
offered for sale at the listed base price in effect as of July 1, 1985. 
(B) The stocks of Burley tobacco from the 1984 crop shall be 
offered for sale at the costs of the association for such tobacco as of 
the date of enactment of this subtitle. 
(C) The purchasers of the stocks of Burley tobacco from the 1982 
crop shall pay the full carrying charges that have accrued to such 
tobacco. 
(D) The purchasers of the stocks of Burley tobacco from the 1984 
crop shall pay the full carrying charges that have accrued to such 
tobacco from the date of enactment of this subtitle to the date such 
tobacco is removed from the inventories of the associations. 
(3)(A) After the 2-year period specified in subsection (a)(3)(B) has 
expired, if the Commodity Credit Corporation offers to sell the 
stocks of the Corporation of Burley tobacco from the 1983 crop to 
domestic manufacturers of cigarettes, such stocks shall be offered 
for sale at the costs of the association, including carrying charges, as 
of the date on which the Corporation calls the loans on such tobacco, 
reduced by 90 percent. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 97 
(B) Neither tobacco producers nor tobacco purchasers shall be 
responsible for carrying charges that accrue to the 1983 crop of 
Burley tobacco after the date on which the Commodity Credit 
Corporation calls the loans on such tobacco. 
(c) TERMS OF AGREEMENTS.—(1)(A) Each domestic manufacturer of 
cigarettes may enter into agreements to purchase inventory stocks 
of Flue-cured and Burley tobacco, in accordance with this section. 
(B) To be eligible for the reductions in price specified in this 
section, such manufacturer shall enter into such agreements as soon 
as practicable, but not later than 90 days after the date of enact-
ment of this subtitle, except that, with respect to the 1983 crop of 
Burley tobacco, if the Corporation offers to sell the stocks of such 
tobacco pursuant to subsection (b)(3)(A), such agreements shall be 
entered into as soon as practicable, but not later than 90 days after 
the end of the 2-year period referred to in subsection (a)(3)(B). 
(C)(i) Such agreements shall provide that, over a period of time, 
each participating domestic manufacturer of cigarettes shall pur-
chase a percentage of the stocks of Flue-cured and Burley tobacco 
held— 
(I) by the producer-owned cooperative marketing associations 
at the close of the 1984 marketing year; or 
(II) in the case of the 1983 crop of Burley tobacco, by the 
Commodity Credit Corporation at the time the Corporation 
offers such tobacco for sale to domestic manufacturers of ciga-
rettes under this section. 
(ii) The period of time referred to in clause (i) may not exceed— 
(I) in the case of Flue-cured tobacco, 8 years from the date of 
enactment of this subtitle; 
(II) in the case of Burley tobacco from the 1982 and 1984 crops, 
5 years from the date of enactment of this subtitle; and 
(III) in the case of the 1983 crop of Burley tobacco, 5 years 
from the end of the 2-year period referred to in subsection 
(a)(3)(B). 
(2)(A)(i) The percentage to be purchased by each participating 
manufacturer shall be at least equal to the respective percentage of 
the participating manufacturer of the total quantity of net ciga-
rettes manufactured for use as determined by the Secretary of 
Agriculture under this paragraph on the basis of the monthly 
reports ("Manufacturer of Tobacco Products—Monthly Reports ) 
submitted (on ATF Form 3068) by manufacturers of tobacco prod-
ucts to the Bureau of Alcohol, Tobacco and Firearms of the Depart-
ment of the Treasury. 
(ii) The Secretary of Agriculture shall request from the Secretary 
of the Treasury copies of such monthly reports necessary to make 
the determinations required under this section. 
(iii) Notwithstanding any other provision of law, the Secretary of 
the Treasury may release and disclose such information to the 
Secretary of Agriculture. 
(B) "Net cigarettes manufactured for use" shall be computed by 
subtracting— 
(i) the cumulative figures entered for large and small ciga-
rettes in item 16f of ATF Form 3068 ("Reduction to tobacco"); 
from 
(ii) the cumulative figures entered for large and small ciga-
rettes in item 7 of such form ("Manufactured'). 
(C)(i) The percentage to be purchased by each participating manu-
facturer shall be determined— 
71-19A 0 - 89 - 6 : Q
L 3 Parti 
100 STAT. 98 
PUBLIC LAW 99-272—APR. 7, 1986 
(I) on the date of enactment of this subtitle; and 
(II) annually thereafter over the course of the respective buy-
out periods specified in this subsection. 
(ii) Such percentage shall be determined by dividing— 
(I) the average net cigarettes manufactured by a manufac-
turer for use for the 12-month period immediately preceding the 
appropriate determination date (the date of enactment of this 
subtitle and annually thereafter over the course of the respec-
tive buy-out periods specified in this subsection); by 
(II) the aggregate average net cigarettes manufactured by all 
domestic cigarette manufecturers for use for such 12-month 
period. 
(D)(i) The quantity of tobacco to be purchased by each participat-
ing manufacturer shall be determined annually, 
(ii) Such quantity shall be based on— 
(I) the percentage of net cigarettes of a manufacturer manu-
factured for use, as determined under subparagraph (C); multi-
plied by 
(II) the appropriate annual quantity to be withdrawn from the 
inventories of the associations or the Commodity Credit Cor-
poration. 
(iii) The appropriate annual quantity to be withdrawn from inven-
tories shall be— 
(I) 12y2 percent of the inventories of Flue-cured tobacco from 
the 1976 through 1984 crops on hand on the date of enactment 
of this subtitle; 
(II) 20 percent of the inventories of Burley tobacco from the 
1982 and 1984 crops on hand on the date of enactment of this 
subtitle; and 
(III) 20 percent of the inventories of Burley tobacco from the 
1983 crop held by the Commodity Credit Corporation on the 
date that is 2 years after the call of the loans on such tobacco by 
the Corporation. 
(E) Any purchases by a manufacturer from the inventories of the 
associations or from the Commodity Credit Corporation for a crop 
covered by this section in any year of the buy-out period that exceed 
the quantity of the purchases of the manufacturer required under 
the agreement, as determined under this section, shall be applied 
against future purchases required of such manufacturer. 
(3) In carrying out this section, manufacturers may confer with 
one another and, separately or collectively, with associations, the 
Secretary of Agriculture, and the Commodity Credit Corporation, as 
may be necessary or appropriate to carry out this section and the 
purposes of this subtitle. 
(d) APPROVAL OF AGREEMENTS.—(1)(A) Each agreement entered 
into under this section shall be submitted to the Secretary of 
Agriculture for review and approval. 
(B) In the case of an agreement to purchase tobacco from the 
inventory of a producer association, the agreement shall be submit-
ted by the association. 
(C) No agreement may become effective until approved by the 
Secretary. 
(2) The Secretary of Agriculture shall not approve any agreement 
suljmitted under this section unless the Secretary has determined 
that— 
(A) the agreement— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 99 
(i) will not unduly impair or disrupt the orderly market-
ing of current and future tobacco crops during the term of 
/ 
the agreement; and 
(ii) is otherwise consistent with the purposes of this sub-
title; and 
(B) the price and other terms of sale are uniform and non-
discriminatory among various purchasers. 
(e) DISCLOSURE.—The limitations on disclosure set forth in subsec-
tions (c) and (d) of section 320A of the Agricultural Adjustment Act 
of 1938 (as added by section 1103(d)) shall apply to information 
submitted by domestic manufacturers of cigarettes under this sec-
tion with respect to net cigarettes manufactured for use, including 
information provided on ATF Form 3068. Any officer or employee of 
the Department of Agriculture who violates such limitations on 
disclosure shall be subject to the penalties set forth in section 
320A(c)(4)ofsuchAct. 
SEC. 1110. REVIEW OF TOBACCO GRADING SYSTEM AND DISASTER CROP 
DESIGNATION. 
(a) STUDY.—(1)(A) The Secretary of Agriculture shall conduct a 
comprehensive study of the methods and procedures for grading 
tobacco marketed in the United States. 
(B) In carrying out such study, the Secretary shall evaluate, 
among other things— 
(i) the extent to which grades assigned to tobacco accurately 
reflect the quality of such tobacco; 
(ii) the extent to which the number of grades of tobacco affects 
the operation of the grading system; and 
(iii) the competence and independence of tobacco graders. 
(2) The Secretary shall also study the feasibility and desirability 
of— 
(A) providing for a grade that would be used to designate 
tobacco that is of such poor quality as a result of a natural 
disaster as to affect substantially the marketability of such 
tobacco; and 
(B) establishing a price support level, if any, for such tobacco 
that may be adjusted by the Secretary as necessary to facilitate 
the sale of such tobacco and protect the no net cost funds or 
accounts. 
(b) REPORT.—(1) Not later than 120 days after the date of enact- Congress, 
ment of this subtitle, the Secretary of Agriculture shall report the 
results of the studies required under subsection (a), together with 
any recommendations for necessary legislation, to the Committee on 
Agriculture of the House of Representatives and the Committee on 
Agriculture, Nutrition, and Forestry of the Senate. 
(2) As soon as practicable after submission of the report required 
under paragraph (1), but not later than the opening of the market-
ing season for the 1986 crop of Flue-cured tobacco, the Secretary 
shall implement any recommendations made in such report that 
may be implemented by the Secretary under existing authority. 
SEC. 
nil. 
INVESTMENT 
OF 
TOBACCO 
INSPECTION 
FEES. 
Section 5 of the Tobacco Inspection Act (7 U.S.C. 51 Id) is 
amended— 
(1) by inserting "late payment penalties, and interest earned 
from the investment of such funds," after "The fees and 
charges," in the ninth sentence; 
100 STAT. 100 
PUBLIC LAW 99-272—APR. 7, 1986 
(2) by inserting after the ninth sentence the following new 
sentences: "Any funds realized from the collection of fees or 
7 use 5lle. 
charges authorized under this section and section 6 and credited 
to the current appropriation account incurring the cost of serv-
ices provided under this section and section 6, late payment 
penalties, and interest earned from the investment of such 
funds may be invested by the Secretary in insured or fully 
collateralized, interest-bearing accounts or, at the discretion of 
the Secretary, by the Secretary of the Treasury in United States 
Government debt instruments. Any income realized from this 
activity may be used to pay the expenses of the Secretary of 
Agriculture incident to providing services under this Act or 
reinvested in the manner authorized in the preceding sen-
tence."; and 
(3) by striking out "Such fees and charges" in the tenth 
sentence (as it existed before the amendment made by clause (2)) 
and inserting in lieu thereof "The fees and charges authorized 
in this section". 
7 u s e 1445 note. 
SEC. 1112. EFFECTIVE DATE. 
Except as otherwise provided in this subtitle, this subtitle and the 
amendments made by this subtitle shall become effective on the 
date of enactment of this subtitle. 
TITLE II—ARMED SERVICES AND 
DEFENSE-RELATED PROGRAMS 
SEC. 2001. COLLECTION BY THE UNITED STATES OF INPATIENT HOSPITAL 
COSTS INCURRED ON BEHALF OF CERTAIN PERSONS. 
(a) IN GENERAL.—(1) Chapter 55 of title 10, United States Code, is 
amended by adding at the end thereof the following new section: 
10 use 1095. 
"§ 1095. Collection from third-party payers of reasonable inpatient 
hospital care costs incurred on behalf of retirees and 
dependents 
Insurance. 
"(a)(1) In the case of a person who is covered by section 1074(b), 
Health and 
1076(a), or 1076(b) of this title, the United States shall have the right 
99 Stat 656^ 
^^ Collect from a third-party payer the reasonable costs of inpatient 
10 use 1076. 
hospital care incurred by the United States on behalf of such person 
through a facility of the uniformed services to the extent that the 
person would be eligible to receive reimbursement or indemnifica-
tion from the third-party payer if the person were to incur such 
costs on the person's own behalf. If the insurance, medical service, 
or health plan of that payer includes a requirement for a deductible 
or copayment by the beneficiary of the plan, then the amount that 
the United States may collect from the third-party payer is the 
reasonable cost of the care provided less the appropriate deductible 
or copayment amount. 
"(2) A person covered by section 1074(b), 1076(a), or 1076(b) of this 
title may not be required to pay an additional amount to the United 
States for inpatient hospital care by reason of this section. 
"(b) No provision of any insurance, medical service, or health plan 
contract or agreement having the effect of excluding from coverage 
or limiting payment of charges for certain care if that care is 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 101 
provided through a faciHty of the uniformed services shall operate to 
prevent collection by the United States under subsection (a). 
"(c) Under regulations prescribed under subsection (f), records of 
the facility of the uniformed services that provided inpatient hos-
pital care to a beneficiary of an insurance, medical service, or health 
plan of a third-party payer shall be made available for inspection 
and review by representatives of the payer from which collection by 
the United States is sought. 
"(d) Notwithstanding subsections (a) and (b), collection may not be 
made under this section in the case of a plan administered under 
title XVIII or XIX of the Social Security Act (42 U.S.C. 1395 et seq.). 42 use 1396. 
"(e)(1) The United States may institute and prosecute legal 
proceedings against a third-party payer to enforce a right of the 
United States under this section. 
"(2) The administering Secretary may compromise, settle, or 
waive a claim of the United States under this section. 
"(f) The Secretary of Defense, in consultation with the other 
Regulations, 
administering Secretaries, shall prescribe regulations for the 
administration of this section. Such regulations shall provide for 
computation of the reasonable cost of inpatient hospital care. Com-
putation of such reasonable cost may be based on— 
"(1) per diem rates; or 
"(2) such other method as may be appropriate. 
"(g) In this section, 'third-party payer' means an entity that 
provides an insurance, medical service, or health plan by contract or 
agreement.". 
(2) The table of sections at the beginning of such chapter is 
amended by adding at the end thereof the following new item: 
"1095. Collection from third-party payers of reasonable inpatient hospital care costs 
incurred on behalf of retirees and dependents.". 
(b) EFFECTIVE DATE.—Section 1095 of title 10, United States Code, 
as added by subsection (a), shall apply with respect to inpatient 
hospital care provided after September 30, 1986, but only with 
respect to an insurance, medical service, or health plan agreement 
entered into, amended, or renewed on or after the date of the 
enactment of this Act. 
SEC. 2002. EXTENSION OF DEADLINE FOR REPORT ON USE BY CHAMPUS 
SYSTEM OF MEDICARE PROSPECTIVE PAYMENT PROGRAM. 
Section 634(c) of the Department of Defense Authorization Act, 
1985 (Public Law 98-525; 98 Stat. 2544), is amended by striking out 
"February 28, 1985" and inserting in lieu thereof "June 30, 1986", 
10 u s e 1095 
note. 
TITLE III—HOUSING AND COMMUNITY 
DEVELOPMENT PROGRAMS 
SEC. 3001. SHORT TITLE AND TABLE OF SECTIONS. 
(a) SHORT TITLE.—This title may be cited as the "Housing and 
Community Development Reconciliation Amendments of 1985". 
(b) TABLE OF SECTIONS.— 
Sec. 3001. Short title and table of sections. 
Sec. 3002. Purchase of CDBG guaranteed obligations by the Federal Financing 
Bank. 
Sec. 3003. Public housing operating subsidies. 
Housing and 
Community 
Development 
Reconciliation 
Amendments of 
1985. 
42 u s e 5301 
note. 
100 STAT. 102 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 5308. 
42 u s e 5308 
note. 
42 u s e 5308 
note. 
42 u s e 1437g. 
42 u s e 1437b. 
Loans. 
Contracts. 
Sec. 3004. Public and Indian housing financing reforms. 
Sec. 3005. Rural housing authorizations. 
Sec. 3006. Management of insured and guaranteed rural housing loans. 
Sec. 3007. Extension of Federal Housing Administration mortgage insurance pro-
grams. 
Sec. 3008. Extension of rehabilitation loan authority. 
Sec. 3009. Extension of rural housing authorities. 
Sec. 3010. Extension of flood and crime insurance programs. 
Sec. 3011. Miscellaneous extensions. 
SEC. 3002. PURCHASE OF CDBG GUARANTEED OBLIGATIONS BY THE FED-
ERAL FINANCING BANK. 
(a) PROHIBITION.—Section 108 of the Housing and Community 
Development Act of 1974 is amended by adding at the end thereof 
the following: 
"(1) Notes or other obligations guaranteed under this section may 
not be purchased by the Federal Financing Bank.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall take effect on July 1,1986, 
(c) ADMINISTRATIVE ACTIONS.—The Secretary of Housing and 
Urban Development shall take such administrative actions as are 
necessary to provide by the effective date of subsection (a) private 
sector financing of loans guaranteed under section 108 of the Hous-
ing and Community Development Act of 1974. 
SEC. 3003. PUBLIC HOUSING OPERATING SUBSIDIES. 
Section 9(c) of such Act is amended by striking out "and by" after 
"1983," and by inserting after "1984" the following: ", and not to 
exceed $1,279,000,000 on or after October 1,1985". 
SEC. 3004. PUBLIC AND INDIAN HOUSING FINANCING REFORMS. 
Section 4 of the United States Housing Act of 1937 is amended by 
adding at the end thereof the following new subsection: 
"(c)(1) At such times as the Secretary may determine, and in 
accordance with such accounting and other procedures as the Sec-
retary may prescribe, each loan made by the Secretary under 
subsection (a) that has any principal amount outstanding or any 
interest amount outstanding or accrued shall be forgiven; and the 
terms and conditions of any contract, or any amendment to a 
contract, for such loan with respect to any promise to repay such 
principal and interest shall be canceled. Such cancellation shall not 
affect any other terms and conditions of such contract, which shall 
remain in effect as if the cancellation had not occurred. This 
paragraph shall not apply to any loan the repayment of which was 
not to be made using annual contributions, or to any loan all or part 
of the proceeds of which are due a public housing agency from 
contractors or others. 
"(2)(A) On the date of the enactment of the Housing and Commu-
nity Development Reconciliation Amendments of 1985, each note or 
other obligation issued by the Secretary to the Secretary of the 
Treasury pursuant to subsection (b), together with any promise to 
repay the principal and unpaid interest that has accrued on each 
note or obligation, shall be forgiven; and any other term or condition 
specified by each such obligation shall be canceled. 
"(B) On September 30,1986, and on any subsequent September 30, 
each such note or other obligation issued by the Secretary to the 
Secretary of the Treasury pursuant to subsection (b) during the 
fiscal year ending on such date, together with any promise to repay 
the principal and unpaid interest that has accrued on each note or 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 103 
obligation, shall be forgiven; and any other term or condition speci-
fied by each such obligation shall be canceled. 
"(3) Any amount of budget authority (and contract authority) that 
becomes available during any fiscal year as a result of the forgive-
ness of any loan, note, or obligation under this subsection shall be 
rescinded.". 
SEC. 3005. RURAL HOUSING AUTHORIZATIONS. 
Subsection (a)(1) of section 513 of the Housing Act of 1949 is 42 use 1483. 
amended to read as follows: 
"(a)(1) The Secretary may insure and guarantee loans under this 
title during fiscal year 1986 in an aggregate amount not to exceed 
$2,146,600,000, of which— 
"(A) $1,209,600,000 shall be for loans under section 502; 
42 USC 1472. 
"(B) $17,000,000 shall be for loans under section 504; 
42 use 1474. 
"(C) $19,000,000 shall be for loans under section 514; 
42 use 1484. 
"(D) $900,000,000 shall be for loans under section 515; and 42 use 1485. 
"(E) $1,000,000 shall be for loans under section 524.". 
42 use I490a. 
SEC. 3006. MANAGEMENT OF INSURED AND GUARANTEED RURAL HOUSING 
LOANS. 
(a) SALE OF INSURED AND GUARANTEED LOANS TO PUBLIC.—Section 
517(c) of the Housing Act of 1949 is amended by adding at the end 42 use 1487. 
thereof the following new sentence: "Any loan made and sold by the 
Secretary under this section after the date of the enactment of the 
Housing and Community Development Reconciliation Amendments 
of 1985 (and any loan made by other lenders under this title that is 
insured or guaranteed in accordance with this section, is purchased 
by the Secretary, and is sold by the Secretary under this section 
after such date) shall be sold to the public and may not be sold to the 
Federal Financing Bank, unless such sale to the Federal Financing 
Bank is required to service transactions under this title between the 
Secretary and the Federal Financing Bank occurring on or before 
such date.". 
(b) INTEREST SUBSIDY ON INSURED AND GUARANTEED LOANS OF-
FERED F
O
R SALE TO PUBLIC.—Section 517(d) of the Housing Act of 
1949 is amended— 
(1) by inserting "(1)" after the subsection designation; and 
(2) by adding at the end thereof the following new paragraph: 
"(2) Each loan made by the Secretary or other lenders under this 
title that is insured or guaranteed in accordance with this subsec-
tion shall, when offered for sale to the public, be accompanied by an 
agreement by the Secretary to pay to the holder of such loan 
(through an agreement to purchase such loan or through such other 
means as the Secretary determines to be appropriate) the difference 
between the rate of interest paid by the borrower of such loan and 
the market rate of interest (as determined by the Secretary) on 
obligations having comparable periods to maturity on the date of 
such sale.". 
(c) PROTECTION OF BORROWERS UNDER LOANS SOLD TO PUBLIC.— 
Section 517(d) of the Housing Act of 1949, as amended by subsection 
(b) of this section, is amended by adding at the end thereof the 
following new paragraph: 
"(3) Each loan made by the Secretary or other lenders under this 
title that is insured or guaranteed in accordance with this subsec-
tion shall, when offered for sale to the public, be accompanied by 
100 STAT. 104 
PUBLIC LAW 99-272—APR. 7, 1986 
agreements for the benefit of the borrower under the loan that 
provide that— 
"(A) the purchaser or any assignee of the loan shall not 
diminish any substantive or procedural right of the borrower 
arising under this title; 
"(B) upon any substantial default of the borrower, but prior to 
foreclosure, the loan shall be assigned to the Secretary for the 
purpose of avoiding foreclosure; and 
"(C) following any assignment under subparagraph (B) and 
before commencing any action to foreclose or otherwise dis-
possess the borrower, the Secretary shall afford the borrower all 
substantive and procedural rights arising under this title, 
including consideration for interest subsidy, moratorium, 
reamortization, refinancing, and appeal of any adverse decision 
to an impartial officer. 
"(4) From the proceeds of loan sales under paragraph (2), the 
Secretary shall set aside as a reserve against future losses not less 
than 5 percent of the outstanding face amount of the loans held by 
the public at any time.". 
(d) USE OF RURAL HOUSING INSURANCE FUND.—Section 517(j) of 
42 use 1487. 
the Housing Act of 1949 is amended— 
(1) by striking out "and" at the end of paragraph (4); 
(2) by striking out the period at the end of paragraph (5) and 
inserting in lieu thereof "; and"; and 
(3) by adding at the end thereof the following new paragraph: 
"(6) to make payments and take other actions in accordance 
with agreements entered into under paragraphs (2) and (3) of 
subsection (d).". 
(e) ELIGIBILITY FOR GUARANTEED LOANS.—Section 517 of the Hous-
ing Act of 1949 is amended by striking out subsection (n). 
O
D REGULATIONS.—Section 517(o) of the Housing Act of 1949 is 
amended— 
(1) by inserting "(1)" after the subsection designation; and 
(2) by adding at the end thereof the following new paragraph: 
Regulations. 
"(2) Not later than the expiration of the 90-day period following 
Marketing. 
the date of the enactment of the Housing and Community Develop-
ment Reconciliation Amendments of 1985, the Secretary shall issue 
regulations to facilitate the marketability in the secondary mort-
gage market of loans insured or guaranteed under this section. Such 
regulations shall ensure that such loans are competitive with other 
loans and mortgages insured or guaranteed by the Federal 
Government.". 
SEC. 3007. EXTENSION OF FEDERAL HOUSING ADMINISTRATION MORT-
GAGE INSURANCE PROGRAMS. 
12 use 1703. 
(^) TITLE I INSURANCE.—Section 2(a) of the National Housing Act 
is amended by striking out "prior to December 16, 1985" in the first 
sentence and inserting in lieu thereof "not later than March 17, 
1986". 
(b) GENERAL INSURANCE.—Section 217 of the National Housing 
12 use I7l5h. 
Act is amended by striking out "December 15, 1985" and inserting 
in lieu thereof "March 17,1986". 
(c) LOW AND MODERATE INCOME HOUSING INSURANCE.—Section 
12 use 1715/. 
221(f) of the National Housing Act is amended by striking out 
"December 15, 1985" in the fifth sentence and inserting in lieu 
thereof"Marchl7,1986". 
(d) SECTION 235 HOMEOWNERSHIP.— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 105 
(1) ASSISTANCE PAYMENTS AUTHORITY.—Section 235(h)(1) of the 
National Housing Act is amended by striking out "December 15, 12 USC 1715z. 
1985" in the last sentence and inserting in lieu thereof 
"March 17, 1986". 
(2) INSURANCE AUTHORITY.—Section 235(m) of the National 
Housing Act is amended by striking out "December 15, 1985" 
and inserting in lieu thereof "March 17,1986". 
(3) HOUSING STIMULUS AUTHORITY.—Section 235(q)(l) of the 
National Housing Act is amended by striking out "December 15, 
1985" in the last sentence and inserting in lieu thereof 
"March 17, 1986". 
(e) CO-INSURANCE.— 
(1) GENERAL AUTHORITY.—Section 244(d) of the National Hous-
ing Act is amended by striking out "December 15, 1985" and 12 USC l715z-9. 
inserting in lieu thereof "March 17,1986". 
(2) RENTAL REHABILITATION AND DEVELOPMENT PROJECTS.—Sec-
tion 244(h) of the National Housing Act is amended by striking 
out "on or after December 16, 1985" in the last sentence and 
inserting in lieu thereof "after March 17, 1986". 
(f) GRADUATED PAYMENT AND INDEXED MORTGAGE INSURANCE.— 
Section 245(a) of the National Housing Act is amended by striking 12 USC 
out "December 15, 1985" in the last sentence and inserting in lieu I7l5z-10. 
thereof "March 17,1986". 
(g) REINSURANCE CONTRACTS.—Section 249(a) of the National 
Housing Act is amended by striking out "December 15, 1985" in the 12 USC 
second sentence and inserting in lieu thereof "March 17, 1986". I7l5z-14. 
(h) ARMED SERVICES HOUSING INSURANCE.— 
(1) CIVILIAN EMPLOYEES OF ARMED FORCES.—Section 809(f) of 
the National Housing Act is amended by striking out "Decem- 
12 USC I748h-1. 
ber 15, 1985" in the last sentence and inserting in lieu thereof 
"March 17,1986". 
(2) DEFENSE HOUSING FOR IMPACTED AREAS.—Section 810(k) of 
the National Housing Act is amended by striking out "Decem- 
12 USC l748h-2. 
ber 15, 1985" in the last sentence and inserting in lieu thereof 
"March 17,1986". 
(i) LAND DEVELOPMENT INSURANCE.—Section 1002(a) of the Na-
tional Housing Act is amended by striking out "December 15, 1985" 12 usc I749bb. 
in the last sentence and inserting in lieu thereof "March 17, 1986". 
(j) GROUP PRACTICE FACILITIES INSURANCE.—Section 1101(a) of the 
National Housing Act is amended by striking out "December 15, 12 USC I749aaa. 
1985" in the last sentence and inserting in lieu thereof "March 17, 
1986". 
SEC. 3008. EXTENSION OF REHABILITATION LOAN AUTHORITY. 
Section 312(h) of the Housing Act of 1964 is amended— 
42 USC 1452b. 
(1) by striking out "December 15, 1985" and inserting in lieu 
thereof "March 17, 1986"; and 
(2) by striking out "prior to December 16, 1985" and inserting 
in lieu thereof "on or before such date". 
SEC. 3009. EXTENSION OF RURAL HOUSING AUTHORITIES. 
(a) RENTAL HOUSING LOAN AUTHORITY.—Section 515(b)(4) of the 
Housing Act of 1949 is amended by striking out "December 15,1985" 42 usc 1485. 
and inserting in lieu thereof "March 17, 1986". 
(b) RURAL AREA CLASSIFICATION.—Section 520 of the Housing Act 
of 1949 is amended by striking out "December 15, 1985" in the last 42 USC 1490. 
sentence and inserting in lieu thereof "March 17,1986". 
100 STAT. 106 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 1490c. 
42 use 4026. 
42 use 4056. 
42 use 4101. 
12 use 1749bbb. 
42 use 5302. 
12 use 1701q 
note. 
12 use 2811. 
(c) MUTUAL AND SELF-HELP HOUSING GRANT AND LOAN AUTHOR-
ITY.—Section 523(0 of the Housing Act of 1949 is amended by 
striking out "December 15, 1985" and inserting in lieu thereof 
"March 17,1986". 
SEC. 3010. EXTENSION OF FLOOD AND CRIME INSURANCE PROGRAMS. 
(a) FLOOD INSURANCE.— 
(1) GENERAL AUTHORITY.—Section 1319 of the National Flood 
Insurance Act of 1968 is amended by striking out "December 15, 
1985" and inserting in lieu thereof "March 17,1986". 
(2) EMERGENCY IMPLEMENTATION.—Section 1336(a) of the Na-
tional Flood Insurance Act of 1968 is amended by striking out 
"December 15, 1985" and inserting in lieu thereof "March 17, 
1986". 
(3) ESTABLISHMENT OF FLOOD-RISK ZONES.—Section 1360(a)(2) of 
the National Flood Insurance Act of 1968 is amended by strik-
ing out "December 15, 1985" and inserting in lieu thereof 
"March 17,1986". 
(b) CRIME INSURANCE.—Section 1201(b)(1) of the National Housing 
Act is amended by striking out "December 15, 1985" in the matter 
preceding subparagraph (A) and inserting in lieu thereof "March 17, 
1986". 
SEC. 3011. MISCELLANEOUS EXTENSIONS. 
(a) COMMUNITY DEVELOPMENT BLOCK GRANT CLASSIFICATIONS.— 
(1) METROPOLITAN CITY.—Section 102(a)(4) of the Housing and 
Community Development Act of 1974 is amended by striking 
out "December 15,1985" in the second sentence and inserting in 
lieu thereof "March 17,1986". 
(2) URBAN COUNTY.—Section 102(a)(6) of the Housing and 
Community Development Act of 1974 is amended by striking 
out "December 15,1985" in the second sentence and inserting in 
lieu thereof "March 17,1986". 
O
t
)
) SECTION 202 INTEREST RATE LIMITATION.—Section 223(a)(2) of 
the Housing and Urban-Rural Recovery Act of 1983 is amended by 
striking out "prior to December 16, 1985" and inserting in lieu 
thereof "not later than March 17,1986". 
(c) HOME MORTGAGE DISCLOSURE ACT OF 1975.—Section 312 of the 
Home Mortgage Disclosure Act of 1975 is amended by striking out 
"December 16, 1985" and inserting in lieu thereof "March 17, 1986". 
TITLE IV—TRANSPORTATION AND 
RELATED PROGRAMS 
Amtrak 
Reauthorization 
Act of 1985. 
45 use 501 note. 
Subtitle A—Railroads 
SEC. 4001. SHORT TITLE. 
This subtitle may be cited as the "Amtrak Reauthorization Act of 
1985". 
SEC. 4002. AUTHORIZATION OF APPROPRIATIONS. 
(a) AUTHORIZATION.—Section 601(b)(2) of the Rail Passenger Serv-
ice Act (45 U.S.C. 601(b)(2)) is amended— 
(1) in subparagraph (A) by striking out "and" after "403(b) of 
this Act;"; 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 107 
(2) in subparagraph (B) by striking out the period and insert-
ing in lieu thereof a semicolon; and 
(3) by adding at the end the following new subparagraphs: 
"(C) not to exceed $600,000,000 for the fiscal year ending 
September 30,1986; 
"(D) not to exceed $606,100,000 for the fiscal year ending 
September 30,1987; and 
"(E) not to exceed $630,300,000 for the fiscal year ending 
September 30,1988.". 
(b) LIMITATION.—Such section 601(b) is further amended by adding 45 use 601. 
at the end a new paragraph as follows: 
"(5) Unless sufficient funds are otherwise available to operate the 
Corporation's rail system at substantially the same level of service, 
maintenance, and equipment overhauls in effect on the date of the 
enactment of this paragraph, funds appropriated to or for the 
benefit of the Corporation under this section before the date of the 
enactment of this paragraph which the Corporation has designated 
for nonoperational capital projects shall be used as necessary to 
maintain the operations of the system at such level.". 
SEC. 4003. CAPITAL ASSETS. 
Section 304(c) of the Rail Passenger Service Act (45 U.S.C. 544(c)) 
is amended by adding at the end thereof the following new 
paragraph: 
"(3) The preferred stock issued pursuant to paragraphs (1) and (2) 
of this subsection shall be deemed to have been issued as of the date 
of receipt by the Corporation of the funds for which such stock is 
issued.". 
SEC. 4004. GOVERNMENT TRAVEL. 
Section 306(f) of the Rail Passenger Service Act (45 U.S.C. 546(f)) is 
amended by inserting ", which shall include allowing the Corpora-
tion to participate in the contract air program administered by the 
General Services Administration in markets where service provided 
by the Corporation is competitive as to rates and total trip times" 
before the period. 
SEC. 4005. REPORT CONSOLIDATION. 
Section 308(a) of the Rail Passenger Service Act (45 U.S.C. 548(a)) 
is amended to read as follows: 
"(a) The Corporation shall submit to the Congress a report not 
later than February 15 of each year. The report shall include, for 
each route on which the Corporation operated intercity rail pas-
senger service during the preceding fiscal year, data on ridership, 
passenger miles, short-term avoidable profit or loss per passenger 
mile, revenue-to-cost ratio, revenues, the Federal subsidy, the non-
Federal subsidy, and on-time performance. Such report shall also 
specify significant operational problems which have been identified 
by the Corporation, together with proposals by the Corporation to 
resolve such problems.". 
SEC. 4006. CHARTER TRAINS. 
Section 402 of the Rail Passenger Service Act (45 U.S.C. 562) is 
amended— 
(1) by repealing subsection (g); and 
(2) by redesignating subsection (h) as subsection (g). 
100 STAT. 108 
PUBLIC LAW 99-272—APR. 7, 1986 
SEC. 4007. MISCELLANEOUS AMENDMENTS. 
(a) AUDITS.—Section 805 of the Rail Passenger Service Act (45 
U.S.C. 644) is amended— 
(1) in subsection (2)(A) by striking out "shall conduct annually 
a" in the first sentence and inserting in lieu thereof "may 
conduct"; and 
(2) in subsections (2)(A) and (2)(B) by striking "audit" wher-
ever it appears and inserting in lieu thereof "audits". 
(b) REPEAL OF STUDIES AND REPORTS.—Sections 306(k), 806, 810, 
and 811 of the Rail Passenger Service Act (45 U.S.C. 546(k), 645, 649, 
and 650) are repealed. 
(c) EMERGENCY ASSISTANCE.—Title VII of the Rail Passenger Serv-
ice Act (45 U.S.C. 621 and 622) is repealed. 
(d) NORTHEAST CORRIDOR REPORTS.—Section 703(1 )(D) of the Rail-
road Revitalization and Regulatory Reform Act of 1976 (45 U.S.C. 
853(1 )(D)) is repealed. 
(e) PERFORMANCE EVALUATION CENTER.—(1) Section 305(1) of the 
Rail Passenger Service Act (45 U.S.C. 545(1)) is repealed. 
(2) Section 305(m) of the Rail Passenger Service Act (45 U.S.C. 
545(m)) is amended by striking out "Center" each place it appears 
and inserting in lieu thereof "Corporation". 
SEC. 4008. REVENUE-COST RATIO. 
Section 404(c)(4)(A) of the Rail Passenger Service Act (45 U.S.C. 
564(c)(4)(a)) is amended by adding at the end the following new 
sentence: "Commencing in fiscal year 1986, the Corporation shall set 
a goal of recovering an amount sufficient that the ratio of its 
revenues, including contributions from States, agencies, and other 
persons, to costs, excluding capital costs, shall be at least 61 
percent.". 
SEC. 4009. LABOR-RELATED COST SAVINGS. 
Amtrak and the representatives of employees of Amtrak shall 
negotiate changes in existing agreements between such parties that 
will result in substantial cost savings to Amtrak, and shall report 
the results of such negotiations to the Congress within six months 
after the date of enactment of this Act. 
45 u s e 564 note. 
SEC. 4010. ROUTE DISCONTINUANCE. 
Amtrak shall not, by reason of any provision of this subtitle, 
including section 4002, reduce the frequency of service on any line 
on which, as of May 1, 1985, three or fewer trains operated per week. 
SEC. 4011. EMPLOYMENT VACANCY FILING. 
(a) LIABILITY.—Section 704(c) of the Regional Rail Reorganization 
Act of 1973 (45 U.S.C. 797c(c)) is amended— 
(1) by inserting "(1)" after "VACANCY NOTICES.—"; and 
(2) by adding at the end a new paragraph as follows: 
"(2)(A) As soon as the Board becomes aware of any failure on the 
part of a railroad to comply with paragraph (1), the Board shall issue 
a warning to such railroad of its potential liability under subpara-
graph (B). 
"(B) Any railroad failing to comply with paragraph (1) of this 
subsection after being warned by the Board under subparagraph (A) 
shall be liable for a civil penalty in the amount of $500 for each 
subsequent vacancy with respect to which such railroad has so failed 
to comply.". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 109 
(b) EXTENSION.—Section 704(f) of such Act (45 U.S.C. 797c(f)) is 
amended by striking out "4-year" and inserting in lieu thereof "6-
year". 
(c) EXEMPTION.—The provisions of section 703 of the Regional Rail 
45 use 797b 
Reorganization Act of 1973 (45 U.S.C. 797b), section 8 of the Milwau- note. 
kee Railroad Restructuring Act (45 U.S.C. 907), and section 105 of 
the Rock Island Railroad Transition and Employee Assistance Act 
(45 U.S.C. 1004) shall not apply to the National Railroad Passenger 
Corporation in the hiring of qualified train and engine employees 
who hold seniority rights to work in intercity rail passenger service 
in connection with the assumption by such Corporation of functions 
previously performed under contract by other carriers. 
(d) EFFECTIVE DATES.—The amendments made by subsections (a) 45 use 797c 
and (c) shall take effect on the date of enactment of this Act, and the ^°^^-
amendment made by subsection (b) shall be effective as of August 1, 
1985. 
SEC. 4012. TRANSPORTATION OF USED UNOCCUPIED VEHICLES. 
Section 103(3) of the Rail Passenger Service Act (45 U.S.C. 502(3)) 
is amended by inserting ", and, when space is available, of used 
unoccupied vehicles" after "and their occupants". 
SEC. 4013. AMTRAK CORPORATE CITIZENSHIP. 
Section 306(m) of the Rail Passenger Service Act (45 U.S.C. 546(m)) 
is amended by inserting "only" immediately after "citizen". 
SEC. 4014. ROUTE AND SERVICE CRITERIA. 
(a) ROUTE AND SERVICE CRITERIA AMENDMENTS.—The Rail Pas-
senger Service Act is amended— 
(1) in section 403(d) (45 U.S.C. 563(d))— 
(A) by striking out "criteria set forth in section 
404(d)(2)(B)" and inserting in lieu thereof "criterion set 
forth in section 404(d)(2)"; and 
Post, p. no. 
(B) by inserting after the first sentence thereof the follow-
ing: "Beginning October 1, 1986, if such service is not 
projected to meet such criterion, the Corporation may dis-
continue, modify, or adjust such service so that the ap-
plicable criterion will be met."; 
(2) in section 404(c)(3)(B) (45 U.S.C. 564(c)(3)(B))— 
(A) by striking out "60" and inserting in lieu thereof 
"120"; 
(B) by striking out "either the Senate" and all that Congress, 
follows through "that it does" and inserting in lieu thereof 
"the Senate and the House of Representatives adopt a joint 
resolution during such period stating that they do"; and 
(C) by adding at the end thereof the following: "For 
purposes of this subparagraph, continuity of session of the 
Congress is broken only by an adjournment sine die and the 
days on which either House is not in session because of 
adjournment of more than 3 days to a day certain are 
excluded in the computation of such 120-day period."; 
(3) by amending section 404(c)(4)(B) (45 U.S.C. 564(c)(4)(B)) to 
read as follows: 
"(B) The Corporation shall conduct an annual review of each route 
in the basic system to determine if such route is projected to meet 
the criterion appropriate to such route set forth in subsection (d), as 
adjusted to reflect constant 1979 dollars. If the Corporation deter-
100 STAT. 110 
PUBLIC LAW 99-272—APR. 7, 1986 
mines on the basis of such review that such route will not meet such 
criterion, the Corporation shall discontinue, modify, or adjust the 
operation of rail passenger service over such route so that the 
criterion will be met."; 
(4) in the first sentence of section 404(d)(1) (45 U.S.C. 
564(d)(1))-
(A) by striking out "if—" and inserting in lieu thereof 
"if; 
(B) by striking out "(A)"; and 
(C) by striking out all after "mile" the second time it 
appears therein and inserting in lieu there(Jf a period; 
(5) in the second sentence of section 404(d)(1) (45 U.S.C. 
564(d)(1)) by striking out "and passenger mile per train mile"; 
(6) by striking out the last sentence of section 404(d)(1) (45 
U.S.C. 564(d)(1)); and 
(7) in section 404(d)(2) (45 U.S.C. 564(d)(2))— 
(A) by striking out "if—" and inserting in lieu thereof 
"if; 
(B) by striking out "(A)"; and 
(C) by striking out all after "mile" the second time it 
appears therein and inserting in lieu thereof a period. 
45 use 563 note. 
(b) EFFECTIVE DATE.—The provisions of this section shall take 
effect on October 1, 1986. 
SEC. 4015. ICC REGULATION. 
Section 306(a)(3) of the Rail Passenger Service Act (45 U.S.C. 
546(a)(3)) is amended by striking out ", except as otherwise provided 
in this Act,". 
SEC. 4016. MEANING OF "DISCONTINUANCE" FOR LABOR PROTECTION 
PURPOSES. 
Section 405(a) of the Rail Passenger Service Act (45 U.S.C. 565(a)) 
is amended by adding at the end thereof the following: "For pur-
poses of subsection (c) of this section and any agreement designed to 
implement the provisions of such subsection, a 'discontinuance of 
intercity rail passenger service' shall not include any adjustment in 
frequency or seasonal suspension of intercity rail passenger trains 
the effect of which is a temporary suspension of service unless such 
adjustment or suspension causes a reduction of passenger train 
operations on a particular route to a frequency of less than three 
round trips per week at any time during any calendar year.". 
SEC. 4017. NORTHEAST CORRIDOR COST DISPUTE DECISIONS. 
(a) ICC DECISIONS.—(1) Section 1163(a)(2) of the Northeast Rail 
Service Act of 1981 (45 U.S.C. 1111(a)(2)) is amended to read as 
follows: 
"(2) The Commission, in making such a determination, shall 
consider all relevant factors, and shall not permit cross subsidiza-
tion between intercity rail passenger service and commuter rail 
passenger service.". 
45 use 1111 
(2) Any decisions of the Interstate Commerce Commission before 
note. 
the date of enactment of this Act under section 1163(a)(2) of the 
Northeast Rail Service Act of 1981 (45 U.S.C. 1111(a)(2)) shall have 
no force and effect after the date of enactment of this Act. 
(b) ASSIGNMENT OF COSTS.—Section 402(a) of the Rail Passenger 
Service Act (45 U.S.C. 562(a)) is amended— 
(1) by inserting "(1)" immediately after "(a)"; 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. Ill 
(2) by inserting "(2)" immediately before "Notwithstanding"; 
(3) in the second sentence of paragraph (2), as so designated by 
paragraph (2) of this subsection, by striking out "180" and 
inserting in lieu thereof "120"; 
(4) in the last sentence of paragraph (2), as so designated by 
paragraph (2) of this subsection, by striking out "shall consider 
all relevant factors, and shall not permit cross subsidization 
among intercity, commuter," and inserting in lieu thereof 
"shall not permit cross subsidization between intercity rail 
passenger service"; and 
(5) by adding at the end of paragraph (2), as so designated by 
paragraph (2) of this subsection, the following: "The Commis-
sion, in making such a determination, shall assign to a freight 
railroad obtaining services pursuant to this paragraph the costs 
incurred by the Corporation solely for the benefit of that rail-
road, plus a proportionate share of all other costs of providing 
X ; services covered by this paragraph that are incurred for the 
common benefit of the Corporation and such freight railroad. 
The proportionate share of such other costs assigned to a freight 
railroad shall be based on relative measures of volume of car 
operations, tonnage, or other factors that reasonably reflect the 
relative use of the rail properties covered by this paragraph. 
Nothing in this paragraph shall be construed to preclude par-
ties from entering into an agreement under this paragraph 
either before or after a determination of the Commission under 
this paragraph.". 
(c) EFFECTIVENESS OF STANDARD.—The compensation standard 45 use 562 note. 
established by the amendment made by subsection O
t
>
) of this section 
shall be effective in any proceeding instituted under section 402(a)(2) 
of the Rail Passenger Service Act (45 U.S.C. 562(a)(2)) after the date 
of enactment of this Act. 
(d) CONGRESSIONAL POLICY.—Nothing in this section, or any 45 use 562 note. 
amendment made by this section, shall be construed to alter the 
Congressional policy against cross subsidization among intercity, 
commuter, and rail freight services expressed in the last sentence of 
section 402(a) of the Rail Passenger Service Act, as in effect before 
the date of enactment of this Act. 
SEC. 4018. LOCAL RAIL SERVICE ASSISTANCE. 
Section 5(q) of the Department of Transportation Act (49 U.S.C. 
App. 1654(q)) is amended— 
(1) by inserting after "September 30, 1984." the following: "Of 
the funds authorized to be appropriated under this subsection, 
there are authorized to be appropriated not to exceed 
$12,000,000 for the fiscal year ending September 30, 1986, not to 
exceed $10,000,000 for the fiscal year ending September 30, 
1987, and not to exceed $8,000,000 for the fiscal year ending 
September 30, 1988."; and 
(2) by adding at the end thereof the following: "No funds are 
authorized to be appropriated under this subsection for any 
period after September 30, 1988.". 
100 STAT. 112 
PUBLIC LAW 99-272—APR. 7, 1986 
Subtitle B—Highway Programs 
96 Stat. 2099. 
96 Stat. 2137. 
92 Stat. 2692. 
State and local 
governments. 
State and local 
governments. 
State and local 
governments. 
Safety. 
23 u s e 104 note. 
SEC. 4101. REDUCTIONS IN HIGHWAY APPORTIONMENTS. 
(a) PRIMARY SYSTEM.—The first sentence of section 105(a)(1) of the 
Highway Improvement Act of 1982 is amended by striking out 
"$2,450,000,000" and inserting in lieu thereof "$2,375,000,000". 
(b) BRIDGE REPLACEMENT AND REHABILITATION.—Section 202(1) of 
the Highway Safety Act of 1982 is amended by striking out 
"$2,050,000,000" and inserting in lieu thereof "$1,900,000,000". 
(c) INTERSTATE 4R.—The first sentence of section 105 of the Fed-
eral-Aid Highway Act of 1978 is amended by striking out 
"$3,150,000,000" and inserting in lieu thereof "$2,975,000,000". 
(d) APPORTIONMENT ADJUSTMENTS.— 
(1) DETERMINATION OF ADJUSTMENT AMOUNT.—On the first day 
following the effective date of this section, the Secretary of 
Transportation shall determine— 
(A) the amount of funds that would have been appor-
tioned to each State on October 1,1985— 
(i) for the Federal-aid primary system program if the 
amendment made by subsection (a) had been in effect 
on such date; 
(ii) for the highway bridge replacement and re-
habilitation program if the amendment made by 
subsection (b) had been in effect on such date; and 
(iii) for the program to resurface, restore, rehabili-
tate, and reconstruct routes on the National System of 
Interstate and Defense Highways if the amendment 
made by subsection (c) had been in effect on such date; 
and 
(B) the amount by which the amount which was appor-
tioned to such State on October 1, 1985, for such program 
exceeds the amount determined under subparagraph (A) for 
such program. 
(2) ADJUSTMENTS TO CURRENT APPORTIONMENT.—To the extent 
that any funds— 
(A) which were apportioned to a State on October 1, 1985, 
for any program referred to in paragraph (1)(A); and 
(B) which are unobligated on the first day following the 
effective date of this section; 
do not exceed the amount determined under paragraph (IXB) 
for such program, such apportioned and unobligated funds shall 
lapse on such first day. 
(3) ADJUSTMENT TO FUTURE APPORTIONMENT.—If the amount 
determined under paragraph (1)(B) with respect to the appor-
tionment made on October 1, 1985, to any State for any program 
referred to in paragraph (IXA) is greater than the amount of 
funds which lapse from the apportionment to such State for 
such program under paragraph (2), the Secretary of Transpor-
tation shall reduce the amount which, but for this paragraph, 
would otherwise be apportioned to such State for such program 
on October 1,1986, by the amount of such excess. 
SEC. 4102. OBLIGATION CEILING. 
(a) GENERAL LIMITATION.—Notwithstanding any other provision of 
law, the total of all obligations for Federal-aid highways and high-
way safety construction programs shall not exceed— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 113 
Post, p. 116. 
95 Stat. 1701. 
96 Stat. 2119. 
40 u s e 818. 
State and local 
governments. 
23 u s e 104 note. 
(1) $13,125,000,000 for fiscal year 1986; 
(2) $13,525,000,000 for fiscal year 1987; and 
(3) $14,100,000,000 for fiscal year 1988. 
(b) EXCEPTIONS.—The limitations under subsection (a) shall not 
23 use 104 note, 
apply to obligations— 
(1) under section 125 of title 23, United States Code; 
(2) under section 157 of such title; 
(3) under section 320 of such title; 
(4) under section 147 of the Surface Transportation Assistance 
Act of 1978; 
(5) under section 9 of the Federal-Aid Highway Act of 1981; 
(6) under sections 131(b) and 131(j) of the Surface Transpor-
tation Assistance Act of 1982; and 
(7) under section 118 of the National Visitor Center Facilities 
Act of 1968. 
(c) DISTRIBUTION OF OBLIGATIONAL AUTHORITY.—For each of the 
fiscal years 1986, 1987, and 1988, the Secretary of Transportation 
shall distribute the limitation imposed by subsection (a) by alloca-
tion in the ratio which sums authorized to be appropriated for 
Federal-aid highways and highway safety construction which are 
apportioned or allocated to each State for such fiscal year bears to 
the total of the sums authorized to be appropriated for Federal-aid 
highways and highway safety construction which are apportioned or 
allocated to all the States for such fiscal year. 
(d) LIMITATION ON OBLIGATIONAL AUTHORITY.—During the period 
October 1 through December 31 of each of the fiscal years 1986, 
1987, and 1988, no State shall obligate more than 35 percent of the 
amount distributed to such State under subsection (c) for such fiscal 
year, and the total of all State obligations during such period shall 
not exceed 25 percent of the total amount distributed to all States 
under such subsection for such fiscal year. 
(e) REDISTRIBUTION OF UNUSED OBLIGATIONAL AUTHORITY.—Not-
withstanding subsections (c) and (d), the Secretary of Transportation 
shall— 
(1) provide all States with authority sufficient to prevent 
lapses of sums authorized to be appropriated for Federal-aid 
highways and highway safety construction which have been 
apportioned or allocated to a State, except in those instances in 
which a State indicates its intention to lapse sums apportioned 
under section 104(b)(5)(A) of title 23, United States Code; 
(2) after August 1 of each of the fiscal years 1986, 1987, and 
1988, revise a distribution of the funds made available under 
subsection (c) for such fiscal year if a State will not obligate the 
amount distributed during such fiscal year and redistribute 
sufficient amounts to those States able to obligate amounts in 
addition to those previously distributed during such fiscal year 
giving priority to those States having large unobligated bal-
ances of funds apportioned under section 104 of title 23, United 
States Code, and giving priority to those States which, because 
of statutory changes made by the Surface Transportation 
Assistance Act of 1982 and the Federal-Aid Highway Act of 
23 use 101 note. 
1981, have experienced substantial proportional reductions in 
23 use lOi note, 
their apportionments and allocations; and 
(3) not distribute amounts authorized for administrative ex-
penses and Federal lands highways programs. 
(f) CONFORMING AMENDMENT.—Section 157(b) of title 23, United 
States Code, is amended by striking out the period at the end of the 
State and local 
governments. 
23 u s e 104 note. 
State and local 
governments. 
23 u s e 104 note. 
100 STAT. 114 
PUBLIC LAW 99-272—APR. 7, 1986 
last sentence and inserting in lieu thereof "and section 4102(c) of the 
Consolidated Omnibus Budget Reconciliation Act of 1985.". 
SEC. 4103. INCREASE IN THE STATE EMERGENCY REPAIR FUND LIMITA-
TION. 
The first sentence of section 125(b) of title 23, United States Code, 
is amended by inserting after "$30,000,000" the following: "(and 
$55,000,000 for projects in connection with disasters or failures 
occurring in calendar year 1985)". 
SEC. 4104. NATIONAL MINIMUM DRINKING AGE AMENDMENTS. 
(a) 
EXTENSION 
OF PENALTY 
FOR NON-COMPLIANCE.—Section 
158(a)(2) of title 23, United States Code, is amended by striking out 
"the fiscal year succeeding" and inserting in lieu thereof "each 
fiscal year after". 
(b) COMPLYING STATE LAWS.—Subsection (a) of section 158 of such 
title is amended by adding at the end thereof the following new 
paragraph: 
"(3) STATE GRANDFATHER LAW AS COMPLYING.—If, before the 
:.: „ later of (A) October 1, 1986, or (B) the tenth day following the 
last day of the first session the legislature of a State convenes 
after the date of the enactment of this paragraph, such State 
has in effect a law which makes unlawful the purchase and 
public possession in such State of any alcoholic beverage by a 
person who is less than 21 years of age (other than any person 
who is 18 years of age or older on the day preceding the effective 
date of such law and at such time could lawfully purchase or 
publicly possess any alcoholic beverage in such State), such 
State shall be deemed to be in compliance with paragraphs (1) 
and (2) of this subsection in each fiscal year in which such law is 
in effect,". 
(c) PERIOD OF AVAILABILITY; EFFECT OF COMPLIANCE AND NON-
23 use 158. 
COMPLIANCE.—Subsection (b) of section 158 of such title is amended 
to read as follows: 
"(b) PERIOD OF AVAILABILITY; EFFECT OF COMPLIANCE AND NON-
COMPLIANCE.— 
"(1) PERIOD OF AVAILABILITY OF WITHHELD FUNDS.— 
"(A) 
FUNDS WITHHELD ON OR BEFORE SEPTEMBER 30, 
State and local 
1988.—Any funds withheld under this section from appor-
governments. 
tionment to any State on or before September 30, 1988, 
shall remain available for apportionment to such State as 
follows: 
"(i) If such funds would have been apportioned under 
section 104(b)(5)(A) of this title but for this section, such 
funds shall remain available until the end of the fiscal 
year for which such funds are authorized to be appro-
priated. 
"(ii) If such funds would have been apportioned 
under section 104(b)(5)(B) of this title but for this sec-
' 
tion, such funds shall remain available until the end of 
,, 
;ii 
the second fiscal year following the fiscal year for 
which such funds are authorized to be appropriated, 
"(iii) If such funds would have been apportioned 
under section 104(b)(1), 104(b)(2), or 104(b)(6) of this title 
but for this section, such funds shall remain available 
until the end of the third fiscal year following the fiscal 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 115 
year for which such funds are authorized to be 
appropriated. 
"(B) 
FUNDS WITHHELD AFTER SEPTEMBER 30, 1988.—No 
funds withheld under this section from apportionment to 
any State after September 30, 1988, shall be available for 
apportionment to such State. 
"(2) APPORTIONMENT OF WITHHELD FUNDS AFTER COMPLI- State and local 
ANCE.—If, before the last day of the period for which funds governments, 
withheld under this section from apportionment are to remain 
available for apportionment to a State under paragraph (1)(A), 
the State makes effective a law which is in compliance with 
subsection (a), the Secretary shall on the day following the 
effective date of such law apportion to such State the withheld 
funds remaining available for apportionment to such State. 
"(3) PERIOD OF AVAILABILITY OF SUBSEQUENTLY APPORTIONED 
FUNDS.—Any funds apportioned pursuant to paragraph (2) shall 
remain available for expenditure as follows: 
"(A) Funds apportioned under section 104(b)(5)(A) of this 
title shall remain available until the end of the fiscal year 
succeeding the fiscal year in which such funds are so 
apportioned. 
"(B) Funds apportioned under section 104(b)(1), 104(b)(2), 
104(b)(5)(B), or 104(b)(6) of this title shall remain available 
until the end of the third fiscal year succeeding the fiscal 
year in which such funds are so apportioned. 
Sums not obligated at the end of such period shall lapse or, in 
the case of funds apportioned under section 104(b)(5) of this title, 
shall lapse and be made available by the Secretary for projects 
in accordance with section 118(b) of this title. 
"(4) EFFECT OF NONCOMPLIANCE.—If, at the end of the period State and local 
for which funds withheld under this section from apportion- governments, 
ment are available for apportionment to a State under para-
graph (1), the State has not made effective a law which is in 
compliance with subsection (a), such funds shall lapse or, in the 
case of funds withheld from apportionment under section 
104(b)(5) of this title, such funds shall lapse and be made 
available by the Secretary for projects in accordance with sec-
tion 118(b) of this title.", 
(d) CONFORMING AMENDMENTS.—Such section 158 is further 
23 use 158. 
amended— 
(1) in subsection (a) by inserting "WITHHOLDING OF FUNDS FOR 
NONCOMPLIANCE.—" before "(1) The"; 
(2) in subsection (a)(1) by inserting "FIRST YEAR.—" before 
"The Secretary"; 
(3) by indenting paragraphs (1) and (2) of subsection (a) and 
aligning them with paragraph (3) of such subsection as inserted 
by subsection (b) of this section; 
(4) in subsection (a)(1) by inserting "first" before "fiscal year" 
the second place it appears; 
(5) in subsection (a)(2) by inserting "AFTER THE FIRST YEAR.—" 
before "The Secretary"; and 
(6) in subsection (c) by inserting "ALCOHOLIC BEVERAGE DE-
FINED.—" before "As". 
100 STAT. 116 
PUBLIC LAW 99-272—APR. 7, 1986 
SEC. 4105. OHIO RIVER BRIDGE FUND REPROGRAMMING. 
23 use 144 note. 
Section 147 of the Federal-Aid Highway Act of 1978 is amended by 
inserting "(a)" after "SEC. 147." and by adding at the end thereof the 
following new subsection: 
"(b)(1) Of the funds which have been set aside previously pursuant 
to the fourth and fifth sentences of subsection (a) of this section and 
which are in excess of the amounts needed to complete the projects 
authorized by such subsection— 
"(A) $65,000,000 shall be available to the Secretary of 
Transportation to carry out the state-of-the-art technology 
projects described in paragraph (2) of this subsection; and 
"(B) the remainder shall be apportioned under subsection (e) 
of section 144 of title 23, United States Code, for carrying out 
projects under such section. 
"(2) The state-of-the-art technology projects referred to in para-
graph (1) of this subsection are the following: 
Highways. 
"(A) Construction of a bridge (including approaches thereto) 
Kentucky. 
across the Ohio River between Newport, Kentucky, and Cin-
Ohio. 
cinnati, Ohio, to replace a bridge on a highway designated as a 
United States route. 
"(B) Construction of a bridge (including approaches thereto) 
across the Ohio River between Covington, Kentucky, and Cin-
cinnati, Ohio, to replace a bridge on a Kentucky State highway. 
"(C) Construction of a bridge (including approaches thereto) 
across the Ohio River near Maysville, Kentucky, and Aberdeen, 
Ohio, to replace a bridge on a highway designated as a United 
States route. 
Safety. 
"(3) In order to demonstrate the latest high-type geometric design 
Science and 
features (including safety hardware) and new advances in highway 
technology. 
bridge construction, the projects authorized by this subsection shall 
utilize state-of-the-art technology, and all design elements, including 
the decking, shall be designed to provide the best life-cycle costs, 
thereby minimizing future maintenance and rehabilitation costs. 
"(4) The Secretary of Transportation may provide necessary tech-
nical assistance in the design and construction of projects under this 
subsection. 
Reports. 
"(5) Not later than one year after the completion of the state-of-
the-art technology projects under this subsection, the Secretary of 
Transportation shall submit a report to Congress, including but not 
limited to the results of such projects, the effects of using the best 
available technology on safety and other considerations, rec-
ommendations for applying the results to other bridge projects, and 
any changes that may be necessary by law to permit further use of 
such features. 
"(6) In allocating funds made available to carry out the projects 
described in paragraph (2) of this subsection, the Secretary shall 
give priority to completing the projects described in subparagraphs 
(A) and (B) of such paragraph. At such time as the Secretary 
determines and certifies in writing that sufficient funds have been 
set aside, from the amount made available under paragraph (1)(A), 
to complete the projects described in subparagraphs (A) and (B) of 
paragraph (2), any remaining funds shall be used to carry out the 
project described in subparagraph (C) of paragraph (2). 
"(7) Funds made available to carry out the projects described in 
paragraph (2) of this subsection shall be available for obligation in 
the same manner and to the same extent as if such funds were 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 117 
apportioned under chapter 1 of title 23, United States Code, except 23 USC lOl et 
that such funds shall be available until expended and shall not be *^'?-
subject to any obligation limitation. The Federal share of the 
projects described in paragraph (2) of this subsection shall be that 
provided in subsection (a).". 
TITLE V—CORPORATION FOR PUBLIC 
BROADCASTING AND FEDERAL COMMU-
NICATIONS COMMISSION 
SEC. 5001. CORPORATION FOR PUBLIC BROADCASTING. 
(a) PUBLIC TELECOMMUNICATIONS FACILITIES.—Section 391 of the 
Communications Act of 1934 (47 U.S.C. 391) is amended— 
(1) by striking out "and" after "1983,"; and 
(2) by inserting ", $24,000,000 for fiscal year 1986, $28,000,000 
for fiscal year 1987, and $32,000,000 for fiscal year 1988," imme-
diately after "1984,". 
O
t
)
) ALLOCATION OF APPROPRIATIONS.—Section 393 of the Commu-
nications Act of 1934 (47 U.S.C. 393) is amended— 
(1) by striking out subsection (c); and 
(2) by redesignating subsection (d) as subsection (c). 
(c) FINANCING OF CORPORATION FOR PUBLIC BROADCASTING.—(1) 
Section 396(k)(l)(C) of the Communications Act of 1934 (47 U.S.C. 
396(k)(l)(C)) is amended— 
(A) by striking out "and 1986" and inserting in lieu thereof 
"1986,1987,1988,1989, and 1990"; 
(B) by striking out "and" after "fiscal year 1985,"; and 
(C) by inserting ", $200,000,000 for fiscal year 1987, 
$214,000,000 for fiscal year 1988, $238,000,000 for fiscal year 
1989, and $254,000,000 for fiscal year 1990" immediately before 
the period at the end thereof. 
(2) Section 396(k)(3)(A)(i)(II) of the Communications Act of 1934 (47 
U.S.C. 396(k)(3)(A)(i)(II)) is amended by striking out "research, train-
ing, technical assistance, engineering, instructional support, pay-
ment of interest on indebtedness,". 
(3) Section 396(k) of the Communications Act of 1934 (47 U.S.C. 
396(k)) is amended— 
(A) by striking out paragraph (8); and 
(B) by redesignating paragraphs (9) and (10) as paragraphs (8) 
and (9), respectively. 
SEC. 5002. FEDERAL COMMUNICATIONS COMMISSION. 
(a) AUTHORIZATION OF APPROPRIATIONS.—(1) Section 6 of the 
Communications Act of 1934 (47 U.S.C. 156) is amended to read as 
follows: 
"AUTHORIZATION OF APPROPRIATIONS 
"SEC. 6. There are authorized to be appropriated for the adminis-
tration of this Act by the Commission $98,100,000 for fiscal year 
1986 and $97,600,000 for fiscal year 1987, together with such sums as 
may be necessary for increases resulting from adjustments in salary, 
pay, retirement, other employee benefits required by law, and other 
nondiscretionary costs, for each of the fiscal years 1986 and 1987." 
100 STAT. 118 
PUBLIC LAW 99-272—APR. 7, 1986 
47 use 156 note. 
(2) The amendment made by paragraph (1) of this subsection shall 
apply with respect to fiscal years beginning after September 30, 
1985. 
(b) REIMBURSED EXPENSES.—Section 4(gX2) of the Communications 
Act of 1934 (47 U.S.C. 154(g)(2)) is amended— 
(1) in subparagraph (D), by striking out "1985" and inserting 
in lieu thereof "1987"; and 
(2) by adding at the end thereof the following new 
subparagraph: 
"(E) Funds which are received by the Commission as reimburse-
ments under the provisions of this paragraph after the close of a 
fiscal year shall remain available for obligation.". 
(c) ANNUAL REPORT.—Section 5(g) of the Communications Act of 
1934 (47 U.S.C. 155(g)) is amended by striking out "January 31" and 
inserting in lieu thereof "March 31". 
(d) ADDITIONAL SAVINGS.—For provisions of law which, through 
relocation of the Fort Lauderdale, Florida, Monitoring Station of the 
Federal Communications Commission, reduce spending for fiscal 
year 1986 in satisfaction of the reconciliation requirements imposed 
by section 2(e) of S. Con. Res. 32 (99th Congress), see the material 
under the heading "FEDERAL COMMUNICATIONS COMMISSION" in the 
99 Stat. 293. 
Supplemental Appropriations Act, 1985 (Public Law 99-88). 
(e) CHARGES FOR OPERATIONS.—The Communications Act of 1934 
(47 U.S.C. 151 et seq.) is amended by inserting immediately after 
section 7 the following new section: 
"CHARGES 
47 use 158. 
"SEC. 8. (a) The Commission shall assess and collect charges at 
such rates as the Commission shall establish or at such modified 
rates as it shall establish pursuant to the provisions of subsection (b) 
of this section. The Schedule of Charges established under this 
subsection shall be implemented not later than 360 days after the 
date of enactment of this section. 
"(b)(1) The Schedule of Charges established under this section 
shall be reviewed by the Commission every two years after the date 
of enactment of this section and adjusted by the Commission to 
reflect changes in the Consumer Price Index. Increases or decreases 
in charges shall apply to all categories of charges, except that 
individual fees shall not be adjusted until the increase or decrease, 
as determined by the net change in the Consumer Price Index since 
the date of enactment of this section, amounts to at least $5.00 in 
the case of fees under $100.00, or 5 percent in the case of fees of 
$100.00 or more. All fees which require adjustment will be rounded 
upward to the next $5.00 increment. The Commission shall transmit 
to the Congress notification of any such adjustment not later than 
90 days before the effective date of such adjustment. 
"(2) Increases or decreases in charges made pursuant to this 
subsection shall not be subject to judicial review. 
Regulations. 
"(c)(1) The Commission shall prescribe by regulation an additional 
charge which shall be assessed as a penalty for late payment of 
charges required by subsection (a) of this section. Such penalty shall 
be 25 percent of the amount of the charge which was not paid in a 
timely manner. 
"(2) The Commission may dismiss any application or other filing 
for failure to pay in a timely manner any charge or penalty under 
this section. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 119 
"(d)(1) The charges established under this section shall not be 
applicable to the following radio services: Local Government, Police, 
Fire, Highway Maintenance, Forestry-Conservation, Public Safety, 
and Special Emergency Radio, or to governmental entities licensed 
in other services. 
"(2) The Commission may waive or defer payment of a charge in 
any specific instance for good cause shown, where such action would 
promote the public interest. 
"(e) Moneys received from charges established under this section 
shall be deposited in the general fund of the Treasury to reimburse 
the United States for amounts appropriated for use by the Commis-
sion in carrying out its functions under this Act. 
"(f) The Commission shall prescribe appropriate rules and regula- Regulations, 
tions to carry out the provisions of this section.". 
(f) Until modified pursuant to section 8(b) of the Communications 47 USC 158 note. 
Act of 1934 (as added by subsection (e) of this section), the Schedule 
of Charges which the Federal Communications Commission shall 
prescribe pursuant to section 8(a) of such Act shall be as follows: 
Schedule of Charges 
Service 
Fee 
amount 
PRIVATE RADIO BUREAU 
1. 
Marine Coast Stations (New, Modifications, Renewals) 
$60.00 
2. 
Operational Fixed Microwave Stations (New, Modifications, Renewals) 
135.00 
3. 
Aviation (Ground Stations) (New, Modifications, Renewals) 
60.00 
4. 
Land Mobile Radio Licenses (New, Modifications, Renewals) 
30.00 
EQUIPMENT APPROVAL SERVICE 
1. 
Certification 
a. Receivers (Except TV & FM Receivers) 
250.00 
b. All Other Devices 
650.00 
2. 
Type Acceptance 
a. Approval of Subscription TV Systems 
2,000.00 
b. All Others 
325.00 
3. 
Type Approval 
a. Ship (Radio Telegraph) Automatic Alarm Systems 
6,500.00 
b. Ship and Lifeboat (Radio Telegraph) Transmitters 
3,250.00 
c. All Others (With Testing) 
1,300.00 
d. All Others (Without Testing) 
150.00 
4. 
Notifications 
100.00 
MASS MEDIA BUREAU 
1. 
Commercial TV Stations 
a. New and Major Change Construction Permits Application Fees 
2,250.00 
b. Minor Changes Application Fee 
500.00 
c. Hearing Charge 
6,000.00 
d. License Fee 
150.00 
2. 
Commercial Radio Stations 
a. New and Major Change Construction Permits 
(1) Application Fee AM Station 
2,000.00 
(2) Application Fee FM Station 
1,800.00 
b. Minor Changes Appl. Fee-AM & FM 
500.00 
c. Hearing Charge 
6,000.00 
d. License Fee 
(DAM 
325.00 
(2)FM 
100.00 
e. Directional Antenna License Fee (AM only) 
375.00 
3. 
FM/TV Translators and LPTV Stations (New & Major Change Construction 
Permits) 
a. Application Fee 
375.00 
b. License Fee 
75.00 
4. 
Station Assignment and Transfer Fees 
a. AM. FM and TV Commercial Stations 
(1) Application Fee (Forms 314/315) 
500.00 
100 STAT. 120 
PUBLIC LAW 99-272—APR. 7, 1986 
Schedule of Charges—Continued 
Service 
Fee 
amount 
(2) Application Fee (Form 316) 
70.00 
b. FM/TV Translators & LPTV Stations 
75.00 
5. 
Auxiliary Services Major Actions—Application Fee 
75.00 
6. 
Renewals—All Services 
30.00 
7. 
Cable Television Service 
a. Cable Television Relay Service—Construction Permits, Assignments & 
Transfers, Renewals & Modifications 
135.00 
b. Cable Special Relief Petitions—Filing Fee 
700.00 
8. 
Direct Broadcast Satellite New & Major Change CPs 
a. Application for Authorization to Construct a Direct Broadcast Satellite 
1,800.00 
b. Issuance of CP & Launch Authority 
17,500.00 
c. License to Operate Satellite 
500.00 
d. Hearing Charge 
6,000.00 
COMMON CARRIER BUREAU 
1. 
Domestic Public Land Mobile Stations (Base, Dispatch, Control & Repeater 
Stations) 
a. New or Additional Facility Authorizations, Assignments & Transfers (Per 
transmitter/per station) 
200.00 
b. Renewals and Minor Modifications (Per station) 
20.00 
c. Air-Ground Individual License Renewals & Modifications 
20.00 
2. 
Cellular Systems 
a. Initial Construction Permits & Major Modification Applications (Per 
cellular systems), 
200.00 
b. Assignments & Transfers (Per station) 
200.00 
c. Initial covering license (Per cellular system) 
(1) Wireline carrier 
525.00 
(2) Nonwireline carrier 
50.00 
d. Renewals 
20.00 
e. Minor modifications and additional licenses 
50.00 
3. 
Rural Radio (Ontral Office, Interoffice or Relay Facilities) 
a. Initial Construction Permit, Assignments & Transfers (Per transmitter) 
90.00 
b. Renewals & Modifications (Per station) 
20.00 
4. 
Offshore Radio Service 
a. Initial Construction Permit, Assignments & Transfers (Per transmitter) 
90.00 
b. Renewals & Modifications (Per station) 
20.00 
5. 
Local Television or Point To Point Microwave Radio Service 
a. Construction Permits, Modifications of (Construction Permits, and Renew-
als of Licenses 
135.00 
b. Assignments & Transfers of Control (Per Station) 
45.00 
c. Initial License for New Frequency 
135.00 
6. 
International Fixed Public Radio (Public & Control Stations) 
a. Initial Construction Permits, Assignments & Transfers 
450.00 
b. Renewals & Modifications 
325.00 
7. 
Satellite Services 
a. Transmit Earth Stations 
(1) Initial Station Authorization 
1,350.00 
(2) Assignments & Transfers of Station Authorizations 
450.00 
(3) All Other Applications 
90.00 
b. Small Transmit/Receive Earth Stations (2 meters or less) 
(1) Lead Authorization 
3,000.00 
(2) Routine Authorization 
30.00 
(3) All Other Applications 
90.00 
c. Receive Only Earth Stations 
(1) Initial Station Authorization 
200.00 
(2) All Other Applications 
90.00 
d. Applications For Authority To Construct a Space Station 
1,800.00 
e. Applications For Authority To Launch & Operate a Space Station 
18,000.00 
f. Satellite System Application 
(1) Initial Station Authorization 
5,000.00 
(2) Assignments & Transfers of Systems 
1,333.00 
(3) All Other Applications 
90.00 
8. 
Multipoint Distribution Service 
a. Construction Permits, Renewals & Modifications of Construction Permits... 
135.00 
b. Assignments & Transfers of (Control (Per station) 
45.00 
c. Initial License (Per channel) 
400.00 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 121 
Schedule of Charges—Continued 
Fee 
amount 
9. 
Section 214 Applications 
a. Applications for Overseas Cable Construction 
8,100.00 
b. Applications for Domestic Cable Construction 
540.00 
c. All Other 214 Applications 
540.00 
10. Tariff Filings 
a. Filing Fee 
250.00 
b. Special Permission Filings 
200.00 
11. Telephone Equipment Registration 
135.00 
12. Digital Electronic Message Service 
a. Construction Permits, Renewals & Modifications of Construction Permits.... 
135.00 
b. Assignments & Transfers of Control (Per station) 
45.00 
c. Initial License (First License or License Adding a New Frequency) 
135.00 
TITLE VI—MARITIME, COASTAL ZONE, 
AND RELATED PROGRAMS 
Subtitle A—Boating Safety Fund 
SEC. 6001. BOATING SAFETY FUND. 
46 USC 13106 
An amount equal to one-third of the amount transferred for fiscal 
year 1985 to the Boat Safety Account under section 9503(c)(4) of the 
Internal Revenue Code of 1954 (26 U.S.C. 9503(c)(4)) shall be depos-
ited in the general fund of the Treasury as proprietary receipts of 
the department in which the Coast Guard is operating and ascribed 
to Coast Guard activities. Section 13106(a) of title 46, United States 
Code, shall be applied with respect to fiscal year 1985 by substitut-
ing "one-third" for "two-thirds" in the first sentence. 
Subtitle B—NOAA Nautical and Aeronautical 
Products 
SEC. 6011. SALE AND DISTRIBUTION OF NOAA NAUTICAL AND AERONAUTI-
CAL PRODUCTS. 
(a) Section 1307 of title 44, United States Code, is amended to read 
as follows: 
"§ 1307. National Oceanic and Atmospheric Administration: nau-
tical and aeronautical products, sale and distribution 
"(a)(1) All nautical and aeronautical products created or published 
by the National Oceanic and Atmospheric Administration shall be 
sold at such prices as the Secretary of Commerce shall establish 
annually, in accordance with the provisions of this subsection. The 
Secretary shall publish annually the prices at which nautical and 
aeronautical products are sold to the public. 
"(2)(A) Subject to subparagraph (B) of this paragraph, the prices of 
nautical and aeronautical products may be increased over a period 
of not less than three years after the date of enactment of this 
section so as to recover all costs attributable to data base manage-
ment, compilation, printing, and distribution of such products. The 
prices of such products may be maintained to recover all such costs 
thereafter. At the end of such period and every three years there-
100 STAT. 122 
PUBLIC LAW 99-272—APR. 7, 1986 
after, the Secretary, after consultation with the Secretary of 
Transportation, shall report to the Congress on the effect of impos-
ing or maintaining such increased prices, including any impact on 
aviation and marine safety. 
"(B) The Secretary, after consultation with the Secretary of 
Transportation, shall adjust the prices of nautical or aeronautical 
products in such manner as is necessary to avoid any adverse impact 
on aviation and marine safety attributable to the prices specified in 
subparagraph (A) of this paragraph. 
"(3) This section shall not be construed to require the establish-
ment of any price for a nautical or aeronautical product where, in 
the judgment of the Secretary, furnishing of that product to a 
recipient is a reasonable exchange for voluntary contribution of 
information by the recipient to a program of the National Oceanic 
and Atmospheric Administration. 
"(4) Prices established under this section may not include costs 
attributable to the acquisition or processing of nautical or aeronauti-
cal data. 
"(b) Fees collected from the sale of nautical or aeronautical prod-
ucts under this section and from any licensing of such products 
which is permitted under any other provision of law shall be depos-
ited in the miscellaneous receipts fund of the United States 
Treasury. 
International 
"(c) The Secretary may distribute nautical and aeronautical 
organizations. 
products— 
"(1) without charge to each foreign government or inter-
national organization with which the Secretary or a Federal 
department or agency has an agreement for exchange of these 
products without cost; and 
"(2) at prices which the Secretary establishes, to the depart-
ments and officers of the United States requiring them for 
official use. 
"(d) The fees provided for in this section are for the purpose of 
reimbursing the United States Government for the costs of creating, 
publishing or distributing aeronautical and nautical products of the 
National Oceanic and Atmospheric Administration. The collection 
of fees authorized by this section shall not alter or expand any duty 
or liability of the United States under existing law for the perform-
ance of functions for which fees are collected, nor shall the collec-
tion of fees constitute an express or implied undertaking by the 
United States to perform any activity in a certain manner. 
"(e) For purposes of this section, the term 'nautical and aeronauti-
cal products' includes all nautical and aeronautical charts, tide and 
tidal current tables, tidal current charts, coast pilots, water level 
products, and associated data bases which are created or published 
by the National Oceanic and Atmospheric Administration.", 
(b) The item relating to section 1307 in the analysis of chapter 13 
44 use 1301 et 
of title 44, United States Code, is amended to read as follows: 
"1307. National Oceanic and Atmospheric Administration: nautical and aeronauti-
cal products, sale and distribution.". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 123 
Subtitle C—Foreign Fishing Permit Fees 
SEC. 6021. FOREIGN FISHING PERMIT FEES. 
Paragraph (10) of section 204(b) of the Magnuson Fishery Con-
servation and Management Act (16 U.S.C. 1824(b)(10)) is amended to 
read as follows: 
"(10) FEES.—(A) Fees shall be paid to the Secretary by the Maritime affairs. 
owner or operator of any foreign fishing vessel for which a 
permit is issued pursuant to this subsection. The Secretary, in 
consultation with the Secretary of State, shall establish a sched-
ule of such fees which shall apply nondiscriminatorily to each 
foreign nation. 
"(B) Unless subparagraph (C) applies, the fees imposed under 
subparagraph (A) shall be at least in an amount sufficient to 
return to the United States an amount which bears to the total 
cost of carrying out the provisions of this Act during each fiscal 
year the same ratio as the aggregate quantity of fish harvested 
by foreign fishing vessels within the fishery conservation zone 
during the preceding year bears to the aggregate quantity of 
fish harvested by both foreign and domestic fishing vessels 
within such zone and the territorial waters of the United States 
during such preceding year. 
"(C) If the Secretary, in consultation with the Secretary of Conservation. 
State, finds that any foreign nation receiving an allocation 
under section 201(e)— 
"(i) is harvesting anadromous species of United States 
origin at a level that is unacceptable to the Secretary; or 
"(ii) is failing to take sufficient action to benefit the 
conservation and development of United States fisheries; 
the fees imposed under subparagraph (A) for the next fiscal year 
shall be at least in an amount sufficient to return to the United 
States an amount which bears to the total cost of carrying out 
the provisions of this Act during that fiscal year the same ratio 
as the aggregate quantity of fish harvested by foreign fishing 
vessels within the fishery conservation zone during the preced-
ing year bears to the aggregate quantity of fish harvested by 
both foreign and domestic fishing vessels within such zone 
during such preceding year. If the Secretary, in consultation 
with the Secretary of State, finds, at any time during a fiscal 
year in which fees calculated under this subparagraph are in 
effect with respect to a foreign nation, that the conditions 
requiring that calculation no longer exist, the fees imposed 
under this paragraph with respect to that nation for the 
remainder of the fiscal year shall be calculated under subpara-
graph (B). 
"(D) Before the end of each fiscal year, the Secretary, in 
consultation with the Secretary of State, shall review, based on 
the criteria established in subparagraph (C) (i) and (ii), the 
performance of every nation receiving an allocation under sec-
tion 201(e) and provide written notice to the Congress of his 
findings and reasons therefor before the end of the fiscal year. 
"(E) For purposes of this paragraph, the total cost of carrying Conservation. 
out the provisions of this Act includes, but is not limited to, 
fishery 
conservation and management, 
fisheries 
research, 
administration, and enforcement, but excludes costs for observ-
ers covered by surcharges under section 201(i)(4). 
100 STAT. 124 
PUBLIC LAW 99-272—APR. 7, 1986 
Coastal Zone 
Management 
Reauthorization 
Act of 1985. 
16 u s e 1451 
note. 
16 u s e 1452. 
State and local 
governments. 
16 u s e 1455a. 
State and local 
governments. 
"(F)(i) The amounts collected by the Secretary under this 
paragraph (except the amounts referred to in clause (ii)) shall be 
transferred to the fisheries loan fund established under section 
4 of the Fish and Wildlife Act of 1956 (16 U.S.C. 742(c)) for so 
long as such fund exists and used for the purpose of making 
loans therefrom, but only to the extent and in amounts provided 
for in advance in appropriation Acts. 
"(ii) The Secretary shall deposit into the general fund of the 
United States Treasury the difference between the amounts 
collected under subparagraph (C) and the amounts that would 
have been collected had that subparagraph not been enacted.". 
Subtitle D—Amendments to the Coastal Zone 
Management Act 
'Coastal Zone Management 
SEC. 6041. SHORT TITLE. 
This subtitle may be cited as the 
Reauthorization Act of 1985". 
SEC. 6042. REFERENCE. 
Whenever in this subtitle an amendment or repeal is expressed in 
terms of an amendment, or repeal, of a section, subsection, para-
graph, or other provision, the reference is to be considered to be 
made to a section, subsection, paragraph, or other provision of the 
Coastal Zone Management Act of 1972 (16 U.S.C. 1451 et seq.) unless 
otherwise specified. 
SEC. 6043. REDUCTION OF ADMINISTRATIVE GRANTS. 
(a) Section 312(c) (16 U.S.C. 1458(c)) is amended by striking "if the 
Secretary determines" and all that follows thereafter and inserting 
in lieu thereof the following: "if the Secretary determines that the 
coastal state— 
"(1) is failing to make significant improvement in achieving 
the coastal management objectives specified in section 303(2) (A) 
through (I); or 
"(2) is failing to make satisfactory progress in providing in its 
management program for the matters referred to in section 
306(i) (A) and (B). . 
(b)(1) Subsection (a) of section 306 of the Coastal Zone Manage-
ment Act of 1972 (16 U.S.C. 1455) is amended by striking out "The 
Secretary may" and all that follows through "if the Secretary—" 
and substituting in lieu thereof the following: "The Secretary may 
make grants to any coastal state for the purpose of administering 
that state's management program, if the state matches any such 
grant according to the following ratios of Federal to state contribu-
tions for the applicable fiscal year: 4 to 1 for fiscal year 1986; 2.3 to 1 
for fiscal year 1987; 1.5 to 1 for fiscal year 1988; 1 to 1 for any fiscal 
year after fiscal year 1988. The Secretary may make the grant only 
if the Secretary—". 
(2) Section 306A is amended by striking section (d)(1) and 
substituting in lieu thereof the following: 
"(d)(1) The Secretary may make grants to any coastal state for the 
purpose of carrying out the project or purpose for which such grants 
are awarded, if the state matches any such grant according to the 
following ratios of Federal to state contributions for the applicable 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 125 
fiscal year: 4 to 1 for fiscal year 1986; 2.3 to 1 for fiscal year 1987; 1.5 
to 1 for fiscal year 1988; and 1 to 1 for each fiscal year after fiscal 
year 1988.". 
(c) Section 306(g) (16 U.S.C. 1455) is amended by striking out the 
period at the end of the first sentence and all that follows thereafter 
and inserting in lieu thereof the following: ", and subject to the 
following conditions: 
"(1) The state shall promptly notify the Secretary of any 
proposed amendment, modification or other program change 
and submit it for Secretarial approval. The Secretary may 
suspend all or part of any grant made under this section 
pending state submission of the proposed amendment, modifica-
tion or other program change. 
"(2) Within 30 days from the date on which the Secretary 
receives any proposed amendment, the Secretary shall notify 
the state whether the Secretary approves or disapproves the 
amendment, or whether the Secretary finds it is necessary to 
extend the review of the proposed amendment for a period not 
to exceed 120 days from the date the Secretary received the 
proposed amendment. The Secretary may extend this 120-day 
period only as necessary to meet the requirements of the Na-
tional Environmental Policy Act (42 U.S.C. 4321 et seq.). 
"(3) The state may not implement any proposed amendment 
as part of its approved program pursuant to section 306, until 
after the proposed amendment has been approved by the 
Secretary.". 
SEC. 6044. NATIONAL ESTUARINE RESERVE RESEARCH SYSTEM. 
Section 315 (16 U.S.C. 1461) is amended to read as follows: 
State and local 
governments. 
NATIONAL ESTUARINE RESERVE RESEARCH SYSTEM 
"SEC. 315. (a) ESTABLISHMENT OF THE SYSTEM.—There is estab-
lished the National Estuarine Reserve Research System (hereinafter 
referred to in this section as the 'System') that consists o
f
— 
"(1) each estuarine sanctuary designated under this section as 
in effect before the date of the enactment of the Coastal Zone 
Management Reauthorization Act of 1985; and 
"(2) each estuarine area designated as a national estuarine 
reserve under subsection (b). 
Each estuarine sanctuary referred to in paragraph (1) is hereby 
designated as a national estuarine reserve. 
"(b) DESIGNATION OF NATIONAL ESTUARINE RESERVES.—After the 
date of the enactment of the Coastal Zone Management Reauthor-
ization Act of 1985, the Secretary may designate an estuarine area 
as a national estuarine reserve i
f
— 
"(1) the Governor of the coastal State in which the area is 
located nominates the area for that designation; and 
"(2) the Secretary finds that— 
"(A) the area is a representative estuarine ecosystem that 
is suitable for long-term research and contributes to the 
biogeographical and typological balance of the System; 
"(B) the law of the coastal State provides long-term 
protection for reserve resources to ensure a stable environ-
ment for research; 
"(C) designation of the area as a reserve will serve to 
enhance public awareness and understanding of estuarine 
Ante, p. 124. 
State and local 
governments. 
100 STAT. 126 
PUBLIC LAW 99-272—APR. 7, 1986 
State and local 
government. 
Grants. 
Education. 
State and local 
governments. 
areas, and provide suitable opportunities for public edu-
cation and interpretation; and 
"(D) the coastal State in which the area is located has 
complied with the requirements of any regulations issued 
by the Secretary to implement this section. 
"(c) EsTUARiNE RESEARCH GUIDELINES.—The Secretary shall de-
velop guidelines for the conduct of research within the System that 
shall include— 
"(1) a mechanism for identifying, and establishing priorities 
among, the coastal management issues that should be addressed 
through coordinated research within the System; 
"(2) the establishment of common research principles and 
objectives to guide the development of research programs 
within the System; 
"(3) the identification of uniform research methodologies 
which will ensure comparability of data, the broadest applica-
tion of research results, and the maximum use of the System for 
research purposes; 
"(4) the establishment of performance standards upon which 
the effectiveness of the research efforts and the value of re-
serves within the System in addressing the coastal management 
issues identified in subsection (1) may be measured; and 
"(5) the consideration of additional sources of funds for estua-
rine research than the funds authorized under this Act, and 
strategies for encouraging the use of such funds within the 
System, with particular emphasis on mechanisms established 
under subsection (d). 
In developing the guidelines under this section, the Secretary shall 
consult with prominent members of the estuarine 
research 
community. 
"(d) PROMOTION AND COORDINATION OF ESTUARINE RESEARCH.— 
The Secretary shall take such action as is necessary to promote and 
coordinate the use of the System for research purposes including— 
"(1) requiring that the National Oceanic and Atmospheric 
Administration, in conducting or supporting estuarine research, 
give priority consideration to research that uses the System; 
and 
"(2) consulting with other Federal and State agencies to 
promote use of one or more reserves within the System by such 
agencies when conducting estuarine research. 
"(e) FINANCIAL ASSISTANCE.—(1) The Secretary may, in accordance 
with such rules and regulations as the Secretary shall promulgate, 
make grants— 
"(A) to a coastal State— 
"(i) for purposes of acquiring such lands and waters, and 
any property interests therein, as are necessary to ensure 
the appropriate long-term management of an area as a 
national estuarine reserve, 
"(ii) for purposes of operating or managing a national 
estuarine reserve and constructing appropriate reserve 
facilities, or 
"(iii) for purposes of conducting educational or interpre-
tive activities; and 
"(B) to any coastal State or public or private person for 
purposes of supporting research and monitoring within a na-
tional estuarine reserve that are consistent with the research 
guidelines developed under subsection (c). 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 127 
"(2) Financial assistance provided under paragraph (1) shall be State and local 
subject to such terms and conditions as the Secretary considers governments, 
necessary or appropriate to protect the interests of the United 
States, including requiring coastal States to execute suitable title 
documents setting forth the property interest or interests of the 
United States in any lands and waters acquired in whole or part 
with such financial assistance. 
"(3)(A) The amount of the financial assistance provided under 
paragraph (l)(A)(i) of subsection (e) with respect to the acquisition of 
lands and waters, or interests therein, for any one national estua-
rine reserve may not exceed an amount equal to 50 per centum of 
the costs of the lands, waters, and interests therein or $4,000,000, 
whichever amount is less. 
"(B) The amount of the financial assistance provided under para-
graph (1)(A) (ii) and (iii) and paragraph (1)(B) of subsection (e) may 
not exceed 50 per centum of the costs incurred to achieve the 
purposes described in those paragraphs with respect to a reserve. 
"(f) EVALUATION OF SYSTEM PERFORMANCE.—(1) The Secretary Education, 
shall periodically evaluate the operation and management of each Research and 
national estuarine reserve, including education and interpretive development, 
activities, and the research being conducted within the reserve. 
"(2) If evaluation under paragraph (1) reveals that the operation 
and management of the reserve is deficient, or that the research 
being conducted within the reserve is not consistent with the re-
search guidelines developed under subsection (c), the Secretary may 
suspend the eligibility of that reserve for financial assistance under 
subsection (e) until the deficiency or inconsistency is remedied. 
"(3) The Secretary may withdraw the designation of an estuarine Research and 
area as a national estuarine reserve if evaluation under paragraph development. 
(1) reveals that— 
"(A) the basis for any one or more of the findings made under 
subsection Ot))(2) regarding that area no longer exists; or 
"(B) a substantial portion of the research conducted within 
the area, over a period of years, has not been consistent with the 
research guidelines developed under subsection (c). 
"(g) REPORT.—The Secretary shall include in the report required 
under section 316 information regarding— 
16 USC 1462. 
"(1) new designations of national estuarine reserves; 
"(2) any expansion of existing national estuarine reserves; 
"(3) the status of the research program being conducted 
within the System; and 
"(4) a summary of the evaluations made under subsection 
(f).". 
SEC. 6045. REPEALS. 
The following are repealed: 
(1) Section 310 (16 U.S.C. 1456c; relating to research and 
technical assistance programs and grants). 
(2) Section 314 (16 U.S.C. 1460; establishing the Coastal Zone 
Management Advisory Committee). 
(3) Subsection (c) of section 15 of the Coastal Zone Manage-
ment Act Amendments of 1976, Public Law 94-370 (16 U.S.C. 
1451 note; relating to certain additional personnel positions). 
SEC. 6046. AUTHORIZATIONS OF APPROPRIATIONS. 
Section 318 (16 U.S.C. 1464) is amended— 
(1) by amending paragraph (1) to read as follows: 
100 STAT. 128 
PUBLIC LAW 99-272—APR. 7, 1986 
"(1) such sums, not to exceed $35,000,000 for the fiscal year 
ending September 30, 1986, not to exceed $36,600,000 for the 
fiscal year ending September 30, 1987, $37,900,000 for the fiscal 
year ending September 30, 1988, $38,800,000 for the fiscal year 
ending September 30, 1989, and $40,600,000 for the fiscal year 
ending September 30, 1990, as may be necessary for grants 
Ante, pp. 124, 
Under sections 306 and 
306A, to remain 
available 
until 
125. 
expended;"; 
(2) by striking paragraph (2) and renumbering the succeeding 
paragraphs; and 
(3) by amending paragraphs (3), (4), and (5) (as renumbered by 
paragraph (2) of this section) to read as follows: 
"(3) such sums, not to exceed $1,000,000 for the fiscal year 
ending September 30, 1986, and not to exceed $1,500,000 for 
each of the fiscal years occurring during the period beginning 
October 1, 1986, and ending September 30, 1990, as may be 
16 use 1456b. 
necessary for grants under section 309, to remain available 
until expended; 
"(4) such sums, not to exceed $2,500,000 for the fiscal year 
ending September 30, 1986, not to exceed $3,800,000 for the 
fiscal year ending September 30, 1987, $4,500,000 for the fiscal 
year ending September 30, 1988, $5,000,000 for the fiscal year 
ending September 30, 1989, and $5,500,000 for the fiscal year 
ending September 30, 1990, as may be necessary for grants 
Ante, p. 125. 
Under section 315, to remain available until expended; and 
"(5) such sums, not to exceed $3,300,000 for the fiscal year 
ending September 30, 1986, not to exceed $3,300,000 for the 
fiscal year ending September 30, 1987, $3,300,000 for the fiscal 
year ending September 30, 1988, $4,000,000 for the fiscal year 
ending September 30, 1989, and $4,000,000 for the fiscal year 
ending September 30, 1990, as may be necessary for administra-
tive expenses incident to the administration of this title.". 
SEC. 6047. TECHNICAL AMENDMENT. 
Section 308(h) (16 U.S.C. 1456a(h)) is amended by deleting "subsec-
tions (c)(1)" each place it appears and inserting instead "subsections 
(0". 
Subpart E—National Oceanic and Atmospheric 
Administration 
SEC. 6051. AUTHORIZATION OF APPROPRIATIONS. 
(a) For purposes of this section— 
(1) The term "Administration" means the National Oceanic 
and Atmospheric Administration. 
(2) The term "Department" means the Department of Com-
merce. 
Ob) There are authorized to be appropriated to the Department to 
enable the Administration to carry out its executive direction and 
administration functions and duties under law, $47,667,000 for fiscal 
year 1986 and $49,812,000 for fiscal year 1987. Moneys appropriated 
pursuant to this authorization shall be used to fund those functions 
and duties relating to executive direction and administration au-
thorized by the Act entitled "An Act to clarify the status and 
benefits of commissioned officers of the National Oceanic and At-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 129 
mospheric Administration, and for other purposes", approved 
December 31, 1970 (33 U.S.C. 857-1 et seq.), and any other law 
involving such functions and duties. Such functions and duties 
include management, administrative support, retired pay of Na-
tional Oceanic and Atmospheric Administration commissioned offi-
cers, and policy development. 
(c) There are authorized to be appropriated to the Department to 
enable the Administration to carry out its marine services functions 
and duties under law, $61,791,000 for fiscal year 1986 and 
$64,572,000 for fiscal year 1987. Moneys appropriated pursuant to 
this authorization shall be used to fund those functions and duties 
relating to marine services authorized by the Act entitled "An Act 
to define the functions and duties of the Coast and Geodetic Survey, 
and for other purposes", approved August 6, 1947 (33 U.S.C. 883a et 
seq.), and any other law involving such functions and duties. Such 
functions and duties include ship operations, maintenance, and 
support. 
(d) There are authorized to be appropriated to the Department to 
enable the Administration to carry out its aircraft services functions 
and duties under law, $14,779,000 for fiscal year 1986 and 
$15,440,000 for fiscal year 1987. Moneys appropriated pursuant to 
this authorization shall be used to fund those functions and duties 
relating to aircraft services authorized by the Act entitled "An Act 
to increase the efficiency and reduce the expenses of the Signal 
Corps of the Army, and to transfer the Weather Service to the 
Department of Agriculture", approved October 1,1890 (15 U.S.C. 311 
et seq.), and any other law involving such functions and duties. Such 
functions and duties include aircraft operations, maintenance, and 
support. 
(e) For the purpose of enabling the Administration to carry out its 
functions and duties under the National Advisory Committee on 
Oceans and Atmosphere Act of 1977 (33 U.S.C. 857-13 et seq.), there 
are authorized to be appropriated to the Department $50(),000 for 
fiscal year 1986. 
(f)(1) There are authorized to be appropriated to the Department 
to enable the Administration to carry out its nonliving marine 
resource functions and duties under law, $1,800,000 for fiscal year 
1986 and $1,881,000 for fiscal year 1987. Moneys appropriated pursu-
ant to this authorization shall be used to fund those functions and 
duties relating to nonliving marine resources authorized by the Act 
entitled "An Act to define the functions and duties of the Coast and 
Geodetic Survey, and for other purposes", approved August 6, 1947 
(33 U.S.C. 883a et seq.), and any other law involving such functions 
and duties. Such functions and duties include research, develop-
ment, and licensing responsibilities pertaining to ocean thermal 
energy conversion and the deep seabed mining of manganese nod-
ules, and polymetallic sulfide analyses and research. 
(2) The authorization provided for under paragraph (1) of this 
subsection shall be in addition to moneys authorized under the Deep 
Seabed Hard Mineral Resources Act (30 U.S.C. 1401 et seq.), and the 
Ocean Thermal Energy Conversion Act of 1980 (42 U.S.C. 9101 et 
seq.), for the purpose of carrying out such functions and duties 
relating to nonliving marine resources. 
(g)(1) There are authorized to be appropriated to the Department 
to enable the Administration to carry out its ocean research func-
tions and duties under law, $33,884,000 for fiscal year 1986 and 
$35,409,000 for fiscal year 1987. Moneys appropriated pursuant to 
100 STAT. 130 
PUBLIC LAW 99-272—APR. 7, 1986 
this authorization shall be used to fund those functions and duties 
relating to ocean research authorized by the Act entitled "An Act to 
define the functions and duties of the Coast and Geodetic Survey, 
and for other purposes", approved August 6, 1947 (33 U.S.C. 883a et 
seq.), and any other law involving such functions and duties. Such 
functions and duties include undersea marine resources, air-sea 
interaction, and ocean and Great Lakes environmental research. 
(2) The authorization provided for under paragraph (1) of this 
subsection shall be in addition to ocean research moneys authorized 
under the National Ocean Pollution Planning Act of 1978 (33 U.S.C. 
1701 et seq.) for the purpose of carrying out such functions and 
duties relating to ocean research. 
(h)(1) There are authorized to be appropriated to the Department 
to enable the Administration to carry out its ocean service functions 
and duties under law, $17,181,000 for fiscal year 1986 and 
$17,954,000 for fiscal year 1987. Moneys appropriated pursuant to 
this authorization shall be used to fund those functions and duties 
relating to ocean services authorized by the Act entitled "An Act to 
define the functions and duties of the Coast and Geodetic Survey, 
and for other purposes", approved August 6, 1947 (33 U.S.C. 883a et 
seq.), and any other law involving such functions and duties. Such 
functions and duties include coordination of interagency research in 
ocean dumping and marine pollution, and provision of tide and 
current data for the safe and efficient use of the oceans and Great 
Lakes by government, commerce, and the private sector. 
(2) The authorization provided for under paragraph (1) of this 
subsection shall be in addition to moneys authorized under the 
Marine Protection, Research, and Sanctuaries Act of 1972 (33 U.S.C. 
1441 et seq.), the Coastal Zone Management Act of 1972 (16 U.S.C. 
1451 et seq.), and the National Ocean Pollution Planning Act of 1978 
(33 U.S.C. 1701 et seq.), for the purpose of carrying out such func-
tions and duties relating to ocean services. 
(i) There are authorized to be appropriated to the Department to 
enable the Administration to carry out its mapping, charting, and 
geodesy functions and duties under law, $47,943,000 for fiscal year 
1986 and $50,100,000 for fiscal year 1987. Moneys appropriated 
pursuant to this authorization shall be used to fund those functions 
and duties relating to mapping, charting, and geodesy authorized by 
the Act entitled "An Act to define the functions and duties of the 
Coast and Geodetic Survey, and for other purposes", approved 
August 6, 1947 (33 U.S.C. 883a et seq.), and any other law involving 
such functions and duties. Such functions and duties include aero-
nautical and nautical mapping and charting activities, and geodetic 
data collection and analysis. 
(j) There are authorized to be appropriated to the Department to 
enable the Administration to carry out its programs at current 
levels such sums as may be necessary to accommodate salary, pay, 
and other employee benefits authorized by law for fiscal years 1986 
and 1987. 
'
.
•
.
,
•
•
•
• 
;
T 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 131 
Subtitle F—Marine Protection, Research, and 
Sanctuaries Act Amendments 
SEC. 6061. CONSOLIDATION OF REPORT. 
Section 201 of the Marine Protection, Research, and Sanctuaries 
Act of 1972 (33 U.S.C. 1441) is amended by striking out all that 
follows "connecting waters" and inserting in lieu thereof a period. 
SEC. 6062. MARINE RESEARCH REQUIREMENTS. 
Section 202 of the Marine Protection, Research, and Sanctuaries 
Act of 1972 (33 U.S.C. 1442) is amended— 
(1) by inserting "(1)" before "The Secretary" in subsection (a); 
(2) by striking out "in consultation" in the first sentence of 
subsection (a) and inserting in lieu thereof "in close consulta-
tion"; 
(3) by adding at the end of subsection (a) the following new 
paragraph: 
"(2) The Secretary of Commerce shall ensure that the program Pollution, 
under this section complements, when appropriate, the activities 
undertaken by other Federal agencies pursuant to title I and section 33 USC 1411. 
203. That program shall include but not be limited to— 
Infra. 
"(A) the development and assessment of scientific techniques 
to define and quantify the degradation of the marine environ-
ment; 
"(B) the assessment of the capacity of the marine environ-
ment to receive materials without degradation; 
"(C) continuing monitoring programs to assess the health of 
the marine environment, including but not limited to the mon-
itoring of bottom oxygen concentrations, contaminant levels in 
biota, sediments, and the water column, diseases in fish and 
shellfish, and changes in types and abundance of indicator 
species; 
"(D) the development of methodologies, techniques, and equip-
ment for disposal of waste materials to minimize degradation of 
the marine environment."; and 
(4) by striking out subsection (c) and redesignating subsections 
(d) and (e) as subsections (c) and (d), respectively. 
^ 
SEC. 6063. REGIONAL MANAGEMENT PLANS. 
Section 203 of the Marine Protection, Research, and Sanctuaries 
'^' ^
: 
• 
Act of 1972 (33 U.S.C. 1443) is amended by adding at the end thereof 
the following new subsections: 
"(c) The Administrator, in cooperation with the Secretary, the State and local 
Secretary of Commerce, and other officials of appropriate Federal, governments. 
State, and local agencies, shall assess the feasibility in coastal areas Waste disposal, 
of regional management plans for the disposal of waste materials. 
Such plans should integrate where appropriate Federal, State, re-
gional, and local waste disposal activities into a comprehensive 
regional disposal strategy. These plans should address, among other 
things— 
"(1) the sources, quantities, and types of materials that re-
quire and will require disposal; 
"(2) the environmental, economic, social, and human health 
factors (and the methods used to assess these factors) associated 
with disposal alternatives; 
' ' ^^^-^ 
100 STAT. 132 
PUBLIC LAW 99-272—APR. 7, 1986 
Reports. 
New York. 
33 use 1445. 
33 use 1444. 
Ante, p. 131. 
33 use 1411. 
33 use 1441. 
Ante, p. 131. 
I 
"(3) the improvements in production processes, methods of 
disposal, and recycling to reduce the adverse effects associated 
with such disposal alternatives; 
"(4) the applicable laws and regulations governing waste 
disposal; and 
"(5) improvements in permitting processes to reduce adminis-
trative burdens. 
"(d) The Administrator, in cooperation with the Secretary of 
Commerce, shall submit to the Congress and the President, not later 
than one year after the date of enactment of this provision, a report 
on sewage sludge disposal in the New York City metropolitan 
region. The report shall— 
"(1) consider the factors listed in subsection (c) as they relate 
to landfilling, incineration, ocean dumping, or any other fea-
sible disposal or reuse/recycling option; 
"(2) include an assessment of the cost of these alternatives; 
and 
v.:: 
"(3) recommend such regulatory or legislative changes as may 
be necessary to reduce the adverse impacts associated with 
sewage sludge disposal.". 
SEC. 6064. AUTHORIZATION OF APPROPRIATIONS. 
Section 204 of the Marine Protection, Research, and Sanctuaries 
Act of 1972 (33 U.S.C 1444) is redesignated as section 205; and such 
section as so redesignated is amended by striking out "and" imme-
diately following "fiscal year 1981" and by striking out "1982." and 
inserting in lieu thereof the following: "1982, not to exceed 
$10,635,000 for fiscal year 1986, and not to exceed $11,114,000 for 
fiscal year 1987.". 
SEC. 6065. CONSOLIDATION OF REPORTS. 
Section 205 of the Marine Protection, Research, and Sanctuaries 
Act of 1972 (33 U.S.C. 1445) is transferred to a point immediately 
following section 203 of such Act and redesignated as section 204; 
and such section as so transferred and redesignated is amended to 
read as follows: 
"ANNUAL REPORT 
"SEC. 204. (a) In March of each year, the Secretary of Commerce 
shall report to the Congress on his activities under this title during 
the previous fiscal year. The report shall include— 
"(1) the Secretary's findings made under section 201, includ-
ing an evaluation of the short-term ecological effects and the 
social and economic factors involved with the dumping; 
"(2) the results of activities undertaken pursuant to section 
202; 
"(3) with the concurrence of the Administrator and after 
consulting with officials of other appropriate Federal agencies, 
an identification of the short- and long-term research require-
ments associated with activities under title I, and a description 
of how Federal research under titles I and II will meet those 
requirements; and 
-
« 
"(4) activities of the Department of Commerce under section 5 
of the Act of March 10, 1934 (48 Stat. 401; 16 U.S.C. 665). 
