[Congressional Record Volume 151, Number 161 (Thursday, December 15, 2005)]
[House]
[Pages H11678-H11798]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1315
PENSION PROTECTION ACT OF 2005
Mr. BOEHNER. Madam Speaker, pursuant to House Resolution 602, I call
up the bill (H.R. 2830) to amend the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code of 1986 to reform
the pension funding rules, and for other purposes, and ask for its
immediate consideration.
The Clerk read the title of the bill.
The SPEAKER pro tempore (Mrs. Capito). Pursuant to House Resolution
602, the bill is considered read.
The text of the bill is as follows:
H.R. 2830
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Pension
Protection Act of 2005''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title and table of contents.
TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
Sec. 101. Minimum funding standards.
Sec. 102. Funding rules for single-employer defined benefit pension
plans.
Sec. 103. Limitations on distributions and benefit accruals under
single-employer plans.
Sec. 104. Technical and conforming amendments.
Subtitle B--Amendments to Internal Revenue Code of 1986
Sec. 111. Minimum funding standards.
Sec. 112. Funding rules for single-employer defined benefit pension
plans.
Sec. 113. Limitations on distributions and benefit accruals under
single-employer plans.
Sec. 114. Technical and conforming amendments.
Subtitle C--Other provisions
Sec. 121. Modification of transition rule to pension funding
requirements.
Sec. 122. Treatment of nonqualified deferred compensation plans when
employer defined benefit plan in at-risk status.
TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
Sec. 201. Funding rules for multiemployer defined benefit plans.
Sec. 202. Additional funding rules for multiemployer plans in
endangered or critical status.
[[Page H11679]]
Sec. 203. Measures to forestall insolvency of multiemployer plans.
Sec. 204. Withdrawal liability reforms.
Sec. 205. Removal of restrictions with respect to procedures applicable
to disputes involving withdrawal liability.
Subtitle B--Amendments to Internal Revenue Code of 1986
Sec. 211. Funding rules for multiemployer defined benefit plans.
Sec. 212. Additional funding rules for multiemployer plans in
endangered or critical status.
TITLE III--OTHER INTEREST-RELATED FUNDING PROVISIONS
Sec. 301. Interest rate assumption for determination of lump sum
distributions.
Sec. 302. Interest rate assumption for applying benefit limitations to
lump sum distributions.
TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS
Sec. 401. Increases in PBGC premiums.
TITLE V--DISCLOSURE
Sec. 501. Defined benefit plan funding notices.
Sec. 502. Additional disclosure requirements.
Sec. 503. Notice to participants and beneficiaries of section 4010
filings with the PBGC.
TITLE VI--INVESTMENT ADVICE
Sec. 601. Amendments to Employee Retirement Income Security Act of 1974
providing prohibited transaction exemption for provision
of investment advice.
Sec. 602. Amendments to Internal Revenue Code of 1986 providing
prohibited transaction exemption for provision of
investment advice.
TITLE VII--DEDUCTION LIMITATIONS
Sec. 701. Increase in deduction limits.
Sec. 702. Updating deduction rules for combination of plans.
TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
SEC. 101. MINIMUM FUNDING STANDARDS.
(a) Repeal of Existing Funding Rules.--Sections 302 through
306 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1082 through 1085a) are repealed.
(b) New Minimum Funding Standards.--Part 3 of subtitle B of
title I of such Act (as amended by subsection (a)) is amended
further by inserting after section 301 the following new
section:
``Minimum funding standards
``Sec. 302. (a) Requirement to Meet Minimum Funding
Standard.--
``(1) In general.--A plan to which this part applies shall
satisfy the minimum funding standard applicable to the plan
for any plan year.
``(2) Minimum funding standard.--For purposes of paragraph
(1), a plan shall be treated as satisfying the minimum
funding standard for a plan year if--
``(A) in the case of a defined benefit plan which is a
single-employer plan, the employer makes contributions to or
under the plan for the plan year which, in the aggregate, are
not less than the minimum required contribution determined
under section 303 for the plan for the plan year,
``(B) in the case of a money purchase plan which is a
single-employer plan, the employer makes contributions to or
under the plan for the plan year which are required under the
terms of the plan, and
``(C) in the case of a multiemployer plan, the employers
make contributions to or under the plan for any plan year
which, in the aggregate, are sufficient to ensure that the
plan does not have an accumulated funding deficiency under
section 304 as of the end of the plan year.
``(b) Liability for Contributions.--
``(1) In general.--Except as provided in paragraph (2), the
amount of any contribution required by this section
(including any required installments under paragraphs (3) and
(4) of section 303(i)) shall be paid by any employer
responsible for making contributions to or under the plan.
``(2) Joint and several liability where employer member of
controlled group.--In the case of a single-employer plan, if
the employer referred to in paragraph (1) is a member of a
controlled group, each member of such group shall be jointly
and severally liable for payment of such contributions.
``(c) Variance From Minimum Funding Standards.--
``(1) Waiver in case of business hardship.--
``(A) In general.--If--
``(i) an employer is (or in the case of a multiemployer
plan, 10 percent or more of the number of employers
contributing to or under the plan is) unable to satisfy the
minimum funding standard for a plan year without temporary
substantial business hardship (substantial business hardship
in the case of a multiemployer), and
``(ii) application of the standard would be adverse to the
interests of plan participants in the aggregate,
the Secretary of the Treasury may, subject to subparagraphs
(B) and (C), waive the requirements of subsection (a) for
such year with respect to all or any portion of the minimum
funding standard. The Secretary of the Treasury shall not
waive the minimum funding standard with respect to a plan for
more than 3 of any 15 (5 of any 15 in the case of a
multiemployer plan) consecutive plan years.
``(B) Effects of waiver.--If a waiver is granted under
subparagraph (A) for any plan year--
``(i) in the case of a single-employer plan, the minimum
required contribution under section 303 for the plan year
shall be reduced by the amount of the waived funding
deficiency and such amount shall be amortized as required
under section 303(j), and
``(ii) in the case of a multiemployer plan, the funding
standard account shall be credited under section 304(b)(3)(C)
with the amount of the waived funding deficiency and such
amount shall be amortized as required under section
304(b)(2)(C).
``(C) Waiver of amortized portion not allowed.--The
Secretary of the Treasury may not waive under subparagraph
(A) any portion of the minimum funding standard under
subsection (a) for a plan year which is attributable to any
amortization payment required to be made for such plan year
with respect to any amortization described in subparagraph
(B) of any waived portion of the minimum funding standard for
any preceding plan year.
``(2) Determination of business hardship.--For purposes of
this subsection, the factors taken into account in
determining temporary substantial business hardship
(substantial business hardship in the case of a multiemployer
plan) shall include (but shall not be limited to) whether or
not--
``(A) the employer is operating at an economic loss,
``(B) there is substantial unemployment or underemployment
in the trade or business and in the industry concerned,
``(C) the sales and profits of the industry concerned are
depressed or declining, and
``(D) it is reasonable to expect that the plan will be
continued only if the waiver is granted.
``(3) Waived funding deficiency.--For purposes of this
part, the term `waived funding deficiency' means the portion
of the minimum funding standard under subsection (a)
(determined without regard to the waiver) for a plan year
waived by the Secretary of the Treasury and not satisfied by
employer contributions.
``(4) Security for waivers for single-employer plans,
consultations.--
``(A) Security may be required.--
``(i) In general.--Except as provided in subparagraph (C),
the Secretary of the Treasury may require an employer
maintaining a defined benefit plan which is a single-employer
plan (within the meaning of section 4001(a)(15)) to provide
security to such plan as a condition for granting or
modifying a waiver under paragraph (1).
``(ii) special rules.--Any security provided under clause
(i) may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Corporation,
by a contributing sponsor (within the meaning of section
4001(a)(13)), or a member of such sponsor's controlled group
(within the meaning of section 4001(a)(14)).
``(B) Consultation with the pension benefit guaranty
corporation.--Except as provided in subparagraph (C), the
Secretary of the Treasury shall, before granting or modifying
a waiver under this subsection with respect to a plan
described in subparagraph (A)(i)--
``(i) provide the Pension Benefit Guaranty Corporation
with--
``(I) notice of the completed application for any waiver or
modification, and
``(II) an opportunity to comment on such application within
30 days after receipt of such notice, and
``(ii) consider--
``(I) any comments of the Corporation under clause (i)(II),
and
``(II) any views of any employee organization (within the
meaning of section 3(4)) representing participants in the
plan which are submitted in writing to the Secretary of the
Treasury in connection with such application.
Information provided to the Corporation under this
subparagraph shall be considered tax return information and
subject to the safeguarding and reporting requirements of
section 6103(p) of the Internal Revenue Code of 1986.
``(C) Exception for certain waivers.--
``(i) In general.--The preceding provisions of this
paragraph shall not apply to any plan with respect to which
the sum of--
``(I) the shortfall amortization charge (within the meaning
of section 303(c)(1)) for the plan year, and
``(II) the aggregate total of shortfall amortization
installments determined for succeeding plan years under
section 303(c)(2),
is less than $1,000,000.
``(ii) Treatment of waivers for which applications are
pending.--The amount described in clause (i)(I) shall include
any increase in such amount which would result if all
applications for waivers of the minimum funding standard
under this subsection which are pending with respect to such
plan were denied.
``(5) Special rules for single-employer plans.--
``(A) Application must be submitted before date 2\1/2\
months after close of year.--In the case of a single-employer
plan, no waiver may be granted under this subsection with
respect to any plan for any plan
[[Page H11680]]
year unless an application therefor is submitted to the
Secretary of the Treasury not later than the 15th day of the
3rd month beginning after the close of such plan year.
``(B) Special rule if employer is member of controlled
group.--In the case of a single-employer plan, if an employer
is a member of a controlled group, the temporary substantial
business hardship requirements of paragraph (1) shall be
treated as met only if such requirements are met--
``(i) with respect to such employer, and
``(ii) with respect to the controlled group of which such
employer is a member (determined by treating all members of
such group as a single employer).
The Secretary of the Treasury may provide that an analysis of
a trade or business or industry of a member need not be
conducted if the Secretary of the Treasury determines such
analysis is not necessary because the taking into account of
such member would not significantly affect the determination
under this paragraph.
``(6) Notice to employee organizations.--
``(A) In general.--The Secretary of the Treasury shall,
before granting a waiver under this subsection, require each
applicant to provide evidence satisfactory to such Secretary
that the applicant has provided notice of the filing of the
application for such waiver to each employee organization
representing employees covered by the affected plan, and each
affected party (as defined in section 4001(a)(21)). Such
notice shall include a description of the extent to which the
plan is funded for benefits which are guaranteed under title
IV and for benefit liabilities.
``(B) Consideration of relevant information.--The Secretary
of the Treasury shall consider any relevant information
provided by a person to whom notice was given under
subparagraph (A).
``(7) Cross reference.--For corresponding duties of the
Secretary of the Treasury with regard to implementation of
the Internal Revenue Code of 1986, see section 412(c) of such
Code.
``(d) Miscellaneous Rules.--
``(1) Change in method or year.--If the funding method, the
valuation date, or a plan year for a plan is changed, the
change shall take effect only if approved by the Secretary of
the Treasury.
``(2) Certain retroactive plan amendments.--For purposes of
this section, any amendment applying to a plan year which--
``(A) is adopted after the close of such plan year but no
later than 2\1/2\ months after the close of the plan year
(or, in the case of a multiemployer plan, no later than 2
years after the close of such plan year),
``(B) does not reduce the accrued benefit of any
participant determined as of the beginning of the first plan
year to which the amendment applies, and
``(C) does not reduce the accrued benefit of any
participant determined as of the time of adoption except to
the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed
to have been made on the first day of such plan year. No
amendment described in this paragraph which reduces the
accrued benefits of any participant shall take effect unless
the plan administrator files a notice with the Secretary of
the Treasury notifying him of such amendment and such
Secretary has approved such amendment, or within 90 days
after the date on which such notice was filed, failed to
disapprove such amendment. No amendment described in this
subsection shall be approved by the Secretary of the Treasury
unless such Secretary determines that such amendment is
necessary because of a substantial business hardship (as
determined under subsection (c)(2)) and that a waiver under
subsection (c) (or, in the case of a multiemployer plan, any
extension of the amortization period under section 304(d)) is
unavailable or inadequate.
``(3) Controlled group.--For purposes of this section, the
term `controlled group' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 of the Internal Revenue Code of 1986.''.
(c) Clerical Amendment.--The table of contents in section 1
of such Act is amended by striking the items relating to
sections 302 through 306 and inserting the following new
item:
``Sec. 302. Minimum funding standards.''.
(d) Effective Date.--The amendments made by this section
shall apply to plan years beginning after 2005.
SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS.
(a) In General.--Part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (as amended
by section 101 of this Act) is amended further by inserting
after section 302 the following new section.
``Minimum funding standards for single-employer defined benefit pension
plans
``Sec. 303. (a) Minimum Required Contribution.--
``(1) In general.--For purposes of section 302(a)(2)(A),
except as otherwise provided in this subsection, the minimum
required contribution with respect to a plan for a plan year
is the target normal cost of the plan for the plan year.
``(2) Shortfall amortization charge.--In any case in which
the value of plan assets (determined without regard to
subsection (e)(1)) of the plan for the plan year which are
held by the plan immediately before the valuation date is
less than the funding target of the plan for the plan year,
the minimum required contribution with respect to the plan
for the plan year is the sum of the amount determined under
paragraph (1) plus a shortfall amortization charge for such
plan year determined under subsection (c).
``(3) Credit for excess assets.--In any case in which the
value of plan assets of the plan for the plan year which are
held by the plan immediately before the valuation date exceed
the funding target of the plan for the plan year, the minimum
required contribution with respect to the plan for the plan
year is the amount determined under paragraph (1), reduced by
such excess.
``(4) Pre-funding balance.--In the case of any plan year in
which--
``(A) the ratio (expressed as a percentage) which--
``(i) the value of plan assets (determined without regard
to subsection (e)(1)(B)) for the preceding plan year, bears
to
``(ii) the funding target of the plan for the preceding
plan year (determined without regard to subsection (g)(1)),
is at least 80 percent, and
``(B) the plan sponsor elects (in such form and manner as
shall be prescribed in regulations of the Secretary of the
Treasury) to credit against the minimum required contribution
for the current plan year all or a portion of the funding
standard carryover balance and the pre-funding balance (to
the extent provided in subsection (h)) for the preceding plan
year (not in excess of such minimum required contribution),
the minimum required contribution for the plan year shall be
reduced by the amount so credited by the plan sponsor.
``(b) Target Normal Cost.--For purposes of this section,
subject to subsection (g)(2), the term `target normal cost'
means, for any plan year, the present value of all benefits
which are expected to accrue or to be earned under the plan
during the plan year. If any benefit attributable to services
performed in a preceding plan year is increased by reason of
any increase in compensation during the current plan year,
the increase shall be treated as having accrued during the
current plan year.
``(c) Shortfall Amortization Charge.--
``(1) In general.--The shortfall amortization charge for a
plan for any plan year is the aggregate total of the
shortfall amortization installments for such plan year with
respect to the shortfall amortization bases for such plan
year and each of the 6 preceding plan years.
``(2) Shortfall amortization installment.--
``(A) In general.--For purposes of paragraph (1), the plan
sponsor shall determine, with respect to the shortfall
amortization base of the plan for any plan year, the amounts
necessary to amortize such shortfall amortization base, in
level annual installments over a period of 7 plan years
beginning with such plan year. The annual installment of such
amortization for each plan year in such 7-plan-year period is
the shortfall amortization installment for such plan year
with respect to such shortfall amortization base.
``(B) Computation assumptions.--The determination of any
annual installment under subparagraph (A) for any plan year
shall be made as of the valuation date for such plan year,
using the effective rate of interest for the plan for such
plan year.
``(3) Shortfall amortization base.--The shortfall
amortization base of a plan for a plan year is the excess (if
any) of--
``(A) the funding shortfall of such plan for such plan
year, over
``(B) the present value (determined using the effective
interest rate of the plan for the plan year) of the aggregate
total of the shortfall amortization installments, for such
plan year and the 5 succeeding plan years, which have been
determined with respect to the shortfall amortization bases
of the plan for each of the 6 plan years preceding such plan
year.
``(4) Funding shortfall.--For purposes of this section, the
funding shortfall of a plan for any plan year is the excess
(if any) of--
``(A) the funding target of the plan for the plan year,
over
``(B) the value of plan assets of the plan for the plan
year which are held by the plan immediately before the
valuation date.
``(5) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the
shortfall amortization charge for such plan year and
succeeding plan years, the shortfall amortization base for
all preceding plan years shall be reduced to zero.
``(d) Rules Relating to Funding Target.--For purposes of
this section--
``(1) Funding target.--Except as provided in subsection
(g)(1), the funding target of a plan for a plan year is the
present value of all liabilities to participants and their
beneficiaries under the plan for the plan year.
``(2) Funding target attainment percentage.--The `funding
target attainment percentage' of a plan for a plan year is
the ratio (expressed as a percentage) which--
``(A) the value of plan assets for the plan year, bears to
``(B) the funding target of the plan for the plan year
(determined without regard to subsection (g)(1)).
``(e) Valuation of Plan Assets and Liabilities.--
[[Page H11681]]
``(1) Value of plan assets.--For purposes of this section
(other than paragraph (4) and subsections (a)(2) and (h)(3)),
the term `value of plan assets' means the excess of the value
of plan assets (determined without regard to this paragraph)
over the sum of--
``(A) the pre-funding balance of the plan maintained under
subsection (h)(1), and
``(B) the funding standard carryover balance of the plan
maintained under subsection (h)(2).
``(2) Timing of determinations.--Except as otherwise
provided under this subsection, all determinations under this
section for a plan year shall be made as of the valuation
date of the plan for such plan year.
``(3) Valuation date.--For purposes of this section--
``(A) In general.--Except as provided in subparagraph (B),
the valuation date of a plan for any plan year shall be the
first day of the plan year.
``(B) Exception for small plans.--If, on each day during
the preceding plan year, a plan had 500 or fewer
participants, the plan may designate any day during the plan
year as its valuation date for such plan year. For purposes
of this subparagraph, all defined benefit plans (other than
multiemployer plans) maintained by the same employer (or any
member of such employer's controlled group) shall be treated
as 1 plan, but only employees of such employer or member
shall be taken into account.
``(C) Application of certain rules in determination of plan
size.--For purposes of this paragraph--
``(i) Plans not in existence in preceding year.--In the
case of the first plan year of any plan, subparagraph (B)
shall apply to such plan by taking into account the number of
participants that the plan is reasonably expected to have on
days during such first plan year.
``(ii) Predecessors.--Any reference in subparagraph (B) to
an employer shall include a reference to any predecessor of
such employer.
``(4) Authorization of use of actuarial value.--For
purposes of this section, the value of plan assets
(determined without regard to paragraph (1)) shall be
determined on the basis of any reasonable actuarial method of
valuation which takes into account fair market value and
which is permitted under regulations prescribed by the
Secretary of the Treasury, except that--
``(A) any such method providing for averaging of fair
market values may not provide for averaging of such values
over more than the current plan year and the 2 preceding plan
years, and
``(B) any such method may not result in a determination of
the value of plan assets which, at any time, is lower than 90
percent or greater than 110 percent of the fair market value
of such assets at such time.
``(5) Accounting for contribution receipts.--For purposes
of this section--
``(A) Contributions for prior plan years taken into
account.--For purposes of determining the value of plan
assets for any current plan year, in any case in which a
contribution properly allocable to amounts owed for a
preceding plan year is made on or after the valuation date of
the plan for such current plan year, such contribution shall
be taken into account, except that any such contribution made
during any such current plan year beginning after 2006 shall
be taken into account only in an amount equal to its present
value (determined using the effective rate of interest for
the plan for the preceding plan year) as of the valuation
date of the plan for such current plan year.
``(B) Contributions for current plan year disregarded.--For
purposes of determining the value of plan assets for any
current plan year, contributions which are properly allocable
to amounts owed for such plan year shall not be taken into
account, and, in the case of any such contribution made
before the valuation date of the plan for such plan year,
such value of plan assets shall be reduced for interest on
such amount determined using the effective rate of interest
of the plan for the preceding plan year for the period
beginning when such payment was made and ending on the
valuation date of the plan.
``(6) Accounting for plan liabilities.--For purposes of
this section--
``(A) Liabilities taken into account for current plan
year.--In determining the value of liabilities under a plan
for a plan year, liabilities shall be taken into account to
the extent attributable to benefits (including any early
retirement or similar benefit) accrued as of the beginning of
the plan year.
``(B) Accruals during current plan year disregarded.--For
purposes of subparagraph (A), benefits accrued during such
plan year (after those taken into account under subparagraph
(A)) shall not be taken into account, irrespective of whether
the valuation date of the plan for such plan year is later
than the first day of such plan year.
``(f) Actuarial Assumptions and Methods.--
``(1) In general.--Subject to this subsection, the
determination of any present value or other computation under
this section shall be made on the basis of actuarial
assumptions and methods--
``(A) each of which is reasonable (taking into account the
experience of the plan and reasonable expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(2) Interest rates.--
``(A) Effective interest rate.--For purposes of this
section, the term `effective interest rate' means, with
respect to any plan for any plan year, the single rate of
interest which, if used to determine the present value of the
plan's liabilities referred to in subsection (d)(1) would
result in an amount equal to the funding target of the plan
for such plan year.
``(B) Application to funding target.--For purposes of
determining the funding target of a plan for any plan year,
the interest rate used in determining the present value of
the liabilities of the plan shall be--
``(i) in the case of liabilities 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 liabilities reasonably determined to
be payable during the 15-year period beginning at the end of
the period described in clause (i), the second segment rate
with respect to the applicable month, and
``(iii) in the case of liabilities reasonably determined to
be payable after the period described in clause (ii), the
third segment rate with respect to the applicable month.
``(C) 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 of the Treasury
for such month on the basis of the corporate bond yield curve
for such month, taking into account only that portion of such
yield curve which is based on bonds 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 of the Treasury
for such month on the basis of the corporate bond yield curve
for such month, taking into account only that portion of such
yield curve which is based on bonds 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 of the Treasury
for such month on the basis of the corporate bond yield curve
for such month, taking into account only that portion of such
yield curve which is based on bonds maturing during periods
beginning after the period described in clause (ii).
``(D) Corporate bond yield curve.--For purposes of this
paragraph--
``(i) In general.--The term `corporate bond yield curve'
means, with respect to any month, a yield curve which is
prescribed by the Secretary of the Treasury for such month
and which reflects a 3-year weighted average of yields on
investment grade corporate bonds with varying maturities.
``(ii) 3-year weighted average.--The term `3-year weighted
average' means an averaging methodology under which the most
recent year is weighted 50 percent, the year preceding such
year is weighted 35 percent, and the second year preceding
such year is weighted 15 percent.
``(E) Applicable month.--For purposes of this paragraph,
the term `applicable month' means, with respect to any plan
for any plan year, the month which includes the valuation
date of such plan for such plan year or, at the election of
the plan administrator, any of the 4 months which precede
such month. Any election made under this subparagraph shall
apply to the plan year for which made and all succeeding plan
years unless revoked with the consent of the Secretary of the
Treasury.
``(F) Publication requirements.--The Secretary of the
Treasury shall publish for each month the corporate bond
yield curve (and the corporate bond yield curve reflecting
the modification described in section 205(g)(3)(B)(iii)(I))
for such month and each of the rates determined under
subparagraph (B) for such month. The Secretary of the
Treasury shall also publish a description of the methodology
used to determine such yield curve and such rates which is
sufficiently detailed to enable plans to make reasonable
projections regarding the yield curve and such rates for
future months based on the plan's projection of future
interest rates.
``(G) Transition rule.--
``(i) In general.--Notwithstanding the preceding provisions
of this paragraph, for plan years beginning in 2006 or 2007,
the first, second, and third segment rates for a plan with
respect to any month shall be equal to the sum of--
``(I) the product of such rate for such month determined
without regard to this subparagraph, multiplied by the
applicable percentage, and
``(II) the product of the rate determined under the rules
of section 302(b)(5)(B)(ii)(II) (as in effect for plan years
beginning in 2005), multiplied by a percentage equal to 100
percent minus the applicable percentage.
``(ii) Applicable percentage.--For purposes of clause (i),
the applicable percentage is 33\1/3\ percent for plan years
beginning in 2006 and 66\2/3\ percent for plan years
beginning in 2007.
``(3) Mortality table.--
``(A) In general.--The mortality tables used in determining
any present value or making any computation under this
section shall be the RP-2000 Combined Mortality Table, as
published by the Society of American Actuaries, as in effect
on the date of the enactment of the Pension Protection Act of
[[Page H11682]]
2005 and as revised from time to time under subparagraph (B).
``(B) Periodic revision.--The Secretary of the Treasury
shall (at least every 10 years) make revisions in any tables
in effect under this paragraph to reflect the actual
experience of pension plans and projected trends in such
experience.
``(C) Transition rule.--Under regulations of the Secretary
of the Treasury, any difference in assumptions as set forth
in the mortality table specified in subparagraph (A) and
assumptions as set forth in the mortality table described in
section 302(d)(7)(C)(ii) (as in effect for plan years
beginning in 2005) shall be phased in ratably over the first
period of 5 plan years beginning in or after 2006 so as to be
fully effective for the fifth plan year.
``(4) Probability of benefit payments in the form of lump
sums or other optional forms.--For purposes of determining
any present value or making any computation under this
section, there shall be taken into account--
``(A) the probability that future benefit payments under
the plan will be made in the form of optional forms of
benefits provided under the plan (including lump sum
distributions, determined on the basis of the plan's
experience and other related assumptions), and
``(B) any difference in the present value of such future
benefit payments resulting from the use of actuarial
assumptions, in determining benefit payments in any such
optional form of benefits, which are different from those
specified in this subsection.
``(5) Approval of large changes in actuarial assumptions.--
``(A) In general.--No actuarial assumption used to
determine the funding target for a single-employer plan to
which this paragraph applies may be changed without the
approval of the Secretary of the Treasury.
``(B) Plans to which paragraph applies.--This paragraph
shall apply to a plan only if--
``(i) the aggregate unfunded vested benefits as of the
close of the preceding plan year (as determined under section
4006(a)(3)(E)(iii)) of such plan and all other plans
maintained by the contributing sponsors (as defined in
section 4001(a)(13)) and members of such sponsors' controlled
groups (as defined in section 4001(a)(14)) which are covered
by title IV (disregarding plans with no unfunded vested
benefits) exceed $50,000,000; and
``(ii) the change in assumptions (determined after taking
into account any changes in interest rate and mortality
table) results in a decrease in the funding shortfall of the
plan for the current plan year that exceeds $50,000,000, or
that exceeds $5,000,000 and that is 5 percent or more of the
funding target of the plan before such change.
``(g) Special Rules for at-Risk Plans.--
``(1) Funding target for plans in at-risk status.--
``(A) In general.--In any case in which a plan is in at-
risk status for a plan year, the funding target of the plan
for the plan year is the sum of--
``(i) the present value of all liabilities to participants
and their beneficiaries under the plan for the plan year, as
determined by using, in addition to the actuarial assumptions
described in subsection (f), the supplemental actuarial
assumptions described in subparagraph (B), plus
``(ii) a loading factor determined under subparagraph (C).
``(B) Supplemental actuarial assumptions.--The actuarial
assumptions used in determining the valuation of the funding
target shall include, in addition to the actuarial
assumptions described in subsection (f), an assumption that
all participants will elect benefits at such times and in
such forms as will result in the highest present value of
liabilities under subparagraph (A)(i).
``(C) Loading factor.--The loading factor applied with
respect to a plan under this paragraph for any plan year is
the sum of--
``(i) $700, times the number of participants in the plan,
plus
``(ii) 4 percent of the funding target (determined without
regard to this paragraph) of the plan for the plan year.
``(2) Target normal cost of at-risk plans.--
``(A) In general.--In any case in which a plan is in at-
risk status for a plan year, the target normal cost of the
plan for such plan year shall be the sum of--
``(i) the present value of all benefits which are expected
to accrue under the plan during the plan year, determined
under the actuarial assumptions used under paragraph (1),
plus
``(ii) the loading factor under paragraph (1)(C), excluding
the portion of the loading factor described in paragraph
(1)(C)(i).
``(B) Minimum amount.--In no event shall the target normal
cost of a plan determined under this paragraph be less than
the target normal cost of such plan as determined without
regard to this paragraph.
``(3) Determination of at-risk status.--For purposes of
this subsection, a plan is in `at-risk status' for a plan
year if the funding target attainment percentage of the plan
for the preceding plan year was less than 60 percent.
``(4) Transition between applicable funding targets and
between applicable target normal cost.--
``(A) In general.--In any case in which a plan which is in
at-risk status for a plan year has been in such status for a
consecutive period of fewer than 5 plan years, the applicable
amount of the funding target and of the target normal cost
shall be, in lieu of the amount determined without regard to
this paragraph, the sum of--
``(i) the amount determined under this section without
regard to this subsection, plus
``(ii) the transition percentage for such plan year of the
excess of the amount determined under this subsection
(without regard to this paragraph) over the amount determined
under this section without regard to this subsection.
``(B) Transition percentage.--For purposes of this
paragraph, the `transition percentage' for a plan year is the
product derived by multiplying--
``(i) 20 percent, by
``(ii) the number of plan years during the period described
in subparagraph (A).
``(h) Pre-Funding and Funding Standard Carryover
Balances.--
``(1) Pre-funding balance.--
``(A) In general.--The plan sponsor of a pension plan which
is a single-employer plan shall maintain a pre-funding
balance for purposes of this subsection. Such balance shall
consist of a beginning balance of zero, increased and
decreased to the extent provided in subparagraphs (B) and
(C), and adjusted further as provided in paragraph (3).
``(B) Increases.--As of the valuation date for each plan
year beginning after 2006, the pre-funding balance of a plan
shall be increased by the amount elected by the plan sponsor
for the plan year. Such amount shall not exceed the excess
(if any) of--
``(i) the aggregate total of employer contributions to the
plan for the preceding plan year, over
``(ii) the minimum required contribution for such preceding
plan year (increased by interest on any portion of such
minimum required contribution remaining unpaid, at the
effective interest rate for the plan for the preceding plan
year, for the period beginning with the first day of such
preceding plan year and ending on the date that payment of
such portion is made).
``(C) Decreases.--As of the valuation date for each plan
year after 2006, the pre-funding balance of a plan shall be
decreased (but not below zero) by the sum of--
``(i) the amount credited under subsection (a)(4) (if any)
in reducing the minimum required contribution of the plan for
the preceding plan year, and
``(ii) the amount elected by the plan sponsor as a
reduction in the pre-funding balance (for purposes of the
determination under subsection (e)(1) and any other purpose
under this section).
``(D) Coordination with funding standard carryover
balance.--To the extent that any plan has a funding standard
carryover balance greater than zero--
``(i) no amount of the pre-funding balance of such plan may
be credited under subsection (a)(4) in reducing the minimum
required contribution, and
``(ii) no election may be made under subparagraph (C)(ii).
``(E) No use of balance to reduce minimum required
contribution if used to avoid shortfall amortization.--The
amount of the pre-funding balance of such plan may be
credited under subsection (a)(4) in reducing the minimum
required contribution only if the plan sponsor has elected to
apply subsection (a)(2) to the plan for such plan year by
substituting `subsection (e)(1)(B)' for `subsection (e)(1)'.
``(2) Funding standard carryover balance.--
``(A) In general.--The plan sponsor of a pension plan to
which this paragraph applies shall maintain a funding
standard carryover balance for purposes of this subsection.
Such balance shall consist of a beginning balance determined
under subparagraph (C), decreased to the extent provided in
subparagraph (D), and adjusted further as provided in
paragraph (3).
``(B) Plans to which this paragraph applies.--This
paragraph applies to any plan which--
``(i) is a single-employer plan subject to this part,
``(ii) was in effect for a plan year beginning in 2005, and
``(iii) had a positive balance in the funding standard
account under section 302(b) as in effect for such plan year
and determined as of the end of such plan year.
``(C) Beginning balance.--The beginning balance of the
funding standard carryover balance shall be the positive
balance described in subparagraph (B)(iii).
``(D) Decreases.--As of the valuation date for each plan
year after 2006, the funding standard carryover balance of a
plan shall be decreased (but not below zero) by the sum of--
``(i) the amount credited under subsection (a)(4) (if any)
in reducing the minimum required contribution of the plan for
the preceding plan year, and
``(ii) the amount elected by the plan sponsor as a
reduction in the funding standard carryover balance (for
purposes of the determination under subsection (e)(1) and any
other purpose under this section).
``(3) Adjustments.--In determining the pre-funding balance
or the funding standard carryover balance of a plan as of the
valuation date of the plan (before applying any increase or
decrease under paragraph (1) or (2)), the plan sponsor shall,
in accordance with regulations which shall be prescribed by
the Secretary of the Treasury, adjust such balance of the
plan so as to reflect the rate of net gain or loss
(determined, notwithstanding subsection (e)(4), on the basis
of fair market value) experienced by all plan assets for the
period beginning with the valuation
[[Page H11683]]
date for the preceding plan year and ending with the date
preceding the valuation date for the current plan year,
properly taking into account, in accordance with such
regulations, all contributions, distributions, and other plan
payments made during such period.
``(4) Elections.--Except as otherwise provided in this
subsection, any election made under this subsection shall be
made at such time and in such form and manner as the
Secretary of the Treasury may provide.
``(5) Coordination with waivers.--For purposes of this
subsection, the term `minimum required contribution' means
for any plan year the minimum required contribution for such
plan year determined without regard to this subsection and by
taking into account any waiver under section 302(c) and any
waiver amortization charge under subsection (j) for such plan
year.
``(i) Payment of Minimum Required Contributions.--
``(1) In general.--For purposes of this section, the due
date for any payment of any minimum required contribution for
any plan year shall be 8\1/2\ months after the close of the
plan year.
``(2) Interest.--Any payment required under paragraph (1)
for a plan year made after the valuation date for such plan
year shall be increased by interest, for the period from the
valuation date to the payment date, at the effective rate of
interest for the plan for such plan year.
``(3) Accelerated quarterly contribution schedule for
underfunded plans.--
``(A) Interest penalty for failure to meet accelerated
quarterly payment schedule.--In any case in which the plan
has a funding shortfall for the preceding plan year, if the
required installment is not paid in full, then the minimum
required contribution for the plan year (as increased under
paragraph (2)) shall be further increased by an amount equal
to the interest on the amount of the underpayment for the
period of the underpayment, using an interest rate equal to
the excess of--
``(i) 175 percent of the Federal mid-term rate (as in
effect under section 1274 of the Internal Revenue Code of
1986 for the 1st month of such plan year), over
``(ii) the effective rate of interest for the plan for the
plan year.
``(B) Amount of underpayment, period of underpayment.--For
purposes of subparagraph (A)--
``(i) Amount.--The amount of the underpayment shall be the
excess of--
``(I) the required installment, over
``(II) the amount (if any) of the installment contributed
to or under the plan on or before the due date for the
installment.
``(ii) Period of underpayment.--The period for which any
interest is charged under this paragraph with respect to any
portion of the underpayment shall run from the due date for
the installment to the date on which such portion is
contributed to or under the plan.
``(iii) Order of crediting contributions.--For purposes of
clause (i)(II), contributions shall be credited against
unpaid required installments in the order in which such
installments are required to be paid.
``(C) Number of required installments; due dates.--For
purposes of this paragraph--
``(i) Payable in 4 installments.--There shall be 4 required
installments for each plan year.
``(ii) Time for payment of installments.--The due dates for
required installments are set forth in the following table:
``In the case of the following required
installment: The due date is:
1st..................................... April 15
2nd..................................... July 15
3rd..................................... October 15
4th..................................... January 15 of the following
year
``(D) Amount of required installment.--For purposes of this
paragraph--
``(i) In general.--The amount of any required installment
shall be 25 percent of the required annual payment.
``(ii) Required annual payment.--For purposes of clause
(i), the term `required annual payment' means the lesser of--
``(I) 90 percent of the minimum required contribution
(without regard to any waiver under section 302(c)) to the
plan for the plan year under this section, or
``(II) in the case of a plan year beginning after 2006, 100
percent of the minimum required contribution (without regard
to any waiver under section 302(c)) to the plan for the
preceding plan year.
Subclause (II) shall not apply if the preceding plan year
referred to in such clause was not a year of 12 months.
``(E) Fiscal years and short years.--
``(i) Fiscal years.--In applying this paragraph to a plan
year beginning on any date other than January 1, there shall
be substituted for the months specified in this paragraph,
the months which correspond thereto.
``(ii) Short plan year.--This subparagraph shall be applied
to plan years of less than 12 months in accordance with
regulations prescribed by the Secretary of the Treasury.
``(4) Liquidity requirement in connection with quarterly
contributions.--
``(A) In general.--A plan to which this paragraph applies
shall be treated as failing to pay the full amount of any
required installment under paragraph (3) to the extent that
the value of the liquid assets paid in such installment is
less than the liquidity shortfall (whether or not such
liquidity shortfall exceeds the amount of such installment
required to be paid but for this paragraph).
``(B) Plans to which paragraph applies.--This paragraph
shall apply to a plan (other than a plan that would be
described in subsection (e)(3)(B) if `100' were substituted
for `500' therein) which--
``(i) is required to pay installments under paragraph (3)
for a plan year, and
``(ii) has a liquidity shortfall for any quarter during
such plan year.
``(C) Period of underpayment.--For purposes of paragraph
(3)(A), any portion of an installment that is treated as not
paid under subparagraph (A) shall continue to be treated as
unpaid until the close of the quarter in which the due date
for such installment occurs.
``(D) Limitation on increase.--If the amount of any
required installment is increased by reason of subparagraph
(A), in no event shall such increase exceed the amount which,
when added to prior installments for the plan year, is
necessary to increase the funding target attainment
percentage of the plan for the plan year (taking into account
the expected increase in funding target due to benefits
accruing or earned during the plan year) to 100 percent.
``(E) Definitions.--For purposes of this subparagraph:
``(i) Liquidity shortfall.--The term `liquidity shortfall'
means, with respect to any required installment, an amount
equal to the excess (as of the last day of the quarter for
which such installment is made) of--
``(I) the base amount with respect to such quarter, over
``(II) the value (as of such last day) of the plan's liquid
assets.
``(ii) Base amount.--
``(I) In general.--The term `base amount' means, with
respect to any quarter, an amount equal to 3 times the sum of
the adjusted disbursements from the plan for the 12 months
ending on the last day of such quarter.
``(II) Special rule.--If the amount determined under
subclause (I) exceeds an amount equal to 2 times the sum of
the adjusted disbursements from the plan for the 36 months
ending on the last day of the quarter and an enrolled actuary
certifies to the satisfaction of the Secretary of the
Treasury that such excess is the result of nonrecurring
circumstances, the base amount with respect to such quarter
shall be determined without regard to amounts related to
those nonrecurring circumstances.
``(iii) Disbursements from the plan.--The term
`disbursements from the plan' means all disbursements from
the trust, including purchases of annuities, payments of
single sums and other benefits, and administrative expenses.
``(iv) Adjusted disbursements.--The term `adjusted
disbursements' means disbursements from the plan reduced by
the product of--
``(I) the plan's funding target attainment percentage for
the plan year, and
``(II) the sum of the purchases of annuities, payments of
single sums, and such other disbursements as the Secretary of
the Treasury shall provide in regulations.
``(v) Liquid assets.--The term `liquid assets' means cash,
marketable securities, and such other assets as specified by
the Secretary of the Treasury in regulations.
``(vi) Quarter.--The term `quarter' means, with respect to
any required installment, the 3-month period preceding the
month in which the due date for such installment occurs.
``(F) Regulations.--The Secretary of the Treasury may
prescribe such regulations as are necessary to carry out this
paragraph.
``(j) Waiver Amortization Charge.--
``(1) In general.--The minimum required contribution for
any plan year under subsection (a) shall be increased by the
amount of the waiver amortization charge (if any) for such
plan year.
``(2) Determination of waiver amortization charge.--The
waiver amortization charge for a plan for any plan year is
the aggregate total of the waiver amortization installments
for such plan year with respect to the waiver amortization
bases for such plan year and each of the 4 preceding plan
years.
``(3) Waiver amortization installment.--For purposes of
paragraph (2), the plan sponsor shall determine, with respect
to the waiver amortization base of the plan for any plan
year, the amounts necessary to amortize such waiver
amortization base, in level annual installments over a period
of 5 plan years beginning with such plan year. The annual
installment of such amortization for each plan year in such
5-plan year period is the waiver amortization installment for
such plan year with respect to such waiver amortization base.
``(4) Computation assumptions.--The determination of any
annual installment under paragraph (2) for any plan year
shall be made as of the valuation date for such plan year,
using the effective rate of interest for the plan for the
preceding plan year.
``(5) Waiver amortization base.--The waiver amortization
base of a plan for a plan year is the excess (if any) of--
[[Page H11684]]
``(A) the portion of the minimum required contribution of
such plan waived under section 302(c) for such plan year,
over
``(B) the aggregate total of the waiver amortization
installments, for such plan year and the 3 succeeding plan
years, which have been determined with respect to the waiver
amortization bases of the plan for each of the 4 plan years
preceding such plan year.
``(k) Imposition of Lien Where Failure to Make Required
Contributions.--
``(1) In general.--In the case of a plan covered under
section 4021 of this Act and to which this subsection applies
(as provided under paragraph (2)), if--
``(A) any person fails to make a contribution payment
required by section 302 and this section before the due date
for such payment, and
``(B) the unpaid balance of such payment (including
interest), when added to the aggregate unpaid balance of all
preceding such payments for which payment was not made before
the due date (including interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount
determined under paragraph (3) upon all property and rights
to property, whether real or personal, belonging to such
person and any other person who is a member of the same
controlled group of which such person is a member.
``(2) Plans to which subsection applies.--This subsection
shall apply to a defined benefit plan which is a single-
employer plan for any plan year for which the funding target
attainment percentage (as defined in subsection (d)(2)) of
such plan is less than 100 percent.
``(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of contribution payments required under this section
and section 302 for which payment has not been made before
the due date.
``(4) Notice of failure; lien.--
``(A) Notice of failure.--A person committing a failure
described in paragraph (1) shall notify the Pension Benefit
Guaranty Corporation of such failure within 10 days of the
due date for the required contribution payment.
``(B) Period of lien.--The lien imposed by paragraph (1)
shall arise on the due date for the required contribution
payment and shall continue until the last day of the first
plan year in which the plan ceases to be described in
paragraph (1)(B). Such lien shall continue to run without
regard to whether such plan continues to be described in
paragraph (2) during the period referred to in the preceding
sentence.
``(C) Certain rules to apply.--Any amount with respect to
which a lien is imposed under paragraph (1) shall be treated
as taxes due and owing the United States and rules similar to
the rules of subsections (c), (d), and (e) of section 4068
shall apply with respect to a lien imposed by subsection (a)
and the amount with respect to such lien.
``(5) Enforcement.--Any lien created under paragraph (1)
may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Pension
Benefit Guaranty Corporation, by the contributing sponsor (or
any member of the controlled group of the contributing
sponsor).
``(6) Definitions.--For purposes of this subsection--
``(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a contribution
payment required to be made to the plan, including any
required installment under paragraphs (3) and (4) of
subsection (i).
``(B) Due date; required installment.--The terms `due date'
and `required installment' have the meanings given such terms
by subsection (i), except that in the case of a payment other
than a required installment, the due date shall be the date
such payment is required to be made under section 303.
``(C) Controlled group.--The term `controlled group' means
any group treated as a single employer under subsections (b),
(c), (m), and (o) of section 414 of the Internal Revenue Code
of 1986.
``(l) Qualified Transfers to Health Benefit Accounts.--In
the case of a qualified transfer (as defined in section 420
of the Internal Revenue Code of 1986), any assets so
transferred shall not, for purposes of this section, be
treated as assets in the plan.''.
(b) Clerical Amendment.--The table of sections in section 1
of such Act (as amended by section 101) is amended by
inserting after the item relating to section 302 the
following new item:
``Sec. 303. Minimum funding standards for single-employer defined
benefit pension plans.''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning after 2005.
SEC. 103. LIMITATIONS ON DISTRIBUTIONS AND BENEFIT ACCRUALS
UNDER SINGLE-EMPLOYER PLANS.
(a) Prohibition of Shutdown Benefits and Other
Unpredictable Contingent Event Benefits Under Single-Employer
Plans.--Section 206 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1056) is amended by adding at
the end the following new subsection:
``(g) Prohibition of Shutdown Benefits and Other
Unpredictable Contingent Event Benefits Under Single-Employer
Plans.--
``(1) In general.--No pension plan which is a single-
employer plan may provide benefits which are payable upon the
occurrence of--
``(A) a plant shutdown, or
``(B) any other unpredictable contingent event.
``(2) Unpredictable contingent event.--For purposes of this
subsection, the term `unpredictable contingent event' means
an event other than--
``(A) attainment of any age, performance of any service,
receipt or derivation of any compensation, or the occurrence
of death or disability, or
``(B) an event which is reasonably and reliably predictable
(as determined by the Secretary of the Treasury).''.
(b) Other Limits on Benefits and Benefit Accruals.--
(1) In general.--Section 206 of such Act (as amended by
subsection (a)) is amended further by adding at the end the
following new subsection:
``(h) Funding-Based Limits on Benefits and Benefit Accruals
Under Single-Employer Plans.--
``(1) Limitations on plan amendments increasing liability
for benefits.--
``(A) In general.--No amendment to a single-employer plan
which has the effect of increasing liabilities of the plan by
reason of increases in benefits, establishment of new
benefits, changing the rate of benefit accrual, or changing
the rate at which benefits become nonforfeitable to the plan
may take effect during any plan year if the funding target
attainment percentage as of the valuation date of the plan
for such plan year is--
``(i) less than 80 percent, or
``(ii) would be less than 80 percent taking into account
such amendment.
``(B) Exemption.--Subparagraph (A) shall cease to apply
with respect to any plan year, effective as of the first date
of the plan year (or if later, the effective date of the
amendment), upon payment by the plan sponsor of a
contribution equal to--
``(i) in the case of subparagraph (A)(i), the amount of the
increase in the funding target of the plan (under section
303) for the plan year attributable to the amendment, and
``(ii) in the case of subparagraph (A)(ii), the amount
sufficient to result in a funding target attainment
percentage of 80 percent.
``(2) Funding-based limitation on certain forms of
distribution.--A single-employer plan shall provide that, in
any case in which the plan's funding target attainment
percentage as of the valuation date of the plan for a plan
year is less than 80 percent, the plan may not after such
date pay any prohibited payment (as defined in section
206(e)).
``(3) Limitations on benefit accruals for plans with severe
funding shortfalls.--A single-employer plan shall provide
that, in any case in which the plan's funding target
attainment percentage as of the valuation date of the plan
for a plan year is less than 60 percent, all future benefit
accruals under the plan shall cease as of such date.
``(4) New plans.--Paragraphs (1) and (3) shall not apply to
a plan for the first 5 plan years of the plan. For purposes
of this paragraph, the reference in this paragraph to a plan
shall include a reference to any predecessor plan.
``(5) Presumed underfunding for purposes of benefit
limitations based on prior year's funding status.--
``(A) Presumption of continued underfunding.--In any case
in which a benefit limitation under paragraph (1), (2), or
(3) has been applied to a plan with respect to the plan year
preceding the current plan year, the funding target
attainment percentage of the plan as of the valuation date of
the plan for the current plan year shall be presumed to be
equal to the funding target attainment percentage of the plan
as of the valuation date of the plan for the preceding plan
year until the enrolled actuary of the plan certifies the
actual funding target attainment percentage of the plan as of
the valuation date of the plan for the current plan year.
``(B) Presumption of underfunding after 10th month.--In any
case in which no such certification is made with respect to
the plan before the first day of the 10th month of the
current plan year, for purposes of paragraphs (1), (2), and
(3), the plan's funding target attainment percentage shall be
conclusively presumed to be less than 60 percent as of the
first day of such 10th month, and such day shall be deemed,
for purposes of such paragraphs, to be the valuation date of
the plan for the current plan year.
``(C) Presumption of underfunding after 4th month for
nearly underfunded plans.--In any case in which--
``(i) a benefit limitation under paragraph (1), (2), or (3)
did not apply to a plan with respect to the plan year
preceding the current plan year, but the funding target
attainment percentage of the plan for such preceding plan
year was not more than 10 percentage points greater than the
percentage which would have caused such paragraph to apply to
the plan with respect to such preceding plan year, and
``(ii) as of the first day of the 4th month of the current
plan year, the enrolled actuary of the plan has not certified
the actual funding target attainment percentage of the plan
as of the valuation date of the plan for the current plan
year,
until the enrolled actuary so certifies, such first day shall
be deemed, for purposes of such paragraph, to be the
valuation date of the plan for the current plan year and the
funding target attainment percentage of the plan as of such
first day shall, for purposes of such paragraph, be presumed
to be equal to
[[Page H11685]]
10 percentage points less than the funding target attainment
percentage of the plan as of the valuation date of the plan
for such preceding plan year.
``(6) Restoration by plan amendment of benefits or benefit
accrual.--In any case in which a prohibition under paragraph
(2) of the payment of lump sum distributions or benefits in
any other accelerated form or a cessation of benefit accruals
under paragraph (3) is applied to a plan with respect to any
plan year and such prohibition or cessation, as the case may
be, ceases to apply to any subsequent plan year, the plan may
provide for the resumption of such benefit payment or such
benefit accrual only by means of the adoption of a plan
amendment after the valuation date of the plan for such
subsequent plan year. The preceding sentence shall not apply
to a prohibition or cessation required by reason of paragraph
(5).
``(7) Funding target attainment percentage.--For purposes
of this subsection, the term `funding target attainment
percentage' has the meaning provided such term under section
303(d)(2).''.
(2) Notice requirement.--
(A) In general.--Section 101 of such Act (29 U.S.C. 1021)
is amended--
(i) by redesignating subsection (j) as subsection (k); and
(ii) by inserting after subsection (i) the following new
subsection:
``(j) Notice of Funding-Based Limitation on Certain Forms
of Distribution.--The plan administrator of a single-employer
plan shall provide a written notice to plan participants and
beneficiaries within 30 days after the plan has become
subject to the restriction described in section 206(h)(2) or
at such other time as may be deterimined by the Secretary.''.
(B) Penalty.--Section 502(c)(1)(A) of such Act (29 U.S.C.
1132(c)(1)(A)) is amended by striking ``section 606'' and all
that follows through ``101(f)'' and inserting ``section 606,
101(e)(1), 101(f), or 101(j)''.
(c) Special Rule for Plan Amendments.--A plan shall not
fail to meet the requirements of section 204(g) of the
Employee Retirement Income Security Act of 1974 or section
411(d)(6) of the Internal Revenue Code of 1986 solely by
reason of the adoption by the plan of an amendment necessary
to meet the requirements of the amendments made by this
section.
(d) Effective Date.--
(1) Shutdown benefits.--Except as provided in paragraph
(3), the amendments made by subsection (a) shall apply with
respect to plant shutdowns, or other unpredictable contingent
events, occurring after 2006.
(2) Other benefits.--Except as provided in paragraph (3),
the amendments made by subsection (b) shall apply with
respect to plan years beginning after 2006.
(3) Collective bargaining exception.--In the case of a plan
maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified before the date of the enactment of this
Act, the amendments made by this subsection shall not apply
to plan years beginning before the earlier of--
(A) the later of--
(i) the date on which the last collective bargaining
agreement relating to the plan terminates (determined without
regard to any extension thereof agreed to after the date of
the enactment of this Act), or
(ii) the first day of the first plan year to which the
amendments made by this subsection would (but for this
subparagraph) apply, or
(B) January 1, 2009
.For purposes of clause (i), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan
which amends the plan solely to conform to any requirement
added by this subsection shall not be treated as a
termination of such collective bargaining agreement.
SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Security Required for Plan Amendment Resulting in
Significant Underfunding.--Section 307 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1085b) is
amended--
(1) in subsection (a)(1), by striking ``current liability
under the plan'' and inserting ``the funding target of the
plan'';
(2) in subsection (a)(2), by striking ``funded current
liability percentage'' and inserting ``funding target
attainment percentage'', and by striking ``unfunded current
liability'' and inserting ``unfunded liabilities'';
(3) in subsection (c)(1)(A), by striking ``funded current
liability percentage'' and inserting ``funding target
attainment percentage'', and by ``unfunded current
liability'' and inserting ``unfunded liabilities'';
(4) in subsection (c)(1)(B), by striking ``current
liability'' and inserting ``funding target'';
(5) in subsection (d), by striking ``funded current
liability percentage'' each place it appears and inserting
``funding target attainment percentage''; and
(6) in subsection (f), by striking ``the terms'' and all
that follows and inserting the following: ``the terms
`funding target' and `funding target attainment percentage'
shall have the meanings given such terms by sections 303(d)
and 303(g)(4), respectively, and the term `unfunded
liabilities' means, with respect to any plan year, the excess
(if any) of the funding target of the plan over the value of
the plan's assets determined under section 303(e)(4).''
(b) Miscellaneous Amendments.--Subtitle B of title I of
such Act (29 U.S.C. 1021 et seq.) is amended--
(1) in section 101(d)(3), by striking ``section 302(e)''
and inserting ``section 303(i)'';
(2) in section 101(f)(2)(B), by striking clause (i) and
inserting the following:
``(i) a statement as to whether--
``(I) in the case of a single-employer plan, the plan's
funding target attainment percentage (as defined in section
303(g)(4)), or
``(II) in the case of a multiemployer plan, the plan's
funded current liability percentage (as defined in section
305(e)(4)),
is at least 100 percent (and, if note, the actual
percentage);'';
(3) in section 103(d)(8)(B), by striking ``the requirements
of section 302(c)(3)'' and inserting ``the applicable
requirements of sections 303(f) and 304(c)(3)'';
(4) in section 103(d), by striking paragraph (11) and
inserting the following:
``(11) If the current value of the assets of the plan is
less than 70 percent of--
``(A) in the case of a single-employer plan, the funding
target (as defined in section 303(d)) of the plan, or
``(B) in the case of a multiemployer plan, the current
liability (as defined in section 304(c)(6)(C)) under the
plan,
the percentage which such value is of the amount described in
subparagraph (A) or (B).'';
(5) in section 203(a)(3)(C), by striking ``section
302(c)(8)'' and inserting ``section 302(d)(2)'';
(6) in section 204(g)(1), by striking ``section 302(c)(8)''
and inserting ``section 302(d)(2)'';
(7) in section 204(i)(2)(B), by striking ``section
302(c)(8)'' and inserting ``section 302(d)(2)'';
(8) in section 204(i)(3), by striking ``funded current
liability percentage (within the meaning of section 302(d)(8)
of this Act)'' and inserting ``funding target attainment
percentage (as defined in section 303(g)(4))'';
(9) in section 204(i)(4), by striking ``section
302(c)(11)(A), without regard to section 302(c)(11)(B)'' and
inserting ``section 302(b)(1), without regard to section
302(b)(2)'';
(10) in section 206(e)(1), by striking ``subject to the
additional funding requirements of section 302(d)'' and
inserting ``in at-risk status under section 303(g)'', and by
striking ``section 302(e)(5)'' and inserting ``section
303(i)(4)(E)(i)'';
(11) in section 206(e)(3), by striking ``section 302(e) by
reason of paragraph (5)(A) thereof'' and inserting ``section
303(i)(3) by reason of section 303(i)(4)(A)''; and
(12) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by
striking ``American Jobs Creation Act of 2004'' and inserting
``Pension Protection Act of 2005''.
(c) Repeal of Expired Authority for Temporary Variances.--
Section 207 of such Act (29 U.S.C. 1057) is repealed.
(d) Effective Date.--The amendments made by this section
shall apply to plan years beginning after 2005.
Subtitle B--Amendments to Internal Revenue Code of 1986
SEC. 111. MINIMUM FUNDING STANDARDS.
(a) In General.--Section 412 of the Internal Revenue Code
of 1986 (relating to minimum funding standards) is amended to
read as follows:
``SEC. 412. MINIMUM FUNDING STANDARDS.
``(a) Requirement to Meet Minimum Funding Standard.--
``(1) In general.--A plan to which this part applies shall
satisfy the minimum funding standard applicable to the plan
for any plan year.
``(2) Minimum funding standard.--For purposes of paragraph
(1), a plan shall be treated as satisfying the minimum
funding standard for a plan year if--
``(A) in the case of a defined benefit plan which is a
single-employer plan, the employer makes contributions to or
under the plan for the plan year which, in the aggregate, are
not less than the minimum required contribution determined
under section 430 for the plan for the plan year,
``(B) in the case of a money purchase plan which is a
single-employer plan, the employer makes contributions to or
under the plan for the plan year which are required under the
terms of the plan, and
``(C) in the case of a multiemployer plan, the employers
make contributions to or under the plan for any plan year
which, in the aggregate, are sufficient to ensure that the
plan does not have an accumulated funding deficiency under
section 431 as of the end of the plan year.
``(b) Liability for Contributions.--
``(1) In general.--Except as provided in paragraph (2), the
amount of any contribution required by this section
(including any required installments under paragraphs (3) and
(4) of section 430(i)) shall be paid by any employer
responsible for making contributions to or under the plan.
``(2) Joint and several liability where employer member of
controlled group.--In the case of a single-employer plan, if
the employer referred to in paragraph (1) is a member of a
controlled group, each member of such group shall be jointly
and severally liable for payment of such contributions.
``(c) Variance From Minimum Funding Standards.--
``(1) Waiver in case of business hardship.--
``(A) In general.--If--
``(i) an employer is (or in the case of a multiemployer
plan, 10 percent or more of the number of employers
contributing to or
[[Page H11686]]
under the plan is) unable to satisfy the minimum funding
standard for a plan year without temporary substantial
business hardship (substantial business hardship in the case
of a multiemployer), and
``(ii) application of the standard would be adverse to the
interests of plan participants in the aggregate,
the Secretary may, subject to subparagraphs (B) and (C),
waive the requirements of subsection (a) for such year with
respect to all or any portion of the minimum funding
standard. The Secretary shall not waive the minimum funding
standard with respect to a plan for more than 3 of any 15 (5
of any 15 in the case of a multiemployer plan) consecutive
plan years.
``(B) Effects of waiver.--If a waiver is granted under
subparagraph (A) for any plan year--
``(i) in the case of a single-employer plan, the minimum
required contribution under section 430 for the plan year
shall be reduced by the amount of the waived funding
deficiency and such amount shall be amortized as required
under section 430(j), and
``(ii) in the case of a multiemployer plan, the funding
standard account shall be credited under section 431(b)(3)(C)
with the amount of the waived funding deficiency and such
amount shall be amortized as required under section
431(b)(2)(C).
``(C) Waiver of amortized portion not allowed.--The
Secretary may not waive under subparagraph (A) any portion of
the minimum funding standard under subsection (a) for a plan
year which is attributable to any amortization payment
required to be made for such plan year with respect to any
amortization described in subparagraph (B) of any waived
portion of the minimum funding standard for any preceding
plan year.
``(2) Determination of business hardship.--For purposes of
this subsection, the factors taken into account in
determining temporary substantial business hardship
(substantial business hardship in the case of a multiemployer
plan) shall include (but shall not be limited to) whether or
not--
``(A) the employer is operating at an economic loss,
``(B) there is substantial unemployment or underemployment
in the trade or business and in the industry concerned,
``(C) the sales and profits of the industry concerned are
depressed or declining, and
``(D) it is reasonable to expect that the plan will be
continued only if the waiver is granted.
``(3) Waived funding deficiency.--For purposes of this
part, the term `waived funding deficiency' means the portion
of the minimum funding standard under subsection (a)
(determined without regard to the waiver) for a plan year
waived by the Secretary and not satisfied by employer
contributions.
``(4) Security for waivers for single-employer plans,
consultations.--
``(A) Security may be required.--
``(i) In general.--Except as provided in subparagraph (C),
the Secretary may require an employer maintaining a defined
benefit plan which is a single-employer plan (within the
meaning of section 4001(a)(15) of the Employee Retirement and
Income Security Act of 1974) to provide security to such plan
as a condition for granting or modifying a waiver under
paragraph (1).
``(ii) Special rules.--Any security provided under clause
(i) may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Corporation,
by a contributing sponsor (within the meaning of section
4001(a)(13) of such Act), or a member of such sponsor's
controlled group (within the meaning of section 4001(a)(14)
of such Act).
``(B) Consultation with the pension benefit guaranty
corporation.--Except as provided in subparagraph (C), the
Secretary shall, before granting or modifying a waiver under
this subsection with respect to a plan described in
subparagraph (A)(i)--
``(i) provide the Pension Benefit Guaranty Corporation
with--
``(I) notice of the completed application for any waiver or
modification, and
``(II) an opportunity to comment on such application within
30 days after receipt of such notice, and
``(ii) consider--
``(I) any comments of the Corporation under clause (i)(II),
and
``(II) any views of any employee organization (within the
meaning of section 3(4) of the Employee Retirement and Income
Security Act of 1974) representing participants in the plan
which are submitted in writing to the Secretary in connection
with such application.
Information provided to the Corporation under this
subparagraph shall be considered tax return information and
subject to the safeguarding and reporting requirements of
section 6103(p).
``(C) Exception for certain waivers.--
``(i) In general.--The preceding provisions of this
paragraph shall not apply to any plan with respect to which
the sum of--
``(I) the shortfall amortization charge (within the meaning
of section 303(c)(1)) for the plan year, and
``(II) the aggregate total of shortfall amortization
installments determined for succeeding plan years under
section 303(c)(2),
is less than $1,000,000.
``(ii) Treatment of waivers for which applications are
pending.--The amount described in clause (i)(I) shall include
any increase in such amount which would result if all
applications for waivers of the minimum funding standard
under this subsection which are pending with respect to such
plan were denied.
``(5) Special rules for single-employer plans.--
``(A) Application must be submitted before date 2\1/2\
months after close of year.--In the case of a single-employer
plan, no waiver may be granted under this subsection with
respect to any plan for any plan year unless an application
therefor is submitted to the Secretary not later than the
15th day of the 3rd month beginning after the close of such
plan year.
``(B) Special rule if employer is member of controlled
group.--In the case of a single-employer plan, if an employer
is a member of a controlled group, the temporary substantial
business hardship requirements of paragraph (1) shall be
treated as met only if such requirements are met--
``(i) with respect to such employer, and
``(ii) with respect to the controlled group of which such
employer is a member (determined by treating all members of
such group as a single employer).
The Secretary may provide that an analysis of a trade or
business or industry of a member need not be conducted if the
Secretary determines such analysis is not necessary because
the taking into account of such member would not
significantly affect the determination under this paragraph.
``(6) Notice to employee organizations.--
``(A) In general.--The Secretary shall, before granting a
waiver under this subsection, require each applicant to
provide evidence satisfactory to the Secretary that the
applicant has provided notice of the filing of the
application for such waiver to each employee organization
representing employees covered by the affected plan, and
participant, beneficiary, and alternate payee (within the
meaning of section 414(p)(8)). Such notice shall include a
description of the extent to which the plan is funded for
benefits which are guaranteed under title IV and for benefit
liabilities.
``(B) Consideration of relevant information.--The Secretary
shall consider any relevant information provided by a person
to whom notice was given under subparagraph (A).
``(d) Miscellaneous Rules.--
``(1) Change in method or year.--If the funding method, the
valuation date, or a plan year for a plan is changed, the
change shall take effect only if approved by the Secretary.
``(2) Certain retroactive plan amendments.--For purposes of
this section, any amendment applying to a plan year which--
``(A) is adopted after the close of such plan year but no
later than 2\1/2\ months after the close of the plan year
(or, in the case of a multiemployer plan, no later than 2
years after the close of such plan year),
``(B) does not reduce the accrued benefit of any
participant determined as of the beginning of the first plan
year to which the amendment applies, and
``(C) does not reduce the accrued benefit of any
participant determined as of the time of adoption except to
the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed
to have been made on the first day of such plan year. No
amendment described in this paragraph which reduces the
accrued benefits of any participant shall take effect unless
the plan administrator files a notice with the Secretary
notifying him of such amendment and the Secretary has
approved such amendment, or within 90 days after the date on
which such notice was filed, failed to disapprove such
amendment. No amendment described in this subsection shall be
approved by the Secretary unless the Secretary determines
that such amendment is necessary because of a substantial
business hardship (as determined under subsection (c)(2)) and
that a waiver under subsection (c) (or, in the case of a
multiemployer plan, any extension of the amortization period
under section 431(d)) is unavailable or inadequate.
``(3) Controlled group.--For purposes of this section, the
term `controlled group' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section
414.
``(4) Certain insurance contract plans.--A plan is
described in this paragraph if--
``(A) the plan is funded exclusively by the purchase of
individual insurance contracts,
``(B) such contracts provide for level annual premium
payments to be paid extending not later than the retirement
age for each individual participating in the plan, and
commencing with the date the individual became a participant
in the plan (or, in the case of an increase in benefits,
commencing at the time such increase becomes effective),
``(C) benefits provided by the plan are equal to the
benefits provided under each contract at normal retirement
age under the plan and are guaranteed by an insurance carrier
(licensed under the laws of a State to do business with the
plan) to the extent premiums have been paid,
``(D) premiums payable for the plan year, and all prior
plan years, under such contracts have been paid before lapse
or there is reinstatement of the policy,
``(E) no rights under such contracts have been subject to a
security interest at any time during the plan year, and
``(F) no policy loans are outstanding at any time during
the plan year.
[[Page H11687]]
A plan funded exclusively by the purchase of group insurance
contracts which is determined under regulations prescribed by
the Secretary to have the same characteristics as contracts
described in the preceding sentence shall be treated as a
plan described in this paragraph.''.
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning after 2005.
SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS.
(a) In General.--Subchapter D of chapter 1 of the Internal
Revenue Code of 1986 (relating to deferred compensation,
etc.) is amended by adding at the end the following new part:
``PART III--MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED
BENEFIT PENSION PLANS
``SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER
DEFINED BENEFIT PENSION PLANS.
``(a) Minimum Required Contribution.--
``(1) In general.--For purposes of section 412(a)(2)(A),
except as otherwise provided in this subsection, the minimum
required contribution with respect to a plan for a plan year
is the target normal cost of the plan for the plan year.
``(2) Shortfall amortization charge.--In any case in which
the value of plan assets (determined without regard to
subsection (e)(1)) of the plan for the plan year which are
held by the plan immediately before the valuation date is
less than the funding target of the plan for the plan year,
the minimum required contribution with respect to the plan
for the plan year is the sum of the amount determined under
paragraph (1) plus a shortfall amortization charge for such
plan year determined under subsection (c).
``(3) Credit for excess assets.--In any case in which the
value of plan assets of the plan for the plan year which are
held by the plan immediately before the valuation date exceed
the funding target of the plan for the plan year, the minimum
required contribution with respect to the plan for the plan
year is the amount determined under paragraph (1), reduced by
such excess.
``(4) Pre-funding balance.--In the case of any plan year in
which--
``(A) the ratio (expressed as a percentage) which--
``(i) the value of plan assets (determined without regard
to subsection (e)(1)(B)) for the preceding plan year, bears
to
``(ii) the funding target of the plan for the preceding
plan year (determined without regard to subsection (g)(1)),
is at least 80 percent, and
``(B) the plan sponsor elects (in such form and manner as
shall be prescribed in regulations of the Secretary) to
credit against the minimum required contribution for the
current plan year all or a portion of the funding standard
carryover balance and the pre-funding balance (to the extent
provided in subsection (h)) for the preceding plan year (not
in excess of such minimum required contribution),
the minimum required contribution for the plan year shall be
reduced by the amount so credited by the plan sponsor.
``(b) Target Normal Cost.--For purposes of this section,
subject to subsection (g)(2), the term `target normal cost'
means, for any plan year, the present value of all benefits
which are expected to accrue or to be earned under the plan
during the plan year. If any benefit attributable to services
performed in a preceding plan year is increased by reason of
any increase in compensation during the current plan year,
the increase shall be treated as having accrued during the
current plan year.
``(c) Shortfall Amortization Charge.--
``(1) In general.--The shortfall amortization charge for a
plan for any plan year is the aggregate total of the
shortfall amortization installments for such plan year with
respect to the shortfall amortization bases for such plan
year and each of the 6 preceding plan years.
``(2) Shortfall amortization installment.--
``(A) In general.--For purposes of paragraph (1), the plan
sponsor shall determine, with respect to the shortfall
amortization base of the plan for any plan year, the amounts
necessary to amortize such shortfall amortization base, in
level annual installments over a period of 7 plan years
beginning with such plan year. The annual installment of such
amortization for each plan year in such 7-plan-year period is
the shortfall amortization installment for such plan year
with respect to such shortfall amortization base.
``(B) Computation assumptions.--The determination of any
annual installment under subparagraph (A) for any plan year
shall be made as of the valuation date for such plan year,
using the effective rate of interest for the plan for such
plan year.
``(3) Shortfall amortization base.--The shortfall
amortization base of a plan for a plan year is the excess (if
any) of--
``(A) the funding shortfall of such plan for such plan
year, over
``(B) the present value (determined using the effective
interest rate of the plan for the plan year) of the aggregate
total of the shortfall amortization installments, for such
plan year and the 5 succeeding plan years, which have been
determined with respect to the shortfall amortization bases
of the plan for each of the 6 plan years preceding such plan
year.
``(4) Funding shortfall.--For purposes of this section, the
funding shortfall of a plan for any plan year is the excess
(if any) of--
``(A) the funding target of the plan for the plan year,
over
``(B) the value of plan assets of the plan for the plan
year which are held by the plan immediately before the
valuation date.
``(5) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the
shortfall amortization charge for such plan year and
succeeding plan years, the shortfall amortization base for
all preceding plan years shall be reduced to zero.
``(d) Rules Relating to Funding Target.--For purposes of
this section--
``(1) Funding target.--Except as provided in subsection
(g)(1), the funding target of a plan for a plan year is the
present value of all liabilities to participants and their
beneficiaries under the plan for the plan year.
``(2) Funding target attainment percentage.--The `funding
target attainment percentage' of a plan for a plan year is
the ratio (expressed as a percentage) which--
``(A) the value of plan assets for the plan year, bears to
``(B) the funding target of the plan for the plan year
(determined without regard to subsection (g)(1)).
``(e) Valuation of Plan Assets and Liabilities.--
``(1) Value of plan assets.--For purposes of this section
(other than paragraph (4) and subsections (a)(2) and (h)(3)),
the term `value of plan assets' means the excess of the value
of plan assets (determined without regard to this paragraph)
over the sum of--
``(A) the pre-funding balance of the plan maintained under
subsection (h)(1), and
``(B) the funding standard carryover balance of the plan
maintained under subsection (h)(2).
``(2) Timing of determinations.--Except as otherwise
provided under this subsection, all determinations under this
section for a plan year shall be made as of the valuation
date of the plan for such plan year.
``(3) Valuation date.--For purposes of this section--
``(A) In general.--Except as provided in subparagraph (B),
the valuation date of a plan for any plan year shall be the
first day of the plan year.
``(B) Exception for small plans.--If, on each day during
the preceding plan year, a plan had 500 or fewer
participants, the plan may designate any day during the plan
year as its valuation date for such plan year. For purposes
of this subparagraph, all defined benefit plans (other than
multiemployer plans) maintained by the same employer (or any
member of such employer's controlled group) shall be treated
as 1 plan, but only employees of such employer or member
shall be taken into account.
``(C) Application of certain rules in determination of plan
size.--For purposes of this paragraph--
``(i) Plans not in existence in preceding year.--In the
case of the first plan year of any plan, subparagraph (B)
shall apply to such plan by taking into account the number of
participants that the plan is reasonably expected to have on
days during such first plan year.
``(ii) Predecessors.--Any reference in subparagraph (B) to
an employer shall include a reference to any predecessor of
such employer.
``(4) Authorization of use of actuarial value.--For
purposes of this section, the value of plan assets
(determined without regard to paragraph (1)) shall be
determined on the basis of any reasonable actuarial method of
valuation which takes into account fair market value and
which is permitted under regulations prescribed by the
Secretary, except that--
``(A) any such method providing for averaging of fair
market values may not provide for averaging of such values
over more than the current plan year and the 2 preceding plan
years, and
``(B) any such method may not result in a determination of
the value of plan assets which, at any time, is lower than 90
percent or greater than 110 percent of the fair market value
of such assets at such time.
``(5) Accounting for contribution receipts.--For purposes
of this section--
``(A) Contributions for prior plan years taken into
account.--For purposes of determining the value of plan
assets for any current plan year, in any case in which a
contribution properly allocable to amounts owed for a
preceding plan year is made on or after the valuation date of
the plan for such current plan year, such contribution shall
be taken into account, except that any such contribution made
during any such current plan year beginning after 2006 shall
be taken into account only in an amount equal to its present
value (determined using the effective rate of interest for
the plan for the preceding plan year) as of the valuation
date of the plan for such current plan year.
``(B) Contributions for current plan year disregarded.--For
purposes of determining the value of plan assets for any
current plan year, contributions which are properly allocable
to amounts owed for such plan year shall not be taken into
account, and, in the case of any such contribution made
before the valuation date of the plan for such plan year,
such value of plan assets shall be reduced for interest on
such amount determined using the effective rate of interest
of the plan for the preceding plan year for the period
beginning when such payment was
[[Page H11688]]
made and ending on the valuation date of the plan.
``(6) Accounting for plan liabilities.--For purposes of
this section--
``(A) Liabilities taken into account for current plan
year.--In determining the value of liabilities under a plan
for a plan year, liabilities shall be taken into account to
the extent attributable to benefits (including any early
retirement or similar benefit) accrued as of the beginning of
the plan year.
``(B) Accruals during current plan year disregarded.--For
purposes of subparagraph (A), benefits accrued during such
plan year (after those taken into account under subparagraph
(A)) shall not be taken into account, irrespective of whether
the valuation date of the plan for such plan year is later
than the first day of such plan year.
``(f) Actuarial Assumptions and Methods.--
``(1) In general.--Subject to this subsection, the
determination of any present value or other computation under
this section shall be made on the basis of actuarial
assumptions and methods--
``(A) each of which is reasonable (taking into account the
experience of the plan and reasonable expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(2) Interest rates.--
``(A) Effective interest rate.--For purposes of this
section, the term `effective interest rate' means, with
respect to any plan for any plan year, the single rate of
interest which, if used to determine the present value of the
plan's liabilities referred to in subsection (d)(1) would
result in an amount equal to the funding target of the plan
for such plan year.
``(B) Application to funding target.--For purposes of
determining the funding target of a plan for any plan year,
the interest rate used in determining the present value of
the liabilities of the plan shall be--
``(i) in the case of liabilities 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 liabilities reasonably determined to
be payable during the 15-year period beginning at the end of
the period described in clause (i), the second segment rate
with respect to the applicable month, and
``(iii) in the case of liabilities reasonably determined to
be payable after the period described in clause (ii), the
third segment rate with respect to the applicable month.
``(C) 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 corporate bond yield curve for such month,
taking into account only that portion of such yield curve
which is based on bonds 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 corporate bond yield curve for such month,
taking into account only that portion of such yield curve
which is based on bonds 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 corporate bond yield curve for such month,
taking into account only that portion of such yield curve
which is based on bonds maturing during periods beginning
after the period described in clause (ii).
``(D) Corporate bond yield curve.--For purposes of this
paragraph--
``(i) In general.--The term `corporate bond yield curve'
means, with respect to any month, a yield curve which is
prescribed by the Secretary for such month and which reflects
a 3-year weighted average of yields on investment grade
corporate bonds with varying maturities.
``(ii) 3-year weighted average.--The term `3-year weighted
average' means an averaging methodology under which the most
recent year is weighted 50 percent, the year preceding such
year is weighted 35 percent, and the second year preceding
such year is weighted 15 percent.
``(E) Applicable month.--For purposes of this paragraph,
the term `applicable month' means, with respect to any plan
for any plan year, the month which includes the valuation
date of such plan for such plan year or, at the election of
the plan administrator, any of the 4 months which precede
such month. Any election made under this subparagraph shall
apply to the plan year for which made and all succeeding plan
years unless revoked with the consent of the Secretary.
``(F) Publication requirements.--The Secretary shall
publish for each month the corporate bond yield curve (and
the corporate bond yield curve reflecting the modification
described in section 417(e)(3)(A)(iii)(I)) for such month and
each of the rates determined under subparagraph (B) for such
month. The Secretary shall also publish a description of the
methodology used to determine such yield curve and such rates
which is sufficiently detailed to enable plans to make
reasonable projections regarding the yield curve and such
rates for future months based on the plan's projection of
future interest rates.
``(G) Transition rule.--
``(i) In general.--Notwithstanding the preceding provisions
of this paragraph, for plan years beginning in 2006 or 2007,
the first, second, and third segment rates for a plan with
respect to any month shall be equal to the sum of--
``(I) the product of such rate for such month determined
without regard to this subparagraph, multiplied by the
applicable percentage, and
``(II) the product of the rate determined under the rules
of section 412(b)(5)(B)(ii)(II) (as in effect for plan years
beginning in 2005), multiplied by a percentage equal to 100
percent minus the applicable percentage.
``(ii) Applicable percentage.--For purposes of clause (i),
the applicable percentage is 33\1/3\ percent for plan years
beginning in 2006 and 66\2/3\ percent for plan years
beginning in 2007.
``(3) Mortality table.--
``(A) In general.--The mortality tables used in determining
any present value or making any computation under this
section shall be the RP-2000 Combined Mortality Table, as
published by the Society of American Actuaries, as in effect
on the date of the enactment of the Pension Protection Act of
2005 and as revised from time to time under subparagraph (B).
``(B) Periodic revision.--The Secretary shall (at least
every 10 years) make revisions in any tables in effect under
this paragraph to reflect the actual experience of pension
plans and projected trends in such experience.
``(C) Transition rule.--Under regulations of the Secretary,
any difference in assumptions as set forth in the mortality
table specified in subparagraph (A) and assumptions as set
forth in the mortality table described in section
412(d)(7)(C)(ii) (as in effect for plan years beginning in
2005) shall be phased in ratably over the first period of 5
plan years beginning in or after 2006 so as to be fully
effective for the fifth plan year.
``(4) Probability of benefit payments in the form of lump
sums or other optional forms.--For purposes of determining
any present value or making any computation under this
section, there shall be taken into account--
``(A) the probability that future benefit payments under
the plan will be made in the form of optional forms of
benefits provided under the plan (including lump sum
distributions, determined on the basis of the plan's
experience and other related assumptions), and
``(B) any difference in the present value of such future
benefit payments resulting from the use of actuarial
assumptions, in determining benefit payments in any such
optional form of benefits, which are different from those
specified in this subsection.
``(5) Approval of large changes in actuarial assumptions.--
``(A) In general.--No actuarial assumption used to
determine the funding target for a single-employer plan to
which this paragraph applies may be changed without the
approval of the Secretary.
``(B) Plans to which paragraph applies.--This paragraph
shall apply to a plan only if--
``(i) the aggregate unfunded vested benefits as of the
close of the preceding plan year (as determined under section
4006(a)(3)(E)(iii) of the Employee Retirement and Income
Security Act of 1974) of such plan and all other plans
maintained by the contributing sponsors (as defined in
section 4001(a)(13) of such Act) and members of such
sponsors' controlled groups (as defined in section
4001(a)(14) of such Act) which are covered by title IV
(disregarding plans with no unfunded vested benefits) exceed
$50,000,000; and
``(ii) the change in assumptions (determined after taking
into account any changes in interest rate and mortality
table) results in a decrease in the funding shortfall of the
plan for the current plan year that exceeds $50,000,000, or
that exceeds $5,000,000 and that is 5 percent or more of the
funding target of the plan before such change.
``(g) Special Rules for at-Risk Plans.--
``(1) Funding target for plans in at-risk status.--
``(A) In general.--In any case in which a plan is in at-
risk status for a plan year, the funding target of the plan
for the plan year is the sum of--
``(i) the present value of all liabilities to participants
and their beneficiaries under the plan for the plan year, as
determined by using, in addition to the actuarial assumptions
described in subsection (f), the supplemental actuarial
assumptions described in subparagraph (B), plus
``(ii) a loading factor determined under subparagraph (C).
``(B) Supplemental actuarial assumptions.--The actuarial
assumptions used in determining the valuation of the funding
target shall include, in addition to the actuarial
assumptions described in subsection (f), an assumption that
all participants will elect benefits at such times and in
such forms as will result in the highest present value of
liabilities under subparagraph (A)(i).
``(C) Loading factor.--The loading factor applied with
respect to a plan under this paragraph for any plan year is
the sum of--
``(i) $700, times the number of participants in the plan,
plus
``(ii) 4 percent of the funding target (determined without
regard to this paragraph) of the plan for the plan year.
[[Page H11689]]
``(2) Target normal cost of at-risk plans.--
``(A) In general.--In any case in which a plan is in at-
risk status for a plan year, the target normal cost of the
plan for such plan year shall be the sum of--
``(i) the present value of all benefits which are expected
to accrue under the plan during the plan year, determined
under the actuarial assumptions used under paragraph (1),
plus
``(ii) the loading factor under paragraph (1)(C), excluding
the portion of the loading factor described in paragraph
(1)(C)(i).
``(B) Minimum amount.--In no event shall the target normal
cost of a plan determined under this paragraph be less than
the target normal cost of such plan as determined without
regard to this paragraph.
``(3) Determination of at-risk status.--For purposes of
this subsection, a plan is in `at-risk status' for a plan
year if the funding target attainment percentage of the plan
for the preceding plan year was less than 60 percent.
``(4) Transition between applicable funding targets and
between applicable target normal cost.--
``(A) In general.--In any case in which a plan which is in
at-risk status for a plan year has been in such status for a
consecutive period of fewer than 5 plan years, the applicable
amount of the funding target and of the target normal cost
shall be, in lieu of the amount determined without regard to
this paragraph, the sum of--
``(i) the amount determined under this section without
regard to this subsection, plus
``(ii) the transition percentage for such plan year of the
excess of the amount determined under this subsection
(without regard to this paragraph) over the amount determined
under this section without regard to this subsection.
``(B) Transition percentage.--For purposes of this
paragraph, the `transition percentage' for a plan year is the
product derived by multiplying--
``(i) 20 percent, by
``(ii) the number of plan years during the period described
in subparagraph (A).
``(h) Pre-Funding and Funding Standard Carryover
Balances.--
``(1) Pre-funding balance.--
``(A) In general.--The plan sponsor of a pension plan which
is a single-employer plan shall maintain a pre-funding
balance for purposes of this subsection. Such balance shall
consist of a beginning balance of zero, increased and
decreased to the extent provided in subparagraphs (B) and
(C), and adjusted further as provided in paragraph (3).
``(B) Increases.--As of the valuation date for each plan
year beginning after 2006, the pre-funding balance of a plan
shall be increased by the amount elected by the plan sponsor
for the plan year. Such amount shall not exceed the excess
(if any) of--
``(i) the aggregate total of employer contributions to the
plan for the preceding plan year, over
``(ii) the minimum required contribution for such preceding
plan year (increased by interest on any portion of such
minimum required contribution remaining unpaid, at the
effective interest rate for the plan for the preceding plan
year, for the period beginning with the first day of such
preceding plan year and ending on the date that payment of
such portion is made).
``(C) Decreases.--As of the valuation date for each plan
year after 2006, the pre-funding balance of a plan shall be
decreased (but not below zero) by the sum of--
``(i) the amount credited under subsection (a)(4) (if any)
in reducing the minimum required contribution of the plan for
the preceding plan year, and
``(ii) the amount elected by the plan sponsor as a
reduction in the pre-funding balance (for purposes of the
determination under subsection (e)(1) and any other purpose
under this section).
``(D) Coordination with funding standard carryover
balance.--To the extent that any plan has a funding standard
carryover balance greater than zero--
``(i) no amount of the pre-funding balance of such plan may
be credited under subsection (a)(4) in reducing the minimum
required contribution, and
``(ii) no election may be made under subparagraph (C)(ii).
``(E) No use of balance to reduce minimum required
contribution if used to avoid shortfall amortization.--The
amount of the pre-funding balance of such plan may be
credited under subsection (a)(4) in reducing the minimum
required contribution only if the plan sponsor has elected to
apply subsection (a)(2) to the plan for such plan year by
substituting `subsection (e)(1)(B)' for `subsection (e)(1)'.
``(2) Funding standard carryover balance.--
``(A) In general.--The plan sponsor of a pension plan to
which this paragraph applies shall maintain a funding
standard carryover balance for purposes of this subsection.
Such balance shall consist of a beginning balance determined
under subparagraph (C), decreased to the extent provided in
subparagraph (D), and adjusted further as provided in
paragraph (3).
``(B) Plans to which this paragraph applies.--This
paragraph applies to any plan which--
``(i) is a single-employer plan subject to this part,
``(ii) was in effect for a plan year beginning in 2005, and
``(iii) had a positive balance in the funding standard
account under section 412(b) as in effect for such plan year
and determined as of the end of such plan year.
``(C) Beginning balance.--The beginning balance of the
funding standard carryover balance shall be the positive
balance described in subparagraph (B)(iii).
``(D) Decreases.--As of the valuation date for each plan
year after 2006, the funding standard carryover balance of a
plan shall be decreased (but not below zero) by the sum of--
``(i) the amount credited under subsection (a)(4) (if any)
in reducing the minimum required contribution of the plan for
the preceding plan year, and
``(ii) the amount elected by the plan sponsor as a
reduction in the funding standard carryover balance (for
purposes of the determination under subsection (e)(1) and any
other purpose under this section).
``(3) Adjustments.--In determining the pre-funding balance
or the funding standard carryover balance of a plan as of the
valuation date of the plan (before applying any increase or
decrease under paragraph (1) or (2)), the plan sponsor shall,
in accordance with regulations which shall be prescribed by
the Secretary, adjust such balance of the plan so as to
reflect the rate of net gain or loss (determined,
notwithstanding subsection (e)(4), on the basis of fair
market value) experienced by all plan assets for the period
beginning with the valuation date for the preceding plan year
and ending with the date preceding the valuation date for the
current plan year, properly taking into account, in
accordance with such regulations, all contributions,
distributions, and other plan payments made during such
period.
``(4) Elections.--Except as otherwise provided in this
subsection, any election made under this subsection shall be
made at such time and in such form and manner as the
Secretary may provide.
``(5) Coordination with waivers.--For purposes of this
subsection, the term `minimum required contribution' means
for any plan year the minimum required contribution for such
plan year determined without regard to this subsection and by
taking into account any waiver under section 412(c) and any
waiver amortization charge under subsection (j) for such plan
year.
``(i) Payment of Minimum Required Contributions.--
``(1) In general.--For purposes of this section, the due
date for any payment of any minimum required contribution for
any plan year shall be 8\1/2\ months after the close of the
plan year.
``(2) Interest.--Any payment required under paragraph (1)
for a plan year made after the valuation date for such plan
year shall be increased by interest, for the period from the
valuation date to the payment date, at the effective rate of
interest for the plan for such plan year.
``(3) Accelerated quarterly contribution schedule for
underfunded plans.--
``(A) Interest penalty for failure to meet accelerated
quarterly payment schedule.--In any case in which the plan
has a funding shortfall for the preceding plan year, if the
required installment is not paid in full, then the minimum
required contribution for the plan year (as increased under
paragraph (2)) shall be further increased by an amount equal
to the interest on the amount of the underpayment for the
period of the underpayment, using an interest rate equal to
the excess of--
``(i) 175 percent of the Federal mid-term rate (as in
effect under section 1274 for the 1st month of such plan
year), over
``(ii) the effective rate of interest for the plan for the
plan year.
``(B) Amount of underpayment, period of underpayment.--For
purposes of subparagraph (A)--
``(i) Amount.--The amount of the underpayment shall be the
excess of--
``(I) the required installment, over
``(II) the amount (if any) of the installment contributed
to or under the plan on or before the due date for the
installment.
``(ii) Period of underpayment.--The period for which any
interest is charged under this paragraph with respect to any
portion of the underpayment shall run from the due date for
the installment to the date on which such portion is
contributed to or under the plan.
``(iii) Order of crediting contributions.--For purposes of
clause (i)(II), contributions shall be credited against
unpaid required installments in the order in which such
installments are required to be paid.
``(C) Number of required installments; due dates.--For
purposes of this paragraph--
``(i) Payable in 4 installments.--There shall be 4 required
installments for each plan year.
``(ii) Time for payment of installments.--The due dates for
required installments are set forth in the following table:
``In the case of the following required
installment: The due date is:
1st..................................... April 15
2nd..................................... July 15
3rd..................................... October 15
4th..................................... January 15 of the following
year
``(D) Amount of required installment.--For purposes of this
paragraph--
[[Page H11690]]
``(i) In general.--The amount of any required installment
shall be 25 percent of the required annual payment.
``(ii) Required annual payment.--For purposes of clause
(i), the term `required annual payment' means the lesser of--
``(I) 90 percent of the minimum required contribution
(without regard to any waiver under section 412(c)) to the
plan for the plan year under this section, or
``(II) in the case of a plan year beginning after 2006, 100
percent of the minimum required contribution (without regard
to any waiver under section 412(c)) to the plan for the
preceding plan year.
Subclause (II) shall not apply if the preceding plan year
referred to in such clause was not a year of 12 months.
``(E) Fiscal years and short years.--
``(i) Fiscal years.--In applying this paragraph to a plan
year beginning on any date other than January 1, there shall
be substituted for the months specified in this paragraph,
the months which correspond thereto.
``(ii) Short plan year.--This subparagraph shall be applied
to plan years of less than 12 months in accordance with
regulations prescribed by the Secretary.
``(4) Liquidity requirement in connection with quarterly
contributions.--
``(A) In general.--A plan to which this paragraph applies
shall be treated as failing to pay the full amount of any
required installment under paragraph (3) to the extent that
the value of the liquid assets paid in such installment is
less than the liquidity shortfall (whether or not such
liquidity shortfall exceeds the amount of such installment
required to be paid but for this paragraph).
``(B) Plans to which paragraph applies.--This paragraph
shall apply to a plan (other than a plan that would be
described in subsection (e)(3)(B) if `100' were substituted
for `500' therein) which--
``(i) is required to pay installments under paragraph (3)
for a plan year, and
``(ii) has a liquidity shortfall for any quarter during
such plan year.
``(C) Period of underpayment.--For purposes of paragraph
(3)(A), any portion of an installment that is treated as not
paid under subparagraph (A) shall continue to be treated as
unpaid until the close of the quarter in which the due date
for such installment occurs.
``(D) Limitation on increase.--If the amount of any
required installment is increased by reason of subparagraph
(A), in no event shall such increase exceed the amount which,
when added to prior installments for the plan year, is
necessary to increase the funding target attainment
percentage of the plan for the plan year (taking into account
the expected increase in funding target due to benefits
accruing or earned during the plan year) to 100 percent.
``(E) Definitions.--For purposes of this subparagraph:
``(i) Liquidity shortfall.--The term `liquidity shortfall'
means, with respect to any required installment, an amount
equal to the excess (as of the last day of the quarter for
which such installment is made) of--
``(I) the base amount with respect to such quarter, over
``(II) the value (as of such last day) of the plan's liquid
assets.
``(ii) Base amount.--
``(I) In general.--The term `base amount' means, with
respect to any quarter, an amount equal to 3 times the sum of
the adjusted disbursements from the plan for the 12 months
ending on the last day of such quarter.
``(II) Special rule.--If the amount determined under
subclause (I) exceeds an amount equal to 2 times the sum of
the adjusted disbursements from the plan for the 36 months
ending on the last day of the quarter and an enrolled actuary
certifies to the satisfaction of the Secretary that such
excess is the result of nonrecurring circumstances, the base
amount with respect to such quarter shall be determined
without regard to amounts related to those nonrecurring
circumstances.
``(iii) Disbursements from the plan.--The term
`disbursements from the plan' means all disbursements from
the trust, including purchases of annuities, payments of
single sums and other benefits, and administrative expenses.
``(iv) Adjusted disbursements.--The term `adjusted
disbursements' means disbursements from the plan reduced by
the product of--
``(I) the plan's funding target attainment percentage for
the plan year, and
``(II) the sum of the purchases of annuities, payments of
single sums, and such other disbursements as the Secretary
shall provide in regulations.
``(v) Liquid assets.--The term `liquid assets' means cash,
marketable securities, and such other assets as specified by
the Secretary in regulations.
``(vi) Quarter.--The term `quarter' means, with respect to
any required installment, the 3-month period preceding the
month in which the due date for such installment occurs.
``(F) Regulations.--The Secretary may prescribe such
regulations as are necessary to carry out this paragraph.
``(j) Waiver Amortization Charge.--
``(1) In general.--The minimum required contribution for
any plan year under subsection (a) shall be increased by the
amount of the waiver amortization charge (if any) for such
plan year.
``(2) Determination of waiver amortization charge.--The
waiver amortization charge for a plan for any plan year is
the aggregate total of the waiver amortization installments
for such plan year with respect to the waiver amortization
bases for such plan year and each of the 4 preceding plan
years.
``(3) Waiver amortization installment.--For purposes of
paragraph (2), the plan sponsor shall determine, with respect
to the waiver amortization base of the plan for any plan
year, the amounts necessary to amortize such waiver
amortization base, in level annual installments over a period
of 5 plan years beginning with such plan year. The annual
installment of such amortization for each plan year in such
5-plan year period is the waiver amortization installment for
such plan year with respect to such waiver amortization base.
``(4) Computation assumptions.--The determination of any
annual installment under paragraph (2) for any plan year
shall be made as of the valuation date for such plan year,
using the effective rate of interest for the plan for the
preceding plan year.
``(5) Waiver amortization base.--The waiver amortization
base of a plan for a plan year is the excess (if any) of--
``(A) the portion of the minimum required contribution of
such plan waived under section 412(c) for such plan year,
over
``(B) the aggregate total of the waiver amortization
installments, for such plan year and the 3 succeeding plan
years, which have been determined with respect to the waiver
amortization bases of the plan for each of the 4 plan years
preceding such plan year.
``(k) Imposition of Lien Where Failure to Make Required
Contributions.--
``(1) In general.--In the case of a plan covered under
section 4021 of the Employee Retirement and Income Security
Act of 1974 and to which this subsection applies (as provided
under paragraph (2)), if--
``(A) any person fails to make a contribution payment
required by section 412 and this section before the due date
for such payment, and
``(B) the unpaid balance of such payment (including
interest), when added to the aggregate unpaid balance of all
preceding such payments for which payment was not made before
the due date (including interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount
determined under paragraph (3) upon all property and rights
to property, whether real or personal, belonging to such
person and any other person who is a member of the same
controlled group of which such person is a member.
``(2) Plans to which subsection applies.--This subsection
shall apply to a defined benefit plan which is a single-
employer plan for any plan year for which the funding target
attainment percentage (as defined in subsection (d)(2)) of
such plan is less than 100 percent.
``(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of contribution payments required under this section
and section 412 for which payment has not been made before
the due date.
``(4) Notice of failure; lien.--
``(A) Notice of failure.--A person committing a failure
described in paragraph (1) shall notify the Pension Benefit
Guaranty Corporation of such failure within 10 days of the
due date for the required contribution payment.
``(B) Period of lien.--The lien imposed by paragraph (1)
shall arise on the due date for the required contribution
payment and shall continue until the last day of the first
plan year in which the plan ceases to be described in
paragraph (1)(B). Such lien shall continue to run without
regard to whether such plan continues to be described in
paragraph (2) during the period referred to in the preceding
sentence.
``(C) Certain rules to apply.--Any amount with respect to
which a lien is imposed under paragraph (1) shall be treated
as taxes due and owing the United States and rules similar to
the rules of subsections (c), (d), and (e) of section 4068 of
the Employee Retirement and Income Security Act of 1974 shall
apply with respect to a lien imposed by subsection (a) and
the amount with respect to such lien.
``(5) Enforcement.--Any lien created under paragraph (1)
may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Pension
Benefit Guaranty Corporation, by the contributing sponsor (or
any member of the controlled group of the contributing
sponsor).
``(6) Definitions.--For purposes of this subsection--
``(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a contribution
payment required to be made to the plan, including any
required installment under paragraphs (3) and (4) of
subsection (i).
``(B) Due date; required installment.--The terms `due date'
and `required installment' have the meanings given such terms
by subsection (i), except that in the case of a payment other
than a required installment, the due date shall be the date
such payment is required to be made under section 430.
``(C) Controlled group.--The term `controlled group' means
any group treated as a single employer under subsections (b),
(c), (m), and (o) of section 414.
``(l) Qualified Transfers to Health Benefit Accounts.--In
the case of a qualified
[[Page H11691]]
transfer (as defined in section 420), any assets so
transferred shall not, for purposes
of this section, be treated as assets in the
plan.''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning after 2005.
SEC. 113. LIMITATIONS ON DISTRIBUTIONS AND BENEFIT ACCRUALS
UNDER SINGLE-EMPLOYER PLANS.
(a) Prohibition of Shutdown Benefits and Other
Unpredictable Contingent Event Benefits Under Single-Employer
Plans.--Part III of subchapter D of chapter 1 of the Internal
Revenue Code of 1986 (relating to deferred compensation,
etc.) is amended--
(1) by striking the heading and inserting the following:
``PART III--RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT
LIMITATIONS
``Subpart A. Minimum funding standards for pension plans.
``Subpart B. Benefit limitations under single-employer plans.
``Subpart A--Minimum Funding Standards for Pension Plans
``Sec. 430. Minimum funding standards for single-employer defined
benefit pension plans.'',
and
(2) by adding at the end the following new subpart:
``Subpart B--Benefit Limitations Under Single-employer Plans
``Sec. 436. Prohibition of shutdown benefits and other unpredictable
contingent event benefits.
``SEC. 436. PROHIBITION OF SHUTDOWN BENEFITS AND OTHER
UNPREDICTABLE CONTINGENT EVENT BENEFITS.
``(a) In General.--No pension plan which is a single-
employer plan may provide benefits which are payable upon the
occurrence of--
``(1) a plant shutdown, or
``(2) any other unpredictable contingent event.
``(b) Unpredictable Contingent Event.--For purposes of this
subsection, the term `unpredictable contingent event' means
an event other than--
``(1) attainment of any age, performance of any service,
receipt or derivation of any compensation, or the occurrence
of death or disability, or
``(2) an event which is reasonably and reliably predictable
(as determined by the Secretary).''.
(b) Other Limits on Benefits and Benefit Accruals.--
(1) In general.--Subpart B of part III of subchapter D of
chapter 1 of such Code is amended by adding at the end the
following:
``SEC. 437. BENEFIT LIMIATIONS ON UNDERFUNDED PLANS.
``(a) Limitations on Plan Amendments Increasing Liability
for Benefits.--
``(1) In general.--No amendment to a defined benefit plan
(other than a multiemployer plan) which has the effect of
increasing liabilities of the plan by reason of increases in
benefits, establishment of new benefits, changing the rate of
benefit accrual, or changing the rate at which benefits
become nonforfeitable to the plan may take effect during any
plan year if the funding target attainment percentage as of
the valuation date of the plan for such plan year is--
``(A) less than 80 percent, or
``(B) would be less than 80 percent taking into account
such amendment.
``(2) Exemption.--Paragraph (1) shall cease to apply with
respect to any plan year, effective as of the first date of
the plan year (or if later, the effective date of the
amendment), upon payment by the plan sponsor of a
contribution equal to--
``(A) in the case of paragraph (1)(A), the amount of the
increase in the funding target of the plan (under section
430) for the plan year attributable to the amendment, and
``(B) in the case of subparagraph (1)(B), the amount
sufficient to result in a funding target attainment
percentage of 80 percent.
``(b) Funding-Based Limitation on Certain Forms of
Distribution.--A defined benefit plan (other than a
multiemployer plan) shall provide that, in any case in which
the plan's funding target attainment percentage as of the
valuation date of the plan for a plan year is less than 80
percent, the plan may not after such date pay any prohibited
payment (as defined in section 206(e) of the Employee
Retirement and Income Security Act of 1974).
``(c) Limitations on Benefit Accruals for Plans With Severe
Funding Shortfalls.--A defined benefit plan (other than a
multiemployer plan) shall provide that, in any case in which
the plan's funding target attainment percentage as of the
valuation date of the plan for a plan year is less than 60
percent, all future benefit accruals under the plan shall
cease as of such date.
``(d) New Plans.--Subsections (a) and (c) shall not apply
to a plan for the first 5 plan years of the plan. For
purposes of this subsection, the reference in this subsection
to a plan shall include a reference to any predecessor plan.
``(e) Presumed Underfunding for Purposes of Benefit
Limitations Based on Prior Year's Funding Status.--
``(1) Presumption of continued underfunding.--In any case
in which a benefit limitation under subsections (a), (b), or
(c) has been applied to a plan with respect to the plan year
preceding the current plan year, the funding target
attainment percentage of the plan as of the valuation date of
the plan for the current plan year shall be presumed to be
equal to the funding target attainment percentage of the plan
as of the valuation date of the plan for the preceding plan
year until the enrolled actuary of the plan certifies the
actual funding target attainment percentage of the plan as of
the valuation date of the plan for the current plan year.
``(2) Presumption of underfunding after 10th month.--In any
case in which no such certification is made with respect to
the plan before the first day of the 10th month of the
current plan year, for purposes of subsections (a), (b), and
(c), the plan's funding target attainment percentage shall be
conclusively presumed to be less than 60 percent as of the
first day of such 10th month, and such day shall be deemed,
for purposes of such paragraphs, to be the valuation date of
the plan for the current plan year.
``(3) Presumption of underfunding after 4th month for
nearly underfunded plans.--In any case in which--
``(A) a benefit limitation under subsections (a), (b), or
(c) did not apply to a plan with respect to the plan year
preceding the current plan year, but the funding target
attainment percentage of the plan for such preceding plan
year was not more than 10 percentage points greater than the
percentage which would have caused such paragraph to apply to
the plan with respect to such preceding plan year, and
``(B) as of the first day of the 4th month of the current
plan year, the enrolled actuary of the plan has not certified
the actual funding target attainment percentage of the plan
as of the valuation date of the plan for the current plan
year,
until the enrolled actuary so certifies, such first day shall
be deemed, for purposes of such subsection, to be the
valuation date of the plan for the current plan year and the
funding target attainment percentage of the plan as of such
first day shall, for purposes of such subsection, be presumed
to be equal to 10 percentage points less than the funding
target attainment percentage of the plan as of the valuation
date of the plan for such preceding plan year.
``(f) Restoration by Plan Amendment of Benefits or Benefit
Accrual.--In any case in which a prohibition under subsection
(b) of the payment of lump sum distributions or benefits in
any other accelerated form or a cessation of benefit accruals
under subsection (c) is applied to a plan with respect to any
plan year and such prohibition or cessation, as the case may
be, ceases to apply to any subsequent plan year, the plan may
provide for the resumption of such benefit payment or such
benefit accrual only by means of the adoption of a plan
amendment after the valuation date of the plan for such
subsequent plan year. The preceding sentence shall not apply
to a prohibition or cessation required by reason of
subsection (e).
``(g) Funding Target Attainment Percentage.--For purposes
of this section, the term `funding target attainment
percentage' has the meaning provided such term under section
430(d)(2).''.
(2) Clerical amendment.--The table of sections for such
subpart is amended by adding at the end the following new
item:
``Sec. 437. Benefit limitations on underfunded plans.''.
(c) Special Rule for Plan Amendments.--A plan shall not
fail to meet the requirements of section 204(g) of the
Employee Retirement Income Security Act of 1974 or section
411(d)(6) of the Internal Revenue Code of 1986 solely by
reason of the adoption by the plan of an amendment necessary
to meet the requirements of the amendments made by this
section.
(d) Effective Date.--
(1) Shutdown benefits.--Except as provided in paragraph
(3), the amendments made by subsection (a) shall apply with
respect to plant shutdowns, or other unpredictable contingent
events, occurring after 2006.
(2) Other benefits.--Except as provided in paragraph (3),
the amendments made by subsection (b) shall apply with
respect to plan years beginning after 2006.
(3) Collective bargaining exception.--In the case of a plan
maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified before the date of the enactment of this
Act, the amendments made by this subsection shall not apply
to plan years beginning before the earlier of--
(A) the later of--
(i) the date on which the last collective bargaining
agreement relating to the plan terminates (determined without
regard to any extension thereof agreed to after the date of
the enactment of this Act), or
(ii) the first day of the first plan year to which the
amendments made by this subsection would (but for this
subparagraph) apply, or
(B) January 1, 2009.
For purposes of clause (i), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan
which amends the plan solely to conform to any requirement
added by this subsection shall not be treated as a
termination of such collective bargaining agreement.
SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Amendments Related to Qualification Requirements.--
(1) Section 401(a)(29) of the Internal Revenue Code of 1986
is amended to read as follows:
``(29) Benefit limitations on plans in at-risk status.--In
the case of a defined benefit
[[Page H11692]]
plan (other than a multiemployer plan) to which the
requirements of section 412 apply, the trust of which the
plan is a part shall not constitute a qualified trust under
this subsection unless the plan meets the requirements of
sections 436 and 437.''.
(2) Section 401(a)(32) of such Code is amended--
(A) in subparagraph (A), by striking ``412(m)(5)'' each
place it appears and inserting ``section 430(i)(4)'', and
(B) in subparagraph (C), by striking ``section 412(m)'' and
inserting ``section 430(i)''.
(3) Section 401(a) is amended by striking paragraph (33)
and by redesignating paragraph (34) as paragraph (33).
(b) Vesting Rules.--Section 411 of such Code is amended--
(1) by striking ``section 412(c)(8)'' in subsection
(a)(3)(C) and inserting ``section 412(d)(2)'',
(2) in subsection (b)(1)(F)--
(A) by striking ``paragraphs (2) and (3) of section
412(i)'' in clause (ii) and inserting ``subparagraphs (B) and
(C) of section 412(d)(4)'', and
(B) by striking ``paragraphs (4), (5), and (6) of section
412(i)'' and inserting ``subparagraphs (D), (E), and (F) of
section 412(d)(4)'', and
(3) by striking ``section 412(c)(8)'' in subsection
(d)(6)(A) and inserting ``section 412(e)(3)''.
(c) Mergers and Consolidations of Plans.--Subclause (I) of
section 414(l)(2)(B)(i) of such Code is amended to read as
follows:
``(I) the amount determined under section 431(c)(6)(A)(i)
in the case of a multiemployer plan (and the sum of the
target liability amount and target normal cost determined
under section 430 in the case of any other plan), over''.
(d) Transfer of Excess Pension Assets to Retiree Health
Accounts.--
(1) Section 420(e)(2) of such Code is amended to read as
follows:
``(2) Excess pension assets.--The term `excess pension
assets' means the excess (if any) of--
``(A) the lesser of--
``(i) the fair market value of the plan's assets (reduced
by the pre-funding balance and the funding standard carryover
balance, as determined under section 430(e)(1)), or
``(ii) the value of plan assets as determined under section
430(e)(4) after reduction under section 430(e)(1), over
``(B) 125 percent of the sum of the target liability amount
and the target normal cost determined under section 430 for
such plan year.''.
(2) Section 420(e)(4) of such Code is amended to read as
follows:
``(4) Coordination with section 430.--In the case of a
qualified transfer, any assets so transferred shall not, for
purposes of this section, be treated as assets in the
plan.''.
(e) Excise Taxes.--
(1) In general.--Subsections (a) and (b) of section 4971 of
such Code are amended to read as follows:
``(a) Initial Tax.--If at any time during any taxable year
an employer maintains a plan to which section 412 applies,
there is hereby imposed for the taxable year a tax equal to--
``(1) in the case of a single-employer plan, 10 percent of
the aggregate unpaid minimum required contributions for all
plan years remaining unpaid as of the end of any plan year
ending with or within the taxable year, and
``(2) in the case of a multiemployer plan, 5 percent of the
accumulated funding deficiency determined under section 431
as of the end of any plan year ending with or within the
taxable year.
``(b) Additional Tax.--If--
``(1) a tax is imposed under subsection (a)(1) on any
unpaid required minimum contribution and such amount remains
unpaid as of the close of the taxable period, or
``(2) a tax is imposed under subsection (a)(2) on any
accumulated funding deficiency and the accumulated funding
deficiency is not corrected within the taxable period,
there is hereby imposed a tax equal to 100 percent of the
unpaid minimum required contribution or accumulated funding
deficiency, whichever is applicable, to the extent not so
paid or corrected.''.
(2) Section 4971(c) of such Code is amended--
(A) by striking ``the last two sentences of section
412(a)'' in paragraph (1) and inserting ``section 431'', and
(B) by adding at the end the following new paragraph:
``(4) Unpaid minimum required contribution.--
``(A) In general.--The term `unpaid minimum required
contribution' means, with respect to any plan year, any
minimum required contribution under section 430 for the plan
year which is not paid on or before the due date (as
determined under section 430(i)(1)) for the plan year.
``(B) Ordering rule.--Any payment to or under a plan for
any plan year shall be allocated first to unpaid minimum
required contributions for all preceding plan years on a
first-in, first-out basis and then to the minimum required
contribution under section 430 for the plan year.''.
(3) Section 4971(e)(1) of such Code is amended by striking
``section 412(b)(3)(A)'' and inserting ``section
412(a)(1)(A)''.
(4) Section 4971(f)(1) of such Code is amended--
(A) by striking ``section 412(m)(5)'' and inserting
``section 430(i)(4)'', and
(B) by striking ``section 412(m)'' and inserting ``section
430(i)''.
(5) Section 4972(c)(7) of such Code is amended by striking
``except to the extent that such contributions exceed the
full-funding limitation (as defined in section 412(c)(7),
determined without regard to subparagraph (A)(i)(I)
thereof)'' and inserting ``except, in the case of a
multiemployer plan, to the extent that such contributions
exceed the full-funding limitation (as defined in section
431(c)(6))''.
(f) Reporting Requirements.--Section 6059(b) of such Code
is amended--
(1) by striking ``the accumulated funding deficiency (as
defined in section 412(a))'' in paragraph (2) and inserting
``the minimum required contribution determined under section
430, or the accumulated funding deficiency determined under
section 431,'', and
(2) by striking paragraph (3)(B) and inserting:
``(B) the requirements for reasonable actuarial assumptions
under section 430(f)(1) or 431(c)(3), whichever are
applicable, have been complied with.''.
Subtitle C--Other Provisions
SEC. 121. MODIFICATION OF TRANSITION RULE TO PENSION FUNDING
REQUIREMENTS.
(a) In General.--In the case of a plan that--
(1) was not required to pay a variable rate premium for the
plan year beginning in 1996,
(2) has not, in any plan year beginning after 1995, merged
with another plan (other than a plan sponsored by an employer
that was in 1996 within the controlled group of the plan
sponsor); and
(3) is sponsored by a company that is engaged primarily in
the interurban or interstate passenger bus service,
the rules described in subsection (b) shall apply for any
plan year beginning after 2005.
(b) Modified Rules.--The rules described in this subsection
are as follows:
(1) For purposes of section 430(i)(3) of the Internal
Revenue Code of 1986 and section 303(i)(3) of the Employee
Retirement Income Security Act of 1974, the plan shall be
treated as not having a funding shortfall for any plan year.
(2) For purposes of--
(A) determining unfunded vested benefits under section
4006(a)(3)(E)(iii) of such Act, and
(B) determining any present value or making any computation
under section 412 of such Code or section 302 of such Act,
the mortality table shall be the mortality table used by the
plan.
(c) Conforming Amendment.--
(1) Section 769 of the Retirement Protection Act of 1994 is
amended by striking subsection (c).
(2) The amendment made this subsection shall apply to plan
years beginning after 2005.
SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION
PLANS WHEN EMPLOYER DEFINED BENEFIT PLAN IN AT-
RISK STATUS.
(a) In General.--Subsection (b) of section 409A of the
Internal Revenue Code of 1986 (providing rules relating to
funding) is amended by redesignating paragraphs (3) and (4)
as paragraphs (4) and (5), respectively, and by inserting
after paragraph (2) the following new paragraph:
``(3) Employer's defined benefit plan in at-risk status.--
In the case of a plan to which section 412 applies, if--
``(A) during any period in which any defined benefit plan
of an employer is in an at-risk status (as defined in section
412(g)(3)), assets are set aside (directly or indirectly) in
a trust (or other arrangement determined by the Secretary),
or transferred to such a trust or other arrangement, for
purposes of paying deferred compensation under a nonqualified
deferred compensation plan of the employer, or
``(B) a nonqualified deferred compensation plan of the
employer provides that assets will become restricted to the
provision of benefits under the plan in connection with such
at-risk status (or other similar financial measure determined
by the Secretary) of the defined benefit plan, or assets are
so restricted,
such assets shall for purposes of section 83 be treated as
property transferred in connection with the performance of
services whether or not such assets are available to satisfy
claims of general creditors.''.
(b) Conforming Amendments.--Paragraphs (4) and (5) of
section 409A(b) of such Code, as redesignated by subsection
(a) of this subsection, are each amended by striking
``paragraph (1) or (2)'' each place it appears and inserting
``paragraph (1), (2), or (3)''.
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 2006.
TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS.
(a) In General.--Part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (as amended
by section 102) is amended further by inserting after section
303 the following new section:
``Minimum funding standards for multiemployer plans
``Sec. 304. (a) In General.--For purposes of section 302,
the accumulated funding deficiency of a multiemployer plan
for any plan year is--
[[Page H11693]]
``(1) except as provided in paragraph (2), the amount,
determined as of the end of the plan year, equal to the
excess (if any) of the total charges to the funding standard
account of the plan for all plan years (beginning with the
first plan year for which this part applies to the plan) over
the total credits to such account for such years, and
``(2) if the multiemployer plan is in reorganization for
any plan year, the accumulated funding deficiency of the plan
determined under section 4243.
``(b) Funding Standard Account.--
``(1) Account required.--Each multiemployer plan to which
this part applies shall establish and maintain a funding
standard account. Such account shall be credited and charged
solely as provided in this section.
``(2) Charges to account.--For a plan year, the funding
standard account shall be charged with the sum of--
``(A) the normal cost of the plan for the plan year,
``(B) the amounts necessary to amortize in equal annual
installments (until fully amortized)--
``(i) in the case of a plan in existence on January 1,
1974, the unfunded past service liability under the plan on
the first day of the first plan year to which this section
applies, over a period of 40 plan years,
``(ii) in the case of a plan which comes into existence
after January 1, 1974, the unfunded past service liability
under the plan on the first day of the first plan year to
which this section applies, over a period of 15 plan years,
``(iii) separately, with respect to each plan year, the net
increase (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(iv) separately, with respect to each plan year, the net
experience loss (if any) under the plan, over a period of 15
plan years, and
``(v) separately, with respect to each plan year, the net
loss (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount necessary to amortize each waived funding
deficiency (within the meaning of section 302(c)(3)) for each
prior plan year in equal annual installments (until fully
amortized) over a period of 15 plan years,
``(D) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 5 plan
years any amount credited to the funding standard account
under section 302(b)(3)(D) (as in effect on the day before
the date of the enactment of this section), and
``(E) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 20
years the contributions which would be required to be made
under the plan but for the provisions of section
302(c)(7)(A)(i)(I) (as in effect on the day before the date
of the enactment of this section).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the employer to
or under the plan for the plan year,
``(B) the amount necessary to amortize in equal annual
installments (until fully amortized)--
``(i) separately, with respect to each plan year, the net
decrease (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(ii) separately, with respect to each plan year, the net
experience gain (if any) under the plan, over a period of 15
plan years, and
``(iii) separately, with respect to each plan year, the net
gain (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount of the waived funding deficiency (within
the meaning of section 302(c)(3)) for the plan year, and
``(D) in the case of a plan year for which the accumulated
funding deficiency is determined under the funding standard
account if such plan year follows a plan year for which such
deficiency was determined under the alternative minimum
funding standard under section 305 (as in effect on the day
before the date of the enactment of this section), the excess
(if any) of any debit balance in the funding standard account
(determined without regard to this subparagraph) over any
debit balance in the alternative minimum funding standard
account.
``(4) Special rule for amounts first amortized to plan
years before 2006.--In the case of any amount amortized under
section 302(b) (as in effect before the date of the enactment
of Pension Protection Act of 2005) over any period beginning
with a plan year beginning before 2006, in lieu of the
amortization described in paragraphs (2)(B) and (3)(B), such
amount shall continue to be amortized under such section as
so in effect.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations prescribed by the Secretary of the
Treasury, amounts required to be amortized under paragraph
(2) or paragraph (3), as the case may be--
``(A) may be combined into one amount under such paragraph
to be amortized over a period determined on the basis of the
remaining amortization period for all items entering into
such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the resulting
amount to be amortized over a period determined on the basis
of the remaining amortization periods for all items entering
into whichever of the two amounts being offset is the
greater.
``(6) Interest.--The funding standard account (and items
therein) shall be charged or credited (as determined under
regulations prescribed by the Secretary of the Treasury) with
interest at the appropriate rate consistent with the rate or
rates of interest used under the plan to determine costs.
