Pension Funding Equity Act of 2004
PL 108-218 (H.R.3108), enacted 04/10/2004

118 STAT. 596
PUBLIC LAW 108–218—APR. 10, 2004
Public Law 108–218
108th Congress
An Act
To amend the Employee Retirement Income Security Act of 1974 and the Internal
Revenue Code of 1986 to temporarily replace the 30-year Treasury rate with
a rate based on long-term corporate bonds for certain pension plan funding
requirements and other provisions, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Pension Funding Equity Act
of 2004’’.
TITLE I—PENSION FUNDING
SEC. 101. TEMPORARY REPLACEMENT OF 30-YEAR TREASURY RATE.
(a) EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—
(1) DETERMINATION OF PERMISSIBLE RANGE.—
(A) IN
GENERAL.—Clause (ii) of section 302(b)(5)(B)
of the Employee Retirement Income Security Act of 1974
is amended by redesignating subclause (II) as subclause
(III) and by inserting after subclause (I) the following new
subclause:
‘‘(II) SPECIAL
RULE
FOR
YEARS
2004
AND
2005.—
In the case of plan years beginning after December
31, 2003, and before January 1, 2006, the term ‘permis-
sible range’ means a rate of interest which is not
above, and not more than 10 percent below, the
weighted average of the rates of interest on amounts
invested conservatively in long-term investment grade
corporate bonds during the 4-year period ending on
the last day before the beginning of the plan year.
Such rates shall be determined by the Secretary of
the Treasury on the basis of 2 or more indices that
are selected periodically by the Secretary of the
Treasury and that are in the top 3 quality levels avail-
able. The Secretary of the Treasury shall make the
permissible range, and the indices and methodology
used to determine the average rate, publicly avail-
able.’’.
(B) SECRETARIAL AUTHORITY.—Subclause (III) of section
302(b)(5)(B)(ii) of such Act, as redesignated by subpara-
graph (A), is amended—
(i) by inserting ‘‘or (II)’’ after ‘‘subclause (I)’’ the
first place it appears, and
Public
information.
29 USC 1082.
Pension Funding
Equity Act of
2004.
29 USC 1001
note.
Apr. 10, 2004
[H.R. 3108]
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118 STAT. 597
PUBLIC LAW 108–218—APR. 10, 2004
(ii) by striking ‘‘subclause (I)’’ the second place
it appears and inserting ‘‘such subclause’’.
(C) CONFORMING AMENDMENT.—Subclause (I) of section
302(b)(5)(B)(ii) of such Act is amended by inserting ‘‘or
(III)’’ after ‘‘subclause (II)’’.
(2) DETERMINATION OF CURRENT LIABILITY.—Clause (i) of
section 302(d)(7)(C) of such Act is amended by adding at the
end the following new subclause:
‘‘(IV) SPECIAL RULE FOR 2004 AND 2005.—For
plan years beginning in 2004 or 2005, notwith-
standing subclause (I), the rate of interest used
to determine current liability under this subsection
shall be the rate of interest under subsection
(b)(5).’’.
(3) CONFORMING
AMENDMENT.—Paragraph (7) of section
302(e) of such Act is amended to read as follows:
‘‘(7) SPECIAL RULE FOR 2002.—In any case in which the
interest rate used to determine current liability is determined
under subsection (d)(7)(C)(i)(III), for purposes of applying para-
graphs (1) and (4)(B)(ii) for plan years beginning in 2002,
the current liability for the preceding plan year shall be redeter-
mined using 120 percent as the specified percentage determined
under subsection (d)(7)(C)(i)(II).’’.
(4) PBGC.—Clause (iii) of section 4006(a)(3)(E) of such
Act is amended by adding at the end the following new sub-
clause:
‘‘(V) In the case of plan years beginning after December
31, 2003, and before January 1, 2006, the annual yield taken
into account under subclause (II) shall be the annual rate
of interest determined by the Secretary of the Treasury on
amounts invested conservatively in long-term investment grade
corporate bonds for the month preceding the month in which
the plan year begins. For purposes of the preceding sentence,
the Secretary of the Treasury shall determine such rate of
interest on the basis of 2 or more indices that are selected
periodically by the Secretary of the Treasury and that are
in the top 3 quality levels available. The Secretary of the
Treasury shall make the permissible range, and the indices
and methodology used to determine the rate, publicly avail-
able.’’.
(b) INTERNAL REVENUE CODE OF 1986.—
(1) DETERMINATION OF PERMISSIBLE RANGE.—
(A) IN
GENERAL.—Clause (ii) of section 412(b)(5)(B)
of the Internal Revenue Code of 1986 is amended by
redesignating subclause (II) as subclause (III) and by
inserting after subclause (I) the following new subclause:
‘‘(II) SPECIAL RULE FOR YEARS 2004 AND 2005.—
In the case of plan years beginning after December
31, 2003, and before January 1, 2006, the term
‘permissible range’ means a rate of interest which
is not above, and not more than 10 percent below,
the weighted average of the rates of interest on
amounts invested conservatively in long-term
investment grade corporate bonds during the 4-
year period ending on the last day before the begin-
ning of the plan year. Such rates shall be deter-
mined by the Secretary on the basis of 2 or more
26 USC 412.
Public
information.
29 USC 1306.
29 USC 1082.
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118 STAT. 598
PUBLIC LAW 108–218—APR. 10, 2004
indices that are selected periodically by the Sec-
retary and that are in the top 3 quality levels
available. The Secretary shall make the permis-
sible range, and the indices and methodology used
to determine the average rate, publicly available.’’.
(B) SECRETARIAL AUTHORITY.—Subclause (III) of section
412(b)(5)(B)(ii) of such Code, as redesignated by subpara-
graph (A), is amended—
(i) by inserting ‘‘or (II)’’ after ‘‘subclause (I)’’ the
first place it appears, and
(ii) by striking ‘‘subclause (I)’’ the second place
it appears and inserting ‘‘such subclause’’.
(C) CONFORMING AMENDMENT.—Subclause (I) of section
412(b)(5)(B)(ii) of such Code is amended by inserting ‘‘or
(III)’’ after ‘‘subclause (II)’’.
