[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1783 Public Print (PP)]


                           December 22, 2005

                    Ordered to be printed as passed

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
109th CONGRESS
  1st Session
                                S. 1783

_______________________________________________________________________

                                 AN ACT


 
 To amend the Employee Retirement Income Security Act of 1974 and the 
Internal Revenue Code of 1986 to reform the pension funding rules, and 
                          for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Pension Security 
and Transparency Act of 2005''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
   TITLE I--FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER DEFINED 
                  BENEFIT PLANS AND RELATED PROVISIONS

 Subtitle A--Amendments to Employee Retirement Income Security Act of 
                                  1974

Sec. 101. Minimum funding standards.
Sec. 102. Funding rules for single-employer defined benefit pension 
                            plans.
Sec. 103. Benefit limitations under single-employer plans.
Sec. 104. Technical and conforming amendments.
Sec. 105. Special rules for multiple employer plans of certain 
                            cooperatives.
Sec. 106. Temporary relief for certain rescued plans.
        Subtitle B--Amendments to Internal Revenue Code of 1986

Sec. 111. Modifications of the minimum funding standards.
Sec. 112. Funding rules applicable to single-employer pension plans.
Sec. 113. Benefit limitations under single-employer plans.
Sec. 114. Increase in deduction limit for single-employer plans.
Sec. 115. Technical and conforming amendments.
 Subtitle C--Interest Rate Assumptions and Deductible Amounts for 2006

Sec. 121. Extension of replacement of 30-year Treasury rates.
Sec. 122. Deduction limits for plan contributions.
Sec. 123. Updating deduction rules for combination of plans.
TITLE II--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT 
                      PLANS AND RELATED PROVISIONS

                       Subtitle A--Funding Rules

 Part I--Amendments to Employee Retirement Income Security Act of 1974

Sec. 201. Funding rules for multiemployer defined benefit plans.
Sec. 202. Additional funding rules for multiemployer plans in 
                            endangered or critical status.
Sec. 203. Measures to forestall insolvency of multiemployer plans.
Sec. 204. Special rule for certain benefits funded under an agreement 
                            approved by the Pension Benefit Guaranty 
                            Corporation.
Sec. 205. Withdrawal liability reforms.
          Part II--Amendments to Internal Revenue Code of 1986

Sec. 211. Funding rules for multiemployer defined benefit plans.
Sec. 212. Additional funding rules for multiemployer plans in 
                            endangered or critical status.
                   Part III--Sunset of Funding Rules

Sec. 216. Sunset of funding rules.
              Subtitle B--Deduction and Related Provisions

Sec. 221. Deduction limits for multiemployer plans.
Sec. 222. Transfer of excess pension assets to multiemployer health 
                            plan.
                  TITLE III--INTEREST RATE ASSUMPTIONS

Sec. 301. Interest rate assumption for determination of lump sum 
                            distributions.
Sec. 302. Interest rate assumption for applying benefit limitations to 
                            lump sum distributions.
Sec. 303. Restrictions on funding of nonqualified deferred compensation 
                            plans by employers maintaining underfunded 
                            or terminated single-employer plans.
Sec. 304. Modification of pension funding requirements for plans 
                            subject to current transition rule.
          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

Sec. 401. Increases in PBGC premiums.
Sec. 402. Authority to enter alternative funding agreements to prevent 
                            plan terminations.
Sec. 403. Special funding rules for plans maintained by commercial 
                            airlines that are amended to cease future 
                            benefit accruals.
Sec. 404. Limitation on PBGC guarantee of shutdown and other benefits.
Sec. 405. Rules relating to bankruptcy of employer.
Sec. 406. PBGC premiums for new plans of small employers.
Sec. 407. PBGC premiums for small and new plans.
Sec. 408. Authorization for PBGC to pay interest on premium overpayment 
                            refunds.
Sec. 409. Rules for substantial owner benefits in terminated plans.
Sec. 410. Acceleration of PBGC computation of benefits attributable to 
                            recoveries from employers.
Sec. 411. Treatment of certain plans where cessation or change in 
                            membership of a controlled group.
Sec. 412. Effect of title.
Sec. 413. Wage requirement for employers.
                          TITLE V--DISCLOSURE

Sec. 501. Defined benefit plan funding notice.
Sec. 502. Access to multiemployer pension plan information.
Sec. 503. Additional annual reporting requirements.
Sec. 504. Timing of annual reporting requirements.
Sec. 505. Section 4010 filings with the PBGC.
Sec. 506. Disclosure of termination information to plan participants.
Sec. 507. Benefit suspension notice.
Sec. 508. Study and report by Government Accountability Office.
 TITLE VI--TREATMENT OF CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT 
                             PENSION PLANS

Sec. 601. Prospective application of age discrimination, conversion, 
                            and present value assumption rules.
Sec. 602. Regulations relating to mergers and acquisitions.
  TITLE VII--DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS 
                    UNDER DEFINED CONTRIBUTION PLANS

Sec. 701. Defined contribution plans required to provide employees with 
                            freedom to invest their plan assets.
Sec. 702. Notice of freedom to divest employer securities or real 
                            property.
Sec. 703. Periodic pension benefit statements.
Sec. 704. Notice to participants or beneficiaries of blackout periods.
Sec. 705. Allowance of, and credit for, additional IRA payments in 
                            certain bankruptcy cases.
Sec. 706. Inapplicability of relief from fiduciary liability during 
                            suspension of ability of participant or 
                            beneficiary to direct investments.
Sec. 707. Increase in maximum bond amount.
      TITLE VIII--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS

Sec. 801. Defined contribution plans required to provide adequate 
                            investment education to participants.
Sec. 802. Independent investment advice provided to plan participants.
Sec. 803. Treatment of qualified retirement planning services.
Sec. 804. Increase in penalties for coercive interference with exercise 
                            of ERISA rights.
Sec. 805. Administrative provision.
      TITLE IX--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

Sec. 901. Regulations on time and order of issuance of domestic 
                            relations orders.
Sec. 902. Entitlement of divorced spouses to railroad retirement 
                            annuities independent of actual entitlement 
                            of employee.
Sec. 903. Extension of tier II railroad retirement benefits to 
                            surviving former spouses pursuant to 
                            divorce agreements.
Sec. 904. Requirement for additional survivor annuity option.
      TITLE X--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES

Sec. 1001. Clarifications regarding purchase of permissive service 
                            credit.
Sec. 1002. Allow rollover of after-tax amounts in annuity contracts.
Sec. 1003. Clarification of minimum distribution rules for governmental 
                            plans.
Sec. 1004. Waiver of 10 percent early withdrawal penalty tax on certain 
                            distributions of pension plans for public 
                            safety employees.
Sec. 1005. Allow rollovers by nonspouse beneficiaries of certain 
                            retirement plan distributions.
Sec. 1006. Faster vesting of employer nonelective contributions.
Sec. 1007. Allow direct rollovers from retirement plans to Roth IRAS.
Sec. 1008. Elimination of higher penalty on certain simple plan 
                            distributions.
Sec. 1009. Simple plan portability.
Sec. 1010. Eligibility for participation in retirement plans.
Sec. 1011. Transfers to the PBGC.
Sec. 1012. Missing participants.
Sec. 1013. Modifications of rules governing hardships and unforseen 
                            financial emergencies.
                  TITLE XI--ADMINISTRATIVE PROVISIONS

Sec. 1101. Employee plans compliance resolution system.
Sec. 1102. Notice and consent period regarding distributions.
Sec. 1103. Reporting simplification.
Sec. 1104. Voluntary early retirement incentive and employment 
                            retention plans maintained by local 
                            educational agencies and other entities.
Sec. 1105. No reduction in unemployment compensation as a result of 
                            pension rollovers.
Sec. 1106. Withholding on distributions from governmental section 457 
                            plans.
Sec. 1107. Treatment of defined benefit plan as governmental plan.
Sec. 1108. Increasing participation in cash or deferred plans through 
                            automatic contribution arrangements.
Sec. 1109. Treatment of investment of assets by plan where participant 
                            fails to exercise investment election.
Sec. 1110. Clarification of fiduciary rules.
            TITLE XII--UNITED STATES TAX COURT MODERNIZATION

Sec. 1200. Amendment of 1986 Code.
Sec. 1201. Annuities for survivors of Tax Court judges who are 
                            assassinated.
Sec. 1202. Cost-of-living adjustments for Tax Court judicial survivor 
                            annuities.
Sec. 1203. Life insurance coverage for Tax Court judges.
Sec. 1204. Cost of life insurance coverage for Tax Court judges age 65 
                            or over.
Sec. 1205. Modification of timing of lump-sum payment of judges' 
                            accrued annual leave.
Sec. 1206. Participation of Tax Court judges in the Thrift Savings 
                            Plan.
Sec. 1207. Exemption of teaching compensation of retired judges from 
                            limitation on outside earned income.
Sec. 1208. General provisions relating to Magistrate Judges of the Tax 
                            Court.
Sec. 1209. Annuities to surviving spouses and dependent children of 
                            Magistrate Judges of the Tax Court.
Sec. 1210. Retirement and annuity program.
Sec. 1211. Incumbent Magistrate Judges of the Tax Court.
Sec. 1212. Provisions for recall.
Sec. 1213. Effective date.
                      TITLE XIII--OTHER PROVISIONS

                  Subtitle A--Administrative Provision

Sec. 1301. Provisions relating to plan amendments.
Sec. 1302. Authority to the Secretary of Labor, Secretary of the 
                            Treasury, and the Pension Benefit Guaranty 
                            Corporation to postpone certain deadlines.
           Subtitle B--Governmental Pension Plan Equalization

Sec. 1311. Definition of governmental plan.
Sec. 1312. Extension to all governmental plans of current moratorium on 
                            application of certain nondiscrimination 
                            rules applicable to State and local plans.
Sec. 1313. Clarification that Tribal governments are subject to the 
                            same defined benefit plan rules and 
                            regulations applied to State and other 
                            local governments, their police and 
                            firefighters.
Sec. 1314. Effective date.
                  Subtitle C--Miscellaneous Provisions

Sec. 1321. Transfer of excess funds from black lung disability trusts 
                            to United Mine Workers of America Combined 
                            Benefit Fund.
Sec. 1322. Treatment of death benefits from corporate-owned life 
                            insurance.
              Subtitle D--Other Related Pension Provisions

                  Part I--Health and Medical Benefits

Sec. 1331. Use of excess pension assets for future retiree health 
                            benefits.
Sec. 1332. Special rules for funding of collectively bargained retiree 
                            health benefits.
Sec. 1333. Allowance of reserve for medical benefits of plans sponsored 
                            by bona fide associations.
                 Part II--Cash or Deferred Arrangements

Sec. 1336. Treatment of eligible combined defined benefit plans and 
                            qualified cash or deferred arrangements.
Sec. 1337. State and local governments eligible to maintain section 
                            401(k) plans.
                     Part III--Excess Contributions

Sec. 1339. Excess contributions.
                       Part IV--Other Provisions

Sec. 1341. Amendments relating to prohibited transactions.
Sec. 1342. Federal Task Force on Older Workers.
Sec. 1343. Technical corrections to Saver Act.

   TITLE I--FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER DEFINED 
                  BENEFIT PLANS AND RELATED PROVISIONS

 Subtitle A--Amendments to Employee Retirement Income Security Act of 
                                  1974

SEC. 101. MINIMUM FUNDING STANDARDS.

    (a) Repeal of Existing Funding Rules.--Sections 302 through 308 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082 
through 1086) are repealed.
    (b) New Minimum Funding Standards.--Part 3 of subtitle B of title I 
of such Act (as amended by subsection (a)) is amended by inserting 
after section 301 the following new section:

                      ``minimum funding standards

    ``Sec. 302. (a) Requirement To Meet Minimum Funding Standard.--
            ``(1) In general.--A plan to which this part applies shall 
        satisfy the minimum funding standard applicable to the plan for 
        any plan year.
            ``(2) Minimum funding standard.--For purposes of paragraph 
        (1), a plan shall be treated as satisfying the minimum funding 
        standard for a plan year if--
                    ``(A) in the case of a defined benefit plan which 
                is a single-employer plan, the employer makes 
                contributions to or under the plan for the plan year 
                which, in the aggregate, are not less than the minimum 
                required contribution determined under section 303 for 
                the plan for the plan year,
                    ``(B) in the case of a money purchase plan which is 
                a single-employer plan, the employer makes 
                contributions to or under the plan for the plan year 
                which are required under the terms of the plan, and
                    ``(C) in the case of a multiemployer plan, the 
                employers make contributions to or under the plan for 
                any plan year which, in the aggregate, are sufficient 
                to ensure that the plan does not have an accumulated 
                funding deficiency under section 304 as of the end of 
                the plan year.
    ``(b) Liability for Contributions.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        amount of any contribution required by this section (including 
        any required installments under section 303(j)) shall be paid 
        by the employer responsible for making contributions to or 
        under the plan.
            ``(2) Joint and several liability where employer member of 
        controlled group.--If the employer referred to in paragraph (1) 
        is a member of a controlled group, each member of such group 
        shall be jointly and severally liable for payment of such 
        contributions.
    ``(c) Variance From Minimum Funding Standards.--
            ``(1) Waiver in case of business hardship.--
                    ``(A) In general.--If--
                            ``(i) an employer is (or in the case of a 
                        multiemployer plan, 10 percent or more of the 
                        number of employers contributing to or under 
                        the plan are) unable to satisfy the minimum 
                        funding standard for a plan year without 
                        temporary substantial business hardship 
                        (substantial business hardship in the case of a 
                        multiemployer plan), and
                            ``(ii) application of the standard would be 
                        adverse to the interests of plan participants 
                        in the aggregate,
                the Secretary of the Treasury may, subject to 
                subparagraph (C), waive the requirements of subsection 
                (a) for such year with respect to all or any portion of 
                the minimum funding standard. The Secretary of the 
                Treasury shall not waive the minimum funding standard 
                with respect to a plan for more than 3 of any 15 (5 of 
                any 15 in the case of a multiemployer plan) consecutive 
                plan years.
                    ``(B) Effects of waiver.--If a waiver is granted 
                under subparagraph (A) for any plan year--
                            ``(i) in the case of a single-employer 
                        plan, the minimum required contribution under 
                        section 303 for the plan year shall be reduced 
                        by the amount of the waived funding deficiency 
                        and such amount shall be amortized as required 
                        under section 303(e), and
                            ``(ii) in the case of a multiemployer plan, 
                        the funding standard account shall be credited 
                        under section 304(b)(3)(C) with the amount of 
                        the waived funding deficiency and such amount 
                        shall be amortized as required under section 
                        304(b)(2)(C).
                    ``(C) Waiver of amortized portion not allowed.--The 
                Secretary of the Treasury may not waive under 
                subparagraph (A) any portion of the minimum funding 
                standard under subsection (a) for a plan year which is 
                attributable to any waived funding deficiency for any 
                preceding plan year.
            ``(2) Determination of business hardship.--For purposes of 
        this subsection, the factors taken into account in determining 
        temporary substantial business hardship (substantial business 
        hardship in the case of a multiemployer plan) shall include 
        (but shall not be limited to) whether or not--
                    ``(A) the employer is operating at an economic 
                loss,
                    ``(B) there is substantial unemployment or 
                underemployment in the trade or business and in the 
                industry concerned,
                    ``(C) the sales and profits of the industry 
                concerned are depressed or declining, and
                    ``(D) it is reasonable to expect that the plan will 
                be continued only if the waiver is granted.
            ``(3) Waived funding deficiency.--For purposes of this 
        part, the term `waived funding deficiency' means the portion of 
        the minimum funding standard under subsection (a) (determined 
        without regard to the waiver) for a plan year waived by the 
        Secretary of the Treasury and not satisfied by employer 
        contributions.
            ``(4) Security for waivers for single-employer plans, 
        consultations.--
                    ``(A) Security may be required.--
                            ``(i) In general.--Except as provided in 
                        subparagraph (C), the Secretary of the Treasury 
                        may require an employer maintaining a defined 
                        benefit plan which is a single-employer plan 
                        (within the meaning of section 4001(a)(15)) to 
                        provide security to such plan as a condition 
                        for granting or modifying a waiver under 
                        paragraph (1).
                            ``(ii)  Special rules.--Any security 
                        provided under clause (i) may be perfected and 
                        enforced only by the Pension Benefit Guaranty 
                        Corporation, or, at the direction of the 
                        Corporation, by a contributing sponsor (within 
                        the meaning of section 4001(a)(13)) or a member 
                        of such sponsor's controlled group (within the 
                        meaning of section 4001(a)(14)).
                    ``(B) Consultation with the pension benefit 
                guaranty corporation.--Except as provided in 
                subparagraph (C), the Secretary of the Treasury shall, 
                before granting or modifying a waiver under this 
                subsection with respect to a plan described in 
                subparagraph (A)(i)--
                            ``(i) provide the Pension Benefit Guaranty 
                        Corporation with--
                                    ``(I) notice of the completed 
                                application for any waiver or 
                                modification, and
                                    ``(II) an opportunity to comment on 
                                such application within 30 days after 
                                receipt of such notice, and
                            ``(ii) consider--
                                    ``(I) any comments of the 
                                Corporation under clause (i)(II), and
                                    ``(II) any views of any employee 
                                organization (within the meaning of 
                                section 3(4)) representing participants 
                                in the plan which are submitted in 
                                writing to the Secretary of the 
                                Treasury in connection with such 
                                application.
                Information provided to the Corporation under this 
                subparagraph shall be considered tax return information 
                and subject to the safeguarding and reporting 
                requirements of section 6103(p) of the Internal Revenue 
                Code of 1986.
                    ``(C) Exception for certain waivers.--
                            ``(i) In general.--The preceding provisions 
                        of this paragraph shall not apply to any plan 
                        with respect to which the sum of--
                                    ``(I) the aggregate unpaid minimum 
                                required contributions for the plan 
                                year and all preceding plan years, and
                                    ``(II) the present value of all 
                                waiver amortization installments 
                                determined for the plan year and 
                                succeeding plan years under section 
                                303(e)(2),
                        is less than $1,000,000.
                            ``(ii) Treatment of waivers for which 
                        applications are pending.--The amount described 
                        in clause (i)(I) shall include any increase in 
                        such amount which would result if all 
                        applications for waivers of the minimum funding 
                        standard under this subsection which are 
                        pending with respect to such plan were denied.
                            ``(iii) Unpaid minimum required 
                        contribution.--For purposes of this 
                        subparagraph--
                                    ``(I) In general.--The term `unpaid 
                                minimum required contribution' means, 
                                with respect to any plan year, any 
                                minimum required contribution under 
                                section 303 for the plan year which is 
                                not paid on or before the due date (as 
                                determined under section 303(j)(1)) for 
                                the plan year.
                                    ``(II) Ordering rule.--For purposes 
                                of subclause (I), any payment to or 
                                under a plan for any plan year shall be 
                                allocated first to unpaid minimum 
                                required contributions for all 
                                preceding plan years on a first-in, 
                                first-out basis and then to the minimum 
                                required contribution under section 303 
                                for the plan year.
            ``(5) Special rules for single-employer plans.--
                    ``(A) Application must be submitted before date 
                2\1/2\ months after close of year.--In the case of a 
                single-employer plan, no waiver may be granted under 
                this subsection with respect to any plan for any plan 
                year unless an application therefor is submitted to the 
                Secretary of the Treasury not later than the 15th day 
                of the 3rd month beginning after the close of such plan 
                year.
                    ``(B) Special rule if employer is member of 
                controlled group.--In the case of a single-employer 
                plan, if an employer is a member of a controlled group, 
                the temporary substantial business hardship 
                requirements of paragraph (1) shall be treated as met 
                only if such requirements are met--
                            ``(i) with respect to such employer, and
                            ``(ii) with respect to the controlled group 
                        of which such employer is a member (determined 
                        by treating all members of such group as a 
                        single employer).
                The Secretary of the Treasury may provide that an 
                analysis of a trade or business or industry of a member 
                need not be conducted if the Secretary of the Treasury 
                determines such analysis is not necessary because the 
                taking into account of such member would not 
                significantly affect the determination under this 
                paragraph.
            ``(6) Advance notice.--
                    ``(A) In general.--The Secretary of the Treasury 
                shall, before granting a waiver under this subsection, 
                require each applicant to provide evidence satisfactory 
                to such Secretary that the applicant has provided 
                notice of the filing of the application for such waiver 
                to each affected party (as defined in section 
                4001(a)(21)) other than the Pension Benefit Guaranty 
                Corporation and in the case of a multiemployer plan, to 
                each employer required to contribute to the plan under 
                subsection (b)(1). Such notice shall include a 
                description of the extent to which the plan is funded 
                for benefits which are guaranteed under title IV and 
                for benefit liabilities.
                    ``(B) Consideration of relevant information.--The 
                Secretary of the Treasury shall consider any relevant 
                information provided by a person to whom notice was 
                given under subparagraph (A).
            ``(7) Restriction on plan amendments.--
                    ``(A) In general.--No amendment of a plan which 
                increases the liabilities of the plan by reason of any 
                increase in benefits, any change in the accrual of 
                benefits, or any change in the rate at which benefits 
                become nonforfeitable under the plan shall be adopted 
                if a waiver under this subsection or an extension of 
                time under section 304(d) is in effect with respect to 
                the plan, or if a plan amendment described in 
                subsection (d)(2) has been made at any time in the 
                preceding 24 months. If a plan is amended in violation 
                of the preceding sentence, any such waiver, or 
                extension of time, shall not apply to any plan year 
                ending on or after the date on which such amendment is 
                adopted.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to any plan amendment which--
                            ``(i) the Secretary of the Treasury 
                        determines to be reasonable and which provides 
                        for only de minimis increases in the 
                        liabilities of the plan,
                            ``(ii) only repeals an amendment described 
                        in subsection (d)(2), or
                            ``(iii) is required as a condition of 
                        qualification under part I of subchapter D, of 
                        chapter 1 of the Internal Revenue Code of 1986.
            ``(8) Cross reference.--For corresponding duties of the 
        Secretary of the Treasury with regard to implementation of the 
        Internal Revenue Code of 1986, see section 412(d) of such Code.
    ``(d) Miscellaneous Rules.--
            ``(1) Change in method or year.--If the funding method, the 
        valuation date, or a plan year for a plan is changed, the 
        change shall take effect only if approved by the Secretary of 
        the Treasury.
            ``(2) Certain retroactive plan amendments.--For purposes of 
        this section, any amendment applying to a plan year which--
                    ``(A) is adopted after the close of such plan year 
                but no later than 2\1/2\ months after the close of the 
                plan year (or, in the case of a multiemployer plan, no 
                later than 2 years after the close of such plan year),
                    ``(B) does not reduce the accrued benefit of any 
                participant determined as of the beginning of the first 
                plan year to which the amendment applies, and
                    ``(C) does not reduce the accrued benefit of any 
                participant determined as of the time of adoption 
                except to the extent required by the circumstances,
        shall, at the election of the plan administrator, be deemed to 
        have been made on the first day of such plan year. No amendment 
        described in this paragraph which reduces the accrued benefits 
        of any participant shall take effect unless the plan 
        administrator files a notice with the Secretary of the Treasury 
        notifying him of such amendment and such Secretary has approved 
        such amendment, or within 90 days after the date on which such 
        notice was filed, failed to disapprove such amendment. No 
        amendment described in this subsection shall be approved by the 
        Secretary of the Treasury unless such Secretary determines that 
        such amendment is necessary because of a temporary substantial 
        business hardship (as determined under subsection (c)(2)) or a 
        substantial business hardship (as so determined) in the case of 
        a multiemployer plan and that a waiver under subsection (c) 
        (or, in the case of a multiemployer plan, any extension of the 
        amortization period under section 304(d)) is unavailable or 
        inadequate.
            ``(3) Controlled group.--For purposes of this section, the 
        term `controlled group' means any group treated as a single 
        employer under subsection (b), (c), (m), or (o) of section 414 
        of the Internal Revenue Code of 1986.''.
    (c) Clerical Amendment.--The table of contents in section 1 of such 
Act is amended by striking the items relating to sections 302 through 
308 and inserting the following new item:

        ``Sec. 302. Minimum funding standards.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after 2006.

SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION 
              PLANS.

    (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by section 101 of 
this Act) is amended by inserting after section 302 the following new 
section:

``minimum funding standards for single-employer defined benefit pension 
                                 plans

    ``Sec. 303. (a) Minimum Required Contribution.--For purposes of 
this section and section 302(a)(2)(A), except as provided in subsection 
(f), the term `minimum required contribution' means, with respect to 
any plan year of a defined benefit plan which is a single employer 
plan--
            ``(1) in any case in which the value of plan assets of the 
        plan (as reduced under subsection (f)(4)) is less than the 
        funding target of the plan for the plan year, the sum of--
                    ``(A) the target normal cost of the plan for the 
                plan year,
                    ``(B) the shortfall amortization charge (if any) 
                for the plan for the plan year determined under 
                subsection (c), and
                    ``(C) the waiver amortization charge (if any) for 
                the plan for the plan year as determined under 
                subsection (e); or
            ``(2) in any case in which the value of plan assets of the 
        plan (as reduced under subsection (f)(4)) equals or exceeds the 
        funding target of the plan for the plan year, the target normal 
        cost of the plan for the plan year reduced (but not below zero) 
        by any such excess.
    ``(b) Target Normal Cost.--For purposes of this section, except as 
provided in subsection (i)(2) with respect to plans in at-risk status, 
the term `target normal cost' means, for any plan year, the present 
value of all benefits which are expected to accrue or to be earned 
under the plan during the plan year. For purposes of this subsection, 
if any benefit attributable to services performed in a preceding plan 
year is increased by reason of any increase in compensation during the 
current plan year, the increase in such benefit shall be treated as 
having accrued during the current plan year.
    ``(c) Shortfall Amortization Charge.--
            ``(1) In general.--For purposes of this section, the 
        shortfall amortization charge for a plan for any plan year is 
        the aggregate total of the shortfall amortization installments 
        for such plan year with respect to the shortfall amortization 
        bases for such plan year and each of the 6 preceding plan 
        years.
            ``(2) Shortfall amortization installment.--For purposes of 
        paragraph (1)--
                    ``(A) Determination.--The shortfall amortization 
                installments are the amounts necessary to amortize the 
                shortfall amortization base of the plan for any plan 
                year in level annual installments over the 7-plan-year 
                period beginning with such plan year.
                    ``(B) Shortfall installment.--The shortfall 
                amortization installment for any plan year in the 7-
                plan-year period under subparagraph (A) with respect to 
                any shortfall amortization base is the annual 
                installment determined under subparagraph (A) for that 
                year for that base.
                    ``(C) Segment rates.--In determining any shortfall 
                amortization installment under this paragraph, the plan 
                sponsor shall use the segment rates determined under 
                subparagraph (C) of subsection (h)(2), applied under 
                rules similar to the rules of subparagraph (B) of 
                subsection (h)(2).
            ``(3) Shortfall amortization base.--For purposes of this 
        section, the shortfall amortization base of a plan for a plan 
        year is the excess (if any) of--
                    ``(A) the funding shortfall of such plan for such 
                plan year, over
                    ``(B) the present value (determined using the 
                segment rates determined under subparagraph (C) of 
                subsection (h)(2), applied under rules similar to the 
                rules of subparagraph (B) of subsection (h)(2)) of the 
                aggregate total of the shortfall amortization 
                installments and waiver amortization installments which 
                have been determined for such plan year and any 
                succeeding plan year with respect to the shortfall 
                amortization bases and waiver amortization bases of the 
                plan for any plan year preceding such plan year.
            ``(4) Funding shortfall.--
                    ``(A) In general.--For purposes of this section, 
                except as provided in subparagraph (B), the funding 
                shortfall of a plan for any plan year is the excess (if 
                any) of--
                            ``(i) the funding target of the plan for 
                        the plan year, over
                            ``(ii) the value of plan assets of the plan 
                        (as reduced under subsection (f)(4)) for the 
                        plan year which are held by the plan on the 
                        valuation date.
                    ``(B) Transition rule for amortization of funding 
                shortfall.--
                            ``(i) In general.--Solely for purposes of 
                        applying paragraph (3) in the case of plan 
                        years beginning after 2006 and before 2011, 
                        only the applicable percentage of the funding 
                        target shall be taken into account under 
                        paragraph (3)(A) in determining the funding 
                        shortfall for the plan year.
                            ``(ii) Applicable percentage.--For purposes 
                        of subparagraph (A)--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), the 
                                applicable percentage shall be 93 
                                percent for plan years beginning in 
                                2007, 96 percent for plan years 
                                beginning in 2008, and 100 percent for 
                                any succeeding plan year.
                                    ``(II) Small plans.--In the case of 
                                a plan described in subsection 
                                (g)(2)(B), the applicable percentage 
                                shall be determined in accordance with 
                                the following table:

``In the case of a plan year                             The applicable
  beginning in calendar year:                           percentage is--
    2007..........................................                  92 
    2008..........................................                  94 
    2009..........................................                  96 
    2010..........................................                  98.
            ``(5) Early deemed amortization upon attainment of funding 
        target.--In any case in which the funding shortfall of a plan 
        for a plan year is zero, for purposes of determining the 
        shortfall amortization charge for such plan year and succeeding 
        plan years, the shortfall amortization bases for all preceding 
        plan years (and all shortfall amortization installments 
        determined with respect to such bases) shall be reduced to 
        zero.
    ``(d) Rules Relating to Funding Target.--For purposes of this 
section--
            ``(1) Funding target.--Except as provided in subsection 
        (i)(1) with respect to plans in at-risk status, the funding 
        target of a plan for a plan year is the present value of all 
        benefits accrued or earned under the plan as of the beginning 
        of the plan year.
            ``(2) Funding target attainment percentage.--The `funding 
        target attainment percentage' of a plan for a plan year is the 
        ratio (expressed as a percentage) which--
                    ``(A) the value of plan assets for the plan year, 
                bears to
                    ``(B) the funding target of the plan for the plan 
                year (determined without regard to subsection (i)(1)).
    ``(e) Waiver Amortization Charge.--
            ``(1) Determination of waiver amortization charge.--The 
        waiver amortization charge (if any) for a plan for any plan 
        year is the aggregate total of the waiver amortization 
        installments for such plan year with respect to the waiver 
        amortization bases for each of the 5 preceding plan years.
            ``(2) Waiver amortization installment.--For purposes of 
        paragraph (1)--
                    ``(A) Determination.--The waiver amortization 
                installments are the amounts necessary to amortize the 
                waiver amortization base of the plan for any plan year 
                in level annual installments over a period of 5 plan 
                years beginning with the succeeding plan year.
                    ``(B) Waiver installment.--The waiver amortization 
                installment for any plan year in the 5-year period 
                under subparagraph (A) with respect to any waiver 
                amortization base is the annual installment determined 
                under subparagraph (A) for that year for that base.
            ``(3) Interest rate.--In determining any waiver 
        amortization installment under this subsection, the plan 
        sponsor shall use the segment rates determined under 
        subparagraph (C) of subsection (h)(2), applied under rules 
        similar to the rules of subparagraph (B) of subsection (h)(2).
            ``(4) Waiver amortization base.--The waiver amortization 
        base of a plan for a plan year is the amount of the waived 
        funding deficiency (if any) for such plan year under section 
        302(c).
            ``(5) Early deemed amortization upon attainment of funding 
        target.--In any case in which the funding shortfall of a plan 
        for a plan year is zero, for purposes of determining the waiver 
        amortization charge for such plan year and succeeding plan 
        years, the waiver amortization bases for all preceding plan 
        years (and all waiver amortization installments with respect to 
        such bases) shall be reduced to zero.
    ``(f) Use of Prefunding Balances To Satisfy Minimum Required 
Contributions.--
            ``(1) In general.--A plan sponsor may credit any amount of 
        a plan's prefunding balance for a plan year against the minimum 
        required contribution for the plan year and the amount of the 
        contributions an employer is required to make under section 
        302(b) for the plan year shall be reduced by the amount so 
        credited. Any such amount shall be credited on the first day of 
        the plan year.
            ``(2) Prefunding balance.--
                    ``(A) Beginning balance.--The beginning balance of 
                a prefunding balance maintained by a plan shall be 
                zero, except that if a plan was in effect for a plan 
                year beginning in 2006 and had a positive balance in 
                the funding standard account under section 302(b) (as 
                in effect for such plan year) as of the end of such 
                plan year, the beginning balance for the plan for its 
                first plan year beginning after 2006 shall be such 
                positive balance.
                    ``(B) Increases.--
                            ``(i) In general.--As of the first day of 
                        each plan year beginning after 2007, the 
                        prefunding balance of a plan shall be increased 
                        by the excess (if any) of--
                                    ``(I) the aggregate amount of 
                                employer contributions to the plan for 
                                the preceding plan year, over
                                    ``(II) the minimum required 
                                contribution for the preceding plan 
                                year.
                            ``(ii) Adjustments for interest.--Any 
                        excess contributions under clause (i) shall be 
                        properly adjusted for interest accruing for the 
                        periods between the first day of the current 
                        plan year and the dates on which the excess 
                        contributions were made, determined by using 
                        the effective interest rate for the preceding 
                        plan year and by treating contributions as 
                        being first used to satisfy the minimum 
                        required contribution.
                            ``(iii) Certain contributions 
                        disregarded.--Any contribution which is 
                        required to be made under section 206(g) in 
                        addition to any contribution required under 
                        this section shall not be taken into account 
                        for purposes of clause (i).
                    ``(C) Decreases.--As of the first day of each plan 
                year after 2007, the prefunding balance of a plan shall 
                be decreased (but not below zero) by the amount of the 
                balance credited under paragraph (1) against the 
                minimum required contribution of the plan for the 
                preceding plan year.
                    ``(D) Adjustments for investment experience.--In 
                determining the prefunding balance of a plan as of the 
                first day of the plan year, the plan sponsor shall, in 
                accordance with regulations prescribed by the Secretary 
                of the Treasury, adjust such balance to reflect the 
                rate of return on plan assets for the preceding plan 
                year. Notwithstanding subsection (g)(3), such rate of 
                return shall be determined on the basis of fair market 
                value and shall properly take into account, in 
                accordance with such regulations, all contributions, 
                distributions, and other plan payments made during such 
                period.
            ``(3) Limitation for underfunded plans.--
                    ``(A) In general.--If the ratio (expressed as a 
                percentage) for any plan year which--
                            ``(i) the value of plan assets for the 
                        preceding plan year, bears to
                            ``(ii) the funding target of the plan for 
                        the preceding plan year (determined without 
                        regard to subsection (i)(1)),
                is less than 80 percent, the preceding provisions of 
                this subsection shall not apply unless employers liable 
                for contributions to the plan under section 302(b) make 
                contributions to the plan for the plan year in an 
                aggregate amount not less than the amount determined 
                under subparagraph (B). Any contribution required by 
                this subparagraph may not be reduced by any credit 
                otherwise allowable under paragraph (1).
                    ``(B) Applicable amount.--The amount determined 
                under this subparagraph for any plan year is the 
                greater of--
                            ``(i) the target normal cost of the plan 
                        for the plan year, or
                            ``(ii) 25 percent of the minimum required 
                        contribution under subsection (a) for the plan 
                        year without regard to this subsection.
            ``(4) Reduction in value of assets.--Solely for purposes of 
        applying subsections (a) and (c)(4)(A)(ii) in determining the 
        minimum required contribution under this section, the value of 
        the plan assets otherwise determined without regard to this 
        paragraph shall be reduced by the amount of the prefunding 
        balance under this subsection.
    ``(g) Valuation of Plan Assets and Liabilities.--
            ``(1) Timing of determinations.--Except as otherwise 
        provided under this subsection, all determinations under this 
        section for a plan year shall be made as of the valuation date 
        of the plan for such plan year.
            ``(2) Valuation date.--For purposes of this section--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the valuation date of a plan for any 
                plan year shall be the first day of the plan year.
                    ``(B) Exception for small plans.--If, on each day 
                during the preceding plan year, a plan had 100 or fewer 
                participants, the plan may designate any day during the 
                plan year as its valuation date for such plan year and 
                succeeding plan years. For purposes of this 
                subparagraph, all defined benefit plans (other than 
                multiemployer plans) maintained by the same employer 
                (or any member of such employer's controlled group) 
                shall be treated as 1 plan, but only employees of such 
                employer or member shall be taken into account.
                    ``(C) Application of certain rules in determination 
                of plan size.--For purposes of this paragraph--
                            ``(i) Plans not in existence in preceding 
                        year.--In the case of the first plan year of 
                        any plan, subparagraph (B) shall apply to such 
                        plan by taking into account the number of 
                        participants that the plan is reasonably 
                        expected to have on days during such first plan 
                        year.
                            ``(ii) Predecessors.--Any reference in 
                        subparagraph (B) to an employer shall include a 
                        reference to any predecessor of such employer.
            ``(3) Determination of value of plan assets.--For purposes 
        of this section--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the value of plan assets shall be the 
                fair market value of the assets.
                    ``(B) Averaging allowed.--A plan may determine the 
                value of plan assets on the basis of any reasonable 
                actuarial method of valuation providing for the 
                averaging of fair market values, but only if such 
                method--
                            ``(i) is permitted under regulations 
                        prescribed by the Secretary of the Treasury, 
                        and
                            ``(ii) does not provide for averaging of 
                        such values over more than the period beginning 
                        on the last day of the 12th month preceding the 
                        valuation date and ending on the valuation date 
                        (or a similar period in the case of a valuation 
                        date which is not the 1st day of a month).
            ``(4) Accounting for contribution receipts.--For purposes 
        of determining the value of assets under paragraph (3)--
                    ``(A) Prior year contributions.--If--
                            ``(i) an employer makes any contribution to 
                        the plan after the valuation date for the plan 
                        year in which the contribution is made, and
                            ``(ii) the contribution is for a preceding 
                        plan year,
                the contribution shall be taken into account as an 
                asset of the plan as of the valuation date, except that 
                in the case of any plan year beginning after 2007, only 
                the present value (determined as of the valuation date) 
                of such contribution may be taken into account. For 
                purposes of the preceding sentence, present value shall 
                be determined using the effective interest rate for the 
                preceding plan year to which the contribution is 
                properly allocable.
                    ``(B) Special rule for current year contributions 
                made before valuation date.--If any contributions for 
                any plan year are made to or under the plan during the 
                plan year but before the valuation date for the plan 
                year, the assets of the plan as of the valuation date 
                shall not include--
                            ``(i) such contributions, and
                            ``(ii) interest on such contributions for 
                        the period between the date of the 
                        contributions and the valuation date, 
                        determined by using the effective interest rate 
                        for the plan year.
    ``(h) Actuarial Assumptions and Methods.--
            ``(1) In general.--Subject to this subsection, the 
        determination of any present value or other computation under 
        this section shall be made on the basis of actuarial 
        assumptions and methods--
                    ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                    ``(B) which, in combination, offer the actuary's 
                best estimate of anticipated experience under the plan.
            ``(2) Interest rates.--
                    ``(A) Effective interest rate.--For purposes of 
                this section, the term `effective interest rate' means, 
                with respect to any plan for any plan year, the single 
                rate of interest which, if used to determine the 
                present value of the plan's accrued or earned benefits 
                referred to in subsection (d)(1), would result in an 
                amount equal to the funding target of the plan for such 
                plan year.
                    ``(B) Interest rates for determining funding 
                target.--For purposes of determining the funding target 
                of a plan for any plan year, the interest rate used in 
                determining the present value of the benefits of the 
                plan shall be--
                            ``(i) in the case of benefits reasonably 
                        determined to be payable during the 5-year 
                        period beginning on the first day of the plan 
                        year, the first segment rate with respect to 
                        the applicable month,
                            ``(ii) in the case of benefits reasonably 
                        determined to be payable during the 15-year 
                        period beginning at the end of the period 
                        described in clause (i), the second segment 
                        rate with respect to the applicable month, and
                            ``(iii) in the case of benefits reasonably 
                        determined to be payable after the period 
                        described in clause (ii), the third segment 
                        rate with respect to the applicable month.
                    ``(C) Segment rates.--For purposes of this 
                paragraph--
                            ``(i) First segment rate.--The term `first 
                        segment rate' means, with respect to any month, 
                        the single rate of interest which shall be 
                        determined by the Secretary of the Treasury for 
                        such month on the basis of the corporate bond 
                        yield curve for such month, taking into account 
                        only that portion of such yield curve which is 
                        based on bonds maturing during the 5-year 
                        period commencing with such month.
                            ``(ii) Second segment rate.--The term 
                        `second segment rate' means, with respect to 
                        any month, the single rate of interest which 
                        shall be determined by the Secretary of the 
                        Treasury for such month on the basis of the 
                        corporate bond yield curve for such month, 
                        taking into account only that portion of such 
                        yield curve which is based on bonds maturing 
                        during each of the years in the 15-year period 
                        beginning at the end of the period described in 
                        clause (i).
                            ``(iii) Third segment rate.--The term 
                        `third segment rate' means, with respect to any 
                        month, the single rate of interest which shall 
                        be determined by the Secretary of the Treasury 
                        for such month on the basis of the corporate 
                        bond yield curve for such month, taking into 
                        account only that portion of such yield curve 
                        which is based on bonds maturing during periods 
                        beginning after the period described in clause 
                        (ii).
                    ``(D) Corporate bond yield curve.--The term 
                `corporate bond yield curve' means, with respect to any 
                month, a yield curve which is prescribed by the 
                Secretary of the Treasury for such month and which 
                reflects the average, for the 12-month period ending 
                with the month preceding such month, of yields on 
                investment grade corporate bonds with varying 
                maturities.
                    ``(E) Applicable month.--For purposes of this 
                paragraph, the term `applicable month' means, with 
                respect to any plan for any plan year, the month which 
                includes the valuation date of such plan for such plan 
                year or, at the election of the plan administrator, any 
                of the 4 months which precede such month. Any election 
                made under this subparagraph shall apply to the plan 
                year for which the election is made and all succeeding 
                plan years, unless the election is revoked with the 
                consent of the Secretary of the Treasury.
                    ``(F) Publication requirements.--The Secretary of 
                the Treasury shall publish for each month the corporate 
                bond yield curve for such month and each of the rates 
                determined under this paragraph for such month. The 
                Secretary of the Treasury shall also publish a 
                description of the methodology used to determine such 
                yield curve and such rates which is sufficiently 
                detailed to enable plans to make reasonable projections 
                regarding the yield curve and such rates for future 
                months based on the plan's projection of future 
                interest rates.
                    ``(G) Transition rule.--
                            ``(i) In general.--Notwithstanding the 
                        preceding provisions of this paragraph, for 
                        plan years beginning in 2007 or 2008, the 
                        first, second, or third segment rate for a plan 
                        with respect to any month shall be equal to the 
                        sum of--
                                    ``(I) the product of such rate for 
                                such month determined without regard to 
                                this subparagraph, multiplied by the 
                                applicable percentage, and
                                    ``(II) the product of the rate 
                                determined under the rules of section 
                                302(b)(5)(B)(ii)(II) (as in effect for 
                                plan years beginning in 2006), 
                                multiplied by a percentage equal to 100 
                                percent minus the applicable 
                                percentage.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is 
                        33\1/3\ percent for plan years beginning in 
                        2007 and 66\2/3\ percent for plan years 
                        beginning in 2008.
            ``(3) Mortality tables.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (C) and (D), the mortality table used in 
                determining any present value or making any computation 
                under this section shall be the RP-2000 Combined 
                Mortality Table, using Scale AA, as published by the 
                Society of Actuaries, as in effect on the date of the 
                enactment of the Pension Security and Transparency Act 
                of 2005 and as revised from time to time under 
                subparagraph (B).
                    ``(B) Periodic revision.--The Secretary of the 
                Treasury shall (at least every 10 years) make revisions 
                in any table in effect under subparagraph (A) to 
                reflect the actual experience of pension plans and 
                projected trends in such experience.
                    ``(C) Substitute mortality table.--
                            ``(i) In general.--Upon request by the plan 
                        sponsor and approval by the Secretary of the 
                        Treasury, a mortality table which meets the 
                        requirements of clause (ii) shall be used in 
                        determining any present value or making any 
                        computation under this section during the 10-
                        consecutive plan year period specified in the 
                        request. A mortality table described in this 
                        clause shall cease to be in effect if the plan 
                        actuary determines at any time that such table 
                        does not meet the requirements of clause (ii).
                            ``(ii) Requirements.--A mortality table 
                        meets the requirements of this clause if the 
                        Secretary of the Treasury determines that--
                                    ``(I) there is a sufficient number 
                                of plan participants, and the pension 
                                plans have been maintained for a 
                                sufficient period of time, to have 
                                credible information necessary for 
                                purposes of subclause (II),
                                    ``(II) such table reflects the 
                                actual experience of the pension plans 
                                maintained by the sponsor and projected 
                                trends in general mortality experience,
                                    ``(III) except as provided by the 
                                Secretary, such table will be used by 
                                all plans maintained by the plan 
                                sponsor and all members of any 
                                controlled group which includes the 
                                plan sponsor, and
                                    ``(IV) such table is significantly 
                                different from the table described in 
                                subparagraph (A).
                            ``(iii) Deadline for disposition of 
                        application.--Any mortality table submitted to 
                        the Secretary of the Treasury for approval 
                        under this subparagraph shall be treated as in 
                        effect for the first plan year in the 10-year 
                        period described in clause (i) unless the 
                        Secretary of the Treasury, during the 180-day 
                        period beginning on the date of such 
                        submission, disapproves of such table and 
                        provides the reasons that such table fails to 
                        meet the requirements of clause (ii). The 180-
                        day period shall be extended for any period 
                        during which the Secretary of the Treasury has 
                        requested information from the plan sponsor and 
                        such information has not been provided.
                    ``(D) Separate mortality tables for the disabled.--
                Notwithstanding subparagraph (A)--
                            ``(i) In general.--The Secretary of the 
                        Treasury shall establish mortality tables which 
                        may be used (in lieu of the tables under 
                        subparagraph (A)) under this subsection for 
                        individuals who are entitled to benefits under 
                        the plan on account of disability. The 
                        Secretary of the Treasury shall establish 
                        separate tables for individuals whose 
                        disabilities occur in plan years beginning 
                        before January 1, 1995, and for individuals 
                        whose disabilities occur in plan years 
                        beginning on or after such date.
                            ``(ii) Special rule for disabilities 
                        occurring after 1994.--In the case of 
                        disabilities occurring in plan years beginning 
                        after December 31, 1994, the tables under 
                        clause (i) shall apply only with respect to 
                        individuals described in such subclause who are 
                        disabled within the meaning of title II of the 
                        Social Security Act and the regulations 
                        thereunder.
                            ``(iii) Periodic revision.--The Secretary 
                        of the Treasury shall (at least every 10 years) 
                        make revisions in any table in effect under 
                        clause (i) to reflect the actual experience of 
                        pension plans and projected trends in such 
                        experience.
                    ``(E) Transition rule.--Under regulations of the 
                Secretary of the Treasury, any difference in present 
                value resulting from any differences in assumptions as 
                set forth in the mortality table specified in 
                subparagraph (A) and assumptions as set forth in the 
                mortality table described in section 302(d)(7)(C)(ii) 
                (as in effect for plan years beginning in 2006) shall 
                be phased in ratably over the first period of 5 plan 
                years beginning in or after 2007 so as to be fully 
                effective for the fifth plan year.
            ``(4) Probability of benefit payments in the form of lump 
        sums or other optional forms.--For purposes of determining any 
        present value or making any computation under this section, 
        there shall be taken into account--
                    ``(A) the probability that future benefit payments 
                under the plan will be made in the form of optional 
                forms of benefits provided under the plan (including 
                lump sum distributions, determined on the basis of the 
                plan's experience and other related assumptions), and
                    ``(B) any difference in the present value of such 
                future benefit payments resulting from the use of 
                actuarial assumptions, in determining benefit payments 
                in any such optional form of benefits, which are 
                different from those specified in this subsection.
            ``(5) Approval of large changes in actuarial assumptions.--
                    ``(A) In general.--No actuarial assumption used to 
                determine the funding target for a plan to which this 
                paragraph applies may be changed without the approval 
                of the Secretary of the Treasury.
                    ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                            ``(i) the aggregate unfunded benefits as of 
                        the close of the preceding plan year (as 
                        determined under section 4006(a)(3)(E)(iii)) of 
                        such plan and all other plans maintained by the 
                        contributing sponsors (as defined in section 
                        4001(a)(13)) and members of such sponsors' 
                        controlled groups (as defined in section 
                        4001(a)(14)) which are covered by title IV 
                        (disregarding plans with no unfunded benefits) 
                        exceed $50,000,000; and
                            ``(ii) the change in assumptions 
                        (determined after taking into account any 
                        changes in interest rate and mortality table) 
                        results in a decrease in the funding shortfall 
                        of the plan for the current plan year that 
                        exceeds $50,000,000, or that exceeds $5,000,000 
                        and that is 5 percent or more of the funding 
                        target of the plan before such change.
    ``(i) Special Rules for At-Risk Plans.--
            ``(1) Funding target for plans in at-risk status.--
                    ``(A) In general.--In the case of a plan to which 
                this subsection applies for a plan year, the funding 
                target of the plan for the plan year is equal to the 
                present value of all liabilities to participants and 
                their beneficiaries under the plan for the plan year, 
                as determined by using the additional actuarial 
                assumptions described in subparagraph (B).
                    ``(B) Additional actuarial assumptions.--The 
                actuarial assumptions described in this subparagraph 
                are as follows:
                            ``(i) All employees who are not otherwise 
                        assumed to retire as of the valuation date but 
                        who will be eligible to elect benefits during 
                        the plan year and the 7 succeeding plan years 
                        shall be assumed to retire at the earliest 
                        retirement date under the plan but not before 
                        the end of the plan year for which the at-risk 
                        target liability and at-risk target normal cost 
                        are being determined.
                            ``(ii) All employees shall be assumed to 
                        elect the retirement benefit available under 
                        the plan at the assumed retirement age 
                        (determined after application of clause (i)) 
                        which would result in the highest present value 
                        of liabilities.
            ``(2) Target normal cost of at-risk plans.--In the case of 
        a plan to which this subsection applies for a plan year, the 
        target normal cost of the plan for such plan year shall be 
        equal to the present value of all benefits which are expected 
        to accrue or be earned under the plan during the plan year, 
        determined using the additional actuarial assumptions described 
        in paragraph (1)(B).
            ``(3) Minimum amount.--In no event shall--
                    ``(A) the at-risk target liability be less than the 
                target liability, as determined without regard to this 
                subsection, or
                    ``(B) the at-risk target normal cost be less than 
                the target normal cost, as determined without regard to 
                this subsection.
            ``(4) Determination of at-risk status.--For purposes of 
        this subsection, a plan is in at-risk status for a plan year 
        if--
                    ``(A) the plan is maintained by a financially-weak 
                employer, and
                    ``(B) the funding target attainment percentage for 
                the plan year is less than 93 percent.
            ``(5) Financially-weak employer.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `financially-weak employer' means any employer 
                if--
                            ``(i) as of the valuation date for each of 
                        the years during a period of at least 3 
                        consecutive plan years ending with the plan 
                        year--
                                    ``(I) the employer has an 
                                outstanding senior unsecured debt 
                                instrument which is rated lower than 
                                investment grade by each of the 
                                nationally recognized statistical 
                                rating organizations for corporate 
                                bonds that has issued a credit rating 
                                for such instrument, or
                                    ``(II) if no such debt instrument 
                                has been rated by such an organization 
                                but 1 or more of such organizations has 
                                made an issuer credit rating for such 
                                employer, all such organizations which 
                                have so rated the employer have rated 
                                such employer lower than investment 
                                grade, and
                            ``(ii) at least 2 of the years during such 
                        period are deterioration years.
                If an employer is treated as a financially-weak 
                employer for any plan year, clause (ii) shall not apply 
                in determining whether the employer is so treated for 
                any succeeding plan year in any continuous period of 
                plan years for which the employer is treated as a 
                financially-weak employer.
                    ``(B) Controlled group exception.--If an employer 
                treated as a financially-weak employer under 
                subparagraph (A) is a member of a controlled group (as 
                defined in section 302(d)(3)), the employer shall not 
                be treated as a financially-weak employer if a 
                significant member (as determined under regulations 
                prescribed by the Secretary of the Treasury) of such 
                group has an outstanding senior unsecured debt 
                instrument that is rated as being investment grade by 
                an organization described in subparagraph (A).
                    ``(C) Employers with no ratings.--If--
                            ``(i) an employer has no debt instrument 
                        described in subparagraph (A)(i) which was 
                        rated by an organization described in such 
                        subparagraph, and
                            ``(ii) no such organization has made an 
                        issuer credit rating for such employer,
                then such employer shall only be treated as a 
                financially-weak employer to the extent provided in 
                regulations prescribed by the Secretary of the 
                Treasury.
            ``(6) Determination of deterioration year.--For purposes of 
        paragraph (5), the term `deterioration year' means any year 
        during the period described in paragraph (5)(A)(i) for which 
        the rating described in subclause (I) or (II) of paragraph 
        (5)(A)(i) by each organization is either--
                    ``(A) lower than the lowest rating of the employer 
                by such organization for a preceding year in such 
                period, or
                    ``(B) the lowest rating used by such organization.
            ``(7) Years before effective date.--For purposes of 
        paragraphs (5) and (6), plan years beginning before 2007 shall 
        not be taken into account.
            ``(8) Transition between applicable funding targets and 
        between applicable target normal costs.--
                    ``(A) In general.--In any case in which a plan 
                which is in at-risk status for a plan year has been in 
                such status for a consecutive period of fewer than 5 
                plan years, the applicable amount of the funding target 
                and of the target normal cost shall be, in lieu of the 
                amount determined without regard to this paragraph, the 
                sum of--
                            ``(i) the amount determined under this 
                        section without regard to this subsection, plus
                            ``(ii) the transition percentage for such 
                        plan year of the excess of the amount 
                        determined under this subsection (without 
                        regard to this paragraph) over the amount 
                        determined under this section without regard to 
                        this subsection.
                    ``(B) Improvement years not taken into account.--
                            ``(i) In general.--An improvement year 
                        shall not be taken into account in determining 
                        any consecutive period of plan years for 
                        purposes of subparagraph (A).
                            ``(ii) Application of subsection after 
                        improvement year ends.--Plan years immediately 
                        before and after an improvement year (or 
                        consecutive period of improvement years) shall 
                        be treated as consecutive for purposes of 
                        subparagraph (A).
                            ``(iii) Improvement year.--For purposes of 
                        this subparagraph, the term `improvement year' 
                        means any plan year for which any rating 
                        described in subclause (I) or (II) of paragraph 
                        (5)(A)(i) is higher than such rating for the 
                        preceding plan year.
                    ``(C) Transition percentage.--For purposes of 
                subparagraph (A), the transition percentage shall be 
                determined in accordance with the following table:

``If the consecutive number of                                         
  years (including the plan year)                        The transition
  the plan is in at-risk status                         percentage is--
        is--
    1.............................................                  20 
    2.............................................                  40 
    3.............................................                  60 
    4.............................................                  80.
                    ``(D) Years before effective date.--For purposes of 
                this paragraph, plan years beginning before 2007 shall 
                not be taken into account.
            ``(9) Plans to which subsection applies.--
                    ``(A) In general.--Except as provided in this 
                paragraph, this subsection shall apply to any plan to 
                which this section applies and which is in at-risk 
                status for the plan year.
                    ``(B) Exception for small plans.--This subsection 
                shall not apply to a plan for a plan year if the plan 
                was described in subsection (g)(2)(B) for the preceding 
                plan year, determined by substituting `500' for `100'.
                    ``(C) Exception for plans maintained by certain 
                cooperatives.--This subsection shall not apply to an 
                eligible cooperative plan described in subparagraph 
                (D).
                    ``(D) Eligible cooperative plan defined.--For 
                purposes of subparagraph (C), a plan shall be treated 
                as an eligible cooperative plan for a plan year if the 
                plan is maintained by more than 1 employer and at least 
                85 percent of the employers are--
                            ``(i) rural cooperatives (as defined in 
                        section 401(k)(7)(B) of the Internal Revenue 
                        Code of 1986 without regard to clause (iv) 
                        thereof), or
                            ``(ii) organizations which are--
                                    ``(I) cooperative organizations 
                                described in section 1381(a) of such 
                                Code which are more than 50-percent 
                                owned by agricultural producers or by 
                                cooperatives owned by agricultural 
                                producers, or
                                    ``(II) more than 50-percent owned, 
                                or controlled by, one or more 
                                cooperative organizations described in 
                                subclause (I).
                A plan shall also be treated as an eligible cooperative 
                plan for any plan year for which it is described in 
                section 210(a) and is maintained by a rural telephone 
                cooperative association described in section 
                3(40)(B)(v).
                    ``(E) Exception for plans secured by third parties 
                bound by pbgc agreements.--This subsection shall not 
                apply to any plan if--
                            ``(i) a person other than the employer 
                        obligated to contribute under the plan is, 
                        under the terms of an agreement with the 
                        Pension Benefit Guaranty Corporation, liable 
                        for any failure of the employer to meet its 
                        obligation to pay any minimum required 
                        contribution or termination liability with 
                        respect to the plan; and
                            ``(ii) such person is not a financially-
                        weak employer under paragraph (5).
    ``(j) Payment of Minimum Required Contributions.--
            ``(1) In general.--For purposes of this section, the due 
        date for any payment of any minimum required contribution for 
        any plan year shall be 8\1/2\ months after the close of the 
        plan year.
            ``(2) Interest.--Any payment required under paragraph (1) 
        for a plan year made after the valuation date for such plan 
        year shall be increased by interest for the period from the 
        valuation date to the payment date, determined by using the 
        effective rate of interest for the plan for such plan year.
            ``(3) Accelerated quarterly contribution schedule for 
        underfunded plans.--
                    ``(A) Failure to timely make required 
                installment.--
                            ``(i) In general.--In the case of a plan to 
                        which this paragraph applies, the employer 
                        maintaining the plan shall make the required 
                        installments under this paragraph and if the 
                        employer fails to pay the full amount of a 
                        required installment for the plan year, then 
                        the amount of interest charged under paragraph 
                        (2) on the underpayment for the period of 
                        underpayment shall be determined by using a 
                        rate of interest equal to the rate otherwise 
                        used under paragraph (2) plus 5 percentage 
                        points.
                            ``(ii) Plans to which paragraph applies.--
                        This paragraph applies to any defined benefit 
                        plan to which this section applies other than a 
                        plan which--
                                    ``(I) is a plan described in 
                                subsection (g)(2)(B)), or
                                    ``(II) had a funding shortfall of 
                                $1,000,000 or less for the preceding 
                                plan year.
                    ``(B) Amount of underpayment, period of 
                underpayment.--For purposes of subparagraph (A)--
                            ``(i) Amount.--The amount of the 
                        underpayment shall be the excess of--
                                    ``(I) the required installment, 
                                over
                                    ``(II) the amount (if any) of the 
                                installment contributed to or under the 
                                plan on or before the due date for the 
                                installment.
                            ``(ii) Period of underpayment.--The period 
                        for which any interest is charged under this 
                        paragraph with respect to any portion of the 
                        underpayment shall run from the due date for 
                        the installment to the date on which such 
                        portion is contributed to or under the plan.
                            ``(iii) Order of crediting contributions.--
                        For purposes of clause (i)(II), contributions 
                        shall be credited against unpaid required 
                        installments in the order in which such 
                        installments are required to be paid.
                    ``(C) Number of required installments; due dates.--
                For purposes of this paragraph--
                            ``(i) Payable in 4 installments.--There 
                        shall be 4 required installments for each plan 
                        year.
                            ``(ii) Time for payment of installments.--
                        The due dates for required installments are set 
                        forth in the following table:

 
 
 
In the case of the following
 required installment:              The due date is:
  1st.............................  April 15
  2nd.............................  July 15
  3rd.............................  October 15
  4th.............................  January 15 of the following year.

                    ``(D) Amount of required installment.--For purposes 
                of this paragraph--
                            ``(i) In general.--The amount of any 
                        required installment shall be 25 percent of the 
                        required annual payment.
                            ``(ii) Required annual payment.--For 
                        purposes of clause (i), the term `required 
                        annual payment' means the lesser of--
                                    ``(I) 90 percent of the minimum 
                                required contribution (without regard 
                                to any waiver under section 302(c)) to 
                                the plan for the plan year under this 
                                section, or
                                    ``(II) in the case of a plan year 
                                beginning after 2007, 100 percent of 
                                the minimum required contribution 
                                (without regard to any waiver under 
                                section 302(c)) to the plan for the 
                                preceding plan year.
                        Subclause (II) shall not apply if the preceding 
                        plan year referred to in such clause was not a 
                        year of 12 months.
                    ``(E) Fiscal years and short years.--
                            ``(i) Fiscal years.--In applying this 
                        paragraph to a plan year beginning on any date 
                        other than January 1, there shall be 
                        substituted for the months specified in this 
                        paragraph, the months which correspond thereto.
                            ``(ii) Short plan year.--This subparagraph 
                        shall be applied to plan years of less than 12 
                        months in accordance with regulations 
                        prescribed by the Secretary of the Treasury.
            ``(4) Liquidity requirement in connection with quarterly 
        contributions.--
                    ``(A) In general.--A plan to which this paragraph 
                applies shall be treated as failing to pay the full 
                amount of any required installment under paragraph (3) 
                to the extent that the value of the liquid assets paid 
                in such installment is less than the liquidity 
                shortfall (whether or not such liquidity shortfall 
                exceeds the amount of such installment required to be 
                paid but for this paragraph).
                    ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan which--
                            ``(i) is required to pay installments under 
                        paragraph (3) for a plan year, and
                            ``(ii) has a liquidity shortfall for any 
                        quarter during such plan year.
                    ``(C) Period of underpayment.--For purposes of 
                paragraph (3)(A), any portion of an installment that is 
                treated as not paid under subparagraph (A) shall 
                continue to be treated as unpaid until the close of the 
                quarter in which the due date for such installment 
                occurs.
                    ``(D) Limitation on increase.--If the amount of any 
                required installment is increased by reason of 
                subparagraph (A), in no event shall such increase 
                exceed the amount which, when added to prior 
                installments for the plan year, is necessary to 
                increase the funding target attainment percentage of 
                the plan for the plan year (taking into account the 
                expected increase in funding target due to benefits 
                accruing or earned during the plan year) to 100 
                percent.
                    ``(E) Definitions.--For purposes of this 
                subparagraph:
                            ``(i) Liquidity shortfall.--The term 
                        `liquidity shortfall' means, with respect to 
                        any required installment, an amount equal to 
                        the excess (as of the last day of the quarter 
                        for which such installment is made) of--
                                    ``(I) the base amount with respect 
                                to such quarter, over
                                    ``(II) the value (as of such last 
                                day) of the plan's liquid assets.
                            ``(ii) Base amount.--
                                    ``(I) In general.--The term `base 
                                amount' means, with respect to any 
                                quarter, an amount equal to 3 times the 
                                sum of the adjusted disbursements from 
                                the plan for the 12 months ending on 
                                the last day of such quarter.
                                    ``(II) Special rule.--If the amount 
                                determined under subclause (I) exceeds 
                                an amount equal to 2 times the sum of 
                                the adjusted disbursements from the 
                                plan for the 36 months ending on the 
                                last day of the quarter and an enrolled 
                                actuary certifies to the satisfaction 
                                of the Secretary of the Treasury that 
                                such excess is the result of 
                                nonrecurring circumstances, the base 
                                amount with respect to such quarter 
                                shall be determined without regard to 
                                amounts related to those nonrecurring 
                                circumstances.
                            ``(iii) Disbursements from the plan.--The 
                        term `disbursements from the plan' means all 
                        disbursements from the trust, including 
                        purchases of annuities, payments of single sums 
                        and other benefits, and administrative 
                        expenses.
                            ``(iv) Adjusted disbursements.--The term 
                        `adjusted disbursements' means disbursements 
                        from the plan reduced by the product of--
                                    ``(I) the plan's funding target 
                                attainment percentage for the plan 
                                year, and
                                    ``(II) the sum of the purchases of 
                                annuities, payments of single sums, and 
                                such other disbursements as the 
                                Secretary of the Treasury shall provide 
                                in regulations.
                            ``(v) Liquid assets.--The term `liquid 
                        assets' means cash, marketable securities, and 
                        such other assets as specified by the Secretary 
                        of the Treasury in regulations.
                            ``(vi) Quarter.--The term `quarter' means, 
                        with respect to any required installment, the 
                        3-month period preceding the month in which the 
                        due date for such installment occurs.
                    ``(F) Regulations.--The Secretary of the Treasury 
                may prescribe such regulations as are necessary to 
                carry out this paragraph.
    ``(k) Imposition of Lien Where Failure To Make Required 
Contributions.--
            ``(1) In general.--In the case of a plan to which this 
        subsection applies, if--
                    ``(A) any person fails to make a contribution 
                payment required by section 302 and this section before 
                the due date for such payment, and
                    ``(B) the unpaid balance of such payment (including 
                interest), when added to the aggregate unpaid balance 
                of all preceding such payments for which payment was 
                not made before the due date (including interest), 
                exceeds $1,000,000,
        then there shall be a lien in favor of the plan in the amount 
        determined under paragraph (3) upon all property and rights to 
        property, whether real or personal, belonging to such person 
        and any other person who is a member of the same controlled 
        group of which such person is a member.
            ``(2) Plans to which subsection applies.--This subsection 
        shall apply to a defined benefit plan which is a single-
        employer plan covered under section 4021 for any plan year for 
        which the funding target attainment percentage (as defined in 
        subsection (d)(2)) of such plan is less than 100 percent.
            ``(3) Amount of lien.--For purposes of paragraph (1), the 
        amount of the lien shall be equal to the aggregate unpaid 
        balance of contribution payments required under this section 
        and section 302 for which payment has not been made before the 
        due date.
            ``(4) Notice of failure; lien.--
                    ``(A) Notice of failure.--A person committing a 
                failure described in paragraph (1) shall notify the 
                Pension Benefit Guaranty Corporation of such failure 
                within 10 days of the due date for the required 
                contribution payment.
                    ``(B) Period of lien.--The lien imposed by 
                paragraph (1) shall arise on the due date for the 
                required contribution payment and shall continue until 
                the last day of the first plan year in which the plan 
                ceases to be described in paragraph (1)(B). Such lien 
                shall continue to run without regard to whether such 
                plan continues to be described in paragraph (2) during 
                the period referred to in the preceding sentence.
                    ``(C) Certain rules to apply.--Any amount with 
                respect to which a lien is imposed under paragraph (1) 
                shall be treated as taxes due and owing the United 
                States and rules similar to the rules of subsections 
                (c), (d), and (e) of section 4068 shall apply with 
                respect to a lien imposed by subsection (a) and the 
                amount with respect to such lien.
            ``(5) Enforcement.--Any lien created under paragraph (1) 
        may be perfected and enforced only by the Pension Benefit 
        Guaranty Corporation, or at the direction of the Pension 
        Benefit Guaranty Corporation, by the contributing sponsor (or 
        any member of the controlled group of the contributing 
        sponsor).
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Contribution payment.--The term `contribution 
                payment' means, in connection with a plan, a 
                contribution payment required to be made to the plan, 
                including any required installment under paragraphs (3) 
                and (4) of subsection (j).
                    ``(B) Due date; required installment.--The terms 
                `due date' and `required installment' have the meanings 
                given such terms by subsection (j), except that in the 
                case of a payment other than a required installment, 
                the due date shall be the date such payment is required 
                to be made under section 303.
                    ``(C) Controlled group.--The term `controlled 
                group' means any group treated as a single employer 
                under subsections (b), (c), (m), and (o) of section 414 
                of the Internal Revenue Code of 1986.
    ``(l) Qualified Transfers to Health Benefit Accounts.--In the case 
of a qualified transfer (as defined in section 420 of the Internal 
Revenue Code of 1986), any assets so transferred shall not, for 
purposes of this section, be treated as assets in the plan.''.
    (b) Clerical Amendment.--The table of sections in section 1 of such 
Act (as amended by section 101) is amended by inserting after the item 
relating to section 302 the following new item:

        ``Sec. 303. Minimum funding standards for single-employer 
                            defined benefit pension plans.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to plan years beginning after 2006.

SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

    (a) Limits on Benefits and Benefit Accruals.--
            (1) In general.--Section 206 of such Act is amended by 
        adding at the end the following new subsection:
    ``(g) Funding-Based Limits on Benefits and Benefit Accruals Under 
Single-Employer Plans.--
            ``(1) Limitations on plan amendments increasing liability 
        for benefits.--
                    ``(A) In general.--Except as provided in paragraph 
                (4), no amendment to a single-employer plan which has 
                the effect of increasing liabilities of the plan by 
                reason of increases in benefits, establishment of new 
                benefits, changing the rate of benefit accrual, or 
                changing the rate at which benefits become 
                nonforfeitable may take effect during any plan year if 
                the adjusted funding target attainment percentage as of 
                the valuation date of the plan for such plan year is--
                            ``(i) less than 80 percent, or
                            ``(ii) would be less than 80 percent taking 
                        into account such amendment.
                    ``(B) Exemption.--Subparagraph (A) shall cease to 
                apply with respect to any plan year, effective as of 
                the first date of the plan year (or if later, the 
                effective date of the amendment), upon payment by the 
                plan sponsor of a contribution (in addition to any 
                minimum required contribution under section 303) equal 
                to--
                            ``(i) in the case of subparagraph (A)(i), 
                        the amount of the increase in the funding 
                        target of the plan (under section 303) for the 
                        plan year attributable to the amendment, and
                            ``(ii) in the case of subparagraph (A)(ii), 
                        the amount sufficient to result in an adjusted 
                        funding target attainment percentage of 80 
                        percent.
                    ``(C) Exception for certain benefit increases.--
                Subparagraph (A) shall not apply to any amendment which 
                provides for an increase in benefits under a formula 
                which is not based on a participant's compensation, but 
                only if the rate of such increase is not in excess of 
                the contemporaneous rate of increase in average wages 
                of participants covered by the amendment.
            ``(2) Limitations on accelerated benefit distributions.--
                    ``(A) In general.--A defined benefit plan which is 
                a single-employer plan shall provide that, with respect 
                to any plan year--
                            ``(i) if the plan's adjusted funded target 
                        liability percentage as of the valuation date 
                        for the preceding plan year was less than 60 
                        percent and the preceding plan year is not 
                        otherwise in a prohibited period, the plan 
                        sponsor shall, in addition to any other 
                        contribution required under section 303, 
                        contribute for the current plan year and each 
                        succeeding plan year in the prohibited period 
                        with respect to the current plan year the 
                        amount (if any) which, when added to the 
                        portion of the minimum required contribution 
                        for the plan year described in subparagraphs 
                        (B) and (C) of section 303(a)(1), is sufficient 
                        to result in an adjusted funded target 
                        liability percentage for the plan year of 60 
                        percent, and
                            ``(ii) no prohibited payments will be made 
                        during a prohibited period.
                    ``(B) Prohibited payment.--For purpose of this 
                subsection--
                            ``(i) In general.--The term `prohibited 
                        payment' means--
                                    ``(I) any payment, in excess of the 
                                monthly amount paid under a single life 
                                annuity (plus any social security 
                                supplements described in the last 
                                sentence of section 204(b)(1)(G)), to a 
                                participant or beneficiary whose 
                                annuity starting date (as defined in 
                                section 205(h)(2)) occurs during a 
                                prohibited period,
                                    ``(II) any payment for the purchase 
                                of an irrevocable commitment from an 
                                insurer to pay benefits, and
                                    ``(III) any other payment specified 
                                by the Secretary of the Treasury by 
                                regulations.
                            ``(ii) Exception for certain payments.--In 
                        the case of any prohibited period described in 
                        subparagraph (C)(i), the term `prohibited 
                        payment' shall not include any payment if the 
                        amount of the payment does not exceed the 
                        lesser of--
                                    ``(I) 50 percent of the amount of 
                                the payment which could be made without 
                                regard to this subsection, or
                                    ``(II) the present value 
                                (determined under guidance prescribed 
                                by the Pension Benefit Guaranty 
                                Corporation, using the interest and 
                                mortality assumptions under section 
                                205(g)) of the maximum guarantee with 
                                respect to the participant under 
                                section 4022.
                        The exception under this clause shall only 
                        apply once with respect to any participant, 
                        except that, for purposes of this sentence, a 
                        participant and any beneficiary on his behalf 
                        (including an alternate payee, as defined in 
                        section 206(d)(3)(K)) shall be treated as 1 
                        participant. If the accrued benefit of a 
                        participant is allocated to such an alternate 
                        payee and 1 or more other persons, the amount 
                        under subclause (II) shall be allocated among 
                        such persons in the same manner as the accrued 
                        benefit is allocated unless the qualified 
                        domestic relations order (as defined in section 
                        206(d)(3)(B)(i)) provides otherwise.
                    ``(C) Prohibited period.--For purposes of 
                subparagraph (A), the term `prohibited period' means--
                            ``(i) except as provided in subparagraph 
                        (D), if a plan sponsor is required to make the 
                        contribution for the current plan year under 
                        subparagraph (A), the period beginning on the 
                        1st day of the plan year and ending on the last 
                        day of the 1st period of 2 consecutive plan 
                        years (beginning on or after such 1st day) for 
                        which the plan's adjusted funded target 
                        liability percentage was at least 60 percent,
                            ``(ii) any period the plan sponsor is in 
                        bankruptcy, or
                            ``(iii) any period during which the plan 
                        has a liquidity shortfall (as defined in 
                        section 303(j)(4)(E)(i)).
                The prohibited period for purposes of clause (ii) shall 
                not include any portion of a plan year (even if the 
                plan sponsor is in bankruptcy during such period) which 
                occurs on or after the date the plan's enrolled actuary 
                certifies that, as of the valuation date for the plan 
                year, the plan's adjusted funded target liability 
                percentage is at least 100 percent.
                    ``(D) Satisfaction of requirement before close of 
                plan year.--If, before the close of the current plan 
                year--
                            ``(i) the plan sponsor makes the 
                        contribution required to be made under 
                        subparagraph (A), or
                            ``(ii) the plan's enrolled actuary 
                        certifies that, as of the valuation date for 
                        the plan year, the adjusted funded target 
                        liability percentage of the plan is at least 60 
                        percent,
                this paragraph shall be applied as if no prohibited 
                period had begun as of the beginning of such year and 
                the plan shall, under rules described by the Secretary 
                of the Treasury, restore any payments not made during 
                the prohibited period in effect before the application 
                of this paragraph.
            ``(3) Limitation on benefit accruals for plans with severe 
        funding shortfalls.--
                    ``(A) In general.--Except as provided in paragraph 
                (4), a single-employer plan shall provide that all 
                future benefit accruals under the plan shall cease 
                during a severe funding shortfall period, but only to 
                the extent the cessation of such accruals would have 
                been permitted under section 204(g) if the cessation 
                had been implemented by a plan amendment adopted 
                immediately before the severe funding shortfall period.
                    ``(B) Severe funding shortfall period.--For 
                purposes of subparagraph (A), the term `severe funding 
                shortfall period' means in the case of a plan the 
                adjusted funding target attainment percentage of which 
                as of the valuation date of the plan for any plan year 
                is less than 60 percent, the period--
                            ``(i) beginning on the 1st day of the 
                        succeeding plan year, and
                            ``(ii) ending on the date the plan's 
                        enrolled actuary certifies that the plan's 
                        adjusted funding target attainment percentage 
                        is at least 60 percent, and
                    ``(C) Opportunity for increased funding.--For 
                purposes of subparagraph (B), a plan shall not be 
                treated as described in such subparagraph for a plan 
                year if the plan's enrolled actuary certifies that the 
                plan sponsor has before the end of the plan year 
                contributed (in addition to any minimum required 
                contribution under section 303) the amount sufficient 
                to result in an adjusted funding target attainment 
                percentage as of the valuation date for the plan year 
                of 60 percent.
            ``(4) Exception for certain collectively bargained 
        benefits.--In the case of a plan maintained pursuant to a 
        collective bargaining agreement between employee 
        representatives and the plan sponsor and in effect before the 
        beginning of the first day on which a limitation would 
        otherwise apply under paragraph (1), (2), or (3)--
                    ``(A) such limitations shall not apply to any 
                amendment, prohibited payment, or accrual with respect 
                to such plan, but
                    ``(B) the plan sponsor shall contribute (in 
                addition to any minimum required contribution under 
                section 303) the amount sufficient to result in an 
                adjusted funding target attainment percentage (as of 
                the valuation date for the plan year in which any such 
                limitation would otherwise apply) equal to the 
                percentage necessary to prevent the limitation from 
                applying.
            ``(5) Rules relating to required contributions.--
                    ``(A) Security may be provided.--
                            ``(i) In general.--For purposes of this 
                        subsection, the adjusted funding target 
                        attainment percentage shall be determined by 
                        treating as an asset of the plan any security 
                        provided by a plan sponsor in a form meeting 
                        the requirements of clause (ii).
                            ``(ii) Form of security.--The security 
                        required under clause (i) shall consist of--
                                    ``(I) a bond issued by a corporate 
                                surety company that is an acceptable 
                                surety for purposes of section 412 of 
                                this Act,
                                    ``(II) cash, or United States 
                                obligations which mature in 3 years or 
                                less, held in escrow by a bank or 
                                similar financial institution, or
                                    ``(III) such other form of security 
                                as is satisfactory to the Secretary of 
                                the Treasury and the parties involved.
                            ``(iii) Enforcement.--Any security provided 
                        under clause (i) may be perfected and enforced 
                        at any time after the earlier of--
                                    ``(I) the date on which the plan 
                                terminates,
                                    ``(II) if there is a failure to 
                                make a payment of the minimum required 
                                contribution for any plan year 
                                beginning after the security is 
                                provided, the due date for the payment 
                                under section 303(j), or
                                    ``(III) if the adjusted funding 
                                target attainment percentage is less 
                                than 60 percent for a consecutive 
                                period of 7 years, the valuation date 
                                for the last year in the period.
                            ``(iv) Release of security.--The security 
                        shall be released (and any amounts thereunder 
                        shall be refunded together with any interest 
                        accrued thereon) at such time as the Secretary 
                        of the Treasury may prescribe in regulations, 
                        including regulations for partial releases of 
                        the security by reason of increases in the 
                        funding target attainment percentage.
                    ``(B) Prefunding balance may not be used.--No 
                prefunding balance under section 303(f) may be used to 
                satisfy any required contribution under this 
                subsection.
                    ``(C) Treatment as unpaid minimum required 
                contribution.--The amount of any required contribution 
                which a plan sponsor fails to make under paragraph (1) 
                or (3) for any plan year shall be treated as an unpaid 
                minimum required contribution for purposes of 
                subsection (j) and (k) of section 303 and for purposes 
                of section 4971 of the Internal Revenue Code of 1986.
            ``(6) New plans.--Paragraphs (1) and (3) shall not apply to 
        a plan for the first 5 plan years of the plan. For purposes of 
        this paragraph, the reference in this paragraph to a plan shall 
        include a reference to any predecessor plan.
            ``(7) Presumed underfunding for purposes of benefit 
        limitations based on prior year's funding status.--
                    ``(A) Presumption of continued underfunding.--In 
                any case in which a benefit limitation under paragraph 
                (1), (2), or (3) has been applied to a plan with 
                respect to the plan year preceding the current plan 
                year, the adjusted funding target attainment percentage 
                of the plan as of the valuation date of the plan for 
                the current plan year shall be presumed to be equal to 
                the adjusted funding target attainment percentage of 
                the plan as of the valuation date of the plan for the 
                preceding plan year until the enrolled actuary of the 
                plan certifies the actual adjusted funding target 
                attainment percentage of the plan as of the valuation 
                date of the plan for the current plan year.
                    ``(B) Presumption of underfunding after 10th 
                month.--In any case in which no such certification is 
                made with respect to the plan before the first day of 
                the 10th month of the current plan year, for purposes 
                of paragraphs (1), (2), and (3), the plan's adjusted 
                funding target attainment percentage shall be 
                conclusively presumed to be less than 60 percent as of 
                the first day of such 10th month.
            ``(8) Treatment of plan as of close of prohibited or 
        cessation period.--For purposes of applying this part--
                    ``(A) Operation of plan after period.--Unless the 
                plan provides otherwise, payments and accruals will 
                resume effective as of the day following the close of a 
                period of limitation of payment or accrual of benefits 
                under paragraph (2) or (3).
                    ``(B) Treatment of affected benefits.--Nothing in 
                this paragraph shall be construed as affecting the 
                plan's treatment of benefits which would have been paid 
                or accrued but for this subsection.
            ``(9) Funding target attainment percentage.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `funding target 
                attainment percentage' has the same meaning given such 
                term by section 303(d)(2).
                    ``(B) Adjusted funded target liability 
                percentage.--The term `adjusted funded target liability 
                percentage' means the funded target liability 
                percentage which is determined under subparagraph (A) 
                by increasing each of the amounts under subparagraphs 
                (A) and (B) of section 303(d)(2) by the aggregate 
                amount of purchases of annuities, payments of single 
                sums, and such other disbursements as the Secretary of 
                the Treasury shall prescribe in regulations, which were 
                made by the plan during the preceding 2 plan years.
            ``(10) Years before effective date.--No plan year beginning 
        before 2007 shall be taken into account in determining whether 
        this subsection applies to any plan year beginning after 
        2006.''.
            (2) Notice requirement.--
                    (A) In general.--Section 101 of such Act (29 U.S.C. 
                1021) is amended--
                            (i) by redesignating subsection (j) as 
                        subsection (k); and
                            (ii) by inserting after subsection (i) the 
                        following new subsection:
    ``(j) Notice of Funding-Based Limitation on Certain Forms of 
Distribution.--The plan administrator of a single-employer plan shall 
provide a written notice to plan participants and beneficiaries within 
30 days--
            ``(1) after the plan has become subject to the restriction 
        described in section 206(g)(2),
            ``(2) in the case of a plan to which section 206(g)(3) 
        applies, after--
                    ``(A) the date in the plan year described in 
                section 206(g)(3)(B) on which the plan's enrolled 
                actuary certifies that the plan's adjusted funding 
                target attainment percentage for the plan year is less 
                than 60 percent (or, if earlier, the date such 
                percentage is deemed to be less than 60 percent under 
                section 206(g)(7)), and
                    ``(B) the first day of the severe funding shortfall 
                period, and
            ``(3) at such other time as may be determined by the 
        Secretary of the Treasury.
The notice required to be provided under this subsection shall be in 
writing, except that such notice may be in electronic or other form to 
the extent that such form is reasonably accessible to the recipient.''.
                    (B) Enforcement.--Section 502(c)(4) of such Act (29 
                U.S.C. 1132(c)(4)) is amended by striking ``section 
                302(b)(7)(F)(iv)'' and inserting ``sections 101(j) and 
                302(b)(7)(F)(iv)''.
    (b) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2006.
            (2) Collective bargaining exception.--In the case of a plan 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified before January 1, 2007, the amendments made 
        by this section shall not apply to plan years beginning before 
        the earlier of--
                    (A) the later of--
                            (i) the date on which the last collective 
                        bargaining agreement relating to the plan 
                        terminates (determined without regard to any 
                        extension thereof agreed to after the date of 
                        the enactment of this Act), or
                            (ii) the first day of the first plan year 
                        to which the amendments made by this subsection 
                        would (but for this subparagraph) apply, or
                    (B) January 1, 2010.
        For purposes of subparagraph (A)(i), any plan amendment made 
        pursuant to a collective bargaining agreement relating to the 
        plan which amends the plan solely to conform to any requirement 
        added by this section shall not be treated as a termination of 
        such collective bargaining agreement.

SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Miscellaneous Amendments to Title I.--Subtitle B of title I of 
such Act (29 U.S.C. 1021 et seq.) is amended--
            (1) in section 101(d)(3), by striking ``section 302(e)'' 
        and inserting ``section 303(j)'';
            (2) in section 103(d)(8)(B), by striking ``the requirements 
        of section 302(c)(3)'' and inserting ``the applicable 
        requirements of sections 303(h) and 304(c)(3)'';
            (3) in section 103(d), by striking paragraph (11) and 
        inserting the following:
            ``(11) If the current value of the assets of the plan is 
        less than 70 percent of--
                    ``(A) in the case of a single-employer plan, the 
                funding target (as defined in section 303(d)(1)) of the 
                plan, or
                    ``(B) in the case of a multiemployer plan, the 
                current liability (as defined in section 304(c)(6)(D)) 
                under the plan,
        the percentage which such value is of the amount described in 
        subparagraph (A) or (B).'';
            (4) in section 203(a)(3)(C), by striking ``section 
        302(c)(8)'' and inserting ``section 302(d)(2)'';
            (5) in section 204(g)(1), by striking ``section 302(c)(8)'' 
        and inserting ``section 302(d)(2)'';
            (6) in section 204(i)(2)(B), by striking ``section 
        302(c)(8)'' and inserting ``section 302(d)(2)'';
            (7) in section 204(i)(3), by striking ``funded current 
        liability percentage (within the meaning of section 302(d)(8) 
        of this Act)'' and inserting ``funding target attainment 
        percentage (as defined in section 303(d)(2))'';
            (8) in section 204(i)(4), by striking ``section 
        302(c)(11)(A), without regard to section 302(c)(11)(B)'' and 
        inserting ``section 302(b)(1), without regard to section 
        302(b)(2)'';
            (9) in section 206(e)(1), by striking ``section 302(d)'' 
        and inserting ``section 303(j)(4)'', and by striking ``section 
        302(e)(5)'' and inserting ``section 303(j)(4)(E)(i)'';
            (10) in section 206(e)(3), by striking ``section 302(e) by 
        reason of paragraph (5)(A) thereof'' and inserting ``section 
        303(j)(3) by reason of section 303(j)(4)(A)''; and
            (11) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by 
        striking ``American Jobs Creation Act of 2004'' and inserting 
        ``Pension Security and Transparency Act of 2005''.
    (b) Miscellaneous Amendments to Title IV.--Title IV of such Act is 
amended--
            (1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by 
        striking ``302(c)(11)(A)'' and inserting ``302(b)(1)'', by 
        striking ``412(c)(11)(A)'' and inserting ``412(c)(1)'', by 
        striking ``302(c)(11)(B)'' and inserting ``302(b)(2)'', and by 
        striking ``412(c)(11)(B)'' and inserting ``412(c)(2)'';
            (2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by 
        striking ``302(f)(1)(A) and (B)'' and inserting ``303(k)(1)(A) 
        and (B)'', and by striking ``412(n)(1)(A) and (B)'' and 
        inserting ``430(k)(1)(A) and (B)'';
            (3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by 
        striking ``302(f)(1)(A) and (B)'' and inserting ``303(k)(1)(A) 
        and (B)'', and by striking ``412(n)(1)(A) and (B)'' and 
        inserting ``430(k)(1)(A) and (B)'';
            (4) in section 4062(c)(1) (29 U.S.C. 1362(c)(1)), by 
        striking paragraphs (1), (2), and (3) and inserting the 
        following:
            ``(1)(A) in the case of a single-employer plan, the sum of 
        the shortfall amortization charge (within the meaning of 
        section 303(c)(1) of this Act and 430(d)(1) of the Internal 
        Revenue Code of 1986) with respect to the plan (if any) for the 
        plan year in which the termination date occurs, plus the 
        aggregate total of shortfall amortization installments (if any) 
        determined for succeeding plan years under section 303(c)(2) of 
        this Act and section 430(d)(2) of such Code (which, for 
        purposes of this subparagraph, shall include any increase in 
        such sum which would result if all applications for waivers of 
        the minimum funding standard under section 302(c) of this Act 
        and section 412(d) of such Code which are pending with respect 
        to such plan were denied and if no additional contributions 
        (other than those already made by the termination date) were 
        made for the plan year in which the termination date occurs or 
        for any previous plan year), or
            ``(B) in the case of a multiemployer plan, the outstanding 
        balance of the accumulated funding deficiencies (within the 
        meaning of section 304(a)(2) of this Act and section 431(a) of 
        the Internal Revenue Code of 1986) of the plan (if any) (which, 
        for purposes of this subparagraph, shall include the amount of 
        any increase in such accumulated funding deficiencies of the 
        plan which would result if all pending applications for waivers 
        of the minimum funding standard under section 302(c) of this 
        Act or section 412(d) of such Code and for extensions of the 
        amortization period under section 304(d) of this Act or section 
        431(d) of such Code with respect to such plan were denied and 
        if no additional contributions (other than those already made 
        by the termination date) were made for the plan year in which 
        the termination date occurs or for any previous plan year),
            ``(2)(A) in the case of a single-employer plan, the sum of 
        the waiver amortization charge (within the meaning of section 
        303(e)(1) of this Act and 430(e)(2) of the Internal Revenue 
        Code of 1986) with respect to the plan (if any) for the plan 
        year in which the termination date occurs, plus the aggregate 
        total of waiver amortization installments (if any) determined 
        for succeeding plan years under section 303(e)(3) of this Act 
        and section 430(e)(3) of such Code, or
            ``(B) in the case of a multiemployer plan, the outstanding 
        balance of the amount of waived funding deficiencies of the 
        plan waived before such date under section 302(c) of this Act 
        or section 412(d) of such Code (if any), and
            ``(3) in the case of a multiemployer plan, the outstanding 
        balance of the amount of decreases in the minimum funding 
        standard allowed before such date under section 304(d) of this 
        Act or section 431(d) of such Code (if any);'';
            (5) in section 4071 (29 U.S.C. 1371), by striking 
        ``302(f)(4)'' and inserting ``303(k)(4)'';
            (6) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by 
        striking ``302(a)'' and inserting ``304(a)'', and, in clause 
        (i), by striking ``302(a)'' and inserting ``304(a)'';
            (7) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by 
        striking ``303(a)'' and inserting ``302(c)'';
            (8) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by 
        striking ``303(c)'' and inserting ``302(c)(3)''; and
            (9) in section 4243(g) (29 U.S.C. 1423(g)), by striking 
        ``302(c)(3)'' and inserting ``304(c)(3)''.
    (c) Amendments to Reorganization Plan No. 4 of 1978.--Section 
106(b)(ii) of Reorganization Plan No. 4 of 1978 (ratified and affirmed 
as law by Public Law 98-532 (98 Stat. 2705)) is amended by striking 
``302(c)(8)'' and inserting ``302(d)(2)'', by striking ``304(a) and 
(b)(2)(A)'' and inserting ``304(d)(1), (d)(2), and (e)(2)(A)'', and by 
striking ``412(c)(8), (e), and (f)(2)(A)'' and inserting ``412(d)(2) 
and 431(d)(1), (d)(2), and (e)(2)(A)''.
    (d) Repeal of Expired Authority for Temporary Variances.--Section 
207 of such Act (29 U.S.C. 1057) is repealed.
    (e) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after 2006.

SEC. 105. SPECIAL RULES FOR MULTIPLE EMPLOYER PLANS OF CERTAIN 
              COOPERATIVES.

    (a) General Rule.--Except as provided in this section, if a plan in 
existence on July 26, 2005, was an eligible cooperative plan for its 
plan year which includes such date, the amendments made by section 401 
of this Act, this subtitle, and subtitle B shall not apply to plan 
years beginning before the earlier of--
            (1) the first plan year for which the plan ceases to be an 
        eligible cooperative plan, or
            (2) January 1, 2017.
    (b) Interest Rate.--In applying section 302(b)(5)(B) of the 
Employee Retirement Income Security Act of 1974 and section 
412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect before 
the amendments made by this subtitle and subtitle B) and in applying 
section 4006(a)(3)(E)(iii) of such Act (as in effect before the 
amendments made by section 401) to an eligible cooperative plan for 
plan years beginning after December 31, 2006, and before the first plan 
year to which such amendments apply, the third segment rate determined 
under section 303(h)(2)(C)(iii) of such Act and section 
430(h)(2)(C)(iii) of such Code (as added by such amendments) shall be 
used in lieu of the interest rate otherwise used.
    (c) Eligible Cooperative Plan Defined.--For purposes of this 
section, a plan shall be treated as an eligible cooperative plan for a 
plan year if the plan is maintained by more than 1 employer and at 
least 85 percent of the employers are--
            (1) rural cooperatives (as defined in section 401(k)(7)(B) 
        of such Code without regard to clause (iv) thereof), or
            (2) organizations which are--
                    (A) cooperative organizations described in section 
                1381(a) of such Code which are more than 50-percent 
                owned by agricultural producers or by cooperatives 
                owned by agricultural producers, or
                    (B) more than 50-percent owned, or controlled by, 
                one or more cooperative organizations described in 
                subparagraph (A).
A plan shall also be treated as an eligible cooperative plan for any 
plan year for which it is described in section 210(a) of the Employee 
Retirement Income Security Act of 1974 and is maintained by a rural 
telephone cooperative association described in section 3(40)(B)(v) of 
such Act.

SEC. 106. TEMPORARY RELIEF FOR CERTAIN RESCUED PLANS.

    (a) General Rule.--Except as provided in this section, if a plan in 
existence on July 26, 2005, was a rescued plan as of such date, the 
amendments made by section 401 of this Act, this subtitle, and subtitle 
B shall not apply to plan years beginning before January 1, 2014.
    (b) Interest Rate.--In applying section 302(b)(5)(B) of the 
Employee Retirement Income Security Act of 1974 and section 
412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect before 
the amendments made by this subtitle and subtitle B), and in applying 
section 4006(a)(3)(E)(iii) of such Act (as in effect before the 
amendments made by section 401), to a rescued plan for plan years 
beginning after December 31, 2006, and before January 1, 2014, the 
third segment rate determined under section 303(h)(2)(C)(iii) of such 
Act and section 430(h)(2)(C)(iii) of such Code (as added by such 
amendments) shall be used in lieu of the interest rate otherwise used.
    (c) Rescued Plan.--For purposes of this section, the term ``rescued 
plan'' means a defined benefit plan (other than a multiemployer plan) 
to which section 302 of such Act and section 412 of such Code apply 
and--
            (1) which was sponsored by an employer which was in 
        bankruptcy, giving rise to a claim by the Pension Benefit 
        Guaranty Corporation of at least $100,000,000, but not greater 
        than $150,000,000, and
            (2) the sponsorship of which was assumed by another 
        employer that was not a member of the same controlled group as 
        the bankrupt sponsor and the claim of the Pension Benefit 
        Guaranty Corporation was settled or withdrawn in connection 
        with the assumption of the sponsorship.

        Subtitle B--Amendments to Internal Revenue Code of 1986

SEC. 111. MODIFICATIONS OF THE MINIMUM FUNDING STANDARDS.

    (a) In General.--Section 412 of the Internal Revenue Code of 1986 
(relating to minimum funding standards) is amended to read as follows:

``SEC. 412. MINIMUM FUNDING STANDARDS.

    ``(a) Requirement To Meet Minimum Funding Standard.--
            ``(1) In general.--A plan to which this section applies 
        shall satisfy the minimum funding standard applicable to the 
        plan for any plan year.
            ``(2) Minimum funding standard.--For purposes of paragraph 
        (1), a plan shall be treated as satisfying the minimum funding 
        standard for a plan year if--
                    ``(A) in the case of a defined benefit plan which 
                is a single-employer plan, the employer makes 
                contributions to or under the plan for the plan year 
                which, in the aggregate, are not less than the minimum 
                required contribution determined under section 430 for 
                the plan for the plan year,
                    ``(B) in the case of a money purchase pension plan 
                which is a single-employer plan, the employer makes 
                contributions to or under the plan for the plan year 
                which are required under the terms of the plan, and
                    ``(C) in the case of a multiemployer plan, the 
                employers make contributions to or under the plan for 
                the plan year which, in the aggregate, are sufficient 
                to ensure that the plan does not have an accumulated 
                funding deficiency under section 431 as of the end of 
                the plan year.
    ``(b) Plans to Which Section Applies.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), this section applies to a plan if, for any plan year 
        beginning on or after the effective date of this section for 
        such plan under the Employee Retirement Income Security Act of 
        1974--
                    ``(A) the plan included a trust which qualified (or 
                was determined by the Secretary to have qualified) 
                under section 401(a), or
                    ``(B) the plan satisfied (or was determined by the 
                Secretary to have satisfied) the requirements of 
                section 403(a).
            ``(2) Exceptions.--This section shall not apply to--
                    ``(A) any profit-sharing or stock bonus plan,
                    ``(B) any insurance contract plan described in 
                subsection (g)(3),
                    ``(C) any governmental plan (within the meaning of 
                section 414(d)),
                    ``(D) 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,
                    ``(E) any plan which has not, at any time after 
                September 2, 1974, provided for employer contributions, 
                or
                    ``(F) any plan established and maintained by a 
                society, order, or association described in section 
                501(c)(8) or (9), if no part of the contributions to or 
                under such plan are made by employers of participants 
                in such plan.
        No plan described in subparagraph (C), (D), or (F) shall be 
        treated as a qualified plan for purposes of section 401(a) 
        unless such plan meets the requirements of section 401(a)(7) as 
        in effect on September 1, 1974.
            ``(3) Certain terminated multiemployer plans.--This section 
        applies with respect to a terminated multiemployer plan to 
        which section 4021 of the Employee Retirement Income Security 
        Act of 1974 applies until the last day of the plan year in 
        which the plan terminates (within the meaning of section 
        4041A(a)(2) of such Act).
    ``(c) Liability for Contributions.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        amount of any contribution required by this section and any 
        required installments under section 430(j) shall be paid by any 
        employer responsible for making the contribution to or under 
        the plan.
            ``(2) Joint and several liability where employer member of 
        controlled group.--If the employer referred to in paragraph (1) 
        is a member of a controlled group, each member of such group 
        shall be jointly and severally liable for payment of such 
        contribution or required installment.
    ``(d) Variance From Minimum Funding Standards.--
            ``(1) Waiver in case of business hardship.--
                    ``(A) In general.--If--
                            ``(i) an employer is (or in the case of a 
                        multiemployer plan, 10 percent or more of the 
                        number of employers contributing to or under 
                        the plan are) unable to satisfy the minimum 
                        funding standard for a plan year without 
                        temporary substantial business hardship 
                        (substantial business hardship in the case of a 
                        multiemployer plan), and
                            ``(ii) application of the standard would be 
                        adverse to the interests of plan participants 
                        in the aggregate,
                the Secretary may, subject to subparagraph (C), waive 
                the requirements of subsection (a) for such year with 
                respect to all or any portion of the minimum funding 
                standard. The Secretary of the Treasury shall not waive 
                the minimum funding standard with respect to a plan for 
                more than 3 of any 15 (5 of any 15 in the case of a 
                multiemployer plan) consecutive plan years.
                    ``(B) Effects of waiver.--If a waiver is granted 
                under subparagraph (A) for any plan year--
                            ``(i) in the case of a single-employer 
                        plan, the minimum required contribution under 
                        section 430 for the plan year shall be reduced 
                        by the amount of the waived funding deficiency 
                        and such amount shall be amortized as required 
                        under section 430(e), and
                            ``(ii) in the case of a multiemployer plan, 
                        the funding standard account shall be credited 
                        under section 431(b)(3)(C) with the amount of 
                        the waived funding deficiency and such amount 
                        shall be amortized as required under section 
                        431(b)(2)(C).
                    ``(C) Waiver of amortized portion not allowed.--The 
                Secretary may not waive under subparagraph (A) any 
                portion of the minimum funding standard under 
                subsection (a) for a plan year which is attributable to 
                any waived funding deficiency for any preceding plan 
                year.
            ``(2) Determination of business hardship.--For purposes of 
        this subsection, the factors taken into account in determining 
        temporary substantial business hardship (substantial business 
        hardship in the case of a multiemployer plan) shall include 
        (but shall not be limited to) whether or not--
                    ``(A) the employer is operating at an economic 
                loss,
                    ``(B) there is substantial unemployment or 
                underemployment in the trade or business and in the 
                industry concerned,
                    ``(C) the sales and profits of the industry 
                concerned are depressed or declining, and
                    ``(D) it is reasonable to expect that the plan will 
                be continued only if the waiver is granted.
            ``(3) Waived funding deficiency.--For purposes of this 
        part, the term `waived funding deficiency' means the portion of 
        the minimum funding standard under subsection (a) (determined 
        without regard to the waiver) for a plan year waived by the 
        Secretary and not satisfied by employer contributions.
            ``(4) Security for waivers for single-employer plans, 
        consultations.--
                    ``(A) Security may be required.--
                            ``(i) In general.--Except as provided in 
                        subparagraph (C), the Secretary may require an 
                        employer maintaining a defined benefit plan 
                        which is a single-employer plan (within the 
                        meaning of section 4001(a)(15) of the Employee 
                        Retirement Income Security Act of 1974) to 
                        provide security to such plan as a condition 
                        for granting or modifying a waiver under 
                        paragraph (1).
                            ``(ii)  Special rules.--Any security 
                        provided under clause (i) may be perfected and 
                        enforced only by the Pension Benefit Guaranty 
                        Corporation, or, at the direction of the 
                        Corporation, by a contributing sponsor (within 
                        the meaning of section 4001(a)(13) of such Act) 
                        or a member of such sponsor's controlled group 
                        (within the meaning of section 4001(a)(14) of 
                        such Act).
                    ``(B) Consultation with the pension benefit 
                guaranty corporation.--Except as provided in 
                subparagraph (C), the Secretary shall, before granting 
                or modifying a waiver under this subsection with 
                respect to a plan described in subparagraph (A)(i)--
                            ``(i) provide the Pension Benefit Guaranty 
                        Corporation with--
                                    ``(I) notice of the completed 
                                application for any waiver or 
                                modification, and
                                    ``(II) an opportunity to comment on 
                                such application within 30 days after 
                                receipt of such notice, and
                            ``(ii) consider--
                                    ``(I) any comments of the 
                                Corporation under clause (i)(II), and
                                    ``(II) any views of any employee 
                                organization (within the meaning of 
                                section 3(4) of such Act) representing 
                                participants in the plan which are 
                                submitted in writing to the Secretary 
                                of the Treasury in connection with such 
                                application.
                Information provided to the Corporation under this 
                subparagraph shall be considered tax return information 
                and subject to the safeguarding and reporting 
                requirements of section 6103(p).
                    ``(C) Exception for certain waivers.--
                            ``(i) In general.--The preceding provisions 
                        of this paragraph shall not apply to any plan 
                        with respect to which the sum of--
                                    ``(I) the aggregate unpaid minimum 
                                required contributions for the plan 
                                year and all preceding plan years, and
                                    ``(II) the present value of all 
                                waiver amortization installments 
                                determined for the plan year and 
                                succeeding plan years under section 
                                430(e)(2),
                        is less than $1,000,000.
                            ``(ii) Treatment of waivers for which 
                        applications are pending.--The amount described 
                        in clause (i)(I) shall include any increase in 
                        such amount which would result if all 
                        applications for waivers of the minimum funding 
                        standard under this subsection which are 
                        pending with respect to such plan were denied.
                            ``(iii) Unpaid minimum required 
                        contribution.--For purposes of this 
                        subparagraph--
                                    ``(I) In general.--The term `unpaid 
                                minimum required contribution' means, 
                                with respect to any plan year, any 
                                minimum required contribution under 
                                section 430 for the plan year which is 
                                not paid on or before the due date (as 
                                determined under section 430(j)(1)) for 
                                the plan year.
                                    ``(II) Ordering rule.--For purposes 
                                of subclause (I), any payment to or 
                                under a plan for any plan year shall be 
                                allocated first to unpaid minimum 
                                required contributions for all 
                                preceding plan years on a first-in, 
                                first-out basis and then to the minimum 
                                required contribution under section 430 
                                for the plan year.
            ``(5) Special rules for single-employer plans.--
                    ``(A) Application must be submitted before date 
                2\1/2\ months after close of year.--In the case of a 
                single-employer plan, no waiver may be granted under 
                this subsection with respect to any plan for any plan 
                year unless an application therefor is submitted to the 
                Secretary not later than the 15th day of the 3rd month 
                beginning after the close of such plan year.
                    ``(B) Special rule if employer is member of 
                controlled group.--In the case of a single-employer 
                plan, if an employer is a member of a controlled group, 
                the temporary substantial business hardship 
                requirements of paragraph (1) shall be treated as met 
                only if such requirements are met--
                            ``(i) with respect to such employer, and
                            ``(ii) with respect to the controlled group 
                        of which such employer is a member (determined 
                        by treating all members of such group as a 
                        single employer).
                The Secretary may provide that an analysis of a trade 
                or business or industry of a member need not be 
                conducted if the Secretary determines such analysis is 
                not necessary because the taking into account of such 
                member would not significantly affect the determination 
                under this paragraph.
            ``(6) Advance notice.--
                    ``(A) In general.--The Secretary shall, before 
                granting a waiver under this subsection, require each 
                applicant to provide evidence satisfactory to such 
                Secretary that the applicant has provided notice of the 
                filing of the application for such waiver to each 
                affected party (as defined in section 4001(a)(21) of 
                the Employee Retirement Income Security Act of 1974) 
                other than the Pension Benefit Guaranty Corporation and 
                in the case of a multiemployer plan, to each employer 
                required to contribute to the plan under subsection 
                (b)(1). Such notice shall include a description of the 
                extent to which the plan is funded for benefits which 
                are guaranteed under title IV of such Act and for 
                benefit liabilities.
                    ``(B) Consideration of relevant information.--The 
                Secretary shall consider any relevant information 
                provided by a person to whom notice was given under 
                subparagraph (A).
            ``(7) Restriction on plan amendments.--
                    ``(A) In general.--No amendment of a plan which 
                increases the liabilities of the plan by reason of any 
                increase in benefits, any change in the accrual of 
                benefits, or any change in the rate at which benefits 
                become nonforfeitable under the plan shall be adopted 
                if a waiver under this subsection or an extension of 
                time under section 431(d) is in effect with respect to 
                the plan, or if a plan amendment described in 
                subsection (e)(2) has been made at any time in the 
                preceding 24 months. If a plan is amended in violation 
                of the preceding sentence, any such waiver, or 
                extension of time, shall not apply to any plan year 
                ending on or after the date on which such amendment is 
                adopted.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to any plan amendment which--
                            ``(i) the Secretary determines to be 
                        reasonable and which provides for only de 
                        minimis increases in the liabilities of the 
                        plan,
                            ``(ii) only repeals an amendment described 
                        in subsection (e)(2), or
                            ``(iii) is required as a condition of 
                        qualification under part I of subchapter D, of 
                        chapter 1 of the Internal Revenue Code of 1986.
    ``(e) Miscellaneous Rules.--For purposes of this section--
            ``(1) Change in method or year.--If the funding method, the 
        valuation date, or a plan year for a plan is changed, the 
        change shall take effect only if approved by the Secretary.
            ``(2) Certain retroactive plan amendments.--For purposes of 
        this section, any amendment applying to a plan year which--
                    ``(A) is adopted after the close of such plan year 
                but no later than 2\1/2\ months after the close of the 
                plan year (or, in the case of a multiemployer plan, no 
                later than 2 years after the close of such plan year),
                    ``(B) does not reduce the accrued benefit of any 
                participant determined as of the beginning of the first 
                plan year to which the amendment applies, and
                    ``(C) does not reduce the accrued benefit of any 
                participant determined as of the time of adoption 
                except to the extent required by the circumstances,
        shall, at the election of the plan administrator, be deemed to 
        have been made on the first day of such plan year. No amendment 
        described in this paragraph which reduces the accrued benefits 
        of any participant shall take effect unless the plan 
        administrator files a notice with the Secretary notifying him 
        of such amendment and the Secretary has approved such 
        amendment, or within 90 days after the date on which such 
        notice was filed, failed to disapprove such amendment. No 
        amendment described in this subsection shall be approved by the 
        Secretary unless the Secretary determines that such amendment 
        is necessary because of a temporary substantial business 
        hardship (as determined under subsection (d)(2)) or a 
        substantial business hardship (as so determined) in the case of 
        a multiemployer plan and that a waiver under subsection (d)(1) 
        (or in the case of a multiemployer plan, any extension of the 
        amortization period under section 431(d)) is unavailable or 
        inadequate.
            ``(3) Certain insurance contract plans.--A plan is 
        described in this paragraph if--
                    ``(A) the plan is funded exclusively by the 
                purchase of individual insurance contracts,
                    ``(B) such contracts provide for level annual 
                premium payments to be paid extending not later than 
                the retirement age for each individual participating in 
                the plan, and commencing with the date the individual 
                became a participant in the plan (or, in the case of an 
                increase in benefits, commencing at the time such 
                increase becomes effective),
                    ``(C) benefits provided by the plan are equal to 
                the benefits provided under each contract at normal 
                retirement age under the plan and are guaranteed by an 
                insurance carrier (licensed under the laws of a State 
                to do business with the plan) to the extent premiums 
                have been paid,
                    ``(D) premiums payable for the plan year, and all 
                prior plan years, under such contracts have been paid 
                before lapse or there is reinstatement of the policy,
                    ``(E) no rights under such contracts have been 
                subject to a security interest at any time during the 
                plan year, and
                    ``(F) no policy loans are outstanding at any time 
                during the plan year.
        A plan funded exclusively by the purchase of group insurance 
        contracts which are determined under regulations prescribed by 
        the Secretary to have the same characteristics as contracts 
        described in the preceding sentence shall be treated as a plan 
        described in this paragraph.
            ``(4) Controlled group.--For purposes of this section and 
        section 430, the term `controlled group' means any group 
        treated as a single employer under subsection (b), (c), (m), or 
        (o) of section 414.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 2006.

SEC. 112. FUNDING RULES APPLICABLE TO SINGLE-EMPLOYER PENSION PLANS.

    Subchapter D of chapter 1 of the Internal Revenue Code of 1986 
(relating to deferred compensation, etc.) is amended by adding at the 
end the following new part:

  ``PART III--RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT 
                               LIMITATION

``430. Minimum funding standards for single-employer defined benefit 
                            plans.
``431. Minimum funding standards for multiemployer plans.

``SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED 
              BENEFIT PLANS.

    ``(a) Minimum Required Contribution.--For purposes of this section 
and section 412(a)(2)(A), except as provided in subsection (f), the 
term `minimum required contribution' means, with respect to any plan 
year of a defined benefit plan which is a single employer plan--
            ``(1) in any case in which the value of plan assets of the 
        plan (as reduced under subsection (f)(4)) is less than the 
        funding target of the plan for the plan year, the sum of--
                    ``(A) the target normal cost of the plan for the 
                plan year,
                    ``(B) the shortfall amortization charge (if any) 
                for the plan for the plan year determined under 
                subsection (c), and
                    ``(C) the waiver amortization charge (if any) for 
                the plan for the plan year as determined under 
                subsection (e); or
            ``(2) in any case in which the value of plan assets of the 
        plan (as reduced under subsection (f)(4)) equals or exceeds the 
        funding target of the plan for the plan year, the target normal 
        cost of the plan for the plan year reduced (but not below zero) 
        by any such excess.
    ``(b) Target Normal Cost.--For purposes of this section, except as 
provided in subsection (i)(2) with respect to plans in at-risk status, 
the term `target normal cost' means, for any plan year, the present 
value of all benefits which are expected to accrue or to be earned 
under the plan during the plan year. For purposes of this subsection, 
if any benefit attributable to services performed in a preceding plan 
year is increased by reason of any increase in compensation during the 
current plan year, the increase in such benefit shall be treated as 
having accrued during the current plan year.
    ``(c) Shortfall Amortization Charge.--
            ``(1) In general.--For purposes of this section, the 
        shortfall amortization charge for a plan for any plan year is 
        the aggregate total of the shortfall amortization installments 
        for such plan year with respect to the shortfall amortization 
        bases for such plan year and each of the 6 preceding plan 
        years.
            ``(2) Shortfall amortization installment.--For purposes of 
        paragraph (1)--
                    ``(A) Determination.--The shortfall amortization 
                installments are the amounts necessary to amortize the 
                shortfall amortization base of the plan for any plan 
                year in level annual installments over the 7-plan-year 
                period beginning with such plan year.
                    ``(B) Shortfall installment.--The shortfall 
                amortization installment for any plan year in the 7-
                plan-year period under subparagraph (A) with respect to 
                any shortfall amortization base is the annual 
                installment determined under subparagraph (A) for that 
                year for that base.
                    ``(C) Segment rates.--In determining any shortfall 
                amortization installment under this paragraph, the plan 
                sponsor shall use the segment rates determined under 
                subparagraph (C) of subsection (h)(2), applied under 
                rules similar to the rules of subparagraph (B) of 
                subsection (h)(2).
            ``(3) Shortfall amortization base.--For purposes of this 
        section, the shortfall amortization base of a plan for a plan 
        year is the excess (if any) of--
                    ``(A) the funding shortfall of such plan for such 
                plan year, over
                    ``(B) the present value (determined using the 
                segment rates determined under subparagraph (C) of 
                subsection (h)(2), applied under rules similar to the 
                rules of subparagraph (B) of subsection (h)(2)) of the 
                aggregate total of the shortfall amortization 
                installments and waiver amortization installments which 
                have been determined for such plan year and any 
                succeeding plan year with respect to the shortfall 
                amortization bases and waiver amortization bases of the 
                plan for any plan year preceding such plan year.
            ``(4) Funding shortfall.--
                    ``(A) In general.--For purposes of this section, 
                except as provided in subparagraph (B), the funding 
                shortfall of a plan for any plan year is the excess (if 
                any) of--
                            ``(i) the funding target of the plan for 
                        the plan year, over
                            ``(ii) the value of plan assets of the plan 
                        (as reduced under subsection (f)(4)) for the 
                        plan year which are held by the plan on the 
                        valuation date.
                    ``(B) Transition rule for amortization of funding 
                shortfall.--
                            ``(i) In general.--Solely for purposes of 
                        applying paragraph (3) in the case of plan 
                        years beginning after 2006 and before 2011, 
                        only the applicable percentage of the funding 
                        target shall be taken into account under 
                        paragraph (3)(A) in determining the funding 
                        shortfall for the plan year.
                            ``(ii) Applicable percentage.--For purposes 
                        of subparagraph (A)--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), the 
                                applicable percentage shall be 93 
                                percent for plan years beginning in 
                                2007, 96 percent for plan years 
                                beginning in 2008, and 100 percent for 
                                any succeeding plan year.
                                    ``(II) Small plans.--In the case of 
                                a plan described in subsection 
                                (g)(2)(B), the applicable percentage 
                                shall be determined in accordance with 
                                the following table:

``In the case of a plan year                             The applicable
  beginning in calendar year:                           percentage is--
    2007..........................................                  92 
    2008..........................................                  94 
    2009..........................................                  96 
    2010..........................................                  98.
            ``(5) Early deemed amortization upon attainment of funding 
        target.--In any case in which the funding shortfall of a plan 
        for a plan year is zero, for purposes of determining the 
        shortfall amortization charge for such plan year and succeeding 
        plan years, the shortfall amortization bases for all preceding 
        plan years (and all shortfall amortization installments 
        determined with respect to such bases) shall be reduced to 
        zero.
    ``(d) Rules Relating to Funding Target.--For purposes of this 
section--
            ``(1) Funding target.--Except as provided in subsection 
        (i)(1) with respect to plans in at-risk status, the funding 
        target of a plan for a plan year is the present value of all 
        benefits accrued or earned under the plan as of the beginning 
        of the plan year.
            ``(2) Funding target attainment percentage.--The `funding 
        target attainment percentage' of a plan for a plan year is the 
        ratio (expressed as a percentage) which--
                    ``(A) the value of plan assets for the plan year, 
                bears to
                    ``(B) the funding target of the plan for the plan 
                year (determined without regard to subsection (i)(1)).
    ``(e) Waiver Amortization Charge.--
            ``(1) Determination of waiver amortization charge.--The 
        waiver amortization charge (if any) for a plan for any plan 
        year is the aggregate total of the waiver amortization 
        installments for such plan year with respect to the waiver 
        amortization bases for each of the 5 preceding plan years.
            ``(2) Waiver amortization installment.--For purposes of 
        paragraph (1)--
                    ``(A) Determination.--The waiver amortization 
                installments are the amounts necessary to amortize the 
                waiver amortization base of the plan for any plan year 
                in level annual installments over a period of 5 plan 
                years beginning with the succeeding plan year.
                    ``(B) Waiver installment.--The waiver amortization 
                installment for any plan year in the 5-year period 
                under subparagraph (A) with respect to any waiver 
                amortization base is the annual installment determined 
                under subparagraph (A) for that year for that base.
            ``(3) Interest rate.--In determining any waiver 
        amortization installment under this subsection, the plan 
        sponsor shall use the segment rates determined under 
        subparagraph (C) of subsection (h)(2), applied under rules 
        similar to the rules of subparagraph (B) of subsection (h)(2).
            ``(4) Waiver amortization base.--The waiver amortization 
        base of a plan for a plan year is the amount of the waived 
        funding deficiency (if any) for such plan year under section 
        412(d).
            ``(5) Early deemed amortization upon attainment of funding 
        target.--In any case in which the funding shortfall of a plan 
        for a plan year is zero, for purposes of determining the waiver 
        amortization charge for such plan year and succeeding plan 
        years, the waiver amortization bases for all preceding plan 
        years (and all waiver amortization installments with respect to 
        such bases) shall be reduced to zero.
    ``(f) Use of Prefunding Balances To Satisfy Minimum Required 
Contributions.--
            ``(1) In general.--A plan sponsor may credit any amount of 
        a plan's prefunding balance for a plan year against the minimum 
        required contribution for the plan year and the amount of the 
        contributions an employer is required to make under section 
        412(c) for the plan year shall be reduced by the amount so 
        credited. Any such amount shall be credited on the first day of 
        the plan year.
            ``(2) Prefunding balance.--
                    ``(A) Beginning balance.--The beginning balance of 
                a prefunding balance maintained by a plan shall be 
                zero, except that if a plan was in effect for a plan 
                year beginning in 2006 and had a positive balance in 
                the funding standard account under section 412(b) (as 
                in effect for such plan year) as of the end of such 
                plan year, the beginning balance for the plan for its 
                first plan year beginning after 2006 shall be such 
                positive balance.
                    ``(B) Increases.--
                            ``(i) In general.--As of the first day of 
                        each plan year beginning after 2007, the 
                        prefunding balance of a plan shall be increased 
                        by the excess (if any) of--
                                    ``(I) the aggregate amount of 
                                employer contributions to the plan for 
                                the preceding plan year, over
                                    ``(II) the minimum required 
                                contribution for the preceding plan 
                                year.
                            ``(ii) Adjustments for interest.--Any 
                        excess contributions under clause (i) shall be 
                        properly adjusted for interest accruing for the 
                        periods between the first day of the current 
                        plan year and the dates on which the excess 
                        contributions were made, determined by using 
                        the effective interest rate for the preceding 
                        plan year and by treating contributions as 
                        being first used to satisfy the minimum 
                        required contribution.
                            ``(iii) Certain contributions 
                        disregarded.--Any contribution which is 
                        required to be made under section 436 in 
                        addition to any contribution required under 
                        this section shall not be taken into account 
                        for purposes of clause (i).
                    ``(C) Decreases.--As of the first day of each plan 
                year after 2007, the prefunding balance of a plan shall 
                be decreased (but not below zero) by the amount of the 
                balance credited under paragraph (1) against the 
                minimum required contribution of the plan for the 
                preceding plan year.
                    ``(D) Adjustments for investment experience.--In 
                determining the prefunding balance of a plan as of the 
                first day of the plan year, the plan sponsor shall, in 
                accordance with regulations prescribed by the 
                Secretary, adjust such balance to reflect the rate of 
                return on plan assets for the preceding plan year. 
                Notwithstanding subsection (g)(3), such rate of return 
                shall be determined on the basis of fair market value 
                and shall properly take into account, in accordance 
                with such regulations, all contributions, 
                distributions, and other plan payments made during such 
                period.
            ``(3) Limitation for underfunded plans.--
                    ``(A) In general.--If the ratio (expressed as a 
                percentage) for any plan year which--
                            ``(i) the value of plan assets for the 
                        preceding plan year, bears to
                            ``(ii) the funding target of the plan for 
                        the preceding plan year (determined without 
                        regard to subsection (i)(1)),
                is less than 80 percent, the preceding provisions of 
                this subsection shall not apply unless employers liable 
                for contributions to the plan under section 412(c) make 
                contributions to the plan for the plan year in an 
                aggregate amount not less than the amount determined 
                under subparagraph (B). Any contribution required by 
                this subparagraph may not be reduced by any credit 
                otherwise allowable under paragraph (1).
                    ``(B) Applicable amount.--The amount determined 
                under this subparagraph for any plan year is the 
                greater of--
                            ``(i) the target normal cost of the plan 
                        for the plan year, or
                            ``(ii) 25 percent of the minimum required 
                        contribution under subsection (a) for the plan 
                        year without regard to this subsection.
            ``(4) Reduction in value of assets.--Solely for purposes of 
        applying subsections (a) and (c)(4)(A)(ii) in determining the 
        minimum required contribution under this section, the value of 
        the plan assets otherwise determined without regard to this 
        paragraph shall be reduced by the amount of the prefunding 
        balance under this subsection.
    ``(g) Valuation of Plan Assets and Liabilities.--
            ``(1) Timing of determinations.--Except as otherwise 
        provided under this subsection, all determinations under this 
        section for a plan year shall be made as of the valuation date 
        of the plan for such plan year.
            ``(2) Valuation date.--For purposes of this section--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the valuation date of a plan for any 
                plan year shall be the first day of the plan year.
                    ``(B) Exception for small plans.--If, on each day 
                during the preceding plan year, a plan had 100 or fewer 
                participants, the plan may designate any day during the 
                plan year as its valuation date for such plan year and 
                succeeding plan years. For purposes of this 
                subparagraph, all defined benefit plans (other than 
                multiemployer plans) maintained by the same employer 
                (or any member of such employer's controlled group) 
                shall be treated as 1 plan, but only employees of such 
                employer or member shall be taken into account.
                    ``(C) Application of certain rules in determination 
                of plan size.--For purposes of this paragraph--
                            ``(i) Plans not in existence in preceding 
                        year.--In the case of the first plan year of 
                        any plan, subparagraph (B) shall apply to such 
                        plan by taking into account the number of 
                        participants that the plan is reasonably 
                        expected to have on days during such first plan 
                        year.
                            ``(ii) Predecessors.--Any reference in 
                        subparagraph (B) to an employer shall include a 
                        reference to any predecessor of such employer.
            ``(3) Determination of value of plan assets.--For purposes 
        of this section--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the value of plan assets shall be the 
                fair market value of the assets.
                    ``(B) Averaging allowed.--A plan may determine the 
                value of plan assets on the basis of any reasonable 
                actuarial method of valuation providing for the 
                averaging of fair market values, but only if such 
                method--
                            ``(i) is permitted under regulations 
                        prescribed by the Secretary, and
                            ``(ii) does not provide for averaging of 
                        such values over more than the period beginning 
                        on the last day of the 12th month preceding the 
                        valuation date and ending on the valuation date 
                        (or a similar period in the case of a valuation 
                        date which is not the 1st day of a month).
            ``(4) Accounting for contribution receipts.--For purposes 
        of determining the value of assets under paragraph (3)--
                    ``(A) Prior year contributions.--If--
                            ``(i) an employer makes any contribution to 
                        the plan after the valuation date for the plan 
                        year in which the contribution is made, and
                            ``(ii) the contribution is for a preceding 
                        plan year,
                the contribution shall be taken into account as an 
                asset of the plan as of the valuation date, except that 
                in the case of any plan year beginning after 2007, only 
                the present value (determined as of the valuation date) 
                of such contribution may be taken into account. For 
                purposes of the preceding sentence, present value shall 
                be determined using the effective interest rate for the 
                preceding plan year to which the contribution is 
                properly allocable.
                    ``(B) Special rule for current year contributions 
                made before valuation date.--If any contributions for 
                any plan year are made to or under the plan during the 
                plan year but before the valuation date for the plan 
                year, the assets of the plan as of the valuation date 
                shall not include--
                            ``(i) such contributions, and
                            ``(ii) interest on such contributions for 
                        the period between the date of the 
                        contributions and the valuation date, 
                        determined by using the effective interest rate 
                        for the plan year.
    ``(h) Actuarial Assumptions and Methods.--
            ``(1) In general.--Subject to this subsection, the 
        determination of any present value or other computation under 
        this section shall be made on the basis of actuarial 
        assumptions and methods--
                    ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                    ``(B) which, in combination, offer the actuary's 
                best estimate of anticipated experience under the plan.
            ``(2) Interest rates.--
                    ``(A) Effective interest rate.--For purposes of 
                this section, the term `effective interest rate' means, 
                with respect to any plan for any plan year, the single 
                rate of interest which, if used to determine the 
                present value of the plan's accrued or earned benefits 
                referred to in subsection (d)(1), would result in an 
                amount equal to the funding target of the plan for such 
                plan year.
                    ``(B) Interest rates for determining funding 
                target.--For purposes of determining the funding target 
                of a plan for any plan year, the interest rate used in 
                determining the present value of the benefits of the 
                plan shall be--
                            ``(i) in the case of benefits reasonably 
                        determined to be payable during the 5-year 
                        period beginning on the first day of the plan 
                        year, the first segment rate with respect to 
                        the applicable month,
                            ``(ii) in the case of benefits reasonably 
                        determined to be payable during the 15-year 
                        period beginning at the end of the period 
                        described in clause (i), the second segment 
                        rate with respect to the applicable month, and
                            ``(iii) in the case of benefits reasonably 
                        determined to be payable after the period 
                        described in clause (ii), the third segment 
                        rate with respect to the applicable month.
                    ``(C) Segment rates.--For purposes of this 
                paragraph--
                            ``(i) First segment rate.--The term `first 
                        segment rate' means, with respect to any month, 
                        the single rate of interest which shall be 
                        determined by the Secretary for such month on 
                        the basis of the corporate bond yield curve for 
                        such month, taking into account only that 
                        portion of such yield curve which is based on 
                        bonds maturing during the 5-year period 
                        commencing with such month.
                            ``(ii) Second segment rate.--The term 
                        `second segment rate' means, with respect to 
                        any month, the single rate of interest which 
                        shall be determined by the Secretary for such 
                        month on the basis of the corporate bond yield 
                        curve for such month, taking into account only 
                        that portion of such yield curve which is based 
                        on bonds maturing during each of the years in 
                        the 15-year period beginning at the end of the 
                        period described in clause (i).
                            ``(iii) Third segment rate.--The term 
                        `third segment rate' means, with respect to any 
                        month, the single rate of interest which shall 
                        be determined by the Secretary for such month 
                        on the basis of the corporate bond yield curve 
                        for such month, taking into account only that 
                        portion of such yield curve which is based on 
                        bonds maturing during periods beginning after 
                        the period described in clause (ii).
                    ``(D) Corporate bond yield curve.--The term 
                `corporate bond yield curve' means, with respect to any 
                month, a yield curve which is prescribed by the 
                Secretary for such month and which reflects the 
                average, for the 12-month period ending with the month 
                preceding such month, of yields on investment grade 
                corporate bonds with varying maturities.
                    ``(E) Applicable month.--For purposes of this 
                paragraph, the term `applicable month' means, with 
                respect to any plan for any plan year, the month which 
                includes the valuation date of such plan for such plan 
                year or, at the election of the plan administrator, any 
                of the 4 months which precede such month. Any election 
                made under this subparagraph shall apply to the plan 
                year for which the election is made and all succeeding 
                plan years, unless the election is revoked with the 
                consent of the Secretary.
                    ``(F) Publication requirements.--The Secretary 
                shall publish for each month the corporate bond yield 
                curve for such month and each of the rates determined 
                under this paragraph for such month. The Secretary 
                shall also publish a description of the methodology 
                used to determine such yield curve and such rates which 
                is sufficiently detailed to enable plans to make 
                reasonable projections regarding the yield curve and 
                such rates for future months based on the plan's 
                projection of future interest rates.
                    ``(G) Transition rule.--
                            ``(i) In general.--Notwithstanding the 
                        preceding provisions of this paragraph, for 
                        plan years beginning in 2007 or 2008, the 
                        first, second, or third segment rate for a plan 
                        with respect to any month shall be equal to the 
                        sum of--
                                    ``(I) the product of such rate for 
                                such month determined without regard to 
                                this subparagraph, multiplied by the 
                                applicable percentage, and
                                    ``(II) the product of the rate 
                                determined under the rules of section 
                                412(b)(5)(B)(ii)(II) (as in effect for 
                                plan years beginning in 2006), 
                                multiplied by a percentage equal to 100 
                                percent minus the applicable 
                                percentage.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is 
                        33\1/3\ percent for plan years beginning in 
                        2007 and 66\2/3\ percent for plan years 
                        beginning in 2008.
            ``(3) Mortality tables.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (C) and (D), the mortality table used in 
                determining any present value or making any computation 
                under this section shall be the RP-2000 Combined 
                Mortality Table, using Scale AA, as published by the 
                Society of Actuaries, as in effect on the date of the 
                enactment of the Pension Security and Transparency Act 
                of 2005 and as revised from time to time under 
                subparagraph (B).
                    ``(B) Periodic revision.--The Secretary shall (at 
                least every 10 years) make revisions in any table in 
                effect under subparagraph (A) to reflect the actual 
                experience of pension plans and projected trends in 
                such experience.
                    ``(C) Substitute mortality table.--
                            ``(i) In general.--Upon request by the plan 
                        sponsor and approval by the Secretary, a 
                        mortality table which meets the requirements of 
                        clause (ii) shall be used in determining any 
                        present value or making any computation under 
                        this section during the 10-consecutive plan 
                        year period specified in the request. A 
                        mortality table described in this clause shall 
                        cease to be in effect if the plan actuary 
                        determines at any time that such table does not 
                        meet the requirements of clause (ii).
                            ``(ii) Requirements.--A mortality table 
                        meets the requirements of this clause if the 
                        Secretary determines that--
                                    ``(I) there is a sufficient number 
                                of plan participants, and the pension 
                                plans have been maintained for a 
                                sufficient period of time, to have 
                                credible information necessary for 
                                purposes of subclause (II),
                                    ``(II) such table reflects the 
                                actual experience of the pension plans 
                                maintained by the sponsor and projected 
                                trends in general mortality experience,
                                    ``(III) except as provided by the 
                                Secretary, such table will be used by 
                                all plans maintained by the plan 
                                sponsor and all members of any 
                                controlled group which includes the 
                                plan sponsor, and
                                    ``(IV) such table is significantly 
                                different from the table described in 
                                subparagraph (A).
                            ``(iii) Deadline for disposition of 
                        application.--Any mortality table submitted to 
                        the Secretary for approval under this 
                        subparagraph shall be treated as in effect for 
                        the first plan year in the 10-year period 
                        described in clause (i) unless the Secretary, 
                        during the 180-day period beginning on the date 
                        of such submission, disapproves of such table 
                        and provides the reasons that such table fails 
                        to meet the requirements of clause (ii). The 
                        180-day period shall be extended for any period 
                        during which the Secretary has requested 
                        information from the plan sponsor and such 
                        information has not been provided.
                    ``(D) Separate mortality tables for the disabled.--
                Notwithstanding subparagraph (A)--
                            ``(i) In general.--The Secretary shall 
                        establish mortality tables which may be used 
                        (in lieu of the tables under subparagraph (A)) 
                        under this subsection for individuals who are 
                        entitled to benefits under the plan on account 
                        of disability. The Secretary shall establish 
                        separate tables for individuals whose 
                        disabilities occur in plan years beginning 
                        before January 1, 1995, and for individuals 
                        whose disabilities occur in plan years 
                        beginning on or after such date.
                            ``(ii) Special rule for disabilities 
                        occurring after 1994.--In the case of 
                        disabilities occurring in plan years beginning 
                        after December 31, 1994, the tables under 
                        clause (i) shall apply only with respect to 
                        individuals described in such subclause who are 
                        disabled within the meaning of title II of the 
                        Social Security Act and the regulations 
                        thereunder.
                            ``(iii) Periodic revision.--The Secretary 
                        shall (at least every 10 years) make revisions 
                        in any table in effect under clause (i) to 
                        reflect the actual experience of pension plans 
                        and projected trends in such experience.
                    ``(E) Transition rule.--Under regulations of the 
                Secretary, any difference in present value resulting 
                from any differences in assumptions as set forth in the 
                mortality table specified in subparagraph (A) and 
                assumptions as set forth in the mortality table 
                described in section 412(l)(7)(C)(ii) (as in effect for 
                plan years beginning in 2006) shall be phased in 
                ratably over the first period of 5 plan years beginning 
                in or after 2007 so as to be fully effective for the 
                fifth plan year.
            ``(4) Probability of benefit payments in the form of lump 
        sums or other optional forms.--For purposes of determining any 
        present value or making any computation under this section, 
        there shall be taken into account--
                    ``(A) the probability that future benefit payments 
                under the plan will be made in the form of optional 
                forms of benefits provided under the plan (including 
                lump sum distributions, determined on the basis of the 
                plan's experience and other related assumptions), and
                    ``(B) any difference in the present value of such 
                future benefit payments resulting from the use of 
                actuarial assumptions, in determining benefit payments 
                in any such optional form of benefits, which are 
                different from those specified in this subsection.
            ``(5) Approval of large changes in actuarial assumptions.--
                    ``(A) In general.--No actuarial assumption used to 
                determine the funding target for a plan to which this 
                paragraph applies may be changed without the approval 
                of the Secretary.
                    ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                            ``(i) the aggregate unfunded benefits as of 
                        the close of the preceding plan year (as 
                        determined under section 4006(a)(3)(E)(iii) of 
                        the Employee Retirement Income Security Act of 
                        1974) of such plan and all other plans 
                        maintained by the contributing sponsors (as 
                        defined in section 4001(a)(13) of such Act) and 
                        members of such sponsors' controlled groups (as 
                        defined in section 4001(a)(14) of such Act) 
                        which are covered by title IV of such Act 
                        (disregarding plans with no unfunded benefits) 
                        exceed $50,000,000; and
                            ``(ii) the change in assumptions 
                        (determined after taking into account any 
                        changes in interest rate and mortality table) 
                        results in a decrease in the funding shortfall 
                        of the plan for the current plan year that 
                        exceeds $50,000,000, or that exceeds $5,000,000 
                        and that is 5 percent or more of the funding 
                        target of the plan before such change.
    ``(i) Special Rules for At-Risk Plans.--
            ``(1) Funding target for plans in at-risk status.--
                    ``(A) In general.--In the case of a plan to which 
                this subsection applies for a plan year, the funding 
                target of the plan for the plan year is equal to the 
                present value of all liabilities to participants and 
                their beneficiaries under the plan for the plan year, 
                as determined by using the additional actuarial 
                assumptions described in subparagraph (B).
                    ``(B) Additional actuarial assumptions.--The 
                actuarial assumptions described in this subparagraph 
                are as follows:
                            ``(i) All employees who are not otherwise 
                        assumed to retire as of the valuation date but 
                        who will be eligible to elect benefits during 
                        the plan year and the 7 succeeding plan years 
                        shall be assumed to retire at the earliest 
                        retirement date under the plan but not before 
                        the end of the plan year for which the at-risk 
                        target liability and at-risk target normal cost 
                        are being determined.
                            ``(ii) All employees shall be assumed to 
                        elect the retirement benefit available under 
                        the plan at the assumed retirement age 
                        (determined after application of clause (i)) 
                        which would result in the highest present value 
                        of liabilities.
            ``(2) Target normal cost of at-risk plans.--In the case of 
        a plan to which this subsection applies for a plan year, the 
        target normal cost of the plan for such plan year shall be 
        equal to the present value of all benefits which are expected 
        to accrue or be earned under the plan during the plan year, 
        determined using the additional actuarial assumptions described 
        in paragraph (1)(B).
            ``(3) Minimum amount.--In no event shall--
                    ``(A) the at-risk target liability be less than the 
                target liability, as determined without regard to this 
                subsection, or
                    ``(B) the at-risk target normal cost be less than 
                the target normal cost, as determined without regard to 
                this subsection.
            ``(4) Determination of at-risk status.--For purposes of 
        this subsection, a plan is in at-risk status for a plan year 
        if--
                    ``(A) the plan is maintained by a financially-weak 
                employer, and
                    ``(B) the funding target attainment percentage for 
                the plan year is less than 93 percent.
            ``(5) Financially-weak employer.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `financially-weak employer' means any employer 
                if--
                            ``(i) as of the valuation date for each of 
                        the years during a period of at least 3 
                        consecutive plan years ending with the plan 
                        year--
                                    ``(I) the employer has an 
                                outstanding senior unsecured debt 
                                instrument which is rated lower than 
                                investment grade by each of the 
                                nationally recognized statistical 
                                rating organizations for corporate 
                                bonds that has issued a credit rating 
                                for such instrument, or
                                    ``(II) if no such debt instrument 
                                has been rated by such an organization 
                                but 1 or more of such organizations has 
                                made an issuer credit rating for such 
                                employer, all such organizations which 
                                have so rated the employer have rated 
                                such employer lower than investment 
                                grade, and
                            ``(ii) at least 2 of the years during such 
                        period are deterioration years.
                If an employer is treated as a financially-weak 
                employer for any plan year, clause (ii) shall not apply 
                in determining whether the employer is so treated for 
                any succeeding plan year in any continuous period of 
                plan years for which the employer is treated as a 
                financially-weak employer.
                    ``(B) Controlled group exception.--If an employer 
                treated as a financially-weak employer under 
                subparagraph (A) is a member of a controlled group (as 
                defined in section 412(e)(4)), the employer shall not 
                be treated as a financially-weak employer if a 
                significant member (as determined under regulations 
                prescribed by the Secretary) of such group has an 
                outstanding senior unsecured debt instrument that is 
                rated as being investment grade by an organization 
                described in subparagraph (A).
                    ``(C) Employers with no ratings.--If--
                            ``(i) an employer has no debt instrument 
                        described in subparagraph (A)(i) which was 
                        rated by an organization described in such 
                        subparagraph, and
                            ``(ii) no such organization has made an 
                        issuer credit rating for such employer,
                then such employer shall only be treated as a 
                financially-weak employer to the extent provided in 
                regulations prescribed by the Secretary.
            ``(6) Determination of deterioration year.--For purposes of 
        paragraph (5), the term `deterioration year' means any year 
        during the period described in paragraph (5)(A)(i) for which 
        the rating described in subclause (I) or (II) of paragraph 
        (5)(A)(i) by each organization is either--
                    ``(A) lower than the lowest rating of the employer 
                by such organization for a preceding year in such 
                period, or
                    ``(B) the lowest rating used by such organization.
            ``(7) Years before effective date.--For purposes of 
        paragraphs (5) and (6), plan years beginning before 2007 shall 
        not be taken into account.
            ``(8) Transition between applicable funding targets and 
        between applicable target normal costs.--
                    ``(A) In general.--In any case in which a plan 
                which is in at-risk status for a plan year has been in 
                such status for a consecutive period of fewer than 5 
                plan years, the applicable amount of the funding target 
                and of the target normal cost shall be, in lieu of the 
                amount determined without regard to this paragraph, the 
                sum of--
                            ``(i) the amount determined under this 
                        section without regard to this subsection, plus
                            ``(ii) the transition percentage for such 
                        plan year of the excess of the amount 
                        determined under this subsection (without 
                        regard to this paragraph) over the amount 
                        determined under this section without regard to 
                        this subsection.
                    ``(B) Improvement years not taken into account.--
                            ``(i) In general.--An improvement year 
                        shall not be taken into account in determining 
                        any consecutive period of plan years for 
                        purposes of subparagraph (A).
                            ``(ii) Application of subsection after 
                        improvement year ends.--Plan years immediately 
                        before and after an improvement year (or 
                        consecutive period of improvement years) shall 
                        be treated as consecutive for purposes of 
                        subparagraph (A).
                            ``(iii) Improvement year.--For purposes of 
                        this subparagraph, the term `improvement year' 
                        means any plan year for which any rating 
                        described in subclause (I) or (II) of paragraph 
                        (5)(A)(i) is higher than such rating for the 
                        preceding plan year.
                    ``(C) Transition percentage.--For purposes of 
                subparagraph (A), the transition percentage shall be 
                determined in accordance with the following table:

``If the consecutive number of
  years (including the plan year)                        The transition
  the plan is in at-risk status                         percentage is--
        is--
    1.............................................                  20 
    2.............................................                  40 
    3.............................................                  60 
    4.............................................                  80.
                    ``(D) Years before effective date.--For purposes of 
                this paragraph, plan years beginning before 2007 shall 
                not be taken into account.
            ``(9) Plans to which subsection applies.--
                    ``(A) In general.--Except as provided in this 
                paragraph, this subsection shall apply to any plan to 
                which this section applies and which is in at-risk 
                status for the plan year.
                    ``(B) Exception for small plans.--This subsection 
                shall not apply to a plan for a plan year if the plan 
                was described in subsection (g)(2)(B) for the preceding 
                plan year, determined by substituting `500' for `100'.
                    ``(C) Exception for plans maintained by certain 
                cooperatives.--This subsection shall not apply to an 
                eligible cooperative plan described in subparagraph 
                (D).
                    ``(D) Eligible cooperative plan defined.--For 
                purposes of subparagraph (C), a plan shall be treated 
                as an eligible cooperative plan for a plan year if the 
                plan is maintained by more than 1 employer and at least 
                85 percent of the employers are--
                            ``(i) rural cooperatives (as defined in 
                        section 401(k)(7)(B) without regard to clause 
                        (iv) thereof), or
                            ``(ii) organizations which are--
                                    ``(I) cooperative organizations 
                                described in section 1381(a) which are 
                                more than 50-percent owned by 
                                agricultural producers or by 
                                cooperatives owned by agricultural 
                                producers, or
                                    ``(II) more than 50-percent owned, 
                                or controlled by, one or more 
                                cooperative organizations described in 
                                subclause (I).
                A plan shall also be treated as an eligible cooperative 
                plan for any plan year for which it is described in 
                section 210(a) of the Employee Retirement Income 
                Security Act of 1974 and is maintained by a rural 
                telephone cooperative association described in section 
                3(40)(B)(v) of such Act.
                    ``(E) Exception for plans secured by third parties 
                bound by pbgc agreements.--This subsection shall not 
                apply to any plan if--
                            ``(i) a person other than the employer 
                        obligated to contribute under the plan is, 
                        under the terms of an agreement with the 
                        Pension Benefit Guaranty Corporation, liable 
                        for any failure of the employer to meet its 
                        obligation to pay any minimum required 
                        contribution or termination liability with 
                        respect to the plan; and
                            ``(ii) such person is not a financially-
                        weak employer under paragraph (5).
    ``(j) Payment of Minimum Required Contributions.--
            ``(1) In general.--For purposes of this section, the due 
        date for any payment of any minimum required contribution for 
        any plan year shall be 8\1/2\ months after the close of the 
        plan year.
            ``(2) Interest.--Any payment required under paragraph (1) 
        for a plan year made after the valuation date for such plan 
        year shall be increased by interest for the period from the 
        valuation date to the payment date, determined by using the 
        effective rate of interest for the plan for such plan year.
            ``(3) Accelerated quarterly contribution schedule for 
        underfunded plans.--
                    ``(A) Interest penalty for failure to meet 
                accelerated quarterly payment schedule.--A plan shall 
                make the required installments under this paragraph for 
                a plan year if the plan had a funding shortfall for the 
                preceding plan year. If the required installment is not 
                paid in full, then the minimum required contribution 
                for the plan year (as increased under paragraph (2)) 
                shall be further increased by an amount equal to the 
                interest on the amount of the underpayment for the 
                period of the underpayment, using an interest rate 
                equal to the excess of--
                            ``(i) 175 percent of the Federal mid-term 
                        rate (as in effect under section 1274 for the 
                        1st month of such plan year), over
                            ``(ii) the effective rate of interest for 
                        the plan for the plan year.
                    ``(B) Amount of underpayment, period of 
                underpayment.--For purposes of subparagraph (A)--
                            ``(i) Amount.--The amount of the 
                        underpayment shall be the excess of--
                                    ``(I) the required installment, 
                                over
                                    ``(II) the amount (if any) of the 
                                installment contributed to or under the 
                                plan on or before the due date for the 
                                installment.
                            ``(ii) Period of underpayment.--The period 
                        for which any interest is charged under this 
                        paragraph with respect to any portion of the 
                        underpayment shall run from the due date for 
                        the installment to the date on which such 
                        portion is contributed to or under the plan.
                            ``(iii) Order of crediting contributions.--
                        For purposes of clause (i)(II), contributions 
                        shall be credited against unpaid required 
                        installments in the order in which such 
                        installments are required to be paid.
                    ``(C) Number of required installments; due dates.--
                For purposes of this paragraph--
                            ``(i) Payable in 4 installments.--There 
                        shall be 4 required installments for each plan 
                        year.
                            ``(ii) Time for payment of installments.--
                        The due dates for required installments are set 
                        forth in the following table:

 
 
 
In the case of the following
 required installment:              The due date is:
  1st.............................  April 15
  2nd.............................  July 15
  3rd.............................  October 15
  4th.............................  January 15 of the following year.

                    ``(D) Amount of required installment.--For purposes 
                of this paragraph--
                            ``(i) In general.--The amount of any 
                        required installment shall be 25 percent of the 
                        required annual payment.
                            ``(ii) Required annual payment.--For 
                        purposes of clause (i), the term `required 
                        annual payment' means the lesser of--
                                    ``(I) 90 percent of the minimum 
                                required contribution (without regard 
                                to any waiver under section 302(c)) to 
                                the plan for the plan year under this 
                                section, or
                                    ``(II) in the case of a plan year 
                                beginning after 2007, 100 percent of 
                                the minimum required contribution 
                                (without regard to any waiver under 
                                section 302(c)) to the plan for the 
                                preceding plan year.
                        Subclause (II) shall not apply if the preceding 
                        plan year referred to in such clause was not a 
                        year of 12 months.
                    ``(E) Fiscal years and short years.--
                            ``(i) Fiscal years.--In applying this 
                        paragraph to a plan year beginning on any date 
                        other than January 1, there shall be 
                        substituted for the months specified in this 
                        paragraph, the months which correspond thereto.
                            ``(ii) Short plan year.--This subparagraph 
                        shall be applied to plan years of less than 12 
                        months in accordance with regulations 
                        prescribed by the Secretary of the Treasury.
            ``(4) Liquidity requirement in connection with quarterly 
        contributions.--
                    ``(A) In general.--A plan to which this paragraph 
                applies shall be treated as failing to pay the full 
                amount of any required installment under paragraph (3) 
                to the extent that the value of the liquid assets paid 
                in such installment is less than the liquidity 
                shortfall (whether or not such liquidity shortfall 
                exceeds the amount of such installment required to be 
                paid but for this paragraph).
                    ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan which--
                            ``(i) is required to pay installments under 
                        paragraph (3) for a plan year, and
                            ``(ii) has a liquidity shortfall for any 
                        quarter during such plan year.
                    ``(C) Period of underpayment.--For purposes of 
                paragraph (3)(A), any portion of an installment that is 
                treated as not paid under subparagraph (A) shall 
                continue to be treated as unpaid until the close of the 
                quarter in which the due date for such installment 
                occurs.
                    ``(D) Limitation on increase.--If the amount of any 
                required installment is increased by reason of 
                subparagraph (A), in no event shall such increase 
                exceed the amount which, when added to prior 
                installments for the plan year, is necessary to 
                increase the funding target attainment percentage of 
                the plan for the plan year (taking into account the 
                expected increase in funding target due to benefits 
                accruing or earned during the plan year) to 100 
                percent.
                    ``(E) Definitions.--For purposes of this 
                subparagraph:
                            ``(i) Liquidity shortfall.--The term 
                        `liquidity shortfall' means, with respect to 
                        any required installment, an amount equal to 
                        the excess (as of the last day of the quarter 
                        for which such installment is made) of--
                                    ``(I) the base amount with respect 
                                to such quarter, over
                                    ``(II) the value (as of such last 
                                day) of the plan's liquid assets.
                            ``(ii) Base amount.--
                                    ``(I) In general.--The term `base 
                                amount' means, with respect to any 
                                quarter, an amount equal to 3 times the 
                                sum of the adjusted disbursements from 
                                the plan for the 12 months ending on 
                                the last day of such quarter.
                                    ``(II) Special rule.--If the amount 
                                determined under subclause (I) exceeds 
                                an amount equal to 2 times the sum of 
                                the adjusted disbursements from the 
                                plan for the 36 months ending on the 
                                last day of the quarter and an enrolled 
                                actuary certifies to the satisfaction 
                                of the Secretary that such excess is 
                                the result of nonrecurring 
                                circumstances, the base amount with 
                                respect to such quarter shall be 
                                determined without regard to amounts 
                                related to those nonrecurring 
                                circumstances.
                            ``(iii) Disbursements from the plan.--The 
                        term `disbursements from the plan' means all 
                        disbursements from the trust, including 
                        purchases of annuities, payments of single sums 
                        and other benefits, and administrative 
                        expenses.
                            ``(iv) Adjusted disbursements.--The term 
                        `adjusted disbursements' means disbursements 
                        from the plan reduced by the product of--
                                    ``(I) the plan's funding target 
                                attainment percentage for the plan 
                                year, and
                                    ``(II) the sum of the purchases of 
                                annuities, payments of single sums, and 
                                such other disbursements as the 
                                Secretary shall provide in regulations.
                            ``(v) Liquid assets.--The term `liquid 
                        assets' means cash, marketable securities, and 
                        such other assets as specified by the Secretary 
                        in regulations.
                            ``(vi) Quarter.--The term `quarter' means, 
                        with respect to any required installment, the 
                        3-month period preceding the month in which the 
                        due date for such installment occurs.
                    ``(F) Regulations.--The Secretary may prescribe 
                such regulations as are necessary to carry out this 
                paragraph.
    ``(k) Imposition of Lien Where Failure To Make Required 
Contributions.--
            ``(1) In general.--In the case of a plan to which this 
        subsection applies, if--
                    ``(A) any person fails to make a contribution 
                payment required by section 412 and this section before 
                the due date for such payment, and
                    ``(B) the unpaid balance of such payment (including 
                interest), when added to the aggregate unpaid balance 
                of all preceding such payments for which payment was 
                not made before the due date (including interest), 
                exceeds $1,000,000,
        then there shall be a lien in favor of the plan in the amount 
        determined under paragraph (3) upon all property and rights to 
        property, whether real or personal, belonging to such person 
        and any other person who is a member of the same controlled 
        group of which such person is a member.
            ``(2) Plans to which subsection applies.--This subsection 
        shall apply to a defined benefit plan which is a single-
        employer plan covered under section 4021 of the Employee 
        Retirement Income Security Act of 1974 for any plan year for 
        which the funding target attainment percentage (as defined in 
        subsection (d)(2)) of such plan is less than 100 percent.
            ``(3) Amount of lien.--For purposes of paragraph (1), the 
        amount of the lien shall be equal to the aggregate unpaid 
        balance of contribution payments required under this section 
        and section 302 for which payment has not been made before the 
        due date.
            ``(4) Notice of failure; lien.--
                    ``(A) Notice of failure.--A person committing a 
                failure described in paragraph (1) shall notify the 
                Pension Benefit Guaranty Corporation of such failure 
                within 10 days of the due date for the required 
                contribution payment.
                    ``(B) Period of lien.--The lien imposed by 
                paragraph (1) shall arise on the due date for the 
                required contribution payment and shall continue until 
                the last day of the first plan year in which the plan 
                ceases to be described in paragraph (1)(B). Such lien 
                shall continue to run without regard to whether such 
                plan continues to be described in paragraph (2) during 
                the period referred to in the preceding sentence.
                    ``(C) Certain rules to apply.--Any amount with 
                respect to which a lien is imposed under paragraph (1) 
                shall be treated as taxes due and owing the United 
                States and rules similar to the rules of subsections 
                (c), (d), and (e) of section 4068 of the Employee 
                Retirement Income Security Act of 1974 shall apply with 
                respect to a lien imposed by subsection (a) and the 
                amount with respect to such lien.
            ``(5) Enforcement.--Any lien created under paragraph (1) 
        may be perfected and enforced only by the Pension Benefit 
        Guaranty Corporation, or at the direction of the Pension 
        Benefit Guaranty Corporation, by the contributing sponsor (or 
        any member of the controlled group of the contributing 
        sponsor).
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Contribution payment.--The term `contribution 
                payment' means, in connection with a plan, a 
                contribution payment required to be made to the plan, 
                including any required installment under paragraphs (3) 
                and (4) of subsection (j).
                    ``(B) Due date; required installment.--The terms 
                `due date' and `required installment' have the meanings 
                given such terms by subsection (j), except that in the 
                case of a payment other than a required installment, 
                the due date shall be the date such payment is required 
                to be made under section 303.
                    ``(C) Controlled group.--The term `controlled 
                group' means any group treated as a single employer 
                under subsections (b), (c), (m), and (o) of section 
                414.
    ``(l) Qualified Transfers to Health Benefit Accounts.--In the case 
of a qualified transfer (as defined in section 420), any assets so 
transferred shall not, for purposes of this section, be treated as 
assets in the plan.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to plan years beginning after 2006.

SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

    (a) In General.--Part III of subchapter D of chapter 1 of the 
Internal Revenue Code of 1986 (relating to rules relating to minimum 
funding standards) is amended by adding at the end the following new 
subpart:

  ``Subpart B--Limitations on Benefit Improvements by Single-Employer 
                                 Plans

        ``Sec. 436. Funding-based limits on benefits and benefit 
                            accruals under single-employer plans.

``SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT ACCRUALS UNDER 
              SINGLE-EMPLOYER PLANS.

    ``(a) General Rule.--For purposes of section 401(a)(29), a defined 
benefit plan which is a single-employer plan shall be treated as 
meeting the requirements of this section if the plan meets the 
requirements of subsections (b), (c), and (d).
    ``(b) Limitations on Plan Amendments Increasing Liability for 
Benefits.--
            ``(1) In general.--Except as provided in this section, no 
        amendment to a single-employer plan which has the effect of 
        increasing liabilities of the plan by reason of increases in 
        benefits, establishment of new benefits, changing the rate of 
        benefit accrual, or changing the rate at which benefits become 
        nonforfeitable may take effect during any plan year if the 
        adjusted funding target attainment percentage as of the 
        valuation date of the plan for such plan year is--
                    ``(A) less than 80 percent, or
                    ``(B) would be less than 80 percent taking into 
                account such amendment.
            ``(2) Exemption.--Paragraph (1) shall cease to apply with 
        respect to any plan year, effective as of the first date of the 
        plan year (or if later, the effective date of the amendment), 
        upon payment by the plan sponsor of a contribution (in addition 
        to any minimum required contribution under section 430) equal 
        to--
                    ``(A) in the case of paragraph (1)(A), the amount 
                of the increase in the funding target of the plan 
                (under section 430) for the plan year attributable to 
                the amendment, and
                    ``(B) in the case of paragraph (1)(B), the amount 
                sufficient to result in a funding target attainment 
                percentage of 80 percent.
            ``(3) Exception for certain benefit increases.--Paragraph 
        (1) shall not apply to any amendment which provides for an 
        increase in benefits under a formula which is not based on a 
        participant's compensation, but only if the rate of such 
        increase is not in excess of the contemporaneous rate of 
        increase in average wages of participants covered by the 
        amendment.
    ``(c) Limitations on Accelerated Benefit Distributions.--
            ``(1) In general.--The requirements of this subsection are 
        met if the plan provides that, with respect to any plan year--
                    ``(A) if the plan's adjusted funded target 
                liability percentage as of the valuation date for the 
                preceding plan year was less than 60 percent and the 
                preceding plan year is not otherwise in a prohibited 
                period, the plan sponsor shall, in addition to any 
                other contribution required under section 430, 
                contribute for the current plan year and each 
                succeeding plan year in the prohibited period with 
                respect to the current plan year the amount (if any) 
                which, when added to the portion of the minimum 
                required contribution for the plan year described in 
                subparagraphs (B) and (C) of section 430(a)(1), is 
                sufficient to result in an adjusted funded target 
                liability percentage for the plan year of 60 percent, 
                and
                    ``(B) no prohibited payments will be made during a 
                prohibited period.
            ``(2) Prohibited payment.--For purpose of this subsection--
                    ``(A) In general.--The term `prohibited payment' 
                means--
                            ``(i) any payment, in excess of the monthly 
                        amount paid under a single life annuity (plus 
                        any social security supplements described in 
                        the last sentence of section 411(a)(9)), to a 
                        participant or beneficiary whose annuity 
                        starting date (as defined in section 417(f)(2)) 
                        occurs during a prohibited period,
                            ``(ii) any payment for the purchase of an 
                        irrevocable commitment from an insurer to pay 
                        benefits, and
                            ``(iii) any other payment specified by the 
                        Secretary by regulations.
                    ``(B) Exception for certain payments.--In the case 
                of any prohibited period described in paragraph (3)(A), 
                the term `prohibited payment' shall not include any 
                payment if the amount of the payment does not exceed 
                the lesser of--
                            ``(i) 50 percent of the amount of the 
                        payment which could be made without regard to 
                        this subsection, or
                            ``(ii) the present value (determined under 
                        guidance prescribed by the Pension Benefit 
                        Guaranty Corporation, using the interest and 
                        mortality assumptions under section 417(e)) of 
                        the maximum guarantee with respect to the 
                        participant under section 4022 of the Employee 
                        Retirement Income Security Act of 1974.
                The exception under this subparagraph shall only apply 
                once with respect to any participant, except that, for 
                purposes of this sentence, a participant and any 
                beneficiary on his behalf (including an alternate 
                payee, as defined in section 414(p)(8)) shall be 
                treated as 1 participant. If the accrued benefit of a 
                participant is allocated to such an alternate payee and 
                1 or more other persons, the amount under clause (ii) 
                shall be allocated among such persons in the same 
                manner as the accrued benefit is allocated unless the 
                qualified domestic relations order (as defined in 
                section 414(p)(1)(A)) provides otherwise.
            ``(3) Prohibited period.--For purposes of paragraph (1), 
        the term `prohibited period' means--
                    ``(A) except as provided in paragraph (4), if a 
                plan sponsor is required to make the contribution for 
                the current plan year under paragraph (1), the period 
                beginning on the 1st day of the plan year and ending on 
                the last day of the 1st period of 2 consecutive plan 
                years (beginning on or after such 1st day) for which 
                the plan's adjusted funded target liability percentage 
                was at least 60 percent,
                    ``(B) any period the plan sponsor is in bankruptcy, 
                or
                    ``(C) any period during which the plan has a 
                liquidity shortfall (as defined in section 
                430(j)(4)(E)(i)).
        The prohibited period for purposes of subparagraph (B) shall 
        not include any portion of a plan year (even if the plan 
        sponsor is in bankruptcy during such period) which occurs on or 
        after the date the plan's enrolled actuary certifies that, as 
        of the valuation date for the plan year, the plan's adjusted 
        funded target liability percentage is at least 100 percent.
            ``(4) Satisfaction of requirement before close of plan 
        year.--If, before the close of the current plan year--
                    ``(A) the plan sponsor makes the contribution 
                required to be made under paragraph (1), or
                    ``(B) the plan's enrolled actuary certifies that, 
                as of the valuation date for the plan year, the 
                adjusted funded target liability percentage of the plan 
                is at least 60 percent,
        this subsection shall be applied as if no prohibited period had 
        begun as of the beginning of such year and the plan shall, 
        under rules described by the Secretary, restore any payments 
        not made during the prohibited period in effect before the 
        application of this paragraph.
    ``(d) Limitation on Benefit Accruals for Plans With Severe Funding 
Shortfalls.--
            ``(1) In general.--Except as provided in subsection (e), a 
        single-employer plan shall provide that all future benefit 
        accruals under the plan shall cease during a severe funding 
        shortfall period, but only to the extent the cessation of such 
        accruals would have been permitted under section 411(d)(6) if 
        the cessation had been implemented by a plan amendment adopted 
        immediately before the severe funding shortfall period.
            ``(2) Severe funding shortfall period.--For purposes of 
        paragraph (1), the term `severe funding shortfall period' means 
        in the case of a plan the adjusted funding target attainment 
        percentage of which as of the valuation date of the plan for 
        any plan year is less than 60 percent, the period--
                    ``(A) beginning on the 1st day of the succeeding 
                plan year, and
                    ``(B) ending on the date the plan's enrolled 
                actuary certifies that the plan's funding target 
                attainment percentage is at least 60 percent.
            ``(3) Opportunity for increased funding.--For purposes of 
        paragraph (2)(A), a plan shall not be treated as described in 
        such paragraph for a plan year if the plan's enrolled actuary 
        certifies that the plan sponsor has before the end of the plan 
        year contributed (in addition to any minimum required 
        contribution under section 430) the amount sufficient to result 
        in an adjusted funding target attainment percentage as of the 
        valuation date for the plan year of 60 percent.
    ``(e) Exception for Certain Collectively Bargained Benefits.--In 
the case of a plan maintained pursuant to a collective bargaining 
agreement between employee representatives and the plan sponsor and in 
effect before the beginning of the first day on which a limitation 
would otherwise apply under subsections (b), (c), or (d)--
            ``(1) such limitations shall not apply to any amendment, 
        prohibited payment, or accrual with respect to such plan, but
            ``(2) the plan sponsor shall contribute (in addition to any 
        minimum required contribution under section 430) the amount 
        sufficient to result in a funding target attainment percentage 
        (as of the valuation date for the plan year in which any such 
        limitation would otherwise apply) equal to the percentage 
        necessary to prevent the limitation from applying.
    ``(f) Rules Relating to Required Contributions.--
            ``(1) Security may be provided.--
                    ``(A) In general.--For purposes of this section, 
                the adjusted funding target attainment percentage shall 
                be determined by treating as an asset of the plan any 
                security provided by a plan sponsor in a form meeting 
                the requirements of subparagraph (B) .
                    ``(B) Form of security.--The security required 
                under subparagraph (A) shall consist of--
                            ``(i) a bond issued by a corporate surety 
                        company that is an acceptable surety for 
                        purposes of section 412 of the Employee 
                        Retirement Income Security Act of 1974,
                            ``(ii) cash, or United States obligations 
                        which mature in 3 years or less, held in escrow 
                        by a bank or similar financial institution, or
                            ``(iii) such other form of security as is 
                        satisfactory to the Secretary and the parties 
                        involved.
                    ``(C) Enforcement.--Any security provided under 
                subparagraph (A) may be perfected and enforced at any 
                time after the earlier of--
                            ``(i) the date on which the plan 
                        terminates,
                            ``(ii) if there is a failure to make a 
                        payment of the minimum required contribution 
                        for any plan year beginning after the security 
                        is provided, the due date for the payment under 
                        section 430(j), or
                            ``(iii) if the adjusted funding target 
                        attainment percentage is less than 60 percent 
                        for a consecutive period of 7 years, the 
                        valuation date for the last year in the period.
                    ``(D) Release of security.--The security shall be 
                released (and any amounts thereunder shall be refunded 
                together with any interest accrued thereon) at such 
                time as the Secretary may prescribe in regulations, 
                including regulations for partial releases of the 
                security by reason of increases in the funding target 
                attainment percentage.
            ``(2) Prefunding balance may not be used.--No prefunding 
        balance under section 430(f) may be used to satisfy any 
        required contribution under this section.
            ``(3) Treatment as unpaid minimum required contribution.--
        The amount of any required contribution which a plan sponsor 
        fails to make under subsection (b) or (d) for any plan year 
        shall be treated as an unpaid minimum required contribution for 
        purposes of subsection (j) and (k) of section 430 and for 
        purposes of section 4971.
    ``(g) New Plans.--Subsections (b) and (d) shall not apply to a plan 
for the first 5 plan years of the plan. For purposes of this 
subsection, the reference in this subsection to a plan shall include a 
reference to any predecessor plan.
    ``(h) Presumed Underfunding for Purposes of Benefit Limitations 
Based on Prior Year's Funding Status.--
            ``(1) Presumption of continued underfunding.--In any case 
        in which a benefit limitation under subsection (b), (c), or (d) 
        has been applied to a plan with respect to the plan year 
        preceding the current plan year, the adjusted funding target 
        attainment percentage of the plan as of the valuation date of 
        the plan for the current plan year shall be presumed to be 
        equal to the adjusted funding target attainment percentage of 
        the plan as of the valuation date of the plan for the preceding 
        plan year until the enrolled actuary of the plan certifies the 
        actual adjusted funding target attainment percentage of the 
        plan as of the valuation date of the plan for the current plan 
        year.
            ``(2) Presumption of underfunding after 10th month.--In any 
        case in which no such certification is made with respect to the 
        plan before the first day of the 10th month of the current plan 
        year, for purposes of subsections (b), (c), and (d), the plan's 
        adjusted funding target attainment percentage shall be 
        conclusively presumed to be less than 60 percent as of the 
        first day of such 10th month.
    ``(i) Treatment of Plan as of Close of Prohibited or Cessation 
Period.--For purposes of applying this part--
            ``(1) Operation of plan after period.--Unless the plan 
        provides otherwise, payments and accruals will resume effective 
        as of the day following the close of a period of limitation of 
        payment or accrual of benefits under subsection (c) or (d).
            ``(2) Treatment of affected benefits.--Nothing in this 
        subsection shall be construed as affecting the plan's treatment 
        of benefits which would have been paid or accrued but for this 
        section.
    ``(j) Funding Target Attainment Percentage.--For purposes of this 
section--
            ``(1) In general.--The term `funding target attainment 
        percentage' has the same meaning given such term by section 
        430(d)(2).
            ``(2) Adjusted funded target liability percentage.--The 
        term `adjusted funded target liability percentage' means the 
        funded target liability percentage which is determined under 
        subparagraph (A) by increasing each of the amounts under 
        subparagraphs (A) and (B) of section 430(d)(2) by the aggregate 
        amount of purchases of annuities, payments of single sums, and 
        such other disbursements as the Secretary shall prescribe in 
        regulations, which were made by the plan during the preceding 2 
        plan years.
    ``(k) Special Rules.--
            ``(1) Bankruptcy.--In the case of a plan sponsor during any 
        period the plan is in bankruptcy--
                    ``(A) subsection (b) shall be applied by 
                substituting `100 percent' for `80 percent' each place 
                it appears,
                    ``(B) any exception under subsection (b) for any 
                benefit increases pursuant to a collective bargaining 
                agreement shall not apply, and
                    ``(C) the exception under subsection (f) shall not 
                apply for purposes of subsection (b).
            ``(2) Years before effective date.--No plan year beginning 
        before 2007 shall be taken into account in determining whether 
        this section applies to any plan year beginning after 2006.''.
    (b) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2006.
            (2) Collective bargaining exception.--In the case of a plan 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified before January 1, 2007, the amendments made 
        by this section shall not apply to plan years beginning before 
        the earlier of--
                    (A) the later of--
                            (i) the date on which the last collective 
                        bargaining agreement relating to the plan 
                        terminates (determined without regard to any 
                        extension thereof agreed to after the date of 
                        the enactment of this Act), or
                            (ii) the first day of the first plan year 
                        to which the amendments made by this subsection 
                        would (but for this subparagraph) apply, or
                    (B) January 1, 2010.
        For purposes of subparagraph (A)(i), any plan amendment made 
        pursuant to a collective bargaining agreement relating to the 
        plan which amends the plan solely to conform to any requirement 
        added by this section shall not be treated as a termination of 
        such collective bargaining agreement.

