[Congressional Record Volume 160, Number 46 (Monday, March 24, 2014)]
[House]
[Pages H2577-H2589]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1715
COOPERATIVE AND SMALL EMPLOYER CHARITY PENSION FLEXIBILITY ACT
Mrs. BROOKS of Indiana. Madam Speaker, I move to suspend the rules
and pass the bill (H.R. 4275) to amend the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code of 1986 to provide
for cooperative and small employer charity pension plans.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 4275
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the
``Cooperative and Small Employer Charity Pension Flexibility
Act''.
(b) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Congressional findings and declarations of policy.
Sec. 3. Effective date.
TITLE I--AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
AND OTHER PROVISIONS
Sec. 101. Definition of cooperative and small employer charity pension
plans.
Sec. 102. Funding rules applicable to cooperative and small employer
charity pension plans.
Sec. 103. Elections.
Sec. 104. Transparency.
Sec. 105. Sponsor education and assistance.
TITLE II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
Sec. 201. Definition of cooperative and small employer charity pension
plans.
Sec. 202. Funding rules applicable to cooperative and small employer
charity pension plans.
Sec. 203. Election not to be treated as a CSEC plan.
SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATIONS OF POLICY.
Congress finds as follows:
(1) Defined benefit pension plans are a cost-effective way
for cooperative associations and charities to provide their
employees with economic security in retirement.
(2) Many cooperative associations and charitable
organizations are only able to provide their employees with
defined benefit pension plans because those organizations are
able to pool their resources using the multiple employer plan
structure.
(3) The pension funding rules should encourage cooperative
associations and charities to continue to provide their
employees with pension benefits.
SEC. 3. EFFECTIVE DATE.
Unless otherwise specified in this Act, the provisions of
this Act shall apply to years beginning after December 31,
2013.
TITLE I--AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
AND OTHER PROVISIONS
SEC. 101. DEFINITION OF COOPERATIVE AND SMALL EMPLOYER
CHARITY PENSION PLANS.
Section 210 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1060) is amended by adding at the end the
following new subsection:
``(f) Cooperative and Small Employer Charity Pension
Plans.--
``(1) In general.--For purposes of this title, except as
provided in this subsection, a CSEC plan is an employee
pension benefit plan (other than a multiemployer plan) that
is a defined benefit plan--
``(A) to which section 104 of the Pension Protection Act of
2006 applies, without regard to--
``(i) section 104(a)(2) of such Act;
``(ii) the amendments to such section 104 by section 202(b)
of the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010; and
``(iii) paragraph (3)(B); or
``(B) that, as of June 25, 2010, was maintained by more
than one employer and all of the employers were organizations
described in section 501(c)(3) of the Internal Revenue Code
of 1986.
``(2) Aggregation.--All employers that are treated as a
single employer under subsection (b) or (c) of section 414 of
the Internal Revenue Code of 1986 shall be treated as a
single employer for purposes of determining if a plan was
maintained by more than one employer under paragraph
(1)(B).''.
SEC. 102. FUNDING RULES APPLICABLE TO COOPERATIVE AND SMALL
EMPLOYER CHARITY PENSION PLANS.
(a) In General.--Part 3 of title I of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1081 et
seq.) is amended by adding at the end the following new
section:
``SEC. 306. MINIMUM FUNDING STANDARDS.
``(a) General Rule.--For purposes of section 302, the term
`accumulated funding deficiency' for a CSEC plan means the
excess of the total charges to the funding standard account
for all plan years (beginning with the first plan year to
which section 302 applies) over the total credits to such
account for
[[Page H2578]]
such years or, if less, the excess of the total charges to
the alternative minimum funding standard account for such
plan years over the total credits to such account for such
years.
``(b) Funding Standard Account.--
``(1) Account required.--Each plan to which this section
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 302
applies, over a period of 40 plan years,
``(ii) in the case of a plan which comes into existence
after January 1, 1974, but before the first day of the first
plan year beginning after December 31, 2013, the unfunded
past service liability under the plan on the first day of the
first plan year to which section 302 applies, over a period
of 30 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 5
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 10 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 5 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 paragraph (3)(D), 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
enactment of the Pension Protection Act of 2006).
``(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 5
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 10 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, 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) 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.
``(5) Interest.--
``(A) In general.--Except as provided in subparagraph (B),
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.
``(B) Exception.--The interest rate used for purposes of
computing the amortization charge described in subsection
(b)(2)(C) or for purposes of any arrangement under subsection
(d) for any plan year shall be the greater of--
``(i) 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
``(ii) the rate of interest determined under subparagraph
(A).
``(6) Amortization schedules in effect.--Amortization
schedules for amounts described in paragraphs (2) and (3)
that are in effect as of the last day of the last plan year
beginning before January 1, 2014, by reason of section 104 of
the Pension Protection Act of 2006 shall remain in effect
pursuant to their terms and this section, except that such
amounts shall not be amortized again under this section.
``(c) Special 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) Dedicated bond portfolio.--The Secretary of the
Treasury may by regulations provide that the value of any
dedicated bond portfolio of a plan shall be determined by
using the interest rate under section 302(b)(5) (as in effect
on the day before the enactment of the Pension Protection Act
of 2006).
``(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) Funding method and plan year.--
``(A) Funding methods available.--All funding methods
available to CSEC plans under section 302 (as in effect on
the day before the enactment of the Pension Protection Act of
2006) shall continue to be available under this section.
``(B) Changes.--If the funding method for a plan is
changed, the new funding method shall become the funding
method used to determine costs and liabilities under the plan
only if the change is approved by the Secretary of the
Treasury. If the plan year for a plan is changed, the new
plan year shall become the plan year for the plan only if the
change is approved by the Secretary of the Treasury.
``(C) Approval required for certain changes in assumptions
by certain single-employer plans subject to additional
funding requirement.--
``(i) In general.--No actuarial assumption (other than the
assumptions described in subsection (h)(3)) used to determine
the current liability for a plan to which this subparagraph
applies may be changed without the approval of the Secretary
of the Treasury.
``(ii) Plans to which subparagraph applies.--This
subparagraph shall apply to a plan only if--
``(I) the plan is a CSEC plan,
``(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
current liability of the plan before such change.
``(6) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency (determined without regard to
the alternative minimum funding standard account permitted
under subsection (e)) 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 paragraphs (2)(B), (C), and
(D) and (3)(B) of subsection (b) which are required to be
amortized shall be considered fully amortized for purposes of
such paragraphs.
[[Page H2579]]
``(7) Full-funding limitation.--For purposes of paragraph
(6), the term `full-funding limitation' means the excess (if
any) of--
``(A) 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
``(B) the lesser of--
``(i) the fair market value of the plan's assets, or
``(ii) the value of such assets determined under paragraph
(2).
``(C) 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 (determined
without regard to paragraph (4) of subsection (h)) of the
plan (including the expected increase in such 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.
``(8) 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.
``(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.
``(9) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer during the period--
``(A) beginning on the day after the last day of such plan
year, and
``(B) ending on the day which is 8\1/2\ months after the
close of the plan year,
shall be deemed to have been made on such last day.
``(10) Anticipation of benefit increases effective in the
future.--In determining projected benefits, the funding
method of a collectively bargained CSEC plan described in
section 413(a) of the Internal Revenue Code of 1986 shall
anticipate benefit increases scheduled to take effect during
the term of the collective bargaining agreement applicable to
the plan.
``(d) Extension of Amortization Periods.--The period of
years required to amortize any unfunded liability (described
in any clause of subsection (b)(2)(B)) of any plan may be
extended by the Secretary of the Treasury for a period of
time (not in excess of 10 years) if such Secretary determines
that such extension would carry out the purposes of this Act
and provide adequate protection for participants under the
plan and their beneficiaries, and if such Secretary
determines that the failure to permit such extension would
result in--
``(1) a substantial risk to the voluntary continuation of
the plan, or
``(2) a substantial curtailment of pension benefit levels
or employee compensation.
``(e) Alternative Minimum Funding Standard.--
``(1) In general.--A CSEC plan which uses a funding method
that requires contributions in all years not less than those
required under the entry age normal funding method may
maintain an alternative minimum funding standard account for
any plan year. Such account shall be credited and charged
solely as provided in this subsection.
``(2) Charges and credits to account.--For a plan year the
alternative minimum funding standard account shall be--
``(A) charged with the sum of--
``(i) the lesser of normal cost under the funding method
used under the plan or normal cost determined under the unit
credit method,
``(ii) the excess, if any, of the present value of accrued
benefits under the plan over the fair market value of the
assets, and
``(iii) an amount equal to the excess (if any) of credits
to the alternative minimum standard account for all prior
plan years over charges to such account for all such years,
and
``(B) credited with the amount considered contributed by
the employer to or under the plan for the plan year.
