[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1573 Introduced in Senate (IS)]








109th CONGRESS
  1st Session
                                S. 1573

To amend the Internal Revenue Code of 1986 to encourage the funding of 
            collectively bargained retiree health benefits.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 29, 2005

Mrs. Dole (for herself and Mr. Corzine) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to encourage the funding of 
            collectively bargained retiree health benefits.

    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 ``Retiree Health Benefits Act of 
2005''.

SEC. 2. FUNDING OF RETIREE HEALTH BENEFITS.

    (a) Collectively Bargained Transfer Treated as a Qualified 
Transfer.--
            (1) In general.--Section 420(b) of the Internal Revenue 
        Code of 1986 (defining qualified transfer) is amended by 
        redesignating paragraph (5) as paragraph (6) and by inserting 
        after paragraph (4) the following new paragraph:
            ``(5) A collectively bargained transfer (as defined in 
        subsection (e)(5)) shall be treated as a qualified transfer.''.
            (2) Conforming amendments.--
                    (A) Subparagraph (B) of section 420(b)(2) of such 
                Code is amended by inserting ``or a collectively 
                bargained transfer'' after ``paragraph (4)''.
                    (B) Paragraph (3) of section 420(b) of such Code is 
                amended to read as follows:
            ``(3) Limitation on amount transferred.--
                    ``(A) In general.--The amount of excess pension 
                assets which may be transferred in a qualified transfer 
                (other than a collectively bargained transfer) shall 
                not exceed the amount which is reasonably estimated to 
                be the amount the employer maintaining the plan will 
                pay (whether directly or through reimbursement) out of 
                such account during the taxable year of the transfer 
                for qualified current retiree health liabilities.
                    ``(B) Exception for collectively bargained 
                transfers.--The amount of excess pension assets which 
                may be transferred in a collectively bargained transfer 
                shall not exceed the amount which is reasonably 
                estimated, in accordance with the provisions of the 
                collective bargaining agreement and generally accepted 
                accounting principles, to be the amount the employer 
                maintaining the plan will pay (whether directly or 
                through reimbursement) out of such account during the 
                collectively bargained cost maintenance period for 
                collectively bargained retiree health liabilities.''.
                    (C) Section 420(b)(6) of such Code, as redesignated 
                by paragraph (1), is amended by inserting ``(other than 
                a collectively bargained transfer)'' after ``No 
                transfer''.
    (b) Requirements of Plans Making Collectively Bargained 
Transfers.--
            (1) In general.--Paragraph (1) of section 420(c) of the 
        Internal Revenue Code of 1986 (relating to requirements of plan 
        transferring assets) is amended to read as follows:
            ``(1) Use of transferred assets.--
                    ``(A) In general.--Except in the case of a 
                collectively bargained transfer, any assets transferred 
                to a health benefits account in a qualified transfer 
                (and any income allocable thereto) shall be used only 
                to pay qualified current retiree health liabilities 
                (other than liabilities of key employees not taken into 
                account under subsection (e)(1)(D)) for the taxable 
                year of the transfer (whether directly or through 
                reimbursement).
                    ``(B) Collectively bargained transfer.--Any assets 
                transferred to a health benefits account in a 
                collectively bargained transfer (and any income 
                allocable thereto) shall be used only to pay 
                collectively bargained retiree health liabilities 
                (other than liabilities of key employees not taken into 
                account under subsection (e)(6)(D)) for the taxable 
                year of the transfer or for any subsequent taxable year 
                during the collectively bargained cost maintenance 
                period (whether directly or through reimbursement).
                    ``(C) Amounts not used to pay for health 
                benefits.--
                            ``(i) In general.--Any assets transferred 
                        to a health benefits account in a qualified 
                        transfer (and any income allocable thereto) 
                        which are not used as provided in subparagraph 
                        (A) (in the case of a qualified transfer other 
                        than a collectively bargained transfer) or 
                        cannot be used as provided in subparagraph (B) 
                        (in the case of a collectively bargained 
                        transfer) shall be transferred out of the 
                        account to the transferor plan.
                            ``(ii) Tax treatment of amounts.--Any 
                        amount transferred out of an account under 
                        clause (i)--
                                    ``(I) shall not be includible in 
                                the gross income of the employer, but
                                    ``(II) shall be treated as an 
                                employer reversion for purposes of 
                                section 4980 (without regard to 
                                subsection (d) thereof).
                    ``(D) Ordering rule.--For purposes of this section, 
                any amount paid out of a health benefits account shall 
                be treated as paid first out of the assets and income 
                described in subparagraph (A) (in the case of a 
                qualified transfer other than a collectively bargained 
                transfer) or subparagraph (B) (in the case of a 
                collectively bargained transfer).''.
            (2) Conforming amendments.--