(2) DETERMINATION OF CURRENT LIABILITY.—Clause (i) of
section 412(l)(7)(C) of such Code is amended by adding at
the end the following new subclause:
‘‘(IV) SPECIAL RULE FOR 2004 AND 2005.—For
plan years beginning in 2004 or 2005, notwith-
standing subclause (I), the rate of interest used
to determine current liability under this subsection
shall be the rate of interest under subsection
(b)(5).’’.
(3) CONFORMING
AMENDMENT.—Paragraph (7) of section
412(m) of such Code is amended to read as follows:
‘‘(7) SPECIAL RULE FOR 2002.—In any case in which the
interest rate used to determine current liability is determined
under subsection (l)(7)(C)(i)(III), for purposes of applying para-
graphs (1) and (4)(B)(ii) for plan years beginning in 2002,
the current liability for the preceding plan year shall be redeter-
mined using 120 percent as the specified percentage determined
under subsection (l)(7)(C)(i)(II).’’.
(4) 
LIMITATION
ON
CERTAIN
ASSUMPTIONS.—Section
415(b)(2)(E)(ii) of such Code is amended by inserting ‘‘, except
that in the case of plan years beginning in 2004 or 2005,
‘5.5 percent’ shall be substituted for ‘5 percent’ in clause (i)’’
before the period at the end.
(5) ELECTION TO DISREGARD MODIFICATION FOR DEDUCTION
PURPOSES.—Section 404(a)(1) of such Code is amended by
adding at the end the following new subparagraph:
‘‘(F) ELECTION
TO
DISREGARD
MODIFIED
INTEREST
RATE.—An employer may elect to disregard subsections
(b)(5)(B)(ii)(II) and (l)(7)(C)(i)(IV) of section 412 solely for
purposes of determining the interest rate used in calcu-
lating the maximum amount of the deduction allowable
under this paragraph.’’.
(c) PROVISIONS RELATING TO PLAN AMENDMENTS.—
(1) IN GENERAL.—If this subsection applies to any plan
or annuity contract amendment—
(A) such plan or contract shall be treated as being
operated in accordance with the terms of the plan or con-
tract during the period described in paragraph (2)(B)(i),
and
(B) except as provided by the Secretary of the Treasury,
such plan shall not fail to meet the requirements of section
411(d)(6) of the Internal Revenue Code of 1986 and section
26 USC 411 note.
26 USC 404.
26 USC 415.
26 USC 412.
Public
information.
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118 STAT. 599
PUBLIC LAW 108–218—APR. 10, 2004
204(g) of the Employee Retirement Income Security Act
of 1974 by reason of such amendment.
(2) AMENDMENTS TO WHICH SECTION APPLIES.—
(A) IN GENERAL.—This subsection shall apply to any
amendment to any plan or annuity contract which is
made—
(i) pursuant to any amendment made by this sec-
tion, and
(ii) on or before the last day of the first plan
year beginning on or after January 1, 2006.
(B) CONDITIONS.—This subsection shall not apply to
any plan or annuity contract amendment unless—
(i) during the period beginning on the date the
amendment described in subparagraph (A)(i) takes
effect and ending on the date described in subpara-
graph (A)(ii) (or, if earlier, the date the plan or contract
amendment is adopted), the plan or contract is oper-
ated as if such plan or contract amendment were in
effect; and
(ii) such plan or contract amendment applies retro-
actively for such period.
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as provided in paragraphs (2)
and (3), the amendments made by this section shall apply
to plan years beginning after December 31, 2003.
(2) LOOKBACK RULES.—For purposes of applying subsections
(d)(9)(B)(ii) and (e)(1) of section 302 of the Employee Retirement
Income Security Act of 1974 and subsections (l)(9)(B)(ii) and
(m)(1) of section 412 of the Internal Revenue Code of 1986
to plan years beginning after December 31, 2003, the amend-
ments made by this section may be applied as if such amend-
ments had been in effect for all prior plan years. The Secretary
of the Treasury may prescribe simplified assumptions which
may be used in applying the amendments made by this section
to such prior plan years.
(3) TRANSITION RULE FOR SECTION 415 LIMITATION.—In the
case of any participant or beneficiary receiving a distribution
after December 31, 2003 and before January 1, 2005, the
amount payable under any form of benefit subject to section
417(e)(3) of the Internal Revenue Code of 1986 and subject
to adjustment under section 415(b)(2)(B) of such Code shall
not, solely by reason of the amendment made by subsection
(b)(4), be less than the amount that would have been so payable
had the amount payable been determined using the applicable
interest rate in effect as of the last day of the last plan year
beginning before January 1, 2004.
SEC. 102. ELECTION OF ALTERNATIVE DEFICIT REDUCTION CON-
TRIBUTION.
(a) AMENDMENT OF ERISA.—Section 302(d) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082(d)) is
amended by adding at the end the following new paragraph:
‘‘(12) ELECTION FOR CERTAIN PLANS.—
‘‘(A) IN
GENERAL.—In the case of a defined benefit
plan established and maintained by an applicable employer,
if this subsection did not apply to the plan for the plan
Applicability.
26 USC 404 note.
Effective date.
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118 STAT. 600
PUBLIC LAW 108–218—APR. 10, 2004
year beginning in 2000 (determined without regard to para-
graph (6)), then, at the election of the employer, the
increased amount under paragraph (1) for any applicable
plan year shall be the greater of—
‘‘(i) 20 percent of the increased amount under para-
graph (1) determined without regard to this paragraph,
or
‘‘(ii) the increased amount which would be deter-
mined under paragraph (1) if the deficit reduction con-
tribution under paragraph (2) for the applicable plan
year were determined without regard to subparagraphs
(A), (B), and (D) of paragraph (2).
