[Congressional Record Volume 147, Number 112 (Friday, August 3, 2001)]
[Senate]
[Pages S8959-S8961]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM:
  S. 1386. A bill to amen the Internal Revenue Code of 1986 to provide 
for the equitable operation of welfare benefit plans for employees, and 
for other purposes; to the Committee on Finance.
  Mr. SANTORUM. Mr. President, I ask unanimous consent that the text of 
bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1386

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

[[Page S8960]]

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS; AMENDMENT TO 1986 
                   CODE.

       (a) Short Title.--This Act may be cited as the ``Employee 
     Welfare Benefit Equity Act of 2001''.
       (b) Table of Contents.--The table of contents is as 
     follows:

Sec. 1. Short title; table of contents; amendment to 1986 Code.

                 TITLE I--CERTAIN WELFARE BENEFIT PLANS

Sec. 101. Modification of definition of ten-or-more employer plans.
Sec. 102. Clarification of deduction limits for certain collectively 
              bargained plans.
Sec. 103. Clarification of standards for section 501(c)(9) approval.
Sec. 104. Tax shelter provisions not to apply.
Sec. 105. Effective dates.

                    TITLE II--ENFORCEMENT PROVISIONS

Sec. 201. Clarification of section 4976.
Sec. 202. Effective date.

       (c) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or a repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

                 TITLE I--CERTAIN WELFARE BENEFIT PLANS

     SEC. 101. MODIFICATION OF DEFINITION OF TEN-OR-MORE EMPLOYER 
                   PLANS.

       (a) Additional Requirements.--Paragraph (6)(B) of section 
     419A(f) (relating to the exception for 10 or more employer 
     plans) is amended by striking ``and'' at the end of clause 
     (i), by striking the period at the end of clause (ii) and 
     inserting a comma, and by adding at the end the following new 
     clauses:
       ``(iii) which meets the requirements of section 505(b)(1) 
     with respect to all benefits provided by the plan,
       ``(iv) which has obtained a favorable determination from 
     the Secretary that such plan (or a predecessor plan) is an 
     organization described in section 501(c)(9), and
       ``(v) under which no severance pay benefit is provided.''
       (b) Clarification of Experience Rating.--
       (1) In general.--Paragraph (6)(A) of section 419A(f) 
     (relating to the exception for 10 or more employer plans) is 
     amended by striking the second sentence and inserting the 
     following: ``The preceding sentence shall not apply to any 
     plan which is an experience-rated plan.''
       (2) Experience-rated plan.--Section 419A(f)(6) is amended 
     by adding at the end the following new subparagraph:
       ``(C) Experience-rated plan.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `experience-rated plan' means a 
     plan which determines contributions by individual employers 
     on the basis of actual gain or loss experience.
       ``(ii) Exception for guaranteed benefit plan.--

       ``(I) In general.--The term `experience-rated plan' shall 
     not include a guaranteed benefit plan.
       ``(II) Guaranteed benefit plan.--The term `guaranteed 
     benefit plan' means a plan the benefits of which are funded 
     with insurance contracts or are otherwise determinable and 
     payable to a participant without reference to, or limitation 
     by, the amount of contributions to the plan attributable to 
     any contributing employer. A plan shall not fail to be 
     treated as a guaranteed benefit plan solely because benefits 
     may be limited or denied in the event a contributing employer 
     fails to pay premiums or assessments required by the plan as 
     a condition of continued participation.''

       (c) Single Plan Requirement.--Section 419A(f)(6), as 
     amended by subsections (a) and (b), is amended--
       (1) by striking ``means a plan'' in subparagraph (B) and 
     inserting ``means a single plan'', and
       (2) by adding at the end the following:
       ``(D) Single plan.--For purposes of this paragraph, the 
     term `single plan' means a written plan or series of related 
     written plans the terms of which provide that--
       ``(i) all assets of the plan or plans, whether maintained 
     under 1 or more trusts, accounts, or other arrangements and 
     without regard to the method of accounting of the plan or 
     plans, are available to pay benefits of all participants 
     without regard to the participant's contributing employer, 
     and
       ``(ii) the method of accounting of the plan or plans may 
     not operate to limit or reduce the benefits payable to a 
     participant at any time before the withdrawal of the 
     participant's employer from the plan or the termination of 
     any benefit arrangement under the plan.''

