[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2005 Placed on Calendar Senate (PCS)]






                                                       Calendar No. 425
108th CONGRESS
  2d Session
                                S. 2005

                          [Report No. 108-221]

To temporarily replace the use by pension plans of the 30-year treasury 
     bond rate with a composite corporate rate, and to establish a 
                  commission on defined benefit plans.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 9, 2004

    Mr. Gregg, from the Committee on Health, Education, Labor, and 
   Pensions, reported under authority of the order of the Senate of 
December 9, 2003, the following original bill; which was read twice and 
                         placed on the calendar

_______________________________________________________________________

                                 A BILL


 
To temporarily replace the use by pension plans of the 30-year treasury 
     bond rate with a composite corporate rate, and to establish a 
                  commission on defined benefit plans.

    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 Stability Act''.

SEC. 2. TEMPORARY REPLACEMENT OF INTEREST RATE ON 30-YEAR TREASURY 
              SECURITIES WITH INTEREST RATE ON CONSERVATIVELY INVESTED 
              LONG-TERM CORPORATE BONDS.

    (a) Employee Retirement Income Security Act of 1974.--
            (1) Determination of permissible range.--
                    (A) In general.--Section 302(b)(5)(B)(ii) of the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1082(b)(5)(B)(ii)) is amended--
                            (i) in subclause (I), by inserting ``or 
                        (III)'' after ``subclause (II)'';
                            (ii) by redesignating subclause (II) as 
                        subclause (III);
                            (iii) by inserting after subclause (I) the 
                        following new subclause:
                            ``(II) Special rule for years 2004, 2005, 
                        and 2006.--In the case of plan years beginning 
                        after December 31, 2003, and before January 1, 
                        2007, 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 conservative long-term corporate bond rates 
                        during the 4-year period ending on the last day 
                        before the beginning of the plan year. The 
                        Secretary, in consultation with the Secretary 
                        of the Treasury, shall, by regulation, 
                        prescribe a method for periodically determining 
                        conservative long-term bond rates for purposes 
                        of this subclause. Such rates shall reflect the 
                        rates of interest on amounts conservatively 
                        invested in long-term corporate bonds and shall 
                        be based on the use of 2 or more indices that 
                        are in the top 2 quality levels available 
                        reflecting average maturities of 20 years or 
                        more.''; and
                            (iv) in subclause (III), as so 
                        redesignated--
                                    (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''.
            (2) Determination of current liability.--Section 
        302(d)(7)(C)(i) of such Act (29 U.S.C. 1082(d)(7)(C)(i)) is 
        amended by adding at the end the following new subclause:
                                    ``(IV) Special rule for 2004, 2005, 
                                and 2006.--For plan years beginning in 
                                2004, 2005, or 2006, notwithstanding 
                                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.--Section 302(e) of such Act (29 
        U.S.C. 1082(e)) is amended by striking paragraph (7) and 
        inserting the following:
            ``(7) Special rule for 2007.--For purposes of applying 
        paragraphs (1) and (4)(B)(ii) for plan years beginning in 2007, 
        current liability for the preceding plan year shall be 
        redetermined using 105 percent of the annual rate of interest 
        on 30-year Treasury securities for such preceding plan year as 
        the specific percentage determined under subsection 
        (d)(7)(C)(i)(II).''.
            (4) PBGC.--Section 4006(a)(3)(E)(iii) of such Act (29 
        U.S.C. 1306(a)(3)(E)(iii)) is amended by adding at the end the 
        following new subclause:
            ``(V) In the case of plan years beginning after December 
        31, 2003, and before January 1, 2007, the annual yield taken 
        into account under subclause (II) shall be the annual yield 
        determined by the Secretary on amounts conservatively invested 
        in long-term corporate bonds for the month preceding the month 
        in which the plan year begins. For purposes of the preceding 
        sentence, the Secretary, in consultation with the Secretary of 
        the Treasury, shall, by regulation, prescribe a method for 
        periodically determining conservative long-term bond rates. 
        Such rates shall reflect the rates of interest on amounts 
        conservatively invested in long-term corporate bonds and shall 
        be based on the use of 2 or more indices that are in the top 2 
        quality levels available reflecting average maturities of 20 
        years or more.''.
    (b) Internal Revenue Code of 1986.--
            (1) Determination of permissible range.--
                    (A) In general.--Section 412(b)(5)(B)(ii) of the 
                Internal Revenue Code of 1986 is amended--
                            (i) in subclause (I), by inserting ``or 
                        (III)'' after ``subclause (II)'';
                            (ii) by redesignating subclause (II) as 
                        subclause (III);
                            (iii) by inserting after subclause (I) the 
                        following new subclause:
                                    ``(II) Special rule for 2004, 2005, 
                                and 2006.--In the case of plan years 
                                beginning after December 31, 2003, and 
                                before January 1, 2007, 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 conservative 
                                long-term corporate bond rates during 
                                the 4-year period ending on the last 
                                day before the beginning of the plan 
                                year. The Secretary of Labor, in 
                                consultation with the Secretary, shall, 
                                by regulation, prescribe a method for 
                                periodically determining conservative 
                                long-term bond rates for purposes of 
                                this paragraph. Such rates shall 
                                reflect the rates of interest on 
                                amounts conservatively invested in 
                                long-term corporate bonds and shall be 
                                based on the use of 2 or more indices 
                                that are in the top 2 quality levels 
                                available reflecting average maturities 
                                of 20 years or more.''; and
                            (iv) in subclause (III), as so 
                        redesignated--
                                    (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''.
            (2) Determination of current liability.--Section 
        412(l)(7)(C)(i) of such Code is amended by adding at the end 
        the following new subclause:
                                    ``(IV) Special rule for 2004, 2005, 
                                and 2006.--For plan years beginning in 
                                2004, 2005, or 2006, notwithstanding 
                                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.--Section 412(m) of such Code is 
        amended by striking paragraph (7) and inserting the following:
            ``(7) Special rule for 2007.--For purposes of applying 
        paragraphs (1) and (4)(B)(ii) for plan years beginning in 2007, 
        current liability for the preceding plan year shall be 
        redetermined using 105 percent of the annual rate of interest 
        on 30-year Treasury securities for such preceding plan year as 
        the specific 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 striking ``the 
        applicable interest rate (as defined in section 417(e)(3))'' 
        and inserting ``5.5 percent''.