``(3) Interest.--The alternative minimum funding standard
account (and items therein) shall be charged or credited with
interest in the manner provided under subsection (b)(5) with
respect to the funding standard account.
``(f) Quarterly Contributions Required.--
``(1) In general.--If a CSEC plan which has a funded
current liability percentage for the preceding plan year of
less than 100 percent fails to pay the full amount of a
required installment for the plan year, then the rate of
interest charged to the funding standard account under
subsection (b)(5) with respect to the amount of the
underpayment for the period of the underpayment shall be
equal to the greater of--
``(A) 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), or
``(B) the rate of interest used under the plan in
determining costs.
``(2) Amount of underpayment, period of underpayment.--For
purposes of paragraph (1)--
``(A) 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.
``(B) Period of underpayment.--The period for which
interest is charged under this subsection with regard 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 (determined without regard
to subsection (c)(9)).
``(C) Order of crediting contributions.--For purposes of
subparagraph (A)(ii), contributions shall be credited against
unpaid required installments in the order in which such
installments are required to be paid.
``(3) Number of required installments; due dates.--For
purposes of this subsection--
``(A) Payable in 4 installments.--There shall be 4 required
installments for each plan year.
``(B) Time for payment of installments.--
``In the case of the following required
installments: The due date is:
1st............................................ April 15
2nd............................................ July 15
3rd............................................ October 15
4th............................................ January 15 of the
following year.
``(4) Amount of required installment.--For purposes of this
subsection--
``(A) In general.--The amount of any required installment
shall be 25 percent of the required annual payment.
``(B) Required annual payment.--For purposes of
subparagraph (A), the term `required annual payment' means
the lesser of--
``(i) 90 percent of the amount required to be contributed
to or under the plan by the employer for the plan year under
section 302 (without regard to any waiver under subsection
(c) thereof), or
``(ii) 100 percent of the amount so required for the
preceding plan year.
Clause (ii) shall not apply if the preceding plan year was
not a year of 12 months.
``(5) Liquidity requirement.--
``(A) In general.--A plan to which this paragraph applies
shall be treated as failing to pay the full amount of any
required installment 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 CSEC plan other than a plan described in
section 302(d)(6)(A) (as in effect on the day before the
enactment of the Pension Protection Act of 2006) which--
``(i) is required to pay installments under this subsection
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
(1), any portion of an installment that is treated as not
paid under
[[Page H2580]]
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 funded current liability percentage
(taking into account the expected increase in current
liability due to benefits accruing during the plan year) to
100 percent.
``(E) Definitions.--For purposes of this paragraph--
``(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 the base amount with
respect to such quarter over 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 funded current liability 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.
``(6) Fiscal years and short years.--
``(A) Fiscal years.--In applying this subsection to a plan
year beginning on any date other than January 1, there shall
be substituted for the months specified in this subsection,
the months which correspond thereto.
``(B) Short plan year.--This subsection shall be applied to
plan years of less than 12 months in accordance with
regulations prescribed by the Secretary of the Treasury.
``(g) Imposition of Lien Where Failure To Make Required
Contributions.--
``(1) In general.--In the case of a plan to which this
section applies, if--
``(A) any person fails to make a required installment under
subsection (f) or any other payment required under this
section before the due date for such installment or other
payment, and
``(B) the unpaid balance of such installment or other
payment (including interest), when added to the aggregate
unpaid balance of all preceding such installments or other
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 CSEC plan for any plan year for which the
funded current liability percentage 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 Retirement
Protection Act of 1994).
``(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of required installments and other payments required
under this section (including interest)--
``(A) for plan years beginning after 1987, and
``(B) 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 installment or other payment.
``(B) Period of lien.--The lien imposed by paragraph (1)
shall arise on the due date for the required installment or
other 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 any contributing employer
(or any member of the controlled group of the contributing
employer).
``(6) Definitions.--For purposes of this subsection--
``(A) Due date; required installment.--The terms `due date'
and `required installment' have the meanings given such terms
by subsection (f), 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 this section.
``(B) 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.
``(h) Current Liability.--For purposes of this section--
``(1) In general.--The term `current liability' means all
liabilities to employees and their beneficiaries under the
plan.
``(2) Treatment of unpredictable contingent event
benefits.--
``(A) In general.--For purposes of paragraph (1), any
unpredictable contingent event benefit shall not be taken
into account until the event on which the benefit is
contingent occurs.
``(B) Unpredictable contingent event benefit.--The term
`unpredictable contingent event benefit' means 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).
``(3) Interest rate and mortality assumptions used.--
``(A) Interest rate.--The rate of interest used to
determine current liability under this section shall be the
third segment rate determined under section 303(h)(2)(C).
``(B) Mortality tables.--
``(i) Secretarial authority.--The Secretary of the Treasury
may by regulation prescribe 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 of the Treasury shall take into
account results of available independent studies of mortality
of individuals covered by pension plans.
``(ii) Periodic review.--The Secretary of the Treasury
shall periodically (at least every 5 years) review any tables
in effect under this subsection and shall, to the extent the
Secretary of the Treasury determines necessary, by regulation
update the tables to reflect the actual experience of pension
plans and projected trends in such experience.
``(C) Separate mortality tables for the disabled.--
Notwithstanding subparagraph (B)--
``(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 subparagraph (B)) to determine current liability
under this subsection for individuals who are entitled to
benefits under the plan on account of disability. The
Secretary of the Treasury 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 clause
(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.
``(4) Certain service disregarded.--
``(A) In general.--In the case of a participant to whom
this paragraph applies, only the applicable percentage of the
years of service before such individual became a participant
shall be taken into account in computing the current
liability of the plan.
``(B) Applicable percentage.--For purposes of this
subparagraph, the applicable percentage shall be determined
as follows:
[[Page H2581]]
The applicable
``If the years of participation are: percentage is:
1.............................................. 20
2.............................................. 40
3.............................................. 60
4.............................................. 80
5 or more...................................... 100.
``(C) Participants to whom paragraph applies.--This
subparagraph shall apply to any participant who, at the time
of becoming a participant--
``(i) has not accrued any other benefit under any defined
benefit plan (whether or not terminated) maintained by the
employer or a member of the same controlled group of which
the employer is a member,
``(ii) who first becomes a participant under the plan in a
plan year beginning after December 31, 1987, and
``(iii) has years of service greater than the minimum years
of service necessary for eligibility to participate in the
plan.
``(D) Election.--An employer may elect not to have this
subparagraph apply. Such an election, once made, may be
revoked only with the consent of the Secretary of the
Treasury.
``(i) Funded Current Liability Percentage.--For purposes of
this section, the term `funded current liability percentage'
means, with respect to any plan year, the percentage which--
``(1) the value of the plan's assets determined under
subsection (c)(2), is of
``(2) the current liability under the plan.
``(j) Funding Restoration Status.--Notwithstanding any
other provisions of this section--
``(1) Normal cost payment.--
``(A) In general.--In the case of a CSEC plan that is in
funding restoration status for a plan year, for purposes of
section 302, the term `accumulated funding deficiency' means,
for such plan year, the greater of--
``(i) the amount described in subsection (a), or
``(ii) the excess of the normal cost of the plan for the
plan year over the amount actually contributed to or under
the plan for the plan year.
``(B) Normal cost.--In the case of a CSEC plan that uses a
spread gain funding method, for purposes of this subsection,
the term `normal cost' means normal cost as determined under
the entry age normal funding method.
``(2) Plan amendments.--In the case of a CSEC plan that is
in funding restoration status for a plan year, no amendment
to such plan may take effect during such plan year if such
amendment has the effect of increasing liabilities of the
plan by means of increases in benefits, establishment of new
benefits, changing the rate of benefit accrual, or changing
the rate at which benefits become nonforfeitable. This
paragraph shall not apply to any plan amendment that is
required to comply with any applicable law. This paragraph
shall cease to apply with respect to any plan year, effective
as of the first day of the plan year (or if later, the
effective date of the amendment) upon payment by the plan
sponsor of a contribution to the plan (in addition to any
contribution required under this section without regard to
this paragraph) in an amount equal to the increase in the
funding liability of the plan attributable to the plan
amendment.
``(3) Funding restoration plan.--The sponsor of a CSEC plan
shall establish a written funding restoration plan within 180
days of the receipt by the plan sponsor of a certification
from the plan actuary that the plan is in funding restoration
status for a plan year. Such funding restoration plan shall
consist of actions that are calculated, based on reasonably
anticipated experience and reasonable actuarial assumptions,
to increase the plan's funded percentage to 100 percent over
a period that is not longer than the greater of 7 years or
the shortest amount of time practicable. Such funding
restoration plan shall take into account contributions
required under this section (without regard to this
paragraph). If a plan remains in funding restoration status
for 2 or more years, such funding restoration plan shall be
updated each year after the 1st such year within 180 days of
receipt by the plan sponsor of a certification from the plan
actuary that the plan remains in funding restoration status
for the plan year.
