[Congressional Record (Bound Edition), Volume 152 (2006), Part 2]
[Senate]
[Pages 2585-2660]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           TEXT OF AMENDMENTS

  SA 2901. Mr. FRIST proposed an amendment to the bill H.R. 2830, to 
amend the Employee Retirement Income Security Act of 1974 and the 
Internal Revenue Code of 1986 to reform the pension funding rules, and 
for other purposes; as follows:

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Pension 
     Security and Transparency Act of 2005''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title and table of contents.

   TITLE I--FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER DEFINED 
                  BENEFIT PLANS AND RELATED PROVISIONS

 Subtitle A--Amendments to Employee Retirement Income Security Act of 
                                  1974

Sec. 101. Minimum funding standards.
Sec. 102. Funding rules for single-employer defined benefit pension 
              plans.
Sec. 103. Benefit limitations under single-employer plans.
Sec. 104. Technical and conforming amendments.
Sec. 105. Special rules for multiple employer plans of certain 
              cooperatives.
Sec. 106. Temporary relief for certain rescued plans.

        Subtitle B--Amendments to Internal Revenue Code of 1986

Sec. 111. Modifications of the minimum funding standards.
Sec. 112. Funding rules applicable to single-employer pension plans.
Sec. 113. Benefit limitations under single-employer plans.
Sec. 114. Increase in deduction limit for single-employer plans.
Sec. 115. Technical and conforming amendments.

 Subtitle C--Interest Rate Assumptions and Deductible Amounts for 2006

Sec. 121. Extension of replacement of 30-year Treasury rates.
Sec. 122. Deduction limits for plan contributions.
Sec. 123. Updating deduction rules for combination of plans.

TITLE II--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT 
                      PLANS AND RELATED PROVISIONS

                       Subtitle A--Funding Rules

 Part I--Amendments to Employee Retirement Income Security Act of 1974

Sec. 201. Funding rules for multiemployer defined benefit plans.
Sec. 202. Additional funding rules for multiemployer plans in 
              endangered or critical status.
Sec. 203. Measures to forestall insolvency of multiemployer plans.
Sec. 204. Special rule for certain benefits funded under an agreement 
              approved by the Pension Benefit Guaranty Corporation.
Sec. 205. Withdrawal liability reforms.

          Part II--Amendments to Internal Revenue Code of 1986

Sec. 211. Funding rules for multiemployer defined benefit plans.
Sec. 212. Additional funding rules for multiemployer plans in 
              endangered or critical status.

                   Part III--Sunset of Funding Rules

Sec. 216. Sunset of funding rules.

              Subtitle B--Deduction and Related Provisions

Sec. 221. Deduction limits for multiemployer plans.
Sec. 222. Transfer of excess pension assets to multiemployer health 
              plan.

                  TITLE III--INTEREST RATE ASSUMPTIONS

Sec. 301. Interest rate assumption for determination of lump sum 
              distributions.
Sec. 302. Interest rate assumption for applying benefit limitations to 
              lump sum distributions.
Sec. 303. Restrictions on funding of nonqualified deferred compensation 
              plans by employers maintaining underfunded or terminated 
              single-employer plans.
Sec. 304. Modification of pension funding requirements for plans 
              subject to current transition rule.

          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

Sec. 401. Increases in PBGC premiums.
Sec. 402. Authority to enter alternative funding agreements to prevent 
              plan terminations.
Sec. 403. Special funding rules for plans maintained by commercial 
              airlines that are amended to cease future benefit 
              accruals.
Sec. 404. Limitation on PBGC guarantee of shutdown and other benefits.
Sec. 405. Rules relating to bankruptcy of employer.
Sec. 406. PBGC premiums for new plans of small employers.
Sec. 407. PBGC premiums for small and new plans.
Sec. 408. Authorization for PBGC to pay interest on premium overpayment 
              refunds.
Sec. 409. Rules for substantial owner benefits in terminated plans.
Sec. 410. Acceleration of PBGC computation of benefits attributable to 
              recoveries from employers.
Sec. 411. Treatment of certain plans where cessation or change in 
              membership of a controlled group.
Sec. 412. Effect of title.
Sec. 413. Wage requirement for employers.

                          TITLE V--DISCLOSURE

Sec. 501. Defined benefit plan funding notice.
Sec. 502. Access to multiemployer pension plan information.
Sec. 503. Additional annual reporting requirements.
Sec. 504. Timing of annual reporting requirements.
Sec. 505. Section 4010 filings with the PBGC.
Sec. 506. Disclosure of termination information to plan participants.
Sec. 507. Benefit suspension notice.
Sec. 508. Study and report by Government Accountability Office.

 TITLE VI--TREATMENT OF CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT 
                             PENSION PLANS

Sec. 601. Prospective application of age discrimination, conversion, 
              and present value assumption rules.
Sec. 602. Regulations relating to mergers and acquisitions.

[[Page 2586]]

  TITLE VII--DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS 
                    UNDER DEFINED CONTRIBUTION PLANS

Sec. 701. Defined contribution plans required to provide employees with 
              freedom to invest their plan assets.
Sec. 702. Notice of freedom to divest employer securities or real 
              property.
Sec. 703. Periodic pension benefit statements.
Sec. 704. Notice to participants or beneficiaries of blackout periods.
Sec. 705. Allowance of, and credit for, additional IRA payments in 
              certain bankruptcy cases.
Sec. 706. Inapplicability of relief from fiduciary liability during 
              suspension of ability of participant or beneficiary to 
              direct investments.
Sec. 707. Increase in maximum bond amount.

      TITLE VIII--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS

Sec. 801. Defined contribution plans required to provide adequate 
              investment education to participants.
Sec. 802. Independent investment advice provided to plan participants.
Sec. 803. Treatment of qualified retirement planning services.
Sec. 804. Increase in penalties for coercive interference with exercise 
              of ERISA rights.
Sec. 805. Administrative provision.

      TITLE IX--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

Sec. 901. Regulations on time and order of issuance of domestic 
              relations orders.
Sec. 902. Entitlement of divorced spouses to railroad retirement 
              annuities independent of actual entitlement of employee.
Sec. 903. Extension of tier II railroad retirement benefits to 
              surviving former spouses pursuant to divorce agreements.
Sec. 904. Requirement for additional survivor annuity option.

      TITLE X--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES

Sec. 1001. Clarifications regarding purchase of permissive service 
              credit.
Sec. 1002. Allow rollover of after-tax amounts in annuity contracts.
Sec. 1003. Clarification of minimum distribution rules for governmental 
              plans.
Sec. 1004. Waiver of 10 percent early withdrawal penalty tax on certain 
              distributions of pension plans for public safety 
              employees.
Sec. 1005. Allow rollovers by nonspouse beneficiaries of certain 
              retirement plan distributions.
Sec. 1006. Faster vesting of employer nonelective contributions.
Sec. 1007. Allow direct rollovers from retirement plans to Roth IRAS.
Sec. 1008. Elimination of higher penalty on certain simple plan 
              distributions.
Sec. 1009. Simple plan portability.
Sec. 1010. Eligibility for participation in retirement plans.
Sec. 1011. Transfers to the PBGC.
Sec. 1012. Missing participants.
Sec. 1013. Modifications of rules governing hardships and unforseen 
              financial emergencies.

                  TITLE XI--ADMINISTRATIVE PROVISIONS

Sec. 1101. Employee plans compliance resolution system.
Sec. 1102. Notice and consent period regarding distributions.
Sec. 1103. Reporting simplification.
Sec. 1104. Voluntary early retirement incentive and employment 
              retention plans maintained by local educational agencies 
              and other entities.
Sec. 1105. No reduction in unemployment compensation as a result of 
              pension rollovers.
Sec. 1106. Withholding on distributions from governmental section 457 
              plans.
Sec. 1107. Treatment of defined benefit plan as governmental plan.
Sec. 1108. Increasing participation in cash or deferred plans through 
              automatic contribution arrangements.
Sec. 1109. Treatment of investment of assets by plan where participant 
              fails to exercise investment election.
Sec. 1110. Clarification of fiduciary rules.

            TITLE XII--UNITED STATES TAX COURT MODERNIZATION

Sec. 1200. Amendment of 1986 Code.
Sec. 1201. Annuities for survivors of Tax Court judges who are 
              assassinated.
Sec. 1202. Cost-of-living adjustments for Tax Court judicial survivor 
              annuities.
Sec. 1203. Life insurance coverage for Tax Court judges.
Sec. 1204. Cost of life insurance coverage for Tax Court judges age 65 
              or over.
Sec. 1205. Modification of timing of lump-sum payment of judges' 
              accrued annual leave.
Sec. 1206. Participation of Tax Court judges in the Thrift Savings 
              Plan.
Sec. 1207. Exemption of teaching compensation of retired judges from 
              limitation on outside earned income.
Sec. 1208. General provisions relating to Magistrate Judges of the Tax 
              Court.
Sec. 1209. Annuities to surviving spouses and dependent children of 
              Magistrate Judges of the Tax Court.
Sec. 1210. Retirement and annuity program.
Sec. 1211. Incumbent Magistrate Judges of the Tax Court.
Sec. 1212. Provisions for recall.
Sec. 1213. Effective date.

                      TITLE XIII--OTHER PROVISIONS

                  Subtitle A--Administrative Provision

Sec. 1301. Provisions relating to plan amendments.
Sec. 1302. Authority to the Secretary of Labor, Secretary of the 
              Treasury, and the Pension Benefit Guaranty Corporation to 
              postpone certain deadlines.

           Subtitle B--Governmental Pension Plan Equalization

Sec. 1311. Definition of governmental plan.
Sec. 1312. Extension to all governmental plans of current moratorium on 
              application of certain nondiscrimination rules applicable 
              to State and local plans.
Sec. 1313. Clarification that Tribal governments are subject to the 
              same defined benefit plan rules and regulations applied 
              to State and other local governments, their police and 
              firefighters.
Sec. 1314. Effective date.