‘‘(B) RESTRICTIONS ON BENEFIT INCREASES.—No amend-
ment which increases the liabilities of the plan by reason
of any increase in benefits, any change in the accrual
of benefits, or any change in the rate at which benefits
become nonforfeitable under the plan shall be adopted
during any applicable plan year, unless—
‘‘(i) the plan’s enrolled actuary certifies (in such
form and manner prescribed by the Secretary of the
Treasury) that the amendment provides for an increase
in annual contributions which will exceed the increase
in annual charges to the funding standard account
attributable to such amendment, or
‘‘(ii) the amendment is required by a collective
bargaining agreement which is in effect on the date
of enactment of this subparagraph.
If a plan is amended during any applicable plan year
in violation of the preceding sentence, any election under
this paragraph shall not apply to any applicable plan year
ending on or after the date on which such amendment
is adopted.
‘‘(C) APPLICABLE EMPLOYER.—For purposes of this para-
graph, the term ‘applicable employer’ means an employer
which is—
‘‘(i) a commercial passenger airline,
‘‘(ii) primarily engaged in the production or manu-
facture of a steel mill product or the processing of
iron ore pellets, or
‘‘(iii) an organization described in section 501(c)(5)
of the Internal Revenue Code of 1986 and which estab-
lished the plan to which this paragraph applies on
June 30, 1955.
‘‘(D) APPLICABLE
PLAN
YEAR.—For purposes of this
paragraph—
‘‘(i) IN GENERAL.—The term ‘applicable plan year’
means any plan year beginning after December 27,
2003, and before December 28, 2005, for which the
employer elects the application of this paragraph.
‘‘(ii) LIMITATION ON NUMBER OF YEARS WHICH MAY
BE ELECTED.—An election may not be made under this
paragraph with respect to more than 2 plan years.
‘‘(E) NOTICE
REQUIREMENTS
FOR
PLANS
ELECTING
ALTERNATIVE DEFICIT REDUCTION CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—If an employer elects an alter-
native deficit reduction contribution under this para-
graph and section 412(l)(12) of the Internal Revenue
Deadline.
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118 STAT. 601
PUBLIC LAW 108–218—APR. 10, 2004
Code of 1986 for any year, the employer shall provide,
within 30 days of filing the election for such year,
written notice of the election to participants and bene-
ficiaries and to the Pension Benefit Guaranty Corpora-
tion.
‘‘(ii) NOTICE TO PARTICIPANTS AND BENEFICIARIES.—
The notice under clause (i) to participants and bene-
ficiaries shall include with respect to any election—
‘‘(I) the due date of the alternative deficit
reduction contribution and the amount by which
such contribution was reduced from the amount
which would have been owed if the election were
not made, and
‘‘(II) a description of the benefits under the
plan which are eligible to be guaranteed by the
Pension Benefit Guaranty Corporation and an
explanation of the limitations on the guarantee
and the circumstances under which such limita-
tions apply, including the maximum guaranteed
monthly benefits which the Pension Benefit Guar-
anty Corporation would pay if the plan terminated
while underfunded.
‘‘(iii) NOTICE TO PBGC.—The notice under clause
(i) to the Pension Benefit Guaranty Corporation shall
include—
‘‘(I) the information described in clause (ii)(I),
‘‘(II) the number of years it will take to restore
the plan to full funding if the employer only makes
the required contributions, and
‘‘(III) information as to how the amount by
which the plan is underfunded compares with the
capitalization of the employer making the election.
‘‘(F) ELECTION.—An election under this paragraph shall
be made at such time and in such manner as the Secretary
of the Treasury may prescribe.’’.
(b) AMENDMENT OF 1986 CODE.—Section 412(l) of the Internal
Revenue Code of 1986 (relating to applicability of subsection) is
amended by adding at the end the following new paragraph:
‘‘(12) ELECTION FOR CERTAIN PLANS.—
‘‘(A) IN
GENERAL.—In the case of a defined benefit
plan established and maintained by an applicable employer,
if this subsection did not apply to the plan for the plan
year beginning in 2000 (determined without regard to para-
graph (6)), then, at the election of the employer, the
increased amount under paragraph (1) for any applicable
plan year shall be the greater of—
‘‘(i) 20 percent of the increased amount under para-
graph (1) determined without regard to this paragraph,
or
‘‘(ii) the increased amount which would be deter-
mined under paragraph (1) if the deficit reduction con-
tribution under paragraph (2) for the applicable plan
year were determined without regard to subparagraphs
(A), (B), and (D) of paragraph (2).
‘‘(B) RESTRICTIONS ON BENEFIT INCREASES.—No amend-
ment which increases the liabilities of the plan by reason
of any increase in benefits, any change in the accrual
26 USC 412.
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118 STAT. 602
PUBLIC LAW 108–218—APR. 10, 2004
of benefits, or any change in the rate at which benefits
become nonforfeitable under the plan shall be adopted
during any applicable plan year, unless—
‘‘(i) the plan’s enrolled actuary certifies (in such
form and manner prescribed by the Secretary) that
the amendment provides for an increase in annual
contributions which will exceed the increase in annual
charges to the funding standard account attributable
to such amendment, or
‘‘(ii) the amendment is required by a collective
bargaining agreement which is in effect on the date
of enactment of this subparagraph.
If a plan is amended during any applicable plan year
in violation of the preceding sentence, any election under
this paragraph shall not apply to any applicable plan year
ending on or after the date on which such amendment
is adopted.
‘‘(C) APPLICABLE EMPLOYER.—For purposes of this para-
graph, the term ‘applicable employer’ means an employer
which is—
‘‘(i) a commercial passenger airline,
‘‘(ii) primarily engaged in the production or manu-
facture of a steel mill product or the processing of
iron ore pellets, or
‘‘(iii) an organization described in section 501(c)(5)
and which established the plan to which this paragraph
applies on June 30, 1955.
‘‘(D) APPLICABLE
PLAN
YEAR.—For purposes of this
paragraph—
‘‘(i) IN GENERAL.—The term ‘applicable plan year’
means any plan year beginning after December 27,
2003, and before December 28, 2005, for which the
employer elects the application of this paragraph.
‘‘(ii) LIMITATION ON NUMBER OF YEARS WHICH MAY
BE ELECTED.—An election may not be made under this
paragraph with respect to more than 2 plan years.
