[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1953 Placed on Calendar Senate (PCS)]


                                                       Calendar No. 276
109th CONGRESS
  1st Session
                                S. 1953

                          [Report No. 109-174]

To amend the Internal Revenue Code of 1986 and the Employee Retirement 
   Income Security Act of 1974 to protect the retirement security of 
American workers by ensuring that pension benefits are funded and that 
pension assets are adequately diversified and by providing workers with 
adequate access to, and information about, their pension plans, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 2, 2005

  Mr. Grassley, from the Committee on Finance, reported the following 
     original bill; which was read twice and placed on the calendar

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 and the Employee Retirement 
   Income Security Act of 1974 to protect the retirement security of 
American workers by ensuring that pension benefits are funded and that 
pension assets are adequately diversified and by providing workers with 
adequate access to, and information about, their pension plans, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``National Employee 
Savings and Trust Equity Guarantee Act of 2005''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
TITLE I--DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS UNDER 
                       DEFINED CONTRIBUTION PLANS

Sec. 101. Defined contribution plans required to provide employees with 
                            freedom to invest their plan assets.
Sec. 102. Notice of freedom to divest employer securities or real 
                            property.
Sec. 103. Periodic pension benefit statements.
Sec. 104. Notice to participants or beneficiaries of blackout periods.
Sec. 105. Allowance of, and credit for, additional IRA payments in 
                            certain bankruptcy cases.
       TITLE II--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS

Sec. 201. Defined contribution plans required to provide adequate 
                            investment education to participants.
Sec. 202. Material information relating to investment in employer 
                            securities.
Sec. 203. Independent investment advice provided to plan participants.
Sec. 204. Treatment of qualified retirement planning services.
Sec. 205. Administrative provisions.
 TITLE III--IMPROVEMENTS IN FUNDING RULES FOR SINGLE-EMPLOYER PENSION 
                                 PLANS

    Subtitle A--Rules Relating to Funding, Benefit Limitations, and 
                               Deductions

        Part I--Amendments to the Internal Revenue Code of 1986

Sec. 301. Modifications of the minimum funding standards.
Sec. 302. Funding rules applicable to single-employer pension plans.
Sec. 303. Limitation on benefit improvements by single-employer plans 
                            which are underfunded or maintained by 
                            financially weak or bankrupt employers.
Sec. 304. Increase in deduction limit for single-employer plans.
Sec. 305. Technical and conforming amendments.
 Part II--Amendments to the Employee Retirement Income Security Act of 
                                  1974

Sec. 311. Modifications of the minimum funding standards.
Sec. 312. Funding rules applicable to single-employer pension plans.
Sec. 313. Limitation on benefit improvements by single-employer plans 
                            which are underfunded or maintained by 
                            financially weak or bankrupt employers.
Sec. 314. Technical and conforming amendments.
  Part III--Interest Rate Assumptions and Deductible Amounts for 2006

Sec. 321. Extension of replacement of 30-year Treasury rates.
Sec. 322. Deduction limits for plan contributions.
Sec. 323. Updating deduction rules for combination of plans.
                     Subtitle B--Related Provisions

Sec. 331. Replacement of 30-year Treasury rate for calculating lump-sum 
                            distributions.
Sec. 332. Interest rate assumption for applying benefit limitations to 
                            lump sum distributions.
Sec. 333. Restrictions on funding of nonqualified deferred compensation 
                            plans by employers maintaining underfunded 
                            or terminated single-employer plans.
Sec. 334. Special funding rules for plans maintained by commercial 
                            airlines that are amended to cease future 
                            benefit accruals.
Sec. 335. Modification of pension funding requirements for plans 
                            subject to current transition rule.
                      Subtitle C--Other Provisions

Sec. 341. Treatment of cash balance and other hybrid defined benefit 
                            pension plans.
Sec. 342. Treatment of eligible combined defined benefit plans and 
                            qualified cash or deferred arrangements.
                          Subtitle D--Studies

Sec. 351. Joint study on revitalizing defined benefit plans.
Sec. 352. Study on floor-offset ESOPS.
  TITLE IV--DISCLOSURE AND BENEFIT STATEMENT REQUIREMENTS FOR SINGLE-
                     EMPLOYER DEFINED BENEFIT PLANS

Sec. 401. Actuarial reports and summary annual reports.
Sec. 402. Notice of funding benefit limitations and restrictions on 
                            benefit increases.
Sec. 403. Notice of bankruptcy filing.
   TITLE V--IMPROVEMENTS IN FUNDING RULES FOR MULTIEMPLOYER DEFINED 
             BENEFITS PENSION PLANS AND RELATED PROVISIONS

Sec. 501. Deduction limits for multiemployer plans.
Sec. 502. Multiemployer defined benefit plan funding notices.
Sec. 503. Transfer of excess pension assets to multiemployer health 
                            plan.
Sec. 504. Administrative provisions.
            TITLE VI--PBGC PREMIUM AND GUARANTEE PROVISIONS

Sec. 601. Increases in PBGC premiums for single-employer plans.
Sec. 602. Rules relating to bankruptcy of employer.
Sec. 603. Limitation on PBGC guarantee of shutdown and other benefits.
Sec. 604. PBGC premiums for new plans of small employers.
Sec. 605. PBGC premiums for small and new plans.
Sec. 606. Authorization for PBGC to pay interest on premium overpayment 
                            refunds.
Sec. 607. Rules for substantial owner benefits in terminated plans.
Sec. 608. Acceleration of PBGC computation of benefits attributable to 
                            recoveries from employers.
      TITLE VII--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

Sec. 701. Joint study of application of spousal consent rules to 
                            defined contribution plans.
Sec. 702. Regulations on time and order of issuance of domestic 
                            relations orders.
Sec. 703. Entitlement of divorced spouses to railroad retirement 
                            annuities independent of actual entitlement 
                            of employee.
Sec. 704. Extension of tier II railroad retirement benefits to 
                            surviving former spouses pursuant to 
                            divorce agreements.
Sec. 705. Requirement for additional survivor annuity option.
     TITLE VIII--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES

Sec. 801. Clarifications regarding purchase of permissive service 
                            credit.
Sec. 802. Allow rollover of after-tax amounts in annuity contracts.
Sec. 803. Clarification of minimum distribution rules for governmental 
                            plans.
Sec. 804. Waiver of 10 percent early withdrawal penalty tax on certain 
                            distributions of pension plans for public 
                            safety employees.
Sec. 805. Allow rollovers by nonspouse beneficiaries of certain 
                            retirement plan distributions.
Sec. 806. Faster vesting of employer nonelective contributions.
Sec. 807. Allow direct rollovers from retirement plans to Roth IRAs.
Sec. 808. Elimination of higher penalty on certain simple plan 
                            distributions.
Sec. 809. Simple plan portability.
Sec. 810. Eligibility for participation in retirement plans.
Sec. 811. Transfers to the PBGC.
Sec. 812. Missing participants.
                  TITLE IX--ADMINISTRATIVE PROVISIONS

Sec. 901. Employee Plans Compliance Resolution System.
Sec. 902. Extension to all governmental plans of moratorium on 
                            application of certain nondiscrimination 
                            rules applicable to State and local plans.
Sec. 903. Notice and consent period regarding distributions.
Sec. 904. Reporting simplification.
Sec. 905. Voluntary early retirement incentive and employment retention 
                            plans maintained by local educational 
                            agencies and other entities.
Sec. 906. No reduction in unemployment compensation as a result of 
                            pension rollovers.
Sec. 907. Withholding on distributions from governmental section 457 
                            plans.
Sec. 908. Clarification of treatment of defined benefit plans of Indian 
                            tribal governments.
Sec. 909. Treatment of defined benefit plan as governmental plan.
Sec. 910. Provisions relating to plan amendments.
             TITLE X--UNITED STATES TAX COURT MODERNIZATION

Sec. 1000. Amendment of 1986 Code.
             Subtitle A--Tax Court Pension and Compensation

Sec. 1001. Annuities for survivors of Tax Court judges who are 
                            assassinated.
Sec. 1002. Cost-of-Living adjustments for Tax Court judicial survivor 
                            annuities.
Sec. 1003. Life insurance coverage for Tax Court judges.
Sec. 1004. Cost of life insurance coverage for Tax Court judges age 65 
                            or over.
Sec. 1005. Modification of timing of Lump-Sum Payment of judges' 
                            accrued annual leave.
Sec. 1006. Participation of Tax Court judges in the Thrift Savings 
                            Plan.
Sec. 1007. Exemption of teaching compensation of retired judges from 
                            limitation on outside earned income.
Sec. 1008. General provisions relating to Magistrate Judges of the Tax 
                            Court.
Sec. 1009. Annuities to surviving spouses and dependent children of 
                            Magistrate Judges of the Tax Court.
Sec. 1010. Retirement and Annuity Program.
Sec. 1011. Incumbent Magistrate Judges of the Tax Court.
Sec. 1012. Provisions for recall.
Sec. 1013. Effective date.
                    Subtitle B--Tax Court Procedure

Sec. 1021. Jurisdiction of Tax Court over collection due process cases.
Sec. 1022. Authority for Magistrate Judges to hear and decide certain 
                            employment status cases.
Sec. 1023. Confirmation of authority of Tax Court to apply doctrine of 
                            equitable recoupment.
Sec. 1024. Tax Court filing fee in all cases commenced by filing 
                            petition.
Sec. 1025. Amendments to appoint employees.
Sec. 1026. Expanded use of Tax Court practice fee for pro se taxpayers.
                       TITLE XI--OTHER PROVISIONS

Sec. 1101. Transfer of excess funds from black lung disability trusts 
                            to United Mine Workers of America Combined 
                            Benefit Fund.
Sec. 1102. Treatment of death benefits from corporate-owned life 
                            insurance.

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

SEC. 101. 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) 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. 102. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES OR REAL 
              PROPERTY.

    (a) Amendments of Internal Revenue Code.--
            (1) Excise tax.--Chapter 43 of the Internal Revenue Code of 
        1986 (relating to qualified pension, etc., plans) is amended by 
        adding at the end the following new section:

``SEC. 4980H. FAILURE OF CERTAIN DEFINED CONTRIBUTION PLANS TO PROVIDE 
              NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of a defined contribution plan to meet the requirements of 
subsection (e) with respect to any participant or beneficiary.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any participant 
        or beneficiary shall be $100 for each day in the noncompliance 
        period with respect to the failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the notice to which the failure 
        relates is provided or the failure is otherwise corrected.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered and 
        reasonable diligence exercised.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that any 
        person subject to liability for tax under subsection (d) did 
        not know that the failure existed and exercised reasonable 
        diligence to meet the requirements of subsection (e).
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the notice described in 
                subsection (e) during the 30-day period beginning on 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(3) Overall limitation for unintentional failures.--
                    ``(A) In general.--If the person subject to 
                liability for tax under subsection (d) exercised 
                reasonable diligence to meet the requirements of 
                subsection (e), the tax imposed by subsection (a) for 
                failures during the taxable year of the employer (or, 
                in the case of a multiemployer plan, the taxable year 
                of the trust forming part of the plan) shall not exceed 
                $500,000. For purposes of the preceding sentence, all 
                multiemployer plans of which the same trust forms a 
                part shall be treated as 1 plan.
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
                purposes of this section do not have the same taxable 
                year, the taxable years taken into account shall be 
                determined under principles similar to the principles 
                of section 1561.
            ``(4) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive or otherwise inequitable relative to the failure 
        involved.
    ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
            ``(1) In the case of a plan not described in paragraph (2), 
        the employer.
            ``(2) In the case of a multiemployer plan, the plan.
    ``(e) Notice of Right to Divest.--Not later than 30 days before the 
first date on which an applicable individual of an applicable defined 
contribution plan is eligible to exercise the right under section 
401(a)(35) to direct the proceeds from the divestment of employer 
securities or employer real property with respect to any type of 
contribution, the plan 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 applicable 
individual.
    ``(f) Definitions.--Any term used in this section which is also 
used in section 401(a)(35) shall have the meaning given such term by 
section 401(a)(35).''
            (2) Aggregation.--Section 414(t) of such Code is amended by 
        striking ``or 4980B'' and inserting ``4980B, or 4980H''.
            (3) Clerical amendment.--The table of sections for chapter 
        43 of such Code is amended by adding at the end the following 
        new item:

``Sec. 4980H. Failure of certain defined contribution plans to provide 
                            notice of freedom to divest employer 
                            securities.''.
    (b) Amendments of ERISA.--
            (1) In general.--Section 101 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1021) is amended by 
        redesignating subsection (j) as subsection (k) and by inserting 
        after subsection (i) the following new subsection:
    ``(j) 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 applicable 
individual.''
            (2) 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(j)'' and inserting 
        ``subsection (i) or (j) 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 4980H(e) of 
        the Internal Revenue Code of 1986 or section 101(j) 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. 103. PERIODIC PENSION BENEFIT STATEMENTS.

    (a) Amendments of Internal Revenue Code.--
            (1) Excise tax.--Chapter 43 of the Internal Revenue Code of 
        1986 (relating to qualified pension, etc., plans), as amended 
        by this Act, is amended by adding at the end the following new 
        section:

``SEC. 4980I. FAILURE OF CERTAIN PENSION PLANS TO PROVIDE REQUIRED 
              INFORMATION.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of an applicable pension plan to meet the requirements of 
subsection (e) with respect to any participant or beneficiary.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any participant 
        or beneficiary shall be $100 for each day in the noncompliance 
        period with respect to the failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the statement to which the 
        failure relates is provided or the failure is otherwise 
        corrected.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered and 
        reasonable diligence exercised.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that any 
        person subject to liability for tax under subsection (d) did 
        not know that the failure existed and exercised reasonable 
        diligence to meet the requirements of subsection (e).
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the statement described 
                in subsection (e) during the 30-day period beginning on 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(3) Overall limitation for unintentional failures.--
                    ``(A) In general.--If the person subject to 
                liability for tax under subsection (d) exercised 
                reasonable diligence to meet the requirements of 
                subsection (e), the tax imposed by subsection (a) for 
                failures during the taxable year of the employer (or, 
                in the case of a multiemployer plan, the taxable year 
                of the trust forming part of the plan) shall not exceed 
                $500,000. For purposes of the preceding sentence, all 
                multiemployer plans of which the same trust forms a 
                part shall be treated as 1 plan.
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
                purposes of this section do not have the same taxable 
                year, the taxable years taken into account shall be 
                determined under principles similar to the principles 
                of section 1561.
            ``(4) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive or otherwise inequitable relative to the failure 
        involved.
    ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
            ``(1) In the case of a plan not described in paragraph (2) 
        or (3), the employer.
            ``(2) In the case of a multiemployer plan, the plan.
            ``(3) In the case of an arrangement described in subsection 
        (e)(4), the person required to provide the statement under 
        subsection (e).
    ``(e) Requirements to Provide Pension Benefit Statements.--
            ``(1) Requirements.--
                    ``(A) Defined contribution plan.--The administrator 
                of an applicable pension plan which is a defined 
                contribution plan shall furnish a pension benefit 
                statement described in paragraph (2)--
                            ``(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 who does not 
                        have the right to direct the investment of 
                        assets in that account, and
                            ``(iii) upon written request to a plan 
                        beneficiary who is not a participant or 
                        beneficiary described in clause (i) or (ii), 
                        except that this clause shall apply to only 1 
                        request during any 12-month period.
                    ``(B) Defined benefit plan.--The administrator of 
                an applicable pension plan which is a defined benefit 
                plan shall furnish a pension benefit statement 
                described in paragraph (2)--
                            ``(i) at least once every 3 years to each 
                        participant who has 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, except that this 
                        clause shall apply to only 1 request during any 
                        12-month period.
                Information furnished under clause (i) to a participant 
                may be based on reasonable estimates determined under 
                regulations prescribed by the Secretary of Labor, in 
                consultation with the Pension Benefit Guaranty 
                Corporation.
            ``(2) Statements.--
                    ``(A) In general.--A pension benefit statement 
                furnished 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) 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 a 
                defined contribution 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 of 
                Labor, 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)) under the plan need not be taken into 
                account in determining the 3-year period under 
                paragraph (1)(B)(i).
            ``(4) Special rule for certain annuities.--In the case of 
        an annuity contract or custodial account described in section 
        403(b) which is not a plan established or maintained by the 
        employer, the pension benefit statement under this subsection 
        shall be furnished by the issuer of the contract, the custodian 
        of the account, or such other person as is specified by the 
        Secretary.
    ``(f) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable pension plan.--The term `applicable 
        pension plan' means a plan described in clause (i), (ii), or 
        (iv) of section 219(g)(5)(A) other than a one-participant 
        retirement plan (as defined in section 401(a)(35)(E)(iv)).
            ``(2) Exception for government and church plans.--This 
        section shall not apply to any governmental or church plan. For 
        purposes of this paragraph, the terms `governmental plan' and 
        `church plan' have the meanings given such terms by section 
        414.''
            (2) Aggregation.--Section 414(t) of such Code, as amended 
        by this Act, is amended by striking ``or 4980H'' and inserting 
        ``4980H, or 4980I''.
            (3) Clerical amendment.--The table of sections for chapter 
        43 of such Code, as amended by this Act, is amended by adding 
        at the end the following new item:

``Sec. 4980I. Failure of certain pension plans to provide required 
                            information.''.
    (b) 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)''.
    (c) 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 4980I of the Internal Revenue Code of 
        1986 and 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. 104. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT PERIODS.

    (a) Amendments of Internal Revenue Code.--
            (1) Excise tax.--
                    (A) In general.--Chapter 43 of the Internal Revenue 
                Code of 1986 (relating to qualified pension, etc., 
                plans), as amended by this Act, is amended by adding at 
                the end the following new section:

``SEC. 4980J. FAILURE OF CERTAIN DEFINED CONTRIBUTION PLANS TO PROVIDE 
              NOTICE OF BLACKOUT PERIODS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of any defined contribution plan to which this section applies 
to meet the requirements of subsection (e) with respect to any 
participant or beneficiary.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any participant 
        or beneficiary shall be $100 for each day in the noncompliance 
        period with respect to the failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the notice to which the failure 
        relates is provided or the failure is otherwise corrected.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered and 
        reasonable diligence exercised.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that any 
        person subject to liability for tax under subsection (d) did 
        not know that the failure existed and exercised reasonable 
        diligence to meet the requirements of subsection (e).
            ``(2) Tax not to apply to failures corrected as soon as 
        reasonably practicable.--No tax shall be imposed by subsection 
        (a) on any failure if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the notice described in 
                subsection (e) as soon as reasonably practicable after 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(3) Overall limitation for unintentional failures.--
                    ``(A) In general.--If the person subject to 
                liability for tax under subsection (d) exercised 
                reasonable diligence to meet the requirements of 
                subsection (e), the tax imposed by subsection (a) for 
                failures during the taxable year of the employer (or, 
                in the case of a multiemployer plan, the taxable year 
                of the trust forming part of the plan) shall not exceed 
                $500,000. For purposes of the preceding sentence, all 
                multiemployer plans of which the same trust forms a 
                part shall be treated as 1 plan.
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
                purposes of this section do not have the same taxable 
                year, the taxable years taken into account shall be 
                determined under principles similar to the principles 
                of section 1561.
            ``(4) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive or otherwise inequitable relative to the failure 
        involved.
    ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
            ``(1) In the case of a plan not described in paragraph (2) 
        or (3), the employer.
            ``(2) In the case of a multiemployer plan, the plan.
            ``(3) In the case of an arrangement described in subsection 
        (e)(1)(B), the person required to provide the notice under 
        subsection (e).
    ``(e) Notice of Blackout Periods to Participant or Beneficiary 
Under Defined Contribution Plan.--
            ``(1) In general.--
                    ``(A) Duties of plan administrator.--In advance of 
                the commencement of any blackout period with respect to 
                a defined contribution plan, the plan administrator 
                shall notify the plan participants and beneficiaries 
                who are affected by such action in accordance with this 
                subsection.
                    ``(B) Special rule for certain annuities.--In the 
                case of an annuity contract or custodial account 
                described in section 403(b) which is not a plan 
                established or maintained by the employer, the notice 
                shall be furnished by the issuer of the contract, the 
                custodian of the account, or such other person as is 
                specified by the Secretary.
            ``(2) Notice requirements.--
                    ``(A) In general.--The notices described in 
                paragraph (1) shall be written in a manner calculated 
                to be understood by the average plan participant and 
                shall include--
                            ``(i) the reasons for the blackout period,
                            ``(ii) an identification of the investments 
                        and other rights affected,
                            ``(iii) the expected beginning date and 
                        length of the blackout period,
                            ``(iv) in the case of investments affected, 
                        a statement that the participant or beneficiary 
                        should evaluate the appropriateness of their 
                        current investment decisions in light of their 
                        inability to direct or diversify assets 
                        credited to their accounts during the blackout 
                        period, and
                            ``(v) such other matters as the Secretary 
                        of Labor may require by regulation.
                    ``(B) Notice to participants and beneficiaries.--
                Except as otherwise provided in this subsection, 
                notices described in paragraph (1) shall be furnished 
                to all participants and beneficiaries under the plan to 
                whom the blackout period applies at least 30 days in 
                advance of the blackout period.
                    ``(C) Exception to 30-day notice requirement.--In 
                any case in which--
                            ``(i) a deferral of the blackout period 
                        would violate the requirements of subparagraph 
                        (A) or (B) of section 404(a)(1) of the Employee 
                        Retirement Income Security Act of 1974, and a 
                        fiduciary of the plan reasonably so determines 
                        in writing, or
                            ``(ii) the inability to provide the 30-day 
                        advance notice is due to events that were 
                        unforeseeable or circumstances beyond the 
                        reasonable control of the plan administrator, 
                        and a fiduciary of the plan reasonably so 
                        determines in writing,
                subparagraph (B) shall not apply, and the notice shall 
                be furnished to all participants and beneficiaries 
                under the plan to whom the blackout period applies as 
                soon as reasonably possible under the circumstances 
                unless such a notice in advance of the termination of 
                the blackout period is impracticable.
                    ``(D) Written notice.--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.
                    ``(E) Notice to issuers of employer securities 
                subject to blackout period.--In the case of any 
                blackout period in connection with a defined 
                contribution plan, the plan administrator shall provide 
                timely notice of such blackout period to the issuer of 
                any employer securities subject to such blackout 
                period.
            ``(3) Exception for blackout periods with limited 
        applicability.--In any case in which the blackout period 
        applies only to 1 or more participants or beneficiaries in 
        connection with a merger, acquisition, divestiture, or similar 
        transaction involving the plan or plan sponsor and occurs 
        solely in connection with becoming or ceasing to be a 
        participant or beneficiary under the plan by reason of such 
        merger, acquisition, divestiture, or transaction, the 
        requirement of this subsection that the notice be provided to 
        all participants and beneficiaries shall be treated as met if 
        the notice required under paragraph (1) is provided to such 
        participants or beneficiaries to whom the blackout period 
        applies as soon as reasonably practicable.
            ``(4) Changes in length of blackout period.--If, following 
        the furnishing of the notice pursuant to this subsection, there 
        is a change in the beginning date or length of the blackout 
        period (specified in such notice pursuant to paragraph 
        (2)(A)(iii)), the administrator shall provide affected 
        participants and beneficiaries notice of the change as soon as 
        reasonably practicable. In relation to the extended blackout 
        period, such notice shall meet the requirements of paragraph 
        (2)(D) and shall specify any material change in the matters 
        referred to in clauses (i) through (v) of paragraph (2)(A).
            ``(5) Regulatory exceptions.--The Secretary of Labor may 
        provide by regulation for additional exceptions to the 
        requirements of this subsection which the Secretary of Labor 
        determines are in the interests of participants and 
        beneficiaries.
            ``(6) Guidance and model notices.--The Secretary of Labor 
        shall issue guidance and model notices which meet the 
        requirements of this subsection.
            ``(7) Blackout period.--For purposes of this subsection--
                    ``(A) In general.--The term `blackout period' 
                means, in connection with a defined contribution plan, 
                any period for which any ability of participants or 
                beneficiaries under the plan, which is otherwise 
                available under terms of the plan, to direct or 
                diversify assets credited to their accounts, to obtain 
                loans from the plan, or to obtain distributions from 
                the plan is temporarily suspended, limited, or 
                restricted, if such suspension, limitation, or 
                restriction is for any period of more than 3 
                consecutive business days.
                    ``(B) Exclusions.--The term `blackout period' does 
                not include a suspension, limitation, or restriction--
                            ``(i) which occurs by reason of the 
                        application of the securities laws (as defined 
                        in section 3(a)(47) of the Securities Exchange 
                        Act of 1934),
                            ``(ii) which is a change to the plan which 
                        provides for a regularly scheduled suspension, 
                        limitation, or restriction which is disclosed 
                        to participants or beneficiaries through any 
                        summary of material modifications, any 
                        materials describing specific investment 
                        alternatives under the plan, or any changes 
                        thereto, or
                            ``(iii) which applies only to 1 or more 
                        individuals, each of whom is the participant, 
                        an alternate payee (as defined in section 
                        414(p)(8)), or any other beneficiary pursuant 
                        to a qualified domestic relations order (as 
                        defined in section 414(p)(1)(A)).
            ``(8) Defined contribution plan to which section applies.--
                    ``(A) In general.--Except as provided in this 
                paragraph, this section applies to any defined 
                contribution plan described in clause (i), (ii), or 
                (iv) of section 219(g)(5)(A).
                    ``(B) Exception for one-participant retirement 
                plan.--This section shall not apply to a one-
                participant retirement plan (as defined in section 
                401(a)(35)(E)(iv)).
                    ``(C) Exception for governmental and church 
                plans.--This section shall not apply to governmental 
                and church plans. For purposes of this subparagraph, 
                the terms `governmental plan' and `church plan' have 
                the meanings given such terms by section 414.''
                    (B) Aggregation.--Section 414(t) of such Code, as 
                amended by this Act, is amended by striking ``or 
                4980I'' and inserting ``4980I, or 4980J''.
                    (C) Clerical amendment.--The table of sections for 
                chapter 43 of such Code is amended by adding at the end 
                the following new item:

