[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1708 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1708

 To amend the Employee Retirement Income Security Act of 1974 and the 
 Internal Revenue Code of 1986 to require plans which adopt amendments 
     that significantly reduce future benefit accruals to provide 
     participants with adequate notice of the changes made by such 
                              amendments.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 7, 1999

  Mr. Moynihan (for himself, Mr. Jeffords, Mr. Leahy, Mr. Kerrey, Mr. 
  Robb, Mr. Rockefeller, Mr. Sarbanes, Mr. Grams, and Mr. Lieberman) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Employee Retirement Income Security Act of 1974 and the 
 Internal Revenue Code of 1986 to require plans which adopt amendments 
     that significantly reduce future benefit accruals to provide 
     participants with adequate notice of the changes made by such 
                              amendments.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Pension Reduction Disclosure Act of 
1999''.

SEC. 2. NOTICE REQUIRED FOR CERTAIN PLAN AMENDMENTS REDUCING FUTURE 
              BENEFIT ACCRUALS.

    (a) General Notice Requirements.--Section 204(h) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is amended 
to read as follows:
    ``(h) Notice Requirements for Pension Plan Amendments Reducing 
Accruals.--
            ``(1) In general.--If an applicable pension plan is amended 
        so as to provide for a significant reduction in the rate of 
        future benefit accrual of 1 or more applicable individuals, the 
        plan administrator shall--
                    ``(A) not later than the 45th day before the 
                effective date of the amendment, provide the written 
                notice described in paragraph (2) to each applicable 
                individual (and to each employee organization 
                representing applicable individuals), and
                    ``(B) in the case of a large applicable pension 
                plan--
                            ``(i) include in the notice under paragraph 
                        (2) the additional information described in 
                        paragraph (3),
                            ``(ii) make available the information 
                        described in paragraph (4) in accordance with 
                        such paragraph, and
                            ``(iii) provide individual benefit 
                        statements in accordance with section 105(e).
            ``(2) Basic written notice.--The notice under paragraph (1) 
        shall include a summary of the important terms of the 
        amendment, including--
                    ``(A) the effective date of the amendment,
                    ``(B) a statement that the amendment is expected to 
                significantly reduce the rate of future benefit 
                accrual,
                    ``(C) a description of the classes of applicable 
                individuals to whom the amendment applies, and
                    ``(D) a description of how the amendment 
                significantly reduces the rate of future benefit 
                accrual.
            ``(3) Additional information to be provided by large 
        applicable pension plans.--
                    ``(A) In general.--The information described in 
                this paragraph is--
                            ``(i) a description of the plan's benefit 
                        formulas (including formulas for determining 
                        early retirement benefits) both before and 
                        after the amendment and an explanation of the 
                        effect of the different formulas on applicable 
                        individuals,
                            ``(ii) an explanation of the circumstances 
                        (if any) under which (for appropriate 
                        categories of applicable individuals) the 
                        amendment is reasonably expected to result in a 
                        temporary period after the effective date of 
                        the amendment during which there are no or 
                        minimal accruals,
                            ``(iii) illustrative examples of normal or 
                        early retirement benefits meeting the 
                        requirements of subparagraph (B), and
                            ``(iv) notice of each applicable 
                        individual's right to request, and of the 
                        procedures for requesting, the information 
                        required to be provided under paragraph (4) and 
                        under section 105(e).
                    ``(B) Illustrative examples.--Illustrative examples 
                meet the requirements of this subparagraph if such 
                examples illustrate the adverse effects of the plan 
                amendment. Such examples shall be prepared by the plan 
                administrator in accordance with regulations prescribed 
                by the Secretary of the Treasury, and such regulations 
                shall require that the examples--