‘‘(E) ELECTION.—An election under this paragraph shall
be made at such time and in such manner as the Secretary
may prescribe.’’.
(c) EFFECT OF ELECTION.—An election under section 302(d)(12)
of the Employee Retirement Income Security Act of 1974 or section
412(l)(12) of the Internal Revenue Code of 1986 (as added by this
section) with respect to a plan shall not invalidate any obligation
(pursuant to a collective bargaining agreement in effect on the
date of the election) to provide benefits, to change the accrual
of benefits, or to change the rate at which benefits become non-
forfeitable under the plan.
(d) PENALTY
FOR
FAILING
TO
PROVIDE
NOTICE.—Section
502(c)(3) of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1132(c)(3)) is amended by inserting ‘‘or who fails to
meet the requirements of section 302(d)(12)(E) with respect to any
person’’ after ‘‘101(e)(2) with respect to any person’’.
SEC. 103. MULTIEMPLOYER PLAN FUNDING NOTICES.
(a) IN GENERAL.—Section 101 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021) is amended by
inserting after subsection (e) the following new subsection:
26 USC 412 note.
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118 STAT. 603
PUBLIC LAW 108–218—APR. 10, 2004
‘‘(f) 
MULTIEMPLOYER
DEFINED
BENEFIT
PLAN
FUNDING
NOTICES.—
‘‘(1) IN GENERAL.—The administrator of a defined benefit
plan which is a multiemployer plan shall for each plan year
provide a plan funding notice to each plan participant and
beneficiary, to each labor organization representing such
participants or beneficiaries, to each employer that has an
obligation to contribute under the plan, and to the Pension
Benefit Guaranty Corporation.
‘‘(2) INFORMATION CONTAINED IN NOTICES.—
‘‘(A) IDENTIFYING INFORMATION.—Each notice required
under paragraph (1) shall contain identifying information,
including the name of the plan, the address and phone
number of the plan administrator and the plan’s principal
administrative officer, each plan sponsor’s employer identi-
fication number, and the plan number of the plan.
‘‘(B) SPECIFIC
INFORMATION.—A plan funding notice
under paragraph (1) shall include—
‘‘(i) a statement as to whether the plan’s funded
current liability percentage (as defined in section
302(d)(8)(B)) for the plan year to which the notice
relates is at least 100 percent (and, if not, the actual
percentage);
‘‘(ii) a statement of the value of the plan’s assets,
the amount of benefit payments, and the ratio of the
assets to the payments for the plan year to which
the notice relates;
‘‘(iii) a summary of the rules governing insolvent
multiemployer plans, including the limitations on ben-
efit payments and any potential benefit reductions and
suspensions (and the potential effects of such limita-
tions, reductions, and suspensions on the plan); and
‘‘(iv) a general description of the benefits under
the plan which are eligible to be guaranteed by the
Pension Benefit Guaranty Corporation, along with an
explanation of the limitations on the guarantee and
the circumstances under which such limitations apply.
‘‘(C) OTHER INFORMATION.—Each notice under para-
graph (1) shall include any additional information which
the plan administrator elects to include to the extent not
inconsistent with regulations prescribed by the Secretary.
‘‘(3) TIME FOR PROVIDING NOTICE.—Any notice under para-
graph (1) shall be provided no later than two months after
the deadline (including extensions) for filing the annual report
for the plan year to which the notice relates.
‘‘(4) FORM AND MANNER.—Any notice under paragraph (1)—
‘‘(A) shall be provided in a form and manner prescribed
in regulations of the Secretary,
‘‘(B) shall be written in a manner so as to be understood
by the average plan participant, and
‘‘(C) may be provided in written, electronic, or other
appropriate form to the extent such form is reasonably
accessible to persons to whom the notice is required to
be provided.’’.
(b) PENALTIES.—Section 502(c)(1) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1132(c)(1)) is amended
Regulations.
Deadline.
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118 STAT. 604
PUBLIC LAW 108–218—APR. 10, 2004
by striking ‘‘or section 101(e)(1)’’ and inserting ‘‘, section 101(e)(1),
or section 101(f)’’.
(c) REGULATIONS AND MODEL NOTICE.—The Secretary of Labor
shall, not later than 1 year after the date of the enactment of
this Act, issue regulations (including a model notice) necessary
to implement the amendments made by this section.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to plan years beginning after December 31, 2004.
SEC. 104. ELECTION FOR DEFERRAL OF CHARGE FOR PORTION OF
NET EXPERIENCE LOSS.
(a) EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—
(1) IN GENERAL.—Section 302(b)(7) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1082(b)(7)) is
amended by adding at the end the following new subparagraph:
‘‘(F) ELECTION FOR DEFERRAL OF CHARGE FOR PORTION
OF NET EXPERIENCE LOSS.—
‘‘(i) IN GENERAL.—With respect to the net experi-
ence loss of an eligible multiemployer plan for the
first plan year beginning after December 31, 2001,
the plan sponsor may elect to defer up to 80 percent
of the amount otherwise required to be charged under
paragraph (2)(B)(iv) for any plan year beginning after
June 30, 2003, and before July 1, 2005, to any plan
year selected by the plan from either of the 2 imme-
diately succeeding plan years.
‘‘(ii) INTEREST.—For the plan year to which a
charge is deferred pursuant to an election under clause
(i), the funding standard account shall be charged with
interest on the deferred charge for the period of
deferral at the rate determined under section 304(a)
for multiemployer plans.
‘‘(iii) RESTRICTIONS
ON
BENEFIT
INCREASES.—No
amendment which increases the liabilities of the plan
by reason of any increase in benefits, any change in
the accrual of benefits, or any change in the rate
at which benefits become nonforfeitable under the plan
shall be adopted during any period for which a charge
is deferred pursuant to an election under clause (i),
unless—
‘‘(I) the plan’s enrolled actuary certifies (in
such form and manner prescribed by the Secretary
of the Treasury) that the amendment provides for
an increase in annual contributions which will
exceed the increase in annual charges to the
funding standard account attributable to such
amendment, or
‘‘(II) the amendment is required by a collective
bargaining agreement which is in effect on the
date of enactment of this subparagraph.