``Sec. 4980J. Failure of applicable defined contribution plan to 
                            provide notice of blackout periods.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to failures after the date of the enactment of this 
        Act.
    (b) 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 clause (i) 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 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,'',
                    (B) by striking ``employer'' and ``employer's'' in 
                paragraph (8)(B)(iii) and inserting ``individual'' and 
                ``individual's'', respectively,
                    (C) by striking ``leases employees'' in paragraph 
                (8)(B)(v) and inserting ``uses the services of leased 
                employees (within the meaning of section 414(n) of the 
                Internal Revenue Code of 1986)'', and
                    (D) by adding at the end of paragraph (8)(B) the 
                following flush sentence:
                ``For purposes of this paragraph, an individual shall 
                be treated as a partner if the individual is so treated 
                under section 401(a)(35)(E)(iv) of the Internal Revenue 
                Code of 1986.''
            (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. 105. 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.

       TITLE II--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS

SEC. 201. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE ADEQUATE 
              INVESTMENT EDUCATION TO PARTICIPANTS.

    (a) Excise Tax on Failure of Certain Defined Contribution Plans to 
Provide Adequate Investment Information.--
            (1) In general.--Section 4980I(e)(1)(A) of the Internal 
        Revenue Code of 1986, as added by section 103, is amended by 
        adding at the end the following new flush sentence:
                ``In addition to the pension benefit statement, the 
                administrator 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 
                as provided in paragraph (5).''
            (2) Basic investment guidelines.--Section 4980I(e) of such 
        Code, as so added, is amended by adding at the end the 
        following new paragraph:
            ``(5) Basic investment guidelines.--
                    ``(A) In general.--The Secretary of Labor shall, in 
                consultation with the Secretary, develop and make 
                available to defined contribution plans for 
                distribution under paragraph (1)(A) a model form 
                containing basic guidelines for investing for 
                retirement. Except as otherwise provided by the 
                Secretary of Labor, 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 of Labor,
                            ``(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 of Labor 
                        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 of Labor 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) Rules relating to form and statement.--The 
                model form under subparagraph (A)--
                            ``(i) shall be written in a manner 
                        calculated to be understood by the average plan 
                        participant, and
                            ``(ii) may be delivered in written, 
                        electronic, or other appropriate form to the 
                        extent such form is reasonably accessible to 
                        participants and beneficiaries.''
            (3) Conforming amendments.--Section 4980I of such Code is 
        amended--
                    (A) by adding at the end of subsection (c)(3) the 
                following new subparagraph:
                    ``(C) Separate application.--This paragraph shall 
                be applied separately to failures to meet the 
                requirements of subsection (e)(1)(A) to provide pension 
                benefit statements and failures to meet the 
                requirements of subsection (e)(1)(A) to provide model 
                forms containing basic investment guidelines.'';
                    (B) by inserting ``or model form'' after 
                ``statement'' in subsection (d)(3); and
                    (C) by inserting ``or model form containing basic 
                investment guidelines'' after ``statement'' in 
                subsection (e)(4).
    (b) Adequate Investment Education.--
            (1) In general.--Section 104 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1024) is amended by 
        redesignating subsection (d) as subsection (e) and by inserting 
        after subsection (c) the following new subsection:
    ``(d) Basic Investment Guidelines.--
            ``(1) In general.--The administrator of an individual 
        account plan (other than a one-participant retirement plan 
        described in section 101(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 section 102, is amended by striking 
        ``section 101'' and inserting ``section 101 or section 
        104(d)''.
    (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. 202. MATERIAL INFORMATION RELATING TO INVESTMENT IN EMPLOYER 
              SECURITIES.

    (a) Amendments of Internal Revenue Code.--
            (1) In general.--Section 4980H(e) of the Internal Revenue 
        Code of 1986, as added by section 102, is amended--
                    (A) by striking ``(e) Notice of Right To Divest.--
                Not'' and inserting:
    ``(e) Notice Requirements.--
            ``(1) Notice of right to divest.--Not'',
                    (B) by redesignating paragraphs (1) and (2) as 
                subparagraphs (A) and (B) and adjusting all margins 
                accordingly, and
                    (C) by adding at the end the following new 
                paragraph:
            ``(2) Material information.--
                    ``(A) In general.--The administrator of a defined 
                contribution plan (other than a one-participant 
                retirement plan) shall provide to each participant and 
                beneficiary who has the right to direct the investment 
                of assets in his or her account in employer securities 
                with all reports, proxy statements, and other 
                communications regarding investment of such assets in 
                employer securities to the extent that such reports, 
                statements, and communications are required to be 
                provided by the plan sponsor to investors in connection 
                with such an investment under applicable securities 
                laws. Such reports, statements, and communications may 
                be delivered in written, electronic, or other 
                appropriate form to the extent such form is reasonably 
                accessible to participants and beneficiaries.
                    ``(B) Plan sponsor.--If any information required to 
                be provided under paragraph (1) is maintained by the 
                plan sponsor, the plan sponsor shall transmit such 
                information to the plan administrator.''
            (2) Conforming amendments.--
                    (A) Section 4980H(c)(3) of such Code, as so added, 
                is amended by adding at the end the following new 
                subparagraph:
                    ``(C) Separate application.--This paragraph shall 
                be applied separately for failures to meet the 
                requirements of subsection (e)(1) and failures to meet 
                the requirements of subsection (e)(2).''
                    (B)(i) The heading for section 4980H of such Code, 
                as so added, is amended by striking ``notice of freedom 
                to divest employer securities'' and inserting 
                ``information regarding investment in employer 
                securities''.
                    (ii) The item relating to section 4980H in the 
                table of sections for chapter 43 of such Code, as so 
                added, is amended by striking ``notice of freedom to 
                divest employer securities'' and inserting 
                ``information regarding investment in employer 
                securities''.
    (b) Amendments of ERISA.--
            (1) 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 (k) as 
        subsection (l) and by inserting after subsection (j) the 
        following new subsection:
    ``(k) Providing of Material Information.--
            ``(1) In general.--The administrator of an individual 
        account plan (other than a one-participant retirement plan 
        described in section 101(i)(8)(B)) shall provide to each 
        participant and beneficiary who has the right to direct the 
        investment of assets in his or her account in employer 
        securities with all reports, proxy statements, and other 
        communications regarding investment of such assets in employer 
        securities to the extent that such reports, statements, and 
        communications are required to be provided by the plan sponsor 
        to investors in connection with such an investment under 
        applicable securities laws. Such reports, statements, and 
        communications may be delivered in written, electronic, or 
        other appropriate form to the extent such form is reasonably 
        accessible to participants and beneficiaries.
            ``(2) Plan sponsor.--If any information required to be 
        provided under paragraph (1) is maintained by the plan sponsor, 
        the plan sponsor shall transmit such information to the plan 
        administrator.''
            (2) Enforcement.--Section 502 of such Act (29 U.S.C. 1132) 
        is amended--
                    (A) in subsection (a)(6), by striking ``(6), or 
                (7)'' and inserting ``(6), (7), or (8)'';
                    (B) by redesignating paragraph (8) of subsection 
                (c) as paragraph (9); and
                    (C) by inserting after paragraph (7) of subsection 
                (c) the following new paragraph:
    ``(8) The Secretary may assess a civil penalty against any person 
of up to $1,000 a day from the date of the person's failure or refusal 
to comply with the requirements of section 101(k) until such failure or 
refusal is corrected.''
    (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. 203. 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. 204. 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. 205. ADMINISTRATIVE PROVISIONS.

    (a) Authority of the Secretary of the Treasury.--The Secretary of 
the Treasury shall have the authority to prescribe rules applicable to 
the statements required under section 4980H(e)(1) of the Internal 
Revenue Code of 1986 (as added and amended by this Act) and section 
101(j) of the Employee Retirement Income Security Act of 1974 (as added 
by this Act).
    (b) Authority of the Secretary of Labor.--The Secretary of Labor 
shall have the authority to prescribe rules applicable to the 
statements required under--
            (1) section 4980H(e)(2) of the Internal Revenue Code of 
        1986 (as added by this Act) and section 101(k) of this Employee 
        Retirement Income Security Act of 1974 (as added by this Act);
            (2) section 4980I of such Code (as added by this Act) and 
        section 105(a) of such Act (as added by this Act); and
            (3) section 4980J of such Code (as added by this Act) and 
        section 101(i) such Act (as amended by this Act).

 TITLE III--IMPROVEMENTS IN FUNDING RULES FOR SINGLE-EMPLOYER PENSION 
                                 PLANS

    Subtitle A--Rules Relating to Funding, Benefit Limitations, and 
                               Deductions

        PART I--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

SEC. 301. 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 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 Standard.--
            ``(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 subparagraphs (B) and 
                (C), waive the requirements of subsection (a) for such 
                year with respect to all or any portion of the minimum 
                funding standard. The Secretary 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, in the case 
                of--
                            ``(i) 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(d), 
                        and
                            ``(ii) 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), except that the interest rate 
                        used for purposes of computing the amortization 
                        charge described in such section shall be the 
                        rate determined under section 6621(b).
                    ``(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 amortization payment required to be made for such 
                plan year with respect to any amortization described in 
                subparagraph (B) of any waived funding deficiency for 
                any preceding plan year.
            ``(2) Determination of business hardship.--For purposes of 
        this section, 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 
        section, 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 under this subsection and not satisfied 
        by employer contributions.
            ``(4) 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.
            ``(5) 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--
                    ``(A) with respect to such employer, and
                    ``(B) 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 subsection.
    ``(e) Extension of Amortization Periods.--In the case of a 
multiemployer plan, the period of years required to amortize any 
unfunded liability (described in any clause of section 431(b)(2)(B)) of 
the plan may be extended by the Secretary for a period of time (not in 
excess of 10 years) if the Secretary determines that such extension 
would carry out the purposes of the Employee Retirement Income Security 
Act of 1974 and would provide adequate protection for participants 
under the plan and their beneficiaries and if the Secretary determines 
that the failure to permit such extension would--
            ``(1) result in--
                    ``(A) a substantial risk to the voluntary 
                continuation of the plan, or
                    ``(B) a substantial curtailment of pension benefit 
                levels or employee compensation, and
            ``(2) be adverse to the interests of plan participants in 
        the aggregate.
The interest rate applicable for any plan year under any arrangement 
entered into by the Secretary in connection with an extension granted 
under this subsection shall be the rate determined under section 
6621(b).
    ``(f) Requirements Relating to Waivers and Extensions.--
            ``(1) Benefits may not be increased during waiver or 
        extension period.--If--
                    ``(A) a waiver under subsection (d)(1) or an 
                extension of time under subsection (e) is in effect 
                with respect to the plan, or
                    ``(B) a plan amendment described in subsection 
                (g)(2) which reduces the accrued benefit of any 
                participant has been made at any time in the preceding 
                12 months (24 months for multiemployer plans),
        no applicable benefit increase shall take effect. If an 
        applicable benefit increase takes effect 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 increase takes effect.
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        applicable benefit increase pursuant to a plan amendment 
        which--
                    ``(A) the Secretary determines to be reasonable and 
                which provides for only de minimis increases in the 
                liabilities of the plan,
                    ``(B) only repeals an amendment described in 
                subsection (g)(2) which reduced the accrued benefit of 
                any participant, or
                    ``(C) is required as a condition of qualification 
                under this part.
            ``(3) Applicable benefit increase.--The term `applicable 
        benefit increase' has the meaning given such term by section 
        436(b)(3) without regard to subparagraph (B) or (C) thereof.
            ``(4) Security for waivers; 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 to provide 
                        security to such plan as a condition for 
                        granting or modifying a waiver under subsection 
                        (d).
                            ``(ii) Special rules.--Any security 
                        provided under clause (i) may be perfected and 
                        enforced only by--
                                    ``(I) the Pension Benefit Guaranty 
                                Corporation, or
                                    ``(II) at the direction of the 
                                Corporation, by a contributing sponsor 
                                (within the meaning of section 
                                4001(a)(13) of the Employee Retirement 
                                Income Security Act of 1974) 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 subsection (d) 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 the Employee Retirement 
                                Income Security Act of 1974) 
                                representing participants in the plan 
                                which are submitted in writing to the 
                                Secretary 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 (within the 
                                meaning of section 4971) for the plan 
                                year and all preceding plan years, and
                                    ``(II) the present value of all 
                                waiver amortization payments under 
                                section 430(d) determined for the plan 
                                year and all succeeding plan years,
                is less than $1,000,000.
                            ``(ii) Treatment of pending waivers.--For 
                        purposes of clause (i)(I), minimum required 
                        contributions shall include any increase in 
                        such amount which would result if all 
                        applications for waivers of the minimum funding 
                        standard under subsection (d) or section 302(c) 
                        of the Employee Retirement Income Security Act 
                        of 1974 which are pending with respect to such 
                        plan were denied.
            ``(5) Additional requirements.--
                    ``(A) Advance notice.--The Secretary shall, before 
                granting a waiver under subsection (d) or an extension 
                under subsection (e), require each applicant to provide 
                evidence satisfactory to the Secretary that the 
                applicant has provided notice of the filing of the 
                application for such waiver or extension to each 
                affected party. Such notice shall include a description 
                of the extent to which the plan is funded for benefits 
                which are guaranteed under title IV of the Employee 
                Retirement Income Security Act of 1974 and for benefit 
                liabilities (within the meaning of section 4041(d) of 
                such Act).
                    ``(B) Consideration of relevant information.--The 
                Secretary shall consider any relevant information 
                provided by a person to whom notice was given under 
                subparagraph (A).
    ``(g) Other Definitions and Rules.--For purposes of this section--
            ``(1) Change in method or year.--If the funding method 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 substantial business hardship (as 
        determined under subsection (d)(2)) and that a waiver under 
        subsection (d)(1) 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. 302. FUNDING RULES APPLICABLE TO SINGLE-EMPLOYER PENSION PLANS.

    (a) In General.--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 
                              LIMITATIONS

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

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

    ``(a) Minimum Required Contribution.--
            ``(1) In general.--The minimum required contribution for a 
        defined benefit plan to which section 412(a)(2)(A) applies for 
        any plan year shall, for purposes of this section and section 
        412, be equal to the sum of--
                    ``(A) the target normal cost for the plan year,
                    ``(B) the aggregate amortization payment (if any) 
                for the plan year, and
                    ``(C) the waiver amortization payment (if any) for 
                the plan year.
        In no event shall the sum of the amounts determined under 
        subparagraphs (B) and (C) for any plan year exceed the unfunded 
        target liability for the plan year.
            ``(2) Limitation on annual increases or decreases.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the minimum required contribution for 
                any plan year beginning after 2007--
                            ``(i) shall not exceed the minimum required 
                        contribution for the preceding plan year 
                        (determined after application of this paragraph 
                        and without regard to any adjustment under 
                        subsection (i)(2)), increased by the greater 
                        of--
                                    ``(I) 30 percent of the target 
                                normal cost of the plan for the 
                                preceding plan year, or
                                    ``(II) 2 percent of the target 
                                liability of the plan for the preceding 
                                plan year, and
                            ``(ii) shall not be less than such minimum 
                        required contribution for the preceding plan 
                        year, reduced by the greater of the amounts 
                        under subclause (I) or (II) of clause (i).
                    ``(B) Special rules for benefit increases or 
                decreases during plan year.--If an applicable benefit 
                increase (as defined in section 436(b)(3) without 
                regard to subparagraph (B) or (C) thereof) takes effect 
                during the current plan year--
                            ``(i) the minimum required contribution for 
                        the current plan year for purposes of applying 
                        subparagraph (A) shall be determined without 
                        regard to any increase in such contribution 
                        attributable to the applicable benefit 
                        increase, and
                            ``(ii) the amount determined under 
                        subparagraph (A) (after application of clause 
                        (i)) shall be increased by the amount of the 
                        increase in the minimum required contribution 
                        disregarded under clause (i).
                A similar rule shall apply in the case of any benefit 
                decrease which takes effect during the current plan 
                year.
                    ``(C) Special rules relating to preceding year.--
                For purposes of subparagraph (A)--
                            ``(i) all target liability amortization 
                        installments and waiver amortization 
                        installments under subsections (c) and (d) 
                        which were determined with respect to any 
                        amortizable target liability or waived funding 
                        deficiency which is fully amortized as of the 
                        close of the preceding plan year shall not be 
                        taken into account in determining the minimum 
                        required contribution for the preceding plan 
                        year, and
                            ``(ii) if paragraph (3) applied for the 
                        preceding plan year, the minimum required 
                        contribution for the preceding plan year shall 
                        be treated as being equal to the target normal 
                        cost for such year.
            ``(3) Special rules for plans where assets exceed target 
        liability.--If, as of the valuation date for any plan year, the 
        value of the assets of the plan (reduced as provided in 
        subsection (e)(3)) equals or exceeds the target liability for 
        the plan year (in this subsection referred to as the `current 
        plan year')--
                    ``(A) the minimum required contribution for the 
                current plan year shall be equal to target normal cost, 
                reduced (but not below zero) by the amount of any such 
                excess, and
                    ``(B) all target liability amortization 
                installments and waiver amortization installments under 
                subsections (c) and (d) which were determined with 
                respect to any amortizable target liability or waived 
                funding deficiency for the current plan year or any 
                preceding plan year shall not be taken into account for 
                any succeeding plan year.
    ``(b) Target Normal Cost.--For purposes of this section--
            ``(1) In general.--The term `target normal cost' means, 
        with respect to any plan year, the present value of all 
        benefits which accrue or are earned under the plan during the 
        plan year. 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 shall 
        be treated as accruing during the current plan year.
            ``(2) Financially-weak employers.--If a plan sponsor of a 
        plan for any plan year is a financially-weak employer for any 
        plan year, the target normal cost of the plan for the plan year 
        shall be the at-risk target normal cost determined under 
        subsection (f).
    ``(c) Definitions and Rules Relating to Target Liability .--For 
purposes of this section--
            ``(1) Target liability.--
                    ``(A) In general.--The term `target liability' 
                means, with respect to any plan year, the present value 
                of all benefits accrued or earned under the plan as of 
                the beginning of the plan year.
                    ``(B) Financially-weak employers.--If a plan 
                sponsor of a plan for any plan year is a financially-
                weak employer for any plan year, the target liability 
                of the plan for the plan year shall be the at-risk 
                target liability determined under subsection (f).
            ``(2) Unfunded target liability.--The term `unfunded target 
        liability' means, with respect to any plan year, the excess (if 
        any) of--
                    ``(A) the target liability for the plan year, over
                    ``(B) the value of the assets of the plan (reduced 
                as provided under subsection (e)(3)) as of the 
                valuation date.
            ``(3) Aggregate amortization payments.--For purposes of 
        this section--
                    ``(A) Aggregate amortization payment.--The 
                aggregate amortization payment for any plan year is the 
                aggregate amount of the target liability amortization 
                installments determined for the plan year with respect 
                to any amortizable target liability for the plan year 
                and each of the 6 preceding plan years.
                    ``(B) Amortizable target liability.--
                            ``(i) In general.--The term `amortizable 
                        target liability' means, with respect to any 
                        plan year, the amount (if any) by which the 
                        unfunded target liability for the current plan 
                        year is more or less than the amount determined 
                        under clause (ii).
                            ``(ii) Amounts previously accounted for.--
                        The amount determined under this clause is the 
                        present value of all target liability 
                        amortization installments and waiver 
                        amortization installments under this subsection 
                        and subsection (d) which were determined for 
                        the current plan year or any succeeding plan 
                        year with respect to any amortizable target 
                        liability or waived funding deficiency for any 
                        plan year preceding the current plan year.
                    ``(C) Target liability amortization installments.--
                If a plan has an amortizable target liability for any 
                plan year--
                            ``(i) the liability shall be amortized in 7 
                        level amortization amounts over the 7-plan year 
                        period beginning with the plan year, and
                            ``(ii) the target liability amortization 
                        installment with respect to the liability for 
                        each of the 7 plan years shall be the fixed 
                        amount necessary to amortize the liability as 
                        provided under clause (i).
                    ``(D) Computation assumptions.--In determining the 
                present value of any amortization installment under 
                subparagraph (B)(ii), or the amount of any amortization 
                installment under subparagraph (C), the following rules 
                shall apply:
                            ``(i) Each amortization installment shall 
                        be treated as made on the valuation date for 
                        the plan year for which the installment is 
                        determined.
                            ``(ii) The interest rates used shall be the 
                        interest rates determined under the yield curve 
                        method under subsection (h)(2)(B) for the 
                        current plan year.
            ``(4) Transition rule for amortization of unfunded target 
        liability.--
                    ``(A) 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 
                target liability shall be taken into account under 
                paragraph (2)(A) in determining unfunded target 
                liability for the plan year.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A)--
                            ``(i) In general.--Except as provided in 
                        clause (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)(1)(B)(ii), 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.
    ``(d) Amortization of Waived Funding Deficiency.--For purposes of 
this section--
            ``(1) In general.--The waiver amortization payment for any 
        plan year is the aggregate amount of the waiver amortization 
        installments determined for the plan year with respect to any 
        waived funding deficiency for each of the 5 preceding plan 
        years.
            ``(2) Waiver amortization installments.--If a plan has a 
        waived funding deficiency for any plan year--
                    ``(A) the deficiency shall be amortized in 5 level 
                amortization amounts over the 5-plan year period 
                beginning with the succeeding plan year, and
                    ``(B) the waiver amortization installment with 
                respect to the deficiency for each of the 5 plan years 
                shall be the fixed amount necessary to amortize the 
                deficiency as provided under subparagraph (A).
            ``(3) Computation assumptions.--In making any determination 
        under paragraph (2) with respect to the amount of any 
        amortization installment, the following rules shall apply:
                    ``(A) Each amortization installment will be treated 
                as made on the valuation date for the plan year for 
                which the installment is determined.
                    ``(B) The interest rates used shall be the interest 
                rates determined under the yield curve method under 
                subsection (h)(2)(B) for the plan year in which the 
                waived funding deficiency to which the installment 
                relates arose.
            ``(4) Waived funding deficiency.--The waived funding 
        deficiency of a plan for any plan year is the amount of any 
        waived funding deficiency for the plan year under section 
        412(d).
    ``(e) 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 
        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 applicable effective interest rate (as 
                        defined in subsection (g)(3)) 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 
                net gain or loss with respect to plan assets for the 
                preceding plan year. Notwithstanding subsection 
                (g)(2)(B), such rate of net gain or loss 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) Reduction in value of assets.--Solely for purposes of 
        applying subsections (a)(3) and (c)(2) in determining the 
        minimum required contribution under this section, the value of 
        the plan assets otherwise determined under subsection (g)(2) 
        shall be reduced by the amount of the prefunding balance under 
        this subsection.
    ``(f) Special Rules for Large Plans Maintained by Financially-Weak 
Employers.--
            ``(1) Determination of target liability and normal cost.--
                    ``(A) In general.--If, as of the valuation date for 
                any plan year, any plan sponsor of a plan to which this 
                section applies is a financially-weak employer, then, 
                in applying this section for the plan year, the at-risk 
                target liability and at-risk target normal cost shall 
                (if greater) be substituted for the target liability 
                and target normal cost, respectively. Such substitution 
                shall not be applied for any plan year for which the 
                plan has no unfunded target liability (determined 
                without regard to this subsection or any reduction in 
                the value of assets under subsection (e)(3)).
                    ``(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)(1)(B)(ii) 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 a 
                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 described in section 
                        1381(a) more than 50 percent of the ownership 
                        or capital and profits interests of which are 
                        held--
                                    ``(I) by producers of agricultural 
                                products, or
                                    ``(II) organizations described in 
                                section 1381(a) meeting the 
                                requirements of subclause (I).
                    ``(D) Plans losing exemption.--If subparagraph (B) 
                or (C) does not apply to a plan year but did apply for 
                the preceding plan year, no plan year preceding the 
                current plan year shall be taken into account for 
                purposes of paragraph (3) or (4)(A).
            ``(2) At-risk amounts.--
                    ``(A) In general.--Except as provided in paragraph 
                (3), the at-risk target liability and at-risk target 
                normal cost shall be determined in the same manner as 
                the target liability and target normal cost, except 
                that the actuarial assumptions described in 
                subparagraph (B) shall be used in computing such 
                amounts.
                    ``(B) 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 
                        shall be assumed to retire at the earliest 
                        retirement age 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.
            ``(3) Plan sponsors financially weak for less than 5 
        years.--
                    ``(A) In general.--If a plan sponsor to which this 
                subsection applies for any plan year was not a 
                financially-weak employer on the valuation date for 
                each of the 4 immediately preceding plan years, the at-
                risk target liability or at-risk target normal cost 
                shall be equal to the sum of--
                            ``(i) the applicable percentage of the at-
                        risk target liability or the at-risk target 
                        normal cost, whichever is applicable, 
                        determined under this subsection (without 
                        regard to this paragraph), and
                            ``(ii) the product of the target liability 
                        or the target normal cost, whichever is 
                        applicable, determined without regard to this 
                        subsection, and a percentage equal to 100 
                        percent minus the applicable percentage.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined in accordance with the following table:

