Pension Funding Equity Act of 2004
Public Law 108–218, as amended
Pension Funding Equity Act of 2004
218
110–458
Statute Compilation
United States House of Representatives
Office of the Legislative Counsel
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Pension Funding Equity Act of 2004
12448
108
2004-04-10
Pension Funding Equity Act of 2004
[(Public Law 108–218)]
[As Amended Through P.L. 110–458, Enacted December 23, 2008]
[Currency: This publication is a compilation of the text of Public Law 108–218. It was last amended by the public law listed in the As Amended Through note above and below at the bottom of each page of the pdf version and reflects current law through the date of the enactment of the public law listed at https://www.govinfo.gov/app/collection/comps/]
[Note: While this publication does not represent an official version of any Federal statute, substantial efforts have been made to ensure the accuracy of its contents. The official version of Federal law is found in the United States Statutes at Large and in the United States Code. The legal effect to be given to the Statutes at Large and the United States Code is established by statute (1 U.S.C. 112, 204).]

AN ACT
To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to temporarily replace the 30-year Treasury rate with a rate based on long-term corporate bonds for certain pension plan funding requirements and other provisions, 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.
[29 U.S.C. 1001 note]

SHORT TITLE.
This Act may be cited as the “Pension Funding Equity Act of 2004”.
TITLE I—

PENSION FUNDING
SEC. 101.

TEMPORARY REPLACEMENT OF 30-YEAR TREASURY RATE.
(a)

Employee Retirement Income Security Act of 1974.—
(1)

Determination of permissible range.—
(A)
[29 U.S.C. 1082]

In general.—
Clause (ii) of section 302(b)(5)(B) of the Employee Retirement Income Security Act of 1974 is amended by redesignating subclause (II) as subclause (III) and by inserting after subclause (I) the following new subclause:
“(II)

Special rule for years 2004 and 2005.
In the case of plan years beginning after December 31, 2003, and before January 1, 2006, the term ‘permissible range’ means a rate of interest which is not above, and not more than 10 percent below, the weighted average of the rates of interest on amounts invested conservatively in long-term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year. Such rates 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 and that are in the top 3 quality levels available. The Secretary of the Treasury shall make the permissible range, and the indices and methodology used to determine the average rate, publicly available.”
.
(B)

Secretarial authority.—
Subclause (III) of section 302(b)(5)(B)(ii) of such Act, as redesignated by subparagraph (A), is amended—
(i)
by inserting “or (II)” after “subclause (I)” the first place it appears, and
(ii)
by striking “subclause (I)” the second place it appears and inserting “such subclause”.
(C)
[29 U.S.C. 1082]

Conforming amendment.—
Subclause (I) of section 302(b)(5)(B)(ii) of such Act is amended by inserting “or (III)” after “subclause (II)”.
(2)

Determination of current liability.—
Clause (i) of section 302(d)(7)(C) of such Act is amended by adding at the end the following new subclause:
“(IV)

Special rule for 2004 and 2005.
For plan years beginning in 2004 or 2005, notwithstanding subclause (I), the rate of interest used to determine current liability under this subsection shall be the rate of interest under subsection (b)(5).”
.
(3)

Conforming amendment.—
Paragraph (7) of section 302(e) of such Act is amended to read as follows:
“(7)

Special rule for 2002.
In any case in which the interest rate used to determine current liability is determined under subsection (d)(7)(C)(i)(III), for purposes of applying paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002, the current liability for the preceding plan year shall be redetermined using 120 percent as the specified percentage determined under subsection (d)(7)(C)(i)(II).”
.
(4)
[29 U.S.C. 1306]

PBGC.—
Clause (iii) of section 4006(a)(3)(E) of such Act is amended by adding at the end the following new subclause:
“(V)
In the case of plan years beginning after December 31, 2003, and before January 1, 2006, the annual yield taken into account under subclause (II) shall be the annual rate of interest determined by the Secretary of the Treasury on amounts invested conservatively in long-term investment grade corporate bonds for the month preceding the month in which the plan year begins. For purposes of the preceding sentence, the Secretary of the Treasury shall determine such rate of interest on the basis of 2 or more indices that are selected periodically by the Secretary of the Treasury and that are in the top 3 quality levels available. The Secretary of the Treasury shall make the permissible range, and the indices and methodology used to determine the rate, publicly available.”
.
(b)

Internal Revenue Code of 1986.—
(1)

Determination of permissible range.—
(A)
[26 U.S.C. 412]

In general.—
Clause (ii) of section 412(b)(5)(B) of the Internal Revenue Code of 1986 is amended by redesignating subclause (II) as subclause (III) and by inserting after subclause (I) the following new subclause:
“(II)