     SEC. 102. CLARIFICATION OF DEDUCTION LIMITS FOR CERTAIN 
                   COLLECTIVELY BARGAINED PLANS.

       Paragraph (5) of section 419A(f) (relating to the 
     deductions limits for certain collectively bargained plans) 
     is amended by adding at the end the following flush 
     sentences:

     ``Subparagraph (B) shall not apply to any plan maintained 
     pursuant to an agreement between employee representatives and 
     1 or more employers unless the taxpayer applies for, and the 
     Secretary issues, a determination that such agreement is a 
     bona fide collective bargaining agreement and that the 
     welfare benefits provided under the agreement were the 
     subject of good faith bargaining between employee 
     representatives and such employer or employers. The Secretary 
     may issue regulations to carry out the purposes of the 
     preceding sentence.''

      SEC. 103. CLARIFICATION OF STANDARDS FOR SECTION 501(C)(9) 
                   APPROVAL.

       Section 505 is amended by adding at the end the following 
     new subsection:
       ``(d) Clarification of Standards for Exemption.--
       ``(1) Membership.--An organization shall not fail to be 
     treated as an organization described in paragraph (9) of 
     section 501(c) solely because its membership includes 
     employees or other allowable participants who--
       ``(A) reside or work in different geographic locales, or
       ``(B) do not work in the same industrial or employment 
     classification.
       ``(2) Funding.--An organization described in paragraph (9) 
     or (20) of section 501(c) shall not be treated as 
     discriminatory solely because life insurance or other 
     benefits provided by the organization are funded with 
     different types of products, contracts, investments, or other 
     funding methods of varying costs, but only if the plan under 
     which such benefits are provided meets the requirements of 
     subsection (b).''

     SEC. 104. TAX SHELTER PROVISIONS NOT TO APPLY.

       Section 419 (relating to treatment of funded welfare 
     benefit plans) is amended by adding at the end the following:
       ``(h) Tax Shelter Rules Not To Apply.--For purposes of this 
     title, a welfare benefit fund meeting all applicable 
     requirements of this title shall not be treated as a tax 
     shelter or corporate tax shelter.''

     SEC. 105. EFFECTIVE DATES.

       (a) In General.--The amendments made by this title shall 
     apply to contributions to a welfare benefit fund made after 
     the date of the enactment of this Act.
       (b) Tax Shelter Rules.--The amendment made by section 104 
     shall take effect as if included in the amendments made by 
     section 1028 of the Taxpayer Relief Act of 1997.

                    TITLE II--ENFORCEMENT PROVISIONS

     SEC. 201. CLARIFICATION OF SECTION 4976.

       Section 4976 (relating to excise taxes with respect to 
     funded welfare benefit plans) is amended to read as follows:

     ``SEC. 4976. TAXES WITH RESPECT TO FUNDED WELFARE BENEFIT 
                   PLANS.

       ``(a) Imposition of Tax.--
       ``(1) General rule.--If--
       ``(A) an employer maintains a welfare benefit fund, and
       ``(B) there is--
       ``(i) a disqualified benefit provided or funded during any 
     taxable year, or
       ``(ii) a premature termination of such plan,