``If the consecutive number of                                         
  years (including the plan year)                                      
  the plan sponsor is financially                        The applicable
  weak is--                                             percentage is--
    1.............................................                  20 
    2.............................................                  40 
    3.............................................                  60 
    4.............................................                  80.
            ``(4) Financially-weak employer.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `financially-weak employer' means any employer 
                if, as of the valuation date for each of the 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.
                    ``(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(g)(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. Such 
                regulations shall also provide for the application of 
                paragraph (5) in the case of employers treated as 
                financially weak under such regulations.
            ``(5) Determination of consecutive periods where employer 
        is financially weak.--
                    ``(A) Ratings of investment grade or higher.--If, 
                as of the valuation date for any plan year, any rating 
                described in clause (i) or (ii) of paragraph (4)(A) is 
                investment grade or higher--
                            ``(i) this subsection shall not apply for 
                        the plan year, and
                            ``(ii) in applying this subsection for any 
                        succeeding plan year, the plan year described 
                        in clause (i) and any preceding plan year shall 
                        not be taken into account in determining any 
                        consecutive period of plan years under 
                        paragraphs (3) and (4)(A).
                    ``(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 paragraphs (3) and (4)(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 
                        paragraphs (3) and (4)(A).
                            ``(iii) Improvement year.--For purposes of 
                        this subparagraph, the term `improvement year' 
                        means any plan year for which any rating 
                        described in clause (i) or (ii) of paragraph 
                        (4)(A) is higher than such rating for the 
                        preceding plan year.
            ``(6) Years before effective date.--For purposes of 
        paragraphs (3) and (4), plan years beginning before 2007 shall 
        not be taken into account.
    ``(g) Valuation of Plan Assets and Liabilities.--
            ``(1) Time for making determinations.--
                    ``(A) In general.--Except as otherwise provided in 
                this section, all determinations under this section for 
                a plan year shall be made as of the valuation date of 
                the plan for the plan year.
                    ``(B) Valuation date.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the valuation date is the first 
                        day of the plan year.
                            ``(ii) Exception for small plans.--If, on 
                        each day during the preceding plan year, a plan 
                        had 100 or fewer participants, a plan may 
                        designate any day during the plan year as its 
                        valuation date for the plan year and succeeding 
                        plan years. For purposes of this clause, all 
                        defined benefit plans (other than multiemployer 
                        plans) maintained by the same employer (or any 
                        member of such employer's controlled group (as 
                        defined in section 412(g)(4))) shall be treated 
                        as 1 plan, but only participants with respect 
                        to such employer or member shall be taken into 
                        account.
                            ``(iii) Application of certain rules in 
                        determination of plan size.--
                                    ``(I) Plans not in existence in 
                                preceding year.--In the case of the 
                                first plan year of any plan, clause 
                                (ii) shall apply to such plan by taking 
                                into account the number of participants 
                                the plan is reasonably expected to have 
                                on days during such first plan year.
                                    ``(II) Predecessors.--Any reference 
                                in clause (ii) to an employer shall 
                                include a reference to any predecessor 
                                of such employer.
            ``(2) Determination of value of plan assets.--For purposes 
        of this section--
                    ``(A) In general.--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 4th 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).
                    ``(C) Accounting for contribution receipts.--For 
                purposes of determining the value of assets under this 
                paragraph--
                            ``(i) 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 applicable 
                        effective interest rate for the preceding plan 
                        year to which the contribution is properly 
                        allocable.
                            ``(ii) 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 
                                applicable effective interest rate for 
                                the plan year.
            ``(3) Applicable effective interest rate.--For purposes of 
        this section, the term `applicable effective interest rate' 
        means, with respect to any plan year, the single rate of 
        interest which, if used to determine the present value of 
        benefits accrued or earned under the plan as of the beginning 
        of the plan year, would result in an amount equal to the target 
        liability for the plan year.
    ``(h) Actuarial Assumptions and Methods.--For purposes of this 
section--
            ``(1) Actuarial assumptions.--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 rate assumptions used.--
                    ``(A) In general.--Except as provided in this 
                section, the determination of present value or other 
                computation requiring any interest rate assumption 
                shall be made--
                            ``(i) in the case of plan years beginning 
                        in 2007 or 2008, by using the phase-in yield 
                        curve method (as defined in subparagraph (C)), 
                        and
                            ``(ii) in the case of plan years beginning 
                        after 2008, by using the yield curve method (as 
                        defined in subparagraph (B)).
                    ``(B) Yield curve method.--For purposes of this 
                paragraph--
                            ``(i) In general.--The yield curve method 
                        is a method under which present value or other 
                        amounts requiring interest rate assumptions are 
                        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.
                    ``(C) Phase-in yield curve method.--
                            ``(i) In general.--Present value or any 
                        other amount requiring the use of interest rate 
                        assumptions 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 
                                (B), and
                                    ``(II) the product of such amount 
                                determined by using the interest rate 
                                rules in effect under section 412(b)(5) 
                                for plan years beginning in 2006 and a 
                                percentage equal to 100 percent minus 
                                the applicable percentage.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is 33 
                        percent for plan years beginning in 2007 and 67 
                        percent for plan years beginning in 2008.
            ``(3) Mortality table used.--
                    ``(A) Secretarial authority.--The Secretary shall 
                by regulation prescribe mortality tables to be used 
                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.
                    ``(B) 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.
                    ``(C) Periodic review.--The Secretary shall 
                periodically (at least every 5 years) review any tables 
                in effect under this paragraph and shall, to the extent 
                the Secretary determines necessary, update the tables 
                to reflect the actual experience of pension plans and 
                projected trends in such experience.
            ``(4) Treatment of optional forms of benefits.--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 payments will be 
                made in an optional form of benefit provided under the 
                plan (including lump sum payments), and
                    ``(B) any differences between the present value of 
                any such optional form of benefit and the present value 
                of the future payments used in computing target normal 
                costs and target liability under this section.
            ``(5) Approval required for certain changes in assumptions 
        by certain plans.--
                    ``(A) In general.--No actuarial assumption used to 
                determine the target liability for a plan to which this 
                paragraph applies may be changed without the approval 
                of the Secretary. The preceding sentence shall not 
                apply to changes required under paragraph (2) or (3) 
                with respect to any assumption.
                    ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                            ``(i) the plan is a defined benefit plan to 
                        which title IV of the Employee Retirement 
                        Income Security Act of 1974 applies;
                            ``(ii) the aggregate unfunded target 
                        liabilities as of the close of the preceding 
                        plan year of--
                                    ``(I) such plan, and
                                    ``(II) all other plans to which 
                                such title IV applies maintained by 
                                persons which are liable for payment of 
                                contributions to such plan under 
                                section 412(c),
                        exceed $50,000,000; and
                            ``(iii) the change in assumptions 
                        (determined after taking into account any 
                        changes as a result of the application of 
                        paragraphs (2) and (3)) results in a decrease 
                        in the unfunded target liability of the plan 
                        for the current plan year which--
                                    ``(I) exceeds $50,000,000, or
                                    ``(II) exceeds $5,000,000 and is 5 
                                percent or more of the target liability 
                                of the plan before such change.
    ``(i) Payment of Minimum Required Contribution.--
            ``(1) In general.--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 minimum required contribution for a 
        plan year which is made on a date other than the valuation date 
        for such plan year shall be properly adjusted for interest 
        accruing for the period between the valuation date and the 
        payment date, determined by using the applicable effective 
        interest rate (as defined in subsection (g)(3)) for the plan 
        year.
    ``(j) Quarterly Contributions Required.--
            ``(1) Failure to timely make required installment.--
                    ``(A) In general.--In the case of a plan to which 
                this subsection applies, the employer maintaining the 
                plan shall make the required installments under this 
                subsection 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 subsection 
                (i)(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 
                subsection (i)(2) plus 5 percentage points.
                    ``(B) Plans to which subsection applies.--This 
                subsection applies to any defined benefit plan to which 
                this section applies other than a plan which--
                            ``(i) is a plan described in subsection 
                        (g)(1)(B)(ii)), or
                            ``(ii) had an unfunded target liability of 
                        $1,000,000 or less for the preceding plan year.
            ``(2) Amount of underpayment, period of underpayment.--For 
        purposes of paragraph (1)--
                    ``(A) 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.
                    ``(B) Period of underpayment.--The period for which 
                interest is charged under this subsection with regard 
                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.
                    ``(C) Order of crediting contributions.--For 
                purposes of subparagraph (A)(ii), contributions shall 
                be credited against unpaid required installments in the 
                order in which such installments are required to be 
                paid.
            ``(3) Number of required installments; due dates.--For 
        purposes of this subsection--
                    ``(A) Payable in 4 installments.--There shall be 4 
                required installments for each plan year.
                    ``(B) Time for payment of installments.--

In the case of the following          
        required installments:      The due date is:
    1st............................
                                        April 15
    2nd............................
                                        July 15
    3rd............................
                                        October 15
    4th............................
                                        January 15 of the following 
                                                year.
            ``(4) Amount of required installment.--For purposes of this 
        subsection--
                    ``(A) In general.--The amount of any required 
                installment shall be 25 percent of the required annual 
                payment.
                    ``(B) Required annual payment.--For purposes of 
                subparagraph (A), the term `required annual payment' 
                means the lesser of--
                            ``(i) 90 percent of the minimum required 
                        contribution under subsection (a) required to 
                        be contributed to or under the plan by the 
                        employer for the plan year, or
                            ``(ii) 100 percent of the minimum required 
                        contribution so required for the preceding plan 
                        year (without regard to any waiver under 
                        section 412(d)).
                Clause (ii) shall not apply if the preceding plan year 
                was not a year of 12 months. In the case of any plan 
                year beginning in 2007, the amount under clause (ii) 
                for the preceding plan year shall be determined by 
                reference to the amount required to be contributed to 
                or under the plan under section 412 (as such section 
                was in effect before the date of the enactment of this 
                part).
            ``(5) Liquidity requirement.--
                    ``(A) In general.--A plan to which this paragraph 
                applies shall be treated as failing to pay the full 
                amount of any required installment 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 defined benefit plan--
                            ``(i) to which this subsection applies for 
                        a plan year, and
                            ``(ii) which has a liquidity shortfall for 
                        any quarter during such plan year.
                    ``(C) Period of underpayment.--For purposes of 
                paragraph (1), 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.--In no event shall 
                the increase in the amount of any required installment 
                under subparagraph (A) exceed the sum of the unfunded 
                target liability and target normal cost for the plan 
                year.
                    ``(E) Definitions.--For purposes of this 
                paragraph--
                            ``(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 the base 
                        amount with respect to such quarter over 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 funded target 
                                liability percentage (as defined in 
                                section 436(e)) 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.
            ``(6) Fiscal years and short years.--
                    ``(A) Fiscal years.--In applying this subsection to 
                a plan year beginning on any date other than January 1, 
                there shall be substituted for the months specified in 
                this subsection the months which correspond thereto.
                    ``(B) Short plan year.--This subsection shall be 
                applied to plan years of less than 12 months in 
                accordance with regulations prescribed by the 
                Secretary.
    ``(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 required 
                installment under subsection (j) or any other payment 
                required under this section before the due date for 
                such installment or other payment, and
                    ``(B) the unpaid balance of such installment or 
                other payment (including interest), when added to the 
                aggregate unpaid balance of all preceding such 
                installments or other 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 for any plan year for 
        which the funded target liability percentage (within the 
        meaning of section 436(e)) of such plan is less than 100 
        percent. This subsection shall not apply to any plan to which 
        section 4021 of the Employee Retirement Income Security Act of 
        1974 does not apply.
            ``(3) Amount of lien.--For purposes of paragraph (1), the 
        amount of the lien shall be equal to the aggregate unpaid 
        balance of required installments and other payments required 
        under this section (including interest) 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 
                installment or other payment.
                    ``(B) Period of lien.--The lien imposed by 
                paragraph (1) shall arise on the due date for the 
                required installment or other 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 (as defined in section 
        412(g)(4)) of the contributing sponsor).
            ``(6) Definitions.--For purposes of this subsection, 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 this 
        section.
    ``(l) Regulations.--The Secretary shall prescribe such regulations 
as are necessary to carry out the provisions of this section, including 
regulations--
            ``(1) for the proper treatment of increases in liabilities 
        of any plan pursuant to plan amendments which are adopted, or 
        which take effect, on a date during the plan year other than 
        the valuation date,
            ``(2) for the application of any small plan exception under 
        this section in cases of mergers and acquisitions, and
            ``(3) for the application of this section in the case of a 
        plan maintained by more than one employer.

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

    ``(a) In General.--In the case of a multiemployer plan to which 
section 412(a)(2)(C) applies, the accumulated funding deficiency of the 
plan for any plan year for purposes of section 412 shall be--
            ``(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 to which section 412 applies to the plan) over the total 
        credits to such account for such years, or
            ``(2) if the multiemployer plan is in reorganization for 
        any plan year, the accumulated funding deficiency of the plan 
        determined under section 418B.
    ``(b) Funding Standard Account.--
            ``(1) Account required.--Each multiemployer plan to which 
        this section 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) in the case of a plan in existence on 
                        January 1, 1974, the unfunded past service 
                        liability under the plan on the first day of 
                        the first plan year to which this section 
                        applies, over a period of 40 plan years,
                            ``(ii) in the case of a plan which comes 
                        into existence after January 1, 1974, the 
                        unfunded past service liability under the plan 
                        on the first day of the first plan year to 
                        which this section applies, over a period of 30 
                        plan years,
                            ``(iii) 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 30 plan years,
                            ``(iv) separately, with respect to each 
                        plan year, the net experience loss (if any) 
                        under the plan, over a period of 15 plan years, 
                        and
                            ``(v) 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 30 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 this section), 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 this 
                section).
            ``(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 30 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 30 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 this section), 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) 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.
            ``(5) Interest.--The funding standard account (and items 
        therein) shall be charged or credited (as determined under 
        regulations prescribed by the Secretary) with interest at the 
        appropriate rate consistent with the rate or rates of interest 
        used under the plan to determine costs.
            ``(6) Certain amortization charges and credits.--In the 
        case of a plan which, immediately before the date of the 
        enactment of the Multiemployer Pension Plan Amendments Act of 
        1980, was a multiemployer plan (within the meaning of section 
        414(f) as in effect immediately before such date)--
                    ``(A) any amount described in paragraph (2)(B)(ii), 
                (2)(B)(iii), or (3)(B)(i) of this subsection which 
                arose in a plan year beginning before such date shall 
                be amortized in equal annual installments (until fully 
                amortized) over 40 plan years, beginning with the plan 
                year in which the amount arose;
                    ``(B) any amount described in paragraph (2)(B)(iv) 
                or (3)(B)(ii) of this subsection which arose in a plan 
                year beginning before such date shall be amortized in 
                equal annual installments (until fully amortized) over 
                20 plan years, beginning with the plan year in which 
                the amount arose;
                    ``(C) any change in past service liability which 
                arises during the period of 3 plan years beginning on 
                or after such date, and results from a plan amendment 
                adopted before such date, shall be amortized in equal 
                annual installments (until fully amortized) over 40 
                plan years, beginning with the plan year in which the 
                change arises; and
                    ``(D) any change in past service liability which 
                arises during the period of 2 plan years beginning on 
                or after such date, and results from the changing of a 
                group of participants from one benefit level to another 
                benefit level under a schedule of plan benefits which--
                            ``(i) was adopted before such date, and
                            ``(ii) was effective for any plan 
                        participant before the beginning of the first 
                        plan year beginning on or after such date,
                shall be amortized in equal annual installments (until 
                fully amortized) over 40 plan years, beginning with the 
                plan year in which the change arises.
            ``(7) Special rules.--For purposes of this section--
                    ``(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 
                418B(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 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 this section) for 
                any plan year, the funding standard account shall be 
                charged in the plan year to which the portion of the 
                net experience loss was deferred in the same manner as 
                required under such section (and paragraph (2)(B)(iv) 
                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 determined by the 
                Secretary.
    ``(c) Special Rules.--
            ``(1) Determinations to be made under funding method.--For 
        purposes of this section, 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 section, 
                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) which, in the aggregate, are 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 paragraphs (2)(B), 
                (C), and (D) and (3)(B) of subsection (b) which are 
                required to be amortized shall be considered fully 
                amortized for purposes of such paragraphs.
            ``(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).
                For purposes of subparagraph (A), unless otherwise 
                provided by the plan, the accrued liability under a 
                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)).
                    ``(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) 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 (D).
                            ``(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 (ii)) 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 the 
                        Secretary determines necessary, update the 
                        tables to reflect the actual experience of 
                        pension plans and projected trends in such 
                        experience.
                    ``(D) 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)(5) 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)(C) 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)(C) 
                        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.''.
    (b) Conforming Amendment.--The table of parts for subchapter D of 
chapter 1 of such Code is amended by adding at the end the following 
new item:

        ``Part III. Rules relating to minimum funding standards and 
                            benefit limitations.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2006.

SEC. 303. LIMITATION ON BENEFIT IMPROVEMENTS BY SINGLE-EMPLOYER PLANS 
              WHICH ARE UNDERFUNDED OR MAINTAINED BY FINANCIALLY WEAK 
              OR BANKRUPT EMPLOYERS.

    (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. Limitations on benefit improvements by single-
                            employer plans which are underfunded or 
                            maintained by financially weak or bankrupt 
                            employers.

``SEC. 436. LIMITATIONS ON BENEFIT IMPROVEMENTS BY SINGLE-EMPLOYER 
              PLANS WHICH ARE UNDERFUNDED OR MAINTAINED BY FINANCIALLY 
              WEAK EMPLOYERS.