"(b) In March of each year, the Administrator shall report to the 
Congress on his activities during the previous fiscal year under 
section 203.". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 133 
Subtitle G—National Ocean Pollution 
Planning Act Amendments 
SEC. 6071. FINDINGS AND PURPOSES. 
(a) Section 2(a) of the National Ocean Pollution Planning Act of 
1978 (33 U.S.C. 1701) is amended by adding at the end thereof the 
following new paragraphs: 
"(6) Numerous Federal agencies have initiated and supported 
research projects to study, enhance, manage, preserve, protect, 
or restore the resources of the Great Lakes, the Chesapeake 
Bay, Puget Sound, and other estuaries of national significance. 
"(7) Various research projects relating to the Great Lakes, the 
Chesapeake Bay, Puget Sound, and other estuaries of national 
significance, including those conducted at the college and 
university level and those conducted at the State and local 
governmental level, can be more effectively coordinated in 
order to obtain maximum benefits.". 
(b) Section 2(b) of the National Ocean Pollution Planning Act of 
1978 (33 U.S.C. 1701) is amended by striking out "and" at the end of 
paragraph (2), by redesignating paragraph (3) as paragraph (4), and 
by inserting after paragraph (2) the following new paragraph: 
"(3) to provide for the effective coordination of research con-
ducted to support the preservation and protection of the 
environmental quality of the Great Lakes, the Chesapeake Bay, 
Puget Sound, and other estuaries of national significance, and 
to encourage the use of such research in determinations that 
affect the environmental quality of the Great Lakes, the Chesa-
peake Bay, Puget Sound, and other estuaries of national signifi-
cance; and". 
SEC. 6072. NATIONAL OCEAN POLLUTION PROGRAM OFFICE AND NA-
TIONAL OCEAN POLLUTION POLICY BOARD. 
The National Ocean Pollution Planning Act of 1978 (33 U.S.C. 
1701 et seq.) is further amended as follows: 
(1) Section 3 is amended— 
(A) by redesignating paragraphs (3) through (6) as para-
graphs (4) through (7), respectively; 
(B) by inserting after paragraph (2) the following new 
paragraph: 
"(3) The term 'Board' means the National Ocean Pollution 
Policy Board established under section 3A(b)."; and 
(C) by adding at the end thereof the following new para-
graph: 
"(8) The term 'Office' means the National Ocean Pollution 
Program Office established under section 3A(a).". 
(2) The following new section is inserted immediately after 
section 3: 
"SEC. 3A. NATIONAL OCEAN POLLUTION PROGRAM OFFICE AND NA-
TIONAL OCEAN POLLUTION POLICY BOARD. 
"(a) PROGRAM OFFICE.—(1) The Administrator shall establish 
within the Administration the National Ocean Pollution Program 
Office. 
"(2) The Office shall— 
Research and 
development. 
Conservation. 
J8I; 
gfnxi-
33 use 1702. 
Infra. 
33 use 1702a. 
100 STAT. 134 
PUBLIC LAW 99-272—APR. 7, 1986 
"(A) serve as the lead entity responsible for administering the 
33 use 1703. 
program established under section 4; 
"(B) be headed by a director who shall— 
"(i) be appointed by the Administrator, 
;' 
"(ii) serve as the Chair of the Board, and 
^ 
• 
"(iii) be the spokesperson for the program; 
"(C) serve as the staff for the Board and its supporting 
committees and working groups; and 
"(D) review each department and agency budget request 
transmitted under section 4(d) and submit an analysis of the 
requests to the Board for its review. 
The analysis described in subparagraph (D) shall include an analysis 
of how each departmental or agency budget request relates to the 
priorities and goals of the Plan established under section 4. 
"(b) POLICY BOARD.—(1) The Administrator, with the cooperation 
33 use 1706. 
of the Federal departments and agencies referred to in section 7, 
shall establish a National Ocean Pollution Policy Board consisting 
of representatives of those departments and agencies. 
Reports. 
"(2) The Board shall— 
"(A) be responsible for coordinated planning and progress 
review for the program established under section 4; 
"(B) review all department and agency budget requests 
transmitted to it under section 4(d) and submit a report to the 
Office of Management and Budget and to the Congress concern-
ing those budget requests; 
"(C) establish and maintain such interagency groups as the 
Board determines to be necessary to carry out its activities; and 
"(D) consult with and seek the advice of users and producers 
of ocean pollution data, information, and services to guide the 
Board's efforts, keeping the Director and the Congress advised 
, of such consultations.". 
SEC. 6073. FEDERAL PLANNING TO INCLUDE GREAT LAKES. 
Section 4 of the National Ocean Pollution Planning Act of 1978 (33 
U.S.C. 1703) is amended— 
(1) by inserting 
after 
"general 
research on marine 
ecosystems" in subsection (b)(2)(A) the following: ", including 
the Great Lakes, the Chesapeake Bay, Puget Sound, and other 
estuaries of national significance,"; 
(2) in subsection (b)(4)— 
: 
• 
(A) by striking out "BUDGET REVIEW.—" and inserting in 
.f 
rt 
lieu thereof "PLAN REVIEW.—"; and 
CI 
(B) by striking out "to coordinate the budget review 
process"; and 
(3) by adding at the end thereof the following new subsection: 
"(d) BUDGETING.—Each Federal agency and department included 
under the Plan shall prepare and submit to the Office of Manage-
ment and Budget, the Office, and the Board on or before the date of 
,-; 
submission of departmental requests for appropriations to the Office 
of Management and Budget, an annual request for appropriations to 
carry out the activities of that agency or department under the Plan 
during the subsequent fiscal year. The Office of Management and 
Budget shall review the request for appropriations as an integrated, 
coherent, and multiagency request, taking into account the review 
Ante, p. 133. 
by the Board of those requests under section 3A(b).". 
• • 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 135 
SEC. 6074. DISSEMINATION OF INFORMATION ON GREAT LAKES. 
Section 8 of the National Ocean Pollution Planning Act of 1978 (33 
U.S.C. 1707) is amended by adding "(a)" after "SEC. 8." and by 
adding at the end thereof the following new subsection: 
"(b) The Administrator shall ensure that the findings and 
information regarding ocean pollution research activities associated 
with the Great Lakes identified pursuant to section 4(b) be dissemi- 33 USC 1703. 
nated in a timely manner and in useful forms to relevant depart-
ments of the Federal Government, State governments, and other 
persons with an interest in such information.". 
SEC. 6075. AUTHORIZATION OF APPROPRIATIONS. 
Section 10 of the National Ocean Pollution Planning Act of 1978, 
as amended (33 U.S.C. 1709), is amended by striking out "and" after 
"1981," and by striking out "1982." and inserting in lieu thereof 
"1982, and not to exceed $3,571,000 for fiscal year 1986, and not to 
exceed $3,732,000 for fiscal year 1987.". 
Subtitle H—Weather ModiHcation 
SEC. 6081. AUTHORIZATION OF APPROPRIATIONS. 
Section 6 of the Act entitled "An Act to provide for the reporting 
of weather modification activities to the Federal Government", 
approved December 18, 1971 (85 Stat. 736; 15 U.S.C. 330e), is 
amended— 
(1) by striking "and"; and 
(2) by inserting immediately after "1981," the following: 
"$100,000 for the fiscal year ending September 30, 1986, 
$100,000 for the fiscal year ending September 30, 1987, $100,000 
for the fiscal year ending September 30,1988,". 
SEC. 6082. OCEAN SATELLITE DATA. 
33 USC 883j. 
The Administrator of the National Oceanic and Atmospheric 
Administration (hereinafter referred to in this subtitle as the 
"Administration") shall take such actions, including the sponsorship 
of applied research, as may be necessary to assure the future 
availability and usefulness of ocean satellite data to the maritime 
community. 
SEC. 6083. AWARDING OF CONTRACTS. 
15 USC 1530. 
' 
The Administration may not award any contract for the perform- 
Congress, 
ance of any "commercial activity", as defined by paragraph 6.a. of 
the Office of Management and Budget Circular Memorandum A-76, 
which is performed by Administration employees until at least 30 
calendar days after the Administrator of the Administration has 
presented, in writing, to the President of the Senate, the Speaker of 
the House of Representatives, the Committee on Commerce, Science, 
and Transportation of the Senate, and the Committee on Merchant 
Marine and Fisheries and the Committee on Science and Technology 
,,; 
of the House of Representatives, a full and complete description of 
such proposed contract, together with supporting documentation. 
Such documentation shall include— 
(Da comparison of the cost of such activity as performed by 
employees of the Administration and the cost of such activity as 
performed under the proposed contract; 
100 STAT. 136 
PUBLIC LAW 99-272—APR. 7, 1986 
Contracts. 
Grants. 
State and local 
governments. 
(2) a comparison of the services performed by employees of the 
Administration and the services to be performed under the 
proposed contract; and 
(3) an assessment of the benefits to the Federal Government 
of proceeding with the proposed contract. 
SEC. 6084. NATIONAL CLIMATE PROGRAM. 
(a) Section 4 of the National Climate Program Act (15 U.S.C. 2903) 
is amended— 
(1) by redesignating paragraphs (1) through (3) as paragraphs 
(2) through (4), respectively; and 
(2) by inserting before paragraph (2), as so redesignated, the 
following new paragraph: 
"(1) The term 'Board' means the Climate Program Policy 
Board.". 
(b) Section 5(c) of the National Climate Program Act (15 U.S.C. 
2904(c)) is amended— 
(1) by inserting "(1)" immediately before "The Secretary"; 
(2) by designating the third sentence as paragraph (4); and 
(3) by striking the second sentence and inserting in lieu 
thereof the following new paragraphs: 
"(2) The Office shall— 
"(A) serve as the lead entity responsible for administering the 
program; 
"(B) be headed by a Director who shall represent the Climate 
Program Policy Board and shall be spokesperson for the 
program; 
"(C) serve as the staff for the Board and its supporting 
committees and working groups; 
"(D) review each agency budget request transmitted under 
subsection (g)(1) and submit an analysis of the requests to the 
Board for its review; 
"(E) be responsible for coordinating interagency participation 
in international climate-related activities; and 
"(F) work with the National Academy of Sciences and other 
private, academic, State, and local groups in preparing and 
implementing the 5-year plan (described in subsection (d)(9)) and 
the program. 
The analysis described in subparagraph (D) shall include an analysis 
of how each agency's budget request relates to the priorities and 
goals of the program established pursuant to this Act. 
"(3) The Secretary may provide, through the Office, financial 
assistance, in the form of contracts or grants or cooperative agree-
ments, for climate-related activities which are needed to meet the 
goals and priorities of the program set forth in the 5-year plan 
pursuant to subsection (d)(9), if such goals and priorities are not 
being adequately addressed by any Federal department, agency, or 
instrumentality.". 
(c) Section 5(d) of the National Climate Program Act (15 U.S.C. 
2904(d)) is amended— 
(1) by striking the semicolon at the end of paragraph (7) and 
inserting in lieu thereof the following: ". Such mechanisms may 
provide, among others, for the following State and regional 
services and functions: (A) studies relating to and analyses of 
climatic effects on agricultural production, water resources, 
energy needs, and other critical sectors of the economy; (B) 
atmospheric data collection and monitoring on a statewide and 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 137 
regional basis; (C) advice to regional, State, and local govern-
ment agencies regarding climate-related issues; (D) information 
to users within the State regarding climate and climatic effects; 
and (E) information to the Secretary regarding the needs of 
persons within the States for climate-related services, informa-
tion, and data. The Secretary may make annual grants to any 
State or group of States, which grants shall be made available to 
public or private educational institutions, to State agencies, and 
to other persons or institutions qualified to conduct climate-
related studies or provide climate-related services;"; 
(2) by striking "biennially" in paragraph (9) and inserting in 
lieu thereof "at least once every four years"; and 
(3) by striking "under section 6" in paragraph (9) and insert-
ing in lieu thereof "described in paragraph (7)". 
(d) Section 5(e) of the National Climate Program Act (15 U.S.C. 
2904(e)) is amended to read as follows: 
"(e) CLIMATE PROGRAM POLICY BOARD.—(1) The Secretary shall 
establish and maintain an interagency Climate Program Policy 
Board, consisting of representatives of the Federal agencies specified 
in subsection (b)(2) and any other agency which the Secretary 
determines should participate in the Program. 
"(2) The Board shall— 
"(A) be responsible for coordinated planning and progress 
review for the Program; 
"(B) review all agency and department budget requests re-
lated to climate transmitted under subsection (g)(1) and submit 
a report to the Office of Management and Budget concerning 
such budget requests; 
"(C) establish and maintain such interagency groups as the 
Board determines to be necessary to carry out its activities; and 
"(D) consult with and seek the advice of users and producers 
of climate data, information, and services to guide the Board's 
efforts, keeping the Director and the Congress advised of such 
contacts. 
"(3) The Board biennially shall select a Chair from among its 
members. A Board member who is a representative of an agency 
may not serve as Chair of the Board for a term if an individual who 
represented that same agency on the Board served as the Board's 
Chair for the previous term.". 
(e) Section 5(f)(2) of the National Climate Program Act (15 U.S.C. 
2904(f)(2)) is amended by inserting "with the Office" immediately 
after "cooperate". 
if) The first sentence of section 5(g)(1) of the National Climate 
Program Act (15 U.S.C. 2904(g)(1)) is amended by inserting imme-
diately before the period the following: "and shall transmit a copy of 
such request to the National Climate Program Office". 
(g) Section 6 of the National Climate Program Act (15 U.S.C. 2905) 
is repealed. 
(h) There are authorized to be appropriated to the Administration, 
for purposes of carrying out the provisions of the amendments made 
by this section, $1,897,000 for fiscal year 1986 and $1,982,000 for 
fiscal year 1987. Of such funds, at least 25 percent shall be made 
available for intergovernmental climate-related activities described 
in section 5(d)(7) of the National Climate Program Act (15 U.S.C. 
2904(d)(7)), and at least 20 percent shall be made available during 
each fiscal year for experimental climate forecast centers described 
Grants. 
State and local 
governments. 
Reports. 
100 STAT. 138 
PUBLIC LAW 99-272—APR. 7, 1986 
in section 5(d)(8) of the National Climate Program Act (15 U.S.C. 
2904(d)(8)). 
SEC. 6085. COOPERATIVE AGREEMENTS FOR MAPPING AND CHARTING 
SURVEYS. 
Section 5 of the Act entitled "An Act to define the functions and 
duties of the Coast and Geodetic Survey, and for other purposes", 
approved August 6, 1947 (61 Stat. 788, 33 U.S.C. 883e) is amended— 
(1) by inserting "(1)" after "SEC. 5."; 
(2) by inserting "any Federal agency," after "or subdivision 
thereof,"; and 
(3) by adding at the end thereof the following: 
"(2) The Secretary of Commerce is authorized to establish the 
terms of any cooperative agreement entered into under this section, 
including the amount of funds to be received, and may contribute 
that portion of the costs incurred by the National Oceanic and 
Atmospheric Administration, including shiptime and personnel ex-
penses, which the Secretary determines represents the amount of 
benefits derived by the Administration from the cooperative 
agreement.". 
Subtitle I—Maritime Authorizations 
SEC. 6091. MARITIME PROGRAMS. 
(a) Funds are authorized to be appropriated without fiscal year 
limitation as the appropriation Act may provide for the use of the 
Department of Transportation for fiscal year 1986 as follows: 
(1) for payment of obligations incurred for operating-differen-
tial subsidy, not to exceed $335,084,000; 
(2) for expenses necessary for research and development 
activities, not to exceed $9,900,000; and 
(3) for expenses necessary for operations and training activi-
ties, not to exceed $71,967,000, including not to exceed— 
(A) $34,847,000 for maritime education and training ex-
penses, including not to exceed $19,633,000 for maritime 
training at the Merchant Marine Academy at Kings Point, 
New York, $10,915,000 for financial assistance to State 
maritime academies, $3,000,000 for fuel oil assistance to 
State maritime academy training vessels, and $1,299,000 for 
expenses necessary for additional training; 
(B) $9,277,000 for national security support capabilities, 
including not to exceed $7,932,000 for reserve fleet ex-
penses, and $1,345,000 for emergency planning/operations; 
and 
(C) $27,843,000 for other operations and training ex-
penses. 
(b) Funds are authorized to be appropriated for the use of the 
Federal Maritime Commission, in the amount of $11,940,000 for 
fiscal year 1986. 
PUBLIC LAW 99-272-APR. 7, 1986 
100 STAT. 139 
TITLE VII—ENERGY AND RELATED 
PROGRAMS 
Subtitle A—Pipeline Programs 
SEC. 7001. NATURAL GAS PIPELINE SAFETY AUTHORIZATIONS. 
Section 17(a) of the Natural Gas Pipeline Safety Act of 1968 (49 
U.S.C. App. 1684(a)) is amended— 
(1) by striking out "and" at the end of paragraph (2); 
:g 
(2) by striking out the period at the end of paragraph (3) and 
p 
inserting in lieu thereof "; and"; and 
(3) by adding at the end thereof the following new paragraph: 
"(4) $3,450,000 for the fiscal year ending September 30, 1986.". 
SEC. 7002. AUTHORIZATIONS FOR FEDERAL GRANTS-IN-AID. 
(a) COMBINED PROGRAM.—Section 17 of the Natural Gas Pipeline 
Safety Act of 1968 (49 U.S.C. App. 1684) is amended by adding at the 
.. . 
end thereof the following new subsections: 
"(c) For the purpose of carrying out the Federal grants-in-aid 
provisions of section 5(d) of this Act and section 205(d) of the Infra. 
Hazardous Liquid Pipeline Safety Act of 1979 (49 U.S.C. App. 
2004(d)) there are authorized to be appropriated $5,000,000 for the 
fiscal year ending September 30,1986. 
"(d) Not less than 5 percent of any amounts appropriated for 
carrying out the Federal grants-in-aid provisions for any fiscal year 
beginning after September 30, 1985, shall be available only for 
carrying out the Federal grants-in-aid provisions of section 205(d) of 
the Hazardous Liquid Pipeline Safety Act of 1979 (49 U.S.C. App. 
2004(d)).". 
(b) CONFORMING AMENDMENTS.— 
•'••: -• "-^ 
(1) Section 5(d)(2) of such Act (49 U.S.C. App. 1674(d)(2)) is 
^'-^^^' 
amended— 
(A) by striking out "authorized to be appropriated by 
section 17(b) of this Act" and inserting in lieu thereof 
"appropriated for carrying out the Federal grants-in-aid 
provisions of this subsection"; and 
(B) by striking out "(1) of this section" and inserting in 
lieu thereof "(1) of this subsection". 
(2) Section 205(d)(2) of the Hazardous Liquid Pipeline Safety 
Act of 1979 (49 U.S.C. App. 2004(d)(2)) is amended by striking 
out "authorized to be appropriated by section 214 of this title" 
and inserting in lieu thereof "appropriated for carrying out the 
Federal grants-in-aid provisions of this subsection". 
(3) Section 214(a) of the Hazardous Liquid Pipeline Safety Act 
of 1979 (49 U.S.C. App. 2013(a)) is amended by inserting after 
"subsection (b)" the following: "or section 17(c) of the Natural 
Gas Pipeline Safety Act of 1968 (49 U.S.C. App. 1684(c))". 
(4) Section 17(a) of the Natural Gas Pipeline Safety Act of 
1968 (49 U.S.C. App. 1684(a)) is amended by inserting after 
"subsection (b)" the following: "or (c)". 
SEC. 7003. REPORTS. 
(a) GRANTS MERGER REPORT.— 
(1) MERGER RECOMMENDATIONS.—The Secretary of Transpor-
tation shall prepare a report which shall contain details of the 
100 STAT. 140 
PUBLIC LAW 99-272—APR. 7, 1986 
Secretary's recommendations with respect to the potential 
merger and joint administration of the Federal grants-in-aid 
provisions of section 5(d) of the Natural Gas Pipeline Safety Act 
Ante, p. 139. 
of 1968 (49 U.S.C. App. 1674(d)) and section 205(d) of the Hazard-
Ante, p. 139. 
ous Liquid Pipeline Safety Act of 1979 (49 U.S.C. App. 2004(d)). 
State and local 
(2) CONSULTATION.—In preparing the report required by para-
governments. 
graph (1), the Secretary shall consult with appropriate State 
authorities. The Secretary shall include in such report a sum-
mary of the views and recommendations of such State authori-
ties. 
(b) GRANTS ALLOCATION REPORT.— 
State and local 
(1) CONTENTS.—The Secretary of Transportation shall prepare 
governments. 
a report which shall contain an explanation of the method by 
which the Secretary allocates funds to the States under section 
5(d) of the Natural Gas Pipeline Safety Act of 1968 (49 U.S.C 
App. 1674(d)) and section 205(d) of the Hazardous Liquid Pipe-
line Safety Act of 1979 (49 U.S.C. App. 2004(d)). 
Federal 
(2) PUBLICATION.—The Secretary shall publish in the Federal 
Register, 
Register, as a matter of public information, the explanation 
publication. 
contained in the report required by paragraph (1), 
(c) REPORT DEADLINE.—The reports required by subsections (a)(1) 
and (b)(1) shall be submitted to Congress no later than July 1, 1986. 
SEC. 7004. HAZARDOUS LIQUID PIPELINE SAFETY AUTHORIZATIONS. 
Section 214(a) of the Hazardous Liquid Pipeline Safety Act of 1979 
(49 U.S.C. App. 2013(a)) is amended— 
(1) by striking out "and" at the end of paragraph (2); 
(2) by striking out the period at the end of paragraph (3) and 
inserting in lieu thereof "; and"; and 
(3) by adding at the end thereof the following new paragraph: 
"(4) $875,000 for the fiscal year ending September 30, 1986.". 
49 u s e app. 
SEC. 7005. PIPELINE SAFETY USER FEES. 
(a) ESTABLISHMENT.— 
(1) SCHEDULE.—The Secretary of Transportation (hereafter in 
this section referred to as the "Secretary") shall establish a 
schedule of fees based on the usage, in reasonable relationship 
to volume-miles, miles, revenues, or an appropriate combination 
thereof, of natural gas and hazardous liquid pipelines. In 
establishing such schedule, the Secretary shall take into consid-
eration the allocation of departmental resources. 
(2) COLLECTION.—The Secretary shall establish procedures for 
State and local 
the Collection of such fees. The Secretary may use the services of 
governments. 
any Federal, State, or local agency or instrumentality to collect 
such fees, and may reimburse such agency or instrumentality a 
reasonable amount for such services. 
(3) LIABILITY.—Fees established under this section shall be 
assessed to the persons operating— 
(A) all pipeline facilities subject to the Hazardous Liquid 
^ 
Pipeline Safety Act of 1979 (49 U.S.C. App. 2001 et seq.); and 
(B) all pipeline transmission facilities and all liquefied 
• 
natural gas facilities subject to the jurisdiction of the Natu-
ral Gas Pipeline Safety Act of 1968 (49 U.S.C. App. 1671 et 
seq.). 
(b) TIME OF ASSESSMENT.—The Secretary shall assess and collect 
fees described in subsection (a) with respect to each fiscal year 
befDre the end of such fiscal year. 
>
. no ,j 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 141 
(c) USE OF FUNDS.—Funds received under subsection (a) shall be 
used, to the extent provided for in advance in appropriation Acts, 
only-
C
D in the case of natural gas pipeline safety fees, for activities 
authorized under the Natural Gas Pipeline Safety Act of 1968 
(49 U.S.C. App. 1671 et seq.); and 
(2) in the case of hazardous liquid pipeline safety fees, for 
activities authorized under the Hazardous Liquid Pipeline 
Safety Act of 1979 (49 U.S.C. App. 2001 et seq.). 
(d) FEE SCHEDULE.—Fees established by the Secretary under 
subsection (a) shall be assessed against all natural gas and hazard-
ous liquids transported by pipelines subject to the Natural Gas 
Pipeline Safety Act of 1968 and the Hazardous Liquid Pipeline 
Safety Act of 1979 after September 30, 1985, and shall be sufficient 
to meet the costs of activities described in subsection (c), beginning 
on October 1, 1985, but at no time shall the aggregate of fees 
received for any fiscal year under this section exceed 105 percent of 
the aggregate of appropriations made for such fiscal year for activi-
ties to be funded by such fees. 
Subtitle B—Strategic Petroleum Reserve 
SEC. 7101. AUTHORIZATIONS OF APPROPRIATIONS FOR FISCAL YEARS 
1986,1987, 
AND 1988. 
Funds are hereby authorized to be appropriated in accordance 
with section 660 of the Department of Energy Organization Act for 
42 USC 7270. 
operating expenses for the Strategic Petroleum Reserve— 
(1) to carry out part B of title I of the Energy Policy and 
Conservation Act (including any drawdown and distribution of 
42 USC 6231. 
the Reserve), except acquisition, transportation, and injection of 
petroleum products, as defined for purposes of such part B, for 
the Reserve— 
(A) for fiscal year 1986, $135,912,000; 
P i 
(B) for fiscal year 1987, $358,996,000; and 
(C) for fiscal year 1988, $156,692,000; and 
(2) to carry out part B of title I of the Energy Policy and 
Conservation Act for the acquisition, transportation, and injec-
tion of petroleum products, as defined for purposes of such part 
B, for the Reserve and for any drawdown and distribution of the 
Reserve— 
(A) for fiscal year 1986, $357,548,000; 
(B) for fiscal year 1987, $333,695,000; and 
(C) for fiscal year 1988, $357,000,000. 
SEC. 7102. FILL-RATE OF THE RESERVE; LIMITATION ON UNITED STATES 
SHARE OF THE NAVAL PETROLEUM RESERVE. 
(a) FILL-RATE OF THE RESERVE.—Section 160(c) of the Energy Policy 
and Conservation Act (42 U.S.C. 6240(c)) is amended by adding the 
following new paragraph at the end: 
"(3) Notwithstanding paragraph (2), beginning in fiscal year 1986 President of U.S. 
and continuing through fiscal years 1987 and 1988 until the quantity 
of crude oil in storage within the Reserve is at least 527,000,000 
, ^,, 
barrels, the President shall carry out petroleum acquisition, 
*
^ 
transportation, and injection activities at a level sufficient to assure 
a minimum average annual fill-rate of at least 35,000 barrels per 
day in addition to any petroleum products acquired for the Reserve 
100 STAT. 142 
PUBLIC LAW 99-272—APR. 7, 1986 
to replace petroleum products withdrawn from the Reserve as a 
result of a test drawdown and distribution.". 
(b) LIMITATION ON UNITED STATES SHARE OF THE NAVAL PETRO-
LEUM RESERVE.—Section 160(d)(1) of such Act (42 U.S.C. 6240(d)(1)) is 
amended— 
(1) by striking out "500,000,000 barrels" in subparagraph (A) 
and inserting in lieu thereof "527,000,000 barrels"; and 
(2) by striking out subparagraph (C) and inserting in lieu 
thereof the following: 
"(C) acquisition, transportation, and injection activities for 
the Reserve are being undertaken, beginning in fiscal year 1986 
and continuing through fiscal years 1987 and 1988 until the 
quantity of crude oil in storage within the Reserve is at least 
527,000,000 barrels, at a level sufficient to assure that petro-
leum products in storage in the Reserve will be increased at a 
minimum annual average rate of at least 35,000 barrels per day 
in addition to any petroleum products acquired for the Reserve 
to replace petroleum products withdrawn from the Reserve as a 
result of a test drawdown and distribution.". 
Subtitle C—Federal Energy Conservation 
Shared Savings 
.« 
SEC. 7201. SHARED ENERGY SAVINGS. 
(a) IN GENERAL.—The National Energy Conservation Policy Act 
(42 U.S.C. 8201 and following) is amended by adding at the end the 
following new title: 
"TITLE VIII—SHARED ENERGY SAVINGS 
42 use 8287. 
"SEC. 801. AUTHORITY TO ENTER INTO CONTRACTS. 
"The head of a Federal agency may enter into contracts under 
this title solely for the purpose of achieving energy savings and 
benefits ancillary to that purpose. Each such contract may, notwith-
standing any other provision of law, be for a period not to exceed 25 
years. Such contract shall provide that the contractor shall incur 
costs of implementing energy savings measures, including at least 
the costs (if any) incurred in making energy audits, acquiring and 
installing equipment, and training personnel, in exchange for a 
share of any energy savings directly resulting from implementation 
of such measures during the term of the contract. 
42 use 8287a. 
"SEC. 802. PAYMENT OF COSTS. 
"Any amount paid by a Federal agency pursuant to any contract 
entered into under this title may be paid only from funds appro-
priated or otherwise made available to the agency for fiscal year 
1986 or any fiscal year thereafter for the payment of energy ex-
penses (and related operation and maintenance expenses). 
42 use 8287b. 
"SEC. 803. REPORTS. 
"Each Federal agency shall periodically furnish the Secretary of 
Energy with full and complete information on its activities under 
this title, and the Secretary shall include in the report submitted to 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 143 
Congress under section 550 a description of the progress made by 
42 USC 8260. 
each Federal agency in— 
"(1) including the authority provided by this title in its 
contracting practices; and 
"(2) achieving energy savings under contracts entered into 
under this title. 
"SEC. 804. DEFINITIONS. 
"For purposes of this title— 
"(1) the term 'Federal agency' means an agency defined in 
section 551(1) of title 5, United States Code, and 
"(2) the term 'energy savings' means a reduction in the cost of 
energy, from a base cost established through a methodology set 
forth in the contract, utilized in an existing federally owned 
building or buildings or other federally owned facilities as a 
result of— 
"(A) the lease or purchase of operating equipment, 
improvements, altered operation and maintenance, or tech-
nical services; or 
"(B) the increased efficient use of existing energy sources 
by cogeneration or heat recovery, excluding any cogenera-
tion process for other than a federally owned building or 
buildings or other federally owned facilities.". 
(b) TABLE OF CONTENTS.—The table of contents of such Act is 
amended by adding the following at the end: 
"TITLE VIII—SHARED ENERGY SAVINGS 
"Sec. 801. Authority to enter into contracts. 
"Sec. 802. Payment of costs. 
"Sec. 803. Reports. 
"Sec. 804. Definitions.". 
Subtitle D—Biomass Energy and Alcohol Fuels 
Loan Guarantees 
42 USC 8287c. 
SEC. 7301. BIOMASS ENERGY AND ALCOHOL FUELS LOAN GUARANTEES. 
Section 221 of the Biomass Energy and Alcohol Fuels Act of 1980 
(Public Law 96-294; 42 U.S.C. 8821) is amended by— 
(1) striking out "September 30, 1985" and inserting in lieu 
thereof "June 30,1986"; and 
(2) adding at the end thereof the following: "Notwithstanding 
any other provision of this subtitle, the Secretary of Energy 
may modify the terms and conditions of any conditional 
commitment for a loan guarantee under this subtitle made 
before October 1,1984, including the amount of the loan guaran-
tee. Nothing in this section shall be interpreted as indicating 
Congressional approval with respect to any pending conditional 
commitments under this Act.". 
cs'i 
Subtitle E—Synthetic Fuels 
SEC. 7401. SHORT TITLE. 
This subtitle may be cited as the "Synthetic Fuels Corporation Act 
of 1985". 
Synthetic Fuels 
Corporation Act 
of 1985. 
42 USC note 
prec. 8791. 
100 STAT. 144 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e note 
prec. 8791. 
42 u s e 8701 
note. 
42 u s e note 
prec. 8791. 
42 u s e 8791. 
42 u s e note 
prec. 8791. 
42 u s e 8731. 
42 u s e 8731. 
42 u s e note 
prec. 8791. 
eontracts. 
SEC. 7402. CESSATION OF FINANCIAL ASSISTANCE AUTHORITY. 
Effective on the date of enactment of this Act, the United States 
Synthetic Fuels Corporation (hereafter in this subtitle referred to as 
the "Corporation") may not make any legally binding awards or 
commitments for financial assistance (including any changes in an 
existing award or commitment) pursuant to the Energy Security Act 
for synthetic fuel project proposals, except that nothing in this Act 
shall impair or alter the powers, duties, rights, obligations, privi-
leges, or liabilities of the Corporation, its Board or Chairman, or 
project sponsors in the performance and completion of the terms 
and undertakings of a legally binding award or commitment entered 
into prior to the date of enactment of this Act. 
SEC. 7403. TERMINATION OF THE CORPORATION. 
(a) Within 60 days of the date of enactment of this Act, the 
Directors of the Corporation shall terminate their duties under the 
Energy Security Act and be discharged. 
(b) Within 120 days of the date of enactment of this Act, the 
Corporation shall terminate, except as otherwise provided in this 
subtitle, in accordance with subtitle J of part B of title I of the 
Energy Security Act. 
SEC. 7404. DUTIES OF SECRETARY OF THE TREASURY. 
(a) Within 60 days of the date of enactment of this Act (or earlier, 
in the event of absence of a Chairman of the Board of Directors of 
the Corporation), the Secretary of the Treasury shall assume the 
duties of the Chairman of the Board of Directors of the Corporation. 
(b) Notwithstanding any other provision of law, the duties and 
responsibilities of the Secretary of the Treasury under subtitle J of 
part B of title I of the Energy Security Act or this Act may not be 
transferred to any other Federal department or agency. 
(c) Notwithstanding such termination of the Corporation, the 
Advisory Committee established under jection 123 of the Energy 
Security Act (42 U.S.C 8719) shall remain in effect to advise the 
Secretary of the Treasury regarding the administration of any 
contract or obligation of the Corporation pursuant to subtitle D of 
part B of title I of such Act. 
(d) To the extent that the Secretary of the Treasury may be 
required to take an action under section 131(q) of the Energy 
Security Act in connection with an award or commitment of finan-
cial assistance under such Act, the Secretary shall complete such 
action within 30 days of the date of enactment of this Act. 
SEC. 7405. SALARIES AND COMPENSATION RIGHTS. 
(a) The Director of the Office of Personnel Management shall, 
before February 1, 1986, determine the amount of compensation or 
benefits which each Director, officer, or employee of the Corporation 
shall be legally entitled to under any contract as of the date of 
enactment of this Act. 
(b) Effective on the date of enactment of this Act, no change in 
any Director, officer, or employee compensation or benefits shall be 
allowed or permitted, unless the Director of the Office of Personnel 
Management agrees that such change is reasonable. 
(c) Effective on the date of enactment of this Act— 
(1) no officer or employee of the Corporation shall receive a 
salary in excess of the rate of basic pay payable for level IV of 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 145 
the Executive Schedule under title 5 of the United States Code; 
and 
(2) the Corporation shall not waive any requirements in its 
By-Laws which are necessary for a Director, officer, or employee 
to qualify for pension or termination benefits under the By-
Laws and written personnel policies and procedures in effect on 
the date of enactment of this Act. 
SEC. 7406. REPORT TO THE CONGRESS. 
42 USC note 
The Corporation shall, within 60 days of the date of enactment of 
^^^' 
this Act, transmit to the Committee on Energy and Natural Re-
sources of the Senate and to the Committee on Energy and Com-
merce and Committee on Banking, Housing and Urban Affairs of 
the House of Representatives a report— 
(1) containing a review of implementation of its Phase I 
Business Plan dated February 19,1985; and 
(2) fulfilling the requirements of section 126(b)(3) of the 
Energy Security Act (42 U.S.C. 8722(b)(3)). 
Subtitle F—Uranium Enrichment 
SEC. 7501. AUTHORIZATION OF APPROPRIATIONS. 
In accordance with section 660 of the Department of Energy 
Organization Act (42 U.S.C. 7270), there is authorized to be appro-
priated to the Department of Energy for each of the fiscal years 
1986, 1987, and 1988 to carry out uranium enrichment service 
activities an amount equal to the difference between— 
(1) the revenues to be received during each such fiscal year by 
the Department of Energy in providing uranium enrichment 
^ 
service activities, as estimated in the budget submitted by the 
President to the Congress for each such fiscal year; and 
(2) the amount determined by the Secretary of Energy under 
section 7502(c)(1) for each such fiscal year. 
SEC. 7502. REPAYMENTS TO UNITED STATES TREASURY. 
(a) PARTIAL REPAYMENT OF UNRECOVERED COSTS.— 
(1) IN GENERAL.—The Secretary of Energy shall deposit in the 
general fund of the Treasury of the United States, in partial 
repayment of unrecovered Federal Government costs for ura-
nium enrichment service activities, an amount determined by 
the Secretary under subsection (c) for each of the fiscal years 
^' 
1986,1987, and 1988. 
(2) REVENUES IN EXCESS OF EXPENDITURES.—In addition to the 
* 
payments required under paragraph (1), the Secretary of 
. 
Energy shall deposit in the general fund of the Treasury of the 
' 
United States, in partial repayment of amounts identified by 
the Secretary under subsection (cX4)(B), any revenues in excess 
of expenditures received for the provision of such activities 
during the 3-year period referred to in paragraph (1). 
(b) REPAYMENT SCHEDULE.—The Secretary of Energy may make 
the repayments required in subsection (a) for any fiscal year on a 
quarterly basis. 
(c) DETERMINATION OF SECRETARY.— 
(1) IN GENERAL.—The Secretary of Energy shall determine, in 
his or her discretion, the amount of partial repayment to be 
made under subsection (aXD for each of the fiscal years 1986, 
100 STAT. 146 
PUBLIC LAW 99-272—APR. 7, 1986 
Congress. 
' 
1987, and 1988, consistent with the financial integrity of the 
uranium enrichment service activities program during a period 
of not less than 10 years. The amount of such repayment shall 
not adversely affect the reliability of the supply of uranium 
enrichment services at competitive prices for existing and 
potential customers. The determinations under this paragraph 
shall be made after notice and opportunity for public comment. 
(2) REPAYMENT GOALS.—The Secretary of Energy shall seek to 
achieve the following repayment amounts under subsection 
(a)(1): 
. , 
(A) $110,000,000 for fiscal year 1986; 
v 
(B) $150,000,000 for fiscal year 1987; and 
- 
' 
(C) $150,000,000 for fiscal year 1988. 
I ,j. 
(3) SCHEDULE FOR DETERMINATION.—The Secretary of Energy 
shall make the determination required in paragraph (1) for any 
j i fiscal year before the President submits to the Congress the 
budget for such fiscal year, except that the Secretary may make 
subsequent revisions in such determination. 
(4) SUBMISSION TO CONGRESS.— 
(A) IN GENERAL.—The Secretary of Energy shall submit to 
the Congress any determination made under paragraph (1), 
together with the reasons underlying such determination. 
(B) INITIAL SUBMISSION.—The Secretary shall include in 
the initial submission under this paragraph an estimate of 
the amount of prior investment in the uranium enrichment 
service activities program that remains unrecovered. 
SEC. 7503. URANIUM ENRICHMENT REPORT. 
Not later than 60 days after the date of the enactment of this Act, 
the Secretary of Energy shall submit to the Committee on Energy 
and Natural Resources of the Senate and the Committees on Energy 
and Commerce and on Interior and Insular Affairs of the House of 
Representatives a report regarding the effects of the September 19, 
1985, decision of the United States District Court for the District of 
Colorado holding that the utility services uranium enrichment con 
tracts of the Department of Energy are null and void (Western 
Nuclear Inc. v. F. Clark Huffman, Civil No. 84-C-2315). To the 
extent that it will not compromise the appeals process or the 
competitive position of the Department of Energy with regard to 
uranium enrichment, the report shall identify— 
(1) the effects of the decision on— 
(A) the operation of the uranium enrichment facilities of 
,,|4 ^i ,. the Department of Energy; and 
(B) the revenues of the uranium enrichment program; 
and 
(2) how the response of the Department of Energy may miti-
gate such effects. 
Subtitle G—Nuclear Regulatory Commission 
Annual Charges 
42 u s e 2213. 
Congress. 
SEC. 7601. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES. 
(a) SUBMISSION OF REPORT.—Within 90 days after the date of the 
enactment of this Act, the Nuclear Regulatory Commission shall 
submit to the Committee on Energy and Commerce and the Commit-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 147 
tee on Interior and Insular Affairs of the House of Representatives 
and the Committee on Environment and PubHc Works of the Senate 
a report evaluating the feasibility and necessity of establishing a 
system for the assessment and collection of annual charges from 
persons licensed by the Commission pursuant to the Atomic Energy 
Act of 1954 (42 U.S.C. 2011 et seq.) to fund all or part of the activities 
conducted by the Commission pursuant to such Act. Such report 
shall include an analysis of— 
(1) the extent to which the Commission's existing statutory or 
regulatory authority to assess and collect annual charges, 
including the authority of the Commission to assess and collect 
fees pursuant to title V of the Independent Offices Appropria-
tion Act of 1952, is adequate to enable the Commission to assess 
and collect fees commensurate with the value of the benefit 
rendered to the licensee and the cost to the Commission of 
rendering such benefit; 
(2) the amounts currently assessed and collected by the 
Commission pursuant to existing statutory or regulatory 
authority, and the purposes for which such fees are assessed and 
collected; and 
(3) any recommendations of the Commission for expanding 
the existing statutory authority to assess and collect fees, 
including the Commission's justification for such expansion. 
Qi) ASSESSMENT AND COLLECTION.— 
(1) IN GENERAL.—Upon the expiration of a period of 45 cal-
endar days (excluding any day in which either House of Con-
gress is not in session because of an adjournment of more than 3 
calendar days to a day certain or an adjournment sine die) 
£ 
following receipt by the Congress of the report required pursu-
ant to subsection (a), the Nuclear Regulatory Commission shall 
assess and collect annual charges from its licensees on a fiscal 
year basis, except that— 
(A) the maximum amount of the aggregate charges as-
• 
sessed pursuant to this paragraph in any fiscal year may 
. 
not exceed an amount that, when added to other amounts 
'"^ 
collected by the Commission for such fiscal year under 
other provisions of law, is estimated to be equal to 33 
percent of the costs incurred by the Commission with re-
spect to such fiscal year; and 
(B) any such charge assessed pursuant to this paragraph 
• 
shall be reasonably related to the regulatory service pro-
vided by the Commission and shall fairly reflect the cost to 
V. .>? 
the Commission of providing such service. 
(2) ESTABLISHMENT OF AMOUNT BY RULE.—The amount of the 
charges assessed pursuant to this paragraph shall be estab-
lished by rule. 
31 use 9701. 
TITLE VIII—OUTER CONTINENTAL SHELF 
AND RELATED PROGRAMS 
SEC. 8001. SHORT TITLE. 
This title may be referred to as the 
Lands Act Amendments of 1985". 
'Outer Continental Shelf 
Outer 
Continental 
Shelf Lands Act 
Amendments of 
1985. 
43 u s e 1301 
note. 
100 STAT. 148 
PUBLIC LAW 99-272—APR. 7, 1986 
43 u s e 1332. 
Minerals and 
mining. 
State and local 
governments. 
Infra. 
Contracts. 
State and local 
governments. 
Energy. 
43 u s e 1352. 
Alaska. 
43 u s e 1336. 
SEC. 8002. NATIONAL POLICY FOR THE OUTER CONTINENTAL SHELF. 
The Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) is 
amended in paragraph (4) of section 3 by deleting the word "and" at 
the end of subparagraph (A); deleting the semicolon at the end of 
subparagraph (B) and inserting in lieu thereof a period; designating 
subparagraph (B) as subparagraph (C); and inserting after subpara-
graph (A) the following new subparagraph (B): 
"(B) the distribution of a portion of the receipts from the 
leasing of mineral resources of the outer Continental Shelf 
adjacent to State lands, as provided under section 8(g), will 
provide affected coastal States and localities with funds which 
may be used for the mitigation of adverse economic and 
environmental effects related to the development of such re-
sources; and", 
s
f 
SEC. 8003. REVISION OF SECTION 8(g). 
Section 8(g) of the Outer Continental Shelf Lands Act (43 U.S.C. 
1337(g)) is amended to read as follows: 
"(g)(1) At the time of soliciting nominations for the leasing of 
lands containing tracts wholly or partially within three nautical 
miles of the seaward boundary of any coastal State, and subse-
quently as new information is obtained or developed by the Sec-
retary, the Secretary shall, in addition to the information required 
by section 26 of this Act, provide the Governor of such State— 
"(A) an identification and schedule of the areas and regions 
proposed to be offered for leasing; 
"(B) at the request of the Governor of such State, all informa-
tion from all sources concerning the geographical, geological, 
and ecological characteristics of such tracts; 
"(C) an estimate of the oil and gas reserves in the areas 
proposed for leasing; and 
"(D) at the request of the Governor of such State, an identi-
fication of any field, geological structure, or trap located wholly 
or partially within three nautical miles of the seaward bound-
ary of such coastal State, including all information relating to 
the entire field, geological structure, or trap. 
The provisions of the first sentence of subsection (c) and the provi-
sions of subsections (e)-(h) of section 26 of this Act shall be ap-
plicable to the release by the Secretary of any information to any 
coastal State under this paragraph. In addition, the provisions of 
subsections (c) and (e)-(h) of section 26 of this Act shall apply in 
their entirety to the release by the Secretary to any coastal State of 
any information relating to Federal lands beyond three nautical 
miles of the seaward boundary of such coastal State. 
"(2) Notwithstanding any other provision of this Act, the Sec-
retary shall deposit into a separate account in the Treasury of the 
United States all bonuses, rents, and royalties, and other revenues 
(derived from any bidding system authorized under subsection 
(a)(1)), excluding Federal income and windfall profits taxes, and 
derived from any lease issued after September 18, 1978 of any 
Federal tract which lies wholly (or, in the case of Alaska, partially 
until seven years from the date of settlement of any boundary 
dispute that is the subject of an agreement under section 7 of this 
Act entered into prior to January 1, 1986 or until April 15, 1993 with 
respect to any other tract) within three nautical miles of the sea-
ward boundary of any coastal State, or, (except as provided above for 
Alaska) in the case where a Federal tract lies partially within three 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 149 
nautical miles of the seaward boundary, a percentage of bonuses, 
rents, royalties, and other revenues (derived from any bidding 
system authorized under subsection (a)(1)), excluding Federal income 
and windfall profits taxes, and derived from any lease issued after 
September 18, 1978 of such tract equal to the percentage of surface 
acreage of the tract that lies within such three nautical miles. 
Except as provided in paragraph (5) of this subsection, not later than 
the last business day of the month following the month in which 
those revenues are deposited in the Treasury, the Secretary shall 
transmit to such coastal State 27 percent of those revenues, together 
with all accrued interest thereon. The remaining balance of such 
revenues shall be transmitted simultaneously to the miscellaneous 
receipts account of the Treasury of the United States. 
"(3) Whenever the Secretary or the Governor of a coastal State 
determines that a common potentially hydrocarbon-bearing area 
may underlie the Federal and State boundary, the Secretary or the 
Governor shall notify the other party in writing of his determina-
tion and the Secretary shall provide to the Governor notice of the 
current and projected status of the tract or tracts containing the 
, 
, , . 
common potentially hydrocarbon-bearing area. If the Secretary has 
' 
' 
leased or intends to lease such tract or tracts, the Secretary and the 
Governor of the coastal State may enter into an agreement to divide 
the revenues from production of any common potentially hydro-
carbon-bearing area, by unitization or other royalty sharing agree-
ment, pursuant to existing law. If the Secretary and the Governor 
do not enter into an agreement, the Secretary may nevertheless 
proceed with the leasing of the tract or tracts. Any revenues re-
ceived by the United States under such an agreement shall be 
subject to the requirements of paragraph (2). 
"(4) The deposits in the Treasury account described in this section 
shall be invested by the Secretary of the Treasury in securities 
backed by the full faith and credit of the United States having 
maturities suitable to the needs of the account and yielding the 
highest reasonably available interest rates as determined by the 
Secretary of the Treasury. 
"(5)(A) When there is a boundary dispute between the United 
States and a State which is subject to an agreement under section 7 
of this Act, the Secretary shall credit to the account established 
43 USC 1336. 
pursuant to such agreement all bonuses, ren's, and royalties, and 
other revenues (derived from any bidding sys 3m authorized under 
subsection (a)(1)), excluding Federal income and windfall profits 
taxes, and derived from any lease issued after September 18, 1978 of 
any Federal tract which lies wholly or partially within three nau-
tical miles of the seaward boundary asserted by the State, if that 
money has not otherwise been deposited in such account. Proceeds 
of such account shall be distributed as follows: 
, . ,^ 
"Upon the settlement of any boundary dispute which is sub- 
' 1
- .: 
ject to a section 7 agreement between the United States and a 
State, the Secretary shall pay to such State all moneys due such 
State from amounts deposited in the escro 
account. If there is 
insufficient money deposited in the escrc v account, the Sec-
retary shall transmit, from any revenues derived from any lease 
of Federal lands under this Act, the remaining balance due such 
State in accordance with the formula set forth in section 
8004(b)(lXB) of the Outer Continental Shelf Lands Act Amend-
ments of 1985. 
Post, p. 150. 
100 STAT. 150 
PUBLIC LAW 99-272—APR. 7, 1986 
"(B) This paragraph applies to all Federal oil and gas lease sales, 
under this Act, including joint lease sales, occurring after Septem-
ber 18,1978. 
"(6) This section shall be deemed to take effect on October 1, 1985, 
for purposes of determining the amounts to be deposited in the 
separate account and the States' shares described in paragraph (2). 
"(7) When the Secretary leases any tract which lies wholly or 
partially within three miles of the seaward boundary of two or more 
States, the revenues from such tract shall be distributed as other-
wise provided by this section, except that the State's share of such 
revenues that would otherwise result under this section shall be 
divided equally among such States.". 
43 u s e 1337 
SEC. 8004. DISTRIBUTION OF SECTION 8(g) ACCOUNT. 
State and local 
(a) Prior to April 15, 1986, the Secretary shall distribute to the 
governments. 
designated coastal States the sum of— 
(1) the amounts due and payable to each such State under 
paragraph (2) of section 8(g) of the Outer Continental Shelf 
Ante, p. 148. 
Lands Act, as amended by this title, for the period between 
October 1,1985, and the date of such distribution, and 
(2) the amounts due each such State under subsection (b)(lXA) 
of this section for the period prior to October 1,1985. 
(b)(1) As a fair and equitable disposition of all revenues (including 
interest thereon) derived from any lease of Federal lands wholly or 
partially within 3 miles of the seaward boundary of a coastal State 
prior to October 1,1985, the Secretary shall distribute: 
(A) from the funds which were deposited in the separate 
account in the Treasury of the United States under section 
8(g)(4) of the Outer Continental Shelf Lands Act (43 U.S.C. 
1337(g)(4)) which was in effect prior to the date of enactment of 
section 8003 of this title the following sums: 
($ million) 
Louisiana 
572 
- 
Texas 
382 
California 
338 
ijg^«j 
Alabama 
66 
Alaska 
51 
Mississippi 
14 
^ -^ >
^ i • 
Florida 
0.03 
as well as 27 percent of the royalties, derived from any lease of 
Federal lands, which have been deposited through September 
30, 1985, in the separate account described in this paragraph 
and interest thereon accrued through September 30, 1985, and 
shall transmit any remaining amounts to the miscellaneous 
receipts account of the Treasury of the United States; and 
(B) from revenues derived from any lease of Federal lands 
43 use 1301 
under the Outer Continental Shelf Lands Act, as amended, 
^°^- 
prior to April 15 of each of the fifteen fiscal years following the 
fiscal year in which this title is enacted, 3 percent of the 
following sums in each of the five fiscal years following the date 
of enactment of this Act, 7 percent of such sums in each of the 
next five fiscal years, and 10 percent of such sums in each of the 
following five fiscal years: 
($ million) 
Louisiana 
84 
Texas 
134 
t 
n Ay/ 
California 
289 
Alabama 
7 
Alaska 
134 
Mississippi 
2. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 151 
(2) The acceptance of any payment by a State under this section Claims, 
shall satisfy and release any and all claims of such State against the 
United States arising under, or related to, section 8(g) of the Outer 
Continental Shelf Lands Act, as it was in effect prior to the date of Ante, p. 148. 
enactment of this Act and shall vest in such State the right to 
receive payments as set forth in this section. 
(c) Notwithstanding any other provision of this Act, the amounts Louisiana. 
due and payable to the State of Louisiana prior to October 1, 1986, 
under subtitle A of title VIII (Outer Continental Shelf and Related 
Programs) of this Act shall remain in their separate accounts in the 
Treasury of the United States and continue to accrue interest until 
October 1, 1986, except that the $572,000,000 set forth in subsection 
8004(b)(1)(A) of this section shall only accrue interest from April 15, 
1986 to October 1, 1986, at which time the Secretary shall imme-
diately distribute such sums with accrued interest to the State of 
Louisiana. 
SEC. 8005. IMMOBILIZATION OF BOUNDARIES. 
Section 2(b) of the Submerged Lands Act (43 U.S.C. 1301(b)) is 
amended by inserting before the semicolon at the end a comma and 
the following: "except that any boundary between a State and the State and local 
United States under this Act which has been or is hereafter fixed by governments, 
coordinates under a final decree of the United States Supreme Court 
shall remain immobilized at the coordinates provided under such 
decree and shall not be ambulatory". 
TITLE IX—MEDICARE, MEDICAID, AND 
MATERNAL AND CHILD HEALTH PRO-
GRAMS 
SEC. 9000. SHORT TITLE; TABLE OF CONTENTS OF TITLE. 
This title may be cited as the "Medicare and Medicaid Budget 
Reconciliation Amendments of 1985". 
Medicare and 
Medicaid Budget 
Reconciliation 
Amendments of 
1985. 
42 u s e 1305 
note. 
TABLE OF CONTENTS OF TITLE 
, 
. ', 
Subtitle A—Medicare 
till:, 
" :. «> 
PART 1—PROVISIONS RELATING TO PART A OF MEDICARE 
SUBPART A—HOSPITAL REIMBURSEMENT 
Sec. 9101. Rate of increase in payments for inpatient hospital services. 
Sec. 9102. One-year extension of PPS transition. 
Sec. 9103. Application of revised hospital wage index. 
Sec. 9104. Payments to hospitals for indirect costs of medical education. 
Sec. 9105. Payments for hospitals which serve a disproportionate share of low-
income patients. 
Sec. 9106. Treatment of certain rural osteopathic hospitals as rural referral centers. 
Sec. 9107. Return on equity capital for inpatient hospital services and other serv-
ices. 
Sec. 9108. Continuation of medicare reimbursement waivers for certain hospitals 
participating in regional hospital reimbursement demonstrations. 
Sec. 9109. Four-year test for State waivers for certain States. 
Sec. 9110. Asset valuation for donations of State property to nonprofit corporations. 
Sec. 9111. Payments to sole community hospitals. 
Sec. 9112. Indirect teaching adjustment for certain clinics. 
Sec. 9113. Report on impact of outlier and transfer policy on rural hospitals. 
Sec. 9114. Information on impact of PPS payments on hospitals. 
100 STAT. 152 
PUBLIC LAW 99-272—APR. 7, 1986 
,,r,. 
Sec. 9115. Special rules for implementation of subpart. 
SUBPART B—MISCELLANEOUS PKOVISIONS 
~ 
' ' 
Sec. 9121. Responsibilities of medicare hospitals in emergency cases. 
Sec. 9122. Requirement for medicare hospitals to participate in CHAMPUS and 
CHAMPVA programs. 
Sec. 9123. Extension and payment for hospice care. 
Sec. 9124. Limiting the penalty for late enrollment in part A. 
' 
^; 
Sec. 9125. Promulgation of inpatient hospital deductible. 
, -
Sec. 9126. Access to skilled nursing facilities. 
Sec. 9127. Additional members of Prospective Payment Assessment Commission. 
Sec. 9128. Sense of the Senate with respect to inpatient hospital deductible. 
Sec. 9129. Medicare coverage of State and local employees. 
PART 2—PROVISIONS RELATING TO PARTS A AND B OF MEDICARE 
SUBPART A—PAYMENT-RELATED PROVISIONS 
Sec. 9201. Extension of working aged provision. 
, 
Sec. 9202. Payments to hospitals for direct costs of medical education. 
Sec. 9204. Moratorium on laboratory payment demonstration. 
Sec. 9205. Home health waiver of liability. 
* .: 
; 
-
SUBPART B—OTHER PROVISIONS 
Sec. 9211. Provisions relating to health maintenance organizations and competitive 
medical plans. 
1 
Sec. 9213. Removal of prohibition on comments by medicare and social security ac-
tuaries relating to economic assumptions. 
Sec. 9214. Limitation on merger of end stage renal disease networks. 
Sec. 9215. Extension of certain medicare municipal health services demonstration 
projects. 
Sec. 9216. Audit and medical claims review. 
Sec. 9217. Liver transplants. 
Sec. 9218. Studies relating to physical therapists and other professionals. 
''i'fj 
J 
Sec. 9219. Technical corrections. 
Sec. 9220. Extension of on lok waiver. 
Sec. 9221. Continuation of "Access: Medicare" demonstration project. 
PART 3—PROVISIONS RELATING TO PART B OF MEDICARE 
SUBPART A—PAYMENT-RELATED PROVISIONS 
Sec. 9301. Medicare physician payment provisions. 
Sec. 9303. Payment for clinical laboratory services. 
Sec. 9304. Determinations of inherent reasonableness of charges and customary 
charges for certain former hospital-compensated physicians. 
Sec. 9305. Physician Payment Review Commission and development of relative 
value scale. 
Sec. 9306. Limitation on medicare payment for post-cataract surgery patients. 
Sec. 9307. Payment for £issistants at surgery for certain cataract operations and 
other operations. 
SUBPART B—BENEFITS AND OTHER PROVISIONS 
Sec. 9313. Part B premium. 
Sec. 9314. Demonstration of preventive health services under medicare. 
Sec. 9315. Extension of GAO reporting date. 
PART 4—PEER REVIEW ORGANIZATIONS 
Sec. 9401. 100 percent peer review of certain surgical procedures. 
Sec. 9402. Peer review organization reimbursement. 
Sec. 9403. Denial of payment for substandard care. 
Sec. 9404. Health maintenance organization membership on peer review organiza-
tion boards. 
Sec. 9405. Peer review organization review of health maintenance organizations. 
Sec. 9406. Substitute review pending termination of a peer review organization con-
tract. 
Subtitle B—Medicaid and Maternal and Child Health 
Sec. 9501. Services for pregnant women. 
Sec. 9502. Modifications of waiver provisions for home and community-based serv-
ices. 
Sec. 9503. Third-party liability. 
Sec. 9505. Optional hospice benefits. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 153 
Sec. 9506. Treatment of potential payments from medicaid qualifying trusts. 
Sec. 9507. Written standards for provision of organ transplants. 
Sec. 9508. Optional targeted case management services. 
Sec. 9509. Revaluation of assets. 
Sec. 9510. Beginning date of optional coverage for individuals in medical institu-
tions. 
Sec. 9511. Optional coverage of children. 
Sec. 9512. Overpayment recovery rules. 
Sec. 9514. Regulations for intermediate care facilities for the mentally retarded. 
Sec. 9515. Life safety code recognition. 
Sec. 9516. Correction and reduction plans for intermediate care facilities for the 
mentally retarded. 
Sec. 9517. Modifying application of medicaid HMO provisions for certain health 
centers. 
Sec. 9518. Extension of MMIS deadline. 
Sec. 9519. Report on adjustment in medicaid payments for hospitals serving dispro-
portionate numbers of low income patients. 
Sec. 9520. Task Force on Technology-Dependent Children. 
Sec. 9522. Expansion of services under demonstration waivers. 
Sec. 9523. Extension of Texas waiver project. 
Sec. 9524. Wisconsin health maintenance organization waiver. 
Sec. 9525. New Jersey demonstration project relating to training of AFDC recipi-
ents as home health aides. 
Sec. 9526. Reference to provisions of law providing coverage under, or directly 
affecting, the medicaid program. 
Sec. 9527. Children with special health care needs. 
Sec. 9528. Annual calculation of Federal medical assistance percentage. 
Sec. 9529. Medicaid coverage relating to adoption assistance and foster care. 
Subtitle C—Task Force on Long-Term Health Care Policies 
,j: ^ 
Sec. 9601. Recommendations for long-term health care policies. 
'• -; 
Subtitle A—Medicare 
PART 1—PROVISIONS RELATING TO PART A OF 
MEDICARE 
Subpart A—Hospital Reimbursement 
SEC. 9101. RATE OF INCREASE IN PAYMENTS FOR INPATIENT HOSPITAL 
SERVICES. 
(a) EXTENSION OF CURRENT FREEZE ON PAYMENT RATES THROUGH 
APRIL 30, 1986.—Section 5(c) of the Emergency Extension Act of 
1985 (Public Law 99-107) is amended to read as follows: 
42 USC I395ww 
"(c) EXTENSION PERIOD DEFINED.— 
^°^-
"(1) HOSPITAL PAYMENTS.—For purposes of subsection (a), the 
term 'extension period' means the period beginning on October 
1,1985, and ending on April 30,1986.". 
(b) APPLICABLE PERCENTAGE INCREASE.—Section 1886(b)(3)(B) of 
the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is amended to 
read as follows: 
"(B)(i) For purposes of subparagraph (A) for 12-month cost report-
ing periods beginning during a fiscal year and for purposes of 
subsection (d) for discharges occurring during a fiscal year, the 
'applicable percentage increase' shall be— 
"(I) for fiscal year 1986, Vz percent, 
"(II) for fiscal years 1987 and 1988, a percentage determined 
by the Secretary pursuant to subsection (e)(4), but not to exceed 
the market basket percentage increase (as defined in clause (ii)), 
and 
100 STAT. 154 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1395WW 
note. 
42 u s e 1395WW 
note. 
wwdfiJCf "'>;= I Si 
"(III) for fiscal year 1989 and subsequent fiscal years, the 
percentage determined by the Secretary pursuant to subsection 
(e)(4). 
"(ii) For purposes of clause (i), the term 'market basket percentage 
increase' means, with respect to cost reporting periods and dis-
charges occurring in a fiscal year, the percentage, estimated by the 
Secretary before the beginning of the period or fiscal year, by which 
the cost of the mix of goods and services (including personnel costs 
but excluding nonoperating costs) comprising routine, ancillary, and 
special care unit inpatient hospital services, based on an index of 
appropriately weighted indicators of changes in wages and prices 
which are representative of the mix of goods and services included 
in such inpatient hospital services, for the period or fiscal year will 
exceed the cost of such mix of goods and services for the preceding 
12-month cost reporting period or fiscal year.". 
(c) CONFORMING AMENDMENTS.—(1) Section 1886(d)(3)(A) of such 
Act (42 U.S.C. 1395ww(d)(3)(A)) is amended by striking out "for fiscal 
year 1985" and inserting in lieu thereof "for each of fiscal years 1985 
and 1986". 
(2) Section 1886(e)(3) of such Act is amended by striking out 
"(instead of the applicable percentage increase described in subsec-
tion (b)(3)(B))". 
(3) Section 1886(e)(4) of such Act is amended by striking out "1986" 
and inserting in lieu thereof "1987". 
(d) EFFECTIVE DATE OF FREEZE EXTENSION.—The amendment made 
by subsection (a) shall take effect on March 15, 1986, and the 
amendments made by subsection (c) shall take effect on the date of 
the enactment of this Act. 
(e) EFFECTIVE DATE FOR INCREASE.— 
(1) PPS HOSPITALS, D
R
G PORTION OF PAYMENT.—In the case of a 
subsection (d) hospital (as defined in paragraph (4))— 
(A) the amendment made by subsection (b) shall apply to 
payments made under section 1886(d)(1)(A) of such Act 
made on the basis of discharges occurring on or after May 1, 
1986; and 
*
^ 
(B) for discharges occurring on or after October 1, 1986, 
the applicable percentage increase (described in section 
1886(b)(3)(B)) for discharges occurring during fiscal year 
1986 shall be deemed to have been V2 percent. 
(2) P P S HOSPITALS, HOSPITAL SPECIFIC PORTION OF PAYMENT.— 
In the case of a subsection (d) hospital— 
(A) the amendment made by subsection (b) shall apply to 
payments under section 1886(d)(lXA) of the Social Security 
Act made on the basis of discharges occurring during a cost 
reporting period of a hospital, for the hospital's cost report-
ing periods beginning on or after October 1,1985; 
(B) notwithstanding subparagraph (A), for the cost report-
ing period beginning during fiscal year 1986, the applicable 
percentage incresise (as defined in section 1886(b)(3)(B) of 
such Act) for the— 
(i) first 7 months of the cost reporting period shall be 
0 percent, and 
' ' 
(ij) for the remaining 5 months of the cost reporting 
period shall be V2 percent; and 
(C) for cost reporting periods beginning on or after Octo-
ber 1, 1986, the applicable percentage increase (as so 
B.i"-U 
OJ 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 155 
defined) with respect to the previous cost reporting period 
shall be deemed to have been V
2 percent. 
(3) PPS-EXEMPT HOSPITALS.—In the case of a hospital that is 
not a subsection (d) hospital— 
(A) the amendment made by subsection (b) shall apply to 
cost reporting periods beginning on or after October 1, 1985; 
(B) notwithstanding subparagraph (A), for the hospital's 
cost reporting period beginning during fiscal year 1986, 
payment under title XVIII of the Social Security Act shall 42 USC 1395. 
be made as though the applicable percentage increase de-
scribed in section 1886(b)(3)(B) were equal to %4 of 1 per- 42 USC I395ww. 
cent; and 
(C) for cost reporting periods beginning on or after Octo-
ber 1, 1986, the applicable percentage increase (as so de-
i?;^ 
fined) 
with respect to the cost reporting period beginning 
during fiscal year 1986 shall be deemed to have been V
2 
percent. 
(4) DEFINITION.—In this subsection, the term "subsection (d) 
hospital" has the meaning given such term in section 
1886(d)(1)(B) of the Social Security Act. 
SEC. 9102. ONE-YEAR EXTENSION OF PPS TRANSITION. 
(a) ONE-YEAR DELAY OF FULL IMPLEMENTATION OF PROSPECTIVE 
PAYMENT SYSTEM.—Section 1886(d)(1)(A) of the Social Security Act 
(42 U.S.C. 1395ww(d)(l)(A)) is amended by striking out "1986" in 
clauses (ii) and (iii) and inserting in lieu thereof "1987". 
(b) N E W TARGET AND D R G PERCENTAGES FOR REMAINDER OF FISCAL 
YEAR 1986.—Section 1886(d)(1)(C) of such Act is amended— 
(1) by striking out ", or discharges occurring", 
(2) by striking out "and" at the end of clause (ii), 
(3) by striking out "(iii) on or after October 1, 1985, and before 
October 1, 1986" in clause (iii) and inserting in lieu thereof "(iv) 
on or after October 1, 1986, and before October 1, 1987", and 
(4) by inserting after clause (ii) the following new clause: 
"(iii) on or after October 1, 1985, and before October 1, 1986, 
the 'target percentage' is 45 percent and the 'DRG percentage' 
is 55 percent; and". 
(c) NEW BLENDED NATIONAL-REGIONAL DRG RATE FOR REMAINDER 
OF 
FISCAL 
YEAR 1986.—Section 1886(d)(1)(D) of such Act is 
' 
'•^;^';' 
amended— 
(1) by striking out "cost reporting periods beginning, or", and 
(2) by striking out "1985" and "1986" and inserting in lieu 
thereof "1986" and "1987", respectively, each place it appears. 
(d) EFFECTIVE DATES.— 
42 u s e I395ww 
(1) DELAY IN FINAL TRANSITION.—The amendment made by note, 
subsection (a) shall take effect on the date of the enactment of 
this Act. 
(2) CHANGE IN HOSPITAL SPECIFIC PERCENTAGE.—The amend-
ments made by subsection (b) shall apply— 
(A) to cost reporting periods beginning on or after Octo-
'^ ^- 
ber 1,1985, but 
«- O
B
O 
(B) notwithstanding subparagraph (A), for a hospital's 
cost reporting period beginning during fiscal year 1986, for 
purposes of section 1886(d)(1)(A) of the Social Security Act— 
(i) during the first 7 months of the period the "target 
percentage" is 50 percent and the "DRG percentage' is 
50 percent, and 
100 STAT. 156 
PUBLIC LAW 99-272—APR. 7, 1986 
Jfti" *?! 
42 u s e 1395WW. 
42 u s e 1395WW 
note. 
42 u s e 1395WW. 
42 u s e 1395WW 
note. 
26 u s e 1 note. 
42 u s e 1395ww 
note. 
^J^^',.^,, 
. 
(ii) during the remaining 5 months of the period the 
"target percentage" is 45 percent and the "DRG 
percentage" is 55 percent. 
(3) CHANGE IN BLENDED RATE.—The amendments made by 
subsection (c) shall apply to discharges occurring on or after 
May 1,1986. 
(4) EXCEPTION.— 
(A) Notwithstanding any other provision of this subsec-
tion, the amendments made by this section shall not apply 
to payments with respect to the operating costs of inpatient 
hospital services (as defined in section 1886(a)(4) of the 
Social Security Act) of a subsection (d) hospital (as defined 
in section 1886(d)(1)(B) of such Act) located in the State of 
Oregon. 
(B) Notwithstanding any other provision of law, for a cost 
reporting period beginning during fiscal year 1986 of a 
subsection (d) hospital to which the amendments made by 
i 
this section 
do not apply, for 
purposes of section 
1886(d)( 1)(A) of of Social Security Act— 
(i) during the first 7 months of the period the "target 
percentage" is 50 percent and the "DRG percentage" is 
50 percent, and 
js , 
. 
(ii) during the remaining 5 months of the period the 
"target percentage" is 25 percent and the "DRG 
percentage" is 75 percent. 
(C) Notwithstanding any other provision of law, for pur-
,,. , 
poses of section 1886(d)(1)(D) of such Act, the applicable 
combined adjusted DRG prospective payment rate for a 
subsection (d) hospital to which the amendments made by 
this section do not apply is, for discharges occurring on or 
after October 1, 1985, and before May 1, 1986, a combined 
i . 
rate consisting of 25 percent of the national adjusted DRG 
prospective payment rate and 75 percent of the regional 
adjusted DRG prospective payment rate for such dis-
charges. 
SEC. 9103. APPLICATION OF REVISED HOSPITAL WAGE INDEX. 
• • 
(a) APPLICATION OF REVISED INDEX PROSPECTIVELY.—(1) Section 
2316(b) of the Deficit Reduction Act of 1984 (98 Stat. 1081) is 
amended to read as follows: 
"(b) The Secretary shall adjust the payment amounts for hospitals 
for discharges occurring on or after May 1, 1986, to reflect the 
changes the Secretary has promulgated in final regulations (on 
September 3, 1985) relating to the hospital wage index under section 
1886(d)(3)(E) of the Social Security Act. For discharges occurring 
after September 30, 1986, the Secretary shall provide for such 
periodic adjustments in the appropriate wage index used under that 
section as may be necessary, taking into account changes in the 
wage levels and relative proportions of full-time and part-time 
workers.". 
(2) The amendment made by paragraph (1) shall be effective as if 
it had been included in the Deficit Reduction Act of 1984. 
O
t
)
) STUDY OF METHODOLOGY FOR AREA WAGE ADJUSTMENT FOR 
CENTRAL CITIES.—(1) The Secretary of Health and Human Services, 
in consultation with the Prospective Payment Assessment Commis-
sion, shall collect information and shall develop one or more meth-
odologies to permit the adjustment of the wage indices used for 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 157 
purposes of sections 1886(d)(2)(C)(ii), 1886(d)(2XH), and 1886(d)(3)(E) of 
the Social Security Act, in order to more accurately reflect hospital 
labor markets, by taking into account variations in wages and wage-
related costs between the central city portion of urban areas and 
other parts of urban areas. 
(2) The Secretary shall report to Congress on the information 
collected and the methodologies developed under paragraph (1) not 
later than May 1, 1987. The report shall include a recommendation 
as to the feasibility and desirability of implementing such 
methodologies. 
SEC. 9104. PAYMENTS TO HOSPITALS FOR INDIRECT COSTS OF MEDICAL 
EDUCATION. 
(a) PAYMENT FOR INDIRECT COSTS OF MEDICAL EDUCATION.—Section 
1886(d)(5)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(5)(B)) is 
amended to read as follows: 
"(B) The Secretary shall provide for an additional payment 
amount for subsection (d) hospitals with indirect costs of medical 
education, in an amount computed in the same manner as the 
adjustment for such costs under regulations (in effect as of January 
1,1983) under subsection (a)(2), except as follows: 
"(i) The amount of such additional payment shall be deter-
mined by multiplying (I) the sum of the amount determined 
under paragraph (l)(A)(ii)(II) (or, if applicable, the amount 
determined under paragraph (l)(A)(iii)) and the amount paid to 
the hospital under subparagraph (A), by (II) the indirect teach-
ing adjustment factor described in clause (ii). 
"(ii) For purposes of clause (i)(II), the indirect teaching adjust-
ment factor for discharges occurring— 
"(I) on or after May 1, 1986, and before October 1, 1988, is 
equal to 2 X (d + r)- ""S-1), or 
"(II) on 
or 
after 
October 
1, 1988, is equal 
to 
1.5x((l + r)"^^-l), 
where 'r' is the ratio of the hospital's full-time equivalent 
interns and residents to beds. 
"(iii) In determining such adjustment the Secretary shall not 
distinguish between those interns and residents who are 
employees of a hospital and those interns and residents who 
furnish services to a hospital but are not employees of such 
hospital. 
"(iv) In determining such adjustment, the Secretary shall 
^ 
continue to count interns and residents assigned to outpatient 
services of the hospital as part of the calculation of the full-
time-equivalent number of interns and residents.". 
(b) ADJUSTMENT OF PAYMENT AMOUNTS.— 
(1) 
RESTANDARDIZING DRG PAYMENT AMOUNTS TO REFLECT 
CHANGE IN FORMULA.—Section 1886(d)(2)(C)(i) of such Act is 
amended by inserting "(taking into account, for discharges 
occurring after September 30, 1986, the amendments made by 
section 9104(a) of the Medicare and Medicaid Budget Reconcili-
ation Amendments of 1985)" after "medical education costs". 
(2) PROVIDING FOR SYSTEM SAVINGS FROM CHANGE IN FOR-
MULA.—Subparagraph (C) of section 1886(d)(3) of such Act is 
amended— 
(A) by inserting "(i)" after "(C)", 
(B) by 
inserting 
"FOR 
FISCAL 
YEAR 
1985" 
after 
"NEUTRALITY", 
42 u s e 1395WW. 
Reports. 
100 STAT. 158 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1395WW. 
42 u s e 1395WW 
note. 
Urban areas. 
State and local 
governments. 
(C) by striking out "The Secretary" and inserting in lieu 
thereof "For discharges occurring in fiscal year 1985, the 
, 
Secretary", and 
(D) by adding at the end the following new clause: 
"(ii) REDUCING FOR SAVINGS FROM AMENDMENT TO INDIRECT 
TEACHING ADJUSTMENT FOR DISCHARGES AFTER SEPTEMBER 30, 
1986.—For discharges occurring after September 30, 1986, the 
Secretary shall further reduce each of the average standardized 
amounts (in a proportion which takes into account the differing 
effects of the standardization effected under paragraph (2)(C)(i)) 
so as to provide for a reduction in the total of the payments 
(attributable to this paragraph) made for discharges occurring— 
"(I) on or after October 1, 1986, and before October 1, 
1988, of an amount equal to the estimated reduction in the 
payment amounts under paragraph (5)(B) that would have 
resulted from the enactment of the amendments made by 
section 9104 of the Medicare and Medicaid Budget Rec-
onciliation Amendments of 1985 if the factor described in 
^ 
clause (ii)(II) of paragraph (5)(B) were applied for discharges 
*"*" 
occurring during such period instead of the factor described 
in clause (ii)(I) of that paragraph, and 
"(II) on or after October 1, 1988, of an amount equal to 
the estimated reduction in the payment amounts under 
paragraph (5)(B) for those discharges that has resulted from 
, 
the enactment of the amendments made by section 9104 of 
the Medicare and Medicaid Budget Reconciliation Amend-
ments of 1985.". 
(3) CONFORMING AMENDMENT.—Clauses (i)(I) and (ii)(I) of sec-
tion 1886(d)(3)(D) of such Act are each amended by inserting "or 
reduced" after "(B), and adjusted", 
(c) EFFECTIVE DATE.—(1) Except as provided in paragraph (2), the 
amendments made by this section shall apply to discharges occur-
ring on or after May 1,1986. 
(2) The amendments made by this section shall not first be applied 
to discharges occurring as of a date unless, for discharges occurring 
on that date, the amendments made by section 9105 are also being 
applied. 
SEC. 9105. PAYMENTS FOR HOSPITALS WHICH SERVE A DISPROPORTION-
ATE SHARE OF LOW-INCOME PATIENTS. 
(a) PAYMENT FOR HOSPITALS WHICH SERVE A DISPROPORTIONATE 
SHARE OF LOW-INCOME PATIENTS.—Section 1886(d)(5) of the Social 
Security Act (42 U.S.C. 1395ww(d)(5)) is amended by adding at the 
end the following new subparagraph: 
"(F)(i) For discharges occurring on or after May 1, 1986, and before 
October 1, 1988, the Secretary shall provide, in accordance with this 
subparagraph, for an additional payment amount for each subsec-
tion (d) hospital which— 
"(I) serves a significantly disproportionate number of low-
income patients (as defined in clause (v)), or 
"(II) is located in an urban area, has 100 or more beds, and 
can demonstrate that its net inpatient care revenues (excluding 
any of such revenues attributable to this title or State plans 
approved under title XIX), during the cost reporting period in 
which the discharges occur, for indigent care from State and 
local government sources exceed 30 percent of its total of such 
revenues during the period. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 159 
"(ii) The amount of such payment for each discharge shall be 
determined by multiplying (I) the sum of the amount determined 
under paragraph (IXAXiiXII) (or, if applicable, the amount deter-
mined under paragraph (IXAXiii)) and the amount paid to the 
hospital under subparagraph (A) for that discharge, by (II) the 
disproportionate share adjustment percentage established under 
clause (iii) or (iv) for the cost reporting period in which the discharge 
occurs. 
"(iii) The disproportionate share adjustment percentage for a cost 
reporting period for a hospital described in clause (iXII) is equal to 15 
percent. 
"(iv) The disproportionate share adjustment percentage for a cost Rural areas. 
reporting period for a hospital that is not described in clause (iXII) 
and that— 
"(I) is located in an urban area and has 100 or more beds, is 
equal to the lesser of 15 percent, or the percent determined in 
accordance with the following formula: (P—15X.5) + 2.5, where 
'P' is the hospital's disproportionate patient percentage (as 
defined in clause (vi)); 
"(II) is located in an urban area and has less than 100 beds, is 
equal to 5 percent; or 
"(III) is located in a rural area, is equal to 4 percent. 
"(v) In this subparagraph, a hospital 'serves a significantly dis- Rural areas. 
proportionate number of low income patients' for a cost reporting 
period if the hospital has a disproportionate patient percentage (as 
defined in clause (vi)) for that period which equals, or exceeds— 
"(I) 15 percent, if the hospital is located in an urban area and 
has 100 or more beds, 
"(II) 40 percent, if the hospital is located in an urban area and 
has less than 100 beds, or 
"(III) 45 percent, if the hospital is located in a rural area. 
"(vi) In this subparagraph, the term 'disproportionate patient 
percentage' means, with respect to a cost reporting period of a 
hospital, the sum o
f
— 
"(I) the fraction (expressed as a percentage), the numerator of 
which is the number of such hospital's patient days for such 
period which were made up of patients who (for such days) were 
entitled to benefits under part A of this title and were entitled 
to supplementary security income benefits (excluding any State 
supplementation) under title XVI of this Act, and the denomi-
nator of which is the number of such hospital's patient days for 
such fiscal year which were made up of patients who (for such 
days) were entitled to benefits under part A of this title, and 
(II) the fraction (expressed as a percentage), the numerator 
of which is the number of the hospital's patient days for such 
period which consist of patients who (for such days) were eli-
gible for medical assistance under a State plan approved under 
title XIX, but who were not entitled to benefits under part A of 
this title, and the denominator of which is the total number of 
the hospital's patient days for such period.". 
Ot)) RESTANDARDIZING D R G PAYMENT AMOUNTS TO REFLECT DIS- 42 use I395ww. 
PROPORTIONATE SHARE PAYMENTS.—Section 1886(dX2XC) of such Act 
is amended— 
(1) by striking out "and" at the end of clause (ii), 
(2) by striking out the period at the end of clause (iii) and 
inserting in lieu thereof ", and", and 
(3) by adding at the end the following new clause: 
100 STAT. 160 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1395WW. 
42 u s e 1395WW 
note. 
42 u s e 1395WW 
note. 
"(iv) for discharges occurring on or after October 1, 1986, 
and before October 1, 1988, excluding an estimate of the 
additional payments to certain hospitals to be made under 
paragraph (5)(F).". 
(c) CONFORMING AMENDMENT.—Section 1886(d)(5)(C)(i) of such Act 
is amended by striking out ", and of public or other hospitals that 
serve a significantly disproportionate number of patients who have 
low income or are entitled to benefits under part A of this title". 
(d) CBO REPORT.—The Congressional Budget Office shall study, 
and report to Congress not later than January 1, 1987, on the impact 
of the implementation of this section on hospitals, including the 
appropriateness of the factors used in determining which hospitals 
are eligible for additional payments under section 1886(d)(5)(F) of 
the Social Security Act and the amount of the additional payments 
made to those hospitals. 
(e) EFFECTIVE DATE.—The amendments made by this section shall 
apply to discharges occurring on or after May 1, 1986. 
SEC. 9106. TREATMENT OF CERTAIN RURAL OSTEOPATHIC HOSPITALS AS 
RURAL REFERRAL CENTERS. 
(a) IN GENERAL.—Section 1886(d)(5)(C)(i) of the Social Security Act 
(42 U.S.C. 1395ww(d)(5)(C)(i)) is amended by inserting before the 
period at the end of the second sentence the following: "and which 
shall not require a rural osteopathic hospital to have more than 
3,000 discharges in a year in order to be classified as a rural referral 
center". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to cost reporting periods beginning on or after Janu-
ary 1, 1986. 
SEC. 9107. RETURN ON EQUITY CAPITAL FOR INPATIENT HOSPITAL SERV-
ICES AND OTHER SERVICES. 
(a) INPATIENT HOSPITAL SERVICES.— 
(1) PHASE-DOWN IN PAYMENT FOR RETURN ON EQUITY CAPITAL.— 
Section 1886(g)(2) of the Social Security Act (42 U.S.C. 
1395ww(g)(2)) is amended— 
(A) by inserting "the applicable percentage (described in 
subparagraph (B)) o f before "the average of the rates of 
interest" 
(B) by inserting "(A)" after "(2)", and 
(C) by adding at the end the following new subparagraph: 
"(B) In this paragraph, the 'applicable percentage' is— 
• 
"(i) 75 percent, for cost reporting periods beginning 
during fiscal year 1987, 
"(ii) 50 percent, for cost reporting periods beginning 
during fiscal year 1988, 
"(iii) 25 percent, for cost reporting periods beginning 
^ 
during fiscal year 1989, and 
M:- 1' 
«
«
^
^
^
) Q percent, for cost reporting periods beginning on or 
after October 1, 1989.". 
(2) EXCLUSION FROM PROSPECTIVE PAYMENT.—The second sen-
tence of section 1886(a)(4) of such Act is amended— 
(A) by inserting "a return on equity capital," after "anes-
I . 
thetist,", and 
"" 
(B) by inserting "other" before "capital-related costs". 
O
t
)
) OTHER SERVICES.— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 161 
(1) LIMITATION ON RATE.—Section 1861(v)(l) of such Act (42 
U.S.C. 1395x(v)(l)) is amended by adding at the end the follow-
ing new subparagraph: 
"(P) If such regulations provide for the payment for a return on 
equity capital (other than with respect to costs of inpatient hospital 
services), the rate of return to be recognized, for determining the 
reasonable cost of services furnished in a cost reporting period, shall 
be equal to the average of the rates of interest, for each of the 
months any part of which is included in the period, on obligations 
issued for purchase by the Federal Hospital Insurance Trust Fund.". 
(2) CONFORMING AMENDMENTS.—Section 1861(v)(l)(B) of such 
Act is amended— 
(A) by striking out "any fiscal period" and "such fiscal 
period" and inserting in lieu thereof "any cost reporting 
.,, 
period" and "the period", respectively, and 
(B) by striking out "not exceed one and one-half times" in 
the second sentence and inserting in lieu thereof "be equal 
to". 
(c) EFFECTIVE DATES.—(1) The amendments made by subsection (a) 
shall apply to hospital cost reporting periods beginning on or after 
October 1,1986. 
(2) The amendments made by subsection (b) shall apply to cost 
reporting periods beginning on or after October 1,1985. 
SEC. 9108. CONTINUATION OF MEDICARE REIMBURSEMENT WAIVERS FOR 
CERTAIN HOSPITALS PARTICIPATING IN REGIONAL HOS-
PITAL REIMBURSEMENT DEMONSTRATIONS. 
(a) CONTINUATION OF WAIVERS.—A hospital reimbursement con-
trol system which, on January 1, 1985, was carrying out a dem-
onstration under a contract which had been approved by the 
Secretary of Health and Human Services pursuant to section 222(a) 
of the Social Security Amendments of 1972, or under section 402 of 
the Social Security Amendments of 1967 (as amended by section 
222(b) of the Social Security Amendments of 1972), shall be deemed 
to meet the requirements of section 1886(c)(1)(A) of the Social Secu-
rity Act if such system applies— 
(1) to substantially all non-Federal acute care hospitals (as 
defined by the Secretary) in the geographic area served by such 
system on January 1,1985, and 
(2) to the review of at least 75 percent of— 
(A) all revenues or expenses in such geographic area for 
inpatient hospital services, and 
(B) revenues or expenses in such geographic area for 
inpatient hospital services provided under the State's plan 
approved under title XIX. 
(b) APPROVAL.—In the case of a hospital cost control system 
described in subsection (a), the requirements of section 1886(c) of the 
Social Security Act which apply to States shall instead apply to such 
system and, for such purposes, any reference to a State is deemed a 
reference to such system. 
(c) EFFECTIVE DATE.—This section shall become effective on the 
date of the enactment of this Act. 
SEC. 9109. FOUR-YEAR TEST FOR STATE WAIVERS FOR CERTAIN STATES. 
(a) IN GENERAL.—Section 1886(c) of the Social Security Act (42 
U.S.C 1395ww(c)) is amended by adding at the end the following new 
paragraph: 
42 u s e 1395WW 
note. 
42 u s e 1395x 
note. 
42 u s e 1395WW 
note. 
42 u s e 1395b-l 
note. 
Infra. 
100 STAT. 162 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1395WW 
note. 
42 u s e 1395x 
note. 
26 u s e 1 note. 
42 u s e 1395WW 
note. 
"(7) In the case of a State which made a request under paragraph 
(5) before December 31, 1984, for the approval of a State hospital 
reimbursement control system and which request was approved— 
"(A) in applying paragraphs (1)(C) and (6), a reference to a '36-
month period' is deemed a reference to a '48-month period', and 
"(B) in order to allow the State the opportunity to provide the 
assurances described in paragraph (1)(C) for a 48-month period, 
the Secretary may not discontinue payments under the system, 
under the authority of paragraph (3)(A) because the Secretary 
has reason to believe that such assurances are not being (or will 
not be) met, before July 1, 1986.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall take effect on the date of the enactment of this Act. 
SEC. 9110. ASSET VALUATION FOR DONATIONS OF STATE PROPERTY TO 
NONPROFIT CORPORATIONS. 
(a) GENERAL RULE.—Section 1861(v)(l)(0) of the Social Security 
Act (42 U.S.C. 1395x(v)(l)(0)) is amended— 
(1) by inserting ", except as provided in clause (iv)," in clause 
(i) after "such regulations shall provide", and 
(2) by adding at the end the following new clause: 
"(iv) In the case of the transfer of a hospital from ownership by a 
State to ownership by a nonprofit corporation without monetary 
consideration, the basis for capital allowances to the new owner 
shall be the book value of the hospital to the State at the time of the 
transfer.". 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall be applied as though they were originally included in the 
Deficit Reduction Act of 1984. 
SEC. 9111. PAYMENTS TO SOLE COMMUNITY HOSPITALS. 
(a) ADJUSTMENT TO PAYMENT AMOUNT.—Section 1886(d)(5)(C)(ii) of 
the Social Security Act (42 U.S.C. 1395ww(d)(5)(C)(ii)) is amended by 
inserting after the second sentence thereof the following: "In the 
case of a sole community hospital which experiences, in any cost 
reporting period after the cost reporting period which was used as 
the base for determining the target amount for payments to such 
hospital under paragraph (l)(A)(i)(I), a significant increase in operat-
ing costs attributable to the addition of new inpatient facilities or 
services at such hospital (including the opening of a special care 
unit), the Secretary shall provide for such adjustment to the pay-
ment amounts under this subsection for such cost reporting period 
and subsequent cost reporting periods as may be necessary to 
reasonably compensate such hospital for such increased costs.". 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply to payments for cost reporting periods beginning on or after 
October 1, 1983, and before October 1, 1989. 
(c) STUDY.—The Secretary of Health and Human Services shall 
conduct a study of the effects of the amendment made by subsection 
(a). The Secretary shall report the results of such study, including 
recommendations for a permanent mechanism to take into account 
needed expansions of services by sole community hospitals and the 
hospital-specific medicare payment rates thereof, to the Congress 
prior to January 1, 1987. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 163 
42 u s e 1495y 
note. 
42 u s e 1395c. 
42 u s e 1395J. 
42 u s e 1395y 
note. 
SEC. 9112. INDIRECT TEACHING ADJUSTMENT FOR CERTAIN CLINICS. 
(a) IN GENERAL.—Section 602(k) of the Social Security Amend-
ments of 1983 (97 Stat. 165) is amended by inserting "(1)" after "(k)" 
and by adding at the end the following new paragraphs: 
"(2) In the case of a hospital which is receiving payments pursuant 
to a waiver under paragraph (1), payment of the adjustment for 
indirect costs of approved educational activities shall be made as if 
the hospital were receiving under part A of title XVIII of the Social 
Security Act all the payments which are made under part B of such 
title solely by reason of such waiver. 
"(3) Any waiver granted under paragraph (1) shall provide that, 
with respect to those items and services billed under part B of title 
XVIII of the Social Security Act solely by reason of such waiver— 
"(A) payment under such part shall be equal to 100 percent of 
the reasonable charge or other applicable payment base for the 
items and services; and 
"(B) the entity furnishing the items and services must agree 
to accept the amount paid pursuant to subparagraph (A) as the 
full charge for the items and services.". 
(b) EFFECTIVE DATES.—(1) Section 602(k)(2) of the Social Security 
Amendments of 1983 (as added by subsection (a)) shall apply to cost 
reporting periods beginning on or after January 1, 1986. 
(2) Section 602(k)(3) of the Social Security Amendments of 1983 (as 
added by subsection (a)) shall apply to items and services furnished 
after the end of the 10-day period beginning on the date of the 
enactment of this Act. 
SEC. 9113. REPORT ON IMPACT OF OUTLIER AND TRANSFER POLICY ON 
RURAL HOSPITALS. 
-^ S> 
(a) REVIEW.—The Secretary of Health and Human Services shall 
review the impact of policies respecting outliers and patient trans-
fers on payments under section 1886(d) of the Social Security Act to 42 use I395ww. 
rural hospitals (particularly on rural hospitals with less than 100 
beds). 
(b) REPORT.—The Secretary shall report to Congress on the find-
ings of the review not later than January 1, 1987, and shall include 
in the report recommendations on changes in policies respecting 
outliers and patient transfers to the extent they adversely affect 
rural hospitals. 
SEC. 9114. INFORMATION ON IMPACT OF PPS PAYMENTS ON HOSPITALS. 
(a) DISCLOSURE OF INFORMATION.—The Secretary of Health and 
Human Services shall make available to the Prospective Payment 
Assessment Commission, the Congressional Budget Office, the 
Comptroller General, and the Congressional Research Service the 
most current information on the payments being made under sec-
tion 1886 of the Social Security Act to individual hospitals. Such 
information shall be made available in a manner that permits 
examination of the impact of such section on hospitals. 
(h) CONFIDENTIALITY.—Information disclosed under subsection (a) 
shall be treated as confidential and shall not be subject to further 
disclosure in a manner that permits the identification of individual 
hospitals. 
SEC. 9115. SPECIAL RULES FOR IMPLEMENTATION OF SUBPART. 
(a) WAIVER OF PAPERWORK REDUCTION.—Chapter 35 of title 44, 42 use I395ww 
United States Code, shall not apply to information required for "°*f 
• ^ „^„, 
44 u s e 3501 et 
42 u s e 1395WW 
note. 
100 STAT. 164 
PUBLIC LAW 99-272—APR. 7, 1986 
purposes of carrying out this subpart and implementing the amend-
ments made by this subpart. 
(b) USE OF INTERIM FINAL REGULATIONS.—The Secretary of Health 
and Human Services shall issue such regulations (on an interim or 
other basis) as may be necessary to implement this subpart and the 
amendments made by this subpart. 
Subpart B—Miscellaneous Provisions 
SEC. 9121. RESPONSIBILITIES OF MEDICARE HOSPITALS IN EMERGENCY 
CASES. 
(a) 
REQUIREMENT OF MEDICARE HOSPITAL PROVIDER AGREE-
MENTS.—Section 1866(a)(1) of the Social Security Act (42 U.S.C. 
1395cc(a)(l)) is amended— 
(1) by striking out "and" at the end of subparagraph (G), 
(2) by striking out the period at the end of subparagraph (H) 
and inserting in lieu thereof ", and", and 
(3) by inserting after subparagraph (H) the following new 
subparagraph: 
"(I) in the case of a hospital, to complv with the requirements 
Infra. 
of section 1867 to the extent applicable.'. 
(b) REQUIREMENTS.—Title XVIII of such Act is amended by insert-
ing after section 1866 the following new section: 
"EXAMINATION AND TREATMENT FOR EMERGENCY MEDICAL 
CONDITIONS AND WOMEN IN ACTIVE LABOR 
42 use I395dd. 
"SEC. 1867. (a) MEDICAL SCREENING REQUIREMENT.—In the case of 
a hospital that has a hospital emergency department, if any individ-
ual (whether or not eligible for benefits under this title) comes to the 
emergency department and a request is made on the individual's 
behalf for examination or treatment for a medical condition, the 
hospital must provide for an appropriate medical screening exam-
ination within the capability of the hospital's emergency depart-
ment to determine whether or not an emergency medical condition 
(within the meaning of subsection (e)(1)) exists or to determine if the 
individual is in active labor (within the meaning of subsection (e)(2)). 
"(b) NECESSARY STABILIZING TREATMENT FOR EMERGENCY MEDICAL 
CONDITIONS AND ACTIVE LABOR.— 
"(1) IN GENERAL.—If any individual (whether or not eligible 
for benefits under this title) comes to a hospital and the hospital 
determines that the individual has an emergency medical condi-
tion or is in active labor, the hospital must provide either— 
"(A) within the staff and facilities available at the hos-
pital, for such further medical examination and such treat-
ment as may be required to stabilize the medical condition 
or to provide for treatment of the labor, or 
"(B) for transfer of the individual to another medical 
facility in accordance with subsection (c). 
"(2) 
REFUSAL TO CONSENT TO TREATMENT.—A hospital 
is 
deemed to meet the requirement of paragraph (1)(A) with re-
spect to an individual if the hospital offers the individual the 
further medical examination and treatment described in that 
paragraph but the individual (or a legally responsible person 
,^ 
acting on the individual's behalf) refuses to consent to the 
examination or treatment. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 165 
"(3) REFUSAL TO CONSENT TO TRANSFER.—A hospital is deemed 
to meet the requirement of paragraph (1) with respect to an 
individual if the hospital offers to transfer the individual to 
another medical facility in accordance with subsection (c) but 
the individual (or a legally responsible person acting on the 
individual's behalf) refuses to consent to the transfer. 
'(c) RESTRICTING TRANSFERS UNTIL PATIENT STABILIZED.— 
"(1) RULE.—If a patient at a hospital has an emergency 
medical condition which has not been stabilized (within the 
meaning of subsection (e)(4)(B)) or is in active labor, the hospital 
may not transfer the patient unless— 
"(A)(i) the patient (or a legally responsible person acting 
on the patient's behalf) requests that the transfer be ef-
fected, or 
* 
"(ii) a physician (within the meaning of section 1861(r)(l)), 42 USC I395x. 
or other qualified medical personnel when a physician is 
not readily available in the emergency department, has 
signed a certification that, based upon the reasonable risks 
and benefits to the patient, and based upon the information 
available at the time, the medical benefits reasonably ex-
pected from the provision of appropriate medical treatment 
at another medical facility outweigh the increased risks to 
the individual's medical condition from effecting the trans-
fer; and 
"(B) the transfer is an appropriate transfer (within the 
meaning of paragraph (2)) to that facility. 
"(2) APPROPRIATE TRANSFER.—An appropriate transfer to a 
medical facility is a transfer— 
"(A) in which the receiving facility— 
"(i) has available space and qualified personnel for 
the treatment of the patient, and 
"(ii) has agreed to accept transfer of the patient and 
to provide appropriate medical treatment; 
"(B) in which the transferring hospital provides the 
receiving facility with appropriate medical records (or 
copies thereof) of the examination and treatment effected at 
the transferring hospital; 
"(C) in which the transfer is effected through qualified 
personnel and transportation equipment, as required 
including the use of necessary and medically appropriate 
life support measures during the transfer; and 
"(D) which meets such other requirements as the Sec-
retary may find necessary in the interest of the health and 
safety of patients transferred. 
'(d) ENFORCEMENT.— 
"(1) As REQUIREMENT OF MEDICARE PROVIDER AGREEMENT.—If a 
hospital knowingly and willfully, or negligently, fails to meet 
the requirements of this section, such hospital is subject to— 
"(A) termination of its provider agreement under this 
title in accordance with section 1866(b), or 
42 USC I395cc. 
"(B) at the option of the Secretary, suspension of such 
agreement for such period of time as the Secretary deter-
mines to be appropriate, upon reasonable notice to the 
hospital and to the public. 
"(2) CIVIL MONETARY PENALTIES.—In addition to the other 
grounds for imposition of a civil money penalty under section 
1128A(a), a participating hospital that knowingly violates a 42 USC 
1320a-7a. 
100 STAT. 166 
PUBLIC LAW 99-272—APR. 7, 1986 
requirement of this section and the responsible physician in the 
hospital with respect to such a violation are each subject, under 
that section, to a civil money penalty of not more than $25,000 
for each such violation. As used in the previous sentence, the 
term 'responsible physician' means, with respect to a hospital's 
violation of a requirement of this section, a physician who— 
"(A) is employed by, or under contract with, the partici-
pating hospital, and 
"(B) acting as such an employee or under such a contract, 
has professional responsibility for the provision of examina-
tions or treatments for the individual, or transfers of the 
individual, with respect to which the violation occurred. 
"(3) CIVIL ENFORCEMENT.— 
xv. 
J 
i 
"(A) PERSONAL HARM.—Any individual who suffers per-
sonal harm as a direct result of a participating hospital's 
violation of a requirement of this section may, in a civil 
action against the participating hospital, obtain those dam-
ages available for personal injury under the law of the 
State in which the hospital is located, and such equitable 
relief as is appropriate. 
State and local 
"(B) FINANCIAL LOSS TO OTHER MEDICAL FACILITY.—Any 
governments. 
medical facility that suffers a financial loss as a direct 
result of a participating hospital's violation of a require-
"•r ' 
ment of this section may, in a civil action against the 
participating hospital, obtain those damages available for 
'•>•' 
financial loss, under the law of the State in which the 
hospital is located, and such equitable relief as is appro-
priate. 
^-* 
"(C) LIMITATIONS ON ACTIONS.—No action may be brought 
under this paragraph more than two years after the date of 
the violation with respect to which the action is brought. 
"(e) DEFINITIONS.—In this section: 
"(1) The term 'emergency medical condition' means a medical 
condition manifesting itself by acute symptoms of sufficient 
severity (including severe pain) such that the absence of imme-
diate medical attention could reasonably be expected to result 
in— 
"(A) placing the patient's health in serious jeopardy, 
"(B) serious impairment to bodily functions, or 
"(C) serious dysfunction of any bodily organ or part. 
"(2) The term 'active labor' means labor at a time at which— 
"(A) delivery is imminent, 
"(B) there is inadequate time to effect safe transfer to 
another hospital prior to delivery, or 
"(C) a transfer may pose a threat of the health and safety 
of the patient or the unborn child. 
"(3) The term 'participating hospital' means hospital that has 
42 use 1
3
9
5
C
C
. 
entered into a provider agreement under section 1866 and has, 
under the agreement, obligated itself to comply with the 
requirements of this section. 
"(4)(A) The term 'to stabilize' means, with respect to an 
emergency medical condition, to provide such medical treat-
ment of the condition as may be necessary to assure, within 
reasonable medical probability, that no material deterioration 
of the condition is likely to result from the transfer of the 
individual from a facility. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 167 
State and local 
governments. 
42 u s e 1395dd 
note. 
Ante, p. 164. 
Ante, p. 164. 
"(B) The term 'stabilized' means, with respect to an emer-
gency medical condition, that no material deterioration of the 
condition is likely, within reasonable medical probability, to 
result from the transfer of the individual from a facility. 
"(5) The term 'transfer' means the movement (including the 
discharge) of a patient outside a hospital's facilities at the 
direction of any person employed by (or affiliated or associated, 
directly or indirectly, with) the hospital, but does not include 
such a movement of a patient who (A) has been declared dead, 
or (B) leaves the facility without the permission of any such 
person. 
"(f) PREEMPTION.—The provisions of this section do not preempt 
any State or local law requirement, except to the extent that the 
requirement directly conflicts with a requirement of this section.". 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
take effect on the first day of the first month that begins at least 90 
days after the date of the enactment of this Act. 
(d) REPORT.—The Secretary of Health and Human Services shall, 
not later than 6 months after the effective date described in subsec-
tion (c), report to Congress on the methods to be used for monitoring 
and enforcing compliance with section 1867 of the Social Security 
Act. 
SEC. 9122. REQUIREMENT FOR MEDICARE HOSPITALS TO PARTICIPATE IN 
CHAMPUS AND CHAMPVA PROGRAMS. 
(a) IN GENERAL.—Section 1866(a)(1) of the Social Security Act (42 
U.S.C. 1395cc(a)(l)) is amended— 
(1) by striking out "and" at the end of subparagraph (H), 
(2) by striking out the period at the end of subparagraph (I) 
and inserting in lieu thereof ", and", and 
(3) by inserting after subparagraph (I) the following new 
subparagraph: 
"(J) in the case of hospitals which provide inpatient hospital 
services for which payment may be made under this title, to be 
a participating provider of medical care under any health plan 
contracted for under section 1079 or 1086 of title 10, or under 
section 613 of title 38, United States Code, in accordance with 
admission practices, payment methodology, and amounts as 
prescribed under joint regulations issued by the Secretary and 
by the Secretaries of Defense and Transportation, in im-
plementation of sections 1079 and 1086 of title 10, United States 
Code.". 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply to agreements entered into or renewed on or after the 
date of the enactment of this Act, but shall apply only to inpatient 
hospital services provided pursuant to admissions to hospitals occur-
ring on or after January 1,1987. 
(c) REFERENCE TO STUDY REQUIRED.—For a study of the use by 
CHAMPUS of the medicare prospective payment system, see section 
634 of the Department of Defense Authorization Act, 1985 (Public 
Law 98-525), the deadline for which is extended under section 2002 
98 Stat. 2544 
of this Act. 
(d) REPORT.—The Secretary of Health and Human Services shall 
report to Congress periodically on the number of hospitals that have 
terminated or failed to renew an agreement under section 1866 of 
the Social Security Act as a result of the additional conditions 
imposed under the amendments made by subsection (a). 
42 u s e 1395CC 
note. 
42 u s e 1395CC 
note. 
100 STAT. 168 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1395c 
note. 
42 u s e 1395r. 
42 u s e 1395i-2 
note. 
42 u s e 1395e 
note. 
SEC. 9123. EXTENSION AND PAYMENT FOR HOSPICE CAKE. 
(a) ELIMINATION OF SUNSET.—Section 122(h)(1) of the Tax Equity 
and Fiscal Responsibility Act of 1982 (P.L. 97-248, 96 Stat. 362), 
relating to the end of the effective date for hospice care, is 
amended— 
(1) in subparagraph (A)— 
(A) by striking out "(h)(1)(A) Subject to subparagraph (B), 
the" and inserting in lieu thereof "(h)(1) The", and 
(B) by striking out ", and before October 1, 1986", and 
(2) by striking out subparagraph (B). 
(b) INCREASE IN PAYMENT OF DAILY RATES FOR HOSPICE CARE.—(1) 
Subparagraph (B) of section 1814(i)(l) of the Social Security Act (42 
U.S.C. 1395f(i)(l)) is amended to read as follows: 
"(B) Notwithstanding subparagraph (A), for hospice care fur-
nished on or after April 1, 1986, the daily rate of payment per day 
for routine home care shall be $63.17 and the daily rate of payment 
for other services included in hospice care shall be the daily rate of 
payment recognized under subparagraph (A) as of July 1, 1985, 
increased by $10.". 
(2) Subparagraph (C) of such section is amended by striking out 
"1985" and inserting in lieu thereof "1986". 
SEC. 9124. LIMITING THE PENALTY FOR LATE ENROLLMENT IN PART A. 
(a) LIMITING PENALTY TO 10 PERCENT AND TWICE THE PERIOD 
DURING WHICH NOT ENROLLED.—Section 1818(c) of the Social Secu-
rity Act (42 U.S.C. 1395i-2(c)) is amended— 
(1) by striking out "and" at the end of paragraph (5), 
(2) by striking out the period at the end of paragraph (6) and 
inserting in lieu thereof "; and", and 
(3) by adding at the end the following new paragraph: 
"(7) any percent increase effected under section 1839(b) in an 
individual's monthly premium may not exceed 10 percent and 
shall only apply to premiums paid during a period equal to 
twice the number of months in the full 12-month periods de-
scribed in that section.". 