Special rule for years 2004 and 2005.
In the case of plan years beginning after December 31, 2003, and before January 1, 2006, the term ‘permissible range’ means a rate of interest which is not above, and not more than 10 percent below, the weighted average of the rates of interest on amounts invested conservatively in long-term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year. Such rates shall be determined by the Secretary on the basis of 2 or more indices that are selected periodically by the Secretary and that are in the top 3 quality levels available. The Secretary shall make the permissible range, and the indices and methodology used to determine the average rate, publicly available.”
.
(B)
[26 U.S.C. 412]

Secretarial authority.—
Subclause (III) of section 412(b)(5)(B)(ii) of such Code, as redesignated by subparagraph (A), is amended—
(i)
by inserting “or (II)” after “subclause (I)” the first place it appears, and
(ii)
by striking “subclause (I)” the second place it appears and inserting “such subclause”.
(C)

Conforming amendment.—
Subclause (I) of section 412(b)(5)(B)(ii) of such Code is amended by inserting “or (III)” after “subclause (II)”.
(2)

Determination of current liability.—
Clause (i) of section 412(l)(7)(C) of such Code is amended by adding at the end the following new subclause:
“(IV)

Special rule for 2004 and 2005.
For plan years beginning in 2004 or 2005, notwithstanding subclause (I), the rate of interest used to determine current liability under this subsection shall be the rate of interest under subsection (b)(5).”
.
(3)

Conforming amendment.—
Paragraph (7) of section 412(m) of such Code is amended to read as follows:
“(7)

Special rule for 2002.
In any case in which the interest rate used to determine current liability is determined under subsection (l)(7)(C)(i)(III), for purposes of applying paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002, the current liability for the preceding plan year shall be redetermined using 120 percent as the specified percentage determined under subsection (l)(7)(C)(i)(II).”
.
(4)
[26 U.S.C. 415]

Limitation on certain assumptions.—
Section 415(b)(2)(E)(ii) of such Code is amended by inserting “
, except that in the case of plan years beginning in 2004 or 2005, ‘
5.5 percent
’ shall be substituted for ‘
5 percent
’ in clause (i)
” before the period at the end.
(5)
[26 U.S.C. 404]

Election to disregard modification for deduction purposes.—
Section 404(a)(1) of such Code is amended by adding at the end the following new subparagraph:
“(F)

Election to disregard modified interest rate.
An employer may elect to disregard subsections (b)(5)(B)(ii)(II) and (l)(7)(C)(i)(IV) of section 412 solely for purposes of determining the interest rate used in calculating the maximum amount of the deduction allowable under this paragraph.”
.
(c)
[26 U.S.C. 411 note]

Provisions Relating to Plan Amendments.—
(1)

In general.—
If this subsection applies to any plan or annuity contract amendment—
(A)
such plan or contract shall be treated as being operated in accordance with the terms of the plan or contract during the period described in paragraph (2)(B)(i), and
(B)
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.
(2)

Amendments to which section applies.—
(A)

In general.—
This subsection shall apply to any amendment to any plan or annuity contract which is made—
(i)
pursuant to any amendment made by this section, and
(ii)
on or before the last day of the first plan year beginning on or after January 1, 2009.
(B)

Conditions.—
This subsection shall not apply to any plan or annuity contract amendment unless—
(i)
during the period beginning on the date the amendment described in subparagraph (A)(i) takes effect and ending on the date described in subparagraph (A)(ii) (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
(ii)
such plan or contract amendment applies retroactively for such period.
(d)
[26 U.S.C. 404 note]

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, 2003.
(2)

Lookback rules.—
For purposes of applying subsections (d)(9)(B)(ii) and (e)(1) of section 302 of the Employee Retirement Income Security Act of 1974 and subsections (l)(9)(B)(ii) and (m)(1) of section 412 of the Internal Revenue Code of 1986 to plan years beginning after December 31, 2003, the amendments made by this section may be applied as if such amendments had been in effect for all prior plan years. The Secretary of the Treasury may prescribe simplified assumptions which may be used in applying the amendments made by this section to such prior plan years.
(3)

Transition rule for section 415 limitation.—
In the case of any participant or beneficiary receiving a distribution after December 31, 2003 and before January 1, 2005, the amount payable under any form of benefit subject to section 417(e)(3) of the Internal Revenue Code of 1986 and subject to adjustment under section 415(b)(2)(B) of such Code shall not, solely by reason of the amendment made by subsection (b)(4), be less than the amount that would have been so payable had the amount payable been determined using the applicable interest rate in effect as of the last day of the last plan year beginning before January 1, 2004.
SEC. 102.