    ``(a) Benefit Limitation Requirements.--For purposes of section 
401(a)(29), except as provided in subsection (f)(5), 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 Benefit Increases.--
            ``(1) In general.--A plan meets the requirements of this 
        subsection for any plan year if the plan provides that if the 
        plan's adjusted funded target liability percentage for the 
        preceding plan year is less than 80 percent, any applicable 
        benefit increase shall not take effect during the plan year 
        until the plan has met the additional funding requirements of 
        paragraph (2).
            ``(2) Additional funding requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any applicable 
                benefit increase for any plan year if the plan sponsor, 
                in addition to any other contribution required under 
                section 430, contributes to or under the plan an 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 the adjusted 
                funded target liability percentage of the plan for the 
                plan year being equal to 80 percent.
                    ``(B) Benefit increases counted for purposes of 
                funded percentage.--For purposes of subparagraph (A), 
                the adjusted funded target liability percentage shall 
                be determined by taking into account all increases in 
                liabilities of the plan which would have been taken 
                into account in determining such percentage if the 
                applicable benefit increase had taken effect as of the 
                beginning of the plan year.
                    ``(C) Payments after valuation date.--In the case 
                of any contribution required by this subsection which 
                is made after the first day of the plan year, the 
                amount of the contribution shall be adjusted in the 
                same manner as it would be under section 430(i)(2) if 
                it were a minimum required contribution for the plan 
                year.
                    ``(D) Treatment of payment in computing minimum 
                required contribution.--If any applicable benefit 
                increase to which this subsection applies for any plan 
                year is required to be taken into account in 
                determining the minimum required contribution under 
                section 430 for the plan year, any payment required by 
                this paragraph with respect to the applicable benefit 
                increase shall, for purposes of determining the amount 
                of such minimum required contribution, be treated in 
                the same manner as a contribution for a preceding plan 
                year is treated under section 430(g)(2)(C)(i).
            ``(3) Applicable benefit increase.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `applicable benefit 
                increase' means, with respect to any plan year, any 
                increase in liabilities of the plan by plan amendment 
                (or otherwise as provided in regulations prescribed by 
                the Secretary) which, but for this subsection, 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.
                    ``(B) Exception for certain benefit increases.--In 
                the case of a plan maintained pursuant to 1 or more 
                collective bargaining agreements between employee 
                representatives and 1 or more plan sponsors, such term 
                shall not include any increase in liabilities of the 
                plan by reason of any increase in benefits pursuant to, 
                and for individuals covered by, the agreements 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) Exception for collectively bargained 
                increases negotiated before underfunding occurs.--In 
                the case of a plan maintained pursuant to 1 or more 
                collective bargaining agreements between employee 
                representatives and 1 or more plan sponsors and 
                ratified in a plan year with respect to which the 
                adjusted funded target liability percentage was at 
                least 80 percent, such term shall not include any 
                increase or change described in subparagraph (A) 
                pursuant to, and for individuals covered by, the 
                agreements which takes effect in any plan year 
                beginning after the plan year in which the agreements 
                are ratified and before the earlier of--
                            ``(i) the date on which the last of such 
                        collective bargaining agreement terminates 
                        (determined without regard to any extension 
                        thereof), or
                            ``(ii) the date which is 3 years after the 
                        date on which this subsection would otherwise 
                        apply but for this subparagraph.
                    ``(D) Other exceptions.--Such term shall not 
                include any increase in liabilities--
                            ``(i) by reason of a plan amendment if such 
                        amendment is required as a condition of 
                        qualification under this part, or
                            ``(ii) which is specified in regulations 
                        prescribed by the Secretary.
            ``(4) Special rule for plans in bankruptcy.--In the case of 
        any period during which the plan sponsor is in bankruptcy--
                    ``(A) paragraphs (1) and (2)(A) shall be applied by 
                substituting `100 percent' for `80 percent', and
                    ``(B) the exceptions under subparagraphs (B) and 
                (C) of paragraph (3) shall not apply.
    ``(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 (5), 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)(5)(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) Rules relating to required contributions.--
                    ``(A) Security may be provided.--
                            ``(i) In general.--A plan sponsor shall not 
                        be treated as failing to meet the requirements 
                        of paragraph (1) if the plan sponsor provides 
                        security in a form meeting the requirements of 
                        clause (ii) for any portion of the amount 
                        required to be contributed under paragraph (1) 
                        but which is not so contributed. Such security 
                        shall be provided no later than the due date of 
                        the contribution to which it relates or such 
                        earlier date as the Secretary may prescribe.
                            ``(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 
                                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.
                            ``(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 430(i), or
                                    ``(III) if the adjusted funded 
                                target liability 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 the end of the prohibited 
                        period for the failure to which the security 
                        relates. The Secretary may prescribe 
                        regulations for partial releases of the 
                        security by reason of increases in the adjusted 
                        funded target liability percentage.
                            ``(v) Security not treated as plan asset.--
                        Any security under this subparagraph shall not 
                        be taken into account in determining the value 
                        of the plan's assets except to the extent 
                        provided in clause (i).
                    ``(B) Treatment as unpaid minimum required 
                contribution.--The amount of any required contribution 
                which a plan sponsor fails to make under paragraph (1) 
                by the close of the plan year to which the contribution 
                relates 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.
            ``(5) 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) Freeze on Plan Benefits.--
            ``(1) In general.--The requirements of this subsection are 
        met if the plan provides that, notwithstanding any other 
        provision of the plan, during a freeze period--
                    ``(A) the accrued benefit, any death or disability 
                benefit, and any social security supplement described 
                in the last sentence of section 411(a)(9) of each 
                participant are frozen at the amount of such benefit or 
                supplement immediately before the freeze period, and
                    ``(B) all other benefits provided 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) if 
        they had been implemented by a plan amendment adopted 
        immediately before the freeze period.
            ``(2) Freeze period.--For purposes of paragraph (1), the 
        term `freeze period' means any period treated as a prohibited 
        period under subsection (c)(3)(A). A rule similar to the rule 
        of subsection (c)(5) shall apply for purposes of this 
        subsection.
            ``(3) 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 plan 
        sponsors and ratified in a plan year with respect to which the 
        funded target liability percentage as of the valuation date was 
        at least 60 percent, this subsection shall not be applied to 
        benefits pursuant to, and individuals covered by, such 
        agreement for plan years beginning before the earlier of--
                    ``(A) the date on which the last of such collective 
                bargaining agreements terminates (determined without 
                regard to any extension thereof), or
                    ``(B) the date which is 3 years after the date the 
                freeze period would otherwise begin under this 
                subsection.
    ``(e) Definitions and Rules Relating to Application of 
Limitations.--For purposes of this section--
            ``(1) Funded target liability percentage.--
                    ``(A) In general.--The term `funded target 
                liability percentage' means, with respect to any plan 
                year, the percentage equal to a fraction--
                            ``(i) the numerator of which is the value 
                        of assets of the plan determined under section 
                        430(g)(2) for the plan year, and
                            ``(ii) the denominator of which is the 
                        target liability for the plan year.
                    ``(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 clauses (i) and 
                (ii) of subparagraph (A) 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.
            ``(2) Certification.--A certification by an enrolled 
        actuary under this section shall be made in such form and 
        manner as the Secretary may prescribe and shall be based on the 
        information available to the enrolled actuary. The enrolled 
        actuary shall notify the plan administrator of any change in 
        the funded target liability percentage if the actual target 
        liability or asset value differs from that used for the 
        certification.
            ``(3) Contributions included in assets.--In making a 
        certification under paragraph (2) for purposes of this section, 
        the determination of whether and to what extent contributions 
        are to be taken into account in computing the assets of the 
        plan shall be made in the same manner as under section 
        430(g)(2)(C), except that contributions in excess of the 
        minimum required contribution for any preceding plan year shall 
        not be taken into account unless made before the date of the 
        certification.
            ``(4) Treatment of plan as of close of prohibited or freeze 
        period.--For purposes of applying this part--
                    ``(A) Operation of plan after period.--Unless the 
                plan provides otherwise, the accrual and payment of 
                benefits which were prohibited, frozen, or eliminated 
                under subsection (c) or (d) shall resume, effective as 
                of the day following the close of a prohibited or 
                freeze period under subsection (c) or (d), whichever is 
                applicable.
                    ``(B) Treatment of affected benefits.--Nothing in 
                this paragraph shall be construed as affecting the 
                plan's treatment of benefits prohibited, frozen, or 
                eliminated during the prohibited or freeze period.
    ``(f) Other Definitions and Rules.--For purposes of this section--
            ``(1) Coordination with minimum required contributions.--
        Any contribution by a plan sponsor for a plan year shall be 
        allocated first to any minimum required contribution under 
        section 430 for any plan year the valuation date of which 
        occurs on or before the date of the contribution by the plan 
        sponsor until all such minimum required contributions are fully 
        made and then to the contributions required under subsection 
        (b), (c), or (d).
            ``(2) Terms used in section 430.--Any term used in this 
        section which is also used in section 430 shall have the 
        meaning given such term by section 430.
            ``(3) Bankruptcy.--A plan sponsor is in bankruptcy during 
        any period the plan sponsor is a debtor in a case under title 
        11, United States Code, or similar Federal or State law.
            ``(4) Plan sponsor.--The term `plan sponsor' means the 
        employer referred to in section 412(c)(without regard to 
        paragraph (2)).
            ``(5) Plans in existence less than 5 years.--This section 
        (other than subsection (c)) shall not apply to a plan for each 
        of the plan's first 5 plan years. For purposes of this 
        paragraph, plan years of any predecessor plan shall be taken 
        into account. Notwithstanding this paragraph, subsections (b) 
        and (d) shall apply during any period the plan sponsor is in 
        bankruptcy.
            ``(6) Coordination with other requirements.--A trust 
        forming part of a plan to which this section applies shall not 
        be treated as failing to constitute a qualified trust merely 
        because the plan does not make a payment required under the 
        plan because the plan is prohibited from making the payment by 
        reason of this section.
            ``(7) 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) Conforming Amendments.--Part III of subchapter D of chapter 1 
of such Code, as added by this subtitle, is amended by striking the 
heading and table of sections and inserting:

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

        ``Subpart A. Minimum funding standards for pension plans.
        ``Subpart B. Limitations on benefit improvements by single-
                            employer plans.

        ``Subpart A--Minimum Funding Standards for Pension Plans

        ``Sec. 430. Minimum funding standards for plans other than 
                            multiemployer plans.
        ``Sec. 431. Minimum funding standards for multiemployer 
                            plans.''.
    (c) Effective Date.--
            (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 the date of the enactment of this 
        Act, the amendments made by this subsection 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, 2009.
        For purposes of clause (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 subsection shall not be treated as a termination of such 
        collective bargaining agreement.

SEC. 304. 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 single-employer 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 target liability 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(f) 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 at-risk target liability for the 
                        plan year (determined as if section 430(f) 
                        applied to the plan), plus
                            ``(ii) the at-risk 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 target liability 
                        for the plan year, and
                            ``(ii) the amount by which the target 
                        liability 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 subsections (j)(1) and (l) 
                        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 (other 
                than multiemployer plans) maintained by the same 
                employer (or any member of such employer's controlled 
                group (within the meaning of section 412(g)(4))) shall 
                be treated as one plan, but only participants with 
                respect to 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 section 323 of 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) 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 unfunded target liability 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) (without regard to 
        subparagraph (B) thereof) of section 431(c)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2006.

SEC. 305. 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 underfunded plans and plans 
        maintained by financially weak employers.--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)(A) Section 401(a) of such Code, as amended by section 
        101 of this Act, is amended by striking paragraphs (32) and 
        (33) and by redesignating paragraphs (34) and (35) as 
        paragraphs (32) and (33).
            (B)(i) Section 401(a)(28)(B)(v) of such Code, as added by 
        section 101 of this Act, is amended by striking ``paragraph 
        (35)(E)'' and inserting ``paragraph (33)(E)''.
            (ii) Section 409(h)(7) of such Code, as amended by section 
        101 of this Act, is amended by striking ``section 401(a)(35)'' 
        and inserting ``section 401(a)(33)''.
            (iii) Section 101(c)(3)(C) of this Act is amended by 
        striking ``section 401(a)(35)(H)'' and inserting ``section 
        401(a)(33)(H)''.
            (iv) Subsections (e) and (f) of section 4980H(e) of such 
        Code, as added by section 102 of this Act, are each amended by 
        striking ``section 401(a)(35)'' each place it appears and 
        inserting ``section 401(a)(33)''.
            (v) Section 4980I(f)(1) of such Code, as added by section 
        103 of this Act, is amended by striking ``section 
        401(a)(35)(E)(iv)'' and inserting ``section 
        401(a)(33)(E)(iv)''.
            (vi) Section 4980J(e)(9)(B) of such Code, as added by 
        section 104 of this Act, is amended by striking ``section 
        401(a)(35)(E)(iv)'' and inserting ``section 
        401(a)(33)(E)(iv)''.
            (vii) Section 101(i)(8)(B) of the Employee Retirement 
        Income Security Act of 1974, as amended by section 104 of this 
        Act, is amended by striking ``section 401(a)(35)(E)(iv)'' and 
        inserting ``401(a)(33)(E)(iv)''.
    (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(g)(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(g)(3)'', and
                    (B) by striking ``paragraphs (4), (5), and (6) of 
                section 412(i)'' and inserting ``subparagraphs (D), 
                (E), and (F) of section 412(g)(3)'', and
            (3) by striking ``section 412(c)(8)'' in subsection 
        (d)(6)(A) and inserting ``section 412(g)(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 target liability and target normal 
                                cost determined under section 430 in 
                                the case of any other plan), over''.
    (d) Special Rules for Multiemployer Plans.--
            (1) Section 418(b)(2) of such Code is amended--
                    (A) by striking ``section 412(b)(2)'' in 
                subparagraph (A) and inserting ``section 431(b)(2)'', 
                and
                    (B) by striking ``section 412(b)(3)(B)'' in 
                subparagraph (B) and inserting ``section 
                431(b)(3)(B)''.
            (2) Section 418B of such Code is amended--
                    (A) by striking ``section 412(b)(2)(A) or (B)'' in 
                subsection (d)(1)(B) and inserting ``section 
                431(b)(2)(A) or (B)'',
                    (B) by striking ``section 412(c)(8)'' in subsection 
                (e) and inserting ``section 412(g)(2)'', and
                    (C) by striking ``section 412(c)(3)'' in subsection 
                (g) and inserting ``section 431(c)(3)''.
            (3) Section 418D(a)(2) of such Code is amended--
                    (A) by striking ``section 412(c)(8)'' and inserting 
                ``section 412(g)(2)'', and
                    (B) by striking ``section 412(c)(10)'' and 
                inserting ``section 431(c)(8)''.
    (e) 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 the amount determined under 
                subparagraph (A) or (B) of section 430(g)(2) as of the 
                valuation date for the plan year in which the transfer 
                occurs, over
                    ``(B) 125 percent of the sum of the target 
                liability 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 to a health benefits account, any assets 
        transferred in a plan year on or before the valuation date for 
        the plan year (and any income allocable thereto) shall, for 
        purposes of section 430, not be treated as assets in the plan 
        as of the valuation date. The prefunding balance under section 
        430(e) for the plan year shall be reduced by the assets so 
        transferred.''.
    (f) Excise Taxes.--
            (1) 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 plan other than a multiemployer 
        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(h)(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 in the order in which such contributions 
                became due 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(c)(1)''.
            (4) Section 4971(f)(1) of such Code is amended--
                    (A) by striking ``section 412(m)(5)'' and inserting 
                ``section 430(j)(5)'', 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))''.
    (g) 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 unpaid minimum required contributions 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.''.
    (h) Definitions.--Section 414 of such Code (relating to definitions 
and special rules) is amended by adding at the end the following:
    ``(w) Other Definitions.--For purposes of this part--
            ``(1) Affected party.--The term `affected party' means, 
        with respect to any plan--
                    ``(A) a participant,
                    ``(B) a beneficiary,
                    ``(C) an alternate payee (as defined in section 
                414(p)(8)),
                    ``(D) each employee organization representing 
                participants in the plan, and
                    ``(E) each employer with an obligation to make 
                contributions to the plan.
            ``(2) Single-employer plan.--The term `single-employer 
        plan' means a defined benefit plan, or a defined contribution 
        plan, which is not a multiemployer plan.''.
    (i) Effective Date.--
            (1) In general.--Except as prescribed in paragraph (2), the 
        amendments made by this section shall apply to plan years 
        beginning after December 31, 2006.
            (2) Excise tax.--The amendments made by subsection (f) 
        shall apply to any taxable year with or within which a plan 
        year beginning after December 31, 2006, ends.

 PART II--AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
                                  1974

SEC. 311. MODIFICATIONS OF THE 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 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 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 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 and any 
        required installments under section 303(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.
    ``(c)  Variance From Minimum Funding Standard.--
            ``(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 
                subparagraphs (B) and (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, in the case 
                of--
                            ``(i) 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(d), 
                        and
                            ``(ii) 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), except that the interest rate 
                        used for purposes of computing the amortization 
                        charge described in such section shall be the 
                        rate determined under section 6621(b) of the 
                        Internal Revenue Code of 1986.
                    ``(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 amortization payment required to be 
                made for such plan year with respect to any 
                amortization described in subparagraph (B) of any 
                waived funding deficiency for any preceding plan year.
            ``(2) Determination of business hardship.--For purposes of 
        this section, 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 
        section, 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 under this subsection 
        and not satisfied by employer contributions.
            ``(4) 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.
            ``(5) 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--
                    ``(A) with respect to such employer, and
                    ``(B) 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 
        subsection.
    ``(d) Extension of Amortization Periods.--In the case of a 
multiemployer plan, the period of years required to amortize any 
unfunded liability (described in any clause of section 304(b)(2)(B)) of 
the plan may be extended by the Secretary of the Treasury for a period 
of time (not in excess of 10 years) if the Secretary of the Treasury 
determines that such extension would carry out the purposes of this Act 
and would provide adequate protection for participants under the plan 
and their beneficiaries and if the Secretary of the Treasury determines 
that the failure to permit such extension would--
            ``(1) result in--
                    ``(A) a substantial risk to the voluntary 
                continuation of the plan, or
                    ``(B) a substantial curtailment of pension benefit 
                levels or employee compensation, and
            ``(2) be adverse to the interests of plan participants in 
        the aggregate.
The interest rate applicable for any plan year under any arrangement 
entered into by the Secretary of the Treasury in connection with an 
extension granted under this subsection shall be the rate determined 
under section 6621(b) of the Internal Revenue Code of 1986.
    ``(e) Requirements Relating to Waivers and Extensions.--
            ``(1) Benefits may not be increased during waiver or 
        extension period.--If--
                    ``(A) a waiver under subsection (c)(1) or an 
                extension of time under subsection (d) is in effect 
                with respect to the plan, or
                    ``(B) a plan amendment described in subsection 
                (f)(2) which reduces the accrued benefit of any 
                participant has been made at any time in the preceding 
                12 months (24 months for multiemployer plans),
        no applicable benefit increase shall take effect. If an 
        applicable benefit increase takes effect 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 increase takes effect.
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        applicable benefit increase pursuant to a plan amendment 
        which--
                    ``(A) the Secretary of the Treasury determines to 
                be reasonable and which provides for only de minimis 
                increases in the liabilities of the plan,
                    ``(B) only repeals an amendment described in 
                subsection (f)(2) which reduced the accrued benefit of 
                any participant, or
                    ``(C) is required as a condition of qualification 
                under part I of subchapter D of chapter 1 of the 
                Internal Revenue Code of 1986.
            ``(3) Applicable benefit increase.--The term `applicable 
        benefit increase' has the meaning given such term by section 
        305(b)(3) without regard to subparagraph (B) or (C) thereof.
            ``(4) Security for waivers; 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 to 
                        provide security to such plan as a condition 
                        for granting or modifying a waiver under 
                        subsection (c).
                            ``(ii) Special rules.--Any security 
                        provided under clause (i) may be perfected and 
                        enforced only by--
                                    ``(I) the Pension Benefit Guaranty 
                                Corporation, or
                                    ``(II) 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 subsection 
                (c) 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 (within the 
                                meaning of section 4971 of the Internal 
                                Revenue Code of 1986) for the plan year 
                                and all preceding plan years, and
                                    ``(II) the present value of all 
                                waiver amortization payments under 
                                section 303(d) determined for the plan 
                                year and all succeeding plan years,
                        is less than $1,000,000.
                            ``(ii) Treatment of pending waivers.--For 
                        purposes of clause (i)(I), minimum required 
                        contributions shall include any increase in 
                        such amount which would result if all 
                        applications for waivers of the minimum funding 
                        standard under subsection (c) or section 412(d) 
                        of the Internal Revenue Code of 1986 which are 
                        pending with respect to such plan were denied.
            ``(5) Additional requirements.--
                    ``(A) Advance notice.--The Secretary of the 
                Treasury shall, before granting a waiver under 
                subsection (c) or an extension under subsection (d), 
                require each applicant to provide evidence satisfactory 
                to the Secretary of the Treasury that the applicant has 
                provided notice of the filing of the application for 
                such waiver or extension to each affected party (as 
                defined in section 4001(a)(21)) other than the 
                Corporation, and each employer with an obligation to 
                make contributions 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 (within the 
                meaning of section 4041(d)).
                    ``(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).
    ``(f) Other Definitions and Rules.--For purposes of this section--
            ``(1) Change in method or year.--If the funding method 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 and one-half 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 substantial business 
        hardship (as determined under subsection (c)(2)) and that a 
        waiver under subsection (c)(1) is unavailable or inadequate.
            ``(3) Controlled group.--For purposes of this section and 
        section 303, 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 
306 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 December 31, 2006.