If a plan is amended during any such plan year in
violation of the preceding sentence, any election under
this paragraph shall not apply to any such plan year
ending on or after the date on which such amendment
is adopted.
29 USC 1021
note.
Deadline.
29 USC 1021
note.
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118 STAT. 605
PUBLIC LAW 108–218—APR. 10, 2004
‘‘(iv) ELIGIBLE
MULTIEMPLOYER
PLAN.—For pur-
poses of this subparagraph, the term ‘eligible multiem-
ployer plan’ means a multiemployer plan—
‘‘(I) which had a net investment loss for the
first plan year beginning after December 31, 2001,
of at least 10 percent of the average fair market
value of the plan assets during the plan year,
and
‘‘(II) with respect to which the plan’s enrolled
actuary certifies (not taking into account the
application of this subparagraph), on the basis of
the acutuarial assumptions used for the last plan
year ending before the date of the enactment of
this subparagraph, that the plan is projected to
have an accumulated funding deficiency (within
the meaning of subsection (a)(2)) for any plan year
beginning after June 30, 2003, and before July
1, 2006.
For purposes of subclause (I), a plan’s net investment
loss shall be determined on the basis of the actual
loss and not under any actuarial method used under
subsection (c)(2).
‘‘(v) EXCEPTION TO TREATMENT OF ELIGIBLE MULTI-
EMPLOYER PLAN.—In no event shall a plan be treated
as an eligible multiemployer plan under clause (iv)
if—
‘‘(I) for any taxable year beginning during the
10-year period preceding the first plan year for
which an election is made under clause (i), any
employer required to contribute to the plan failed
to timely pay any excise tax imposed under section
4971 of the Internal Revenue Code of 1986 with
respect to the plan,
‘‘(II) for any plan year beginning after June
30, 1993, and before the first plan year for which
an election is made under clause (i), the average
contribution required to be made by all employers
to the plan does not exceed 10 cents per hour
or no employer is required to make contributions
to the plan, or
‘‘(III) with respect to any of the plan years
beginning after June 30, 1993, and before the first
plan year for which an election is made under
clause (i), a waiver was granted under section
303 of this Act or section 412(d) of the Internal
Revenue Code of 1986 with respect to the plan
or an extension of an amortization period was
granted under section 304 of this Act or section
412(e) of such Code with respect to the plan.
‘‘(vi) NOTICE.—If a plan sponsor makes an election
under this subparagraph or section 412(b)(7)(F) of the
Internal Revenue Code of 1986 for any plan year, the
plan administrator shall provide, within 30 days of
filing the election for such year, written notice of the
election to participants and beneficiaries, to each labor
organization representing such participants or bene-
ficiaries, to each employer that has an obligation to
Deadline.
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PUBLIC LAW 108–218—APR. 10, 2004
contribute under the plan, and to the Pension Benefit
Guaranty Corporation. Such notice shall include with
respect to any election the amount of any charge to
be deferred and the period of the deferral. Such notice
shall also include the maximum guaranteed monthly
benefits which the Pension Benefit Guaranty Corpora-
tion would pay if the plan terminated while under-
funded.
‘‘(vii) ELECTION.—An election under this subpara-
graph shall be made at such time and in such manner
as the Secretary of the Treasury may prescribe.’’.
(2) PENALTY.—Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) is amended to read as follows:
‘‘(4) The Secretary may assess a civil penalty of not more
than $1,000 a day for each violation by any person of section
302(b)(7)(F)(vi).’’.
(b) INTERNAL REVENUE CODE OF 1986.—Section 412(b)(7) of
the Internal Revenue Code of 1986 (relating to special rules for
multiemployer plans) is amended by adding at the end the following
new subparagraph:
‘‘(F) ELECTION FOR DEFERRAL OF CHARGE FOR PORTION
OF NET EXPERIENCE LOSS.—
‘‘(i) IN GENERAL.—With respect to the net experi-
ence loss of an eligible multiemployer plan for the
first plan year beginning after December 31, 2001,
the plan sponsor may elect to defer up to 80 percent
of the amount otherwise required to be charged under
paragraph (2)(B)(iv) for any plan year beginning after
June 30, 2003, and before July 1, 2005, to any plan
year selected by the plan from either of the 2 imme-
diately succeeding plan years.
‘‘(ii) INTEREST.—For the plan year to which a
charge is deferred pursuant to an election under clause
(i), the funding standard account shall be charged with
interest on the deferred charge for the period of
deferral at the rate determined under subsection (d)
for multiemployer plans.
‘‘(iii) RESTRICTIONS
ON
BENEFIT
INCREASES.—No
amendment which increases the liabilities of the plan
by reason of any increase in benefits, any change in
the accrual of benefits, or any change in the rate
at which benefits become nonforfeitable under the plan
shall be adopted during any period for which a charge
is deferred pursuant to an election under clause (i),
unless—
‘‘(I) the plan’s enrolled actuary certifies (in
such form and manner prescribed by the Secretary)
that the amendment provides for an increase in
annual contributions which will exceed the
increase in annual charges to the funding standard
account attributable to such amendment, or
‘‘(II) the amendment is required by a collective
bargaining agreement which is in effect on the
date of enactment of this subparagraph.
If a plan is amended during any such plan year in
violation of the preceding sentence, any election under
this paragraph shall not apply to any such plan year
26 USC 412.
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118 STAT. 607
PUBLIC LAW 108–218—APR. 10, 2004
ending on or after the date on which such amendment
is adopted.
‘‘(iv) ELIGIBLE
MULTIEMPLOYER
PLAN.—For pur-
poses of this subparagraph, the term ‘eligible multiem-
ployer plan’ means a multiemployer plan—
‘‘(I) which had a net investment loss for the
first plan year beginning after December 31, 2001,
of at least 10 percent of the average fair market
value of the plan assets during the plan year,
and
‘‘(II) with respect to which the plan’s enrolled
actuary certifies (not taking into account the
application of this subparagraph), on the basis of
the acutuarial assumptions used for the last plan
year ending before the date of the enactment of
this subparagraph, that the plan is projected to
have an accumulated funding deficiency (within
the meaning of subsection (a)) for any plan year
beginning after June 30, 2003, and before July
1, 2006.
