109 HR 2831 IH: Pension Preservation and Portability Act of 2005 U.S. House of Representatives 2005-06-09 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 1st Session H. R. 2831 IN THE HOUSE OF REPRESENTATIVES June 9, 2005 Mr. Boehner introduced the following bill; which was referred to the Committee on Education and the Workforce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend title I of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to make improvements in benefit accrual standards.

1.

Short title

This Act may be cited as the Pension Preservation and Portability Act of 2005.

2.

Improvements in benefit accrual standards

(a)

Amendments to the Employee Retirement Income Security Act of 1974

(1)

Rules relating to reduction in accrued benefits because of attainment of any age

Section 204(b)(1)(H) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1054(b)(1)(H)) is amended by adding at the end the following new clauses: (vii) (I)A plan complies with clause (i) if a participant’s entire accrued benefit, as determined as of any date under the formula for determining benefits as set forth in the text of the plan documents, would be equal to or greater than that of any similarly situated, younger individual. (II)For purposes of this clause, an individual is similarly situated to a participant if such individual is identical to such participant in every respect (including period of service, compensation, position, date of hire, work history, and any other respect) except for age. (III)In determining the entire accrued benefit for purposes of this clause, the subsidized portion of any early retirement benefit (including any early retirement subsidy that is fully or partially included or reflected in an employee’s opening balance or other transition benefits) shall be disregarded. (viii)A plan shall not be treated as failing to meet the requirements of this subparagraph solely because the plan provides allowable offsets against those benefits under the plan which are attributable to employer contributions, based on benefits which are provided under title II of the Social Security Act, the Railroad Retirement Act of 1974, or under any retirement program for officers or employees of the Federal Government or of the government of any State or political subdivision thereof. For purposes of this clause, allowable offsets based on such benefits consist of offsets equal to all or part of the actual benefit payment amounts, reasonable projections or estimations of such benefit payment amounts, or actuarial equivalents of such actual benefit payment amounts, projections, or estimations (determined on the basis of reasonable actuarial assumptions). (ix)A plan shall not be treated as failing to meet the requirements of this subparagraph solely because the plan provides a disparity in contributions or benefits with respect to which the requirements of section 401(l) of the Internal Revenue Code of 1986 are met. (x) (I)A plan shall not be treated as failing to meet the requirements of this subparagraph solely because the plan provides for pre-retirement indexing of accrued benefits under the plan. (II)For purposes of this clause, the term pre-retirement indexing means, in connection with an accrued benefit, the periodic adjustment of the accrued benefit by means of the application of a recognized index or methodology so as to protect the economic value of the benefit against inflation prior to distribution.. (2)

Determinations of accrued benefit as balance of benefit account

Section 203 of such Act (29 U.S.C. 1053) is amended by adding at the end the following new subsection: (f) (1)A defined benefit plan under which the accrued benefit payable under the plan upon distribution (or any portion thereof) is expressed as the balance of an account maintained for the participant shall not be treated as failing to meet the requirements of subsection (a)(2) and section 205(g) solely because of the amount actually made available for such distribution under the terms of the plan, in any case in which— (A)the applicable interest rate that would be required to discount the participant’s accrued benefit projected under the terms of the plan to normal retirement age to a present value equal to the amount actually made available for distribution under the plan is not greater than (B)a market rate of return. (2)The Secretary of the Treasury may provide by regulation for rules governing the calculation of a market rate of return for purposes of paragraph (1) and for permissible methods of crediting interest to the account (including variable interest rates) resulting in effective rates of return meeting the requirements of paragraph (1).. (b)

Amendments to the Internal Revenue Code of 1986

(1)

Rules relating to reduction in accrued benefits because of attainment of any age

Subparagraph (H) of section 411(b)(1) of the Internal Revenue Code of 1986 (relating to continued accrual beyond normal retirement age) is amended— (A)by striking the heading and inserting the following: Rules relating to reduction in accrued benefits because of attainment of any age.—; and (B)by adding at the end the following: (vi)

Comparison to similarly situated, younger individuals

(I)

In general

A plan shall not be treated as failing to meet the requirements of clause (i) if, as of any applicable date, a participant’s entire accrued benefit, as determined under the formula for determining benefits as set forth in the text of the plan documents, would be equal to or greater than that of any similarly situated, younger individual. (II)

Similarly situated individual

For purposes of this clause, an individual is similarly situated to a participant if such individual is identical to such participant in every respect (including period of service, compensation, position, date of hire, work history, and any other respect) except for age. (III)

Subsidized portion of early retirement benefit disregarded

In determining the entire accrued benefit for purposes of this clause, the subsidized portion of any early retirement benefit shall be disregarded. (vii)

Allowable offsets

A plan shall not be treated as failing to meet the requirements of this subparagraph solely because the plan provides allowable offsets against those benefits under the plan which are attributable to employer contributions, based on benefits which are provided— (I)under title II of the Social Security Act, the Railroad Retirement Act of 1974, or under any retirement program for officers or employees of the Federal Government or of the government of any State or political subdivision thereof, or (II)under another defined benefit plan which meets the requirements of this subparagraph or a defined contribution plan which meets the requirements of paragraph (2), if such offset is determined under a formula which does not provide for the commencement of, or any increase in, the offset upon the attainment of any specified age of the participant.For purposes of this clause, allowable offsets based on such benefits consist of offsets equal to the actual benefit payment amounts, reasonable projections or estimations of such benefit payment amounts, or actuarial equivalents of such actual benefit payment amounts, projections, or estimations (determined on the basis of reasonable actuarial assumptions). (viii)

Compliance with rules permitting disparity in plan contributions or benefits

A plan shall not be treated as failing to meet the requirements of this subparagraph solely because the plan provides a disparity in contributions or benefits with respect to which the requirements of section 401(l) are met. (ix)

Pre-retirement indexing

(I)

In general

A plan shall not be treated as failing to meet the requirements of this subparagraph solely because the plan provides for pre-retirement indexing of accrued benefits under the plan. (II)

Definition

For purposes of this clause, the term pre-retirement indexing means, in connection with an accrued benefit, the periodic adjustment of the accrued benefit by means of the application of a recognized index or methodology so as to protect the economic value of the benefit against inflation prior to distribution.. (2)

Determinations of accrued benefit as balance of benefit account

Subsection (a) of section 411 of such Code (relating to minimum vesting standards) is amended by adding at the end the following new paragraph: (13)

Maintenance of nonforfeitability of benefits expressed as account balance

(A)

In general

A defined benefit plan under which the accrued benefit payable under the plan upon distribution (or any portion thereof) is expressed as the balance of an account maintained for the participant shall not be treated as failing to meet the requirements of paragraph (2) or 417(e) solely because of the amount actually made available for such distribution under the terms of the plan, in any case in which— (i)the applicable interest rate that would be required to discount the participant’s accrued benefit projected under the terms of the plan to normal retirement age to a present value equal to the amount actually made available for distribution under the plan is not greater than (ii)a market rate of return. (B)

Regulations

The Secretary may provide by regulation for rules governing the calculation of a market rate of return for purposes of subparagraph (A) and for permissible methods of crediting interest to the account (including variable interest rates) resulting in effective rates of return meeting the requirements of subparagraph (A).. (c)

Effective date

The amendments made by this section shall apply to plan years beginning before, on, or after the date of the enactment of this Act.