SEC. 3. COMMISSION ON DEFINED PENSION BENEFIT PLANS.

    (a) In General.--Part 5 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1131 et seq.) is 
amended by adding at the end the following:

``SEC. 519. COMMISSION ON DEFINED PENSION BENEFIT PLANS.

    ``(a) Establishment of the Commission.--
            ``(1) Establishment.--There is established, subject to the 
        Federal Advisory Committee Act, the Commission on Defined 
        Benefit Pension Plans (in this section referred to as the 
        ``Commission'').
            ``(2) Membership.--The Commission shall be composed of 13 
        members of whom--
                    ``(A) 1 shall be the Secretary or their designee;
                    ``(B) 1 shall be the Secretary of the Treasury or 
                their designee;
                    ``(C) 1 shall be the Executive Director of the 
                Pension Benefit Guaranty Corporation or their designee;
                    ``(D) 2 shall be appointed by the President from 
                among members of the general public;
                    ``(E) 1 shall be appointed by the chairman of the 
                Committee on Health, Education, Labor, and Pensions of 
                the Senate;
                    ``(F) 1 shall be appointed by the ranking minority 
                member of the Committee on Health, Education, Labor, 
                and Pensions of the Senate;
                    ``(G) 1 shall be appointed by the chairman of the 
                Committee on Finance of the Senate;
                    ``(H) 1 shall be appointed by the ranking minority 
                member of the Committee on Finance of the Senate;
                    ``(I) 1 shall be appointed by the chairman of the 
                Committee on Education and the Workforce of the House 
                of Representatives;
                    ``(J) 1 shall be appointed by the ranking minority 
                member of the Committee on Education and the Workforce 
                of the House of Representatives;
                    ``(K) 1 shall be appointed by the chairman of the 
                Committee on Ways and Means of the House of 
                Representatives; and
                    ``(L) 1 shall be appointed by the ranking minority 
                member of the Committee on Ways and Means of the House 
                of Representatives.
            ``(3) Period of appointment; vacancies.--Members shall be 
        appointed for the life of the Commission. Any vacancy in the 
        Commission shall not affect its powers, but shall be filled in 
        the same manner as the original appointment.
            ``(4) Quorum.--A majority of the members of the Commission 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
            ``(5) Chairperson and vice chairperson.--The Commission 
        shall select a Chairperson and Vice Chairperson from among its 
        members.
    ``(b) Duties of the Commission.--
            ``(1) Study and recommendations.--The Commission shall 
        conduct a thorough study of, and shall develop recommendations 
        on, the following issues relating to defined benefit pension 
        plans:
                    ``(A) How to reform the defined benefit pension 
                plan funding rules to increase participants' benefit 
                security, provide rational and predictable funding 
                rules for employers, and protect the financial 
                independence of the Pension Benefit Guaranty 
                Corporation.
                    ``(B) The relevance and effectiveness of the 
                current liability rules, and, if such rules are 
                maintained, an analysis of alternative valuation 
                measures for those rules, including the rationale for 
                the measures as well as their strengths and weaknesses.
                    ``(C) The appropriate interest rates that should be 
                used in valuing plan liabilities, the variable rate 
                premium, and lump-sum benefits, including whether the 
                rates proposed are transparent, widely understood, 
                publicly available, and resistant to manipulation.
                    ``(D) Whether the recommended interest rate would 
                impact the investment policy of the pension trust along 
                with an analysis of the impact on capital markets, the 
                cost of maintaining a pension plan over the long term, 
                and the compatibility of any effect on investment 
                policy with the fiduciary requirements to diversify 
                investments under this Act.
                    ``(E) The appropriate mortality assumptions that 
                should be used in valuing plan liabilities.
                    ``(F) Whether such assumptions should contain a 
                collar adjustment or should otherwise be adjusted to 
                reflect the workforce covered by the plan.
                    ``(G) A consideration of other actuarial 
                assumptions used in valuing plan liabilities.
                    ``(H) Whether the same interest rate should be used 