SEC. 114. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EMPLOYER PLANS.

    (a) In General.--Section 404 of the Internal Revenue Code of 1986 
(relating to deduction for contributions of an employer to an 
employees' trust or annuity plan and compensation under a deferred 
payment plan) is amended--
            (1) in subsection (a)(1)(A), by inserting ``in the case of 
        a defined benefit plan other than a multiemployer plan, in an 
        amount determined under subsection (o), and in the case of any 
        other plan'' after ``section 501(a),'', and
            (2) by inserting at the end the following new subsection:
    ``(o) Deduction Limit for Single-Employer Plans.--For purposes of 
subsection (a)(1)(A)--
            ``(1) In general.--In the case of a defined benefit plan to 
        which subsection (a)(1)(A) applies (other than a multiemployer 
        plan), the amount determined under this subsection for any 
        taxable year shall be equal to the greater of--
                    ``(A) the sum of the amounts determined under 
                paragraph (2) with respect to each plan year ending 
                with or within the taxable year, or
                    ``(B) the sum of the minimum required contributions 
                under section 430 for such plan years.
            ``(2) Determination of amount.--
                    ``(A) In general.--The amount determined under this 
                paragraph for any plan year shall be equal to the 
                excess (if any) of--
                            ``(i) the sum of--
                                    ``(I) the funding target for the 
                                plan year,
                                    ``(II) the target normal cost for 
                                the plan year, and
                                    ``(III) the cushion amount for the 
                                plan year, over
                            ``(ii) the value (determined under section 
                        430(g)(2)) of the assets of the plan which are 
                        held by the plan as of the valuation date for 
                        the plan year.
                    ``(B) Special rule for certain employers.--If 
                section 430(i) does not apply to a plan for a plan 
                year, the amount determined under subparagraph (A)(i) 
                for the plan year shall in no event be less than the 
                sum of--
                            ``(i) the funding target for the plan year 
                        (determined as if section 430(i) applied to the 
                        plan), plus
                            ``(ii) the target normal cost for the plan 
                        year (as so determined).
            ``(3) Cushion amount.--For purposes of paragraph 
        (2)(A)(i)(III)--
                    ``(A) In general.--The cushion amount for any plan 
                year is the sum of--
                            ``(i) 80 percent of the funding target for 
                        the plan year, and
                            ``(ii) the amount by which the funding 
                        target for the plan year would increase if the 
                        plan were to take into account--
                                    ``(I) increases in compensation 
                                which are expected to occur in 
                                succeeding plan years, or
                                    ``(II) if the plan does not base 
                                benefits for service to date on 
                                compensation, increases in benefits 
                                which are expected to occur in 
                                succeeding plan years (determined on 
                                the basis of the average annual 
                                increase in benefits over the 6 
                                immediately preceding plan years).
                    ``(B) Limitations.--
                            ``(i) In general.--In making the 
                        computation under subparagraph (A)(ii), the 
                        plan's actuary shall assume that the 
                        limitations under subsection (l) and section 
                        415(b) shall apply.
                            ``(ii) Expected increases.--In the case of 
                        a plan year during which a plan is covered 
                        under section 4021 of the Employee Retirement 
                        Income Security Act of 1974, the plan's actuary 
                        may, notwithstanding subsection (j) or (l), 
                        take into account increases in the limitations 
                        which are expected to occur in succeeding plan 
                        years.
            ``(4) Special rules for plans with 100 or fewer 
        participants.--
                    ``(A) In general.--For purposes of determining the 
                amount under paragraph (3) for any plan year, in the 
                case of a plan which has 100 or fewer participants for 
                the plan year, the liability of the plan attributable 
                to benefit increases for highly compensated employees 
                (as defined in section 414(q)) resulting from a plan 
                amendment which is made or becomes effective, whichever 
                is later, within the last 2 years shall not be taken 
                into account in determining the target liability.
                    ``(B) Rule for determining number of 
                participants.--For purposes of determining the number 
                of plan participants, all defined benefit plans 
                maintained by the same employer (or any member of such 
                employer's controlled group (within the meaning of 
                section 412(f)(4))) shall be treated as one plan, but 
                only participants of such member or employer shall be 
                taken into account.
            ``(5)  Special rule for terminating plans.--In the case of 
        a plan which, subject to section 4041 of the Employee 
        Retirement Income Security Act of 1974, terminates during the 
        plan year, the amount determined under paragraph (2) shall in 
        no event be less than the amount required to make the plan 
        sufficient for benefit liabilities (within the meaning of 
        section 4041(d) of such Act).
            ``(6) Actuarial assumptions.--Any computation under this 
        subsection for any plan year shall use the same actuarial 
        assumptions which are used for the plan year under section 430.
            ``(7) Definitions.--Any term used in this subsection which 
        is also used in section 430 shall have the same meaning given 
        such term by section 430.''.
    (b) Exception From Limitation on Deduction Where Combination of 
Defined Contribution and Defined Benefit Plans.--Section 404(a)(7)(C) 
of such Code, as amended by this Act, is amended by adding at the end 
the following new clause:
                            ``(iv) Guaranteed plans.--In applying this 
                        paragraph, any single-employer plan covered 
                        under section 4021 of the Employee Retirement 
                        Income Security Act of 1974 shall not be taken 
                        into account.''.
    (c) Technical and Conforming Amendments.--
            (1) The last sentence of section 404(a)(1)(A) of such Code 
        is amended by striking ``section 412'' each place it appears 
        and inserting ``section 431''.
            (2) Section 404(a)(1)(B) of such Code is amended--
                    (A) by striking ``In the case of a plan'' and 
                inserting ``In the case of a multiemployer plan'',
                    (B) by striking ``section 412(c)(7)'' each place it 
                appears and inserting ``section 431(c)(6)'',
                    (C) by striking ``section 412(c)(7)(B)'' and 
                inserting ``section 431(c)(6)(A)(ii)'',
                    (D) by striking ``section 412(c)(7)(A)'' and 
                inserting ``section 431(c)(6)(A)(i)'', and
                    (E) by striking ``section 412'' and inserting 
                ``section 431''.
            (3) Section 404(a)(7)(A) of such Code, as amended by this 
        Act, is amended--
                    (A) by adding at the end of subparagraph (A) the 
                following new sentence: ``In the case of a defined 
                benefit plan which is a single employer plan, the 
                amount necessary to satisfy the minimum funding 
                standard provided by section 412 shall not be less than 
                the plan's funding shortfall determined under section 
                430.'', and
                    (B) by striking subparagraph (D) and inserting:
                    ``(D) Insurance contract plans.--For purposes of 
                this paragraph, a plan described in section 412(g)(3) 
                shall be treated as a defined benefit plan.''.
            (4) Section 404A(g)(3)(A) of such Code is amended by 
        striking ``paragraphs (3) and (7) of section 412(c)'' and 
        inserting ``paragraphs (3) and (6) of section 431(c)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2006.

SEC. 115. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Amendments Related to Qualification Requirements.--
            (1) Section 401(a)(29) of the Internal Revenue Code of 1986 
        is amended to read as follows:
            ``(29) Benefit limitations on plans in at-risk status.--In 
        the case of a defined benefit plan (other than a multiemployer 
        plan) to which the requirements of section 412 apply, the trust 
        of which the plan is a part shall not constitute a qualified 
        trust under this subsection unless the plan meets the 
        requirements of section 436.''.
            (2) Section 401(a)(32) of such Code is amended--
                    (A) in subparagraph (A), by striking ``412(m)(5)'' 
                each place it appears and inserting ``section 
                430(j)(4)'', and
                    (B) in subparagraph (C), by striking ``section 
                412(m)'' and inserting ``section 430(j)''.
            (3) Section 401(a), as amended by this Act, is amended by 
        striking paragraph (33) and by redesignating paragraphs (34) 
        and (35) as paragraph (33) and (34).
    (b) Vesting Rules.--Section 411 of such Code is amended--
            (1) by striking ``section 412(c)(8)'' in subsection 
        (a)(3)(C) and inserting ``section 412(d)(2)'',
            (2) in subsection (b)(1)(F)--
                    (A) by striking ``paragraphs (2) and (3) of section 
                412(i)'' in clause (ii) and inserting ``subparagraphs 
                (B) and (C) of section 412(e)(3)'', and
                    (B) by striking ``paragraphs (4), (5), and (6) of 
                section 412(i)'' and inserting ``subparagraphs (D), 
                (E), and (F) of section 412(e)(3)'', and
            (3) by striking ``section 412(c)(8)'' in subsection 
        (d)(6)(A) and inserting ``section 412(e)(2)''.
    (c) Mergers and Consolidations of Plans.--Subclause (I) of section 
414(l)(2)(B)(i) of such Code is amended to read as follows:
                                    ``(I) the amount determined under 
                                section 431(c)(6)(A)(i) in the case of 
                                a multiemployer plan (and the sum of 
                                the funding shortfall and target normal 
                                cost determined under section 430 in 
                                the case of any other plan), over''.
    (d) Transfer of Excess Pension Assets to Retiree Health Accounts.--
            (1) Section 420(e)(2) of such Code is amended to read as 
        follows:
            ``(2) Excess pension assets.--The term `excess pension 
        assets' means the excess (if any) of--
                    ``(A) the lesser of--
                            ``(i) the fair market value of the plan's 
                        assets (reduced by the prefunding balance 
                        determined under section 430(f)), or
                            ``(ii) the value of plan assets as 
                        determined under section 430(g)(3) after 
                        reduction under section 430(f), over
                    ``(B) 125 percent of the sum of the funding 
                shortfall and the target normal cost determined under 
                section 430 for such plan year.''.
            (2) Section 420(e)(4) of such Code is amended to read as 
        follows:
            ``(4) Coordination with section 430.--In the case of a 
        qualified transfer, any assets so transferred shall not, for 
        purposes of this section, be treated as assets in the plan.''.
    (e) Excise Taxes.--
            (1) In general.--Subsections (a) and (b) of section 4971 of 
        such Code are amended to read as follows:
    ``(a) Initial Tax.--If at any time during any taxable year an 
employer maintains a plan to which section 412 applies, there is hereby 
imposed for the taxable year a tax equal to--
            ``(1) in the case of a single-employer plan, 10 percent of 
        the aggregate unpaid minimum required contributions for all 
        plan years remaining unpaid as of the end of any plan year 
        ending with or within the taxable year, and
            ``(2) in the case of a multiemployer plan, 5 percent of the 
        accumulated funding deficiency determined under section 431 as 
        of the end of any plan year ending with or within the taxable 
        year.
    ``(b) Additional Tax.--If--
            ``(1) a tax is imposed under subsection (a)(1) on any 
        unpaid required minimum contribution and such amount remains 
        unpaid as of the close of the taxable period, or
            ``(2) a tax is imposed under subsection (a)(2) on any 
        accumulated funding deficiency and the accumulated funding 
        deficiency is not corrected within the taxable period,
there is hereby imposed a tax equal to 100 percent of the unpaid 
minimum required contribution or accumulated funding deficiency, 
whichever is applicable, to the extent not so paid or corrected.''.
            (2) Section 4971(c) of such Code is amended--
                    (A) by striking ``the last two sentences of section 
                412(a)'' in paragraph (1) and inserting ``section 
                431'', and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Unpaid minimum required contribution.--
                    ``(A) In general.--The term `unpaid minimum 
                required contribution' means, with respect to any plan 
                year, any minimum required contribution under section 
                430 for the plan year which is not paid on or before 
                the due date (as determined under section 430(j)(1)) 
                for the plan year.
                    ``(B) Ordering rule.--Any payment to or under a 
                plan for any plan year shall be allocated first to 
                unpaid minimum required contributions for all preceding 
                plan years on a first-in, first-out basis and then to 
                the minimum required contribution under section 430 for 
                the plan year.''.
            (3) Section 4971(e)(1) of such Code is amended by striking 
        ``section 412(b)(3)(A)'' and inserting ``section 
        412(a)(1)(A)''.
            (4) Section 4971(f)(1) of such Code is amended--
                    (A) by striking ``section 412(m)(5)'' and inserting 
                ``section 430(j)(4)'', and
                    (B) by striking ``section 412(m)'' and inserting 
                ``section 430(j)''.
            (5) Section 4972(c)(7) of such Code is amended by striking 
        ``except to the extent that such contributions exceed the full-
        funding limitation (as defined in section 412(c)(7), determined 
        without regard to subparagraph (A)(i)(I) thereof)'' and 
        inserting ``except, in the case of a multiemployer plan, to the 
        extent that such contributions exceed the full-funding 
        limitation (as defined in section 431(c)(6))''.
    (f) Reporting Requirements.--Section 6059(b) of such Code is 
amended--
            (1) by striking ``the accumulated funding deficiency (as 
        defined in section 412(a))'' in paragraph (2) and inserting 
        ``the minimum required contribution determined under section 
        430, or the accumulated funding deficiency determined under 
        section 431,'', and
            (2) by striking paragraph (3)(B) and inserting:
                    ``(B) the requirements for reasonable actuarial 
                assumptions under section 430(h)(1) or 431(c)(3), 
                whichever are applicable, have been complied with.''.

 Subtitle C--Interest Rate Assumptions and Deductible Amounts for 2006

SEC. 121. EXTENSION OF REPLACEMENT OF 30-YEAR TREASURY RATES.

    (a) Amendments of ERISA.--
            (1) Determination of range.--Subclause (II) of section 
        302(b)(5)(B)(ii) of the Employee Retirement Income Security Act 
        of 1974 is amended--
                    (A) by striking ``2006'' and inserting ``2007'', 
                and
                    (B) by striking ``and 2005'' in the heading and 
                inserting ``, 2005, and 2006''.
            (2) Determination of current liability.--Subclause (IV) of 
        section 302(d)(7)(C)(i) of such Act is amended--
                    (A) by striking ``or 2005'' and inserting ``, 2005, 
                or 2006'', and
                    (B) by striking ``and 2005'' in the heading and 
                inserting ``, 2005, and 2006''.
            (3) PBGC premium rate.--Subclause (V) of section 
        4006(a)(3)(E)(iii) of such Act is amended by striking ``2006'' 
        and inserting ``2007''.
    (b) Amendments of Internal Revenue Code.--
            (1) Determination of range.--Subclause (II) of section 
        412(b)(5)(B)(ii) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) by striking ``2006'' and inserting ``2007'', 
                and
                    (B) by striking ``and 2005'' in the heading and 
                inserting ``, 2005, and 2006''.
            (2) Determination of current liability.--Subclause (IV) of 
        section 412(l)(7)(C)(i) of such Code is amended--
                    (A) by striking ``or 2005'' and inserting ``, 2005, 
                or 2006'', and
                    (B) by striking ``and 2005'' in the heading and 
                inserting ``, 2005, and 2006''.
    (c) Plan Amendments.--Clause (ii) of section 101(c)(2)(A) of the 
Pension Funding Equity Act of 2004 is amended by striking ``2006'' and 
inserting ``2007''.

SEC. 122. DEDUCTION LIMITS FOR PLAN CONTRIBUTIONS.

    (a) In General.--Clause (i) of section 404(a)(1)(D) of the Internal 
Revenue Code of 1986 (relating to special rule in case of certain 
plans) is amended by striking ``section 412(l)'' and inserting 
``section 412(l)(8)(A), except that section 412(l)(8)(A) shall be 
applied for purposes of this clause by substituting `180 percent (130 
percent in the case of a multiemployer plan) of current liability' for 
`the current liability' in clause (i).''
    (b) Conforming Amendment.--Section 404(a)(1) of the Internal 
Revenue Code of 1986 is amended by striking subparagraph (F).
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2005.

SEC. 123. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.

    (a) In General.--Subparagraph (C) of section 404(a)(7) of the 
Internal Revenue Code of 1986 (relating to limitation on deductions 
where combination of defined contribution plan and defined benefit 
plan) is amended by adding after clause (ii) the following new clause:
                            ``(iii) Limitation.--In the case of 
                        employer contributions to 1 or more defined 
                        contribution plans, this paragraph shall only 
                        apply to the extent that such contributions 
                        exceed 6 percent of the compensation otherwise 
                        paid or accrued during the taxable year to the 
                        beneficiaries under such plans. For purposes of 
                        this clause, amounts carried over from 
                        preceding taxable years under subparagraph (B) 
                        shall be treated as employer contributions to 1 
                        or more defined contributions to the extent 
                        attributable to employer contributions to such 
                        plans in such preceding taxable years.''
    (b) Conforming Amendment.--Subparagraph (A) of section 4972(c)(6) 
of such Code (relating to nondeductible contributions) is amended to 
read as follows:
                    ``(A) so much of the contributions to 1 or more 
                defined contribution plans which are not deductible 
                when contributed solely because of section 404(a)(7) as 
                does not exceed the amount of contributions described 
                in section 401(m)(4)(A), or''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions for taxable years beginning after December 31, 
2005.

TITLE II--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT 
                      PLANS AND RELATED PROVISIONS

                       Subtitle A--Funding Rules

 PART I--AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS.

    (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by this Act) is 
amended by inserting after section 303 the following new section:

          ``minimum funding standards for multiemployer plans

    ``Sec. 304. (a) In General.--For purposes of section 302, the 
accumulated funding deficiency of a multiemployer plan for any plan 
year is--
            ``(1) except as provided in paragraph (2), the amount, 
        determined as of the end of the plan year, equal to the excess 
        (if any) of the total charges to the funding standard account 
        of the plan for all plan years (beginning with the first plan 
        year for which this part applies to the plan) over the total 
        credits to such account for such years, and
            ``(2) if the multiemployer plan is in reorganization for 
        any plan year, the accumulated funding deficiency of the plan 
        determined under section 4243.
    ``(b) Funding Standard Account.--
            ``(1) Account required.--Each multiemployer plan to which 
        this part applies shall establish and maintain a funding 
        standard account. Such account shall be credited and charged 
        solely as provided in this section.
            ``(2) Charges to account.--For a plan year, the funding 
        standard account shall be charged with the sum of--
                    ``(A) the normal cost of the plan for the plan 
                year,
                    ``(B) the amounts necessary to amortize in equal 
                annual installments (until fully amortized)--
                            ``(i) separately, with respect to each plan 
                        year, the net increase (if any) in unfunded 
                        past service liability under the plan arising 
                        from plan amendments adopted in such year, over 
                        a period of 15 plan years,
                            ``(ii) separately, with respect to each 
                        plan year, the net experience loss (if any) 
                        under the plan, over a period of 15 plan years, 
                        and
                            ``(iii) separately, with respect to each 
                        plan year, the net loss (if any) resulting from 
                        changes in actuarial assumptions used under the 
                        plan, over a period of 15 plan years,
                    ``(C) the amount necessary to amortize each waived 
                funding deficiency (within the meaning of section 
                302(c)(3)) for each prior plan year in equal annual 
                installments (until fully amortized) over a period of 
                15 plan years,
                    ``(D) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 5 plan years any amount credited to the 
                funding standard account under section 302(b)(3)(D) (as 
                in effect on the day before the date of the enactment 
                of the Pension Security and Transparency Act of 2005), 
                and
                    ``(E) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 20 years the contributions which would be 
                required to be made under the plan but for the 
                provisions of section 302(c)(7)(A)(i)(I) (as in effect 
                on the day before the date of the enactment of the 
                Pension Security and Transparency Act of 2005).
            ``(3) Credits to account.--For a plan year, the funding 
        standard account shall be credited with the sum of--
                    ``(A) the amount considered contributed by the 
                employer to or under the plan for the plan year,
                    ``(B) the amount necessary to amortize in equal 
                annual installments (until fully amortized)--
                            ``(i) separately, with respect to each plan 
                        year, the net decrease (if any) in unfunded 
                        past service liability under the plan arising 
                        from plan amendments adopted in such year, over 
                        a period of 15 plan years,
                            ``(ii) separately, with respect to each 
                        plan year, the net experience gain (if any) 
                        under the plan, over a period of 15 plan years, 
                        and
                            ``(iii) separately, with respect to each 
                        plan year, the net gain (if any) resulting from 
                        changes in actuarial assumptions used under the 
                        plan, over a period of 15 plan years,
                    ``(C) the amount of the waived funding deficiency 
                (within the meaning of section 302(c)(3)) for the plan 
                year, and
                    ``(D) in the case of a plan year for which the 
                accumulated funding deficiency is determined under the 
                funding standard account if such plan year follows a 
                plan year for which such deficiency was determined 
                under the alternative minimum funding standard under 
                section 305 (as in effect on the day before the date of 
                the enactment of the Pension Security and Transparency 
                Act of 2005), the excess (if any) of any debit balance 
                in the funding standard account (determined without 
                regard to this subparagraph) over any debit balance in 
                the alternative minimum funding standard account.
            ``(4) Special rule for amounts first amortized to plan 
        years before 2007.--In the case of any amount amortized under 
        section 302(b) (as in effect on the day before the date of the 
        enactment of the Pension Security and Transparency Act of 2005) 
        over any period beginning with a plan year beginning before 
        2007, in lieu of the amortization described in paragraphs 
        (2)(B) and (3)(B), such amount shall continue to be amortized 
        under such section as so in effect.
            ``(5) Combining and offsetting amounts to be amortized.--
        Under regulations prescribed by the Secretary of the Treasury, 
        amounts required to be amortized under paragraph (2) or 
        paragraph (3), as the case may be--
                    ``(A) may be combined into one amount under such 
                paragraph to be amortized over a period determined on 
                the basis of the remaining amortization period for all 
                items entering into such combined amount, and
                    ``(B) may be offset against amounts required to be 
                amortized under the other such paragraph, with the 
                resulting amount to be amortized over a period 
                determined on the basis of the remaining amortization 
                periods for all items entering into whichever of the 
                two amounts being offset is the greater.
            ``(6) Interest.--The funding standard account (and items 
        therein) shall be charged or credited (as determined under 
        regulations prescribed by the Secretary of the Treasury) with 
        interest at the appropriate rate consistent with the rate or 
        rates of interest used under the plan to determine costs.
            ``(7) Special rules relating to charges and credits to 
        funding standard account.--For purposes of this part--
                    ``(A) Withdrawal liability.--Any amount received by 
                a multiemployer plan in payment of all or part of an 
                employer's withdrawal liability under part 1 of 
                subtitle E of title IV shall be considered an amount 
                contributed by the employer to or under the plan. The 
                Secretary of the Treasury may prescribe by regulation 
                additional charges and credits to a multiemployer 
                plan's funding standard account to the extent necessary 
                to prevent withdrawal liability payments from being 
                unduly reflected as advance funding for plan 
                liabilities.
                    ``(B) Adjustments when a multiemployer plan leaves 
                reorganization.--If a multiemployer plan is not in 
                reorganization in the plan year but was in 
                reorganization in the immediately preceding plan year, 
                any balance in the funding standard account at the 
                close of such immediately preceding plan year--
                            ``(i) shall be eliminated by an offsetting 
                        credit or charge (as the case may be), but
                            ``(ii) shall be taken into account in 
                        subsequent plan years by being amortized in 
                        equal annual installments (until fully 
                        amortized) over 30 plan years.
                The preceding sentence shall not apply to the extent of 
                any accumulated funding deficiency under section 
                4243(a) as of the end of the last plan year that the 
                plan was in reorganization.
                    ``(C) Plan payments to supplemental program or 
                withdrawal liability payment fund.--Any amount paid by 
                a plan during a plan year to the Pension Benefit 
                Guaranty Corporation pursuant to section 4222 of this 
                Act or to a fund exempt under section 501(c)(22) of the 
                Internal Revenue Code of 1986 pursuant to section 4223 
                of this Act shall reduce the amount of contributions 
                considered received by the plan for the plan year.
                    ``(D) Interim withdrawal liability payments.--Any 
                amount paid by an employer pending a final 
                determination of the employer's withdrawal liability 
                under part 1 of subtitle E of title IV and subsequently 
                refunded to the employer by the plan shall be charged 
                to the funding standard account in accordance with 
                regulations prescribed by the Secretary of the 
                Treasury.
                    ``(E) Election for deferral of charge for portion 
                of net experience loss.--If an election is in effect 
                under section 302(b)(7)(F) (as in effect on the day 
                before the date of the enactment of the Pension 
                Security and Transparency Act of 2005) for any plan 
                year, the funding standard account shall be charged in 
                the plan year to which the portion of the net 
                experience loss deferred by such election was deferred 
                with the amount so deferred (and paragraph (2)(B)(ii) 
                shall not apply to the amount so charged).
                    ``(F) Financial assistance.--Any amount of any 
                financial assistance from the Pension Benefit Guaranty 
                Corporation to any plan, and any repayment of such 
                amount, shall be taken into account under this section 
                and section 412 of the Internal Revenue Code of 1986 in 
                such manner as is determined by the Secretary of the 
                Treasury.
                    ``(G) Short-term benefits.--To the extent that any 
                plan amendment increases the unfunded past service 
                liability under the plan by reason of an increase in 
                benefits which are payable under the terms of the plan 
                for a period that does not exceed 14 years from the 
                effective date of the amendment, paragraph (2)(B)(i) 
                shall be applied separately with respect to such 
                increase in unfunded past service liability by 
                substituting the number of years of the period during 
                which such benefits are payable for `15'.
    ``(c) Additional Rules.--
            ``(1) Determinations to be made under funding method.--For 
        purposes of this part, normal costs, accrued liability, past 
        service liabilities, and experience gains and losses shall be 
        determined under the funding method used to determine costs 
        under the plan.
            ``(2) Valuation of assets.--
                    ``(A) In general.--For purposes of this part, the 
                value of the plan's assets shall be determined on the 
                basis of any reasonable actuarial method of valuation 
                which takes into account fair market value and which is 
                permitted under regulations prescribed by the Secretary 
                of the Treasury.
                    ``(B) Election with respect to bonds.--The value of 
                a bond or other evidence of indebtedness which is not 
                in default as to principal or interest may, at the 
                election of the plan administrator, be determined on an 
                amortized basis running from initial cost at purchase 
                to par value at maturity or earliest call date. Any 
                election under this subparagraph shall be made at such 
                time and in such manner as the Secretary of the 
                Treasury shall by regulations provide, shall apply to 
                all such evidences of indebtedness, and may be revoked 
                only with the consent of such Secretary.
            ``(3) Actuarial assumptions must be reasonable.--For 
        purposes of this section, all costs, liabilities, rates of 
        interest, and other factors under the plan shall be determined 
        on the basis of actuarial assumptions and methods--
                    ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                    ``(B) which, in combination, offer the actuary's 
                best estimate of anticipated experience under the plan.
            ``(4) Treatment of certain changes as experience gain or 
        loss.--For purposes of this section, if--
                    ``(A) a change in benefits under the Social 
                Security Act or in other retirement benefits created 
                under Federal or State law, or
                    ``(B) a change in the definition of the term 
                `wages' under section 3121 of the Internal Revenue Code 
                of 1986, or a change in the amount of such wages taken 
                into account under regulations prescribed for purposes 
                of section 401(a)(5) of such Code,
        results in an increase or decrease in accrued liability under a 
        plan, such increase or decrease shall be treated as an 
        experience loss or gain.
            ``(5) Full funding.--If, as of the close of a plan year, a 
        plan would (without regard to this paragraph) have an 
        accumulated funding deficiency in excess of the full funding 
        limitation--
                    ``(A) the funding standard account shall be 
                credited with the amount of such excess, and
                    ``(B) all amounts described in subparagraphs (B), 
                (C), and (D) of subsection (b) (2) and subparagraph (B) 
                of subsection (b)(3) which are required to be amortized 
                shall be considered fully amortized for purposes of 
                such subparagraphs.
            ``(6) Full-funding limitation.--
                    ``(A) In general.--For purposes of paragraph (5), 
                the term `full-funding limitation' means the excess (if 
                any) of--
                            ``(i) the accrued liability (including 
                        normal cost) under the plan (determined under 
                        the entry age normal funding method if such 
                        accrued liability cannot be directly calculated 
                        under the funding method used for the plan), 
                        over
                            ``(ii) the lesser of--
                                    ``(I) the fair market value of the 
                                plan's assets, or
                                    ``(II) the value of such assets 
                                determined under paragraph (2).
                    ``(B) Minimum amount.--
                            ``(i) In general.--In no event shall the 
                        full-funding limitation determined under 
                        subparagraph (A) be less than the excess (if 
                        any) of--
                                    ``(I) 90 percent of the current 
                                liability of the plan (including the 
                                expected increase in current liability 
                                due to benefits accruing during the 
                                plan year), over
                                    ``(II) the value of the plan's 
                                assets determined under paragraph (2).
                            ``(ii) Assets.--For purposes of clause (i), 
                        assets shall not be reduced by any credit 
                        balance in the funding standard account.
                    ``(C) Full funding limitation.--For purposes of 
                this paragraph, unless otherwise provided by the plan, 
                the accrued liability under a multiemployer plan shall 
                not include benefits which are not nonforfeitable under 
                the plan after the termination of the plan (taking into 
                consideration section 411(d)(3) of the Internal Revenue 
                Code of 1986).
                    ``(D) Current liability.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `current 
                        liability' means all liabilities to employees 
                        and their beneficiaries under the plan.
                            ``(ii) Treatment of unpredictable 
                        contingent event benefits.--For purposes of 
                        clause (i), any benefit contingent on an event 
                        other than--
                                    ``(I) age, service, compensation, 
                                death, or disability, or
                                    ``(II) an event which is reasonably 
                                and reliably predictable (as determined 
                                by the Secretary of the Treasury),
                        shall not be taken into account until the event 
                        on which the benefit is contingent occurs.
                            ``(iii) Interest rate used.--The rate of 
                        interest used to determine current liability 
                        under this paragraph shall be the rate of 
                        interest determined under subparagraph (E).
                            ``(iv) Mortality tables.--
                                    ``(I) Commissioners' standard 
                                table.--In the case of plan years 
                                beginning before the first plan year to 
                                which the first tables prescribed under 
                                subclause (II) apply, the mortality 
                                table used in determining current 
                                liability under this paragraph shall be 
                                the table prescribed by the Secretary 
                                of the Treasury which is based on the 
                                prevailing commissioners' standard 
                                table (described in section 
                                807(d)(5)(A) of the Internal Revenue 
                                Code of 1986) used to determine 
                                reserves for group annuity contracts 
                                issued on January 1, 1993.
                                    ``(II) Secretarial authority.--The 
                                Secretary of the Treasury may by 
                                regulation prescribe for plan years 
                                beginning after December 31, 1999, 
                                mortality tables to be used in 
                                determining current liability under 
                                this subsection. Such tables shall be 
                                based upon the actual experience of 
                                pension plans and projected trends in 
                                such experience. In prescribing such 
                                tables, such Secretary shall take into 
                                account results of available 
                                independent studies of mortality of 
                                individuals covered by pension plans.
                            ``(v) Separate mortality tables for the 
                        disabled.--Notwithstanding clause (iv)--
                                    ``(I) In general.--The Secretary of 
                                the Treasury shall establish mortality 
                                tables which may be used (in lieu of 
                                the tables under clause (iv)) to 
                                determine current liability under this 
                                subsection for individuals who are 
                                entitled to benefits under the plan on 
                                account of disability. Such Secretary 
                                shall establish separate tables for 
                                individuals whose disabilities occur in 
                                plan years beginning before January 1, 
                                1995, and for individuals whose 
                                disabilities occur in plan years 
                                beginning on or after such date.
                                    ``(II) Special rule for 
                                disabilities occurring after 1994.--In 
                                the case of disabilities occurring in 
                                plan years beginning after December 31, 
                                1994, the tables under subclause (I) 
                                shall apply only with respect to 
                                individuals described in such subclause 
                                who are disabled within the meaning of 
                                title II of the Social Security Act and 
                                the regulations thereunder.
                            ``(vi) Periodic review.--The Secretary of 
                        the Treasury shall periodically (at least every 
                        5 years) review any tables in effect under this 
                        subparagraph and shall, to the extent such 
                        Secretary determines necessary, by regulation 
                        update the tables to reflect the actual 
                        experience of pension plans and projected 
                        trends in such experience.
                    ``(E) Required change of interest rate.--For 
                purposes of determining a plan's current liability for 
                purposes of this paragraph--
                            ``(i) In general.--If any rate of interest 
                        used under the plan under subsection (b)(6) to 
                        determine cost is not within the permissible 
                        range, the plan shall establish a new rate of 
                        interest within the permissible range.
                            ``(ii) Permissible range.--For purposes of 
                        this subparagraph--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), the term 
                                `permissible range' means a rate of 
                                interest which is not more than 5 
                                percent above, and not more than 10 
                                percent below, the weighted average of 
                                the rates of interest on 30-year 
                                Treasury securities during the 4-year 
                                period ending on the last day before 
                                the beginning of the plan year.
                                    ``(II) Secretarial authority.--If 
                                the Secretary of the Treasury finds 
                                that the lowest rate of interest 
                                permissible under subclause (I) is 
                                unreasonably high, such Secretary may 
                                prescribe a lower rate of interest, 
                                except that such rate may not be less 
                                than 80 percent of the average rate 
                                determined under such subclause.
                            ``(iii) Assumptions.--Notwithstanding 
                        paragraph (3)(A), the interest rate used under 
                        the plan shall be--
                                    ``(I) determined without taking 
                                into account the experience of the plan 
                                and reasonable expectations, but
                                    ``(II) consistent with the 
                                assumptions which reflect the purchase 
                                rates which would be used by insurance 
                                companies to satisfy the liabilities 
                                under the plan.
            ``(7) Annual valuation.--
                    ``(A) In general.--For purposes of this section, a 
                determination of experience gains and losses and a 
                valuation of the plan's liability shall be made not 
                less frequently than once every year, except that such 
                determination shall be made more frequently to the 
                extent required in particular cases under regulations 
                prescribed by the Secretary of the Treasury.
                    ``(B) Valuation date.--
                            ``(i) Current year.--Except as provided in 
                        clause (ii), the valuation referred to in 
                        subparagraph (A) shall be made as of a date 
                        within the plan year to which the valuation 
                        refers or within one month prior to the 
                        beginning of such year.
                            ``(ii) Use of prior year valuation.--The 
                        valuation referred to in subparagraph (A) may 
                        be made as of a date within the plan year prior 
                        to the year to which the valuation refers if, 
                        as of such date, the value of the assets of the 
                        plan are not less than 100 percent of the 
                        plan's current liability (as defined in 
                        paragraph (6)(D) without regard to clause (iv) 
                        thereof).
                            ``(iii) Adjustments.--Information under 
                        clause (ii) shall, in accordance with 
                        regulations, be actuarially adjusted to reflect 
                        significant differences in participants.
                            ``(iv) Limitation.--A change in funding 
                        method to use a prior year valuation, as 
                        provided in clause (ii), may not be made unless 
                        as of the valuation date within the prior plan 
                        year, the value of the assets of the plan are 
                        not less than 125 percent of the plan's current 
                        liability (as defined in paragraph (6)(D) 
                        without regard to clause (iv) thereof).
            ``(8) Time when certain contributions deemed made.--For 
        purposes of this section, any contributions for a plan year 
        made by an employer after the last day of such plan year, but 
        not later than two and one-half months after such day, shall be 
        deemed to have been made on such last day. For purposes of this 
        subparagraph, such two and one-half month period may be 
        extended for not more than six months under regulations 
        prescribed by the Secretary of the Treasury.
    ``(d) Extension of Amortization Periods for Multiemployer Plans.--
            ``(1) Automatic extension upon application by certain 
        plans.--
                    ``(A) In general.--If the plan sponsor of a 
                multiemployer plan--
                            ``(i) submits to the Secretary of the 
                        Treasury an application for an extension of the 
                        period of years required to amortize any 
                        unfunded liability described in any clause of 
                        subsection (b)(2)(B) or described in subsection 
                        (b)(4), and
                            ``(ii) includes with the application a 
                        certification by the plan's actuary described 
                        in subparagraph (B),
                the Secretary of the Treasury shall extend the 
                amortization period for the period of time (not in 
                excess of 5 years) specified in the application. Such 
                extension shall be in addition to any extension under 
                paragraph (2).
                    ``(B) Criteria.--A certification with respect to a 
                multiemployer plan is described in this subparagraph if 
                the plan's actuary certifies that, based on reasonable 
                assumptions--
                            ``(i) absent the extension under 
                        subparagraph (A), the plan would have an 
                        accumulated funding deficiency in the current 
                        plan year or any of the 9 succeeding plan 
                        years,
                            ``(ii) the plan sponsor has adopted a plan 
                        to improve the plan's funding status,
                            ``(iii) the plan is projected to have 
                        sufficient assets to timely pay expected 
                        benefits and anticipated expenditures over the 
                        amortization period as extended, and
                            ``(iv) the notice required under paragraph 
                        (3)(A) has been provided.
            ``(2) Additional extension.--
                    ``(A) In general.--If the plan sponsor of a 
                multiemployer plan submits to the Secretary of the 
                Treasury an application for an extension of the period 
                of years required to amortize any unfunded liability 
                described in any clause of subsection (b)(2)(B) or 
                described in subsection (b)(4), the Secretary of the 
                Treasury may extend the amortization period for a 
                period of time (not in excess of 5 years) if the 
                Secretary of the Treasury makes the determination 
                described in subparagraph (B). Such extension shall be 
                in addition to any extension under paragraph (1).
                    ``(B) Determination.--The Secretary make grant an 
                extension under subparagraph (A) if the Secretary 
                determines that--
                            ``(i) such extension would carry out the 
                        purposes of this Act and would provide adequate 
                        protection for participants under the plan and 
                        their beneficiaries, and
                            ``(ii) the failure to permit such extension 
                        would--
                                    ``(I) result in a substantial risk 
                                to the voluntary continuation of the 
                                plan, or a substantial curtailment of 
                                pension benefit levels or employee 
                                compensation, and
                                    ``(II) be adverse to the interests 
                                of plan participants in the aggregate.
                    ``(C) Action by secretary.--The Secretary of the 
                Treasury shall act upon any application for an 
                extension under this paragraph within 180 days of the 
                submission of such application. If the Secretary 
                rejects the application for an extension under this 
                paragraph, the Secretary shall provide notice to the 
                plan detailing the specific reasons for the rejection, 
                including references to the criteria set forth above.
            ``(3) Advance notice.--
                    ``(A) In general.--The Secretary of the Treasury 
                shall, before granting an extension under this 
                subsection, require each applicant to provide evidence 
                satisfactory to such Secretary that the applicant has 
                provided notice of the filing of the application for 
                such extension to each affected party (as defined in 
                section 4001(a)(21)) with respect to the affected plan. 
                Such notice shall include a description of the extent 
                to which the plan is funded for benefits which are 
                guaranteed under title IV and for benefit liabilities.
                    ``(B) Consideration of relevant information.--The 
                Secretary of the Treasury shall consider any relevant 
                information provided by a person to whom notice was 
                given under paragraph (1).''.
    (b) Shortfall Funding Method.--
            (1) In general.--A multiemployer plan meeting the criteria 
        of paragraph (2) may adopt, use, or cease using, the shortfall 
        funding method and such adoption, use, or cessation of use of 
        such method, shall be deemed approved by the Secretary of the 
        Treasury under section 302(d)(1) of the Employee Retirement 
        Income Security Act of 1974 and section 412(e)(1) of the 
        Internal Revenue Code of 1986.
            (2) Criteria.--A multiemployer pension plan meets the 
        criteria of this clause if--
                    (A) the plan has not used the shortfall funding 
                method during the 5-year period ending on the day 
                before the date the plan is to use the method under 
                paragraph (1); and
                    (B) the plan is not operating under an amortization 
                period extension under section 304(d) of such Act and 
                did not operate under such an extension during such 5-
                year period.
            (3) Shortfall funding method defined.--For purposes of this 
        subsection, the term ``shortfall funding method'' means the 
        shortfall funding method described in Treasury Regulations 
        section 1.412(c)(1)-2 (26 C.F.R. 1.412(c)(1)-2).
            (4) Benefit restrictions to apply.--The benefit 
        restrictions under section 302(c)(7) of such Act and section 
        412(d)(7) of such Code shall apply during any period a 
        multiemployer plan is on the shortfall funding method pursuant 
        to this subsection.
            (5) Use of shortfall method not to preclude other 
        options.--Nothing in this subsection shall be construed to 
        affect a multiemployer plan's ability to adopt the shortfall 
        funding method with the Secretary's permission under otherwise 
        applicable regulations or to affect a multiemployer plan's 
        right to change funding methods, with or without the 
        Secretary's consent, as provided in applicable rules and 
        regulations.
    (c) Conforming Amendments.--
            (1) Section 301 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1081) is amended by striking subsection 
        (d).
            (2) The table of contents in section 1 of such Act (as 
        amended by this Act) is amended by inserting after the item 
        relating to section 303 the following new item:

``Sec. 304. Minimum funding standards for multiemployer plans.''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after 2006.
            (2) Special rule for certain amortization extensions.--If 
        the Secretary of the Treasury grants an extension under section 
        304 of the Employee Retirement Income Security Act of 1974 and 
        section 412(e) of the Internal Revenue Code of 1986 with 
        respect to any application filed with the Secretary of the 
        Treasury on or before June 30, 2005, the extension (and any 
        modification thereof) shall be applied and administered under 
        the rules of such sections as in effect before the enactment of 
        this Act, including the use of the rate of interest determined 
        under section 6621(b) of such Code.

SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN 
              ENDANGERED OR CRITICAL STATUS.

    (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by the preceding 
provisions of this Act) is amended by inserting after section 304 the 
following new section:

``additional funding rules for multiemployer plans in endangered status 
                           or critical status

    ``Sec. 305. (a) General Rule.--For purposes of this part, in the 
case of a multiemployer plan--
            ``(1) if the plan is in endangered status--
                    ``(A) the plan sponsor shall adopt and implement a 
                funding improvement plan in accordance with the 
                requirements of subsection (c), and
                    ``(B) the requirements of subsection (d) shall 
                apply during the funding plan adoption period and the 
                funding improvement period, and
            ``(2) if the plan is in critical status--
                    ``(A) the plan sponsor shall adopt and implement a 
                rehabilitation plan in accordance with the requirements 
                of subsection (e), and
                    ``(B) the requirements of subsection (f) shall 
                apply during the rehabilitation plan adoption period 
                and the rehabilitation period.
    ``(b) Determination of Endangered and Critical Status.--For 
purposes of this section--
            ``(1) Endangered status.--A multiemployer plan is in 
        endangered status for a plan year if, as determined by the plan 
        actuary under paragraph (3), the plan is not in critical status 
        for the plan year and either--
                    ``(A) the plan's funded percentage for such plan 
                year is less than 80 percent, or
                    ``(B) the plan has an accumulated funding 
                deficiency for such plan year, or is projected to have 
                such an accumulated funding deficiency for any of the 6 
                succeeding plan years, taking into account any 
                extension of amortization periods under section 304(d).
        For purposes of this section, a plan described in subparagraph 
        (B) shall be treated as in seriously endangered status.
            ``(2) Critical status.--A multiemployer plan is in critical 
        status for a plan year if, as determined by the plan actuary 
        under paragraph (3), the plan is described in 1 or more of the 
        following subparagraphs as of the beginning of the plan year:
                    ``(A) A plan is described in this subparagraph if--
                            ``(i) the funded percentage of the plan is 
                        less than 65 percent, and
                            ``(ii) the sum of--
                                    ``(I) the market value of plan 
                                assets, plus
                                    ``(II) the present value of the 
                                reasonably anticipated employer 
                                contributions for the current plan year 
                                and each of the 5 succeeding plan 
                                years, assuming that the terms of all 
                                collective bargaining agreements 
                                pursuant to which the plan is 
                                maintained for the current plan year 
                                continue in effect for succeeding plan 
                                years,
                        is less than the present value of all benefits 
                        projected to be payable under the plan during 
                        the current plan year and each of the 5 
                        succeeding plan years (plus administrative 
                        expenses for such plan years).
                    ``(B) A plan is described in this subparagraph if--
                            ``(i) the plan has an accumulated funding 
                        deficiency for the current plan year, not 
                        taking into account any extension of 
                        amortization periods under section 304(d), or
                            ``(ii) the plan is projected to have an 
                        accumulated funding deficiency for any of the 3 
                        succeeding plan years (4 succeeding plan years 
                        if the funded percentage of the plan is 65 
                        percent or less), not taking into account any 
                        extension of amortization periods under section 
                        304(d).
                    ``(C) A plan is described in this subparagraph if--
                            ``(i)(I) the plan's normal cost for the 
                        current plan year, plus interest (determined at 
                        the rate used for determining costs under the 
                        plan) for the current plan year on the amount 
                        of unfunded benefit liabilities under the plan 
                        as of the last date of the preceding plan year, 
                        exceeds
                            ``(II) the present value of the reasonably 
                        anticipated employer contributions for the 
                        current plan year,
                            ``(ii) the present value of nonforfeitable 
                        benefits of inactive participants is greater 
                        than the present value of nonforfeitable 
                        benefits of active participants, and
                            ``(iii) the plan has an accumulated funding 
                        deficiency for the current plan year, or is 
                        projected to have such a deficiency for any of 
                        the 4 succeeding plan years, not taking into 
                        account any extension of amortization periods 
                        under section 304(d).
                    ``(D) A plan is described in this subparagraph if 
                the sum of--
                            ``(i) the market value of plan assets, plus
                            ``(ii) the present value of the reasonably 
                        anticipated employer contributions for the 
                        current plan year and each of the 4 succeeding 
                        plan years, assuming that the terms of all 
                        collective bargaining agreements pursuant to 
                        which the plan is maintained for the current 
                        plan year continue in effect for succeeding 
                        plan years,
                is less than the present value of all benefits 
                projected to be payable under the plan during the 
                current plan year and each of the 4 succeeding plan 
                years (plus administrative expenses for such plan 
                years).
            ``(3) Annual certification by plan actuary.--
                    ``(A) In general.--During the 90-day period 
                beginning on the first day of each plan year of a 
                multiemployer plan, the plan actuary shall certify to 
                the Secretary of the Treasury--
                            ``(i) whether or not the plan is in 
                        endangered status for such plan year and 
                        whether or not the plan is in critical status 
                        for such plan year, and
                            ``(ii) in the case of a plan which is in a 
                        funding improvement or rehabilitation period, 
                        whether or not the plan is making the scheduled 
                        progress in meeting the requirements of its 
                        funding improvement or rehabilitation plan.
                    ``(B) Actuarial projections of assets and 
                liabilities.--
                            ``(i) In general.--In making the 
                        determinations and projections under this 
                        subsection, the plan actuary shall make 
                        projections required for the current and 
                        succeeding plan years, using reasonable 
                        actuarial estimates, assumptions, and methods, 
                        of the current value of the assets of the plan 
                        and the present value of all liabilities to 
                        participants and beneficiaries under the plan 
                        for the current plan year as of the beginning 
                        of such year. The projected present value of 
                        liabilities as of the beginning of such year 
                        shall be determined based on the actuarial 
                        statement required under section 103(d) with 
                        respect to the most recently filed annual 
                        report or the actuarial valuation for the 
                        preceding plan year.
                            ``(ii) Determinations of future 
                        contributions.--Any actuarial projection of 
                        plan assets shall assume--
                                    ``(I) reasonably anticipated 
                                employer contributions for the current 
                                and succeeding plan years, assuming 
                                that the terms of the one or more 
                                collective bargaining agreements 
                                pursuant to which the plan is 
                                maintained for the current plan year 
                                continue in effect for succeeding plan 
                                years, or
                                    ``(II) that employer contributions 
                                for the most recent plan year will 
                                continue indefinitely, but only if the 
                                plan actuary determines there have been 
                                no significant demographic changes that 
                                would make such assumption 
                                unreasonable.
                    ``(C) Penalty for failure to secure timely 
                actuarial certification.--Any failure of the plan's 
                actuary to certify the plan's status under this 
                subsection by the date specified in subparagraph (A) 
                shall be treated for purposes of section 502(c)(2) as a 
                failure or refusal by the plan administrator to file 
                the annual report required to be filed with the 
                Secretary under section 101(b)(4).
                    ``(D) Notice.--In any case in which a multiemployer 
                plan is certified to be in endangered or critical 
                status under subparagraph (A), the plan sponsor shall, 
                not later than 30 days after the date of the 
                certification, provide notification of the endangered 
                or critical status to the participants and 
                beneficiaries, the bargaining parties, the Pension 
                Benefit Guaranty Corporation, the Secretary of the 
                Treasury, and the Secretary.
    ``(c) Funding Improvement Plan Must Be Adopted for Multiemployer 
Plans in Endangered Status.--
            ``(1) In general.--In any case in which a multiemployer 
        plan is in endangered status for a plan year, the plan sponsor, 
        in accordance with this subsection--
                    ``(A) shall adopt a funding improvement plan not 
                later than 240 days following the required date for the 
                actuarial certification of endangered status under 
                subsection (b)(3)(A), and
                    ``(B) within 30 days after the adoption of the 
                funding improvement plan--
                            ``(i) in the case of a plan in seriously 
                        endangered status, shall provide to the 
                        bargaining parties 1 or more schedules showing 
                        revised benefit structures, revised 
                        contribution structures, or both, which, if 
                        adopted, may reasonably be expected to enable 
                        the multiemployer plan to meet the applicable 
                        requirements under paragraph (3) in accordance 
                        with the funding improvement plan, including a 
                        description of the reductions in future benefit 
                        accruals and increases in contributions that 
                        the plan sponsor determines are reasonably 
                        necessary to meet the applicable requirements 
                        if the plan sponsor assumes that there are no 
                        increases in contributions under the plan other 
                        than the increases necessary to meet the 
                        applicable requirements after future benefit 
                        accruals have been reduced to the maximum 
                        extent permitted by law, and
                            ``(ii) may, if the plan sponsor deems 
                        appropriate, prepare and provide the bargaining 
                        parties with additional information relating to 
                        contribution rates or benefit reductions, 
                        alternative schedules, or other information 
                        relevant to achieving the requirements under 
                        paragraph (3) in accordance with the funding 
                        improvement plan.
            ``(2) Exception for years after process begins.--Paragraph 
        (1) shall not apply to a plan year if such year is in a funding 
        plan adoption period or funding improvement period by reason of 
        the plan being in endangered status for a preceding plan year. 
        For purposes of this section, such preceding plan year shall be 
        the initial determination year with respect to the funding 
        improvement plan to which it relates.
            ``(3) Funding improvement plan.--For purposes of this 
        section--
                    ``(A) In general.--A funding improvement plan is a 
                plan which consists of the actions, including options 
                or a range of options to be proposed to the bargaining 
                parties, which, under reasonable actuarial assumptions, 
                will result in the plan meeting the requirements of 
                this paragraph.
                    ``(B) Plans other than seriously endangered 
                plans.--In the case of plan not in seriously endangered 
                status, the requirements of this paragraph are met if 
                the plan's funded percentage as of the close of the 
                funding improvement period exceeds the lesser of 80 
                percent or a percentage equal to the sum of--
                            ``(i) such percentage as of the beginning 
                        of such period, plus
                            ``(ii) 10 percent of the percentage under 
                        clause (i).
                    ``(C) Seriously endangered plans.--In the case of a 
                plan in seriously endangered status, the requirements 
                of this paragraph are met if--
                            ``(i) the plan's funded percentage as of 
                        the close of the funding improvement period 
                        equals or exceeds the percentage which is equal 
                        to the sum of--
                                    ``(I) such percentage as of the 
                                beginning of such period, plus
                                    ``(II) 33 percent of the difference 
                                between 100 percent and the percentage 
                                under subclause (I), and
                            ``(ii) there is no accumulated funding 
                        deficiency for any plan year during the funding 
                        improvement period (taking into account any 
                        extension of amortization periods under section 
                        304(d)).
            ``(4) Funding improvement period.--For purposes of this 
        section--
                    ``(A) In general.--The funding improvement period 
                for any funding improvement plan adopted pursuant to 
                this subsection is the 10-year period beginning on the 
                first day of the first plan year of the multiemployer 
                plan beginning after the earlier of--
                            ``(i) the second anniversary of the date of 
                        the adoption of the funding improvement plan, 
                        or
                            ``(ii) the expiration of the collective 
                        bargaining agreements in effect on the due date 
                        for the actuarial certification of endangered 
                        status for the initial determination year under 
                        subsection (b)(3)(A) and covering, as of such 
                        due date, at least 75 percent of the active 
                        participants in such multiemployer plan.
                    ``(B) Coordination with changes in status.--
                            ``(i) Plans no longer in endangered 
                        status.--If the plan's actuary certifies under 
                        subsection (b)(3)(A) for a plan year in any 
                        funding plan adoption period or funding 
                        improvement period that the plan is no longer 
                        in endangered status and is not in critical 
                        status, the funding plan adoption period or 
                        funding improvement period, whichever is 
                        applicable, shall end as of the close of the 
                        preceding plan year.
                            ``(ii) Plans in critical status.--If the 
                        plan's actuary certifies under subsection 
                        (b)(3)(A) for a plan year in any funding plan 
                        adoption period or funding improvement period 
                        that the plan is in critical status, the 
                        funding plan adoption period or funding 
                        improvement period, whichever is applicable, 
                        shall end as of the close of the plan year 
                        preceding the first plan year in the 
                        rehabilitation period with respect to such 
                        status.
                    ``(C) Plans in endangered status at end of 
                period.--If the plan's actuary certifies under 
                subsection (b)(3)(A) for the first plan year following 
                the close of the period described in subparagraph (A) 
                that the plan is in endangered status, the provisions 
                of this subsection and subsection (d) shall be applied 
                as if such first plan year were an initial 
                determination year, except that the plan may not be 
                amended in a manner inconsistent with the funding 
                improvement plan in effect for the preceding plan year 
                until a new funding improvement plan is adopted.
            ``(5) Special rules for certain underfunded plans.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if the funded percentage of a plan in 
                seriously endangered status was 70 percent or less as 
                of the beginning of the initial determination year, the 
                following rules shall apply in determining whether the 
                requirements of paragraph (3)(C)(i) are met:
                            ``(i) The plan's funded percentage as of 
                        the close of the funding improvement period 
                        must equal or exceed a percentage which is 
                        equal to the sum of--
                                    ``(I) such percentage as of the 
                                beginning of such period, plus
                                    ``(II) 20 percent of the difference 
                                between 100 percent and the percentage 
                                under subclause (I).
                            ``(ii) The funding improvement period under 
                        paragraph (4)(A) shall be 15 years rather than 
                        10 years.
                    ``(B) Special rules for plans with funded 
                percentage over 70 percent.--If the funded percentage 
                described in subparagraph (A) was more than 70 percent 
                but less than 80 percent as of the beginning of the 
                initial determination year--
                            ``(i) subparagraph (A) shall apply if the 
                        plan's actuary certifies, within 30 days after 
                        the certification under subsection (b)(3)(A) 
                        for the initial determination year, that, based 
                        on the terms of the plan and the collective 
                        bargaining agreements in effect at the time of 
                        such certification, the plan is not projected 
                        to meet the requirements of paragraph (3)(C)(i) 
                        without regard to this paragraph, and
                            ``(ii) if there is a certification under 
                        clause (i), the plan may, in formulating its 
                        funding improvement plan, only take into 
                        account the rules of subparagraph (A) for plan 
                        years in the funding improvement period 
                        beginning on or before the date on which the 
                        last of the collective bargaining agreements 
                        described in paragraph (4)(A)(ii) expires.
                Notwithstanding clause (ii), if for any plan year 
                ending after the date described in clause (ii) the plan 
                actuary certifies (at the time of the annual 
                certification under subsection (b)(3)(A) for such plan 
                year) that, based on the terms of the plan and 
                collective bargaining agreements in effect at the time 
                of that annual certification, the plan is not projected 
                to be able to meet the requirements of paragraph 
                (3)(C)(i) without regard to this paragraph, the plan 
                may continue to assume for such year that the funding 
                improvement period is 15 years rather than 10 years.
            ``(6) Updates to funding improvement plan and schedules.--
                    ``(A) Funding improvement plan.--The plan sponsor 
                shall annually update the funding improvement plan and 
                shall file the update with the plan's annual report 
                under section 104.
                    ``(B) Schedules.--The plan sponsor may periodically 
                update any schedule of contribution rates provided 
                under this subsection to reflect the experience of the 
                plan, except that the schedule or schedules described 
                in paragraph (1)(B)(i) shall be updated at least once 
                every 3 years.
                    ``(C) Duration of schedule.--A schedule of 
                contribution rates provided by the plan sponsor and 
                relied upon by bargaining parties in negotiating a 
                collective bargaining agreement shall remain in effect 
                for the duration of that collective bargaining 
                agreement.
            ``(7) Penalty if no funding improvement plan adopted.--A 
        failure of the plan sponsor to adopt a funding improvement plan 
        by the date specified in paragraph (1)(A) shall be treated for 
        purposes of section 502(c)(2) as a failure or refusal by the 
        plan administrator to file the annual report required to be 
        filed with the Secretary under section 101(b)(4).
            ``(8) Funding plan adoption period.--For purposes of this 
        section, the term `funding plan adoption period' means the 
        period beginning on the date of the certification under 
        subsection (b)(3)(A) for the initial determination year and 
        ending on the day before the first day of the funding 
        improvement period.
    ``(d) Rules for Operation of Plan During Adoption and Improvement 
Periods; Failure To Meet Requirements.--
            ``(1) Special rules for plan adoption period.--During the 
        plan adoption period--
                    ``(A) the plan sponsor may not accept a collective 
                bargaining agreement or participation agreement with 
                respect to the multiemployer plan that provides for--
                            ``(i) a reduction in the level of 
                        contributions for any participants,
                            ``(ii) a suspension of contributions with 
                        respect to any period of service, or
                            ``(iii) any new direct or indirect 
                        exclusion of younger or newly hired employees 
                        from plan participation,
                    ``(B) no amendment of the plan which increases the 
                liabilities of the plan by reason of any increase in 
                benefits, any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan may be adopted unless the 
                amendment is required as a condition of qualification 
                under part I of subchapter D of chapter 1 of the 
                Internal Revenue Code of 1986 or to comply with other 
                applicable law, and
                    ``(C) in the case of a plan in seriously endangered 
                status, the plan sponsor shall take all reasonable 
                actions which are consistent with the terms of the plan 
                and applicable law and which are expected, based on 
                reasonable assumptions, to achieve--
                            ``(i) an increase in the plan's funded 
                        percentage, and
                            ``(ii) postponement of an accumulated 
                        funding deficiency for at least 1 additional 
                        plan year.
        Actions under subparagraph (C) include applications for 
        extensions of amortization periods under section 304(d), use of 
        the shortfall funding method in making funding standard account 
        computations, amendments to the plan's benefit structure, 
        reductions in future benefit accruals, and other reasonable 
        actions consistent with the terms of the plan and applicable 
        law.
            ``(2) Compliance with funding improvement plan.--
                    ``(A) In general.--A plan may not be amended after 
                the date of the adoption of a funding improvement plan 
                under subsection (c) so as to be inconsistent with the 
                funding improvement plan.
                    ``(B) No reduction in contributions.--A plan 
                sponsor may not during any funding improvement period 
                accept a collective bargaining agreement or 
                participation agreement with respect to the 
                multiemployer plan that provides for--
                            ``(i) a reduction in the level of 
                        contributions for any participants,
                            ``(ii) a suspension of contributions with 
                        respect to any period of service, or
                            ``(iii) any new direct or indirect 
                        exclusion of younger or newly hired employees 
                        from plan participation.
                    ``(C) Special rules for benefit increases.--A plan 
                may not be amended after the date of the adoption of a 
                funding improvement plan under subsection (c) so as to 
                increase benefits, including future benefit accruals, 
                unless--
                            ``(i) in the case of a plan in seriously 
                        endangered status, the plan actuary certifies 
                        that, after taking into account the benefit 
                        increase, the plan is still reasonably expected 
                        to meet the requirements under subsection 
                        (c)(3) in accordance with the schedule 
                        contemplated in the funding improvement plan, 
                        and
                            ``(ii) in the case of a plan not in 
                        seriously endangered status, the actuary 
                        certifies that such increase is paid for out of 
                        contributions not required by the funding 
                        improvement plan to meet the requirements under 
                        subsection (c)(3) in accordance with the 
                        schedule contemplated in the funding 
                        improvement plan.
            ``(3) Failure to meet requirements.--
                    ``(A) In general.--Notwithstanding section 4971(g) 
                of the Internal Revenue Code of 1986, if a plan fails 
                to meet the requirements of subsection (c)(3) by the 
                end of the funding improvement period, the plan shall 
                be treated as having an accumulated funding deficiency 
                for purposes of section 4971 of such Code for the last 
                plan year in such period (and each succeeding plan year 
                until such requirements are met) in an amount equal to 
                the greater of the amount of the contributions 
                necessary to meet such requirements or the amount of 
                such accumulated funding deficiency without regard to 
                this paragraph.
                    ``(B) Waiver.--In the case of a failure described 
                in subparagraph (A) which is due to reasonable cause 
                and not to willful neglect, the Secretary of the 
                Treasury may waive part or all of the tax imposed by 
                section 4971 of such Code to the extent that the 
                payment of such tax would be excessive or otherwise 
                inequitable relative to the failure involved.
    ``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans 
in Critical Status.--
            ``(1) In general.--In any case in which a multiemployer 
        plan is in critical status for a plan year, the plan sponsor, 
        in accordance with this subsection--
                    ``(A) shall adopt a rehabilitation plan not later 
                than 240 days following the required date for the 
                actuarial certification of critical status under 
                subsection (b)(3)(A), and
                    ``(B) within 30 days after the adoption of the 
                rehabilitation plan--
                            ``(i) shall provide to the bargaining 
                        parties 1 or more schedules showing revised 
                        benefit structures, revised contribution 
                        structures, or both, which, if adopted, may 
                        reasonably be expected to enable the 
                        multiemployer plan to emerge from critical 
                        status in accordance with the rehabilitation 
                        plan, and
                            ``(ii) may, if the plan sponsor deems 
                        appropriate, prepare and provide the bargaining 
                        parties with additional information relating to 
                        contribution rates or benefit reductions, 
                        alternative schedules, or other information 
                        relevant to emerging from critical status in 
                        accordance with the rehabilitation plan.
        The schedule or schedules described in subparagraph (B)(i) 
        shall reflect reductions in future benefit accruals and 
        increases in contributions that the plan sponsor determines are 
        reasonably necessary to emerge from critical status. One 
        schedule shall be designated as the default schedule and such 
        schedule shall assume that there are no increases in 
        contributions under the plan other than the increases necessary 
        to emerge from critical status after future benefit accruals 
        and other benefits (other than benefits the reduction or 
        elimination of which are not permitted under section 204(g)) 
        have been reduced to the maximum extent permitted by law.
            ``(2) Exception for years after process begins.--Paragraph 
        (1) shall not apply to a plan year if such year is in a 
        rehabilitation plan adoption period or rehabilitation period by 
        reason of the plan being in critical status for a preceding 
        plan year. For purposes of this section, such preceding plan 
        year shall be the initial critical year with respect to the 
        rehabilitation plan to which it relates.
            ``(3) Rehabilitation plan.--For purposes of this section--
                    ``(A) In general.--A rehabilitation plan is a plan 
                which consists of--
                            ``(i) actions which will enable, under 
                        reasonable actuarial assumptions, the plan to 
                        cease to be in critical status by the end of 
                        the rehabilitation period and may include 
                        reductions in plan expenditures (including plan 
                        mergers and consolidations), reductions in 
                        future benefit accruals or increases in 
                        contributions, if agreed to by the bargaining 
                        parties, or any combination of such actions, or
                            ``(ii) if the plan sponsor determines that, 
                        based on reasonable actuarial assumptions and 
                        upon exhaustion of all reasonable measures, the 
                        plan can not reasonably be expected to emerge 
                        from critical status by the end of the 
                        rehabilitation period, reasonable measures to 
                        emerge from critical status at a later time or 
                        to forestall possible insolvency (within the 
                        meaning of section 4245).
                Such plan shall include the schedules required to be 
                provided under paragraph (1)(B)(i). If clause (ii) 
                applies, such plan shall set forth the alternatives 
                considered, explain why the plan is not reasonably 
                expected to emerge from critical status by the end of 
                the rehabilitation period, and specify when, if ever, 
                the plan is expected to emerge from critical status in 
                accordance with the rehabilitation plan.
                    ``(B) Updates to rehabilitation plan and 
                schedules.--
                            ``(i) Rehabilitation plan.--The plan 
                        sponsor shall annually update the 
                        rehabilitation plan and shall file the update 
                        with the plan's annual report under section 
                        104.
                            ``(ii) Schedules.--The plan sponsor may 
                        periodically update any schedule of 
                        contribution rates provided under this 
                        subsection to reflect the experience of the 
                        plan, except that the schedule or schedules 
                        described in paragraph (1)(B)(i) shall be 
                        updated at least once every 3 years.
                            ``(iii) Duration of schedule.--A schedule 
                        of contribution rates provided by the plan 
                        sponsor and relied upon by bargaining parties 
                        in negotiating a collective bargaining 
                        agreement shall remain in effect for the 
                        duration of that collective bargaining 
                        agreement.
                    ``(C) Default schedule.--If the collective 
                bargaining agreement providing for contributions under 
                a multiemployer plan that was in effect at the time the 
                plan entered critical status expires and, after 
                receiving a schedule from the plan sponsor under 
                paragraph (1)(B)(i), the bargaining parties have not 
                adopted a collective bargaining agreement with terms 
                consistent with such a schedule, the default schedule 
                described in the last sentence of paragraph (1) shall 
                go into effect with respect to those bargaining 
                parties.
            ``(4) Rehabilitation period.--For purposes of this 
        section--
                    ``(A) In general.--The rehabilitation period for a 
                plan in critical status is the 10-year period beginning 
                on the first day of the first plan year of the 
                multiemployer plan following the earlier of--
                            ``(i) the second anniversary of the date of 
                        the adoption of the rehabilitation plan, or
                            ``(ii) the expiration of the collective 
                        bargaining agreements in effect on the date of 
                        the due date for the actuarial certification of 
                        critical status for the initial critical year 
                        under subsection (a)(1) and covering, as of 
                        such date at least 75 percent of the active 
                        participants in such multiemployer plan.
                If a plan emerges from critical status as provided 
                under subparagraph (B) before the end of such 10-year 
                period, the rehabilitation period shall end with the 
                plan year preceding the plan year for which the 
                determination under subparagraph (B) is made.
                    ``(B) Emergence.--A plan in critical status shall 
                remain in such status until a plan year for which the 
                plan actuary certifies, in accordance with subsection 
                (b)(3)(A), that the plan is not projected to have an 
                accumulated funding deficiency for the plan year or any 
                of the 9 succeeding plan years, without regard to use 
                of the shortfall method or any extension of 
                amortization periods under section 304(d).
            ``(5) Penalty if no rehabilitation plan adopted.--A failure 
        of a plan sponsor to adopt a rehabilitation plan by the date 
        specified in paragraph (1)(A) shall be treated for purposes of 
        section 502(c)(2) as a failure or refusal by the plan 
        administrator to file the annual report required to be filed 
        with the Secretary under section 101(b)(4).
            ``(6) Rehabilitation plan adoption period.--For purposes of 
        this section, the term `rehabilitation plan adoption period' 
        means the period beginning on the date of the certification 
        under subsection (b)(3)(A) for the initial critical year and 
        ending on the day before the first day of the rehabilitation 
        period.
            ``(7) Limitation on reduction in rates of future 
        accruals.--Any reduction in the rate of future accruals under 
        any schedule described in paragraph (1)(B)(i) shall not reduce 
        the rate of future accruals below--
                    ``(A) a monthly benefit (payable as a single life 
                annuity commencing at the participant's normal 
                retirement age) equal to 1 percent of the contributions 
                required to be made with respect to a participant, or 
                the equivalent standard accrual rate for a participant 
                or group of participants under the collective 
                bargaining agreements in effect as of the first day of 
                the initial critical year, or
                    ``(B) if lower, the accrual rate under the plan on 
                such first day.
        The equivalent standard accrual rate shall be determined by the 
        plan sponsor based on the standard or average contribution base 
        units which the plan sponsor determines to be representative 
        for active participants and such other factors as the plan 
        sponsor determines to be relevant. Nothing in this paragraph 
        shall be construed as limiting the ability of the plan sponsor 
        to prepare and provide the bargaining parties with alternative 
        schedules to the default schedule that established lower or 
        higher accrual and contribution rates than the rates otherwise 
        described in this paragraph.
            ``(8) Employer impact.--For the purposes of this section, 
        the plan sponsor shall consider the impact of the 
        rehabilitation plan and contribution schedules authorized by 
        this section on bargaining parties with fewer than 500 
        employees and shall implement the plan in a manner that 
        encourages their continued participation in the plan and 
        minimizes financial harm to employers and their workers.
    ``(f) Rules for Operation of Plan During Adoption and 
Rehabilitation Period.--
            ``(1) Compliance with rehabilitation plan.--
                    ``(A) In general.--A plan may not be amended after 
                the date of the adoption of a rehabilitation plan under 
                subsection (e) so as to be inconsistent with the 
                rehabilitation plan.
                    ``(B) Special rules for benefit increases.--A plan 
                may not be amended after the date of the adoption of a 
                rehabilitation plan under subsection (e) so as to 
                increase benefits, including future benefit accruals, 
                unless the plan actuary certifies that such increase is 
                paid for out of additional contributions not 
                contemplated by the rehabilitation plan, and, after 
                taking into account the benefit increase, the 
                multiemployer plan still is reasonably expected to 
                emerge from critical status by the end of the 
                rehabilitation period on the schedule contemplated in 
                the rehabilitation plan.
            ``(2) Restriction on lump sums and similar benefits.--
                    ``(A) In general.--Effective on the date the notice 
                of certification of the plan's critical status for the 
                initial critical year under subsection (b)(3)(D) is 
                sent, and notwithstanding section 204(g), the plan 
                shall not pay--
                            ``(i) any payment, in excess of the monthly 
                        amount paid under a single life annuity (plus 
                        any social security supplements described in 
                        the last sentence of section 204(b)(1)(G)),
                            ``(ii) any payment for the purchase of an 
                        irrevocable commitment from an insurer to pay 
                        benefits, and
                            ``(iii) any other payment specified by the 
                        Secretary of the Treasury by regulations.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a benefit which under section 203(e) may be 
                immediately distributed without the consent of the 
                participant or to any makeup payment in the case of a 
                retroactive annuity starting date or any similar 
                payment of benefits owed with respect to a prior 
                period.
            ``(3) Adjustments disregarded in withdrawal liability 
        determination.--Any benefit reductions under this subsection 
        shall be disregarded in determining a plan's unfunded vested 
        benefits for purposes of determining an employer's withdrawal 
        liability under section 4201.
            ``(4) Special rules for plan adoption period.--During the 
        rehabilitation plan adoption period--
                    ``(A) the plan sponsor may not accept a collective 
                bargaining agreement or participation agreement with 
                respect to the multiemployer plan that provides for--
                            ``(i) a reduction in the level of 
                        contributions for any participants,
                            ``(ii) a suspension of contributions with 
                        respect to any period of service, or
                            ``(iii) any new direct or indirect 
                        exclusion of younger or newly hired employees 
                        from plan participation, and
                    ``(B) no amendment of the plan which increases the 
                liabilities of the plan by reason of any increase in 
                benefits, any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan may be adopted unless the 
                amendment is required as a condition of qualification 
                under part I of subchapter D of chapter 1 of the 
                Internal Revenue Code of 1986 or to comply with other 
                applicable law.
            ``(5) Failure to meet requirements.--
                    ``(A) In general.--Notwithstanding section 4971(g) 
                of the Internal Revenue Code of 1986, if a plan--
                            ``(i) fails to meet the requirements of 
                        subsection (e) by the end of the rehabilitation 
                        period, or
                            ``(ii) has received a certification under 
                        subsection (b)(3)(A)(ii) for 3 consecutive plan 
                        years that the plan is not making the scheduled 
                        progress in meeting its requirements under the 
                        rehabilitation plan,
                the plan shall be treated as having an accumulated 
                funding deficiency for purposes of section 4971 of such 
                Code for the last plan year in such period (and each 
                succeeding plan year until such requirements are met) 
                in an amount equal to the greater of the amount of the 
                contributions necessary to meet such requirements or 
                the amount of such accumulated funding deficiency 
                without regard to this paragraph.
                    ``(B) Waiver.--In the case of a failure described 
                in subparagraph (A) which is due to reasonable cause 
                and not to willful neglect, the Secretary of the 
                Treasury may waive part or all of the tax imposed by 
                section 4971 of such Code to the extent that the 
                payment of such tax would be excessive or otherwise 
                inequitable relative to the failure involved.
    ``(g) Expedited Resolution of Plan Sponsor Decisions.--If, within 
60 days of the due date for adoption of a funding improvement plan 
under subsection (c) or a rehabilitation plan under subsection (e), the 
plan sponsor of a plan in endangered status or a plan in critical 
status has not agreed on a funding improvement plan or rehabilitation 
plan, then any member of the board or group that constitutes the plan 
sponsor may require that the plan sponsor enter into an expedited 
dispute resolution procedure for the development and adoption of a 
funding improvement plan or rehabilitation plan.
    ``(h) Nonbargained Participation.--
            ``(1) Both bargained and nonbargained employee-
        participants.--In the case of an employer that contributes to a 
        multiemployer plan with respect to both employees who are 
        covered by one or more collective bargaining agreements and to 
        employees who are not so covered, if the plan is in endangered 
        status or in critical status, benefits of and contributions for 
        the nonbargained employees, including surcharges on those 
        contributions, shall be determined as if those nonbargained 
        employees were covered under the first to expire of the 
        employer's collective bargaining agreements in effect when the 
        plan entered endangered or critical status.
            ``(2) Nonbargained employees only.--In the case of an 
        employer that contributes to a multiemployer plan only with 
        respect to employees who are not covered by a collective 
        bargaining agreement, this section shall be applied as if the 
        employer were the bargaining parties, and its participation 
        agreement with the plan was a collective bargaining agreement 
        with a term ending on the first day of the plan year beginning 
        after the employer is provided the schedule or schedules 
        described in subsections (c) and (e).
            ``(3) Employees covered by a collective bargaining 
        agreement.--The determination as to whether an employee covered 
        by a collective bargaining agreement for purposes of this 
        section shall be made without regard to the special rule in 
        Treasury Regulation section 1.410(b)-6(d)(ii)(D).
    ``(i) Definitions; Actuarial Method.--For purposes of this 
section--
            ``(1) Bargaining party.--The term `bargaining party' 
        means--
                    ``(A)(i) except as provided in clause (ii), an 
                employer who has an obligation to contribute under the 
                plan; or
                    ``(ii) in the case of a plan described under 
                section 404(c) of the Internal Revenue Code of 1986, or 
                a continuation of such a plan, the association of 
                employers that is the employee settlor of the plan; and
                    ``(B) an employee organization which, for purposes 
                of collective bargaining, represents plan participants 
                employed by an employer who has an obligation to 
                contribute under the plan.
            ``(2) Funded percentage.--The term `funded percentage' 
        means the percentage equal to a fraction--
                    ``(A) the numerator of which is the value of the 
                plan's assets, as determined under section 304(c)(2), 
                and
                    ``(B) the denominator of which is the accrued 
                liability of the plan, determined using actuarial 
                assumptions described in section 304(c)(3).
            ``(3) Accumulated funding deficiency.--The term 
        `accumulated funding deficiency' has the meaning given such 
        term in section 304(a).
            ``(4) Active participant.--The term `active participant' 
        means, in connection with a multiemployer plan, a participant 
        who is in covered service under the plan.
            ``(5) Inactive participant.--The term `inactive 
        participant' means, in connection with a multiemployer plan, a 
        participant, or the beneficiary or alternate payee of a 
        participant, who--
                    ``(A) is not in covered service under the plan, and
                    ``(B) is in pay status under the plan or has a 
                nonforfeitable right to benefits under the plan.
            ``(6) Pay status.--A person is in pay status under a 
        multiemployer plan if--
                    ``(A) at any time during the current plan year, 
                such person is a participant or beneficiary under the 
                plan and is paid an early, late, normal, or disability 
                retirement benefit under the plan (or a death benefit 
                under the plan related to a retirement benefit), or
                    ``(B) to the extent provided in regulations of the 
                Secretary of the Treasury, such person is entitled to 
                such a benefit under the plan.
            ``(7) Obligation to contribute.--The term `obligation to 
        contribute' has the meaning given such term under section 
        4212(a).
            ``(8) Actuarial method.--Notwithstanding any other 
        provision of this section, the actuary's determinations with 
        respect to a plan's normal cost, actuarial accrued liability, 
        and improvements in a plan's funded percentage under this 
        section shall be based upon the unit credit funding method 
        (whether or not that method is used for the plan's actuarial 
        valuation).
            ``(9) Plan sponsor.--In the case of a plan described under 
        section 404(c) of the Internal Revenue Code of 1986, or a 
        continuation of such a plan, the term `plan sponsor' means the 
        bargaining parties described under paragraph (1).''.
    (b) Cause of Action To Compel Adoption of Funding Improvement or 
Rehabilitation Plan.--Section 502(a) of the Employee Retirement Income 
Security Act of 1974 is amended by striking ``or'' at the end of 
paragraph (8), by striking the period at the end of paragraph (9) and 
inserting ``; or'' and by adding at the end the following:
            ``(10) in the case of a multiemployer plan that has been 
        certified by the actuary to be in endangered or critical status 
        under section 305, if the plan sponsor has not adopted a 
        funding improvement or rehabilitation plan under subsection (c) 
        or (e) of that section by the deadline established in that 
        section, by an employer that has an obligation to contribute 
        with respect to the multiemployer plan or an employee 
        organization that represents active participants in the 
        multiemployer plan, for an order compelling the plan sponsor to 
        adopt a funding improvement or rehabilitation plan.''.
    (c) 4971 Excise Tax Inapplicable.--Section 4971 of the Internal 
Revenue Code of 1986 is amended by redesignating subsection (g) as 
subsection (h), and inserting after subsection (f) the following:
    ``(g) Multiemployer Plans in Critical Status.--No tax shall be 
imposed under this section for a taxable year with respect to a 
multiemployer plan if, for the plan years ending with or within the 
taxable year, the plan is in critical status pursuant to section 305 of 
the Employee Retirement Income Security Act of 1974. This subsection 
shall only apply if the plan adopts a rehabilitation plan in accordance 
with section 305(e) of such Act and complies with such rehabilitation 
plan (and any modifications of the plan) and shall not apply if an 
excise tax is required to be imposed under this section by reason of a 
violation of such section 305.''.
    (d) No Additional Contributions Required.--
            (1) Section 302(b) of the Employee Retirement Income 
        Security Act of 1974, as amended by this Act , is amended by 
        adding at the end the following new paragraph:
            ``(3) Multiemployer plans in critical status.--Subparagraph 
        (A) shall not apply in the case of a multiemployer plan for any 
        plan year in which the plan is in critical status pursuant to 
        section 305. This paragraph shall only apply if the plan adopts 
        a rehabilitation plan in accordance with section 305(e) and 
        complies with such rehabilitation plan (and any modifications 
        of the plan).''.
            (2) Section 412(c) of the Internal Revenue Code of 1986, as 
        amended by this Act, is amended by adding at the end the 
        following new paragraph:
            ``(3) Multiemployer plans in critical status.--Subparagraph 
        (A) shall not apply in the case of a multiemployer plan for any 
        plan year in which the plan is in critical status pursuant to 
        section 305 of the Employee Retirement Income Security Act of 
        1974. This paragraph shall only apply if the plan adopts a 
        rehabilitation plan in accordance with section 305(e) of such 
        Act and complies with such rehabilitation plan (and any 
        modifications of the plan).''.
    (e) Conforming Amendment.--The table of contents in section 1 of 
such Act (as amended by the preceding provisions of this Act) is 
amended by inserting after the item relating to section 304 the 
following new item:

``Sec. 305. Additional funding rules for multiemployer plans in 
                            endangered status or critical status.''.
    (f) Effective Dates.--
            (1) In general.--The amendment made by this section shall 
        apply with respect to plan years beginning after 2006.
            (2) Special rule for certain restored benefits.--In the 
        case of a multiemployer plan--
                    (A) with respect to which benefits were reduced 
                pursuant to a plan amendment adopted on or after 
                January 1, 2002, and before June 30, 2005, and
                    (B) which, pursuant to the plan document, the trust 
                agreement, or a formal written communication from the 
                plan sponsor to participants provided before June 30, 
                2005, provided for the restoration of such benefits,
        the amendments made by this section shall not apply to such 
        benefit restorations to the extent that any restriction on the 
        providing or accrual of such benefits would otherwise apply by 
        reason of such amendments.

SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.

    (a) Advance Determination of Impending Insolvency Over 5 Years.--
Section 4245(d)(1) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1426(d)(1)) is amended--
            (1) by striking ``3 plan years'' the second place it 
        appears and inserting ``5 plan years''; and
            (2) by adding at the end the following new sentence: ``If 
        the plan sponsor makes such a determination that the plan will 
        be insolvent in any of the next 5 plan years, the plan sponsor 
        shall make the comparison under this paragraph at least 
        annually until the plan sponsor makes a determination that the 
        plan will not be insolvent in any of the next 5 plan years.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to determinations made in plan years beginning after 
2006.

SEC. 204. SPECIAL RULE FOR CERTAIN BENEFITS FUNDED UNDER AN AGREEMENT 
              APPROVED BY THE PENSION BENEFIT GUARANTY CORPORATION.

    In the case of a multiemployer plan that is a party to an agreement 
that was approved by the Pension Benefit Guaranty Corporation prior to 
June 30, 2005, and that--
            (1) increases benefits, and
            (2) provides for special withdrawal liability rules under 
        section 4203(f) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1383),
the amendments made by sections 201, 202, 211, and 212 of this Act 
shall not apply to the benefit increases under any plan amendment 
adopted prior to June 30, 2005, that are funded pursuant to such 
agreement if the plan is funded in compliance with such agreement (and 
any amendments thereto).

SEC. 205. WITHDRAWAL LIABILITY REFORMS.