``(7) Certain amortization charges and credits.--In the
case of a plan which, immediately before the date of the
enactment of the Multiemployer Pension Plan Amendments Act of
1980, was a multiemployer plan (within the meaning of section
3(37) as in effect immediately before such date)--
``(A) any amount described in paragraph (2)(B)(ii),
(2)(B)(iii), or (3)(B)(i) of this subsection which arose in a
plan year beginning before such date shall be amortized in
equal annual installments (until fully amortized) over 40
plan years, beginning with the plan year in which the amount
arose;
``(B) any amount described in paragraph (2)(B)(iv) or
(3)(B)(ii) of this subsection which arose in a plan year
beginning before such date shall be amortized in equal annual
installments (until fully amortized) over 20 plan years,
beginning with the plan year in which the amount arose;
``(C) any change in past service liability which arises
during the period of 3 plan years beginning on or after such
date, and results from a plan amendment adopted before such
date, shall be amortized in equal annual installments (until
fully amortized) over 40 plan years, beginning with the plan
year in which the change arises; and
``(D) any change in past service liability which arises
during the period of 2 plan years beginning on or after such
date, and results from the changing of a group of
participants from one benefit level to another benefit level
under a schedule of plan benefits which--
``(i) was adopted before such date, and
``(ii) was effective for any plan participant before the
beginning of the first plan year beginning on or after such
date,
shall be amortized in equal annual installments (until fully
amortized) over 40 plan years, beginning with the plan year
in which the change arises.
``(8) Special rules relating to charges and credits to
funding standard account.--For purposes of this part--
``(A) Withdrawal liability.--Any amount received by a
multiemployer plan in payment of all or part of an employer's
withdrawal liability under part 1 of subtitle E of title IV
shall be considered an amount contributed by the employer to
or under the plan. The Secretary of the Treasury may
prescribe by regulation additional charges and credits to a
multiemployer plan's funding standard account to the extent
necessary to prevent withdrawal liability payments from being
unduly reflected as advance funding for plan liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in reorganization in
the immediately preceding plan year, any balance in the
funding standard account at the close of such immediately
preceding plan year--
``(i) shall be eliminated by an offsetting credit or charge
(as the case may be), but
``(ii) shall be taken into account in subsequent plan years
by being amortized in equal annual installments (until fully
amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any
accumulated funding deficiency under section 4243(a) as of
the end of the last plan year that the plan was in
reorganization.
``(C) Plan payments to supplemental program or withdrawal
liability payment fund.--Any amount paid by a plan during a
plan year to the Pension Benefit Guaranty Corporation
pursuant to section 4222 of this Act or to a fund exempt
under section 501(c)(22) of the Internal Revenue Code of 1986
pursuant to section 4223 of this Act shall reduce the amount
of contributions considered received by the plan for the plan
year.
``(D) Interim withdrawal liability payments.--Any amount
paid by an employer pending a final determination of the
employer's withdrawal liability under part 1 of subtitle E of
title IV and subsequently refunded to the employer by the
plan shall be charged to the funding standard account in
accordance with regulations prescribed by the Secretary of
the Treasury.
``(E) Election for deferral of charge for portion of net
experience loss.--If an election is in effect under section
302(b)(7)(F) (as in effect on the day before the date of the
enactment of this section) for any plan year, the funding
standard account shall be charged in the plan year to which
the portion of the net experience loss deferred by such
election was deferred with the amount so deferred (and
paragraph (2)(B)(iv) shall not apply to the amount so
charged).
``(F) Financial assistance.--Any amount of any financial
assistance from the Pension Benefit Guaranty Corporation to
any plan, and any repayment of such amount, shall be taken
into account under this section and section 412 in such
manner as is determined by the Secretary of the Treasury.
``(G) Short-term benefits.--To the extent that any plan
amendment increases the unfunded past service liability under
the plan by reason of an increase in benefits which
[[Page H11694]]
are payable under the plan during a period that does not
exceed 14 years, paragraph (2)(B)(iii) shall be applied
separately with respect to such increase in unfunded past
service liability by substituting the number of years of the
period during which such benefits are payable for `15'.
``(c) Additional Rules.--
``(1) Determinations to be made under funding method.--For
purposes of this part, normal costs, accrued liability, past
service liabilities, and experience gains and losses shall be
determined under the funding method used to determine costs
under the plan.
``(2) Valuation of assets.--
``(A) In general.--For purposes of this part, the value of
the plan's assets shall be determined on the basis of any
reasonable actuarial method of valuation which takes into
account fair market value and which is permitted under
regulations prescribed by the Secretary of the Treasury.
``(B) Election with respect to bonds.--The value of a bond
or other evidence of indebtedness which is not in default as
to principal or interest may, at the election of the plan
administrator, be determined on an amortized basis running
from initial cost at purchase to par value at maturity or
earliest call date. Any election under this subparagraph
shall be made at such time and in such manner as the
Secretary of the Treasury shall by regulations provide, shall
apply to all such evidences of indebtedness, and may be
revoked only with the consent of such Secretary.
``(3) Actuarial assumptions must be reasonable.--For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be
determined on the basis of actuarial assumptions and
methods--
``(A) which, in the aggregate, are reasonable (taking into
account the experience of the plan and reasonable
expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(4) Treatment of certain changes as experience gain or
loss.--For purposes of this section, if--
``(A) a change in benefits under the Social Security Act or
in other retirement benefits created under Federal or State
law, or
``(B) a change in the definition of the term `wages' under
section 3121 of the Internal Revenue Code of 1986, or a
change in the amount of such wages taken into account under
regulations prescribed for purposes of section 401(a)(5) of
such Code,
results in an increase or decrease in accrued liability under
a plan, such increase or decrease shall be treated as an
experience loss or gain.
``(5) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency in excess of the full funding
limitation--
``(A) the funding standard account shall be credited with
the amount of such excess, and
``(B) all amounts described in subparagraphs (B), (C), and
(D) of paragraph (2) and subparagraph (B) of subsection
(b)(3) which are required to be amortized shall be considered
fully amortized for purposes of such subparagraphs.
``(6) Full-funding limitation.--
``(A) In general.--For purposes of paragraph (5), the term
`full-funding limitation' means the excess (if any) of--
``(i) the accrued liability (including normal cost) under
the plan (determined under the entry age normal funding
method if such accrued liability cannot be directly
calculated under the funding method used for the plan), over
``(ii) the lesser of--
``(I) the fair market value of the plan's assets, or
``(II) the value of such assets determined under paragraph
(2).
``(B) Minimum amount.--
``(i) In general.--In no event shall the full-funding
limitation determined under subparagraph (A) be less than the
excess (if any) of--
``(I) 90 percent of the current liability of the plan
(including the expected increase in current liability due to
benefits accruing during the plan year), over
``(II) the value of the plan's assets determined under
paragraph (2).
``(ii) Assets.--For purposes of clause (i), assets shall
not be reduced by any credit balance in the funding standard
account.
``(C) Current liability.--For purposes of this paragraph--
``(i) In general.--The term `current liability' means all
liabilities to employees and their beneficiaries under the
plan.
``(ii) Treatment of unpredictable contingent event
benefits.--For purposes of clause (i), any benefit contingent
on an event other than--
``(I) age, service, compensation, death, or disability, or
``(II) an event which is reasonably and reliably
predictable (as determined by the Secretary of the Treasury),
shall not be taken into account until the event on which the
benefit is contingent occurs.
``(iii) Interest rate used.--The rate of interest used to
determine current liability under this paragraph shall be the
rate of interest determined under subparagraph (D).
``(iv) Mortality tables.--
``(I) Commissioners' standard table.--In the case of plan
years beginning before the first plan year to which the first
tables prescribed under subclause (II) apply, the mortality
table used in determining current liability under this
paragraph shall be the table prescribed by the Secretary of
the Treasury which is based on the prevailing commissioners'
standard table (described in section 807(d)(5)(A) of the
Internal Revenue Code of 1986) used to determine reserves for
group annuity contracts issued on January 1, 1993.
``(II) Secretarial authority.--The Secretary of the
Treasury may by regulation prescribe for plan years beginning
after December 31, 1999, mortality tables to be used in
determining current liability under this subsection. Such
tables shall be based upon the actual experience of pension
plans and projected trends in such experience. In prescribing
such tables, such Secretary shall take into account results
of available independent studies of mortality of individuals
covered by pension plans.
``(v) Separate mortality tables for the disabled.--
Notwithstanding clause (iv)--
``(I) In general.--In the case of plan years beginning
after December 31, 1995, the Secretary of the Treasury shall
establish mortality tables which may be used (in lieu of the
tables under clause (ii)) to determine current liability
under this subsection for individuals who are entitled to
benefits under the plan on account of disability. Such
Secretary shall establish separate tables for individuals
whose disabilities occur in plan years beginning before
January 1, 1995, and for individuals whose disabilities occur
in plan years beginning on or after such date.
``(II) Special rule for disabilities occurring after
1994.--In the case of disabilities occurring in plan years
beginning after December 31, 1994, the tables under subclause
(I) shall apply only with respect to individuals described in
such subclause who are disabled within the meaning of title
II of the Social Security Act and the regulations thereunder.
``(vi) Periodic review.--The Secretary of the Treasury
shall periodically (at least every 5 years) review any tables
in effect under this subparagraph and shall, to the extent
such Secretary determines necessary, by regulation update the
tables to reflect the actual experience of pension plans and
projected trends in such experience.
``(D) Required change of interest rate.--For purposes of
determining a plan's current liability for purposes of this
paragraph--
``(i) In general.--If any rate of interest used under the
plan under subsection (b)(5) to determine cost is not within
the permissible range, the plan shall establish a new rate of
interest within the permissible range.
``(ii) Permissible range.--For purposes of this
subparagraph--
``(I) In general.--Except as provided in subclause (II),
the term `permissible range' means a rate of interest which
is not more than 5 percent above, and not more than 10
percent below, the weighted average of the rates of interest
on 30-year Treasury securities during the 4-year period
ending on the last day before the beginning of the plan year.
``(II) Secretarial authority.--If the Secretary of the
Treasury finds that the lowest rate of interest permissible
under subclause (I) is unreasonably high, such Secretary may
prescribe a lower rate of interest, except that such rate may
not be less than 80 percent of the average rate determined
under such subclause.
``(iii) Assumptions.--Notwithstanding paragraph (3)(A), the
interest rate used under the plan shall be--
``(I) determined without taking into account the experience
of the plan and reasonable expectations, but
``(II) consistent with the assumptions which reflect the
purchase rates which would be used by insurance companies to
satisfy the liabilities under the plan.
``(E) Full funding limitation.--For purposes of this
paragraph, unless otherwise provided by the plan, the accrued
liability under a multiemployer plan shall not include
benefits which are not nonforfeitable under the plan after
the termination of the plan (taking into consideration
section 411(d)(3) of the Internal Revenue Code of 1986).
``(7) Annual valuation.--
``(A) In general.--For purposes of this section, a
determination of experience gains and losses and a valuation
of the plan's liability shall be made not less frequently
than once every year, except that such determination shall be
made more frequently to the extent required in particular
cases under regulations prescribed by the Secretary of the
Treasury.
``(B) Valuation date.--
``(i) Current year.--Except as provided in clause (ii), the
valuation referred to in subparagraph (A) shall be made as of
a date within the plan year to which the valuation refers or
within one month prior to the beginning of such year.
``(ii) Use of prior year valuation.--The valuation referred
to in subparagraph (A) may be made as of a date within the
plan year prior to the year to which the valuation refers if,
as of such date, the value of the assets of the plan are not
less than 100 percent of the plan's current liability (as
defined in paragraph (6)(C) without regard to clause (iv)
thereof).
``(iii) Adjustments.--Information under clause (ii) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
[[Page H11695]]
``(iv) Limitation.--A change in funding method to use a
prior year valuation, as provided in clause (ii), may not be
made unless as of the valuation date within the prior plan
year, the value of the assets of the plan are not less than
125 percent of the plan's current liability (as defined in
paragraph (6)(C) without regard to clause (iv) thereof).
``(8) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer after the last day of such plan year, but
not later than two and one-half months after such day, shall
be deemed to have been made on such last day. For purposes of
this subparagraph, such two and one-half month period may be
extended for not more than six months under regulations
prescribed by the Secretary of the Treasury.
``(d) Extension of Amortization Periods for Multiemployer
Plans.--In the case of a multiemployer plan--
``(1) Automatic extension.--The Secretary of the Treasury
shall, upon application and subject to the requirements of
paragraph (4), extend the period of years required to
amortize any unfunded liability (described in any clause of
subsection (b)(2)(B)) of the plan for a period of time not in
excess of 5 years.
``(2) Extension for cause.--The period of years required to
amortize any unfunded liability (described in any clause of
subsection (b)(2)(B)) of any multiemployer plan may be
extended (in addition to any extension under paragraph (1))
by the Secretary of the Treasury for a period of time (not in
excess of 5 years) if he determines that such extension would
carry out the purposes of this Act and would provide adequate
protection for participants under the plan and their
beneficiaries and if he determines that the failure to permit
such extension would--
``(A) result in--
``(i) a substantial risk to the voluntary continuation of
the plan, or
``(ii) a substantial curtailment of pension benefit levels
or employee compensation, and
``(B) be adverse to the interests of plan participants in
the aggregate.
``(3) Interest rate.--The interest rate applicable for any
plan year under any arrangement entered into by the Secretary
of the Treasury in connection with an extension granted under
this subsection shall be the greater of--
``(A) 150 percent of the Federal mid-term rate (as in
effect under section 1274 of the Internal Revenue Code of
1986 for the 1st month of such plan year), or
``(B) the rate of interest used under the plan for
determining costs.
``(4) Required notice.--
``(A) In general.--The Secretary of the Treasury shall,
before granting an extension under this section, require each
applicant to provide evidence satisfactory to such Secretary
that the applicant has provided notice of the filing of the
application for such extension to each employee organization
representing employees covered by the affected plan and to
the Pension Benefit Guaranty Corporation.
``(B) Consideration of relevant information.--The Secretary
of the Treasury shall consider any relevant information
provided by a person to whom notice was given under paragraph
(1).
``(e) Restriction on Plan Amendments.--
``(1) In general.--No amendment of a multiemployer plan
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 if a waiver
under section 302(c) or an extension of time under subsection
(d) is in effect with respect to the plan, or if a plan
amendment described in section 302(d)(2) has been made at any
time in the preceding 24 months. If a plan is amended in
violation of the preceding sentence, any such waiver, or
extension of time, shall not apply to any plan year ending on
or after the date on which such amendment is adopted.
``(2) Exception.--Paragraph (1) shall not apply to any plan
amendment which--
``(A) the Secretary determines to be reasonable and which
provides for only de minimis increases in the liabilities of
the plan,
``(B) only repeals an amendment described in section
302(d)(2), or
``(C) is required as a condition of qualification under
part I of subchapter D, of chapter 1, of the Internal Revenue
Code of 1986.''.
(b) Conforming Amendments.--
(1) Section 301 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1081) is amended by striking
subsection (d).
(2) The table of contents in section 1 of such Act (as
amended by section 102 of this Act) is amended further by
inserting after the item relating to section 303 the
following new item:
``Sec. 304. Minimum funding standards for multiemployer plans.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after 2005.
SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN
ENDANGERED OR CRITICAL STATUS.
(a) In General.--Part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (as amended
by the preceding provisions of this Act) is amended further
by inserting after section 304 the following new section:
``Additional funding rules for multiemployer plans in endangered status
or critical status
``Sec. 305. (a) Annual Certification by Plan Actuary.--
``(1) In general.--During the 90-day period beginning on
first day of each plan year of a multiemployer plan, the plan
actuary of shall certify to the Secretary of the Treasury
whether or not the plan is in endangered status for such plan
year and whether or not the plan is in critical status for
such plan year.
``(2) Actuarial projections of assets and liabilities.--
``(A) In general.--In making the determinations under
paragraph (1), the plan actuary shall make projections under
subsections (b)(2) and (c)(2) for the current and succeeding
plan years, using reasonable actuarial assumptions and
methods, of the current value of the assets of the plan and
the present value of all liabilities to participants and
beneficiaries under the plan for the current plan year as of
the beginning of such year, as set forth in the actuarial
statement prepared for the preceding plan year under section
103(d).
``(B) Determinations of future contributions.--Any such
actuarial projection of plan assets shall assume--
``(i) reasonably anticipated employer and employee
contributions for the current and succeeding plan years,
assuming that the terms of the one or more collective
bargaining agreements pursuant to which the plan is
maintained for the current plan year continue in effect for
succeeding plan years, or
``(ii) employer and employee contributions projected for
the current and succeeding plan years under the terms of such
collective bargaining agreements (assuming the continued
application of such terms indefinitely to such plan years),
but only if the plan actuary determines there have been no
significant demographic changes that would make continued
application of such terms unreasonable.
``(3) Presumed status in absence of timely actuarial
certification.--If certification under this subsection is not
made before the end of the 90-day period specified in
paragraph (1), the plan shall be presumed to be in critical
status for such plan year until such time as the actuary
makes a contrary certification.
``(4) Notice.--In any case in which a multiemployer plan is
certified to be in endangered or critical status for a plan
year under paragraph (1), is presumed to be in critical
status under paragraph (3), or is deemed to be in critical
status under subsection (b)(7), the plan sponsor shall, not
later than 30 days after the date of the certification,
presumption, or deeming, provide notification of the
endangered or critical status to the participants and
beneficiaries, the bargaining parties, the Pension Benefit
Guaranty Corporation, the Secretary of the Treasury, and the
Secretary of Labor.
``(b) Funding Rules for Multiemployer Plans in Endangered
Status.--
``(1) In general.--In any case in which a multiemployer
plan is in endangered status for a plan year, the plan
sponsor shall, in accordance with this subsection, amend the
plan to include a funding improvement plan upon approval
thereof by the bargaining parties under this subsection. The
amendment shall be adopted not later than 240 days after the
date on which the plan is certified to be in endangered
status under subsection (a)(1).
``(2) Endangered status.--A multiemployer plan is in
endangered status for a plan year if, as determined by the
plan actuary under subsection (c)--
``(A) the plan's funded percentage for such plan year is
less than 80 percent, or
``(B) the plan has an accumulated funding deficiency for
such plan year under section 304 or is projected to have such
an accumulated funding deficiency for any of the 6 succeeding
plan years, taking into account any extension of amortization
periods under section 304(d).
``(3) Funding improvement plan.--
``(A) Benchmarks.--A funding improvement plan shall consist
of amendments to the plan formulated to provide, under
reasonable actuarial assumptions, for the attainment, during
the funding improvement period under the funding improvement
plan, of the following benchmarks:
``(i) Reduction in unfunded current liability.--A
percentage decrease in the plan's unfunded current liability
from the amount for the first plan year of the funding
improvement period to the amount for the last plan year of
the funding improvement period, of at least 33\1/3\ percent.
``(ii) Avoidance of accumulated funding deficiencies.--No
accumulated funding deficiency for any plan year during the
funding improvement period (taking into account any extension
of amortization periods under section 304(d)).
``(B) Funding improvement period.--The funding improvement
period for any funding improvement plan adopted pursuant to
this subsection is the 10-year period beginning on the
earlier of--
``(i) the second anniversary of the date of the adoption of
the funding improvement plan, or
``(ii) the first day of the first plan year of the
multiemployer plan following the plan year in which occurs
the first date after the day of the certification as of which
collective bargaining agreements covering on the day of such
certification at least 75 percent of active participants in
such multiemployer plan have expired.
[[Page H11696]]
``(C) Reporting.--A summary of any funding improvement plan
or modification thereto adopted during any plan year shall be
included in the annual report for such plan year under
section 104(a) and in the summary annual report described in
section 104(b)(3).
``(4) Development of funding improvement plan.--
``(A) Actions by plan sponsor pending approval.--Pending
the approval of a funding improvement plan under this
paragraph, the plan sponsor shall take all reasonable
actions, consistent with the terms of the plan and applicable
law, necessary to ensure--
``(i) an increase in the plan's funded percentage, and
``(ii) postponement of an accumulated funding deficiency
for at least 1 additional plan year.
Such actions include applications for extensions of
amortization periods under section 304(d), use of the
shortfall funding method in making funding standard account
computations, amendments to the plan's benefit structure,
reductions in future benefit accruals, and other reasonable
actions consistent with the terms of the plan and applicable
law.
``(B) Recommendations by plan sponsor.--
``(i) In general.--During the period of 90 days following
the date on which a multiemployer plan is certified to be in
endangered status, the plan sponsor shall develop and provide
to the bargaining parties alternative proposals for revised
benefit structures, contribution structures, or both, which,
if adopted as amendments to the plan, may be reasonably
expected to meet the benchmarks described in paragraph
(3)(A). Such proposals shall include--
``(I) at least one proposal for reductions in the amount of
future benefit accruals necessary to achieve the benchmarks,
assuming no amendments increasing contributions under the
plan (other than amendments increasing contributions
necessary to achieve the benchmarks after amendments have
reduced future benefit accruals to the maximum extent
permitted by law), and
``(II) at least one proposal for increases in contributions
under the plan necessary to achieve the benchmarks, assuming
no amendments reducing future benefit accruals under the
plan.
``(ii) Requests by bargaining parties.--Upon the request of
any bargaining party who--
``(I) employs at least 5 percent of the active
participants, or
``(II) represents as an employee organization, for purposes
of collective bargaining, at least 5 percent of the active
participants,
the plan sponsor shall provide all such parties information
as to other combinations of increases in contributions and
reductions in future benefit accruals which would result in
achieving the benchmarks.
``(iii) Other information.--The plan sponsor may, as it
deems appropriate, prepare and provide the bargaining parties
with additional information relating to contribution
structures or benefit structures or other information
relevant to the funding improvement plan.
``(5) Maintenance of contributions pending approval of
funding improvement plan.--Pending approval of a funding
improvement plan by the bargaining parties with respect to a
multiemployer plan, the multiemployer plan may not be amended
so as to provide--
``(A) a reduction in the level of contributions for
participants who are not in pay status,
``(B) a suspension of contributions with respect to any
period of service, or
``(C) any new direct or indirect exclusion of younger or
newly hired employees from plan participation.
``(6) Benefit restrictions pending approval of funding
improvement plan.--Pending approval of a funding improvement
plan by the bargaining parties with respect to a
multiemployer plan--
``(A) Restrictions on lump sum distributions and similar
distributions.--The multiemployer plan may not be amended so
as to provide additional forms of benefits.
``(B) Prohibition on benefit increases.--
``(i) In general.--No amendment of the plan 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 may be adopted.
``(ii) Exception.--Clause (i) shall not apply to any plan
amendment which--
``(I) the Secretary of the Treasury determines to be
reasonable and which provides for only de minimis increases
in the liabilities of the plan,
``(II) only repeals an amendment described in section
302(d)(2), or
``(III) is required as a condition of qualification under
part I of subchapter D of chapter 1 of subtitle A of the
Internal Revenue Code of 1986.
``(7) Default critical status if no funding improvement
plan adopted.--If no plan amendment adopting a funding
improvement plan has been adopted by the end of the 240-day
period referred to in subsection (a)(1), the plan shall be in
critical status as of the first day of the succeeding plan
year.
``(8) Restrictions upon approval of funding improvement
plan.--Upon adoption of a funding improvement plan with
respect to a multiemployer plan, the plan may not be
amended--
``(A) so as to be inconsistent with the funding improvement
plan, or
``(B) so as to increase future benefit accruals, unless the
plan actuary certifies in advance that, after taking into
account the proposed increase, the plan is reasonably
expected to meet the the benchmarks described in paragraph
(3)(A).
``(c) Funding Rules for Multiemployer Plans in Critical
Status.--
``(1) In general.--In any case in which a multiemployer
plan is in critical status for a plan year, the plan sponsor
shall, in accordance with this subsection, amend the plan to
include a rehabilitation plan under this subsection. The
amendment shall be adopted not later than 240 days after the
date on which the plan is certified to be in critical status
under subsection (a)(1) or is presumed to be in critical
status under subsection (a)(3), or the first day of the plan
year in the case of a plan that is deemed to be in critical
status under subsection (b)(7).
``(2) Critical status.--A multiemployer plan is in critical
status for a plan year if--
``(A) the plan is in endangered status for the plan year
and the requirements of subsection (b)(1) are not met with
respect to the plan for such plan year, or
``(B) as determined by the plan actuary under subsection
(a), the plan is described in paragraph (3).
Any multiemployer plan which is in critical status under
subparagraph (A) or (B) for a plan year shall be treated as
in critical status also for the succeeding plan year.
``(3) Criticality description.--For purposes of paragraph
(2)(B), a plan is described in this paragraph if the plan is
described in at least one of the following subparagraphs:
``(A) A plan is described in this subparagraph if, as of
the beginning of the current plan year--
``(i) the funded percentage of the plan is less than 65
percent, and
``(ii) the sum of--
``(I) the market value of plan assets, plus
``(II) the present value of the reasonably anticipated
employer and employee contributions for the current plan year
and each of the 6 succeeding plan years, assuming that the
terms of the one or more collective bargaining agreements
pursuant to which the plan is maintained for the current plan
year continue in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits
for all participants and beneficiaries projected to be
payable under the plan during the current plan year and each
of the 6 succeeding plan years (plus administrative expenses
for such plan years).
``(B) A plan is described in this subparagraph if, as of
the beginning of the current plan year, the sum of--
``(i) the market value of plan assets, plus
``(ii) the present value of the reasonably anticipated
employer and employee contributions for the current plan year
and each of the 4 succeeding plan years, assuming that the
terms of the one or more collective bargaining agreements
pursuant to which the plan is maintained for the current plan
year remain in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits
for all participants and beneficiaries projected to be
payable under the plan during the current plan year and each
of the 4 succeeding plan years (plus administrative expenses
for such plan years).
``(C) A plan is described in this subparagraph if--
``(i) as of the beginning of the current plan year, the
funded percentage of the plan is less than 65 percent, and
``(ii) the plan has an accumulated funding deficiency for
the current plan year or is projected to have an accumulated
funding deficiency for any of the 4 succeeding plan years,
taking into account any extension of amortization periods
under section 304(e).
``(D) A plan is described in this subparagraph if--
``(i)(I) the plan's normal cost for the current plan year,
plus interest (determined at the rate used for determining
cost under the plan) for the current plan year on the amount
of unfunded benefit liabilities under the plan as of the last
date of the preceding plan year, exceeds
``(II) the present value, as of the beginning of the
current plan year, of the reasonably anticipated employer and
employee contributions for the current plan year,
``(ii) the present value, as of the beginning of the
current plan year, of nonforfeitable benefits of inactive
participants is greater than the present value, as of the
beginning of the current plan year, of nonforfeitable
benefits of active participants, and
``(iii) the plan is projected to have an accumulated
funding deficiency for the current plan year or any of the 4
succeeding plan years.
``(E) A plan is described in this subparagraph if--
``(i) the funded percentage of the plan is greater than 65
percent for the current plan year, and
``(ii) the plan is projected to have an accumulated funding
deficiency during either of the following 3 plan years.
``(4) Rehabilitation plan.--
``(A) In general.--A rehabilitation plan shall consist of--
``(i) amendments to the plan providing (under reasonable
actuarial assumptions) for measures, agreed to by the
bargaining parties, to increase contributions, reduce plan
expenditures (including plan mergers and
[[Page H11697]]
consolidations), or reduce future benefit accruals, or to
take any combination of such actions, determined necessary to
cause the plan to cease, during the rehabilitation period, to
be in critical status,
``(ii) measures, agreed to by the bargaining parties, to
provide funding relief, or
``(iii) reasonable measures to forestall possible
insolvency (within the meaning of section 4245) if the plan
sponsor determines that, upon exhaustion of all reasonable
measures, the plan would not cease during the rehabilitation
period to be in critical status.
``(B) Rehabilitation period.--The rehabilitation period for
any rehabilitation plan adopted pursuant to this section is
the 10-year period beginning on the earlier of--
``(i) the second anniversary of the date of the adoption of
the rehabilitation plan, or
``(ii) the first day of the first plan year of the
multiemployer plan following the plan year in which occurs
the first date after the day of the certification as of which
collective bargaining agreements covering on the day of such
certification at least 75 percent of active participants in
such multiemployer plan have expired.
``(C) Reporting.--A summary of any rehabilitation plan or
modification thereto adopted during any plan year, together
with annual updates regarding the funding ratio of the plan,
shall be included in the annual report for such plan year
under section 104(a) and in the summary annual report
described in section 104(b)(3).
``(5) Development of rehabilitation plan.--
``(A) Proposals by plan sponsor.--
``(i) In general.--Within 90 days after the date of the
certification under subsection (a) that the plan is in
critical status (or the date as of which the requirements of
subsection (b)(1) are not met with respect to the plan), the
plan sponsor shall propose to all bargaining parties a range
of alternative schedules of increases in contributions and
reductions in future benefit accruals that would serve to
carry out a rehabilitation plan under this subsection.
``(ii) Proposal assuming no contribution increases.--Such
proposals shall include, as one of the proposed schedules, a
schedule of those reductions in future benefit accruals that
would be necessary to cause the plan to cease to be in
critical status if there were no further increases in rates
of contribution to the plan.
``(iii) Proposal where contributions are necessary.--If the
plan sponsor determines that the plan will not cease to be in
critical status during the rehabilitation period unless the
plan is amended to provide for an increase in contributions,
the plan sponsor's proposals shall include a schedule of
those increases in contribution rates that would be necessary
to cause the plan to cease to be in critical status if future
benefit accruals were reduced to the maximum extent permitted
by law and the rate of future benefit accruals did not exceed
1 percent per plan year.
``(B) Requests for additional schedules.--Upon the joint
request of all bargaining parties, each of whom--
``(i) employs at least 5 percent of the active
participants, or
``(ii) represents as an employee organization, for purposes
of collective bargaining, at least 5 percent of the active
participants,
the plan sponsor shall include among the proposed schedules
such schedules of increases in contributions and reductions
in future benefit accruals as may be specified by the
bargaining parties.
``(C) Default schedule.--In any case in which the
bargaining parties, as of 240 days after the later of the
date of the certification under subsection (a) or the first
day the plan is in critical status under subsection (a)(3) or
(b)(7), have not agreed to at least one of the proposed
schedules, the plan sponsor shall amend the plan to implement
the schedule required by subparagraph (A)(ii).
``(D) Subsequent amendments.--Upon the adoption of a
schedule of increases in contributions or reductions in
future benefit accruals as part of the rehabilitation plan,
the plan sponsor may amend the plan thereafter to update the
schedule to adjust for any experience of the plan contrary to
past actuarial assumptions, except that such an amendment may
be made not more than once in any 3-year period.
``(E) Allocation of reductions in future benefit
accruals.--Any schedule containing reductions in future
benefit accruals forming a part of a rehabilitation plan
shall be applicable with respect to any group of active
participants who are employed by any bargaining party (as an
employer obligated to contribute under the plan) in
proportion to the extent to which increases in contributions
under such schedule apply to such bargaining party.
``(6) Maintenance of contributions and restrictions on
benefits pending adoption of rehabilitation plan.--The rules
of paragraphs (5) and (6) of subsection (b) shall apply for
purposes of this subsection by substituting the term
`rehabilitation plan' for `funding improvement plan'.
``(7) Deemed withdrawal.--Upon the failure of any employer
who has an obligation to contribute under the plan to make
contributions in compliance with the schedule adopted under
paragraph (6) as part of the rehabilitation plan, the failure
of the employer may, at the discretion of the plan sponsor,
be treated as a withdrawal by the employer from the plan
under section 4203 or a partial withdrawal by the employer
under section 4205.
``(d) Definitions.--For purposes of this section--
``(1) Bargaining party.--The term `bargaining party' means,
in connection with a multiemployer plan--
``(A) an employer who has an obligation to contribute under
the plan, and
``(B) an employee organization which, for purposes of
collective bargaining, represents plan participants employed
by such an employer.
``(2) Current liability.--The term `current liability' has
the meaning provided such term in section 304(c)(6)(C).
``(3) Unfunded current liability.--The term `unfunded
current liability' means the excess (if any) of--
``(A) the current liability of the plan, over
``(B) the value of the plan's assets determined under
section 304(c)(2).
``(4) Funded percentage.--The term `funded percentage'
means the percentage expressed as a ratio of which--
``(A) the numerator of which is the value of the plan's
assets, as determined under section 304(c)(2), and
``(B) the denominator of which is the accrued liability of
the plan.
``(5) Unfunded vested benefits.--The term `unfunded vested
benefits' has the meaning provided in section 4241(b)(9).
``(6) Accumulated funding deficiency.--The term
`accumulated funding deficiency' has the meaning provided
such term in section 304(a).
``(7) Active participant.--The term `active participant'
means, in connection with a multiemployer plan, a participant
who is in covered service under the plan.
``(8) Inactive participant.--The term `inactive
participant' means, in connection with a multiemployer plan,
a participant who--
``(A) is not in covered service under the plan, and
``(B) is in pay status under the plan or has a
nonforfeitable right to benefits under the plan.
``(9) Pay status.--A person is in `pay status' under a
multiemployer plan if--
``(A) at any time during the current plan year, such person
is a participant or beneficiary under the plan and is paid an
early, late, normal, or disability retirement benefit under
the plan (or a death benefit under the plan related to a
retirement benefit), or
``(B) to the extent provided in regulations of the
Secretary of the Treasury, such person is entitled to such a
benefit under the plan.
``(10) Obligation to contribute.--The term `obligation to
contribute' has the meaning provided such term under section
4212(a).''.
(b) Conforming Amendment.--The table of contents in section
1 of such Act (as amended by the preceding provisions of this
Act) is amended further by inserting after the item relating
to section 304 the following new item:
``Sec. 305. Additional funding rules for multiemployer plans in
endangered status or critical status.''.
(c) Effective Date.--The amendment made by this section
shall apply with respect to plan years beginning after 2005.
SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER
PLANS.
(a) Advance Determination of Impending Insolvency Over 5
Years.--Section 4245(d)(1) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1426(d)(1)) is amended--
(1) by striking ``3 plan years'' the second place it
appears and inserting ``5 plan years''; and
(2) by adding at the end the following new sentence: ``If
the plan sponsor makes such a determination that the plan
will be insolvent in any of the next 5 plan years, the plan
sponsor shall make the comparison under this paragraph at
least annually until the plan sponsor makes a determination
that the plan will not be insolvent in any of the next 5 plan
years.''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to determinations made in plan years
beginning after 2005.
SEC. 204. WITHDRAWAL LIABILITY REFORMS.
(a) Repeal of Limitation on Withdrawal Liability in the
Event of Certain Sales of Employer Assets to Unrelated
Parties.--
(1) In general.--Section 4225 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1405) is repealed.
(2) Conforming amendment.--The table of contents in section
1 of such Act is amended by striking the item relating to
section 4225.
(3) Effective date.--The amendments made by this section
shall apply with respect to sales occurring on or after
January 1, 2006.
(b) Repeal of Limitation to 20 Annual Payments.--
(1) In general.--Section 4219(c)(1) of such Act (29 U.S.C.
1399(c)(1)) is amended by striking subparagraph (B).
(2) Effective date.--The amendment made by this section
shall apply with respect to withdrawals occurring on or after
January 1, 2006.
(c) Partial Withdrawals by Means of Outsourcing.--
(1) In general.--Section 4205(b)(2)(A) of such Act (29
U.S.C. 1385(b)(2)(A)) is amended--
(A) by striking ``or'' at the end of clause (i);
(B) by striking ``ceased.'' at the end of clause (ii) and
inserting ``ceased, or''; and
(C) by adding at the end the following new clause:
[[Page H11698]]
``(iii) an employer continues to perform work of the type
for which contributions are made under the plan by means of
services of individuals who are not employees of such
employer covered by such plan.''.
(2) Effective date.--The amendment made by this subsection
shall apply with respect to work performed on or after
January 1, 2006.
(d) Repeal of Special Rule for Long and Short Haul Trucking
Industry.--
(1) In general.--Subsection (d) of section 4203 of such Act
(29 U.S.C. 1383(d)) is repealed.
(2) Effective date.--The repeal under this subsection shall
apply with respect to cessations to have obligations to
contribute to multiemployer plans and cessations of covered
operations under such plans occurring on or after January 1,
2006.
(e) Application of Forgiveness Rule to Plans Primarily
Covering Employees in the Building and Construction.--
(1) In general.--Section 4210(b) of such Act (29 U.S.C.
1390(b)) is amended--
(A) by striking paragraph (1); and
(B) by redesignating paragraphs (2) through (4) as
paragraphs (1) through (3), respectively.
(2) Effective date.--The amendments made by this subsection
shall apply with respect to plan withdrawals occurring on or
after January 1, 2006.
SEC. 205. REMOVAL OF RESTRICTIONS WITH RESPECT TO PROCEDURES
APPLICABLE TO DISPUTES INVOLVING WITHDRAWAL
LIABILITY.
(a) In General.--Section 4221(f)(1) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1401(f)(1))
is amended--
(1) in subparagraph (A) by inserting ``and'' after
``plan,'', and
(2) by striking subparagraphs (B) and (C) and inserting the
following new subparagraph:
``(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 any transaction which occurred at least
5 years (2 years in the case of a small employer) before the
date of the complete or partial withdrawal was to evade or
avoid withdrawal liability under this subtitle,''.
(b) Small Employer.--Paragraph (2) of section 4221(f) of
such Act is amended by adding at the end the following new
subparagraph:
``(C) Small employer.--For purposes of paragraph (1)(B)--
``(i) In general.--The term `small employer' means any
employer who (as of immediately before the transaction
referred to in paragraph (1)(B)) employs not more than 250
employees.
``(ii) Controlled group.--Any group treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 of the Internal Revenue Code of 1986 shall be treated as
a single employer for purposes of this subparagraph.''.
(c) Conforming Amendment.--Subparagraph (A) of section
4221(f)(2) of such Act is amended by striking
``Notwithstanding'' and inserting ``In the case of a
transaction occurring before January 1, 1999, and at least 5
years before the date of the complete or partial withdrawal,
notwithstanding''.
(d) 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 on or after the date of the enactment of
this Act.
Subtitle B--Amendments to Internal Revenue Code of 1986
SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS.
(a) In General.--Subpart A of part III of subchapter D of
chapter 1 of the Internal Revenue Code of 1986 (added by
section 112 of this Act) is amended by adding at the end the
following new section:
``SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER
PLANS.
``(a) In General.--For purposes of section 412, the
accumulated funding deficiency of a multiemployer plan for
any plan year is--
``(1) except as provided in paragraph (2), the amount,
determined as of the end of the plan year, equal to the
excess (if any) of the total charges to the funding standard
account of the plan for all plan years (beginning with the
first plan year for which this part applies to the plan) over
the total credits to such account for such years, and
``(2) if the multiemployer plan is in reorganization for
any plan year, the accumulated funding deficiency of the plan
determined under section 418B.
``(b) Funding Standard Account.--
``(1) Account required.--Each multiemployer plan to which
this part applies shall establish and maintain a funding
standard account. Such account shall be credited and charged
solely as provided in this section.
``(2) Charges to account.--For a plan year, the funding
standard account shall be charged with the sum of--
``(A) the normal cost of the plan for the plan year,
``(B) the amounts necessary to amortize in equal annual
installments (until fully amortized)--
``(i) in the case of a plan in existence on January 1,
1974, the unfunded past service liability under the plan on
the first day of the first plan year to which this section
applies, over a period of 40 plan years,
``(ii) in the case of a plan which comes into existence
after January 1, 1974, the unfunded past service liability
under the plan on the first day of the first plan year to
which this section applies, over a period of 15 plan years,
``(iii) separately, with respect to each plan year, the net
increase (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(iv) separately, with respect to each plan year, the net
experience loss (if any) under the plan, over a period of 15
plan years, and
``(v) separately, with respect to each plan year, the net
loss (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount necessary to amortize each waived funding
deficiency (within the meaning of section 412(c)(3)) for each
prior plan year in equal annual installments (until fully
amortized) over a period of 15 plan years,
``(D) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 5 plan
years any amount credited to the funding standard account
under section 412(b)(3)(D) (as in effect on the day before
the date of the enactment of this section), and
``(E) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 20
years the contributions which would be required to be made
under the plan but for the provisions of section
412(c)(7)(A)(i)(I) (as in effect on the day before the date
of the enactment of this section).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the employer to
or under the plan for the plan year,
``(B) the amount necessary to amortize in equal annual
installments (until fully amortized)--
``(i) separately, with respect to each plan year, the net
decrease (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(ii) separately, with respect to each plan year, the net
experience gain (if any) under the plan, over a period of 15
plan years, and
``(iii) separately, with respect to each plan year, the net
gain (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount of the waived funding deficiency (within
the meaning of section 412(c)(3)) for the plan year, and
``(D) in the case of a plan year for which the accumulated
funding deficiency is determined under the funding standard
account if such plan year follows a plan year for which such
deficiency was determined under the alternative minimum
funding standard under section 412(g) (as in effect on the
day before the date of the enactment of this section), the
excess (if any) of any debit balance in the funding standard
account (determined without regard to this subparagraph) over
any debit balance in the alternative minimum funding standard
account.
``(4) Special rule for amounts first amortized to plan
years before 2006.--In the case of any amount amortized under
section 412(b) (as in effect before the date of the enactment
of Pension Protection Act of 2005) over any period beginning
with a plan year beginning before 2006, in lieu of the
amortization described in paragraphs (2)(B) and (3)(B), such
amount shall continue to be amortized under such section as
so in effect.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations prescribed by the Secretary, amounts
required to be amortized under paragraph (2) or paragraph
(3), as the case may be--
``(A) may be combined into one amount under such paragraph
to be amortized over a period determined on the basis of the
remaining amortization period for all items entering into
such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the resulting
amount to be amortized over a period determined on the basis
of the remaining amortization periods for all items entering
into whichever of the two amounts being offset is the
greater.
``(6) Interest.--The funding standard account (and items
therein) shall be charged or credited (as determined under
regulations prescribed by the Secretary) with interest at the
appropriate rate consistent with the rate or rates of
interest used under the plan to determine costs.
``(7) Certain amortization charges and credits.--In the
case of a plan which, immediately before the date of the
enactment of the Multiemployer Pension Plan Amendments Act of
1980, was a multiemployer plan (within the meaning of section
414(f) as in effect immediately before such date)--
``(A) any amount described in paragraph (2)(B)(ii),
(2)(B)(iii), or (3)(B)(i) of this subsection which arose in a
plan year beginning before such date shall be amortized in
equal annual installments (until fully amortized) over 40
plan years, beginning with the plan year in which the amount
arose;
``(B) any amount described in paragraph (2)(B)(iv) or
(3)(B)(ii) of this subsection which arose in a plan year
beginning before such date shall be amortized in equal annual
installments (until fully amortized) over 20 plan years,
beginning with the plan year in which the amount arose;
``(C) any change in past service liability which arises
during the period of 3 plan years beginning on or after such
date, and results from a plan amendment adopted before such
[[Page H11699]]
date, shall be amortized in equal annual installments (until
fully amortized) over 40 plan years, beginning with the plan
year in which the change arises; and
``(D) any change in past service liability which arises
during the period of 2 plan years beginning on or after such
date, and results from the changing of a group of
participants from one benefit level to another benefit level
under a schedule of plan benefits which--
``(i) was adopted before such date, and
``(ii) was effective for any plan participant before the
beginning of the first plan year beginning on or after such
date,
shall be amortized in equal annual installments (until fully
amortized) over 40 plan years, beginning with the plan year
in which the change arises.
``(8) Special rules relating to charges and credits to
funding standard account.--For purposes of this part--
``(A) Withdrawal liability.--Any amount received by a
multiemployer plan in payment of all or part of an employer's
withdrawal liability under part 1 of subtitle E of title IV
shall be considered an amount contributed by the employer to
or under the plan. The Secretary may prescribe by regulation
additional charges and credits to a multiemployer plan's
funding standard account to the extent necessary to prevent
withdrawal liability payments from being unduly reflected as
advance funding for plan liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in reorganization in
the immediately preceding plan year, any balance in the
funding standard account at the close of such immediately
preceding plan year--
``(i) shall be eliminated by an offsetting credit or charge
(as the case may be), but
``(ii) shall be taken into account in subsequent plan years
by being amortized in equal annual installments (until fully
amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any
accumulated funding deficiency under section 418B(a) as of
the end of the last plan year that the plan was in
reorganization.
``(C) Plan payments to supplemental program or withdrawal
liability payment fund.--Any amount paid by a plan during a
plan year to the Pension Benefit Guaranty Corporation
pursuant to section 4222 of the Employee Retirement Income
Security Act of 1974 or to a fund exempt under section
501(c)(22) pursuant to section 4223 of such Act shall reduce
the amount of contributions considered received by the plan
for the plan year.
``(D) Interim withdrawal liability payments.--Any amount
paid by an employer pending a final determination of the
employer's withdrawal liability under part 1 of subtitle E of
title IV and subsequently refunded to the employer by the
plan shall be charged to the funding standard account in
accordance with regulations prescribed by the Secretary.
``(E) Election for deferral of charge for portion of net
experience loss.--If an election is in effect under section
412(b)(7)(F) (as in effect on the day before the date of the
enactment of this section) for any plan year, the funding
standard account shall be charged in the plan year to which
the portion of the net experience loss deferred by such
election was deferred with the amount so deferred (and
paragraph (2)(B)(iv) shall not apply to the amount so
charged).
``(F) Financial assistance.--Any amount of any financial
assistance from the Pension Benefit Guaranty Corporation to
any plan, and any repayment of such amount, shall be taken
into account under this section and section 412 in such
manner as is determined by the Secretary.
``(G) Short-term benefits.--To the extent that any plan
amendment increases the unfunded past service liability under
the plan by reason of an increase in benefits which are
payable under the plan during a period that does not exceed
14 years, paragraph (2)(B)(iii) shall be applied separately
with respect to such increase in unfunded past service
liability by substituting the number of years of the period
during which such benefits are payable for `15'.
``(c) Additional Rules.--
``(1) Determinations to be made under funding method.--For
purposes of this part, normal costs, accrued liability, past
service liabilities, and experience gains and losses shall be
determined under the funding method used to determine costs
under the plan.
``(2) Valuation of assets.--
``(A) In general.--For purposes of this part, the value of
the plan's assets shall be determined on the basis of any
reasonable actuarial method of valuation which takes into
account fair market value and which is permitted under
regulations prescribed by the Secretary.
``(B) Election with respect to bonds.--The value of a bond
or other evidence of indebtedness which is not in default as
to principal or interest may, at the election of the plan
administrator, be determined on an amortized basis running
from initial cost at purchase to par value at maturity or
earliest call date. Any election under this subparagraph
shall be made at such time and in such manner as the
Secretary shall by regulations provide, shall apply to all
such evidences of indebtedness, and may be revoked only with
the consent of the Secretary.
``(3) Actuarial assumptions must be reasonable.--For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be
determined on the basis of actuarial assumptions and
methods--
``(A) which, in the aggregate, are reasonable (taking into
account the experience of the plan and reasonable
expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(4) Treatment of certain changes as experience gain or
loss.--For purposes of this section, if--
``(A) a change in benefits under the Social Security Act or
in other retirement benefits created under Federal or State
law, or
``(B) a change in the definition of the term `wages' under
section 3121, or a change in the amount of such wages taken
into account under regulations prescribed for purposes of
section 401(a)(5),
results in an increase or decrease in accrued liability under
a plan, such increase or decrease shall be treated as an
experience loss or gain.
``(5) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency in excess of the full funding
limitation--
``(A) the funding standard account shall be credited with
the amount of such excess, and
``(B) all amounts described in subparagraphs (B), (C), and
(D) of paragraph (2) and subparagraph (B) of subsection
(b)(3) which are required to be amortized shall be considered
fully amortized for purposes of such subparagraphs.
``(6) Full-funding limitation.--
``(A) In general.--For purposes of paragraph (5), the term
`full-funding limitation' means the excess (if any) of--
``(i) the accrued liability (including normal cost) under
the plan (determined under the entry age normal funding
method if such accrued liability cannot be directly
calculated under the funding method used for the plan), over
``(ii) the lesser of--
``(I) the fair market value of the plan's assets, or
``(II) the value of such assets determined under paragraph
(2).
``(B) Minimum amount.--
``(i) In general.--In no event shall the full-funding
limitation determined under subparagraph (A) be less than the
excess (if any) of--
``(I) 90 percent of the current liability of the plan
(including the expected increase in current liability due to
benefits accruing during the plan year), over
``(II) the value of the plan's assets determined under
paragraph (2).
``(ii) Assets.--For purposes of clause (i), assets shall
not be reduced by any credit balance in the funding standard
account.
``(C) Current liability.--For purposes of this paragraph--
``(i) In general.--The term `current liability' means all
liabilities to employees and their beneficiaries under the
plan.
``(ii) Treatment of unpredictable contingent event
benefits.--For purposes of clause (i), any benefit contingent
on an event other than--
``(I) age, service, compensation, death, or disability, or
``(II) an event which is reasonably and reliably
predictable (as determined by the Secretary),
shall not be taken into account until the event on which the
benefit is contingent occurs.
``(iii) Interest rate used.--The rate of interest used to
determine current liability under this paragraph shall be the
rate of interest determined under subparagraph (D).
``(iv) Mortality tables.--
``(I) Commissioners' standard table.--In the case of plan
years beginning before the first plan year to which the first
tables prescribed under subclause (II) apply, the mortality
table used in determining current liability under this
paragraph shall be the table prescribed by the Secretary
which is based on the prevailing commissioners' standard
table (described in section 807(d)(5)(A)) used to determine
reserves for group annuity contracts issued on January 1,
1993.
``(II) Secretarial authority.--The Secretary may by
regulation prescribe for plan years beginning after December
31, 1999, mortality tables to be used in determining current
liability under this subsection. Such tables shall be based
upon the actual experience of pension plans and projected
trends in such experience. In prescribing such tables, the
Secretary shall take into account results of available
independent studies of mortality of individuals covered by
pension plans.
``(v) Separate mortality tables for the disabled.--
Notwithstanding clause (iv)--
``(I) In general.--In the case of plan years beginning
after December 31, 1995, the Secretary shall establish
mortality tables which may be used (in lieu of the tables
under clause (ii)) to determine current liability under this
subsection for individuals who are entitled to benefits under
the plan on account of disability. The Secretary shall
establish separate tables for individuals whose disabilities
occur in plan years beginning before January 1, 1995, and for
individuals whose disabilities occur in plan years beginning
on or after such date.
``(II) Special rule for disabilities occurring after
1994.--In the case of disabilities
[[Page H11700]]
occurring in plan years beginning after December 31, 1994,
the tables under subclause (I) shall apply only with respect
to individuals described in such subclause who are disabled
within the meaning of title II of the Social Security Act and
the regulations thereunder.
``(vi) Periodic review.--The Secretary shall periodically
(at least every 5 years) review any tables in effect under
this subparagraph and shall, to the extent the Secretary
determines necessary, by regulation update the tables to
reflect the actual experience of pension plans and projected
trends in such experience.
``(D) Required change of interest rate.--For purposes of
determining a plan's current liability for purposes of this
paragraph--
``(i) In general.--If any rate of interest used under the
plan under subsection (b)(5) to determine cost is not within
the permissible range, the plan shall establish a new rate of
interest within the permissible range.
``(ii) Permissible range.--For purposes of this
subparagraph--
``(I) In general.--Except as provided in subclause (II),
the term `permissible range' means a rate of interest which
is not more than 5 percent above, and not more than 10
percent below, the weighted average of the rates of interest
on 30-year Treasury securities during the 4-year period
ending on the last day before the beginning of the plan year.
``(II) Secretarial authority.--If the Secretary finds that
the lowest rate of interest permissible under subclause (I)
is unreasonably high, the Secretary may prescribe a lower
rate of interest, except that such rate may not be less than
80 percent of the average rate determined under such
subclause.
``(iii) Assumptions.--Notwithstanding paragraph (3)(A), the
interest rate used under the plan shall be--
``(I) determined without taking into account the experience
of the plan and reasonable expectations, but
``(II) consistent with the assumptions which reflect the
purchase rates which would be used by insurance companies to
satisfy the liabilities under the plan.
``(E) Full funding limitation.--For purposes of this
paragraph, unless otherwise provided by the plan, the accrued
liability under a multiemployer plan shall not include
benefits which are not nonforfeitable under the plan after
the termination of the plan (taking into consideration
section 411(d)(3)).
``(7) Annual valuation.--
``(A) In general.--For purposes of this section, a
determination of experience gains and losses and a valuation
of the plan's liability shall be made not less frequently
than once every year, except that such determination shall be
made more frequently to the extent required in particular
cases under regulations prescribed by the Secretary.
``(B) Valuation date.--
``(i) Current year.--Except as provided in clause (ii), the
valuation referred to in subparagraph (A) shall be made as of
a date within the plan year to which the valuation refers or
within one month prior to the beginning of such year.
``(ii) Use of prior year valuation.--The valuation referred
to in subparagraph (A) may be made as of a date within the
plan year prior to the year to which the valuation refers if,
as of such date, the value of the assets of the plan are not
less than 100 percent of the plan's current liability (as
defined in paragraph (6)(C) without regard to clause (iv)
thereof).
``(iii) Adjustments.--Information under clause (ii) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
``(iv) Limitation.--A change in funding method to use a
prior year valuation, as provided in clause (ii), may not be
made unless as of the valuation date within the prior plan
year, the value of the assets of the plan are not less than
125 percent of the plan's current liability (as defined in
paragraph (6)(C) without regard to clause (iv) thereof).
``(8) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer after the last day of such plan year, but
not later than two and one-half months after such day, shall
be deemed to have been made on such last day. For purposes of
this subparagraph, such two and one-half month period may be
extended for not more than six months under regulations
prescribed by the Secretary.
``(d) Extension of Amortization Periods for Multiemployer
Plans.--In the case of a multiemployer plan--
``(1) Automatic extension.--The Secretary shall, upon
application and subject to the requirements of paragraph (4),
extend the period of years required to amortize any unfunded
liability (described in any clause of subsection (b)(2)(B))
of the plan for a period of time not in excess of 5 years.
``(2) Extension for cause.--The period of years required to
amortize any unfunded liability (described in any clause of
subsection (b)(2)(B)) of any multiemployer plan may be
extended (in addition to any extension under paragraph (1))
by the Secretary for a period of time (not in excess of 5
years) if he determines that such extension would carry out
the purposes of this Act and would provide adequate
protection for participants under the plan and their
beneficiaries and if he determines that the failure to permit
such extension would--
``(A) result in--
``(i) a substantial risk to the voluntary continuation of
the plan, or
``(ii) a substantial curtailment of pension benefit levels
or employee compensation, and
``(B) be adverse to the interests of plan participants in
the aggregate.
``(3) Interest rate.--The interest rate applicable for any
plan year under any arrangement entered into by the Secretary
in connection with an extension granted under this subsection
shall be the greater of--
``(A) 150 percent of the Federal mid-term rate (as in
effect under section 1274 for the 1st month of such plan
year), or
``(B) the rate of interest used under the plan for
determining costs.
``(4) Required notice.--
``(A) In general.--The Secretary shall, before granting an
extension under this section, require each applicant to
provide evidence satisfactory to the Secretary that the
applicant has provided notice of the filing of the
application for such extension to each employee organization
representing employees covered by the affected plan and to
the Pension Benefit Guaranty Corporation.
``(B) Consideration of relevant information.--The Secretary
shall consider any relevant information provided by a person
to whom notice was given under paragraph (1).
``(e) Restriction on Plan Amendments.--
``(1) In general.--No amendment of a multiemployer plan
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 if a waiver
under section 412(c) or an extension of time under subsection
(d) is in effect with respect to the plan, or if a plan
amendment described in section 412(d)(2) has been made at any
time in the preceding 24 months. If a plan is amended in
violation of the preceding sentence, any such waiver, or
extension of time, shall not apply to any plan year ending on
or after the date on which such amendment is adopted.
``(2) Exception.--Paragraph (1) shall not apply to any plan
amendment which--
``(A) the Secretary determines to be reasonable and which
provides for only de minimis increases in the liabilities of
the plan,
``(B) only repeals an amendment described in section
412(d)(2), or
``(C) is required as a condition of qualification under
part I of subchapter D, of chapter 1.''.
(b) Conforming Amendments.--
(1) Section 418(b)(2) of such Code is amended--
(A) by striking ``section 412(b)(2)'' in subparagraph (A)
and inserting ``section 431(b)(2)'', and
(B) by striking ``section 412(b)(3)(B)'' in subparagraph
(B) and inserting ``section 431(b)(3)(B)''.
(2) Section 418B of such Code is amended--
(A) by striking ``section 412(b)(2)(A) or (B)'' in
subsection (d)(1)(B) and inserting ``section 431(b)(2)(A) or
(B)'',
(B) by striking ``section 412(c)(8)'' in subsection (e) and
inserting ``section 412(g)(2)'', and
(C) by striking ``section 412(c)(3)'' in subsection (g) and
inserting ``section 431(c)(3)''.
(3) Section 418D(a)(2) of such Code is amended--
(A) by striking ``section 412(c)(8)'' and inserting
``section 412(g)(2)'', and
(B) by striking ``section 412(c)(10)'' and inserting
``section 431(c)(8)''.
(c) Clerical Amendment.--The table of sections for subpart
A of part III of subchapter D of chapter 1 of such Code is
amended by adding after the item relating to section 430 the
following new item:
``Sec. 431. Minimum funding standards for multiemployer plans.''.
(d) Effective Date.--The amendments made by this section
shall apply to plan years beginning after 2005.
SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN
ENDANGERED OR CRITICAL STATUS.
(a) In General.--Subpart A of part III of subchapter D of
chapter 1 of the Internal Revenue Code of 1986 is amended by
inserting after section 431 the following new section:
``SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS
IN ENDANGERED STATUS OR CRITICAL STATUS.
``(a) Annual Certification by Plan Actuary.--
``(1) In general.--During the 90-day period beginning on
first day of each plan year of a multiemployer plan, the plan
actuary of shall certify to the Secretary whether or not the
plan is in endangered status for such plan year and whether
or not the plan is in critical status for such plan year.
``(2) Actuarial projections of assets and liabilities.--
``(A) In general.--In making the determinations under
paragraph (1), the plan actuary shall make projections under
subsections (b)(2) and (c)(2) for the current and succeeding
plan years, using reasonable actuarial assumptions and
methods, of the current value of the assets of the plan and
the present value of all liabilities to participants and
beneficiaries under the plan for the current plan year as of
the beginning of such year, as set forth in the actuarial
statement prepared for the preceding plan year under section
6058.
``(B) Determinations of future contributions.--Any such
actuarial projection of plan assets shall assume--
``(i) reasonably anticipated employer and employee
contributions for the current and
[[Page H11701]]
succeeding plan years, assuming that the terms of the one or
more collective bargaining agreements pursuant to which the
plan is maintained for the current plan year continue in
effect for succeeding plan years, or
``(ii) employer and employee contributions projected for
the current and succeeding plan years under the terms of such
collective bargaining agreements (assuming the continued
application of such terms indefinitely to such plan years),
but only if the plan actuary determines there have been no
significant demographic changes that would make continued
application of such terms unreasonable.
``(3) Presumed status in absence of timely actuarial
certification.--If certification under this subsection is not
made before the end of the 90-day period specified in
paragraph (1), the plan shall be presumed to be in critical
status for such plan year until such time as the actuary
makes a contrary certification.
``(4) Notice.--In any case in which a multiemployer plan is
certified to be in endangered or critical status for a plan
year under paragraph (1), is presumed to be in critical
status under paragraph (3), or is deemed to be in critical
status under subsection (b)(7), the plan sponsor shall, not
later than 30 days after the date of the certification,
presumption, or deeming, provide notification of the
endangered or critical status to the participants and
beneficiaries, the bargaining parties, the Pension Benefit
Guaranty Corporation, the Secretary of the Treasury, and the
Secretary of Labor.
``(b) Funding Rules for Multiemployer Plans in Endangered
Status.--
``(1) In general.--In any case in which a multiemployer
plan is in endangered status for a plan year, the plan
sponsor shall, in accordance with this subsection, amend the
plan to include a funding improvement plan upon approval
thereof by the bargaining parties under this subsection. The
amendment shall be adopted not later than 240 days after the
date on which the plan is certified to be in endangered
status under subsection (a)(1).
``(2) Endangered status.--A multiemployer plan is in
endangered status for a plan year if, as determined by the
plan actuary under subsection (c)--
``(A) the plan's funded percentage for such plan year is
less than 80 percent, or
``(B) the plan has an accumulated funding deficiency for
such plan year under section 431 or is projected to have such
an accumulated funding deficiency for any of the 6 succeeding
plan years, taking into account any extension of amortization
periods under section 431(d).
``(3) Funding improvement plan.--
``(A) Benchmarks.--A funding improvement plan shall consist
of amendments to the plan formulated to provide, under
reasonable actuarial assumptions, for the attainment, during
the funding improvement period under the funding improvement
plan, of the following benchmarks:
``(i) Reduction in unfunded current liability.--A
percentage decrease in the plan's unfunded current liability
from the amount for the first plan year of the funding
improvement period to the amount for the last plan year of
the funding improvement period, of at least 33\1/3\ percent.
``(ii) Avoidance of accumulated funding deficiencies.--No
accumulated funding deficiency for any plan year during the
funding improvement period (taking into account any extension
of amortization periods under section 431(d)).
``(B) Funding improvement period.--The funding improvement
period for any funding improvement plan adopted pursuant to
this subsection is the 10-year period beginning on the
earlier of--
``(i) the second anniversary of the date of the adoption of
the funding improvement plan, or
``(ii) the first day of the first plan year of the
multiemployer plan following the plan year in which occurs
the first date after the day of the certification as of which
collective bargaining agreements covering on the day of such
certification at least 75 percent of active participants in
such multiemployer plan have expired.
``(C) Reporting.--A summary of any funding improvement plan
or modification thereto adopted during any plan year shall be
included in the annual report for such plan year under
section 104(a) of the Employee Retirement and Income Security
Act of 1974 and in the summary annual report described in
section 104(b)(3) of such Act.
``(4) Development of funding improvement plan.--
``(A) Actions by plan sponsor pending approval.--Pending
the approval of a funding improvement plan under this
paragraph, the plan sponsor shall take all reasonable
actions, consistent with the terms of the plan and applicable
law, necessary to ensure--
``(i) an increase in the plan's funded percentage, and
``(ii) postponement of an accumulated funding deficiency
for at least 1 additional plan year.
Such actions include applications for extensions of
amortization periods under section 431(d), use of the
shortfall funding method in making funding standard account
computations, amendments to the plan's benefit structure,
reductions in future benefit accruals, and other reasonable
actions consistent with the terms of the plan and applicable
law.
``(B) Recommendations by plan sponsor.--
``(i) In general.--During the period of 90 days following
the date on which a multiemployer plan is certified to be in
endangered status, the plan sponsor shall develop and provide
to the bargaining parties alternative proposals for revised
benefit structures, contribution structures, or both, which,
if adopted as amendments to the plan, may be reasonably
expected to meet the benchmarks described in paragraph
(3)(A). Such proposals shall include--
``(I) at least one proposal for reductions in the amount of
future benefit accruals necessary to achieve the benchmarks,
assuming no amendments increasing contributions under the
plan (other than amendments increasing contributions
necessary to achieve the benchmarks after amendments have
reduced future benefit accruals to the maximum extent
permitted by law), and
``(II) at least one proposal for increases in contributions
under the plan necessary to achieve the benchmarks, assuming
no amendments reducing future benefit accruals under the
plan.
``(ii) Requests by bargaining parties.--Upon the request of
any bargaining party who--
``(I) employs at least 5 percent of the active
participants, or
``(II) represents as an employee organization, for purposes
of collective bargaining, at least 5 percent of the active
participants,
the plan sponsor shall provide all such parties information
as to other combinations of increases in contributions and
reductions in future benefit accruals which would result in
achieving the benchmarks.
``(iii) Other information.--The plan sponsor may, as it
deems appropriate, prepare and provide the bargaining parties
with additional information relating to contribution
structures or benefit structures or other information
relevant to the funding improvement plan.
``(5) Maintenance of contributions pending approval of
funding improvement plan.--Pending approval of a funding
improvement plan by the bargaining parties with respect to a
multiemployer plan, the multiemployer plan may not be amended
so as to provide--
``(A) a reduction in the level of contributions for
participants who are not in pay status,
``(B) a suspension of contributions with respect to any
period of service, or
``(C) any new direct or indirect exclusion of younger or
newly hired employees from plan participation.
``(6) Benefit restrictions pending approval of funding
improvement plan.--Pending approval of a funding improvement
plan by the bargaining parties with respect to a
multiemployer plan--
``(A) Restrictions on lump sum distributions and similar
distributions.--The multiemployer plan may not be amended so
as to provide additional forms of benefits.
``(B) Prohibition on benefit increases.--
``(i) In general.--No amendment of the plan 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 may be adopted.
``(ii) Exception.--Clause (i) shall not apply to any plan
amendment which--
``(I) the Secretary determines to be reasonable and which
provides for only de minimis increases in the liabilities of
the plan,
``(II) only repeals an amendment described in section
430(d)(2), or
``(III) is required as a condition of qualification under
part I of subchapter D of chapter 1 of subtitle A.
``(7) Default critical status if no funding improvement
plan adopted.--If no plan amendment adopting a funding
improvement plan has been adopted by the end of the 240-day
period referred to in subsection (a)(1), the plan shall be in
critical status as of the first day of the succeeding plan
year.
``(8) Restrictions upon approval of funding improvement
plan.--Upon adoption of a funding improvement plan with
respect to a multiemployer plan, the plan may not be
amended--
``(A) so as to be inconsistent with the funding improvement
plan, or
``(B) so as to increase future benefit accruals, unless the
plan actuary certifies in advance that, after taking into
account the proposed increase, the plan is reasonably
expected to meet the the benchmarks described in paragraph
(3)(A).
``(c) Funding Rules for Multiemployer Plans in Critical
Status.--
``(1) In general.--In any case in which a multiemployer
plan is in critical status for a plan year, the plan sponsor
shall, in accordance with this subsection, amend the plan to
include a rehabilitation plan under this subsection. The
amendment shall be adopted not later than 240 days after the
date on which the plan is certified to be in critical status
under subsection (a)(1) or is presumed to be in critical
status under subsection (a)(3), or the first day of the plan
year in the case of a plan that is deemed to be in critical
status under subsection (b)(7).
``(2) Critical status.--A multiemployer plan is in critical
status for a plan year if--
``(A) the plan is in endangered status for the plan year
and the requirements of subsection (b)(1) are not met with
respect to the plan for such plan year, or
``(B) as determined by the plan actuary under subsection
(a), the plan is described in paragraph (3).
[[Page H11702]]
Any multiemployer plan which is in critical status under
subparagraph (A) or (B) for a plan year shall be treated as
in critical status also for the succeeding plan year.
``(3) Criticality description.--For purposes of paragraph
(2)(B), a plan is described in this paragraph if the plan is
described in at least one of the following subparagraphs:
``(A) A plan is described in this subparagraph if, as of
the beginning of the current plan year--
``(i) the funded percentage of the plan is less than 65
percent, and
``(ii) the sum of--
``(I) the market value of plan assets, plus
``(II) the present value of the reasonably anticipated
employer and employee contributions for the current plan year
and each of the 6 succeeding plan years, assuming that the
terms of the one or more collective bargaining agreements
pursuant to which the plan is maintained for the current plan
year continue in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits
for all participants and beneficiaries projected to be
payable under the plan during the current plan year and each
of the 6 succeeding plan years (plus administrative expenses
for such plan years).
``(B) A plan is described in this subparagraph if, as of
the beginning of the current plan year, the sum of--
``(i) the market value of plan assets, plus
``(ii) the present value of the reasonably anticipated
employer and employee contributions for the current plan year
and each of the 4 succeeding plan years, assuming that the
terms of the one or more collective bargaining agreements
pursuant to which the plan is maintained for the current plan
year remain in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits
for all participants and beneficiaries projected to be
payable under the plan during the current plan year and each
of the 4 succeeding plan years (plus administrative expenses
for such plan years).
``(C) A plan is described in this subparagraph if--
``(i) as of the beginning of the current plan year, the
funded percentage of the plan is less than 65 percent, and
``(ii) the plan has an accumulated funding deficiency for
the current plan year or is projected to have an accumulated
funding deficiency for any of the 4 succeeding plan years,
taking into account any extension of amortization periods
under section 431(d).
``(D) A plan is described in this subparagraph if--
``(i)(I) the plan's normal cost for the current plan year,
plus interest (determined at the rate used for determining
cost under the plan) for the current plan year on the amount
of unfunded benefit liabilities under the plan as of the last
date of the preceding plan year, exceeds
``(II) the present value, as of the beginning of the
current plan year, of the reasonably anticipated employer and
employee contributions for the current plan year,
``(ii) the present value, as of the beginning of the
current plan year, of nonforfeitable benefits of inactive
participants is greater than the present value, as of the
beginning of the current plan year, of nonforfeitable
benefits of active participants, and
``(iii) the plan is projected to have an accumulated
funding deficiency for the current plan year or any of the 4
succeeding plan years.
``(E) A plan is described in this subparagraph if--
``(i) the funded percentage of the plan is greater than 65
percent for the current plan year, and
``(ii) the plan is projected to have an accumulated funding
deficiency during either of the following 3 plan years.
``(4) Rehabilitation plan.--
``(A) In general.--A rehabilitation plan shall consist of--
``(i) amendments to the plan providing (under reasonable
actuarial assumptions) for measures, agreed to by the
bargaining parties, to increase contributions, reduce plan
expenditures (including plan mergers and consolidations), or
reduce future benefit accruals, or to take any combination of
such actions, determined necessary to cause the plan to
cease, during the rehabilitation period, to be in critical
status,
``(ii) measures, agreed to by the bargaining parties, to
provide funding relief, or
``(iii) reasonable measures to forestall possible
insolvency (within the meaning of section 418E) if the plan
sponsor determines that, upon exhaustion of all reasonable
measures, the plan would not cease during the rehabilitation
period to be in critical status.
``(B) Rehabilitation period.--The rehabilitation period for
any rehabilitation plan adopted pursuant to this section is
the 10-year period beginning on the earlier of--
``(i) the second anniversary of the date of the adoption of
the rehabilitation plan, or
``(ii) the first day of the first plan year of the
multiemployer plan following the plan year in which occurs
the first date after the day of the certification as of which
collective bargaining agreements covering on the day of such
certification at least 75 percent of active participants in
such multiemployer plan have expired.
``(C) Reporting.--A summary of any rehabilitation plan or
modification thereto adopted during any plan year, together
with annual updates regarding the funding ratio of the plan,
shall be included in the annual report for such plan year
under section 104(a) and in the summary annual report
described in section 104(b)(3) of the Employee Retirement and
Income Security Act of 1974.
``(5) Development of rehabilitation plan.--
``(A) Proposals by plan sponsor.--
``(i) In general.--Within 90 days after the date of the
certification under subsection (a) that the plan is in
critical status (or the date as of which the requirements of
subsection (b)(1) are not met with respect to the plan), the
plan sponsor shall propose to all bargaining parties a range
of alternative schedules of increases in contributions and
reductions in future benefit accruals that would serve to
carry out a rehabilitation plan under this subsection.
``(ii) Proposal assuming no contribution increases.--Such
proposals shall include, as one of the proposed schedules, a
schedule of those reductions in future benefit accruals that
would be necessary to cause the plan to cease to be in
critical status if there were no further increases in rates
of contribution to the plan.
``(iii) Proposal where contributions are necessary.--If the
plan sponsor determines that the plan will not cease to be in
critical status during the rehabilitation period unless the
plan is amended to provide for an increase in contributions,
the plan sponsor's proposals shall include a schedule of
those increases in contribution rates that would be necessary
to cause the plan to cease to be in critical status if future
benefit accruals were reduced to the maximum extent permitted
by law and the rate of future benefit accruals did not exceed
1 percent per plan year.
``(B) Requests for additional schedules.--Upon the joint
request of all bargaining parties, each of whom--
``(i) employs at least 5 percent of the active
participants, or
``(ii) represents as an employee organization, for purposes
of collective bargaining, at least 5 percent of the active
participants,
the plan sponsor shall include among the proposed schedules
such schedules of increases in contributions and reductions
in future benefit accruals as may be specified by the
bargaining parties.
``(C) Default schedule.--In any case in which the
bargaining parties, as of 240 days after the later of the
date of the certification under subsection (a) or the first
day the plan is in critical status under subsection (a)(3) or
(b)(7), have not agreed to at least one of the proposed
schedules, the plan sponsor shall amend the plan to implement
the schedule required by subparagraph (A)(ii).
``(D) Subsequent amendments.--Upon the adoption of a
schedule of increases in contributions or reductions in
future benefit accruals as part of the rehabilitation plan,
the plan sponsor may amend the plan thereafter to update the
schedule to adjust for any experience of the plan contrary to
past actuarial assumptions, except that such an amendment may
be made not more than once in any 3-year period.
``(E) Allocation of reductions in future benefit
accruals.--Any schedule containing reductions in future
benefit accruals forming a part of a rehabilitation plan
shall be applicable with respect to any group of active
participants who are employed by any bargaining party (as an
employer obligated to contribute under the plan) in
proportion to the extent to which increases in contributions
under such schedule apply to such bargaining party.
``(6) Maintenance of contributions and restrictions on
benefits pending adoption of rehabilitation plan.--The rules
of paragraphs (5) and (6) of subsection (b) shall apply for
purposes of this subsection by substituting the term
`rehabilitation plan' for `funding improvement plan'.
``(7) Deemed withdrawal.--Upon the failure of any employer
who has an obligation to contribute under the plan to make
contributions in compliance with the schedule adopted under
paragraph (6) as part of the rehabilitation plan, the failure
of the employer may, at the discretion of the plan sponsor,
be treated as a withdrawal by the employer from the plan
under section 4203 of the Employee Retirement and Income
Security Act of 1974 or a partial withdrawal by the employer
under section 4205 of such Act.
``(d) Definitions.--For purposes of this section--
``(1) Bargaining party.--The term `bargaining party' means,
in connection with a multiemployer plan--
``(A) an employer who has an obligation to contribute under
the plan, and
``(B) an employee organization which, for purposes of
collective bargaining, represents plan participants employed
by such an employer.
``(2) Current liability.--The term `current liability' has
the meaning provided such term in section 431(c)(6)(C).
``(3) Unfunded current liability.--The term `unfunded
current liability' means the excess (if any) of--
``(A) the current liability of the plan, over
``(B) the value of the plan's assets determined under
section 431(c)(2).
``(4) Funded percentage.--The term `funded percentage'
means the percentage expressed as a ratio of which--
``(A) the numerator of which is the value of the plan's
assets, as determined under section 431(c)(2), and
``(B) the denominator of which is the accrued liability of
the plan.
``(5) Unfunded vested benefits.--The term `unfunded vested
benefits' has the meaning provided in section 418(b)(7).
[[Page H11703]]
``(6) Accumulated funding deficiency.--The term
`accumulated funding deficiency' has the meaning provided
such term in section 431(a).
``(7) Active participant.--The term `active participant'
means, in connection with a multiemployer plan, a participant
who is in covered service under the plan.
``(8) Inactive participant.--The term `inactive
participant' means, in connection with a multiemployer plan,
a participant who--
``(A) is not in covered service under the plan, and
``(B) is in pay status under the plan or has a
nonforfeitable right to benefits under the plan.
``(9) Pay status.--A person is in `pay status' under a
multiemployer plan if--
``(A) at any time during the current plan year, such person
is a participant or beneficiary under the plan and is paid an
early, late, normal, or disability retirement benefit under
the plan (or a death benefit under the plan related to a
retirement benefit), or
``(B) to the extent provided in regulations of the
Secretary, such person is entitled to such a benefit under
the plan.
``(10) Obligation to contribute.--The term `obligation to
contribute' has the meaning provided such term under section
4212(a).''.
(b) Clerical Amendment.--The table of sections for subpart
A of part III of subchapter D of chapter 1 of such Code is
amended by adding at the end the following new item:
``Sec. 432. Additional funding rules for multiemployer plans in
endangered status or critical status.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after 2005.
TITLE III--OTHER INTEREST-RELATED FUNDING PROVISIONS
SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP
SUM DISTRIBUTIONS.
(a) Amendments to Employee Retirement Income Security Act
of 1974.--Subparagraph (B) of section 205(g)(3) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1055(g)(3)) is amended to read as follows:
``(B) For purposes of subparagraph (A)--
``(i) The term `applicable mortality table' means the
mortality table specified for the plan year under section
303(f)(3).
``(ii) The term `applicable interest rate' means the
adjusted first, second, and third segment rates applied under
rules similar to the rules of section 303(f)(2)(B).
``(iii) For purposes of clause (ii), the adjusted first,
second, and third segment rates are the first, second, and
third segment rates which would be determined under section
303(f)(2)(C) if--
``(I) section 303(f)(2)(D)(i) were applied by substituting
`the yields' for `a 3-year weighted average of yields', and
``(II) the applicable percentage under section 303(f)(2)(G)
were determined in accordance with the following table:
------------------------------------------------------------------------
The applicable percentage
``In the case of plan years beginning in: is:
------------------------------------------------------------------------
2006.................................... 20 percent
2007.................................... 40 percent
2008.................................... 60 percent
2009.................................... 80 percent.''.
------------------------------------------------------------------------
(b) Amendments to Internal Revenue Code of 1986.--Section
417(e)(3)(A) of the Internal Revenue Code of 1986 is amended
by striking clause (ii) and inserting the following:
``(ii) Applicable mortality table.--For purposes of clause
(i), the term `applicable mortality table' means the
mortality table specified for the plan under section
430(f)(3).
``(iii) Applicable interest rate.--For purposes of clause
(i), the term `applicable interest rate' means the adjusted
first, second, and third segment rates applied under rules
similar to the rules of section 430(f)(2)(B).
``(iv) Adjusted first, second, and third segment rates.--
For purposes of clause (iii), the adjusted first, second, and
third segment rates are the first, second, and third segment
rates which would be determined under section 430(f)(2)(C)
if--
``(I) section 430(f)(2)(D)(i) were applied by substituting
`the yields' for `a 3-year weighted average of yields', and
``(II) the applicable percentage under section 430(f)(2)(G)
were determined in accordance with the following table:
------------------------------------------------------------------------
The applicable percentage
``In the case of plan years beginning in: is:
------------------------------------------------------------------------
2006.................................... 20 percent
2007.................................... 40 percent
2008.................................... 60 percent
2009.................................... 80 percent.''.
------------------------------------------------------------------------
(c) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning after 2005.
SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT
LIMITATIONS TO LUMP SUM DISTRIBUTIONS.
(a) In General.--Clause (ii) of section 415(b)(2)(E) of the
Internal Revenue Code of 1986 is amended to read as follows:
``(ii) For purposes of adjusting any benefit under
subparagraph (B) for any form of benefit subject to section
417(e)(3), the interest rate assumption shall not be less
than the greater of--
``(I) 5.5 percent,
``(II) the rate that provides a benefit of not more than
105 percent of the benefit that would be provided if the
applicable interest rate (as defined in section 417(e)(3))
were the interest rate assumption, or
``(III) the rate specified under the plan.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to distributions made in years beginning after
2005.
TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS
SEC. 401. INCREASES IN PBGC PREMIUMS.
(a) Flat-Rate Premiums.--Section 4006(a)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3))
is amended--
(1) by striking clause (i) of subparagraph (A) and
inserting the following:
``(i) in the case of a single-employer plan--
``(I) for plan years beginning after December 31, 1990, and
before January 1, 2008, an amount equal to the sum of $19,
and
``(II) for plan years beginning after December 31, 2007, an
amount determined under subparagraph (F),
plus the additional premium (if any) determined under
subparagraph (E) for each individual who is a participant in
such plan during the plan year;''; and
(2) by adding at the end the following new subparagraph:
``(F)(i) Except as otherwise provided in this subparagraph,
for purposes of determining the annual premium rate payable
to the corporation by a single-employer plan for basic
benefits guaranteed under this title, the amount determined
under this subparagraph is the greater of $30 or the adjusted
amount determined under clause (ii).
``(ii) The adjusted amount determined under this clause is
the product derived by multiplying $30 by the ratio of--
``(I) the national average wage index (as defined in
section 209(k)(1) of the Social Security Act) for the first
of the 2 calendar years preceding the calendar year before
the calendar year in which the plan year begins, to
``(II) the national average wage index (as so defined) for
2006,
with such product, if not a multiple of $1, being rounded to
the next higher multiple of $1 where such product is a
multiple of $0.50 but not of $1, and to the nearest multiple
of $1 in any other case.
``(iii) For purposes of determining the annual premium rate
payable to the corporation by a single-employer plan for
basic benefits guaranteed under this title for any plan year
beginning after 2007 and before 2012--
``(I) except as provided in subclause (II), the premium
amount referred to in subparagraph (A)(i)(II) for any such
plan year is the amount set forth in connection with such
plan year in the following table:
------------------------------------------------------------------------
``If the plan year begins in: The amount is:
------------------------------------------------------------------------
2008.................................... $21.20
2009.................................... $23.40
2010.................................... $25.60
2011.................................... $27.80; or
------------------------------------------------------------------------
``(II) if the plan's funding target attainment percentage
for the plan year preceding the current plan year was less
than 80 percent, the premium amount referred to in
subparagraph (A)(i)(II) for such current plan year is the
amount set forth in connection with such current plan year in
the following table:
------------------------------------------------------------------------
``If the plan year begins in: The amount is:
------------------------------------------------------------------------
2008.................................... $22.67
2009.................................... $26.33
2010 or 2011............................ the amount provided under
clause (i)
------------------------------------------------------------------------
``(iv) For purposes of this subparagraph, the term `funding
target attainment percentage' has the meaning provided such
term in section 303(d)(2).''.
(b) Risk-Based Premiums.--
(1) In general.--Section 4006(a)(3)(E) of such Act (29
U.S.C. 1306(a)(3)(E)) is amended--
(A) in clause (ii), by striking ``$9.00'' and inserting
``the greater of $9.00 or the adjusted amount determined
under clause (iii)'';
(B) by redesignating clauses (iii) and (iv) as clauses (iv)
and (v), respectively; and
(C) by inserting after clause (ii) the following new
clause:
``(iii) The adjusted amount determined under this clause is
the product derived by multiplying $9.00 by the ratio of--
``(I) the national average wage index (as defined in
section 209(k)(1) of the Social Security Act) for the first
of the 2 calendar years preceding the calendar year before
the calendar year in which the plan year begins, to
``(II) the national average wage index (as so defined) for
2006,
with such product, if not a multiple of $1.00, being rounded
to the next higher multiple of $1.00 where such product is a
multiple of $0.50 but not of $1.00, and to the nearest
multiple of $1.00 in any other case.''.
(2) Conforming amendments related to funding rules for
single-employer plans.--Section 4006(a)(3)(E) of such Act (as
amended by paragraph (1)) is amended further--
(A) by striking clause (iv) and inserting the following:
``(iv)(I) For purposes of clause (ii), except as provided
in subclause (II) or (III), the term
[[Page H11704]]
`unfunded benefits' means, for a plan year, the amount which
would be the plan's funding shortfall (as defined in section
303(c)(4)), if the value of plan assets of the plan were
equal to the fair market value of such assets and determined
without regard to section 303(e)(1), and only vested benefits
were taken into account.
``(II) The interest rate used in valuing vested benefits
for purposes of subclause (I) shall be equal to the first,
second, or third segment rate which would be determined under
section 303(f)(2)(C) if section 303(f)(2)(D)(i) were applied
by substituting `the yields' for `the 3-year weighted average
of yields', as applicable under rules similar to the rules
under section 303(f)(2)(B).''; and
(B) by striking clause (iv).
(3) Effective dates.--
(A) The amendments made by paragraph (1) shall apply with
respect to premiums for plan years after 2007.
(B) The amendments made by paragraph (2) shall apply with
respect to plan years beginning after 2005.
TITLE V--DISCLOSURE
SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICES.
(a) Application of Plan Funding Notice Requirements to All
Defined Benefit Plans.--Section 101(f) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1021(f)) is
amended--
(1) in the heading, by striking ``Multiemployer'';
(2) in paragraph (1), by striking ``which is a
multiemployer plan''; and
(3) in paragraph (2)(B)(iii), by inserting after ``plan''
the following: ``, and a summary of the rules governing
termination of single-employer plans under subtitle C of
title IV''.
(b) Inclusion of Statement of the Ratio of Inactive
Participants to Active Participants.--Section 101(f)(2)(B) of
such Act (29 U.S.C. 1021(f)(2)(B)) is amended--
(1) in clause (iii)(II) (added by subsection (a)(3) of this
section), by striking ``and'' at the end;
(2) in clause (iv), by striking ``apply.'' and inserting
``apply; and''; and
(3) by adding at the end the following new clause:
``(v) a statement of the ratio, as of the end of the plan
year to which the notice relates, of--
``(I) the number of participants who are not in covered
service under the plan and are in pay status under the plan
or have a nonforfeitable right to benefits under the plan, to
``(II) the number of participants who are in covered
service under the plan.''.
(c) Comparison of Monthly Average of Value of Plan Assets
to Projected Current Liabilities.--Section 101(f)(2)(B) of
such Act (29 U.S.C. 1021(f)(2)(B)) (as amended by the
preceding provisions of this section) is amended further--
(1) by striking clause (ii) and inserting the following:
``(ii) a statement of a reasonable estimate of--
``(I) the value of the plan's assets for the plan year to
which the notice relates,
``(II) projected liabilities of the plan for the plan year
to which the notice relates, and
``(III) the ratio of the estimated amount determined under
subclause (I) to the estimated amount determined under
subclause (II);''; and
(2) by adding at the end (after and below clause (v)) the
following:
``For purposes of determining a plan's projected liabilities
for a plan year under clause (ii)(II), such projected
liabilities shall be determined by projecting forward in a
reasonable manner to the end of the plan year the liabilities
of the plan to participants and beneficiaries as of the first
day of the plan year, taking into account any significant
events that occur during the plan year and that have a
material effect on such liabilities, including any plan
amendments in effect for the plan year.''.
(d) Statement of Plan's Funding Policy and Method of Asset
Allocation.--Section 101(f)(2)(B) of such Act (as amended by
the preceding provisions of this section) is amended
further--
(1) in clause (iv), by striking ``and'' at the end;
(2) in clause (v), by striking the period and inserting
``; and''; and
(3) by inserting after clause (v) the following new clause:
``(vi) a statement setting forth the funding policy of the
plan and the asset allocation of investments under the plan
(expressed as percentages of total assets) as of the end of
the plan year to which the notice relates.''.
(e) Notice of Funding Improvement Plan or Rehabilitation
Plan Adopted by Multiemployer Plan.--Section 101(f)(2)(B) of
such Act (as amended by the preceding provisions of this
section) is amended further--
(1) in clause (v), by striking ``and'' at the end;
(2) in clause (vi), by striking the period and inserting
``; and''; and
(3) by inserting after clause (vi) the following new
clause:
``(vii) a summary of any funding improvement plan,
rehabilitation plan, or modification thereof adopted under
section 305 during the plan year to which the notice
relates.''.
(f) Notice Provided to Alternate Payees.--Section 101(f)(1)
of such Act (29 U.S.C. 1021(f)(1)) is amended by adding at
the end the following new sentence: ``For purposes of this
paragraph, the term `beneficiary' includes an alternate payee
(within the meaning of section 206(d)(3)(K)) under an
applicable qualified domestic relations order (within the
meaning of section 206(d)(3)(B)(i)) receiving benefits under
the plan.''.
(g) Notice Due 90 Days After Plan's Valuation Date.--
Section 101(f)(3) of such Act (29 U.S.C. 1021(f)(3)) is
amended by striking ``two months after the deadline
(including extensions) for filing the annual report for the
plan year'' and inserting ``90 days after the end of the plan
year''.
(h) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2005.
SEC. 502. ADDITIONAL DISCLOSURE REQUIREMENTS.
(a) Additional Annual Reporting Requirements.--Section 103
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1023) is amended--
(1) in subsection (a)(1)(B), by striking ``subsections (d)
and (e)'' and inserting ``subsections (d), (e), and (f)'';
and
(2) by adding at the end the following new subsection:
``(f)(1) With respect to any defined benefit plan, an
annual report under this section for a plan year shall
include the following:
``(A)(i) The ratio of the number of inactive participants
under the plan as of the end of such plan year to the number
of active participants as of the end of such plan year.
``(ii) For purposes of clause (i)--
``(I) the term `active participant' means an individual who
is in covered service under the plan, and
``(II) the term `inactive participant' means an individual
who is not in covered service under the plan who is in pay
status under the plan or has a nonforfeitable right to
benefits under the plan.
``(B) In any case in which any liabilities to participants
or their beneficiaries under such plan as of the end of such
plan year consist (in whole or in part) of liabilities to
such participants and beneficiaries borne by 2 or more
pension plans as of immediately before such plan year, the
funded ratio of each of such 2 or more pension plans as of
immediately before such plan year and the funded ratio of the
plan with respect to which the annual report is filed as of
the end of such plan year.
``(C) For purposes of this paragraph, the term `funded
ratio' means, in connection with a plan, the percentage
which--
``(i) the value of the plan's assets is of
``(ii) the liabilities to participants and beneficiaries
under the plan.
``(2) With respect to any defined benefit plan which is a
multiemployer plan, an annual report under this section for a
plan year shall include the following:
``(A) The number of employers obligated to contribute to
the plan as of the end of such plan year.
``(B) The number of participants under the plan on whose
behalf no employer contributions have been made to the plan
for such plan year. For purposes of this subparagraph, the
term `employer contribution' means, in connection with a
participant, a contribution made by an employer as an
employer of such participant.''.
(b) Additional Information in Annual Actuarial Statement
Regarding Plan Retirement Projections.--Section 103(d) of
such Act (29 U.S.C. 1023(d)) is amended--
(1) by redesignating paragraphs (12) and (13) as paragraphs
(13) and (14), respectively; and
(2) by inserting after paragraph (11) the following new
paragraph:
``(12) A statement explaining the actuarial assumptions and
methods used in projecting future retirements and asset
distributions under the plan.''.
(c) Summary Annual Report Filed Within 15 Days After
Deadline for Filing of Annual Report.--Section 104(b)(3) of
such Act (29 U.S.C. 1024(b)(3)) is amended--
(1) by striking ``Within 210 days after the close of the
fiscal year,'' and inserting ``Within 15 business days after
the due date under subsection (a)(1) for the filing of the
annual report for the fiscal year of the plan''; and
(2) by striking ``the latest'' and inserting ``such''.
(d) Information Made Available to Participants,
Beneficiaries, and Employers With Respect to Multiemployer
Plans.--
(1) In general.--Section 101 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021) is amended--
(A) by redesignating subsection (j) as subsection (k); and
(B) by inserting after subsection (i) the following new
subsection:
``(j) Multiemployer Plan Information Made Available on
Request.--
``(1) In general.--Each administrator of a multiemployer
plan shall furnish to any plan participant or beneficiary or
any employer having an obligation to contribute to the plan,
who so requests in writing--
``(A) a copy of any actuary report received by the plan for
any plan year which has been in receipt by the plan for at
least 30 days, and
``(B) a copy of any financial report prepared for the plan
by any plan investment manager or advisor or other person who
is a plan fiduciary which has been in receipt by the plan for
at least 30 days.
``(2) Compliance.--Information required to be provided
under paragraph (1) --
``(A) shall be provided to the requesting participant,
beneficiary, or employer within
[[Page H11705]]
30 days after the request in a form and manner prescribed in
regulations of the Secretary, and
``(B) may be provided in written, electronic, or other
appropriate form to the extent such form is reasonably
accessible to persons to whom the information is required to
be provided.
``(3) Limitations.--In no case shall a participant,
beneficiary, or employer be entitled under this subsection to
receive more than one copy of any report described in
paragraph (1) during any one 12-month period. The
administrator may make a reasonable charge to cover copying,
mailing, and other costs of furnishing copies of information
pursuant to paragraph (1). The Secretary may by regulations
prescribe the maximum amount which will constitute a
reasonable charge under the preceding sentence.''.
(2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) is amended by inserting ``or 101(j)'' after
``101(f)(1)''.
(3) Regulations.--The Secretary shall prescribe regulations
under section 101(j)(2) of the Employee Retirement Income
Security Act of 1974 (added by paragraph (1) of this
subsection) not later than 90 days after the date of the
enactment of this Act.
(e) Notice of Potential Withdrawal Liability to
Multiemployer Plans.--
(1) In general.--Section 101 of such Act (as amended by
subsection (e) of this section) is amended further--
(A) by redesignating subsection (k) as subsection (l); and
(B) by inserting after subsection (j) the following new
subsection:
``(k) Notice of Potential Withdrawal Liability.--
``(1) In general.--The plan sponsor or administrator shall
furnish to any employer who has an obligation to contribute
under the plan and who so requests in writing notice of--
``(A) the amount which would be the amount of such
employer's withdrawal liability under part 1 of subtitle E of
title IV if such employer withdrew on the last day of the
plan year preceding the date of the request, and
``(B) the average increase, per participant under the plan,
in accrued liabilities under the plan as of the end of such
plan year to participants under such plan on whose behalf no
employer contributions are payable (or their beneficiaries),
which would be attributable to such a withdrawal by such
employer.
For purposes of subparagraph (B), the term `employer
contribution' means, in connection with a participant, a
contribution made by an employer as an employer of such
participant.
``(2) Compliance.--Any notice required to be provided under
paragraph (1)--
``(A) shall be provided to the requesting employer within
180 days after the request in a form and manner prescribed in
regulations of the Secretary, and
``(B) may be provided in written, electronic, or other
appropriate form to the extent such form is reasonably
accessible to employers to whom the information is required
to be provided.
``(3) Limitations.--In no case shall an employer be
entitled under this subsection to receive more than one
notice described in paragraph (1) during any one 12-month
period. The person required to provide such notice may make a
reasonable charge to cover copying, mailing, and other costs
of furnishing such notice pursuant to paragraph (1). The
Secretary may by regulations prescribe the maximum amount
which will constitute a reasonable charge under the preceding
sentence.''.
(f) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2005.
SEC. 503. NOTICE TO PARTICIPANTS AND BENEFICIARIES OF SECTION
4010 FILINGS WITH THE PBGC.
(a) In General.--Section 4010 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1310) is amended by
adding at the end the following new subsection:
``(d) Notice to Participants and Beneficiaries.--
``(1) In general.--Not later than 90 days after the
submission by any person to the corporation of information or
documentary material with respect to any plan pursuant to
subsection (a), such person shall provide notice of such
submission to each participant and beneficiary under the plan
(and under all plans maintained by members of the controlled
group of each contributing sponsor of the plan). Such notice
shall also set forth--
``(A) the number of single-employer plans covered by this
title which are in at-risk status and are maintained by
contributing sponsors of such plan (and by members of their
controlled groups) with respect to which the funding target
attainment percentage for the preceding plan year of each
plan is less than 60 percent;
``(B) the value of the assets of each of the plans
described in subparagraph (A) for the plan year, the funding
target for each of such plans for the plan year, and the
funding target attainment percentage of each of such plans
for the plan year; and
``(C) taking into account all single-employer plans
maintained by the contributing sponsor and the members of its
controlled group as of the end of such plan year--
``(i) the aggregate total of the values of plan assets of
such plans as of the end of such plan year,
``(ii) the aggregate total of the funding targets of such
plans, as of the end of such plan year, taking into account
only benefits to which participants and beneficiaries have a
nonforfeitable right, and
``(iii) the aggregate funding targets attainment percentage
with respect to the contributing sponsor for the preceding
plan year.
``(2) Definitions.--For purposes of this subsection--
``(A) Value of plan assets.--The term `value of plan
assets' means the value of plan assets, as determined under
section 303(a)(2).
``(B) Funding target.--The term `funding target' has the
meaning provided under section 303(d)(1).
``(C) Funding target attainment percentage.--The term
`funding target attainment percentage' has the meaning
provided in section 303(d)(2).
``(D) Aggregate funding target attainment percentage.--The
term `aggregate funding targets attainment percentage' with
respect to a contributing sponsor for a plan year is the
percentage, taking into account all plans maintained by the
contributing sponsor and the members of its controlled group
as of the end of such plan year, which
``(i) the aggregate total of the values of plan assets, as
of the end of such plan year, of such plans, is of
``(ii) the aggregate total of the funding targets of such
plans, as of the end of such plan year, taking into account
only benefits to which participants and beneficiaries have a
nonforfeitable right.
``(E) At-risk status.--The term `at-risk status' has the
meaning provided in section 303(h)(3).
``(3) Compliance.--
``(A) In general.--Any notice required to be provided under
paragraph (1) may be provided in written, electronic, or
other appropriate form to the extent such form is reasonably
accessible to individuals to whom the information is required
to be provided.
``(B) Limitations.--In no case shall a participant or
beneficiary be entitled under this subsection to receive more
than one notice described in paragraph (1) during any one 12-
month period. The person required to provide such notice may
make a reasonable charge to cover copying, mailing, and other
costs of furnishing such notice pursuant to paragraph (1).
The corporation may by regulations prescribe the maximum
amount which will constitute a reasonable charge under the
preceding sentence.''.
(b) Effective Date.--The amendment made by this section
shall apply with respect to plan years beginning after 2006.
TITLE VI--INVESTMENT ADVICE
SEC. 601. AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974 PROVIDING PROHIBITED TRANSACTION
EXEMPTION FOR PROVISION OF INVESTMENT ADVICE.
(a) Exemption From Prohibited Transactions.--Section 408(b)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(b)) is amended by adding at the end the following
new paragraph:
``(14)(A) Any transaction described in subparagraph (B) in
connection with the provision of investment advice described
in section 3(21)(A)(ii), in any case in which--
``(i) the investment of assets of the plan is subject to
the direction of plan participants or beneficiaries,
``(ii) the advice is provided to the plan or a participant
or beneficiary of the plan by a fiduciary adviser in
connection with any sale, acquisition, or holding of a
security or other property for purposes of investment of plan
assets, and
``(iii) the requirements of subsection (g) are met in
connection with the provision of the advice.
``(B) The transactions described in this subparagraph are
the following:
``(i) the provision of the advice to the plan, participant,
or beneficiary;
``(ii) the sale, acquisition, or holding of a security or
other property (including any lending of money or other
extension of credit associated with the sale, acquisition, or
holding of a security or other property) pursuant to the
advice; and
``(iii) the direct or indirect receipt of fees or other
compensation by the fiduciary adviser or an affiliate thereof
(or any employee, agent, or registered representative of the
fiduciary adviser or affiliate) in connection with the
provision of the advice or in connection with a sale,
acquisition, or holding of a security or other property
pursuant to the advice.''.
(b) Requirements.--Section 408 of such Act is amended
further by adding at the end the following new subsection:
``(g) Requirements Relating to Provision of Investment
Advice by Fiduciary Advisers.--
``(1) In general.--The requirements of this subsection are
met in connection with the provision of investment advice
referred to in section 3(21)(A)(ii), provided to an employee
benefit plan or a participant or beneficiary of an employee
benefit plan by a fiduciary adviser with respect to the plan
in connection with any sale, acquisition, or holding of a
security or other property for purposes of investment of
amounts held by the plan, if--
``(A) in the case of the initial provision of the advice
with regard to the security or other property by the
fiduciary adviser to the plan, participant, or beneficiary,
the fiduciary adviser provides to the recipient of the
advice, at a time reasonably contemporaneous with the initial
provision of the advice, a written notification (which may
[[Page H11706]]
consist of notification by means of electronic
communication)--
``(i) of all fees or other compensation relating to the
advice that the fiduciary adviser or any affiliate thereof is
to receive (including compensation provided by any third
party) in connection with the provision of the advice or in
connection with the sale, acquisition, or holding of the
security or other property,
``(ii) of any material affiliation or contractual
relationship of the fiduciary adviser or affiliates thereof
in the security or other property,
``(iii) of any limitation placed on the scope of the
investment advice to be provided by the fiduciary adviser
with respect to any such sale, acquisition, or holding of a
security or other property,
``(iv) of the types of services provided by the fiduciary
adviser in connection with the provision of investment advice
by the fiduciary adviser,
``(v) that the adviser is acting as a fiduciary of the plan
in connection with the provision of the advice, and
``(vi) that a recipient of the advice may separately
arrange for the provision of advice by another adviser, that
could have no material affiliation with and receive no fees
or other compensation in connection with the security or
other property,
``(B) the fiduciary adviser provides appropriate
disclosure, in connection with the sale, acquisition, or
holding of the security or other property, in accordance with
all applicable securities laws,
``(C) the sale, acquisition, or holding occurs solely at
the direction of the recipient of the advice,
``(D) the compensation received by the fiduciary adviser
and affiliates thereof in connection with the sale,
acquisition, or holding of the security or other property is
reasonable, and
``(E) the terms of the sale, acquisition, or holding of the
security or other property are at least as favorable to the
plan as an arm's length transaction would be.
``(2) Standards for presentation of information.--
``(A) In general.--The notification required to be provided
to participants and beneficiaries under paragraph (1)(A)
shall be written in a clear and conspicuous manner and in a
manner calculated to be understood by the average plan
participant and shall be sufficiently accurate and
comprehensive to reasonably apprise such participants and
beneficiaries of the information required to be provided in
the notification.
``(B) Model form for disclosure of fees and other
compensation.--The Secretary shall issue a model form for the
disclosure of fees and other compensation required in
paragraph (1)(A)(i) which meets the requirements of
subparagraph (A).
``(3) Exemption conditioned on making required information
available annually, on request, and in the event of material
change.--The requirements of paragraph (1)(A) shall be deemed
not to have been met in connection with the initial or any
subsequent provision of advice described in paragraph (1) to
the plan, participant, or beneficiary if, at any time during
the provision of advisory services to the plan, participant,
or beneficiary, the fiduciary adviser fails to maintain the
information described in clauses (i) through (iv) of
subparagraph (A) in currently accurate form and in the manner
described in paragraph (2) or fails--
``(A) to provide, without charge, such currently accurate
information to the recipient of the advice no less than
annually,
``(B) to make such currently accurate information
available, upon request and without charge, to the recipient
of the advice, or
``(C) in the event of a material change to the information
described in clauses (i) through (iv) of paragraph (1)(A), to
provide, without charge, such currently accurate information
to the recipient of the advice at a time reasonably
contemporaneous to the material change in information.
``(4) Maintenance for 6 years of evidence of compliance.--A
fiduciary adviser referred to in paragraph (1) who has
provided advice referred to in such paragraph shall, for a
period of not less than 6 years after the provision of the
advice, maintain any records necessary for determining
whether the requirements of the preceding provisions of this
subsection and of subsection (b)(14) have been met. A
transaction prohibited under section 406 shall not be
considered to have occurred solely because the records are
lost or destroyed prior to the end of the 6-year period due
to circumstances beyond the control of the fiduciary adviser.
``(5) Exemption for plan sponsor and certain other
fiduciaries.--
``(A) In general.--Subject to subparagraph (B), a plan
sponsor or other person who is a fiduciary (other than a
fiduciary adviser) shall not be treated as failing to meet
the requirements of this part solely by reason of the
provision of investment advice referred to in section
3(21)(A)(ii) (or solely by reason of contracting for or
otherwise arranging for the provision of the advice), if--
``(i) the advice is provided by a fiduciary adviser
pursuant to an arrangement between the plan sponsor or other
fiduciary and the fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred to in such
section,
``(ii) the terms of the arrangement require compliance by
the fiduciary adviser with the requirements of this
subsection, and
``(iii) the terms of the arrangement include a written
acknowledgment by the fiduciary adviser that the fiduciary
adviser is a fiduciary of the plan with respect to the
provision of the advice.
``(B) Continued duty of prudent selection of adviser and
periodic review.--Nothing in subparagraph (A) shall be
construed to exempt a plan sponsor or other person who is a
fiduciary from any requirement of this part for the prudent
selection and periodic review of a fiduciary adviser with
whom the plan sponsor or other person enters into an
arrangement for the provision of advice referred to in
section 3(21)(A)(ii). The plan sponsor or other person who is
a fiduciary has no duty under this part to monitor the
specific investment advice given by the fiduciary adviser to
any particular recipient of the advice.
``(C) Availability of plan assets for payment for advice.--
Nothing in this part shall be construed to preclude the use
of plan assets to pay for reasonable expenses in providing
investment advice referred to in section 3(21)(A)(ii).
``(6) Definitions.--For purposes of this subsection and
subsection (b)(14)--
``(A) Fiduciary adviser.--The term `fiduciary adviser'
means, with respect to a plan, a person who is a fiduciary of
the plan by reason of the provision of investment advice by
the person to the plan or to a participant or beneficiary and
who is--
``(i) registered as an investment adviser under the
Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) or
under the laws of the State in which the fiduciary maintains
its principal office and place of business,
``(ii) a bank or similar financial institution referred to
in section 408(b)(4) or a savings association (as defined in
section 3(b)(1) of the Federal Deposit Insurance Act (12
U.S.C. 1813(b)(1))), but only if the advice is provided
through a trust department of the bank or similar financial
institution or savings association which is subject to
periodic examination and review by Federal or State banking
authorities,
``(iii) an insurance company qualified to do business under
the laws of a State,
``(iv) a person registered as a broker or dealer under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
``(v) an affiliate of a person described in any of clauses
(i) through (iv), or
``(vi) an employee, agent, or registered representative of
a person described in any of clauses (i) through (v) who
satisfies the requirements of applicable insurance, banking,
and securities laws relating to the provision of the advice.
``(B) Affiliate.--The term `affiliate' of another entity
means an affiliated person of the entity (as defined in
section 2(a)(3) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(3))).
``(C) Registered representative.--The term `registered
representative' of another entity means a person described in
section 3(a)(18) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(18)) (substituting the entity for the broker or
dealer referred to in such section) or a person described in
section 202(a)(17) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)(17)) (substituting the entity for the
investment adviser referred to in such section).''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to advice referred to in section
3(21)(A)(ii) of the Employee Retirement Income Security Act
of 1974 provided on or after January 1, 2006.
SEC. 602. AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
PROVIDING PROHIBITED TRANSACTION EXEMPTION FOR
PROVISION OF INVESTMENT ADVICE.
(a) Exemption From Prohibited Transactions.--Subsection (d)
of section 4975 of the Internal Revenue Code of 1986
(relating to exemptions from tax on prohibited transactions)
is amended--
(1) in paragraph (14), by striking ``or'' at the end;
(2) in paragraph (15), by striking the period at the end
and inserting ``; or''; and
(3) by adding at the end the following new paragraph:
``(16) any transaction described in subsection (f)(7)(A) in
connection with the provision of investment advice described
in subsection (e)(3)(B)(i), in any case in which--
``(A) the investment of assets of the plan is subject to
the direction of plan participants or beneficiaries,
``(B) the advice is provided to the plan or a participant
or beneficiary of the plan by a fiduciary adviser in
connection with any sale, acquisition, or holding of a
security or other property for purposes of investment of plan
assets, and
``(C) the requirements of subsection (f)(7)(B) are met in
connection with the provision of the advice.''.
(b) Allowed Transactions and Requirements.--Subsection (f)
of such section 4975 (relating to other definitions and
special rules) is amended by adding at the end the following
new paragraph:
``(7) Provisions relating to investment advice provided by
fiduciary advisers.--
``(A) Transactions allowable in connection with investment
advice provided by fiduciary advisers.--The transactions
referred to in subsection (d)(16), in connection with the
provision of investment advice by a fiduciary adviser, are
the following:
``(i) the provision of the advice to the plan, participant,
or beneficiary;
``(ii) the sale, acquisition, or holding of a security or
other property (including any lending of money or other
extension of credit
[[Page H11707]]
associated with the sale, acquisition, or holding of a
security or other property) pursuant to the advice; and
``(iii) the direct or indirect receipt of fees or other
compensation by the fiduciary adviser or an affiliate thereof
(or any employee, agent, or registered representative of the
fiduciary adviser or affiliate) in connection with the
provision of the advice or in connection with a sale,
acquisition, or holding of a security or other property
pursuant to the advice.
``(B) Requirements relating to provision of investment
advice by fiduciary advisers.--The requirements of this
subparagraph (referred to in subsection (d)(16)(C)) are met
in connection with the provision of investment advice
referred to in subsection (e)(3)(B), provided to a plan or a
participant or beneficiary of a plan by a fiduciary adviser
with respect to the plan in connection with any sale,
acquisition, or holding of a security or other property for
purposes of investment of amounts held by the plan, if--
``(i) in the case of the initial provision of the advice
with regard to the security or other property by the
fiduciary adviser to the plan, participant, or beneficiary,
the fiduciary adviser provides to the recipient of the
advice, at a time reasonably contemporaneous with the initial
provision of the advice, a written notification (which may
consist of notification by means of electronic
communication)--
``(I) of all fees or other compensation relating to the
advice that the fiduciary adviser or any affiliate thereof is
to receive (including compensation provided by any third
party) in connection with the provision of the advice or in
connection with the sale, acquisition, or holding of the
security or other property,
``(II) of any material affiliation or contractual
relationship of the fiduciary adviser or affiliates thereof
in the security or other property,
``(III) of any limitation placed on the scope of the
investment advice to be provided by the fiduciary adviser
with respect to any such sale, acquisition, or holding of a
security or other property,
``(IV) of the types of services provided by the fiduciary
adviser in connection with the provision of investment advice
by the fiduciary adviser,
``(V) that the adviser is acting as a fiduciary of the plan
in connection with the provision of the advice, and
``(VI) that a recipient of the advice may separately
arrange for the provision of advice by another adviser, that
could have no material affiliation with and receive no fees
or other compensation in connection with the security or
other property,
``(ii) the fiduciary adviser provides appropriate
disclosure, in connection with the sale, acquisition, or
holding of the security or other property, in accordance with
all applicable securities laws,
``(iii) the sale, acquisition, or holding occurs solely at
the direction of the recipient of the advice,
``(iv) the compensation received by the fiduciary adviser
and affiliates thereof in connection with the sale,
acquisition, or holding of the security or other property is
reasonable, and
``(v) the terms of the sale, acquisition, or holding of the
security or other property are at least as favorable to the
plan as an arm's length transaction would be.
``(C) Standards for presentation of information.--The
notification required to be provided to participants and
beneficiaries under subparagraph (B)(i) shall be written in a
clear and conspicuous manner and in a manner calculated to be
understood by the average plan participant and shall be
sufficiently accurate and comprehensive to reasonably apprise
such participants and beneficiaries of the information
required to be provided in the notification.
``(D) Exemption conditioned on making required information
available annually, on request, and in the event of material
change.--The requirements of subparagraph (B)(i) shall be
deemed not to have been met in connection with the initial or
any subsequent provision of advice described in subparagraph
(B) to the plan, participant, or beneficiary if, at any time
during the provision of advisory services to the plan,
participant, or beneficiary, the fiduciary adviser fails to
maintain the information described in subclauses (I) through
(IV) of subparagraph (B)(i) in currently accurate form and in
the manner required by subparagraph (C), or fails--
``(i) to provide, without charge, such currently accurate
information to the recipient of the advice no less than
annually,
``(ii) to make such currently accurate information
available, upon request and without charge, to the recipient
of the advice, or
``(iii) in the event of a material change to the
information described in subclauses (I) through (IV) of
subparagraph (B)(i), to provide, without charge, such
currently accurate information to the recipient of the advice
at a time reasonably contemporaneous to the material change
in information.
``(E) Maintenance for 6 years of evidence of compliance.--A
fiduciary adviser referred to in subparagraph (B) who has
provided advice referred to in such subparagraph shall, for a
period of not less than 6 years after the provision of the
advice, maintain any records necessary for determining
whether the requirements of the preceding provisions of this
paragraph and of subsection (d)(16) have been met. A
transaction prohibited under subsection (c)(1) shall not be
considered to have occurred solely because the records are
lost or destroyed prior to the end of the 6-year period due
to circumstances beyond the control of the fiduciary adviser.
``(F) Exemption for plan sponsor and certain other
fiduciaries.--A plan sponsor or other person who is a
fiduciary (other than a fiduciary adviser) shall not be
treated as failing to meet the requirements of this section
solely by reason of the provision of investment advice
referred to in subsection (e)(3)(B) (or solely by reason of
contracting for or otherwise arranging for the provision of
the advice), if--
``(i) the advice is provided by a fiduciary adviser
pursuant to an arrangement between the plan sponsor or other
fiduciary and the fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred to in such
section,
``(ii) the terms of the arrangement require compliance by
the fiduciary adviser with the requirements of this
paragraph,
``(iii) the terms of the arrangement include a written
acknowledgment by the fiduciary adviser that the fiduciary
adviser is a fiduciary of the plan with respect to the
provision of the advice, and
``(iv) the requirements of part 4 of subtitle B of title I
of the Employee Retirement Income Security Act of 1974 are
met in connection with the provision of such advice.
``(G) Definitions.--For purposes of this paragraph and
subsection (d)(16)--
``(i) Fiduciary adviser.--The term `fiduciary adviser'
means, with respect to a plan, a person who is a fiduciary of
the plan by reason of the provision of investment advice by
the person to the plan or to a participant or beneficiary and
who is--
``(I) registered as an investment adviser under the
Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) or
under the laws of the State in which the fiduciary maintains
its principal office and place of business,
``(II) a bank or similar financial institution referred to
in subsection (d)(4) or a savings association (as defined in
section 3(b)(1) of the Federal Deposit Insurance Act (12
U.S.C. 1813(b)(1))), but only if the advice is provided
through a trust department of the bank or similar financial
institution or savings association which is subject to
periodic examination and review by Federal or State banking
authorities,
``(III) an insurance company qualified to do business under
the laws of a State,
``(IV) a person registered as a broker or dealer under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
``(V) an affiliate of a person described in any of
subclauses (I) through (IV), or
``(VI) an employee, agent, or registered representative of
a person described in any of subclauses (I) through (V) who
satisfies the requirements of applicable insurance, banking,
and securities laws relating to the provision of the advice.
``(ii) Affiliate.--The term `affiliate' of another entity
means an affiliated person of the entity (as defined in
section 2(a)(3) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(3))).
``(iii) Registered representative.--The term `registered
representative' of another entity means a person described in
section 3(a)(18) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(18)) (substituting the entity for the broker or
dealer referred to in such section) or a person described in
section 202(a)(17) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)(17)) (substituting the entity for the
investment adviser referred to in such section).''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to advice referred to in section
4975(c)(3)(B) of the Internal Revenue Code of 1986 provided
on or after January 1, 2006.
TITLE VII--DEDUCTION LIMITATIONS
SEC. 701. INCREASE IN DEDUCTION LIMITS.
(a) Increase in Deduction Limit for Single-Employer
Plans.--Section 404 of the Internal Revenue Code of 1986
(relating to deduction for contributions of an employer to an
employees' trust or annuity plan and compensation under a
deferred payment plan) is amended--
(1) in subsection (a)(1)(A), by inserting ``in the case of
a defined benefit plan other than a multiemployer plan, in an
amount determined under subsection (o), and in the case of
any other plan'' after ``section 501(a),'', and
(2) by inserting at the end the following new subsection:
``(o) Deduction Limit for Single-Employer Plans.--For
purposes of subsection (a)(1)(A)--
``(1) In general.--In the case of a defined benefit plan to
which subsection (a)(1)(A) applies (other than a
multiemployer plan), the amount determined under this
subsection for any taxable year shall be equal to the amount
determined under paragraph (2) with respect to each plan year
ending with or within the taxable year.
``(2) Determination of amount.--The amount determined under
this paragraph for any plan year shall be equal to the excess
(if any) of--
``(A) the greater of--
``(i) the sum of--
``(I) 150 percent of the funding target applicable to the
plan for such plan year, determined under section 430(e),
plus
``(II) the target normal cost applicable to the plan for
such plan year, determined under section 430(b), or
[[Page H11708]]
``(ii) in the case of a plan that is not in an at-risk
status (as determined under 430(g)), the sum of--
``(I) the funding target which would be applicable to the
plan for such plan year if such plan were in an at-risk
status, determined under section 430(e) (with regard to
section 430(g)), plus
``(II) the target normal cost which would be applicable to
the plan for such plan year if such plan were in an at-risk
status, determined under section 430(b) (with regard to
section 430(g)), over
``(B) the value of the plan assets (determined under
section 430(e) as of the valuation date of the plan).
``(3) Special rule for terminating plans.--In the case of a
plan which, subject to section 4041 of the Employee
Retirement Income Security Act of 1974, terminates during the
plan year, the amount determined under paragraph (2) shall
not be less than the amount required to make the plan
sufficient for benefit liabilities (within the meaning of
section 4041(d) of such Act).
``(4) Definitions.--Any term used in this subsection which
is also used in section 430 shall have the same meaning given
such term by section 430.''.
(b) Increase in Deduction Limit for Multiemployer Plans.--
Section 404(a)(1)(D) of such Code is amended to read as
follows:
``(D) Amount determined on basis of unfunded current
liability.--
``(i) In general.--In the case of a defined benefit plan
which is a multiemployer plan, except as provided in
regulations, the maximum amount deductible under the
limitations of this paragraph shall not be less than the
unfunded current liability of the plan.