                            ``(i) reflect fairly the different 
                        categories of applicable individuals who are 
                        similarly affected by the plan amendment after 
                        consideration of all relevant factors,
                            ``(ii) show a comparison of benefits for 
                        each such category of applicable individuals 
                        under the plan (as in effect before and after 
                        the effective date) at appropriate future 
                        dates, and
                            ``(iii) illustrate any temporary period 
                        described in subparagraph (A)(ii).
                Such comparison shall be based on benefits in the form 
                of a life annuity and on actuarial assumptions each of 
                which is reasonable (and is so certified by an enrolled 
                actuary) when applied to all participants in the plan.
            ``(4) Supporting information relating to calculation of 
        benefits.--
                    ``(A) In general.--Each individual who receives or 
                who is entitled to receive the information described in 
                paragraph (3) may (after so receiving or becoming so 
                entitled) request the plan administrator to provide the 
information described in subparagraph (B).
                    ``(B) Information.--The plan administrator shall, 
                within 15 days after the date on which a request under 
                subparagraph (A) is made, provide to the individual 
                information (including benefit formulas and actuarial 
                factors) which is sufficient--
                            ``(i) to confirm the benefit comparisons in 
                        the illustrative examples described in 
                        paragraph (3)(B), and
                            ``(ii) to enable the individual to use the 
                        individual's own personal information to make 
                        calculations of the individual's own benefits 
                        which are similar to the calculations made in 
                        such examples.
                Nothing in this subsection shall be construed to 
                require the plan administrator to provide to an 
                individual such individual's personal information for 
                purposes of clause (ii).
                    ``(C) Time limitation on requests.--This paragraph 
                shall apply only to requests made during the 12-month 
                period that begins on the later of the effective date 
                of the amendment to which it relates or the date the 
                notice described in paragraph (2) is provided.
            ``(5) Sanctions.--
                    ``(A) In general.--In the case of any egregious 
                failure to meet any requirement of this subsection with 
                respect to any plan amendment, the provisions of the 
                applicable pension plan shall be applied as if such 
                plan amendment entitled all applicable individuals to 
                the greater of--
                            ``(i) the benefits to which they would have 
                        been entitled without regard to such amendment, 
                        or
                            ``(ii) the benefits under the plan with 
                        regard to such amendment.
                    ``(B) Egregious failure.--For purposes of 
                subparagraph (A), there is an egregious failure to meet 
                the requirements of this subsection if such failure 
                is--
                            ``(i) an intentional failure (including any 
                        failure to promptly provide the required notice 
                        or information after the plan administrator 
                        discovers an unintentional failure to meet the 
                        requirements of this subsection),
                            ``(ii) a failure to provide most of the 
                        individuals with most of the information they 
                        are entitled to receive under this subsection, 
                        or
                            ``(iii) a failure which is determined to be 
                        egregious under regulations prescribed by the 
                        Secretary of the Treasury.
                    ``(C) Excise tax.--For excise tax on failure to 
                meet requirements, see section 4980F of the Internal 
                Revenue Code of 1986.
            ``(6) Special rules.--
                    ``(A) Plain language.--The notice required under 
                paragraph (1) shall be written in a manner calculated 
                to be understood by the average plan participant who is 
                an applicable individual.
                    ``(B) Notice to designees.--The notice and 
                information required to be provided under this 
                subsection may be provided to a person designated, in 
                writing, by the person to which it would otherwise be 