    (a) Repeal of Limitation on Withdrawal Liability of Insolvent 
Employers.--
            (1) In general.--Subsections (b) and (d) of section 4225 of 
        the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1405) are repealed.
            (2) Conforming amendments.--Subsections (c) and (e) of 
        section 4225 of such Act are redesignated as subsections (b) 
        and (c), respectively.
            (3) Effective date.--The amendments made by this section 
        shall apply with respect to sales occurring on or after January 
        1, 2006.
    (b) Withdrawal Liability Continues if Work Contracted Out.--
            (1) In general.--Clause (i) of section 4205(b)(2)(A) of 
        such Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting ``or 
        to an entity or entities owned or controlled by the employer'' 
        after ``to another location''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply with respect to work transferred on or after the 
        date of the enactment of this Act.
    (c) Application of Forgiveness Rule to Plans Primarily Covering 
Employees in the Building and Construction.--
            (1) In general.--Section 4210(b) of such Act (29 U.S.C. 
        1390(b)) is amended--
                    (A) by striking paragraph (1); and
                    (B) by redesignating paragraphs (2) through (4) as 
                paragraphs (1) through (3), respectively.
            (2) Effective date.--The amendments made by this subsection 
        shall apply with respect to plan withdrawals occurring on or 
        after January 1, 2006.

          PART II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS.

    (a) In General.--Subpart A of part III of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 (as added by this Act) is amended 
by inserting after section 430 the following new section:

``SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER PLANS.

    ``(a) In General.--For purposes of section 412, the accumulated 
funding deficiency of a multiemployer plan for any plan year is--
            ``(1) except as provided in paragraph (2), the amount, 
        determined as of the end of the plan year, equal to the excess 
        (if any) of the total charges to the funding standard account 
        of the plan for all plan years (beginning with the first plan 
        year for which this part applies to the plan) over the total 
        credits to such account for such years, and
            ``(2) if the multiemployer plan is in reorganization for 
        any plan year, the accumulated funding deficiency of the plan 
        determined under section 4243 of the Employee Retirement Income 
        Security Act of 1974.
    ``(b) Funding Standard Account.--
            ``(1) Account required.--Each multiemployer plan to which 
        this part applies shall establish and maintain a funding 
        standard account. Such account shall be credited and charged 
        solely as provided in this section.
            ``(2) Charges to account.--For a plan year, the funding 
        standard account shall be charged with the sum of--
                    ``(A) the normal cost of the plan for the plan 
                year,
                    ``(B) the amounts necessary to amortize in equal 
                annual installments (until fully amortized)--
                            ``(i) separately, with respect to each plan 
                        year, the net increase (if any) in unfunded 
                        past service liability under the plan arising 
                        from plan amendments adopted in such year, over 
                        a period of 15 plan years,
                            ``(ii) separately, with respect to each 
                        plan year, the net experience loss (if any) 
                        under the plan, over a period of 15 plan years, 
                        and
                            ``(iii) separately, with respect to each 
                        plan year, the net loss (if any) resulting from 
                        changes in actuarial assumptions used under the 
                        plan, over a period of 15 plan years,
                    ``(C) the amount necessary to amortize each waived 
                funding deficiency (within the meaning of section 
                412(d)(3)) for each prior plan year in equal annual 
                installments (until fully amortized) over a period of 
                15 plan years,
                    ``(D) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 5 plan years any amount credited to the 
                funding standard account under section 412(b)(3)(D) (as 
                in effect on the day before the date of the enactment 
                of the Pension Security and Transparency Act of 2005), 
                and
                    ``(E) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 20 years the contributions which would be 
                required to be made under the plan but for the 
                provisions of section 412(c)(7)(A)(i)(I) (as in effect 
                on the day before the date of the enactment of the 
                Pension Security and Transparency Act of 2005).
            ``(3) Credits to account.--For a plan year, the funding 
        standard account shall be credited with the sum of--
                    ``(A) the amount considered contributed by the 
                employer to or under the plan for the plan year,
                    ``(B) the amount necessary to amortize in equal 
                annual installments (until fully amortized)--
                            ``(i) separately, with respect to each plan 
                        year, the net decrease (if any) in unfunded 
                        past service liability under the plan arising 
                        from plan amendments adopted in such year, over 
                        a period of 15 plan years,
                            ``(ii) separately, with respect to each 
                        plan year, the net experience gain (if any) 
                        under the plan, over a period of 15 plan years, 
                        and
                            ``(iii) separately, with respect to each 
                        plan year, the net gain (if any) resulting from 
                        changes in actuarial assumptions used under the 
                        plan, over a period of 15 plan years,
                    ``(C) the amount of the waived funding deficiency 
                (within the meaning of section 412(d)(3)) for the plan 
                year, and
                    ``(D) in the case of a plan year for which the 
                accumulated funding deficiency is determined under the 
                funding standard account if such plan year follows a 
                plan year for which such deficiency was determined 
                under the alternative minimum funding standard under 
                section 412(g) (as in effect on the day before the date 
                of the enactment of the Pension Security and 
                Transparency Act of 2005), the excess (if any) of any 
                debit balance in the funding standard account 
                (determined without regard to this subparagraph) over 
                any debit balance in the alternative minimum funding 
                standard account.
            ``(4) Special rule for amounts first amortized to plan 
        years before 2007.--In the case of any amount amortized under 
        section 412(b) (as in effect on the day before the date of the 
        enactment of the Pension Security and Transparency Act of 2005) 
        over any period beginning with a plan year beginning before 
        2007, in lieu of the amortization described in paragraphs 
        (2)(B) and (3)(B), such amount shall continue to be amortized 
        under such section as so in effect.
            ``(5) Combining and offsetting amounts to be amortized.--
        Under regulations prescribed by the Secretary, amounts required 
        to be amortized under paragraph (2) or paragraph (3), as the 
        case may be--
                    ``(A) may be combined into one amount under such 
                paragraph to be amortized over a period determined on 
                the basis of the remaining amortization period for all 
                items entering into such combined amount, and
                    ``(B) may be offset against amounts required to be 
                amortized under the other such paragraph, with the 
                resulting amount to be amortized over a period 
                determined on the basis of the remaining amortization 
                periods for all items entering into whichever of the 
                two amounts being offset is the greater.
            ``(6) Interest.--The funding standard account (and items 
        therein) shall be charged or credited (as determined under 
        regulations prescribed by the Secretary of the Treasury) with 
        interest at the appropriate rate consistent with the rate or 
        rates of interest used under the plan to determine costs.
            ``(7) Special rules relating to charges and credits to 
        funding standard account.--For purposes of this part--
                    ``(A) Withdrawal liability.--Any amount received by 
                a multiemployer plan in payment of all or part of an 
                employer's withdrawal liability under part 1 of 
                subtitle E of title IV of the Employee Retirement 
                Income Security Act of 1974 shall be considered an 
                amount contributed by the employer to or under the 
                plan. The Secretary may prescribe by regulation 
                additional charges and credits to a multiemployer 
                plan's funding standard account to the extent necessary 
                to prevent withdrawal liability payments from being 
                unduly reflected as advance funding for plan 
                liabilities.
                    ``(B) Adjustments when a multiemployer plan leaves 
                reorganization.--If a multiemployer plan is not in 
                reorganization in the plan year but was in 
                reorganization in the immediately preceding plan year, 
                any balance in the funding standard account at the 
                close of such immediately preceding plan year--
                            ``(i) shall be eliminated by an offsetting 
                        credit or charge (as the case may be), but
                            ``(ii) shall be taken into account in 
                        subsequent plan years by being amortized in 
                        equal annual installments (until fully 
                        amortized) over 30 plan years.
                The preceding sentence shall not apply to the extent of 
                any accumulated funding deficiency under section 
                4243(a) of such Act as of the end of the last plan year 
                that the plan was in reorganization.
                    ``(C) Plan payments to supplemental program or 
                withdrawal liability payment fund.--Any amount paid by 
                a plan during a plan year to the Pension Benefit 
                Guaranty Corporation pursuant to section 4222 of such 
                Act or to a fund exempt under section 501(c)(22) 
                pursuant to section 4223 of such Act shall reduce the 
                amount of contributions considered received by the plan 
                for the plan year.
                    ``(D) Interim withdrawal liability payments.--Any 
                amount paid by an employer pending a final 
                determination of the employer's withdrawal liability 
                under part 1 of subtitle E of title IV of such Act and 
                subsequently refunded to the employer by the plan shall 
                be charged to the funding standard account in 
                accordance with regulations prescribed by the 
                Secretary.
                    ``(E) Election for deferral of charge for portion 
                of net experience loss.--If an election is in effect 
                under section 412(b)(7)(F) (as in effect on the day 
                before the date of the enactment of the Pension 
                Security and Transparency Act of 2005) for any plan 
                year, the funding standard account shall be charged in 
                the plan year to which the portion of the net 
                experience loss deferred by such election was deferred 
                with the amount so deferred (and paragraph (2)(B)(ii) 
                shall not apply to the amount so charged).
                    ``(F) Financial assistance.--Any amount of any 
                financial assistance from the Pension Benefit Guaranty 
                Corporation to any plan, and any repayment of such 
                amount, shall be taken into account under this section 
                and section 412 in such manner as is determined by the 
                Secretary.
                    ``(G) Short-term benefits.--To the extent that any 
                plan amendment increases the unfunded past service 
                liability under the plan by reason of an increase in 
                benefits which are payable under the terms of the plan 
                for a period that does not exceed 14 years from the 
                effective date of the amendment, paragraph (2)(B)(i) 
                shall be applied separately with respect to such 
                increase in unfunded past service liability by 
                substituting the number of years of the period during 
                which such benefits are payable for `15'.
    ``(c) Additional Rules.--
            ``(1) Determinations to be made under funding method.--For 
        purposes of this part, normal costs, accrued liability, past 
        service liabilities, and experience gains and losses shall be 
        determined under the funding method used to determine costs 
        under the plan.
            ``(2) Valuation of assets.--
                    ``(A) In general.--For purposes of this part, the 
                value of the plan's assets shall be determined on the 
                basis of any reasonable actuarial method of valuation 
                which takes into account fair market value and which is 
                permitted under regulations prescribed by the 
                Secretary.
                    ``(B) Election with respect to bonds.--The value of 
                a bond or other evidence of indebtedness which is not 
                in default as to principal or interest may, at the 
                election of the plan administrator, be determined on an 
                amortized basis running from initial cost at purchase 
                to par value at maturity or earliest call date. Any 
                election under this subparagraph shall be made at such 
                time and in such manner as the Secretary shall by 
                regulations provide, shall apply to all such evidences 
                of indebtedness, and may be revoked only with the 
                consent of the Secretary.
            ``(3) Actuarial assumptions must be reasonable.--For 
        purposes of this section, all costs, liabilities, rates of 
        interest, and other factors under the plan shall be determined 
        on the basis of actuarial assumptions and methods--
                    ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                    ``(B) which, in combination, offer the actuary's 
                best estimate of anticipated experience under the plan.
            ``(4) Treatment of certain changes as experience gain or 
        loss.--For purposes of this section, if--
                    ``(A) a change in benefits under the Social 
                Security Act or in other retirement benefits created 
                under Federal or State law, or
                    ``(B) a change in the definition of the term 
                `wages' under section 3121, or a change in the amount 
                of such wages taken into account under regulations 
                prescribed for purposes of section 401(a)(5),
        results in an increase or decrease in accrued liability under a 
        plan, such increase or decrease shall be treated as an 
        experience loss or gain.
            ``(5) Full funding.--If, as of the close of a plan year, a 
        plan would (without regard to this paragraph) have an 
        accumulated funding deficiency in excess of the full funding 
        limitation--
                    ``(A) the funding standard account shall be 
                credited with the amount of such excess, and
                    ``(B) all amounts described in subparagraphs (B), 
                (C), and (D) of subsection (b) (2) and subparagraph (B) 
                of subsection (b)(3) which are required to be amortized 
                shall be considered fully amortized for purposes of 
                such subparagraphs.
            ``(6) Full-funding limitation.--
                    ``(A) In general.--For purposes of paragraph (5), 
                the term `full-funding limitation' means the excess (if 
                any) of--
                            ``(i) the accrued liability (including 
                        normal cost) under the plan (determined under 
                        the entry age normal funding method if such 
                        accrued liability cannot be directly calculated 
                        under the funding method used for the plan), 
                        over
                            ``(ii) the lesser of--
                                    ``(I) the fair market value of the 
                                plan's assets, or
                                    ``(II) the value of such assets 
                                determined under paragraph (2).
                    ``(B) Minimum amount.--
                            ``(i) In general.--In no event shall the 
                        full-funding limitation determined under 
                        subparagraph (A) be less than the excess (if 
                        any) of--
                                    ``(I) 90 percent of the current 
                                liability of the plan (including the 
                                expected increase in current liability 
                                due to benefits accruing during the 
                                plan year), over
                                    ``(II) the value of the plan's 
                                assets determined under paragraph (2).
                            ``(ii) Assets.--For purposes of clause (i), 
                        assets shall not be reduced by any credit 
                        balance in the funding standard account.
                    ``(C) Full funding limitation.--For purposes of 
                this paragraph, unless otherwise provided by the plan, 
                the accrued liability under a multiemployer plan shall 
                not include benefits which are not nonforfeitable under 
                the plan after the termination of the plan (taking into 
                consideration section 411(d)(3)).
                    ``(D) Current liability.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `current 
                        liability' means all liabilities to employees 
                        and their beneficiaries under the plan.
                            ``(ii) Treatment of unpredictable 
                        contingent event benefits.--For purposes of 
                        clause (i), any benefit contingent on an event 
                        other than--
                                    ``(I) age, service, compensation, 
                                death, or disability, or
                                    ``(II) an event which is reasonably 
                                and reliably predictable (as determined 
                                by the Secretary),
                        shall not be taken into account until the event 
                        on which the benefit is contingent occurs.
                            ``(iii) Interest rate used.--The rate of 
                        interest used to determine current liability 
                        under this paragraph shall be the rate of 
                        interest determined under subparagraph (E).
                            ``(iv) Mortality tables.--
                                    ``(I) Commissioners' standard 
                                table.--In the case of plan years 
                                beginning before the first plan year to 
                                which the first tables prescribed under 
                                subclause (II) apply, the mortality 
                                table used in determining current 
                                liability under this paragraph shall be 
                                the table prescribed by the Secretary 
                                which is based on the prevailing 
                                commissioners' standard table 
                                (described in section 807(d)(5)(A)) 
                                used to determine reserves for group 
                                annuity contracts issued on January 1, 
                                1993.
                                    ``(II) Secretarial authority.--The 
                                Secretary may by regulation prescribe 
                                for plan years beginning after December 
                                31, 1999, mortality tables to be used 
                                in determining current liability under 
                                this subsection. Such tables shall be 
                                based upon the actual experience of 
                                pension plans and projected trends in 
                                such experience. In prescribing such 
                                tables, the Secretary shall take into 
                                account results of available 
                                independent studies of mortality of 
                                individuals covered by pension plans.
                            ``(v) Separate mortality tables for the 
                        disabled.--Notwithstanding clause (iv)--
                                    ``(I) In general.--The Secretary 
                                shall establish mortality tables which 
                                may be used (in lieu of the tables 
                                under clause (iv)) to determine current 
                                liability under this subsection for 
                                individuals who are entitled to 
                                benefits under the plan on account of 
                                disability. The Secretary shall 
                                establish separate tables for 
                                individuals whose disabilities occur in 
                                plan years beginning before January 1, 
                                1995, and for individuals whose 
                                disabilities occur in plan years 
                                beginning on or after such date.
                                    ``(II) Special rule for 
                                disabilities occurring after 1994.--In 
                                the case of disabilities occurring in 
                                plan years beginning after December 31, 
                                1994, the tables under subclause (I) 
                                shall apply only with respect to 
                                individuals described in such subclause 
                                who are disabled within the meaning of 
                                title II of the Social Security Act and 
                                the regulations thereunder.
                            ``(vi) Periodic review.--The Secretary 
                        shall periodically (at least every 5 years) 
                        review any tables in effect under this 
                        subparagraph and shall, to the extent such 
                        Secretary determines necessary, by regulation 
                        update the tables to reflect the actual 
                        experience of pension plans and projected 
                        trends in such experience.
                    ``(E) Required change of interest rate.--For 
                purposes of determining a plan's current liability for 
                purposes of this paragraph--
                            ``(i) In general.--If any rate of interest 
                        used under the plan under subsection (b)(6) to 
                        determine cost is not within the permissible 
                        range, the plan shall establish a new rate of 
                        interest within the permissible range.
                            ``(ii) Permissible range.--For purposes of 
                        this subparagraph--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), the term 
                                `permissible range' means a rate of 
                                interest which is not more than 5 
                                percent above, and not more than 10 
                                percent below, the weighted average of 
                                the rates of interest on 30-year 
                                Treasury securities during the 4-year 
                                period ending on the last day before 
                                the beginning of the plan year.
                                    ``(II) Secretarial authority.--If 
                                the Secretary finds that the lowest 
                                rate of interest permissible under 
                                subclause (I) is unreasonably high, the 
                                Secretary may prescribe a lower rate of 
                                interest, except that such rate may not 
                                be less than 80 percent of the average 
                                rate determined under such subclause.
                            ``(iii) Assumptions.--Notwithstanding 
                        paragraph (3)(A), the interest rate used under 
                        the plan shall be--
                                    ``(I) determined without taking 
                                into account the experience of the plan 
                                and reasonable expectations, but
                                    ``(II) consistent with the 
                                assumptions which reflect the purchase 
                                rates which would be used by insurance 
                                companies to satisfy the liabilities 
                                under the plan.
            ``(7) Annual valuation.--
                    ``(A) In general.--For purposes of this section, a 
                determination of experience gains and losses and a 
                valuation of the plan's liability shall be made not 
                less frequently than once every year, except that such 
                determination shall be made more frequently to the 
                extent required in particular cases under regulations 
                prescribed by the Secretary.
                    ``(B) Valuation date.--
                            ``(i) Current year.--Except as provided in 
                        clause (ii), the valuation referred to in 
                        subparagraph (A) shall be made as of a date 
                        within the plan year to which the valuation 
                        refers or within one month prior to the 
                        beginning of such year.
                            ``(ii) Use of prior year valuation.--The 
                        valuation referred to in subparagraph (A) may 
                        be made as of a date within the plan year prior 
                        to the year to which the valuation refers if, 
                        as of such date, the value of the assets of the 
                        plan are not less than 100 percent of the 
                        plan's current liability (as defined in 
                        paragraph (6)(D) without regard to clause (iv) 
                        thereof).
                            ``(iii) Adjustments.--Information under 
                        clause (ii) shall, in accordance with 
                        regulations, be actuarially adjusted to reflect 
                        significant differences in participants.
                            ``(iv) Limitation.--A change in funding 
                        method to use a prior year valuation, as 
                        provided in clause (ii), may not be made unless 
                        as of the valuation date within the prior plan 
                        year, the value of the assets of the plan are 
                        not less than 125 percent of the plan's current 
                        liability (as defined in paragraph (6)(D) 
                        without regard to clause (iv) thereof).
            ``(8) Time when certain contributions deemed made.--For 
        purposes of this section, any contributions for a plan year 
        made by an employer after the last day of such plan year, but 
        not later than two and one-half months after such day, shall be 
        deemed to have been made on such last day. For purposes of this 
        subparagraph, such two and one-half month period may be 
        extended for not more than six months under regulations 
        prescribed by the Secretary.
    ``(d) Extension of Amortization Periods for Multiemployer Plans.--
            ``(1) Automatic extension upon application by certain 
        plans.--
                    ``(A) In general.--If the plan sponsor of a 
                multiemployer plan--
                            ``(i) submits to the Secretary an 
                        application for an extension of the period of 
                        years required to amortize any unfunded 
                        liability described in any clause of subsection 
                        (b)(2)(B) or described in subsection (b)(4), 
                        and
                            ``(ii) includes with the application a 
                        certification by the plan's actuary described 
                        in subparagraph (B),
                the Secretary shall extend the amortization period for 
                the period of time (not in excess of 5 years) specified 
                in the application. Such extension shall be in addition 
                to any extension under paragraph (2).
                    ``(B) Criteria.--A certification with respect to a 
                multiemployer plan is described in this subparagraph if 
                the plan's actuary certifies that, based on reasonable 
                assumptions--
                            ``(i) absent the extension under 
                        subparagraph (A), the plan would have an 
                        accumulated funding deficiency in the current 
                        plan year or any of the 9 succeeding plan 
                        years,
                            ``(ii) the plan sponsor has adopted a plan 
                        to improve the plan's funding status,
                            ``(iii) the plan is projected to have 
                        sufficient assets to timely pay expected 
                        benefits and anticipated expenditures over the 
                        amortization period as extended, and
                            ``(iv) the notice required under paragraph 
                        (3)(A) has been provided.
            ``(2) Additional extension.--
                    ``(A) In general.--If the plan sponsor of a 
                multiemployer plan submits to the Secretary an 
                application for an extension of the period of years 
                required to amortize any unfunded liability described 
                in any clause of subsection (b)(2)(B) or described in 
                subsection (b)(4), the Secretary may extend the 
                amortization period for a period of time (not in excess 
                of 5 years) if the Secretary of the Treasury makes the 
                determination described in subparagraph (B). Such 
                extension shall be in addition to any extension under 
                paragraph (1).
                    ``(B) Determination.--The Secretary may grant an 
                extension under subparagraph (A) if the Secretary 
                determines that--
                            ``(i) such extension would carry out the 
                        purposes of this Act and would provide adequate 
                        protection for participants under the plan and 
                        their beneficiaries, and
                            ``(ii) the failure to permit such extension 
                        would--
                                    ``(I) result in a substantial risk 
                                to the voluntary continuation of the 
                                plan, or a substantial curtailment of 
                                pension benefit levels or employee 
                                compensation, and
                                    ``(II) be adverse to the interests 
                                of plan participants in the aggregate.
                    ``(C) Action by secretary.--The Secretary shall act 
                upon any application for an extension under this 
                paragraph within 180 days of the submission of such 
                application. If the Secretary rejects the application 
                for an extension under this paragraph, the Secretary 
                shall provide notice to the plan detailing the specific 
                reasons for the rejection, including references to the 
                criteria set forth above.
            ``(3) Advance notice.--
                    ``(A) In general.--The Secretary shall, before 
                granting an extension under this subsection, require 
                each applicant to provide evidence satisfactory to such 
                Secretary that the applicant has provided notice of the 
                filing of the application for such extension to each 
                affected party (as defined in section 4001(a)(21) of 
                the Employee Retirement Income Security Act of 1974) 
                with respect to the affected plan. Such notice shall 
                include a description of the extent to which the plan 
                is funded for benefits which are guaranteed under title 
                IV of such Act and for benefit liabilities.
                    ``(B) Consideration of relevant information.--The 
                Secretary shall consider any relevant information 
                provided by a person to whom notice was given under 
                paragraph (1).''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after 2006.
            (2) Special rule for certain amortization extensions.--If 
        the Secretary of the Treasury grants an extension under section 
        304 of the Employee Retirement Income Security Act of 1974 and 
        section 412(e) of the Internal Revenue Code of 1986 with 
        respect to any application filed with the Secretary of the 
        Treasury on or before June 30, 2005, the extension (and any 
        modification thereof) shall be applied and administered under 
        the rules of such sections as in effect before the enactment of 
        this Act, including the use of the rate of interest determined 
        under section 6621(b) of such Code.

SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN 
              ENDANGERED OR CRITICAL STATUS.

    (a) In General.--Subpart A of part III of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 (as amended by this Act) is 
amended by inserting after section 431 the following new section:

``SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN 
              ENDANGERED STATUS OR CRITICAL STATUS.

    ``(a) General Rule.--For purposes of this part, in the case of a 
multiemployer plan--
            ``(1) if the plan is in endangered status--
                    ``(A) the plan sponsor shall adopt and implement a 
                funding improvement plan in accordance with the 
                requirements of subsection (c), and
                    ``(B) the requirements of subsection (d) shall 
                apply during the funding plan adoption period and the 
                funding improvement period, and
            ``(2) if the plan is in critical status--
                    ``(A) the plan sponsor shall adopt and implement a 
                rehabilitation plan in accordance with the requirements 
                of subsection (e), and
                    ``(B) the requirements of subsection (f) shall 
                apply during the rehabilitation plan adoption period 
                and the rehabilitation period.
    ``(b) Determination of Endangered and Critical Status.--For 
purposes of this section--
            ``(1) Endangered status.--A multiemployer plan is in 
        endangered status for a plan year if, as determined by the plan 
        actuary under paragraph (3), the plan is not in critical status 
        for the plan year and either--
                    ``(A) the plan's funded percentage for such plan 
                year is less than 80 percent, or
                    ``(B) the plan has an accumulated funding 
                deficiency for such plan year, or is projected to have 
                such an accumulated funding deficiency for any of the 6 
                succeeding plan years, taking into account any 
                extension of amortization periods under section 431(d).
        For purposes of this section, a plan described in subparagraph 
        (B) shall be treated as in seriously endangered status.
            ``(2) Critical status.--A multiemployer plan is in critical 
        status for a plan year if, as determined by the plan actuary 
        under paragraph (3), the plan is described in 1 or more of the 
        following subparagraphs as of the beginning of the plan year:
                    ``(A) A plan is described in this subparagraph if--
                            ``(i) the funded percentage of the plan is 
                        less than 65 percent, and
                            ``(ii) the sum of--
                                    ``(I) the market value of plan 
                                assets, plus
                                    ``(II) the present value of the 
                                reasonably anticipated employer 
                                contributions for the current plan year 
                                and each of the 5 succeeding plan 
                                years, assuming that the terms of all 
                                collective bargaining agreements 
                                pursuant to which the plan is 
                                maintained for the current plan year 
                                continue in effect for succeeding plan 
                                years,
                        is less than the present value of all benefits 
                        projected to be payable under the plan during 
                        the current plan year and each of the 5 
                        succeeding plan years (plus administrative 
                        expenses for such plan years).
                    ``(B) A plan is described in this subparagraph if--
                            ``(i) the plan has an accumulated funding 
                        deficiency for the current plan year, not 
                        taking into account any extension of 
                        amortization periods under section 431(d), or
                            ``(ii) the plan is projected to have an 
                        accumulated funding deficiency for any of the 3 
                        succeeding plan years (4 succeeding plan years 
                        if the funded percentage of the plan is 65 
                        percent or less), not taking into account any 
                        extension of amortization periods under section 
                        431(d).
                    ``(C) A plan is described in this subparagraph if--
                            ``(i)(I) the plan's normal cost for the 
                        current plan year, plus interest (determined at 
                        the rate used for determining costs under the 
                        plan) for the current plan year on the amount 
                        of unfunded benefit liabilities under the plan 
                        as of the last date of the preceding plan year, 
                        exceeds
                            ``(II) the present value of the reasonably 
                        anticipated employer contributions for the 
                        current plan year,
                            ``(ii) the present value of nonforfeitable 
                        benefits of inactive participants is greater 
                        than the present value of nonforfeitable 
                        benefits of active participants, and
                            ``(iii) the plan has an accumulated funding 
                        deficiency for the current plan year, or is 
                        projected to have such a deficiency for any of 
                        the 4 succeeding plan years, not taking into 
                        account any extension of amortization periods 
                        under section 431(d).
                    ``(D) A plan is described in this subparagraph if 
                the sum of--
                            ``(i) the market value of plan assets, plus
                            ``(ii) the present value of the reasonably 
                        anticipated employer contributions for the 
                        current plan year and each of the 4 succeeding 
                        plan years, assuming that the terms of all 
                        collective bargaining agreements pursuant to 
                        which the plan is maintained for the current 
                        plan year continue in effect for succeeding 
                        plan years,
                is less than the present value of all benefits 
                projected to be payable under the plan during the 
                current plan year and each of the 4 succeeding plan 
                years (plus administrative expenses for such plan 
                years).
            ``(3) Annual certification by plan actuary.--
                    ``(A) In general.--During the 90-day period 
                beginning on the first day of each plan year of a 
                multiemployer plan, the plan actuary shall certify to 
                the Secretary--
                            ``(i) whether or not the plan is in 
                        endangered status for such plan year and 
                        whether or not the plan is in critical status 
                        for such plan year, and
                            ``(ii) in the case of a plan which is in a 
                        funding improvement or rehabilitation period, 
                        whether or not the plan is making the scheduled 
                        progress in meeting the requirements of its 
                        funding improvement or rehabilitation plan.
                    ``(B) Actuarial projections of assets and 
                liabilities.--
                            ``(i) In general.--In making the 
                        determinations and projections under this 
                        subsection, the plan actuary shall make 
                        projections required for the current and 
                        succeeding plan years, using reasonable 
                        actuarial estimates, assumptions, and methods, 
                        of the current value of the assets of the plan 
                        and the present value of all liabilities to 
                        participants and beneficiaries under the plan 
                        for the current plan year as of the beginning 
                        of such year. The projected present value of 
                        liabilities as of the beginning of such year 
                        shall be determined based on the actuarial 
                        statement required under section 103(d) of the 
                        Employee Retirement Income Security Act of 1974 
                        with respect to the most recently filed annual 
                        report or the actuarial valuation for the 
                        preceding plan year.
                            ``(ii) Determinations of future 
                        contributions.--Any actuarial projection of 
                        plan assets shall assume--
                                    ``(I) reasonably anticipated 
                                employer contributions for the current 
                                and succeeding plan years, assuming 
                                that the terms of the one or more 
                                collective bargaining agreements 
                                pursuant to which the plan is 
                                maintained for the current plan year 
                                continue in effect for succeeding plan 
                                years, or
                                    ``(II) that employer contributions 
                                for the most recent plan year will 
                                continue indefinitely, but only if the 
                                plan actuary determines there have been 
                                no significant demographic changes that 
                                would make such assumption 
                                unreasonable.
                    ``(C) Penalty for failure to secure timely 
                actuarial certification.--Any failure of the plan's 
                actuary to certify the plan's status under this 
                subsection by the date specified in subparagraph (A) 
                shall be treated for purposes of section 502(c)(2) of 
                such Act as a failure or refusal by the plan 
                administrator to file the annual report required to be 
                filed with the Secretary under section 101(b)(4) of 
                such Act.
                    ``(D) Notice.--In any case in which a multiemployer 
                plan is certified to be in endangered or critical 
                status under subparagraph (A), the plan sponsor shall, 
                not later than 30 days after the date of the 
                certification, provide notification of the endangered 
                or critical status to the participants and 
                beneficiaries, the bargaining parties, the Pension 
                Benefit Guaranty Corporation, the Secretary, and the 
                Secretary of Labor.
    ``(c) Funding Improvement Plan Must Be Adopted for Multiemployer 
Plans in Endangered Status.--
            ``(1) In general.--In any case in which a multiemployer 
        plan is in endangered status for a plan year, the plan sponsor, 
        in accordance with this subsection--
                    ``(A) shall adopt a funding improvement plan not 
                later than 240 days following the required date for the 
                actuarial certification of endangered status under 
                subsection (b)(3)(A), and
                    ``(B) within 30 days after the adoption of the 
                funding improvement plan--
                            ``(i) in the case of a plan in seriously 
                        endangered status, shall provide to the 
                        bargaining parties 1 or more schedules showing 
                        revised benefit structures, revised 
                        contribution structures, or both, which, if 
                        adopted, may reasonably be expected to enable 
                        the multiemployer plan to meet the applicable 
                        requirements under paragraph (3) in accordance 
                        with the funding improvement plan, including a 
                        description of the reductions in future benefit 
                        accruals and increases in contributions that 
                        the plan sponsor determines are reasonably 
                        necessary to meet the applicable requirements 
                        if the plan sponsor assumes that there are no 
                        increases in contributions under the plan other 
                        than the increases necessary to meet the 
                        applicable requirements after future benefit 
                        accruals have been reduced to the maximum 
                        extent permitted by law, and
                            ``(ii) may, if the plan sponsor deems 
                        appropriate, prepare and provide the bargaining 
                        parties with additional information relating to 
                        contribution rates or benefit reductions, 
                        alternative schedules, or other information 
                        relevant to achieving the requirements under 
                        paragraph (3) in accordance with the funding 
                        improvement plan.
            ``(2) Exception for years after process begins.--Paragraph 
        (1) shall not apply to a plan year if such year is in a funding 
        plan adoption period or funding improvement period by reason of 
        the plan being in endangered status for a preceding plan year. 
        For purposes of this section, such preceding plan year shall be 
        the initial determination year with respect to the funding 
        improvement plan to which it relates.
            ``(3) Funding improvement plan.--For purposes of this 
        section--
                    ``(A) In general.--A funding improvement plan is a 
                plan which consists of the actions, including options 
                or a range of options to be proposed to the bargaining 
                parties, which, under reasonable actuarial assumptions, 
                will result in the plan meeting the requirements of 
                this paragraph.
                    ``(B) Plans other than seriously endangered 
                plans.--In the case of plan not in seriously endangered 
                status, the requirements of this paragraph are met if 
                the plan's funded percentage as of the close of the 
                funding improvement period exceeds the lesser of 80 
                percent or a percentage equal to the sum of--
                            ``(i) such percentage as of the beginning 
                        of such period, plus
                            ``(ii) 10 percent of the percentage 
                        determined under clause (i).
                    ``(C) Seriously endangered plans.--In the case of a 
                plan in seriously endangered status, the requirements 
                of this paragraph are met if--
                            ``(i) the plan's funded percentage as of 
                        the close of the funding improvement period 
                        equals or exceeds the percentage which is equal 
                        to the sum of--
                                    ``(I) such percentage as of the 
                                beginning of such period, plus
                                    ``(II) 33 percent of the difference 
                                between 100 percent and the percentage 
                                under subclause (I), and
                            ``(ii) there is no accumulated funding 
                        deficiency for any plan year during the funding 
                        improvement period (taking into account any 
                        extension of amortization periods under section 
                        431(d)).
            ``(4) Funding improvement period.--For purposes of this 
        section--
                    ``(A) In general.--The funding improvement period 
                for any funding improvement plan adopted pursuant to 
                this subsection is the 10-year period beginning on the 
                first day of the first plan year of the multiemployer 
                plan beginning after the earlier of--
                            ``(i) the second anniversary of the date of 
                        the adoption of the funding improvement plan, 
                        or
                            ``(ii) the expiration of the collective 
                        bargaining agreements in effect on the due date 
                        for the actuarial certification of endangered 
                        status for the initial determination year under 
                        subsection (b)(3)(A) and covering, as of such 
                        due date, at least 75 percent of the active 
                        participants in such multiemployer plan.
                    ``(B) Coordination with changes in status.--
                            ``(i) Plans no longer in endangered 
                        status.--If the plan's actuary certifies under 
                        subsection (b)(3)(A) for a plan year in any 
                        funding plan adoption period or funding 
                        improvement period that the plan is no longer 
                        in endangered status and is not in critical 
                        status, the funding plan adoption period or 
                        funding improvement period, whichever is 
                        applicable, shall end as of the close of the 
                        preceding plan year.
                            ``(ii) Plans in critical status.--If the 
                        plan's actuary certifies under subsection 
                        (b)(3)(A) for a plan year in any funding plan 
                        adoption period or funding improvement period 
                        that the plan is in critical status, the 
                        funding plan adoption period or funding 
                        improvement period, whichever is applicable, 
                        shall end as of the close of the plan year 
                        preceding the first plan year in the 
                        rehabilitation period with respect to such 
                        status.
            ``(5) Special rules for certain underfunded plans.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if the funded percentage of a plan in 
                seriously endangered status was 70 percent or less as 
                of the beginning of the initial determination year, the 
                following rules shall apply in determining whether the 
                requirements of paragraph (3)(C)(i) are met:
                            ``(i) The plan's funded percentage as of 
                        the close of the funding improvement period 
                        must equal or exceed a percentage which is 
                        equal to the sum of--
                                    ``(I) such percentage as of the 
                                beginning of such period, plus
                                    ``(II) 20 percent of the difference 
                                between 100 percent and the percentage 
                                under subclause (I).
                            ``(ii) The funding improvement period under 
                        paragraph (4)(A) shall be 15 years rather than 
                        10 years.
                    ``(B) Special rules for plans with funded 
                percentage over 70 percent.--If the funded percentage 
                described in subparagraph (A) was more than 70 percent 
                but less than 80 percent as of the beginning of the 
                initial determination year--
                            ``(i) subparagraph (A) shall apply if the 
                        plan's actuary certifies, within 30 days after 
                        the certification under subsection (b)(3)(A) 
                        for the initial determination year, that, based 
                        on the terms of the plan and the collective 
                        bargaining agreements in effect at the time of 
                        such certification, the plan is not projected 
                        to meet the requirements of paragraph (3)(C)(i) 
                        without regard to this paragraph, and
                            ``(ii) if there is a certification under 
                        clause (i), the plan may, in formulating its 
                        funding improvement plan, only take into 
                        account the rules of subparagraph (A) for plan 
                        years in the funding improvement period 
                        beginning on or before the date on which the 
                        last of the collective bargaining agreements 
                        described in paragraph (4)(A)(ii) expires.
                Notwithstanding clause (ii), if for any plan year 
                ending after the date described in clause (ii) the plan 
                actuary certifies (at the time of the annual 
                certification under subsection (b)(3)(A) for such plan 
                year) that, based on the terms of the plan and 
                collective bargaining agreements in effect at the time 
                of that annual certification, the plan is not projected 
                to be able to meet the requirements of paragraph 
                (3)(C)(i) without regard to this paragraph, the plan 
                may continue to assume for such year that the funding 
                improvement period is 15 years rather than 10 years.
            ``(6) Updates to funding improvement plan and schedules.--
                    ``(A) Funding improvement plan.--The plan sponsor 
                shall annually update the funding improvement plan and 
                shall file the update with the plan's annual report 
                under section 104 of the Employee Retirement Income 
                Security Act of 1974.
                    ``(B) Schedules.--The plan sponsor may periodically 
                update any schedule of contribution rates provided 
                under this subsection to reflect the experience of the 
                plan, except that the schedule or schedules described 
                in paragraph (1)(B)(i) shall be updated at least once 
                every 3 years.
                    ``(C) Duration of schedule.--A schedule of 
                contribution rates provided by the plan sponsor and 
                relied upon by bargaining parties in negotiating a 
                collective bargaining agreement shall remain in effect 
                for the duration of that collective bargaining 
                agreement.
            ``(7) Penalty if no funding improvement plan adopted.--A 
        failure of the plan sponsor to adopt a funding improvement plan 
        by the date specified in paragraph (1)(A) shall be treated for 
        purposes of section 502(c)(2) of such Act as a failure or 
        refusal by the plan administrator to file the annual report 
        required to be filed with the Secretary of Labor under section 
        101(b)(4) of such Act.
            ``(8) Funding plan adoption period.--For purposes of this 
        section, the term `funding plan adoption period' means the 
        period beginning on the date of the certification under 
        subsection (b)(3)(A) for the initial determination year and 
        ending on the day before the first day of the funding 
        improvement period.
    ``(d) Rules for Operation of Plan During Adoption and Improvement 
Periods; Failure to Meet Requirements.--
            ``(1) Special rules for plan adoption period.--During the 
        plan adoption period--
                    ``(A) the plan sponsor may not accept a collective 
                bargaining agreement or participation agreement with 
                respect to the multiemployer plan that provides for--
                            ``(i) a reduction in the level of 
                        contributions for any participants,
                            ``(ii) a suspension of contributions with 
                        respect to any period of service, or
                            ``(iii) any new direct or indirect 
                        exclusion of younger or newly hired employees 
                        from plan participation,
                    ``(B) no amendment of the plan which increases the 
                liabilities of the plan by reason of any increase in 
                benefits, any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan may be adopted unless the 
                amendment is required as a condition of qualification 
                under part I of subchapter D of chapter 1 or to comply 
                with other applicable law, and
                    ``(C) in the case of a plan in seriously endangered 
                status, the plan sponsor shall take all reasonable 
                actions which are consistent with the terms of the plan 
                and applicable law and which are expected, based on 
                reasonable assumptions, to achieve--
                            ``(i) an increase in the plan's funded 
                        percentage, and
                            ``(ii) postponement of an accumulated 
                        funding deficiency for at least 1 additional 
                        plan year.
        Actions under subparagraph (C) include applications for 
        extensions of amortization periods under section 431(d), use of 
        the shortfall funding method in making funding standard account 
        computations, amendments to the plan's benefit structure, 
        reductions in future benefit accruals, and other reasonable 
        actions consistent with the terms of the plan and applicable 
        law.
            ``(2) Compliance with funding improvement plan.--
                    ``(A) In general.--A plan may not be amended after 
                the date of the adoption of a funding improvement plan 
                under subsection (c) so as to be inconsistent with the 
                funding improvement plan.
                    ``(B) No reduction in contributions.--A plan 
                sponsor may not during any funding improvement period 
                accept a collective bargaining agreement or 
                participation agreement with respect to the 
                multiemployer plan that provides for--
                            ``(i) a reduction in the level of 
                        contributions for any participants,
                            ``(ii) a suspension of contributions with 
                        respect to any period of service, or
                            ``(iii) any new direct or indirect 
                        exclusion of younger or newly hired employees 
                        from plan participation.
                    ``(C) Special rules for benefit increases.--A plan 
                may not be amended after the date of the adoption of a 
                funding improvement plan under subsection (c) so as to 
                increase benefits, including future benefit accruals, 
                unless--
                            ``(i) in the case of a plan in seriously 
                        endangered status, the plan actuary certifies 
                        that, after taking into account the benefit 
                        increase, the plan is still reasonably expected 
                        to meet the requirements under subsection 
                        (c)(3) in accordance with the schedule 
                        contemplated in the funding improvement plan, 
                        and
                            ``(ii) in the case of a plan not in 
                        seriously endangered status, the actuary 
                        certifies that such increase is paid for out of 
                        contributions not required by the funding 
                        improvement plan to meet the requirements under 
                        subsection (c)(3) in accordance with the 
                        schedule contemplated in the funding 
                        improvement plan.
            ``(3) Failure to meet requirements.--
                    ``(A) In general.--Notwithstanding section 4971(g), 
                if a plan fails to meet the requirements of subsection 
                (c)(3) by the end of the funding improvement period, 
                the plan shall be treated as having an accumulated 
                funding deficiency for purposes of section 4971 for the 
                last plan year in such period (and each succeeding plan 
                year until such requirements are met) in an amount 
                equal to the greater of the amount of the contributions 
                necessary to meet such requirements or the amount of 
                such accumulated funding deficiency without regard to 
                this paragraph.
                    ``(B) Waiver.--In the case of a failure described 
                in subparagraph (A) which is due to reasonable cause 
                and not to willful neglect, the Secretary of the 
                Treasury may waive part or all of the tax imposed by 
                section 4971 of such Code to the extent that the 
                payment of such tax would be excessive or otherwise 
                inequitable relative to the failure involved.
    ``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans 
in Critical Status.--
            ``(1) In general.--In any case in which a multiemployer 
        plan is in critical status for a plan year, the plan sponsor, 
        in accordance with this subsection--
                    ``(A) shall adopt a rehabilitation plan not later 
                than 240 days following the required date for the 
                actuarial certification of critical status under 
                subsection (b)(3)(A), and
                    ``(B) within 30 days after the adoption of the 
                rehabilitation plan--
                            ``(i) shall provide to the bargaining 
                        parties 1 or more schedules showing revised 
                        benefit structures, revised contribution 
                        structures, or both, which, if adopted, may 
                        reasonably be expected to enable the 
                        multiemployer plan to emerge from critical 
                        status in accordance with the rehabilitation 
                        plan, and
                            ``(ii) may, if the plan sponsor deems 
                        appropriate, prepare and provide the bargaining 
                        parties with additional information relating to 
                        contribution rates or benefit reductions, 
                        alternative schedules, or other information 
                        relevant to emerging from critical status in 
                        accordance with the rehabilitation plan.
        The schedule or schedules described in subparagraph (B)(i) 
        shall reflect reductions in future benefit accruals and 
        increases in contributions that the plan sponsor determines are 
        reasonably necessary to emerge from critical status. One 
        schedule shall be designated as the default schedule and such 
        schedule shall assume that there are no increases in 
        contributions under the plan other than the increases necessary 
        to emerge from critical status after future benefit accruals 
        and other benefits (other than benefits the reduction or 
        elimination of which are not permitted under section 411(d)(6)) 
        have been reduced to the maximum extent permitted by law.
            ``(2) Exception for years after process begins.--Paragraph 
        (1) shall not apply to a plan year if such year is in a 
        rehabilitation plan adoption period or rehabilitation period by 
        reason of the plan being in critical status for a preceding 
        plan year. For purposes of this section, such preceding plan 
        year shall be the initial critical year with respect to the 
        rehabilitation plan to which it relates.
            ``(3) Rehabilitation plan.--For purposes of this section--
                    ``(A) In general.--A rehabilitation plan is a plan 
                which consists of--
                            ``(i) actions which will enable, under 
                        reasonable actuarial assumptions, the plan to 
                        cease to be in critical status by the end of 
                        the rehabilitation period and may include 
                        reductions in plan expenditures (including plan 
                        mergers and consolidations), reductions in 
                        future benefit accruals or increases in 
                        contributions, if agreed to by the bargaining 
                        parties, or any combination of such actions, or
                            ``(ii) if the plan sponsor determines that, 
                        based on reasonable actuarial assumptions and 
                        upon exhaustion of all reasonable measures, the 
                        plan can not reasonably be expected to emerge 
                        from critical status by the end of the 
                        rehabilitation period, reasonable measures to 
                        emerge from critical status at a later time or 
                        to forestall possible insolvency (within the 
                        meaning of section 4245 of the Employee 
                        Retirement Income Security Act of 1974).
                Such plan shall include the schedules required to be 
                provided under paragraph (1)(B)(i). If clause (ii) 
                applies, such plan shall set forth the alternatives 
                considered, explain why the plan is not reasonably 
                expected to emerge from critical status by the end of 
                the rehabilitation period, and specify when, if ever, 
                the plan is expected to emerge from critical status in 
                accordance with the rehabilitation plan.
                    ``(B) Updates to rehabilitation plan and 
                schedules.--
                            ``(i) Rehabilitation plan.--The plan 
                        sponsor shall annually update the 
                        rehabilitation plan and shall file the update 
                        with the plan's annual report under section 104 
                        of the Employee Retirement Income Security Act 
                        of 1974.
                            ``(ii) Schedules.--The plan sponsor may 
                        periodically update any schedule of 
                        contribution rates provided under this 
                        subsection to reflect the experience of the 
                        plan, except that the schedule or schedules 
                        described in paragraph (1)(B)(i) shall be 
                        updated at least once every 3 years.
                            ``(iii) Duration of schedule.--A schedule 
                        of contribution rates provided by the plan 
                        sponsor and relied upon by bargaining parties 
                        in negotiating a collective bargaining 
                        agreement shall remain in effect for the 
                        duration of that collective bargaining 
                        agreement.
                    ``(C) Default schedule.--If the collective 
                bargaining agreement providing for contributions under 
                a multiemployer plan that was in effect at the time the 
                plan entered critical status expires and, after 
                receiving a schedule from the plan sponsor under 
                paragraph (1)(B)(i), the bargaining parties have not 
                adopted a collective bargaining agreement with terms 
                consistent with such a schedule, the default schedule 
                described in the last sentence of paragraph (1) shall 
                go into effect with respect to those bargaining 
                parties.
            ``(4) Rehabilitation period.--For purposes of this 
        section--
                    ``(A) In general.--The rehabilitation period for a 
                plan in critical status is the 10-year period beginning 
                on the first day of the first plan year of the 
                multiemployer plan following the earlier of--
                            ``(i) the second anniversary of the date of 
                        the adoption of the rehabilitation plan, or
                            ``(ii) the expiration of the collective 
                        bargaining agreements in effect on the date of 
                        the due date for the actuarial certification of 
                        critical status for the initial critical year 
                        under subsection (a)(1) and covering, as of 
                        such date at least 75 percent of the active 
                        participants in such multiemployer plan.
                If a plan emerges from critical status as provided 
                under subparagraph (B) before the end of such 10-year 
                period, the rehabilitation period shall end with the 
                plan year preceding the plan year for which the 
                determination under subparagraph (B) is made.
                    ``(B) Emergence.--A plan in critical status shall 
                remain in such status until a plan year for which the 
                plan actuary certifies, in accordance with subsection 
                (b)(3)(A), that the plan is not projected to have an 
                accumulated funding deficiency for the plan year or any 
                of the 9 succeeding plan years, without regard to use 
                of the shortfall method or any extension of 
                amortization periods under section 431(d).
            ``(5) Penalty if no rehabilitation plan adopted.--A failure 
        of a plan sponsor to adopt a rehabilitation plan by the date 
        specified in paragraph (1)(A) shall be treated for purposes of 
        section 502(c)(2) of the Employee Retirement Income Security 
        Act of 1974 as a failure or refusal by the plan administrator 
        to file the annual report required to be filed with the 
        Secretary of Labor under section 101(b)(4) of such Act.
            ``(6) Rehabilitation plan adoption period.--For purposes of 
        this section, the term `rehabilitation plan adoption period' 
        means the period beginning on the date of the certification 
        under subsection (b)(3)(A) for the initial critical year and 
        ending on the day before the first day of the rehabilitation 
        period.
            ``(7) Limitation on reduction in rates of future 
        accruals.--Any reduction in the rate of future accruals under 
        any schedule described in paragraph (1)(B)(i) shall not reduce 
        the rate of future accruals below--
                    ``(A) a monthly benefit (payable as a single life 
                annuity commencing at the participant's normal 
                retirement age) equal to 1 percent of the contributions 
                required to be made with respect to a participant, or 
                the equivalent standard accrual rate for a participant 
                or group of participants under the collective 
                bargaining agreements in effect as of the first day of 
                the initial critical year, or
                    ``(B) if lower, the accrual rate under the plan on 
                such first day.
        The equivalent standard accrual rate shall be determined by the 
        plan sponsor based on the standard or average contribution base 
        units which the plan sponsor determines to be representative 
        for active participants and such other factors as the plan 
        sponsor determines to be relevant. Nothing in this paragraph 
        shall be construed as limiting the ability of the plan sponsor 
        to prepare and provide the bargaining parties with alternative 
        schedules to the default schedule that established lower or 
        higher accrual and contribution rates than the rates otherwise 
        described in this paragraph.
            ``(8) Employer impact.--For the purposes of this section, 
        the plan sponsor shall consider the impact of the 
        rehabilitation plan and contribution schedules authorized by 
        this section on bargaining parties with fewer than 500 
        employees and shall implement the plan in a manner that 
        encourages their continued participation in the plan and 
        minimizes financial harm to employers and their workers.
    ``(f) Rules for Operation of Plan During Adoption and 
Rehabilitation Period.--
            ``(1) Compliance with rehabilitation plan.--
                    ``(A) In general.--A plan may not be amended after 
                the date of the adoption of a rehabilitation plan under 
                subsection (e) so as to be inconsistent with the 
                rehabilitation plan.
                    ``(B) Special rules for benefit increases.--A plan 
                may not be amended after the date of the adoption of a 
                rehabilitation plan under subsection (e) so as to 
                increase benefits, including future benefit accruals, 
                unless the plan actuary certifies that such increase is 
                paid for out of additional contributions not 
                contemplated by the rehabilitation plan, and, after 
                taking into account the benefit increase, the 
                multiemployer plan still is reasonably expected to 
                emerge from critical status by the end of the 
                rehabilitation period on the schedule contemplated in 
                the rehabilitation plan.
            ``(2) Restriction on lump sums and similar benefits.--
                    ``(A) In general.--Effective on the date the notice 
                of certification of the plan's critical status for the 
                initial critical year under subsection (b)(3)(D) is 
                sent, and notwithstanding section 411(d)(6), the plan 
                shall not pay--
                            ``(i) any payment, in excess of the monthly 
                        amount paid under a single life annuity (plus 
                        any social security supplements described in 
                        the last sentence of section 411(b)(1)(A)),
                            ``(ii) any payment for the purchase of an 
                        irrevocable commitment from an insurer to pay 
                        benefits, and
                            ``(iii) any other payment specified by the 
                        Secretary by regulations.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a benefit which under section 411(a)(11) may be 
                immediately distributed without the consent of the 
                participant or to any makeup payment in the case of a 
                retroactive annuity starting date or any similar 
                payment of benefits owed with respect to a prior 
                period.
            ``(3) Adjustments disregarded in withdrawal liability 
        determination.--Any benefit reductions under this subsection 
        shall be disregarded in determining a plan's unfunded vested 
        benefits for purposes of determining an employer's withdrawal 
        liability under section 4201 of the Employee Retirement Income 
        Security Act of 1974.
            ``(4) Special rules for plan adoption period.--During the 
        rehabilitation plan adoption period--
                    ``(A) the plan sponsor may not accept a collective 
                bargaining agreement or participation agreement with 
                respect to the multiemployer plan that provides for--
                            ``(i) a reduction in the level of 
                        contributions for any participants,
                            ``(ii) a suspension of contributions with 
                        respect to any period of service, or
                            ``(iii) any new direct or indirect 
                        exclusion of younger or newly hired employees 
                        from plan participation, and
                    ``(B) no amendment of the plan which increases the 
                liabilities of the plan by reason of any increase in 
                benefits, any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan may be adopted unless the 
                amendment is required as a condition of qualification 
                under part I of subchapter D of chapter 1 or to comply 
                with other applicable law.
            ``(5) Failure to meet requirements.--
                    ``(A) In general.--Notwithstanding section 4971(g), 
                if a plan--
                            ``(i) fails to meet the requirements of 
                        subsection (e) by the end of the rehabilitation 
                        period, or
                            ``(ii) has received a certification under 
                        subsection (b)(3)(A)(ii) for 3 consecutive plan 
                        years that the plan is not making the scheduled 
                        progress in meeting its requirements under the 
                        rehabilitation plan,
                the plan shall be treated as having an accumulated 
                funding deficiency for purposes of section 4971 for the 
                last plan year in such period (and each succeeding plan 
                year until such requirements are met) in an amount 
                equal to the greater of the amount of the contributions 
                necessary to meet such requirements or the amount of 
                such accumulated funding deficiency without regard to 
                this paragraph.
                    ``(B) Waiver.--In the case of a failure described 
                in subparagraph (A) which is due to reasonable cause 
                and not to willful neglect, the Secretary may waive 
                part or all of the tax imposed by section 4971 to the 
                extent that the payment of such tax would be excessive 
                or otherwise inequitable relative to the failure 
                involved.
    ``(g) Expedited Resolution of Plan Sponsor Decisions.--If, within 
60 days of the due date for adoption of a funding improvement plan 
under subsection (c) or a rehabilitation plan under subsection (e), the 
plan sponsor of a plan in endangered status or a plan in critical 
status has not agreed on a funding improvement plan or rehabilitation 
plan, then any member of the board or group that constitutes the plan 
sponsor may require that the plan sponsor enter into an expedited 
dispute resolution procedure for the development and adoption of a 
funding improvement plan or rehabilitation plan.
    ``(h) Nonbargained Participation.--
            ``(1) Both bargained and nonbargained employee-
        participants.--In the case of an employer that contributes to a 
        multiemployer plan with respect to both employees who are 
        covered by one or more collective bargaining agreements and to 
        employees who are not so covered, if the plan is in endangered 
        status or in critical status, benefits of and contributions for 
        the nonbargained employees, including surcharges on those 
        contributions, shall be determined as if those nonbargained 
        employees were covered under the first to expire of the 
        employer's collective bargaining agreements in effect when the 
        plan entered endangered or critical status.
            ``(2) Nonbargained employees only.--In the case of an 
        employer that contributes to a multiemployer plan only with 
        respect to employees who are not covered by a collective 
        bargaining agreement, this section shall be applied as if the 
        employer were the bargaining parties, and its participation 
        agreement with the plan was a collective bargaining agreement 
        with a term ending on the first day of the plan year beginning 
        after the employer is provided the schedule or schedules 
        described in subsections (c) and (e).
            ``(3) Employees covered by a collective bargaining 
        agreement.--The determination as to whether an employee covered 
        by a collective bargaining agreement for purposes of this 
        section shall be made without regard to the special rule in 
        Treasury Regulation section 1.410(b)-6(d)(ii)(D).
    ``(i) Definitions; Actuarial Method.--For purposes of this 
section--
            ``(1) Bargaining party.--The term `bargaining party' 
        means--
                    ``(A)(i) except as provided in clause (ii), an 
                employer who has an obligation to contribute under the 
                plan; or
                    ``(ii) in the case of a plan described under 
                section 404(c), or a continuation of such a plan, the 
                association of employers that is the employee settlor 
                of the plan; and
                    ``(B) an employee organization which, for purposes 
                of collective bargaining, represents plan participants 
                employed by an employer who has an obligation to 
                contribute under the plan.
            ``(2) Funded percentage.--The term `funded percentage' 
        means the percentage equal to a fraction--
                    ``(A) the numerator of which is the value of the 
                plan's assets, as determined under section 431(c)(2), 
                and
                    ``(B) the denominator of which is the accrued 
                liability of the plan, determined using actuarial 
                assumptions described in section 431(c)(3).
            ``(3) Accumulated funding deficiency.--The term 
        `accumulated funding deficiency' has the meaning given such 
        term in section 412(a).
            ``(4) Active participant.--The term `active participant' 
        means, in connection with a multiemployer plan, a participant 
        who is in covered service under the plan.
            ``(5) Inactive participant.--The term `inactive 
        participant' means, in connection with a multiemployer plan, a 
        participant, or the beneficiary or alternate payee of a 
        participant, who--
                    ``(A) is not in covered service under the plan, and
                    ``(B) is in pay status under the plan or has a 
                nonforfeitable right to benefits under the plan.
            ``(6) Pay status.--A person is in pay status under a 
        multiemployer plan if--
                    ``(A) at any time during the current plan year, 
                such person is a participant or beneficiary under the 
                plan and is paid an early, late, normal, or disability 
                retirement benefit under the plan (or a death benefit 
                under the plan related to a retirement benefit), or
                    ``(B) to the extent provided in regulations of the 
                Secretary, such person is entitled to such a benefit 
                under the plan.
            ``(7) Obligation to contribute.--The term `obligation to 
        contribute' has the meaning given such term under section 
        4212(a) of the Employee Retirement Income Security Act of 1974.
            ``(8) Actuarial method.--Notwithstanding any other 
        provision of this section, the actuary's determinations with 
        respect to a plan's normal cost, actuarial accrued liability, 
        and improvements in a plan's funded percentage under this 
        section shall be based upon the unit credit funding method 
        (whether or not that method is used for the plan's actuarial 
        valuation).
            ``(9) Plan sponsor.--In the case of a plan described under 
        section 404(c), or a continuation of such a plan, the term 
        `plan sponsor' means the bargaining parties described under 
        paragraph (1).''
    (b) Effective Dates.--
            (1) In general.--The amendment made by this section shall 
        apply with respect to plan years beginning after 2006.
            (2) Special rule for certain restored benefits.--In the 
        case of a multiemployer plan--
                    (A) with respect to which benefits were reduced 
                pursuant to a plan amendment adopted on or after 
                January 1, 2002, and before June 30, 2005, and
                    (B) which, pursuant to the plan document, the trust 
                agreement, or a formal written communication from the 
                plan sponsor to participants provided before June 30, 
                2005, provided for the restoration of such benefits,
        the amendments made by this section shall not apply to such 
        benefit restorations to the extent that any restriction on the 
        providing or accrual of such benefits would otherwise apply by 
        reason of such amendments.

                   PART III--SUNSET OF FUNDING RULES

SEC. 216. SUNSET OF FUNDING RULES.

    (a) Report.--Not later than December 31, 2011, the Secretary of 
Labor, the Secretary of the Treasury, and the Executive Director of the 
Pension Benefit Guaranty Corporation shall conduct a study of the 
effect of the amendments made by this subtitle on the operation and 
funding status of multiemployer plans and shall report the results of 
such study, including any recommendations for legislation, to the 
Congress.
    (b) Matters Included in Study.--The study required under subsection 
(a) shall include--
            (1) the effect of funding difficulties, funding rules in 
        effect before the date of the enactment of this Act, and the 
        amendments made by this subtitle on small businesses 
        participating in multiemployer plans,
            (2) the effect on the financial status of small employers 
        of--
                    (A) funding targets set in funding improvement and 
                rehabilitation plans and associated contribution 
                increases,
                    (B) funding deficiencies,
                    (C) excise taxes,
                    (D) withdrawal liability,
                    (E) the possibility of alternatives schedules and 
                procedures for financially-troubled employers, and
                    (F) other aspects of the multiemployer system, and
            (3) the role of the multiemployer pension plan system in 
        helping small employers to offer pension benefits.
    (c) Sunset.--
            (1) In general.--Except as provided in this subsection, 
        notwithstanding any other provision of this Act, the provisions 
        of, and the amendments made by, this subtitle shall not apply 
        to plan years beginning after December 31, 2014, and the 
        Employee Retirement Income Security Act of 1974 and the 
        Internal Revenue Code of 1986 shall be applied to such plan 
        years under the provisions of sections 302 through 308 of such 
        Act and 412 of such Code (as in effect before the amendments 
        made by this Act).
            (2) Funding improvement and rehabilitation plans.--If a 
        plan is operating under a funding improvement or rehabilitation 
        plan under section 305 of such Act or 432 of such Code for its 
        last year beginning before January 1, 2015, such plan shall 
        continue to operate under such funding improvement or 
        rehabilitation plan during any period after December 31, 2014, 
        such funding improvement or rehabilitation plan is in effect 
        and all provisions of such Act or Code relating to the 
        operation of such funding improvement or rehabilitation plan 
        shall continue in effect during such period.
            (3) Amortization schedules.--In the case of any amount 
        amortized under section 304(b) of such Act or 431 of such Code 
        (as in effect after the amendments made by this subtitle) over 
        any period beginning with a plan year beginning before January 
        1, 2015, such amount shall, in lieu of the amortization which 
        would apply after the application of this subsection, continue 
        to be amortized under such section 304 or 431 (as so in 
        effect).

              Subtitle B--Deduction and Related Provisions

SEC. 221. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS.

    (a) Increase in Deduction.--Section 404(a)(1)(D) of the Internal 
Revenue Code of 1986, as amended by this Act, is amended to read as 
follows:
                    ``(D) Amount determined on basis of unfunded 
                current liability.--
                            ``(i) In general.--In the case of a defined 
                        benefit plan which is a multiemployer plan, 
                        except as provided in regulations, the maximum 
                        amount deductible under the limitations of this 
                        paragraph shall not be less than the unfunded 
                        current liability of the plan.
                            ``(ii) Unfunded current liability.--For 
                        purposes of clause (i), the term `unfunded 
                        current liability' means the excess (if any) 
                        of--
                                    ``(I) 140 percent of the current 
                                liability of the plan determined under 
                                section 431(c)(6)(C), over
                                    ``(II) the value of the plan's 
                                assets determined under section 
                                431(c)(2).''.
    (b) Exception From Limitation on Deduction Where Combination of 
Defined Contribution and Defined Benefit Plans.--
            (1) In general.--Section 404(a)(7)(C) of such Code, as 
        amended by this Act, is amended by adding at the end the 
        following new clause:
                            ``(v) Multiemployer plans.--In applying 
                        this paragraph, any multiemployer plan shall 
                        not be taken into account.''.
            (2) Conforming amendment.--Section 404(a)(7)(A) of such 
        Code is amended by striking the last sentence.
    (c) Effective Dates.--
            (1) Deduction limit.--The amendment made by subsection (a) 
        shall apply to years beginning after December 31, 2006.
            (2) Exception.--The amendments made by subsection (b) shall 
        apply to years beginning after December 31, 2005.

SEC. 222. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER HEALTH 
              PLAN.

    (a) In General.--Section 420(e) of the Internal Revenue Code of 
1986 (relating to definitions and special rules) is amended by adding 
at the end the following new paragraph:
            ``(5) Application to multiemployer plan.--In the case of 
        any plan to which section 404(c) applies (or any successor plan 
        primarily covering employees in the building and construction 
        industry)--
                    ``(A) the prohibition under subsection (a) on the 
                application of this section to a multiemployer plan 
                shall not apply, and
                    ``(B) this section shall be applied to any such 
                plan--
                            ``(i) by treating any reference in this 
                        section to an employer as a reference to all 
                        employers maintaining the plan (or, if 
                        appropriate, the plan sponsor), and
                            ``(ii) in accordance with such 
                        modifications of this section (and the 
                        provisions of this title and the Employee 
                        Retirement Income Security Act of 1974 relating 
                        to this section) as the Secretary determines 
                        appropriate to reflect the fact the plan is not 
                        maintained by a single employer.''
    (b) Amendments of ERISA.--
            (1) Section 101(e)(3) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by 
        striking ``American Jobs Creation Act of 2004'' and inserting 
        ``Pension Security and Transparency Act of 2005''.
            (2) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is 
        amended by striking ``American Jobs Creation Act of 2004'' and 
        inserting ``Pension Security and Transparency Act of 2005''.
            (3) Section 408(b)(13) of such Act (29 U.S.C. 1108(b)(13)) 
        is amended by striking ``American Jobs Creation Act of 2004'' 
        and inserting ``Pension Security and Transparency Act of 
        2005''.
    (c) Effective Date.--The amendment made by this section shall apply 
to transfers made in taxable years beginning after December 31, 2004.

                  TITLE III--INTEREST RATE ASSUMPTIONS

SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP SUM 
              DISTRIBUTIONS.

    (a) Amendments of ERISA.--
            (1) In general.--Section 205(g)(3)(A) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 
        1055(g)(3)(A)) is amended by adding at the end the following 
        new sentence: ``In the case of plan years beginning after 2006, 
        the preceding sentence shall be applied by using the applicable 
        yield curve method under subparagraph (C) rather than the 
        applicable interest rate.''.
            (2) Applicable yield curve method.--Section 205(g)(3) of 
        such Act (29 U.S.C. 1055(g)(3)) is amended by adding at the end 
        the following new subparagraphs:
                    ``(C) Applicable yield curve method.--For purposes 
                of subparagraph (A), the term `applicable yield curve 
                method' means--
                            ``(i) the phase-in yield curve method in 
                        the case of plan years beginning in 2007, 2008, 
                        and 2009, and
                            ``(ii) the yield curve method for years 
                        beginning after 2009.
                    ``(D) Yield curve method.--For purposes of this 
                paragraph--
                            ``(i) In general.--The yield curve method 
                        is a method under which present value is 
                        determined--
                                    ``(I) by using interest rates drawn 
                                from a yield curve which is prescribed 
                                by the Secretary of the Treasury and 
                                which reflects the yield on high-
                                quality corporate bonds with varying 
                                maturities, and
                                    ``(II) by matching the timing of 
                                the expected benefit payments under the 
                                plan to the interest rates on such 
                                yield curve.
                            ``(ii) Publication.--Each month the 
                        Secretary of the Treasury shall publish any 
                        yield curve prescribed under this subparagraph 
                        which shall apply to plan years beginning in 
                        such month and such yield curve shall be based 
                        on average interest rates for business days 
                        occurring during the 3 preceding months.
                    ``(E) Phase-in yield curve method.--
                            ``(i) In general.--Present value determined 
                        under the phase-in yield curve method shall be 
                        equal to the sum of--
                                    ``(I) the applicable percentage of 
                                such amount determined under the yield 
                                curve method described in subparagraph 
                                (D), and
                                    ``(II) the product of such amount 
                                determined by using the applicable 
                                interest rate and a percentage equal to 
                                100 percent minus the applicable 
                                percentage.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is 25 
                        percent for plan years beginning in 2007, 50 
                        percent for plan years beginning in 2008, and 
                        75 percent for plan years beginning in 2009.''.
    (b) Amendments of Internal Revenue Code.--
            (1) In general.--Section 417(e)(3)(A) of the Internal 
        Revenue Code of 1986 (relating to determination of present 
        value) is amended by adding at the end the following new 
        sentence: ``In the case of plan years beginning after 2006, the 
        preceding sentence shall be applied by using the applicable 
        yield curve method under subparagraph (C) rather than the 
        applicable interest rate.''
            (2) Applicable yield curve method.--Section 417(e) of such 
        Code is amended by adding at the end the following new 
        subparagraphs:
                    ``(C) Applicable yield curve method.--For purposes 
                of subparagraph (A), the term `applicable yield curve 
                method' means--
                            ``(i) the phase-in yield curve method in 
                        the case of plan years beginning in 2007, 2008, 
                        and 2009, and
                            ``(ii) the yield curve method for years 
                        beginning after 2009.
                    ``(D) Yield curve method.--For purposes of this 
                paragraph--
                            ``(i) In general.--The yield curve method 
                        is a method under which present value is 
                        determined--
                                    ``(I) by using interest rates drawn 
                                from a yield curve which is prescribed 
                                by the Secretary and which reflects the 
                                yield on high-quality corporate bonds 
                                with varying maturities, and
                                    ``(II) by matching the timing of 
                                the expected benefit payments under the 
                                plan to the interest rates on such 
                                yield curve.
                            ``(ii) Publication.--Each month the 
                        Secretary shall publish any yield curve 
                        prescribed under this subparagraph which shall 
                        apply to plan years beginning in such month and 
                        such yield curve shall be based on average 
                        interest rates for business days occurring 
                        during the 3 preceding months.
                    ``(E) Phase-in yield curve method.--
                            ``(i) In general.--Present value determined 
                        under the phase-in yield curve method shall be 
                        equal to the sum of--
                                    ``(I) the applicable percentage of 
                                such amount determined under the yield 
                                curve method described in subparagraph 
                                (D), and
                                    ``(II) the product of such amount 
                                determined by using the applicable 
                                interest rate and a percentage equal to 
                                100 percent minus the applicable 
                                percentage.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is 25 
                        percent for plan years beginning in 2007, 50 
                        percent for plan years beginning in 2008, and 
                        75 percent for plan years beginning in 2009.''.
    (c) Special Rule for Plan Amendments.--A plan shall not fail to 
meet the requirements of section 204(g) of the Employee Retirement 
Income Security Act of 1974 or section 411(d)(6) of the Internal 
Revenue Code of 1986 solely by reason of the adoption by the plan of an 
amendment necessary to meet the requirements of the amendments made by 
this section.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to plan years beginning after 2006.

SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT LIMITATIONS TO 
              LUMP SUM DISTRIBUTIONS.

    (a) In General.--Clause (ii) of section 415(b)(2)(E) of the 
Internal Revenue Code of 1986 is amended to read as follows:
                            ``(ii) For purposes of adjusting any 
                        benefit under subparagraph (B) for any form of 
                        benefit subject to section 417(e)(3), clause 
                        (i) shall be applied by substituting `5.5 
                        percent' for `5 percent'.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 2005.

SEC. 303. RESTRICTIONS ON FUNDING OF NONQUALIFIED DEFERRED COMPENSATION 
              PLANS BY EMPLOYERS MAINTAINING UNDERFUNDED OR TERMINATED 
              SINGLE-EMPLOYER PLANS.

    (a) Amendments of ERISA.--
            (1) In general.--Part 3 of subtitle A of title I of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 1081 
        et seq.), as amended by this Act, is amended by adding at the 
        end the following new section:

    ``notice of funding of nonqualified deferred compensation plans

    ``Sec. 306. (a) Notice and Access.--
            ``(1) Notice relating to restricted period.--The plan 
        administrator of a defined benefit plan which is a single-
        employer plan shall notify each plan sponsor of the plan within 
        a reasonable period of time after the occurrence of an event 
        which results in a restricted period with respect to the plan. 
        Such notice shall include information--
                    ``(A) as to the duration of the restricted period, 
                and
                    ``(B) the restrictions under section 409A(b)(3) of 
                the Internal Revenue Code of 1986 which apply during 
                the restricted period to the plan sponsor and any 
                member of a controlled group which includes such 
                sponsor.
            ``(2) Notice of existence of, and transfers to, 
        nonqualified deferred compensation plans.--
                    ``(A) Initial notice.--Within 30 days of receipt of 
                a notice under paragraph (1), each plan sponsor shall 
                notify the plan administrator of the plan described in 
                paragraph (1)--
                            ``(i) of nonqualified deferred compensation 
                        plans maintained by the plan sponsor or any 
                        member of a controlled group which includes 
                        such sponsor, and
                            ``(ii) the amount of any assets transferred 
                        or otherwise reserved by the plan sponsor or 
                        such member in violation of section 409A(b)(3) 
                        of such Code during any portion of the 
                        restricted period occurring on or before the 
                        date the plan sponsor provides such notice.
                    ``(B) Additional notices.--If, after the date on 
                which notice is provided under subparagraph (A) and 
                during any portion of the remaining restricted period 
                specified in the notice provided under paragraph (1), 
                the plan sponsor of a plan described in paragraph (1) 
                or a member of a controlled group which includes such 
                sponsor--
                            ``(i) transfers or reserves assets in 
                        violation of section 409A(b)(3) of such Code, 
                        or
                            ``(ii) establishes a new nonqualified 
                        deferred compensation plan,
                the plan sponsor shall notify the plan administrator of 
                the plan described in paragraph (1) of such transfer, 
                reservation, or establishment within 3 days of the date 
                of such action.
            ``(3) Access to financial data.--Any fiduciary of the plan 
        shall have access to the financial records of a plan sponsor or 
        any member of a controlled group which includes such sponsor to 
        determine if assets were transferred or otherwise reserved in 
        violation of section 409A(b)(3) of such Code.
            ``(4) Form and manner.--The Secretary may prescribe the 
        form and manner of a notice required under this section. Such a 
        notice shall be written in a manner calculated to be understood 
        by the average plan participant and may be delivered in 
        written, electronic, or other appropriate form to the extent 
        that such form is reasonably accessible to the recipient.
    ``(b) Restricted Period.--For purposes of this section, the term 
`restricted period' means, with respect to any plan described in 
subsection (a)(1)--
            ``(1) any period--
                    ``(A) beginning on the first day of a plan year 
                following a plan year for which the plan's adjusted 
                funding target attainment percentage (as defined in 
                section 303) was less than 60 percent (determined as of 
                the close of such year), and
                    ``(B) ending on the last day of the first period of 
                2 consecutive plan years (beginning on or after such 
                first day) for which such percentage was at least 60 
                percent,
            ``(2) any period the plan sponsor is in bankruptcy, and
            ``(3) the 12-month period beginning on the date which is 6 
        months before the termination date of the plan if, as of the 
        termination date, the plan is not sufficient for benefit 
        liabilities (within the meaning of section 4041).
In the case of a plan which is in at-risk status, paragraph (1) shall 
be applied by substituting `80 percent' for `60 percent' each place it 
appears.
    ``(c) Nonqualified Deferred Compensation Plan.--For purposes of 
this section--
            ``(1) In general.--The term `nonqualified deferred 
        compensation plan' means any plan that provides for the 
        deferral of compensation, other than--
                    ``(A) a qualified employer plan, and
                    ``(B) any bona fide vacation leave, sick leave, 
                compensatory time, disability pay, or death benefit 
                plan.
            ``(2) Qualified employer plan.--The term `qualified 
        employer plan' means--
                    ``(A) any plan, contract, pension, account, or 
                trust described in subparagraph (A) or (B) of section 
                219(g)(5) of the Internal Revenue Code of 1986 (without 
                regard to subparagraph (A)(iii)),
                    ``(B) any eligible deferred compensation plan 
                (within the meaning of section 457(b)) of such Code, 
                and
                    ``(C) any plan described in section 415(m) of such 
                Code.
            ``(3) Plan includes arrangements, etc.--The term `plan' 
        includes any agreement or arrangement, including an agreement 
        or arrangement that includes one person.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Applicable covered employee.--
                    ``(A) In general.--The term `applicable covered 
                employee' means any--
                            ``(i) covered employee of a plan sponsor,
                            ``(ii) covered employee of a member of a 
                        controlled group which includes the plan 
                        sponsor, and
                            ``(iii) former employee who was a covered 
                        employee at the time of termination of 
                        employment with the plan sponsor or a member of 
                        a controlled group which includes the plan 
                        sponsor.
                    ``(B) Covered employee.--The term `covered 
                employee' has the meaning given such term by section 
                162(m)(3) of the Internal Revenue Code of 1986.
            ``(2) Controlled group.--The term `controlled group' has 
        the meaning given such term by section 302(d)(3).''.
            (2) Enforcement.--
                    (A) In general.--Section 502(a) of the Employee 
                Retirement Income Security Act (29 U.S.C. 1132(a)), as 
                amended by this Act, is amended--
                            (i) by striking ``or'' at the end of 
                        paragraph (9), by striking the period at the 
                        end of paragraph (10) and inserting ``; or'', 
                        and by adding at the end the following new 
                        paragraph:
            ``(11) by a fiduciary of a defined benefit plan which is a 
        single-employer plan against--
                    ``(A) a plan sponsor, a member of a controlled 
                group which includes the plan sponsor, an applicable 
                covered employee, or a person holding assets which are 
                part of a nonqualified deferred compensation plan to 
                recover on behalf of the plan--
                            ``(i) assets which were set aside or 
                        transferred in violation of section 409A(b)(3) 
                        of the Internal Revenue Code of 1986 (and any 
                        earnings properly allocable to the assets); or
                            ``(ii) amounts equivalent to the assets and 
                        earnings described in clause (i); or
                    ``(B) a plan sponsor, or a member of a controlled 
                group which includes the plan sponsor, to compel the 
                production of records the fiduciary is entitled to 
                under section 306.''; and
                            (ii) by adding at the end the following new 
                        flush sentence:
``For purposes of paragraph (11), any term used in such paragraph which 
is also used in section 306 shall have the meaning given such term by 
section 306.''.
                    (B) Awarding of fees.--Section 502(g) of such Act 
                (29 U.S.C. 1132(g)) is amended by adding at the end the 
                following new paragraph:
            ``(3) Actions to recover assets transferred to nonqualified 
        deferred compensation plans.--If, in any action under 
        subsection (a)(11) by a fiduciary for or on behalf of a plan to 
        enforce section 306 of this Act and section 409A(b)(3), a 
        judgment is awarded in favor of the plan, the court may, in 
        addition to any other amount, award the plan reasonable 
        attorney's fees and costs of the action, to be paid by the 
        defendant''.
            (3) Clerical amendment.--The table of contents in section 1 
        of such Act, as amended by this Act, is amended by adding at 
        the end the following new item:

        ``Sec. 306. Restrictions on funding of nonqualified deferred 
                            compensation plans.''.
    (b) Amendments of Internal Revenue Code.--
            (1) In general.--Subsection (b) of section 409A of the 
        Internal Revenue Code of 1986 (providing rules relating to 
        funding) is amended by redesignating paragraphs (3) and (4) as 
        paragraphs (4) and (5), respectively, and by inserting after 
        paragraph (2) the following new paragraph:
            ``(3) Employers of underfunded or terminated defined 
        benefit plans.--During any restricted period--
                    ``(A) a plan sponsor of a defined benefit plan 
                which is a single-employer plan, or
                    ``(B) any member of a controlled group which 
                includes such sponsor,
        shall not directly or indirectly transfer assets, or directly 
        or indirectly otherwise reserve assets, in a trust (or other 
        arrangement determined by the Secretary) for purposes of paying 
        deferred compensation of an applicable covered employee under a 
        nonqualified deferred compensation plan of the plan sponsor or 
        member. Any assets transferred or reserved in violation of the 
        preceding sentence shall, for purposes of section 83, be 
        treated as property transferred in connection with the 
        performance of services whether or not such assets are 
        available to satisfy claims of general creditors. For purposes 
        of this paragraph, any term used in this paragraph which is 
        also used in section 306 of the Employee Retirement Income 
        Security Act of 1974 shall have the meaning given such term by 
        such section.''.
            (2) Conforming amendments.--Paragraphs (4) and (5) of 
        section 409A(b) of such Code, as redesignated by subsection (a) 
        of this subsection, are each amended by striking ``paragraph 
        (1) or (2)'' each place it appears and inserting ``paragraph 
        (1), (2), or (3)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers or other reservation of assets after December 31, 
2006.

SEC. 304. MODIFICATION OF PENSION FUNDING REQUIREMENTS FOR PLANS 
              SUBJECT TO CURRENT TRANSITION RULE.

    (a) Plan Year Before New Funding Rules.--Section 769(c)(3) of the 
Retirement Protection Act of 1994, as added by section 201 of the 
Pension Funding Equity Act of 2004, is amended by striking ``and 2005'' 
and inserting ``, 2005, and 2006''.
    (b) Plan Years After New Funding Rules.--
            (1) In general.--In the case of a plan that--
                    (A) was not required to pay a variable rate premium 
                for the plan year beginning in 1996,
                    (B) has not, in any plan year beginning after 1995, 
                merged with another plan (other than a plan sponsored 
                by an employer that was in 1996 within the controlled 
                group of the plan sponsor), and
                    (C) is sponsored by a company that is engaged 
                primarily in the interurban or interstate passenger bus 
                service,
        the rules described in subsection (b) shall apply for any plan 
        year beginning after 2006.
            (2) Modified rules.--The rules described in this subsection 
        are as follows:
                    (A) For purposes of--
                            (i) determining unfunded benefits under 
                        section 4006(a)(3)(E)(ii) of the Employee 
                        Retirement Income Security Act of 1974, and
                            (ii) determining any present value or 
                        making any computation under section 412 and 
                        section 430 of the Internal Revenue Code of 
                        1986 and sections 302 and 303 of such Act,
        the mortality table shall be the mortality table used by the 
        plan.
                    (B) Notwithstanding section 303(f)(4) of such Act 
                or 430(f)(4) of such Code, for purposes of section 
                303(c)(4)(A)(ii) of such Act and 430(c)(4)(A)(ii) of 
                such Code, the value of plan assets shall not be 
                reduced by the amount of the prefunding balance if, 
                pursuant to a binding written agreement with the 
                Pension Benefit Guaranty Corporation entered into 
                before January 1, 2006, the prefunding balance is not 
                available to reduce the minimum required contribution 
                for the plan year.
            (3) Definitions.--Any term used in this section which is 
        also used in section 303 of such Act or section 430 of such 
        Code shall have the meaning provided such term in such section.
            (4) Conforming amendment.--Section 769 of the Retirement 
        Protection Act of 1994 is amended by striking subsection (c).
            (5) Effective date.--The amendments made by this subsection 
        shall apply to plan years beginning after 2006.

          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

SEC. 401. INCREASES IN PBGC PREMIUMS.