``(ii) Unfunded current liability.--For purposes of clause
(i), the term `unfunded current liability' means the excess
(if any) of--
``(I) 140 percent of the current liability of the plan
determined under section 431(c)(6)(C), over
``(II) the value of the plan's assets determined under
section 431(c)(2).''.
(c) Technical and Conforming Amendments.--
(1) The last sentence of section 404(a)(1)(A) of such Code
is amended by striking ``section 412'' each place it appears
and inserting ``section 431''.
(2) Section 404(a)(1)(B) of such Code is amended--
(A) by striking ``In the case of a plan'' and inserting
``In the case of a multiemployer plan'',
(B) by striking ``section 412(c)(7)'' each place it appears
and inserting ``section 431(c)(6)'',
(C) by striking ``section 412(c)(7)(B)'' and inserting
``section 431(c)(6)(A)(ii)'',
(D) by striking ``section 412(c)(7)(A)'' and inserting
``section 431(c)(6)(A)(i)'', and
(E) by striking ``section 412'' and inserting ``section
431''.
(3) Section 404(a)(1) of such Code is amended by striking
subparagraph (F).
(4) Section 404(a)(7) of such Code is amended--
(A) in subparagraph (A)(ii), by striking ``for the plan
year'' and all that follows and inserting ``which are
multiemployer plans for the plan year which ends with or
within such taxable year (or for any prior plan year) and the
maximum amount of employer contributions allowable under
subsection (o) with respect to any such defined benefit plans
which are not multiemployer plans for the plan year.'',
(B) by striking ``section 412(l)'' in the last sentence of
subparagraph (A) and inserting ``paragraph (1)(D)(ii)'', and
(C) by striking subparagraph (D) and inserting:
``(D) Insurance contract plans.--For purposes of this
paragraph, a plan described in section 412(d)(3) shall be
treated as a defined benefit plan.''.
(5) Section 404A(g)(3)(A) of such Code is amended by
striking ``paragraphs (3) and (7) of section 412(c)'' and
inserting ``sections 430(d)(1) and 431(c) (3) and (6)''.
(d) Effective Date.--The amendments made by this section
shall apply to contributions for taxable years beginning
after 2005.
SEC. 702. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.
(a) In General.--Subparagraph (C) of section 404(a)(7)
(relating to limitation on deductions where combination of
defined contribution plan and defined benefit plan) is
amended by adding after clause (ii) the following new clause:
``(iii) Limitation.--In the case of employer contributions
to 1 or more defined contribution plans, this paragraph shall
only apply to the extent that such contributions exceed 6
percent of the compensation otherwise paid or accrued during
the taxable year to the beneficiaries under such plans. For
purposes of this clause, amounts carried over from preceding
taxable years under subparagraph (B) shall be treated as
employer contributions to 1 or more defined contributions to
the extent attributable to employer contributions to such
plans in such preceding taxable years.''.
(b) Conforming Amendments.--Subparagraph (A) of section
4972(c)(6) of such Code (relating to nondeductible
contributions) is amended to read as follows:
``(A) so much of the contributions to 1 or more defined
contribution plans which are not deductible when contributed
solely because of section 404(a)(7) as does not exceed the
amount of contributions described in section 401(m)(4)(A),
or''.
(c) Effective Date.--The amendments made by this section
shall apply to contributions for taxable years beginning
after December 31, 2005.
The SPEAKER pro tempore. In lieu of the amendments recommended by the
Committees on Education and the Workforce and Ways and Means printed in
the bill, the amendment in the nature of a substitute printed in part A
of House Report 109-346 is adopted.
The text of the amendment in the nature of a substitute is as
follows:
H.R. 2830
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Pension
Protection Act of 2005''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title and table of contents.
TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
Sec. 101. Minimum funding standards.
Sec. 102. Funding rules for single-employer defined benefit pension
plans.
Sec. 103. Benefit limitations under single-employer plans.
Sec. 104. Technical and conforming amendments.
Subtitle B--Amendments to Internal Revenue Code of 1986
Sec. 111. Minimum funding standards.
Sec. 112. Funding rules for single-employer defined benefit pension
plans.
Sec. 113. Benefit limitations under single-employer plans.
Sec. 114. Technical and conforming amendments.
Subtitle C--Other Provisions
Sec. 121. Modification of transition rule to pension funding
requirements.
Sec. 122. Treatment of nonqualified deferred compensation plans when
employer defined benefit plan in at-risk status.
TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
Sec. 201. Funding rules for multiemployer defined benefit plans.
Sec. 202. Additional funding rules for multiemployer plans in
endangered or critical status.
Sec. 203. Measures to forestall insolvency of multiemployer plans.
Sec. 204. Withdrawal liability reforms.
Sec. 205. Removal of restrictions with respect to procedures applicable
to disputes involving withdrawal liability.
Subtitle B--Amendments to Internal Revenue Code of 1986
Sec. 211. Funding rules for multiemployer defined benefit plans.
Sec. 212. Additional funding rules for multiemployer plans in
endangered or critical status.
Sec. 213. Measures to forestall insolvency of multiemployer plans.
TITLE III--OTHER PROVISIONS
Sec. 301. Interest rate for 2006 funding requirements.
Sec. 302. Interest rate assumption for determination of lump sum
distributions.
Sec. 303. Interest rate assumption for applying benefit limitations to
lump sum distributions.
Sec. 304. Distributions during working retirement.
Sec. 305. Other amendments relating to prohibited transactions.
Sec. 306. Correction period for certain transactions involving
securities and commodities.
Sec. 307. Recovery by reimbursement or subrogation with respect to
provided benefits.
Sec. 308. Exercise of control over plan assets in connection with
qualified changes in investment options.
Sec. 309. Clarification of fiduciary rules.
Sec. 310. Government Accountability Office pension funding report.
TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS
Sec. 401. Increases in PBGC premiums.
TITLE V--DISCLOSURE
Sec. 501. Defined benefit plan funding notices.
Sec. 502. Additional disclosure requirements.
Sec. 503. Section 4010 filings with the PBGC.
TITLE VI--INVESTMENT ADVICE
Sec. 601. Amendments to Employee Retirement Income Security Act of 1974
providing prohibited transaction exemption for provision
of investment advice.
Sec. 602. Amendments to Internal Revenue Code of 1986 providing
prohibited transaction exemption for provision of
investment advice.
TITLE VII--BENEFIT ACCRUAL STANDARDS
Sec. 701. Benefit accrual standards.
[[Page H11709]]
TITLE VIII--DEDUCTION LIMITATIONS
Sec. 801. Increase in deduction limits.
Sec. 802. Updating deduction rules for combination of plans.
TITLE IX--ENHANCED RETIREMENTS SAVINGS AND DEFINED CONTRIBUTION PLANS
Sec. 901. Pensions and individual retirement arrangement provisions of
Economic Growth and Tax Relief Reconciliation Act of 2001
made permanent.
Sec. 902. Saver's credit.
Sec. 903. Increasing participation through automatic contribution
arrangements.
Sec. 904. Penalty-free withdrawals from retirement plans for
individuals called to active duty for at least 179 days.
Sec. 905. Waiver of 10 percent early withdrawal penalty tax on certain
distributions of pension plans for public safety
employees.
Sec. 906. Combat zone compensation taken into account for purposes of
determining limitation and deductibility of contributions
to individual retirement plans.
Sec. 907. Direct payment of tax refunds to individual retirement plans.
Sec. 908. IRA eligibility for the disabled.
Sec. 909. Allow rollovers by nonspouse beneficiaries of certain
retirement plan distributions.
TITLE X--PROVISIONS TO ENHANCE HEALTH CARE AFFORDABILITY
Sec. 1001. Treatment of annuity and life insurance contracts with a
long-term care insurance feature.
Sec. 1002. Disposition of unused health and dependent care benefits in
cafeteria plans and flexible spending arrangements.
Sec. 1003. Distributions from governmental retirement plans for health
and long-term care insurance for public safety officers.
TITLE XI--GENERAL PROVISIONS
Sec. 1101. Provisions relating to plan amendments.
TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
SEC. 101. MINIMUM FUNDING STANDARDS.
(a) Repeal of Existing Funding Rules.--Sections 302 through
308 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1082 through 1086) are repealed.
(b) New Minimum Funding Standards.--Part 3 of subtitle B of
title I of such Act (as amended by subsection (a)) is amended
further by inserting after section 301 the following new
section:
``Minimum funding standards
``Sec. 302. (a) Requirement to Meet Minimum Funding
Standard.--
``(1) In general.--A plan to which this part applies shall
satisfy the minimum funding standard applicable to the plan
for any plan year.
``(2) Minimum funding standard.--For purposes of paragraph
(1), a plan shall be treated as satisfying the minimum
funding standard for a plan year if--
``(A) in the case of a defined benefit plan which is a
single-employer plan, the employer makes contributions to or
under the plan for the plan year which, in the aggregate, are
not less than the minimum required contribution determined
under section 303 for the plan for the plan year,
``(B) in the case of a money purchase plan which is a
single-employer plan, the employer makes contributions to or
under the plan for the plan year which are required under the
terms of the plan, and
``(C) in the case of a multiemployer plan, the employers
make contributions to or under the plan for any plan year
which, in the aggregate, are sufficient to ensure that the
plan does not have an accumulated funding deficiency under
section 304 as of the end of the plan year.
``(b) Liability for Contributions.--
``(1) In general.--Except as provided in paragraph (2), the
amount of any contribution required by this section
(including any required installments under paragraphs (3) and
(4) of section 303(j)) shall be paid by the employer
responsible for making contributions to or under the plan.
``(2) Joint and several liability where employer member of
controlled group.--In the case of a single-employer plan, if
the employer referred to in paragraph (1) is a member of a
controlled group, each member of such group shall be jointly
and severally liable for payment of such contributions.
``(c) Variance From Minimum Funding Standards.--
``(1) Waiver in case of business hardship.--
``(A) In general.--If--
``(i) an employer is (or in the case of a multiemployer
plan, 10 percent or more of the number of employers
contributing to or under the plan is) unable to satisfy the
minimum funding standard for a plan year without temporary
substantial business hardship (substantial business hardship
in the case of a multiemployer plan), and
``(ii) application of the standard would be adverse to the
interests of plan participants in the aggregate,
the Secretary of the Treasury may, subject to subparagraph
(C), waive the requirements of subsection (a) for such year
with respect to all or any portion of the minimum funding
standard. The Secretary of the Treasury shall not waive the
minimum funding standard with respect to a plan for more than
3 of any 15 (5 of any 15 in the case of a multiemployer plan)
consecutive plan years.
``(B) Effects of waiver.--If a waiver is granted under
subparagraph (A) for any plan year--
``(i) in the case of a single-employer plan, the minimum
required contribution under section 303 for the plan year
shall be reduced by the amount of the waived funding
deficiency and such amount shall be amortized as required
under section 303(e), and
``(ii) in the case of a multiemployer plan, the funding
standard account shall be credited under section 304(b)(3)(C)
with the amount of the waived funding deficiency and such
amount shall be amortized as required under section
304(b)(2)(C).
``(C) Waiver of amortized portion not allowed.--The
Secretary of the Treasury may not waive under subparagraph
(A) any portion of the minimum funding standard under
subsection (a) for a plan year which is attributable to any
waived funding deficiency for any preceding plan year.
``(2) Determination of business hardship.--For purposes of
this subsection, the factors taken into account in
determining temporary substantial business hardship
(substantial business hardship in the case of a multiemployer
plan) shall include (but shall not be limited to) whether or
not--
``(A) the employer is operating at an economic loss,
``(B) there is substantial unemployment or underemployment
in the trade or business and in the industry concerned,
``(C) the sales and profits of the industry concerned are
depressed or declining, and
``(D) it is reasonable to expect that the plan will be
continued only if the waiver is granted.
``(3) Waived funding deficiency.--For purposes of this
part, the term `waived funding deficiency' means the portion
of the minimum funding standard under subsection (a)
(determined without regard to the waiver) for a plan year
waived by the Secretary of the Treasury and not satisfied by
employer contributions.
``(4) Security for waivers for single-employer plans,
consultations.--
``(A) Security may be required.--
``(i) In general.--Except as provided in subparagraph (C),
the Secretary of the Treasury may require an employer
maintaining a defined benefit plan which is a single-employer
plan (within the meaning of section 4001(a)(15)) to provide
security to such plan as a condition for granting or
modifying a waiver under paragraph (1).
``(ii) special rules.--Any security provided under clause
(i) may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Corporation,
by a contributing sponsor (within the meaning of section
4001(a)(13)), or a member of such sponsor's controlled group
(within the meaning of section 4001(a)(14)).
``(B) Consultation with the pension benefit guaranty
corporation.--Except as provided in subparagraph (C), the
Secretary of the Treasury shall, before granting or modifying
a waiver under this subsection with respect to a plan
described in subparagraph (A)(i)--
``(i) provide the Pension Benefit Guaranty Corporation
with--
``(I) notice of the completed application for any waiver or
modification, and
``(II) an opportunity to comment on such application within
30 days after receipt of such notice, and
``(ii) consider--
``(I) any comments of the Corporation under clause (i)(II),
and
``(II) any views of any employee organization (within the
meaning of section 3(4)) representing participants in the
plan which are submitted in writing to the Secretary of the
Treasury in connection with such application.
Information provided to the Corporation under this
subparagraph shall be considered tax return information and
subject to the safeguarding and reporting requirements of
section 6103(p) of the Internal Revenue Code of 1986.
``(C) Exception for certain waivers.--
``(i) In general.--The preceding provisions of this
paragraph shall not apply to any plan with respect to which
the sum of--
``(I) the aggregate unpaid minimum required contribution
for the plan year and all preceding plan years, and
``(II) the present value of all waiver amortization
installments determined for the plan year and succeeding plan
years under section 303(e)(2),
is less than $1,000,000.
``(ii) Treatment of waivers for which applications are
pending.--The amount described in clause (i)(I) shall include
any increase in such amount which would result if all
applications for waivers of the minimum funding standard
under this subsection which are pending with respect to such
plan were denied.
``(iii) Unpaid minimum required contribution.--For purposes
of this subparagraph--
``(I) In general.--The term `unpaid minimum required
contribution' means, with respect to any plan year, any
minimum required contribution under section 303 for the plan
year which is not paid on or before the due date (as
determined under section 303(j)(1)) for the plan year.
[[Page H11710]]
``(II) Ordering rule.--For purposes of subclause (I), any
payment to or under a plan for any plan year shall be
allocated first to unpaid minimum required contributions for
all preceding plan years on a first-in, first-out basis and
then to the minimum required contribution under section 303
for the plan year.
``(5) Special rules for single-employer plans.--
``(A) Application must be submitted before date 2\1/2\
months after close of year.--In the case of a single-employer
plan, no waiver may be granted under this subsection with
respect to any plan for any plan year unless an application
therefor is submitted to the Secretary of the Treasury not
later than the 15th day of the 3rd month beginning after the
close of such plan year.
``(B) Special rule if employer is member of controlled
group.--In the case of a single-employer plan, if an employer
is a member of a controlled group, the temporary substantial
business hardship requirements of paragraph (1) shall be
treated as met only if such requirements are met--
``(i) with respect to such employer, and
``(ii) with respect to the controlled group of which such
employer is a member (determined by treating all members of
such group as a single employer).
The Secretary of the Treasury may provide that an analysis of
a trade or business or industry of a member need not be
conducted if such Secretary determines such analysis is not
necessary because the taking into account of such member
would not significantly affect the determination under this
paragraph.
``(6) Advance notice.--
``(A) In general.--The Secretary of the Treasury shall,
before granting a waiver under this subsection, require each
applicant to provide evidence satisfactory to such Secretary
that the applicant has provided notice of the filing of the
application for such waiver to to each affected party (as
defined in section 4001(a)(21)). Such notice shall include a
description of the extent to which the plan is funded for
benefits which are guaranteed under title IV and for benefit
liabilities.
``(B) Consideration of relevant information.--The Secretary
of the Treasury shall consider any relevant information
provided by a person to whom notice was given under
subparagraph (A).
``(7) Restriction on plan amendments.--
``(A) In general.--No amendment of a plan 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 if a waiver under this
subsection or an extension of time under section 304(d) is in
effect with respect to the plan, or if a plan amendment
described in subsection (d)(2) has been made at any time in
the preceding 12 months (24 months in the case of a
multiemployer plan). If a plan is amended in violation of the
preceding sentence, any such waiver, or extension of time,
shall not apply to any plan year ending on or after the date
on which such amendment is adopted.
``(B) Exception.--Paragraph (1) shall not apply to any plan
amendment which--
``(i) the Secretary of the Treasury determines to be
reasonable and which provides for only de minimis increases
in the liabilities of the plan,
``(ii) only repeals an amendment described in subsection
(d)(2), or
``(iii) is required as a condition of qualification under
part I of subchapter D of chapter 1 of the Internal Revenue
Code of 1986.
``(8) Cross reference.--For corresponding duties of the
Secretary of the Treasury with regard to implementation of
the Internal Revenue Code of 1986, see section 412(c) of such
Code.
``(d) Miscellaneous Rules.--
``(1) Change in method or year.--If the funding method, the
valuation date, or a plan year for a plan is changed, the
change shall take effect only if approved by the Secretary of
the Treasury.
``(2) Certain retroactive plan amendments.--For purposes of
this section, any amendment applying to a plan year which--
``(A) is adopted after the close of such plan year but no
later than 2\1/2\ months after the close of the plan year
(or, in the case of a multiemployer plan, no later than 2
years after the close of such plan year),
``(B) does not reduce the accrued benefit of any
participant determined as of the beginning of the first plan
year to which the amendment applies, and
``(C) does not reduce the accrued benefit of any
participant determined as of the time of adoption except to
the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed
to have been made on the first day of such plan year. No
amendment described in this paragraph which reduces the
accrued benefits of any participant shall take effect unless
the plan administrator files a notice with the Secretary of
the Treasury notifying him of such amendment and such
Secretary has approved such amendment, or within 90 days
after the date on which such notice was filed, failed to
disapprove such amendment. No amendment described in this
subsection shall be approved by the Secretary of the Treasury
unless such Secretary determines that such amendment is
necessary because of a substantial business hardship (as
determined under subsection (c)(2)) and that a waiver under
subsection (c) (or, in the case of a multiemployer plan, any
extension of the amortization period under section 304(d)) is
unavailable or inadequate.
``(3) Controlled group.--For purposes of this section, the
term `controlled group' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 of the Internal Revenue Code of 1986.''.
(c) Clerical Amendment.--The table of contents in section 1
of such Act is amended by striking the items relating to
sections 302 through 308 and inserting the following new
item:
``Sec. 302. Minimum funding standards.''.
(d) Effective Date.--The amendments made by this section
shall apply to plan years beginning after 2006.
SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS.
(a) In General.--Part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (as amended
by section 101 of this Act) is amended further by inserting
after section 302 the following new section:
``Minimum funding standards for single-employer defined benefit pension
plans
``Sec. 303. (a) Minimum Required Contribution.--For
purposes of this section and section 302(a)(2)(A), except as
provided in subsection (f), the term `minimum required
contribution' means, with respect to any plan year of a
single-employer plan--
``(1) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(B)) is less than the
funding target of the plan for the plan year, the sum of--
``(A) the target normal cost of the plan for the plan year,
``(B) the shortfall amortization charge (if any) for the
plan for the plan year determined under subsection (c), and
``(C) the waiver amortization charge (if any) for the plan
for the plan year as determined under subsection (e);
``(2) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(B)) exceeds the
funding target of the plan for the plan year, the target
normal cost of the plan for the plan year reduced by such
excess; or
``(3) in any other case, the target normal cost of the plan
for the plan year.
``(b) Target Normal Cost.--For purposes of this section,
except as provided in subsection (i)(2) with respect to plans
in at-risk status, the term `target normal cost' means, for
any plan year, the present value of all benefits which are
expected to accrue or to be earned under the plan during the
plan year. For purposes of this subsection, if any benefit
attributable to services performed in a preceding plan year
is increased by reason of any increase in compensation during
the current plan year, the increase in such benefit shall be
treated as having accrued during the current plan year.
``(c) Shortfall Amortization Charge.--
``(1) In general.--For purposes of this section, the
shortfall amortization charge for a plan for any plan year is
the aggregate total of the shortfall amortization
installments for such plan year with respect to the shortfall
amortization bases for such plan year and each of the 6
preceding plan years.
``(2) Shortfall amortization installment.--The plan sponsor
shall determine, with respect to the shortfall amortization
base of the plan for any plan year, the amounts necessary to
amortize such shortfall amortization base, in level annual
installments over a period of 7 plan years beginning with
such plan year. For purposes of paragraph (1), the annual
installment of such amortization for each plan year in such
7-plan-year period is the shortfall amortization installment
for such plan year with respect to such shortfall
amortization base. In determining any shortfall amortization
installment under this paragraph, the plan sponsor shall use
the segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the rules
of subparagraph (B) of subsection (h)(2).
``(3) Shortfall amortization base.--For purposes of this
section, the shortfall amortization base of a plan for a plan
year is the excess (if any) of--
``(A) the funding shortfall of such plan for such plan
year, over
``(B) the sum of--
``(i) the present value (determined using the segment rates
determined under subparagraph (C) of subsection (h)(2),
applied under rules similar to the rules of subparagraph (B)
of subsection (h)(2)) of the aggregate total of the shortfall
amortization installments, for such plan year and the 5
succeeding plan years, which have been determined with
respect to the shortfall amortization bases of the plan for
each of the 6 plan years preceding such plan year, and
``(ii) the present value (as so determined) of the
aggregate total of the waiver amortization installments for
such plan year and the 5 succeeding plan years, which have
been determined with respect to the waiver amortization bases
of the plan for each of the 5 plan years preceding such plan
year.
``(4) Funding shortfall.--For purposes of this section, the
funding shortfall of a plan for any plan year is the excess
(if any) of--
``(A) the funding target of the plan for the plan year,
over
``(B) the value of plan assets of the plan (as reduced
under subsection (f)(4)(B)) for the plan year which are held
by the plan on the valuation date.
``(5) Exemption from new shortfall amortization base.--
[[Page H11711]]
``(A) In general.--In any case in which the value of plan
assets of the plan (as reduced under subsection (f)(4)(A)) is
equal to or greater than the funding target of the plan for
the plan year, the shortfall amortization base of the plan
for such plan year shall be zero.
``(B) Transition rule.--
``(i) In general.--In the case of a non-deficit reduction
plan, subparagraph (A) shall be applied to plan years
beginning after 2006 and before 2011 by substituting, for the
funding target of the plan for the plan year, the applicable
percentage of such funding target determined under the
following table:
``In the case of a plan year beginning in The applicable percentage
calendar year: is:
2007...................................... 92 percent
2008...................................... 94 percent
2009...................................... 96 percent
2010...................................... 98 percent.
``(ii) Limitation.--Clause (i) shall not apply with respect
to any plan year after 2007 unless the ratio (expressed as a
percentage) which--
``(I) the value of plan assets for each preceding plan year
after 2006 (as reduced under subsection (f)(4)(A)), bears to
``(II) the funding target of the plan for such preceding
plan year (determined without regard to subsection (i)(1)),
is not less than the applicable percentage with respect to
such preceding plan determined under clause (i).
``(iii) Non-deficit reduction plan.--For purposes of clause
(i), the term `non-deficit reduction plan' means any plan--
``(I) to which this part (as in effect on the day before
the date of the enactment of the Pension Protection Act of
2005) applied for the plan year beginning in 2006, and
``(II) to which section 302(d) (as so in effect) did not
apply for such plan year.
``(6) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the
shortfall amortization charge for such plan year and
succeeding plan years, the shortfall amortization bases for
all preceding plan years (and all shortfall amortization
installments determined with respect to such bases) shall be
reduced to zero.
``(d) Rules Relating to Funding Target.--For purposes of
this section--
``(1) Funding target.--Except as provided in subsection
(i)(1) with respect to plans in at-risk status, the funding
target of a plan for a plan year is the present value of all
liabilities to participants and their beneficiaries under the
plan for the plan year.
``(2) Funding target attainment percentage.--The `funding
target attainment percentage' of a plan for a plan year is
the ratio (expressed as a percentage) which--
``(A) the value of plan assets for the plan year (as
reduced under subsection (f)(4)(B)), bears to
``(B) the funding target of the plan for the plan year
(determined without regard to subsection (i)(1)).
``(e) Waiver Amortization Charge.--
``(1) Determination of waiver amortization charge.--The
waiver amortization charge (if any) for a plan for any plan
year is the aggregate total of the waiver amortization
installments for such plan year with respect to the waiver
amortization bases for each of the 5 preceding plan years.
``(2) Waiver amortization installment.--The plan sponsor
shall determine, with respect to the waiver amortization base
of the plan for any plan year, the amounts necessary to
amortize such waiver amortization base, in level annual
installments over a period of 5 plan years beginning with the
succeeding plan year. For purposes of paragraph (1), the
annual installment of such amortization for each plan year in
such 5-plan year period is the waiver amortization
installment for such plan year with respect to such waiver
amortization base.
``(3) Interest rate.--In determining any waiver
amortization installment under this subsection, the plan
sponsor shall use the segment rates determined under
subparagraph (C) of subsection (h)(2), applied under rules
similar to the rules of subparagraph (B) of subsection
(h)(2).
``(4) Waiver amortization base.--The waiver amortization
base of a plan for a plan year is the amount of the waived
funding deficiency (if any) for such plan year under section
302(c).
``(5) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the
waiver amortization charge for such plan year and succeeding
plan years, the waiver amortization base for all preceding
plan years shall be reduced to zero.
``(f) Reduction of Minimum Required Contribution by Pre-
Funding Balance and Funding Standard Carryover Balance.--
``(1) Election to maintain balances.--
``(A) Pre-funding balance.--The plan sponsor of a single-
employer plan may elect to maintain a pre-funding balance.
``(B) Funding standard carryover balance.--
``(i) In general.--In the case of a single-employer plan
described in clause (ii), the plan sponsor may elect to
maintain a funding standard carryover balance, until such
balance is reduced to zero.
``(ii) Plans maintaining funding standard account in
2006.--A plan is described in this clause if the plan--
``(I) was in effect for a plan year beginning in 2006, and
``(II) had a positive balance in the funding standard
account under section 302(b) as in effect for such plan year
and determined as of the end of such plan year.
``(2) Application of balances.--A pre-funding balance and a
funding standard carryover balance maintained pursuant to
this paragraph--
``(A) shall be available for crediting against the minimum
required contribution, pursuant to an election under
paragraph (3),
``(B) shall be applied as a reduction in the amount treated
as the value of plan assets for purposes of this section, to
the extent provided in paragraph (4), and
``(C) may be reduced at any time, pursuant to an election
under paragraph (5).
``(3) Election to apply balances against minimum required
contribution.--
``(A) In general.--Except as provided in subparagraphs (B)
and (C), in the case of any plan year in which the plan
sponsor elects to credit against the minimum required
contribution for the current plan year all or a portion of
the pre-funding balance or the funding standard carryover
balance for the current plan year (not in excess of such
minimum required contribution), the minimum required
contribution for the plan year shall be reduced by the amount
so credited by the plan sponsor. For purposes of the
preceding sentence, the minimum required contribution shall
be determined after taking into account any waiver under
section 302(c).
``(B) Coordination with funding standard carryover
balance.--To the extent that any plan has a funding standard
carryover balance greater than zero, no amount of the pre-
funding balance of such plan may be credited under this
paragraph in reducing the minimum required contribution.
``(C) Limitation for underfunded plans.--The preceding
provisions of this paragraph shall not apply for any plan
year if the ratio (expressed as a percentage) which--
``(i) the value of plan assets for the preceding plan year
(as reduced under paragraph (4)(C)), bears to
``(ii) the funding target of the plan for the preceding
plan year (determined without regard to subsection (i)(1)),
is less than 80 percent.
``(4) Effect of balances on amounts treated as value of
plan assets.--In the case of any plan maintaining a pre-
funding balance or a funding standard carryover balance
pursuant to this subsection, the amount treated as the value
of plan assets shall be deemed to be such amount, reduced as
provided in the following subparagraphs:
``(A) Applicability of shortfall amortization base.--For
purposes of subsection (c)(5), the value of plan assets is
deemed to be such amount, reduced by the amount of the pre-
funding balance, but only if an election under paragraph (2)
applying any portion of the pre-funding balance in reducing
the minimum required contribution is in effect for the plan
year.
``(B) Determination of excess assets, funding shortfall,
and funding target attainment percentage.--
``(i) In general.--For purposes of subsections (a),
(c)(4)(B), and (d)(2)(A), the value of plan assets is deemed
to be such amount, reduced by the amount of the pre-funding
balance and the funding standard carryover balance.
``(ii) Special rule for certain binding agreements with
pbgc.--For purposes of subsection (c)(4)(B), the value of
plan assets shall not be deemed to be reduced for a plan year
by the amount of the specified balance if, with respect to
such balance, there is in effect for a plan year a binding
written agreement with the Pension Benefit Guaranty
Corporation which provides that such balance is not available
to reduce the minimum required contribution for the plan
year. For purposes of the preceding sentence, the term
`specified balance' means the pre-funding balance or the
funding standard carryover balance, as the case may be.
``(C) Availability of balances in plan year for crediting
against minimum required contribution.--For purposes of
paragraph (3)(C)(i) of this subsection, the value of plan
assets is deemed to be such amount, reduced by the amount of
the pre-funding balance.
``(5) Election to reduce balance prior to determinations of
value of plan assets and crediting against minimum required
contribution.--
``(A) In general.--The plan sponsor may elect to reduce by
any amount the balance of the pre-funding balance and the
funding standard carryover balance for any plan year (but not
below zero). Such reduction shall be effective prior to any
determination of the value of plan assets for such plan year
under this section and application of the balance in
[[Page H11712]]
reducing the minimum required contribution for such plan for
such plan year pursuant to an election under paragraph (2).
``(B) Coordination between pre-funding balance and funding
standard carryover balance.--To the extent that any plan has
a funding standard carryover balance greater than zero, no
election may be made under subparagraph (A) with respect to
the pre-funding balance.
``(6) Pre-funding balance.--
``(A) In general.--A pre-funding balance maintained by a
plan shall consist of a beginning balance of zero, increased
and decreased to the extent provided in subparagraphs (B) and
(C), and adjusted further as provided in paragraph (8).
``(B) Increases.--As of the valuation date for each plan
year beginning after 2007, the pre-funding balance of a plan
shall be increased by the amount elected by the plan sponsor
for the plan year. Such amount shall not exceed the excess
(if any) of--
``(i) the aggregate total of employer contributions to the
plan for the preceding plan year, over
``(ii) the minimum required contribution for such preceding
plan year (increased by interest on any portion of such
minimum required contribution remaining unpaid as of the
valuation date for the current plan year, at the effective
interest rate for the plan for the preceding plan year, for
the period beginning with the first day of such preceding
plan year and ending on the date that payment of such portion
is made).
``(C) Decreases.--As of the valuation date for each plan
year after 2007, the pre-funding balance of a plan shall be
decreased (but not below zero) by the sum of--
``(i) the amount of such balance credited under paragraph
(2) (if any) in reducing the minimum required contribution of
the plan for the preceding plan year, and
``(ii) any reduction in such balance elected under
paragraph (5).
``(7) Funding standard carryover balance.--
``(A) In general.--A funding standard carryover balance
maintained by a plan shall consist of a beginning balance
determined under subparagraph (B), decreased to the extent
provided in subparagraph (C), and adjusted further as
provided in paragraph (8).
``(B) Beginning balance.--The beginning balance of the
funding standard carryover balance shall be the positive
balance described in paragraph (1)(B)(ii)(II).
``(C) Decreases.--As of the valuation date for each plan
year after 2007, the funding standard carryover balance of a
plan shall be decreased (but not below zero) by the sum of--
``(i) the amount of such balance credited under paragraph
(2) (if any) in reducing the minimum required contribution of
the plan for the preceding plan year, and
``(ii) any reduction in such balance elected under
paragraph (5).
``(8) Adjustments to balances.--In determining the pre-
funding balance or the funding standard carryover balance of
a plan as of the valuation date (before applying any increase
or decrease under paragraph (6) or (7)), the plan sponsor
shall, in accordance with regulations which shall be
prescribed by the Secretary of the Treasury, adjust such
balance so as to reflect the rate of net gain or loss
(determined, notwithstanding subsection (g)(3), on the basis
of fair market value) experienced by all plan assets for the
period beginning with the valuation date for the preceding
plan year and ending with the date preceding the valuation
date for the current plan year, properly taking into account,
in accordance with such regulations, all contributions,
distributions, and other plan payments made during such
period.
``(9) Elections.--Elections under this subsection shall be
made at such times, and in such form and manner, as shall be
prescribed in regulations of the Secretary of the Treasury.
``(g) Valuation of Plan Assets and Liabilities.--
``(1) Timing of determinations.--Except as otherwise
provided under this subsection, all determinations under this
section for a plan year shall be made as of the valuation
date of the plan for such plan year.
``(2) Valuation date.--For purposes of this section--
``(A) In general.--Except as provided in subparagraph (B),
the valuation date of a plan for any plan year shall be the
first day of the plan year.
``(B) Exception for small plans.--If, on each day during
the preceding plan year, a plan had 500 or fewer
participants, the plan may designate any day during the plan
year as its valuation date for such plan year and succeeding
plan years. For purposes of this subparagraph, all defined
benefit plans which are single-employer plans and are
maintained by the same employer (or any member of such
employer's controlled group) shall be treated as 1 plan, but
only participants with respect to such employer or member
shall be taken into account.
``(C) Application of certain rules in determination of plan
size.--For purposes of this paragraph--
``(i) Plans not in existence in preceding year.--In the
case of the first plan year of any plan, subparagraph (B)
shall apply to such plan by taking into account the number of
participants that the plan is reasonably expected to have on
days during such first plan year.
``(ii) Predecessors.--Any reference in subparagraph (B) to
an employer shall include a reference to any predecessor of
such employer.
``(3) Authorization of use of actuarial value.--For
purposes of this section, the value of plan assets shall be
determined on the basis of any reasonable actuarial method of
valuation which takes into account fair market value and
which is permitted under regulations prescribed by the
Secretary of the Treasury, except that--
``(A) any such method providing for averaging of fair
market values may not provide for averaging of such values
over more than the 36-month period ending with the month
which includes the valuation date, and
``(B) any such method may not result in a determination of
the value of plan assets which, at any time, is lower than 90
percent or greater than 110 percent of the fair market value
of such assets at such time.
``(4) Accounting for contribution receipts.--For purposes
of this section--
``(A) Contributions for prior plan years taken into
account.--For purposes of determining the value of plan
assets for any current plan year, in any case in which a
contribution properly allocable to amounts owed for a
preceding plan year is made on or after the valuation date of
the plan for such current plan year, such contribution shall
be taken into account, except that any such contribution made
during any such current plan year beginning after 2007 shall
be taken into account only in an amount equal to its present
value (determined using the effective rate of interest for
the plan for the preceding plan year) as of the valuation
date of the plan for such current plan year.
``(B) Contributions for current plan year disregarded.--For
purposes of determining the value of plan assets for any
current plan year, contributions which are properly allocable
to amounts owed for such plan year shall not be taken into
account, and, in the case of any such contribution made
before the valuation date of the plan for such plan year,
such value of plan assets shall be reduced for interest on
such amount determined using the effective rate of interest
of the plan for the current plan year for the period
beginning when such payment was made and ending on the
valuation date of the plan.
``(5) Accounting for plan liabilities.--For purposes of
this section--
``(A) Liabilities taken into account for current plan
year.--In determining the value of liabilities under a plan
for a plan year, liabilities shall be taken into account to
the extent attributable to benefits (including any early
retirement or similar benefit) accrued or earned as of the
beginning of the plan year.
``(B) Accruals during current plan year disregarded.--For
purposes of subparagraph (A), benefits accrued or earned
during such plan year shall not be taken into account,
irrespective of whether the valuation date of the plan for
such plan year is later than the first day of such plan year.
``(h) Actuarial Assumptions and Methods.--
``(1) In general.--Subject to this subsection, the
determination of any present value or other computation under
this section shall be made on the basis of actuarial
assumptions and methods--
``(A) each of which is reasonable (taking into account the
experience of the plan and reasonable expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(2) Interest rates.--
``(A) Effective interest rate.--For purposes of this
section, the term `effective interest rate' means, with
respect to any plan for any plan year, the single rate of
interest which, if used to determine the present value of the
plan's liabilities referred to in subsection (d)(1), would
result in an amount equal to the funding target of the plan
for such plan year.
``(B) Interest rates for determining funding target.--For
purposes of determining the funding target of a plan for any
plan year, the interest rate used in determining the present
value of the liabilities of the plan shall be--
``(i) in the case of liabilities 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 liabilities reasonably determined to
be payable during the 15-year period beginning at the end of
the period described in clause (i), the second segment rate
with respect to the applicable month, and
``(iii) in the case of liabilities reasonably determined to
be payable after the period described in clause (ii), the
third segment rate with respect to the applicable month.
``(C) 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 of the Treasury
for such month on the basis of the corporate bond yield curve
for such month, taking into account only that portion of such
yield curve which is based on bonds 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 of the Treasury
for such month on the basis of the corporate bond yield curve
for such month, taking into account only that portion of
[[Page H11713]]
such yield curve which is based on bonds 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 of the Treasury
for such month on the basis of the corporate bond yield curve
for such month, taking into account only that portion of such
yield curve which is based on bonds maturing during periods
beginning after the period described in clause (ii).
``(D) Corporate bond yield curve.--For purposes of this
paragraph--
``(i) In general.--The term `corporate bond yield curve'
means, with respect to any month, a yield curve which is
prescribed by the Secretary of the Treasury for such month
and which reflects a 3-year weighted average of yields on
investment grade corporate bonds with varying maturities.
``(ii) 3-year weighted average.--The term `3-year weighted
average' means an average determined by using a methodology
under which the most recent year is weighted 50 percent, the
year preceding such year is weighted 35 percent, and the
second year preceding such year is weighted 15 percent.
``(E) Applicable month.--For purposes of this paragraph,
the term `applicable month' means, with respect to any plan
for any plan year, the month which includes the valuation
date of such plan for such plan year or, at the election of
the plan sponsor, any of the 4 months which precede such
month. Any election made under this subparagraph shall apply
to the plan year for which the election is made and all
succeeding plan years, unless the election is revoked with
the consent of the Secretary of the Treasury.
``(F) Publication requirements.--The Secretary of the
Treasury shall publish for each month the corporate bond
yield curve (and the corporate bond yield curve reflecting
the modification described in section 205(g)(3)(B)(iii)(I))
for such month and each of the rates determined under
subparagraph (B) for such month. The Secretary of the
Treasury shall also publish a description of the methodology
used to determine such yield curve and such rates which is
sufficiently detailed to enable plans to make reasonable
projections regarding the yield curve and such rates for
future months based on the plan's projection of future
interest rates.
``(G) Transition rule.--
``(i) In general.--Notwithstanding the preceding provisions
of this paragraph, for plan years beginning in 2007 or 2008,
the first, second, or third segment rate for a plan with
respect to any month shall be equal to the sum of--
``(I) the product of such rate for such month determined
without regard to this subparagraph, multiplied by the
applicable percentage, and
``(II) the product of the rate determined under the rules
of section 302(b)(5)(B)(ii)(II) (as in effect for plan years
beginning in 2006), multiplied by a percentage equal to 100
percent minus the applicable percentage.
``(ii) Applicable percentage.--For purposes of clause (i),
the applicable percentage is 33\1/3\ percent for plan years
beginning in 2007 and 66\2/3\ percent for plan years
beginning in 2008.
``(iii) New plans ineligible.--Clause (i) shall not apply
to any plan if the first plan year of the plan begins after
December 31, 2006.
``(3) Mortality table.--
``(A) In general.--Except as provided in subparagraph (B),
the mortality table used in determining any present value or
making any computation under this section shall be the RP-
2000 Combined Mortality Table using Scale AA published by the
Society of Actuaries (as in effect on the date of the
enactment of the Pension Protection Act of 2005), projected
as of the plan's valuation date.
``(B) Substitute mortality table.--
``(i) In general.--Upon request by the plan sponsor and
approval by the Secretary of the Treasury for a period not to
exceed 10 years, a mortality table which meets the
requirements of clause (ii) shall be used in determining any
present value or making any computation under this section. A
mortality table described in this clause shall cease to be in
effect if the plan actuary determines at any time that such
table does not meet the requirements of subclauses (I) and
(II) of clause (ii).
``(ii) Requirements.--A mortality table meets the
requirements of this clause if the Secretary of the Treasury
determines that--
``(I) such table reflects the actual experience of the
pension plan and projected trends in such experience, and
``(II) such table is significantly different from the table
described in subparagraph (A).
``(iii) Deadline for disposition of application.--Any
mortality table submitted to the Secretary of the Treasury
for approval under this subparagraph shall be treated as in
effect for the succeeding plan year unless such Secretary,
during the 180-day period beginning on the date of such
submission, disapproves of such table and provides the
reasons that such table fails to meet the requirements of
clause (ii).
``(C) Transition rule.--Under regulations of the Secretary
of the Treasury, any difference in present value resulting
from the difference in the assumptions as set forth in the
mortality table specified in subparagraph (A) and the
assumptions as set forth in the mortality table described in
section 302(d)(7)(C)(ii) (as in effect for plan years
beginning in 2006) shall be phased in ratably over the first
period of 5 plan years beginning in or after 2007 so as to be
fully effective for the fifth plan year. The preceding
sentence shall not apply to any plan if the first plan year
of the plan begins after December 31, 2006.
``(4) Probability of benefit payments in the form of lump
sums or other optional forms.--For purposes of determining
any present value or making any computation under this
section, there shall be taken into account--
``(A) the probability that future benefit payments under
the plan will be made in the form of optional forms of
benefits provided under the plan (including lump sum
distributions, determined on the basis of the plan's
experience and other related assumptions), and
``(B) any difference in the present value of such future
benefit payments resulting from the use of actuarial
assumptions, in determining benefit payments in any such
optional form of benefits, which are different from those
specified in this subsection.
``(5) Approval of large changes in actuarial assumptions.--
``(A) In general.--No actuarial assumption used to
determine the funding target for a plan to which this
paragraph applies may be changed without the approval of the
Secretary of the Treasury.
``(B) Plans to which paragraph applies.--This paragraph
shall apply to a plan only if--
``(i) the plan is a single-employer plan to which title IV
applies,
``(ii) the aggregate unfunded vested benefits as of the
close of the preceding plan year (as determined under section
4006(a)(3)(E)(iii)) of such plan and all other plans
maintained by the contributing sponsors (as defined in
section 4001(a)(13)) and members of such sponsors' controlled
groups (as defined in section 4001(a)(14)) which are covered
by title IV (disregarding plans with no unfunded vested
benefits) exceed $50,000,000, and
``(iii) the change in assumptions (determined after taking
into account any changes in interest rate and mortality
table) results in a decrease in the funding shortfall of the
plan for the current plan year that exceeds $50,000,000, or
that exceeds $5,000,000 and that is 5 percent or more of the
funding target of the plan before such change.
``(i) Special Rules for at-Risk Plans.--
``(1) Funding target for plans in at-risk status.--
``(A) In general.--In any case in which a plan is in at-
risk status for a plan year, the funding target of the plan
for the plan year is the sum of--
``(i) the present value of all liabilities to participants
and their beneficiaries under the plan for the plan year, as
determined by using, in addition to the actuarial assumptions
described in subsection (h), the supplemental actuarial
assumptions described in subparagraph (B), plus
``(ii) a loading factor determined under subparagraph (C).
``(B) Supplemental actuarial assumptions.--The actuarial
assumptions used in determining the valuation of the funding
target shall include, in addition to the actuarial
assumptions described in subsection (h), an assumption that
all participants will elect benefits at such times and in
such forms as will result in the highest present value of
liabilities under subparagraph (A)(i).
``(C) Loading factor.--The loading factor applied with
respect to a plan under this paragraph for any plan year is
the sum of--
``(i) $700, times the number of participants in the plan,
plus
``(ii) 4 percent of the funding target (determined without
regard to this paragraph) of the plan for the plan year.
``(2) Target normal cost of at-risk plans.--In any case in
which a plan is in at-risk status for a plan year, the target
normal cost of the plan for such plan year shall be the sum
of--
``(A) the present value of all benefits which are expected
to accrue or be earned under the plan during the plan year,
determined under the actuarial assumptions used under
paragraph (1), plus
``(B) the loading factor under paragraph (1)(C), excluding
the portion of the loading factor described in paragraph
(1)(C)(i).
``(3) Determination of at-risk status.--For purposes of
this subsection, a plan is in `at-risk status' for a plan
year if the funding target attainment percentage of the plan
for the preceding plan year was less than 60 percent.
``(4) Transition between applicable funding targets and
between applicable target normal costs.--
``(A) In general.--In any case in which a plan which is in
at-risk status for a plan year has been in such status for a
consecutive period of fewer than 5 plan years, the applicable
amount of the funding target and of the target normal cost
shall be, in lieu of the amount determined without regard to
this paragraph, the sum of--
``(i) the amount determined under this section without
regard to this subsection, plus
``(ii) the transition percentage for such plan year of the
excess of the amount determined under this subsection
(without regard to this paragraph) over the amount determined
under this section without regard to this subsection.
``(B) Transition percentage.--For purposes of this
paragraph, the `transition percentage' for a plan year is the
product derived by multiplying--
``(i) 20 percent, by
``(ii) the number of plan years during the period described
in subparagraph (A).
[[Page H11714]]
``(j) Payment of Minimum Required Contributions.--
``(1) In general.--For purposes of this section, the due
date for any payment of any minimum required contribution for
any plan year shall be 8\1/2\ months after the close of the
plan year.
``(2) Interest.--Any payment required under paragraph (1)
for a plan year that is made on a date other than the
valuation date for such plan year shall be adjusted for
interest accruing for the period between the valuation date
and the payment date, at the effective rate of interest for
the plan for such plan year.
``(3) Accelerated quarterly contribution schedule for
underfunded plans.--
``(A) Interest penalty for failure to meet accelerated
quarterly payment schedule.--In any case in which the plan
has a funding shortfall for the preceding plan year, if the
required installment is not paid in full, then the minimum
required contribution for the plan year (as increased under
paragraph (2)) shall be further increased by an amount equal
to the interest on the amount of the underpayment for the
period of the underpayment, using an interest rate equal to
the excess of--
``(i) 175 percent of the Federal mid-term rate (as in
effect under section 1274 for the 1st month of such plan
year), over
``(ii) the effective rate of interest for the plan for the
plan year.
``(B) Amount of underpayment, period of underpayment.--For
purposes of subparagraph (A)--
``(i) Amount.--The amount of the underpayment shall be the
excess of--
``(I) the required installment, over
``(II) the amount (if any) of the installment contributed
to or under the plan on or before the due date for the
installment.
``(ii) Period of underpayment.--The period for which any
interest is charged under this paragraph with respect to any
portion of the underpayment shall run from the due date for
the installment to the date on which such portion is
contributed to or under the plan.
``(iii) Order of crediting contributions.--For purposes of
clause (i)(II), contributions shall be credited against
unpaid required installments in the order in which such
installments are required to be paid.
``(C) Number of required installments; due dates.--For
purposes of this paragraph--
``(i) Payable in 4 installments.--There shall be 4 required
installments for each plan year.
``(ii) Time for payment of installments.--The due dates for
required installments are set forth in the following table:
`In the case of the following required
installment: The due date is:
1st....................................... April 15
2nd....................................... July 15
3rd....................................... October 15
4th....................................... January 15 of the following
year
``(D) Amount of required installment.--For purposes of this
paragraph--
``(i) In general.--The amount of any required installment
shall be 25 percent of the required annual payment.
``(ii) Required annual payment.--For purposes of clause
(i), the term `required annual payment' means the lesser of--
``(I) 90 percent of the minimum required contribution
(without regard to any waiver under section 302(c)) to the
plan for the plan year under this section, or
``(II) in the case of a plan year beginning after 2007, 100
percent of the minimum required contribution (without regard
to any waiver under section 302(c)) to the plan for the
preceding plan year.
Subclause (II) shall not apply if the preceding plan year
referred to in such clause was not a year of 12 months.
``(E) Fiscal years and short years.--
``(i) Fiscal years.--In applying this paragraph to a plan
year beginning on any date other than January 1, there shall
be substituted for the months specified in this paragraph,
the months which correspond thereto.
``(ii) Short plan year.--This subparagraph shall be applied
to plan years of less than 12 months in accordance with
regulations prescribed by the Secretary of the Treasury.
``(4) Liquidity requirement in connection with quarterly
contributions.--
``(A) In general.--A plan to which this paragraph applies
shall be treated as failing to pay the full amount of any
required installment under paragraph (3) to the extent that
the value of the liquid assets paid in such installment is
less than the liquidity shortfall (whether or not such
liquidity shortfall exceeds the amount of such installment
required to be paid but for this paragraph).
``(B) Plans to which paragraph applies.--This paragraph
shall apply to a plan (other than a plan that would be
described in subsection (f)(2)(B) if `100' were substituted
for `500' therein) which--
``(i) is required to pay installments under paragraph (3)
for a plan year, and
``(ii) has a liquidity shortfall for any quarter during
such plan year.
``(C) Period of underpayment.--For purposes of paragraph
(3)(A), any portion of an installment that is treated as not
paid under subparagraph (A) shall continue to be treated as
unpaid until the close of the quarter in which the due date
for such installment occurs.
``(D) Limitation on increase.--If the amount of any
required installment is increased by reason of subparagraph
(A), in no event shall such increase exceed the amount which,
when added to prior installments for the plan year, is
necessary to increase the funding target attainment
percentage of the plan for the plan year (taking into account
the expected increase in funding target due to benefits
accruing or earned during the plan year) to 100 percent.
``(E) Definitions.--For purposes of this subparagraph:
``(i) Liquidity shortfall.--The term `liquidity shortfall'
means, with respect to any required installment, an amount
equal to the excess (as of the last day of the quarter for
which such installment is made) of--
``(I) the base amount with respect to such quarter, over
``(II) the value (as of such last day) of the plan's liquid
assets.
``(ii) Base amount.--
``(I) In general.--The term `base amount' means, with
respect to any quarter, an amount equal to 3 times the sum of
the adjusted disbursements from the plan for the 12 months
ending on the last day of such quarter.
``(II) Special rule.--If the amount determined under
subclause (I) exceeds an amount equal to 2 times the sum of
the adjusted disbursements from the plan for the 36 months
ending on the last day of the quarter and an enrolled actuary
certifies to the satisfaction of the Secretary of the
Treasury that such excess is the result of nonrecurring
circumstances, the base amount with respect to such quarter
shall be determined without regard to amounts related to
those nonrecurring circumstances.
``(iii) Disbursements from the plan.--The term
`disbursements from the plan' means all disbursements from
the trust, including purchases of annuities, payments of
single sums and other benefits, and administrative expenses.
``(iv) Adjusted disbursements.--The term `adjusted
disbursements' means disbursements from the plan reduced by
the product of--
``(I) the plan's funding target attainment percentage for
the plan year, and
``(II) the sum of the purchases of annuities, payments of
single sums, and such other disbursements as the Secretary of
the Treasury shall provide in regulations.
``(v) Liquid assets.--The term `liquid assets' means cash,
marketable securities, and such other assets as specified by
the Secretary of the Treasury in regulations.
``(vi) Quarter.--The term `quarter' means, with respect to
any required installment, the 3-month period preceding the
month in which the due date for such installment occurs.
``(F) Regulations.--The Secretary of the Treasury may
prescribe such regulations as are necessary to carry out this
paragraph.
``(k) Imposition of Lien Where Failure to Make Required
Contributions.--
``(1) In general.--In the case of a plan to which this
subsection applies (as provided under paragraph (2)), if--
``(A) any person fails to make a contribution payment
required by section 302 and this section before the due date
for such payment, and
``(B) the unpaid balance of such payment (including
interest), when added to the aggregate unpaid balance of all
preceding such payments for which payment was not made before
the due date (including interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount
determined under paragraph (3) upon all property and rights
to property, whether real or personal, belonging to such
person and any other person who is a member of the same
controlled group of which such person is a member.
``(2) Plans to which subsection applies.--This subsection
shall apply to a single-employer plan for any plan year for
which the funding target attainment percentage (as defined in
subsection (d)(2)) of such plan is less than 100 percent.
This subsection shall not apply to any plan to which section
4021 does not apply (as such section is in effect on the date
of the enactment of the Pension Protection Act of 2005).
``(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of contribution payments required under this section
and section 302 for which payment has not been made before
the due date.
``(4) Notice of failure; lien.--
``(A) Notice of failure.--A person committing a failure
described in paragraph (1) shall notify the Pension Benefit
Guaranty Corporation of such failure within 10 days of the
due date for the required contribution payment.
``(B) Period of lien.--The lien imposed by paragraph (1)
shall arise on the due date for the required contribution
payment and shall continue until the last day of the first
plan year in which the plan ceases to be described in
paragraph (1)(B). Such lien shall continue to run without
regard to whether such plan continues to be described in
paragraph (2) during the period referred to in the preceding
sentence.
``(C) Certain rules to apply.--Any amount with respect to
which a lien is imposed under paragraph (1) shall be treated
as taxes due and owing the United States and rules similar to
the rules of subsections (c), (d), and (e) of section 4068
shall apply with
[[Page H11715]]
respect to a lien imposed by subsection (a) and the amount
with respect to such lien.
``(5) Enforcement.--Any lien created under paragraph (1)
may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Pension
Benefit Guaranty Corporation, by the contributing sponsor (or
any member of the controlled group of the contributing
sponsor).
``(6) Definitions.--For purposes of this subsection--
``(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a contribution
payment required to be made to the plan, including any
required installment under paragraphs (3) and (4) of
subsection (i).
``(B) Due date; required installment.--The terms `due date'
and `required installment' have the meanings given such terms
by subsection (j), except that in the case of a payment other
than a required installment, the due date shall be the date
such payment is required to be made under section 303.
``(C) Controlled group.--The term `controlled group' means
any group treated as a single employer under subsections (b),
(c), (m), and (o) of section 414 of the Internal Revenue Code
of 1986.
``(l) Qualified Transfers to Health Benefit Accounts.--In
the case of a qualified transfer (as defined in section 420
of the Internal Revenue Code of 1986), any assets so
transferred shall not, for purposes of this section, be
treated as assets in the plan.''.
(b) Clerical Amendment.--The table of sections in section 1
of such Act (as amended by section 101) is amended by
inserting after the item relating to section 302 the
following new item:
``Sec. 303. Minimum funding standards for single-employer defined
benefit pension plans.''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning after 2006.
SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.
(a) Prohibition of Shutdown Benefits and Other
Unpredictable Contingent Event Benefits Under Single-Employer
Plans.--Section 206 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1056) is amended by adding at
the end the following new subsection:
``(g) Funding-Based Limitation on Shutdown Benefits and
Other Unpredictable Contingent Event Benefits Under Single-
Employer Plans.--
``(1) In general.--No defined benefit plan which is a
single-employer plan may provide benefits to which
participants are entitled solely by reason of the occurrence
of a plant shutdown or any other unpredictable contingent
event occurring during any plan year if the funding target
attainment percentage as of the valuation date of the plan
for such plan year--
``(A) is less than 80 percent, or
``(B) would be less than 80 percent taking into account
such occurrence.
``(2) Exemption.--Paragraph (1) shall cease to apply with
respect to any plan year, effective as of the first date of
the plan year, upon payment by the plan sponsor of a
contribution (in addition to any minimum required
contribution under section 303) equal to--
``(A) in the case of paragraph (1)(A), the amount of the
increase in the funding target of the plan (under section
303) for the plan year attributable to the occurrence
referred to in paragraph (1), and
``(B) in the case of paragraph (1)(B), the amount
sufficient to result in a funding target attainment
percentage of 80 percent.
Rules similar to the rules of subsection (h)(6) shall apply
for purposes of this paragraph.
``(3) Unpredictable contingent event.--For purposes of this
subsection, the term `unpredictable contingent event' means
an event other than--
``(A) attainment of any age, performance of any service,
receipt or derivation of any compensation, or the occurrence
of death or disability, or
``(B) an event which is reasonably and reliably predictable
(as determined by the Secretary of the Treasury).
``(4) New plans.--Paragraph (1) shall not apply to a plan
for the first 5 plan years of the plan. For purposes of this
subsection, the reference in this subsection to a plan shall
include a reference to any predecessor plan.
``(5) Deemed reduction of funding balances.--A rule similar
to the rule of subsection (h)(8) shall apply for purposes of
this subsection.''.
(b) Other Limits on Benefits and Benefit Accruals.--
(1) In general.--Section 206 of such Act (as amended by
subsection (a)) is amended further by adding at the end the
following new subsection:
``(h) Funding-Based Limits on Benefits and Benefit Accruals
Under Single-Employer Plans.--
``(1) Limitations on plan amendments increasing liability
for benefits.--
``(A) In general.--No amendment to a defined benefit plan
which is a single-employer plan which has the effect of
increasing liabilities of the plan by reason of increases in
benefits, establishment of new benefits, changing the rate of
benefit accrual, or changing the rate at which benefits
become nonforfeitable to the plan may take effect during any
plan year if the funding target attainment percentage as of
the valuation date of the plan for such plan year is--
``(i) less than 80 percent, or
``(ii) would be less than 80 percent taking into account
such amendment.
For purposes of this subparagraph, any increase in benefits
under the plan by reason of an increase in the benefit rate
provided under the plan or on the basis of an increase in
compensation shall be treated as effected by plan amendment.
``(B) Exemption.--Subparagraph (A) shall cease to apply
with respect to any plan year, effective as of the first date
of the plan year (or if later, the effective date of the
amendment), upon payment by the plan sponsor of a
contribution (in addition to any minimum required
contribution under section 303) equal to--
``(i) in the case of subparagraph (A)(i), the amount of the
increase in the funding target of the plan (under section
303) for the plan year attributable to the amendment, and
``(ii) in the case of subparagraph (A)(ii), the amount
sufficient to result in a funding target attainment
percentage of 80 percent.
``(2) Funding-based limitation on certain forms of
distribution.--
``(A) In general.--A defined benefit plan which is a
single-employer plan shall provide that, in any case in which
the plan's funding target attainment percentage as of the
valuation date of the plan for a plan year is less than 80
percent, the plan may not after such date pay any prohibited
payment (as defined in section 206(e)).
``(B) Exception.--Subparagraph (A) shall not apply to any
plan for any plan year if the terms of such plan (as in
effect for the period beginning on June 29, 2005, and ending
with such plan year) provide for no benefit accruals with
respect to any participant during such period.
``(3) Limitations on benefit accruals for plans with severe
funding shortfalls.--A defined benefit plan which is a
single-employer plan shall provide that, in any case in which
the plan's funding target attainment percentage as of the
valuation date of the plan for a plan year is less than 60
percent, all future benefit accruals under the plan shall
cease as of such date.
``(4) New plans.--Paragraphs (1) and (3) shall not apply to
a plan for the first 5 plan years of the plan. For purposes
of this subsection, the reference in this subsection to a
plan shall include a reference to any predecessor plan.
``(5) Presumed underfunding for purposes of benefit
limitations based on prior year's funding status.--
``(A) Presumption of continued underfunding.--In any case
in which a benefit limitation under paragraph (1), (2), or
(3) has been applied to a plan with respect to the plan year
preceding the current plan year, the funding target
attainment percentage of the plan as of the valuation date of
the plan for the current plan year shall be presumed to be
equal to the funding target attainment percentage of the plan
as of the valuation date of the plan for the preceding plan
year until the enrolled actuary of the plan certifies the
actual funding target attainment percentage of the plan as of
the valuation date of the plan for the current plan year.
``(B) Presumption of underfunding after 10th month.--In any
case in which no such certification is made with respect to
the plan before the first day of the 10th month of the
current plan year, for purposes of paragraphs (1), (2), and
(3), the plan's funding target attainment percentage shall be
conclusively presumed to be less than 60 percent as of the
first day of such 10th month, and such day shall be deemed,
for purposes of such subsections, to be the valuation date of
the plan for the current plan year.
``(C) Presumption of underfunding after 4th month for
nearly underfunded plans.--In any case in which--
``(i) a benefit limitation under paragraph (1), (2), or (3)
did not apply to a plan with respect to the plan year
preceding the current plan year, but the funding target
attainment percentage of the plan for such preceding plan
year was not more than 10 percentage points greater than the
percentage which would have caused such subsection to apply
to the plan with respect to such preceding plan year, and
``(ii) as of the first day of the 4th month of the current
plan year, the enrolled actuary of the plan has not certified
the actual funding target attainment percentage of the plan
as of the valuation date of the plan for the current plan
year,
until the enrolled actuary so certifies, such first day shall
be deemed, for purposes of such subsection, to be the
valuation date of the plan for the current plan year and the
funding target attainment percentage of the plan as of such
first day shall, for purposes of such paragraph, be presumed
to be equal to 10 percentage points less than the funding
target attainment percentage of the plan as of the valuation
date of the plan for such preceding plan year.
``(6) Restoration by plan amendment of benefits or benefit
accrual.--In any case in which a prohibition under paragraph
(2) of a payment described in paragraph (2)(A) or a cessation
of benefit accruals under paragraph (3) is applied to a plan
with respect to any plan year and such prohibition or
cessation, as the case may be, ceases to apply to any
subsequent plan year, the plan may provide for the resumption
of such benefit payment or such benefit accrual only by means
of the adoption of a plan amendment after the valuation date
of the plan for such subsequent plan year. The preceding
sentence
[[Page H11716]]
shall not apply to a prohibition or cessation required by
reason of paragraph (5).
``(7) Funding target attainment percentage.--
``(A) In general.--For purposes of this subsection, the
term `funding target attainment percentage' means, with
respect to any plan for any plan year, the ratio (expressed
as a percentage) which--
``(i) the value of plan assets for the plan year (as
determined under section 303(g)) reduced by the pre-funding
balance and the funding standard carryover balance (within
the meaning of section 303(f)), bears to
``(ii) the funding target of the plan for the plan year (as
determined under section 303(d)(1), but without regard to
section 303(i)(1)).
``(B) Application to plans which are fully funded without
regard to reductions for funding balances.--
``(i) In general.--In the case of a plan for any plan year,
if the funding target attainment percentage is 100 percent or
more (determined without regard to this subparagraph and
without regard to the reduction under subparagraph (A)(i) for
the pre-funding balance and the funding standard carryover
balance), subparagraph (A) shall be applied without regard to
such reduction.
``(ii) Transition rule.--Clause (i) shall be applied to
plan years beginning after 2006 and before 2011 by
substituting for `100 percent' the applicable percentage
determined in accordance with the following table:
------------------------------------------------------------------------
``In the case of a plan year beginning in The applicable percentage
calendar year: is:
------------------------------------------------------------------------
2007...................................... 92 percent
2008...................................... 94 percent
2009...................................... 96 percent
2010...................................... 98 percent.
------------------------------------------------------------------------
``(iii) Limitation.--Clause (ii) shall not apply with
respect to any plan year after 2007 unless the funding target
attainment percentage (determined without regard to this
subparagraph and without regard to the reduction under
subparagraph (A)(i) for the pre-funding balance and the
funding standard carryover balance) of the plan for each
preceding plan year after 2006 was not less than the
applicable percentage with respect to such preceding plan
year determined under clause (ii).
``(8) Deemed reduction of funding balances.--In the case of
a plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers--
``(A) In general.--In any case in which a benefit
limitation under paragraph (1), (2), or (3) would (but for
this paragraph and determined without regard to paragraph
(1)(B)) apply to such plan for the plan year, the plan
sponsor of such plan shall be treated for purposes of this
Act as having made an election under section 303(f)(5) to
reduce the balance of the pre-funding balance and the funding
standard carryover balance for the plan year (in a manner
consistent with the requirements of section 303(f)(5)(B)) by
such amount as is necessary for such benefit limitation to
not apply to the plan for such plan year.
``(B) Exception for insufficient funding balances.--
Subparagraph (A) shall not apply with respect to a benefit
limitation for any plan year if the application of
subparagraph (A) would not result in the benefit limitation
not applying for such plan year.''.
(2) Notice requirement.--
(A) In general.--Section 101 of such Act (29 U.S.C. 1021)
is amended--
(i) by redesignating subsection (j) as subsection (k); and
(ii) by inserting after subsection (i) the following new
subsection:
``(j) Notice of Funding-Based Limitation on Certain Forms
of Distribution.--The plan administrator of a defined benefit
plan which is a single-employer plan shall provide a written
notice to plan participants and beneficiaries within 30 days
after the plan has become subject to the restriction
described in section 206(h)(2) or at such other time as may
be determined by the Secretary.''.
(B) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) is amended by striking ``section
302(b)(7)(F)(vi)'' and inserting ``sections 101(j) and
302(b)(7)(F)(vi)''.
(c) Effective Date.--
(1) Shutdown benefits.--Except as provided in paragraph
(3), the amendments made by subsection (a) shall apply with
respect to plant shutdowns, or other unpredictable contingent
events, occurring after 2006.
(2) Other benefits.--Except as provided in paragraph (3),
the amendments made by subsection (b) shall apply with
respect to plan years beginning after 2006.
(3) Collective bargaining exception.--In the case of a plan
maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified before the date of the enactment of this
Act, the amendments made by this subsection shall not apply
to plan years beginning before the earlier of--
(A) the later of--
(i) the date on which the last collective bargaining
agreement relating to the plan terminates (determined without
regard to any extension thereof agreed to after the date of
the enactment of this Act), or
(ii) the first day of the first plan year to which the
amendments made by this subsection would (but for this
subparagraph) apply, or
(B) January 1, 2009.
For purposes of clause (i), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan
which amends the plan solely to conform to any requirement
added by this subsection shall not be treated as a
termination of such collective bargaining agreement.
(d) Special Rule for 2007.--For purposes of applying
paragraph (5) of section 206(h) of such Act (as added by this
section) to current plan years (within the meaning of such
paragraph) beginning in 2007, the modified funded current
liability percentage of the plan for the preceding year shall
be substituted for the funding target attainment percentage
of the plan for the preceding year. For purposes of the
preceding sentence, the term ``modified funded current
liability percentage'' means the funded current liability
percentage (as defined in section 302(l)(8) of such Act),
reduced as described in subparagraph (E) thereof in the case
of a plan with a funded current liability percentage (as so
defined and before such reduction) which is less than 100
percent.
SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Miscellaneous Amendments to Title I.--Subtitle B of
title I of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1021 et seq.) is amended--
(1) in section 101(d)(3), by striking ``section 302(e)''
and inserting ``section 303(j)'';
(2) in section 101(f)(2)(B), by striking clause (i) and
inserting the following:
``(i) a statement as to whether--
``(I) in the case of a defined benefit plan which is a
single-employer plan, the plan's funding target attainment
percentage (as defined in section 303(d)(2)), or
``(II) in the case of a defined benefit plan which is a
multiemployer plan, the plan's funded percentage (as defined
in section 305(d)(2)),
is at least 100 percent (and, if not, the actual
percentage);'';
(3) in section 103(d)(8)(B), by striking ``the requirements
of section 302(c)(3)'' and inserting ``the applicable
requirements of sections 303(h) and 304(c)(3)'';
(4) in section 103(d), by striking paragraph (11) and
inserting the following:
``(11) If the current value of the assets of the plan is
less than 70 percent of--
``(A) in the case of a defined benefit plan which is a
single-employer plan, the funding target (as defined in
section 303(d)(1)) of the plan, or
``(B) in the case of a defined benefit plan which is a
multiemployer plan, the current liability (as defined in
section 304(c)(6)(D)) under the plan,
the percentage which such value is of the amount described in
subparagraph (A) or (B).'';
(5) in section 203(a)(3)(C), by striking ``section
302(c)(8)'' and inserting ``section 302(d)(2)'';
(6) in section 204(g)(1), by striking ``section 302(c)(8)''
and inserting ``section 302(d)(2)'';
(7) in section 204(i)(2)(B), by striking ``section
302(c)(8)'' and inserting ``section 302(d)(2)'';
(8) in section 204(i)(3), by striking ``funded current
liability percentage (within the meaning of section 302(d)(8)
of this Act)'' and inserting ``funding target attainment
percentage (as defined in section 303(d)(2))'';
(9) in section 204(i)(4), by striking ``section
302(c)(11)(A), without regard to section 302(c)(11)(B)'' and
inserting ``section 302(b)(1), without regard to section
302(b)(2)'';
(10) in section 206(e)(1), by striking ``section 302(d)''
and inserting ``section 303(j)(4)'', and by striking
``section 302(e)(5)'' and inserting ``section
303(j)(4)(E)(i)'';
(11) in section 206(e)(3), by striking ``section 302(e) by
reason of paragraph (5)(A) thereof'' and inserting ``section
303(j)(3) by reason of section 303(j)(4)(A)''; and
(12) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by
striking ``American Jobs Creation Act of 2004'' and inserting
``Pension Protection Act of 2005''.
(b) Miscellaneous Amendments to Title IV.--Title IV of such
Act is amended--
(1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by
striking ``302(c)(11)(A)'' and inserting ``302(b)(1)'', by
striking ``412(c)(11)(A)'' and inserting ``412(b)(1)'', by
striking ``302(c)(11)(B)'' and inserting ``302(b)(2)'', and
by striking ``412(c)(11)(B)'' and inserting ``412(b)(2)'';
(2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by
striking ``302(f)(1)(A) and (B)'' and inserting
``303(k)(1)(A) and (B)'', and by striking ``412(n)(1)(A) and
(B)'' and inserting ``430(k)(1)(A) and (B)'';
[[Page H11717]]
(3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by
striking ``302(f)(1)(A) and (B)'' and inserting
``303(k)(1)(A) and (B)'', and by striking ``412(n)(1)(A) and
(B)'' and inserting ``430(k)(1)(A) and (B)'';
(4) in section 4011(b) (29 U.S.C. 1311(b)), by striking
``to which'' and all that follows and inserting ``for any
plan year for which the plan's funding target attainment
percentage (as defined in section 303(d)(2)) is at least 90
percent.'';
(5) in section 4062(c)(1) (29 U.S.C. 1362(c)(1)), by
striking paragraphs (1), (2), and (3) and inserting the
following:
``(1)(A) in the case of a single-employer plan, the sum of
the shortfall amortization charge (within the meaning of
section 303(c)(1) of this Act and 430(c)(1) of the Internal
Revenue Code of 1986) with respect to the plan (if any) for
the plan year in which the termination date occurs, plus the
aggregate total of shortfall amortization installments (if
any) determined for succeeding plan years under section
303(c)(2) of this Act and section 430(c)(2) of such Code
(which, for purposes of this subparagraph, shall include any
increase in such sum which would result if all applications
for waivers of the minimum funding standard under section
302(c) of this Act and section 412(c) of such Code which are
pending with respect to such plan were denied and if no
additional contributions (other than those already made by
the termination date) were made for the plan year in which
the termination date occurs or for any previous plan year),
or
``(B) in the case of a multiemployer plan, the outstanding
balance of the accumulated funding deficiencies (within the
meaning of section 304(a)(2) of this Act and section 431(a)
of the Internal Revenue Code of 1986) of the plan (if any)
(which, for purposes of this subparagraph, shall include the
amount of any increase in such accumulated funding
deficiencies of the plan which would result if all pending
applications for waivers of the minimum funding standard
under section 302(c) of this Act or section 412(c) of such
Code and for extensions of the amortization period under
section 304(d) of this Act or section 431(d) of such Code
with respect to such plan were denied and if no additional
contributions (other than those already made by the
termination date) were made for the plan year in which the
termination date occurs or for any previous plan year),
``(2)(A) in the case of a single-employer plan, the sum of
the waiver amortization charge (within the meaning of section
303(e)(1) of this Act and 430(j)(2) of the Internal Revenue
Code of 1986) with respect to the plan (if any) for the plan
year in which the termination date occurs, plus the aggregate
total of waiver amortization installments (if any) determined
for succeeding plan years under section 303(e)(2) of this Act
and section 430(j)(3) of such Code, or
``(B) in the case of a multiemployer plan, the outstanding
balance of the amount of waived funding deficiencies of the
plan waived before such date under section 302(c) of this Act
or section 412(c) of such Code (if any), and
``(3) in the case of a multiemployer plan, the outstanding
balance of the amount of decreases in the minimum funding
standard allowed before such date under section 304(d) of
this Act or section 431(d) of such Code (if any);'';
(6) in section 4071 (29 U.S.C. 1371), by striking
``302(f)(4)'' and inserting ``303(k)(4)'';
(7) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by
striking ``302(a)'' and inserting ``304(a)'', and, in clause
(i), by striking ``302(a)'' and inserting ``304(a)'';
(8) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by
striking ``303(a)'' and inserting ``302(c)'';
(9) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by
striking ``303(c)'' and inserting ``302(c)(3)''; and
(10) in section 4243(g) (29 U.S.C. 1423(g)), by striking
``302(c)(3)'' and inserting ``304(c)(3)''.
(c) Amendments to Reorganization Plan No. 4 of 1978.--
Section 106(b)(ii) of Reorganization Plan No. 4 of 1978
(ratified and affirmed as law by Public Law 98-532 (98 Stat.
2705)) is amended by striking ``302(c)(8)'' and inserting
``302(d)(2)'', by striking ``304(a) and (b)(2)(A)'' and
inserting ``304(d)(1), (d)(2), and (e)(2)(A)'', and by
striking ``412(c)(8), (e), and (f)(2)(A)'' and inserting
``412(d)(2) and 431(d)(1), (d)(2), and (e)(2)(A)''.
(d) Repeal of Expired Authority for Temporary Variances.--
(1) In general.--Section 207 of such Act (29 U.S.C. 1057)
is repealed.
(2) Conforming amendment.--The table of contents in section
1 of such Act is amended by striking the item relating to
section 207.
(e) Effective Date.--The amendments made by this section
shall apply to plan years beginning after 2006.
Subtitle B--Amendments to Internal Revenue Code of 1986
SEC. 111. MINIMUM FUNDING STANDARDS.
(a) New Minimum Funding Standards.--Section 412 of the
Internal Revenue Code of 1986 (relating to minimum funding
standards) is amended to read as follows:
``SEC. 412. MINIMUM FUNDING STANDARDS.
``(a) Requirement to Meet Minimum Funding Standard.--
``(1) In general.--A plan to which this section applies
shall satisfy the minimum funding standard applicable to the
plan for any plan year.
``(2) Minimum funding standard.--For purposes of paragraph
(1), a plan shall be treated as satisfying the minimum
funding standard for a plan year if--
``(A) in the case of a defined benefit plan which is not a
multiemployer plan, the employer makes contributions to or
under the plan for the plan year which, in the aggregate, are
not less than the minimum required contribution determined
under section 430 for the plan for the plan year,
``(B) in the case of a money purchase plan which is not a
multiemployer plan, the employer makes contributions to or
under the plan for the plan year which are required under the
terms of the plan, and
``(C) in the case of a multiemployer plan, the employers
make contributions to or under the plan for any plan year
which, in the aggregate, are sufficient to ensure that the
plan does not have an accumulated funding deficiency under
section 431 as of the end of the plan year.
``(b) Liability for Contributions.--
``(1) In general.--Except as provided in paragraph (2), the
amount of any contribution required by this section
(including any required installments under paragraphs (3) and
(4) of section 430(j)) shall be paid by the employer
responsible for making contributions to or under the plan.
``(2) Joint and several liability where employer member of
controlled group.--In the case of a defined benefit plan
which is not a multiemployer plan, if the employer referred
to in paragraph (1) is a member of a controlled group, each
member of such group shall be jointly and severally liable
for payment of such contributions.
``(c) Variance From Minimum Funding Standards.--
``(1) Waiver in case of business hardship.--
``(A) In general.--If--
``(i) an employer is (or in the case of a multiemployer
plan, 10 percent or more of the number of employers
contributing to or under the plan is) unable to satisfy the
minimum funding standard for a plan year without temporary
substantial business hardship (substantial business hardship
in the case of a multiemployer plan), and
``(ii) application of the standard would be adverse to the
interests of plan participants in the aggregate,
the Secretary may, subject to subparagraph (C), waive the
requirements of subsection (a) for such year with respect to
all or any portion of the minimum funding standard. The
Secretary shall not waive the minimum funding standard with
respect to a plan for more than 3 of any 15 (5 of any 15 in
the case of a multiemployer plan) consecutive plan years.
``(B) Effects of waiver.--If a waiver is granted under
subparagraph (A) for any plan year--
``(i) in the case of a defined benefit plan which is not a
multiemployer plan, the minimum required contribution under
section 430 for the plan year shall be reduced by the amount
of the waived funding deficiency and such amount shall be
amortized as required under section 430(e), and
``(ii) in the case of a multiemployer plan, the funding
standard account shall be credited under section 431(b)(3)(C)
with the amount of the waived funding deficiency and such
amount shall be amortized as required under section
431(b)(2)(C).
``(C) Waiver of amortized portion not allowed.--The
Secretary may not waive under subparagraph (A) any portion of
the minimum funding standard under subsection (a) for a plan
year which is attributable to any waived funding deficiency
for any preceding plan year.
``(2) Determination of business hardship.--For purposes of
this subsection, the factors taken into account in
determining temporary substantial business hardship
(substantial business hardship in the case of a multiemployer
plan) shall include (but shall not be limited to) whether or
not--
``(A) the employer is operating at an economic loss,
``(B) there is substantial unemployment or underemployment
in the trade or business and in the industry concerned,
``(C) the sales and profits of the industry concerned are
depressed or declining, and
``(D) it is reasonable to expect that the plan will be
continued only if the waiver is granted.
``(3) Waived funding deficiency.--For purposes of this
section and part III of this subchapter, the term `waived
funding deficiency' means the portion of the minimum funding
standard under subsection (a) (determined without regard to
the waiver) for a plan year waived by the Secretary and not
satisfied by employer contributions.
``(4) Security for waivers for single-employer plans,
consultations.--
``(A) Security may be required.--
``(i) In general.--Except as provided in subparagraph (C),
the Secretary may require an employer maintaining a defined
benefit plan which is a single-employer plan (within the
meaning of section 4001(a)(15) of the Employee Retirement
Income Security Act of 1974) to provide security to such plan
as a condition for granting or modifying a waiver under
paragraph (1).
``(ii) special rules.--Any security provided under clause
(i) may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Corporation,
by a contributing sponsor (within the meaning of section
4001(a)(13) of the Employee Retirement Income Security Act of
1974), or a member of such sponsor's controlled group (within
the meaning of section 4001(a)(14) of such Act).
[[Page H11718]]
``(B) Consultation with the pension benefit guaranty
corporation.--Except as provided in subparagraph (C), the
Secretary shall, before granting or modifying a waiver under
this subsection with respect to a plan described in
subparagraph (A)(i)--
``(i) provide the Pension Benefit Guaranty Corporation
with--
``(I) notice of the completed application for any waiver or
modification, and
``(II) an opportunity to comment on such application within
30 days after receipt of such notice, and
``(ii) consider--
``(I) any comments of the Corporation under clause (i)(II),
and
``(II) any views of any employee organization (within the
meaning of section 3(4) of the Employee Retirement Income
Security Act of 1974) representing participants in the plan
which are submitted in writing to the Secretary in connection
with such application.
Information provided to the Corporation under this
subparagraph shall be considered tax return information and
subject to the safeguarding and reporting requirements of
section 6103(p).
``(C) Exception for certain waivers.--
``(i) In general.--The preceding provisions of this
paragraph shall not apply to any plan with respect to which
the sum of--
``(I) the aggregate unpaid minimum required contribution
(within the meaning of section 4971(c)(4)) for the plan year
and all preceding plan years, and
``(II) the present value of all waiver amortization
installments determined for the plan year and succeeding plan
years under section 430(e)(2),
is less than $1,000,000.
``(ii) Treatment of waivers for which applications are
pending.--The amount described in clause (i)(I) shall include
any increase in such amount which would result if all
applications for waivers of the minimum funding standard
under this subsection which are pending with respect to such
plan were denied.
``(5) Special rules for single-employer plans.--
``(A) Application must be submitted before date 2\1/2\
months after close of year.--In the case of a defined benefit
plan which is not a multiemployer plan, no waiver may be
granted under this subsection with respect to any plan for
any plan year unless an application therefor is submitted to
the Secretary not later than the 15th day of the 3rd month
beginning after the close of such plan year.
``(B) Special rule if employer is member of controlled
group.--In the case of a defined benefit plan which is not a
multiemployer plan, if an employer is a member of a
controlled group, the temporary substantial business hardship
requirements of paragraph (1) shall be treated as met only if
such requirements are met--
``(i) with respect to such employer, and
``(ii) with respect to the controlled group of which such
employer is a member (determined by treating all members of
such group as a single employer).
The Secretary may provide that an analysis of a trade or
business or industry of a member need not be conducted if the
Secretary determines such analysis is not necessary because
the taking into account of such member would not
significantly affect the determination under this paragraph.
``(6) Advance notice.--
``(A) In general.--The Secretary shall, before granting a
waiver under this subsection, require each applicant to
provide evidence satisfactory to the Secretary that the
applicant has provided notice of the filing of the
application for such waiver to to each affected party (as
defined in section 4001(a)(21) of the Employee Retirement
Income Security Act of 1974). Such notice shall include a
description of the extent to which the plan is funded for
benefits which are guaranteed under title IV of the Employee
Retirement Income Security Act of 1974 and for benefit
liabilities.
``(B) Consideration of relevant information.--The Secretary
shall consider any relevant information provided by a person
to whom notice was given under subparagraph (A).
``(7) Restriction on plan amendments.--
``(A) In general.--No amendment of a plan 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 if a waiver under this
subsection or an extension of time under section 431(d) is in
effect with respect to the plan, or if a plan amendment
described in subsection (d)(2) has been made at any time in
the preceding 12 months (24 months in the case of a
multiemployer plan). If a plan is amended in violation of the
preceding sentence, any such waiver, or extension of time,
shall not apply to any plan year ending on or after the date
on which such amendment is adopted.
``(B) Exception.--Paragraph (1) shall not apply to any plan
amendment which--
``(i) the Secretary determines to be reasonable and which
provides for only de minimis increases in the liabilities of
the plan,
``(ii) only repeals an amendment described in subsection
(d)(2), or
``(iii) is required as a condition of qualification under
part I of subchapter D, of chapter 1.
``(d) Miscellaneous Rules.--
``(1) Change in method or year.--If the funding method, the
valuation date, or a plan year for a plan is changed, the
change shall take effect only if approved by the Secretary.
``(2) Certain retroactive plan amendments.--For purposes of
this section, any amendment applying to a plan year which--
``(A) is adopted after the close of such plan year but no
later than 2\1/2\ months after the close of the plan year
(or, in the case of a multiemployer plan, no later than 2
years after the close of such plan year),
``(B) does not reduce the accrued benefit of any
participant determined as of the beginning of the first plan
year to which the amendment applies, and
``(C) does not reduce the accrued benefit of any
participant determined as of the time of adoption except to
the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed
to have been made on the first day of such plan year. No
amendment described in this paragraph which reduces the
accrued benefits of any participant shall take effect unless
the plan administrator files a notice with the Secretary
notifying him of such amendment and the Secretary has
approved such amendment, or within 90 days after the date on
which such notice was filed, failed to disapprove such
amendment. No amendment described in this subsection shall be
approved by the Secretary unless the Secretary determines
that such amendment is necessary because of a substantial
business hardship (as determined under subsection (c)(2)) and
that a waiver under subsection (c) (or, in the case of a
multiemployer plan, any extension of the amortization period
under section 431(d)) is unavailable or inadequate.
``(3) Controlled group.--For purposes of this section, the
term `controlled group' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section
414.
``(e) Plans to Which Section Applies.--
``(1) In general.--Except as provided in paragraph (2),
this section applies to a plan if, for any plan year
beginning after December 31, 2006--
``(A) such plan included a trust which qualified (or was
determined by the Secretary to have qualified) under section
401(a), or
``(B) such plan satisfied (or was determined by the
Secretary to have satisfied) the requirements of section
403(a).
``(2) Exceptions.--This section shall not apply to--
``(A) any profit-sharing or stock bonus plan,
``(B) any insurance contract plan described in paragraph
(3),
``(C) any governmental plan (within the meaning of section
414(d)),
``(D) any church plan (within the meaning of section
414(e)) with respect to which the election provided by
section 410(d) has not been made,
``(E) any plan which has not, at any time after September
2, 1974, provided for employer contributions, or
``(F) any plan established and maintained by a society,
order, or association described in section 501(c)(8) or (9),
if no part of the contributions to or under such plan are
made by employers of participants in such plan.
No plan described in subparagraph (C), (D), or (F) shall be
treated as a qualified plan for purposes of section 401(a)
unless such plan meets the requirements of section 401(a)(7)
as in effect on September 1, 1974.
``(3) Certain insurance contract plans.--A plan is
described in this paragraph if--
``(A) the plan is funded exclusively by the purchase of
individual insurance contracts,
``(B) such contracts provide for level annual premium
payments to be paid extending not later than the retirement
age for each individual participating in the plan, and
commencing with the date the individual became a participant
in the plan (or, in the case of an increase in benefits,
commencing at the time such increase becomes effective),
``(C) benefits provided by the plan are equal to the
benefits provided under each contract at normal retirement
age under the plan and are guaranteed by an insurance carrier
(licensed under the laws of a State to do business with the
plan) to the extent premiums have been paid,
``(D) premiums payable for the plan year, and all prior
plan years, under such contracts have been paid before lapse
or there is reinstatement of the policy,
``(E) no rights under such contracts have been subject to a
security interest at any time during the plan year, and
``(F) no policy loans are outstanding at any time during
the plan year.
A plan funded exclusively by the purchase of group insurance
contracts which is determined under regulations prescribed by
the Secretary to have the same characteristics as contracts
described in the preceding sentence shall be treated as a
plan described in this paragraph.''.
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2006.
SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS.
(a) In General.--Subchapter D of chapter 1 of the Internal
Revenue Code of 1986 (relating to deferred compensation,
etc.) is amended by adding at the end the following new part:
[[Page H11719]]
``PART III--MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED
BENEFIT PENSION PLANS
``SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER
DEFINED BENEFIT PENSION PLANS.
``(a) Minimum Required Contribution.--For purposes of this
section and section 412(a)(2)(A), except as provided in
subsection (f), the term `minimum required contribution'
means, with respect to any plan year of a defined benefit
plan which is not a multiemployer plan--
``(1) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(B)) is less than the
funding target of the plan for the plan year, the sum of--
``(A) the target normal cost of the plan for the plan year,
``(B) the shortfall amortization charge (if any) for the
plan for the plan year determined under subsection (c), and
``(C) the waiver amortization charge (if any) for the plan
for the plan year as determined under subsection (e);
``(2) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(B)) exceeds the
funding target of the plan for the plan year, the target
normal cost of the plan for the plan year reduced by such
excess; or
``(3) in any other case, the target normal cost of the plan
for the plan year.
``(b) Target Normal Cost.--For purposes of this section,
except as provided in subsection (i)(2) with respect to plans
in at-risk status, the term `target normal cost' means, for
any plan year, the present value of all benefits which are
expected to accrue or to be earned under the plan during the
plan year. For purposes of this subsection, if any benefit
attributable to services performed in a preceding plan year
is increased by reason of any increase in compensation during
the current plan year, the increase in such benefit shall be
treated as having accrued during the current plan year.
``(c) Shortfall Amortization Charge.--
``(1) In general.--For purposes of this section, the
shortfall amortization charge for a plan for any plan year is
the aggregate total of the shortfall amortization
installments for such plan year with respect to the shortfall
amortization bases for such plan year and each of the 6
preceding plan years.
``(2) Shortfall amortization installment.--The plan sponsor
shall determine, with respect to the shortfall amortization
base of the plan for any plan year, the amounts necessary to
amortize such shortfall amortization base, in level annual
installments over a period of 7 plan years beginning with
such plan year. For purposes of paragraph (1), the annual
installment of such amortization for each plan year in such
7-plan-year period is the shortfall amortization installment
for such plan year with respect to such shortfall
amortization base. In determining any shortfall amortization
installment under this paragraph, the plan sponsor shall use
the segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the rules
of subparagraph (B) of subsection (h)(2).
``(3) Shortfall amortization base.--For purposes of this
section, the shortfall amortization base of a plan for a plan
year is the excess (if any) of--
``(A) the funding shortfall of such plan for such plan
year, over
``(B) the sum of--
``(i) the present value (determined using the segment rates
determined under subparagraph (C) of subsection (h)(2),
applied under rules similar to the rules of subparagraph (B)
of subsection (h)(2)) of the aggregate total of the shortfall
amortization installments, for such plan year and the 5
succeeding plan years, which have been determined with
respect to the shortfall amortization bases of the plan for
each of the 6 plan years preceding such plan year, and
``(ii) the present value (as so determined) of the
aggregate total of the waiver amortization installments for
such plan year and the 5 succeeding plan years, which have
been determined with respect to the waiver amortization bases
of the plan for each of the 5 plan years preceding such plan
year.
``(4) Funding shortfall.--For purposes of this section, the
funding shortfall of a plan for any plan year is the excess
(if any) of--
``(A) the funding target of the plan for the plan year,
over
``(B) the value of plan assets of the plan (as reduced
under subsection (f)(4)(B)) for the plan year which are held
by the plan on the valuation date.
``(5) Exemption from new shortfall amortization base.--
``(A) In general.--In any case in which the value of plan
assets of the plan (as reduced under subsection (f)(4)(A)) is
equal to or greater than the funding target of the plan for
the plan year, the shortfall amortization base of the plan
for such plan year shall be zero.
``(B) Transition rule.--
``(i) In general.--In the case of a non-deficit reduction
plan, subparagraph (A) shall be applied to plan years
beginning after 2006 and before 2011 by substituting, for the
funding target of the plan for the plan year, the applicable
percentage of such funding target determined under the
following table:
``In the case of a plan year beginning in The applicable percentage
calendar year: is:
2007.................................... 92 percent
2008.................................... 94 percent
2009.................................... 96 percent
2010.................................... 98 percent.
``(ii) Limitation.--Clause (i) shall not apply with respect
to any plan year after 2007 unless the ratio (expressed as a
percentage) which--
``(I) the value of plan assets for each preceding plan year
after 2006 (as reduced under subsection (f)(4)(A)), bears to
``(II) the funding target of the plan for such preceding
plan year (determined without regard to subsection (i)(1)),
is not less than the applicable percentage with respect to
such preceding plan determined under clause (i).
``(iii) Non-deficit reduction plan.--For purposes of clause
(i), the term `non-deficit reduction plan' means any plan--
``(I) to which this part (as in effect on the day before
the date of the enactment of the Pension Protection Act of
2005) applied for the plan year beginning in 2006, and
``(II) to which section 412(d) (as so in effect) did not
apply for such plan year.
``(6) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the
shortfall amortization charge for such plan year and
succeeding plan years, the shortfall amortization bases for
all preceding plan years (and all shortfall amortization
installments determined with respect to such bases) shall be
reduced to zero.
``(d) Rules Relating to Funding Target.--For purposes of
this section--
``(1) Funding target.--Except as provided in subsection
(i)(1) with respect to plans in at-risk status, the funding
target of a plan for a plan year is the present value of all
liabilities to participants and their beneficiaries under the
plan for the plan year.
``(2) Funding target attainment percentage.--The `funding
target attainment percentage' of a plan for a plan year is
the ratio (expressed as a percentage) which--
``(A) the value of plan assets for the plan year (as
reduced under subsection (f)(4)(B)), bears to
``(B) the funding target of the plan for the plan year
(determined without regard to subsection (i)(1)).
``(e) Waiver Amortization Charge.--
``(1) Determination of waiver amortization charge.--The
waiver amortization charge (if any) for a plan for any plan
year is the aggregate total of the waiver amortization
installments for such plan year with respect to the waiver
amortization bases for each of the 5 preceding plan years.
``(2) Waiver amortization installment.--The plan sponsor
shall determine, with respect to the waiver amortization base
of the plan for any plan year, the amounts necessary to
amortize such waiver amortization base, in level annual
installments over a period of 5 plan years beginning with the
succeeding plan year. For purposes of paragraph (1), the
annual installment of such amortization for each plan year in
such 5-plan year period is the waiver amortization
installment for such plan year with respect to such waiver
amortization base.
``(3) Interest rate.--In determining any waiver
amortization installment under this subsection, the plan
sponsor shall use the segment rates determined under
subparagraph (C) of subsection (h)(2), applied under rules
similar to the rules of subparagraph (B) of subsection
(h)(2).
``(4) Waiver amortization base.--The waiver amortization
base of a plan for a plan year is the amount of the waived
funding deficiency (if any) for such plan year under section
412(c).
``(5) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the
waiver amortization charge for such plan year and succeeding
plan years, the waiver amortization base for all preceding
plan years shall be reduced to zero.
``(f) Reduction of Minimum Required Contribution by Pre-
Funding Balance and Funding Standard Carryover Balance.--
``(1) Election to maintain balances.--
``(A) Pre-funding balance.--The plan sponsor of a defined
benefit plan which is not a multiemployer plan may elect to
maintain a pre-funding balance.
``(B) Funding standard carryover balance.--
``(i) In general.--In the case of a defined benefit plan
(other than a multiemployer plan) described in clause (ii),
the plan sponsor may elect to maintain a funding standard
carryover balance, until such balance is reduced to zero.
``(ii) Plans maintaining funding standard account in
2006.--A plan is described in this clause if the plan--
[[Page H11720]]
``(I) was in effect for a plan year beginning in 2006, and
``(II) had a positive balance in the funding standard
account under section 412(b) as in effect for such plan year
and determined as of the end of such plan year.
``(2) Application of balances.--A pre-funding balance and a
funding standard carryover balance maintained pursuant to
this paragraph--
``(A) shall be available for crediting against the minimum
required contribution, pursuant to an election under
paragraph (3),
``(B) shall be applied as a reduction in the amount treated
as the value of plan assets for purposes of this section, to
the extent provided in paragraph (4), and
``(C) may be reduced at any time, pursuant to an election
under paragraph (5).
``(3) Election to apply balances against minimum required
contribution.--
``(A) In general.--Except as provided in subparagraphs (B)
and (C), in the case of any plan year in which the plan
sponsor elects to credit against the minimum required
contribution for the current plan year all or a portion of
the pre-funding balance or the funding standard carryover
balance for the current plan year (not in excess of such
minimum required contribution), the minimum required
contribution for the plan year shall be reduced by the amount
so credited by the plan sponsor. For purposes of the
preceding sentence, the minimum required contribution shall
be determined after taking into account any waiver under
section 412(c).
``(B) Coordination with funding standard carryover
balance.--To the extent that any plan has a funding standard
carryover balance greater than zero, no amount of the pre-
funding balance of such plan may be credited under this
paragraph in reducing the minimum required contribution.
``(C) Limitation for underfunded plans.--The preceding
provisions of this paragraph shall not apply for any plan
year if the ratio (expressed as a percentage) which--
``(i) the value of plan assets for the preceding plan year
(as reduced under paragraph (4)(C)), bears to
``(ii) the funding target of the plan for the preceding
plan year (determined without regard to subsection (i)(1)),
is less than 80 percent.
``(4) Effect of balances on amounts treated as value of
plan assets.--In the case of any plan maintaining a pre-
funding balance or a funding standard carryover balance
pursuant to this subsection, the amount treated as the value
of plan assets shall be deemed to be such amount, reduced as
provided in the following subparagraphs:
``(A) Applicability of shortfall amortization base.--For
purposes of subsection (c)(5), the value of plan assets is
deemed to be such amount, reduced by the amount of the pre-
funding balance, but only if an election under paragraph (2)
applying any portion of the pre-funding balance in reducing
the minimum required contribution is in effect for the plan
year.
``(B) Determination of excess assets, funding shortfall,
and funding target attainment percentage.--
``(i) In general.--For purposes of subsections (a),
(c)(4)(B), and (d)(2)(A), the value of plan assets is deemed
to be such amount, reduced by the amount of the pre-funding
balance and the funding standard carryover balance.
``(ii) Special rule for certain binding agreements with
pbgc.--For purposes of subsection (c)(4)(B), the value of
plan assets shall not be deemed to be reduced for a plan year
by the amount of the specified balance if, with respect to
such balance, there is in effect for a plan year a binding
written agreement with the Pension Benefit Guaranty
Corporation which provides that such balance is not available
to reduce the minimum required contribution for the plan
year. For purposes of the preceding sentence, the term
`specified balance' means the pre-funding balance or the
funding standard carryover balance, as the case may be.
``(C) Availability of balances in plan year for crediting
against minimum required contribution.--For purposes of
paragraph (3)(C)(i) of this subsection, the value of plan
assets is deemed to be such amount, reduced by the amount of
the pre-funding balance.
``(5) Election to reduce balance prior to determinations of
value of plan assets and crediting against minimum required
contribution.--
``(A) In general.--The plan sponsor may elect to reduce by
any amount the balance of the pre-funding balance and the
funding standard carryover balance for any plan year (but not
below zero). Such reduction shall be effective prior to any
determination of the value of plan assets for such plan year
under this section and application of the balance in reducing
the minimum required contribution for such plan for such plan
year pursuant to an election under paragraph (2).
``(B) Coordination between pre-funding balance and funding
standard carryover balance.--To the extent that any plan has
a funding standard carryover balance greater than zero, no
election may be made under subparagraph (A) with respect to
the pre-funding balance.
``(6) Pre-funding balance.--
``(A) In general.--A pre-funding balance maintained by a
plan shall consist of a beginning balance of zero, increased
and decreased to the extent provided in subparagraphs (B) and
(C), and adjusted further as provided in paragraph (8).
``(B) Increases.--As of the valuation date for each plan
year beginning after 2007, the pre-funding balance of a plan
shall be increased by the amount elected by the plan sponsor
for the plan year. Such amount shall not exceed the excess
(if any) of--
``(i) the aggregate total of employer contributions to the
plan for the preceding plan year, over
``(ii) the minimum required contribution for such preceding
plan year (increased by interest on any portion of such
minimum required contribution remaining unpaid as of the
valuation date for the current plan year, at the effective
interest rate for the plan for the preceding plan year, for
the period beginning with the first day of such preceding
plan year and ending on the date that payment of such portion
is made).
``(C) Decreases.--As of the valuation date for each plan
year after 2007, the pre-funding balance of a plan shall be
decreased (but not below zero) by the sum of--
``(i) the amount of such balance credited under paragraph
(2) (if any) in reducing the minimum required contribution of
the plan for the preceding plan year, and
``(ii) any reduction in such balance elected under
paragraph (5).
``(7) Funding standard carryover balance.--
``(A) In general.--A funding standard carryover balance
maintained by a plan shall consist of a beginning balance
determined under subparagraph (B), decreased to the extent
provided in subparagraph (C), and adjusted further as
provided in paragraph (8).
``(B) Beginning balance.--The beginning balance of the
funding standard carryover balance shall be the positive
balance described in paragraph (1)(B)(ii)(II).
``(C) Decreases.--As of the valuation date for each plan
year after 2007, the funding standard carryover balance of a
plan shall be decreased (but not below zero) by the sum of--
``(i) the amount of such balance credited under paragraph
(2) (if any) in reducing the minimum required contribution of
the plan for the preceding plan year, and
``(ii) any reduction in such balance elected under
paragraph (5).
``(8) Adjustments to balances.--In determining the pre-
funding balance or the funding standard carryover balance of
a plan as of the valuation date (before applying any increase
or decrease under paragraph (6) or (7)), the plan sponsor
shall, in accordance with regulations which shall be
prescribed by the Secretary, adjust such balance so as to
reflect the rate of net gain or loss (determined,
notwithstanding subsection (g)(3), on the basis of fair
market value) experienced by all plan assets for the period
beginning with the valuation date for the preceding plan year
and ending with the date preceding the valuation date for the
current plan year, properly taking into account, in
accordance with such regulations, all contributions,
distributions, and other plan payments made during such
period.
``(9) Elections.--Elections under this subsection shall be
made at such times, and in such form and manner, as shall be
prescribed in regulations of the Secretary.
``(g) Valuation of Plan Assets and Liabilities.--
``(1) Timing of determinations.--Except as otherwise
provided under this subsection, all determinations under this
section for a plan year shall be made as of the valuation
date of the plan for such plan year.
``(2) Valuation date.--For purposes of this section--
``(A) In general.--Except as provided in subparagraph (B),
the valuation date of a plan for any plan year shall be the
first day of the plan year.
``(B) Exception for small plans.--If, on each day during
the preceding plan year, a plan had 500 or fewer
participants, the plan may designate any day during the plan
year as its valuation date for such plan year and succeeding
plan years. For purposes of this subparagraph, all defined
benefit plans (other than multiemployer plans) maintained by
the same employer (or any member of such employer's
controlled group) shall be treated as 1 plan, but only
participants with respect to such employer or member shall be
taken into account.
``(C) Application of certain rules in determination of plan
size.--For purposes of this paragraph--
``(i) Plans not in existence in preceding year.--In the
case of the first plan year of any plan, subparagraph (B)
shall apply to such plan by taking into account the number of
participants that the plan is reasonably expected to have on
days during such first plan year.
``(ii) Predecessors.--Any reference in subparagraph (B) to
an employer shall include a reference to any predecessor of
such employer.
``(3) Authorization of use of actuarial value.--For
purposes of this section, the value of plan assets shall be
determined on the basis of any reasonable actuarial method of
valuation which takes into account fair market value and
which is permitted under regulations prescribed by the
Secretary, except that--
``(A) any such method providing for averaging of fair
market values may not provide for averaging of such values
over more than the 36-month period ending with the month
which includes the valuation date, and
``(B) any such method may not result in a determination of
the value of plan assets which, at any time, is lower than 90
percent
[[Page H11721]]
or greater than 110 percent of the fair market value of such
assets at such time.
``(4) Accounting for contribution receipts.--For purposes
of this section--
``(A) Contributions for prior plan years taken into
account.--For purposes of determining the value of plan
assets for any current plan year, in any case in which a
contribution properly allocable to amounts owed for a
preceding plan year is made on or after the valuation date of
the plan for such current plan year, such contribution shall
be taken into account, except that any such contribution made
during any such current plan year beginning after 2007 shall
be taken into account only in an amount equal to its present
value (determined using the effective rate of interest for
the plan for the preceding plan year) as of the valuation
date of the plan for such current plan year.
``(B) Contributions for current plan year disregarded.--For
purposes of determining the value of plan assets for any
current plan year, contributions which are properly allocable
to amounts owed for such plan year shall not be taken into
account, and, in the case of any such contribution made
before the valuation date of the plan for such plan year,
such value of plan assets shall be reduced for interest on
such amount determined using the effective rate of interest
of the plan for the current plan year for the period
beginning when such payment was made and ending on the
valuation date of the plan.
``(5) Accounting for plan liabilities.--For purposes of
this section--
``(A) Liabilities taken into account for current plan
year.--In determining the value of liabilities under a plan
for a plan year, liabilities shall be taken into account to
the extent attributable to benefits (including any early
retirement or similar benefit) accrued or earned as of the
beginning of the plan year.
``(B) Accruals during current plan year disregarded.--For
purposes of subparagraph (A), benefits accrued or earned
during such plan year shall not be taken into account,
irrespective of whether the valuation date of the plan for
such plan year is later than the first day of such plan year.
``(h) Actuarial Assumptions and Methods.--
``(1) In general.--Subject to this subsection, the
determination of any present value or other computation under
this section shall be made on the basis of actuarial
assumptions and methods--
``(A) each of which is reasonable (taking into account the
experience of the plan and reasonable expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(2) Interest rates.--
``(A) Effective interest rate.--For purposes of this
section, the term `effective interest rate' means, with
respect to any plan for any plan year, the single rate of
interest which, if used to determine the present value of the
plan's liabilities referred to in subsection (d)(1), would
result in an amount equal to the funding target of the plan
for such plan year.
``(B) Interest rates for determining funding target.--For
purposes of determining the funding target of a plan for any
plan year, the interest rate used in determining the present
value of the liabilities of the plan shall be--
``(i) in the case of liabilities 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 liabilities reasonably determined to
be payable during the 15-year period beginning at the end of
the period described in clause (i), the second segment rate
with respect to the applicable month, and
``(iii) in the case of liabilities reasonably determined to
be payable after the period described in clause (ii), the
third segment rate with respect to the applicable month.
``(C) 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 corporate bond yield curve for such month,
taking into account only that portion of such yield curve
which is based on bonds 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 corporate bond yield curve for such month,
taking into account only that portion of such yield curve
which is based on bonds 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 corporate bond yield curve for such month,
taking into account only that portion of such yield curve
which is based on bonds maturing during periods beginning
after the period described in clause (ii).
``(D) Corporate bond yield curve.--For purposes of this
paragraph--
``(i) In general.--The term `corporate bond yield curve'
means, with respect to any month, a yield curve which is
prescribed by the Secretary for such month and which reflects
a 3-year weighted average of yields on investment grade
corporate bonds with varying maturities.
``(ii) 3-year weighted average.--The term `3-year weighted
average' means an average determined by using a methodology
under which the most recent year is weighted 50 percent, the
year preceding such year is weighted 35 percent, and the
second year preceding such year is weighted 15 percent.
``(E) Applicable month.--For purposes of this paragraph,
the term `applicable month' means, with respect to any plan
for any plan year, the month which includes the valuation
date of such plan for such plan year or, at the election of
the plan sponsor, any of the 4 months which precede such
month. Any election made under this subparagraph shall apply
to the plan year for which the election is made and all
succeeding plan years, unless the election is revoked with
the consent of the Secretary.
``(F) Publication requirements.--The Secretary shall
publish for each month the corporate bond yield curve (and
the corporate bond yield curve reflecting the modification
described in section 417(e)(3)(D)(i) for such month and each
of the rates determined under subparagraph (B) for such
month. The Secretary shall also publish a description of the
methodology used to determine such yield curve and such rates
which is sufficiently detailed to enable plans to make
reasonable projections regarding the yield curve and such
rates for future months based on the plan's projection of
future interest rates.
``(G) Transition rule.--
``(i) In general.--Notwithstanding the preceding provisions
of this paragraph, for plan years beginning in 2007 or 2008,
the first, second, or third segment rate for a plan with
respect to any month shall be equal to the sum of--
``(I) the product of such rate for such month determined
without regard to this subparagraph, multiplied by the
applicable percentage, and
``(II) the product of the rate determined under the rules
of section 412(b)(5)(B)(ii)(II) (as in effect for plan years
beginning in 2006), multiplied by a percentage equal to 100
percent minus the applicable percentage.
``(ii) Applicable percentage.--For purposes of clause (i),
the applicable percentage is 33\1/3\ percent for plan years
beginning in 2007 and 66\2/3\ percent for plan years
beginning in 2008.
``(iii) New plans ineligible.--Clause (i) shall not apply
to any plan if the first plan year of the plan begins after
December 31, 2006.
``(3) Mortality table.--
``(A) In general.--Except as provided in subparagraph (B),
the mortality table used in determining any present value or
making any computation under this section shall be the RP-
2000 Combined Mortality Table using Scale AA published by the
Society of Actuaries (as in effect on the date of the
enactment of the Pension Protection Act of 2005), projected
as of the plan's valuation date.
``(B) Substitute mortality table.--
``(i) In general.--Upon request by the plan sponsor and
approval by the Secretary for a period not to exceed 10
years, a mortality table which meets the requirements of
clause (ii) shall be used in determining any present value or
making any computation under this section. A mortality table
described in this clause shall cease to be in effect if the
plan actuary determines at any time that such table does not
meet the requirements of subclauses (I) and (II) of clause
(ii).
``(ii) Requirements.--A mortality table meets the
requirements of this clause if the Secretary determines
that--
``(I) such table reflects the actual experience of the
pension plan and projected trends in such experience, and
``(II) such table is significantly different from the table
described in subparagraph (A).
``(iii) Deadline for disposition of application.--Any
mortality table submitted to the Secretary for approval under
this subparagraph shall be treated as in effect for the
succeeding plan year unless the Secretary, during the 180-day
period beginning on the date of such submission, disapproves
of such table and provides the reasons that such table fails
to meet the requirements of clause (ii).
``(C) Transition rule.--Under regulations of the Secretary,
any difference in present value resulting from the difference
in the assumptions as set forth in the mortality table
specified in subparagraph (A) and the assumptions as set
forth in the mortality table described in section
412(l)(7)(C)(ii) (as in effect for plan years beginning in
2006) shall be phased in ratably over the first period of 5
plan years beginning in or after 2007 so as to be fully
effective for the fifth plan year. The preceding sentence
shall not apply to any plan if the first plan year of the
plan begins after December 31, 2006.
``(4) Probability of benefit payments in the form of lump
sums or other optional forms.--For purposes of determining
any present value or making any computation under this
section, there shall be taken into account--
``(A) the probability that future benefit payments under
the plan will be made in the form of optional forms of
benefits provided under the plan (including lump sum
distributions, determined on the basis of the plan's
experience and other related assumptions), and
``(B) any difference in the present value of such future
benefit payments resulting from
[[Page H11722]]
the use of actuarial assumptions, in determining benefit
payments in any such optional form of benefits, which are
different from those specified in this subsection.
``(5) Approval of large changes in actuarial assumptions.--
``(A) In general.--No actuarial assumption used to
determine the funding target for a plan to which this
paragraph applies may be changed without the approval of the
Secretary.
``(B) Plans to which paragraph applies.--This paragraph
shall apply to a plan only if--
``(i) the plan is a defined benefit plan (other than a
multiemployer plan) to which title IV of the Employee
Retirement Income Security Act of 1974 applies,
``(ii) the aggregate unfunded vested benefits as of the
close of the preceding plan year (as determined under section
4006(a)(3)(E)(iii) of the Employee Retirement Income Security
Act of 1974) of such plan and all other plans maintained by
the contributing sponsors (as defined in section 4001(a)(13)
of such Act) and members of such sponsors' controlled groups
(as defined in section 4001(a)(14) of such Act) which are
covered by title IV (disregarding plans with no unfunded
vested benefits) exceed $50,000,000, and
``(iii) the change in assumptions (determined after taking
into account any changes in interest rate and mortality
table) results in a decrease in the funding shortfall of the
plan for the current plan year that exceeds $50,000,000, or
that exceeds $5,000,000 and that is 5 percent or more of the
funding target of the plan before such change.
``(i) Special Rules for at-Risk Plans.--
``(1) Funding target for plans in at-risk status.--
``(A) In general.--In any case in which a plan is in at-
risk status for a plan year, the funding target of the plan
for the plan year is the sum of--
``(i) the present value of all liabilities to participants
and their beneficiaries under the plan for the plan year, as
determined by using, in addition to the actuarial assumptions
described in subsection (h), the supplemental actuarial
assumptions described in subparagraph (B), plus
``(ii) a loading factor determined under subparagraph (C).
``(B) Supplemental actuarial assumptions.--The actuarial
assumptions used in determining the valuation of the funding
target shall include, in addition to the actuarial
assumptions described in subsection (h), an assumption that
all participants will elect benefits at such times and in
such forms as will result in the highest present value of
liabilities under subparagraph (A)(i).
``(C) Loading factor.--The loading factor applied with
respect to a plan under this paragraph for any plan year is
the sum of--
``(i) $700, times the number of participants in the plan,
plus
``(ii) 4 percent of the funding target (determined without
regard to this paragraph) of the plan for the plan year.
``(2) Target normal cost of at-risk plans.--In any case in
which a plan is in at-risk status for a plan year, the target
normal cost of the plan for such plan year shall be the sum
of--
``(A) the present value of all benefits which are expected
to accrue or be earned under the plan during the plan year,
determined under the actuarial assumptions used under
paragraph (1), plus
``(B) the loading factor under paragraph (1)(C), excluding
the portion of the loading factor described in paragraph
(1)(C)(i).
``(3) Determination of at-risk status.--For purposes of
this subsection, a plan is in `at-risk status' for a plan
year if the funding target attainment percentage of the plan
for the preceding plan year was less than 60 percent.
``(4) Transition between applicable funding targets and
between applicable target normal costs.--
``(A) In general.--In any case in which a plan which is in
at-risk status for a plan year has been in such status for a
consecutive period of fewer than 5 plan years, the applicable
amount of the funding target and of the target normal cost
shall be, in lieu of the amount determined without regard to
this paragraph, the sum of--
``(i) the amount determined under this section without
regard to this subsection, plus
``(ii) the transition percentage for such plan year of the
excess of the amount determined under this subsection
(without regard to this paragraph) over the amount determined
under this section without regard to this subsection.
``(B) Transition percentage.--For purposes of this
paragraph, the `transition percentage' for a plan year is the
product derived by multiplying--
``(i) 20 percent, by
``(ii) the number of plan years during the period described
in subparagraph (A).
``(j) Payment of Minimum Required Contributions.--
``(1) In general.--For purposes of this section, the due
date for any payment of any minimum required contribution for
any plan year shall be 8\1/2\ months after the close of the
plan year.
``(2) Interest.--Any payment required under paragraph (1)
for a plan year that is made on a date other than the
valuation date for such plan year shall be adjusted for
interest accruing for the period between the valuation date
and the payment date, at the effective rate of interest for
the plan for such plan year.
``(3) Accelerated quarterly contribution schedule for
underfunded plans.--
``(A) Interest penalty for failure to meet accelerated
quarterly payment schedule.--In any case in which the plan
has a funding shortfall for the preceding plan year, if the
required installment is not paid in full, then the minimum
required contribution for the plan year (as increased under
paragraph (2)) shall be further increased by an amount equal
to the interest on the amount of the underpayment for the
period of the underpayment, using an interest rate equal to
the excess of--
``(i) 175 percent of the Federal mid-term rate (as in
effect under section 1274 for the 1st month of such plan
year), over
``(ii) the effective rate of interest for the plan for the
plan year.
``(B) Amount of underpayment, period of underpayment.--For
purposes of subparagraph (A)--
``(i) Amount.--The amount of the underpayment shall be the
excess of--
``(I) the required installment, over
``(II) the amount (if any) of the installment contributed
to or under the plan on or before the due date for the
installment.
``(ii) Period of underpayment.--The period for which any
interest is charged under this paragraph with respect to any
portion of the underpayment shall run from the due date for
the installment to the date on which such portion is
contributed to or under the plan.
``(iii) Order of crediting contributions.--For purposes of
clause (i)(II), contributions shall be credited against
unpaid required installments in the order in which such
installments are required to be paid.
``(C) Number of required installments; due dates.--For
purposes of this paragraph--
``(i) Payable in 4 installments.--There shall be 4 required
installments for each plan year.
``(ii) Time for payment of installments.--The due dates for
required installments are set forth in the following table:
``In the case of the following required
installment: The due date is:
1st..................................... April 15
2nd..................................... July 15
3rd..................................... October 15
4th..................................... January 15 of the following
year
``(D) Amount of required installment.--For purposes of this
paragraph--
``(i) In general.--The amount of any required installment
shall be 25 percent of the required annual payment.
``(ii) Required annual payment.--For purposes of clause
(i), the term `required annual payment' means the lesser of--
``(I) 90 percent of the minimum required contribution
(without regard to any waiver under section 412(c)) to the
plan for the plan year under this section, or
``(II) in the case of a plan year beginning after 2007, 100
percent of the minimum required contribution (without regard
to any waiver under section 412(c)) to the plan for the
preceding plan year.
Subclause (II) shall not apply if the preceding plan year
referred to in such clause was not a year of 12 months.
``(E) Fiscal years and short years.--
``(i) Fiscal years.--In applying this paragraph to a plan
year beginning on any date other than January 1, there shall
be substituted for the months specified in this paragraph,
the months which correspond thereto.
``(ii) Short plan year.--This subparagraph shall be applied
to plan years of less than 12 months in accordance with
regulations prescribed by the Secretary.
``(4) Liquidity requirement in connection with quarterly
contributions.--
``(A) In general.--A plan to which this paragraph applies
shall be treated as failing to pay the full amount of any
required installment under paragraph (3) to the extent that
the value of the liquid assets paid in such installment is
less than the liquidity shortfall (whether or not such
liquidity shortfall exceeds the amount of such installment
required to be paid but for this paragraph).
``(B) Plans to which paragraph applies.--This paragraph
shall apply to a plan (other than a plan that would be
described in subsection (f)(2)(B) if `100' were substituted
for `500' therein) which--
``(i) is required to pay installments under paragraph (3)
for a plan year, and
``(ii) has a liquidity shortfall for any quarter during
such plan year.
[[Page H11723]]
``(C) Period of underpayment.--For purposes of paragraph
(3)(A), any portion of an installment that is treated as not
paid under subparagraph (A) shall continue to be treated as
unpaid until the close of the quarter in which the due date
for such installment occurs.
``(D) Limitation on increase.--If the amount of any
required installment is increased by reason of subparagraph
(A), in no event shall such increase exceed the amount which,
when added to prior installments for the plan year, is
necessary to increase the funding target attainment
percentage of the plan for the plan year (taking into account
the expected increase in funding target due to benefits
accruing or earned during the plan year) to 100 percent.