                    (A) Subparagraph (A) of section 420(c)(3) of such 
                Code is amended to read as follows:
                    ``(A) In general.--The requirements of this 
                paragraph are met if--
                            ``(i) except as provided in clause (ii), 
                        each group health plan or arrangement under 
                        which applicable health benefits are provided 
                        provides that the applicable employer cost for 
                        each taxable year during the cost maintenance 
                        period shall not be less than the higher of the 
                        applicable employer costs for each of the 2 
                        taxable years immediately preceding the taxable 
                        year of the qualified transfer, and
                            ``(ii) in the case of a collectively 
                        bargained transfer, each collectively bargained 
                        group health plan under which collectively 
                        bargained health benefits are provided provides 
                        that the collectively bargained employer cost 
                        for each taxable year during the collectively 
                        bargained cost maintenance period shall not be 
                        less than the amount specified by the 
                        collective bargaining agreement.''.
                    (B) Section 420(c)(3) of such Code is amended by 
                redesignating subparagraphs (C), (D), and (E) as 
                subparagraphs (D), (E), and (F), respectively, and by 
                inserting after subparagraph (B) the following new 
                subparagraph:
                    ``(C) Collectively bargained employer cost.--For 
                purposes of this paragraph, the term `collectively 
                bargained employer cost' means the average cost per 
                covered individual of providing collectively bargained 
                retiree health benefits as determined in accordance 
                with the applicable collective bargaining agreement. 
                Such agreement may provide for an appropriate reduction 
                in the collectively bargained employer cost to take 
                into account any portion of the collectively bargained 
                retiree health benefits that is provided or financed by 
                a government program or other source.''.
                    (C) Subparagraph (E) of section 420(c)(3) of such 
                Code (as redesignated by subparagraph (B)) is amended 
                to read as follows:
                    ``(E) Maintenance period.--For purposes of this 
                paragraph--
                            ``(i) Cost maintenance period.--The term 
                        `cost maintenance period' means the period of 5 
                        taxable years beginning with the taxable year 
                        in which the qualified transfer occurs. If a 
                        taxable year is in 2 or more overlapping cost 
                        maintenance periods, this paragraph shall be 
                        applied by taking into account the highest 
                        applicable employer cost required to be 
                        provided under subparagraph (A)(i) for such 
                        taxable year.
                            ``(ii) Collectively bargained cost 
                        maintenance period.--The term `collectively 
                        bargained cost maintenance period' means, with 
                        respect to each covered retiree and his covered 
                        spouse and dependents, the shorter of--
                                    ``(I) the remaining lifetime of 
                                such covered retiree and his covered 
                                spouse and dependents, or
                                    ``(II) the period of coverage 
                                provided by the collectively bargained 
                                health plan (determined as of the date 
                                of the collectively bargained transfer) 
                                with respect to such covered retiree 
                                and his covered spouse and 
                                dependents.''.
    (c) Limitations on Employer.--Subsection (d) of section 420 of the 
Internal Revenue Code of 1986 is amended to read as follows:
    ``(d) Limitations on Employer.--For purposes of this title--
            ``(1) Deduction limitations.--No deduction shall be 
        allowed--
                    ``(A) for the transfer of any amount to a health 
                benefits account in a qualified transfer (or any 
                retransfer to the plan under subsection (c)(1)(C)),
                    ``(B) for qualified current retiree health 
                liabilities or collectively bargained retiree health 
                liabilities paid out of the assets (and income) 
                described in subsection (c)(1), or
                    ``(C) except in the case of a collectively 
                bargained transfer, for any amounts to which 
                subparagraph (B) does not apply and which are paid for 
                qualified current retiree health liabilities for the 
                taxable year to the extent such amounts are not greater 
                than the excess (if any) of--
                            ``(i) the amount determined under 
                        subparagraph (A) (and income allocable 
                        thereto), over
                            ``(ii) the amount determined under 
                        subparagraph (B).
            ``(2) Other limitations.--
                    ``(A) No contributions allowed.--Except as provided 
                in subparagraph (B), an employer may not contribute 
                after December 31, 1990, any amount to a health 
                benefits account or welfare benefit fund (as defined in 
                section 419(e)(1)) with respect to qualified current 
                retiree health liabilities for which transferred assets 
                are required to be used under subsection (c)(1)(A).
                    ``(B) Exception.--An employer may contribute an 
                amount to a health benefits account or welfare benefit 
                fund (as defined in section 419(e)(1)) with respect to 