                  Subtitle C--Miscellaneous Provisions

Sec. 1321. Transfer of excess funds from black lung disability trusts 
              to United Mine Workers of America Combined Benefit Fund.
Sec. 1322. Treatment of death benefits from corporate-owned life 
              insurance.

              Subtitle D--Other Related Pension Provisions

                  Part I--Health and Medical Benefits

Sec. 1331. Use of excess pension assets for future retiree health 
              benefits.
Sec. 1332. Special rules for funding of collectively bargained retiree 
              health benefits.
Sec. 1333. Allowance of reserve for medical benefits of plans sponsored 
              by bona fide associations.

                 Part II--Cash or Deferred Arrangements

Sec. 1336. Treatment of eligible combined defined benefit plans and 
              qualified cash or deferred arrangements.
Sec. 1337. State and local governments eligible to maintain section 
              401(k) plans.

                     Part III--Excess Contributions

Sec. 1339. Excess contributions.

                       Part IV--Other Provisions

Sec. 1341. Amendments relating to prohibited transactions.
Sec. 1342. Federal Task Force on Older Workers.
Sec. 1343. Technical corrections to Saver Act.

   TITLE I--FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER DEFINED 
                  BENEFIT PLANS AND RELATED PROVISIONS

 Subtitle A--Amendments to Employee Retirement Income Security Act of 
                                  1974

     SEC. 101. MINIMUM FUNDING STANDARDS.

       (a) Repeal of Existing Funding Rules.--Sections 302 through 
     308 of the Employee Retirement Income Security Act of 1974 
     (29 U.S.C. 1082 through 1086) are repealed.
       (b) New Minimum Funding Standards.--Part 3 of subtitle B of 
     title I of such Act (as amended by subsection (a)) is amended 
     by inserting after section 301 the following new section:


                      ``MINIMUM FUNDING STANDARDS

       ``Sec. 302. (a) Requirement To Meet Minimum Funding 
     Standard.--
       ``(1) In general.--A plan to which this part applies shall 
     satisfy the minimum funding standard applicable to the plan 
     for any plan year.
       ``(2) Minimum funding standard.--For purposes of paragraph 
     (1), a plan shall be treated as satisfying the minimum 
     funding standard for a plan year if--
       ``(A) in the case of a defined benefit plan which is a 
     single-employer plan, the employer makes contributions to or 
     under the plan for the plan year which, in the aggregate, are 
     not less than the minimum required contribution determined 
     under section 303 for the plan for the plan year,
       ``(B) in the case of a money purchase plan which is a 
     single-employer plan, the employer makes contributions to or 
     under the plan for the plan year which are required under the 
     terms of the plan, and
       ``(C) in the case of a multiemployer plan, the employers 
     make contributions to or under the plan for any plan year 
     which, in the aggregate, are sufficient to ensure that the 
     plan does not have an accumulated funding deficiency under 
     section 304 as of the end of the plan year.

[[Page 2587]]

       ``(b) Liability for Contributions.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     amount of any contribution required by this section 
     (including any required installments under section 303(j)) 
     shall be paid by the employer responsible for making 
     contributions to or under the plan.
       ``(2) Joint and several liability where employer member of 
     controlled group.--If the employer referred to in paragraph 
     (1) is a member of a controlled group, each member of such 
     group shall be jointly and severally liable for payment of 
     such contributions.
       ``(c) Variance From Minimum Funding Standards.--
       ``(1) Waiver in case of business hardship.--
       ``(A) In general.--If--
       ``(i) an employer is (or in the case of a multiemployer 
     plan, 10 percent or more of the number of employers 
     contributing to or under the plan are) unable to satisfy the 
     minimum funding standard for a plan year without temporary 
     substantial business hardship (substantial business hardship 
     in the case of a multiemployer plan), and
       ``(ii) application of the standard would be adverse to the 
     interests of plan participants in the aggregate,

     the Secretary of the Treasury may, subject to subparagraph 
     (C), waive the requirements of subsection (a) for such year 
     with respect to all or any portion of the minimum funding 
     standard. The Secretary of the Treasury shall not waive the 
     minimum funding standard with respect to a plan for more than 
     3 of any 15 (5 of any 15 in the case of a multiemployer plan) 
     consecutive plan years.
       ``(B) Effects of waiver.--If a waiver is granted under 
     subparagraph (A) for any plan year--
       ``(i) in the case of a single-employer plan, the minimum 
     required contribution under section 303 for the plan year 
     shall be reduced by the amount of the waived funding 
     deficiency and such amount shall be amortized as required 
     under section 303(e), and
       ``(ii) in the case of a multiemployer plan, the funding 
     standard account shall be credited under section 304(b)(3)(C) 
     with the amount of the waived funding deficiency and such 
     amount shall be amortized as required under section 
     304(b)(2)(C).
       ``(C) Waiver of amortized portion not allowed.--The 
     Secretary of the Treasury may not waive under subparagraph 
     (A) any portion of the minimum funding standard under 
     subsection (a) for a plan year which is attributable to any 
     waived funding deficiency for any preceding plan year.
       ``(2) Determination of business hardship.--For purposes of 
     this subsection, the factors taken into account in 
     determining temporary substantial business hardship 
     (substantial business hardship in the case of a multiemployer 
     plan) shall include (but shall not be limited to) whether or 
     not--
       ``(A) the employer is operating at an economic loss,
       ``(B) there is substantial unemployment or underemployment 
     in the trade or business and in the industry concerned,
       ``(C) the sales and profits of the industry concerned are 
     depressed or declining, and
       ``(D) it is reasonable to expect that the plan will be 
     continued only if the waiver is granted.
       ``(3) Waived funding deficiency.--For purposes of this 
     part, the term `waived funding deficiency' means the portion 
     of the minimum funding standard under subsection (a) 
     (determined without regard to the waiver) for a plan year 
     waived by the Secretary of the Treasury and not satisfied by 
     employer contributions.
       ``(4) Security for waivers for single-employer plans, 
     consultations.--
       ``(A) Security may be required.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     the Secretary of the Treasury may require an employer 
     maintaining a defined benefit plan which is a single-employer 
     plan (within the meaning of section 4001(a)(15)) to provide 
     security to such plan as a condition for granting or 
     modifying a waiver under paragraph (1).
       ``(ii)  Special rules.--Any security provided under clause 
     (i) may be perfected and enforced only by the Pension Benefit 
     Guaranty Corporation, or, at the direction of the 
     Corporation, by a contributing sponsor (within the meaning of 
     section 4001(a)(13)) or a member of such sponsor's controlled 
     group (within the meaning of section 4001(a)(14)).
       ``(B) Consultation with the pension benefit guaranty 
     corporation.--Except as provided in subparagraph (C), the 
     Secretary of the Treasury shall, before granting or modifying 
     a waiver under this subsection with respect to a plan 
     described in subparagraph (A)(i)--
       ``(i) provide the Pension Benefit Guaranty Corporation 
     with--

       ``(I) notice of the completed application for any waiver or 
     modification, and
       ``(II) an opportunity to comment on such application within 
     30 days after receipt of such notice, and

       ``(ii) consider--

       ``(I) any comments of the Corporation under clause (i)(II), 
     and
       ``(II) any views of any employee organization (within the 
     meaning of section 3(4)) representing participants in the 
     plan which are submitted in writing to the Secretary of the 
     Treasury in connection with such application.

     Information provided to the Corporation under this 
     subparagraph shall be considered tax return information and 
     subject to the safeguarding and reporting requirements of 
     section 6103(p) of the Internal Revenue Code of 1986.
       ``(C) Exception for certain waivers.--
       ``(i) In general.--The preceding provisions of this 
     paragraph shall not apply to any plan with respect to which 
     the sum of--

       ``(I) the aggregate unpaid minimum required contributions 
     for the plan year and all preceding plan years, and
       ``(II) the present value of all waiver amortization 
     installments determined for the plan year and succeeding plan 
     years under section 303(e)(2),

     is less than $1,000,000.
       ``(ii) Treatment of waivers for which applications are 
     pending.--The amount described in clause (i)(I) shall include 
     any increase in such amount which would result if all 
     applications for waivers of the minimum funding standard 
     under this subsection which are pending with respect to such 
     plan were denied.
       ``(iii) Unpaid minimum required contribution.--For purposes 
     of this subparagraph--

       ``(I) In general.--The term `unpaid minimum required 
     contribution' means, with respect to any plan year, any 
     minimum required contribution under section 303 for the plan 
     year which is not paid on or before the due date (as 
     determined under section 303(j)(1)) for the plan year.
       ``(II) Ordering rule.--For purposes of subclause (I), any 
     payment to or under a plan for any plan year shall be 
     allocated first to unpaid minimum required contributions for 
     all preceding plan years on a first-in, first-out basis and 
     then to the minimum required contribution under section 303 
     for the plan year.

       ``(5) Special rules for single-employer plans.--
       ``(A) Application must be submitted before date 2\1/2\ 
     months after close of year.--In the case of a single-employer 
     plan, no waiver may be granted under this subsection with 
     respect to any plan for any plan year unless an application 
     therefor is submitted to the Secretary of the Treasury not 
     later than the 15th day of the 3rd month beginning after the 
     close of such plan year.
       ``(B) Special rule if employer is member of controlled 
     group.--In the case of a single-employer plan, if an employer 
     is a member of a controlled group, the temporary substantial 
     business hardship requirements of paragraph (1) shall be 
     treated as met only if such requirements are met--
       ``(i) with respect to such employer, and
       ``(ii) with respect to the controlled group of which such 
     employer is a member (determined by treating all members of 
     such group as a single employer).