                for purposes of both funding and lump sum benefits, 
                including consideration of the effect on plan funding 
                and other purposes for which the interest rate is used 
                if such rate is different for those purposes.
                    ``(I) The effect of the interest rate on 
                participants' decisions whether to elect lump sum 
                benefits.
                    ``(J) The appropriate means of providing transition 
                protection to participants in the event changes are 
                enacted.
                    ``(K) Whether the same interest rate used for 
                funding purposes should also apply for other purposes 
                for which the rate of interest on 30-year Treasury 
                securities is currently used.
                    ``(L) The need to avoid volatile funding 
                obligations and how to reform the law to avoid such 
                volatility, including volatility attributable to the 
                recent downturn in the equity markets and significant 
                decrease in interest rates.
                    ``(M) The need for predictability, simplicity, and 
                transparency with respect to the calculation of funding 
                obligations, and how to reform the law to achieve such 
                goals.
                    ``(N) Effective means that would provide for 
                additional funding in favorable economic periods, so 
                that funding levels can withstand market downturns 
                without requiring large contributions during adverse 
                economic conditions.
                    ``(O) How to design transition rules so that 
                funding reforms do not cause short-term hardships for 
                employers or employees.
                    ``(P) How to ensure that revisions to funding 
                obligations do not discourage employers from 
                maintaining pension plans.
                    ``(Q) How to ensure that required disclosure of 
                funding information is material and relevant without 
                requiring disclosures that impose disclosure 
                requirements that are unnecessarily burdensome, are 
                misleading with respect to the funded status of an 
                ongoing plan, or are not adjusted to reflect the size 
                of the plan.
                    ``(R) Other funding and benefit reforms that would 
                promote the creation and expansion of defined benefit 
                plans.
            ``(2) Report.--Not later than December 31, 2005, the 
        Commission shall submit a report to the appropriate committees 
        of Congress containing a detailed statement of the findings and 
        conclusions of the Commission, together with its 
        recommendations for such legislation as it considers 
        appropriate (including proposed legislative language to 
        implement the recommendations).
    ``(c) Powers of the Commission.--
            ``(1) Hearings.--The Commission may hold such hearings, sit 
        and act at such times and places, take such testimony, and 
        receive such evidence as the Commission considers advisable to 
        carry out this section. The Commission shall, to the maximum 
        extent possible, use existing data and research prior to 
        holding such hearings
            ``(2) Information from federal agencies.--The Commission 
        may secure directly from any Federal department or agency such 
        information as the Commission considers necessary to carry out 
        this section. Upon request of the Chairperson of the 
        Commission, the head of such department or agency shall furnish 
        such information to the Commission.
            ``(3) Postal services.--The Commission may use the United 
        States mails in the same manner and under the same conditions 
        as other departments and agencies of the Federal Government.
    ``(d) Commission Personnel Matters.--
            ``(1) Compensation; travel expenses.--Each member of the 
        Commission shall serve without compensation but shall be 
        allowed travel expenses, including per diem in lieu of 
        subsistence, at rates authorized for employees of agencies 
        under subchapter I of chapter 57 of title 5, United States 
        Code, while away from their homes or regular places of business 
        in the performance of services for the Commission.
            ``(2) Staff and equipment.--The Pension Benefit Guaranty 
        Corporation shall provide all financial, administrative, and 
        staffing requirements for the Commission, including--
                    ``(A) office space;
                    ``(B) furnishings; and
                    ``(C) equipment.
    ``(e) Termination of the Commission.--The Commission shall 
terminate 180 days after the date on which the Commission submits its 
report under subsection (b)(2).''.
    (b) Table of Contents.--The table of contents for part 5 of 
subtitle B of title I of such Act (29 U.S.C. 1131 et seq.) is amended 
by adding at the end the following:

