[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>