``(4) Annual certification by plan actuary.--Not later than
the 90th day of each plan year of a CSEC plan, the plan
actuary shall certify to the plan sponsor whether or not the
plan is in funding restoration status for the plan year,
based on the plan's funded percentage as of the beginning of
the plan year. For this purpose, the actuary may conclusively
rely on an estimate of--
``(A) the plan's funding liability, based on the funding
liability of the plan for the preceding plan year and on
reasonable actuarial estimates, assumptions, and methods, and
``(B) the amount of any contributions reasonably
anticipated to be made for the preceding plan year.
Contributions described in subparagraph (B) shall be taken
into account in determining the plan's funded percentage as
of the beginning of the plan year.
``(5) Definitions.--For purposes of this subsection--
``(A) Funding restoration status.--A CSEC plan shall be
treated as in funding restoration status for a plan year if
the plan's funded percentage as of the beginning of such plan
year is less than 80 percent.
``(B) Funded percentage.--The term `funded percentage'
means the ratio (expressed as a percentage) which--
``(i) the value of plan assets (as determined under
subsection (c)(2)), bears to
``(ii) the plan's funding liability.
``(C) Funding liability.--The term `funding liability' for
a plan year means the present value of all benefits accrued
or earned under the plan as of the beginning of the plan
year, based on the assumptions used by the plan pursuant to
this section, including the interest rate described in
subsection (b)(5)(A) (without regard to subsection
(b)(5)(B)).
``(D) Spread gain funding method.--The term `spread gain
funding method' has the meaning given such term under rules
and forms issued by the Secretary of the Treasury.''.
(b) Separate Rules for CSEC Plans.--
(1) In general.--Paragraph (2) of section 302(a) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1082(a)) is amended by striking ``and'' at the end of
subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting ``, and'', and by inserting at
the end thereof the following new subparagraph:
``(D) in the case of a CSEC 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 306
as of the end of the plan year.''.
(2) Conforming amendments.--Section 302 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082) is
amended--
(A) by striking ``multiemployer plan'' the first place it
appears in clause (i) of subsection (c)(1)(A) and the last
place it appears in paragraph (2) of subsection (d), and
inserting ``multiemployer plan or a CSEC plan'',
(B) by striking ``303(j)'' in paragraph (1) of subsection
(b) and inserting ``303(j) or under section 306(f)'',
(C)(i) by striking ``and'' at the end of clause (i) of
subsection (c)(1)(B),
(ii) by striking the period at the end of clause (ii) of
subsection (c)(1)(B), and inserting ``, and'', and
(iii) by inserting the following new clause after clause
(ii) of subsection (c)(1)(B):
``(iii) in the case of a CSEC plan, the funding standard
account shall be credited under section 306(b)(3)(C) with the
amount of the waived funding deficiency and such amount shall
be amortized as required under section 306(b)(2)(C).'',
(D) by striking ``under paragraph (1)'' in clause (i) of
subsection (c)(4)(A) and inserting ``under paragraph (1) or
for granting an extension under section 306(d)'',
(E) by striking ``waiver under this subsection'' in
subparagraph (B) of subsection (c)(4) and inserting ``waiver
under this subsection or an extension under 306(d)'',
(F) by striking ``waiver or modification'' in subclause (I)
of subsection (c)(4)(B)(i) and inserting ``waiver,
modification, or extension'',
(G) by striking ``waivers'' in the heading of subsection
(c)(4)(C) and of clause (ii) of subsection (c)(4)(C) and
inserting ``waivers or extensions'',
(H) by striking ``section 304(d)'' in subparagraph (A) of
subsection (c)(7) and in paragraph (2) of subsection (d) and
inserting ``section 304(d) or section 306(d)'',
(I) by striking ``and'' at the end of subclause (I) of
subsection (c)(4)(C)(i) and adding ``or the accumulated
funding deficiency under section 306, whichever is
applicable,'',
(J) by striking ``303(e)(2),'' in subclause (II) of
subsection (c)(4)(C)(i) and inserting ``303(e)(2) or
306(b)(2)(C), whichever is applicable, and'',
(K) by adding immediately after subclause (II) of
subsection (c)(4)(C)(i) the following new subclause:
``(III) the total amounts not paid by reason of an
extension in effect under section 306(d),'',
(L) by striking ``for waivers of'' in clause (ii) of
subsection (c)(4)(C) and inserting ``for waivers or
extensions with respect to'', and
(M) by striking ``single-employer plan'' in subparagraph
(A) of subsection (a)(2) and in clause (i) of subsection
(c)(1)(B) and inserting ``single-employer plan (other than a
CSEC plan)''.
[[Page H2582]]
(3) Benefit restrictions.--Subsection (g) of section 206 of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1056) is amended by adding at the end thereof the
following new paragraph:
``(12) CSEC plans.--This subsection shall not apply to a
CSEC plan (as defined in section 210(f)).''.
(4) Benefit increases.--Paragraph (3) of section 204(i) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1054(i)) is amended by striking ``multiemployer
plans'' and inserting ``multiemployer plans or CSEC plans''.
(5) Section 103.--Subparagraph (B) of section 103(d)(8) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1023(d)(8)) is amended by striking ``303(h) and
304(c)(3)'' and inserting ``303(h), 304(c)(3), and
306(c)(3)''.
(6) Section 502.--Subsection (c) of section 502 of the
Employee Retirement Income Security Act of 1974 is amended--
(A) by redesignating the last paragraph as paragraph (11),
and
(B) by adding at the end the following new paragraph:
``(12) The Secretary may assess a civil penalty against any
sponsor of a CSEC plan of up to $100 a day from the date of
the plan sponsor's failure to comply with the requirements of
section 306(j)(3) to establish or update a funding
restoration plan.''.
(7) Section 4003.--Subparagraph (B) of section 4003(e)(1)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1303(e)(1)) is amended by striking ``303(k)(1)(A) and
(B) of this Act or section 430(k)(1)(A) and (B) of the
Internal Revenue Code of 1986'' and inserting ``303(k)(1)(A)
and (B) or 306(g)(1)(A) and (B) of this Act or section
430(k)(1)(A) and (B) or 433(g)(1)(A) and (B) of the Internal
Revenue Code of 1986''.
(8) Section 4010.--Paragraph (2) of section 4010(b) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1310(b)) is amended by striking ``303(k)(1)(A) and (B) of
this Act or section 430(k)(1)(A) and (B) of the Internal
Revenue Code of 1986'' and inserting ``303(k)(1)(A) and (B)
or 306(g)(1)(A) and (B) of this Act or section 430(k)(1)(A)
and (B) or 433(g)(1)(A) and (B) of the Internal Revenue Code
of 1986''.
(9) Section 4071.--Section 4071 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1371) is amended by
striking ``section 303(k)(4)'' and inserting ``section
303(k)(4) or 306(g)(4)''.
SEC. 103. ELECTIONS.
(a) Election Not To Be Treated as a CSEC Plan.--Subsection
(f) of section 210 of the Employee Retirement Income Security
Act of 1974, as added by section 101, is amended by adding at
the end the following new paragraph:
``(3) Election.--
``(A) In general.--If a plan falls within the definition of
a CSEC plan under this subsection (without regard to this
paragraph), such plan shall be a CSEC plan unless the plan
sponsor elects not later than the close of the first plan
year of the plan beginning after December 31, 2013, not to be
treated as a CSEC plan. An election under the preceding
sentence shall take effect for such plan year and, once made,
may be revoked only with the consent of the Secretary of the
Treasury.
``(B) Special rule.--If a plan described in subparagraph
(A) is treated as a CSEC plan, section 104 of the Pension
Protection Act of 2006, as amended by the Preservation of
Access to Care for Medicare Beneficiaries and Pension Relief
Act of 2010, shall cease to apply to such plan as of the
first date as of which such plan is treated as a CSEC
plan.''.
(b) Election To Cease To Be Treated as an Eligible Charity
Plan.--Subsection (d) of section 104 of the Pension
Protection Act of 2006, as added by section 202 of the
Preservation of Access to Care for Medicare Beneficiaries and
Pension Relief Act of 2010, is amended--
(1) by striking ``For purposes of'' and inserting ``(1) In
general.--For purposes of'', and
(2) by adding at the end the following:
``(2) Election not to be an eligible charity plan.--A plan
sponsor may elect for a plan to cease to be treated as an
eligible charity plan for plan years beginning after December
31, 2013. Such election shall be made at such time and in
such form and manner as shall be prescribed by the Secretary
of the Treasury. Any such election may be revoked only with
the consent of the Secretary of the Treasury.