``519. Commission on Defined Pension Benefit Plans.''.

SEC. 4. CONGRESSIONAL ACTION.

    Not later than 120 days after receipt of a legislative proposal 
under subsection 519(b)(2) of the Employee Retirement Income Security 
Act of 1974, as added by section 3, Congress shall act on such 
proposal.

SEC. 5. EFFECTIVE DATES.

    (a) In General.--Except as provided in subsections (b) and (c), the 
amendments made by this Act shall apply to years beginning after 
December 31, 2003.
    (b) Lookback Rules.--For purposes of applying subsections 
(l)(9)(B)(ii) and (m)(1) of section 412 of the Internal Revenue Code of 
1986, and subsections (d)(9)(B)(ii) and (e)(1) of section 302 of the 
Employee Retirement Income Security Act of 1974 to plan years beginning 
after December 31, 2003, the amendments made by this section may be 
applied as if such amendments had been in effect for all years 
beginning before such date.
    (c) 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 to section 
415(b)(2)(E)(ii), 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.
    (e) Termination Date.--The amendments made by this Act shall not 
apply to plan years beginning after December 31, 2006.




                                                       Calendar No. 425

108th CONGRESS

  2d Session

                                S. 2005

                          [Report No. 108-221]

_______________________________________________________________________

                                 A BILL

To temporarily replace the use by pension plans of the 30-year treasury 
     bond rate with a composite corporate rate, and to establish a 
                  commission on defined benefit plans.

_______________________________________________________________________

                            January 9, 2004

                 Read twice and placed on the calendar