                collectively bargained retiree health liabilities for 
                which transferred assets are required to be used under 
                subsection (c)(1)(B), and the deductibility of any such 
                contribution shall be governed by the limits applicable 
                to the deductibility of contributions to a welfare 
                benefit fund under a collective bargaining agreement 
                (as determined under section 419A(f)(5)(A)) without 
                regard to whether such contributions are made to a 
                health benefits account or welfare benefit fund and 
                without regard to the provisions of section 404 or the 
                other provisions of this section.''.
    (d) Definitions.--Section 420(e) of the Internal Revenue Code of 
1986 (relating to definition and special rules) is amended by adding at 
the end the following new paragraphs:
            ``(5) Collectively bargained transfer.--The term 
        `collectively bargained transfer' means a transfer--
                    ``(A) of excess pension assets to a health benefits 
                account which is part of such plan in a taxable year 
                beginning after December 31, 2004,
                    ``(B) which does not contravene any other provision 
                of law,
                    ``(C) with respect to which are met in connection 
                with the plan--
                            ``(i) the use requirements of subsection 
                        (c)(1),
                            ``(ii) the vesting requirements of 
                        subsection (c)(2), and
                            ``(iii) the minimum cost requirements of 
                        subsection (c)(3),
                    ``(D) which is made in accordance with a collective 
                bargaining agreement, and
                    ``(E) which, before the transfer, the employer 
                designates, in a written notice delivered to each 
                employee organization that is a party to the collective 
                bargaining agreement, as a collectively bargained 
                transfer in accordance with this section.
            ``(6) Collectively bargained retiree health liabilities.--
                    ``(A) In general.--The term `collectively bargained 
                retiree health liabilities' means the present value, as 
                of the beginning of a taxable year and determined in 
                accordance with the applicable collective bargaining 
                agreement, of all collectively bargained health 
                benefits (including administrative expenses) for such 
                taxable year and all subsequent taxable years during 
                the collectively bargained cost maintenance period.
                    ``(B) Reduction for amounts previously set aside.--
                The amount determined under subparagraph (A) shall be 
                reduced by the value (as of the close of the plan year 
                preceding the year of the collectively bargained 
                transfer) of the assets in all health benefits accounts 
                or welfare benefit funds (as defined in section 
                419(e)(1)) set aside to pay for the collectively 
                bargained retiree health liabilities.
                    ``(C) Key employees excluded.--If an employee is a 
                key employee (within the meaning of section 416(I)(1)) 
                with respect to any plan year ending in a taxable year, 
                such employee shall not be taken into account in 
                computing collectively bargained retiree health 
                liabilities for such taxable year or in calculating 
                collectively bargained employer cost under subsection 
                (c)(3)(C).
            ``(7) Collectively bargained health benefits.--The term 
        `collectively bargained health benefits' means health benefits 
        or coverage which are provided to--
                    ``(A) retired employees who, immediately before the 
                collectively bargained transfer, are entitled to 
                receive such benefits upon retirement and who are 
                entitled to pension benefits under the plan, and their 
                spouses and dependents, and
                    ``(B) if specified by the provisions of the 
                collective bargaining agreement governing the 
                collectively bargained transfer, active employees who, 
                following their retirement, are entitled to receive 
                such benefits and who are entitled to pension benefits 
                under the plan, and their spouses and dependents.
            ``(8) Collectively bargained health plan.--The term 
        `collectively bargained health plan' means a group health plan 
        or arrangement for retired employees and their spouses and 
        dependents that is maintained pursuant to 1 or more collective 
        bargaining agreements.''.
    (e) Conforming Amendments.--
            (1) The last sentence of section 401(h) of the Internal 
        Revenue Code of 1986 is amended by inserting ``(other than 
        contributions with respect to collectively bargained retiree 
        health liabilities within the meaning of section 420(e)(6))'' 
        after ``medical benefits''.
            (2) Section 101(e)(3) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by 
        striking ``Pension Funding Equity Act of 2004'' and inserting 
        ``Retiree Health Benefits Act of 2005.''
            (3) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is 
        amended by striking ``Pension Funding Equity Act of 2004'' and 
        inserting ``Retiree Health Benefits Act of 2005.''
            (4) Paragraph (13) of section 408(b) of such Act (29 U.S.C. 
        1108(b)) is amended--
                    (A) by striking ``before January 1, 2014'' and 
                inserting ``in accordance with section 420 of the 
                Internal Revenue Code of 1986 (as in effect on the date 
                of the enactment of the Retiree Health Benefits Act of 
                2005)'', and
                    (B) by striking ``Pension Funding Equity Act of 
                2004'' and inserting ``Retiree Health Benefits Act of 
                2005''.
    (f) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2004.
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