     The Secretary of the Treasury may provide that an analysis of 
     a trade or business or industry of a member need not be 
     conducted if the Secretary of the Treasury determines such 
     analysis is not necessary because the taking into account of 
     such member would not significantly affect the determination 
     under this paragraph.
       ``(6) Advance notice.--
       ``(A) In general.--The Secretary of the Treasury shall, 
     before granting a waiver under this subsection, require each 
     applicant to provide evidence satisfactory to such Secretary 
     that the applicant has provided notice of the filing of the 
     application for such waiver to each affected party (as 
     defined in section 4001(a)(21)) other than the Pension 
     Benefit Guaranty Corporation and in the case of a 
     multiemployer plan, to each employer required to contribute 
     to the plan under subsection (b)(1). Such notice shall 
     include a description of the extent to which the plan is 
     funded for benefits which are guaranteed under title IV and 
     for benefit liabilities.
       ``(B) Consideration of relevant information.--The Secretary 
     of the Treasury shall consider any relevant information 
     provided by a person to whom notice was given under 
     subparagraph (A).
       ``(7) Restriction on plan amendments.--
       ``(A) In general.--No amendment of a plan which increases 
     the liabilities of the plan by reason of any increase in 
     benefits, any change in the accrual of benefits, or any 
     change in the rate at which benefits become nonforfeitable 
     under the plan shall be adopted if a waiver under this 
     subsection or an extension of time under section 304(d) is in 
     effect with respect to the plan, or if a plan amendment 
     described in subsection (d)(2) has been made at any time in 
     the preceding 24 months. If a plan is amended in violation of 
     the preceding sentence, any such waiver, or extension of 
     time, shall not apply to any plan year ending on or after the 
     date on which such amendment is adopted.
       ``(B) Exception.--Subparagraph (A) shall not apply to any 
     plan amendment which--
       ``(i) the Secretary of the Treasury determines to be 
     reasonable and which provides for only de minimis increases 
     in the liabilities of the plan,
       ``(ii) only repeals an amendment described in subsection 
     (d)(2), or
       ``(iii) is required as a condition of qualification under 
     part I of subchapter D, of chapter 1 of the Internal Revenue 
     Code of 1986.

[[Page 2588]]

       ``(8) Cross reference.--For corresponding duties of the 
     Secretary of the Treasury with regard to implementation of 
     the Internal Revenue Code of 1986, see section 412(d) of such 
     Code.
       ``(d) Miscellaneous Rules.--
       ``(1) Change in method or year.--If the funding method, the 
     valuation date, or a plan year for a plan is changed, the 
     change shall take effect only if approved by the Secretary of 
     the Treasury.
       ``(2) Certain retroactive plan amendments.--For purposes of 
     this section, any amendment applying to a plan year which--
       ``(A) is adopted after the close of such plan year but no 
     later than 2\1/2\ months after the close of the plan year 
     (or, in the case of a multiemployer plan, no later than 2 
     years after the close of such plan year),
       ``(B) does not reduce the accrued benefit of any 
     participant determined as of the beginning of the first plan 
     year to which the amendment applies, and
       ``(C) does not reduce the accrued benefit of any 
     participant determined as of the time of adoption except to 
     the extent required by the circumstances,

     shall, at the election of the plan administrator, be deemed 
     to have been made on the first day of such plan year. No 
     amendment described in this paragraph which reduces the 
     accrued benefits of any participant shall take effect unless 
     the plan administrator files a notice with the Secretary of 
     the Treasury notifying him of such amendment and such 
     Secretary has approved such amendment, or within 90 days 
     after the date on which such notice was filed, failed to 
     disapprove such amendment. No amendment described in this 
     subsection shall be approved by the Secretary of the Treasury 
     unless such Secretary determines that such amendment is 
     necessary because of a temporary substantial business 
     hardship (as determined under subsection (c)(2)) or a 
     substantial business hardship (as so determined) in the case 
     of a multiemployer plan and that a waiver under subsection 
     (c) (or, in the case of a multiemployer plan, any extension 
     of the amortization period under section 304(d)) is 
     unavailable or inadequate.
       ``(3) Controlled group.--For purposes of this section, the 
     term `controlled group' means any group treated as a single 
     employer under subsection (b), (c), (m), or (o) of section 
     414 of the Internal Revenue Code of 1986.''.
       (c) Clerical Amendment.--The table of contents in section 1 
     of such Act is amended by striking the items relating to 
     sections 302 through 308 and inserting the following new 
     item:

``Sec. 302. Minimum funding standards.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after 2006.

     SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT 
                   PENSION PLANS.

       (a) In General.--Part 3 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 (as amended 
     by section 101 of this Act) is amended by inserting after 
     section 302 the following new section:


``MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION 
                                 PLANS

       ``Sec. 303. (a) Minimum Required Contribution.--For 
     purposes of this section and section 302(a)(2)(A), except as 
     provided in subsection (f), the term `minimum required 
     contribution' means, with respect to any plan year of a 
     defined benefit plan which is a single employer plan--
       ``(1) in any case in which the value of plan assets of the 
     plan (as reduced under subsection (f)(4)) is less than the 
     funding target of the plan for the plan year, the sum of--
       ``(A) the target normal cost of the plan for the plan year,
       ``(B) the shortfall amortization charge (if any) for the 
     plan for the plan year determined under subsection (c), and
       ``(C) the waiver amortization charge (if any) for the plan 
     for the plan year as determined under subsection (e); or
       ``(2) in any case in which the value of plan assets of the 
     plan (as reduced under subsection (f)(4)) equals or exceeds 
     the funding target of the plan for the plan year, the target 
     normal cost of the plan for the plan year reduced (but not 
     below zero) by any such excess.
       ``(b) Target Normal Cost.--For purposes of this section, 
     except as provided in subsection (i)(2) with respect to plans 
     in at-risk status, the term `target normal cost' means, for 
     any plan year, the present value of all benefits which are 
     expected to accrue or to be earned under the plan during the 
     plan year. For purposes of this subsection, if any benefit 
     attributable to services performed in a preceding plan year 
     is increased by reason of any increase in compensation during 
     the current plan year, the increase in such benefit shall be 
     treated as having accrued during the current plan year.
       ``(c) Shortfall Amortization Charge.--
       ``(1) In general.--For purposes of this section, the 
     shortfall amortization charge for a plan for any plan year is 
     the aggregate total of the shortfall amortization 
     installments for such plan year with respect to the shortfall 
     amortization bases for such plan year and each of the 6 
     preceding plan years.
       ``(2) Shortfall amortization installment.--For purposes of 
     paragraph (1)--
       ``(A) Determination.--The shortfall amortization 
     installments are the amounts necessary to amortize the 
     shortfall amortization base of the plan for any plan year in 
     level annual installments over the 7-plan-year period 
     beginning with such plan year.
       ``(B) Shortfall installment.--The shortfall amortization 
     installment for any plan year in the 7-plan-year period under 
     subparagraph (A) with respect to any shortfall amortization 
     base is the annual installment determined under subparagraph 
     (A) for that year for that base.
       ``(C) Segment rates.--In determining any shortfall 
     amortization installment under this paragraph, the plan 
     sponsor shall use the segment rates determined under 
     subparagraph (C) of subsection (h)(2), applied under rules 
     similar to the rules of subparagraph (B) of subsection 
     (h)(2).
       ``(3) Shortfall amortization base.--For purposes of this 
     section, the shortfall amortization base of a plan for a plan 
     year is the excess (if any) of--
       ``(A) the funding shortfall of such plan for such plan 
     year, over
       ``(B) the present value (determined using the segment rates 
     determined under subparagraph (C) of subsection (h)(2), 
     applied under rules similar to the rules of subparagraph (B) 
     of subsection (h)(2)) of the aggregate total of the shortfall 
     amortization installments and waiver amortization 
     installments which have been determined for such plan year 
     and any succeeding plan year with respect to the shortfall 
     amortization bases and waiver amortization bases of the plan 
     for any plan year preceding such plan year.
       ``(4) Funding shortfall.--
       ``(A) In general.--For purposes of this section, except as 
     provided in subparagraph (B), the funding shortfall of a plan 
     for any plan year is the excess (if any) of--
       ``(i) the funding target of the plan for the plan year, 
     over
       ``(ii) the value of plan assets of the plan (as reduced 
     under subsection (f)(4)) for the plan year which are held by 
     the plan on the valuation date.
       ``(B) Transition rule for amortization of funding 
     shortfall.--
       ``(i) In general.--Solely for purposes of applying 
     paragraph (3) in the case of plan years beginning after 2006 
     and before 2011, only the applicable percentage of the 
     funding target shall be taken into account under paragraph 
     (3)(A) in determining the funding shortfall for the plan 
     year.
       ``(ii) Applicable percentage.--For purposes of subparagraph 
     (A)--

       ``(I) In general.--Except as provided in subclause (II), 
     the applicable percentage shall be 93 percent for plan years 
     beginning in 2007, 96 percent for plan years beginning in 
     2008, and 100 percent for any succeeding plan year.
       ``(II) Small plans.--In the case of a plan described in 
     subsection (g)(2)(B), the applicable percentage shall be 
     determined in accordance with the following table:

``In the case of a plan year beginning inThe applicable percentage is--
  2007..........................................................92 ....

  2008..........................................................94 ....

  2009..........................................................96 ....

  2010..........................................................98.....