``(3) Election to use funding options available to other
plan sponsors.--
``(A) A plan sponsor that makes the election described in
paragraph (2) may elect for a plan to apply the rules
described in subparagraphs (B), (C), and (D) for plan years
beginning after December 31, 2013. Such election shall be
made at such time and in such form and manner as shall be
prescribed by the Secretary of the Treasury. Any such
election may be revoked only with the consent of the
Secretary of the Treasury.
``(B) Under the rules described in this subparagraph, for
the first plan year beginning after December 31, 2013, a plan
has--
``(i) an 11-year shortfall amortization base,
``(ii) a 12-year shortfall amortization base, and
``(iii) a 7-year shortfall amortization base.
``(C) Under the rules described in this subparagraph,
section 303(c)(2)(A) and (B) of the Employee Retirement
Income Security Act of 1974, and section 430(c)(2)(A) and (B)
of the Internal Revenue Code of 1986 shall be applied by--
``(i) in the case of an 11-year shortfall amortization
base, substituting `11-plan-year period' for `7-plan-year
period' wherever such phrase appears, and
``(ii) in the case of a 12-year shortfall amortization
base, substituting `12-plan-year period' for `7-plan-year
period' wherever such phrase appears.
``(D) Under the rules described in this subparagraph,
section 303(c)(7) of the Employee Retirement Income Security
Act of 1974 and section 430(c)(7) of the Internal Revenue
Code of 1986 shall apply to a plan for which an election has
been made under subparagraph (A). Such provisions shall apply
in the following manner:
``(i) The first plan year beginning after December 31,
2013, shall be treated as an election year, and no other plan
years shall be so treated.
``(ii) All references in section 303(c)(7) of such Act and
section 430(c)(7) of such Code to `February 28, 2010' or
`March 1, 2010' shall be treated as references to `February
28, 2013' or `March 1, 2013', respectively.
``(E) For purposes of this paragraph, the 11-year
amortization base is an amount, determined for the first plan
year beginning after December 31, 2013, equal to the
unamortized principal amount of the shortfall amortization
base (as defined in section 303(c)(3) of the Employee
Retirement Income Security Act of 1974 and section 430(c)(3)
of the Internal Revenue Code of 1986) that would have applied
to the plan for the first plan beginning after December 31,
2009, if--
``(i) the plan had never been an eligible charity plan,
``(ii) the plan sponsor had made the election described in
section 303(c)(2)(D)(i) of the Employee Retirement Income
Security Act of 1974 and in section 430(c)(2)(D)(i) of the
Internal Revenue Code of 1986 to have section 303(c)(2)(D)(i)
of such Act and section 430(c)(2)(D)(iii) of such Code apply
with respect to the shortfall amortization base for the first
plan year beginning after December 31, 2009, and
``(iii) no event had occurred under paragraph (6) or (7) of
section 303(c) of such Act or paragraph (6) or (7) of section
430(c) of such Code that, as of the first day of the first
plan year beginning after December 31, 2013, would have
modified the shortfall amortization base or the shortfall
amortization installments with respect to the first plan year
beginning after December 31, 2009.
``(F) For purposes of this paragraph, the 12-year
amortization base is an amount, determined for the first plan
year beginning after December 31, 2013, equal to the
unamortized principal amount of the shortfall amortization
base (as defined in section 303(c)(3) of the Employee
Retirement Income Security Act of 1974 and section 430(c)(3)
of the Internal Revenue Code of 1986) that would have applied
to the plan for the first plan beginning after December 31,
2010, if--
``(i) the plan had never been an eligible charity plan,
``(ii) the plan sponsor had made the election described in
section 303(c)(2)(D)(i) of the Employee Retirement Income
Security Act of 1974 and in section 430(c)(2)(D)(i) of the
Internal Revenue Code of 1986 to have section 303(c)(2)(D)(i)
of such Act and section 430(c)(2)(D)(iii) of such Code apply
with respect to the shortfall amortization base for the first
plan year beginning after December 31, 2010, and
``(iii) no event had occurred under paragraph (6) or (7) of
section 303(c) of such Act or paragraph (6) or (7) of section
430(c) of such Code that, as of the first day of the first
plan year beginning after December 31, 2013, would have
modified the shortfall amortization base or the shortfall
amortization installments with respect to the first plan year
beginning after December 31, 2010.
``(G) For purposes of this paragraph, the 7-year shortfall
amortization base is an amount, determined for the first plan
year beginning after December 31, 2013, equal to--
``(i) the shortfall amortization base for the first plan
year beginning after December 31, 2013, without regard to
this paragraph, minus
``(ii) the sum of the 11-year shortfall amortization base
and the 12-year shortfall amortization base.
``(4) Retroactive election.--Not later than December 31,
2014, a plan sponsor may make a one-time, irrevocable,
retroactive election to not be treated as an eligible charity
plan. Such election shall be effective for plan years
beginning after December 31, 2007, and shall be made by
providing reasonable notice to the Secretary of the
Treasury.''.
(c) Deemed Election.--For purposes of the Internal Revenue
Code of 1986, sections 4(b)(2) and 4021(b)(3) of the Employee
Retirement Income Security Act of 1974, and all other
purposes, a plan shall be deemed to have made an irrevocable
election under section 410(d) of the Internal Revenue Code of
1986 if--
(1) the plan was established before January 1, 2014;
(2) the plan falls within the definition of a CSEC plan;
(3) the plan sponsor does not make an election under
section 210(f)(3)(A) of the Employee Retirement Income
Security Act of 1974 and section 414(y)(3)(A) of the Internal
Revenue Code of 1986, as added by this Act; and
(4) the plan, plan sponsor, administrator, or fiduciary
remits one or more premium payments for the plan to the
Pension Benefit Guaranty Corporation for a plan year
beginning after December 31, 2013.
[[Page H2583]]
(d) Effective Date.--The amendments made by this section
shall apply as of the date of enactment of this Act.
SEC. 104. TRANSPARENCY.
(a) Notice to Participants.--
(1) In general.--Paragraph (2) of section 101(f) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1021(f)) is amended by adding at the end the following new
subparagraph:
``(E) Effect of csec plan rules on plan funding.--In the
case of a CSEC plan, each notice under paragraph (1) shall
include--
``(i) a statement that different rules apply to CSEC plans
than apply to single-employer plans,
``(ii) for the first 2 plan years beginning after December
31, 2013, a statement that, as a result of changes in the law
made by the Cooperative and Small Employer Charity Pension
Flexibility Act, the contributions to the plan may have
changed, and
``(iii) in the case of a CSEC plan that is in funding
restoration status for the plan year, a statement that the
plan is in funding restoration status for such plan year.
A copy of the statement required under clause (iii) shall be
provided to the Secretary, the Secretary of the Treasury, and
the Director of the Pension Benefit Guaranty Corporation.''.
(2) Model notice.--The Secretary of Labor may modify the
model notice required to be published under section 501(c) of
the Pension Protection Act of 2006 to include the information
described in section 101(f)(2)(E) of the Employee Retirement
Income Security Act of 1974, as added by this subsection.
(b) Notice of Failure To Meet Minimum Funding Standards.--
(1) Pending waivers.--Paragraph (2) of section 101(d) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1021(d)) is amended by striking ``303'' and inserting
``303 or 306''.
(2) Definitions.--Paragraph (3) of section 101(d) of the
Employee Retirement Income Security Act of 1974 (21 U.S.C.
1021(d)) is amended by striking ``303(j)'' and inserting
``303(j) or 306(f), whichever is applicable''.
(c) Additional Reporting Requirements.--Section 103 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1023) is amended by adding at the end the following new
subsection:
``(g) Additional Information With Respect to Multiple
Employer Plans.--With respect to any multiple employer plan,
an annual report under this section for a plan year shall
include a list of participating employers and a good faith
estimate of the percentage of total contributions made by
such participating employers during the plan year.''.
SEC. 105. SPONSOR EDUCATION AND ASSISTANCE.
(a) Definition.--In this section, the term ``CSEC plan''
has the meaning given that term in subsection (f)(1) of
section 210 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1060(f)(1)) (as added by this Act).
(b) Education.--The Participant and Plan Sponsor Advocate
established under section 4004 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1304) shall make
itself available to assist CSEC plan sponsors and
participants as part of the duties it performs under the
general supervision of the Board of Directors under section
4004(b) of such Act (29 U.S.C. 1304(b)).
TITLE II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
SEC. 201. DEFINITION OF COOPERATIVE AND SMALL EMPLOYER
CHARITY PENSION PLANS.