ELECTION OF ALTERNATIVE DEFICIT REDUCTION CONTRIBUTION.
(a)

Amendment of ERISA.—
Section 302(d) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(d)) is amended by adding at the end the following new paragraph:
“(12)

Election for certain plans.
“(A)

In general.
In the case of a defined benefit plan established and maintained by an applicable employer, if this subsection did not apply to the plan for the plan year beginning in 2000 (determined without regard to paragraph (6)), then, at the election of the employer, the increased amount under paragraph (1) for any applicable plan year shall be the greater of—
“(i)
20 percent of the increased amount under paragraph (1) determined without regard to this paragraph, or
“(ii)
the increased amount which would be determined under paragraph (1) if the deficit reduction contribution under paragraph (2) for the applicable plan year were determined without regard to subparagraphs (A), (B), and (D) of paragraph (2).
“(B)

Restrictions on benefit increases.
No amendment which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted during any applicable plan year, unless—
“(i)
the plan’s enrolled actuary certifies (in such form and manner prescribed by the Secretary of the Treasury) that the amendment provides for an increase in annual contributions which will exceed the increase in annual charges to the funding standard account attributable to such amendment, or
“(ii)
the amendment is required by a collective bargaining agreement which is in effect on the date of enactment of this subparagraph.
If a plan is amended during any applicable plan year in violation of the preceding sentence, any election under this paragraph shall not apply to any applicable plan year ending on or after the date on which such amendment is adopted.
“(C)

Applicable employer.
For purposes of this paragraph, the term ‘applicable employer’ means an employer which is—
“(i)
a commercial passenger airline,
“(ii)
primarily engaged in the production or manufacture of a steel mill product or the processing of iron ore pellets, or
“(iii)
an organization described in section 501(c)(5) of the Internal Revenue Code of 1986 and which established the plan to which this paragraph applies on June 30, 1955.
“(D)

Applicable plan year.
For purposes of this paragraph—
“(i)

In general.
The term ‘applicable plan year’ means any plan year beginning after December 27, 2003, and before December 28, 2005, for which the employer elects the application of this paragraph.
“(ii)

Limitation on number of years which may be elected.
An election may not be made under this paragraph with respect to more than 2 plan years.
“(E)

Notice requirements for plans electing alternative deficit reduction contributions.
“(i)

In general.
If an employer elects an alternative deficit reduction contribution under this paragraph and section 412(l)(12) of the Internal Revenue Code of 1986 for any year, the employer shall provide, within 30 days of filing the election for such year, written notice of the election to participants and beneficiaries and to the Pension Benefit Guaranty Corporation.
“(ii)

Notice to participants and beneficiaries.
The notice under clause (i) to participants and beneficiaries shall include with respect to any election—
“(I)
the due date of the alternative deficit reduction contribution and the amount by which such contribution was reduced from the amount which would have been owed if the election were not made, and
“(II)
a description of the benefits under the plan which are eligible to be guaranteed by the Pension Benefit Guaranty Corporation and an explanation of the limitations on the guarantee and the circumstances under which such limitations apply, including the maximum guaranteed monthly benefits which the Pension Benefit Guaranty Corporation would pay if the plan terminated while underfunded.
“(iii)

Notice to pbgc.
The notice under clause (i) to the Pension Benefit Guaranty Corporation shall include—
“(I)
the information described in clause (ii)(I),
“(II)
the number of years it will take to restore the plan to full funding if the employer only makes the required contributions, and
“(III)
information as to how the amount by which the plan is underfunded compares with the capitalization of the employer making the election.
“(F)

Election.
An election under this paragraph shall be made at such time and in such manner as the Secretary of the Treasury may prescribe.”
.
(b)
[26 U.S.C. 412]

Amendment of 1986 Code.—
Section 412(l) of the Internal Revenue Code of 1986 (relating to applicability of subsection) is amended by adding at the end the following new paragraph:
“(12)

Election for certain plans.
“(A)

In general.
In the case of a defined benefit plan established and maintained by an applicable employer, if this subsection did not apply to the plan for the plan year beginning in 2000 (determined without regard to paragraph (6)), then, at the election of the employer, the increased amount under paragraph (1) for any applicable plan year shall be the greater of—
“(i)
20 percent of the increased amount under paragraph (1) determined without regard to this paragraph, or
“(ii)
the increased amount which would be determined under paragraph (1) if the deficit reduction contribution under paragraph (2) for the applicable plan year were determined without regard to subparagraphs (A), (B), and (D) of paragraph (2).
“(B)

Restrictions on benefit increases.
No amendment which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted during any applicable plan year, unless—
“(i)
the plan’s enrolled actuary certifies (in such form and manner prescribed by the Secretary) that the amendment provides for an increase in annual contributions which will exceed the increase in annual charges to the funding standard account attributable to such amendment, or
“(ii)
the amendment is required by a collective bargaining agreement which is in effect on the date of enactment of this subparagraph.
If a plan is amended during any applicable plan year in violation of the preceding sentence, any election under this paragraph shall not apply to any applicable plan year ending on or after the date on which such amendment is adopted.
“(C)

Applicable employer.
For purposes of this paragraph, the term ‘applicable employer’ means an employer which is—
“(i)
a commercial passenger airline,
“(ii)
primarily engaged in the production or manufacture of a steel mill product or the processing of iron ore pellets, or
“(iii)
an organization described in section 501(c)(5) and which established the plan to which this paragraph applies on June 30, 1955.
“(D)

Applicable plan year.
For purposes of this paragraph—
“(i)