``(E) Definitions.--For purposes of this subparagraph:
``(i) Liquidity shortfall.--The term `liquidity shortfall'
means, with respect to any required installment, an amount
equal to the excess (as of the last day of the quarter for
which such installment is made) of--
``(I) the base amount with respect to such quarter, over
``(II) the value (as of such last day) of the plan's liquid
assets.
``(ii) Base amount.--
``(I) In general.--The term `base amount' means, with
respect to any quarter, an amount equal to 3 times the sum of
the adjusted disbursements from the plan for the 12 months
ending on the last day of such quarter.
``(II) Special rule.--If the amount determined under
subclause (I) exceeds an amount equal to 2 times the sum of
the adjusted disbursements from the plan for the 36 months
ending on the last day of the quarter and an enrolled actuary
certifies to the satisfaction of the Secretary that such
excess is the result of nonrecurring circumstances, the base
amount with respect to such quarter shall be determined
without regard to amounts related to those nonrecurring
circumstances.
``(iii) Disbursements from the plan.--The term
`disbursements from the plan' means all disbursements from
the trust, including purchases of annuities, payments of
single sums and other benefits, and administrative expenses.
``(iv) Adjusted disbursements.--The term `adjusted
disbursements' means disbursements from the plan reduced by
the product of--
``(I) the plan's funding target attainment percentage for
the plan year, and
``(II) the sum of the purchases of annuities, payments of
single sums, and such other disbursements as the Secretary
shall provide in regulations.
``(v) Liquid assets.--The term `liquid assets' means cash,
marketable securities, and such other assets as specified by
the Secretary in regulations.
``(vi) Quarter.--The term `quarter' means, with respect to
any required installment, the 3-month period preceding the
month in which the due date for such installment occurs.
``(F) Regulations.--The Secretary may prescribe such
regulations as are necessary to carry out this paragraph.
``(k) Imposition of Lien Where Failure to Make Required
Contributions.--
``(1) In general.--In the case of a plan to which this
subsection applies, if--
``(A) any person fails to make a contribution payment
required by section 412 and this section before the due date
for such payment, and
``(B) the unpaid balance of such payment (including
interest), when added to the aggregate unpaid balance of all
preceding such payments for which payment was not made before
the due date (including interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount
determined under paragraph (3) upon all property and rights
to property, whether real or personal, belonging to such
person and any other person who is a member of the same
controlled group of which such person is a member.
``(2) Plans to which subsection applies.--This subsection
shall apply to a defined benefit plan (other than a
multiemployer plan) for any plan year for which the funding
target attainment percentage (as defined in subsection
(d)(2)) of such plan is less than 100 percent. This
subsection shall not apply to any plan to which section 4021
of the Employee Retirement Income Security Act of 1974 does
not apply (as such section is in effect on the date of the
enactment of the Pension Protection Act of 2005).
``(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of contribution payments required under this section
and section 412 for which payment has not been made before
the due date.
``(4) Notice of failure; lien.--
``(A) Notice of failure.--A person committing a failure
described in paragraph (1) shall notify the Pension Benefit
Guaranty Corporation of such failure within 10 days of the
due date for the required contribution payment.
``(B) Period of lien.--The lien imposed by paragraph (1)
shall arise on the due date for the required contribution
payment and shall continue until the last day of the first
plan year in which the plan ceases to be described in
paragraph (1)(B). Such lien shall continue to run without
regard to whether such plan continues to be described in
paragraph (2) during the period referred to in the preceding
sentence.
``(C) Certain rules to apply.--Any amount with respect to
which a lien is imposed under paragraph (1) shall be treated
as taxes due and owing the United States and rules similar to
the rules of subsections (c), (d), and (e) of section 4068 of
the Employee Retirement Income Security Act of 1974 shall
apply with respect to a lien imposed by subsection (a) and
the amount with respect to such lien.
``(5) Enforcement.--Any lien created under paragraph (1)
may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Pension
Benefit Guaranty Corporation, by the contributing sponsor (or
any member of the controlled group of the contributing
sponsor).
``(6) Definitions.--For purposes of this subsection--
``(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a contribution
payment required to be made to the plan, including any
required installment under paragraphs (3) and (4) of
subsection (i).
``(B) Due date; required installment.--The terms `due date'
and `required installment' have the meanings given such terms
by subsection (j), except that in the case of a payment other
than a required installment, the due date shall be the date
such payment is required to be made under section 430.
``(C) Controlled group.--The term `controlled group' means
any group treated as a single employer under subsections (b),
(c), (m), and (o) of section 414.
``(l) Qualified Transfers to Health Benefit Accounts.--In
the case of a qualified transfer (as defined in section 420),
any assets so transferred shall not, for purposes of this
section, be treated as assets in the plan.''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning after
December 31, 2006.
SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.
(a) Prohibition of Shutdown Benefits and Other
Unpredictable Contingent Event Benefits Under Single-Employer
Plans.--
(1) In general.--Part III of subchapter D of chapter 1 of
the Internal Revenue Code of 1986 (relating to deferred
compensation, etc.) is amended--
(A) by striking the heading and inserting the following:
``PART III--RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT
LIMITATIONS
``Subpart A. Minimum funding standards for pension plans.
``Subpart B. Benefit limitations under single-employer plans.
``Subpart A--Minimum Funding Standards for Pension Plans
``Sec. 430. Minimum funding standards for single-employer defined
benefit pension plans.'', and
(B) by adding at the end the following new subpart:
``Subpart B--Benefit Limitations Under Single-employer Plans
``Sec. 436. Funding-based limitation on shutdown benefits and other
unpredictable contingent event benefits under single-
employer plans.
``SEC. 436. FUNDING-BASED LIMITATION ON SHUTDOWN BENEFITS AND
OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS
UNDER SINGLE-EMPLOYER PLANS.
``(a) In General.--No defined benefit plan (other than a
multiemployer plan) may provide benefits to which
participants are entitled solely by reason of the occurrence
of a plant shutdown or any other unpredictable contingent
event occurring during any plan year if the funding target
attainment percentage as of the valuation date of the plan
for such plan year--
``(1) is less than 80 percent, or
``(2) would be less than 80 percent taking into account
such occurrence.
``(b) Exemption.--Subsection (a) shall cease to apply with
respect to any plan year, effective as of the first date of
the plan year, upon payment by the plan sponsor of a
contribution (in addition to any minimum required
contribution under section 430) equal to--
``(1) in the case of subsection (a)(1), the amount of the
increase in the funding target of the plan (under section
430) for the plan year attributable to the occurrence
referred to in subsection (a), and
``(2) in the case of subsection (a)(2), the amount
sufficient to result in a funding target attainment
percentage of 80 percent.
Rules similar to the rules of section 437(f) shall apply for
purposes of this subsection.
``(c) Unpredictable Contingent Event.--For purposes of this
section, the term `unpredictable contingent event' means an
event other than--
``(1) attainment of any age, performance of any service,
receipt or derivation of any compensation, or the occurrence
of death or disability, or
``(2) an event which is reasonably and reliably predictable
(as determined by the Secretary).
``(d) New Plans.--Subsection (a) shall not apply to a plan
for the first 5 plan years of the plan. For purposes of this
subsection, the reference in this subsection to a plan shall
include a reference to any predecessor plan.
[[Page H11724]]
``(e) Deemed Reduction of Funding Balances.--A rule similar
to the rule of section 437(h) shall apply for purposes of
this section.''.
(2) Clerical amendment.--The table of parts for suchapter D
of chapter 1 of the Internal Revenue Code of 1986 is amended
by adding at the end the following new item:
``Part III_Rules Relating to Minimum Funding Standards and Benefit
Limitations''.
(b) Other Limits on Benefits and Benefit Accruals.--
(1) In general.--Subpart B of part III of subchapter D of
chapter 1 of such Code is amended by adding at the end the
following:
``SEC. 437. FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT
ACCRUALS UNDER SINGLE-EMPLOYER PLANS.
``(a) Limitations on Plan Amendments Increasing Liability
for Benefits.--
``(1) In general.--No amendment to a defined benefit plan
(other than a multiemployer plan) which has the effect of
increasing liabilities of the plan by reason of increases in
benefits, establishment of new benefits, changing the rate of
benefit accrual, or changing the rate at which benefits
become nonforfeitable to the plan may take effect during any
plan year if the funding target attainment percentage as of
the valuation date of the plan for such plan year is--
``(A) less than 80 percent, or
``(B) would be less than 80 percent taking into account
such amendment.
For purposes of this paragraph, any increase in benefits
under the plan by reason of an increase in the benefit rate
provided under the plan or on the basis of an increase in
compensation shall be treated as effected by plan amendment.
``(2) Exemption.--Paragraph (1) shall cease to apply with
respect to any plan year, effective as of the first date of
the plan year (or if later, the effective date of the
amendment), upon payment by the plan sponsor of a
contribution (in addition to any minimum required
contribution under section 430) equal to--
``(A) in the case of paragraph (1)(A), the amount of the
increase in the funding target of the plan (under section
430) for the plan year attributable to the amendment, and
``(B) in the case of paragraph (1)(B), the amount
sufficient to result in a funding target attainment
percentage of 80 percent.
``(b) Funding-Based Limitation on Certain Forms of
Distribution.--
``(1) In general.--A defined benefit plan (other than a
multiemployer plan) shall provide that, in any case in which
the plan's funding target attainment percentage as of the
valuation date of the plan for a plan year is less than 80
percent, the plan may not after such date pay any payment
described in section 401(a)(32)(B).
``(2) Exception.--Paragraph (1) shall not apply to any plan
for any plan year if the terms of such plan (as in effect for
the period beginning on June 29, 2005, and ending with such
plan year) provide for no benefit accruals with respect to
any participant during such period.
``(c) Limitations on Benefit Accruals for Plans With Severe
Funding Shortfalls.--A defined benefit plan (other than a
multiemployer plan) shall provide that, in any case in which
the plan's funding target attainment percentage as of the
valuation date of the plan for a plan year is less than 60
percent, all future benefit accruals under the plan shall
cease as of such date.
``(d) New Plans.--Subsections (a) and (c) shall not apply
to a plan for the first 5 plan years of the plan. For
purposes of this subsection, the reference in this subsection
to a plan shall include a reference to any predecessor plan.
``(e) Presumed Underfunding for Purposes of Benefit
Limitations Based on Prior Year's Funding Status.--
``(1) Presumption of continued underfunding.--In any case
in which a benefit limitation under subsection (a), (b), or
(c) has been applied to a plan with respect to the plan year
preceding the current plan year, the funding target
attainment percentage of the plan as of the valuation date of
the plan for the current plan year shall be presumed to be
equal to the funding target attainment percentage of the plan
as of the valuation date of the plan for the preceding plan
year until the enrolled actuary of the plan certifies the
actual funding target attainment percentage of the plan as of
the valuation date of the plan for the current plan year.
``(2) Presumption of underfunding after 10th month.--In any
case in which no such certification is made with respect to
the plan before the first day of the 10th month of the
current plan year, for purposes of subsections (a), (b), and
(c), the plan's funding target attainment percentage shall be
conclusively presumed to be less than 60 percent as of the
first day of such 10th month, and such day shall be deemed,
for purposes of such subsections, to be the valuation date of
the plan for the current plan year.
``(3) Presumption of underfunding after 4th month for
nearly underfunded plans.--In any case in which--
``(A) a benefit limitation under subsection (a), (b), or
(c) did not apply to a plan with respect to the plan year
preceding the current plan year, but the funding target
attainment percentage of the plan for such preceding plan
year was not more than 10 percentage points greater than the
percentage which would have caused such subsection to apply
to the plan with respect to such preceding plan year, and
``(B) as of the first day of the 4th month of the current
plan year, the enrolled actuary of the plan has not certified
the actual funding target attainment percentage of the plan
as of the valuation date of the plan for the current plan
year,
until the enrolled actuary so certifies, such first day shall
be deemed, for purposes of such subsection, to be the
valuation date of the plan for the current plan year and the
funding target attainment percentage of the plan as of such
first day shall, for purposes of such subsection, be presumed
to be equal to 10 percentage points less than the funding
target attainment percentage of the plan as of the valuation
date of the plan for such preceding plan year.
``(f) Restoration by Plan Amendment of Benefits or Benefit
Accrual.--In any case in which a prohibition under subsection
(b) of a payment described in subsection (b)(1) or a
cessation of benefit accruals under subsection (c) is applied
to a plan with respect to any plan year and such prohibition
or cessation, as the case may be, ceases to apply to any
subsequent plan year, the plan may provide for the resumption
of such benefit payment or such benefit accrual only by means
of the adoption of a plan amendment after the valuation date
of the plan for such subsequent plan year. The preceding
sentence shall not apply to a prohibition or cessation
required by reason of subsection (e).
``(g) Funding Target Attainment Percentage.--
``(1) In general.--For purposes of this section, the term
`funding target attainment percentage' means, with respect to
any plan for any plan year, the ratio (expressed as a
percentage) which--
``(A) the value of plan assets for the plan year (as
determined under section 430(g)) reduced by the pre-funding
balance and the funding standard carryover balance (within
the meaning of section 430(f)), bears to
``(B) the funding target of the plan for the plan year (as
determined under section 430(d)(1), but without regard to
section 430(i)(1)).
``(2) Application to plans which are fully funded without
regard to reductions for funding balances.--
``(A) In general.--In the case of a plan for any plan year,
if the funding target attainment percentage is 100 percent or
more (determined without regard to this subparagraph and
without regard to the reduction under paragraph (1)(A) for
the pre-funding balance and the funding standard carryover
balance), paragraph (1) shall be applied without regard to
such reduction.
``(B) Transition rule.--Subparagraph (A) shall be applied
to plan years beginning after 2006 and before 2011 by
substituting for `100 percent' the applicable percentage
determined in accordance with the following table:
``In the case of a plan year beginning in The applicable percentage
calendar year: is:
2007...................................... 92 percent
2008...................................... 94 percent
2009...................................... 96 percent
2010...................................... 98 percent.
``(C) Limitation.--Subparagraph (B) shall not apply with
respect to any plan year after 2007 unless the funding target
attainment percentage (determined without regard to this
paragraph and without regard to the reduction under paragraph
(1)(A) for the pre-funding balance and the funding standard
carryover balance) of the plan for each preceding plan year
after 2006 was not less than the applicable percentage with
respect to such preceding plan year determined under
subparagraph (B).
``(h) Deemed Reduction of Funding Balances.--In the case of
a plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers--
``(1) In general.--In any case in which a benefit
limitation under subsection (a), (b), or (c) would (but for
this subsection and determined without regard to subsection
(a)(2)) apply to such plan for the plan year, the plan
sponsor of such plan shall be treated for purposes of this
title as having made an election under section 430(f)(5) to
reduce the balance of the pre-funding balance and the funding
standard carryover balance for the plan year (in a manner
consistent with the requirements of section 430(f)(5)(B)) by
such amount as is necessary for such benefit limitation to
not apply to the plan for such plan year.
``(2) Exception for insufficient funding balances.--
Paragraph (1) shall not apply with respect to a benefit
limitation for any plan year if the application of paragraph
(1)
[[Page H11725]]
would not result in the benefit limitation not applying for
such plan year.''.
(2) Clerical amendment.--The table of sections for such
subpart is amended by adding at the end the following new
item:
``Sec. 437. Funding-based limits on benefits and benefit accruals under
single-employer plans.''.
(c) Effective Date.--
(1) Shutdown benefits.--Except as provided in paragraph
(3), the amendments made by subsection (a) shall apply with
respect to plant shutdowns, or other unpredictable contingent
events, occurring after December 31, 2006.
(2) Other benefits.--Except as provided in paragraph (3),
the amendments made by subsection (b) shall apply with
respect to plan years beginning after December 31, 2006.
(3) Collective bargaining exception.--In the case of a plan
maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified before the date of the enactment of this
Act, the amendments made by this subsection shall not apply
to plan years beginning before the earlier of--
(A) the later of--
(i) the date on which the last collective bargaining
agreement relating to the plan terminates (determined without
regard to any extension thereof agreed to after the date of
the enactment of this Act), or
(ii) the first day of the first plan year to which the
amendments made by this subsection would (but for this
subparagraph) apply, or
(B) January 1, 2009.
For purposes of clause (i), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan
which amends the plan solely to conform to any requirement
added by this subsection shall not be treated as a
termination of such collective bargaining agreement.
(d) Special Rule for 2007.--For purposes of applying
subsection (e) of section 437 of such Code (as added by this
section) to current plan years (within the meaning of such
subsection) beginning in 2007, the modified funded current
liability percentage of the plan for the preceding year shall
be substituted for the funding target attainment percentage
of the plan for the preceding year. For purposes of the
preceding sentence, the term ``modified funded current
liability percentage'' means the funded current liability
percentage (as defined in section 412(l)(8) of such Code),
reduced as described in subparagraph (E) thereof in the case
of a plan with a funded current liability percentage (as so
defined and before such reduction) which is less than 100
percent.
SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Amendments Related to Qualification Requirements.--
(1) Section 401(a)(29) of the Internal Revenue Code of 1986
is amended to read as follows:
``(29) Benefit limitations on plans in at-risk status.--In
the case of a defined benefit plan (other than a
multiemployer plan) to which the requirements of section 412
apply, the trust of which the plan is a part shall not
constitute a qualified trust under this subsection unless the
plan meets the requirements of sections 436 and 437.''.
(2) Section 401(a)(32) of such Code is amended--
(A) in subparagraph (A), by striking ``412(m)(5)'' each
place it appears and inserting ``430(j)(4)'', and
(B) in subparagraph (C), by striking ``section 412(m) by
reason of paragraph (5)(A) thereof'' and inserting ``section
430(j)(3) by reason of section 430(j)(4)(A)''.
(3) Section 401(a)(33) of such Code is amended--
(A) in subparagraph (B)(i), by striking ``funded current
liability percentage (as defined in section 412(l)(8))'' and
inserting ``funding target attainment percentage (as defined
in section 430(d)(2))'',
(B) in subparagraph (B)(iii), by striking ``subsection
412(c)(8)'' and inserting ``section 412(d)(2)'', and
(C) in subparagraph (D), by striking ``section 412(c)(11)
(without regard to subparagraph (B) thereof)'' and inserting
``section 412(b) (without regard to paragraph (2) thereof)''.
(b) Vesting Rules.--Section 411 of such Code is amended--
(1) by striking ``section 412(c)(8)'' in subsection
(a)(3)(C) and inserting ``section 412(d)(2)'',
(2) in subsection (b)(1)(F)--
(A) by striking ``paragraphs (2) and (3) of section
412(i)'' in clause (ii) and inserting ``subparagraphs (B) and
(C) of section 412(e)(3)'', and
(B) by striking ``paragraphs (4), (5), and (6) of section
412(i)'' and inserting ``subparagraphs (D), (E), and (F) of
section 412(e)(3)'', and
(3) by striking ``section 412(c)(8)'' in subsection
(d)(6)(A) and inserting ``section 412(d)(2)''.
(c) Mergers and Consolidations of Plans.--Subclause (I) of
section 414(l)(2)(B)(i) of such Code is amended to read as
follows:
``(I) the amount determined under section 431(c)(6)(A)(i)
in the case of a multiemployer plan (and the sum of the
target liability amount and target normal cost determined
under section 430 in the case of any other plan), over''.
(d) Transfer of Excess Pension Assets to Retiree Health
Accounts.--
(1) Section 420(e)(2) of such Code is amended to read as
follows:
``(2) Excess pension assets.--The term `excess pension
assets' means the excess (if any) of--
``(A) the lesser of--
``(i) the fair market value of the plan's assets (reduced
by the pre-funding balance and the funding standard carryover
balance, as determined under section 430(f)), or
``(ii) the value of plan assets as determined under section
430(g)(3) (reduced by the pre-funding balance and the funding
standard carryover balance, as determined under section
430(f)), over
``(B) 125 percent of the sum of the target liability amount
and the target normal cost determined under section 430 for
such plan year.''.
(2) Section 420(e)(4) of such Code is amended to read as
follows:
``(4) Coordination with section 430.--In the case of a
qualified transfer, any assets so transferred shall not, for
purposes of this section, be treated as assets in the
plan.''.
(e) Excise Taxes.--
(1) In general.--Subsections (a) and (b) of section 4971 of
such Code are amended to read as follows:
``(a) Initial Tax.--If at any time during any taxable year
an employer maintains a plan to which section 412 applies,
there is hereby imposed for the taxable year a tax equal to--
``(1) in the case of a defined benefit plan which is not a
multiemployer plan, 10 percent of the aggregate unpaid
minimum required contributions for all plan years remaining
unpaid as of the end of any plan year ending with or within
the taxable year, and
``(2) in the case of a multiemployer plan, 5 percent of the
accumulated funding deficiency determined under section 431
as of the end of any plan year ending with or within the
taxable year.
``(b) Additional Tax.--If--
``(1) a tax is imposed under subsection (a)(1) on any
unpaid required minimum contribution and such amount remains
unpaid as of the close of the taxable period, or
``(2) a tax is imposed under subsection (a)(2) on any
accumulated funding deficiency and the accumulated funding
deficiency is not corrected within the taxable period,
there is hereby imposed a tax equal to 100 percent of the
unpaid minimum required contribution or accumulated funding
deficiency, whichever is applicable, to the extent not so
paid or corrected.''.
(2) Section 4971(c) of such Code is amended--
(A) by striking ``the last two sentences of section
412(a)'' in paragraph (1) and inserting ``section 431'', and
(B) by adding at the end the following new paragraph:
``(4) Unpaid minimum required contribution.--
``(A) In general.--The term `unpaid minimum required
contribution' means, with respect to any plan year, any
minimum required contribution under section 430 for the plan
year which is not paid on or before the due date (as
determined under section 430(j)(1)) for the plan year.
``(B) Ordering rule.--Any payment to or under a plan for
any plan year shall be allocated first to unpaid minimum
required contributions for all preceding plan years in the
order in which such contributions became due and then to the
minimum required contribution under section 430 for the plan
year.''.
(3) Section 4971(e)(1) of such Code is amended by striking
``section 412(b)(3)(A)'' and inserting ``section 412(a)(2)''.
(4) Section 4971(f)(1) of such Code is amended--
(A) by striking ``section 412(m)(5)'' and inserting
``section 430(j)(4)'', and
(B) by striking ``section 412(m)'' and inserting ``section
430(j)(3)''.
(5) Section 4972(c)(7) of such Code is amended by striking
``except to the extent that such contributions exceed the
full-funding limitation (as defined in section 412(c)(7),
determined without regard to subparagraph (A)(i)(I)
thereof)'' and inserting ``except, in the case of a
multiemployer plan, to the extent that such contributions
exceed the full-funding limitation (as defined in section
431(c)(6))''.
(f) Reporting Requirements.--Section 6059(b) of such Code
is amended--
(1) by striking ``the accumulated funding deficiency (as
defined in section 412(a))'' in paragraph (2) and inserting
``the minimum required contribution determined under section
430, or the accumulated funding deficiency determined under
section 431,'', and
(2) by striking paragraph (3)(B) and inserting:
``(B) the requirements for reasonable actuarial assumptions
under section 430(h)(1) or 431(c)(3), whichever are
applicable, have been complied with,''.
(g) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2006.
Subtitle C--Other Provisions
SEC. 121. MODIFICATION OF TRANSITION RULE TO PENSION FUNDING
REQUIREMENTS.
(a) In General.--In the case of a plan that--
(1) was not required to pay a variable rate premium for the
plan year beginning in 1996,
(2) has not, in any plan year beginning after 1995, merged
with another plan (other than a plan sponsored by an employer
that
[[Page H11726]]
was in 1996 within the controlled group of the plan sponsor);
and
(3) is sponsored by a company that is engaged primarily in
the interurban or interstate passenger bus service,
the rules described in subsection (b) shall apply for any
plan year beginning after December 31, 2006.
(b) Modified Rules.--The rules described in this subsection
are as follows:
(1) For purposes of section 430(j)(3) of the Internal
Revenue Code of 1986 and section 303(j)(3) of the Employee
Retirement Income Security Act of 1974, the plan shall be
treated as not having a funding shortfall for any plan year.
(2) For purposes of--
(A) determining unfunded vested benefits under section
4006(a)(3)(E)(iii) of such Act, and
(B) determining any present value or making any computation
under section 412 of such Code or section 302 of such Act,
the mortality table shall be the mortality table used by the
plan.
(3) Section 430(c)(5)(B) of such Code and section
303(c)(5)(B) of such Act (relating to phase-in of funding
target for exemption from new shortfall amortization base)
shall each be applied by substituting ``2012'' for ``2011''
therein and by substituting for the table therein the
following:
------------------------------------------------------------------------
In the case of a plan year beginning in The applicable
calendar year: percentage is:
------------------------------------------------------------------------
2007........................................... 90 percent
2008........................................... 92 percent
2009........................................... 94 percent
2010........................................... 96 percent
2011........................................... 98 percent.
------------------------------------------------------------------------
(c) Definitions.--Any term used in this section which is
also used in section 430 of such Code or section 303 of such
Act shall have the meaning provided such term in such
section. If the same term has a different meaning in such
Code and such Act, such term shall, for purposes of this
section, have the meaning provided by such Code when applied
with respect to such Code and the meaning provided by such
Act when applied with respect to such Act.
(d) Special Rule for 2006.--
(1) in general.--Section 769(c)(3) of the Retirement
Protection Act of 1994, as added by section 201 of the
Pension Funding Equity Act of 2004, is amended by striking
``and 2005'' and inserting ``, 2005, and 2006''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to plan years beginning after December 31, 2005.
(e) Conforming Amendment.--
(1) Section 769 of the Retirement Protection Act of 1994 is
amended by striking subsection (c).
(2) The amendment made by paragraph (1) shall take effect
on December 31, 2006, and shall apply to plan years beginning
after such date.
SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION
PLANS WHEN EMPLOYER DEFINED BENEFIT PLAN IN AT-
RISK STATUS.
(a) In General.--Subsection (b) of section 409A of the
Internal Revenue Code of 1986 (providing rules relating to
funding) is amended by redesignating paragraphs (3) and (4)
as paragraphs (4) and (5), respectively, and by inserting
after paragraph (2) the following new paragraph:
``(3) Employer's defined benefit plan in at-risk status.--
If--
``(A) during any period in which a defined benefit plan to
which section 412 applies is in an at-risk status (as defined
in section 430(i)(3)), assets are set aside (directly or
indirectly) in a trust (or other arrangement determined by
the Secretary), or transferred to such a trust or other
arrangement, for purposes of paying deferred compensation
under a nonqualified deferred compensation plan of the
employer maintaining the defined benefit plan, or
``(B) a nonqualified deferred compensation plan of the
employer provides that assets will become restricted to the
provision of benefits under the plan in connection with such
at-risk status (or other similar financial measure determined
by the Secretary) of the defined benefit plan, or assets are
so restricted,
such assets shall for purposes of section 83 be treated as
property transferred in connection with the performance of
services whether or not such assets are available to satisfy
claims of general creditors. Subparagraph (A) shall not apply
with respect to any assets which are so set aside before the
defined benefit plan is in at-risk status.''.
(b) Conforming Amendments.--Paragraphs (4) and (5) of
section 409A(b) of such Code, as redesignated by subsection
(a) of this subsection, are each amended by striking
``paragraph (1) or (2)'' each place it appears and inserting
``paragraph (1), (2), or (3)''.
(c) Effective Date.--The amendments made by this section
shall apply to transfers or reservations of assets after
December 31, 2005.
(d) Special Rule for 2006.--For purposes of determining if
a plan is in at-risk status (within the meaning of section
409A of such Code, as added by this section) for any plan
year beginning in 2006, such section shall be applied by
substituting the plan's modified funded current liability
percentage for the plan's funding target attainment
percentage. For purposes of the preceding sentence, the term
``modified funded current liability percentage'' means the
funded current liability percentage (as defined in section
412(l)(8) of such Code), reduced as described in subparagraph
(E) thereof.
TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS.
(a) In General.--Part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (as amended
by section 102) is amended further by inserting after section
303 the following new section:
``Minimum funding standards for multiemployer plans
``Sec. 304. (a) In General.--For purposes of section 302,
the accumulated funding deficiency of a multiemployer plan
for any plan year is--
``(1) except as provided in paragraph (2), the amount,
determined as of the end of the plan year, equal to the
excess (if any) of the total charges to the funding standard
account of the plan for all plan years (beginning with the
first plan year for which this part applies to the plan) over
the total credits to such account for such years, and
``(2) if the multiemployer plan is in reorganization for
any plan year, the accumulated funding deficiency of the plan
determined under section 4243.
``(b) Funding Standard Account.--
``(1) Account required.--Each multiemployer plan to which
this part applies shall establish and maintain a funding
standard account. Such account shall be credited and charged
solely as provided in this section.
``(2) Charges to account.--For a plan year, the funding
standard account shall be charged with the sum of--
``(A) the normal cost of the plan for the plan year,
``(B) the amounts necessary to amortize in equal annual
installments (until fully amortized)--
``(i) in the case of a plan in existence on January 1,
1974, the unfunded past service liability under the plan on
the first day of the first plan year to which this part
applies, over a period of 40 plan years,
``(ii) in the case of a plan which comes into existence
after January 1, 1974, the unfunded past service liability
under the plan on the first day of the first plan year to
which this part applies, over a period of 15 plan years,
``(iii) separately, with respect to each plan year, the net
increase (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(iv) separately, with respect to each plan year, the net
experience loss (if any) under the plan, over a period of 15
plan years, and
``(v) separately, with respect to each plan year, the net
loss (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount necessary to amortize each waived funding
deficiency (within the meaning of section 302(c)(3)) for each
prior plan year in equal annual installments (until fully
amortized) over a period of 15 plan years,
``(D) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 5 plan
years any amount credited to the funding standard account
under section 302(b)(3)(D) (as in effect on the day before
the date of the enactment of the Pension Protection Act of
2005), and
``(E) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 20
years the contributions which would be required to be made
under the plan but for the provisions of section
302(c)(7)(A)(i)(I) (as in effect on the day before the date
of the enactment of the Pension Protection Act of 2005).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the employer to
or under the plan for the plan year,
``(B) the amount necessary to amortize in equal annual
installments (until fully amortized)--
``(i) separately, with respect to each plan year, the net
decrease (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(ii) separately, with respect to each plan year, the net
experience gain (if any) under the plan, over a period of 15
plan years, and
``(iii) separately, with respect to each plan year, the net
gain (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount of the waived funding deficiency (within
the meaning of section 302(c)(3)) for the plan year, and
``(D) in the case of a plan year for which the accumulated
funding deficiency is determined under the funding standard
account if such plan year follows a plan year for which such
deficiency was determined under the alternative minimum
funding standard under section 305 (as in effect on the day
before the date of the enactment of the Pension Protection
Act of 2005), the excess (if any) of any debit balance in the
funding standard account (determined without regard to this
subparagraph) over any debit balance in the alternative
minimum funding standard account.
``(4) Special rules for certain pre-2007 amortizations.--
``(A) In general.--In the case of any amount amortized
under section 302(b) (as in
[[Page H11727]]
effect on the day before the date of the enactment of the
Pension Protection Act of 2005) over any period beginning
with a plan year beginning before 2007, in lieu of the
amortization described in paragraphs (2)(B) and (3)(B), such
amount shall continue to be amortized under such section as
so in effect.
``(B) Interest rate.--For purposes of amortizations under
section 302(b) (as in effect on the day before the date of
the enactment of the Pension Protection Act of 2005), in the
case of any waiver under section 303 (as so in effect) or
extension under section 304 (as so in effect) with respect to
which application has been made before June 30, 2005, the
interest rate under section 303(a)(2) (as so in effect) or
section 304(a) (as so in effect), as the case may be, shall
apply.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations prescribed by the Secretary of the
Treasury, amounts required to be amortized under paragraph
(2) or paragraph (3), as the case may be--
``(A) may be combined into one amount under such paragraph
to be amortized over a period determined on the basis of the
remaining amortization period for all items entering into
such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the resulting
amount to be amortized over a period determined on the basis
of the remaining amortization periods for all items entering
into whichever of the two amounts being offset is the
greater.
``(6) Interest.--Except as provided in subsection (c)(9),
the funding standard account (and items therein) shall be
charged or credited (as determined under regulations
prescribed by the Secretary of the Treasury) with interest at
the appropriate rate consistent with the rate or rates of
interest used under the plan to determine costs.
``(7) Certain amortization charges and credits.--In the
case of a plan which, immediately before the date of the
enactment of the Multiemployer Pension Plan Amendments Act of
1980, was a multiemployer plan (within the meaning of section
3(37) as in effect immediately before such date)--
``(A) any amount described in paragraph (2)(B)(ii),
(2)(B)(iii), or (3)(B)(i) of this subsection which arose in a
plan year beginning before such date shall be amortized in
equal annual installments (until fully amortized) over 40
plan years, beginning with the plan year in which the amount
arose,
``(B) any amount described in paragraph (2)(B)(iv) or
(3)(B)(ii) of this subsection which arose in a plan year
beginning before such date shall be amortized in equal annual
installments (until fully amortized) over 20 plan years,
beginning with the plan year in which the amount arose,
``(C) any change in past service liability which arises
during the period of 3 plan years beginning on or after such
date, and results from a plan amendment adopted before such
date, shall be amortized in equal annual installments (until
fully amortized) over 40 plan years, beginning with the plan
year in which the change arises, and
``(D) any change in past service liability which arises
during the period of 2 plan years beginning on or after such
date, and results from the changing of a group of
participants from one benefit level to another benefit level
under a schedule of plan benefits which--
``(i) was adopted before such date, and
``(ii) was effective for any plan participant before the
beginning of the first plan year beginning on or after such
date,
shall be amortized in equal annual installments (until fully
amortized) over 40 plan years, beginning with the plan year
in which the change arises.
``(8) Special rules relating to charges and credits to
funding standard account.--For purposes of this section--
``(A) Withdrawal liability.--Any amount received by a
multiemployer plan in payment of all or part of an employer's
withdrawal liability under part 1 of subtitle E of title IV
shall be considered an amount contributed by the employer to
or under the plan. The Secretary of the Treasury may
prescribe by regulation additional charges and credits to a
multiemployer plan's funding standard account to the extent
necessary to prevent withdrawal liability payments from being
unduly reflected as advance funding for plan liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in reorganization in
the immediately preceding plan year, any balance in the
funding standard account at the close of such immediately
preceding plan year--
``(i) shall be eliminated by an offsetting credit or charge
(as the case may be), but
``(ii) shall be taken into account in subsequent plan years
by being amortized in equal annual installments (until fully
amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any
accumulated funding deficiency under section 4243(a) as of
the end of the last plan year that the plan was in
reorganization.
``(C) Plan payments to supplemental program or withdrawal
liability payment fund.--Any amount paid by a plan during a
plan year to the Pension Benefit Guaranty Corporation
pursuant to section 4222 of this Act or to a fund exempt
under section 501(c)(22) of the Internal Revenue Code of 1986
pursuant to section 4223 of this Act shall reduce the amount
of contributions considered received by the plan for the plan
year.
``(D) Interim withdrawal liability payments.--Any amount
paid by an employer pending a final determination of the
employer's withdrawal liability under part 1 of subtitle E of
title IV and subsequently refunded to the employer by the
plan shall be charged to the funding standard account in
accordance with regulations prescribed by the Secretary of
the Treasury.
``(E) Election for deferral of charge for portion of net
experience loss.--If an election is in effect under section
302(b)(7)(F) (as in effect on the day before the date of the
enactment of the Pension Protection Act of 2005) for any plan
year, the funding standard account shall be charged in the
plan year to which the portion of the net experience loss
deferred by such election was deferred with the amount so
deferred (and paragraph (2)(B)(iv) shall not apply to the
amount so charged).
``(F) Financial assistance.--Any amount of any financial
assistance from the Pension Benefit Guaranty Corporation to
any plan, and any repayment of such amount, shall be taken
into account under this section and section 302 in such
manner as is determined by the Secretary of the Treasury.
``(G) Short-term benefits.--To the extent that any plan
amendment increases the unfunded past service liability under
the plan by reason of an increase in benefits which are
payable under the plan during a period that does not exceed
14 years, paragraph (2)(B)(iii) shall be applied separately
with respect to such increase in unfunded past service
liability by substituting the number of years of the period
during which such benefits are payable for `15'.
``(c) Additional Rules.--
``(1) Determinations to be made under funding method.--For
purposes of this section, normal costs, accrued liability,
past service liabilities, and experience gains and losses
shall be determined under the funding method used to
determine costs under the plan.
``(2) Valuation of assets.--
``(A) In general.--For purposes of this section, the value
of the plan's assets shall be determined on the basis of any
reasonable actuarial method of valuation which takes into
account fair market value and which is permitted under
regulations prescribed by the Secretary of the Treasury.
``(B) Election with respect to bonds.--The value of a bond
or other evidence of indebtedness which is not in default as
to principal or interest may, at the election of the plan
administrator, be determined on an amortized basis running
from initial cost at purchase to par value at maturity or
earliest call date. Any election under this subparagraph
shall be made at such time and in such manner as the
Secretary of the Treasury shall by regulations provide, shall
apply to all such evidences of indebtedness, and may be
revoked only with the consent of such Secretary.
``(3) Actuarial assumptions must be reasonable.--For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be
determined on the basis of actuarial assumptions and
methods--
``(A) each of which is reasonable (taking into account the
experience of the plan and reasonable expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(4) Treatment of certain changes as experience gain or
loss.--For purposes of this section, if--
``(A) a change in benefits under the Social Security Act or
in other retirement benefits created under Federal or State
law, or
``(B) a change in the definition of the term `wages' under
section 3121 of the Internal Revenue Code of 1986, or a
change in the amount of such wages taken into account under
regulations prescribed for purposes of section 401(a)(5) of
such Code,
results in an increase or decrease in accrued liability under
a plan, such increase or decrease shall be treated as an
experience loss or gain.
``(5) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency in excess of the full funding
limitation--
``(A) the funding standard account shall be credited with
the amount of such excess, and
``(B) all amounts described in subparagraphs (B), (C), and
(D) of subsection (b)(2) and subparagraph (B) of subsection
(b)(3) which are required to be amortized shall be considered
fully amortized for purposes of such subparagraphs.
``(6) Full-funding limitation.--
``(A) In general.--For purposes of paragraph (5), the term
`full-funding limitation' means the excess (if any) of--
``(i) the accrued liability (including normal cost) under
the plan (determined under the entry age normal funding
method if such accrued liability cannot be directly
calculated under the funding method used for the plan), over
``(ii) the lesser of--
``(I) the fair market value of the plan's assets, or
``(II) the value of such assets determined under paragraph
(2).
``(B) Minimum amount.--
``(i) In general.--In no event shall the full-funding
limitation determined under subparagraph (A) be less than the
excess (if any) of--
[[Page H11728]]
``(I) 90 percent of the current liability of the plan
(including the expected increase in current liability due to
benefits accruing during the plan year), over
``(II) the value of the plan's assets determined under
paragraph (2).
``(ii) Assets.--For purposes of clause (i), assets shall
not be reduced by any credit balance in the funding standard
account.
``(C) Full funding limitation.--For purposes of this
paragraph, unless otherwise provided by the plan, the accrued
liability under a multiemployer plan shall not include
benefits which are not nonforfeitable under the plan after
the termination of the plan (taking into consideration
section 411(d)(3) of the Internal Revenue Code of 1986).
``(D) Current liability.--For purposes of this paragraph--
``(i) In general.--The term `current liability' means all
liabilities to employees and their beneficiaries under the
plan.
``(ii) Treatment of unpredictable contingent event
benefits.--For purposes of clause (i), any benefit contingent
on an event other than--
``(I) age, service, compensation, death, or disability, or
``(II) an event which is reasonably and reliably
predictable (as determined by the Secretary of the Treasury),
shall not be taken into account until the event on which the
benefit is contingent occurs.
``(iii) Interest rate used.--The rate of interest used to
determine current liability under this paragraph shall be the
rate of interest determined under subparagraph (E).
``(iv) Mortality tables.--
``(I) Commissioners' standard table.--In the case of plan
years beginning before the first plan year to which the first
tables prescribed under subclause (II) apply, the mortality
table used in determining current liability under this
paragraph shall be the table prescribed by the Secretary of
the Treasury which is based on the prevailing commissioners'
standard table (described in section 807(d)(5)(A) of the
Internal Revenue Code of 1986) used to determine reserves for
group annuity contracts issued on January 1, 1993.
``(II) Secretarial authority.--The Secretary of the
Treasury may by regulation prescribe for plan years beginning
after December 31, 1999, mortality tables to be used in
determining current liability under this subsection. Such
tables shall be based upon the actual experience of pension
plans and projected trends in such experience. In prescribing
such tables, such Secretary shall take into account results
of available independent studies of mortality of individuals
covered by pension plans.
``(v) Separate mortality tables for the disabled.--
Notwithstanding clause (iv)--
``(I) In general.--In the case of plan years beginning
after December 31, 1995, the Secretary of the Treasury shall
establish mortality tables which may be used (in lieu of the
tables under clause (iv)) to determine current liability
under this subsection for individuals who are entitled to
benefits under the plan on account of disability. Such
Secretary shall establish separate tables for individuals
whose disabilities occur in plan years beginning before
January 1, 1995, and for individuals whose disabilities occur
in plan years beginning on or after such date.
``(II) Special rule for disabilities occurring after
1994.--In the case of disabilities occurring in plan years
beginning after December 31, 1994, the tables under subclause
(I) shall apply only with respect to individuals described in
such subclause who are disabled within the meaning of title
II of the Social Security Act and the regulations thereunder.
``(vi) Periodic review.--The Secretary of the Treasury
shall periodically (at least every 5 years) review any tables
in effect under this subparagraph and shall, to the extent
such Secretary determines necessary, by regulation update the
tables to reflect the actual experience of pension plans and
projected trends in such experience.
``(E) Required change of interest rate.--For purposes of
determining a plan's current liability for purposes of this
paragraph--
``(i) In general.--If any rate of interest used under the
plan under subsection (b)(6) to determine cost is not within
the permissible range, the plan shall establish a new rate of
interest within the permissible range.
``(ii) Permissible range.--For purposes of this
subparagraph--
``(I) In general.--Except as provided in subclause (II),
the term `permissible range' means a rate of interest which
is not more than 5 percent above, and not more than 10
percent below, the weighted average of the rates of interest
on 30-year Treasury securities during the 4-year period
ending on the last day before the beginning of the plan year.
``(II) Secretarial authority.--If the Secretary of the
Treasury finds that the lowest rate of interest permissible
under subclause (I) is unreasonably high, such Secretary may
prescribe a lower rate of interest, except that such rate may
not be less than 80 percent of the average rate determined
under such subclause.
``(iii) Assumptions.--Notwithstanding paragraph (3)(A), the
interest rate used under the plan shall be--
``(I) determined without taking into account the experience
of the plan and reasonable expectations, but
``(II) consistent with the assumptions which reflect the
purchase rates which would be used by insurance companies to
satisfy the liabilities under the plan.
``(7) Annual valuation.--
``(A) In general.--For purposes of this section, a
determination of experience gains and losses and a valuation
of the plan's liability shall be made not less frequently
than once every year, except that such determination shall be
made more frequently to the extent required in particular
cases under regulations prescribed by the Secretary of the
Treasury.
``(B) Valuation date.--
``(i) Current year.--Except as provided in clause (ii), the
valuation referred to in subparagraph (A) shall be made as of
a date within the plan year to which the valuation refers or
within one month prior to the beginning of such year.
``(ii) Use of prior year valuation.--The valuation referred
to in subparagraph (A) may be made as of a date within the
plan year prior to the year to which the valuation refers if,
as of such date, the value of the assets of the plan are not
less than 100 percent of the plan's current liability (as
defined in paragraph (6)(D) without regard to clause (iv)
thereof).
``(iii) Adjustments.--Information under clause (ii) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
``(iv) Limitation.--A change in funding method to use a
prior year valuation, as provided in clause (ii), may not be
made unless as of the valuation date within the prior plan
year, the value of the assets of the plan are not less than
125 percent of the plan's current liability (as defined in
paragraph (6)(D) without regard to clause (iv) thereof).
``(8) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer after the last day of such plan year, but
not later than two and one-half months after such day, shall
be deemed to have been made on such last day. For purposes of
this subparagraph, such two and one-half month period may be
extended for not more than six months under regulations
prescribed by the Secretary of the Treasury.
``(9) Interest rule for waivers and extensions.--The
interest rate applicable for any plan year for purposes of
computing the amortization charge described in subsection
(b)(2)(C) and in connection with an extension granted under
subsection (d) shall be the greater of--
``(A) 150 percent of the Federal mid-term rate (as in
effect under section 1274 of the Internal Revenue Code of
1986 for the 1st month of such plan year), or
``(B) the rate of interest used under the plan for
determining costs.
``(d) Extension of Amortization Periods for Multiemployer
Plans.--In the case of a multiemployer plan--
``(1) Extension.--The period of years required to amortize
any unfunded liability (described in any clause of subsection
(b)(2)(B)) of any multiemployer plan shall be extended by the
Secretary of the Treasury for a period of time (not in excess
of 5 years) if it is demonstrated to such Secretary that--
``(A) absent the extension, the plan would have an
accumulated funding deficiency in any of the next 10 plan
years,
``(B) the plan sponsor has adopted a plan to improve the
plan's funding status, and
``(C) taking into account the extension, the plan is
projected to have sufficient assets to timely pay its
expected benefit liabilities and other anticipated
expenditures.
``(2) Additional extension.--The period of years required
to amortize any unfunded liability (described in any clause
of subsection (b)(2)(B)) of any multiemployer plan may be
extended (in addition to any extension under paragraph (1))
by the Secretary of the Treasury for a period of time (not in
excess of 5 years) if such Secretary determines that such
extension would carry out the purposes of this Act and would
provide adequate protection for participants under the plan
and their beneficiaries and if such Secretary determines that
the failure to permit such extension would--
``(A) result in--
``(i) a substantial risk to the voluntary continuation of
the plan, or
``(ii) a substantial curtailment of pension benefit levels
or employee compensation, and
``(B) be adverse to the interests of plan participants in
the aggregate.
``(3) Advance notice.--
``(A) In general.--The Secretary of the Treasury shall,
before granting an extension under this section, require each
applicant to provide evidence satisfactory to such Secretary
that the applicant has provided notice of the filing of the
application for such extension to each affected party (as
defined in section 4001(a)(21)) with respect to the affected
plan. Such notice shall include a description of the extent
to which the plan is funded for benefits which are guaranteed
under title IV and for benefit liabilities.
``(B) Consideration of relevant information.--The Secretary
of the Treasury shall consider any relevant information
provided by a person to whom notice was given under paragraph
(1).''.
(b) Conforming Amendments.--
(1) Section 301 of such Act (29 U.S.C. 1081) is amended by
striking subsection (d).
(2) The table of contents in section 1 of such Act (as
amended by section 102 of this Act) is amended further by
inserting after
[[Page H11729]]
the item relating to section 303 the following new item:
``Sec. 304. Minimum funding standards for multiemployer plans.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2006.
SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN
ENDANGERED OR CRITICAL STATUS.
(a) In General.--Part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (as amended
by the preceding provisions of this Act) is amended further
by inserting after section 304 the following new section:
``Additional funding rules for multiemployer plans in endangered status
or critical status
``Sec. 305. (a) Annual Certification by Plan Actuary.--
``(1) In general.--During the 90-day period beginning on
first day of each plan year of a multiemployer plan, the plan
actuary shall certify to the Secretary of the Treasury
whether or not the plan is in endangered status for such plan
year and whether or not the plan is in critical status for
such plan year.
``(2) Actuarial projections of assets and liabilities.--
``(A) In general.--In making the determinations under
paragraph (1), the plan actuary shall make projections under
subsections (b)(2) and (c)(2) for the current and succeeding
plan years, using reasonable actuarial assumptions and
methods, of the current value of the assets of the plan and
the present value of all liabilities to participants and
beneficiaries under the plan for the current plan year as of
the beginning of such year, as based on the actuarial
statement prepared for the preceding plan year under section
103(d).
``(B) Determinations of future contributions.--Any such
actuarial projection of plan assets shall assume--
``(i) reasonably anticipated employer and employee
contributions for the current and succeeding plan years,
assuming that the terms of the one or more collective
bargaining agreements pursuant to which the plan is
maintained for the current plan year continue in effect for
succeeding plan years, or
``(ii) that employer and employee contributions for the
most recent plan year will continue indefinitely, but only if
the plan actuary determines there have been no significant
demographic changes that would make continued application of
such terms unreasonable.
``(3) Presumed status in absence of timely actuarial
certification.--If certification under this subsection is not
made before the end of the 90-day period specified in
paragraph (1), the plan shall be presumed to be in critical
status for such plan year until such time as the plan actuary
makes a contrary certification.
``(4) Notice.--In any case in which a multiemployer plan is
certified to be in endangered status under paragraph (1) or
enters into critical status, the plan sponsor shall, not
later than 30 days after the date of the certification or
entry, provide notification of the endangered or critical
status to the participants and beneficiaries, the bargaining
parties, the Pension Benefit Guaranty Corporation, the
Secretary of the Treasury, and the Secretary of Labor.
``(b) Funding Rules for Multiemployer Plans in Endangered
Status.--
``(1) In general.--In any case in which a multiemployer
plan is in endangered status for a plan year and no funding
improvement plan under this subsection with respect to such
multiemployer plan is in effect for the plan year, the plan
sponsor shall, in accordance with this subsection, amend the
multiemployer plan to include a funding improvement plan upon
approval thereof by the bargaining parties under this
subsection. The amendment shall be adopted not later than 240
days after the date on which the plan is certified to be in
endangered status under subsection (a)(1).
``(2) Endangered status.--A multiemployer plan is in
endangered status for a plan year if, as determined by the
plan actuary under subsection (a)--
``(A) the plan's funded percentage for such plan year is
less than 80 percent, or
``(B) the plan has an accumulated funding deficiency for
such plan year under section 304 or is projected to have such
an accumulated funding deficiency for any of the 6 succeeding
plan years, taking into account any extension of amortization
periods under section 304(d).
``(3) Funding improvement plan.--
``(A) Benchmarks.--A funding improvement plan shall consist
of amendments to the plan formulated to provide, under
reasonable actuarial assumptions, for the attainment, during
the funding improvement period under the funding improvement
plan, of the following benchmarks:
``(i) Increase in funded percentage.--An increase in the
plan's funded percentage such that--
``(I) the difference between 100 percent and the plan's
funded percentage for the last year of the funding
improvement period, is not more than
``(II) \2/3\ of the difference between 100 percent and the
plan's funded percentage for the first year of the funding
improvement period.
``(ii) Avoidance of accumulated funding deficiencies.--No
accumulated funding deficiency for any plan year during the
funding improvement period (taking into account any extension
of amortization periods under section 304(d)).
``(B) Funding improvement period.--The funding improvement
period for any funding improvement plan adopted pursuant to
this subsection is the 10-year period beginning on the
earlier of--
``(i) the second anniversary of the date of the adoption of
the funding improvement plan, or
``(ii) the first day of the first plan year of the
multiemployer plan following the plan year in which occurs
the first date after the day of the certification as of which
collective bargaining agreements covering on the day of such
certification at least 75 percent of active participants in
such multiemployer plan have expired.
``(C) Special rules for certain seriously underfunded
plans.--
``(i) In the case of a plan in which the funded percentage
of a plan for the plan year is 70 percent or less,
subparagraph (A)(i)(II) shall be applied by substituting `\4/
5\' for `\2/3\' and subparagraph (B) shall be applied by
substituting `the 15-year period' for `the 10-year period'.
``(ii) In the case of a plan in which the funded percentage
of a plan for the plan year is more than 70 percent but less
than 80 percent, and--
``(I) the plan actuary certifies within 30 days after
certification under subsection (a)(1) that the plan is not
able to attain the increase described in subparagraph (A)(i)
over the period described in subparagraph (B), and
``(II) the plan year is prior to the day described in
subparagraph (B)(ii),
subparagraph (A)(i)(II) shall be applied by substituting `\4/
5\' for `\2/3\' and subparagraph (B) shall be applied by
substituting `the 15-year period' for `the 10-year period'.
``(iii) For any plan year following the year described in
clause (ii)(II), subparagraph (A)(i)(II) and subparagraph (B)
shall apply, except that for each plan year ending after such
date for which the plan actuary certifies (at the time of the
annual certification under subsection (a)(1) for such plan
year) that the plan is not able to attain the increase
described in subparagraph (A)(i) over the period described in
subparagraph (B), subparagraph (B) shall be applied by
substituting `the 15-year period' for `the 10-year period'.
``(D) Reporting.--A summary of any funding improvement plan
or modification thereto adopted during any plan year,
together with annual updates regarding the funding ratio of
the plan, shall be included in the annual report for such
plan year under section 104(a) and in the summary annual
report described in section 104(b)(3).
``(4) Development of funding improvement plan.--
``(A) Actions by plan sponsor pending approval.--Pending
the approval of a funding improvement plan under this
paragraph, the plan sponsor shall take all reasonable
actions, consistent with the terms of the plan and applicable
law, necessary to ensure--
``(i) an increase in the plan's funded percentage, and
``(ii) postponement of an accumulated funding deficiency
for at least 1 additional plan year.
Such actions include applications for extensions of
amortization periods under section 304(d), use of the
shortfall funding method in making funding standard account
computations, amendments to the plan's benefit structure,
reductions in future benefit accruals, and other reasonable
actions consistent with the terms of the plan and applicable
law.
``(B) Recommendations by plan sponsor.--
``(i) In general.--During the period of 90 days following
the date on which a multiemployer plan is certified to be in
endangered status, the plan sponsor shall develop and provide
to the bargaining parties alternative proposals for revised
benefit structures, contribution structures, or both, which,
if adopted as amendments to the plan, may be reasonably
expected to meet the benchmarks described in paragraph
(3)(A). Such proposals shall include--
``(I) at least one proposal for reductions in the amount of
future benefit accruals necessary to achieve the benchmarks,
assuming no amendments increasing contributions under the
plan (other than amendments increasing contributions
necessary to achieve the benchmarks after amendments have
reduced future benefit accruals to the maximum extent
permitted by law), and
``(II) at least one proposal for increases in contributions
under the plan necessary to achieve the benchmarks, assuming
no amendments reducing future benefit accruals under the
plan.
``(ii) Requests by bargaining parties.--Upon the request of
any bargaining party who--
``(I) employs at least 5 percent of the active
participants, or
``(II) represents as an employee organization, for purposes
of collective bargaining, at least 5 percent of the active
participants,
the plan sponsor shall provide all such parties information
as to other combinations of increases in contributions and
reductions in future benefit accruals which would result in
achieving the benchmarks.
``(iii) Other information.--The plan sponsor may, as it
deems appropriate, prepare and provide the bargaining parties
with additional information relating to contribution
[[Page H11730]]
structures or benefit structures or other information
relevant to the funding improvement plan.
``(5) Maintenance of contributions pending approval of
funding improvement plan.--Pending approval of a funding
improvement plan by the bargaining parties with respect to a
multiemployer plan, the multiemployer plan may not be amended
so as to provide--
``(A) a reduction in the level of contributions for
participants who are not in pay status,
``(B) a suspension of contributions with respect to any
period of service, or
``(C) any new direct or indirect exclusion of younger or
newly hired employees from plan participation.
``(6) Benefit restrictions pending approval of funding
improvement plan.--Pending approval of a funding improvement
plan by the bargaining parties with respect to a
multiemployer plan--
``(A) Restrictions on lump sum and similar distributions.--
In any case in which the present value of a participant's
accrued benefit under the plan exceeds $5,000, such benefit
may not be distributed as an immediate distribution or in any
other accelerated form.
``(B) Prohibition on benefit increases.--
``(i) In general.--No amendment of the plan 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 may be adopted.
``(ii) Exception.--Clause (i) shall not apply to any plan
amendment which is required as a condition of qualification
under part I of subchapter D of chapter 1 of subtitle A of
the Internal Revenue Code of 1986.
``(7) Default critical status if no funding improvement
plan adopted.--If no plan amendment adopting a funding
improvement plan has been adopted by the end of the 240-day
period referred to in subsection (b)(1), the plan enters into
critical status as of the first day of the succeeding plan
year.
``(8) Restrictions upon approval of funding improvement
plan.--Upon adoption of a funding improvement plan with
respect to a multiemployer plan, the plan may not be
amended--
``(A) so as to be inconsistent with the funding improvement
plan, or
``(B) so as to increase future benefit accruals, unless the
plan actuary certifies in advance that, after taking into
account the proposed increase, the plan is reasonably
expected to meet the the benchmarks described in paragraph
(3)(A).
``(c) Funding Rules for Multiemployer Plans in Critical
Status.--
``(1) In general.--In any case in which a multiemployer
plan is in critical status for a plan year as described in
paragraph (2) (or otherwise enters into critical status under
this section) and no rehabilitation plan under this
subsection with respect to such multiemployer plan is in
effect for the plan year, the plan sponsor shall, in
accordance with this subsection, amend the multiemployer plan
to include a rehabilitation plan under this subsection. The
amendment shall be adopted not later than 240 days after the
date on which the plan enters into critical status.
``(2) Critical status.--A multiemployer plan is in critical
status for a plan year if--
``(A) the plan is in endangered status for the preceding
plan year and the requirements of subsection (b)(1) were not
met with respect to the plan for such preceding plan year, or
``(B) as determined by the plan actuary under subsection
(a), the plan is described in paragraph (3).
``(3) Criticality description.--For purposes of paragraph
(2)(B), a plan is described in this paragraph if the plan is
described in at least one of the following subparagraphs:
``(A) A plan is described in this subparagraph if, as of
the beginning of the current plan year--
``(i) the funded percentage of the plan is less than 65
percent, and
``(ii) the sum of--
``(I) the market value of plan assets, plus
``(II) the present value of the reasonably anticipated
employer and employee contributions for the current plan year
and each of the 6 succeeding plan years, assuming that the
terms of the one or more collective bargaining agreements
pursuant to which the plan is maintained for the current plan
year continue in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits
for all participants and beneficiaries projected to be
payable under the plan during the current plan year and each
of the 6 succeeding plan years (plus administrative expenses
for such plan years).
``(B) A plan is described in this subparagraph if, as of
the beginning of the current plan year, the sum of--
``(i) the market value of plan assets, plus
``(ii) the present value of the reasonably anticipated
employer and employee contributions for the current plan year
and each of the 4 succeeding plan years, assuming that the
terms of the one or more collective bargaining agreements
pursuant to which the plan is maintained for the current plan
year remain in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits
for all participants and beneficiaries projected to be
payable under the plan during the current plan year and each
of the 4 succeeding plan years (plus administrative expenses
for such plan years).
``(C) A plan is described in this subparagraph if--
``(i) as of the beginning of the current plan year, the
funded percentage of the plan is less than 65 percent, and
``(ii) the plan has an accumulated funding deficiency for
the current plan year or is projected to have an accumulated
funding deficiency for any of the 4 succeeding plan years,
not taking into account any extension of amortization periods
under section 304(d).
``(D) A plan is described in this subparagraph if--
``(i)(I) the plan's normal cost for the current plan year,
plus interest (determined at the rate used for determining
cost under the plan) for the current plan year on the amount
of unfunded benefit liabilities under the plan as of the last
date of the preceding plan year, exceeds
``(II) the present value, as of the beginning of the
current plan year, of the reasonably anticipated employer and
employee contributions for the current plan year,
``(ii) the present value, as of the beginning of the
current plan year, of nonforfeitable benefits of inactive
participants is greater than the present value, as of the
beginning of the current plan year, of nonforfeitable
benefits of active participants, and
``(iii) the plan is projected to have an accumulated
funding deficiency for the current plan year or any of the 4
succeeding plan years, not taking into account any extension
of amortization periods under section 304(d).
``(E) A plan is described in this subparagraph if--
``(i) the funded percentage of the plan is greater than 65
percent for the current plan year, and
``(ii) the plan is projected to have an accumulated funding
deficiency during any of the succeeding 3 plan years, not
taking into account any extension of amortization periods
under section 304(d).
``(4) Rehabilitation plan.--
``(A) In general.--A rehabilitation plan shall consist of--
``(i) amendments to the plan providing (under reasonable
actuarial assumptions) for measures, agreed to by the
bargaining parties, to increase contributions, reduce plan
expenditures (including plan mergers and consolidations), or
reduce future benefit accruals, or to take any combination of
such actions, determined necessary to cause the plan to
cease, during the rehabilitation period, to be in critical
status, or
``(ii) reasonable measures to forestall possible insolvency
(within the meaning of section 4245) if the plan sponsor
determines that, upon exhaustion of all reasonable measures,
the plan would not cease during the rehabilitation period to
be in critical status.
A rehabilitation must provide annual standards for meeting
the requirements of such rehabilitation plan.
``(B) Rehabilitation period.--The rehabilitation period for
any rehabilitation plan adopted pursuant to this subsection
is the 10-year period beginning on the earlier of--
``(i) the second anniversary of the date of the adoption of
the rehabilitation plan, or
``(ii) the first day of the first plan year of the
multiemployer plan following the plan year in which occurs
the first date, after the date of the plan's entry into
critical status, as of which collective bargaining agreements
covering at least 75 percent of active participants in such
multiemployer plan (determined as of such date of entry) have
expired.
``(C) Reporting.--A summary of any rehabilitation plan or
modification thereto adopted during any plan year, together
with annual updates regarding the funding ratio of the plan,
shall be included in the annual report for such plan year
under section 104(a) and in the summary annual report
described in section 104(b)(3).
``(5) Development of rehabilitation plan.--
``(A) Proposals by plan sponsor.--
``(i) In general.--Within 90 days after the date of entry
into critical status (or the date as of which the
requirements of subsection (b)(1) are not met with respect to
the plan), the plan sponsor shall propose to all bargaining
parties a range of alternative schedules of increases in
contributions and reductions in future benefit accruals that
would serve to carry out a rehabilitation plan under this
subsection.
``(ii) Proposal assuming no contribution increases.--Such
proposals shall include, as one of the proposed schedules, a
schedule of those reductions in future benefit accruals that
would be necessary to cause the plan to cease to be in
critical status if there were no further increases in rates
of contribution to the plan.
``(iii) Proposal where contributions are necessary.--If the
plan sponsor determines that the plan will not cease to be in
critical status during the rehabilitation period unless the
plan is amended to provide for an increase in contributions,
the plan sponsor's proposals shall include a schedule of
those increases in contribution rates that would be necessary
to cause the plan to cease to be in critical status if future
benefit accruals were reduced to the maximum extent permitted
by law.
``(B) Requests for additional schedules.--Upon the request
of any bargaining party who--
``(i) employs at least 5 percent of the active
participants, or
[[Page H11731]]
``(ii) represents as an employee organization, for purposes
of collective bargaining, at least 5 percent of active
participants,
the plan sponsor shall include among the proposed schedules
such schedules of increases in contributions and reductions
in future benefit accruals as may be specified by the
bargaining parties.
``(C) Subsequent amendments.--Upon the adoption of a
schedule of increases in contributions or reductions in
future benefit accruals as part of the rehabilitation plan,
the plan sponsor may amend the plan thereafter to update the
schedule to adjust for any experience of the plan contrary to
past actuarial assumptions, except that such an amendment may
be made not more than once in any 3-year period.
``(D) Allocation of reductions in future benefit
accruals.--Any schedule containing reductions in future
benefit accruals forming a part of a rehabilitation plan
shall be applicable with respect to any group of active
participants who are employed by any bargaining party (as an
employer obligated to contribute under the plan) in
proportion to the extent to which increases in contributions
under such schedule apply to such bargaining party.
``(E) Limitation on reduction in rates of future
accruals.--Any schedule proposed under this paragraph shall
not reduce the rate of future accruals below the lower of--
``(i) a monthly benefit equal to 1 percent of the
contributions required to be made with respect to a
participant or the equivalent standard accrual rate for a
participant or group of participants under the collective
bargaining agreements in effect as of the first day of the
plan year in which the plan enters critical status, or
``(ii) if lower, the accrual rate under the plan on such
date.
The equivalent standard accrual rate shall be determined by
the trustees based on the standard or average contribution
base units that they determine to be representative for
active participants and such other factors as they determine
to be relevant.
``(F) Protection of restored rates of accrual.--
``(i) In general.--Any schedule proposed under this
paragraph shall not reduce the rate of future accruals below
any restored accrual rate.
``(ii) Restored accrual rate.--For purposes of clause (i),
the term `restored accrual rate' means a rate of benefit
accruals which was reduced and subsequently restored before
entry of the plan into critical status.
``(6) Maintenance of contributions and restrictions on
benefits pending adoption of rehabilitation plan.--The rules
of paragraphs (5) and (6) of subsection (b) shall apply for
purposes of this subsection by substituting the term
`rehabilitation plan' for `funding improvement plan'.
``(7) Special rules.--
``(A) Automatic employer surcharge.--
``(i) 5 percent and 10 percent surcharge.--For the first
plan year in which the plan is in critical status, each
employer otherwise obligated to make a contribution for that
plan year shall be obligated to pay to the plan a surcharge
equal to 5 percent of the contribution otherwise required
under the respective collective bargaining agreement (or
other agreement pursuant to which the employer contributes).
For each consecutive plan year thereafter in which the plan
is in critical status, the surcharge shall be 10 percent of
the contribution otherwise required under the respective
collective bargaining agreement (or other agreement pursuant
to which the employer contributes).
``(ii) Enforcement of surcharge.--The surcharges under
clause (i) shall be due and payable on the same schedule as
the contributions on which they are based. Any failure to
make a surcharge payment shall be treated as a delinquent
contribution under section 515 and shall be enforceable as
such.
``(iii) Surcharge to terminate upon cba renegotiation.--The
surcharge under this paragraph shall cease to be effective
with respect to employees covered by a collective bargaining
agreement, beginning on the date on which that agreement is
renegotiated to include--
``(I) a schedule of benefits and contributions published by
the trustees pursuant to the plan's rehabilitation plan, or
``(II) otherwise collectively bargained benefit changes.
``(iv) Surcharge not to apply until employer receives 30-
day notice.--The surcharge under this subparagraph shall not
apply to an employer until 30 days after the employer has
been notified by the trustees that the plan is in critical
status and that the surcharge is in effect.
``(v) Surcharge not to generate increased benefit
accruals.--Notwithstanding any provision of a plan to the
contrary, the amount of any surcharge shall not be the basis
for any benefit accruals under the plan.
``(B) Benefit adjustments.--
``(i) In general.--The trustees shall make appropriate
reductions, if any, to adjustable benefits based upon the
outcome of collective bargaining over the schedules provided
under paragraph (5).
``(ii) Retiree protection.--Except as provided in
subparagraph (C), the trustees of a plan in critical status
may not reduce adjustable benefits of any participant or
beneficiary who was in pay status at least one year before
the first day of the first plan year in which the plan enters
into critical status.
``(iii) Trustee flexibility.--The trustees shall include in
the schedules provided to the bargaining parties an allowance
for funding the benefits of participants with respect to whom
contributions are not currently required to be made, and
shall reduce their benefits to the extent permitted under
this title and considered appropriate based on the plan's
then current overall funding status and its future prospects
in light of the results of the parties' negotiations.
``(C) Adjustable benefit defined.--For purposes of this
paragraph, the term `adjustable benefit' means--
``(i) benefits, rights, and features, such as post-
retirement death benefits, 60-month guarantees, disability
benefits not yet in pay status, and similar benefits,
``(ii) retirement-type subsidies, early retirement
benefits, and benefit payment options (other than the 50
percent qualified joint-and-survivor benefit and single life
annuity), and
``(iii) benefit increases that would not be eligible for a
guarantee under section 4022A on the first day of the plan
year in which the plan enters into critical status because
they were adopted, or if later, took effect less than 60
months before reorganization.
``(D) Normal retirement benefits protected.--Nothing in
this paragraph shall be construed to permit a plan to reduce
the level of a participant's accrued benefit payable at
normal retirement age which is not an adjustable benefit.
``(E) Adjustments disregarded in withdrawal liability
determination.--
``(i) Benefit reductions.--Any benefit reductions under
this paragraph shall be disregarded in determining a plan's
unfunded vested benefits for purposes of determining an
employer's withdrawal liability under section 4201.
``(ii) Surcharges.--Any surcharges under this paragraph
shall be disregarded in determining an employer's withdrawal
liability under section 4211, except for purposes of
determining the unfunded vested benefits attributable to an
employer or under a modified attributable method adopted with
the approval of the Pension Benefit Guaranty Corporation
under subsection (c)(5) of that section.
``(8) Restrictions upon approval of rehabilitation plan.--
Upon adoption of a rehabilitation plan with respect to a
multiemployer plan, the plan may not be amended--
``(A) so as to be inconsistent with the rehabilitation
plan, or
``(B) so as to increase future benefit accruals, unless the
plan actuary certifies in advance that, after taking into
account the proposed increase, the plan is reasonably
expected to cease to be in critical status.
``(9) Implementation of default schedule upon failure to
adopt rehabilitation plan.--If the plan is not amended by the
end of the 240-day period after entry into critical status to
include a rehabilitation plan, the plan sponsor shall amend
the plan to implement the schedule required by paragraph
(5)(A)(ii).
``(10) Deemed withdrawal.--Upon the failure of any employer
who has an obligation to contribute under the plan to make
contributions in compliance with the schedule adopted under
paragraph (4) as part of the rehabilitation plan, the failure
of the employer may, at the discretion of the plan sponsor,
be treated as a withdrawal by the employer from the plan
under section 4203 or a partial withdrawal by the employer
under section 4205.
``(11) Special rule for plan amendments.--A multiemployer
plan in critical status shall not fail to meet the
requirements of section 204(g) or section 411(d)(6) of the
Internal Revenue Code of 1986 solely by reason of the
adoption by the plan of an amendment necessary to meet the
requirements of this subsection.
``(d) Definitions.--For purposes of this section--
``(1) Bargaining party.--The term `bargaining party' means,
in connection with a multiemployer plan--
``(A) an employer who has an obligation to contribute under
the plan, and
``(B) an employee organization which, for purposes of
collective bargaining, represents plan participants employed
by such an employer.
``(2) Funded percentage.--The term `funded percentage'
means the percentage expressed as a ratio of which--
``(A) the numerator of which is the value of the plan's
assets, as determined under section 304(c)(2), and
``(B) the denominator of which is the accrued liability of
the plan.
``(3) Accumulated funding deficiency.--The term
`accumulated funding deficiency' has the meaning provided
such term in section 304(a).
``(4) Active participant.--The term `active participant'
means, in connection with a multiemployer plan, a participant
who is in covered service under the plan.
``(5) Inactive participant.--The term `inactive
participant' means, in connection with a multiemployer plan,
a participant who--
``(A) is not in covered service under the plan, and
``(B) is in pay status under the plan or has a
nonforfeitable right to benefits under the plan.
``(6) Pay status.--A person is in `pay status' under a
multiemployer plan if--
``(A) at any time during the current plan year, such person
is a participant or beneficiary under the plan and is paid an
early, late, normal, or disability retirement benefit
[[Page H11732]]
under the plan (or a death benefit under the plan related to
a retirement benefit), or
``(B) to the extent provided in regulations of the
Secretary of the Treasury, such person is entitled to such a
benefit under the plan.
``(7) Obligation to contribute.--The term `obligation to
contribute' has the meaning provided such term under section
4212(a).
``(8) Entry into critical status.--A plan shall be treated
as entering into critical status as of the date that such
plan is certified to be in critical status under subsection
(a)(1), is presumed to be in critical status under subsection
(a)(3), or enters into critical status under subsection
(b)(7).''.
(b) Enforcement.--Section 502 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1132) is amended--
(1) in subsection (a)(6) by striking ``(6), or (7)'' and
inserting ``(6), (7), or (8)'';
(2) by redesignating subsection (c)(8) as subsection
(c)(9); and
(3) by inserting after subsection (c)(7) the following new
paragraph:
``(8) The Secretary may assess a civil penalty against--
``(A) any person of not more than $1,100 per day for each
violation by such person of subsection (a)(1), (b)(1), or
(c)(1) of section 305, or
``(B) any plan sponsor for failure by the plan sponsor to
implement the terms of any funding improvement plan or
rehabilitation plan adopted under section 305.''.
(c) Conforming Amendment.--The table of contents in section
1 of such Act (as amended by the preceding provisions of this
Act) is amended further by inserting after the item relating
to section 304 the following new item:
``Sec. 305. Additional funding rules for multiemployer plans in
endangered status or critical status.''.
(d) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning after 2005.
(e) Special Rule for 2006.--In the case of any plan year
beginning in 2006, any reference in section 305 of the
Employee Retirement Income Security Act of 1974 (as added by
this section) to section 304 of such Act (as added by this
Act) shall be treated as a reference to the corresponding
provision of the Employee Retirement Income Security Act of
1974 as in effect for plan years beginning in such year.
SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER
PLANS.
(a) Advance Determination of Impending Insolvency Over 5
Years.--Section 4245(d)(1) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1426(d)(1)) is amended--
(1) by striking ``3 plan years'' the second place it
appears and inserting ``5 plan years''; and
(2) by adding at the end the following new sentence: ``If
the plan sponsor makes such a determination that the plan
will be insolvent in any of the next 5 plan years, the plan
sponsor shall make the comparison under this paragraph at
least annually until the plan sponsor makes a determination
that the plan will not be insolvent in any of the next 5 plan
years.''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to determinations made in plan years
beginning after December 31, 2005.
SEC. 204. WITHDRAWAL LIABILITY REFORMS.
(a) Repeal of Limitation on Withdrawal Liability in the
Event of Certain Sales of Employer Assets to Unrelated
Parties.--
(1) In general.--Section 4225 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1405) is repealed.
(2) Conforming amendment.--The table of contents in section
1 of such Act is amended by striking the item relating to
section 4225.
(3) Effective date.--The amendments made by this section
shall apply with respect to sales occurring on or after
January 1, 2006.
(b) Repeal of Limitation to 20 Annual Payments.--
(1) In general.--Section 4219(c)(1) of such Act (29 U.S.C.
1399(c)(1)) is amended by striking subparagraph (B).
(2) Effective date.--The amendment made by this section
shall apply with respect to withdrawals occurring on or after
January 1, 2006.
(c) Withdrawal Liability Continues If Work Contracted
Out.--
(1) In general.--Clause (i) of section 4205(b)(2)(A) of
such Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting
``or to another party or parties'' after ``to another
location''.
(2) Effective date.--The amendment made by this subsection
shall apply with respect to work transferred on or after the
date of the enactment of this Act.
(d) Repeal of Special Rule for Long and Short Haul Trucking
Industry.--
(1) In general.--Subsection (d) of section 4203 of such Act
(29 U.S.C. 1383(d)) is repealed.
(2) Effective date.--The repeal under this subsection shall
apply with respect to cessations to have obligations to
contribute to multiemployer plans and cessations of covered
operations under such plans occurring on or after January 1,
2006.
(e) Application of Forgiveness Rule to Plans Primarily
Covering Employees in the Building and Construction.--
(1) In general.--Section 4210(b) of such Act (29 U.S.C.
1390(b)) is amended--
(A) by striking paragraph (1); and
(B) by redesignating paragraphs (2) through (4) as
paragraphs (1) through (3), respectively.
(2) Effective date.--The amendments made by this subsection
shall apply with respect to plan withdrawals occurring on or
after January 1, 2006.
SEC. 205. REMOVAL OF RESTRICTIONS WITH RESPECT TO PROCEDURES
APPLICABLE TO DISPUTES INVOLVING WITHDRAWAL
LIABILITY.
(a) In General.--Section 4221(f)(1) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1401(f)(1))
is amended--
(1) in subparagraph (A) by inserting ``and'' after
``plan,'', and
(2) by striking subparagraphs (B) and (C) and inserting the
following new subparagraph:
``(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 any transaction which occurred at least
5 years (2 years in the case of a small employer) before the
date of the complete or partial withdrawal was to evade or
avoid withdrawal liability under this subtitle,''.
(b) Small Employer.--Paragraph (2) of section 4221(f) of
such Act is amended by adding at the end the following new
subparagraph:
``(C) Small employer.--For purposes of paragraph (1)(B)--
``(i) In general.--The term `small employer' means any
employer who (as of immediately before the transaction
referred to in paragraph (1)(B))--
``(I) employs not more than 500 employees, and
``(II) is required to make contributions to the plan for
not more than 250 employees.
``(ii) Controlled group.--Any group treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 of the Internal Revenue Code of 1986 shall be treated as
a single employer for purposes of this subparagraph.''.
(c) Additional Amendments.--
(1) Subparagraph (A) of section 4221(f)(2) of such Act (29
U.S.C. 1401(f)(2)) is amended by striking ``Notwithstanding''
and inserting ``In the case of a transaction occurring before
January 1, 1999, and at least 5 years before the date of the
complete or partial withdrawal, notwithstanding''.
(2) Section 4221(f)(2)(B) of such Act (29 U.S.C.
1401(f)(2)(B)) is amended--
(A) by inserting ``with respect to withdrawal liability
payments'' after ``determination'' the first place it
appears, and
(B) by striking ``any'' and inserting ``the''.
(d) 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 on or after the date of the enactment of
this Act.
Subtitle B--Amendments to Internal Revenue Code of 1986
SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS.
(a) In General.--Subpart A of part III of subchapter D of
chapter 1 of the Internal Revenue Code of 1986 (added by
section 112 of this Act) is amended by adding at the end the
following new section:
``SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER
PLANS.
``(a) In General.--For purposes of section 412, the
accumulated funding deficiency of a multiemployer plan for
any plan year is--
``(1) except as provided in paragraph (2), the amount,
determined as of the end of the plan year, equal to the
excess (if any) of the total charges to the funding standard
account of the plan for all plan years (beginning with the
first plan year for which section 412 applies to the plan)
over the total credits to such account for such years, and
``(2) if the multiemployer plan is in reorganization for
any plan year, the accumulated funding deficiency of the plan
determined under section 418B.
``(b) Funding Standard Account.--
``(1) Account required.--Each multiemployer plan to which
section 412 applies shall establish and maintain a funding
standard account. Such account shall be credited and charged
solely as provided in this section.
``(2) Charges to account.--For a plan year, the funding
standard account shall be charged with the sum of--
``(A) the normal cost of the plan for the plan year,
``(B) the amounts necessary to amortize in equal annual
installments (until fully amortized)--
``(i) in the case of a plan in existence on January 1,
1974, the unfunded past service liability under the plan on
the first day of the first plan year to which section 412
applies, over a period of 40 plan years,
``(ii) in the case of a plan which comes into existence
after January 1, 1974, the unfunded past service liability
under the plan on the first day of the first plan year to
which section 412 applies, over a period of 15 plan years,
``(iii) separately, with respect to each plan year, the net
increase (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(iv) separately, with respect to each plan year, the net
experience loss (if any) under the plan, over a period of 15
plan years, and
``(v) separately, with respect to each plan year, the net
loss (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount necessary to amortize each waived funding
deficiency (within the
[[Page H11733]]
meaning of section 412(c)(3)) for each prior plan year in
equal annual installments (until fully amortized) over a
period of 15 plan years,
``(D) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 5 plan
years any amount credited to the funding standard account
under section 412(b)(3)(D) (as in effect on the day before
the date of the enactment of the Pension Protection Act of
2005), and
``(E) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 20
years the contributions which would be required to be made
under the plan but for the provisions of section
412(c)(7)(A)(i)(I) (as in effect on the day before the date
of the enactment of the Pension Protection Act of 2005).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the employer to
or under the plan for the plan year,
``(B) the amount necessary to amortize in equal annual
installments (until fully amortized)--
``(i) separately, with respect to each plan year, the net
decrease (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(ii) separately, with respect to each plan year, the net
experience gain (if any) under the plan, over a period of 15
plan years, and
``(iii) separately, with respect to each plan year, the net
gain (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount of the waived funding deficiency (within
the meaning of section 412(c)(3)) for the plan year, and
``(D) in the case of a plan year for which the accumulated
funding deficiency is determined under the funding standard
account if such plan year follows a plan year for which such
deficiency was determined under the alternative minimum
funding standard under section 412(g) (as in effect on the
day before the date of the enactment of the Pension
Protection Act of 2005), the excess (if any) of any debit
balance in the funding standard account (determined without
regard to this subparagraph) over any debit balance in the
alternative minimum funding standard account.
``(4) Special rules for pre-2007 amortizations.--
``(A) In general.--In the case of any amount amortized
under section 412(b) (as in effect on the day before the date
of the enactment of the Pension Protection Act of 2005) over
any period beginning with a plan year beginning before 2007,
in lieu of the amortization described in paragraphs (2)(B)
and (3)(B), such amount shall continue to be amortized under
such section as so in effect.
``(B) Interest rate.--For purposes of amortizations under
section 412(b) (as in effect on the day before the date of
the enactment of the Pension Protection Act of 2005), in the
case of any waiver under section 412(d) (as so in effect) or
extension under section 412(e) (as so in effect) with respect
to which application has been made before June 30, 2005, the
interest rate under section 412(d)(1)(A) (as so in effect) or
section 412(e) (as so in effect), as the case may be, shall
apply.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations prescribed by the Secretary, amounts
required to be amortized under paragraph (2) or paragraph
(3), as the case may be--
``(A) may be combined into one amount under such paragraph
to be amortized over a period determined on the basis of the
remaining amortization period for all items entering into
such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the resulting
amount to be amortized over a period determined on the basis
of the remaining amortization periods for all items entering
into whichever of the two amounts being offset is the
greater.
``(6) Interest.--Except as provided in subsection (c)(9),
the funding standard account (and items therein) shall be
charged or credited (as determined under regulations
prescribed by the Secretary) with interest at the appropriate
rate consistent with the rate or rates of interest used under
the plan to determine costs.
``(7) Certain amortization charges and credits.--In the
case of a plan which, immediately before the date of the
enactment of the Multiemployer Pension Plan Amendments Act of
1980, was a multiemployer plan (within the meaning of section
414(f) as in effect immediately before such date)--
``(A) any amount described in paragraph (2)(B)(ii),
(2)(B)(iii), or (3)(B)(i) of this subsection which arose in a
plan year beginning before such date shall be amortized in
equal annual installments (until fully amortized) over 40
plan years, beginning with the plan year in which the amount
arose,
``(B) any amount described in paragraph (2)(B)(iv) or
(3)(B)(ii) of this subsection which arose in a plan year
beginning before such date shall be amortized in equal annual
installments (until fully amortized) over 20 plan years,
beginning with the plan year in which the amount arose,
``(C) any change in past service liability which arises
during the period of 3 plan years beginning on or after such
date, and results from a plan amendment adopted before such
date, shall be amortized in equal annual installments (until
fully amortized) over 40 plan years, beginning with the plan
year in which the change arises, and
``(D) any change in past service liability which arises
during the period of 2 plan years beginning on or after such
date, and results from the changing of a group of
participants from one benefit level to another benefit level
under a schedule of plan benefits which--
``(i) was adopted before such date, and
``(ii) was effective for any plan participant before the
beginning of the first plan year beginning on or after such
date,
shall be amortized in equal annual installments (until fully
amortized) over 40 plan years, beginning with the plan year
in which the change arises.
``(8) Special rules relating to charges and credits to
funding standard account.--For purposes of this section--
``(A) Withdrawal liability.--Any amount received by a
multiemployer plan in payment of all or part of an employer's
withdrawal liability under part 1 of subtitle E of title IV
of the Employee Retirement Income Security Act of 1974 shall
be considered an amount contributed by the employer to or
under the plan. The Secretary may prescribe by regulation
additional charges and credits to a multiemployer plan's
funding standard account to the extent necessary to prevent
withdrawal liability payments from being unduly reflected as
advance funding for plan liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in reorganization in
the immediately preceding plan year, any balance in the
funding standard account at the close of such immediately
preceding plan year--
``(i) shall be eliminated by an offsetting credit or charge
(as the case may be), but
``(ii) shall be taken into account in subsequent plan years
by being amortized in equal annual installments (until fully
amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any
accumulated funding deficiency under section 418B(a) as of
the end of the last plan year that the plan was in
reorganization.
``(C) Plan payments to supplemental program or withdrawal
liability payment fund.--Any amount paid by a plan during a
plan year to the Pension Benefit Guaranty Corporation
pursuant to section 4222 of the Employee Retirement Income
Security Act of 1974 or to a fund exempt under section
501(c)(22) pursuant to section 4223 of such Act shall reduce
the amount of contributions considered received by the plan
for the plan year.
``(D) Interim withdrawal liability payments.--Any amount
paid by an employer pending a final determination of the
employer's withdrawal liability under part 1 of subtitle E of
title IV of such Act and subsequently refunded to the
employer by the plan shall be charged to the funding standard
account in accordance with regulations prescribed by the
Secretary.
``(E) Election for deferral of charge for portion of net
experience loss.--If an election is in effect under section
412(b)(7)(F) (as in effect on the day before the date of the
enactment of the Pension Protection Act of 2005) for any plan
year, the funding standard account shall be charged in the
plan year to which the portion of the net experience loss
deferred by such election was deferred with the amount so
deferred (and paragraph (2)(B)(iv) shall not apply to the
amount so charged).
``(F) Financial assistance.--Any amount of any financial
assistance from the Pension Benefit Guaranty Corporation to
any plan, and any repayment of such amount, shall be taken
into account under this section and section 412 in such
manner as is determined by the Secretary.
``(G) Short-term benefits.--To the extent that any plan
amendment increases the unfunded past service liability under
the plan by reason of an increase in benefits which are
payable under the plan during a period that does not exceed
14 years, paragraph (2)(B)(iii) shall be applied separately
with respect to such increase in unfunded past service
liability by substituting the number of years of the period
during which such benefits are payable for `15'.
``(c) Additional Rules.--
``(1) Determinations to be made under funding method.--For
purposes of this section, normal costs, accrued liability,
past service liabilities, and experience gains and losses
shall be determined under the funding method used to
determine costs under the plan.
``(2) Valuation of assets.--
``(A) In general.--For purposes of this section, the value
of the plan's assets shall be determined on the basis of any
reasonable actuarial method of valuation which takes into
account fair market value and which is permitted under
regulations prescribed by the Secretary.
``(B) Election with respect to bonds.--The value of a bond
or other evidence of indebtedness which is not in default as
to principal or interest may, at the election of the plan
administrator, be determined on an amortized basis running
from initial cost at purchase to par value at maturity or
earliest call date. Any election under this subparagraph
shall be made at such time and in such manner as the
Secretary shall by regulations provide, shall apply to all
such evidences of indebtedness, and may be revoked only with
the consent of the Secretary.
[[Page H11734]]
``(3) Actuarial assumptions must be reasonable.--For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be
determined on the basis of actuarial assumptions and
methods--
``(A) each of which is reasonable (taking into account the
experience of the plan and reasonable expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(4) Treatment of certain changes as experience gain or
loss.--For purposes of this section, if--
``(A) a change in benefits under the Social Security Act or
in other retirement benefits created under Federal or State
law, or
``(B) a change in the definition of the term `wages' under
section 3121, or a change in the amount of such wages taken
into account under regulations prescribed for purposes of
section 401(a)(5),
results in an increase or decrease in accrued liability under
a plan, such increase or decrease shall be treated as an
experience loss or gain.
``(5) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency in excess of the full funding
limitation--
``(A) the funding standard account shall be credited with
the amount of such excess, and
``(B) all amounts described in subparagraphs (B), (C), and
(D) of subsection (b)(2) and subparagraph (B) of subsection
(b)(3) which are required to be amortized shall be considered
fully amortized for purposes of such subparagraphs.
``(6) Full-funding limitation.--
``(A) In general.--For purposes of paragraph (5), the term
`full-funding limitation' means the excess (if any) of--
``(i) the accrued liability (including normal cost) under
the plan (determined under the entry age normal funding
method if such accrued liability cannot be directly
calculated under the funding method used for the plan), over
``(ii) the lesser of--
``(I) the fair market value of the plan's assets, or
``(II) the value of such assets determined under paragraph
(2).
``(B) Minimum amount.--
``(i) In general.--In no event shall the full-funding
limitation determined under subparagraph (A) be less than the
excess (if any) of--
``(I) 90 percent of the current liability of the plan
(including the expected increase in current liability due to
benefits accruing during the plan year), over
``(II) the value of the plan's assets determined under
paragraph (2).
``(ii) Assets.--For purposes of clause (i), assets shall
not be reduced by any credit balance in the funding standard
account.
``(C) Full funding limitation.--For purposes of this
paragraph, unless otherwise provided by the plan, the accrued
liability under a multiemployer plan shall not include
benefits which are not nonforfeitable under the plan after
the termination of the plan (taking into consideration
section 411(d)(3)).
``(D) Current liability.--For purposes of this paragraph--
``(i) In general.--The term `current liability' means all
liabilities to employees and their beneficiaries under the
plan.
``(ii) Treatment of unpredictable contingent event
benefits.--For purposes of clause (i), any benefit contingent
on an event other than--
``(I) age, service, compensation, death, or disability, or
``(II) an event which is reasonably and reliably
predictable (as determined by the Secretary),
shall not be taken into account until the event on which the
benefit is contingent occurs.
``(iii) Interest rate used.--The rate of interest used to
determine current liability under this paragraph shall be the
rate of interest determined under subparagraph (E).
``(iv) Mortality tables.--
``(I) Commissioners' standard table.--In the case of plan
years beginning before the first plan year to which the first
tables prescribed under subclause (II) apply, the mortality
table used in determining current liability under this
paragraph shall be the table prescribed by the Secretary
which is based on the prevailing commissioners' standard
table (described in section 807(d)(5)(A)) used to determine
reserves for group annuity contracts issued on January 1,
1993.
``(II) Secretarial authority.--The Secretary may by
regulation prescribe for plan years beginning after December
31, 1999, mortality tables to be used in determining current
liability under this subsection. Such tables shall be based
upon the actual experience of pension plans and projected
trends in such experience. In prescribing such tables, the
Secretary shall take into account results of available
independent studies of mortality of individuals covered by
pension plans.
``(v) Separate mortality tables for the disabled.--
Notwithstanding clause (iv)--
``(I) In general.--In the case of plan years beginning
after December 31, 1995, the Secretary shall establish
mortality tables which may be used (in lieu of the tables
under clause (iv)) to determine current liability under this
subsection for individuals who are entitled to benefits under
the plan on account of disability. The Secretary shall
establish separate tables for individuals whose disabilities
occur in plan years beginning before January 1, 1995, and for
individuals whose disabilities occur in plan years beginning
on or after such date.
``(II) Special rule for disabilities occurring after
1994.--In the case of disabilities occurring in plan years
beginning after December 31, 1994, the tables under subclause
(I) shall apply only with respect to individuals described in
such subclause who are disabled within the meaning of title
II of the Social Security Act and the regulations thereunder.
``(vi) Periodic review.--The Secretary shall periodically
(at least every 5 years) review any tables in effect under
this subparagraph and shall, to the extent the Secretary
determines necessary, by regulation update the tables to
reflect the actual experience of pension plans and projected
trends in such experience.
``(E) Required change of interest rate.--For purposes of
determining a plan's current liability for purposes of this
paragraph--
``(i) In general.--If any rate of interest used under the
plan under subsection (b)(6) to determine cost is not within
the permissible range, the plan shall establish a new rate of
interest within the permissible range.
``(ii) Permissible range.--For purposes of this
subparagraph--
``(I) In general.--Except as provided in subclause (II),
the term `permissible range' means a rate of interest which
is not more than 5 percent above, and not more than 10
percent below, the weighted average of the rates of interest
on 30-year Treasury securities during the 4-year period
ending on the last day before the beginning of the plan year.
``(II) Secretarial authority.--If the Secretary finds that
the lowest rate of interest permissible under subclause (I)
is unreasonably high, the Secretary may prescribe a lower
rate of interest, except that such rate may not be less than
80 percent of the average rate determined under such
subclause.
``(iii) Assumptions.--Notwithstanding paragraph (3)(A), the
interest rate used under the plan shall be--
``(I) determined without taking into account the experience
of the plan and reasonable expectations, but
``(II) consistent with the assumptions which reflect the
purchase rates which would be used by insurance companies to
satisfy the liabilities under the plan.
``(7) Annual valuation.--
``(A) In general.--For purposes of this section, a
determination of experience gains and losses and a valuation
of the plan's liability shall be made not less frequently
than once every year, except that such determination shall be
made more frequently to the extent required in particular
cases under regulations prescribed by the Secretary.
``(B) Valuation date.--
``(i) Current year.--Except as provided in clause (ii), the
valuation referred to in subparagraph (A) shall be made as of
a date within the plan year to which the valuation refers or
within one month prior to the beginning of such year.
``(ii) Use of prior year valuation.--The valuation referred
to in subparagraph (A) may be made as of a date within the
plan year prior to the year to which the valuation refers if,
as of such date, the value of the assets of the plan are not
less than 100 percent of the plan's current liability (as
defined in paragraph (6)(D) without regard to clause (iv)
thereof).
``(iii) Adjustments.--Information under clause (ii) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
``(iv) Limitation.--A change in funding method to use a
prior year valuation, as provided in clause (ii), may not be
made unless as of the valuation date within the prior plan
year, the value of the assets of the plan are not less than
125 percent of the plan's current liability (as defined in
paragraph (6)(D) without regard to clause (iv) thereof).
``(8) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer after the last day of such plan year, but
not later than two and one-half months after such day, shall
be deemed to have been made on such last day. For purposes of
this subparagraph, such two and one-half month period may be
extended for not more than six months under regulations
prescribed by the Secretary.
``(9) Interest rule for waivers and extensions.--The
interest rate applicable for any plan year for purposes of
computing the amortization charge described in subsection
(b)(2)(C) and in connection with an extension granted under
subsection (d) shall be the greater of--
``(A) 150 percent of the Federal mid-term rate (as in
effect under section 1274 for the 1st month of such plan
year), or
``(B) the rate of interest used under the plan for
determining costs.
``(d) Extension of Amortization Periods for Multiemployer
Plans.--In the case of a multiemployer plan--
``(1) Extension.--The period of years required to amortize
any unfunded liability (described in any clause of subsection
(b)(2)(B)) of any multiemployer plan shall be extended by the
Secretary for a period of time (not in excess of 5 years) if
it is demonstrated to the Secretary that--
``(A) absent the extension, the plan would have an
accumulated funding deficiency in any of the next 10 plan
years,
[[Page H11735]]
``(B) the plan sponsor has adopted a plan to improve the
plan's funding status, and
``(C) taking into account the extension, the plan is
projected to have sufficient assets to timely pay its
expected benefit liabilities and other anticipated
expenditures.
``(2) Additional extension.--The period of years required
to amortize any unfunded liability (described in any clause
of subsection (b)(2)(B)) of any multiemployer plan may be
extended (in addition to any extension under paragraph (1))
by the Secretary for a period of time (not in excess of 5
years) if the Secretary determines that such extension would
carry out the purposes of the Employee Retirement Income
Security Act of 1974 and would provide adequate protection
for participants under the plan and their beneficiaries and
if the Secretary determines that the failure to permit such
extension would--
``(A) result in--
``(i) a substantial risk to the voluntary continuation of
the plan, or
``(ii) a substantial curtailment of pension benefit levels
or employee compensation, and
``(B) be adverse to the interests of plan participants in
the aggregate.
``(3) Advance notice.--
``(A) In general.--The Secretary shall, before granting an
extension under this section, require each applicant to
provide evidence satisfactory to the Secretary that the
applicant has provided notice of the filing of the
application for such extension to each affected party (as
defined in section 4001(a)(21) of the Employee Retirement
Income Security Act of 1974) with respect to the affected
plan. Such notice shall include a description of the extent
to which the plan is funded for benefits which are guaranteed
under title IV of such Act and for benefit liabilities.
``(B) Consideration of relevant information.--The Secretary
shall consider any relevant information provided by a person
to whom notice was given under paragraph (1).''.
(b) Conforming Amendments.--
(1) Section 418(b)(2) of such Code is amended--
(A) by striking ``section 412(b)(2)'' in subparagraph (A)
and inserting ``section 431(b)(2)'', and
(B) by striking ``section 412(b)(3)(B)'' in subparagraph
(B) and inserting ``section 431(b)(3)(B)''.
(2) Section 418B of such Code is amended--
(A) by striking ``section 412(b)(2)(A) or (B)'' in
subsection (d)(1)(B) and inserting ``section 431(b)(2)(A) or
(B)'',
(B) by striking ``section 412(c)(8)'' in subsection (e) and
inserting ``section 412(d)(2)'', and
(C) by striking ``section 412(c)(3)'' in subsection (g) and
inserting ``section 431(c)(3)''.
(3) Section 418D(a)(2) of such Code is amended--
(A) by striking ``section 412(c)(8)'' and inserting
``section 412(d)(2)'', and
(B) by striking ``section 412(c)(10)'' and inserting
``section 431(c)(8)''.
(c) Clerical Amendment.--The table of sections for subpart
A of part III of subchapter D of chapter 1 of such Code is
amended by adding after the item relating to section 430 the
following new item:
``Sec. 431. Minimum funding standards for multiemployer plans.''.
(d) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2006.
SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN
ENDANGERED OR CRITICAL STATUS.
(a) In General.--Subpart A of part III of subchapter D of
chapter 1 of the Internal Revenue Code of 1986 is amended by
inserting after section 431 the following new section:
``SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS
IN ENDANGERED STATUS OR CRITICAL STATUS.
``(a) Annual Certification by Plan Actuary.--
``(1) In general.--During the 90-day period beginning on
first day of each plan year of a multiemployer plan, the plan
actuary shall certify to the Secretary whether or not the
plan is in endangered status for such plan year and whether
or not the plan is in critical status for such plan year.
``(2) Actuarial projections of assets and liabilities.--
``(A) In general.--In making the determinations under
paragraph (1), the plan actuary shall make projections under
subsections (b)(2) and (c)(2) for the current and succeeding
plan years, using reasonable actuarial assumptions and
methods, of the current value of the assets of the plan and
the present value of all liabilities to participants and
beneficiaries under the plan for the current plan year as of
the beginning of such year, as based on the actuarial
statement prepared for the preceding plan year under section
103(d) of the Employee Retirement Income Security Act of
1974.
``(B) Determinations of future contributions.--Any such
actuarial projection of plan assets shall assume--
``(i) reasonably anticipated employer and employee
contributions for the current and succeeding plan years,
assuming that the terms of the one or more collective
bargaining agreements pursuant to which the plan is
maintained for the current plan year continue in effect for
succeeding plan years, or
``(ii) that employer and employee contributions for the
most recent plan year will continue indefinitely, but only if
the plan actuary determines there have been no significant
demographic changes that would make continued application of
such terms unreasonable.
``(3) Presumed status in absence of timely actuarial
certification.--If certification under this subsection is not
made before the end of the 90-day period specified in
paragraph (1), the plan shall be presumed to be in critical
status for such plan year until such time as the plan actuary
makes a contrary certification.
``(4) Notice.--In any case in which a multiemployer plan is
certified to be in endangered status under paragraph (1) or
enters into critical status, the plan sponsor shall, not
later than 30 days after the date of the certification or
entry, provide notification of the endangered or critical
status to the participants and beneficiaries, the bargaining
parties, the Pension Benefit Guaranty Corporation, the
Secretary of the Treasury, and the Secretary of Labor.
``(b) Funding Rules for Multiemployer Plans in Endangered
Status.--
``(1) In general.--In any case in which a multiemployer
plan is in endangered status for a plan year and no funding
improvement plan under this subsection with respect to such
multiemployer plan is in effect for the plan year, the plan
sponsor shall, in accordance with this subsection, amend the
multiemployer plan to include a funding improvement plan upon
approval thereof by the bargaining parties under this
subsection. The amendment shall be adopted not later than 240
days after the date on which the plan is certified to be in
endangered status under subsection (a)(1).
``(2) Endangered status.--A multiemployer plan is in
endangered status for a plan year if, as determined by the
plan actuary under subsection (a)--
``(A) the plan's funded percentage for such plan year is
less than 80 percent, or
``(B) the plan has an accumulated funding deficiency for
such plan year under section 431 or is projected to have such
an accumulated funding deficiency for any of the 6 succeeding
plan years, taking into account any extension of amortization
periods under section 431(d).
``(3) Funding improvement plan.--
``(A) Benchmarks.--A funding improvement plan shall consist
of amendments to the plan formulated to provide, under
reasonable actuarial assumptions, for the attainment, during
the funding improvement period under the funding improvement
plan, of the following benchmarks:
``(i) Increase in funded percentage.--An increase in the
plan's funded percentage such that--
``(I) the difference between 100 percent and the plan's
funded percentage for the last year of the funding
improvement period, is not more than
``(II) \2/3\ of the difference between 100 percent and the
plan's funded percentage for the first year of the funding
improvement period.
``(ii) Avoidance of accumulated funding deficiencies.--No
accumulated funding deficiency for any plan year during the
funding improvement period (taking into account any extension
of amortization periods under section 431(d)).
``(B) Funding improvement period.--The funding improvement
period for any funding improvement plan adopted pursuant to
this subsection is the 10-year period beginning on the
earlier of--
``(i) the second anniversary of the date of the adoption of
the funding improvement plan, or
``(ii) the first day of the first plan year of the
multiemployer plan following the plan year in which occurs
the first date after the day of the certification as of which
collective bargaining agreements covering on the day of such
certification at least 75 percent of active participants in
such multiemployer plan have expired.
``(C) Special rules for certain seriously underfunded
plans.--
``(i) In the case of a plan in which the funded percentage
of a plan for the plan year is 70 percent or less,
subparagraph (A)(i)(II) shall be applied by substituting `\4/
5\' for `\2/3\' and subparagraph (B) shall be applied by
substituting `the 15-year period' for `the 10-year period'.
``(ii) In the case of a plan in which the funded percentage
of a plan for the plan year is more than 70 percent but less
than 80 percent, and--
``(I) the plan actuary certifies within 30 days after
certification under subsection (a)(1) that the plan is not
able to attain the increase described in subparagraph (A)(i)
over the period described in subparagraph (B), and
``(II) the plan year is prior to the day described in
subparagraph (B)(ii),
subparagraph (A)(i)(II) shall be applied by substituting `\4/
5\' for `\2/3\' and subparagraph (B) shall be applied by
substituting `the 15-year period' for `the 10-year period'.
``(iii) For any plan year following the year described in
clause (ii)(II), subparagraph (A)(i)(II) and subparagraph (B)
shall apply, except that for each plan year ending after such
date for which the plan actuary certifies (at the time of the
annual certification under subsection (a)(1) for such plan
year) that the plan is not able to attain the increase
described in subparagraph (A)(i) over the period described in
subparagraph (B), subparagraph (B) shall be applied by
substituting `the 15-year period' for `the 10-year period'.
[[Page H11736]]
``(D) Reporting.--A summary of any funding improvement plan
or modification thereto adopted during any plan year,
together with annual updates regarding the funding ratio of
the plan, shall be included in the annual report for such
plan year under section 104(a) of the Employee Retirement
Income Security Act of 1974 and in the summary annual report
described in section 104(b)(3) of such Act.
``(4) Development of funding improvement plan.--
``(A) Actions by plan sponsor pending approval.--Pending
the approval of a funding improvement plan under this
paragraph, the plan sponsor shall take all reasonable
actions, consistent with the terms of the plan and applicable
law, necessary to ensure--
``(i) an increase in the plan's funded percentage, and
``(ii) postponement of an accumulated funding deficiency
for at least 1 additional plan year.
Such actions include applications for extensions of
amortization periods under section 431(d), use of the
shortfall funding method in making funding standard account
computations, amendments to the plan's benefit structure,
reductions in future benefit accruals, and other reasonable
actions consistent with the terms of the plan and applicable
law.
``(B) Recommendations by plan sponsor.--
``(i) In general.--During the period of 90 days following
the date on which a multiemployer plan is certified to be in
endangered status, the plan sponsor shall develop and provide
to the bargaining parties alternative proposals for revised
benefit structures, contribution structures, or both, which,
if adopted as amendments to the plan, may be reasonably
expected to meet the benchmarks described in paragraph
(3)(A). Such proposals shall include--
``(I) at least one proposal for reductions in the amount of
future benefit accruals necessary to achieve the benchmarks,
assuming no amendments increasing contributions under the
plan (other than amendments increasing contributions
necessary to achieve the benchmarks after amendments have
reduced future benefit accruals to the maximum extent
permitted by law), and
``(II) at least one proposal for increases in contributions
under the plan necessary to achieve the benchmarks, assuming
no amendments reducing future benefit accruals under the
plan.
``(ii) Requests by bargaining parties.--Upon the request of
any bargaining party who--
``(I) employs at least 5 percent of the active
participants, or
``(II) represents as an employee organization, for purposes
of collective bargaining, at least 5 percent of the active
participants,
the plan sponsor shall provide all such parties information
as to other combinations of increases in contributions and
reductions in future benefit accruals which would result in
achieving the benchmarks.
``(iii) Other information.--The plan sponsor may, as it
deems appropriate, prepare and provide the bargaining parties
with additional information relating to contribution
structures or benefit structures or other information
relevant to the funding improvement plan.
``(5) Maintenance of contributions pending approval of
funding improvement plan.--Pending approval of a funding
improvement plan by the bargaining parties with respect to a
multiemployer plan, the multiemployer plan may not be amended
so as to provide--
``(A) a reduction in the level of contributions for
participants who are not in pay status,
``(B) a suspension of contributions with respect to any
period of service, or
``(C) any new direct or indirect exclusion of younger or
newly hired employees from plan participation.
``(6) Benefit restrictions pending approval of funding
improvement plan.--Pending approval of a funding improvement
plan by the bargaining parties with respect to a
multiemployer plan--
``(A) Restrictions on lump sum and similar distributions.--
In any case in which the present value of a participant's
accrued benefit under the plan exceeds $5,000, such benefit
may not be distributed as an immediate distribution or in any
other accelerated form.
``(B) Prohibition on benefit increases.--
``(i) In general.--No amendment of the plan 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 may be adopted.
``(ii) Exception.--Clause (i) shall not apply to any plan
amendment which is required as a condition of qualification
under part I of subchapter D of chapter 1 of subtitle A.
``(7) Default critical status if no funding improvement
plan adopted.--If no plan amendment adopting a funding
improvement plan has been adopted by the end of the 240-day
period referred to in subsection (b)(1), the plan enters into
critical status as of the first day of the succeeding plan
year.
``(8) Restrictions upon approval of funding improvement
plan.--Upon adoption of a funding improvement plan with
respect to a multiemployer plan, the plan may not be
amended--
``(A) so as to be inconsistent with the funding improvement
plan, or
``(B) so as to increase future benefit accruals, unless the
plan actuary certifies in advance that, after taking into
account the proposed increase, the plan is reasonably
expected to meet the the benchmarks described in paragraph
(3)(A).
``(c) Funding Rules for Multiemployer Plans in Critical
Status.--
``(1) In general.--In any case in which a multiemployer
plan is in critical status for a plan year as described in
paragraph (2) (or otherwise enters into critical status under
this section) and no rehabilitation plan under this
subsection with respect to such multiemployer plan is in
effect for the plan year, the plan sponsor shall, in
accordance with this subsection, amend the multiemployer plan
to include a rehabilitation plan under this subsection. The
amendment shall be adopted not later than 240 days after the
date on which the plan enters into critical status.
``(2) Critical status.--A multiemployer plan is in critical
status for a plan year if--
``(A) the plan is in endangered status for the preceding
plan year and the requirements of subsection (b)(1) were not
met with respect to the plan for such preceding plan year, or
``(B) as determined by the plan actuary under subsection
(a), the plan is described in paragraph (3).
``(3) Criticality description.--For purposes of paragraph
(2)(B), a plan is described in this paragraph if the plan is
described in at least one of the following subparagraphs:
``(A) A plan is described in this subparagraph if, as of
the beginning of the current plan year--
``(i) the funded percentage of the plan is less than 65
percent, and
``(ii) the sum of--
``(I) the market value of plan assets, plus
``(II) the present value of the reasonably anticipated
employer and employee contributions for the current plan year
and each of the 6 succeeding plan years, assuming that the
terms of the one or more collective bargaining agreements
pursuant to which the plan is maintained for the current plan
year continue in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits
for all participants and beneficiaries projected to be
payable under the plan during the current plan year and each
of the 6 succeeding plan years (plus administrative expenses
for such plan years).
``(B) A plan is described in this subparagraph if, as of
the beginning of the current plan year, the sum of--
``(i) the market value of plan assets, plus
``(ii) the present value of the reasonably anticipated
employer and employee contributions for the current plan year
and each of the 4 succeeding plan years, assuming that the
terms of the one or more collective bargaining agreements
pursuant to which the plan is maintained for the current plan
year remain in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits
for all participants and beneficiaries projected to be
payable under the plan during the current plan year and each
of the 4 succeeding plan years (plus administrative expenses
for such plan years).
``(C) A plan is described in this subparagraph if--
``(i) as of the beginning of the current plan year, the
funded percentage of the plan is less than 65 percent, and
``(ii) the plan has an accumulated funding deficiency for
the current plan year or is projected to have an accumulated
funding deficiency for any of the 4 succeeding plan years,
not taking into account any extension of amortization periods
under section 431(d).
``(D) A plan is described in this subparagraph if--
``(i)(I) the plan's normal cost for the current plan year,
plus interest (determined at the rate used for determining
cost under the plan) for the current plan year on the amount
of unfunded benefit liabilities under the plan as of the last
date of the preceding plan year, exceeds
``(II) the present value, as of the beginning of the
current plan year, of the reasonably anticipated employer and
employee contributions for the current plan year,
``(ii) the present value, as of the beginning of the
current plan year, of nonforfeitable benefits of inactive
participants is greater than the present value, as of the
beginning of the current plan year, of nonforfeitable
benefits of active participants, and
``(iii) the plan is projected to have an accumulated
funding deficiency for the current plan year or any of the 4
succeeding plan years, not taking into account any extension
of amortization periods under section 431(d).
``(E) A plan is described in this subparagraph if--
``(i) the funded percentage of the plan is greater than 65
percent for the current plan year, and
``(ii) the plan is projected to have an accumulated funding
deficiency during any of the succeeding 3 plan years, not
taking into account any extension of amortization periods
under section 431(d).
``(4) Rehabilitation plan.--
``(A) In general.--A rehabilitation plan shall consist of--
``(i) amendments to the plan providing (under reasonable
actuarial assumptions) for measures, agreed to by the
bargaining parties, to increase contributions, reduce plan
expenditures (including plan mergers and consolidations), or
reduce future benefit accruals, or to take any combination of
such actions, determined necessary to cause the plan to
cease, during the rehabilitation period, to be in critical
status, or
[[Page H11737]]
``(ii) reasonable measures to forestall possible insolvency
(within the meaning of section 418E) if the plan sponsor
determines that, upon exhaustion of all reasonable measures,
the plan would not cease during the rehabilitation period to
be in critical status.
A rehabilitation must provide annual standards for meeting
the requirements of such rehabilitation plan.
``(B) Rehabilitation period.--The rehabilitation period for
any rehabilitation plan adopted pursuant to this subsection
is the 10-year period beginning on the earlier of--
``(i) the second anniversary of the date of the adoption of
the rehabilitation plan, or
``(ii) the first day of the first plan year of the
multiemployer plan following the plan year in which occurs
the first date, after the date of the plan's entry into
critical status, as of which collective bargaining agreements
covering at least 75 percent of active participants in such
multiemployer plan (determined as of such date of entry) have
expired.
``(C) Reporting.--A summary of any rehabilitation plan or
modification thereto adopted during any plan year, together
with annual updates regarding the funding ratio of the plan,
shall be included in the annual report for such plan year
under section 104(a) of the Employee Retirement Income
Security Act of 1974 and in the summary annual report
described in section 104(b)(3) of such Act.
``(5) Development of rehabilitation plan.--
``(A) Proposals by plan sponsor.--
``(i) In general.--Within 90 days after the date of entry
into critical status (or the date as of which the
requirements of subsection (b)(1) are not met with respect to
the plan), the plan sponsor shall propose to all bargaining
parties a range of alternative schedules of increases in
contributions and reductions in future benefit accruals that
would serve to carry out a rehabilitation plan under this
subsection.
``(ii) Proposal assuming no contribution increases.--Such
proposals shall include, as one of the proposed schedules, a
schedule of those reductions in future benefit accruals that
would be necessary to cause the plan to cease to be in
critical status if there were no further increases in rates
of contribution to the plan.
``(iii) Proposal where contributions are necessary.--If the
plan sponsor determines that the plan will not cease to be in
critical status during the rehabilitation period unless the
plan is amended to provide for an increase in contributions,
the plan sponsor's proposals shall include a schedule of
those increases in contribution rates that would be necessary
to cause the plan to cease to be in critical status if future
benefit accruals were reduced to the maximum extent permitted
by law.
``(B) Requests for additional schedules.--Upon the request
of any bargaining party who--
``(i) employs at least 5 percent of the active
participants, or
``(ii) represents as an employee organization, for purposes
of collective bargaining, at least 5 percent of active
participants,
the plan sponsor shall include among the proposed schedules
such schedules of increases in contributions and reductions
in future benefit accruals as may be specified by the
bargaining parties.
``(C) Subsequent amendments.--Upon the adoption of a
schedule of increases in contributions or reductions in
future benefit accruals as part of the rehabilitation plan,
the plan sponsor may amend the plan thereafter to update the
schedule to adjust for any experience of the plan contrary to
past actuarial assumptions, except that such an amendment may
be made not more than once in any 3-year period.
``(D) Allocation of reductions in future benefit
accruals.--Any schedule containing reductions in future
benefit accruals forming a part of a rehabilitation plan
shall be applicable with respect to any group of active
participants who are employed by any bargaining party (as an
employer obligated to contribute under the plan) in
proportion to the extent to which increases in contributions
under such schedule apply to such bargaining party.
``(E) Limitation on reduction in rates of future
accruals.--Any schedule proposed under this paragraph shall
not reduce the rate of future accruals below the lower of--
``(i) a monthly benefit equal to 1 percent of the
contributions required to be made with respect to a
participant or the equivalent standard accrual rate for a
participant or group of participants under the collective
bargaining agreements in effect as of the first day of the
plan year in which the plan enters critical status, or
``(ii) if lower, the accrual rate under the plan on such
date.
The equivalent standard accrual rate shall be determined by
the trustees based on the standard or average contribution
base units that they determine to be representative for
active participants and such other factors as they determine
to be relevant.
``(F) Protection of restored rates of accrual.--
``(i) In general.--Any schedule proposed under this
paragraph shall not reduce the rate of future accruals below
any restored accrual rate.
``(ii) Restored accrual rate.--For purposes of clause (i),
the term `restored accrual rate' means a rate of benefit
accruals which was reduced and subsequently restored before
entry of the plan into critical status.
``(6) Maintenance of contributions and restrictions on
benefits pending adoption of rehabilitation plan.--The rules
of paragraphs (5) and (6) of subsection (b) shall apply for
purposes of this subsection by substituting the term
`rehabilitation plan' for `funding improvement plan'.
``(7) Special rules.--
``(A) Automatic employer surcharge.--
``(i) 5 percent and 10 percent surcharge.--For the first
plan year in which the plan is in critical status, each
employer otherwise obligated to make a contribution for that
plan year shall be obligated to pay to the plan a surcharge
equal to 5 percent of the contribution otherwise required
under the respective collective bargaining agreement (or
other agreement pursuant to which the employer contributes).
For each consecutive plan year thereafter in which the plan
is in critical status, the surcharge shall be 10 percent of
the contribution otherwise required under the respective
collective bargaining agreement (or other agreement pursuant
to which the employer contributes).
``(ii) Enforcement of surcharge.--The surcharges under
clause (i) shall be due and payable on the same schedule as
the contributions on which they are based. Any failure to
make a surcharge payment shall be treated as a delinquent
contribution under section 515 of the Employee Retirement
Income Security Act of 1974 and shall be enforceable as such.
``(iii) Surcharge to terminate upon cba renegotiation.--The
surcharge under this paragraph shall cease to be effective
with respect to employees covered by a collective bargaining
agreement, beginning on the date on which that agreement is
renegotiated to include--
``(I) a schedule of benefits and contributions published by
the trustees pursuant to the plan's rehabilitation plan, or
``(II) otherwise collectively bargained benefit changes.
``(iv) Surcharge not to apply until employer receives 30-
day notice.--The surcharge under this subparagraph shall not
apply to an employer until 30 days after the employer has
been notified by the trustees that the plan is in critical
status and that the surcharge is in effect.
``(v) Surcharge not to generate increased benefit
accruals.--Notwithstanding any provision of a plan to the
contrary, the amount of any surcharge shall not be the basis
for any benefit accruals under the plan.
``(B) Benefit adjustments.--
``(i) In general.--The trustees shall make appropriate
reductions, if any, to adjustable benefits based upon the
outcome of collective bargaining over the schedules provided
under paragraph (5).
``(ii) Retiree protection.--Except as provided in
subparagraph (C), the trustees of a plan in critical status
may not reduce adjustable benefits of any participant or
beneficiary who was in pay status at least one year before
the first day of the first plan year in which the plan enters
into critical status.
