[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 347 Introduced in Senate (IS)]
112th CONGRESS
1st Session
S. 347
To amend the Internal Revenue Code of 1986 to provide for reporting and
disclosure by State and local public employee retirement pension plans.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 15, 2011
Mr. Burr (for himself, Mr. Thune, Mr. Coburn, Mr. Isakson, Mr. Ensign,
Mr. Grassley, and Mr. Kyl) 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 for reporting and
disclosure by State and local public employee retirement pension plans.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Public Employee Pension Transparency
Act''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Pursuant to clauses 1 and 3 of section 8 of article I
of the Constitution of the United States, the Congress has the
authority to condition the continuation of certain specified
Federal tax benefits upon State or local government employee
pension benefit plans provision of meaningful disclosure under
section 4980J of the Internal Revenue Code of 1986, as added by
this Act.
(2) State or local government employee pension benefit
plans have promised pension benefits to approximately 20
million Americans who are active employees of these entities.
An additional 7 million retirees and their dependents currently
receive benefits from State or local government employee
pension benefit plans. The interests of participants in many of
such plans are in the nature of property rights under State
law.
(3) State or local government employee pension benefit
plans are substantially facilitated by the favorable tax
treatment of participants and beneficiaries, investment
earnings, and employee contributions with respect to such plans
provided by the Federal Government under the Internal Revenue
Code of 1986.
(4) The investment of State or local government employee
pension benefit plan assets, the distribution of benefits under
such plans, and other related financial activities are
facilitated through the use of instrumentalities of, and
substantially affect, interstate commerce. These activities,
which are interstate in nature and have a substantial impact on
the national economy, affect capital formation, regional growth
and decline, the national markets for insurance, and the
markets for securities and the trading of securities of State
and local governments.
(5) The financial status of State or local government
employee pension benefit plans also has a direct impact on the
national markets for insurance and trading of securities of
State and local governments.
(6) State or local government employee pension benefit
plans additionally have a substantial impact on interstate
commerce as a consequence of the interstate movement of
participants.
(7) State or local government employee pension benefit
plans are becoming a large financial burden on certain State
and local governments and have already resulted in tax
increases and the reduction of services.
(8) In fact, a recent study published in the Journal of
Economic Perspectives found that the present value of the
already-promised pension liabilities of the 50 States amount to
$5.17 trillion and that these pension plans are unfunded by
$3.23 trillion. Another study determined that the total
unfunded liability for all municipal plans in the United States
is $574 billion.
(9) Some economists and observers have stated that the
extent to which State or local government employee pension
benefit plans are underfunded is obscured by governmental
accounting rules and practices, particularly as they relate to
the valuation of plan assets and liabilities. This results in a
misstatement of the value of plan assets and an understatement
of plan liabilities, a situation that poses a significant
threat to the soundness of State and local budgets.
(10) There currently is a lack of meaningful disclosure
regarding the value of State or local government employee
pension benefit plan assets and liabilities. This lack of
meaningful disclosure poses a direct and serious threat to the
financial stability of such plans and their sponsoring
governments, impairs the ability of State and local government
taxpayers and officials to understand the financial obligations
of their government, and reduces the likelihood that State and
local government processes will be effective in assuring the
prudent management of their plans. The status quo also
constitutes a serious threat to the future economic health of
the Nation and places an undue burden upon State and local
government taxpayers, who will be called upon to fully fund
existing, and future, pension promises.
(11) State or local government employee pension benefit
plans are affected with a national public interest and
meaningful disclosure of the value of their assets and
liabilities is necessary and desirable in order to adequately
protect plan participants and their beneficiaries and the
general public. Meaningful disclosure would also further
efforts to provide for the general welfare and the free flow of
commerce.
SEC. 3. REPORTING OF INFORMATION WITH RESPECT TO STATE OR LOCAL
GOVERNMENT EMPLOYEE PENSION BENEFIT PLANS TREATED AS A
TAX EXEMPTION, ETC., REQUIREMENT FOR STATE AND LOCAL
BONDS.