       ``(5) Early deemed amortization upon attainment of funding 
     target.--In any case in which the funding shortfall of a plan 
     for a plan year is zero, for purposes of determining the 
     shortfall amortization charge for such plan year and 
     succeeding plan years, the shortfall amortization bases for 
     all preceding plan years (and all shortfall amortization 
     installments determined with respect to such bases) shall be 
     reduced to zero.
       ``(d) Rules Relating to Funding Target.--For purposes of 
     this section--
       ``(1) Funding target.--Except as provided in subsection 
     (i)(1) with respect to plans in at-risk status, the funding 
     target of a plan for a plan year is the present value of all 
     benefits accrued or earned under the plan as of the beginning 
     of the plan year.
       ``(2) Funding target attainment percentage.--The `funding 
     target attainment percentage' of a plan for a plan year is 
     the ratio (expressed as a percentage) which--
       ``(A) the value of plan assets for the plan year, bears to
       ``(B) the funding target of the plan for the plan year 
     (determined without regard to subsection (i)(1)).
       ``(e) Waiver Amortization Charge.--
       ``(1) Determination of waiver amortization charge.--The 
     waiver amortization charge (if any) for a plan for any plan 
     year is the aggregate total of the waiver amortization 
     installments for such plan year with respect to the waiver 
     amortization bases for each of the 5 preceding plan years.
       ``(2) Waiver amortization installment.--For purposes of 
     paragraph (1)--
       ``(A) Determination.--The waiver amortization installments 
     are the amounts necessary to amortize the waiver amortization 
     base of the plan for any plan year in level annual 
     installments over a period of 5 plan years beginning with the 
     succeeding plan year.
       ``(B) Waiver installment.--The waiver amortization 
     installment for any plan year in the 5-year period under 
     subparagraph (A) with respect to any waiver amortization base

[[Page 2589]]

     is the annual installment determined under subparagraph (A) 
     for that year for that base.
       ``(3) Interest rate.--In determining any waiver 
     amortization installment under this subsection, the plan 
     sponsor shall use the segment rates determined under 
     subparagraph (C) of subsection (h)(2), applied under rules 
     similar to the rules of subparagraph (B) of subsection 
     (h)(2).
       ``(4) Waiver amortization base.--The waiver amortization 
     base of a plan for a plan year is the amount of the waived 
     funding deficiency (if any) for such plan year under section 
     302(c).
       ``(5) Early deemed amortization upon attainment of funding 
     target.--In any case in which the funding shortfall of a plan 
     for a plan year is zero, for purposes of determining the 
     waiver amortization charge for such plan year and succeeding 
     plan years, the waiver amortization bases for all preceding 
     plan years (and all waiver amortization installments with 
     respect to such bases) shall be reduced to zero.
       ``(f) Use of Prefunding Balances To Satisfy Minimum 
     Required Contributions.--
       ``(1) In general.--A plan sponsor may credit any amount of 
     a plan's prefunding balance for a plan year against the 
     minimum required contribution for the plan year and the 
     amount of the contributions an employer is required to make 
     under section 302(b) for the plan year shall be reduced by 
     the amount so credited. Any such amount shall be credited on 
     the first day of the plan year.
       ``(2) Prefunding balance.--
       ``(A) Beginning balance.--The beginning balance of a 
     prefunding balance maintained by a plan shall be zero, except 
     that if a plan was in effect for a plan year beginning in 
     2006 and had a positive balance in the funding standard 
     account under section 302(b) (as in effect for such plan 
     year) as of the end of such plan year, the beginning balance 
     for the plan for its first plan year beginning after 2006 
     shall be such positive balance.
       ``(B) Increases.--
       ``(i) In general.--As of the first day of each plan year 
     beginning after 2007, the prefunding balance of a plan shall 
     be increased by the excess (if any) of--

       ``(I) the aggregate amount of employer contributions to the 
     plan for the preceding plan year, over
       ``(II) the minimum required contribution for the preceding 
     plan year.

       ``(ii) Adjustments for interest.--Any excess contributions 
     under clause (i) shall be properly adjusted for interest 
     accruing for the periods between the first day of the current 
     plan year and the dates on which the excess contributions 
     were made, determined by using the effective interest rate 
     for the preceding plan year and by treating contributions as 
     being first used to satisfy the minimum required 
     contribution.
       ``(iii) Certain contributions disregarded.--Any 
     contribution which is required to be made under section 
     206(g) in addition to any contribution required under this 
     section shall not be taken into account for purposes of 
     clause (i).
       ``(C) Decreases.--As of the first day of each plan year 
     after 2007, the prefunding balance of a plan shall be 
     decreased (but not below zero) by the amount of the balance 
     credited under paragraph (1) against the minimum required 
     contribution of the plan for the preceding plan year.
       ``(D) Adjustments for investment experience.--In 
     determining the prefunding balance of a plan as of the first 
     day of the plan year, the plan sponsor shall, in accordance 
     with regulations prescribed by the Secretary of the Treasury, 
     adjust such balance to reflect the rate of return on plan 
     assets for the preceding plan year. Notwithstanding 
     subsection (g)(3), such rate of return shall be determined on 
     the basis of fair market value and shall properly take into 
     account, in accordance with such regulations, all 
     contributions, distributions, and other plan payments made 
     during such period.
       ``(3) Limitation for underfunded plans.--
       ``(A) In general.--If the ratio (expressed as a percentage) 
     for any plan year which--
       ``(i) the value of plan assets for the preceding plan year, 
     bears to
       ``(ii) the funding target of the plan for the preceding 
     plan year (determined without regard to subsection (i)(1)),

     is less than 80 percent, the preceding provisions of this 
     subsection shall not apply unless employers liable for 
     contributions to the plan under section 302(b) make 
     contributions to the plan for the plan year in an aggregate 
     amount not less than the amount determined under subparagraph 
     (B). Any contribution required by this subparagraph may not 
     be reduced by any credit otherwise allowable under paragraph 
     (1).
       ``(B) Applicable amount.--The amount determined under this 
     subparagraph for any plan year is the greater of--
       ``(i) the target normal cost of the plan for the plan year, 
     or
       ``(ii) 25 percent of the minimum required contribution 
     under subsection (a) for the plan year without regard to this 
     subsection.
       ``(4) Reduction in value of assets.--Solely for purposes of 
     applying subsections (a) and (c)(4)(A)(ii) in determining the 
     minimum required contribution under this section, the value 
     of the plan assets otherwise determined without regard to 
     this paragraph shall be reduced by the amount of the 
     prefunding balance under this subsection.
       ``(g) Valuation of Plan Assets and Liabilities.--
       ``(1) Timing of determinations.--Except as otherwise 
     provided under this subsection, all determinations under this 
     section for a plan year shall be made as of the valuation 
     date of the plan for such plan year.
       ``(2) Valuation date.--For purposes of this section--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the valuation date of a plan for any plan year shall be the 
     first day of the plan year.
       ``(B) Exception for small plans.--If, on each day during 
     the preceding plan year, a plan had 100 or fewer 
     participants, the plan may designate any day during the plan 
     year as its valuation date for such plan year and succeeding 
     plan years. For purposes of this subparagraph, all defined 
     benefit plans (other than multiemployer plans) maintained by 
     the same employer (or any member of such employer's 
     controlled group) shall be treated as 1 plan, but only 
     employees of such employer or member shall be taken into 
     account.
       ``(C) Application of certain rules in determination of plan 
     size.--For purposes of this paragraph--
       ``(i) Plans not in existence in preceding year.--In the 
     case of the first plan year of any plan, subparagraph (B) 
     shall apply to such plan by taking into account the number of 
     participants that the plan is reasonably expected to have on 
     days during such first plan year.
       ``(ii) Predecessors.--Any reference in subparagraph (B) to 
     an employer shall include a reference to any predecessor of 
     such employer.
       ``(3) Determination of value of plan assets.--For purposes 
     of this section--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the value of plan assets shall be the fair market value of 
     the assets.
       ``(B) Averaging allowed.--A plan may determine the value of 
     plan assets on the basis of any reasonable actuarial method 
     of valuation providing for the averaging of fair market 
     values, but only if such method--
       ``(i) is permitted under regulations prescribed by the 
     Secretary of the Treasury, and
       ``(ii) does not provide for averaging of such values over 
     more than the period beginning on the last day of the 12th 
     month preceding the valuation date and ending on the 
     valuation date (or a similar period in the case of a 
     valuation date which is not the 1st day of a month).
       ``(4) Accounting for contribution receipts.--For purposes 
     of determining the value of assets under paragraph (3)--
       ``(A) Prior year contributions.--If--
       ``(i) an employer makes any contribution to the plan after 
     the valuation date for the plan year in which the 
     contribution is made, and
       ``(ii) the contribution is for a preceding plan year,

     the contribution shall be taken into account as an asset of 
     the plan as of the valuation date, except that in the case of 
     any plan year beginning after 2007, only the present value 
     (determined as of the valuation date) of such contribution 
     may be taken into account. For purposes of the preceding 
     sentence, present value shall be determined using the 
     effective interest rate for the preceding plan year to which 
     the contribution is properly allocable.
       ``(B) Special rule for current year contributions made 
     before valuation date.--If any contributions for any plan 
     year are made to or under the plan during the plan year but 
     before the valuation date for the plan year, the assets of 
     the plan as of the valuation date shall not include--
       ``(i) such contributions, and
       ``(ii) interest on such contributions for the period 
     between the date of the contributions and the valuation date, 
     determined by using the effective interest rate for the plan 
     year.
       ``(h) Actuarial Assumptions and Methods.--
       ``(1) In general.--Subject to this subsection, the 
     determination of any present value or other computation under 
     this section shall be made on the basis of actuarial 
     assumptions and methods--
       ``(A) each of which is reasonable (taking into account the 
     experience of the plan and reasonable expectations), and
       ``(B) which, in combination, offer the actuary's best 
     estimate of anticipated experience under the plan.
       ``(2) Interest rates.--
       ``(A) Effective interest rate.--For purposes of this 
     section, the term `effective interest rate' means, with 
     respect to any plan for any plan year, the single rate of 
     interest which, if used to determine the present value of the 
     plan's accrued or earned benefits referred to in subsection 
     (d)(1), would result in an amount equal to the funding target 
     of the plan for such plan year.
       ``(B) Interest rates for determining funding target.--For 
     purposes of determining the funding target of a plan for any 
     plan year, the interest rate used in determining the present 
     value of the benefits of the plan shall be--
       ``(i) in the case of benefits reasonably determined to be 
     payable during the 5-year period beginning on the first day 
     of the plan