``(iii) Trustee flexibility.--The trustees shall include in
the schedules provided to the bargaining parties an allowance
for funding the benefits of participants with respect to whom
contributions are not currently required to be made, and
shall reduce their benefits to the extent permitted under
this title and considered appropriate based on the plan's
then current overall funding status and its future prospects
in light of the results of the parties' negotiations.
``(C) Adjustable benefit defined.--For purposes of this
paragraph, the term `adjustable benefit' means--
``(i) benefits, rights, and features, such as post-
retirement death benefits, 60-month guarantees, disability
benefits not yet in pay status, and similar benefits,
``(ii) retirement-type subsidies, early retirement
benefits, and benefit payment options (other than the 50
percent qualified joint-and-survivor benefit and single life
annuity), and
``(iii) benefit increases that would not be eligible for a
guarantee under section 4022A of the Employee Retirement
Income Security Act of 1974 on the first day of the plan year
in which the plan enters into critical status because they
were adopted, or if later, took effect less than 60 months
before reorganization.
``(D) Normal retirement benefits protected.--Nothing in
this paragraph shall be construed to permit a plan to reduce
the level of a participant's accrued benefit payable at
normal retirement age which is not an adjustable benefit.
``(E) Adjustments disregarded in withdrawal liability
determination.--
``(i) Benefit reductions.--Any benefit reductions under
this paragraph shall be disregarded in determining a plan's
unfunded vested benefits for purposes of determining an
employer's withdrawal liability under section 4201 of the
Employee Retirement Income Security Act of 1974.
``(ii) Surcharges.--Any surcharges under this paragraph
shall be disregarded in determining an employer's withdrawal
liability under section 4211 of the Employee Retirement
Income Security Act of 1974, except for purposes of
determining the unfunded vested benefits attributable to an
employer or under a modified attributable method adopted with
the approval of the Pension Benefit
[[Page H11738]]
Guaranty Corporation under subsection (c)(5) of that section.
``(8) Restrictions upon approval of rehabilitation plan.--
Upon adoption of a rehabilitation plan with respect to a
multiemployer plan, the plan may not be amended--
``(A) so as to be inconsistent with the rehabilitation
plan, or
``(B) so as to increase future benefit accruals, unless the
plan actuary certifies in advance that, after taking into
account the proposed increase, the plan is reasonably
expected to cease to be in critical status.
``(9) Implementation of default schedule upon failure to
adopt rehabilitation plan.--If the plan is not amended by the
end of the 240-day period after entry into critical status to
include a rehabilitation plan, the plan sponsor shall amend
the plan to implement the schedule required by paragraph
(5)(A)(ii).
``(10) Deemed withdrawal.--Upon the failure of any employer
who has an obligation to contribute under the plan to make
contributions in compliance with the schedule adopted under
paragraph (4) as part of the rehabilitation plan, the failure
of the employer may, at the discretion of the plan sponsor,
be treated as a withdrawal by the employer from the plan
under section 4203 of the Employee Retirement Income Security
Act of 1974 or a partial withdrawal by the employer under
section 4205 of such Act.
``(11) Special rule for plan amendments.--A multiemployer
plan in critical status shall not fail to meet the
requirements of section 204(g) of the Employee Retirement
Income Security Act of 1974 or section 411(d)(6) solely by
reason of the adoption by the plan of an amendment necessary
to meet the requirements of this subsection.
``(d) Definitions.--For purposes of this section--
``(1) Bargaining party.--The term `bargaining party' means,
in connection with a multiemployer plan--
``(A) an employer who has an obligation to contribute under
the plan, and
``(B) an employee organization which, for purposes of
collective bargaining, represents plan participants employed
by such an employer.
``(2) Funded percentage.--The term `funded percentage'
means the percentage expressed as a ratio of which--
``(A) the numerator of which is the value of the plan's
assets, as determined under section 431(c)(2), and
``(B) the denominator of which is the accrued liability of
the plan.
``(3) Accumulated funding deficiency.--The term
`accumulated funding deficiency' has the meaning provided
such term in section 431(a).
``(4) Active participant.--The term `active participant'
means, in connection with a multiemployer plan, a participant
who is in covered service under the plan.
``(5) Inactive participant.--The term `inactive
participant' means, in connection with a multiemployer plan,
a participant who--
``(A) is not in covered service under the plan, and
``(B) is in pay status under the plan or has a
nonforfeitable right to benefits under the plan.
``(6) Pay status.--A person is in `pay status' under a
multiemployer plan if--
``(A) at any time during the current plan year, such person
is a participant or beneficiary under the plan and is paid an
early, late, normal, or disability retirement benefit under
the plan (or a death benefit under the plan related to a
retirement benefit), or
``(B) to the extent provided in regulations of the
Secretary, such person is entitled to such a benefit under
the plan.
``(7) Obligation to contribute.--The term `obligation to
contribute' has the meaning provided such term under section
4212(a) of the Employee Retirement Income Security Act of
1974.
``(8) Entry into critical status.--A plan shall be treated
as entering into critical status as of the date that such
plan is certified to be in critical status under subsection
(a)(1), is presumed to be in critical status under subsection
(a)(3), or enters into critical status under subsection
(b)(7).''.
(b) Excise Tax on Failures to Act With Respect to
Multiemployer Plans in Critical Status.--Section 4971 of the
Internal Revenue Code of 1986 is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following:
``(g) Multiemployer Plans in Critical Status.--
``(1) Substitution of excise tax for initial and additional
tax.--In the case of a multiemployer plan to which section
432(c) applies for a period, subsections (a) and (b) shall
not apply with respect to such period.
``(2) Failure to adopt rehabilitation plan.--
``(A) In general.--In the case of a multiemployer plan to
which section 432(c) applies, there is hereby imposed a tax
on the failure of such plan to adopt a rehabilitation plan.
``(B) Amount of tax.--The amount of the tax imposed under
subparagraph (A) with respect to any plan sponsor shall be
the greater of--
``(i) the amount of tax imposed under subsection (a)
(determined without regard to this subsection), or
``(ii) the amount equal to $1,100 multiplied by the number
of days in the period beginning on the first day of the 240-
day period described in section 432(c)(1) and ending on the
day on which the rehabilitation plan is adopted.
``(C) Liability for tax.--
``(i) In general.--The tax imposed by subparagraph (A)
shall be paid by each plan sponsor.
``(ii) Plan sponsor.--For purposes of clause (i), the term
`plan sponsor' in the case of a multiemployer plan means the
association, committee, joint board of trustees, or other
similar group of representatives of the parties who establish
or maintain the plan.
``(3) Failure to comply with rehabilitation plan.--
``(A) In general.--In the case of a multiemployer plan to
which section 432(c) applies, there is hereby imposed a tax
on each failure to make a required contribution under the
rehabilitation plan within the time required under such plan.
``(B) Amount of tax.--The amount of the tax imposed by
subparagraph (A) shall be, with respect to each required
contribution under the rehabilitation plan, the amount equal
to the excess of the amount of such required contribution
over the amount contributed.
``(C) Liability for tax.--The tax imposed by subparagraph
(A) shall be paid by the employer responsible for
contributing to or under the rehabilitation plan which fails
to make the contribution.
``(4) Rehabilitation plan.--For purposes of this
subsection, the term `rehabilitation plan' means the plan
required to be adopted under section 432(c).''.
(c) Clerical Amendment.--The table of sections for subpart
A of part III of subchapter D of chapter 1 of such Code is
amended by adding at the end the following new item:
``Sec. 432. Additional funding rules for multiemployer plans in
endangered status or critical status.''.
(d) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning after
December 31, 2005.
(e) Special Rule for 2006.--In the case of any plan year
beginning in 2006, any reference in section 432 of the
Internal Revenue Code of 1986 (as added by this section) to
section 431 of such Code (as added by this Act) shall be
treated as a reference to the corresponding provision of such
Code as in effect for plan years beginning in such year.
SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER
PLANS.
(a) Advance Determination of Impending Insolvency Over 5
Years.--Section 418E(d)(1) of the Internal Revenue Code of
1986 is amended--
(1) by striking ``3 plan years'' the second place it
appears and inserting ``5 plan years'', and
(2) by adding at the end the following new sentence: ``If
the plan sponsor makes such a determination that the plan
will be insolvent in any of the next 5 plan years, the plan
sponsor shall make the comparison under this paragraph at
least annually until the plan sponsor makes a determination
that the plan will not be insolvent in any of the next 5 plan
years.''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to determinations made in plan years
beginning after December 31, 2005.
TITLE III--OTHER PROVISIONS
SEC. 301. INTEREST RATE FOR 2006 FUNDING REQUIREMENTS.
(a) Amendments to Employee Retirement Income Security Act
of 1974.--
(1) In general.--Subclause (II) of section 302(b)(5)(B)(ii)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1082(b)(5)(B)(ii)) is amended--
(A) by striking ``January 1, 2006'' and inserting ``January
1, 2007'', and
(B) by striking ``and 2005'' in the heading and inserting
``, 2005, and 2006''.
(2) Current liability.--Subclause (IV) of section
302(d)(7)(C)(i) of such Act (29 U.S.C. 1082(d)(7)(C)(i)) is
amended--
(A) by striking ``or 2005'' and inserting ``, 2005, or
2006'', and
(B) by striking ``and 2005'' in the heading and inserting
``, 2005, and 2006''.
(b) Amendments to Internal Revenue Code of 1986.--
(1) In general.--Subclause (II) of section 412(b)(5)(B)(ii)
of the Internal Revenue Code of 1986 is amended--
(A) by striking ``January 1, 2006'' and inserting ``January
1, 2007'', and
(B) by striking ``and 2005'' in the heading and inserting
``, 2005, and 2006''.
(2) Current liability.--Subclause (IV) of section
412(l)(7)(C)(i) of such Code is amended--
(A) by striking ``or 2005'' and inserting ``, 2005, or
2006'', and
(B) by striking ``and 2005'' in the heading and inserting
``, 2005, and 2006''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2005.
SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP
SUM DISTRIBUTIONS.
(a) Amendment to Employee Retirement Income Security Act of
1974.--Paragraph (3) of section 205(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1055(g)(3))
is amended to read as follows:
``(3)(A) For purposes of paragraphs (1) and (2), the
present value shall not be less than the present value
calculated by using the applicable mortality table and the
applicable interest rate.
``(B) For purposes of subparagraph (A)--
[[Page H11739]]
``(i) The term `applicable mortality table' means a
mortality table, modified as appropriate by the Secretary of
the Treasury, based on the mortality table specified for the
plan year under section 303(h)(3).
``(ii) The term `applicable interest rate' means the
adjusted first, second, and third segment rates applied under
rules similar to the rules of section 303(h)(2)(C) for the
month before the date of the distribution or such other time
as the Secretary of the Treasury may by regulations
prescribe.
``(iii) For purposes of clause (ii), the adjusted first,
second, and third segment rates are the first, second, and
third segment rates which would be determined under section
303(h)(2)(C) if--
``(I) section 303(h)(2)(D)(i) were applied by substituting
`the yields' for `a 3-year weighted average of yields',
``(II) section 303(h)(2)(G)(i)(II) were applied by
substituting `section 205(g)(3)(A)(ii)(II)' for `section
302(b)(5)(B)(ii)(II)', and
``(III) the applicable percentage under section
303(h)(2)(G) were determined in accordance with the following
table:
``In the case of plan years beginning in: The applicable percentage is:
2007................................... 20 percent
2008................................... 40 percent
2009................................... 60 percent
2010................................... 80 percent.''.
(b) Amendment to Internal Revenue Code of 1986.--Paragraph
(3) of section 417(e) of the Internal Revenue Code of 1986 is
amended to read as follows:
``(3) Determination of present value.--
``(A) In general.--For purposes of paragraphs (1) and (2),
the present value shall not be less than the present value
calculated by using the applicable mortality table and the
applicable interest rate.
``(B) Applicable mortality table.--For purposes of
subparagraph (A), the term `applicable mortality table' means
a mortality table, modified as appropriate by the Secretary,
based on the mortality table specified for the plan year
under section 430(h)(3).
``(C) Applicable interest rate.--For purposes of
subparagraph (A), the term `applicable interest rate' means
the adjusted first, second, and third segment rates applied
under rules similar to the rules of section 430(h)(2)(C) for
the month before the date of the distribution or such other
time as the Secretary may by regulations prescribe.
``(D) Applicable segment rates.--For purposes of
subparagraph (C), the adjusted first, second, and third
segment rates are the first, second, and third segment rates
which would be determined under section 430(h)(2)(C) if--
``(i) section 430(h)(2)(D)(i) were applied by substituting
`the yields' for `a 3-year weighted average of yields',
``(ii) section 430(h)(2)(G)(i)(II) were applied by
substituting `section 417(e)(3)(A)(ii)(II)' for `section
412(b)(5)(B)(ii)(II)', and
``(iii) the applicable percentage under section
430(h)(2)(G) were determined in accordance with the following
table:
``In the case of plan years beginning in: The applicable percentage is:
2007................................... 20 percent
2008................................... 40 percent
2009................................... 60 percent
2010................................... 80 percent.''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning after
December 31, 2006.
SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT
LIMITATIONS TO LUMP SUM DISTRIBUTIONS.
(a) In General.--Clause (ii) of section 415(b)(2)(E) of the
Internal Revenue Code of 1986 is amended to read as follows:
``(ii) For purposes of adjusting any benefit under
subparagraph (B) for any form of benefit subject to section
417(e)(3), the interest rate assumption shall not be less
than the greater of--
``(I) 5.5 percent,
``(II) the rate that provides a benefit of not more than
105 percent of the benefit that would be provided if the
applicable interest rate (as defined in section 417(e)(3))
were the interest rate assumption, or
``(III) the rate specified under the plan.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to distributions made in years beginning after
December 31, 2005.
SEC. 304. DISTRIBUTIONS DURING WORKING RETIREMENT.
(a) Amendment to the Employee Retirement Income Security
Act of 1974.--Subparagraph (A) of section 3(2) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1002(2)) is amended by adding at the end the following new
sentence: ``A distribution from a plan, fund, or program
shall not be treated as made in a form other than retirement
income or as a distribution prior to termination of covered
employment solely because such distribution is made to an
employee who has attained age 62 and who is not separated
from employment at the time of such distribution.''.
(b) Amendment to the Internal Revenue Code of 1986.--
Subsection (a) of section 401 of the Internal Revenue Code of
1986 is amended by inserting after paragraph (34) the
following new paragraph:
``(35) Distributions during working retirement.--A trust
forming part of a pension plan shall not be treated as
failing to constitute a qualified trust under this section
solely because a distribution is made from such trust to an
employee who has attained age 62 and who is not separated
from employment at the time of such distribution.''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions in plan years beginning after
December 31, 2005.
SEC. 305. OTHER AMENDMENTS RELATING TO PROHIBITED
TRANSACTIONS.
(a) Definition of Amount Involved.--Section 502(i) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1132(i)) is amended to read as follows:
``(i)(1) In the case of a transaction prohibited by section
406 by a party in interest with respect to a plan to which
this part applies, the Secretary may assess a civil penalty
against such party in interest. Except as provided in
paragraph (2), the amount of such penalty may not exceed 5
percent of the amount involved in each such transaction for
each year or part thereof during which the prohibited
transaction continues.
``(2) If the transaction is not corrected (in such manner
as the Secretary shall prescribe in regulations) within 90
days after notice from the Secretary (or such longer period
as the Secretary may permit), such penalty may be in an
amount not more than 100 percent of the amount involved.
``(3) For purposes of paragraph (1)--
``(A) Except as provided in subparagraphs (C) and (D), the
term `amount involved' means, with respect to a prohibited
transaction, the greater of--
``(i) the amount of money and the fair market value of the
other property given, or
``(ii) the amount of money and the fair market value of the
other property received.
``(B) For purposes of subparagraph (A), fair market value
shall be determined as of the date on which the prohibited
transaction occurs, except that in the case described in
paragraph (2) fair market value shall be the highest fair
market value during the period between the date of the
transaction and the date of correction.
``(C) In the case of services described in subsection
(b)(2) or (c)(2) of section 408, the term `amount involved'
means only the amount of excess compensation.
``(D) In the case of principal transactions prohibited
under section 406(a) involving securities or commodities, the
term `amount involved' means only the amount received by the
disqualified person in excess of the amount such person would
have received in an arm's length transaction with an
unrelated party as of the same date.
``(E) For the purposes of this paragraph--
``(i) the term `security' has the meaning given such term
by section 475(c)(2) of the Internal Revenue Code of 1986
(without regard to subparagraph (F)(iii) and the last
sentence thereof), and
``(ii) the term `commodity' has the meaning given such term
by section 475(e)(2) of such Code (without regard to
subparagraph (D)(iii) thereof).''.
(b) Exemption for Block Trading.--
(1) Amendments to employee retirement income security act
of 1974.--Section 408(b) of such Act (29 U.S.C. 1108(b)), as
amended by section 601, is further amended by adding at the
end the following new paragraph:
``(15)(A) Any transaction involving the purchase or sale of
securities between a plan and a party in interest (other than
a fiduciary described in section 3(21)(A)(ii)) with respect
to a plan if--
``(i) the transaction involves a block trade,
``(ii) at the time of the transaction, the interest of the
plan (together with the interests of any other plans
maintained by the same plan sponsor), does not exceed 10
percent of the aggregate size of the block trade, and
``(iii) the terms of the transaction, including the price,
are at least as favorable to the plan as an arm's length
transaction.
``(B) For purposes of this paragraph, the term `block
trade' includes any trade which will be allocated across two
or more client accounts of a fiduciary.''.
(2) Amendments to internal revenue code of 1986.--
(A) In general.--Subsection (d) of section 4975 of the
Internal Revenue Code of 1986 (relating to exemptions) is
amended by striking ``or'' at the end of paragraph (15), by
striking the period at the end of paragraph (16) and
inserting ``, or'', and by adding at the end the following
new paragraph:
``(17) any transaction involving the purchase or sale of
securities between a plan and a party in interest (other than
a fiduciary described in subsection (e)(3)(B)) with respect
to a plan if--
``(A) the transaction involves a block trade,
``(B) at the time of the transaction, the interest of the
plan (together with the interests of any other plans
maintained by the same plan sponsor), does not exceed 10
percent of the aggregate size of the block trade, and
``(C) the terms of the transaction, including the price,
are at least as favorable to the plan as an arm's length
transaction.
``(D) For purposes of this paragraph, the term `block
trade' includes any trade which will be allocated across two
or more client accounts of a fiduciary.''.
[[Page H11740]]
(B) Special rule relating to block trade.--Subsection (f)
of section 4975 of such Code (relating to other definitions
and special rules) is amended by adding at the end the
following new paragraph:
``(8) Block trade.--For purposes of subsection (d)(17), the
term `block trade' includes any trade which will be allocated
across two or more client accounts of a fiduciary.''.
(c) Bonding Relief.-- Section 412(a) of such Act (29 U.S.C.
1112(a)) is amended--
(1) by redesignating paragraph (2) as paragraph (3);
(2) by striking ``and'' at the end of paragraph (1); and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) no bond shall be required of an entity which is
subject to regulation as a broker or a dealer under section
15 of the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.) or an entity registered under the Investment Advisers
Act of 1940 (15 U.S.C. 80b-1 et seq.), including requirements
imposed by a self-regulatory organization (within the meaning
of section 3(a)(26) of such Act (15 U.S.C. 78c(a)(26)), or
any affiliate with respect to which the broker or dealer
agrees to be liable to the same extent as if they held the
assets directly.''.
(d) Exemption for Electronic Communication Network.--
(1) In general.--Section 408(b) of such Act (as amended by
subsection (b)) is further amended by adding at the end the
following:
``(16) Any transaction involving the purchase or sale of
securities, or other property (as determined in regulations
of the Secretary) between a plan and a fiduciary or a party
in interest if--
``(A) the transaction is executed through an exchange,
electronic communication network, alternative trading system,
or similar execution system or trading venue subject to
regulation and oversight by--
``(i) the applicable Federal regulating entity, or
``(ii) such other applicable governmental regulating agency
as the Secretary may determine appropriate in the case of any
fiduciary or party in interest or class of fiduciaries or
parties in interest or any transaction or class of
transactions,
``(B) neither the execution system nor the parties to the
transaction take into account the identity of the parties in
the execution of trades,
``(C) the transaction is effected pursuant to rules
designed to match purchases and sales at the best price
available through the execution system,
``(D) the price and compensation associated with the
purchase and sale are not greater than an arm's length
transaction with an unrelated party,
``(E) if the fiduciary or party in interest has an
ownership interest in the system or venue described in
subparagraph (A), the system or venue has been authorized
under the plan for transactions described in this paragraph,
and
``(F) not less than 30 days prior to the initial
transaction described in this paragraph executed through any
system or venue described in subparagraph (A), the plan
administrator is provided written notice of the execution of
such transaction through such system or venue.''.
(2) Effective date.--The amendment made by this subsection
shall take effect 30 days after the date of the enactment of
this Act.
(e) Conforming ERISA's Prohibited Transaction Provision to
FERSA.--Section 408(b) of such Act (29 U.S.C. 1106), as
amended by subsection (d), is further amended by adding at
the end the following new paragraph:
``(17)(A) transactions described in subparagraphs (A), (B),
and (D) of section 406(a)(1) between a plan and a party that
is a party in interest (under section 3(14)) solely by reason
of providing services, but only if in connection with such
transaction the plan receives no less, nor pays no more, than
adequate consideration.
``(B) For purposes of this paragraph, the term `adequate
consideration' means--
``(i) in the case of a security for which there is a
generally recognized market--
``(I) the price of the security prevailing on a national
securities exchange which is registered under section 6 of
the Securities Exchange Act of 1934, taking into account
factors such as the size of the transaction and marketability
of the security, or
``(II) if the security is not traded on such a national
securities exchange, a price not less favorable to the plan
than the offering price for the security as established by
the current bid and asked prices quoted by persons
independent of the issuer and of the party in interest,
taking into account factors such as the size of the
transaction and marketability of the security, and
``(ii) in the case of an asset other than a security for
which there is a generally recognized market, the fair market
value of the asset as determined in good faith by a fiduciary
or fiduciaries in accordance with regulations prescribed by
the Secretary.''.
(f) Relief for Foreign Exchange Transactions.-- Section
408(b) of such Act (as amended by the preceding provisions of
this section) is further amended by adding at the end the
following new paragraph:
``(18) Any foreign exchange transactions, between a bank or
broker-dealer, or any affiliate of either thereof, and a plan
with respect to which the bank or broker-dealer, or any
affiliate, is a trustee, custodian, fiduciary, or other party
in interest, if--
``(A) the transaction is in connection with the purchase or
sale of securities,
``(B) at the time the foreign exchange transaction is
entered into, the terms of the transaction are not less
favorable to the plan than the terms generally available in
comparable arm's length foreign exchange transactions between
unrelated parties, or the terms afforded by the bank or the
broker-dealer (or any affiliate thereof) in comparable arm's-
length foreign exchange transactions involving unrelated
parties, and
``(C) the exchange rate used by the bank or broker-dealer
for a particular foreign exchange transaction may not deviate
by more than 3 percent from the interbank bid and asked rates
at the time of the transaction as displayed on an independent
service that reports rates of exchange in the foreign
currency market for such currency.''.
(g) Definition of Plan Asset Vehicle.--Section 3 of such
Act (29 U.S.C. 1002) is amended by adding at the end the
following new paragraph:
``(42) the term `plan assets' means plan assets as defined
by such regulations as the Secretary may prescribe, except
that under such regulations the assets of any entity shall
not be treated as plan assets if, immediately after the most
recent acquisition of any equity interest in the entity, less
than 50 percent of the total value of each class of equity
interest in the entity is held by employee benefit plan
investors. For purposes of determinations pursuant to this
paragraph, the value of any equity interest owned by a person
(other than such an employee benefit plan) who has
discretionary authority or control with respect to the assets
of the entity or any person who provides investment advice
for a fee (direct or indirect) with respect to such assets,
or any affiliate of such a person, shall be disregarded for
purposes of calculating the 50 percent threshold. An entity
shall be considered to hold plan assets only to the extent of
the percentage of the equity interest owned by benefit plan
investors. For purposes of this paragraph, the term `benefit
plan investor' means an employee benefit plan subject to this
part and any plan to which section 4975 of the Internal
Revenue Code of 1986 applies.''.
SEC. 306. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS
INVOLVING SECURITIES AND COMMODITIES.
(a) Amendment of Employee Retirement Income Security Act of
1974.--Section 408(b) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1108(b)), as amended by
sections 304 and 601, is further amended by adding at the end
the following new paragraph:
``(19)(A) Except as provided in subparagraphs (B) and (C),
a transaction described in section 406(a) in connection with
the acquisition, holding, or disposition of any security or
commodity, if the transaction is corrected before the end of
the correction period.
``(B) Subparagraph (A) does not apply to any transaction
between a plan and a plan sponsor or its affiliates that
involves the acquisition or sale of an employer security (as
defined in section 407(d)(1)) or the acquisition, sale, or
lease of employer real property (as defined in section
407(d)(2)).
``(C) In the case of any fiduciary or other party in
interest (or any other person knowingly participating in such
transaction), subparagraph (A) does not apply to any
transaction if, at the time the transaction occurs, such
fiduciary or party in interest (or other person) knew (or
reasonably should have known) that the transaction would
(without regard to this paragraph) constitute a violation of
section 406(a).
``(D) For purposes of this paragraph, the term `correction
period' means, in connection with a fiduciary or party in
interest (or other person knowingly participating in the
transaction), the 14-day period beginning on the date on
which such fiduciary or party in interest (or other person)
discovers, or reasonably should have discovered, that the
transaction would (without regard to this paragraph)
constitute a violation of section 406(a).
``(E) For purposes of this paragraph--
``(i) The term `security' has the meaning given such term
by section 475(c)(2) of the Internal Revenue Code of 1986
(without regard to subparagraph (F)(iii) and the last
sentence thereof).
``(ii) The term `commodity' has the meaning given such term
by section 475(e)(2) of such Code (without regard to
subparagraph (D)(iii) thereof).
``(iii) The term `correct' means, with respect to a
transaction--
``(I) to undo the transaction to the extent possible and in
any case to make good to the plan or affected account any
losses resulting from the transaction, and
``(II) to restore to the plan or affected account any
profits made through the use of assets of the plan.''.
(b) Amendment of Internal Revenue Code of 1986.--
(1) In general.--Subsection (d) of section 4975 of the
Internal Revenue Code of 1986 (relating to exemptions), as
amended by this Act, is amended by striking ``or'' at the end
of paragraph (16), by striking the period at the end of
paragraph (17) and inserting ``, or'', and by adding at the
end the following new paragraph:
``(18) except as provided in subsection (f)(9), a
transaction described in subparagraph (A), (B), (C), or (D)
of subsection (c)(1) in connection with the acquisition,
holding, or disposition of any security or commodity, if the
[[Page H11741]]
transaction is corrected before the end of the correction
period.''.
(2) Special rules relating to correction period.--
Subsection (f) of section 4975 of such Code (relating to
other definitions and special rules), as amended by this Act,
is amended by adding at the end the following new paragraph:
``(9) Correction period.--
``(A) In general.--For purposes of subsection (d)(18), the
term `correction period' means the 14-day period beginning on
the date on which the disqualified person discovers, or
reasonably should have discovered, that the transaction would
(without regard to this paragraph and subsection (d)(18))
constitute a prohibited transaction.
``(B) Exceptions.--
``(i) Employer securities.--Subsection (d)(18) does not
apply to any transaction between a plan and a plan sponsor or
its affiliates that involves the acquisition or sale of an
employer security (as defined in section 407(d)(1)) or the
acquisition, sale, or lease of employer real property (as
defined in section 407(d)(2)).
``(ii) Knowing prohibited transaction.--In the case of any
disqualified person, subsection (d)(18) does not apply to a
transaction if, at the time the transaction is entered into,
the disqualified person knew (or reasonably should have
known) that the transaction would (without regard to this
paragraph) constitute a prohibited transaction.
``(C) Abatement of tax where there is a correction.--If a
transaction is not treated as a prohibited transaction by
reason of subsection (d)(18), then no tax under subsection
(a) and (b) shall be assessed with respect to such
transaction, and if assessed the assessment shall be abated,
and if collected shall be credited or refunded as an
overpayment.
``(D) Definitions.--For purposes of this paragraph and
subsection (d)(18)--
``(i) Security.--The term `security' has the meaning given
such term by section 475(c)(2) (without regard to
subparagraph (F)(iii) and the last sentence thereof).
``(ii) Commodity.--The term `commodity' has the meaning
given such term by section 475(e)(2) (without regard to
subparagraph (D)(iii) thereof).
``(iii) Correct.--The term `correct' means, with respect to
a transaction--
``(I) to undo the transaction to the extent possible and in
any case to make good to the plan or affected account any
losses resulting from the transaction, and
``(II) to restore to the plan or affected account any
profits made through the use of assets of the plan.''.
(c) Effective Date.--The amendments made by this section
shall apply to any transaction which the fiduciary or
disqualified person discovers, or reasonably should have
discovered, after the date of the enactment of this Act
constitutes a prohibited transaction.
SEC. 307. RECOVERY BY REIMBURSEMENT OR SUBROGATION WITH
RESPECT TO PROVIDED BENEFITS.
(a) In General.--Section 502(a) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1132(a)) is amended by
adding, after and below paragraph (9), the following new
sentence:
``Actions described under paragraph (3) include an action by
a fiduciary for recovery of amounts on behalf of the plan
enforcing terms of the plan that provide a right of recovery
by reimbursement or subrogation with respect to benefits
provided to or for a participant or beneficiary.''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect on January 1, 2006.
SEC. 308. EXERCISE OF CONTROL OVER PLAN ASSETS IN CONNECTION
WITH QUALIFIED CHANGES IN INVESTMENT OPTIONS.
(a) In General.--Section 404(c) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by
adding at the end the following new paragraph:
``(4)(A) In any case in which a qualified change in
investment options occurs in connection with an individual
account plan, a participant or beneficiary shall not be
treated for purposes of paragraph (1) as not exercising
control over the assets in his account in connection with
such change if the requirements of subparagraph (C) are met
in connection with such change.
``(B) For purposes of subparagraph (A), the term `qualified
change in investment options' means, in connection with an
individual account plan, a change in the investment options
offered to the participant or beneficiary under the terms of
the plan, under which--
``(i) the participant's account is reallocated among one or
more new investment options which are offered in lieu of one
or more investment options offered immediately prior to the
effective date of the change, and
``(ii) the characteristics of the new investment options,
including characteristics relating to risk and rate of
return, are, as of immediately after the change, reasonably
similar to those of the existing investment options as of
immediately before the change.
``(C) The requirements of this subparagraph are met in
connection with a qualified change in investment options if--
``(i) at least 60 days prior to the effective date of the
change, the plan administrator furnishes written notice of
the change to the participants and beneficiaries, including
information comparing the existing and new investment options
and an explanation that, in the absence of affirmative
investment instructions from the participant or beneficiary
to the contrary, the account of the participant or
beneficiary will be invested in the manner described in
subparagraph (B),
``(ii) the participant has not provided to the plan
administrator, in advance of the effective date of the
change, affirmative investment instructions contrary to the
change, and
``(iii) the investments under the plan of the participant
or beneficiary as in effect immediately prior to the
effective date of the change was the product of the exercise
by such participant or beneficiary of control over the assets
of the account within the meaning of paragraph (1).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply with respect to changes in investment options
taking effect on or after January 1, 2006.
SEC. 309. CLARIFICATION OF FIDUCIARY RULES.
Not later than 1 year after the date of the enactment of
this Act, the Secretary of Labor shall issue final
regulations clarifying that the selection of an annuity
contract as an optional form of distribution from an
individual account plan to a participant or beneficiary--
(1) is not subject to the safest available annuity standard
under Interpretive Bulletin 95-1 (29 C.F.R. 2509.95-1), and
(2) is subject to all otherwise applicable fiduciary
standards.
SEC. 310. GOVERNMENT ACCOUNTABILITY OFFICE PENSION FUNDING
REPORT.
(a) In General.--The Comptroller General of the Government
Accountability Office shall transmit to the Congress a
pension funding report not later than one year after the date
of the enactment of this Act.
(b) Report Content.--The pension funding report required
under subsection (a) shall include an analysis of the
feasibility, advantages, and disadvantages of--
(1) requiring an employee pension benefit plan to insure a
portion of such plan's total investments;
(2) requiring an employee pension benefit plan to adhere to
uniform solvency standards set by the Pension Benefit
Guaranty Corporation, which are similar to those applied on a
State level in the insurance industry; and
(3) amortizing a single-employer defined benefit pension
plan's shortfall amortization base (referred to in section
303(c)(3) of the Employee Retirement Income Security Act of
1974 (as amended by this Act)) over various periods of not
more than 7 years.
TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS
SEC. 401. INCREASES IN PBGC PREMIUMS.
(a) Flat-Rate Premiums.--Section 4006(a)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3))
is amended--
(1) by striking clause (i) of subparagraph (A) and
inserting the following:
``(i) in the case of a single-employer plan, an amount
equal to--
``(I) for plan years beginning after December 31, 1990, and
before January 1, 2006, $19, or
``(II) for plan years beginning after December 31, 2005,
the amount determined under subparagraph (F),
plus the additional premium (if any) determined under
subparagraph (E) for each individual who is a participant in
such plan during the plan year;''; and
(2) by adding at the end the following new subparagraph:
``(F)(i) Except as otherwise provided in this subparagraph,
for purposes of determining the annual premium rate payable
to the corporation by a single-employer plan for basic
benefits guaranteed under this title, the amount determined
under this subparagraph is the greater of $30 or the adjusted
amount determined under clause (ii).
``(ii) For plan years beginning after 2006, the adjusted
amount determined under this clause is the product derived by
multiplying $30 by the ratio of--
``(I) the national average wage index (as defined in
section 209(k)(1) of the Social Security Act) for the first
of the 2 calendar years preceding the calendar year in which
the plan year begins, to
``(II) the national average wage index (as so defined) for
2004,
with such product, if not a multiple of $1, being rounded to
the next higher multiple of $1 where such product is a
multiple of $0.50 but not of $1, and to the nearest multiple
of $1 in any other case.
``(iii) For purposes of determining the annual premium rate
payable to the corporation by a single-employer plan for
basic benefits guaranteed under this title for any plan year
beginning after 2005 and before 2010--
``(I) except as provided in subclause (II), the premium
amount referred to in subparagraph (A)(i)(II) for any such
plan year is the amount set forth in connection with such
plan year in the following table:
``If the plan year begins in: The amount is:
2006................................... $21.20
2007................................... $23.40
2008................................... $25.60
2009................................... $27.80; or
``(II) if the plan's funding target attainment percentage
for the plan year preceding the current plan year was less
than 80 percent, the premium amount referred to in
subparagraph (A)(i)(II) for such current plan year is the
amount set forth in connection
[[Page H11742]]
with such current plan year in the following table:
``If the plan year begins in: The amount is:
2006................................... $22.67
2007................................... $26.33
2008 or 2009........................... the amount provided under
clause (i).
``(iv) For purposes of this subparagraph, the term `funding
target attainment percentage' has the meaning provided such
term in section 303(d)(2).''.
(b) Premium Rate for Certain Terminated Single-Employer
Plans.--Subsection (a) of section 4006 of such Act (29 U.S.C.
1306) is amended by adding at the end the following:
``(7) Premium Rate for Certain Terminated Single-Employer
Plans.--
``(A) In general.--If there is a termination of a single-
employer plan under clause (ii) or (iii) of section
4041(c)(2)(B) or section 4042, there shall be payable to the
corporation, with respect to each applicable 12-month period,
a premium at a rate equal to $1,250 multiplied by the number
of individuals who were participants in the plan immediately
before the termination date. Such premium shall be in
addition to any other premium under this section.
``(B) Special rule for plans terminated in bankruptcy
reorganization.--If the plan is terminated under
4041(c)(2)(B)(ii) or under section 4042 and, as of the
termination date, a person who is (as of such date) a
contributing sponsor of the plan or a member of such
sponsor's controlled group has filed or has had filed against
such person a petition seeking reorganization in a case under
title 11 of the United States Code, or under any similar law
of a State or a political subdivision of a State (or a case
described in section 4041(c)(2)(B)(i) filed by or against
such person has been converted, as of such date, to such a
case in which reorganization is sought), subparagraph (A)
shall not apply to such plan until the date of the discharge
of such person in such case.
``(C) Applicable 12-month period.--For purposes of
subparagraph (A)--
``(i) In general.--The term `applicable 12-month period'
means--
``(I) the 12-month period beginning with the first month
following the month in which the termination date occurs, and
``(II) each of the first two 12-month periods immediately
following the period described in subclause (I).
``(ii) Plans terminated in bankruptcy reorganization.--In
any case in which the requirements of subparagraph (B) are
met in connection with the termination of the plan with
respect to 1 or more persons described in such subparagraph,
the 12-month period described in clause (i)(I) shall be the
12-month period beginning with the first month following the
month which includes the earliest date as of which each such
person is discharged in the case described in such clause in
connection with such person.
``(D) Coordination with section 4007.--
``(i) Notwithstanding section 4007--
``(I) premiums under this paragraph shall be due within 30
days after the beginning of any applicable 12-month period,
and
``(II) the designated payor shall be the person who is the
contributing sponsor as of immediately before the termination
date.
``(ii) The fifth sentence of section 4007(a) shall not
apply in connection with premiums determined under this
paragraph.''.
(c) Risk-Based Premiums.--
(1) Extension through 2006.--Section 4006(a)(3)(E)(iii)(V)
of such Act is amended by striking ``January 1, 2006'' and
inserting ``January 1, 2007''.
(2) Conforming amendments related to funding rules for
single-employer plans.--Section 4006(a)(3)(E) of such Act is
amended by striking clauses (iii) and (iv) and inserting the
following:
``(iii)(I) For purposes of clause (ii), except as provided
in subclause (II), the term `unfunded vested benefits' means,
for a plan year, the amount which would be the plan's funding
shortfall (as defined in section 303(c)(4)), if the value of
plan assets of the plan were equal to the fair market value
of such assets and only vested benefits were taken into
account.
``(II) The interest rate used in valuing vested benefits
for purposes of subclause (I) shall be equal to the first,
second, or third segment rate which would be determined under
section 303(h)(2)(C) if section 303(h)(2)(D)(i) were applied
by substituting `the yields' for `the 3-year weighted average
of yields', as applicable under rules similar to the rules
under section 303(h)(2)(B).''.
(d) Effective Dates.--
(1) In general.--The amendments made by subsection (a) and
(c)(1) shall apply to plan years beginning after December 31,
2005.
(2) Premium rate for certain terminated single-employer
plans.--The amendment made by subsection (b) shall apply with
respect to cases commenced under title 11, United States
Code, or under any similar law of a State or political
subdivision of a State after October 26, 2005.
(3) Conforming amendments related to funding rules for
single-employer plans.--The amendments made by subsection
(c)(2) shall take effect on December 31, 2006, and shall
apply to plan years beginning after such date.
TITLE V--DISCLOSURE
SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICES.
(a) Application of Plan Funding Notice Requirements to All
Defined Benefit Plans.--Section 101(f) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1021(f)) is
amended--
(1) in the heading, by striking ``Multiemployer'';
(2) in paragraph (1), by striking ``which is a
multiemployer plan''; and
(3) by striking paragraph (2)(B)(iii) and inserting the
following:
``(iii)(I) in the case of a single-employer plan, a summary
of the rules governing termination of single-employer plans
under subtitle C of title IV, or
``(II) in the case of a multiemployer plan, 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''.
(b) Inclusion of Statement of the Ratio of Inactive
Participants to Active Participants.--Section 101(f)(2)(B) of
such Act (29 U.S.C. 1021(f)(2)(B)) is amended--
(1) in clause (iii)(II) (added by subsection (a)(3) of this
section), by striking ``and'' at the end;
(2) in clause (iv), by striking ``apply.'' and inserting
``apply; and''; and
(3) by adding at the end the following new clause:
``(v) a statement of the ratio, as of the end of the plan
year to which the notice relates, of--
``(I) the number of participants who are not in covered
service under the plan and are in pay status under the plan
or have a nonforfeitable right to benefits under the plan, to
``(II) the number of participants who are in covered
service under the plan.''.
(c) Comparison of Monthly Average of Value of Plan Assets
to Projected Current Liabilities.--Section 101(f)(2)(B) of
such Act (29 U.S.C. 1021(f)(2)(B)) (as amended by the
preceding provisions of this section) is amended further--
(1) by striking clause (ii) and inserting the following:
``(ii) a statement of a reasonable estimate of--
``(I) the value of the plan's assets for the plan year to
which the notice relates,
``(II) projected liabilities of the plan for the plan year
to which the notice relates, and
``(III) the ratio of the estimated amount determined under
subclause (I) to the estimated amount determined under
subclause (II);''; and
(2) by adding at the end (after and below clause (v)) the
following:
``For purposes of determining a plan's projected liabilities
for a plan year under clause (ii)(II), such projected
liabilities shall be determined by projecting forward in a
reasonable manner to the end of the plan year the liabilities
of the plan to participants and beneficiaries as of the first
day of the plan year, taking into account any significant
events that occur during the plan year and that have a
material effect on such liabilities, including any plan
amendments in effect for the plan year.''.
(d) Statement of Plan's Funding Policy and Method of Asset
Allocation.--Section 101(f)(2)(B) of such Act (as amended by
the preceding provisions of this section) is amended
further--
(1) in clause (iv), by striking ``and'' at the end;
(2) in clause (v), by striking the period and inserting
``; and''; and
(3) by inserting after clause (v) the following new clause:
``(vi) a statement setting forth the funding policy of the
plan and the asset allocation of investments under the plan
(expressed as percentages of total assets) as of the end of
the plan year to which the notice relates.''.
(e) Notice of Funding Improvement Plan or Rehabilitation
Plan Adopted by Multiemployer Plan.--Section 101(f)(2)(B) of
such Act (as amended by the preceding provisions of this
section) is amended further--
(1) in clause (v), by striking ``and'' at the end;
(2) in clause (vi), by striking the period and inserting
``; and''; and
(3) by inserting after clause (vi) the following new
clause:
``(vii) a summary of any funding improvement plan,
rehabilitation plan, or modification thereof adopted under
section 305 during the plan year to which the notice
relates.''.
(f) Notice Due 90 Days After Plan's Valuation Date.--
(1) In general.--Section 101(f)(3) of such Act (29 U.S.C.
1021(f)(3)) is amended by striking ``two months after the
deadline (including extensions) for filing the annual report
for the plan year'' and inserting ``90 days after the end of
the plan year''.
(2) Model notice.--Not later than 180 days after the date
of the enactment of this Act, the Secretary of Labor shall
publish a model version of the notice required by section
101(f) of the Employee Retirement Income Security Act of
1974.
(g) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2005.
SEC. 502. ADDITIONAL DISCLOSURE REQUIREMENTS.
(a) Additional Annual Reporting Requirements.--Section 103
of the Employee
[[Page H11743]]
Retirement Income Security Act of 1974 (29 U.S.C. 1023) is
amended--
(1) in subsection (a)(1)(B), by striking ``subsections (d)
and (e)'' and inserting ``subsections (d), (e), and (f)'';
and
(2) by adding at the end the following new subsection:
``(f)(1) With respect to any defined benefit plan, an
annual report under this section for a plan year shall
include the following:
``(A) The ratio, as of the end of such plan year, of--
``(i) the number of participants who, as of the end of such
plan year, are not in covered service under the plan and are
in pay status under the plan or have a nonforfeitable right
to benefits under the plan, to
``(ii) the number of participants who are in covered
service under the plan as of the end of such plan year.
``(B) In any case in which any liabilities to participants
or their beneficiaries under such plan as of the end of such
plan year consist (in whole or in part) of liabilities to
such participants and beneficiaries borne by 2 or more
pension plans as of immediately before such plan year, the
funded ratio of each of such 2 or more pension plans as of
immediately before such plan year and the funded ratio of the
plan with respect to which the annual report is filed as of
the end of such plan year.
``(C) For purposes of this paragraph, the term `funded
ratio' means, in connection with a plan, the percentage
which--
``(i) the value of the plan's assets is of
``(ii) the liabilities to participants and beneficiaries
under the plan.
``(2) With respect to any defined benefit plan which is a
multiemployer plan, an annual report under this section for a
plan year shall include the following:
``(A) The number of employers obligated to contribute to
the plan as of the end of such plan year.
``(B) The number of participants under the plan on whose
behalf no employer contributions have been made to the plan
for such plan year. For purposes of this subparagraph, the
term `employer contribution' means, in connection with a
participant, a contribution made by an employer as an
employer of such participant.''.
(b) Additional Information in Annual Actuarial Statement
Regarding Plan Retirement Projections.--Section 103(d) of
such Act (29 U.S.C. 1023(d)) is amended--
(1) by redesignating paragraphs (12) and (13) as paragraphs
(13) and (14), respectively; and
(2) by inserting after paragraph (11) the following new
paragraph:
``(12) A statement explaining the actuarial assumptions and
methods used in projecting future retirements and forms of
benefit distributions under the plan.''.
(c) Filing After 285 Days After Plan Year Only in Cases of
Hardship.--Section 104(a)(1) of such Act (29 U.S.C.
1024(a)(1)) is amended by inserting after the first sentence
the following new sentence: ``In the case of a pension plan,
the Secretary may extend the deadline for filing the annual
report for any plan year past 285 days after the close of the
plan year only on a case by case basis and only in cases of
hardship, in accordance with regulations which shall be
prescribed by the Secretary.''.
(d) Internet Display of Information.--Section 104(b) of
such Act (29 U.S.C. 1024(b)) is amended by adding at the end
the following:
``(5) Identification and basic plan information and
actuarial information included in the annual report for any
plan year shall be filed with the Secretary in an electronic
format which accommodates display on the Internet, in
accordance with regulations which shall be prescribed by the
Secretary. The Secretary shall provide for display of such
information included in the annual report, within 90 days
after the date of the filing of the annual report, on a
website maintained by the Secretary on the Internet and other
appropriate media. Such information shall also be displayed
on any website maintained by the plan sponsor (or by the plan
administrator on behalf of the plan sponsor) on the Internet,
in accordance with regulations which shall be prescribed by
the Secretary.''.
(e) Summary Annual Report Filed Within 15 Days After
Deadline for Filing of Annual Report.--Section 104(b)(3) of
such Act (29 U.S.C. 1024(b)(3)) is amended--
(1) by striking ``Within 210 days after the close of the
fiscal year of the plan,'' and inserting ``Within 15 business
days after the due date under subsection (a)(1) for the
filing of the annual report for the fiscal year of the
plan,''; and
(2) by striking ``the latest'' and inserting ``such''.
(f) Disclosure of Plan Assets and Liabilities in Summary
Annual Report.--
(1) In general.--Section 104(b)(3) of such Act (as amended
by subsection (a)) is amended further--
(A) by inserting ``(A)'' after ``(3)''; and
(B) by adding at the end the following:
``(B) The material provided pursuant to subparagraph (A) to
summarize the latest annual report shall be written in a
manner calculated to be understood by the average plan
participant and shall set forth the total assets and
liabilities of the plan for the plan year for which the
latest annual report was filed and for each of the 2
preceding plan years, as reported in the annual report for
each such plan year under this section.''.
(g) Information Made Available to Participants,
Beneficiaries, and Employers With Respect to Multiemployer
Plans.--
(1) In general.--Section 101 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021) (as amended by
section 103(b)(2)(A)) is further amended--
(A) by redesignating subsection (k) as subsection (l); and
(B) by inserting after subsection (j) the following new
subsection:
``(k) Multiemployer Plan Information Made Available on
Request.--
``(1) In general.--Each administrator of a multiemployer
plan shall furnish to any plan participant or beneficiary or
any employer having an obligation to contribute to the plan,
who so requests in writing--
``(A) a copy of any actuarial report received by the plan
for any plan year which has been in receipt by the plan for
at least 30 days, and
``(B) a copy of any financial report prepared for the plan
by any plan investment manager or advisor or other person who
is a plan fiduciary which has been in receipt by the plan for
at least 30 days.
``(2) Compliance.--Information required to be provided
under paragraph (1) --
``(A) shall be provided to the requesting participant,
beneficiary, or employer within 30 days after the request in
a form and manner prescribed in regulations of the Secretary,
and
``(B) may be provided in written, electronic, or other
appropriate form to the extent such form is reasonably
accessible to persons to whom the information is required to
be provided.
``(3) Limitations.--In no case shall a participant,
beneficiary, or employer be entitled under this subsection to
receive more than one copy of any report described in
paragraph (1) during any one 12-month period. The
administrator may make a reasonable charge to cover copying,
mailing, and other costs of furnishing copies of information
pursuant to paragraph (1). The Secretary may by regulations
prescribe the maximum amount which will constitute a
reasonable charge under the preceding sentence.''.
(2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) (as amended by section 103(b)(2)(B)) is further
amended by striking ``sections 101(j) and 302(b)(7)(F)(iv)''
and inserting ``sections 101(j), 101(k), and
302(b)(7)(F)(iv)''.
(3) Regulations.--The Secretary shall prescribe regulations
under section 101(k)(2) of the Employee Retirement Income
Security Act of 1974 (added by paragraph (1) of this
subsection) not later than 90 days after the date of the
enactment of this Act.
(h) Notice of Potential Withdrawal Liability to
Multiemployer Plans.--
(1) In general.--Section 101 of such Act (as amended by
subsection (g) of this section) is further amended--
(A) by redesignating subsection (l) as subsection (m); and
(B) by inserting after subsection (k) the following new
subsection:
``(l) Notice of Potential Withdrawal Liability.--
``(1) In general.--The plan sponsor or administrator of a
multiemployer plan shall furnish to any employer who has an
obligation to contribute under the plan and who so requests
in writing notice of--
``(A) the amount which would be the amount of such
employer's withdrawal liability under part 1 of subtitle E of
title IV if such employer withdrew on the last day of the
plan year preceding the date of the request, and
``(B) the average increase, per participant under the plan,
in accrued liabilities under the plan as of the end of such
plan year to participants under such plan on whose behalf no
employer contributions are payable (or their beneficiaries),
which would be attributable to such a withdrawal by such
employer.
For purposes of subparagraph (B), the term `employer
contribution' means, in connection with a participant, a
contribution made by an employer as an employer of such
participant.
``(2) Compliance.--Any notice required to be provided under
paragraph (1)--
``(A) shall be provided to the requesting employer within
180 days after the request in a form and manner prescribed in
regulations of the Secretary, and
``(B) may be provided in written, electronic, or other
appropriate form to the extent such form is reasonably
accessible to employers to whom the information is required
to be provided.
``(3) Limitations.--In no case shall an employer be
entitled under this subsection to receive more than one
notice described in paragraph (1) during any one 12-month
period. The person required to provide such notice may make a
reasonable charge to cover copying, mailing, and other costs
of furnishing such notice pursuant to paragraph (1). The
Secretary may by regulations prescribe the maximum amount
which will constitute a reasonable charge under the preceding
sentence.''.
(2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) (as amended by paragraph (1)) is further amended
by striking ``sections 101(j), 101(k), and 302(b)(7)(F)(iv)''
and inserting ``sections 101(j), 101(k), 101(l), and
302(b)(7)(F)(iv)''.
(i) Model Form.--Not later than 180 days after the date of
the enactment of this Act, the Secretary of Labor shall
publish a model form for providing the statements, schedules,
and other material required to be provided under section
104(b)(3) of the Employee
[[Page H11744]]
Retirement Income Security Act of 1974, as amended by this
section.
(j) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2005.
SEC. 503. SECTION 4010 FILINGS WITH THE PBGC.
(a) Change in Criteria for Persons Required to Provide
Information to PBGC.--Section 4010(b) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1310(b)) is
amended by striking paragraph (1), by redesignating
paragraphs (2) and (3) as paragraphs (3) and (4),
respectively, and by inserting before paragraph (3) (as so
redesignated) the following new paragraphs:
``(1) the aggregate funding target attainment percentage of
the plan (as defined in subsection (d)(2)) is less than 60
percent;
``(2)(A) the aggregate funding target attainment percentage
of the plan (as defined in subsection (d)(2)) is less than 75
percent, and
``(B) the plan sponsor is in an industry with respect to
which the corporation determines that there is substantial
unemployment or underemployment and the sales and profits are
depressed or declining;''.
(b) Notice to Participants and Beneficiaries.--Section 4010
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1310) is amended by adding at the end the following
new subsection:
``(d) Notice to Participants and Beneficiaries.--
``(1) In general.--Not later than 90 days after the
submission by any person to the corporation of information or
documentary material with respect to any plan pursuant to
subsection (a), such person shall provide notice of such
submission to each participant and beneficiary under the plan
(and under all plans maintained by members of the controlled
group of each contributing sponsor of the plan). Such notice
shall also set forth--
``(A) the number of single-employer plans covered by this
title which are in at-risk status and are maintained by
contributing sponsors of such plan (and by members of their
controlled groups) with respect to which the funding target
attainment percentage for the preceding plan year of each
plan is less than 60 percent;
``(B) the value of the assets of each of the plans
described in subparagraph (A) for the plan year, the funding
target for each of such plans for the plan year, and the
funding target attainment percentage of each of such plans
for the plan year; and
``(C) taking into account all single-employer plans
maintained by the contributing sponsor and the members of its
controlled group as of the end of such plan year--
``(i) the aggregate total of the values of plan assets of
such plans as of the end of such plan year,
``(ii) the aggregate total of the funding targets of such
plans, as of the end of such plan year, taking into account
only benefits to which participants and beneficiaries have a
nonforfeitable right, and
``(iii) the aggregate funding targets attainment percentage
with respect to the contributing sponsor for the preceding
plan year.
``(2) Definitions.--For purposes of this subsection--
``(A) Value of plan assets.--The term `value of plan
assets' means the value of plan assets, as determined under
section 303(g)(3).
``(B) Funding target.--The term `funding target' has the
meaning provided under section 303(d)(1).
``(C) Funding target attainment percentage.--The term
`funding target attainment percentage' has the meaning
provided in section 303(d)(2).
``(D) Aggregate funding targets attainment percentage.--The
term `aggregate funding targets attainment percentage' with
respect to a contributing sponsor for a plan year is the
percentage, taking into account all plans maintained by the
contributing sponsor and the members of its controlled group
as of the end of such plan year, which
``(i) the aggregate total of the values of plan assets, as
of the end of such plan year, of such plans, is of
``(ii) the aggregate total of the funding targets of such
plans, as of the end of such plan year, taking into account
only benefits to which participants and beneficiaries have a
nonforfeitable right.
``(E) At-risk status.--The term `at-risk status' has the
meaning provided in section 303(i)(3).
``(3) Compliance.--
``(A) In general.--Any notice required to be provided under
paragraph (1) may be provided in written, electronic, or
other appropriate form to the extent such form is reasonably
accessible to individuals to whom the information is required
to be provided.
``(B) Limitations.--In no case shall a participant or
beneficiary be entitled under this subsection to receive more
than one notice described in paragraph (1) during any one 12-
month period. The person required to provide such notice may
make a reasonable charge to cover copying, mailing, and other
costs of furnishing such notice pursuant to paragraph (1).
The corporation may by regulations prescribe the maximum
amount which will constitute a reasonable charge under the
preceding sentence.
``(4) Notice to congress.--Concurrent with the provision of
any notice under paragraph (1), such person shall provide
such notice to the Committee on Education and the Workforce
and the Committee on Ways and Means of the House of
Representatives and the Committee on Health, Education,
Labor, and Pensions and the Committee on Finance of the
Senate, which shall be treated as materials provided in
executive session.''.
(c) Effective Date.--The amendment made by this section
shall apply with respect to plan years beginning after
December 31, 2006.
TITLE VI--INVESTMENT ADVICE
SEC. 601. AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974 PROVIDING PROHIBITED TRANSACTION
EXEMPTION FOR PROVISION OF INVESTMENT ADVICE.
(a) Exemption From Prohibited Transactions.--Section 408(b)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(b)) is amended by adding at the end the following
new paragraph:
``(14)(A) Any transaction described in subparagraph (B) in
connection with the provision of investment advice described
in section 3(21)(A)(ii), in any case in which--
``(i) the investment of assets of the plan is subject to
the direction of plan participants or beneficiaries,
``(ii) the advice is provided to the plan or a participant
or beneficiary of the plan by a fiduciary adviser in
connection with any sale, acquisition, or holding of a
security or other property for purposes of investment of plan
assets, and
``(iii) the requirements of subsection (g) are met in
connection with the provision of the advice.
``(B) The transactions described in this subparagraph are
the following:
``(i) the provision of the advice to the plan, participant,
or beneficiary;
``(ii) the sale, acquisition, or holding of a security or
other property (including any lending of money or other
extension of credit associated with the sale, acquisition, or
holding of a security or other property) pursuant to the
advice; and
``(iii) the direct or indirect receipt of fees or other
compensation by the fiduciary adviser or an affiliate thereof
(or any employee, agent, or registered representative of the
fiduciary adviser or affiliate) in connection with the
provision of the advice or in connection with a sale,
acquisition, or holding of a security or other property
pursuant to the advice.''.
(b) Requirements.--Section 408 of such Act is amended
further by adding at the end the following new subsection:
``(g) Requirements Relating to Provision of Investment
Advice by Fiduciary Advisers.--
``(1) In general.--The requirements of this subsection are
met in connection with the provision of investment advice
referred to in section 3(21)(A)(ii), provided to an employee
benefit plan or a participant or beneficiary of an employee
benefit plan by a fiduciary adviser with respect to the plan
in connection with any sale, acquisition, or holding of a
security or other property for purposes of investment of
amounts held by the plan, if--
``(A) in the case of the initial provision of the advice
with regard to the security or other property by the
fiduciary adviser to the plan, participant, or beneficiary,
the fiduciary adviser provides to the recipient of the
advice, at a time reasonably contemporaneous with the initial
provision of the advice, a written notification (which may
consist of notification by means of electronic
communication)--
``(i) of all fees or other compensation relating to the
advice that the fiduciary adviser or any affiliate thereof is
to receive (including compensation provided by any third
party) in connection with the provision of the advice or in
connection with the sale, acquisition, or holding of the
security or other property,
``(ii) of any material affiliation or contractual
relationship of the fiduciary adviser or affiliates thereof
in the security or other property,
``(iii) of any limitation placed on the scope of the
investment advice to be provided by the fiduciary adviser
with respect to any such sale, acquisition, or holding of a
security or other property,
``(iv) of the types of services provided by the fiduciary
adviser in connection with the provision of investment advice
by the fiduciary adviser,
``(v) that the adviser is acting as a fiduciary of the plan
in connection with the provision of the advice, and
``(vi) that a recipient of the advice may separately
arrange for the provision of advice by another adviser, that
could have no material affiliation with and receive no fees
or other compensation in connection with the security or
other property,
``(B) the fiduciary adviser provides appropriate
disclosure, in connection with the sale, acquisition, or
holding of the security or other property, in accordance with
all applicable securities laws,
``(C) the sale, acquisition, or holding occurs solely at
the direction of the recipient of the advice,
``(D) the compensation received by the fiduciary adviser
and affiliates thereof in connection with the sale,
acquisition, or holding of the security or other property is
reasonable, and
``(E) the terms of the sale, acquisition, or holding of the
security or other property are at least as favorable to the
plan as an arm's length transaction would be.
``(2) Standards for presentation of information.--
``(A) In general.--The notification required to be provided
to participants and beneficiaries under paragraph (1)(A)
shall be written in a clear and conspicuous manner
[[Page H11745]]
and in a manner calculated to be understood by the average
plan participant and shall be sufficiently accurate and
comprehensive to reasonably apprise such participants and
beneficiaries of the information required to be provided in
the notification.
``(B) Model form for disclosure of fees and other
compensation.--The Secretary shall issue a model form for the
disclosure of fees and other compensation required in
paragraph (1)(A)(i) which meets the requirements of
subparagraph (A).
``(3) Exemption conditioned on making required information
available annually, on request, and in the event of material
change.--The requirements of paragraph (1)(A) shall be deemed
not to have been met in connection with the initial or any
subsequent provision of advice described in paragraph (1) to
the plan, participant, or beneficiary if, at any time during
the provision of advisory services to the plan, participant,
or beneficiary, the fiduciary adviser fails to maintain the
information described in clauses (i) through (iv) of
subparagraph (A) in currently accurate form and in the manner
described in paragraph (2) or fails--
``(A) to provide, without charge, such currently accurate
information to the recipient of the advice no less than
annually,
``(B) to make such currently accurate information
available, upon request and without charge, to the recipient
of the advice, or
``(C) in the event of a material change to the information
described in clauses (i) through (iv) of paragraph (1)(A), to
provide, without charge, such currently accurate information
to the recipient of the advice at a time reasonably
contemporaneous to the material change in information.
``(4) Maintenance for 6 years of evidence of compliance.--A
fiduciary adviser referred to in paragraph (1) who has
provided advice referred to in such paragraph shall, for a
period of not less than 6 years after the provision of the
advice, maintain any records necessary for determining
whether the requirements of the preceding provisions of this
subsection and of subsection (b)(14) have been met. A
transaction prohibited under section 406 shall not be
considered to have occurred solely because the records are
lost or destroyed prior to the end of the 6-year period due
to circumstances beyond the control of the fiduciary adviser.
``(5) Exemption for plan sponsor and certain other
fiduciaries.--
``(A) In general.--Subject to subparagraph (B), a plan
sponsor or other person who is a fiduciary (other than a
fiduciary adviser) shall not be treated as failing to meet
the requirements of this part solely by reason of the
provision of investment advice referred to in section
3(21)(A)(ii) (or solely by reason of contracting for or
otherwise arranging for the provision of the advice), if--
``(i) the advice is provided by a fiduciary adviser
pursuant to an arrangement between the plan sponsor or other
fiduciary and the fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred to in such
section,
``(ii) the terms of the arrangement require compliance by
the fiduciary adviser with the requirements of this
subsection, and
``(iii) the terms of the arrangement include a written
acknowledgment by the fiduciary adviser that the fiduciary
adviser is a fiduciary of the plan with respect to the
provision of the advice.
``(B) Continued duty of prudent selection of adviser and
periodic review.--Nothing in subparagraph (A) shall be
construed to exempt a plan sponsor or other person who is a
fiduciary from any requirement of this part for the prudent
selection and periodic review of a fiduciary adviser with
whom the plan sponsor or other person enters into an
arrangement for the provision of advice referred to in
section 3(21)(A)(ii). The plan sponsor or other person who is
a fiduciary has no duty under this part to monitor the
specific investment advice given by the fiduciary adviser to
any particular recipient of the advice.
``(C) Availability of plan assets for payment for advice.--
Nothing in this part shall be construed to preclude the use
of plan assets to pay for reasonable expenses in providing
investment advice referred to in section 3(21)(A)(ii).
``(6) Definitions.--For purposes of this subsection and
subsection (b)(14)--
``(A) Fiduciary adviser.--The term `fiduciary adviser'
means, with respect to a plan, a person who is a fiduciary of
the plan by reason of the provision of investment advice by
the person to the plan or to a participant or beneficiary and
who is--
``(i) registered as an investment adviser under the
Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) or
under the laws of the State in which the fiduciary maintains
its principal office and place of business,
``(ii) a bank or similar financial institution referred to
in section 408(b)(4) or a savings association (as defined in
section 3(b)(1) of the Federal Deposit Insurance Act (12
U.S.C. 1813(b)(1))), but only if the advice is provided
through a trust department of the bank or similar financial
institution or savings association which is subject to
periodic examination and review by Federal or State banking
authorities,
``(iii) an insurance company qualified to do business under
the laws of a State,
``(iv) a person registered as a broker or dealer under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
``(v) an affiliate of a person described in any of clauses
(i) through (iv), or
``(vi) an employee, agent, or registered representative of
a person described in any of clauses (i) through (v) who
satisfies the requirements of applicable insurance, banking,
and securities laws relating to the provision of the advice.
``(B) Affiliate.--The term `affiliate' of another entity
means an affiliated person of the entity (as defined in
section 2(a)(3) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(3))).
``(C) Registered representative.--The term `registered
representative' of another entity means a person described in
section 3(a)(18) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(18)) (substituting the entity for the broker or
dealer referred to in such section) or a person described in
section 202(a)(17) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)(17)) (substituting the entity for the
investment adviser referred to in such section).''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to advice referred to in section
3(21)(A)(ii) of the Employee Retirement Income Security Act
of 1974 provided on or after January 1, 2006.
SEC. 602. AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
PROVIDING PROHIBITED TRANSACTION EXEMPTION FOR
PROVISION OF INVESTMENT ADVICE.
(a) Exemption From Prohibited Transactions.--Subsection (d)
of section 4975 of the Internal Revenue Code of 1986
(relating to exemptions from tax on prohibited transactions),
as amended by this Act, is amended--
(1) in paragraph (17), by striking ``or'' at the end;
(2) in paragraph (18), by striking the period at the end
and inserting ``; or''; and
(3) by adding at the end the following new paragraph:
``(19) any transaction described in subsection (f)(10)(A)
in connection with the provision of investment advice
described in subsection (e)(3)(B)(i), in any case in which--
``(A) the investment of assets of the plan is subject to
the direction of plan participants or beneficiaries,
``(B) the advice is provided to the plan or a participant
or beneficiary of the plan by a fiduciary adviser in
connection with any sale, acquisition, or holding of a
security or other property for purposes of investment of plan
assets, and
``(C) the requirements of subsection (f)(10)(B) are met in
connection with the provision of the advice.''.
(b) Allowed Transactions and Requirements.--Subsection (f)
of such section 4975 (relating to other definitions and
special rules), as amended by this Act, is amended by adding
at the end the following new paragraph:
``(10) Provisions relating to investment advice provided by
fiduciary advisers.--
``(A) Transactions allowable in connection with investment
advice provided by fiduciary advisers.--The transactions
referred to in subsection (d)(19), in connection with the
provision of investment advice by a fiduciary adviser, are
the following:
``(i) the provision of the advice to the plan, participant,
or beneficiary;
``(ii) the sale, acquisition, or holding of a security or
other property (including any lending of money or other
extension of credit associated with the sale, acquisition, or
holding of a security or other property) pursuant to the
advice; and
``(iii) the direct or indirect receipt of fees or other
compensation by the fiduciary adviser or an affiliate thereof
(or any employee, agent, or registered representative of the
fiduciary adviser or affiliate) in connection with the
provision of the advice or in connection with a sale,
acquisition, or holding of a security or other property
pursuant to the advice.
``(B) Requirements relating to provision of investment
advice by fiduciary advisers.--The requirements of this
subparagraph (referred to in subsection (d)(19)(C)) are met
in connection with the provision of investment advice
referred to in subsection (e)(3)(B), provided to a plan or a
participant or beneficiary of a plan by a fiduciary adviser
with respect to the plan in connection with any sale,
acquisition, or holding of a security or other property for
purposes of investment of amounts held by the plan, if--
``(i) in the case of the initial provision of the advice
with regard to the security or other property by the
fiduciary adviser to the plan, participant, or beneficiary,
the fiduciary adviser provides to the recipient of the
advice, at a time reasonably contemporaneous with the initial
provision of the advice, a written notification (which may
consist of notification by means of electronic
communication)--
``(I) of all fees or other compensation relating to the
advice that the fiduciary adviser or any affiliate thereof is
to receive (including compensation provided by any third
party) in connection with the provision of the advice or in
connection with the sale, acquisition, or holding of the
security or other property,
``(II) of any material affiliation or contractual
relationship of the fiduciary adviser or affiliates thereof
in the security or other property,
``(III) of any limitation placed on the scope of the
investment advice to be provided by the fiduciary adviser
with respect to any such sale, acquisition, or holding of a
security or other property,
``(IV) of the types of services provided by the fiduciary
adviser in connection with the
[[Page H11746]]
provision of investment advice by the fiduciary adviser,
``(V) that the adviser is acting as a fiduciary of the plan
in connection with the provision of the advice, and
``(VI) that a recipient of the advice may separately
arrange for the provision of advice by another adviser, that
could have no material affiliation with and receive no fees
or other compensation in connection with the security or
other property,
``(ii) the fiduciary adviser provides appropriate
disclosure, in connection with the sale, acquisition, or
holding of the security or other property, in accordance with
all applicable securities laws,
``(iii) the sale, acquisition, or holding occurs solely at
the direction of the recipient of the advice,
``(iv) the compensation received by the fiduciary adviser
and affiliates thereof in connection with the sale,
acquisition, or holding of the security or other property is
reasonable, and
``(v) the terms of the sale, acquisition, or holding of the
security or other property are at least as favorable to the
plan as an arm's length transaction would be.
``(C) Standards for presentation of information.--The
notification required to be provided to participants and
beneficiaries under subparagraph (B)(i) shall be written in a
clear and conspicuous manner and in a manner calculated to be
understood by the average plan participant and shall be
sufficiently accurate and comprehensive to reasonably apprise
such participants and beneficiaries of the information
required to be provided in the notification.
``(D) Exemption conditioned on making required information
available annually, on request, and in the event of material
change.--The requirements of subparagraph (B)(i) shall be
deemed not to have been met in connection with the initial or
any subsequent provision of advice described in subparagraph
(B) to the plan, participant, or beneficiary if, at any time
during the provision of advisory services to the plan,
participant, or beneficiary, the fiduciary adviser fails to
maintain the information described in subclauses (I) through
(IV) of subparagraph (B)(i) in currently accurate form and in
the manner required by subparagraph (C), or fails--
``(i) to provide, without charge, such currently accurate
information to the recipient of the advice no less than
annually,
``(ii) to make such currently accurate information
available, upon request and without charge, to the recipient
of the advice, or
``(iii) in the event of a material change to the
information described in subclauses (I) through (IV) of
subparagraph (B)(i), to provide, without charge, such
currently accurate information to the recipient of the advice
at a time reasonably contemporaneous to the material change
in information.
``(E) Maintenance for 6 years of evidence of compliance.--A
fiduciary adviser referred to in subparagraph (B) who has
provided advice referred to in such subparagraph shall, for a
period of not less than 6 years after the provision of the
advice, maintain any records necessary for determining
whether the requirements of the preceding provisions of this
paragraph and of subsection (d)(19) have been met. A
transaction prohibited under subsection (c)(1) shall not be
considered to have occurred solely because the records are
lost or destroyed prior to the end of the 6-year period due
to circumstances beyond the control of the fiduciary adviser.
``(F) Exemption for plan sponsor and certain other
fiduciaries.--A plan sponsor or other person who is a
fiduciary (other than a fiduciary adviser) shall not be
treated as failing to meet the requirements of this section
solely by reason of the provision of investment advice
referred to in subsection (e)(3)(B) (or solely by reason of
contracting for or otherwise arranging for the provision of
the advice), if--
``(i) the advice is provided by a fiduciary adviser
pursuant to an arrangement between the plan sponsor or other
fiduciary and the fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred to in such
section,
``(ii) the terms of the arrangement require compliance by
the fiduciary adviser with the requirements of this
paragraph,
``(iii) the terms of the arrangement include a written
acknowledgment by the fiduciary adviser that the fiduciary
adviser is a fiduciary of the plan with respect to the
provision of the advice, and
``(iv) the requirements of part 4 of subtitle B of title I
of the Employee Retirement Income Security Act of 1974 are
met in connection with the provision of such advice.
``(G) Definitions.--For purposes of this paragraph and
subsection (d)(19)--
``(i) Fiduciary adviser.--The term `fiduciary adviser'
means, with respect to a plan, a person who is a fiduciary of
the plan by reason of the provision of investment advice by
the person to the plan or to a participant or beneficiary and
who is--
``(I) registered as an investment adviser under the
Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) or
under the laws of the State in which the fiduciary maintains
its principal office and place of business,
``(II) a bank or similar financial institution referred to
in subsection (d)(4) or a savings association (as defined in
section 3(b)(1) of the Federal Deposit Insurance Act (12
U.S.C. 1813(b)(1))), but only if the advice is provided
through a trust department of the bank or similar financial
institution or savings association which is subject to
periodic examination and review by Federal or State banking
authorities,
``(III) an insurance company qualified to do business under
the laws of a State,
``(IV) a person registered as a broker or dealer under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
``(V) an affiliate of a person described in any of
subclauses (I) through (IV), or
``(VI) an employee, agent, or registered representative of
a person described in any of subclauses (I) through (V) who
satisfies the requirements of applicable insurance, banking,
and securities laws relating to the provision of the advice.
``(ii) Affiliate.--The term `affiliate' of another entity
means an affiliated person of the entity (as defined in
section 2(a)(3) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(3))).
``(iii) Registered representative.--The term `registered
representative' of another entity means a person described in
section 3(a)(18) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(18)) (substituting the entity for the broker or
dealer referred to in such section) or a person described in
section 202(a)(17) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)(17)) (substituting the entity for the
investment adviser referred to in such section).''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to advice referred to in section
4975(c)(3)(B) of the Internal Revenue Code of 1986 provided
on or after January 1, 2006.
TITLE VII--BENEFIT ACCRUAL STANDARDS
SEC. 701. BENEFIT ACCRUAL STANDARDS.
(a) Amendments to the Employee Retirement Income Security
Act of 1974.--
(1) Rules relating to reduction in rate of benefit
accrual.--Section 204(b)(1)(H) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1054(b)(1)(H)) is
amended by adding at the end the following new clauses:
``(vii)(I) A plan shall not be treated as failing to meet
the requirements of clause (i) if a participant's entire
accrued benefit, as determined as of any date under the
formula for determining benefits as set forth in the text of
the plan documents, would be equal to or greater than that of
any similarly situated, younger individual.
``(II) For purposes of this clause, an individual is
similarly situated to a participant if such individual is
identical to such participant in every respect (including
period of service, compensation, position, date of hire, work
history, and any other respect) except for age.
``(III) In determining the entire accrued benefit for
purposes of this clause, the subsidized portion of any early
retirement benefit (including any early retirement subsidy
that is fully or partially included or reflected in an
employee's opening balance or other transition benefits)
shall be disregarded.
``(IV) In determining the entire accrued benefit for
purposes of this clause, such benefit may be calculated as
the present value of accrued benefits projected to normal
retirement age, as an account balance, or as the current
value of the accumulated percentage of the employee's final
average compensation.
``(viii) A plan shall not be treated as failing to meet the
requirements of this subparagraph solely because the plan
provides allowable offsets against those benefits under the
plan which are attributable to employer contributions, based
on benefits which are provided under title II of the Social
Security Act, under the Railroad Retirement Act of 1974,
under another plan described in section 401(a) of the
Internal Revenue Code of 1986 maintained by the same
employer, under any retirement program for officers or
employees of the Federal Government or of the government of
any State or political subdivision thereof, or under such
other arrangements as the Secretary of the Treasury may
provide. For purposes of this clause, allowable offsets based
on such benefits consist of offsets equal to all or part of
the actual benefit payment amounts, reasonable projections or
estimations of such benefit payment amounts, or actuarial
equivalents of such actual benefit payment amounts,
projections, or estimations (determined on the basis of
reasonable actuarial assumptions).
``(ix) A plan shall not be treated as failing to meet the
requirements of this subparagraph solely because the plan
provides a disparity in contributions or benefits with
respect to which the requirements of section 401(l) of the
Internal Revenue Code of 1986 are met.
``(x)(I) A plan shall not be treated as failing to meet the
requirements of this subparagraph solely because the plan
provides for indexing of accrued benefits under the plan.
``(II) Except in the case of any benefit provided in the
form of a variable annuity, subclause (I) shall not apply
with respect to any indexing which results in an accrued
benefit less than the accrued benefit determined without
regard to such indexing.
``(III) For purposes of this clause, the term `indexing'
means, in connection with an accrued benefit, the periodic
adjustment of the accrued benefit by means of the application
of a recognized investment index or methodology.''.
(2) Determinations of accrued benefit as balance of benefit
account.--Section 203 of such Act (29 U.S.C. 1053) is amended
by adding at the end the following new subsection:
[[Page H11747]]
``(f)(1) A defined benefit plan under which the accrued
benefit payable under the plan upon distribution (or any
portion thereof) is expressed as the balance of a
hypothetical account maintained for the participant shall not
be treated as failing to meet the requirements of subsection
(a)(2), section 204(c) (but only in the case of a plan which
does not provide for employee contributions), or section
205(g) solely because of the amount actually made available
for such distribution under the terms of the plan, in any
case in which the applicable interest rate that would be used
under the terms of the plan to project the amount of the
participant's account balance to normal retirement age is not
greater than a market rate of return.
``(2) The Secretary of the Treasury may provide by
regulation for rules governing the calculation of a market
rate of return for purposes of paragraph (1) and for
permissible methods of crediting interest to the account
(including fixed or variable interest rates) resulting in
effective rates of return meeting the requirements of
paragraph (1).''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) Rules relating to reduction in rate of benefit
accrual.--Subparagraph (H) of section 411(b)(1) of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new clauses:
``(vi) Comparison to similarly situated younger
individual.--
``(I) In general.--A plan shall not be treated as failing
to meet the requirements of clause (i) if a participant's
entire accrued benefit, as determined as of any date under
the formula for determining benefits as set forth in the text
of the plan documents, would be equal to or greater than that
of any similarly situated, younger individual.
``(II) Similarly situated.--For purposes of this clause, an
individual is similarly situated to a participant if such
individual is identical to such participant in every respect
(including period of service, compensation, position, date of
hire, work history, and any other respect) except for age.
``(III) Disregard of subsidized early retirement
benefits.--In determining the entire accrued benefit for
purposes of this clause, the subsidized portion of any early
retirement benefit (including any early retirement subsidy
that is fully or partially included or reflected in an
employee's opening balance or other transition benefits)
shall be disregarded.
``(IV) Entire accrued benefit.--In determining the entire
accrued benefit for purposes of this clause, such benefit may
be calculated as the present value of accrued benefits
projected to normal retirement age, as an account balance, or
as the current value of the accumulated percentage of the
employee's final average compensation.
``(vii) Certain offsets permitted.--A plan shall not be
treated as failing to meet the requirements of this
subparagraph solely because the plan provides allowable
offsets against those benefits under the plan which are
attributable to employer contributions, based on benefits
which are provided under title II of the Social Security Act,
under the Railroad Retirement Act of 1974, under another plan
described in section 401(a) maintained by the same employer,
under any retirement program for officers or employees of the
Federal Government or of the government of any State or
political subdivision thereof, or under such other
arrangements as the Secretary may provide. For purposes of
this clause, allowable offsets based on such benefits consist
of offsets equal to all or part of the actual benefit payment
amounts, reasonable projections or estimations of such
benefit payment amounts, or actuarial equivalents of such
actual benefit payment amounts, projections, or estimations
(determined on the basis of reasonable actuarial
assumptions).
``(viii) Permitted disparities in plan contributions or
benefits.--A plan shall not be treated as failing to meet the
requirements of this subparagraph solely because the plan
provides a disparity in contributions or benefits with
respect to which the requirements of section 401(l) are met.
``(ix) Indexing permitted.--
``(I) In general.--A plan shall not be treated as failing
to meet the requirements of this subparagraph solely because
the plan provides for indexing of accrued benefits under the
plan.
``(II) Protection of economic value.--Except in the case of
any benefit provided in the form of a variable annuity,
subclause (I) shall not apply with respect to any indexing
which results in an accrued benefit less than the accrued
benefit determined without regard to such indexing.
``(III) Indexing.--For purposes of this clause, the term
`indexing' means, in connection with an accrued benefit, the
periodic adjustment of the accrued benefit by means of the
application of a recognized investment index or
methodology.''.
(2) Determinations of accrued benefit as balance of benefit
account.--Subsection (a) of section 411 of such Code is
amended by adding at the end the following new paragraph:
``(13) Determinations of accrued benefit as balance of
benefit account.--
``(A) In general.--A defined benefit plan under which the
accrued benefit payable under the plan upon distribution (or
any portion thereof) is expressed as the balance of a
hypothetical account maintained for the participant shall not
be treated as failing to meet the requirements of subsection
(a)(2), subsection (c) (but only in the case of a plan which
does not provide for employee contributions), or section
417(e) solely because of the amount actually made available
for such distribution under the terms of the plan, in any
case in which the applicable interest rate that would be used
under the terms of the plan to project the amount of the
participant's account balance to normal retirement age is not
greater than a market rate of return.
``(B) Regulations.--The Secretary may provide by regulation
for rules governing the calculation of a market rate of
return for purposes of subparagraph (A) and for permissible
methods of crediting interest to the account (including fixed
or variable interest rates) resulting in effective rates of
return meeting the requirements of subparagraph (A).''.
(c) Effective Date.--The amendments made by this section
shall apply to periods beginning on or after June 29, 2005.
TITLE VIII--DEDUCTION LIMITATIONS
SEC. 801. INCREASE IN DEDUCTION LIMITS.
(a) Increase in Deduction Limit for Single-Employer
Plans.--Section 404 of the Internal Revenue Code of 1986
(relating to deduction for contributions of an employer to an
employees' trust or annuity plan and compensation under a
deferred payment plan) is amended--
(1) in subsection (a)(1)(A), by inserting ``in the case of
a defined benefit plan other than a multiemployer plan, in an
amount determined under subsection (o), and in the case of
any other plan'' after ``section 501(a),'', and
(2) by inserting at the end the following new subsection:
``(o) Deduction Limit for Single-Employer Plans.--For
purposes of subsection (a)(1)(A)--
``(1) In general.--In the case of a defined benefit plan to
which subsection (a)(1)(A) applies (other than a
multiemployer plan), the amount determined under this
subsection for any taxable year shall be equal to the amount
determined under paragraph (2) with respect to each plan year
ending with or within the taxable year.
``(2) Determination of amount.--The amount determined under
this paragraph for any plan year shall be equal to the excess
(if any) of--
``(A) the greater of--
``(i) the sum of--
``(I) 150 percent of the funding target applicable to the
plan for such plan year, determined under section 430, plus
``(II) the target normal cost applicable to the plan for
such plan year, determined under section 430(b), or
``(ii) in the case of a plan that is not in an at-risk
status (as determined under 430(i)), the sum of--
``(I) the funding target which would be applicable to the
plan for such plan year if such plan were in an at-risk
status, determined under section 430(d) (with regard to
section 430(i)), plus
``(II) the target normal cost which would be applicable to
the plan for such plan year if such plan were in an at-risk
status, determined under section 430(d) (with regard to
section 430(i)), over
``(B) the value of the plan assets (determined under
section 430(g)).
``(3) Special rule for terminating plans.--In the case of a
plan which, subject to section 4041 of the Employee
Retirement Income Security Act of 1974, terminates during the
plan year, the amount determined under paragraph (2) shall
not be less than the amount required to make the plan
sufficient for benefit liabilities (within the meaning of
section 4041(d) of such Act).
``(4) Definitions.--Any term used in this subsection which
is also used in section 430 shall have the same meaning given
such term by section 430.''.
(b) Increase in Deduction Limit for Multiemployer Plans.--
Section 404(a)(1)(D) of such Code is amended to read as
follows:
``(D) Minimum deduction for multiemployer plans.--In the
case of a defined benefit plan which is a multiemployer plan,
except as provided in regulations, the maximum amount
deductible under the limitations of this paragraph shall not
be less than the excess (if any) of--
``(i) 140 percent of the current liability of the plan
determined under section 431(c)(6)(D), over
``(ii) the value of the plan's assets determined under
section 431(c)(2).''.
(c) Technical and Conforming Amendments.--
(1) The last sentence of section 404(a)(1)(A) of such Code
is amended by striking ``section 412'' each place it appears
and inserting ``section 431''.
(2) Section 404(a)(1)(B) of such Code is amended--
(A) by striking ``In the case of a plan'' and inserting
``In the case of a multiemployer plan'',
(B) by striking ``section 412(c)(7)'' each place it appears
and inserting ``section 431(c)(6)'',
(C) by striking ``section 412(c)(7)(B)'' and inserting
``section 431(c)(6)(D)'',
(D) by striking ``section 412(c)(7)(A)'' and inserting
``section 431(c)(6)(A)'', and
(E) by striking ``section 412'' and inserting ``section
431''.
(3) Section 404(a)(1) of such Code is amended by striking
subparagraph (F).
(4) Section 404(a)(7) of such Code is amended--
(A) in subparagraph (A)(ii), by striking ``for the plan
year'' and all that follows and inserting ``which are
multiemployer plans
[[Page H11748]]
for the plan year which ends with or within such taxable year
(or for any prior plan year) and the maximum amount of
employer contributions allowable under subsection (o) with
respect to any such defined benefit plans which are not
multiemployer plans for the plan year.'',
(B) by striking ``section 412(l)'' in the last sentence of
subparagraph (A) and inserting ``paragraph (1)(D)(ii)'', and
(C) by striking subparagraph (D) and inserting:
``(D) Insurance contract plans.--For purposes of this
paragraph, a plan described in section 412(e)(3) shall be
treated as a defined benefit plan.''.
(5) Section 404A(g)(3)(A) of such Code is amended by
striking ``paragraphs (3) and (7) of section 412(c)'' and
inserting ``sections 430(h)(1) and 431(c)(3) and (6)''.
(d) Effective Date.--The amendments made by this section
shall apply to contributions for taxable years beginning
after December 31, 2006.
SEC. 802. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.
(a) In General.--Subparagraph (C) of section 404(a)(7) of
the Internal Revenue Code of 1986 (relating to limitation on
deductions where combination of defined contribution plan and
defined benefit plan) is amended by adding after clause (ii)
the following new clause:
``(iii) Limitation.--In the case of employer contributions
to 1 or more defined contribution plans, this paragraph shall
only apply to the extent that such contributions exceed 6
percent of the compensation otherwise paid or accrued during
the taxable year to the beneficiaries under such plans. For
purposes of this clause, amounts carried over from preceding
taxable years under subparagraph (B) shall be treated as
employer contributions to 1 or more defined contributions to
the extent attributable to employer contributions to such
plans in such preceding taxable years.''.
(b) Conforming Amendments.--Subparagraph (A) of section
4972(c)(6) of such Code (relating to nondeductible
contributions) is amended to read as follows:
``(A) so much of the contributions to 1 or more defined
contribution plans which are not deductible when contributed
solely because of section 404(a)(7) as does not exceed the
amount of contributions described in section 401(m)(4)(A),
or''.
(c) Effective Date.--The amendments made by this section
shall apply to contributions for taxable years beginning
after December 31, 2006.
TITLE IX--ENHANCED RETIREMENTS SAVINGS AND DEFINED CONTRIBUTION PLANS
SEC. 901. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT
PROVISIONS OF ECONOMIC GROWTH AND TAX RELIEF
RECONCILIATION ACT OF 2001 MADE PERMANENT.
Title IX of the Economic Growth and Tax Relief
Reconciliation Act of 2001 shall not apply to the provisions
of, and amendments made by, subtitles (A) through (F) of
title VI of such Act (relating to pension and individual
retirement arrangement provisions).
SEC. 902. SAVER'S CREDIT.
(a) Permanency.--Section 25B of the Internal Revenue Code
of 1986 (relating to elective deferrals and IRA contributions
by certain individuals) is amended by striking subsection
(h).
(b) Voluntary Deposit Into Qualified Account.--
(1) Section 25B of such Code, as amended by subsection (a),
is further amended by adding at the end the following new
subsection:
``(h) Voluntary Deposit Into Qualified Account.--
``(1) In general.--So much of any overpayment under section
6401(b) as does not exceed the amount allowed as a tax credit
under subsection (a) shall, at the election of the taxpayer,
be paid on behalf of the individual taxpayer to an applicable
retirement plan designated by the individual, except that in
the case of a joint return, each spouse shall be entitled to
designate an applicable retirement plan with respect to
payments attributable to such spouse.
``(2) Applicable retirement plan.--For purposes of this
subsection, the term `applicable retirement plan' means any
eligible retirement plan (as defined in section 402(c)(8)(B))
that elects to accept deposits under this subsection.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning after December 31,
2006.
SEC. 903. INCREASING PARTICIPATION THROUGH AUTOMATIC
CONTRIBUTION ARRANGEMENTS.
(a) In General.--Section 401(k) of the Internal Revenue
Code of 1986 (relating to cash or deferred arrangement) is
amended by adding at the end the following new paragraph:
``(13) Alternative method for automatic contribution
arrangements to meet nondiscrimination requirements.--
``(A) In general.--A qualified automatic contribution
arrangement shall be treated as meeting the requirements of
paragraph (3)(A)(ii).
``(B) Qualified automatic contribution arrangement.--For
purposes of this paragraph, the term `qualified automatic
contribution arrangement' means any cash or deferred
arrangement which meets the requirements of subparagraphs (C)
through (F).
``(C) Automatic deferral.--
``(i) In general.--The requirements of this subparagraph
are met if, under the arrangement, each employee eligible to
participate in the arrangement is treated as having elected
to have the employer make elective contributions in an amount
equal to a qualified percentage of compensation.
``(ii) Election out.--The election treated as having been
made under clause (i) shall cease to apply with respect to
any employee if such employee makes an affirmative election--
``(I) to not have such contributions made, or
``(II) to make elective contributions at a level specified
in such affirmative election.
``(iii) Qualified percentage.--For purposes of this
subparagraph, the term `qualified percentage' means, with
respect to any employee, any percentage determined under the
arrangement if such percentage is applied uniformly, does not
exceed 10 percent, and is at least--
``(I) 3 percent during the period ending on the last day of
the first plan year which begins after the date on which the
first elective contribution described in clause (i) is made
with respect to such employee,
``(II) 4 percent during the first plan year following the
plan year described in subclause (I),
``(III) 5 percent during the second plan year following the
plan year described in subclause (I), and
``(IV) 6 percent during any subsequent plan year.
``(iv) Automatic deferral for current employees not
required.--Clause (i) shall be applied without taking into
account any employee who was eligible to participate in the
arrangement (or a predecessor arrangement) immediately before
the date on which such arrangement becomes a qualified
automatic contribution arrangement (determined after
application of this clause).
``(D) Participation.--
``(i) In general.--An arrangement meets the requirements of
this subparagraph for any year if, during the plan year or
the preceding plan year, elective contributions are made on
behalf of at least 70 percent of the employees eligible to
participate in the arrangement other than--
``(I) highly compensated employees, and
``(II) at the election of the plan administrator, employees
described in subparagraph (C)(iv).
``(ii) First plan year.--An arrangement (other than a
successor arrangement) shall be treated as meeting the
requirements of this subparagraph with respect to the first
plan year with respect to which such arrangement is a
qualified automatic contribution arrangement (determined
without regard to this subparagraph).
``(E) Matching or nonelective contributions.--
``(i) In general.--The requirements of this subparagraph
are met if, under the arrangement, the employer--
``(I) makes matching contributions on behalf of each
employee who is not a highly compensated employee in an
amount equal to 50 percent of the elective contributions of
the employee to the extent such elective contributions do not
exceed 6 percent of compensation, or
``(II) is required, without regard to whether the employee
makes an elective contribution or employee contribution, to
make a contribution to a defined contribution plan on behalf
of each employee who is not a highly compensated employee and
who is eligible to participate in the arrangement in an
amount equal to at least 2 percent of the employee's
compensation.
``(ii) Application of rules for matching contributions.--
The rules of clauses (ii) and (iii) of paragraph (12)(B)
shall apply for purposes of clause (i)(I).
``(iii) Withdrawal and vesting restrictions.--An
arrangement shall not be treated as meeting the requirements
of clause (i) unless, with respect to employer contributions
(including matching contributions) taken into account in
determining whether the requirements of clause (i) are met--
``(I) any employee who has completed at least 2 years of
service (within the meaning of section 411(a)) has a
nonforfeitable right to 100 percent of the employee's accrued
benefit derived from such employer contributions, and
``(II) the requirements of subparagraph (B) of paragraph
(2) are met with respect to all such employer contributions.
``(iv) Application of certain other rules.--The rules of
subparagraphs (E)(ii) and (F) of paragraph (12) shall apply
for purposes of subclauses (I) and (II) of clause (i).
``(F) Notice requirements.--
``(i) In general.--The requirements of this subparagraph
are met if, within a reasonable period before each plan year,
each employee eligible to participate in the arrangement for
such year receives written notice of the employee's rights
and obligations under the arrangement which--
``(I) is sufficiently accurate and comprehensive to apprise
the employee of such rights and obligations, and
``(II) is written in a manner calculated to be understood
by the average employee to whom the arrangement applies.
``(ii) Timing and content requirements.--A notice shall not
be treated as meeting the requirements of clause (i) with
respect to an employee unless--
``(I) the notice explains the employee's right under the
arrangement to elect not to have elective contributions made
on the employee's behalf (or to elect to have such
contributions made at a different percentage),
[[Page H11749]]
``(II) in the case of an arrangement under which the
employee may elect among 2 or more investment options, the
notice explains how contributions made under the arrangement
will be invested in the absence of any investment election by
the employee, and
``(III) the employee has a reasonable period of time after
receipt of the notice described in subclauses (I) and (II)
and before the first elective contribution is made to make
either such election.''.
(b) Matching Contributions.--Section 401(m) of such Code
(relating to nondiscrimination test for matching
contributions and employee contributions) is amended by
redesignating paragraph (12) as paragraph (13) and by
inserting after paragraph (11) the following new paragraph:
``(12) Alternative method for automatic contribution
arrangements.--A defined contribution plan shall be treated
as meeting the requirements of paragraph (2) with respect to
matching contributions if the plan--
``(A) is a qualified automatic contribution arrangement (as
defined in subsection (k)(13)), and
``(B) meets the requirements of paragraph (11)(B).''.
(c) Exclusion From Definition of Top-Heavy Plans.--
(1) Elective contribution rule.--Clause (i) of section
416(g)(4)(H) of such Code is amended by inserting ``or
401(k)(13)'' after ``section 401(k)(12)''.
(2) Matching contribution rule.--Clause (ii) of section
416(g)(4)(H) of such Code is amended by inserting ``or
401(m)(12)'' after ``section 401(m)(11)''.
(d) Corrective Distributions.--
(1) In general.--Section 414 of the Internal Revenue Code
of 1986 (relating to definitions and special rules) is
amended by adding at the end the following new subsection:
``(w) Automatic Contribution Arrangements.--
``(1) In general.--No tax shall be imposed under section
72(t) on a distribution from an applicable employer plan to
the employee with respect to whom such contribution relates
if such distribution does not exceed the erroneous automatic
contribution amount and is made not later than the 1st April
15 following the close of the taxable year in which such
contribution was made.
``(2) Erroneous automatic contribution amount.--For
purposes of this subsection--
``(A) In general.--The term `erroneous automatic
contribution amount' means the lesser of--
``(i) the amount of automatic contributions made during the
applicable period which the employee elects in a notice to
the plan administrator to treat as an erroneous automatic
contribution amount for purposes of this subsection, or
``(ii) $500.
``(B) Automatic contribution.--The term `automatic
contribution' means contributions which, under the terms of
the plan--
``(i) the employee can elect to be made as contributions
under the plan on behalf of the employee, or to the employee
directly in cash, and
``(ii) which are made on behalf of the employee under the
plan pursuant to a plan provision treating the employee as
having elected to have the employer make such contributions
on behalf of the employee until the employee affirmatively
elects not to have such contribution made or affirmatively
elects to make contributions as a specified level.
``(3) Applicable employer plan.--For purposes of this
subsection, the term `applicable employer plan'means--
``(A) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a),
``(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b), and
``(C) an eligible deferred compensation plan described in
section 457(b) which is maintained by an eligible employer
described in section 457(e)(1)(A).
``(4) Applicable period.--For purposes of this subsection,
the term `applicable period' means, with respect to any
employee, the three month period that begins on the first
date that an automatic contribution described in paragraph
(2)(B) is made with respect to such employee.
``(5) Special rules.--A distribution described in paragraph
(1) (subject to the limitation of paragraph (2))--
``(A) shall not be treated as a distribution for purposes
of sections 401(k)(2)(B)(i), 403(b)(7), 403(b)(11), and
457(d)(1)(A), and
``(B) shall not be taken into account for purposes of
section 401(k)(3).''.
(2) Vesting conforming amendments.--
(A) Section 411(a)(3)(G) of such Code is amended by
inserting ``an erroneous automatic contribution under section
414(w),'' after ``402(g)(2)(A),''.
(B) The heading of section 411(a)(3)(G) of such Code is
amended by inserting ``or erroneous automatic contribution''
before the period.
(C) Section 401(k)(8)(E) of such Code is amended by
inserting ``an erroneous automatic contribution under section
414(w),'' after ``402(g)(2)(A),''.
(D) The heading of section 401(k)(8)(E) of such Code is
amended by inserting ``or erroneous automatic contribution''
before the period.
(E) Section 203(a)(3)(F) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1053(a)(3)(F)) is amended by
inserting ``an erroneous automatic contribution under section
414(w) of such Code,'' after ``402(g)(2)(A) of such Code,''.
(e) Control Over Plan Assets Deemed to Have Been Exercised
With Respect to Default Investment Arrangements.--Section
404(c) of the Employee Retirement Income Security Act of
1974, as amended by section 308, is further amended by adding
at the end the following new paragraph:
``(5)(A) For purposes of paragraph (1), a participant in an
individual account plan shall be treated as exercising
control over the assets in the account with respect to the
amount of contributions made under a default investment
arrangement.
``(B)(i) For purposes of this paragraph, the term `default
investment arrangement' means an arrangement--
``(I) which meets the requirements of subparagraph (C),
``(II) under which the participant is treated as having
elected to have the plan sponsor exercise control over the
assets in the participant's account until the participant
specifically elects to exercise such control, and
``(III) under which assets described in subclause (II) are
invested in accordance with regulations prescribed by the
Secretary.
``(ii) The regulations prescribed pursuant to clause
(i)(III) shall provide guidance on the appropriateness of
certain investments for designation as default investments
under the arrangement, which shall include guidance
regarding--
``(I) appropriate mixes of default investments and asset
classes which the Secretary considers consistent with long-
term capital appreciation, and
``(II) the designation of other default investments.
``(C)(i) For purposes of subparagraph (B)(i)(I), an
arrangement meets the requirements of this subparagraph for
any plan year if, within a reasonable period before such plan
year, the plan administrator gives to each participant to
whom the arrangement applies for such plan year notice of the
participant's rights and obligations under the arrangement
which--
``(I) is sufficiently accurate and comprehensive to apprise
the participant of such rights and obligations, and
``(II) is written in a manner calculated to be understood
by the average participant to whom the arrangement applies.
``(ii) A notice shall not be treated as meeting the
requirements of clause (i) with respect to a participant
unless--
``(I) the notice includes an explanation of the
participant's right under the arrangement to specifically
elect to exercise control over the assets in the
participant's account,
``(II) the employee has a reasonable period of time, after
receipt of the notice described in subclause (I) and before
the assets are first invested, to specifically make such an
election, and
``(III) the notice explains how contributions made under
the arrangement will be invested in the absence of any
investment election specifically made by the employee.''.
(f) Preemption of Conflicting State Regulation.--Section
514 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1144) is amended by adding at the end the
following new subsection:
``(e)(1) Notwithstanding any other provision of this
section, this title shall supersede any law of a State which
would directly or indirectly prohibit or restrict the
inclusion in any plan of an automatic contribution
arrangement. The Secretary may prescribe regulations which
would establish minimum standards that such an arrangement
would be required to satisfy in order for this subsection to
apply in the case of such arrangement.
``(2)(A) For purposes of this subsection, the term
`automatic contribution arrangement' means an arrangement--
``(i) which meets the requirements of paragraph (3),
``(ii) under which a participant may elect to have the plan
sponsor make payments as contributions under the plan on
behalf of the participant, or to the participant directly in
cash,
``(iii) under which a participant is treated as having
elected to have the plan sponsor make such contributions in
an amount equal to a uniform percentage of compensation
provided under the plan until the participant specifically
elects not to have such contributions made (or specifically
elects to have such contributions made at a different
percentage), and
``(iv) under which such contributions are invested in
accordance with regulations prescribed by the Secretary.
``(B) The regulations prescribed pursuant to subparagraph
(A)(iv) shall provide guidance on the appropriateness of
certain investments for designation as default investments
under the arrangement, which shall include guidance regarding
appropriate mixes of default investments and asset classes
which the Secretary considers consistent with long-term
capital appreciation
``(3)(A) For purposes of paragraph (2)(A)(i), an
arrangement meets the requirements of this paragraph for any
plan year if, within a reasonable period before such plan
year, the plan administrator gives to each participant to
whom the arrangement applies for such plan year notice of the
participant's rights and obligations under the arrangement
which--
``(i) is sufficiently accurate and comprehensive to apprise
the participant of such rights and obligations, and
``(ii) is written in a manner calculated to be understood
by the average participant to whom the arrangement applies.
[[Page H11750]]
``(B) A notice shall not be treated as meeting the
requirements of subparagraph (A) with respect to a
participant unless--
``(i) the notice includes an explanation of the
participant's right under the arrangement not to have
elective contributions made on the participant's behalf (or
to elect to have such contributions made at a different
percentage),
``(ii) the participant has a reasonable period of time,
after receipt of the notice described in clause (i) and
before the first elective contribution is made, to make such
election, and
``(iii) the notice explains how contributions made under
the arrangement will be invested in the absence of any
investment election by the participant.''.
(g) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2005.
SEC. 904. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR
INDIVIDUALS CALLED TO ACTIVE DUTY FOR AT LEAST
179 DAYS.
(a) In General.--Paragraph (2) of section 72(t) of the
Internal Revenue Code of 1986 (relating to 10-percent
additional tax on early distributions from qualified
retirement plans) is amended by adding at the end the
following new subparagraph:
``(G) Distributions from retirement plans to individuals
called to active duty.--
``(i) In general.--Any qualified reservist distribution.
``(ii) Amount distributed may be repaid.--Any individual
who receives a qualified reservist distribution may, at any
time during the 2-year period beginning on the day after the
end of the active duty period, make one or more contributions
to an individual retirement plan of such individual in an
aggregate amount not to exceed the amount of such
distribution. The dollar limitations otherwise applicable to
contributions to individual retirement plans shall not apply
to any contribution made pursuant to the preceding sentence.
No deduction shall be allowed for any contribution pursuant
to this clause.
``(iii) Qualified reservist distribution.--For purposes of
this subparagraph, the term `qualified reservist
distribution' means any distribution to an individual if--
``(I) such distribution is from an individual retirement
plan, or from amounts attributable to employer contributions
made pursuant to elective deferrals described in subparagraph
(A) or (C) of section 402(g)(3) or section
501(c)(18)(D)(iii),
``(II) such individual was (by reason of being a member of
a reserve component (as defined in section 101 of title 37,
United States Code)), ordered or called to active duty for a
period in excess of 179 days or for an indefinite period, and
``(III) such distribution is made during the period
beginning on the date of such order or call and ending at the
close of the active duty period.
``(iv) Application of subparagraph.--This subparagraph
applies to individuals ordered or called to active duty after
September 11, 2001, and before September 12, 2007. In no
event shall the 2-year period referred to in clause (ii) end
before the date which is 2-years after the date of the
enactment of this subparagraph.''.
(b) Conforming Amendments.--
(1) Section 401(k)(2)(B)(i) of such Code is amended by
striking ``or'' at the end of subclause (III), by striking
``and'' at the end of subclause (IV) and inserting ``or'',
and by inserting after subclause (IV) the following new
subclause:
``(V) in the case of a qualified reservist distribution (as
defined in section 72(t)(2)(G)(iii)), the date on which a
period referred to in subclause (III) of such section begins,
and''.
(2) Section 403(b)(7)(A)(ii) of such Code is amended by
inserting ``(unless such amount is a distribution to which
section 72(t)(2)(G) applies)'' after ``distributee''.
(3) Section 403(b)(11) of such Code is amended by striking
``or'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, or'', and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) for distributions to which section 72(t)(2)(G)
applies.''.
(c) Effective Date; Waiver of Limitations.--
(1) Effective date.--The amendment made by this section
shall apply to distributions after September 11, 2001.
(2) Waiver of limitations.--If refund or credit of any
overpayment of tax resulting from the amendments made by this
section is prevented at any time before the close of the 1-
year period beginning on the date of the enactment of this
Act by the operation of any law or rule of law (including res
judicata), such refund or credit may nevertheless be made or
allowed if claim therefor is filed before the close of such
period.
SEC. 905. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX
ON CERTAIN DISTRIBUTIONS OF PENSION PLANS FOR
PUBLIC SAFETY EMPLOYEES.
(a) In General.--Section 72(t)(2) of the Internal Revenue
Code of 1986 (relating to subsection not to apply to certain
distributions), as amended by section 904, is amended by
adding at the end the following new subsection:
``(H) DROP distributions to qualified public safety
employees in governmental plans.--
``(i) In general.--Distributions to an individual who is a
qualified public safety employee from a governmental plan
within the meaning of section 414(d) to the extent such
distributions are attributable to a DROP benefit.
``(ii) Definitions.--For purposes of this subparagraph--
``(I) DROP benefit.--The term `DROP benefit' means a
feature of a governmental plan which is a defined benefit
plan and under which an employee elects to receive credits to
an account (including a notional account) in the plan which
are not in excess of the plan benefits (payable in the form
of an annuity) that would have been provided if the employee
had retired under the plan at a specified earlier retirement
date and which are in lieu of increases in the employee's
accrued pension benefit based on years of service after the
effective date of the DROP election.
``(II) Qualified public safety employee.--The term
`qualified public safety employee' means any employee of any
police department or fire department organized and operated
by a State or political subdivision of a State if the
employee provides police protection, firefighting services,
or emergency medical services for any area within the
jurisdiction of such State or political subdivision and if
the employee was eligible to retire on or before the date of
such election and receive immediate retirement benefits.''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after the date of the enactment
of this Act.
SEC. 906. COMBAT ZONE COMPENSATION TAKEN INTO ACCOUNT FOR
PURPOSES OF DETERMINING LIMITATION AND
DEDUCTIBILITY OF CONTRIBUTIONS TO INDIVIDUAL
RETIREMENT PLANS.
(a) In General.--Subsection (f) of section 219 of the
Internal Revenue Code of 1986 is amended by redesignating
paragraph (7) as paragraph (8) and by inserting after
paragraph (6) the following new paragraph:
``(7) Special rule for compensation earned by members of
the armed forces for service in a combat zone.--For purposes
of subsections (b)(1)(B) and (c), the amount of compensation
includible in an individual's gross income shall be
determined without regard to section 112.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 907. DIRECT PAYMENT OF TAX REFUNDS TO INDIVIDUAL
RETIREMENT PLANS.
(a) In General.--The Secretary of the Treasury (or the
Secretary's delegate) shall make available a form (or modify
existing forms) for use by individuals to direct that a
portion of any refund of overpayment of tax imposed by
chapter 1 of the Internal Revenue Code of 1986 be paid
directly to an individual retirement plan (as defined in
section 7701(a)(37) of such Code) of such individual.
(b) Effective Date.--The form required by subsection (a)
shall be made available for taxable years beginning after
December 31, 2006.
SEC. 908. IRA ELIGIBILITY FOR THE DISABLED.
(a) In General.--Subsection (f) of section 219 of the
Internal Revenue Code of 1986 (relating to other definitions
and special rules), as amended by this Act, is further
amended by redesignating paragraph (8) as paragraph (9) and
by inserting after paragraph (7) the following new paragraph:
``(8) Special rule for certain disabled individuals.--In
the case of an individual--
``(A) who is disabled (within the meaning of section
72(m)(7)), and
``(B) who has not attained the applicable age (as defined
in section 401(a)(9)(H)) before the close of the taxable
year,
subparagraph (B) of subsection (b)(1) shall not apply.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 909. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF
CERTAIN RETIREMENT PLAN DISTRIBUTIONS.
(a) In General.--
(1) Qualified plans.--Section 402(c) of the Internal
Revenue Code of 1986 (relating to rollovers from exempt
trusts) is amended by adding at the end the following new
paragraph:
``(11) Distributions to inherited individual retirement
plan of nonspouse beneficiary.--
``(A) In general.--If, with respect to any portion of a
distribution from an eligible retirement plan of a deceased
employee, a direct trustee-to-trustee transfer is made to an
individual retirement plan described in clause (i) or (ii) of
paragraph (8)(B) established for the purposes of receiving
the distribution on behalf of an individual who is a
designated beneficiary (as defined by section 401(a)(9)(E))
of the employee and who is not the surviving spouse of the
employee--
``(i) the transfer shall be treated as an eligible rollover
distribution for purposes of this subsection,
``(ii) the individual retirement plan shall be treated as
an inherited individual retirement account or individual
retirement annuity (within the meaning of section
408(d)(3)(C)) for purposes of this title, and
``(iii) section 401(a)(9)(B) (other than clause (iv)
thereof) shall apply to such plan.
``(B) Certain trusts treated as beneficiaries.--For
purposes of this paragraph, to the extent provided in rules
prescribed by the Secretary, a trust maintained for the
benefit of one or more designated beneficiaries shall be
treated in the same manner as a trust designated
beneficiary.''.
[[Page H11751]]
(2) Section 403(a) plans.--Subparagraph (B) of section
403(a)(4) of such Code (relating to rollover amounts) is
amended by inserting ``and (11)'' after ``(7)''.
(3) Section 403(b) plans.--Subparagraph (B) of section
403(b)(8) of such Code (relating to rollover amounts) is
amended by striking ``and (9)'' and inserting ``, (9), and
(11)''.
(4) Section 457 plans.--Subparagraph (B) of section
457(e)(16) of such Code (relating to rollover amounts) is
amended by striking ``and (9)'' and inserting ``, (9), and
(11)''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2005.
TITLE X--PROVISIONS TO ENHANCE HEALTH CARE AFFORDABILITY
SEC. 1001. TREATMENT OF ANNUITY AND LIFE INSURANCE CONTRACTS
WITH A LONG-TERM CARE INSURANCE FEATURE.
(a) Exclusion From Gross Income.--Subsection (e) of section
72 of the Internal Revenue Code of 1986 (relating to amounts
not received as annuities) is amended by redesignating
paragraph (11) as paragraph (12) and by inserting after
paragraph (10) the following new paragraph:
``(11) Special rules for certain combination contracts
providing long-term care insurance.--Notwithstanding
paragraphs (2), (5)(C), and (10), in the case of any charge
against the cash value of an annuity contract or the cash
surrender value of a life insurance contract made as payment
for coverage under a qualified long-term care insurance
contract which is part of or a rider on such annuity or life
insurance contract--
``(A) the investment in the contract shall be reduced (but
not below zero) by such charge, and
``(B) such charge shall not be includible in gross
income.''.
(b) Tax-Free Exchanges Among Certain Insurance Policies.--
(1) Annuity contracts can include qualified long-term care
insurance riders.--Paragraph (2) of section 1035(b) of such
Code is amended by adding at the end the following new
sentence: ``For purposes of the preceding sentence, a
contract shall not fail to be treated as an annuity contract
solely because a qualified long-term care insurance contract
is a part of or a rider on such contract.''.
(2) Life insurance contracts can include qualified long-
term care insurance riders.--Paragraph (3) of section 1035(b)
of such Code is amended by adding at the end the following
new sentence: ``For purposes of the preceding sentence, a
contract shall not fail to be treated as a life insurance
contract solely because a qualified long-term care insurance
contract is a part of or a rider on such contract.''.
(3) Expansion of tax-free exchanges of life insurance,
endowment, and annuity contracts for long-term care
contracts.--Subsection (a) of section 1035 of such Code
(relating to certain exchanges of insurance policies) is
amended--
(A) in paragraph (1) by striking ``contract;'' and
inserting ``contract or for a qualified long-term care
insurance contract;'',
(B) in paragraph (2) by striking ``contract;'' and
inserting ``contract, or (C) for a qualified long-term care
insurance contract;'', and
(C) in paragraph (3) by striking ``contract.'' and
inserting ``contract or for a qualified long-term care
insurance contract.''.
(4) Tax-free exchanges of qualified long-term care
insurance contract.--Subsection (a) of section 1035 of such
Code (relating to certain exchanges of insurance policies) is
amended by striking ``or'' at the end of paragraph (2), by
striking the period at the end of paragraph (3) and inserting
``; or'', and by inserting after paragraph (3) the following
new paragraph:
``(4) a qualified long-term care insurance contract for a
qualified long-term care insurance contract.''.
(c) Treatment of Coverage Provided as Part of a Life
Insurance or Annuity Contract.--Subsection (e) of section
7702B of such Code (relating to treatment of qualified long-
term care insurance) is amended to read as follows:
``(e) Treatment of Coverage Provided as Part of a Life
Insurance or Annuity Contract.--
``(1) Coverage treated as contract.--Except as otherwise
provided in regulations prescribed by the Secretary, in the
case of any long-term care insurance coverage (whether or not
qualified) provided by a rider on or as part of a life
insurance contract or an annuity contract, this title shall
apply as if the portion of the contract providing such
coverage is a separate contract.
``(2) Denial of deduction under section 213.--No deduction
shall be allowed under section 213(a) for any payment made
for coverage under a qualified long-term care insurance
contract if such payment is made as a charge against the cash
value of an annuity contract or the cash surrender value of a
life insurance contract.
``(3) Application of section 7702.--Section 7702(c)(2)
(relating to the guideline premium limitation) shall be
applied by increasing the guideline premium limitation with
respect to the life insurance contract, as of any date--
``(A) by the sum of any charges (but not premium payments)
against the life insurance contract's cash surrender value
(within the meaning of section 7702(f)(2)(A)) for coverage
under the qualified long-term care insurance contract made to
that date under the life insurance contract, less
``(B) any such charges the imposition of which reduces the
premiums paid for the life insurance contract (within the
meaning of section 7702(f)(1)).
``(4) Portion defined.--For purposes of this subsection,
the term `portion' means only the terms and benefits under a
life insurance contract or annuity contract that are in
addition to the terms and benefits under the contract without
regard to long-term care insurance coverage.
``(5) Annuity contracts to which paragraph (1) does not
apply.--For purposes of this subsection, none of the
following shall be treated as an annuity contract:
``(A) A trust described in section 401(a) which is exempt
from tax under section 501(a).
``(B) A contract--
``(i) purchased by a trust described in subparagraph (A),
``(ii) purchased as part of a plan described in section
403(a),
``(iii) described in section 403(b),
``(iv) provided for employees of a life insurance company
under a plan described in section 818(a)(3), or
``(v) from an individual retirement account or an
individual retirement annuity.
``(C) A contract purchased by an employer for the benefit
of the employee (or the employee's spouse).
Any dividend described in section 404(k) which is received by
a participant or beneficiary shall, for purposes of this
paragraph, be treated as paid under a separate contract to
which subparagraph (B)(i) applies.''.
(d) Information Reporting.--
(1) Subpart B of part III of subchapter A of chapter 61 of
such Code (relating to information concerning transactions
with other persons) is amended by adding at the end the
following new section:
``SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED LONG-TERM
CARE INSURANCE CONTRACTS UNDER COMBINED
ARRANGEMENTS.
``(a) Requirement of Reporting.--Any person who makes a
charge against the cash value of an annuity contract, or the
cash surrender value of a life insurance contract, which is
excludible from gross income under section 72(e)(11) shall
make a return, according to the forms or regulations
prescribed by the Secretary, setting forth--
``(1) the amount of the aggregate of such charges against
each such contract for the calendar year,
``(2) the amount of the reduction in the investment in each
such contract by reason of such charges, and
``(3) the name, address, and TIN of the individual who is
the holder of each such contract.
``(b) Statements to Be Furnished to Persons With Respect to
Whom Information Is Required.--Every person required to make
a return under subsection (a) shall furnish to each
individual whose name is required to be set forth in such
return a written statement showing--
``(1) the name, address, and phone number of the
information contact of the person making the payments, and
``(2) the information required to be shown on the return
with respect to such individual.
The written statement required under the preceding sentence
shall be furnished to the individual on or before January 31
of the year following the calendar year for which the return
under subsection (a) was required to be made.''.
(2) Clerical amendment.--The table of sections for subpart
B of part III of subchapter A of such chapter 61 of such Code
is amended by adding at the end the following new item:
``Sec. 6050U. Charges or payments for qualified long-term care
insurance contracts under combined arrangements.''.
(e) Treatment of Policy Acquisition Expenses.--Subsection
(e) of section 848 of such Code (relating to classification
of contracts) is amended by adding at the end the following
new paragraph:
``(6) Treatment of certain qualified long-term care
insurance contract arrangements.--An annuity or life
insurance contract which includes a qualified long-term care
insurance contract as a part of or a rider on such annuity or
life insurance contract shall be treated as a specified
insurance contract not described in subparagraph (A) or (B)
of subsection (c)(1).''.
(f) Treatment as Qualified Additional Benefit.--
Subparagraph (A) of section 7702(f)(5) of such Code (relating
to qualified additional benefits) is amended by striking
``or'' at the end of clause (iv), by redesignating clause (v)
as clause (vi), and by inserting after clause (iv) the
following new clause:
``(v) qualified long-term care insurance contract which is
a part of or a rider on the contract, or''.
(g) Effective Dates.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to contracts
issued before, on, or after December 31, 2006, but only with
respect to periods beginning after such date.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply with respect to exchanges occurring after
December 31, 2006.
