[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4274 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 4274

To amend the Internal Revenue Code of 1986 and the Employee Retirement 
Income Security Act of 1974 to provide for protections with respect to 
  the accrued benefits of participants during conversions of pension 
                      plans to cash balance plans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            November 9, 2005

Mrs. Jones of Ohio 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 the Internal Revenue Code of 1986 and the Employee Retirement 
Income Security Act of 1974 to provide for protections with respect to 
  the accrued benefits of participants during conversions of pension 
                      plans to cash balance 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 ``Preservation of Defined Benefit 
Plans Act of 2005''.

SEC. 2. RULES RELATING TO REDUCTION IN ACCRUED BENEFITS BECAUSE OF 
              ATTAINMENT OF ANY AGE.

    (a) Amendment to Internal Revenue Code of 1986.--Subparagraph (H) 
of section 411(b)(1) of the Internal Revenue Code of 1986 (relating to 
continued accrual beyond normal retirement age) is amended--
            (1) by striking the heading and inserting the following: 
        ``Rules relating to reduction in accrued benefits because of 
        attainment of any age.--''; and
            (2) by adding at the end the following:
                            ``(vi) Comparison to similarly situated, 
                        younger individuals.--
                                    ``(I) 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 age 
                                discriminatory under the rules set 
                                forth in this subsection if the 
                                participant's accrued benefit under the 
                                plan, as determined as of any date 
                                under the formula as set forth in 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.''.
    (b) Amendment to the Employee Retirement Income Security Act of 
1974.--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 clause:
            ``(vii)(I) 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 age 
        discriminatory under the rules set forth in this subsection if 
        the participant's accrued benefit under the plan, as determined 
        as of any date under the formula as set forth in 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.''.
    (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.

SEC. 3. DETERMINATIONS OF ACCRUED BENEFIT AS BALANCE OF BENEFIT 
              ACCOUNT.

    (a) Amendment to Internal Revenue Code of 1986.--Subsection (a) of 
section 411 of the Internal Revenue Code of 1986 (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).''.
    (b) Amendment to Employee Retirement Income Security Act of 1974.--
Section 203 of the Employee Retirement Income Security Act of 1974 (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).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after the date of the enactment of this 
Act.

SEC. 4. AGE DISCRIMINATION PROTECTIONS FOR PENSION PLAN PARTICIPANTS 
              FROM CASH BALANCE CONVERSIONS.

    (a) Amendment to Internal Revenue Code of 1986.--Section 411 of the 
Internal Revenue Code of 1986 (relating to special rules) is amended by 
adding at the end the following new subsection:
    ``(f) Age Discrimination Safe Harbor Rules for Certain Plan 
Conversions.--
            ``(1) Age discrimination.--An applicable plan amendment 
        adopted by a defined benefit plan shall not be treated as 
        satisfying the requirements of this section unless the opening 
        account balance of each participant under the plan after the 
        adoption of the amendment is equal to at least the present 
        value of the participant's retirement benefit at age 65 before 
        the effective date of the amendment, determined under the terms 
        of the plan as in effect immediately before the effective date.
            ``(2) Applicable plan amendment.--For purposes of this 
        subsection, the term `applicable plan amendment' means a plan 
        amendment which has the effect of converting a defined benefit 
        plan to a plan under which the accrued benefit is expressed to 
        participants and beneficiaries as an amount other than an 
        annual benefit commencing at normal retirement age (or which 
        has a similar effect as determined under regulations of the 
        Secretary under subsection (b)(1)(I)(iv)).
            ``(3) Special transition rules.--
                    ``(A) In general.--Paragraph (1) shall not apply 
                with respect to an applicable plan amendment adopted on 
                or after January 1, 1997, and before November 9, 2005, 
                until the date which is 2 years after the date of the 
                enactment of this subsection.
                    ``(B) Participants separated from service before 
                enactment.--A participant who is separated from service 
                before November 9, 2005, need not be taken into account 
                for purposes of applying paragraph (1) until the date 
                which is 3 years after the date of the enactment of 
                this subsection.''.
    (b) Employee Retirement Income Security Act of 1974.--Section 203 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053) 
is amended by adding at the end the following new subsection:
    ``(f)(1) An applicable plan amendment adopted by a defined benefit 
plan shall not be treated as satisfying the requirements of this 
section unless the opening account balance of each participant under 
the plan after the adoption of the amendment is equal to at least the 
present value of the participant's retirement benefit at age 65 before 
the effective date of the amendment, determined under the terms of the 
plan as in effect immediately before the effective date.
    ``(2) For purposes of this subsection, the term `applicable plan 
amendment' means a plan amendment which has the effect of converting a 
defined benefit plan to a plan under which the accrued benefit is 
expressed to participants and beneficiaries as an amount other than an 
annual benefit commencing at normal retirement age (or which has a 
similar effect as determined under regulations of the Secretary of the 
Treasury under subsection (b)(1)(I)(iv)).
    ``(3)(A) Paragraph (1) shall not apply with respect to an 
applicable plan amendment adopted on or after January 1, 1997, and 
before November 9, 2005, until the date which is 2 years after the date 
of the enactment of this subsection.
    ``(B) A participant who is separated from service before November 
9, 2005, need not be taken into account for purposes of applying 
paragraph (1) until the date which is 3 years after the date of the 
enactment of this subsection.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 5. WEAR AWAY PROTECTIONS IN PENSION PLAN CASH BALANCE CONVERSIONS.