[[Page 2590]]

     year, the first segment rate with respect to the applicable 
     month,
       ``(ii) in the case of benefits reasonably determined to be 
     payable during the 15-year period beginning at the end of the 
     period described in clause (i), the second segment rate with 
     respect to the applicable month, and
       ``(iii) in the case of benefits reasonably determined to be 
     payable after the period described in clause (ii), the third 
     segment rate with respect to the applicable month.
       ``(C) Segment rates.--For purposes of this paragraph--
       ``(i) First segment rate.--The term `first segment rate' 
     means, with respect to any month, the single rate of interest 
     which shall be determined by the Secretary of the Treasury 
     for such month on the basis of the corporate bond yield curve 
     for such month, taking into account only that portion of such 
     yield curve which is based on bonds maturing during the 5-
     year period commencing with such month.
       ``(ii) Second segment rate.--The term `second segment rate' 
     means, with respect to any month, the single rate of interest 
     which shall be determined by the Secretary of the Treasury 
     for such month on the basis of the corporate bond yield curve 
     for such month, taking into account only that portion of such 
     yield curve which is based on bonds maturing during each of 
     the years in the 15-year period beginning at the end of the 
     period described in clause (i).
       ``(iii) Third segment rate.--The term `third segment rate' 
     means, with respect to any month, the single rate of interest 
     which shall be determined by the Secretary of the Treasury 
     for such month on the basis of the corporate bond yield curve 
     for such month, taking into account only that portion of such 
     yield curve which is based on bonds maturing during periods 
     beginning after the period described in clause (ii).
       ``(D) Corporate bond yield curve.--The term `corporate bond 
     yield curve' means, with respect to any month, a yield curve 
     which is prescribed by the Secretary of the Treasury for such 
     month and which reflects the average, for the 12-month period 
     ending with the month preceding such month, of yields on 
     investment grade corporate bonds with varying maturities.
       ``(E) Applicable month.--For purposes of this paragraph, 
     the term `applicable month' means, with respect to any plan 
     for any plan year, the month which includes the valuation 
     date of such plan for such plan year or, at the election of 
     the plan administrator, any of the 4 months which precede 
     such month. Any election made under this subparagraph shall 
     apply to the plan year for which the election is made and all 
     succeeding plan years, unless the election is revoked with 
     the consent of the Secretary of the Treasury.
       ``(F) Publication requirements.--The Secretary of the 
     Treasury shall publish for each month the corporate bond 
     yield curve for such month and each of the rates determined 
     under this paragraph for such month. The Secretary of the 
     Treasury shall also publish a description of the methodology 
     used to determine such yield curve and such rates which is 
     sufficiently detailed to enable plans to make reasonable 
     projections regarding the yield curve and such rates for 
     future months based on the plan's projection of future 
     interest rates.
       ``(G) Transition rule.--
       ``(i) In general.--Notwithstanding the preceding provisions 
     of this paragraph, for plan years beginning in 2007 or 2008, 
     the first, second, or third segment rate for a plan with 
     respect to any month shall be equal to the sum of--

       ``(I) the product of such rate for such month determined 
     without regard to this subparagraph, multiplied by the 
     applicable percentage, and
       ``(II) the product of the rate determined under the rules 
     of section 302(b)(5)(B)(ii)(II) (as in effect for plan years 
     beginning in 2006), multiplied by a percentage equal to 100 
     percent minus the applicable percentage.

       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage is 33\1/3\ percent for plan years 
     beginning in 2007 and 66\2/3\ percent for plan years 
     beginning in 2008.
       ``(3) Mortality tables.--
       ``(A) In general.--Except as provided in subparagraphs (C) 
     and (D), the mortality table used in determining any present 
     value or making any computation under this section shall be 
     the RP-2000 Combined Mortality Table, using Scale AA, as 
     published by the Society of Actuaries, as in effect on the 
     date of the enactment of the Pension Security and 
     Transparency Act of 2005 and as revised from time to time 
     under subparagraph (B).
       ``(B) Periodic revision.--The Secretary of the Treasury 
     shall (at least every 10 years) make revisions in any table 
     in effect under subparagraph (A) to reflect the actual 
     experience of pension plans and projected trends in such 
     experience.
       ``(C) Substitute mortality table.--
       ``(i) In general.--Upon request by the plan sponsor and 
     approval by the Secretary of the Treasury, a mortality table 
     which meets the requirements of clause (ii) shall be used in 
     determining any present value or making any computation under 
     this section during the 10-consecutive plan year period 
     specified in the request. A mortality table described in this 
     clause shall cease to be in effect if the plan actuary 
     determines at any time that such table does not meet the 
     requirements of clause (ii).
       ``(ii) Requirements.--A mortality table meets the 
     requirements of this clause if the Secretary of the Treasury 
     determines that--

       ``(I) there is a sufficient number of plan participants, 
     and the pension plans have been maintained for a sufficient 
     period of time, to have credible information necessary for 
     purposes of subclause (II),
       ``(II) such table reflects the actual experience of the 
     pension plans maintained by the sponsor and projected trends 
     in general mortality experience,
       ``(III) except as provided by the Secretary, such table 
     will be used by all plans maintained by the plan sponsor and 
     all members of any controlled group which includes the plan 
     sponsor, and
       ``(IV) such table is significantly different from the table 
     described in subparagraph (A).

       ``(iii) Deadline for disposition of application.--Any 
     mortality table submitted to the Secretary of the Treasury 
     for approval under this subparagraph shall be treated as in 
     effect for the first plan year in the 10-year period 
     described in clause (i) unless the Secretary of the Treasury, 
     during the 180-day period beginning on the date of such 
     submission, disapproves of such table and provides the 
     reasons that such table fails to meet the requirements of 
     clause (ii). The 180-day period shall be extended for any 
     period during which the Secretary of the Treasury has 
     requested information from the plan sponsor and such 
     information has not been provided.
       ``(D) Separate mortality tables for the disabled.--
     Notwithstanding subparagraph (A)--
       ``(i) In general.--The Secretary of the Treasury shall 
     establish mortality tables which may be used (in lieu of the 
     tables under subparagraph (A)) 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.
       ``(iii) Periodic revision.--The Secretary of the Treasury 
     shall (at least every 10 years) make revisions in any table 
     in effect under clause (i) to reflect the actual experience 
     of pension plans and projected trends in such experience.
       ``(E) Transition rule.--Under regulations of the Secretary 
     of the Treasury, any difference in present value resulting 
     from any differences in assumptions as set forth in the 
     mortality table specified in subparagraph (A) and assumptions 
     as set forth in the mortality table described in section 
     302(d)(7)(C)(ii) (as in effect for plan years beginning in 
     2006) shall be phased in ratably over the first period of 5 
     plan years beginning in or after 2007 so as to be fully 
     effective for the fifth plan year.
       ``(4) Probability of benefit payments in the form of lump 
     sums or other optional forms.--For purposes of determining 
     any present value or making any computation under this 
     section, there shall be taken into account--
       ``(A) the probability that future benefit payments under 
     the plan will be made in the form of optional forms of 
     benefits provided under the plan (including lump sum 
     distributions, determined on the basis of the plan's 
     experience and other related assumptions), and
       ``(B) any difference in the present value of such future 
     benefit payments resulting from the use of actuarial 
     assumptions, in determining benefit payments in any such 
     optional form of benefits, which are different from those 
     specified in this subsection.
       ``(5) Approval of large changes in actuarial assumptions.--
       ``(A) In general.--No actuarial assumption used to 
     determine the funding target for a plan to which this 
     paragraph applies may be changed without the approval of the 
     Secretary of the Treasury.
       ``(B) Plans to which paragraph applies.--This paragraph 
     shall apply to a plan only if--
       ``(i) the aggregate unfunded 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 benefits) 
     exceed $50,000,000; and
       ``(ii) the change in assumptions (determined after taking 
     into account any changes in interest rate and mortality 
     table) results in a decrease in the funding shortfall of the 
     plan for the current plan year that exceeds $50,000,000, or 
     that exceeds $5,000,000 and that is 5 percent or more of the 
     funding target of the plan before such change.

[[Page 2591]]

       ``(i) Special Rules for At-Risk Plans.--
       ``(1) Funding target for plans in at-risk status.--
       ``(A) In general.--In the case of a plan to which this 
     subsection applies for a plan year, the funding target of the 
     plan for the plan year is equal to the present value of all 
     liabilities to participants and their beneficiaries under the 
     plan for the plan year, as determined by using the additional 
     actuarial assumptions described in subparagraph (B).
       ``(B) Additional actuarial assumptions.--The actuarial 
     assumptions described in this subparagraph are as follows:
       ``(i) All employees who are not otherwise assumed to retire 
     as of the valuation date but who will be eligible to elect 
     benefits during the plan year and the 7 succeeding plan years 
     shall be assumed to retire at the earliest retirement date 
     under the plan but not before the end of the plan year for 
     which the at-risk target liability and at-risk target normal 
     cost are being determined.
       ``(ii) All employees shall be assumed to elect the 
     retirement benefit available under the plan at the assumed 
     retirement age (determined after application of clause (i)) 
     which would result in the highest present value of 
     liabilities.
       ``(2) Target normal cost of at-risk plans.--In the case of 
     a plan to which this subsection applies for a plan year, the 
     target normal cost of the plan for such plan year shall be 
     equal to the present value of all benefits which are expected 
     to accrue or be earned under the plan during the plan year, 
     determined using the additional actuarial assumptions 
     described in paragraph (1)(B).
       ``(3) Minimum amount.--In no event shall--
       ``(A) the at-risk target liability be less than the target 
     liability, as determined without regard to this subsection, 
     or
       ``(B) the at-risk target normal cost be less than the 
     target normal cost, as determined without regard to this 
     subsection.
       ``(4) Determination of at-risk status.--For purposes of 
     this subsection, a plan is in at-risk status for a plan year 
     if--
       ``(A) the plan is maintained by a financially-weak 
     employer, and
       ``(B) the funding target attainment percentage for the plan 
     year is less than 93 percent.
       ``(5) Financially-weak employer.--
       ``(A) In general.--For purposes of this subsection, the 
     term `financially-weak employer' means any employer if--
       ``(i) as of the valuation date for each of the years during 
     a period of at least 3 consecutive plan years ending with the 
     plan year--

       ``(I) the employer has an outstanding senior unsecured debt 
     instrument which is rated lower than investment grade by each 
     of the nationally recognized statistical rating organizations 
     for corporate bonds that has issued a credit rating for such 
     instrument, or
       ``(II) if no such debt instrument has been rated by such an 
     organization but 1 or more of such organizations has made an 
     issuer credit rating for such employer, all such 
     organizations which have so rated the employer have rated 
     such employer lower than investment grade, and

       ``(ii) at least 2 of the years during such period are 
     deterioration years.