    (a) Flat-Rate Premiums.--
            (1) In general.--Section 4006(a)(3)(A)(i) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 
        1306(a)(3)(A)(i)) is amended to read as follows:
                            ``(i) in the case of a single-employer 
                        plan, an amount equal to--
                                    ``(I) for plan years beginning 
                                after December 31, 1990, and before 
                                January 1, 2006, $19, or
                                    ``(II) for plan years beginning 
                                after December 31, 2005, the amount 
                                determined under subparagraph (H),
                        plus the additional premium (if any) determined 
                        under subparagraph (E) for each individual who 
                        is a participant in such plan during the plan 
                        year;''.
            (2) Amount of premium after 2005.--Section 4006(a)(3) of 
        such Act (29 U.S.C. 1306(a)(3)), as amended by sections 406 and 
        407, is amended by adding at the end the following:
                    ``(H) Amount of premium.--
                            ``(i) In general.--The amount determined 
                        under this subparagraph is the greater of $30 
                        or in the case of plan years beginning after 
                        December 31, 2006, the adjusted amount 
                        determined under clause (ii).
                            ``(ii) Adjusted amount.--The adjusted 
                        amount determined under this clause is the 
                        product derived by multiplying $30 by the ratio 
                        of--
                                    ``(I) the contribution and benefit 
                                base (determined under section 230 of 
                                the Social Security Act) in effect in 
                                the calendar year in which the plan 
                                year begins, to
                                    ``(II) the contribution and benefit 
                                base in effect in 2006.
                            ``(iii) Rounding.--If the amount determined 
                        under clause (ii) is not a multiple of $1, such 
                        product shall be rounded to the nearest 
                        multiple of $1.''.
    (b) Risk-Based Premiums.--
            (1) Conforming amendments related to funding rules for 
        single-employer plans.--Section 4006(a)(3)(E) of such Act is 
        amended by striking clauses (iii) and (iv) and inserting the 
        following:
    ``(iii)(I) For purposes of clause (ii), except as provided in 
subclause (II), the term `unfunded benefits' means, for a plan year, 
the amount which would be the plan's funding shortfall (as defined in 
section 303(c)(4)) if the value of plan assets of the plan were equal 
to the fair market value of such assets.
    ``(II) The interest rate used in valuing benefits for purposes of 
subclause (I) shall be equal to the first, second, or third segment 
rate which would be determined under section 303(h)(2)(C) if section 
303(h)(2)(D) were applied by using the yields on investment grade 
corporate bonds with varying maturities rather than the average of such 
yields for a 12-month period.''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply with respect to plan years beginning after 2006.
    (c) Flat-Rate Premium Adjustment.--
            (1) In general.--Beginning in 2011, and every 5 years 
        thereafter, the Board of Directors of the Pension Benefit 
        Guaranty Corporation under title IV of the Employee Retirement 
        Income Security Act (29 U.S.C. 1301 et seq.) shall submit to 
        Congress a report that describes any recommendations for 
        adjusting the premium rate payable to the Corporation described 
        under section 4006(a)(3)(A)(i) of such Act (as amended by 
        subsection (a)).
            (2) Considerations.--In developing the report described 
        under paragraph (1), the Corporation shall consider--
                    (A) the national average wage index (as defined in 
                section 209(k)(1) of the Social Security Act (42 U.S.C. 
                409(k)(1)));
                    (B) the finances of the Corporation as of the date 
                of such report and an actuarial evaluation of the 
                expected operations and status of the funds established 
                under section 4005 of such title IV (29 U.S.C. 1305) 
                for the 5 years succeeding such date;
                    (C) the impact of any increases in such premium 
                rate on plan sponsors subject to such title IV; and
                    (D) such other factors determined relevant by the 
                Corporation.

SEC. 402. AUTHORITY TO ENTER ALTERNATIVE FUNDING AGREEMENTS TO PREVENT 
              PLAN TERMINATIONS.

    (a) Authority To Enter Into Agreements.--
            (1) Distress terminations.--Section 4041(c) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)) is 
        amended by adding at the end the following:
            ``(4) Alternative funding agreements.--
                    ``(A) In general.--If the corporation determines 
                that--
                            ``(i) a plan meets the requirements for a 
                        distress termination under this subsection 
                        without regard to an alternative funding 
                        agreement under section 4047(a), and
                            ``(ii) the termination of the plan would 
                        not be necessary if such an agreement were 
                        entered into,
                the corporation may request that the Secretary of the 
                Treasury, in consultation with the corporation, enter 
                into such an agreement with the contributing sponsors 
                under the plan.
                    ``(B) Early action initiatives.--Subject to the 
                limitations in subsection (a)(3), if--
                            ``(i) the corporation determines that it is 
                        reasonable to believe that a plan may be 
                        subject to a distress termination within 6 
                        months unless action is taken, the corporation 
                        may request that the Secretary of the Treasury, 
                        in consultation with the corporation, enter 
                        into an alternative funding agreement under 
                        section 4047(a); and
                            ``(ii) the corporation, upon the request of 
                        the contributing sponsor of a plan or other 
                        person, determines that it is reasonable to 
                        believe that a plan may be subject to a 
                        distress termination within 2 years unless 
                        action is taken, the corporation may request 
                        that the Secretary of the Treasury, in 
                        consultation with the corporation, enter into 
                        an alternative funding agreement under section 
                        4047(a).''.
            (2) Involuntary terminations.--Section 4042 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1342) is 
        amended by adding at the end the following:
    ``(i) Alternative Funding Agreements.--If--
            ``(1) the corporation determines that it is reasonable to 
        believe that a plan will meet the requirements for an 
        involuntary termination under this section without regard to an 
        alternative funding agreement under section 4047(a) within 6 
        months unless action is taken, or
            ``(B) the corporation, upon the request of the contributing 
        sponsor of a plan or other person, determines that it is 
        reasonable to believe that a plan may be subject to an 
        involuntary termination within 2 years unless action is taken,
and such a termination would not be necessary if such an agreement is 
entered into, the corporation may request that the Secretary of the 
Treasury, in consultation with the corporation, enter into an 
alternative funding agreement under section 4047(a).''.
    (b) Alternative Funding Schedules To Prevent Plan Termination.--
            (1) In general.--Section 4047 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1347) is amended by--
                    (A) striking the section heading and all that 
                follows through ``Whenever'' and inserting--

``SEC. 4047. ALTERNATIVE FUNDING SCHEDULES TO PREVENT TERMINATION; 
              RESTORATION OF TERMINATED PLANS.

    ``(a) Alternative Funding Agreements.--
            ``(1) In general.--If the requirements of section 
        4041(c)(4) or 4042(i) are met with respect to any plan, the 
        Secretary of the Treasury, in consultation with the 
        corporation, may enter into an alternative funding agreement 
        with the contributing sponsors under the plan that meets the 
        requirements of this subsection.
            ``(2) Other requirements.--An alternative funding agreement 
        may be entered into by the Secretary of the Treasury, in 
        consultation with corporation, only if--
                    ``(A) such Secretary finds the agreement to be in 
                the best interests of the participants and 
                beneficiaries; and
                    ``(B) the agreement meets the requirements set 
                forth by such Secretary in regulations.
            ``(3) Alternative funding agreement.--
                    ``(A) In general.--An agreement meets the 
                requirements of this subsection if the agreement--
                            ``(i) provides for an additional 
                        amortization schedule for a period not to 
                        exceed 10 years,
                            ``(ii) requires the plan to pay at the time 
                        the agreement is entered into any professional 
                        fees or other expenses incurred by the 
                        Secretary of the Treasury or the corporation in 
                        connection with the agreements,
                            ``(iii) requires approval by the 
                        corporation before the contributing sponsor 
                        establishes or maintains any other defined 
                        benefit plan other than any multiemployer plan 
                        that covers a substantial number of employees 
                        who are covered by the plan subject to the 
                        agreement or who perform substantially the same 
                        type of work with respect to the same business 
                        operations as employees covered by such plan, 
                        and
                            ``(iv) provides for a termination date, or 
                        a schedule of termination dates, for the 
                        purpose of the guarantee under section 4022, to 
                        apply if a plan terminates during the period 
                        that the agreement is in effect.
                    ``(B) Other conditions.--Notwithstanding any other 
                provision of this Act, an agreement meeting the 
                requirements of this subsection may provide--
                            ``(i) for restrictions on, or the 
                        elimination of, future accruals, but only to 
                        the extent that such restrictions or 
                        eliminations would have been permitted under 
                        section 204(g) or section 411(d)(6) of the 
                        Internal Revenue Code of 1986 if they had been 
                        implemented by a plan amendment adopted 
                        immediately before the effective date of the 
                        agreement,
                            ``(ii) that the contributing sponsors will 
                        provide security or other collateral in such 
                        form and amount as specified in the agreement,
                            ``(iii) conditions under which the plan 
                        could be terminated in a standard termination 
                        under section 4041(b) or conditions under which 
                        accruals to which clause (i) applies could 
                        resume in the future, and
                            ``(iv) for such other terms and conditions 
                        as the Secretary of the Treasury, in 
                        consultation with the corporation, determines 
                        necessary to protect the interests of the 
                        corporation.
                    ``(C) Employee requirements.--
                            ``(i) In general.--An agreement meets the 
                        requirements of this subsection only if--
                                    ``(I) at least 60 days before the 
                                agreement is to take effect the 
                                contributing sponsors notify affected 
                                parties (other than the corporation) of 
                                the terms of the agreement and its 
                                effect on such parties, and
                                    ``(II) each employee organization 
                                representing participants in the plan 
                                approves the agreement before it takes 
                                effect.
                            ``(ii) Form and manner of notice.--The 
                        notice under clause (i) shall be written in a 
                        manner calculated to be understood by the 
                        average plan participant and may be provided to 
                        a person designated, in writing, by the person 
                        to which it would otherwise be provided. Such 
                        notice may be provided in written, electronic, 
                        or other appropriate form to the extent such 
                        form is reasonably accessible to persons to 
                        whom the notice is required to be provided.
            ``(4) Coordination with minimum funding requirements.--Any 
        alternative funding schedule under an agreement meeting the 
        requirements under this subsection shall supersede the minimum 
        funding requirements of this Act and the Internal Revenue Code 
        of 1986. For purposes of applying this Act or such Code, any 
        contribution required under such schedule shall be treated in 
        the same manner as contributions required under section 302 of 
        this Act and section 412 of such Code.
    ``(b) Restoration of Terminated Plans.--Whenever''.
            (2) Conforming amendment.--The table of contents for title 
        IV of such Act is amended by striking the item relating to 
        section 4047 and inserting the following:

        ``4047. Alternative funding schedules to prevent terminations; 
                            restoration of terminated plans.''.
    (c) Amendments to Other Provisions.--
            (1) Qualification requirement.--Section 401(a) of the 
        Internal Revenue Code of 1986, as amended by sections 115 and 
        701 of this Act, is amended by inserting after paragraph (35) 
        the following new paragraph:
            ``(36) Successor plans to certain plans.--If--
                    ``(A) an alternative funding agreement described in 
                section 4047(a) of the Employee Retirement Income 
                Security Act of 1974 is in effect with respect to any 
                plan, and
                    ``(B) the plan is maintained by an employer that 
                establishes or maintains 1 or more other defined 
                benefit plans (other than any multiemployer plan), and 
                such other plans in combination provide benefit 
                accruals to any substantial number of successor 
                employees,
        the Secretary may, in the Secretary's discretion, determine 
        that any trust of which any other such plan is a part does not 
        constitute a qualified trust under this subsection unless all 
        benefit obligations of the plan to which the alternative 
        funding agreement applies have been satisfied. For purposes of 
        this paragraph, the term `successor employee' means any 
        employee who is or was covered by the plan to which the 
        alternative funding agreement applies and any employee who 
        performs substantially the same type of work with respect to 
        the same business operations as an employee covered by such 
        plan.''.
            (2) Limitation on deductions under certain plans.--Section 
        404(a)(7)(C) of the Internal Revenue Code of 1986 is amended by 
        adding at the end the following:
                            ``(iii) Plans subject to alternative 
                        funding agreements.--This paragraph shall not 
                        apply to any plan for a plan year if an 
                        alternative funding agreement described in 
                        section 4047(a) of the Employee Retirement 
                        Income Security Act of 1974 is in effect for 
                        such year.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.

SEC. 403. SPECIAL FUNDING RULES FOR PLANS MAINTAINED BY COMMERCIAL 
              AIRLINES THAT ARE AMENDED TO CEASE FUTURE BENEFIT 
              ACCRUALS.

    (a) In General.--If an election is made to have this section apply 
to an eligible plan--
            (1) in the case of any applicable plan year beginning 
        before January 1, 2007, the plan shall not have an accumulated 
        funding deficiency for purposes of section 302 of the Employee 
        Retirement Income Security Act of 1974 and sections 412 and 
        4971 of the Internal Revenue Code of 1986 if contributions to 
        the plan for the plan year are not less than the minimum 
        required contribution determined under subsection (d) for the 
        plan for the plan year, and
            (2) in the case of any applicable plan year beginning on or 
        after January 1, 2007, the minimum required contribution 
        determined under sections 303 of such Act and 430 of such Code 
        shall, for purposes of sections 302 and 303 of such Act and 
        sections 412, 430, and 4971 of such Code, be equal to the 
        minimum required contribution determined under subsection (d) 
        for the plan for the plan year.
    (b) Eligible Plan.--For purposes of this section--
            (1) In general.--The term ``eligible plan'' means a defined 
        benefit plan (other than a multiemployer plan) to which 
        sections 302 of such Act and 412 of such Code applies--
                    (A) which is sponsored by an employer--
                            (i) which is a commercial airline passenger 
                        airline, or
                            (ii) the principal business of which is 
                        providing catering services to a commercial 
                        passenger airline, and
                    (B) with respect to which the requirements of 
                paragraphs (2) and (3) are met.
            (2) Accrual restrictions.--
                    (A) In general.--The requirements of this paragraph 
                are met if, effective as of the first day of the first 
                applicable plan year and at all times thereafter while 
                an election under this section is in effect, the plan 
                provides that--
                            (i) the accrued benefit, any death or 
                        disability benefit, and any social security 
                        supplement described in the last sentence of 
                        section 411(a)(9) of such Code and section 
                        204(b)(1)(G) of such Act, of each participant 
                        are frozen at the amount of such benefit or 
                        supplement immediately before such first day, 
                        and
                            (ii) all other benefits under the plan are 
                        eliminated,
                but only to the extent the freezing or elimination of 
                such benefits would have been permitted under section 
                411(d)(6) of such Code and section 204(g) of such Act 
                if they had been implemented by a plan amendment 
                adopted immediately before such first day.
                    (B) Increases in section 415 limits disregarded.--
                If a plan provides that an accrued benefit of a 
                participant which has been subject to any limitation 
                under section 415 of such Code will be increased if 
                such limitation is increased, the plan shall not be 
                treated as meeting the requirements of this paragraph 
                unless, effective as of the first day of the first 
                applicable plan year and at all times thereafter while 
                an election under this section is in effect, the plan 
                provides that any such increase shall not take effect. 
                A plan shall not fail to meet the requirements of 
                section 411(d)(6) of such Code and section 204(g) of 
                such Act solely because the plan is amended to meet the 
                requirements of this subparagraph.
            (3) Restriction on applicable benefit increases.--
                    (A) In general.--The requirements of this paragraph 
                are met if no applicable benefit increase takes effect 
                at any time during the period beginning on July 26, 
                2005, and ending on the day before the first day of the 
                first applicable plan year.
                    (B) Applicable benefit increase.--For purposes of 
                this paragraph, the term ``applicable benefit 
                increase'' means, with respect to any plan year, any 
                increase in liabilities of the plan by plan amendment 
                (or otherwise provided in regulations provided by the 
                Secretary) which, but for this paragraph, would occur 
                during the plan year by reason of--
                            (i) any increase in benefits,
                            (ii) any change in the accrual of benefits, 
                        or
                            (iii) any change in the rate at which 
                        benefits become nonforfeitable under the plan.
            (4) Exception for imputed disability service.--Paragraphs 
        (2) and (3) shall not apply to any accrual or increase with 
        respect to imputed service provided to a participant during any 
        period of the participant's disability occurring on or after 
        the effective date of the plan amendment providing the 
        restrictions under paragraph (2) if the participant--
                    (A) was receiving disability benefits as of such 
                date, or
                    (B) was receiving sick pay and subsequently 
                determined to be eligible for disability benefits as of 
                such date.
    (c) Elections and Related Terms.--
            (1) In general.--A plan sponsor shall make the election 
        under subsection (a) at such time and in such manner as the 
        Secretary of the Treasury may prescribe. Except as provided in 
        subsection (h)(5), such election, once made, may be revoked 
        only with the consent of such Secretary.
            (2) Years for which election made.--
                    (A) In general.--The plan sponsor may select the 
                first plan year to which the election under subsection 
                (a) applies from among plan years ending after the date 
                of the election. The election shall apply to such plan 
                year and all subsequent years.
                    (B) Election of new plan year.--The plan sponsor 
                may specify a new plan year in the election under 
                subsection (a) and the plan year of the plan may be 
                changed to such new plan year without the approval of 
                the Secretary of the Treasury.
            (3) Applicable plan year.--The term ``applicable plan 
        year'' means each plan year to which the election under 
        subsection (a) applies under paragraph (1).
    (d) Minimum Required Contribution.--
            (1) In general.--In the case of any applicable plan year 
        during the amortization period, the minimum required 
        contribution shall be the amount necessary to amortize the 
        unfunded liability of the plan, determined as of the first day 
        of the plan year, in equal annual installments (until fully 
        amortized) over the remainder of the amortization period. Such 
        amount shall be separately determined for each applicable plan 
        year.
            (2) Years after amortization period.--In the case of any 
        plan year beginning after the end of the amortization period, 
        section 302(a)(2)(A) of such Act and section 412(a)(2)(A) of 
        such Code shall apply to such plan, but the prefunding balance 
        as of the first day of the first of such years under section 
        303(f) of such Act and section 430(f) of such Code shall be 
        zero.
            (3) Definitions.--For purposes of this section--
                    (A) Unfunded liability.--The term ``unfunded 
                liability'' means the unfunded accrued liability under 
                the plan, determined under the unit credit funding 
                method.
                    (B) Amortization period.--The term ``amortization 
                period'' means the 20-plan year period beginning with 
                the first applicable plan year.
            (4) Other rules.--In determining the minimum required 
        contribution and amortization amount under this subsection--
                    (A) the provisions of section 302(c)(3) of such Act 
                and section 412(c)(3) of such Code, as in effect before 
                the date of enactment of this section, shall apply,
                    (B) the rate of interest under section 302(b) of 
                such Act and section 412(b) of such Code, as so in 
                effect, shall be used for all calculations requiring an 
                interest rate, and
                    (C) the value of plan assets shall be equal to 
                their fair market value.
            (5) Special rule for certain plan spinoffs.--For purposes 
        of subsection (a), if, with respect to any eligible plan to 
        which this subsection applies--
                    (A) any applicable plan year includes the date of 
                the enactment of this Act,
                    (B) a plan was spun off from the eligible plan 
                during the plan year but before such date of enactment,
        the minimum required contribution under subsection (a)(1) for 
        the eligible plan for such applicable plan year shall be 
        determined as if the plans were a single plan for that plan 
        year (based on the full 12-month plan year in effect prior to 
        the spin-off). The employer shall designate the allocation of 
        the minimum required contribution between such plans for the 
        applicable plan year and direct the appropriate reallocation 
        between the plans of any contributions for the applicable plan 
        year.
    (e) Funding Standard Account and Prefunding Balance.--Any charge or 
credit in the funding standard account under section 302 of such Act or 
section 412 of such Code, and any prefunding balance under section 303 
of such Act or section 430 of such Code, as of the day before the first 
day of the first applicable plan year, shall be reduced to zero.
    (f) Amendments to Other Provisions.--
            (1) Qualification requirement.--Section 401(a)(36) of the 
        Internal Revenue Code of 1986, as added by section 402 of this 
        Act, is amended by adding at the end the following: ``This 
        paragraph shall also apply to any plan during any period during 
        which an amortization schedule under section 403 of the Pension 
        Security and Transparency Act of 2005 is in effect.''
            (2) PBGC liability limited.--Section 4022 of the Employee 
        Retirement Income Security Act of 1974, as amended by this Act, 
        is amended by adding at the end the following new subsection:
    ``(h) Special Rule for Plans Electing Certain Funding 
Requirements.--During any period in which an election by a plan under 
section 403 of the Pension Security and Transparency Act of 2005 is in 
effect, then this section and section 4044(a)(3) shall be applied by 
treating the first day of the first applicable plan year as the 
termination date of the plan. This subsection shall not apply to any 
plan for which an election under section 403(h) of such Act is in 
effect.''.
            (3) Limitation on deductions under certain plans.--Section 
        404(a)(7)(C)(iii) of the Internal Revenue Code of 1986, as 
        added by this Act, is amended by adding at the end the 
        following new sentence: ``This clause shall also apply to any 
        plan for a plan year if an election under section 403 of the 
        Pension Security and Transparency Act of 2005 is in effect for 
        such year.''
            (4) Notice.--In the case of a plan amendment adopted in 
        order to comply with this section, any notice required under 
        section 204(h) of such Act or section 4980F(e) of such Code 
        shall be provided within 15 days of the effective date of such 
        plan amendment. This subsection shall not apply to any plan 
        unless such plan is maintained pursuant to one or more 
        collective bargaining agreements between employee 
        representatives and 1 or more employers.
    (g) Special Rules for Termination of Eligible Plans.--During any 
period an election is in effect under this section with respect to an 
eligible plan, the Pension Benefit Guaranty Corporation shall, before 
it seeks or approves a termination of such plan under section 4041(c) 
or 4042 of the Employee Retirement Income Security Act of 1974--
            (1) make a determination under section 4041(c)(4) or 
        4042(i) of such Act whether the termination would be necessary 
        if the Secretary of the Treasury were to enter into an 
        agreement under section 4047(a) of such Act which provides an 
        alternative funding agreement to replace the amortization 
        schedule under this section, and
            (2) if the Corporation determines such an agreement would 
        make such termination unnecessary, take all necessary actions 
        to ensure the agreement is entered into.
The Pension Benefit Guaranty Corporation shall make the determination 
under paragraph (1) within 90 days of receiving all information needed 
in connection with a request for a termination (or if no such request 
is made, within 90 days of consideration of the termination by the 
Corporation).
    (h) Certain Benefit Accruals and Increases Allowed if Additional 
Contributions Made To Cover Costs.--
            (1) In general.--If an employer elects the application of 
        this subsection--
                    (A) the requirements of paragraphs (2) and (3) of 
                subsection (b) shall not apply with respect to any 
                eligible plan maintained by the employer and specified 
                in the election, and
                    (B) the minimum required contribution under 
                subsection (d) for any plan year with respect to the 
                plan shall be increased by the amounts described in 
                paragraphs (2) and (3).
        Any liabilities and assets taken into account under this 
        subsection shall not be taken into account in determining the 
        unfunded liability of the plan for purposes of subsection (d).
            (2) Current funding of accruals and increases.--The amount 
        determined under this paragraph for any plan year is the target 
        normal cost which would occur under section 303(b) of such Act 
        and 430(b) of such Code if--
                    (A) any benefit accrual, or benefit increase taking 
                effect, during the plan year by reason of this 
                subsection were treated as having been accrued or 
                earned during the plan year, and
                    (B) the plan were treated as if it were in at-risk 
                status.
            (3) Funding must be maintained.--The amount determined 
        under this paragraph for any plan year is the amount of any 
        increase in the shortfall amortization charge which would occur 
        under section 303(c) of such Act and 430(c) of such Code if--
                    (A) the funding target were determined by only 
                taking into account benefits to which paragraph (2) 
                applied for preceding plan years,
                    (B) the only assets taken into account were the 
                contributions required under this paragraph and 
                paragraph (2) for preceding plan years (and any 
                earnings thereon),
                    (C) the amortization period included only the plan 
                year,
                    (D) the transition rule under section 303(c)(4)(B) 
                of such Act and section 430(c)(4)(B) of such Code did 
                not apply, and
                    (E) the plan were treated as if it were in at-risk 
                status.
            (4) Special rules for years before 2007.--Notwithstanding 
        any other provision of this Act, in the case of an applicable 
        plan year of an eligible plan to which this subsection applies 
        which begins before January 1, 2007, in determining the amounts 
        described in paragraphs (2) and (3) for such plan year--
                    (A) the provisions of, and amendments made by, 
                sections 101, 102, 111, and 112 shall apply to such 
                plan year, except that
                    (B) the interest rate used under section 303 of 
                such Act and section 430 of such Code for purposes of 
                applying paragraphs (2) and (3) to such plan year shall 
                be the interest rate determined under section 302(b)(5) 
                of such Act and section 412(b)(5) of such Code, as in 
                effect for plan years beginning in 2005.
            (5) Election out of section.--An employer maintaining an 
        eligible plan to which this subsection applies may make a one-
        time election with respect to any applicable plan year not to 
        have this section apply to such plan year and all subsequent 
        plan years. Subject to subsection (d)(2), the minimum required 
        contribution under section 303 of such Act and 430 of such Code 
        for all such plan years shall be determined without regard to 
        this section.
    (i) Exclusion of Certain Employees From Minimum Coverage 
Requirements.--
            (1) In general.--Section 410(b)(3) of such Code is amended 
        by striking the last sentence and inserting the following: 
        ``For purposes of subparagraph (B), management pilots who are 
        not represented in accordance with title II of the Railway 
        Labor Act shall be treated as covered by a collective 
        bargaining agreement described in such subparagraph if the 
        management pilots manage the flight operations of air pilots 
        who are so represented and the management pilots are, pursuant 
        to the terms of the agreement, included in the group of 
        employees benefitting under the trust described in such 
        subparagraph. Subparagraph (B) shall not apply in the case of a 
        plan which provides contributions or benefits for employees 
        whose principal duties are not customarily performed aboard an 
        aircraft in flight (other than management pilots described in 
        the preceding sentence).''
            (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning before, on, or after the date of 
        the enactment of this Act.
    (j) Effective Date.--Except as otherwise provided in this section, 
the amendments made by this section shall apply to plan years ending 
after the date of the enactment of this Act.

SEC. 404. LIMITATION ON PBGC GUARANTEE OF SHUTDOWN AND OTHER BENEFITS.

    (a) In General.--Section 4022(b) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1322(b)) is amended by adding at the 
end the following:
            ``(8) If a benefit is payable by reason of--
                    ``(A) a plant shutdown or similar event; or
                    ``(B) any event other than attainment of any age, 
                performance of any service, receipt or derivation of 
                any compensation, or the occurrence of death or 
                disability,
        this section shall be applied as if a plan amendment had been 
        adopted on the date such event occurred that provides for the 
        payment of such benefit.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to benefits that become payable as a result of a plant shutdown or 
other similar event, as such terms are used in the amendment made by 
subsection (a), that occurs after July 26, 2005.

SEC. 405. RULES RELATING TO BANKRUPTCY OF EMPLOYER.

    (a) Guarantee.--Section 4022 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1322), as amended by this Act, is 
amended by adding at the end the following:
    ``(i) Bankruptcy Filing Substituted for Termination Date.--If a 
contributing sponsor of a plan has filed or has had filed against such 
person a petition seeking liquidation or reorganization in a case under 
title 11, United States Code, or under any similar Federal law or law 
of a State or political subdivision, and the case has not been 
dismissed as of the termination date, then this section shall be 
applied by treating the date such petition was filed as the termination 
date of the plan.''.
    (b) Allocation of Assets Among Priority Groups in Bankruptcy 
Proceedings.--Section 4044 of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1344) is amended by adding at the end the 
following:
    ``(e) Bankruptcy Filing Substituted for Termination Date.--If a 
contributing sponsor of a plan has filed or has had filed against such 
person a petition seeking liquidation or reorganization in a case under 
title 11, United States Code, or under any similar Federal law or law 
of a State or political subdivision, and the case has not been 
dismissed as of the termination date, then subsection (a)(3) shall be 
applied by treating the date such petition was filed as the termination 
date of the plan.''.
    (c) Effective Date.--The amendments made this section shall apply 
with respect to proceedings initiated under title 11, United States 
Code, or under any similar Federal law or law of a State or political 
subdivision, on or after the date that is 30 days after the date of 
enactment of this Act.

SEC. 406. PBGC PREMIUMS FOR NEW PLANS OF SMALL EMPLOYERS.

    (a) In General.--Subparagraph (A) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(A)) is amended--
            (1) in clause (i), by inserting ``other than a new single-
        employer plan (as defined in subparagraph (F)) maintained by a 
        small employer (as so defined),'' after ``single-employer 
        plan,'',
            (2) in clause (iii), by striking the period at the end and 
        inserting ``, and'', and
            (3) by adding at the end the following new clause:
            ``(v) in the case of a new single-employer plan (as defined 
        in subparagraph (F)) maintained by a small employer (as so 
        defined) for the plan year, $5 for each individual who is a 
        participant in such plan during the plan year.''
    (b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)) is amended by adding at the end the following new 
subparagraph:
    ``(F)(i) For purposes of this paragraph, a single-employer plan 
maintained by a contributing sponsor shall be treated as a new single-
employer plan for each of its first 5 plan years if, during the 36-
month period ending on the date of the adoption of such plan, the 
sponsor or any member of such sponsor's controlled group (or any 
predecessor of either) did not establish or maintain a plan to which 
this title applies with respect to which benefits were accrued for 
substantially the same employees as are in the new single-employer 
plan.
    ``(ii)(I) For purposes of this paragraph, the term `small employer' 
means an employer which on the first day of any plan year has, in 
aggregation with all members of the controlled group of such employer, 
100 or fewer employees.
    ``(II) In the case of a plan maintained by two or more contributing 
sponsors that are not part of the same controlled group, the employees 
of all contributing sponsors and controlled groups of such sponsors 
shall be aggregated for purposes of determining whether any 
contributing sponsor is a small employer.''
    (c) Effective Date.--The amendments made by this section shall 
apply to plans first effective after December 31, 2005.

SEC. 407. PBGC PREMIUMS FOR SMALL AND NEW PLANS.

    (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)), 
as amended by this Act, is amended by adding at the end the following 
new clause:
    ``(iv) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an amount equal 
to the product of the amount determined under clause (ii) and the 
applicable percentage. For purposes of this clause, the term 
`applicable percentage' means--
            ``(I) 0 percent, for the first plan year.
            ``(II) 20 percent, for the second plan year.
            ``(III) 40 percent, for the third plan year.
            ``(IV) 60 percent, for the fourth plan year.
            ``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in 
section 3(35)) maintained by a contributing sponsor shall be treated as 
a new defined benefit plan for each of its first 5 plan years if, 
during the 36-month period ending on the date of the adoption of the 
plan, the sponsor and each member of any controlled group including the 
sponsor (or any predecessor of either) did not establish or maintain a 
plan to which this title applies with respect to which benefits were 
accrued for substantially the same employees as are in the new plan.''
    (b) Small Plans.--Paragraph (3) of section 4006(a) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)), is 
amended--
            (1) by striking ``The'' in subparagraph (E)(i) and 
        inserting ``Except as provided in subparagraph (G), the'', and
            (2) by inserting after subparagraph (F) the following new 
        subparagraph:
    ``(G)(i) In the case of an employer who has 25 or fewer employees 
on the first day of the plan year, the additional premium determined 
under subparagraph (E) for each participant shall not exceed $5 
multiplied by the number of participants in the plan as of the close of 
the preceding plan year.
    ``(ii) For purposes of clause (i), whether an employer has 25 or 
fewer employees on the first day of the plan year is determined by 
taking into consideration all of the employees of all members of the 
contributing sponsor's controlled group. In the case of a plan 
maintained by two or more contributing sponsors, the employees of all 
contributing sponsors and their controlled groups shall be aggregated 
for purposes of determining whether the 25-or-fewer-employees 
limitation has been satisfied.''
    (c) Effective Dates.--
            (1) Subsection (a).--The amendments made by subsection (a) 
        shall apply to plans first effective after December 31, 2005.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to plan years beginning after December 31, 2005.

SEC. 408. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM OVERPAYMENT 
              REFUNDS.

    (a) In General.--Section 4007(b) of the Employment Retirement 
Income Security Act of 1974 (29 U.S.C. 1307(b)) is amended--
            (1) by striking ``(b)'' and inserting ``(b)(1)'', and
            (2) by inserting at the end the following new paragraph:
    ``(2) The corporation is authorized to pay, subject to regulations 
prescribed by the corporation, interest on the amount of any 
overpayment of premium refunded to a designated payor. Interest under 
this paragraph shall be calculated at the same rate and in the same 
manner as interest is calculated for underpayments under paragraph 
(1).''
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to interest accruing for periods beginning not earlier than the 
date of the enactment of this Act.

SEC. 409. RULES FOR SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

    (a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1322(b)(5)) is amended to read as follows:
    ``(5)(A) For purposes of this paragraph, the term `majority owner' 
means an individual who, at any time during the 60-month period ending 
on the date the determination is being made--
            ``(i) owns the entire interest in an unincorporated trade 
        or business,
            ``(ii) in the case of a partnership, is a partner who owns, 
        directly or indirectly, 50 percent or more of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 (other than 
paragraph (3)(C) thereof) shall apply, including the application of 
such rules under section 414(c) of such Code.
    ``(B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall equal the 
product of--
            ``(i) a fraction (not to exceed 1) the numerator of which 
        is the number of years from the later of the effective date or 
        the adoption date of the plan to the termination date, and the 
        denominator of which is 10, and
            ``(ii) the amount of benefits that would be guaranteed 
        under this section if the participant were not a majority 
        owner.''
    (b) Modification of Allocation of Assets.--
            (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
        striking ``section 4022(b)(5)'' and inserting ``section 
        4022(b)(5)(B)''.
            (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
        amended--
                    (A) by striking ``(5)'' in paragraph (2) and 
                inserting ``(4), (5),'', and
                    (B) by redesignating paragraphs (3) through (6) as 
                paragraphs (4) through (7), respectively, and by 
                inserting after paragraph (2) the following new 
                paragraph:
            ``(3) If assets available for allocation under paragraph 
        (4) of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that 
        paragraph, the assets shall be allocated first to benefits 
        described in subparagraph (A) of that paragraph. Any remaining 
        assets shall then be allocated to benefits described in 
        subparagraph (B) of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full the 
        benefits described in that subparagraph, the assets shall be 
        allocated pro rata among individuals on the basis of the 
        present value (as of the termination date) of their respective 
        benefits described in that subparagraph.''
    (c) Conforming Amendments.--
            (1) Section 4021 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1321) is amended--
                    (A) in subsection (b)(9), by striking ``as defined 
                in section 4022(b)(6)'', and
                    (B) by adding at the end the following new 
                subsection:
    ``(d) For purposes of subsection (b)(9), the term `substantial 
owner' means an individual who, at any time during the 60-month period 
ending on the date the determination is being made--
            ``(1) owns the entire interest in an unincorporated trade 
        or business,
            ``(2) in the case of a partnership, is a partner who owns, 
        directly or indirectly, more than 10 percent of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 (other than 
paragraph (3)(C) thereof) shall apply, including the application of 
such rules under section 414(c) of such Code.''
            (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
        is amended by striking ``section 4022(b)(6)'' and inserting 
        ``section 4021(d)''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan 
        terminations--
                    (A) under section 4041(c) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1341(c)) with respect to which notices of intent to 
                terminate are provided under section 4041(a)(2) of such 
                Act (29 U.S.C. 1341(a)(2)) after December 31, 2005, and
                    (B) under section 4042 of such Act (29 U.S.C. 1342) 
                with respect to which proceedings are instituted by the 
                corporation after such date.
            (2) Conforming amendments.--The amendments made by 
        subsection (c) shall take effect on January 1, 2006.

SEC. 410. ACCELERATION OF PBGC COMPUTATION OF BENEFITS ATTRIBUTABLE TO 
              RECOVERIES FROM EMPLOYERS.

    (a) Modification of Average Recovery Percentage of Outstanding 
Amount of Benefit Liabilities Payable by Corporation to Participants 
and Beneficiaries.--Section 4022(c)(3)(B)(ii) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1322(c)(3)(B)(ii)) is 
amended to read as follows:
                            ``(ii) notices of intent to terminate were 
                        provided (or in the case of a termination by 
                        the corporation, a notice of determination 
                        under section 4042 was issued) during the 5-
                        Federal fiscal year period ending with the 
                        third fiscal year preceding the fiscal year in 
                        which occurs the date of the notice of intent 
                        to terminate (or the notice of determination 
                        under section 4042) with respect to the plan 
                        termination for which the recovery ratio is 
                        being determined.''
    (b) Valuation of Section 4062(c) Liability for Determining Amounts 
Payable by Corporation to Participants and Beneficiaries.--
            (1) Single-employer plan benefits guaranteed.--Section 
        4022(c)(3)(A) of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 13) is amended to read as follows:
                    ``(A) In general.--Except as provided in 
                subparagraph (C), the term `recovery ratio' means the 
                ratio which--
                            ``(i) the sum of the values of all 
                        recoveries under section 4062, 4063, or 4064, 
                        determined by the corporation in connection 
                        with plan terminations described under 
                        subparagraph (B), bears to
                            ``(ii) the sum of all unfunded benefit 
                        liabilities under such plans as of the 
                        termination date in connection with any such 
                        prior termination.''.
            (2) Allocation of assets.--Section 4044 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1362) is 
        amended by adding at the end the following new subsection:
    ``(e) Valuation of Section 4062(c) Liability for Determining 
Amounts Payable by Corporation to Participants and Beneficiaries.--
            ``(1) In general.--In the case of a terminated plan, the 
        value of the recovery of liability under section 4062(c) 
        allocable as a plan asset under this section for purposes of 
        determining the amount of benefits payable by the corporation 
        shall be determined by multiplying--
                    ``(A) the amount of liability under section 4062(c) 
                as of the termination date of the plan, by
                    ``(B) the applicable section 4062(c) recovery 
                ratio.
            ``(2) Section 4062(c) recovery ratio.--For purposes of this 
        subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (C), the term `section 4062(c) recovery 
                ratio' means the ratio which--
                            ``(i) the sum of the values of all 
                        recoveries under section 4062(c) determined by 
                        the corporation in connection with plan 
                        terminations described under subparagraph (B), 
                        bears to
                            ``(ii) the sum of all the amounts of 
                        liability under section 4062(c) with respect to 
                        such plans as of the termination date in 
                        connection with any such prior termination.
                    ``(B) Prior terminations.--A plan termination 
                described in this subparagraph is a termination with 
                respect to which--
                            ``(i) the value of recoveries under section 
                        4062(c) have been determined by the 
                        corporation, and
                            ``(ii) notices of intent to terminate were 
                        provided (or in the case of a termination by 
                        the corporation, a notice of determination 
                        under section 4042 was issued) during the 5-
                        Federal fiscal year period ending with the 
                        third fiscal year preceding the fiscal year in 
                        which occurs the date of the notice of intent 
                        to terminate (or the notice of determination 
                        under section 4042) with respect to the plan 
                        termination for which the recovery ratio is 
                        being determined.
                    ``(C) Exception.--In the case of a terminated plan 
                with respect to which the outstanding amount of benefit 
                liabilities exceeds $20,000,000, the term `section 
                4062(c) recovery ratio' means, with respect to the 
                termination of such plan, the ratio of--
                            ``(i) the value of the recoveries on behalf 
                        of the plan under section 4062(c), to
                            ``(ii) the amount of the liability owed 
                        under section 4062(c) as of the date of plan 
                        termination to the trustee appointed under 
                        section 4042 (b) or (c).
            ``(3) Subsection not to apply.--This subsection shall not 
        apply with respect to the determination of--
                    ``(A) whether the amount of outstanding benefit 
                liabilities exceeds $20,000,000, or
                    ``(B) the amount of any liability under section 
                4062 to the corporation or the trustee appointed under 
                section 4042 (b) or (c).
            ``(4) Determinations.--Determinations under this subsection 
        shall be made by the corporation. Such determinations shall be 
        binding unless shown by clear and convincing evidence to be 
        unreasonable.''
    (c) Effective Date.--The amendments made by this section shall 
apply for any termination for which notices of intent to terminate are 
provided (or in the case of a termination by the corporation, a notice 
of determination under section 4042 under the Employee Retirement 
Income Security Act of 1974 is issued) on or after the date which is 30 
days after the date of enactment of this section.

SEC. 411. TREATMENT OF CERTAIN PLANS WHERE CESSATION OR CHANGE IN 
              MEMBERSHIP OF A CONTROLLED GROUP.

    (a) In General.--Section 4041(b) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1341(b)) is amended by adding at the 
end the following new paragraph:
            ``(5) Special rule for certain plans where cessation or 
        change in membership of a controlled group.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if--
                            ``(i) there is transaction or series of 
                        transactions which result in a single-employer 
                        plan which is a defined benefit plan being 
                        maintained by an employer which is not a member 
                        of the same controlled group of which the 
                        employer maintaining the plan before such 
                        transaction or series of transactions was a 
                        member,
                            ``(ii) the corporation treats the 
                        transaction or series of transactions as 
                        resulting in a standard termination to which 
                        this subsection applies, and
                            ``(iii) the plan is fully funded,
                then the interest rate used in determining whether the 
                plan is sufficient for benefit liabilities for purposes 
                of this subsection shall be the interest rate used in 
                determining whether the plan is fully funded.
                    ``(B) Limitations.--Subparagraph (A) shall not 
                apply to any transaction or series of transactions 
                unless--
                            ``(i) any employer maintaining the plan 
                        immediately before or after such transaction or 
                        series of transactions--
                                    ``(I) has an outstanding senior 
                                unsecured debt instrument which is 
                                rated investment grade by each of the 
                                nationally recognized statistical 
                                rating organizations for corporate 
                                bonds that has issued a credit rating 
                                for such instrument, or
                                    ``(II) if no such debt instrument 
                                of such employer has been rated by such 
                                an organization but 1 or more of such 
                                organizations has made an issuer credit 
                                rating for such employer, all such 
                                organizations which have so rated the 
                                employer have rated such employer 
                                investment grade, and
                            ``(ii) the employer maintaining the plan 
                        after the transaction or series of transactions 
                        employs at least 30 percent of the employees 
                        located in the United States who were employed 
                        by such employer immediately before the 
                        transaction or series of transactions.
                    ``(C) Fully funded.--For purposes of subparagraph 
                (A), a plan shall be treated as fully funded with 
                respect to any transaction or series of transactions 
                if--
                            ``(i) in the case of a transaction or 
                        series of transactions which occur in a plan 
                        year beginning before January 1, 2007, the 
                        funded current liability percentage determined 
                        under section 302(d) for the plan year is at 
                        least 100 percent, and
                            ``(ii) in the case of a transaction or 
                        series of transactions which occur in a plan 
                        year beginning on or after such date, the 
                        funding target attainment percentage determined 
                        under section 303 is, as of the valuation date 
                        for such plan year, at least 100 percent.''
    (b) Effective Date.--The amendments made by this section shall 
apply to any transaction or series of transactions occurring on and 
after the date of the enactment of this Act.

SEC. 412. EFFECT OF TITLE.

    The decreases in Federal outlays resulting from the enactment of 
this title, and the amendments made by this title, shall be treated as 
in lieu of the decreases in Federal outlays which--
            (1) resulted from amendments made to title IV of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 1301 
        et seq.); and
            (2) were contained in an Act enacted pursuant to the 
        concurrent resolution on the budget for fiscal year 2006.

SEC. 413. AGE REQUIREMENT FOR EMPLOYERS.

    (a) Single-Employer Plan Benefits Guaranteed.--Section 4022(b) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1322(b)) 
is amended in the flush matter following paragraph (3), by adding at 
the end the following: ``If, at the time of termination of a plan under 
this title, regulations prescribed by the Federal Aviation 
Administration require an individual to separate from service as a 
commercial airline pilot after attaining any age before age 65, 
paragraph (3) shall be applied to an individual who is a participant in 
the plan by reason of such service by substituting such age for age 
65.''.
    (b) Multiemployer Plan Benefits Guaranteed.--Section 4022B(a) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1322b(a)) is amended by adding at the end the following: ``If, at the 
time of termination of a plan under this title, regulations prescribed 
by the Federal Aviation Administration require an individual to 
separate from service as a commercial airline pilot after attaining any 
age before age 65, this subsection shall be applied to an individual 
who is a participant in the plan by reason of such service by 
substituting such age for age 65.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to benefits payable on or after the date of enactment of this 
Act.

                          TITLE V--DISCLOSURE

SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE.

    (a) In General.--Section 101(f) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1021(f)) is amended to read as follows:
    ``(f) Defined Benefit Plan Funding Notices.--
            ``(1) In general.--The administrator of a defined benefit 
        plan shall for each plan year provide a plan funding notice to 
        the Pension Benefit Guaranty Corporation, to each plan 
        participant and beneficiary, to each labor organization 
        representing such participants or beneficiaries, and, in the 
        case of a multiemployer plan, to each employer that has an 
        obligation to contribute to the plan.
            ``(2) Information contained in notices.--
                    ``(A) Identifying information.--Each notice 
                required under paragraph (1) shall contain identifying 
                information, including the name of the plan, the 
                address and phone number of the plan administrator and 
                the plan's principal administrative officer, each plan 
                sponsor's employer identification number, and the plan 
                number of the plan.
                    ``(B) Specific information.--A plan funding notice 
                under paragraph (1) shall include--
                            ``(i)(I) in the case of a single-employer 
                        plan, a statement as to whether the plan's 
                        funding target attainment percentage (as 
                        defined in section 303(d)(2)) for the plan year 
                        to which the notice relates, and for the 2 
                        preceding plan years, is at least 100 percent 
                        (and, if not, the actual percentages), or
                            ``(II) in the case of a multiemployer plan, 
                        a statement as to whether the plan's funded 
                        percentage (as defined in section 305(i)) for 
                        the plan year to which the notice relates, and 
                        for the 2 preceding plan years, is at least 100 
                        percent (and, if not, the actual percentages),
                            ``(ii)(I) in the case of a single-employer 
                        plan, a statement of the value of the plan's 
                        assets and liabilities for the plan year to 
                        which the notice relates as of the last day of 
                        the plan year to which the notice relates 
                        determined using the asset valuation under 
                        subclause (I) of section 4006(a)(3)(E)(iii) and 
                        the interest rate under subclause (II) of such 
                        section, and
                            ``(II) in the case of a multiemployer plan, 
                        a statement of the value of the plan's assets 
                        and liabilities for the plan year to which the 
                        notice relates as the last day of such plan 
                        year,
                            ``(iii) a statement of the number of 
                        participants who are--
                                    ``(I) retired or separated from 
                                service and are receiving benefits,
                                    ``(II) retired or separated 
                                participants entitled to future 
                                benefits, and
                                    ``(II) active participants under 
                                the plan,
                            ``(iv) a statement setting forth the 
                        funding policy of the plan and the asset 
                        allocation of investments under the plan 
                        (expressed as percentages of total assets) as 
                        of the end of the plan year to which the notice 
                        relates,
                            ``(v) in the case of a multiemployer plan, 
                        whether the plan was in critical or endangered 
                        status under section 305 for such plan year 
                        and, if so--
                                    ``(I) a list of the actions taken 
                                by the plan to improve its funding 
                                status, and
                                    ``(II) a statement describing how a 
                                person may obtain a copy of the plan's 
                                improvement or rehabilitation plan, as 
                                appropriate, adopted under section 305 
                                and the actuarial and financial data 
                                that demonstrate any action taken by 
                                the plan toward fiscal improvement,
                            ``(vi) a summary of any funding improvement 
                        plan, rehabilitation plan, or modification 
                        thereof adopted under section 305 during the 
                        plan year to which the notice relates,
                            ``(vii) in the case of any plan amendments, 
                        scheduled benefit increase or reduction, or 
                        other known event taking effect in the current 
                        plan year and having a material effect on plan 
                        liabilities or assets for the year (as defined 
                        in regulations by the Secretary), an 
                        explanation of the amendment, schedule increase 
                        or reduction, or event, and a projection to the 
                        end of such plan year of the effect of the 
                        amendment, scheduled increase or reduction, or 
                        event on plan liabilities,
                            ``(viii)(I) in the case of a single-
                        employer plan, a summary of the rules governing 
                        termination of single-employer plans under 
                        subtitle C of title IV, or
                            ``(II) in the case of a multiemployer plan, 
                        a summary of the rules governing reorganization 
                        or insolvency, including the limitations on 
                        benefit payments and any potential benefit 
                        reductions and suspensions (and the potential 
                        effects of such limitations, reductions, and 
                        suspensions on the plan), and
                            ``(ix) a general description of the 
                        benefits under the plan which are eligible to 
                        be guaranteed by the Pension Benefit Guaranty 
                        Corporation, along with an explanation of the 
                        limitations on the guarantee and the 
                        circumstances under which such limitations 
                        apply.
                    ``(C) Other information.--Each notice under 
                paragraph (1) shall include--
                            ``(i) in the case of a multiemployer plan, 
                        a statement that the plan administrator shall 
                        provide, upon written request, to any labor 
                        organization representing plan participants and 
                        beneficiaries and any employer that has an 
                        obligation to contribute to the plan, a copy of 
                        the annual report filed with the Secretary 
                        under section 104(a), and
                            ``(ii) any additional information which the 
                        plan administrator elects to include to the 
                        extent not inconsistent with regulations 
                        prescribed by the Secretary.
            ``(3) Time for providing notice.--
                    ``(A) In general.--Any notice under paragraph (1) 
                shall be provided not later than 90 days after the end 
                of the plan year to which the notice relates.
                    ``(B) Exception for small plans.--In the case of a 
                small plan (as such term is used under section 
                303(g)(2)(B)) any notice under paragraph (1) shall be 
                provided upon filing of the annual report under section 
                104(a).
            ``(4) Form and manner.--Any notice under paragraph (1)--
                    ``(A) shall be provided in a form and manner 
                prescribed in regulations of the Secretary,
                    ``(B) shall be written in a manner so as to be 
                understood by the average plan participant, and
                    ``(C) may be provided in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to persons to whom the notice is 
                required to be provided.''.
    (b) Model Notice.--Not later than 180 days after the date of the 
enactment of this Act, the Secretary of Labor shall publish a model 
version of the notice required by section 101(f) of the Employee 
Retirement Income Security Act of 1974. The Secretary of Labor may 
promulgate any interim final rules as the Secretary determines 
appropriate to carry out the provisions of this subsection.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2005.

SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN INFORMATION.

    (a) Financial Information With Respect to Multiemployer Plans.--
            (1) In general.--Section 101 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1021) is amended--
                    (A) by redesignating subsection (k) as subsection 
                (l); and
                    (B) by inserting after subsection (j) the following 
                new subsection:
    ``(k) Multiemployer Plan Information Made Available on Request.--
            ``(1) In general.--Each administrator of a multiemployer 
        plan shall, upon written request, furnish to any plan 
        participant or beneficiary, employee representative, or any 
        employer that has an obligation to contribute to the plan--
                    ``(A) a copy of any periodic actuarial report 
                (including sensitivity testing) received by the plan 
                for any plan year which has been in the plan's 
                possession for at least 30 days, and
                    ``(B)(i) a copy of any quarterly, semi-annual, or 
                annual financial report prepared for the plan by any 
                plan investment manager or advisor or other fiduciary 
                which has been in the plan's possession for at least 30 
                days, or
                    ``(ii) at the discretion of the person submitting 
                the written request, a copy of a quarterly summary of 
                the financial reports described clause (i).
            ``(2) Compliance.--Information required to be provided 
        under paragraph (1) --
                    ``(A) shall be provided to the requesting 
                participant, beneficiary, or employer within 30 days 
                after the request in a form and manner prescribed in 
                regulations of the Secretary,
                    ``(B) may be provided in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to persons to whom the 
                information is required to be provided, and
                    ``(C) shall not--
                            ``(i) include any individually identifiable 
                        information regarding any plan participant, 
                        beneficiary, employee, fiduciary, or 
                        contributing employer, or
                            ``(ii) reveal any proprietary information 
                        regarding the plan, any contributing employer, 
                        or entity providing services to the plan.
            ``(3) Limitations.--In no case shall a participant, 
        beneficiary, or employer be entitled under this subsection to 
        receive more than one copy of any report described in paragraph 
        (1) during any one 12-month period. The administrator may make 
        a reasonable charge to cover copying, mailing, and other costs 
        of furnishing copies of information pursuant to paragraph (1). 
        The Secretary may by regulations prescribe the maximum amount 
        which will constitute a reasonable charge under the preceding 
        sentence.''.
            (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
        1132(c)(4)) is amended by striking ``section 101(j)'' and 
        inserting ``subsection (j) or (k) of section 101''.
            (3) Regulations.--The Secretary shall prescribe regulations 
        under section 101(k)(2) of the Employee Retirement Income 
        Security Act of 1974 (added by paragraph (1)) not later than 
        270 days after the date of the enactment of this Act.
    (b) Notice of Potential Withdrawal Liability to Multiemployer 
Plans.--
            (1) In general.--Section 101 of such Act (as amended by 
        subsection (a)) is amended--
                    (A) by redesignating subsection (l) as subsection 
                (m); and
                    (B) by inserting after subsection (k) the following 
                new subsection:
    ``(l) Notice of Potential Withdrawal Liability.--
            ``(1) In general.--The plan sponsor or administrator of a 
        multiemployer plan shall, upon written request, furnish to any 
        employer who has an obligation to contribute to the plan a 
        notice of--
                    ``(A) the estimated amount which would be the 
                amount of such employer's withdrawal liability under 
                part 1 of subtitle E of title IV if such employer 
                withdrew on the last day of the plan year preceding the 
                date of the request, and
                    ``(B) an explanation of how such estimated 
                liability amount was determined, including the 
                actuarial assumptions and methods used to determine the 
                value of the plan liabilities and assets, the data 
                regarding employer contributions, unfunded vested 
                benefits, annual changes in the plan's unfunded vested 
                benefits, and the application of any relevant 
                limitations on the estimated withdrawal liability.
        For purposes of subparagraph (B), the term `employer 
        contribution' means, in connection with a participant, a 
        contribution made by an employer as an employer of such 
        participant.
            ``(2) Compliance.--Any notice required to be provided under 
        paragraph (1)--
                    ``(A) shall be provided to the requesting employer 
                within--
                            ``(i) 180 days after the request in a form 
                        and manner prescribed in regulations of the 
                        Secretary, or
                            ``(ii) subject to regulations of the 
                        Secretary, such longer time as may be necessary 
                        in the case of a plan that determines 
                        withdrawal liability based on any method 
                        described under paragraph (4) or (5) of section 
                        4211(c); and
                    ``(B) may be provided in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to employers to whom the 
                information is required to be provided.
            ``(3) Limitations.--In no case shall an employer be 
        entitled under this subsection to receive more than one notice 
        described in paragraph (1) during any one 12-month period. The 
        person required to provide such notice may make a reasonable 
        charge to cover copying, mailing, and other costs of furnishing 
        such notice pursuant to paragraph (1). The Secretary may by 
        regulations prescribe the maximum amount which will constitute 
        a reasonable charge under the preceding sentence.''.
            (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
        1132(c)(4)) is amended by striking ``section 101(j) or (k)'' 
        and inserting ``subsection (j), (k), or (l) of section 101''.
    (c) Notice of Amendment Reducing Future Accruals.--Section 
204(h)(1) of such Act (29 U.S.C. 1054(h)(1)) is amended by inserting at 
the end before the period ``and to each employer who has an obligation 
to contribute to the plan.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2005.

SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIREMENTS.

    (a) Additional Annual Reporting Requirements With Respect to 
Defined Benefit Plans.--
            (1) In general.--Section 103 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1023) is amended--
                    (A) in subsection (a)(1)(B), by striking 
                ``subsections (d) and (e)'' and inserting ``subsections 
                (d), (e), and (f)''; and
                    (B) by adding at the end the following new 
                subsection:
    ``(f) Additional Information With Respect to Defined Benefit 
Plans.--
            ``(1) General information.--With respect to any defined 
        benefit plan, an annual report under this section for a plan 
        year shall include the following:
                    ``(A) In any case in which any liabilities to 
                participants or their beneficiaries under such plan as 
                of the end of such plan year consist (in whole or in 
                part) of liabilities to such participants and 
                beneficiaries under 2 or more pension plans as of 
                immediately before such plan year, the funded 
                percentage of each of such 2 or more pension plans as 
                of the last day of such plan year and the funded 
                percentage of the plan with respect to which the annual 
                report is filed as of the last day of such plan year.
                    ``(B) For purposes of this paragraph, the term 
                `funded percentage'--
                            ``(i) in the case of a single-employer 
                        plan, means the funding target attainment 
                        percentage, as defined in section 303(d)(2), 
                        and
                            ``(ii) in the case of a multiemployer plan, 
                        has the meaning given such term in section 
                        305(i)(2).
            ``(2) Additional information for multiemployer plans.--With 
        respect to any defined benefit plan which is a multiemployer 
        plan, an annual report under this section for a plan year shall 
        include, in addition to the information required under 
        paragraph (1), the following, as of the end of the plan year to 
        which the notice relates:
                    ``(A) The number of employers obligated to 
                contribute to the plan.
                    ``(B) A list of the employers that contributed more 
                than 5 percent of the total contributions to the plan 
                during such plan year.
                    ``(C) The number of participants under the plan on 
                whose behalf no employer contributions have been made 
                to the plan for such plan year and for each of the 2 
                preceding plan years. For purposes of this 
                subparagraph, the term `employer contribution' means, 
                in connection with a participant, a contribution made 
                by an employer as an employer of such participant.
                    ``(D) The ratio of--
                            ``(i) the number of participants under the 
                        plan on whose behalf no employer had an 
                        obligation to make an employer contribution 
                        during the plan year, to
                            ``(ii) the number of participants under the 
                        plan on whose behalf no employer had an 
                        obligation to make an employer contribution 
                        during each of the 2 preceding plan years.
                    ``(E) Whether the plan received an amortization 
                extension under section 304(d) or section 431(d) of the 
                Internal Revenue Code of 1986 for such plan year and, 
                if so, the amount of the difference between the minimum 
                required contribution for the year and the minimum 
                required contribution which would have been required 
                without regard to the extension, and the period of such 
                extension.
                    ``(F) Whether the plan used the shortfall funding 
                method (as such term is used in section 305) for such 
                plan year and, if so, the amount of the difference 
                between the minimum required contribution for the year 
                and the minimum required contribution which would have 
                been required without regard to the use of such method, 
                and the period of use of such method.
                    ``(G) Whether the plan was in critical or 
                endangered status under section 305 for such plan year, 
                and if so, a summary of any funding improvement or 
                rehabilitation plan (or modification thereto) adopted 
                during the plan year, and the funding ratio of the 
                plan.
                    ``(H) The number of employers that withdrew from 
                the plan during the preceding plan year and the 
                aggregate amount of withdrawal liability assessed, or 
                estimated to be assessed, against such withdrawn 
                employers.
                    ``(I) In the case of a multiemployer plan that has 
                merged with another plan or to which assets and 
                liabilities have been transferred, the actuarial 
                valuation of the assets and liabilities of each 
                affected plan during the year preceding the effective 
                date of the merger or transfer, based upon the most 
                recent data available as of the day before the first 
                day of the plan year, or other valuation method 
                performed under standards and procedures as the 
                Secretary may prescribe by regulation.''.
            (2) Guidance by secretary of labor.--
                    (A) In general.--Not later than 180 days after the 
                date of enactment of this Act, the Secretary of Labor 
                shall publish guidance to assist multiemployer defined 
                benefit plans to--
                            (i) identify and enumerate plan 
                        participants for whom there is no employer with 
                        an obligation to make an employer contribution 
                        under the plan; and
                            (ii) report such information under section 
                        103(f)(2)(D) of the Employee Retirement Income 
                        Security Act of 1974 (as added by this 
                        section).
                    (B) Waiver of requirement.--The Secretary of Labor 
                shall waive the requirement under section 103(f)(2)(D) 
                of such Act (as added by this section) for the 
                construction and entertainment industries.
    (b) Additional Information in Annual Actuarial Statement Regarding 
Plan Retirement Projections.--Section 103(d) of such Act (29 U.S.C. 
1023(d)) is amended--
            (1) by redesignating paragraphs (12) and (13) as paragraphs 
        (13) and (14), respectively; and
            (2) by inserting after paragraph (11) the following new 
        paragraph:
            ``(12) A statement explaining the actuarial assumptions and 
        methods used in projecting future retirements and forms of 
        benefit distributions under the plan.''.
    (c) Form and Manner of Report.--Section 104(b)(3) of such Act (29 
U.S.C. 1024(b)(3)) is amended by--
            (1) striking ``(3) Within'' and inserting--
                    ``(A) In general.--Within''; and
            (2) adding at the end the following:
                    ``(B) Form of report.--The material provided 
                pursuant to subparagraph (A) to summarize the latest 
                annual report shall be written in a manner calculated 
                to be understood by the average plan participant.
    (d) Furnishing Summary Plan Information to Employers and Employee 
Representatives of Multiemployer Plans.--
            (1) In general.--Section 104 of such Act (29 U.S.C. 1024) 
        is amended--
                    (A) in the header, by striking ``participants'' and 
                inserting ``participants and certain employers'';
                    (B) redesignating subsection (d) as subsection (e); 
                and
                    (C) inserting after subsection (c) the following:
    ``(d) Furnishing Summary Plan Information to Employers and Employee 
Representatives of Multiemployer Plans.--
            ``(1) In general.--With respect to a multiemployer plan 
        subject to this section, within 30 days after the due date 
        under subsection (a)(1) for the filing of the annual report for 
        the fiscal year of the plan, the administrators shall furnish 
        to each employee organization, employer with an obligation to 
        contribute to the plan, and the Pension Benefit Guaranty 
        Corporation, a report that contains--
                    ``(A) a description of the contribution schedules 
                and benefit formulas under the plan, and any 
                modification to such schedules and formulas, during 
                such plan year;
                    ``(B) the number of employers obligated to 
                contribute to the plan;
                    ``(C) a list of the employers that contributed more 
                than 5 percent of the total contributions to the plan 
                during such plan year;
                    ``(D) the number of participants under the plan on 
                whose behalf no employer contributions (which, for 
                purposes of this paragraph, means, in connection with a 
                participant, a contribution made by an employer as an 
                employer of such participant) have been made to the 
                plan for such plan year and for each of the 2 preceding 
                plan years;
                    ``(E) whether the plan was in critical or 
                endangered status under section 305 for such plan year 
                and, if so, include--
                            ``(i) a list of the actions taken by the 
                        plan to improve its funding status; and
                            ``(ii) a statement describing how a person 
                        may obtain a copy of the plan's improvement or 
                        rehabilitation plan, as appropriate, adopted 
                        under section 305 and the actuarial and 
                        financial data that demonstrate any action 
                        taken by the plan toward fiscal improvement;
                    ``(H) the number of employers that withdrew from 
                the plan during the preceding plan year and the 
                aggregate amount of withdrawal liability assessed, or 
                estimated to be assessed, against such withdrawn 
                employers, as reported on the annual report for the 
                plan year to which the report under this subsection 
                relates;
                    ``(I) in the case of a multiemployer plan that has 
                merged with another plan or to which assets and 
                liabilities have been transferred, the actuarial 
                valuation of the assets and liabilities of each 
                affected plan during the year preceding the effective 
                date of the merger or transfer, based upon the most 
                recent data available as of the day before the first 
                day of the plan year, or other valuation method 
                performed under standards and procedures as the 
                Secretary may prescribe by regulation;
                    ``(J) a description as to whether the plan--
                            ``(i) sought or received an amortization 
                        extension under section 304(d) or section 
                        431(d) of the Internal Revenue Code of 1986 for 
                        such plan year;
                            ``(ii) used the shortfall funding method 
                        (as such term is used in section 305) for such 
                        plan year; or
                            ``(iii) was in critical or endangered 
                        status under section 305 for such plan year; 
                        and
                    ``(K) notification of the right under this section 
                of the recipient to a copy of the annual report filed 
                with the Secretary under subsection (a), summary annual 
                report, summary plan description, summary of any 
                material modification of the plan, upon written 
                request, but that--
                            ``(i) in no case shall a recipient be 
                        entitled to receive more than one copy of any 
                        such report described during any one 12-month 
                        period; and
                            ``(ii) the administrator may make a 
                        reasonable charge to cover copying, mailing, 
                        and other costs of furnishing copies of 
                        information pursuant to this subparagraph.
            ``(2) Effect of section.--Nothing in this section waives 
        any other provision under this title requiring plan 
        administrators to provide, upon request, information to 
        employers that have an obligation to contribution under the 
        plan.''.
    (e) Model Form.--Not later than 270 days after the date of the 
enactment of this Act, the Secretary of Labor shall publish a model 
form for providing the statements, schedules, and other material 
required to be provided under section 104(b)(3) of the Employee 
Retirement Income Security Act of 1974, as amended by this section. The 
Secretary of Labor may promulgate any interim final rules as the 
Secretary determines appropriate to carry out the provisions of this 
subsection.
    (f) Five-year Report With Respect to Multiemployer Plans.--Section 
4022A(f) of such Act (29 U.S.C. 1322a(f)) is amended by adding at the 
end the following:
            ``(6) Not later than 5 years after the date of the 
        enactment of the Pension Security and Transparency Act of 2005, 
        and at least every fifth year thereafter, the corporation shall 
        submit to Congress a report that contains a description of the 
        fiscal conditions of the multiemployer pension plan system as 
        of the date of such report based on the information submitted 
        to the corporation under section 104(d).''.
    (g) Conforming Amendment.--Title IV of such Act (29 U.S.C. 1301 et 
seq.) is amended by striking section 4011.
    (h) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2005.
            (2) Special rule.--Notwithstanding the provisions of 
        paragraph (1), the requirement under section 103(f)(2)(D) of 
        the Employee Retirement Income Security Act (as added by this 
        section) shall apply to plan years beginning after December 31, 
        2007.

SEC. 504. TIMING OF ANNUAL REPORTING REQUIREMENTS.

    (a) Filing After 285 Days After Plan Year Only in Cases of 
Hardship.--Section 104(a)(1) of such Act (29 U.S.C. 1024(a)(1)) is 
amended by inserting after the first sentence the following new 
sentence: ``In the case of a pension plan, the Secretary may extend the 
deadline for filing the annual report for any plan year past 285 days 
after the close of the plan year only on a case by case basis and only 
in cases of hardship, in accordance with regulations which shall be 
prescribed by the Secretary.''.
    (b) Internet Display of Information.--Section 104(b) of such Act 
(29 U.S.C. 1024(b)) is amended by adding at the end the following:
    ``(5) Identification and basic plan information and actuarial 
information included in the annual report for any plan year shall be 
filed with the Secretary in an electronic format which accommodates 
display on the Internet, in accordance with regulations which shall be 
prescribed by the Secretary. The Secretary shall provide for display of 
such information included in the annual report, within 90 days after 
the date of the filing of the annual report, on an Internet website 
maintained by the Secretary and other appropriate media. Such 
information shall also be displayed on any Internet website maintained 
by the plan sponsor (or by the plan administrator on behalf of the plan 
sponsor), in accordance with regulations which shall be prescribed by 
the Secretary.''.
    (c) Summary Annual Report Filed Within 30 Days After Deadline for 
Filing of Annual Report.--Section 104(b)(3) of such Act (29 U.S.C. 
1024(b)(3)), as amended by section 503, is amended by--
            (1) striking ``(3)(A) Within 210 days after the close of 
        the fiscal year,'' and inserting ``(3)(A) Within 30 days after 
        the due date under subsection (a)(1) for the filing of the 
        annual report for the fiscal year of the plan'';
            (2) striking ``the latest'' and inserting ``such''; and
            (3) adding at the end the following
                    ``(C) Date of internet display.--Display of the 
                summary annual report on the Internet website 
                maintained by the plan sponsor (or by the plan 
                administrator on behalf of the plan sponsor) by the 
                date required under subparagraph (A) shall be treated 
                as furnishing such report to each participant and 
                beneficiary receiving benefits under the plan by such 
                date, except that such report shall be furnished to 
                each such participant and beneficiary as soon as 
                practicable thereafter, and in no event later the 30 
                days after such date.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2005.

SEC. 505. SECTION 4010 FILINGS WITH THE PBGC.

    (a) Change in Criteria for Persons Required To Provide Information 
To PBGC.--Section 4010(b) of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1310(b)) is amended--
            (1) in paragraph (1)--
                    (A) by striking ''(1) the aggregate'' and inserting 
                ``(1)(A) the aggregate'';
                    (B) by striking the semicolon and inserting ``; 
                and'';
                    (C) by inserting after subparagraph (A) the 
                following:
            ``(B)(i) the aggregate funding targets attainment 
        percentage of the plan (as defined in subsection (d)) is less 
        than 90 percent; or
            ``(ii) any debt instrument of the plan sponsor or the plan 
        sponsor has received a rating described in subclause (I) or 
        (II) of section 303(i)(5)(A)(i);''; and
            (2) by redesignating paragraphs (2) and (3) as paragraphs 
        (4) and (5), respectively, and by inserting before paragraph 
        (4) (as so redesignated) the following new paragraphs:
            ``(2) the aggregate funding targets attainment percentage 
        of the plan (as defined in subsection (d)) is less than 60 
        percent;
            ``(3)(A) the aggregate funding targets attainment 
        percentage of the plan (as defined in subsection (d)) is less 
        than 75 percent, and
            ``(B) the plan sponsor is in an industry with respect to 
        which the corporation determines that there is substantial 
        unemployment or underemployment and the sales and profits are 
        depressed or declining;''.
    (b) Additional Information Required.--Section 4010 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1310) is amended by 
adding at the end the following new subsection:
    ``(d) Additional Information Required.--
            ``(1) In General.--The information submitted to the 
        corporation under subsection (a) shall include--
                    ``(A) the amount of benefit liabilities under the 
                plan determined using the assumptions used by the 
                corporation in determining liabilities;
                    ``(B) the funding target of the plan determined as 
                if the plan has been in at-risk status for at least 5 
                plan years; and
                    ``(C) the funding target attainment percentage of 
                the plan.
            ``(2) Definitions.--For purposes of this subsection:
                    ``(A) Value of plan assets.--The term `value of 
                plan assets' means the value of plan assets, as 
                determined under section 303(g)(3).
                    ``(B) Funding target.--The term `funding target' 
                has the meaning provided under section 303(d)(1).
                    ``(C) Funding target attainment percentage.--The 
                term `funding target attainment percentage' has the 
                meaning provided in section 303(d)(2).
                    ``(D) Aggregate funding targets attainment 
                percentage.--The term `aggregate funding targets 
                attainment percentage' means, with respect to a 
                contributing sponsor for a plan year, the percentage, 
                taking into account all plans maintained by the 
                contributing sponsor and the members of its controlled 
                group as of the end of such plan year, which--
                            ``(i) the aggregate total of the values of 
                        plan assets, as of the end of such plan year, 
                        of such plans, is of
                            ``(ii) the aggregate total of the funding 
                        targets of such plans, as of the end of such 
                        plan year, taking into account only benefits to 
                        which participants and beneficiaries have a 
                        nonforfeitable right.
                    ``(E) At-risk status.--The term `at-risk status' 
                has the meaning provided in section 303(i)(4).
    ``(e) Notice to Congress.--The Corporation shall, on an annual 
basis, submit to the Committee on Health, Education, Labor, and 
Pensions of the Senate and the Committee on Education and the Workforce 
of the House of Representatives, a summary report of the information 
submitted to the Corporation under this section.''.
    (c) Effective Date.--The amendment made by this section shall apply 
with respect to plan years beginning after 2006.

SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO PLAN PARTICIPANTS.

    (a) Distress Terminations.--
            (1) In general.--Section 4041(c)(2) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)(2)) 
        is amended by adding at the end the following:
                    ``(D) Disclosure of termination information.--
                            ``(i) In general.--A plan administrator 
                        that has filed a notice of intent to terminate 
                        under subsection (a)(2) shall provide to an 
                        affected party any information provided to the 
                        corporation under paragraph (2) not later than 
                        15 days after--
                                    ``(I) receipt of a request from the 
                                affected party for the information; or
                                    ``(II) the provision of new 
                                information to the corporation relating 
                                to the previous request.
                            ``(ii) Confidentiality.--
                                    ``(I) In general.--The plan 
                                administrator shall not provide 
                                information under clause (i) in a form 
                                that includes any information that may 
                                directly or indirectly be associated 
                                with, or otherwise identify, an 
                                individual participant or beneficiary.
                                    ``(II) Limitation.--A court may 
                                limit disclosure under this 
                                subparagraph of confidential 
                                information described in section 552(b) 
                                of title 5, United States Code, to any 
                                authorized representative of the 
                                participants or beneficiaries that 
                                agrees to ensure the confidentiality of 
                                such information.
                            ``(iii) Form and manner of information; 
                        charges.--
                                    ``(I) Form and manner.--The 
                                corporation may prescribe the form and 
                                manner of the provision of information 
                                under this subparagraph, which shall 
                                include delivery in written, 
                                electronic, or other appropriate form 
                                to the extent that such form is 
                                reasonably accessible to individuals to 
                                whom the information is required to be 
                                provided.
                                    ``(II) Reasonable charges.--A plan 
                                sponsor may charge a reasonable fee for 
                                any information provided under this 
                                subparagraph in other than electronic 
                                form.
                            ``(iv) Authorized representative.--For 
                        purposes of this subparagraph, the term 
                        `authorized representative' means any employee 
                        organization representing participants in the 
                        pension plan.''.
            (2) Conforming amendment.--Section 4041(c)(1) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1341(c)(1)) is amended in subparagraph (C) by striking 
        ``subparagraph (B)'' and inserting ``subparagraphs (B) and 
        (D)''.
    (b) Involuntary Terminations.--
            (1) In general.--Section 4042(c) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1342(c)) is amended by--
                    (A) striking ``(c) If the'' and inserting ``(c)(1) 
                If the'';
                    (B) redesignating paragraph (3) as paragraph (2); 
                and
                    (C) adding at the end the following:
            ``(3) Disclosure of termination information.--
                    ``(A) In general.--
                            ``(i) Information from plan sponsor or 
                        administrator.--A plan sponsor or plan 
                        administrator of a single-employer plan that 
                        has received a notice from the corporation of a 
                        determination that the plan should be 
                        terminated under this section shall provide to 
                        an affected party any information provided to 
                        the corporation in conjunction with the plan 
                        termination.
                            ``(ii) Information from corporation.--The 
                        corporation shall provide a copy of the 
                        administrative record, including the 
                        trusteeship decision record of a termination of 
                        a plan described under clause (i).
                    ``(B) Timing of disclosure.--The plan sponsor, plan 
                administrator, or the corporation, as applicable, shall 
                provide the information described in subparagraph (A) 
                not later than 15 days after--
                            ``(i) receipt of a request from an affected 
                        party for such information; or
                            ``(ii) in the case of information described 
                        under subparagraph (A)(i), the provision of any 
                        new information to the corporation relating to 
                        a previous request by an affected party.
                    ``(C) Confidentiality.--
                            ``(i) In general.--The plan administrator 
                        and plan sponsor shall not provide information 
                        under subparagraph (A)(i) in a form which 
                        includes any information that may directly or 
                        indirectly be associated with, or otherwise 
                        identify, an individual participant or 
                        beneficiary.
                            ``(ii) Limitation.--A court may limit 
                        disclosure under this paragraph of confidential 
                        information described in section 552(b) of 
                        title 5, United States Code, to authorized 
                        representatives (within the meaning of section 
                        4041(c)(2)(D)(iv)) of the participants or 
                        beneficiaries that agree to ensure the 
                        confidentiality of such information.
                    ``(D) Form and manner of information; charges.--
                            ``(i) Form and manner.--The corporation may 
                        prescribe the form and manner of the provision 
                        of information under this paragraph, which 
                        shall include delivery in written, electronic, 
                        or other appropriate form to the extent that 
                        such form is reasonably accessible to 
                        individuals to whom the information is required 
                        to be provided.
                            ``(ii) Reasonable charges.--A plan sponsor 
                        may charge a reasonable fee for any information 
                        provided under this paragraph in other than 
                        electronic form.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any plan termination under title IV of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1301 et seq.) with respect to 
which the notice of intent to terminate (or in the case of a 
termination by the Pension Benefit Guaranty Corporation, a notice of 
determination under section 4042 of such Act (29 U.S.C. 1342)) occurs 
after the date of enactment of this Act.

SEC. 507. BENEFIT SUSPENSION NOTICE.

    (a) Modification of Regulation.--The Secretary of Labor shall 
modify the regulation under subparagraph (B) of section 203(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1053(a)(3)(B)) to provide that the notification required by such 
regulation in connection with any suspension of benefits described in 
such subparagraph--
            (1) in the case of an employee who returns to service 
        described in section 203(a)(3)(B) (i) or (ii) of such Act after 
        commencement of payment of benefits under the plan, shall be 
        made during the first calendar month or the first 4- or 5-week 
        payroll period ending in a calendar month in which the plan 
        withholds payments, and
            (2) in the case of any employee who is not described in 
        paragraph (1)--
                    (A) may be included in the summary plan description 
                for the plan furnished in accordance with section 
                104(b) of such Act (29 U.S.C. 1024(b)), rather than in 
                a separate notice, and
                    (B) need not include a copy of the relevant plan 
                provisions.
    (b) Effective Date.--The modification made under this section shall 
apply to plan years beginning after December 31, 2005.

SEC. 508. STUDY AND REPORT BY GOVERNMENT ACCOUNTABILITY OFFICE.

    (a) In General.--The Comptroller General of the United States shall 
conduct a study to determine the effectiveness of the enforcement of 
provisions in the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1001 et seq.) and in other Federal laws designed to protect 
pension plans and the assets and participants of such plan from fraud 
and mismanagement, including excessive investment management fees, 
violations of fiduciary duties under Title I of such Act, and the 
quality of plan assets.
    (b) Content of Study.--The study described in subsection (a) shall 
include:
            (1) An identification of which Federal departments and 
        agencies have responsibility for enforcement of these 
        provisions, including the recovery of lost plan assets due to 
        fraud and mismanagement.
            (2) Identification of all administrative enforcement 
        powers, procedures, and strategies used by the Securities and 
        Exchange Commission that have the potential to improve the 
        Department of Labor's enforcement of the fiduciary provisions 
        of the Employee Retirement Income Security Act of 1974 (29 
        U.S.C. 1001 et seq.).
            (3) Identification of any statutory or other barriers that 
        restrict the Department of Labor's authority to use such 
        powers, procedures, and strategies identified in paragraph (2).
            (4) An evaluation of whether giving additional 
        investigative or enforcement authority to the Pension Benefit 
        Guaranty Corporation or the Securities and Exchange Commission 
        would significantly improve enforcement of those provisions.
            (5) An evaluation of the current authority of the Pension 
        Benefit Guaranty Corporation to bring actions to recover any 
        funds lost by pension plans due to violations of any fiduciary 
        standards under Title I of such Act or other Federal statutes.
            (6) The impact that expanding any such authority by the 
        Pension Benefit Guaranty Corporation to bring such actions 
        would have on the Corporation's solvency.
    (c) Report.--Not later than 6 months after the enactment of this 
Act, the Comptroller General shall submit a report to Congress on the 
study conducted under subsection (a) that includes such recommendations 
for legislation or administrative action as the Comptroller General 
determines are appropriate.

 TITLE VI--TREATMENT OF CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT 
                             PENSION PLANS

SEC. 601. PROSPECTIVE APPLICATION OF AGE DISCRIMINATION, CONVERSION, 
              AND PRESENT VALUE ASSUMPTION RULES.