(b) EFFECTIVE DATE.—(1) The amendment made by subsection 
(a)(3) shall apply to premiums paid for months beginning with July 
1986. 
(2) In applying that amendment, months (before, during, or after 
April 1986) in which an individual was required to pay a premium 
increased under the section that was so amended shall be taken into 
account in determining the month in which the premium will no 
longer be subject to an increase under that section as so amended. 
SEC. 9125. PROMULGATION OF INPATIENT HOSPITAL DEDUCTIBLE. 
(a) CHANGE IN DEADLINE.—Section 1813(b)(2) of the Social Security 
Act (42 U.S.C. 1395e(b)(2)) is amended by striking out "October 1" 
and inserting in lieu thereof "September 15". 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply to calendar years after 1985. 
SEC. 9126. ACCESS TO SKILLED NURSING FACILITIES. 
(a) OPTIONAL PROSPECTIVE RATES FOR CERTAIN SKILLED NURSING 
FACILITIES.—Section 1888 of the Social Security Act (42 U.S.C. 
1395yy) is amended by adding at the end the following new 
subsection: 
; 
. 
. _, 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 169 
•tU 1 
"(d)(1) Any skilled nursing facility may choose to be paid under 
this subsection on the basis of a prospective payment for all routine 
service costs (and capital-related costs) of extended care services 
provided in a fiscal year if such facility had, in the preceding fiscal 
year, fewer than 1,500 patient days with respect to which payments 
were made under this title. Such prospective payment shall be in 
lieu of payments which would otherwise be made for routine service 
costs pursuant to section 1861(v) and subsections (a) through (c) of 42 USC I395x. 
this section and capital-related costs pursuant to section 1861(v). 
This subsection shall not apply to a facility for any fiscal year 
immediately following a fiscal year in which such facility had 1,500 
or more patient days with respect to which payments were made 
under this title, without regard to whether payments were made 
under this subsection during such preceding fiscal year. 
"(2)(A) The amount of the payment under this section shall be 
determined on a per diem basis. 
"(B) Subject to the limitations of subparagraph (C), for skilled 
Urban areas, 
nursing facilities located— 
Rural areas, 
"(i) in an urban area, the amount shall be equal to 105 
percent of the mean of the per diem reasonable routine service 
and capital-related costs of extended care services for skilled 
nursing facilities in urban areas within the same region, deter-
mined without regard to the limitations of subsection (a) and 
adjusted for different area wage levels, and 
"(ii) in a rural area the amount shall be equal to 105 percent 
of the mean of the per diem reasonable routine service and 
capital-related costs of extended care services for skilled nursing 
facilities in rural areas within the same region, determined 
without regard to the limitations of subsection (a) and adjusted 
for different area wage levels. 
"(C) The per diem amounts determined under subparagraph (B) 
shall not exceed the limit on routine service costs determined under 
subsection (a) with respect to the facility, adjusted to take into 
account average capital-related costs with respect to the type and 
location of the facility. 
"(3) For purposes of this subsection, urban and rural areas shall be 
determined in the same manner as for purposes of subsection (a), 
and the term 'region' shall have the same meaning as under section 
1886(d)(2)(D). 
"(4) The Secretary shall establish the prospective payment 
amounts for each fiscal year at least 90 days prior to the beginning 
of such fiscal year, on the basis of the most recent data available for 
a 12-month period. A skilled nursing facility must notify the Sec-
retary of its intention to be paid pursuant to this subsection for a 
fiscal year within 60 days after the Secretary establishes the final 
prospective payment amounts for such fiscal year. 
"(5) The Secretary shall provide for a simplified cost report to be Reports, 
filed by facilities being paid pursuant to this subsection, which shall 
require only the cost information necessary for determining prospec-
tive payment amounts pursuant to paragraph (2) and reasonable 
costs of ancillary services. 
"(6) In lieu of payment on a cost basis for ancillary services 
provided by a facility which is being paid pursuant to this subsec-
tion, the Secretary may pay for such ancillary services on a reason-
able charge basis if the Secretary determines that such payment 
basis will provide an equitable level of reimbursement and will ease 
the reporting burden of the facility.". 
100 STAT. 170 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 1395yy. 
42 use 1395y 
note. 
42 use 1395y. 
42 use 1395yy 
note. 
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(b) PUBLICATION OF DATA RELATING TO ADJUSTMENTS TO S N F 
LIMITS.—Section 1888(c) of such Act is amended by adding at the end 
thereof the following: "The Secretary shall publish the data and 
criteria to be used for purposes of this subsection on an annual 
basis.". 
(c) REINSTATEMENT OF WAIVER OF LIABILITY PRESUMPTION.—The 
Secretary of Health and Human Services shall, for purposes of 
determining whether payments to a skilled nursing facility should 
be denied pursuant to section 1862(a)(1)(A) of the Social Security 
Act, apply the same presumption of compliance (5 percent) as in 
effect under regulations as of July 1, 1985. Such presumption shall 
apply for the 30-month period beginning with the first month 
beginning after the date of the enactment of this Act. 
(d) EFFECTIVE DATES.—(1) The amendment made by subsection (a) 
shall apply to fiscal years beginning on or after October 1, 1986. 
(2) The amendment made by subsection (b) shall become effective 
on the date of the enactment of this Act. 
SEC. 9127. ADDITIONAL MEMBERS OF PROSPECTIVE PAYMENT ASSESS-
MENT COMMISSION. 
(a) EXPANSION OF MEMBERSHIP.—Section 1886(e)(6)(A) of the Social 
Security Act (42 U.S.C. 1395ww(e)(6)(A)) is amended by striking out 
"15 individuals" and inserting in lieu thereof "17 individuals". 
(b) APPOINTMENTS.—The Director of the Congressional Office of 
Technology Assessment shall appoint the two additional members of 
the Prospective Payment Assessment Commission, as required by 
the amendment made by subsection (a), no later than 60 days after 
the date of the enactment of this Act, for terms of three years. 
SEC. 9128. SENSE OF THE SENATE WITH RESPECT TO INPATIENT HOS-
PITAL DEDUCTIBLE. 
In view of the $92 Medicare hospital deductible increase that went 
into effect January 1, 1986, it is the sense of the Senate that the 
Committee on Finance should report legislation which will reform 
calculation of the annual increase in such deductible so that it is 
more consistent with annual increases in Medicare payments to 
hospitals. 
SEC. 9129. MEDICARE COVERAGE OF STATE AND LOCAL EMPLOYEES. 
For provision providing for medicare coverage of certain State and 
local employees, see section 13205 of this Act. 
PART 2—PROVISIONS RELATING TO PARTS A 
AND B OF MEDICARE 
Subpart A—Payment-Related Provisions 
SEC. 9201. EXTENSION OF WORKING AGED PROVISION. 
(a) EXTENSION OF SECONDARY PAYOR STATUS BEYOND AGE 69.— 
Section 
1862(b)(3)(A) of the Social Security Act (42 U.S.C. 
1395y(b)(3)(A)) is amended— 
(1) in clause (i), by striking out "who is under 70 years of age 
during any part of such month" and ", if the spouse is under 70 
years of age during any part of such month", and 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 171 
(2) in clause (iii), by striking out "and ending with the month 
before the month in which such individual attains the age of 
70". 
(b) EXTENSION OF AGE DISCRIMINATION PROVISIONS.— 
(1) Section 4(g)(1) of the Age Discrimination in Employment 
Act of 1967 (29 U.S.C. 623(gXl)) is amended by striking out 
"through 69" and inserting in lieu thereof "or older" each place 
it appears. 
(2) Section 12(a) of such Act (29 U.S.C. 631(a)) is amended by 
inserting "(except the provisions of section 4(g))" after "Act'. 
(3) Section 4 of such Act (29 U.S.C. 623) is amended by 
redesignating the second subsection (g), added by section 802 of 
the Older Americans Act Amendments of 1984, as subsection 
98 Stat. 1792. 
(h). 
(c) CONFORMING AMENDMENTS.— 
(1) SPECIAL ENROLLMENT PERIOD.—Paragraph (3) of section 
1837(i) of the Social Security Act (42 U.S.C. 1395p(i)(3)) is 
amended to read as follows: 
"(3) The special enrollment period referred to in paragraphs (1) 
and (2) is the period beginning with the first day of the first month 
in which the individual is no longer enrolled in a group health plan 
described in section 1862(b)(3)(A)(iv) by reason of current employ- 42 USC 1395y. 
ment and ending seven months later.". 
(2) EFFECTIVE DATE OF ENROLLMENT.—Subsection (e) of section 
1838 of the Social Security Act (42 U.S.C. 1395q) is amended to 
read as follows: 
"(e) Notwithstanding subsection (a), in the case of an individual 
who enrolls during a special enrollment period pursuant to section 
1837(i)(3)— 
42 use 1395p. 
"(1) in the first month of the special enrollment period, the 
coverage period shall begin on the first day of that month, or 
"(2) in a month after the first month of the special enrollment 
period, the coverage period shall begin on the first day of the 
month following the month in which the individual so enrolls." 
(d) EFFECTIVE DATES.—(1) The amendments made by subsection (a) 
42 USC I395y 
shall apply with respect to items and services furnished on or after 
note. 
May 1,1986. 
(2) The amendments made by subsections (b) and (c) shall become 
42 USC I395p 
effective on May 1,1986. 
note. 
SEC. 9202. PAYMENTS TO HOSPITALS FOR DIRECT COSTS OF MEDICAL 
EDUCATION. 
(a) MEDICARE PAYMENT METHODOLOGY.—Section 1886 of the Social 
Security Act (42 U.S.C. 1395ww) is amended by adding at the end the 
following new subsection: 
"(h) 
PAYMENTS FOR DIRECT 
GRADUATE 
MEDICAL 
EDUCATION 
COSTS.— 
"(1) SUBSTITUTION OF SPECIAL PAYMENT RULES.—Notwithstand-
ing section 1861(v), instead of any amounts that are otherwise 
42 USC I395x. 
payable under this title with respect to the reasonable costs of 
hospitals for direct graduate medical education costs, the Sec-
retary shall provide for payments for such costs in accordance 
with paragraph (3) of this subsection. In providing for such 
payments, the Secretary shall provide for an allocation of such 
payments between part A and part B (and the trust funds 
established under the respective parts) as reasonably reflects 
the proportion of direct graduate medical education costs of 
100 STAT. 172 
PUBLIC LAW 99-272—APR. 7, 1986 
hospitals associated with the provision of services under each 
respective part. 
"(2) DETERMINATION OF HOSPITAL-SPECIFIC APPROVED FTE RESI-
DENT AMOUNTS.—The Secretary shall determine, for each hos-
pital with an approved medical residency training program, an 
approved FTE resident amount for each cost reporting period 
beginning on or after July 1, 1985, as follows: 
"(A) DETERMINING ALLOWABLE AVERAGE COST PER FTE RESI-
DENT IN A HOSPITAL'S BASE PERIOD.—The Secretary shall 
determine, for the hospital's cost reporting period that 
began during fiscal year 1984, the average amount recog-
nized as reasonable under this title for direct graduate 
medical education costs of the hospital for each full-time-
equivalent resident. 
"(B) UPDATING TO THE FIRST COST REPORTING PERIOD.— 
"(i) IN GENERAL.—The Secretary shall update each 
average amount determined under subparagraph (A) 
by the percentage increase in the consumer price index 
during the 12-month cost reporting period described in 
such subparagraph. 
"(ii) EXCEPTION.—The Secretary shall not perform an 
update under clause (i) in the case of a hospital if the 
hospital's reporting period, described in subparagraph 
(A), began on or after July 1, 1984, and before Octo-
ber 1, 1984. 
"(C) AMOUNT FOR FIRST COST REPORTING PERIOD.—For the 
first cost reporting period of the hospital beginning on or 
after July 1, 1985, the approved FTE resident amount for 
the hospital is equal to the amount determined under 
paragraph (B) increased by 1 percent. 
"(D) AMOUNT FOR SUBSEQUENT COST REPORTING PERIODS.— 
For each subsequent cost reporting period, the approved 
FTE resident amount for the hospital is equal to the 
amount determined under this paragraph for the previous 
cost reporting period updated, through the midpoint of the 
period, by projecting the estimated percentage change in 
the consumer price index during the 12-month period 
ending at that midpoint, with appropriate adjustments to 
,, 
reflect previous under- or over-estimations under this 
subparagraph in the projected percentage change in the 
consumer price index. 
"(E) TREATMENT OF CERTAIN HOSPITALS.—In the case of a 
hospital that did not have an approved medical residency 
training program or was not participating in the program 
under this title for a cost reporting period beginning during 
fiscal year 1984, the Secretary shall, for the first such 
period for which it has such a residency training program 
and is participating under this title, provide for such ap-
proved FTE resident amount as the Secretary determines to 
be appropriate, based on approved FTE resident amounts 
for comparable programs. 
"(3) HOSPITAL PAYMENT AMOUNT PER RESIDENT.— 
"(A) IN GENERAL.—The payment amount, for a hospital 
cost reporting period beginning on or after July 1, 1985, is 
equal to the product of— 
"(i) the aggregate approved amount (as defined in 
subparagraph (B)) for that period, and 
-5Sj* ^ 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 173 
"(ii) the hospital's medicare patient load (as defined 
in subparagraph (O) for that period. 
"(B) AGGREGATE APPROVED AMOUNT.—As used in subpara-
graph (A), the term 'aggregate approved amount' means, 
for a hospital cost reporting period, the product of— 
"(i) the hospital's approved FTE resident amount 
(determined under paragraph (2)) for that period, and 
"(ii) the weighted average number of full-time-
equivalent residents (as determined under paragraph 
(4)) in the hospital's approved medical residency train-
ing programs in that period. 
"(C) MEDICARE PATIENT LOAD.—As used in subparagraph 
(A), the term 'medicare patient load' means, with respect to 
a hospital's cost reporting period, the fraction of the total 
number of inpatient-bed-days (as established by the Sec-
retary) during the period which are attributable to patients 
with respect to whom payment may be made under part A. 
'(4) DETERMINATION OF FULL-TIME-EQUIVALENT RESIDENTS.— 
"(A) RULES.—The Secretary shall establish rules consist-
ent with this paragraph for the computation of the number 
of full-time-equivalent residents in an approved medical 
residency training program. 
"(B) 
ADJUSTMENT FOR PART-YEAR OR PART-TIME RESI-
DENTS.—Such rules shall take into account individuals who 
serve as residents for only a portion of a period with a 
hospital or simultaneously with more than one hospital. 
"(C) WEIGHTING FACTORS FOR CERTAIN RESIDENTS.—Sub-
ject to subparagraph (E), such rules shall provide, in cal-
culating the number of full-time-equivalent residents in an 
approved residency program— 
"(i) before July 1, 1986, for each resident the 
weighting factor is 1.00, 
"(ii) on or after July 1, 1986, for a resident who is in 
the resident's initial residency period (as defined in 
paragraph (5)(F)), the weighting factor is 1.00, 
"(iii) on or after July 1, 1986, and before July 1, 1987, 
for a resident who is not in the resident's initial resi-
dency period (as defined in paragraph (5)(F)), the 
weighting factor is .75, and 
"(iv) on or after July 1,1987, for a resident who is not 
in the resident's initial residency period (as defined in 
paragraph (5)(F)), the weighting factor is .50. 
"(E) 
FOREIGN MEDICAL GRADUATES REQUIRED TO PASS 
FMGEMS E X A M I N A T I O N . — 
"(i) IN GENERAL.—Except as provided in clause (ii), 
such rules shall provide that, in the case of an individ-
ual who is a foreign medical graduate (as defined in 
paragraph (5)(D)), the individual shall not be counted as 
a resident on or after July 1,1986, unless— 
"(I) the individual has passed the FMGEMS 
examination (as defined in paragraph (5XE)), or 
"(II) the individual has previously received cer-
tification from, or has previously passed the exam-
ination of, the Educational Commission for Foreign 
Medical Graduates. 
100 STAT. 174 
PUBLIC LAW 99-272—APR. 7, 1986 
"(ii) TRANSITION FOR CURRENT FMGS.—On or after 
July 1, 1986, in the case of a foreign medical graduate 
who— 
"(I) has served as a resident before July 1, 1986, 
and is serving as a resident after that date, but 
"(II) has not passed the FMGEMS examination 
or a previous examination of the Educational 
Commission for Foreign Medical Graduates before 
July 1,1986, 
, 
the individual shall be counted as a resident at a rate 
equal to one-half of the rate at which the individual 
would otherwise be counted. 
"(5) DEFINITIONS AND SPECIAL RULES.—As used in this subsec-
tion: 
"(A) APPROVED MEDICAL RESIDENCY TRAINING PROGRAM.— 
The term 'approved medical residency training program' 
means a residency or other postgraduate medical training 
program participation in which may be counted toward 
certification in a specialty or subspecialty and includes 
formal postgraduate training programs in geriatric medi-
cine approved by the Secretary. 
"(B) CONSUMER PRICE INDEX.—As used in this paragraph, 
the term 'consumer price index' refers to the Consumer 
Price Index for All Urban Consumers (United States city 
average), as published by the Secretary of Commerce. 
"(C) DIRECT GRADUATE MEDICAL EDUCATION COSTS.—The 
term 'direct graduate medical education costs' means direct 
costs of approved educational activities for approved medi-
cal residency training programs. 
"(D) FOREIGN MEDICAL GRADUATE.—The term 'foreign 
medical graduate' means a resident who is not a graduate 
i.w T 
of— 
"(i) a school of medicine accredited by the Liaison 
, i 3 
Committee on Medical Education of the American 
,-jj 
Medical Association and the Association of American 
Medical Colleges (or approved by such Committee as 
meeting the standards necessary for such accredita-
tion), 
^jl 
"(ii) a school of osteopathy accredited by the Amer-
ican Osteopathic Association, or approved by such 
Association as meeting the standards necessary for 
j, 
such accreditation, or 
' 
''^*^ 
"(iii) a school of dentistry or podiatry which is accred-
ited (or meets the standards for accreditation) by an 
'^')A'! 
organization recognized by the Secretary for such pur-
pose. 
"(E) FMGEMS EXAMINATION.—The term 
'FMGEMS 
examination' means parts I and II of the Foreign Medical 
Graduate Examination in the Medical Sciences recognized 
by the Secretary for this purpose. 
"(F) INITIAL RESIDENCY PERIOD.—The term 'initial resi-
dency period' means the period of board eligibility plus one 
year, except that— 
"(i) except as provided in clause (ii), in no case shall 
the initial period of residency exceed an aggregate 
^': 
period of formal training of more than five years for 
any individual, and 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 175 
"(ii) a period, of not more than two years, during 
which an individual is in a geriatric residency or 
fellowship program which meets such criteria as the 
Secretary may establish, shall be treated as part of the 
initial residency period, but shall not be counted 
against any limitation on the initial residency period. 
The initial residency period shall be determined, with re-
spect to a resident, as of the time the resident enters the 
residency training program. 
"(G) PERIOD OF BOARD ELIGIBILITY.— 
"(i) GENERAL RULE.—Subject to clauses (ii) and (iii), 
the term 'period of board eligibility' means, for a resi-
dent, the minimum number of years of formal training 
necessary to satisfy the requirements for initial board 
eligibility in the particular specialty for which the 
resident is training. 
"(ii) APPLICATION OF 1985-I986 DIRECTORY.—Except as 
provided in clause (iii), the period of board eligibility 
shall be such period specified in the 1985-1986 Direc-
tory of Residency Training Programs published by the 
Accreditation Council on Graduate Medical Education. 
"(iii) CHANGES IN PERIOD OF BOARD ELIGIBILITY.—On 
or after July 1, 1989, if the Accreditation Council on 
Graduate Medical Education, in its Directory of Resi-
dency Training Programs— 
"(I) increases the minimum number of years of 
formal training necessary to satisfy the require-
-i.L , 
ments for a specialty, above the period specified in 
its 1985-1986 Directory, the Secretary may in-
crease the period of board eligibility for that spe-
cialty, but not to exceed the period of board 
eligibility specified in that later Directory, or 
"(II) decreases the minimum number of years of 
formal training necessary to satisfy the require-
ments for a specialty, below the period specified in 
its 1985-1986 Directory, the Secretary may de-
crease the period of board eligibility for that spe-
cialty, but not below the period of board eligibility 
: 
J 
specified in that later Directory. 
"(H) RESIDENT.—The term 'resident' includes an intern or 
other participant in an approved medical residency training 
program.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to hospital cost reporting periods beginning on or after 
July 1, 1985. 
(c) STUDIES BY SECRETARY.—(1) The Secretary of Health and 
Human Services shall conduct a study with respect to approved 
educational activities relating to nursing and other health profes-
sions for which reimbursement is made to hospitals under title 
XVIII of the Social Security Act. The study shall address— 
(A) the types and numbers of such programs, and number of 
students supported or trained under each program; 
(B) the fiscal and administrative relationships between the 
hospitals involved and the schools with which the programs and 
students are affiliated; and 
(C) the types and amounts of expenses of such programs for 
which reimbursement is made, and the financial and other 
42 use 1
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42 u s e 1395. 
100 STAT. 176 
PUBLIC LAW 99-272—APR. 7, 1986 
Ante, p. 171. 
42 use 1
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42 use 1395. 
42 use 1395u 
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contributions which accrue to the hospital as a consequence of 
having such programs. 
The Secretary shall report the results of such study to the Commit-
tee on Finance of the Senate and the Committees on Ways and 
Means and Energy and Commerce of the House of Representatives 
prior to December 31,1987. 
(2) The Secretary shall conduct a separate study of the advisability 
of continuing 
or 
terminating 
the 
exception 
under 
section 
1886(h)(5)(F)(ii) of the Social Security Act for geriatric residencies 
and fellowships, and of expanding such exception to cover other 
educational activities, particularly those which are necessary to 
meet the projected health care needs of Medicare beneficiaries. Such 
study shall also examine the adequacy of the supply of faculty in the 
field of geriatrics. The Secretary shall report the results of such 
study to the committees described in paragraph (1) prior to July 1, 
1990. 
(d) GAO STUDY.—(1) The Comptroller General shall conduct a 
study of the variation in the amounts of payments made under title 
XVIII of the Social Security Act with respect to patients in different 
teaching hospital settings and in the amounts of such payments 
which are made with respect to patients who are treated in teaching 
and nonteaching hospital settings. Such study shall identify the 
components of such payments (including payments with respect to 
inpatient hospital services, physicians' services, and capital costs, 
and, in the case of teaching hospital patients, payments with respect 
to direct and indirect teaching costs) and shall account, to the extent 
feasible, for any variations in the amounts of the payment compo-
nents between teaching and nonteaching settings and among dif-
ferent teaching settings. 
(2) In carrying out such study, the Comptroller General may 
utilize a sample of hospital patients and any other data sources 
which he deems appropriate, and shall, to the extent feasible, 
control for differences in severity of illness levels, area wage levels, 
levels of physician reasonable charges for like services and proce-
dures, and for other factors which could affect the comparability of 
patients and of payments between teaching and nonteaching set-
tings and among teaching settings. The information obtained in the 
study shall be coordinated with the information obtained in conduct-
ing the study of teaching physicians' services under section 2307(c) 
of the Deficit Reduction Act of 1984. 
(3) The Comptroller General shall report the results of the study 
to the committees described in subsection (c)(1) prior to Decem-
ber 31, 1987. 
(e) 
REPORT 
ON 
UNIFORMITY 
OF 
APPROVED 
F T E 
RESIDENT 
AMOUNTS.—The Secretary of Health and Human Services shall 
report to the committees described in subsection (c)(1), not later than 
December 31, 1987, on whether section 1886(h) of the Social Security 
Act should be revised to provide for greater uniformity in the 
approved FTE resident amounts established under paragraph (2) of 
that section, and, if so, how such revisions should be implemented. 
(f) STUDY ON FOREIGN MEDICAL GRADUATES.—The Secretary of 
Health and Human Services shall study, and report to the commit-
tees described in subsection (c)(1), not later than December 31, 1987, 
respecting the use of physicians who are foreign medical graduates 
(within the meaning ot section 1886(h)(5)(D) of the Social Security 
Act) in the provision of health care services (particularly inpatient 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 177 
and outpatient hospital services) to medicare beneficiaries. Such 
study shall evaluate— 
(1) the types of services provided; 
(2) the cost of providing such services, relative to the cost of 
other physicians providing the services or other approaches to 
providing the services; 
(3) any deficiencies in the quality of the services provided, and 
methods of assuring the quality of such services; and 
(4) the impact on costs of and access to services if medicare 
payment for hospitals' costs of graduate medical education of 
foreign medical graduates were phased out. 
(g) ESTABLISHING PHYSICIAN IDENTIFIER SYSTEM.—The Secretary of 
Health and Human Services shall establish a system, for im-
plementation not later than July 1, 1987, which provides for a 
unique identifier for each physician who furnishes services for 
which payment may be made under title XVIII of the Social Secu-
rity Act. 
(h) PAPERWORK REDUCTION.—Chapter 35 of title 44, United States 
Code, shall not apply to information required for purposes of carry-
ing out this section and the amendments made by this section. 
(i) PROHIBITING A LIMIT ON INCREASES ON DIRECT MEDICAL EDU-
CATION COSTS.—(1) Section 1861(v)(l) of the Social Security Act (42 
U.S.C. 1395x(v)(l)), as amended by section 9107(b) of this title, 
is further amended by adding at the end the following new 
subparagraph: 
"(Q) Except as otherwise explicitly authorized, the Secretary is not 
authorized to limit the rate of increase on allowable costs of ap-
proved medical educational activities.". 
(2) The amendment made by paragraph (1) shall apply to cost 
reporting periods beginning on or after July 1,1985. 
(j) SPECIAL TREATMENT OF STATES FORMERLY UNDER WAIVER.—In 
the case of a hospital in a State that has had a waiver approved 
under section 1886(c) of the Social Security Act, for cost reporting 
periods beginning on or after January 1, 1986, if the waiver is 
terminated— 
(1) the Secretary of Health and Human Services shall permit 
the hospital to change the method by which it allocates adminis-
trative and general costs to the direct medical education cost 
centers to the method specified in the medicare cost report; 
(2) the Secretary may make appropriate adjustments in the 
regional adjusted DRG prospective payment rate (for the region 
in which the State is located), based on the assumption that all 
teaching hospitals in the State use the medicare cost report; and 
(3) the Secretary shall adjust the hospital-specific portion of 
payment under section 1886(d) of such Act for any such hospital 
that actually chooses to use the medicare cost report. 
The Secretary shall implement this subsection based on the best 
available data. 
SEC. 9204. MORATORIUM ON LABORATORY PAYMENT DEMONSTRATION. 
(a) MORATORIUM.—Prior to January 1, 1987, the Secretary of 
Health and Human Services shall not conduct any demonstration 
projects relating to competitive bidding as a method of purchasing 
laboratory services under title XVIII of the Social Security Act. The 
Secretary may contract for the design of, and site selection for, such 
demonstration projects. 
42 u s e 1395WW 
note. 
42 u s e 1395. 
42 u s e 1395WW 
note. 
44USe 3501 et 
seq. 
42 u s e 1395x 
note. 
42 u s e 1395WW 
note. 
^n^e, p. 161. 
' 
42 u s e 1395ww 
note. 
eontracts. 
42 u s e 1395. 
100 STAT. 178 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 1395. 
42 use 1395y 
note. 
42 use 1395y. 
42 use 1395h. 
(b) COOPERATION IN STUDY.—The Secretary of Health and Human 
Services and the Comptroller General shall assist representatives of 
clinical laboratories in the industry's conduct of a study to deter-
mine whether methods exist which are better than competitive 
bidding for purposes of utilizing competitive market forces in setting 
payment levels for laboratory services under title XVIII of the 
Social Security Act. If such a study is conducted by the clinical 
laboratory industry, the Secretary and the Comptroller General 
shall comment on such study and submit such comments and the 
study to the Senate Committee on Finance and the House Commit-
tees on Ways and Means and Energy and Commerce. 
SEC. 9205. HOME HEALTH WAIVER OF LIABILITY. 
The Secretary of Health and Human Services shall, for purposes 
of determining whether payments to a home health agency should 
be denied pursuant to section 1862(a)(1)(A) of the Social Security 
Act, apply a presumption of compliance (2.5 percent) in the same 
manner as under the regulations in effect as of July 1, 1985. Such 
presumption shall apply until 12 months after the date on which ten 
regional intermediaries have commenced operations to service home 
health agencies, as required under section 1816(e)(4) of the Social 
Security Act. 
Subpart B—Other Provisions 
Contracts. 
42 use 1395WW. 
.aft: 
SEC. 9211. PROVISIONS RELATING TO HEALTH MAINTENANCE ORGANIZA-
TIONS AND COMPETITIVE MEDICAL PLANS. 
(a) FINANCIAL RESPONSIBILITY FOR PATIENTS HOSPITALIZED ON THE 
EFFECTIVE DATE OF AN ENROLLMENT OR DISENROLLMENT.—(1) Subsec-
tion (c) of section 1876 of the Social Security Act (42 U.S.C. 1395mm) 
is amended by adding at the end the following new paragraph: 
"(7) A risk-sharing contract under this section shall provide that 
in the case of an individual who is receiving inpatient hospital 
services from a subsection (d) hospital (as defined in section 
1886(d)(1)(B)) as of the effective date of the individual's— 
"(A) enrollment with an eligible organization under this sec-
tion— 
"(i) payment for such services until the date of the 
individual's discharge shall be made under this title as if 
the individual were not enrolled with the organization, 
"(ii) the organization shall not be financially responsible 
for payment for such services until the date after the date 
of the individual's discharge, and 
"(iii) the organization shall nonetheless be paid the full 
amount otherwise payable to the organization under this 
section; or 
"(B) termination of enrollment with an eligible organization 
under this section— 
"(i) the organization shall be financially responsible for 
payment for such services after such date and until the date 
of the individual's discharge, 
"(ii) payment for such services during the stay shall not 
be made under section 1886(d), and 
"(iii) the organization shall not receive any payment with 
respect to the individual under this section during the 
period the individual is not enrolled.". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 179 
(2) Subsection (aX3) of such section is amended by striking out 
"Payments" and inserting in lieu thereof "Subject to subsection 
(c)(7), payments". 
(3) Subsection (a)(6) of such section is amended by striking out "If 
and inserting in lieu thereof "Subject to subsection (c)(7), if . 
(b) DiSENROLLMENTS.— 
(1) EFFECTIVE DATE.—Subsection (c)(3)(B) of such section is 
amended by striking out "a full calendar month after" and 
inserting in lieu thereof "the date on which". 
(2) INFORMATION.—Such subsection is further amended by 
adding at the end the following: "In the case of an individual's 
termination of enrollment, the organization shall provide the 
individual with a copy of the written request for termination of 
enrollment and a written explanation of the period (ending on 
the effective date of the termination) during which the individ-
ual continues to be enrolled with the organization and may not 
receive benefits under this title other than through the 
organization.". 
. f -i 
(c) REVIEW OF MARKETING MATERIAL.—Subsection (c)(3)(C) of such 
section is amended by adding at the end the following: "No bro-
chures, application forms, or other promotional or informational 
material may be distributed by an organization to (or for the use of) 
individuals eligible to enroll with the organization under this sec-
tion unless (i) at least 45 days before its distribution, the organiza-
tion has submitted the material to the Secretary for review and (ii) 
the Secretary has not disapproved the distribution of the material. 
The Secretary shall review all such material submitted and shall 
disapprove such material if the Secretary determines, in the Sec-
retary's discretion, that the material is materially inaccurate or 
misleading or otherwise makes a material misrepresentation.". 
(d) PROMPT PUBLICATION OF AAPCC.—Subsection (a)(1)(A) of such 
section is amended by inserting after "The Secretary shall annually 
determine" the following: ", and shall publish not later than 
September 7 before the calendar year concerned". 
(e) EFFECTIVE DATES.— 
42 use 1395mm 
(1) FINANCIAL RESPONSIBILITY.—The amendments made by ^°^^-
subsection (a) shall apply to enrollments and disenrollments 
that become effective on or after the date of the enactment of 
this Act. 
(2) DISENROLLMENTS.—The amendments made by subsection 
(b) shall apply to requests for termination of enrollment submit-
ted on or after May 1,1986. 
(3) MATERIAL REVIEW.—(A) The amendment made by subsec-
tion (c) shall not apply to material which has been distributed 
before July 1,1986. 
(B) Such amendment also shall not apply so as to require the 
submission of material which is distributed before July 1, 1986. 
(C) Such amendment shall also not apply to material which 
the Secretary determines has been prepared before the date of 
the enactment of this Act and for which a commitment for 
distribution has been made, if the application of such amend-
ment would constitute a hardship for the organization involved. 
(4) PUBLICATION.—The amendment made by subsection (d) 
shall apply to determinations of per capita rates of payment for 
1987 and subsequent years. 
(5) NECESSARY MODIFICATION OF CONTRACTS.—The Secretary of 
Health and Human Services shall provide for such changes in 
100 STAT. 180 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1395 
mm. 
42 u s e 401 note. 
42 u s e 1395rr 
note. 
42 u s e 1395rr. 
Maryland. 
Ohio. 
Wisconsin. 
California. 
42 u s e 1395b-l 
note. 
42 u s e 1395b-l. 
42 u s e 1395h 
note. 
42 u s e 1395h 
note. 
the risk-sharing contracts which have been entered into under 
section 1876 of the Social Security Act as may be necessary to 
conform to the requirements imposed by the amendments made 
by this section on a timely basis. 
SEC. 9213. REMOVAL OF PROHIBITION ON COMMENTS BY MEDICARE AND 
SOCIAL SECURITY ACTUARIES RELATING TO ECONOMIC 
ASSUMPTIONS. 
(a) FEDERAL OLD-AGE AND DISABILITY INSURANCE TRUST FUND.— 
Section 201(c) of the Social Security Act (42 U.S.C. 401(c)) is amended 
by striking out ": Provided, That the certification shall not refer to 
economic assumptions underlying the Trustee's report, and shall" 
and inserting in lieu thereof ". Such report shall". 
(b) MEDICARE TRUST FUNDS.—Sections 1817(b) and 1841(b) of such 
Act (42 U.S.C. 1395i(b), 1395t(b)) are each amended by striking out 
": Provided, That the certification shall not refer to economic 
assumptions underlying the Trustee's report". 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
become effective on the date of the enactment of this Act. 
SEC. 9214. LIMITATION ON MERGER OF END STAGE RENAL DISEASE NET-
WORKS. 
The Secretary of Health and Human Services shall maintain 
renal disease network organizations as authorized under section 
1881(c) of the Social Security Act, and may not merge the network 
organizations into other organizations or entities. The Secretary 
may consolidate such network organizations, but only if such 
consolidation does not result in fewer than 14 such organizations 
being permitted to exist. 
SEC. 9215. EXTENSION OF CERTAIN MEDICARE MUNICIPAL HEALTH SERV-
ICES DEMONSTRATION PROJECTS. 
The Secretary of Health and Human Services shall extend, for a 
period of three additional years, approval of four municipal health 
services demonstration projects (located in Baltimore, Cincinnati, 
Milwaukee, and San Jose) authorized under section 402(a) of the 
Social Security Amendments of 1967. 
SEC. 9216. AUDIT AND MEDICAL CLAIMS REVIEW 
.„ 
* 
(a) INCREASE IN ACTIVITIES FOR FISCAL YEARS 1986, 
1987, 
AND 
1988.—Section 118 of the Tax Equity and Fiscal Responsibility Act 
of 1982 (96 Stat. 355) is amended— 
(1) by striking out "for fiscal years 1983, 1984, and 1985", 
(2) by striking out "such fiscal years" and inserting in lieu 
thereof "fiscal years 1983, 1984, and 1985, and $105,000,000 for 
each of fiscal years 1986, 1987, and 1988", and 
(3) by striking out "the purpose of carrying out provider cost 
audits and reviews of medical necessity" and inserting in lieu 
thereof "purposes of carrying out provider cost audits, of review-
ing medical necessity, and of recovering third-party liability 
payments". 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply to fiscal years beginning with fiscal year 1986. 
SEC. 9217. LIVER TRANSPLANTS. 
(a) The Senate finds that: 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 181 
(1) There have been more than 600 liver transplants since 
1963 and the one year survival rate at qualified institutions is 
now greater than 70 percent. 
(2) There are 4,000 to 4,700 potential candidates in the United 
States each year who require a liver transplant, but only a 
small percentage would be eligible for Medicare coverage. 
(3) There are currently individuals on waiting lists for liver 
transplants who will die without Medicare coverage. 
(4) After extensive review and consideration of all the avail- 
,pj j'«, 
able data, an National Institutes of Health expert panel 
concluded liver transplantation is "a therapeutic modality for 
end-stage liver disease that deserves broader application" in a 
limited number of centers where they can be carried out under 
optimal conditions. 
(5) National Institutes of Health further recommended that 
liver transplants be done in individuals under 18 years of age. 
(6) The CHAMPUS program, after considering all relevant 
data, determined that there was no scientific basis for limiting 
liver transplants to children under 18 years of age. 
(7) The Department of Health and Human Services has deter-
mined that liver transplantation is no longer an experimental 
procedure only for children under 18. 
(b) Based upon the above findings, it is the sense of the Senate 
that: 
(1) For the purposes of title XVIII of the Social Security Act, 
42 use 1395. 
the Secretary immediately reconsider the Medicare liver trans-
plant coverage decision and implement a policy under which a 
liver transplant shall not be considered to be an experimental 
procedure for Medicare beneficiaries solely because an individ-
ual is over 18 years of age. 
. j >
j
; 
(2) A liver transplant shall be covered under such title when 
-'^o.i 
reasonable and medically necessary. 
(3) The Secretary shall place appropriate limiting criteria on 
coverage, including those relating to the patient's condition, the 
.^ -^^^ ., 
disease state, and the institution providing the care, so as to 
' ^ 
> .j 
ensure the highest quality of medical care demonstrated to be 
consistent with successful outcomes. 
SEC. 9218. STUDIES RELATING TO PHYSICAL THERAPISTS AND OTHER 
PROFESSIONALS. 
(a) SUPERVISION OF HOME HEALTH SERVICES.—The Secretary of 
Health and Human Services shall conduct a study of the advisability 
of changing the requirements of title XVIII of the Social Security 
Act to allow home health services to be provided under the super-
vision of a physical therapist or other health care professional, 
rather than requiring the supervision of a physician or registered 
nurse. 
Cb) OFFICE REQUIREMENT.—The Secretary of Health and Human 
Services shall conduct a study on the advisability of deleting the 
requirement under such title that a physical therapist must have an 
office equipped with specified equipment, even if such therapist 
provides all such services in patients' homes. 
(c) REPORTS.—The Secretary shall report the results of the studies 
to the Congress prior to October 1, 1986. 
SEC. 9219. TECHNICAL CORRECTIONS. 
(a) WORKING AGED TECHNICAL CORRECTIONS.— 
100 STAT. 182 
PUBLIC LAW 99-272—APR. 7, 1986 
(1) PREMIUM PENALTY.—The second sentence of section 1839(b) 
of the Social Security Act (42 U.S.C. 1395r(b)), as amended by 
section 2338(a) of the Deficit Reduction Act of 1984, is amended 
by striking out "months in which" and all that follows through 
"clause (iv) of such section" and inserting in lieu thereof 
"months during which the individual has attained the age of 65 
' 
and for which the individual can demonstrate that the individ-
ual was enrolled in a group health plan described in section 
42 use 1395y. 
1862(b)(3)(A)(iv)". 
(2) SPECIAL ENROLLMENT PERIODS.—Section 1837(i) of the Social 
Security Act (42 U.S.C. 1395p), as added by section 2338(b) of the 
Deficit Reduction Act of 1984, is amended— 
(A) in paragraph (1), by amending subparagraph (A) to 
read as follows: 
"(A) has attained the age of 65,"; and 
(B) in paragraph (2), by redesignating subparagraph (C) as 
subparagraph (D) and by amending subparagraphs (A) and 
(B) to read as follows: 
"(A) has attained the age of 65; 
"(B)(i) has enrolled (or has been deemed to have enrolled) in 
the medical insurance program established under this part 
during the individual's initial enrollment period, or (ii) is an 
individual described in paragraph (1)(B); 
"(C) has enrolled in such program during any subsequent 
special enrollment period under this subsection during which 
the individual was not enrolled in a group health plan described 
in section 1862(b)(3)(A)(iv) by reason of the individual's (or 
individual's spouse's) current employment; and". 
(3) EFFECTIVE DATES.— 
42 use 1395r 
(A) The amendment made by paragraph (1) shall apply to 
note. 
months beginning with January 1983 for premiums for 
months beginning with the first month that begins more 
than 30 days after the date of the enactment of this Act. 
42 use I395p 
(BXi) The amendments made by paragraph (2) shall apply 
note. 
to enrollments in months beginning with the first effective 
month (as defined in clause (ii)), except that in the case of 
any individual who would have a special enrollment period 
gji|v 
under section 1837(i) of the Social Security Act that would 
have begun after November 1984 and before the first effec-
tive month, the period shall be deemed to begin with the 
first day of the first effective month. 
(ii) For purposes of clause (i), the term "first effective 
month" means the first month that begins more than 90 
days after the date of the enactment of this Act. 
(b) MISCELLANEOUS TECHNICAL CORRECTIONS.— 
(1)(A) Subclause (III) of section 1842(b)(7XB)(ii) of the Social 
Security Act (42 U.S.C. 1395ua))(7)(B)(ii)), as added by section 
2307(aX2XG) of the Deficit Reduction Act of 1984, is amended by 
indenting it two additional ems to the right so as to align its 
left margin with the left margins of subclauses (I) and (II) of 
that section. 
(B) Section 1861(n) of the Social Security Act (42 U.S.C. 
1395x(n)), as inserted by section 2321(e)(3) of the Deficit Reduc-
tion Act of 1984, is amended by striking out "at his home" and 
inserting in lieu thereof "as his home". 
(C) Section 1888(b) of the Social Security Act (42 U.S.C. 
1395yy0>)), as added by section 2319(b) of the Deficit Reduction 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 183 
Act of 1984, is amended by striking out "nothwithstanding" and 
inserting in lieu thereof "notwithstanding". 
(D) The amendments made by this paragraph shall be effec-
tive as if they had been originally included in the Deficit 
Reduction Act of 1984. 
(2)(A) Clause (iii) of section 1842(b)(7)(B) of the Social Security 
Act (42 U.S.C. 1395u(b)(7)(B)), as added by section 3(b)(6) of 
Public Law 98-617, is amended by moving its alignment two 
additional ems to the left so as to align its left margin with the 
left margins of clauses (i) and (ii) of that section. 
(B) The amendment made by subparagraph (A) shall be effec-
tive as if it had been originally included in Public Law 98-617. 
(3)(A) Section 1861(v)(l)(G)(i) of the Social Security Act (42 
U.S.C. 1395x(b)(l)(G)(i)), as amended by section 602(d)(1) of the 
Social Security Amendments of 1983, is amended by inserting, 
in the matter after subclause (III), "on the basis of 
after 
"(during such period)". 
(B) The amendment made by subparagraph (A) shall be effec-
tive as if it had been originally included in the Social Security 
Amendments of 1983. 
SEC. 9220. EXTENSION OF ON LOK WAIVER. 
(a) CONTINUED APPROVAL.— 
(1) MEDICARE WAIVERS.—Notwithstanding any limitations 
contained in section 222 of the Social Security Amendments of 
1972 and section 402(a) of the Social Security Amendments of 
1967, the Secretary of Health and Human Services shall con-
tinue approval of the risk-sharing application (described in 
section 603(c)(1) of Public Law 98-21) for waivers of certain 
requirements of title XVIII of the Social Security Act after the 
end of the period described in that section. 
(2) MEDICAID WAIVERS.—Notwithstanding any limitations con-
tained in section 1115 of the Social Security Act, the Secretary 
shall approve any application of the Department of Health 
Services, State of California, for a waiver of requirements of 
title XIX of such Act in order to continue carrying out the 
demonstration project referred to in section 603(c)(2) of Public 
Law 98-21 after the end of the period described in that section. 
(b) TERMS, CONDITIONS, AND PERIOD OF APPROVAL.—The Sec-
retary's approval of an application (or renewal of an application) 
under this section— 
(1) shall be on the same terms and conditions as applied with 
respect to the corresponding application under section 603(c) of 
Public Law 98-21 as of July 1, 1985, except that requirements 
relating to collection and evaluation of information for dem-
onstration purposes (and not for operational purposes) shall not 
apply; and 
(2) shall remain in effect until such time as the Secretary 
finds that the applicant no longer complies with the terms and 
conditions described in paragraph (1). 
SEC. 9221. CONTINUATION OF "ACCESS: MEDICARE" DEMONSTRATION 
PROJECT. 
(a) APPROVAL OF APPLICATION.—The Secretary of Health and 
Human Services shall approve any application for a waiver of any 
requirement of titles XVIII and XIX of the Social Security Act 
necessary to provide for the continuation, through September 30, 
42 u s e 1395u 
note. 
42 u s e 1395U 
note. 
42 u s e 1395x 
note. 
42 u s e 1395b-l 
and note, 139511. 
42 u s e 1395b-l. 
42 u s e 1395b-l 
note. 
42 u s e 1395. 
42 u s e 1315. 
42 u s e 1396. 
42 u s e 1395, 
1396. 
100 STAT. 184 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 1395b-l 
and note, 1395/Z. 
42 use 1395b-l. 
42 use 1
3
9
5
W
W 
note. 
1986, of the "Access: Medicare" demonstration project carried out 
pursuant to section 222 of the Social Security Amendments of 1972 
and section 402(a) of the Social Security Amendments of 1967 by 
Monroe County Long Term Care Program, Inc. 
(b) TERMS AND CONDITIONS.—The Secretary's approval of an ap-
plication (or renewal of an application) under subsection (a) shall be 
on the same terms and conditions as applied to the demonstration 
project as in effect on August 31,1985. 
PART 3—PROVISIONS RELATING TO PART B OF 
MEDICARE 
Subpart A—Payment-Related Provisions 
SEC. 9301. MEDICARE PHYSICIAN PAYMENT PROVISIONS. 
(a) EXTENSION OF CURRENT FREEZE ON PAYMENT RATES THROUGH 
APRIL 30, 1986.—Section 5(c) of the Emergency Extension Act of 
1985 (Public Law 99-107), as amended by section 9101(a) of this title, 
is further amended by adding at the end the following new 
paragraph: 
"(2) PHYSICIAN PAYMENTS.—For purposes of subsection (b), the 
term 'extension period' means the period beginning on Octo-
ber 1,1985, and ending on April 30,1986." 
(b) EXTENSION OF CERTAIN PROVISIONS THROUGH DECEMBER 31, 
1986.— 
(1) EXTENSION.—Section 1842(bX4) of the Social Security Act 
(42 U.S.C. 1395u(b)(4)) is amended— 
(A) in subparagraph (A)— 
(i) by inserting "(i)" after "(4)(A)", and 
(ii) by adding at the end the following new clauses: 
"(ii)(I) In determining the prevailing charge levels under the third 
and fourth sentences of paragraph (3) for physicians' services fur-
nished during the 8-month period beginning May 1, 1986, by a 
physician who is not a participating physician (as defined in subsec-
tion (h)(1)) at the time of furnishing the services, the Secretary shall 
not set any level higher than the same level as was set for the 12-
month period beginning July 1,1983. 
"(II) In determining the prevailing charge levels under the fourth 
sentence of paragraph (3) for physicians' services furnished during 
the 8-month period beginning May 1, 1986, by a physician who is a 
participating physician (as defined in subsection (h)(1)) at the time of 
furnishing the services, the Secretary shall permit an additional one 
percentage point increase in the increase otherwise permitted under 
that sentence. 
"(iii) In determining the prevailing charge levels under the third 
and fourth sentences of paragraph (3) for physicians' services fur-
nished during a 12-month period beginning on or after January 1, 
1987, by a physician who is not a participating physician (as defined 
in subsection (h)(1)) at the time of furnishing the services, the 
Secretary shall not set any level higher than the same level as was 
set for services furnished during the previous calendar year (without 
regard to clause (ii)(II)) for physicians who were participating physi-
cians during that year."; 
(B) in subparagraph (B)— 
"t 
(i) by inserting "(i)" after "(B)", and 
^^ _.;,, 
(ii) by adding at the end the following new clause: 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 185 
"(ii) In determining the reasonable charge under paragraph (3) for 
physicians' services furnished during the 8-month period beginning 
May 1, 1986, by a physician who is not a participating physician (as 
defined in subsection (h)(1)) at the time of furnishing the services— 
"(I) if the physician was not a participating physician at any 
time during the 12-month period beginning on October 1, 1984, 
the customary charges shall be the same customary charges as 
were recognized under this section for the 12-month period 
,
^ . ^ 
beginning July 1, 1983, and 
"-' * 
"(II) if the physician was a participating physician at any 
time during the 12-month period beginning on October 1, 1984, 
the physician's customary charges shall be determined based 
upon the physician's actual charges billed during the 12-month 
period ending on March 31,1985."; 
(C) in subparagraph (C)— 
(i) by inserting "(i)" after "'(C)", 
(ii) by striking out "(A)" and inserting in lieu thereof 
"(A)(i)" each place it appears, and 
(iii) by adding at the end the following new clause: 
"(ii) In determining the prevailing charge levels under the third 
and fourth sentences of paragraph (3) for physicians' services fur- 
,-^ 
nished during the periods beginning after December 31, 1986, by a 
~.o,-
physician who was not a participating physician on that date, the 
Secretary shall treat the level as set under subparagraph (A)(ii) as 
having fully provided for the economic changes which would have 
been taken into account but for the limitations contained in 
. 
subparagraph (A)(ii)."; and 
(D) in subparagraph (D)— 
(i) by striking out "In determining" and all that follows 
through "subsection (h)(1))" and insert in lieu thereof "(i) In 
determining the customary charges for physicians' services 
furnished during the 8-month period beginning May 1, 
1986, or the 12-month period beginning January 1, 1987, by 
a physician who was not a participating physician (as de-
fined in subsection (h)(1)) on September 30, 1985", and 
(ii) by adding at the end the following new clauses: 
"(ii) In determining the customary charges for physicians' services 
furnished during the 12-month period beginning January 1, 1987, by 
a physician who is not a participating physician (as defined in 
subsection (h)(1)) on April 30, 1986, the Secretary shall not recognize 
increases in actual charges for services furnished during the 
7-month period beginning on October 1, 1985, above the level of the 
physician's actual charges billed during the 3-month period ending 
on June 30,1984. 
"(iii) In determining the customary charges for physicians' serv-
ices furnished during the 12-month period beginning January 1, 
1987, or January 1, 1988, by a physician who is not a participating 
physician (as defined in subsection (h)(1)) on December 31, 1986, the 
Secretary shall not recognize increases in actual charges for services 
furnished during the 8-month period beginning on May 1, 1986, 
above the level of the physician s actual charges billed during the 
3-month period ending on June 30, 1984.". 
(2) CONTINUED ENFORCEMENT.—The first sentence of section 
1842(j)(l) of such Act (42 U.S.C. 1395u(j)(l)) is amended to read as 
follows: "In the case of a physician who is not a participating 
physician for items and services furnished during a portion of 
the 30-month period beginning July 1, 1984, the Secretary shall 
100 STAT. 186 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 1395U 
note. 
42 use 1395U. 
42 use 1395u 
note. 
42 use 1395u. 
monitor the physician's actual charges to individuals enrolled 
under this part for physicians' services during that portion of 
that period.". 
(3) PERIOD FOR ENTERING PARTICIPATION AGREEMENTS.—The 
Secretary of Health and Human Services shall provide, during 
the month of April 1986, that physicians and suppliers may 
enter into an agreement under section 1842(h)(1) of the Social 
Security Act for the 8-month period beginning May 1, 1986, or 
terminate such an agreement previously entered into for fiscal 
year 1986. In the case of a physician or supplier who entered 
into such an agreement for fiscal year 1986, the physician or 
supplier shall be deemed to have entered into such agreement 
for such 8-month period and for each succeeding year unless the 
physician or supplier terminates such agreement before the 
beginning of the respective period. At the beginning of such 
8-month period, the Secretary shall publish a new directory (de-
scribed in section 1842(h)(4) of that Act, as redesignated by 
subsection (c)(3)(D) of this section) of participating physicians 
and suppliers. 
(4) EFFECTIVE DATE.—The amendments made by this subsec-
tion shall apply to services furnished on or after May 1, 1986. 
(c) INCENTIVES FOR PARTICIPATING PHYSICIAN PROGRAM.— 
(1) 15-MONTH EXTENSION OF TRANSFER OF FUNDS FOR CAR-
RIERS.—Section 2306(e) of the Deficit Reduction Act of 1984 
(Public Law 98-369; 98 Stat. 1073) is amended— 
(A) by striking out "and 1985" and inserting in lieu 
thereof ", 1985, and 1986", 
(B) by striking out "the amendments made by this sec-
tion" and inserting in lieu thereof "subsections (b)(4), (h), 
and (j) of section 1842 of the Social Security Act", 
(C) by striking out "and" before "not less", 
(D) by inserting before the period at the end the follow-
ing: ", and not less than $18,000,000 for fiscal year 1986", 
and 
(E) by adding at the end the following new sentences: "A 
significant proportion of such funds shall be used for the 
expansion of the participating physician and supplier pro-
gram and for the development of professional relations 
staffs dedicated to addressing the billing and other prob-
lems of physicians and suppliers participating in that pro-
gram. Such funds for fiscal year 1986 are available for 
obligation until December 31, 1986.". 
(2) IMPROVEMENT OF PARTICIPATING PHYSICIAN DIRECTORIES.— 
Section 1842(i) of the Social Security Act (42 U.S.C. 1395u(i)) is 
amended— 
(A) in the first sentence of paragraph (2)— 
(i) by striking out "a directory" and inserting in lieu 
thereof "directories (for appropriate local geographic 
areas)", and 
(ii) by inserting "for that area" before "for that fiscal 
year"; 
(B) in the second sentence of paragraph (2), by striking 
out "The directory" and inserting in lieu thereof "Each 
directory"; 
,,_.,^,.^^ .•,••,...•..,,,..,,.rru-..-••..- 
-•,-
(C) in paragraph (3)— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 187 
(i) by striking out "directory" the first place it ap-
pears and inserting in lieu thereof "the directories", 
and 
(ii) by striking out "directory" the second place it 
appears and inserting in lieu thereof "the appropriate 
area directory or directories"; and 
' 
" 
(D) in paragraph (4)— 
(i) by striking out "directory" and inserting in lieu 
- -
^ 
thereof "the directories", and 
,.. 
(ii) by adding at the end the following: "The Sec-
retary shall provide that each appropriate area direc-
tory is sent to each participating physician located in 
that area.". 
(3) EUMINATION OF PHYSICIAN ASSIGNMENT RATE LIST.—Section 
1842(i) of such Act is further amended— 
42 use I395u. 
(A) by striking out "(iXD" and all that follows through 
the end of paragraph (1), 
(B) by striking out "subsection (hXD" in paragraph (2) 
,,: 
and inserting in lieu thereof "paragraph (1)", 
(C) by striking out "list and" each place it appears in 
paragraphs (3) and (4), and 
(D) by redesignating paragraphs (2) through (4) as para-
graphs (4) through (6) of subsection (h), respectively. 
(4) 
I N F O R M A T I O N O N T H E PARTICIPATING PHYSICIAN A N D SUP-
PLIER PROGRAM IN EXPLANATIONS OF MEDICARE BENEFITS FOR 
UNASSiGNED CLAIMS.—Section 1842(h) of such Act, as previously 
amended by this subsection, is further amended by adding at 
the end the following new paragraphs: 
"(7) The Secretary shall provide that each explanation of benefits 
provided under this part for services furnished in the United States, 
in conjunction with the payment of claims under section 1833(aXl) 42 USC 1395Z. 
(made other than on an assignment-related basis, described in para-
graph (8)), shall include— 
"(A) a reminder of the participating physician and supplier 
program established under this subsection (including the limita-
tion on charges that may be imposed by such physicians and 
suppliers), and 
"(B) the toll-free telephone number or numbers, maintained 
under paragraph (2), at which an individual enrolled under this 
part may obtain information on participating physicians and 
suppliers. 
"(8) For purposes of this title, a claim is considered to be paid on 
an 'assignment-related basis' if the claim is paid on the beisis of an 
assignment described in subsection (bX3XBXii), in accordance with 
subsection (bX6XB), or under the procedure described in section 
1870(fKl).". 
(5) EFFECTIVE DATE.—Section 1842(bX7) of the Social Security 
Act, as added by paragraph (4) of this subsection, shall apply to 
explanations of benefits provided on or after such date (not later 
than October 1, 1986) as the Secretary of Health and Human 
Services shall specify. 
(d) CHANGING CUSTOMARY AND PREVAIUNG CHARGE UPDATES FOR 
PHYSICIAN SERVICES AND OTHER PART B SERVICES FROM OCTOBER TO 
JANUARY.— 
(1) PAYMENT UPDATES.—Section 1842(bX3) of the Social Secu-
rity Act (42 U.S.C. 1395u(bX3)) is amended— 
•H'J 
42 USC 1395gg. 
42 USC 1395U 
note. 
100 STAT. 188 
PUBLIC LAW 99-272—APR. 7, 1986 
(A) in subparagraph (F), by striking out "(ending on 
September 30)"; 
(B) in the third sentence, by striking out "March 31" and 
all that follows through "of each year)" and inserting in 
lieu thereof "June 30 last preceding the start of the cal-
endar year"; and 
(C) in the eighth sentence, by striking out "the twelve-
month period beginning on October 1 in". 
(2) PARTICIPATION AGREEMENTS.—Section 1842(hXl) of such 
42 use 1395u. 
Act is amended— 
(A) in the second sentence— 
(i) by striking out "before October 1" and inserting in 
lieu thereof "before the beginning", 
(ii) by striking out "on the basis of an assignment" 
and all that follows through "1870(f)(1)" and inserting 
in lieu thereof "on an assignment-related basis", and 
(iii) by striking out "the 12-month period beginning 
on October 1 of'; and 
(B) in the third sentence— 
(i) by striking out "after October 1" and inserting in 
lieu thereof "after the beginning", and 
(ii) by striking out "12-month period beginning on 
such October 1" and inserting in lieu thereof "year". 
(3) DIRECTORIES.—The first sentence of section 1842(iX2) of 
such Act (which is redesignated as section 1842(hX4) by subsec-
tion (c)(3)(D)), is further amended by striking out "fiscal" each 
place it appears. 
(4) EFFECTIVE DATE.—The amendments made by this subsec-
tion shall apply to items and services furnished on or after 
October 1,1986. 
(5) TRANSITION.—Notwithstanding any other provision of law, 
for purposes of making payment under part B of title XVIII of 
the Social Security Act, customary and prevailing charges (and 
the lowest charges determined under the sixth sentence of 
section 1842(bX3) of such Act) for items and services furnished 
during the period beginning on October 1, 1986, and ending on 
December 31, 1986, shall be determined on the same basis as for 
items and services furnished on September 30,1986. 
SEC. 9303. PAYMENT FOR CLINICAL LABORATORY SERVICES. 
(a) CHANGING MONTH OF ANNUAL UPDATE FROM JULY TO JANU-
ARY.— 
(1) IN GENERAL.—Section 1833(h) of the Social Security Act (42 
42 use 1395Z. 
U.S.C. 13951(h)) is amended— 
(A) by striking out "June 30, 1987" and "July 1, 1987" 
and inserting in lieu thereof "December 31, 1987" and 
"January 1, 1988", respectively, each place either appears, 
and 
(B) in paragraph (2), by inserting "(to become effective on 
January 1 of each year)' after "adjusted annually". 
42 use 1395/ 
(2) EFFECTIVE DATE.—The amendments made by paragraph (1) 
note. 
shall apply to clinical laboratory diagnostic tests performed on 
or after July 1,1986. 
42 use 1
3
9
5
Z 
(3) TRANSITION.—The Secretary of Health and Human Serv-
note. 
ices shall provide that the annual adjustment under section 
1833(h) of the Social Security Act for 1986— 
(A) shall take effect on January 1,1987, 
i. 
42 use 1395u 
note. 
42 use 1395u 
note. 
42 use 1395J. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 189 
(B) shall apply for the 12-month period beginning on that 
date, and 
(C) shall take into account the percentage increase or 
decrease in the Consumer Price Index for all urban consum-
ers (United States city average) occurring over an 18-month 
period, rather than over a 12-month period. 
(b) PROVIDING CEILING ON RATES.— 
(1) CEILING ON PAYMENTS.—Paragraphs (l)(D)(i) and (2)(D)(i) of 
section 1833(a) of the Social Security Act (42 U.S.C 13951(a)) are 
each amended by inserting after "lesser of the amount deter-
mined under such fee schedule" the following: ", the limitation 
amount for that test determined under subsection (h)(4)(B),". 
(2) ESTABLISHMENT OF LIMITATION AMOUNT.—Section 1833(h)(4) 
of such Act is amended by inserting "(A)" after "(4)" and by 
adding at the end the following new subparagraph: 
"(B) For purposes of subsections (a)(l)(D)(i) and (a)(2)(D)(i), the 
limitation amount for a clinical diagnostic laboratory test per-
formed— 
"(i) on or after July 1, 1986, and before January 1, 1988, is 
equal to 115 percent of the median of all the fee schedules 
established for that test for that laboratory setting under para-
graph (1), or 
"(ii) after December 31, 1987, and so long as a fee schedule for 
the test has not been established on a nationwide basis, is equal 
to 110 percent of the median of all the fee schedules established 
for that test for that laboratory setting under paragraph (1).". 
(3) 
METHOD OF PAYMENT FOR NON-INDEPENDENT LABORA-
TORIES.—Section 1833(h)(5)(C) of such Act is amended by striking 
out "which is independent of a physician's office or" and insert-
ing in lieu thereof "other than". 
(4) EXTENDING MEDICARE PROFICIENCY EXAMINATION AUTHOR-
ITY.—Section 1123(a) of such Act (42 U.S.C. 1320a-2(a)) is amend-
ed by striking out "September 30, 1983" and inserting in lieu 
thereof "September 30, 1987". 
(5) EFFECTIVE DATES.—(A) The amendments made by para- 
42 USC 1
3
9
5
Z 
graphs (1) and (2) shall apply to clinical diagnostic laboratory note. 
tests performed on or after July 1, 1986. 
(B) The amendment made by paragraph (3) shall apply to 42 USC 1395/ 
clinical diagnostic laboratory tests performed on or after Janu- note. 
ary 1,1987. 
(C) The amendment made by paragraph (4) shall take effect 
42 USC l320a-2 
on the date of the enactment of this Act. 
note. 
(c) REPORT ON MINIMUM STANDARDS FOR CLINICAL LABORATORIES 
THAT ARE PART OF, OR ASSOCIATED WITH, PHYSICIANS' OFFICES.—The 
Secretary of Health and Human Services shall report to Congress, 
not later than 12 months after the date of the enactment of this Act, 
on the standards that might be established under the medicare 
program for clinical laboratories which are part of or associated 
with a physician's office to assure the health and safety of individ-
uals with respect to whom the laboratories perform clinical diag-
nostic laboratory tests for which payment may be made under the 
program. In recommending standards, the Secretary shall consider 
the differences in the scope, type, and complexity of tests performed 
by such laboratories and such other factors as may indicate 
a need for different standards for laboratories with different 
characteristics. 
100 STAT. 190 
PUBLIC LAW 99-272—APR. 7, 1986 
SEC. 9304. DETERMINATIONS OF INHERENT REASONABLENESS OF 
CHARGES AND CUSTOMARY CHARGES FOR CERTAIN FORMER 
HOSPITALCOMPENSATED PHYSICIANS. 
(a) 
REGULATIONS RELATING TO INHERENT REASONABLENESS OF 
CHARGES.—Section 1842(b) of the Social Security Act (42 U.S.C. 
1395u(b)) is amended by adding at the end the following new para-
graph: 
"(8) The Secretary by regulation shall— 
"(A) describe the factors to be used in determining the cases 
(of particular items or services) in which the application of this 
subsection results in the determination of a reasonable charge 
that, by reason of its grossly excessive or grossly deficient 
amount, is not inherently reasonable, and 
"(B) provide in those cases for the factors that will be consid-
ered in establishing a reasonable charge that is realistic and 
equitable.". 
42 u s e 1395u 
(b) COMPUTATION OF CuSTOMARY CHARGES FOR CERTAIN FORMER 
note. 
HOSPITAL-COMPENSATED PHYSICIANS.—(1) In applying section 1842(b) 
of the Social Security Act to payment for physicians' services per-
formed during the 8-month period beginning May 1, 1986, in the 
case of a physician who at anytime during the period beginning on 
October 31, 1982, and ending on January 31, 1985, was a hospital-
compensated physician (as defined in paragraph (3)) but who, as of 
February 1, 1985, was no longer a hospital-compensated physician, 
the physician's customary charges shall— 
(A) be based upon the physician's actual charges billed during 
the 12-month period ending on March 31,1985, and 
(B) in the case of a physician who was not a participating 
physician (as defined in section 1842(hXl) of the Social Security 
Act) on September 30, 1985, and who is not such a physician on 
May 1, 1986, be deflated (to take into account the legislative 
freeze on actual charges for nonparticipating physicians' serv-
ices) by multiplying the physician's customary charges by .85. 
(2) In applying section 1842(b) of the Social Security Act to pay-
ment for physicians' services performed during the 8-month period 
beginning May 1, 1986, in the case of a physician who during the 
period beginning on February 1, 1985, and ending on December 31, 
1986, changes from being a hospital-compensated physician to not 
being a hospital-compensated physician, the physician's customary 
charges shall be determined in the same manner as if the physician 
were considered to be a new physician. 
(3) In this subsection, the term "hospital-compensated physician" 
means, with respect to services furnished to patients of a hospital, a 
physician who is compensated by the hospital for the furnishing of 
physicians' services for which payment may be made under this 
part. 
SEC. 9305. PHYSICIAN PAYMENT REVIEW COMMISSION AND DEVELOP-
MENT OF RELATIVE VALUE SCALE. 
(a) EsTABUSHMENT OF COMMISSION.—Part B of title XVIII of the 
Social Security Act is amended by adding at the end the following 
new section: 
PHYSICIAN PAYMENT REVIEW COMMISSION 
r 
42USC1395W-1. 
"SEC. 1845. (aXD The Director of the Congressional Office of 
Technology Assessment (hereinafter in this section referred to as 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 191 
the 'Director' £ind the 'Office', respectively) shall provide for the 
appointment of a Physician Payment Review Commission (herein-
after in this section referred to as the 'Commission'), to be composed 
of individuals with expertise in the provision and financing of 
physicians' services appointed by the Director (without regard to the 
provisions of title 5, United States Code, governing appointments in 
the competitive service). 
"(2) The Commission shall consist of 11 individuals. Members of 
the Commission shall first be appointed no later than May 1, 1986, 
for a term of three years, except that the Director may provide 
initially for such shorter terms as will insure that (on a continuing 
basis) the terms of no more than four members expire in any one 
year. 
"(3) The membership of the Commission shall include physicians, 
other health professionals, individuals skilled in the conduct and 
interpretation of biomedical, health services, and health economics 
research, and representatives of consumers and the elderly. The 
Director shall seek nominations from a wide range of groups, includ-
ing— 
"(A) national organizations representing physicians, includ-
ing medical specialty organizations, 
"(B) organizations representing the elderly and consumers, 
"(C) national organizations representing medical schools, 
"(D) national organizations representing hospitals, including 
teaching hospitals, and 
"(E) national organizations representing health benefits pro-
grams. 
"(b)(1) The Commission shall make recommendations to the Con-
gress, not later than March 1 of each year (beginning with 1987), 
regarding adjustments to the reasonable charge levels for physi-
cians' services recognized under section 1842(b) and changes in the 
methodology for determining the rates of payment, and for making 
payment, for physicians' services under this title and other items 
and services under this part. 
"(2) In making its recommendations, the Commission shall— 
"(A) consider, and make recommendations on the feasibility 
and desirability of reducing, the differences in payment 
amounts for physicians' services under this part which are 
based on differences in geographic location or specialty; 
"(B) review the input costs (including time, professional skills, 
and risks) associated with the provision of different physicians' 
services; 
"(C) identify those charges recognized as reasonable under 
section 1842(b) which are significantly out-of-line, based on the 42 USC I395u. 
considerations of subparagraphs (A) and (B); 
"(D) assess the likely impact of different adjustments in pay 
ment rates, particularly their impact on physician participation 
in the participation program established under section 1842(h) 
and on beneficiary access to necessary physicians' services; 
"(E) make recommendations on ways to increase physician 
participation in that participation program and the acceptance 
of payment under this part on an assignment-related basis; 
"(F) make recommendations respecting the advisability and 
feasibility of making changes in the payment system for physi-
cians' services under this part based on (i) the Secretary's study 
under section 603(b)(2) of the Social Security Amendments of 
1983 (relating to payments for physicians' services furnished to 42 USC I395b-l 
note. 
100 STAT. 192 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 1395/ 
note. 
42 u s e 1395WW. 
42 u s e 1396. 
hospital inpatients on the basis of diagnosis-related groups) and 
(ii) the Office's report under section 2309 of the Deficit Reduc-
tion Act of 1984 (relating to physician reimbursement under 
this part); 
"(G) identify those procedures, involving the use of assistants 
at surgery, for which payment for those assistants should not be 
made under this title without prior approval; and 
"(H) identify those procedures for which an opinion of a 
second physician should be required before payment is made 
under this title. 
"(3) The Commission also shall advise and make recommendations 
to the Secretary respecting the development of the relative value 
scale under subsection (e). 
"(c)(1) The following provisions of section 1886(e)(6) shall apply to 
the Commission in the same manner as they apply to the Prospec-
tive Payment Assessment Commission: 
"(A) Subparagraph (C) (relating to staffing and administration 
generally). 
"(B) Subparagraph (D) (relating to compensation of members). 
"(C) Subparagraph (F) (relating to access to information), 
"(D) Subparagraph (G) (relating to reports and use of funds). 
"(E) Subparagraph (H) (relating to periodic GAO audits). 
"(F) Subparagraph (J) (relating to requests for appropria-
tions). 
"(2) In order to carry out its functions, the Commission shall 
collect and assess information on medical and surgical procedures 
and services, including information on regional variations of medi-
cal practice. In collecting and assessing information, the Commis-
sion shall— 
"(A) utilize existing 
information, 
both 
published 
and 
unpublished, where possible, collected and assessed either by its 
own staff or under other arrangements made in accordance 
with this section, 
"(B) carry out, or award grants or contracts for, original 
research and experimentation, where existing information is 
inadequate for the development of useful and valid guidelines 
by the Commission, and 
"(C) adopt procedures allowing any interested party to submit 
information with respect to physicians' services (including new 
practices, such as the use of new technologies and treatment 
modalities), which information the Commission shall consider in 
making reports and recommendations to the Secretary and 
Congress. 
"(d) There are authorized to be appropriated such sums as may be 
necessary to carry out the provisions of this section. Such sums shall 
be payable from the Federal Supplementary Medical Insurance 
Trust Fund.". 
(b) DEVELOPMENT OF RELATIVE VALUE SCALE FOR PHYSICIANS' 
SERVICES.—Section 1845 of the Social Security Act, as added by 
subsection (a), is further amended by adding at the end the following 
new subsection: 
"(e)(1) The Secretary shall develop a relative value scale that 
establishes a numerical relationship among the various physicians' 
services for which payment may be made under this part or under 
State plans approved under title XIX. 
"(2) In developing the scale, the Secretary shall consider among 
other items— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 193 
"(A) the report of the Office of Technology Assessment under 
section 2309 of the Deficit Reduction Act of 1984, 
"(B) the recommendations of the Physician Payment Review 
Commission under subsection (b)(3), and 
"(C) factors with respect to the input costs for furnishing 
particular physicians' services, such as— 
"(i) the differences in costs of furnishing services in dif-
ferent settings, 
"(ii) the differences in skill levels and training required to 
perform the services, and 
"(iii) the time required, and risk involved, in furnishing 
different services. 
"(3) The Secretary shall complete the development of the relative 
value scale under this section, and report to Congress on the devel-
opment, not later than July 1, 1987. The report shall include rec-
ommendations for the application of the scale to payment for physi-
cians' services furnished under this part on or after January 1, 
1988.". 
SEC. 9306. LIMITATION ON MEDICARE PAYMENT FOR POST-CATARACT 
SURGERY PATIENTS. 
(a) DETERMINATION OF SEPARATE PAYMENT AMOUNTS FOR PROS-
THETIC LENSES AND PROFESSIONAL SERVICES.—Section 1842(b) of the 
Social Security Act (42 U.S.C. 1395u(b)) is amended by adding after 
paragraph (8), added by section 9304(a) of this title, the following 
new paragraph: 
"(9) In providing payment for cataract eyeglasses and cataract 
contact lenses, and professional services relating to them, under this 
part, each carrier shall— 
"(A) provide for separate determinations of the payment 
amount for the eyeglasses and lenses and of the payment 
amount for the professional services of a physician (as defined 
in section 1861(r)), and 
"(B) not recognize as reasonable for such eyeglasses and 
lenses more than such amount as the Secretary establishes in 
guidelines relating to the inherent reasonableness of charges for 
such eyeglasses and lenses.". 
(b) EFFECTIVE DATE.—The amendments made by this section shall 
apply to items and services furnished on or after April 1, 1986. 
SEC. 9307. PAYMENT FOR ASSISTANTS AT SURGERY FOR CERTAIN CATA-
RACT OPERATIONS AND OTHER OPERATIONS. 
(a) LIMITATION ON PAYMENT.—Section 1862(a) of the Social Secu-
rity Act (42 U.S.C. 1395y(a)) is amended— 
(1) by striking out "or" at the end of paragraph (13), 
(2) by striking out the period at the end of paragraph (14) and 
inserting in lieu thereof "; or", and 
(3) by adding at the end the following new paragraph: 
"(15) which are for services of an assistant at surgery in a 
cataract operation unless, before the surgery is performed, the 
appropriate 
utilization 
and 
quality 
control 
peer 
review 
organization (under part B of title XI) or a carrier under section 
1842 has approved of the use of such an assistant in the surgical 
procedure based on the existence of a complicating medical 
condition.". 
(b) ADDITIONAL PRO FUNCTIONS.—Section 1154(a)(8) of such Act 
(42 U.S.C. 1320c-3(a)(8)) is amended by inserting before the period at 
42 u s e 1395/ 
note. 
Reports. 
42 u s e 1395x. 
42 u s e 1395u 
note. 
42 u s e 1320c. 
42 u s e 1395u. 
7i iQA n 
 RQ  q : Of. ? Parti 
100 STAT. 194 
PUBLIC LAW 99-272—APR. 7, 1986 
Ante, p. 193. 
42 use 1395y 
note. 
42 use 1320C-3 
note. 
42 use 1395b-l 
note. 
42 use 1395. 
the end the following: "or as may be required to carry out section 
1862(a)(15)". 
(c) PROHIBITION FOR SUBMITTING BILL FOR WHICH PAYMENT MAY 
NOT BE MADE.—Section 1842 of such Act (42 U.S.C. 1395u) is 
amended— 
(1) in subsection (jX2), by inserting "or subsection (k)" after 
"paragraph (1)", and 
(2) by adding at the end the following new subsection: 
"(k)(l) If a physician knowingly and willfully bills an individual 
enrolled under this part for charges for services as an assistant at 
surgery for which payment may not be made by reason of section 
1862(aX15), the Secretary may apply sanctions against such physi-
cian in accordance with subsection (j)(2). 
"(2) If a physician knowingly and willfully bills an individual 
enrolled under this part for charges that includes a charge for an 
assistant at surgery for which payment may not be made by reason 
of section 1862(a)(15), the Secretary may apply sanctions against 
such physician in accordance with subsection (j)(2).". 
(d) EXTENSION OF PROHIBITION TO OTHER PROCEDURES.—The Sec-
retary of Health and Human Services, after consultation with the 
Physician Payment Review Commission, shall develop recommenda-
tions and guidelines respecting other surgical procedures for which 
an assistant at surgery is generally not medically necessary and the 
circumstances under which the use of an assistant at surgery is 
generally appropriate but should be subject to prior approval of an 
appropriate entity. The Secretary shall report to Congress, not later 
than January 1, 1987, on these recommendations and guidelines. 
(e) EFFECTIVE DATE.—The amendments made by this section shall 
apply to services performed on or after April 1,1986. 
Subpart B—Benefits and Other Provisions 
SEC. 9313. PART B PREMIUM. 
of the Social Security Act (42 U.S.C. 1395r) is 
'1988" and inserting in 
Section 1839 
amended— 
(1) in subsection (e), by striking out 
lieu thereof "1989" each place it appears; 
(2) in subsection (f)(1), by striking out "or 1986" and inserting 
in lieu thereof ", 1986, or 1987"; and 
(3) in subsection (f)(2), by striking out "or 1987" and inserting 
in lieu thereof ", 1987, or 1988". 
SEC. 9314. DEMONSTRATION OF PREVENTIVE HEALTH SERVICES UNDER 
MEDICARE. 
(a) DEMONSTRATION PROGRAM.—The Secretary of Health and 
Human Services (hereinafter in this section referred to as the 
"Secretary") shall establish a 4-year demonstration program de-
signed to reduce disability and dependency through the provision of 
preventive health services to individuals entitled to benefits under 
title XVIII of the Social Security Act (hereinafter in this section 
referred to as "medicare beneficiaries"). 
(b) PREVENTIVE HEALTH SERVICES UNDER DEMONSTRATION PRO-
GRAM.—The preventive health services to be made available under 
the demonstration program shall include— 
(1) health screenings, 
(2) health risk appraisals, 
(3) immunizations, and 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 195 
(4) counseling on and instruction in— 
(A) diet and nutrition, 
(B) reduction of stress, 
(C) exercise and exercise programs, 
(D) sleep regulation, 
(E) injury prevention, 
(F) prevention of alcohol and drug abuse, 
(G) prevention of mental health disorders, 
(H) self-care, including use of medication, and 
(I) reduction or cessation of smoking. 
(c) CONDUCT OF PROGRAM.—The demonstration program shall— 
Schools and 
(1) be conducted under the direction of accredited public or 
colleges, 
private nonprofit schools of public health or preventive medi-
cine departments accredited by the Council on Education for 
Public Health; 
(2) be conducted in no fewer than five sites, which sites shall 
be chosen so as to be geographically diverse and shall be readily 
accessible to a significant number of medicare beneficiaries; 
(3) involve community outreach efforts at each site to enroll 
the maximum number of medicare beneficiaries in the program; 
and 
(4) be designed— 
(A) to test alternative methods of payment for preventive 
health services, including payment on a prepayment basis 
as well as payment on a fee-for-service basis, 
(B) to permit a variety of appropriate health care provid-
ers to furnish preventive health services, including physi-
cians, health educators, nurses, allied health personnel, 
dieticians, and clinical psychologists, and 
(C) to facilitate evaluation under subsection (d). 
(d) EVALUATION.—The Secretary shall evaluate the demonstration 
project in order to determine— 
(1) the short-term and long-term costs and benefits of provid-
ing preventive health services for medicare beneficiaries, 
including any reduction in inpatient services resulting from 
providing the services, and 
(2) what practical mechanisms exist to finance preventive 
health services under title XVIII of the Social Security Act. 
42 USC 1395. 
(e) REPORTS TO CONGRESS.—(1) Not later than three years after the 
date of the enactment of this Act, the Secretary shall submit a 
preliminary report to the Committees on Ways and Means and 
Energy and Commerce of the House of Representatives and to the 
Committee on Finance of the Senate on the progress made in the 
demonstration program, including a description of the sites at which 
the program is being conducted and the preventive health services 
being provided at the different sites. 
(2) Not later than five years after the date of the enactment of this 
Act, the Secretary shall submit a final report to those Committees 
on the demonstration program and shall include in the report— 
(A) the evaluation described in subsection (d), and 
(B) recommendations for appropriate legislative changes to 
incorporate payment for cost-effective preventive health serv-
ices into the medicare program. 
(f) FUNDING.—Expenditures made for the demonstration program 
shall be made from the Federal Supplementary Medical Insurance 
Trust Fund (established by section 1841 of the Social Security Act). 
42 use I395t. 
Grants and payments under contracts may be made either in ad-
100 STAT. 196 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1395. 
42 u s e 1395h 
note. 
vance or by way of reimbursement, as may be determined by the 
Secretary, and shall be made in such installments and on such 
conditions as the Secretary finds necessary to carry out the purpose 
of this section. Funding for the demonstration program shall not 
exceed $4,000,000 over the duration of the program. 
(g) WAIVER OF MEDICARE REQUIREMENTS.—The Secretary shall 
waive compliance with such requirements of title XVIII of the Social 
Security Act to the extent and for the period the Secretary finds 
necessary for the conduct of the demonstration program. 
SEC. 9315. EXTENSION OF GAO REPORTING DATE. 
(a) EXTENSION.—Section 2326(e)(2) of the Deficit Reduction Act of 
1984 (98 Stat. 1088) is amended by striking out "12 months after the 
date of the enactment of this Act" and inserting in lieu thereof 
"May 1,1986". 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply as though it were included in the Deficit Reduction Act of 
1984 as originally enacted. 
PART 4—PEER REVIEW ORGANIZATIONS 
42 u s e 1320C-3. 
Infra. 
42 use 
1320C-13. 
42 u s e 1320C-3. 
SEC. 9401. 100 PERCENT PEER REVIEW OF CERTAIN SURGICAL PROCE-
DURES. 
(a) REQUIREMENT.—Section 1154(a) of the Social Security Act (42 
U.S.C. 1395c-3(a)) is amended by adding at the end thereof the 
following new paragraph: 
"(12) The organization shall perform the review, referral, and 
other functions required under section 1164.". 
(b) ADDITIONAL PEER REVIEW FUNCTIONS.—Part B of title XI of the 
Social Security Act is amended by adding at the end the following 
new section: 
"lOO PERCENT PEER REVIEW FOR CERTAIN SURGICAL PROCEDURES 
"SEC. 1164. (a) 100 PERCENT REVIEW FUNCTION.— 
"(1) IN GENERAL.—Each utilization and quality control peer 
review organization shall perform the review described in sec-
tion 1154(a)(1) for 100 percent of the surgical procedures speci-
fied pursuant to subsection (b). 
"(2) TIMING OF REVIEW.— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), the review required under paragraph (1) shall be per-
formed— 
"(i) before the performance of the procedure, in the 
case of an outpatient procedure, or 
"(ii) before admission to the hospital for the provision 
of services in connection with the procedure, in the 
case of a procedure performed on an inpatient basis. 
"(B) EXCEPTION.—The review with respect to a procedure 
need not be performed by the time specified in subpara-
graph (A) in cases of a medical emergency and under such 
other circumstances as the Secretary may specify. 
"(b) 
SPECIFICATION OF SURGICAL PROCEDURES AND QUALIFIED 
REVIEWERS.— 
"(1) IN CONTRACT.—The contract with each organization 
under this part shall specify at least 10 surgical procedures to 
be covered under this section. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 197 
"(2) SELECTION GUIDELINES.— 
"(A) IN GENERAL.—The specification of procedures shall 
be consistent with selection guidelines established by the 
Secretary under paragraph (3). The procedures specified 
shall be included among the surgical procedures which the 
Secretary has identified as reasonably being able to meet 
such guidelines. 
"(B) EXCEPTION.—The Secretary may permit an organiza-
tion to include among the procedures specified under para-
graph (1) procedures not identified by the Secretary under 
paragraph (2)(A) if to do so would be cost effective and 
consistent with the criteria described in paragraph (3). 
"(3) CRITERIA.—The Secretary shall establish such guidelines 
and identify such surgical procedures consistent with the follow-
ing criteria: 
"(A) The procedure is one which generally can be post-
poned without undue risk to the patient. 
"(B) The procedure is a high volume procedure among 
patients who are covered under the programs established 
under title XVIII or is a high cost procedure. 
42 USC 1395. 
"(C) The procedure has a comparatively high rate of 
nonconflrmation upon examination by another qualified 
physician, there is substantial geographic variation in the 
rates of performance of the procedure, or there are other 
reasons why pre-procedure review for 100 percent of the 
procedures would be cost effective. 
"(4) 
QUALIFICATIONS 
FOR PHYSICIANS 
PROVIDING 
SECOND 
OPINIONS.— 
"(A) IN GENERAL.—The Secretary shall specify, for each 
procedure identified under paragraphs (2) and (3), the type 
or types of board certified or board eligible specialists who 
may conduct a second opinion, required under subsection 
(c), based upon the nature of the procedure. 
"(B) FREEDOM OF CHOICE OF PATIENT TO CHOOSE PHYSI-
CIAN.—Subject to paragraphs (C) and (D), the patient may 
choose any physician of the proper specialty under subpara-
graph (A) to provide the second opinion. 
"(C) PHYSICIANS PROHIBITED FROM PROVIDING SECOND OPIN-
IONS.—For purposes of this section, a second opinion may 
not be provided by a physician who is affiliated with, or has 
a common financial interest with, the physician who ren-
dered the first opinion that the procedure was necessary. 
"(D) RESTRICTED LIST.—In accordance with guidelines of 
the Secretary, an organization may disqualify a physician 
from providing a second opinion under this section because 
of the gross unreliability of the second opinions provided. 
'(c) REQUIRING A SECOND OPINION IN CERTAIN CASES.— 
"(1) DETERMINATIONS BY ORGANIZATION.—In the case of a 
review performed pursuant to subsection (a), the organization 
shall determine, based on such review, that the surgical 
procedure— 
"(A) is reasonable and medically necessary, 
"(B) is not reasonable and medically necessary, or 
"(C) may be considered reasonable and necessary, but, 
because of questions as to the medical appropriateness of 
performing the procedure, it is appropriate to require the 
patient to seek a second opinion as to the necessity and 
100 STAT. 198 
PUBLIC LAW 99-272—APR. 7, 1986 
appropriateness of performing the procedure before the 
performance of the procedure. 
The Secretary shall develop appropriate measures to ensure 
that second opinions are only required in situations where a 
second opinion is needed to resolve outstanding uncertainties as 
to the medical necessity of the procedure. The organization 
42 use 1320C-3. 
shall notify, in accordance with section 1154(a)(3), the physician, 
patient, and hospital or other entity furnishing the service, in 
the event of a determination under subparagraph (B) or (C) of 
this paragraph. 
"(2) PROHIBITION OF PAYMENT IF REQUIRED SECOND OPINION NOT 
PROVIDED.—No payment may be made under part A or part B of 
42 use 1395c, 
title XVIII with respect to items or services furnished in connec-
1395J. 
tion with a surgical procedure for which there is a determina-
tion described in paragraph (1)(C), unless the individual 
undergoing the procedure obtains the second opinion required 
under that paragraph. The second opinion need not necessarily 
agree with the first opinion in order for payment to be made. 
"(3) EXCEPTIONS FOR ELECTIVE SECOND OPINIONS.—Paragraphs 
(1)(C) and (2) shall not apply to a surgical procedure if— 
"(A) a delay in providing the procedure would result in a 
risk to the patient; 
"(B) no physician is available (within such reasonable 
limits as the Secretary shall specify) who is (i) qualified to 
provide the second opinion, and (ii) a participating physi-
cian or a physician who has agreed to accept assignment for 
the second opinion; or 
"(C) the procedure is to be performed on a patient who is 
a member of a health maintenance organization or competi-
tive medical plan having a risk-sharing contract with the 
42 use 1395mm. 
Secretary under section 1876. 
"(d) REFERRAL MECHANISM FOR SECOND OPINIONS.— 
"(1) ACTING AS REFERRAL CENTER.—Each organization shall 
serve as a referral center for second opinions required under 
this section. 
"(2) REFERRAL OF PATIENT.—The organization shall maintain a 
list of physicians qualified to provide a second opinion and shall 
advise the patient as to which physicians are participating 
42 use I395u. 
physicians (within the meaning of section 1842(h)) and which 
physicians have agreed to accept assignment to perform second 
opinions. The organization shall assist patients in referral to a 
qualified physician of the appropriate specialty for purposes of 
providing the opinion. 
"(3) FORWARDING OF RELEVANT MEDICAL RECORDS.—Each peer 
review organization shall, if the patient seeking the second 
opinion so requests, obtain the relevant medical records from 
the physician who rendered the first opinion that the procedure 
was necessary, and provide the relevant information to the 
physician selected by the patient to render the second opinion. 
"(e) NOTICE TO PHYSICIANS, HOSPITALS, AND BENEFICIARIES.—The 
Secretary shall assure that notice is provided to physicians, hos-
pitals, ambulatory surgical centers, and beneficiaries respecting the 
activities under this section, including the applicable list of surgical 
procedures specified under this section.", 
(b) WAIVER OF DEDUCTIBLE AND COPAYMENTS.— 
(1) DEDUCTIBLE.—Section 1833(b) of the Social Security Act (42 
42 use 1395Z. 
U.S.C. 13951(b)) is amended by striking out "and" before "(4)", 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 199 
and by inserting before the period at the end of the first 
sentence the following: ", and (5) such deductible shall not apply 
with respect to items and services furnished in connection with 
obtaining a second opinion required under section 1164(c)(2) (or Ante, p. 196. 
a third opinion, if the second opinion was in disagreement with 
the first opinion)". 
(2) CoPAYMENTS.—(A) Section 1833(a)(1) of such Act (42 U.S.C. 
13951(a)(1)) is amended by striking out "and" before "(F)", and 42 USC 1395/. 
by adding at the end thereof the following: "and (G) with respect 
to items and services (other than clinical diagnostic laboratory 
tests) furnished in connection with obtaining a second opinion 
required under section 1164(c)(2) (or a third opinion, if the 
second opinion was in disagreement with the first opinion), the 
amounts paid shall be 100 percent of the reasonable charges for 
such items and services;". 
(B) Section 1833(a)(1)(D) of such Act is amended by striking 
out "or under the procedure described in section 1870(f)(1)" and 
inserting in lieu thereof ", under the procedure described in 
section 1870(f)(1), or for tests furnished in connection with 42 USC 1395gg. 
obtaining a second opinion required under section 1164(c)(2) (or 
a third opinion, if the second opinion was in disagreement with 
the first opinion)". 
(C) Section 1833(a)(2)(A) of such Act is amended by inserting ", to 
items and services (other than clinical diagnostic laboratory tests) 
furnished in connection with obtaining a second opinion required 
under section 1164(c)(2) (or a third opinion, if the second opinion was 
in disagreement with the first opinion)," after "(other than durable 
medical equipment)". 
(D) Section 1833(a)(2)(D) of such Act is amended by striking out "or 
to a provider having an agreement under section 1866" and insert-
ing in lieu thereof "to a provider having an agreement under section 
1866, or for tests furnished in connection with obtaining a second 
opinion required under section 1164(c)(2) (or a third opinion, if the 
second opinion was in disagreement with the first opinion)". 
(E) Section 1833(a)(3) of such Act is amended by inserting after 
"1861(s)(10)(A)" the following: "and for items and services furnished 
in connection with obtaining a second opinion required under sec-
tion 1164(c)(2), or a third opinion, if the second opinion was in 
disagreement with the first opinion". 
(F) The last sentence of section 1866(a)(2)(A) of such Act (42 U.S.C. 
1395cc(a)(2)(A)) is amended by inserting after "1861(s)(10)(A)" the 
following: ", with respect to items and services furnished in connec-
tion with obtaining a second opinion required under section 
1164(c)(2) (or a third opinion, if the second opinion was in disagree-
ment with the first opinion),". 
(c) CONFORMING AMENDMENTS.— 
(1) EXCLUSIONS FROM COVERAGE.—Section 1862(a) of the Social 
Security Act (42 U.S.C. 1395g(a)), as amended by section 9307(a) 42 USC I395y. 
of this title, is amended— 
(A) by striking out "or" at the end of paragraph (14); 
(B) by striking out the period at the end of paragraph (15) 
and inserting in lieu thereof "; or"; and 
(C) by adding at the end thereof the following new 
paragraph: 
"(16) furnished in connection with a surgical procedure for 
which a second opinion is required under section 1164(cX2) and 
has not been obtained.". 
100 STAT. 200 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1320C-3 
note. 
Contracts. 
42 u s e 1320c. 
42 u s e 1320C-13 
note. 
42 u s e 1395CC 
note. 
42 u s e 1320C-2 
note. 
42 u s e 1320C-3 
note. 
(d) EFFECTIVE DATES.—The amendments made by subsection (a) 
shall apply to items and services furnished on or after January 1, 
1987. The Secretary of Health and Human Services shall provide for 
such modification of contracts under part B of title XI of the Social 
Security Act that are in effect on that date as may be necessary to 
effect these amendments on a timely basis. 
(e) STUDY.—The Secretary of Health and Human Services shall 
conduct a study of the results of the amendments made by this 
section, and shall report the results of the study to the Congress 
within 36 months after the date of the enactment of this Act. 
SEC. 9402. PEER REVIEW ORGANIZATION REIMBURSEMENT. 
(a) REIMBURSEMENT AMOUNTS.—Section 1866(a)(1)(F) of the Social 
Security Act (42 U.S.C. 1395cc(a)(l)(F)) is amended— 
(1) by striking out clause (iii), 
(2) by inserting "and" at the end of clause (ii), 
(3) by redesignating clause (iv) as clause (iii), and 
(4) by striking out "1982" in clause (iii) as so redesignated and 
inserting in lieu thereof "1986". 
(b) MONTHLY PAYMENTS.—Section 1153(c)(8) of such Act (42 U.S.C. 
1320c-2(c)(8)) is amended to read as follows: 
"(8) reimbursement shall be made to the organization on a 
monthly basis, with payments for any month being made not 
later than 15 days after the close of such month.". 
(c) EFFECTIVE DATES.—(1) The amendments made by subsection (a) 
shall become effective on the date of the enactment of this Act. 
(2) The amendment made by subsection (b) shall apply to contracts 
entered into or renewed on or after the date of the enactment of this 
Act. 
SEC. 9403. DENIAL OF PAYMENT FOR SUBSTANDARD CARE. 
(a) DENIAL AUTHORITY FOR PRO.—Section 1154(a)(2) of the Social 
Security Act (42 U.S.C. 1320c-3(a)(2)) is amended— 
(1) by striking out "subparagraphs (A) and (C)" and inserting 
in lieu thereof "subparagraphs (A), (B), and (C)"; and 
(2) by adding at the end thereof (after and below subpara-
graph (D)) the following: 
"Determinations that payment should not be made by reason of 
subparagraph (B) of paragraph (1) shall be made only on the 
basis of criteria which are consistent with guidelines established 
bv the Secretarv.". 
(b) WAIVER OF LIABILITY.—Section 1866(a)(1) of such Act (42 U.S.C. 
1395cc(a)(l)) is amended by striking out "and" at the end of subpara-
graph (G), by striking out the period at the end of subparagraph (H) 
and inserting in lieu thereof ", and", and by inserting after subpara-
graph (H) the following new subparagraph: 
"(I) not to charge any individual or any other person for items 
or services for which payment under this title is denied under 
section 1154(a)(2) by reason of a determination under section 
1154(a)(1)(B).". 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
become effective on the date of the enactment of this Act. 
SEC. 9404. HEALTH MAINTENANCE ORGANIZATION MEMBERSHIP ON PEER 
REVIEW ORGANIZATION BOARDS. 
(a) REMOVAL OF ONE-MEMBER LIMITATION.—Section 1153(b)(2)(A) 
of the Social Security Act (42 U.S.C. 1320c-2(b)(2)(A)) is amended by 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 201 
42 u s e 1320C-3 
note. 
striking out "consists only of one individual member of the govern-
ing board" and inserting in lieu thereof "consists only of members of 
the governing board". 
(b) EFFECTIVE DATE.—The amendment made by this section shall 42 USC l320c-2 
become effective on the date of the enactment of this Act. 
^°^^-
SEC. 9405. PEER REVIEW ORGANIZATION REVIEW OF HEALTH MAINTE-
NANCE ORGANIZATIONS. 
(a) COMPARABLE REVIEW FOR HEALTH MAINTENANCE ORGANIZA-
TIONS AND COMPETITIVE MEDICAL PLANS.—Section 1154(a)(1) of the 
Social Security Act (42 U.S.C. 1320c-3(a)(l)) is amended by inserting 
"(including where payment is made for such services to eligible 
organizations pursuant to contracts under section 1876)" after "title 42 USC 1395mm 
XVIII". 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply to items and services furnished on or after January 1, 1987. 
SEC. 9406. SUBSTITUTE REVIEW PENDING TERMINATION OF A PEER 
REVIEW ORGANIZATION CONTRACT. 
(a) SUBSTITUTE REVIEW.—Section 1153(d) of the Social Security Act 
(42 U.S.C. 1320c-2(d)) is amended by adding at the end thereof the 
following new paragraph: 
"(4) During the period after the Secretary has given notice of 
intent to terminate a contract, and prior to the time that the 
Secretary enters into a contract with another utilization and quality 
control peer review organization, the Secretary may transfer review 
responsibilities of the organization under the contract being termi-
nated to another utilization and quality control peer review 
organization, or to an intermediary or carrier having an agreement 
under section 1816 or a contract under section 1842.". 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
become effective on the date of the enactment of this Act. 
Subtitle B—Medicaid and Maternal and Child 
Health 
42 USC 1395h, 
1395u. 
42 USC 1320C-2 
note. 
SEC. 9501. SERVICES FOR PREGNANT WOMEN. 
(a) EXPANDED COVERAGE.—Section 1905(n)(l) of the Social Security 
Act (42 U.S.C. 1396d(n)(l)) is amended— 
(1) by striking out "or" at the end of subparagraph (A); 
(2) by striking out "and" at the end of subparagraph (B) and 
inserting in lieu thereof "or"; and 
(3) by adding after subparagraph (B) the following new 
subparagraph: 
"(C) otherwise meets the income and resources requirements 
of a State plan under part A of title IV; and". 
(b) OPTIONAL EXPANSION OF PREGNANCY-RELATED SERVICES.—Sec-
tion 1902(a)(10) of such Act (42 U.S.C. 1396a(aX10)) is amended, in 
the matter after subparagraph (D) thereof^ 
(1) by striking out "and" before "(IV)" and inserting in lieu 
thereof a comma; and 
(2) by inserting before the semicolon at the end thereof the 
following: ", and (V) the making available to pregnant women 
covered under the plan of services relating to pregnancy (includ-
ing prenatal, delivery, and postpartum services) or to any other 
State and local 
governments. 
42 USC 601. 
100 STAT. 202 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 1396a. 
State and local 
governments. 
42 use 1396d 
note. 
42 use 1396. 
State and local 
governments. 
42 use 1396a 
note. 
42 use 1396a 
note. 
condition which may complicate pregnancy shall not, by reason 
of this paragraph (10), require the making available of such 
services, or the making available of such services of the same 
amount, duration, and scope, to any other individuals, provided 
such services are made available (in the same amount, duration, 
and scope) to all pregnant women covered under the State 
plan". 
(c) POSTPARTUM ELIGIBILITY FOR PREGNANT WOMEN.—Section 
1902(e) of such Act (42 U.S.C. 1396b(e)) is amended by adding at the 
end the following new paragraph: 
"(5) A woman who, while pregnant, is eligible for, has applied for, 
and has received medical assistance under the State plan, shall 
continue to be eligible under the plan, as though she were pregnant, 
for all pregnancy-related and postpartum medical assistance under 
the plan, until the end of the 60-day period beginning on the last day 
of her pregnancy.". 
(d) EFFECTIVE DATES.— 
(1) EXPANDED COVERAGE.—(A) The amendments made by 
subsection (a) apply (except as provided under subparagraph (B)) 
to payments under title XIX of the Social Security Act for 
calendar quarters beginning on or after the July 1, 1986, with-
out regard to whether or not final regulations to carry out the 
amendments have been promulgated by that date. 
(B) In the case of a State plan for medical assistance under 
title XIX of the Social Security Act which the Secretary of 
Health and Human Services determines requires State legisla-
tion (other than legislation appropriating funds) in order for the 
plan to meet the additional requirement imposed by the amend-
ments made by subsection (a), the State plan shall not be 
regarded as failing to comply with the requirements of such 
title solely on the basis of its failure to meet this additional 
requirement before the first day of the first calendar quarter 
beginning after the close of the first regular session of the State 
legislature that begins after the date of the enactment of this 
Act. 
(2) OPTIONAL SERVICES.—The amendments made by subsection 
(b) shall become effective on the date of the enactment of this 
Act. 
(3) CONTINUED COVERAGE.—The amendment made by subsec-
tion (c) shall apply to medical assistance furnished to a woman 
on or after the date of the enactment of this Act. 
SEC. 9502. MODIFICATIONS OF WAIVER PROVISIONS FOR HOME AND 
COMMUNITY-BASED SERVICES. 
(a) EXPLICIT INCLUSION OF CERTAIN PREVOCATIONAL AND EDU-
CATIONAL SERVICES.—Section 1915(c) of the Social Security Act (42 
U.S.C. 1396n(c)) is amended by adding at the end thereof the follow-
ing new paragraph: 
"(5) For purposes of paragraph (4)(B), the term 'habilitation 
services', with respect to individuals who receive such services after 
discharge from a skilled nursing facility or intermediate care 
facility— 
"(A) means services designed to assist individuals in acquir-
ing, retaining, and improving the self-help, socialization, and 
adaptive skills necessary to reside successfully in home and 
community based settings; and 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 203 
"(B) includes (except as provided in subparagraph (C)) 
prevocational, educational, and supported employment services; 
but 
"(C) does not include— 
"(i) special education and related services (as defined in 
section 602(16) and (17) of the Education of the Handicapped 
Act (20 U.S.C. 1401(16), (17)) which otherwise are available 
to the individual through a local educational agency; and 
"(ii) vocational rehabilitation services which otherwise 
are available to the individual through a program funded 
under section 110 of the Rehabilitation Act of 1973 (29 
U.S.C. 730).". 
(b) PERMITTING HOSPITAL LEVEL OF CARE FOR CERTAIN PARTICI-
PANTS.—(1) Section 1915(c)(1) of such Act (42 U.S.C 1396n(c)(l)) is State and local 
amended by inserting "or but for the provision of such services the governments. 
individuals would continue to receive inpatient hospital services, 
skilled nursing facility services, or intermediate care facility serv-
ices because they are dependent on ventilator support the cost of 
which is reimbursed under the State plan" before the period at the 
end thereof. 
(2) Section 1915(cX2XC) of such Act (42 U.S.C. 1396n(cK2XC)) is 
amended— 
(A) by inserting "hospital or" after "provided in a"; and 
(B) by inserting "inpatient hospital services or" after "the 
provision of. 
(c) PROHIBITING IMPOSITION OF CERTAIN REGULATORY LIMITS.— 
Section 1915(c) of such Act (42 U.S.C. 1396n(c)) as amended by 
subsection (a), is further amended— 
(1) in paragraph (2XD), by inserting "100 percent o f after 
"does not exceed ; and 
(2) by adding at the end thereof the following new paragraph: 
"(6) The Secretary may not require, as a condition of approval of a 
waiver under this section under paragraph (2XD), that the actual 
total expenditures for home and community-based services under 
the waiver (and a claim for Federal financial participation in 
expenditures for the services) cannot exceed the approved estimates 
for these services. The Secretary may not deny Federal financial 
State and local 
payment with respect to services under such a waiver on the ground governments. 
that, in order to comply with paragraph (2XD), a State has failed to 
comply with such a requirement.". 
(d) COMPUTATION OF EXPENDITURES FOR CERTAIN DISABLED PA-
TIENTS.—Section 1915(c) of such Act (42 U.S.C. 1396n(c)), as amended 
by subsection (c), is further amended by adding at the end thereof 
the following new paragraph: 
"(7) In making estimates under paragraph (2XD) in the case of a 
State and local 
waiver which applies only to physically disabled individuals who are governments. 
inpatients in skilled nursing or intermediate care facilities, the 
State may determine the average per capita expenditure which 
would have been made in a fiscal year for those individuals under 
the State plan separately from the expenditure for other individuals 
who are inpatients of those facilities.'. 
(e) 
PERMITTING 
FLEXIBIUTY 
IN 
ESTABUSHING 
MAINTENANCE 
INCOME STANDARDS.—Section 1915(cX3) of such Act (42 U.S.C. 
1396n(cX3)) is amended by adding at the end the following new 
sentence: "A waiver may provide, with respect to post-eligibility 
treatment of income of all individuals receiving services under that 
waiver, that the maximum amount of the individual's income which 
100 STAT. 204 
PUBLIC LAW 99-272—APR. 7, 1986 
State and local 
governments. 
42 use 1396n 
note. 
State and local 
governments. 
42 use 701. 
State and local 
governments. 
42 use 1396n 
note. 
may be disregarded for any month for the maintenance needs of the 
individual may be an amount greater than the maximum allowed 
for that purpose under regulations in effect on July 1, 1985.". 
(f) WAIVER EXTENSIONS.—The Secretary of Health and Human 
Services shall extend, upon request of the State, any waiver under 
section 1915(c) of the Social Security Act which expires on or after 
September 30, 1985, and before September 30, 1986. Such extension 
shall be for a period of not less than one year nor more than five 
years, subject to section 1915(e)(1) of such Act. 
(g) WAIVER RENEWALS.—Section 1915(c)(3) of the Social Security 
Act (42 U.S.C. 1396n(c)(3)) is amended— 
(1) by striking out "additional three-year periods" and insert-
ing in lieu thereof "additional five-year periods"; and 
(2) by striking out "previous three-year period" and inserting 
in lieu thereof "previous waiver period". 
(h) COORDINATED SERVICES BETWEEN M C H PROGRAM AND HOME 
AND COMMUNITY-BASED SERVICE PROGRAMS.—Section 1915(c) of the 
Social Security Act (42 U.S.C. 1396n(c)), as amended by subsection (d) 
of this section, is further amended by adding at the end thereof the 
following new paragraph: 
"(8) The State agency administering the plan under this title may, 
whenever appropriate, enter into cooperative arrangements with 
the State agency responsible for administering the program for 
children with special health care needs under title V in order to 
assure improved access to coordinated services to meet the needs of 
such children.". 
(i) SUBSTITUTION OF PARTICIPANTS.—(1) Section 1915(c) of the Social 
Security Act (42 U.S.C. 1396n(c)), as amended by subsection (h) of 
this section, is further amended by adding at the end thereof the 
following new paragraph: 
"(9) In the case of any waiver under this subsection which con-
tains a limit on the number of individuals who shall receive home or 
community-based services, the State may substitute additional 
individuals to receive such services to replace any individuals who 
die or become ineligible for services under the State plan.". 