Section 414 of the Internal Revenue Code of 1986 is amended
by adding at the end the following new subsection:
``(y) Cooperative and Small Employer Charity Pension
Plans.--
``(1) In general.--For purposes of this title, except as
provided in this subsection, a CSEC plan is a defined benefit
plan (other than a multiemployer plan)--
``(A) to which section 104 of the Pension Protection Act of
2006 applies, without regard to--
``(i) section 104(a)(2) of such Act;
``(ii) the amendments to such section 104 by section 202(b)
of the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010; and
``(iii) paragraph (3)(B); or
``(B) that, as of June 25, 2010, was maintained by more
than one employer and all of the employers were organizations
described in section 501(c)(3).
``(2) Aggregation.--All employers that are treated as a
single employer under subsection (b) or (c) shall be treated
as a single employer for purposes of determining if a plan
was maintained by more than one employer under paragraph
(1)(B).''.
SEC. 202. FUNDING RULES APPLICABLE TO COOPERATIVE AND SMALL
EMPLOYER CHARITY PENSION PLANS.
(a) In General.--Subpart A of part III of subchapter D of
chapter 1 of subtitle A of the Internal Revenue Code of 1986
is amended by adding at the end the following new section:
``SEC. 433. MINIMUM FUNDING STANDARDS.
``(a) General Rule.--For purposes of section 412, the term
`accumulated funding deficiency' for a CSEC plan means the
excess of the total charges to the funding standard account
for all plan years (beginning with the first plan year to
which section 412 applies) over the total credits to such
account for such years or, if less, the excess of the total
charges to the alternative minimum funding standard account
for such plan years over the total credits to such account
for such years.
``(b) Funding Standard Account.--
``(1) Account required.--Each plan to which this section
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, but before the first day of the first
plan year beginning after December 31, 2013, 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 30 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 5
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 10 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 5 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 paragraph (3)(D), 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
enactment of the Pension Protection Act of 2006).
``(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 5
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 10 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, 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) 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.
``(5) Interest.--
``(A) In general.--Except as provided in subparagraph (B),
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.
``(B) Exception.--The interest rate used for purposes of
computing the amortization charge described in subsection
(b)(2)(C) or for
[[Page H2584]]
purposes of any arrangement under subsection (d) for any plan
year shall be the greater of--
``(i) 150 percent of the Federal mid-term rate (as in
effect under section 1274 for the 1st month of such plan
year), or
``(ii) the rate of interest determined under subparagraph
(A).
``(6) Amortization schedules in effect.--Amortization
schedules for amounts described in paragraphs (2) and (3)
that are in effect as of the last day of the last plan year
beginning before January 1, 2014, by reason of section 104 of
the Pension Protection Act of 2006 shall remain in effect
pursuant to their terms and this section, except that such
amounts shall not be amortized again under this section.
``(c) Special 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) Dedicated bond portfolio.--The Secretary may by
regulations provide that the value of any dedicated bond
portfolio of a plan shall be determined by using the interest
rate under section 412(b)(5) (as in effect on the day before
the enactment of the Pension Protection Act of 2006).
``(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) Funding method and plan year.--
``(A) Funding methods available.--All funding methods
available to CSEC plans under section 412 (as in effect on
the day before the enactment of the Pension Protection Act of
2006) shall continue to be available under this section.
``(B) Changes.--If the funding method for a plan is
changed, the new funding method shall become the funding
method used to determine costs and liabilities under the plan
only if the change is approved by the Secretary. If the plan
year for a plan is changed, the new plan year shall become
the plan year for the plan only if the change is approved by
the Secretary.
``(C) Approval required for certain changes in assumptions
by certain single-employer plans subject to additional
funding requirement.--
``(i) In general.--No actuarial assumption (other than the
assumptions described in subsection (h)(3)) used to determine
the current liability for a plan to which this subparagraph
applies may be changed without the approval of the Secretary.
``(ii) Plans to which subparagraph applies.--This
subparagraph shall apply to a plan only if--
``(I) the plan is a CSEC plan,
``(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
current liability of the plan before such change.
``(6) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency (determined without regard to
the alternative minimum funding standard account permitted
under subsection (e)) 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 paragraphs (2)(B), (C), and
(D) and (3)(B) of subsection (b) which are required to be
amortized shall be considered fully amortized for purposes of
such paragraphs.
``(7) Full-funding limitation.--For purposes of paragraph
(6), the term `full-funding limitation' means the excess (if
any) of--
``(A) 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
``(B) the lesser of--
``(i) the fair market value of the plan's assets, or
``(ii) the value of such assets determined under paragraph
(2).
``(C) 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 (determined
without regard to paragraph (4) of subsection (h)) of the
plan (including the expected increase in such 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.
``(8) 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.
``(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.
``(9) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer during the period--
``(A) beginning on the day after the last day of such plan
year, and
``(B) ending on the day which is 8\1/2\ months after the
close of the plan year,
shall be deemed to have been made on such last day.
``(10) Anticipation of benefit increases effective in the
future.--In determining projected benefits, the funding
method of a collectively bargained CSEC plan described in
section 413(a) shall anticipate benefit increases scheduled
to take effect during the term of the collective bargaining
agreement applicable to the plan.
``(d) Extension of Amortization Periods.--The period of
years required to amortize any unfunded liability (described
in any clause of subsection (b)(2)(B)) of any plan may be
extended by the Secretary for a period of time (not in excess
of 10 years) if the Secretary determines that such extension
would carry out the purposes of the Employee Retirement
Income Security Act of 1974 and provide adequate protection
for participants under the plan and their beneficiaries, and
if the Secretary determines that the failure to permit such
extension would result in--
``(1) a substantial risk to the voluntary continuation of
the plan, or
``(2) a substantial curtailment of pension benefit levels
or employee compensation.
``(e) Alternative Minimum Funding Standard.--
``(1) In general.--A CSEC plan which uses a funding method
that requires contributions in all years not less than those
required under the entry age normal funding method may
maintain an alternative minimum funding standard account for
any plan year. Such account shall be credited and charged
solely as provided in this subsection.
``(2) Charges and credits to account.--For a plan year the
alternative minimum funding standard account shall be--
``(A) charged with the sum of--
``(i) the lesser of normal cost under the funding method
used under the plan or normal cost determined under the unit
credit method,
``(ii) the excess, if any, of the present value of accrued
benefits under the plan over the fair market value of the
assets, and
``(iii) an amount equal to the excess (if any) of credits
to the alternative minimum standard account for all prior
plan years over charges to such account for all such years,
and
``(B) credited with the amount considered contributed by
the employer to or under the plan for the plan year.
``(3) Interest.--The alternative minimum funding standard
account (and items therein) shall be charged or credited with
interest in
[[Page H2585]]
the manner provided under subsection (b)(5) with respect to
the funding standard account.
``(f) Quarterly Contributions Required.--
``(1) In general.--If a CSEC plan which has a funded
current liability percentage for the preceding plan year of
less than 100 percent fails to pay the full amount of a
required installment for the plan year, then the rate of
interest charged to the funding standard account under
subsection (b)(5) with respect to the amount of the
underpayment for the period of the underpayment shall be
equal to the greater of--
``(A) 175 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 in
determining costs.
``(2) Amount of underpayment, period of underpayment.--For
purposes of paragraph (1)--
``(A) 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.
``(B) Period of underpayment.--The period for which
interest is charged under this subsection with regard 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 (determined without regard
to subsection (c)(9)).
``(C) Order of crediting contributions.--For purposes of
subparagraph (A)(ii), contributions shall be credited against
unpaid required installments in the order in which such
installments are required to be paid.
``(3) Number of required installments; due dates.--For
purposes of this subsection--
``(A) Payable in 4 installments.--There shall be 4 required
installments for each plan year.
``(B) Time for payment of installments.--
``In the case of the following required
installments: The due date is:
1st............................................ April 15
2nd............................................ July 15
3rd............................................ October 15
4th............................................ January 15 of the
following year.
``(4) Amount of required installment.--For purposes of this
subsection--
``(A) In general.--The amount of any required installment
shall be 25 percent of the required annual payment.
``(B) Required annual payment.--For purposes of
subparagraph (A), the term `required annual payment' means
the lesser of--
``(i) 90 percent of the amount required to be contributed
to or under the plan by the employer for the plan year under
section 412 (without regard to any waiver under subsection
(c) thereof), or
``(ii) 100 percent of the amount so required for the
preceding plan year.
Clause (ii) shall not apply if the preceding plan year was
not a year of 12 months.
``(5) Liquidity requirement.--
``(A) In general.--A plan to which this paragraph applies
shall be treated as failing to pay the full amount of any
required installment 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 CSEC plan other than a plan described in
section 412(l)(6)(A) (as in effect on the day before the
enactment of the Pension Protection Act of 2006) which--
``(i) is required to pay installments under this subsection
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
(1), 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 funded current liability percentage
(taking into account the expected increase in current
liability due to benefits accruing during the plan year) to
100 percent.