    (a) Application of Age Discrimination Prohibitions.--
            (1) Amendment of erisa.--Section 204(b) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1054(b)) is 
        amended by adding at the end the following:
            ``(5) Special rules for cash balance and other hybrid 
        defined benefit plans.--
                    ``(A) In general.--A qualified cash balance plan 
                shall not be treated as violating the requirements of 
                paragraph (1)(H) merely because it may reasonably be 
                expected that the period over which interest credits 
                will be made to a participant's accumulation account 
                (or its equivalent) is longer for a younger 
                participant. This paragraph shall not apply to any plan 
                if the rate of any pay credit or interest credit to 
                such an account under the plan decreases by reason of 
                the participant's attainment of any age.
                    ``(B) Qualified cash balance plan.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `qualified cash 
                        balance plan' means a cash balance plan which 
                        meets the vesting requirement under clause (ii) 
                        and the interest credit requirement under 
                        clause (iii).
                            ``(ii) Vesting requirements.--A plan meets 
                        the requirements of this clause if an employee 
                        who has completed at least 3 years of service 
                        has a nonforfeitable right to 100 percent of 
                        the employee's accrued benefit derived from 
                        employer contributions.
                            ``(iii) Interest credits.--A plan meets the 
                        requirements of this clause if the terms of the 
                        plan provide that any interest credit (or 
                        equivalent amount) for any plan year shall be 
                        at a rate which--
                                    ``(I) is not less than the 
                                applicable Federal mid-term interest 
                                rate (as determined under section 
                                1274(d)(1) of the Internal Revenue Code 
                                of 1986), and
                                    ``(II) is not greater than the 
                                greater of the rate determined under 
                                subclause (I) or a rate equal to the 
                                rate of interest on amounts invested 
                                conservatively in long-term investment 
                                grade corporate bonds.
                            ``(iv) Determination of rates.--For 
                        purposes of clause (iii)(II), the rate of 
                        interest on amounts invested conservatively in 
                        long-term investment grade corporate bonds 
                        shall be determined by the Secretary of the 
                        Treasury on the basis of 2 or more indices that 
                        are selected periodically by the Secretary of 
                        the Treasury. The Secretary of the Treasury 
                        shall make publicly available the indices and 
                        methodology used to determine the rate.
                            ``(v) Variable rate of interest.--If the 
                        interest credit rate under the plan is a 
                        variable rate, the plan shall provide that, 
                        upon the termination of the plan, the rate of 
                        interest used to determine accrued benefits 
                        under the plan shall be equal to the average of 
                        the rates of interest used under the plan 
                        during the 5-year period ending on the 
                        termination date.
                    ``(C) Cash balance plan.--For purposes of this 
                paragraph, the term `cash balance plan' means a defined 
                benefit plan under which--
                            ``(i) the accrued benefit is determined by 
                        reference to the balance of a hypothetical 
                        accumulation account, and
                            ``(ii) pay credits and interest credits are 
                        credited to such account.
                    ``(D) Regulations to include similar or other 
                hybrid plans.--
                            ``(i) Cash balance plan.--The Secretary of 
                        the Treasury shall issue regulations which 
                        include in the definition of cash balance plan 
                        any defined benefit plan (or any portion of 
                        such a plan) which has an effect similar to a 
                        cash balance plan. Such regulations may provide 
                        that if a plan sponsor represents in 
                        communications to participants and 
                        beneficiaries that a plan amendment results in 
                        a plan being described in the preceding 
                        sentence, such plan shall be treated as a cash 
                        balance plan.
                            ``(ii) Qualified cash balance plan.--The 
                        Secretary of the Treasury may in the 
                        regulations issued under clause (i) provide for 
                        the treatment of a cash balance plan as a 
                        qualified cash balance plan in cases where the 
                        cash balance plan has an effect similar to the 
                        qualified cash balance plan.''.
            (2) Age discrimination in employment act.--Section 4(i)(2) 
        of the Age Discrimination of Employment Act of 1967 (29 U.S.C. 
        623(i)(2)) is amended--
                    (A) by inserting ``(A)'' after ``(2)'', and
                    (B) by adding at the end the following new 
                subparagraph:
    ``(B) A defined benefit plan which is treated as a qualified cash 
balance plan for purposes of section 204(b)(5) of the Employee 
Retirement Income Security Act of 1974 shall not be treated as 
violating the requirements of paragraph (1)(A) merely because it may 
reasonably be expected that the period over which interest credits will 
be made under the plan to a participant's accumulation account (or its 
equivalent) is longer for a younger participant. This subparagraph 
shall not apply to any plan if the rate of any pay credit or interest 
credit to such an account under the plan decreases by reason of the 
participant's attainment of any age.''.
            (3) Amendment of internal revenue code.--Section 411(b) of 
        the Internal Revenue Code of 1986 (relating to accrued benefit 
        requirements) is amended by adding at the end the following:
            ``(5) Special rules for cash balance and other hybrid 
        defined benefit plans.--
                    ``(A) In general.--A qualified cash balance plan 
                shall not be treated as violating the requirements of 
                paragraph (1)(H) merely because it may reasonably be 
                expected that the period over which interest credits 
                will be made to a participant's accumulation account 
                (or its equivalent) is longer for a younger 
                participant. This paragraph shall not apply to any plan 
                if the rate of any pay credit or interest credit to 
                such an account under the plan decreases by reason of 
                the participant's attainment of any age.
                    ``(B) Qualified cash balance plan.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `qualified cash 
                        balance plan' means a cash balance plan which 
                        meets the vesting requirement under clause (ii) 
                        and the interest credit requirement under 
                        clause (iii).
                            ``(ii) Vesting requirements.--A plan meets 
                        the requirements of this clause if an employee 
                        who has completed at least 3 years of service 
                        has a nonforfeitable right to 100 percent of 
                        the employee's accrued benefit derived from 
                        employer contributions.
                            ``(iii) Interest credits.--A plan meets the 
                        requirements of this clause if the terms of the 
                        plan provide that any interest credit (or 
                        equivalent amount) for any plan year shall be 
                        at a rate which--
                                    ``(I) is not less than the 
                                applicable Federal mid-term interest 
                                rate (as determined under section 
                                1274(d)(1)), and
                                    ``(II) is not greater than the 
                                greater of the rate determined under 
                                subclause (I) or a rate equal to the 
                                rate of interest on amounts invested 
                                conservatively in long-term investment 
                                grade corporate bonds.
                            ``(iv) Determination of rates.--For 
                        purposes of clause (iii)(II), the rate of 
                        interest on amounts invested conservatively in 
                        long-term investment grade corporate bonds 
                        shall be determined by the Secretary on the 
                        basis of 2 or more indices that are selected 
                        periodically by the Secretary. The Secretary 
                        shall make publicly available the indices and 
                        methodology used to determine the rate.
                            ``(v) Variable rate of interest.--If the 
                        interest credit rate under the plan is a 
                        variable rate, the plan shall provide that, 
                        upon the termination of the plan, the rate of 
                        interest used to determine accrued benefits 
                        under the plan shall be equal to the average of 
                        the rates of interest used under the plan 
                        during the 5-year period ending on the 
                        termination date.
                    ``(C) Cash balance plan.--For purposes of this 
                paragraph, the term `cash balance plan' means a defined 
                benefit plan under which--
                            ``(i) the accrued benefit is determined by 
                        reference to the balance of a hypothetical 
                        accumulation account, and
                            ``(ii) pay credits and interest credits are 
                        credited to such account.
                    ``(D) Regulations to include similar or other 
                hybrid plans.--
                            ``(i) Cash balance plan.--The Secretary 
                        shall issue regulations which include in the 
                        definition of cash balance plan any defined 
                        benefit plan (or any portion of such a plan) 
                        which has an effect similar to a cash balance 
                        plan. Such regulations may provide that if a 
                        plan sponsor represents in communications to 
                        participants and beneficiaries that a plan 
                        amendment results in a plan being described in 
                        the preceding sentence, such plan shall be 
                        treated as a cash balance plan.
                            ``(ii) Qualified cash balance plan.--The 
                        Secretary may in the regulations issued under 
                        clause (i) provide for the treatment of a cash 
                        balance plan as a qualified cash balance plan 
                        in cases where the cash balance plan has an 
                        effect similar to the qualified cash balance 
                        plan.''.
    (b) Rules Applicable to Accrued Benefits Under Converted Plans.--
            (1) Amendment of erisa.--Section 204(g) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
        amended by adding at the end the following new paragraph:
            ``(6) Treatment of conversions to cash balance or other 
        hybrid plans.--
                    ``(A) In general.--For purposes of this subsection, 
                an applicable plan amendment shall be treated as 
                reducing the accrued benefit of a participant if, under 
                the terms of the plan as in effect after the amendment, 
                the accrued benefit of any participant who was a 
                participant as of the effective date of the amendment 
                may at any time be less than the accrued benefit 
                determined under the method under subparagraph (B), 
                (C), or (D) which is specified in the plan and applies 
                uniformly to all participants. An applicable plan 
                amendment shall in no event be treated as meeting the 
                requirements of any such subparagraph if the conversion 
                described in subparagraph (G)(i) is into a cash balance 
                plan other than a qualified cash balance plan (as 
                defined in subsection (b)(5)(B)).
                    ``(B) No wearaway.--
                            ``(i) In general.--The accrued benefit 
                        determined under this subparagraph is the sum 
                        of--
                                    ``(I) 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 before the amendment, plus
                                    ``(II) except as provided in clause 
                                (ii), the participant's accrued benefit 
                                for years of service after the 
                                effective date of the amendment, 
                                determined under the terms of the plan 
                                as in effect after the amendment.
                            ``(ii) Required amounts for certain 
                        periods.--Notwithstanding clause (i)(II), the 
                        plan shall provide that either--
                                    ``(I) the accrued benefit of all 
                                participants for each of the first 5 
                                plan years to which the amendment 
                                applies shall be equal to the greater 
                                of the accrued benefit determined under 
                                the terms of the plan as in effect both 
                                before and after the amendment, or
                                    ``(II) the accrued benefit for 
                                periods after the effective date of the 
                                amendment of all participants who, as 
                                of the effective date of the amendment, 
                                had attained the age of 40 and had a 
                                combined age and years of service under 
                                the plan of not less than 55 shall be 
                                determined under either of the methods 
                                described in clause (iii) which is 
                                selected by the plan and which is 
                                specified in the amendment.
                            ``(iii) Applicable method.--For purposes of 
                        clause (ii)(II), the plan shall select 1 of the 
                        following methods:
                                    ``(I) The accrued benefit shall be 
                                equal to the greater of the accrued 
                                benefit determined under the terms of 
                                the plan as in effect both before and 
                                after the amendment.
                                    ``(II) At the election of the 
                                participant, the accrued benefit shall 
                                be determined under the terms of the 
                                plan as in effect either before or 
                                after the amendment.
                    ``(C) Greater of old or new or election of 
                either.--The accrued benefit determined under this 
                subparagraph is the accrued benefit determined under 1 
                of the following methods which is selected by the plan 
                and which is specified in the amendment:
                            ``(i) The accrued benefit shall be equal to 
                        the greater of the accrued benefit determined 
                        under the terms of the plan as in effect both 
                        before and after the amendment.
                            ``(ii) At the election of the participant, 
                        the accrued benefit shall be determined under 
                        the terms of the plan as in effect either 
                        before or after the amendment.
                    ``(D) Method prescribed by secretary.--The accrued 
                benefit determined under this subparagraph shall be 
                determined under regulations prescribed by the 
                Secretary which are consistent with the purposes of 
                this paragraph and which may require a plan to provide 
                a credit of additional amounts or increases in initial 
                account balances in amounts substantially equivalent to 
                the benefits that would be required to be provided to 
                meet the requirements of subparagraphs (B) or (C).
                    ``(E) Inclusion of prior accrued benefit into 
                initial account balance.--
                            ``(i) In general.--If, for purposes of 
                        subparagraphs (B), (C), or (D), an applicable 
                        plan amendment provides that an amount will be 
                        initially credited to a participant's 
                        accumulation account (or its equivalent) on the 
                        effective date of the amendment with respect to 
                        the participant's accrued benefit for periods 
                        before such date, the requirements of such 
                        subparagraph shall be treated as met with 
                        respect to such accrued benefit if the amount 
                        initially credited is not less than the present 
                        value of the participant's accrued benefit 
                        determined by using the applicable mortality 
                        table and the lower of the applicable interest 
                        rate under section 205(g)(3)(A), or the 
                        interest rate used to credit interest under the 
                        plan, as of such date.
                            ``(ii) Adjustments for certain subsidized 
                        benefits.--For purposes of subparagraph (B), if 
                        any early retirement benefit or retirement-type 
                        subsidy (within the meaning of paragraph 
                        (6)(B)(i)) is not included in the initial 
                        account balance under clause (i), the plan 
                        shall credit the accumulation account with the 
                        amount of such benefit or subsidy for the plan 
                        year in which the participant retires if, as of 
                        such time, the participant has met the age, 
                        years of service, and other requirements under 
                        the plan for entitlement to such benefit or 
                        subsidy.
                    ``(F) Requirements where participant offered 
                choice.--If a plan provides a participant with an 
                election described in subparagraph (B)(iii)(II) or 
                (C)(ii), the following rules shall apply:
                            ``(i) Notice.--The plan shall not be 
                        treated as meeting the requirements of either 
                        such subparagraph unless the plan provides the 
                        participant a notice of the right to make such 
                        election which includes information (meeting 
                        such requirements as may be prescribed by the 
                        Secretary of the Treasury)--
                                    ``(I) by which the participant may 
                                project benefits under the formulas 
                                from which the participant may choose 
                                and may model the impact of any such 
                                choice, and
                                    ``(II) with respect to 
                                circumstances under which a participant 
                                may not receive the projected accrued 
                                benefits by reason of a plan 
                                termination or otherwise.
                            ``(ii) Significant reduction of rate of 
                        accrual.--The plan shall provide that if, 
                        during any of the first 5 plan years during 
                        which such an election is in effect, the plan 
                        adopts an amendment which results in a 
                        significant reduction in the rate of future 
                        benefit accrual (within the meaning of section 
                        204(h)), the accrued benefit of the participant 
                        shall be determined as if the participant had 
                        made the election which resulted in the 
                        greatest accrued benefit.
                            ``(iii) Benefits must not be contingent on 
                        election.--The plan shall not be treated as 
                        meeting the requirements of either such 
                        subparagraph if any other benefit is 
                        conditioned (directly or indirectly) on such 
                        election.
                    ``(G) Applicable plan amendment.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `applicable 
                        plan amendment' means an amendment to a defined 
                        benefit plan which has the effect of converting 
                        the plan to a cash balance plan.
                            ``(ii) Special rule for coordinated 
                        benefits.--If the benefits of 2 or more defined 
                        benefit plans established or maintained by an 
                        employer are coordinated in such a manner as to 
                        have the effect of the adoption of an amendment 
                        described in clause (i), the sponsor of the 
                        defined benefit plan or plans providing for 
                        such coordination shall be treated as having 
                        adopted such a plan amendment as of the date 
                        such coordination begins.
                            ``(iii) Multiple amendments.--The Secretary 
                        of the Treasury shall issue regulations to 
                        prevent the avoidance of the purposes of this 
                        paragraph through the use of 2 or more plan 
                        amendments rather than a single amendment.
                            ``(iv) Cash balance plan.--For purposes of 
                        this paragraph, the term `cash balance plan' 
                        has the meaning given such term by subsection 
                        (b)(5)(C).
                            ``(v) Coordination with accrual rules.--If 
                        a plan amendment is treated as meeting the 
                        requirements of this paragraph with respect to 
                        any participant because such participant is 
                        eligible to continue to accrue benefits in the 
                        same manner as under the terms of the plan in 
                        effect before the amendment, the Secretary of 
                        the Treasury shall prescribe regulations under 
                        which the plan shall not be treated as failing 
                        to meet the requirements of subparagraph (A), 
                        (B), or (C) of section 204(b)(1) if the 
                        requirements of this paragraph are met.
                    ``(H) Application of certain rules to early-
                retirement benefits.--Rules similar to the rules of 
                clauses (i), (ii), and (iii) of subparagraph (B) and 
                subparagraph (C) shall apply in the case of any early 
                retirement benefit or retirement-type subsidy (within 
                the meaning of section 204(g)(2)(A)).''.
            (2) Amendment of internal revenue code.--Section 411(d) of 
        the Internal Revenue Code of 1986 (relating to special rules) 
        is amended by adding at the end the following new paragraph:
            ``(7) Treatment of conversions to cash balance or other 
        hybrid plans.--
                    ``(A) In general.--For purposes of paragraph (6), 
                an applicable plan amendment shall be treated as 
                reducing the accrued benefit of a participant if, under 
                the terms of the plan as in effect after the amendment, 
                the accrued benefit of any participant who was a 
                participant as of the effective date of the amendment 
                may at any time be less than the accrued benefit 
                determined under the method under subparagraph (B), 
                (C), or (D) which is specified in the plan and applies 
                uniformly to all participants. An applicable plan 
                amendment shall in no event be treated as meeting the 
                requirements of any such subparagraph if the conversion 
                described in subparagraph (G)(i) is into a cash balance 
                plan other than a qualified cash balance plan (as 
                defined in subsection (b)(5)(B)).
                    ``(B) No wearaway.--
                            ``(i) In general.--The accrued benefit 
                        determined under this subparagraph is the sum 
                        of--
                                    ``(I) 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 before the amendment, plus
                                    ``(II) except as provided in clause 
                                (ii), the participant's accrued benefit 
                                for years of service after the 
                                effective date of the amendment, 
                                determined under the terms of the plan 
                                as in effect after the amendment.
                        A similar rule shall apply in the case of any 
                        early retirement benefit or retirement-type 
                        subsidy (within the meaning of section 
                        411(d)(6)(B)(i)).
                            ``(ii) Required amounts for certain 
                        periods.--Notwithstanding clause (i)(II), the 
                        plan shall provide that either--
                                    ``(I) the accrued benefit of all 
                                participants for each of the first 5 
                                plan years to which the amendment 
                                applies shall be equal to the greater 
                                of the accrued benefit determined under 
                                the terms of the plan as in effect both 
                                before and after the amendment, or
                                    ``(II) the accrued benefit for 
                                periods after the effective date of the 
                                amendment of all participants who, as 
                                of the effective date of the amendment, 
                                had attained the age of 40 and had a 
                                combined age and years of service under 
                                the plan of not less than 55 shall be 
                                determined under either of the methods 
                                described in clause (iii) which is 
                                selected by the plan and which is 
                                specified in the amendment.
                            ``(iii) Applicable method.--For purposes of 
                        clause (ii)(II), the plan shall select 1 of the 
                        following methods:
                                    ``(I) The accrued benefit shall be 
                                equal to the greater of the accrued 
                                benefit determined under the terms of 
                                the plan as in effect both before and 
                                after the amendment.
                                    ``(II) At the election of the 
                                participant, the accrued benefit shall 
                                be determined under the terms of the 
                                plan as in effect either before or 
                                after the amendment.
                    ``(C) Greater of old or new or election of 
                either.--The accrued benefit determined under this 
                subparagraph is the accrued benefit determined under 1 
                of the following methods which is selected by the plan 
                and which is specified in the amendment:
                            ``(i) The accrued benefit shall be equal to 
                        the greater of the accrued benefit determined 
                        under the terms of the plan as in effect both 
                        before and after the amendment.
                            ``(ii) At the election of the participant, 
                        the accrued benefit shall be determined under 
                        the terms of the plan as in effect either 
                        before or after the amendment.
                    ``(D) Method prescribed by secretary.--The accrued 
                benefit determined under this subparagraph shall be 
                determined under regulations prescribed by the 
                Secretary which are consistent with the purposes of 
                this paragraph and which may require a plan to provide 
                a credit of additional amounts or increases in initial 
                account balances in amounts substantially equivalent to 
                the benefits that would be required to be provided to 
                meet the requirements of subparagraphs (B) or (C).
                    ``(E) Inclusion of prior accrued benefit into 
                initial account balance.--
                            ``(i) In general.--If, for purposes of 
                        subparagraphs (B), (C), or (D), an applicable 
                        plan amendment provides that an amount will be 
                        initially credited to a participant's 
                        accumulation account (or its equivalent) on the 
                        effective date of the amendment with respect to 
                        the participant's accrued benefit for periods 
                        before such date, the requirements of such 
                        subparagraph shall be treated as met with 
                        respect to such accrued benefit if the amount 
                        initially credited is not less than the present 
                        value of the participant's accrued benefit 
                        determined by using the applicable mortality 
                        table and the lower of the applicable interest 
                        rate under section 417(e)(3)(A), or the 
                        interest rate used to credit interest under the 
                        plan, as of such date.
                            ``(ii) Adjustments for certain subsidized 
                        benefits.--For purposes of subparagraph (B), if 
                        any early retirement benefit or retirement-type 
                        subsidy (within the meaning of paragraph 
                        (6)(B)(i)) is not included in the initial 
                        account balance under clause (i), the plan 
                        shall credit the accumulation account with the 
                        amount of such benefit or subsidy for the plan 
                        year in which the participant retires if, as of 
                        such time, the participant has met the age, 
                        years of service, and other requirements under 
                        the plan for entitlement to such benefit or 
                        subsidy.
                    ``(F) Requirements where participant offered 
                choice.--If a plan provides a participant with an 
                election described in subparagraph (B)(iii)(II) or 
                (C)(ii), the following rules shall apply:
                            ``(i) Notice.--The plan shall not be 
                        treated as meeting the requirements of either 
                        such subparagraph unless the plan provides the 
                        participant a notice of the right to make such 
                        election which includes information (meeting 
                        such requirements as may be prescribed by the 
                        Secretary)--
                                    ``(I) by which the participant may 
                                project benefits under the formulas 
                                from which the participant may choose 
                                and may model the impact of any such 
                                choice, and
                                    ``(II) with respect to 
                                circumstances under which a participant 
                                may not receive the projected accrued 
                                benefits by reason of a plan 
                                termination or otherwise.
                            ``(ii) Significant reduction of rate of 
                        accrual.--The plan shall provide that if, 
                        during any of the first 5 plan years during 
                        which such an election is in effect, the plan 
                        adopts an amendment which results in a 
                        significant reduction in the rate of future 
                        benefit accrual (within the meaning of section 
                        4980F(e)), the accrued benefit of the 
                        participant shall be determined as if the 
                        participant had made the election which 
                        resulted in the greatest accrued benefit.
                            ``(iii) Benefits must not be contingent on 
                        election.--The plan shall not be treated as 
                        meeting the requirements of either such 
                        subparagraph if any other benefit is 
                        conditioned (directly or indirectly) on such 
                        election.
                    ``(G) Applicable plan amendment.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `applicable 
                        plan amendment' means an amendment to a defined 
                        benefit plan which has the effect of converting 
                        the plan to a cash balance plan.
                            ``(ii) Special rule for coordinated 
                        benefits.--If the benefits of 2 or more defined 
                        benefit plans established or maintained by an 
                        employer are coordinated in such a manner as to 
                        have the effect of the adoption of an amendment 
                        described in clause (i), the sponsor of the 
                        defined benefit plan or plans providing for 
                        such coordination shall be treated as having 
                        adopted such a plan amendment as of the date 
                        such coordination begins.
                            ``(iii) Multiple amendments.--The Secretary 
                        shall issue regulations to prevent the 
                        avoidance of the purposes of this paragraph 
                        through the use of 2 or more plan amendments 
                        rather than a single amendment.
                            ``(iv) Cash balance plan.--For purposes of 
                        this paragraph, the term `cash balance plan' 
                        has the meaning given such term by subsection 
                        (b)(5)(C).
                            ``(v) Coordination with accrual and 
                        nondiscrimination rules.--If a plan amendment 
                        is treated as meeting the requirements of this 
                        paragraph with respect to any participant 
                        because such participant is eligible to 
                        continue to accrue benefits in the same manner 
                        as under the terms of the plan in effect before 
                        the amendment, the Secretary shall prescribe 
                        regulations under which--
                                    ``(I) the plan shall not be treated 
                                as failing to meet the requirements of 
                                subparagraph (A), (B), or (C) of 
                                section 411(b)(1) if the requirements 
                                of this paragraph are met, and
                                    ``(II) the plan shall, subject to 
                                such terms and conditions as may be 
                                provided in such regulations, not be 
                                treated as failing to meet the 
                                requirements of section 401(a)(4) 
                                merely because the plan provides any 
                                accrual or benefit which is required to 
                                be provided under subparagraph (B), 
                                (C), or (D) or because only 
                                participants as of the effective date 
                                of the amendment are so eligible, 
                                except that this subclause shall only 
                                apply if the plan met the requirements 
                                of section 401(a)(4) under the terms of 
                                the plan as in effect before the 
                                amendment.
                    ``(H) Application of certain rules to early-
                retirement benefits.--Rules similar to the rules of 
                clauses (i), (ii), and (iii) of subparagraph (B) and 
                subparagraph (C) shall apply in the case of any early 
                retirement benefit or retirement-type subsidy (within 
                the meaning of section 411(d)(6)(B)(i)).''.
    (c) Assumptions Used in Computing Present Value of Accrued 
Benefit.--
            (1) Amendment of erisa.--Section 205(g)(3) of such Act (29 
        U.S.C. 1055(g)(3)), is amended--
                    (A) by striking ``or (B)'' in subparagraph (A)(i) 
                and inserting ``, (B), or (C)'', and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Present value of accrued benefit under cash 
                balance plan.--Except as provided in regulations, in 
                the case of a qualified cash balance plan (as defined 
                in section 204(g)(6)(B)), the present value of the 
                accrued benefit of any participant shall, for purposes 
                of paragraphs (1) and (2), be equal to the balance in 
                the participant's accumulation account (or its 
                equivalent) as of the time the present value 
                determination is being made.''.
            (2) Amendment of internal revenue code.--Section 417(e)(3) 
        of such Code, is amended--
                    (A) by striking ``or (B)'' in subparagraph (A)(i) 
                and inserting ``, (B), or (C)'', and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Present value of accrued benefit under cash 
                balance plan.--Except as provided in regulations, in 
                the case of a qualified cash balance plan (as defined 
                in section 411(d)(7)(B)), the present value of the 
                accrued benefit of any participant shall, for purposes 
                of paragraphs (1) and (2), be equal to the balance in 
                the participant's accumulation account (or its 
                equivalent) as of the time the present value 
                determination is being made.''
    (d) No Inference.--Nothing in the amendments made by this section 
shall be construed to infer the proper treatment of cash balance plans 
or conversions to cash balance plans under sections 204(b)(1)(H) of the 
Employee Retirement Income Security Act of 1974, 4(i)(1) of the Age 
Discrimination in Employment Act of 1967, and 411(b)(1)(H) of the 
Internal Revenue Code of 1986, as in effect before such amendments.
    (e) Effective Dates.--
            (1) Age discrimination and lump-sum distributions.--
                    (A) In general.--The amendments made by subsections 
                (a) and (c) shall apply to periods after July 31, 2005.
                    (B) Vesting and interest credit requirements.--In 
                the case of a plan in existence on July 31, 2005, the 
                requirements of clauses (ii) and (iii) of section 
                411(b)(5)(B) of the Internal Revenue Code of 1986, and 
                of clauses (ii) and (iii) of 204(b)(5)(B) of the 
                Employee Retirement Income Security Act of 1974 shall, 
                for purposes of applying the amendments made by 
                subsections (a) and (c), apply to years beginning after 
                December 31, 2006, unless the plan sponsor elects the 
                application of such requirements for any period after 
                July 31, 2005, and before the first year beginning 
                after December 31, 2006.
                    (C) Special rule for collectively bargained 
                plans.--In the case of a plan maintained pursuant to 1 
                or more collective bargaining agreements between 
                employee representatives and 1 or more employers 
                ratified on or before the date of the enactment of this 
                Act, the requirements described in subparagraph (B) 
                shall, for purposes of applying the amendments made by 
                subsections (a) and (c), not apply to plan years 
                beginning before--
                            (i) the earlier of--
                                    (I) the date on which the last of 
                                such collective bargaining agreements 
                                terminates (determined without regard 
                                to any extension thereof on or after 
                                such date of enactment), or
                                    (II) January 1, 2007, or
                            (ii) January 1, 2009.
            (2) Conversions.--The amendments made by subsection (b) 
        shall apply to plan amendments adopted after, and taking effect 
        after, July 31, 2005, except that the plan sponsor may elect to 
        have such amendments apply to plan amendments adopted before, 
        and taking effect after, such date.

SEC. 602. REGULATIONS RELATING TO MERGERS AND ACQUISITIONS.

    The Secretary of the Treasury or his delegate shall, not later than 
12 months after the date of the enactment of this Act, prescribe 
regulations for the application of the amendments made by, and the 
provisions of, this title in cases where the conversion of a plan to a 
cash balance plan is made with respect to a group of employees who 
become employees by reason of a merger, acquisition, or similar 
transaction.

  TITLE VII--DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS 
                    UNDER DEFINED CONTRIBUTION PLANS

SEC. 701. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE EMPLOYEES WITH 
              FREEDOM TO INVEST THEIR PLAN ASSETS.

    (a) Amendments of Internal Revenue Code.--
            (1) Qualification requirement.--Section 401(a) of the 
        Internal Revenue Code of 1986 (relating to qualified pension, 
        profit-sharing, and stock bonus plans), as amended by section 
        115 of this Act, is amended by inserting after paragraph (34) 
        the following new paragraph:
            ``(35) Diversification requirements for certain defined 
        contribution plans.--
                    ``(A) In general.--A trust which is part of an 
                applicable defined contribution plan shall not be 
                treated as a qualified trust unless the plan meets the 
                diversification requirements of subparagraphs (B), (C), 
                and (D).
                    ``(B) Employee contributions and elective deferrals 
                invested in employer securities or real property.--In 
                the case of the portion of an applicable individual's 
                account attributable to employee contributions and 
                elective deferrals which is invested in employer 
                securities or employer real property, a plan meets the 
                requirements of this subparagraph if the applicable 
                individual may elect to direct the plan to divest any 
                such securities or real property and to reinvest an 
                equivalent amount in other investment options meeting 
                the requirements of subparagraph (D).
                    ``(C) Employer contributions invested in employer 
                securities or real property.--In the case of the 
                portion of the account attributable to employer 
                contributions other than elective deferrals which is 
                invested in employer securities or employer real 
                property, a plan meets the requirements of this 
                subparagraph if each applicable individual who--
                            ``(i) is a participant who has completed at 
                        least 3 years of service, or
                            ``(ii) is a beneficiary of a participant 
                        described in clause (i) or of a deceased 
                        participant,
                may elect to direct the plan to divest any such 
                securities or real property and to reinvest an 
                equivalent amount in other investment options meeting 
                the requirements of subparagraph (D).
                    ``(D) Investment options.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if the plan offers not 
                        less than 3 investment options, other than 
                        employer securities or employer real property, 
                        to which an applicable individual may direct 
                        the proceeds from the divestment of employer 
                        securities or employer real property pursuant 
                        to this paragraph, each of which is diversified 
                        and has materially different risk and return 
                        characteristics.
                            ``(ii) Treatment of certain restrictions 
                        and conditions.--
                                    ``(I) Time for making investment 
                                choices.--A plan shall not be treated 
                                as failing to meet the requirements of 
                                this subparagraph merely because the 
                                plan limits the time for divestment and 
                                reinvestment to periodic, reasonable 
                                opportunities occurring no less 
                                frequently than quarterly.
                                    ``(II) Certain restrictions and 
                                conditions not allowed.--Except as 
                                provided in regulations, a plan shall 
                                not meet the requirements of this 
                                subparagraph if the plan imposes 
                                restrictions or conditions with respect 
                                to the investment of employer 
                                securities or employer real property 
                                which are not imposed on the investment 
                                of other assets of the plan. This 
                                subclause shall not apply to any 
                                restrictions or conditions imposed by 
                                reason of the application of securities 
                                laws.
                    ``(E) Applicable defined contribution plan.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `applicable 
                        defined contribution plan' means any defined 
                        contribution plan which holds any publicly 
                        traded employer securities.
                            ``(ii) Exception for certain esops.--Such 
                        term does not include an employee stock 
                        ownership plan if--
                                    ``(I) there are no contributions to 
                                such plan (or earnings thereunder) 
                                which are held within such plan and are 
                                subject to subsection (k) or (m), and
                                    ``(II) such plan is a separate plan 
                                for purposes of section 414(l) with 
                                respect to any other defined benefit 
                                plan or defined contribution plan 
                                maintained by the same employer or 
                                employers.
                            ``(iii) Exception for one participant 
                        plans.--Such term does not include a one-
                        participant retirement plan.
                            ``(iv) One-participant retirement plan.--
                        For purposes of clause (iii), the term `one-
                        participant retirement plan' means a retirement 
                        plan that--
                                    ``(I) on the first day of the plan 
                                year covered only one individual (or 
                                the individual and the individual's 
                                spouse) and the individual owned 100 
                                percent of the plan sponsor (whether or 
                                not incorporated), or covered only one 
                                or more partners (or partners and their 
                                spouses) in the plan sponsor,
                                    ``(II) meets the minimum coverage 
                                requirements of section 410(b) without 
                                being combined with any other plan of 
                                the business that covers the employees 
                                of the business,
                                    ``(III) does not provide benefits 
                                to anyone except the individual (and 
                                the individual's spouse) or the 
                                partners (and their spouses),
                                    ``(IV) does not cover a business 
                                that is a member of an affiliated 
                                service group, a controlled group of 
                                corporations, or a group of businesses 
                                under common control, and
                                    ``(V) does not cover a business 
                                that uses the services of leased 
                                employees (within the meaning of 
                                section 414(n)).
                        For purposes of this clause, the term `partner' 
                        includes a 2-percent shareholder (as defined in 
                        section 1372(b)) of an S corporation.
                    ``(F) Certain plans treated as holding publicly 
                traded employer securities.--
                            ``(i) In general.--Except as provided in 
                        regulations or in clause (ii), a plan holding 
                        employer securities which are not publicly 
                        traded employer securities shall be treated as 
                        holding publicly traded employer securities if 
                        any employer corporation, or any member of a 
                        controlled group of corporations which includes 
                        such employer corporation, has issued a class 
                        of stock which is a publicly traded employer 
                        security.
                            ``(ii) Exception for certain controlled 
                        groups with publicly traded securities.--Clause 
                        (i) shall not apply to a plan if--
                                    ``(I) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any publicly 
                                traded employer security, and
                                    ``(II) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any special 
                                class of stock which grants particular 
                                rights to, or bears particular risks 
                                for, the holder or issuer with respect 
                                to any corporation described in clause 
                                (i) which has issued any publicly 
                                traded employer security.
                            ``(iii) Definitions.--For purposes of this 
                        subparagraph, the term--
                                    ``(I) `controlled group of 
                                corporations' has the meaning given 
                                such term by section 1563(a), except 
                                that `50 percent' shall be substituted 
                                for `80 percent' each place it appears,
                                    ``(II) `employer corporation' means 
                                a corporation which is an employer 
                                maintaining the plan, and
                                    ``(III) `parent corporation' has 
                                the meaning given such term by section 
                                424(e).
                    ``(G) Other definitions.--For purposes of this 
                paragraph--
                            ``(i) Applicable individual.--The term 
                        `applicable individual' means--
                                    ``(I) any participant in the plan, 
                                and
                                    ``(II) any beneficiary who has an 
                                account under the plan with respect to 
                                which the beneficiary is entitled to 
                                exercise the rights of a participant.
                            ``(ii) Elective deferral.--The term 
                        `elective deferral' means an employer 
                        contribution described in section 402(g)(3)(A).
                            ``(iii) Employer security.--The term 
                        `employer security' has the meaning given such 
                        term by section 407(d)(1) of the Employee 
                        Retirement Income Security Act of 1974.
                            ``(iv) Employer real property.--The term 
                        `employer real property' has the meaning given 
                        such term by section 407(d)(2) of the Employee 
                        Retirement Income Security Act of 1974.
                            ``(v) Employee stock ownership plan.--The 
                        term `employee stock ownership plan' has the 
                        meaning given such term by section 4975(e)(7).
                            ``(vi) Publicly traded employer 
                        securities.--The term `publicly traded employer 
                        securities' means employer securities which are 
                        readily tradable on an established securities 
                        market.
                            ``(vii) Year of service.--The term `year of 
                        service' has the meaning given such term by 
                        section 411(a)(5).
                    ``(H) Transition rule for securities or real 
                property attributable to employer contributions.--
                            ``(i) Rules phased in over 3 years.--
                                    ``(I) In general.--In the case of 
                                the portion of an account to which 
                                subparagraph (C) applies and which 
                                consists of employer securities or 
                                employer real property acquired in a 
                                plan year beginning before January 1, 
                                2006, subparagraph (C) shall only apply 
                                to the applicable percentage of such 
                                securities or real property. This 
                                subparagraph shall be applied 
                                separately with respect to each class 
                                of securities and employer real 
                                property.
                                    ``(II) Exception for certain 
                                participants aged 55 or over.--
                                Subclause (I) shall not apply to an 
                                applicable individual who is a 
                                participant who has attained age 55 and 
                                completed at least 3 years of service 
                                before the first plan year beginning 
                                after December 31, 2005.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage shall 
                        be determined as follows:

Plan year to which                                       The applicable
  subparagraph (C) applies:                              percentage is:
    1st...........................................                  33 
    2d............................................                  66 
    3d and following..............................              100.''.
            (2) Conforming amendments.--
                    (A) Section 401(a)(28)(B) of such Code (relating to 
                additional requirements relating to employee stock 
                ownership plans) is amended by adding at the end the 
                following new clause:
                            ``(v) Exception.--This subparagraph shall 
                        not apply to an applicable defined contribution 
                        plan (as defined in paragraph (35)(E)).''
                    (B) Section 409(h)(7) of such Code is amended by 
                inserting ``or subparagraph (B) or (C) of section 
                401(a)(35)'' before the period at the end.
                    (C) Section 4980(c)(3)(A) of such Code is amended 
                by striking ``if--'' and all that follows and inserting 
                ``if the requirements of subparagraphs (B), (C), and 
                (D) are met.''
    (b) Amendments of ERISA.--
            (1) In general.--Section 204 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1054) is amended by 
        redesignating subsection (j) as subsection (k) and by inserting 
        after subsection (i) the following new subsection:
    ``(j) Diversification Requirements for Certain Individual Account 
Plans.--
            ``(1) In general.--An applicable individual account plan 
        shall meet the diversification requirements of paragraphs (2), 
        (3), and (4).
            ``(2) Employee contributions and elective deferrals 
        invested in employer securities or real property.--In the case 
        of the portion of an applicable individual's account 
        attributable to employee contributions and elective deferrals 
        which is invested in employer securities or employer real 
        property, a plan meets the requirements of this paragraph if 
        the applicable individual may elect to direct the plan to 
        divest any such securities or real property and to reinvest an 
        equivalent amount in other investment options meeting the 
        requirements of paragraph (4).
            ``(3) Employer contributions invested in employer 
        securities or real property.--In the case of the portion of the 
        account attributable to employer contributions other than 
        elective deferrals which is invested in employer securities or 
        employer real property, a plan meets the requirements of this 
        paragraph if each applicable individual who--
                    ``(A) is a participant who has completed at least 3 
                years of service, or
                    ``(B) is a beneficiary of a participant described 
                in subparagraph (A) or of a deceased participant,
        may elect to direct the plan to divest any such securities or 
        real property and to reinvest an equivalent amount in other 
        investment options meeting the requirements of paragraph (4).
            ``(4) Investment options.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the plan offers not less than 3 
                investment options, other than employer securities or 
                employer real property, to which an applicable 
                individual may direct the proceeds from the divestment 
                of employer securities or employer real property 
                pursuant to this subsection, each of which is 
                diversified and has materially different risk and 
                return characteristics.
                    ``(B) Treatment of certain restrictions and 
                conditions.--
                            ``(i) Time for making investment choices.--
                        A plan shall not be treated as failing to meet 
                        the requirements of this paragraph merely 
                        because the plan limits the time for divestment 
                        and reinvestment to periodic, reasonable 
                        opportunities occurring no less frequently than 
                        quarterly.
                            ``(ii) Certain restrictions and conditions 
                        not allowed.--Except as provided in 
                        regulations, a plan shall not meet the 
                        requirements of this paragraph if the plan 
                        imposes restrictions or conditions with respect 
                        to the investment of employer securities or 
                        employer real property which are not imposed on 
                        the investment of other assets of the plan. 
                        This subparagraph shall not apply to any 
                        restrictions or conditions imposed by reason of 
                        the application of securities laws.
            ``(5) Applicable individual account plan.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `applicable individual 
                account plan' means any individual account plan (as 
                defined in section 3(34)) which holds any publicly 
                traded employer securities.
                    ``(B) Exception for certain esops.--Such term does 
                not include an employee stock ownership plan if--
                            ``(i) there are no contributions to such 
                        plan (or earnings thereunder) which are held 
                        within such plan and are subject to subsection 
                        (k) or (m) of section 401 of the Internal 
                        Revenue Code of 1986, and
                            ``(ii) such plan is a separate plan (for 
                        purposes of section 414(l) of such Code) with 
                        respect to any other defined benefit plan or 
                        individual account plan maintained by the same 
                        employer or employers.
                    ``(C) Exception for one participant plans.--Such 
                term shall not include a one-participant retirement 
                plan (as defined in section 101(i)(8)(B)).
                    ``(D) Certain plans treated as holding publicly 
                traded employer securities.--
                            ``(i) In general.--Except as provided in 
                        regulations or in clause (ii), a plan holding 
                        employer securities which are not publicly 
                        traded employer securities shall be treated as 
                        holding publicly traded employer securities if 
                        any employer corporation, or any member of a 
                        controlled group of corporations which includes 
                        such employer corporation, has issued a class 
                        of stock which is a publicly traded employer 
                        security.
                            ``(ii) Exception for certain controlled 
                        groups with publicly traded securities.--Clause 
                        (i) shall not apply to a plan if--
                                    ``(I) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any publicly 
                                traded employer security, and
                                    ``(II) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any special 
                                class of stock which grants particular 
                                rights to, or bears particular risks 
                                for, the holder or issuer with respect 
                                to any corporation described in clause 
                                (i) which has issued any publicly 
                                traded employer security.
                            ``(iii) Definitions.--For purposes of this 
                        subparagraph, the term--
                                    ``(I) `controlled group of 
                                corporations' has the meaning given 
                                such term by section 1563(a) of the 
                                Internal Revenue Code of 1986, except 
                                that `50 percent' shall be substituted 
                                for `80 percent' each place it appears,
                                    ``(II) `employer corporation' means 
                                a corporation which is an employer 
                                maintaining the plan, and
                                    ``(III) `parent corporation' has 
                                the meaning given such term by section 
                                424(e) of such Code.
            ``(6) Other definitions.--For purposes of this paragraph--
                    ``(A) Applicable individual.--The term `applicable 
                individual' means--
                            ``(i) any participant in the plan, and
                            ``(ii) any beneficiary who has an account 
                        under the plan with respect to which the 
                        beneficiary is entitled to exercise the rights 
                        of a participant.
                    ``(B) Elective deferral.--The term `elective 
                deferral' means an employer contribution described in 
                section 402(g)(3)(A) of the Internal Revenue Code of 
                1986.
                    ``(C) Employer security.--The term `employer 
                security' has the meaning given such term by section 
                407(d)(1).
                    ``(D) Employer real property.--The term `employer 
                real property' has the meaning given such term by 
                section 407(d)(2).
                    ``(E) Employee stock ownership plan.--The term 
                `employee stock ownership plan' has the meaning given 
                such term by section 4975(e)(7) of such Code.
                    ``(F) Publicly traded employer securities.--The 
                term `publicly traded employer securities' means 
                employer securities which are readily tradable on an 
                established securities market.
                    ``(G) Year of service.--The term `year of service' 
                has the meaning given such term by section 203(b)(2).
            ``(7) Transition rule for securities or real property 
        attributable to employer contributions.--
                    ``(A) Rules phased in over 3 years.--
                            ``(i) In general.--In the case of the 
                        portion of an account to which paragraph (3) 
                        applies and which consists of employer 
                        securities or employer real property acquired 
                        in a plan year beginning before January 1, 
                        2006, paragraph (3) shall only apply to the 
                        applicable percentage of such securities or 
                        real property. This subparagraph shall be 
                        applied separately with respect to each class 
                        of securities and employer real property.
                            ``(ii) Exception for certain participants 
                        aged 55 or over.--Clause (i) shall not apply to 
                        an applicable individual who is a participant 
                        who has attained age 55 and completed at least 
                        3 years of service before the first plan year 
                        beginning after December 31, 2005.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined as follows:

Plan year to which                                       The applicable
  paragraph (3) applies:                                 percentage is:
    1st...........................................                  33 
    2d............................................                  66 
    3d and following..............................              100.''.
            (2) Conforming amendment.--Section 407(b)(3) of such Act 
        (29 U.S.C. 1107(b)(3)) is amended by adding at the end the 
        following:

                                ``(D) For diversification requirements 
for qualifying employer securities and qualifying real property held in 
certain individual account plans, see section 204(j).''
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to plan 
        years beginning after December 31, 2005.
            (2) Special rule for collectively bargained agreements.--In 
        the case of a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified on or before the date of the enactment 
        of this Act, paragraph (1) shall be applied to benefits 
        pursuant to, and individuals covered by, any such agreement by 
        substituting for ``December 31, 2005'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2006, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2007.
            (3) Special rule for certain employer securities held in an 
        esop.--
                    (A) In general.--In the case of employer securities 
                to which this paragraph applies, the amendments made by 
                this section shall apply to plan years beginning after 
                the earlier of--
                            (i) December 31, 2006, or
                            (ii) the first date on which the fair 
                        market value of such securities exceeds the 
                        guaranteed minimum value described in 
                        subparagraph (B)(ii).
                    (B) Applicable securities.--This paragraph shall 
                apply to employer securities which are attributable to 
                employer contributions other than elective deferrals, 
                and which, on September 17, 2003--
                            (i) consist of preferred stock, and
                            (ii) are within an employee stock ownership 
                        plan (as defined in section 4975(e)(7) of the 
                        Internal Revenue Code of 1986), the terms of 
                        which provide that the value of the securities 
                        cannot be less than the guaranteed minimum 
                        value specified by the plan on such date.
                    (C) Coordination with transition rule.--In applying 
                section 401(a)(35)(H) of the Internal Revenue Code of 
                1986 and section 204(j)(7) of the Employee Retirement 
                Income Security Act of 1974 (as added by this section) 
                to employer securities to which this paragraph applies, 
                the applicable percentage shall be determined without 
                regard to this paragraph.

SEC. 702. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES OR REAL 
              PROPERTY.

    (a) In general.--Section 101 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1021), as amended by this Act, is 
amended by redesignating subsection (m) as subsection (n) and by 
inserting after subsection (l) the following:
    ``(m) Notice of Right To Divest.--Not later than 30 days before the 
first date on which an applicable individual of an applicable 
individual account plan is eligible to exercise the right under section 
204(j) to direct the proceeds from the divestment of employer 
securities or employer real property with respect to any type of 
contribution, the administrator shall provide to such individual a 
notice--
            ``(1) setting forth such right under such section, and
            ``(2) describing the importance of diversifying the 
        investment of retirement account assets.
The notice required by this subsection shall be written in a manner 
calculated to be understood by the average plan participant and may be 
delivered in written, electronic, or other appropriate form to the 
extent that such form is reasonably accessible to the recipient.''
    (b) Penalties.--Section 502(c)(7) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132(c)(7)) is amended by striking 
``section 101(i)'' and inserting ``subsection (i) or (m) of section 
101''.
    (c) Model Notice.--The Secretary of the Treasury shall, within 180 
days after the date of the enactment of this subsection, prescribe a 
model notice for purposes of satisfying the requirements of the 
amendments made by this section.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2005.
            (2) Transition rule.--If notice under section 101(m) of the 
        Employee Retirement Income Security Act of 1974 (as added by 
        this section) would otherwise be required to be provided before 
        the 90th day after the date of the enactment of this Act, such 
        notice shall not be required to be provided until such 90th 
        day.

SEC. 703. PERIODIC PENSION BENEFIT STATEMENTS.

    (a) Amendments of ERISA.--
            (1) In general.--Section 105(a) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1025(a)) is amended to 
        read as follows:
    ``(a) Requirements To Provide Pension Benefit Statements.--
            ``(1) Requirements.--
                    ``(A) Individual account plan.--The administrator 
                of an individual account plan (other than a one-
                participant retirement plan described in section 
                101(i)(8)(B)) shall furnish a pension benefit 
                statement--
                            ``(i) at least once each calendar quarter 
                        to a participant or beneficiary who has the 
                        right to direct the investment of assets in his 
                        or her account under the plan,
                            ``(ii) at least once each calendar year to 
                        a participant or beneficiary who has his or her 
                        own account under the plan but does not have 
                        the right to direct the investment of assets in 
                        that account, and
                            ``(iii) upon written request to a plan 
                        beneficiary not described in clause (i) or 
                        (ii).
                    ``(B) Defined benefit plan.--The administrator of a 
                defined benefit plan (other than a one-participant 
                retirement plan described in section 101(i)(8)(B)) 
                shall furnish a pension benefit statement--
                            ``(i) at least once every 3 years to each 
                        participant with a nonforfeitable accrued 
                        benefit and who is employed by the employer 
                        maintaining the plan at the time the statement 
                        is to be furnished, and
                            ``(ii) to a participant or beneficiary of 
                        the plan upon written request.
                Information furnished under clause (i) to a participant 
                may be based on reasonable estimates determined under 
                regulations prescribed by the Secretary, in 
                consultation with the Pension Benefit Guaranty 
                Corporation.
            ``(2) Statements.--
                    ``(A) In general.--A pension benefit statement 
                under paragraph (1)--
                            ``(i) shall indicate, on the basis of the 
                        latest available information--
                                    ``(I) the total benefits accrued, 
                                and
                                    ``(II) the nonforfeitable pension 
                                benefits, if any, which have accrued, 
                                or the earliest date on which benefits 
                                will become nonforfeitable,
                            ``(ii) shall include an explanation of any 
                        permitted disparity under section 401(l) of the 
                        Internal Revenue Code of 1986 or any floor-
                        offset arrangement that may be applied in 
                        determining any accrued benefits described in 
                        clause (i),
                            ``(iii) shall be written in a manner 
                        calculated to be understood by the average plan 
                        participant, and
                            ``(iv) may be delivered in written, 
                        electronic, or other appropriate form to the 
                        extent such form is reasonably accessible to 
                        the participant or beneficiary.
                    ``(B) Additional information.--In the case of an 
                individual account plan, any pension benefit statement 
                under clause (i) or (ii) of paragraph (1)(A) shall 
                include--
                            ``(i) the value of each investment to which 
                        assets in the individual account have been 
                        allocated, determined as of the most recent 
                        valuation date under the plan, including the 
                        value of any assets held in the form of 
                        employer securities or employer real property, 
                        without regard to whether such securities or 
                        real property were contributed by the plan 
                        sponsor or acquired at the direction of the 
                        plan or of the participant or beneficiary, and
                            ``(ii) in the case of a pension benefit 
                        statement under paragraph (1)(A)(i)--
                                    ``(I) an explanation of any 
                                limitations or restrictions on any 
                                right of the participant or beneficiary 
                                under the plan to direct an investment, 
                                and
                                    ``(II) a notice that investments in 
                                any individual account may not be 
                                adequately diversified if the value of 
                                any investment in the account exceeds 
                                20 percent of the fair market value of 
                                all investments in the account.
                    ``(C) Alternative notice.--The requirements of 
                subparagraph (A)(i)(II) are met if, at least annually 
                and in accordance with requirements of the Secretary, 
                the plan--
                            ``(i) updates the information described in 
                        such paragraph which is provided in the pension 
                        benefit statement, or
                            ``(ii) provides in a separate statement 
                        such information as is necessary to enable a 
                        participant or beneficiary to determine their 
                        nonforfeitable vested benefits.
            ``(3) Defined benefit plans.--
                    ``(A) Alternative notice.--In the case of a defined 
                benefit plan, the requirements of paragraph (1)(B)(i) 
                shall be treated as met with respect to a participant 
                if at least once each year the administrator provides 
                to the participant notice of the availability of the 
                pension benefit statement and the ways in which the 
                participant may obtain such statement. Such notice may 
                be delivered in written, electronic, or other 
                appropriate form to the extent such form is reasonably 
                accessible to the participant.
                    ``(B) Years in which no benefits accrue.--The 
                Secretary may provide that years in which no employee 
                or former employee benefits (within the meaning of 
                section 410(b) of the Internal Revenue Code of 1986) 
                under the plan need not be taken into account in 
                determining the 3-year period under paragraph 
                (1)(B)(i).''
            (2) Conforming amendments.--
                    (A) Section 105 of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1025) is amended by 
                striking subsection (d).
                    (B) Section 105(b) of such Act (29 U.S.C. 1025(b)) 
                is amended to read as follows:
    ``(b) Limitation on Number of Statements.--In no case shall a 
participant or beneficiary of a plan be entitled to more than 1 
statement described in subparagraph (A)(iii) or (B)(ii) of subsection 
(a)(1), whichever is applicable, in any 12-month period.''
                    (C) Section 502(c)(1) of such Act (29 U.S.C. 
                1132(c)(1)) is amended by striking ``or section 
                101(f)'' and inserting ``section 101(f), or section 
                105(a)''.
    (b) Model Statements.--
            (1) In general.--The Secretary of Labor shall, within 180 
        days after the date of the enactment of this section, develop 1 
        or more model benefit statements that are written in a manner 
        calculated to be understood by the average plan participant and 
        that may be used by plan administrators in complying with the 
        requirements of section 105 of the Employee Retirement Income 
        Security Act of 1974.
            (2) Interim final rules.--The Secretary of Labor may 
        promulgate any interim final rules as the Secretary determines 
        appropriate to carry out the provisions of this subsection.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2006.
            (2) Special rule for collectively bargained agreements.--In 
        the case of a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified on or before the date of the enactment 
        of this Act, paragraph (1) shall be applied to benefits 
        pursuant to, and individuals covered by, any such agreement by 
        substituting for ``December 31, 2006'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2007, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2008.

SEC. 704. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT PERIODS.

    (a) Amendments of ERISA.--
            (1) In general.--Section 101(i) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1021(i)) is amended--
                    (A) by striking clauses (i) through (iv) of 
                paragraph (8)(B) and inserting:
                            ``(i) on the first day of the plan year--
                                    ``(I) covered only one individual 
                                (or the individual and the individual's 
                                spouse) and the individual (or the 
                                individual and the individual's spouse) 
                                owned 100 percent of the plan sponsor 
                                (whether or not incorporated), or
                                    ``(II) covered only one or more 
                                partners (or partners and their 
                                spouses) in the plan sponsor, and'', 
                                and
                    (B) in paragraph (8)(B), by redesignating clause 
                (v) as clause (ii).
            (2) Effective date.--The amendments made by this subsection 
        shall take effect as if included in the provisions of section 
        306 of Public Law 107-204 (116 Stat. 745 et seq.).

SEC. 705. ALLOWANCE OF, AND CREDIT FOR, ADDITIONAL IRA PAYMENTS IN 
              CERTAIN BANKRUPTCY CASES.

    (a) Allowance of Contributions.--Section 219(b)(5) of the Internal 
Revenue Code of 1986 (relating to deductible amount) is amended by 
redesignating subparagraph (C) as subparagraph (D) and by inserting 
after subparagraph (B) the following new subparagraph:
                    ``(C) Catchup contributions for certain 
                individuals.--
                            ``(i) In general.--In the case of an 
                        applicable individual who elects to make a 
                        qualified retirement contribution in addition 
                        to the deductible amount determined under 
                        subparagraph (A)--
                                    ``(I) the deductible amount for any 
                                taxable year shall be increased by an 
                                amount equal to 3 times the applicable 
                                amount determined under subparagraph 
                                (B) for such taxable year, and
                                    ``(II) subparagraph (B) shall not 
                                apply.
                            ``(ii) Applicable individual.--For purposes 
                        of this subparagraph, the term `applicable 
                        individual' means, with respect to any taxable 
                        year, any individual who was a qualified 
                        participant in a qualified cash or deferred 
                        arrangement (as defined in section 401(k)) of 
                        an employer described in clause (iii) under 
                        which the employer matched at least 50 percent 
                        of the employee's contributions to such 
                        arrangement with stock of such employer.
                            ``(iii) Employer described.--An employer is 
                        described in this clause if, in any taxable 
                        year preceding the taxable year described in 
                        clause (ii)--
                                    ``(I) such employer (or any 
                                controlling corporation of such 
                                employer) was a debtor in a case under 
                                title 11 of the United States Code, or 
                                similar Federal or State law, and
                                    ``(II) such employer (or any other 
                                person) was subject to an indictment or 
                                conviction resulting from business 
                                transactions related to such case.
                            ``(iv) Qualified participant.--For purposes 
                        of clause (ii), the term `qualified 
                        participant' means any applicable individual 
                        who was a participant in the cash or deferred 
                        arrangement described in clause (i) on the date 
                        that is 6 months before the filing of the case 
                        described in clause (iii).
                            ``(v) Termination.--This subparagraph shall 
                        not apply to taxable years beginning after 
                        December 31, 2009.''
    (b) Saver's Credit Expanded To Include Catchup Contributions.--
            (1) In general.--Section 25B of the Internal Revenue Code 
        of 1986 (relating to credit for elective deferrals and IRA 
        contributions by certain individuals) is amended by 
        redesignating subsection (h) as subsection (i) and by inserting 
        after subsection (g) the following new subsection:
    ``(h) Additional Credit for Certain Catchup Contributions.--
            ``(1) In general.--In the case of an eligible individual 
        who is an applicable individual under section 219(b)(5)(C) for 
        any taxable year, the amount of the credit allowable under 
        subsection (a) for the taxable year shall be increased by 50 
        percent of so much of the qualified retirement contributions 
        (as defined in section 219(e)) of the individual for the 
        taxable year as exceeds the deductible amount for the taxable 
        year under section 219(b)(5) (without regard to subparagraphs 
        (B) and (C) thereof).
            ``(2) Coordination with other contributions.--For purposes 
        of this section--
                    ``(A) any contribution to which this subsection 
                applies shall not be taken into account in determining 
                the amount of the credit allowable under subsection (a) 
                without regard to this subsection, and
                    ``(B) in applying any reduction in qualified 
                retirement savings contributions under subsection 
                (d)(2), the reduction shall be applied first to 
                qualified retirement savings contributions other than 
                contributions to which this subsection applies.''.
            (2) Extension of termination date for catchup credit.--
        Section 25B(i) of such Code, as redesignated by paragraph (1), 
        is amended by inserting ``(December 31, 2007, in the case of 
        the portion of the credit allowed under subsection (h))'' after 
        ``2006''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 706. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY DURING 
              SUSPENSION OF ABILITY OF PARTICIPANT OR BENEFICIARY TO 
              DIRECT INVESTMENTS.

    (a) In General.--Section 404(c)(1) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1104(c)(1)) is amended--
            (1) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively, and by inserting ``(A)'' after 
        ``(c)(1)'',
            (2) in subparagraph (A)(ii) (as redesignated by paragraph 
        (1)), by inserting before the period the following: ``, except 
        that this clause shall not apply in connection with such 
        participant or beneficiary for any blackout period during which 
        the ability of such participant or beneficiary to direct the 
        investment of the assets in his or her account is suspended by 
        a plan sponsor or fiduciary'', and
            (3) by adding at the end the following new subparagraphs:
    ``(B)(i) If a person referred to in subparagraph (A)(ii) meets the 
requirements of this title in connection with authorizing and 
implementing the blackout period, any person who is otherwise a 
fiduciary shall not be liable under this title for any loss occurring 
during such period as a result of any exercise by the participant or 
beneficiary of control over assets in his or her account before the 
period. Matters to be considered in determining whether such person has 
satisfied the requirements of this title include, but are not limited 
to, whether such person--
            ``(I) has considered the reasonableness of the expected 
        blackout period,
            ``(II) has provided the notice required under section 
        101(i)(1), and
            ``(III) has acted in accordance with the requirements of 
        subsection (a) in determining whether to enter into the 
        blackout period.
    ``(ii) For purposes of this subsection, if a blackout period arises 
in connection with a change in the investment options offered under the 
plan, a participant or beneficiary shall be deemed to have exercised 
control over the assets in his or her account prior to the blackout 
period if, after notice of the change in investment options is given to 
such participant or beneficiary, assets in the account of the 
participant or beneficiary are transferred--
            ``(I) to plan investment options in accordance with the 
        affirmative election of the participant or beneficiary; or
            ``(II) in the absence of such an election and in the case 
        in which fiduciary relief was provided under this subsection 
        for the prior investment options, to plan investment options in 
        the manner set forth in such notice.
    ``(C) For purposes of this paragraph, the term `blackout period' 
has the meaning given such term by section 101(i)(7).''
    (b) Guidance.--Not later than 180 days after the date of enactment 
of this Act, the Secretary of Labor, in consultation with the Secretary 
of the Treasury, shall issue interim final regulations providing 
guidance, including safe harbors, on how plan sponsors or any other 
affected fiduciaries can satisfy their fiduciary responsibilities 
during any blackout period during which the ability of a participant or 
beneficiary to direct the investment of assets in his or her individual 
account is suspended.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2005.
            (2) Special rule for collectively bargained agreements.--In 
        the case of a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified on or before the date of the enactment 
        of this Act, paragraph (1) shall be applied to benefits 
        pursuant to, and individuals covered by, any such agreement by 
        substituting for ``December 31, 2005'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2006, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2007.

SEC. 707. INCREASE IN MAXIMUM BOND AMOUNT.

    (a) In General.--Section 412(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1112) is amended by adding at the end 
the following: ``In the case of a plan that holds employer securities 
(within the meaning of section 407(d)(1)), this subsection shall be 
applied by substituting `$1,000,000' for `$500,000' each place it 
appears.''
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 2005.

      TITLE VIII--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS

SEC. 801. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE ADEQUATE 
              INVESTMENT EDUCATION TO PARTICIPANTS.

    (a) Adequate Investment Education.--
            (1) In general.--Section 101 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1024), as amended by 
        this Act, is amended by redesignating subsection (n) as 
        subsection (o) and by inserting after subsection (m) the 
        following:
    ``(n) Basic Investment Guidelines.--
            ``(1) In general.--The administrator of an individual 
        account plan (other than a one-participant retirement plan 
        described in subsection (i)(8)(B)) shall furnish at least once 
        each year to each participant or beneficiary who has the right 
        to direct the investment of assets in his or her account the 
        model form relating to basic investment guidelines which is 
        described in paragraph (2).
            ``(2) Model form.--
                    ``(A) In general.--The Secretary shall, in 
                consultation with the Secretary of Treasury, develop 
                and make available to individual account plans for 
                distribution under paragraph (1) a model form 
                containing basic guidelines for investing for 
                retirement. Except as otherwise provided by the 
                Secretary, such guidelines shall include--
                            ``(i) information on the benefits of 
                        diversification,
                            ``(ii) information on the essential 
                        differences, in terms of risk and return, of 
                        pension plan investments, including stocks, 
                        bonds, mutual funds, and money market 
                        investments,
                            ``(iii) information on how an individual's 
                        pension plan investment allocations may differ 
                        depending on the individual's age and years to 
                        retirement and on other factors determined by 
                        the Secretary,
                            ``(iv) sources of information where 
                        individuals may learn more about pension 
                        rights, individual investing, and investment 
                        advice, and
                            ``(v) such other information related to 
                        individual investing as the Secretary 
                        determines appropriate.
                    ``(B) Calculation information.--The model form 
                under subparagraph (A) shall include addresses for 
                Internet sites, and a worksheet, which a participant or 
                beneficiary may use to calculate--
                            ``(i) the retirement age value of the 
                        participant's or beneficiary's nonforfeitable 
                        pension benefits under the plan (expressed as 
                        an annuity amount and determined by reference 
                        to varied historical annual rates of return and 
                        annuity interest rates), and
                            ``(ii) other important amounts relating to 
                        retirement savings, including the amount which 
                        a participant or beneficiary would be required 
                        to save annually to provide a retirement income 
                        equal to various percentages of their current 
                        salary (adjusted for expected growth prior to 
                        retirement).
                The Secretary shall develop an Internet site which an 
                individual may use in making such calculations and the 
                address for such site shall be included with the form.
                    ``(C) Public comment.--The Secretary of Labor shall 
                provide at least 90 days for public comment before 
                publishing final notice of the model form.
            ``(3) Rules relating to form and statement.--The model form 
        under paragraph (2)--
                    ``(A) shall be written in a manner calculated to be 
                understood by the average plan participant, and
                    ``(B) may be delivered in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to participants and 
                beneficiaries.''
            (2) Enforcement.--Section 502(c)(7) of such Act (29 U.S.C. 
        1132(c)(7)), as amended by this Act, is amended by striking 
        ``or (l)'' and inserting ``, (l), or (n)''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2006.
            (2) Special rule for collectively bargained agreements.--In 
        the case of a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified on or before the date of the enactment 
        of this Act, paragraph (1) shall be applied to benefits 
        pursuant to, and individuals covered by, any such agreement by 
        substituting for ``December 31, 2006'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2007, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2008.

SEC. 802. INDEPENDENT INVESTMENT ADVICE PROVIDED TO PLAN PARTICIPANTS.

    (a) In General.--Section 404 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104) is amended by adding at the end 
the following new subsection:
    ``(e) Independent Investment Adviser.--
            ``(1) In general.--In the case of an individual account 
        plan which permits a plan participant or beneficiary to direct 
        the investment of the assets in his or her account, if a plan 
        sponsor or other person who is a fiduciary designates and 
        monitors a qualified investment adviser pursuant to the 
        requirements of paragraph (3), such fiduciary--
                    ``(A) shall be deemed to have satisfied the 
                requirements under this section for the prudent 
                designation and periodic review of an investment 
                adviser with whom the plan sponsor or other person who 
                is a fiduciary enters into an arrangement for the 
                provision of advice referred to in section 
                3(21)(A)(ii),
                    ``(B) shall not be liable under this section for 
                any loss, or by reason of any breach, with respect to 
                the provision of investment advice given by such 
                adviser to any plan participant or beneficiary, and
                    ``(C) shall not be liable for any co-fiduciary 
                liability under subsections (a)(2) and (b) of section 
                405 with respect to the provision of investment advice 
                given by such adviser to any plan participant or 
                beneficiary.
            ``(2) Qualified investment adviser.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified investment adviser' means, with 
                respect to a plan, a person--
                            ``(i) who is a fiduciary of the plan by 
                        reason of the provision of investment advice by 
                        such person to a plan participant or 
                        beneficiary;
                            ``(ii) who--
                                    ``(I) is registered as an 
                                investment adviser under the Investment 
                                Advisers Act of 1940 (15 U.S.C. 80b-1 
                                et seq.),
                                    ``(II) is registered as an 
                                investment adviser under the laws of 
                                the State in which such adviser 
                                maintains the principal office and 
                                place of business of such adviser, but 
                                only if such State laws are consistent 
                                with section 203A of the Investment 
                                Advisers Act of 1940 (15 U.S.C. 80b-
                                3a),
                                    ``(III) is a bank or similar 
                                financial institution referred to in 
                                section 408(b)(4),
                                    ``(IV) is an insurance company 
                                qualified to do business under the laws 
                                of a State, or
                                    ``(V) is any other comparably 
                                qualified entity which satisfies such 
                                criteria as the Secretary determines 
                                appropriate, consistent with the 
                                purposes of this subsection, and
                            ``(iii) who meets the requirements of 
                        subparagraph (B).
                    ``(B) Adviser requirements.--The requirements of 
                this subparagraph are met if every individual employed 
                (or otherwise compensated) by a person described in 
                subparagraph (A)(ii) who provides investment advice on 
                behalf of such person to any plan participant or 
                beneficiary is--
                            ``(i) an individual described in subclause 
                        (I) of subparagraph (A)(ii),
                            ``(ii) an individual described in subclause 
                        (II) of subparagraph (A)(ii), but only if such 
                        State has an examination requirement to qualify 
                        for registration,
                            ``(iii) registered as a broker or dealer 
                        under the Securities Exchange Act of 1934 (15 
                        U.S.C. 78a et seq.),
                            ``(iv) a registered representative as 
                        described in section 3(a)(18) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) or 
                        section 202(a)(17) of the Investment Advisers 
                        Act of 1940 (15 U.S.C. 80b-2(a)(17)), or
                            ``(v) any other comparably qualified 
                        individual who satisfies such criteria as the 
                        Secretary determines appropriate, consistent 
                        with the purposes of this subsection.
            ``(3) Verification requirements.--The requirements of this 
        paragraph are met if--
                    ``(A) the plan sponsor or other person who is a 
                fiduciary in designating a qualified investment adviser 
                receives at the time of the designation, and annually 
                thereafter, a written verification from the qualified 
                investment adviser that the investment adviser--
                            ``(i) is and remains a qualified investment 
                        adviser,
                            ``(ii) acknowledges that the investment 
                        adviser is a fiduciary with respect to the plan 
                        and is solely responsible for its investment 
                        advice,
                            ``(iii) has reviewed the plan documents 
                        (including investment options) and has 
                        determined that its relationship with the plan 
                        and the investment advice provided to any plan 
                        participant or beneficiary, including any fees 
                        or other compensation it will receive, will not 
                        constitute a violation of section 406,
                            ``(iv) will, in providing investment advice 
                        to any participant or beneficiary, consider any 
                        employer securities or employer real property 
                        allocated to his or her account, and
                            ``(v) has the necessary insurance coverage 
                        (as determined by the Secretary) for any claim 
                        by any plan participant or beneficiary,
                    ``(B) the plan sponsor or other person who is a 
                fiduciary in designating a qualified investment adviser 
                reviews the documents described in paragraph (4) 
                provided by such adviser and determines that there is 
                no material reason not to enter into an arrangement for 
                the provision of advice by such qualified investment 
                adviser, and
                    ``(C) the plan sponsor or other person who is a 
                fiduciary in designating a qualified investment 
                adviser, within 30 days of having information brought 
                to its attention that the investment adviser is no 
                longer qualified or that a substantial number of plan 
                participants or beneficiaries have raised concerns 
                about the services being provided by the investment 
                adviser--
                            ``(i) investigates such information and 
                        concerns, and
                            ``(ii) determines that there is no material 
                        reason not to continue the designation of the 
                        adviser as a qualified investment adviser.
            ``(4) Documentation.--A qualified investment adviser shall 
        provide the following documents to the plan sponsor or other 
        person who is a fiduciary in designating the adviser:
                    ``(A) The contract with the plan sponsor or other 
                person who is a fiduciary for the services to be 
                provided by the investment adviser to the plan 
                participants and beneficiaries.
                    ``(B) A disclosure as to any fees or other 
                compensation that will be received by the investment 
                adviser for the provision of such investment advice and 
                as to any fees and other compensation that will be 
                received as a result of a participant's investment 
                election.
                    ``(C) The Uniform Application for Investment 
                Adviser Registration as filed with the Securities and 
                Exchange Commission or a substantially similar 
                disclosure application as determined by and filed with 
                the Secretary.
            ``(5) Treatment as fiduciary.--Any qualified investment 
        adviser that acknowledges it is a fiduciary pursuant to 
        paragraph (3)(A)(ii) shall be deemed a fiduciary under this 
        part with respect to the provision of investment advice to a 
        plan participant or beneficiary.''
    (b) Fiduciary Liability.--Section 404(c)(1)(B) of such Act is 
amended by inserting ``(other than a qualified investment adviser)'' 
after ``fiduciary''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to investment advisers designated after the date of 
the enactment of this Act.

SEC. 803. TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.

    (a) In General.--Subsection (m) of section 132 of the Internal 
Revenue Code of 1986 (defining qualified retirement services) is 
amended by adding at the end the following new paragraph:
            ``(4) No constructive receipt.--
                    ``(A) In general.--No amount shall be included in 
                the gross income of any employee solely because the 
                employee may choose between any qualified retirement 
                planning services provided by an eligible investment 
                advisor and compensation which would otherwise be 
                includible in the gross income of such employee. The 
                preceding sentence shall apply to highly compensated 
                employees only if the choice described in such sentence 
                is available on substantially the same terms to each 
                member of the group of employees normally provided 
                education and information regarding the employer's 
                qualified employer plan.
                    ``(B) Limitation.--The maximum amount which may be 
                excluded under subparagraph (A) with respect to any 
                employee for any taxable year shall not exceed $1,000.
                    ``(C) Eligible investment adviser.--For purposes of 
                this paragraph, the term `eligible investment adviser' 
                means, with respect to a plan, a person--
                            ``(i) who--
                                    ``(I) is registered as an 
                                investment adviser under the Investment 
                                Advisers Act of 1940 (15 U.S.C. 80b-1 
                                et seq.),
                                    ``(II) is registered as an 
                                investment adviser under the laws of 
                                the State in which such adviser 
                                maintains the principal office and 
                                place of business of such adviser, but 
                                only if such State laws are consistent 
                                with section 203A of the Investment 
                                Advisers Act of 1940 (15 U.S.C. 80b-
                                3a),
                                    ``(III) is a bank or similar 
                                financial institution referred to in 
                                section 408(b)(4),
                                    ``(IV) is an insurance company 
                                qualified to do business under the laws 
                                of a State, or
                                    ``(V) is any other comparably 
                                qualified entity which satisfies such 
                                criteria as the Secretary determines 
                                appropriate, consistent with the 
                                purposes of this subsection, and
                            ``(ii) who meets the requirements of 
                        subparagraph (D).
                    ``(D) Adviser requirements.--The requirements of 
                this subparagraph are met if every individual employed 
                (or otherwise compensated) by a person described in 
                subparagraph (C)(i) who provides investment advice on 
                behalf of such person to any plan participant or 
                beneficiary is--
                            ``(i) an individual described in subclause 
                        (I) of subparagraph (C)(i),
                            ``(ii) an individual described in subclause 
                        (II) of subparagraph (C)(i), but only if such 
                        State has an examination requirement to qualify 
                        for registration,
                            ``(iii) registered as a broker or dealer 
                        under the Securities Exchange Act of 1934 (15 
                        U.S.C. 78a et seq.),
                            ``(iv) a registered representative as 
                        described in section 3(a)(18) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) or 
                        section 202(a)(17) of the Investment Advisers 
                        Act of 1940 (15 U.S.C. 80b-2(a)(17)), or
                            ``(v) any other comparably qualified 
                        individual who satisfies such criteria as the 
                        Secretary determines appropriate, consistent 
                        with the purposes of this paragraph.
                    ``(E) Termination.--This paragraph shall not apply 
                to taxable years beginning after December 31, 2010.''.
    (b) Conforming Amendments.--
            (1) Section 403(b)(3)(B) of such Code is amended by 
        inserting ``132(m)(4),'' after ``132(f)(4),''.
            (2) Section 414(s)(2) of such Code is amended by inserting 
        ``132(m)(4),'' after ``132(f)(4),''.
            (3) Section 415(c)(3)(D)(ii) of such Code is amended by 
        inserting ``132(m)(4),'' after ``132(f)(4),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 804. INCREASE IN PENALTIES FOR COERCIVE INTERFERENCE WITH EXERCISE 
              OF ERISA RIGHTS.

    (a) In General.--Section 511 of the Employment Retirement Income 
Security Act of 1974 (29 U.S.C. 1141) is amended--
            (1) by striking ``$10,000'' and inserting ``$100,000'', and
            (2) by striking ``one year'' and inserting ``10 years''.
    (b) Effective Date.--The amendments made by this section shall 
apply to violations occurring on and after the date of the enactment of 
this Act.

SEC. 805. ADMINISTRATIVE PROVISION.

    The Secretary of the Treasury shall have the authority to prescribe 
rules applicable to the statements required under sections 101(j) and 
101(m) of the Employee Retirement Income Security Act of 1974 (as added 
by this Act).

      TITLE IX--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

SEC. 901. REGULATIONS ON TIME AND ORDER OF ISSUANCE OF DOMESTIC 
              RELATIONS ORDERS.

    Not later than 1 year after the date of the enactment of this Act, 
the Secretary of Labor shall issue regulations under section 206(d)(3) 
of the Employee Retirement Security Act of 1974 and section 414(p) of 
the Internal Revenue Code of 1986 which clarify that--
            (1) a domestic relations order otherwise meeting the 
        requirements to be a qualified domestic relations order, 
        including the requirements of section 206(d)(3)(D) of such Act 
        and section 414(p)(3) of such Code, shall not fail to be 
        treated as a qualified domestic relations order solely 
        because--
                    (A) the order is issued after, or revises, another 
                domestic relations order or qualified domestic 
                relations order; or
                    (B) of the time at which it is issued; and
            (2) any order described in paragraph (1) shall be subject 
        to the same requirements and protections which apply to 
        qualified domestic relations orders, including the provisions 
        of section 206(d)(3)(H) of such Act and section 414(p)(7) of 
        such Code.

SEC. 902. ENTITLEMENT OF DIVORCED SPOUSES TO RAILROAD RETIREMENT 
              ANNUITIES INDEPENDENT OF ACTUAL ENTITLEMENT OF EMPLOYEE.

    (a) In General.--Section 2 of the Railroad Retirement Act of 1974 
(45 U.S.C. 231a) is amended--
            (1) in subsection (c)(4)(i), by striking ``(A) is entitled 
        to an annuity under subsection (a)(1) and (B)''; and
            (2) in subsection (e)(5), by striking ``or divorced wife'' 
        the second place it appears.
    (b) Effective Date.--The amendments made by this section shall take 
effect 1 year after the date of the enactment of this Act.

SEC. 903. EXTENSION OF TIER II RAILROAD RETIREMENT BENEFITS TO 
              SURVIVING FORMER SPOUSES PURSUANT TO DIVORCE AGREEMENTS.

    (a) In General.--Section 5 of the Railroad Retirement Act of 1974 
(45 U.S.C. 231d) is amended by adding at the end the following:
    ``(d) Notwithstanding any other provision of law, the payment of 
any portion of an annuity computed under section 3(b) to a surviving 
former spouse in accordance with a court decree of divorce, annulment, 
or legal separation or the terms of any court-approved property 
settlement incident to any such court decree shall not be terminated 
upon the death of the individual who performed the service with respect 
to which such annuity is so computed unless such termination is 
otherwise required by the terms of such court decree.''
    (b) Effective Date.--The amendment made by this section shall take 
effect 1 year after the date of the enactment of this Act.

SEC. 904. REQUIREMENT FOR ADDITIONAL SURVIVOR ANNUITY OPTION.

    (a) Amendments to Internal Revenue Code.--
            (1) Election of survivor annuity.--Section 417(a)(1)(A) of 
        the Internal Revenue Code of 1986 is amended--
                    (A) in clause (i), by striking ``, and'' and 
                inserting a comma;
                    (B) by redesignating clause (ii) as clause (iii); 
                and
                    (C) by inserting after clause (i) the following:
                    ``(ii) if the participant elects a waiver under 
                clause (i), may elect the qualified optional survivor 
                annuity at any time during the applicable election 
                period, and''.
            (2) Definition.--Section 417 of such Code is amended by 
        adding at the end the following:
    ``(g) Definition of Qualified Optional Survivor Annuity.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified optional survivor annuity' means an annuity--
                    ``(A) for the life of the participant with a 
                survivor annuity for the life of the spouse which is 
                equal to the applicable percentage of the amount of the 
                annuity which is payable during the joint lives of the 
                participant and the spouse, and
                    ``(B) which is the actuarial equivalent of a single 
                annuity for the life of the participant.
        Such term also includes any annuity in a form having the effect 
        of an annuity described in the preceding sentence.
            ``(2) Applicable percentage.--
                    ``(A) In general.--For purposes of paragraph (1), 
                if the survivor annuity percentage--
                            ``(i) is less than 75 percent, the 
                        applicable percentage is 75 percent, and
                            ``(ii) is greater than or equal to 75 
                        percent, the applicable percentage is 50 
                        percent.
                    ``(B) Survivor annuity percentage.--For purposes of 
                subparagraph (A), the term `survivor annuity 
                percentage' means the percentage which the survivor 
                annuity under the plan's qualified joint and survivor 
                annuity bears to the annuity payable during the joint 
                lives of the participant and the spouse.''.
            (3) Notice.--Section 417(a)(3)(A)(i) of such Code is 
        amended by inserting ``and of the qualified optional survivor 
        annuity'' after ``annuity''.
    (b) Amendments to ERISA.--
            (1) Election of survivor annuity.--Section 205(c)(1)(A) of 
        the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1055(c)(1)(A)) is amended--
                    (A) in clause (i), by striking ``, and'' and 
                inserting a comma;
                    (B) by redesignating clause (ii) as clause (iii); 
                and
                    (C) by inserting after clause (i) the following:
                    ``(ii) if the participant elects a waiver under 
                clause (i), may elect the qualified optional survivor 
                annuity at any time during the applicable election 
                period, and''.
            (2) Definition.--Section 205(d) of such Act (29 U.S.C. 
        1055(d)) is amended--
                    (A) by inserting ``(1)'' after ``(d)'';
                    (B) by redesignating paragraphs (1) and (2) as 
                subparagraphs (A) and (B), respectively; and
                    (C) by adding at the end the following:
    ``(2)(A) For purposes of this section, the term `qualified optional 
survivor annuity' means an annuity--
            ``(i) for the life of the participant with a survivor 
        annuity for the life of the spouse which is equal to the 
        applicable percentage of the amount of the annuity which is 
        payable during the joint lives of the participant and the 
        spouse, and
            ``(ii) which is the actuarial equivalent of a single 
        annuity for the life of the participant.
Such term also includes any annuity in a form having the effect of an 
annuity described in the preceding sentence.
    ``(B)(i) For purposes of subparagraph (A), if the survivor annuity 
percentage--
            ``(I) is less than 75 percent, the applicable percentage is 
        75 percent, and
            ``(II) is greater than or equal to 75 percent, the 
        applicable percentage is 50 percent.
    ``(ii) For purposes of clause (i), the term `survivor annuity 
percentage' means the percentage which the survivor annuity under the 
plan's qualified joint and survivor annuity bears to the annuity 
payable during the joint lives of the participant and the spouse.''.
            (3) Notice.--Section 205(c)(3)(A)(i) of such Act (29 U.S.C. 
        1055(c)(3)(A)(i)) is amended by inserting ``and of the 
        qualified optional survivor annuity'' after ``annuity''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2005.
            (2) Special rule for collectively bargained plans.--In the 
        case of a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified on or before the date of the enactment 
        of this Act, the amendments made by this section shall apply to 
        the first plan year beginning on or after the earlier of--
                    (A) the later of--
                            (i) January 1, 2006, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after the date of enactment of this 
                        Act), or
                    (B) January 1, 2007.

      TITLE X--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES

SEC. 1001. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE SERVICE 
              CREDIT.

    (a) In General.--Section 415(n) of the Internal Revenue Code of 
1986 (relating to special rules for the purchase of permissive service 
credit) is amended--
            (1) by striking ``an employee'' in paragraph (1) and 
        inserting ``a participant'', and
            (2) by adding at the end of paragraph (3)(A) the following 
        new flush sentence:
                ``Such term may include service credit for periods for 
                which there is no performance of service, and 
                notwithstanding clause (ii), may include service 
                credited in order to provide an increased benefit for 
                service credit which a participant is receiving under 
                the plan.''
    (b) Special Rules for Trustee-to-Trustee Transfers.--Section 
415(n)(3) of such Code is amended by adding at the end the following 
new subparagraph:
                    ``(D) Special rules for trustee-to-trustee 
                transfers.--In the case of a trustee-to-trustee 
                transfer to which section 403(b)(13)(A) or 
                457(e)(17)(A) applies (without regard to whether the 
                transfer is made between plans maintained by the same 
                employer)--
                            ``(i) the limitations of subparagraph (B) 
                        shall not apply in determining whether the 
                        transfer is for the purchase of permissive 
                        service credit, and
                            ``(ii) the distribution rules applicable 
                        under this title to the defined benefit 
                        governmental plan to which any amounts are so 
                        transferred shall apply to such amounts and any 
                        benefits attributable to such amounts.''.
    (c) Nonqualified Service.--Section 415(n)(3) of such Code is 
amended--
            (1) by striking ``permissive service credit attributable to 
        nonqualified service'' each place it appears in subparagraph 
        (B) and inserting ``nonqualified service credit'',
            (2) by striking so much of subparagraph (C) as precedes 
        clause (i) and inserting:
                    ``(C) Nonqualified service credit.--For purposes of 
                subparagraph (B), the term `nonqualified service 
                credit' means permissive service credit other than that 
                allowed with respect to--'', and
            (3) by striking ``elementary or secondary education 
        (through grade 12), as determined under State law'' and 
        inserting ``elementary or secondary education (through grade 
        12), or a comparable level of education, as determined under 
        the applicable law of the jurisdiction in which the service was 
        performed''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by subsections (a) and 
        (c) shall take effect as if included in the amendments made by 
        section 1526 of the Taxpayer Relief Act of 1997.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall take effect as if included in the amendments made by 
        section 647 of the Economic Growth and Tax Relief 
        Reconciliation Act of 2001.

SEC. 1002. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY CONTRACTS.

    (a) In General.--Subparagraph (A) of section 402(c)(2) (relating to 
the maximum amount which may be rolled over) is amended--
            (1) by striking ``which is part of a plan which is a 
        defined contribution plan and which agrees to separately 
        account'' and inserting ``or to an annuity contract described 
        in section 403(b) and such trust or contract provides for 
        separate accounting''; and
            (2) by inserting ``(and earnings thereon)'' after ``so 
        transferred''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2005.

SEC. 1003. CLARIFICATION OF MINIMUM DISTRIBUTION RULES FOR GOVERNMENTAL 
              PLANS.

    The Secretary of the Treasury shall issue regulations under which a 
governmental plan (as defined in section 414(d) of the Internal Revenue 
Code of 1986) shall, for all years to which section 401(a)(9) of such 
Code applies to such plan, be treated as having complied with such 
section 401(a)(9) if such plan complies with a reasonable good faith 
interpretation of such section 401(a)(9).

SEC. 1004. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX ON CERTAIN 
              DISTRIBUTIONS OF PENSION PLANS FOR PUBLIC SAFETY 
              EMPLOYEES.

    (a) In General.--Section 72(t) of the Internal Revenue Code of 1986 
(relating to subsection not to apply to certain distributions) is 
amended by adding at the end the following new paragraph:
            ``(10) Distributions to qualified public safety employees 
        in governmental plans.--
                    ``(A) In general.--In the case of a distribution to 
                a qualified public safety employee from a governmental 
                plan (within the meaning of section 414(d)) which is a 
                defined benefit plan, paragraph (2)(A)(v) shall be 
                applied by substituting `age 50' for `age 55'.
                    ``(B) Qualified public safety employee.--For 
                purposes of this paragraph, the term `qualified public 
                safety employee' means any employee of a State or 
                political subdivision of a State who provides police 
                protection, firefighting services, or emergency medical 
                services for any area within the jurisdiction of such 
                State or political subdivision.''
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions after the date of the enactment of this Act.

SEC. 1005. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF CERTAIN 
              RETIREMENT PLAN DISTRIBUTIONS.

    (a) In General.--
            (1) Qualified plans.--Section 402(c) of the Internal 
        Revenue Code of 1986 (relating to rollovers from exempt trusts) 
        is amended by adding at the end the following new paragraph:
            ``(11) Distributions to inherited individual retirement 
        plan of nonspouse beneficiary.--
                    ``(A) In general.--If, with respect to any portion 
                of a distribution from an eligible retirement plan of a 
                deceased employee, a direct trustee-to-trustee transfer 
                is made to an individual retirement plan described in 
                clause (i) or (ii) of paragraph (8)(B) established for 
                the purposes of receiving the distribution on behalf of 
                an individual who is a designated beneficiary (as 
                defined by section 401(a)(9)(E)) of the employee and 
                who is not the surviving spouse of the employee--
                            ``(i) the transfer shall be treated as an 
                        eligible rollover distribution for purposes of 
                        this subsection,
                            ``(ii) the individual retirement plan shall 
                        be treated as an inherited individual 
                        retirement account or individual retirement 
                        annuity (within the meaning of section 
                        408(d)(3)(C)) for purposes of this title, and
                            ``(iii) section 401(a)(9)(B) (other than 
                        clause (iv) thereof) shall apply to such plan.
                    ``(B) Certain trusts treated as beneficiaries.--For 
                purposes of this paragraph, to the extent provided in 
                rules prescribed by the Secretary, a trust maintained 
                for the benefit of one or more designated beneficiaries 
                shall be treated in the same manner as a designated 
                beneficiary.''.
            (2) Section 403(a) plans.--Subparagraph (B) of section 
        403(a)(4) of such Code (relating to rollover amounts) is 
        amended by striking ``and (9)'' and inserting ``, (9), and 
        (11)''.
            (3) Section 403(b) plans.--Subparagraph (B) of section 
        403(b)(8) of such Code (relating to rollover amounts) is 
        amended by striking ``and (9)'' and inserting ``, (9), and 
        (11)''.
            (4) Section 457 plans.--Subparagraph (B) of section 
        457(e)(16) of such Code (relating to rollover amounts) is 
        amended by striking ``and (9)'' and inserting ``, (9), and 
        (11)''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2005.