For purposes of subclause (I), a plan’s net investment
loss shall be determined on the basis of the actual
loss and not under any actuarial method used under
subsection (c)(2).
‘‘(v) EXCEPTION TO TREATMENT OF ELIGIBLE MULTI-
EMPLOYER PLAN.—In no event shall a plan be treated
as an eligible multiemployer plan under clause (iv)
if—
‘‘(I) for any taxable year beginning during the
10-year period preceding the first plan year for
which an election is made under clause (i), any
employer required to contribute to the plan failed
to timely pay any excise tax imposed under section
4971 with respect to the plan,
‘‘(II) for any plan year beginning after June
30, 1993, and before the first plan year for which
an election is made under clause (i), the average
contribution required to be made by all employers
to the plan does not exceed 10 cents per hour
or no employer is required to make contributions
to the plan, or
‘‘(III) with respect to any of the plan years
beginning after June 30, 1993, and before the first
plan year for which an election is made under
clause (i), a waiver was granted under section
412(d) or section 303 of the Employee Retirement
Income Security Act of 1974 with respect to the
plan or an extension of an amortization period
was granted under subsection (e) or section 304
of such Act with respect to the plan.
‘‘(vi) ELECTION.—An election under this subpara-
graph shall be made at such time and in such manner
as the Secretary may prescribe.’’.
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118 STAT. 608
PUBLIC LAW 108–218—APR. 10, 2004
TITLE II—OTHER PROVISIONS
SEC. 201. TWO-YEAR EXTENSION OF TRANSITION RULE TO PENSION
FUNDING REQUIREMENTS.
(a) IN GENERAL.—Section 769(c) of the Retirement Protection
Act of 1994, as added by section 1508 of the Taxpayer Relief
Act of 1997, is amended—
(1) by inserting ‘‘except as provided in paragraph (3),’’
before ‘‘the transition rules’’, and
(2) by adding at the end the following:
‘‘(3) SPECIAL RULES.—In the case of plan years beginning
in 2004 and 2005, the following transition rules shall apply
in lieu of the transition rules described in paragraph (2):
‘‘(A) For purposes of section 412(l)(9)(A) of the Internal
Revenue Code of 1986 and section 302(d)(9)(A) of the
Employee Retirement Income Security Act of 1974, the
funded current liability percentage for any plan year shall
be treated as not less than 90 percent.
‘‘(B) For purposes of section 412(m) of the Internal
Revenue Code of 1986 and section 302(e) of the Employee
Retirement Income Security Act of 1974, the funded current
liability percentage for any plan year shall be treated as
not less than 100 percent.
‘‘(C) For purposes of determining unfunded vested
benefits under section 4006(a)(3)(E)(iii) of the Employee
Retirement Income Security Act of 1974, the mortality
table shall be the mortality table used by the plan.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to plan years beginning after December 31, 2003.
SEC. 202. PROCEDURES APPLICABLE TO DISPUTES INVOLVING PEN-
SION PLAN WITHDRAWAL LIABILITY.
(a) IN GENERAL.—Section 4221 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1401) is amended by adding
at the end the following new subsection:
‘‘(f) PROCEDURES APPLICABLE TO CERTAIN DISPUTES.—
‘‘(1) IN GENERAL.—If—
‘‘(A) a plan sponsor of a plan determines that—
‘‘(i) a complete or partial withdrawal of an
employer has occurred, or
‘‘(ii) an employer is liable for withdrawal liability
payments with respect to the complete or partial with-
drawal of an employer from the plan,
‘‘(B) such determination is based in whole or in part
on a finding by the plan sponsor under section 4212(c)
that a principal purpose of a transaction that occurred
before January 1, 1999, was to evade or avoid withdrawal
liability under this subtitle, and
‘‘(C) such transaction occurred at least 5 years before
the date of the complete or partial withdrawal,
then the special rules under paragraph (2) shall be used in
applying subsections (a) and (d) of this section and section
4219(c) to the employer.
‘‘(2) SPECIAL RULES.—
‘‘(A) 
DETERMINATION.—Notwithstanding 
subsection
(a)(3)—
Applicability.
26 USC 412 note.
Applicability.
26 USC 412 note.
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118 STAT. 609
PUBLIC LAW 108–218—APR. 10, 2004
‘‘(i) a determination by the plan sponsor under
paragraph (1)(B) shall not be presumed to be correct,
and
‘‘(ii) the plan sponsor shall have the burden to
establish, by a preponderance of the evidence, the ele-
ments of the claim under section 4212(c) that a prin-
cipal purpose of the transaction was to evade or avoid
withdrawal liability under this subtitle.
Nothing in this subparagraph shall affect the burden of
establishing any other element of a claim for withdrawal
liability under this subtitle.
‘‘(B) PROCEDURE.—Notwithstanding subsection (d) and
section 4219(c), if an employer contests the plan sponsor’s
determination under paragraph (1) through an arbitration
proceeding pursuant to subsection (a), or through a claim
brought in a court of competent jurisdiction, the employer
shall not be obligated to make any withdrawal liability
payments until a final decision in the arbitration pro-
ceeding, or in court, upholds the plan sponsor’s determina-
tion.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to any employer that receives a notification under
section 4219(b)(1) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1399(b)(1)) after October 31, 2003.
SEC. 203. SENSE OF CONGRESS REGARDING DEFINED BENEFIT PEN-
SION SYSTEM REFORM.
It is the sense of the Congress that the Congress must ensure
the financial health of the defined benefit pension system by
working to promptly implement—
(1) a permanent replacement for the pension discount rate
used for defined benefit pension plan calculations, and
(2) comprehensive funding reforms for all defined benefit
pension plans aimed at achieving accurate and sound pension
funding to enhance retirement security for workers who rely
on defined pension plan benefits, to reduce the volatility of
contributions, to provide plan sponsors with predictability for
plan contributions, and to ensure adequate disclosures for plan
participants in the case of underfunded pension plans.