(j) EFFECTIVE DATES.— 
(1) HABILITATION SERVICES.— The amendment made by subsec-
tion (a) shall be effective for services furnished on or after the 
date of the enactment of this Act. 
(2) HOSPITALIZED 
PATIENTS.—The amendments made by 
subsection (b) shall be effective for services furnished on or after 
October 1, 1985. 
(3) PROHIBITION OF REGULATORY LIMITS AND TREATMENT OF 
CERTAIN PHYSICALLY DISABLED INDIVIDUALS.—The amendments 
made by subsections (c) and (d) shall apply to applications for 
waivers (or renewals thereof) filed before, on, or after, the date 
of the enactment of this Act and for services furnished on or 
after August 13,1981. 
(4) INCOME STANDARDS.—The amendment made by subsection 
(e) shall apply to waivers (or renewals thereof) approved on or 
after the date of the enactment of this Act. 
(5) WAIVER EXTENSIONS.—Subsection (f) shall apply to waivers 
expiring on or after September 30, 1985, and before September 
30,1986. 
(6) WAIVER RENEWALS.—The amendments made by subsection 
(g) shall become effective on September 30, 1986. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 205 
(7) 
COORDINATED SERVICES AND SUBSTITUTION OF PARTICI-
PANTS.—The amendments made by subsections (h) and (i) shall 
become effective on the date of the enactment of this Act. 
SEC. 9503. THIRD-PARTY LIABILITY. 
(a) 
AMENDMENTS TO STATE PLAN REQUIREMENTS.—(1) Section 
1902{a)(25) of the Social Security Act (42 U.S.C. 1396a(aX25)) is 
amended to read as follows: 
"(25) provide— 
"(A) that the State or local agency administering such 
plan will take all reasonable measures to ascertain the 
legal liability of third parties (including health insurers) to 
pay for care and services available under the plan, 
including— 
"(i) the collection of sufficient information (as speci- Claims. 
fied by the Secretary in regulations) to enable the State 
to pursue claims against such third parties, with such 
information being collected at the time of any deter-
mination or redetermination of eligibility for medical 
assistance, and 
"(ii) the submission to the Secretary of a plan (subject 
to approval by the Secretary) for pursuing claims 
against such third parties, which plan shall— 
"(I) be integrated with, and be monitored as a 
part of the Secretary's review of, the State's 
mechanized claims processing and information re-
trieval system under section 1903(r), and 
42 USC 1396b. 
"(II) be subject to the provisions of section 
1903(r)(4) relating to reductions in Federal pay-
ments for failure to meet conditions of approval, 
but shall not be subject to any other financial 
penalty as a result of any other monitoring, quality 
control, or auditing requirements; 
"(B) that in any case where such a legal liability is found 
to exist after medical assistance has been made available on 
behalf of the individual and where the amount of re-
imbursement the State can reasonably expect to recover 
exceeds the costs of such recovery, the State or local agency 
will seek reimbursement for such assistance to the extent of 
such legal liability; 
"(C) that in the case of an individual who is entitled to 
medical assistance under the State plan with respect to a 
service for which a third party is liable for payment, the 
person furnishing the service may not seek to collect from 
the individual (or any financially responsible relative or 
representative of that individual) payment of an amount for 
that service (i) if the total of the amount of the liabilities of 
third parties for that service is at least equal to the amount 
payable for that service under the plan (disregarding sec-
tion 1916), or (ii) in an amount which exceeds the lesser of 42 USC l396o. 
(I) the amount which may be collected under section 1916, 
or (II) the amount by which the amount payable for that 
service under the plan (disregarding section 1916) exceeds 
the total of the amount of the liabilities of third parties for 
that service; 
"(D) that a person who furnishes services and is partici-
pating under the plan may not refuse to furnish services to 
100 STAT. 206 
PUBLIC LAW 99-272—APR. 7, 1986 
an individual (who is entitled to have payment made under 
the plan for the services the person furnishes) because of a 
third party's potential liability for payment for the service; 
"(E) that in the case of prenatal or preventive pediatric 
care (including early and periodic screening and diagnosis 
42 use I396d. 
services under section 1905(a)(4XB)) covered under the State 
plan, the State shall— 
"(i) make payment for such service in accordance 
with the usual payment schedule under such plan for 
such services without regard to the liability of a third 
party for payment for such services; and 
"(ii) seek reimbursement from such third party in 
accordance with subparagraph (B); and 
"(F) that in the case of any services covered under such 
plan which are provided to an individual on whose behalf 
child support enforcement is being carried out by the State 
42 use 651. 
agency under part D of title IV of this Act, the State shall— 
"(i) make payment for such service in accordance 
with the usual payment schedule under such plan for 
such services without regard to any third-party liability 
for payment for such services, if such third-party liabil-
ity is derived (through insurance or otherwise) from the 
parent whose obligation to pay support is being en-
forced by such agency, if payment has not been made 
by such third party within 30 days after such services 
are furnished; and 
"(ii) seek reimbursement from such third party in 
accordance with subparagraph (B);". 
(2) Section 1902 of such Act (42 U.S.C. 1396a) is amended by 
inserting after subsection (f) the following new subsection: 
"(g) In addition to any other sanction available to a State, a State 
may provide for a reduction of any payment amount otherwise due 
with respect to a person who furnishes services under the plan in an 
amount equal to up to three times the amount of any payment 
sought to be collected by that person in violation of subsection 
(aX25XC).". 
(b) 
PERFORMANCE STANDARDS AND REVIEW FOR MECHANIZED 
CLAIMS PROCESSING AND INFORMATION RETRIEVAL SYSTEMS.—(1) Sec-
tion 1903(rX6XJ) of such Act (42 U.S.C. 1396b(rX6XJ)) is amended to 
read as follows: 
"(J) develop and disseminate performance standards for 
assessing the State's third party collection efforts in accordance 
with section 1902(a)(25)(AXii).". 
(2) Section 1903(rX4XA) of such Act (42 U.S.C. 1396b(rX4XA)) is 
amended— 
(A) by striking out "once each fiscal year" and inserting in 
lieu thereof "once every three years"; and 
(B) by adding at the end thereof the following: "Reviews may, 
at the Secretary's discretion, constitute reviews of the entire 
system or of only those standards, systems requirements, and 
other conditions which have demonstrated weakness in previous 
reviews.". 
42 use 1396a 
(c) REGULATIONS.—The Secretary of Health and Human Services 
note. 
shall promulgate final regulations necessary to carry out sections 
1902(aX25) and 1903(rX6XJ) of the Social Security Act within 6 
months after the date of the enactment of this Act. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 207 
(d) ERISA AMENDMENT.—(1) Section 514(b) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144) is amended 
by adding at the end thereof the following new paragraph: 
"(8) Subsection (a) of this section shall not apply to any State law 
mandating that an employee benefit plan not include any provision 
which has the effect of limiting or excluding coverage or payment 
for any health care for an individual who would otherwise be 
covered or entitled to benefits or services under the terms of the 
employee benefit plan, because that individual is provided, or is 
eligible for, benefits or services pursuant to a plan under title XIX of 
the Social Security Act, to the extent such law is necessary for the 
42 USC 1396. 
State to be eligible to receive reimbursement under title XIX of that 
Act". 
(2)(A) Except as provided in subparagraph (B), the amendment 
29 USC 1144 
made by paragraph (1) shall become effective on October 1, 1986. note. 
(B) In the case of a plan maintained pursuant to one or more Effective dates, 
collective bargaining agreements between employee representatives 
and one or more employers ratified on or before the date of the 
enactment of this Act, the amendment made by paragraph (1) shall 
become effective on the later of— 
(i) October 1,1986; or 
(ii) the earlier o
f
—
^ 
(I) the date on which the last of the collective bargaining 
agreements under which the plan is maintained, which 
were in effect on the date of the enactment of this Act, 
terminates (determined without regard to any extension 
thereof agreed to after the date of the enactment of this 
Act); or 
(II) three years after the date of the enactment of this 
Act. 
(e) CONDITION OF ELIGIBILITY.—Section 1912(a)(1) of the Social 
Security Act (42 U.S.C. 1396k(a)(l)) is amended by striking out "and" 
at the end of subparagraph (A), and by adding at the end thereof the 
following new subparagraph: 
"(C) to cooperate with the State in identifying, and 
providing information to assist the State in pursuing, any 
third party who may be liable to pay for care and services 
available under the plan, unless such individual has good 
cause for refusing to cooperate as determined by the State 
agency in accordance with standards prescribed by the 
Secretary, which standards shall take into consideration 
the best interests of the individuals involved; and". 
(f) DISREGARD FROM ERRONEOUS PAYMENTS.—Section 1903(u)(l)(D) 
of such Act (42 U.S.C. 1396b(u)(l)(D)) is amended by adding at the 
end thereof the following new clause: 
"(iv) In determining the amount of erroneous excess payments, 
there shall not be included any error resulting from a failure of an 
individual to cooperate or give correct information with respect to 
third-party liability as required under section 1912(a)(1)(C) or 
402(a)(26)(C).". 
42 use 602. 
(g) EFFECTIVE DATES.—(1) Except as otherwise provided, the 
42 use I396a 
amendments made by this section shall apply to calendar quarters ^°^^-
beginning on or after the date of the enactment of this Act. 
(2) In the case of a State plan for medical assistance under title 
XIX of the Social Security Act which the Secretary of Health and 
Human Services determines requires-State legislation (other than 
legislation appropriating funds) in order for the plan to meet the 
100 STAT. 208 
PUBLIC LAW 99-272—APR. 7, 1986 
additional requirements imposed by the amendments made by this 
section, the State plan shall not be regarded as failing to comply 
with the requirements of such title solely on the basis of its failure 
to meet these additional requirements before the first day of the 
first calendar quarter beginning after the close of the first regular 
session of the State legislature that begins after the date of the 
enactment of this Act. 
(3) No penalty may be applied against any State for a violation of 
42 use 1396a. 
section 1902(a)(25) of the Social Security Act occurring prior to the 
effective date of the amendments made by this section. 
(4) The amendment made by subsection (c) shall become effective 
on the date of the enactment of this Act. 
SEC. 9505. OPTIONAL HOSPICE BENEFITS. 
(a) COVERAGE OF HOSPICE CARE AS AN OPTIONAL MEDICAID BENE-
FIT.—Section 1905 of the Social Security Act (42 U.S.C. 1396d) is 
amended— 
(1) in subsection (a)— 
(A) by striking out "and" at the end of paragraph (17); 
(B) by redesignating paragraph (18) as paragraph (19); 
and 
(C) by inserting after paragraph (17) the following new 
paragraph: 
"(18) hospice care (as defined in subsection (o)); and"; and 
(2) by adding at the end thereof the following new subsection: 
"(o)(l) The term 'hospice care' means the care described in section 
42 use 1395x. 
1861(dd)(l) furnished by a hospice program (as defined in section 
1861(dd)(2)) to a terminally ill individual who has voluntarily elected 
(in accordance with paragraph (2)) to have payment made for hos-
pice care instead of having payment made for certain benefits 
42 use 1395d. 
described in section 1812(d)(2)(A) and intermediate care facility serv-
ices under the plan. For purposes of such election, hospice care may 
be provided to an individual while such individual is a resident of a 
skilled nursing facility or intermediate care facility, but the only 
payment made under the State plan shall be for the hospice care. 
"(2) An individual's voluntary election under this subsection— 
"(A) shall be made in accordance with procedures that are 
established by the State and that are consistent with the proce-
dures established under section 1812(d)(2); 
"(B) shall be for such a period or periods (which need not be 
the same periods described in section 1812(d)(1)) as the State 
may establish; and 
"(C) may be revoked at any time without a showing of cause 
and may be modified so as to change the hospice program with 
respect to which a previous election was made.". 
(b) ELIGIBILITY.— 
(1) 
LIMITATION TO TERMINALLY ILL INDIVIDUALS.—Section 
1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10)), as amended by 
section 9501 of this Act, is further amended, in the matter 
following subparagraph (D), by striking out "and" before "(V)" 
and by inserting before the semicolon at the end thereof the 
following: ", and (VI) with respect to the making available of 
medical assistance for hospice care to terminally ill individuals 
who have made a voluntary election described in section 1905(o) 
to receive hospice care instead of medical assistance for certain 
other services, such assistance may not be made available in an 
amount, duration, or scope less than that provided under title 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 209 
XVIII, and the making available of such assistance shall not, by 42 USC 1395. 
reason of this paragraph (10), require the making available of 
medical assistance for hospice care to other individuals or the 
making available of medical assistance for services waived by 
such terminally ill individuals". 
(2) 
HIGHER 
INCOME 
STANDARD 
PERMITTED.—Section 
1902(a)(10)(A)(ii) of such Act (42 U.S.C. 1396a(a)(10)(A)(ii)) is 
amended— 
(A) by striking out "or" at the end of subclause (V); 
(B) by striking out the semicolon at the end of subclause 
(VI) and inserting in lieu thereof ", or"; and 
(C) by adding at the end the following new subclause: 
"(VII) who would be eligible under the State plan 
under this title if they were in a medical institution, 
who are terminally ill, and who will receive hospice 
care pursuant to a voluntary election described in sec-
tion 1905(o);". 
42 USC 1396d. 
(c) PAYMENT FOR HOSPICE CARE.— 
(1) USE OF MEDICARE RATES.—Section 1902(a)(13) of such Act 
(42 U.S.C. 1396a(a)(13)) is amended— 
(A) by striking out "and" at the end of subparagraph (B); 
(B) by redesignating subparagraph (C) as subparagraph 
(D); and 
(C) by inserting after subparagraph (B) the following new 
subparagraph: 
"(C) for payment for hospice care in the same amounts, 
and using the same methodology, as used under part A of 
title XVIII; except that a separate rate may be paid for 42 USC 1395c. 
hospice care which is furnished to an individual who is a 
resident of a skilled nursing facility or intermediate care 
facility, and who would be eligible under the plan for 
skilled nursing facility services or intermediate care facility 
services if he had not elected to receive hospice care, to take 
into account the room and board furnished by such facility; 
and". 
(2) LIMITATION ON COPAYMENTS.—Subsections (a)(2) and (b)(2) 
of section 1916 of the Social Security Act (42 U.S.C. 1396o) are 
each amended— 
(A) by striking out "or" at the end of subparagraph (C); 
(B) by striking out "; and" at the end of subparagraph (D) 
and inserting in lieu thereof ", or"; and 
(C) by adding at the end the following new subparagraph: 
"(E) services furnished to an individual who is receiving 
hospice care (as defined in section 1905(o)); and". 
(d) CONFORMING AMENDMENTS.— 
(1) Section 1902(j) of such Act (42 U.S.C. 1396a(j)) is amended 
by striking out "(18)" and inserting in lieu thereof "(19)". 
(2) Section 
1902(a)(10)(C)(iv) of such Act (42 U.S.C. 
1396a(a)(10)(C)(iv)) is amended by striking out "through (17)" 
and inserting in lieu thereof "through (18)". 
(e) EFFECTIVE DATE.—The amendments made by this section shall 
42 use I396a 
apply to medical assistance provided for hospice care furnished on or "°te. 
after the date of the enactment of this Act. 
100 STAT. 210 
PUBLIC LAW 99-272—APR. 7, 1986 
State and local 
governments. 
42 use 1396a 
note. 
42 use 1396b 
note. 
SEC. 9506. TREATMENT OF POTENTIAL PAYMENTS FROM MEDICAID 
QUALIFYING TRUSTS. 
(a) AMOUNTS TREATED AS BEING AVAILABLE FROM GRANTOR 
TRUSTS.—Section 1902 of the Social Security Act (42 U.S.C. 1396a) is 
amended by adding at the end thereof the following new subsection: 
"(k)(l) In the case of a medicaid qualifying trust (described in 
paragraph (2)), the amounts from the trust deemed available to a 
grantor, for purposes of subsection (a)(17), is the maximum amount 
of payments that may be permitted under the terms of the trust to 
be distributed to the grantor, assuming the full exercise of discretion 
by the trustee or trustees for the distribution of the maximum 
amount to the grantor. For purposes of the previous sentence, the 
term 'grantor' means the individual referred to in paragraph (2). 
"(2) For purposes of this subsection, a 'medicaid qualifying trust' is 
a trust, or similar legal device, established (other than by will) by an 
individual (or an individual's spouse) under which the individual 
may be the beneficiary of all or part of the payments from the trust 
and the distribution of such payments is determined by one or more 
trustees who are permitted to exercise any discretion with respect to 
the distribution to the individual. 
"(3) This subsection shall apply without regard to— 
"(A) whether or not the medicaid qualifying trust is irrev-
ocable or is established for purposes other than to enable a 
grantor to qualify for medical assistance under this title; or 
"(B) whether or not the discretion described in paragraph (2) 
is actually exercised. 
"(4) The State may waive the application of this subsection with 
respect to an individual where the State determines that such 
application would work an undue hardship.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to medical assistance furnished on or after the first day 
of the second month beginning after the date of the enactment of 
this Act. 
SEC. 9507. WRITTEN STANDARDS FOR PROVISION OF ORGAN TRANS-
PLANTS. 
(a) DENIAL OF FEDERAL PAYMENTS FOR ORGAN 
TRANSPLANTS 
UNLESS PROVIDED UNDER WRITTEN STANDARDS.—Section 1903(i) of 
the Social Security Act (42 U.S.C. 1396b(i)) is amended by inserting 
before paragraph (2) the following new paragraph: 
"(1) for organ transplant procedures unless the State plan 
provides for written standards respecting the coverage of such 
procedures and unless such standards provide that— 
"(A) similarly situated individuals are treated alike; and 
"(B) any restriction, on the facilities or practitioners 
which may provide such procedures, is consistent with the 
accessibility of high quality care to individuals eligible for 
the procedures under the State plan.". 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply to medical assistance furnished on or after January 1, 
1987. 
SEC. 9508. OPTIONAL TARGETED CASE MANAGEMENT SERVICES. 
(a) EXEMPTION FROM CERTAIN REQUIREMENTS.—(1) Section 1915 of 
the Social Security Act (42 U.S.C. 1396n) is amended by adding at 
the end thereof the following new subsection: 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 211 
42 use 1396d. 
42 use 1396n 
note. 
"(g)(1) A State may provide, as medical assistance, case manage- State and local 
ment services under the plan without regard to the requirements of governments. 
section 1902(aXl) and section 1902(a)(10)(B). The provision of case 42 use 1396a. 
management services under this subsection shall not restrict the 
choice of the individual to receive medical assistance in violation of 
section 1902(a)(23). 
"(2) For purposes of this subsection, the term 'case management 
services' means services which will assist individuals eligible under 
the plan in gaining access to needed medical, social, educational, 
and other services. 
(2) Section 1915(b) of such Act (42 U.S.C. 1396n(b)) is amended by 
adding at the end thereof (after and below paragraph (4)) the 
following: "No waiver under this subsection may restrict the choice 
of the individual in receiving services under section 1905(a)(4)(C).". 
(b) EFFECTIVE DATE.—The amendments made by this section shall 
apply to services furnished on or after the date of the enactment of 
this Act. 
SEC. 9509. REVALUATION OF ASSETS. 
(a) REVALUATION OF ASSETS.—Section 1902(aX13) of the Social 
Security Act (42 U.S.C. 1396a(a)(13)), as amended by section 9505 of 
this Act, is further amended— 
(1) in subparagraph (B), by striking out "hospitals, skilled 
nursing facilities, and intermediate care facilities" and insert-
ing in lieu thereof "hospitals"; 
(2) by striking out "and" at the end of subparagraph (C); 
(3) by redesignating subparagraphs (C) and (D) as subpara-
graphs (D) and (E); and 
(4) by inserting after subparagraph (B) the following new 
subparagraph: 
"(C) that the State shall provide assurances satisfactory State and local 
to the Secretary that the valuation of capital assets, for governments. 
purposes of determining payment rates for skilled nursing 
facilities and intermediate care facilities, will not be in-
creased (as measured from the date of acquisition by the 
seller to the date of the change of ownership), solely as a 
result of a change of ownership, by more than the lesser 
of— 
"(i) one-half of the percentage increase (as measured 
over the same period of time, or, if necessary, as 
extrapolated retrospectively by the Secretary) in the 
Dodge Construction Systems Costs for Nursing Homes, 
applied in the aggregate with respect to those facilities 
which have undergone a change of ownership during 
the fiscal year, or 
"(ii) one-half of the percentage increase (as measured 
over the same period of time) in the Consumer Price 
Index for All Urban Consumers (United States city 
average);". 
(b) EFFECTIVE DATES.—(1) Except as provided in paragraphs (2) and 42 use 1396a 
(3), the amendments made by this section shall apply to medical note. 
assistance furnished on or after October 1, 1985, but only with 
respect to changes of ownership occurring on or after such date. 
(2) The amendments made by this section shall not apply with 
respect to a change of ownership pursuant to an enforceable agree-
ment entered into prior to October 1,1985. 
100 STAT. 212 
PUBLIC LAW 99-272—APR. 7, 1986 
State and local 
governments. 
42 use 1396. 
42 use 1396a 
note. 
42 use 1396a 
note. 
42 use 1396d 
note. 
State and local 
governments. 
(3) In the case of a State plan for medical assistance under title 
XIX of the Social Security Act which the Secretary of Health and 
Human Services determines requires State legislation (other than 
legislation appropriating funds) in order for the plan to meet the 
requirements imposed by the amendments made by this section, the 
State plan shall not be regarded as failing to comply with the 
requirements of such title solely on the basis of its failure to meet 
the requirements imposed by the amendments made by this section 
before the first day of the first calendar quarter beginning after the 
close of the first regular session of the State legislature that begins 
after the date of the enactment of this Act. 
(c) GAO STUDY.—The Comptroller General shall conduct a study 
of the effects of the amendments made by this section, and shall 
report the results of such study to the Congress two years after the 
date of the enactment of this Act. 
SEC. 9510. BEGINNING DATE OF OPTIONAL COVERAGE FOR INDIVIDUALS 
IN MEDICAL INSTITUTIONS. 
(a) COVERAGE.—Section 1902(a)(10)(A)(ii)(V) of the Social Security 
Act (42 U.S.C. 1396a(a)(10)(A)(ii)(V)) is amended by inserting "for a 
period of not less than 30 consecutive days (with eligibility by reason 
of this subclause beginning on the first day of such period)" after 
"are in a medical institution". 
(b) EFFECTIVE DATE,—The amendment made by this section shall 
apply with respect to payment for services furnished on or after 
October 1, 1985. 
SEC. 95n. OPTIONAL COVERAGE OF CHILDREN. 
(a) STATE OPTION.—Section 1905(n)(2) of the Social Security Act (42 
U.S.C. 1396d(h)(2)) is amended by inserting "(or such earlier date as 
the State may designate)" after "September 30, 1983". 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply to services furnished on or after April 1,1986. 
SEC. 
9
5
1
2
. 
OVERPAYMENT 
RECOVERY 
RULES. 
(a) OVERPAYMENT RECOVERY.-—-Section 1903(d)(2) of the Social 
Security Act (42 U.S.C. 1396b(d)(2)) is amended— 
(1) by inserting "(A)" after "(2)"; 
(2) by designating the second sentence as subparagraph (B), 
properly indented and aligned below subparagraph (A); and 
(3) by adding at the end thereof the following new subpara-
graphs: 
"(C) For purposes of this subsection, when an overpayment is 
discovered, which was made by a State to a person or other entity, 
the State shall have a period of 60 days in which to recover or 
attempt to recover such overpayment before adjustment is made in 
the Federal payment to such State on account of such overpayment. 
Except as otherwise provided in subparagraph (D), the adjustment 
in the Federal payment shall be made at the end of the 60 days, 
whether or not recovery was made. 
"(D) lii any case where the State is unable to recover a debt which 
represents an overpayment (or any portion thereof) made to a 
person or other entity on account of such debt having been dis-
charged in bankruptcy or otherwise being uncollectable, no adjust-
ment shall be made in the Federal payment to such State on account 
of such overpayment (or portion thereof).". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 213 
(b) EFFECTIVE DATE.—The amendments made by this section shall 
apply to overpayments identified for quarters beginning on or after 
October 1,1985. 
SEC. 9514. REGULATIONS FOR INTERMEDIATE CARE FACILITIES FOR THE 
MENTALLY RETARDED. 
The Secretary of Health and Human Services shall promulgate 
proposed regulations revising standards for intermediate care facili-
ties for the mentally retarded under title XIX of the Social Security 
Act within 60 days after the date of the enactment of this Act. 
SEC. 9515. LIFE SAFETY CODE RECOGNITION. 
For purposes of section 1905(c) of the Social Security Act, an 
intermediate care facility for the mentally retarded (as defined in 
section 1905(d) of such Act) which meets the requirements of the 
relevant sections of the 1985 edition of the Life Safety Code of the 
National Fire Protection Association shall be deemed to meet the 
fire safety requirements for intermediate care facilities for the 
mentally retarded until such time as the Secretary specifies a later 
edition of the Life Safety Code for purposes of such section, or the 
Secretary determines that more stringent standards are necessary 
to protect the safety of residents of such facilities. 
SEC. 9516. CORRECTION AND REDUCTION PLANS FOR INTERMEDIATE 
CARE FACILITIES FOR THE MENTALLY RETARDED. 
(a) CORRECTION AND REDUCTION PLANS.—Title XIX of the Social 
Security Act is amended by adding at the end thereof the following 
new subsection: 
42 u s e 1396b 
note. 
42 u s e 1396d 
note. 
42 u s e 1396. 
42 u s e 1396d 
and notes. 
CORRECTION AND REDUCTION PLANS FOR INTERMEDIATE CARE 
FACILITIES FOR THE MENTALLY RETARDED 
"SEC. 1919. (a) If the Secretary finds that an intermediate care 
facility for the mentally retarded has substantial deficiencies which 
do not pose an immediate threat to the health and safety of resi-
dents, the State may elect, subject to the limitations in this section, 
to— 
"(1) submit, within the number of days specified by the Sec-
retary in regulations which apply to submission of compliance 
plans with respect to deficiencies of such type, a written plan of 
correction which details the extent of the facility's current 
compliance with the standards promulgated by the Secretary, 
including all deficiencies identified during a validation survey, 
and which provides for a timetable for completion of necessary 
steps to correct all staffing deficiencies within 6 months, and a 
timetable for rectifying all physical plant deficiencies within 6 
months; or 
"(2) submit, within a time period consisting of the number of 
days specified for submissions under paragraph (1) plus 35 days, 
a written plan for permanently reducing the number of certified 
beds, within a maximum of 36 months, in order to permit any 
noncomplying buildings (or distinct parts thereof) to be vacated 
and any staffing deficiencies to be corrected (hereinafter in this 
section referred to as a 'reduction plan'). 
"(b) As conditions of approval of any reduction plan submitted 
pursuant to subsection (a)(2), the State must— 
"(1) provide for a hearing to be held at the affected facility at 
least 35 days prior to submission of the reduction plan, with 
State and local 
governments. 
42 u s e 1396r. 
100 STAT. 214 
PUBLIC LAW 99-272—APR. 7, 1986 
reasonable notice thereof to the staff and residents of the 
facility, responsible members of the residents' families, and the 
general public; 
"(2) demonstrate that the State has successfully provided 
home and community services similar to the services proposed 
to be provided under the reduction plan for similar individuals 
eligible for medical assistance; and 
"(3) provide assurances that the requirements of subsection (c) 
shall be met with respect to the reduction plan. 
"(c) The reduction plan must— 
"(1) identify the number and service needs of existing facility 
residents to be provided home or community services and the 
timetable for providing such services, in 6 month intervals, 
within the 36-month period; 
"(2) describe the methods to be used to select such residents 
for home and community services and to develop the alternative 
home and community services to meet their needs effectively; 
"(3) describe the necessary safeguards that will be applied to 
protect the health and welfare of the former residents of the 
facility who are to receive home or community services, includ-
ing adequate standards for consumer and provider participation 
and assurances that applicable State licensure and applicable 
State and Federal certification requirements will be met in 
providing such home or community services; 
"(4) provide that residents of the affected facility who are 
eligible for medical assistance while in the facility shall, at their 
option, be placed in another setting (or another part of the 
affected facility) so as to retain their eligibility for medical 
assistance; 
"(5) specify the actions which will be taken to protect the 
health and safety of the residents who remain in the affected 
facility while the reduction plan is in effect; 
"(6) provide that the ratio of qualified staff to residents at the 
affected facility (or the part thereof) which is subject to the 
reduction plan will be the higher of— 
"(A) the ratio which the Secretary determines is nec-
essary in order to assure the health and safety of the 
residents of such facility (or part thereof); or 
"(B) the ratio which was in effect at the time that the 
finding of substantial deficiencies (referred to in subsection 
(a)) was made; and 
"(7) provide for the protection of the interests of employees 
affected by actions under the reduction plan, including— 
"(A) arrangements to preserve employee rights and 
benefits; 
"(B) training and retraining of such employees where 
necessary; 
"(C) redeployment of such employees to community set-
tings under the reduction plan; and 
(D) making maximum efforts to guarantee the employ-
ment of such employees (but this requirement shall not be 
construed to guarantee the employment of any employee). 
"(dXD The Secretary must provide for a period of not less than 30 
days after the submission of a reduction plan by a State, during 
which comments on such reduction plan may be submitted to the 
Secretary, before the Secretary approves or disapproves such reduc-
tion plan. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 215 
"(2) If the Secretary approves more than 15 reduction plans under 
this section in any fiscal year, any reduction plans approved in 
addition to the first 15 such plans approved, must be for a facility (or 
part thereof) for which the costs of correcting the substantial defi-
ciencies (referred to in subsection (a)) are $2,000,000 or greater (as 
demonstrated by the State to the satisfaction of the Secretary). 
"(e)(1) If the Secretary, at the conclusion of the 6-month plan of 
correction described in subsection (a)(1), determines that the State 
has substantially failed to correct the deficiencies described in 
subsection (a), the Secretary may terminate the facility's provider 
agreement in accordance with the provisions of section 1910(c). 
"(2) In the case of a reduction plan described in subsection (a)(2), if 
the Secretary determines, at the conclusion of the initial 6-month 
period or any 6-month interval thereafter, that the State has 
substantially failed to meet the requirements of subsection (c), the 
Secretary shall— 
"(A) terminate the facility's provider agreement in accord-
ance with the provisions of section 1910(c); or 
"(B) if the State has failed to meet such requirements despite 
good faith efforts, disallow, for purposes of Federal financial 
participation, an amount equal to 5 percent of the cost of care 
for all eligible individuals in the facility for each month for 
which the State fails to meet such requirements. 
"(f) The provisions of this section shall apply only to plans of 
correction and reduction plans approved by the Secretary within 3 
years after the effective date of final regulations implementing this 
section.". 
(b) EFFECTIVE DATE.—(1) The amendment made by this section 
shall become effective on the date of the enactment of this Act. 
(2) The Secretary of Health and Human Services shall issue a 
notice of proposed rulemaking with respect to section 1919 of the 
Social Security Act within 60 days after the date of the enactment of 
this Act, and shall allow a period of 30 days for comment thereon 
prior to promulgating final regulations implementing such section. 
(c) REPORT.—'The Secretary of Health and Human Services shall 
submit a report to the Congress on the implementation and results 
of section 1919 of the Social Security Act. Such report shall be 
submitted not later than 30 months after the effective date of final 
regulations promulgated to implement such section. 
SEC. 9517. MODIFYING APPLICATION OF MEDICAID HMO PROVISIONS FOR 
CERTAIN HEALTH CENTERS. 
(a) WAIVING APPLICATION OF 75 PERCENT RULE AND CERTAIN 
ORGANIZATIONAL REQUIREMENTS.—Section 1903(m)(2) of the Social 
Security Act (42 U.S.C. 1396b(mX2)) is amended— 
(1) in subparagraph (A), by striking out "(B) and (C)" and 
inserting in lieu thereof "(B), (C), and (G)"; 
(2) in subparagraph (F)— 
(A) by striking out "(FXi) In the case of a contract with a 
health maintenance organization described in clause (ii)" 
and inserting in lieu thereof "(F) in the case of a contract 
with an entity described in subparagraph (G) or with a 
qualified health maintenance organization (as defined in 
section 1310(d) of the Public Health Service Act) which 
meets the requirement of subparagraph (A)(ii)"; 
(B) by striking out "such organization" and inserting in 
lieu thereof "such entity or organization"; and 
42 u s e 13961. 
Law 
enforcement 
and crime. 
42 u s e 1396r 
note. 
42 u s e 1396r 
note. 
Contracts. 
42 u s e 300e-9. 
100 STAT. 216 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 254b, 
254c. 
40 u s e app. 1. 
Ante, p. 215. 
42 u s e 1396b 
note. 
42 u s e 1396n. 
42 u s e 1396b 
note. 
(C) by striking out clause (ii); and 
(3) by adding at the end thereof the following new subpara-
graph: 
"(G) In the case of an entity which is receiving (and has received 
during the previous two years) a grant of at least $100,000 under 
section 329(d)(1)(A) or 330(d)(1) of the Public Health Service Act or is 
receiving (and has received during the previous two years) at least 
$100,000 (by grant, subgrant, or subcontract) under the Appalachian 
Regional Development Act of 1965, clauses (i) and (ii) of subpara-
graph (A) shall not apply.". 
(b) PERMITTING 6-MONTH CONTINUATION OF BENEFITS.—Section 
1902(e)(2) of such Act (42 U.S.C. 1396a(e)(2)) is amended— 
(1) in subparagraph (A)— 
(A) by inserting "or with an entity described in section 
1903(m)(2)(G)" after "Public Health Service Act)"; and 
(B) by inserting "or entity" before the period; and 
(2) in subparagraph (B)— 
(A) by striking out "a health maintenance organization" 
and inserting in lieu thereof "an organization or entity"; 
and 
(B) by inserting "or entity" after "the organization". 
(c) HEALTH INSURING ORGANIZATIONS.—(1) Section 1903(m)(2XA) of 
the Social Security Act (42 U.S.C. 1396b(m)(2)(A)) is amended, in the 
matter before clause (i)— 
(1) by inserting "(including a health insuring organization)" 
after "any entity"; and 
(2) by inserting "(directly 
providers of services)" after 
(2)(A) Except as provided in subparagraph (B), the amendments 
made by paragraph (1) shall apply to expenditures incurred for 
health insuring organizations which first become operational on or 
after January 1,1986. 
(B) In the case of a health insuring organization— 
(i) which first becomes operational on or after January 1, 
1986, but 
(ii) for which the Secretary of Health and Human Services 
has waived, under section 1915(b) of the Social Security Act and 
before such date, certain requirements of section 1902 of such 
Act, 
clauses (ii) and (iv) of section 1903(m)(2)(A) of such Act shall not 
apply during the period for which such waiver is effective. 
SEC. 9518. EXTENSION OF MMIS DEADLINE. 
(a) NEW DEADLINE.—Section 1903(r)(l)(B) of the Social Security 
Act (42 U.S.C. 1396b(r)(l)(B)) is amended by striking out "the earlier 
o f and all that follows through the end of subparagraph (B) and 
inserting in lieu thereof "September 30, 1985.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to payment under section 1903(a) of the Social Security 
Act for calendar quarters beginning on or after October 1, 1982. 
SEC. 9519. REPORT ON ADJUSTMENT IN MEDICAID PAYMENTS FOR HOS-
PITALS SERVING DISPROPORTIONATE NUMBERS OF LOW 
INCOME PATIENTS. 
The Secretary of Health and Human Services shall transmit to 
Congress, not later than October 1, 1986, a report that— 
or through arrangements with 
responsible for the provision' 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 217 
42 u s e 1396a 
note. 
(1) describes the methodology used by States under section 
1902(a)(13)(A) of the Social Security Act, in their making pay- 42 USC 1396a. 
ments to hospitals, in taking into account the situation of 
hospitals that serve a disproportionate number of low income 
patients with special needs; 
(2) identifies each of those hospitals that have had the amount 
of their payments under that title adjusted under that section; 
and 
(3) for each of those hospitals, describes the proportion of total 
inpatient-days attributable to low income patients and the 
proportion of total inpatient-days attributable to patients en-
titled to medical assistance under that title. 
SEC. 9520. TASK FORCE ON TECHNOLOGY-DEPENDENT CHILDREN. 
(a) APPOINTMENT OF TASK FORCE.—The Secretary of Health and 
Human Services, within six months after the date of the enactment 
of this Act, shall establish a task force concerning alternatives to 
institutional care for technology-dependent children (as defined in 
subsection (e)). 
(b) MEMBERSHIP.—The task force shall include representatives of 
Federal and State agencies with responsibilities relating to child 
health, health insurers, large employers (including those that self-
insure for health care costs), providers of health care to technology-
dependent children, and parents of technology-dependent children. 
(c) FUNCTIONS OF TASK FORCE.—The task force shall— 
(1) identify barriers that prevent the provision of appropriate 
care in a home or community setting to meet the special needs 
of technology-dependent children; and 
(2) recommend changes in the provision and financing of 
health care in private and public health care programs (includ-
ing appropriate joint public-private initiatives) so as to provide 
home and community-based alternatives to the institutionaliza-
tion of technology-dependent children. 
(d) REPORT.—The task force shall make a final report to the 
Secretary and to the Congress on its activities not later than two 
years after the date of the enactment of this Act. 
(e) DEFINITION.—In this section, the term "technology-dependent 
child" means a child who has a chronic illness which makes the 
child dependent upon the continuing use of medical care technology 
(such as a ventilator). 
SEC. 9522. EXPANSION OF SERVICES UNDER DEMONSTRATION WAIVERS. 
In the case of waivers granted to (or submitted during 1986 by) the 
State of Oregon under section 1915(b) of the Social Security Act, the 
Secretary of Health and Human Services may waive the require-
ments of section 1903(m)(2)(A) of such Act with respect to any entity 
providing services under any such waiver if such entity does not 
provide more than 5 of the services listed in section 1903(m)(2)(A) of 
such Act, and does not provide inpatient hospital services. 
SEC. 9523. EXTENSION OF TEXAS WAIVER PROJECT. 
(a) RENEWED APPROVAL.—Notwithstanding any limitations con-
tained in section 1115 of the Social Security Act but subject to 42 USC 1315. 
subsection (b) of this section, the Secretary of Health and Human 
Services, upon application, shall renew approval of demonstration 
project number ll-P-97473/6-06 ("Modifications under the Texas 
System of Care for the Elderly: Alternatives to the Institutionalized 
Oregon. 
42 USC 1396n. 
42 USC 1396b. 
100 STAT. 218 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 1396n. 
42 use 1396b. 
42 u s e 1396a. 
42 use 632a. 
42 u s e 1396s. 
42 u s e 602. 
42 use 605. 
42 u s e 614. 
42 use 1382h. 
42 u s e 673. 
8 u s e 1522. 
42 use 1396a 
note. 
Aged"), previously approved under that section, until January 1, 
1989. 
(b) TERMS AND CONDITIONS.—The Secretary's renewed approval of 
the project under subsection (a)— 
(1) shall be on the same terms and conditions as applied to the 
project as of December 31, 1985; and 
(2) shall remain in effect until such time as the Secretary 
finds that the applicant no longer complies with such terms and 
conditions. 
SEC. 9524. WISCONSIN HEALTH MAINTENANCE ORGANIZATION WAIVER. 
The waiver granted to the State of Wisconsin pursuant to section 
1915(b) of the Social Security Act relating to the requirements of 
section 1903(m) of such Act in conjunction with a waiver of the 
requirements of section 1902(a)(23) of such Act shall, upon request 
by the State, be reinstated, and shall be renewable for terms of 2 
years, subject to the showings required generally under section 
1915(b) of such Act. 
SEC. 9525. NEW JERSEY DEMONSTRATION PROJECT RELATING TO TRAIN-
ING OF AFDC RECIPIENTS AS HOME HEALTH AIDES. 
The Secretary of Health and Human Services shall continue for 
one additional year the demonstration project conducted by the 
State of New Jersey pursuant to section 966 of the Omnibus Rec-
onciliation Act of 1980. Federal matching for such demonstration 
project shall be 50 percent. 
SEC. 9526. REFERENCE TO PROVISIONS OF LAW PROVIDING COVERAGE 
UNDER, OR DIRECTLY AFFECTING, THE MEDICAID PROGRAM. 
Title XIX of the Social Security Act is amended by adding at the 
end thereof the following new section: 
"REFERENCES TO L A W S DIRECTLY AFFECTING MEDICAID PROGRAM 
"SEC. 1920. (a) AUTHORITY OR REQUIREMENTS TO COVER ADDITIONAL 
INDIVIDUALS.—For provisions of law which make additional individ-
uals eligible for medical assistance under this title, see the 
following: 
"(1) AFDC—(A) Section 402(aX37) of this Act (relating to 
individuals who lose AFDC eligibility due to increased 
earnings). 
"(B) Section 406(h) of this Act (relating to individuals who lose 
AFDC eligibility due to increased collection of child or spousal 
support). 
(C) Section 414(g) of this Act (relating to certain individuals 
participating in work supplementation programs). 
"(2) SSL—Section 1619 of this Act (relating to benefits for 
individuals who perform substantial gainful activity despite 
severe medical impairment). 
"(3) FOSTER CARE AND ADOPTION ASSISTANCE.—Section 473(b) of 
this Act (relating to medical Eissistance for children in foster 
care and for adopted children). 
"(4) REFUGEE ASSISTANCE.—Section 412(eX5) of the Immigra-
tion and Nationality Act (relating to medical assistance for 
certain refu^rees). 
"(5) MISCELLANEOUS.—(A) Section 230 of Public Law 93-66 
(relating to deeming eligible for medical assistance certain 
essential persons). 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 219 
42 u s e 1396a 
note. 
42 use 1396a 
note. 
42 use 1396a 
note. 
42 use 1396a 
note. 
42 use 1396a 
note. 
42 use 1382g. 
42 use 1382 
note. 
"(B) Section 231 of Public Law 93-66 (relating to deeming 
eligible for medical assistance certain persons in medical 
institutions). 
"(C) Section 232 of Public Law 93-66 (relating to deeming 
eligible for medical assistance certain blind and disabled medi-
cally indigent persons). 
"(D) Section 13(c) of Public Law 93-233 (relating to deeming 
eligible for medical assistance certain individuals receiving 
mandatory State supplementary payments). 
"(E) Section 503 of Public Law 94-566 (relating to deeming 
eligible for medical assistance certain individuals who would be 
eligible for supplemental security income benefits but for cost-
of-living increases in social security benefits). 
"(F) Section 310(b)(1) of Public Law 96-272 (relating to 
continuing medicaid eligibility for certain recipients of Veter-
ans' Administration pensions). 
"
O
t
>
) ADDITIONAL STATE PLAN REQUIREMENTS.—For other provi-
sions of law that establish additional requirements for State plans to 
be approved under this title, see the following: 
"(1) Section 1618 of this Act (relating to requirement for 
operation of certain State supplementation programs). 
"(2) Section 212(a) of Public Law 93-66 (relating to requiring 
mandatory minimum State supplementation of SSI benefits 
program). . 
SEC. 9527. CHILDREN WITH SPECIAL HEALTH CARE NEEDS. 
(a) Section 501(aX4) of the Social Security Act (42 U.S.C. 701(aX4)) 
is amended by striking out "children who are crippled or who are 
suffering from conditions leading to crippling" and inserting in lieu 
thereof "children who are 'children with special health care needs' 
or who are suffering from conditions leading to such status". 
O
b
) Section 501(a) of such Act is amended by striking out "crippled 
children" in the matter following paragraph (4) and inserting in lieu 
thereof "children with special health care needs". 
(c) Section 5010t>Xl)(A) of such Act is amended by striking out 
"crippled children's services" and inserting in lieu thereof "services 
for children with special health care needs". 
(d) Section 502(a)(2XB) of such Act is amended— 
(1) by striking out "crippled children's programs" and insert-
ing in lieu thereof "programs for children with special health 
care needs"; and 
(2) by striking out "crippled children's services" and inserting 
in lieu thereof "services for children with special health care 
needs". 
(e) Sections 504(bXl) and 5090t)) of such Act are each amended by 
striking out "crippled children" and inserting in lieu thereof "chil-
dren with special health care needs". 
SEC. 9528. ANNUAL CALCULATION OF FEDERAL MEDICAL ASSISTANCE 
PERCENTAGE. 
(a) ANNUAL CALCULATION.—Section 1101(a)(8XP) of the Social 
42usei30i. 
Security Act is amended— 
(1) by striking out "even-numbered"; and 
(2) by striking out "eight quarters" and inserting in lieu 
thereof "four quarters". 
Ot)) EFFECTIVE DATE.—The amendments made by this section shall 
apply to the Federal percentage (and Federal medical assistance 
42 use 702. 
42 use 704, 709. 
42 use 1301 
note. 
100 STAT. 220 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 673. 
42 u s e 606. 
42 u s e 601. 
42 u s e 1396a 
note. 
42 u s e 1396d. 
42 u s e 670. 
42 u s e 1396a 
note. 
percentage) for fiscal years 1987 and thereafter. Such amendments 
shall 
apply without 
regard 
to the 
requirement 
of section 
1101(a)(8)(B) of the Social Security Act relating to the promulgation 
of the Federal percentage prior to November 30 of the year preced-
ing the year in which the new Federal percentage becomes 
applicable. The Secretary of Health and Human Services shall 
promulgate such new percentage for fiscal year 1987 as soon as 
practicable after the date of the enactment of this Act. 
SEC. 9529. MEDICAID COVERAGE RELATING TO ADOPTION ASSISTANCE 
AND FOSTER CARE. 
(a) STATE OF RESIDENCE.—(1) Section 1902(a) of the Social Security 
Act (42 U.S.C. 1396a(a)) is amended by adding at the end thereof the 
following: 
"For purposes of this title, any child who meets the requirements of 
paragraph (1) or (2) of section 473(b) shall be deemed to be a 
dependent child as defined in section 406 and shall be deemed to be 
a recipient of aid to families with dependent children under part A 
of title IV in the State where such child resides.". 
(2) EFFECTIVE DATE.—The amendment made by paragraph (1) 
shall apply to medical assistance furnished on or after the first 
calendar quarter that begins more than 90 days after the date of the 
enactment of this Act. 
(b) ELIGIBILITY OF CERTAIN 
ADOPTED CHILDREN.—(1) Section 
1902(a)(10)(A)(ii) of the Social Security Act, as amended by section 
9505 of this Act, is amended— 
(A) by striking out "or" at the end of subclause (VI); 
(B) by striking out the semicolon at the end of subclause (VII) 
and inserting in lieu thereof ", or"; and 
(C) by adding after subclause (VII) the following new 
subclause: 
"(VIII) who is a child described in section 1905(a)(i)— 
"(aa) for whom there is in effect an adoption assist-
ance agreement (other than an agreement under part E 
of title IV) between the State and an adoptive parent or 
parents, 
"(bb) who the State agency responsible for adoption 
assistance has determined cannot be placed with adop-
tive parents without medical assistance because such 
child has special needs for medical or rehabilitative 
care, and 
"(cc) who was eligible for medical assistance under 
the State plan prior to the adoption assistance agree-
ment being entered into, or who would have been 
eligible for medical assistance at such time if the eligi-
bility standards and methodologies of the State's foster 
care program under part E of title IV were applied 
rather than the eligibility standards and methodologies 
of the State's aid to families with dependent children 
program under part A of title IV;". 
(2) In the case of an adoption assistance agreement (other than an 
agreement under part E of title IV of the Social Security Act) 
entered into before the date of the enactment of this Act— 
(A) the requirements of subdivisions (aa) and (bb) of section 
1902(a)(10)(A)(ii)(VIII) of the Social Security Act shall be deemed 
to be met if the State agency responsible for adoption assistance 
agreements determines that— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 221 
(i) at the time of adoptive placement the child had special 
needs for medical or rehabilitative care that made the child 
difficult to place; and 
(ii) there is in effect with respect to such child an adop-
tion assistance agreement between the State and an adop-
tive parent or parents; and 
(B) the requirement of subdivision (cc) of such section shall be 
deemed to be met if the child was found by the State to be 
eligible for medical assistance prior to such agreement being 
entered into. 
(3) This subsection, and the amendments made by this subsection, 
shall apply to adoption assistance agreements entered into before, 
on, or after the date of the enactment of this Act. 
42 use 1396a 
note. 
Subtitle C—Task Force on Long-Term Health 
Care Policies 
SEC. 9601. RECOMMENDATIONS FOR LONG-TERM HEALTH CARE POLICIES. 
(a) ESTABLISHMENT OF TASK FORCE.—(1) The Secretary of Health 
and Human Services (hereinafter in this section referred to as the 
"Secretary") shall establish a Task Force on Long-Term Health Care 
Policies (hereinafter in this section referred to as the "Task Force"). 
The Task Force shall be established not later than 60 days after the 
date of the enactment of this Act and in consultation with the 
National Association of Insurance Commissioners. 
(b) COMPOSITION OF TASK FORCE.—The Task Force shall be com-
posed of 18 members, which shall include— 
(1) two members representing the National Association of 
Insurance Commissioners, 
(2) three members representing Federal and State agencies 
with responsibilities relating to health or the elderly, 
(3) three members representing private insurers, 
(4) three members from organizations representing consumers 
or the elderly, and 
(5) three members from organizations representing providers 
of long-term health care services. 
The Secretary shall designate a member of the Task Force as chair. 
(c) DEVELOPMENT OF RECOMMENDATIONS.—The Task Force shall 
develop recommendations for long-term health care policies, includ-
ing recommendations designed— 
(1) to limit marketing and agent abuse for those policies, 
(2) to assure the dissemination of such information to consum-
ers as is necessary to permit informed choice in purchasing the 
policies and to reduce the purchase of unnecessary or duplica-
tive coverage, 
(3) to assure that benefits provided under the policies are 
reasonable in relationship to premiums charged, and 
(4) to promote the development and availability of long-term 
health care policies which meet these recommendations. 
(d) REPORT.—Not later than 18 months after the date of the 
enactment of this Act, the Task Force shall report to the Secretary, 
to the Committee on Energy and Commerce of the House of Rep-
resentatives and to the Committee on Labor and Human Resources 
of the Senate respecting— 
42 use 1395b 
note. 
100 STAT. 222 
PUBLIC LAW 99-272—APR. 7, 1986 
(1) the recommendations developed under subsection (c), 
including an explanation of the reasons for their selection, and 
(2) such recommendations for additional activities respecting 
long-term health care policies as the Task Force finds 
appropriate. 
The Secretary, in cooperation with the National Association of 
Insurance Commissioners, shall provide for the dissemination of the 
report to each of the States. 
(e) TERMINATION OF TASK FORCE.—The Task Force shall terminate 
90 days after the date of submission of the report required under 
subsection (d). 
(f) REPORTS OF SECRETARY.—The Secretary shall transmit to the 
Committee on Energy and Commerce of the House of Representa-
tives and to the Committee on Labor and Human Resources of the 
Senate two reports on— 
(1) actions taken by the States to implement the recommenda-
tions developed under this section and to recommend additional 
action; and 
(2) recommendations for legislative and administrative action, 
if any, needed to respond to issues raised by the Task Force or to 
improve consumer protection with respect to long-term health 
care policies. 
The first report shall be transmitted 18 months after the date the 
report is made under subsection (d), and the second report shall be 
transmitted 18 months later. 
(g) LONG-TERM HEALTH CARE POUCY DEFINED.—In this section, 
the term "long-term health care policy" means an insurance policy, 
or similar health benefits plan, which is designed for or marketed as 
providing (or making payments for) health care services (such as 
nursing home care and home health care) or related services (which 
may include home and community-based services), or both, over an 
extended period of time. 
(h) ASSURANCE OF STATES' JURISDICTION.—Nothing in this section 
shall be construed as recommending Federal preemption of the 
States in overseeing the operation and regulation of insurance 
carriers in their respective jurisdictions. 
TITLE X—PRIVATE HEALTH INSURANCE 
COVERAGE 
SEC. 10001. EMPLOYERS REQUIRED TO PROVIDE CERTAIN EMPLOYEES 
AND FAMILY MEMBERS WITH CONTINUED HEALTH INSUR-
ANCE COVERAGE AT GROUP RATES (INTERNAL REVENUE 
CODE AMENDMENTS). 
(a) DENIAL OF DEDUCTION FOR EMPLOYER CONTRIBUTION TO PLAN.— 
26 use 162. 
Subsection (i) of section 162 of the Internal Revenue Code of 1954 
(relating to deduction for trade or business expenses with respect to 
group health plans) is amended by redesignating paragraph (2) as 
paragraph (3) and by inserting after paragraph (1) the following new 
paragraph: 
"(2) PLANS MUST PROVIDE CONTINUATION COVERAGE TO CERTAIN 
INDIVIDUALS.— 
"(A) IN GENERAL.—No deduction shall be allowed under 
this section for expenses paid or incurred by an employer 
for any group health plan maintained by such employer 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 223 
unless all such plans maintained by such employer meet 
the continuing coverage requirements of subsection (k). 
"(B) EXCEPTION FOR CERTAIN SMALL EMPLOYERS, ETC.— 
Subparagraph (A) shall not apply to any plan described in 
section 106(b)(2).". 
(b) DENIAL OF EXCLUSION FOR HIGHLY COMPENSATED INDIVID- 
26 use 106. 
UALS.—Section 106 of the Internal Revenue Code of 1954 (relating to 
contributions by employer to accident and health plans) is amended 
by inserting "(a) IN GENERAL.—" before "Gross" and by inserting at 
the end thereof the following new subsection: 
"(b) EXCEPTION FOR HIGHLY COMPENSATED INDIVIDUALS WHERE 
PLAN FAILS TO PROVIDE CERTAIN CONTINUATION COVERAGE.— 
"(1) IN GENERAL.—Subsection (a) shall not apply to any 
amount contributed by an employer on behalf of a highly 
compensated individual (within the meaning of section 105(h)(5)) 
to a group health plan maintained by such employer unless all 
such plans maintained by such employer meet the continuing 
coverage requirements of section 162(k). 
"(2) EXCEPTION FOR CERTAIN PLANS.—Paragraph (1) shall not 
apply to any— 
"(A) group health plan for any calendar year if all 
employers maintaining such plan normally employed fewer 
than 20 employees on a typical business day during the 
preceding calendar year, 
"(B) governmental plan (within the meaning of section 
414(d)), or 
"(C) church plan (within the meaning of section 414(e)). 
Under regulations, rules similar to the rules of subsections (a) 
and (b) of section 52 (relating to employers under common 
control) shall apply for purposes of subparagraph (A). 
"(3) GROUP HEALTH PLAN.—For purposes of this subsection, 
the term 'group health plan' has the meaning given such term 
by section 162(i)(3).". 
(c) CONTINUATION COVERAGE REQUIREMENTS.—Section 162 of the 
Internal Revenue Code of 1954 is amended by redesignating subsec- 
26 USC 162. 
tion (k) as subsection (1) and by inserting after subsection (j) the 
following new subsection: 
"(k) CONTINUATION COVERAGE REQUIREMENTS OF GROUP HEALTH 
PLANS.— 
"(1) IN GENERAL.—For purposes of subsection (iX2) and section 
106(b)(1), a group health plan meets the requirements of this 
subsection only if each qualified beneficiary who would lose 
coverage under the plan as a result of a qualifying event is 
entitled to elect, within the election period, continuation cov-
erage under the plan. 
"(2) CONTINUATION COVERAGE.—For purposes of paragraph (1), 
the term 'continuation coverage' means coverage under the 
plan which meets the following requirements: 
"(A) TYPE OF BENEFIT COVERAGE.—The coverage must 
consist of coverage which, £is of the time the coverage is 
being provided, is identical to the coverage provided under 
the plan to similarly situated beneficiaries under the plan 
with respect to whom a qualifying event has not occurred. 
"(B) PERIOD OF COVERAGE.—The coverage must extend 
for at least the period beginning on the date of the qual-
ifying event and ending not earlier than the earliest of the 
following-
100 STAT. 224 
PUBLIC LAW 99-272—APR. 7, 1986 
"(i) MAXIMUM PERIOD.—In the case o
f
— 
"(I) a qualifying event described in paragraph 
(3)(B) (relating to terminations and reduced hours), 
the date which is 18 months after the date of the 
qualifying event, and 
"(II) any qualifying event not described in 
subclause (I), the date which is 36 months after the 
date of the qualifying event, 
"(ii) END OF PLAN.—The date on which the employer 
ceases to provide any group health plan to any em-
ployee. 
"(iii) FAILURE TO PAY PREMIUM.—The date on which 
coverage ceases under the plan by reason of a failure to 
make timely payment of any premium required under 
the plan with respect to the qualified beneficiary. 
"(iv) REEMPLOYMENT OR MEDICARE ELIGIBILITY.—The 
date on which the qualified beneficiary first becomes, 
after the date of the election— 
"(I) a covered employee under any other group 
health plan, or 
"(II) entitled to benefits under title XVIII of the 
42 use 1395. 
Social Security Act. 
"(v) REMARRIAGE OF SPOUSE.—In the case of an 
individual who is a qualified beneficiary by reason of 
being the spouse of a covered employee, the date on 
which the beneficiary remarries and becomes covered 
under a group health plan. 
"(C) PREMIUM REQUIREMENTS.—The plan may require 
payment of a premium for any period of continuation cov-
erage, except that such premium— 
"(i) shall not exceed 102 percent of the applicable 
premium for such period, and 
"(ii) may, at the election of the payor, be made in 
monthly installments. 
If an election is made after the qualifying event, the plan 
shall permit payment for continuation coverage during the 
period preceding the election to be made within 45 days of 
the date of the election. 
"(D) 
No 
REQUIREMENT OF INSURABILITY.—The coverage 
may not be conditioned upon, or discriminate on the basis 
of lack of, evidence of insurability. 
"(E) CONVERSION OPTION.—In the case of a qualified bene-
ficiary whose period of continuation coverage expires under 
subparagraph (B)(i), the plan must, during the 180-day 
period ending on such expiration date, provide to the quali-
fied beneficiary the option of enrollment under a conver-
sion health plan otherwise generally available under the 
plan. 
"(3) QUALIFYING EVENT.—For purposes of this subsection, the 
term 'qualifying event' means, with respect to any covered 
employee, any of the following events which, but for the 
continuation coverage required under this subsection, would 
result in the loss of coverage of a qualified beneficiary: 
"(A) The death of the covered employee. 
"(B) The termination (other than by reason of such 
employee's gross misconduct), or reduction of hours, of the 
covered employee's employment. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 225 
"(C) The divorce or legal separation of the covered em-
ployee from the employee's spouse. 
"(D) The covered employee becoming entitled to benefits 
under title XVIII of the Social Security Act. 
42 USC 1395. 
"(E) A dependent child ceasing to be a dependent child 
under the generally applicable requirements of the plan. 
"(4) APPLICABLE PREMIUM.—For purposes of this subsection— 
"(A) IN GENERAL.—The term 'applicable premium' means, 
with respect to any period of continuation coverage of 
qualified beneficiaries, the cost to the plan for such period 
of the coverage for similarly situated beneficiaries with 
respect to whom a qualifying event has not occurred (with-
out regard to whether such cost is paid by the employer or 
employee). 
"(B) SPECIAL RULE FOR SELF-INSURED PLANS.—To the 
extent that a plan is a self-insured plan— 
"(i) IN GENERAL.—Except as provided in clause (ii), 
the applicable premium for any period of continuation 
coverage of qualified beneficiaries shall be equal to a 
reasonable estimate of the cost of providing coverage 
for such period for similarly situated beneficiaries 
which— 
"(I) is determined on an actuarial basis, and 
"(II) takes into account such factors as the Sec-
retary may prescribe in regulations. 
"(ii) DETERMINATION ON BASIS OF PAST COST.—If a plan 
administrator elects to have this clause apply, the ap-
plicable premium for any period of continuation cov-
erage of qualified beneficiaries shall be equal to— 
"(I) the cost to the plan for similarly situated 
beneficiaries for the same period occurring during 
the preceding determination period under subpara-
graph (C), adjusted by 
"(II) the percentage increase or decrease in the 
implicit price deflator of the gross national product 
(calculated by the Department of Commerce and 
published in the Survey of Current Business) for 
the 12-month period ending on the last day of the 
sixth month of such preceding determination 
period. 
"(iii) CLAUSE (ii) NOT TO APPLY WHERE SIGNIFICANT 
CHANGE.—A plan administrator may not elect to have 
clause (ii) apply in any case in which there is any 
significant 
difference, 
between the determination 
period and the preceding determination period, in cov-
erage under, or in employees covered by, the plan. The 
determination under the preceding sentence for any 
determination period shall be made at the same time as 
the determination under subparagraph (C). 
"(C) DETERMINATION PERIOD.—The determination of any 
applicable premium shall be made for a period of 12 months 
and shall be made before the beginning of such period. 
"(5) ELECTION.—For purposes of this subsection— 
"(A) ELECTION PERIOD.—The term 'election period' means 
the period which— 
100 STAT. 226 
PUBLIC LAW 99-272—APR. 7, 1986 
"(i) begins not later than the date on which coverage 
terminates under the plan by reason of a qualifying 
event, 
"(ii) is of at least 60 days' duration, and 
"(iii) ends not earlier than 60 days after the later of— 
"(I) the date described in clause (i), or 
"(11) in the case of any qualified beneficiary who 
receives notice under paragraph (6)(D), the date of 
such notice. 
"(B) 
EFFECT OF ELECTION ON OTHER BENEFICIARIES.— 
Except as otherwise specified in an election, any election by 
a qualified beneficiary described in clause (i)(I) or (ii) of 
paragraph (7)(B) shall be deemed to include an election of 
continuation coverage on behalf of any other qualified bene-
ficiary who would lose coverage under the plan by reason of 
the qualifying event. 
"(6) NOTICE REQUIREMENTS.—In accordance with regulations 
prescribed by the Secretary— 
"(A) the group health plan shall provide, at the time of 
commencement of coverage under the plan, written notice 
to each covered employee and spouse of the employee (if 
any) of the rights provided under this subsection, 
"(B) the employer of an employee under a plan must 
notify the plan administrator of a qualifying event de-
scribed in subparagraph (A), (B), or (D) of paragraph (3) with 
respect to such employee within 30 days of the date of the 
qualifying event, 
"(C) each covered employee or qualified beneficiary is 
responsible for notifying the plan administrator of the 
occurrence of any qualifying event described in subpara-
graph (C) or (E) of paragraph (3), and 
"(D) the plan administrator shall notify— 
"(i) in the case of a qualifying event described in 
subparagraph (A), (B), or (D) of paragraph (3), any 
qualified beneficiary with respect to such event, and 
"(ii) in the case of a qualifying event described in 
subparagraph (C) or (E) of paragraph (3) where the 
covered employee notifies the plan administrator under 
subparagraph (C), any qualified beneficiary with re-
spect to such event, 
of such beneficiary's rights under this subsection. 
For purposes of subparagraph (D), any notification shall be 
made within 14 days of the date on which the plan adminis-
trator is notified under subparagraph (B) or (C), whichever is 
applicable, and any such notification to an individual who is a 
qualified beneficiary as the spouse of the covered employee shall 
be treated as notification to all other qualified beneficiaries 
residing with such spouse at the time such notification is made. 
"(7) DEFINITIONS.—For purposes of this subsection— 
"(A) COVERED EMPLOYEE.—The term 'covered employee' 
means an individual who is (or was) provided coverage 
under a group health plan by virtue of the individual's 
employment or previous employment with an employer 
"(B) QUAUFIED BENEFICIARY.— 
"(i) IN GENERAL.—The term 'qualified beneficiary' 
means, with respect to a covered employee under a 
group health plan, any other individual who, on the 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 227 
day before the qualifying event for that employee, is a 
beneficiary under the plan— 
"(I) as the spouse of the covered employee, or 
"(II) as the dependent child of the employee, 
"(ii) SPECIAL RULE FOR TERMINATIONS AND REDUCED 
EMPLOYMENT.—In the case of a qualifying event de-
scribed in paragraph (3)(B), the term 'qualified bene-
ficiary' includes the covered employee. 
"(C) PLAN ADMINISTRATOR.—The term 'plan adminis-
trator' has the meaning given the term 'administrator' by 
section 3(16)(A) of the Employee Retirement Income Secu-
rity Act of 1974.". 
29 use 1002. 
(d) CONFORMING AMENDMENT.—Paragraph (1) of section 162(i) is 26 use 162. 
amended by striking out "GENERAL RULE ' in the heading thereof 
and inserting in lieu thereof "COVERAGE RELATING TO END STAGE 
RENAL DISEASE". 
(e) EFFECTIVE DATES.— 
26 use 106 note. 
(1) GENERAL RULE.—The amendments made by this section 
shall apply to plan years beginning on or after July 1, 1986. 
(2) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREEMENTS.— 
In the case of a group health plan maintained pursuant to one 
or more collective bargaining agreements between employee 
representatives and one or more employers ratified before the 
date of the enactment of this Act, the amendments made by this 
section shall not apply to plan years beginning before the later 
of— 
(A) the date on which the last of the collective bargaining 
agreements relating to the plan terminates (determined 
without regard to any extension thereof agreed to after the 
date of the enactment of this Act), or 
(B) January 1,1987. 
For purposes of subparagraph (A), any plan amendment made 
pursuant to a collective bargaining agreement relating to the 
plan which amends the plan solely to conform to any require-
ment added by this section shall not be treated as a termination 
of such collective bargaining agreement. 
SEC. 10002. TEMPORARY EXTENSION OF COVERAGE AT GROUP RATES FOR 
CERTAIN EMPLOYEES AND FAMILY MEMBERS (ERISA 
AMENDMENTS). 
(a) IN GENERAL.—Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding at the end thereof 
the following new part: 
"PART 6—CONTINUATION COVERAGE UNDER GROUP HEALTH PLANS 
"SEC. 601. PLANS MUST PROVIDE CONTINUATION COVERAGE TO CERTAIN 
29 USC 1161. 
INDIVIDUALS. 
"(a) IN GENERAL.—The plan sponsor of each group health plan 
shall provide, in accordance with this part, that each qualified 
beneficiary who would lose coverage under the plan as a result of a 
qualifying event is entitled, under the plan, to elect, within the 
election period, continuation coverage under the plan. 
"(b) EXCEPTION FOR CERTAIN PLANS.—Subsection (a) shall not 
apply to any group health plan for any calendar year if all employ-
ers maintaining such plan normally employed fewer than 20 
employees on a typical business day during the preceding calendar 
100 STAT. 228 
PUBLIC LAW 99-272—APR. 7, 1986 
year. Under regulations, rules similar to the rules of subsections (a) 
26 use 52. 
and (b) of section 52 of the Internal Revenue Code of 1954 (relating 
to employers under common control) shall apply for purposes of this 
subsection. 
29 use 1162. 
"SEC. 602. CONTINUATION COVERAGE. 
"For purposes of section 601, the term 'continuation coverage' 
means coverage under the plan which meets the following 
requirements: 
"(1) TYPE OF BENEFIT COVERAGE.—The coverage must consist 
of coverage which, as of the time the coverage is being provided, 
is identical to the coverage provided under the plan to similarly 
situated beneficiaries under the plan with respect to whom a 
qualifying event has not occurred. 
"(2) PERIOD OF COVERAGE,—The coverage must extend for at 
least the period beginning on the date of the qualifying event 
and ending not earlier than the earliest of the following: 
"(A) MAXIMUM PERIOD.—In the case o
f
— 
"(i) a qualifying event described in section 603(2) 
(relating to terminations and reduced hours), the date 
which is 18 months after the date of the qualifying 
event, and 
"(ii) any qualifying event not described in clause (i), 
the date which is 36 months after the date of the 
qualifying event. 
"(B) END OF PLAN.—The date on which the employer 
ceases to provide any group health plan to any employee. 
"(C) FAILURE TO PAY PREMIUM.—The date on which cov-
erage ceases under the plan by reason of a failure to make 
timely payment of any premium required under the plan 
with respect to the qualified beneficiary. 
"(D) REEMPLOYMENT OR MEDICARE ELIGIBILITY.—The date 
on which the qualified beneficiary first becomes, after the 
date of the election— 
"(i) a covered employee under any other group health 
plan, or 
"(ii) entitled to benefits under title XVIII of the 
42 use 1395. 
Social Security Act. 
"(E) REMARRIAGE OF SPOUSE.—In the case of an individual 
who is a qualified beneficiary by reason of being the spouse 
of a covered employee, the date on which the beneficiary 
remarries and becomes covered under a group health plan. 
"(3) PREMIUM REQUIREMENTS.—The plan may require pay-
ment of a premium for any period of continuation coverage, 
except that such premium— 
"(A) shall not exceed 102 percent of the applicable pre-
mium for such period, and 
"(B) may, at the election of the payor, be made in 
monthly installments. 
If an election is made after the qualifying event, the plan shall 
permit payment for continuation coverage during the period 
preceding the election to be made within 45 days of the date of 
the election. 
"(4) No REQUIREMENT OF INSURABILITY.—The coverage may 
not be conditioned upon, or discriminate on the basis of lack of, 
evidence of insurability. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 229 
"(5) CONVERSION OPTION.—In the case of a qualified bene-
ficiary whose period of continuation coverage expires under 
paragraph (2)(A), the plan must, during the 180-day period 
ending on such expiration date, provide to the qualified bene-
ficiary the option of enrollment under a conversion health plan 
otherwise generally available under the plan. 
"SEC. 603. QUALIFYING EVENT. 
29 USC 1163. 
"For purposes of this part, the term 'qualifying event' means, with 
respect to any covered employee, any of the following events which, 
but for the continuation coverage required under this part, would 
result in the loss of coverage of a qualified beneficiary: 
"(1) The death of the covered employee. 
"(2) The termination (other than by reason of such employee's 
gross misconduct), or reduction of hours, of the covered employ-
ee's employment. 
"(3) 'The divorce or legal separation of the covered employee 
from the employee's spouse. 
"(4) The covered employee becoming entitled to benefits 
under title XVIII of the Social Security Act. 
42 USC 1395. 
"(5) A dependent child ceasing to be a dependent child under 
the generally applicable requirements of the plan. 
"SEC. 604. APPLICABLE PREMIUM. 
29 USC 1164. 
"For purposes of this part— 
"(1) IN GENERAL.—The term 'applicable premium' means, 
with respect to any period of continuation coverage of qualified 
beneficiaries, the cost to the plan for such period of the coverage 
for similarly situated beneficiaries with respect to whom a 
qualifying event has not occurred (without regard to whether 
such cost is paid by the employer or employee). 
"(2) SPECIAL RULE FOR SELF-INSURED PLANS.—To the extent 
that a plan is a self-insured plan— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), the applicable premium for any period of continuation 
coverage of qualified beneficiaries shall be equal to a 
reasonable estimate of the cost of providing coverage for 
such period for similarly situated beneficiaries which— 
"(i) is determined on an actuarial basis, and 
"(ii) takes into account such factors as the Secretary 
may prescribe in regulations. 
"(B) 
DETERMINATION ON BASIS OF PAST COST.—If 
an 
administrator elects to have this subparagraph apply, the 
applicable premium for any period of continuation coverage 
of qualified beneficiaries shall be equal to— 
"(i) the cost to the plan for similarly situated bene-
ficiaries for the same period occurring during the 
preceding determination period under paragraph (3), 
adjusted by 
"(ii) the percentage increase or decrease in the im-
plicit price deflator of the gross national product (cal-
culated by the Department of Commerce and published 
in the Survey of Current Business) for the 12-month 
period ending on the last day of the sixth month of such 
preceding determination period. 
"(C) SUBPARAGRAPH (B) NOT TO APPLY WHERE SIGNIFICANT 
CHANGE.—An administrator may not elect to have subpara-
100 STAT. 230 
PUBLIC LAW 99-272—APR. 7, 1986 
graph (B) apply in any case in which there is any significant 
difference, between the determination period and the 
preceding determination period, in coverage under, or in 
employees covered by, the plan. The determination under 
the preceding sentence for any determination period shall 
be made at the same time as the determination under 
paragraph (3). 
"(3) DETERMINATION PERIOD.—The determination of any ap-
plicable premium shall be made for a period of 12 months and 
shall be made before the beginning of such period. 
29 use 1165. 
"SEC. 605. ELECTION. 
"For purposes of this part— 
"(1) ELECTION PERIOD.—The term 'election period' means the 
period which— 
"(A) begins not later than the date on which coverage 
terminates under the plan by reason of a qualifying event, 
"(B) is of at least 60 days' duration, and 
"(C) ends not earlier than 60 days after the later of— 
"(i) the date described in subparagraph (A), or 
"(ii) in the case of any qualified beneficiary who 
receives notice under section 606(4), the date of such 
notice. 
"(2) EFFECT OF ELECTION ON OTHER BENEFICIARIES.—Except as 
otherwise specified in an election, any election by a qualified 
beneficiary described in subparagraph (A)(i) or (B) of section 
607(3) shall be deemed to include an election of continuation 
coverage on behalf of any other qualified beneficiary who would 
lose coverage under the plan by reason of the qualifying event. 
29 use 1166. 
"SEC. 606. NOTICE REQUIREMENTS. 
"In accordance with regulations prescribed by the Secretary— 
"(1) the group health plan shall provide, at the time of 
commencement of coverage under the plan, written notice to 
each covered employee and spouse of the employee (if any) of 
the rights provided under this subsection, 
"(2) the employer of an employee under a plan must notify 
the administrator of a qualifying event described in paragraph 
(1), (2), or (4) of section 603 within 30 days of the date of the 
qualifying event, 
"(3) each covered employee or qualified beneficiary is respon-
sible for notifying the administrator of the occurrence of any 
qualifying event described in paragraph (3) or (5) of section 603, 
and 
"(4) the administrator shall notify— 
"(A) in the case of a qualifying event described in para-
graph (1), (2), or (4) of section 603, any qualified beneficiary 
with respect to such event, and 
"(B) in the case of a qualifying event described in para-
graph (3) or (5) of section 603 where the covered employee 
notifies the administrator under paragraph (3), any quali-
fied beneficiary with respect to such event, 
of such beneficiary's rights under this subsection. 
For purposes of paragraph (4), any notification shall be made within 
14 days of the date on which the administrator is notified under 
paragraph (2) or (3), whichever is applicable, and any such notifica-
tion to an individual who is a qualified beneficiary as the spouse of 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 231 
the covered employee shall be treated as notification to all other 
qualified beneficiaries residing with such spouse at the time such 
notification is made. 
"SEC. 607. DEFINITIONS. 
29 USC 1167. 
"For purposes of this part— 
"(1) GROUP HEALTH PLAN.—The term 'group health plan' 
means an employee welfare benefit plan that is a group health 
plan (within the meaning of section 162(i)(3) of the Internal 
Revenue Code of 1954). 
26 USC 162. 
"(2) COVERED EMPLOYEE.—The term 'covered employee' means 
an individual who is (or was) provided coverage under a group 
health plan by virtue of the individual's employment or pre-
vious employment with an employer. 
"(3) QUALIFIED BENEFICIARY.— 
"(A) IN GENERAL.—The term 
'qualified 
beneficiary' 
means, with respect to a covered employee under a group 
health plan, any other individual who, on the day before 
the qualifying event for that employee, is a beneficiary 
under the plan— 
"(i) as the spouse of the covered employee, or 
"(ii) as the dependent child of the employee. 
"(B) 
SPECIAL RULE FOR TERMINATIONS AND REDUCED 
EMPLOYMENT.—In the case of a qualifying event described 
in section 603(2), the term 'qualified beneficiary' includes 
the covered employee. 
"SEC. 608. REGULATIONS. 
29 USC 1168. 
"The Secretary may prescribe regulations to carry out the provi-
sions of this part.". 
(b) PENALTY FOR FAILURE TO PROVIDE NOTICE.—Section 502(c) of 
such Act (29 U.S.C. 1132(c)) is amended by inserting after "Any 
administrator" the following: "(1) who fails to meet the require-
ments of paragraph (1) or (4) of section 606 with respect to a 
participant or beneficiary, or (2)". 
(c) CLERICAL AMENDMENTS.—The table of contents in section 1 of 
such Act is amended by inserting after the item relating to section 
514 the following new items: 
"PART 6—CONTINUATION COVERAGE UNDER GROUP HEALTH PLANS 
"Sec. 601. Plans must provide continuation coverage to certain individuals. 
"Sec. 602. Continuation coverage. 
"Sec. 603. Qualifying event. 
"Sec. 604. Applicable premium. 
"Sec. 605. Election. 
"Sec. 606. Notice requirements. 
"Sec. 607. Definitions. 
"Sec. 608. Regulations.". 
(d) EFFECTIVE DATES.— 
29 u s e 1161 
(1) GENERAL RULE.—The amendments made by this section ^°^^-
shall apply to plan years beginning on or after July 1, 1986. 
(2) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREEMENTS.— 
In the case of a group health plan maintained pursuant to one 
or more collective bargaining agreements between employee 
representatives and one or more employers ratified before the 
date of the enactment of this Act, the amendments made by this 
section shall not apply to plan years beginning before the later 
of— 
100 STAT. 232 
PUBLIC LAW 99-272—APR. 7, 1986 
(A) the date on which the last of the collective bargaining 
agreements relating to the plan terminates (determined 
without regard to any extension thereof agreed to after the 
date of the enactment of this Act), or 
(B) January 1, 1987. 
For purposes of subparagraph (A), any plan amendment made 
pursuant to a collective bargaining agreement relating to the 
plan which amends the plan solely to conform to any require-
ment added by this section shall not be treated as a termination 
of such collective bargaining agreement. 
29 use 1166 
(e) NOTIFICATION TO COVERED EMPLOYEES.—At the time that the 
note. 
amendments made by this section apply to a group health plan 
(within the meaning of section 607(1) of the Employee Retirement 
Ante, p. 231. 
Income Security Act of 1974), the plan shall notify each covered 
employee, and spouse of the employee (if any), who is covered under 
the plan at that time of the continuation coverage required under 
Ante, p. 227. 
part 6 of subtitle B of title I of such Act. The notice furnished under 
this subsection is in lieu of notice that may otherwise be required 
Ante, p. 230. 
under section 606(1) of such Act with respect to such individuals. 
SEC. 
10003. CONTINUATION OF HEALTH INSURANCE FOR ST.4TE AND 
LOCAL EMPLOYEES WHO LOST EMPLOYMENT-RELATED 
COVERAGE (PUBLIC HEALTH SERVICE ACT AMENDMENTS). 
(a) IN GENERAL.—The Public Health Service Act is amended by 
adding at the end the following new title: 
"TITLE 
XXII—REQUIREMENTS 
FOR 
CERTAIN 
GROUP 
HEALTH 
PLANS 
FOR 
CERTAIN 
STATE 
AND 
LOCAL 
EMPLOYEES 
42 u s e 300bb-l. 
District of 
Columbia. 
26 u s e 52. 
"SEC. 220L STATE AND LOCAL GOVERNMENTAL GROUP HEALTH PLANS 
MUST PROVIDE CONTINUATION COVERAGE TO CERTAIN 
INDIVIDUALS. 
"(a) IN GENERAL.—In accordance with regulations which the Sec-
retary shall prescribe, each group health plan that is maintained by 
any State that receives funds under this Act, by any political 
subdivision of such a State, or by any agency or instrumentality of 
such a State or political subdivision, shall provide, in accordance 
with this title, that each qualified beneficiary who would lose cov-
erage under the plan as a result of a qualifying event is entitled, 
under the plan, to elect, within the election period, continuation 
coverage under the plan. 
"(b) EXCEPTION FOR CERTAIN PLANS.—Subsection (a) shall not 
apply to— 
"(1) any group health plan for any calendar year if all employ-
ers maintaining such plan normally employed fewer than 20 
employees on a typical business day during the preceding cal-
endar year, or 
"(2) any group health plan maintained for employees by the 
government of the District of Columbia or any territory or 
possession of the United States or any agency or instrumental-
ity. 
Under regulations, rules similar to the rules of subsections (a) and 
(b) of section 52 of the Internal Revenue Code of 1954 (relating to 
employers under common control) shall apply for purposes of para-
graph (1). 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 233 
"SEC. 2202. CONTINUATION COVERAGE. 
42 USC 300bb-2. 
"For purposes of section 2201, the term 'continuation coverage' 
means coverage under the plan which meets the following require-
ments: 
"(1) TYPE OF BENEFIT COVERAGE.—The coverage must consist 
of coverage which, as of the time the coverage is being provided, 
is identical to the coverage provided under the plan to similarly 
situated beneficiaries under the plan with respect to whom a 
qualifying event has not occurred. 
"(2) PERIOD OF COVERAGE.—The coverage must extend for at 
least the period beginning on the date of the qualifying event 
and ending not earlier than the earliest of the following: 
"(A) MAXIMUM PERIOD.—In the case o
f
— 
"(i) a qualifying event described in section 2203(2) 
(relating to terminations and reduced hours), the date 
which is 18 months after the date of the qualifying 
event, and 
"(ii) any qualifying event not described in clause (i), 
the date which is 36 months after the date of the 
qualifying event. 
"(B) END OF PLAN.—The date on which the employer 
ceases to provide any group health plan to any employee. 
"(C) FAILURE TO PAY PREMIUM.—The date on which cov-
erage ceases under the plan by reason of a failure to make 
timely payment of any premium required under the plan 
with respect to the qualified beneficiary. 
"(D) REEMPLOYMENT OR MEDICARE ELIGIBILITY.—The date 
on which the qualified beneficiary first becomes, after the 
date of the election— 
"(i) a covered employee under any other group health 
plan, or 
"(ii) entitled to benefits under title XVIII of the 
Social Security Act. 
42 USC 1395. 
"(E) REMARRIAGE OF SPOUSE.—In the case of an individual 
who is a qualified beneficiary by reason of being the spouse 
of a covered employee, the date on which the beneficiary 
remarries and becomes covered under a group health plan. 
"(3) PREMIUM REQUIREMENTS.—The plan may require pay-
ment of a premium for any period of continuation coverage, 
except that such premium— 
"(A) shall not exceed 102 percent of the applicable pre-
mium for such period, and 
"(B) may, at the election of the payor, be made in 
monthly installments. 
If an election is made after the qualifying event, the plan shall 
permit payment for continuation coverage during the period 
preceding the election to be made within 45 days of the date of 
the election. 
"(4) No REQUIREMENT OF INSURABILITY.—The coverage 
may 
not be conditioned upon, or discriminate on the basis of lack of, 
evidence of insurability. 
"(5) CONVERSION OPTION.—In the case of a qualified bene-
ficiary whose period of continuation coverage expires under 
paragraph (2)(A), the plan must, during the 180-day period 
ending on such expiration date, provide to the qualified bene-
100 STAT. 234 
PUBLIC LAW 99-272—APR. 7, 1986 
ficiary the option of enrollment under a conversion health plan 
otherwise generally available under the plan. 
42 use 300bb-3. 
"SEC. 2203. QUALIFYING EVENT. 
"For purposes of this title; the term 'qualifying event' means, with 
respect to any covered employee, any of the following events which, 
but for the continuation coverage required under this title, would 
result in the loss of coverage of a qualified beneficiary: 
"(1) The death of the covered employee. 
"(2) The termination (other than by reason of such employee's 
gross misconduct), or reduction of hours, of the covered em-
ployee's employment. 
' (3) The divorce or legal separation of the covered employee 
from- the employee's spouse. 
"(4) The covered employee becoming entitled to benefits 
42 use 1395c. 
under title XVIII of the Social Security Act. 
ehildren and 
"(5) A dependent child ceasing to be a dependent child under 
y°"*^- 
the generally applicable requirements of the plan. 
42 use 300bb-4. 
"SEC. 2204. APPLICABLE PREMIUM. 
"For purposes of this title— 
"(1) IN GENERAL.—The term 'applicable premium' means, 
with respect to any period of continuation coverage of qualified 
beneficiaries, the cost to the plan for such period of the coverage 
for similarly situated beneficiaries with respect to whom a 
qualifying event has not occurred (without regard to whether 
such cost is paid by the employer or employee). 
"(2) SPECIAL RULE FOR SELF-INSURED PLANS.—To the extent 
that a plan is a self-insured plan— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), the applicable premium for any period of continuation 
coverage of qualified beneficiaries shall be equal to a 
reasonable estimate of the cost of providing coverage for 
such period for similarly situated beneficiaries which— 
"(i) is determined on an actuarial basis, and 
"(ii) takes into account such factors as the Secretary 
may prescribe in regulations. 
"(B) DETERMINATION ON BASIS OF PAST COST.—If a plan 
administrator elects to have this subparagraph apply, the 
applicable premium for any period of continuation coverage 
of qualified beneficiaries shall be equal to— 
"(i) the cost to the plan for similarly situated bene-
ficiaries for the same period occurring during the 
preceding determination period under paragraph (3), 
adjusted by 
(ii) the percentage increase or decrease in the im-
plicit price deflator of the gross national product (cal-
culated by the Department of Commerce and published 
in the Survey of Current Business) for the 12-month 
period ending on the last day of the sixth month of such 
preceding determination period. 
"(C) SUBPARAGRAPH (B) NOT TO APPLY WHERE SIGNIFICANT 
CHANGE.—A plan administrator may not elect to have 
subparagraph (B) apply in any case in which there is any 
significant difference, between the determination period 
and the preceding determination period, in coverage under, 
or in employees covered by, the plan. The determination 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 235 
under the preceding sentence for any determination period 
shall be made at the same time as the determination under 
paragraph (3). 
"(3) DETERMINATION PERIOD.—The determination of any ap-
plicable premium shall be made for a period of 12 months and 
shall be made before the beginning of such period. 
"SEC. 2205. ELECTION. 
"For purposes of this title— 
"(1) ELECTION PERIOD.—The term 'election period' means the 
period which— 
"(A) begins not later than the date on which coverage 
terminates under the plan by reason of a qualifying event, 
"(B) is of at least 60 days' duration, and 
"(C) ends not earlier than 60 days after the later of^ 
"(i) the date described in subparagraph (A), or 
"(ii) in the case of any qualified beneficiary who 
receives notice under section 2206(4), the date of such 
notice. 
"(2) EFFECT OF ELECTION ON OTHER BENEFICIARIES.—Except as 
otherwise specified in an election, any election by a qualified 
beneficiary described in subparagraph (A)(i) or (B) of section 
2208(3) shall be deemed to include an election of continuation 
coverage on behalf of any other qualified beneficiary who would 
lose coverage under the plan by reason of the qualifying event. 
"SEC. 2206. NOTICE REQUIREMENTS. 
"In accordance with regulations prescribed by the Secretary— 
"(1) the group health plan shall provide, at the time of 
commencement of coverage under the plan, written notice to 
each covered employee and spouse of the employee (if any) of 
the rights provided under this subsection, 
"(2) the employer of an employee under a plan must notify 
the plan administrator of a qualifying event described in para-
graph (1), (2), or (4) of section 2203 within 30 days of the date of 
the qualifying event, 
"(3) each covered employee or qualified beneficiary is respon-
sible for notifying the plan administrator of the occurrence of 
any qualif3dng event described in paragraph (3) or (5) of section 
2203, and 
"(4) the plan administrator shall notify— 
"(A) in the case of a qualifying event described in para-
graph (1), (2), or (4) of section 2203, any qualified beneficiary 
with respect to such event, and 
"(B) in the case of a qualifying event described in para-
graph (3) or (5) of section 2203 where the covered employee 
notifies the plan administrator under paragraph (3), any 
qualified beneficiary with respect to such event, 
of such beneficiary's rights under this subsection. 
For purposes of paragraph (4), any notification shall be made within 
14 days of the date on which the plan administrator is notified 
under paragraph (2) or (3), whichever is applicable, and any such 
notification to an individual who is a qualified beneficiary as the 
spouse of the covered employee shall be treated as notification to all 
other qualified beneficiaries residing with such spouse at the time 
such notification is made. 
42 use 300bb-5. 
42 use 300bb-6. 
100 STAT. 236 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 300bb-7. 
"SEC. 2207. ENFORCEMENT. 
42 u s e 300bb-8. 
Health and 
medical care. 
26 u s e 162. 
29 u s e 1002. 
42 u s e 300bb-l 
note. 
42 u s e 300bb-6 
note. 
Ante, p. 232. 
"Any individual who is aggrieved by the failure of a State, politi-
cal subdivision, or agency or instrumentality thereof, to comply with 
the requirements of this title may bring an action for appropriate 
equitable relief. 
"SEC. 2208. DEFINITIONS. 
"For purposes of this title— 
"(1) GROUP HEALTH PLAN.—The term 'group health plan' has 
the meaning given such term in section 162(i)(3) of the Internal 
Revenue Code of 1954. 
"(2) COVERED EMPLOYEE.—The term 'covered employee' means 
an individual who is (or was) provided coverage under a group 
health plan by virtue of the individual's employment or pre-
vious employment with an employer. 
"(3) QUALIFIED BENEFICIARY.— 
"(A) IN GENERAL.—The term 
'qualified 
beneficiary' 
means, with respect to a covered employee under a group 
health plan, any other individual who, on the day before 
the qualifying event for that employee, is a beneficiary 
under the plan— 
"(i) as the spouse of the covered employee, or 
"(ii) as the dependent child of the employee. 
"(B) 
SPECIAL RULE FOR TERMINATIONS AND REDUCED 
EMPLOYMENT.—In the case of a qualifying event described 
in section 2203(2), the term 'qualified beneficiary' includes 
the covered employee. 
"(4) PLAN ADMINISTRATOR.—The term 'plan administrator' has 
the meaning given the term 'administrator' by section 3(16)(A) 
of the Employee Retirement Income Security Act of 1974." 
(b) EFFECTIVE DATES.— 
(1) GENERAL RULE.—The amendments made by this section 
shall apply to plan years beginning on or after July 1, 1986. 
(2) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREEMENTS.— 
In the case of a group health plan maintained pursuant to one 
or more collective bargaining agreements between employee 
representatives and one or more employers ratified before the 
date of the enactment of this Act, the amendments made by this 
section shall not apply to plan years beginning before the later 
of— 
(A) the date on which the last of the collective bargaining 
agreements relating to the plan terminates (determined 
without regard to any extension thereof agreed to after the 
date of the enactment of this Act), or 
(B) January 1,1987. 
For purposes of subparagraph (A), any plan amendment 
made pursuant to a collective bargaining agreement relating to 
the plan which amends the plan solely to conform to any 
requirement added by this section shall not be treated as a 
termination of such collective bargaining agreement. 
(c) NOTIFICATION TO COVERED EMPLOYEES.—At the time that the 
amendments made by this section apply to a group health plan 
(covered under section 2201 of the Public Health Service Act), the 
plan shall notify each covered employee, and spouse of the employee 
(if any), who is covered under the plan at that time of the continu-
ation coverage required under title XXII of such Act. The notice 
furnished under this subsection is in lieu of notice that may other-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 237 
wise be required under section 2206(1) of such Act with respect to 
such individuals. 
TITLE XI—SINGLE-EMPLOYER PLAN TER- s
m
g
i
e 
MINATION INSURANCE SYSTEM AMEND- p^Z%i.n 
MENTS 
icTo"f%r 
SEC. 11001. SHORT TITLE AND TABLE OF CONTENTS. 
This title may be cited as "Single-Employer Pension Plan Amend-
ments Act of 1986". 
TABLE OF CONTENTS 
Sec. 11001. Short title and table of contents. 
Sec. 11002. Findings and declaration of policy. 
Sec. 11003. Amendment of the Employee Retirement Income Security Act of 1974. 
Sec. 11004. Definitions. 
Sec. 11005. Single-employer plan termination insurance premiums. 
Sec. 11006. Notice of significant reduction in benefit accruals. 
Sec. 11007. General requirements relating to termination of single-employer plans 
by plan administrators. 
Sec. 11008. Standard termination of single-employer plans. 
Sec. 11009. Distress termination of single-employer plans. 
Sec. 11010. Termination proceedings; duties of the corporation. 
Sec. 11011. Amendments to liability provisions; liabilities relating to benefit com-
mitments in excess of benefits guaranteed by the corporation. 
Sec. 11012. Distribution to participants and beneficiaries of liability payments to 
section 4049 trust. 
Sec. 11013. Treatment of transactions to evade liability; effect of corporate reorgani-
zation. 
Sec. 11014. Enforcement authority relating to terminations of single-employer 
plans. 
Sec. 11015. Provisions relating to waivers of minimum funding standard and exten-
sions of amortization period. 
Sec. 11016. Conforming, clarifying, technical, and miscellaneous amendments. 
Sec. 11017. Studies. 
Sec. 11018. Limitation on regulations. 
Sec. 11019. Effective date of title; temporary procedures. 
SEC. 11002. FINDINGS AND DECLARATION OF POLICY. 
(a) FINDINGS.—The Congress finds that— 
(1) single-employer defined benefit pension plans have a 
substantial impact on interstate commerce and are affected 
with a national interest; 
(2) the continued well-being and retirement income security of 
millions of workers, retirees, and their dependents are directly 
affected by such plans; 
(3) the existence of a sound termination insurance system is 
fundamental to the retirement income security of participants 
and beneficiaries of such plans; and 
(4) the current termination insurance system in some in-
stances encourages employers to terminate pension plans, evade 
their obligations to pay benefits, and shift unfunded pension 
liabilities onto the termination insurance system and the other 
premium-payers. 
(b) ADDITIONAL FINDINGS.—The Congress further finds that modi-
fication of the current termination insurance system and an in-
crease in the insurance premium for single-employer defined benefit 
pension plans— 
(1) is desirable to increase the likelihood that full benefits will 
be paid to participants and beneficiaries of such plans; 
29 u s e 1001 
note. 
29 u s e 1001b. 
100 STAT. 238 
PUBLIC LAW 99-272—APR. 7, 1986 
(2) is desirable to provide for the transfer of liabilities to the 
termination insurance system only in cases of severe hardship; 
(3) is necessary to maintain the premium costs of such system 
at a reasonable level; and 
(4) is necessary to finance properly current funding defi-
ciencies and future obligations of the single-employer pension 
plan termination insurance system. 
Commerce and 
(c) DECLARATION OF POLICY.—It is hereby declared to be the policy 
trade. 
of this t i t l e -
C
D to foster and facilitate interstate commerce; 
(2) to encourage the maintenance and growth of single-em-
ployer defined benefit pension plans; 
(3) to increase the likelihood that participants and bene-
ficiaries under single-employer defined benefit pension plans 
will receive their full benefits; 
(4) to provide for the transfer of unfunded pension liabilities 
onto the single-employer pension plan termination insurance 
system only in cases of severe hardship; 
(5) to maintain the premium costs of such system at a reason-
able level; and 
(6) to assure the prudent financing of current funding defi-
ciencies and future obligations of the single-employer pension 
plan termination insurance system by increasing termination 
insurance premiums. 
SEC. 11003. AMENDMENT OF THE EMPLOYEE RETIREMENT INCOME SECU-
RITY ACT OF 1974. 
Whenever in this title an amendment or repeal is expressed in 
terms of an amendment to or repeal of a section or other provision, 
the reference is to a section or other provision of the Employee 
Retirement Income Security Act of 1974, unless otherwise specified. 
SEC. 11004. DEFINITIONS. 
(a) IN GENERAL.—Section 4001(a) (29 U.S.C. 1301(a)) is amended— 
(1) by striking out paragraph (2) and inserting in lieu thereof 
the following new paragraph: 
"(2) 'substantial employer', for any plan year of a single-
employer plan, means one or more persons— 
"(A) who are contributing sponsors of the plan in such 
plan year, 
"(B) who, at any time during such plan year, are mem-
bers of the same controlled group, and 
"(C) whose required contributions to the plan for each 
plan year constituting one o
f
—
-
"(i) the two immediately preceding plan years, or 
"(ii) the first two of the three immediately preceding 
plan years, 
total an amount greater than or equal to 10 percent of all 
contributions required to be paid to or under the plan for 
such plan year;"; 
(2) in paragraph (11), by striking out "and"; 
(3) in paragraph (12), by striking out "corporation." and 
inserting in lieu thereof "corporation;'; and 
(4) by adding after paragraph (12) the following new para-
graphs: 
"(13) 'contributing sponsor', of a single-employer plan, means 
a person— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 239 
"(A) who is responsible, in connection with such plan, for 
meeting the funding requirements under section 302 of this 
Act or section 412 of the Internal Revenue Code of 1954, or 
29 USC 1112. 
"(B) who is a member of the controlled group of a person 
26 USC 412. 
described in subparagraph (A), has been responsible for 
meeting such funding requirements, and has employed a 
significant number (as may be defined in regulations of the 
corporation) of participants under such plan while such 
person was so responsible; 
"(14) in the case of a single-employer plan— 
"(A) 'controlled group' means, in connection with any 
person, a group consisting of such person and all other 
persons under common control with such person; and 
"(B) the determination of whether two or more persons 
are under 'common control' shall be made under regula-
tions of the corporation which are consistent and coexten-
sive with regulations prescribed for similar purposes by the 
Secretary of the Treasury under subsections (b) and (c) of 
section 414 of the Internal Revenue Code of 1954; 
26 USC 414. 
"(15) 'single-employer plan' means any defined benefit plan 
(as defined in section 3(35)) which is not a multiemployer plan; 
29 USC 1002. 
"(16) 'benefit commitments', to a participant or beneficiary as 
of any date under a single-employer plan, means all benefits 
provided by the plan with respect to the participant or bene-
ficiary which— 
"(A) are guaranteed under section 4022, 
29 USC 1322. 
"(B) would be guaranteed under section 4022, but for the 
operation of subsection 4022(b), or 
"(C) constitute— 
"(i) early retirement supplements or subsidies, or 
"(ii) plant closing benefits, 
irrespective of whether any such supplements, subsidies, or 
benefits are benefits guaranteed under section 4022, if the 
participant or beneficiary has satisfied, as of such date, all 
of the conditions required of him or her under the provi-
sions of the plan to establish entitlement to the benefits, 
except for the submission of a formal application, retire-
ment, completion of a required waiting period subsequent 
to application for benefits, or designation of a beneficiary; 
"(17) 'amount of unfunded guaranteed benefits', of a partici-
pant or beneficiary as of any date under a single-employer plan, 
means an amount equal to the excess of— 
"(A) the actuarial present value (determined as of such 
date on the basis of assumptions prescribed by the corpora-
tion for purposes of section 4044) of the benefits of the 29 USC 1344. 
participant or beneficiary under the plan which are guaran-
teed under section 4022, over 
"(B) the current value (as of such date) of the assets of the 
plan which are required to be allocated to those benefits 
under section 4044; 
29 USC 1344. 
"(18) 'amount of unfunded benefit commitments', of a partici-
pant or beneficiary as of any date under a single-employer plan, 
means an amount equal to the excess of— 
"(A) the actuarial present value (determined as of such 
date on the basis of assumptions prescribed by the corpora-
tion for purposes of section 4044) of the benefit commit-
ments to the participant or beneficiary under the plan, over 
100 STAT. 240 
PUBLIC LAW 99-272—APR. 7, 1986 
"(B) the current value (as of such date) of the assets of the 
plan which are required to be allocated to those benefit 
29 use 1344. 
commitments under section 4044; 
"(19) 'outstanding amount of benefit commitments', of a 
participant or beneficiary under a terminated single-employer 
plan, means the excess o
f
— 
"(A) the actuarial present value (determined as of the 
termination date on the basis of assumptions prescribed by 
the corporation for purposes of section 4044) of the benefit 
commitments to such participant or beneficiary under the 
plan, over 
"(B) the actuarial present value (determined as of such 
date on the basis of assumptions prescribed by the corpora-
tion for purposes of section 4044) of the benefits of such 
participant or beneficiary which are guaranteed under sec-
29 use 1322. 
tion 4022 or to which assets of the plan are required to be 
allocated under section 4044; 
29 use 1002. 
"(20) 'person' has the meaning set forth in section 3(9); 
"(21) 'affected party' means, with respect to a plan— 
"(A) each participant in the plan, 
"(B) each beneficiary under the plan who is a beneficiary 
of a deceased participant or who is an alternate payee 
29 use 1056. 
(within the meaning of section 206(d)(3)(K)) under an ap-
plicable qualified domestic relations order (within the 
meaning of section 206(d)(3)(B)(i)), 
"(C) each employee organization representing partici-
pants in the plan, and 
"(D) the corporation, 
except that, in connection with any notice required to be pro-
vided to the affected party, if an affected party has designated, 
in writing, a person to receive such notice on behalf of the 
affected party, any reference to the affected party shall be 
construed to refer to such person.", 
(b) TECHNICAL CORRECTION OF ERROR IN MULTIEMPLOYER PENSION 
29 use 1301. 
PLAN AMENDMENTS ACT OF 1980.—Section 4001 is further amended 
by striking out the amendments made by section 402(a)(1)(F) of the 
Multiemployer Pension Plan Amendments Act of 1980 (94 Stat. 
29 use 1301. 
1297) (adding new paragraphs after a subsection (c)(1)), and, in lieu 
thereof, in subsection (b), by inserting "(1)" after "(b)" and by adding 
at the end of such subsection the following new paragraph: 
"(2) For purposes of subtitle E— 
"(A) except as otherwise provided in subtitle E, contributions 
or other payments shall be considered made under a plan for a 
plan year if they are made within the period prescribed under 
26 use 412. 
section 412(c)(10) of the Internal Revenue Code of 1954 (deter-
mined, in the case of a terminated plan, as if the plan had 
continued beyond the termination date), and 
-
^ 
"(B) the term 'Secretary of the Treasury' means the Secretary 
of the Treasury or such Secretary's delegate.". 
SEC. 11005. SINGLE-EMPLOYER PLAN TERMINATION INSURANCE PRE-
MIUMS. 
(a) PREMIUM INCREASE.— 
(1) 
GENERAL 
RULE.—Section 
4006(a)(3)(A)(i) 
(29 U.S.C. 
1306(a)(3)(A)(i)) is amended by striking out "for plan years begin-
ning after December 31, 1977, an amount equal to $2.60" and 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 241 
inserting in lieu thereof "for plan years beginning after Decem-
ber 31, 1985, an amount equal to $8.50". 
(2) CONFORMING AMENDMENT WITH RESPECT TO PLAN YEARS 
AFTER 1977.—Section 4006(c)(1) (29 U.S.C, 1306(c)(1)) is amended 
by striking out subparagraph (A) and inserting in lieu thereof 
the following new subparagraph: 
"(A) in the case of each plan which was not a multiemployer 
plan in a plan year— 
"(i) with respect to each plan year beginning before Janu-
ary 1, 1978, an amount equal to $1 for each individual who 
was a participant in such plan during the plan year, and 
"(ii) with respect to each plan year beginning after 
December 31, 1977, an amount equal to $2.60 for each 
individual who was a participant in such plan during the 
plan year, and", 
(b) INCORPORATION OF CERTAIN P'ORMER PROVISIONS IN LIEU OF 
CROSS REFERENCE THERETO.—Section 4006(a) (29 U.S.C. 1306(a)) is 
amended— 
(1) in paragraph (1), by striking out the last sentence; and 
(2) by adding at the end thereof the following new paragraph: 
"(6)(A) In carrying out its authority under paragraph (1) to estab-
lish premium rates and bases for basic benefits guaranteed under 
section 4022 with respect to single-employer plans, the corporation 
29 USC 1322. 
shall establish such rates and bases in coverage schedules in accord-
ance with the provisions of this paragraph. 
"(B) The corporation may establish annual premiums for single-
employer plans composed of the sum o
f
— 
"(i) a charge based on a rate applicable to the excess, if any, of 
the present value of the basic benefits of the plan which are 
guaranteed over the value of the assets of the plan, not in excess 
of 0.1 percent, and 
"(ii) an additional charge based on a rate applicable to the 
present value of the basic benefits of the plan which are guaran-
teed. 
The rate for the additional charge referred to in clause (ii) shall be 
set by the corporation for every year at a level which the corpora-
tion estimates will yield total revenue approximately equal to the 
total revenue to be derived by the corporation from the charges 
referred to in clause (i) of this subparagraph. 
"(C) The corporation may establish annual premiums for single-
employer plans based on— 
"(i) the number of participants in a plan, but such premium 
rates shall not exceed the rates described in paragraph (3), 
"(ii) unfunded basic benefits guaranteed under this title, but 
such premium rates shall not exceed the limitations applicable 
to charges referred to in subparagraph (B)(i), or 
"(iii) total guaranteed basic benefits, but such premium rates 
shall not exceed the rates for additional charges referred to in 
subparagraph (B)(ii). 
If the corporation uses two or more of the rate bases described in 
this subparagraph, the premium rates shall be designed to produce 
approximately equal amounts of aggregate premium revenue from 
each of the rate bases used. 
"(D) For purposes of this paragraph, the corporation shall by 
regulation define the terms 'value of assets' and 'present value of 
the benefits of the plan which are guaranteed' in a manner consist-
100 STAT. 242 
PUBLIC LAW 99-272—APR. 7, 1986 
ent with the purposes of this title and the provisions of this 
section.". 
(c) APPROVAL BY JOINT RESOLUTION OF RECOMMENDATIONS OF THE 
PENSION BENEFIT GUARANTY CORPORATION.—Title IV is amended as 
follows: 
(1) The last sentence of subsection (a)(2) of section 4006 (29 
U.S.C. 1306(a)(2)) is amended by striking out "the Congress 
approves such revised schedule by a concurrent resolution" and 
inserting in lieu thereof "a joint resolution approving such 
revised schedule is enacted". 
(2) Subsection (a)(4) of section 4006 (29 U.S.C. 1306(a)(4)) is 
amended by striking out "approval by the Congress" and insert-
ing in lieu thereof "the enactment of a joint resolution". 
(3) Subsection (b)(3) of section 4006 (29 U.S.C. 1306(b)(3)) is 
amended by striking out "concurrent" and inserting in lieu 
thereof "joint", by striking out "That the Congress favors the" 
and inserting in lieu thereof "The", and by inserting "is hereby 
approved" before the period preceding the quotation marks. 
(4) 
Subsection 
(f)(2)(B) 
of 
section 
4022A 
(29 
U.S.C. 
1322a(f)(2)(B)) is amended by striking out "Congress by concur-
rent resolution" and inserting in lieu thereof "the enactment of 
a joint resolution". 
(5) 
Subsection 
(f)(2)(C) 
of 
section 
4022A 
(29 
U.S.C. 
1322a(f)(2)(C)) is amended by striking out "approved" and insert-
ing in lieu thereof "so enacted". 
(6) 
Subsection 
(f)(3)(B) 
of 
section 
4022A 
(29 
U.S.C. 
1322a(f)(3)(A)) is amended by striking out "Congress by a concur-
rent resolution" and inserting in lieu thereof "enactment of a 
joint resolution". 