SEC. 1006. FASTER VESTING OF EMPLOYER NONELECTIVE CONTRIBUTIONS.

    (a) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Paragraph (2) of section 411(a) of the 
        Internal Revenue Code of 1986 (relating to employer 
        contributions) is amended to read as follows:
            ``(2) Employer contributions.--
                    ``(A) Defined benefit plans.--
                            ``(i) In general.--In the case of a defined 
                        benefit plan, a plan satisfies the requirements 
                        of this paragraph if it satisfies the 
                        requirements of clause (ii) or (iii).
                            ``(ii) 5-year vesting.--A plan satisfies 
                        the requirements of this clause if an employee 
                        who has completed at least 5 years of service 
                        has a nonforfeitable right to 100 percent of 
                        the employee's accrued benefit derived from 
                        employer contributions.
                            ``(iii) 3 to 7 year vesting.--A plan 
                        satisfies the requirements of this clause if an 
                        employee has a nonforfeitable right to a 
                        percentage of the employee's accrued benefit 
                        derived from employer contributions determined 
                        under the following table:

                  
                                                     The nonforfeitable
                  ``Years of service:
                                                        percentage is: 
                 3.........................................         20 
                 4.........................................         40 
                 5.........................................         60 
                 6.........................................         80 
                 7 or more.................................        100.
                    ``(B) Defined contribution plans.--
                            ``(i) In general.--In the case of a defined 
                        contribution plan, a plan satisfies the 
                        requirements of this paragraph if it satisfies 
                        the requirements of clause (ii) or (iii).
                            ``(ii) 3-year vesting.--A plan satisfies 
                        the requirements of this clause if an employee 
                        who has completed at least 3 years of service 
                        has a nonforfeitable right to 100 percent of 
                        the employee's accrued benefit derived from 
                        employer contributions.
                            ``(iii) 2 to 6 year vesting.--A plan 
                        satisfies the requirements of this clause if an 
                        employee has a nonforfeitable right to a 
                        percentage of the employee's accrued benefit 
                        derived from employer contributions determined 
                        under the following table:


                                                     The nonforfeitable
                  ``Years of service:
                                                        percentage is: 
                 2.........................................         20 
                 3.........................................         40 
                 4.........................................         60 
                 5.........................................         80 
                 6 or more.................................     100.''.
            (2) Conforming amendment.--Section 411(a) of such Code 
        (relating to general rule for minimum vesting standards) is 
        amended by striking paragraph (12).
    (b) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Paragraph (2) of section 203(a) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1053(a)(2)) is amended to read as follows:
            ``(2)(A)(i) In the case of a defined benefit plan, a plan 
        satisfies the requirements of this paragraph if it satisfies 
        the requirements of clause (ii) or (iii).
            ``(ii) A plan satisfies the requirements of this clause if 
        an employee who has completed at least 5 years of service has a 
        nonforfeitable right to 100 percent of the employee's accrued 
        benefit derived from employer contributions.
            ``(iii) A plan satisfies the requirements of this clause if 
        an employee has a nonforfeitable right to a percentage of the 
        employee's accrued benefit derived from employer contributions 
        determined under the following table:


                                                     The nonforfeitable
                  ``Years of service:
                                                        percentage is: 
                 3.........................................         20 
                 4.........................................         40 
                 5.........................................         60 
                 6.........................................         80 
                 7 or more.................................        100.
            ``(B)(i) In the case of an individual account plan, a plan 
        satisfies the requirements of this paragraph if it satisfies 
        the requirements of clause (ii) or (iii).
            ``(ii) A plan satisfies the requirements of this clause if 
        an employee who has completed at least 3 years of service has a 
        nonforfeitable right to 100 percent of the employee's accrued 
        benefit derived from employer contributions.
            ``(iii) A plan satisfies the requirements of this clause if 
        an employee has a nonforfeitable right to a percentage of the 
        employee's accrued benefit derived from employer contributions 
        determined under the following table:


                                                     The nonforfeitable
                  ``Years of service:
                                                        percentage is: 
                 2.........................................         20 
                 3.........................................         40 
                 4.........................................         60 
                 5.........................................         80 
                 6 or more.................................     100.''.
            (2) Conforming amendment.--Section 203(a) of such Act is 
        amended by striking paragraph (4).
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (4), the amendments made by this section shall apply to 
        contributions for plan years beginning after December 31, 2005.
            (2) Collective bargaining agreements.--In the case of a 
        plan maintained pursuant to one or more collective bargaining 
        agreements between employee representatives and one or more 
        employers ratified before the date of the enactment of this 
        Act, the amendments made by this section shall not apply to 
        contributions on behalf of employees covered by any such 
        agreement for plan years beginning before the earlier of--
                    (A) the later of--
                            (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of the 
                        enactment); or
                            (ii) January 1, 2006; or
                    (B) January 1, 2008.
            (3) Service required.--With respect to any plan, the 
        amendments made by this section shall not apply to any employee 
        before the date that such employee has 1 hour of service under 
        such plan in any plan year to which the amendments made by this 
        section apply.
            (4) Special rule for stock ownership plans.--
        Notwithstanding paragraph (1) or (2), in the case of an 
        employee stock ownership plan (as defined in section 4975(e)(7) 
        of the Internal Revenue Code of 1986) which had outstanding on 
        September 26, 2005, a loan incurred for the purpose of 
        acquiring qualifying employer securities (as defined in section 
        4975(e)(8) of such Code), the amendments made by this section 
        shall not apply to any plan year beginning before the earlier 
        of--
                    (A) the date on which the loan is fully repaid, or
                    (B) the date on which the loan was, as of September 
                26, 2005, scheduled to be fully repaid.

SEC. 1007. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO ROTH IRAS.

    (a) In General.--Subsection (e) of section 408A of the Internal 
Revenue Code of 1986 (defining qualified rollover contribution) is 
amended to read as follows:
    ``(e) Qualified Rollover Contribution.--For purposes of this 
section, the term `qualified rollover contribution' means a rollover 
contribution--
            ``(1) to a Roth IRA from another such account,
            ``(2) from an eligible retirement plan, but only if--
                    ``(A) in the case of an individual retirement plan, 
                such rollover contribution meets the requirements of 
                section 408(d)(3), and
                    ``(B) in the case of any eligible retirement plan 
                (as defined in section 402(c)(8)(B) other than clauses 
                (i) and (ii) thereof), such rollover contribution meets 
                the requirements of section 402(c), 403(b)(8), or 
                457(e)(16), as applicable.
For purposes of section 408(d)(3)(B), there shall be disregarded any 
qualified rollover contribution from an individual retirement plan 
(other than a Roth IRA) to a Roth IRA.''
    (b) Conforming Amendments.--
            (1) Section 408A(c)(3)(B) of such Code is amended--
                    (A) in the text by striking ``individual retirement 
                plan'' and inserting ``an eligible retirement plan (as 
                defined by section 402(c)(8)(B))'', and
                    (B) in the heading by striking ``IRA'' and 
                inserting ``Eligible Retirement Plan''.
            (2) Section 408A(d)(3) of such Code is amended--
                    (A) in subparagraph (A), by striking ``section 
                408(d)(3)'' inserting ``sections 402(c), 403(b)(8), 
                408(d)(3), and 457(e)(16)'',
                    (B) in subparagraph (B), by striking ``individual 
                retirement plan'' and inserting ``eligible retirement 
                plan (as defined by section 402(c)(8)(B))'',
                    (C) in subparagraph (D), by inserting ``or 6047'' 
                after ``408(i)'',
                    (D) in subparagraph (D), by striking ``or both'' 
                and inserting ``persons subject to section 6047(d)(1), 
                or all of the foregoing persons'', and
                    (E) in the heading, by striking ``IRA'' and 
                inserting ``Eligible Retirement Plan''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2005.

SEC. 1008. ELIMINATION OF HIGHER PENALTY ON CERTAIN SIMPLE PLAN 
              DISTRIBUTIONS.

    (a) In General.--Subsection (t) of section 72 of the Internal 
Revenue Code of 1986 (relating to 10-percent additional tax on early 
distributions from qualified retirement plans), as amended by section 
1004, is amended by striking paragraph (6) and redesignating paragraphs 
(7), (8), (9), and (10) as paragraphs (6), (7), (8), and (9), 
respectively.
    (b) Conforming Amendments.--
            (1) Section 72(t)(2)(E) of such Code is amended by striking 
        ``paragraph (7)'' and inserting ``paragraph (6)''.
            (2) Section 72(t)(2)(F) of such Code is amended by striking 
        ``paragraph (8)'' and inserting ``paragraph (7)''.
            (3) Section 408(d)(3)(G) of such Code is amended by 
        striking ``applies'' and inserting ``applied on the day before 
        the date of the enactment of the Pension Security and 
        Transparency Act of 2005)''.
            (4) Section 457(a)(2) of such Code is amended by striking 
        ``section 72(t)(9)'' and inserting ``section 72(t)(8)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2005.

SEC. 1009. SIMPLE PLAN PORTABILITY.

    (a) Repeal of Limitation.--Paragraph (3) of section 408(d) of the 
Internal Revenue Code of 1986 (relating to rollover contributions), as 
amended by this Act, is amended by striking subparagraph (G) and 
redesignating subparagraphs (H) and (I) as subparagraphs (G) and (H), 
respectively.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2005.

SEC. 1010. ELIGIBILITY FOR PARTICIPATION IN RETIREMENT PLANS.

    An individual shall not be precluded from participating in an 
eligible deferred compensation plan by reason of having received a 
distribution under section 457(e)(9) of the Internal Revenue Code of 
1986, as in effect prior to the enactment of the Small Business Job 
Protection Act of 1996.

SEC. 1011. TRANSFERS TO THE PBGC.

    (a) Mandatory Distributions to PBGC.--Clause (i) of section 
401(a)(31)(B) of the Internal Revenue Code of 1986 (relating to general 
rule for certain mandatory distributions) is amended by inserting ``to 
the Pension Benefit Guaranty Corporation in accordance with section 
4050(e) of the Employee Retirement Income Security Act of 1974 or'' 
after ``such transfer''.
    (b) Tax Treatment of Distributions.--Subparagraph (B) of section 
401(a)(31) of such Code is amended by adding at the end the following 
new clause:
                            ``(iii) Income tax treatment of transfers 
                        to pbgc.--For purposes of determining the 
                        income tax treatment relating to transfers to 
                        the Pension Benefit Guaranty Corporation under 
                        clause (i)--
                                    ``(I) the transfer of amounts to 
                                the Pension Benefit Guaranty 
                                Corporation pursuant to clause (i) 
                                shall be treated as a transfer to an 
                                individual retirement plan under such 
                                clause, and
                                    ``(II) the distribution of such 
                                amounts from the Pension Benefit 
                                Guaranty Corporation shall be treated 
                                as a distribution from an individual 
                                retirement plan.''.
    (c) Missing Participants and Beneficiaries.--Section 4050 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1350), as 
amended by section 1012, is amended by redesignating subsection (e) as 
subsection (g) and by inserting after subsection (d) the following new 
subsections:
    ``(e) Involuntary Cashouts.--
            ``(1) Payment by the corporation.--If benefits under a plan 
        described in paragraph (3) were transferred to the corporation 
        under section 401(a)(31)(B) of the Internal Revenue Code of 
        1986, the corporation shall, upon application filed by the 
        participant or beneficiary with the corporation in such form 
        and manner as may be prescribed in regulations of the 
        corporation, pay to the participant or beneficiary the amount 
        transferred (or the appropriate survivor benefit) either--
                    ``(A) in a single sum (plus interest), or
                    ``(B) in such other form as is specified in 
                regulations of the corporation.
            ``(2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a plan 
        described in paragraph (3) shall, upon a transfer of benefits 
        to the corporation under section 401(a)(31)(B) of such Code, 
        provide the corporation information with respect to benefits of 
        the participant or beneficiary so transferred.
            ``(3) Plans described.--A plan is described in this 
        paragraph if the plan is a pension plan (within the meaning of 
        section 3(2))--
                    ``(A) which provides for mandatory distributions 
                under section 401(a)(31)(B) of the Internal Revenue 
                Code of 1986, and
                    ``(B) which is not a plan described in paragraphs 
                (2) through (11) of section 4021(b).
            ``(4) Certain provisions not to apply.--Subsections (a)(1) 
        and (a)(3) shall not apply to a plan described in paragraph 
        (3).
    ``(f) Authority To Charge Fee.--The corporation may charge a 
reasonable fee for costs incurred in connection with the transfer and 
management of amounts transferred to the corporation under this 
section. Such fee may be imposed on the transferor and may be deducted 
from amounts so transferred.''.
    (d) Effective Dates.--
            (1) Internal revenue code provisions.--The amendments made 
        by subsections (a) and (b) shall take effect as if included in 
        the amendments made by section 657 of the Economic Growth and 
        Tax Relief Reconciliation Act of 2001.
            (2) Employee retirement income security act of 1974 
        provisions.--The amendments made by subsection (c) shall apply 
        to distributions made after final regulations implementing 
        subsections (e) and (f) of section 4050 of the Employee 
        Retirement Income Security Act of 1974 (as added by subsection 
        (c)) are prescribed.
            (3) Regulations.--The Pension Benefit Guaranty Corporation 
        shall issue regulations necessary to carry out the amendments 
        made by subsection (c) not later than December 31, 2006.

SEC. 1012. MISSING PARTICIPANTS.

    (a) In General.--Section 4050 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating 
subsection (c) as subsection (e) and by inserting after subsection (b) 
the following new subsections:
    ``(c) Multiemployer Plans.--The corporation shall prescribe rules 
similar to the rules in subsection (a) for multiemployer plans covered 
by this title that terminate under section 4041A.
    ``(d) Plans Not Otherwise Subject to Title.--
            ``(1) Transfer to corporation.--The plan administrator of a 
        plan described in paragraph (4) may elect to transfer a missing 
        participant's benefits to the corporation upon termination of 
        the plan.
            ``(2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a plan 
        described in paragraph (4) shall, upon termination of the plan, 
        provide the corporation information with respect to benefits of 
        a missing participant if the plan transfers such benefits--
                    ``(A) to the corporation, or
                    ``(B) to an entity other than the corporation or a 
                plan described in paragraph (4)(B)(ii).
            ``(3) Payment by the corporation.--If benefits of a missing 
        participant were transferred to the corporation under paragraph 
        (1), the corporation shall, upon location of the participant or 
        beneficiary, pay to the participant or beneficiary the amount 
        transferred (or the appropriate survivor benefit) either--
                    ``(A) in a single sum (plus interest), or
                    ``(B) in such other form as is specified in 
                regulations of the corporation.
            ``(4) Plans described.--A plan is described in this 
        paragraph if--
                    ``(A) the plan is a pension plan (within the 
                meaning of section 3(2))--
                            ``(i) to which the provisions of this 
                        section do not apply (without regard to this 
                        subsection), and
                            ``(ii) which is not a plan described in 
                        paragraphs (2) through (11) of section 4021(b), 
                        and
                    ``(B) at the time the assets are to be distributed 
                upon termination, the plan--
                            ``(i) has missing participants, and
                            ``(ii) has not provided for the transfer of 
                        assets to pay the benefits of all missing 
                        participants to another pension plan (within 
                        the meaning of section 3(2)).
            ``(5) Certain provisions not to apply.--Subsections (a)(1) 
        and (a)(3) shall not apply to a plan described in paragraph 
        (4).''.
    (b) Conforming Amendments.--Section 206(f) of such Act (29 U.S.C. 
1056(f)) is amended--
            (1) by striking ``title IV'' and inserting ``section 
        4050''; and
            (2) by striking ``the plan shall provide that,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after final regulations implementing 
subsections (c) and (d) of section 4050 of the Employee Retirement 
Income Security Act of 1974 (as added by subsection (a)), respectively, 
are prescribed.

SEC. 1013. MODIFICATIONS OF RULES GOVERNING HARDSHIPS AND UNFORSEEN 
              FINANCIAL EMERGENCIES.

    Within 180 days after the date of the enactment of this Act, the 
Secretary of the Treasury shall modify the rules for determining 
whether a participant has had a hardship for purposes of section 
401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide 
that if an event (including the occurrence of a medical expense) would 
constitute a hardship under the plan if it occurred with respect to the 
participant's spouse or dependent (as defined in section 152 of such 
Code), such event shall, to the extent permitted under a plan, 
constitute a hardship if it occurs with respect to a person who is a 
beneficiary under the plan with respect to the participant. The 
Secretary of the Treasury shall issue similar rules for purposes of 
determining whether a participant has had--
            (1) a hardship for purposes of section 403(b)(11)(B) of 
        such Code; or
            (2) an unforeseen financial emergency for purposes of 
        sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii), and 
        457(d)(1)(A)(iii) of such Code.

                  TITLE XI--ADMINISTRATIVE PROVISIONS

SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.

    (a) In General.--The Secretary of the Treasury shall have full 
authority to establish and implement the Employee Plans Compliance 
Resolution System (or any successor program) and any other employee 
plans correction policies, including the authority to waive income, 
excise, or other taxes to ensure that any tax, penalty, or sanction is 
not excessive and bears a reasonable relationship to the nature, 
extent, and severity of the failure.
    (b) Improvements.--The Secretary of the Treasury shall continue to 
update and improve the Employee Plans Compliance Resolution System (or 
any successor program), giving special attention to--
            (1) increasing the awareness and knowledge of small 
        employers concerning the availability and use of the program;
            (2) taking into account special concerns and circumstances 
        that small employers face with respect to compliance and 
        correction of compliance failures;
            (3) extending the duration of the self-correction period 
        under the Self-Correction Program for significant compliance 
        failures;
            (4) expanding the availability to correct insignificant 
        compliance failures under the Self-Correction Program during 
        audit; and
            (5) assuring that any tax, penalty, or sanction that is 
        imposed by reason of a compliance failure is not excessive and 
        bears a reasonable relationship to the nature, extent, and 
        severity of the failure.

SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

    (a) Expansion of Period.--
            (1) Amendment of internal revenue code.--
                    (A) In general.--Section 417(a)(6)(A) of the 
                Internal Revenue Code of 1986 is amended by striking 
                ``90-day'' and inserting ``180-day''.
                    (B) Modification of regulations.--The Secretary of 
                the Treasury shall modify the regulations under 
                sections 402(f), 411(a)(11), and 417 of the Internal 
                Revenue Code of 1986 by substituting ``180 days'' for 
                ``90 days'' each place it appears in Treasury 
                Regulations sections 1.402(f)-1, 1.411(a)-11(c), and 
                1.417(e)-1(b).
            (2) Amendment of erisa.--
                    (A) In general.--Section 205(c)(7)(A) of the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1055(c)(7)(A)) is amended by striking ``90-day'' 
                and inserting ``180-day''.
                    (B) Modification of regulations.--The Secretary of 
                the Treasury shall modify the regulations under part 2 
                of subtitle B of title I of the Employee Retirement 
                Income Security Act of 1974 relating to sections 203(e) 
                and 205 of such Act by substituting ``180 days'' for 
                ``90 days'' each place it appears.
            (3) Effective date.--The amendments and modifications made 
        or required by this subsection shall apply to years beginning 
        after December 31, 2005.
    (b) Notification of Right To Defer.--
            (1) In general.--The Secretary of the Treasury shall modify 
        the regulations under section 411(a)(11) of the Internal 
        Revenue Code of 1986 and under section 205 of the Employee 
        Retirement Income Security Act of 1974 to provide that the 
        description of a participant's right, if any, to defer receipt 
        of a distribution shall also describe the consequences of 
        failing to defer such receipt.
            (2) Effective date.--
                    (A) In general.--The modifications required by 
                paragraph (1) shall apply to years beginning after 
                December 31, 2005.
                    (B) Reasonable notice.--A plan shall not be treated 
                as failing to meet the requirements of section 
                411(a)(11) of such Code or section 205 of such Act with 
                respect to any description of consequences described in 
                paragraph (1) made within 90 days after the Secretary 
                of the Treasury issues the modifications required by 
                paragraph (1) if the plan administrator makes a 
                reasonable attempt to comply with such requirements.

SEC. 1103. REPORTING SIMPLIFICATION.

    (a) Simplified Annual Filing Requirement for Owners and Their 
Spouses.--
            (1) In general.--The Secretary of the Treasury shall modify 
        the requirements for filing annual returns with respect to one-
        participant retirement plans to ensure that such plans with 
        assets of $250,000 or less as of the close of the plan year 
        need not file a return for that year.
            (2) One-participant retirement plan defined.--For purposes 
        of this subsection, the term ``one-participant retirement 
        plan'' means a retirement plan with respect to which the 
        following requirements are met:
                    (A) on the first day of the plan year--
                            (i) the plan covered only one individual 
                        (or the individual and the individual's spouse) 
                        and the individual owned 100 percent of the 
                        plan sponsor (whether or not incorporated), or
                            (ii) the plan covered only one or more 
                        partners (or partners and their spouses) in the 
                        plan sponsor;
                    (B) the plan meets the minimum coverage 
                requirements of section 410(b) of the Internal Revenue 
                Code of 1986 without being combined with any other plan 
                of the business that covers the employees of the 
                business;
                    (C) the plan does not provide benefits to anyone 
                except the individual (and the individual's spouse) or 
                the partners (and their spouses);
                    (D) the plan does not cover a business that is a 
                member of an affiliated service group, a controlled 
                group of corporations, or a group of businesses under 
                common control; and
                    (E) the plan does not cover a business that uses 
                the services of leased employees (within the meaning of 
                section 414(n) of such Code).
        For purposes of this paragraph, the term ``partner'' includes a 
        2-percent shareholder (as defined in section 1372(b) of such 
        Code) of an S corporation.
            (3) Other definitions.--Terms used in paragraph (2) which 
        are also used in section 414 of the Internal Revenue Code of 
        1986 shall have the respective meanings given such terms by 
        such section.
            (4) Effective date.--The provisions of this subsection 
        shall apply to plan years beginning on or after January 1, 
        2006.
    (b) Simplified Annual Filing Requirement for Plans With Fewer Than 
25 Participants.--In the case of plan years beginning after December 
31, 2006, the Secretary of the Treasury and the Secretary of Labor 
shall provide for the filing of a simplified annual return for any 
retirement plan which covers less than 25 participants on the first day 
of a plan year and which meets the requirements described in 
subparagraphs (B), (D), and (E) of subsection (a)(2).

SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE AND EMPLOYMENT 
              RETENTION PLANS MAINTAINED BY LOCAL EDUCATIONAL AGENCIES 
              AND OTHER ENTITIES.

    (a) Voluntary Early Retirement Incentive Plans.--
            (1) Treatment as plan providing severance pay.--Section 
        457(e)(11) of the Internal Revenue Code of 1986 (relating to 
        certain plans excluded) is amended by adding at the end the 
        following new subparagraph:
                    ``(D) Certain voluntary early retirement incentive 
                plans.--
                            ``(i) In general.--If an applicable 
                        voluntary early retirement incentive plan--
                                    ``(I) makes payments or supplements 
                                as an early retirement benefit, a 
                                retirement-type subsidy, or a benefit 
                                described in the last sentence of 
                                section 411(a)(9), and
                                    ``(II) such payments or supplements 
                                are made in coordination with a defined 
                                benefit plan which is described in 
                                section 401(a) and includes a trust 
                                exempt from tax under section 501(a) 
                                and which is maintained by an eligible 
                                employer described in paragraph (1)(A) 
                                or by an education association 
                                described in clause (ii)(II),
                        such applicable plan shall be treated for 
                        purposes of subparagraph (A)(i) as a bona fide 
                        severance pay plan with respect to such 
                        payments or supplements to the extent such 
                        payments or supplements could otherwise have 
                        been provided under such defined benefit plan 
                        (determined as if section 411 applied to such 
                        defined benefit plan).
                            ``(ii) Applicable voluntary early 
                        retirement incentive plan.--For purposes of 
                        this subparagraph, the term `applicable 
                        voluntary early retirement incentive plan' 
                        means a voluntary early retirement incentive 
                        plan maintained by--
                                    ``(I) a local educational agency 
                                (as defined in section 9101 of the 
                                Elementary and Secondary Education Act 
                                of 1965 (20 U.S.C. 7801)), or
                                    ``(II) an education association 
                                which principally represents employees 
                                of 1 or more agencies described in 
                                subclause (I) and which is described in 
                                section 501(c) (5) or (6) and exempt 
                                from tax under section 501(a).''
            (2) Age discrimination in employment act.--Section 4(l)(1) 
        of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 
        623(l)(1)) is amended--
                    (A) by inserting ``(A)'' after ``(1)'',
                    (B) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively,
                    (C) by redesignating clauses (i) and (ii) of 
                subparagraph (B) (as in effect before the amendments 
                made by subparagraph (B)) as subclauses (I) and (II), 
                respectively, and
                    (D) by adding at the end the following:
            ``(B) A voluntary early retirement incentive plan that--
                    ``(i) is maintained by--
                            ``(I) a local educational agency (as 
                        defined in section 9101 of the Elementary and 
                        Secondary Education Act of 1965 (20 U.S.C. 
                        7801), or
                            ``(II) an education association which 
                        principally represents employees of 1 or more 
                        agencies described in subclause (I) and which 
                        is described in section 501(c) (5) or (6) of 
                        the Internal Revenue Code of 1986 and exempt 
                        from taxation under section 501(a) of such 
                        Code, and
                    ``(ii) makes payments or supplements described in 
                subclauses (I) and (II) of subparagraph (A)(ii) in 
                coordination with a defined benefit plan (as so 
                defined) maintained by an eligible employer described 
                in section 457(e)(1)(A) of such Code or by an education 
                association described in clause (i)(II),
        shall be treated solely for purposes of subparagraph (A)(ii) as 
        if it were a part of the defined benefit plan with respect to 
        such payments or supplements. Payments or supplements under 
        such a voluntary early retirement incentive plan shall not 
        constitute severance pay for purposes of section 4(l)(2) of the 
        Age Discrimination in Employment Act (29 U.S.C. 623(l)(2)).''.
    (b) Employment Retention Plans.--
            (1) In general.--Section 457(f)(2) of the Internal Revenue 
        Code of 1986 (relating to exceptions) is amended by striking 
        ``and'' at the end of subparagraph (D), by striking the period 
        at the end of subparagraph (E) and inserting ``, and'', and by 
        adding at the end the following:
                    ``(F) that portion of any applicable employment 
                retention plan described in paragraph (4) with respect 
                to any participant.''
            (2) Definitions and rules relating to employment retention 
        plans.--Section 457(f) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(4) Employment retention plans.--For purposes of 
        paragraph (2)(F)--
                    ``(A) In general.--The portion of an applicable 
                employment retention plan described in this paragraph 
                with respect to any participant is that portion of the 
                plan which provides benefits payable to the participant 
                not in excess of twice the applicable dollar limit 
                determined under subsection (e)(15).
                    ``(B) Other rules.--
                            ``(i) Limitation.--Paragraph (2)(F) shall 
                        only apply to the portion of the plan described 
                        in subparagraph (A) for years preceding the 
                        year in which such portion is paid or otherwise 
                        made available to the participant.
                            ``(ii) Treatment.--A plan shall not be 
                        treated for purposes of this title as providing 
                        for the deferral of compensation for any year 
                        with respect to the portion of the plan 
                        described in subparagraph (A).
                    ``(C) Applicable employment retention plan.--The 
                term `applicable employment retention plan' means an 
                employment retention plan maintained by--
                            ``(i) a local educational agency (as 
                        defined in section 9101 of the Elementary and 
                        Secondary Education Act of 1965 (20 U.S.C. 
                        7801), or
                            ``(ii) an education association which 
                        principally represents employees of 1 or more 
                        agencies described in clause (i) and which is 
                        described in section 501(c) (5) or (6) and 
                        exempt from taxation under section 501(a).
                    ``(D) Employment retention plan.--The term 
                `employment retention plan' means a plan to pay, upon 
                termination of employment, compensation to an employee 
                of a local educational agency or education association 
                described in subparagraph (C) for purposes of--
                            ``(i) retaining the services of the 
                        employee, or
                            ``(ii) rewarding such employee for the 
                        employee's service with 1 or more such agencies 
                        or associations.''.
    (c) Coordination With ERISA.--Section 3(2)(B) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)(B)) is 
amended by adding at the end the following: ``An applicable voluntary 
early retirement incentive plan (as defined in section 
457(e)(11)(D)(ii) of the Internal Revenue Code of 1986) making payments 
or supplements described in section 457(e)(11)(D)(i) of such Code, and 
an applicable employment retention plan (as defined in section 
457(f)(4)(C) of such Code) making payments of benefits described in 
section 457(f)(4)(A) of such Code, shall, for purposes of this title, 
be treated as a welfare plan (and not a pension plan) with respect to 
such payments and supplements.''
    (d) Effective Dates.--
            (1) In general.--The amendments made by this Act shall take 
        effect on the date of the enactment of this Act.
            (2) Tax amendments.--The amendments made by subsections 
        (a)(1) and (b) shall apply to taxable years ending after the 
        date of the enactment of this Act.
            (3) ERISA amendments.--The amendment made by subsection (c) 
        shall apply to plan years ending after the date of the 
        enactment of this Act.
            (4) Construction.--Nothing in the amendments made by this 
        section shall alter or affect the construction of the Internal 
        Revenue Code of 1986, the Employee Retirement Income Security 
        Act of 1974, or the Age Discrimination in Employment Act of 
        1967 as applied to any plan, arrangement, or conduct to which 
        such amendments do not apply.

SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSATION AS A RESULT OF 
              PENSION ROLLOVERS.

    (a) In General.--Section 3304(a) of the Internal Revenue Code of 
1986 (relating to requirements for State unemployment laws) is amended 
by adding at the end the following new flush sentence:
``Compensation shall not be reduced under paragraph (15) for any 
pension, retirement or retired pay, annuity, or similar payment which 
is not includible in gross income of the individual for the taxable 
year in which paid because it was part of a rollover distribution.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to weeks beginning on or after the date of the enactment of this Act.

SEC. 1106. WITHHOLDING ON DISTRIBUTIONS FROM GOVERNMENTAL SECTION 457 
              PLANS.

    (a) In General.--Section 641(f) of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 is amended by adding at the end the 
following new paragraph:
            ``(4) Transition rule for certain governmental plans.--In 
        the case of distributions from an eligible deferred 
        compensation plan of an employer described in section 
        457(e)(1)(A) of the Internal Revenue Code of 1986 which are 
        made after December 31, 2001, and which are part of a series of 
        distributions which--
                    ``(A) began before January 1, 2002, and
                    ``(B) are payable for 10 years or less, the 
                Internal Revenue Code of 1986 may be applied to such 
                distributions without regard to the amendments made by 
                subsection (a)(1)(D).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the provisions of section 641 of the 
Economic Growth and Tax Relief Reconciliation Act of 2001.

SEC. 1107. TREATMENT OF DEFINED BENEFIT PLAN AS GOVERNMENTAL PLAN.

    (a) In General.--For purposes of the Internal Revenue Code of 1986 
and the Employee Retirement Income Security Act of 1974, an eligible 
defined benefit plan shall be treated as a governmental plan (within 
the meaning of section 414(d) of such Code and section 3(32) of such 
Act).
    (b) Eligible Defined Benefit Plan.--For purposes of this section, 
an eligible defined benefit plan is a defined benefit plan maintained 
by a nonprofit corporation which was--
            (1) incorporated on September 16, 1998, under a State 
        nonprofit corporation statute; and
            (2) organized for the express purpose of supporting the 
        missions and goals of a public corporation which--
                    (A) was created by a State statute effective on 
                July 1, 1995;
                    (B) is a governmental entity under State law; and
                    (C) is a member of the nonprofit corporation.
    (c) Effective Date.--The amendments made by this section shall 
apply to any year beginning before, on, or after the date of the 
enactment of this Act.

SEC. 1108. INCREASING PARTICIPATION IN CASH OR DEFERRED PLANS THROUGH 
              AUTOMATIC CONTRIBUTION ARRANGEMENTS.

    (a) In General.--Section 401(k) of the Internal Revenue Code of 
1986 (relating to cash or deferred arrangement) is amended by adding at 
the end the following new paragraph:
            ``(13) Nondiscrimination requirements for automatic 
        contribution trusts.--
                    ``(A) In general.--A cash or deferred arrangement 
                shall be treated as meeting the requirements of 
                paragraph (3)(A)(ii) if such arrangement constitutes an 
                automatic contribution trust.
                    ``(B) Automatic contribution trust.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the term `automatic contribution 
                        trust' means an arrangement--
                                    ``(I) except as provided in clauses 
                                (ii) and (iii), under which each 
                                employee eligible to participate in the 
                                arrangement is treated as having 
                                elected to have the employer make 
                                elective contributions in an amount 
                                equal to the applicable percentage of 
                                the employee's compensation, and
                                    ``(II) which meets the requirements 
                                of subparagraphs (C), (D), (E), and 
                                (F).
                            ``(ii) Exception for existing employees.--
                        In the case of any employee--
                                    ``(I) who was eligible to 
                                participate in the arrangement (or a 
                                predecessor arrangement) immediately 
                                before the first date on which the 
                                arrangement is an automatic 
                                contribution trust, and
                                    ``(II) whose rate of contribution 
                                immediately before such first date was 
                                less than the applicable percentage for 
                                the employee,
                        clause (i)(I) shall not apply to such employee 
                        until the date which is 1 year after such first 
                        date (or such earlier date as the employee may 
                        elect).
                            ``(iii) Election out.--Each employee 
                        eligible to participate in the arrangement may 
                        specifically elect not to have contributions 
                        made under clause (i), and such clause shall 
                        cease to apply to compensation paid on or after 
                        the effective date of the election.
                            ``(iv) Applicable percentage.--For purposes 
                        of this subparagraph--
                                    ``(I) In general.--The term 
                                `applicable percentage' means, with 
                                respect to any employee, the uniform 
                                percentage (not less than 3 percent) 
                                determined under the arrangement. In 
                                the case of an employee who was 
                                eligible to participate in the 
                                arrangement (or a predecessor 
                                arrangement) immediately before the 
                                first date on which the arrangement is 
                                an automatic contribution trust, the 
                                initial applicable percentage shall in 
                                no event be less than the percentage in 
                                effect with respect to the employee 
                                under the arrangement immediately 
                                before the employee first begins 
                                participation in the automatic 
                                contribution trust.
                                    ``(II) Increase in percentage.--In 
                                the case of the second plan year 
                                beginning after the first date on which 
                                the election under clause (i)(I) is in 
                                effect with respect to the employee and 
                                any succeeding plan year, the 
                                applicable percentage shall be a 
                                percentage (not greater than 10 percent 
                                or such higher uniform percentage 
                                determined under the arrangement) equal 
                                to the sum of the applicable percentage 
                                for the employee as of the close of the 
                                preceding plan year plus 1 percentage 
                                point (or such higher percentage 
                                specified by the plan). A plan may 
                                elect to provide that, in lieu of any 
                                increase under the preceding sentence, 
                                the increase in the applicable 
                                percentage required under this 
                                subclause shall occur after each 
                                increase in compensation an employee 
                                receives on or after the first day of 
                                such second plan year and that the 
                                applicable percentage after each such 
                                increase in compensation shall be equal 
                                to the applicable percentage for the 
                                employee immediately before such 
                                increase in compensation plus 1 
                                percentage point (or such higher 
                                percentage specified by the plan).
                    ``(C) Matching or nonelective contributions.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the arrangement, 
                        the employer--
                                    ``(I) makes matching contributions 
                                on behalf of each employee who is not a 
                                highly compensated employee in an 
                                amount equal to 50 percent of the 
                                elective contributions of the employee 
                                to the extent such elective 
                                contributions do not exceed 7 percent 
                                of compensation; or
                                    ``(II) is required, without regard 
                                to whether the employee makes an 
                                elective contribution or employee 
                                contribution, to make a contribution to 
                                a defined contribution plan on behalf 
                                of each employee who is not a highly 
                                compensated employee and who is 
                                eligible to participate in the 
                                arrangement in an amount equal to at 
                                least 3 percent of the employee's 
                                compensation,
                        The rules of clauses (ii) and (iii) of 
                        paragraph (12)(B) shall apply for purposes of 
                        subclause (I). The rules of paragraph 
                        (12)(E)(ii) shall apply for purposes of 
                        subclauses (I) and (II).
                            ``(ii) Other plans.--An arrangement shall 
                        be treated as meeting the requirements under 
                        clause (i) if any other plan maintained by the 
                        employer meets such requirements with respect 
                        to employees eligible under the arrangement.
                    ``(D) Notice requirements.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if the requirements of 
                        clauses (ii) and (iii) are met.
                            ``(ii) Reasonable period to make 
                        election.--The requirements of this clause are 
                        met if each employee to whom subparagraph 
                        (B)(i) applies--
                                    ``(I) receives a notice explaining 
                                the employee's right under the 
                                arrangement to elect not to have 
                                elective contributions made on the 
                                employee's behalf, and how 
                                contributions made under the 
                                arrangement will be invested in the 
                                absence of any investment election by 
                                the employee, and
                                    ``(II) has a reasonable period of 
                                time after receipt of such notice and 
                                before the first elective contribution 
                                is made to make such election.
                            ``(iii) Annual notice of rights and 
                        obligations.--The requirements of this clause 
                        are met if each employee eligible to 
                        participate in the arrangement is, within a 
                        reasonable period before any year (or if the 
                        plan elects to change the applicable percentage 
                        after any increase in compensation, before the 
                        increase), given notice of the employee's 
                        rights and obligations under the arrangement.
                The requirements of clauses (i) and (ii) of paragraph 
                (12)(D) shall be met with respect to the notices 
                described in clauses (ii) and (iii) of this 
                subparagraph.
                    ``(E) Participation, withdrawal, and vesting 
                requirements.--The requirements of this subparagraph 
                are met if--
                            ``(i) the arrangement requires that each 
                        employee eligible to participate in the 
                        arrangement (determined without regard to any 
                        minimum service requirement otherwise 
                        applicable under section 410(a) or the plan) 
                        commences participation in the arrangement no 
                        later than the 1st day of the 1st calendar 
                        quarter beginning after the date on which 
                        employee first becomes so eligible,
                            ``(ii) the withdrawal requirements of 
                        paragraph (2)(B) are met with respect to all 
                        employer contributions (including matching and 
                        elective contributions) taken into account in 
                        determining whether the arrangement meets the 
                        requirements of subparagraph (C), and
                            ``(iii) the arrangement requires that an 
                        employee's right to the accrued benefit derived 
                        from employer contributions described in clause 
                        (ii) (other than elective contributions) is 
                        nonforfeitable after the employee has completed 
                        at least 2 years of service.
                    ``(F) Certain withdrawals must be allowed.--
                Notwithstanding any other provision of this subsection, 
                the requirements of this subparagraph are met if the 
                arrangement allows employees to elect to make 
                permissible withdrawals in accordance with section 
                414(w).''
    (b) Matching Contributions.--Section 401(m) of the Internal Revenue 
Code of 1986 (relating to nondiscrimination test for matching 
contributions and employee contributions) is amended by redesignating 
paragraph (12) as paragraph (13) and by inserting after paragraph (11) 
the following new paragraph:
            ``(12) Alternate method for automatic contribution 
        trusts.--A defined contribution plan shall be treated as 
        meeting the requirements of paragraph (2) with respect to 
        matching contributions if the plan--
                    ``(A) meets the contribution requirements of 
                subparagraphs (B)(i) and (C) of subsection (k)(13);
                    ``(B) meets the notice requirements of subparagraph 
                (D) of subsection (k)(13); and
                    ``(C) meets the requirements of paragraph (11)(B) 
                (ii) and (iii).''.
    (c) Exclusion From Definition of Top-Heavy Plans.--
            (1) Elective contribution rule.--Clause (i) of section 
        416(g)(4)(H) of the Internal Revenue Code of 1986 is amended by 
        inserting ``or 401(k)(13)'' after ``section 401(k)(12)''.
            (2) Matching contribution rule.--Clause (ii) of section 
        416(g)(4)(H) of such Code is amended by inserting ``or 
        401(m)(12)'' after ``section 401(m)(11)''.
    (d) Section 403(b) contracts.--Paragraph (11) of section 401(m) of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following:
                    ``(C) Section 403(b) contracts.--An annuity 
                contract under section 403(b) shall be treated as 
                meeting the requirements of paragraph (2) with respect 
                to matching contributions if such contract meets 
                requirements similar to the requirements under 
                subparagraph (A).''.
    (e) Preemption of Conflicting State Regulation.--Section 514 of the 
Employee Retirement Income Security of 1974 (29 U.S.C. 1144) is amended 
by inserting at the end the following new subsection:
    ``(e) Automatic Contribution Arrangements.--
            ``(1) In general.--Notwithstanding any other provision of 
        this section, any law of a State shall be superseded if it 
        would directly or indirectly prohibit or restrict the inclusion 
        in any plan of an eligible automatic contribution arrangement.
            ``(2) Eligible automatic contribution arrangement.--For 
        purposes of this subsection, the term `eligible automatic 
        contribution arrangement' means an arrangement--
                    ``(A) under which a participant may elect to have 
                the employer make payments as contributions under the 
                plan on behalf of the participant, or to the 
                participant directly in cash,
                    ``(B) under which the participant is treated as 
                having elected to have the employer make such 
                contributions in an amount equal to a uniform 
                percentage of compensation provided under the plan 
                until the participant specifically elects not to have 
                such contributions made (or specifically elects to have 
                such contributions made at a different percentage),
                    ``(C) under which contributions described in 
                subparagraph (B) are invested in accordance with 
                regulations prescribed by the Secretary under section 
                404(c)(4), and
                    ``(D) which meets the requirements of paragraph 
                (3).
            ``(3) Notice requirements.--
                    ``(A) In general.--The administrator of an 
                individual account plan shall, within a reasonable 
                period before each plan year, give to each employee to 
                whom an arrangement described in paragraph (2) applies 
                for such plan year notice of the employee's rights and 
                obligations under the arrangement which--
                            ``(i) is sufficiently accurate and 
                        comprehensive to apprise the employee of such 
                        rights and obligations, and
                            ``(ii) is written in a manner calculated to 
                        be understood by the average employee to whom 
                        the arrangement applies.
                    ``(B) Time and form of notice.--A notice shall not 
                be treated as meeting the requirements of subparagraph 
                (A) with respect to an employee unless--
                            ``(i) the notice includes a notice 
                        explaining the employee's right under the 
                        arrangement to elect not to have elective 
                        contributions made on the employee's behalf (or 
                        to elect to have such contributions made at a 
                        different percentage),
                            ``(ii) the employee has a reasonable period 
                        of time after receipt of the notice described 
                        in clause (i) and before the first elective 
                        contribution is made to make such election, and
                            ``(iii) the notice explains how 
                        contributions made under the arrangement will 
                        be invested in the absence of any investment 
                        election by the employee.''.
    (f) Treatment of Withdrawals of Contributions During First 60 
Days.--Section 414 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(w) Special Rules for Certain Withdrawals From Eligible Automatic 
Contribution Arrangements.--
            ``(1) In general.--If an eligible automatic contribution 
        arrangement allows an employee to elect to make permissible 
        withdrawals--
                    ``(A) the amount of any such withdrawal shall be 
                includible in the gross income of the employee for the 
                taxable year of the employee in which the distribution 
                is made,
                    ``(B) no tax shall be imposed under section 72(t) 
                with respect to the distribution, and
                    ``(C) the arrangement shall not be treated as 
                violating any restriction on distributions under this 
                title solely by reason of allowing the withdrawal.
        In the case of any distribution to an employee by reason of an 
        election under this paragraph, employer matching contributions 
        shall be forfeited or subject to such other treatment as the 
        Secretary may prescribe.
            ``(2) Permissible withdrawal.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `permissible 
                withdrawal' means any withdrawal from an eligible 
                automatic contribution arrangement meeting the 
                requirements of this paragraph which--
                            ``(i) is made pursuant to an election by an 
                        employee, and
                            ``(ii) consists of elective contributions 
                        described in paragraph (3)(B) (and earnings 
                        attributable thereto).
                    ``(B) Time for making election.--Subparagraph (A) 
                shall not apply to an election by an employee unless 
                the election is made no later than the date which is 60 
                days after the date of the first elective contribution 
                with respect to the employee under the arrangement.
                    ``(C) Amount of distribution.--Subparagraph (A) 
                shall not apply to any election by an employee unless 
                the amount of any distribution by reason of the 
                election is equal to the amount of elective 
                contributions made with respect to the first payroll 
                period to which the eligible automatic contribution 
                arrangement applies to the employee and any succeeding 
                payroll period beginning before the effective date of 
                the election (and earnings attributable thereto).
            ``(3) Eligible automatic contribution arrangement.--For 
        purposes of this subsection, the term `eligible automatic 
        contribution arrangement' means an arrangement--
                    ``(A) under which a participant may elect to have 
                the employer make payments as contributions under the 
                plan on behalf of the participant, or to the 
                participant directly in cash,
                    ``(B) under which the participant is treated as 
                having elected to have the employer make such 
                contributions in an amount equal to a uniform 
                percentage of compensation provided under the plan 
                until the participant specifically elects not to have 
                such contributions made (or specifically elects to have 
                such contributions made at a different percentage),
                    ``(C) under which contributions described in 
                subparagraph (B) are invested in accordance with 
                regulations prescribed by the Secretary of Labor under 
                section 404(c)(4) of the Employee Retirement Income 
                Security Act of 1974, and
                    ``(D) which meets the requirements of paragraph 
                (4).
            ``(4) Notice requirements.--
                    ``(A) In general.--The administrator of a plan 
                containing an arrangement described in paragraph (3) 
                shall, within a reasonable period before each plan 
                year, give to each employee to whom an arrangement 
                described in paragraph (3) applies for such plan year 
                notice of the employee's rights and obligations under 
                the arrangement which--
                            ``(i) is sufficiently accurate and 
                        comprehensive to apprise the employee of such 
                        rights and obligations, and
                            ``(ii) is written in a manner calculated to 
                        be understood by the average employee to whom 
                        the arrangement applies.
                    ``(B) Time and form of notice.--A notice shall not 
                be treated as meeting the requirements of subparagraph 
                (A) with respect to an employee unless--
                            ``(i) the notice includes a notice 
                        explaining the employee's right under the 
                        arrangement to elect not to have elective 
                        contributions made on the employee's behalf (or 
                        to elect to have such contributions made at a 
                        different percentage),
                            ``(ii) the employee has a reasonable period 
                        of time after receipt of the notice described 
                        in clause (i) and before the first elective 
                        contribution is made to make such election, and
                            ``(iii) the notice explains how 
                        contributions made under the arrangement will 
                        be invested in the absence of any investment 
                        election by the employee.''.
    (g) Effective Date.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to plan years 
        beginning after December 31, 2005.
            (2) Section 403(b) contracts.--The amendments made by 
        subsection (d) shall apply to years ending after the date of 
        the enactment of this Act.

SEC. 1109. TREATMENT OF INVESTMENT OF ASSETS BY PLAN WHERE PARTICIPANT 
              FAILS TO EXERCISE INVESTMENT ELECTION.

    (a) In General.--Section 404(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(c)) is amended by adding at the 
end the following new paragraph:
            ``(4) Default investment arrangements.--
                    ``(A) In general.--For purposes of paragraph (1), a 
                participant in an individual account plan meeting the 
                notice requirements of subparagraph (B) shall be 
                treated as exercising control over the assets in the 
                account with respect to the amount of contributions and 
                earnings which, in the absence of an investment 
                election by the participant, are invested by the plan 
                in accordance with regulations prescribed by the 
                Secretary. The regulations under this subparagraph 
                shall provide guidance on the appropriateness of 
                designating default investments that include a mix of 
                asset classes consistent with capital preservation, 
                long-term capital appreciation, or a blend of both.
                    ``(B) Notice requirements.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if each participant--
                                    ``(I) receives, within a reasonable 
                                period of time before each plan year, a 
                                notice explaining the employee's right 
                                under the plan to designate how 
                                contributions and earnings will be 
                                invested and explaining how, in the 
                                absence of any investment election by 
                                the participant, such contributions and 
                                earnings will be invested, and
                                    ``(II) has a reasonable period of 
                                time after receipt of such notice and 
                                before the beginning of the plan year 
                                to make such designation.
                            ``(ii) Form of notice.--The requirements of 
                        clauses (i) and (ii) of section 401(k)(12)(D) 
                        of the Internal Revenue Code of 1986 shall be 
                        met with respect to the notices described in 
                        this subparagraph.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2005.
            (2) Regulations.--Final regulations under section 
        404(c)(4)(A) of the Employee Retirement Income Security Act of 
        1974 (as added by this section) shall be issued no later than 6 
        months after the date of the enactment of this Act.

SEC. 1110. CLARIFICATION OF FIDUCIARY RULES.

    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of Labor shall issue final 
regulations clarifying that the selection of an annuity contract as an 
optional form of distribution from an individual account plan to a 
participant or beneficiary--
            (1) is not subject to the safest available annuity standard 
        under Interpretive Bulletin 95-1 (29 C.F.R. 2509.95-1), and
            (2) is subject to all otherwise applicable fiduciary 
        standards.
    (b) Effective Date.--This section shall take effect on the date of 
enactment of this Act.

            TITLE XII--UNITED STATES TAX COURT MODERNIZATION

SEC. 1200. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 1201. ANNUITIES FOR SURVIVORS OF TAX COURT JUDGES WHO ARE 
              ASSASSINATED.

    (a) Eligibility in Case of Death by Assassination.--Subsection (h) 
of section 7448 (relating to annuities to surviving spouses and 
dependent children of judges) is amended to read as follows:
    ``(h) Entitlement to Annuity.--
            ``(1) In general.--
                    ``(A) Annuity to surviving spouse.--If a judge 
                described in paragraph (2) is survived by a surviving 
                spouse but not by a dependent child, there shall be 
                paid to such surviving spouse an annuity beginning with 
                the day of the death of the judge or following the 
                surviving spouse's attainment of the age of 50 years, 
                whichever is the later, in an amount computed as 
                provided in subsection (m).
                    ``(B) Annuity to child.--If such a judge is 
                survived by a surviving spouse and a dependent child or 
                children, there shall be paid to such surviving spouse 
                an immediate annuity in an amount computed as provided 
                in subsection (m), and there shall also be paid to or 
                on behalf of each such child an immediate annuity equal 
                to the lesser of--
                            ``(i) 10 percent of the average annual 
                        salary of such judge (determined in accordance 
                        with subsection (m)), or
                            ``(ii) 20 percent of such average annual 
                        salary, divided by the number of such children.
                    ``(C) Annuity to surviving dependent children.--If 
                such a judge leaves no surviving spouse but leaves a 
                surviving dependent child or children, there shall be 
                paid to or on behalf of each such child an immediate 
                annuity equal to the lesser of--
                            ``(i) 20 percent of the average annual 
                        salary of such judge (determined in accordance 
                        with subsection (m)), or
                            ``(ii) 40 percent of such average annual 
                        salary, divided by the number of such children.
            ``(2) Covered judges.--Paragraph (1) applies to any judge 
        electing under subsection (b)--
                    ``(A) who dies while a judge after having rendered 
                at least 5 years of civilian service computed as 
                prescribed in subsection (n), for the last 5 years of 
                which the salary deductions provided for by subsection 
                (c)(1) or the deposits required by subsection (d) have 
                actually been made or the salary deductions required by 
                the civil service retirement laws have actually been 
                made, or
                    ``(B) who dies by assassination after having 
                rendered less than 5 years of civilian service computed 
                as prescribed in subsection (n) if, for the period of 
                such service, the salary deductions provided for by 
                subsection (c)(1) or the deposits required by 
                subsection (d) have actually been made.
            ``(3) Termination of annuity.--
                    ``(A) In the case of a surviving spouse.--The 
                annuity payable to a surviving spouse under this 
                subsection shall be terminable upon such surviving 
                spouse's death or such surviving spouse's remarriage 
                before attaining age 55.
                    ``(B) In the case of a child.--The annuity payable 
                to a child under this subsection shall be terminable 
                upon (i) the child attaining the age of 18 years, (ii) 
                the child's marriage, or (iii) the child's death, 
                whichever first occurs, except that if such child is 
                incapable of self-support by reason of mental or 
                physical disability the child's annuity shall be 
                terminable only upon death, marriage, or recovery from 
                such disability.
                    ``(C) In the case of a dependent child after death 
                of surviving spouse.--In case of the death of a 
                surviving spouse of a judge leaving a dependent child 
                or children of the judge surviving such spouse, the 
                annuity of such child or children shall be recomputed 
                and paid as provided in paragraph (1)(C).
                    ``(D) Recomputation.--In any case in which the 
                annuity of a dependent child is terminated under this 
                subsection, the annuities of any remaining dependent 
                child or children, based upon the service of the same 
                judge, shall be recomputed and paid as though the child 
                whose annuity was so terminated had not survived such 
                judge.
            ``(4) Special rule for assassinated judges.--In the case of 
        a survivor or survivors of a judge described in paragraph 
        (2)(B), there shall be deducted from the annuities otherwise 
        payable under this section an amount equal to--
                    ``(A) the amount of salary deductions provided for 
                by subsection (c)(1) that would have been made if such 
                deductions had been made for 5 years of civilian 
                service computed as prescribed in subsection (n) before 
                the judge's death, reduced by
                    ``(B) the amount of such salary deductions that 
                were actually made before the date of the judge's 
                death.'.'
    (b) Definition of Assassination.--Section 7448(a) (relating to 
definitions) is amended by adding at the end the following new 
paragraph:
            ``(8) The terms `assassinated' and `assassination' mean the 
        killing of a judge that is motivated by the performance by that 
        judge of his or her official duties.''.
    (c) Determination of Assassination.--Subsection (i) of section 7448 
is amended--
            (1) by striking the subsection heading and inserting the 
        following:
    ``(i) Determinations by Chief Judge.--
            ``(1) Dependency and disability.--'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraph:
            ``(2) Assassination.--The chief judge shall determine 
        whether the killing of a judge was an assassination, subject to 
        review only by the Tax Court. The head of any Federal agency 
        that investigates the killing of a judge shall provide 
        information to the chief judge that would assist the chief 
        judge in making such a determination.''.
    (d) Computation of Annuities.--Subsection (m) of section 7448 is 
amended--
            (1) by striking the subsection heading and inserting the 
        following:
    ``(m) Computation of Annuities.--
            ``(1) In general.--'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraph:
            ``(2) Assassinated judges.--In the case of a judge who is 
        assassinated and who has served less than 3 years, the annuity 
        of the surviving spouse of such judge shall be based upon the 
        average annual salary received by such judge for judicial 
        service.''.
    (e) Other Benefits.--Section 7448 is amended by adding at the end 
the following:
    ``(u) Other Benefits.--In the case of a judge who is assassinated, 
an annuity shall be paid under this section notwithstanding a 
survivor's eligibility for or receipt of benefits under chapter 81 of 
title 5, United States Code, except that the annuity for which a 
surviving spouse is eligible under this section shall be reduced to the 
extent that the total benefits paid under this section and chapter 81 
of that title for any year would exceed the current salary for that 
year of the office of the judge.''.

SEC. 1202. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL SURVIVOR 
              ANNUITIES.

    (a) In General.--Subsection (s) of section 7448 (relating to 
annuities to surviving spouses and dependent children of judges) is 
amended to read as follows:
    ``(s) Increases in Survivor Annuities.--Each time that an increase 
is made under section 8340(b) of title 5, United States Code, in 
annuities payable under subchapter III of chapter 83 of that title, 
each annuity payable from the survivors annuity fund under this section 
shall be increased at the same time by the same percentage by which 
annuities are increased under such section 8340(b).''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to increases made under section 8340(b) of title 5, United 
States Code, in annuities payable under subchapter III of chapter 83 of 
that title, taking effect after the date of the enactment of this Act.

SEC. 1203. LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES.

    (a) In General.--Section 7447 (relating to retirement of judges) is 
amended by adding at the end the following new subsection:
    ``(j) Life Insurance Coverage.--For purposes of chapter 87 of title 
5, United States Code (relating to life insurance), any individual who 
is serving as a judge of the Tax Court or who is retired under this 
section is deemed to be an employee who is continuing in active 
employment.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to any individual serving as a judge of the United States Tax Court or 
to any retired judge of the United States Tax Court on the date of the 
enactment of this Act.

SEC. 1204. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES AGE 65 
              OR OVER.

    Section 7472 (relating to expenditures) is amended by inserting 
after the first sentence the following new sentence: ``Notwithstanding 
any other provision of law, the Tax Court is authorized to pay on 
behalf of its judges, age 65 or over, any increase in the cost of 
Federal Employees' Group Life Insurance imposed after April 24, 1999, 
including any expenses generated by such payments, as authorized by the 
chief judge in a manner consistent with such payments authorized by the 
Judicial Conference of the United States pursuant to section 604(a)(5) 
of title 28, United States Code.''

SEC. 1205. MODIFICATION OF TIMING OF LUMP-SUM PAYMENT OF JUDGES' 
              ACCRUED ANNUAL LEAVE.

    (a) In General.--Section 7443 (relating to membership of the Tax 
Court) is amended by adding at the end the following new subsection:
    ``(h) Lump-Sum Payment of Judges' Accrued Annual Leave.--
Notwithstanding the provisions of sections 5551 and 6301 of title 5, 
United States Code, when an individual subject to the leave system 
provided in chapter 63 of that title is appointed by the President to 
be a judge of the Tax Court, the individual shall be entitled to 
receive, upon appointment to the Tax Court, a lump-sum payment from the 
Tax Court of the accumulated and accrued current annual leave standing 
to the individual's credit as certified by the agency from which the 
individual resigned.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to any judge of the United States Tax Court who has an outstanding 
leave balance on the date of the enactment of this Act and to any 
individual appointed by the President to serve as a judge of the United 
States Tax Court after such date.

SEC. 1206. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT SAVINGS 
              PLAN.

    (a) In General.--Section 7447 (relating to retirement of judges), 
as amended by this Act, is amended by adding at the end the following 
new subsection:
    ``(k) Thrift Savings Plan.--
            ``(1) Election to contribute.--
                    ``(A) In general.--A judge of the Tax Court may 
                elect to contribute to the Thrift Savings Fund 
                established by section 8437 of title 5, United States 
                Code.
                    ``(B) Period of election.--An election may be made 
                under this paragraph only during a period provided 
                under section 8432(b) of title 5, United States Code, 
                for individuals subject to chapter 84 of such title.
            ``(2) Applicability of title 5 provisions.--Except as 
        otherwise provided in this subsection, the provisions of 
        subchapters III and VII of chapter 84 of title 5, United States 
        Code, shall apply with respect to a judge who makes an election 
        under paragraph (1).
            ``(3) Special rules.--
                    ``(A) Amount contributed.--The amount contributed 
                by a judge to the Thrift Savings Fund in any pay period 
                shall not exceed the maximum percentage of such judge's 
                basic pay for such period as allowable under section 
                8440f of title 5, United States Code. Basic pay does 
                not include any retired pay paid pursuant to this 
                section.
                    ``(B) Contributions for benefit of judge.--No 
                contributions may be made for the benefit of a judge 
                under section 8432(c) of title 5, United States Code.
                    ``(C) Applicability of section 8433(b) of title 5 
                whether or not judge retires.--Section 8433(b) of title 
                5, United States Code, applies with respect to a judge 
                who makes an election under paragraph (1) and who 
                either--
                            ``(i) retires under subsection (b), or
                            ``(ii) ceases to serve as a judge of the 
                        Tax Court but does not retire under subsection 
                        (b).
                Retirement under subsection (b) is a separation from 
                service for purposes of subchapters III and VII of 
                chapter 84 of that title.
                    ``(D) Applicability of section 8351(b)(5) of title 
                5.--The provisions of section 8351(b)(5) of title 5, 
                United States Code, shall apply with respect to a judge 
                who makes an election under paragraph (1).
                    ``(E) Exception.--Notwithstanding subparagraph (C), 
                if any judge retires under this section, or resigns 
                without having met the age and service requirements set 
                forth under subsection (b)(2), and such judge's 
                nonforfeitable account balance is less than an amount 
                that the Executive Director of the Office of Personnel 
                Management prescribes by regulation, the Executive 
                Director shall pay the nonforfeitable account balance 
                to the participant in a single payment.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act, except that United 
States Tax Court judges may only begin to participate in the Thrift 
Savings Plan at the next open season beginning after such date.

SEC. 1207. EXEMPTION OF TEACHING COMPENSATION OF RETIRED JUDGES FROM 
              LIMITATION ON OUTSIDE EARNED INCOME.

    (a) In General.--Section 7447 (relating to retirement of judges), 
as amended by this Act, is amended by adding at the end the following 
new subsection:
    ``(l) Teaching Compensation of Retired Judges.--For purposes of the 
limitation under section 501(a) of the Ethics in Government Act of 1978 
(5 U.S.C. App.), any compensation for teaching approved under section 
502(a)(5) of such Act shall not be treated as outside earned income 
when received by a judge of the Tax Court who has retired under 
subsection (b) for teaching performed during any calendar year for 
which such a judge has met the requirements of subsection (c), as 
certified by the chief judge of the Tax Court.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to any individual serving as a retired judge of the United States Tax 
Court on or after the date of the enactment of this Act.

SEC. 1208. GENERAL PROVISIONS RELATING TO MAGISTRATE JUDGES OF THE TAX 
              COURT.

    (a) Title of Special Trial Judge Changed to Magistrate Judge of the 
Tax Court.--The heading of section 7443A is amended to read as follows:

``SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.''

    (b) Appointment, Tenure, and Removal.--Subsection (a) of section 
7443A is amended to read as follows:
    ``(a) Appointment, Tenure, and Removal.--
            ``(1) Appointment.--The chief judge may, from time to time, 
        appoint and reappoint magistrate judges of the Tax Court for a 
        term of 8 years. The magistrate judges of the Tax Court shall 
        proceed under such rules as may be promulgated by the Tax 
        Court.
            ``(2) Removal.--Removal of a magistrate judge of the Tax 
        Court during the term for which he or she is appointed shall be 
        only for incompetency, misconduct, neglect of duty, or physical 
        or mental disability, but the office of a magistrate judge of 
        the Tax Court shall be terminated if the judges of the Tax 
        Court determine that the services performed by the magistrate 
        judge of the Tax Court are no longer needed. Removal shall not 
        occur unless a majority of all the judges of the Tax Court 
        concur in the order of removal. Before any order of removal 
        shall be entered, a full specification of the charges shall be 
        furnished to the magistrate judge of the Tax Court, and he or 
        she shall be accorded by the judges of the Tax Court an 
        opportunity to be heard on the charges.''.
    (c) Salary.--Section 7443A(d) (relating to salary) is amended by 
striking ``90'' and inserting ``92''.
    (d) Exemption From Federal Leave Provisions.--Section 7443A is 
amended by adding at the end the following new subsection:
    ``(f) Exemption From Federal Leave Provisions.--
            ``(1) In general.--A magistrate judge of the Tax Court 
        appointed under this section shall be exempt from the 
        provisions of subchapter I of chapter 63 of title 5, United 
        States Code.
            ``(2) Treatment of unused leave.--
                    ``(A) After service as magistrate judge.--If an 
                individual who is exempted under paragraph (1) from the 
                subchapter referred to in such paragraph was previously 
                subject to such subchapter and, without a break in 
                service, again becomes subject to such subchapter on 
                completion of the individual's service as a magistrate 
                judge, the unused annual leave and sick leave standing 
                to the individual's credit when such individual was 
                exempted from this subchapter is deemed to have 
                remained to the individual's credit.
                    ``(B) Computation of annuity.--In computing an 
                annuity under section 8339 of title 5, United States 
                Code, the total service of an individual specified in 
                subparagraph (A) who retires on an immediate annuity or 
                dies leaving a survivor or survivors entitled to an 
                annuity includes, without regard to the limitations 
                imposed by subsection (f) of such section 8339, the 
                days of unused sick leave standing to the individual's 
                credit when such individual was exempted from 
                subchapter I of chapter 63 of title 5, United States 
                Code, except that these days will not be counted in 
                determining average pay or annuity eligibility.
                    ``(C) Lump sum payment.--Any accumulated and 
                current accrued annual leave or vacation balances 
                credited to a magistrate judge as of the date of the 
                enactment of this subsection shall be paid in a lump 
                sum at the time of separation from service pursuant to 
                the provisions and restrictions set forth in section 
                5551 of title 5, United States Code, and related 
                provisions referred to in such section.''.
    (e) Conforming Amendments.--
            (1) The heading of subsection (b) of section 7443A is 
        amended by striking ``Special Trial Judges'' and inserting 
        ``Magistrate Judges of the Tax Court''.
            (2) Section 7443A(b) is amended by striking ``special trial 
        judges of the court'' and inserting ``magistrate judges of the 
        Tax Court''.
            (3) Subsections (c) and (d) of section 7443A are amended by 
        striking ``special trial judge'' and inserting ``magistrate 
        judge of the Tax Court'' each place it appears.
            (4) Section 7443A(e) is amended by striking ``special trial 
        judges'' and inserting ``magistrate judges of the Tax Court''.
            (5) Section 7456(a) is amended by striking ``special trial 
        judge'' each place it appears and inserting ``magistrate 
        judge''.
            (6) Subsection (c) of section 7471 is amended--
                    (A) by striking the subsection heading and 
                inserting ``Magistrate Judges of the Tax Court.--'', 
                and
                    (B) by striking ``special trial judges'' and 
                inserting ``magistrate judges''.

SEC. 1209. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF 
              MAGISTRATE JUDGES OF THE TAX COURT.

    (a) Definitions.--Section 7448(a) (relating to definitions), as 
amended by this Act, is amended by redesignating paragraphs (5), (6), 
(7), and (8) as paragraphs (7), (8), (9), and (10), respectively, and 
by inserting after paragraph (4) the following new paragraphs:
            ``(5) The term `magistrate judge' means a judicial officer 
        appointed pursuant to section 7443A, including any individual 
        receiving an annuity under section 7443B, or chapters 83 or 84, 
        as the case may be, of title 5, United States Code, whether or 
        not performing judicial duties under section 7443C.
            ``(6) The term `magistrate judge's salary' means the salary 
        of a magistrate judge received under section 7443A(d), any 
        amount received as an annuity under section 7443B, or chapters 
        83 or 84, as the case may be, of title 5, United States Code, 
        and compensation received under section 7443C.''.
    (b) Election.--Subsection (b) of section 7448 (relating to 
annuities to surviving spouses and dependent children of judges) is 
amended--
            (1) by striking the subsection heading and inserting the 
        following:
    ``(b) Election.--
            ``(1) Judges.--'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraph:
            ``(2) Magistrate judges.--Any magistrate judge may by 
        written election filed with the chief judge bring himself or 
        herself within the purview of this section. Such election shall 
        be filed not later than the later of 6 months after--
                    ``(A) 6 months after the date of the enactment of 
                this paragraph,
                    ``(B) the date the judge takes office, or
                    ``(C) the date the judge marries.''.
    (c) Conforming Amendments.--
            (1) The heading of section 7448 is amended by inserting 
        ``and magistrate judges'' after ``judges''.
            (2) The item relating to section 7448 in the table of 
        sections for part I of subchapter C of chapter 76 is amended by 
        inserting ``and magistrate judges'' after ``judges''.
            (3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n), 
        and (u) of section 7448, as amended by this Act, are each 
        amended--
                    (A) by inserting ``or magistrate judge'' after 
                ``judge'' each place it appears other than in the 
                phrase ``chief judge'', and
                    (B) by inserting ``or magistrate judge's'' after 
                ``judge's'' each place it appears.
            (4) Section 7448(c) is amended--
                    (A) in paragraph (1), by striking ``Tax Court 
                judges'' and inserting ``Tax Court judicial officers'',
                    (B) in paragraph (2)--
                            (i) in subparagraph (A), by inserting ``and 
                        section 7443A(d)'' after ``(a)(4)'', and
                            (ii) in subparagraph (B), by striking 
                        ``subsection (a)(4)'' and inserting 
                        ``subsections (a)(4) and (a)(6)''.
            (5) Section 7448(g) is amended by inserting ``or section 
        7443B'' after ``section 7447'' each place it appears, and by 
        inserting ``or an annuity'' after ``retired pay''.
            (6) Section 7448(j)(1) is amended--
                    (A) in subparagraph (A), by striking ``service or 
                retired'' and inserting ``service, retired'', and by 
                inserting ``, or receiving any annuity under section 
                7443B or chapters 83 or 84 of title 5, United States 
                Code,'' after ``section 7447'', and
                    (B) in the last sentence, by striking ``subsections 
                (a) (6) and (7)'' and inserting ``paragraphs (8) and 
                (9) of subsection (a)''.
            (7) Section 7448(m)(1), as amended by this Act, is 
        amended--
                    (A) by inserting ``or any annuity under section 
                7443B or chapters 83 or 84 of title 5, United States 
                Code'' after ``7447(d)'', and
                    (B) by inserting ``or 7443B(m)(1)(B) after 
                ``7447(f)(4)''.
            (8) Section 7448(n) is amended by inserting ``his years of 
        service pursuant to any appointment under section 7443A,'' 
        after ``of the Tax Court,''.
            (9) Section 3121(b)(5)(E) is amended by inserting ``or 
        magistrate judge'' before ``of the United States Tax Court''.
            (10) Section 210(a)(5)(E) of the Social Security Act is 
        amended by inserting ``or magistrate judge'' before ``of the 
        United States Tax Court''.

SEC. 1210. RETIREMENT AND ANNUITY PROGRAM.

    (a) Retirement and Annuity Program.--Part I of subchapter C of 
chapter 76 is amended by inserting after section 7443A the following 
new section:

``SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF THE TAX COURT.

    ``(a) Retirement Based on Years of Service.--A magistrate judge of 
the Tax Court to whom this section applies and who retires from office 
after attaining the age of 65 years and serving at least 14 years, 
whether continuously or otherwise, as such magistrate judge shall, 
subject to subsection (f), be entitled to receive, during the remainder 
of the magistrate judge's lifetime, an annuity equal to the salary 
being received at the time the magistrate judge leaves office.
    ``(b) Retirement Upon Failure of Reappointment.--A magistrate judge 
of the Tax Court to whom this section applies who is not reappointed 
following the expiration of the term of office of such magistrate judge 
and who retires upon the completion of the term shall, subject to 
subsection (f), be entitled to receive, upon attaining the age of 65 
years and during the remainder of such magistrate judge's lifetime, an 
annuity equal to that portion of the salary being received at the time 
the magistrate judge leaves office which the aggregate number of years 
of service, not to exceed 14, bears to 14, if--
            ``(1) such magistrate judge has served at least 1 full term 
        as a magistrate judge, and
            ``(2) not earlier than 9 months before the date on which 
        the term of office of such magistrate judge expires, and not 
        later than 6 months before such date, such magistrate judge 
        notified the chief judge of the Tax Court in writing that such 
        magistrate judge was willing to accept reappointment to the 
        position in which such magistrate judge was serving.
    ``(c) Service of at Least 8 Years.--A magistrate judge of the Tax 
Court to whom this section applies and who retires after serving at 
least 8 years, whether continuously or otherwise, as such a magistrate 
judge shall, subject to subsection (f), be entitled to receive, upon 
attaining the age of 65 years and during the remainder of the 
magistrate judge's lifetime, an annuity equal to that portion of the 
salary being received at the time the magistrate judge leaves office 
which the aggregate number of years of service, not to exceed 14, bears 
to 14. Such annuity shall be reduced by \1/6\ of 1 percent for each 
full month such magistrate judge was under the age of 65 at the time 
the magistrate judge left office, except that such reduction shall not 
exceed 20 percent.
    ``(d) Retirement for Disability.--A magistrate judge of the Tax 
Court to whom this section applies, who has served at least 5 years, 
whether continuously or otherwise, as such a magistrate judge and who 
retires or is removed from office upon the sole ground of mental or 
physical disability shall, subject to subsection (f), be entitled to 
receive, during the remainder of the magistrate judge's lifetime, an 
annuity equal to 40 percent of the salary being received at the time of 
retirement or removal or, in the case of a magistrate judge who has 
served for at least 10 years, an amount equal to that proportion of the 
salary being received at the time of retirement or removal which the 
aggregate number of years of service, not to exceed 14, bears to 14.
    ``(e) Cost-of-Living Adjustments.--A magistrate judge of the Tax 
Court who is entitled to an annuity under this section is also entitled 
to a cost-of-living adjustment in such annuity, calculated and payable 
in the same manner as adjustments under section 8340(b) of title 5, 
United States Code, except that any such annuity, as increased under 
this subsection, may not exceed the salary then payable for the 
position from which the magistrate judge retired or was removed.
    ``(f) Election; Annuity in Lieu of Other Annuities.--
            ``(1) In general.--A magistrate judge of the Tax Court 
        shall be entitled to an annuity under this section if the 
        magistrate judge elects an annuity under this section by 
        notifying the chief judge of the Tax Court not later than the 
        later of--
                    ``(A) 5 years after the magistrate judge of the Tax 
                Court begins judicial service, or
                    ``(B) 5 years after the date of the enactment of 
                this subsection.
        Such notice shall be given in accordance with procedures 
        prescribed by the Tax Court.
            ``(2) Annuity in lieu of other annuity.--A magistrate judge 
        who elects to receive an annuity under this section shall not 
        be entitled to receive--
                    ``(A) any annuity to which such magistrate judge 
                would otherwise have been entitled under subchapter III 
                of chapter 83, or under chapter 84 (except for 
                subchapters III and VII), of title 5, United States 
                Code, for service performed as a magistrate or 
                otherwise,
                    ``(B) an annuity or salary in senior status or 
                retirement under section 371 or 372 of title 28, United 
                States Code,
                    ``(C) retired pay under section 7447, or
                    ``(D) retired pay under section 7296 of title 38, 
                United States Code.
            ``(3) Coordination with title 5.--A magistrate judge of the 
        Tax Court who elects to receive an annuity under this section--
                    ``(A) shall not be subject to deductions and 
                contributions otherwise required by section 8334(a) of 
                title 5, United States Code,
                    ``(B) shall be excluded from the operation of 
                chapter 84 (other than subchapters III and VII) of such 
                title 5, and
                    ``(C) is entitled to a lump-sum credit under 
                section 8342(a) or 8424 of such title 5, as the case 
                may be.
    ``(g) Calculation of Service.--For purposes of calculating an 
annuity under this section--
            ``(1) service as a magistrate judge of the Tax Court to 
        whom this section applies may be credited, and
            ``(2) each month of service shall be credited as \1/12\ of 
        a year, and the fractional part of any month shall not be 
        credited.
    ``(h) Covered Positions and Service.--This section applies to any 
magistrate judge of the Tax Court or special trial judge of the Tax 
Court appointed under this subchapter, but only with respect to service 
as such a magistrate judge or special trial judge after a date not 
earlier than 9\1/2\ years before the date of the enactment of this 
subsection.
    ``(i) Payments Pursuant to Court Order.--
            ``(1) In general.--Payments under this section which would 
        otherwise be made to a magistrate judge of the Tax Court based 
        upon his or her service shall be paid (in whole or in part) by 
        the chief judge of the Tax Court to another person if and to 
        the extent expressly provided for in the terms of any court 
        decree of divorce, annulment, or legal separation, or the terms 
        of any court order or court-approved property settlement 
        agreement incident to any court decree of divorce, annulment, 
        or legal separation. Any payment under this paragraph to a 
        person bars recovery by any other person.
            ``(2) Requirements for payment.--Paragraph (1) shall apply 
        only to payments made by the chief judge of the Tax Court after 
        the date of receipt by the chief judge of written notice of 
        such decree, order, or agreement, and such additional 
        information as the chief judge may prescribe.
            ``(3) Court defined.--For purposes of this subsection, the 
        term `court' means any court of any State, the District of 
        Columbia, the Commonwealth of Puerto Rico, Guam, the Northern 
        Mariana Islands, or the Virgin Islands, and any Indian tribal 
        court or courts of Indian offense.
    ``(j) Deductions, Contributions, and Deposits.--
            ``(1) Deductions.--Beginning with the next pay period after 
        the chief judge of the Tax Court receives a notice under 
        subsection (f) that a magistrate judge of the Tax Court has 
        elected an annuity under this section, the chief judge shall 
        deduct and withhold 1 percent of the salary of such magistrate 
        judge. Amounts shall be so deducted and withheld in a manner 
        determined by the chief judge. Amounts deducted and withheld 
        under this subsection shall be deposited in the Treasury of the 
        United States to the credit of the Tax Court Judicial Officers' 
        Retirement Fund. Deductions under this subsection from the 
        salary of a magistrate judge shall terminate upon the 
        retirement of the magistrate judge or upon completion of 14 
        years of service for which contributions under this section 
        have been made, whether continuously or otherwise, as 
        calculated under subsection (g), whichever occurs first.
            ``(2) Consent to deductions; discharge of claims.--Each 
        magistrate judge of the Tax Court who makes an election under 
        subsection (f) shall be deemed to consent and agree to the 
        deductions from salary which are made under paragraph (1). 
        Payment of such salary less such deductions (and any deductions 
        made under section 7448) is a full and complete discharge and 
        acquittance of all claims and demands for all services rendered 
        by such magistrate judge during the period covered by such 
        payment, except the right to those benefits to which the 
        magistrate judge is entitled under this section (and section 
        7448).
    ``(k) Deposits for Prior Service.--Each magistrate judge of the Tax 
Court who makes an election under subsection (f) may deposit, for 
service performed before such election for which contributions may be 
made under this section, an amount equal to 1 percent of the salary 
received for that service. Credit for any period covered by that 
service may not be allowed for purposes of an annuity under this 
section until a deposit under this subsection has been made for that 
period.
    ``(l) Individual Retirement Records.--The amounts deducted and 
withheld under subsection (j), and the amounts deposited under 
subsection (k), shall be credited to individual accounts in the name of 
each magistrate judge of the Tax Court from whom such amounts are 
received, for credit to the Tax Court Judicial Officers' Retirement 
Fund.
    ``(m) Annuities Affected in Certain Cases.--
            ``(1) 1-year forfeiture for failure to perform judicial 
        duties.--Subject to paragraph (3), any magistrate judge of the 
        Tax Court who retires under this section and who fails to 
        perform judicial duties required of such individual by section 
        7443C shall forfeit all rights to an annuity under this section 
        for a 1-year period which begins on the 1st day on which such 
        individual fails to perform such duties.
            ``(2) Permanent forfeiture of retired pay where certain 
        non-government services performed.--Subject to paragraph (3), 
        any magistrate judge of the Tax Court who retires under this 
        section and who thereafter performs (or supervises or directs 
        the performance of) legal or accounting services in the field 
        of Federal taxation for the individual's client, the 
        individual's employer, or any of such employer's clients, shall 
        forfeit all rights to an annuity under this section for all 
        periods beginning on or after the first day on which the 
        individual performs (or supervises or directs the performance 
        of) such services. The preceding sentence shall not apply to 
        any civil office or employment under the Government of the 
        United States.
            ``(3) Forfeitures not to apply where individual elects to 
        freeze amount of annuity.--
                    ``(A) In general.--If a magistrate judge of the Tax 
                Court makes an election under this paragraph--
                            ``(i) paragraphs (1) and (2) (and section 
                        7443C) shall not apply to such magistrate judge 
                        beginning on the date such election takes 
                        effect, and
                            ``(ii) the annuity payable under this 
                        section to such magistrate judge, for periods 
                        beginning on or after the date such election 
                        takes effect, shall be equal to the annuity to 
                        which such magistrate judge is entitled on the 
                        day before such effective date.
                    ``(B) Election requirements.--An election under 
                subparagraph (A)--
                            ``(i) may be made by a magistrate judge of 
                        the Tax Court eligible for retirement under 
                        this section, and
                            ``(ii) shall be filed with the chief judge 
                        of the Tax Court.
                Such an election, once it takes effect, shall be 
                irrevocable.
                    ``(C) Effective date of election.--Any election 
                under subparagraph (A) shall take effect on the first 
                day of the first month following the month in which the 
                election is made.
            ``(4) Accepting other employment.--Any magistrate judge of 
        the Tax Court who retires under this section and thereafter 
        accepts compensation for civil office or employment under the 
        United States Government (other than for the performance of 
        functions as a magistrate judge of the Tax Court under section 
        7443C) shall forfeit all rights to an annuity under this 
        section for the period for which such compensation is received. 
        For purposes of this paragraph, the term `compensation' 
        includes retired pay or salary received in retired status.
    ``(n) Lump-Sum Payments.--
            ``(1) Eligibility.--
                    ``(A) In general.--Subject to paragraph (2), an 
                individual who serves as a magistrate judge of the Tax 
                Court and--
                            ``(i) who leaves office and is not 
                        reappointed as a magistrate judge of the Tax 
                        Court for at least 31 consecutive days,
                            ``(ii) who files an application with the 
                        chief judge of the Tax Court for payment of a 
                        lump-sum credit,
                            ``(iii) is not serving as a magistrate 
                        judge of the Tax Court at the time of filing of 
                        the application, and
                            ``(iv) will not become eligible to receive 
                        an annuity under this section within 31 days 
                        after filing the application,
                is entitled to be paid the lump-sum credit. Payment of 
                the lump-sum credit voids all rights to an annuity 
                under this section based on the service on which the 
                lump-sum credit is based, until that individual resumes 
                office as a magistrate judge of the Tax Court.
                    ``(B) Payment to survivors.--Lump-sum benefits 
                authorized by subparagraphs (C), (D), and (E) of this 
                paragraph shall be paid to the person or persons 
                surviving the magistrate judge of the Tax Court and 
                alive on the date title to the payment arises, in the 
                order of precedence set forth in subsection (o) of 
                section 376 of title 28, United States Code, and in 
                accordance with the last 2 sentences of paragraph (1) 
                of that subsection. For purposes of the preceding 
                sentence, the term `judicial official' as used in 
                subsection (o) of such section 376 shall be deemed to 
                mean `magistrate judge of the Tax Court' and the terms 
                `Administrative Office of the United States Courts' and 
                `Director of the Administrative Office of the United 
                States Courts' shall be deemed to mean `chief judge of 
                the Tax Court'.
                    ``(C) Payment upon death of judge before receipt of 
                annuity.--If a magistrate judge of the Tax Court dies 
                before receiving an annuity under this section, the 
                lump-sum credit shall be paid.
                    ``(D) Payment of annuity remainder.--If all annuity 
                rights under this section based on the service of a 
                deceased magistrate judge of the Tax Court terminate 
                before the total annuity paid equals the lump-sum 
                credit, the difference shall be paid.
                    ``(E) Payment upon death of judge during receipt of 
                annuity.--If a magistrate judge of the Tax Court who is 
                receiving an annuity under this section dies, any 
                accrued annuity benefits remaining unpaid shall be 
                paid.
                    ``(F) Payment upon termination.--Any accrued 
                annuity benefits remaining unpaid on the termination, 
                except by death, of the annuity of a magistrate judge 
                of the Tax Court shall be paid to that individual.
                    ``(G) Payment upon accepting other employment.--
                Subject to paragraph (2), a magistrate judge of the Tax 
                Court who forfeits rights to an annuity under 
                subsection (m)(4) before the total annuity paid equals 
                the lump-sum credit shall be entitled to be paid the 
                difference if the magistrate judge of the Tax Court 
                files an application with the chief judge of the Tax 
                Court for payment of that difference. A payment under 
                this subparagraph voids all rights to an annuity on 
                which the payment is based.
            ``(2) Spouses and former spouses.--
                    ``(A) In general.--Payment of the lump-sum credit 
                under paragraph (1)(A) or a payment under paragraph 
                (1)(G)--
                            ``(i) may be made only if any current 
                        spouse and any former spouse of the magistrate 
                        judge of the Tax Court are notified of the 
                        magistrate judge's application, and
                            ``(ii) shall be subject to the terms of a 
                        court decree of divorce, annulment, or legal 
                        separation, or any court or court approved 
                        property settlement agreement incident to such 
                        decree, if--
                                    ``(I) the decree, order, or 
                                agreement expressly relates to any 
                                portion of the lump-sum credit or other 
                                payment involved, and
                                    ``(II) payment of the lump-sum 
                                credit or other payment would 
                                extinguish entitlement of the 
                                magistrate judge's spouse or former 
                                spouse to any portion of an annuity 
                                under subsection (i).
                    ``(B) Notification.--Notification of a spouse or 
                former spouse under this paragraph shall be made in 
                accordance with such procedures as the chief judge of 
                the Tax Court shall prescribe. The chief judge may 
                provide under such procedures that subparagraph (A)(i) 
                may be waived with respect to a spouse or former spouse 
                if the magistrate judge establishes to the satisfaction 
                of the chief judge that the whereabouts of such spouse 
                or former spouse cannot be determined.
                    ``(C) Resolution of 2 or more orders.--The chief 
                judge shall prescribe procedures under which this 
                paragraph shall be applied in any case in which the 
                chief judge receives 2 or more orders or decrees 
                described in subparagraph (A).
            ``(3) Definition.--For purposes of this subsection, the 
        term `lump-sum credit' means the unrefunded amount consisting 
        of--
                    ``(A) retirement deductions made under this section 
                from the salary of a magistrate judge of the Tax Court,
                    ``(B) amounts deposited under subsection (k) by a 
                magistrate judge of the Tax Court covering earlier 
                service, and
                    ``(C) interest on the deductions and deposits 
                which, for any calendar year, shall be equal to the 
                overall average yield to the Tax Court Judicial 
                Officers' Retirement Fund during the preceding fiscal 
                year from all obligations purchased by the Secretary 
                during such fiscal year under subsection (o); but does 
                not include interest--
                            ``(i) if the service covered thereby 
                        aggregates 1 year or less, or
                            ``(ii) for the fractional part of a month 
                        in the total service.
    ``(o) Tax Court Judicial Officers' Retirement Fund.--
            ``(1) Establishment.--There is established in the Treasury 
        a fund which shall be known as the `Tax Court Judicial 
        Officers' Retirement Fund'. Amounts in the Fund are authorized 
        to be appropriated for the payment of annuities, refunds, and 
        other payments under this section.
            ``(2) Investment of fund.--The Secretary shall invest, in 
        interest bearing securities of the United States, such 
        currently available portions of the Tax Court Judicial 
        Officers' Retirement Fund as are not immediately required for 
        payments from the Fund. The income derived from these 
        investments constitutes a part of the Fund.
            ``(3) Unfunded liability.--
                    ``(A) In general.--There are authorized to be 
                appropriated to the Tax Court Judicial Officers' 
                Retirement Fund amounts required to reduce to zero the 
                unfunded liability of the Fund.
                    ``(B) Unfunded liability.--For purposes of 
                subparagraph (A), the term `unfunded liability' means 
                the estimated excess, determined on an annual basis in 
                accordance with the provisions of section 9503 of title 
                31, United States Code, of the present value of all 
                benefits payable from the Tax Court Judicial Officers' 
                Retirement Fund over the sum of--
                            ``(i) the present value of deductions to be 
                        withheld under this section from the future 
                        basic pay of magistrate judges of the Tax 
                        Court, plus
                            ``(ii) the balance in the Fund as of the 
                        date the unfunded liability is determined.
    ``(p) Participation in Thrift Savings Plan.--
            ``(1) Election to contribute.--
                    ``(A) In general.--A magistrate judge of the Tax 
                Court who elects to receive an annuity under this 
                section or under section 611 of the Pension Security 
                and Transparency Act of 2005 may elect to contribute an 
                amount of such individual's basic pay to the Thrift 
                Savings Fund established by section 8437 of title 5, 
                United States Code.
                    ``(B) Period of election.--An election may be made 
                under this paragraph only during a period provided 
                under section 8432(b) of title 5, United States Code, 
                for individuals subject to chapter 84 of such title.
            ``(2) Applicability of title 5 provisions.--Except as 
        otherwise provided in this subsection, the provisions of 
        subchapters III and VII of chapter 84 of title 5, United States 
        Code, shall apply with respect to a magistrate judge who makes 
        an election under paragraph (1).
            ``(3) Special rules.--
                    ``(A) Amount contributed.--The amount contributed 
                by a magistrate judge to the Thrift Savings Fund in any 
                pay period shall not exceed the maximum percentage of 
                such judge's basic pay for such pay period as allowable 
                under section 8440f of title 5, United States Code.
                    ``(B) Contributions for benefit of judge.--No 
                contributions may be made for the benefit of a 
                magistrate judge under section 8432(c) of title 5, 
                United States Code.
                    ``(C) Applicability of section 8433(b) of title 
                5.--Section 8433(b) of title 5, United States Code, 
                applies with respect to a magistrate judge who makes an 
                election under paragraph (1) and--
                            ``(i) who retires entitled to an immediate 
                        annuity under this section (including a 
                        disability annuity under subsection (d) of this 
                        section) or section 611 of the Pension Security 
                        and Transparency Act of 2005,
                            ``(ii) who retires before attaining age 65 
                        but is entitled, upon attaining age 65, to an 
                        annuity under this section or section 611 of 
                        the Pension Security and Transparency Act of 
                        2005, or
                            ``(iii) who retires before becoming 
                        entitled to an immediate annuity, or an annuity 
                        upon attaining age 65, under this section or 
                        section 611 of the Pension Security and 
                        Transparency Act of 2005.
                    ``(D) Separation from service.--With respect to a 
                magistrate judge to whom this subsection applies, 
                retirement under this section or section 611 of the 
                Pension Security and Transparency Act of 2005 is a 
                separation from service for purposes of subchapters III 
                and VII of chapter 84 of title 5, United States Code.
            ``(4) Definitions.--For purposes of this subsection, the 
        terms `retirement' and `retire' include removal from office 
        under section 7443A(a)(2) on the sole ground of mental or 
        physical disability.
            ``(5) Offset.--In the case of a magistrate judge who 
        receives a distribution from the Thrift Savings Fund and who 
        later receives an annuity under this section, that annuity 
        shall be offset by an amount equal to the amount which 
        represents the Government's contribution to that person's 
        Thrift Savings Account, without regard to earnings attributable 
        to that amount. Where such an offset would exceed 50 percent of 
        the annuity to be received in the first year, the offset may be 
        divided equally over the first 2 years in which that person 
        receives the annuity.
            ``(6) Exception.--Notwithstanding clauses (i) and (ii) of 
        paragraph (3)(C), if any magistrate judge retires under 
        circumstances making such magistrate judge eligible to make an 
        election under subsection (b) of section 8433 of title 5, 
        United States Code, and such magistrate judge's nonforfeitable 
        account balance is less than an amount that the Executive 
        Director of the Office of Personnel Management prescribes by 
        regulation, the Executive Director shall pay the nonforfeitable 
        account balance to the participant in a single payment.''.
    (b) Conforming Amendment.--The table of sections for part I of 
subchapter C of chapter 76 is amended by inserting after the item 
relating to section 7443A the following new item:

``Sec. 7443B. Retirement for magistrate judges of the Tax Court.''.