SEC. 312. FUNDING RULES APPLICABLE TO SINGLE-EMPLOYER 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 311 of 
this Act, is amended by inserting after section 302 the following new 
section:

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

    ``Sec. 303. (a) Minimum Required Contribution.--
            ``(1) In general.--The minimum required contribution for a 
        defined benefit plan to which section 302(a)(2)(A) applies for 
        any plan year shall, for purposes of this section and section 
        302, be equal to the sum of--
                    ``(A) the target normal cost for the plan year,
                    ``(B) the aggregate amortization payment (if any) 
                for the plan year, and
                    ``(C) the waiver amortization payment (if any) for 
                the plan year.
        In no event shall the sum of the amounts determined under 
        subparagraphs (B) and (C) for any plan year exceed the unfunded 
        target liability for the plan year.
            ``(2) Limitation on annual increases or decreases.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the minimum required contribution for 
                any plan year beginning after 2007--
                            ``(i) shall not exceed the minimum required 
                        contribution for the preceding plan year 
                        (determined after application of this paragraph 
                        and without regard to any adjustment under 
                        subsection (i)(2)), increased by the greater 
                        of--
                                    ``(I) 30 percent of the target 
                                normal cost of the plan for the 
                                preceding plan year, or
                                    ``(II) 2 percent of the target 
                                liability of the plan for the preceding 
                                plan year, and
                            ``(ii) shall not be less than such minimum 
                        required contribution for the preceding plan 
                        year, reduced by the greater of the amounts 
                        under subclause (I) or (II) of clause (i).
                    ``(B) Special rules for benefit increases or 
                decreases during plan year.--If an applicable benefit 
                increase (as defined in section 305(b)(3) without 
                regard to subparagraph (B) or (C) thereof) takes effect 
                during the current plan year--
                            ``(i) the minimum required contribution for 
                        the current plan year for purposes of applying 
                        subparagraph (A) shall be determined without 
                        regard to any increase in such contribution 
                        attributable to the applicable benefit 
                        increase, and
                            ``(ii) the amount determined under 
                        subparagraph (A) (after application of clause 
                        (i)) shall be increased by the amount of the 
                        increase in the minimum required contribution 
                        disregarded under clause (i).
                A similar rule shall apply in the case of any benefit 
                decrease which takes effect during the current plan 
                year.
                    ``(C) Special rules relating to preceding year.--
                For purposes of subparagraph (A)--
                            ``(i) all target liability amortization 
                        installments and waiver amortization 
                        installments under subsections (c) and (d) 
                        which were determined with respect to any 
                        amortizable target liability or waived funding 
                        deficiency which is fully amortized as of the 
                        close of the preceding plan year shall not be 
                        taken into account in determining the minimum 
                        required contribution for the preceding plan 
                        year, and
                            ``(ii) if paragraph (3) applied for the 
                        preceding plan year, the minimum required 
                        contribution for the preceding plan year shall 
                        be treated as being equal to the target normal 
                        cost for such year.
            ``(3) Special rules for plans where assets exceed target 
        liability.--If, as of the valuation date for any plan year, the 
        value of the assets of the plan (reduced as provided in 
        subsection (e)(3)) equals or exceeds the target liability for 
        the plan year (in this subsection referred to as the `current 
        plan year')--
                    ``(A) the minimum required contribution for the 
                current plan year shall be equal to target normal cost, 
                reduced (but not below zero) by the amount of any such 
                excess, and
                    ``(B) all target liability amortization 
                installments and waiver amortization installments under 
                subsections (c) and (d) which were determined with 
                respect to any amortizable target liability or waived 
                funding deficiency for the current plan year or any 
                preceding plan year shall not be taken into account for 
                any succeeding plan year.
    ``(b) Target Normal Cost.--For purposes of this section--
            ``(1) In general.--The term `target normal cost' means, 
        with respect to any plan year, the present value of all 
        benefits which accrue or are earned under the plan during the 
        plan year. 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 shall 
        be treated as accruing during the current plan year.
            ``(2) Financially-weak employers.--If a plan sponsor of a 
        plan for any plan year is a financially-weak employer for any 
        plan year, the target normal cost of the plan for the plan year 
        shall be the at-risk target normal cost determined under 
        subsection (f).
    ``(c) Definitions and Rules Relating to Target Liability .--For 
purposes of this section--
            ``(1) Target liability.--
                    ``(A) In general.--The term `target liability' 
                means, with respect to any plan year, the present value 
                of all benefits accrued or earned under the plan as of 
                the beginning of the plan year.
                    ``(B) Financially-weak employers.--If a plan 
                sponsor of a plan for any plan year is a financially-
                weak employer for any plan year, the target liability 
                of the plan for the plan year shall be the at-risk 
                target liability determined under subsection (f).
            ``(2) Unfunded target liability.--The term `unfunded target 
        liability' means, with respect to any plan year, the excess (if 
        any) of--
                    ``(A) the target liability for the plan year, over
                    ``(B) the value of the assets of the plan (reduced 
                as provided under subsection (e)(3)) as of the 
                valuation date.
            ``(3) Aggregate amortization payments.--For purposes of 
        this section--
                    ``(A) Aggregate amortization payment.--The 
                aggregate amortization payment for any plan year is the 
                aggregate amount of the target liability amortization 
                installments determined for the plan year with respect 
                to any amortizable target liability for the plan year 
                and each of the 6 preceding plan years.
                    ``(B) Amortizable target liability.--
                            ``(i) In general.--The term `amortizable 
                        target liability' means, with respect to any 
                        plan year, the amount (if any) by which the 
                        unfunded target liability for the current plan 
                        year is more or less than the amount determined 
                        under clause (ii).
                            ``(ii) Amounts previously accounted for.--
                        The amount determined under this clause is the 
                        present value of all target liability 
                        amortization installments and waiver 
                        amortization installments under this subsection 
                        and subsection (d) which were determined for 
                        the current plan year or any succeeding plan 
                        year with respect to any amortizable target 
                        liability or waived funding deficiency for any 
                        plan year preceding the current plan year.
                    ``(C) Target liability amortization installments.--
                If a plan has an amortizable target liability for any 
                plan year--
                            ``(i) the liability shall be amortized in 7 
                        level amortization amounts over the 7-plan year 
                        period beginning with the plan year, and
                            ``(ii) the target liability amortization 
                        installment with respect to the liability for 
                        each of the 7 plan years shall be the fixed 
                        amount necessary to amortize the liability as 
                        provided under clause (i).
                    ``(D) Computation assumptions.--In determining the 
                present value of any amortization installment under 
                subparagraph (B)(ii), or the amount of any amortization 
                installment under subparagraph (C), the following rules 
                shall apply:
                            ``(i) Each amortization installment shall 
                        be treated as made on the valuation date for 
                        the plan year for which the installment is 
                        determined.
                            ``(ii) The interest rates used shall be the 
                        interest rates determined under the yield curve 
                        method under subsection (h)(2)(B) for the 
                        current plan year.
            ``(4) Transition rule for amortization of unfunded target 
        liability.--
                    ``(A) 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 
                target liability shall be taken into account under 
                paragraph (2)(A) in determining unfunded target 
                liability for the plan year.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A)--
                            ``(i) In general.--Except as provided in 
                        clause (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)(1)(B)(ii), 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.
    ``(d) Amortization of Waived Funding Deficiency.--For purposes of 
this section--
            ``(1) In general.--The waiver amortization payment for any 
        plan year is the aggregate amount of the waiver amortization 
        installments determined for the plan year with respect to any 
        waived funding deficiency for each of the 5 preceding plan 
        years.
            ``(2) Waiver amortization installments.--If a plan has a 
        waived funding deficiency for any plan year--
                    ``(A) the deficiency shall be amortized in 5 level 
                amortization amounts over the 5-plan year period 
                beginning with the succeeding plan year, and
                    ``(B) the waiver amortization installment with 
                respect to the deficiency for each of the 5 plan years 
                shall be the fixed amount necessary to amortize the 
                deficiency as provided under subparagraph (A).
            ``(3) Computation assumptions.--In making any determination 
        under paragraph (2) with respect to the amount of any 
        amortization installment, the following rules shall apply:
                    ``(A) Each amortization installment will be treated 
                as made on the valuation date for the plan year for 
                which the installment is determined.
                    ``(B) The interest rates used shall be the interest 
                rates determined under the yield curve method under 
                subsection (h)(2)(B) for the plan year in which the 
                waived funding deficiency to which the installment 
                relates arose.
            ``(4) Waived funding deficiency.--The waived funding 
        deficiency of a plan for any plan year is the amount of any 
        waived funding deficiency for the plan year under section 
        302(c).
    ``(e) 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 
        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 applicable effective interest rate (as 
                        defined in subsection (g)(3)) 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 305 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 
                net gain or loss with respect to plan assets for the 
                preceding plan year. Notwithstanding subsection 
                (g)(2)(B), such rate of net gain or loss 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) Reduction in value of assets.--Solely for purposes of 
        applying subsections (a)(3) and (c)(2) in determining the 
        minimum required contribution under this section, the value of 
        the plan assets otherwise determined under subsection (g)(2) 
        shall be reduced by the amount of the prefunding balance under 
        this subsection.
    ``(f) Special Rules for Large Plans Maintained by Financially-Weak 
Employers.--
            ``(1) Determination of target liability and normal cost.--
                    ``(A) In general.--If, as of the valuation date for 
                any plan year, any plan sponsor of a plan to which this 
                section applies is a financially-weak employer, then, 
                in applying this section for the plan year, the at-risk 
                target liability and at-risk target normal cost shall 
                (if greater) be substituted for the target liability 
                and target normal cost, respectively. Such substitution 
                shall not be applied for any plan year for which the 
                plan has no unfunded target liability (determined 
                without regard to this subsection or any reduction in 
                the value of assets under subsection (e)(3)).
                    ``(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)(1)(B)(ii) 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 a 
                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 described in section 
                        1381(a) of such Code more than 50 percent of 
                        the ownership or capital and profits interests 
                        of which are held--
                                    ``(I) by producers of agricultural 
                                products, or
                                    ``(II) organizations described in 
                                section 1381(a) of such Code meeting 
                                the requirements of subclause (I).
                    ``(D) Plans losing exemption.--If subparagraph (B) 
                or (C) does not apply to a plan year but did apply for 
                the preceding plan year, no plan year preceding the 
                current plan year shall be taken into account for 
                purposes of paragraph (3) or (4)(A).
            ``(2) At-risk amounts.--
                    ``(A) In general.--Except as provided in paragraph 
                (3), the at-risk target liability and at-risk target 
                normal cost shall be determined in the same manner as 
                the target liability and target normal cost, except 
                that the actuarial assumptions described in 
                subparagraph (B) shall be used in computing such 
                amounts.
                    ``(B) 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 
                        shall be assumed to retire at the earliest 
                        retirement age 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.
            ``(3) Plan sponsors financially weak for less than 5 
        years.--
                    ``(A) In general.--If a plan sponsor to which this 
                subsection applies for any plan year was not a 
                financially-weak employer on the valuation date for 
                each of the 4 immediately preceding plan years, the at-
                risk target liability or at-risk target normal cost 
                shall be equal to the sum of--
                            ``(i) the applicable percentage of the at-
                        risk target liability or the at-risk target 
                        normal cost, whichever is applicable, 
                        determined under this subsection (without 
                        regard to this paragraph), and
                            ``(ii) the product of the target liability 
                        or the target normal cost, whichever is 
                        applicable, determined without regard to this 
                        subsection, and a percentage equal to 100 
                        percent minus the applicable percentage.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined in accordance with the following table:

``If the consecutive number of                                         
  years (including the plan year)                                      
  the plan sponsor is financially                        The applicable
  weak is--                                             percentage is--
    1.............................................                  20 
    2.............................................                  40 
    3.............................................                  60 
    4.............................................                  80.
            ``(4) Financially-weak employer.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `financially-weak employer' means any employer 
                if, as of the valuation date for each of the 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.
                    ``(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(f)(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. Such regulations shall also provide for the 
                application of paragraph (5) in the case of employers 
                treated as financially weak under such regulations.
            ``(5) Determination of consecutive periods where employer 
        is financially weak.--
                    ``(A) Ratings of investment grade or higher.--If, 
                as of the valuation date for any plan year, any rating 
                described in clause (i) or (ii) of paragraph (4)(A) is 
                investment grade or higher--
                            ``(i) this subsection shall not apply for 
                        the plan year, and
                            ``(ii) in applying this subsection for any 
                        succeeding plan year, the plan year described 
                        in clause (i) and any preceding plan year shall 
                        not be taken into account in determining any 
                        consecutive period of plan years under 
                        paragraphs (3) and (4)(A).
                    ``(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 paragraphs (3) and (4)(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 
                        paragraphs (3) and (4)(A).
                            ``(iii) Improvement year.--For purposes of 
                        this subparagraph, the term `improvement year' 
                        means any plan year for which any rating 
                        described in clause (i) or (ii) of paragraph 
                        (4)(A) is higher than such rating for the 
                        preceding plan year.
            ``(6) Years before effective date.--For purposes of 
        paragraphs (3) and (4), plan years beginning before 2007 shall 
        not be taken into account.
    ``(g) Valuation of Plan Assets and Liabilities.--
            ``(1) Time for making determinations.--
                    ``(A) In general.--Except as otherwise provided in 
                this section, all determinations under this section for 
                a plan year shall be made as of the valuation date of 
                the plan for the plan year.
                    ``(B) Valuation date.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the valuation date is the first 
                        day of the plan year.
                            ``(ii) Exception for small plans.--If, on 
                        each day during the preceding plan year, a plan 
                        had 100 or fewer participants, a plan may 
                        designate any day during the plan year as its 
                        valuation date for the plan year and succeeding 
                        plan years. For purposes of this clause, all 
                        defined benefit plans (other than multiemployer 
                        plans) maintained by the same employer (or any 
                        member of such employer's controlled group (as 
                        defined in section 302(f)(3))) shall be treated 
                        as 1 plan, but only participants with respect 
                        to such employer or member shall be taken into 
                        account.
                            ``(iii) Application of certain rules in 
                        determination of plan size.--
                                    ``(I) Plans not in existence in 
                                preceding year.--In the case of the 
                                first plan year of any plan, clause 
                                (ii) shall apply to such plan by taking 
                                into account the number of participants 
                                the plan is reasonably expected to have 
                                on days during such first plan year.
                                    ``(II) Predecessors.--Any reference 
                                in clause (ii) to an employer shall 
                                include a reference to any predecessor 
                                of such employer.
            ``(2) Determination of value of plan assets.--For purposes 
        of this section--
                    ``(A) In general.--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 4th 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).
                    ``(C) Accounting for contribution receipts.--For 
                purposes of determining the value of assets under this 
                paragraph--
                            ``(i) 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 applicable 
                        effective interest rate for the preceding plan 
                        year to which the contribution is properly 
                        allocable.
                            ``(ii) 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 
                                applicable effective interest rate for 
                                the plan year.
            ``(3) Applicable effective interest rate.--For purposes of 
        this section, the term `applicable effective interest rate' 
        means, with respect to any plan year, the single rate of 
        interest which, if used to determine the present value of 
        benefits earned or accrued under the plan as of the beginning 
        of the plan year, would result in an amount equal to the target 
        liability for the plan year.
    ``(h) Actuarial Assumptions and Methods.--For purposes of this 
section--
            ``(1) Actuarial assumptions.--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 rate assumptions used.--
                    ``(A) In general.--Except as provided in this 
                section, the determination of present value or other 
                computation requiring any interest rate assumption 
                shall be made--
                            ``(i) in the case of plan years beginning 
                        in 2007 or 2008, by using the phase-in yield 
                        curve method (as defined in subparagraph (C)), 
                        and
                            ``(ii) in the case of plan years beginning 
                        after 2008, by using the yield curve method (as 
                        defined in subparagraph (B)).
                    ``(B) Yield curve method.--For purposes of this 
                paragraph--
                            ``(i) In general.--The yield curve method 
                        is a method under which present value or other 
                        amounts requiring interest rate assumptions are 
                        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.
                    ``(C) Phase-in yield curve method.--
                            ``(i) In general.--Present value or any 
                        other amount requiring the use of interest rate 
                        assumptions 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 
                                (B), and
                                    ``(II) the product of such amount 
                                determined by using the interest rate 
                                rules in effect under section 302(b)(5) 
                                for plan years beginning in 2006 and a 
                                percentage equal to 100 percent minus 
                                the applicable percentage.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is 33 
                        percent for plan years beginning in 2007 and 67 
                        percent for plan years beginning in 2008.
            ``(3) Mortality table used.--
                    ``(A) Secretarial authority.--The Secretary of the 
                Treasury shall by regulation prescribe mortality tables 
                to be used 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 of the Treasury shall take 
                into account results of available independent studies 
                of mortality of individuals covered by pension plans.
                    ``(B) 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.
                    ``(C) Periodic review.--The Secretary of the 
                Treasury shall periodically (at least every 5 years) 
                review any tables in effect under this paragraph and 
                shall, to the extent the Secretary of the Treasury 
                determines necessary, update the tables to reflect the 
                actual experience of pension plans and projected trends 
                in such experience.
            ``(4) Treatment of optional forms of benefits.--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 payments will be 
                made in an optional form of benefit provided under the 
                plan (including lump sum payments), and
                    ``(B) any differences between the present value of 
                any such optional form of benefit and the present value 
                of the future payments used in computing target normal 
                costs and target liability under this section.
            ``(5) Approval required for certain changes in assumptions 
        by certain plans.--
                    ``(A) In general.--No actuarial assumption used to 
                determine the target liability for a plan to which this 
                paragraph applies may be changed without the approval 
                of the Secretary of the Treasury. The preceding 
                sentence shall not apply to changes required under 
                paragraph (2) or (3) with respect to any assumption.
                    ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                            ``(i) the plan is a defined benefit plan to 
                        which title IV applies;
                            ``(ii) the aggregate unfunded target 
                        liabilities as of the close of the preceding 
                        plan year of--
                                    ``(I) such plan, and
                                    ``(II) all other plans to which 
                                title IV applies maintained by persons 
                                which are liable for payment of 
                                contributions to such plan under 
                                section 302(b),
                        exceed $50,000,000; and
                            ``(iii) the change in assumptions 
                        (determined after taking into account any 
                        changes as a result of the application of 
                        paragraphs (2) and (3)) results in a decrease 
                        in the unfunded target liability of the plan 
                        for the current plan year which--
                                    ``(I) exceeds $50,000,000, or
                                    ``(II) exceeds $5,000,000 and is 5 
                                percent or more of the target liability 
                                of the plan before such change.
    ``(i) Payment of Minimum Required Contribution.--
            ``(1) In general.--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 minimum required contribution for a 
        plan year which is made on a date other than the valuation date 
        for such plan year shall be properly adjusted for interest 
        accruing for the period between the valuation date and the 
        payment date, determined by using the applicable effective 
        interest rate (as defined in subsection (g)(3)) for the plan 
        year.
    ``(j) Quarterly Contributions Required.--
            ``(1) Failure to timely make required installment.--
                    ``(A) In general.--In the case of a plan to which 
                this subsection applies, the employer maintaining the 
                plan shall make the required installments under this 
                subsection 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 subsection 
                (i)(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 
                subsection (i)(2) plus 5 percentage points.
                    ``(B) Plans to which subsection applies.--This 
                subsection applies to any defined benefit plan to which 
                this section applies other than a plan which--
                            ``(i) is a plan described in subsection 
                        (g)(1)(B)(ii)), or
                            ``(ii) had an unfunded target liability of 
                        $1,000,000 or less for the preceding plan year.
            ``(2) Amount of underpayment, period of underpayment.--For 
        purposes of paragraph (1)--
                    ``(A) 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.
                    ``(B) Period of underpayment.--The period for which 
                interest is charged under this subsection with regard 
                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.
                    ``(C) Order of crediting contributions.--For 
                purposes of subparagraph (A)(ii), contributions shall 
                be credited against unpaid required installments in the 
                order in which such installments are required to be 
                paid.
            ``(3) Number of required installments; due dates.--For 
        purposes of this subsection--
                    ``(A) Payable in 4 installments.--There shall be 4 
                required installments for each plan year.
                    ``(B) Time for payment of installments.--

In the case of the following          
        required installments:      The due date is:
    1st............................
                                        April 15
    2nd............................
                                        July 15
    3rd............................
                                        October 15
    4th............................
                                        January 15 of the following 
                                                year.
            ``(4) Amount of required installment.--For purposes of this 
        subsection--
                    ``(A) In general.--The amount of any required 
                installment shall be 25 percent of the required annual 
                payment.
                    ``(B) Required annual payment.--For purposes of 
                subparagraph (A), the term `required annual payment' 
                means the lesser of--
                            ``(i) 90 percent of the minimum required 
                        contribution under subsection (a) required to 
                        be contributed to or under the plan by the 
                        employer for the plan year, or
                            ``(ii) 100 percent of the minimum required 
                        contribution so required for the preceding plan 
                        year (without regard to any waiver under 
                        section 302(c)).
                Clause (ii) shall not apply if the preceding plan year 
                was not a year of 12 months. In the case of any plan 
                year beginning in 2007, the amount under clause (ii) 
                for the preceding plan year shall be determined by 
                reference to the amount required to be contributed to 
                or under the plan under section 302 (as such section 
                was in effect before the date of the enactment of this 
                part).
            ``(5) Liquidity requirement.--
                    ``(A) In general.--A plan to which this paragraph 
                applies shall be treated as failing to pay the full 
                amount of any required installment 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 defined benefit plan--
                            ``(i) to which this subsection applies for 
                        a plan year, and
                            ``(ii) which has a liquidity shortfall for 
                        any quarter during such plan year.
                    ``(C) Period of underpayment.--For purposes of 
                paragraph (1), 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.--In no event shall 
                the increase in the amount of any required installment 
                under subparagraph (A) exceed the sum of the unfunded 
                target liability and target normal cost for the plan 
                year.
                    ``(E) Definitions.--For purposes of this 
                paragraph--
                            ``(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 the base 
                        amount with respect to such quarter over 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 funded target 
                                liability percentage (as defined in 
                                section 305(e)) 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.
            ``(6) Fiscal years and short years.--
                    ``(A) Fiscal years.--In applying this subsection to 
                a plan year beginning on any date other than January 1, 
                there shall be substituted for the months specified in 
                this subsection the months which correspond thereto.
                    ``(B) Short plan year.--This subsection shall be 
                applied to plan years of less than 12 months in 
                accordance with regulations prescribed by the Secretary 
                of the Treasury.
    ``(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 required 
                installment under subsection (j) or any other payment 
                required under this section before the due date for 
                such installment or other payment, and
                    ``(B) the unpaid balance of such installment or 
                other payment (including interest), when added to the 
                aggregate unpaid balance of all preceding such 
                installments or other 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 for any plan year for 
        which the funded target liability percentage (within the 
        meaning of section 305(e)) of such plan is less than 100 
        percent. This subsection shall not apply to any plan to which 
        section 4021 does not apply.
            ``(3) Amount of lien.--For purposes of paragraph (1), the 
        amount of the lien shall be equal to the aggregate unpaid 
        balance of required installments and other payments required 
        under this section (including interest) 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 
                installment or other payment.
                    ``(B) Period of lien.--The lien imposed by 
                paragraph (1) shall arise on the due date for the 
                required installment or other 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 (as defined in section 
        302(f)(3)) of the contributing sponsor).
            ``(6) Definitions.--For purposes of this subsection, 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 this 
        section.
    ``(l) Regulations.--The Secretary of the Treasury shall prescribe 
such regulations as are necessary to carry out the provisions of this 
section, including regulations--
            ``(1) for the proper treatment of increases in liabilities 
        of any plan pursuant to plan amendments which are adopted, or 
        which take effect, on a date during the plan year other than 
        the valuation date,
            ``(2) for the application of any small plan exception under 
        this section in cases of mergers and acquisitions, and
            ``(3) for the application of this section in the case of a 
        plan maintained by more than one employer.