(7) 
Subsection 
(f)(4)(A) 
of 
section 
4022A 
(29 
U.S.C. 
1322a(f)(4)(A)) is amended by striking out "concurrent" and 
inserting in lieu thereof "joint". 
(8) 
Subsection 
(f)(4)(B) 
of 
section 
4022A 
(29 
U.S.C. 
1322a(f)(4XB)) is amended by striking out "concurrent" each 
place it appears and inserting in lieu thereof "joint", by striking 
out "That the Congress favors the" and inserting in lieu thereof 
"The", and by inserting "is hereby approved" immediately 
before the period preceding the quotation marks. 
(9) 
Subsection 
(f)(4)(C) 
of 
section 
4022A 
(29 
U.S.C. 
1322a(f)(4)(C)) is amended by striking out "concurrent" and 
inserting in lieu thereof "joint". 
(10) Subsection (g)(4)(A)(ii) of section 4022A (29 U.S.C. 
1322a(g)(4)(A)(ii)) is amended by striking out "concurrent" and 
inserting in lieu thereof "joint", and by striking out "adopted" 
and inserting in lieu thereof "enacted". 
(11) Subsection 
(g)(4)(B) of section 
4022A 
(29 U.S.C. 
1322a(g)(4)(B)) is amended by striking out "concurrent" each 
place it appears and inserting in lieu thereof "joint", by striking 
out "That the Congress disapproves the" and inserting in lieu 
thereof "The", and by inserting "is hereby disapproved" imme-
diately before the period preceding the quotation marks. 
(12) Subsection 
(g)(4)(D) of section 
4022A 
(29 U.S.C. 
1322a(g)(4)(D)) is amended by striking out "concurrent" and 
inserting in lieu thereof "joint". 
42 use 1306 
(d) EFFECTIVE DATES.— 
note. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 243 
(1) GENERAL RULE.—Except as provided in paragraph (2), the 
amendments made by this section shall be effective for plan 
years commencing after December 31, 1985. 
(2) SPECIAL RULE.—The amendments made by subsection (b) 
shall be effective as of the date of the enactment of the Multi-
employer Pension Plan Amendments Act of 1980. 
29 USC lOOl 
(e) TRANSITIONAL RULE.— 
note. 
(1) NOTICE OF PREMIUM INCREASE.—Not later than 30 days ^ote^^ ^ 
after the date of the enactment of this Act, the Pension Benefit 
Guaranty Corporation shall send a notice to the plan adminis-
trator of each single-employer plan affected by the premium 
increase established by the amendment made by subsection 
(a)(1). Such notice shall describe such increase and the require-
ments of this subsection. 
(2) DUE DATE FOR UNPAID PREMIUMS.—With respect to any 
plan year beginning during the period beginning on January 1, 
1986, and ending 30 days after the date of the enactment of this 
Act, any unpaid amount of such premium increase shall be due 
and payable no later than the earlier of 60 days after the date of 
the enactment of this Act or 30 days after the date on which the 
notice required by paragraph (1) is sent, except that in no event 
shall the amount of the premium increase established under the 
amendment made by subsection (a)(1) be due and payable for a 
plan year earlier than the date on which premiums for the plan 
would have been due for such plan year had this Act not been 
enacted. 
(3) ENFORCEMENT.—For purposes of enforcement, the require-
ments of paragraphs (1) and (2) shall be considered to be require-
ments of sections 4006 and 4007 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1306 and 1307). 
SEC. 11006. NOTICE OF SIGNIFICANT REDUCTION IN BENEFIT ACCRUALS. 
(a) IN GENERAL.—Section 204 (29 U.S.C. 1054) is amended— 
(1) by redesignating subsection (h) as subsection (i); and 
(2) by inserting after subsection (g) the following new 
subsection: 
"(h) A single-employer plan may not be amended so as to provide 
for a significant reduction in the rate of future benefit accrual, 
unless, after adoption of the plan amendment and not less than 15 
days before the effective date of the plan amendment, the plan 
administrator provides a written notice, setting forth the plan 
amendment and its effective date, to— 
"(1) each participant in the plan, 
"(2) each beneficiary who is an alternate payee (within the 
meaning of section 206(dX3)(K)) under an applicable qualified 
29 USC 1056. 
domestic relations order (within the meaning of section 
206(d)(3XBXi)), and 
"(3) each employee organization representing participants in 
the plan, 
except that such notice shall instead be provided to a person des-
ignated, in writing, to receive such notice on behalf of any person 
referred to in paragraph (1), (2), or (3).". 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 29 USC 1054 
shall apply with respect to plan amendments adopted on or after 
note. 
January 1, 1986, except that, in the case of plan amendments 
adopted on or after January 1, 1986, and on or before the date of the 
enactment of this Act, the requirements of section 204(h) of the 
100 STAT. 244 
PUBLIC LAW 99-272—APR. 7, 1986 
Employee Retirement Income Security Act of 1974 (as added by this 
section) shall be treated as met if the written notice required under 
such section 204(h) is provided before 60 days after the date of the 
enactment of this Act. 
SEC. 11007. GENERAL REQUIREMENTS RELATING TO TERMINATION OF 
SINGLE-EMPLOYER PLANS BY PLAN ADMINISTRATORS. 
(a) IN GENERAL.—Section 4041 (29 U.S.C. 1341) is amended by 
striking out subsections (a) through (c) and inserting in lieu thereof 
the following: 
"SEC. 
4041. 
(a) GENERAL RULES GOVERNING SINGLE-EMPLOYER 
PLAN TERMINATIONS.— 
"(1) EXCLUSIVE MEANS OF PLAN TERMINATION.—Except in 
the 
case of a termination for which proceedings are otherwise in-
Post, p. 253. 
stituted by the corporation as provided in section 4042, a single-
employer plan may be terminated only in a standard termi-
nation under subsection (b) or a distress termination under 
subsection (c). 
"(2) 60-DAY NOTICE OF INTENT TO TERMINATE.—Not leSS t h a n 60 
days before the proposed termination date of a standard termi-
nation under subsection (b) or a distress termination under 
subsection (c), the plan administrator shall provide to each 
affected party (other than the corporation in the case of a 
standard termination) a written notice of intent to terminate 
stating that such termination is intended and the proposed 
termination 
date. The written 
notice shall include any 
related additional information required in regulations of the 
corporation. 
Corporations. 
"(3) ADHERENCE TO COLLECTIVE BARGAINING AGREEMENTS.— 
The corporation shall not proceed with a termination of a plan 
under this section if the termination would violate the terms 
and conditions of an existing collective bargaining agreement. 
Nothing in the preceding sentence shall be construed as limit-
ing the authority of the corporation to institute proceedings to 
involuntarily terminate a plan under section 4042.". 
(b) DEFINITIONS RELATING TO SUFFICIENCY.—Section 4041(d) (29 
U.S.C. 1341(d)) is amended to read as follows: 
"(d) SUFFICIENCY.—For purposes of this section— 
"(1) SUFFICIENCY FOR BENEFIT COMMITMENTS.—A single-em-
ployer plan is sufficient for benefit commitments if there is no 
amount of unfunded benefit commitments under the plan. 
"(2) SUFFICIENCY FOR GUARANTEED BENEFITS.—A single-em-
ployer plan is sufficient for guaranteed benefits if there is no 
amount of unfunded guaranteed benefits under the plan.". 
SEC. 11008. STANDARD TERMINATION OF SINGLE-EMPLOYER PLANS. 
(a) IN GENERAL.—Section 4041 (as amended by section 11007 of 
this Act) is further amended by inserting after subsection (a) the 
following new subsection: 
"(b) STANDARD TERMINATION OF SINGLE-EMPLOYER PLANS.— 
"(1) GENERAL REQUIREMENTS.—A single-employer plan may 
terminate under a standard termination only i
f
— 
"(A) the plan administrator provides the 60-day advance 
notice of intent to terminate to affected parties required 
under subsection (a)(2), 
"(B) the requirements of subparagraphs (A) and (B) of 
paragraph (2) are met. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 245 
"(C) the corporation does not issue a notice of noncompli-
ance under subparagraph (C) of paragraph (2), and 
"(D) when the final distribution of assets occurs, the plan 
is sufficient for benefit commitments (determined as of the 
termination date). 
'(2) TERMINATION PROCEDURE.— 
"(A) NOTICE TO THE CORPORATION.—As soon as practicable 
after the date on which the notice of intent to terminate is 
provided pursuant to subsection (a)(2), the plan adminis-
trator shall send a notice to the corporation setting forth— 
"(i) certification by an enrolled actuary— 
"(I) of the projected amount of the assets of the 
plan (as of a proposed date of final distribution of 
assets), 
"(II) of the actuarial present value (as of such 
date) of the benefit commitments (determined as of 
the proposed termination date) under the plan, and 
"(III) that the plan is projected to be sufficient 
(as of such proposed date of final distribution) for 
such benefit commitments, 
"(ii) such information as the corporation may pre- Regulations, 
scribe in regulations as necessary to enable the cor-
poration to make determinations under subparagraph 
(C), and 
"(iii) certification by the plan administrator that the 
information on which the enrolled actuary based the 
certification under clause (i) and the information pro-
vided to the corporation under clause (ii) are accurate 
and complete. 
"(B) NOTICE TO PARTICIPANTS AND BENEFICIARIES OF BENE-
FIT COMMITMENTS.—No later than the date on which a 
notice is sent by the plan administrator under subpara-
graph (A), the plan administrator shall send a notice to 
each person who is a participant or beneficiary under the 
plan— 
"(i) specifying the amount of such person's benefit 
commitments (if any) as of the proposed termination 
date and the benefit form on the basis of which such 
amount is determined, and 
"(ii) including the following information used in 
determining such benefit commitments: 
"(I) the length of service, 
"(II) the age of the participant or beneficiary, 
"(III) wages, 
"(IV) the assumptions, including the interest 
rate, and 
"(V) such other information as the corporation 
may require. 
Such notice shall be written in such manner as is likely 
to be understood by the participant or beneficiary and 
as may be prescribed in regulations of the corporation. 
"(C) NOTICE FROM THE CORPORATION OF NONCOMPLIANCE.— 
"(i) IN GENERAL.—Within 60 days after receipt of the 
notice under subparagraph (A), the corporation shall 
issue a notice of noncompliance to the plan adminis-
trator i
f
— 
100 STAT. 246 
PUBLIC LAW 99-272—APR. 7, 1986 
"(I) it has reason to believe that any requirement 
of subsection (a)(2) or subparagraph (A) or (B) has 
not been met, or 
"(II) it otherwise determines, on the basis of 
information provided by affected parties or other-
wise obtained by the corporation, that there is 
reason to beUeve that the plan is not sufficient for 
benefit commitments, 
"(ii) EXTENSION.—The corporation and the plan 
administrator may agree to extend the 60-day period 
referred to in clause (i) by a written agreement signed 
by the corporation and the plan administrator before 
the expiration of the 60-day period. The 60-day period 
shall be extended as provided in the agreement and 
may be further extended by subsequent written agree-
ments signed by the corporation and the plan adminis-
trator made before the expiration of a previously 
agreed upon extension of the 60-day period. Any exten-
sion may be made upon such terms and conditions 
(including the payment of benefits) as are agreed upon 
by the corporation and the plan administrator. 
"(D) FINAL DISTRIBUTION OF ASSETS IN ABSENCE OF NOTICE 
OF NONCOMPLIANCE.—The plan administrator shall com-
mence the final distribution of assets pursuant to the stand-
ard termination of the plan as soon as practicable after the 
expiration of the 60-day (or extended) period referred to in 
subparagraph (C), but such final distribution may occur 
only i
f
— 
"(i) the plan administrator has not received during 
such period a notice of noncompliance from the cor-
poration under subparagraph (C), and 
"(ii) when such final distribution occurs, the plan is 
sufficient for benefit commitments (determined as of 
the termination date). 
"(3) METHODS OF FINAL DISTRIBUTION OF ASSETS.— 
"(A) IN GENERAL.—In connection with any final distribu-
tion of assets pursuant to the standard termination of the 
plan under this subsection, the plan administrator shall 
29 use 1344. 
distribute the assets in accordance with section 4044. In 
distributing such assets, the plan administrator shall— 
"(i) purchase irrevocable commitments from an in-
surer to provide the benefit commitments under the 
plan and all other benefits (if any) under the plan to 
which assets are required to be allocated under section 
4044, or 
"(ii) in accordance with the provisions of the plan and 
any applicable regulations of the corporation, other-
wise fully provide the benefit commitments under the 
plan and all other benefits (if any) under the plan to 
which assets are required to be allocated under section 
4044. 
"(B) CERTIFICATION TO THE CORPORATION OF FINAL DIS-
TRIBUTION OF ASSETS.—Within 30 days after the final dis-
tribution of assets is completed pursuant to the standard 
termination of the plan under this subsection, the plan 
administrator shall send a notice to the corporation certify-
ing that the assets of the plan have been distributed in 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 247 
accordance with the provisions of subparagraph (A) so as to 
pay the benefit commitments under the plan and all other 
benefits under the plan to which assets are required to be 
allocated under section 4044. 
29 USC 1344. 
"(4) CONTINUING AUTHORITY.—Nothing in this section shall be 
construed to preclude the continued exercise by the corporation, 
after the termination date of a plan terminated in a standard 
termination under this subsection, of its authority under section 
4003 with respect to matters relating to the termination. A 29 USC 1303. 
certification under paragraph (3)(B) shall not affect the corpora-
tion's obligations under section 4022.". 
29 USC 1322. 
(b) CONFORMING AMENDMENT.—Section 4041(f) (29 U.S.C. 1341(f)) 
is amended to read as follows: 
"(f) LIMITATION ON THE CONVERSION OF A DEFINED BENEFIT PLAN 
T
O A DEFINED CONTRIBUTION PLAN.—The adoption of an amendment 
to a plan which causes the plan to become a plan described in 
section 4021(bXl) constitutes a termination of the plan. Such an 29 USC 1821. 
amendment may take effect only after the plan satisfies the require-
ments for standard termination under subsection (b) or distress 
termination under subsection (c).". 
(c) AUTHORITY FOR 60-DAY EXTENSION.—In the case of a standard 
29 USC 1341 
termination of a plan under section 4041(b) of the Employee Retire- note. 
ment Income Security Act of 1974 (as amended by this section) with 
^*^' P" ^'*' 
respect to which a notice of intent to terminate is filed before 120 
days after the date of the enactment of this Act, the Pension Benefit 
Guaranty Corporation may, without the consent of the plan 
administrator, extend the 60-day period under section 4041(b)(2)(C)(i) 
of such Act (as so amended) for a period not to exceed 60 days. 
(d) SPECIAL TEMPORARY RULE.— 
29 use 1341 
(1) REQUIREMENTS TO BE MET BEFORE FINAL DISTRIBUTION OF "O^. 
ASSETS.—In the case of the termination of a single-employer 
plan described in paragraph (2) with respect to which the 
amount payable to the employer pursuant to section 4044(d) 29 USC 1344. 
exceeds $1,000,000 (determined as of the proposed date of final 
distribution of assets), the final distribution of assets pursuant 
to such termination may not occur unless the Pension Benefit 
Guaranty Corporation— 
(A) determines that the assets of the plan are sufficient 
for benefit commitments (within the meaning of section 
4041(d)(1) of the Employee Retirement Income Security Act 
of 1974 (as amended by section 11007)) under the plan, and 
(B) issues to the plan administrator a written notice 
setting forth the determination described in subparagraph 
(A). 
(2) PLANS TO WHICH SUBSECTION APPLIES.—A single-employer 
plan is described in this paragraph if— 
(A) the plan administrator has filed a notice of intent to 
terminate with the Pension Benefit Guaranty Corporation, 
and— 
(i) the filing was made before January 1, 1986, and 
the Corporation has not issued a notice of sufficiency 
for such plan before the date of the enactment of this 
Act, or 
(ii) the filing is made on or after January 1, 1986, and 
before 60 days after the date of the enactment of this 
Act and the Corporation has not issued a notice of 
100 STAT. 248 
PUBLIC LAW 99-272—APR. 7, 1986 
sufficiency for such plan before the date of the enact-
ment of this Act, and 
(B) of the persons who are (as of the termination date) 
participants in the plan, the lesser of 10 percent or 200 have 
filed complaints with the Corporation regarding such termi-
nation— 
(i) in the case of plans described in subparagraph 
(A)(i), before 15 days after the date of the enactment of 
this Act, or 
(ii) in any other case, before the later of 15 days after 
the date of the enactment of this Act or 45 days after 
the date of the filing of such notice. 
(3) CONSIDERATION OF COMPLAINTS.—The Corporation shall 
consider and respond to such complaints not later than 90 days 
after the date on which the Corporation makes the determina-
tion described in paragraph (1)(A). The Corporation may hold 
informal hearings to expedite consideration of such complaints. 
Any such hearing shall be exempt from the requirements of 
5 use 500 et 
chapter 5 of title 5, United States Code. 
seq- 
(4) DELAY ON ISSUANCE OF NOTICE.— 
(A) GENERAL RULE.—Except as provided in subparagraph 
(B), the Corporation shall not issue any notice described in 
paragraph (1)(B) until 90 days after the date on which the 
Corporation makes the determination described in para-
graph (1)(A). 
(B) EXCEPTION IN CASES OF SUBSTANTIAL BUSINESS HARD-
SHIP.—Except in the case of an acquisition, takeover, or 
leveraged buyout, the preceding provisions of this subsec-
tion shall not apply if the contributing sponsor dem-
onstrates to the satisfaction of the Corporation that the 
contributing sponsor is experiencing substantial business 
hardship. For purposes of this subparagraph, a contributing 
sponsor shall be considered as experiencing substantial 
business hardship if the contributing sponsor has been 
operating, and can demonstrate that the contributing spon-
sor will continue to operate, at an economic loss. 
SEC. 11009. DISTRESS TERMINATION OF SINGLE-EMPLOYER PLANS. 
29 use 1341. 
(a) IN GENERAL.—Section 4041 (as amended by sections 11007 and 
11008 of this Act) is further amended by inserting after subsection 
(b) the following new subsection: 
"(c) DISTRESS TERMINATION OF SINGLE-EMPLOYER PLANS.— 
"(1) IN GENERAL.—A single-employer plan may terminate 
under a distress termination only i
f
— 
"(A) the plan administrator provides the 60-day advance 
notice of intent to terminate to affected parties required 
under subsection (a)(2), 
"(B) the requirements of subparagraph (A) of paragraph 
(2) are met, and 
"(C) the corporation determines that the requirements of 
subparagraph (B) of paragraph (2) are met. 
"(2) TERMINATION REQUIREMENTS.— 
Regulations. 
"(A) INFORMATION SUBMITTED TO THE CORPORATION.—As 
soon as practicable after the date on which the notice of 
intent to terminate is provided pursuant to subsection (a)(2), 
the plan administrator shall provide the corporation, in 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 249 
such form as may be prescribed by the corporation in 
regulations, the following information: 
"(i) such information as the corporation may pre-
scribe by regulation as necessary to make determina-
tions under subparagraph (B) and paragraph (3); 
"(ii) certification by an enrolled actuary o
f
— 
"(I) the amount (as of the proposed termination 
date) of the current value of the assets of the plan, 
"(II) the actuarial present value (as of such date) 
of the benefit commitments under the plan, 
"(III) whether the plan is sufficient for benefit 
commitments as of such date, 
"(IV) the actuarial present value (as of such date) 
of benefits under the plan guaranteed under sec-
tion 4022, and 
29 USC 1322. 
"(V) whether the plan is sufficient for guaran-
teed benefits as of such date; 
"(iii) in any case in which the plan is not sufficient 
for benefit commitments as of such date— 
"(I) the name and address of each participant 
and beneficiary under the plan as of such date, and 
"(II) such other information as shall be pre-
scribed by the corporation by regulation as nec-
essary to enable the corporation (or its designee 
under section 4049(b)) to be able to make payments Post, p. 258. 
to participants and beneficiaries as required under 
section 4049; and 
"(iv) certification by the plan administrator that the 
information on which the enrolled actuary based the 
certifications under clause (ii) and the information pro-
vided to the corporation under clauses (i) and (iii) are 
accurate and complete. 
"(B) DETERMINATION BY THE CORPORATION OF NECESSARY 
DISTRESS CRITERIA.—Upon receipt of the notice of intent to 
terminate required under subsection (a)(2) and the informa-
tion required under subparagraph (A), the corporation shall 
determine whether the requirements of this subparagraph 
are met as provided in clause (i), (ii), or (iii). The require-
ments of this subparagraph are met if each person who is 
(as of the termination date) a contributing sponsor of such 
plan or a substantial member of such sponsor's controlled 
group meets the requirements of any of the following 
clauses: 
"(i) 
LIQUIDATION 
IN 
BANKRUPTCY 
OR INSOLVENCY 
PROCEEDINGS.—The requirements of this clause are met 
by a. person if— 
"(I) such person has filed or has had filed against 
such person, as of the termination date, a petition 
seeking liquidation in a case under title 11, United 
States Code, or under any similar law of a State or 
political subdivision of a State, and 
"(II) such case has not, as of the termination 
date, been dismissed, 
"(ii) REORGANIZATION IN BANKRUPTCY OR INSOLVENCY 
PROCEEDINGS.—The requirements of this clause are met 
by a person if— 
100 STAT. 250 
PUBLIC LAW 99-272—APR. 7, 1986 
"(I) such person has filed, or has had filed 
against such person, as of the termination date, a 
petition seeking reorganization in a case under 
title 11, United States Code, or under any similar 
law of a State or political subdivision of a State (or 
a case described in clause (i) filed by or against 
such person has been converted, as of such date, to 
such a case in which reorganization is sought), 
"(II) such case has not, as of the termination 
date, been dismissed, and 
"(III) the bankruptcy court (or other appropriate 
court in a case under such similar law of a State or 
political subdivision) approves the termination, 
"(iii) TERMINATION REQUIRED TO ENABLE PAYMENT OF 
DEBTS WHILE STAYING IN BUSINESS O
R T
O AVOID UN-
REASONABLY BURDENSOME PENSION COSTS CAUSED B
Y 
DECLINING WORKFORCE.—The requirements of this 
clause are met by a person if such person demonstrates 
to the satisfaction of the corporation that— 
"(I) unless a distress termination occurs, such 
person will be unable to pay such person's debts 
when due and will be unable to continue in busi-
ness, or 
"(II) the costs of providing pension coverage have 
become unreasonably burdensome to such person, 
solely as a result of a decline of such person's 
workforce covered as participants under all single-
employer plans of which such person is a contrib-
uting sponsor. 
"(C) SUBSTANTIAL MEMBER.—For purposes of subpara-
graph (B), the term 'substantial member' of a controlled 
group means a person whose assets comprise 5 percent or 
more of the total assets of the controlled group as a whole. 
"(D) NOTIFICATION OF DETERMINATIONS BY THE CORPORA-
TION.—The corporation shall notify the plan administrator 
as soon as practicable of its determinations made pursuant 
to subparagraph (B). 
^ 
"(3) TERMINATION PROCEDURE.— 
"(A) DETERMINATIONS BY THE CORPORATION RELATING TO 
PLAN SUFFICIENCY FOR GUARANTEED BENEFITS AND FOR BENE-
FIT COMMITMENTS.—If the Corporation determines that the 
requirements for a distress termination set forth in para-
graphs (1) and (2) are met, the corporation shall— 
"(i) determine that the plan is sufficient for guaran-
teed benefits (as of the termination date) or that the 
corporation is unable to make such determination on 
the basis of information made available to the corpora-
tion, 
"(ii) determine that the plan is sufficient for benefit 
commitments (as of the termination date) or that the 
corporation is unable to make such determination on 
the basis of information made available to the corpora-
tion, and 
"(iii) notify the plan administrator of the determina-
tions made pursuant to this subparagraph as soon as 
practicable. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 251 
"(B) IMPLEMENTATION OF TERMINATION.—After the cor-
poration notifies the plan administrator of its determina-
tions under subparagraph (A), the termination of the plan 
shall be carried out as soon as practicable, as provided in 
clause (i), (ii), or (iii). 
"(i) CASES OF SUFFICIENCY FOR BENEFIT COMMIT-
MENTS.—In 
any 
case 
in which 
the 
corporation 
determines that the plan is sufficient for benefit 
commitments, the plan administrator shall proceed to 
distribute the plan s assets, and make certification to 
the corporation with respect to such distribution, in the 
manner described in subsection (b)(3), and shall take 
such other actions as may be appropriate to carry out 
the termination of the plan, 
"(ii) CASES OF SUFFICIENCY FOR GUARANTEED BENEFITS 
WITHOUT A FINDING OF SUFFICIENCY FOR BENEFIT 
COMMITMENTS.—In any case in which the corporation 
determines that the plan is sufficient for guaranteed 
benefits, but further determines that it is unable to 
determine that the plan is sufficient for benefit 
commitments on the basis of the information made 
available to it— 
"(I) the plan administrator shall proceed to 
distribute the plan's assets in the manner de-
scribed in subsection (b)(3), make certification to 
the corporation that the distribution has occurred, 
and take such actions as may be appropriate to 
carry out the termination of the plan, and 
"(II) the corporation shall establish a separate 
trust in connection with the plan for purposes of 
section 4049. 
Post, p. 258. 
"(iii) CASES WITHOUT ANY FINDING OF SUFFICIENCY.— 
In any case in which the corporation determines that it 
is unable to determine that the plan is sufficient for 
guaranteed benefits on the basis of the information 
made available to it— 
"(I) the corporation shall commence proceedings Post, p. 253. 
in accordance with section 4042, and 
"(II) the corporation shall establish a separate 
trust in connection with the plan for purposes of 
section 4049 unless the corporation determines 
that all benefit commitments under the plan are 
benefits guaranteed by the corporation under sec-
tion 4022. 
29 use 1322. 
"(C) 
FINDING AFTER AUTHORIZED COMMENCEMENT OF 
TERMINATION THAT PLAN IS UNABLE TO PAY BENEFITS.— 
"(i) FINDING WITH RESPECT TO BENEFIT COMMITMENTS 
WHICH ARE NOT GUARANTEED BENEFITS.—If, after the 
plan administrator has begun to terminate the plan as 
authorized 
under 
subparagraph 
(B)(i), the 
plan 
administrator finds that the plan is unable, or will be 
unable, to pay benefit commitments which are not 
benefits guaranteed by the corporation under section 
4022, the plan administrator shall notify the corpora-
tion of such finding as soon as practicable thereafter. If 
the corporation concurs in the finding of the plan 
administrator (or the corporation itself makes such a 
100 STAT. 252 
PUBLIC LAW 99-272—APR. 7, 1986 
finding) the corporation shall take the actions set forth 
in subparagraph (B)(ii)(II) relating to the trust estab-
Post, p. 258. 
lished for purposes of section 4049. 
"(ii) FINDING WITH RESPECT TO GUARANTEED BENE-
FITS.—If, after the plan administrator has begun to 
terminate the plan as authorized by subparagraph (B) (i) 
or (ii), the plan administrator finds that the plan is 
unable, or will be unable, to pay all benefits under the 
plan which are guaranteed by the corporation under 
29 use 1322. 
section 4022, the plan administrator shall notify the 
corporation of such finding as soon as practicable there-
after. If the corporation concurs in the finding of the 
plan administrator (or the corporation itself makes 
such a finding), the corporation shall institute appro-
29 use 1342. 
priate proceedings under section 4042. 
"(D) ADMINISTRATION OF THE PLAN DURING INTERIM PERIOD.— 
"(i) IN GENERAL.—The plan administrator shall— 
"(I) meet the requirements of clause (ii) for the period 
commencing on the date on which the plan adminis-
trator provides a notice of distress termination to the 
corporation under subsection (a)(2) and ending on the 
date on which the plan administrator receives notifica-
tion from the corporation of its determinations under 
subparagraph (A), and 
"(II) meet the requirements of clause (ii) commencing 
on the date on which the plan administrator or the 
corporation makes a finding under subparagraph (C)(ii). 
"(ii) REQUIREMENTS.—The requirements of this clause are 
met by the plan administrator if the plan administrator— 
"(I) refrains from distributing assets or taking any 
other actions to carry out the proposed termination of 
this subsection, 
"(II) pays benefits attributable to employer contribu-
tions, other than death benefits, only in the form of an 
annuity, 
"(III) does not use plan assets to purchase irrevocable 
commitments to provide benefits from an insurer, and 
"(IV) continues to pay all benefit commitments under 
the plan, but, commencing on the proposed termination 
date, limits the payment of benefits under the plan to 
those benefits which are guaranteed by the corporation 
under section 4022 or to which assets are required to be 
allocated under section 4044. 
In the event the plan administrator is later determined not 
to have met the requirements for distress termination, any 
benefits which are not paid solely by reason of compliance 
with subclause (IV) shall be due and payable immediately 
(together with interest, at a reasonable rate, in accordance 
with regulations of the corporation).". 
29 use 1341. 
(b) CONFORMING AMENDMENTS.—Section 4041 (as amended by the 
preceding provisions of this title) is further amended— 
(1) by striking out subsection (e); and 
(2) by redesignating subsection (f) as subsection (e). 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 253 
SEC. 11010. TERMINATION PROCEEDINGS; DUTIES OF THE CORPORATION. 
(a) MANDATORY COMMENCEMENT OF PROCEEDINGS UPON INABILITY 
OF SINGLE-EMPLOYER PLAN TO PAY BENEFITS THAT ARE CURRENTLY 
DUE.— 
(1) IN GENERAL.—Section 4042(a) (29 U.S.C. 1342(a)) is 
amended— 
(A) in paragraph (2), by striking out "is" and inserting in 
lieu thereof "will be"; and 
(B) by inserting at the beginning of the matter following 
paragraph (4) the following new sentence: "The corporation 
shall as soon as practicable institute proceedings under this 
section to terminate a single-employer plan whenever the 
corporation determines that the plan does not have assets 
available to pay benefits which are currently due under the 
terms of the plan". 
(2) CONFORMING AMENDMENTS.— 
(A) Section 4042(b)(1) (29 U.S.C. 1342(b)(1)) is amended, in 
the first sentence, by inserting "or is required under subsec-
tion (a) to institute proceedings under this section," after 
"to a plan". 
(B) Section 4042(c) (29 U.S.C. 1342(c)) is amended in the 
first sentence by striking out "If the corporation" and all 
that follows down through "has determined" and inserting 
in lieu thereof the following: "If the corporation is required 
under subsection (a) of this section to commence proceed-
ings under this section with respect to a plan or, after 
issuing a notice under this section to a plan administrator, 
has determined". 
(b) ESTABLISHMENT OF SECTION 4049 TRUST.—Section 4042 is fur-
ther amended by adding at the end thereof the following new 
subsection: 
"(i) In any case in which a plan is terminated under this section in 
a termination proceeding initiated by the corporation pursuant to 
subsection (a), the corporation shall establish a separate trust in 
connection with the plan for purposes of section 4049, unless the Post, p. 258. 
corporation determines that all benefit commitments under the plan 
are benefits guaranteed by the corporation under section 4022 or 29 USC 1322. 
that there is no amount of unfunded benefit commitments under the 
plan.". 
(c) CONFORMING AMENDMENT.—The heading for section 4042 is 
amended to read as follows: 
"INSTITUTION OF TERMINATION PROCEEDINGS BY THE CORPORATION", 
SEC. 11011. AMENDMENTS TO LIABILITY PROVISIONS; LIABILITIES RELAT-
ING TO BENEFIT COMMITMENTS IN EXCESS OF BENEFITS 
GUARANTEED BY THE CORPORATION. 
(a) LIABILITY FOR DISTRESS TERMINATIONS AND TERMINATIONS BY 
THE CORPORATION.—Section 4062 (29 U.S.C. 1362) is amended— 
(1) by redesignating subsection (e) as subsection (f); and 
(2) by striking out so much as precedes subsection (f) (as 
redesignated) and inserting in lieu thereof the following: 
100 STAT. 254 
PUBLIC LAW 99-272—APR. 7, 1986 
"LIABILITY FOR TERMINATION OF SINGLE-EMPLOYER PLANS UNDER A 
DISTRESS TERMINATION OR A TERMINATION BY THE CORPORATION 
"SEC. 4062. (a) IN GENERAL.—In any case in which a single-
employer plan is terminated in a distress termination under section 
Ante, p. 248. 
4041(c) or a termination otherwise instituted by the corporation 
Ante, p. 253. 
under section 4042, any person who is, on the termination date, a 
contributing sponsor of the plan or a member of such a contributing 
sponsor's controlled group shall incur liability under this section. 
The liability under this section of all such persons shall be joint and 
several. The liability under this section consists o
f
— 
"(1) liability to the corporation, to the extent provided in 
subsection (b), 
"(2) liability to the trust established pursuant to section 
Ante, pp. 248, 
4041(c)(3)(B) (ii) or (iii) or section 4042(i), to the extent provided 
253. 
in subsection (c), and 
"(3) liability to the trustee appointed under subsection (b) or 
(c) of section 4042, to the extent provided in subsection (d). 
"(b) LlABIUTY TO THE CORPORATION.— 
"(1) AMOUNT OF LIABILITY.— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), the liability to the corporation of a person described in 
subsection (a) shall consist of the sum o
f
— 
"(i) the lesser o
f
— 
"(I) the total amount of unfunded guaranteed 
benefits (as of the termination date) of all partici-
pants and beneficiaries under the plan, or 
"(II) 30 percent of the collective net worth of all 
persons described in subsection (a), 
and 
"(ii) the excess (if any) of— 
"(I) 75 percent of the amount described in clause 
(i)(I), over 
"(II) the amount described in clause (i)(II), 
together with interest (at a reasonable rate) calculated from 
the termination date in accordance with regulations pre-
scribed by the corporation. 
"(B) 
SPECIAL RULE IN CASE OF SUBSEQUENT INSUFFI-
CIENCY.—For purposes of subparagraph (A), in any case 
described in section 4041(c)(3)(C)(ii), actuarial present values 
shall be determined as of the date of the notice to the 
corporation (or the finding by the corporation) described in 
such section. 
"(2) PAYMENT OF LIABILITY.— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), the liability to the corporation under this subsection 
shall be due and payable to the corporation as of the 
termination date, in cash or securities acceptable to the 
corporation. 
"(B) SPECIAL RULE.—Payment of the liability under para-
graph (l)(A)(ii) shall be made under commercially reason-
able terms prescribed by the corporation. The parties in-
volved shall make a reasonable effort to reach agreement 
on such commercially reasonable terms. Any such terms 
prescribed by the corporation shall provide for deferral of 
50 percent of any amount of liability otherwise payable for 
any year under this subparagraph if a person subject to 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 255 
such liability demonstrates to the satisfaction of the cor-
poration that no person subject to such liability has any 
individual pre-tax profits for such person's fiscal year 
ending during such year. 
"(3) ALTERNATIVE ARRANGEMENTS.—The corporation and any 
person liable under this section may agree to alternative 
arrangements for the satisfaction of liability to the corporation 
under this subsection. 
"(c) LIABILITY TO SECTION 4049 TRUST.— 
"(1) AMOUNT OF LIABILITY.— 
"(A) IN GENERAL.—In any case in which there is an 
outstanding amount of benefit commitments under a plan 
terminated under section 4041(c) or 4042, a person described 
Ante, pp. 248, 
in subsection (a) shall be subject to liability under this 
^53. 
subsection 
to the trust 
established 
under 
section 
4041(c)(3)(B) (ii) or (iii) or section 4042(i) in connection with 
the terminated plan. Except as provided in subparagraph 
(B), the liability of such person under this subsection shall 
consist of the lesser of— 
"(i) 75 percent of the total outstanding amount of 
benefit commitments under the plan, or 
"(ii) 15 percent of the actuarial present value (deter-
mined as of the termination date on the basis of 
assumptions prescribed by the corporation for purposes 
of section 4044) of all benefit commitments under the 29 USC 1344. 
plan. 
"(B) SPECIAL RULE IN CASE OF SUBSEQUENT INSUFFI-
CIENCY.—For purposes of subparagraph (A)— 
"(i) PLANS INSUFFICIENT FOR GUARANTEED BENEFITS.— 
In any case described in section 4041(c)(3)(C)(ii), actuar-
ial present values shall be determined as of the date of 
the notice to the corporation (or the finding by the 
corporation) described in such section. 
"(ii) PLANS SUFFICIENT FOR GUARANTEED BENEFITS BUT 
INSUFFICIENT FOR BENEFIT ENTITLEMENTS.—In a n y Case 
described in section 4041(c)(3)(C)(i) but not described in 
section 4041(c)(3)(C)(ii), actuarial present values shall be 
determined as of the date on which the final distribu-
tion of assets is completed. 
"(2) PAYMENT OF LIABILITY.— 
"(A) GENERAL RULE.—Except as otherwise provided in 
this paragraph, payment of a person's liability under this 
subsection shall be made for liability payment years under 
commercially reasonable terms prescribed by the fiduciary 
designated 
by the corporation 
pursuant 
to section 
4049(b)(1)(A). Such fiduciary and the liable persons assessed Post, p. 258. 
liability under this subsection shall make a reasonable 
effort to reach agreement on such commercially reasonable 
terms. 
"(B) SPECIAL RULE FOR PLANS WITH LOW AMOUNTS OF 
LIABILITY.—In any case in which the amount described in 
paragraph (1)(A) is less than $100,000, the requirements of 
subparagraph (A) may be satisfied by payment of such 
liability over 10 liability payment years in equal annual 
installments (with interest at the rate determined under 
section 66210t)) of the Internal Revenue Code of 1954). The 26 USC 6621. 
corporation may, by regulation, increase the dollar amount 
100 STAT. 256 
PUBLIC LAW 99-272—APR. 7, 1986 
referred to in this subparagraph as it determines appro-
priate, taking into account reasonable administrative costs 
Ante, p. 248. 
of trusts established under section 4041(c)(3)(B) (ii) or (iii) or 
Ante, p. 253. 
section 4042(i). 
"(C) DEFERRAL OF PAYMENTS.—The terms for payment 
provided for under subparagraph (A) or (B) shall also pro-
vide for deferral of 75 percent of any amount of liability 
otherwise payable for any liability payment year if a person 
subject to such liability demonstrates to the satisfaction of 
the corporation that no person subject to such liability has 
any individual pre-tax profits for such person's fiscal year 
ending during such year. The amount of liability so de-
ferred is payable only after payment in full of any amount 
of liability under subsection (b) in connection with the 
termination of the same plan which has been deferred 
pursuant to terms provided for under subsection (b)(2)(B). 
"(d) LIABILITY TO SECTION 4042 TRUSTEE.—A person described in 
subsection (a) shall be subject to liability under this subsection to 
the trustee appointed under subsection (b) or (c) of section 4042. The 
liability of such person under this subsection shall consist of^ 
"(1) the outstanding balance of the accumulated funding defi-
29 use 1082. 
ciencies (within the meaning of section 302(a)(2) of this Act and 
26 use 412. 
section 412(a) of the Internal Revenue Code of 1954) of the plan 
(if any) (which, for purposes of this subparagraph, shall include 
the amount of any increase in such accumulated funding defi-
ciencies of the plan which would result if all pending applica-
tions for waivers of the minimum funding standard under 
29 use 1083. 
section 303 of this Act or section 412(d) of such Code and for 
29 use 1084. 
extensions of the amortization period under section 304 of this 
Act or section 412(e) of such Code with respect to such plan were 
denied and if no additional contributions (other than those 
already made by the termination date) were made for the plan 
year in which the termination date occurs or for any previous 
plan year), 
"(2) the outstanding balance of the amount of waived funding 
deficiencies of the plan waived before such date under section 
303 of this Act or section 412(d) of such Code (if any), and 
"(3) the outstanding balance of the amount of decreases in the 
minimum funding standard allowed before such date under 
section 304 of this Act or section 412(e) of such Code (if any), 
together with interest (at a reasonable rate) calculated from the 
termination date in accordance with regulations prescribed by the 
corporation. The liability under this subsection shall be due and pay-
able to such trustee as of the termination date, in cash or securities 
acceptable to such trustee. 
"(e) DEFINITIONS.— 
"(1) 
COLLECTIVE NET WORTH OF PERSONS SUBJECT TO LIA-
BILITY.— 
"(A) IN GENERAL.—The collective net worth of persons 
subject to liability in connection with a plan termination 
consists of the sum of the individual net worths of all 
persons who— 
"(i) have individual net worths which are greater 
than zero, and 
"(ii) are (as of the termination date) contributing 
sponsors of the terminated plan or members of their 
controlled groups. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 257 
"(B) DETERMINATION OF NET WORTH.—For purposes of this 
paragraph, the net worth of a person is— 
"(i) determined on whatever basis best reflects, in the 
determination of the corporation, the current status of 
the person's operations and prospects at the time 
chosen for determining the net worth of the person, 
and 
"(ii) increased by the amount of any transfers of 
assets made by the person which are determined by the 
corporation to be improper under the circumstances, 
including any such transfers which would be inappro-
priate under title 11, United States Code, if the person 
were a debtor in a case under chapter 7 of such title, li USC 701 et 
"(C) TIMING OF DETERMINATION.—For purposes of this ««9-
paragraph, determinations of net worth shall be made as of 
a day chosen by the corporation (during the 120-day period 
ending with the termination date) and shall be computed 
without regard to any liability under this section. 
"(2) PRE-TAX PROFITS.—The term 'pre-tax profits' means— 
"(A) except as provided in subparagraph (B), for any fiscal 
year of any person, such person's consolidated net income 
(excluding any extraordinary charges to income and includ-
ing any extraordinary credits to income) for such fiscal 
year, as shown on audited financial statements prepared in 
accordance with generally accepted accounting principles, 
or 
"(B) for any fiscal year of an organization described in 
section 501(c) of the Internal Revenue Code of 1954, the 
26 USC 501. 
excess of income over expenses (as such terms are defined 
for such organizations under generally accepted accounting 
principles), 
before provision for or deduction of Federal or other income tax, 
any contribution to any single-employer plan of which such 
person is a contributing sponsor at any time during the period 
beginning on the termination date and ending with the end of 
such fiscal year, and any amounts required to be paid for such 
fiscal year under this section. The corporation may by regula-
tion require such information to be filed on such forms as may 
be necessary to determine the existence and amount of such 
pre-tax profits. 
"(3) LIABILITY PAYMENT YEARS.—The liability payment years 
in connection with a terminated plan consist of the consecutive 
one-year periods following the last plan year preceding the 
termination date, excluding the first such year in any case in 
which the first such year ends less than 180 days after the 
termination date.". 
(b) CLERICAL AMENDMENT.—Subsection (f) of section 4062 (as re- 42 use 1362. 
designated by subsection (a)(1)) is amended by inserting "TREATMENT 
OF SUBSTANTIAL CESSATION OF OPERATIONS.—" after "(0". 
(c) AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1954.— 
(1) TIME FOR DEDUCTION OF CERTAIN EMPLOYER LIABILITY PAY-
MENTS.—Paragraph (3) of section 404(g) of the Internal Revenue 
Code of 1954 (relating to certain employer liability payments 
26 USC 404. 
considered as contributions) is amended to read as follows: 
"(3) TIMING OF DEDUCTION OF CONTRIBUTIONS.— 
"(A) IN GENERAL.—Except as otherwise provided in this 
paragraph, any payment described in paragraph (1) shall 
71-194 0 - 89 - 11 : Q
L 3 Parti 
100 STAT. 258 
PUBLIC LAW 99-272—APR. 7, 1986 
(subject to the last sentence of subsection (a)(1)(A)) be 
deductible under this section when paid. 
"(B) CONTRIBUTIONS UNDER STANDARD TERMINATIONS.— 
Subparagraph (A) shall not apply (and subsection (a)(1)(A) 
shall apply) to any payments described in paragraph (1) 
which are paid to terminate a plan under section 4041(b) of 
Ante, p. 244. 
the Employee Retirement Income Security Act of 1974 to 
the extent such payments result in the assets of the plan 
being in excess of the total amount of benefits under such 
plan which are guaranteed by the Pension Benefit Guar-
29 use 1322. 
anty Corporation under section 4022 of such Act. 
"(C) CONTRIBUTIONS TO CERTAIN TRUSTS.—Subparagraph 
(A) shall not apply to any payment described in paragraph 
29 use 1362. 
(1) which is made under section 4062(c) of such Act and such 
payment shall be deductible at such time as may be pre-
scribed in regulations which are based on principles similar 
to the principles of subsection (a)(1)(A).". 
(2) REFERENCES TO ERISA.—Subsection (g) of section 404 of the 
26 use 404; 
Internal Revenue Code of 1954 is amended by adding at the end 
ante, p. 257. 
thereof the following new paragraph: 
"(4) REFERENCES TO EMPLOYEE RETIREMENT INCOME SECURITY 
ACT OF 1974.—For purposes of this subsection, any reference to a 
section of the Employee Retirement Income Security Act of 1974 
shall be treated as a reference to such section as in effect on the 
date of the enactment of the Single-Employer Pension Plan 
Ante, p. 237. 
Amendments Act of 1986.". 
26 use 404 note. 
(3) EFFECTIVE DATE.—The amendments made by this subsec-
tion shall apply to payments made after January 1, 1986, in 
taxable years ending after such date. 
SEC. 11012. DISTRIBUTION TO PARTICIPANTS AND BENEFICIARIES OF LI-
ABILITY PAYMENTS TO SECTION 4049 TRUST. 
(a) IN GENERAL.—Subtitle C of title IV is amended by adding at 
the end thereof the following new section: 
"DISTRIBUTION TO PARTICIPANTS AND BENEFICIARIES OF UABILITY 
PAYMENTS TO SECTION 4049 TRUST 
29 use 1349. 
"SEC. 4049. (a) TRUST REQUIREMENTS.—The requirements of this 
section apply to a trust established by the corporation in connection 
Ante, p. 248. 
with a terminated plan pursuant to section 4041(c)(3XB) (ii) or (iii). 
The trust shall be used exclusively for— 
29 use 1362. 
"(1) receiving liability payments under section 4062(c) from 
the persons who were (as of the termination date) contributing 
sponsors of the terminated plan and members of their con-
trolled groups, 
"(2) making distributions as provided in this section to the 
persons who were (as of the termination date) participants and 
beneficiaries under the terminated plan, and 
"(3) defraying the reasonable administrative expenses in-
curred in carrying out responsibilities under this section. 
The trust shall be maintained for such period of time as is necessary 
to receive all liability payments required to be made to the trust 
under section 4062(c) with respect to the terminated plan and to 
make all distributions required to be made to participants and 
beneficiaries under this section with respect to the terminated 
plan. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 259 
"(b) DESIGNATION OF FIDUCIARY BY THE CORPORATION.— 
"(1) PURPOSES FOR DESIGNATION OF FIDUCIARY.— 
"(A) COLLECTION OP LIABILITY.—The corporation shall des-
ignate a fiduciary (within the meaning of section 3(21)) to 
29 USC 1002. 
serve as trustee of the trust for purposes of conducting 
negotiations and assessing and collecting liability pursuant 
to section 4062(c). 
29 USC 1362. 
"(B) ADMINISTRATION OF TRUST.— 
"(i) CORPORATION'S FUNCTIONS.—Except as provided 
in clause (ii), the corporation shall serve as trustee of 
the trust for purposes of administering the trust, 
including making distributions from the trust to 
participants and beneficiaries. 
"(ii) DESIGNATION OF FIDUCIARY IF COST-EFFECTIVE.—If 
the corporation determines that it would be cost-effec-
tive to do so, it may designate a fiduciary (within the 
meaning of section 3(21)), including the fiduciary des-
ignated under subparagraph (A), to perform the func-
tions described in clause (i). 
"(2) FIDUCIARY REQUIREMENTS.—A fiduciary designated under 
paragraph (1) shall be— 
"(A) independent of each contributing sponsor of the plan 
and the members of such sponsor's controlled group, and 
"(B) subject to the requirements of part 4 of subtitle B of 
title I (other than section 406(a)) as if such trust were a plan 
29 USC 1101, 
subject to such part. 
1106-
"(c) DISTRIBUTIONS FROM TRUST.— 
"(1) IN GENERAL.—Not later than 30 days after the end of each 
liability payment year (described in section 4062(e)(3)) with 
29 USC 1362. 
respect to a terminated single-employer plan, the corporation, 
or its designee under subsection (b), shall distribute from the 
trust maintained pursuant to subsection (a) to each person who 
was (as of the termination date) a participant or beneficiary 
under the plan— 
"(A) in any case not described in subparagraph (B), an 
amount equal to the outstanding amount of benefit commit-
ments to such person under the plan (including interest 
calculated from the termination date), to the extent not 
previously paid under this paragraph, or 
"(B) in any case in which the balance in the trust at the 
end of such year which is in cash or may be prudently 
converted to cash (after taking into account liability pay-
ments received under subsection (a)(1) and administrative 
expenses paid under subsection (a)(3)) is less than the total 
of all amounts described in subparagraph (A) in connection 
with all persons who were (as of the termination date) 
participants and beneficiaries under the terminated plan, 
the product derived by multiplying— 
"(i) the amount described in subparagraph (A) in 
connection with each such person, by 
"(ii) a fraction— 
"(I) the numerator of which is such balance in 
the trust, and 
"(II) the denominator of which is equal to the 
total of all amounts described in subparagraph (A) 
in connection with all persons who were (as of the 
100 STAT. 260 
PUBLIC LAW 99-272—APR. 7, 1986 
termination date) participants and beneficiaries 
under the terminated plan. 
"(2) CARRY-OVER OF MINIMAL PAYMENT AMOUNTS.—The cor-
poration, or its designee under subsection (b), may withhold a 
payment to any person under this subsection in connection with 
any liability payment year (other than the last liability pay-
ment year with respect to which payments under paragraph (1) 
are payable) if such payment does not exceed $100. In any case 
in which such a payment is so withheld, the payment to such 
person in connection with the next following liability pay-
ment year shall be increased by the amount of such withheld 
payment. 
"(d) REGULATIONS.—The corporation may issue such regulations 
as it considers necessary to carry out the purposes of this section.". 
(b) TAX-EXEMPT STATUS FOR TRUSTS DESCRIBED IN SECTION 4049 OF 
ERISA.—Subsection (c) of section 501 of the Internal Revenue Code 
26 use 501. 
of 1954 (relating to list of tax-exempt organizations) is amended by 
adding at the end thereof the following new paragraph: 
"(24) A trust described in section 4049 of the Employee Retire-
Ante, p. 258. 
ment Income Security Act of 1974 (as in effect on the date of the 
enactment of the Single-Employer Pension Plan Amendments 
Ante, p. 237. 
Act of 1986).". 
(c) ROLLOVERS OF PAYMENTS FROM TRUST ALLOWED.—Paragraph 
26 use 402. 
(6) of section 402(a) of such Code (relating to special rollover rules) is 
amended by adding at the end thereof the following new subpara-
graph: 
"(G) PAYMENTS FROM CERTAIN PENSION PLAN TERMINATION 
TRUSTS.—If— 
"(i) any amount is paid or distributed to a recipient from 
a trust described in section 501(c)(24), 
"(ii) the recipient transfers any portion of the property 
received in such distribution to an eligible retirement plan 
described in subclause (I) or (II) of paragraph (5)(E)(iv), and 
"(iii) in the case of a distribution of property other than 
money, the amount so transferred consists of the property 
distributed, 
then the portion of the distribution so transferred shall be 
treated as a distribution described in paragraph (5)(A).". 
29 use 1362 
(d) SPECIAL DELAYED PAYMENT RULE.—In the case of a distress 
note. 
termination under section 4041(c) of the Employee Retirement 
Income Security Act of 1974 (as amended by section 11009) pursuant 
to a notice of intent to terminate filed before January 1, 1987, no 
payment of liability otherwise payable as provided in section 
29 use 1362. 
4062(c)(2)(B) of such Act (as amended by this section) shall be 
required to be made before January 1,1989. 
SEC. 11013. TREATMENT OF TRANSACTIONS TO EVADE LIABILITY; EFFECT 
OF CORPORATE REORGANIZATION, 
(a) IN GENERAL.—Subtitle D of title IV is amended by adding at 
the end thereof the following new section: 
"TREATMENT OF TRANSACTIONS TO EVADE LIABILITY; EFFECT OF 
CORPORATE REORGANIZATION 
29 use 1369. 
"SEC. 4069. (a) TREATMENT OF TRANSACTIONS TO EVADE LIABIL-
ITY.—If a principal purpose of any person in entering into any 
transaction is to evade liability to which such person would be 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 261 
subject under this subtitle and the transaction becomes effective 
within five years before the termination date of the termination on 
which such Uabihty would be based, then such person and the 
members of such person's controlled group (determined as of the 
termination date) shall be subject to liability under this subtitle in 
connection with such termination as if such person were a contribut-
ing sponsor of the terminated plan as of the termination date. This 
subsection shall not cause any person to be liable under this subtitle 
in connection with such plan termination for any increases or 
improvements in the benefits provided under the plan which are 
adopted after the date on which the transaction referred to in the 
preceding sentence becomes effective. 
"(b) EFFECT OF CORPORATE REORGANIZATION.—For purposes of this 
subtitle, the following rules apply in the case of certain corporate 
reorganizations: 
"(1) CHANGE OF IDENTITY, FORM, ETC.—If a person ceases to 
exist by reason of a reorganization which involves a mere 
change in identity, form, or place of organization, however 
effected, a successor corporation resulting from such reorganiza-
tion shall be treated as the person to whom this subtitle applies. 
"(2) 
LIQUIDATION INTO PARENT CORPORATION.—If a person 
ceases to exist by reason of liquidation into a parent corpora-
tion, the parent corporation shall be treated as the person to 
whom this subtitle applies. 
"(3) MERGER, CONSOLIDATION, OR DIVISION.—If a person ceases 
to exist by reason of a merger, consolidation, or division, the 
successor corporation or corporations shall be treated as the 
person to whom this subtitle applies.", 
(b) EFFECTIVE DATE.—Section 4069(a) of the Employee Retirement 
Income Security Act of 1974 (as added by subsection (a)) shall apply 
29 USC 1369 
with respect to transactions becoming effective on or after Janu- 
^°^-
ary 1, 1986. 
SEC. 11014. ENFORCEMENT AUTHORITY RELATING TO TERMINATIONS OF 
SINGLE-EMPLOYER PLANS. 
(a) PRIVATE RIGHTS OF ACTION.—Subtitle D of title IV (as amended 
by section 11013) is further amended by adding at the end thereof 
the following new section: 
"ENFORCEMENT AUTHORITY RELATING TO TERMINATIONS OF SINGLE-
EMPLOYER PLANS 
"SEC. 4070. (a) IN GENERAL.—Any person who is with respect to a 
29 USC 1370. 
single-employer plan a fiduciary, contributing sponsor, member of a 
contributing sponsor's controlled group, participant, or beneficiary, 
and is adversely affected by an act or practice of any party (other 
than the corporation) in violation of any provision of section 4041, 
4042, 4049, 4062, 4063, 4064, or 4069, or who is an employee organiza- Ante, pp. 244, 
tion representing such a participant or beneficiary so adversely 
oQ^frlf?-
affected for purposes of collective bargaining with respect to such i362-i364 
plan, may bring an action— 
Ante. p. 260. 
"(1) to enjoin such act or practice, or 
"(2) to obtain other appropriate equitable relief (A) to redress 
such violation or (B) to enforce such provision. 
"(b) STATUS OF PLAN AS PARTY TO ACTION AND WITH RESPECT TO 
LEGAL PROCESS.—A single-employer plan may be sued under this 
section as an entity. Service of summons, subpoena, or other legal 
100 STAT. 262 
PUBLIC LAW 99-272—APR. 7, 1986 
process of a court upon a trustee or an administrator of a single-
employer plan in such trustee's or administrator's capacity as such 
shall constitute service upon the plan. If a plan has not designated 
in the summary plan description of the plan an individual as agent 
for the service of legal process, service upon any contributing spon-
sor of the plan shall constitute such service. Any money judgment 
under this section against a single-employer plan shall be enforce-
able only against the plan as an entity and shall not be enforceable 
against any other person unless liability against such person is 
established in such person's individual capacity. 
Courts, U.S. 
"(c) JURISDICTION AND VENUE.—The district courts of the United 
States shall have exclusive jurisdiction of civil actions under this 
section. Such actions may be brought in the district where the plan 
is administered, where the violation took place, or where a defend-
ant resides or may be found, and process may be served in any other 
district where a defendant resides or may be found. The district 
courts of the United States shall have jurisdiction, without regard to 
the amount in controversy or the citizenship of the parties, to grant 
the relief provided for in subsection (a) in any action. 
"(d) RIGHT OF CORPORATION TO INTERVENE.—A copy of the com-
plaint or notice of appeal in any action under this section shall be 
served upon the corporation by certified mail. The corporation shall 
have the right in its discretion to intervene in any action. 
"(e) AWARDS OF COSTS AND EXPENSES.— 
"(1) GENERAL RULE.—In any action brought under this sec-
tion, the court in its discretion may award all or a portion of the 
costs and expenses incurred in connection with such action, 
including reasonable attorney's fees, to any party who prevails 
or substantially prevails in such action. 
"(2) EXEMPTION FOR PLANS.—Notwithstanding the preceding 
provisions of this subsection, no plan shall be required in any 
action to pay any costs and expenses (including attorney's fees). 
"(f) LIMITATION ON ACTIONS.— 
"(1) IN GENERAL.—Except as provided in paragraph (3), an 
action under this section may not be brought after the later o
f
— 
"(A) 6 years after the date on which the cause of action 
arose, or 
"(B) 3 years after the applicable date specified in para-
graph (2). 
"(2) APPLICABLE DATE.— 
"(A) GENERAL RULE.—Except as provided in subpara-
graph (B), the applicable date specified in this paragraph is 
the earliest date on which the plaintiff acquired or should 
have acquired actual knowledge of the existence of such 
cause of action. 
"(B) SPECIAL RULE FOR PLAINTIFFS WHO ARE FIDUCIARIES.— 
In the case of a plaintiff who is a fiduciary bringing the 
action in the exercise of fiduciary duties, the applicable 
date specified in this paragraph is the date on which the 
plaintiff became a fiduciary with respect to the plan if such 
date is later than the date described in subparagraph (A). 
"(3) CASES OF FRAUD OR CONCEALMENT.—In the case of fraud or 
concealment, the period described in paragraph (1)(B) shall be 
extended to 6 years after the applicable date specified in para-
graph (2).". 
(b) CIVIL ACTIONS INVOLVING THE PENSION BENEFIT GUARANTY 
CORPORATION.— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 263 
(1) ACTIONS AGAINST THE CORPORATION.—Section 4003(f) (29 
U.S.C. 1303(f)) is amended to read as follows: 
"(f)(1) Except with respect to withdrawal liability disputes under 
part 1 of subtitle E, any person who is a fiduciary, employer, 
contributing sponsor, member of a contributing sponsor's controlled 
group, participant, or beneficiary, and is adversely affected by any 
action of the corporation with respect to a plan in which such person 
has an interest, or who is an employee organization representing 
such a participant or beneficiary so adversely affected for purposes 
of collective bargaining with respect to such plan, may bring an 
action against the corporation for appropriate equitable relief in the 
appropriate court. 
"(2) For purposes of this subsection, the term 'appropriate court' 
means— 
"(A) the United States district court before which proceedings 
under section 4041 or 4042 are being conducted. 
Ante, pp. 244, 
"(B) if no such proceedings are being conducted, the United 253. 
States district court for the judicial district in which the plan 
has its principal office, or 
"(C) the United States District Court for the District of 
Columbia. 
"(3) In any action brought under this subsection, the court may 
award all or a portion of the costs and expenses incurred in connec-
tion with such action to any party who prevails or substantially 
prevails in such action. 
"(4) This subsection shall be the exclusive means for bringing 
actions against the corporation under this title, including actions 
against the corporation in its capacity as a trustee under section 
4042 or 4049. 
Ante, p. 258. 
"(5)(A) Except as provided in subparagraph (C), an action under 
this subsection may not be brought after the later o
f
— 
"(i) 6 years after the date on which the cause of action arose, 
or 
"(ii) 3 years after the applicable date specified in subpara-
graph (B). 
"(B)(i) Except as provided in clause (ii), the applicable date speci-
fied in this subparagraph is the earliest date on which the plaintiff 
acquired or should have acquired actual knowledge of the existence 
of such cause of action. 
"(ii) In the case of a plaintiff who is a fiduciary bringing the action 
m the exercise of fiduciary duties, the applicable date specified in 
this subparagraph is the date on which the plaintiff became a 
fiduciary with respect to the plan if such date is later than the date 
specified in clause (i). 
"(C) In the case of fraud or concealment, the period described in 
subparagraph (A)(ii) shall be extended to 6 years after the applicable 
date specified in subparagraph (B). 
"(6) The district courts of the United States have jurisdiction of 
actions brought under this subsection without regard to the amount 
in controversy. 
"(7) In any suit, action, or proceeding in which the corporation is a 
party, or intervenes under section 4301, in any State court, the 29 USC 1451. 
corporation may, without bond or security, remove such suit, action, 
or proceeding from the State court to the United States district 
court for the district or division in which such suit, action, or 
proceeding is pending by following any procedure for removal now 
or hereafter in effect.'. 
100 STAT. 264 
PUBLIC LAW 99-272—APR. 7, 1986 
(2) LIMITATION ON ACTIONS BY THE CORPORATION.—Section 
4003(e) (29 U.S.C. 1303(e)) is amended by adding at the end 
thereof the following new paragraph: 
"(6)(A) Except as provided in subparagraph (C), an action under 
this subsection may not be brought after the later o
f
— 
"(i) 6 years after the date on which the cause of action arose, 
or 
"(ii) 3 years after the applicable date specified in subpara-
graph (B). 
"(B)(i) Except as provided in clause (ii), the applicable date speci-
fied in this subparagraph is the earliest date on which the corpora-
tion acquired or should have acquired actual knowledge of the 
existence of such cause of action. 
"(ii) If the corporation brings the action as a trustee, the ap-
plicable date specified in this subparagraph is the date on which the 
corporation became a trustee with respect to the plan if such date is 
later than the date described in clause (i). 
"(C) In the case of fraud or concealment, the period described in 
subparagraph (A)(ii) shall be extended to 6 years after the applicable 
date specified in subparagraph (B).". 
29 use 1303 
(3) EFFECTIVE DATE.—The amendments made by this subsec-
note. 
tion shall apply with respect to actions filed after the date of the 
enactment of this Act. 
SEC. 11015. PROVISIONS RELATING TO WAIVERS OF MINIMUM FUNDING 
STANDARD AND EXTENSIONS OF AMORTIZATION PERIOD. 
(a) SECURITY FOR WAIVERS.— 
(1) ERISA AMENDMENT.— 
(A) IN GENERAL.—Part 3 of subtitle B of title I is 
amended— 
(i) by redesignating section 306 (29 U.S.C. 1086) as 
section 307; and 
(ii) by inserting after section 305 (29 U.S.C. 1085) the 
following new section: 
"SECURITY FOR WAIVERS OF MINIMUM FUNDING STANDARD AND 
EXTENSIONS OF AMORTIZATION PERIOD 
29 use 1085a. 
"SEC. 306. (a) SECURITY MAY B E REQUIRED.— 
"(1) IN GENERAL.—Except as provided in subsection (c), the 
Secretary of the Treasury may require an employer maintain-
ing a defined benefit plan which is a single-employer plan 
29 use 1301. 
(within the meaning of section 4001(a)(15)) to provide security to 
such plan as a condition for granting or modifying a waiver 
29 use 1083, 
under section 303 or an extension under section 3(34. 
1084. 
"(2) SPECIAL RULES.—Any security provided under paragraph 
(1) may be perfected and enforced only by the Pension Benefit 
Guaranty Corporation or, at the direction of the Corporation, by 
a 
contributing 
sponsor (within 
the meaning of section 
4001(a)(13)) or a member of such sponsor's controlled group 
(within the meaning of section 4001(a)(14)). 
"(b) CONSULTATION WITH THE PENSION BENEFIT GUARANTY COR-
PORATION.—Except as provided in subsection (c), the Secretary of the 
Treasury shall, before granting or modifying a waiver under section 
303 or an extension under section 304 with respect to a plan 
described in subsection (a)(1)— 
"(1) provide the Pension Benefit Guaranty Corporation with— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 265 
"(A) notice of the completed application for any waiver, 
extension, or modification, and 
"(B) an opportunity to comment on such application 
within 30 days after receipt of such notice, and 
"(2) consider— 
"(A) any comments of the Corporation under paragraph 
(1)(B), and 
"(B) any views of any employee organization representing 
participants in the plan which are submitted in writing to 
the Secretary of the Treasury in connection with such 
application. 
Information provided to the corporation under this subsection shall 
be considered tax return information and subject to the safeguard-
ing and reporting requirements of section 6103(p) of the Internal 
Revenue Code of 1954. 
26 USC 6103. 
"(c) EXCEPTION FOR CERTAIN WAIVERS AND EXTENSIONS.— 
"(1) IN GENERAL.—The preceding provisions of this section 
shall not apply to any plan with respect to which the sum o
f
— 
"(A) the outstanding balance of the accumulated funding 
deficiencies (within the meaning of section 302(a)(2) of this 
Act and section 412(a) of the Internal Revenue Code of 1954) 
29 USC 1082. 
of the plan, 
26 USC 412. 
"(B) the outstanding balance of the amount of waived 
funding deficiencies of the plan waived under section 303 of 
this Act or section 412(d) of such Code, and 
"(C) the outstanding balance of the amount of decreases 
in the minimum funding standard allowed under section 
304 of this Act or section 412(e) of such Code, 
29 USC 1084. 
is less than $2,000,000. 
"(2) ACCUMULATED FUNDING DEFICIENCIES.—For purposes of 
paragraph (1)(A), accumulated funding deficiencies shall include 
any increase in such amount which would result if all applica-
tions for waivers of the minimum funding standard under 
section 303 of this Act or section 412(d) of the Internal Revenue 
29 USC 1083. 
Code of 1954 and for extensions of the amortization period 
under section 304 of this Act or section 412(e) of such Code 
which are pending with respect to such plan were denied.". 
(B) 
CONFORMING 
AMENDMENT.—Section 
211(c)(1) 
is 
29 USC 1061. 
amended by striking out "306(c)" and inserting in lieu 
thereof "307(c)". 
(C) CLERICAL AMENDMENT.—The table of sections in sec-
tion 1 is amended by striking out the item relating to 
section 306 and inserting in lieu thereof the following new 
items: 
"Sec. 306. Security for waivers of minimum funding standard and extensions of am-
ortization period. 
"Sec. 307. Effective dates." 
(2) AMENDMENTS TO THE INTERNAL REVENUE CODE OF I 9 5 4 . — 
(A) IN GENERAL.—Subsection (f) of section 412 of the 
Internal Revenue Code of 1954 (relating to requirement 
26 USC 412. 
that benefits may not be increased during waiver or exten-
sion period) is amended by adding at the end thereof the 
following new paragraph: 
"(3) SECURITY FOR WAIVERS AND EXTENSIONS; 
CONSULTA-
TIONS.— 
"(A) SECURITY MAY BE REQUIRED.— 
100 STAT. 266 
PUBLIC LAW 99-272—APR. 7, 1986 
"(i) IN GENERAL.—Except as provided in subpara-
graph (C), the Secretary may require an employer 
maintaining a defined benefit plan which is a single-
employer 
plan 
(within 
the 
meaning 
of 
section 
4001(a)(15) of the Employee Retirement Income Secu-
29 use 1301. 
rity Act of 1974) to provide security to such plan as a 
condition for granting or modifying a waiver under 
subsection (d) or an extension under subsection (e). 
"(ii) SPECIAL RULES.—Any security provided under 
clause (i) may be perfected and enforced only by the 
Pension Benefit Guaranty Corporation, or at the direc-
tion of the Corporation, by a contributing sponsor 
Ante, p. 238. 
(within the meaning of section 4001(a)(13) of such Act), 
or a member of such sponsor's controlled group (within 
Ante, p. 238. 
the meaning of section 4001(a)(14) of such Act). 
"(B) CONSULTATION WITH THE PENSION BENEFIT GUARANTY 
CORPORATION.—Except as provided in subparagraph (C), the 
Secretary shall, before granting or modifying a waiver 
under subsection (d) or an extension under subsection (e) 
with respect to a plan described in subparagraph (A)(i)— 
"(i) provide the Pension Benefit Guaranty Corpora-
tion with— 
"(I) notice of the completed application for any 
waiver, extension, or modification, and 
"(II) an opportunity to comment on such applica-
tion within 30 days after receipt of such notice, and 
"(ii) consider— 
"(I) any comments of the Corporation under 
clause (i)(II), and 
"(II) any views of any employee organization 
(within the meaning of section 3(4) of the Employee 
29 use 1002. 
Retirement Income Security Act of 1974) represent-
ing participants in the plan which are submitted in 
writing to the Secretary in connection with such 
application. 
Information 
provided to the corporation 
under 
this 
subparagraph shall be considered tax return information 
and subject to the safeguarding and reporting requirements 
26 use 6103. 
of section 6103(p). 
"(C) EXCEPTION FOR CERTAIN WAIVERS AND EXTENSIONS.— 
"(i) IN GENERAL.—The preceding provisions of this 
paragraph shall not apply to any plan with respect to 
which the sum o
f
— 
"(I) the outstanding balance of the accumulated 
funding deficiencies (within the meaning of subsec-
29 use 1082. 
tion (a) and section 302(a) of such Act) of the plan, 
"(II) the outstanding balance of the amount of 
waived funding deficiencies of the plan waived 
29 use 1083. 
under subsection (d) or section 303 of such Act, and 
"(III) the outstanding balance of the amount of 
decreases in the minimum funding standard al-
lowed under subsection (e) or section 304 of such 
29 u s e 1084. 
Act, 
is less than $2,000,000. 
"(ii) ACCUMULATED FUNDING DEFICIENCIES.—For pur-
poses of clause (i)(I), accumulated funding deficiencies 
shall include any increase in such amount which would 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 267 
result if all applications for waivers of the minimum 
funding standard under subsection (d) or section 303 of 
such Act and for extensions of the amortization period 29 USC 1083. 
under subsection (e) or section 304 of such Act which 29 USC 1084. 
are pending with respect to such plan were denied.". 
(B) CONFORMING AMENDMENTS.—Section 412(f) of the 
In-
ternal Revenue Code of 1954 is amended— 
26 USC 412. 
(i) by striking out the heading thereof and inserting 
in lieu thereof: 
"(f) REQUIREMENTS RELATING TO WAIVERS AND EXTENSIONS.—", 
and 
(ii) by striking out the heading of paragraph (1) 
thereof and inserting in lieu thereof: 
"(1) 
BENEFITS MAY NOT BE INCREASED DURING WAIVER OR 
EXTENSION PERIOD.—". 
(3) EFFECTIVE DATES.—The amendments made by this subsec- 29 USC 1085a 
tion shall apply with respect to applications for waivers, exten- note, 
sions, and modifications filed on or after the date of the enact-
ment of this Act. 
(b) APPLICABLE INTEREST RATE UNDER ARRANGEMENTS PROVIDING 
F
O
R WAIVERS AND EXTENSIONS.— 
(1) AMENDMENTS TO ERISA.— 
(A) VARIANCES FROM THE MINIMUM FUNDING STANDARD.— 
Section 303(a) (29 U.S.C. 1083(a)) is amended by adding at 
the end thereof the following new sentence: "The interest 
rate used for purposes of computing the amortization 
charge described in section 302(b)(2)(C) for a variance 
29 USC 1082. 
granted under this subsection shall be the rate determined 
under section 6621(b) of the Internal Revenue Code of 
1954.". 
26 USC 6621. 
(B) EXTENSIONS OF THE AMORTIZATION PERIOD.—Section 
304(a) (29 U.S.C. 1084(a)) is amended by adding after and 
below paragraph (2) the following new sentence: 
"The interest rate applicable under any arrangement entered into 
by the Secretary in connection with an extension granted under this 
subsection shall be the rate determined under section 6621(b) of the 
Internal Revenue Code of 1954.". 
(2) AMENDMENTS TO INTERNAL REVENUE CODE.— 
(A) VARIANCES FROM THE MINIMUM FUNDING STANDARD.— 
Paragraph (1) of section 412(d) of the Internal Revenue Code 
of 1954 (relating to waivers in case of substantial business 
26 USC 412. 
hardship) is amended by adding at the end thereof the 
following new sentence: "The interest rate used for pur-
poses of computing the amortization charge described in 
section 412(b)(2)(C) for a variance granted under this subsec-
tion shall be the rate determined under section 6621(b).". 
(B) EXTENSIONS OF THE AMORTIZATION PERIOD.—Subsection 
(e) of section 412 of such Code (relating to extension of 
amortization period) is amended by adding after and below 
paragraph (2) the following new sentence: 
"The interest rate applicable under any arrangement entered into 
by the Secretary in connection with an extension granted under this 
subsection shall be the rate determined under section 6621(b).". 
100 STAT. 268 
PUBLIC LAW 99-272—APR. 7, 1986 
SEC. 11016. CONFORMING, CLARIFYING, TECHNICAL, AND MISCELLANE-
OUS AMENDMENTS. 
(a) 
CONFORMING 
AMENDMENTS 
RELATING 
TO 
PLAN 
TERMI-
NATIONS.— 
(1) 
ESTIMATED 
BENEFITS 
FOR 
CERTAIN 
SINGLE-EMPLOYER 
PLANS.—Section 4005(b)(2) (29 U.S.C. 1305(b)(2)) is amended— 
(A) by striking out "and" at the end of subparagraph (C); 
(B) by striking out the period at the end of subparagraph 
(D) and inserting in heu thereof ", and"; and 
(C) by adding at the end thereof the following: 
"(E) to pay to participants and beneficiaries the estimated 
amount of benefits which are guaranteed by the corporation 
under this title and the estimated amount of other benefits to 
29 use 1344. 
which plan assets are allocated under section 4044, under 
single-employer plans which are unable to pay benefits when 
due or which are abandoned.". 
(2) CREDITS TO REVOLVING FUND.—Section 4005(b)(1) (29 U.S.C. 
1305(b)(1)) is amended— 
(A) by striking out "and" at the end of subparagraph (E); 
(B) by redesignating subparagraph (F) as subparagraph 
(G); and 
(C) by inserting after subparagraph (E) the following new 
subparagraph: 
"(F) attorney's fees awarded to the corporation, and". 
(3) RESTORATION OF PLANS.—Section 4047 (29 U.S.C. 1347) is 
amended— 
(A) in the first sentence, by inserting "under section 4041 
or 4042" after "terminated" each place it appears; and 
(B) in the second sentence, by striking out "section 4042" 
and inserting in lieu thereof "section 4041 or 4042". 
(4) TERMINATION DATE.—Section 4048(a) (29 U.S.C. 1348(a)) is 
amended— 
(A) by striking out "date of termination" and inserting in 
lieu thereof "termination date"; 
(B) by redesignating paragraphs (1) through (3) as para-
graphs (2) through (4), respectively; 
(C) in paragraph (2) (as redesignated), by inserting "in a 
distress termination" after "terminated" and by striking 
out "section 4041" and inserting in lieu thereof "section 
4041(c)"; 
(D) by inserting before paragraph (2) (as redesignated) the 
following new paragraph: 
"(1) in the case of a plan terminated in a standard termi-
nation in accordance with the provisions of section 4041(b), the 
termination date proposed in the notice provided under section 
4041(a)(2),"; 
and 
(E) in paragraph (4) (as redesignated), by striking out "in 
accordance with the provisions of either section" and insert-
ing in lieu thereof "under section 4041(c) or 4042". 
(5) CONFORMING AMENDMENTS TO SPECIAL LIABILITY RULES 
RELATING TO CERTAIN SINGLE-EMPLOYER PLANS UNDER MULTIPLE 
CONTROLLED GROUPS.— 
(A) 
LIABILITY 
OF SUBSTANTIAL 
EMPLOYER 
FOR WITH-
DRAWAL.— 
(i) Section 4063(a) (29 U.S.C. 1363(a)) is amended— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 269 
(I) by striking out "plan under which more than 
one employer makes contributions (other than a 
multiemployer plan)" and inserting in lieu thereof 
"single-employer plan which has two or more 
contributing sponsors at least two of whom are not 
under common control"; 
(II) in paragraph (1), by striking out "withdrawal 
of a substantial employer" and inserting in lieu 
thereof "withdrawal during a plan year of a 
substantial employer for such plan year"; 
(III) in paragraph (2), by striking out "of such 
employer" and all that follows and inserting in lieu 
thereof "of all persons with respect to the with-
drawal of the substantial employer."; 
(IV) by striking out "whether such employer is 
liable for any amount under this subtitle with 
respect to the withdrawal" and inserting in lieu 
thereof "whether there is liability resulting from 
the withdrawal of the substantial employer"; and 
(V) by striking out "notify such employer" and 
inserting in lieu thereof "notify the liable per-
sons". 
(ii) Section 4063(b) (29 U.S.C. 1363(b)) is amended— 
(I) by striking out "an employer" and all that 
follows down through "shall be liable" and insert-
ing in lieu thereof "any one or more contributing 
sponsors who withdraw, during a plan year for 
which they constitute a substantial employer, from 
a single-employer plan which has two or more 
contributing sponsors at least two of whom are not 
under common control, shall, upon notification of 
such contributing sponsors by the corporation as 
provided by subsection (a), be liable, together with 
the members of their controlled groups,"; 
(II) by striking out "such employer's"; 
(III) by striking out "the employer's withdrawal" 
and inserting in lieu thereof "the withdrawal re-
ferred to in subsection (a)(1)"; 
(IV) in paragraph (1), by striking out "such em-
ployer" and inserting in lieu thereof "such contrib-
uting sponsors"; 
(V) in paragraph (2), by striking out "all employ-
ers" and inserting in lieu thereof "all contributing 
sponsors"; and 
(VI) by striking out "the liability of each such 
employer" and inserting in lieu thereof "such li-
ability". 
(iii) Section 4063(c) (29 U.S.C. 1363(c)) is amended— 
(I) in paragraph (1), by striking out "In lieu of 
payment of his liability under this section the 
employer" and inserting in lieu thereof "In lieu of 
payment of a contributing sponsor's liability under 
this section, the contributing sponsor"; 
(II) in paragraph (2), by inserting "under section 
4041(c) or 4042" after "terminated", by striking out 
"of such employer", and by striking out "to the 
100 STAT. 270 
PUBLIC LAW 99-272—APR. 7, 1986 
employer (or his bond cancelled)" and inserting in 
lieu thereof "(or the bond cancelled)"; and 
(III) in paragraph (3), by inserting "under section 
4041(c) or 4042" after "terminates" and by striking 
out "employer" in subparagraph (C) and inserting 
in lieu thereof "contributing sponsor". 
(iv) Section 4063(d) (29 U.S.C. 1363(d)) is amended— 
(I) by striking out "Upon a showing by the plan 
administrator of a plan (other than a multiem-
ployer plan) that the withdrawal from the plan by 
any employer or employers has resulted" and 
inserting in lieu thereof "Upon a showing by the 
plan administrator of the plan that the withdrawal 
from the plan by one or more contributing spon-
sors has resulted"; 
(II) by striking out "by employers"; 
(III) in paragraph (1), by striking out "their 
employer's" and inserting in lieu thereof "the"; 
and 
(IV) in paragraph (2), by striking out "termi-
nation" and inserting in lieu thereof "plan termi-
nated under section 4042". 
(v) Section 4063(e) (29 U.S.C. 1363(e)) is amended— 
(I) by striking out "to any employer or plan 
administrator"; and 
(II) by striking out "all other employers" and 
inserting in lieu thereof "contributing sponsors". 
(vi) The heading for section 4063 is amended by 
adding at the end thereof the following "FROM SINGLE-
EMPLOYER 
PLANS 
UNDER 
MULTIPLE 
CONTROLLED 
GROUPS.". 
(B) 
A L L O C A T I O N O F LIABILITY U P O N T E R M I N A T I O N O F CER-
TAIN SINGLE-EMPLOYER PLANS.— 
(i) Section 4064(a) (29 U.S.C. 1364(a)) is amended— 
(I) by striking out "all employers who maintain a 
plan under which more than one employer makes 
contributions (other than a multiemployer plan)" 
and inserting in lieu thereof "all contributing 
sponsors of a single-employer plan which has two 
or more contributing sponsors at least two of whom 
are not under common control"; and 
(II) by inserting "under section 4041(c) or 4042" 
(ii) Section 4064(b) (29 U.S.C. 1364(b)) is amended to 
read as follows: 
"(b) The corporation shall determine the liability with respect to 
each contributing sponsor and each member of its controlled group 
29 use 1362. 
in a manner consistent with section 4062, except that— 
"(1) the amount of the liability determined under section 
4062(b)(1) with respect to the entire plan— 
"(A) shall be determined without regard to clauses (iXII) 
and (ii) of section 4062(b)(1)(A), and 
"(B) shall be allocated to each controlled group by mul-
tiplying such amount by a fraction— 
"(i) the numerator of which is the amount required to 
be contributed to the plan for the last 5 plan years 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 271 
ending prior to the termination date by persons in such 
controlled group as contributing sponsors, and 
"(ii) the denominator of which is the total amount 
required to be contributed to the plan for such last 5 
plan years by all persons as contributing sponsors, 
and clauses (i)(II) and (ii) of section 4062(b)(1)(A) shall be applied 
29 USC 1362. 
separately with respect to each such controlled group, and 
"(2) the amount of the liability determined under section 
4062(c)(1) with respect to the entire plan shall be allocated to 
each controlled group by multiplying such amount by the frac-
tion described in paragraph (1)(B) in connection with such 
controlled group. 
The corporation may also determine the liability of each such 
contributing sponsor and member of its controlled group on any 
other equitable basis prescribed by the corporation in regulations.", 
(iii) The heading for section 4064 is amended to read 
as follows: 
"LIABIUTY ON TERMINATION OF SINGLE-EMPLOYER PLANS UNDER 
MULTIPLE CONTROLLED GROUPS". 
(C) ANNUAL NOTIFICATION TO SUBSTANTIAL EMPLOYERS.— 
Section 4066 (29 U.S.C. 1366) is amended— 
(i) by striking out "each plan under which contribu-
tions are made by more than one employer (other than 
a multiemployer plan)" and inserting in lieu thereof 
"each single-employer plan which has at least two 
contributing sponsors at least two of whom are not 
under common control"; 
(ii) by striking out "any employer making contribu-
tions under that plan" and inserting in lieu thereof 
"contributing sponsor of the plan"; and 
(iii) by striking out "that he is a substantial em-
ployer" and inserting in lieu thereof "that such 
contributing sponsor (alone or together with members 
of such contributing sponsor's controlled group) con-
stitutes a substantial employer". 
(6) 
ADDITIONAL AMENDMENTS RELATING TO RECOVERY OF 
AMOUNTS OF LIABILITY.— 
(A) Section 4067 (29 U.S.C. 1367) is amended— 
(i) in the heading, by striking out "EMPLOYER"; 
(ii) by striking out "employer or employers" and 
inserting in lieu thereof "contributing sponsors and 
members of their controlled groups"; and 
(iii) by inserting "of amounts of liability to the cor-
poration accruing as of the termination date" after 
"deferred payment". 
(B) Section 4068 (29 U.S.C. 1368) is amended— 
(i) in the heading, by striking out "OF EMPLOYER"; 
(ii) in subsection (a), by striking out "employer or 
employers" the first place it appears and inserting in 
lieu thereof "person", by striking out "neglect or 
refuse" and inserting in lieu thereof "neglects or re-
fuses", by inserting "to the extent of an amount equal 
to 
the 
unpaid 
amount 
described 
in 
section 
4062(b)(l)(A)(i)" after "liability" and after "corpora-
tion" the second place it appears, and by striking out 
100 STAT. 272 
PUBLIC LAW 99-272—APR. 7, 1986 
"employer or employers" and inserting in lieu thereof 
"person"; 
(iii) in subsection (d)(1), by striking out "employer" 
and inserting in lieu thereof "liable person"; 
(iv) in subsection (d)(2), by striking out "employer" 
each place it appears and inserting in lieu thereof 
"liable person"; 
(v) in subsection (e), by striking out "employer or 
employers" and inserting in lieu thereof 
"liable 
person"; and 
(vi) by striking out subsection (c)(1) (29 U.S.C. 
1368(c)(1)) and inserting in lieu thereof the following: 
"(c)(1) Except as otherwise provided under this section, the prior-
ity of a lien imposed under subsection (a) shall be determined in the 
same manner as under section 6323 of the Internal Revenue Code of 
26 use 6323. 
1954 (as in effect on the date of the enactment of the Single-
Ante, p. 237. 
Employer Pension Plan Amendments Act of 1986). Such section 6323 
shall be applied for purposes of this section by disregarding subsec-
tion (g)(4) and by substituting— 
"(A) 'lien imposed by section 4068 of the Employee Retire-
29 use 1368. 
ment Income Security Act of 1974' for 'lien imposed by section 
6321' each place it appears in subsections (a), (b), (c)(1), (c)(4)(B), 
(d), (e), and (h)(5); 
"(B) 'the corporation' for 'the Secretary' in subsections (a) and 
(b)(9)(C); 
"(C) 'the payment of the amount on which the section 4068(a) 
lien is based' for 'the collection of any tax under this title' in 
subsection (b)(3); 
"(D) 'a person whose property is subject to the lien' for 'the 
taxpayer' in subsections (b)(8), (c)(2)(A)(i) (the first place it ap-
pears), (c)(2)(A)(ii), (c)(2)(B), (c)(4)(B), and (c)(4)(C) (in the matter 
preceding clause (i)); 
"(E) 'such person' for 'the taxpayer' in subsections (c)(2)(A)(i) 
(the second place it appears) and (c)(4)(C)(ii); 
"(F) 'payment of the loan value of the amount on which the 
lien is based is made to the corporation' for 'satisfaction of a 
levy pursuant to section 6332(b)' in subsection (b)(9)(C); 
"(G) 'section 4068(a) lien' for 'tax lien' each place it appears in 
subsections (c)(1), (c)(2)(A), (c)(2)(B), (c)(3)(B)(iii), (c)(4)(B), (d), and 
(h)(5); and 
"(H) 'the date on which the lien is first filed' for 'the date of 
the assessment of the tax' in subsection (g)(3)(A).". 
(b) CLARIFICATION OF DESCRIPTION OF CERTAIN INFORMATION RE-
QUIRED To BE FILED IN ANNUAL REPORT.— 
(1) IN GENERAL.—Section 103(d)(6) (29 U.S.C. 1023(d)(6)) is 
amended to read as follows: 
"(6) Information required in regulations of the Pension Bene-
fit Guaranty Corporation with respect to: 
"(A) the current value of the assets of the plan, 
"(B) the present value of all nonforfeitable benefits for 
participants and beneficiaries receiving payments under 
the plan, 
"(C) the present value of all nonforfeitable benefits for all 
other participants and beneficiaries, 
"(D) the present value of all accrued benefits which are 
not nonforfeitable (including a separate accounting of such 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 273 
benefits which are benefit commitments, as defined in sec-
tion 4001(a)(16)), and 
29 USC 1301. 
"(E) the actuarial assumptions and techniques used in 
determining the values described in subparagraphs (A) 
through (D).". 
(2) CONFORMING AMENDMENT.—Section 104(a)(2)(A) (29 U.S.C. 
1024(a)(2)(A)) is amended by striking out the second sentence. 
(3) TRANSITION RULES.—Any regulations, modifications, or 
29 USC 1023 
waivers which have been issued by the Secretary of Labor with 
"°*^-
respect to section 103(d)(6) of the Employee Retirement Income 
Security Act of 1974 (as in effect immediately before the date of 
29 USC 1023. 
the enactment of this Act) shall remain in full force and 
effect until modified by any regulations with respect to such 
section 103(d)(6) prescribed by the Pension Benefit Guaranty 
Corporation. 
(c) ADDITIONAL AMENDMENTS.— 
(1) 
DEFINITION 
FOR TITLE L—Section 
3(37)(A) (29 U.S.C. 
1002(37)(A)) is amended by inserting "pension" before "plan". 
(2) NOTICE OF REQUEST FOR WAIVERS OF MINIMUM FUNDING 
STANDARDS AND RIGHT TO SUBMIT RELEVANT INFORMATION.—Sec-
tion 303 (29 U.S.C. 1083) is amended by inserting after subsec-
tion (d) the following new subsection: 
"(e)(1) The Secretary of the Treasury shall, before granting a 
waiver under this section, require each applicant to provide evi-
dence satisfactory to such Secretary that the applicant has provided 
notice of the filing of the application for such waiver to each 
employee 
organization 
representing 
employees 
covered by the 
affected plan. 
"(2) The Secretary of the Treasury shall consider any relevant 
information provided by a person to whom notice was given under 
paragraph (1).". 
(3) NOTICE OF REQUEST FOR EXTENSIONS OF AMORTIZATION 
PERIOD AND RIGHT TO SUBMIT RELEVANT INFORMATION.—Section 
304 (29 U.S.C. 1084) is amended by adding at the end thereof the 
following new subsection: 
"(c)(1) The Secretary of the Treasury shall, before granting an 
extension under this section, require each applicant to provide 
evidence satisfactory to such Secretary that the applicant has pro-
vided notice of the filing of the application for such extension to 
each employee organization representing employees covered by the 
affected plan. 
"(2) The Secretary of the Treasury shall consider any relevant 
information provided by a person to whom notice was given under 
paragraph (1).". 
(4) AMENDMENT TO THE INTERNAL REVENUE CODE OF 1954.— 
Subsection (f) of section 412 of the Internal Revenue Code of 
1954 (relating to benefits may not be increased during waiver or 26 USC 412. 
extension period), as amended by the preceding provisions of 
this title, is further amended by adding at the end thereof the 
following new paragraph: 
"(4) ADDITIONAL REQUIREMENTS.— 
"(A) ADVANCE NOTICE.—The Secretary shall, before grant-
ing a waiver under subsection (d) or an extension under 
subsection (e), require each applicant to provide evidence 
satisfactory to the Secretary that the applicant has pro-
vided notice of the filing of the application for such waiver 
100 STAT. 274 
PUBLIC LAW 99-272—APR. 7, 1986 
or extension to each employee organization representing 
employees covered by the affected plan. 
"(B) 
CONSIDERATION OF RELEVANT INFORMATION.—The 
Secretary shall consider any relevant information p r o v e d 
by a person to whom notice was given under subparagraph 
(A).". 
(5) AUDIT OF PLANS TERMINATED IN STANDARD TERMINATION.— 
Section 4003(a) (29 U.S.C. 1303(a)) is amended by adding at the 
end thereof the following new sentence: "The corporation shall 
annually audit a statistically significant number of plans termi-
Ante, p. 244. 
nating under section 4041(b) to determine whether participants 
and beneficiaries have received their benefit commitments. 
Each audit shall include a statistically significant number of 
participants and beneficiaries.". 
(6) REPEAL OF EXPIRED AUTHORITY.—Section 4004 (29 U.S.C. 
1304) is repealed. 
(7) VOTING BY CORPORATION OF STOCK PAID AS LIABILITY.— 
Section 4005 (29 U.S.C. 1305) is amended by adding at the end 
thereof the following new subsection: 
"(g) Any stock in a person liable to the corporation under this title 
which is paid to the corporation by such person or a member of such 
person's controlled group in satisfaction of such person's liability 
under this title may be voted only by the custodial trustees or 
outside money managers of the corporation or fiduciaries with 
Ante, p. 258. 
respect to trusts to which the requirements of section 4049 apply.". 
(8) EFFECTIVE YEARS.—Section 4022(b)(7) (29 U.S.C. 1322(b)(7)) 
is amended by striking out "following" and inserting in lieu 
thereof "beginning with". 
(9) TREATMENT OF QUALIFIED PRERETIREMENT SURVIVOR ANNU-
ITIES.—Section 4022 (29 U.S.C. 1322) is amended by adding at 
the end thereof the following new subsection: 
"(d) For purposes of subsection (a), a qualified preretirement 
29 use 1055. 
survivor annuity (as defined in section 205(e)(1)) with respect to a 
participant under a terminated single-employer plan shall not be 
treated as forfeitable solely because the participant has not died as 
of the termination date.". 
(10) 
CLARIFICATION OF POWER TO COLLECT AMOUNTS DUE 
THE CORPORATION.—Section 
4042(d)(l)(B)(ii) 
(29 
U.S.C. 
1342(d)(l)(B)(ii)) is amended by inserting after "amounts due the 
plan" the following: ", including but not limited to the power to 
collect from the persons obligated to meet the requirements of 
29 use 1082. 
section 302 or the terms of the plan". 
(11) CONFORMING AMENDMENT.—Section 4042(d)(3) (29 U.S.C. 
1342(d)(3)) is amended by striking out "same duties as a trustee 
appointed under section 47 of the Bankruptcy Act" and insert-
ing in lieu thereof "same duties as those of a trustee under 
section 704 of title 11, United States Code". 
(12) CONFORMING AMENDMENT.—Section 4044(a) (29 U.S.C. 
1344(a)) is amended by striking out "defined benefit". 
(13) CLERICAL CORRECTIONS.—Section 4044(a)(4) (29 U.S.C. 
1344(a)(4)(A)) is amended— 
(A) in subparagraph (A), by striking out "section 
4022(b)(5)" and inserting in lieu thereof "section 4022B(a)"; 
and 
(B) in subparagraph (B), by striking out "section 
4022(b)(6)" and inserting in lieu thereof "section 4022(b)(5)". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 275 
(14) RELEASE OF LIEN.—Section 4068(e) (29 U.S.C. 1368(e)) is 
amended by striking out ", with the consent of the board of 
directors,". 
(d) STUDIES BY COMPTROLLER GENERAL.— 
(1) IN GENERAL.—The Comptroller General of the United 
States may, pursuant to the request of any Member of Congress, 
study employee benefit plans, including the effects of such plans 
on employees, participants, and their beneficiaries. 
(2) ACCESS TO BOOKS, DOCUMENTS, ETC.—For the purpose of 
conducting studies under this subsection, the Comptroller Gen-
eral, or any of his duly authorized representatives, shall have 
access to and the right to examine and copy any books, docu-
ments, papers, records, or other recorded information— 
(A) within the possession or control of the administrator, 
sponsor, or employer of and persons providing services to 
any employee benefit plan, and 
(B) which the Comptroller General or his representative 
finds, in his own judgment, pertinent to such study. 
The Comptroller General shall not disclose the identity of any 
individual or employer in making any information obtained 
under this subsection available to the public. 
(3) DEFINITIONS.—For purposes of this subsection, the terms 
"employee benefit plan", "participant", "administrator", "bene-
ficiary' , "plan sponsor", "employee", and "employer" are de-
fined in section 3 of the Employee Retirement Income Security 
Act of 1974. 
(4) EFFECTIVE DATE.—The preceding provisions of this subsec-
tion shall be effective on the date of the enactment of this Act. 
(e) AMENDMENTS TO THE TABLE OF CONTENTS OF ERISA.—The table 
of contents in section 1 is amended— 
(1) by striking out the item relating to section 4004; 
(2) by striking out the item relating to section 4042 and 
inserting in lieu thereof the following new item: 
"Sec. 4042. Institution of termination proceedings by the corporation."; 
(3) by inserting after the item relating to section 4048 the 
following new item: 
"Sec. 4049. Distribution to participants and beneficiaries of liability payments to 
section 4049 trust."; 
and 
(4) by striking out the items relating to subtitle D of title IV 
and inserting in lieu thereof the following new items: 
"Subtitle D—Liability 
"Sec. 4061. Amounts payable by the corporation. 
"Sec. 4062. Liability for termination of single-employer plans under a distress ter-
mination or a termination by the corporation. 
"Sec. 4063. Liability of substantial employer for withdrawal from single-employer 
plans under multiple controlled groups. 
"Sec. 4064. Liability on termination of single-employer plans under multiple con-
trolled groups. 
"Sec. 4065. Annual report of plan administrator. 
"Sec. 4066. Annual notification of substantial employers. 
"Sec. 4067. Recovery of liability for plan termination. 
"Sec. 4068. Lien for liability. 
"Sec. 4069. Treatment of transactions to evade liability; effect of corporate reorga-
nization. 
"Sec. 4070. Enforcement authority relating to terminations of single-employer 
plans.". 
29 u s e 1143a. 
Congress. 
Classified 
information. 
29 u s e 1002. 
29 u s e 1143a 
note. 
100 STAT. 276 
PUBLIC LAW 99-272—APR. 7, 1986 
29 use 1306 
SEC. 11017. STUDIES. 
(a) 
SINGLE-EMPLOYER PENSION PLAN TERMINATION INSURANCE 
PREMIUM STUDY.— 
(1) IN GENERAL.—As soon as practicable after the date of the 
enactment of this Act, the Pension Benefit Guaranty Corpora-
tion shall conduct a study of the premiums established under 
the single-employer pension plan termination insurance pro-
gram under title IV of the Employee Retirement Income Secu-
29 use 1301. 
rity Act of 1974. 
(2) MATTERS TO BE STUDIED.—The Corporation shall specifi-
cally consider in its study the following matters: 
(A) the effect of the amendments made by this title on the 
long-term stability of the single-employer pension plan 
termination insurance program under title IV of the Em-
ployee Retirement Income Security Act of 1974, 
(B) alternatives to the current statutory mechanism with 
respect to proposals for changes in the premium levels 
under such program, 
(C) the methods currently used by the Corporation in 
projecting future program costs of the single-employer pen-
sion plan termination insurance program, 
(D) alternative methods of projecting such future pro-
gram costs and an evaluation of each such alternative 
method, 
(E) the methods currently used by the Corporation in 
determining premiums needed to allocate and adequately 
fund such future program costs, 
(F) alternative methods of making such premium deter-
minations and an evaluation of each such alternative 
method, and 
(G) alternative premium bases upon which some or all of 
such projected future program costs would be allocated on 
an exposure-related or risk-related computation, which may 
take into account the different exposures or risks imposed 
on the Corporation by plan sponsors with different histories 
and under different circumstances. 
(3) SUBMISSION OF CORPORATION'S REPORT.—Not later than one 
year after the date of the enactment of this Act, the Corporation 
shall report the results of its study, together with any rec-
ommendations for statutory changes, to an advisory council, to 
be appointed by the chairmen of the Committee on Education 
and Labor and the Committee on Ways and Means of the House 
of Representatives and the Committee on Labor and Human 
Resources and the Committee on Finance of the Senate. The 
advisory council shall be composed of representatives of single-
employer plan sponsors, employee organizations representing 
single-employer plan participants, and members of the general 
public who are experts in the matters to be considered in the 
study. The members of the advisory council shall serve without 
compensation. 
(4) SUBMISSION OF COUNCIL'S REPORT TO CONGRESS.—Not later 
than 180 days after the date of the submission of the Corpora-
tion's report to the advisory council under paragraph (3), the 
advisory council shall submit the results of the Corporation's 
study and the Corporation's recommendations, together with 
the recommendations of the council, to the Speaker of the 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 277 
House of Representatives and the President pro tempore of the 
Senate. 
(5) COOPERATION BY THE PENSION BENEFIT GUARANTY CORPORA-
TION AND OTHER FEDERAL AGENCIES.—The Corporation shall co-
operate with the advisory council in reviewing the results of the 
Corporation's study and recommendations. In order to avoid 
unnecessary expense and duplication, to the extent not other-
wise prohibited by law, the Corporation and any other Federal 
agency shall provide to the advisory council any data, analyses, 
or other relevant information related to the matters under 
review. 
(b) OVERFUNDED PENSION PLAN STUDY.— 
(1) I N GENERAL.—As soon as practicable after the date of 
enactment of this Act, the Secretary of Labor shall conduct a 
study of terminations resulting in residual assets under section 
4044(d) of the Employee Retirement Income Security Act of 
1974. 
29 use 1344. 
(2) REPORT.—No later than May 1, 1986, the Secretary of 
Labor shall submit a report on the study conducted under 
paragraph (1), together with any recommendations for statutory 
changes, to the chairmen of the Committee on Education and 
Labor and the Committee on Ways and Means of the House of 
Representatives and the Com.mittee on Labor and Human Re-
sources and the Committee on Finance of the Senate. 
SEC. 11018. LIMITATION ON REGULATIONS. 
29 USC 1135 
(a) REGULATORY TREATMENT OF ASSETS OF REAL ESTATE ENTITIES.— 
(1) IN GENERAL.—Except as a defense, no rule or regulation 
adopted pursuant to the Secretary's proposed regulation defin-
ing "plan assets" for purposes of the Employee Retirement 
Income Security Act of 1974 (50 Fed. Reg. 961, January 8, 1985, 
as modified by 50 Fed. Reg. 6861, February 15, 1985), or any 
reproposal thereof prior to the adoption of the regulations 
required to be issued in accordance with subsection (d), shall 
apply to any asset of a real estate entity in which a plan, 
account, or arrangement subject to such Act invests if— 
(A) any interest in the entity is first offered to a plan, 
account, or arrangement subject to such Act investing in 
the entity (hereinafter in this section referred to as a "plan 
investor") on or before the date which is 120 days after the 
date of publication of such rule or regulation as a final rule 
or regulation; 
(B) no plan investor acquires an interest in the entity 
from an issuer or underwriter at any time on or after the 
date which is 270 days after the date of publication of such 
rule or regulation as a final rule or regulation (except 
pursuant to a contract or subscription binding on the plan 
investor and entered into, or tendered, before the expira-
tion of such 270-day period, or pursuant to the exercise, on 
or before December 31, 1990, of a warrant which was the 
subject of an effective registration under the Securities Act 
of 1933 (15 U.S.C. 77q et seq.) prior to the date of the i5USC77ae^ 
enactment of this section); and 
seq. 
(C) every interest in the entity acquired by a plan inves-
tor (or contracted for or subscribed to by a plan investor) 
before the expiration of such 270-day period is a security— 
100 STAT. 278 
PUBLIC LAW 99-272—APR. 7, 1986 
(i) which is part of an issue or class of securities 
which upon such acquisition or at any time during the 
offering period is held by 100 or more persons; 
(ii) the economic rights of ownership in respect of 
which are freely transferable; 
(iii) which is registered under the Securities Act of 
15 use 77a et 
1933; and 
««9- 
(iv) which is part of an issue or class of securities 
which is registered under the Securities Exchange Act 
of 1934 (15 U.S.C. 78a et seq.) (or is so registered within 
three years of the effective date of the registration 
statement of such securities for purposes of the Securi-
ties Act of 1933: Provided, That the issuer provides plan 
investors with such reports with respect to the offering 
period as are required with respect to such period by 
the Securities and Exchange Commission under such 
Acts and the rules and regulations promulgated there-
under). 
In the case of partnerships organized prior to enactment of this 
section, the requirements of subparagraphs (iii) and (iv) shall 
not apply to initial limited partnership interests in an entity 
otherwise described above: Provided, That such entity was the 
subject of an effective registration under the Securities Act of 
1933 prior to the date of the enactment of this section, such 
interests were issued solely for partnership organizational pur-
poses in compliance with State limited partnership laws, and 
such interest has a value as of the date of issue of less than 
$20,000 and represents less than one percent of the total in-
terests outstanding as of the completion of the offering period. 
(2) MAINTENANCE OF CURRENT REGULATORY TREATMENT.—No 
asset of any real estate entity described in paragraph (1) shall 
be treated as an asset of any plan investor for any purpose of 
29 use 1001 
the Employee Retirement Income Security Act of 1974 if the 
^°^- 
assets of such entity would not have been assets of such plan 
investor under the provisions o
f
— 
(A) Interpretive Bulletin 75-2 (29 CFR 2509 750-2); or 
(B) the regulations proposed by the Secretary of Labor 
and published— 
(i) on August 28,1979, at 44 Fed. Reg. 50363; 
(ii) on June 6, 1980, at 45 Fed. Reg. 38084; 
(iii) on January 8, 1985, at 50 Fed. Reg. 961; or 
(iv) on February 15, 1985, at 50 Fed. Reg. 6361, 
without regard to any limitation of any effective date pro-
posed therein, 
(b) DEFINITIONS AND SPECIAL RULES.—For purposes of this 
section— 
(1) The term "real estate entity" means an entity which, at 
any time within two years after the closing of its offering period 
has invested or has contracted to invest at least 75 percent of 
the value of its net assets available for investment in direct or 
indirect ownership of "real estate assets" or "interests in real 
property". 
(2) The term "real estate asset" means real property (includ-
ing an interest in real property) and any share of stock or 
beneficial interest, partnership interest, depository receipt, or 
any other interest in any other real estate entity. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 279 
(3) The term "interest in real property" includes, directly or 
indirectly, the following: 
(A) the ownership or co-ownership of land or improve-
ments thereon; 
(B) any mortgage (including an interest in or co-owner-
ship of any mortgage, leasehold mortgage, pool of mort-
gages, deed of trust, or similar instrument) on land or 
improvements thereon, 
(C) any leasehold of land or improvements thereon; and 
(D) any option to acquire any of the foregoing, but does 
not include any mineral, oil, or gas royalty interest. 
(4) Whether the economic rights of ownership with respect to 
a security are "freely transferable" shall be determined based 
upon all the facts and circumstances, but ordinarily none of the 
following, alone or in any combination, shall cause the economic 
rights of ownership to be considered not freely transferable— 
(A) any requirement that not less than a minimum 
number of shares or units of such security be transferred or 
assigned by any investor: Provided, That such requirement 
does not prevent transfer of all of the then remaining 
shares or units held by an investor; 
(B) any prohibition against transfer or assignment of such 
security or rights in respect thereof to an ineligible or 
unsuitable investor; 
(C) any restriction on or prohibition against any transfer 
or assignment which would either result in a termination 
or reclassification of the entity for Federal or State tax 
purposes or which would violate any State or Federal stat-
ute, regulation, court order, judicial decree, or rule of law; 
(D) any requirement that reasonable transfer or admin-
istrative fees be paid in connection with a transfer or 
assignment; 
(E) any requirement that advance notice of a transfer or 
assignment be given to the entity and any requirement 
regarding execution of documentation evidencing such 
transfer or assignment (including documentation setting 
forth representations from either or both of the transferor 
or transferee as to compliance with any restriction or 
requirement described in this section or requiring compli-
ance with the entity's governing instruments); 
(F) any restriction on substitution of an assignee as a 
limited partner of a partnership, including a general part-
ner consent requirement: Provided, That the economic 
benefits of ownership of the assignor may be transferred or 
assigned without regard to such restriction or consent 
(other than compliance with any other restriction described 
in this section); 
(G) any administrative procedure which establishes an 
effective date, or an event such as the completion of the 
offering, prior to which a transfer or assignment will not be 
effective; and 
(H) any limitation or restriction on transfer or assign-
ment which is not created or imposed by the issuer or any 
person acting for or on behalf of such issuer, 
(c) No EFFECT ON SECRETARY'S AUTHORITY OTHER THAN AS PRO- Regulations. 
viDED.—Except as provided in subsection (a), nothing in this section 
shall limit the authority of the Secretary of Labor to issue regula-
100 STAT. 280 
PUBLIC LAW 99-272—APR. 7, 1986 
tions or otherwise interpret section 3(21) of the Employee Retire-
29 use 1002. 
ment Income Security Act of 1974. 
