[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 861 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                 S. 861

   To amend the Internal Revenue Code of 1986 to provide transition 
   funding rules for certain plans electing to cease future benefit 
                   accruals, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 20, 2005

Mr. Isakson (for himself and Mr. Rockefeller) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to provide transition 
   funding rules for certain plans electing to cease future benefit 
                   accruals, 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.

    This Act may be cited as the ``Employee Pension Preservation Act of 
2005''.

SEC. 2. TRANSITION FUNDING RULES FOR CERTAIN PLANS THAT ARE AMENDED TO 
              CEASE FUTURE BENEFIT ACCRUALS.

    (a) Amendment of 1986 Code.--Section 412 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
subsection:
    ``(o) Transition Funding Standards for Certain Plans That Are 
Amended to Permanently Cease Future Benefit Accruals.--
            ``(1) In general.--Notwithstanding any other provision of 
        this section, if an eligible plan elects to have this 
        subsection apply--
                    ``(A) the plan shall maintain a transition funding 
                standard account for each applicable plan year,
                    ``(B) the accumulated funding deficiency of the 
                plan for any applicable plan year for purposes of this 
                section and section 4971 shall be determined by using 
                the transition funding standard account rather than the 
                funding standard account used without regard to this 
                subsection, and
                    ``(C) except as provided in paragraph (6), the 
                transition funding standard account shall be credited 
                and charged solely as provided in this subsection and 
                without regard to the requirements of subsection (b), 
                (d), (e), (f), (g), or (l).
            ``(2) Eligible plan.--For purposes of this subsection--
                    ``(A) In general.--The term `eligible plan' means a 
                plan (other than multiemployer plan) to which this 
                section applies--
                            ``(i) which is sponsored by an applicable 
                        employer (as defined in subsection 
                        (l)(12)(C)(i)), and
                            ``(ii) with respect to which the 
                        requirements of subparagraphs (B) and (C) are 
                        met.
                    ``(B) Accrual restrictions.--The requirements of 
                this subparagraph are met if, effective as of the first 
                day of the first applicable plan year and at all times 
                thereafter, the plan provides that, except to the 
                extent required under section 401(a) or as provided in 
                paragraph (4)(C), a participant will not receive any 
                credit for any purpose under the plan for service with, 
                or for compensation earned from, the employer (or any 
                member of the employer's controlled group (within the 
                meaning of subsection (1)(8)(C))) on or after such 
                first day.
                    ``(C) Restriction on amendments increasing 
                liabilities.--The requirements of this subparagraph are 
                met if, at any time during the period beginning on the 
                date of the enactment of this subsection and ending on 
                the day before the first day of the first applicable 
                plan year, no amendment to the plan has been adopted 
                which increases the liabilities of the plan by reason 
                of any increase in benefits, any change in the accrual 
                of benefits, or any change in the rate at which 
                benefits become nonforfeitable under the plan. This 
                subparagraph shall not apply to any plan amendment 
                described in clause (i) or (ii) of subsection 
                (l)(12)(B).
            ``(3) Elections and related terms.--
                    ``(A) In general.--A plan sponsor shall make the 
                election under paragraph (1) at such time and in such 
                manner as the Secretary may prescribe. Such election, 
                once made, is irrevocable without the consent of the 
                Secretary.
                    ``(B) Years for which election made.--
                            ``(i) In general.--The plan sponsor may 
                        select the first plan year to which the 
                        election under paragraph (1) applies from among 
                        plan years ending after the date of the 
                        election. The election shall apply to such plan 
                        year and all subsequent years.
                            ``(ii) Election of new plan year.--The plan 
                        sponsor may specify a new plan year in the 
                        election under paragraph (1) and the plan year 
                        of the plan may be changed to such new plan 
                        year without the approval of the Secretary.
                    ``(C) Applicable plan year.--The term `applicable 
                plan year' means each plan year to which the election 
                under paragraph (1) applies under subparagraph (A).
            ``(4) Charges to the account.--
                    ``(A) In general.--In the case of any applicable 
                plan year during the amortization period, the 
                transition funding standard account shall be charged 
                with 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 charge shall be separately determined for 
                each applicable plan year.
                    ``(B) Years after amortization period.--In the case 
                of an applicable plan year beginning after the 
                amortization period, the transition funding standard 
                account shall be charged with the unfunded liability 
                determined as of the first day of the plan year.
                    ``(C) Current funding of otherwise prohibited 
                credits.--Notwithstanding paragraph (2)(C), a plan may 
                provide credit for any applicable plan year which is 