                provided.
            ``(7) Alternative methods of compliance with enhanced 
        disclosure requirements in certain cases.--The Secretary of the 
        Treasury shall prescribe such regulations as may be necessary 
        to carry out this subsection. The Secretary of the Treasury 
        may--
                    ``(A) prescribe alternative or simplified methods 
                of complying with paragraphs (3) and (4) in situations 
                where--
                            ``(i) there is no fundamental change in the 
                        manner in which the accrued benefit of an 
                        applicable individual is determined under the 
                        plan, and
                            ``(ii) such other methods are adequate to 
                        reasonably inform plan participants who are 
                        applicable individuals of the impact of the 
                        reductions,
                    ``(B) reduce the advance notice period in paragraph 
                (1)(A) from 45 days to 15 days before the effective 
                date of the amendment for cases in which compliance 
                with the 45-day advance notice requirement would be 
                unduly burdensome because the amendment is contingent 
                on a merger, acquisition, disposition, or other similar 
                transaction involving plan participants who are 
                applicable individuals or because 45 days advance 
                notice is otherwise impracticable,
                    ``(C) permit the comparison of benefits under 
                paragraph (3)(B)(i) to be based on a form of payment 
                other than a life annuity, or
                    ``(D) specify actuarial assumptions that are deemed 
                to be reasonable for purposes of the benefit 
                comparisons under paragraph (3)(B)(i).
            ``(8) Applicable individual.--For purposes of this 
        subsection, the term `applicable individual' means, with 
        respect to any plan amendment--
                    ``(A) each participant in the plan, and
                    ``(B) each beneficiary who is an alternate payee 
                (within the meaning of section 206(d)(3)(K)) under a 
                qualified domestic relations order (within the meaning 
                of section 206(d)(3)(B)(i)),
        whose future benefit accruals under the plan may reasonably be 
        expected to be reduced by such plan amendment.
            ``(9) Terms relating to plans.--For purposes of this 
        subsection--
                    ``(A) Applicable pension plan.--The term 
                `applicable pension plan' means--
                            ``(i) a defined benefit plan, or
                            ``(ii) an individual account plan which is 
                        subject to the funding standards of section 
                        302.
                    ``(B) Large applicable pension plan.--The term 
                `large applicable pension plan' means an applicable 
                pension plan which had 100 or more active participants 
                as of the last day of the plan year preceding the plan 
                year in which the plan amendment becomes effective.''
    (b) Individual Statements.--Section 105 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1025) is amended by adding at 
the end the following new subsection:
    ``(e)(1) The plan administrator of a large applicable pension plan 
shall furnish an individual statement described in paragraph (2) to 
each individual--
            ``(A) who receives, or is entitled to receive, under 
        section 204(h) the information described in paragraph (3) 
        thereof from such administrator, and
            ``(B) who requests in writing such a statement from such 
        administrator.
    ``(2) The statement described in this paragraph is a statement 
which provides information which is substantially the same as the 
information in the illustrative examples described in section 
204(h)(3)(B) but which is based on data specific to the requesting 
individual and, if the individual so requests, information as of 1 
other future date not included in such examples.
    ``(3) Paragraph (1) shall apply only to requests made during the 
12-month period that begins on the later of the effective date of the 
amendment to which it relates or the date the notice described in 
section 204(h)(2) is provided. In no case shall an individual be 
entitled under this subsection to receive more than one such statement 
with respect to an amendment.
    ``(4) Notwithstanding section 502(c)(1), the statement required by 
paragraph (1) shall be treated as timely furnished if furnished on or 
before--
            ``(A) the date which is 90 days after the effective date of 
        the plan amendment to which is relates, or
            ``(B) such later date as may be permitted by the Secretary 
        of Labor.
    ``(5) Any term used in this subsection which is used in section 
204(h) shall have the meaning given such term by such section.
    ``(6) A statement under this subsection shall not be taken into 
account for purposes of subsection (b).''