In general.
The term ‘applicable plan year’ means any plan year beginning after December 27, 2003, and before December 28, 2005, for which the employer elects the application of this paragraph.
“(ii)

Limitation on number of years which may be elected.
An election may not be made under this paragraph with respect to more than 2 plan years.
“(E)

Election.
An election under this paragraph shall be made at such time and in such manner as the Secretary may prescribe.”
.
(c)
[26 U.S.C. 412 note]

Effect of Election.—
An election under section 302(d)(12) of the Employee Retirement Income Security Act of 1974 or section 412(l)(12) of the Internal Revenue Code of 1986 (as added by this section) with respect to a plan shall not invalidate any obligation (pursuant to a collective bargaining agreement in effect on the date of the election) to provide benefits, to change the accrual of benefits, or to change the rate at which benefits become nonforfeitable under the plan.
(d)

Penalty for Failing To Provide Notice.—
Section 502(c)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132(c)(3)) is amended by inserting “or who fails to meet the requirements of section 302(d)(12)(E) with respect to any person” after “101(e)(2) with respect to any person”.
SEC. 103.

MULTIEMPLOYER PLAN FUNDING NOTICES.
(a)

In General.—
Section 101 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021) is amended by inserting after subsection (e) the following new subsection:
“(f)

Multiemployer Defined Benefit Plan Funding Notices.
“(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 plan participant and beneficiary, to each labor organization representing such participants or beneficiaries, to each employer that has an obligation to contribute under the plan, and to 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 plan’s funded current liability percentage (as defined in section 302(d)(8)(B)) for the plan year to which the notice relates 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, 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.
“(3)

Time for providing notice.
Any notice under paragraph (1) shall be provided no later than two months after the deadline (including extensions) for filing the annual report 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,
“(B)
shall be written in a manner so as to be understood by the average plan participant, and
“(C)
may be provided in written, electronic, or other appropriate form to the extent such form is reasonably accessible to persons to whom the notice is required to be provided.”
.
(b)

Penalties.—
Section 502(c)(1) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132(c)(1)) is amended by striking “or section 101(e)(1)” and inserting “, section 101(e)(1), or section 101(f)”.
(c)
[29 U.S.C. 1021 note]

Regulations and Model Notice.—
The Secretary of Labor shall, not later than 1 year after the date of the enactment of this Act, issue regulations (including a model notice) necessary to implement the amendments made by this section.
(d)
[29 U.S.C. 1021 note]

Effective Date.—
The amendments made by this section shall apply to plan years beginning after December 31, 2004.
SEC. 104.

ELECTION FOR DEFERRAL OF CHARGE FOR PORTION OF NET EXPERIENCE LOSS.
(a)

Employee Retirement Income Security Act of 1974.—
(1)

In general.—
Section 302(b)(7) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(b)(7)) is amended by adding at the end the following new subparagraph:
“(F)

Election for deferral of charge for portion of net experience loss.
“(i)

In general.
With respect to the net experience loss of an eligible multiemployer plan for the first plan year beginning after December 31, 2001, the plan sponsor may elect to defer up to 80 percent of the amount otherwise required to be charged under paragraph (2)(B)(iv) for any plan year beginning after June 30, 2003, and before July 1, 2005, to any plan year selected by the plan from either of the 2 immediately succeeding plan years.
“(ii)

Interest.
For the plan year to which a charge is deferred pursuant to an election under clause (i), the funding standard account shall be charged with interest on the deferred charge for the period of deferral at the rate determined under section 304(a) for multiemployer plans.
“(iii)

Restrictions on benefit increases.
No amendment which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted during any period for which a charge is deferred pursuant to an election under clause (i), unless—
“(I)
the plan’s enrolled actuary certifies (in such form and manner prescribed by the Secretary of the Treasury) that the amendment provides for an increase in annual contributions which will exceed the increase in annual charges to the funding standard account attributable to such amendment, or
“(II)
the amendment is required by a collective bargaining agreement which is in effect on the date of enactment of this subparagraph.
If a plan is amended during any such plan year in violation of the preceding sentence, any election under this paragraph shall not apply to any such plan year ending on or after the date on which such amendment is adopted.
“(iv)

Eligible multiemployer plan.
For purposes of this subparagraph, the term ‘eligible multiemployer plan’ means a multiemployer plan—
“(I)
which had a net investment loss for the first plan year beginning after December 31, 2001, of at least 10 percent of the average fair market value of the plan assets during the plan year, and
“(II)
with respect to which the plan’s enrolled actuary certifies (not taking into account the application of this subparagraph), on the basis of the acutuarial assumptions used for the last plan year ending before the date of the enactment of this subparagraph, that the plan is projected to have an accumulated funding deficiency (within the meaning of subsection (a)(2)) for any plan year beginning after June 30, 2003, and before July 1, 2006.
For purposes of subclause (I), a plan’s net investment loss shall be determined on the basis of the actual loss and not under any actuarial method used under subsection (c)(2).
“(v)