(a) In General.--Subpart B of part IV of subchapter B of chapter 1
of the Internal Revenue Code of 1986 (relating to requirements
applicable to all State and local bonds) is amended by adding at the
end the following new section:
``SEC. 149A. REPORTING WITH RESPECT TO STATE OR LOCAL GOVERNMENT
EMPLOYEE PENSION BENEFIT PLANS.
``(a) In General.--In the case of a failure to satisfy any
requirement of subsection (a) or (b) of section 4980J (relating to
failure of State or local government employee pension benefit plans to
meet reporting requirements) with respect to any plan maintained with
respect to employees of one or more States or political subdivisions of
one or more States, no specified Federal tax benefit shall be allowed
or made with respect to any specified bond issued by any such State or
political subdivision (or by any bonding authority acting on behalf, or
for the benefit, of such State or political subdivision) during the
noncompliance period.
``(b) Noncompliance Period.--For purposes of this section, the term
`noncompliance period' means, with respect to any State or political
subdivision in connection with any failure, the period beginning on the
date that the Secretary notifies such State or political subdivision of
such failure and ending on the date that such failure is cured (as
determined by the Secretary).
``(c) Specified Bond.--For purposes of this section, the term
`specified bond' means--
``(1) any State or local bond within the meaning of section
103,
``(2) any qualified tax credit bond within the meaning of
section 54A, and
``(3) any build America bond within the meaning of section
54AA.
``(d) Specified Federal Tax Benefit.--For purposes of this section,
the term `specified Federal tax benefit' means--
``(1) any exemption from gross income allowed under section
103 (relating to interest on State and local bonds),
``(2) any credit allowed under section 54A (relating to
credit to holders of qualified tax credit bonds),
``(3) any credit allowed under section 54AA (relating to
build America bonds), and
``(4) any credit or payment allowed or made under section
6431 (relating to credit for qualified bonds allowed to
issuer).''.
(b) Reporting Requirements.--Chapter 43 of such Code is amended by
adding at the end the following new section:
``SEC. 4980J. FAILURE OF STATE OR LOCAL GOVERNMENT EMPLOYEE PENSION
BENEFIT PLANS TO MEET REPORTING REQUIREMENTS.
``(a) Annual Report.--For purposes of section 149A, the
requirements of this subsection are as follows:
``(1) In general.--The plan sponsor of a State or local
government employee pension benefit plan shall file with the
Secretary, in such form and manner as shall be prescribed by
the Secretary, a report for each plan year beginning on or
after January 1, 2011, setting forth the following information
with respect to the plan, as determined by the plan sponsor as
of the end of such plan year:
``(A) A schedule of funding status, which shall
include a statement as to the current liability of the
plan, the amount of plan assets available to meet that
liability, the amount of the net unfunded liability (if
any), and the funding percentage of the plan.
``(B) A schedule of contributions by the plan
sponsor for the plan year, indicating which are or are
not taken into account under subparagraph (A).
``(C) Alternative projections which shall be
specified in regulations of the Secretary for each of
the next 20 plan years following the plan year relating
to the amount of annual contributions, the fair market
value of plan assets, current liability, the funding
percentage, and such other matters as the Secretary may
specify in such regulations, together with a statement
of the assumptions and methods used in connection with
such projections, including assumptions related to
funding policy, plan changes, future workforce
projections, future investment returns, and such other
matters as the Secretary may specify in such
regulations. The Secretary shall specify in such
regulations the projection assumptions and methods to
be used as necessary to achieve comparability across
plans.
``(D) A statement of the actuarial assumptions used
for the plan year, including the rate of return on
investment of plan assets and assumptions as to such
other matters as the Secretary may prescribe by
regulation.
``(E) A statement of the number of participants who
are each of the following--
``(i) those who are retired or separated
from service and are receiving benefits,
``(ii) those who are retired or separated
and are entitled to future benefits, and
``(iii) those who are active under the
plan.
``(F) A statement of the plan's investment returns,
including the rate of return, for the plan year and the
5 preceding plan years.