          ``minimum funding standards for multiemployer plans

    ``Sec. 304. (a) In General.--In the case of a multiemployer plan to 
which this section 302(a)(2)(C) applies, the accumulated funding 
deficiency of the plan for any plan year for purposes of section 302 
shall be--
            ``(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 to which section 302 applies to the plan) over the total 
        credits to such account for such years, or
            ``(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 section 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) in the case of a plan in existence on 
                        January 1, 1974, the unfunded past service 
                        liability under the plan on the first day of 
                        the first plan year to which this section 
                        applies, over a period of 40 plan years,
                            ``(ii) in the case of a plan which comes 
                        into existence after January 1, 1974, the 
                        unfunded past service liability under the plan 
                        on the first day of the first plan year to 
                        which this section applies, over a period of 30 
                        plan years,
                            ``(iii) 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 30 plan years,
                            ``(iv) separately, with respect to each 
                        plan year, the net experience loss (if any) 
                        under the plan, over a period of 15 plan years, 
                        and
                            ``(v) 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 30 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 this section), 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 this 
                section).
            ``(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 30 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 30 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 this section), 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) 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.
            ``(5) 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.
            ``(6) Certain amortization charges and credits.--In the 
        case of a plan which, immediately before the date of the 
        enactment of the Multiemployer Pension Plan Amendments Act of 
        1980, was a multiemployer plan (within the meaning of section 
        3(37) as in effect immediately before such date)--
                    ``(A) any amount described in paragraph (2)(B)(ii), 
                (2)(B)(iii), or (3)(B)(i) of this subsection which 
                arose in a plan year beginning before such date shall 
                be amortized in equal annual installments (until fully 
                amortized) over 40 plan years, beginning with the plan 
                year in which the amount arose;
                    ``(B) any amount described in paragraph (2)(B)(iv) 
                or (3)(B)(ii) of this subsection which arose in a plan 
                year beginning before such date shall be amortized in 
                equal annual installments (until fully amortized) over 
                20 plan years, beginning with the plan year in which 
                the amount arose;
                    ``(C) any change in past service liability which 
                arises during the period of 3 plan years beginning on 
                or after such date, and results from a plan amendment 
                adopted before such date, shall be amortized in equal 
                annual installments (until fully amortized) over 40 
                plan years, beginning with the plan year in which the 
                change arises; and
                    ``(D) any change in past service liability which 
                arises during the period of 2 plan years beginning on 
                or after such date, and results from the changing of a 
                group of participants from one benefit level to another 
                benefit level under a schedule of plan benefits which--
                            ``(i) was adopted before such date, and
                            ``(ii) was effective for any plan 
                        participant before the beginning of the first 
                        plan year beginning on or after such date,
                shall be amortized in equal annual installments (until 
                fully amortized) over 40 plan years, beginning with the 
                plan year in which the change arises.
            ``(7) Special rules.--For purposes of this section--
                    ``(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 or to a 
                fund exempt under section 501(c)(22) of the Internal 
                Revenue Code of 1986 pursuant to section 4223 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 this section) for 
                any plan year, the funding standard account shall be 
                charged in the plan year to which the portion of the 
                net experience loss was deferred in the same manner as 
                required under such section (and paragraph (2)(B)(iv) 
                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 302 in such manner as determined by the 
                Secretary of the Treasury.
    ``(c) Special Rules.--
            ``(1) Determinations to be made under funding method.--For 
        purposes of this section, 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 section, 
                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) which, in the aggregate, are 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 paragraphs (2)(B), 
                (C), and (D) and (3)(B) of subsection (b) which are 
                required to be amortized shall be considered fully 
                amortized for purposes of such paragraphs.
            ``(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).
                For purposes of subparagraph (A), unless otherwise 
                provided by the plan, the accrued liability under a 
                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).
                    ``(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) 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 (D).
                            ``(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, the Secretary of the Treasury 
                                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 (ii)) to 
                                determine current liability 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 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, update the 
                        tables to reflect the actual experience of 
                        pension plans and projected trends in such 
                        experience.
                    ``(D) 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)(5) 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)(C) 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)(C) 
                        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.''.
    (b) Clerical Amendment.--The table of sections in section 1 of such 
Act, as amended by this Act, 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 plans.
        ``Sec. 304. Minimum funding standards for multiemployer 
                            plans.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2006.

SEC. 313. LIMITATION ON BENEFIT IMPROVEMENTS BY SINGLE-EMPLOYER PLANS 
              WHICH ARE UNDERFUNDED OR MAINTAINED BY FINANCIALLY WEAK 
              OR BANKRUPT EMPLOYERS.

    (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by sections 311 and 
312 of this Act) is amended by inserting after section 304 the 
following new section:

 ``limitations on benefit improvements by single-employer plans which 
are underfunded or maintained by financially weak or bankrupt employers

    ``Sec. 305. (a) Benefit Limitation Requirement.--Except as provided 
in subsection (f)(5), a defined benefit plan which is a single-employer 
plan to which section 302 applies shall meet the requirements of 
subsections (b), (c), and (d).
    ``(b) Limitations on Benefit Increases.--
            ``(1) In general.--A plan meets the requirements of this 
        subsection for any plan year if the plan provides that if the 
        plan's adjusted funded target liability percentage for the 
        preceding plan year is less than 80 percent, any applicable 
        benefit increase shall not take effect during the plan year 
        until the plan has met the additional funding requirements of 
        paragraph (2).
            ``(2) Additional funding requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any applicable 
                benefit increase for any plan year if the plan sponsor, 
                in addition to any other contribution required under 
                section 303, contributes to or under the plan an 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 the adjusted 
                funded target liability percentage of the plan for the 
                plan year being equal to 80 percent.
                    ``(B) Benefit increases counted for purposes of 
                funded percentage.--For purposes of subparagraph (A), 
                the adjusted funded target liability percentage shall 
                be determined by taking into account all increases in 
                liabilities of the plan which would have been taken 
                into account in determining such percentage if the 
                applicable benefit increase had taken effect as of the 
                beginning of the plan year.
                    ``(C) Payments after valuation date.--In the case 
                of any contribution required by this subsection which 
                is made after the first day of the plan year, the 
                amount of the contribution shall be adjusted in the 
                same manner as it would be under section 303(i)(2) if 
                it were a minimum required contribution for the plan 
                year.
                    ``(D) Treatment of payment in computing minimum 
                required contribution.--If any applicable benefit 
                increase to which this subsection applies for any plan 
                year is required to be taken into account in 
                determining the minimum required contribution under 
                section 303 for the plan year, any payment required by 
                this paragraph with respect to the applicable benefit 
                increase shall, for purposes of determining the amount 
                of such minimum required contribution, be treated in 
                the same manner as a contribution for a preceding plan 
                year is treated under section 303(g)(2)(C)(i).
            ``(3) Applicable benefit increase.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `applicable benefit 
                increase' means, with respect to any plan year, any 
                increase in liabilities of the plan by plan amendment 
                (or otherwise as provided in regulations prescribed by 
                the Secretary of the Treasury) which, but for this 
                subsection, 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.
                    ``(B) Exception for certain benefit increases.--In 
                the case of a plan maintained pursuant to 1 or more 
                collective bargaining agreements between employee 
                representatives and 1 or more plan sponsors, such term 
                shall not include any increase in liabilities of the 
                plan by reason of any increase in benefits pursuant to, 
                and for individuals covered by, the agreements 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) Exception for collectively bargained 
                increases negotiated before underfunding occurs.--In 
                the case of a plan maintained pursuant to 1 or more 
                collective bargaining agreements between employee 
                representatives and 1 or more plan sponsors and 
                ratified in a plan year with respect to which the 
                adjusted funded target liability percentage was at 
                least 80 percent, such term shall not include any 
                increase or change described in subparagraph (A) 
                pursuant to, and for individuals covered by, the 
                agreements which takes effect in any plan year 
                beginning after the plan year in which the agreements 
                are ratified and before the earlier of--
                            ``(i) the date on which the last of such 
                        collective bargaining agreement terminates 
                        (determined without regard to any extension 
                        thereof), or
                            ``(ii) the date which is 3 years after the 
                        date on which this subsection would otherwise 
                        apply but for this subparagraph.
                    ``(D) Exceptions.--Such term shall not include any 
                increase in liabilities--
                            ``(i) by reason of a plan amendment if such 
                        amendment is required as a condition of 
                        qualification under this part, or
                            ``(ii) which is specified in regulations 
                        prescribed by the Secretary of the Treasury.
            ``(4) Special rule for plans in bankruptcy.--In the case of 
        any period during which the plan sponsor is in bankruptcy--
                    ``(A) paragraphs (1) and (2)(A) shall be applied by 
                substituting `100 percent' for `80 percent', and
                    ``(B) the exceptions under subparagraphs (B) and 
                (C) of paragraph (3) shall not apply.
    ``(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 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
                    ``(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 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.
                    ``(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 205(g)) of 
                        the maximum guarantee with respect to the 
                        participant under section 4022.
                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 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 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 206(d)(3)(B)(i)) provides otherwise.
            ``(3) Prohibited period.--For purposes of paragraph (1), 
        the term `prohibited period' means--
                    ``(A) except as provided in paragraph (5), 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 
                303(j)(5)(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) Rules relating to required contributions.--
                    ``(A) Security may be provided.--
                            ``(i) In general.--A plan sponsor shall not 
                        be treated as failing to meet the requirements 
                        of paragraph (1) if the plan sponsor provides 
                        security in a form meeting the requirements of 
                        clause (ii) for any portion of the amount 
                        required to be contributed under paragraph (1) 
                        but which is not so contributed. Such security 
                        shall be provided no later than the due date of 
                        the contribution to which it relates or such 
                        earlier date as the Secretary of Treasury may 
                        prescribe.
                            ``(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,
                                    ``(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(i), or
                                    ``(III) if the adjusted funded 
                                target liability 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 the end of the prohibited 
                        period for the failure to which the security 
                        relates. The Secretary of the Treasury may 
                        prescribe regulations for partial releases of 
                        the security by reason of increases in the 
                        adjusted funded target liability percentage.
                            ``(v) Security not treated as plan asset.--
                        Any security under this subparagraph shall not 
                        be taken into account in determining the value 
                        of the plan's assets except to the extent 
                        provided in clause (i).
                    ``(B) Treatment as unpaid minimum required 
                contribution.--The amount of any required contribution 
                which a plan sponsor fails to make under paragraph (1) 
                by the close of the plan year to which the contribution 
                relates 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.
            ``(5) 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 of the Treasury, restore 
        any payments not made during the prohibited period in effect 
        before the application of this paragraph.
    ``(d) Freeze on Plan Benefits.--
            ``(1) In general.--The requirements of this subsection are 
        met if the plan provides that, notwithstanding any other 
        provision of the plan, during a freeze period--
                    ``(A) the accrued benefit, any death or disability 
                benefit, and any social security supplement described 
                in the last sentence of section 204(b)(1)(G) of each 
                participant are frozen at the amount of such benefit or 
                supplement immediately before the freeze period, and
                    ``(B) all other benefits provided under the plan 
                are eliminated,
        but only to the extent the freezing or elimination of such 
        benefits would have been permitted under section 204(g) if they 
        had been implemented by a plan amendment adopted immediately 
        before the freeze period.
            ``(2) Freeze period.--For purposes of paragraph (1), the 
        term `freeze period' means any period treated as a prohibited 
        period under subsection (c)(3)(A). A rule similar to the rule 
        of subsection (c)(5) shall apply for purposes of this 
        subsection.
            ``(3) 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 plan 
        sponsors and ratified in a plan year with respect to which the 
        funded target liability percentage as of the valuation date was 
        at least 60 percent, this subsection shall not be applied to 
        benefits pursuant to, and individuals covered by, such 
        agreement for plan years beginning before the earlier of--
                    ``(A) the date on which the last of such collective 
                bargaining agreements terminates (determined without 
                regard to any extension thereof), or
                    ``(B) the date which is 3 years after the date the 
                freeze period would otherwise begin under this 
                subsection.
    ``(e) Definitions and Rules Relating to Application of 
Limitations.--For purposes of this section--
            ``(1) Funded target liability percentage.--
                    ``(A) In general.--The term `funded target 
                liability percentage' means, with respect to any plan 
                year, the percentage equal to a fraction--
                            ``(i) the numerator of which is the value 
                        of assets of the plan determined under section 
                        303(g)(2) for the plan year, and
                            ``(ii) the denominator of which is the 
                        target liability for the plan year.
                    ``(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 clauses (i) and 
                (ii) of subparagraph (A) 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.
            ``(2) Certification.--A certification by an enrolled 
        actuary under this section shall be made in such form and 
        manner as the Secretary of the Treasury may prescribe and shall 
        be based on the information available to the enrolled actuary. 
        The enrolled actuary shall notify the plan administrator of any 
        change in the funded target liability percentage if the actual 
        target liability or asset value differs from that used for the 
        certification.
            ``(3) Contributions included in assets.--In making a 
        certification under paragraph (2) for purposes of this section, 
        the determination of whether and to what extent contributions 
        are to be taken into account in computing the fair market value 
        of the assets of the plan shall be made in the same manner as 
        under section 303(g)(2)(C), except that contributions in excess 
        of the minimum required contribution for any preceding plan 
        year shall not be taken into account unless made before the 
        date of the certification.
            ``(4) Treatment of plan as of close of prohibited or freeze 
        period.--For purposes of applying this part--
                    ``(A) Operation of plan after period.--Unless the 
                plan provides otherwise, the accrual and payment of 
                benefits which were prohibited, frozen, or eliminated 
                under subsection (c) or (d) shall resume, effective as 
                of the day following the close of a prohibited or 
                freeze period under subsection (c) or (d), whichever is 
                applicable.
                    ``(B) Treatment of affected benefits.--Nothing in 
                this paragraph shall be construed as affecting the 
                plan's treatment of benefits prohibited, frozen, or 
                eliminated during the prohibited or freeze period.
    ``(f) Other Definitions and Rules.--For purposes of this section--
            ``(1) Coordination with minimum required contributions.--
        Any contribution by a plan sponsor for a plan year shall be 
        allocated first to any minimum required contribution under 
        section 303 for any plan year the valuation date of which 
        occurs on or before the date of the contribution by the plan 
        sponsor until all such minimum required contributions are fully 
        made and then to the contributions required under subsection 
        (b), (c), or (d).
            ``(2) Terms used in section 303.--Any term used in this 
        section which is also used in section 303 shall have the 
        meaning given such term by section 303.
            ``(3) Bankruptcy.--A plan sponsor is in bankruptcy during 
        any period the plan sponsor is a debtor in a case under title 
        11, United States Code, or similar Federal or State law.
            ``(4) Plan sponsor.--The term `plan sponsor' means the 
        employer referred to in section 302(b) (without regard to 
        paragraph (2)).
            ``(5) Plans in existence less than 5 years.--This section 
        (other than subsection (c)) shall not apply to a plan for each 
        of the plan's first 5 plan years. For purposes of this 
        paragraph, plan years of any predecessor plan shall be taken 
        into account. Notwithstanding this paragraph, subsections (b) 
        and (d) shall apply during any period the plan sponsor is in 
        bankruptcy.
            ``(6) Coordination with other requirements.--A plan to 
        which this section applies shall not be treated as failing to 
        meet any other requirement of this Act merely because the plan 
        does not make a payment required under the plan because the 
        plan is prohibited from making the payment by reason of this 
        section.
            ``(7) 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) Conforming Amendments.--
            (1) Section 204 of such Act (29 U.S.C.1054) is amended by 
        striking subsection (i) and by redesignating subsection (j) as 
        subsection (i).
            (2) Section 206 of such Act (29 U.S.C.1056) is amended by 
        striking subsection (e).
    (c) 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. 305.Limitations on benefit improvements by single-
                            employer plans which are underfunded or 
                            maintained by financially weak 
                            employers.''.
    (d) Effective Date.--
            (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 the date of the enactment of this 
        Act, the amendments made by this subsection 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, 2009.
        For purposes of clause (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 subsection shall not be treated as a termination of such 
        collective bargaining agreement.

SEC. 314. 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 101(f)(2)(B), by striking clause (i) and 
        inserting the following:
                            ``(i) a statement as to whether the 
                        percentage which the amount determined under 
                        section 304(c)(6)(A)(ii) bears to the amount 
                        determined under section 304(c)(6)(C), is at 
                        least 100 percent (and, if not, the actual 
                        percentage);'';
            (3) in section 103(d)(8)(B), by striking ``the requirements 
        of section 302(c)(3)'' and inserting ``the applicable 
        requirements of sections 303(h)(1) and 304(c)(3)'';
            (4) 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 
                target liability (as defined in section 303(c)) of the 
                plan, or
                    ``(B) in the case of a multiemployer plan, the 
                current liability (as defined in section 304(c)(6)(C)) 
                under the plan,
        the percentage which such value is of the amount described in 
        subparagraph (A) or (B).'';
            (5) in section 203(a)(3)(C), by striking ``section 
        302(c)(8)'' and inserting ``section 302(f)(2)'';
            (6) in section 204(g)(1), by striking ``section 302(c)(8)'' 
        and inserting ``section 302(f)(2)'';
            (7) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by 
        striking ``American Jobs Creation Act of 2004'' and inserting 
        ``National Employee Savings and Trust Equity Guarantee 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) (29 U.S.C. 1362(c)), by striking 
        paragraphs (1), (2), and (3) and inserting the following:
            ``(1)(A) in the case of a single-employer plan, the sum of 
        unpaid minimum required contributions (within the meaning of 
        section 4971(c)(4) of the Internal Revenue Code of 1986) with 
        respect to the plan (if any) for the plan year in which the 
        termination date occurs and all preceding plan years (which, 
        for purposes of this subparagraph, shall include any increase 
        in such sum which would result 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) 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 302(d) of this Act or section 
        412(e) 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 amortization payments described in subparagraph (B) or (C) 
        of section 303(a)(1) of this Act or subparagraph (B) or (C) of 
        section 430(a)(1) of the Internal Revenue Code of 1986 which 
        were determined for the plan year in which the termination date 
        occurs or any preceding plan year, but are properly allocable 
        to any succeeding plan year, 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 302(d) of this 
        Act or section 431(e) 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)'' each place it appears 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(f)(2)'', by striking ``304(a) and 
(b)(2)(A)'' and inserting ``302(d) and (e)(1)(A)'', and by striking 
``412(c)(8)'' and inserting ``412(g)(2) ''.
    (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 December 31, 2006.

  PART III--INTEREST RATE ASSUMPTIONS AND DEDUCTIBLE AMOUNTS FOR 2006

SEC. 321. EXTENSION OF REPLACEMENT OF 30-YEAR TREASURY RATES.

    (a) 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''.
    (b) 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''.
    (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. 322. 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. 323. 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.

                     Subtitle B--Related Provisions

SEC. 331. REPLACEMENT OF 30-YEAR TREASURY RATE FOR CALCULATING LUMP-SUM 
              DISTRIBUTIONS.

    (a) Amendments of Internal Revenue Code.--Section 417(e)(3)(A) of 
the Internal Revenue Code of 1986 (relating to determination of present 
value) is amended--
            (1) by striking ``and the applicable interest rate.'' in 
        clause (i) and inserting ``and by using--
                                    ``(I) the phase-in yield curve 
                                method in the case of plan years 
                                beginning in 2007, 2008, 2009, and 
                                2010, and
                                    ``(II) the yield curve method for 
                                years beginning after 2010.''; and
            (2) by striking subclause (II) of clause (ii) and 
        inserting:
                                    ``(II) Yield curve method.--The 
                                term `yield curve method' has the 
                                meaning given such term by section 
                                430(h)(2)(B).
                                    ``(III) Phase-in yield curve 
                                method.--The term `phase in yield curve 
                                method' has the meaning given the term 
                                by section 430(h)(2)(C), except that 
                                the annual rate of interest on 30-year 
                                Treasury securities shall be 
                                substituted for the interest rate under 
                                section 430(h)(2)(C)(i)(II) and the 
                                applicable percentage determined under 
                                subclause (IV) shall be substituted for 
                                the applicable percentage used under 
                                such section.
                                    ``(IV) Applicable percentage.--For 
                                purposes of subclause (III), the 
                                applicable percentage shall be 
                                determined in accordance with the 
                                following table:

In the case of years                                     The applicable
  beginning in--                                        percentage is--
    2007..........................................                  20 
    2008..........................................                  40 
    2009..........................................                  60 
    2010..........................................               80.''.
    (b) Amendments of ERISA.--Section 205(g)(3)(A) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1055(g)(3)) is 
amended--
            (1) by striking ``and the applicable interest rate.'' in 
        clause (i) and inserting ``and by using--
                                    ``(I) the phase-in yield curve 
                                method in the case of plan years 
                                beginning in 2007, 2008, 2009, and 
                                2010, and
                                    ``(II) the yield curve method for 
                                years beginning after 2010.''; and
            (2) by striking subclause (II) of clause (ii) and 
        inserting:
                                    ``(II) Yield curve method.--The 
                                term `yield curve method' has the 
                                meaning given such term by section 
                                303(h)(2)(B).
                                    ``(III) Phase-in yield curve 
                                method.--The term `phase in yield curve 
                                method' has the meaning given the term 
                                by section 303(h)(2)(C), except that 
                                the annual rate of interest on 30-year 
                                Treasury securities shall be 
                                substituted for the interest rate under 
                                section 303(h)(2)(C)(i)(II) and the 
                                applicable percentage determined under 
                                subclause (IV) shall be substituted for 
                                the applicable percentage used under 
                                such section.
                                    ``(IV) Applicable percentage.--For 
                                purposes of subclause (III), the 
                                applicable percentage shall be 
                                determined in accordance with the 
                                following table:

In the case of years                                     The applicable
  beginning in--                                        percentage is--
    2007..........................................                  20 
    2008..........................................                  40 
    2009..........................................                  60 
    2010..........................................               80.''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2006.
            (2) Special rule for certain optional benefits.--If--
                    (A) for the last plan year of a plan beginning in 
                2003, the plan provides that the applicable interest 
                rate under section 417(e)(3) of the Internal Revenue 
                Code of 1986 and section 205(g)(3) of Employee 
                Retirement Income Security Act of 1974 shall be used 
                for purposes of determining the amount of a benefit 
                (other than the accrued benefit) to which such sections 
                417(e)(3) and 205(g)(3) do not apply, and
                    (B) such plan is amended to provide that a rate 
                other than the applicable interest rate shall be used 
                for such purposes and the first plan year for which 
                such amendment is effective begins no later than 
                January 1, 2007,
        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 Employee Retirement Income Security Act of 1974 by 
        reason of such amendment.