    (a) Amendment to Internal Revenue Code of 1986.--Section 411 of the 
Internal Revenue Code of 1986 (relating to special rules), as amended 
by section 4, is amended by adding at the end the following new 
subsection:
    ``(g) Treatment of Plan Amendments Wearing Away Accrued Benefit.--
            ``(1) In general.--An applicable plan amendment adopted by 
        a defined benefit plan shall not be treated as satisfying the 
        requirements of this section unless the applicable plan 
        amendment meets the requirements of paragraphs (2) and (3).
            ``(2) Wear away prevented.--For purposes of paragraph (1), 
        an applicable plan amendment meets the requirements of this 
        paragraph if, under the terms of the plan after the adoption of 
        the amendment, the accrued benefit of the participant at any 
        time is not less than the sum of--
                    ``(A) the participant's accrued benefit for years 
                of service before the effective date of the amendment, 
                determined under the terms of the plan as in effect 
                immediately before the effective date, plus
                    ``(B) the participant's accrued benefit determined 
                under the formula applicable to benefit accruals under 
                the current plan as applied to years of service after 
                such effective date.
            ``(3) Employer choice of method to protect certain 
        participants.--For purposes of paragraph (1), an applicable 
        plan amendment meets the requirements of this paragraph if the 
        plan to be amended provides each participant who has at least 
        10 years of service (as determined under subsection (a)) under 
        the plan at the time such amendment takes effect and is within 
        5 years of eligibility for retirement under the plan with one 
        of the following:
                    ``(A) Participant election to maintain rate of 
                accrual in effect before plan amendment.--Each such 
                participant--
                            ``(i) is provided with notice of the plan 
                        amendment, including a comparison of the 
                        present and projected values of the accrued 
                        benefit determined both with and without regard 
                        to the plan amendment, and
                            ``(ii) may elect upon retirement to either 
                        receive benefits under the terms of the plan as 
                        in effect at the time of retirement or to 
                        receive benefits under the terms of the plan as 
                        in effect immediately before the effective date 
                        of such plan amendment (taking into account all 
                        benefit accruals under such terms since such 
                        date).
                    ``(B) Benefits of amended plan do not decrease.--
                For each such participant, the benefits after the plan 
                amendment takes effect are not less than the greatest 
                benefits the participant would have received by reason 
                of the election described in subparagraph (A)(ii).
                    ``(C) Maintenance of effort.--For each such 
                participant, for at least the first 5 years after the 
                plan amendment takes effect, benefits under the terms 
                of the plan as in effect immediately before the 
                effective date of such plan amendment (taking into 
                account all benefit accruals under such terms since 
                such date).
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) Applicable plan amendment.--The term 
                `applicable plan amendment' has the meaning given such 
                term by subsection (f).
                    ``(B) Protected accrued benefit.--An accrued 
                benefit shall include any early retirement benefit or 
                retirement-type subsidy (within the meaning of 
                subsection (d)(6)(B)(i)), but only with respect to a 
                participant who satisfies (either before or after the 
                effective date of the amendment) the conditions for the 
                benefit or subsidy under the terms of the plan as in 
                effect immediately before such date.''.
    (b) Employee Retirement Income Security Act of 1974.--Section 203 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1053), as amended by section 4, is amended by adding at the end the 
following new subsection:
    ``(g)(1) An applicable plan amendment adopted by a defined benefit 
plan shall not be treated as satisfying the requirements of this 
section unless the applicable plan amendment meets the requirements of 
paragraphs (2) and (3).
    ``(2) For purposes of paragraph (1), an applicable plan amendment 
meets the requirements of this paragraph if, under the terms of the 
plan after the adoption of the amendment, the accrued benefit of the 
participant at any time is not less than the sum of--
            ``(A) the participant's accrued benefit for years of 
        service before the effective date of the amendment, determined 
        under the terms of the plan as in effect immediately before the 
        effective date, plus
            ``(B) the participant's accrued benefit determined under 
        the formula applicable to benefit accruals under the current 
        plan as applied to years of service after such effective date.
    ``(3) For purposes of paragraph (1), an applicable plan amendment 
meets the requirements of this paragraph if the plan to be amended 
provides each participant who has at least 10 years of service (as 
determined under subsection (a)) under the plan at the time such 
amendment takes effect and is within 5 years of eligibility for 
retirement under the plan with one of the following:
            ``(A) Each such participant--
                    ``(i) is provided with notice of the plan 
                amendment, including a comparison of the present and 
                projected values of the accrued benefit determined both 
                with and without regard to the plan amendment, and
                    ``(ii) may elect upon retirement to either receive 
                benefits under the terms of the plan as in effect at 
                the time of retirement or to receive benefits under the 
                terms of the plan as in effect immediately before the 
                effective date of such plan amendment (taking into 
                account all benefit accruals under such terms since 
                such date).
            ``(B) For each such participant, the benefits after the 
        plan amendment takes effect are not less than the greatest 
        benefits the participant would have received by reason of the 
        election described in subparagraph (A)(ii).
            ``(C) For each such participant, for at least the first 5 
        years after the plan amendment takes effect, benefits under the 
        terms of the plan as in effect immediately before the effective 
        date of such plan amendment (taking into account all benefit 
        accruals under such terms since such date).
    ``(4) For purposes of this subsection--
            ``(A) The term `applicable plan amendment' has the meaning 
        given such term by subsection (f).
            ``(B) An accrued benefit shall include any early retirement 
        benefit or retirement-type subsidy (within the meaning of 
        subsection (d)(6)(B)(i)), but only with respect to a 
        participant who satisfies (either before or after the effective 
        date of the amendment) the conditions for the benefit or 
        subsidy under the terms of the plan as in effect immediately 
        before such date.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to any amendment to a plan adopted after the date of 
the enactment of this Act.
                                 <all>