SEC. 3. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT 
              PLANS SIGNIFICANTLY REDUCING FUTURE BENEFIT ACCRUALS.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 
(relating to qualified pension, etc., plans) is amended by adding at 
the end the following new section:

``SEC. 4980F. FAILURE OF DEFINED BENEFIT PLANS REDUCING BENEFIT 
              ACCRUALS TO SATISFY NOTICE REQUIREMENTS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of a plan administrator of an applicable pension plan to meet 
the requirements of subsection (e) with respect to any applicable 
individual.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any applicable 
        individual shall be $100 for each day in the noncompliance 
        period with respect to such failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the failure is corrected.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Overall limitation for unintentional failures.--
                    ``(A) In general.--In the case of failures that are 
                due to reasonable cause and not to willful neglect, the 
                tax imposed by subsection (a) for failures during the 
                taxable year of the employer (or, in the case of a 
                multiemployer plan, the taxable year of the trust 
                forming part of the plan) shall not exceed $500,000 
                ($1,000,000 in the case of a large applicable pension 
                plan).
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
                purposes of this section do not have the same taxable 
                year, the taxable years taken into account shall be 
                determined under principles similar to the principles 
                of section 1561.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
            ``(1) In the case of a plan other than a multiemployer 
        plan, the employer.
            ``(2) In the case of a multiemployer plan, the plan.
    ``(e) Notice Requirements for Pension Plan Amendments Reducing 
Accruals.--
            ``(1) In general.--If an applicable pension plan is amended 
        so as to provide for a significant reduction in the rate of 
        future benefit accrual of 1 or more applicable individuals, the 
        plan administrator shall--
                    ``(A) not later than the 45th day before the 
                effective date of the amendment, provide the written 
                notice described in paragraph (2) to each applicable 
                individual (and to each employee organization (as 
                defined in section 3(4) of the Employee Retirement 
                Income Security Act of 1974) representing applicable 
                individuals), and
                    ``(B) in the case of a large applicable pension 
                plan--
                            ``(i) include in the notice under paragraph 
                        (2) the additional information described in 
                        paragraph (3), and
                            ``(ii) make available the information 
                        described in paragraph (4) in accordance with 
                        such paragraph.
            ``(2) Basic written notice.--The notice under paragraph (1) 
        shall include a summary of the important terms of the 
        amendment, including--
                    ``(A) the effective date of the amendment,
                    ``(B) a statement that the amendment is expected to 
                significantly reduce the rate of future benefit 
                accrual,
                    ``(C) a description of the classes of applicable 
                individuals to whom the amendment applies, and
                    ``(D) a description of how the amendment 
                significantly reduces the rate of future benefit 
                accrual.
            ``(3) Additional information to be provided by large 
        applicable pension plans.--
                    ``(A) In general.--The information described in 
                this paragraph is--
                            ``(i) a description of the plan's benefit 
                        formulas (including formulas for determining 
                        early retirement benefits) both before and 
                        after the amendment and an explanation of the 
                        effect of the different formulas on applicable 
                        individuals,
                            ``(ii) an explanation of the circumstances 
                        (if any) under which (for appropriate 
                        categories of applicable individuals) the 
                        amendment is reasonably expected to result in a 
                        temporary period after the effective date of 
                        the amendment during which there are no or 
                        minimal accruals,
                            ``(iii) illustrative examples of normal or 
                        early retirement benefits meeting the 
                        requirements of subparagraph (B), and
                            ``(iv) notice of each applicable 
                        individual's right to request, and of the 
                        procedures for requesting, the information 
                        required to be provided under paragraph (4) and 
                        under section 105(e) of Employee Retirement 
                        Income Security Act of 1974.
                    ``(B) Illustrative examples.--Illustrative examples 
                meet the requirements of this subparagraph if such 
                examples illustrate the adverse effects of the plan 
                amendment. Such examples shall be prepared by the plan 
                administrator in accordance with regulations prescribed 
                by the Secretary, and such regulations shall require 
                that the examples--
                            ``(i) reflect fairly the different 
                        categories of applicable individuals who are 
                        similarly affected by the plan amendment after 
                        consideration of all relevant factors,
                            ``(ii) show a comparison of benefits for 
                        each such category of applicable individuals 
                        under the plan (as in effect before and after 
                        the effective date) at appropriate future 
                        dates, and
                            ``(iii) illustrate any temporary period 
                        described in subparagraph (A)(ii).
                Such comparison shall be based on benefits in the form 
                of a life annuity and on actuarial assumptions each of 
                which is reasonable (and is so certified by an enrolled 
                actuary) when applied to all participants in the plan.
            ``(4) Supporting information relating to calculation of 
        benefits.--
                    ``(A) In general.--Each individual who receives or 
                who is entitled to receive the information described in 
                paragraph (3) may (after so receiving or becoming so 
                entitled) request the plan administrator to provide the 