     If an employer is treated as a financially-weak employer for 
     any plan year, clause (ii) shall not apply in determining 
     whether the employer is so treated for any succeeding plan 
     year in any continuous period of plan years for which the 
     employer is treated as a financially-weak employer.
       ``(B) Controlled group exception.--If an employer treated 
     as a financially-weak employer under subparagraph (A) is a 
     member of a controlled group (as defined in section 
     302(d)(3)), the employer shall not be treated as a 
     financially-weak employer if a significant member (as 
     determined under regulations prescribed by the Secretary of 
     the Treasury) of such group has an outstanding senior 
     unsecured debt instrument that is rated as being investment 
     grade by an organization described in subparagraph (A).
       ``(C) Employers with no ratings.--If--
       ``(i) an employer has no debt instrument described in 
     subparagraph (A)(i) which was rated by an organization 
     described in such subparagraph, and
       ``(ii) no such organization has made an issuer credit 
     rating for such employer,
     then such employer shall only be treated as a financially-
     weak employer to the extent provided in regulations 
     prescribed by the Secretary of the Treasury.
       ``(6) Determination of deterioration year.--For purposes of 
     paragraph (5), the term `deterioration year' means any year 
     during the period described in paragraph (5)(A)(i) for which 
     the rating described in subclause (I) or (II) of paragraph 
     (5)(A)(i) by each organization is either--
       ``(A) lower than the lowest rating of the employer by such 
     organization for a preceding year in such period, or
       ``(B) the lowest rating used by such organization.
       ``(7) Years before effective date.--For purposes of 
     paragraphs (5) and (6), plan years beginning before 2007 
     shall not be taken into account.
       ``(8) Transition between applicable funding targets and 
     between applicable target normal costs.--
       ``(A) In general.--In any case in which a plan which is in 
     at-risk status for a plan year has been in such status for a 
     consecutive period of fewer than 5 plan years, the applicable 
     amount of the funding target and of the target normal cost 
     shall be, in lieu of the amount determined without regard to 
     this paragraph, the sum of--
       ``(i) the amount determined under this section without 
     regard to this subsection, plus
       ``(ii) the transition percentage for such plan year of the 
     excess of the amount determined under this subsection 
     (without regard to this paragraph) over the amount determined 
     under this section without regard to this subsection.
       ``(B) Improvement years not taken into account.--
       ``(i) In general.--An improvement year shall not be taken 
     into account in determining any consecutive period of plan 
     years for purposes of subparagraph (A).
       ``(ii) Application of subsection after improvement year 
     ends.--Plan years immediately before and after an improvement 
     year (or consecutive period of improvement years) shall be 
     treated as consecutive for purposes of subparagraph (A).
       ``(iii) Improvement year.--For purposes of this 
     subparagraph, the term `improvement year' means any plan year 
     for which any rating described in subclause (I) or (II) of 
     paragraph (5)(A)(i) is higher than such rating for the 
     preceding plan year.
       ``(C) Transition percentage.--For purposes of subparagraph 
     (A), the transition percentage shall be determined in 
     accordance with the following table:

``If the consecutive number of years (including the plan year) the plan 
  is in at-risk status is--              The transition percentage is--
  1.............................................................20 ....

  2.............................................................40 ....

  3.............................................................60 ....

  4.............................................................80.....

       ``(D) Years before effective date.--For purposes of this 
     paragraph, plan years beginning before 2007 shall not be 
     taken into account.
       ``(9) Plans to which subsection applies.--
       ``(A) In general.--Except as provided in this paragraph, 
     this subsection shall apply to any plan to which this section 
     applies and which is in at-risk status for the plan year.
       ``(B) Exception for small plans.--This subsection shall not 
     apply to a plan for a plan year if the plan was described in 
     subsection (g)(2)(B) for the preceding plan year, determined 
     by substituting `500' for `100'.
       ``(C) Exception for plans maintained by certain 
     cooperatives.--This subsection shall not apply to an eligible 
     cooperative plan described in subparagraph (D).
       ``(D) Eligible cooperative plan defined.--For purposes of 
     subparagraph (C), a plan shall be treated as an eligible 
     cooperative plan for a plan year if the plan is maintained by 
     more than 1 employer and at least 85 percent of the employers 
     are--
       ``(i) rural cooperatives (as defined in section 
     401(k)(7)(B) of the Internal Revenue Code of 1986 without 
     regard to clause (iv) thereof), or
       ``(ii) organizations which are--

       ``(I) cooperative organizations described in section 
     1381(a) of such Code which are more than 50-percent owned by 
     agricultural producers or by cooperatives owned by 
     agricultural producers, or
       ``(II) more than 50-percent owned, or controlled by, one or 
     more cooperative organizations described in subclause (I).

     A plan shall also be treated as an eligible cooperative plan 
     for any plan year for which it is described in section 210(a) 
     and is maintained by a rural telephone cooperative 
     association described in section 3(40)(B)(v).
       ``(E) Exception for plans secured by third parties bound by 
     pbgc agreements.--This subsection shall not apply to any plan 
     if--
       ``(i) a person other than the employer obligated to 
     contribute under the plan is, under the terms of an agreement 
     with the Pension Benefit Guaranty Corporation, liable for any 
     failure of the employer to meet its obligation to pay any 
     minimum required contribution or termination liability with 
     respect to the plan; and
       ``(ii) such person is not a financially-weak employer under 
     paragraph (5).
       ``(j) Payment of Minimum Required Contributions.--
       ``(1) In general.--For purposes of this section, the due 
     date for any payment of any minimum required contribution for 
     any plan year shall be 8\1/2\ months after the close of the 
     plan year.
       ``(2) Interest.--Any payment required under paragraph (1) 
     for a plan year made after the valuation date for such plan 
     year shall be increased by interest for the period from the 
     valuation date to the payment date, determined by using the 
     effective rate of interest for the plan for such plan year.
       ``(3) Accelerated quarterly contribution schedule for 
     underfunded plans.--
       ``(A) Failure to timely make required installment.--
       ``(i) In general.--In the case of a plan to which this 
     paragraph applies, the employer

[[Page 2592]]

     maintaining the plan shall make the required installments 
     under this paragraph and if the employer fails to pay the 
     full amount of a required installment for the plan year, then 
     the amount of interest charged under paragraph (2) on the 
     underpayment for the period of underpayment shall be 
     determined by using a rate of interest equal to the rate 
     otherwise used under paragraph (2) plus 5 percentage points.
       ``(ii) Plans to which paragraph applies.--This paragraph 
     applies to any defined benefit plan to which this section 
     applies other than a plan which--

       ``(I) is a plan described in subsection (g)(2)(B)), or
       ``(II) had a funding shortfall of $1,000,000 or less for 
     the preceding plan year.

       ``(B) Amount of underpayment, period of underpayment.--For 
     purposes of subparagraph (A)--
       ``(i) Amount.--The amount of the underpayment shall be the 
     excess of--

       ``(I) the required installment, over
       ``(II) the amount (if any) of the installment contributed 
     to or under the plan on or before the due date for the 
     installment.

       ``(ii) Period of underpayment.--The period for which any 
     interest is charged under this paragraph with respect to any 
     portion of the underpayment shall run from the due date for 
     the installment to the date on which such portion is 
     contributed to or under the plan.
       ``(iii) Order of crediting contributions.--For purposes of 
     clause (i)(II), contributions shall be credited against 
     unpaid required installments in the order in which such 
     installments are required to be paid.
       ``(C) Number of required installments; due dates.--For 
     purposes of this paragraph--
       ``(i) Payable in 4 installments.--There shall be 4 required 
     installments for each plan year.
       ``(ii) Time for payment of installments.--The due dates for 
     required installments are set forth in the following table:

 
   In the case of thefollowing  required
               installment:                       The due date is:
 
1st.......................................  April 15
2nd.......................................  July 15
3rd.......................................  October 15
4th.......................................  January 15 of the following
                                             year.
 


       ``(D) Amount of required installment.--For purposes of this 
     paragraph--
       ``(i) In general.--The amount of any required installment 
     shall be 25 percent of the required annual payment.
       ``(ii) Required annual payment.--For purposes of clause 
     (i), the term `required annual payment' means the lesser of--

       ``(I) 90 percent of the minimum required contribution 
     (without regard to any waiver under section 302(c)) to the 
     plan for the plan year under this section, or
       ``(II) in the case of a plan year beginning after 2007, 100 
     percent of the minimum required contribution (without regard 
     to any waiver under section 302(c)) to the plan for the 
     preceding plan year.