[[Page H11752]]
SEC. 1002. DISPOSITION OF UNUSED HEALTH AND DEPENDENT CARE
BENEFITS IN CAFETERIA PLANS AND FLEXIBLE
SPENDING ARRANGEMENTS.
(a) In General.--Section 125 of the Internal Revenue Code
of 1986 (relating to cafeteria plans) is amended by
redesignating subsections (h) and (i) as subsections (i) and
(j), respectively, and by inserting after subsection (g) the
following:
``(h) Contributions of Certain Unused Health and Dependent
Care Benefits.--
``(1) In general.--For purposes of this title, a plan or
other arrangement shall not fail to be treated as a cafeteria
plan solely because under such plan qualified benefits
include--
``(A) a health flexible spending arrangement under which
not more than $500 of unused benefits under such arrangement
may be--
``(i) carried forward to the succeeding plan year of such
health flexible spending arrangement, or
``(ii) to the extent permitted by section 106(d),
contributed by the employer to a health savings account (as
defined in section 223(d)) maintained for the benefit of the
employee, and
``(B) a dependent care flexible spending arrangement under
which not more than $500 of unused benefits under such
arrangement may be carried forward to the succeeding plan
year of such dependent care flexible spending arrangement.
``(2) Health flexible spending arrangement.--For purposes
of this subsection, the term `health flexible spending
arrangement' means a flexible spending arrangement (as
defined in section 106(c)) that is a qualified benefit and
only permits reimbursement for expenses for medical care (as
defined in section 213(d)(1), without regard to subparagraphs
(C) and (D) thereof).
``(3) Dependent care flexible spending arrangement.--For
purposes of this subsection, the term `dependent care
flexible spending arrangement' means a flexible spending
arrangement (as defined in section 106(c)) that is a
qualified benefit and only permits reimbursement for expenses
for dependent care assistance which meets the requirements of
section 129(d).
``(4) Unused benefits.--For purposes of this subsection,
with respect to an employee, the term `unused benefits' means
the excess of--
``(A) the maximum amount of reimbursement allowable to the
employee for a plan year under a health flexible spending
arrangement or the dependent care flexible spending
arrangement, as the case may be, over
``(B) the actual amount of reimbursement for such year
under such arrangement.''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to taxable years beginning after December 31,
2005.
SEC. 1003. DISTRIBUTIONS FROM GOVERNMENTAL RETIREMENT PLANS
FOR HEALTH AND LONG-TERM CARE INSURANCE FOR
PUBLIC SAFETY OFFICERS.
(a) In General.--Section 402 of the Internal Revenue Code
of 1986 (relating to taxability of beneficiary of employees'
trust) is amended by adding at the end the following new
subsection:
``(l) Distributions From Governmental Plans for Health and
Long-Term Care Insurance.--
``(1) In general.--In the case of an employee who is an
eligible retired public safety officer who makes the election
described in paragraph (6) with respect to any taxable year
of such employee, gross income of such employee for such
taxable year does not include any distribution from an
eligible retirement plan to the extent that the aggregate
amount of such distributions does not exceed the amount paid
by such employee for qualified health insurance premiums of
the employee, his spouse, or dependents (as defined in
section 152) for such taxable year.
``(2) Limitation.--The amount which may be excluded from
gross income for the taxable year by reason of paragraph (1)
shall not exceed $5,000.
``(3) Distributions must otherwise be includible.--
``(A) In general.--An amount shall be treated as a
distribution for purposes of paragraph (1) only to the extent
that such amount would be includible in gross income without
regard to paragraph (1).
``(B) Application of section 72.--Notwithstanding section
72, in determining the extent to which an amount is treated
as a distribution for purposes of subparagraph (A), the
aggregate amounts distributed from an eligible retirement
plan in a taxable year (up to the amount excluded under
paragraph (1)) shall be treated as includible in gross income
(without regard to subparagraph (A)) to the extent that such
amount does not exceed the aggregate amount which would have
been so includible if all amounts distributed from all
eligible retirement plans were treated as 1 contract for
purposes of determining the inclusion of such distribution
under section 72. Proper adjustments shall be made in
applying section 72 to other distributions in such taxable
year and subsequent taxable years.
``(4) Definitions.--For purposes of this subsection--
``(A) Eligible retirement plan.--For purposes of paragraph
(1), the term `eligible retirement plan' means a governmental
plan (within the meaning of section 414(d)) which is
described in clause (iii), (iv), (v), or (vi) of subsection
(c)(8)(B).
``(B) Eligible retired public safety officer.--The term
`eligible retired public safety officer' means an individual
who, by reason of disability or attainment of normal
retirement age, is separated from service as a public safety
officer with the employer who maintains the eligible
retirement plan from which distributions subject to paragraph
(1) are made.
``(C) Public safety officer.--The term `public safety
officer' shall have the same meaning given such term by
section 1204(8)(A) of the Omnibus Crime Control and Safe
Streets Act of 1968 (42 U.S.C. 3796b(8)(A)).
``(D) Qualified health insurance premiums.--The term
`qualified health insurance premiums' means premiums for
coverage for the eligible retired public safety officer, his
spouse, and dependents, by an accident or health insurance
plan or qualified long-term care insurance contract (as
defined in section 7702B(b)).
``(5) Special rules.--For purposes of this subsection--
``(A) Direct payment to insurer required.--Paragraph (1)
shall only apply to a distribution if payment of the premiums
is made directly to the provider of the accident or health
insurance plan or qualified long-term care insurance contract
by deduction from a distribution from the eligible retirement
plan.
``(B) Related plans treated as 1.--All eligible retirement
plans of an employer shall be treated as a single plan.
``(6) Election described.--
``(A) In general.--For purposes of paragraph (1), an
election is described in this paragraph if the election is
made by an employee after separation from service with
respect to amounts not distributed from an eligible
retirement plan to have amounts from such plan distributed in
order to pay for qualified health insurance premiums.
``(B) Special rule.--A plan shall not be treated as
violating the requirements of section 401, or as engaging in
a prohibited transaction for purposes of section 503(b),
merely because it provides for an election with respect to
amounts that are otherwise distributable under the plan or
merely because of a distribution made pursuant to an election
described in subparagraph (A).
``(7) Coordination with medical expense deduction.--The
amounts excluded from gross income under paragraph (1) shall
not be taken into account under section 213.
``(8) Coordination with deduction for health insurance
costs of self-employed individuals.--The amounts excluded
from gross income under paragraph (1) shall not be taken into
account under section 162(l).''.
(b) Conforming Amendments.--
(1) Section 403(a) of such Code (relating to taxability of
beneficiary under a qualified annuity plan) is amended by
inserting after paragraph (1) the following new paragraph:
``(2) Special rule for health and long-term care
insurance.--To the extent provided in section 402(l),
paragraph (1) shall not apply to the amount distributed under
the contract which is otherwise includible in gross income
under this subsection.''.
(2) Section 403(b) of such Code (relating to taxability of
beneficiary under annuity purchased by section 501(c)(3)
organization or public school) is amended by inserting after
paragraph (1) the following new paragraph:
``(2) Special rule for health and long-term care
insurance.--To the extent provided in section 402(l),
paragraph (1) shall not apply to the amount distributed under
the contract which is otherwise includible in gross income
under this subsection.''.
(3) Section 457(a) of such Code (relating to year of
inclusion in gross income) is amended by adding at the end
the following new paragraph:
``(3) Special rule for health and long-term care
insurance.--In the case of a plan of an eligible employer
described in subsection (e)(1)(A), to the extent provided in
section 402(l), paragraph (1) shall not apply to amounts
otherwise includible in gross income under this
subsection.''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions in taxable years beginning after
December 31, 2005.
TITLE XI--GENERAL PROVISIONS
SEC. 1101. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) In General.--If this section applies to any pension
plan or contract amendment--
(1) such pension plan or contract shall be treated as being
operated in accordance with the terms of the plan during the
period described in subsection (b)(2)(A), and
(2) except as provided by the Secretary of the Treasury,
such pension 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.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any pension plan or annuity contract which is made--
(A) pursuant to any amendment made by this Act or pursuant
to any regulation issued by the Secretary of the Treasury or
the Secretary of Labor under this Act, and
(B) on or before the last day of the first plan year
beginning on or after January 1, 2008.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), this paragraph
shall be applied by substituting ``2010'' for ``2008''.
[[Page H11753]]
(2) Conditions.--This section shall not apply to any
amendment unless--
(A) during the period--
(i) beginning on the date the legislative or regulatory
amendment described in paragraph (1)(A) takes effect (or in
the case of a plan or contract amendment not required by such
legislative or regulatory amendment, the effective date
specified by the plan), and
(ii) ending on the date described in paragraph (1)(B) (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
(B) such plan or contract amendment applies retroactively
for such period.
The SPEAKER pro tempore. The gentleman from Ohio (Mr. Boehner), the
gentleman from California (Mr. George Miller), the gentleman from
Michigan (Mr. Camp), and the gentleman from New York (Mr. Rangel) each
will control 22\1/2\ minutes.
The Chair recognizes the gentleman from Ohio.
General Leave
Mr. BOEHNER. Madam Speaker, I ask unanimous consent that all Members
may have 5 legislative days within which to revise and extend their
remarks on H.R. 2830.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Ohio?
There was no objection.
Mr. BOEHNER. Madam Speaker, I yield myself such time as I may
consume.
Madam Speaker, I will put this as bluntly as I can: our Nation's
pension laws are outdated and broken and placing at risk the retirement
security of millions of American workers. Today, we have an opportunity
to change this by voting for the most comprehensive reforms to worker
pension laws in more than a generation.
The Pension Protection Act is the outcome of one of the most thorough
and remarkable legislative processes I have seen during my years in the
House. On June 4, 2003, the Committee on Education and the Workforce
held the first of nearly a dozen hearings on traditional pension plans,
and from these hearings they have covered a broad set of issues,
ranging from what is broken to who it has impacted to how we should go
about fixing it. And, today, we stand ready to debate and vote on the
product of those 30 months of deliberations.
There are three key strengths of this bill, and I would like to
highlight each of those for my colleagues. It is a balanced approach,
it is comprehensive in nature, and it is a benefit to American
taxpayers.
First, the bill's greatest strength is its balanced approach to the
pension crisis that we face. While some are calling for suffocating
pension funding rules which would place an incredible burden on
employers who voluntarily offer retirement benefits, our bill makes
certain not to tighten the rules so much that employers leave the
defined benefit system altogether.
While others call for relaxation of pension rules, our bill ensures
that employers and unions keep their promises to workers and retirees
who are counting on their pension benefits. In short, our bill aims to
shore up the traditional defined benefit pension system to which we and
our parents have grown accustomed so our children and grandchildren
might have a chance to be part of it as well.
The second major strength of the Pension Protection Act is inherently
comprehensive in nature. As you can see on the chart that is next to
me, the measure would ensure that pensions are fully funded to restore
worker and retiree confidence; it has enhanced disclosure requirements
so that workers and retirees are no longer kept in the dark about the
health of their pensions; it would improve the financial condition of
the Federal agency charged with ensuring some 30,000 private pension
plans; it would reform outdated laws that deny workers access to
professional and secure investment advice while providing even more
workers with 401(k)-type plans; and it would end sweetheart deals like
those we have seen at some airlines and other corporations that have
terminated their plans in which executives enjoy a windfall of cash
while workers and retirees are left wondering about their futures.
Incidentally, these five reforms are only the tip of the iceberg.
There is much more that this bill offers to workers and retirees, far
more than this chart could ever tell us.
Finally, yet another strength of this measure is its benefit to
American taxpayers. Each of us remembers all too well the savings &
loan bailout of more than a decade ago. By enacting the Pension
Protection Act, we can be more confident that history will not repeat
itself with regard to our pension system.
As you can see on this second chart, the Pension Benefit Guaranty
Corporation, which ensures nearly 30,000 private worker pensions, is in
dire financial condition. With some $450 billion in pension plan
underfunding among financially weak companies looming on the horizon,
the PBGC's debt could balloon even further than its current $23
billion.
Even though no taxpayer funds fund the Pension Benefit Guaranty
Corporation, could American taxpayers be called upon to bail out the
agency if its financial condition continues to deteriorate? I think so.
That is why the Pension Protection Act includes responsible increases
to employer-paid premiums for the first time since 1991, along with
substantial reforms to place the defined benefit system on more solid
ground. For taxpayers who may be left holding the bag otherwise, I
think this is good news.
Madam Speaker, throughout this process I have made every effort to
include my colleagues on both sides of the aisle. And even after my
Democratic friends voted ``present,'' that is right, they did not vote
``no,'' they voted ``present,'' when our committee approved the bill
back in June, I was hopeful that they would join us and the ever-
growing coalition of labor and employer groups in support of these
reforms.
However, some of my colleagues have offered nothing more than
rhetoric based on quirky accounting schemes and purposely skewed
modeling in an effort to characterize the Pension Protection Act in a
negative manner. I expect these hollow and misleading arguments will
continue today as they seek to detract from a debate which they have
largely been absent from for the last 30 months. It is my sincere hope,
however, that many of my Democrat colleagues will look beyond the
rhetoric and support these long-overdue reforms. This bill definitely
deserves bipartisan support.
Madam Speaker, the Pension Protection Act would not be before us if
it were not for the work of my friend, the chairman of the Ways and
Means Committee, Mr. Thomas; the Employer-Employee Relations
Subcommittee chair and vice chair, Mr. Johnson and Mr. Kline; my friend
from Ohio, Mr. Tiberi, a committee colleague who worked tirelessly to
garner support for the bill; and all of the others on my committee and
throughout the House who understand how imperative it is to reform our
Nation's outdated pension laws for the benefit of workers, retirees,
and taxpayers alike. I thank them for their efforts to bring this bill
to the floor.
Madam Speaker, I reserve the balance of my time.
Mr. RANGEL. Madam Speaker, I yield myself such time as I may consume.
My colleagues, I do not know how the majority gets away with what
they do. I do not think that their legislative initiatives are just for
the legislation, but rather to do away with traditions that have
existed under Democrat administrations.
If you have an immigration problem, lock up the immigrants and lock
up the employers. If you have a health problem, then get rid of
Medicaid and Medicare and let the private sector resolve the problems.
If you have a prescription drug problem and you want to subsidize that
and help out the older people, do not let the Federal Government do it.
Give the money to the private sector; let them compete and let them do
it. The Social Security system, if people have relied on their
government when they get older or disabled, do not let the government
be involved. Get some private accounts and let them do it.
Now we are talking about how well the economy is doing: plants are
closing; people are fearful of losing their jobs; pension plans are
going busted; and, really, people do not feel nearly as good as the
Republicans and the President think.
[[Page H11754]]
Now we have a bill before us where these pension plans would be a
heck of a lot better if we did nothing, rather than do the harm that we
are about to do to them. The demands that are going to be made on
employers to reach sometimes the increase of 240 percent in making
contributions to these plans will cause many of them to drop the plan
and go into bankruptcy. The whole idea of how much revenue we are going
to lose, some $70 billion, is not even an issue, if at the end of the
day enough sweetheart nips and tucks were given to a handful of people
so that we would be assured that the days of defined benefit pensions
are just about over.
Some people will have to make political choices today in terms of
support of this because there are some vested interest people that need
short-gain satisfaction. But at the end of the day, the same way people
regret their votes for the Gulf of Tonkin Resolution, they will have to
come back and ask did they do more damage than good on today. If you
look at actuaries and people who have studied this, they realize that
so few pensions are now protected by the PBGC, and in the future many
less will be protected.
So, Madam Speaker, these bills are not brought up just to become law.
Many of the bills that are coming to this floor are brought to see
which people are going to vote against the title of the bill and pay a
price for that at the polls, or whether some are secure enough to vote
against the substance of the bill that in the long term is going to
adversely affect our workers.
At this time with the House permission, I would like to turn the
balance of my time over to Congressman Ben Cardin from Maryland who has
spent a lot of time on pensions and can share with the House the
pitfalls that we have in this bill before the House today.
I yield the balance of my time to Congressman Cardin.
The SPEAKER pro tempore. Without objection, the gentleman from
Maryland will control the balance of the time.
There was no objection.
{time} 1330
Mr. BOEHNER. Madam Speaker, I yield 4 minutes to the gentleman from
Texas (Mr. Sam Johnson), the chairman of the Employer-Employee
Subcommittee of the Education and Workforce Committee.
(Mr. SAM JOHNSON of Texas asked and was given permission to revise
and extend his remarks.)
Mr. SAM JOHNSON of Texas. Madam Speaker, I have the honor of chairing
a subcommittee that has jurisdiction over pension law and being an
original sponsor of the Pension Protection Act. As a member of both the
Committee on Education and the Workforce and the Ways and Means
Committee, we have been working for the last 2 years to get a pension
bill to the House floor, and I am proud to rise in strong support of
the bill.
The Pension Protection Act is good and it is tough. Our bill makes
companies put their money behind their promises and keep employees well
informed on the health of their pension plans.
While this bill is tough, it does not go overboard with more red tape
that has almost killed traditional pension plans. Even with all the red
tape that currently binds up these pension plans, there still are some
loopholes in current law that have allowed companies to run away from
their responsibilities and dump pension promises onto the Pension
Benefit Guaranty Corporation.
The PBGC says it is $23 billion in the hole, and they say that, with
expected terminations, they are close to $28 billion. Our bill will
tighten up pension laws so that companies making promises to employees
for their retirement security actually put the money behind their
promises.
It is a shame our pension laws have allowed those most directly
affected, workers and retirees, to be left unaware that there may be
little money behind the promises of a secure retirement. United
Airlines' pilots' pension plan was only 30 percent funded when it was
dumped on the government. Those pilots and their families did not know
how bad the situation was, and they are the ones that are now trying to
figure out how to live on one-third of what they had planned to
receive.
Our bill requires a company to tell their employees if the pension
plan is less than 80 percent funded. Employees will now push their
bosses to put money into the plans to match the promises being made.
This is a really important reform and should not be minimized.
Also, not to be underestimated is a provision that will allow for a
phased retirement of older workers. The provision would allow people to
continue working, but also collect their employer-based pension after
the age of 62. Current rules prohibit working for the same employer
while also collecting a pension today. This prohibition simply forces
many people to change jobs or work for a competitor or stop working
altogether. My constituents have been really happy to hear about this
additional way to step lightly into retirement.
The bill also helps to modernize the pension law on cash balance
pension plans. This type of pension plan represents the best chance we
have at maintaining defined benefit plans in the future. Cash balance
plans are a better fit than traditional plans with today's mobile
workforce where employees generally do not stay with one employer for
their entire career. The bill clarifies that in the future these plans
are not age discriminatory. We need to provide this certainty. In fact,
we should go further in providing certainty for plans regardless of
when they were created, but because of litigation we cannot.
We need to get this bill through the House and on to conference with
the Senate and quickly enacted early next year. The number of
traditional pension plans has been declining rapidly. The companies
dropping these plans are in two groups. The first group is those that
do not put their money behind their pension promises and turn their
liabilities over to the government. We have seen that in the steel and
airline industries.
The second group is companies that are just sick of the red tape and
uncertainty of our laws so they decide to stop offering plans
altogether, like Verizon announced last week.
In the many hearings on pension issues we have heard over and over
again that companies need predictability and stability in their plans.
We need to get this bill enacted so that companies put their money
behind their promises so they can plan with certainty in the long term.
Support this bill.
Mr. CARDIN. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, the objective of this legislation should be to
encourage the retention and expansion of traditional defined benefit
plans. Traditional defined benefit plans generally offer a guaranteed
benefit to the worker and, they are generally well managed and
diversified. The passage of this bill, in my view, will set up a
conference report that will come back to us that will accelerate the
termination of well-funded and managed traditional defined benefit
plans. And I say that for three reasons.
Three parts of this legislation will adversely affect well-funded and
managed plans. First, the funding roles are more costly and more
restrictive. That in and of itself will act as a disincentive for
continuation of these plans.
Second, there is a failure to include relief for the airline
industry, clearly putting pressure on well-funded and managed plans to
pick up the costs for other industries, questioning whether they should
stay and provide these plans.
Third, we continue to allow companies to go into bankruptcy in order
to dump their costs onto the PBGC, once again affecting those well-
funded plans that are going to be asked to pick up the tab.
For all these reasons this legislation is likely to accelerate the
termination of plans that we would want to see continued. The
termination of these plans will just adversely affect the funding of
the PBGC, the guaranteed fund, complicating the situation and making it
worse.
Madam Speaker, I want to point out that there are provisions in this
legislation that are very good. The provisions dealing with the defined
contribution provisions are needed and, as it was pointed out in the
Ways and Means Committee, contain many of the provisions that were
worked on through the Portman-Cardin process as
[[Page H11755]]
well as legislation presented by Mr. Emanuel and Mr. Pomeroy. It
includes automatic enrollment, the split refunds where tax refunds can
go partially into retirement savings, the extension of the savers
credit, the ability for individuals to roll over funds and keep them in
retirement funds longer.
All of those are positive aspects. However, when you look at this
bill in balance, we do need to pass legislation; but on balance this
legislation will cause more harm than good, and I urge my colleagues to
reject the bill.
Madam Speaker, I reserve the balance of my time.
Mr. BOEHNER. Madam Speaker, I yield 2 minutes to the gentleman from
California (Mr. McKeon), the chairman of the 21st Century
Competitiveness Subcommittee.
Mr. McKEON. Madam Speaker, I rise in strong support of H.R. 2830, and
I thank Chairmen Boehner and Thomas and Johnson for their great work in
getting us to this point.
This bill represents a responsible approach that will protect the
retirement benefits of millions of American workers and help ensure
that their pension benefits will be there when they retire.
In recent years, our important retirement security system has come
under strain from the increased aging of the workforce and from
dishonest employers who made promises they could not keep. Many workers
and retirees have been misled into believing that they will have a
secure retirement only to see their pension plan terminated due to plan
underfunding.
This bill includes reforms to ensure employers more accurately
measure and fund their short-term and long-term pension promises. It
includes tough new funding requirements to ensure plans are adequately
and consistently funded, and it provides meaningful disclosure
provisions about the financial status of pension benefits.
In addition, this bill is important to protect taxpayers from a
multibillion dollar bail-out of the Pension Benefit Guaranty
Corporation. When the PBGC cannot pay benefit for plans where they have
assumed planned liabilities, taxpayers are on the hook for the
difference. In fact, in November the Pension Benefit Guaranty
Corporation reported a long-term liability deficit of $22.8 billion.
That is billion with a B.
The Pension Protection Act will reasonably increase employer-paid
premiums to help shore up the PBGC and protect taxpayers from this
potentially large liability.
This bill contains commonsense reforms that will help protect the
pensions of millions of Americans; and this bill is supported by a
broad array of unions, employers, and other organizations. Passage of
the Pension Protection Act is important to the retirement security of
millions of Americans, and it is important to help protect taxpayers
from an expensive bail-out.
I strongly urge my colleagues to support this bill.
Mr. GEORGE MILLER of California. Madam Speaker, I yield myself 5
minutes.
Madam Speaker, when we are starting to deal with the pension plans
that protect America's retirements, one of the things we should do is
to make a decision not to do any harm. But the fact of the matter is
that this bill makes things worse in many ways for many pensioners in
this country and many future pensioners.
First and foremost, we created the Pension Benefit Guaranty
Corporation to be there to protect some of the retiree benefits of
people if pension plans went bust or the corporations went bust. We are
now told that this legislation makes that problem worse.
The speaker who was just in the well said there was some $23 billion
in deficit in that plan. And what we now see is a Pension Benefit
Guaranty Corporation, the Congressional Budget Office tells us that
this makes it at least $9 billion worse over the next decade. So while
we narrow the deficit, in fact we see that we increase this agency's
deficit problems.
This is an agency that can look out into the future and can see up to
$100 billion of liabilities possibly coming their way. Maybe some of
them will not come because of this bill, but many of them will come
because of this bill, because this bill, in fact, makes it easier,
makes it easier to terminate plans. It makes it easier to put plans
into bankruptcy. It certainly does not make it any more difficult to
put into bankruptcy as we saw with United Airlines.
So what does that mean? That means that a plan that was designed, an
insurance policy that was designed for when companies went out of
business, now companies can take their pension plans, the retirement
nest eggs of their workers, and put them into bankruptcy, and the
company can go merrily on its way. I do not choose that term lightly,
``merrily on its way,'' because after what we saw after years and
decades of manipulating the pension plans of United Airlines, about not
being truthful with the employees, not being truthful with the public,
not being truthful with the shareholders about their liabilities, they
put them into bankruptcy. Those workers had given back billions of
dollars in wage concessions, retirement concessions to try to keep that
airline afloat. They were not able to because they went into
bankruptcy.
Yesterday, we learned that the top executives of that corporation
have now petitioned the court to distribute $235 million in stock to
those very same executives that ran this corporation into the ground,
that they are going to get $235 million in stock. The employees who had
all of the concessions, all of the cutbacks, the employees are going to
be required to service, maintain, run and staff those airlines, start
all over, having fallen and been cast to the floor.
That is what is wrong with this legislation. It treats those in the
corporate suites entirely differently than it takes care of the workers
on the shop floor or on the airlines or in the repair facilities. That
is the problem with it is that we see that this plan simply does not
provide the kinds of protections necessary, the kinds of protections
that are necessary for those employees who have worked so terribly long
for those corporations, who invested their entire lives in these
corporations.
Plus the fact that it also makes it, and we are told by a number of
the employer groups, this is what makes it more likely that the
companies will terminate their plans, that they will freeze their
plans. What does that mean? That means a lots of people who may be 50,
55 years old today, just as we found out with the cash balance plans,
this makes it easier to do a cash balance, a lot of people who are
working today are going to find out that they will not have a
retirement nest egg that they have been planning on. They will not be
able to carry out the standard of living that they were anticipating to
provide for their families.
{time} 1345
That is what this legislation does. It makes those kinds of decisions
much easier, much easier for the companies to do that.
What does that mean? That means that America is going to end up with
a poorer retired population than they had before. That means that these
people are going to have less of the kind of retirement that they had
anticipated because of the acceleration of the terminations, because of
the acceleration of the freezing of the plans and because of the ease
which you can now go and apparently the acceptability in the business
community of entering bankruptcy.
We changed the personal bankruptcy laws in this Congress because we
said people were using it as a convenience. It is interesting now that
the corporations have decided they will use it as a convenience to
redesign themselves, to reconfigure themselves, to reinvent themselves.
If United Airlines is the model, the only losers will be the workers
and the retirees in those corporations.
That is what this legislation does not do. It does not really speak
to trying to make sure that we could do all that we can to secure the
retirement of current workers and of future retirees.
I would urge my colleagues to vote against this legislation when we
get to that vote and understand that we should not be making the
problems of America's pensioners even worse than they are today.
Madam Speaker, we are facing a serious pension crisis that has
already cost employees across the Nation billions of dollars in lost
benefits--benefits they were told were ironclad. If you calculate just
the losses employees suffered in the Nation's four largest pension
terminations it exceeds $6 billion in earned defined benefit promises.
Let's be clear what is happening to our retirement system--this Enron
the sequel. This
[[Page H11756]]
is Enron 2 with a vengeance. This is a national disgrace.
This bill does absolutely nothing about companies who decide to use
the Federal Government to dump and run on their promises to employees.
Exploiting loopholes in our pension and bankruptcy laws, clever lawyers
have turned a Federal agency that was supposed to be a last resort for
companies that were closing shop, into a dumping ground for companies
to ditch unwanted promises to reward investors at the expense of
employees and taxpayers. So powerful is this gaping hole in our pension
protections, companies can now exact major wage and benefit concession
by merely threatening to terminate their pension plan.
Folks, if you want help fast forward to the new Wal-Mart economy--
this is your bill. If you want to further weaken employees' hand in the
battle for fair wages and benefits, this is your bill. If you want to
stand by and watch as companies freeze, downgrade or drop their pension
plans, this is your bill.
Last summer thousands of United Airline employees--mechanics, flight
attendants, and pilots--lost billions in irreplaceable pension savings
that changed their lives forever. These families--denied the courtesy
of even a single hearing before the Education and Workforce Committee--
participated in an online hearing Democrats sponsored. Over 1,000
participated in this unique online hearing and their powerful voices
were heard.
They wrote to us about the personal and financial devastation
resulting from the loss of promised benefits, and the lost opportunity
to earn future benefits. Listen to Kenneth Schmidt, a long-time
employee of United from Goodyear, AZ, who wrote:
Dear Congressmen,
I had worked for United for 38 years when I retired in
February of 2003. My job as a mechanic was always a source of
pride to me. I worked midnights for many years, with doing so
I missed out on many family gatherings, holidays, etc. This
was what I chose to do in life, and I did it with no
complaints. But, now I am faced with large cuts to my
retirement benefits. My retirement should be a time of taking
it easy, traveling, and enjoying my ``Golden Years''. If this
cut happens both my wife and I will be forced to reenter the
work world, probably full time, if our medical insurance is
also affected. This is a sad time in this country for all the
workers who are relying on a pension to ease their lives, and
make this time relaxing, and enjoyable. The stress that is
being created by this turn in events is not healthy for
anyone. Please try and help all retirees, and future retirees
out of this most unfortunate set of troubles.
Guess what this bill says to Kenneth Schmidt and the millions of
future Ken Schmidt's who have suffered from broken pension promises:
Too bad, tough luck. You're on your own.
How can it be that tens of thousand of United Airlines employees like
Ken Schmidt lose billions of dollars in promise benefits, and we do
nothing? For example, we all know that United Airlines was permitted to
terminate its flight attendants plans without ever having to show it
was necessary to continue operating the company. The plan was
terminated despite the testimony of a government hired economist who
concluded the United plan was affordable and should be continued. This
bill does nothing for them. The Democratic substitute--denied by the
Republican leadership--would have restored the United plan until the
company showed it couldn't afford it.
This bill does nothing for thousands of pilots whose benefits are cut
by half or more by the Federal Government when a plan is terminated.
When a plan is taken over by the PBGC after termination by its sponsor,
the PBGC is required by law to impose a heavy penalty of those who
retire at age 60--even airline pilots who are forced to retire at age
60 under Federal law. Our substitute fixes this injustice and allows
pilots to get the same maximum PBGC benefit other workers receive.
H.R. 2830 rejects the Senate bill provisions that provide urgent
relief to companies like Delta and Northwest airlines so these
companies don't terminate their plans. Our Democratic substitute
includes this urgently needed relief.
If you want to let the hard-earned pensions of airline employees
across the Nation crumble into a heap of broken promises like United
and USAirways, this is your bill.
Mr. Chairman, the sponsors of H.R. 2830 have referred to it as a
``pension reform bill.'' They say it will reform the Pension Benefits
Guaranty Corporation that's already $23 billion in the red and going
up. And they say it will turn around $450 billion in underfunding
reported by the Nation's pension plans. In truth, this bill not only
fails to tackle pension reform, it actually hastens the unraveling of
the PBGC and defined benefit plans. Here is what the Congressional
Budget Office says about this bill: ``H.R. 2830 would actually increase
the PBGC's 10 year net costs by $9 billion, or by about 14 percent
compared to with what it would be under current policy.'' The PBGC
found the same--that H.R. 2830 would mean billions more red ink to its
agency over current law.
How can a bill be reforming a system if it is increasing the PBGC's
red ink over current law? It can't, and that's why this bill is a sham.
This bill also repeals two long-standing, bedrock protections for
employees that, if permitted to pass, will haunt employees for years to
come.
First, this bill overrides discrimination laws against older,
existing workers for cash balance plans without any transition
protections. It means that older workers will face up to what the GAO
calculated would be up to a 50 percent cut in their benefits. These
angry constituents will be calling the offices of Members of Congress
in droves--just like thousands of IBM employees who spent years seeking
to rectify deep cuts in pension benefits from a cash balance
conversion. They will ask why Congress permitted companies to slash
their benefits with no transition protections, no option to stay in the
traditional plans, with no legal recourse. Tough luck to them,
according to H.R. 2830. By contrast, the bipartisan Senate bill has
significant protections for older workers, but this bill rejects them
all.
This bill is also larded up with lots of special interest perks, but
none as pernicious as the repeal of the longstanding prohibition on
conflicted investment advice. Federal pension law has always required
investment advice to employees to be on the level--free from self-
interested, tainted financial advice. No more. This bill gives a
sweetheart deal to investment houses by allowing them to offer
conflicted investment advice to employees so long as they disclose to
them that fix is in. And of course, it ignores years of mutual fund
financial scandals involving padded fees and commissions, secret market
timing, late trading, and more uncovered by the SEC, Elliot Spitzer,
and other State attorneys general.
Here is what Arthur Levitt, former SEC chairman, says about the
Boehner/Thomas investment advice provision.
. . . I have reservations when . . . advice comes from the
very same mutual fund company whose products are for sale to
a plans participants. One of my bedrock principles of
investing is that advice should come from mutual parties
with no axe to grind.
Financial journalist Jane Bryant Quinn and NY Attorney General Elliot
Spitzer have also expressed strong opposition to this change.
It's amazing that we don't lift a finger for the Ken Schmidts of the
world, but we pull out all the stops to reverse a 30-year bedrock
protection for employees for mutual funds and investment firms'
lobbyists.
By contrast, the Senate bill does not include this repeal and goes
further to actually strengthen the independent advice employees
receive.
This bill does nothing to ensure fair treatment between workers and
executives. Under this bill, if an employer does not fund its pension
plan above 80 percent, then the workers get punished by benefit limits.
What's the penalty for the executives who ran the plan down between 60
percent and 80 percent? Zero? If an employer does not fund above 60
percent, the bill requires more benefits limits for workers. For
executives, only a weak provision for new executive compensation, with
loopholes that allow the companies to promise future golden parachutes.
This bill doesn't reform our pensions; it actually hastens the
pension crisis according to two independent Federal agencies. Rather
than encouraging companies to keep their defined benefit plan in place,
it encourages companies to freeze, downgrade or drop their pension
plans altogether. It gives the green light to companies who want to
dump and run, and opens new loopholes for mutual funds to steer
employees into investments that feather their own nests at the expense
of employees. It overrules age discrimination laws to slash the
pensions of older workers and other existing employees. And it launches
new, punishing benefit cuts for employees of underfunded pension plans,
while letting the very executives who ran the company and the pension
plan into the ground off the hook. And it does nothing to address the
urgent crisis of our airline companies and employees--where jobs and
the hard-earned retirement benefits of hundreds of thousands of
Americans hang in the balance.
I urge you to oppose this bill.
Madam Speaker, I reserve the balance of my time.
Mr. BOEHNER. Madam Speaker, I yield myself 3 minutes, and I yield to
the gentleman from Georgia (Mr. Price).
Mr. PRICE of Georgia. Madam Speaker, would the chairman engage in a
colloquy with me and my colleague, the gentleman from Minnesota (Mr.
Kline), concerning the difficulties facing the airline industry,
particularly in terms of assisting airlines and that they fulfill their
pension promises to their employees?
Mr. BOEHNER. I will be happy to do so.
[[Page H11757]]
Mr. PRICE of Georiga. As you and I are both aware, the airline
industry continues to amass losses as the industry strives to become
more dynamic, both externally and internally. Losses during the last 4
years have proven that the business model used by legacy carriers is
outdated but under duress by high-fuel prices and post-9/11
repercussions.
A primary component playing into the equation of legacy carrier
viability is the pension systems currently in place. The current model
of defined benefit pension plans and the rules associated with it have
come under scrutiny as two legacy carriers, making up approximately 20
percent of the domestic airline market, recently terminated their
employee pension plans.
There are no winners when airlines default on their pension plans.
Employees now are planning for a retirement with a fraction of what
they were originally promised, and further, the Pension Benefit
Guaranty Corporation, the government agency and guarantor of all
pension plans, is put more and more into the red, and taxpayers are
exposed to greater risk. Eventually, the point will be reached when
taxpayers have to bail out the PBGC if no action is taken.
With these concerns in mind, I would ask the chairman to agree to
work with me and the gentleman from Minnesota (Mr. Kline) to develop a
process, as the Senate has done, to provide airlines with the
flexibility needed to fund their defined benefit pension systems over a
long amortization period. I believe it is critical that we join with
the Senate in this effort and through the conference process to develop
final legislation that contains industry-specific reform for the
airlines.
Mr. BOEHNER. Madam Speaker, reclaiming my time, let me thank my
colleague from Georgia for his work on this issue for lo these many
months. I know that my colleague from Minnesota (Mr. Kline) has similar
concerns, and I am happy to yield to him.
Mr. KLINE. Madam Speaker, I thank the chairman for yielding.
I would like to echo my colleague from Georgia's comments on this
important subject. I, too, come from a district full of hardworking
airline employees that have genuine concerns about the future of their
pension plan. Throughout this process, I have worked to ensure that we
address this issue in a way that does two critical things: One, make
sure airlines can continue to afford participation in their defined
benefits system; two, support the policy priorities of our committee,
the Education and the Workforce Committee, in our efforts to protect
employees by making sure the promises they have been made are backed
with well-funded pension plans.
Madam Speaker, I commend the chairman for all his work on this bill
and ask for his continued good efforts on behalf of the airline
industry as we go forward.
Mr. BOEHNER. Madam Speaker, reclaiming my time, as has been the case
all year, the lines of communication between those of us that are
interested in this, both on and off the committee, and those on the
other side of the aisle as well, the lines of communication are open
and will remain open.
As we move into conference, the process, I remain committed to
ensuring that the concerns of all stakeholders involved are addressed
in a bipartisan fashion as we complete action on comprehensive reforms
in an expeditious manner.
I remain committed, as I believe both of my colleagues do, that
airlines do, and that we need to find a solution that will allow
airlines to maintain their plans and ensure employees of both plans are
adequately funded.
Madam Speaker, I reserve the balance of my time.
Mr. CARDIN. Madam Speaker, I am pleased to yield 3 minutes to the
gentleman from Washington (Mr. McDermott).
(Mr. McDERMOTT asked and was given permission to revise and extend
his remarks.)
Mr. McDERMOTT. Madam Speaker, this bill proves that the Republicans
are not just after poor people. This pension bill boils down to one
fundamental principle: The Republicans want all Americans, including
flight attendants and everybody else out there on a pension, to be
entirely alone, isolated from the strength and compassion of American
values.
I am here to say that this pension bill that forces elderly Americans
into solitary confinement is abusive, irresponsible and morally
bankrupt. This whole year has been about doing it to people. Get rid of
Social Security, privatize it, put them on their own. Medicare:
Privatize it, put them on their own. Now we have the pension bill:
Privatize it, put them on their own.
Take away the union benefit, how will they do it? They are going to
Boeing. They squeeze Boeing tight, and Boeing flips into 401(k), and
there goes the pension down the drain.
Now this raises the question, what is wrong with you people? We
decided a long time ago in this country that there was strength in
numbers. We had to do things together. That is why Social Security was
developed. That is why Medicare was developed.
The Republican vision articulated in this bill is that America is a
sinking ship, and the shout is for every man and woman, you are on your
own.
They call it an ownership society. You will still have a pension; it
will be a 401(k). But it really is, you are on your own. If you can
figure out the market, good luck, baby.
There are not enough lifeboats in the water, and we know that, and
everybody is jumping off the ship. In 1980, 40 percent of employers
provided a pension. Today, only 20 percent do. Now, that is a 50
percent reduction in 20 years, and the pensions that are provided,
fewer provide a guaranteed benefit than they used to get.
So what do we have left? The stark fact is that half of America's
retirees have less than $15,000 income. Imagine living in the United
States on $15,000 after working for 45 years. Only 50 percent of
American households have retirement savings at all, but if they do not
have a benefit from the pension and their Social Security, which has
not been ripped away from them, they got nothing.
Now, half of the households who have savings have an average $385 a
month. So they get their Social Security, $1,800 a month at the
maximum, and $385, oh, they are living fat on $2,000 a month.
The people without any savings are disproportionately poor, have
nothing except Social Security, and the Republicans, as I say, tried to
take that away earlier in the year. We beat them on that, and we should
beat them on this.
This is the definition of financial freedom that Republicans want for
Americans: They want riskier pensions and no way for anybody to be sure
of anything. I urge my colleagues to vote no on this.
Mr. BOEHNER. Madam Speaker, I am pleased to yield 1\1/2\ minutes to
the gentleman from Louisiana (Mr. Boustany), a member of our committee.
Mr. BOUSTANY. Madam Speaker, I rise in strong support of this bill.
This bill strengthens our Nation's retirement system and comes at a
critical time as economic conditions are requiring companies to
confront new challenges.
This legislation provides steps to help employers plan and manage
finances accurately, to determine pension liabilities and to ensure
pensions are funded and benefits are paid.
I want to discuss an important section of the bill regarding multi-
employer pension plans. Under current law, multi-employer pension plans
are loosely regulated and have few requirements for timely disclosure
of information.
For the first time ever, beneficiaries and contributing employers of
these multi-employer pension plans will have transparent information to
make accurate funding decisions. The legislation creates a system for
identifying financially troubled plans and improving their funding
status.
Furthermore, new notice and disclosure requirements will provide
participants with clearer and more specific financial information.
Workers and retirees must be provided with an annual update on the
plan's assets, liabilities, financial condition and funding policies.
Underfunded plans are required to file financial information with the
PGBC and provide notice to workers and retirees. Existing financial
disclosure documents are updated to provide more information,
particularly about plan mergers and actuarial assumptions.
[[Page H11758]]
Multi-employer plans must notify a contributing employer of their
withdrawal liability upon request.
Madam Speaker, I urge colleagues to back this bill and take a very
important opportunity to put employees' pension plans on a solid
foundation.
Mr. GEORGE MILLER of California. Madam Speaker, I yield 2 minutes to
the gentlewoman from California (Ms. Woolsey).
Ms. WOOLSEY. Madam Speaker, American workers know that a defined
pension plan is a promise from their employer, a promise that, when
they retire, they will receive a benefit they can rely on. In fact,
they have planned their retirement future on that promise. This bill
allows companies to break that promise. It allows companies to switch
midstream to cash balance plans, ignoring that promise to their
workers.
These workers have trusted that this benefit will be there. It will
be there at the end of their service to a company. In fact, these
workers have quite often given up pay raises or other benefits for
their retirement security. These pension benefits have been earned.
They have been promised. They must be honored.
Actually, earlier this year, the Republican majority tried but failed
to destroy the Social Security system by going back on their promise to
every American that at a certain age they would receive a defined
benefit, a benefit they could count on.
Americans overwhelmingly stood up to the Republicans and said Social
Security is ours, you promised it, we rely on it, you cannot have it.
So the Republican majority could not take Social Security away from
Americans with privatization. Now, they are trying to pull the rug out
from under people who have dedicated their lives working hard for their
companies.
Madam Speaker, these workers were promised defined retirement
benefits. They earned those benefits, and this Congress cannot allow
companies to go back on their word. We must ensure that these
hardworking Americans get the pension benefits they have been promised
that they have earned.
I urge my colleagues to oppose H.R. 2830. Protect American pensions.
Mr. BOEHNER. Madam Speaker, I yield myself such time as I may
consume, and I yield to my colleague the gentleman from Ohio (Mr.
Tiberi).
Mr. TIBERI. Madam Speaker, I appreciate the chairman rising to engage
me in a colloquy.
I would like to thank both you and Chairman Thomas for your work on
this bill. As you remember, back during the committee, I spoke about
shutdown benefits and appreciate the work that you and Chairman Thomas
have done in the last couple of days to deal with stakeholders in that
industry. However, the language contained in the bill does not quite go
far enough, I believe, in helping everybody in every industry.
Mr. Chairman, as I have told you before, my father worked in the
manufacturing business as an employee for over 20 years. He was a
member of the steel workers, and one day when I was in high school, he
came home and was out of a job, which is traumatic enough, but he was
also out of a pension.
Today, employers and employer groups can work together to provide
shutdown benefits to employees and to families, and my hope is that
your commitment still stands, as it has, that we will work,
particularly with the steel industry as we have done with the auto
industry, to make sure that shutdown benefits remain a vital option for
employers.
Mr. BOEHNER. Madam Speaker, reclaiming my time, I would say to my
colleague that I agree with his comments regarding the importance of
shutdown benefits to workers who may suddenly find that the plant for
which they have worked, for 20 years in your father's case, happens to
be closed.
I think the gentleman knows that I am troubled by the fact that
shutdown benefits are often paid from a company's pension plan, despite
the fact that they are not technically retirement benefits in the true
sense of the word. These benefits resemble severance-type pay benefits,
and more importantly, these benefits are not funded.
But I want to make clear, for the benefit of my colleagues, that our
bill does not prohibit shutdown benefits, as some have suggested.
Instead, with further modifications that we have made over the last
few days, it merely requires that shutdown benefits be paid from
corporate assets and not pension plan assets, if the pension plan is
funded at below 80 percent. I think this is an important change, and I
believe it will help restore the financial integrity of this important
benefit.
My colleague from Ohio correctly notes that we still have work to do
on this issue of shutdown benefits, specifically as it relates to the
steel industry, and as such, I pledge to him and other Members who may
have an interest in this as well that on this issue we will continue to
work on this matter throughout this legislative process.
{time} 1400
Mr. GEORGE MILLER of California. Mr. Speaker, I yield 2 minutes to
the gentleman from New Jersey (Mr. Andrews).
(Mr. ANDREWS asked and was given permission to revise and extend his
remarks.)
Mr. ANDREWS. Mr. Speaker, I am going to vote to send this bill along
to the conference and vote ``yes'' for two reasons: first, I think the
bill very wisely includes relief for multi-employer plans, an issue
that many of us have worked on for a very long period of time. These
are plans run by small businesses who find large contributions to be
very stifling to their ability to compete. I think this relief is long
overdue, and it is the principle reason that I will vote to send the
bill along to conference.
The second reason is I think conference will finally be the forum
where some very serious flaws in the bill can be addressed and
renegotiated. Mr. Miller's substitute, which unfortunately was not made
in order under this rule, addresses those flaws.
First of all, the law makes it far too easy for failed pension plans
to be dumped into the Pension Benefit Guarantee Corporation. Mr. Miller
and Mr. Rangel had ideas that would preclude that dumping from
happening. They ought to be adopted.
Second, I think the law ought to make it clear that there cannot be
bias or favoritism in favor of highly compensated people at the expense
of the rank and file. Mr. Rangel and Mr. Miller's substitute
accomplishes that. The underlying bill does not.
These and some other issues, I believe, need to be worked out in the
conference. I think, unfortunately, they should have been worked out on
this House floor with a proper rule, but with those reservations I will
vote to send the bill along to conference.
Mr. GEORGE MILLER of California. Mr. Speaker, I yield 1 minute to the
gentleman from Georgia (Mr. Scott).
Mr. SCOTT of Georgia. Mr. Speaker, I rise to urge my colleagues to
vote ``yes'' on this important piece of legislation for several
reasons. Paramount, it will help an industry that badly needs our help
at a very critical time, and the only way we can help the airline
industry is to get it into conference. There are a lot of things that
may be right with this bill, there a lot of things that may be wrong
with this bill, but the only answer and the logical and most
responsible thing that we need to do is to vote ``yes'' and send the
bill to conference, allow the process to work.
I appreciate Mr. Miller who has worked very diligently with me and
understands my concerns. I represent an area that has probably more
airline employees maybe than any other district. I represent Delta
Airlines. We all know that Delta Airlines is in a bankruptcy fight,
fighting for its very life; and the two most critical issues that they
need help on is doing something to lower the high cost of fuel, which
we have problems with and how we can do it. There are all kinds of
questions. But there is one thing we can do, and that is to help them
with relief of their pension plans. So I urge my colleagues to vote
``yes'' on this important legislation.
Mr. Speaker, this is a comprehensive pension reform bill that will
protect workers' retirement incomes, give companies a longer window to
make underfunded plans whole, and will help protect U.S. taxpayers from
taking on the liability associated with future plan terminations.
Now I'm asking your help to help my people in Georgia.
[[Page H11759]]
One area that remains to be addressed in conference are major
airlines' pension plans. Delta Air Lines employs thousands of men and
women in my district who rely now or plan to rely in whole or in part
on retirement benefits provided by Delta.
Without a change in current law that allows Delta and other air
carriers that have defined benefit plan obligations, like Northwest,
Continental and American, to make their pension payments over a longer
period of time--20 years--it's certainly a possibility that some or all
of these plans will be terminated, benefits reduced and liability
shifted to the taxpayer.
These carriers want to honor their obligations, but need to be
equipped with the tools to have a fighting chance to do so. And getting
this pension bill to conference is our only hope.
Although we are not addressing this specific need today, I strongly
support continued pursuit in conference of an airline specific
provision similar to that passed by the Senate, extending the payment
period for these carriers to 20 years.
Help us get this bill to conference. Let's help Delta and all the
airlines who need our help so much.
I want to thank Chairman Boehner for your hard work in making this
reform bill a reality, and look forward to working with the conferees.
Mr. BOEHNER. Mr. Speaker, I reserve the balance of my time.
Mr. GEORGE MILLER of California. Mr. Speaker, I yield 2 minutes to
the gentleman from Vermont (Mr. Sanders).
Mr. SANDERS. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, I rise in strong opposition to H.R. 2830, the so-called
Pension Protection Act. It should be pointed out that H.R. 2830 is
opposed by AARP, by the Pension Rights Center, and pension advocates
across the country. While I recognize that the Republican leadership
included some modest provisions to attract some union support, H.R.
2830 still has a number of provisions that will jeopardize the
retirement security of millions of American workers.
Among other harmful provisions, this bill would legalize age
discrimination in cash balance pension conversions. Year after year,
Congress has voted against cash balance pension conversions because of
the harm they have caused older workers.
Mr. Speaker, we do not tolerate discrimination in this country based
on race, gender, religion, or disability; and we must not tolerate
discrimination based on age with regard to pensions.
Unfortunately, that is exactly what H.R. 2830 does. According to the
GAO, cash balance conversions without protections slash the pension
benefits of an average 50-year-old by $238 a month. Younger workers are
also hurt. As the GAO reported, a typical 30-year-old would see his or
her pension benefits slashed by $59 a month under a cash balance
conversion. H.R. 2830 would legitimize these harmful pension cuts by
legalizing cash balance conversions without requiring employers to
protect older workers. That is wrong.
Mr. Speaker, let me read to you what the AARP and the Pension Rights
Center have to say about this legislation. According to the AARP: ``We
cannot support legislation that would clarify the legal status of cash
balance pension plans without providing protections for older, long-
service workers involved in cash balance plan conversions.''
I urge a ``no'' vote.
Mr. CARDIN. Mr. Speaker, I am curious: Is the majority on the Ways
and Means side going to be using their time or not? Does the gentleman
know?
Mr. BOEHNER. I assume so.
Mr. CARDIN. Can I inquire as to the amount of time that remains on
all sides?
The SPEAKER pro tempore (Mr. Latham). The gentleman from Maryland has
13\1/2\ minutes remaining. The gentleman from Ohio has 3\1/2\ minutes.
The gentleman from California has 11 minutes remaining.
Mr. CARDIN. The time for the gentleman from Michigan?
The SPEAKER pro tempore. The gentleman from Michigan still has 22\1/
2\ minutes remaining.
Mr. CARDIN. Mr. Speaker, I reserve the balance of my time.
Mr. GEORGE MILLER of California. Mr. Speaker, I yield 3 minutes to
the gentleman from Massachusetts (Mr. Tierney).
Mr. TIERNEY. Mr. Speaker, I thank the gentleman for yielding me this
time, and I rise today to oppose H.R. 2830, the so-called Pension
Protection Act, not because the system certainly does not need to be
reformed, but because I think this particular vehicle, the way it was
constructed, actually does damage to what used to be our three-legged
stool of retirement security.
We used to rely on pensions; personal savings; and, of course, Social
Security. We spent a great deal of this past year fighting any efforts
to privatize Social Security and making sure that we had that leg in
place. This bill does nothing to enhance personal savings, something
this Congress ought to be taking up and making sure we do enhance.
With respect to pensions, we are in need of serious reform, but this
moves us in the wrong direction. We have millions of Americans who have
worked and tried to put their houses in order, tried to make sure when
they retired they had a dignified and comfortable living, but this
situation shows us over and over again that companies are now finding
it better for themselves financially to go into bankruptcy, capsize
their pension responsibilities, and then sometimes coming out more
profitable for the shareholders and for some of the CEOs but not for
the rank-and-file workers. This is not fair, it is not right, and it
certainly is not sound policy for this country.
In too many instances, these companies are defaulting without first
having made every possible effort to finance these pension plans and
making them work. Workers on the other hand have had decades of working
for companies, providing loyal service, the bargain for which was that
in the end they would have a guaranteed pension. Many of them had
forgone wages during the course of their 20, 25, 30 years of service.
CEOs, however, are still getting golden parachutes. They are getting
the chance to steer their businesses into court to dump the pension
plans and come out and still get taken care of handsomely; yet workers
do not.
The Congressional Budget Office and the Pension Benefit Guaranty
Corporation both say that this bill will actually add to the Pension
Benefit Guaranty Corporation's deficit; that the bill could actually
chase companies out of the defined benefit system and leave workers
with fewer choices and plans for retirement than they have now.
This bill does not seem to do anything to discourage the pension plan
terminations that threaten workers' retirement security, and it does
not stop companies from dumping plans in bankruptcy.
In committee, we offered an amendment that would allow the Pension
Benefit Guaranty Corporation to intervene earlier, to work with
companies in making sure they first exhausted all their options for
making sure the plans survived before permitting them to terminate the
plans and go into bankruptcy. A substitute for this bill would have
allowed us to present that notion again.
Unfortunately, our colleagues on the Republican majority saw fit not
to allow a substitute amendment so that we could not debate this
proposal. And I suspect we do not see it here today because it would
have carried. We would have gotten a majority of people in this Chamber
to understand that everything should be done that is possible to
prevent a plan from going into bankruptcy before the plan is actually
terminated.
Companies should first have to exhaust every single avenue of
creative financing in order to save and restore pensions before they
allow bankruptcy filings. The Pension Benefit Guaranty Corporation does
have expertise it can lend to companies before it gets to that
situation.
For those reasons and many others, Mr. Speaker, I urge we vote
against this bill and hope we get a better vehicle in the future.
Mr. BOEHNER. Mr. Speaker, I yield myself the balance of my time.
As I listen to my colleagues on the other side of the aisle, I have
to tell you that I am confused. Some of them say the rules that we are
proposing here are too tough and are going to drive employers out of
the pension business, while we have some of my colleagues on the other
side of the aisle saying the rules are not tight enough and we are
going to create more deficits at the Pension Benefit Guaranty
[[Page H11760]]
Corporation. Ladies and gentlemen, I think the bill is just right.
Yes, these are better rules that will require companies to better
fund their plans. They certainly are better than current law. But I do
not believe they go to the point of driving companies out of the
defined benefit system.
My good friend from California believes we are going to drive up the
deficit. Now, if the rules were not strong enough, I would not have had
virtually every employer in America who has a defined benefit plan
beating on my office door complaining about the rules we were
proposing. I would not have had every labor organization talking to me
about how do we get this right.
The fact is, if you look at the chart that we have here, plans must
meet a 100 percent funding target. That is not the law today. If they
are in the 80-90 percent range, it is good enough. But then as soon as
the market turns down or the industry has a bump in the road, it is not
long before they are under 60 and in deep trouble. So requiring plans
to be 100 percent funded, I think, is a very good idea.
Having an interest rate that is commensurate with their liabilities
is something that we have not done ever. We have had one interest rate
used to calculate the plan's liabilities. Under this modified yield
curve proposal, they will have three different interest rates to use
based on the longevity of their workforce, 0-5 years, 5-20, and those
employees who will retire after 20 years. It will give us a more
accurate reflection of the true cost of those plans.
Third, it requires funding shortfalls to be erased over 7 years. We
want to give companies time to go from the current rules to these more
responsible rules; and if we do not have a sufficient transition time,
what is going to happen is that we are going to create real havoc in
the marketplace.
Fourth, it restricts unlimited use of credit balances. We all know
that the current rules about credit balances are, frankly, some of the
most irresponsible public policy that I have seen. Beginning to
restrict the use of those credit balances will, in fact, strengthen
these plans.
Fifth, it curves benefit increases for underfunded plans. We all know
there are plans that were underfunded, severely underfunded, and yet
increasing benefits at the same time. That is not fair to workers who
are being given promises that someone has no intention of keeping.
Last, it shores up the finances of the Pension Benefit Guaranty
Corporation.
All of these will bring more funding to company pension plans, it
will bring more funding to the Pension Benefit Guaranty Corporation,
and put our pension system for American workers on a stronger
foundation.
{time} 1415
Why else do I think we are just right? I have a long list of business
organizations that are supporting this bill and a long list of labor
organizations that are supporting this bill. It is a balanced bill. I
urge my colleagues to support it.
Mr. GEORGE MILLER of California. Mr. Speaker, I yield myself 3
minutes.
Mr. Speaker, when United Airlines announced it was going to go into
bankruptcy, the Democratic members of the Committee on Education and
the Workforce planned an e-hearing so those people who were most
affected by the termination of that plan and the bankruptcy of that
company would have an opportunity to talk to their representatives in
Congress. We were not going to have a hearing on this problem, and
these people could not come to Washington and testify. So we opened up
the Internet to them, and we received thousands of replies from people
telling us their life stories. The amazing thing about it was how many
of these people were using their retirement to care for another member
of their family. It could be a spouse with an illness, it could be a
child, a grandchild, and all of a sudden, half of their pensions were
evaporated into the bankruptcy of United Airlines.
Mr. Kenneth Schmidt, a long-time employee of United from Goodyear,
Arizona, wrote, ``Dear Congressman, I had worked at United for 38 years
when I retired in February of 2003. My job as a mechanic was always a
source of pride to me. I worked midnights for many years, and in doing
so, I missed many of my family gatherings and holidays. This was what I
chose to do in life, and I did it with no complaints. But now I am
faced with large cuts in my retirement benefits. My retirement should
be a time for taking it easy, traveling and enjoying my `golden years.'
If this cut happens, both my wife and I will be forced to reenter the
work world, probably full time if our medical insurance is also
affected. This is a sad time in this country for all the workers who
are relying on a pension to ease their lives and make this time
relaxing and enjoyable. The stress that is being created by the turn of
events is not healthy for anyone. Please try and help all retirees and
future retirees out of this most unfortunate set of troubles.''
What the problem is is that this legislation does nothing for the
Kenneth Schmidts of the world, he and his family. It does nothing to
keep companies from simply making a business decision that they can
throw the company into bankruptcy, get rid of the retirement and health
care obligations to retirees and move along. This is not some unusual
practice to bring shame upon a company. The steel companies did it. The
airlines have done it. There is a question of whether the automobile
industry will go this way.
It is really not completely about their pensions. It is about a
decision of a business plan. It is about competition and a change in
the marketplace. But the fact of the matter is that, at the end of the
day, there is no showing. United did not have to show that for these
pension plans they would be a solvent company. In fact, the people from
the PBGC wrote and said that they thought the flight attendant plan
could be salvaged, and in fact, maybe the others could. But the
decision was made and they went into bankruptcy without a hearing on
that issue.
Companies should have to exhaust all of their attempts to try to save
the retirement plans of these Americans, these people who have worked
hard. Remember, these pension plans, they traded pay. They traded
health care benefits. They traded vacation days for this pension plan.
That was the agreement and the guarantee. Now, unilaterally, the
company gets up and walks away from it.
And to rub salt into their wounds, there were pilots required by the
laws of this Nation to retire earlier. They take an additional hit on
their pension because they are early retirees, not because they wanted
to stop flying but because the law says they have to retire.
So we have pension plans that could have been salvaged and people who
are being punished because of the Federal law in terms of their early
retirements, and this bill does nothing to fix that.
We do that in our motion to recommit. We address the concerns of the
flight attendants. We address the concerns of the early retirees, and
we address the concerns of the airlines, but it does not do that in the
majority bill because they want to go off and use those people as
trading chips, the retirement nest eggs of these hardworking Americans,
in the conference committee. I urge Members to vote against this
legislation.
Mr. CAMP of Michigan. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, H.R. 2830, the Pension Protection Act of 2005
strengthens retirement security for millions of Americans. Current
pension funding laws and structures are outdated and threaten the
financial stability of the pension system. In fact, the Pension Benefit
Guaranty Corporation, PBGC, the government insurer of pension plans,
estimates that single employer plans are underfunded by up to $450
billion.
Furthermore, an increasing number of companies are using the
bankruptcy system to dump massively underfunded pension plans on the
PBGC. Since traditional pensions are a critical component of retirement
security, it is essential to form law that modernizes and strengthens
funding rules. H.R. 2830 ensures that companies fulfill their pension
promises to working people. It requires employers to fully fund their
pension plans and rectify funding shortfalls more quickly. It also
ensures that employees receive up-to-date and accurate information
about their pensions and prevents companies from making future promises
when they cannot even meet current obligations.
The bill strikes the right balance in ensuring the plans will begin
to be
[[Page H11761]]
more appropriately funded while not being so strict that the companies
providing pension plans are in danger of having to terminate them. To
that end, H.R. 2830 provides transition relief to employers, giving
them time and flexibility to get their pension funding in order.
In addition, the Ways and Means Committee incorporated into this
package a number of tax incentives to increase retirement savings for
Americans. Included in H.R. 2830 are provisions to make permanent the
savers' credit and the increased contribution limits for IRAs and other
401(k) plans. The bill also increases savings opportunities for our men
and women in combat and provides increased pension flexibility for
public safety officers, including firefighters, policemen and emergency
medical service employees.
Furthermore, this bill provides tax benefits to make health care and
long-term care more affordable. H.R. 2830 makes permanent bipartisan
pension improvements established in 2001. While pension reform is a
difficult area to make adjustments, given the unique needs of each
employer, this legislation is a fair and balanced package that will
provide economic security for millions of Americans. It has broad
support for both the employer and labor communities. I urge my
colleagues to support this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. GEORGE MILLER of California. Mr. Speaker, I ask unanimous consent
to yield the balance of my time to the gentleman from Maryland (Mr.
Cardin) for his control in this debate.
The SPEAKER pro tempore (Mr. Latham). Is there objection to the
request of the gentleman from California?
There was no objection.
Mr. CARDIN. Mr. Speaker, I yield 3 minutes to the gentleman from
Michigan (Mr. Levin), the senior Democrat on the Subcommittee for
Social Security and who understands retirement security.
(Mr. LEVIN asked and was given permission to revise and extend his
remarks.)
Mr. LEVIN. Mr. Speaker, in a few words, what we need to do is to
reform our pension system but not to undermine it.
There is a basic issue here, and I hope Members will pay attention to
it. We have had in this country in the private sector a system of
guaranteed monthly benefits under defined pension plans in the private
sector for millions and millions of people. That has been meaningful.
What I think is going to happen if this bill becomes law and if it
were to be combined in conference with provisions in the Senate is
essentially to undermine defined benefit plans and move us towards what
are called defined contribution plans, so more and more, everybody will
rely on a 401(k) instead of the guaranteed benefit in the private
sector. That shift was tried in Social Security by the majority. It
failed for good reasons, and now I think there is another effort here
regarding private pension plans to lead to the same result.
We asked the Bush administration when they testified before Ways and
Means, tell us the impact on industry of your proposals. They could not
tell us. If you look at the chief financial officers, 60 percent of
them who deal with pension plans essentially say that this yield curve
of the administration, and there is a modified version of it in this
bill, would lead to benefit cuts and termination of defined benefit
plans, and that would affect manufacturing as well as other industries.
I know there have been some efforts to moderate that. Various people
have scrambled to try to reduce the potential undermining of defined
benefit plans through this provision on credit balances, but I want
everybody to know that that is not likely to work out in the main
because this Republican bill would discourage companies from doing the
responsible and sensible thing, advance funding their pension plans to
free up resources in years when they needed to make big expenditures,
like rolling out a big product line, and penalize those who would do it
any way, who would advance funds.
Look, there are some transition rules, but they are not going to
basically resolve this issue of whether we are going to maintain,
strengthen defined benefit plans.
Now, it is said, look to the conference committee. All I can say is,
look at the history of conference committees in this institution in
recent years. What is likely to come out is a bill that would make this
bill even worse, and even if it did not, what we face with this bill is
this basic question: Do we want to strengthen defined guaranteed
pension plans and payments, or are we going to move to everybody on
their own? I think this House should stand up and say, let us stand up
for a defined benefit system in this country.
Mr. CAMP of Michigan. Mr. Speaker, I yield 2 minutes to the gentleman
from Georgia (Mr. Scott).
Mr. SCOTT of Georgia. Mr. Speaker, I rise again in support of this
important legislation. I wanted to get down to this, well, to kind of
deal with some specifics as to why it is important that we move this
bill on over into conference.
First of all, this is a comprehensive pension reform bill that will
protect workers' retirement incomes. It will give companies a longer
window to make underfunded plans whole, and it will help protect U.S.
taxpayers from taking on the liability associated with future plan
terminations.
As I mentioned before, Delta Airlines employs thousands of men and
women in my district, and other airlines, in many of your districts
throughout this country, rely now or plan to rely in whole or in part
on retirement benefits provided by Delta. Without a change in current
law, that will allow Delta and other airline carriers that have defined
benefit plans and obligations, like Northwest, Continental and
American, to make their pension payments over a longer period of time,
20 years, then it is a certainty that some or all of these plans will
be terminated. Benefits will be reduced, and liabilities will be
shifted to the taxpayer.
We have an opportunity with this vehicle today to make sure that does
not happen. We do not need to extend this liability over to the
taxpayers. These employers and airline carriers want to honor their
obligations, their pensions, but they need our help. They need to be
equipped with the tools just to have a fighting chance to do so.
Mr. Speaker, let us give our airlines this fighting chance. I know
that is not the main item on the agenda, but this is the only vehicle
we have that we can use in conference to fix the situation. I urge
Members to give us a chance so we can help a very important industry.
{time} 1430
Mr. CARDIN. Mr. Speaker, first let me yield myself 30 seconds to
point out that I wish we did have provisions in this bill to deal with
the airline industry, because I think we should. The problem is that we
do not, and we go to conference with a situation where those who have
well-funded plans are now likely to be asked to pay because of the
costs of the airline industry. And let me also point out from Mr.
Boehner's comment about making the PBGC better funded, if we have a lot
of terminated plans, it is not going to be better funded. And the
gentleman brags about a permanent yield curve which is unpredictable to
business. It would be better to have a corporate bond rate, and I am
sorry that is not in the legislation.
Mr. Speaker, I yield 2 minutes to the gentleman from Massachusetts
(Mr. Neal), a senior members of the Ways and Means Committee and one of
the leading experts on retirement issues.
Mr. NEAL of Massachusetts. Mr. Speaker, as the consumer listens to
this debate, one of the things I believe that they want to understand
is that the advocates of this legislation, they are the ones that, just
a year ago, were trying to privatize the Social Security system. They
wanted to privatize the Social Security system. That should not be
dismissed. So this bill is now shuttled to the floor, barely a word of
consideration in the Ways and Means Committee, and the Republicans on
the Rules Committee would not grant us the opportunity to offer an
alternative.
Pensions, like Social Security, should be sacred between the employer
and the employee. There are few things that matter more than long-term
security and a guaranteed pension.
Now, let me give you the schedule of the Ways and Means Committee. We
found days to discuss a free trade
[[Page H11762]]
agreement with Bahrain, days to hear testimony about Bahrain, a country
with 700,000 people. And then we took months and months and months, as
they attempted to privatize Social Security. We spent a
disproportionate amount of time, after the American people said, and
the Wall Street Journal poll today, by the way, indicates quite clearly
how they felt about their privatization plan of Social Security. Boy,
is that clear. I will bet you on the other side everybody has read that
poll by now. That was a terrible idea, and this is a terrible idea.
So where do we find ourselves? This legislation will do more harm
than it will do good. The Committee on Investment of Employee Benefit
Assets, a group that represents chief investment officers from the
larger corporations in the country, recently conducted their own survey
and concluded that if this were to pass, 60 percent of those employers
would either freeze or terminate their pension plans. Everybody knows
the most robust debate in America next year is going to take place over
retirement security. Reject this legislation.
Mr. CAMP of Michigan. Mr. Speaker, I yield myself 30 seconds just to
say that we had several hearings on this pension bill in the Ways and
Mean Committee, including the Select Revenue Subcommittee which I
chair. Let me just say that the PBGC's analysis shows that funding
contributions to this end up being lower only in the short term; but,
actually, starting in 2010, contributions to pension plans will
increase. And that is because the funding reforms in the bill are
phased in over 5 years.
Mr. Speaker, I yield 2 minutes to the gentleman from Pennsylvania
(Mr. English), a member of the Ways and Means Committee.
Mr. ENGLISH of Pennsylvania. Mr. Speaker, I particularly want to
commend the Chairs of the Ways and Means and Education and the
Workforce Committees for putting together a bill which could finally
fix the antiquated laws that govern pension plans and protect, at the
same time, the interests of workers, retirees, and taxpayers.
What comprehensive pension reform must do and what this bill does for
the first time in a generation is to significantly shore up pension
funds through tough funding rules, but without pushing employers into
termination, bankruptcy, and a multibillion dollar taxpayer bail-out of
the PBGC.
But this bill goes beyond reforming pension laws. It also embraces
new tax policies to encourage savings for retirement. First, the bill
provides for automatic enrollment into 401(k) plans. While defined
contribution plans such as 401(k)s have seen increases in participation
since their inception, our national savings rate now is well below 1
percent.
A study by the Vanguard Group projected that enacting the automatic
enrollment provisions in this bill would boost participation to create
5.5 million new participants in 401(k) plans.
The bill also provides for split tax refunds, where taxpayers may
direct all or part of their tax refund to be deposited into an IRA.
Recently, we became aware of a pilot project that gave a sampling of
tax filers the opportunity to split their refunds between a savings
account and a refund check. Participants deposited $583, on average, 47
percent, of their refunds into savings accounts. Most significantly, 75
percent of these individuals had no prior savings. These results speak
for themselves.
As cochairman of the Savings and Ownership Caucus, I believe that
reaching out and empowering working families is essential to increasing
the country's savings rate and ultimately to improve on our trade
balance, strengthening our economy and providing a growth path for the
American future. I urge a ``yes'' vote on this pro-worker, pro-retiree,
pro-savings legislation.
Mr. CARDIN. Mr. Speaker, I yield 3 minutes to the gentleman from
North Dakota (Mr. Pomeroy), one of the leaders in the Ways and Means
Committee on pension issues, the former insurance commissioner from
North Dakota.
Mr. POMEROY. Mr. Speaker, there are two major problems with this
bill. The first is that it costs $70 billion and the costs are not paid
for, not offset anywhere. It drives the deficit deeper.
Last week, this Chamber voted to deal with the AMT 1-year fix, $31
billion. The majority voted to pass a budget reconciliation that added
another $56 billion in deficit. This adds an additional $70 billion in
deficit. $177 billion in deeper deficits.
You know, it is Christmastime. People are thinking what to give their
children. Well, the majority seems intent on giving them quite a
present indeed, $177 billion deeper deficit going on top of $8 trillion
of debt.
The second aspect of this bill that I want to point out is that it is
deeply flawed pension policy, and it will cause the cancellation,
freezing of thousands of plans affecting millions of workers.
Do not take my word for it. This is the estimate of the chief
investment officers in an organization known as CIVA. They estimate
that if this bill passes, 60 percent of the plans will freeze. Frozen
plans mean frozen benefits. And we do not know, the rest may freeze as
well. They conclude: ``These proposals would have long-term
consequences for current and future workers with the potential to
damage the retirement security of millions of Americans.'' Potential to
damage the retirement security of millions of Americans.
We have seen this story before. This is a group that worked for
months to privatize Social Security, take away that monthly dependable
income our seniors enjoy. Well, they failed on that one. Now they are
after pensions, and without question this will dismantle pensions in
the very same way they tried to dismantle Social Security.
Now, several groups are for this bill. Why? Well, airlines are so
desperate for a fix they are arguing for this bill even though it has
no provisions for airlines. I was stunned when the chairman announced
in a colloquy his lines of communication are open. Well, Mr. Chairman,
people have been calling. Airlines have been calling. Hello. Advocates
for airlines, worrying about their workers have been calling. Hello,
Northwest Airlines has been calling. Hello. Delta Airlines, calling.
Hello. No answer. No answer from the majority. And so someone that
supports an airline urged to vote for this bill when the provision is
utterly left out, it makes no sense. You do not help airlines with this
proposal. The Democrats had an alternative that had airline relief in
it. It was not even allowed for consideration.
You think you are going to be treated fairly in conference committee.
The administration opposes airline relief. The chairman has spoken out
against airline relief. There is nothing in the bill for airline
relief. They are hoping against hope that something will be done. They
deserve so much more than that.
I believe that this bill is deeply flawed pension policy. It will
hurt workers. Vote ``no.''
Mr. CAMP of Michigan. Mr. Speaker, I yield 2 minutes to the gentleman
from Minnesota (Mr. Ramstad), a distinguished member of the Ways and
Means Committee.
Mr. RAMSTAD. Mr. Speaker, I strongly support this important
legislation to address pending funding issues for America's workers,
and I applaud the work of Chairman Thomas and Chairman Boehner on this
bill.
As my friend from North Dakota, on the other side of the aisle, just
pointed out, relief for the pension plans of America's struggling
airlines is not in the current House bill. Certainly important to my
district, but I have been assured, Mr. Speaker, that as this bill moves
to conference with the Senate version, the special challenges facing
airlines will be addressed. It is important to the people of my
district. Northwest Airlines is the largest employer in the Third
Congressional District of Minnesota, and thousands of Northwest
employees are counting on Congress to rescue their pension plan. No one
wants to see another pension plan fail and be turned over to the
Pension Benefit Guarantee Corporation.
Northwest Airlines is struggling to emerge from bankruptcy and is
trying to do the right thing for its employees by maintaining its
pension plan. So as this bill moves through the process, I agree, we
must provide relief to this fragile industry. But we must pass this
bill today to get it to conference so we can take care of the airlines.
We must act today by passing this bill so employees can get the
benefits they were promised and so the PBGC and taxpayers will not be
on the hook. So let
[[Page H11763]]
us pass this bill, get it to conference, address the airlines' pension
problems in conference, and get this bill to the President before we go
home for the holidays.
Mr. CARDIN. Mr. Speaker, I reserve the balance of my time.
Mr. CAMP of Michigan. Mr. Speaker, I yield 2 minutes to the gentleman
from Indiana (Mr. Chocola), a distinguished member of the Ways and
Means Committee.
Mr. CHOCOLA. Mr. Speaker, it is because of today's outdated pension
rules, workers, retirees and taxpayers all stand to lose unless we act
now to reform our pension system. Under current law, employers have
been allowed to underestimate their future pension liabilities and to
make promises they simply cannot keep. The recent example of United
Airlines underscores the need for reform. United Pilots Plan was
severely underfunded, yet the company was not required to make cash
contributions to that plan in 8 years prior to its termination.
The legislation before us today strikes a careful balance between
preserving the defined benefit pension system for workers and ensuring
that employers properly fund their plans. This bill provides workers
with meaningful disclosure about the status of their pensions, and it
protects taxpayers from a possible multibillion dollar bail-out of the
PBGC, which insures the pensions of some 44 million workers.
But H.R. 2830 contains other important provisions aimed at improving
the economic security of retired Americans. For example, it provides
retired firefighters and police officers, who often retire early
without Medicare coverage, with a tax break on pension withdrawals to
pay for health insurance premiums. This provision enjoys strong
bipartisan support and offers a small measure to protect against
exorbitant health care costs that follow a career spent responding to
emergencies.
All together, Mr. Speaker, this bill represents a balanced approach
to protecting the interest of workers, retirees and taxpayers, and I
urge my colleagues to support its passage.
Mr. CAMP of Michigan. Mr. Speaker, I yield 2 minutes to the
gentlewoman from Michigan (Mrs. Miller).
Mrs. MILLER of Michigan. Mr. Speaker, when this issue first came to
the floor, I was very concerned, certainly, about how it dealt with
some of our manufacturing companies and our workers as well. So many
people in my district have worked a lifetime to secure a good pension
to help them in their retirement years. They perform jobs that are
difficult on them, both physically and mentally; and they have earned
their pension.
In Michigan we have so many workers in the airline industry, because,
of course, Detroit is the hub for Northwest Airlines. But we obviously
also have a huge number of auto workers because of the Big Three and
the numerous suppliers to the auto industry that reside there.
Northwest Airlines supports this legislation, as does Continental
Airlines, American Airlines, Delta Airlines. So you might think, well,
it must be bad for the airline workers then, right? But the bill is
actually supported by the Airline Pilots Association and the
Association of Flight Attendants. So both management and labor do
support this bill.
This bill is also supported by General Motors and even the Delphi
Corporation. So you might think it might be bad for auto workers,
right? Well, it is actually also supported by the United Auto Workers
Union. In fact, it is also supported by the Affiliated Unions of the
Building and Construction Trades Department of the AFL-CIO, the
Bricklayers and Allied Craft Workers, the Transport Workers Union, the
United Brotherhood of Carpenters and Joiners, and the United Food and
Commercial Workers Union.
{time} 1445
It is also supported by the U.S. Chamber of Commerce and the Business
Roundtable. Any bill that acquires the support of business and labor
must be doing something right in today's economy and this climate.
I think we have crafted an excellent piece of legislation. It does
what needs to be done: It protects workers pensions. Let us pass this
legislation. Let us get it into conference with the Senate, and let us
get on with the job of ensuring that workers are secure in the
knowledge that the pension that they have worked so hard to get will be
there when they retire.
Mr. CARDIN. Mr. Speaker, I yield 1 minute to the gentleman from Texas
(Mr. Doggett), a distinguished member of the Ways and Means Committee.
Mr. DOGGETT. Mr. Speaker, in Texas, gray skies could mean a twister,
a hurricane, or just a lot of rain. To avoid disaster, we want a
reliable weather forecast. The same when we go to the doctor, a
diagnosis before taking necessary action. And the same should also be
true of our economic health.
Families that work hard to earn a pension depend on it for retirement
security. But too many suddenly find that their pension funds are
drained, denying them of the dignified and comfortable retirement for
which they have worked a lifetime.
In addition to the many other problems identified here today by my
Democratic Ways and Means colleagues, this bill lacks a pension
disclosure requirement that would empower workers to understand just
how strong or weak their pension plans really are. Having to wait until
a retirement fund's bankruptcy is announced in the newspaper is a
little too late for employees to take any remedial action to be able to
protect themselves.
Both the Government Accountability Office and the Pension Benefit
Guaranty Corporation recommend that employees be provided information
far beyond the provisions of this bill. I think it is important that we
not leave the employees in the dark with corporate employers blocking
the light switch.
A majority of the House voted to allow the Federal Government to comb
through library records yesterday. Why can employees not be allowed
full access to their own pension information today?
Mr. CAMP of Michigan. Mr. Speaker, I yield 2 minutes to the gentleman
from Delaware (Mr. Castle).
Mr. CASTLE. Mr. Speaker, I thank the gentleman for yielding me this
time.
I would like to offer my support also for the comprehensive pension
reform legislation that we are now considering. I would also like to
congratulate and thank Chairman Boehner and Chairman Thomas for their
hard work in getting us to a point where we can make meaningful and
necessary reforms to our pension system.
It has become very clear to us that the laws governing pension plans
are antiquated. This is evident from recent high-profile bankruptcies,
pension plan terminations and the Pension Benefit Guaranty
Corporation's, PBGC, latest report of a $22.8 billion long-term
deficit. It would be criminal if Congress were to ignore these
instances and not do something to protect the interests of workers,
retirees and taxpayers alike.
As we have all heard here this afternoon, H.R. 2830 will strengthen
pension plan funding rules, provide workers with meaningful disclosure
about the health of their pension plans and protect taxpayers from a
possible multi-billion dollar bailout of the PBGC. I would like to
highlight a couple of provisions within the bill that I believe are
also vital to the health of the system.
First, many workers and retirees in recent years mistakenly believed
that their pension plans were well funded only to receive a shock when
the plan was terminated. Without basic information, workers and
retirees are left without the most basic tool they need to hold their
employers accountable: complete and accurate information about the true
funded status of their pension plans. The Pension Protection Act
ensures workers and retirees are given timely, accurate and
straightforward information about the health of their plans and thus
their own financial future. It is my belief that requiring transparency
is one of the most important things that Congress can do for employees.
Second, when pension plans are underfunded and worker retirement
security is in jeopardy, excessive executive compensation packages can
add insult to injury by heaping lavish benefits on executives while
workers and retirees wonder if they will have any retirement benefit at
all. The Pension Protection Act restricts the funding of
[[Page H11764]]
such executive compensation arrangements if an employer has a severely
underfunded plan. Moreover, it requires plans that become subject to
these limitations to notify affected workers and retirees.
Again, I thank the chairmen for their leadership, and I urge my
colleagues to support the Pension Protection Act.
Mr. CAMP of Michigan. Mr. Speaker, I yield 2 minutes to the gentleman
from Wisconsin (Mr. Ryan), a distinguished member of the Ways and Means
Committee.
Mr. RYAN of Wisconsin. Mr. Speaker, I thank the gentleman for
yielding me this time.
Mr. Speaker, I cannot think of anything more scary, anything worse
than working one's lifetime, working hard every day and then seeing
their pension go before them, seeing their pension get terminated. That
is the worst possible thing that could happen to a worker and to a
family.
We have a system that needs fixing, Mr. Speaker. We have a pension
system that has some loopholes where companies could not put money in
their pension plan when they needed to, to make them funded, and then
we have a system that disincentivizes companies from putting more money
in their pension plan to prefund the workers and employees when they
have one and they have the will to do so. That is wrong, and that needs
to be fixed.
Yet, on the other hand, Mr. Speaker, as this legislation was being
drafted, we want to make sure we get to a time where companies fully
fund their workers' pensions. Getting to that transition was difficult,
and I want to thank the chairman of the Ways and Means Committee, Mr.
Thomas; the chairman of the Education and the Workforce Committee, Mr.
Boehner, for working with us to address our concerns specifically on
behalf of the auto sector. Because of this, the issues surrounding
credit balances, plant shutdown benefits and those things that were
raised by the auto sector, by the UAW, have been addressed in this
legislation, are being addressed in this manager's amendment.
I opposed this bill in committee. I was the only Republican to do so.
But, Mr. Speaker, we have fixed this legislation. This legislation is
good for labor. This legislation is good for management. But, most
importantly, this legislation is good to the employees and the workers
of America.
I encourage and I ask for a yes vote on this bill because it is
fixed. It is good, and it should pass.
Mr. CARDIN. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Ohio (Mrs. Jones), distinguished member of the Ways and Means
Committee.
Mrs. JONES of Ohio. Mr. Speaker, I thank the gentleman for yielding
me this time.
The prior speaker said we have fixed it. Well, if it is fixed, why
are the airlines not included in the legislation?
I have been on the floor of the House ever since I came here. My
daddy worked for United for 40 years. My sister worked for United for
25 years. My brother-in-law worked for United for 27 years. My niece
works for United right now. If we are so concerned about them, why is
it not in the legislation?
Secondly, if we fixed it, why is it unclear what happens with cash
balance plans that are already in place and the IRS has not given them
a decision? We go prospectively, but we do not go retroactively.
In the City of Cleveland, there are four companies that went into a
cash balance plan, and cash balance plans are the wave of the future.
People want portability. They are not going to work for United, like my
dad, for 40 years. They are going to work one place 7 years. They are
going to work somewhere else 7 years, and they need to move their money
around. It is the wave of the future, and we have not fixed cash
balance plans. And I encourage my colleagues to fix it. If they are
saying we fixed it, fix it right now.
I want to encourage Mr. Boehner, Mr. Thomas, Mr. Camp and everyone
else: Do not tell us we are going to fix it in conference. Put it in
the bill. I would like to see it in writing. I want to see it in red,
black, blue, brown, whatever color you want to give it to me. Our
promises are idle if it is not in writing. I want this legislation to
work for Americans because people do deserve certainty. They deserve
certainty. Employers who went into a plan, they even paid up for their
employees to deal with the issue of wear-away, and they cannot get
clarity on the programs that they have in place right now. Help them.
Fix it.
Mr. CAMP of Michigan. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I yield to the gentleman from Minnesota (Mr. Kennedy)
for the purpose of a colloquy.
Mr. KENNEDY of Minnesota. Mr. Speaker, I believe that section 122 of
this bill is an important public policy statement that says corporate
executives who are not properly funding the pension plans of their
employees should not be feathering their own nests with overly generous
retirement packages. Currently, the bill penalizes employers who fund
executive compensation if the sponsor's employee defined plans are less
than 60 percent funded. My concern is that by setting this threshold
too low, we are not discouraging them enough from being irresponsible
with the retirement security of their employees while they take care of
their own retirement packages.
I ask the chairman to work with me in conference to increase the
threshold to at least 80 percent so that we encourage executives to
take their pension funding obligations more seriously, not leave their
defined benefit plan beneficiaries and, indeed, the PBGC and taxpayers
on the hook.
Mr. CAMP of Michigan. Mr. Speaker, reclaiming my time, I would just
say to the gentleman, as chairman of the Select Revenue Measures
Subcommittee of Ways and Means, I look forward to working with him on
this and other issues as this legislation moves through the process and
to conference.
Mr. KENNEDY of Minnesota. Mr. Speaker, I thank the gentleman for his
response.
Mr. CAMP of Michigan. Mr. Speaker, I yield 2 minutes to the
gentlewoman from Pennsylvania (Ms. Hart), a distinguished member of the
Ways and Means Committee.
Ms. HART. Mr. Speaker, I thank the subcommittee chairman, Mr. Camp,
and my colleagues for working so hard on this bill, along with our
chairman and chairman of the Education and the Workforce Committee.
Without their urging, this bill would not be on the floor today, and
this bill is so extremely important, especially to constituents in my
district.
Over the last year, I have met with employees, union members, covered
by both multi-employer and single-employer plans, also with the
employers to discuss their concerns regarding pensions. Pension
protection continues to be their top issue. Many of my constituents
have faced challenges to their pensions with companies like U.S.
Airways filing for bankruptcy or others turning their plans over to the
Pension Benefit Guaranty Corporation.
This bill would establish sensible funding rules, requiring employers
to fund 100 percent of their pension liabilities. In this bill, fair
consideration is given to those plans which need to catch up, but
funding shortfalls must be made up within 7 years. Also, employers are
urged to increase their pension contributions during profitable years,
which they cannot currently do freely under the present rules.
In addition, the bill encourages greater transparency so that
employees know the status and financial health of their own company's
pension plan. Ultimately, this is their own retirement financing. They
have a right to know. These requirements will create more stability and
certainty in these pension plans.
This bill also prohibits employers from funding golden parachute
executive compensation plans if the pension plans of the rank and file
are underfunded. U.S. Airways executives walked away with $35 million
in executive compensation after running the company nearly into the
ground and dragging concessions out of their employees, including
reductions in pension benefits for pilots and leaving other employees
in the dark about the funding of their pension plans. This is unfair to
the hardworking employees of these companies, and this bill would
prevent such a travesty in the future.
Finally, this bill encourages additional retirement savings by
extending and improving incentives to save. The bill makes permanent
provisions
[[Page H11765]]
passed in 2001 to increase annual contributions to IRAs and qualified
pension plans and ``catch-up'' contributions for individuals over 50.
I hope my colleagues will support this legislation because it finally
gives employees what they need: stability in their retirement.
Mr. CARDIN. Mr. Speaker, I yield 2 minutes to the gentleman from
Illinois (Mr. Emanuel), whose provisions are in this bill concerning
split refunds and automatic enrollment and other issues that he has
brought to the table.
Mr. EMANUEL. Mr. Speaker, this legislation is a missed opportunity.
As my colleague from Maryland just noted, I have sponsored
legislation on the automatic enrollment and 401(k) plans, direct
deposit of tax savings into a savings plan, and the savers credit for
people with moderate income, to start saving. Why? Because basically
almost 80 percent of small business employees have no retirement plan
outside of Social Security. For approximately 38 percent of the
households in America, the only savings plan they have is Social
Security.
By doing what is right, by helping people start up their personal
savings through 401(k)s and other types of personal savings, we would
actually encourage people to save for their retirement. So this
legislation on the defined contribution level takes the right step. And
it is so unfortunate because we can get an overwhelming vote for those
provisions to help Americans save outside of Social Security. And I am
glad we took this year to stop the privatization of Social Security.
But in doing that, they have added the provisions on the defined
benefit plans. On a stand-alone, none of that would pass. So what they
are trying to do is get the goods through Customs using the defined
contributions to get through what I think are some very dangerous
provisions as it relates to the defined benefit plans for millions of
workers who have basically negotiated a deal with their employers.
Because what does this legislation do?
{time} 1500
It makes a bad situation worse.
The PBGC and the Congressional Budget Office have estimated that in
fact $9 billion in defaulted plans would be left on the taxpayers. We
started 3 years ago with the PBGC, which guarantees all retirement
plans in this country, with a surplus. Today, we are running a deficit,
and this legislation would make that situation worse. As the old saying
goes, when you are in a hole stop digging. This legislation would dig
even faster.
Companies, and we know them all, we have seen the stories, are using
our bankruptcy laws to literally dump their pension systems, and it is
a backdoor to walk out of their obligation. This legislation does
nothing to stop companies from dumping their plans, and it does not
ensure fairness between workers and executives. So while there are good
provisions that relate to the defined contributions, it makes the
defined benefit plans much worse.
Mr. CAMP of Michigan. Mr. Speaker, I yield myself 2 minutes.
Mr. Speaker, pension reform is more than just an accounting issue; it
is about protecting the trust between employers and their employees. It
is critical for Congress to address this issue and step in and fix
rules that no longer work. Many businesses are complying with pension
laws. However, the current system is too weak, and many companies have
plans that are underfunded. It is time for Congress to step in and
reform single-employer pension plans, multi-employer plans, improve
disclosure and enhance retirement savings. The bill before us achieves
these goals.
The pension bill requires companies to accurately measure how much to
contribute to their plans and how much they owe.
This bill also protects shutdown benefits. Those are benefits that
are paid to workers who are being laid off because of a plant closing.
These benefits are critical to help older workers affected by corporate
downsizing. It is imperative that well-funded plans be able to continue
to provide their workers with shutdown double benefits, and I am glad
this Pension Protection Act preserves this important pension security
tool.
The strength of multi-employer pension plans is critical to the
retirement security of many Americans. Approximately 1,600 multi-
employer plans cover about 9.8 working people in the United States.
Multi-employer plans, like single-employer plans, cannot simply be
turned over to the PBGC. Therefore, it is even more important to those
involved that these plans are properly funded.
This bill strengthens the solvency of multi-employer defined pension
benefit plans by providing trustees with the tools to fix the plan's
financial situation. The bill requires trustees to adopt rehabilitation
plans for critically funded pensions and protects employers from
defaulting on their promises.
One important provision of this bill, and perhaps one of the least
mentioned, is regarding disclosure requirements. The bill would give
retirees and employees better information on the financial condition of
their plan. Now workers will be sent information from their plan's
sponsor and the plan's ratio of assets to liabilities, the plan's
funding and asset allocation policies and other critical information.
While protecting pensions is a focus of this legislation, the bill
does much more than that. It includes new opportunities for people to
prepare for their retirement and bolster their savings. The bill
provides individuals with new insurance products that help Americans
better afford long-term health care costs.
I applaud the work of Chairman Thomas and Chairman Boehner and urge
support of this bill.
Mr. CARDIN. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, I am sure that people who are watching this debate are
somewhat confused about some of the technical provisions that we have
talked about on the funding of a guaranteed fund. But let me try to
simplify it.
The bottom line is that the total changes that are being suggested
make it more rigid and less predictable for those companies that have
traditional pension plans as to how much money they have to put into
the guaranteed fund. Understand that the guaranteed fund is funded by
the companies making contributions to the guaranteed fund. It is not
funded by the government.
So if you have a plan that is well-funded and you are now being told
it is going to cost you more to stay in that plan, there is an
incentive for you to freeze your plan or to leave. That is what is
going to happen, and that is why we are very concerned about many
people losing their traditional pension plans as a result of this
legislation.
The second point, let me point out, is that many Members have been
talking about the airline industry and to try to help the airline
industry. I pointed out that I think we should do that. We should do
that because, A, it will allow the guaranteed fund to concentrate on
other plans, and companies will not arbitrarily cancel their plans
because they are afraid they are going to be stuck with the costs of
bailing out the airline industry. That makes sense. But we are told: We
are going to do that in conference, trust us.
We are the legislative body. We should do it. How do we know what is
going to come out of conference? It is our responsibility to make sure
it is done. We made some changes for the auto industry. Why have we not
brought in those provisions? It is our responsibility to do it.
And I haven't heard anyone talk about how we are going to correct the
problem of an industry going into bankruptcy in order to save their
costs. Is there any hope that that will come out of conference? I doubt
it.
We can do better. I urge my colleagues to reject this bill.
Mr. CAMP of Michigan. Mr. Speaker, I yield the balance of my time to
the distinguished chairman of the Education and Workforce Committee,
the gentleman from Ohio (Mr. Boehner).
The SPEAKER pro tempore (Mr. Latham). The gentleman from Ohio is
recognized for 3 minutes.
Mr. BOEHNER. Let me thank my colleague and my friend and classmate,
Mr. Camp, for yielding me time, and thank all of my colleagues for what
I think has been a very healthy debate today about how we strengthen
America's pension system.
We have heard Members argue that the bill that we are bringing before
us is too difficult, that we will force companies out of pension plans
and leave their employees hanging; while others
[[Page H11766]]
have argued that the rules are not tough enough, and we are keeping the
door open to irresponsible practices.
I truly do believe that we have a bill that is balanced, that will
not push employers who have these plans out of the system and will
protect American workers who have been promised these benefits.
If we do not act, we know exactly what is going to happen: Millions
and millions more Americans are going to lose an opportunity for a
defined benefit pension plan, and millions of Americans who already
have one are going to be at risk that they will not have their plan. So
Congress must act.
Not only did we deal with single-employer pension plans, but we have
not talked much about multiple-employer pension plans that you find
traditionally in the trucking industry, the food industry and others.
And while they have not been talked about much today in this debate and
the administration did not propose changes, there are serious changes
to the multi-employer pension system in this plan that will help
strengthen that system.
Those plans, by and large, are healthier than single-employer plans,
and we have labor and management on both sides in the multi-employer
sector come together to put rules in place so that their plans can
never get into a very weakly funded position. I am glad they are in the
bill.
Lastly, let me point out that there are large numbers of groups
supporting this bill. Every major labor organization, with the
exception of several, is supporting this bill. Many in the management
sector in every large business organization is supporting this bill.
Why would all of the labor organizations and the business organizations
all be on board in support of this bill? Because they think it is
balanced. They think it is the right thing to do, and they know that
Congress needs to act.
Is everything perfect in the bill? No. As the gentleman pointed out,
we have got airline relief that we will probably be talking about again
soon. Our commitment is to deal with this in conference.
My colleague from Ohio talked about the need to go further on cash
balance language. I certainly agree with her. There are 7 million
Americans who have cash balance plans or other types of hybrid plans.
We need to provide legal certainty for those who have converted to a
cash balance plan so that we do not put in jeopardy the 7 million
Americans counting on benefits from those plans.
We have a good bill. I would urge my colleagues to support it.
Ms. MILLENDER-McDONALD. Mr. Speaker, I rise in strong opposition to
the Pension Protection Act of 2005. This Act does not protect the
American worker. In fact, this bill places the future of today's
American worker in jeopardy.
Even worse, this bill places those who have put in the years and
worked hard at the mercy of bad management decisions.
Furthermore, pensions are a financial safety net that many Americans
and businesses pay into. Pension programs are an important factor when
workers choose a job and it plays a large part in financial planning.
Many people go their entire career thinking they will have this money
upon retirement and regularly contribute even when they could use the
money to take their family on vacation or buy their children clothes.
Instead, they place earnings into their pensions as much in the short
run as they will need in the future.
Pension plans are as much about personal responsibility as they are
about good financial planning.
The American worker's pension should not be a pawn for businesses to
navigate bankruptcy. I am especially concerned about the adverse affect
this bill has on women.
As a Member on the Aviation subcommittee and a frequent flyer, I have
worked for years with airlines and flight attendants.
Many, many airline employees are women. Many of those women are
single mothers. Without a guaranteed source of retirement income, it is
almost impossible for these women to stay in the employ of the
airlines--and worse yet, many of these women have already put in years
of hard work and have already lost upwards of 75 percent of their
pensions.
Mr. Speaker, my office has received a towering pile of heartbreaking
letters from people whose pensions have been lost.
How do we as Members of Congress tell these people that after all
these years of paying into a pension--working toward a retirement--they
have to make other plans for their golden years.
We have an opportunity to do some real good. We have an opportunity
to strengthen the commitment between the employers and workers, however
this bill further drives a wedge between the two.
Vote no against this bill today and let us pledge to come back during
the second session of the 109th Congress and do this right.
We owe it to the American people to take their financial future as
seriously as they do. Vote no on the Pension Protection Act of 2005.
Mr. HOLT. Mr. Speaker, I rise to express my opposition to the pension
reform legislation that we are considering today. I oppose this
legislation because it will further erode an employer's willingness to
provide defined benefit plans and will close the loopholes that allow
companies to dump their pension obligations on to taxpayers.
Throughout the 1990's, in American workplaces a dramatic shift from
traditional defined-benefit plans to defined-contribution plans
occurred. Rather than being able to count on a regular pension check of
a specified amount each month for the rest of his or her life, many
workers must now put money in a mutual fund or other investment and
take what comes each month for as long as it may last. Many other
companies began to ``cash out'' their pensions giving employees a cash
balance payout, claiming it was equivalent to a pension. It is not
equivalent to a pension. Furthermore, some companies have used the
Pension Benefit Guarantee Corporation to bail them out of their
financial troubles. Now, millions of workers have entered retirement,
only to learn that their company could not provide the benefits they
had been promised. The Pension Benefit Guarantee Corporation has
amassed a $23 billion deficit, jeopardizing its ability to insure
defined pension benefit plans. As millions of more workers face reduced
benefits, it is clear that Congress must find an effective solution to
this problem. Unfortunately, the legislation we are considering today
will not strengthen the defined benefit program or help to ensure that
millions of workers receive the benefits they have been promised and
planned on for retirement.
Unlike the Democratic substitute that Representative Miller and
Representative Rangel tried to offer, this bill will not make it more
difficult for companies to use the bankruptcy code to dump their
pension obligations to the Pension Benefit Guarantee Corporation
(PBGC). The decision of United Airlines to force the PBGC to cover its
pension obligations resulted in reduced benefits for its employees and
retirees and shifted its burden to fulfill pension promises on to the
American taxpayer. As a result of United Airlines action, the PBGC was
forced to absorb $8 billion in guaranteed benefits, and employees and
retirees lost $3 billion in their earned pension benefits. Then the
directors of the reorganized company gave themselves bonuses. Northwest
and Delta Airlines, as well as companies such as Delphi are also on the
verge of following in the path of United Airlines. This will
undoubtedly increase the PBGC deficit, and further jeopardize its
ability to insure pension plans. I hope that when this bill moves to
conference, the conferees will include important provisions from the
Democratic substitute that will reduce a company's ability to dump
their pension liabilities to the PBGC. Specifically, pension reform
legislation should include measures that require companies to seek
alternatives before terminating their pension plan and require
companies to prove that the plan is unaffordable in a court of law.
I also believe that the provisions in the bill that legalize cash
balance plans will hurt millions of workers. Over 8 million workers
have already been affected by cash balance conversions, before the
courts put a hold on the discriminatory way companies converted to
these cash balance plans. The GAO has estimated that without older
worker protections over 85 percent of younger workers and 90 percent of
older workers would loose expected pension benefits if a defined
benefit plan were converted to a cash balance plan. Legalizing cash
balance plans will hurt workers that are nearing retirement and will
cause more anxiety for younger workers that must plan for retirement
with uncertain benefits.
Although I will oppose this bill for the aforementioned reasons,
there are provisions that I believe will benefit workers. For example,
this legislation will allow employers to give their employees access to
professional investment advice. With the dramatic increase in hybrid
plans and defined contribution plans, employees are now faced with
making multiple investment decisions that will have a profound impact
on their retirement security. This investment advice provision will
ensure that workers will be able to make informed decisions regarding
their future.
American workers deserve to know that their pension is secure and
that they will receive the benefits that they have been promised during
their years of service. As this bill moves to conference, I hope the
conferees will be able to improve the shortcomings of this legislation
so that we can pass legislation that
[[Page H11767]]
will preserve the defined benefit pension system.
Mr. MARKEY. Mr. Speaker, I rise in opposition to the so-called
pension ``reform'' bill today on the House Floor.
The bill before us today fails to address fundamental problems that
have robbed millions of hard-working Americans of the retirement
benefits they have earned. This Republican bill will not prevent
companies from dumping their pension plans onto the Pension Benefit
Guarantee Corporation (PBGC), which already is burdened with a $23
billion deficit and may have to be bailed out by taxpayers. This bill
does nothing to protect older workers when their pension plan is
converted to a ``cash-balance'' plan that could short-change them of
the benefits they have accrued. This bill also contains provisions that
increase the costs and regulations for companies to maintain pension
plans to the point that many companies will freeze or abandon their
plans, accelerating the growing pension crisis.
Democrats were not permitted to offer amendments to improve this
bill. While I cannot support this flawed, misguided Republican bill, I
support the Democratic Substitute offered by Representative Miller,
Representative Rangel and Representative Cardin. The Democratic
Substitute would stabilize existing pension plans by extending for 2
years the corporate-bond-rate used to determine PBGC liabilities,
encourage employers to maintain defined benefit plans without cuts in
workers' pension benefits, and protect older workers during cash-
balance conversions.
As the pensions of workers remain at risk, I am concerned about
conflicts-of-interest, hidden financial arrangements and unlawful
activities that may be causing or contributing to the poor financial
health of pension plans at companies across the country. In May 2005,
the Securities and Exchange Commission (SEC) released a report,
``Examinations of Select Pension Consultants'', that revealed
significant conflict-of-interest and non-disclosure issues within the
pension plan consultant industry. Specifically, the SEC found, among
other conclusions, that:
[P]ension consultants may steer clients to hire certain
money managers and other vendors based on the pension
consultant's (or affiliate's) other business relationships
and receipt of fees from these firms, rather than because the
money manager is best-suited to the client's needs. Such a
conflict can compromise the fiduciary duty that investment
advisers owe their clients.
The findings included in the Commission's report are particularly
disturbing for pension plan beneficiaries, whose benefit payments are
dependent upon their plan management's diligent performance of its
fiduciary duties, and for the Federal Government, which is faced with
an enormous deficit at the Pension Benefit Guaranty Corporation (PBGC)
as a result of a series of massive corporate bankruptcies that have
resulted in PBGC assumption of severely underfunded pension plans
terminated when the corporations entered bankruptcy.
Representative Miller and I have requested that the Government
Accountability Office (GAO) investigate whether the Federal Government
is aggressively regulating and enforcing statutes intended to protect
pension plans and their beneficiaries from conflicts-of-interest and
similar undisclosed relationships that can impair pension fund returns.
We have urged GAO to examine whether any of the 3,500 terminated
pension plans that are now the responsibility of the PBGC may have been
adversely affected--prior to PBGC assumption ofthe plans' liabilities--
by the types of conflicts and hidden financial arrangements uncovered
by the SEC.
I am hopeful that the pension legislation considered today by the
House will be greatly improved during the conference with the Senate,
so that we can have a vote on pension reform legislation that actually
addresses the real problems that exist in the current system.
Additionally, I look forward to GAO's work in the important area of
pension fund consultants. The ongoing crisis in the pension fund
marketplace requires a thorough, independent review to identify
problems with government regulation and enforcement and recommend
improvements. American workers have relied on the pension promises of
their employers. It is unconscionable to abandon these workers.
I urge a ``no'' vote on this Republican pension bill, and a ``yes''
vote on the Democratic Substitute.
Mr. GUTKNECHT. Mr. Speaker, I rise to speak on behalf of 7,000
current and former IBM employees who live in my district. While most of
this bill is necessary and the legislation is appropriate, the weakness
of the bill is that it fails to clarify the rules concerning the
conversion of defined benefit pension plans into cash balance pension
plans.
I understand the bill will not affect the IBM employees and their
court case. It could, however, affect millions of Americans that are
currently vested in defined benefit pension plans. Even though they may
be working for a very profitable company, they could, under the terms
of this bill, show up for work one day and learn that their promised
benefits have been dramatically reduced with the sweep of a pen.
Under cash balance plans, older, long-serving employees do not have
the same opportunities to build up retirement benefits that younger
workers do. The bill before us today would allow conversions to take
place but gives no protections to workers during these transitions. I
offered an amendment last night at the Rules Committee to provide
protections to vested workers. Unfortunately, the Committee did not
rule my amendment in order.
The Senate version of the bill contains more protections for workers.
For those and other reasons AARP supports the Senate passed bill and
opposes the House bill. I would hope protections like the amendment I
tried to offer will be incorporated in the final version.
While I am voting today to move the bill forward into conference with
the Senate in the hopes more worker protections can be added, I reserve
the right to oppose a report that fails to correct this glaring
omission.
Mr. LARSON of Connecticut. Mr. Speaker, I rise in opposiiton to the
so-called Pension Protection Act and in support of the Democratic
motion to recommit.
There is no question that our Nation is facing a pension crisis. Over
34 million American workers currently rely on the benefits they receive
from a defined benefit pension plan to make ends meet. Yet, with the
growing number of corporations cutting pension benefits or declaring
bankruptcy, people are increasingly concerned about their retirement
security. More and more, American workers are facing the prospect of
seeing their employers use our Nation's bankruptcy laws to back out of
their pension promises and turning their obligations over to the
Pension Benefit Guaranty Corporation (PBGC)--which only partially funds
promised benefits.
Unfortunately, the bill before us today is a missed opportunity to
provide American workers with real pension protection.
H.R. 2830 makes significant changes to the rules for defined benefit
pension plans, increases the premiums that companies pay into the PBGC,
and does nothing to prevent companies from dumping their pension
obligations on American taxpayers. According to the Chief Investment
Officers of over sixty percent of our Nation's largest pension plans,
these likely will lead to cuts or terminations of existing plans.
According to the Congressional Budget Office, this legislation would
add over $70 billion to the federal deficit and fails to improve the
PBGC's financial condition by increasing the agency's financial
shortfall by $2.5 billion.
Rather than allowing an open debate on this important issue, the
majority leadership has chosen to close this bill from amendments or
even allow consideration of a Democratic substitute. The Miller/Cardin
motion to recommit protects American pension benefits by making it
harder for companies to declare bankruptcy and abandon workers
pensions, protects worker's retirement security by providing employers
with pension funding stability and gives the airlines the tools they
need to shore up their employee pension plans. This alternative would
provide American workers with real pension protection, rather than
continued retirement insecurity.
Mr. Speaker, today's legislation is the latest in a series of
attempts to privatize profits and socialize losses. It is my sincere
hope that as we move into conference, we can produce legislation that
will protect the hard earned pension benefits of our Nation's workers.
Mr. NORWOOD. Mr. Speaker, I rise in strong support of the Pension
Protection Act (H.R. 2830), legislation that responds to the many
challenges currently facing the financial health of the defined benefit
pension system.
The defined benefit system provides millions of American retirees and
current workers with retirement benefits earned over the course of a
lifetime. Yet the rules governing the structure of the defined benefit
system are geared towards a 20th century workforce that no longer
exists. The Pension Protection Act will bring these outdated rules into
the 21st century and respond to the rapidly evolving American workforce
that is more fluid, technologically advanced and diverse than ever
before.
H.R. 2830 accomplishes this goal by implementing four commonsense
reforms that hold employers to a higher standard and will ensure the
fiscal future of the defined benefit system: (1) The legislation will
ensure employers properly and adequately fund employees' defined
benefit pension plans; (2) provide meaningful new disclosure to workers
about the status of their pension plan; (3) secure the financial future
of the Pension Benefit Guarantee Corporation (PBGC) and prevent a
possible multi-billion dollar taxpayer-funded bailout; (4) encourage
greater employee savings for retirement goals by reforming outdated
defined contribution plan rules.
The legislation also prohibits executive compensation arrangements
when a rank and file employee pension plan is severely under-funded.
This important provision will prevent corporate chieftains from
escaping via the golden
[[Page H11768]]
parachute when an employer carries a qualified pension plan that is 60
percent under-funded or more. After all, the average working man in
rural Georgia deserves nothing less than a corporate executive in New
York.
And while H.R. 2830 includes important reforms to ensure employers
more accurately fund their pension obligations, it also holds union
leaders to a higher standard as well. Over the years, union leaders
have exerted tremendous pressure on employers in every commercial
sector by negotiating benefit increases to defined benefit plans that
are already under-funded.
While many employers have not held up their end of the bargain by
responsibly funding plan benefits, union leaders are equally
responsible for misleading their workers and pushing for unrealistic
benefit increases knowing full well an employer's plan is already
under-funded. This is no less outrageous, and H.R. 2830 takes important
steps to prevent union leaders and employers from negotiating
unrealistic benefit increases that will only hasten plan failure and an
eventual taxpayer bailout.
In addition, the compromise measure includes a series of requirements
to address ``Critical Multiemployer Plans'' funded between 65 percent
and 70 percent. These plans face significant and immediate funding
problems. H.R. 2830 not only strengthens the funding requirements for
critical plans, it also requires trustees to develop a rehabilitation
proposal to show a 20 percent improvement over 15 years.
Mr. Speaker, the number of employer sponsored defined benefit plans
are declining by the day, down from an all-time high of 170,000 in 1985
to 30,000 today. This is unacceptable. Congress should not sit idly by
while the defined benefit system continues to die on the vine, and for
that reason I urge all of my colleagues to avert the pending retirement
security crisis by passing the Pension Protection Act today.
Mr. UDALL of Colorado. Mr. Speaker, I must reluctantly oppose this
legislation.
I support changing the current rules related to pensions, and had
hoped that this bill would be considered under procedures that would
allow it to be improved.
However, the Republican leadership has made it impossible for even a
single amendment to be considered--and the bill's flaws so outweigh its
good features that it should not be passed in its current form.
Among the most troubling aspects of the bill is its potential effect
on defined-benefit pension plans.
Some 34 million Americans are now covered by defined-benefit plans,
but their retirement security is threatened by the failure of some
companies to adequately fund the plans, by corporate bankruptcies such
as that of United Airlines, and consideration by even profitable
companies of freezing benefits and ending their plans.
And many of the people who manage large pension plans tell us the
result of enacting this bill's provisions that would make significant
changes to the rules for these plans and increase the premiums
companies pay the Pension Benefit Guaranty Corporation, PBGC, could be
benefit cuts or, worse, termination of even well-funded plans.
At the same time, the bill's requirements for increased payments to
PBGC threatens the financial health of many manufacturing companies and
fail even to adequately improve PBGC's financial condition--its own
analysis found that the bill would increase the agency's financial
shortfall by $2.5 billion.
And both the Congressional Budget Office and PBGC have concluded that
the bill would increase claims on the Federal Government by billions of
dollars, which would increase the likelihood of a massive taxpayer
bailout as well as the loss of billions of dollars in employee and
retiree benefits.
I am not prepared to support legislation that would increase the
chances of such outcomes, especially when its tax provisions would
substantially increase future budget deficits and would primarily
benefit taxpayers in the highest income groups.
According to the Joint Committee on Taxation, the revenue effects of
the tax provisions primarily benefiting higher-income households would
grow from $3.6 billion in 2012, the first full year affected, to $5.6
billion a year by 2015. But the effect of extending the saver's credit,
which is most important to lower-income honseholds, would fall from
$1.4 billion in 2008, the first full year affected by that provision,
to $943 million by 2015.
That means that while in 2012, the saver's credit would account for
one-fourth of the total benefits of all of these provisions, by 2015 it
would account for only 14 percent of the total benefits. And after that
the saver's credit would dwindle further, eventually fading away, while
the upper-income pension tax changes would become still more robust.
As the Center on Budget and Policy Priorities says, ``To allow the
severe erosion over time of the principal tax incentive for modest-
income families to save for retirement does not make sense as
retirement policy. To do so while protecting very generous retirement
tax-cut benefits that go overwhelmingly to higher-income taxpayers who
generally are able to save adequately for retirement anyway, without
these tax subsidies, is even less defensible. And incorporating
regressive tax policy of this nature into a bill that swells budget
deficits, and opens the door to still more deficit-increasing tax cuts
in the future, stands sound policy on its head.''
I think they are right.
And, in addition to badly framed provisions, the bill's flaws also
include some serious omissions. I am particularly disappointed there is
nothing in the bill like the bipartisan Senate-passed provisions to
protect the pensions of employees and retirees of airline companies. As
Coloradans know all too well, the employees and retirees of United
Airlines already have lost $3 billion in earned pension benefits. We
should be working to help them, and we also should be working to make
it less likely that their experience will be repeated.
In summary, Mr. Speaker, while I recognize that there are good
aspects to this bill, and while I think Congress does need to act on
this subject, I think that on balance the bill as it stands should be
rejected so that a better-balanced measure can be brought forward.
Mr. BLUMENAUER. Mr. Speaker, the income security of Americans has
been under constant attack by the administration and Congress this
year, especially those families who have not had the good fortune to
earn a living that places them in our highest income brackets.
The year started with efforts to dismantle Social Security, an
efficient program that is the primary source of income for a majority
of retirees. Next, a slanted bankruptcy bill that puts no burden of
responsibility on unscrupulous lenders and credit card companies and
all of it on the families that face hardships from large medical bills,
family breakups, and job losses. Congress has been wringing its hands
the last couple of months over which programs for America's most
vulnerable should be cut so tax cuts can be extended years from now.
The latest attack on the security of American families is this
pension bill. It is clear that the Pension Benefit Guaranty Corporation
must be strengthened and that rules must be put in place to ensure
companies adequately fund the promises they make to employees.
Instead, the Congressional Budget Office has reported that this bill
would actually increase the PBGC's deficit by $9 billion over the next
10 years. The bill also legalizes cash balance plans without
protections for long serving employees. It has been reported that
without older worker protections over 90 percent of older workers would
lose expected pension benefits if a defined benefit plan were converted
to a cash balance plan. Additionally, this bill does nothing to help
the struggling airline industry that has already seen United Airlines
employees and retirees lose over $3 billion in earned pension benefits.
Strengthening the pension system and providing security to all
families should be a priority of Congress and can be achieved with
fiscal responsibility and fair policy. This bill falls short on both
accounts.
Mr. STARK. Mr. Speaker, I rise today in strong opposition to H.R.
2830, which would be better titled the Republican Pension Destruction
Act. American workers deserve much better than a bill that will reduce
employee pensions and provide incentives for employers to break pension
promises to employees.
Recent bankruptcies in the airline industry shed a bright light on
exactly what big corporations are up to. A few months ago, United
Airlines dumped its flight attendant pension program onto the Pension
Benefit Guaranty Corporation (PBGC)--a government organization meant to
serve as an insurance policy for corporations who can no longer afford
to meet their pension obligations. The PBGC, however, does not fund
pensions at 100 percent, instead making a reduced payment to retired
employees.
As a result, tens of thousands of United employees, past and present,
will receive smaller pension payments than they deserve. Unbelievably,
in the same bankruptcy proceedings United Airline's CEO Glen Tilton was
allowed to keep his $4.5 million pension. This is unacceptable, and the
bill offered today does nothing to prevent CEOs from opening these
golden parachutes while their employees are forced to take a reduction
in their benefits.
I've heard from hundreds of constituents on this issue. I can't say
it any better than this former United employee from Hayward, CA who
made the following statement during an e-hearing I have been co-hosting
regarding the United Airlines crisis.
``I worked for United Airlines 35 years as a mechanic. Two years ago
I retired with the promise that my pension was safe. If I lose a big
chunk of pension I will have to sell my house and take my almost blind
wife to another state where it's cheaper to live. Away from our doctors
and family. I am not able to
[[Page H11769]]
work anymore--physically unable--can you help us?''
We could help United employees and the retirement security of
millions of Americans by passing real pension reform, but Republicans
would rather destroy pensions instead of protecting them. When
Democrats offered legislation to fix the pension solvency issue by
protecting retirees and forcing CEOs to be held accountable, the
Republican Majority wouldn't bring it up for a vote because it could
have passed. Sadly, this is just one more example of Republicans siding
with corporate campaign donors instead of working Americans.
The list of problems associated with this bill is seemingly endless.
The PBGC itself says its own ability to cover pensions will decrease by
$2.5 billion under this bill. The Republican bill does nothing to
protect airline employees. And in a final slap in the face to
hardworking taxpayers, the bill adds $71 billion to the deficit over
the next 10 years, because Republicans refuse to be fiscally
responsible and pay for their reforms.
This Republican pension bill undermines retirement security and puts
the once guaranteed pension benefits of millions of hard working
Americans in jeopardy. I urge all my colleagues to vote ``no'' on this
bill.