(d) TIME LIMIT FOR FINAL REGULATIONS.—The Secretary of Labor 
shall adopt final regulations defining "plan assets' by December 31, 
1986. 
(e) EFFECTIVE DATE.—The preceding provisions of this section 
shall take effect on the date of the enactment of this Act. 
SEC. 11019. EFFECTIVE DATE OF TITLE; TEMPORARY PROCEDURES. 
29 use 1341 
(a) I N GENERAL.—Except as otherwise provided in this title, the 
J^ot^- 
amendments made by this title shall be effective as of January 1, 
1986, except that such amendments shall not apply with respect to 
terminations for which— 
(1) notices of intent to terminate were filed with the Pension 
Benefit Guaranty Corporation under section 4041 of the Em-
Ante, p. 244. 
ployee Retirement Income Security Act of 1974 before such 
date, or 
(2) proceedings were commenced under section 4042 of such 
Ante, p. 253. 
Act before such date. 
(b) TRANSITIONAL RULES.— 
(1) IN GENERAL.—In the case of a single-employer plan termi-
nation for which a notice of intent to terminate was filed with 
the Pension Benefit Guaranty Corporation under section 4041 of 
the Employee Retirement Income Security Act of 1974 (as in 
effect before the amendments made by this title) on or after 
January 1, 1986, but before the date of the enactment of this 
Act, the amendments made by this title shall apply with respect 
to such termination, as modified by paragraphs (2) and (3). 
(2) DEEMED COMPLIANCE WITH NOTICE REQUIREMENTS.—The 
requirements of subsections (a)(2), (b)(1)(A), and (c)(1)(A) of sec-
tion 4041 of the Employee Retirement Income Security Act of 
1974 (as amended by this title) shall be considered to have been 
met with respect to a termination described in paragraph (1) 
if— 
(A) the plan administrator provided notice to the partici-
pants in the plan regarding the termination in compliance 
with applicable regulations of the Pension Benefit Guar-
anty Corporation as in effect on the date of the notice, and 
(B) the notice of intent to terminate provided to the 
Pension Benefit Guaranty Corporation in connection with 
the termination was filed with the Corporation not less 
than 10 days before the proposed date of termination speci-
fied in the notice. 
For purposes of section 4041 of such Act (as amended by this 
title), the proposed date of termination specified in the notice of 
intent to terminate referred to in subparagraph (B) shall be 
considered the proposed termination date. 
(3) SPECIAL TERMINATION PROCEDURES.— 
(A) IN GENERAL.—This paragraph shall apply with re-
spect to any termination described in paragraph (1) if, 
within 90 days after the date of enactment of this Act, the 
plan administrator notifies the Corporation in writing— 
(i) that the plan administrator wishes the termi-
nation to proceed as a standard termination under 
section 4041(b) of the Employee Retirement Income 
Security Act of 1974 (as amended by this title) in 
accordance with subparagraph (B), 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 281 
(ii) that the plan administrator wishes the termi-
nation to proceed as a distress termination under sec-
tion 4041(c) of such Act (as amended by this title) in 
Ante, p. 248. 
accordance with subparagraph (C), or 
(iii) that the plan administrator wishes to stop the 
termination proceedings in accordance with subpara-
graph (D). 
(B) 
TERMINATIONS PROCEEDING AS STANDARD TERMI-
NATION.— 
(i) TERMINATIONS FOR WHICH SUFFICIENCY NOTICES 
HAVE NOT B E E N ISSUED.— 
(I) IN GENERAL.—In the case of a plan termi-
nation described in paragraph (1) with respect to 
which the Corporation has been provided the 
notification described in subparagraph (A)(i) and 
with respect to which a notice of sufficiency has 
not been issued by the Corporation before the date 
of the enactment of this Act, if, during the 90-day 
period commencing on the date of the notice re-
quired in subclause (II), all benefit commitments 
under the plan have been satisfied, the termi-
nation shall be treated as a standard termination 
under section 4041(b) of such Act (as amended by 
this title). 
(II) SPECIAL NOTICE REGARDING SUFFICIENCY FOR 
TERMINATIONS FOR WHICH NOTICES OF SUFFICIENCY 
HAVE NOT BEEN ISSUED AS OF DATE OF ENACTMENT.— 
In the case of a plan termination described in 
paragraph (1) with respect to which the Corpora-
tion has been provided the notification described in 
subparagraph (A)(i) and with respect to which a 
notice of sufficiency has not been issued by the 
Corporation before the date of the enactment of 
this Act, the Corporation shall make the deter-
minations described in section 4041(c)(3)(A) (i) and 
(ii) (as amended by this title) and notify the plan 
administrator of such determinations as provided 
in section 4041(c)(3)(A)(iii) (as amended by this 
title). 
(ii) TERMINATIONS FOR WHICH NOTICES OF SUFFICIENCY 
HAVE BEEN ISSUED.—In the case of a plan termination 
described in paragraph (1) with respect to which the 
Corporation has been provided the notification de-
scribed in subparagraph (A)(i) and with respect to 
which a notice of sufficiency has been issued by the 
Corporation before the date of the enactment of this 
Act, clause (i)(I) shall apply, except that the 90-day 
period referred to in clause (i)(I) shall begin on the date 
of the enactment of this Act. 
(C) 
TERMINATIONS 
PROCEEDING 
AS 
DISTRESS 
TERMI-
NATION.—In the case of a plan termination described in 
paragraph (1) with respect to which the Corporation has 
been provided the notification described in subparagraph 
(A)(ii), if the requirements of section 4041(c)(2)(B) of such 
Act (as amended by this title) are met, the termination 
Ante, p. 248. 
shall be treated as a distress termination under section 
4041(c) of such Act (as amended by this title). 
100 STAT. 282 
PUBLIC LAW 99-272—APR. 7, 1986 
(D) 
TERMINATION OF PROCEEDINGS BY PLAN ADMINIS-
TRATOR.— 
(i) IN GENERAL.—Except as provided in clause (ii), in 
the case of a plan termination described in paragraph 
(1) with respect to which the Corporation has been 
provided the notification described in subparagraph 
(AXiii), the termination shall not take effect. 
(ii) TERMINATIONS WITH RESPECT TO WHICH FINAL DIS-
TRIBUTION OF ASSETS HAS COMMENCED.—Clause (i) shall 
not apply with respect to a termination with respect to 
which the final distribution of assets has commenced 
before the date of the enactment of this Act unless, 
within 90 days after the date of the enactment of this 
Act, the plan has been restored in accordance with 
procedures issued by the Corporation pursuant to 
subsection (c). 
(E) AUTHORITY OF CORPORATION TO EXTEND 90-DAY PERIODS 
T
O PERMIT STANDARD TERMINATION.—The Corporation may, 
on a case-by-case basis in accordance with subsection (c), 
provide for extensions of the applicable 90-day period re-
ferred to in clause (i) or (ii) of subparagraph (B) if it is 
demonstrated to the satisfaction of the Corporation that— 
(i) the plan could not otherwise, pursuant to the 
preceding provisions of this paragraph, terminate in a 
termination treated as a standard termination under 
section 4041(b) of the Employee Retirement Income 
Ante, p. 244. 
Security Act of 1974 (as amended by this title), and 
(ii) the extension would result in a greater likelihood 
that benefit commitments under the plan would be 
paid in full, 
except that any such period may not be so extended beyond 
one year after the date of the enactment of this Act. 
(c) AUTHORITY TO PRESCRIBE TEMPORARY PROCEDURES.—The Pen-
sion Benefit Guaranty Corporation may prescribe temporary proce-
dures for purposes of carrying out the amendments made by this 
title during the 180-day period beginning on the date described in 
subsection (a). 
TITLE XII—INCOME SECURITY AND 
RELATED PROGRAMS 
Subtitle A—Old-Age, Survivors, and Disability 
Insurance Program 
SEC. 12101. DEMONSTRATION PROJECTS INVOLVING THE DISABILITY 
INSURANCE PROGRAM. 
(a) EXTENSION OF WAIVER AUTHORITY.—Section 505(a)(3) of 
the 
42 use 1310 
Social Security Disability Amendments of 1980 is amended by 
note. 
inserting "which is initiated before June 10,1990" after "demonstra-
tion project under paragraph (1)". 
42 use 1310 
(b) INTERIM REPORTS.—Section 505(a)(4) of such Amendments is 
note- 
amended to read as follows: 
"(4) On or before June 9 in each of the years 1986, 1987, 1988, and 
1989, the Secretary shall submit to the Congress an interim report 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 283 
on the progress of the experiments and demonstration projects 
carried out under this subsection together with any related data and 
materials which the Secretary may consider appropriate.". 
(c) FINAL REPORT.—Section 505(c) of such Amendments is 
42 USC1310 
amended by striking out "under this section no later than five years note, 
after the date of the enactment of this Act" and inserting in lieu 
thereof "under subsection (a) no later than June 9, 1990". 
(d) INCORPORATION OF CERTAIN REPORTS INTO SECRETARY'S ANNUAL 
REPORT TO CONGRESS.—Section 1110(b) of the Social Security Act is 
42 USC 1310. 
amended by adding at the end thereof the following new paragraph: 
"(3) All reports of the Secretary with respect to projects carried 
out under this subsection shall be incorporated into the Secretary's 
annual report to the Congress required by section 704.". 
42 USC 904. 
SEC. 12102. DISABILITY ADVISORY COUNCIL. 
42 USC 907. 
(a) APPOINTMENT OF COUNCIL.—Within ninety days after the date 
of the enactment of this Act, the Secretary of Health and Human 
Services shall appoint a special Disability Advisory Council. 
(b) MEMBERSHIP OF COUNCIL.—The Disability Advisory Council 
shall consist of a Chairman and not more than twelve other persons, 
appointed by the Secretary without regard to the provisions of title 
5, United States Code, governing appointments in the competitive 
service. The appointed members shall, to the extent possible, rep-
resent organizations of employers and employees in equal numbers, 
medical and vocational experts from the public or private sector (or 
from both such sectors), organizations representing disabled people, 
and the public. The Council shall meet as often as may be necessary 
for the performance of its duties under this section, but not less 
often than quarterly. 
(c) DUTIES OF COUNCIL.—(1) The Advisory Council shall conduct 
studies and make recommendations with respect to the medical and 
vocational aspects of disability under both title II and title XVI of 
the Social Security Act, including studies and recommendations 
42 USC 401, 
relating to— 
l^^l-
(A) the effectiveness of vocational rehabilitation programs for 
recipients of disability insurance benefits or supplemental secu-
rity income benefits; 
(B) the question of using specialists for completing medical 
and vocational evaluations at the State agency level in the 
disability determination process, including the question of 
requiring, in cases involving impairments other than mental 
impairments, that the medical portion of each case review (as 
well as any applicable assessment of residual functional capac-
ity) be completed by an appropriate medical specialist employed 
by the appropriate State agency before any determination can 
be made with respect to the impairment involved; 
(C) alternative approaches to work evaluation in the case of 
applicants for benefits based on disability and recipients of such 
benefits undergoing reviews of their cases, including immediate 
referral of any such applicant or recipient to a vocational 
rehabilitation agency for services at the same time he or she 
is referred to the appropriate State agency for a disability 
determination; 
(D) the feasibility and appropriateness of providing work 
evaluation stipends for applicants for and recipients of benefits 
based on disability in cases where extended work evaluation is 
100 STAT. 284 
PUBLIC LAW 99-272—APR. 7, 1986 
needed prior to the final determination of their eligibility for 
such benefits or for further rehabilitation and related services; 
(E) the standards, policies, and procedures which are applied 
or used by the Secretary of Health and Human Services with 
respect to work evaluations in order to determine whether such 
standards, policies, and procedures will provide appropriate 
screening criteria for work evaluation referrals in the case of 
applicants for and recipients of benefits based on disability; and 
(F) possible criteria for assessing the probability that an 
applicant for or recipient of benefits based on disability will 
benefit from rehabilitation services, taking into consideration 
not only whether the individual involved will be able after 
rehabilitation to engage in substantial gainful activity but also 
whether rehabilitation services can reasonably be expected to 
improve the individual's functioning so that he or she will bo 
able to live independently or work in a sheltered environment. 
(2) For purposes of this subsection, "work evaluation" includes 
(with respect to any individual) a determination o
f
— 
(A) such individual's skills, 
' ' (B) the work activities or types of work activity for which such 
individual's skills are insufficient or inadequate, 
(C) the work activities or types of work activity for which such 
individual might potentially be trained or rehabilitated, 
(D) the length of time for which such individual is capable of 
sustaining work (including, in the case of the mentally im-
paired, the ability to cope with the stress of competitive work), 
and 
(E) any modifications which may be necessary, in work activi-
ties for which such individual might be trained or rehabilitated, 
in order to enable him or her to perform such activities. 
(d) PROVISION OF ASSISTANCE TO COUNCIL; COMPENSATION OF MEM-
BERS.—(1) The Disability Advisory Council is authorized to engage 
such technical assistance, including actuarial services, as may be 
required to carry out its functions, and the Secretary of Health and 
Human Services shall, in addition, make available to the Council 
such secretarial, clerical, and other assistance and such actuarial 
and other pertinent data prepared by the Department of Health and 
Human Services as the Council may require to carry out such 
functions. 
(2) Appointed members of the Council, while serving on business 
of the Council (inclusive of traveltime), shall receive compensation 
at rates fixed by the Secretary, but not exceeding $100 per day, and, 
while so serving away from their homes or regular places of 
business, they may be allowed travel expenses, including per 
diem in lieu of subsistence, as authorized by section 5703 of title 5, 
United States Code, for persons in the Government employed 
intermittently. 
(e) REPORTS.—The Disability Advisory Council shall submit a 
report (including any interim reports the Council may have issued) 
of its findings and recommendations to the Secretary of Health and 
Human Services not later than December 31, 1986; and such report 
and recommendations shall thereupon be transmitted to the Con-
gress and to the Board of Trustees of the Federal Disability Insur-
ance Trust Fund. 
(f) TERMINATION.—After the date of the transmittal to the Con-
gress of the report required by subsection (e), the Disability Advisory 
Council shall cease to exist. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 285 
(g) CONFORMING AMENDMENTS.—(1) Section 706 of the Social Secu-
rity Act is amended— 
42 USC 907. 
(A) by inserting "except as provided in subsection (e)," imme-
diately before "the Secretary shall appoint" in subsection (a); 
and 
(B) by adding at the end thereof the following new subsection: 
"(e) No Advisory Council on Social Security shall be appointed 
under subsection (a) in 1985 (or in any subsequent year prior to 
1989).". 
(2) Section 12 of the Social Security Disability Benefits Reform Act 
of 1984 is repealed. 
42 USC 907 
note. 
SEC. 12103. TAXATION OF SOCIAL SECURITY BENEFITS RECEIVED BY 
CERTAIN CITIZENS OF POSSESSIONS OF THE UNITED 
STATES. 
(a) GENERAL RULE.—Section 932 of the Internal Revenue Code of 
1954 (relating to citizens of possessions of the United States) is 
26 USC 932. 
amended by redesignating subsection (c) as subsection (d) and by 
inserting after subsection (b) the following new subsection: 
"(c) TAXATION OF SOCIAL SECURITY BENEFITS.—If, for purposes of 
an income tax imposed in the possession, any social security benefit 
(as defined in section 86(d)) received by an individual described in 
26 USC 86. 
subsection (a) is treated in a manner equivalent to that provided by 
section 86, then— 
"(1) such benefit shall be exempt from the tax imposed by 
section 871, and 
Infra. 
"(2) no amount shall be deducted and withheld from such 
benefit under section 1441. 
26 USC 1441. 
Any income tax imposed in a possession which treats social security 
benefits (as defined in section 86(d)) in a manner equivalent to 
section 86, and which first becomes effective within 15 months after 
the date of the enactment of this subsection, shall, for purposes of 
this section, be deemed to have been in effect as of January 1, 
1984.". 
(b) CROSS REFERENCE.—Paragraph (3) of section 871(a) of such Code 
26 USC 871. 
is amended by adding at the end thereof (after and below subpara-
graph (B)) the following new sentence: 
"For treatment of certain citizens of possessions of the United States, 
see section 932(c)." 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
26 USC 932 
apply to benefits received after December 31, 1983, in taxable years 
note, 
ending after such date. 
SEC. 12104. APPLICATION OF DEPENDENCY TEST TO ADOPTED GREAT-
GRANDCHILDREN FOR PURPOSES OF CHILD'S INSURANCE 
BENEFITS. 
(a) TREATMENT OF GRANDCHILDREN AND GREAT-GRANDCHILDREN 
ALIKE.—Section 202(d)(8)(D)(ii)(III) of the Social Security Act is 42 USC 402. 
amended by inserting "or great-grandchild" after "grandchild" 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 42 USC 402 
shall apply with respect to benefits for which application is filed 
^°^-
after the date of the enactment of this Act. 
100 STAT. 286 
PUBLIC LAW 99-272—APR. 7, 1986 
SEC. 12105. ELIMINATION OF REQUIREMENT FOR PUBLICATION OF REVI-
SIONS IN PRE-1979 BENEFIT TABLE. 
42 use 415. 
Section 215(i)(4) of the Social Security Act is amended by striking 
out "the Secretary shall publish" and all that follows in the last 
sentence and inserting in lieu thereof the following: "the Secretary 
shall revise the table of benefits contained in subsection (a), as in 
effect in December 1978, in accordance with the requirements of 
paragraph (2)(D) of this subsection £is then in effect, except that the 
requirement in such paragraph (2)(D) that the Secretary publish 
such revision of the table of benefits in the Federal Register shall 
not apply.". 
SEC. 12106. FORMULA CLARIFICATION. 
42 use 910. 
Section 709(b)(1) of the Social Security Act is amended to read as 
follows: 
"(1) the balance in such Trust Fund as of the beginning of 
42 use 401. 
such year, including the taxes transferred under section 201(a) 
on the first day of such year and reduced by the outstanding 
amount of any loan (including interest thereon) theretofore 
42 use 13951. 
made to such Trust Fund under section 201(1) or 1817(j), to". 
SEC. 12107. EXTENSION OF 15-MONTH REENTITLEMENT PERIOD TO 
CHILDHOOD DISABILITY BENEFICIARIES SUBSEQUENTLY 
ENTITLED. 
42 use 402. 
(a) IN GENERAL.—Section 202(d)(6)(E) of the Social Security Act is 
amended by striking out "the third month following the month in 
which he ceases to be under such disability" and inserting in lieu 
thereof "the termination month (as defined in paragraph (l)(G)(i)), 
subject to section 223(e),". 
42 use 423. 
(b) CONFORMING AMENDMENT.—Section 223(e) of such Act is 
amended by inserting "(d)(6)(A)(ii), (dX6)(B)," after "(d)(l)(B)(ii),". 
42 use 402 note. 
(c) EFFECTIVE DATE.—The amendments made by this section are 
effective December 1, 1980, and shall apply with respect to any 
individual who is under a disability (as defined in section 223(d) of 
the Social Security Act) on or after that date. 
SEC. 12108. CHARGING OF WORK DEDUCTIONS AGAINST AUXILIARY 
BENEFITS IN DISABILITY CASES. 
42 use 403. 
(a) IN GENERAL.—(1) Section 203(a)(4) of the Social Security Act is 
amended by striking out "preceding" in the first sentence. 
(2) Section 203(aX6) of such Act is amended— 
(A) by striking out "and (5)" and inserting in lieu thereof "(4), 
and (5)"; and 
(B) by striking out ", whether or not" and all that follows 
down through "further reduced" and inserting in lieu thereof 
"shall be reduced". 
42 use 403 note. 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply with respect to benefits payable for months after Decem-
ber 1985. 
SEC. 12109. PERFECTING AMENDMENTS TO DISABILITY OFFSET PRO-
VISION. 
42 use 424a. 
(a) IN GENERAL.—(1) Section 224(a)(2) of the Social Security Act is 
amended to read as follows: 
"(2) such individual is entitled for such month to— 
"(A) periodic benefits on account of his or her total or 
partial disability (whether or not permanent) under a work-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 287 
men's compensation law or plan of the United States or a 
State, or 
"(B) periodic benefits on account of his or her total or 
partial disability (whether or not permanent) under any 
other law or plan of the United States, a State, a political 
subdivision (as that term is used in section 218(b)(2)), or an 
42 USC 418. 
instrumentality of two or more States (as that term is used 
in section 218(k)), other than (i) benefits payable under title 
38, United States Code, (ii) benefits payable under a pro-
gram of assistance which is based on need, (iii) benefits 
based on service all or substantially all of which was in-
cluded under an agreement entered into by a State and the 
Secretary under section 218, and (iv) benefits under a law or 
plan of the United States based on service all or part of 
which is employment as defined in section 210,". 
42 USC 410. 
(2) Section 224(a)(2)(B) of such Act (as amended by paragraph (1) of 42 USC 424a. 
this subsection) is further amended by striking out "all or part of 
which" in clause (iv) and inserting in lieu thereof "all or substan-
tially all of which". 
(b) EFFECTIVE DATES.—(1) The amendment made by subsection 
42 USC 424a 
(a)(1) shall be effective as though it had been included or reflected in 
^°^-
the amendment made by section 2208(a)(3) of the Omnibus Budget 
Reconciliation Act of 1981. 
42 USC 424a. 
(2) The amendment made by subsection (a)(2) shall apply only with 
respect to monthly benefits payable on the basis of the wages and 
self-employment income of individuals who become disabled (within 
the meaning of section 223(d) of the Social Security Act) after the 42 USC 423. 
month in which this Act is enacted. 
SEC. 12110. STATE COVERAGE AGREEMENTS. 
(a) MAXIMUM PERIOD OF RETROACTIVE COVERAGE.—Section 218(f)(1) 
of the Social Security Act is amended by striking out "is agreed to 42 USC 418. 
by the Secretary and the State" and inserting in lieu thereof "is 
mailed or delivered by other means to the Secretary". 
O
t
>
) POSITIONS COMPENSATED SOLELY ON FEE BASIS.—Section 
218(u)(3) of such Act is amended by striking out "is agreed to by the 
Secretary and the State" and inserting in lieu thereof "is mailed or 
delivered by other means to the Secretary". 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
42 USC 418 note, 
apply with respect to agreements and modifications of agreements 
which are mailed or delivered to the Secretary of Health and 
Human Services (under section 218 of the Social Security Act) on or 
after the date of the enactment of this Act. 
SEC. 12111. EFFECT OF EARLY DELIVERY OF BENEFIT CHECKS. 
(a) FOR O A S D I PURPOSES.—Section 708 of the Social Security 
Act is amended by adding at the end thereof the following new 42 USC 909. 
subsection: 
"(c) For purposes of computing the 'OASDI trust fund ratio' under 
section 201(1), the 'OASDI fund ratio' under section 215(i), and the 42 USC 401. 
'balance ratio' under section 709(b), benefit checks delivered before 
^| USC 415. 
the end of the month for which they are issued by reason of 
subsection (a) of this section shall be deemed to have been delivered 
on the regularly designated delivery date.". 
Ot)) FOR INCOME TAX PURPOSES.—Section 86(d) of the Internal 
Revenue Code of 1954 (relating to taxation of social security and tier 
26 usc 86. 
100 STAT. 288 
PUBLIC LAW 99-272—APR. 7, 1986 
1 railroad retirement benefits) is amended by adding at the end 
thereof the following new paragraph: 
"(5) EFFECT OF EARLY DELIVERY OF BENEFIT CHECKS.—For pur-
poses of subsection (a), in any case where section 708 of the 
42 use 909. 
Social Security Act causes social security benefit checks to be 
delivered before the end of the calendar month for which they 
are issued, the benefits involved shall be deemed to have been 
received in the succeeding calendar month.". 
42 use 909 note. 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
apply with respect to benefit checks issued for months ending after 
the date of the enactment of this Act. 
SEC. 12112. EXEMPTION FROM SOCIAL SECURITY COVERAGE FOR RE-
TIRED FEDERAL JUDGES ON ACTIVE DUTY. 
(a) AMENDMENT TO SOCIAL SECURITY ACT.—Section 209 of the 
42 use 409. 
Social Security Act is amended in the third to the last paragraph 
thereof (added by section 101(c)(1) of the Social Security Amend-
ments of 1983) by striking out "shall, subject to the provisions of 
subsection (a) of this section, include" and inserting in lieu thereof 
"shall not include". 
(b) AMENDMENT TO INTERNAL REVENUE CODE.—Section 3121(i)(5) of 
26 use 3121. 
the Internal Revenue Code of 1954 is amended by striking out 
"shall, subject to the provisions of subsection (a)(1) of this section, 
include" and inserting in lieu thereof "shall not include". 
42 use 409 note. 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
be effective with respect to service performed after December 31, 
1983. 
SEC. 12113. RECOVERY OF OVERPAYMENTS. 
42 use 404. 
(a) OASDI PAYMENTS.—Section 204(a) of the Social Security Act is 
amended— 
(1) by inserting "(1)" after "204(a)"; 
(2) by redesignating paragraphs (1) and (2) as subparagraphs 
(A) and (B); and 
(3) by adding at the end thereof the following new paragraph: 
"(2) Notwithstanding any other provision of this section, when any 
payment of more than the correct amount is made to or on behalf of 
an individual who has died, and such payment— 
"(A) is made by direct deposit to a financial institution; 
"(B) is credited by the financial institution to a joint account 
of the deceased individual and another person; and 
"(C) such other person was entitled to a monthly benefit on 
the basis of the same wages and self-employment income as the 
deceased individual for the month preceding the month in 
which the deceased individual died, 
the amount of such payment in excess of the correct amount shall be 
treated as a payment of more than the correct amount to such other 
person.". 
42 use 1383. 
(b) SSI PAYMENTS.—Section 1631(b) of the Social Security Act is 
amended by redesignating paragraphs (2) through (4) as paragraphs 
(3) through (5), and by inserting after paragraph (1) the following 
new paragraph: 
"(2) Notwithstanding any other provision of this section, when any 
payment of more than the correct amount is made to or on behalf of 
an individual who has died, and such payment— 
"(A) is made by direct deposit to a financial institution; 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 289 
"(B) is credited by the financial institution to a joint account 
of the deceased individual and another person; and 
"(C) such other person is the surviving spouse of the deceased 
individual, and was eligible for a payment under this title 
(including any State supplementation payment paid by the 
Secretary) as an eligible spouse (or as either member of an 
eligible couple) for the month in which the deceased individual 
died, 
the amount of such payment in excess of the correct amount shall be 
treated as a payment of more than the correct amount to such other 
person.". 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
42 USC 404 
apply only in the case of deaths of which the Secretary is first "^te. 
notified on or after the date of the enactment of this Act. 
SEC. 12114. COVERAGE OF CONNECTICUT STATE POLICE. 
Notwithstanding any provision of section 218 of the Social Secu- 42 USC 418 
rity Act, the Secretary of Health and Human Services shall, upon ^°^^-
the request of the Governor of Connecticut, modify the agreement 
under such section between the Secretary and the State of Connecti-
cut to provide that service performed after the date of the enact-
ment of this Act by members of the Division of the State Police 
within the Connecticut Department of Public Safety, who are hired 
on or after May 8, 1984, and who are members of the tier II plan of 
the Connecticut State Employees Retirement System, shall be cov-
ered under such agreement. 
SEC. 12115. GENERAL EFFECTIVE DATE OF SUBTITLE. 
Except as otherwise specifically provided, the preceding provisions 
42 USC 415 
of this subtitle, including the amendments made thereby, shall take 
^°^-
effect on the first day of the month following the month in which 
this Act is enacted. 
Subtitle B—Supplemental Security Income 
Program 
SEC. 12201. AMENDMENTS 
RELATING 
TO 
STATE 
SUPPLEMENTATION 
UNDER SSI. 
(a) 
PASSTHROUGH RELATING TO OPTIONAL STATE SUPPLEMENTA-
TION.—Section 1618 of the Social Security Act is amended by 
42 USC I382g. 
adding at the end thereof the following new subsection: 
"(f) The Secretary shall not find that a State has failed to meet the 
requirements imposed by subsection (a) with respect to the levels of 
its supplementary payments for the period January 1, 1984, through 
December 31, 1985, if in the period January 1, 1986, through Decem-
ber 31, 1986, its supplementary payment levels (other than to recipi-
ents oif benefits determined under section 1611(e)(1)(B)) are not less 
42 USC 1382. 
than those in effect in December 1976, increased by a percentage 
equal to the percentage by which payments under section 1611(b) of 
this Act and section 211(a)(1)(A) of Public Law 93-66 have been 
42 USC 1382 
increased as a result of all adjustments under section 1617 (a) and (c) "°*®-
which have occurred after December 1976 and before February 
^^ ^°^ ^^^^^• 
1986.". 
71-194 0 - 89 - 12 : Q
L 3 Parti 
100 STAT. 290 
PUBLIC LAW 99-272—APR. 7, 1986 
(b) FEDERAL ADMINISTRATION OF STATE SUPPLEMENTATION.—Sec-
42 use I382e. 
tion 1616(b) of such Act is amended by adding at the end thereof 
(after and below paragraph (2)) the following new sentence: 
"At the option of the State (but subject to paragraph (2) of this 
subsection), the agreement between the Secretary and such State 
entered into under subsection (a) shall be modified to provide that 
the Secretary will make supplementary payments, on and after an 
effective date to be specified in the agreement as so modified, to 
individuals 
receiving 
benefits 
determined 
under 
section 
42 u s e 1382. 
1611(eXl)(B).". 
SEC. 12202. PRESERVATION OF BENEFIT STATUS FOR DISABLED WIDOWS 
AND WIDOWERS WHO LOST SSI BENEFITS BECAUSE OF 1983 
CHANGES IN ACTUARIAL REDUCTION FORMULA. 
42 use 1383c. 
(a) IN GENERAL.—Section 1634 of the Social Security Act is 
amended— 
(1) by inserting "(a)" after "SEC. 1634.", and 
(2) by adding at the end the following new subsection: 
Insurance. 
"(b)(1) An eligible disabled widow or widower (described in para-
graph (2)) who is entitled to a widow's or widower's insurance 
42 use 402. 
benefit based on a disability for any month under section 202 (e) or 
(f) but is not eligible for benefits under this title in that month, and 
who applies for the protection of this subsection under paragraph 
42 use 1396. 
(3), shall be deemed for purposes of title XIX to be an individual 
with respect to whom benefits under this title are paid in that 
month if he or she— 
"(A) has been continuously entitled to such widow's or 
widower's insurance benefits from the first month for which 
the increase described in paragraph (2)(C) w£is reflected in such 
benefits through the month involved, and 
"(B) would be eligible for benefits under this title in the 
month involved if the amount of the increase described in 
paragraph (2)(C) in his or her widow's or widower's insurance 
benefits, and any subsequent cost-of-living adjustments in such 
42 use 415. 
benefits under section 215(i), were disregarded. 
"(2) For purposes of paragraph (1), the term 'eligible disabled 
widow or widower' means an individual who— 
42 use 401. 
"(A) was entitled to a monthly insurance benefit under title II 
for December 1983, 
"(B) was entitled to a widow's or widower's insurance benefit 
based on a disability under section 202 (e) or (D for January 1984 
and with respect to whom a benefit under this title was paid in 
that month, and 
"(C) because of the increase in the amount of his or her 
widow's or widower's insurance benefits which resulted from 
the amendments made by section 134 of the Social Security 
42 use 402 and 
Amendments of 1983 (Public Law 98-21) (eliminating the addi-
note. 
tional reduction factor for disabled widows and widowers under 
age 60), was ineligible for benefits under this title in the first 
month in which such increase w£is paid to him or her (and in 
which a retroactive payment of such increase for prior months 
was not made). 
"(3) This subsection shall only apply to an individual who files a 
written application for protection under this subsection, in such 
manner and form as the Secretary may prescribe, during the 15-
month period beginning with the month in which this subsection is 
enacted. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 291 
"(4) For purposes of this subsection, the term 'benefits under this 
title' includes payments of the type described in section 1616(a) or of 
the type described in section 212(a) of Public Law 93-66.". 
(b) IDENTIFICATION OF BENEFICIARIES.—(1) As soon as possible after 
the date of the enactment of this Act, the Secretary of Health and 
Human Services shall provide each State with the names of all 
individuals receiving widow's or widower's insurance benefits under 
subsection (e) or (f) of section 202 of the Social Security Act based on 
a disability who might qualify for medical assistance under the plan 
of that State approved under title XIX of such Act by reason of the 
application of section 1634(b) of the Social Security Act. 
(2) Each State shall— 
(A) using the information so provided and any other informa-
tion it may have, promptly notify all individuals who may 
qualify for medical assistance under its plan by reason of such 
section 1634(b) of their right to make application for such 
assistance, 
(B) solicit their applications for such assistance, and 
(C) make the necessary determination of such individuals' 
eligibility for such assistance under such section and under such 
title XIX. 
(c) EFFECTIVE DATE.—The amendment made by subsection (a)(2) 
shall not have the effect of deeming an individual eligible for 
medical assistance for any month which begins less than two 
months after the date of the enactment of this Act. 
42 use 1382e. 
42 use 1382 
note. 
42 use 1383c 
note. 
42 use 402. 
42 use 1396. 
42 use 1383c. 
42 use 1383c 
note. 
Subtitle C—AFDC, Adoption Assistance, and 
Foster Care Programs 
SEC. 12301. AFDC QUALITY CONTROL STUDIES AND PENALTY MORA-
TORIUM 
42 use 603 
note. 
42 use 601. 
42 use 1396. 
(a) STUDIES.—(1) The Secretary of Health and Human Services 
(hereafter referred to in this section as the "Secretary") shall con-
duct a study of quality control systems for the Aid to Families with 
Dependent Children Program under title IV-A of the Social Secu-
rity Act and for the Medicaid Program under title XIX of such Act. 
The study shall examine how best to operate such systems in order 
to obtain information which will allow program managers to im-
prove the quality of administration, and provide reasonable data on 
the basis of which Federal funding may be withheld for States with 
excessive levels of erroneous payments. 
(2) The Secretary shall also contract with the National Academy Contracts, 
of Sciences to conduct a concurrent independent study for the 
purpose described in paragraph (1). For purposes of such study, the 
Secretary shall provide to the National Academy of Sciences any 
relevant data available to the Secretary at the onset of the study 
and on an ongoing basis. 
(3) The Secretary and the National Academy of Sciences shall 
report the results of their respective studies to the Congress within 
one year after the date of the enactment of this Act. 
(b) MORATORIUM ON PENALTIES.—(1) During the 24-month period 
beginning with the first calendar quarter which begins after the 
date of the enactment of this Act (hereafter in this section referred 
to as the "moratorium period"), the Secretary shall not impose any 
reductions in payments to States pursuant to section 403(i) of the 
Reports. 
100 STAT. 292 
PUBLIC LAW 99-272—APR. 7, 1986 
42 u s e 603. 
42 u s e 601. 
Puerto Rico. 
Guam. 
Virgin Islands. 
American 
Samoa. 
Northern 
Mariana Islands. 
Regulations. 
42 u s e 1396. 
State and local 
governments. 
42 u s e 602. 
State and local 
governments. 
42 u s e 603. 
State and local 
governments. 
42 u s e 602 note. 
42 u s e 602. 
Social Security Act (or prior regulations), or pursuant to any com-
parable provision of law relating to the programs under title IV-A 
of such Act in Puerto Rico, Guam, the Virgin Islands, American 
Samoa, or the Northern Mariana Islands. 
(2) During the moratorium period, the Secretary and the States 
shall continue to operate the quality control systems in effect under 
title IV-A of the Social Security Act, and to calculate the error rates 
under the provisions referred to in paragraph (1). 
(c) RESTRUCTURED QUAUTY CONTROL SYSTEMS.—(1) Not later than 
18 months after the date of the enactment of this Act, the Secretary 
shall publish regulations which shall— 
(A) restructure the quality control systems under titles IV-A 
and XIX of the Social Security Act to the extent the Secretary 
determines to be appropriate, taking into account the studies 
conducted under subsection (a); and 
(B) establish, taking into account the studies conducted under 
subsection (a), criteria for adjusting the reductions which shall 
be made for quarters prior to the implementation of the restruc-
tured quality control systems so as to eliminate reductions for 
those quarters which would not be required if the restructured 
quality control systems had been in effect during those 
quarters. 
(2) Beginning with the first calendar quarter after the moratorium 
period, the Secretary shall implement the revised quality control 
systems, and shall reduce payments to States— 
(A) for quarters after the moratorium period in accordance 
with the restructured quality control systems; and 
(B) for quarters in and before the moratorium period, as 
provided under the regulations described in paragraph (1)(B). 
(d) EFFECTIVE DATE.—This section shall become effective on the 
date of the enactment of this Act. 
SEC. 12303. A F D C AUTOMATION REQUIREMENTS. 
(a) IN GENERAL.—Section 402(eX2) of the Social Security Act is 
amended by adding at the end thereof the following new subpara-
graph: 
"(C) If the Secretary determines that such a system has not been 
implemented by the State by the date specified for implementation 
in the State's advance automatic data processing planning docu-
ment, then the Secretary shall reduce payments to such State, in 
accordance with section 403(b), in an amount equal to 40 percent of 
the expenditures referred to in section 403(a)(3XB) with respect to 
which payments were made to the State under section 403(a)(3)(B). 
The Secretary may extend the deadline for implementation if the 
State demonstrates to the satisfaction of the Secretary that the 
State cannot implement such system by the date specified in such 
planning document due to circumstances 
beyond the State's 
control.". 
O
b
) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall become effective on the date of the enactment of this Act, but 
shall apply only with respect to sums expended by the States for the 
purposes described in section 403(a)(3XB) of the Social Security Act 
on or after the date of the enactment of this Act. 
SEC. 12304. THIRD-PARTY LIABILITY. 
(a) IN GENERAL.—Section 402(aX26) of the Social Security Act is 
amended— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 293 
42 use 602 
note. 
(1) by striking out the comma at the end of subparagraph (A) 
and inserting in lieu thereof a semicolon; 
(2) by adding "and" after the semicolon at the end of subpara-
graph (B); and 
(3) by adding after subparagraph (B) the following new 
subparagraph: 
"(C) to cooperate with the State in identifying, and State and local 
providing information to assist the State in pursuing, any governments. 
third party who may be liable to pay for care and services 
available under the State's plan for medical assistance 
under title XIX, unless such individual has good cause for 42 use 1396. 
refusing to cooperate as determined by the State agency in 
accordance with standards prescribed by the Secretary, 
which standards shall take into consideration the best in-
terests of the individuals involved; but the State shall not 
be subject to any financial penalty in the administration or 
enforcement of this subparagraph as a result of any mon-
itoring, quality control, or auditing requirements;", 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply to calendar quarters beginning on or after the date of 
the enactment of this Act. 
SEC. 12305. PROVISIONS RELATING TO MEDICAID COVERAGE UNDER THE 
ADOPTION ASSISTANCE AND FOSTER CARE PROGRAMS. 
(a) IN GENERAL.—Section 473(b) of the Social Security Act is 42 use 673. 
amended to read as follows: 
"(b) For purposes of titles XIX and XX, any child— 
42 USC 1396, 
"(1)(A) who is a child described in subsection (a)(1), and 
1397. 
"(B) with respect to whom an adoption assistance agreement 
is in effect under this section (whether or not adoption assist-
ance payments are provided under the agreement or are being 
made under this section), including any such child who has been 
placed for adoption in accordance with applicable State and 
local law (whether or not an interlocutory or other judicial 
decree of adoption has been issued), or 
"(2) with respect to whom foster care maintenance payments 
are being made under section 472, 
42 use 672. 
shall be deemed to be a dependent child as defined in section 406 42 use 606. 
and shall be deemed to be a recipient of aid to families with 
dependent children under part A of this title in the State where 
such child resides.". 
(b) CONFORMING AMENDMENTS.—(1) Section 473(c)(2) of such Act is 
amended— 
(A) by striking out "without providing adoption assistance" in 
clause (A) and inserting in lieu thereof "without providing 
adoption assistance under this section or medical assistance 
under title XIX"; and 
(B) by inserting "or medical assistance under title XIX" 
before the period at the end thereof. 
(2) Section 475(3) of such Act is amended by striking out "the 42 USC 675. 
adoption assistance payments and any additional services and assist-
ance" in clause (A) of the first sentence and inserting in lieu thereof 
"any adoption assistance payments and any other services and 
£issistance". 
(3) Section 1902(a)(10)(A)(i)(I) of such Act is amended by striking 42 use I396a. 
out "or 406(h)" and inserting in lieu thereof ", 406(h), or 473(b)". 
100 STAT. 294 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 673 note. 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
apply to medical eissistance furnished in or after the first calendar 
quarter beginning more than 90 days after the date of the enact-
ment of this Act. 
SEC. 12306. EXTENSION OF VOLUNTARY PLACEMENT, AND CEILING AND 
TRIGGER PROVISIONS, RELATING TO FOSTER CARE. 
42 use 674. 
(a) Section 474(b) of the Social Security Act is amended— 
(1) in paragraphs (1), (2)(B), and (4)(B), by striking out "1985" 
and inserting in lieu thereof "1987"; 
(2) in paragraph (2)(A)— 
(A) by inserting "and" at the end of clause (ii), and 
(B) by striking out clauses (iii), (iv), and (v) and inserting 
in lieu thereof the following: 
"(iii) with respect to each of the fiscal years 1983 through 
42 use 620. 
1987, only if the amount appropriated under section 420 for 
such fiscal year is equal to $266,000,000."; and 
(3) in paragraph (5)(A)— 
(A) by striking out "October 1, 1985" and inserting in lieu 
thereof "October 1,1987", and 
(B) in clause (ii), by striking out "1984 and 1985" and 
inserting in lieu thereof "1984 through 1987". 
Ot)) Paragraphs (1) and (2) of section 474(c) of such Act are each 
amended by striking out "1985" and inserting in lieu thereof "1987". 
(c)(1) Section 102(a)(1) of the Adoption Assistance and Child Wel-
42 u s e 672 note, fare Act of 1980 (Public Law 96-272) is amended by striking out 
"1985" and inserting in lieu thereof "1987". 
42 use 672 note. 
(2) Section 102(c) of such Act is amended by striking out "1985" 
each place it appears and inserting in lieu thereof "1987". 
SEC. 12307. INDEPENDENT LIVING INITIATIVES. 
(a) INDEPENDENT LIVING INITIATIVES.—Part E of title IV of 
the 
Social Security Act is amended by adding at the end thereof the 
following new section: 
State and local 
governments. 
42 use 677. 
State and local 
governments. 
Contracts. 
INDEPENDENT LIVING INITIATIVES 
"SEC. 477. (a) Payments shall be made in accordance with this 
section for the purpose of assisting States and localities in establish-
ing and carrying out programs designed to assist children, with 
respect to whom foster care maintenance payments are being made 
by the State under this part and who have attained age 16, in 
making the transition from foster care to independent living. Any 
State which provides for the establishment and carrying out of one 
or more such programs in accordance with this section for a fiscal 
year shall be entitled to receive payments under this section for 
such fiscal year, in an amount determined under subsection (e). 
Such payments shall be made only for the fiscal years 1987 and 
1988. 
"(b) The State agency administering or supervising the adminis-
tration of the State's programs under this part shall be responsible 
for administering or supervising the administration of the State's 
programs described in subsection (a). Payment under this section 
shall be made to the State, and shall be used for the purpose of 
conducting and providing in accordance with this section (directly or 
under contracts with local governmental entities or private non-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 295 
State and local 
governments. 
profit organizations) the activities and services required to carry out 
the program or programs involved. 
"(c) In order for a State to receive payments under this section for 
any fiscal year, the State agency must submit to the Secretary, in 
such manner and form as the Secretary may prescribe, a description 
of the program together with satisfactory assurances that the pro-
gram will be operated in an effective and efficient manner and will 
otherwise meet the requirements of this section. In the case of 
payments for fiscal year 1987, such description and assurances must 
be submitted within 90 days after the Secretary promulgates regula-
tions as required under subsection (i), and in the case of payments 
for fiscal year 1988, such description and assurances must be 
submitted prior to January 1, 1988. 
"(d) In carrying out the purpose described in subsection (a), it shall 
be the objective of each program established under this section to 
help the individuals participating in such program to prepare to live 
independently upon leaving foster care. Such programs may include 
(subject to the availability of funds) programs to— 
"(1) enable participants to seek a high school diploma or its Education, 
equivalent or to take part in appropriate vocational training; 
"(2) provide training in daily living skills, budgeting, locating 
and maintaining housing, and career planning; 
"(3) provide for individual and group counseling; 
"(4) integrate and coordinate services otherwise available to 
participants; 
"(5) provide for the establishment of outreach programs de-
signed to attract individuals who are eligible to participate in 
the program; 
"(6) provide each participant a written transitional independ-
ent living plan which shall be based on an assessment of his 
needs, and which shall be incorporated into his case plan, as 
described in section 475(1); and 
"(7) provide participants with other services and assistance 
designed to improve their transition to independent living. 
"(e)(1) The amount to which a State shall be entitled under section 
474(a)(4) for each of the fiscal years 1987 and 1988 shall be an 
amount which bears the same ratio to $45,000,000 as such State's 
average number of children receiving foster care maintenance pay-
ments under this part in fiscal year 1984 bears to the total of the 
average number of children receiving such payments under this 
part for all States for fiscal year 1984. 
"(2) If any State does not apply for funds under this section for 
any fiscal year within the time provided in subsection (c), the funds 
to which such State would have been entitled for such fiscal year 
shall be reallocated to one or more other States on the basis of their 
relative need for additional payments under this section (as deter-
mined by the Secretary). 
"(3) Any amounts payable to States under this section shall be in 
addition to amounts payable to States under subsections (a)(1), (a)(2), 
and (a)(3) of section 474, and shall supplement and not replace any 
other funds which may be available for the same general purposes 
in the localities involved. 
"(f) Payments made to a State under this section for any fiscal 
year— 
"(1) shall be used only for the specific purposes described in 
this section; 
42 use 675. 
State and local 
governments. 
42 use 674. 
100 STAT. 296 
PUBLIC LAW 99-272—APR. 7, 1986 
"(2) may be made on an estimated basis in advance of the 
determination of the exact amount, with appropriate subse-
quent adjustments to take account of any error in the estimates; 
and 
"(3) shall be expended by such State in such fiscal year or in 
the succeeding fiscal year. 
Reports. 
"(gXD Not later than March 1,1988, each State shall submit to the 
Secretary a report on the programs carried out with the amounts 
received under this section. Such report— 
"(A) shall be in such form and contain such information as 
may be necessary to provide an accurate description of such 
activities, to provide a complete record of the purposes for which 
the funds were spent, and to indicate the extent to which the 
expenditure of such funds succeeded in accomplishing the pur-
pose described in subsection (a); and 
"(B) shall specifically contain such information as the Sec-
retary may require in order to carry out the evaluation under 
paragraph (2). 
"(2) Not later than July 1, 1988, the Secretary, on the basis of the 
reports submitted by States under paragraph (1) for the fiscal year 
1987, and on the basis of such additional information as the Sec-
retary may obtain or develop, shall evaluate the use by States of the 
, 
payments made available under this section for such fiscal year with 
* 
respect to the purpose of this section, with the objective of apprais-
ing the achievements of the programs for which such payments were 
made available, and developing comprehensive information and 
data on the basis of which decisions can be made with respect to the 
improvement of such programs and the necessity for providing 
further payments in subsequent years. The Secretary shall report 
such evaluation to the Congress. As a part of such evaluation, the 
Secretary shall include, at a minimum, a detailed overall description 
of the number and characteristics of the individuals served by the 
programs, the various kinds of activities conducted and services 
provided and the results achieved, and shall set forth in detail 
findings and comments with respect to the various State programs 
and a statement of plans and recommendations for the future. 
"(h) Notwithstanding any other provision of this title, payments 
made and services provided to participants in a program under this 
section, as a direct consequence of their participation in such pro-
gram, shall not be considered as income or resources for purposes of 
determining eligibility (or the eligibility of any other persons) for aid 
42 use 602, 671. under the State's plan approved under section 402 or 471, or for 
purposes of determining the level of such aid. 
Regulations. 
"(i) The Secretary shall promulgate final regulations for im-
plementing this section within 60 days after the date of the enact-
ment of this section.". 
42 use 675. 
(b) CASE PLANS.—Section 475(1) of such Act is amended by adding 
at the end thereof the following: "Where appropriate, for a child age 
16 or over, the case plan must also include a written description of 
the programs and services which will help such child prepare for the 
transition from foster care to independent living.". 
42 use 674. 
(c) PAYMENTS TO STATES.—Section 474(a) of such Act is amended— 
(1) by striking out the period at the end of paragraph (3) and 
inserting in lieu thereof "; plus"; and 
(2) by adding at the end thereof the following new paragraph: 
"(4) an amount for transitional independent living pro-
Ante, p. 294. 
grams as provided in section 477.". 
PUBLIC LAW 99-272—APR, 7, 1986 
100 STAT. 297 
(d) CONFORMING AMENDMENT,—Section 470 of such Act is 42 use 670. 
amended by striking out "foster care and adoption assistance" and 
inserting in lieu thereof "foster care, adoption assistance, and 
transitional independent living programs". 
Subtitle D—Provisions Relating to 
Unemployment Compensation 
SEC. 12401. RECOVERY OF UNEMPLOYMENT BENEFIT OVERPAYMENTS. 
(a) IN GENERAL.—(1) Section 303(a)(5) of the Social Security Act is 
42 USC 503. 
amended by inserting before "; and" at the end thereof the follow-
ing: ": Provided further, That amounts may be deducted from un-
employment benefits and used to repay overpayments as provided in 
subsection (g)". 
(2) Section 303 of such Act is amended by adding at the end 
thereof the following new subsection: 
"(g)(1) A State may deduct from unemployment benefits otherwise 
State and local 
payable to an individual an amount equal to any overpayment made governments. 
to such individual under an unemployment benefit program of the 
United States or of any other State, and not previously recovered. 
The amount so deducted shall be paid to the jurisdiction under 
whose program such overpayment was made. Any such deduction 
shall be made only in accordance with the same procedures relating 
to notice and opportunity for a hearing as apply to the recovery of 
overpayments of regular unemployment compensation paid by such 
State. 
"(2) Any State may enter into an agreement with the Secretary of 
Labor under which— 
"(A) the State agrees to recover from unemployment benefits 
otherwise payable to an individual by such State any overpay-
ments made under an unemployment benefit program of the 
United States to such individual and not previously recovered, 
in accordance with paragraph (1), and to pay such amounts 
recovered to the United States for credit to the appropriate 
account, and 
"(B) the United States agrees to allow the State to recover 
from unemployment benefits otherwise payable to an individual 
under an unemployment benefit program of the United States 
any overpayments made by such State to such individual under 
a State unemployment benefit program and not previously 
recovered, in accordance with the same procedures as apply 
under paragraph (1). 
"(3) For purposes of this subsection, 'unemployment benefits' 
means unemployment compensation, trade adjustment allowances, 
and other unemployment assistance,". 
Oa) CONFORMING AMENDMENTS.—(1) Section 3304(a)(4) of the In- 26 USC 3304. 
ternal Revenue Code of 1954 is amended— 
(A) by striking out "and" at the end of subparagraph (B); 
(B) by adding "and" at the end of subparagraph (C); and 
(C) by adding at the end thereof the following new subpara-
graph: 
"(D) amounts may be deducted from unemployment bene-
fits and used to repay overpayments as provided in section 
303(g) of the Social Security Act;". 
(2) Section 3306(f) of such Code is amended— 
26 USC 3306. 
100 STAT. 298 
PUBLIC LAW 99-272—APR. 7, 1986 
42 use 503. 
42 use 503 note. 
26 use 3304 
note. 
26 use 3304 
note. 
26 use 3304 
note. 
State and local 
governments. 
Armed Forces. 
42 u s e 5121 
note. 
(A) by striking out "and" at the end of paragraph (1); 
(B) by striking out the period at the end of paragraph (2) and 
inserting in lieu thereof ", and"; and 
(C) by adding at the end thereof the following new paragraph: 
"(3) amounts may be deducted from unemployment benefits 
and used to repay overpayments as provided in section 303(g) of 
the Social Security Act.", 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
apply to recoveries made on or after the date of the enactment of 
this Act and shall apply with respect to overpayments made before, 
on, or after such date. 
SEC. 12402. SUPPLEMENTAL UNEMPLOYMENT COMPENSATION FOR CER-
TAIN INDIVIDUALS. 
(a) IN GENERAL.—If— 
(1) an individual was receiving Federal supplemental com-
pensation for the week which includes March 31, 1985, or a 
series of consecutive weeks which began with such week, and 
(2) such individual did not meet the consecutive-week eligi-
bility requirements of the Federal Supplemental Compensation 
Act of 1982 during any period of 1 or more subsequent weeks by 
reason of performing temporary disaster services described in 
subsection (e), 
weeks in such period shall be disregarded for purposes of the 
consecutive-week requirement of section 602(f)(2)(B) of such Act, 
and, notwithstanding the requirements of State law relating to the 
availability for work, the active search for work, or the refusal to 
accept work, such individual shall be entitled to payment of Federal 
supplemental compensation for each week of unemployment which 
is described in subsection (b) and for which a certification of 
unemployment is made by such individual in accordance with 
subsection (c). 
(b) WEEKS FOR WHICH PAYMENT SHALL BE MADE.—A week of 
unemployment for which payment shall be made under subsection 
(a) is a week which occurred during the period which commences 
with the first week beginning after the close of the period described 
in subsection (a)(2) and ends with the beginning of the first week in 
which the individual was employed after the close of such period. 
(c) CERTIFICATION.—The certification of unemployment referred to 
in subsection (a) shall be a certification— 
(1) that is made on a form provided by the State agency 
concerned and signed by the individual; and 
(2) that identifies the weeks of unemployment for which the 
individual is making the certification. 
(d) LIMITATION ON AMOUNT OF PAYMENT.—In no case may the 
total amount paid to an individual under subsection (a) exceed the 
amount remaining in the account established for such individual 
under section 602(e) of the Federal Supplemental Compensation Act 
of 1982 after payments were made from such account for weeks of 
unemployment beginning before the period described in subsection 
(a)(2). 
(e) DEFINITION.—For purposes of subsection (a), the term "tem-
porary disaster services" means services performed as a member of 
the National Guard after being called up by the Governor of a State 
to perform services related to a major disaster that was declared on 
June 3, 1985, by the President of the United States under the 
Disaster Relief Act of 1974. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 299 
(f) MODIFICATION OF AGREEMENT.—(1) The Secretary of Labor 
shall, at the earliest possible date after the date of the enactment of 
this Act, propose to any State concerned a modification of the 
agreement that the Secretary hgis with such State under section 602 
of the Federal Supplemental Compensation Act of 1982 in order to 
carry out this section. 
(2) Pending modification of the agreement, the State may make 
payment in accordance with the provisions of this section and shall 
be reimbursed in accordance with the provisions of section 604(a) of 
the Federal Supplemental Compensation Act of 1982. For purposes 
of carrying out this paragraph, the term "this subtitle" in such 
section 604(a) shall include this section. 
(g) EFFECTIVE DATE.—The provisions of this section shall apply to 
weeks beginning after March 31,1985. 
Subtitle E—Restoration of Civil Service 
Retirement and Disability Fund 
State and local 
governments. 
26 use 3304 
note. 
26 use 3304 
note. 
SEC. 12501. APPROPRIATION TO CIVIL SERVICE RETIREMENT AND 
DISABILITY 
FUND 
OF 
INTEREST 
LOST 
FROM 
NONINVESTMENT IN SEPTEMBER 1984. 
On December 31, 1985, the Secretary of the Treasury shall pay to 
the Civil Service Retirement and Disability Fund, from amounts in 
the general fund of the Treasury not otherwise appropriated, an 
amount determined by the Secretary to be equal to the sum o
f
— 
(1) the excess of (A) the amount of interest which would have 
been earned by such fund, during the period beginning with 
September 28, 1984, and ending with December 31, 1984, on all 
monies transferred to such fund on September 28, 1984, if all 
such monies had been invested on September 28, 1984, over (B) 
the amount of interest actually earned by such fund on such 
monies during such period; 
(2) interest that would have been earned on the amount 
described in paragraph (1) during the period beginning with 
January 1,1985, and ending with June 30,1985; 
(3) the excess of (A) the amount of interest which would have 
been earned by such fund, during the period beginning on 
January 1, 1985, and ending on June 30, 1985, on all monies 
transferred to such fund on September 28, 1984, if all such 
monies had been invested on September 28, 1984, over (B) the 
amount of interest actually earned by such fund on such monies 
during such period; and 
(4) the interest that would have been earned on the amounts 
described in paragraphs (1), (2), and (3) during the period begin-
ning with July 1, 1985, and ending with December 31, 1985. 
100 STAT. 300 
PUBLIC LAW 99-272—APR. 7, 1986 
TITLE XIII—REVENUES, TRADE, AND 
RELATED PROGRAMS 
Trade Adjust-
ment Assistance 
Reform and 
Extension Act 
of 1986. 
19 u s e 2101 
note. 
Agriculture and 
agricultural 
commodities. 
Subtitle A—Trade and Customs Provisions 
PART 1—TRADE ADJUSTMENT ASSISTANCE 
SEC. 13001. SHORT TITLE. 
This part may be cited as the 
Reform and Extension Act of 1986". 
'Trade Adjustment Assistance 
19 u s e 2297. 
SEC. 13002. ELIGIBILITY OF WORKERS AND FIRMS FOR TRADE ADJUST-
MENT ASSISTANCE. 
(a) WORKERS.—Sections 221(a) and 222 of the Trade Act of 1974 (19 
U.S.C. 2271(a); 2272) are each amended by inserting "(including 
workers in any agricultural firm or subdivision of an agricultural 
firm)" after "group of workers". 
(b) FIRMS.— 
(i) Subsections (a) and (c) of section 251 of the Trade Act of 
1974 (19 U.S.C. 2341) are each amended by inserting "(including 
any agricultural firm)" after "a firm". 
(2) Paragraph (2) of section 251(c) of the Trade Act of 1974 (19 
U.S.C. 2341(c)(2)) is amended to read as follows: 
"(2) that— 
"(A) sales or production, or both, of the firm have de-
creased absolutely, or 
"(B) sales or production, or both, of an article that ac-
counted for not less than 25 percent of the total production 
or sales of the firm during the 12-month period preceding 
the most recent 12-month period for which data are avail-
able have decreased absolutely, and". 
SEC. 13003. CASH ASSISTANCE FOR WORKERS. 
(a) PARTICIPATION IN JOB SEARCH PROGRAM REQUIRED.— 
(1) Subsection (a) of section 231 of the Trade Act of 1974 (19 
U.S.C. 2291(a)) is amended by adding at the end thereof the 
following new paragraph: 
"(5) Such worker, unless the Secretary has determined that 
no acceptable job search program is reasonably available— 
"(A) is enrolled in a job search program approved by the 
Secretary under section 237(c), or 
"(B) has, after the date on which the worker became 
totally separated, or partially separated, from the adversely 
affected employment, completed a job search program ap-
proved by the Secretary under section 237(c).". 
(2) Section 231 of the Trade Act of 1974 (19 U.S.C. 2291) 
is amended by adding at the end thereof the following new 
subsection: 
"(c) If the Secretary determines that— 
"(1) the adversely affected worker— 
"(A) has failed to begin participation in the job search 
program the enrollment in which meets the requirement of 
subsection (a)(5), or 
"(B) has ceased to participate in such job search program 
before completing such job search program, and 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 301 
"(2) there is no justifiable cause for such failure or cessation, 
no trade readjustment allowance may be paid to the adversely 
affected worker under this part on or after the date of such deter-
mination until the adversely affected worker begins or resumes 
participation in a job search program approved under section 
237(c).". 
(3) Subsection (a) of section 239 of the Trade Act of 1974 (19 
U.S.C. 2311(a)) is amended— 
(A) by striking out "training," in clause (2) and inserting 
in lieu thereof "training and job search programs,"; and 
(B) by striking out "and (3)" and inserting in lieu thereof 
"(3) will make determinations and approvals regarding job 
search programs under sections 231(c) and 237(c), and (4)". 19 USC 2291, 
(b) QUALIFYING WEEKS OF EMPLOYMENT.—The last sentence of ^^^^• 
section 231(a)(2) of the Trade Act of 1974 (19 U.S.C. 2291(a)(2)) is 
amended by striking out all that follows after subparagraph (C) and 
inserting in lieu thereof "shall be treated as a week of employment 
at wages of $30 or more, but not more than 7 weeks, in case of weeks 
described in paragraph (A) or (C), or both, may be treated as weeks 
of employment under this sentence.". 
(c) WEEKLY AMOUNTS OF READJUSTMENT ALLOWANCES.—Section 
232 of the Trade Act of 1974 (19 U.S.C. 2292) is amended— 
(1) by striking out "under any Federal law," in subsection (c) 
and inserting in lieu thereof "under any Federal law other than 
this Act", 
(2) by striking out "under section 236(c)" in subsection (c) and 
inserting in lieu thereof "under section 231(c) or 236(c)", and 
(3) by striking out "If the training allowance" in subsection (c) 
and inserting in lieu thereof "If such training allowance". 
(d) LIMITATIONS.— 
(1) Paragraph (2) of section 233(a) of the Trade Act of 1974 (19 
U.S.C. 2293(a)(2)) is amended by striking out "52-week period" 
and inserting in lieu thereof "104-week period". 
(2) Section 233 of the Trade Act of 1974 (19 U.S.C. 2293) 
is amended by adding at the end thereof the following new 
subsection: 
"(e) No trade readjustment allowance shall be paid to a worker 
under this part for any week during which the worker is receiving 
on-the-job training.". 
SEC. 13004. JOB TRAINING FOR WORKERS. 
(a) IN GENERAL.—Section 236 of the Trade Act of 1974 (19 U.S.C. 
2296) is amended— 
(1) by striking out "for a worker" in subsection (a)(lXA) and 
inserting in lieu thereof "for an adversely affected worker", 
(2) by striking out "may approve" in the first sentence of 
subsection (a)(1) and inserting in lieu thereof "shall (to the 
extent appropriated funds are available) approve", 
(3) by striking out "under paragraph (1)" in subsection (a)(2) 
and inserting in lieu thereof "under subsection (a)", 
(4) by striking out "this subsection" in subsection (a)(3) and 
inserting in lieu thereof "this section", 
(5) by redesignating paragraphs (2) and (3) of subsection (a) as 
subsections (e) and (f), respectively, 
(6) by inserting at the end of subsection (a) the following new 
paragraphs: 
100 STAT. 302 
PUBLIC LAW 99-272—APR. 7, 1986 
Emplojmient 
and 
unemployment. 
29 use 1653. 
29 use 1512. 
Contracts. 
"(2) For purposes of applying paragraph (1)(C), a reasonable 
expectation of employment does not require that employment 
opportunities for a worker be available, or offered, immediately 
upon the completion of training approved under this paragraph (1). 
"(3)(A) If the costs of training an adversely affected worker are 
paid by the Secretary under paragraph (1), no other payment for 
such costs may be made under any other provision of Federal law. 
"(B) No payment may be made under paragraph (1) of the costs of 
training an adversely affected worker if such costs— 
"(i) have already been paid under any other provision of 
Federal law, or 
"(ii) are reimbursable under any other provision of Federal 
law and a portion of such costs have already been paid under 
such other provision of Federal law. 
"(C) The provisions of this paragraph shall not apply to, or take 
into account, any funds provided under any other provision of 
Federal law which are used for any purpose other than the direct 
payment of the costs incurred in training a particular adversely 
affected worker, even if such use has the effect of indirectly paying 
or reducing any portion of the costs involved in training the ad-
versely affected worker. 
"(4) The training programs that may be approved under para-
graph (1) include, but are not limited to— 
"(A) on-the-job training, 
"(B) any training program provided by a State pursuant to 
section 303 of the Job Training Partnership Act, 
"(C) any training program approved by a private industry 
council established under section 102 of such Act, and 
"(D) any other training program approved by the Secretary.", 
and 
(7) by inserting after subsection (c) the following new subjec-
tion: 
(d) Notwithstanding any provision of subsection (a)(1), the Sec-
retary may pay the costs of on-the-job training of an adversely 
affected worker under subsection (a)(1) only if— 
"(1) no currently employed worker is displaced by such ad-
versely affected worker (including partial displacement such as 
a reduction in the hours of nonovertime work, wages, or employ-
ment benefits), 
"(2) such training does not impair existing contracts for serv-
ices or collective bargaining agreements, 
"(3) in the case of training which would be inconsistent with 
the terms of a collective bargaining agreement, the written 
concurrence of the labor organization concerned has been 
obtained, 
"(4) no other individual is on layoff from the same, or any 
substantially equivalent, job for which such adversely affected 
worker is being trained, 
"(5) the employer has not terminated the employment of any 
regular employee or otherwise reduced the workforce of the 
employer with the intention of filling the vacancy so created by 
hiring such adversely affected worker, 
"(6) the job for which such adversely affected worker is being 
trained is not being created in a promotional line that will 
infringe in any way upon the promotional opportunities of 
currently employed individuals, 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 303 
"(7) such training is not for the same occupation from which 
the worker was separated and with respect to which such 
worker's group was certified pursuant to section 222, 
19 USC 2272. 
"(8) the employer certifies to the Secretary that the employer 
will continue to employ such worker for at least 26 weeks after 
completion of such training if the worker desires to continue 
such employment and the employer does not have due cause to 
terminate such employment, 
"(9) the employer has not received payment under subsection 
(a)(1) with respect to any other on-the-job training provided by 
such employer which failed to meet the requirements of para-
graphs (1), (2), (3), (4), (5), and (6), and 
"(10) the employer has not taken, at any time, any action 
which violated the terms of any certification described in para-
graph (8) made by such employer with respect to any other on-
the-job training provided by such employer for which the Sec-
retary has made a payment under subsection (a)(1).". 
(b) ON-THE-JOB TRAINING DEFINED.—Section 247 of the Trade Act 
of 1974 (19 U.S.C. 2319) is amended by adding at the end thereof the 
following new paragraph: 
"(16) The term "on-the-job training" means training provided 
by an employer to an individual who is employed by the 
employer.". 
(c) AGREEMENTS WITH THE STATES.—Section 239 of the Trade Act 
of 1974 (19 U.S.C. 231.1) is amended— 
(1) by amending subsection (a)(2) by inserting "but in accord-
ance with subsection (f)," after "where appropriate,"; and 
(2) by adding at the end thereof the following new subsections: 
"(e) Agreements entered into under this section may be made with 
one or more State or local agencies including— 
"(1) the employment service agency of such State, 
"(2) any State agency carrying out title III of the Job Training 
Partnership Act, or 
29 USC 1651. 
"(3) any other State or local agency administering job training 
or related programs. 
"(f) Each cooperating State agency shall, in carrying out subsec-
tion (a)(2)— 
"(1) advise each adversely affected worker to apply for train-
ing under section 236(a) at the time the worker makes applica- 19 USC 2296. 
tion for trade readjustment allowances (but failure of the 
worker to do so may not be treated as cause for denial of those 
allowances), and 
"(2) within 60 days after application for training is made by 
the worker, interview the adversely affected worker regarding 
suitable training opportunities available to the worker under 
section 236 and review such opportunities with the worker.". 
SEC. 13005. JOB SEARCH ALLOWANCES. 
(a) IN GENERAL.—Section 237 of the Trade Act of 1974 (19 U.S.C. 
2297) is amended by adding at the end thereof the following new 
subsection: 
"(c) The Secretary shall reimburse any adversely affected worker 
for necessary expenses incurred by such worker in participating in a 
job search program approved by the Secretary.". 
(b) DEFINITIONS.—Section 247 of the Trade Act of 1974 (19 U.S.C. 
2319), as amended by section 13004(b) of this Act, is further amended 
by adding at the end thereof the following new paragraph: 
100 STAT. 304 
PUBLIC LAW 99-272—APR. 7, 1986 
"(17XA) The term 'job search program' means a job search 
workshop or job finding club. 
"(B) The term 'job search workshop' means a short (1 to 3 
days) seminar designed to provide participants with knowledge 
that will enable the participants to find jobs. Subjects are not 
limited to, but should include, labor market information, 
resume writing, interviewing techniques, and techniques for 
finding job openings. 
"(C) The term 'job finding club' means a job search workshop 
which includes a period (1 to 2 weeks) of structured, supervised 
activity in which participants attempt to obtain jobs.". 
SEC. 13006. ADJUSTMENT ASSISTANCE FOR FIRMS. 
^0) TECHNICAIJ ASSISTANCE 
(1) Paragraph (1) of section 252(b) of the Trade Act of 1974 (19 
U.S.C. 2342(bXl)) is amended to read as follows: 
"(1) Adjustment assistance under this chapter consists of technical 
assistance. The Secretary shall approve a firm's application for 
adjustment assistance only if the Secretary determines that the 
firm's adjustment proposal— 
"(A) is reasonably calculated to materially contribute to the 
economic adjustment of the firm, 
"(B) gives adequate consideration to the interests of the work-
ers of such firm, and 
"(C) demonstrates that the firm will make all reasonable 
efforts to use its own resources for economic development.". 
(2) Section 252 of the Trade Act of 1974 (19 U.S.C. 2342) is 
amended by striking out subsection (c) and redesignating 
subsection (d) as subsection (c). 
(3) Paragraph (2) of section 253(b) of the Trade Act of 1974 (19 
U.S.C. 2343(bX2)) is amended by striking out "such cost" and 
inserting in lieu thereof "such cost for assistance described in 
paragraph (2) or (3) of subsection (a)". 
(b) No NEW LOANS OR GUARANTEES.—Section 254 of the Trade Act 
of 1974 (19 U.S.C. 2344) is amended by adding at the end thereof the 
following new subsection: 
"(d) Notwithstanding any other provision of this chapter, no direct 
loans or guarantees of loans may be made under this chapter after 
the date of enactment of the Trade Adjustment Assistance Reform 
Ante, p. 300. 
and Extension Act of 1986.". 
SEC. 13007. EXTENSION AND TERMINATION OF TRADE ADJUSTMENT 
ASSISTANCE. 
(a) IN GENERAL.—Section 285 of the Trade Act of 1974 (19 U.S.C. 
2271, preceding note) is amended— 
(1) by striking out the first sentence thereof and inserting in 
lieu thereof "(a)", 
(2) by striking out the section heading and inserting in lieu 
thereof "SEC. 285. TERMINATION.", and 
(3) by adding at the end thereof the following new subsection: 
"(b) No assistance, allowances, or other payments may be provided 
under chapter 2, and no technical assistance may be provided under 
chapter 3, after September 30,1991.". 
O
t
>
) CONFORMING AMENDMENT.—The table of contents of the Trade 
Act of 1974 is amended by striking out the item relating to section 
285 and inserting in lieu thereof the following: 
"Sec. 285. Termination.". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 305 
SEC. 13008. AUTHORIZATION OF APPROPRIATIONS. 
(a) WORKERS.—Section 245 of the Trade Act of 1974 (19 U.S.C. 
2317) is amended by striking out "1982 through 1985" and inserting 
in lieu thereof "1986,1987,1988,1989,1990, and 1991". 
O
t
)
) FIRMS.—Subsection (b) of section 256 of the Trade Act of 1974 
(19 U.S.C. 2346(b)) is amended— 
(1) by inserting "for fiscal years 1986, 1987, 1988, 1989, 1990, 
and 1991" after "to the Secretary", 
(2) by striking out "from time to time", and 
(3) by striking out the last sentence thereof. 
SEC. 13009. EFFECTIVE DATES; APPLICATION OF GRAMM-RUDMAN. 
19 USC 2291 
(a) IN GENERAL.—Except as provided in subsections (b) and (c), the 
amendments made by this part shall take effect on the date of the 
enactment of this Act. 
Ot)) JOB SEARCH PROGRAM REQUIREMENTS.—The amendments made 
by section 13003(a) apply with respect to workers covered by peti-
tions filed under section 221 of the Trade Act of 1974 on or after the 19 USC 2271. 
date of the enactment of this Act. 
(c) EXTENSION AND AUTHORIZATION.—Chapters 2 and 3 of title II of 
the Trade Act of 1974 (19 U.S.C. 2271, et seq.) shall be applied as if 
the amendments made by sections 13007 and 13008 had taken effect 
on December 18,1985. 
(d) APPLICATION OF GRAMM-RUDMAN.—Trade readjustment allow- Sequestration 
ances payable under part I of chapter 2 of title II of the Trade Act of Report. 
1974 for the period from March 1, 1986, and until October 1, 1986, 
shall be reduced by a percentage equal to the non-defense sequester 
percentage applied in the Sequestration Report (submitted under 
the Balanced Budget and Emergency Deficit Control Act of 1985 and 
2 USC 901 note. 
dated January 21, 1986) of the Comptroller General of the United 
States for fiscal year 1986. 
PART 
2—AUTHORIZATION 
OF 
APPROPRIATIONS 
FOR TRADE 
AND 
CUSTOMS 
AGENCIES 
SEC. 13021. UNITED STATES INTERNATIONAL TRADE COMMISSION. 
The first sentence of paragraph (2) of section 330(e) of the Tariff 
Act of 1930 (19 U.S.C. 1330(e)(2)) is amended to read as follows: 
"There are authorized to be appropriated to the Commission for 
necessary expenses (including the rental of conference rooms in the 
District of Columbia and elsewhere) for fiscal year 1986 not to 
exceed $28,901,000; of which not to exceed $2,500 may be used, 
subject to approval by the Chairman of the Commission, for recep-
tion and entertainment expenses.". 
SEC. 13022. UNITED STATES CUSTOMS SERVICE. 
(a) AUTHORIZATION OF APPROPRIATIONS.—Section 301 of the Cus-
toms Procedural Reform and Simplification Act of 1978 (19 U.S.C. 
2075) is amended as follows: 
(1) Subsection (b) is amended to read as follows: 
"Ot))(l) There are authorized to be appropriated to the Department 
of the Treasury not to exceed $772,141,000 for the salaries and 
expenses of the United States Customs Service for fiscal year 1986; 
of which— 
100 STAT. 306 
PUBLIC LAW 99-272—APR. 7, 1986 
50 u s e app. 
2401 note. 
Aircraft and 
air carriers. 
Drugs and drug 
abuse. 
"(A) $27,900,000 is for the addition of 500 inspectors, 150 
import specialists, 100 customs patrol officers, and 50 special 
agents; 
"(B) $53,500,000 is for the operation and maintenance of the 
air interdiction program of the Service; and 
"(C) not to exceed $14,000,000 is for the implementation of the 
'Operation EXODUS' program and any related program de-
signed to enforce or monitor export controls under the Export 
Administration Act of 1979. 
"(2) No part of any sum that is appropriated under the authority 
of paragraph (1) may be used to close any port of entry at which, 
during fiscal year 1985— 
"(A) not less than 2,500 merchandise entries (including infor-
mal entries) were made; and 
"(B) not less than $1,500,000 in customs revenues were 
assessed. 
"(3)(A) No part of any sum that is appropriated under the author-
ity of paragraph (1) may be used for further research and develop-
ment or acquisition of F-15 avionics for the P-3 aircraft and related 
equipment until 60 days after the Committee on Ways and Means 
and the Committee on Finance have received from the Secretary of 
the Treasury a written comparative assessment of the suitability of 
the P-3, E-2, or other appropriate aircraft for use by the Customs 
Service in its air drug interdiction program. Such assessment, which 
the Secretary may not submit to the Committees until the General 
Accounting Office study required under paragraph (7) is completed, 
shall include life cycle costs. 
"(B) Acquisition of additional aircraft for use by the Customs 
Service for its air drug interdiction program after completion of the 
assessment required under subparagraph (A) shall be subject to 
competitive bidding through the use of the normal 'request for 
proposal' process. 
"(4) No part of any sum that is appropriated under the authority 
of paragraph (1) may be used to consolidate the drawback liquida-
tion centers within the Customs Service to less than 4 such centers. 
If a consolidation is undertaken, the Commissioner of Customs shall 
select the location of the centers after taking into account the 
drawback volume at, and the geographic dispersion of, the respec-
tive centers being considered for consolidation. 
"(5) In addition to any sum authorized to be appropriated under 
paragraph (1), there are authorized to be appropriated to the Depart-
ment of the 'Treasury for fiscal year 1986 not to exceed $8,000,000 
from the Customs Forfeiture Fund for the making of payments 
under section 613A of the Tariff Act of 1930 (19 U.S.C. 1613b), of 
which not to exceed $5,000,000 may be used for the modification of 
aircraft (whether or not aircraft described in subsection (aX5) of that 
section) for drug interdiction. 
"(6) In addition to any other amounts authorized to be appro-
priated for the Customs Service for fiscal years 1987 and 1988, there 
are authorized to be appropriated $27,900,000 for each of such fiscal 
years to fund the additional personnel referred to in paragraph 
(IXA). 
"(7) As soon as possible after the date of the enactment of this 
paragraph, but not later than 12 months after that date, the Gen-
eral Accounting Office shall complete, and submit to the Committee 
on Ways and Means and the Committee on Finance, a study that 
evaluates the air detection and interdiction capability of the Cus-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 307 
toms Service, including assets, geographic dispersal, costs of oper-
ation, procurement practices, and the services and equipment pro-
vided by other Federal agencies. Within 6 months after commencing 
the study, the General Accounting Office shall consult with the 
Committees on the progress of the study."; and 
(2) by adding at the end thereof the following new subsections: 
"(f) USE OF SAVINGS RESULTING FROM ADMINISTRATIVE CONSOLIDA-
TIONS.—If savings in salaries and expenses result from the consolida-
tion of administrative functions within the Customs Service, the 
Commissioner of Customs shall apply those savings, to the extent 
they are not needed to meet emergency requirements of the Service, 
to strengthening the commercial operations of the Service by 
increasing the number of inspector, import specialist, patrol officer, 
and other line operational positions. 
"(g) ALLOCATION OF RESOURCES.—The Commissioner of Customs 
shall ensure that existing levels of commercial services, including 
inspection and control, classification, and value, shall continue to be 
provided by Customs personnel assigned to the headquarters office 
of any Customs district designated by statute before the date of 
enactment of this subsection. The number of such personnel as-
signed to any such district headquarters shall not be reduced 
through attrition or otherwise, and such personnel shall be afforded 
the opportunity to maintain their proficiency through training and 
workshops to the same extent provided to Customs personnel in any 
other district. Automation and other modernization equipment shall 
be made available, as needed on a timely basis, to such headquarters 
to the same extent as such equipment is made available to any other 
district headquarters.". 
(b) ELIMINATION OF SURETIES ON CUSTOMS BONDS.—(1) The 
Commissioner of Customs may not publish, nor take any other 
action to give force and effect to, any final rule that would revise 
any provision in 19 CFR part 113 or section 142.4 (as in effect on 
March 1, 1984) relating to the requirement for sureties on customs 
bonds— 
(A) unless the Commissioner submits to the Committee on Reports. 
Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate, on the same day, a report 
containing— 
(i) the text of the draft final rule; 
(ii) an analysis of the revenue impact of the rule; 
(iii) a regulatory impact analysis; 
(iv) the estimated cost benefit of the rule to the Customs 
Service and to the importing community, and an expla-
nation in support of those estimates; and 
(v) a justification for each revision to be effected by the 
rule; and 
(B) until the close of the first period of 90 calendar days of 
continuous session of Congress occurring after the date on 
which the report is submitted under subparagraph (A). 
SEC. 13023. UNITED STATES TRADE REPRESENTATIVE. 
Section 141 of the Trade Act of 1974 (19 U.S.C. 2171) is amended— 
(1) by inserting before the semicolon at the end of subsection 
(d)(1) the following: ", except that not more than 20 individuals 
may be employed without regard to any provision of law regu-
lating the employment or compensation at rates not to exceed 
100 STAT. 308 
PUBLIC LAW 99-272—APR. 7, 1986 
the rate of pay for level IV of the Executive Schedule in section 
5314 of title 5, United States Code"; and 
(2) by amending subsection (f)(1) by striking out "$14,179,000 
for fiscal year 1985" and inserting in lieu thereof "$13,582,000 
for fiscal year 1986". 
SEC. 13024. NOTIFICATION OF CERTAIN ACTIONS. 
Section 237 of the Trade and Tariff Act of 1984 (98 Stat. 2993) is 
amended— 
(1) by striking out "1985" in subsection (b) and inserting in 
lieu thereof "1986"; 
(2) by striking out subsection (c); 
(3) by redesignating subsection (b) as subsection (c); and 
(4) by inserting after subsection (a) the following new sub-
section: 
"(b) The notice required under subsection (a) shall include— 
"(1) a statement which sets forth in detail the factors taken 
into account in making the decision to take the action described 
in subsection (a) and the reasons for such action; and 
"(2) an analysis of the impact such action will have on the 
commerce and community served by each office affected by such 
action.". 
PART 3—CUSTOMS FEES 
SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES. 
Vessels. 
(a) SCHEDULE OF FEES.—In addition to any other fee authorized by 
Railroads. 
law, the Secretary of the Treasury shall charge and collect the 
^^rr^^^* ^^^ ^^^ following fees for the provision of customs services in connection 
19 use 580. 
with the following: 
(1) For the arrival of a commercial vessel of 100 net tons or 
more, $397. 
(2) Subject to the limitation in subsection (b)(2), for the arrival 
of a commercial truck, $5. 
(3) Subject to the limitations in subsection (b)(1)(B) and (3), for 
the arrival of each railroad car, whether passenger or freight, 
$5. 
(4) For all arrivals made during a calendar year by a private 
vessel or private aircraft, $25. 
(5) For the arrival of each passenger aboard a commercial 
vessel or commercial aircraft from a place outside the United 
States (other than a place referred to in subsection (b)(1)(A)), $5. 
(6) For each item of dutiable mail for which a document is 
prepared by a customs officer, $5. 
(7) For each customs broker permit held by an individual, 
partnership, association, or corporate customs broker, $125 per 
year. 
Prohibition. 
(b) LIMITATIONS ON FEES.—(1) No fee may be charged under subsec-
19 use 58c. 
tion (a) for customs services provided in connection with— 
(A) the arrival of any passenger whose journey originated in— 
(i) Canada, 
(ii) Mexico, 
(iii) a territory or possession of the United States, or 
(iv) any adjacent island (within the meaning of section 
101(b)(5) of the Immigration and Nationality Act (8 U.S.C. 
1101(b)(5)); or 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 309 
(B) the arrival of any railroad car that is part of a train which 
originates and terminates in the same country, but only i
f
— 
(i) such car is part of such train when such train departs 
from the United States, and 
(ii) no passengers board or disembark from such train, 
and no cargo is loaded or unloaded from such train, while 
such train is within any country other than the country in 
which such train originates and terminates. 
(2) No fee may be charged under subsection (a)(2) for the arrival of 
a commercial truck during any calendar year after a total of $100 in 
fees has been paid to the Secretary of the Treasury for the provision 
of customs services for all arrivals of such commercial truck during 
such calendar year. 
(3) No fee may be charged under subsection (a)(3) for the arrival of 
a railroad car whether passenger or freight during any calendar 
year after a total of $10() in fees has been paid to the Secretary of 
the Treasury for the provision of customs services for all arrivals of 
such passenger or freight rail car during such calendar year. 
(c) DEFINITIONS.—For purposes of this section— 
(1) The term "vessel" does not include any ferry. 
(2) The term "arrival" means arrival at a port of entry in the 
customs territory of the United States. 
(3) The term ' customs territory of the United States" has the 
meaning given to such term by headnote 2 of the General 
Headnotes and Rules of Interpretation of the Tariff Schedules of 
the United States. 
(4) The term "customs broker permit" means a permit issued 
under section 641(c) of the Tariff Act of 1930 (19 U.S.C. 1641(c)). 
(d) COLLECTION.—(1) Each person that issues a document or ticket 
to an individual for transportation by a commercial vessel or 
commercial aircraft into the customs territory of the United States 
shall— 
(A) collect from that individual the fee charged under subsec-
tion (a)(5) at the time the document or ticket is issued; and 
(B) separately identify on that document or ticket the fee 
charged under subsection (a)(5) as a Federal inspection fee. 
(2) If-
(A) a document or ticket for transportation of a passenger into 
the customs territory of the United States is issued in a foreign 
country; and 
(B) the fee charged under subsection (a)(5) is not collected at 
the time such document or ticket is issued; 
the person providing transportation to such passenger shall collect 
such fee at the time such passenger departs from the customs 
territory of the United States and shall provide such passenger a 
receipt for the payment of such fee. 
(3) The person who collects fees under paragraph (1) or (2) shall 
remit those fees to the Secretary of the Treasury at any time before 
the date that is 31 days after the close of the calendar quarter in 
which the fees are collected. 
(e) PROVISION OF CUSTOMS SERVICES.—(1) Notwithstanding section 
451 of the Tariff Act of 1930 (19 U.S.C. 1451) or any other provision 
of law (other than paragraph (2)), the customs services required to be 
provided to passengers upon arrival in the United States on sched-
uled airline flights at customs serviced airports shall be adequately 
provided when needed and at no cost (other than the fees imposed 
under subsection (a)) to airlines and airline passengers. 
19 u s e 58c. 
19 u s e 1202. 
Transportation. 
Aircraft and 
air carriers. 
Maritime affairs. 
19 u s e 58c. 
Aircraft and air 
carriers. 
19 u s e 58c. 
100 STAT. 310 
PUBLIC LAW 99-272—APR. 7, 1986 
(2) This subsection shall not apply with respect to any airport to 
which section 236 of the Trade and Tariff Act of 1984 (19 U.S.C. 58b) 
applies. 
19 use 58c. 
(f) DISPOSITION OF FEES.—(1) Notwithstanding section 524 of the 
Tariff Act of 1930 (19 U.S.C. 1524), all of the fees collected under 
subsection (a) shall be deposited in a separate account within the 
general fund of the Treasury of the United States. Such account 
shall be known as the "Customs User Fee Account". 
(2)(A) The Secretary of the Treasury shall refund out of the 
Customs User Fee Account to any appropriation the amount paid 
out of such appropriation for expenses incurred by the Secretary of 
the Treasury in providing overtime customs inspectional services for 
which the recipient of such services is not required to reimburse the 
Secretary of the Treasury. 
(B) The amounts which are required to be refunded under 
subparagraph (A) shall be refunded at least quarterly on the basis of 
estimates made by the Secretary of the Treasury of the expenses 
referred to in subparagraph (A). Proper adjustments shall be made 
in the amounts subsequently refunded under subparagraph (A) to 
the extent prior estimates were in excess of, or less than, the 
amounts required to be refunded under subparagraph (A). 
19 use 58c. 
(g) REGULATIONS.—The Secretary of the Treasury may prescribe 
such rules and regulations as may be necessary to carry out the 
provisions of this section. 
(h) CONFORMING AMENDMENTS.—(1) Subsection (i) of section 305 of 
the Rail Passenger Service Act (45 U.S.C. 545(i)) is amended by 
striking out the last sentence thereof. 
(2) Subsection (e) of section 53 of the Airport and Airway Develop-
49 use app. 
ment Act of 1970 (49 U.S.C. 1741(e)) is repealed. 
i'^4i. 
(i) EFFECT ON OTHER AUTHORITY.—Except with respect to customs 
19 use 58c. 
services for which fees are imposed under subsection (a), nothing in 
this section shall be construed as affecting the authority of the 
Secretary of the Treasury to charge fees under section 214(b) of the 
Customs Procedural Reform and Simplification Act of 1978 (19 
U.S.C. 58a). 
19 use 58c note. 
(j) EFFECTIVE DATES.—(1) Except as provided in paragraph (2), the 
provisions of this section, and the amendments and repeals made by 
this section, shall apply with respect to customs services rendered 
after the date that is 90 days after the date of enactment of this Act. 
(2) Fees may be charged under subsection (a)(5) only with respect 
to customs services rendered in regard to arriving passengers using 
transportation for which documents or tickets were issued after the 
date that is 90 days after such date of enactment. 
SEC. 13032. USER FEES FOR CUSTOMS SERVICES AT CERTAIN SMALL AIR-
PORTS. 
Section 236 of the Trade and Tariff Act of 1984 (19 U.S.C. 58b) is 
amended— 
(1) by striking out "4 airports" in subsection (c) and inserting 
in lieu thereof "20 airports '; and 
(2) by striking out the last sentence in subsection (e) and 
inserting in lieu thereof the following new sentences: "The 
Secretary of the Treasury is authorized and directed to pay out 
of any funds available in such account any expenses incurred by 
the Federal Government in providing customs services at such 
airport (including expenses incurred for the salaries and ex-
penses of individuals employed to provide such services). None 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 311 
of the funds deposited into such account shall be available for 
any purpose other than making payments authorized under the 
preceding sentence.". 
SEC. 13033. ADVISORY COMMITTEE. 
19 USC 2071 
In accordance with the provisions of the Federal Advisory 
Committee Act, the Secretary of the Treasury shall establish an 
5 USC app. 
advisory committee, whose membership shall consist of representa-
tives from the airline, shipping, and other transportation industries, 
the general public, and others who may be subject to any fee or 
charge (1) authorized by law, or (2) proposed by the United States 
Customs Service for the purpose of covering expenses incurred by 
the Customs Service. The advisory committee shall meet on a 
periodic basis and shall advise the Secretary on issues related to the 
performance of the customs services. This advice shall include, but 
not be limited to, such issues as the time periods during which such 
services should be performed, the proper number and deployment of 
inspection officers, the level of fees, and the appropriateness of any 
proposed fee. The Secretary shall give substantial consideration to 
the views of the advisory committee in the exercise of his duties. 
Subtitle B—General Revenue Provisions 
SEC. 13200. AMENDMENT OF 1954 CODE. 
Except as otherwise expressly provided, whenever in this subtitle 
an amendment or repeal is expressed in terms of an amendment to, 
or repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Internal 
Revenue Code of 1954. 
26 USC l et seq. 
SEC. 13201. INCREASE IN TAX ON CIGARETTES MADE PERMANENT. 
(a) Subsection (c) of section 283 of the Tax Equity and Fiscal 
Responsibility Act of 1982 (relating to increase in tax on cigarettes) 26 USC 5701 
is amended by striking out all that follows "December 31, 1982" and ^°^-
inserting in lieu thereof a period. 
(b) For purposes of all Federal and State laws, the amendment state and local 
made by subsection (a) shall be treated as having taken effect on 1°^®^'!?"^®"*^^-
M a r c h 14,1986. 
^6 USC 5701 
SEC. 13202. TAX ON SMOKELESS TOBACCO. 
(a) In GENERAL.—Section 5701 (relating to rate of tax) is amended 
26 USC 5701. 
by redesignating subsection (e) as subsection (f) and by inserting 
after subsection (d) the following new subsection: 
"(e) SMOKELESS TOBACCO.—On smokeless tobacco, manufacturered 
in or imported into the United States, there shall be imposed the 
following taxes: 
"(1) SNUFF.—On snuff, 24 cents per pound and a propor-
tionate tax at the like rate on all fractional parts of a pound. 
"(2) CHEWING TOBACCO.—On chewing tobacco, 8 cents per 
pound and a proportionate tax at the like rate on all fractional 
parts of a pound.". 
(b) CONFORMING AMENDMENTS.— 
(1) The heading of chapter 52 is amended by inserting 
"SMOKELESS TOBACCO," after "CIGARETTES,". 
100 STAT. 312 
PUBLIC LAW 99-272—APR. 7, 1986 
26 use 5702. 
(2) Section 5702(c) (defining tobacco products) is amended by 
striking out "and cigarettes" and inserting in lieu thereof 
", cigarettes, and smokeless tobacco". 
(3) Section 5702(d) (defining manufacturers of tobacco prod-
ucts) is amended by striking out "cigars or cigarettes" each 
place it appears and inserting in lieu thereof "cigars, cigarettes, 
or smokeless tobacco". 
(4) Section 5702 is amended by adding at the end thereof the 
following new subsection: 
"(n) DEFINITIONS RELATING TO SMOKELESS TOBACCO.— 
"(1) SMOKELESS TOBACCO.—The term 'smokeless tobacco' 
means any snuff or chewing tobacco. 
"(2) SNUFF.—The term 'snuff means any finely cut, ground, 
or powdered tobacco that is not intended to be smoked. 
"(3) CHEWING TOBACCO.—The term 'chewing tobacco' means 
any leaf tobacco that is not intended to be smoked,". 
26 use 5701 
(c) EFFECTIVE DATE.— 
note. 
(1) IN GENERAL.—The amendments made by this section shall 
apply to smokeless tobacco removed after June 30,1986. 
(2) TRANSITIONAL RULE.—Any person who— 
(A) on the date of the enactment of this Act, is engaged in 
business as a manufacturer of smokeless tobacco, and 
(B) before July 1, 1986, submits an application under 
sulbchapter B of chapter 52 of the Internal Revenue Code of 
26 use 5711. 
1954 to engage in such business, 
may, notwithstanding such subchapter B, continue to engage in 
such business pending final action on such application. Pending 
26 use 5701 et 
such final action, all provisions of chapter 52 of such Code shall 
s«9- 
apply to such applicant in the same manner and to the same 
extent as if such applicant were a holder of a permit to manu-
facture smokless tobacco under such chapter 52. 
SEC. 13203. INCREASE IN EXCISE TAX ON COAL. 
26 use 4121. 
(a) INCREASE IN TAX.—Subsections (a) and (b) of section 4121 
(relating to imposition of tax on coal) are amended to read as 
follows: 
"(a) TAX IMPOSED.— 
"(1) IN GENERAL.—There is hereby imposed on coal from 
mines located in the United States sold by the producer, a tax 
equal to the rate per ton determined under subsection (b). 
"(2) LIMITATION ON TAX.—The amount of the tax imposed by 
paragraph (1) with respect to a ton of coal shall not exceed the 
applicable percentage (determined under subsection (b)) of the 
price at which such ton of coal is sold by the producer. 
"(b) DETERMINATION OF RATES AND LIMITATION ON TAX.—For pur-
poses of subsection (a), in the case of sales during any calendar year 
beginning after December 31, 1985— 
"(1) the rate of tax on coal from underground mines shall be 
$1.10, 
"(2) the rate of tax on coal from surface mines shall be $.55, 
and 
"(3) the applicable percentage shall be 4.4 percent.". 
26 use 9501 
(b) 5-YEAR MORATORIUM ON INTEREST ACCRUALS WITH RESPECT TO 
note. 
THE INDEBTEDNESS OF THE BLACK LUNG DISABILITY TRUST FUND.—No 
interest shall accrue for the period beginning on October 1, 1985, 
and ending on September 30, 1990, with respect to any repayable 
advance to the Black Lung Disability Trust Fund. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 313 
(c) EXISTING REDUCTION IN RATES FOR PERIOD AFTER TEMPORARY 
INCREASE RETAINED.—So much of subsection (e) of section 4121 26 use 4i2i. 
(relating to temporary increase in amount of tax) as precedes para-
graph (2) is amended to read as follows: 
"(e) REDUCTION IN AMOUNT OF TAX.— 
"(1) IN GENERAL.—Effective with respect to sales after the 
temporary increase termination date, subsection (b) shall be 
applied— 
"(A) by substituting '$.50' for '$1.10', 
"(B) by substituting '$.25' for '$.55', and 
"(C) by substituting '2 percent' for '4.4 percent'.". 
(d) EFFECTIVE DATE.—The amendments made by this section shall 26 use 4121 
apply to sales after March 31,1986. 
note. 
SEC. 13204. ONLY RAILROAD RETIREMENT BENEFITS EQUIVALENT TO 
SOCIAL SECURITY BENEFITS TREATED AS TIER 1 BENEFITS. 
(a) IN GENERAL.—Paragraph (4) of section 86(d) (defining Social 26 use 86. 
Security benefits) is amended to read as follows: 
' (4) TIER i RAILROAD RETIREMENT BENEFIT.—For purposes of 
paragraph (1), the term 'tier 1 railroad retirement benefit' 
means— 
"(A) the amount of the annuity under the Railroad 
Retirement Act of 1974 equal to the amount of the benefit 45 use 231. 
to which the taxpayer would have been entitled under the 
Social Security Act if all of the service after December 31, 42 use 1305 et 
1936, of the employee (on whose employment record the *^9 
annuity is being paid) had been included in the term 
'employment' as defined in the Social Security Act, and 
"(B) a monthly annuity amount under section 3(f)(3) of 
the Railroad Retirement Act of 1974.". 
45 use 231b. 
Qa) EFFECTIVE DATE.—The amendment made by subsection (a) 26 use 86 note. 
shall apply to any monthly benefit for which the generally ap-
plicable payment date is after December 31,1985. 
SEC. 13205. MEDICARE COVERAGE OF, AND APPLICATION OF HOSPITAL 
INSURANCE TAX TO, NEWLY HIRED STATE AND LOCAL 
GOVERNMENT EMPLOYEES. 
(a) APPLICATION OF HOSPITAL INSURANCE TAX TO NEWLY HIRED 
EMPLOYEES OF STATE AND LOCAL GOVERNMENTS.— 
(1) IN GENERAL.—Subsection (u) of section 3121 (relating to 26 use 3121. 
application of hospital insurance tax to Federal employment) is 
amended to read as follows: 
"(u) APPLICATION OF HOSPITAL INSURANCE TAX TO FEDERAL, STATE, 
AND LOCAL EMPLOYMENT.— 
"(1) FEDERAL EMPLOYMENT.—For purposes of the taxes im-
posed by sections 31010?) and 3111(b), subsection (b) shall be 26USe3ioi, 
applied without regard to paragraph (5) thereof. 
3lii. 
"(2) STATE AND LOCAL EMPLOYMENT.—For purposes of the 
taxes imposed by sections 3101(b) and 31110t))— 
"(A) IN GENERAL.—Except as provided in subparagraphs 
(B) and (C), subsection (b) shall be applied without regard to 
paragraph (7) thereof. 
"(B) EXCEPTION FOR CERTAIN SERVICES.—Service shall not 
be treated as employment by reason of subparagraph (A) 
if— 
"(i) the service is included under an agreement under 
section 218 of the Social Security Act, or 
42 use 418. 
100 STAT. 314 
PUBLIC LAW 99-272—APR. 7, 1986 
"(ii) the service is performed— 
"(I) by an individual who is employed by a State 
or political subdivision thereof to relieve him from 
unemployment, 
District of 
"(H) in a hospital, home, or other institution by a 
Columbia. 
patient or inmate thereof as an employee of a State 
or political subdivision thereof or of the District of 
Columbia, 
"(III) by an individual, as an employee of a State 
or political subdivision thereof or of the District of 
Columbia, serving on a temporary basis in case of 
fire, storm, snow, earthquake, flood or other simi-
lar emergency, or 
"(IV) by any individual as an employee included 
under section 5351(2) of title 5, United States Code 
(relating to certain interns, student nurses, and 
other student employees of hospitals of the District 
of Columbia Government), other than as a medical 
or dental intern or a medical or dental resident in 
training. 
As used in this subparagraph, the terms 'State' and 'politi-
cal subdivision' have the meanings given those terms in 
42 use 418. 
section 218(b) of the Social Security Act. 
"(C) EXCEPTION FOR CURRENT EMPLOYMENT WHICH CON-
TINUES.—Service performed for an employer shall not be 
treated as employment by reason of subparagraph (A) if— 
"(i) such service would be excluded from the term 
'employment' for purposes of this chapter if subpara-
graph (A) did not apply; 
"(ii) such service is performed by an individual— 
"(I) who was performing substantial and regular 
service for remuneration for that employer before 
April 1,1986, 
"(II) who is a bona fide employee of that em-
ployer on March 31,1986, and 
"(III) whose employment relationship with that 
employer was not entered into for purposes of 
meeting the requirements of this subparagraph; 
and 
"(iii) the employment relationship with that em-
ployer has not been terminated after March 31, 1986. 
"(D) TREATMENT OF AGENCIES AND INSTRUMENTAUTIES.— 
District of 
For purposes of subparagraph (C), under regulations— 
Columbia. 
"(j) All agencies and instrumentalities of a State (£is 
42 use 418. 
defined in section 218(b) of the Social Security Act) or of 
the District of Columbia shall be treated as a single 
employer. 
"(ii) All agencies and instrumentalities of a political 
subdivision of a State (as so defined) shall be treated as 
a single employer and shall not be treated as described 
in clause (i). 
"(3) 
MEDICARE QUALIFIED GOVERNMENT EMPLOYMENT.—For 
purposes of this chapter, the term 'medicare qualified govern-
ment employment' means service which— 
"(A) is employment (as defined in subsection (b)) with the 
application of paragraphs (1) and (2), but 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 315 
"(B) would not be employment (as so defined) without the 
application of such paragraphs." 
(2) CONFORMING AMENDMENTS.— 
(A)(i) Section 3125 (relating to returns in the case of 
governmental employees in Guam, American Samoa, and 
the District of Columbia) is amended by redesignated 
subsections (a), (b), and (c) as subsections (b), (c), and (d), 
respectively, and by inserting before subsection (b) (as so 
redesignated) the following new subsection: 
"(a) STATES.—Except as otherwise provided in this section, in the 
case of the taxes imposed by sections 3101(b) and 3111(b) with 
respect to service performed in the employ of a State or any political 
subdivision thereof (or any instrumentality of any one or more of 
the foregoing which is wholly owned thereby), the return and pay-
ment of such taxes may be made by the head of the agency or 
instrumentality having the control of such service, or by such agents 
as such head may designate. The person making such return may, 
for convenience of administration, make payments of the tax im-
posed under section 3111 with respect to the service of such individ-
uals without regard to the contribution and benefit base limitation 
in section 3121(a)(1)." 
(ii) The section heading for such section 3125 is amended 
by inserting "STATES," before "GUAM". 
(iii) The item relating to section 3125 in the table of 
sections for subchapter C of chaper 21 is amended by 
inserting "States," before "Guam". 
(B) Subsection (b) of section 1402 is amended by striking 
out "medicare qualified Federal employment (as defined in 
section 3121(uX2))" and inserting in lieu thereof "medicare 
qualified government employment (as defined in section 
3121(u)(3))". 
(C) Section 3122 (relating to Federal service) is amended 
by striking out "including service which is medicare quali-
fied Federal employment (as defined in section 3121(u)(2))" 
and inserting in lieu thereof "including such service which 
is medicare qualified government employment (as defined 
in section 3121(u)(3))". 
(D) Subsection (a) of section 6205 (relating to special rules 
applicable to certain employment tsixes) is amended by 
adding at the end thereof the following new paragraph: 
"(5) STATES AND POLITICAL SUBDIVISIONS AS EMPLOYER.—For 
purposes of this subsection, in the case of remuneration received 
from a State or any political subdivision thereof (or any 
instrumentality of any one or more of the foregoing which is 
wholly owned thereby) during any calendar year, each head of 
an agency or instrumentality, and each agent designated by 
either, who makes a return pursuant to section 3125 shall be 
deemed a separate employer.' 
(E)(i) Section 6413(a) (relating to adjustment of certain 
employment taxes) is amended by adding at the end thereof 
the following new paragraph: 
"(5) STATES AND POLITICAL SUBDIVISIONS AS EMPLOYER.—For 
purposes of this subsection, in the case of remuneration received 
from a State or any political subdivision thereof (or any 
instrumentality of any one or more of the foregoing which is 
wholly owned thereby) during any calendar year, each head of 
an agency or instrumentality, and each agent designated by 
26 u s e 3125. 
Guam, 
American 
Samoa. 
District of 
Columbia. 
26 u s e 3101, 
3111. 
26 u s e 1402. 
26 u s e 3121. 
26 u s e 3122. 
26 use 6205. 
26 u s e 3125. 
26 u s e 6413. 
100 STAT. 316 
PUBLIC LAW 99-272—APR. 7, 1986 
26 use 3125. 
either, who makes a return pursuant to section 3125 shall be 
deemed a separate employer." 
26 use 6413. 
(ii) Section 6413(c)(2) (relating to special refunds of certain 
employment taxes) is amended— 
(I) by striking out "3125(a)", "3125(b)", and "3125(c)" 
in subparagraphs (D), (E), and (F), respectively, and 
inserting in lieu thereof "3125(b)", "3125(c)", and 
"3125(d)^', respectively, and 
(II) by adding at the end thereof the following new 
subparagraph: 
"(G) EMPLOYEES OF STATES AND POLITICAL SUBDIVISIONS.— 
In the case of remuneration received from a State or any 
political subdivision thereof (or any instrumentality of any 
one or more of the foregoing which is wholly owned 
thereby) during any calendar year, each head of an agency 
or instrumentality, and each agent designated by either, 
who makes a return pursuant to section 3125(a) shall, for 
purposes of this subsection, be deemed 
a 
separate 
employer." 
(b) ENTITLEMENT TO HOSPITAL INSURANCE BENEFITS.— 
(1) REVISION OF DEFINITION OF MEDICARE QUALIFIED GOVERN-
MENT EMPLOYMENT.—Section 210(p)) of the Social Security Act 
(42 U.S.C. 410(p)) is amended to read as follows: 
"MEDICARE QUALIFIED GOVERNMENT EMPLOYMENT 
State and local 
"(p)(l) For purposes of sections 226 and 226A, the term 'medicare 
governments. 
qualified government employment' means any service which would 
426^1 ^^^' 
constitute 'employment' as defined in subsection (a) of this section 
but for the application of the provisions of— 
"(A) subsection (a)(5), or 
"(B) subsection (a)(7), except as provided in paragraphs (2) and 
(3). 
"(2) Service shall not be treated as employment by reason of 
paragraph (1)(B) if the service is performed— 
"(A) by an individual who is employed by a State or political 
subdivision thereof to relieve him from unemployment, 
"(B) in a hospital, home, or other institution by a patient or 
inmate thereof as an employee of a State or political subdivision 
thereof or of the District of Columbia, 
"(C) by an individual, as an employee of a State or political 
subdivision thereof or of the District of Columbia, serving on a 
temporary basis in case of fire, storm, snow, earthquake, flood 
or other similar emergency, or 
"(D) by any individual as an employee included under section 
5351(2) of title 5, United States Code (relating to certain interns, 
student nurses, and other student employees of hospitals of the 
District of Columbia Government), other than as a medical or 
dental intern or a medical or dental resident in training. 