SEC. 1211. INCUMBENT MAGISTRATE JUDGES OF THE TAX COURT.

    (a) Retirement Annuity Under Title 5 and Section 7443B of the 
Internal Revenue Code of 1986.--A magistrate judge of the United States 
Tax Court in active service on the date of the enactment of this Act 
shall, subject to subsection (b), be entitled, in lieu of the annuity 
otherwise provided under the amendments made by this title, to--
            (1) an annuity under subchapter III of chapter 83, or under 
        chapter 84 (except for subchapters III and VII), of title 5, 
        United States Code, as the case may be, for creditable service 
        before the date on which service would begin to be credited for 
        purposes of paragraph (2), and
            (2) an annuity calculated under subsection (b) or (c) and 
        subsection (g) of section 7443B of the Internal Revenue Code of 
        1986, as added by this Act, for any service as a magistrate 
        judge of the United States Tax Court or special trial judge of 
        the United States Tax Court but only with respect to service as 
        such a magistrate judge or special trial judge after a date not 
        earlier than 9\1/2\ years prior to the date of the enactment of 
        this Act (as specified in the election pursuant to subsection 
        (b)) for which deductions and deposits are made under 
        subsections (j) and (k) of such section 7443B, as applicable, 
        without regard to the minimum number of years of service as 
        such a magistrate judge of the United States Tax Court, except 
        that--
                    (A) in the case of a magistrate judge who retired 
                with less than 8 years of service, the annuity under 
                subsection (c) of such section 7443B shall be equal to 
                that proportion of the salary being received at the 
                time the magistrate judge leaves office which the years 
                of service bears to 14, subject to a reduction in 
                accordance with subsection (c) of such section 7443B if 
                the magistrate judge is under age 65 at the time he or 
                she leaves office, and
                    (B) the aggregate amount of the annuity initially 
                payable on retirement under this subsection may not 
                exceed the rate of pay for the magistrate judge which 
                is in effect on the day before the retirement becomes 
                effective.
    (b) Filing of Notice of Election.--A magistrate judge of the United 
States Tax Court shall be entitled to an annuity under this section 
only if the magistrate judge files a notice of that election with the 
chief judge of the United States Tax Court specifying the date on which 
service would begin to be credited under section 7443B of the Internal 
Revenue Code of 1986, as added by this Act, in lieu of chapter 83 or 
chapter 84 of title 5, United States Code. Such notice shall be filed 
in accordance with such procedures as the chief judge of the United 
States Tax Court shall prescribe.
    (c) Lump-Sum Credit Under Title 5.--A magistrate judge of the 
United States Tax Court who makes an election under subsection (b) 
shall be entitled to a lump-sum credit under section 8342 or 8424 of 
title 5, United States Code, as the case may be, for any service which 
is covered under section 7443B of the Internal Revenue Code of 1986, as 
added by this Act, pursuant to that election, and with respect to which 
any contributions were made by the magistrate judge under the 
applicable provisions of title 5, United States Code.
    (d) Recall.--With respect to any magistrate judge of the United 
States Tax Court receiving an annuity under this section who is 
recalled to serve under section 7443C of the Internal Revenue Code of 
1986, as added by this Act--
            (1) the amount of compensation which such recalled 
        magistrate judge receives under such section 7443C shall be 
        calculated on the basis of the annuity received under this 
        section, and
            (2) such recalled magistrate judge of the United States Tax 
        Court may serve as a reemployed annuitant to the extent 
        otherwise permitted under title 5, United States Code.
Section 7443B(m)(4) of the Internal Revenue Code of 1986, as added by 
this Act, shall not apply with respect to service as a reemployed 
annuitant described in paragraph (2).

SEC. 1212. PROVISIONS FOR RECALL.

    (a) In General.--Part I of subchapter C of chapter 76, as amended 
by this Act, is amended by inserting after section 7443B the following 
new section:

``SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX COURT.

    ``(a) Recalling of Retired Magistrate Judges.--Any individual who 
has retired pursuant to section 7443B or the applicable provisions of 
title 5, United States Code, upon reaching the age and service 
requirements established therein, may at or after retirement be called 
upon by the chief judge of the Tax Court to perform such judicial 
duties with the Tax Court as may be requested of such individual for 
any period or periods specified by the chief judge; except that in the 
case of any such individual--
            ``(1) the aggregate of such periods in any 1 calendar year 
        shall not (without such individual's consent) exceed 90 
        calendar days, and
            ``(2) such individual shall be relieved of performing such 
        duties during any period in which illness or disability 
        precludes the performance of such duties.
Any act, or failure to act, by an individual performing judicial duties 
pursuant to this subsection shall have the same force and effect as if 
it were the act (or failure to act) of a magistrate judge of the Tax 
Court.
    ``(b) Compensation.--For the year in which a period of recall 
occurs, the magistrate judge shall receive, in addition to the annuity 
provided under the provisions of section 7443B or under the applicable 
provisions of title 5, United States Code, an amount equal to the 
difference between that annuity and the current salary of the office to 
which the magistrate judge is recalled. The annuity of the magistrate 
judge who completes that period of service, who is not recalled in a 
subsequent year, and who retired under section 7443B, shall be equal to 
the salary in effect at the end of the year in which the period of 
recall occurred for the office from which such individual retired.
    ``(c) Rulemaking Authority.--The provisions of this section may be 
implemented under such rules as may be promulgated by the Tax Court.''
    (b) Conforming Amendment.--The table of sections for part I of 
subchapter C of chapter 76, as amended by this Act, is amended by 
inserting after the item relating to section 7443B the following new 
item:

``Sec. 7443C. Recall of magistrate judges of the Tax Court.''.

SEC. 1213. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this subtitle 
shall take effect on the date of the enactment of this Act.

                      TITLE XIII--OTHER PROVISIONS

                  Subtitle A--Administrative Provision

SEC. 1301. PROVISIONS RELATING TO PLAN AMENDMENTS.

    (a) In General.--If this section applies to any plan or contract 
amendment--
            (1) such plan or contract shall be treated as being 
        operated in accordance with the terms of the plan during the 
        period described in subsection (b)(2)(A), and
            (2) except as provided by the Secretary of the Treasury, 
        such plan shall not fail to meet the requirements of section 
        411(d)(6) of the Internal Revenue Code of 1986 and section 
        204(g) of the Employee Retirement Income Security Act of 1974 
        by reason of such amendment.
    (b) Amendments to Which Section Applies.--
            (1) In general.--This section shall apply to any amendment 
        to any plan or annuity contract which is made--
                    (A) pursuant to any amendment made by this Act or 
                the Economic Growth and Tax Relief Reconciliation Act 
                of 2001, or pursuant to any regulation issued by the 
                Secretary of the Treasury or the Secretary of Labor 
                under such Acts, and
                    (B) on or before the last day of the first plan 
                year beginning on or after January 1, 2007, or such 
                later date as the Secretary of the Treasury may 
                prescribe.
        In the case of a governmental plan (as defined in section 
        414(d) of the Internal Revenue Code of 1986), subparagraph (B) 
        shall be applied by substituting the date which is 2 years 
        after the date otherwise applied under subparagraph (B).
            (2) Conditions.--This section shall not apply to any 
        amendment unless--
                    (A) during the period--
                            (i) beginning on the date the legislative 
                        or regulatory amendment described in paragraph 
                        (1)(A) takes effect (or in the case of a plan 
                        or contract amendment not required by such 
                        legislative or regulatory amendment, the 
                        effective date specified by the plan), and
                            (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the date the 
                        plan or contract amendment is adopted),
                the plan or contract is operated as if such plan or 
                contract amendment were in effect; and
                    (B) such plan or contract amendment applies 
                retroactively for such period.

SEC. 1302. AUTHORITY TO THE SECRETARY OF LABOR, SECRETARY OF THE 
              TREASURY, AND THE PENSION BENEFIT GUARANTY CORPORATION TO 
              POSTPONE CERTAIN DEADLINES.

    The Secretary of Labor, the Secretary of the Treasury, and the 
Executive Director of the Pension Benefit Guaranty Corporation shall 
exercise their authority under section 518 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1148) and section 7508A of the 
Internal Revenue Code of 1986 to postpone certain deadlines by reason 
of the Presidentially declared disaster areas in Louisiana, 
Mississippi, Alabama, Texas, Florida, or elsewhere, due to the effect 
of Hurricane Katrina, Rita, or Wilma. The Secretaries and the Executive 
Director of the Corporation shall issue guidance as soon as is 
practicable to plan sponsors and participants regarding extension of 
deadlines and rules applicable to these extraordinary circumstances. 
Nothing in this section shall be construed to relieve any plan sponsor 
from any requirement to pay benefits or make contributions under the 
plan of the sponsor.

           Subtitle B--Governmental Pension Plan Equalization

SEC. 1311. DEFINITION OF GOVERNMENTAL PLAN.

    (a) Amendment to Internal Revenue Code of 1986.--Section 414(d) of 
the Internal Revenue Code of 1986 (definition of governmental plan) is 
amended by adding at the end the following: ``The term `governmental 
plan' includes a plan established or maintained for its employees by an 
Indian tribal government (as defined in section 7701(a)(40)), a 
subdivision of an Indian tribal government (determined in accordance 
with section 7871(d)), an agency instrumentality (or subdivision) of an 
Indian tribal government, or an entity established under Federal, 
State, or tribal law which is wholly owned or controlled by any of the 
foregoing.''.
    (b) Amendment to Employee Retirement Income Security Act of 1974.--
Section 3(32) of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1002(32)) is amended by adding at the end the following: 
``The term `governmental plan' includes a plan established or 
maintained for its employees by an Indian tribal government (as defined 
in section 7701(a)(40)), a subdivision of an Indian tribal government 
(determined in accordance with section 7871(d)), an agency 
instrumentality (or subdivision) of an Indian tribal government, or an 
entity established under Federal, State, or tribal law that is wholly 
owned or controlled by any of the foregoing.''.

SEC. 1312. EXTENSION TO ALL GOVERNMENTAL PLANS OF CURRENT MORATORIUM ON 
              APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE 
              TO STATE AND LOCAL PLANS.

    (a) In General.--
            (1) Subparagraph (G) of section 401(a)(5) and subparagraph 
        (G) of section 401(a)(26) of the Internal Revenue Code of 1986 
        are each amended by striking ``section 414(d))'' and all that 
        follows and inserting ``section 414(d)).''.
            (2) Subparagraph (G) of section 401(k)(3) of such Code and 
        paragraph (2) of section 1505(d) of the Taxpayer Relief Act of 
        1997 (Public Law 105-34; 111 Stat. 1063) are each amended by 
        striking ``maintained by a State or local government or 
        political subdivision thereof (or agency or instrumentality 
        thereof)''.
    (b) Conforming Amendments.--
            (1) The heading of subparagraph (G) of section 401(a)(5) of 
        the Internal Revenue Code of 1986 is amended by striking 
        ``State and local governmental'' and inserting 
        ``Governmental''.
            (2) The heading of subparagraph (G) of section 401(a)(26) 
        of such Code is amended by striking ``Exception for state and 
        local'' and inserting ``Exception for''.
            (3) Section 401(k)(3)(G) of such Code is amended by 
        inserting ``Governmental plan.--'' after ``(G)''.

SEC. 1313. CLARIFICATION THAT TRIBAL GOVERNMENTS ARE SUBJECT TO THE 
              SAME DEFINED BENEFIT PLAN RULES AND REGULATIONS APPLIED 
              TO STATE AND OTHER LOCAL GOVERNMENTS, THEIR POLICE AND 
              FIREFIGHTERS.

    (a) Amendments to Internal Revenue Code of 1986.--
            (1) Police and firefighters.--Subparagraph (H) section 
        415(b)(2) of the Internal Revenue Code of 1986 (defining 
        participant) is amended--
                    (A) in clause (i), by striking ``State or political 
                subdivision'' and inserting ``State, Indian tribal 
                government (as defined in section 7701(a)(40)), or any 
                political subdivision''; and
                    (B) in clause (ii)(I), by striking ``State or 
                political subdivision'' each place it appears and 
                inserting ``State, Indian tribal government (as so 
                defined), or any political subdivision''.
            (2) State and local government plans.--
                    (A) In general.--Subparagraph (A) of section 
                415(b)(10) of such Code (relating to limitation to 
                equal accrued benefit) is amended--
                            (i) by inserting ``, Indian tribal 
                        government (as defined in section 
                        7701(a)(40)),'' after ``State'';
                            (ii) by inserting ``any'' before 
                        ``political subdivision''; and
                            (iii) by inserting ``any of'' before ``the 
                        foregoing''.
                    (B) Conforming amendment.--The heading of paragraph 
                (1) of section 415(b) of such Code is amended by 
                striking ``Special rule for state and'' and inserting 
                ``Special rule for state, indian tribal, and''.
            (3) Government pick up contributions.--Paragraph (2) of 
        section 414(h) of such Code (relating to designation by units 
        of government) is amended by striking ``State or political 
        subdivision'' and inserting ``State, Indian tribal government 
        (as defined in section 7701(a)(40)), or any political 
        subdivision''.
    (b) Amendments to Employee Retirement Income Security Act of 
1974.--Section 4021(b) of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1321(b)) is amended--
            (1) in paragraph (12), by striking ``or'' at the end;
            (2) in paragraph (13), by striking ``plan.'' and inserting 
        ``plan; or''; and
            (3) by adding at the end the following:
            ``(14) established and maintained for its employees by an 
        Indian tribal government (as defined in section 7701(a)(40) of 
        the Internal Revenue Code of 1986), a subdivision of an Indian 
        tribal government (determined in accordance with section 
        7871(d) of such Code), an agency or instrumentality of an 
        Indian tribal government or subdivision thereof, or an entity 
        established under Federal, State, or tribal law that is wholly 
        owned or controlled by any of the foregoing.''.

SEC. 1314. EFFECTIVE DATE.

    The amendments made by this subtitle shall apply to any year 
beginning before, on, or after the date of the enactment of this Act.

                  Subtitle C--Miscellaneous Provisions

SEC. 1321. TRANSFER OF EXCESS FUNDS FROM BLACK LUNG DISABILITY TRUSTS 
              TO UNITED MINE WORKERS OF AMERICA COMBINED BENEFIT FUND.

    (a) In General.--So much of section 501(c)(21)(C) of the Internal 
Revenue Code of 1986 (relating to black lung disability trusts) as 
precedes the last sentence is amended to read as follows:
                    ``(C) Payments described in subparagraph (A)(i)(IV) 
                may be made from such trust during a taxable year only 
                to the extent that the aggregate amount of such 
                payments during such taxable year does not exceed the 
                excess (if any), as of the close of the preceding 
                taxable year, of--
                            ``(i) the fair market value of the assets 
                        of the trust, over
                            ``(ii) 110 percent of the present value of 
                        the liability described in subparagraph 
                        (A)(i)(I) of such person.''
    (b) Transfer.--Section 9705 of such Code (relating to transfer) is 
amended by adding at the end the following new subsection:
    ``(c) Transfer From Black Lung Disability Trusts.--
            ``(1) In general.--The Secretary shall transfer each fiscal 
        year to the Fund from the general fund of the Treasury an 
        amount which the Secretary estimates to be the additional 
        amounts received in the Treasury for that fiscal year by reason 
        of the amendment made by section 1321(a) of the Pension 
        Security and Transparency Act of 2005. The Secretary shall 
        adjust the amount transferred for any year to the extent 
        necessary to correct errors in any estimate for any prior year.
            ``(2) Use of funds.--Any amount transferred to the Combined 
        Fund under paragraph (1) shall be used to proportionately 
        reduce the unassigned beneficiary premium under section 
        9704(a)(3) of each assigned operator for any plan year 
        beginning after December 31, 2002.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 1322. TREATMENT OF DEATH BENEFITS FROM CORPORATE-OWNED LIFE 
              INSURANCE.

    (a) In General.--Section 101 of the Internal Revenue Code of 1986 
(relating to certain death benefits) is amended by adding at the end 
the following new subsection:
    ``(j) Treatment of Certain Employer-Owned Life Insurance 
Contracts.--
            ``(1) General rule.--In the case of an employer-owned life 
        insurance contract, the amount excluded from gross income of an 
        applicable policyholder by reason of paragraph (1) of 
        subsection (a) shall not exceed an amount equal to the sum of 
        the premiums and other amounts paid by the policyholder for the 
        contract.
            ``(2) Exceptions.--In the case of an employer-owned life 
        insurance contract with respect to which the notice and consent 
        requirements of paragraph (4) are met, paragraph (1) shall not 
        apply to any of the following:
                    ``(A) Exceptions based on insured's status.--Any 
                amount received by reason of the death of an insured 
                who, with respect to an applicable policyholder--
                            ``(i) was an employee at any time during 
                        the 12-month period before the insured's death, 
                        or
                            ``(ii) is, at the time the contract is 
                        issued--
                                    ``(I) a director,
                                    ``(II) a highly compensated 
                                employee within the meaning of section 
                                414(q) (without regard to paragraph 
                                (1)(B)(ii) thereof), or
                                    ``(III) a highly compensated 
                                individual within the meaning of 
                                section 105(h)(5), except that `35 
                                percent' shall be substituted for `25 
                                percent' in subparagraph (C) thereof.
                    ``(B) Exception for amounts paid to insured's 
                heirs.--Any amount received by reason of the death of 
                an insured to the extent--
                            ``(i) the amount is paid to a member of the 
                        family (within the meaning of section 
                        267(c)(4)) of the insured, any individual who 
                        is the designated beneficiary of the insured 
                        under the contract (other than the applicable 
                        policyholder), a trust established for the 
                        benefit of any such member of the family or 
                        designated beneficiary, or the estate of the 
                        insured, or
                            ``(ii) the amount is used to purchase an 
                        equity (or capital or profits) interest in the 
                        applicable policyholder from any person 
                        described in clause (i).
            ``(3) Employer-owned life insurance contract.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `employer-owned life insurance contract' means 
                a life insurance contract which--
                            ``(i) is owned by a person engaged in a 
                        trade or business and under which such person 
                        (or a related person described in subparagraph 
                        (B)(ii)) is directly or indirectly a 
                        beneficiary under the contract, and
                            ``(ii) covers the life of an insured who is 
                        an employee with respect to the trade or 
                        business of the applicable policyholder on the 
                        date the contract is issued.
                For purposes of the preceding sentence, if coverage for 
                each insured under a master contract is treated as a 
                separate contract for purposes of sections 817(h), 
                7702, and 7702A, coverage for each such insured shall 
                be treated as a separate contract.
                    ``(B) Applicable policyholder.--For purposes of 
                this subsection--
                            ``(i) In general.--The term `applicable 
                        policyholder' means, with respect to any 
                        employer-owned life insurance contract, the 
                        person described in subparagraph (A)(i) which 
                        owns the contract.
                            ``(ii) Related persons.--The term 
                        `applicable policyholder' includes any person 
                        which--
                                    ``(I) bears a relationship to the 
                                person described in clause (i) which is 
                                specified in section 267(b) or 
                                707(b)(1), or
                                    ``(II) is engaged in trades or 
                                businesses with such person which are 
                                under common control (within the 
                                meaning of subsection (a) or (b) of 
                                section 52).
            ``(4) Notice and consent requirements.--The notice and 
        consent requirements of this paragraph are met if, before the 
        issuance of the contract, the employee--
                    ``(A) is notified in writing that the applicable 
                policyholder intends to insure the employee's life and 
                the maximum face amount for which the employee could be 
                insured at the time the contract was issued,
                    ``(B) provides written consent to being insured 
                under the contract and that such coverage may continue 
                after the insured terminates employment, and
                    ``(C) is informed in writing that an applicable 
                policyholder will be a beneficiary of any proceeds 
                payable upon the death of the employee.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Employee.--The term `employee' includes an 
                officer, director, and highly compensated employee 
                (within the meaning of section 414(q)).
                    ``(B) Insured.--The term `insured' means, with 
                respect to an employer-owned life insurance contract, 
                an individual covered by the contract who is a United 
                States citizen or resident. In the case of a contract 
                covering the joint lives of 2 individuals, references 
                to an insured include both of the individuals.''.
    (b) Reporting Requirements.--Subpart A of part III of subchapter A 
of chapter 61 of the Internal Revenue Code of 1986 (relating to 
information concerning persons subject to special provisions) is 
amended by inserting after section 6039H the following new section:

``SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO EMPLOYER-OWNED LIFE 
              INSURANCE CONTRACTS.

    ``(a) In General.--Every applicable policyholder owning 1 or more 
employer-owned life insurance contracts issued after the date of the 
enactment of this section shall file a return (at such time and in such 
manner as the Secretary shall by regulations prescribe) showing for 
each year such contracts are owned--
            ``(1) the number of employees of the applicable 
        policyholder at the end of the year,
            ``(2) the number of such employees insured under such 
        contracts at the end of the year,
            ``(3) the total amount of insurance in force at the end of 
        the year under such contracts,
            ``(4) the name, address, and taxpayer identification number 
        of the applicable policyholder and the type of business in 
        which the policyholder is engaged, and
            ``(5) that the applicable policyholder has a valid consent 
        for each insured employee (or, if all such consents are not 
        obtained, the number of insured employees for whom such consent 
        was not obtained).
    ``(b) Recordkeeping Requirement.--Each applicable policyholder 
owning 1 or more employer-owned life insurance contracts during any 
year shall keep such records as may be necessary for purposes of 
determining whether the requirements of this section and section 101(j) 
are met.
    ``(c) Definitions.--Any term used in this section which is used in 
section 101(j) shall have the same meaning given such term by section 
101(j).''.
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 101(a) of the Internal Revenue 
        Code of 1986 is amended by striking ``and subsection (f)'' and 
        inserting ``subsection (f), and subsection (j)''.
            (2) The table of sections for subpart A of part III of 
        subchapter A of chapter 61 of such Code is amended by inserting 
        after the item relating to section 6039H the following new 
        item:

``Sec. 6039I. Returns and records with respect to employer-owned life 
                            insurance contracts.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to life insurance contracts issued after the date of the 
enactment of this Act, except for a contract issued after such date 
pursuant to an exchange described in section 1035 of the Internal 
Revenue Code of 1986 for a contract issued on or prior to that date. 
For purposes of the preceding sentence, any material increase in the 
death benefit or other material change shall cause the contract to be 
treated as a new contract except that, in the case of a master contract 
(within the meaning of section 264(f)(4)(E) of such Code), the addition 
of covered lives shall be treated as a new contract only with respect 
to such additional covered lives.

              Subtitle D--Other Related Pension Provisions

                  PART I--HEALTH AND MEDICAL BENEFITS

SEC. 1331. USE OF EXCESS PENSION ASSETS FOR FUTURE RETIREE HEALTH 
              BENEFITS.

    (a) In General.--Section 420 of the Internal Revenue Code of 1986 
(relating to transfers of excess pension assets to retiree health 
accounts), as amended by this Act, is amended by adding at the end the 
following new subsection:
    ``(f) Qualified Transfer To Cover Future Retiree Health Costs.--
            ``(1) In general.--An employer maintaining a defined 
        benefit plan (other than a multiemployer plan) may elect for 
        any taxable year to have the plan make a qualified future 
        transfer rather than a qualified transfer for the taxable year. 
        Except as provided in this subsection, a qualified future 
        transfer shall be treated for purposes of this title and the 
        Employee Retirement Income Security Act of 1974 as if it were a 
        qualified transfer.
            ``(2) Qualified future transfer.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified future 
                transfer' means a transfer which meets all of the 
                requirements for a qualified transfer, except that--
                            ``(i) the determination of excess pension 
                        assets shall be made under subparagraph (B),
                            ``(ii) the limitation on the amount 
                        transferred shall be made under subparagraph 
                        (C), and
                            ``(iii) the minimum cost requirements of 
                        subsection (c)(3) shall be modified as provided 
                        under subparagraph (D).
                    ``(B) Excess pension assets.--
                            ``(i) In general.--In determining excess 
                        pension assets for purposes of this subsection, 
                        subsection (e)(2) shall be applied by 
                        substituting `115 percent' for `125 percent'.
                            ``(ii) Requirement to maintain funded 
                        status.--If, as of any valuation date of any 
                        plan year in the transfer period, the amount 
                        determined under subsection (e)(2)(B) (after 
                        application of clause (i)) exceeds the amount 
                        determined under subsection (e)(2)(A), either--
                                    ``(I) the employer maintaining the 
                                plan shall make contributions to the 
                                plan in an amount not less than the 
                                amount required to reduce such excess 
                                to zero as of such date, or
                                    ``(II) there is transferred from 
                                the health benefits account to the plan 
                                an amount not less than the amount 
                                required to reduce such excess to zero 
                                as of such date.
                    ``(C) Limitation on amount transferred.--
                Notwithstanding subsection (b)(3), the amount of the 
                excess pension assets which may be transferred in a 
                qualified future transfer shall be equal to the sum 
                of--
                            ``(i) if the transfer period includes the 
                        taxable year of the transfer, the amount 
                        determined under subsection (b)(3) for such 
                        taxable year, plus
                            ``(ii) in the case of all other taxable 
                        years in the transfer period, the sum of the 
                        qualified current retiree health liabilities 
                        which the plan reasonably estimates, in 
                        accordance with guidance issued by the 
                        Secretary, will be incurred for each of such 
                        years.
                    ``(D) Minimum cost requirements.--
                            ``(i) In general.--The requirements of 
                        subsection (c)(3) shall be treated as met if 
                        each group health plan or arrangement under 
                        which applicable health benefits are provided 
                        provides applicable health benefits during the 
                        period beginning with the first year of the 
                        transfer period and ending with the last day of 
                        the 4th year following the transfer period such 
                        that the annual average amount of such benefits 
                        provided during such period is not less than 
                        the applicable employer cost determined under 
                        subsection (c)(3)(A) with respect to the 
                        transfer.
                            ``(ii) Election to maintain benefits.--An 
                        employer may elect, in lieu of the requirements 
                        of clause (i), to meet the requirements of 
                        subsection (c)(3) by meeting the requirements 
                        of such subsection (as in effect before the 
                        amendments made by section 535 of the Tax 
                        Relief Extension Act of 1999) for each of the 
                        years described in the period under clause (i).
            ``(3) Coordination with other transfers.--In applying 
        subsection (b)(3) to any subsequent transfer during a taxable 
        year in a transfer period, qualified current retiree health 
        liabilities shall be reduced by any such liabilities taken into 
        account with respect to the qualified future transfer to which 
        such period relates.
            ``(4) Transfer period.--For purposes of this subsection, 
        the term `transfer period' means, with respect to any transfer, 
        a period of consecutive taxable years specified in the election 
        under paragraph (1) which begins and ends during the 10-
        taxable-year period beginning with the taxable year of the 
        transfer.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers after the date of the enactment of this Act.

SEC. 1332. SPECIAL RULES FOR FUNDING OF COLLECTIVELY BARGAINED 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.''.
    (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. The Secretary shall 
                provide rules to ensure that the application of this 
                section does not result in a deduction being allowed 
                more than once for the same contribution or for 2 or 
                more contributions or expenditures relating to the same 
                collectively bargained retiree health liabilities.''.
    (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, 2005, and
                    ``(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,
                    ``(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, and
                    ``(F) which involves--
                            ``(i) a plan maintained by an employer 
                        which, in its taxable year ending in 2005, 
                        provided health benefits or coverage to 
                        retirees and their spouses and dependents under 
                        all of the benefit plans maintained by the 
                        employer, but only if the aggregate cost 
                        (including administrative expenses) of such 
                        benefits or coverage which would have been 
                        allowable as a deduction to the employer (if 
                        such benefits or coverage had been provided 
                        directly by the employer and the employer used 
                        the cash receipts and disbursements method of 
                        accounting) is at least 5 percent of the gross 
                        receipts of the employer (determined in 
                        accordance with the last sentence of subsection 
                        (c)(2)(E)(ii)(II)) for such taxable year,
                            ``(ii) or a plan maintained by a successor 
                        to such employer.
                Such term shall not include a transfer after December 
                31, 2013.
            ``(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 Amendment.--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''.
    (f) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2004.

SEC. 1333. ALLOWANCE OF RESERVE FOR MEDICAL BENEFITS OF PLANS SPONSORED 
              BY BONA FIDE ASSOCIATIONS.

    (a) In General.--Section 419A(c) of the Internal Revenue Code of 
1986 (relating to account limit) is amended by adding at the end the 
following new paragraph:
            ``(6) Additional reserve for medical benefits of bona fide 
        association plans.--
                    ``(A) In general.--An applicable account limit for 
                any taxable year may include a reserve in an amount not 
                to exceed 35 percent of the sum of--
                            ``(i) the qualified direct costs, and
                            ``(ii) the change in claims incurred but 
                        unpaid,
                for such taxable year with respect to medical benefits 
                (other than post-retirement medical benefits).
                    ``(B) Applicable account limit.--For purposes of 
                this subsection, the term `applicable account limit' 
                means an account limit for a qualified asset account 
                with respect to medical benefits provided through a 
                plan maintained by a bona fide association (as defined 
                in section 2791(d)(3) of the Public Health Service Act 
                (42 U.S.C. 300gg-91(d)(3))''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after December 31, 2005.

                 PART II--CASH OR DEFERRED ARRANGEMENTS

SEC. 1336. TREATMENT OF ELIGIBLE COMBINED DEFINED BENEFIT PLANS AND 
              QUALIFIED CASH OR DEFERRED ARRANGEMENTS.

    (a) Amendments of Internal Revenue Code.--Section 414 of the 
Internal Revenue Code of 1986, as amended by this Act, is amended by 
adding at the end the following new subsection:
    ``(x) Special Rules for Eligible Combined Defined Benefit Plans and 
Qualified Cash or Deferred Arrangements.--
            ``(1) General rule.--Except as provided in this subsection, 
        the requirements of this title shall be applied to any defined 
        benefit plan or applicable defined contribution plan which are 
        part of an eligible combined plan in the same manner as if each 
        such plan were not a part of the eligible combined plan.
            ``(2) Eligible combined plan.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `eligible combined 
                plan' means a plan--
                            ``(i) which is maintained by an employer 
                        which, at the time the plan is established, is 
                        a small employer,
                            ``(ii) which consists of a defined benefit 
                        plan and an applicable defined contribution 
                        plan,
                            ``(iii) the assets of which are held in a 
                        single trust forming part of the plan and are 
                        clearly identified and allocated to the defined 
                        benefit plan and the applicable defined 
                        contribution plan to the extent necessary for 
                        the separate application of this title under 
                        paragraph (1), and
                            ``(iv) with respect to which the benefit, 
                        contribution, vesting, and nondiscrimination 
                        requirements of subparagraphs (B), (C), (D), 
                        (E), and (F) are met.
                For purposes of this subparagraph, the term `small 
                employer' has the meaning given such term by section 
                4980D(d)(2), except that such section shall be applied 
                by substituting `500' for `50' each place it appears.
                    ``(B) Benefit requirements.--
                            ``(i) In general.--The benefit requirements 
                        of this subparagraph are met with respect to 
                        the defined benefit plan forming part of the 
                        eligible combined plan if the accrued benefit 
                        of each participant derived from employer 
                        contributions, when expressed as an annual 
                        retirement benefit, is not less than the 
                        applicable percentage of the participant's 
                        final average pay. For purposes of this clause, 
                        final average pay shall be determined using the 
                        period of consecutive years (not exceeding 5) 
                        during which the participant had the greatest 
                        aggregate compensation from the employer.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is the 
                        lesser of--
                                    ``(I) 1 percent multiplied by the 
                                number of years of service with the 
                                employer, or
                                    ``(II) 20 percent.
                            ``(iii) Special rule for cash balance 
                        plans.--If the defined benefit plan under 
                        clause (i) is a qualified cash balance plan 
                        (within the meaning of section 411(b)(5)), the 
                        plan shall be treated as meeting the 
                        requirements of clause (i) with respect to any 
                        plan year if each participant receives pay 
                        credit for the year which is not less than the 
                        percentage of compensation determined in 
                        accordance with the following table:

``If the participant's age as of                                       
        the
    beginning of the year is--                      The percentage is--
    30 or less....................................                  2  
    Over 30 but less than 40......................                  4  
    40 or over but less than 50...................                  6  
    50 or over....................................                 8.  
                            ``(iv) Years of service.--For purposes of 
                        this subparagraph, years of service shall be 
                        determined under the rules of paragraphs (4), 
                        (5), and (6) of section 411(a), except that the 
                        plan may not disregard any year of service 
                        because of a participant making, or failing to 
                        make, any elective deferral with respect to the 
                        qualified cash or deferred arrangement to which 
                        subparagraph (C) applies.
                    ``(C) Contribution requirements.--
                            ``(i) In general.--The contribution 
                        requirements of this subparagraph with respect 
                        to any applicable defined contribution plan 
                        forming part of eligible combined plan are met 
                        if--
                                    ``(I) the qualified cash or 
                                deferred arrangement included in such 
                                plan constitutes an automatic 
                                contribution arrangement, and
                                    ``(II) the employer is required to 
                                make matching contributions on behalf 
                                of each employee eligible to 
                                participate in the arrangement in an 
                                amount equal to 50 percent of the 
                                elective contributions of the employee 
                                to the extent such elective 
                                contributions do not exceed 4 percent 
                                of compensation.
                        Rules similar to the rules of clauses (ii) and 
                        (iii) of section 401(k)(12)(B) shall apply for 
                        purposes of this clause.
                            ``(ii) Nonelective contributions.--An 
                        applicable defined contribution plan shall not 
                        be treated as failing to meet the requirements 
                        of clause (i) because the employer makes 
                        nonelective contributions under the plan but 
                        such contributions shall not be taken into 
                        account in determining whether the requirements 
                        of clause (i)(II) are met.
                    ``(D) Vesting requirements.--The vesting 
                requirements of this subparagraph are met if--
                            ``(i) in the case of a defined benefit plan 
                        forming part of an eligible combined plan an 
                        employee who has completed at least 3 years of 
                        service has a nonforfeitable right to 100 
                        percent of the employee's accrued benefit under 
                        the plan derived from employer contributions, 
                        and
                            ``(ii) in the case of an applicable defined 
                        contribution plan forming part of eligible 
                        combined plan--
                                    ``(I) an employee has a 
                                nonforfeitable right to any matching 
                                contribution made under the qualified 
                                cash or deferred arrangement included 
                                in such plan by an employer with 
                                respect to any elective contribution, 
                                including matching contributions in 
                                excess of the contributions required 
                                under subparagraph (C)(i)(II), and
                                    ``(II) an employee who has 
                                completed at least 3 years of service 
                                has a nonforfeitable right to 100 
                                percent of the employee's accrued 
                                benefit derived under the arrangement 
                                from nonelective contributions of the 
                                employer.
                        For purposes of this subparagraph, the rules of 
                        section 411 shall apply to the extent not 
                        inconsistent with this subparagraph.
                    ``(E) Uniform provision of benefits.--In the case 
                of a defined benefit plan or applicable defined 
                contribution plan forming part of an eligible combined 
                plan, the requirements of this subparagraph are met if 
                all benefits under each such plan, and all rights and 
                features under each such plan, must be provided 
                uniformly to all participants.
                    ``(F) Requirements must be met without taking into 
                account social security and similar contributions and 
                benefits or other plans.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if the requirements of 
                        clauses (ii) and (iii) are met.
                            ``(ii) Social security and similar 
                        contributions.--The requirements of this clause 
                        are met if--
                                    ``(I) the requirements of 
                                subparagraphs (B) and (C) are met 
                                without regard to section 401(l), and
                                    ``(II) the requirements of sections 
                                401(a)(4) and 410(b) are met with 
                                respect to both the applicable defined 
                                contribution plan and defined benefit 
                                plan forming part of an eligible 
                                combined plan without regard to section 
                                401(l).
                            ``(iii) Other plans and arrangements.--The 
                        requirements of this clause are met if the 
                        applicable defined contribution plan and 
                        defined benefit plan forming part of an 
                        eligible combined plan meet the requirements of 
                        sections 401(a)(4) and 410(b) without being 
                        combined with any other plan.
            ``(3) Nondiscrimination requirements for qualified cash or 
        deferred arrangement.--
                    ``(A) In general.--A qualified cash or deferred 
                arrangement which is included in an applicable defined 
                contribution plan forming part of an eligible combined 
                plan shall be treated as meeting the requirements of 
                section 401(k)(3)(A)(ii) if the requirements of 
                paragraph (2)(C) are met with respect to such 
                arrangement.
                    ``(B) Matching contributions.--In applying section 
                401(m)(11) to any matching contribution with respect to 
                a contribution to which paragraph (2)(C) applies, the 
                contribution requirement of paragraph (2)(C) and the 
                notice requirements of paragraph (5)(B) shall be 
                substituted for the requirements otherwise applicable 
                under clauses (i) and (ii) of section 401(m)(11)(A).
            ``(4) Satisfaction of top-heavy rules.--A defined benefit 
        plan and applicable defined contribution plan forming part of 
        an eligible combined plan for any plan year shall be treated as 
        meeting the requirements of section 416 for the plan year.
            ``(5) Automatic contribution arrangement.--For purposes of 
        this subsection--
                    ``(A) In general.--A qualified cash or deferred 
                arrangement shall be treated as an automatic 
                contribution arrangement if the arrangement--
                            ``(i) provides that each employee eligible 
                        to participate in the arrangement is treated as 
                        having elected to have the employer make 
                        elective contributions in an amount equal to 4 
                        percent of the employee's compensation unless 
                        the employee specifically elects not to have 
                        such contributions made or to have such 
                        contributions made at a different rate, and
                            ``(ii) meets the notice requirements under 
                        subparagraph (B).
                    ``(B) Notice requirements.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if the requirements of 
                        clauses (ii) and (iii) are met.
                            ``(ii) Reasonable period to make 
                        election.--The requirements of this clause are 
                        met if each employee to whom subparagraph 
                        (A)(i) applies--
                                    ``(I) receives a notice explaining 
                                the employee's right under the 
                                arrangement to elect not to have 
                                elective contributions made on the 
                                employee's behalf or to have the 
                                contributions made at a different rate, 
                                and
                                    ``(II) has a reasonable period of 
                                time after receipt of such notice and 
                                before the first elective contribution 
                                is made to make such election.
                            ``(iii) Annual notice of rights and 
                        obligations.--The requirements of this clause 
                        are met if each employee eligible to 
                        participate in the arrangement is, within a 
                        reasonable period before any year, given notice 
                        of the employee's rights and obligations under 
                        the arrangement.
                The requirements of clauses (i) and (ii) of section 
                401(k)(12)(D) shall be met with respect to the notices 
                described in clauses (ii) and (iii) of this 
                subparagraph.
            ``(6) Coordination with other requirements.--
                    ``(A) Treatment of separate plans.--Section 414(k) 
                shall not apply to an eligible combined plan.
                    ``(B) Reporting.--An eligible combined plan shall 
                be treated as a single plan for purposes of sections 
                6058 and 6059.
            ``(7) Applicable defined contribution plan.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `applicable defined 
                contribution plan' means a defined contribution plan 
                which includes a qualified cash or deferred 
                arrangement.
                    ``(B) Qualified cash or deferred arrangement.--The 
                term `qualified cash or deferred arrangement' has the 
                meaning given such term by section 401(k)(2).''.
    (b) Amendments of ERISA.--
            (1) In general.--Section 210 of the Employee Retirement 
        Income Security Act of 1974 is amended by adding at the end the 
        following new subsection:
    ``(e) Special Rules for Eligible Combined Defined Benefit Plans and 
Qualified Cash or Deferred Arrangements.--
            ``(1) General rule.--Except as provided in this subsection, 
        this Act shall be applied to any defined benefit plan or 
        applicable individual account plan which are part of an 
        eligible combined plan in the same manner as if each such plan 
        were not a part of the eligible combined plan.
            ``(2) Eligible combined plan.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `eligible combined 
                plan' means a plan--
                            ``(i) which, at the time the plan is 
                        established, is maintained by a small employer,
                            ``(ii) which consists of a defined benefit 
                        plan and an applicable individual account plan 
                        each of which qualifies under section 401(a) of 
                        the Internal Revenue Code of 1986,
                            ``(iii) the assets of which are held in a 
                        single trust forming part of the plan and are 
                        clearly identified and allocated to the defined 
                        benefit plan and the applicable individual 
                        account plan to the extent necessary for the 
                        separate application of this Act under 
                        paragraph (1), and
                            ``(iv) with respect to which the benefit, 
                        contribution, vesting, and nondiscrimination 
                        requirements of subparagraphs (B), (C), (D), 
                        (E), and (F) are met.
                For purposes of this subparagraph, the term `small 
                employer' has the meaning given such term by section 
                4980D(d)(2), except that such section shall be applied 
                by substituting `500' for `50' each place it appears.
                    ``(B) Benefit requirements.--
                            ``(i) In general.--The benefit requirements 
                        of this subparagraph are met with respect to 
                        the defined benefit plan forming part of the 
                        eligible combined plan if the accrued benefit 
                        of each participant derived from employer 
                        contributions, when expressed as an annual 
                        retirement benefit, is not less than the 
                        applicable percentage of the participant's 
                        final average pay. For purposes of this clause, 
                        final average pay shall be determined using the 
                        period of consecutive years (not exceeding 5) 
                        during which the participant had the greatest 
                        aggregate compensation from the employer.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is the 
                        lesser of--
                                    ``(I) 1 percent multiplied by the 
                                number of years of service with the 
                                employer, or
                                    ``(II) 20 percent.
                            ``(iii) Special rule for cash balance 
                        plans.--If the defined benefit plan under 
                        clause (i) is a qualified cash balance plan 
                        (within the meaning of section 204(b)(5)), the 
                        plan shall be treated as meeting the 
                        requirements of clause (i) with respect to any 
                        plan year if each participant receives pay 
                        credit for the year which is not less than the 
                        percentage of compensation determined in 
                        accordance with the following table:

``If the participant's age as of                                       
        the
    beginning of the year is--                      The percentage is--
    30 or less....................................                  2  
    Over 30 but less than 40......................                  4  
    40 or over but less than 50...................                  6  
    50 or over....................................                 8.  
                            ``(iv) Years of service.--For purposes of 
                        this subparagraph, years of service shall be 
                        determined under the rules of paragraphs (1), 
                        (2), and (3) of section 203(b), except that the 
                        plan may not disregard any year of service 
                        because of a participant making, or failing to 
                        make, any elective deferral with respect to the 
                        qualified cash or deferred arrangement to which 
                        subparagraph (C) applies.
                    ``(C) Contribution requirements.--
                            ``(i) In general.--The contribution 
                        requirements of this subparagraph with respect 
                        to any applicable individual account plan 
                        forming part of eligible combined plan are met 
                        if--
                                    ``(I) the qualified cash or 
                                deferred arrangement included in such 
                                plan constitutes an automatic 
                                contribution arrangement, and
                                    ``(II) the employer is required to 
                                make matching contributions on behalf 
                                of each employee eligible to 
                                participate in the arrangement in an 
                                amount equal to 50 percent of the 
                                elective contributions of the employee 
                                to the extent such elective 
                                contributions do not exceed 4 percent 
                                of compensation.
                        Rules similar to the rules of clauses (ii) and 
                        (iii) of section 401(k)(12)(B) of the Internal 
                        Revenue Code of 1986 shall apply for purposes 
                        of this clause.
                            ``(ii) Nonelective contributions.--An 
                        applicable individual account plan shall not be 
                        treated as failing to meet the requirements of 
                        clause (i) because the employer makes 
                        nonelective contributions under the plan but 
                        such contributions shall not be taken into 
                        account in determining whether the requirements 
                        of clause (i)(II) are met.
                    ``(D) Vesting requirements.--The vesting 
                requirements of this subparagraph are met if--
                            ``(i) in the case of a defined benefit plan 
                        forming part of an eligible combined plan an 
                        employee who has completed at least 3 years of 
                        service has a nonforfeitable right to 100 
                        percent of the employee's accrued benefit under 
                        the plan derived from employer contributions, 
                        and
                            ``(ii) in the case of an applicable 
                        individual account plan forming part of 
                        eligible combined plan--
                                    ``(I) an employee has a 
                                nonforfeitable right to any matching 
                                contribution made under the qualified 
                                cash or deferred arrangement included 
                                in such plan by an employer with 
                                respect to any elective contribution, 
                                including matching contributions in 
                                excess of the contributions required 
                                under subparagraph (C)(i)(II), and
                                    ``(II) an employee who has 
                                completed at least 3 years of service 
                                has a nonforfeitable right to 100 
                                percent of the employee's accrued 
                                benefit derived under the arrangement 
                                from nonelective contributions of the 
                                employer.
                        For purposes of this subparagraph, the rules of 
                        section 203 shall apply to the extent not 
                        inconsistent with this subparagraph.
                    ``(E) Uniform provision of benefits.--In the case 
                of a defined benefit plan or applicable individual 
                account plan forming part of an eligible combined plan, 
                the requirements of this subparagraph are met if all 
                benefits under each such plan, and all rights and 
                features under each such plan, must be provided 
                uniformly to all participants.
                    ``(F) Requirements must be met without taking into 
                account social security and similar contributions and 
                benefits or other plans.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if the requirements of 
                        clauses (ii) and (iii) are met.
                            ``(ii) Social security and similar 
                        contributions.--The requirements of this clause 
                        are met if--
                                    ``(I) the requirements of 
                                subparagraphs (B) and (C) are met 
                                without regard to section 401(l) of the 
                                Internal Revenue Code of 1986, and
                                    ``(II) the requirements of sections 
                                401(a)(4) and 410(b) of the Internal 
                                Revenue Code of 1986 are met with 
                                respect to both the applicable defined 
                                contribution plan and defined benefit 
                                plan forming part of an eligible 
                                combined plan without regard to section 
                                401(l) of the Internal Revenue Code of 
                                1986.
                            ``(iii) Other plans and arrangements.--The 
                        requirements of this clause are met if the 
                        applicable defined contribution plan and 
                        defined benefit plan forming part of an 
                        eligible combined plan meet the requirements of 
                        sections 401(a)(4) and 410(b) of the Internal 
                        Revenue Code of 1986 without being combined 
                        with any other plan.
            ``(3) Nondiscrimination requirements for qualified cash or 
        deferred arrangement.--
                    ``(A) In general.--A qualified cash or deferred 
                arrangement which is included in an applicable 
                individual account plan forming part of an eligible 
                combined plan shall be treated as meeting the 
                requirements of section 401(k)(3)(A)(ii) of the 
                Internal Revenue Code of 1986 if the requirements of 
                subparagraph (C) are met with respect to such 
                arrangement.
                    ``(B) Matching contributions.--In applying section 
                401(m)(11) of such Code to any matching contribution 
                with respect to a contribution to which paragraph 
                (2)(C) applies, the contribution requirement of 
                paragraph (2)(C) and the notice requirements of 
                paragraph (5)(B) shall be substituted for the 
                requirements otherwise applicable under clauses (i) and 
                (ii) of section 401(m)(11)(A) of such Code.
            ``(4) Automatic contribution arrangement.--For purposes of 
        this subsection--
                    ``(A) In general.--A qualified cash or deferred 
                arrangement shall be treated as an automatic 
                contribution arrangement if the arrangement--
                            ``(i) provides that each employee eligible 
                        to participate in the arrangement is treated as 
                        having elected to have the employer make 
                        elective contributions in an amount equal to 4 
                        percent of the employee's compensation unless 
                        the employee specifically elects not to have 
                        such contributions made or to have such 
                        contributions made at a different rate, and
                            ``(ii) meets the notice requirements under 
                        subparagraph (B).
                    ``(B) Notice requirements.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if the requirements of 
                        clauses (ii) and (iii) are met.
                            ``(ii) Reasonable period to make 
                        election.--The requirements of this clause are 
                        met if each employee to whom subparagraph 
                        (A)(i) applies--
                                    ``(I) receives a notice explaining 
                                the employee's right under the 
                                arrangement to elect not to have 
                                elective contributions made on the 
                                employee's behalf or to have the 
                                contributions made at a different rate, 
                                and
                                    ``(II) has a reasonable period of 
                                time after receipt of such notice and 
                                before the first elective contribution 
                                is made to make such election.
                            ``(iii) Annual notice of rights and 
                        obligations.--The requirements of this clause 
                        are met if each employee eligible to 
                        participate in the arrangement is, within a 
                        reasonable period before any year, given notice 
                        of the employee's rights and obligations under 
                        the arrangement.
                The requirements of clauses (i) and (ii) of section 
                401(k)(12)(D) of the Internal Revenue Code of 1986 
                shall be met with respect to the notices described in 
                clauses (ii) and (iii) of this subparagraph.
            ``(5) Coordination with other requirements.--
                    ``(A) Treatment of separate plans.--Section 414(k) 
                of the Internal Revenue Code of 1986 shall not apply to 
                an eligible combined plan.
                    ``(B) Reporting.--An eligible combined plan shall 
                be treated as a single plan for purposes of section 
                103.
            ``(6) Applicable individual account plan.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `applicable individual 
                account plan' means an individual account plan which 
                includes a qualified cash or deferred arrangement.
                    ``(B) Qualified cash or deferred arrangement.--The 
                term `qualified cash or deferred arrangement' has the 
                meaning given such term by section 401(k)(2) of the 
                Internal Revenue Code of 1986.''.
            (2) Conforming changes.--
                    (A) The heading for section 210 of such Act is 
                amended to read as follows:

``SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPECIAL RULES.''.

                    (B) The table of contents in section 1 of such Act 
                is amended by striking the item relating to section 210 
                and inserting the following new item:

``Sec. 210. Multiple employer plans and other special rules''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2008.

SEC. 1337. STATE AND LOCAL GOVERNMENTS ELIGIBLE TO MAINTAIN SECTION 
              401(K) PLANS.

    (a) In General.--Clause (ii) of section 401(k)(4)(B) of the 
Internal Revenue Code of 1986 (relating to governments ineligible) is 
amended to read as follows:
                            ``(ii) Governments eligible.--A State or 
                        local government or political subdivision 
                        thereof, or any agency or instrumentality 
                        thereof, may include a qualified cash or 
                        deferred arrangement as part of a plan 
                        maintained by it.''
    (b) Coordination With Section 457 Limits.--Section 402(g) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following:
            ``(9) Coordination of section 457 limits for state and 
        local governmental plans.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of an individual who is a 
                participant in 1 or more qualified cash or deferred 
                arrangements maintained by a governmental entity 
                described in section 401(k)(4)(B)(ii), the amount 
                excludable from gross income under paragraph (1) with 
                respect to the individual for any taxable year with 
                respect to elective deferrals under such arrangements 
                shall be reduced by the aggregate amounts deferred 
                under section 457 with respect to the individual for 
                the taxable year under 1 or more eligible deferred 
                compensation plans (as defined in section 457(b)) 
                maintained by an employer described in section 
                457(e)(1)(A).
                    ``(B) Special rule for pre-1986 grandfathered 
                plans.--Subparagraph (A) shall not apply to any 
                qualified cash or deferred arrangement maintained by a 
                governmental entity described in section 
                401(k)(4)(B)(ii) if the arrangement (or any 
                predecessor) was adopted by the entity before May 6, 
                1986, or treated as so adopted under section 
                1116(f)(2)(B) of the Tax Reform Act of 1986.''
    (c) Effective Dates.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2005.

                     PART III--EXCESS CONTRIBUTIONS

SEC. 1339. EXCESS CONTRIBUTIONS.

    (a) Expansion of Corrective Distribution Period for Automatic 
Contribution Arrangements.--Subsection (f) of section 4979 of the 
Internal Revenue Code of 1986 is amended--
            (1) by and inserting ``(6 months in the case of an excess 
        contribution or excess aggregate contribution to an eligible 
        automatic contribution arrangement (as defined in section 
        414(w)(3)))'' after ``2\1/2\ months'' in paragraph (1), and
            (2) by striking ``2\1/2\ Months of'' in the heading and 
        inserting ``Specified Period After''.
    (b) Year of Inclusion.--Paragraph (2) of section 4979(f) of such 
Code is amended to read as follows:
            ``(2) Year of inclusion.--Any amount distributed as 
        provided in paragraph (1) shall be treated as earned and 
        received by the recipient in the recipient's taxable year in 
        which such distributions were made.''.
    (c) Simplification of Allocable Earnings.--
            (1) Section 4979.--Subsection (f) of section 4979 of such 
        Code is amended--
                    (A) by adding ``through the end of the plan year 
                for which the contribution was made'' after ``thereto'' 
                in paragraph (1), and
                    (B) by adding ``through the end of the plan year 
                for which the contributions were made'' after 
                ``thereto'' in paragraph (2)(B).
            (2) Section 401(k) and 401(m).--
                    (A) Clause (i) of section 401(k)(8)(A) is amended 
                by adding ``through the end of such year'' after ``such 
                contributions''.
                    (B) Subparagraph (A) of section 401(m)(6) of such 
                Code is amended by adding ``through the end of such 
                year'' after ``to such contributions''.
    (d) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2005.

                       PART IV--OTHER PROVISIONS

SEC. 1341. AMENDMENTS RELATING TO PROHIBITED TRANSACTIONS.

    (a) Exemption for Block Trading.--
            (1) In general.--Section 408(b) of the Employee Retirement 
        Income Security Act (29 U.S.C. 1108(b)) is amended by adding at 
        the end the following new paragraph:
            ``(14) Block trading.--
                    ``(A) In general.--Any transaction involving the 
                purchase or sale of securities between a plan and a 
                party in interest (other than a fiduciary who has 
                investment discretion or control with respect to the 
                assets involved in the transaction or is providing 
                investment advice as a fiduciary for purposes of this 
                title to enter into the transaction) with respect to a 
                plan if--
                            ``(i) the transaction involves a block 
                        trade,
                            ``(ii) at the time of the transaction, the 
                        interest of the plan (together with the 
                        interests of any other plans maintained by the 
                        same plan sponsor) does not exceed 10 percent 
                        of the aggregate size of the block trade,
                            ``(iii) the terms of the transaction, 
                        including the price, are at least as favorable 
                        to the plan as an arm's length transaction, and
                            ``(iv) compensation associated with the 
                        purchase and sale is not greater than an arm's 
                        length transaction with an unrelated party.
                    ``(B) Block trade.--For purposes of this paragraph, 
                the term `block trade' includes any trade of at least 
                10,000 shares or with a market value of at least 
                $200,000 which will be allocated across two or more 
                unrelated client accounts of a fiduciary.''.
            (2) Conforming amendments.--
                    (A) Section 4975(d) of such Code is amended--
                            (i) by striking ``or'' at the end of 
                        paragraph (15),
                            (ii) by striking the period at the end of 
                        paragraph (16)(F) and inserting ``; or'', and
                            (iii) by adding at the end the following 
                        new paragraph:
            ``(17) any transaction involving the purchase or sale of 
        securities between a plan and a disqualified person (other than 
        a fiduciary who has investment discretion or control over the 
        transaction or is providing investment advice as a fiduciary 
        for purposes of title I of the Employee Retirement Income 
        Security Act to enter into the transaction) with respect to a 
        plan if--
                    ``(A) the transaction involves a block trade,
                    ``(B) at the time of the transaction, the interest 
                of the plan (together with the interests of any other 
                plans maintained by the same plan sponsor) does not 
                exceed 10 percent of the aggregate size of the block 
                trade,
                    ``(C) the terms of the transaction, including the 
                price, are at least as favorable to the plan as an 
                arm's length transaction, and
                    ``(D) compensation associated with the purchase and 
                sale is not greater than an arm's length transaction 
                with an unrelated party.''.
                    (B) Section 4975(e) of such Code is amended by 
                adding at the end the following new paragraph:
            ``(11) Block trade.--The term `block trade' includes any 
        trade of at least 10,000 shares or with a market value of at 
        least $200,000 which will be allocated across two or more 
        unrelated client accounts of a fiduciary.''.
    (b) Bonding Relief.--Section 412(a) of such Act (29 U.S.C. 1112(a)) 
is amended--
            (1) by redesignating paragraph (2) as paragraph (3),
            (2) by striking ``and'' at the end of paragraph (1), and
            (3) by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) no bond shall be required of any entity which is 
        registered as a broker or a dealer under section 15(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) if the 
        broker or dealer is subject to the fidelity bond requirements 
        of a self-regulatory organization (within the meaning of 
        section 3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).''.
    (c) Exemption for Financial Markets Trading Systems.--
            (1) In general.--Section 408(b) of such Act, as amended by 
        subsection (b)(1), is amended by adding at the end the 
        following new paragraph:
            ``(15) Financial markets trading systems.--Any transaction 
        involving the purchase and sale of securities between a plan 
        and a fiduciary or a party in interest if--
                    ``(A) the transaction is executed through--
                            ``(i) a national securities exchange or a 
                        trading system owned by a national securities 
                        association registered with the Securities and 
                        Exchange Commission, regardless of whether such 
                        fiduciary or party in interest (or any 
                        affiliate of either) has an interest in such 
                        exchange or trading system,
                            ``(ii) an alternative trading system or 
                        electronic communication network subject to 
                        regulation and oversight by the Securities and 
                        Exchange Commission, regardless of whether such 
                        fiduciary or party in interest (or any 
                        affiliate of either) has an interest in such 
                        alternative trading system or electronic 
                        communications network, or
                            ``(iii) any other trading system for 
                        securities or other property approved by the 
                        Secretary through regulatory or exemptive 
                        relief,
                    ``(B) the price associated with the purchase and 
                sale is at least as favorable as an arm's length 
                transaction with an unrelated party,
                    ``(C) the compensation associated with the purchase 
                and sale is not greater than an arm's length 
                transaction with an unrelated party,
                    ``(D) in the event the fiduciary or party in 
                interest directing the transaction (or any affiliate of 
                either) has an ownership interest in the trading system 
                (other than an exchange or trading system described in 
                subparagraph (A)(i)), the execution of transactions on 
                such system is annually authorized by a plan fiduciary,
                    ``(E) the transaction is executed in accordance 
                with the nondiscretionary rules and procedures adopted 
                by such trading system to match offsetting orders, and
                    ``(F) in the event the transaction is not executed 
                on an exchange or trading system described in 
                subparagraph (A)(i)--
                            ``(i) neither the trading system nor the 
                        parties to the transaction take into account 
                        the identity of the parties in the execution of 
                        trades, and the parties to the transaction do 
                        not actually know the identity of the other at 
                        the time that the terms and price of the 
                        transaction are agreed to, or
                            ``(ii) the transaction is effected pursuant 
                        to rules designed to match purchases and sales 
                        at the best price available through the trading 
                        system.''.
            (2) Conforming amendment.--Section 4975(d) of such Code (as 
        amended by subsection (b)(2)) is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (16),
                    (B) by striking the period at the end of paragraph 
                (17)(E) and inserting ``; or'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(18) any transaction involving the purchase and sale of 
        securities or other property between a plan and a fiduciary or 
        a disqualified person if--
                    ``(A) the transaction is executed through--
                            ``(i) a national securities exchange or a 
                        trading system owned by a national securities 
                        association registered with the Securities and 
                        Exchange Commission, regardless of whether such 
                        fiduciary or disqualified person (or any 
                        affiliate of either) has an interest in such 
                        exchange or trading system,
                            ``(ii) an alternative trading system or 
                        electronic communication network subject to 
                        regulation and oversight by the Securities and 
                        Exchange Commission, regardless of whether such 
                        fiduciary or disqualified person (or any 
                        affiliate of either) has an interest in such 
                        alternative trading system or electronic 
                        communications network, or
                            ``(iii) any other trading system for 
                        securities or other property approved by the 
                        Secretary through regulatory or exemptive 
                        relief,
                    ``(B) the price associated with the purchase and 
                sale is at least as favorable as an arm's length 
                transaction with an unrelated party,
                    ``(C) the compensation associated with the purchase 
                and sale is not greater than an arm's length 
                transaction with an unrelated party,
                    ``(D) in the event the fiduciary or disqualified 
                person directing the transaction (or any affiliate of 
                either) has an ownership interest in the trading system 
                (other than an exchange or trading system described in 
                subparagraph (A)(i)), the execution of transactions on 
                such system is annually authorized by a plan fiduciary,
                    ``(E) the transaction is executed in accordance 
                with the nondiscretionary rules and procedures adopted 
                by such trading system to match offsetting orders, and
                    ``(F) in the event the transaction is not executed 
                on an exchange or trading system described in 
                subparagraph (A)(i)--
                            ``(i) neither the trading system nor the 
                        parties to the transaction take into account 
                        the identity of the parties in the execution of 
                        trades, and the parties to the transaction do 
                        not actually know the identity of the other at 
                        the time that the terms and price of the 
                        transaction are agreed to, or
                            ``(ii) the transaction is effected pursuant 
                        to rules designed to match purchases and sales 
                        at the best price available through the trading 
                        system.''.
    (d) Relief for Foreign Exchange Transactions.--
            (1) In general.--Section 408(b) of such Act (29 U.S.C. 
        1108(b)), as amended by subsection (c)(1), is amended by adding 
        at the end the following new paragraph:
            ``(16) Any foreign exchange transactions, between a bank or 
        broker-dealer (or any affiliate of either), and a plan or an 
        individual retirement account (within the meaning of section 
        408 of the Internal Revenue Code of 1986) with respect to which 
        such bank or broker-dealer (or affiliate) is a trustee, 
        custodian, fiduciary, or other party in interest, if--
                    ``(A) the transaction is in connection with the 
                purchase, holding, or sale of securities,
                    ``(B) at the time the foreign exchange transaction 
                is entered into, the terms of the transaction are not 
                less favorable to the plan than the terms generally 
                available in comparable arm's length foreign exchange 
                transactions between unrelated parties, or the terms 
                afforded by the bank or broker-dealer (or any affiliate 
                of either) in comparable arm's-length foreign exchange 
                transactions involving unrelated parties,
                    ``(C) the exchange rate used by such bank or 
                broker-dealer (or affiliate) for a particular foreign 
                exchange transaction does not deviate by more or less 
                than 3 percent from the interbank bid and asked rates 
                at the time of the transaction as displayed on an 
                independent service that reports rates of exchange in 
                the foreign currency market for such currency, and
                    ``(D) the bank or broker-dealer (or any affiliate 
                of either) does not have investment discretion, or 
                provide investment advice, with respect to the 
                transaction.''.
            (2) Conforming amendment.--Section 4975(d) of such Code, as 
        amended by subsection (c)(2), is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (17)(E),
                    (B) by striking the period at the end of paragraph 
                (18)(F)(ii) and inserting ``; or'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(19) any foreign exchange transactions, between a bank or 
        broker-dealer (or any affiliate of either) and a plan or an 
        individual retirement account (within the meaning of section 
        408) with respect to which such bank or broker-dealer (or 
        affiliate) is a trustee, custodian, fiduciary, or disqualified 
        person, if--
                    ``(A) the transaction is in connection with the 
                purchase, holding, or sale of securities,
                    ``(B) at the time the foreign exchange transaction 
                is entered into, the terms of the transaction are not 
                less favorable to the plan than the terms generally 
                available in comparable arm's length foreign exchange 
                transactions between unrelated parties, or the terms 
                afforded by the bank or broker-dealer (or any affiliate 
                of either) in comparable arm's-length foreign exchange 
                transactions involving unrelated parties,
                    ``(C) the exchange rate used by such bank or 
                broker-dealer (or affiliate) for a particular foreign 
                exchange transaction does not deviate by more or less 
                than 3 percent from the interbank bid and asked rates 
                at the time of the transaction as displayed on an 
                independent service that reports rates of exchange in 
                the foreign currency market for such currency, and
                    ``(D) the bank or broker-dealer (or any affiliate 
                of either) does not have investment discretion, or 
                provide investment advice, with respect to the 
                transaction.''.
    (e) Correction Period for Certain Transactions Involving Securities 
and Commodities.--
            (1) In general.--Section 408(b) of such Act (29 U.S.C. 
        1108(b)), as amended by subsection (d)(1), is amended by adding 
        at the end the following new paragraph:
            ``(17) Correction period for certain transactions involving 
        securities and commodities.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), a transaction described in 
                section 406(a) in connection with the acquisition, 
                holding, or disposition of any security or commodity, 
                if the transaction is corrected before the end of the 
                correction period.
                    ``(B) Exception for employer securities and real 
                property.--Subparagraph (A) does not apply to any 
                transaction between a plan and a plan sponsor or its 
                affiliates that involves the acquisition or sale of an 
                employer security (as defined in section 407(d)(1)) or 
                the acquisition, sale, or lease of employer real 
                property (as defined in section 407(d)(2)).
                    ``(C) Exception for knowing violations.--In the 
                case of any fiduciary or other party in interest (or 
                any other person knowingly participating in such 
                transaction), subparagraph (A) does not apply to any 
                prohibited transaction if, at the time such transaction 
                occurs, such fiduciary or party in interest (or other 
                person) knew that the transaction would (without regard 
                to this paragraph) constitute a violation of section 
                406(a).
                    ``(D) Correction period.--For purposes of this 
                paragraph, the term `correction period' means the 14-
                day period beginning on the date on which such 
                transaction occurs.
                    ``(E) Other definitions.--For purposes of this 
                paragraph--
                            ``(i) the term `security' has the meaning 
                        given such term by section 475(c)(2) of the 
                        Internal Revenue Code of 1986 (without regard 
                        to subparagraph (F)(iii) and the last sentence 
                        thereof),
                            ``(ii) the term `commodity' has the meaning 
                        given such term by section 475(e)(2) of such 
                        Code (without regard to subparagraph (D)(iii) 
                        thereof), and
                            ``(iii) the terms `correction' and 
                        `correct' mean, with respect to a transaction, 
                        undoing the transaction to the extent possible, 
                        but in any case, making good to the plan or 
                        affected account any losses resulting from the 
                        transaction and restoring to the plan or 
                        affected account any profits made through use 
                        of the plan.''.
            (2) Conforming amendments.--
                    (A) Section 4975(d) of such Code, as amended by 
                subsection (d)(2), is amended--
                            (i) by striking ``or'' at the end of 
                        paragraph (18)(F)(2),
                            (ii) by striking the period at the end of 
                        paragraph (19)(D) and inserting ``; or'', and
                            (iii) by adding at the end the following 
                        new paragraph:
            ``(20) except as provided in subparagraph (B) or (C) of 
        subsection (f)(8), a transaction described in subparagraph (A), 
        (B), (C), or (D) of subsection (c)(1) in connection with the 
        acquisition, holding, or disposition of any security or 
        commodity, if the transaction is corrected before the end of 
        the correction period.''.
                    (B) Section 4975(f) of such Code is amended by 
                adding at the end the following new paragraph:
            ``(8) Correction period.--
                    ``(A) In general.--For purposes of subsection 
                (d)(20), the term `correction period' means the 14-day 
                period beginning on the date on which such transaction 
                occurs.
                    ``(B) Exception for employer securities and real 
                property.--Subsection (d)(20) does not apply to any 
                transaction between a plan and a plan sponsor or its 
                affiliates that involves the acquisition or sale of an 
                employer security (as defined in section 407(d)(1) of 
                the Employee Retirement Income Security Act) or the 
                acquisition, sale, or lease of employer real property 
                (as defined in section 407(d)(2) of such Act).
                    ``(C) Exception for knowing violations.--In the 
                case of any fiduciary or other disqualified person (or 
                any other person knowingly participating in such 
                transaction), subsection (d)(20) does not apply to any 
                prohibited transaction if, at the time such transaction 
                occurs, such fiduciary or disqualified person (or other 
                person) knew that the transaction would (without regard 
                to subsection (d)(20) or this paragraph) constitute a 
                violation of subparagraph (A), (B), (C), or (D) of 
                subsection (c)(1).
                    ``(D) Abatement of tax where there is a 
                correction.--If a transaction is not treated as a 
                prohibited transaction by reason of subsection (d)(20), 
                then no tax under subsections (a) and (b) shall be 
                assessed with respect to such transaction, and, if 
                assessed, the assessment shall be abated, and, if 
                collected, shall be credited or refunded as an 
                overpayment.
                    ``(E) Other definitions.--For purposes of this 
                paragraph and subsection (d)(20)--
                            ``(i) the term `security' has the meaning 
                        given such term by section 475(c)(2) (without 
                        regard to subparagraph (F)(iii) and the last 
                        sentence thereof),
                            ``(ii) the term `commodity' has the meaning 
                        given such term by section 475(e)(2) (without 
                        regard to subparagraph (D)(iii) thereof), and
                            ``(iii) the terms `correction' and 
                        `correct' mean, with respect to a transaction, 
                        undoing the transaction to the extent possible, 
                        but in any case, making good to the plan or 
                        affected account any losses resulting from the 
                        transaction and restoring to the plan or 
                        affected account any profits made through use 
                        of the plan.''.
                    (C) Section 4975(f)(5) of such Code is amended by 
                striking ``The terms'' and inserting ``Except as 
                provided in paragraph (8)(E)(iii), the terms''.
    (f) Cross Trades Study.--Not later than 2 years after the date of 
the enactment of this Act, the Secretary of Labor, in consultation with 
the President's Working Group on Financial Markets, shall report to the 
President and Congress the results of a study on the implications for 
pension plans, plan sponsors, plan fiduciaries, and plan participants 
of a prohibited transaction exemption for active cross trades and the 
impact that such a prohibited transaction exemption could have on the 
safety and security of pension plan assets. The study shall review and 
include recommendations regarding--
            (1) the regulation and practice of passive and active cross 
        trades in United States securities markets,
            (2) the potential benefits and drawbacks of permitting 
        active cross trades for retirement funds, and
            (3) the ease or difficulty in policing cross trading 
        activities for plan sponsors, plan fiduciaries, and any Federal 
        agency charged with safeguarding the Nation's retirement funds.
    (g) GAO Study.--The Comptroller General of the United States shall 
prepare a preliminary report not later than 2 years after the date of 
the enactment of this Act and a final report not later than 3 years 
after such date regarding the effects of the amendments made by this 
section, focusing on the effect of electronic communication networks 
and block trading on plan investments and on the oversight and 
enforcement activities of the Department of Labor to protect the rights 
of plan participants and beneficiaries. The Comptroller General of the 
United States shall submit the reports required under the preceding 
sentence to the Committees on Finance and Health, Education, Labor, and 
Pensions of the Senate and the Committees on Ways and Means and 
Education and the Workforce of the House of Representatives.
    (h) Effective Date.--The amendments made by this section shall 
apply to any transaction after the date of the enactment of this Act.

SEC. 1342. FEDERAL TASK FORCE ON OLDER WORKERS.

    (a) Establishment.--Not later than 90 days after the date of 
enactment of this section, the Secretary of Labor shall establish a 
Federal Task Force on Older Workers (referred to in this section as the 
``Task Force'').
    (b) Membership.--The Task Force established pursuant to subsection 
(a) shall be composed of representatives from all relevant Federal 
agencies that have regulatory jurisdiction over, or a clear policy 
interest in, pension issues relating to older workers, including the 
Internal Revenue Service and the Equal Employment Opportunity 
Commission.
    (c) Activities.--
            (1) In general.--Not later than 1 year after the date of 
        establishment of the Task Force, the Task Force shall--
                    (A) identify statutory and regulatory provisions in 
                current pension law that are disincentives to work and 
                develop legislative and regulatory proposals to address 
                such disincentives; and
                    (B) identify best pension practices in the private 
                sector for hiring and retaining older workers, and 
                serve as a clearinghouse of such information.
            (2) Report.--Not later than 1 year after the date of 
        establishment of the Task Force, the Task Force shall submit a 
        report to Congress on the activities of the Task Force pursuant 
        to paragraph (1). Such report shall be made available to the 
        public.
    (d) Consultation.--In carrying out activities pursuant to this 
section, the Task Force shall consult with senior, business, labor, and 
other interested organizations.
    (e) Applicability of FACA; Termination of Task Force.--
            (1) FACA.--The Federal Advisory Committee Act (5 U.S.C. 
        App.) shall not apply to the Task Force established pursuant to 
        this section.
            (2) Termination.--The Task Force shall terminate 30 days 
        after the date the Task Force completes all of its duties under 
        this section.

SEC. 1343. TECHNICAL CORRECTIONS TO SAVER ACT.

    Section 517 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1147) is amended--
            (1) in subsection (a), by striking ``2001 and 2005 on or 
        after September 1 of each year involved'' and inserting ``2006 
        and 2010'';
            (2) in subsection (b), by adding at the end the following 
        new sentence: ``To effectuate the purposes of this paragraph, 
        the Secretary may enter into a cooperative agreement, pursuant 
        to the Federal Grant and Cooperative Agreement Act of 1977 (31 
        U.S.C. 6301 et seq.), with any appropriate, qualified 
        entity.'';
            (3) in subsection (e)(2)--
                    (A) by striking ``Committee on Labor and Human 
                Resources'' in subparagraph (D) and inserting 
                ``Committee on Health, Education, Labor, and 
                Pensions'';
                    (B) by striking subparagraph (F) and inserting the 
                following:
                    ``(F) the Chairman and Ranking Member of the 
                Subcommittee on Labor, Health and Human Services, and 
                Education of the Committee on Appropriations of the 
                House of Representatives and the Chairman and Ranking 
                Member of the Subcommittee on Labor, Health and Human 
                Services, and Education of the Committee on 
                Appropriations of the Senate;'';
                    (C) by redesignating subparagraph (G) as 
                subparagraph (J); and
                    (D) by inserting after subparagraph (F) the 
                following new subparagraphs:
                    ``(G) the Chairman and Ranking Member of the 
                Committee on Finance of the Senate;
                    ``(H) the Chairman and Ranking Member of the 
                Committee on Ways and Means of the House of 
                Representatives;
                    ``(I) the Chairman and Ranking Member of the 
                Subcommittee on Employer-Employee Relations of the 
                Committee on Education and the Workforce of the House 
                of Representatives; and'';
            (4) in subsection (e)(3)(B), by striking ``January 31, 
        1998'' and inserting ``3 months before the convening of each 
        summit;'';
            (5) in subsection (f)(1)(C), by inserting ``, no later than 
        90 days prior to the date of the commencement of the National 
        Summit,'' after ``comment'';
            (6) in subsection (g), by inserting ``, in consultation 
        with the congressional leaders specified in subsection 
        (e)(2),'' after ``report'' the first place it appears in the 
        text;
            (7) in subsection (i)--
                    (A) by striking ``for fiscal years beginning on or 
                after October 1, 1997,''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(3) Reception and representation authority.--The Secretary is 
hereby granted reception and representation authority limited 
specifically to the events at the National Summit. The Secretary shall 
use any private contributions accepted in connection with the National 
Summit prior to using funds appropriated for purposes of the National 
Summit pursuant to this paragraph.''; and
            (8) in subsection (k)--
                    (A) by striking ``shall enter into a contract on a 
                sole-source basis'' and inserting ``may enter into a 
                contract on a sole-source basis''; and
                    (B) by striking ``in fiscal year 1998''.

            Passed the Senate November 16, 2005.

            Attest:

                                                             Secretary.
109th CONGRESS

  1st Session

                                S. 1783

_______________________________________________________________________

                                 AN ACT

 To amend the Employee Retirement Income Security Act of 1974 and the 
Internal Revenue Code of 1986 to reform the pension funding rules, and 
                          for other purposes.

_______________________________________________________________________

                           December 22, 2005

                    Ordered to be printed as passed