``(E) Definitions.--For purposes of this paragraph--
``(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 the base amount with
respect to such quarter over 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 funded current liability 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.
``(6) Fiscal years and short years.--
``(A) Fiscal years.--In applying this subsection to a plan
year beginning on any date other than January 1, there shall
be substituted for the months specified in this subsection,
the months which correspond thereto.
``(B) Short plan year.--This subsection shall be applied to
plan years of less than 12 months in accordance with
regulations prescribed by the Secretary.
``(g) Imposition of Lien Where Failure To Make Required
Contributions.--
``(1) In general.--In the case of a plan to which this
section applies, if--
``(A) any person fails to make a required installment under
subsection (f) or any other payment required under this
section before the due date for such installment or other
payment, and
``(B) the unpaid balance of such installment or other
payment (including interest), when added to the aggregate
unpaid balance of all preceding such installments or other
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 CSEC plan for any plan year for which the
funded current liability percentage 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 Retirement Protection Act of
1994).
``(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of required installments and other payments required
under this section (including interest)--
``(A) for plan years beginning after 1987, and
``(B) 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 installment or other payment.
``(B) Period of lien.--The lien imposed by paragraph (1)
shall arise on the due date for
[[Page H2586]]
the required installment or other 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 any contributing employer
(or any member of the controlled group of the contributing
employer).
``(6) Definitions.--For purposes of this subsection--
``(A) Due date; required installment.--The terms `due date'
and `required installment' have the meanings given such terms
by subsection (f), 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 this section.
``(B) Controlled group.--The term `controlled group' means
any group treated as a single employer under subsections (b),
(c), (m), and (o) of section 414.
``(h) Current Liability.--For purposes of this section--
``(1) In general.--The term `current liability' means all
liabilities to employees and their beneficiaries under the
plan.
``(2) Treatment of unpredictable contingent event
benefits.--
``(A) In general.--For purposes of paragraph (1), any
unpredictable contingent event benefit shall not be taken
into account until the event on which the benefit is
contingent occurs.
``(B) Unpredictable contingent event benefit.--The term
`unpredictable contingent event benefit' means 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).
``(3) Interest rate and mortality assumptions used.--
``(A) Interest rate.--The rate of interest used to
determine current liability under this section shall be the
third segment rate determined under section 430(h)(2)(C).
``(B) Mortality tables.--
``(i) Secretarial authority.--The Secretary may by
regulation prescribe 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.
``(ii) Periodic review.--The Secretary shall periodically
(at least every 5 years) review any tables in effect under
this subsection 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.
``(C) Separate mortality tables for the disabled.--
Notwithstanding subparagraph (B)--
``(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 subparagraph (B)) 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 clause
(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.
``(4) Certain service disregarded.--
``(A) In general.--In the case of a participant to whom
this paragraph applies, only the applicable percentage of the
years of service before such individual became a participant
shall be taken into account in computing the current
liability of the plan.
``(B) Applicable percentage.--For purposes of this
subparagraph, the applicable percentage shall be determined
as follows:
The applicable
``If the years of participation are: percentage is:
1.............................................. 20
2.............................................. 40
3.............................................. 60
4.............................................. 80
5 or more...................................... 100.
``(C) Participants to whom paragraph applies.--This
subparagraph shall apply to any participant who, at the time
of becoming a participant--
``(i) has not accrued any other benefit under any defined
benefit plan (whether or not terminated) maintained by the
employer or a member of the same controlled group of which
the employer is a member,
``(ii) who first becomes a participant under the plan in a
plan year beginning after December 31, 1987, and
``(iii) has years of service greater than the minimum years
of service necessary for eligibility to participate in the
plan.
``(D) Election.--An employer may elect not to have this
subparagraph apply. Such an election, once made, may be
revoked only with the consent of the Secretary.
``(i) Funded Current Liability Percentage.--For purposes of
this section, the term `funded current liability percentage'
means, with respect to any plan year, the percentage which--
``(1) the value of the plan's assets determined under
subsection (c)(2), is of
``(2) the current liability under the plan.
``(j) Funding Restoration Status.--Notwithstanding any
other provisions of this section--
``(1) Normal cost payment.--
``(A) In general.--In the case of a CSEC plan that is in
funding restoration status for a plan year, for purposes of
section 412, the term `accumulated funding deficiency' means,
for such plan year, the greater of--
``(i) the amount described in subsection (a), or
``(ii) the excess of the normal cost of the plan for the
plan year over the amount actually contributed to or under
the plan for the plan year.
``(B) Normal cost.--In the case of a CSEC plan that uses a
spread gain funding method, for purposes of this subsection,
the term `normal cost' means normal cost as determined under
the entry age normal funding method.
``(2) Plan amendments.--In the case of a CSEC plan that is
in funding restoration status for a plan year, no amendment
to such plan may take effect during such plan year if such
amendment has the effect of increasing liabilities of the
plan by means of increases in benefits, establishment of new
benefits, changing the rate of benefit accrual, or changing
the rate at which benefits become nonforfeitable. This
paragraph shall not apply to any plan amendment that is
required to comply with any applicable law. This paragraph
shall cease to apply with respect to any plan year, effective
as of the first day of the plan year (or if later, the
effective date of the amendment) upon payment by the plan
sponsor of a contribution to the plan (in addition to any
contribution required under this section without regard to
this paragraph) in an amount equal to the increase in the
funding liability of the plan attributable to the plan
amendment.
``(3) Funding restoration plan.--The sponsor of a CSEC plan
shall establish a written funding restoration plan within 180
days of the receipt by the plan sponsor of a certification
from the plan actuary that the plan is in funding restoration
status for a plan year. Such funding restoration plan shall
consist of actions that are calculated, based on reasonably
anticipated experience and reasonable actuarial assumptions,
to increase the plan's funded percentage to 100 percent over
a period that is not longer than the greater of 7 years or
the shortest amount of time practicable. Such funding
restoration plan shall take into account contributions
required under this section (without regard to this
paragraph). If a plan remains in funding restoration status
for 2 or more years, such funding restoration plan shall be
updated each year after the 1st such year within 180 days of
receipt by the plan sponsor of a certification from the plan
actuary that the plan remains in funding restoration status
for the plan year.
``(4) Annual certification by plan actuary.--Not later than
the 90th day of each plan year of a CSEC plan, the plan
actuary shall certify to the plan sponsor whether or not the
plan is in funding restoration status
[[Page H2587]]
for the plan year, based on the plan's funded percentage as
of the beginning of the plan year. For this purpose, the
actuary may conclusively rely on an estimate of--
``(A) the plan's funding liability, based on the funding
liability of the plan for the preceding plan year and on
reasonable actuarial estimates, assumptions, and methods, and
``(B) the amount of any contributions reasonably
anticipated to be made for the preceding plan year.
Contributions described in subparagraph (B) shall be taken
into account in determining the plan's funded percentage as
of the beginning of the plan year.
``(5) Definitions.--For purposes of this subsection--
``(A) Funding restoration status.--A CSEC plan shall be
treated as in funding restoration status for a plan year if
the plan's funded percentage as of the beginning of such plan
year is less than 80 percent.
``(B) Funded percentage.--The term `funded percentage'
means the ratio (expressed as a percentage) which--
``(i) the value of plan assets (as determined under
subsection (c)(2)), bears to
``(ii) the plan's funding liability.
``(C) Funding liability.--The term `funding liability' for
a plan year means the present value of all benefits accrued
or earned under the plan as of the beginning of the plan
year, based on the assumptions used by the plan pursuant to
this section, including the interest rate described in
subsection (b)(5)(A) (without regard to subsection
(b)(5)(B)).
``(D) Spread gain funding method.--The term `spread gain
funding method' has the meaning given such term under rules
and forms issued by the Secretary.
``(E) Plan sponsor.--The term `plan sponsor' means, with
respect to a CSEC plan, the association, committee, joint
board of trustees, or other similar group of representatives
of the parties who establish or maintain the plan.''.
(b) CSEC Plans.--Section 413 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new
subsection:
``(d) CSEC Plans.--Notwithstanding any other provision of
this section, in the case of a CSEC plan--
``(1) Funding.--The requirements of section 412 shall be
determined as if all participants in the plan were employed
by a single employer.
``(2) Application of provisions.--Paragraphs (1), (2), (3),
and (5) of subsection (c) shall apply.
``(3) Deduction limitations.--Each applicable limitation
provided by section 404(a) shall be determined as if all
participants in the plan were employed by a single employer.
The amounts contributed to or under the plan by each employer
who maintains the plan (for the portion of the taxable year
included within a plan year) shall be considered not to
exceed such applicable limitation if the anticipated employer
contributions for such plan year of all employers (determined
in a reasonable manner not inconsistent with regulations
prescribed by the Secretary) do not exceed such limitation.