Exception to treatment of eligible multiemployer plan.
In no event shall a plan be treated as an eligible multiemployer plan under clause (iv) if—
“(I)
for any taxable year beginning during the 10-year period preceding the first plan year for which an election is made under clause (i), any employer required to contribute to the plan failed to timely pay any excise tax imposed under section 4971 of the Internal Revenue Code of 1986 with respect to the plan,
“(II)
for any plan year beginning after June 30, 1993, and before the first plan year for which an election is made under clause (i), the average contribution required to be made by all employers to the plan does not exceed 10 cents per hour or no employer is required to make contributions to the plan, or
“(III)
with respect to any of the plan years beginning after June 30, 1993, and before the first plan year for which an election is made under clause (i), a waiver was granted under section 303 of this Act or section 412(d) of the Internal Revenue Code of 1986 with respect to the plan or an extension of an amortization period was granted under section 304 of this Act or section 412(e) of such Code with respect to the plan.
“(vi)

Notice.
If a plan sponsor makes an election under this subparagraph or section 412(b)(7)(F) of the Internal Revenue Code of 1986 for any plan year, the plan administrator shall provide, within 30 days of filing the election for such year, written notice of the election to participants and beneficiaries, to each labor organization representing such participants or beneficiaries, to each employer that has an obligation to contribute under the plan, and to the Pension Benefit Guaranty Corporation. Such notice shall include with respect to any election the amount of any charge to be deferred and the period of the deferral. Such notice shall also include the maximum guaranteed monthly benefits which the Pension Benefit Guaranty Corporation would pay if the plan terminated while underfunded.
“(vii)

Election.
An election under this subparagraph shall be made at such time and in such manner as the Secretary of the Treasury may prescribe.”
.
(2)

Penalty.—
Section 502(c)(4) of such Act (29 U.S.C. 1132(c)(4)) is amended to read as follows:
“(4)
The Secretary may assess a civil penalty of not more than $1,000 a day for each violation by any person of section 302(b)(7)(F)(vi).”
.
(b)
[26 U.S.C. 412]

Internal Revenue Code of 1986.—
Section 412(b)(7) of the Internal Revenue Code of 1986 (relating to special rules for multiemployer plans) is amended by adding at the end the following new subparagraph:
“(F)

Election for deferral of charge for portion of net experience loss.
“(i)

In general.
With respect to the net experience loss of an eligible multiemployer plan for the first plan year beginning after December 31, 2001, the plan sponsor may elect to defer up to 80 percent of the amount otherwise required to be charged under paragraph (2)(B)(iv) for any plan year beginning after June 30, 2003, and before July 1, 2005, to any plan year selected by the plan from either of the 2 immediately succeeding plan years.
“(ii)

Interest.
For the plan year to which a charge is deferred pursuant to an election under clause (i), the funding standard account shall be charged with interest on the deferred charge for the period of deferral at the rate determined under subsection (d) for multiemployer plans.
“(iii)

Restrictions on benefit increases.
No amendment which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted during any period for which a charge is deferred pursuant to an election under clause (i), unless—
“(I)
the plan’s enrolled actuary certifies (in such form and manner prescribed by the Secretary) that the amendment provides for an increase in annual contributions which will exceed the increase in annual charges to the funding standard account attributable to such amendment, or
“(II)
the amendment is required by a collective bargaining agreement which is in effect on the date of enactment of this subparagraph.
If a plan is amended during any such plan year in violation of the preceding sentence, any election under this paragraph shall not apply to any such plan year ending on or after the date on which such amendment is adopted.
“(iv)

Eligible multiemployer plan.
For purposes of this subparagraph, the term ‘eligible multiemployer plan’ means a multiemployer plan—
“(I)
which had a net investment loss for the first plan year beginning after December 31, 2001, of at least 10 percent of the average fair market value of the plan assets during the plan year, and
“(II)
with respect to which the plan’s enrolled actuary certifies (not taking into account the application of this subparagraph), on the basis of the acutuarial assumptions used for the last plan year ending before the date of the enactment of this subparagraph, that the plan is projected to have an accumulated funding deficiency (within the meaning of subsection (a)) for any plan year beginning after June 30, 2003, and before July 1, 2006.
For purposes of subclause (I), a plan’s net investment loss shall be determined on the basis of the actual loss and not under any actuarial method used under subsection (c)(2).
“(v)

Exception to treatment of eligible multiemployer plan.
In no event shall a plan be treated as an eligible multiemployer plan under clause (iv) if—
“(I)
for any taxable year beginning during the 10-year period preceding the first plan year for which an election is made under clause (i), any employer required to contribute to the plan failed to timely pay any excise tax imposed under section 4971 with respect to the plan,
“(II)
for any plan year beginning after June 30, 1993, and before the first plan year for which an election is made under clause (i), the average contribution required to be made by all employers to the plan does not exceed 10 cents per hour or no employer is required to make contributions to the plan, or
“(III)
with respect to any of the plan years beginning after June 30, 1993, and before the first plan year for which an election is made under clause (i), a waiver was granted under section 412(d) or section 303 of the Employee Retirement Income Security Act of 1974 with respect to the plan or an extension of an amortization period was granted under subsection (e) or section 304 of such Act with respect to the plan.
“(vi)

Election.
An election under this subparagraph shall be made at such time and in such manner as the Secretary may prescribe.”
.
TITLE II—

OTHER PROVISIONS
SEC. 201.