SEC. 204. EXTENSION OF TRANSFERS OF EXCESS PENSION ASSETS
TO RETIREE HEALTH ACCOUNTS.
(a) AMENDMENT OF INTERNAL REVENUE CODE OF 1986.—Para-
graph (5) of section 420(b) of the Internal Revenue Code of 1986
(relating to expiration) is amended by striking ‘‘December 31, 2005’’
and inserting ‘‘December 31, 2013’’.
(b) AMENDMENTS OF ERISA.—
(1) Section 101(e)(3) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by
striking ‘‘Tax Relief Extension Act of 1999’’ and inserting ‘‘Pen-
sion Funding Equity Act of 2004’’.
(2) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is
amended by striking ‘‘Tax Relief Extension Act of 1999’’ and
inserting ‘‘Pension Funding Equity Act of 2004’’.
(3) Paragraph (13) of section 408(b) of such Act (29 U.S.C.
1108(b)(3)) is amended—
(A) by striking ‘‘January 1, 2006’’ and inserting
‘‘January 1, 2014’’, and
26 USC 420.
Applicability.
26 USC 1401
note.
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118 STAT. 610
PUBLIC LAW 108–218—APR. 10, 2004
(B) by striking ‘‘Tax Relief Extension Act of 1999’’
and inserting ‘‘Pension Funding Equity Act of 2004’’.
SEC. 205. REPEAL OF REDUCTION OF DEDUCTIONS FOR MUTUAL LIFE
INSURANCE COMPANIES.
(a) IN GENERAL.—Section 809 of the Internal Revenue Code
of 1986 (relating to reductions in certain deduction of mutual life
insurance companies) is hereby repealed.
(b) CONFORMING AMENDMENTS.—
(1) Subsections (a)(2)(B) and (b)(1)(B) of section 807 of
such Code are each amended by striking ‘‘the sum of (i)’’ and
by striking ‘‘plus (ii) any excess described in section 809(a)(2)
for the taxable year,’’.
(2)(A) The last sentence of section 807(d)(1) of such Code
is amended by striking ‘‘section 809(b)(4)(B)’’ and inserting
‘‘paragraph (6)’’.
(B) Subsection (d) of section 807 of such Code is amended
by adding at the end the following new paragraph:
‘‘(6) STATUTORY RESERVES.—The term ‘statutory reserves’
means the aggregate amount set forth in the annual statement
with respect to items described in section 807(c). Such term
shall not include any reserve attributable to a deferred and
uncollected premium if the establishment of such reserve is
not permitted under section 811(c).’’.
(3) Subsection (c) of section 808 of such Code is amended
to read as follows:
‘‘(c) AMOUNT OF DEDUCTION.—The deduction for policyholder
dividends for any taxable year shall be an amount equal to the
policyholder dividends paid or accrued during the taxable year.’’.
(4) Subparagraph (A) of section 812(b)(3) of such Code
is amended by striking ‘‘sections 808 and 809’’ and inserting
‘‘section 808’’.
(5) Subsection (c) of section 817 of such Code is amended
by striking ‘‘(other than section 809)’’.
(6) Subsection (c) of section 842 of such Code is amended
by striking paragraph (3) and by redesignating paragraph (4)
as paragraph (3).
(7) The table of sections for subpart C of part I of sub-
chapter L of chapter 1 of such Code is amended by striking
the item relating to section 809.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2004.
SEC. 206. CLARIFICATION OF EXEMPTION FROM TAX FOR SMALL PROP-
ERTY AND CASUALTY INSURANCE COMPANIES.
(a) IN GENERAL.—Section 501(c)(15)(A) of the Internal Revenue
Code of 1986 is amended to read as follows:
‘‘(A) Insurance companies (as defined in section 816(a))
other than life (including interinsurers and reciprocal under-
writers) if—
‘‘(i)(I) the gross receipts for the taxable year do not
exceed $600,000, and
‘‘(II) more than 50 percent of such gross receipts consist
of premiums, or
‘‘(ii) in the case of a mutual insurance company—
‘‘(I) the gross receipts of which for the taxable
year do not exceed $150,000, and
26 USC 501.
Applicability.
26 USC 807 note.
26 USC 842.
26 USC 817.
26 USC 812.
26 USC 808.
26 USC 807.
26 USC 809.
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118 STAT. 611
PUBLIC LAW 108–218—APR. 10, 2004
‘‘(II) more than 35 percent of such gross receipts
consist of premiums.
Clause (ii) shall not apply to a company if any employee of
the company, or a member of the employee’s family (as defined
in section 2032A(e)(2)), is an employee of another company
exempt from taxation by reason of this paragraph (or would
be so exempt but for this sentence).’’.
(b) CONTROLLED GROUP RULE.—Section 501(c)(15)(C) of the
Internal Revenue Code of 1986 is amended by inserting ‘‘, except
that in applying section 831(b)(2)(B)(ii) for purposes of this subpara-
graph, subparagraphs (B) and (C) of section 1563(b)(2) shall be
disregarded’’ before the period at the end.
(c) DEFINITION OF INSURANCE COMPANY FOR SECTION 831.—
Section 831 of the Internal Revenue Code of 1986 is amended
by redesignating subsection (c) as subsection (d) and by inserting
after subsection (b) the following new subsection:
‘‘(c) INSURANCE COMPANY DEFINED.—For purposes of this sec-
tion, the term ‘insurance company’ has the meaning given to such
term by section 816(a)).’’.
(d) CONFORMING AMENDMENT.—Clause (i) of section 831(b)(2)(A)
of the Internal Revenue Code of 1986 is amended by striking
‘‘exceed $350,000 but’’.
(e) 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, 2003.
(2) TRANSITION RULE FOR COMPANIES IN RECEIVERSHIP OR
LIQUIDATION.—In the case of a company or association which—
(A) for the taxable year which includes April 1, 2004,
meets the requirements of section 501(c)(15)(A) of the
Internal Revenue Code of 1986, as in effect for the last
taxable year beginning before January 1, 2004, and
(B) on April 1, 2004, is in a receivership, liquidation,
or similar proceeding under the supervision of a State
court,
the amendments made by this section shall apply to taxable
years beginning after the earlier of the date such proceeding
ends or December 31, 2007.