As used in this paragraph, the terms 'State' and 'political subdivi-
42 use 418. 
sion' have the meanings given those terms in section 218(b). 
"(3) Service performed for an employer shall not be treated as 
employment by reason of paragraph (1)(B) i
f
— 
"(A) such service would be excluded from the term 'employ-
ment' for purposes of this section if paragraph (1)(B) did not 
apply; 
"(B) such service is performed by an individual— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 317 
"(i) who was performing substantial and regular service 
for remuneration for that employer before April 1, 1986, 
"(ii) who is a bona fide employee of that employer on 
March 31, 1986, and 
"(iii) whose employment relationship with that employer 
was not entered into for purposes of meeting the require-
ments of this subparagraph; and 
"(C) the employment relationship with that employer has not 
been terminated after March 31, 1986. 
"(4) For purposes of paragraph (3), under regulations (consistent 
with regulations established under section 3121(u)(2XD) of the In-
ternal Revenue Code of 1954)— 
26 use 3121. 
"(A) all agencies and instrumentalities of a State (as defined 
in section 218(b)) or of the District of Columbia shall be treated 
42 USC 418. 
as a single employer, and 
"(B) all agencies and instrumentalities of a political subdivi-
sion of a State (as so defined) shall be treated as a single 
employer and shall not be treated as described in subparagraph 
"(A)." 
(2) ENTITLEMENT TO HOSPITAL INSURANCE BENEFITS.— 
(A) FOR INDIVIDUALS AGE 65 OR OLDER AND FOR DISABLED 
INDIVIDUALS.—Section 226 of such Act (42 U.S.C. 426) is 
amended by striking out "medicare qualified 
Federal 
employment" in subsections (a)(2)(C)(i) and (b)(2)(C)(ii)(I) and 
inserting in lieu thereof "medicare qualified government 
- 
employment". 
(B) FOR INDIVIDUALS WITH END-STAGE RENAL DISEASE.— 
Section 226A(a) of such Act (42 U.S.C. 426-l(a)) is amended 
by striking out "medicare qualified Federal employment" 
in paragraphs (l)(A)(ii) and (l)(B)(iii) and inserting in lieu 
thereof "medicare qualified government employment". 
(C) CONFORMING AMENDMENTS.— 
(i) Section 1811 of such Act (42 U.S.C. 1395c) is 
amended by striking out "Federal employment" in 
clauses (1) and (2) and inserting in lieu thereof "govern-
ment employment". 
(ii) Section 226(g) of such Act (42 U.S.C. 426(g)) is 
amended by striking out "medicare qualified Federal 
employment" and inserting in lieu thereof "medicare 
qualified government employment by virtue of service 
described in section 210(a)(5)". 
42 use 410. 
(c) OPTIONAL MEDICARE COVERAGE OF CURRENT EMPLOYEES.—Sec-
tion 218 of the Social Security Act (42 U.S.C. 418) is amended by 
adding at the end the following new subsection: 
"(v)(l) The Secretary shall, at the request of any State, enter into State and local 
or modify an agreement with such State under this section for the governments. 
purpose of extending the provisions of title XVIII, and sections 226 425^ 
^^^^' 
and 226A, to services performed by employees of such State or any 42 use 426-1. 
political subdivision thereof who are described in paragraph (2). 
"(2) This subsection shall apply only with respect to employees— 
"(A) whose services are not treated as employment as that 
term applies under section 210(p) by reason of paragraph (3) of 
Ante, p. 316. 
such section; and 
"(B) who are not otherwise covered under the State's agree-
ment under this section. 
"(3) Payments by the State required under subsection (e) with 
respect to employees covered under this subsection shall be limited 
100 STAT. 318 
PUBLIC LAW 99-272—APR. 7, 1986 
to amounts equivalent to the sum of the taxes which would be 
imposed by sections 3101(b) and 3111(b) of the Internal Revenue 
26 use 3101, 
Code of 1954 if such services for which wages were paid to such 
3111- 
employees constituted 'employment' as defined in section 3121 of 
26 use 3121. 
such Code. 
42 use 426, 
"(4) For purposes of sections 226 and 226A of this Act, services 
426-1. 
covered under an agreement pursuant to this subsection shall be 
treated as 'medicare qualified government employment'. 
"(5) Except as otherwise provided in this subsection, the provisions 
of this section shall apply with respect to services covered under the 
agreement pursuant to this subsection. 
"(w) Notwithstanding sections 3125(a), 6205(a)(5), 6413(a)(5), and 
26 use 3125, 
6413(c)(2)(G) of the Internal Revenue Code of 1954, any State shall 
6205,6413. 
make payments of the taxes imposed with respect to services of 
employees of such State and of a political subdivision thereof under 
sections 3101(b) and 3111(b) of such Code, and reports of such 
services, under the same procedures as apply to payments and 
reports under subsection (e) of this section, but only if any employ-
ees of such State or of such political subdivision thereof respectively 
are covered under an agreement pursuant to this section.". 
26 use 3121 
(d) EFFECTIVE DATES.— 
note. 
(1) HOSPITAL INSURANCE TAXES.—The amendments made by 
sulDsection (a) shall apply to services performed after March 31, 
1986. 
42 u s e 410 n^te. 
(2) MEDICARE COVERAGE.— 
(A) IN GENERAL.—The amendments made by subsection 
Ot)) shall be effective after March 31, 1986, and the amend-
ments made by paragraph (3) of that subsection shall apply 
to services performed (for medicare qualified government 
employment) after that date. 
(B) 'TREATMENT OF CERTAIN DISABILITIES.—For purposes of 
establishing entitlement to hospital insurance benefits 
42 use 1395c. 
under part A of title XVIII of the Social Security Act 
pursuant to the amendments made by subsection (b), no 
individual may be considered to be under a disability for 
any period beginning before April 1,1986. 
42 use 418 note. 
(3) OPTIONAL COVERAGE OF CURRENT EMPLOYEES.—The amend-
ment made by subsection (c) shall apply to services performed 
after March 31,1986. 
SEC. 13206. FULL-TIME STUDENTS NOT ELIGIBLE FOR INCOME AVER-
AGING. 
26 use 1303. 
(a) IN GENERAL.—Subsection (d) of section 1303 (defining eligible 
individuals for income averaging) is amended to read as follows: 
"(d) 
ELIGIBLE INDIVIDUALS NOT TO INCLUDE FULL-TIME 
STU-
DENTS.— 
"(1) IN GENERAL.—For purposes of this part, an individual 
shall not be an eligible individual for the computation year if, at 
any time during any base period year, such individual was a 
student. 
"(2) EXCEPTION FOR MARRIED STUDENTS PROVIDING 25 PERCENT 
O
R LESS OF JOINT INCOME.—Paragraph (1) shall not apply to any 
individual for any computation year i
f
— 
"(A) the individual makes a joint return for the computa-
tion year, and 
"(B) not more than 25 percent of the aggregate adjusted 
gross income of such individual and the spouse of such 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 319 
individual for such computation year is attributable to such 
individual. In applying subparagraph (B), amounts which 
constitute earned income (within the meaning of section 
911(d)(2)) and are community income under commuity prop- 26 USC 911. 
erty laws applicable to such income shall be taken into 
account as if such amounts did not constitute community 
income. 
"(3) STUDENT DEFINED.—For purposes of this subsection, the 
term 'student' means, with respect to a taxable year, an individ-
ual who during each of 5 calendar months during such taxable 
year— 
"(A) was a full-time student at an educational organiza-
tion described in section 170(b)(l)(A)(ii); or 
26 USC 170. 
"(B) was pursuing a full-time course of institutional on-
farm training under the supervision of an accredited agent 
of an 
educational 
organization 
described 
in 
section 
170(b)(l)(A)(ii) or of a State or political subdivision of a 
State.". 
(b) REPEAL OF NON-FULL-TIME STUDENT SUPPORT EXCEPTION.— 
Paragraph (2) of section 1303(c) (relating to individuals receiving 26 USC 1303. 
support from others) is amended— 
(1) by striking out subparagraph (A), 
(2) by redesignating subparagraphs (B) and (C) as subpara-
graphs (A) and (B), and 
(3) by striking out "subparagraph (C)" in the second sentence 
and inserting in lieu thereof "subparagraph (B)". 
(c) EFFECTIVE DATE.—The amendments made by this section shall 26 use 1303 
apply with respect to taxable years beginning after December 31, ^°^-
1985. 
SEC. 13207. APPLICATION OF FRINGE BENEFIT RULES TO AIRLINES AND 
THEIR AFFILIATES. 
(a) PARENTS OF AIRUNE EMPLOYEES TREATED AS EMPLOYEES IN 
APPLYING FRINGE BENEFIT RULES.— 
(1) IN GENERAL.—Section 132(f) (relating to certain individuals 
26 USC 132. 
treated as employees with respect to certain fringe benefits) 
is amended by adding at the end thereof the following new 
paragraph: 
"(3) SPECIAL RULE FOR PARENTS IN THE CASE OF AIR TRANSPOR-
TATION.—Any use of air transportation by a parent of an em-
ployee (determined without regard to paragraph (1)(B)) shall be 
treated as use by the employee.". 
(2) EFFECTIVE DATE.—The amendment made by this subsection 
26 USC 132 note, 
shall take effect on January 1,1985. 
(b) LINE OF BUSINESS TEST FOR AFFIUATES PROVIDING AIRLINE-
RELATED SERVICES.— 
(1) IN GENERAL.—Section 132(h) (relating to special rules) 
is amended by adding at the end thereof the following new 
paragraph: 
"(6) SPECIAL RULE FOR AFFIUATES OF AIRLINES.— 
"(A) IN GENERAL.—If— 
"(i) a qualified affiliate is a member of an affiliated 
group another member of which operates an airline, 
and 
"(ii) employees of the qualified affiliate who are di-
rectly engaged in providing airline-related services are 
100 STAT. 320 
PUBLIC LAW 99-272—APR. 7, 1986 
entitled to no-additional-cost service with respect to air 
transportation provided by such other member, 
then, for purposes of applying paragraph (1) of subsection 
(a) to such no-additional-cost service provided to such 
employees, such qualified affiliate shall be treated as en-
gaged in the same line of business as such other member. 
"(B) QUALIFIED AFFILIATE.—For purposes of this para-
graph, the term 'qualified affiliate' means any corporation 
which is predominantly engaged in airline-related services. 
"(C) AIRLINE-RELATED SERVICES.—For purposes of this 
paragraph, the term 'airline-related services' means any of 
the following services provided in connection with air 
transportation: 
"(i) Catering. 
"(ii) Baggage handling, 
"(iii) Ticketing and reservations. 
"(iv) Flight planning and weather analysis. 
"(v) Restaurants and gift shops located at an airport. 
"(vi) Such other similar services provided to the air-
line as the Secretary may prescribe. 
"(D) AFFILIATED GROUP.—For purposes of this paragraph, 
the term 'affiliated group' has the meaning given such term 
26 use 1504. 
by section 1504(a).". 
26 use 132 note. 
(2) EFFECTIVE DATE.—The amendment made by this subsection 
shall take effect on January 1, 1985. 
26 u s e 132 note. 
(c) TRANSITIONAL RuLE FOR DETERMINATION OF LiNE OF BUSINESS 
IN CASE OF AFFILIATED GROUP OPERATING AIRUNE.—If, as of Septem-
ber 12, 1984— 
(1) an individual— 
(A) was an employee (within the meaning of section 132 of 
26 use 132. 
the Internal Revenue Code of 1954, including subsection (f) 
thereof) of one member of an affiliated group (as defined in 
26 use 1504. 
section 1504 of such Code), hereinafter referred to as the 
"first corporation", and 
(B) was eligible for no-additional-cost service in the form 
of air transportation provided by another member of such 
affiliated group, hereinafter referred to as the "second 
corporation", 
(2) at least 50 percent of the individuals performing service for 
the first corporation were or had been employees of, or had 
previously performed services for, the second corporation, and 
(3) the primary business of the affiliated group was air 
transportation of passengers, 
then, for purposes of applying paragraphs (1) and (2) of section 132(a) 
26 use 132. 
of the Internal Revenue Code of 1954, with respect to no-additional-
cost services and qualified employee discounts provided after Decem-
ber 31, 1984, for such individual by the second corporation, the first 
corporation shall be treated as engaged in the same air transpor-
tation line of business as the second corporation. For purposes of the 
preceding sentence, an employee of the second corporation who is 
performing services for the first corporation shall also be treated as 
an employee of the first corporation. 
26 u s e 132 note. 
(d) SPECIAL RULE FOR SERVICES RELATED TO PROVIDING AlR 
TRANSPORTATION.—Section 531 of the Tax Reform Act 
of 1984 
is 
amended by redesignating subsections (g) and (h) as subsections (h) 
and (i), respectively, and by inserting after subsection (f) the follow-
ing new subsection: 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 321 
"(g) SPECIAL RULE FOR CERTAIN SERVICES RELATED TO AIR 26 use 132 note. 
TRANSPORTATION.— 
"(1) IN GENERAL.—If^ 
"(A) an individual performs services for a qualified air 
transportation organization, and 
"(B) such services are performed primarily for persons 
engaged in providing air transportation and are of the kind 
which (if performed on September 12, 1984) would qualify 
such individual for no-additional-cost services in the form of 
air transportation, 
then, with respect to such individual, such qualified air 
transportation organization shall be treated as engaged in the 
line of business of providing air transportation. 
"(2) QUALIFIED AIR TRANSPORTATION ORGANIZATION.—For pur-
poses of paragraph (1), the term 'qualified air transportation 
organization' means any organization— 
"(A) if such organization (or a predecessor) was in exist-
ence on September 12, 1984, 
"(B) i
f
— 
"(i) such organization is described in section 501(c)(6) 
of the Internal Revenue Code of 1954 and the member- 
26 USC 501. 
ship of such organization is limited to entities engaged 
in the transportation by air of individuals or property 
for compensation or hire, or 
"(ii) such organization is a corporation all the stock of 
which is owned entirely by entities referred to in clause 
(i), and 
"(C) if such organization is operated in furtherance of the 
activities of its members or owners.". 
SEC. 13208. CERTAIN INSOLVENT TAXPAYERS ALLOWED TO REDUCE CAP-
ITAL GAINS PREFERENCE ITEM FOR PURPOSES OF THE 
INDIVIDUAL MINIMUM TAX. 
(a) IN GENERAL.—Paragraph (9) of section 57(a) (relating to capital 
26 USC 57. 
gains as items of tax preference) is amended by adding at the end 
thereof the following new subparagraph: 
"(E) SPECIAL RULE FOR CERTAIN INSOLVENT TAXPAYERS.— 
"(i) IN GENERAL.—The amount of the tax preference 
under subparagraph (A) shall be reduced (but not below 
zero) by the excess (if any) of— 
"(I) the applicable percentage of gain from any 
farm insolvency transaction, over 
"(II) the applicable percentage of any loss from 
any farm insolvency transaction which offsets such 
gain. 
"(ii) REDUCTION LIMITED TO AMOUNT OF INSOLVENCY.— 
The amount of the reduction determined under clause 
(i) shall not exceed the amount by which the taxpayer 
is insolvent immediately before the transaction (re-
duced by any portion of such amount previously taken 
into account under this clause). 
"(iii) FARM INSOLVENCY TRANSACTION.—For purposes 
of this subparagraph, the term 'farm insolvency trans-
action' means— 
"(I) the transfer by a farmer of farmland to a 
creditor in cancellation of indebtedness or 
71-194 0 - 89 - 13 : Q
L 3 Parti 
100 STAT. 322 
PUBLIC LAW 99-272—APR. 7, 1986 
"(ID the sale or exchange by the farmer of prop-
erty described in subclause (I) under the threat of 
foreclosure, 
but only if the farmer is insolvent immediately before 
such transaction. 
"(iv) INSOLVENT.—For purposes of this subparagraph, 
the term 'insolvent' means the excess of liabilities over 
the fair market value of assets. 
"(v) APPLICABLE PERCENTAGE.—For purposes of this 
subparagraph, the term 'applicable percentage' means 
that percentage of net capital gain with respect to 
26 use 1202. 
which a deduction is allowed under section 1202(a). 
"(vi) FARMLAND.—For purposes of this subparagraph, 
the term 'farmland' means any land used or held for 
use in the trade or business of farming (within the 
26 use 2032A. 
meaning of section 2032A(e)(5)). 
"(vii) FARMER.—For purposes of this subparagraph, 
the term 'farmer' means any taxpayer if 50 percent or 
more of the average annual gross income of the tax-
payer for the 3 preceding taxable years is attributable 
to the trade or business of farming (within the meaning 
of section 2032A(e)(5))." 
26 use 57 note. 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply to transfers or sales or exchanges made after December 31, 
1981, in taxable years ending after such date. 
SEC. 13209. TREATMENT OF CERTAIN POLLUTION CONTROL BONDS. 
(a) GENERAL RULE.—For purposes of subparagraph (F) of section 
26 use 103. 
103(b)(4) of the Internal Revenue Code of 1954 (relating to pollution 
control facilities), any obligation issued after December 31, 1985, 
shall be treated as described in such subparagraph if it is part of an 
issue substantially all of the proceeds of which are used by a 
qualified regional pollution control authority to acquire existing air 
or water pollution control facilities which the authority itself will 
operate in order to maintain or improve control of pollutants. The 
provisions of section 103(b)(17) of such Code (relating to prohibition 
on acquisition of existing property not permitted) shall not apply to 
any obligation described in the preceding sentence. 
(b) $200,000,000 LIMITATION.—The aggregate amount of obliga-
tions to which subsection (a) applies shall not exceed $200,000,000, 
except that the amount of such obligations issued during calendar 
year 1986 to which subsection (a) applies shall not exceed 
$100,000,000. 
(c) RESTRICTIONS.—Subsection (a) shall apply only if— 
(1) the amount paid (directly or indirectly) for the facilities 
does not exceed their fair market value, 
(2) the fees or charges imposed (directly or indirectly) on any 
seller for the use of any facilities after the sale are not less than 
the amounts charged for the use of such facilities to persons 
other than the seller, 
(3) the original use of the facilities acquired with the proceeds 
of such obligations commenced before September 3, 1982, and 
(4) no person other than the qualified regional pollution 
control authority is considered after the sale as the owner of the 
facilities for purposes of Federal income taxes. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 323 
(d) 
QUALIFIED REGIONAL POLLUTION CONTROL AUTHORITY DE-
FINED.—For purposes of this section, the term "qualified regional 
pollution control authority" means an authority which— 
(1) is a political subdivision created by State law to control air 
or water pollution, 
(2) has within its jurisdictional boundaries all or part of at 
least 2 counties (or equivalent political subdivision), 
(3) operates air or water pollution control facilities, and 
(4) was created on September 1,1969. 
(e) REPEAL OF SECTION 103(b)(ll).—Paragraph (11) of section 103(b) 26 use 103. 
is hereby repealed. 
SEC. 13210. TREATMENT OF THE NETTING OF GAINS AND LOSSES BY 
COOPERATIVES. 
(a) IN GENERAL.—Section 1388 (relating to definitions and special 26 USC 1388. 
rules applicable to cooperatives) is amended by redesignating 
subsection (j) as subsection (k) and by inserting after subsection (i) 
the following new subsection: 
"(j) SPECIAL RULES FOR THE NETTING OF GAINS AND LOSSES BY 
COOPERATIVES.—For purposes of this subchapter, in the case of any 
organization to which part I of this subchapter applies— 
26 USC 1381. 
"(1) OPTIONAL NETTING OF PATRONAGE GAINS AND LOSSES PER-
MITTED.—The net earnings of such organization may, at its 
option, be determined by offsetting patronage losses (including 
any patronage loss carried to such year) which are attributable 
to 1 or more allocation units (whether such units are functional, 
divisional, departmental, geographic, or otherwise) against 
patronage earnings of 1 or more other such allocation units. 
"(2) CERTAIN NETTING PERMITTED AFTER SECTION 381 TRANS-
ACTIONS.—If such an organization acquires the assets of another 
such organization in a transaction described in section 381(a), 26 USC 381. 
the acquiring organization may, in computing its net earnings 
for taxable years ending after the date of acquisition, offset 
losses of 1 or more allocation units of the acquiring or acquired 
organization against earnings of the acquired or acquiring 
organization, respectively, but only to the extent— 
"(A) such earnings are properly allocable to periods after 
the date of acquisition, and 
"(B) such earnings could have been offset by such losses if 
such earnings and losses had been derived from allocation 
units of the same organization. 
"(3) NOTICE REQUIREMENTS.— 
"(A) IN GENERAL.—In the case of any organization which 
exercises its option under paragraph (1) for any taxable 
year, such organization shall, on or before the 15th day of 
the 9th month following the close of such taxable year, 
provide to its patrons a written notice which— 
"(i) states that the organization has offset earnings 
and losses from 1 or more of its allocation units and 
that such offset may have affected the amount which is 
being distributed to its patrons, 
"(ii) states generally the identity of the offsetting 
allocation units, and 
"(iii) states briefly what rights, if any, its patrons 
may have to additional financial information of such 
organization under terms of its charter, articles of 
incorporation, or bylaws, or under any provision of law. 
100 STAT. 324 
PUBLIC LAW 99-272—APR. 7, 1986 
"(B) CERTAIN INFORMATION NEED NOT BE PROVIDED.—An 
organization may exclude from the information required to 
be provided under clause (ii) of subparagraph (A) any de-
tailed or specific data regarding earnings or losses of such 
units which such organization determines would disclose 
commercially sensitive information which— 
"(i) could result in di.~competitive disadvantage to 
such organization, or 
"(ii) could create a competitive advantage to the 
benefit of a competitor of such organization. 
"(C) FAILURE TO PROVIDE SUFFICIENT NOTICE.—If the Sec-
retary determines that an organization failed to provide 
sufficient notice under this paragraph— 
"(i) the Secretary shall notify such organization, and 
"(ii) such organization shall, upon receipt of such 
notification, provide to its patrons a revised notice 
meeting the requirements of this paragraph. 
Any such failure shall not affect the treatment of the 
organization under any provision of this subchapter or 
26 use 521. 
section 521. 
"(4) PATRONAGE EARNINGS OR LOSSES DEFINED.—For purposes 
of this subsection, the terms 'patronage earnings' and 'patron-
age losses' means earnings and losses, respectively, which are 
derived from business done with or for patrons of the organiza-
tion." 
26 use 521. 
(b) TAX-EXEMPT STATUS NOT AFFECTED BY NETTING.—Section 
521(b) (relating to applicable rules) is amended by adding at the end 
thereof the following new paragraph: 
"(6) NETTING OF LOSSES.—Exemption shall not be denied any 
such association because such association computes its net earn-
ings for purposes of determining any amount available for 
distribution to patrons in the manner described in paragraph (1) 
Ante, p. 323. 
of section 1388(j)." 
26 use 1388 
(c) EFFECTIVE DATE.— 
^°^' 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to taxable years 
beginning after December 31, 1962. 
(2) NOTIFICATION REQUIREMENT.—The provisions of section 
1388(j)(3) of the Internal Revenue Code of 1954 (as added by 
subsection (a)) shall apply to taxable years beginning on or after 
the date of the enactment of this Act. 
(3) No INFERENCE.—Nothing in the amendments made by this 
section shall be construed to infer that a change in law is 
intended as to whether any patronage earnings may or not be 
offset by nonpatronage losses, and any determination of such 
issue shall be made as if such amendments had not been 
enacted. 
SEC. 13211. ALLOCATION UNDER SECTION 861 OF RESEARCH AND EXPERI-
MENTAL EXPENDITURES. 
26 use 861 note. 
Subsection (c) of section 126 of the Deficit Reduction Act of 1984 is 
amended— 
(1) by striking out "1985" and inserting in lieu thereof "1986"; 
and 
(2) by striking out "3rd" each place it appears and inserting in 
lieu thereof "4th". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 325 
SEC. 13212. LIMITATION ON ISSUANCE OF UNITED STATES BONDS. 
Subsection (a) of section 3102 of title 31, United States Code, is 
amended by striking out "$200,000,000,000" and inserting in lieu 
thereof "$250,000,000,000". 
SEC. 13213. AUTHORIZATION OF ADDITIONAL FUNDS TO INTERNAL REVE-
NUE SERVICE FOR REVENUE ENFORCEMENT AND RELATED 
PURPOSES, ETC. 
(a) AUTHORIZATION.—There is authorized to be 
appropriated 
$46,500,000 for each of the fiscal years 1986, 1987, and 1988 for the 
use of the Internal Revenue Service to employ 1,550 additional 
agents and examination employees. 
Ot)) RESTORATION OF PROPOSED CUTS.—It is the sense of the Con-
gress that— 
(1) the restoration of the cuts in the budget for the Internal 
Revenue Service for fiscal year 1986, and 
(2) the further increase in such budget total, 
recommended by the Committee on Appropriations of the House of 
Representatives are necessary for the efficient operation of the 
Government and to carry out the purposes of this Act. 
Subtitle C—Provisions Relating to 
Unemployment Taxes 
SEC. 13301. RAILROAD UNEMPLOYMENT REPAYMENT TAX. 
(a) RATE OF TAX.—Subsection (c) of section 3321 of the Internal 
Revenue Code of 1954 (relating to rate of railroad unemployment 
26 USC 3321. 
repayment tax) is amended to read as follows: 
"(c) RATE OF TAX.—For purposes of this section— 
"(1) I N GENERAL.—The applicable percentage for any taxable 
period shall be the sum of— 
"(A) the basic rate for such period, and 
"(B) the surtax rate (if any) for such period. 
"(2) BASIC RATE.—For purposes of paragraph (1)— 
"(A) FOR PERIODS BEFORE 1989.—The basic rate shall be— 
"(i) 4.3 percent for the taxable period beginning on 
July 1,1986, and ending on December 31, 1986, 
"(ii) 4.7 percent for the 1987 taxable period, and 
"(iii) 6 percent for the 1988 taxable period. 
"(B) FOR PERIODS AFTER 1988.—For any taxable period 
beginning after December 31, 1988, the basic rate shall be 
the sum of— 
"(i) 2.9 percent, plus 
"(ii) 0.3 percent for each preceding taxable period 
after 1988. 
In no event shall the basic rate under this subparagraph 
exceed 5 percent. 
"(3) SURTAX RATE.—For purposes of paragraph (1), the surtax 
rate shall be— 
"(A) 3.5 percent for any taxable period if, as of September 
30 of the preceding calendar year, there was a balance of 
transfers (or unpaid interest thereon) made after Septem-
ber 30, 1985, to the railroad unemployment insurance ac-
count under section 10(d) of the Railroad Unemployment 
Insurance Act, and 
45 USC 360. 
100 STAT. 326 
PUBLIC LAW 99-272—APR. 7, 1986 
"(B) zero for any other taxable period. 
"(4) BASIC RATE NOT TO APPLY TO RAIL WAGES PAID AFTER 
SEPTEMBER 30, 1990.—The basic rate under paragraph (1>(A, 
shall not apply to rail wages paid after September 30, 1990 " 
OJ) BASE OF TAX TO BE COMPENSATION USED FOR RAILROAD RETIRE-
26 use 3323. 
MENT TAX PURPOSES.—Subsection (b) of section 3323 of such Code 
(defining rail wages) is amended to read as follows: 
"(b) RAIL WAGES.— 
"(1) IN GENERAL.—For purposes of this chapter, the term 'rail 
26 use 3231. 
wages' means compensation (as defined in section 3231(e) for 
26 use 3201. 
purposes of the tax imposed by section 3201(a)) with the modi-
fications specified in paragraph (2). 
"(2) MODIFICATIONS.—In applying subsection (e) of section 
3231 for purposes of paragraph (1)— 
"(A) ONLY EMPLOYMENT COVERED BY RAILROAD UNEMPLOY-
MENT INSURANCE ACT TAKEN INTO ACCOUNT.—Such subsec-
tion (e) shall be applied— 
"(i) by substituting 'rail employment' for 'services' 
each place it appears, 
"(ii) by substituting 'rail employer' for 'employer' 
each place it appears, and 
"(iii) by substituting 'rail employee' for 'employee' 
each place it appears. 
"(B) $7,000 WAGE BASE.—Such subsection (e) shall be ap-
plied by substituting for 'the applicable base' in paragraph 
(2)(A)(i) thereof— 
"(i) except as provided in clauses (ii) and (iii),'$7,000', 
"(ii) '$3,500' for the taxable period beginning on July 
1,1986, and ending on December 31, 1986, and 
"(iii) for purposes of applying the basic rate under 
26 use 3321. 
section 3321(c)(1)(A), '$5,250' for the taxable period 
beginning on January 1,1990. 
"(C) SUCCESSOR EMPLOYERS.—For purposes of this subsec-
tion, rules similar to the rules applicable under section 
3231(e)(2)(C) shall apply." 
(c) USE OF TAXES.— 
(1) IN GENERAL.—Paragraph (2) of section 232(a) of the Rail-
45 use 231n 
road Retirement Revenue Act of 1983 (relating to tax used to 
^°^- 
repay loans made to railroad unemployment insurance account) 
is amended to read as follows: 
"(2) TAXES CREDITED AGAINST LOANS TO RAILROAD UNEMPLOY-
MENT INSURANCE ACCOUNT.— 
"(A) TAXES ATTRIBUTABLE TO BASIC RATE TO REDUCE RAIL-
ROAD UNEMPLOYMENT LOANS MADE BEFORE O
C
T
O
B
E
R 1, 
1985.—So much of the amount transferred under paragraph 
(1) as is attributable to the basic rate under section 
3321(c)(1)(A) of the Internal Revenue Code of 1954 shall be 
credited against, and operate to reduce, the outstanding 
balance of railroad unemployment loans made before Octo-
ber 1, 1985. 
"(B) TAXES ATTRIBUTABLE TO SURTAX RATE TO REDUCE RAIL-
ROAD UNEMPLOYMENT LOANS MADE AFTER SEPTEMBER 30, 
1985.—So much of the amount transferred under paragraph 
(1) as is attributable to the surtax rate under section 
3321(c)(lXB) of such Code shall be credited against, and 
operate to reduce, the outstanding balance of railroad un-
employment loans made after September 30,1985." 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 327 
(2) TRANSFERS TO RAILROAD UNEMPLOYMENT FUND AFTER LOAN 
REPAID.—Subsection (c) of section 232 of such Act is amended— 
45 USC 23ln 
(A) by striking out "the amount" in paragraph (1) and 
note, 
inserting in lieu thereof "the amount described in subpara-
graph (A) or (B) of subsection (a)(2)", and 
(B) by inserting before the comma at the end of para-
graph (2) "against which the amount described in such 
subparagraph may be credited under such subparagraph". 
(d) TECHNICAL AMENDMENTS.— 
(1) Subsection (a) of section 3322 of such Code (relating to 
26 USC 3322. 
taxable period) is amended— 
(A) by adding "and" at the end of paragraph (1), and 
(B) by striking out paragraphs (2) and (3) and inserting in 
lieu thereof the following: 
"(2) each calendar year after 1986." 
(2) Subsection (b) of section 3322 of such Code (relating to 
earlier termination if loans to rail unemployment fund repaid) 
is amended— 
(A) by striking out "The tax imposed by this chapter shall 
not apply" and inserting in lieu thereof "The basic rate 
under section 3321(c)(1)(A) of the tax imposed by section 
3321 shall not apply", and 
(B) by inserting 'made before October 1, 1985," after "no 
balance of transfers" in paragraph (1) thereof 
SEC. 13302. EXTENSION OF BORROWING AUTHORITY UNDER THE RAIL-
ROAD UNEMPLOYMENT INSURANCE ACT. 
Section 10(d) of the Railroad Unemployment Insurance Act is 45 USC 360. 
amended by striking out the last sentence thereof 
SEC. 13303. CERTAIN EXEMPTIONS FROM THE FEDERAL UNEMPLOYMENT 
TAX ACT. 
(a) CERTAIN AGRICULTURAL LABOR.—Paragraph (1)(B) of section 
26 USC 3306. 
3306(c) of the Internal Revenue Code of 1954 (defining employment) 
is amended by striking out "January 1, 1986," and inserting in lieu 
thereof "January 1, 1988". 
(b) FULL-TIME STUDENTS EMPLOYED BY SUMMER CAMPS.—Notwith-
standing paragraph (3) of section 276(b) of the Tax Equity and Fiscal 
Responsibility Act of 1982, the amendments made by paragraphs (1) 26 USC 3306 
and (2) of such section 276(b) shall also apply to remuneration paid 
note. 
after September 19, 1985. 
(c) SERVICES PERFORMED ON CERTAIN FISHING BOATS.— 
26 use 3306 
(1) IN GENERAL.—Section 822(b) of the Economic Recovery Tax note. 
Act of 1981 is amended to read as follows: 
"(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply to remuneration paid after December 31, 1980.". 
(2) TECHNICAL AMENDMENT.—Paragraph (20) of section 312(b) 
of such Code (defining employment for purposes of Federal 
26 USC 3121. 
Insurance Contributions Act) is amended by inserting "(other 26 USC 3101. 
than service described in paragraph (3)(A))" after "service". 
TITLE XIV—REVENUE SHARING 
SEC. 14001. TERMINATION OF GENERAL REVENUE SHARING. 
(a) IN GENERAL.—(1) Except as otherwise provided in this section, 
chapter 67 of title 31, United States Code, is hereby repealed. 
3i USC 6701 e
^ 
seq. 
100 STAT. 328 
PUBLIC LAW 99-272—APR. 7, 1986 
31 u s e 6701 
note. 
Post, p. 329. 
Ante, p. 327. 
31 u s e 6701 
note. 
State and local 
governments. 
31 u s e 6701 
note. 
State and local 
governments. 
31 u s e 6701 
note. 
31 u s e 6701 
note. 
state and local 
governments, 
eourts, U.S. 
31 u s e 6701 
note. 
31 u s e 6701 
note. 
Reports. 
31 u s e 6701 
et seq. 
(2) The Secretary of the Treasury shall continue to be the trustee 
of the Trust Fund, which shall remain in existence until all entitle-
ment payments which are required to be made under the Revenue 
Sharing Act are made in accordance with the terms of such Act. 
Any funds remaining in the Trust Fund after all of such entitlement 
payments are completely made shall revert to the General Fund of 
the Treasury of the United States. 
(3) The Secretary is authorized to take such necessary or appro-
priate actions, to carry out the requirements of this Act with respect 
to funds appropriated to the Trust Fund, as were authorized under 
the terms of the Revenue Sharing Act, including but not limited to 
enforcement of the regulatory provisions concerning nondiscrimina-
tion, audits, accounting procedures, public hearings, expenditures in 
accordance with State and local law, and cooperation with reason-
able requests for information. 
(4) The Secretary may increase or decrease a payment to a unit of 
general local government under the Revenue Sharing Act for the 
entitlement period ending September 30, 1986, to account for a prior 
underpayment or overpayment only if the increase or decrease is 
demanded by the Secretary or such unit of general local government 
before June 2, 1986. 
(5) Amounts paid to units of general local government from the 
Trust Fund shall be used, obligated, or appropriated by the units of 
general local government before October 1, 1987, and shall continue 
to be subject to the terms of the Revenue Sharing Act. 
(6) Subsection (a)(1) of this section shall not have the effect of 
releasing or extinguishing any fiscal sanction, finding, determina-
tion, compliance agreement, or other duly authorized action for the 
purpose of sustaining any proper action or prosecution for enforce-
ment authorized under the terms of the Revenue Sharing Act. 
(7) The Attorney General, and persons adversely affected by a 
practice of a local government, may bring a civil action in an 
appropriate district court of the United States against the applicable 
unit of general local government as authorized under the Revenue 
Sharing Act. The court is authorized to grant such relief as was 
authorized under the terms of the Revenue Sharing Act. 
(8) The Secretary shall report to Congress on the operation and 
status of the Trust Fund and the implementation of this section not 
later than December 1 of each year the Trust Fund remains on the 
books of the Department of the Treasury. 
(b) CONFORMING AMENDMENTS.—(1) The table of chapters for sub-
title V of title 31, United States Code, is amended by striking out the 
item relating to chapter 67. 
(2) Paragraph (2) of section 1115(b) of the Social Security Act (42 
U.S.C. 1315(b)(2)) is amended— 
(A) by adding "and" at the end of subparagraph (A), 
(B) by striking out "; and" at the end of subparagraph (B) and 
inserting in lieu thereof a period, and 
(C) by striking out subparagraph (C). 
(3) Section 501(b)(6) of the Housing Act of 1949 (42 U.S.C. 
1471(b)(6)) and section 102(a)(17) of the Housing and Community 
Development Act of 1974 (42 U.S.C. 5302(a)(17)) are each amended by 
striking out "or under chapter 67 of title 31, United States Code" 
and inserting in lieu thereof "or was considered an eligible recipient 
under chapter 67 of title 31, United States Code, prior to the repeal 
of such chapter". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 329 
(4) Section 302 of the Age Discrimination Act of 1975 (42 U.S.C. 
6101) is amended by striking out ", including programs or activities 
receiving funds under the State and Local Fiscal Assistance Act of 
1972 (31 U.S.C. 1221 et seq.)". 
(5) Paragraph (3) of section 3 of the Coastal Barrier Resources Act 
(16 U.S.C. 3502(3)) is amended by striking out subparagraph (A) and 
redesignating subparagraphs (B), (C), (D), and (E) as subparagraphs 
(A), (B), (C), and (D), respectively. 
(6) Subparagraph (B) of section 119(n)(2) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5318(n)(2)(B)) is 
amended by striking out "is an eligible recipient under chapter 67 of 
title 31, United States Code" and inserting in lieu thereof "was an 
eligible recipient under chapter 67 of title 31, United States Code, 31 USC 6701 
prior to the repeal of such chapter". 
^
^ «^9-
(7) Paragraph (1) of section 248(h) of the National Housing Act (12 
U.S.C. 1715z-13(h)(l)) is amended by striking out "is an eligible 
recipient under chapter 67 of title 31, United States Code" and 
inserting in lieu thereof "was an eligible recipient under chapter 67 
of title 31, United States Code, prior to the repeal of such chapter". 
(c) DEFINITIONS.—For purposes of this section— 
3i USC 6701 
(1) The term "Trust Fund" means the State and Local note. 
Government Fiscal Assistance Trust Fund established under 
the Revenue Sharing Act. 
Infra. 
(2) The term "Revenue Sharing Act" means the provisions of ^"^e, p. 327. 
chapter 67 of title 31, United States Code, as in effect on the day 
before the date of enactment of this Act and subject to the terms 
of any appropriation Act of fiscal year 1986. 
(3) The term "Secretary" means the Secretary of the 
Treasury. 
(d) AUTHORIZATION OF APPROPRIATIONS.—There are hereby au- 
31 use 6701 
thorized to be appropriated for fiscal year 1987 such sums as may be "o*^^ 
necessary to administer the provisions of this section. 
(e) EFFECTIVE DATES.—(1) Except as otherwise provided in this 
31 USC 6701 
subsection, the repeal and amendments made by this section, and note. 
the provisions of this section, shall take effect on the earlier of— 
(A) the date of the adjournment sine die of the 99th Congress, 
or 
(B) December 31,1986, 
unless the provisions of chapter 67 of title 31, United States Code, 
are amended before the earlier of such dates to apply to any 
entitlement period beginning after September 30,1986. 
(2) The provisions of subsections (a)(4), (c), and (d) shall take effect 
on the date of enactment of this Act. 
(3) Nothing in this section shall be construed to prevent the 
payment of any allocation for the entitlement period ending Septem-
ber 30,1986. 
100 STAT. 330 
PUBLIC LAW 99-272—APR. 7, 1986 
TITLE 
XV—CIVIL 
SERVICE, 
POSTAL 
SERVICE, AND GOVERNMENTAL AF-
FAIRS GENERALLY 
Subtitle A—Postal Service Programs 
SEC. 15101. REVENUE FORGONE. 
Notwithstanding subsection (c) of section 2401 of title 39, United 
39 use 2401 
States Code, the amount authorized to be appropriated pursuant to 
note. 
such subsection for fiscal year 1986 shall be $749,000,000. 
SEC. 15102. DELAY OF STEP 16 RATES: ELIMINATION OF PHASING SCHED-
ULE; TERMINATION OF REDUCTION IN RATES OF POSTAGE 
FOR CERTAIN MAILERS. 
(a) DELAY OF STEP 16 RATES.—The increase in rates of postage for 
non-profit and certain other mailers announced by the Board of 
Governors of the United States Postal Service in Resolution No. 85-7 
(adopted September 6, 1985) shall not take effect before January 1, 
1986. 
(b) ELIMINATION OF PHASING SCHEDULE.—(1) Section 3626(a) of title 
39, United States Code, is amended to read as follows: 
"(a)(1) Except as provided in paragraph (2) of this subsection, rates 
of postage for a class of mail or kind of mailer under former section 
39 use 4358, 
4358, 4452(b), 4452(c), 4554(b), or 4554(c) of this title shall be estab-
4452,4554. 
lished in accordance with applicable provisions of this chapter. 
"(2) Rates of postage for a class of mail or kind of mailer referred 
to in paragraph (1) of this subsection shall be established in accord-
ance with the requirement that the direct and indirect postal costs 
attributable to such class of mail or kind of mailer (excluding any 
other costs of the Postal Service) shall be borne by such class of mail 
or kind of mailer, as the case may be.". 
Effective date. 
(2) The amendment made by this subsection shall apply with 
39 use 3626 
respect to rates of postage taking effect after December 31, 1985. 
" 
(c) TERMINATION OF REDUCTION IN RATES OF POSTAGE FOR CERTAIN 
MAILERS.—Section 3626 of title 39, United States Code, is amended 
by adding at the end thereof the following: 
"(f) In the administration of this chapter, the rates for mail under 
former section 4358(g) of this title shall be established without 
regard to either the provisions of such former section 4358(g) or the 
provisions of this section.". 
SEC. 15103. STUDY AND REPORT. 
(a) PERIOD OF STUDY.—The Postal Rate Commission shall study 
and, within 6 months after the date of the enactment of this Act, 
transmit to the Committee on Post Office and Civil Service of the 
House of Representatives and the Committee on Governmental 
Affairs of the Senate a written report on the matters described in 
subsection (b). 
(b) PURPOSE OF STUDY.—The purpose of the study under this 
section is— 
(1) to develop recommendations for legislation which would 
reduce the amount of revenue forgone with respect to former 
sections 4355(a), 4355(b), 4358(d), 44520t)), 4452(c), 4554(b) and 
4554(c) of title 39, United States Code, by changing the eligi-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 331 
bility requirements under which the reduced rates of postage 
under those sections would apply to mail which advertises or 
promotes the sale of, recommends the purchase of, or announces 
the availability of any article, product, service, insurance, or 
travel arrangements; 
(2)(A) to identify the kinds of mailers which are the most 
frequent users of, or which otherwise significantly benefit from, 
rates for mail under subsections (a), (b), and (c) of former section 
4358 of title 39, United States Code; and 
(B) to examine the arguments for and against making the 
eligibility requirements for the rates referred to in subpara-
graph (A) more stringent, taking into consideration— 
(i) the findings under subparagraph (A); 
(ii) costs and benefits to the public; and 
(iii) any other factor which may be appropriate; and 
(3) to develop one or more alternatives for the method cur-
rently used by the United States Postal Service in computing 
revenue forgone (as determined with respect to the provisions of 
law referred to in section 2401(c) of title 39, United States Code) 
and to determine the advantages and disadvantages of each 
such alternative. 
(c) In preparing its report under this section, the Postal Rate 
Commission shall invite and consider the views of interested parties. 
(d) The United States Postal Service shall, upon request of the 
Postal Rate Commission, cooperate in the conduct of the study and 
the preparation of the report under this section. 
SEC. 15104. RESTRICTION RELATING TO ELIGIBILITY FOR IN-COUNTY 
SECOND-CLASS RATES OF POSTAGE. 
Section 3626 of title 39, United States Code, as amended by section 
15102(c) of this Act, is further amended by adding at the end thereof 
the following: 
"(g)(1) In the administration of this section, the rates for mail 
under subsections (a), (b), and (c) of former section 4358 of this title 
39 use 4358. 
shall not apply to an issue of a publication if the number of copies of 
such issue distributed within the county of publication is less than 
the number equal to the sum of 50 percent of the total paid 
circulation of such issue plus one. 
"(2) Paragraph (1) of this subsection shall not apply to an issue of 
a publication if the total paid circulation of such issue is less than 
10,000 copies.". 
SEC. 15105. CURBING OF SUBSIDIES FOR ADVERTISING-ORIENTED "PLUS 
ISSUES" MAILED TO SUBSCRIBERS AT IN-COUNTY RATES. 
Section 3626 of title 39, United States Code, as amended by 
sections 15102(c) and 15104 of this Act, is further amended by adding 
at the end thereof the following: 
"(h) In the administration of this section, the number of copies of 
a subscription publication mailed to nonsubscribers during a cal-
endar year at rates under subsections (a), (b), and (c) of former 
section 4358 of this title may not exceed 10 percent of the number of 
copies of such publication mailed at such rates to subscribers.". 
100 STAT. 332 
PUBLIC LAW 99-272—APR. 7, 1986 
Subtitle B—Civil Service Programs 
5 u s e 5305 note. 
SEC. 15201. PAY ADJUSTMENTS. 
(a) LIMITATION ON PAY ADJUSTMENTS FOR STATUTORY PAY SYS-
TEMS.—(1) The rates of pay under the General Schedule and the 
rates of pay under the other statutory pay systems referred to in 
section 5301(c) of title 5, United States Code, shall not be adjusted 
under section 5305 of such title during fiscal year 1986. 
President of U.S. 
(2)(A)(i) For fiscal years 1987 and 1988, the President shall provide 
for the adjustment of rates of pay under section 5305 of title 5, 
United States Code, as appropriate to reduce outlays, relating to pay 
of officers and employees of the Federal Government, by at least 
$746,000,000 in fiscal year 1987 and $1,264,000,000 in fiscal year 1988 
(without regard to reductions in outlays which result by reason of 
subparagraph (B)(ii) of this paragraph, paragraph (1) of this subsec-
tion, subsection (b) of this section, and the application of section 1009 
of title 37, United States Code), computed using the baseline used for 
the First Concurrent Resolution on the Budget for Fiscal Year 1986 
(S. Con. Res. 32, 99th Congress), agreed to on August 1, 1985. 
(ii) Clause (i) of this subparagraph shall not be construed to 
suspend the requirements of section 5305 of title 5, United States 
Code, with respect to fiscal years 1987 and 1988. 
(B) Each adjustment in a pay rate or schedule which takes effect 
pursuant to subparagraph (A) of this paragraph— 
(i) shall, to the maximum extent practicable, be of the same 
percentage; and 
(ii) shall be effective with respect to pay periods beginning on 
or after January 1 of the fiscal year involved. 
5 u s e 5343 note. 
(b) 
LIMITATION ON P A Y ADJUSTMENTS FOR PREVAILING 
R A T E 
EMPLOYEES.—(1) Notwithstanding any other provision of law, and 
except as otherwise provided in this subsection, in the case of a 
prevailing rate employee described in section 5342(a)(2) of title 5, 
United States Code, or an employee covered by section 5348 of such 
title, the total adjustment to any wage schedule or rate applicable to 
such employee which is to become effective (determined without 
regard to paragraph (2)) during— 
(A) fiscal year 1986, shall (except to the extent permitted by 
section 616(a)(2) of H.R. 5798, incorporated by reference in 
section 101(j) of Public Law 98-473 (98 Stat. 1963)) be equal to 
zero; 
(B) fiscal year 1987, shall not exceed an increase equal to the 
overall percentage of the adjustment (under section 5305 of title 
5, United States Code) in the rates of pay under the General 
5 use 5332. 
Schedule for such fiscal year; and 
(C) fiscal year 1988, shall not exceed an increase equal to the 
overall percentage of the adjustment (under section 5305 of title 
5, United States Code) in the rates of pay under the General 
Schedule for such fiscal year. 
Effective date. 
(2) Notwithstanding any other provision of law, any increase 
permitted by paragraph (1) which is scheduled to take effect during 
fiscal year 1987 or 1988 (determined without regard to this para-
graph) shall take effect as of the beginning of the first applicable 
pay period beginning at least 90 days after the date on which such 
increase is so scheduled to take effect. 
(3) Notwithstanding the provisions of section 9(b) of Public Law 
5 use 5343 note. 92-392 or section 704(b) of Public Law 95-454, the provisions of 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 333 
paragraphs (1) and (2) shall apply (in such manner as the Office of 
Personnel Management shall prescribe) to prevailing rate employ-
ees to whom such section 9(b) applies, except that the provisions of 5 USC 5343 note, 
paragraph (1) shall not apply to any increase in a wage schedule or 
rate which is required by the terms of a contract entered into before 
October 1, 1985. 
(4) Nothing in this subsection or any provision of law governing 
the use of appropriated funds for the payment of employees covered 
by this subsection during the period covered by paragraph (1) (or any 
part of such period) shall be construed to permit or require the 
payment to any such employee at a rate in excess of the rate that 
would be payable were this subsection, or such provision of law 
governing the use of appropriated funds, not in effect. 
(5) The Office may make exceptions from the limitations imposed 
by paragraph (1) if the Office determines that such exceptions are 
necessary to ensure the recruitment or retention of well-qualified 
employees. 
SEC. 15202. PROVISIONS RELATING TO FEDERAL EMPLOYEES HEALTH 
BENEFITS PROGRAM. 
(a) AMOUNTS TO BE REFUNDED FROM CARRIERS' SPECIAL RE- 
5 USC 8909 note. 
SERVES.—(1) The Office of Personnel Management— 
(A) shall determine the minimum level of financial reserves 
necessary to be held by a carrier for each health benefits plan 
under chapter 89 of such title for the purpose of ensuring the 
stable and efficient operation of such plan; and 
(B) shall require the carrier to refund to the Employees 
Health Benefits Fund (described in section 8909(a) of title 5, 
United States Code) any such reserves in excess of such mini-
mum level in such amounts and at such times during fiscal 
years 1986 and 1987 as the Office determines appropriate. 
(2) In carrying out its responsibilities under this subsection, the 
Office shall ensure that the aggregate amount to be refunded to the 
Employees Health Benefits Fund under this subsection— 
(A) during fiscal year 1986 shall be not less than $800,000,000; 
and 
(B) during fiscal year 1987 shall be not less than $300,000,000. 
(3) No amount in the Employees Health Benefits Fund may be 
transferred to the general fund of the Treasury of the United States 
as a result of a refund made under this subsection. 
(4)(A) Subject to subparagraphs (B) and (C), any amounts refunded 
to the Employees Health Benefits Fund under this subsection may 
be used solely for the purpose of paying the Government contribu-
tion under chapter 89 of title 5, United States Code, for health 
5 USC 8901 et 
benefits for annuitants, as defined by section 8901(3) of title 5, seq. 
United States Code, (including the Government contribution for 
former employees of the United States Postal Service) enrolled in 
health benefits plans under such chapter. 
(B) This paragraph applies to a refund to the extent that such 
refund represents amounts attributable to Government contribu-
tions which were made under section 8906(b) of title 5, United States 
Code, (including contributions made by the United States Postal 
Service) as determined under regulations which the Office of 
Personnel Management shall prescribe. 
(C) Any part of the amount in the Employees Health Benefits 
District of 
Fund as a result of a refund made under this subsection may be 
Columbia, 
transferred— 
100 STAT. 334 
PUBLIC LAW 99-272—APR. 7, 1986 
(i) to the government of the District of Columbia, except that 
the amount of any such part so transferred shall not exceed the 
amount attributable to the contributions made by the govern-
ment of the District of Columbia to subscription charges under 
this chapter (as determined by the Office of Personnel Manage-
ment); and 
(ii) to the United States Postal Service, except that the 
amount of any such part so transferred shall not exceed the 
amount attributable to the contributions made by the United 
States Postal Service to subscription charges under this chapter 
(as determined by the Office). 
(5) The provisions of this subsection shall apply notwithstanding 
any provision of the Federal Employees Benefits Improvement Act 
of 1985. 
(b) GOVERNMENT CONTRIBUTIONS FOR RETIRED FORMER EMPLOYEES 
OF THE UNITED STATES POSTAL SERVICE.—Section 8906(g) of title 5, 
United States Code, is amended— 
(1) by striking out "(g) The" and inserting in lieu thereof 
"(g)(1) Except as provided in paragraph (2), the"; and 
(2) isy adding at the end thereof the following: 
"(2) The Government contributions authorized by this section for 
health benefits for an individual who first becomes an annuitant by 
reason of retirement from employment with the United States 
Postal Service on or after October 1, 1986, shall be paid by the 
United States Postal Service.". 
SEC. 15203. COMPUTATION OF HOURLY RATES OF PAY. 
(a) METHOD OF COMPUTATION.—Section 5504(b) of title 5, United 
States Code, is amended— 
(1) by striking out the first sentence; 
(2) in the second sentence, by striking out "When" and insert-
ing in lieu thereof "When, in the case of an employee,"; 
(3) in paragraph (1), by striking out "2,080" and inserting in 
lieu thereof "2,087"; and 
(4) in the last sentence, by striking out "title." and inserting 
in lieu thereof "title other than an employee or individual 
5 use 5541. 
excluded by section 5541(2)(xvi) of this title. . 
5 use 5504 note. 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall be effective with respect to pay periods commencing on or after 
March 1,1986. 
SEC. 15204. COMPUTATION OF RETIREMENT ANNUITY FOR PART-TIME 
EMPLOYMENT. 
(a) IN GENERAL.—(1) Section 8339 of title 5, United States Code, is 
amended by adding at the end thereof the following new subsection: 
"(oXD In computing an annuity under this subchapter for an 
employee whose service includes service that was performed on a 
part-time basis— 
"(A) the average pay of the employee, to the extent that it 
includes pay for service performed in any position on a part-
time basis, shall be determined by using the annual rate of basic 
pay that would be payable for full-time service in the position; 
and 
"(B) the benefit so computed shall then be multiplied by a 
fraction equal to the ratio which the employee's actual service, 
as determined by prorating an employee's total service to reflect 
the service that was performed on a part-time basis, bears to the 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 335 
total service that would be creditable for the employee if all of 
the service had been performed on a full-time basis. 
"(2) For the purpose of this subsection, employment on a part-time 
basis shall not be considered to include employment on a temporary 
or intermittent basis.". 
(2) Section 8341 of such title is amended— 
5 USC 8341. 
(A) by striking out "and (n)" in subsection (b)(1) and 
inserting in lieu thereof ", (n), and (o)"; and 
(B) by striking out "and (n)" in subsection (d) and insert-
ing in lieu thereof "(n), and (o)". 
(b) Section 4109(b) of title 38, United States Code, is repealed. 
(c) The amendments made by this section shall be effective with 
5 USC 8339 note. 
respect to service performed on or after the date of the enactment of 
this Act. 
SEC. 15205. EFFECT OF WAGE AREA SURVEY REGARDING CERTAIN FED-
ERAL EMPLOYEES IN TUCSON, ARIZONA. 
(a) IN GENERAL.—Notwithstanding any other provision of law 
limiting the amounts payable to prevailing wage rate employees 
during the fiscal year 1986, wage schedules or rates applicable to the 
Tucson, Arizona, wage area shall not be reduced as a result of a 
wage survey conducted during fiscal year 1985. 
(b) EFFECTIVE DATE.—This section shall be effective as of October 
1,1985. 
Subtitle C—Federal Motor Vehicle 
Expenditure Control 
SEC. 15301. MONITORING SYSTEM. 
40 USC 901. 
The head of each executive agency, including the Department of 
Defense, shall designate one office, officer, or employee of the 
agency to establish and operate a central monitoring system for, and 
provide oversight of, the motor vehicle operations of the agency, 
related activities, and related reporting requirements. 
SEC. 15302. DATA COLLECTION. 
40 USC 902. 
(a) COST IDENTIFICATION AND ANALYSIS.—The head of each execu-
tive agency, including the Department of Defense, shall develop a 
system to identify, collect, and analyze data with respect to all costs, 
including obligations and outlays, incurred by the agency in the 
operation, maintenance, acquisition, and disposition of motor ve-
hicles, including Government-owned vehicles, leased vehicles, and 
privately owned vehicles used for official purposes. 
(b) REQUIREMENTS FOR DATA SYSTEMS.—The Administrator, in 
cooperation with the Comptroller General and the Director, shall 
promulgate requirements governing the establishment and oper-
ation by executive agencies of the systems required by subsection (a), 
including requirements with respect to data concerning the costs 
and uses of motor vehicles and with respect to the uniform collection 
and submission of such data. Requirements promulgated under this 
section shall be in conformance with accounting principles and 
standards issued by the Comptroller General. Each executive 
agency, including the Department of Defense, shall comply with 
such requirements. 
100 STAT. 336 
PUBLIC LAW 99-272—APR. 7, 1986 
40 u s e 903. 
SEC. 15303. AGENCY STATEMENTS WITH RESPECT TO MOTOR VEHICLE 
USE. 
(a) CONTENTS OF STATEMENT.—The head of each executive agency, 
including the Department of Defense, shall include with the appro-
priation request of such agency submitted under section 1108 of title 
31, United States Code, for fiscal year 1988 and each succeeding 
fiscal year, a statement— 
(1) specifying— 
(A) the total motor vehicle acquisition, maintenance, leas-
ing, operation, and disposal costs, including obligations and 
outlays, incurred by such agency in the most recently 
completed fiscal year; and 
(B) an estimate of such costs for the fiscal year in which 
such request is submitted and for the succeeding fiscal year; 
and 
(2) justifying why the existing and any new motor vehicle 
acquisition, maintenance, leasing, operation, and disposal 
requirements of the agency cannot be met through the Inter-
agency Fleet Management System operated by the Adminis-
trator, a qualified private fleet management firm, or any other 
method which is less costly to the Government. 
(b) COMPLIANCE WITH REQUIREMENTS.—The head of each executive 
agency shall comply with the requirements promulgated under 
section 15302(b) in preparing each statement required under subsec-
tion (a). 
SEC. 15304. PRESIDENTIAL REPORT. 
President of U.S. 
(a) SUMMARY AND ANALYSIS OF A G E N C Y STATEMENTS.—The Presi-
40 use 904. 
dent shall include with the budget transmitted pursuant to section 
1105 of title 31, United States Code, for fiscal year 1988 and each 
succeeding fiscal year, or in a separate written report to the Con-
gress for each such fiscal year, a summary and analysis of the 
statements most recently submitted by the heads of executive agen-
cies pursuant to section 15303(a). Each such summary and analysis 
shall include a review, for the fiscal year preceding the fiscal year in 
which the budget is submitted, the current fiscal year, and the fiscal 
year for which the budget is submitted, of the cost savings that have 
been achieved, that are estimated will be achieved, and that could 
be achieved, in the acquisition, maintenance, leasing, operation, and 
disposal of motor vehicles by executive agencies through— 
(1) the use of a qualified private fleet management firm or 
another private contractor; 
(2) increased reliance by executive agencies on the Inter-
agency Fleet Management System operated by the Adminis-
trator; or 
(3) other existing motor vehicle management systems. 
(b) APPLICABILITY TO FISCAL YEAR 1986.—The summary and analy-
sis submitted under subsection (a) during fiscal year 1987 is not 
required to include a review, under the second sentence of such 
subsection, of the cost savings achieved for fiscal year 1986. 
40 u s e 905. 
SEC. 15305. STUDY REQUIRED. 
(a) STUDY OF COSTS, BENEFITS, AND FEASIBILITY.—(1) The head of 
each executive agency, including the Department of Defense, shall 
conduct a comprehensive and detailed study of the costs, benefits, 
and feasibility of— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 337 
(A) relying on the Interagency Management Fleet System 
operated by the Administrator; 
(B) entering into a contract with a qualified fleet management 
firm or another private contractor; or 
(C) using any other means less costly to the Government, 
to meet its motor vehicle operation, maintenance, leasing, acquisi-
tion, and disposal requirements. 
(2) Each study conducted under paragraph (1) shall compare the 
costs, benefits, and feasibility of the alternatives described in sub-
paragraphs (A), (B), and (C) of such paragraph to the costs and 
benefits of the agency's current motor vehicle operations and, in the 
case of the alternatives described in subparagraphs (B) and (C) of 
such paragraph, to the costs, benefits, and feasibility of the use of 
the Interagency Fleet Management System operated by the 
Administrator. 
(b) SUBMISSION TO DIRECTOR AND COMPTROLLER GENERAL.—Within Reports. 
6 months after the date of enactment of this Act, the head of each 
executive agency shall submit a report concerning the study re-
quired under subsection (a) to the Administrator. 
SEC. 15306. INTERAGENCY CONSOLIDATION. 
40 USC 906. 
(a) IDENTIFICATION OF OPPORTUNITIES FOR CONSOLIDATION.—The 
Motor vehicles. 
Administrator shall review and identify interagency opportunities 
for the consolidation of motor vehicles, related equipment, and 
facilities, and of functions relating to the administration and 
management of such vehicles, equipment, and facilities, in order to 
reduce the size and cost of the Federal Government's motor vehicle 
fleet. 
(b) REPORT AND ACTION ON FINDINGS.—Within one year after the 
date of enactment of this Act, the Administrator shall— 
(1) submit a report to the Congress specifying the findings and 
recommendations of the Administrator from the review con-
ducted under subsection (a); and 
(2) take such action as the Administrator considers appro-
priate based on such findings and recommendations and in 
accordance with section 211 of the Federal Property and 
Administrative Services Act. 
40 USC 491. 
SEC. 15307. REDUCTION OF STORAGE AND DISPOSAL COSTS. 
40 USC 907. 
The Administrator shall take such actions as may be necessary to 
reduce motor vehicle storage and disposal costs and to improve the 
rate of return on motor vehicle sales through a program of vehicle 
reconditioning prior to sale. 
SEC. 15308. SAVINGS. 
40 USC 908. 
(a) ACTIONS BY PRESIDENT REQUIRED.—The President shall estab-
lish, for each executive agency, including the Department of De-
fense, goals to reduce outlays for the operation, maintenance, leas-
ing, acquisition, and disposal of motor vehicles in order to reduce, by 
fiscal year 1988, the total amount of outlays by all executive agen-
cies for such operation, maintenance, leasing, acquisition, and dis-
posal to an amount which is $150,000,000 less than the amount for 
such operation, maintenance, leasing, acquisition, and disposal re-
quested by the President in the budget submitted under section 1105 
of title 31, United States Code, for fiscal year 1986. 
(b) MONITORING OF COMPLIANCE AND COMPLIANCE REPORT.—The 
Director shall monitor compliance by executive agencies with the 
100 STAT. 338 
PUBLIC LAW 99-272—APR. 7, 1986 
Motor vehicles. 
40 u s e 909. 
goals established by the President under subsection (a) and shall 
include, in each summary and analysis required under section 
15304, a statement specifying the reductions in expenditures by 
executive agencies, including the Department of Defense, achieved 
under such goals. 
SEC. 15309. COMPLIANCE. 
(a) ADMINISTRATOR OF GENERAL SERVICES.—The Administrator 
shall comply with and be subject to the provisions of this part with 
regard to all motor vehicles that are used within the General 
Services Administration for official purposes. 
(b) MANAGERS OF OTHER MOTOR POOLS.—The provisions of this 
part with respect to motor vehicles from the Interagency Fleet 
Management System shall be complied with by the executive agen-
cies to which such motor vehicles are assigned. 
SEC. 15310. A P P L I C A B I L I T Y . 
(a) PRIORITY IN REDUCING HEADQUARTERS USE.—The heads of 
executive agencies shall give first priority to meeting the goals 
established by the President under section 15308(a) by reducing the 
costs of administrative motor vehicles used at the headquarters and 
regional headquarters of executive agencies, rather than by reduc-
ing the costs of motor vehicles used by line agency personnel 
working in agency field operations or activities. 
President of U.S. 
(b) REGULATIONS, STANDARDS, AND DEFINITIONS.—The P r e s i d e n t 
shall require the Administrator, in cooperation with the Director, to 
promulgate appropriate regulations, standards, and definitions to 
assure that executive agencies meet the goals established under 
section 15308(a) in the manner prescribed by subsection (a). 
40 u s e 910. 
40 u s e 911. 
40 u s e 912. 
40 u s e 913. 
SEC. 15311. COOPERATION. 
The Director and the Administrator shall closely cooperate in the 
implementation of the provisions of this part. 
SEC. 15312. REPORTS. 
The Comptroller General shall evaluate the extent to which the 
Director, the Administrator, and executive agencies have complied 
with this part. By January 31, 1988, the Comptroller General shall 
submit a report to the Congress describing the results of such 
evaluation. 
SEC. 15313. DEFINITIONS. 
For purposes of this title— 
(1) the term "executive agency" means an Executive agency 
(as such term is defined in section 105 of title 5, United States 
Code), which operates at least three hundred motor vehicles, 
except that such term does not include the Tennessee Valley 
Authority; 
(2) the term "Director" means the Director of the Office of 
Management and Budget; 
(3) the term "Administrator" means the Administrator of 
General Services; 
(4) the term "Comptroller General" means the Comptroller 
General of the United States; and 
(5) the term "motor vehicle" means any vehicle self-propelled 
or drawn by mechanical power, except that such term does not 
include any vehicle designed or used for military field training, 
combat, or tactical purposes, or any other special purpose ve-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 339 
hide exempted from the requirements of this part by the 
Administrator. 
TITLE XVI—HIGHER EDUCATION 
PROGRAMS 
SEC. 16001. SHORT TITLE; REFERENCE. 
(a) SHORT TITLE.—This title may be cited as the "Student Finan-
cial Assistance Amendments of 1985". 
(b) REFERENCE.—References in this title to "the Act" are to the 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.). 
Subtitle A—Savings in Student Loan Program 
Operations 
Student 
Financial 
Assistance 
Amendments of 
1985. 
20 use 1001 
note. 
SEC. 1
6
0
1
1
. 
RECOVERY OF OUTSTANDING ADVANCES TO GUARANTY 
AGENCIES. 
Section 422 of the Act is amended by adding at the end thereof the 
20 USC 1072. 
following new subsection: 
"(d)(1) Notwithstanding any other provision of this section, ad- State and local 
vances made by the Secretary under this section shall be repaid in governments. 
accordance with this paragraph and shall be deposited in the fund 
established by section 431. The Secretary shall, in accordance with 
20 USC 1081. 
the requirements of paragraph (2), recover (and so deposit) an 
amount equal to $75,000,000 during fiscal year 1988. 
"(2) In determining the amount of advances which shall be repaid 
by a State or nonprofit private institution or organization under 
paragraph (1), the Secretary— 
"(A) shall consider the solvency and maturity, as determined 
by the Comptroller General, of the reserve and insurance funds 
of the State or nonprofit private institution or organization 
assisted by such advances; 
"(B) shall not seek repayment of such advances from any 
State described in subsection (cX5)(B) during any year of its 
eligibility under such subsection; and 
"(C) shall not seek repayment of such advances from any 
State if such repayment encumbers the reserve fund require-
ment mandated by the statutes of such State.". 
SEC. 16012. DISBURSEMENT OF STUDENT LOANS TO INSTITUTIONS RE-
QUIRED. 
(a) FISL LOANS REQUIREMENT.—Section 427(aX2) of the Act is 
20 use 1077. 
amended— 
(1) by striking out clause (ii) of subparagraph (B) and by 
redesignating clauses (iii) and (iv) of subparagraph (B) as clauses 
(ii) and (iii), respectively; 
(2) by striking out "or the fifteen-year period" in the matter 
following clause (viii) of subparagraph (C); and 
(3) by amending subparagraph (I) to read as follows: 
"(I) the funds borrowed by a student are disbursed to the 
institution by check or other means that is payable to and 
requires the endorsement or other certification by such 
student, except nothing in this subparagraph shall be inter-
preted to allow the Secretary to require checks to be made 
100 STAT. 340 
PUBLIC LAW 99-272—APR. 7, 1986 
co-payable to the institution and the borrower or to prohibit 
the disbursement of loan proceeds by means other than by 
20 use 1078. 
(b) GSL LOANS REQUIREMENT.—Section 428(b)(l)(0) of the Act is 
amended to read as follows: 
"(O) provides that funds borrowed by a student are dis-
bursed to the institution by check or other means that is 
payable to and requires the endorsement or other certifi-
cation by such student, except nothing in this subparagraph 
shall be interpreted to allow the Secretary to require checks 
to be made co-payable to the institution and the borrower 
or to prohibit the disbursement of loan proceeds by means 
other than by check;". 
20 use 1083a. 
(c) CONFORMING AMENDMENT.—Section 433A(a) of the Act is 
amended by striking out "to a borrower" in the first sentence. 
SEC. 16013. MULTIPLE DISBURSEMENTS OF STUDENT LOANS REQUIRED. 
(a) REPEAL OF INCENTIVES TO LENDERS TO MAKE MULTIPLE 
20 use 1078. 
DISBURSEMENTS.—Section 428(a) of the Act is amended by striking 
out paragraph (8). 
(b) MULTIPLE DISBURSEMENT REQUIRED IN F I S L PROGRAM.—Sec-
20 use 1077. 
tion 427(a) of the Act is amended— 
(1) by striking out "and" at the end of paragraph (1); 
(2) by striking out the period at the end of paragraph (2) and 
inserting in lieu thereof "; and"; and 
(3) by adding at the end thereof the following: 
"(3) in the case of a loan made for any period of enrollment of 
more than six months, one semester, two quarters, or 600 clock 
hours and for an amount of $1,000 or more, the proceeds of the 
loan will be disbursed directly by the lender in two or more 
installments, none of which exceeds one-half of the loan, with 
the interval between the first and second installment being not 
less than one-third of such period. 
For purposes of paragraph (3), all loans issued for the same period of 
enrollment shall be considered as a single loan.". 
(c) MULTIPLE DISBURSEMENTS REQUIRED IN GSL PROGRAM.—Sec-
tion 42803)(1) of such Act is amended— 
(1) by redesignating subparagraph (P) as subparagraph (Q); 
and 
(2) by inserting after subparagraph (O) the following new 
sulDparagraph: 
"(P) provides that the proceeds of any loan made for any 
period of enrollment of more than six months, one semester, two 
quarters, or 600 clock hours and for an amount of $1,000 or 
more— 
"(i) will be disbursed directly by the lender in two or more 
installments, none of which exceeds one-half of the loan, 
with the interval between the first and second installment 
being not less than one-third of such period, or 
"(ii) will be disbursed in such installments pursuant to 
the escrow provisions of subsection (i) of this section, 
but all loans issued for the same period of enrollment shall be 
considered as a single loan for purposes of this subparagraph; 
and". 
(d) ORIGINATION FEE TO BE DEDUCTED PROPORTIONATELY FROM 
20 use 1087-1. 
EACH INSTALLMENT.—Section 438(c)(2) of the Act is amended by 
striking out "which may be deducted from the proceeds of the loan 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 341 
prior to payment to the borrower" and inserting in lieu thereof 
"which shall be deducted proportionately from each installment 
payment of the proceeds of the loan to the borrower". 
(e) CONFORMING AMENDMENTS.—(1) Section 425(a)(1) of the Act is 
20 use 1075. 
amended— 
(A) by inserting "and" at the end of subparagraph (A), by 
striking out subparagraph (B), and by redesignating subpara-
graph (C) as subparagraph (B); and 
(B) by striking out the last sentence. 
(2) Section 428(aX3XA) of the Act is amended— 
20 use 1078. 
(A) by striking out "Except as provided in paragraph (8) and 
subject" and inserting in lieu thereof "Subject"; and 
(B) by striking out "but, except as provided in paragraph (8) of 
this subsection, such portion" and inserting in lieu thereof "but 
such portion". 
(3) Section 428(bXl)(A) of such Act is amended— 
(A) by inserting "and" at the end of division (i); 
(B) by striking out division (ii) and by redesignating division 
(iii) as division (ii); and 
(C) in the matter following such division, by striking out 
"annual limit," and all that follows and inserting in lieu thereof 
"annual limit;". 
SEC. 16014. PRECLAIM COLLECTION ACTIVITIES. 
(a) DELAY REQUIRED BEFORE SUBMISSION OF CLAIMS BY GUARANTY 
AGENCIES.—(1) Section 428(cXlXA) of the Act is amended by adding 
20 use 1078. 
at the end thereof the following new sentence: "In no case shall a 
State or nonprofit private institution or organization with which the 
Secretary has an agreement pursuant to subsection (b) file a claim 
for such reimbursement with respect to such losses prior to 270 
days after the loan becomes delinquent with respect to any loan 
installment.". 
(2) Section 430(eX2) of the Act is amended— 
20 use 1080. 
(A) by striking out "one hundred and twenty days" and 
inserting in lieu thereof "180 days"; and 
(B) by striking out "one hundred and eighty days" and insert-
ing in lieu thereof "240 days". 
QD) SUPPLEMENTAL PRECLAIMS ASSISTANCE.—(1) Section 428(cX6XA) 
of the Act is amended— 
(A) by inserting after "assistance for default prevention," the 
following: "the administrative costs of supplemental preclaim 
assistance for default prevention,"; and 
(B) by striking out "as such terms are defined in subparagraph 
(B)" and inserting in lieu thereof "as such terms are defined in 
subparagraph (B) or (C)". 
(2) Section 428(cX6) of the Act is amended by adding at the end 
thereof the following new subparagraph: 
"(C)(i) For purposes of this paragraph, 'administrative costs of 
supplemental preclaim assistance for default prevention' means 
(subject to divisions (ii) through (iv)) any administrative costs— 
"(I) incurred by a guaranty agency in connection with a loan 
on which the guarantor has exercised preclaims assistance 
required or permitted under sections 428(cX2XA) and 428(0(2), 
and which has been in delinquent status for at least 120 days; 
and 
100 STAT. 342 
PUBLIC LAW 99-272—APR. 7, 1986 
"(II) which are directly related to providing collection assist-
ance to the lender on a delinquent loan, prior to a claim being 
filed by the guaranty agency, 
including the attributable compensation of appropriate personnel 
(and in the case of personnel who perform several functions, only 
the portion of compensation attributable to the collection assist-
ance), fees paid to locate a missing borrower, postage, equipment, 
supplies, telephone, and similar charges, but does not include over-
head costs. 
"(ii) The administrative costs for which reimbursement is au-
thorized under this subparagraph must be clearly supplemental to 
the preclaim assistance for default prevention which the guaranty 
20 use 1078. 
agency is required to provide pursuant to section 428(c)(2)(A) and 
section 428(f)(2) of this Act. 
"(iii) The services associated with carrying out this subparagraph 
may be provided by the guaranty agency directly or under contract, 
except that such services may not be carried out by an organization 
or entity (other than the guaranty agency)— 
"(I) that is the holder or servicer of the loan or an organiza-
tion or entity that owns or controls the holder or servicer of the 
loan; or 
"(II) that is owned or controlled by the same corporation, 
partnership, association, or individual that owns or controls the 
holder or servicer of the loan. 
"(iv) The costs associated with carrying out this subparagraph 
may not exceed 2 percent of the outstanding principal balance of 
each delinquent loan subject to the supplemental preclaim assist-
ance authorized by this subparagraph or $100, whichever is less.". 
20 use 1078 
(3) The amendments made by this subsection shall be effective in 
accordance with section 16041(a) of this title without regard to 
whether such amendments are reflected in the regulations pre-
scribed by the Secretary of Education. 
SEC. 16015. PROMPT PAYMENT OF SUPPLEMENTAL GUARANTY ADMINIS-
TRATIVE COST AGREEMENT. 
Loans. 
(a) PURPOSE.—It is the purpose of the amendments made by this 
20 use 1078 
section to assure the prompt payment of the amount due under the 
^° ®
' 
supplemental guaranty administrative cost agreement made under 
section 428(f)(2) in order to encourage improved collection of student 
loans and preclaims assistance to prevent default on student loans. 
20 use 1078. 
(b) PROMPT PAYMENT REQUIRED.—(1) Section 428(f)(1) of the Act is 
amended— 
(A) by striking out "is authorized to" and inserting in lieu 
thereof "shall"; 
(B) by striking out "shall not exceed" and inserting in lieu 
thereof "shall be equal to"; and 
(C) by striking out the third and fourth sentences of such 
section. 
(2) Section 428(f)(2) of the Act is amended— 
(A) by striking out "is authorized to" and inserting in lieu 
thereof "shall"; 
(B) by striking out "shall not exceed" and inserting in lieu 
thereof "shall be equal to"; and 
(C) by striking out the third and fourth sentences of such 
section. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 343 
SEC. 16016. GUARANTY AGENCY; LENDER OF LAST RESORT. 
Section 428 of the Act is amended by adding at the end thereof the 20 USC 1078. 
following new subsection: 
"(j) In each State, the guaranty agency or an eligible lender in the State and local 
State described in section 435(d)(1)(D) of this Act shall make loans 
foYjcpTo^ol-
directly, or through an agreement with an eligible lender or lenders, 
^• 
to students who are eligible to have interest benefits paid on their 
behalf (under subsection (a) of this section) but who are otherwise 
unable to obtain loans under this part. Loans made under this 
subsection shall neither exceed the amount of the need of the 
borrower, as determined under subsection (a)(2)(B), nor be less than 
$200.". 
SEC. 16017. STUDENT LOAN CONSOLIDATION. 
(a) LOAN CONSOLIDATION AUTHORIZED.—Part B of title IV of the 
Act is amended by inserting after section 428B the following new 
section: 
"CONSOLIDATION LOANS 
"SEC. 428C. (a)(1) For the purpose of providing loans to eligible 20 USC 1078-3. 
borrowers for consolidation of their obligations with respect to 
student loans made, insured, or guaranteed under this part or made 
under part E of this title, the Secretary or a guaranty agency shall 
20 USC 1088. 
enter into agreements in accordance with subsection (b) with the 
following eligible lenders: 
"(A) the Student Loan Marketing Association; 
"(B) agencies described in subparagraphs (D) and (F) of section 
435(g)(1); and 
20 USC 1085. 
"(C) eligible lenders described in subparagraphs (A), (B), (C), 
and (E) of such section. 
"(2) Except as provided in section 429(e), no contract of insurance 20 USC 1079. 
under this part shall apply to a consolidation loan unless such loan 
is made under an agreement pursuant to this section and is covered 
by a certificate issued in accordance with subsection (bX2). Loans 
covered by such a certificate that is issued by a guaranty agency 
shall be considered to be insured loans for the purposes of re-
imbursements under section 428(c), but no payment shall be made 
20 USC 1078. 
with respect to such loans under section 428(f) to any such guaranty 
agency. 
"(3) For the purpose of this section, the term 'eligible borrower' 
means a borrower who— 
"(A) has an outstanding indebtedness, at the time of applica-
tion for a consolidation loan, to one or more lenders or programs 
under this title of not less than $5,000; 
"(B) has not during the previous 4 months carried at an 
eligible institution at least one-half the normal full-time aca-
demic workload; 
"(C) if in repayment status, is not delinquent with respect to 
any required payment on such indebtedness by more than 90 
days; and 
'(D) is not a parent borrower under section 428B(a)(l). 
20 USC 1078-2. 
"(4) An individual's status as an eligible borrower under this 
section terminates upon receipt of a consolidation loan under this 
section except with respect to loans received under this title after 
the date of receipt of the consolidation loan. For the purpose of 
computing the outstanding indebtedness of such an individual, only 
loans received after such date shall be taken into account. 
100 STAT. 344 
PUBLIC LAW 99-272—APR. 7, 1986 
"(b)(1) Any lender described in clause (A), (B), or (C) of subsection 
(a)(1) who wishes to make consolidation loans under this section 
shall enter into an agreement with the Secretary or a guaranty 
agency which provides— 
"(A)(i) that, in the case of lenders described in subsection 
(a)(1)(C), the lender will make a consolidation loan to any eli-
gible borrower on request of that borrower, if the lender holds 
an outstanding loan of that borrower which is selected by the 
borrower for consolidation under this section, and will make 
such loans to other eligible borrowers only to the extent per-
mitted by the Secretary in an agreement under subsection (d); 
"(ii) that, in the case of lenders described in subsection 
(a)(1)(B), the lender will make, subject to the availability of 
funds allocated for such purpose, a consolidation loan to any 
eligible borrower— 
"(I) who is, or was at the time of receiving a loan which is 
selected for consolidation, a resident of the State of such 
lender; or 
"(II) who received loans under this title while attending 
an institution of higher education in the State of such 
lender, 
except that the lender may elect to limit further the availability 
of its loans under this section to those borrowers for whom the 
lender is the holder of a loan selected for consolidation; or 
"(iii) that, in the case of the Student Loan Marketing Associa-
tion, the lender will make a consolidation loan to any eligible 
borrower on request of that borrower; 
"(B) that each consolidation loan made by the lender will bear 
interest, and be subject to repayment, in accordance with 
subsection (c); 
"(C) that each consolidation loan will be made, notwithstand-
ing any other provision of this part limiting the maximum 
principal amount for all insured loans made to a borrower, in 
an amount (i) which is not less than the minimum amount 
required for eligibility of the borrower under subsection 
(a)(3)(A)(i), and (ii) which is equal to the sum of the unpaid 
principal, accrued unpaid interest and late charges of all loans 
received by the eligible borrower under this title which are 
selected by the borrower for consolidation; 
"(D) that the proceeds of each consolidation loan will be paid 
by the lender to the holder or holders of the loans so selected to 
discharge the liability on such loans; 
"(E) that, in the case of any lender, such lender will not make 
consolidation loans under this part from the proceeds of bonds 
or other obligations, the income from which is exempt from 
26 use 1 et seq. 
taxation under the Internal Revenue Code of 1954, issued subse-
quent to the enactment date of the Student Financial Assist-
Ante, p. 339. 
ance Amendments of 1985; and 
"(F) such other terms and conditions as the Secretary or 
guaranty agency (whichever is party to the agreement) may 
specifically require of the lender to carry out this section. 
"(2) The Secretary shall issue a certificate of comprehensive insur-
20 use 1079. 
ance coverage under section 429(b) to a lender which has entered 
into an agreement with the Secretary under paragraph (1) of this 
subsection. A guaranty agency may issue a certificate of comprehen-
sive insurance coverage to a lender if the lender has entered into an 
agreement under paragraph (1) of this subsection. The Secretary 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 345 
shall not issue such a certificate under this paragraph to a lender 
described in clause (B) or (C) of subsection (a)(1) if the Secretary 
determines that such lender has reasonable access in its State, for 
the purpose of obtaining such a certificate, to a guaranty agency. In 
either case, such certificate shall, at a minimum, provide— 
"(A) that all consolidation loans made by such lender in 
conformity with the requirements of this section will be insured 
against loss of principal and interest by the issuer of such 
certificate; 
"(B) that a consolidation loan will not be insured unless the 
lender has determined to its satisfaction, in accordance with 
reasonable and prudent business practices, for each loan being 
consolidated (i) that the loan is a legal, valid, and binding 
obligation of the borrower; (ii) that each such loan was made 
and serviced in compliance with applicable laws and regula-
tions; and (iii) in the case of loans under this part, that the 
insurance on such loan is in full force and effect; 
"(C) the effective date and expiration date of the certificate; 
"(D) the aggregate amount to which the certificate applies; 
"(E) that, if the lender prior to the expiration of the certificate 
no longer proposes to make consolidation loans, the lender will 
so notify the issuer of such certificate in order that the certifi-
cate may be terminated (without affecting the insurance on any 
consolidation loan made prior to such termination); and 
"(F) the terms upon which the issuer of the certificate may 
limit, suspend, or terminate the lender's authority to make 
consolidation loans under the certificate (without affecting the 
insurance on any consolidation loan made prior to such limita-
tion, suspension, or termination). 
"(3) A consolidation loan made pursuant to this section shall be 
insurable under a certificate issued pursuant to paragraph (2) only if 
the loan is made to an eligible borrower who has agreed to notify the 
holder of the loan promptly concerning any change of address and 
the loan is evidenced by a note or other written agreement which— 
"(A) is made without security and without endorsement, 
except that if the borrower is a minor and such note or other 
written agreement executed by him would not, under applicable 
law, create a binding obligation, endorsement may be required; 
"(B) provides for the payment of interest and the repayment 
of principal in accordance with subsection (c) of this section and 
contains notice of the possibility of a revised repayment sched-
ule under paragraph (2) of such subsection; 
"(C) provides that periodic installments of principal need not 
be paid, but interest shall accrue and be paid, during any 
period— 
"(i) during which the borrower is pursuing a full-time 
course of study at an eligible institution, is pursuing a 
course of study pursuant to a graduate fellowship program 
approved by the Secretary, or pursuant to a rehabilitation 
training program for disabled individuals approved by the 
Secretary; 
"(ii) not in excess of 2 years during which the borrower is 
serving an internship, the successful completion of which is 
required in order to receive professional recognition; 
"(iii) not in excess of 3 years during which the borrower is 
temporarily totally disabled, as established by sworn affida-
vit of a qualified physician, or during which the borrower is 
Fellowships and 
scholarships. 
Handicapped 
persons. 
100 STAT. 346 
PUBLIC LAW 99-272—APR. 7, 1986 
20 use 1078-2. 
20 use 1077a. 
20 use 1087-1. 
unable to secure employment by reason of the care required 
by a spouse who is so disabled; or 
"(iv) which is a single period, not in excess of 12 months, 
at the request of the borrower, during which the borrower 
is seeking and unable to find full-time employment; and 
that any such period shall not be included in determining the 
repayment period provided pursuant to subsection (c)(2) of this 
section; 
"(D) entitles the borrower to accelerate without penalty 
repayment of the whole or any part of the loan; and 
"(E)(i) contains a notice of the system of disclosure concerning 
20 use 1080. 
such loan to credit bureau organizations under section 430(bX2), 
and (ii) provides that the lender on request of the borrower will 
provide information on the repayment status of the note to such 
organizations. 
"(c)(1) Consolidation loans made under this section shall bear 
interest at the rate of 10 per centum per annum on the unpaid 
principal balance of the loan, except that, if the consolidation loan is 
used for the purpose of discharging liability on a loan made pursu-
ant to section 428B, the consolidation loan shall bear interest at a 
rate per annum on such unpaid balance which is equal to the 
highest applicable interest rate under section 427A on any loan 
which is selected for consolidation by the borrower. For the purposes 
of payment of special allowances under section 438(b)(2), the interest 
rate required by this subsection is the applicable interest rate with 
respect to a consolidation loan. 
"(2) Notwithstanding any other provision of this part, to the 
extent authorized by its certificate of insurance under subsection 
(b)(2)(F) and approved by the issuer of such certificate, the lender of 
a consolidation loan, with the agreement of the borrower, may 
establish such repayment terms as will promote the objectives of 
this section, including the establishment of graduated and income 
sensitive repayment schedules. In each case a consolidation loan 
shall be repaid as follows: 
"(A) in the case of a consolidation loan the original amount of 
which is less than $7,500, such loan shall be repaid in not more 
than 10 years; 
"(B) in the case of a consolidation loan the original amount of 
which equals or exceeds $7,500 but is less than $11,000, such 
loan shall be repaid in not more than 13 years; or 
"(C) in the case of a consolidation loan the original amount of 
which equals or exceeds $11,000, such loan shall be repaid in not 
more than 15 years. 
"(3) Repayment of a consolidation loan shall commence within 60 
days after all holders have, pursuant to subsection (b)(lXD), dis-
charged the liability of the borrower on the loans selected for 
consolidation. 
"(4) No origination fee or insurance premium shall be charged to 
the borrower on any consolidation loan, and no insurance premium 
shall be payable by the lender to the issuer of the certificate of 
insurance with respect to any such loan. 
State and local 
"(d)(1) If, within 18 months after the effective date of this section, 
governments. 
an eligible lender described in subsection (a)(1)(B) for a State has not 
entered into an agreement with the Secretary or a guaranty agency 
for purposes of making consolidation loans under this section, the 
Secretary may, after a hearing and upon a determination of need 
therefor, enter into an agreement for the purposes of making 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 347 
consolidation loans to eligible borrowers in such State with an 
eligible lender described in clause (B) or (C) of subsection (aXD from 
another State. 
"(2) Notice of the hearing required by paragraph (1) of this State and local 
subsection shall be sent to the Governor of the affected State and governments, 
the eligible lenders described in subsection (a)(1)(B) for that State. At 
any such hearing representatives of such Governor and lenders may 
present evidence and testimony and examine witnesses, and full 
consideration shall be given to the views of such Governor and 
lenders with respect to the interests of the eligible borrowers in that 
State and with respect to the impact on programs of such lenders of 
allowing a lender described in clause (B) or (C) of subsection (a)(1) 
from another State to make consolidation loans pursuant to an 
agreement under this subsection in such State. 
"(3) An agreement under this subsection may contain such terms 
and conditions as the Secretary may specifically require of the 
lender to carry out this section. 
"(4) The requirements of paragraphs (1) and (2) of this subsection 
shall not apply if, in any State, an eligible lender described in 
subsection (a)(1)(B) from another State is functioning as a secondary 
market described in subparagraph (D) or (F) of section 435(g)(1) prior 
to the date of enactment of the Student Financial Assistance 
Amendments of 1985 and such lender agrees to make consolidation 
loans to eligible borrowers in such State. 
"(e) The authority to make loans under this section expires at the 
close of September 30, 1991. Nothing in this section shall be con-
strued to authorize the Secretary to promulgate rules or regulations 
governing the terms or conditions of the agreements and certificates 
under subsection (b). Loans made under this section shall not be 
considered to be new loans made to students for purposes of section 
424(a).". 
(b) CONFORMING AMENDMENTS.—(1) Section 427(a) of the Act is 
amended by striking out "A loan" and inserting in lieu thereof 
"Except as provided in section 428C, a loan". 
(2) Section 435(g)(1) of the Act is amended— 
(A) by striking out "section 439 (o) and (q)" in subparagraph 
(G) and inserting in lieu thereof "sections 428C and 439(q)"; and 
(B) by striking out "section 428(j)" in subparagraph (H) and 
inserting in lieu thereof "sections 428(h) and 428C". 
(3) Section 438 of the Act is amended— 
20 USC 1087-1. 
(A) in subsection (b)(5)(A)(ii), by inserting ", 428C," after 
"428B"; and 
(B) in subsection (c)(2), by striking out "section 428B and 
section 439(o)" and inserting in lieu thereof "sections 428B and 20 USC 1078-2. 
428C". 
(4) Section 439(d)(1)(C) of the Act is amended by striking out 20 USC 1087-2. 
"428(A), and except with respect to loans under section 439(o),' and 
inserting in lieu thereof "428A, and except with respect to loans 
under section 428C,". 
(c) SPECIAL ALLOWANCE.—(1) Section 438(b)(2)(A) of the Act is 
amended by striking out "subparagraph (B)" and inserting in lieu 
thereof "subparagraphs (B) and (C)". 
(2) The first sentence of section 438(b)(2)(B)(i) of the Act is 
amended— 
(A) by inserting "appropriate" before "quarterly rate" the 
second time it appears; and 
(B) by inserting "or subparagraph (C)" before the period. 
State and local 
governments. 
20 USC 1085. 
Ante, p. 339. 
Termination 
date. 
20 USC 1074. 
20 USC 1077. 
Ante, p. 343. 
100 STAT. 348 
PUBLIC LAW 99-272—APR. 7, 1986 
20 use 1087-1. 
(3) Section 438(b)(2) of the Act is amended by adding at the end 
thereof the following new subparagraph: 
Ante, p. 343. 
"(C) In the case of loans made in accordance with section 428C, the 
applicable per centum to be added under clause (iii) of subparagraph 
(A) shall be 3 per centum.". 
20 use 1078-3 
(d) COST EVALUATION REPORT.—The Secretary of Education shall 
"°*®- 
evaluate the cost, efficiency, and impact of the consolidation loan 
program established by the amendments made by this section and 
shall report to the Congress not later than June 30, 1988, on the 
findings and recommendations required by this subsection. 
SEC. 16018. EXTENSION OF PROGRAM. 
(a) EXTENSION OF AUTHORITY.—Part B of title IV of the Act is 
amended— 
20 use 1074. 
(1) in section 424(a)— 
(A) by striking out "1986" and inserting in lieu thereof 
"1988"; 
(B) by striking out "1990" and inserting in lieu thereof 
"1992"; 
20 use 1078. 
(2) in section 428(a)(5)— 
(A) by striking out "1986" and inserting in lieu thereof 
"1988"; 
(B) by striking out "1990" and inserting in lieu thereof 
"1992"; and 
20 use 1087-2. 
(3) in section 439(1), by striking out "1988" and inserting in 
lieu thereof "1990". 
(b) EXTENSION OF FAMILY CONTRIBUTION SCHEDULES.—Section 9 of 
the Student Financial Assistance Technical Amendments Act of 
20 use 1078 
1982 is amended— 
^'^^- 
(1) in subsection (a), by striking out "and from July x, 1986, 
through June 30, 1987," and inserting in lieu thereof "from July 
1, 1986, through June 30, 1987, from July 1, 1987, through June 
30, 1988, from July 1, 1988, through June 30, 1989, and from 
July 1,1989, through June 30,1990,"; and 
(2) in subsection (c)— 
(A) by striking out "and" at the end of paragraph (3); 
(B) by striking out the comma at the end of paragraph (4) 
and inserting in lieu thereof a semicolon; and 
(C) by inserting after such paragraph the following new 
paragraphs: 
"(5) April 1, 1987, for the period of instruction from July 1, 
1987, through June 30, 1988; 
"(6) April 1, 1988, for the period of instruction from July 1, 
1988, through June 30, 1989; and 
"(7) April 1, 1989, for the period of instruction from July 1, 
1989, through June 30,1990,". 
SEC. 16019. SAVINGS FROM OPERATIONS OF THE STUDENT LOAN MARKET-
ING ASSOCIATION. 
Banks and 
(a) GENERAL RuLE.—In order to Contribute to carrying out the 
banking. 
directions in the first concurrent resolution on the budget for the 
fiscal year 1986 (S. Con. Res. 32, 99th Congress, agreed to August 1, 
1985) designed to reduce the Federal budget deficit, the Student 
Loan Marketing Association shall, during the fiscal year 1986, 
reduce the level of obligations owed to the Federal Financing Bank 
by $30,000,000 which, but for this section, will be paid to the Federal 
Financing Bank after October 1,1986, 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 349 
(b) SPECIAL RULE.—The amount described in subsection (a) may 
not be credited by the Student Loan Marketing Association to 
reduce the obUgation to repay the Federal Financing Bank amounts 
which the Student Loan Marketing Association owes to the Federal 
Financing Bank in each of the fiscal years 1987 and 1988. 
(c) SAVINGS PROVISION.—Nothing in this section shall be construed Contracts. 
to authorize or require the Student Loan Marketing Association or 
the Federal Financing Bank to renegotiate the contract or other 
agreement under which the Student Loan Marketing Association 
agreed to pay amounts made available by the Federal Financing 
Bank to carry out section 439 of the Higher Education Act of 1965. 20 USC 1087-2. 
SEC. 16020. DEFINITION. 
Section 435 of the Act is amended by adding at the end thereof the 20 USC 1085. 
following new subsection: 
"(k) The term 'guaranty agency' means a State or nonprofit 
private institution or organization with which the Secretary has an 
agreement pursuant to section 428(b).". 
20 USC 1078. 
Subtitle B—Savings From Improved Student 
Loan Collection 
20 USC 1078. 
SEC. 16021. AGREEMENT FOR AUDITS. 
Section 428(b)(2) of the Act is amended— 
(1) by striking out "and" at the end of subparagraph (B); 
(2) by striking out the period at the end of subparagraph (C) 
and inserting in lieu thereof "; and"; and 
(3) by inserting after such subparagraph the following: 
"(D) provide for— 
"(i) conducting, except as provided in clause (ii), financial 
and compliance audits of the guaranty agency at least once 
every two years and covering the period since the most 
recent audit, conducted by a qualified, 
independent 
organization or person in accordance with standards estab-
lished by the Comptroller General for the audit of govern-
mental organizations, programs, and functions, and as 
prescribed in regulations of the Secretary, the results of 
which shall be submitted to the Secretary; or 
"(ii) with regard to a guaranty program of a State which 
is audited under chapter 75 of title 31, United States Code, 
deeming such audit to satisfy the requirements of clause (i) 
for the period of time covered by such audit.". 
SEC. 16022. RECOVERY COSTS. 
Section 430(b) of the Act is amended— 
(1) by striking out in paragraph (1) "(including reasonable 
administrative costs)" and inserting in lieu thereof the follow-
ing: "(including reasonable administrative and collection costs, 
to the extent set forth in regulations issued by the Secretary)"; 
(2) by striking out paragraph (2); and 
(3) by striking out "(1)". 
SEC. 16023. CREDIT BUREAU REPORTS. 
Part B of title IV of the Act is amended by adding immediately 20 USC 1080a. 
after section 430 the following new section: 
31 USC 7501 et 
seq. 
20 USC 1080. 
100 STAT. 350 
PUBLIC LAW 99-272—APR. 7, 1986 
"REPORTS TO CREDIT BUREAUS AND INSTITUTIONS OF HIGHER 
EDUCATION 
"SEC. 430A. (a) For the purpose of promoting responsible repay-
ment of loans covered by Federal loan insurance pursuant to this 
20 use 1078. 
part or covered by a guaranty agreement pursuant to section 428, 
the Secretary, and each guaranty agency, eligible lender, and subse-
quent holder shall enter into agreements with credit bureau 
organizations to exchange information concerning student borrow-
ers, in accordance with the requirements of this section. For the 
purpose of assisting such organizations in complying with the Fair 
15 use 1681 
Credit Reporting Act, such agreements may provide for timely 
note- 
response to the Secretary (concerning loans covered by Federal loan 
insurance) or by a guaranty agency, eligible lender, or subsequent 
holder (concerning loans covered by a guaranty agreement) to re-
quests from such organizations for responses to objections raised by 
such borrowers. Subject to the requirements of subsection (c), such 
agreements shall require that the Secretary or guaranty agency, 
eligible lender, or subsequent holder to disclose to such organiza-
tions with respect to any loan dispersed to a student— 
"(1) the date of disbursement and the amount of the loan; 
"(2) the date of default and information concerning collection 
of the loan, including information concerning the repayment 
status of any defaulted loan on which the Secretary has made a 
20 use 1080. 
payment pursuant to section 430(a) or the guaranty agency has 
made a payment to the previous holder of the loan; and 
"(3) the date of cancellation of the note upon completion of 
repayment by the borrower of the loan or payment by the 
20 use 1087. 
Secretary pursuant to section 437. 
"(b) Such agreements may also provide for the disclosure by such 
organizations to the Secretary, a guaranty agency, eligible lender, or 
subsequent holder upon receipt of a notice under subsection (a)(2) 
that such a loan is in default, or information which may assist the 
Secretary, guaranty agency, eligible lender, or subsequent holder in 
collecting the loan. 
"(c) Agreements entered into pursuant to this section shall con-
tain such provisions as may be necessary to ensure that— 
"(1) no information is disclosed by the Secretary, guaranty 
agency, eligible lender, or subsequent holder unless its accuracy 
and completeness have been verified and the Secretary, guar-
anty agency, eligible lender, or subsequent holder has deter-
mined that disclosure would carry out the purpose of this 
section; 
"(2) as to any information so disclosed, such organizations will 
be promptly notified of, and will promptly record, any change 
submitted by the Secretary, guaranty agency, eligible lender, or 
subsequent holder with respect to such information, as required 
15 use 16811. 
by section 611 of the Fair Credit Reporting Act (15 U.S.C. 168i); 
"(3) no use will be made of any such information which would 
result in the use of collection practices with respect to such a 
borrower that are not fair and reasonable or that involve 
harassment, intimidation, false or misleading representations, 
or unnecessary communication concerning the existence of such 
loan or concerning such information; and 
"(4) with regard to notices of default under subsection (a)(2) of 
this section, except for disclosures made to obtain the borrow-
er's location, the Secretary, guaranty agency, eligible lender, or 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 351 
subsequent holder (A) shall not disclose any such information 
until the Secretary, guaranty agency, eligible lender, or subse-
quent holder has notified the borrower that such information 
will be disclosed to credit bureau organizations unless the bor-
rower enters into repayment of the loan, but (B) shall, if the 
borrower has not entered into repayment within a reasonable 
period of time, but not less than thirty days, from the date such 
notice has been sent to the borrower, disclose the information 
required by this subsection. 
"(d) A guaranty agency, eligible lender, subsequent holder, or 
credit bureau organization which discloses or receives information 
under this section shall not be considered a Government contractor 
within the meaning of section 552a of title 5 of the United States 
Code (the Privacy Act of 1974). 
"(e) The Secretary and each guaranty agency, eligible lender, and 
subsequent holder is authorized to disclose information described in 
subsections (a) and (b) concerning student borrowers to the eligible 
institutions such borrowers attend or previously attended. 
"(f) Notwithstanding paragraphs (4) and (6) of subsection (a) of Reports, 
section 605 of the Fair Credit Reporting Act (15 U.S.C. 1681c(a)(4), 
(a)(6)), a consumer reporting agency may make a report containing 
information received from the Secretary, or a guaranty agency, 
eligible lender, or subsequent holder regarding the status of a 
borrower's account on a loan insured or guaranteed under this part 
until the later o
f
— 
"(1) seven years from the date on which the agency paid a 
claim to the holder on insurance or the guaranty, or 
"(2) seven years from the date the Secretary, guaranty 
agency, eligible lender, or subsequent holder first reported the 
account to a consumer reporting agency.". 
SEC. 16024. CIVIL PENALTIES. 
Section 432 of the Act is further amended by adding at the end 20 USC 1082. 
thereof the following new subsection: 
"(f)(1) Upon determination, after reasonable notice and oppor-
tunity for a hearing on the record, that a lender or a guaranty 
agency— 
"(A) has violated or failed to carry out any provision of this 
part or any regulation prescribed under this part, or 
"(B) has engaged in substantial misrepresentation of the 
nature of its financial charges, 
the Secretary may impose a civil penalty upon such lender or 
agency of not to exceed $15,000 for each violation, failure, or mis-
representation. 
"(2) No civil penalty may be imposed under paragraph (1) of this 
subsection unless it is determined that— 
"(A) the violation, failure or substantial misrepresentation 
referred to in that paragraph resulted from— 
"(i) a clear and consistent pattern or practice of viola-
tions, failures, or substantial misrepresentations in which 
the lender or guaranty agency did not maintain procedures 
reasonably adapted to avoid the violation, failure, or 
substantial representation; 
"(ii) gross negligence; or 
"(iii) willful actions on the part of the lender or guaranty 
agency; and 
100 STAT. 352 
PUBLIC LAW 99-272—APR. 7, 1986 
"(B) the violation, failure, or substantial misrepresentation is 
material. 
"(3) A lender or guaranty agency has no liability under paragraph 
(1) of this subsection if, prior to the institution of an action under 
that paragraph, the lender or guaranty agency cures or corrects the 
violation or failure or notifies the person who received the substan-
tial misrepresentation of the actual nature of the financial charges 
involved. 
"(4) For the purposes of paragraph (1) of this subsection, viola-
tions, failures, or substantial misrepresentations arising from a 
specific practice of a lender or guaranty agency shall be deemed to 
be a single violation, failure, or substantial misrepresentation even 
if the violation, failure, or substantial misrepresentation affects 
more than one loan or more than one borrower, or both, and the 
Secretary may only impose a single civil penalty for each such 
violation, failure, or substantial misrepresentation. 
"(5) If a loan affected by a violation, failure, or substantial mis-
representation is assigned to another holder, the lender or guaranty 
agency responsible for the violation, failure, or substantial misrepre-
sentation shall remain liable for any civil money penalty provided 
for under paragraph (1) of this subsection, but the assignee shall not 
be liable for any such civil money penalty. 
"(6) Until a matter is referred to the Attorney General, any civil 
penalty under paragraph (1) of this subsection may be compromised 
by the Secretary. In determining the amount of such penalty, or the 
amount agreed upon in compromise, the Secretary shall consider 
the appropriateness of the penalty to the resources of the lender or 
guaranty agency subject to the determination; the gravity of the 
violation, failure, or substantial misrepresentation; the frequency 
and persistence of the violation, failure, or substantial misrepresen-
tation; and the amount of any losses resulting from the violation, 
failure, or substantial misrepresentation. The amount of such pen-
alty, when finally determined, or the amount agreed upon in com-
promise, may be deducted from any sums owing by the United 
States to the lender or agency charged (unless the lender or agency 
has in the case of a final agency determination commenced proceed-
ings for judicial review within 90 days of the determination, in 
which case the deduction may not be made during the pendency of 
the proceeding).". 
SEC. 16025. ASSIGNMENT AND REFERRAL OF NDSL LOANS FOR COLLEC-
TION. 
20 use 1
0
8
7
C
C
. 
Section 463(a)(5) of the Act is amended to read as follows: 
"(5) provide that where a note or written agreement evidenc-
ing a loan has been in default despite due diligence on the part 
of the institution in attempting collection thereon— 
"(A) if the institution has knowingly failed to maintain 
an acceptable collection record with respect to such loan, as 
determined by the Secretary in accordance with criteria 
established by regulation, the Secretary may— 
"(i) require the institution to assign such note or 
agreement to the Secretary, without recompense; and 
"(ii) apportion any sums collected on such a loan (less 
an amount not to exceed 30 per centum of any sums 
collected to cover the Secretary's collection costs) 
among other institutions in accordance with section 
20 use I087bb. 
462; or 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 353 
"(B) if the institution is not one described in clause (A), 
the Secretary may— 
"(i) allow such institution to transfer its interest in 
such loan to the Secretary, for collection, and the Sec-
retary may use any collections thereon (less an amount 
not to exceed 30 per centum of any sums collected to 
cover the Secretary's collection costs) to make alloca-
tions to institutions of additional capital contributions 
in accordance with section 462; or 
20 USC I087bb. 
"(ii) allow such institution to refer such note or 
agreement to the Secretary, without recompense, 
except that any sums collected on such a loan (less an 
amount not to exceed 30 per centum of any sums 
collected to cover the Secretary's collection costs) shall 
be repaid to such institution no later than 180 days 
after collection by the Secretary and treated as an 
additional capital contribution;". 
SEC. 16026. REPORTING BY CONSUMER REPORTING AGENCY O
N NDSL 
LOANS. 
Section 463(c) of the Act is amended by adding at the end the 20 USC 1087cc. 
following new paragraph: 
"(3) Notwithstanding paragraphs (4) and (6) of subsection (a) of 
section 605 of the Fair Credit Reporting Act (15 U.S.C. 1681c(a)(4), 
(a)(6)), a consumer reporting agency may make a report containing 
information received from the Secretary regarding the status of a 
borrower's account on a loan made under this part until the later 
of— 
"(A) seven years from the date on which the Secretary 
accepted an assignment or referral of a loan, or 
"(B) seven years from the date the Secretary first reported the 
account to a consumer reporting agency, if that account had not 
been previously reported by any other holder of the note.". 