                otherwise prohibited under such paragraph, but the 
                transition funding standard account for the plan year 
                shall be charged with the entire amount of the expected 
                increase in unfunded accrued liability (determined 
                under the unit credit funding method) due to benefits 
                accruing during the plan year which are attributable to 
                such credit.
                    ``(D) Definitions.--For purposes of this 
                subsection--
                            ``(i) Unfunded liability.--The term 
                        `unfunded liability' means the unfunded accrued 
                        liability under the plan, determined under the 
                        unit credit funding method.
                            ``(ii) Amortization period.--The term 
                        `amortization period' means the 25-plan year 
                        period beginning with the first applicable plan 
                        year.
            ``(5) Credit to account.--The transition funding standard 
        account for any applicable plan year shall be credited with the 
        amount considered contributed by the employer to or under the 
        plan for the plan year.
            ``(6) Other rules relating to transition funding standard 
        account.--In the case of any transition funding standard 
        account--
                    ``(A) the provisions of subsection (c) (other than 
                paragraph (7)) shall apply,
                    ``(B) interest on underpayments, if any, shall be 
                charged at the rate determined under subsection (b),
                    ``(C) in determining credits and charges to the 
                transition funding standard account for the first 
                applicable plan year, all existing amortization bases 
                and any credit balances shall be reduced to zero, and
                    ``(D) in determining credits and charges to the 
                transition funding standard account for any applicable 
                plan year, the value of plan assets shall be equal to 
                their fair market value.''
    (b) Amendment of Employee Retirement Income Security Act of 1974.--
Section 302 of the Employee Retirement Income Security Act of 1974 is 
amended by adding at the end the following new subsection:
    ``(i) Transition Funding Standards for Certain Plans That Are 
Amended to Permanently Cease Future Benefit Accruals.--
            ``(1) In general.--Notwithstanding any other provision of 
        this section, if an eligible plan elects to have this 
        subsection apply--
                    ``(A) the plan shall maintain a transition funding 
                standard account for each applicable plan year,
                    ``(B) the accumulated funding deficiency of the 
                plan for any applicable plan year for purposes of this 
                section and section 4971 of the Internal Revenue Code 
                of 1986 shall be determined by using the transition 
                funding standard account rather than the funding 
                standard account used without regard to this 
                subsection, and
                    ``(C) except as provided in paragraph (6), the 
                transition funding standard account shall be credited 
                and charged solely as provided in this subsection and 
                without regard to the requirements of subsection (b) or 
                (d) of this section or section 303, 304, 305, 306, or 
                307.
            ``(2) Eligible plan.--For purposes of this subsection--
                    ``(A) In general.--The term `eligible plan' means a 
                plan (other than multiemployer plan) to which this 
                section applies--
                            ``(i) which is sponsored by an applicable 
                        employer (as defined in subsection 
                        (d)(12)(C)(i)), and
                            ``(ii) with respect to which the 
                        requirements of subparagraphs (B) and (C) are 
                        met.
                    ``(B) Accrual restrictions.--The requirements of 
                this subparagraph are met if, effective as of the first 
                day of the first applicable plan year and at all times 
                thereafter, the plan provides that, except to the 
                extent required under part 2 or as provided in 
                paragraph (4)(C), a participant will not receive any 
                credit for any purpose under the plan for service with, 
                or for compensation earned from, the employer (or any 
                member of the employer's controlled group (within the 
                meaning of subsection (d)(8)(C))) on or after such 
                first day.
                    ``(C) Restriction on amendments increasing 
                liabilities.--The requirements of this subparagraph are 
                met if, at any time during the period beginning on the 
                date of the enactment of this subsection and ending on 
                the day before the first day of the first applicable 
                plan year, no amendment to the plan has been adopted 
                which increases the liabilities of the plan by reason 
                of any increase in benefits, any change in the accrual 
                of benefits, or any change in the rate at which 
                benefits become nonforfeitable under the plan. This 
                subparagraph shall not apply to any plan amendment 
                described in clause (i) or (ii) of subsection 
                (d)(12)(B).
            ``(3) Elections and related terms.--
                    ``(A) In general.--A plan sponsor shall make the 
                election under paragraph (1) at such time and in such 
                manner as the Secretary may prescribe. Such election, 
                once made, is irrevocable without the consent of the 
                Secretary of the Treasury.
                    ``(B) Years for which election made.--
                            ``(i) In general.--The plan sponsor may 
                        select the first plan year to which the 
                        election under paragraph (1) applies from among 
                        plan years ending after the date of the 