     Subclause (II) shall not apply if the preceding plan year 
     referred to in such clause was not a year of 12 months.
       ``(E) Fiscal years and short years.--
       ``(i) Fiscal years.--In applying this paragraph to a plan 
     year beginning on any date other than January 1, there shall 
     be substituted for the months specified in this paragraph, 
     the months which correspond thereto.
       ``(ii) Short plan year.--This subparagraph shall be applied 
     to plan years of less than 12 months in accordance with 
     regulations prescribed by the Secretary of the Treasury.
       ``(4) Liquidity requirement in connection with quarterly 
     contributions.--
       ``(A) In general.--A plan to which this paragraph applies 
     shall be treated as failing to pay the full amount of any 
     required installment under paragraph (3) to the extent that 
     the value of the liquid assets paid in such installment is 
     less than the liquidity shortfall (whether or not such 
     liquidity shortfall exceeds the amount of such installment 
     required to be paid but for this paragraph).
       ``(B) Plans to which paragraph applies.--This paragraph 
     shall apply to a plan which--
       ``(i) is required to pay installments under paragraph (3) 
     for a plan year, and
       ``(ii) has a liquidity shortfall for any quarter during 
     such plan year.
       ``(C) Period of underpayment.--For purposes of paragraph 
     (3)(A), any portion of an installment that is treated as not 
     paid under subparagraph (A) shall continue to be treated as 
     unpaid until the close of the quarter in which the due date 
     for such installment occurs.
       ``(D) Limitation on increase.--If the amount of any 
     required installment is increased by reason of subparagraph 
     (A), in no event shall such increase exceed the amount which, 
     when added to prior installments for the plan year, is 
     necessary to increase the funding target attainment 
     percentage of the plan for the plan year (taking into account 
     the expected increase in funding target due to benefits 
     accruing or earned during the plan year) to 100 percent.
       ``(E) Definitions.--For purposes of this subparagraph:
       ``(i) Liquidity shortfall.--The term `liquidity shortfall' 
     means, with respect to any required installment, an amount 
     equal to the excess (as of the last day of the quarter for 
     which such installment is made) of--

       ``(I) the base amount with respect to such quarter, over
       ``(II) the value (as of such last day) of the plan's liquid 
     assets.

       ``(ii) Base amount.--

       ``(I) In general.--The term `base amount' means, with 
     respect to any quarter, an amount equal to 3 times the sum of 
     the adjusted disbursements from the plan for the 12 months 
     ending on the last day of such quarter.
       ``(II) Special rule.--If the amount determined under 
     subclause (I) exceeds an amount equal to 2 times the sum of 
     the adjusted disbursements from the plan for the 36 months 
     ending on the last day of the quarter and an enrolled actuary 
     certifies to the satisfaction of the Secretary of the 
     Treasury that such excess is the result of nonrecurring 
     circumstances, the base amount with respect to such quarter 
     shall be determined without regard to amounts related to 
     those nonrecurring circumstances.

       ``(iii) Disbursements from the plan.--The term 
     `disbursements from the plan' means all disbursements from 
     the trust, including purchases of annuities, payments of 
     single sums and other benefits, and administrative expenses.
       ``(iv) Adjusted disbursements.--The term `adjusted 
     disbursements' means disbursements from the plan reduced by 
     the product of--

       ``(I) the plan's funding target attainment percentage for 
     the plan year, and
       ``(II) the sum of the purchases of annuities, payments of 
     single sums, and such other disbursements as the Secretary of 
     the Treasury shall provide in regulations.

       ``(v) Liquid assets.--The term `liquid assets' means cash, 
     marketable securities, and such other assets as specified by 
     the Secretary of the Treasury in regulations.
       ``(vi) Quarter.--The term `quarter' means, with respect to 
     any required installment, the 3-month period preceding the 
     month in which the due date for such installment occurs.
       ``(F) Regulations.--The Secretary of the Treasury may 
     prescribe such regulations as are necessary to carry out this 
     paragraph.
       ``(k) Imposition of Lien Where Failure To Make Required 
     Contributions.--
       ``(1) In general.--In the case of a plan to which this 
     subsection applies, if--
       ``(A) any person fails to make a contribution payment 
     required by section 302 and this section before the due date 
     for such payment, and
       ``(B) the unpaid balance of such payment (including 
     interest), when added to the aggregate unpaid balance of all 
     preceding such payments for which payment was not made before 
     the due date (including interest), exceeds $1,000,000,

     then there shall be a lien in favor of the plan in the amount 
     determined under paragraph (3) upon all property and rights 
     to property, whether real or personal, belonging to such 
     person and any other person who is a member of the same 
     controlled group of which such person is a member.
       ``(2) Plans to which subsection applies.--This subsection 
     shall apply to a defined benefit plan which is a single-
     employer plan covered under section 4021 for any plan year 
     for which the funding target attainment percentage (as 
     defined in subsection (d)(2)) of such plan is less than 100 
     percent.
       ``(3) Amount of lien.--For purposes of paragraph (1), the 
     amount of the lien shall be equal to the aggregate unpaid 
     balance of contribution payments required under this section 
     and section 302 for which payment has not been made before 
     the due date.
       ``(4) Notice of failure; lien.--
       ``(A) Notice of failure.--A person committing a failure 
     described in paragraph (1) shall notify the Pension Benefit 
     Guaranty Corporation of such failure within 10 days of the 
     due date for the required contribution payment.
       ``(B) Period of lien.--The lien imposed by paragraph (1) 
     shall arise on the due date for the required contribution 
     payment and shall continue until the last day of the first 
     plan year in which the plan ceases to be described in 
     paragraph (1)(B). Such lien shall continue to run without 
     regard to whether such plan continues to be described in 
     paragraph (2) during the period referred to in the preceding 
     sentence.
       ``(C) Certain rules to apply.--Any amount with respect to 
     which a lien is imposed under paragraph (1) shall be treated 
     as taxes due and owing the United States and rules similar to 
     the rules of subsections (c), (d), and (e) of section 4068 
     shall apply with respect to a lien imposed by subsection (a) 
     and the amount with respect to such lien.
       ``(5) Enforcement.--Any lien created under paragraph (1) 
     may be perfected and enforced only by the Pension Benefit 
     Guaranty Corporation, or at the direction of the Pension 
     Benefit Guaranty Corporation, by the contributing sponsor (or 
     any member of the controlled group of the contributing 
     sponsor).
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Contribution payment.--The term `contribution 
     payment' means, in connection with a plan, a contribution 
     payment required

[[Page 2593]]

     to be made to the plan, including any required installment 
     under paragraphs (3) and (4) of subsection (j).
       ``(B) Due date; required installment.--The terms `due date' 
     and `required installment' have the meanings given such terms 
     by subsection (j), except that in the case of a payment other 
     than a required installment, the due date shall be the date 
     such payment is required to be made under section 303.
       ``(C) Controlled group.--The term `controlled group' means 
     any group treated as a single employer under subsections (b), 
     (c), (m), and (o) of section 414 of the Internal Revenue Code 
     of 1986.
       ``(l) Qualified Transfers to Health Benefit Accounts.--In 
     the case of a qualified transfer (as defined in section 420 
     of the Internal Revenue Code of 1986), any assets so 
     transferred shall not, for purposes of this section, be 
     treated as assets in the plan.''.
       (b) Clerical Amendment.--The table of sections in section 1 
     of such Act (as amended by section 101) is amended by 
     inserting after the item relating to section 302 the 
     following new item:

``Sec. 303. Minimum funding standards for single-employer defined 
              benefit pension plans.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to plan years beginning after 2006.

     SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

       (a) Limits on Benefits and Benefit Accruals.--
       (1) In general.--Section 206 of such Act is amended by 
     adding at the end the following new subsection:
       ``(g) Funding-Based Limits on Benefits and Benefit Accruals 
     Under Single-Employer Plans.--
       ``(1) Limitations on plan amendments increasing liability 
     for benefits.--
       ``(A) In general.--Except as provided in paragraph (4), no 
     amendment to a single-employer plan which has the effect of 
     increasing liabilities of the plan by reason of increases in 
     benefits, establishment of new benefits, changing the rate of 
     benefit accrual, or changing the rate at which benefits 
     become nonforfeitable may take effect during any plan year if 
     the adjusted funding target attainment percentage as of the 
     valuation date of the plan for such plan year is--
       ``(i) less than 80 percent, or
       ``(ii) would be less than 80 percent taking into account 
     such amendment.
       ``(B) Exemption.--Subparagraph (A) shall cease to apply 
     with respect to any plan year, effective as of the first date 
     of the plan year (or if later, the effective date of the 
     amendment), upon payment by the plan sponsor of a 
     contribution (in addition to any minimum required 
     contribution under section 303) equal to--
       ``(i) in the case of subparagraph (A)(i), the amount of the 
     increase in the funding target of the plan (under section 
     303) for the plan year attributable to the amendment, and
       ``(ii) in the case of subparagraph (A)(ii), the amount 
     sufficient to result in an adjusted funding target attainment 
     percentage of 80 percent.
       ``(C) Exception for certain benefit increases.--
     Subparagraph (A) shall not apply to any amendment which 
     provides for an increase in benefits under a formula which is 
     not based on a participant's compensation, but only if the 
     rate of such increase is not in excess of the contemporaneous 
     rate of increase in average wages of participants covered by 
     the amendment.
       ``(2) Limitations on accelerated benefit distributions.--
       ``(A) In general.--A defined benefit plan which is a 
     single-employer plan shall provide that, with respect to any 
     plan year--
       ``(i) if the plan's adjusted funded target liability 
     percentage as of the valuation date for the preceding plan 
     year was less than 60 percent and the preceding plan year is 
     not otherwise in a prohibited period, the plan sponsor shall, 
     in addition to any other contribution required under section 
     303, contribute for the current plan year and each succeeding 
     plan year in the prohibited period with respect to the 
     current plan year the amount (if any) which, when added to 
     the portion of the minimum required contribution for the plan 
     year described in subparagraphs (B) and (C) of section 
     303(a)(1), is sufficient to result in an adjusted funded 
     target liability percentage for the plan year of 60 percent, 
     and
       ``(ii) no prohibited payments will be made during a 
     prohibited period.
       ``(B) Prohibited payment.--For purpose of this subsection--
       ``(i) In general.--The term `prohibited payment' means--

       ``(I) any payment, in excess of the monthly amount paid 
     under a single life annuity (plus any social security 
     supplements described in the last sentence of section 
     204(b)(1)(G)), to a participant or beneficiary whose annuity 
     starting date (as defined in section 205(h)(2)) occurs during 
     a prohibited period,
       ``(II) any payment for the purchase of an irrevocable 
     commitment from an insurer to pay benefits, and
       ``(III) any other payment specified by the Secretary of the 
     Treasury by regulations.