Ms. KILPATRICK of Michigan. Mr. Speaker, I rise in reluctant support
of the Pension Protection Act of 2005, H.R. 2830. I commend the authors
of this bill who worked with elements of the union movement to craft
legislation designed to address some of the issues affecting the
employer-provided pension system. Key stakeholders in Michigan's 13th
Congressional District support the bill that we will consider today.
Organizations like General Motors, Ford Motor Company, the United Auto
Workers Union, building trade unions, Northwest Airlines, airline
pilots, flight attendants, and more have contacted my office to express
their support for the bill.
The leadership of my party has pointed out that the bill has several
major shortcomings. My leadership argues that H.R. 2830 does very
little over the long-term to strengthen traditional, defined benefit
plans. Had the majority permitted Members on my side of the aisle to
amend the bill, I am sure that our suggestions would go a long way to
improving the legislative product before us. We, however, are being
denied that opportunity, and I must decide what best represents the
interests of the income security needs of my Southeast Michigan
constituents. After careful examination, I have decided to support the
passage of H.R. 2830, but with the hope that it will be improved when a
compromised is reached with the other body.
My district is the center of the world automotive industry. As my
colleagues know, the economic condition of the GM, Ford Motor and
Daimler-Chrysler is under stress. The workers employed in local plant
sites throughout the Nation feel their future income security is
threatened because their pensions are dependent on the financial health
of company-sponsored plans.
All in all, this bill strengthens funding for employer pension plans
and includes reforms advocated by companies and unions who participate
in multi-employer pension plans. Therefore, I vote for this bill with
hope that it will move the process forward to address the pension
concerns of the airline industry and airline employees and the concerns
of our steelworkers, who take exception with shutdown provisions of the
bill to address the pension needs of companies in total ``shutdown''
status.
Mr. DAVIS of Kentucky. Mr. Speaker, I rise today in strong support of
H.R. 2830, The Pension Protection Act of 2005. This bill addresses a
serious issue facing our Nation. The ultimate enactment of pension
reform must be a priority to this House and the Congress.
I congratulate and thank Chairman Boehner and Chairman Thomas for
crafting a comprehensive pension reform bill with so much support from
the business and the labor communities.
This legislation represents a successful compromise that will help
protect workers in the auto industry and also protect the major U.S.
auto manufacturers against loss of promised benefits or plan
terminations.
One area that remains to be addressed in conference is the issue of
airline pension plans. The Cincinnati/Northern Kentucky Airport is one
of the Nation's busiest. It is home to Delta Air Lines' second largest
hub. Thousands of men and women in Kentucky's Fourth District work for
airlines. They depend on the retirement benefits provided by the
airline industry.
Without a change in current law that allows air carriers with Defined
Benefit plan obligations to make their pension payments over a longer
period of time--20 years--it is possible that some or all of these
plans will be terminated, benefits reduced and liability shifted to the
American taxpayer.
The airlines want to keep their promises to their employees. They
want to honor their obligations. They do NOT want to terminate their
pension plans nor to reduce benefits. But, they need to be equipped
with the tools necessary to have a fighting chance to keep those
promises.
The Senate airline pension language is carefully crafted to meet the
particular concerns of all the major carriers and provide them with a
20 year period to meet their obligations.
Although we are not addressing this specific issue today, I strongly
support continued pursuit in conference of the Senate-passed airline
pension provision.
Finally, I wish to thank my colleagues on the Ways and Means and
Education and Workforce Committees and their staff for the hard work
that has brought us to this point today. I urge all of my colleagues to
vote in favor of final passage.
Mr. VISCLOSKY. Mr. Speaker, I rise today in opposition to H.R. 2830.
I am old enough to remember a time when everyone on my block in the
Glen Park section of Gary, Indiana had a pension. The defined benefit
pension system today, which protects the retirement security of over 44
million workers, retirees, and their families, is at a critical
juncture. The number of defined benefit plans has declined from over
100,000 in 1985 to under 32,000 in 2004. While the number of active
workers covered by such plans has dropped from over 40 million to under
20 million, an additional 20 million retirees depend on defined benefit
plans for their retirement security.
Both the Congressional Budget Office and the Pension Benefit Guaranty
Corporation have found that H.R. 2830 will add billions more to the
PBGC's already mounting deficit. According to the CBO, this legislation
would increase the PBGC's deficit by $9 billion dollars over the next
ten years. The PBGC is already facing a deficit of $23 billion and
could face additional liabilities of up to $100 billion in the near
future.
In the five years leading up to the closings of LTV and Bethlehem
Steel, steel companies in North America were filing for bankruptcy in
record numbers, using the bankruptcy courts to break their contractual
obligations and impose cuts or outright elimination of jobs, benefits,
pensions and wages of steelworkers. In 2000, LTV Steel filed for
Chapter 11 bankruptcy for protection from its creditors, including its
obligations to its pension plan. In 2002, LTV filed Section 7
bankruptcy, which liquidated its assets. Today's legislation would put
additional pressure on an agency that is already picking up the slack
because corporate America has used them as a dumping ground.
In addition, H.R. 2830 does not ensure fair treatment between workers
and executives. The bill permits CEOs to receive executive golden
parachutes at the same time employees are suffering deep cuts in their
promised retirement benefits. Under H.R. 2830, if an employer does not
fund its pension plan above 80 percent, then workers cannot receive any
increases in benefits or take a lump sum at retirement. No similar
restriction is imposed on executives. If an employer does not fund
above 60 percent, then the workers' plan must be frozen with no new
benefits allowed to accrue. Only at 60 percent are employers prohibited
from transferring funds to executive compensation. However, employers
can get around this prohibition and make promises of future benefits to
executives. I find this deplorable at a time when we are seeing
companies like Delphi abuse the system. Under Chapter 11
reorganization, Delphi could award 500 of their executives cash bonuses
of 30 percent to 250 percent of their base salary for exiting Chapter
11.
In closing Mr. Speaker, I urge my colleagues to oppose H.R. 2830.
According to CBO, H.R. 2830 would increase the Federal deficit by over
$70 billion from 2006-2015. It contains a variety of unoffset tax
incentives for corporate America that will not secure the pension of
the hardworking men and women who are making our steel, mining our
coal, building our homes, and flying our airplanes. Congress owes
working Americans more.
Mr. PAUL. Mr. Speaker, while H.R. 2830, the Pension Protection Act of
2005, is not perfect, it does decrease the risk that employees will be
deprived of pension benefits they were promised as part of their
employment contracts. H.R. 2830 also decreases the likelihood that
American taxpayers will be forced to bailout private pensions, and
reduces the tax burden on American workers to provide them with greater
incentives and opportunities to save for their own retirements.
Therefore, I will vote for this bill on final passage.
However, I oppose this rule, because I do not like the process under
which this bill is being brought to the floor. The rule before us today
does not allow any member to offer, or vote on, amendments that may
improve this bill. In particular, I was hoping to vote on an amendment
protecting United Airline retirees from having their pension benefits
reduced or terminated even though United expects to make $1 billion in
profit within 1 year of being discharged from bankruptcy. The Senate
[[Page H11770]]
version of the bill does address same problems of the airline industry.
However it fails to protect United Airlines retirees. The Federal
Government should not facilitate a large companies getting out of its
contractual obligations to their retired workers. I, therefore, urge my
colleagues to protect the pensions of retired United Airline employees
by rejecting this rule and voting for a rule that allows us to consider
adding, language helping the United Airline retirees to the bill. If
this rule does pass, I urge my colleagues to move the process foreword
by voting for the bill and working to add language protecting the
United Airline pilots to the bill when it goes to conference with the
Senate.
Mr. BRADY of Texas. Mr. Speaker, I rise today in strong support of
H.R. 2830, the Pension Protection Act of 2005. I applaud the chairman
of the Ways and Means Committee, the distinguished Bill Thomas, as well
as the chairman of the Education and Workforce Committee, John Boehner,
for their hard work and leadership on this issue. Protecting the
pensions of millions of Americans is a top priority for this 109th
Congress and H.R. 2830 is strong legislation designed to that end.
I rise today to also thank Chairman Thomas for his inclusion in the
Pension Protection Act of legislation I introduced related to the
waiver of a 10 percent federal tax penalty for public safety
employees--our Nation's firefighters, police officers and emergency
medical personnel. People who put their lives on the iine for us
everyday deserve our full support and they are receiving that support
here today thanks to Chairman Thomas.
Many public safety personnel begin their careers at a young age. They
will vest in their regular pension plans and, even if they participate
in one of the new deferred plans and remain on the job longer, will be
eligible for retirement before they reach age 55.
For example, in Houston the average firefighter begins his career at
age 23. After 20 years of service, now age 43, the average firefighter
is fully vested in the regular pension fund and can retire and begin
receiving benefits immediately. Today, the firefighter can participate
in the deferred plan for up to an additional 10 years. If the
firefighter participates for the full 10 years and then elects to
retire, he or she will be age 53 and, in general, will not be able to
take distributions prior to the age of 59\1/2\ without triggering the
10-percent penalty.
For distributions to public safety employees that are subject to the
10-percent penalty, section 905 of H.R. 2830 would waive the penalty.
This provision has received considerable attention and support during
this and previous Congresses. The effort began in 2002, when my Texas
colleague, Congressman Gene Green, introduced H.R. 4796. Later that
year, Senator Jim Inhofe introduced companion language, S. 3072.
Mr. Speaker, in closing, I want to applaud my House colleagues and,
particular, Ways and Means Chairman Thomas, to whom I would like to
express the deep gratitude of our Nation's firefighters, police and
emergency medical service employees for including section 905 in the
House bill and moving the issue forward.
I strongly urge my colleagues to support passage of H.R. 2830, the
Pension Protection Act.
The SPEAKER pro tempore. All time for debate has expired.
Pursuant to House Resolution 602, the previous question is ordered on
the bill, as amended.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit Offered by Mr. George Miller of California
Mr. GEORGE MILLER of California. Mr. Speaker, I offer a motion to
recommit on behalf of myself and Congressman Cardin.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. GEORGE MILLER of California. Yes, I am, Mr. Speaker, in its
present form.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Mr. George Miller of California moves to recommit the bill
H.R. 2830 to the Committee on Education and the Workforce and
the Committee on Ways and Means with instructions to report
the same back to the House forthwith with the following
amendment:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Pension
Protection Act of 2005''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title and table of contents.
TITLE I--INTEREST RATE FOR 2006 AND 2007 FUNDING REQUIREMENTS
Sec. 101. Interest rate for 2006 and 2007 funding requirements.
Sec. 102. Government Accountability Office pension funding report.
TITLE II--PROTECTING PENSION BENEFITS IN BANKRUPTCY
Sec. 201. Promotion of reasonable alternatives to plan termination.
Sec. 202. Election by employer to restore plan upon emergence from
bankruptcy.
Sec. 203. Date on which lien for missed contributions is deemed
perfected.
TITLE III--PROTECTION OF PENSION PLANS FOR AIRLINE EMPLOYEES
Sec. 301. Special funding rules for plans maintained by commercial
airlines that are amended to cease future benefit
accruals.
Sec. 302. Recognition of legally mandated early retirement ages in
determining amount of guaranteed benefits.
TITLE IV--FAIRNESS FOR RANK AND FILE EMPLOYEES
Sec. 401. Treatment of nonqualified deferred compensation plans when
employer defined benefit plan in at-risk status.
Sec. 402. Nonqualified deferred compensation reduced by percentage of
underfunded plan upon bankruptcy of employer.
Sec. 403. Termination fairness standard for nonqualified deferred
compensation plans in connection with pension plan
terminations based on bankruptcy reorganization.
TITLE V--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS AND RELATED PROVISIONS
Subtitle A--Funding Rules
Part I--Amendments to Employee Retirement Income Security Act of 1974
Sec. 501. Funding rules for multiemployer defined benefit plans.
Sec. 502. Additional funding rules for multiemployer plans in
endangered or critical status.
Sec. 503. Measures to forestall insolvency of multiemployer plans.
Sec. 504. Special rule for certain benefits funded under an agreement
approved by the Pension Benefit Guaranty Corporation.
Sec. 505. Withdrawal liability reforms.
Sec. 506. Special rules for multiple employer plans of certain
cooperatives.
Part II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
Sec. 511. Funding rules for multiemployer defined benefit plans.
Sec. 512. Additional funding rules for multiemployer plans in
endangered or critical status.
Part III--SUNSET OF FUNDING RULES
Sec. 516. Sunset of funding rules.
Subtitle B--Deduction and Related Provisions
Sec. 521. Deduction limits for multiemployer plans.
Sec. 522. Transfer of excess pension assets to multiemployer health
plan.
TITLE VI--ENHANCED RETIREMENT SAVINGS AND DEFINED CONTRIBUTION PLANS
Sec. 601. AmeriSave matching credit.
Sec. 602. Manner in which AmeriSave matching credit allowed.
Sec. 603. Increasing participation through automatic contribution
arrangements.
Sec. 604. Preemption of State laws precluding automatic enrollment or
automatic rollovers.
Sec. 605. Fiduciary standards relating to automatic or default
investments.
Sec. 606. Penalty-free withdrawals from retirement plans for
individuals called to active duty for at least 179 days.
Sec. 607. Waiver of 10 percent early withdrawal penalty tax on certain
distributions of pension plans for public safety
employees.
Sec. 608. Combat zone compensation taken into account for purposes of
determining limitation and deductibility of contributions
to individual retirement plans.
Sec. 609. Direct payment of tax refunds to individual retirement plans.
Sec. 610. Allow rollovers by nonspouse beneficiaries of certain
retirement plan distributions.
Sec. 611. IRA eligibility for the disabled.
TITLE VII--PROVISIONS TO ENHANCE HEALTH CARE AFFORDABILITY
Sec. 701. Treatment of annuity and life insurance contracts with a
long-term care insurance feature.
Sec. 702. Disposition of unused health benefits in cafeteria plans and
flexible spending arrangements.
Sec. 703. Distributions from governmental retirement plans for health
and long-term care insurance for public safety officers.
[[Page H11771]]
TITLE VIII--REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES WITH
INCOMES OVER $1,000,000
Sec. 801. Reduction in benefit of rate reduction for families with
incomes over $1,000,000.
TITLE I--INTEREST RATE FOR 2006 AND 2007 FUNDING REQUIREMENTS
SEC. 101. INTEREST RATE FOR 2006 AND 2007 FUNDING
REQUIREMENTS.
(a) Amendments to ERISA.--
(1) In general.--Subclause (II) of section 302(b)(5)(B)(ii)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1082(b)(5)(B)(ii)(II)) is amended--
(A) by striking ``January 1, 2006'' and inserting ``January
1, 2008'', and
(B) by striking ``and 2005'' in the heading and inserting
``, 2005, 2006, and 2007''.
(2) Current liability.--Subclause (IV) of section
302(d)(7)(C)(i) of such Act (29 U.S.C. 1082(d)(7)(C)(i)(IV))
is amended--
(A) by striking ``or 2005'' and inserting ``, 2005, 2006,
or 2007'', and
(B) by striking ``and 2005'' in the heading and inserting
``, 2005, 2006, and 2007''.
(3) Risk-based premiums.--Section 4006(a)(3)(E)(iii)(V) of
such Act (29 U.S.C. 1306(a)(3)(E)(iii)(V)) is amended by
striking ``January 1, 2006'' and inserting ``January 1,
2008''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) In general.--Subclause (II) of section 412(b)(5)(B)(ii)
of the Internal Revenue Code of 1986 is amended--
(A) by striking ``January 1, 2006'' and inserting ``January
1, 2008'', and
(B) by striking ``and 2005'' in the heading and inserting
``, 2005, 2006, and 2007''.
(2) Current liability.--Subclause (IV) of section
412(l)(7)(C)(i) of such Code is amended--
(A) by striking ``or 2005'' and inserting ``, 2005, 2006,
or 2007'', and
(B) by striking ``and 2005'' in the heading and inserting
``, 2005, 2006, and 2007''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2005.
SEC. 102. GOVERNMENT ACCOUNTABILITY OFFICE PENSION FUNDING
REPORT.
(a) In General.--The Comptroller General of the Government
Accountability Office shall transmit to the Congress a
pension funding report not later than one year after the date
of the enactment of this Act.
(b) Report Content.--The pension funding report required
under subsection (a) shall include an analysis of the
feasibility, advantages, and disadvantages of--
(1) requiring an employee pension benefit plan to insure a
portion of such plan's total investments;
(2) requiring an employee pension benefit plan to adhere to
uniform solvency standards set by the Pension Benefit
Guaranty Corporation, which are similar to those applied on a
State level in the insurance industry; and
(3) amortizing a single-employer defined benefit pension
plan's shortfall amortization base (referred to in section
303(c)(3) of the Employee Retirement Income Security Act of
1974 (as amended by this Act)) over various periods of not
more than 7 years.
TITLE II--PROTECTING PENSION BENEFITS IN BANKRUPTCY
SEC. 201. PROMOTION OF REASONABLE ALTERNATIVES TO PLAN
TERMINATION.
(a) Additional Requirements for Distress Termination.--
Section 4041(c)(2)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1341(c)(2)(B)) is amended by
adding at the end the following:
``(iv) Additional requirements.--Notwithstanding any other
provision of this section, unless the corporation or the
court, in the case of a distress termination pursuant to
clause (ii), has determined that reasonable efforts to
consider available alternatives to termination (including,
but not limited to, alternatives described in section
4042(c)(3)) have been undertaken by such person (and, in the
case of a plan maintained pursuant to a collective bargaining
agreement, have been undertaken by the bargaining parties in
good faith bargaining), the plan may not be terminated. A
participant or beneficiary of the plan or an employee
organization representing such participants or beneficiaries
may bring an action in the appropriate court to challenge
such determination by the corporation and seek equitable
relief or must be afforded an opportunity to be heard by the
appropriate court if a court is making such determination.''.
(b) Efforts by the Corporation at Consultation With
Parties.--Section 4042(c) of such Act (29 U.S.C. 1342(c)) is
amended--
(1) by inserting ``(1)'' after ``(c)'';
(2) by striking ``If the corporation and the plan
administrator agree'' and all that follows through ``in
subsection (d)(3).'';
(3) by redesignating paragraph (3) as paragraph (2); and
(4) by adding at the end the following new paragraph:
``(3)(A) The corporation may not institute proceedings
under this section to terminat such plan unless the
corporation demonstrates that it has made all reasonable
efforts to negoitate with the plan sponsor, the plan
participants, and (in the case of a plan maintained pursuant
to a collective bargaining agreement) the employee
organization representing plan participants for purposes of
collective bargaining to determine whether there are any
reasonable available alternatives to termination (including,
but not limited to, alternatives described subparagraph (B).
``(B) The reasonable alternatives to termination referred
to in subparagraph (A) consist of measures which are in the
best interest of plan participants and which include (but are
not limited to) the following:
``(i) Financing or loans sought by any member of the plan
sponsor's controlled group, with or without assistance from
the corporation, in order to obtain plan financing, including
back-up guarantees to any such financing which the
corporation is hereby authorized to provide for such purpose.
``(ii) New plan structures agreed to by the parties, such
as transfer of plan liabilities to multiemployer plans, new
benefit formulas for new hires or non-vested participants, or
other plan restructuring alternatives agreed to by the
parties.
``(iii) Reinsurance which the corporation is hereby
authorized to obtain for the plan.
``(iv) An agreement by the parties authorizing alternative
funding schedules, approved by the corporation, which shall
thereafter be treated as meeting the minimum funding
requirements for the plan under part 3 of subtitle B of title
I.
``(v) Purchase by the plan sponsor of an annuity contract
to cover liabilities of the plan, which the corporation is
hereby authorized to guarantee as necessary to secure such a
contract.''.
(c) Required Court Determinations.--Section 4042(c) of such
Act is amended by adding at the end the following new
paragraph:
``(4)(A) A plan may not be terminated under this section
unless the court, in the proceedings described in paragraph
(1), finds that--
``(i) reasonable efforts to consider available alternatives
to termination (including, but not limited to, alternatives
described in paragraph (3)) have been undertaken by the plan
sponsor (and, in the case of a plan maintained pursuant to a
collective bargaining agreement, have been undertaken by the
bargaining parties in good faith bargaining),
``(ii) without such termination, a contributing sponsor of
the plan (or a member of such a sponsor's controlled group)
would be unable to pay its debts when due and--
``(I) if such proceedings include proceedings in which
reorganization of such sponsor or member is sought in a case
under title 11, United States Code, or under any similar law
of a State or political subdivision of a State, such sponsor
or member could not be discharged in such proceedings, or
``(II) in any other case, such sponsor or member would be
unable to continue in business, and
``(iii) all otherwise applicable requirements for
termination under this section are met.
``(B) Any party consisting of the plan sponsor, a plan
participant, or (in the case of a plan maintained pursuant to
a collective bargaining agreement) the employee organization
representing plan participants for purposes of collective
bargaining may intervene in the proceedings described in
paragraph (1) to challenge whether all applicable
requirements for termination under this section are met.''.
(d) Notice.--
(1) Section 4041(a) of such Act (29 U.S.C. 1341(a) is
amended by adding at the end the following new paragraph:
``(4) Notice of right to challenge.--Together with the
notice of intent to terminate, the plan administrator shall
provide to each participant and beneficiary a written notice
of the right of participants and beneficiaries to challenge
determinations under this section, written in a manner likely
to be understood by the participant or beneficiary.''.
(2) Section 4042(a) of such Act (29 U.S.C. 1342(a)) is
amended by adding at the end the following new sentence:
``Prior to commencing proceedings under this section with
respect to any plan, the corporation shall provide notice to
plan participants and beneficiaries of the right to challenge
determinations under this section, written in a manner likely
to be understood by the participant or beneficiary.''.
(e) Effective Date.--
(1) In general.--The amendments made by this section shall
apply with respect to any plans undergoing termination
proceedings pursuant to section 4041 or 4042 of the Employee
Retirement Income Security Act of 1974 which are pending on
or after the date of the enactment of this Act.
(2) Transitional rule for involuntary terminations.--In any
case in which, during the period beginning December 1, 2004,
and ending with the date of the enactment of this Act, the
Pension Benefit Guaranty Corporation has commenced
termination proceedings under section 4042 of the Employee
Retirement Income Security Act of 1974 (including the
execution of any termination or trust agreement under such
section)--
(A) the Corporation or other entity serving as trustee
shall, effective as of the date of the enactment of this
Act--
(i) cease any activities undertaken to terminate the plan,
and
(ii) take such actions as may be necessary to restore the
plan to its status immediately prior to the commencement of
such proceedings or the execution of such agreement, and
(B) the procedures and requirements of section 4042 of the
Employee Retirement Income Security Act of 1974 (as amended
by this section) shall apply to any further such proceedings
undertaken after the date of the enactment of this Act.
[[Page H11772]]
SEC. 202. ELECTION BY EMPLOYER TO RESTORE PLAN UPON EMERGENCE
FROM BANKRUPTCY.
(a) In General.--Section 4047 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1347) is amended--
(1) by inserting ``(a)'' before ``Whenever'', and
(2) by adding at the end the following new subsection:
``(b) Within 3 years after the date on which a plan sponsor
of a plan terminated under section 4041(c)(2)(B)(ii) or under
section 4042 with respect to a reorganization case under
title 11 of the United States Code, or under any similar law
of a State or a political subdivision of a State (or with
respect to a case described in section 4041(c)(2)(B)(i) which
has been converted to such a reorganization case), is
discharged in such case (or the case is otherwise dismissed),
the plan sponsor may elect to restore the plan to its
pretermination status. Rules similar to the rules of
subsection (a) shall apply with respect to any election made
under this subsection. ''.
(b) Premium Rate for Terminated Single-Employer Plans Which
Are not Restored.--Subsection (a) of section 4006 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306) is amended by adding at the end the following:
``(7) Premium Rate for Certain Terminated Single-Employer
Plans.--
``(A) In general.--In any case in which a plan sponsor of a
plan terminated under 4041(c)(2)(B)(ii) or under section 4042
with respect to a reorganization case under title 11 of the
United States Code, or under any similar law of a State or a
political subdivision of a State, (or with respect to a case
described in section 4041(c)(2)(B)(i) which has been
converted to such a reorganization case) is discharged in
such case (or the case is otherwise dismissed), unless there
is in effect an election under section 4047(b) in connection
with such case after such discharge (or dismissal), there
shall be payable to the corporation, with respect to each
applicable 12-month period before the end of the 3-year
period after such discharge (or dismissal) for which such
election is not in effect, a premium at a rate equal to
$1,250 multiplied by the number of individuals who were
participants in the plan immediately before the termination
date. Such premium shall be in addition to any other premium
under this section.
``(B) Applicable 12-month period.--For purposes of
subparagraph (A), the term `applicable 12-month period'
means--
``(i) the 12-month period beginning with the first month
following the month in which the termination date occurs, and
``(ii) each of the first two 12-month periods immediately
following the period described in subclause (I).
``(C) Coordination with section 4007.--
``(i) Notwithstanding section 4007--
``(I) premiums under this paragraph shall be due within 30
days after the beginning of any applicable 12-month period,
and
``(II) the designated payor shall be the person who is the
contributing sponsor as of immediately before the termination
date.
``(ii) The fifth sentence of section 4007(a) shall not
apply in connection with premiums determined under this
paragraph.
``(D) Use of Funds.--All amounts paid to the corporation
under subparagraph (A) shall be deposited in the appropriate
fund established under section 4005(a). Amounts deposited
under the preceding sentence shall only be available to the
corporation for payment of nonforfeitable benefits under the
plan to participants of the terminated plan in excess of the
corporation's guarantee under section 4022.''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to plan terminations with respect to
which proceedings are instituted, or are pending, on or after
November 9, 2005.
SEC. 203. DATE ON WHICH LIEN FOR MISSED CONTRIBUTIONS IS
DEEMED PERFECTED.
(a) In General.--Section 4041 of the Employee Retirement
Income Security Act of 1974 is amended by adding at the end
the following new subsection:
``(f) In the case of the commencement of any reorganization
case under title 11 of the United States Code, or under any
similar law of a State or a political subdivision of a State,
(a case described in section 4041(c)(2)(B)(i)) by or against
a plan sponsor which has been converted to such a
reorganization case), any lien or other security of a plan in
such plan sponsor for missed contributions to the plan shall
be treated as being perfected as of the earlier of the date
of the commencement of such case or the date such security or
lien is filed.''.
(b) Effective Date.--The amendment made by this section
shall apply with respect to plan terminations with respect to
which proceedings are instituted, or are pending, on or after
November 9, 2005.
TITLE III--PROTECTION OF PENSION PLANS FOR AIRLINE EMPLOYEES
SEC. 301. SPECIAL FUNDING RULES FOR PLANS MAINTAINED BY
COMMERCIAL AIRLINES THAT ARE AMENDED TO CEASE
FUTURE BENEFIT ACCRUALS.
(a) In General.--If an election is made to have this
section apply to an eligible plan--
(1) in the case of any applicable plan year beginning
before January 1, 2007, the plan shall not have an
accumulated funding deficiency for purposes of section 302 of
the Employee Retirement Income Security Act of 1974 and
sections 412 and 4971 of the Internal Revenue Code of 1986 if
contributions to the plan for the plan year are not less than
the minimum required contribution determined under subsection
(d) for the plan for the plan year, and
(2) in the case of any applicable plan year beginning on or
after January 1, 2007, the minimum required contribution
determined under sections 303 of such Act and 430 of such
Code shall, for purposes of sections 302 and 303 of such Act
and sections 412, 430, and 4971 of such Code, be equal to the
minimum required contribution determined under subsection (d)
for the plan for the plan year.
(b) Eligible Plan.--For purposes of this section--
(1) In general.--The term ``eligible plan'' means a defined
benefit plan (other than a multiemployer plan) to which
sections 302 of such Act and 412 of such Code applies--
(A) which is sponsored by an employer--
(i) which is a commercial airline passenger airline, or
(ii) the principal business of which is providing catering
services to a commercial passenger airline, and
(B) with respect to which the requirements of paragraphs
(2) and (3) are met.
(2) Accrual restrictions.--
(A) In general.--The requirements of this paragraph are met
if, effective as of the first day of the first applicable
plan year and at all times thereafter while an election under
this section is in effect, the plan provides that--
(i) the accrued benefit, any death or disability benefit,
and any social security supplement described in the last
sentence of section 411(a)(9) of such Code and section
204(b)(1)(G) of such Act, of each participant are frozen at
the amount of such benefit or supplement immediately before
such first day, and
(ii) all other benefits under the plan are eliminated,
but only to the extent the freezing or elimination of such
benefits would have been permitted under section 411(d)(6) of
such Code and section 204(g) of such Act if they had been
implemented by a plan amendment adopted immediately before
such first day.
(B) Increases in section 415 limits disregarded.--If a plan
provides that an accrued benefit of a participant which has
been subject to any limitation under section 415 of such Code
will be increased if such limitation is increased, the plan
shall not be treated as meeting the requirements of this
paragraph unless, effective as of the first day of the first
applicable plan year and at all times thereafter while an
election under this section is in effect, the plan provides
that any such increase shall not take effect. A plan shall
not fail to meet the requirements of section 411(d)(6) of
such Code and section 204(g) of such Act solely because the
plan is amended to meet the requirements of this
subparagraph.
(3) Restriction on applicable benefit increases.--
(A) In general.--The requirements of this paragraph are met
if no applicable benefit increase takes effect at any time
during the period beginning on July 26, 2005, and ending on
the day before the first day of the first applicable plan
year.
(B) Applicable benefit increase.--For purposes of this
paragraph, the term ``applicable benefit increase'' means,
with respect to any plan year, any increase in liabilities of
the plan by plan amendment (or otherwise provided in
regulations provided by the Secretary) which, but for this
paragraph, would occur during the plan year by reason of--
(i) any increase in benefits,
(ii) any change in the accrual of benefits, or
(iii) any change in the rate at which benefits become
nonforfeitable under the plan.
(4) Exception for imputed disability service.--Paragraphs
(2) and (3) shall not apply to any accrual or increase with
respect to imputed service provided to a participant during
any period of the participant's disability occurring on or
after the effective date of the plan amendment providing the
restrictions under paragraph (2) if the participant--
(A) was receiving disability benefits as of such date, or
(B) was receiving sick pay and subsequently determined to
be eligible for disability benefits as of such date.
(c) Elections and Related Terms.--
(1) In general.--A plan sponsor shall make the election
under subsection (a) at such time and in such manner as the
Secretary of the Treasury may prescribe. Except as provided
in subsection (h)(5), such election, once made, may be
revoked only with the consent of such Secretary.
(2) Years for which election made.--
(A) In general.--The plan sponsor may select the first plan
year to which the election under subsection (a) applies from
among plan years ending after the date of the election. The
election shall apply to such plan year and all subsequent
years.
(B) Election of new plan year.--The plan sponsor may
specify a new plan year in the election under subsection (a)
and the plan year of the plan may be changed to such new plan
year without the approval of the Secretary of the Treasury.
(3) Applicable plan year.--The term ``applicable plan
year'' means each plan year to which the election under
subsection (a) applies under paragraph (1).
(d) Minimum Required Contribution.--
(1) In general.--In the case of any applicable plan year
during the amortization period,
[[Page H11773]]
the minimum required contribution shall be the amount
necessary to amortize the unfunded liability of the plan,
determined as of the first day of the plan year, in equal
annual installments (until fully amortized) over the
remainder of the amortization period. Such amount shall be
separately determined for each applicable plan year.
(2) Years after amortization period.--In the case of any
plan year beginning after the end of the amortization period,
section 302(a)(2)(A) of such Act and section 412(a)(2)(A) of
such Code shall apply to such plan, but any charge or credit
in the funding standard account under section 302 of such Act
of section 412 of such Code shall be zero.
(3) Definitions.--For purposes of this section--
(A) Unfunded liability.--The term ``unfunded liability''
means the unfunded accrued liability under the plan,
determined under the unit credit funding method.
(B) Amortization period.--The term ``amortization period''
means the 20-plan year period beginning with the first
applicable plan year.
(4) Other rules.--In determining the minimum required
contribution and amortization amount under this subsection--
(A) the provisions of section 302(c)(3) of such Act and
section 412(c)(3) of such Code, as in effect before the date
of enactment of this section, shall apply,
(B) the rate of interest under section 302(b) of such Act
and section 412(b) of such Code, as so in effect, shall be
used for all calculations requiring an interest rate, and
(C) the value of plan assets shall be equal to their fair
market value.
(5) Special rule for certain plan spinoffs.--For purposes
of subsection (a), if, with respect to any eligible plan to
which this subsection applies--
(A) any applicable plan year includes the date of the
enactment of this Act, and
(B) a plan was spun off from the eligible plan during the
plan year but before such date of enactment,
the minimum required contribution under subsection (a)(1) for
the eligible plan for such applicable plan year shall be
determined as if the plans were a single plan for that plan
year (based on the full 12-month plan year in effect prior to
the spin-off). The employer shall designate the allocation of
the minimum required contribution between such plans for the
applicable plan year and direct the appropriate reallocation
between the plans of any contributions for the applicable
plan year.
(e) Funding Standard Account and Prefunding Balance.--Any
charge or credit in the funding standard account under
section 302 of such Act or section 412 of such Code, and any
prefunding balance under section 303 of such Act or section
430 of such Code, as of the day before the first day of the
first applicable plan year, shall be reduced to zero.
(f) Amendments to Other Provisions.--
(1) Qualification requirement.--Section 401(a)(36) of the
Internal Revenue Code of 1986, as added by section 402 of
this Act, is amended by adding at the end the following:
``This paragraph shall also apply to any plan during any
period during which an amortization schedule under section
403 of the Pension Security and Transparency Act of 2005 is
in effect.''
(2) PBGC liability limited.--Section 4022 of the Employee
Retirement Income Security Act of 1974, as amended by this
Act, is amended by adding at the end the following new
subsection:
``(g) Special Rule for Plans Electing Certain Funding
Requirements.--During any period in which an election by a
plan under section 301 of the Pension Protection Act of 2005
is in effect, then this section and section 4044(a)(3) shall
be applied by treating the first day of the first applicable
plan year as the termination date of the plan. This
subsection shall not apply to any plan for which an election
under section 403(h) of such Act is in effect.''.
(3) Limitation on deductions under certain plans.--Section
404(a)(7)(C)(iii) of the Internal Revenue Code of 1986, as
added by this Act, is amended by adding at the end the
following new sentence: ``This clause shall also apply to any
plan for a plan year if an election under section 403 of the
Pension Security and Transparency Act of 2005 is in effect
for such year.''
(4) Notice.--In the case of a plan amendment adopted in
order to comply with this section, any notice required under
section 204(h) of such Act or section 4980F(e) of such Code
shall be provided within 15 days of the effective date of
such plan amendment. This subsection shall not apply to any
plan unless such plan is maintained pursuant to one or more
collective bargaining agreements between employee
representatives and 1 or more employers.
(g) Special Rules for Termination of Eligible Plans.--
During any period an election is in effect under this section
with respect to an eligible plan, the Pension Benefit
Guaranty Corporation shall, before it seeks or approves a
termination of such plan under section 4041(c) or 4042 of the
Employee Retirement Income Security Act of 1974--
(1) make a determination under section 4041(c)(4) or
4042(i) of such Act whether the termination would be
necessary if the Secretary of the Treasury were to enter into
an agreement under section 4047(a) of such Act which provides
an alternative funding agreement to replace the amortization
schedule under this section, and
(2) if the Corporation determines such an agreement would
make such termination unnecessary, take all necessary actions
to ensure the agreement is entered into.
The Pension Benefit Guaranty Corporation shall make the
determination under paragraph (1) within 90 days of receiving
all information needed in connection with a request for a
termination (or if no such request is made, within 90 days of
consideration of the termination by the Corporation).
(h) Certain Benefit Accruals and Increases Allowed If
Additional Contributions Made to Cover Costs.--
(1) In general.--If an employer elects the application of
this subsection--
(A) the requirements of paragraphs (2) and (3) of
subsection (b) shall not apply with respect to any eligible
plan maintained by the employer and specified in the
election, and
(B) the minimum required contribution under subsection (d)
for any plan year with respect to the plan shall be increased
by the amounts described in paragraphs (2) and (3).
Any liabilities and assets taken into account under this
subsection shall not be taken into account in determining the
unfunded liability of the plan for purposes of subsection
(d).
(2) Current funding of accruals and increases.--The amount
determined under this paragraph for any plan year is the
target normal cost which would occur under section 302 of
such Act and 412 of such Code if--
(A) any benefit accrual, or benefit increase taking effect,
during the plan year by reason of this subsection were
treated as having been accrued or earned during the plan
year, and
(B) the plan were treated as if it were subject to section
302(d) of such Act and section 412(d) of such Code.
(3) Funding must be maintained.--The amount determined
under this paragraph for any plan year is the amount charged
to the funding standard account under section 302(d) of such
Act and section 412(d) of such Code if--
(A) the funding target were determined by only taking into
account benefits to which paragraph (2) applied for preceding
plan years,
(B) the only assets taken into account were the
contributions required under this paragraph and paragraph (2)
for preceding plan years (and any earnings thereon),
(C) the amortization period included only the plan year,
(D) the transition rule under section 303(c)(4)(B) of such
Act and section 430(c)(4)(B) of such Code did not apply, and
(E) the plan were treated as if it were subject to section
302(d) of such Act and section 412(d) of such Code.
(4) Special rules for years before 2007.--Notwithstanding
any other provision of this Act, in the case of an applicable
plan year of an eligible plan to which this subsection
applies which begins before January 1, 2007, in determining
the amounts described in paragraphs (2) and (3) for such plan
year--
(A) the provisions of, and amendments made by, sections
101, 102, 111, and 112 shall apply to such plan year, except
that
(B) the interest rate used under section 303 of such Act
and section 430 of such Code for purposes of applying
paragraphs (2) and (3) to such plan year shall be the
interest rate determined under section 302(b)(5) of such Act
and section 412(b)(5) of such Code, as in effect for plan
years beginning in 2005.
(5) Election out of section.--An employer maintaining an
eligible plan to which this subsection applies may make a
one-time election with respect to any applicable plan year
not to have this section apply to such plan year and all
subsequent plan years. Subject to subsection (d)(2), the
minimum required contribution under section 302 of such Act
and 412 of such Code for all such plan years shall be
determined without regard to this section.
(i) Exclusion of Certain Employees From Minimum Coverage
Requirements.--
(1) In general.--Section 410(b)(3) of such Code is amended
by striking the last sentence and inserting the following:
``For purposes of subparagraph (B), management pilots who are
not represented in accordance with title II of the Railway
Labor Act shall be treated as covered by a collective
bargaining agreement described in such subparagraph if the
management pilots manage the flight operations of air pilots
who are so represented and the management pilots are,
pursuant to the terms of the agreement, included in the group
of employees benefitting under the trust described in such
subparagraph. Subparagraph (B) shall not apply in the case of
a plan which provides contributions or benefits for employees
whose principal duties are not customarily performed aboard
an aircraft in flight (other than management pilots described
in the preceding sentence).''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning before, on, or after the date
of the enactment of this Act.
(j) Effective Date.--Except as otherwise provided in this
section, the amendments made by this section shall apply to
plan years ending after the date of the enactment of this
Act.
SEC. 302. RECOGNITION OF LEGALLY MANDATED EARLY RETIREMENT
AGES IN DETERMINING AMOUNT OF GUARANTEED
BENEFITS.
(a) Single-Employer Plan Benefits Guaranteed.--Section
4022(b)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1322(b)(3)) is amended, in the flush matter
following subparagraph (B), by
[[Page H11774]]
adding at the end the following: ``If, at the time of
termination of a plan under this title, regulations
prescribed by the Federal Aviation Administration require an
individual to separate from service as a commercial airline
pilot after attaining a specified age which is less than age
65, the first sentence of this paragraph shall be applied to
an individual who is a participant in the plan by reason of
such service by substituting such age for age 65.''.
(b) Aggregate Limit on Benefit Guaranteed.--Section
4022B(a) of such Act (29 U.S.C. 1322b(a)) is amended by
adding at the end the following: ``If, as of such date,
regulations prescribed by the Federal Aviation Administration
require an individual to separate from service as a
commercial airline pilot after attaining a specified age
which is less than age 65, this subsection shall be applied
to an individual who is a participant in any such plan by
reason of such service by substituting such age for age
65.''.
(c) Effective Date.--The amendments made by this Act shall
apply to benefits payable on or after the date of the
enactment of this Act.
TITLE IV--FAIRNESS FOR RANK AND FILE EMPLOYEES
SEC. 401. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION
PLANS WHEN EMPLOYER DEFINED BENEFIT PLAN IN AT-
RISK STATUS.
(a) In General.--Subsection (b) of section 409A of the
Internal Revenue Code of 1986 (providing rules relating to
funding) is amended by redesignating paragraphs (3) and (4)
as paragraphs (4) and (5), respectively, and by inserting
after paragraph (2) the following new paragraph:
``(3) Employer's defined benefit plan in at-risk status.--
``(A) If--
``(i) during any period in which a defined benefit plan to
which section 412 applies is in an at-risk status, assets are
set aside (directly or indirectly) in a trust (or other
arrangement determined by the Secretary), or transferred to
such a trust or other arrangement, for purposes of paying
deferred compensation under a nonqualified deferred
compensation plan of the employer maintaining the defined
benefit plan, or
``(ii) a nonqualified deferred compensation plan of the
employer provides that assets will become restricted to the
provision of benefits under the plan in connection with such
at-risk status (or other similar financial measure determined
by the Secretary) of the defined benefit plan, or assets are
so restricted,
such assets shall for purposes of section 83 be treated as
property transferred in connection with the performance of
services whether or not such assets are available to satisfy
claims of general creditors.
``(B) At-risk status.--For purposes of subparagraph (A), a
plan is in an at-risk status if the funded current liability
percentage (as defined in section 412(l)(8)), reduced as
described in subparagraph (E) thereof, of the plan is less
than 60 percent. ''.
(b) Conforming Amendments.--Paragraphs (4) and (5) of
section 409A(b) of such Code, as redesignated by subsection
(a) of this subsection, are each amended by striking
``paragraph (1) or (2)'' each place it appears and inserting
``paragraph (1), (2), or (3)''.
(c) Effective Date.--The amendments made by this section
shall apply to transfers or reservations of assets after
December 31, 2005.
SEC. 402. NONQUALIFIED DEFERRED COMPENSATION REDUCED BY
PERCENTAGE OF UNDERFUNDED PLAN UPON BANKRUPTCY
OF EMPLOYER.
(a) In General.--Subsection (b) of section 409A of the
Internal Revenue Code of 1986 (providing rules relating to
funding), as amended by section 302, is amended by
redesignating paragraphs (4) and (5) as paragraphs (5) and
(6), respectively, and by inserting after paragraph (3) the
following new paragraph:
``(4) Reduction in allowable deferred compensation upon
bankruptcy.--
``(A) Upon the commencement of any reorganization case
under title 11 of the United States Code, or under any
similar Federal or State law--
``(i) during any period in which a defined benefit plan to
which section 412 applies is in an at-risk status, assets are
set aside (directly or indirectly) in a trust (or other
arrangement determined by the Secretary), or transferred to
such a trust or other arrangement, for purposes of paying
deferred compensation under a nonqualified deferred
compensation plan of the employer maintaining the defined
benefit plan, or
``(ii) a nonqualified deferred compensation plan of the
employer provides that assets will become restricted to the
provision of benefits under the plan in connection with such
at-risk status (or other similar financial measure determined
by the Secretary) of the defined benefit plan, or assets are
so restricted,
the employer shall reduce the amount of benefit under the
non-qualified plan by the applicable percentage of
underfunding in the pension plan.
``(B) Applicable percentage.--For purposes of subparagraph
(A), the applicable percentage is the excess (if any) of 100
percentage points over the funded current liability
percentage (as defined in section 412(l)(8)), reduced as
described in subparagraph (E) thereof.
``(C) Additional tax.--The tax imposed by this chapter for
any taxable year on any taxpayer with respect to whom a
benefit is reduced under subparagraph (A) shall be increased
by 100 percent of the amount of such reduction. Such amount
shall not be treated as a tax for purposes of section
26(b)(2).''.
(b) Conforming Amendments.--Paragraphs (5) and (6) of
section 409A(b) of such Code, as redesignated by subsection
(a) of this subsection, are each amended by striking ``or
(3)'' each place it appears and inserting ``(3), or (4)''.
(c) Effective Date.--The amendments made by this section
shall apply to transfers or reservations of assets after
December 31, 2005.
SEC. 403. TERMINATION FAIRNESS STANDARD FOR NONQUALIFIED
DEFERRED COMPENSATION PLANS IN CONNECTION WITH
PENSION PLAN TERMINATIONS BASED ON BANKRUPTCY
REORGANIZATION.
(a) In General.--Section 206 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1056) is amended by
adding at the end the following new subsection:
``(g) Termination Fairness Standard for Nonqualified
Deferred Compensation Plans in Connection With Pension Plan
Terminations Based on Bankruptcy Reorganization.--
``(1) In general.--In any case in which a corporation is a
plan sponsor of a defined benefit plan with respect to which
a plan amendment is adopted that has the effect of
implementing a distress termination of the plan under section
4041(c) based on bankruptcy reorganization or a termination
of the plan initiated by the Pension Benefit Guaranty
Corporation under section 4042 based on bankruptcy
reorganization, in any case in which the plan is not
sufficient for guaranteed benefits (within the meaning of
section 4041(d)(2)) as of the proposed termination date, any
covered deferred compensation plan established or maintained
by such plan sponsor after the date of the adoption of such
plan amendment shall meet the termination fairness standard
of this subsection with respect to such plan amendment.
``(2) Termination fairness standard.--A covered deferred
compensation plan established or maintained by a plan sponsor
described in paragraph (1) meets the termination fairness
standard of this subsection with respect to a plan amendment
described in paragraph (1) if, during the 5-year period
beginning on the date of the adoption of such plan
amendment--
``(A) no amount of deferred compensation accrues to a
disqualified individual under the terms of such covered
deferred compensation plan (irrespective of whether the
accrual in deferred compensation is expressed in the form of
a promise, a guarantee, or any other representation), and
``(B) in the case of a covered deferred compensation plan
established during or after the 1-year period preceding the
notice date (or any amendment to a covered deferred
compensation plan if such amendment is adopted during or
after such 1-year period), no distribution of accrued
deferred compensation is made under such plan (or such
amendment) to a disqualified individual.
``(3) Definitions.--For purposes of this subsection--
``(A) Notice date.--The term `notice date' means, with
respect to an amendment described in paragraph (1)--
``(i) in the case of a distress termination under section
4041(d), the date of the advance notice of intent to
terminate provided pursuant to section 4041(a)(2), and
``(ii) in the case of a termination initiated by the
Pension Benefit Guaranty Corporation under section 4042, the
date of the application to the court under section 4042(c).
``(B) Covered deferred compensation plan.--
``(i) In general.--The term `covered deferred compensation
plan' means any plan providing for the deferral of
compensation of a disqualified individual, whether or not--
``(I) compensation of the disqualified individual which is
deferred under such plan is subject to substantial risk of
forfeiture,
``(II) the disqualified individual's rights to the
compensation deferred under the plan are no greater than the
rights of a general creditor of the plan sponsor,
``(III) all amounts set aside (directly or indirectly) for
purposes of paying the deferred compensation (including
income), and all income attributable to such amounts, remain
(until made available to the disqualified individual or other
beneficiary) solely the property of the plan sponsor (without
being restricted to the provision of benefits under the
plan),
``(IV) the amounts referred to in subclause (III) are
available to satisfy the claims of the plan sponsor's general
creditors at all times (not merely after bankruptcy or
insolvency), and
``(V) some or all of the compensation of the disqualified
individual which is deferred under such plan is guaranteed by
an insurance company, insurance service, or other similar
organization.
``(ii) Exception for qualified plans.--Such term shall not
include a plan that is--
``(I) described in section 219(g)(5)(A) of the Internal
Revenue Code of 1986, or
``(II) an eligible deferred compensation plan (as defined
in section 457(b) of such Code) of an eligible employer
described in section 457(e)(1)(A) of such Code.
``(iii) Plan includes arrangements, etc.--For purposes of
this subparagraph, the term `plan' includes any agreement or
arrangement.
[[Page H11775]]
``(C) Disqualified individual.--The term `disqualified
individual' means a director or executive officer of the plan
sponsor.
``(D) Termination based on bankruptcy reorganization.--A
termination of a plan which is a distress termination under
section 4041(c) or a termination instituted by the Pension
Benefit Guaranty Corporation under section 4042 is `based on
bankruptcy reorganization' if such termination is based in
whole or in part on the filing, by or against any person who
is a contributing sponsor of such plan or a member of such
sponsor's controlled group, of a petition seeking
reorganization in a case under title 11, United States Code,
or under any similar law of a State or political subdivision
of a State (or such a case in which liquidation is sought has
been converted to a case in which reorganization is sought).
``(E) Title iv terminology.--Any term used in this
subsection which is defined in section 4001(a) shall have the
meaning provided such term in section 4001(a).
``(4) Special rules.--
``(A) Coordinated benefits.--If the benefits of 2 or more
defined benefit plans established or maintained by an
employer are coordinated in such a manner as to have the
effect of the adoption of an amendment described in paragraph
(1), the sponsor of the defined benefit plan or plans
providing for such coordination shall be treated as having
adopted such a plan amendment as of the date such
coordination begins.
``(B) Multiple amendments.--The Secretary shall issue
regulations to prevent the avoidance of the purposes of this
subsection through the use of 2 or more plan amendments
rather than a single amendment.
``(C) Controlled groups, etc.--For purposes of this
subsection, all persons treated as a single employer under
subsection (b), (c), (m), or (o) of section 414 of the
Internal Revenue Code of 1986 shall be treated as 1 employer.
``(D) Treatment of earnings.--References to deferred
compensation shall be treated as including references to
income attributable to such compensation or such income.
``(5) Coordination.--The Secretary and the Secretary of the
Treasury shall ensure, through the execution of an
interagency memorandum of understanding among such
Secretaries, that regulations, rulings, and interpretations
issued by such Secretaries relating to the same matter over
which both such Secretaries have responsibility under this
subsection and section 4980H of the Internal Revenue Code of
1986 are administered so as to have the same effect at all
times.
``(6) Effect of waiver granted by secretary of the
treasury.--To the extent that any requirement of the
termination fairness standard of section 4980H(a)(2) of the
Internal Revenue Code of 1986 is waived by the Secretary of
the Treasury with respect to any disqualified individual
under section 4980H(g) of such Code in the case of any plan
amendment having the effect of a termination described in
paragraph (1) of this subsection, such requirement under the
termination fairness standard of paragraph (2) of this
subsection shall not apply with respect to such individual in
the case of such plan amendment.''.
(b) Excise Tax on Funding Nonqualified Deferred
Compensation Plans in the Event of a Pension Plan Termination
Based on Bankruptcy Reorganization.--
(1) In general.--Chapter 43 of the Internal Revenue Code of
1986 (relating to qualified pension, etc., plans) is amended
by adding at the end the following new section:
``SEC. 4980H. FUNDING NONQUALIFIED DEFERRED COMPENSATION
PLANS.
``(a) Imposition of Tax in the Event of a Pension Plan
Termination Based on Bankruptcy Reorganization.--
``(1) In general.--In any case in which a corporation is a
plan sponsor of a defined benefit plan with respect to which
an plan amendment is adopted that has the effect of
implementing a distress termination of the plan under section
4041(c) of the Employee Retirement Income Security Act of
1974 based on bankruptcy reorganization or a termination of
the plan initiated by the Pension Benefit Guaranty
Corporation under section 4042 of such Act based on
bankruptcy reorganization, in any case in which the plan is
not sufficient for guaranteed benefits (within the meaning of
section 4041(d)(2) of such Act) as of the proposed
termination date, there is hereby imposed a tax on any
failure to meet the termination fairness standard of
paragraph (2) with respect to such plan amendment.
``(2) Termination fairness standard.--A covered deferred
compensation plan established or maintained by a plan sponsor
described in paragraph (1) meets the termination fairness
standard of this subsection with respect to a plan amendment
described in paragraph (1) if, during the 5-year period
beginning on the date of the adoption of such plan
amendment--
``(A) no amount of deferred compensation accrues to a
disqualified individual under the terms of such covered
deferred compensation plan, irrespective of whether the
accrual in deferred compensation is expressed in the form of
a promise, a guarantee, or any other representation, and
``(B) in the case of a covered deferred compensation plan
established during or after the 1-year period preceding the
notice date (or any amendment to a covered deferred
compensation plan if such amendment is adopted during or
after such 1-year period), no distribution of accrued
deferred compensation is made under such plan (or such
amendment) to a disqualified individual.
``(b) Amount of Tax.--The amount of the tax imposed by
subsection (a) shall be equal to the amount of the accrual
described in subsection (a)(2)(A) comprising the failure or
the distribution described in subsection (a)(2)(B) comprising
the failure.
``(c) Liability for Tax.--The plan sponsor shall be liable
for the tax imposed by this section.
``(d) Definitions.--For purposes of this section--
``(1) Notice date.--The term `notice date' means with
respect to an amendment described in subsection (a)(1)--
``(A) in the case of a distress termination under section
4041(d) of the Employee Retirement Income Security Act of
1974, the date of the advance notice of intent to terminate
provided pursuant to section 4041(a)(2) of such Act, and
``(B) in the case of a termination initiated by the Pension
Benefit Guaranty Corporation under section 4042 of such Act,
the date of the application to the court under section
4042(c) of such Act.
``(2) Covered deferred compensation plan.--
``(A) In general.--The term `covered deferred compensation
plan' means any plan providing for the deferral of
compensation of a disqualified individual, whether or not--
``(i) compensation of the disqualified individual which is
deferred under such plan is subject to substantial risk of
forfeiture,
``(ii) the disqualified individual's rights to the
compensation deferred under the plan are no greater than the
rights of a general creditor of the plan sponsor,
``(iii) all amounts set aside (directly or indirectly) for
purposes of paying the deferred compensation, and all income
attributable to such amounts, remain (until made available to
the participant or other beneficiary) solely the property of
the (without being restricted to the provision of benefits
under the plan),
``(iv) the amounts referred to in clause (iii) are
available to satisfy the claims of the plan sponsor's general
creditors at all times (not merely after bankruptcy or
insolvency), and
``(v) some or all of the compensation of the disqualified
individual which is deferred under such plan is guaranteed by
an insurance company, insurance service, or other similar
organization.
``(B) Exception for qualified plans.--Such term shall not
include a plan that is--
``(i) described in section 219(g)(5)(A), or
``(ii) an eligible deferred compensation plan (as defined
in section 457(b)) of an eligible employer described in
section 457(e)(1)(A).
``(C) Plan includes arrangements, etc.--For purposes of
this paragraph, the term `plan' includes any agreement or
arrangement.
``(3) Disqualified individual.--The term `disqualified
individual' means a director or executive officer of the plan
sponsor.
``(4) Termination based on bankruptcy reorganization.--A
termination of a plan which is a distress termination under
section 4041(c) of the Employee Retirement Income Security
Act of 1974 or a termination instituted by the Pension
Benefit Guaranty Corporation under section 4042 of such Act
is `based on bankruptcy reorganization' if such termination
is based in whole or in part on the filing, by or against any
person who is a contributing sponsor of such plan or a member
of such sponsor's controlled group, of a petition seeking
reorganization in a case under title 11, United States Code,
or under any similar law of a State or political subdivision
of a State (or such a case in which liquidation is sought has
been converted to a case in which reorganization is sought).
``(5) Title iv terminology.--Any term used in this section
which is defined in section 4001(a) of the Employee
Retirement Income Security Act of 1974 shall have the meaning
provided such term in such section 4001(a).
``(e) Special Rules.--
``(1) Coordinated benefits.--If the benefits of 2 or more
defined benefit plans established or maintained by an
employer are coordinated in such a manner as to have the
effect of the adoption of an amendment described in
subsection (a)(1), the sponsor of the defined benefit plan or
plans providing for such coordination shall be treated as
having adopted such a plan amendment as of the date such
coordination begins.
``(2) Multiple amendments.--The Secretary shall issue
regulations to prevent the avoidance of the purposes of this
section through the use of 2 or more plan amendments rather
than a single amendment.
``(3) Controlled groups, etc.--For purposes of this
section, all persons treated as a single employer under
subsection (b), (c), (m), or (o) of section 414 shall be
treated as 1 employer.
``(4) Treatment of earnings.--References to deferred
compensation shall be treated as including references to
income attributable to such compensation or such income.
``(f) Coordination.--The Secretary and the Secretary of
Labor shall ensure, through the execution of an interagency
memorandum of understanding among such Secretaries, that
regulations, rulings, and interpretations issued by such
Secretaries relating to the same matter over which both such
Secretaries have responsibility under this section
[[Page H11776]]
and section 206(g) of the Employee Retirement Income Security
Act of 1974 are administered so as to have the same effect at
all times.
``(g) Waiver.--
``(1) In general.--In the case of any plan amendment having
the effect of a termination described in subsection (a)(1),
the Secretary may waive the application of any requirement of
the termination fairness standard of subsection (a)(2) with
respect to any disqualified individual who first commences
service for the plan sponsor after the notice date with
respect to such plan amendment. The Secretary may grant any
such waiver in the case of any such plan amendment with
respect to any such disqualified individual only after
consultation with the Pension Benefit Guaranty Corporation.
The Secretary shall promptly notify the Secretary of Labor of
any such waiver granted by the Secretary.
``(2) Requirements for waiver.--A waiver may be granted
under paragraph (1) only--
``(A) upon the filing with the Secretary by the plan
sponsor of an application for such waiver, in such form and
manner as shall be prescribed in regulations of the
Secretary,
``(B) upon a showing, to the satisfaction of the Secretary,
that such waiver is a business necessity for the plan
sponsor, as determined under such regulations, and is in the
interest of plan participants and beneficiaries, as
determined under such regulations, and
``(C) after the participants, in such form and manner as
shall be provided in such regulations, have been notified of
the filing of the application for the waiver and have been
provided a reasonable opportunity to provide in advance
comments to the Secretary regarding the proposed waiver.''.
(2) Clerical amendment.--The table of sections for chapter
43 of such Code is amended by adding at the end the following
new item:
``Sec. 4980H. Funding nonqualified deferred compensation plans.''.
(c) Effective Date.--The amendments made by this section
shall apply to--
(1) plan amendments adopted on or after May 10, 2005, and
(2) plan amendments adopted before such date implementing a
plan termination as described in section 206(g)(1) of the
Employee Retirement Income Security Act of 1974 (as added by
subsection (a)) or section 4980H(a)(1)(A) of the Internal
Revenue Code of 1986 (as added by subsection (b)) based on a
bankruptcy reorganization in a case under title 11 of the
United States Code (or under any similar law of a State or a
political subdivision of a State) pending on such date.
TITLE V--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS AND RELATED PROVISIONS
Subtitle A--Funding Rules
PART I--AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
SEC. 501. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS.
(a) In General.--Part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (as amended
by this Act) is amended by inserting after section 303 the
following new section:
``Minimum funding standards for multiemployer plans
``Sec. 304. (a) In General.--For purposes of section 302,
the accumulated funding deficiency of a multiemployer plan
for any plan year is--
``(1) except as provided in paragraph (2), the amount,
determined as of the end of the plan year, equal to the
excess (if any) of the total charges to the funding standard
account of the plan for all plan years (beginning with the
first plan year for which this part applies to the plan) over
the total credits to such account for such years, and
``(2) if the multiemployer plan is in reorganization for
any plan year, the accumulated funding deficiency of the plan
determined under section 4243.
``(b) Funding Standard Account.--
``(1) Account required.--Each multiemployer plan to which
this part applies shall establish and maintain a funding
standard account. Such account shall be credited and charged
solely as provided in this section.
``(2) Charges to account.--For a plan year, the funding
standard account shall be charged with the sum of--
``(A) the normal cost of the plan for the plan year,
``(B) the amounts necessary to amortize in equal annual
installments (until fully amortized)--
``(i) separately, with respect to each plan year, the net
increase (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(ii) separately, with respect to each plan year, the net
experience loss (if any) under the plan, over a period of 15
plan years, and
``(iii) separately, with respect to each plan year, the net
loss (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount necessary to amortize each waived funding
deficiency (within the meaning of section 302(c)(3)) for each
prior plan year in equal annual installments (until fully
amortized) over a period of 15 plan years,
``(D) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 5 plan
years any amount credited to the funding standard account
under section 302(b)(3)(D) (as in effect on the day before
the date of the enactment of the Pension Security and
Transparency Act of 2005), and
``(E) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 20
years the contributions which would be required to be made
under the plan but for the provisions of section
302(c)(7)(A)(i)(I) (as in effect on the day before the date
of the enactment of the Pension Security and Transparency Act
of 2005).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the employer to
or under the plan for the plan year,
``(B) the amount necessary to amortize in equal annual
installments (until fully amortized)--
``(i) separately, with respect to each plan year, the net
decrease (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(ii) separately, with respect to each plan year, the net
experience gain (if any) under the plan, over a period of 15
plan years, and
``(iii) separately, with respect to each plan year, the net
gain (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount of the waived funding deficiency (within
the meaning of section 302(c)(3)) for the plan year, and
``(D) in the case of a plan year for which the accumulated
funding deficiency is determined under the funding standard
account if such plan year follows a plan year for which such
deficiency was determined under the alternative minimum
funding standard under section 305 (as in effect on the day
before the date of the enactment of the Pension Security and
Transparency Act of 2005), the excess (if any) of any debit
balance in the funding standard account (determined without
regard to this subparagraph) over any debit balance in the
alternative minimum funding standard account.
``(4) Special rule for amounts first amortized to plan
years before 2007.--In the case of any amount amortized under
section 302(b) (as in effect on the day before the date of
the enactment of the Pension Security and Transparency Act of
2005) over any period beginning with a plan year beginning
before 2007, in lieu of the amortization described in
paragraphs (2)(B) and (3)(B), such amount shall continue to
be amortized under such section as so in effect.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations prescribed by the Secretary of the
Treasury, amounts required to be amortized under paragraph
(2) or paragraph (3), as the case may be--
``(A) may be combined into one amount under such paragraph
to be amortized over a period determined on the basis of the
remaining amortization period for all items entering into
such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the resulting
amount to be amortized over a period determined on the basis
of the remaining amortization periods for all items entering
into whichever of the two amounts being offset is the
greater.
``(6) Interest.--The funding standard account (and items
therein) shall be charged or credited (as determined under
regulations prescribed by the Secretary of the Treasury) with
interest at the appropriate rate consistent with the rate or
rates of interest used under the plan to determine costs.
``(7) Special rules relating to charges and credits to
funding standard account.--For purposes of this part--
``(A) Withdrawal liability.--Any amount received by a
multiemployer plan in payment of all or part of an employer's
withdrawal liability under part 1 of subtitle E of title IV
shall be considered an amount contributed by the employer to
or under the plan. The Secretary of the Treasury may
prescribe by regulation additional charges and credits to a
multiemployer plan's funding standard account to the extent
necessary to prevent withdrawal liability payments from being
unduly reflected as advance funding for plan liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in reorganization in
the immediately preceding plan year, any balance in the
funding standard account at the close of such immediately
preceding plan year--
``(i) shall be eliminated by an offsetting credit or charge
(as the case may be), but
``(ii) shall be taken into account in subsequent plan years
by being amortized in equal annual installments (until fully
amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any
accumulated funding deficiency under section 4243(a) as of
the end of the last plan year that the plan was in
reorganization.
``(C) Plan payments to supplemental program or withdrawal
liability payment fund.--Any amount paid by a plan during a
plan year to the Pension Benefit Guaranty Corporation
pursuant to section 4222 of this Act or to a fund exempt
under section 501(c)(22) of the Internal Revenue Code of 1986
pursuant to section 4223 of this Act shall reduce the amount
of contributions considered received by the plan for the plan
year.
[[Page H11777]]
``(D) Interim withdrawal liability payments.--Any amount
paid by an employer pending a final determination of the
employer's withdrawal liability under part 1 of subtitle E of
title IV and subsequently refunded to the employer by the
plan shall be charged to the funding standard account in
accordance with regulations prescribed by the Secretary of
the Treasury.
``(E) Election for deferral of charge for portion of net
experience loss.--If an election is in effect under section
302(b)(7)(F) (as in effect on the day before the date of the
enactment of the Pension Security and Transparency Act of
2005) for any plan year, the funding standard account shall
be charged in the plan year to which the portion of the net
experience loss deferred by such election was deferred with
the amount so deferred (and paragraph (2)(B)(ii) shall not
apply to the amount so charged).
``(F) Financial assistance.--Any amount of any financial
assistance from the Pension Benefit Guaranty Corporation to
any plan, and any repayment of such amount, shall be taken
into account under this section and section 412 of the
Internal Revenue Code of 1986 in such manner as is determined
by the Secretary of the Treasury.
``(G) Short-term benefits.--To the extent that any plan
amendment increases the unfunded past service liability under
the plan by reason of an increase in benefits which are
payable under the terms of the plan for a period that does
not exceed 14 years from the effective date of the amendment,
paragraph (2)(B)(i) shall be applied separately with respect
to such increase in unfunded past service liability by
substituting the number of years of the period during which
such benefits are payable for `15'.
``(c) Additional Rules.--
``(1) Determinations to be made under funding method.--For
purposes of this part, normal costs, accrued liability, past
service liabilities, and experience gains and losses shall be
determined under the funding method used to determine costs
under the plan.
``(2) Valuation of assets.--
``(A) In general.--For purposes of this part, the value of
the plan's assets shall be determined on the basis of any
reasonable actuarial method of valuation which takes into
account fair market value and which is permitted under
regulations prescribed by the Secretary of the Treasury.
``(B) Election with respect to bonds.--The value of a bond
or other evidence of indebtedness which is not in default as
to principal or interest may, at the election of the plan
administrator, be determined on an amortized basis running
from initial cost at purchase to par value at maturity or
earliest call date. Any election under this subparagraph
shall be made at such time and in such manner as the
Secretary of the Treasury shall by regulations provide, shall
apply to all such evidences of indebtedness, and may be
revoked only with the consent of such Secretary.
``(3) Actuarial assumptions must be reasonable.--For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be
determined on the basis of actuarial assumptions and
methods--
``(A) each of which is reasonable (taking into account the
experience of the plan and reasonable expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(4) Treatment of certain changes as experience gain or
loss.--For purposes of this section, if--
``(A) a change in benefits under the Social Security Act or
in other retirement benefits created under Federal or State
law, or
``(B) a change in the definition of the term `wages' under
section 3121 of the Internal Revenue Code of 1986, or a
change in the amount of such wages taken into account under
regulations prescribed for purposes of section 401(a)(5) of
such Code,
results in an increase or decrease in accrued liability under
a plan, such increase or decrease shall be treated as an
experience loss or gain.
``(5) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency in excess of the full funding
limitation--
``(A) the funding standard account shall be credited with
the amount of such excess, and
``(B) all amounts described in subparagraphs (B), (C), and
(D) of subsection (b) (2) and subparagraph (B) of subsection
(b)(3) which are required to be amortized shall be considered
fully amortized for purposes of such subparagraphs.
``(6) Full-funding limitation.--
``(A) In general.--For purposes of paragraph (5), the term
`full-funding limitation' means the excess (if any) of--
``(i) the accrued liability (including normal cost) under
the plan (determined under the entry age normal funding
method if such accrued liability cannot be directly
calculated under the funding method used for the plan), over
``(ii) the lesser of--
``(I) the fair market value of the plan's assets, or
``(II) the value of such assets determined under paragraph
(2).
``(B) Minimum amount.--
``(i) In general.--In no event shall the full-funding
limitation determined under subparagraph (A) be less than the
excess (if any) of--
``(I) 90 percent of the current liability of the plan
(including the expected increase in current liability due to
benefits accruing during the plan year), over
``(II) the value of the plan's assets determined under
paragraph (2).
``(ii) Assets.--For purposes of clause (i), assets shall
not be reduced by any credit balance in the funding standard
account.
``(C) Full funding limitation.--For purposes of this
paragraph, unless otherwise provided by the plan, the accrued
liability under a multiemployer plan shall not include
benefits which are not nonforfeitable under the plan after
the termination of the plan (taking into consideration
section 411(d)(3) of the Internal Revenue Code of 1986).
``(D) Current liability.--For purposes of this paragraph--
``(i) In general.--The term `current liability' means all
liabilities to employees and their beneficiaries under the
plan.
``(ii) Treatment of unpredictable contingent event
benefits.--For purposes of clause (i), any benefit contingent
on an event other than--
``(I) age, service, compensation, death, or disability, or
``(II) an event which is reasonably and reliably
predictable (as determined by the Secretary of the Treasury),
shall not be taken into account until the event on which the
benefit is contingent occurs.
``(iii) Interest rate used.--The rate of interest used to
determine current liability under this paragraph shall be the
rate of interest determined under subparagraph (E).
``(iv) Mortality tables.--
``(I) Commissioners' standard table.--In the case of plan
years beginning before the first plan year to which the first
tables prescribed under subclause (II) apply, the mortality
table used in determining current liability under this
paragraph shall be the table prescribed by the Secretary of
the Treasury which is based on the prevailing commissioners'
standard table (described in section 807(d)(5)(A) of the
Internal Revenue Code of 1986) used to determine reserves for
group annuity contracts issued on January 1, 1993.
``(II) Secretarial authority.--The Secretary of the
Treasury may by regulation prescribe for plan years beginning
after December 31, 1999, mortality tables to be used in
determining current liability under this subsection. Such
tables shall be based upon the actual experience of pension
plans and projected trends in such experience. In prescribing
such tables, such Secretary shall take into account results
of available independent studies of mortality of individuals
covered by pension plans.
``(v) Separate mortality tables for the disabled.--
Notwithstanding clause (iv)--
``(I) In general.--The Secretary of the Treasury shall
establish mortality tables which may be used (in lieu of the
tables under clause (iv)) to determine current liability
under this subsection for individuals who are entitled to
benefits under the plan on account of disability. Such
Secretary shall establish separate tables for individuals
whose disabilities occur in plan years beginning before
January 1, 1995, and for individuals whose disabilities occur
in plan years beginning on or after such date.
``(II) Special rule for disabilities occurring after
1994.--In the case of disabilities occurring in plan years
beginning after December 31, 1994, the tables under subclause
(I) shall apply only with respect to individuals described in
such subclause who are disabled within the meaning of title
II of the Social Security Act and the regulations thereunder.
``(vi) Periodic review.--The Secretary of the Treasury
shall periodically (at least every 5 years) review any tables
in effect under this subparagraph and shall, to the extent
such Secretary determines necessary, by regulation update the
tables to reflect the actual experience of pension plans and
projected trends in such experience.
``(E) Required change of interest rate.--For purposes of
determining a plan's current liability for purposes of this
paragraph--
``(i) In general.--If any rate of interest used under the
plan under subsection (b)(6) to determine cost is not within
the permissible range, the plan shall establish a new rate of
interest within the permissible range.
``(ii) Permissible range.--For purposes of this
subparagraph--
``(I) In general.--Except as provided in subclause (II),
the term `permissible range' means a rate of interest which
is not more than 5 percent above, and not more than 10
percent below, the weighted average of the rates of interest
on 30-year Treasury securities during the 4-year period
ending on the last day before the beginning of the plan year.
``(II) Secretarial authority.--If the Secretary of the
Treasury finds that the lowest rate of interest permissible
under subclause (I) is unreasonably high, such Secretary may
prescribe a lower rate of interest, except that such rate may
not be less than 80 percent of the average rate determined
under such subclause.
``(iii) Assumptions.--Notwithstanding paragraph (3)(A), the
interest rate used under the plan shall be--
``(I) determined without taking into account the experience
of the plan and reasonable expectations, but
``(II) consistent with the assumptions which reflect the
purchase rates which would
[[Page H11778]]
be used by insurance companies to satisfy the liabilities
under the plan.
``(7) Annual valuation.--
``(A) In general.--For purposes of this section, a
determination of experience gains and losses and a valuation
of the plan's liability shall be made not less frequently
than once every year, except that such determination shall be
made more frequently to the extent required in particular
cases under regulations prescribed by the Secretary of the
Treasury.
``(B) Valuation date.--
``(i) Current year.--Except as provided in clause (ii), the
valuation referred to in subparagraph (A) shall be made as of
a date within the plan year to which the valuation refers or
within one month prior to the beginning of such year.
``(ii) Use of prior year valuation.--The valuation referred
to in subparagraph (A) may be made as of a date within the
plan year prior to the year to which the valuation refers if,
as of such date, the value of the assets of the plan are not
less than 100 percent of the plan's current liability (as
defined in paragraph (6)(D) without regard to clause (iv)
thereof).
``(iii) Adjustments.--Information under clause (ii) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
``(iv) Limitation.--A change in funding method to use a
prior year valuation, as provided in clause (ii), may not be
made unless as of the valuation date within the prior plan
year, the value of the assets of the plan are not less than
125 percent of the plan's current liability (as defined in
paragraph (6)(D) without regard to clause (iv) thereof).
``(8) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer after the last day of such plan year, but
not later than two and one-half months after such day, shall
be deemed to have been made on such last day. For purposes of
this subparagraph, such two and one-half month period may be
extended for not more than six months under regulations
prescribed by the Secretary of the Treasury.
``(d) Extension of Amortization Periods for Multiemployer
Plans.--
``(1) Automatic extension upon application by certain
plans.--
``(A) In general.--If the plan sponsor of a multiemployer
plan--
``(i) submits to the Secretary of the Treasury an
application for an extension of the period of years required
to amortize any unfunded liability described in any clause of
subsection (b)(2)(B) or described in subsection (b)(4), and
``(ii) includes with the application a certification by the
plan's actuary described in subparagraph (B),
the Secretary of the Treasury shall extend the amortization
period for the period of time (not in excess of 5 years)
specified in the application. Such extension shall be in
addition to any extension under paragraph (2).
``(B) Criteria.--A certification with respect to a
multiemployer plan is described in this subparagraph if the
plan's actuary certifies that, based on reasonable
assumptions--
``(i) absent the extension under subparagraph (A), the plan
would have an accumulated funding deficiency in the current
plan year or any of the 9 succeeding plan years,
``(ii) the plan sponsor has adopted a plan to improve the
plan's funding status,
``(iii) the plan is projected to have sufficient assets to
timely pay expected benefits and anticipated expenditures
over the amortization period as extended, and
``(iv) the notice required under paragraph (3)(A) has been
provided.
``(2) Additional extension.--
``(A) In general.--If the plan sponsor of a multiemployer
plan submits to the Secretary of the Treasury an application
for an extension of the period of years required to amortize
any unfunded liability described in any clause of subsection
(b)(2)(B) or described in subsection (b)(4), the Secretary of
the Treasury may extend the amortization period for a period
of time (not in excess of 5 years) if the Secretary of the
Treasury makes the determination described in subparagraph
(B). Such extension shall be in addition to any extension
under paragraph (1).
``(B) Determination.--The Secretary make grant an extension
under subparagraph (A) if the Secretary determines that--
``(i) such extension would carry out the purposes of this
Act and would provide adequate protection for participants
under the plan and their beneficiaries, and
``(ii) the failure to permit such extension would--
``(I) result in a substantial risk to the voluntary
continuation of the plan, or a substantial curtailment of
pension benefit levels or employee compensation, and
``(II) be adverse to the interests of plan participants in
the aggregate.
``(C) Action by secretary.--The Secretary of the Treasury
shall act upon any application for an extension under this
paragraph within 180 days of the submission of such
application. If the Secretary rejects the application for an
extension under this paragraph, the Secretary shall provide
notice to the plan detailing the specific reasons for the
rejection, including references to the criteria set forth
above.
``(3) Advance notice.--
``(A) In general.--The Secretary of the Treasury shall,
before granting an extension under this subsection, require
each applicant to provide evidence satisfactory to such
Secretary that the applicant has provided notice of the
filing of the application for such extension to each affected
party (as defined in section 4001(a)(21)) with respect to the
affected plan. Such notice shall include a description of the
extent to which the plan is funded for benefits which are
guaranteed under title IV and for benefit liabilities.
``(B) Consideration of relevant information.--The Secretary
of the Treasury shall consider any relevant information
provided by a person to whom notice was given under paragraph
(1).''.
(b) Shortfall Funding Method.--
(1) In general.--A multiemployer plan meeting the criteria
of paragraph (2) may adopt, use, or cease using, the
shortfall funding method and such adoption, use, or cessation
of use of such method, shall be deemed approved by the
Secretary of the Treasury under section 302(d)(1) of the
Employee Retirement Income Security Act of 1974 and section
412(e)(1) of the Internal Revenue Code of 1986.
(2) Criteria.--A multiemployer pension plan meets the
criteria of this clause if--
(A) the plan has not used the shortfall funding method
during the 5-year period ending on the day before the date
the plan is to use the method under paragraph (1); and
(B) the plan is not operating under an amortization period
extension under section 304(d) of such Act and did not
operate under such an extension during such 5-year period.
(3) Shortfall funding method defined.--For purposes of this
subsection, the term ``shortfall funding method'' means the
shortfall funding method described in Treasury Regulations
section 1.412(c)(1)-2 (26 C.F.R. 1.412(c)(1)-2).
(4) Benefit restrictions to apply.--The benefit
restrictions under section 302(c)(7) of such Act and section
412(d)(7) of such Code shall apply during any period a
multiemployer plan is on the shortfall funding method
pursuant to this subsection.
(5) Use of shortfall method not to preclude other
options.--Nothing in this subsection shall be construed to
affect a multiemployer plan's ability to adopt the shortfall
funding method with the Secretary's permission under
otherwise applicable regulations or to affect a multiemployer
plan's right to change funding methods, with or without the
Secretary's consent, as provided in applicable rules and
regulations.
(c) Conforming Amendments.--
(1) Section 301 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1081) is amended by striking
subsection (d).
(2) The table of contents in section 1 of such Act (as
amended by this Act) is amended by inserting after the item
relating to section 303 the following new item:
``Sec. 304. Minimum funding standards for multiemployer plans.''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after 2006.
(2) Special rule for certain amortization extensions.--If
the Secretary of the Treasury grants an extension under
section 304 of the Employee Retirement Income Security Act of
1974 and section 412(e) of the Internal Revenue Code of 1986
with respect to any application filed with the Secretary of
the Treasury on or before June 30, 2005, the extension (and
any modification thereof) shall be applied and administered
under the rules of such sections as in effect before the
enactment of this Act, including the use of the rate of
interest determined under section 6621(b) of such Code.
SEC. 502. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN
ENDANGERED OR CRITICAL STATUS.
(a) In General.--Part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (as amended
by the preceding provisions of this Act) is amended by
inserting after section 304 the following new section:
``Additional funding rules for multiemployer plans in endangered status
or critical status
``Sec. 305. (a) General Rule.--For purposes of this part,
in the case of a multiemployer plan--
``(1) if the plan is in endangered status--
``(A) the plan sponsor shall adopt and implement a funding
improvement plan in accordance with the requirements of
subsection (c), and
``(B) the requirements of subsection (d) shall apply during
the funding plan adoption period and the funding improvement
period, and
``(2) if the plan is in critical status--
``(A) the plan sponsor shall adopt and implement a
rehabilitation plan in accordance with the requirements of
subsection (e), and
``(B) the requirements of subsection (f) shall apply during
the rehabilitation plan adoption period and the
rehabilitation period.
``(b) Determination of Endangered and Critical Status.--For
purposes of this section--
``(1) Endangered status.--A multiemployer plan is in
endangered status for a plan year if, as determined by the
plan actuary under paragraph (3), the plan is not in critical
status for the plan year and either--
``(A) the plan's funded percentage for such plan year is
less than 80 percent, or
``(B) the plan has an accumulated funding deficiency for
such plan year, or is projected to have such an accumulated
funding deficiency for any of the 6 succeeding plan years,
[[Page H11779]]
taking into account any extension of amortization periods
under section 304(d).
For purposes of this section, a plan described in
subparagraph (B) shall be treated as in seriously endangered
status.
``(2) Critical status.--A multiemployer plan is in critical
status for a plan year if, as determined by the plan actuary
under paragraph (3), the plan is described in 1 or more of
the following subparagraphs as of the beginning of the plan
year:
``(A) A plan is described in this subparagraph if--
``(i) the funded percentage of the plan is less than 65
percent, and
``(ii) the sum of--
``(I) the market value of plan assets, plus
``(II) the present value of the reasonably anticipated
employer contributions for the current plan year and each of
the 5 succeeding plan years, assuming that the terms of all
collective bargaining agreements pursuant to which the plan
is maintained for the current plan year continue in effect
for succeeding plan years,
is less than the present value of all benefits projected to
be payable under the plan during the current plan year and
each of the 5 succeeding plan years (plus administrative
expenses for such plan years).
``(B) A plan is described in this subparagraph if--
``(i) the plan has an accumulated funding deficiency for
the current plan year, not taking into account any extension
of amortization periods under section 304(d), or
``(ii) the plan is projected to have an accumulated funding
deficiency for any of the 3 succeeding plan years (4
succeeding plan years if the funded percentage of the plan is
65 percent or less), not taking into account any extension of
amortization periods under section 304(d).
``(C) A plan is described in this subparagraph if--
``(i)(I) the plan's normal cost for the current plan year,
plus interest (determined at the rate used for determining
costs under the plan) for the current plan year on the amount
of unfunded benefit liabilities under the plan as of the last
date of the preceding plan year, exceeds
``(II) the present value of the reasonably anticipated
employer contributions for the current plan year,
``(ii) the present value of nonforfeitable benefits of
inactive participants is greater than the present value of
nonforfeitable benefits of active participants, and
``(iii) the plan has an accumulated funding deficiency for
the current plan year, or is projected to have such a
deficiency for any of the 4 succeeding plan years, not taking
into account any extension of amortization periods under
section 304(d).
``(D) A plan is described in this subparagraph if the sum
of--
``(i) the market value of plan assets, plus
``(ii) the present value of the reasonably anticipated
employer contributions for the current plan year and each of
the 4 succeeding plan years, assuming that the terms of all
collective bargaining agreements pursuant to which the plan
is maintained for the current plan year continue in effect
for succeeding plan years,
is less than the present value of all benefits projected to
be payable under the plan during the current plan year and
each of the 4 succeeding plan years (plus administrative
expenses for such plan years).
``(3) Annual certification by plan actuary.--
``(A) In general.--During the 90-day period beginning on
the first day of each plan year of a multiemployer plan, the
plan actuary shall certify to the Secretary of the Treasury--
``(i) whether or not the plan is in endangered status for
such plan year and whether or not the plan is in critical
status for such plan year, and
``(ii) in the case of a plan which is in a funding
improvement or rehabilitation period, whether or not the plan
is making the scheduled progress in meeting the requirements
of its funding improvement or rehabilitation plan.
``(B) Actuarial projections of assets and liabilities.--
``(i) In general.--In making the determinations and
projections under this subsection, the plan actuary shall
make projections required for the current and succeeding plan
years, using reasonable actuarial estimates, assumptions, and
methods, of the current value of the assets of the plan and
the present value of all liabilities to participants and
beneficiaries under the plan for the current plan year as of
the beginning of such year. The projected present value of
liabilities as of the beginning of such year shall be
determined based on the actuarial statement required under
section 103(d) with respect to the most recently filed annual
report or the actuarial valuation for the preceding plan
year.
``(ii) Determinations of future contributions.--Any
actuarial projection of plan assets shall assume--
``(I) reasonably anticipated employer contributions for the
current and succeeding plan years, assuming that the terms of
the one or more collective bargaining agreements pursuant to
which the plan is maintained for the current plan year
continue in effect for succeeding plan years, or
``(II) that employer contributions for the most recent plan
year will continue indefinitely, but only if the plan actuary
determines there have been no significant demographic changes
that would make such assumption unreasonable.
``(C) Penalty for failure to secure timely actuarial
certification.--Any failure of the plan's actuary to certify
the plan's status under this subsection by the date specified
in subparagraph (A) shall be treated for purposes of section
502(c)(2) as a failure or refusal by the plan administrator
to file the annual report required to be filed with the
Secretary under section 101(b)(4).
``(D) Notice.--In any case in which a multiemployer plan is
certified to be in endangered or critical status under
subparagraph (A), the plan sponsor shall, not later than 30
days after the date of the certification, provide
notification of the endangered or critical status to the
participants and beneficiaries, the bargaining parties, the
Pension Benefit Guaranty Corporation, the Secretary of the
Treasury, and the Secretary.
``(c) Funding Improvement Plan Must Be Adopted for
Multiemployer Plans in Endangered Status.--
``(1) In general.--In any case in which a multiemployer
plan is in endangered status for a plan year, the plan
sponsor, in accordance with this subsection--
``(A) shall adopt a funding improvement plan not later than
240 days following the required date for the actuarial
certification of endangered status under subsection
(b)(3)(A), and
``(B) within 30 days after the adoption of the funding
improvement plan--
``(i) in the case of a plan in seriously endangered status,
shall provide to the bargaining parties 1 or more schedules
showing revised benefit structures, revised contribution
structures, or both, which, if adopted, may reasonably be
expected to enable the multiemployer plan to meet the
applicable requirements under paragraph (3) in accordance
with the funding improvement plan, including a description of
the reductions in future benefit accruals and increases in
contributions that the plan sponsor determines are reasonably
necessary to meet the applicable requirements if the plan
sponsor assumes that there are no increases in contributions
under the plan other than the increases necessary to meet the
applicable requirements after future benefit accruals have
been reduced to the maximum extent permitted by law, and
``(ii) may, if the plan sponsor deems appropriate, prepare
and provide the bargaining parties with additional
information relating to contribution rates or benefit
reductions, alternative schedules, or other information
relevant to achieving the requirements under paragraph (3) in
accordance with the funding improvement plan.
``(2) Exception for years after process begins.--Paragraph
(1) shall not apply to a plan year if such year is in a
funding plan adoption period or funding improvement period by
reason of the plan being in endangered status for a preceding
plan year. For purposes of this section, such preceding plan
year shall be the initial determination year with respect to
the funding improvement plan to which it relates.
``(3) Funding improvement plan.--For purposes of this
section--
``(A) In general.--A funding improvement plan is a plan
which consists of the actions, including options or a range
of options to be proposed to the bargaining parties, which,
under reasonable actuarial assumptions, will result in the
plan meeting the requirements of this paragraph.
``(B) Plans other than seriously endangered plans.--In the
case of plan not in seriously endangered status, the
requirements of this paragraph are met if the plan's funded
percentage as of the close of the funding improvement period
exceeds the lesser of 80 percent or a percentage equal to the
sum of--
``(i) such percentage as of the beginning of such period,
plus
``(ii) 10 percent of the percentage under clause (i).
``(C) Seriously endangered plans.--In the case of a plan in
seriously endangered status, the requirements of this
paragraph are met if--
``(i) the plan's funded percentage as of the close of the
funding improvement period equals or exceeds the percentage
which is equal to the sum of--
``(I) such percentage as of the beginning of such period,
plus
``(II) 33 percent of the difference between 100 percent and
the percentage under subclause (I), and
``(ii) there is no accumulated funding deficiency for any
plan year during the funding improvement period (taking into
account any extension of amortization periods under section
304(d)).
``(4) Funding improvement period.--For purposes of this
section--
``(A) In general.--The funding improvement period for any
funding improvement plan adopted pursuant to this subsection
is the 10-year period beginning on the first day of the first
plan year of the multiemployer plan beginning after the
earlier of--
``(i) the second anniversary of the date of the adoption of
the funding improvement plan, or
``(ii) the expiration of the collective bargaining
agreements in effect on the due date for the actuarial
certification of endangered status for the initial
determination year under subsection (b)(3)(A) and covering,
as of such due date, at least 75 percent of the active
participants in such multiemployer plan.
[[Page H11780]]
``(B) Coordination with changes in status.--
``(i) Plans no longer in endangered status.--If the plan's
actuary certifies under subsection (b)(3)(A) for a plan year
in any funding plan adoption period or funding improvement
period that the plan is no longer in endangered status and is
not in critical status, the funding plan adoption period or
funding improvement period, whichever is applicable, shall
end as of the close of the preceding plan year.
``(ii) Plans in critical status.--If the plan's actuary
certifies under subsection (b)(3)(A) for a plan year in any
funding plan adoption period or funding improvement period
that the plan is in critical status, the funding plan
adoption period or funding improvement period, whichever is
applicable, shall end as of the close of the plan year
preceding the first plan year in the rehabilitation period
with respect to such status.
``(C) Plans in endangered status at end of period.--If the
plan's actuary certifies under subsection (b)(3)(A) for the
first plan year following the close of the period described
in subparagraph (A) that the plan is in endangered status,
the provisions of this subsection and subsection (d) shall be
applied as if such first plan year were an initial
determination year, except that the plan may not be amended
in a manner inconsistent with the funding improvement plan in
effect for the preceding plan year until a new funding
improvement plan is adopted.
``(5) Special rules for certain underfunded plans.--
``(A) In general.--Except as provided in subparagraph (B),
if the funded percentage of a plan in seriously endangered
status was 70 percent or less as of the beginning of the
initial determination year, the following rules shall apply
in determining whether the requirements of paragraph
(3)(C)(i) are met:
``(i) The plan's funded percentage as of the close of the
funding improvement period must equal or exceed a percentage
which is equal to the sum of--
``(I) such percentage as of the beginning of such period,
plus
``(II) 20 percent of the difference between 100 percent and
the percentage under subclause (I).
``(ii) The funding improvement period under paragraph
(4)(A) shall be 15 years rather than 10 years.
``(B) Special rules for plans with funded percentage over
70 percent.--If the funded percentage described in
subparagraph (A) was more than 70 percent but less than 80
percent as of the beginning of the initial determination
year--
``(i) subparagraph (A) shall apply if the plan's actuary
certifies, within 30 days after the certification under
subsection (b)(3)(A) for the initial determination year,
that, based on the terms of the plan and the collective
bargaining agreements in effect at the time of such
certification, the plan is not projected to meet the
requirements of paragraph (3)(C)(i) without regard to this
paragraph, and
``(ii) if there is a certification under clause (i), the
plan may, in formulating its funding improvement plan, only
take into account the rules of subparagraph (A) for plan
years in the funding improvement period beginning on or
before the date on which the last of the collective
bargaining agreements described in paragraph (4)(A)(ii)
expires.
Notwithstanding clause (ii), if for any plan year ending
after the date described in clause (ii) the plan actuary
certifies (at the time of the annual certification under
subsection (b)(3)(A) for such plan year) that, based on the
terms of the plan and collective bargaining agreements in
effect at the time of that annual certification, the plan is
not projected to be able to meet the requirements of
paragraph (3)(C)(i) without regard to this paragraph, the
plan may continue to assume for such year that the funding
improvement period is 15 years rather than 10 years.
``(6) Updates to funding improvement plan and schedules.--
``(A) Funding improvement plan.--The plan sponsor shall
annually update the funding improvement plan and shall file
the update with the plan's annual report under section 104.
``(B) Schedules.--The plan sponsor may periodically update
any schedule of contribution rates provided under this
subsection to reflect the experience of the plan, except that
the schedule or schedules described in paragraph (1)(B)(i)
shall be updated at least once every 3 years.
``(C) Duration of schedule.--A schedule of contribution
rates provided by the plan sponsor and relied upon by
bargaining parties in negotiating a collective bargaining
agreement shall remain in effect for the duration of that
collective bargaining agreement.
``(7) Penalty if no funding improvement plan adopted.--A
failure of the plan sponsor to adopt a funding improvement
plan by the date specified in paragraph (1)(A) shall be
treated for purposes of section 502(c)(2) as a failure or
refusal by the plan administrator to file the annual report
required to be filed with the Secretary under section
101(b)(4).
``(8) Funding plan adoption period.--For purposes of this
section, the term `funding plan adoption period' means the
period beginning on the date of the certification under
subsection (b)(3)(A) for the initial determination year and
ending on the day before the first day of the funding
improvement period.
``(d) Rules for Operation of Plan During Adoption and
Improvement Periods; Failure to Meet Requirements.--
``(1) Special rules for plan adoption period.--During the
plan adoption period--
``(A) the plan sponsor may not accept a collective
bargaining agreement or participation agreement with respect
to the multiemployer plan that provides for--
``(i) a reduction in the level of contributions for any
participants,
``(ii) a suspension of contributions with respect to any
period of service, or
``(iii) any new direct or indirect exclusion of younger or
newly hired employees from plan participation,
``(B) no amendment of the plan 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 may be adopted unless the amendment is
required as a condition of qualification under part I of
subchapter D of chapter 1 of the Internal Revenue Code of
1986 or to comply with other applicable law, and
``(C) in the case of a plan in seriously endangered status,
the plan sponsor shall take all reasonable actions which are
consistent with the terms of the plan and applicable law and
which are expected, based on reasonable assumptions, to
achieve--
``(i) an increase in the plan's funded percentage, and
``(ii) postponement of an accumulated funding deficiency
for at least 1 additional plan year.
Actions under subparagraph (C) include applications for
extensions of amortization periods under section 304(d), use
of the shortfall funding method in making funding standard
account computations, amendments to the plan's benefit
structure, reductions in future benefit accruals, and other
reasonable actions consistent with the terms of the plan and
applicable law.
``(2) Compliance with funding improvement plan.--
``(A) In general.--A plan may not be amended after the date
of the adoption of a funding improvement plan under
subsection (c) so as to be inconsistent with the funding
improvement plan.
``(B) No reduction in contributions.--A plan sponsor may
not during any funding improvement period accept a collective
bargaining agreement or participation agreement with respect
to the multiemployer plan that provides for--
``(i) a reduction in the level of contributions for any
participants,
``(ii) a suspension of contributions with respect to any
period of service, or
``(iii) any new direct or indirect exclusion of younger or
newly hired employees from plan participation.
``(C) Special rules for benefit increases.--A plan may not
be amended after the date of the adoption of a funding
improvement plan under subsection (c) so as to increase
benefits, including future benefit accruals, unless--
``(i) in the case of a plan in seriously endangered status,
the plan actuary certifies that, after taking into account
the benefit increase, the plan is still reasonably expected
to meet the requirements under subsection (c)(3) in
accordance with the schedule contemplated in the funding
improvement plan, and
``(ii) in the case of a plan not in seriously endangered
status, the actuary certifies that such increase is paid for
out of contributions not required by the funding improvement
plan to meet the requirements under subsection (c)(3) in
accordance with the schedule contemplated in the funding
improvement plan.
``(3) Failure to meet requirements.--
``(A) In general.--Notwithstanding section 4971(g) of the
Internal Revenue Code of 1986, if a plan fails to meet the
requirements of subsection (c)(3) by the end of the funding
improvement period, the plan shall be treated as having an
accumulated funding deficiency for purposes of section 4971
of such Code for the last plan year in such period (and each
succeeding plan year until such requirements are met) in an
amount equal to the greater of the amount of the
contributions necessary to meet such requirements or the
amount of such accumulated funding deficiency without regard
to this paragraph.
``(B) Waiver.--In the case of a failure described in
subparagraph (A) which is due to reasonable cause and not to
willful neglect, the Secretary of the Treasury may waive part
or all of the tax imposed by section 4971 of such Code to the
extent that the payment of such tax would be excessive or
otherwise inequitable relative to the failure involved.
``(e) Rehabilitation Plan Must Be Adopted for Multiemployer
Plans in Critical Status.--
``(1) In general.--In any case in which a multiemployer
plan is in critical status for a plan year, the plan sponsor,
in accordance with this subsection--
``(A) shall adopt a rehabilitation plan not later than 240
days following the required date for the actuarial
certification of critical status under subsection (b)(3)(A),
and
``(B) within 30 days after the adoption of the
rehabilitation plan--
``(i) shall provide to the bargaining parties 1 or more
schedules showing revised benefit structures, revised
contribution structures, or both, which, if adopted, may
reasonably be expected to enable the multiemployer plan to
emerge from critical status in accordance with the
rehabilitation plan, and
[[Page H11781]]
``(ii) may, if the plan sponsor deems appropriate, prepare
and provide the bargaining parties with additional
information relating to contribution rates or benefit
reductions, alternative schedules, or other information
relevant to emerging from critical status in accordance with
the rehabilitation plan.
The schedule or schedules described in subparagraph (B)(i)
shall reflect reductions in future benefit accruals and
increases in contributions that the plan sponsor determines
are reasonably necessary to emerge from critical status. One
schedule shall be designated as the default schedule and such
schedule shall assume that there are no increases in
contributions under the plan other than the increases
necessary to emerge from critical status after future benefit
accruals and other benefits (other than benefits the
reduction or elimination of which are not permitted under
section 204(g)) have been reduced to the maximum extent
permitted by law.
``(2) Exception for years after process begins.--Paragraph
(1) shall not apply to a plan year if such year is in a
rehabilitation plan adoption period or rehabilitation period
by reason of the plan being in critical status for a
preceding plan year. For purposes of this section, such
preceding plan year shall be the initial critical year with
respect to the rehabilitation plan to which it relates.
``(3) Rehabilitation plan.--For purposes of this section--
``(A) In general.--A rehabilitation plan is a plan which
consists of--
``(i) actions which will enable, under reasonable actuarial
assumptions, the plan to cease to be in critical status by
the end of the rehabilitation period and may include
reductions in plan expenditures (including plan mergers and
consolidations), reductions in future benefit accruals or
increases in contributions, if agreed to by the bargaining
parties, or any combination of such actions, or
``(ii) if the plan sponsor determines that, based on
reasonable actuarial assumptions and upon exhaustion of all
reasonable measures, the plan can not reasonably be expected
to emerge from critical status by the end of the
rehabilitation period, reasonable measures to emerge from
critical status at a later time or to forestall possible
insolvency (within the meaning of section 4245).
Such plan shall include the schedules required to be provided
under paragraph (1)(B)(i). If clause (ii) applies, such plan
shall set forth the alternatives considered, explain why the
plan is not reasonably expected to emerge from critical
status by the end of the rehabilitation period, and specify
when, if ever, the plan is expected to emerge from critical
status in accordance with the rehabilitation plan.
``(B) Updates to rehabilitation plan and schedules.--
``(i) Rehabilitation plan.--The plan sponsor shall annually
update the rehabilitation plan and shall file the update with
the plan's annual report under section 104.
``(ii) Schedules.--The plan sponsor may periodically update
any schedule of contribution rates provided under this
subsection to reflect the experience of the plan, except that
the schedule or schedules described in paragraph (1)(B)(i)
shall be updated at least once every 3 years.
``(iii) Duration of schedule.--A schedule of contribution
rates provided by the plan sponsor and relied upon by
bargaining parties in negotiating a collective bargaining
agreement shall remain in effect for the duration of that
collective bargaining agreement.
``(C) Default schedule.--If the collective bargaining
agreement providing for contributions under a multiemployer
plan that was in effect at the time the plan entered critical
status expires and, after receiving a schedule from the plan
sponsor under paragraph (1)(B)(i), the bargaining parties
have not adopted a collective bargaining agreement with terms
consistent with such a schedule, the default schedule
described in the last sentence of paragraph (1) shall go into
effect with respect to those bargaining parties.
``(4) Rehabilitation period.--For purposes of this
section--
``(A) In general.--The rehabilitation period for a plan in
critical status is the 10-year period beginning on the first
day of the first plan year of the multiemployer plan
following the earlier of--
``(i) the second anniversary of the date of the adoption of
the rehabilitation plan, or
``(ii) the expiration of the collective bargaining
agreements in effect on the date of the due date for the
actuarial certification of critical status for the initial
critical year under subsection (a)(1) and covering, as of
such date at least 75 percent of the active participants in
such multiemployer plan.
If a plan emerges from critical status as provided under
subparagraph (B) before the end of such 10-year period, the
rehabilitation period shall end with the plan year preceding
the plan year for which the determination under subparagraph
(B) is made.
``(B) Emergence.--A plan in critical status shall remain in
such status until a plan year for which the plan actuary
certifies, in accordance with subsection (b)(3)(A), that the
plan is not projected to have an accumulated funding
deficiency for the plan year or any of the 9 succeeding plan
years, without regard to use of the shortfall method or any
extension of amortization periods under section 304(d).
``(5) Penalty if no rehabilitation plan adopted.--A failure
of a plan sponsor to adopt a rehabilitation plan by the date
specified in paragraph (1)(A) shall be treated for purposes
of section 502(c)(2) as a failure or refusal by the plan
administrator to file the annual report required to be filed
with the Secretary under section 101(b)(4).
``(6) Rehabilitation plan adoption period.--For purposes of
this section, the term `rehabilitation plan adoption period'
means the period beginning on the date of the certification
under subsection (b)(3)(A) for the initial critical year and
ending on the day before the first day of the rehabilitation
period.
``(7) Limitation on reduction in rates of future
accruals.--Any reduction in the rate of future accruals under
any schedule described in paragraph (1)(B)(i) shall not
reduce the rate of future accruals below--
``(A) a monthly benefit (payable as a single life annuity
commencing at the participant's normal retirement age) equal
to 1 percent of the contributions required to be made with
respect to a participant, or the equivalent standard accrual
rate for a participant or group of participants under the
collective bargaining agreements in effect as of the first
day of the initial critical year, or
``(B) if lower, the accrual rate under the plan on such
first day.
The equivalent standard accrual rate shall be determined by
the plan sponsor based on the standard or average
contribution base units which the plan sponsor determines to
be representative for active participants and such other
factors as the plan sponsor determines to be relevant.
Nothing in this paragraph shall be construed as limiting the
ability of the plan sponsor to prepare and provide the
bargaining parties with alternative schedules to the default
schedule that established lower or higher accrual and
contribution rates than the rates otherwise described in this
paragraph.
``(8) Employer impact.--For the purposes of this section,
the plan sponsor shall consider the impact of the
rehabilitation plan and contribution schedules authorized by
this section on bargaining parties with fewer than 500
employees and shall implement the plan in a manner that
encourages their continued participation in the plan and
minimizes financial harm to employers and their workers.
``(f) Rules for Operation of Plan During Adoption and
Rehabilitation Period.--
``(1) Compliance with rehabilitation plan.--
``(A) In general.--A plan may not be amended after the date
of the adoption of a rehabilitation plan under subsection (e)
so as to be inconsistent with the rehabilitation plan.
``(B) Special rules for benefit increases.--A plan may not
be amended after the date of the adoption of a rehabilitation
plan under subsection (e) so as to increase benefits,
including future benefit accruals, unless the plan actuary
certifies that such increase is paid for out of additional
contributions not contemplated by the rehabilitation plan,
and, after taking into account the benefit increase, the
multiemployer plan still is reasonably expected to emerge
from critical status by the end of the rehabilitation period
on the schedule contemplated in the rehabilitation plan.
``(2) Restriction on lump sums and similar benefits.--
``(A) In general.--Effective on the date the notice of
certification of the plan's critical status for the initial
critical year under subsection (b)(3)(D) is sent, and
notwithstanding section 204(g), the plan shall not pay--
``(i) any payment, in excess of the monthly amount paid
under a single life annuity (plus any social security
supplements described in the last sentence of section
204(b)(1)(G)),
``(ii) any payment for the purchase of an irrevocable
commitment from an insurer to pay benefits, and
``(iii) any other payment specified by the Secretary of the
Treasury by regulations.
``(B) Exception.--Subparagraph (A) shall not apply to a
benefit which under section 203(e) may be immediately
distributed without the consent of the participant or to any
makeup payment in the case of a retroactive annuity starting
date or any similar payment of benefits owed with respect to
a prior period.
``(3) Adjustments disregarded in withdrawal liability
determination.--Any benefit reductions under this subsection
shall be disregarded in determining a plan's unfunded vested
benefits for purposes of determining an employer's withdrawal
liability under section 4201.
``(4) Special rules for plan adoption period.--During the
rehabilitation plan adoption period--
``(A) the plan sponsor may not accept a collective
bargaining agreement or participation agreement with respect
to the multiemployer plan that provides for--
``(i) a reduction in the level of contributions for any
participants,
``(ii) a suspension of contributions with respect to any
period of service, or
``(iii) any new direct or indirect exclusion of younger or
newly hired employees from plan participation, and
``(B) no amendment of the plan 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 may be adopted unless the amendment is
required as a condition of
[[Page H11782]]
qualification under part I of subchapter D of chapter 1 of
the Internal Revenue Code of 1986 or to comply with other
applicable law.
``(5) Failure to meet requirements.--
``(A) In general.--Notwithstanding section 4971(g) of the
Internal Revenue Code of 1986, if a plan--
``(i) fails to meet the requirements of subsection (e) by
the end of the rehabilitation period, or
``(ii) has received a certification under subsection
(b)(3)(A)(ii) for 3 consecutive plan years that the plan is
not making the scheduled progress in meeting its requirements
under the rehabilitation plan,
the plan shall be treated as having an accumulated funding
deficiency for purposes of section 4971 of such Code for the
last plan year in such period (and each succeeding plan year
until such requirements are met) in an amount equal to the
greater of the amount of the contributions necessary to meet
such requirements or the amount of such accumulated funding
deficiency without regard to this paragraph.
``(B) Waiver.--In the case of a failure described in
subparagraph (A) which is due to reasonable cause and not to
willful neglect, the Secretary of the Treasury may waive part
or all of the tax imposed by section 4971 of such Code to the
extent that the payment of such tax would be excessive or
otherwise inequitable relative to the failure involved.
``(g) Expedited Resolution of Plan Sponsor Decisions.--If,
within 60 days of the due date for adoption of a funding
improvement plan under subsection (c) or a rehabilitation
plan under subsection (e), the plan sponsor of a plan in
endangered status or a plan in critical status has not agreed
on a funding improvement plan or rehabilitation plan, then
any member of the board or group that constitutes the plan
sponsor may require that the plan sponsor enter into an
expedited dispute resolution procedure for the development
and adoption of a funding improvement plan or rehabilitation
plan.
``(h) Nonbargained Participation.--
``(1) Both bargained and nonbargained employee-
participants.--In the case of an employer that contributes to
a multiemployer plan with respect to both employees who are
covered by one or more collective bargaining agreements and
to employees who are not so covered, if the plan is in
endangered status or in critical status, benefits of and
contributions for the nonbargained employees, including
surcharges on those contributions, shall be determined as if
those nonbargained employees were covered under the first to
expire of the employer's collective bargaining agreements in
effect when the plan entered endangered or critical status.
``(2) Nonbargained employees only.--In the case of an
employer that contributes to a multiemployer plan only with
respect to employees who are not covered by a collective
bargaining agreement, this section shall be applied as if the
employer were the bargaining parties, and its participation
agreement with the plan was a collective bargaining agreement
with a term ending on the first day of the plan year
beginning after the employer is provided the schedule or
schedules described in subsections (c) and (e).
``(3) Employees covered by a collective bargaining
agreement.--The determination as to whether an employee
covered by a collective bargaining agreement for purposes of
this section shall be made without regard to the special rule
in Treasury Regulation section 1.410(b)-6(d)(ii)(D).
``(i) Definitions; Actuarial Method.--For purposes of this
section--
``(1) Bargaining party.--The term `bargaining party'
means--
``(A)(i) except as provided in clause (ii), an employer who
has an obligation to contribute under the plan; or
``(ii) in the case of a plan described under section 404(c)
of the Internal Revenue Code of 1986, or a continuation of
such a plan, the association of employers that is the
employee settlor of the plan; and
``(B) an employee organization which, for purposes of
collective bargaining, represents plan participants employed
by an employer who has an obligation to contribute under the
plan.
``(2) Funded percentage.--The term `funded percentage'
means the percentage equal to a fraction--
``(A) the numerator of which is the value of the plan's
assets, as determined under section 304(c)(2), and
``(B) the denominator of which is the accrued liability of
the plan, determined using actuarial assumptions described in
section 304(c)(3).
``(3) Accumulated funding deficiency.--The term
`accumulated funding deficiency' has the meaning given such
term in section 304(a).
``(4) Active participant.--The term `active participant'
means, in connection with a multiemployer plan, a participant
who is in covered service under the plan.
``(5) Inactive participant.--The term `inactive
participant' means, in connection with a multiemployer plan,
a participant, or the beneficiary or alternate payee of a
participant, who--
``(A) is not in covered service under the plan, and
``(B) is in pay status under the plan or has a
nonforfeitable right to benefits under the plan.
``(6) Pay status.--A person is in pay status under a
multiemployer plan if--
``(A) at any time during the current plan year, such person
is a participant or beneficiary under the plan and is paid an
early, late, normal, or disability retirement benefit under
the plan (or a death benefit under the plan related to a
retirement benefit), or
``(B) to the extent provided in regulations of the
Secretary of the Treasury, such person is entitled to such a
benefit under the plan.
``(7) Obligation to contribute.--The term `obligation to
contribute' has the meaning given such term under section
4212(a).
``(8) Actuarial method.--Notwithstanding any other
provision of this section, the actuary's determinations with
respect to a plan's normal cost, actuarial accrued liability,
and improvements in a plan's funded percentage under this
section shall be based upon the unit credit funding method
(whether or not that method is used for the plan's actuarial
valuation).
``(9) Plan sponsor.--In the case of a plan described under
section 404(c) of the Internal Revenue Code of 1986, or a
continuation of such a plan, the term `plan sponsor' means
the bargaining parties described under paragraph (1).''.
(b) Cause of Action to Compel Adoption of Funding
Improvement or Rehabilitation Plan.--Section 502(a) of the
Employee Retirement Income Security Act of 1974 is amended by
striking ``or'' at the end of paragraph (8), by striking the
period at the end of paragraph (9) and inserting ``; or'' and
by adding at the end the following:
``(10) in the case of a multiemployer plan that has been
certified by the actuary to be in endangered or critical
status under section 305, if the plan sponsor has not adopted
a funding improvement or rehabilitation plan under subsection
(c) or (e) of that section by the deadline established in
that section, by an employer that has an obligation to
contribute with respect to the multiemployer plan or an
employee organization that represents active participants in
the multiemployer plan, for an order compelling the plan
sponsor to adopt a funding improvement or rehabilitation
plan.''.
(c) 4971 Excise Tax Inapplicable.--Section 4971 of the
Internal Revenue Code of 1986 is amended by redesignating
subsection (g) as subsection (h), and inserting after
subsection (f) the following:
``(g) Multiemployer Plans in Critical Status.--No tax shall
be imposed under this section for a taxable year with respect
to a multiemployer plan if, for the plan years ending with or
within the taxable year, the plan is in critical status
pursuant to section 305 of the Employee Retirement Income
Security Act of 1974. This subsection shall only apply if the
plan adopts a rehabilitation plan in accordance with section
305(e) of such Act and complies with such rehabilitation plan
(and any modifications of the plan) and shall not apply if an
excise tax is required to be imposed under this section by
reason of a violation of such section 305.''.
(d) No Additional Contributions Required.--
(1) Section 302(b) of the Employee Retirement Income
Security Act of 1974, as amended by this Act , is amended by
adding at the end the following new paragraph:
``(3) Multiemployer plans in critical status.--Subparagraph
(A) shall not apply in the case of a multiemployer plan for
any plan year in which the plan is in critical status
pursuant to section 305. This paragraph shall only apply if
the plan adopts a rehabilitation plan in accordance with
section 305(e) and complies with such rehabilitation plan
(and any modifications of the plan).''.
(2) Section 412(c) of the Internal Revenue Code of 1986, as
amended by this Act, is amended by adding at the end the
following new paragraph:
``(3) Multiemployer plans in critical status.--Subparagraph
(A) shall not apply in the case of a multiemployer plan for
any plan year in which the plan is in critical status
pursuant to section 305 of the Employee Retirement Income
Security Act of 1974. This paragraph shall only apply if the
plan adopts a rehabilitation plan in accordance with section
305(e) of such Act and complies with such rehabilitation plan
(and any modifications of the plan).''.
(e) Conforming Amendment.--The table of contents in section
1 of such Act (as amended by the preceding provisions of this
Act) is amended by inserting after the item relating to
section 304 the following new item:
``Sec. 305. Additional funding rules for multiemployer plans in
endangered status or critical status.''.
(f) Effective Dates.--
(1) In general.--The amendment made by this section shall
apply with respect to plan years beginning after 2006.
(2) Special rule for certain restored benefits.--In the
case of a multiemployer plan--
(A) with respect to which benefits were reduced pursuant to
a plan amendment adopted on or after January 1, 2002, and
before June 30, 2005, and
(B) which, pursuant to the plan document, the trust
agreement, or a formal written communication from the plan
sponsor to participants provided before June 30, 2005,
provided for the restoration of such benefits,
the amendments made by this section shall not apply to such
benefit restorations to the extent that any restriction on
the providing or accrual of such benefits would otherwise
apply by reason of such amendments.
SEC. 503. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER
PLANS.
(a) Advance Determination of Impending Insolvency Over 5
Years.--Section
[[Page H11783]]
4245(d)(1) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1426(d)(1)) is amended--
(1) by striking ``3 plan years'' the second place it
appears and inserting ``5 plan years''; and
(2) by adding at the end the following new sentence: ``If
the plan sponsor makes such a determination that the plan
will be insolvent in any of the next 5 plan years, the plan
sponsor shall make the comparison under this paragraph at
least annually until the plan sponsor makes a determination
that the plan will not be insolvent in any of the next 5 plan
years.''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to determinations made in plan years
beginning after 2006.
SEC. 504. SPECIAL RULE FOR CERTAIN BENEFITS FUNDED UNDER AN
AGREEMENT APPROVED BY THE PENSION BENEFIT
GUARANTY CORPORATION.
In the case of a multiemployer plan that is a party to an
agreement that was approved by the Pension Benefit Guaranty
Corporation prior to June 30, 2005, and that--
(1) increases benefits, and
(2) provides for special withdrawal liability rules under
section 4203(f) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1383),
the amendments made by sections 201, 202, 211, and 212 of
this Act shall not apply to the benefit increases under any
plan amendment adopted prior to June 30, 2005, that are
funded pursuant to such agreement if the plan is funded in
compliance with such agreement (and any amendments thereto).
SEC. 505. WITHDRAWAL LIABILITY REFORMS.
(a) Repeal of Limitation on Withdrawal Liability of
Insolvent Employers.--
(1) In general.--Subsections (b) and (d) of section 4225 of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1405) are repealed.
(2) Conforming amendments.--Subsections (c) and (e) of
section 4225 of such Act are redesignated as subsections (b)
and (c), respectively.
(3) Effective date.--The amendments made by this section
shall apply with respect to sales occurring on or after
January 1, 2006.
(b) Withdrawal Liability Continues If Work Contracted
Out.--
(1) In general.--Clause (i) of section 4205(b)(2)(A) of
such Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting
``or to an entity or entities owned or controlled by the
employer'' after ``to another location''.
(2) Effective date.--The amendment made by this subsection
shall apply with respect to work transferred on or after the
date of the enactment of this Act.
(c) Application of Forgiveness Rule to Plans Primarily
Covering Employees in the Building and Construction.--
(1) In general.--Section 4210(b) of such Act (29 U.S.C.
1390(b)) is amended--
(A) by striking paragraph (1); and
(B) by redesignating paragraphs (2) through (4) as
paragraphs (1) through (3), respectively.
(2) Effective date.--The amendments made by this subsection
shall apply with respect to plan withdrawals occurring on or
after January 1, 2006.
SEC. 506. SPECIAL RULES FOR MULTIPLE EMPLOYER PLANS OF
CERTAIN COOPERATIVES.
(a) General Rule.--Except as provided in this section, if a
plan in existence on July 26, 2005, was an eligible
cooperative plan for its plan year which includes such date,
the amendments made by this subtitle and subtitle B shall not
apply to plan years beginning before the earlier of--
(1) the first plan year for which the plan ceases to be an
eligible cooperative plan, or
(2) January 1, 2017.
(b) Eligible Cooperative Plans.--For purposes of this
section, the term ``eligible cooperative plan'' means a plan
which is maintained by more than 1 employer and at least 85
percent of the employers are--
(1) rural cooperatives (as defined in section 401(k)(7)(B)
of the Internal Revenue Code of 1986 without regard to clause
(iv) thereof),
(2) rural telephone cooperative associations described in
section 3(40)(B)(v) of the Employee Retirement Income
Security Act of 1974 which is not described in paragraph (1),
or
(3) organizations described in section 1381(a) of such Code
more than 50 percent of the ownership or capital and profits
interests of which are held--
(A) by producers of agricultural products, or
(B) organizations described in section 1381(a) of such Code
meeting the requirements of subparagraph (A).
PART II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
SEC. 511. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS.
(a) In General.--Subpart A of part III of subchapter D of
chapter 1 of the Internal Revenue Code of 1986 (as added by
this Act) is amended by inserting after section 430 the
following new section:
``SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER
PLANS.
``(a) In General.--For purposes of section 412, the
accumulated funding deficiency of a multiemployer plan for
any plan year is--
``(1) except as provided in paragraph (2), the amount,
determined as of the end of the plan year, equal to the
excess (if any) of the total charges to the funding standard
account of the plan for all plan years (beginning with the
first plan year for which this part applies to the plan) over
the total credits to such account for such years, and
``(2) if the multiemployer plan is in reorganization for
any plan year, the accumulated funding deficiency of the plan
determined under section 4243 of the Employee Retirement
Income Security Act of 1974.
``(b) Funding Standard Account.--
``(1) Account required.--Each multiemployer plan to which
this part applies shall establish and maintain a funding
standard account. Such account shall be credited and charged
solely as provided in this section.