                        election. The election shall apply to such plan 
                        year and all subsequent years.
                            ``(ii) Election of new plan year.--The plan 
                        sponsor may specify a new plan year in the 
                        election under paragraph (1) and the plan year 
                        of the plan may be changed to such new plan 
                        year without the approval of the Secretary of 
                        the Treasury.
                    ``(C) Applicable plan year.--For purposes of this 
                subsection, the term `applicable plan year' means each 
                plan year to which the election under paragraph (1) 
                applies under subparagraph (A).
            ``(4) Charges to the account.--
                    ``(A) In general.--In the case of any applicable 
                plan year during the amortization period, the 
                transition funding standard account shall be charged 
                with 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 charge shall be separately determined for 
                each applicable plan year.
                    ``(B) Years after amortization period.--In the case 
                of an applicable plan year beginning after the 
                amortization period, the transition funding standard 
                account shall be charged with the unfunded liability 
                determined as of the first day of the plan year.
                    ``(C) Current funding of otherwise prohibited 
                credits.--Notwithstanding paragraph (2)(C), a plan may 
                provide credit for any applicable plan year which is 
                otherwise prohibited under such paragraph, but the 
                transition funding standard account for the plan year 
                shall be charged with the entire amount of the expected 
                increase in unfunded accrued liability (determined 
                under the unit credit funding method) due to benefits 
                accruing during the plan year which are attributable to 
                such credit.
                    ``(D) Definitions.--For purposes of this 
                subsection--
                            ``(i) Unfunded liability.--The term 
                        `unfunded liability' means the unfunded accrued 
                        liability under the plan, determined under the 
                        unit credit funding method.
                            ``(ii) Amortization period.--The term 
                        `amortization period' means the 25-plan year 
                        period beginning with the first applicable plan 
                        year.
            ``(5) Credit to account.--The transition funding standard 
        account for any applicable plan year shall be credited with the 
        amount considered contributed by the employer to or under the 
        plan for the plan year.
            ``(6) Other rules relating to transition funding standard 
        account.--In the case of any transition funding standard 
        account--
                    ``(A) the provisions of subsection (c) (other than 
                paragraph (7)) shall apply,
                    ``(B) interest on underpayments, if any, shall be 
                charged at the rate determined under subsection (b),
                    ``(C) in determining credits and charges to the 
                transition funding standard account for the first 
                applicable plan year, all existing amortization bases 
                and any credit balances shall be reduced to zero, and
                    ``(D) in determining credits and charges to the 
                transition funding standard account for any applicable 
                plan year, the value of plan assets shall be equal to 
                their fair market value.''.
    (c) Amendment to Qualification Rules.--Section 401(a) of the 
Internal Revenue Code of 1986 is amended by inserting after paragraph 
(34) the following new paragraph:
            ``(35) Successor plans to certain plans.--If a plan to 
        which section 412(o) applies is maintained by an employer that 
        establishes or maintains 1 or more other defined benefit plans, 
        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 412(o) 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 412(o) 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.''
    (d) PBGC Liability Limited.--Section 4022(b) of the Employee 
Retirement Income Security Act of 1974 is amended by adding at the end 
the following new paragraph:
            ``(8) For any plan that terminates at a time when the 
        special funding requirements under section 302(i) and section 
        412(o) of the Internal Revenue Code of 1986 apply to such plan, 
        paragraphs (1), (3), and (7) shall be applied as if the plan 
        had terminated on the first day of the first applicable plan 
        year described in such sections.''
    (e) Limitation on Deductions Under Certain Plans.--
            (1) Special rules.--Section 404(a)(1)(D) of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new clause:
                            ``(v) Plans to which section 412(o) 
                        applies.--In the case of a plan to which 
                        section 412(o) applies, the maximum amount 
                        deductible under the limitations of this 
                        paragraph shall be the amount paid into such 
                        plan for such plan year.''
            (2) Combined plans.--Section 404(a)(7)(C) of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new clause:
                            ``(iii) Plans to which section 412(o) 
                        applies.--Contributions to a plan to which 
                        section 412(o) applies shall be disregarded in 
                        applying this paragraph.''
    (f) Notice.--In the case of a plan amendment adopted in order to 
comply with section 412(o)(2)(B) of the Internal Revenue Code of 1986 
and with section 302(i)(2)(B) of the Employee Retirement Income 
Security Act of 1974, 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--
            (1) described in section 412(o) of such Code and section 
        302(i) of such Act, and
            (2) 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.
                                 <all>