SEC. 16027. DEFAULT PENALTY ON NDSL LOANS. 
Section 463A(a)(7) of the Act is amended by inserting immediately 20 USC I087cc-1. 
before the semicolon at the end thereof the following: "and a 
description of any penalty imposed as a consequence of default, such 
as liability for expenses reasonably incurred in attempts by the 
Secretary or institutions to collect on a loan". 
SEC. 16028. NDSL LOAN AGREEMENTS. 
(a) CHARGES FOR LATE PAYMENTS.—Section 464(cXlXH) of the Act 20 use I087dd. 
is amended to read as follows: 
"(H) pursuant to regulations of the Secretary, shall provide 
for an assessment of a charge with respect to the loan for failure 
of the borrower to pay all or part of an installment when due, 
which shall include the expenses reasonably incurred in 
attempting collection of the loan, to the extent permitted by the 
Secretary, except that no charge imposed under this clause 
shall exceed 20 per centum of the amount of the monthly 
payment of the borrower; and". 
(b) CONFORMING AMENDMENT.—Section 464(cX4) of the 
Act 
is 
amended to read as follows: 
"(4) The institution may elect— 
"(A) to add the amount of any charge imposed under para-
graph (IXH) to the principal amount of the loan as of the first 
71-1Q4 n -
RQ -
14
• OT. -^ Pai-hl
100 STAT. 354 
PUBLIC LAW 99-272—APR. 7, 1986 
day after the day on which the installment was due and to 
notify the borrower of the assessment of the charge; or 
"(B) to make the amount of the charge payable to the institu-
tion not later than the due date of the next installment.". 
SEC. 16029. REFERRAL OF NDSL LOANS FOR COLLECTION. 
Section 467 of the Act is amended to read as follows: 
"COLLECTION OF DEFAULTED LOANS 
20 use I087gg. 
"SEC. 467. (a) With respect to any loan— 
"(1) which was made under this part, and 
"(2) which is referred, transferred, or assigned to the Sec-
20 use 1
0
8
7
C
C
. 
retary by an institution with an agreement under section 463(a), 
the Secretary is authorized to attempt to collect such loan by any 
means authorized by law for collecting claims of the United States 
(including referral to the Attorney General for litigation) and under 
such terms and conditions as the Secretary may prescribe, including 
reimbursement for expenses reasonably incurred in attempting such 
collection. 
"(b) The Secretary shall continue to attempt to collect any loan 
referred, transferred, or assigned under paragraph (5)(A), (5)(B)(i), or 
(6) of section 463(a) until all appropriate collection efforts, as deter-
mined by the Secretary, have been expended.". 
Subtitle C—Savings Related to General 
Provisions 
SEC. 1603L EXCLUSION OF LIQUIDATION PROCEEDS FROM FAMILY CON-
TRIBUTION COMPUTATIONS. 
20 use 1089. 
Section 482 of the Act is amended by adding at the end thereof the 
following new subsection: 
"(f) The Secretary shall, within 30 days after the date of enact-
ment of this subsection, promulgate special regulations to permit, in 
the computation of family contributions for the programs under 
subpart 1 of part A and part B of this title for any academic year 
beginning on or after July 1,1985, the exclusion from family income 
of any proceeds of a sale of farm or business assets of that family if 
such sale results from a voluntary or involuntary foreclosure, for-
feiture, or bankruptcy.". 
SEC. 16032. ADDITIONAL ELIGIBILITY REQUIREMENTS FOR STUDENT 
LOANS. 
20 use 1091. 
(a) 
STUDENT IDENTIFICATION.—Section 484(a) of the Act is 
amended— 
(1) by striking out the word "such" each place it appears in 
paragraph (4) and inserting in lieu thereof "any"; and 
(2) by striking out "(which need not be notarized)" in para-
graph (5) and inserting in lieu thereof "(which need not be 
notarized but which shall include such student's social security 
number or, if the student does not have a social security 
number, such student's student identification number)". 
(b) EuGiBiLiTY DETERMINATIONS.—Section 484 
of the 
Act 
is 
amended by redesignating subsection (b) as subsection (c) and by 
inserting after subsection (a) the following new subsection: 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 355 
"(b) In order to be eligible to receive any loan under this title 
(other than a loan under section 428B or 428C) for any period of 20 USC 1078-2. 
enrollment, a student who is not a graduate or professional student 
^"^e- P- 343. 
(as defined in regulations of the Secretary), and who is enrolled in a 
program at an institution which has a participation agreement with 
the Secretary to make awards under subpart 1 of part A of this title, 
shall— 
"(1) have received a determination of eligibility or ineligibility 
for a grant under such subpart 1 for such period of enrollment; 
or 
"(2) have (A) filed an application with the Pell Grant proc-
essor for such institution for such enrollment period; and (B) 
received from the financial aid administrator of the institution 
a preliminary determination of the student's eligibility or ineli-
gibility for a grant under such subpart 1.". 
(c) CONFORMING AMENDMENT.—Section 428(aX2)(C)(i) of the Act is 
20 use 1078. 
amended by striking out "subparts 1 and 2 of part A," and inserting 
in lieu thereof "subpart 1 of part A (as determined in accordance 
with section 484(b)), subpart 2 of part A,". 
SEC. 16033. STATUTE OF LIMITATIONS. 
Part F of title IV of the Act is amended by adding immediately 
after section 484 the following new section: 
STATUTE OF LIMITATIONS 
"SEC. 484A. (a) Notwithstanding any provision of State law that 
would set an earlier deadline for filing suit— 
"(1) an institution which receives funds under this title may 
file suit for collection of a refund due from a student on a grant 
made or work assistance awarded under this title during a 
period of time extending at least until a date six years (exclu-
sive of periods during which the State statute of limitations 
period otherwise applicable to the suit would be tolled under 
State law) after the date the refund first became due; 
"(2) a guaranty agency which has an agreement with the 
Secretary under section 428(c) may file suit for collection of the 
amount due from a borrower on a loan made under part B of 
this title during a period of time extending at least until a date 
six years (exclusive of periods during which the State statute of 
limitations period otherwise applicable to the suit would be 
tolled under State law) after the date such guaranty agency 
reimburses the previous holder of the loan for its loss on 
account of the default of the borrower; and 
"(3) an institution which has an agreement with the Secretary 
pursuant to section 463(a) may file suit for collection of the 
amount due from a borrower on a loan made under part E of 
this title during a period of time extending at least until a date 
six years (exclusive of periods during which the State statute of 
limitations period otherwise applicable to the suit would be 
tolled under State law) after the date of the default of the 
borrower with respect to that amount; and 
"(4) subject to the provisions of section 2416 of title 28 of the 
United States Code, the Attorney General may file suit— 
"(A) for payment of a refund due from a student on a 
grant made under this title until six years following the 
date on which the refund first became due; 
20 USC 1091a. 
Grants. 
Claims. 
20 USC 1078. 
20 USC 1071. 
20 USC 1087CC. 
20 USC 1088. 
100 STAT. 356 
PUBLIC LAW 99-272—APR. 7, 1986 
"(B) for collection of the amount due the Secretary from a 
20 use 1078. 
borrower pursuant to section 428(c)(2)(D) of this title until 
six years following the date on which the loan is assigned to 
the Secretary under part B of this title; and 
"(C) for collection of the amount due from a borrower on 
a loan made under this part until six years following the 
date on which the loan is £issigned, transferred, or referred 
to the Secretary under part E of this title. 
"(b) Notwithstanding any provision of State law to the contrary— 
"(1) a borrower who has defaulted on a loan made under this 
title shall be required to pay, in addition to other charges 
specified in this title, reasonable collection costs; and 
"(2) in collecting any obligation arising from a loan made 
under part B of this title, a guaranty agency or the Secretary 
shall not be subject to a defense raised by any borrower based 
on a claim of infancy.". 
SEC. 16034. PROGRAM PARTICIPATION AGREEMENTS. 
(a) USE OF INTEREST ON FUNDS RECEIVED.—Section 487(a)(1) of the 
20 use 1094. 
Act is amended to read as follows: 
"(1) The institution will use funds received by it for any 
program under this title and any interest or other earnings 
thereon solely for the purposes specified in, and in accordance 
with the provision of, that program.". 
(b) AUDIT AND RECOVERY OF FUNDS.—Section 487(b)(1) of the Act is 
amended by striking out subparagraph (A) and inserting in lieu 
thereof the following: 
"(A)(i) except as provided in clause (ii), a financial and compli-
ance audit of an eligible institution, with regard to any funds 
obtained by it under this title or obtained from a student or a 
parent who has a loan insured or guaranteed by the Secretary 
under this title, at least once every two years and covering the 
period since the most recent audit, conducted by a qualified, 
independent organization or person in accordance with stand-
ards established by the Comptroller General for the audit of 
governmental organization, programs, and functions, and as 
prescribed in regulations of the Secretary, the results of which 
shall be submitted to the Secretary; or 
"(ii) with regard to an eligible institution which is audited 
31 use 7501 et 
under chapter 75 of title 31, United States Code, deeming such 
seq- 
audit to satisfy the requirements of clause (i) for the period 
covered by such audit;". 
Subtitle D—Effective Dates 
20 use 1072 
SEC. 16041. EFFECTIVE DATES. 
(a) GENERAL RULE.—Except as otherwise provided in this section, 
the amendments made by this subtitle shall take effect on the date 
of enactment of this Act. 
(b) PROSPECTIVE PROVISIONS; LOANS.—(1) The amendments made 
by sections 16012, 16027, and 16028 shall apply to loans to cover the 
cost of attendance for any period of enrollment beginning on or after 
January 1,1986. 
(2) The amendments made by section 16013 shall apply to loans 
made on or after July 1,1986. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 357 
(c) RETROACTIVE PROVISIONS; LOANS.—(1) The amendment made by 
section 16015 shall apply to any fiscal year beginning after Septem-
ber 30,1984. 
(2) The amendments made by sections 16021 through 16026, 16029, 
and 16032(b) shall apply to all loans, including loans made before 
the enactment of this Act, and shall take effect 90 days after the 
enactment of this Act. 
(d) PROSPECTIVE PROVISION; ALL ASSISTANCE.—The amendment 
made by section 16032(a) shall apply to grants, loans, or work 
assistance to cover the cost of attendance for any period of enroll-
ment beginning on or after January 1,1986. 
(e) RETROACTIVE PROVISION; GRANTS.—The amendment made by 
section 16033 shall apply to all grants, including grants awarded 
before the enactment of this Act, and shall take effect 90 days after 
the enactment of this Act. 
(f) RETROACTIVE PROVISIONS; ALL ASSISTANCE.—The amendment 
made by section 16034 shall apply to all grants, loans, or work 
assistance, including such assistance awarded before the enactment 
of this Act, and shall take effect 90 days after the enactment of this 
Act. 
TITLE XVII—GRADUATE MEDICAL EDU-
CATION 
COUNCIL AND TECHNICAL 
AMENDMENTS TO THE PUBLIC HEALTH 
SERVICE ACT 
SEC. 17001. COUNCIL ON GRADUATE MEDICAL EDUCATION. 
Title VII of the Public Health Service Act is amended by adding at 
the end thereof the following new part: 
"PART H—GRADUATE MEDICAL EDUCATION 
"COUNCIL ON GRADUATE MEDICAL EDUCATION 
"SEC. 799. (a) There is established the Council on Graduate Medi- 42 use 295i. 
cal Education (hereafter in this section referred to as the 'Council'). 
The Council shall— 
"(1) prior to July 1, 1988, and every three years thereafter, 
provide advice and make recommendations to the Secretary and 
to the Committees on Labor and Human Resources, and Fi-
nance of the Senate and the Committees on Energy and Com-
merce and Ways and Means of the House of Representatives, 
with respect to— 
"(A) the supply and distribution of physicians in the 
United States; 
"(B) current and future shortages or excesses of physi-
cians in medical and surgical specialties and subspecialties; 
"(C) issues relating to foreign medical school graduates; 
"(D) appropriate Federal policies with respect to the mat-
ters specified in subparagraphs (A), (B), and (C), including 
policies concerning changes in the financing of undergradu-
ate and graduate medical education programs and changes 
in the types of medical education training in graduate 
medical education programs; 
100 STAT. 358 
PUBLIC LAW 99-272—APR. 7, 1986 
"(E) appropriate efforts to be carried out by hospitals, 
schools of medicine, schools of osteopathy, and accrediting 
bodies with respect to the matters specified in subpara-
graphs (A), (B), and (C), including efforts for changes in 
undergraduate and graduate medical education programs; 
and 
"(F) deficiencies in, and needs for improvements in, exist-
ing data bases concerning the supply and distribution of, 
and post-graduate training programs for, physicians in the 
United States and steps that should be taken to eliminate 
those deficiencies; and 
"(2) encourage entities providing graduate medical education 
to conduct activities to voluntarily achieve the recommenda-
tions of the Council under paragraph (1)(E). 
"(b) The Council shall be composed of^ 
"(1) the Assistant Secretary for Health or the designee of the 
Assistant Secretary; 
"(2) the Administrator of the Health Care Financing Adminis-
tration; 
"(3) the Chief Medical Director of the Veterans' Administra-
tion; 
"(4) 6 members appointed by the Secretary to include rep-
resentatives of practicing primary care physicians, national and 
specialty physician organizations, foreign medical graduates, 
and medical student and house staff associations; 
"(5) 4 members appointed by the Secretary to include rep-
resentatives of schools of medicine and osteopathy and public 
and private teaching hospitals; and 
"(6) 4 members appointed by the Secretary to include rep-
resentatives of health insurers, business, and labor. 
"(c)(1) Members of the Council appointed under paragraphs (4), (5), 
and (6) of subsection (b) shall be appointed for a term of 4 years, 
except that the term of office of the members first appointed shall 
expire, as designated by the Secretary at the time of appointment, 4 
at the end of one year, 4 at the end of 2 years, 3 at the end of 3 years, 
and 3 at the end of 4 years. 
"(2) The Secretary shall appoint the first members to the Council 
under paragraphs (4), (5), and (6) of subsection (b) within 60 days 
after the date of enactment of this section. 
"(d) The Council shall elect one of its members as Chairman of the 
Council. 
"(e) Nine members of the Council shall constitute a quorum, but a 
lesser number may hold hearings. 
"(f) Any vacancy in the Council shall not affect its power to 
function. 
"(g) Each member of the Council who is not otherwise employed 
by the United States Government shall receive compensation at a 
rate equal to the daily rate prescribed for GS-18 under the General 
Schedule under section 5332 of title 5, United States Code, for each 
day, including traveltime, such member is engaged in the actual 
performance of duties as a member of the Council. A member of the 
Council who is an officer or employee of the United States Govern-
ment shall serve without additional compensation. All members of 
the Council shall be reimbursed for travel, subsistence, and other 
necessary expenses incurred by them in the performance of their 
duties. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 359 
42 u s e 292b. 
42 u s e 292h. 
"(hXD In order to carry out the provisions of this section, the 
Council is authorized to— 
"(A) collect such information, hold such hearings, and sit and 
act at such times and places, either as a whole or by subcommit-
tee, and request the attendance and testimony of such witnesses 
and the production of such books, records, correspondence, 
memoranda, papers, and documents as the Council or such 
subcommittee may consider available; and 
"(B) request the cooperation and assistance of Federal depart-
ments, agencies, and instrumentalities, and such departments, 
agencies, and instrumentalities are authorized to provide such 
cooperation and assistance. 
"(2) The Council shall coordinate activities carried out under this 
section with the activities of the National Advisory Council on 
Health Professions Education under section 702 and with the activi-
ties of the Secretary under section 708. The Secretary shall, in 
cooperation with the Council and pursuant to the recommendations 
of the Council, take such steps as are practicable to eliminate 
deficiencies in the data base established under section 708 and shall 
make available in its reports such comprehensive data sets as are 
developed pursuant to this section. 
"(i) In the reports required under subsection (a), the Council shall 
specify its activities during the period for which the report is made. 
"(j) The Council shall terminate on September 30,1996." 
SEC. 17002. SPECIAL PAY PROVISIONS. 
(a) 
SERVICE 
IN 
THE 
INDIAN 
HEALTH 
SERVICE.—(1) Section 
208(a)(2)(B) of the Public Health Service Act (42 U.S.C. 210(a)(2)(B)) is 
amended by inserting "(other than an officer serving in the Indian 
Health Service)" after "Corps". 
(2) The amendment made by paragraph (1) shall take effect as of 42 use 210 note. 
October 7,1985. 
(b) 
EMPLOYEES AT THE GILLIS W, 
LONG HANSEN'S DISEASE 
CENTER.—Section 208(e) of the Public Health Service Act (42 U.S.C. 
210(e)) is amended to read as follows: 
"(e) Any civilian employee of the Service who is employed at the 
Gillis W. Long Hansen's Disease Center on the date of the enact-
ment of the Consolidated Omnibus Budget Reconciliation Act of 
1985 shall be entitled to receive, in addition to any compensation to Ante, p. 82. 
which the employee may otherwise be entitled and for so long as the 
employee remains employed at the Center, an amount equal to one-
fourth of such compensation.". 
SEC. 17003. USE OF FISCAL AGENTS BY PUBLIC HEALTH SERVICE. 
Title XXI of the Public Health Service Act is amended by adding 
at the end the following new section: 
Reports. 
Termination 
date. 
USE OF FISCAL AGENTS 
"SEC. 2116. (a) The Secretary may enter into contracts with fiscal 
agents— 
"(1)(A) to determine the amounts payable to persons who, on 
behalf of the Indian Health Service, furnish health services to 
eligible Indians, 
"(B) to determine the amounts payable to persons who, on 
behalf of the Public Health Service, furnish health services to 
individuals pursuant to section 319 or 322, 
Contracts. 
42 use 
300aa-15. 
42 u s e 247d, 
249. 
100 STAT. 360 
PUBLIC LAW 99-272—APR. 7, 1986 
"(2) to receive, disburse, and account for funds in making 
payments described in paragraph (1), 
"(3) to make such audits of records as may be necessary to 
assure that these payments are proper, and 
"(4) to perform such additional functions as may be necessary 
to carry out the functions described in paragraphs (1) through 
(3). 
"(b)(1) Contracts under subsection (a) may be entered into without 
regard to section 3709 of the Revised Statutes (41 U.S.C. 5) or any 
other provision of law requiring competition. 
"(2) No such contract shall be entered into with an entity unless 
the Secretary finds that the entity will perform its obligations under 
the contract efficiently and effectively and will meet such require-
ments as to financial responsibility, legal authority, and other mat-
ters as he finds pertinent. 
"(c) A contract under subsection (a) may provide for advances of 
funds to enable entities to make payments under the contract. 
"(d) Subsections (d) and (e) of section 1842 of the Social Security 
42 use I395u. 
Act shall apply to contracts with entities under subsection (a) in the 
same manner as they apply to contracts with carriers under that 
section. 
"(e) In this section, the term 'fiscal agent' means a carrier de-
scribed in section 1842(f)(1) of the Social Security Act and includes, 
with respect to contracts under subsection (a)(1)(A), an Indian tribe 
or tribal organization acting under contract with the Secretary 
under the Indian Self-Determination Act (Public Law 93-638).". 
SEC. 17004. TECHNICAL REVISIONS RELATING TO EMERGENCY MEDICAL 
SERVICES FOR CHILDREN. 
Section 1910 of the Public Health Service Act (42 U.S.C. 300w-9) is 
amended— 
(1) by striking out "grant to not more than four States in any 
fiscal year" in the first sentence of subsection (a) and inserting 
in lieu thereof "not more than four grants in any fiscal year to 
States or accredited schools of medicine in States"; 
(2) by adding at the end of subsection (a) the following new 
sentence: "Only one grant under this subsection may be made 
in a State (to a State or to a school of medicine in such State) in 
any fiscal year."; 
(3) by striking out "other States" in subsection (b) and insert-
ing in lieu thereof "States in which grants under such subsec-
tion have not been made"; 
(4) by redesignating subsection (c) as subsection (d); and 
(5) by inserting after subsection (b) the following new subsec-
tion: 
"(c) For purposes of this section— 
"(1) the term 'school of medicine' has the same meaning as in 
42 use 292a. 
section 701(4); and 
"(2) the term 'accredited' has the same meaning as in section 
701(5).". 
25 u s e 450 note. 
Grants. 
State and local 
governments. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 361 
TITLE XVIII—SMALL BUSINESS 
PROGRAMS 
SEC. 18001. SMALL 
BUSINESS 
ADMINISTRATION 
PROGRAM 
AND 
AUTHORIZATION LEVELS. 
Section 20 of the Small Business Act is amended by adding the 
following new subsections: 
"(u) The following program levels are authorized for fiscal year 
1986— 
"(1) for the programs authorized by section 7(a) of this Act, 
the Administration is authorized to make $60,000,000 in direct 
and immediate participation loans; and of such sum, the 
Administration is authorized to make $15,000,000 in loans as 
provided in paragraph (10), $25,000,000 in loans as provided in 
paragraph (11), and $20,000,000 in loans to disabled veterans 
and Vietnam era veterans as defined in section 1841, title 38, 
United States Code, under the general terms and conditions of 
title III of Public Law 97-72; 
"(2) for the programs authorized by section 7(a) of this Act 
and section 503 of the Small Business Investment Act of 1958, 
the Administration is authorized to make $2,971,000,000 in 
deferred participation loans and guarantees of debentures; and 
of such sum, the Administration is authorized to make 
$5,000,000 in loans as provided in paragraph (10), $60,000,000 in 
loans as provided in paragraph (11), $15,000,000 in loans as 
provided in paragraph (12), $400,000,000 in loans as provided in 
paragraph (13) and guarantees of debentures as provided in 
section 503; 
"(3) for the programs authorized by title III of the Small 
Business Investment Act of 1958, the Administration is au-
thorized to make $41,000,000 in direct purchases of debentures 
and preferred securities and to make $250,000,000 in guarantees 
of debentures; 
"(4) for the programs authorized by part B of title IV of the 
Small Business Investment Act of 1958, the Administration is 
authorized to enter into guarantees not to exceed $1,050,000,000; 
and 
"(5) for the programs authorized in sections 404 and 405 of the 
Small Business Investment Act of 1958, the Administration is 
authorized to enter into guarantees not to exceed $75,000,000. 
"(v) There are authorized to be appropriated to the Administra-
tion for fiscal year 1986, $515,000,000. Of such sum, $295,000,000 
shall be available for the purpose of carrying out the programs 
referred to in paragraphs (1) through (3) of subsection (u); 
$12,000,000 shall be available for the purposes of carrying out the 
provisions of section 412 of the Small Business Investment Act of 
1958; and $208,000,000 shall be available for salaries and expenses of 
the Administration. There also are hereby authorized to be appro-
priated such sums as may be necessary and appropriate to carry out 
the provisions and purposes, including administrative expenses, of 
sections 7(bXl) and 703)(2) of this Act; and there are authorized to be 
transferred from the disaster loan revolving funds such sums as may 
be necessary and appropriate for such administrative expenses, 
"(w) The following program levels are authorized for fiscal year 
1987— 
15 use 631 note. 
15 use 636. 
Loans. 
Veterans. 
38 use 101 note. 
15 use 697. 
15 use 681. 
15 use 694a. 
15 use 694-1, 
694-2. 
Loans. 
15 use 694c. 
15 use 636. 
100 STAT. 362 
PUBLIC LAW 99-272—APR. 7, 1986 
Loans. 
Veterans. 
38 use 101 note. 
15 use 697. 
15 use 681. 
15 use 694a. 
15 use 694-1, 
694-2. 
15 use 694c. 
15 use 636. 
Loans. 
Veterans. 
15 use 697. 
"(1) for the programs authorized by section 7(a) of this Act, 
the Administration is authorized to make $70,000,000 in direct 
and immediate participation loans; and of such sum, the 
Administration is authorized to make $15,000,000 in loans as 
provided in paragraph (10), $35,000,000 in loans as provided in 
paragraph (11), and $20,000,000 in loans to disabled veterans 
and Vietnam era veterans as defined in section 1841, title 38, 
United States Code, under the general terms and conditions of 
title III of Public Law 97-72; 
"(2) for the programs authorized by section 7(a) of this Act 
and section 503 of the Small Business Investment Act of 1958, 
the Administration is authorized to make $3,134,000,000 in 
deferred participation loans and guarantees of debentures; and 
of such sum, the Administration is authorized to make 
$5,000,000 in loans as provided in paragraph (10), $63,000,000 in 
loans as provided in paragraph (11), $16,000,000 in loans as 
provided in paragraph (12), $450,000,000 in loans as provided in 
paragraph (13) and guarantees of debentures as provided in 
section 503; 
"(3) for the programs authorized by title III of the Small 
Business Investment Act of 1958, the Administration is au-
thorized to make $41,000,000 in direct purchases of debentures 
and preferred securities and to make $261,000,000 in guarantees 
of debentures; 
"(4) for the programs authorized by part B of title IV of the 
Small Business Investment Act of 1958, the Administration is 
authorized to enter into guarantees not to exceed $1,096,000,000; 
and 
"(5) for the programs authorized in sections 404 and 405 of the 
Small Business Investment Act of 1958, the Administration is 
authorized to enter into guarantees not to exceed $75,000,000. 
"(x) There are authorized to be appropriated to the Administra-
tion for fiscal year 1987, $605,000,000. Of such sum, $381,000,000 
shall be available to carry out the programs referred to in para-
graphs (1) through (3) of subsection (w); $14,000,000 shall be avail-
able to carry out the provisions of section 412 of the Small Business 
Investment Act of 1958; and $210,000,000 shall be available for 
salaries and expenses of the Administration. There also are hereby 
authorized to be appropriated such sums as may be necessary and 
appropriate to carry out the provisions and purposes, including 
administrative expenses, of sections 7(b)(1) and 7(b)(2) of this Act; 
and there are authorized to be transferred from the disaster loan 
revolving funds such sums as may be necessary and appropriate for 
such administrative expenses. 
"(y) The following program levels are authorized for fiscal year 
1988— 
"(1) for the programs authorized by section 7(a) of this Act, 
the Administration is authorized to make $75,000,000 in direct 
and immediate participation loans; and of such sum, the 
Administration is authorized to make $15,000,000 in loans as 
provided in paragraph (10), $40,000,000 in loans as provided in 
paragraph (11), and $20,000,000 in loans to disabled veterans 
and Vietnam era veterans as defined in section 1841, title 38, 
United States Code, under the general terms and conditions of 
title III of Public Law 97-72; 
"(2) for the programs authorized by section 7(a) of this Act 
and section 503 of the Small Business Investment Act of 1958, 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 363 
the Administration is authorized to make $3,245,000,000 in 
deferred participation loans and guarantees of debentures; and 
of such sum, the Administration is authorized to make 
$5,000,000 in loans as provided in paragraph (10), $65,000,000 in 
loans as provided in paragraph (11), $16,000,000 in loans as 
provided in paragraph (12), $450,000,000 in loans as provided in 
paragraph (13) and guarantees of debentures as provided in 
section 503; 
15 use 697. 
"(3) for the programs authorized by title III of the Small 
Business Investment Act of 1958, the Administration is au- 15 USC 681. 
thorized to make $41,000,000 in direct purchases of debentures 
and preferred securities and to make $272,000,000 in guarantees 
of debentures; 
"(4) for the programs authorized by part B of title IV of the 
Small Business Investment Act of 1958, the Administration is 15 USC 694a. 
authorized to enter into guarantees not to exceed $1,142,000,000; 
and 
"(5) for the programs authorized in sections 404 and 405 of the 
Small Business Investment Act of 1958, the Administration is 
15 USC 694-1, 
authorized to enter into guarantees not to exceed $75,000,000. 694-2. 
"(z) There are authorized to be appropriated to the Administration 
for fiscal year 1988, $634,000,000. Of such sum, $409,000,000 shall be 
available to carry out the programs referred to in paragraphs (1) 
through (3) of subsection (y); $13,000,000 shall be available to carry 
out the provisions of section 412 of the Small Business Investment 
Act of 1958; and $212,000,000 shall be available for salaries and 15 USC 694c. 
expenses of the Administration. There also are hereby authorized to 
be appropriated such sums as may be necessary and appropriate for 
the carrying out of the provisions and purposes, including adminis-
trative expenses, of sections 7(b)(1) and 7(b)(2) of this Act; and there 
15 USC 636. 
are authorized to be transferred from the disaster loan revolving 
funds such sums as may be necessary and appropriate for such 
administrative expenses. . 
SEC. 18002. TECHNICAL AND CLERICAL AMENDMENTS. 
Section 20 of the Small Business Act is amended— 
15 USC 631 note. 
(1) in subsection (t), as added by section 302 of Public Law 
98-270 
(A) by inserting "(1)" after "(t)"; 
(B) by striking out "each of fiscal years 1985 and 1986," 
and inserting in lieu thereof "fiscal year 1985"; and 
(C) by striking out "for each of such years"; and 
(2) in subsection (t), £is added by section 3 of Public Law 98-
395— 
(A) by redesignating paragraphs (1), (2), and (3) as sub-
paragraphs (A), (B), and (C), respectively; and 
(B) by redesignating such subsection (t) as paragraph (2). 
SEC. 18003. DETERMINATION OF LABOR SURPLUS AREAS. 
(a) IN GENERAL.—Section 15 of the Small Business Act is amended 
15 USC 644. 
by adding at the end thereof the following new subsection: 
"(n) For purposes of this section, the determination of labor 
surplus areas shall be made on the basis of the criteria in effect at 
the time of the determination, except that any minimum population 
criteria shall not exceed twenty-five thousand. Such determination, 
as modified by the preceding sentence, shall be made by the Sec-
retary of Labor.". 
100 STAT. 364 
PUBLIC LAW 99-272—APR. 7, 1986 
15 use 644 note. 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall take effect on the ninetieth day after the date of the enactment 
of this Act. 
SEC. 18004. FEDERAL FINANCING BANK PURCHASE OF GUARANTEED 
OBLIGATIONS. 
(a) IN GENERAL.—Title III of the Small Business Investment Act of 
1958 is amended by adding at the end thereof the following new 
section: 
"GUARANTEED OBUGATIONS NOT ELIGIBLE FOR PURCHASE BY FEDERAL 
FINANCING BANK 
15 use 687k. 
"SEC. 320. Nothing in any provision of law shall be construed to 
authorize the Federal Financing Bank to acquire after September 
30,1985— 
"(1) any obligation the payment of principal or interest on 
which has at any time been guaranteed in whole or in part 
under this title, 
"(2) any obligation which is an interest in any obligation 
described in paragraph (1), or 
"(3) any obligation which is secured by, or substantially all of 
the value of which is attributable to, any obligation described in 
paragraph (1) or (2).". 
Ot)) CLERICAL AMENDMENT.—The table of sections for title III is 
amended by adding at the end thereof the following new item: 
"Sec. 320. Guaranteed obligations not eligible for purchase by Federal Financing 
Bank.". 
SEC. 18005. ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES. 
(a) IN GENERAL.—Title III of the Small Business Investment Act of 
1958 is amended by adding at the end thereof the following new 
section: 
"ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES 
15 use 687/. 
"SEC. 321. (a) The Administration is authorized to issue trust 
certificates representing ownership of all or a fractional part of 
debentures issued by small business investment companies and 
guaranteed by the Administration under this Act: Provided, That 
such trust certificates shall be based on and backed by a trust or 
pool approved by the Administration and composed solely of guaran-
teed debentures. 
"(b) The Administration is authorized, upon such terms and condi-
tions as are deemed appropriate, to guarantee the timely payment of 
the principal of and interest on trust certificates issued by the 
Administration or its agent for purposes of this section. Such 
guarantee shall be limited to the extent of principal and interest on 
the guaranteed debentures which compose the trust or pool. In the 
event that a debenture in such trust or pool is prepaid, either 
voluntarily or in the event of default, the guarantee of timely 
payment of principal and interest on the trust certificates shall be 
reduced in proportion to the amount of principal and interest such 
prepaid debenture represents in the trust or pool. Interest on pre-
paid or defaulted debentures shall accrue and be guaranteed by the 
Administration only through the date of payment on the guarantee. 
During the term of the trust certificate, it may be called for redemp-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 365 
tion due to prepayment or default of all debentures constituting the 
pool. 
"(c) The full faith and credit of the United States is pledged to the 
payment of all amounts which may be required to be paid under any 
guarantee of such trust certificates issued by the Administration or 
its agent pursuant to this section. 
"(d) The Administration shall not collect any fee for any guaran-
tee under this section: Provided, That nothing herein shall preclude 
any agent of the Administration from collecting a fee approved by 
the Administration for the functions described in subsection (f)(2) of 
this section. 
"(e)(1) In the event the Administration pays a claim under a 
guarantee issued under this section, it shall be subrogated fully to 
the rights satisfied by such payment. 
"(2) No State or local law, and no Federal law, shall preclude or 
limit the exercise by the Administration of its ownership rights in 
the debentures constituting the trust or pool against which the trust 
certificates are issued. 
"(f) The Administration shall— 
"(1) provide for a central registration of all trust certificates 
sold pursuant to this section; such central registration shall 
include with respect to each sale, identification of each develop-
ment company; the interest rate paid by the development com-
pany; commissions, fees, or discounts paid to brokers and 
dealers in trust certificates; identification of each purchaser of 
the trust certificate; the price paid by the purchaser for the 
trust certificate; the interest rate paid on the trust certificate; 
the fees of any agent for carrying out the functions described in 
paragraph (2); and such other information as the Administra-
tion deems appropriate; 
"(2) contract with an agent to carry out on behalf of the Contracts 
Administration the central registration functions of this section 
and the issuance of trust certificates to facilitate poolings; such 
agent shall provide a fidelity bond or insurance in such amounts 
as the Administration determines to be necessary to fully pro-
tect the interests of the Government; 
"(3) prior to any sale, require the seller to disclose to a 
purchaser of a trust certificate issued pursuant to this section, 
information on the terms, conditions, and yield of such in-
strument; and 
"(4) have the authority to regulate brokers and dealers in 
trust certificates sold pursuant to this section.", 
(b) RULES AND REGULATIONS; CONSULTATION.—(1) Notwithstanding 
any law, rule, or regulation, within 60 days after the date of the 
enactment of this Act, the Small Business Administration shall 
develop and promulgate final rules and regulations to implement 
the central registration provisions provided for in section 321(f)(1) of 
the Small Business Investment Act, and shall contract with an 
agent for an initial period of not to exceed two years to carry out the 
functions provided for in sections 321(f)(2) and 321(f)(3) of such Act. 
(2) Notwithstanding any law, rule, or regulation, within 60 days 
after the date of the enactment of this Act, the Small Business 
Administration also shall consult with representatives of appro-
priate Federal and State agencies and officials, the securities indus-
try, financial institutions and lenders, and small business persons, 
and shall develop and promulgate final rules and regulations to 
15 use 687Z 
note. 
Ante, p. 364. 
15 use 697b 
note. 
100 STAT. 366 
PUBLIC LAW 99-272—APR. 7, 1986 
Infra; post, 
implement sections 504 and 505 of the Small Business Investment 
P- 367. 
Act. 
(c) CLERICAL AMENDMENT.—The table of sections for title III of 
such Act is amended by adding at the end thereof the following new 
item: 
"Sec. 321. Issuance and guarantee of trust certificates.". 
SEC. 18006. TERMINATION OF AUTHORITY TO MAKE CERTAIN DISASTER 
ASSISTANCE LOANS. 
(a) IN GENERAL.—The Small Business Act is amended— 
15 use 636. 
(1) in section (7)(b)— 
(A) by striking out "The" after "(b)" and inserting in lieu 
Agriculture and 
thereof "Except as to agricultural enterprises as defined in 
agricultural 
section 18(b)(1) of this Act, the,"; 
commodities. 
(gj ^^ Striking out the semicolon at the end of paragraph 
(2) and inserting in lieu thereof a period; and 
(C) by striking out paragraphs (3) and (4); 
(2) in section 7(c)(4) by striking out the last, undesignated 
paragraph; and 
15 use 647. 
(3) in section 18(a) by striking out all that follows "Federal 
Government," through "Consolidated Farm and Rural Develop-
ment Act". 
15 use 636 note. 
O
t
>
) PIPELINE LoANS O
R PREVIOUS DISASTERS.—Notwithstanding the 
amendments made by this section, sections 18002 and 18016, or any 
other provision of law, the Small Business Administration shall 
continue to accept, process, and approve loan applications under 
paragraphs (1) through (4) of subsection 7(b) of the Small Business 
Act and shall obligate and disburse loan funds on account of disas-
ters declared before October 1, 1985, even if any such application is 
filed after the date of the enactment of this Act. 
SEC. 18007. GUARANTEE FEE. 
15 use 636. 
Section 7(a) of the Small Business Act is amended by adding at the 
end thereof the following new sentence: 
"(16) The Administration shall collect a guarantee fee equal 
to two percent of the amount of the deferred participation share 
of any loan under this subsection other than a loan repayable in 
one year or less or a loan under paragraph (13). The fee shall be 
payable by the participating lending institution and may be 
charged to the borrower.". 
SEC. 18008. PILOT PROGRAM INVOLVING SALE OF DEVELOPMENT COM-
PANY DEBENTURES. 
(a) PILOT PROGRAM.—Title V of the Small Business Investment 
Act of 1958 is amended by adding the following new section: 
15 use 697a. 
"SEC. 504. (a) Notwithstanding any other law, rule, or regulation, 
the Administration shall conduct a pilot program involving the sale 
to investors, either publicly or by private placement, of debentures 
guaranteed pursuant to section 503 of the Small Business Invest-
15 use 697. 
ment Act of 1958 as follows— 
"(1) of the program levels otherwise authorized by law for 
fiscal year 1986, an amount not to exceed $200,000,000; and 
"(2) of the program levels otherwise authorized by law for 
fiscal year 1987, an amount not to exceed $295,000,000. 
"(b) Nothing in any provision of law shall be construed to au-
thorize the Federal Financing Bank to acquire— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 367 
"(1) any obligation the payment of principal or interest on 
which at any time has been guaranteed in whole or in part 
under section 503 of the Small Business Investment Act of 1958 15 USC 697. 
and which is being sold pursuant to the provisions of the pilot 
program authorized in this section, 
"(2) any obligation which is an interest in any obligation 
described in paragraph (1), or 
"(3) any obligation which is secured by, or substantially all of 
the value of which is attributable to, any obligation described in 
paragraph (1) or (2).". 
0)) REPORT ON PILOT PROGRAMS.—The Administration shall report 15 use 697a 
to the President and the Congress on the conduct of the pilot note. 
program established under subsection (a) not later than 90 days 
after the date on which the last sale is made pursuant to such 
subsection in each fiscal year, and unless a report has been made 
not later than October 1 of 1986 and 1987, the Administration shall 
make an interim report by such dates. 
(c) AUTHORITY FOR ISSUANCE OF TRUST CERTIFICATES.—Such title is 
further amended by adding at the end thereof the following new 
section: 
"SEC. 505. (a) The Administration is authorized to issue trust 
15 USC 697b. 
certificates representing ownership of all of a fractional part of 
debentures issued by State or local development companies and 
guaranteed by the Administration under this Act: Provided, That 
such trust certificates shall be based on and backed by a trust or 
pool approved by the Administration and composed solely of guaran-
teed debentures. 
"(h) The Administration is authorized, upon such terms and condi-
tions as are deemed appropriate, to guarantee the timely payment of 
the principal of and interest on trust certificates issued by the 
Administration or its agent for purposes of this section. Such 
guarantee shall be limited to the extent of principal and interest on 
the guaranteed debentures which compose the trust or pool. In the 
event that a debenture in such trust or pool is prepaid, either 
voluntarily or in the event of default, the guarantee of timely 
payment of principal and interest on the trust certificates shall be 
reduced in proportion to the amount of principal and interest such 
prepaid debenture represents in the trust or pool. Interest on pre-
paid or defaulted debentures shall accrue and be guaranteed by the 
Administration only through the date of payment on the guarantee. 
During the term of the trust certificate, it may be called for redemp-
tion due to prepayment or default of all debentures constituting the 
pool. 
"(c) The full faith and credit of the United States is pledged to the 
payment of all amounts which may be required to be paid under any 
guarantee of such trust certificates issued by the Administration or 
its agent pursuant to this section. 
"(d) The Administration shall not collect any fee for any guaran-
tee under this section: Provided, That nothing herein shall preclude 
any agent of the Administration from collecting a fee approved by 
the Administration for the functions described in subsection (f)(2) of 
this section. 
"(e)(1) In the event the Administration pays a claim under a 
guarantee issued under this section, it shall be subrogated fully to 
the rights satisfied by such payment. 
"(2) No State or local law, and no Federal law, shall preclude or State and local 
limit the exercise by the Administration of its ownership rights in governments. 
100 STAT. 368 
PUBLIC LAW 99-272—APR. 7, 1986 
Contracts. 
Insurance. 
15 use 697b 
note. 
Ante, p. 367. 
Ante, p. 366. 
15 use 645. 
Contracts. 
Law 
enforcement 
and crime. 
15 use 638, 644. 
15 use 637. 
the debentures constituting the trust or pool against which the trust 
certificates are issued. 
"(f) The Administration shall— 
"(1) provide for a central registration of all trust certificates 
sold pursuant to this section; such central registration shall 
include with respect to each sale, identification of each develop-
ment company; the interest rate paid by the development com-
pany; commissions, fees, or discounts paid to brokers and 
dealers in trust certificates; identification of each purchaser of 
the trust certificate; the price paid by the purchaser for the 
trust certificate; the interest rate paid on the trust certificate; 
the fees of any agent for carrying out the functions described in 
paragraph (2); and such other information as the Administra-
tion deems appropriate; 
"(2) contract with an agent to carry out on behalf of the 
Administration the central registration functions of this section 
and the issuance of trust certificates to facilitate poolings; such 
agent shall provide a fidelity bond or insurance in such amounts 
as the Administration determines to be necessary to fully pro-
tect the interests of the Government; 
"(3) prior to any sale, require the seller to disclose to a 
purchaser of a trust certificate issued pursuant to this section, 
information on the terms, conditions, and yield of such in-
strument; and 
"(4) have the authority to regulate brokers and dealers in 
trust certificates sold pursuant to this section.", 
(d) RULES AND REGULATIONS.—(1) Notwithstanding any law, rule, 
or regulation, within 60 days after the date of enactment of this Act, 
the Small Business Administration shall develop and promulgate 
final rules and regulations to implement the central registration 
provisions provided for in section 505(fKl) of the Small Business 
Investment Act, and shall contract with an agent for an initial 
period of not to exceed two years to carry out the functions provided 
for in section 505(f)(2) of such Act. 
(2) Notwithstanding any law, rule or regulation, within 60 days 
after the date of enactment of this Act, the Small Business Adminis-
tration also shall consult with representatives of appropriate Fed-
eral and State agencies and officials, the securities industry, finan-
cial institutions and lenders, and small business persons, and shall 
develop and promulgate final rules and regulations to implement 
sections 504 and 505 of the Small Business Investment Act. 
SEC. 18009. MISREPRESENTATION AS A SMALL BUSINESS OR MINORITY 
CONCERN. 
Section 16 of the Small Business Act is amended by adding to the 
end thereof the following new subsections: 
"(d) Whoever misrepresents the status of any concern or person as 
a 'small business concern' or 'small business concern owned and 
controlled by socially and economically disadvantaged individuals', 
in order to obtain for oneself or another any— 
"(1) prime contract to be awarded pursuant to section 9 or 15; 
"(2) subcontract to be awarded pursuant to section 8(a); 
"(3) subcontract that is to be included as part or all of a goal 
contained in a subcontracting plan required pursuant to section 
8(d); or 
"(4) prime or subcontract to be awarded as a result, or in 
furtherance, of any other provision of Federal law that specif!-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 369 
cally references section 8(d) for a definition of program 
15 USC 637. 
eligibility, 
shall be punished by a fine of not more than $50,000 or by imprison-
ment for not more than five years, or both. 
"(e) Any representation of the status of any concern or person as a 
'small business concern' or 'small business concern owned and 
controlled by socially and economically disadvantaged individuals' 
in order to obtain any prime contract or subcontract enumerated in 
subsection (d) of this section shall be in writing.". 
SEC. 18010. REPORT CONCERNING ALTERNATIVE SOURCES FOR LOAN 
GUARANTEES. 
Not later than June 30, 1986, the Administrator of the Small 
Business Administration shall submit to the Committees on Small 
Business of the Senate and the House of Representatives an internal 
report concerning— 
(1) the options available to provide a guarantee on loans 
under section 7(a) of the Small Business Act from sources 15 USC 636. 
outside the Federal Government, together with such rec-
ommendations as the Administrator may have with respect to 
such options, including an evaluation of the feasibility of 
establishing a corporation owned by the Federal Government to 
make such guarantees; and 
(2) the imposition, on each participating lender in the guaran-
teed loan program under section 7(a) of the Small Business Act, 
of an annual fee of between one-quarter of one percent and one 
percent of the value of the unpaid balance of any loan made 
under such program, particularly on the revenues that could be 
expected and whether such revenues could be used for a loss 
reserve fund or to defray the cost of administration of the 
program. 
SEC. 18011. USER FEES. 
(a) REPORT ON USER FEES.—Not later than September 30,1986, the 
Small Business Administration shall submit to the Committees on 
Small Business of the Senate and the House of Representatives a 
report on user fees. The report shall specify for each fee which is 
currently being imposed or which is under consideration— 
(1) the type of service provided by the Administration for 
which the fee is or may be charged; 
(2) the amount of fee imposed or being considered; 
(3) the formula for setting the fee; and 
(4) the statutory or regulatory authority for the fee. 
O
b
) REVIEW OF APPROPRIATENESS OF FEES.—The Administration 
shall review all other services provided by the Administration for 
which no fee is currently being imposed and include in the report its 
findings and recommendations as to— 
(1) whether or not a fee should be imposed for each service; 
and 
(2) whether statutory authority is needed to impose the fee. 
SEC. 18012. UTILIZATION OF PROGRAM AUTHORITY. 
Section 20(a) of the Small Business Act is amended— 
15 USC 631 note. 
(1) by inserting "(1)" after "SEC. 20. (a)"; and 
(2) by adding at the end thereof the following: 
"(2) Notwithstanding any other provision of law, the Adminis- Loans. 
tration shall enter into commitments for direct loans and to 
100 STAT. 370 
PUBLIC LAW 99-272—APR. 7, 1986 
guarantee loans, debentures, payment of rentals, or other 
amounts due under qualified contracts and other types of finan-
cial assistance and enter into commitments to purchase deben-
tures and preferred securities and to guarantee sureties against 
loss pursuant to programs under this Act and the Small Busi-
15 use 661 note. 
ness Investment Act of 1958, in the full amounts provided by 
law subject only to (A) the availability of qualified applications, 
and (B) limitations contained in appropriations Acts. Nothing in 
this paragraph authorizes the Administration to reduce or limit 
its authority to enter into such commitments.". 
SEC. 18013. BUSINESS LENDING REFORMS. 
15 use 636. 
Section 7(a)(2) of the Small Business Act is amended— 
(1) by striking out "$100,000" both places it appears and 
inserting in lieu thereof "$155,000"; 
(2) by striking out "90" in subparagraph (B) and inserting in 
lieu thereof "85^'; 
(3) by striking out "90" in the proviso and inserting in lieu 
thereof "85"; and 
(4) by inserting before the period the following: ": Provided, 
further. That the Administration may reduce its participation 
below the per centums stated in this paragraph if the lender 
requests the reduction under the preferred lenders program or 
any successor thereto. As used in this sentence the term 'pre-
ferred lenders program' means a program under which, pursu-
ant to a written agreement between the lender and the 
Administration, the lender has been delegated (1) complete 
authority to make and close loans with a guarantee from the 
Administration without obtaining the prior specific approval of 
the Administration, and (2) authority to service and liquidate 
such loans". 
SEC. 18014. SURETY GUARANTEES. 
15 use 694b. 
Section 411 of the Small Business Investment Act of 1958 is 
amended— 
(1) in subsection (a) by striking out "$1,000,000" and inserting 
in lieu thereof "$1,250,000"; and 
(2) in subsection (eX2) by striking out "$1,000,000" and insert-
ing in lieu thereof "$1,250,000". 
SEC. 18015. ELIGIBILITY OF SMALL BUSINESS OWNED BY INDIAN 
TRIBES. 
(a) CONSIDERATION OF INDIAN TRIBES.—Section 2(e)(1)(C) of the 
Small Business Act (15 U.S.C. 631(e)(2)(C)) is amended by inserting 
"Indian tribes," after "Native Americans,". 
(b) CLARIFICATION OF DEFINITION OF "SOCIALLY AND ECONOMICALLY 
DISADVANTAGED SMALL BUSINESS CONCERN".—Paragraph (4) of sec-
tion 8(a) of such Act (15 U.S.C. 637(a)(4)) is amended to read as 
follows: 
"(4)(A) For purposes of this section, the term 'socially and 
economically disadvantaged small business concern' means any 
small business concern which meets the requirements of subpara-
graph (B) and— 
^ 
"(i) which is at least 51 per centum owned by— 
"(I) one or more socially and economically disadvantaged 
individjuals, or 
"(II) an economically disadvantaged Indian tribe, or 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 371 
"(ii) in the case of any publicly owned business, at least 51 per 
centum of the stock of which is owned by— 
"(I) one or more socially and economically disadvantaged 
individuals, or 
"(II) an economically disadvantaged Indian tribe. 
"(B) A small business concern meets the requirements of this 
subparagraph if the management and daily business operations of 
such small business concern are controlled by one or more— 
"(i) socially and economically disadvantaged individuals de-
scribed in subparagraph (AXiXD or subparagraph (A)(ii)(I), or 
"(ii) members of an economically disadvantaged Indian tribe 
described in subparagraph (AXiXII) or subparagraph (AXiiXII).". 
(c) DETERMINATION OF ECONOMIC DISADVANTAGE OF AN INDIAN 
TRIBE.—Paragraph (6) of such Act (15 U.S.C. 637(aX6)) is amended by 
adding at the end thereof the following new sentence: "In determin-
ing the economic disadvantage of an Indian tribe, the Admin-
istration shall consider, where available, information such as the 
following: the per capita income of members of the tribe excluding 
judgment awards, the percentage of the local Indian population 
below the poverty level, and the tribe's access to capital markets.". 
(d) DEFINITION OF "INDIAN TRIBE".—Section 8(a) of such Act (15 
U.S.C. 637(a)) is amended by adding at the end thereof the following 
new paragraph: 
"(13) For purposes of this subsection, the term 'Indian tribe' 
means any Indian tribe, band, nation, or other organized group or 
community of Indians, including any Alaska Native village or re-
gional or village corporation (within the meaning of the Alaska 
Native Claims Settlement Act) which— 
43 USC 1601 
"(A) is recognized as eligible for the special programs and i^ote. 
services provided by the United States to Indians because of 
their status £is Indians, or 
"(B) is recognized as such by the State in which such tribe, 
band, nation, group, or community resides.". 
SEC. 18016. SIZE STANDARD FOR AGRICULTURAL ENTERPRISES. 
Section 3(a) of the Small Business Act is amended by inserting the 
15 USC 632. 
following before the period at the end of the first sentence: ": Pro-
vided, That notwithstanding any other provision of law, an agricul-
tural enterprise shall be deemed to be a small business concern if it 
(including its affiliates) has annual receipts not in excess of 
$500,000". 
SEC. 
18017. ENCOURAGEMENT OF VETERANS BUSINESS RESOURCE 
COUNCILS. 
(a) FINDINGS.—The Congress finds that— 
State listing. 
(1) Veterans Business Resource Councils have been estab-
lished in the following ten States: California, Ohio, Texas, New 
York, Massachusetts, Indiana, Louisiana, Maryland, Minnesota, 
and Missouri; 
(2) the concept of Veterans Business Resource Councils to 
establish networks of veterans with business experience assist-
ing fellow veterans seeking to establish small businesses merits 
serious consideration; and 
(3) the majority of our Nation's Vietnam era veterans fall 
within the thirty-five to forty-five-year old age range, in which 
most people decide to enter into small business ownership. 
100 STAT. 372 
PUBLIC LAW 99-272—APR. 7, 1986 
(b) RECOMMENDATIONS.—The Congress urges the Small Business 
Administration— 
(1) to evaluate the effectiveness of the Veterans Business 
Resource Councils which are currently operating and to rec-
ommend improvements in their operations; 
(2) to develop guidelines to assist in the establishment of 
Veterans Business Resource Councils; and 
(3) to work with the remaining States and any interested 
organizations to encourage the establishment of Veterans Busi-
ness Resource Councils in those States. 
Veterans 
TITLE XIX—VETERANS' PROGRAMS 
Health-Care 
Amendments of 
1986. 
SEC. 19001. SHORT TITLE; REFERENCES TO TITLE 38, UNITED STATES 
38 u s e 101 note. 
CODE. 
(a) SHORT TITLE.—This title may be cited as the "Veterans' 
Health-Care Amendments of 1986". 
(b) REFERENCES.—Except as otherwise expressly provided, when-
ever in this title an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the ref-
erence shall be considered to be made to a section or other provision 
of title 38, United States Code. 
Subtitle A—Health Care 
SEC. 19011. ELIGIBILITY FOR HEALTH CARE OF VETERANS WITH NON-
SERVICE-CONNECTED DISABILITIES. 
(a) HOSPITAL CARE AND NURSING HOME CARE.—(1) Subsection (a) of 
38 use 610. 
section 610 is amended to read as follows: 
"(a)(1) The Administrator shall furnish hospital care, and may 
furnish nursing home care, which the Administrator determines is 
needed— 
"(A) to any veteran for a service-connected disability; 
"(B) to a veteran whose discharge or release from the active 
military, naval, or air service was for a disability incurred or 
aggravated in line of duty, for any disability; 
"(C) to a veteran who, but for a suspension pursuant to 
section 351 of this title (or both such a suspension and the 
receipt of retired pay), would be entitled to disability compensa-
tion, but only to the extent that such veteran's continuing 
eligibility for such care is provided for in the judgment or 
settlement described in such section, for any disability; 
"(D) to a veteran who has a service-connected disability rated 
at 50 percent or more, for any disability; 
"(E) to any other veteran who has a service-connected disabil-
ity, for any disability; 
"(F) to a veteran who is a former prisoner of war, for any 
disability; 
"(G) to a veteran exposed to a toxic substance or radiation, as 
provided in subsection (e) of this section; 
"(H) to a veteran of the Spanish-American War, the Mexican 
border period, or World War I, for any disability; and 
"(I) to a veteran for a non-service-connected disability, if the 
veteran is unable to defray the expenses of necessary care as 
determined under section 622(a)(1) of this title. 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 373 
"(2)(A) To the extent that resources and facilities are available, 
the Administrator may furnish hospital care and nursing home care 
which the Administrator determines is needed to a veteran for a 
non-service-connected disability if the veteran has an income level 
described in section 622(a)(2) of this title. 
38 USC 622. 
"(B) In the case of a veteran who is not described in paragraph (1) 
of this subsection or in subparagraph (A) of this paragraph, the 
Administrator may furnish hospital care and nursing home care 
which the Administrator determines is needed to the veteran for a 
non-service-connected disability— 
"(i) to the extent that resources and facilities are otherwise 
available; and 
"(ii) subject to the provisions of subsection (f) of this section. 
"(3) In addition to furnishing hospital care and nursing home care 
described in paragraphs (1) and (2) of this subsection through Veter-
ans' Administration facilities, the Administrator may furnish such 
hospital care in accordance with section 603 of this title and may 
furnish such nursing home care as authorized under section 620 of 
this title.". 
(2) Such section is further amended by adding at the end the 
following new subsections: 
"(f)(1) The Administrator may not furnish hospital care or nursing 
home care under this section to a veteran who is eligible for such 
care by reason of subsection (a)(2)(B) of this section unless the 
veteran agrees to pay to the United States the applicable amount 
determined under paragraph (2) of this subsection. 
"(2) A veteran who is furnished hospital care or nursing home 
care under this section and who is required under paragraph (1) of 
this subsection to agree to pay an amount to the United States in 
order to be furnished such care shall be liable to the United States 
for an amount equal to the lesser of— 
"(A) the cost of furnishing such care, as determined by the 
Administrator; and 
"(B) the amount determined under paragraph (3) of this 
subsection. 
"(3)(A) In the case of hospital care furnished during any 365-day Medicare. 
period, the amount referred to in paragraph (2)(B) of this subsection 
is— 
"(i) the amount of the inpatient Medicare deductible, plus 
"(ii) one-half of such amount for each 90 days of care (or 
fraction thereof) after the first 90 days of such care during such 
365-day period. 
"(B) In the case of nursing home care furnished during any 365-
day period, the amount referred to in paragraph (2)(B) of this 
subsection is the amount of the inpatient Medicare deductible for 
each 90 days of such care (or fraction thereof) during such 365-day 
period. 
"(C)(i) Except as provided in clause (ii) of this subparagraph, in the 
case of a veteran who is admitted for nursing home care under this 
section after being furnished, during the preceding 365-day period, 
hospital care for which the veteran has paid the amount of the 
inpatient Medicare deductible under this subsection and who has 
not been furnished 90 days of hospital care in connection with such 
payment, the veteran shall not incur any liability under paragraph 
(2) of this subsection with respect to such nursing home care until— 
"(I) the veteran has been furnished, beginning with the first 
day of such hospital care furnished in connection with such 
100 STAT. 374 
PUBLIC LAW 99-272—APR. 7, 1986 
payment, a total of 90 days of hospital care and nursing home 
care; or 
"(II) the end of the 365-day period applicable to the hospital 
care for which payment was made, 
whichever occurs first. 
"(ii) In the case of a veteran who is admitted for nursing home 
care under this section after being furnished, during any 365-day 
period, hospital care for which the veteran has paid an amount 
under subparagraph (A)(ii) of this paragraph and who has not been 
furnished 90 days of hospital care in connection with such payment, 
the amount of the liability of the veteran under paragraph (2) of this 
subsection with respect to the number of days of such nursing home 
care which, when added to the number of days of such hospital care, 
is 90 or less, is the difference between the inpatient Medicare 
deductible and the amount paid under such subparagraph until— 
"(I) the veteran has been furnished, beginning with the first 
day of such hospital care furnished in connection with such 
payment, a total of 90 days of hospital care and nursing home 
care; or 
"(II) the end of the 365-day period applicable to the hospital 
care for which payment was made, 
whichever occurs first. 
"(D) In the case of a veteran who is admitted for hospital care 
under this section after having been furnished, during the preceding 
365-day period, nursing home care for which the veteran has paid 
the amount of the inpatient Medicare deductible under this subsec-
tion and who has not been furnished 90 days of nursing home care 
in connection with such payment, the veteran shall not incur any 
liability under paragraph (2) of this subsection with respect to such 
hospital care until— 
"(i) the veteran has been furnished, beginning with the first 
day of such nursing home care furnished in connection with 
such payment, a total of 90 days of nursing home care and 
hospital care; or 
"(ii) the end of the 365-day period applicable to the nursing 
home care for which payment was made, 
whichever occurs first. 
"(E) A veteran may not be required to make a payment under this 
subsection for hospital care or nursing home care furnished under 
this section during any 90-day period in which the veteran is 
38 use 612. 
furnished medical services under section 612(f) of this title to the 
extent that such payment would cause the total amount paid by the 
veteran under this subsection for hospital care and nursing home 
care furnished during that period and under section 612(f)(4) of this 
title for medical services furnished during that period to exceed the 
amount of the inpatient Medicare deductible in effect on the first 
dav of such period. 
'(4) Amounts collected or received on behalf of the United States 
under this subsection shall be deposited in the Treasury as mis-
cellaneous receipts. 
"(5) For the purposes of this subsection, the term 'inpatient 
Medicare deductible' means the amount of the inpatient hospital 
deductible in effect under section 18130t)) of the Social Security Act 
(42 U.S.C. 1395e(b)) on the first day of the 365-day period applicable 
under paragraph (3) of this subsection. 
State and local 
"(g) Nothing in this section requires the Administrator to furnish 
governments. 
care to a veteran to whom another agency of Federal, State, or local 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 375 
government has a duty under law to provide care in an institution of 
such government.". 
(b) MEDICAL SERVICES FURNISHED ON AN OUTPATIENT OR AMBULA-
TORY BASIS.—(1) Subsection (a) of section 612 is amended— 
38 USC 612. 
(A) by striking out the first sentence and inserting in Heu 
thereof the following: 
"(1) Except as provided in subsection (b) of this section, the 
Administrator may furnish such medical services as the Adminis-
trator determines are needed— 
"(A) to any veteran for a service-connected disability (includ-
ing a disability that was incurred or aggravated in line of duty 
and for which the veteran was discharged or released from the 
active military, naval, or air service); and 
"(B) for any disability of a veteran who has a service-con-
nected disability rated at 50 percent or more."; 
(B) by designating the sentence beginning "The Adminis-
trator may also" as paragraph (2) and in such sentence striking 
out "The Administrator may also furnish to any such veteran" 
and inserting in lieu thereof "As part of medical services fur-
nished to a veteran under paragraph (1) of this subsection, the 
Administrator may furnish to the veteran"; 
(C) by striking out the sentence beginning "In the case of; 
and 
(D) by adding at the end of such subsection the following: 
"(3) In addition to furnishing medical services under this subsec-
tion through Veterans' Administration facilities, the Administrator 
may furnish such services in accordance with section 603 of this 
title.". 
(2) Subsection (f) of such section is amended— 
(A) by striking out "The Administrator, within the limits of 
Veterans' Administration facilities, may" and inserting in lieu 
thereof "(1) Except as provided in paragraph (4) of this subsec-
tion, the Administrator may"; 
(B) by redesignating clause (1) as clause (A), redesignating 
subclauses (A) and (B) of such clause as subclauses (i) and (ii), 
respectively, and inserting "and" at the end of such clause; 
(C) by striking out clause (2); 
(D) by redesignating clause (3) as clause (B); 
(E) by designating the second sentence as paragraph (2) and in 
such sentence striking out "The Administrator may also furnish 
to any such veteran" and inserting in lieu thereof "As part of 
medical services furnished to a veteran under paragraph (1) of 
this subsection, the Administrator may furnish to the veteran"; 
(F) by striking out the third sentence; and 
(G) by adding at the end the following: 
"(3) In addition to furnishing medical services under this subsec-
tion through Veterans' Administration facilities, the Administrator 
may furnish such services in accordance with section 603 of this 
title. 
"(4)(A) The Administrator may not furnish medical services under 
this subsection (including home health services under paragraph (2) 
of this subsection) to a veteran who is eligible for hospital care 
under this chapter by reason of section 610(a)(2XB) of this title 
unless the veteran agrees to pay to the United States the amount 
determined under subparagraph (B) of this paragraph. 
"(B) A veteran who is furnished medical services under this 
subsection and who is required under subparagraph (A) of this 
100 STAT. 376 
PUBLIC LAW 99-272—APR. 7, 1986 
paragraph to agree to pay an amount to the United States in order 
to be furnished such services shall be liable to the United States, in 
the case of each visit in which such services are furnished to the 
veteran, for an amount equal to 20 percent of the estimated average 
cost (during the calendar year in which the services are furnished) 
of an outpatient visit in a Veterans' Administration facility. Such 
estimated average cost shall be determined by the Administrator. 
Medicare. 
"(C) A veteran may not be required to make a payment under this 
paragraph for services furnished under this subsection during any 
90-day period to the extent that such payment would cause the total 
amount paid by the veteran under this paragraph for medical 
38 use 610. 
services furnished during that period and under section 610(f) of this 
title for hospital and nursing home care furnished during that 
period to exceed the amount of the inpatient Medicare deductible in 
effect on the first day of such 90-day period. 
"(D) This subsection does not apply with respect to home health 
services under this subsection to the extent that such services are 
for improvements and structural alterations. 
"(E) For the purposes of this paragraph, the term 'inpatient 
Medicare deductible' means the amount of the inpatient hospital 
deductible in effect under section 1813(b) of the Social Security Act 
(42 U.S.C. 1395e(b)). 
"(F) Amounts collected or received by the Veterans' Administra-
tion under this paragraph shall be deposited in the Treasury as 
miscellaneous receipts.". 
(3) Subsection (g) of such section is amended to read as follows: 
"(g)(1) The Administrator may furnish medical services which the 
Administrator determines are needed to a veteran— 
"(A) who is a veteran of the Mexican border period or of 
World War I; or 
"(B) who is in receipt of increased pension or additional 
compensation or allowances based on the need of regular aid 
and attendance or by reason of being permanently housebound 
(or who, but for the receipt of retired pay, would be in receipt of 
such pension, compensation, or allowance). 
"(2) As part of medical services furnished to a veteran under 
paragraph (1) of this subsection, the Administrator may furnish to 
the veteran home health services under the terms and conditions set 
forth in subsection (f) of this section. 
"(3) In addition to furnishing medical services under this subsec-
tion through Veterans' Administration facilities, the Administrator 
may furnish such services in accordance with section 603 of this 
title.". 
(4) Subsection (i) of such section is amended by adding at the end 
the following: 
"(6) To any veteran who is in receipt of pension under section 
521 of this title.", 
(c) INCOME THRESHOLDS FOR CERTAIN 
NON-SERVICE-CONNECTED 
38 use 622. 
CARE.—(1) Section 622 is amended to read as follows: 
"§ 622. Determination of inability to defray necessary expenses; 
income thresholds 
"(a)(1) For the purpose^^f section 6i0(a)(l)(l) of this title, a veteran 
shall be considered to be unable to defray the expenses of necessary 
care i
f
— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 377 
"(A) the veteran is eligible to receive medical assistance under 
a State plan approved under title XIX of the Social Security Act 
(42 U.S.C. 1396 et seq.); 
"(B) the veteran is in receipt of pension under section 521 of 
this title; or 
38 USC 521. 
"(C) the veteran's attributable income is not greater than the 
Category A threshold. 
"(2) For the purposes of section 610(a)(2)(A) of this title, a veteran's 
income level is described in this paragraph if the veteran's attrib-
utable income is not greater than the Category B threshold. 
"(b) For the purposes of this section: 
"(1) The Category A threshold— 
"(A) for the calendar year beginning on January 1, 1986, 
is— 
"(i) $15,000 in the case of a veteran with no depend-
ents; and 
"(ii) $18,000 in the case of a veteran with one depend-
ent, plus $1,000 for each additional dependent; and 
"(B) for a calendar year beginning after December 31, 
1986, is the amount in effect for purposes of this paragraph 
for the preceding calendar year as adjusted under subsec-
tion (c) of this subsection. 
"(2) The Category B threshold— 
"(A) for the calendar year beginning on January 1, 1986, 
is— 
"(i) $20,000 in the case of a veteran with no depend-
ents; and 
"(ii) $25,000 in the case of a veteran with one depend-
ent, plus $1,000 for each additional dependent; and 
"(B) for a calendar year beginning after December 31, 
1986, is the amount in effect for purposes of this paragraph 
for the preceding calendar year as adjusted under subsec-
tion (c) of this subsection. 
"(c) Effective on January 1 of each year, the amounts in effect 
Effective date. 
under paragraphs (1) and (2) of subsection (b) of this section shall be 
increased by the percentage by which the maximum rates of pension 
were increased under section 3112(a) of this title during the preced-
ing calendar year. 
"(d)(1) Notwithstanding the attributable income of a veteran, the 
Administrator may refuse to make a determination described in 
paragraph (2) of this subsection if the corpus of the estate of the 
veteran is such that under all the circumstances it is reasonable 
that some part of the corpus of the estate of the veteran be 
consumed for the veteran's maintenance. 
"(2) A determination described in this paragraph is a determina-
tion— 
"(A) that for the purposes of subsection (a)(1)(C) of this section 
a veteran's attributable income is not greater than the Category 
A threshold; or 
"(B) that for the purposes of subsection (a)(2) of this section a 
veteran's attributable income is not greater than the Category 
B threshold. 
"(3) For the purposes of paragraph (1) of this subsection, the 
corpus of the estate of a veteran shall be determined in the same 
manner as the manner in which determinations are made of the 
corpus of the estates of persons under section 522 of this title. 
100 STAT. 378 
PUBLIC LAW 99-272—APR. 7, 1986 
"(e)(1) In order to avoid a hardship to a veteran described in 
paragraph (2) of this subsection, the Administrator may deem the 
veteran to have an attributable income during the previous year not 
greater than the Category A threshold or the Category B threshold, 
as appropriate. 
"(2)(A) A veteran is described in this paragraph for the purposes of 
subsection (a)(1) of this section if— 
"(i) the veteran has an attributable income greater than the 
Category A threshold; and 
"(ii) the current projections of such veteran's income for the 
current year are that the veteran's income for such year will be 
substantially below such threshold. 
"(B) A veteran is described in this paragraph for the purposes of 
subsection (a)(2) of this section if— 
"(i) the veteran has an attributable income greater than the 
Category B threshold; and 
"(ii) the current projections of such veteran's income for the 
current year are that the veteran's income for such year will be 
substantially below such threshold. 
"(f) For purposes of this section: 
"(1) The term 'attributable income' means the income of a 
veteran for the previous year determined in the same manner 
as the manner in which a determination is made of the total 
amount of income by which the rate of pension for such veteran 
38 use 521. 
under section 521 of this title would be reduced if such veteran 
were eligible for pension under that section. 
"(2) The term 'corpus of the estate of the veteran' includes the 
corpus of the estates of the veteran's spouse and dependent 
children, if any. 
"(3) The term 'previous year' means the calendar year preced-
ing the year in which the veteran applies for care or services 
under section 610(a) or 612(f) of this title. 
"(g) For the purposes of sections 610(b)(2) and 624(c) of this title, 
the fact that a veteran is— 
"(1) eligible to receive medical assistance under a State plan 
approved under title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.); 
"(2) a veteran with a service-connected disability; or 
"(3) in receipt of pension under any law administered by the 
Veterans' Administration, 
shall be accepted as sufficient evidence of such veteran's inability to 
defray necessary expenses.". 
(2) The item relating to such section in the table of sections at the 
beginning of chapter 17 is amended to read as follows: 
"622. Determination of inability to defray necessary expenses; income thresholds.". 
Effective date. 
(3) The first increase under subsection (c) of section 622 of title 38, 
38 use 622 note. United States Code, as added by paragraph (1), shall take effect on 
January 1,1987. 
38 use 525. 
(d) CONFORMING AMENDMENTS.—(1) Section 525(a) is amended by 
striking out "section 612(i)(5) of this title" and inserting in lieu 
thereof "clauses (5) and (6) of section 612(i)". 
38 use 601. 
(2) Section 601(6) is amended— 
(A) in clause (A)(i), by striking out "section 612(f)(lXA)" and 
inserting in lieu thereof "section 612(fKlXAXi)", and 
(B) in clause (BXii), by striking out "section 612(fKlXB)" and 
inserting in lieu thereof "section 612(f)(l)(AXii)". 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 379 
(3) Section 610(e) is amended— 
38 USC 610. 
(A) by striking out "may be furnished hospital care or nursing 
home care under subsection (a)(5)" in subparagraphs (A) and (B) 
of paragraph (1) and inserting in Heu thereof "is ehgible for 
hospital care and nursing home care under subsection (a)(1)(G)"; 
and 
(B) by striking out "subsection (a)(5)" in paragraphs (2) and (3) 
and inserting in lieu thereof "subsection (a)(1)(G)". 
(4) Section 612A is amended— 
38 USC 612A. 
(A) by striking out "clause (1)(B)" in subsection (bXD and 
inserting in lieu thereof "paragraph (l)(A)(ii)"; and 
(B) by striking out "612(f)(2)" in subsection (e)(1) and inserting 
in lieu thereof "612(aXlXB)". 
(5) Section 620(f)(lXAXii) is amended by striking out "612(f)(2)" and 38 USC 620. 
inserting in lieu thereof "612(aXlXB)". 
(6) Section 663(aXl) is amended by striking out "612(f)(2)" both 38 USC 663. 
places it appears and inserting in lieu thereof "612(aXlXB)". 
(e) REPORTS ON FURNISHING OF HEALTH CARE AND IMPLEMENTA- 38 use 6io note. 
TiON OF CHANGES IN EUGIBIUTY.—(1) The Administrator of Veter-
ans' Affairs shall submit to the Committees on Veterans' Affairs of 
the Senate and the House of Representatives a report for each of 
fiscal years 1986, 1987, and 1988 concerning the implementation of 
the amendments made by this section. 
(2) Each report under paragraph (1) shall provide detailed 
information with respect to the fiscal year for which it is submitted 
regarding— 
(A) the number of veterans who received health care from the 
Veterans' Administration during the fiscal year concerned 
(shown in total and separately for hospital care, nursing home 
care, outpatient care, and domiciliary care); 
(B) with respect to veterans who applied for health care from 
the Veterans' Administration during such fiscal year but did 
not receive such care— 
(i) the number of such veterans (shown in total and 
separately for hospital care, nursing home care, outpatient 
care, and domiciliary care); and 
(ii) the primary reasons why such care was not furnished; 
(C) the guidelines and processes for— 
(i) implementation of the income-threshold criteria for 
Veterans' Administration health-care eligibility established 
by paragraph (IXD and subparagraphs (A) and (B) of para-
graph (2) of section 610(a) of title 38, United States Code (as 
added by subsection (a)), paragraph (4) of section 612(f) of 
such title (as added by subsection (b)), and section 622 of 
such title (as amended by subsection (c)); and 
(ii) the collection of pajrments required by section 610(f) of 
such title (as added by subsection (aX2)) and by section 
612(fX4) of such title (as added by subsection (bX2)); 
(D) the numbers and characteristics of, and the type and 
extent of health care furnished by the Veterans' Administration 
to, veterans eligible for such care by reason of any such authori-
ties, including— 
(i) with respect to those eligible by reason of each such 
authority, the numbers who applied for and were furnished 
such care, the type and extent of such care that they were 
furnished, and their incomes and family sizes; and 
100 STAT. 380 
PUBLIC LAW 99-272—APR. 7, 1986 
(ii) with respect to veterans eligible by reason of section 
38 use 610. 
610(a)(2)(B) of such title, the average and total payments 
made by such veterans for such care (shown in total and 
separately for hospital care, nursing home care, and out-
patient care); and 
(E) the numbers of, and the type and extent of health care 
furnished by the Veterans' Administration to, veterans eligible 
for such care by reason of each clause of section 610(a)(1) of such 
title (shown in total and separately for veterans with service-
connected disabilities for each percentile disability rating). 
The report for fiscal year 1986 shall include information relating 
only to care furnished on or after July 1, 1986. 
(3) Each report under this subsection shall be submitted not later 
than the February 1 following the end of the fiscal year for which it 
is required. 
38 use 610 note. 
(f) EFFECTIVE DATE.—(1) Except as provided in paragraph (2), the 
amendments made by this section shall apply to hospital care, 
nursing home care, and medical services furnished on or after 
July 1, 1986. 
Regulations. 
(2)(A) The provisions of sections 610 and 622 of title 38, United 
States Code, as in effect on the day before the date of the enactment 
of this Act, shall apply with respect to hospital and nursing home 
care furnished on or after July 1, 1986, to veterans furnished such 
care or services on June 30, 1986, but only to the extent that such 
care is furnished with respect to the same episode of care for which 
it was furnished on June 30, 1986, as determined by the Adminis-
trator pursuant to regulations which the Administrator shall 
prescribe. 
(B) During the months of July and August 1986, the Adminis-
trator may, in order to continue a course of treatment begun before 
July 1, 1986, furnish medical services to a veteran on an ambulatory 
or outpatient basis without regard to the amendments made by this 
section. 
(C) For the purposes of this paragraph, the term "episode of care" 
means a period of consecutive days— 
(i) beginning with the first day on which a veteran is fur-
nished hospital or nursing home care; and 
(ii) ending on the day of the veteran's discharge from the 
hospital or nursing home facility, as the case may be. 
SEC. 19012. TECHNICAL REVISION OF AUTHORITY TO CONTRACT FOR 
HOSPITAL CARE AND MEDICAL SERVICES. 
(a) REPEAL OF CONTRACT AUTHORITY FROM DEFINITION OF VETER-
38 use 601. 
ANs' ADMINISTRATION FACILITIES.—Section 601 is amended— 
(1) in paragraph (4)— 
(A) by inserting "and" at the end of clause (A); and 
(B) by striking out the semicolon at the end of clause (B) 
and all that follows through the end of such paragraph and 
inserting in lieu thereof a period; and 
(2) by adding at the end the following new paragraph: 
"(9) The term 'non-Veterans' Administration facilities' means 
facilities other than Veterans' Administration facilities.". 
(b) REENACTMENT OF CONTRACT AUTHORITY.—(1) Chapter 17 is 
amended by inserting after section 602 the following new section: 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 381 
"§ 603. Contracts for hospital care and medical services in non- 38 USC 603. 
Veterans' Administration facilities 
"(a) When Veterans' Administration facilities are not capable of 
furnishing economical hospital care or medical services because of 
geographical inaccessibility or are not capable of furnishing the care 
or services required, the Administrator, as authorized in section 610 
or 612 of this title, may contract with non-Veterans' Administration 38 USC 610, 612. 
facilities in order to furnish— 
"(1) hospital care or medical services to a veteran for the 
treatment o
f
— 
"(A) a service-connected disability; or 
"(B) a disability for which a veteran was discharged or 
released from the active military, naval, or air service; 
"(2) medical services for the treatment of any disability o
f
— 
"(A) a veteran described in section 612(a)(1)(B) of this 
title; 
"(B) a veteran described in section 612(f)(l)(A)(ii) of this 
title; or 
"(C) a veteran described in section 612(g) of this title if 
the Administrator has determined, based on an examina-
tion by a physician employed by the Veterans' Administra-
tion (or, in areas where no such physician is available, by a 
physician carrying out such function under a contract or 
fee arrangement), that the medical condition of such vet-
eran 
precludes 
appropriate 
treatment 
in 
Veterans' 
Administration facilities; 
"(3) hospital care or medical services for the treatment of 
medical emergencies which pose a serious threat to the life or 
health of a veteran receiving medical services in a Veterans' 
Administration facility until such time following the furnishing 
of care in the non-Veterans' Administration facility as the 
veteran can be safely transferred to a Veterans' Administration 
facility; 
"(4) hospital care for women veterans; 
"(5) hospital care, or medical services that will obviate the 
State and local 
need for hospital admission, for veterans in a State not contig- governments. 
uous to the contiguous States, except that the annually deter-
mined hospital patient load and incidence of the furnishing of 
medical services to veterans hospitalized or treated at the ex-
pense of the Veterans' Administration in Government and non-
Veterans' Administration facilities in each such noncontiguous 
State shall be consistent with the patient load or incidence of 
the furnishing of medical services for veterans hospitalized or 
treated by the Veterans' Administration within the 48 contig-
uous States, but the authority of the Administrator under this 
paragraph with respect to the Commonwealth of Puerto Rico 
shall expire on September 30, 1988, and until such date the 
Administrator may, if necessary to prevent hardship, waive the 
applicability to the Commonwealth of Puerto Rico of the restric-
tions in this paragraph with respect to hospital patient loads 
and the incidence of the furnishing of medical services; 
"(6) diagnostic services necessary for determination of eligi-
bility for, or of the appropriate course of treatment in connec-
tion with, furnishing medical services at independent Veterans' 
Administration out-patient clinics to obviate the need for hos-
pital admission; or 
100 STAT. 382 
PUBLIC LAW 99-272—APR. 7, 1986 
"(7) outpatient dental services and treatment, and related 
dental appliances, for a veteran described in section 612(b)(1)(G) 
38 use 612. 
of this title. 
"(b) In the case of any veteran for whom the Administrator 
contracts to furnish care or services in a non-Veterans' Administra-
tion facility pursuant to a provision of subsection (a) of this sec-
tion, the Administrator shall periodically review the necessity 
for continuing such contractual arrangement pursuant to such 
provision.". 
(2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 602 the 
following new item: 
"603. Contracts for hospital care and medical services in non-Veterans' Administra-
tion facilities.'. 
38 use 612. 
(c) CONFORMING AMENDMENTS.—(1) Section 612(bX3) is amended 
by striking out "clause (i), (ii), or (v) of section 6()1(4)(C)" and 
inserting in lieu thereof "clause (1), (2), or (5) of section 603(a)". 
(2) Section 612(b)(4) is amended by striking out "section 601(4)(C)" 
both places it appears and inserting in lieu thereof "section 603". 
38 use 612A. 
(3) Section 612A(e)(l) is amended by striking out "601(4)(C)(ii)" and 
inserting in lieu thereof "603(a)(2)". 
38 use 903. 
(4) Section 903(a) is amended by inserting "hospital care in accord-
ance with section 603 of this title or" after "was receiving". 
(5) Section 102(b) of the Veterans' Administration Health-Care 
Amendments of 1985 (Public Law 99-166) is amended— 
38 use 601, 603. 
(A) by Striking out "such section" in paragraph (1) and insert-
ing in lieu thereof "section 603(aX5)"; and 
38 use 601 note, 
(B) by striking out "clause (v) of section 601(4)(C)" in para-
603 note. 
graph (5) and inserting in lieu thereof "section 603(a)(5)". 
SEC. 19013. RECOVERY OF THE COST OF CERTAIN HEALTH CARE AND 
SERVICES FURNISHED BY THE VETERANS' ADMINISTRA-
TION. 
(a) IN GENERAL.—Section 629 is amended to read as follows: 
38 use 629. 
"§ 629. Recovery by the United States of the cost of certain care 
and services 
"(a)(1) Subject to the provisions of this section, in any case in 
which a veteran is furnished care or services under this chapter for 
a non-service-connected disability described in paragraph (2) of this 
subsection, the United States has the right to recover or collect the 
reasonable cost of such care or services (as determined by the 
Administrator) from a third party to the extent that the veteran (or 
the provider of the care or services) would be eligible to receive 
payment for such care or services from such third party if the care 
or services had not been furnished by a department or agency of the 
United States. 
State and local 
"(2) Paragraph (1) of this subsection applies to a non-service-
governments, 
connected disability— 
"(A) that is incurred incident to the veteran's employment 
and that is covered under a workers' compensation law or plan 
that provides for payment for the cost of health care and 
services provided to the veteran by reason of the disability; 
"(B) that is incurred as the result of a motor vehicle accident 
to which applies a State law that requires the owners or opera-
tors of motor vehicles registered in that State to have in force 
automobile accident reparations insurance; 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 383 
"(C) that is incurred as the result of a crime of personal 
violence that occurred in a State, or a political subdivision of a 
State, in which a person injured as the result of such a crime is 
entitled to receive health care and services at such State's or 
subdivision's expense for personal injuries suffered as the result 
of such crime; or 
"(D) that is incurred by a veteran— 
"(i) who does not have a service-connected disability; and 
"(ii) who is entitled to care (or payment of the expenses of 
care) under a health-plan contract. 
"(3) In the case of a health-plan contract that contains a require- Contracts, 
ment for payment of a deductible or copayment by the veteran— 
"(A) the veteran's not having paid such deductible or 
copayment with respect to care or services furnished under this 
chapter shall not preclude recovery or collection under this 
section; and 
"(B) the amount that the United States may collect or recover 
under this section shall be reduced by the appropriate deduct-
ible or copayment amount, or both. 
"(b)(1) As to the right provided in subsection (a) of this section, the Claims. 
United States shall be subrogated to any right or claim that the 
veteran (or the veteran's personal representative, successor, depend-
ents, or survivors) may have against a third party. 
"(2)(A) In order to enforce any right or claim to which the United 
States is subrogated under paragraph (1) of this subsection, the 
United States may intervene or join in any action or proceeding 
brought by the veteran (or the veteran's personal representative, 
successor, dependents, or survivors) against a third party. 
"(B) The United States may institute and prosecute legal proceed-
ings against the third party if— 
"(i) an action or proceeding described in subparagraph (A) of 
this paragraph is not begun within 180 days after the first day 
on which care or services for which recovery is sought are 
furnished to the veteran by the Administrator under this 
chapter; 
"(ii) the United States has sent written notice by certified 
mail to the veteran at the veteran's last-known address (or to 
the veteran's personal representative or successor) of the 
intention of the United States to institute such legal proceed-
ings; and 
"(iii) a period of 60 days has passed following the mailing of 
such notice. 
"(c)(1) The Administrator may compromise, settle, or waive any Claims, 
claim which the United States has under this section. 
"(2)(A) The Administrator, after consultation with the Comptrol- Regulations. 
ler General of the United States, shall prescribe regulations for the 
purpose of determining the reasonable cost of care or services under 
subsection (a)(1) of this section. Any determination of such cost shall 
be made in accordance with such regulations. 
"(B) Such regulations shall provide that the reasonable cost of 
care or services sought to be recovered or collected from a third-
party liable under a health-plan contract may not exceed the 
amount that such third party demonstrates to the satisfaction of the 
Administrator it would pay for the care or services in accordance 
with the prevailing rates at which the third party makes payments 
under comparable health-plan contracts with facilities (other than 
100 STAT. 384 
PUBLIC LAW 99-272—APR. 7, 1986 
Reports. 
Contracts. 
38 u s e 3301, 
4132. 
Records. 
Public 
information. 
Contracts. 
Classified 
information. 
Regulations. 
facilities of departments or agencies of the United States) in the 
same geographic area. 
"(C) Not later than 45 days after the date on which the Adminis-
trator prescribes such regulations (or any amendment to such regu-
lations), the Comptroller General shall submit to the Committees on 
Veterans' Affairs of the Senate and the House of Representatives 
the Comptroller General's comments on and recommendations 
regarding such regulations (or amendment). 
"(d) Any contract or agreement into which the Administrator 
enters with a person under section 3718 of title 31 for collection 
services to recover indebtedness owed the United States under this 
section shall provide, with respect to such services, that such person 
is subject to sections 3301 and 4132 of this title. 
"(e) A veteran eligible for care or services under this chapter— 
"(1) may not be denied such care or services by reason of this 
section; and 
"(2) may not be required by reason of this section to make any 
copayment or deductible payment in order to receive such care. 
"(f) No law of any State or of any political subdivision of a State, 
and no provision of any contract or other agreement, shall operate 
to prevent recovery or collection by the United States under this 
section or with respect to care or services furnished under section 
611(b) of this title. 
"(g) Amounts collected or recovered on behalf of the United States 
under this section shall be deposited into the Treasury as mis-
cellaneous receipts. 
"(h)(1) Subject to paragraph (3) of this subsection, the Adminis-
trator shall make available medical records of a veteran described in 
paragraph (2) of this subsection for inspection and review by rep-
resentatives of the third party concerned for the sole purposes of 
permitting the third party to verify— 
"(A) that the care or services for which recovery or collection 
is sought were furnished to the veteran; and 
"(B) that the provision of such care or services to the veteran 
meets criteria generally applicable under the health-plan con-
tract involved. 
"(2) A veteran described in this paragraph is a veteran who is a 
beneficiary of a health-plan contract under which recovery or collec-
tion is sought under this section from the third party concerned for 
the cost of the care or services furnished to the veteran. 
"(3) Records shall be made available under this subsection under 
such conditions to protect the confidentiality of such records as the 
Administrator shall prescribe in regulations. 
"(i) For purposes of this section— 
"(1)(A) The term 'health-plan contract' means an insurance 
policy or contract, medical or hospital service agreement, mem-
bership or subscription contract, or similar arrangement, under 
which health services for individuals are provided or the 
expenses of such services are paid. 
"(B) Such term does not include— 
"(i) an insurance program described in section 1811 of the 
Social Security Act (42 U.S.C. 1395c) or established by 
section 1831 of such Act (42 U.S.C. 1395j); 
"(ii) a State plan for medical assistance approved under 
title XIX of such Act (42 U.S.C. 1396 et seq.); 
"(iii) a workers' compensation law or plan described in 
subparagraph (A) of subsection (a)(2) of this section; or 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 385 
"(iv) a program, plan, or policy under a law described in 
subparagraph (B) or (C) of such subsection. 
"(2) The term 'payment' includes reimbursement and indem-
nification. 
"(3) The term 'third party' means— 
"(A) a State or political subdivision of a State; 
"(B) an employer or an employer's insurance carrier; 
, ^ . 
"(C) an automobile accident reparations insurance car-
rier; or 
"(D) a person obligated to provide, or to pay the expenses 
of, health services under a health-plan contract.". 
(b) EFFECTIVE DATE.—(1) Except as provided in paragraph (2), 
section 629 of title 38, United States Code, as amended by subsection 
(a), shall apply to care and services provided on or after the date of 
the enactment of this Act. 
(2)(A) Such section shall not apply so as to nullify any provision of 
a health-plan contract {as defined in subsection (i) of such section) 
that— 
(i) was entered into before the date of the enactment of this 
Act; and 
(ii) is not modified or renewed on or after such date. 
(B) In the case of a health-plan contract (as so defined) that was 
entered into before such date and which is modified or renewed on 
or after such date, the amendment made by subsection (a) shall 
apply— 
(i) with respect to such plan as of the day after the date that it 
is so modified or renewed; and 
(ii) with respect to care and services provided after such date 
of modification or renewal. 
(3) For purposes of paragraph (2), the term "modified" includes 
any change in premium or coverage. 
(c) REPORTS.—(1) Not later than six months after the date of the 
enactment of this Act, the Administrator of Veterans' Affairs shall 
submit to the Committees on Veterans' Affairs of the Senate and the 
House of Representatives a report on the process for and results of 
the implementation of section 629 of title 38, United States Code, as 
amended by subsection (a). Such report shall show the costs of 
administration (and a detailed breakdown of such costs) and the 
amount of receipts and collections under such section. 
(2) Not later than February 1, 1988, the Administrator shall 
submit to such Committees a report— 
(A) updating the information in the report submitted under 
paragraph (1); and 
(B) providing information on the process and results of such 
implementation through at least the end of fiscal year 1987, 
Subtitle B—Miscellaneous Provisions 
38 u s e 629 note. 
Contracts. 
38 u s e 629 note. 
SEC. 19031. STUDY OF EFFECT OF VIETNAM EXPERIENCE ON HEALTH 
STATUS OF WOMEN VIETNAM VETERANS. 
(a) REQUIREMENT FOR EPIDEMIOLOGICAL STUDY.—(1)(A) Except as 
provided in paragraph (2), the Administrator of Veterans' Affairs 
shall provide for the conduct of an epidemiological study of any 
long-term adverse health effects (particularly gender-specific health 
effects) which have been experienced by women who served in the 
Armed Forces of the United States in the Republic of Vietnam 
38 u s e 219 note. 
71-194 0 - 89 - 15 : QL 3 Parti 
100 STAT. 386 
PUBLIC LAW 99-272—APR. 7, 1986 
Reports. 
Termination 
date. 
Contracts. 
during the Vietnam era and which may have resulted from trau-
matic experiences during such service, from exposure during such 
service to phenoxy herbicides (including the herbicide known as 
Agent Orange), to other herbicides, chemicals, or medications that 
may have deleterious health effects, or to environmental hazards, or 
from any other experience or exposure during such service. 
(B) The Administrator may include in the study conducted under 
this paragraph an evaluation of the means of detecting and treating 
long-term adverse health effects (particularly gender-specific health 
effects) found through the study. 
(2)(A) If the Administrator, in consultation with the Director of 
the Office of Technology Assessment, determines that it is not 
feasible to conduct a scientifically valid study of an aspect of the 
matters described in paragraph (1)— 
(i) the Administrator shall promptly submit to the appro-
priate committees of the Congress a notice of that determina-
tion and the reasons for the determination; and 
(ii) the Director, not later than 60 days after the date on 
which such notice is submitted to the committees, shall submit 
to such committees a report evaluating and commenting on 
such determination. 
(B) The Administrator is not required to study any aspect of the 
matters described in paragraph (1) with respect to which a deter-
mination is made and a notice is submitted pursuant to subpara-
graph (A)(i). 
(C) If the Administrator submits to the Congress notice of a 
determination made pursuant to subparagraph (A) that it is not 
scientifically feasible to conduct the study described in paragraph 
(1)(A), this section (effective as of the date of such notice) shall cease 
to have effect as if repealed by law. 
(3) The Administrator shall provide for the study to be conducted 
through contracts or other agreements with private or public agen-
cies or persons. 
(b) APPROVAL OF PROTOCOL.—(1) The study required by subsection 
(a) shall be conducted in accordance with a protocol approved by the 
Director of the Office of Technology Assessment. 
(2) Not later than July 1, 1986, the Administrator shall publish a 
request for proposals for the design of the protocol to be used in 
conducting the study under this section. 
(3) In considering any proposed protocol for use or approval under 
this subsection, the Administrator and the Director shall take into 
consideration— 
(A) the protocol approved under section 307(a)(2)(A)(i) of the 
Veterans Health Programs Extension and Improvement Act of 
1979 (Public Law 96-151; 38 U.S.C. 219 note); and 
(B) the experience under the study being conducted pursuant 
to that protocol. 
(c) OTA REPORTS.—(1) Concurrent with the approval or dis-
approval of any protocol under subsection (b)(1), the Director shall 
submit to the appropriate committees of the Congress a report— 
(A) explaining the reasons for the Director's approval or 
disapproval of the protocol, as the case may be; and 
(B) containing the Director's conclusions regarding the sci-
entific validity and objectivity of the protocol. 
(2) If the Director has not approved a protocol under subsection 
(b)(1) by the last day of the 180-day period beginning on the date of 
the enactment of this Act, the Director— 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 387 
(A) shall, on such day, submit to the appropriate committees 
of the Congress a report describing the reasons why the Director 
has not approved such a protocol; and 
(B) shall, each 60 days thereafter until such a protocol is 
approved, submit to such committees an updated report on the 
report required by clause (A). 
(d) OTA MONITORING OF COMPLIANCE.—(1) In order to ensure 
compliance with the protocol approved under subsection (b)(1), the 
Director shall monitor the conduct of the study under subsection (a). 
(2)(A) The Director shall submit to the appropriate committees of Reports, 
the Congress, at each of the times specified in subparagraph (B), a 
report on the Director's monitoring of the conduct of the study 
pursuant to paragraph (1). 
(B) A report shall be submitted under subparagraph (A)— 
(i) before the end of the 6-month period beginning on the date 
on which the Director approves the protocol referred to in 
paragraph (1); 
(ii) before the end of the 12-month period beginning on such 
date; and 
(iii) annually thereafter until the study is completed or termi-
nated. 
(e) DURATION OF STUDY.—The study conducted pursuant to subsec-
tion (a) shall be continued for as long after the date on which the 
first report is submitted under subsection (fKD as the Administrator 
determines that there is a reasonable possibility of developing, 
through such study, significant new information on the health 
effects described in subsection (a)(1). 
(f) REPORTS.—(1) Not later than 24 months after the date of the 
approval of the protocol pursuant to subsection Ot))(l) and annually 
thereafter, the Administrator shall submit to the appropriate 
committees of the Congress a report containing— 
(A) a description of the results obtained, before the date of 
such report, under the study conducted pursuant to subsection 
(a); and 
(B) any administrative actions or recommended legislation, or 
both, and any additional comments which the Administrator 
considers appropriate in light of such results. 
(2) Not later than 90 days after the date on which each report 
required by paragraph (1) is submitted, the Administrator shall 
publish in the Federal Register, for public review and comment, a 
description of any action that the Administrator plans or proposes 
to take with respect to programs administered by the Veterans' 
Administration based on— 
(A) the results described in such report; 
(B) the comments and recommendations received on that 
report; and 
(C) any other available pertinent information. 
Each such description shall include a justification or rationale for 
the planned or proposed action. 
(g) DEFINITIONS.—For the purposes of this section: 
(1) The term "gender-specific health effects" includes— 
(A) effects on female reproductive capacity and reproduc-
tive organs; 
(B) effects on reproductive outcomes; 
"••'' 
(C) effects on female-specific organs and tissues; and 
(D) other effects unique to the physiology of females. 
Federal 
Register, 
publication. 
100 STAT. 388 
PUBLIC LAW 99-272—APR. 7, 1986 
(2) The term "Vietnam era" has the meaning given such term 
in section 101(29) of title 38, United States Code. 
38 use 219 note. 
SEC. 19032. ADVISORY COMMITTEE ON NATIVE-AMERICAN VETERANS. 
(a) ESTABLISHMENT OF COMMITTEE.—Not later than May 1, 1986, 
the Administrator of Veterans' Affairs shall establish an advisory 
committee to be known as the Advisory Committee on Native-
American Veterans (hereinafter in this section referred to as the 
"Committee"). 
- , 
(b) DUTIES.—The Committee shall examine and evaluate programs 
and other activities of the Veterans' Administration with respect to 
the needs of veterans who are Native Americans, including Amer-
ican Indians and Alaska Natives. Such examination and evaluation 
shall include— 
(1) an assessment of the needs of such veterans with respect to 
health care, rehabilitation, readjustment counseling, outreach 
services, and other benefits and services under programs 
administered by the Veterans' Administration; and 
(2) a review of the manner in which and the extent to which 
the programs and other activities of the Veterans' Administra-
tion meet such needs. 
(c) MEMBERS.—The Committee shall consist of— 
(1) the Secretary of Labor (or a representative of the Secretary 
of Labor designated by the Secretary after consultation with the 
Assistant Secretary of Labor for Veterans' Employment); 
(2) the Chief Medical Director and Chief Benefits Director of 
the Veterans' Administration or their representatives; and 
(3) members appointed by the Administrator from the general 
public, including— 
(A) representatives of veterans who are Native Ameri-
'
^ 
cans, including American Indians and Alaska Natives and 
such veterans with service-connected disabilities; and 
* 
(B) individuals who are recognized authorities in fields 
riv, 
pertinent to the needs of such veterans, including the spe-
cific health-care needs of such veterans and the furnishing 
of health-care services by the Veterans' Administration to 
such veterans. 
(d) PARTICIPATION BY OTHER AGENCIES.—The Administrator may 
invite representatives of other departments and agencies of the 
Federal Government to participate in the meetings and other activi-
ties of the Committee. 
(e) NUMBER AND PAY OF MEMBERS.—The Administrator shall 
determine the number and pay and allowances of the members of 
the Committee appointed by the Administrator. 
(f) REPORTS.—(1) Not later than February 1, 1987, and February 1, 
1988, the Committee shall submit to the Administrator a report 
containing the findings and any recommendations of the Committee 
regarding the matters described in subsection (b) that were exam-
ined and evaluated by the Committee during the preceding fiscal 
year. 
(2) Not later than 60 days after receiving each such report, the 
Administrator shall transmit to the Committees on Veterans' 
Affairs of the Senate and House of Representatives a copy of the 
report, together with any comments and recommendations concern-
ing the report that the Administrator considers appropriate. 
(g) ALASKA NATIVE DEFINED.—For the purposes of this section, the 
term "Alaska Native" has the meaning given the term "Native" in 
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 389 
section 3(b) of the Alaska Native Claims Settlement Act (43 U.S.C. 
1602(b)). 
(h) TERMINATION.—The Committee shall terminate 90 days after 
the date on which the second report is transmitted by the Com-
mittee pursuant to subsection (f)(2). 
SEC. 19033. WAIVER OF CONGRESSIONAL NOTICE-AND-WAIT PERIOD FOR 
'^^ ' « f S 
ADMINISTRATIVE REORGANIZATION OF CERTAIN VETER-
ANS' 
ADMINISTRATION AUTOMATED DATA PROCESSING 
ACTIVITIES. 
(a) WAIVER.—The Administrator of Veterans' Affairs may under-
take the administrative reorganization described in subsection (b) 
without regard to the requirements of section 2100t))(2) of title 38, 
United States Code. 
Ot)) COVERED ADMINISTRATIVE REORGANIZATION.—The administra-
tive reorganization referred to in subsection (a) is a reorganization 
that— 
(1) involves the transfer of certain functions from the Office of 
Data Management and Telecommunications of the Veterans' 
rtB'jaiJS 
Administration to the Department of Veterans' Benefits of the 
Veterans' Administration; and 
(2) is described in letters dated November 1, 1985, that were 
submitted by the Administrator to the chairmen and ranking 
minority members of the Committees on Veterans' Affairs of 
the Senate and House of Representatives. 
SEC. 19034. RATIFICATION 
OF 
CERTAIN 
TEMPORARILY 
EXPIRED 
AUTHORITIES. 
(a) VETERANS' ADMINISTRATION REGIONAL OFFICE IN THE REPUBLIC 
OF THE PHILIPPINES.—Any action by the Administrator of Veterans' 
Affairs in providing, during the ratification period, for a Veterans' 
Administration Regional Office in the Republic of the Philippines 
under section 230 of title 38, United States Code, is hereby ratified 
with respect to that period. 
O
t
)
) CONTRACT CARE AUTHORITY IN PUERTO RICO AND THE VIRGIN 
ISLANDS.—Any action by the Administrator in entering into a con-
tract applicable to the ratification period for furnishing care 
described in subclause (v) of section 601(4)(C) of title 38, United 
States Code, any action by the Administrator under such contract, 
and any waiver described in that subclause made by the Adminis-
trator that is applicable to that period, is hereby ratified with 
respect to that period. 
(c) ALCOHOL AND DRUG TREATMENT AND REHABILITATION CON-
TRACT PROGRAM.—Any action by the Administrator in entering into 
a contract described in section 620A(a) of title 38, United States 
Code, that is applicable to the ratification period, and any action by 
the Administrator under such contract, is hereby ratified with 
respect to that period. 
(d) RATIFICATION PERIOD DEFINED.—For the purposes of this sec-
tion, the term "ratification period" means the period beginning on 
November 1, 1985, and ending on December 3, 1985. 
K^' 
100 STAT. 390 
PUBLIC LAW 99-272—APR. 7, 1986 
TITLE XX—MISCELLANEOUS PROVISIONS 
Congress. 
Budget, Federal. 
2 use 641. 
2 use 636. 
Effective date. 
SEC. 20001. MISCELLANEOUS PROVISIONS. 
(a) When the Senate is considering a reconciliation bill or a 
reconciliation resolution pursuant to section 310 of the Congres-
sional Budget Act of 1974, upon a point of order being made by any 
Senator against material extraneous to the instructions to a com-
mittee which is contained in any title or provision of the bill or 
resolution or offered as an amendment to the bill or resolution, and 
the point of order is sustained by the Chair, any part of said title or 
provision that contains material extraneous to the instructions to 
said Committee as defined in subsection (d) shall be deemed stricken 
from the bill and may not be offered as an amendment from the 
floor. An affirmative vote of three-fifths of the Members, duly 
chosen and sworn, shall be required to sustain an appeal of the 
ruling of the Chair on a point of order raised under this section, as 
well as to waive or suspend the provisions of this subsection. 
O
b
) No motion to waive or suspend the requirement of section 
305(b)(2) of the Congressional Budget Act of 1974, as it relates to 
germaneness with respect to a reconciliation bill or resolution, shall 
be agreed to unless supported by an affirmative vote of three-fifths 
of the Members, duly chosen and sworn, which super-majority shall 
be required to successfully appeal the ruling of the Chair on a point 
of order raised under that section, as well as to waive or suspend the 
provisions of this subsection. 
(c) This section shall become effective on the date of enactment of 
this title and shall remain in effect until January 2,1987. 
(d)(1)(A) Except as provided in paragraph (2), a provision of a 
reconciliation bill or reconciliation resolution considered pursuant 
to section 310 of the Congressional Budget Act of 1974 shall be 
considered extraneous if such provision does not produce a change 
in outlays or revenues, including changes in outlays and revenues 
brought about by changes in the terms and conditions under which 
outlays are made or revenues are required to be collected; (B) any 
provision producing an increase in outlays or decrease in revenues 
shall be considered extraneous if the net effect of provisions 
reported by the Committee reporting the title containing the provi-
sion is that the Committee fails to achieve its reconciliation instruc-
tions; (C) a provision that is not in the jurisdiction of the Committee 
with jurisdiction over said title or provision shall be considered 
extraneous; (D) a provision shall be considered extraneous if it 
produces changes in outlays or revenues which are merely inciden-
tal to the non-budgetary components of the provision. 
(2) A provision shall not be considered extraneous under (1)(A) 
above if: (A) it is designed to mitigate the direct effects clearly 
attributable to a provision changing outlays or revenues and both 
provisions together produce a net reduction in the deficit; (B) it will 
result in a substantial reduction in outlays or a substantial incresise 
in revenues during fiscal years after the fiscal years covered by the 
reconciliation bill or reconciliation resolution; (C) a reduction of 
outlays or an increase in revenues is likely to occur as a result of the 
provision, in the event of new regulations authorized by the provi-
sion or likely to be proposed, court rulings on pending litigation, or 
relationships between economic indices and stipulated statutory 
triggers pertaining to the provision, other than the regulations, 
court rulings or relationships currently projected by the Congres-
PUBLIC LAW 99-272—APR. 7, 1986 
100 STAT. 391 
sional Budget Office for scorekeeping purposes; (D) such provision 
will be likely to produce a significant reduction in outlays or 
increase in revenues but, due to insufficient data, such reduction or 
increase cannot be reliably estimated. 
Approved April 7, 1986. 
31 
<4B B7 t V 
LEGISLATIVE HISTORY—H.R. 3128 (H.R. 3500) (S. 1730): 
HOUSE REPORTS: No. 99-241, Pt. 1 (Comm. on Ways and Means), Pt. 2 (Comm. on 
Education and Labor), Pt. 3 (Comm. on the Judiciary); No. 99-300 
accompanying H.R. 3500 (Comm. on the Budget) and No. 99-453 
(Comm. of Conference). 
SENATE REPORTS: No. 99-146 accompanying S. 1730 (Comm. on the Budget). 
CONGRESSIONAL RECORD: 
Vol. 131 (1985): Oct. 15, 16, 22-24; Nov. 12-14, S. 1730 considered in Senate. 
Oct. 31, H.R. 3128 considered and passed House. 
Nov. 14, considered and passed Senate, amended, in lieu of 
S. 1730. 
Dec. 5, House agreed to Senate amendment with amendment. 
Dec. 19, Senate agreed to conference report. House rejected 
conference report; receded and concurred in Senate amend-
ment with amendment. Senate concurred in House amend-
ment with amendment. 
Vol. 132 (1986): Mar. 6, House concurred 
in Senate amendment 
with 
amendment. 
Mar. 14, Senate concurred in House amendment 
with 
amendment. 
Mar. 18, House disagreed to Senate amendment. Senate 
insisted on its amendment. 
Mar. 20, House concurred in Senate amendment.