``(G) A statement of the degree to which, and
manner in which, the plan sponsor expects to eliminate
any unfunded current liability that may exist for the
plan year and the extent to which the plan sponsor has
followed the plan's funding policy for each of the
preceding 5 plan years. The Secretary shall prescribe
by regulation the specific criteria to be used for
meeting the requirements of this paragraph.
``(H) A statement of the amount of pension
obligation bonds outstanding.
``(2) Timing of report.--The plan sponsor of a State or
local government employee pension benefit plan shall make the
filing required under paragraph (1) for each plan year not
later than 210 days after the end of such plan year (or within
such time as may be required by regulations prescribed by the
Secretary in order to reduce duplicative filing).
``(b) Additional Reporting Requirements.--For purposes of section
149A, the requirements of this subsection are as follows:
``(1) Supplementary reports.--In any case in which, in
determining the information filed in the annual report for a
plan year under subsection (a)--
``(A) the value of plan assets is determined using
a standard other than fair market value, or
``(B) the interest rate or rates used to determine
the value of liabilities or as the discount value for
liabilities are not the interest rates described in
paragraph (3),
the plan sponsor shall include in the annual report filed for
such plan year pursuant to subsection (a) the supplementary
report for such plan year described in paragraph (2) of this
subsection.
``(2) Use of prescribed valuation method and interest
rates.--A supplementary report for a plan year filed for a plan
year pursuant to this subsection shall include the information
specified as required in the annual report under subparagraphs
(A), (C), (F), and (G) of subsection (a)(1), determined as of
the end of such plan year by valuing plan assets at fair market
value and by using the interest rates described in paragraph
(3) to value liabilities and as the discount value for
liabilities.
``(3) Interest rates based on u.s. treasury obligation
yield curve rate.--
``(A) In general.--The interest rates described in
this subsection are--
``(i) in the case of benefits reasonably
determined to be payable during the 5-year
period beginning on the first day of the plan
year, the first segment rate with respect to
the applicable month,
``(ii) in the case of benefits reasonably
determined to be payable during the 15-year
period beginning at the end of the period
described in subparagraph (A), the second
segment rate with respect to the applicable
month, and
``(iii) in the case of benefits reasonably
determined to be payable after the period
described in clause (ii), the third segment
rate with respect to the applicable month.
``(B) Segment rates.--For purposes of this
paragraph--
``(i) First segment rate.--The term `first
segment rate' means, with respect to any month,
the single rate of interest which shall be
determined by the Secretary for such month on
the basis of the U.S. Treasury obligation yield
curve for such month, taking into account only
that portion of such yield curve which is based
on obligations maturing during the 5-year
period commencing with such month.
``(ii) Second segment rate.--The term
`second segment rate' means, with respect to
any month, the single rate of interest which
shall be determined by the Secretary for such
month on the basis of the U.S. Treasury
obligation yield curve for such month, taking
into account only that portion of such yield
curve which is based on obligations maturing
during the 15-year period beginning at the end
of the period described in clause (i).
``(iii) Third segment rate.--The term
`third segment rate' means, with respect to any
month, the single rate of interest which shall
be determined by the Secretary for such month
on the basis of the U.S. Treasury obligation
yield curve for such month, taking into account
only that portion of such yield curve which is
based on obligations maturing during periods
beginning after the period described in clause
(ii).
``(C) U.S. treasury obligation yield curve.--For
purposes of this subsection, the term `U.S. Treasury
obligation yield curve' means, with respect to any
month, a yield curve which shall be prescribed by the
Secretary for such month and which reflects the
average, for the 24-month period ending with the month
preceding such month, of monthly yields on interest-
bearing obligations of the United States.
``(c) Definitions.--For purposes of this section--
``(1) State or local government employee pension benefit
plan.--The terms `State or local government employee pension
benefit plan' and `plan' mean any plan, fund, or program, other
than a defined contribution plan (within the meaning of section
414(i)), which was heretofore or is hereafter established or
maintained, in whole or in part, by a State, a political
subdivision of a State, or any agency or instrumentality of a
State or political subdivision of a State, to the extent that
by its express terms or as a result of surrounding
circumstances such plan, fund, or program--
``(A) provides retirement income to employees, or
``(B) results in a deferral of income by employees
for periods extending to the termination of covered
employment or beyond, regardless of the method of
calculating the contributions made to the plan, the
method of calculating the benefits under the plan, or
the method of distributing benefits from the plan.