TWO-YEAR EXTENSION OF TRANSITION RULE TO PENSION FUNDING REQUIREMENTS.
(a)
[26 U.S.C. 412 note]

In General.—
Section 769(c) of the Retirement Protection Act of 1994, as added by section 1508 of the Taxpayer Relief Act of 1997, is amended—
(1)
by inserting “except as provided in paragraph (3),” before “the transition rules”, and
(2)
by adding at the end the following:
“(3)

Special rules.
In the case of plan years beginning in 2004 and 2005, the following transition rules shall apply in lieu of the transition rules described in paragraph (2):
“(A)
For purposes of section 412(l)(9)(A) of the Internal Revenue Code of 1986 and section 302(d)(9)(A) of the Employee Retirement Income Security Act of 1974, the funded current liability percentage for any plan year shall be treated as not less than 90 percent.
“(B)
For purposes of section 412(m) of the Internal Revenue Code of 1986 and section 302(e) of the Employee Retirement Income Security Act of 1974, the funded current liability percentage for any plan year shall be treated as not less than 100 percent.
“(C)
For purposes of determining unfunded vested benefits under section 4006(a)(3)(E)(iii) of the Employee Retirement Income Security Act of 1974, the mortality table shall be the mortality table used by the plan.”
.
(b)
[26 U.S.C. 412 note]

Effective Date.—
The amendments made by this section shall apply to plan years beginning after December 31, 2003.
SEC. 202.

PROCEDURES APPLICABLE TO DISPUTES INVOLVING PENSION PLAN WITHDRAWAL LIABILITY.
(a)

In General.—
Section 4221 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1401) is amended by adding at the end the following new subsection:
“(f)

Procedures Applicable to Certain Disputes.
“(1)

In general.
If—
“(A)
a plan sponsor of a plan determines that—
“(i)
a complete or partial withdrawal of an employer has occurred, or
“(ii)
an employer is liable for withdrawal liability payments with respect to the complete or partial withdrawal of an employer from the plan,
“(B)
such determination is based in whole or in part on a finding by the plan sponsor under section 4212(c) that a principal purpose of a transaction that occurred before January 1, 1999, was to evade or avoid withdrawal liability under this subtitle, and
“(C)
such transaction occurred at least 5 years before the date of the complete or partial withdrawal,
then the special rules under paragraph (2) shall be used in applying subsections (a) and (d) of this section and section 4219(c) to the employer.
“(2)

Special rules.
“(A)

Determination.
Notwithstanding subsection (a)(3)—
“(i)
a determination by the plan sponsor under paragraph (1)(B) shall not be presumed to be correct, and
“(ii)
the plan sponsor shall have the burden to establish, by a preponderance of the evidence, the elements of the claim under section 4212(c) that a principal purpose of the transaction was to evade or avoid withdrawal liability under this subtitle.
Nothing in this subparagraph shall affect the burden of establishing any other element of a claim for withdrawal liability under this subtitle.
“(B)

Procedure.
Notwithstanding subsection (d) and section 4219(c), if an employer contests the plan sponsor’s determination under paragraph (1) through an arbitration proceeding pursuant to subsection (a), or through a claim brought in a court of competent jurisdiction, the employer shall not be obligated to make any withdrawal liability payments until a final decision in the arbitration proceeding, or in court, upholds the plan sponsor’s determination.”
.
(b)
[26 U.S.C. 1401 note]

Effective Date.—
The amendments made by this section shall apply to any employer that receives a notification under section 4219(b)(1) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1399(b)(1)) after October 31, 2003.
SEC. 203.

SENSE OF CONGRESS REGARDING DEFINED BENEFIT PENSION SYSTEM REFORM.
It is the sense of the Congress that the Congress must ensure the financial health of the defined benefit pension system by working to promptly implement—
(1)
a permanent replacement for the pension discount rate used for defined benefit pension plan calculations, and
(2)
comprehensive funding reforms for all defined benefit pension plans aimed at achieving accurate and sound pension funding to enhance retirement security for workers who rely on defined pension plan benefits, to reduce the volatility of contributions, to provide plan sponsors with predictability for plan contributions, and to ensure adequate disclosures for plan participants in the case of underfunded pension plans.
SEC. 204.