                information described in subparagraph (B).
                    ``(B) Information.--The plan administrator shall, 
                within 15 days after the date on which a request under 
                subparagraph (A) is made, provide to the individual 
                information (including benefit formulas and actuarial 
                factors) which is sufficient--
                            ``(i) to confirm the benefit comparisons in 
                        the illustrative examples described in 
                        paragraph (3)(B), and
                            ``(ii) to enable the individual to use the 
                        individual's own personal information to make 
                        calculations of the individual's own benefits 
                        which are similar to the calculations made in 
                        such examples.
                Nothing in this subsection shall be construed to 
                require the plan administrator to provide to an 
                individual such individual's personal information for 
                purposes of clause (ii).
                    ``(C) Time limitation on requests.--This paragraph 
                shall apply only to requests made during the 12-month 
                period that begins on the later of the effective date 
                of the amendment to which it relates or the date the 
                notice described in paragraph (2) is provided.
            ``(5) Special rules.--
                    ``(A) Plain language.--The notice required under 
                paragraph (1) shall be written in a manner calculated 
                to be understood by the average plan participant who is 
                an applicable individual.
                    ``(B) Notice to designees.--The notice or 
                information required to be provided under this 
                subsection may be provided to a person designated, in 
                writing, by the person to which it would otherwise be 
                provided.
            ``(6) Alternative methods of compliance with enhanced 
        disclosure requirements in certain cases.--The Secretary shall 
        prescribe such regulations as may be necessary to carry out 
        this subsection. The Secretary may--
                    ``(A) prescribe alternative or simplified methods 
                of complying with paragraphs (3) and (4) in situations 
                where--
                            ``(i) there is no fundamental change in the 
                        manner in which the accrued benefit of an 
                        applicable individual is determined under the 
                        plan, and
                            ``(ii) such other methods are adequate to 
                        reasonably inform plan participants who are 
                        applicable individuals of the impact of the 
                        reductions,
                    ``(B) reduce the advance notice period in paragraph 
                (1)(A) from 45 days to 15 days before the effective 
                date of the amendment for cases in which compliance 
                with the 45-day advance notice requirement would be 
                unduly burdensome because the amendment is contingent 
                on a merger, acquisition, disposition, or other similar 
                transaction involving plan participants who are 
                applicable individuals or because 45 days advance 
                notice is otherwise impracticable,
                    ``(C) permit the comparison of benefits under 
                paragraph (3)(B)(i) to be based on a form of payment 
                other than a life annuity, or
                    ``(D) specify actuarial assumptions that are deemed 
                to be reasonable for purposes of the benefit 
                comparisons under paragraph (3)(B)(i).
            ``(7) Applicable individual.--For purposes of this 
        subsection, the term `applicable individual' means, with 
        respect to any plan amendment--
                    ``(A) each participant in the plan, and
                    ``(B) each beneficiary who is an alternate payee 
                (within the meaning of section 414(p)(8)) under a 
                qualified domestic relations order (within the meaning 
                of section 414(p)(1)),
        whose future benefit accruals under the plan may reasonably be 
        expected to be reduced by such plan amendment.
            ``(8) Terms relating to plans.--For purposes of this 
        subsection--
                    ``(A) Applicable pension plan.--The term 
                `applicable pension plan' means--
                            ``(i) a defined benefit plan, or
                            ``(ii) an individual account plan which is 
                        subject to the funding standards of section 
                        412.
                Such term shall not include any governmental plan 
                (within the meaning of section 414(d)) or any church 
                plan (within the meaning of section 414(e)) with 
                respect to which the election provided by section 
                410(d) has not been made.
                    ``(B) Large applicable pension plan.--The term 
                `large applicable pension plan' means an applicable 
                pension plan which had 100 or more active participants 
                as of the last day of the plan year preceding the plan 
                year in which the plan amendment becomes effective.''
    (b) Conforming Amendment.--The table of sections for chapter 43 of 
such Code is amended by adding at the end the following new item:

                              ``Sec. 4980F. Failure of defined benefit 
                                        plans reducing benefit accruals 
                                        to satisfy notice 
                                        requirements.''

SEC. 4. EFFECTIVE DATES.

    (a) In General.--The amendments made by this Act shall apply to 
plan amendments taking effect after the date of the enactment of this 
Act.
    (b) Special Rules.--
            (1) In general.--The amendments made by this Act shall not 
        apply to any plan amendment for which there was written notice 
        before July 12, 1999, which was reasonably expected to notify 
        substantially all of the plan participants or their 
        representatives.
            (2) Transition.--Until such time as the Secretary of the 
        Treasury issues regulations under section 4980F(e) (3) and (4) 
        of the Internal Revenue Code of 1986 and section 204(h) (3) and 
        (4) of the Employee Retirement Income Security Act of 1974 (as 
        added by the amendments made by this section), a plan shall be 
        treated as meeting the requirements of such sections if it 
        makes a good faith effort to comply with such requirements.
            (3) Notice and information not required to be furnished 
        before 120th day after enactment.--The period for providing any 
        notice or information required by the amendments made by this 
        section shall not end before the date which is 120 days after 
        the date of the enactment of this Act.
                                 <all>