     there is hereby imposed on such employer a tax in the amount 
     determined under paragraph (2).
       ``(2) Amount of tax.--The amount of the tax imposed by 
     paragraph (1) shall be equal to--
       ``(A) in the case of a taxable event under paragraph 
     (1)(B)(i), 100 percent of--
       ``(i) the amount of the disqualified benefit provided, or
       ``(ii) the amount of the funding of the disqualified 
     benefit, and
       ``(B) in the case of a taxable event under paragraph 
     (1)(B)(ii), 100 percent of all contributions to the fund 
     before the termination.
       ``(b) Disqualified Benefit.--For purposes of subsection 
     (a)--
       ``(1) In general.--The term `disqualified benefit' means--
       ``(A) any post-retirement medical benefit or life insurance 
     benefit provided with respect to a key employee if a separate 
     account is required to be established for such employee under 
     section 419A(d) and such payment is not from such account,
       ``(B) any post-retirement medical benefit or life insurance 
     benefit provided or funded with respect to an individual in 
     whose favor discrimination is prohibited unless the plan 
     meets the requirements of section 505(b) with respect to such 
     benefit (whether or not such requirements apply to such 
     plan), and
       ``(C) any portion of a welfare benefit fund reverting to 
     the benefit of the employer.
       ``(2) Exception for collective bargaining plans.--Paragraph 
     (1)(B) shall not apply to any plan maintained pursuant to an 
     agreement between employee representatives and 1 or more 
     employers if the Secretary finds that such agreement is a 
     collective bargaining agreement and that the benefits 
     referred to in paragraph (1)(B) were the subject of good 
     faith bargaining between such employee representatives and 
     such employer or employers.
       ``(3) Exception for nondeductible contributions.--Paragraph 
     (1)(C) shall not apply to any amount attributable to a 
     contribution to the fund which is not allowable as a 
     deduction under section 419 for the taxable year or any prior 
     taxable year (and such contribution shall not be included in 
     any carryover under section 419(d)).
       ``(4) Exception for certain amounts charged against 
     existing reserve.--Subparagraphs (A) and (B) of paragraph (1) 
     shall not apply to post-retirement benefits charged against 
     an existing reserve for post-retirement medical or life 
     insurance benefits (as defined in section 512(a)(3)(E)) or 
     charged against the income on such reserve.
       ``(c) Premature Termination.--For purposes of subsection 
     (a)--
       ``(1) In general.--The term `premature termination' means a 
     termination event which occurs on or before the date which is 
     6 years after the first contribution to a welfare benefit 
     fund which benefits any highly compensated employee.

[[Page S8961]]

       ``(2) Exception for insolvency, etc.--Paragraph (1) shall 
     not apply to any termination event which occurs by reason of 
     the insolvency of the employer or for such other reasons as 
     the Secretary may by regulation determine are not likely to 
     result in abuse.
       ``(3) Termination event.--For purposes of this subsection--
       ``(A) In general.--The term `termination event' means--
       ``(i) the termination of a welfare benefit fund,
       ``(ii) the withdrawal of an employer from a welfare benefit 
     fund to which more than 1 employer contributes, or
       ``(iii) any other action which is designed to cause, 
     directly or indirectly, a distribution of any asset from a 
     welfare benefit fund to a highly compensated employee.
       ``(B) Exception for bona fide benefits.--Subparagraph (A) 
     shall not apply to any bona fide benefit (other than a 
     severance benefit) paid from a welfare benefit fund which is 
     available to all employees on a nondiscriminatory basis and 
     payable pursuant to the terms of a written plan.
       ``(d) Definitions.--For purposes of this section--
       ``(1) In general.--Except as otherwise provided, the terms 
     used in this section shall have the same respective meanings 
     as when used in subpart D of part I of subchapter D of 
     chapter 1.
       ``(2) Post-retirement benefit.--
       ``(A) In general.--The term `post-retirement benefit' means 
     any benefit or distribution which is reasonably determined to 
     be paid, provided, or made available to a participant on or 
     after normal retirement age.
       ``(B) Normal retirement age.--The term `normal retirement 
     age' shall have the same meaning given the term in section 
     3(24) of the Employee Retirement Income Security Act of 1974, 
     but in no event shall such date be later than the latest 
     normal retirement age defined in any qualified retirement 
     plan of the employer maintaining the welfare benefit fund 
     which benefits such individual.
       ``(C) Presumption in the case of permanent life 
     insurance.--In the case of a welfare benefit fund which 
     provides a life insurance benefit for an employee, any 
     contributions to the fund for life insurance benefits in 
     excess of the cumulative projected cost of providing the 
     employee permanent whole life insurance, calculated on the 
     basis level premiums for each for each year before a normal 
     retirement age, shall be treated as funding a post-retirement 
     benefit.''

      SEC. 202. EFFECTIVE DATE.

       The amendments made by this title shall apply to benefits 
     provided, and terminations occurring, after the date of the 
     enactment of this Act.
                                 ______