EXTENSION OF TRANSFERS OF EXCESS PENSION ASSETS TO RETIREE HEALTH ACCOUNTS.
(a)
[26 U.S.C. 420]

Amendment of Internal Revenue Code of 1986.—
Paragraph (5) of section 420(b) of the Internal Revenue Code of 1986 (relating to expiration) is amended by striking “December 31, 2005” and inserting “December 31, 2013”.
(b)

Amendments of ERISA.—
(1)
Section 101(e)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by striking “Tax Relief Extension Act of 1999” and inserting “Pension Funding Equity Act of 2004”.
(2)
Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is amended by striking “Tax Relief Extension Act of 1999” and inserting “Pension Funding Equity Act of 2004”.
(3)
Paragraph (13) of section 408(b) of such Act (29 U.S.C. 1108(b)(3)) is amended—
(A)
by striking “January 1, 2006” and inserting “January 1, 2014”, and
(B)
by striking “Tax Relief Extension Act of 1999” and inserting “Pension Funding Equity Act of 2004”.
SEC. 205.

REPEAL OF REDUCTION OF DEDUCTIONS FOR MUTUAL LIFE INSURANCE COMPANIES.
(a)
[26 U.S.C. 809]

In General.—
Section 809 of the Internal Revenue Code of 1986 (relating to reductions in certain deduction of mutual life insurance companies) is hereby repealed.
(b)

Conforming Amendments.—
(1)
[26 U.S.C. 807]
Subsections (a)(2)(B) and (b)(1)(B) of section 807 of such Code are each amended by striking “the sum of (i)” and by striking “plus (ii) any excess described in section 809(a)(2) for the taxable year,”.
(2)
(A)
The last sentence of section 807(d)(1) of such Code is amended by striking “section 809(b)(4)(B)” and inserting “paragraph (6)”.
(B)
Subsection (d) of section 807 of such Code is amended by adding at the end the following new paragraph:
“(6)

Statutory reserves.
The term ‘statutory reserves’ means the aggregate amount set forth in the annual statement with respect to items described in section 807(c). Such term shall not include any reserve attributable to a deferred and uncollected premium if the establishment of such reserve is not permitted under section 811(c).”
.
(3)
[26 U.S.C. 808]
Subsection (c) of section 808 of such Code is amended to read as follows:
“(c)

Amount of Deduction.
The deduction for policyholder dividends for any taxable year shall be an amount equal to the policyholder dividends paid or accrued during the taxable year.”
.
(4)
[26 U.S.C. 812]
Subparagraph (A) of section 812(b)(3) of such Code is amended by striking “sections 808 and 809” and inserting “section 808”.
(5)
[26 U.S.C. 817]
Subsection (c) of section 817 of such Code is amended by striking “(other than section 809)”.
(6)
[26 U.S.C. 842]
Subsection (c) of section 842 of such Code is amended by striking paragraph (3) and by redesignating paragraph (4) as paragraph (3).
(7)
The table of sections for subpart C of part I of subchapter L of chapter 1 of such Code is amended by striking the item relating to section 809.
(c)
[26 U.S.C. 807 note]

Effective Date.—
The amendments made by this section shall apply to taxable years beginning after December 31, 2004.
SEC. 206.

CLARIFICATION OF EXEMPTION FROM TAX FOR SMALL PROPERTY AND CASUALTY INSURANCE COMPANIES.
(a)
[26 U.S.C. 501]

In General.—
Section 501(c)(15)(A) of the Internal Revenue Code of 1986 is amended to read as follows:
“(A)
Insurance companies (as defined in section 816(a)) other than life (including interinsurers and reciprocal underwriters) if—
“(i)
(I)
the gross receipts for the taxable year do not exceed $600,000, and
“(II)
more than 50 percent of such gross receipts consist of premiums, or
“(ii)
in the case of a mutual insurance company—
“(I)
the gross receipts of which for the taxable year do not exceed $150,000, and
“(II)
more than 35 percent of such gross receipts consist of premiums.
Clause (ii) shall not apply to a company if any employee of the company, or a member of the employee’s family (as defined in section 2032A(e)(2)), is an employee of another company exempt from taxation by reason of this paragraph (or would be so exempt but for this sentence).”
.
(b)
[26 U.S.C. 501]

Controlled Group Rule.—
Section 501(c)(15)(C) of the Internal Revenue Code of 1986 is amended by inserting “, except that in applying section 831(b)(2)(B)(ii) for purposes of this subparagraph, subparagraphs (B) and (C) of section 1563(b)(2) shall be disregarded” before the period at the end.
(c)
[26 U.S.C. 831]

Definition of Insurance Company for Section 831.—
Section 831 of the Internal Revenue Code of 1986 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:
“(c)

Insurance Company Defined.
For purposes of this section, the term ‘insurance company’ has the meaning given to such term by section 816(a)).”
.
(d)

Conforming Amendment.—
Clause (i) of section 831(b)(2)(A) of the Internal Revenue Code of 1986 is amended by striking “exceed $350,000 but”.
(e)
[26 U.S.C. 501 note]

Effective Date.—
(1)