SEC. 332. 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. 333. 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:

 ``restrictions on funding of nonqualified deferred compensation plans

    ``Sec. 306. (a) Restrictions.--During any restricted period--
            ``(1) a plan sponsor of a defined benefit plan which is a 
        single-employer plan, and
            ``(2) any member of a controlled group which includes such 
        sponsor,
may not directly or indirectly transfer assets, and may not directly or 
indirectly otherwise reserve assets, in a trust (or other arrangement 
determined by the Secretary of the Treasury) for purposes of paying 
deferred compensation of an applicable covered employee under a 
nonqualified deferred compensation plan of such plan sponsor or member.
    ``(b) Notice and Access.--
            ``(1) Notice relating to restricted period.--The plan 
        administrator of a plan described in subsection (a)(1) 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 subsection (a) 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 
                subsection (a)(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 subsection (a) 
                        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 subsection 
                (a)(1) or a member of a controlled group which includes 
                such sponsor--
                            ``(i) transfers or reserves assets in 
                        violation of subsection (a), or
                            ``(ii) establishes a new nonqualified 
                        deferred compensation plan,
                the plan sponsor shall notify the plan administrator of 
                the plan described in subsection (a)(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 this section.
    ``(c) Restricted Period.--For purposes of this section, the term 
`restricted period' means, with respect to any plan described in 
subsection (a)(1)--
            ``(1) any prohibited period determined under subparagraph 
        (A) or (B) of section 305(c)(3), except that in making such 
        determination--
                    ``(A) both subsection (c)(1) and (c)(3)(A) of 
                section 305 shall be applied by substituting `80 
                percent' for `60 percent' each place it appears, and
                    ``(B) section 305(c)(5) shall apply.
            ``(2) 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).
    ``(d) 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.
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Applicable covered employee.--
                    ``(A) In general.--The term `applicable covered 
                employee' mean 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(f)(3).''.
            (2) Enforcement.--
                    (A) In general.--Section 502(a) of the Employee 
                Retirement Income Security Act (29 U.S.C. 1132(a)) is 
                amended--
                            (i) 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 new 
                        paragraph:
            ``(10) 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 306 (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 (10), any term used in such paragraph which 
is also used in section 306 shall have the meaning given such term by 
section 306.''.
                    (B) Mandatory 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)(10) by a fiduciary for or on behalf of a plan to 
        enforce section 306, a judgement is awarded in favor of the 
        plan, the court shall, 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.--If, 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,
        directly or indirectly transfers assets, or directly or 
        indirectly otherwise reserves 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, such assets 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 
        4980K(h) shall have the meaning given such term by such 
        section.''.
            (2) Requirement to provide notice of event resulting in 
        restricted period.--
                    (A) In general.--Section 4980K of the Internal 
                Revenue Code of 1986 (as amended by section 403) is 
                amended--
                            (i) in subsection (a), by striking 
                        ``subsection (e), (f), or (g)'' and inserting 
                        ``subsection (e), (f), (g), or (h)'';
                            (ii) by amending subsection (b)(1) to read 
                        as follows:
            ``(1) Amount of tax.--The amount of tax imposed by 
        subsection (a) on any failure--
                    ``(A) under subsection (e), (f), or (g) with 
                respect to any participant or beneficiary shall be $100 
                for each day in the noncompliance period with respect 
                to the failure; and
                    ``(B) under subsection (h) shall be $1000 for each 
                day in the noncompliance period with respect to the 
                failure.'';
                            (iii) in subsection (c)--
                                    (I) by striking ``subsection (e), 
                                (f), or (g)'' each place it appears and 
                                inserting ``subsection (e), (f), (g), 
                                or (h)''; and
                                    (II) in paragraph (3)(C), by 
                                striking ``(f) and (g)'' and inserting 
                                ``(f), (g), and (h)''; and
                            (iv) by adding at the end the following:
    ``(h) Requirement To Provide Notice of Event Resulting in 
Restricted Period.--
            ``(1) In general.--A plan administrator of a defined 
        benefit plan which is a single-employer plan shall provide to 
        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 plan a notice that includes--
                    ``(A) information as to the duration of the 
                restricted period, and
                    ``(B) the restrictions under section 306 of the 
                Employee Retirement Income Security Act of 1974 and 
                section 409A(b)(3) during the restricted period.
            ``(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--
                            ``(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 306 of such 
                        Act or section 409A(b)(3) 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 defined benefit plan which is a 
                single-employer plan or a member of a controlled group 
                which includes such sponsor--
                            ``(i) transfers or reserves assets in 
                        violation of section 306 of such Act or section 
                        409A(b)(3), or
                            ``(ii) establishes a new nonqualified 
                        deferred compensation plan,
                the plan sponsor shall notify the plan administrator of 
                the plan 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 306 of such Act or section 409A(b)(3).
            ``(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.
            ``(5) Definitions.--For purposes of this paragraph, any 
        term used in this subsection which is also used in section 306 
        of such Act shall have the meaning given such term by such 
        section.''.
            (3) 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. 334. SPECIAL FUNDING RULES FOR PLANS MAINTAINED BY COMMERCIAL 
              AIRLINES THAT ARE AMENDED TO CEASE FUTURE BENEFIT 
              ACCRUALS.

    (a) In General.--If an eligible plan elects to have this section 
apply--
            (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 sections 412 and 4971 of the 
        Internal Revenue Code of 1986 and section 302 of the Employee 
        Retirement Income Security Act of 1974 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 section 430 of such Code and 303 of such Act 
        shall, for purposes of sections 412, 430, and 4971 of such Code 
        and sections 302 and 303 of such Act, 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 section 
        412 of such Code and 302 of such Act applies--
                    (A) which is sponsored by an employer which is a 
                commercial passenger airline, and
                    (B) with respect to which the requirements of 
                paragraphs (2) and (3) are met.
            (2) Accrual restrictions.--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, the 
        plan provides that--
                    (A) 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
                    (B) 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.
            (3) Restriction on applicable benefit increases.--The 
        requirements of this paragraph are met if no applicable benefit 
        increase (as defined in section 436(b)(3) of such Code and 
        section 305(b)(3) of such Act, but determined without regard to 
        subparagraph (B) or (C) thereof) 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.
    (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. Such election, once 
        made, may be revoked only with the consent of the 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 close of the amortization period, 
        section 412(a)(2)(A) of such Code and section 302(a)(2)(A) of 
        such Act shall apply to such plan, but the prefunding balance 
        as of the first day of the first plan year beginning after the 
        close of the amortization period under section 430(e) of such 
        Code and section 303(e) of such Act 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 14-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 412(c)(3) of such 
                Code and section 302(c)(3) of such Act, as in effect 
                before the date of enactment of this section, shall 
                apply,
                    (B) the rate of interest under section 412(b)(5)(A) 
                of such Code and section 302(b)(5)(A) of such Act, 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.
    (e) Funding Standard Account and Prefunding Balance.--Any 
amortization bases or credit balances in the funding standard account 
under section 412 of such Code or section 302 of such Act, and any 
prefunding balance under section 430 of such Code or section 303 of 
such Act, 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) of the 
        Internal Revenue Code of 1986, as amended by this Act, is 
        amended by inserting after paragraph (33) the following new 
        paragraph:
            ``(34) Successor plans to certain plans.--If a plan to 
        which section 334 of the National Employee Savings and Trust 
        Equity Guarantee Act of 2005 applies 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 section 334 of the National 
        Employee Savings and Trust Equity Guarantee Act of 2005 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 section 334 of the National Employee 
        Savings and Trust Equity Guarantee Act of 2005 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) 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.--If any plan makes an election under section 334 of the 
National Employee Savings and Trust Equity Guarantee Act of 2005, 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.''
            (3) Limitation on deductions under certain plans.--Section 
        404(a)(7)(C)(iv) 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 not apply to any plan for a plan 
        year if an election under section 334 of the National Employee 
        Savings and Trust Equity Guarantee 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 4980F(e) of such Code or section 204(h) of such Act 
        shall be subject to the timing rules applicable to 
        multiemployer plans under Treasury Regulation section 54.4980F-
        1 Q/A-9 (or any successor provision). 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 one or more employers.
    (g) Effective Date.--The amendments made by this section shall 
apply to plan years ending after the date of the enactment of this Act.

SEC. 335. 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 target liability 
                        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 of the 
                        Internal Revenue Code of 1986 or section 302 of 
                        such Act,
        the mortality table shall be the mortality table used by the 
        plan.
                    (B) Notwithstanding section 303(e)(3) of such Act 
                or 430(e)(3) of such Code, for purposes of section 
                303(c)(2)(B) of such Act and 430(c)(2)(B) 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.

                      Subtitle C--Other Provisions

SEC. 341. TREATMENT OF CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT 
              PENSION PLANS.

    (a) Application of Age Discrimination Prohibitions.--
            (1) 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 rule 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 a qualified cash balance 
                        plan.''.
            (2) 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 rule 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 a 
                        qualified cash balance plan.''.
    (b) Rules Applicable to Accrued Benefits Under Converted Plans.--
            (1) 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)(A), 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 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 paragraph (6)(B)(i)).''.
            (2) 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 paragraph (1), 
                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 of the Treasury which 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 
                        (2)(A)) 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 
                        subsection (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 subsection (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 paragraph (2)(A)).''.
    (c) Assumptions Used in Computing Present Value of Accrued 
Benefit.--
            (1) 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 
                prescribed by the Secretary, in the case of a qualified 
                cash balance plan (as defined in section 411(b)(5)(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 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 
                prescribed by the Secretary of the Treasury, in the 
                case of a qualified cash balance plan (as defined in 
                section 204(b)(5)(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 411(b)(1)(H) and 
417(e) of the Internal Revenue Code of 1986 and 204(b)(1)(H) and 
205(g)(3) of the Employee Retirement Income Security Act of 1974, 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 26, 2005.
                    (B) Vesting and interest credit requirements.--In 
                the case of a plan in existence on July 26, 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 26, 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 the earlier of--
                            (i) 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 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 26, 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. 342. 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 consists of a defined benefit 
                        plan and an applicable defined contribution 
                        plan,
                            ``(ii) 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
                            ``(iii) with respect to which the benefit, 
                        contribution, vesting, and nondiscrimination 
                        requirements of subparagraphs (B), (C), (D), 
                        (E), and (F) are met.
                    ``(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 clasue 
                        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 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,
                            ``(ii) 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
                            ``(iii) with respect to which the benefit, 
                        contribution, vesting, and nondiscrimination 
                        requirements of subparagraphs (B), (C), (D), 
                        (E), and (F) are met.
                    ``(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 clasue 
                        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:

          ``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, 2006.

                          Subtitle D--Studies

SEC. 351. JOINT STUDY ON REVITALIZING DEFINED BENEFIT PLANS.

    (a) Study.--As soon as practicable after the date of the enactment 
of this Act, the Secretary of the Treasury, the Secretary of Labor, and 
the Executive Director of the Pension Benefit Guaranty Corporation 
shall jointly undertake a study on ways to revitalize interest in 
defined benefit plans among employers. In conducting such study, the 
Secretaries and the Executive Director shall consider--
            (1) ways to encourage the establishment of defined benefit 
        plans by small- and mid-sized employers,
            (2) ways to encourage the continued maintenance of defined 
        benefit plans by larger employers, and
            (3) legislative proposals to accomplish the objectives 
        described in paragraphs (1) and (2).
    (b) Report.--Not later than 2 years after the date of the enactment 
of this Act, the Secretaries and the Executive Director shall report 
the results of the study, together with any recommendations for 
legislative changes, to the Committees on Ways and Means and Education 
and the Workforce of the House of Representatives and the Committees on 
Finance and Health, Education, Labor, and Pensions of the Senate.

SEC. 352. STUDY ON FLOOR-OFFSET ESOPS.

    (a) Study.--As soon as practicable after the date of the enactment 
of this Act, the Secretary of the Treasury and the Pension Benefit 
Guaranty Corporation shall undertake a study to determine the number of 
floor-offset employee stock ownership plans still in existence and the 
extent to which such plans pose a risk to plan participants or 
beneficiaries and to the Corporation. Such study shall consider 
legislative proposals to address such risks.
    (b) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Secretary and the Corporation shall report the results 
of the study, together with any recommendations for legislative 
changes, to the Committees on Ways and Means and Education and the 
Workforce of the House of Representatives and the Committees on Finance 
and Health, Education, Labor, and Pensions of the Senate.

  TITLE IV--DISCLOSURE AND BENEFIT STATEMENT REQUIREMENTS FOR SINGLE-
                     EMPLOYER DEFINED BENEFIT PLANS

SEC. 401. ACTUARIAL REPORTS AND SUMMARY ANNUAL REPORTS.

    (a) Amendments of Internal Revenue Code.--
            (1) Actuarial report.--Section 6059(b) of the Internal 
        Revenue Code of 1986 (relating to actuarial reports), as 
        amended by this Act, is amended by--
                    (A) redesignating paragraphs (4) and (5) as 
                paragraphs (5) and (6), respectively; and
                    (B) inserting after paragraph (3) the following:
            ``(4) in the case of a single-employer plan, as of the 
        valuation date to which the report relates--
                    ``(A) the fair market value of the plan assets;
                    ``(B) the target liability and the target normal 
                cost, as determined under section 430; and
                    ``(C) the at risk-liability amount and the at-risk 
                normal cost (determined as if section 430(f) applied to 
                the plan and the plan sponsor were a financially-weak 
                employer for the plan year and the 4 immediately 
                preceding plan years);''.
            (2) Excise tax.--Chapter 43 of the Internal Revenue Code of 
        1986 (relating to qualified pension, etc., plans), as amended 
        by this Act, is amended by adding at the end the following new 
        section:

``SEC. 4980K. FAILURE OF CERTAIN PENSION PLANS TO PROVIDE REQUIRED 
              NOTICES.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of a defined benefit plan which is a single-employer plan to 
meet the requirements of subsection (e).
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any person 
        required to receive a notice shall be $100 for each day in the 
        noncompliance period with respect to the failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the statement to which the 
        failure relates is provided or the failure is otherwise 
        corrected.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered and 
        reasonable diligence exercised.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that any 
        person subject to liability for tax under subsection (d) did 
        not know that the failure existed and exercised reasonable 
        diligence to meet the requirements of subsection (e).
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the statement described 
                in subsection (e) during the 30-day period beginning on 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(3) Overall limitation for unintentional failures.--
                    ``(A) In general.--If the person subject to 
                liability for tax under subsection (d) exercised 
                reasonable diligence to meet the requirements of 
                subsection (e), the tax imposed by subsection (a) for 
                failures during the taxable year of the employer shall 
                not exceed $500,000.
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
                purposes of this section do not have the same taxable 
                year, the taxable years taken into account shall be 
                determined under principles similar to the principles 
                of section 1561.
            ``(4) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive or otherwise inequitable relative to the failure 
        involved.
    ``(d) Liability for Tax.--The employer shall be liable for the tax 
imposed by subsection (a).
    ``(e) Requirement to Provide Summary Annual Report.--
            ``(1) In general.--Not later than the date prescribed by 
        the Secretary, the administrator of a defined benefit plan 
        which is a single-employer plan shall furnish a summary annual 
        report described in paragraph (2).
            ``(2) Content of statement.--A summary annual report 
        furnished under paragraph (1) shall include the following 
        information:
                    ``(A) A statement of the assets and liabilities of 
                the plan aggregated by categories and valued at their 
                current value, and the same data displayed in 
                comparative form for the end the previous fiscal year 
                of the plan.
                    ``(B) A statement of the receipts and disbursements 
                during the preceding 12-month period aggregated by 
                general sources and applications.
                    ``(C) A statement of the funded target liability 
                percentage, as defined in section 436(e), of the plan 
                for such fiscal year and for the 2 preceding fiscal 
                years.
                    ``(D) A statement of whether or not the plan 
                sponsor was a financially-weak employer (as determined 
                under section 430(f)) during each of the fiscal years 
                described in subparagraph (C).
                    ``(E) The limits on the guarantee of the Pension 
                Benefit Guaranty Corporation under title IV of the 
                Employee Retirement Income Security Act of 1974 if the 
                plan is terminated while underfunded.
                    ``(F) Such other material (including the percentage 
                determined under section 103(d)(11) of the Employee 
                Retirement Income Security Act of 1974) as is necessary 
                to fairly summarize the latest return under section 
                6058.
            ``(3) Form and manner.--The Secretary of Labor may 
        prescribe the form and manner of the summary annual report 
        under this subsection and any additional information required 
        to be included in such report. Such 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.''.
            (3) Aggregation.--Section 414(t) of such Code, as amended 
        by this Act, is amended by striking ``4980I, or 4980J'' and 
        inserting ``4980I, 4980J, or 4980K''.
            (4) Clerical amendment.--The table of sections for chapter 
        43 of such Code, as amended by this Act, is amended by adding 
        at the end the following new item:

        ``Sec. 4980K. Failure of certain pension plans to provide 
                            required notices.''.
    (b) Amendments of ERISA.--
            (1) Actuarial statement.--
                    (A) Additional information required.--Section 
                103(d)(3) of the Employee Retirement Income Security 
                Act of 1974 (29 U.S.C. 1023(d)(3)) is amended to read 
                as follows:
            ``(3) The following information applicable to the plan year 
        in which the report is filed:
                    ``(A) An identification of benefits not included in 
                the calculation; a statement of the other facts and 
                actuarial assumptions and methods used to determine 
                costs, and a justification for any change in actuarial 
                assumptions or cost methods; and the minimum 
                contribution required under section 302.
                    ``(B) In the case of a multiemployer plan, the 
                normal costs and the accrued liabilities of the plan.
                    ``(C) In the case of a single-employer plan, the 
                following information as of the valuation date for the 
                plan year to which the report relates:
                    ``(i) The fair market value of the plan assets.
                    ``(ii) The target liability and the target normal 
                cost, as determined under section 303.
                    ``(iii) The at risk-liability and the at-risk 
                normal cost (determined as if section 303(f) applied to 
                the plan and the plan sponsor were a financially-weak 
                employer for the plan year and the 4 immediately 
                preceding plan years).
                    ``(iv) Any other information as prescribed by the 
                Secretary.''.
                    (B) Time for filing actuarial statement.--Section 
                103 of such Act (29 U.S.C. 1023) is amended by adding 
                at the end the following:
    ``(f) Submission Date of Actuarial Statement.--In the case of a 
plan that is subject to section 303(j), the actuarial statement 
described under subsection (d) shall be submitted to the Secretary not 
later than the date that is the fifteenth day of the second month 
following the close of the applicable plan year. If a contribution is 
made to such a plan after the submission of such actuarial statement 
but before the submission of the annual report under section 104(a), 
the plan shall submit an amended actuarial statement with such annual 
report.''.
            (2) Summary annual report to plan participants.--
                    (A) In general.--Section 104(b)(3) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1024(b)(3)) is amended to read as follows:
    ``(3) Summary annual report.--Within 15 days after the due date 
under subsection (a)(1) for the filing of the annual report for the 
fiscal year of the plan, the plan administrator shall furnish to each 
participant, and to each beneficiary receiving benefits under the plan, 
a copy of the following information:
            ``(A) General information.--The statements and schedules, 
        for such fiscal year, described in subparagraphs (A) and (B) of 
        section 103(b)(3) and such other material (including the 
        percentage determined under section 103(d)(11)) as is necessary 
        to fairly summarize the latest annual report.
            ``(B) Additional information for single-employer plans.--In 
        the case of a defined benefit plan that is a single-employer 
        plan--
                    ``(i) a statement of the funded target liability 
                percentage, as defined in section 305(e), of the plan 
                for such fiscal year and for the 2 preceding fiscal 
                years;
                    ``(ii) a statement of whether or not the plan 
                sponsor was a financially-weak employer (as determined 
                under section 303(f)) during each of the fiscal years 
                described in clause (i);
                    ``(iii) the limits on the guarantee of the Pension 
                Benefit Guaranty Corporation under title IV if the plan 
                is terminated while underfunded.
            ``(C) Form and manner of report.--The Secretary may 
        prescribe the form and manner of the summary annual report 
        under this subsection and any additional information required 
        to be included in such report. Such 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) Penalty.--Section 502(c)(7) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1132(c)(7)), as amended by this Act, is amended by 
                striking ``or section 104(d)'' and inserting ``or 
                subsection (b)(3) or (d) of section 104''.
    (c) Repeal of Provisions.--
            (1) Freedom of information act exemption.--Subsection (c) 
        of section 4010 of the Employee Retirement Income Security Act 
        (29 U.S.C. 1310(c)) is repealed.
            (2) Notice to participants.--Section 4011 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1311) is 
        repealed.
            (3) Conforming amendment.--The table of sections for title 
        IV of the Employee Retirement Income Security Act of 1974 is 
        amended by striking the item relating to section 4011.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2006.

SEC. 402. NOTICE OF FUNDING BENEFIT LIMITATIONS AND RESTRICTIONS ON 
              BENEFIT INCREASES.

    (a) Amendments of Internal Revenue Code.--
            (1) Excise tax.--Section 4980K of the Internal Revenue 
        Code, as added by section 401, is amended--
                    (A) in subsection (a), by striking ``subsection 
                (e)'' and inserting ``subsection (e) or (f)'';
                    (B) in subsection (c)--
                            (i) by striking ``subsection (e)'' each 
                        place it appears and inserting ``subsection (e) 
                        or (f)''; and
                            (ii) in paragraph (3), by adding at the end 
                        the following:
                    ``(C) Separate application.--This paragraph shall 
                be applied separately for failures to meet the 
                requirements of subsections (e) and (f).''; and
                    (C) by adding at the end the following:
    ``(f) Requirement to Provide Notice on Benefit Limitations.--
            ``(1) In general.--The plan administrator of a pension plan 
        that becomes subject to any benefit limitation or restriction 
        under section 436 shall provide--
                    ``(A) a written notice to plan participants and 
                beneficiaries of the limitation or restriction within a 
                reasonable time before it takes effect; and
                    ``(B) a written notice of the date on which the 
                limitation or restriction ceases to apply within a 
                reasonable time before such date.
            ``(2) Change in time of notice.--The Secretary may 
        prescribe that a notice under paragraph (1) may be given within 
        a reasonable period of time after the effective date or date of 
        cessation of any benefit limitation or restriction if providing 
        such notice before such date is not practicable due to events 
        that were unforeseeable or circumstances beyond the control of 
        the plan administrator.
            ``(3) Form and manner of notice.--The Secretary may 
        prescribe the form and manner of the notice under this 
        subsection. Such 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) Amendments of ERISA.--
            (1) 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--
                    (A) redesignating subsection (l) as subsection (m); 
                and
                    (B) inserting after subsection (k) the following:
    ``(l) Notice of Funding Benefit Limitations and Restrictions on 
Benefit Increases.--
            ``(1) In general.--The plan administrator of a single-
        employer plan that becomes subject to any benefit limitation or 
        restriction under section 305 shall provide--
                    ``(A) a written notice to plan participants and 
                beneficiaries of the limitation or restriction within a 
                reasonable time before it takes effect; and
                    ``(B) a written notice of the date on which the 
                limitation or restriction ceases to apply within a 
                reasonable time before such date.
            ``(2) Change in time of notice.--The Secretary of Treasury 
        may prescribe that a notice under paragraph (1) may be given 
        within a reasonable period of time after the effective date or 
        date of cessation of any benefit limitation or restriction if 
        providing such notice before such date is not practicable due 
        to events that were unforeseeable or circumstances beyond the 
        control of the plan administrator.
            ``(3) Form and manner of notice.--The Secretary of Treasury 
        may prescribe the form and manner of the notice under this 
        subsection. Such 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.''.
            (2) Penalty.--Section 502(c)(7) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1132(c)(7)), as amended 
        by this Act, is amended by striking ``subsection (i) or (j)'' 
        and inserting ``subsection (i), (j), or (l)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2006.

SEC. 403. NOTICE OF BANKRUPTCY FILING.