SEC. 207. CONFIRMATION OF ANTITRUST STATUS OF GRADUATE MED-
ICAL RESIDENT MATCHING PROGRAMS.
(a) FINDINGS AND PURPOSES.—
(1) FINDINGS.—Congress makes the following findings:
(A) For over 50 years, most United States medical
school seniors and the large majority of graduate medical
education programs (popularly known as ‘‘residency pro-
grams’’) have chosen to use a matching program to match
medical students with residency programs to which they
have applied. These matching programs have been an
integral part of an educational system that has produced
the finest physicians and medical researchers in the world.
(B) Before such matching programs were instituted,
medical students often felt pressure, at an unreasonably
early stage of their medical education, to seek admission
to, and accept offers from, residency programs. As a result,
medical students often made binding commitments before
they were in a position to make an informed decision
15 USC 37b.
Applicability.
26 USC 501 note.
26 USC 831.
26 USC 501.
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118 STAT. 612
PUBLIC LAW 108–218—APR. 10, 2004
about a medical specialty or a residency program and before
residency programs could make an informed assessment
of students’ qualifications. This situation was inefficient,
chaotic, and unfair and it often led to placements that
did not serve the interests of either medical students or
residency programs.
(C) The original matching program, now operated by
the independent non-profit National Resident Matching
Program and popularly known as ‘‘the Match’’, was devel-
oped and implemented more than 50 years ago in response
to widespread student complaints about the prior process.
This Program includes on its board of directors individuals
nominated by medical student organizations as well as
by major medical education and hospital associations.
(D) The Match uses a computerized mathematical algo-
rithm, as students had recommended, to analyze the pref-
erences of students and residency programs and match
students with their highest preferences from among the
available positions in residency programs that listed them.
Students thus obtain a residency position in the most
highly ranked program on their list that has ranked them
sufficiently high among its preferences. Each year, about
85 percent of participating United States medical students
secure a place in one of their top 3 residency program
choices.
(E) Antitrust lawsuits challenging the matching
process, regardless of their merit or lack thereof, have
the potential to undermine this highly efficient, pro-
competitive, and long-standing process. The costs of
defending such litigation would divert the scarce resources
of our country’s teaching hospitals and medical schools
from their crucial missions of patient care, physician
training, and medical research. In addition, such costs may
lead to abandonment of the matching process, which has
effectively served the interests of medical students,
teaching hospitals, and patients for over half a century.
(2) PURPOSES.—It is the purpose of this section to—
(A) confirm that the antitrust laws do not prohibit
sponsoring, conducting, or participating in a graduate med-
ical education residency matching program, or agreeing
to do so; and
(B) ensure that those who sponsor, conduct or partici-
pate in such matching programs are not subjected to the
burden and expense of defending against litigation that
challenges such matching programs under the antitrust
laws.
(b) APPLICATION OF ANTITRUST LAWS TO GRADUATE MEDICAL
EDUCATION RESIDENCY MATCHING PROGRAMS.—
(1) DEFINITIONS.—In this subsection:
(A) ANTITRUST LAWS.—The term ‘‘antitrust laws’’—
(i) has the meaning given such term in subsection
(a) of the first section of the Clayton Act (15 U.S.C.
12(a)), except that such term includes section 5 of
the Federal Trade Commission Act (15 U.S.C. 45) to
the extent such section 5 applies to unfair methods
of competition; and
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118 STAT. 613
PUBLIC LAW 108–218—APR. 10, 2004
(ii) includes any State law similar to the laws
referred to in clause (i).
(B) GRADUATE
MEDICAL
EDUCATION
PROGRAM.—The
term ‘‘graduate medical education program’’ means—
(i) a residency program for the medical education
and training of individuals following graduation from
medical school;
(ii) a program, known as a specialty or subspecialty
fellowship program, that provides more advanced
training; and
(iii) an institution or organization that operates,
sponsors or participates in such a program.
(C) 
GRADUATE
MEDICAL
EDUCATION
RESIDENCY
MATCHING
PROGRAM.—The term ‘‘graduate medical edu-
cation residency matching program’’ means a program
(such as those conducted by the National Resident
Matching Program) that, in connection with the admission
of students to graduate medical education programs, uses
an algorithm and matching rules to match students in
accordance with the preferences of students and the pref-
erences of graduate medical education programs.
(D) STUDENT.—The term ‘‘student’’ means any indi-
vidual who seeks to be admitted to a graduate medical
education program.
(2) CONFIRMATION OF ANTITRUST STATUS.—It shall not be
unlawful under the antitrust laws to sponsor, conduct, or
participate in a graduate medical education residency matching
program, or to agree to sponsor, conduct, or participate in
such a program. Evidence of any of the conduct described
in the preceding sentence shall not be admissible in Federal
court to support any claim or action alleging a violation of
the antitrust laws.
(3) APPLICABILITY.—Nothing in this section shall be con-
strued to exempt from the antitrust laws any agreement on
the part of 2 or more graduate medical education programs
to fix the amount of the stipend or other benefits received
by students participating in such programs.
(c) EFFECTIVE DATE.—This section shall take effect on the date
of enactment of this Act, shall apply to conduct whether it occurs
prior to, on, or after such date of enactment, and shall apply
Applicability.
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118 STAT. 614
PUBLIC LAW 108–218—APR. 10, 2004
LEGISLATIVE HISTORY—H.R. 3108:
HOUSE REPORTS: No. 108–457 (Comm. of Conference).
CONGRESSIONAL RECORD:
Vol. 149 (2003): Oct. 8, considered and passed House.
Vol. 150 (2004): Jan. 22, 26–28, considered and passed Senate, amended.
Apr. 2, House agreed to conference report.
Apr. 8, Senate agreed to conference report.
to all judicial and administrative actions or other proceedings
pending on such date of enactment.
Approved April 10, 2004.
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