In general.—
Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2003.
(2)

Transition rule for companies in receivership or liquidation.—
In the case of a company or association which—
(A)
for the taxable year which includes April 1, 2004, meets the requirements of section 501(c)(15)(A) of the Internal Revenue Code of 1986, as in effect for the last taxable year beginning before January 1, 2004, and
(B)
on April 1, 2004, is in a receivership, liquidation, or similar proceeding under the supervision of a State court,
the amendments made by this section shall apply to taxable years beginning after the earlier of the date such proceeding ends or December 31, 2007.
SEC. 207.
[15 U.S.C. 37b]

CONFIRMATION OF ANTITRUST STATUS OF GRADUATE MEDICAL RESIDENT MATCHING PROGRAMS.
(a)

Findings and Purposes.—
(1)

Findings.—
Congress makes the following findings:
(A)
For over 50 years, most United States medical school seniors and the large majority of graduate medical education programs (popularly known as “residency programs”) have chosen to use a matching program to match medical students with residency programs to which they have applied. These matching programs have been an integral part of an educational system that has produced the finest physicians and medical researchers in the world.
(B)
Before such matching programs were instituted, medical students often felt pressure, at an unreasonably early stage of their medical education, to seek admission to, and accept offers from, residency programs. As a result, medical students often made binding commitments before they were in a position to make an informed decision about a medical specialty or a residency program and before residency programs could make an informed assessment of students’ qualifications. This situation was inefficient, chaotic, and unfair and it often led to placements that did not serve the interests of either medical students or residency programs.
(C)
The original matching program, now operated by the independent non-profit National Resident Matching Program and popularly known as “the Match”, was developed and implemented more than 50 years ago in response to widespread student complaints about the prior process. This Program includes on its board of directors individuals nominated by medical student organizations as well as by major medical education and hospital associations.
(D)
The Match uses a computerized mathematical algorithm, as students had recommended, to analyze the preferences of students and residency programs and match students with their highest preferences from among the available positions in residency programs that listed them. Students thus obtain a residency position in the most highly ranked program on their list that has ranked them sufficiently high among its preferences. Each year, about 85 percent of participating United States medical students secure a place in one of their top 3 residency program choices.
(E)
Antitrust lawsuits challenging the matching process, regardless of their merit or lack thereof, have the potential to undermine this highly efficient, pro-competitive, and long-standing process. The costs of defending such litigation would divert the scarce resources of our country’s teaching hospitals and medical schools from their crucial missions of patient care, physician training, and medical research. In addition, such costs may lead to abandonment of the matching process, which has effectively served the interests of medical students, teaching hospitals, and patients for over half a century.
(2)

Purposes.—
It is the purpose of this section to—
(A)
confirm that the antitrust laws do not prohibit sponsoring, conducting, or participating in a graduate medical education residency matching program, or agreeing to do so; and
(B)
ensure that those who sponsor, conduct or participate in such matching programs are not subjected to the burden and expense of defending against litigation that challenges such matching programs under the antitrust laws.
(b)

Application of Antitrust Laws to Graduate Medical Education Residency Matching Programs.—
(1)

Definitions.—
In this subsection:
(A)

Antitrust laws.—
The term “antitrust laws”—
(i)
has the meaning given such term in subsection (a) of the first section of the Clayton Act (15 U.S.C. 12(a)), except that such term includes section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to the extent such section 5 applies to unfair methods of competition; and
(ii)
includes any State law similar to the laws referred to in clause (i).
(B)

Graduate medical education program.—
The term “graduate medical education program” means—
(i)
a residency program for the medical education and training of individuals following graduation from medical school;
(ii)
a program, known as a specialty or subspecialty fellowship program, that provides more advanced training; and
(iii)
an institution or organization that operates, sponsors or participates in such a program.
(C)

Graduate medical education residency matching program.—
The term “graduate medical education residency matching program” means a program (such as those conducted by the National Resident Matching Program) that, in connection with the admission of students to graduate medical education programs, uses an algorithm and matching rules to match students in accordance with the preferences of students and the preferences of graduate medical education programs.
(D)

Student.—
The term “student” means any individual who seeks to be admitted to a graduate medical education program.
(2)

Confirmation of antitrust status.—
It shall not be unlawful under the antitrust laws to sponsor, conduct, or participate in a graduate medical education residency matching program, or to agree to sponsor, conduct, or participate in such a program. Evidence of any of the conduct described in the preceding sentence shall not be admissible in Federal court to support any claim or action alleging a violation of the antitrust laws.
(3)

Applicability.—
Nothing in this section shall be construed to exempt from the antitrust laws any agreement on the part of 2 or more graduate medical education programs to fix the amount of the stipend or other benefits received by students participating in such programs.
(c)

Effective Date.—
This section shall take effect on the date of enactment of this Act, shall apply to conduct whether it occurs prior to, on, or after such date of enactment, and shall apply to all judicial and administrative actions or other proceedings pending on such date of enactment.