    (a) Amendment of Internal Revenue Code.--
            (1) In general.--Section 4980K of the Internal Revenue 
        Code, as amended by section 402, is amended--
                    (A) in subsection (a), by striking ``subsection (e) 
                or (f)'' and inserting ``subsection (e), (f), or (g)'';
                    (B) in subsection (c)--
                            (i) by striking ``subsection (e) or (f)'' 
                        each place it appears and inserting 
                        ``subsection (e), (f), or (g)''; and
                            (ii) in paragraph (3)(C), by striking ``(e) 
                        and (f)'' and inserting ``(e), (f), and (g)''; 
                        and
                    (C) by adding at the end the following:
    ``(g) Requirement to Notice of Bankruptcy Filing.--
            ``(1) Notice to plan administrator.--A contributing sponsor 
        of a defined benefit plan which is a single-employer plan shall 
        provide a written notice to the plan administrator when such 
        sponsor files (or within a reasonable time after such sponsor 
        has had filed against such sponsor) 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 of a State.
            ``(2) Notice to participants.--The plan administrator of a 
        plan described in paragraph (1) shall, within a reasonable time 
        after such administrator receives a notice provided under 
        paragraph (1) or otherwise has reason to know that the plan 
        sponsor has filed (or has had filed against the sponsor) a 
        petition described under paragraph (1), provide to participants 
        and beneficiaries of the plan a written notice of--
                    ``(A) the filing of such petition; and
                    ``(B) the limits on the guarantee of the Pension 
                Benefit Guaranty Corporation under title IV of the 
                Employee Retirement Income Security Act of 1974 if the 
                plan is terminated while underfunded, taking into 
                account the filing of such petition.
            ``(3) Form and manner.--The Secretary of Labor may 
        prescribe the form and manner of the notice under this 
        subsection. Such 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) Amendment of ERISA.--
            (1) 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--
                    (A) redesignating subsection (m) as subsection (n); 
                and
                    (B) inserting after subsection (l) the following:
    ``(m) Notice of Bankruptcy Filing.--
            ``(1) Notice to plan administrator.--A contributing sponsor 
        of a defined benefit plan that is a single-employer plan shall 
        provide a written notice to the plan administrator when such 
        sponsor files (or within a reasonable time after such sponsor 
        has had filed against such sponsor) 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 of a State.
            ``(2) Notice to participants.--The plan administrator of a 
        defined benefit plan that is a single-employer plan shall, 
        within a reasonable time after such administrator receives a 
        notice provided under paragraph (1) or otherwise has reason to 
        know that the plan sponsor has filed (or has had filed against 
        the sponsor) a petition described under paragraph (1), provide 
        to participants and beneficiaries of the plan a written notice 
        of--
                    ``(A) the filing of such petition; and
                    ``(B) the limits on the guarantee of the Pension 
                Benefit Guaranty Corporation under title IV if the plan 
                is terminated while underfunded, taking into account 
                the filing of such petition.
            ``(3) Form and manner of notice.--The Secretary may 
        prescribe the form and manner of the notice under this 
        subsection. Such 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.''.
            (2) Penalty.--Section 502(c)(7) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1132(c)(7)), as amended 
        by this Act, is amended by striking ``(j), or (l)'' and 
        inserting ``(j), (l), or (m)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2006.

   TITLE V--IMPROVEMENTS IN FUNDING RULES FOR MULTIEMPLOYER DEFINED 
             BENEFITS PENSION PLANS AND RELATED PROVISIONS

SEC. 501. 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) 130 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. 502. MULTIEMPLOYER DEFINED BENEFIT PLAN FUNDING NOTICES.

    (a) Amendment of Internal Revenue Code.--
            (1) In general.--Chapter 43 of the Internal Revenue Code of 
        1986 (relating to qualified pension, etc., plans), as amended 
        by this Act, is amended by adding at the end the following new 
        section:

``SEC. 4980L. FAILURE OF MULTIEMPLOYER DEFINED BENEFIT PLANS TO PROVIDE 
              FUNDING NOTICE.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of a multiemployer defined benefit plan to meet the 
requirements of subsection (e) with respect to any participant or 
beneficiary, labor organization representing such participants or 
beneficiaries, employer that has an obligation to contribute under the 
plan, and to the Pension Benefit Guaranty Corporation.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any recipient 
        described under subsection (a) shall be $100 for each day in 
        the noncompliance period with respect to the failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the statement to which the 
        failure relates is provided or the failure is otherwise 
        corrected.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered and 
        reasonable diligence exercised.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that any 
        person subject to liability for tax under subsection (d) did 
        not know that the failure existed and exercised reasonable 
        diligence to meet the requirements of subsection (e).
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the statement described 
                in subsection (e) during the 30-day period beginning on 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(3) Overall limitation for unintentional failures.--If 
        the person subject to liability for tax under subsection (d) 
        exercised reasonable diligence to meet the requirements of 
        subsection (e), the tax imposed by subsection (a) for failures 
        during the taxable year of the trust forming part of the plan 
        shall not exceed $500,000. For purposes of the preceding 
        sentence, all multiemployer plans of which the same trust forms 
        a part shall be treated as 1 plan.
            ``(4) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive or otherwise inequitable relative to the failure 
        involved.
    ``(d) Liability for Tax.--The plan shall be liable for the tax 
imposed by subsection (a).
    ``(e) Plan Funding Notice.--
            ``(1) In general.--The administrator of a defined benefit 
        plan which is a multiemployer plan shall for each plan year 
        provide a plan funding notice to each affected party and the 
        Pension Benefit Guaranty Corporation.
            ``(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) a statement as to whether the 
                        percentage which the amount determined under 
                        section 431(c)(6)(A)(ii) bears to the amount 
                        determined under section 431(c)6)(C) is at 
                        least 100 percent (and, if not, the actual 
                        percentage);
                            ``(ii) a statement of the value of the 
                        plan's assets, the amount of benefit payments, 
                        and the ratio of the assets to the payments for 
                        the plan year to which the notice relates;
                            ``(iii) a summary of the rules governing 
                        insolvent multiemployer plans, 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
                            ``(iv) a general description of the 
                        benefits under the plan which are eligible to 
                        be guaranteed by the Pension Benefit Guaranty 
                        Corporation under title IV of the Employee 
                        Retirement Income Security Act of 1974, 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 any additional information 
                which the plan administrator elects to include to the 
                extent not inconsistent with regulations prescribed by 
                the Secretary of Labor.
            ``(3) Time for providing notice.--Any notice under 
        paragraph (1) shall be provided not later than 2 months after 
        the deadline (including extensions) for filing the return 
        described under section 6058 for the plan year to which the 
        notice relates.
            ``(4) Form and manner.--Any notice under paragraph (1)--
                    ``(A) shall be provided in a form and manner 
                prescribed in regulations of the Secretary of Labor,
                    ``(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 the recipient.''.
            (2) Clerical amendment.--The table of sections for chapter 
        43 of such Code, as amended by this Act, is amended by adding 
        at the end the following new item:

``Sec. 4980L. Failure of multiemployer defined benefit plans to provide 
                            funding notice.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of enactment of this Act.

SEC. 503. 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) Effective Date.--The amendment made by this section shall apply 
to transfers made in taxable years beginning after December 31, 2004.

SEC. 504. ADMINISTRATIVE PROVISIONS.

    (a) Authority of the Secretary of the Treasury.--The Secretary of 
the Treasury shall have the authority to prescribe rules applicable to 
the statements required under section 4980K(f) of the Internal Revenue 
Code of 1986 (as added by this Act) and section 101(l) of the Employee 
Retirement Income Security Act of 1974 (as added by this Act).
    (b) Authority of the Secretary of Labor.--The Secretary of Labor 
shall have the authority to prescribe rules applicable to the 
statements required under--
            (1) section 4980K(g) of the Internal Revenue Code of 1986 
        (as added by this Act) and section 101(m) of the Employee 
        Retirement Income Security Act of 1974 (as added by this Act); 
        and
            (2) section 4980L of such Code (as added by this Act).

            TITLE VI--PBGC PREMIUM AND GUARANTEE PROVISIONS

SEC. 601. INCREASES IN PBGC PREMIUMS FOR SINGLE-EMPLOYER PLANS.

    (a) Flat-Rate Premiums.--Section 4006(a)(3) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is 
amended--
            (1) in subparagraph (A)(i), by inserting ``(or for plan 
        years beginning after December 31, 2005, the amount determined 
        under subparagraph (F))'' after ``$19''; and
            (2) by adding at the end the following:
                    ``(F) Amount of flat-rate 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) Years before new funding rules take effect.--Section 
        4006(a)(3)(E) of the Employee Retirement Income Security Act 
        (29 U.S.C. 1306(a)(3)(E)) is amended--
                    (A) in clause (ii), by striking ``unfunded vested 
                benefits'' and inserting ``unfunded current liability 
                ''; and
                    (B) in clause (iii)--
                            (i) by striking subclause (I) and 
                        inserting:
                                    ``(I) Except as provided in 
                                subclause (II) or (III), the term 
                                `unfunded current liability' has the 
                                meaning given such term by section 
                                302(d)(8)(A).'', and
                            (ii) by striking ``vested'' before 
                        ``benefits'' in subclause (II).
            (2) Years to which new funding rules apply.--Section 
        4006(a)(3)(E) of the Employee Retirement Income Security Act 
        (29 U.S.C. 1306(a)(3)(E)) is amended--
                    (A) in clause (ii), by striking ``unfunded current 
                liability'' and inserting ``unfunded target liability 
                (as determined under section 303)''; and
                    (B) by striking clauses (iii) and (iv).
    (c) Effective dates.--
            (1) In general.--The amendments made by subsections (a) and 
        (b)(1) shall apply to plan years beginning after December 31, 
        2005.
            (2) New rules.--The amendments made by subsection (b)(2) 
        shall apply to plan years beginning after December 31, 2006.

SEC. 602. 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 date of 
plan termination.''.
    (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. 603. 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 an event that occurs 
after July 26, 2005.

SEC. 604. 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)), as amended by this Act, is amended--
            (1) in clause (i), by inserting ``other than a new single-
        employer plan (as defined in subparagraph (G)) 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:
            ``(iv) in the case of a new single-employer plan (as 
        defined in subparagraph (G)) 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:
    ``(G)(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. 605. 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)(E)), as amended by this Act, is amended by adding at the end 
the following new clause:
    ``(iii) 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)), as amended 
by this Act, is amended--
            (1) by striking ``The'' in subparagraph (E)(i) and 
        inserting ``Except as provided in subparagraph (H), the'', and
            (2) by inserting after subparagraph (G) the following new 
        subparagraph:
    ``(H)(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. 606. 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. 607. 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.
    ``(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 original 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.
    ``(C) For purposes of this paragraph, 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) 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)(1) 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--
            ``(A) owns the entire interest in an unincorporated trade 
        or business,
            ``(B) 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
            ``(C) 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.
    ``(2) For purposes of this subsection, 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. 608. 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.

      TITLE VII--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

SEC. 701. JOINT STUDY OF APPLICATION OF SPOUSAL CONSENT RULES TO 
              DEFINED CONTRIBUTION PLANS.

    (a) Study.--The Secretary of Labor and the Secretary of the 
Treasury shall jointly conduct a study of the feasibility and 
desirability of extending the application of the requirements of 
section 205 of the Employee Retirement Income Security Act of 1974 and 
sections 401(a)(11) and 417 of the Internal Revenue Code of 1986 
(relating to spousal consent requirements) to defined contribution 
plans to which such requirements do not apply. Such study shall include 
consideration of--
            (1) any modifications of such requirements that are 
        necessary to apply such requirements to such plans, and
            (2) the feasibility of providing notice and spousal consent 
        in 1 or more electronic forms that are capable of 
        authentication.
    (b) Report.--Not later than 2 years after the date of the enactment 
of this Act, the Secretaries shall report the results of the study, 
together with any recommendations for legislative changes, to the 
Committees on Ways and Means and Education and the Workforce of the 
House of Representatives and the Committees on Finance and Health, 
Education, Labor, and Pensions of the Senate.

SEC. 702. 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. 703. 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. 704. 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. 705. 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 VIII--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES

SEC. 801. 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. 802. 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. 803. 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. 804. 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. 805. 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. 806. 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 paragraph (2), 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.

SEC. 807. 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. 808. 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 
804, 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 National Employee Savings and 
        Trust Equity Guarantee 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. 809. 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. 810. 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. 811. 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 812, 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. 812. 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.

                  TITLE IX--ADMINISTRATIVE PROVISIONS

SEC. 901. 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. 902. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM ON 
              APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE 
              TO STATE AND LOCAL PLANS.

    (a) In General.--The following provisions are each amended by 
striking ``maintained by a State or local government or political 
subdivision thereof (or agency or instrumentality thereof)'':
            (1) Section 401(a)(5)(G) of the Internal Revenue Code of 
        1986.
            (2) Section 401(a)(26)(H) of such Code.
            (3) Section 401(k)(3)(G) of such Code.
            (4) Section 1505(d)(2) of the Taxpayer Relief Act of 1997.
    (b) Conforming Amendments.--
            (1) The heading for section 401(a)(5)(G) of such Code is 
        amended to read as follows: ``Governmental Plans.--''.
            (2) The heading for section 401(a)(26)(H) of such Code is 
        amended to read as follows: ``Exception for Governmental 
        Plans.--''.
            (3) Section 401(k)(3)(G) of such Code is amended by 
        inserting ``Governmental Plans.--'' after ``(G)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2005.

SEC. 903. 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. 904. REPORTING SIMPLIFICATION.

    (a) Simplified Annual Filing Requirement for Owners and Their 
Spouses.--
            (1) In general.--The Secretary of the Treasury and the 
        Secretary of Labor 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, in consultation with 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. 905. 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. 906. 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. 907. 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. 908. CLARIFICATION OF TREATMENT OF DEFINED BENEFIT PLANS OF INDIAN 
              TRIBAL GOVERNMENTS.

    (a) Definition of Governmental Plan.--
            (1) 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 defined 
        benefit 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 or 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.''.
            (2) 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 
        defined benefit plan established or 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 (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.''.
    (b) Clarification That Tribal Governments Are Subject to the Same 
Plan Rules and Regulations Applied to State and Other Local Governments 
and Their Police and Firefighters.--
            (1) Amendments to internal revenue code of 1986.--
                    (A) Police and firefighters.--Subparagraph (H) of 
                section 415(b)(2) of such Code (defining participant) 
                is amended--
                            (i) 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
                            (ii) 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 thereof''.
                    (B) State and local government plans.--
                            (i) 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''.
                            (ii) Conforming amendment.--The heading of 
                        paragraph (10) 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''.
                    (C) Government pickup contributions.--Paragraph (2) 
                of section 414(h) of such Code (relating to designation 
                by units of government) is amended by adding at the end 
                the following new sentence: ``This paragraph shall also 
                apply to any defined benefit plan maintained by any 
                Indian tribal government (as defined in section 
                7701(a)(40)) or political subdivision thereof, or an 
                agency or instrumentality of either'' .
            (2) 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--
                    (A) in paragraph (12), by striking ``or'' at the 
                end;
                    (B) in paragraph (13), by striking ``plan.'' and 
                inserting ``plan; or''; and
                    (C) by adding at the end the following:
            ``(14) which is a defined benefit plan 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.''.
    (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. 909. 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. 910. 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.

             TITLE X--UNITED STATES TAX COURT MODERNIZATION

SEC. 1000. 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.

             Subtitle A--Tax Court Pension and Compensation

SEC. 1001. 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. 1002. 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. 1003. 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. 1004. 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. 1005. 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. 1006. 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. 1007. 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. 1008. 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. 1009. 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. 1010. 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 National Employee 
                Savings and Trust Equity Guarantee 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 National 
                        Employee Savings and Trust Equity Guarantee 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 National Employee Savings and Trust Equity 
                        Guarantee 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 National Employee Savings 
                        and Trust Equity Guarantee 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 
                National Employee Savings and Trust Equity Guarantee 
                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. 1011. 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. 1012. 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. 1013. EFFECTIVE DATE.

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

                    Subtitle B--Tax Court Procedure

SEC. 1021. JURISDICTION OF TAX COURT OVER COLLECTION DUE PROCESS CASES.

    (a) In General.--Paragraph (1) of section 6330(d) (relating to 
proceeding after hearing) is amended to read as follows:
            ``(1) Judicial review of determination.--The person may, 
        within 30 days of a determination under this section, appeal 
        such determination to the Tax Court (and the Tax Court shall 
        have jurisdiction with respect to such matter).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to determinations made after the date which is 60 days after the date 
of the enactment of this Act.

SEC. 1022. AUTHORITY FOR MAGISTRATE JUDGES TO HEAR AND DECIDE CERTAIN 
              EMPLOYMENT STATUS CASES.

    (a) In General.--Section 7443A(b) (relating to proceedings which 
may be assigned to magistrate judges) is amended by striking ``and'' at 
the end of paragraph (4), by redesignating paragraph (5) as paragraph 
(6), and by inserting after paragraph (4) the following new paragraph:
            ``(5) any proceeding under section 7436(c), and''.
    (b) Conforming Amendment.--Section 7443A(c) is amended by striking 
``or (4)'' and inserting ``(4), or (5)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any proceeding under section 7436(c) of the Internal Revenue 
Code of 1986 with respect to which a decision has not become final (as 
determined under section 7481 of such Code) before the date of the 
enactment of this Act.

SEC. 1023. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF 
              EQUITABLE RECOUPMENT.

    (a) Confirmation of Authority of Tax Court To Apply Doctrine of 
Equitable Recoupment.--Section 6214(b) (relating to jurisdiction over 
other years and quarters) is amended by adding at the end the following 
new sentence: ``Notwithstanding the preceding sentence, the Tax Court 
may apply the doctrine of equitable recoupment to the same extent that 
it is available in civil tax cases before the district courts of the 
United States and the United States Court of Federal Claims.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to any action or proceeding in the United States Tax Court with respect 
to which a decision has not become final (as determined under section 
7481 of the Internal Revenue Code of 1986) as of the date of the 
enactment of this Act.

SEC. 1024. TAX COURT FILING FEE IN ALL CASES COMMENCED BY FILING 
              PETITION.

    (a) In General.--Section 7451 (relating to fee for filing a Tax 
Court petition) is amended by striking all that follows ``petition'' 
and inserting a period.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 1025. AMENDMENTS TO APPOINT EMPLOYEES.

    (a) In General.--Subsection (a) of section 7471 (relating to Tax 
Court employees) is amended to read as follows:
    ``(a) Appointment and Compensation.--
            ``(1) Clerk.--The Tax Court may appoint a clerk without 
        regard to the provisions of title 5, United States Code, 
        governing appointments in the competitive service. The clerk 
        shall serve at the pleasure of the Tax Court.
            ``(2) Law clerks and secretaries.--
                    ``(A) In general.--The judges and special trial 
                judges of the Tax Court may appoint law clerks and 
                secretaries, in such numbers as the Tax Court may 
                approve, without regard to the provisions of title 5, 
                United States Code, governing appointments in the 
                competitive service. Any such law clerk or secretary 
                shall serve at the pleasure of the appointing judge.
                    ``(B) Exemption from federal leave provisions.--A 
                law clerk appointed under this subsection shall be 
                exempt from the provisions of subchapter I of chapter 
                63 of title 5, United States Code. Any unused sick 
                leave or annual leave standing to the employee's credit 
                as of the effective date of this subsection shall 
                remain credited to the employee and shall be available 
                to the employee upon separation from the Federal 
                Government.
            ``(3) Other employees.--The Tax Court may appoint necessary 
        employees without regard to the provisions of title 5, United 
        States Code, governing appointments in the competitive service. 
        Such employees shall be subject to removal by the Tax Court.
            ``(4) Pay.--The Tax Court may fix and adjust the 
        compensation for the clerk and other employees of the Tax Court 
        without regard to the provisions of chapter 51, subchapter III 
        of chapter 53, or section 5373 of title 5, United States Code. 
        To the maximum extent feasible, the Tax Court shall compensate 
        employees at rates consistent with those for employees holding 
        comparable positions in the judicial branch.
            ``(5) Programs.--The Tax Court may establish programs for 
        employee evaluations, incentive awards, flexible work 
        schedules, premium pay, and resolution of employee grievances.
            ``(6) Discrimination prohibited.--The Tax Court shall--
                    ``(A) prohibit discrimination on the basis of race, 
                color, religion, age, sex, national origin, political 
                affiliation, marital status, or handicapping condition; 
                and
                    ``(B) promulgate procedures for resolving 
                complaints of discrimination by employees and 
                applicants for employment.
            ``(7) Experts and consultants.--The Tax Court may procure 
        the services of experts and consultants under section 3109 of 
        title 5, United States Code.
            ``(8) Rights to certain appeals reserved.--Notwithstanding 
        any other provision of law, an individual who is an employee of 
        the Tax Court on the day before the effective date of this 
        subsection and who, as of that day, was entitled to--
                    ``(A) appeal a reduction in grade or removal to the 
                Merit Systems Protection Board under chapter 43 of 
                title 5, United States Code,
                    ``(B) appeal an adverse action to the Merit Systems 
                Protection Board under chapter 75 of title 5, United 
                States Code,
                    ``(C) appeal a prohibited personnel practice 
                described under section 2302(b) of title 5, United 
                States Code, to the Merit Systems Protection Board 
                under chapter 77 of that title,
                    ``(D) make an allegation of a prohibited personnel 
                practice described under section 2302(b) of title 5, 
                United States Code, with the Office of Special Counsel 
                under chapter 12 of that title for action in accordance 
                with that chapter, or
                    ``(E) file an appeal with the Equal Employment 
                Opportunity Commission under part 1614 of title 29 of 
                the Code of Federal Regulations,
        shall be entitled to file such appeal or make such an 
        allegation so long as the individual remains an employee of the 
        Tax Court.
            ``(9) Competitive status.--Notwithstanding any other 
        provision of law, any employee of the Tax Court who has 
        completed at least 1 year of continuous service under a non-
        temporary appointment with the Tax Court acquires a competitive 
        status for appointment to any position in the competitive 
        service for which the employee possesses the required 
        qualifications.
            ``(10) Merit system principles; prohibited personnel 
        practices; and preference eligibles.--Any personnel management 
        system of the Tax Court shall--
                    ``(A) include the principles set forth in section 
                2301(b) of title 5, United States Code;
                    ``(B) prohibit personnel practices prohibited under 
                section 2302(b) of title 5, United States Code; and
                    ``(C) in the case of any individual who would be a 
                preference eligible in the executive branch, the Tax 
                Court will provide preference for that individual in a 
                manner and to an extent consistent with preference 
                accorded to preference eligibles in the executive 
                branch.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date the United States Tax Court adopts a personnel 
management system after the date of the enactment of this Act.

SEC. 1026. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO SE TAXPAYERS.

    (a) In General.--Section 7475(b) (relating to use of fees) is 
amended by inserting before the period at the end ``and to provide 
services to pro se taxpayers''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

                       TITLE XI--OTHER PROVISIONS

SEC. 1101. 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 1101(a) of the National 
        Employee Savings and Trust Equity Guarantee 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. 1102. 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.
                                                       Calendar No. 276

109th CONGRESS

  1st Session

                                S. 1953

                          [Report No. 109-174]

_______________________________________________________________________

                                 A BILL

To amend the Internal Revenue Code of 1986 and the Employee Retirement 
   Income Security Act of 1974 to protect the retirement security of 
American workers by ensuring that pension benefits are funded and that 
pension assets are adequately diversified and by providing workers with 
adequate access to, and information about, their pension plans, and for 
                            other purposes.

_______________________________________________________________________

                            November 2, 2005

                 Read twice and placed on the calendar