If such anticipated contributions exceed such limitation, the
portion of each such employer's contributions which is not
deductible under section 404 shall be determined in
accordance with regulations prescribed by the Secretary.
``(4) Allocations.--Allocations of amounts under paragraph
(3) and subsection (c)(5) among the employers maintaining the
plan shall not be inconsistent with the regulations
prescribed for this purpose by the Secretary.''.
(c) Separate Rules for CSEC Plans.--
(1) In general.--Paragraph (2) of section 412(a) of the
Internal Revenue Code of 1986 is amended by striking ``and''
at the end of subparagraph (B), by striking the period at the
end of subparagraph (C) and inserting ``, and'', and by
inserting at the end thereof the following new subparagraph:
``(D) in the case of a CSEC 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 433
as of the end of the plan year.''.
(2) Conforming amendments.--Section 412 of such Code is
amended--
(A) by striking ``multiemployer plan'' in paragraph (A) of
subsection (a)(2), in clause (i) of subsection (c)(1)(B), the
first place it appears in clause (i) of subsection (c)(1)(A),
and the last place it appears in paragraph (2) of subsection
(d), and inserting ``multiemployer plan or a CSEC plan'',
(B) by striking ``430(j)'' in paragraph (1) of subsection
(b) and inserting ``430(j) or under section 433(f)'',
(C)(i) by striking ``and'' at the end of clause (i) of
subsection (c)(1)(B),
(ii) by striking the period at the end of clause (ii) of
subsection (c)(1)(B) and inserting ``, and'', and
(iii) by inserting the following new clause after clause
(ii) of subsection (c)(1)(B):
``(iii) in the case of a CSEC plan, the funding standard
account shall be credited under section 433(b)(3)(C) with the
amount of the waived funding deficiency and such amount shall
be amortized as required under section 433(b)(2)(C).'',
(D) by striking ``under paragraph (1)'' in clause (i) of
subsection (c)(4)(A) and inserting ``under paragraph (1) or
for granting an extension under section 433(d)'',
(E) by striking ``waiver under this subsection'' in
subparagraph (B) of subsection (c)(4) and inserting ``waiver
under this subsection or an extension under 433(d)'',
(F) by striking ``waiver or modification'' in subclause (I)
of subsection (c)(4)(B)(i) and inserting ``waiver,
modification, or extension'',
(G) by striking ``waivers'' in the heading of subsection
(c)(4)(C) and of clause (ii) of subsection (c)(4)(C) and
inserting ``waivers or extensions'',
(H) by striking ``section 431(d)'' in subparagraph (A) of
subsection (c)(7) and in paragraph (2) of subsection (d) and
inserting ``section 431(d) or section 433(d)'',
(I) by striking ``and'' at the end of subclause (I) of
subsection (c)(4)(C)(i) and inserting ``or the accumulated
funding deficiency under section 433, whichever is
applicable,'',
(J) by striking ``430(e)(2),'' in subclause (II) of
subsection (c)(4)(C)(i) and inserting ``430(e)(2) or
433(b)(2)(C), whichever is applicable, and'',
(K) by adding immediately after subclause (II) of
subsection (c)(4)(C)(i) the following new subclause:
``(III) the total amounts not paid by reason of an
extension in effect under section 433(d),'', and
(L) by striking ``for waivers of'' in clause (ii) of
subsection (c)(4)(C) and inserting ``for waivers or
extensions with respect to''.
(3) Benefit restrictions.--
(A) In general.--Paragraph (29) of section 401(a) of such
Code is amended by striking ``multiemployer plan'' and
inserting ``multiemployer plan or a CSEC plan''.
(B) Conforming change.--Subsection (a) of section 436 of
such Code is amended by striking ``single-employer plan'' and
inserting ``single-employer plan (other than a CSEC plan)''.
(4) Benefit increases.--Subparagraph (C) of section
401(a)(33) of such Code is amended by striking
``multiemployer plans'' and inserting ``multiemployer plans
or CSEC plans''.
(5) Liquidity shortfalls.--
(A) In general.--Subparagraph (A) of section 401(a)(32) of
such Code is amended by striking ``430(j)(4)'' each place it
appears and inserting ``430(j)(4) or 433(f)(5)''.
(B) Period of shortfall.--Subparagraph (C) of section
401(a)(32) of such Code is amended by striking ``430(j)(3) by
reason of section 430(j)(4)(A) thereof'' and inserting
``430(j)(3) or 433(f) by reason of section 430(j)(4)(A) or
433(f)(5), respectively''.
(6) Deduction limits.--Subsection (o) of section 404 of
such Code is amended by adding at the end the following new
paragraph:
``(8) CSEC plans.--Solely for purposes of this subsection,
a CSEC plan shall be treated as though section 430 applied to
such plan and the minimum required contribution for any plan
year shall be the amount described in section
412(a)(2)(D).''.
(7) Section 420.--Paragraph (5) of section 420(e) of such
Code is amended by striking ``section 430'' each place it
appears and inserting ``sections 430 and 433''.
(8) Coordination with section 4971.--
(A) Subsection (a) of section 4971 of such Code is amended
by striking ``and'' at the end of paragraph (1), by striking
the period at the end of paragraph (2) and inserting ``,
and'', and by adding at the end thereof the following new
paragraph:
``(3) in the case of a CSEC plan, 10 percent of the CSEC
accumulated funding deficiency as of the end of the plan year
ending with or within the taxable year.''.
(B) Subsection (b) of section 4971 of such Code is
amended--
(i) by striking ``or'' at the end of paragraph (1), by
adding ``or'' at the end of paragraph (2), and by inserting
immediately after paragraph (2) the following new paragraph:
``(3) a tax is imposed under subsection (a)(3) on any CSEC
accumulated funding deficiency and the CSEC accumulated
funding deficiency is not corrected within the taxable
period,'', and
(ii) by striking ``minimum required contributions or
accumulated funding deficiency'' and inserting ``minimum
required contribution, accumulated funding deficiency, or
CSEC accumulated funding deficiency''.
(C) Subsection (c) of section 4971 of such Code is
amended--
(i) by striking ``accumulated funding deficiency'' each
place it appears in paragraph (2) and inserting ``accumulated
funding deficiency or CSEC accumulated funding deficiency'',
(ii) by striking ``accumulated funding deficiency or unpaid
minimum required contribution'' each place it appears in
paragraph (3) and inserting ``accumulated funding deficiency,
CSEC accumulated funding deficiency, or unpaid minimum
required contribution'', and
(iii) by adding at the end the following new paragraph:
``(5) CSEC accumulated funding deficiency.--The term `CSEC
accumulated funding deficiency' means the accumulated funding
deficiency determined under section 433.''.
(D) Paragraph (1) of section 4971(d) of such Code is
amended by striking ``accumulated funding deficiency or
unpaid minimum required contribution'' and inserting
``accumulated funding deficiency, CSEC accumulated funding
deficiency, or unpaid minimum required contribution''.
(E) Subsection (f) of section 4971 of such Code is
amended--
(i) by striking ``430(j)(4)'' in paragraph (1) and
inserting ``430(j)(4) or 433(f)'',
[[Page H2588]]
(ii) by striking ``430(j)'' in paragraph (1)(B) and
inserting ``430(j) or 433(f), whichever is applicable'', and
(iii) by striking ``412(m)(5)'' in paragraph (3)(A) and
inserting ``430(j) or 433(f), whichever is applicable''.
(9) Excise tax on failure to adopt funding restoration
plan.--Section 4971 of such Code is amended by redesignating
subsection (h) as subsection (i), and by inserting after
subsection (g) the following new subsection:
``(h) Failure of a CSEC Plan Sponsor To Adopt Funding
Restoration Plan.--
``(1) In general.--In the case of a CSEC plan that is in
funding restoration status (within the meaning of section
433(j)(5)(A)), there is hereby imposed a tax on the failure
of such plan to adopt a funding restoration plan within the
time prescribed under section 433(j)(3).
``(2) Amount of tax.--The amount of the tax imposed under
paragraph (1) with respect to any plan sponsor for any
taxable year shall be the amount equal to $100 multiplied by
the number of days during the taxable year which are included
in the period beginning on the day following the close of the
180-day period described in section 433(j)(3) and ending on
the day on which the funding restoration plan is adopted.
``(3) Waiver by secretary.--In the case of a failure
described in paragraph (1) which the Secretary determines is
due to reasonable cause and not to willful neglect, the
Secretary may waive a portion or all of the tax imposed by
such paragraph.
``(4) Liability for tax.--The tax imposed by paragraph (1)
shall be paid by the plan sponsor (within the meaning of
section 433(j)(5)(E)).''.
(10) Reporting.--
(A) In general.--Paragraph (2) of section 6059(b) of such
Code is amended by striking ``430,'' and inserting ``430, the
accumulated funding deficiency under section 433,''.