``(2) Charges to account.--For a plan year, the funding
standard account shall be charged with the sum of--
``(A) the normal cost of the plan for the plan year,
``(B) the amounts necessary to amortize in equal annual
installments (until fully amortized)--
``(i) separately, with respect to each plan year, the net
increase (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(ii) separately, with respect to each plan year, the net
experience loss (if any) under the plan, over a period of 15
plan years, and
``(iii) separately, with respect to each plan year, the net
loss (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount necessary to amortize each waived funding
deficiency (within the meaning of section 412(d)(3)) for each
prior plan year in equal annual installments (until fully
amortized) over a period of 15 plan years,
``(D) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 5 plan
years any amount credited to the funding standard account
under section 412(b)(3)(D) (as in effect on the day before
the date of the enactment of the Pension Security and
Transparency Act of 2005), and
``(E) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 20
years the contributions which would be required to be made
under the plan but for the provisions of section
412(c)(7)(A)(i)(I) (as in effect on the day before the date
of the enactment of the Pension Security and Transparency Act
of 2005).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the employer to
or under the plan for the plan year,
``(B) the amount necessary to amortize in equal annual
installments (until fully amortized)--
``(i) separately, with respect to each plan year, the net
decrease (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 15 plan years,
``(ii) separately, with respect to each plan year, the net
experience gain (if any) under the plan, over a period of 15
plan years, and
``(iii) separately, with respect to each plan year, the net
gain (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 15 plan years,
``(C) the amount of the waived funding deficiency (within
the meaning of section 412(d)(3)) for the plan year, and
``(D) in the case of a plan year for which the accumulated
funding deficiency is determined under the funding standard
account if such plan year follows a plan year for which such
deficiency was determined under the alternative minimum
funding standard under section 412(g) (as in effect on the
day before the date of the enactment of the Pension Security
and Transparency Act of 2005), the excess (if any) of any
debit balance in the funding standard account (determined
without regard to this subparagraph) over any debit balance
in the alternative minimum funding standard account.
``(4) Special rule for amounts first amortized to plan
years before 2007.--In the case of any amount amortized under
section 412(b) (as in effect on the day before the date of
the enactment of the Pension Security and Transparency Act of
2005) over any period beginning with a plan year beginning
before 2007, in lieu of the amortization described in
paragraphs (2)(B) and (3)(B), such amount shall continue to
be amortized under such section as so in effect.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations prescribed by the Secretary, amounts
required to be amortized under paragraph (2) or paragraph
(3), as the case may be--
``(A) may be combined into one amount under such paragraph
to be amortized over a period determined on the basis of the
remaining amortization period for all items entering into
such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the resulting
amount to be amortized over a period determined on the basis
of the remaining amortization periods for all items entering
into whichever of the two amounts being offset is the
greater.
``(6) Interest.--The funding standard account (and items
therein) shall be charged or credited (as determined under
regulations prescribed by the Secretary of the Treasury) with
interest at the appropriate rate consistent with the rate or
rates of interest used under the plan to determine costs.
[[Page H11784]]
``(7) Special rules relating to charges and credits to
funding standard account.--For purposes of this part--
``(A) Withdrawal liability.--Any amount received by a
multiemployer plan in payment of all or part of an employer's
withdrawal liability under part 1 of subtitle E of title IV
of the Employee Retirement Income Security Act of 1974 shall
be considered an amount contributed by the employer to or
under the plan. The Secretary may prescribe by regulation
additional charges and credits to a multiemployer plan's
funding standard account to the extent necessary to prevent
withdrawal liability payments from being unduly reflected as
advance funding for plan liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in reorganization in
the immediately preceding plan year, any balance in the
funding standard account at the close of such immediately
preceding plan year--
``(i) shall be eliminated by an offsetting credit or charge
(as the case may be), but
``(ii) shall be taken into account in subsequent plan years
by being amortized in equal annual installments (until fully
amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any
accumulated funding deficiency under section 4243(a) of such
Act as of the end of the last plan year that the plan was in
reorganization.
``(C) Plan payments to supplemental program or withdrawal
liability payment fund.--Any amount paid by a plan during a
plan year to the Pension Benefit Guaranty Corporation
pursuant to section 4222 of such Act or to a fund exempt
under section 501(c)(22) pursuant to section 4223 of such Act
shall reduce the amount of contributions considered received
by the plan for the plan year.
``(D) Interim withdrawal liability payments.--Any amount
paid by an employer pending a final determination of the
employer's withdrawal liability under part 1 of subtitle E of
title IV of such Act and subsequently refunded to the
employer by the plan shall be charged to the funding standard
account in accordance with regulations prescribed by the
Secretary.
``(E) Election for deferral of charge for portion of net
experience loss.--If an election is in effect under section
412(b)(7)(F) (as in effect on the day before the date of the
enactment of the Pension Security and Transparency Act of
2005) for any plan year, the funding standard account shall
be charged in the plan year to which the portion of the net
experience loss deferred by such election was deferred with
the amount so deferred (and paragraph (2)(B)(ii) shall not
apply to the amount so charged).
``(F) Financial assistance.--Any amount of any financial
assistance from the Pension Benefit Guaranty Corporation to
any plan, and any repayment of such amount, shall be taken
into account under this section and section 412 in such
manner as is determined by the Secretary.
``(G) Short-term benefits.--To the extent that any plan
amendment increases the unfunded past service liability under
the plan by reason of an increase in benefits which are
payable under the terms of the plan for a period that does
not exceed 14 years from the effective date of the amendment,
paragraph (2)(B)(i) shall be applied separately with respect
to such increase in unfunded past service liability by
substituting the number of years of the period during which
such benefits are payable for `15'.
``(c) Additional Rules.--
``(1) Determinations to be made under funding method.--For
purposes of this part, normal costs, accrued liability, past
service liabilities, and experience gains and losses shall be
determined under the funding method used to determine costs
under the plan.
``(2) Valuation of assets.--
``(A) In general.--For purposes of this part, the value of
the plan's assets shall be determined on the basis of any
reasonable actuarial method of valuation which takes into
account fair market value and which is permitted under
regulations prescribed by the Secretary.
``(B) Election with respect to bonds.--The value of a bond
or other evidence of indebtedness which is not in default as
to principal or interest may, at the election of the plan
administrator, be determined on an amortized basis running
from initial cost at purchase to par value at maturity or
earliest call date. Any election under this subparagraph
shall be made at such time and in such manner as the
Secretary shall by regulations provide, shall apply to all
such evidences of indebtedness, and may be revoked only with
the consent of the Secretary.
``(3) Actuarial assumptions must be reasonable.--For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be
determined on the basis of actuarial assumptions and
methods--
``(A) each of which is reasonable (taking into account the
experience of the plan and reasonable expectations), and
``(B) which, in combination, offer the actuary's best
estimate of anticipated experience under the plan.
``(4) Treatment of certain changes as experience gain or
loss.--For purposes of this section, if--
``(A) a change in benefits under the Social Security Act or
in other retirement benefits created under Federal or State
law, or
``(B) a change in the definition of the term `wages' under
section 3121, or a change in the amount of such wages taken
into account under regulations prescribed for purposes of
section 401(a)(5),
results in an increase or decrease in accrued liability under
a plan, such increase or decrease shall be treated as an
experience loss or gain.
``(5) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency in excess of the full funding
limitation--
``(A) the funding standard account shall be credited with
the amount of such excess, and
``(B) all amounts described in subparagraphs (B), (C), and
(D) of subsection (b) (2) and subparagraph (B) of subsection
(b)(3) which are required to be amortized shall be considered
fully amortized for purposes of such subparagraphs.
``(6) Full-funding limitation.--
``(A) In general.--For purposes of paragraph (5), the term
`full-funding limitation' means the excess (if any) of--
``(i) the accrued liability (including normal cost) under
the plan (determined under the entry age normal funding
method if such accrued liability cannot be directly
calculated under the funding method used for the plan), over
``(ii) the lesser of--
``(I) the fair market value of the plan's assets, or
``(II) the value of such assets determined under paragraph
(2).
``(B) Minimum amount.--
``(i) In general.--In no event shall the full-funding
limitation determined under subparagraph (A) be less than the
excess (if any) of--
``(I) 90 percent of the current liability of the plan
(including the expected increase in current liability due to
benefits accruing during the plan year), over
``(II) the value of the plan's assets determined under
paragraph (2).
``(ii) Assets.--For purposes of clause (i), assets shall
not be reduced by any credit balance in the funding standard
account.
``(C) Full funding limitation.--For purposes of this
paragraph, unless otherwise provided by the plan, the accrued
liability under a multiemployer plan shall not include
benefits which are not nonforfeitable under the plan after
the termination of the plan (taking into consideration
section 411(d)(3)).
``(D) Current liability.--For purposes of this paragraph--
``(i) In general.--The term `current liability' means all
liabilities to employees and their beneficiaries under the
plan.
``(ii) Treatment of unpredictable contingent event
benefits.--For purposes of clause (i), any benefit contingent
on an event other than--
``(I) age, service, compensation, death, or disability, or
``(II) an event which is reasonably and reliably
predictable (as determined by the Secretary),
shall not be taken into account until the event on which the
benefit is contingent occurs.
``(iii) Interest rate used.--The rate of interest used to
determine current liability under this paragraph shall be the
rate of interest determined under subparagraph (E).
``(iv) Mortality tables.--
``(I) Commissioners' standard table.--In the case of plan
years beginning before the first plan year to which the first
tables prescribed under subclause (II) apply, the mortality
table used in determining current liability under this
paragraph shall be the table prescribed by the Secretary
which is based on the prevailing commissioners' standard
table (described in section 807(d)(5)(A)) used to determine
reserves for group annuity contracts issued on January 1,
1993.
``(II) Secretarial authority.--The Secretary may by
regulation prescribe for plan years beginning after December
31, 1999, mortality tables to be used in determining current
liability under this subsection. Such tables shall be based
upon the actual experience of pension plans and projected
trends in such experience. In prescribing such tables, the
Secretary shall take into account results of available
independent studies of mortality of individuals covered by
pension plans.
``(v) Separate mortality tables for the disabled.--
Notwithstanding clause (iv)--
``(I) In general.--The Secretary shall establish mortality
tables which may be used (in lieu of the tables under clause
(iv)) to determine current liability under this subsection
for individuals who are entitled to benefits under the plan
on account of disability. The Secretary shall establish
separate tables for individuals whose disabilities occur in
plan years beginning before January 1, 1995, and for
individuals whose disabilities occur in plan years beginning
on or after such date.
``(II) Special rule for disabilities occurring after
1994.--In the case of disabilities occurring in plan years
beginning after December 31, 1994, the tables under subclause
(I) shall apply only with respect to individuals described in
such subclause who are disabled within the meaning of title
II of the Social Security Act and the regulations thereunder.
[[Page H11785]]
``(vi) Periodic review.--The Secretary shall periodically
(at least every 5 years) review any tables in effect under
this subparagraph and shall, to the extent such Secretary
determines necessary, by regulation update the tables to
reflect the actual experience of pension plans and projected
trends in such experience.
``(E) Required change of interest rate.--For purposes of
determining a plan's current liability for purposes of this
paragraph--
``(i) In general.--If any rate of interest used under the
plan under subsection (b)(6) to determine cost is not within
the permissible range, the plan shall establish a new rate of
interest within the permissible range.
``(ii) Permissible range.--For purposes of this
subparagraph--
``(I) In general.--Except as provided in subclause (II),
the term `permissible range' means a rate of interest which
is not more than 5 percent above, and not more than 10
percent below, the weighted average of the rates of interest
on 30-year Treasury securities during the 4-year period
ending on the last day before the beginning of the plan year.
``(II) Secretarial authority.--If the Secretary finds that
the lowest rate of interest permissible under subclause (I)
is unreasonably high, the Secretary may prescribe a lower
rate of interest, except that such rate may not be less than
80 percent of the average rate determined under such
subclause.
``(iii) Assumptions.--Notwithstanding paragraph (3)(A), the
interest rate used under the plan shall be--
``(I) determined without taking into account the experience
of the plan and reasonable expectations, but
``(II) consistent with the assumptions which reflect the
purchase rates which would be used by insurance companies to
satisfy the liabilities under the plan.
``(7) Annual valuation.--
``(A) In general.--For purposes of this section, a
determination of experience gains and losses and a valuation
of the plan's liability shall be made not less frequently
than once every year, except that such determination shall be
made more frequently to the extent required in particular
cases under regulations prescribed by the Secretary.
``(B) Valuation date.--
``(i) Current year.--Except as provided in clause (ii), the
valuation referred to in subparagraph (A) shall be made as of
a date within the plan year to which the valuation refers or
within one month prior to the beginning of such year.
``(ii) Use of prior year valuation.--The valuation referred
to in subparagraph (A) may be made as of a date within the
plan year prior to the year to which the valuation refers if,
as of such date, the value of the assets of the plan are not
less than 100 percent of the plan's current liability (as
defined in paragraph (6)(D) without regard to clause (iv)
thereof).
``(iii) Adjustments.--Information under clause (ii) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
``(iv) Limitation.--A change in funding method to use a
prior year valuation, as provided in clause (ii), may not be
made unless as of the valuation date within the prior plan
year, the value of the assets of the plan are not less than
125 percent of the plan's current liability (as defined in
paragraph (6)(D) without regard to clause (iv) thereof).
``(8) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer after the last day of such plan year, but
not later than two and one-half months after such day, shall
be deemed to have been made on such last day. For purposes of
this subparagraph, such two and one-half month period may be
extended for not more than six months under regulations
prescribed by the Secretary.
``(d) Extension of Amortization Periods for Multiemployer
Plans.--
``(1) Automatic extension upon application by certain
plans.--
``(A) In general.--If the plan sponsor of a multiemployer
plan--
``(i) submits to the Secretary an application for an
extension of the period of years required to amortize any
unfunded liability described in any clause of subsection
(b)(2)(B) or described in subsection (b)(4), and
``(ii) includes with the application a certification by the
plan's actuary described in subparagraph (B),
the Secretary shall extend the amortization period for the
period of time (not in excess of 5 years) specified in the
application. Such extension shall be in addition to any
extension under paragraph (2).
``(B) Criteria.--A certification with respect to a
multiemployer plan is described in this subparagraph if the
plan's actuary certifies that, based on reasonable
assumptions--
``(i) absent the extension under subparagraph (A), the plan
would have an accumulated funding deficiency in the current
plan year or any of the 9 succeeding plan years,
``(ii) the plan sponsor has adopted a plan to improve the
plan's funding status,
``(iii) the plan is projected to have sufficient assets to
timely pay expected benefits and anticipated expenditures
over the amortization period as extended, and
``(iv) the notice required under paragraph (3)(A) has been
provided.
``(2) Additional extension.--
``(A) In general.--If the plan sponsor of a multiemployer
plan submits to the Secretary an application for an extension
of the period of years required to amortize any unfunded
liability described in any clause of subsection (b)(2)(B) or
described in subsection (b)(4), the Secretary may extend the
amortization period for a period of time (not in excess of 5
years) if the Secretary of the Treasury makes the
determination described in subparagraph (B). Such extension
shall be in addition to any extension under paragraph (1).
``(B) Determination.--The Secretary may grant an extension
under subparagraph (A) if the Secretary determines that--
``(i) such extension would carry out the purposes of this
Act and would provide adequate protection for participants
under the plan and their beneficiaries, and
``(ii) the failure to permit such extension would--
``(I) result in a substantial risk to the voluntary
continuation of the plan, or a substantial curtailment of
pension benefit levels or employee compensation, and
``(II) be adverse to the interests of plan participants in
the aggregate.
``(C) Action by secretary.--The Secretary shall act upon
any application for an extension under this paragraph within
180 days of the submission of such application. If the
Secretary rejects the application for an extension under this
paragraph, the Secretary shall provide notice to the plan
detailing the specific reasons for the rejection, including
references to the criteria set forth above.
``(3) Advance notice.--
``(A) In general.--The Secretary shall, before granting an
extension under this subsection, require each applicant to
provide evidence satisfactory to such Secretary that the
applicant has provided notice of the filing of the
application for such extension to each affected party (as
defined in section 4001(a)(21) of the Employee Retirement
Income Security Act of 1974) with respect to the affected
plan. Such notice shall include a description of the extent
to which the plan is funded for benefits which are guaranteed
under title IV of such Act and for benefit liabilities.
``(B) Consideration of relevant information.--The Secretary
shall consider any relevant information provided by a person
to whom notice was given under paragraph (1).''.
(b) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after 2006.
(2) Special rule for certain amortization extensions.--If
the Secretary of the Treasury grants an extension under
section 304 of the Employee Retirement Income Security Act of
1974 and section 412(e) of the Internal Revenue Code of 1986
with respect to any application filed with the Secretary of
the Treasury on or before June 30, 2005, the extension (and
any modification thereof) shall be applied and administered
under the rules of such sections as in effect before the
enactment of this Act, including the use of the rate of
interest determined under section 6621(b) of such Code.
SEC. 512. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN
ENDANGERED OR CRITICAL STATUS.
(a) In General.--Subpart A of part III of subchapter D of
chapter 1 of the Internal Revenue Code of 1986 (as amended by
this Act) is amended by inserting after section 431 the
following new section:
``SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS
IN ENDANGERED STATUS OR CRITICAL STATUS.
``(a) General Rule.--For purposes of this part, in the case
of a multiemployer plan--
``(1) if the plan is in endangered status--
``(A) the plan sponsor shall adopt and implement a funding
improvement plan in accordance with the requirements of
subsection (c), and
``(B) the requirements of subsection (d) shall apply during
the funding plan adoption period and the funding improvement
period, and
``(2) if the plan is in critical status--
``(A) the plan sponsor shall adopt and implement a
rehabilitation plan in accordance with the requirements of
subsection (e), and
``(B) the requirements of subsection (f) shall apply during
the rehabilitation plan adoption period and the
rehabilitation period.
``(b) Determination of Endangered and Critical Status.--For
purposes of this section--
``(1) Endangered status.--A multiemployer plan is in
endangered status for a plan year if, as determined by the
plan actuary under paragraph (3), the plan is not in critical
status for the plan year and either--
``(A) the plan's funded percentage for such plan year is
less than 80 percent, or
``(B) the plan has an accumulated funding deficiency for
such plan year, or is projected to have such an accumulated
funding deficiency for any of the 6 succeeding plan years,
taking into account any extension of amortization periods
under section 431(d).
For purposes of this section, a plan described in
subparagraph (B) shall be treated as in seriously endangered
status.
``(2) Critical status.--A multiemployer plan is in critical
status for a plan year if, as determined by the plan actuary
under paragraph (3), the plan is described in 1 or more of
the following subparagraphs as of the beginning of the plan
year:
``(A) A plan is described in this subparagraph if--
[[Page H11786]]
``(i) the funded percentage of the plan is less than 65
percent, and
``(ii) the sum of--
``(I) the market value of plan assets, plus
``(II) the present value of the reasonably anticipated
employer contributions for the current plan year and each of
the 5 succeeding plan years, assuming that the terms of all
collective bargaining agreements pursuant to which the plan
is maintained for the current plan year continue in effect
for succeeding plan years,
is less than the present value of all benefits projected to
be payable under the plan during the current plan year and
each of the 5 succeeding plan years (plus administrative
expenses for such plan years).
``(B) A plan is described in this subparagraph if--
``(i) the plan has an accumulated funding deficiency for
the current plan year, not taking into account any extension
of amortization periods under section 431(d), or
``(ii) the plan is projected to have an accumulated funding
deficiency for any of the 3 succeeding plan years (4
succeeding plan years if the funded percentage of the plan is
65 percent or less), not taking into account any extension of
amortization periods under section 431(d).
``(C) A plan is described in this subparagraph if--
``(i)(I) the plan's normal cost for the current plan year,
plus interest (determined at the rate used for determining
costs under the plan) for the current plan year on the amount
of unfunded benefit liabilities under the plan as of the last
date of the preceding plan year, exceeds
``(II) the present value of the reasonably anticipated
employer contributions for the current plan year,
``(ii) the present value of nonforfeitable benefits of
inactive participants is greater than the present value of
nonforfeitable benefits of active participants, and
``(iii) the plan has an accumulated funding deficiency for
the current plan year, or is projected to have such a
deficiency for any of the 4 succeeding plan years, not taking
into account any extension of amortization periods under
section 431(d).
``(D) A plan is described in this subparagraph if the sum
of--
``(i) the market value of plan assets, plus
``(ii) the present value of the reasonably anticipated
employer contributions for the current plan year and each of
the 4 succeeding plan years, assuming that the terms of all
collective bargaining agreements pursuant to which the plan
is maintained for the current plan year continue in effect
for succeeding plan years,
is less than the present value of all benefits projected to
be payable under the plan during the current plan year and
each of the 4 succeeding plan years (plus administrative
expenses for such plan years).
``(3) Annual certification by plan actuary.--
``(A) In general.--During the 90-day period beginning on
the first day of each plan year of a multiemployer plan, the
plan actuary shall certify to the Secretary--
``(i) whether or not the plan is in endangered status for
such plan year and whether or not the plan is in critical
status for such plan year, and
``(ii) in the case of a plan which is in a funding
improvement or rehabilitation period, whether or not the plan
is making the scheduled progress in meeting the requirements
of its funding improvement or rehabilitation plan.
``(B) Actuarial projections of assets and liabilities.--
``(i) In general.--In making the determinations and
projections under this subsection, the plan actuary shall
make projections required for the current and succeeding plan
years, using reasonable actuarial estimates, assumptions, and
methods, of the current value of the assets of the plan and
the present value of all liabilities to participants and
beneficiaries under the plan for the current plan year as of
the beginning of such year. The projected present value of
liabilities as of the beginning of such year shall be
determined based on the actuarial statement required under
section 103(d) of the Employee Retirement Income Security Act
of 1974 with respect to the most recently filed annual report
or the actuarial valuation for the preceding plan year.
``(ii) Determinations of future contributions.--Any
actuarial projection of plan assets shall assume--
``(I) reasonably anticipated employer contributions for the
current and succeeding plan years, assuming that the terms of
the one or more collective bargaining agreements pursuant to
which the plan is maintained for the current plan year
continue in effect for succeeding plan years, or
``(II) that employer contributions for the most recent plan
year will continue indefinitely, but only if the plan actuary
determines there have been no significant demographic changes
that would make such assumption unreasonable.
``(C) Penalty for failure to secure timely actuarial
certification.--Any failure of the plan's actuary to certify
the plan's status under this subsection by the date specified
in subparagraph (A) shall be treated for purposes of section
502(c)(2) of such Act as a failure or refusal by the plan
administrator to file the annual report required to be filed
with the Secretary under section 101(b)(4) of such Act.
``(D) Notice.--In any case in which a multiemployer plan is
certified to be in endangered or critical status under
subparagraph (A), the plan sponsor shall, not later than 30
days after the date of the certification, provide
notification of the endangered or critical status to the
participants and beneficiaries, the bargaining parties, the
Pension Benefit Guaranty Corporation, the Secretary, and the
Secretary of Labor.
``(c) Funding Improvement Plan Must Be Adopted for
Multiemployer Plans in Endangered Status.--
``(1) In general.--In any case in which a multiemployer
plan is in endangered status for a plan year, the plan
sponsor, in accordance with this subsection--
``(A) shall adopt a funding improvement plan not later than
240 days following the required date for the actuarial
certification of endangered status under subsection
(b)(3)(A), and
``(B) within 30 days after the adoption of the funding
improvement plan--
``(i) in the case of a plan in seriously endangered status,
shall provide to the bargaining parties 1 or more schedules
showing revised benefit structures, revised contribution
structures, or both, which, if adopted, may reasonably be
expected to enable the multiemployer plan to meet the
applicable requirements under paragraph (3) in accordance
with the funding improvement plan, including a description of
the reductions in future benefit accruals and increases in
contributions that the plan sponsor determines are reasonably
necessary to meet the applicable requirements if the plan
sponsor assumes that there are no increases in contributions
under the plan other than the increases necessary to meet the
applicable requirements after future benefit accruals have
been reduced to the maximum extent permitted by law, and
``(ii) may, if the plan sponsor deems appropriate, prepare
and provide the bargaining parties with additional
information relating to contribution rates or benefit
reductions, alternative schedules, or other information
relevant to achieving the requirements under paragraph (3) in
accordance with the funding improvement plan.
``(2) Exception for years after process begins.--Paragraph
(1) shall not apply to a plan year if such year is in a
funding plan adoption period or funding improvement period by
reason of the plan being in endangered status for a preceding
plan year. For purposes of this section, such preceding plan
year shall be the initial determination year with respect to
the funding improvement plan to which it relates.
``(3) Funding improvement plan.--For purposes of this
section--
``(A) In general.--A funding improvement plan is a plan
which consists of the actions, including options or a range
of options to be proposed to the bargaining parties, which,
under reasonable actuarial assumptions, will result in the
plan meeting the requirements of this paragraph.
``(B) Plans other than seriously endangered plans.--In the
case of plan not in seriously endangered status, the
requirements of this paragraph are met if the plan's funded
percentage as of the close of the funding improvement period
exceeds the lesser of 80 percent or a percentage equal to the
sum of--
``(i) such percentage as of the beginning of such period,
plus
``(ii) 10 percent of the percentage determined under clause
(i).
``(C) Seriously endangered plans.--In the case of a plan in
seriously endangered status, the requirements of this
paragraph are met if--
``(i) the plan's funded percentage as of the close of the
funding improvement period equals or exceeds the percentage
which is equal to the sum of--
``(I) such percentage as of the beginning of such period,
plus
``(II) 33 percent of the difference between 100 percent and
the percentage under subclause (I), and
``(ii) there is no accumulated funding deficiency for any
plan year during the funding improvement period (taking into
account any extension of amortization periods under section
431(d)).
``(4) Funding improvement period.--For purposes of this
section--
``(A) In general.--The funding improvement period for any
funding improvement plan adopted pursuant to this subsection
is the 10-year period beginning on the first day of the first
plan year of the multiemployer plan beginning after the
earlier of--
``(i) the second anniversary of the date of the adoption of
the funding improvement plan, or
``(ii) the expiration of the collective bargaining
agreements in effect on the due date for the actuarial
certification of endangered status for the initial
determination year under subsection (b)(3)(A) and covering,
as of such due date, at least 75 percent of the active
participants in such multiemployer plan.
``(B) Coordination with changes in status.--
``(i) Plans no longer in endangered status.--If the plan's
actuary certifies under subsection (b)(3)(A) for a plan year
in any funding plan adoption period or funding improvement
period that the plan is no longer in endangered status and is
not in critical status, the funding plan adoption period or
funding improvement period, whichever is applicable, shall
end as of the close of the preceding plan year.
[[Page H11787]]
``(ii) Plans in critical status.--If the plan's actuary
certifies under subsection (b)(3)(A) for a plan year in any
funding plan adoption period or funding improvement period
that the plan is in critical status, the funding plan
adoption period or funding improvement period, whichever is
applicable, shall end as of the close of the plan year
preceding the first plan year in the rehabilitation period
with respect to such status.
``(5) Special rules for certain underfunded plans.--
``(A) In general.--Except as provided in subparagraph (B),
if the funded percentage of a plan in seriously endangered
status was 70 percent or less as of the beginning of the
initial determination year, the following rules shall apply
in determining whether the requirements of paragraph
(3)(C)(i) are met:
``(i) The plan's funded percentage as of the close of the
funding improvement period must equal or exceed a percentage
which is equal to the sum of--
``(I) such percentage as of the beginning of such period,
plus
``(II) 20 percent of the difference between 100 percent and
the percentage under subclause (I).
``(ii) The funding improvement period under paragraph
(4)(A) shall be 15 years rather than 10 years.
``(B) Special rules for plans with funded percentage over
70 percent.--If the funded percentage described in
subparagraph (A) was more than 70 percent but less than 80
percent as of the beginning of the initial determination
year--
``(i) subparagraph (A) shall apply if the plan's actuary
certifies, within 30 days after the certification under
subsection (b)(3)(A) for the initial determination year,
that, based on the terms of the plan and the collective
bargaining agreements in effect at the time of such
certification, the plan is not projected to meet the
requirements of paragraph (3)(C)(i) without regard to this
paragraph, and
``(ii) if there is a certification under clause (i), the
plan may, in formulating its funding improvement plan, only
take into account the rules of subparagraph (A) for plan
years in the funding improvement period beginning on or
before the date on which the last of the collective
bargaining agreements described in paragraph (4)(A)(ii)
expires.
Notwithstanding clause (ii), if for any plan year ending
after the date described in clause (ii) the plan actuary
certifies (at the time of the annual certification under
subsection (b)(3)(A) for such plan year) that, based on the
terms of the plan and collective bargaining agreements in
effect at the time of that annual certification, the plan is
not projected to be able to meet the requirements of
paragraph (3)(C)(i) without regard to this paragraph, the
plan may continue to assume for such year that the funding
improvement period is 15 years rather than 10 years.
``(6) Updates to funding improvement plan and schedules.--
``(A) Funding improvement plan.--The plan sponsor shall
annually update the funding improvement plan and shall file
the update with the plan's annual report under section 104 of
the Employee Retirement Income Security Act of 1974.
``(B) Schedules.--The plan sponsor may periodically update
any schedule of contribution rates provided under this
subsection to reflect the experience of the plan, except that
the schedule or schedules described in paragraph (1)(B)(i)
shall be updated at least once every 3 years.
``(C) Duration of schedule.--A schedule of contribution
rates provided by the plan sponsor and relied upon by
bargaining parties in negotiating a collective bargaining
agreement shall remain in effect for the duration of that
collective bargaining agreement.
``(7) Penalty if no funding improvement plan adopted.--A
failure of the plan sponsor to adopt a funding improvement
plan by the date specified in paragraph (1)(A) shall be
treated for purposes of section 502(c)(2) of such Act as a
failure or refusal by the plan administrator to file the
annual report required to be filed with the Secretary of
Labor under section 101(b)(4) of such Act.
``(8) Funding plan adoption period.--For purposes of this
section, the term `funding plan adoption period' means the
period beginning on the date of the certification under
subsection (b)(3)(A) for the initial determination year and
ending on the day before the first day of the funding
improvement period.
``(d) Rules for Operation of Plan During Adoption and
Improvement Periods; Failure to Meet Requirements.--
``(1) Special rules for plan adoption period.--During the
plan adoption period--
``(A) the plan sponsor may not accept a collective
bargaining agreement or participation agreement with respect
to the multiemployer plan that provides for--
``(i) a reduction in the level of contributions for any
participants,
``(ii) a suspension of contributions with respect to any
period of service, or
``(iii) any new direct or indirect exclusion of younger or
newly hired employees from plan participation,
``(B) no amendment of the plan 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 may be adopted unless the amendment is
required as a condition of qualification under part I of
subchapter D of chapter 1 or to comply with other applicable
law, and
``(C) in the case of a plan in seriously endangered status,
the plan sponsor shall take all reasonable actions which are
consistent with the terms of the plan and applicable law and
which are expected, based on reasonable assumptions, to
achieve--
``(i) an increase in the plan's funded percentage, and
``(ii) postponement of an accumulated funding deficiency
for at least 1 additional plan year.
Actions under subparagraph (C) include applications for
extensions of amortization periods under section 431(d), use
of the shortfall funding method in making funding standard
account computations, amendments to the plan's benefit
structure, reductions in future benefit accruals, and other
reasonable actions consistent with the terms of the plan and
applicable law.
``(2) Compliance with funding improvement plan.--
``(A) In general.--A plan may not be amended after the date
of the adoption of a funding improvement plan under
subsection (c) so as to be inconsistent with the funding
improvement plan.
``(B) No reduction in contributions.--A plan sponsor may
not during any funding improvement period accept a collective
bargaining agreement or participation agreement with respect
to the multiemployer plan that provides for--
``(i) a reduction in the level of contributions for any
participants,
``(ii) a suspension of contributions with respect to any
period of service, or
``(iii) any new direct or indirect exclusion of younger or
newly hired employees from plan participation.
``(C) Special rules for benefit increases.--A plan may not
be amended after the date of the adoption of a funding
improvement plan under subsection (c) so as to increase
benefits, including future benefit accruals, unless--
``(i) in the case of a plan in seriously endangered status,
the plan actuary certifies that, after taking into account
the benefit increase, the plan is still reasonably expected
to meet the requirements under subsection (c)(3) in
accordance with the schedule contemplated in the funding
improvement plan, and
``(ii) in the case of a plan not in seriously endangered
status, the actuary certifies that such increase is paid for
out of contributions not required by the funding improvement
plan to meet the requirements under subsection (c)(3) in
accordance with the schedule contemplated in the funding
improvement plan.
``(3) Failure to meet requirements.--
``(A) In general.--Notwithstanding section 4971(g), if a
plan fails to meet the requirements of subsection (c)(3) by
the end of the funding improvement period, the plan shall be
treated as having an accumulated funding deficiency for
purposes of section 4971 for the last plan year in such
period (and each succeeding plan year until such requirements
are met) in an amount equal to the greater of the amount of
the contributions necessary to meet such requirements or the
amount of such accumulated funding deficiency without regard
to this paragraph.
``(B) Waiver.--In the case of a failure described in
subparagraph (A) which is due to reasonable cause and not to
willful neglect, the Secretary of the Treasury may waive part
or all of the tax imposed by section 4971 of such Code to the
extent that the payment of such tax would be excessive or
otherwise inequitable relative to the failure involved.
``(e) Rehabilitation Plan Must Be Adopted for Multiemployer
Plans in Critical Status.--
``(1) In general.--In any case in which a multiemployer
plan is in critical status for a plan year, the plan sponsor,
in accordance with this subsection--
``(A) shall adopt a rehabilitation plan not later than 240
days following the required date for the actuarial
certification of critical status under subsection (b)(3)(A),
and
``(B) within 30 days after the adoption of the
rehabilitation plan--
``(i) shall provide to the bargaining parties 1 or more
schedules showing revised benefit structures, revised
contribution structures, or both, which, if adopted, may
reasonably be expected to enable the multiemployer plan to
emerge from critical status in accordance with the
rehabilitation plan, and
``(ii) may, if the plan sponsor deems appropriate, prepare
and provide the bargaining parties with additional
information relating to contribution rates or benefit
reductions, alternative schedules, or other information
relevant to emerging from critical status in accordance with
the rehabilitation plan.
The schedule or schedules described in subparagraph (B)(i)
shall reflect reductions in future benefit accruals and
increases in contributions that the plan sponsor determines
are reasonably necessary to emerge from critical status. One
schedule shall be designated as the default schedule and such
schedule shall assume that there are no increases in
contributions under the plan other than the increases
necessary to emerge from critical status after future benefit
accruals and other benefits (other than benefits the
reduction or elimination of which are not permitted under
section 411(d)(6)) have been reduced to the maximum extent
permitted by law.
``(2) Exception for years after process begins.--Paragraph
(1) shall not apply to a
[[Page H11788]]
plan year if such year is in a rehabilitation plan adoption
period or rehabilitation period by reason of the plan being
in critical status for a preceding plan year. For purposes of
this section, such preceding plan year shall be the initial
critical year with respect to the rehabilitation plan to
which it relates.
``(3) Rehabilitation plan.--For purposes of this section--
``(A) In general.--A rehabilitation plan is a plan which
consists of--
``(i) actions which will enable, under reasonable actuarial
assumptions, the plan to cease to be in critical status by
the end of the rehabilitation period and may include
reductions in plan expenditures (including plan mergers and
consolidations), reductions in future benefit accruals or
increases in contributions, if agreed to by the bargaining
parties, or any combination of such actions, or
``(ii) if the plan sponsor determines that, based on
reasonable actuarial assumptions and upon exhaustion of all
reasonable measures, the plan can not reasonably be expected
to emerge from critical status by the end of the
rehabilitation period, reasonable measures to emerge from
critical status at a later time or to forestall possible
insolvency (within the meaning of section 4245 of the
Employee Retirement Income Security Act of 1974).
Such plan shall include the schedules required to be provided
under paragraph (1)(B)(i). If clause (ii) applies, such plan
shall set forth the alternatives considered, explain why the
plan is not reasonably expected to emerge from critical
status by the end of the rehabilitation period, and specify
when, if ever, the plan is expected to emerge from critical
status in accordance with the rehabilitation plan.
``(B) Updates to rehabilitation plan and schedules.--
``(i) Rehabilitation plan.--The plan sponsor shall annually
update the rehabilitation plan and shall file the update with
the plan's annual report under section 104 of the Employee
Retirement Income Security Act of 1974.
``(ii) Schedules.--The plan sponsor may periodically update
any schedule of contribution rates provided under this
subsection to reflect the experience of the plan, except that
the schedule or schedules described in paragraph (1)(B)(i)
shall be updated at least once every 3 years.
``(iii) Duration of schedule.--A schedule of contribution
rates provided by the plan sponsor and relied upon by
bargaining parties in negotiating a collective bargaining
agreement shall remain in effect for the duration of that
collective bargaining agreement.
``(C) Default schedule.--If the collective bargaining
agreement providing for contributions under a multiemployer
plan that was in effect at the time the plan entered critical
status expires and, after receiving a schedule from the plan
sponsor under paragraph (1)(B)(i), the bargaining parties
have not adopted a collective bargaining agreement with terms
consistent with such a schedule, the default schedule
described in the last sentence of paragraph (1) shall go into
effect with respect to those bargaining parties.
``(4) Rehabilitation period.--For purposes of this
section--
``(A) In general.--The rehabilitation period for a plan in
critical status is the 10-year period beginning on the first
day of the first plan year of the multiemployer plan
following the earlier of--
``(i) the second anniversary of the date of the adoption of
the rehabilitation plan, or
``(ii) the expiration of the collective bargaining
agreements in effect on the date of the due date for the
actuarial certification of critical status for the initial
critical year under subsection (a)(1) and covering, as of
such date at least 75 percent of the active participants in
such multiemployer plan.
If a plan emerges from critical status as provided under
subparagraph (B) before the end of such 10-year period, the
rehabilitation period shall end with the plan year preceding
the plan year for which the determination under subparagraph
(B) is made.
``(B) Emergence.--A plan in critical status shall remain in
such status until a plan year for which the plan actuary
certifies, in accordance with subsection (b)(3)(A), that the
plan is not projected to have an accumulated funding
deficiency for the plan year or any of the 9 succeeding plan
years, without regard to use of the shortfall method or any
extension of amortization periods under section 431(d).
``(5) Penalty if no rehabilitation plan adopted.--A failure
of a plan sponsor to adopt a rehabilitation plan by the date
specified in paragraph (1)(A) shall be treated for purposes
of section 502(c)(2) of the Employee Retirement Income
Security Act of 1974 as a failure or refusal by the plan
administrator to file the annual report required to be filed
with the Secretary of Labor under section 101(b)(4) of such
Act.
``(6) Rehabilitation plan adoption period.--For purposes of
this section, the term `rehabilitation plan adoption period'
means the period beginning on the date of the certification
under subsection (b)(3)(A) for the initial critical year and
ending on the day before the first day of the rehabilitation
period.
``(7) Limitation on reduction in rates of future
accruals.--Any reduction in the rate of future accruals under
any schedule described in paragraph (1)(B)(i) shall not
reduce the rate of future accruals below--
``(A) a monthly benefit (payable as a single life annuity
commencing at the participant's normal retirement age) equal
to 1 percent of the contributions required to be made with
respect to a participant, or the equivalent standard accrual
rate for a participant or group of participants under the
collective bargaining agreements in effect as of the first
day of the initial critical year, or
``(B) if lower, the accrual rate under the plan on such
first day.
The equivalent standard accrual rate shall be determined by
the plan sponsor based on the standard or average
contribution base units which the plan sponsor determines to
be representative for active participants and such other
factors as the plan sponsor determines to be relevant.
Nothing in this paragraph shall be construed as limiting the
ability of the plan sponsor to prepare and provide the
bargaining parties with alternative schedules to the default
schedule that established lower or higher accrual and
contribution rates than the rates otherwise described in this
paragraph.
``(8) Employer impact.--For the purposes of this section,
the plan sponsor shall consider the impact of the
rehabilitation plan and contribution schedules authorized by
this section on bargaining parties with fewer than 500
employees and shall implement the plan in a manner that
encourages their continued participation in the plan and
minimizes financial harm to employers and their workers.
``(f) Rules for Operation of Plan During Adoption and
Rehabilitation Period.--
``(1) Compliance with rehabilitation plan.--
``(A) In general.--A plan may not be amended after the date
of the adoption of a rehabilitation plan under subsection (e)
so as to be inconsistent with the rehabilitation plan.
``(B) Special rules for benefit increases.--A plan may not
be amended after the date of the adoption of a rehabilitation
plan under subsection (e) so as to increase benefits,
including future benefit accruals, unless the plan actuary
certifies that such increase is paid for out of additional
contributions not contemplated by the rehabilitation plan,
and, after taking into account the benefit increase, the
multiemployer plan still is reasonably expected to emerge
from critical status by the end of the rehabilitation period
on the schedule contemplated in the rehabilitation plan.
``(2) Restriction on lump sums and similar benefits.--
``(A) In general.--Effective on the date the notice of
certification of the plan's critical status for the initial
critical year under subsection (b)(3)(D) is sent, and
notwithstanding section 411(d)(6), the plan shall not pay--
``(i) any payment, in excess of the monthly amount paid
under a single life annuity (plus any social security
supplements described in the last sentence of section
411(b)(1)(A)),
``(ii) any payment for the purchase of an irrevocable
commitment from an insurer to pay benefits, and
``(iii) any other payment specified by the Secretary by
regulations.
``(B) Exception.--Subparagraph (A) shall not apply to a
benefit which under section 411(a)(11) may be immediately
distributed without the consent of the participant or to any
makeup payment in the case of a retroactive annuity starting
date or any similar payment of benefits owed with respect to
a prior period.
``(3) Adjustments disregarded in withdrawal liability
determination.--Any benefit reductions under this subsection
shall be disregarded in determining a plan's unfunded vested
benefits for purposes of determining an employer's withdrawal
liability under section 4201 of the Employee Retirement
Income Security Act of 1974.
``(4) Special rules for plan adoption period.--During the
rehabilitation plan adoption period--
``(A) the plan sponsor may not accept a collective
bargaining agreement or participation agreement with respect
to the multiemployer plan that provides for--
``(i) a reduction in the level of contributions for any
participants,
``(ii) a suspension of contributions with respect to any
period of service, or
``(iii) any new direct or indirect exclusion of younger or
newly hired employees from plan participation, and
``(B) no amendment of the plan 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 may be adopted unless the amendment is
required as a condition of qualification under part I of
subchapter D of chapter 1 or to comply with other applicable
law.
``(5) Failure to meet requirements.--
``(A) In general.--Notwithstanding section 4971(g), if a
plan--
``(i) fails to meet the requirements of subsection (e) by
the end of the rehabilitation period, or
``(ii) has received a certification under subsection
(b)(3)(A)(ii) for 3 consecutive plan years that the plan is
not making the scheduled progress in meeting its requirements
under the rehabilitation plan,
the plan shall be treated as having an accumulated funding
deficiency for purposes of section 4971 for the last plan
year in such period (and each succeeding plan year until such
requirements are met) in an amount
[[Page H11789]]
equal to the greater of the amount of the contributions
necessary to meet such requirements or the amount of such
accumulated funding deficiency without regard to this
paragraph.
``(B) Waiver.--In the case of a failure described in
subparagraph (A) which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all of the
tax imposed by section 4971 to the extent that the payment of
such tax would be excessive or otherwise inequitable relative
to the failure involved.
``(g) Expedited Resolution of Plan Sponsor Decisions.--If,
within 60 days of the due date for adoption of a funding
improvement plan under subsection (c) or a rehabilitation
plan under subsection (e), the plan sponsor of a plan in
endangered status or a plan in critical status has not agreed
on a funding improvement plan or rehabilitation plan, then
any member of the board or group that constitutes the plan
sponsor may require that the plan sponsor enter into an
expedited dispute resolution procedure for the development
and adoption of a funding improvement plan or rehabilitation
plan.
``(h) Nonbargained Participation.--
``(1) Both bargained and nonbargained employee-
participants.--In the case of an employer that contributes to
a multiemployer plan with respect to both employees who are
covered by one or more collective bargaining agreements and
to employees who are not so covered, if the plan is in
endangered status or in critical status, benefits of and
contributions for the nonbargained employees, including
surcharges on those contributions, shall be determined as if
those nonbargained employees were covered under the first to
expire of the employer's collective bargaining agreements in
effect when the plan entered endangered or critical status.
``(2) Nonbargained employees only.--In the case of an
employer that contributes to a multiemployer plan only with
respect to employees who are not covered by a collective
bargaining agreement, this section shall be applied as if the
employer were the bargaining parties, and its participation
agreement with the plan was a collective bargaining agreement
with a term ending on the first day of the plan year
beginning after the employer is provided the schedule or
schedules described in subsections (c) and (e).
``(3) Employees covered by a collective bargaining
agreement.--The determination as to whether an employee
covered by a collective bargaining agreement for purposes of
this section shall be made without regard to the special rule
in Treasury Regulation section 1.410(b)-6(d)(ii)(D).
``(i) Definitions; Actuarial Method.--For purposes of this
section--
``(1) Bargaining party.--The term `bargaining party'
means--
``(A)(i) except as provided in clause (ii), an employer who
has an obligation to contribute under the plan; or
``(ii) in the case of a plan described under section
404(c), or a continuation of such a plan, the association of
employers that is the employee settlor of the plan; and
``(B) an employee organization which, for purposes of
collective bargaining, represents plan participants employed
by an employer who has an obligation to contribute under the
plan.
``(2) Funded percentage.--The term `funded percentage'
means the percentage equal to a fraction--
``(A) the numerator of which is the value of the plan's
assets, as determined under section 431(c)(2), and
``(B) the denominator of which is the accrued liability of
the plan, determined using actuarial assumptions described in
section 431(c)(3).
``(3) Accumulated funding deficiency.--The term
`accumulated funding deficiency' has the meaning given such
term in section 412(a).
``(4) Active participant.--The term `active participant'
means, in connection with a multiemployer plan, a participant
who is in covered service under the plan.
``(5) Inactive participant.--The term `inactive
participant' means, in connection with a multiemployer plan,
a participant, or the beneficiary or alternate payee of a
participant, who--
``(A) is not in covered service under the plan, and
``(B) is in pay status under the plan or has a
nonforfeitable right to benefits under the plan.
``(6) Pay status.--A person is in pay status under a
multiemployer plan if--
``(A) at any time during the current plan year, such person
is a participant or beneficiary under the plan and is paid an
early, late, normal, or disability retirement benefit under
the plan (or a death benefit under the plan related to a
retirement benefit), or
``(B) to the extent provided in regulations of the
Secretary, such person is entitled to such a benefit under
the plan.
``(7) Obligation to contribute.--The term `obligation to
contribute' has the meaning given such term under section
4212(a) of the Employee Retirement Income Security Act of
1974.
``(8) Actuarial method.--Notwithstanding any other
provision of this section, the actuary's determinations with
respect to a plan's normal cost, actuarial accrued liability,
and improvements in a plan's funded percentage under this
section shall be based upon the unit credit funding method
(whether or not that method is used for the plan's actuarial
valuation).
``(9) Plan sponsor.--In the case of a plan described under
section 404(c), or a continuation of such a plan, the term
`plan sponsor' means the bargaining parties described under
paragraph (1).''
(b) Effective Dates.--
(1) In general.--The amendment made by this section shall
apply with respect to plan years beginning after 2006.
(2) Special rule for certain restored benefits.--In the
case of a multiemployer plan--
(A) with respect to which benefits were reduced pursuant to
a plan amendment adopted on or after January 1, 2002, and
before June 30, 2005, and
(B) which, pursuant to the plan document, the trust
agreement, or a formal written communication from the plan
sponsor to participants provided before June 30, 2005,
provided for the restoration of such benefits,
the amendments made by this section shall not apply to such
benefit restorations to the extent that any restriction on
the providing or accrual of such benefits would otherwise
apply by reason of such amendments.
PART III--SUNSET OF FUNDING RULES
SEC. 516. SUNSET OF FUNDING RULES.
(a) Report.--Not later than December 31, 2011, the
Secretary of Labor, the Secretary of the Treasury, and the
Executive Director of the Pension Benefit Guaranty
Corporation shall conduct a study of the effect of the
amendments made by this subtitle on the operation and funding
status of multiemployer plans and shall report the results of
such study, including any recommendations for legislation, to
the Congress.
(b) Matters Included in Study.--The study required under
subsection (a) shall include--
(1) the effect of funding difficulties, funding rules in
effect before the date of the enactment of this Act, and the
amendments made by this subtitle on small businesses
participating in multiemployer plans,
(2) the effect on the financial status of small employers
of--
(A) funding targets set in funding improvement and
rehabilitation plans and associated contribution increases,
(B) funding deficiencies,
(C) excise taxes,
(D) withdrawal liability,
(E) the possibility of alternatives schedules and
procedures for financially-troubled employers, and
(F) other aspects of the multiemployer system, and
(3) the role of the multiemployer pension plan system in
helping small employers to offer pension benefits.
(c) Sunset.--
(1) In general.--Except as provided in this subsection,
notwithstanding any other provision of this Act, the
provisions of, and the amendments made by, this subtitle
shall not apply to plan years beginning after December 31,
2014, and the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 shall be applied to
such plan years under the provisions of sections 302 through
308 of such Act and 412 of such Code (as in effect before the
amendments made by this Act).
(2) Funding improvement and rehabilitation plans.--If a
plan is operating under a funding improvement or
rehabilitation plan under section 305 of such Act or 432 of
such Code for its last year beginning before January 1, 2015,
such plan shall continue to operate under such funding
improvement or rehabilitation plan during any period after
December 31, 2014, such funding improvement or rehabilitation
plan is in effect and all provisions of such Act or Code
relating to the operation of such funding improvement or
rehabilitation plan shall continue in effect during such
period.
(3) Amortization schedules.--In the case of any amount
amortized under section 304(b) of such Act or 431 of such
Code (as in effect after the amendments made by this
subtitle) over any period beginning with a plan year
beginning before January 1, 2015, such amount shall, in lieu
of the amortization which would apply after the application
of this subsection, continue to be amortized under such
section 304 or 431 (as so in effect).
Subtitle B--Deduction and Related Provisions
SEC. 521. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS.
(a) Increase in Deduction.--Section 404(a)(1)(D) of the
Internal Revenue Code of 1986, as amended by this Act, is
amended to read as follows:
``(D) Amount determined on basis of unfunded current
liability.--
``(i) In general.--In the case of a defined benefit plan
which is a multiemployer plan, except as provided in
regulations, the maximum amount deductible under the
limitations of this paragraph shall not be less than the
unfunded current liability of the plan.
``(ii) Unfunded current liability.--For purposes of clause
(i), the term `unfunded current liability' means the excess
(if any) of--
``(I) 140 percent of the current liability of the plan
determined under section 431(c)(6)(C), over
``(II) the value of the plan's assets determined under
section 431(c)(2).''.
(b) Exception From Limitation on Deduction Where
Combination of Defined Contribution and Defined Benefit
Plans.--
(1) In general.--Section 404(a)(7)(C) of such Code, as
amended by this Act, is amended by adding at the end the
following new clause:
[[Page H11790]]
``(v) Multiemployer plans.--In applying this paragraph, any
multiemployer plan shall not be taken into account.''.
(2) Conforming amendment.--Section 404(a)(7)(A) of such
Code is amended by striking the last sentence.
(c) Effective Dates.--
(1) Deduction limit.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 2006.
(2) Exception.--The amendments made by subsection (b) shall
apply to years beginning after December 31, 2005.
SEC. 522. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER
HEALTH PLAN.
(a) In General.--Section 420(e) of the Internal Revenue
Code of 1986 (relating to definitions and special rules) is
amended by adding at the end the following new paragraph:
``(5) Application to multiemployer plan.--In the case of
any plan to which section 404(c) applies (or any successor
plan primarily covering employees in the building and
construction industry)--
``(A) the prohibition under subsection (a) on the
application of this section to a multiemployer plan shall not
apply, and
``(B) this section shall be applied to any such plan--
``(i) by treating any reference in this section to an
employer as a reference to all employers maintaining the plan
(or, if appropriate, the plan sponsor), and
``(ii) in accordance with such modifications of this
section (and the provisions of this title and the Employee
Retirement Income Security Act of 1974 relating to this
section) as the Secretary determines appropriate to reflect
the fact the plan is not maintained by a single employer.''
(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 ``American Jobs Creation Act of 2004'' and inserting
``Pension Security and Transparency Act of 2005''.
(2) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is
amended by striking ``American Jobs Creation Act of 2004''
and inserting ``Pension Security and Transparency Act of
2005''.
(3) Section 408(b)(13) of such Act (29 U.S.C. 1108(b)(13))
is amended by striking ``American Jobs Creation Act of 2004''
and inserting ``Pension Security and Transparency Act of
2005''.
(c) Effective Date.--The amendment made by this section
shall apply to transfers made in taxable years beginning
after December 31, 2004.
TITLE VI--ENHANCED RETIREMENT SAVINGS AND DEFINED CONTRIBUTION PLANS
SEC. 601. AMERISAVE MATCHING CREDIT.
(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by redesignating section 36 as
section 37 and by inserting after section 35 the following
new section:
``SEC. 36. AMERISAVE MATCHING CREDIT.
``(a) Allowance of Credit.--In the case of an eligible
individual, there shall be allowed as a credit against the
tax imposed by this subtitle for the taxable year an amount
equal to 100 percent of so much of the qualified retirement
savings contributions of the eligible individual for the
taxable year as do not exceed the applicable limit.
``(b) Applicable Limit.--For purposes of this section--
``(1) In general.--The applicable limit is $1,000, reduced
(but not below zero) by the reduction amount for each $1,000
(or fraction thereof) by which the taxpayer's adjusted gross
income for the taxable year exceeds the threshold amount.
``(2) Reduction amount; threshold amount.--For purposes of
paragraph (1), the reduction amount and the threshold amount
shall be determined in accordance with the following table:
The
``In the case of The reduction amount threshold
is: amount is:
Joint return....................... $50................... $50,000
Head of a household................ $66.67................ $37,500
All other cases.................... $100.................. $25,000.
``(3) Joint return.--In the case of a joint return, this
subsection shall be applied separately to each individual
filing such return, except that for purposes of paragraph
(1), the adjusted gross income shall be their combined
adjusted gross income of the taxpayer.
``(4) Coordination with manner in which credit allowed.--
The credit under subsection (a) shall be allowed only as
provided in section 6430.
``(c) Eligible Individual.--For purposes of this section--
``(1) In general.--The term `eligible individual' means any
individual if such individual has attained the age of 18 as
of the close of the taxable year.
``(2) Dependents and full-time students not eligible.--The
term `eligible individual' shall not include--
``(A) any individual with respect to whom a deduction under
section 151 is allowable to another taxpayer for a taxable
year beginning in the calendar year in which such
individual's taxable year begins, and
``(B) any individual who is a student (as defined in
section 152(f)).
``(d) Qualified Retirement Savings Contributions.--For
purposes of this section--
``(1) In general.--The term `qualified retirement savings
contributions' means, with respect to any taxable year, the
sum of--
``(A) the amount of the qualified retirement contributions
(as defined in section 219(e)) made by the eligible
individual,
``(B) the amount of--
``(i) any elective deferrals (as defined in section
402(g)(3)) of such individual, and
``(ii) any elective deferral of compensation by such
individual under an eligible deferred compensation plan (as
defined in section 457(b)) of an eligible employer described
in section 457(e)(1)(A), and
``(C) the amount of voluntary employee contributions by
such individual to any qualified retirement plan (as defined
in section 4974(c)).
``(2) Reduction for certain distributions.--
``(A) In general.--The qualified retirement savings
contributions determined under paragraph (1) shall be reduced
(but not below zero) by the aggregate distributions received
by the individual during the testing period from any entity
of a type to which contributions under paragraph (1) may be
made. The preceding sentence shall not apply to the portion
of any distribution which is not includible in gross income
by reason of a trustee-to-trustee transfer or a rollover
distribution.
``(B) Testing period.--For purposes of subparagraph (A),
the testing period, with respect to a taxable year, is the
period which includes such taxable year and the 3 preceding
taxable years.
``(C) Excepted distributions.--There shall not be taken
into account under subparagraph (A)--
``(i) any distribution referred to in section 72(p),
401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), and
``(ii) any distribution to which section 408A(d)(3)
applies.
``(D) Treatment of distributions received by spouse of
individual.--For purposes of determining distributions
received by an individual under subparagraph (A) for any
taxable year, any distribution received by the spouse of such
individual shall be treated as received by such individual if
such individual and spouse file a joint return for such
taxable year and for the taxable year during which the spouse
receives the distribution.
``(3) Additional tax on early net withdrawals.--
``(A) In general.--If with respect to a taxable year there
is a disqualified net withdrawal, the amount of tax imposed
by this chapter for such taxable year shall be increased by
the amount determined under subparagraph (B).
``(B) Determination of amount.--The amount determined under
this subparagraph is the aggregate decrease in credits
allowed under this section for any of the preceding 10
taxable years if the disqualified net withdrawals were
applied against (and operated to reduce) the qualified
retirement savings contributions taken into account under
subsection (a). Such reduction shall be applied in order
beginning with the first taxable year in such 10-year period
and shall take into account any prior application of this
paragraph.
``(C) Disqualified net withdrawals.--The term `disqualified
net withdrawals' means the aggregate distributions subject to
tax under section 72(t) for the taxable year over the
qualified retirement savings contributions for the taxable
year.
``(e) Special Rules.--For purposes of this section--
``(1) Adjusted gross income.--Adjusted gross income shall
be determined without regard to sections 911, 931, and 933.
``(2) Investment in the contract.--Any credit under this
section shall be disregarded in determining investment in the
contract.
``(f) Regulations.--The Secretary may prescribe such
regulations as may be necessary or appropriate to carry out
this section, including regulations requiring recordkeeping
and information reporting.
``(g) Termination.--This section shall not apply to taxable
years beginning after December 31, 2010.''.
(b) Repeal of Savers Credit.--Subpart A of part IV of
subchapter A of chapter 1 of such Code is amended by striking
section 25B (relating to elective deferrals and IRA
contributions by certain individuals).
(c) Conforming Amendments.--
(1) Section 26(b)(2) of such Code is amended by striking
``and'' at the end of subparagraph (R), by striking the
period at the end of subparagraph (S) and inserting ``,
and'', and by inserting after subparagraph (S) the following
new subparagraph:
``(T) section 36(d)(3) (relating to additional tax where
net withdrawals exceed credit).''.
(2) Section 24(b)(3)(B) of such Code is amended by striking
``sections 23 and 25B'' and inserting ``section 23''.
(3) Section 25(e)(1)(C) of such Code is amended by striking
``25B,''.
(4) Section 26(a)(1) of such Code is amended by striking
``sections 23, 24, and 25B'' and inserting ``sections 23 and
24''.
(5) Subchapter C of part IV of subchapter A of chapter 1 of
such Code is amended--
(A) by redesignating section 36 as section 37, and
(B) by redesignating section 25B, as moved by paragraph
(1), as section 36.
[[Page H11791]]
(6) Section 904(h) of such Code is amended by striking
``sections 23, 24, and 25B'' and inserting ``sections 23 and
24''.
(7) Section 1400C of such Code is amended by striking
``sections 23, 24, and 25B'' and inserting ``section 23 and
24''.
(8) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of such Code is amended by striking
the item relating to section 36 and inserting the following:
``Sec. 36. AmeriSave matching credit.
``Sec. 37. Overpayments of tax.''.
(9) The table of sections for subpart A of part IV of such
Code is amended by striking the item relating to section 25B.
(10) Section 1324(b)(2) of title 31, United States Code, is
amended by inserting ``, or from section 36 of such Code''
before the period at the end.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2006.
SEC. 602. MANNER IN WHICH AMERISAVE MATCHING CREDIT ALLOWED.
(a) In General.--Subchapter B of chapter 65 of the Internal
Revenue Code of 1986 (relating to rules of special
application) is amended by adding at the end the following
new section:
``SEC. 6430. MANNER IN WHICH AMERISAVE MATCHING CREDIT
ALLOWED.
``(a) General Rule.--The credit allowed under section 36
shall be allowed only as provided in this section.
``(b) Amount Paid Directly to Retirement Plan.--The credit
allowed under section 36 for a taxable year shall be paid
directly by the Secretary to a plan to which qualified
retirement savings contributions (as defined by section
36(d)) may be made, as specified by the taxpayer on the
return for such taxable year.
``(c) Treatment of Amounts Received by Plans.--
``(1) Certain rules disregarded.--Amounts paid under this
section to a retirement plan shall be disregarded for all
purposes in determining whether the plan meets the applicable
requirements of subtitle A.
``(2) Acceptance by plans.--A plan to which payments may be
made under this section shall not fail to be treated as
qualified merely on account of the receipt of such payments.
``(d) Amount not Treated as Credit or Refund.--Except as
provided by subsection (b), the credit allowed under section
36 shall not be used as a credit under subtitle A or refunded
as part of a return under subtitle A.
``(e) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out this
section.''.
(b) Clerical Amendment.--The table of sections for
subchapter B of chapter 65 of such Code is amended by adding
at the end the following new item:
``Sec. 6430. Manner in which AmeriSave matching credit allowed.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2006.
SEC. 603. INCREASING PARTICIPATION THROUGH AUTOMATIC
CONTRIBUTION ARRANGEMENTS.
(a) Amendments to the Internal Revenue Code of 1986.--
(1) In general.--Section 401(k) of the Internal Revenue
Code of 1986 (relating to cash or deferred arrangement) is
amended by adding at the end the following new paragraph:
``(13) Alternative method for automatic contribution
arrangements to meet nondiscrimination requirements.--
``(A) In general.--A qualified automatic contribution
arrangement shall be treated as meeting the requirements of
paragraph (3)(A)(ii).
``(B) Qualified automatic contribution arrangement.--For
purposes of this paragraph, the term `qualified automatic
contribution arrangement' means any cash or deferred
arrangement which meets the requirements of subparagraphs (C)
through (F).
``(C) Automatic deferral.--
``(i) In general.--The requirements of this subparagraph
are met if, under the arrangement, each employee eligible to
participate in the arrangement is treated as having elected
to have the employer make elective contributions in an amount
equal to a qualified percentage of compensation.
``(ii) Election out.--The election treated as having been
made under clause (i) shall cease to apply with respect to
any employee if such employee makes an affirmative election--
``(I) to not have such contributions made, or
``(II) to make elective contributions at a level specified
in such affirmative election.
``(iii) Qualified percentage.--For purposes of this
subparagraph, the term `qualified percentage' means, with
respect to any employee, any percentage determined under the
arrangement if such percentage is applied uniformly, does not
exceed 10 percent, and is at least--
``(I) 3 percent during the period ending on the last day of
the first plan year which begins after the date on which the
first elective contribution described in clause (i) is made
with respect to such employee,
``(II) 4 percent during the first plan year following the
plan year described in subclause (I),
``(III) 5 percent during the second plan year following the
plan year described in subclause (I), and
``(IV) 6 percent during any subsequent plan year.
``(iv) Automatic deferral for current employees not
required.--Clause (i) shall be applied without taking into
account any employee who was eligible to participate in the
arrangement (or a predecessor arrangement) immediately before
the date on which such arrangement becomes a qualified
automatic contribution arrangement (determined after
application of this clause).
``(D) Participation.--
``(i) In general.--An arrangement meets the requirements of
this subparagraph for any year if, during the plan year or
the preceding plan year, elective contributions are made on
behalf of at least 70 percent of the employees eligible to
participate in the arrangement other than--
``(I) highly compensated employees, and
``(II) at the election of the plan administrator, employees
described in subparagraph (C)(iv).
``(ii) First plan year.--An arrangement (other than a
successor arrangement) shall be treated as meeting the
requirements of this subparagraph with respect to the first
plan year with respect to which such arrangement is a
qualified automatic contribution arrangement (determined
without regard to this subparagraph).
``(E) Matching or nonelective contributions.--
``(i) In general.--The requirements of this subparagraph
are met if, under the arrangement, the employer--
``(I) makes matching contributions on behalf of each
employee who is not a highly compensated employee in an
amount equal to 50 percent of the elective contributions of
the employee to the extent such elective contributions do not
exceed 6 percent of compensation, or
``(II) is required, without regard to whether the employee
makes an elective contribution or employee contribution, to
make a contribution to a defined contribution plan on behalf
of each employee who is not a highly compensated employee and
who is eligible to participate in the arrangement in an
amount equal to at least 2 percent of the employee's
compensation.
``(ii) Application of rules for matching contributions.--
The rules of clauses (ii) and (iii) of paragraph (12)(B)
shall apply for purposes of clause (i)(I).
``(iii) Withdrawal and vesting restrictions.--An
arrangement shall not be treated as meeting the requirements
of clause (i) unless, with respect to employer contributions
(including matching contributions) taken into account in
determining whether the requirements of clause (i) are met--
``(I) any employee who has completed at least 2 years of
service (within the meaning of section 411(a)) has a
nonforfeitable right to 100 percent of the employee's accrued
benefit derived from such employer contributions, and
``(II) the requirements of subparagraph (B) of paragraph
(2) are met with respect to all such employer contributions.
``(iv) Application of certain other rules.--The rules of
subparagraphs (E)(ii) and (F) of paragraph (12) shall apply
for purposes of subclauses (I) and (II) of clause (i).
``(F) Notice requirements.--
``(i) In general.--The requirements of this subparagraph
are met if, within a reasonable period before each plan year,
each employee eligible to participate in the arrangement for
such year receives written notice of the employee's rights
and obligations under the arrangement which--
``(I) is sufficiently accurate and comprehensive to apprise
the employee of such rights and obligations, and
``(II) is written in a manner calculated to be understood
by the average employee to whom the arrangement applies.
``(ii) Timing and content requirements.--A notice shall not
be treated as meeting the requirements of clause (i) with
respect to an employee unless--
``(I) the notice explains the employee's right under the
arrangement to elect not to have elective contributions made
on the employee's behalf (or to elect to have such
contributions made at a different percentage),
``(II) in the case of an arrangement under which the
employee may elect among 2 or more investment options, the
notice explains how contributions made under the arrangement
will be invested in the absence of any investment election by
the employee, and
``(III) the employee has a reasonable period of time after
receipt of the notice described in subclauses (I) and (II)
and before the first elective contribution is made to make
either such election.''.
(2) Matching contributions.--Section 401(m) of such Code
(relating to nondiscrimination test for matching
contributions and employee contributions) is amended by
redesignating paragraph (12) as paragraph (13) and by
inserting after paragraph (11) the following new paragraph:
``(12) Alternative method for automatic contribution
arrangements.--A defined contribution plan shall be treated
as meeting the requirements of paragraph (2) with respect to
matching contributions if the plan--
``(A) is a qualified automatic contribution arrangement (as
defined in subsection (k)(13)), and
``(B) meets the requirements of paragraph (11)(B).''.
(3) Exclusion from definition of top-heavy plans.--
(A) Elective contribution rule.--Clause (i) of section
416(g)(4)(H) of such Code is amended by inserting ``or
401(k)(13)'' after ``section 401(k)(12)''.
(B) Matching contribution rule.--Clause (ii) of section
416(g)(4)(H) of such Code is
[[Page H11792]]
amended by inserting ``or 401(m)(12)'' after ``section
401(m)(11)''.
(4) Corrective distributions.--
(A) In general.--Section 414 of such Code (relating to
definitions and special rules) is amended by adding at the
end the following new subsection:
``(w) Automatic Contribution Arrangements.--
``(1) In general.--No tax shall be imposed under section
72(t) on a distribution from an applicable employer plan to
the employee with respect to whom such contribution relates
if such distribution does not exceed the erroneous automatic
contribution amount and is made not later than the 1st April
15 following the close of the taxable year in which such
contribution was made.
``(2) Erroneous automatic contribution amount.--For
purposes of this subsection--
``(A) In general.--The term `erroneous automatic
contribution amount' means the lesser of--
``(i) the amount of automatic contributions made during the
applicable period which the employee elects in a notice to
the plan administrator to treat as an erroneous automatic
contribution amount for purposes of this subsection, or
``(ii) $500.
``(B) Automatic contribution.--The term `automatic
contribution' means contributions which, under the terms of
the plan--
``(i) the employee can elect to be made as contributions
under the plan on behalf of the employee, or to the employee
directly in cash, and
``(ii) which are made on behalf of the employee under the
plan pursuant to a plan provision treating the employee as
having elected to have the employer make such contributions
on behalf of the employee until the employee affirmatively
elects not to have such contribution made or affirmatively
elects to make contributions as a specified level.
``(3) Applicable employer plan.--For purposes of this
subsection, the term `applicable employer plan'means--
``(A) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a), and
``(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
``(4) Applicable period.--For purposes of this subsection,
the term `applicable period' means, with respect to any
employee, the three month period that begins on the first
date that an automatic contribution described in paragraph
(2)(B) is made with respect to such employee.''.
(B) Vesting conforming amendments.--
(i) Section 411(a)(3)(G) of such Code is amended by
inserting ``an erroneous automatic contribution under section
414(w),'' after ``402(g)(2)(A),''.
(ii) The heading of section 411(a)(3)(G) of such Code is
amended by inserting ``OR ERRONEOUS AUTOMATIC CONTRIBUTION''
before the period.
(iii) Section 401(k)(8)(E) of such Code is amended by
inserting ``an erroneous automatic contribution under section
414(w),'' after ``402(g)(2)(A),''.
(iv) The heading of section 401(k)(8)(E) of such Code is
amended by inserting ``OR ERRONEOUS AUTOMATIC CONTRIBUTION''
before the period.
(5) Effective date.--The amendments made by this subsection
shall apply to plan years beginning after December 31, 2005.
SEC. 604. PREEMPTION OF STATE LAWS PRECLUDING AUTOMATIC
ENROLLMENT OR AUTOMATIC ROLLOVERS.
(a) In General.--Section 514 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1144(b)) is amended--
(1) by redesignating subsection (d) as subsection (e); and
(2) by inserting after subsection (c) the following new
subsection:
``(d) The provisions of this title shall supersede any and
all State laws insofar as they may preclude, or have the
effect of precluding--
``(1) the establishment or operation of, or making of
contributions to, a pension plan under a qualified automatic
enrollment arrangement (as defined in section 401(k)(13) of
the Internal Revenue Code of 1986), or
``(2) a distribution described in section 401(a)(31)(B) of
the Internal Revenue Code of 1986 or the establishment or
operation of an individual retirement plan (as defined in
section 7701(a)(37) of such Code) allowing receipt of such
distributions.''.
(b) Effective Date.--The amendments made by this subsection
shall apply with respect to actions (described in paragraph
(1) or (2) of section 514(d) of the Employee Retirement
Income Security Act of 1974 (added by this subsection)) taken
before, on, or after the date of the enactment of this Act.
SEC. 605. FIDUCIARY STANDARDS RELATING TO AUTOMATIC OR
DEFAULT INVESTMENTS.
(a) In General.--Section 404 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1104) is amended by
adding at the end the following new subsection:
``(e)(1) A fiduciary with respect to an individual account
plan shall be deemed to have satisfied the requirements of
subsection (a)(1)(B) with respect to the plan, in connection
with any qualifying automatic investment under the plan, to
the extent those requirements pertain to asset allocation as
between equity instruments or investments and debt
instruments or investments and to such further extent as may
be specified by the Secretary in administrative guidance of
general applicability.
``(2) For purposes of this subsection, the term `qualifying
automatic investment' means, in connection with a participant
in a plan, an investment of assets constituting some or all
of the participant's accrued benefit under the plan in a form
of investment specified by the plan, in any case in which--
``(A) such assets--
``(i) are attributable to employer contributions (and
earnings thereon) made pursuant to a qualified automatic
enrollment arrangement (as defined in section 401(k)(13) of
the Internal Revenue Code of 1986),
``(ii) are attributable to distributions described in
section 401(a)(31)(B) of such Code, or
``(iii) have been identified by the Secretary as
appropriate for automatic investment,
``(B) the plan provides for investment of such assets in
such form of investment unless, in lieu thereof, alternative
forms of investments, which are also made available to the
participant under the terms of the plan, are selected by the
participant,
``(C) the plan provides, under such form of investment, for
investment of such assets under constraints designed to--
``(i) limit the risk associated with the investment
portfolio to a reasonable level of risk while seeking to
maximize return consistent with that level of risk, or
``(ii) minimize risk while seeking a reasonable expected
return, and
``(D) the expenses associated with the investment meet the
standards of paragraph (3).
``(3)(A) The expenses associated with an investment meet
the standards of this paragraph if they do not exceed
reasonable expenses. Such expenses shall not be treated as
exceeding reasonable expenses solely because the expenses in
any year (excluding expenses for acquisition of the
investment) exceed the investment returns for that year and
cause a reduction in principal.
``(B) For purposes of subparagraph (A), the term `expense'
means any fee, charge, commission, load, or other cost or
expense associated with the investment (including cost of
acquisition, establishment, maintenance, surrender, or
termination of the investment and any other cost of managing
or administering the investment) to the extent borne by
participants.
``(C) The expenses associated with an individual retirement
plan (as defined in section 7701(a)(37) of the Internal
Revenue Code of 1986) shall not be treated as meeting the
standards of this paragraph if such expenses exceed the
expenses normally charged by the trustee or custodian of a
comparable individual retirement plan established to receive
rollover contributions (as defined in section 408(d)(3) of
such Code) which are not distributions described in section
401(a)(31)(B) of such Code.
``(4) The requirements of paragraph (2)(C) shall be treated
as satisfied with respect to investments provided for by a
plan to the extent such investments consist of--
``(A) a balanced portfolio comprised of both equity
investments and either stable value or fixed income
investments provided by a financial institution (or similar
financial entity) that is regulated by the United States or a
State in any case in which--
``(i) the equity investments are broad-based index funds
or, to the extent permitted by the Secretary under
regulations, guidelines, or other administrative guidance,
actively managed funds that are broadly diversified so as to
minimize the risk of large losses, and
``(ii) the stable value or fixed income investments--
``(I) are designed to comprise at least 20 percent of the
total (measured in terms of fair market value), and
``(II) are either diversified to minimize the risk of large
losses or are obligations (which may include inflation-
protected obligations) issued by the United States, or
``(B) stable value investments.
For purposes of this paragraph, the term `stable value
investments' means investments provided by a financial
institution regulated by the United States or a State that
are designed to preserve principal and provide a reasonable
rate of return, whether or not guaranteed, which may include
investments designed to maintain a stable dollar value equal
to the original value of the investment. The Secretary may
prescribe regulations or other administrative guidance
prescribing the manner in which the requirements of paragraph
(A)(i) may be applied taking into account classes of
investment determined on the basis of investment in large,
intermediate, or small capitalization funds, funds of varying
styles (such as growth funds or value funds), or funds
consisting of, or not consisting of, foreign or international
securities.
``(5) An investment otherwise described in the preceding
provisions of this subsection shall not be treated as failing
to be a qualifying automatic investment solely by reason of:
``(A) the availability to the participant under the terms
of the plan of alternative forms of investment which meet the
requirements of subsection (c)(1) or are managed by an
independent investment manager;
``(B) the extent to which provisions of the plan are or are
not directed toward limiting the risk of loss of principal
under such investment or promoting long-term capital
appreciation;
``(C) any change or variation in the percentages of equity
and stable value investments included in the investment
portfolio
[[Page H11793]]
or other aspects of the constituent investments to the extent
such change or variation is based on:
``(i) automatic rebalancing or variable investment returns
prior to periodic rebalancing,
``(ii) the participant's age, or
``(iii) other factors relating to the participant's
situation, such as years until retirement, other retirement
plan coverage, financial situation, or investment preferences
expressed to the plan by the participant; or
``(D) the extent to which such investment consists of
interests in real estate or real-estate-based investments, if
such interests are broadly diversified and do not comprise
more than 10 percent of the equity portion of the total
investment of plan assets.
``(6)(A) Notwithstanding paragraph (1), the requirements of
subsection (a)(1)(C) shall not be treated as satisfied in
connection with any qualifying automatic investment unless
such investment (other than the stable value portion thereof)
is designed so that no more than 0.5 percent of the total
fair market value of the assets invested are invested in
securities issued by, or interests in the property of, any
single person.
``(B) For purposes of subparagraph (A), any person and all
affiliates thereof shall be treated as a single person. A
corporation is an affiliate of a person if such corporation
is a member of any controlled group of corporations (as
defined in section 1563(a) of the Internal Revenue Code of
1986, except that `applicable percentage' shall be
substituted for `80 percent' wherever the latter percentage
appears in such section) of which person is a member. For
purposes of the preceding sentence, the term `applicable
percentage' means 50 percent, or such lower percentage as the
Secretary may prescribe by regulation. A person other than a
corporation shall be treated as an affiliate of any other
person to the extent provided in regulations of the
Secretary. Regulations under this subparagraph shall be
prescribed only after consultation and coordination with the
Secretary of the Treasury.
``(7) The Secretary shall issue regulations or other
administrative guidance specifying the manner in which
investments under independent professional investment
management pursuant to sections 402(c)(3) and 403(a)(2) and
other qualifying automatic investments may serve as the
default investment arrangement with respect to some or all
plan assets without adversely affecting plan compliance with
this part, as governed by subsection (c)(1) with respect to
assets over which participants or beneficiaries exercise
control.
``(8)(A) The Secretary may issue regulations or other
administrative guidance for compliance with the requirements
of this subsection which are consistent with the provisions
of this subsection. Compliance with such regulations or
guidance shall be deemed to be compliance with the
requirements of this subsection. Such regulations or guidance
may express compliance in terms of percentages of assets
under management, flat dollar amounts, or other factors.
``(B) The regulations issued pursuant to subparagraph (A)
may include procedures for granting conditional or
unconditional exemptions of investments, classes of
investments, investment managers, or classes of investment
managers from all or part of the requirements of this
subsection. Such procedures shall be similar to the
procedures applicable under section 408(a) and subject to the
same standards and limitations as apply under section 408(a).
Such exemptions may include, in the case of qualifying
automatic investments, relief from, or simplified methods of
compliance with, the requirements of subparagraphs (B) and
(C) of subsection (a)(1) and the provisions of subsection
(c).''.
(b) Effective Date.--The amendment made by this subsection
shall apply with respect to investments made on or after
January 1, 2005 (irrespective of the extent to which the
Secretary of Labor has issued regulations, guidelines, or
other administrative guidance pursuant to section 404(e) of
the Employee Retirement Income Security Act of 1974 (added by
this subsection)).
SEC. 606. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR
INDIVIDUALS CALLED TO ACTIVE DUTY FOR AT LEAST
179 DAYS.
(a) In General.--Paragraph (2) of section 72(t) of the
Internal Revenue Code of 1986 (relating to 10-percent
additional tax on early distributions from qualified
retirement plans) is amended by adding at the end the
following new subparagraph:
``(G) Distributions from retirement plans to individuals
called to active duty.--
``(i) In general.--Any qualified reservist distribution.
``(ii) Amount distributed may be repaid.--Any individual
who receives a qualified reservist distribution may, at any
time during the 2-year period beginning on the day after the
end of the active duty period, make one or more contributions
to an individual retirement plan of such individual in an
aggregate amount not to exceed the amount of such
distribution. The dollar limitations otherwise applicable to
contributions to individual retirement plans shall not apply
to any contribution made pursuant to the preceding sentence.
No deduction shall be allowed for any contribution pursuant
to this clause.
``(iii) Qualified reservist distribution.--For purposes of
this subparagraph, the term `qualified reservist
distribution' means any distribution to an individual if--
``(I) such distribution is from an individual retirement
plan, or from amounts attributable to employer contributions
made pursuant to elective deferrals described in subparagraph
(A) or (C) of section 402(g)(3) or section
501(c)(18)(D)(iii),
``(II) such individual was (by reason of being a member of
a reserve component (as defined in section 101 of title 37,
United States Code)), ordered or called to active duty for a
period in excess of 179 days or for an indefinite period, and
``(III) such distribution is made during the period
beginning on the date of such order or call and ending at the
close of the active duty period.
``(iv) Application of subparagraph.--This subparagraph
applies to individuals ordered or called to active duty after
September 11, 2001, and before September 12, 2007. In no
event shall the 2-year period referred to in clause (ii) end
before the date which is 2 years after the date of the
enactment of this subparagraph.''.
(b) Conforming Amendments.--
(1) Section 401(k)(2)(B)(i) of such Code is amended by
striking ``or'' at the end of subclause (III), by striking
``and'' at the end of subclause (IV) and inserting ``or'',
and by inserting after subclause (IV) the following new
subclause:
``(V) in the case of a qualified reservist distribution (as
defined in section 72(t)(2)(G)(iii)), the date on which a
period referred to in subclause (III) of such section begins,
and''.
(2) Section 403(b)(7)(A)(ii) of such Code is amended by
inserting ``(unless such amount is a distribution to which
section 72(t)(2)(G) applies)'' after ``distributee''.
(3) Section 403(b)(11) of such Code is amended by striking
``or'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, or'', and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) for distributions to which section 72(t)(2)(G)
applies.''.
(c) Effective Date; Waiver of Limitations.--
(1) Effective date.--The amendment made by this section
shall apply to distributions after September 11, 2001.
(2) Waiver of limitations.--If refund or credit of any
overpayment of tax resulting from the amendments made by this
section is prevented at any time before the close of the 1-
year period beginning on the date of the enactment of this
Act by the operation of any law or rule of law (including res
judicata), such refund or credit may nevertheless be made or
allowed if claim therefor is filed before the close of such
period.
SEC. 607. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX
ON CERTAIN DISTRIBUTIONS OF PENSION PLANS FOR
PUBLIC SAFETY EMPLOYEES.
(a) In General.--Section 72(t)(2) of the Internal Revenue
Code of 1986 (relating to subsection not to apply to certain
distributions), as amended by section 904, is amended by
adding at the end the following new subsection:
``(H) DROP distributions to qualified public safety
employees in governmental plans.--
``(i) In general.--Distributions to an individual who is a
qualified public safety employee from a governmental plan
within the meaning of section 414(d) to the extent such
distributions are attributable to a DROP benefit.
``(ii) Definitions.--For purposes of this subparagraph--
``(I) DROP benefit.--The term `DROP benefit' means a
feature of a governmental plan which is a defined benefit
plan and under which an employee elects to receive credits to
an account (including a notional account) in the plan which
are not in excess of the plan benefits (payable in the form
of an annuity) that would have been provided if the employee
had retired under the plan at a specified earlier retirement
date and which are in lieu of increases in the employee's
accrued pension benefit based on years of service after the
effective date of the DROP election.
``(II) Qualified public safety employee.--The term
`qualified public safety employee' means any employee of any
police department or fire department organized and operated
by a State or political subdivision of a State if the
employee provides police protection, firefighting services,
or emergency medical services for any area within the
jurisdiction of such State or political subdivision and if
the employee was eligible to retire on or before the date of
such election and receive immediate retirement benefits.''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after the date of the enactment
of this Act.
SEC. 608. COMBAT ZONE COMPENSATION TAKEN INTO ACCOUNT FOR
PURPOSES OF DETERMINING LIMITATION AND
DEDUCTIBILITY OF CONTRIBUTIONS TO INDIVIDUAL
RETIREMENT PLANS.
(a) In General.--Subsection (f) of section 219 of the
Internal Revenue Code of 1986 is amended by redesignating
paragraph (7) as paragraph (8) and by inserting after
paragraph (6) the following new paragraph:
``(7) Special rule for compensation earned by members of
the armed forces for service in a combat zone.--For purposes
of subsections (b)(1)(B) and (c), the amount of compensation
includible in an individual's gross income shall be
determined without regard to section 112.''.
[[Page H11794]]
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 609. DIRECT PAYMENT OF TAX REFUNDS TO INDIVIDUAL
RETIREMENT PLANS.
(a) In General.--The Secretary of the Treasury (or the
Secretary's delegate) shall make available a form (or modify
existing forms) for use by individuals to direct that a
portion of any refund of overpayment of tax imposed by
chapter 1 of the Internal Revenue Code of 1986 be paid
directly to an individual retirement plan (as defined in
section 7701(a)(37) of such Code) of such individual.
(b) Effective Date.--The form required by subsection (a)
shall be made available for taxable years beginning after
December 31, 2006.
SEC. 610. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF
CERTAIN RETIREMENT PLAN DISTRIBUTIONS.
(a) In General.--
(1) Qualified plans.--Section 402(c) of the Internal
Revenue Code of 1986 (relating to rollovers from exempt
trusts) is amended by adding at the end the following new
paragraph:
``(11) Distributions to inherited individual retirement
plan of nonspouse beneficiary.--
``(A) In general.--If, with respect to any portion of a
distribution from an eligible retirement plan of a deceased
employee, a direct trustee-to-trustee transfer is made to an
individual retirement plan described in clause (i) or (ii) of
paragraph (8)(B) established for the purposes of receiving
the distribution on behalf of an individual who is a
designated beneficiary (as defined by section 401(a)(9)(E))
of the employee and who is not the surviving spouse of the
employee--
``(i) the transfer shall be treated as an eligible rollover
distribution for purposes of this subsection,
``(ii) the individual retirement plan shall be treated as
an inherited individual retirement account or individual
retirement annuity (within the meaning of section
408(d)(3)(C)) for purposes of this title, and
``(iii) section 401(a)(9)(B) (other than clause (iv)
thereof) shall apply to such plan.
``(B) Certain trusts treated as beneficiaries.--For
purposes of this paragraph, to the extent provided in rules
prescribed by the Secretary, a trust maintained for the
benefit of one or more designated beneficiaries shall be
treated in the same manner as a trust designated
beneficiary.''.
(2) Section 403(a) plans.--Subparagraph (B) of section
403(a)(4) of such Code (relating to rollover amounts) is
amended by inserting ``and (11)'' after ``(7)''.
(3) Section 403(b) plans.--Subparagraph (B) of section
403(b)(8) of such Code (relating to rollover amounts) is
amended by striking ``and (9)'' and inserting ``, (9), and
(11)''.
(4) Section 457 plans.--Subparagraph (B) of section
457(e)(16) of such Code (relating to rollover amounts) is
amended by striking ``and (9)'' and inserting ``, (9), and
(11)''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2005.
SEC. 611. IRA ELIGIBILITY FOR THE DISABLED.
(a) In General.--Subsection (f) of section 219 of the
Internal Revenue Code of 1986 (relating to other definitions
and special rules) is amended by adding at the end the
following:
``(8) Special rule for certain disabled individuals.--In
the case of an individual--
``(A) who is disabled (within the meaning of section
72(m)(7)), and
``(B) who has not attained the applicable age (as defined
in section 401(a)(9)(H)) before the close of the taxable
year,
subparagraph (B) of subsection (b)(1) shall not apply.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2005.
TITLE VII--PROVISIONS TO ENHANCE HEALTH CARE AFFORDABILITY
SEC. 701. TREATMENT OF ANNUITY AND LIFE INSURANCE CONTRACTS
WITH A LONG-TERM CARE INSURANCE FEATURE.
(a) Exclusion From Gross Income.--Subsection (e) of section
72 of the Internal Revenue Code of 1986 (relating to amounts
not received as annuities) is amended by redesignating
paragraph (11) as paragraph (12) and by inserting after
paragraph (10) the following new paragraph:
``(11) Special rules for certain combination contracts
providing long-term care insurance.--Notwithstanding
paragraphs (2), (5)(C), and (10), in the case of any charge
against the cash value of an annuity contract or the cash
surrender value of a life insurance contract made as payment
for coverage under a qualified long-term care insurance
contract which is part of or a rider on such annuity or life
insurance contract--
``(A) the investment in the contract shall be reduced (but
not below zero) by such charge, and
``(B) such charge shall not be includible in gross
income.''.
(b) Tax-Free Exchanges Among Certain Insurance Policies.--
(1) Annuity contracts can include qualified long-term care
insurance riders.--Paragraph (2) of section 1035(b) of such
Code is amended by adding at the end the following new
sentence: ``For purposes of the preceding sentence, a
contract shall not fail to be treated as an annuity contract
solely because a qualified long-term care insurance contract
is a part of or a rider on such contract.''.
(2) Life insurance contracts can include qualified long-
term care insurance riders.--Paragraph (3) of section 1035(b)
of such Code is amended by adding at the end the following
new sentence: ``For purposes of the preceding sentence, a
contract shall not fail to be treated as a life insurance
contract solely because a qualified long-term care insurance
contract is a part of or a rider on such contract.''.
(3) Expansion of tax-free exchanges of life insurance,
endowment, and annuity contracts for long-term care
contracts.--Subsection (a) of section 1035 of such Code
(relating to certain exchanges of insurance policies) is
amended--
(A) in paragraph (1) by striking ``contract;'' and
inserting ``contract or for a qualified long-term care
insurance contract;'',
(B) in paragraph (2) by striking ``contract;'' and
inserting ``contract, or (C) for a qualified long-term care
insurance contract;'', and
(C) in paragraph (3) by striking ``contract.'' and
inserting ``contract or for a qualified long-term care
insurance contract.''.
(4) Tax-free exchanges of qualified long-term care
insurance contract.--Subsection (a) of section 1035 of such
Code (relating to certain exchanges of insurance policies) is
amended by striking ``or'' at the end of paragraph (2), by
striking the period at the end of paragraph (3) and inserting
``; or'', and by inserting after paragraph (3) the following
new paragraph:
``(4) a qualified long-term care insurance contract for a
qualified long-term care insurance contract.''.
(c) Treatment of Coverage Provided as Part of a Life
Insurance or Annuity Contract.--Subsection (e) of section
7702B of such Code (relating to treatment of qualified long-
term care insurance) is amended to read as follows:
``(e) Treatment of Coverage Provided as Part of a Life
Insurance or Annuity Contract.--
``(1) Coverage treated as contract.--Except as otherwise
provided in regulations prescribed by the Secretary, in the
case of any long-term care insurance coverage (whether or not
qualified) provided by a rider on or as part of a life
insurance contract or an annuity contract, this title shall
apply as if the portion of the contract providing such
coverage is a separate contract.
``(2) Denial of deduction under section 213.--No deduction
shall be allowed under section 213(a) for any payment made
for coverage under a qualified long-term care insurance
contract if such payment is made as a charge against the cash
value of an annuity contract or the cash surrender value of a
life insurance contract.
``(3) Application of section 7702.--Section 7702(c)(2)
(relating to the guideline premium limitation) shall be
applied by increasing the guideline premium limitation with
respect to the life insurance contract, as of any date--
``(A) by the sum of any charges (but not premium payments)
against the life insurance contract's cash surrender value
(within the meaning of section 7702(f)(2)(A)) for coverage
under the qualified long-term care insurance contract made to
that date under the life insurance contract, less
``(B) any such charges the imposition of which reduces the
premiums paid for the life insurance contract (within the
meaning of section 7702(f)(1)).
``(4) Portion defined.--For purposes of this subsection,
the term `portion' means only the terms and benefits under a
life insurance contract or annuity contract that are in
addition to the terms and benefits under the contract without
regard to long-term care insurance coverage.
``(5) Annuity contracts to which paragraph (1) does not
apply.--For purposes of this subsection, none of the
following shall be treated as an annuity contract:
``(A) A trust described in section 401(a) which is exempt
from tax under section 501(a).
``(B) A contract--
``(i) purchased by a trust described in subparagraph (A),
``(ii) purchased as part of a plan described in section
403(a),
``(iii) described in section 403(b),
``(iv) provided for employees of a life insurance company
under a plan described in section 818(a)(3), or
``(v) from an individual retirement account or an
individual retirement annuity.
``(C) A contract purchased by an employer for the benefit
of the employee (or the employee's spouse).
Any dividend described in section 404(k) which is received by
a participant or beneficiary shall, for purposes of this
paragraph, be treated as paid under a separate contract to
which subparagraph (B)(i) applies.''.
(d) Information Reporting.--
(1) Subpart B of part III of subchapter A of chapter 61 of
such Code (relating to information concerning transactions
with other persons) is amended by adding at the end the
following new section:
``SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED LONG-TERM
CARE INSURANCE CONTRACTS UNDER COMBINED
ARRANGEMENTS.
``(a) Requirement of Reporting.--Any person who makes a
charge against the cash value of an annuity contract, or the
cash surrender value of a life insurance contract, which is
excludible from gross income under section 72(e)(11) shall
make a return, according to the forms or regulations
prescribed by the Secretary, setting forth--
[[Page H11795]]
``(1) the amount of the aggregate of such charges against
each such contract for the calendar year,
``(2) the amount of the reduction in the investment in each
such contract by reason of such charges, and
``(3) the name, address, and TIN of the individual who is
the holder of each such contract.
``(b) Statements to Be Furnished to Persons With Respect to
Whom Information Is Required.--Every person required to make
a return under subsection (a) shall furnish to each
individual whose name is required to be set forth in such
return a written statement showing--
``(1) the name, address, and phone number of the
information contact of the person making the payments, and
``(2) the information required to be shown on the return
with respect to such individual.
The written statement required under the preceding sentence
shall be furnished to the individual on or before January 31
of the year following the calendar year for which the return
under subsection (a) was required to be made.''.
(2) Clerical amendment.--The table of sections for subpart
B of part III of subchapter A of such chapter 61 of such Code
is amended by adding at the end the following new item:
``Sec. 6050U. Charges or payments for qualified long-term care
insurance contracts under combined arrangements.''.
(e) Treatment of Policy Acquisition Expenses.--Subsection
(e) of section 848 of such Code (relating to classification
of contracts) is amended by adding at the end the following
new paragraph:
``(6) Treatment of certain qualified long-term care
insurance contract arrangements.--An annuity or life
insurance contract which includes a qualified long-term care
insurance contract as a part of or a rider on such annuity or
life insurance contract shall be treated as a specified
insurance contract not described in subparagraph (A) or (B)
of subsection (c)(1).''.
(f) Treatment as Qualified Additional Benefit.--
Subparagraph (A) of section 7702(f)(5) of such Code (relating
to qualified additional benefits) is amended by striking
``or'' at the end of clause (iv), by redesignating clause (v)
as clause (vi), and by inserting after clause (iv) the
following new clause:
``(v) qualified long-term care insurance contract which is
a part of or a rider on the contract, or''.
(g) Effective Dates.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to contracts
issued before, on, or after December 31, 2006, but only with
respect to periods beginning after such date.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply with respect to exchanges occurring after
December 31, 2006.
SEC. 702. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA
PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.
(a) In General.--Section 125 of the Internal Revenue Code
of 1986 (relating to cafeteria plans) is amended by
redesignating subsections (h) and (i) as subsections (i) and
(j), respectively, and by inserting after subsection (g) the
following:
``(h) Contributions of Certain Unused Health Benefits.--
``(1) In general.--For purposes of this title, a plan or
other arrangement shall not fail to be treated as a cafeteria
plan solely because qualified benefits under such plan
include a health flexible spending arrangement under which
not more than $500 of unused health benefits may be--
``(A) carried forward to the succeeding plan year of such
health flexible spending arrangement, or
``(B) to the extent permitted by section 106(d),
contributed by the employer to a health savings account (as
defined in section 223(d)) maintained for the benefit of the
employee.
``(2) Health flexible spending arrangement.--For purposes
of this subsection, the term `health flexible spending
arrangement' means a flexible spending arrangement (as
defined in section 106(c)) that is a qualified benefit and
only permits reimbursement for expenses for medical care (as
defined in section 213(d)(1), without regard to subparagraphs
(C) and (D) thereof).
``(3) Unused health benefits.--For purposes of this
subsection, with respect to an employee, the term `unused
health benefits' means the excess of--
``(A) the maximum amount of reimbursement allowable to the
employee for a plan year under a health flexible spending
arrangement, over
``(B) the actual amount of reimbursement for such year
under such arrangement.''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to taxable years beginning after December 31,
2005.
SEC. 703. DISTRIBUTIONS FROM GOVERNMENTAL RETIREMENT PLANS
FOR HEALTH AND LONG-TERM CARE INSURANCE FOR
PUBLIC SAFETY OFFICERS.
(a) In General.--Section 402 of the Internal Revenue Code
of 1986 (relating to taxability of beneficiary of employees'
trust) is amended by adding at the end the following new
subsection:
``(l) Distributions From Governmental Plans for Health and
Long-Term Care Insurance.--
``(1) In general.--In the case of an employee who is an
eligible retired public safety officer who makes the election
described in paragraph (6) with respect to any taxable year
of such employee, gross income of such employee for such
taxable year does not include any distribution from an
eligible retirement plan to the extent that the aggregate
amount of such distributions does not exceed the amount paid
by such employee for qualified health insurance premiums of
the employee, his spouse, or dependents (as defined in
section 152) for such taxable year.
``(2) Limitation.--The amount which may be excluded from
gross income for the taxable year by reason of paragraph (1)
shall not exceed $5,000.
``(3) Distributions must otherwise be includible.--
``(A) In general.--An amount shall be treated as a
distribution for purposes of paragraph (1) only to the extent
that such amount would be includible in gross income without
regard to paragraph (1).
``(B) Application of section 72.--Notwithstanding section
72, in determining the extent to which an amount is treated
as a distribution for purposes of subparagraph (A), the
aggregate amounts distributed from an eligible retirement
plan in a taxable year (up to the amount excluded under
paragraph (1)) shall be treated as includible in gross income
(without regard to subparagraph (A)) to the extent that such
amount does not exceed the aggregate amount which would have
been so includible if all amounts distributed from all
eligible retirement plans were treated as 1 contract for
purposes of determining the inclusion of such distribution
under section 72. Proper adjustments shall be made in
applying section 72 to other distributions in such taxable
year and subsequent taxable years.
``(4) Definitions.--For purposes of this subsection--
``(A) Eligible retirement plan.--For purposes of paragraph
(1), the term `eligible retirement plan' means a governmental
plan (within the meaning of section 414(d)) which is
described in clause (iii), (iv), (v), or (vi) of subsection
(c)(8)(B).
``(B) Eligible retired public safety officer.--The term
`eligible retired public safety officer' means an individual
who, by reason of disability or attainment of normal
retirement age, is separated from service as a public safety
officer with the employer who maintains the eligible
retirement plan from which distributions subject to paragraph
(1) are made.
``(C) Public safety officer.--The term `public safety
officer' shall have the same meaning given such term by
section 1204(8)(A) of the Omnibus Crime Control and Safe
Streets Act of 1968 (42 U.S.C. 3796b(8)(A)).
``(D) Qualified health insurance premiums.--The term
`qualified health insurance premiums' means premiums for
coverage for the eligible retired public safety officer, his
spouse, and dependents, by an accident or health insurance
plan or qualified long-term care insurance contract (as
defined in section 7702B(b)).
``(5) Special rules.--For purposes of this subsection--
``(A) Direct payment to insurer required.--Paragraph (1)
shall only apply to a distribution if payment of the premiums
is made directly to the provider of the accident or health
insurance plan or qualified long-term care insurance contract
by deduction from a distribution from the eligible retirement
plan.
``(B) Related plans treated as 1.--All eligible retirement
plans of an employer shall be treated as a single plan.
``(6) Election described.--
``(A) In general.--For purposes of paragraph (1), an
election is described in this paragraph if the election is
made by an employee after separation from service with
respect to amounts not distributed from an eligible
retirement plan to have amounts from such plan distributed in
order to pay for qualified health insurance premiums.
``(B) Special rule.--A plan shall not be treated as
violating the requirements of section 401, or as engaging in
a prohibited transaction for purposes of section 503(b),
merely because it provides for an election with respect to
amounts that are otherwise distributable under the plan or
merely because of a distribution made pursuant to an election
described in subparagraph (A).
``(7) Coordination with medical expense deduction.--The
amounts excluded from gross income under paragraph (1) shall
not be taken into account under section 213.
``(8) Coordination with deduction for health insurance
costs of self-employed individuals.--The amounts excluded
from gross income under paragraph (1) shall not be taken into
account under section 162(l).''.
(b) Conforming Amendments.--
(1) Section 403(a) of such Code (relating to taxability of
beneficiary under a qualified annuity plan) is amended by
inserting after paragraph (1) the following new paragraph:
``(2) Special rule for health and long-term care
insurance.--To the extent provided in section 402(l),
paragraph (1) shall not apply to the amount distributed under
the contract which is otherwise includible in gross income
under this subsection.''.
(2) Section 403(b) of such Code (relating to taxability of
beneficiary under annuity purchased by section 501(c)(3)
organization or public school) is amended by inserting after
paragraph (1) the following new paragraph:
[[Page H11796]]
``(2) Special rule for health and long-term care
insurance.--To the extent provided in section 402(l),
paragraph (1) shall not apply to the amount distributed under
the contract which is otherwise includible in gross income
under this subsection.''.
(3) Section 457(a) of such Code (relating to year of
inclusion in gross income) is amended by adding at the end
the following new paragraph:
``(3) Special rule for health and long-term care
insurance.--In the case of a plan of an eligible employer
described in subsection (e)(1)(A), to the extent provided in
section 402(l), paragraph (1) shall not apply to amounts
otherwise includible in gross income under this
subsection.''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions in taxable years beginning after
December 31, 2005.
TITLE VIII--REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES WITH
INCOMES OVER $1,000,000
SEC. 801. REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES
WITH INCOMES OVER $1,000,000.
(a) General Rule.--Section 1 of the Internal Revenue Code
of 1986 (relating to imposition of tax on individuals) is
amended by adding at the end the following new subsection:
``(j) Reduction in Benefit of Rate Reduction for Families
With Incomes Over $1,000,000.--
``(1) In general.--If the adjusted gross income of a
taxpayer exceeds the threshold amount, the tax imposed by
this section (determined without regard to this subsection)
shall be increased by an amount equal to 1.8 percent of so
much of the adjusted gross income as exceeds the threshold
amount.
``(2) Threshold amounts.--For purposes of this subsection,
the term `threshold amount' means--
``(A) $1,000,000 in the case of a joint return, and
``(B) $500,000 in the case of any other return.
``(3) Tax not to apply to estates and trusts.--This
subsection shall not apply to an estate or trust.
``(4) Special rule.--For purposes of section 55, the amount
of the regular tax shall be determined without regard to this
subsection.
``(5) Termination.--This subsection shall not apply to
taxable years beginning after December 31, 2010.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
(c) Section 15 not to Apply.--The amendment made by
subsection (a) shall not be treated as a change in a rate of
tax for purposes of section 15 of the Internal Revenue Code
of 1986.
Mr. GEORGE MILLER of California (during the reading). Mr. Speaker, I
ask unanimous consent that the motion to recommit be considered as read
and printed in the Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from California?
There was no objection.
The SPEAKER pro tempore. The gentleman from California is recognized
for 5 minutes.
Mr. GEORGE MILLER of California. Mr. Speaker, we offer this motion to
recommit to address a number of issues that are not addressed in the
legislation before us and to hopefully not do some of the things that
the legislation before us does. We believe that we can do these things
without driving employers out of the defined benefit system.
The current bill before us provides a compilation of interest rates
and premium fees and costs that we believe will drive employers to
accelerate the termination and freezing of these plans. That is not
because we say it; that is what the employers have told one another in
their associations, the expectation that some 60 percent of the
employers will freeze or terminate their plans.
We believe that our motion to recommit does not impose arbitrary
benefit cuts and freezes on workers who do not control whether or not
the employers fund the pension plans or not.
The motion to recommit would require companies to seek alternatives
to the termination and prove that a plan is in fact unaffordable before
they can cast it away in bankruptcy, as we saw United Airlines do, that
cost the employees billions of dollars in pension benefits.
Importantly, the motion to recommit would actually help the employees
of American, Continental, Delta and Northwest Airlines, whose pension
plans are in danger of being terminated. The bill before us does not do
that. It talks about doing that in the future.
The motion to recommit would also protect 9 million workers who are
covered by multi-employer pension plans in the construction, food
service and transportation industries. We would ensure that workers and
executives would be affected equally in pension plans. Again, the
horrible demonstration out of United Airlines, as the executives walked
away with $235 million in a new, debt-free company and the employees
walked away with wage cuts and benefits cuts and the loss of retirement
benefits.
Finally, the motion to recommit would help workers who do not have
access to defined benefit plans through the automatic enrollment in
401(k) plans and the expanded savers credit.
This legislation, if it is not corrected, is the greatest assault on
the pension benefits and the retirement nest eggs of hardworking,
middle class Americans in the history of this Congress. I say that
because it is quite clear that this will expedite and will accelerate
the freezing and the termination of these plans that so many millions
of Americans are relying on.
One thing this legislation will do, if you want to continue to debate
Social Security, you will now prove with the passage of this
legislation that Social Security is the most secure retirement system
in this country, that it is the only one that people can count on,
because these other plans are in jeopardy.
Mr. Speaker, I yield to my colleague, Mr. Cardin from Maryland.
Mr. CARDIN. Let me thank Mr. Miller for offering this substitute. I
am pleased to join him.
I listened to a lot of my colleagues talk in favor of this bill,
telling me things they do not particularly like about it, things that
will be, they hope, corrected in conference, and now we have a motion
to recommit that does exactly that.
So if we are sincere in wanting to move the process forward so that
we can get to conference, let us speak to what we want to get from the
conference report. Let me make it clear that the rule did not permit us
to offer this directly as a substitute, so the only way we can do it is
by the motion to recommit.
But it does contain the issues that many have talked about. It has
the good without the bad. It has the provisions for the defined
contributions, so that we can deal with the 401(k)s and the IRAs and
the savers credits and automatic enrollments and those provisions that
are important. But it also deals with the issue of the airline industry
directly, not on a promise that we will deal with it in conference, and
it deals with the revolving door of bankruptcy, which, if we do not
correct, we are going to have other problems in addition to the airline
industry. So it deals with those problems.
But it does one more thing, Mr. Speaker, that is critically
important: It takes away the additional deficit that this bill would
create. This bill will add an additional $14 billion to the deficit of
this country. The substitute pays for the cost of the legislation so
that we do not add to the growing problem of the deficit of this
Nation.
{time} 1515
This is a responsible motion, and I urge my colleagues to support it.
Mr. BOEHNER. Mr. Speaker, I rise in opposition to the motion to
recommit.
The SPEAKER pro tempore (Mr. Latham). The gentleman is recognized for
5 minutes.
Mr. BOEHNER. Mr. Speaker, the debate today on the floor is about the
massive underfunding in worker pensions and the need to change the
status quo. Unfortunately, what we have just been presented is what
would actually make pensions less secure by preserving the status quo
and putting at risk millions of American pensions.
Let me make five points. First, the motion to recommit preserves the
status quo by requiring employers and union leaders to fund their plans
at 90 percent or in some cases only 80 percent, instead of the 100
percent funding requirements that we have in the underlying bill. It
just does not pass the straight-face test.
Second, they are preserving the status quo by continuing to allow
employers to take up to 30 years to erase any funding shortfall in
their plan. Pension experts agree that this increases the risk of plan
termination, threatening the benefits of workers and retirees.
Third, they are preserving the status quo on unrestricted use of
credit balances which mask the massive pension
[[Page H11797]]
plan underfunding we see today. We know that the credit balance rules
that are in place today are irresponsible public policy. They must be
changed if we are going to strengthen the pension system. And to allow
those rules to stay in place, again, does not pass the straight-face
test.
Fourth, they propose preserving the status quo by failing to
incorporate the full package of multi-employer reforms that were agreed
to by a broad coalition of organized labor and employer groups.
Last, they preserve the status quo by promoting uncertainty among
employers if these pension benefits and workers who are relying on them
maintain the current interest rate package for 2 years and then go back
to the 30-year rate thereafter.
The modified yield curve in the underlying bill presents a more
accurate picture of the liabilities that these plans have and should,
in fact, stay in the bill.
Mr. Speaker, I believe that the underlying bill is far more balanced.
It really does strengthen American pensions, and I would urge my
colleagues to reject this.
I yield to the gentleman from Michigan.
Mr. CAMP of Michigan. Mr. Speaker, I thank the distinguished chairman
for yielding.
I oppose the motion to recommit. This motion to recommit leaves
current pension funding rules in place which ends up weakening the
funding rules in the underlying bill. This means that businesses would
not be fulfilling their promises to working people.
The motion to recommit also has a $53 billion surtax contained in it
on small business. That surtax is bad for workers, bad for small
business, bad for America. So I would urge a ``no'' vote on the motion
to recommit, a ``yes'' vote on the underlying bill, which would ensure
that pension plans would be appropriately funded, but not so strict as
to cause employers to terminate their pension plans. I urge a ``yes''
vote on the underlying bill.
The SPEAKER pro tempore. Without objection, the previous question is
ordered on the motion to recommit.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. GEORGE MILLER of California. Mr. Speaker, on that I demand the
yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 and clause 9 of rule
XX, this 15-minute vote on the motion to recommit will be followed by
5-minute votes on the question of passage, if ordered; adoption of H.
Res. 610; and motions to suspend the rules with respect to H. Res. 579
and H. Con. Res. 315.
The vote was taken by electronic device, and there were--yeas 200,
nays 227, not voting 6, as follows:
[Roll No. 634]
YEAS--200
Abercrombie
Ackerman
Allen
Andrews
Baca
Baird
Baldwin
Barrow
Bean
Becerra
Berkley
Berman
Berry
Bishop (GA)
Bishop (NY)
Blumenauer
Boren
Boswell
Boucher
Boyd
Brady (PA)
Brown (OH)
Brown, Corrine
Butterfield
Capps
Capuano
Cardin
Cardoza
Carnahan
Carson
Case
Chandler
Clay
Cleaver
Clyburn
Conyers
Cooper
Costa
Costello
Cramer
Crowley
Cuellar
Cummings
Davis (AL)
Davis (CA)
Davis (IL)
Davis (TN)
DeFazio
DeGette
Delahunt
DeLauro
Dicks
Dingell
Doggett
Doyle
Edwards
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Gonzalez
Gordon
Green, Al
Green, Gene
Grijalva
Gutierrez
Harman
Hastings (FL)
Herseth
Higgins
Hinchey
Hinojosa
Holden
Holt
Honda
Hooley
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick (MI)
Kind
Kucinich
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lipinski
Lofgren, Zoe
Lowey
Lynch
Maloney
Markey
Marshall
Matsui
McCarthy
McCollum (MN)
McDermott
McGovern
McIntyre
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Melancon
Menendez
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moore (KS)
Moore (WI)
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Ross
Rothman
Roybal-Allard
Ruppersberger
Rush
Ryan (OH)
Sabo
Salazar
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Schwartz (PA)
Scott (GA)
Scott (VA)
Serrano
Sherman
Skelton
Slaughter
Smith (WA)
Snyder
Solis
Spratt
Stark
Strickland
Stupak
Tanner
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Tierney
Towns
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Wasserman Schultz
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NAYS--227
Aderholt
Akin
Alexander
Bachus
Baker
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boustany
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burton (IN)
Buyer
Calvert
Camp (MI)
Campbell (CA)
Cannon
Cantor
Capito
Carter
Castle
Chabot
Chocola
Coble
Cole (OK)
Conaway
Crenshaw
Cubin
Culberson
Davis (KY)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
Dent
Diaz-Balart, L.
Doolittle
Drake
Dreier
Duncan
Ehlers
Emerson
English (PA)
Everett
Feeney
Ferguson
Fitzpatrick (PA)
Flake
Foley
Forbes
Fortenberry
Fossella
Foxx
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Gohmert
Goode
Goodlatte
Granger
Graves
Green (WI)
Gutknecht
Hall
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Hulshof
Hunter
Inglis (SC)
Issa
Istook
Jenkins
Jindal
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
Kuhl (NY)
LaHood
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas
Lungren, Daniel E.
Mack
Manzullo
Marchant
Matheson
McCaul (TX)
McCotter
McCrery
McHenry
McHugh
McKeon
McMorris
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Otter
Oxley
Paul
Pence
Peterson (PA)
Petri
Pitts
Platts
Poe
Pombo
Porter
Price (GA)
Pryce (OH)
Putnam
Radanovich
Ramstad
Regula
Rehberg
Reichert
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Royce
Ryan (WI)
Ryun (KS)
Saxton
Schmidt
Schwarz (MI)
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (NJ)
Smith (TX)
Sodrel
Souder
Stearns
Sullivan
Sweeney
Tancredo
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Turner
Upton
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Westmoreland
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
Young (FL)
NOT VOTING--6
Davis (FL)
Diaz-Balart, M.
Hyde
Pearce
Pickering
Waters
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Latham) (during the vote). Members are
advised there are 2 minutes remaining in this vote.
{time} 1542
Mr. BARRETT of South Carolina and Mr. SOUDER changed their vote from
``yea'' to ``nay.''
Messrs. McDERMOTT, REYES and FARR changed their vote from ``nay'' to
``yea.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Recorded Vote
Mr. BOEHNER. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. This will be a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 294,
noes 132, not voting 7, as follows:
[[Page H11798]]
[Roll No. 635]
AYES--294
Aderholt
Akin
Alexander
Andrews
Baca
Bachus
Baker
Barrett (SC)
Barrow
Bartlett (MD)
Barton (TX)
Bass
Bean
Beauprez
Berry
Biggert
Bilirakis
Bishop (GA)
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boren
Boswell
Boustany
Bradley (NH)
Brady (PA)
Brady (TX)
Brown (OH)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burton (IN)
Buyer
Calvert
Camp (MI)
Campbell (CA)
Cannon
Cantor
Capito
Capuano
Carter
Case
Castle
Chabot
Chandler
Chocola
Clay
Cleaver
Coble
Cole (OK)
Conaway
Conyers
Cooper
Costello
Cramer
Crenshaw
Cubin
Cuellar
Culberson
Davis (KY)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
Dent
Dingell
Doolittle
Drake
Dreier
Duncan
Edwards
Ehlers
Emerson
Engel
English (PA)
Everett
Fattah
Feeney
Ferguson
Fitzpatrick (PA)
Flake
Foley
Forbes
Ford
Fortenberry
Fossella
Foxx
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gillmor
Gingrey
Gohmert
Goode
Goodlatte
Gordon
Granger
Graves
Green (WI)
Green, Gene
Gutierrez
Gutknecht
Hall
Harman
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Herseth
Hobson
Hoekstra
Holden
Hooley
Hulshof
Hunter
Inglis (SC)
Inslee
Israel
Issa
Istook
Jenkins
Jindal
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kildee
Kilpatrick (MI)
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
Kucinich
Kuhl (NY)
LaHood
Larsen (WA)
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lucas
Lungren, Daniel E.
Lynch
Mack
Manzullo
Marchant
Marshall
Matheson
McCarthy
McCaul (TX)
McCotter
McCrery
McHenry
McHugh
McIntyre
McKeon
McMorris
McNulty
Meek (FL)
Meeks (NY)
Melancon
Menendez
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Moore (KS)
Moran (KS)
Murphy
Musgrave
Myrick
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Oberstar
Osborne
Otter
Owens
Oxley
Pascrell
Pastor
Paul
Pearce
Pence
Peterson (MN)
Peterson (PA)
Petri
Pitts
Platts
Poe
Pombo
Porter
Price (GA)
Pryce (OH)
Putnam
Radanovich
Rahall
Ramstad
Regula
Rehberg
Reichert
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ross
Rothman
Royce
Ryan (OH)
Ryan (WI)
Ryun (KS)
Saxton
Schmidt
Schwarz (MI)
Scott (GA)
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Sodrel
Souder
Stearns
Strickland
Stupak
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Turner
Upton
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Westmoreland
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Wu
Wynn
Young (AK)
Young (FL)
NOES--132
Abercrombie
Ackerman
Allen
Baird
Baldwin
Becerra
Berkley
Berman
Bishop (NY)
Blumenauer
Boucher
Boyd
Brown, Corrine
Butterfield
Capps
Cardin
Cardoza
Carnahan
Carson
Clyburn
Costa
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Dicks
Doggett
Doyle
Emanuel
Eshoo
Etheridge
Evans
Farr
Filner
Frank (MA)
Gonzalez
Green, Al
Grijalva
Hastings (FL)
Higgins
Hinchey
Hinojosa
Holt
Honda
Hostettler
Hoyer
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Langevin
Lantos
Larson (CT)
Lee
Levin
Lewis (GA)
Lofgren, Zoe
Lowey
Maloney
Markey
Matsui
McCollum (MN)
McDermott
McGovern
McKinney
Meehan
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moore (WI)
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Obey
Olver
Ortiz
Pallone
Payne
Pelosi
Pomeroy
Price (NC)
Rangel
Reyes
Roybal-Allard
Ruppersberger
Rush
Sabo
Salazar
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Schwartz (PA)
Scott (VA)
Serrano
Sherman
Skelton
Slaughter
Solis
Spratt
Stark
Taylor (MS)
Thompson (CA)
Thompson (MS)
Tierney
Towns
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Wasserman Schultz
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
NOT VOTING--7
Davis (FL)
Diaz-Balart, L.
Diaz-Balart, M.
Gilchrest
Hyde
Pickering
Waters
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Latham) (during the vote). Members are
advised that 2 minutes remain in this vote.
{time} 1550
Mr. COSTELLO and Mr. MEEK of Florida changed their vote from ``no''
to ``aye.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________