``(2) Funding percentage.--The term `funding percentage'
for a plan year means the ratio (expressed as a percentage)
which--
``(A) the value of plan assets as of the end of the
plan year bears to
``(B) the current liability of the plan for the
plan year.
``(3) Current liability.--The term `current liability' of a
plan for a plan year means the present value of all benefits
accrued or earned under the plan as of the end of the plan
year.
``(4) Plan sponsor.--The term `plan sponsor' means, in
connection with a State or local government employee pension
benefit plan, the State, political subdivision of a State, or
agency or instrumentality of a State or a political subdivision
of a State which establishes or maintains the plan.
``(5) Participant.--
``(A) In general.--The term `participant' means, in
connection with a State or local government employee
pension benefit plan, an individual--
``(i) who is an employee or former employee
of a State, political subdivision of a State,
or agency or instrumentality of a State or a
political subdivision of a State which is the
plan sponsor of such plan, and
``(ii) who is or may become eligible to
receive a benefit of any type from such plan or
whose beneficiaries may be eligible to receive
any such benefit.
``(B) Beneficiary.--The term `beneficiary' means a
person designated by a participant, or by the terms of
the plan, who is or may become entitled to a benefit
thereunder.
``(6) Plan year.--The term `plan year' means, in connection
with a plan, the calendar or fiscal year on which the records
of the plan are kept.
``(7) State.--The term `State' includes any State of the
United States, the District of Columbia, the Commonwealth of
Puerto Rico, the Virgin Islands, American Samoa, Guam, and the
Commonwealth of the Northern Mariana Islands.
``(8) Fair market value.--The term `fair market value' has
the meaning of such term under section 430(g)(3)(A) (without
regard to section 430(g)(3)(B)).
``(d) Model Reporting Statement.--The Secretary shall develop model
reporting statements for purposes of subsections (a) and (b). Plan
sponsors of State or local government employee pension plans may elect,
in such form and manner as shall be prescribed by the Secretary, to
utilize the applicable model reporting statement for purposes of
complying with requirements of such subsections.
``(e) Transparency of Information Filed.--The Secretary shall
create and maintain a public website, with searchable capabilities, for
purposes of posting the information received by the Secretary pursuant
to subsections (a) and (b). Any such information received by the
Secretary (including any updates to such information received by the
Secretary) shall be posted on the website not later than 60 days after
receipt and shall not be treated as return information for purposes of
this title.''.
(c) Clerical Amendments.--
(1) The table of sections for subpart B of part IV of
subchapter B of chapter 1 of such Code is amended by adding at
the end the following new item:
``Sec. 149A. Reporting with respect to State or local government
employee pension benefit plans.''.
(2) 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 State or local government employee pension
benefit plans to meet reporting
requirements.''.
SEC. 4. GENERAL PROVISIONS AND RULES OF CONSTRUCTION.
(a) Limitations on Federal Responsibilities Relating to Plan
Obligations and Liabilities.--The United States shall not be liable for
any obligation related to any current or future shortfall in any State
or local government employee pension plan. Nothing in this Act (or any
amendment made by this Act) or any other provision of law shall be
construed to provide Federal Government funds to diminish or meet any
current or future shortfall in, or obligation of, any State or local
government employee pension plan. The preceding sentence shall also
apply to the Federal Reserve.
(b) No Federal Funding Standards.--Nothing in this Act (or any
amendment made by this Act) shall be construed to alter existing
funding standards for State or local government employee pension plans
or to require Federal funding standards for such plans.
(c) Definitions.--Terms used in this section which are also used in
section 4980J of the Internal Revenue Code of 1986 shall have the same
meaning as when used in such section.
<all>