(B) Assumptions.--Subparagraph (B) of section 6059(b)(3) of
such Code is amended by striking ``430(h)(1) or 431(c)(3)''
and inserting ``430(h)(1), 431(c)(3), or 433(c)(3)''.
SEC. 203. ELECTION NOT TO BE TREATED AS A CSEC PLAN.
(a) In General.--Section 414(y) of the Internal Revenue
Code of 1986, as added by section 201, is amended by adding
at the end the following new paragraph:
``(3) Election.--
``(A) In general.--If a plan falls within the definition of
a CSEC plan under this subsection (without regard to this
paragraph), such plan shall be a CSEC plan unless the plan
sponsor elects not later than the close of the first plan
year of the plan beginning after December 31, 2013, not to be
treated as a CSEC plan. An election under the preceding
sentence shall take effect for such plan year and, once made,
may be revoked only with the consent of the Secretary.
``(B) Special rule.--If a plan described in subparagraph
(A) is treated as a CSEC plan, section 104 of the Pension
Protection Act of 2006, as amended by the Preservation of
Access to Care for Medicare Beneficiaries and Pension Relief
Act of 2010, shall cease to apply to such plan as of the
first date as of which such plan is treated as a CSEC
plan.''.
(b) Effective Date.--The amendment made by this section
shall apply as of the date of enactment of this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
Indiana (Mrs. Brooks) and the gentleman from California (Mr. George
Miller) each will control 20 minutes.
The Chair recognizes the gentlewoman from Indiana.
General Leave
Mrs. BROOKS of Indiana. Madam Speaker, I ask unanimous consent that
all Members may have 5 legislative days in which to revise and extend
their remarks on H.R. 4275.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from Indiana?
There was no objection.
Mrs. BROOKS of Indiana. Madam Speaker, I yield myself such time as I
may consume.
I rise in support of H.R. 4275, the Cooperative and Small Employer
Charity Pension Flexibility Act.
Madam Speaker, like most Members of this body, I meet with charities,
schools, and cooperatives throughout my district on a routine basis
when I am back home in Indiana. I often ask them what Washington can do
to facilitate their mission or ask about the obstacles that they face
when trying to serve their communities. To my surprise, frequently over
this past year, their answers revolve around the uncertainty and the
burden of their pension funding requirements.
This was somewhat of a shock to me, but I soon found out that some
charities, schools, and cooperatives are actually shutting down summer
camps, cutting back on services to the community, or raising prices
just to meet their pension obligations. And for what? To protect the
Pension Benefit Guaranty Corporation because their plans are
unsustainable or underfunded? No. It is because they will soon be
lumped into more onerous funding requirements found in the Pension
Protection Act, known as the PPA, and are making decisions today that
reflect that assumption.
In fact, Congress has already exempted these organizations and found
that multiple employer cooperative and charity plans have unique
missions, limited participation, and sufficient precautionary
safeguards, and that, by design, pose little risk that they will be
unable to pay benefits in the future.
Unfortunately, this exemption is set to expire soon and will require
pension providers to unnecessarily overfund their plans, rather than
using those funds to support services to our communities.
If this were allowed to happen, the results could be catastrophic.
For instance, in my home State of Indiana, rural electric cooperatives
alone could be forced to needlessly increase their pension
contributions by up to 50 percent, costing them $12.7 million a year
and adversely affecting over 1,800 employees in Indiana alone.
Now, it is no secret that the PBGC is facing significant problems
that require a comprehensive solution, and I applaud Dr. Roe, Chairman
Kline, and Ranking Member Miller for their leadership on this issue.
The bill, however, only affects 30 plans and just over 127,000 active
employees, and the very design of the plan shelters the PBGC from
almost all risk. However, without this bill, some Christian schools or
some United Way chapters across the Nation will be forced to meet
costly regulations directed toward at-risk, single-employer plans.
Madam Speaker, forcing charities to overfund their already solvent
plans is not only wrong from an actuarial standpoint, but from a moral
one, as well. For instance, Jewish Federations across the United States
don't needlessly overfund their pensions when that money could be going
to their mission of providing urgent support for Jews in Ukraine or
possibly helping Holocaust survivors age with dignity. These are the
types of consequences that are going to take place if we don't pass
this bill.
And subjecting rural telecom companies to PPA rules would force them
to shift funds from critical services and hurt their ability to provide
pension benefits to their current workers.
Our bill injects certainty and sensibility into the multiple-employer
pension world by simply allowing plans that are already exempted from
the PPA the flexibility to stay excluded permanently or elect into the
PPA structure if they wish to do so. That is why it is called
``flexibility.''
This bill helps cooperatives, schools, and charities do what they do
best: provide quality services that enrich our communities and our
lives. This is something that government cannot do, and it is something
we need to help facilitate.
I urge all of our colleagues to support the Cooperative and Small
Employer Charity Pension Flexibility Act, and I reserve the balance of
my time.
Mr. GEORGE MILLER of California. Madam Speaker, I yield myself such
time as I may consume
(Mr. GEORGE MILLER of California asked and was given permission to
revise and extend his remarks.)
Mr. GEORGE MILLER of California. Madam Speaker, I want to thank the
chairman of the committee for bringing this bill to the floor and for
Congresswoman Brooks' explanation of this legislation, the Cooperative
and Small Employer Charity Pension Flexibility Act.
As she has detailed, this is a small piece of legislation, but a very
important piece of legislation to the existence of these plans and also
to the priorities of the nonprofits that support those plans and the
work that they do in our communities. And what has become clear is that
we need this congressional action because the temporary exemption is
going to expire, and that would cause a hardship that Congresswoman
Brooks has laid out.
Without these changes, these plans, known as CSEC plans, will be
forced to comply with Pension Protection Act funding rules, and many
small, nonprofit employers will be unable to continue to provide those
pension benefits.
This legislation ensures that charities and cooperative associations
will continue to be able to provide quality
[[Page H2589]]
pension benefits to their employees by implementing pension funding
rules that reflect the unique design of their plans.
H.R. 4275 is supported by a wide variety of charitable organizations
from across the country, including the United Way Worldwide and Girl
Scouts of America and many others, and I would urge our colleagues to
support this legislation so that we can make sure that these plans can
continue to provide the benefits for their employees but also provide
the services to their communities.
With that, I yield back the balance of my time.
Mrs. BROOKS of Indiana. I yield as much time as he might consume to
the gentleman from Minnesota (Mr. Kline).
Mr. KLINE. I thank the gentlelady.
Madam Speaker, I rise in support of H.R. 4275. I want to thank my
colleague, Representative Susan Brooks, for sponsoring the legislation
and for her work on this important issue, and my friend and colleague,
Mr. Miller, for his strong support.
In recent years, Congress provided a limited number of charities and
eligible cooperatives temporary exemption from Federal pension
requirements. Our intent was to offer relief to those who faced
unsustainable pension obligations. It is now time to provide the
certainty and flexibility necessary to plan for the future.
Without that certainty, important organizations, such as the Girl
Scouts of Minnesota and Wisconsin River Valleys, would have to cut back
services and support fewer young women. Without that certainty, farmers
would face the prospect of raising food and dairy prices to help make
ends meet. Without that certainty, religious charities would be
hampered in their ability to serve local communities. And without that
certainty, Madam Speaker, utility companies providing electricity to
homes and businesses would have to consider raising rates just to meet
their pension obligations.
That is precisely the reality we now confront. We have a duty to
enact responsible rules that provide certainty and protect the pension
benefits of workers and retirees. The bill before us today is an
attempt to do just that.
This bill would provide certain multiple-employer pension plans
greater flexibility to manage their obligations in a way that supports
the goods and services their participants need to deliver.
Again, I want to thank my friend and colleague, Mrs. Brooks, for her
leadership on this issue, and I urge my colleagues to support the
legislation.
Mrs. BROOKS of Indiana. Madam Speaker, I yield myself the remainder
of my time.
I would like to thank my distinguished colleague from Wisconsin (Mr.
Kind) for co-leading this important effort with me. He has worked
tirelessly in championing and raising awareness about this issue.
Without his work, we would not be here today, and I thank him for his
passion and his expertise on this difficult subject.
Congress faces many difficult challenges, but the fact that we can
come together in a bipartisan way to craft solutions for our country
should be the norm and not the exception for this body. I hope this
will set an example for what we can accomplish when we put partisan
bickering aside. I know there are other pressing issues we can work on
together to move our Nation forward.
In closing, I would just encourage my colleagues to support this
commonsense bill that will save taxpayers money, enhance communities
across America, and encourages co-ops and so many charities to continue
to provide their employees with economic security in retirement.
I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from Indiana (Mrs. Brooks) that the House suspend the rules
and pass the bill, H.R. 4275.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.
____________________