       ``(ii) Exception for certain payments.--In the case of any 
     prohibited period described in subparagraph (C)(i), the term 
     `prohibited payment' shall not include any payment if the 
     amount of the payment does not exceed the lesser of--

       ``(I) 50 percent of the amount of the payment which could 
     be made without regard to this subsection, or
       ``(II) the present value (determined under guidance 
     prescribed by the Pension Benefit Guaranty Corporation, using 
     the interest and mortality assumptions under section 205(g)) 
     of the maximum guarantee with respect to the participant 
     under section 4022.

     The exception under this clause shall only apply once with 
     respect to any participant, except that, for purposes of this 
     sentence, a participant and any beneficiary on his behalf 
     (including an alternate payee, as defined in section 
     206(d)(3)(K)) shall be treated as 1 participant. If the 
     accrued benefit of a participant is allocated to such an 
     alternate payee and 1 or more other persons, the amount under 
     subclause (II) shall be allocated among such persons in the 
     same manner as the accrued benefit is allocated unless the 
     qualified domestic relations order (as defined in section 
     206(d)(3)(B)(i)) provides otherwise.
       ``(C) Prohibited period.--For purposes of subparagraph (A), 
     the term `prohibited period' means--
       ``(i) except as provided in subparagraph (D), if a plan 
     sponsor is required to make the contribution for the current 
     plan year under subparagraph (A), the period beginning on the 
     1st day of the plan year and ending on the last day of the 
     1st period of 2 consecutive plan years (beginning on or after 
     such 1st day) for which the plan's adjusted funded target 
     liability percentage was at least 60 percent,
       ``(ii) any period the plan sponsor is in bankruptcy, or
       ``(iii) any period during which the plan has a liquidity 
     shortfall (as defined in section 303(j)(4)(E)(i)).

     The prohibited period for purposes of clause (ii) shall not 
     include any portion of a plan year (even if the plan sponsor 
     is in bankruptcy during such period) which occurs on or after 
     the date the plan's enrolled actuary certifies that, as of 
     the valuation date for the plan year, the plan's adjusted 
     funded target liability percentage is at least 100 percent.
       ``(D) Satisfaction of requirement before close of plan 
     year.--If, before the close of the current plan year--
       ``(i) the plan sponsor makes the contribution required to 
     be made under subparagraph (A), or
       ``(ii) the plan's enrolled actuary certifies that, as of 
     the valuation date for the plan year, the adjusted funded 
     target liability percentage of the plan is at least 60 
     percent,

     this paragraph shall be applied as if no prohibited period 
     had begun as of the beginning of such year and the plan 
     shall, under rules described by the Secretary of the 
     Treasury, restore any payments not made during the prohibited 
     period in effect before the application of this paragraph.
       ``(3) Limitation on benefit accruals for plans with severe 
     funding shortfalls.--
       ``(A) In general.--Except as provided in paragraph (4), a 
     single-employer plan shall provide that all future benefit 
     accruals under the plan shall cease during a severe funding 
     shortfall period, but only to the extent the cessation of 
     such accruals would have been permitted under section 204(g) 
     if the cessation had been implemented by a plan amendment 
     adopted immediately before the severe funding shortfall 
     period.
       ``(B) Severe funding shortfall period.--For purposes of 
     subparagraph (A), the term `severe funding shortfall period' 
     means in the case of a plan the adjusted funding target 
     attainment percentage of which as of the valuation date of 
     the plan for any plan year is less than 60 percent, the 
     period--
       ``(i) beginning on the 1st day of the succeeding plan year, 
     and
       ``(ii) ending on the date the plan's enrolled actuary 
     certifies that the plan's adjusted funding target attainment 
     percentage is at least 60 percent, and
       ``(C) Opportunity for increased funding.--For purposes of 
     subparagraph (B), a plan shall not be treated as described in 
     such subparagraph for a plan year if the plan's enrolled 
     actuary certifies that the plan sponsor has before the end of 
     the plan year contributed (in addition to any minimum 
     required contribution under section 303) the amount 
     sufficient to result in an adjusted funding target attainment 
     percentage as of the valuation date for the plan year of 60 
     percent.
       ``(4) Exception for certain collectively bargained 
     benefits.--In the case of a plan maintained pursuant to a 
     collective bargaining agreement between employee 
     representatives and the plan sponsor and in effect before the 
     beginning of the first day on which a limitation would 
     otherwise apply under paragraph (1), (2), or (3)--
       ``(A) such limitations shall not apply to any amendment, 
     prohibited payment, or accrual with respect to such plan, but
       ``(B) the plan sponsor shall contribute (in addition to any 
     minimum required contribution under section 303) the amount 
     sufficient to result in an adjusted funding target attainment 
     percentage (as of the valuation date for the plan year in 
     which any such limitation would otherwise apply) equal to the

[[Page 2594]]

     percentage necessary to prevent the limitation from applying.
       ``(5) Rules relating to required contributions.--
       ``(A) Security may be provided.--
       ``(i) In general.--For purposes of this subsection, the 
     adjusted funding target attainment percentage shall be 
     determined by treating as an asset of the plan any security 
     provided by a plan sponsor in a form meeting the requirements 
     of clause (ii).
       ``(ii) Form of security.--The security required under 
     clause (i) shall consist of--

       ``(I) a bond issued by a corporate surety company that is 
     an acceptable surety for purposes of section 412 of this Act,
       ``(II) cash, or United States obligations which mature in 3 
     years or less, held in escrow by a bank or similar financial 
     institution, or
       ``(III) such other form of security as is satisfactory to 
     the Secretary of the Treasury and the parties involved.

       ``(iii) Enforcement.--Any security provided under clause 
     (i) may be perfected and enforced at any time after the 
     earlier of--

       ``(I) the date on which the plan terminates,
       ``(II) if there is a failure to make a payment of the 
     minimum required contribution for any plan year beginning 
     after the security is provided, the due date for the payment 
     under section 303(j), or
       ``(III) if the adjusted funding target attainment 
     percentage is less than 60 percent for a consecutive period 
     of 7 years, the valuation date for the last year in the 
     period.

       ``(iv) Release of security.--The security shall be released 
     (and any amounts thereunder shall be refunded together with 
     any interest accrued thereon) at such time as the Secretary 
     of the Treasury may prescribe in regulations, including 
     regulations for partial releases of the security by reason of 
     increases in the funding target attainment percentage.
       ``(B) Prefunding balance may not be used.--No prefunding 
     balance under section 303(f) may be used to satisfy any 
     required contribution under this subsection.
       ``(C) Treatment as unpaid minimum required contribution.--
     The amount of any required contribution which a plan sponsor 
     fails to make under paragraph (1) or (3) for any plan year 
     shall be treated as an unpaid minimum required contribution 
     for purposes of subsection (j) and (k) of section 303 and for 
     purposes of section 4971 of the Internal Revenue Code of 
     1986.
       ``(6) New plans.--Paragraphs (1) and (3) shall not apply to 
     a plan for the first 5 plan years of the plan. For purposes 
     of this paragraph, the reference in this paragraph to a plan 
     shall include a reference to any predecessor plan.
       ``(7) Presumed underfunding for purposes of benefit 
     limitations based on prior year's funding status.--
       ``(A) Presumption of continued underfunding.--In any case 
     in which a benefit limitation under paragraph (1), (2), or 
     (3) has been applied to a plan with respect to the plan year 
     preceding the current plan year, the adjusted funding target 
     attainment percentage of the plan as of the valuation date of 
     the plan for the current plan year shall be presumed to be 
     equal to the adjusted funding target attainment percentage of 
     the plan as of the valuation date of the plan for the 
     preceding plan year until the enrolled actuary of the plan 
     certifies the actual adjusted funding target attainment 
     percentage of the plan as of the valuation date of the plan 
     for the current plan year.
       ``(B) Presumption of underfunding after 10th month.--In any 
     case in which no such certification is made with respect to 
     the plan before the first day of the 10th month of the 
     current plan year, for purposes of paragraphs (1), (2), and 
     (3), the plan's adjusted funding target attainment percentage 
     shall be conclusively presumed to be less than 60 percent as 
     of the first day of such 10th month.
       ``(8) Treatment of plan as of close of prohibited or 
     cessation period.--For purposes of applying this part--
       ``(A) Operation of plan after period.--Unless the plan 
     provides otherwise, payments and accruals will resume 
     effective as of the day following the close of a period of 
     limitation of payment or accrual of benefits under paragraph 
     (2) or (3).
       ``(B) Treatment of affected benefits.--Nothing in this 
     paragraph shall be construed as affecting the plan's 
     treatment of benefits which would have been paid or accrued 
     but for this subsection.
       ``(9) Funding target attainment percentage.--For purposes 
     of this subsection--
       ``(A) In general.--The term `funding target attainment 
     percentage' has the same meaning given such term by section 
     303(d)(2).
       ``(B) Adjusted funded target liability percentage.--The 
     term `adjusted funded target liability percentage' means the 
     funded target liability percentage which is determined under 
     subparagraph (A) by increasing each of the amounts under 
     subparagraphs (A) and (B) of section 303(d)(2) by the 
     aggregate amount of purchases of annuities, payments of 
     single sums, and such other disbursements as the Secretary of 
     the Treasury shall prescribe in regulations, which were made 
     by the plan during the preceding 2 plan years.
       ``(10) Years before effective date.--No plan year beginning 
     before 2007 shall be taken into account in determining 
     whether this subsection applies to any plan year beginning 
     after 2006.''.
       (2) Notice requirement.--
       (A) In general.--Section 101 of such Act (29 U.S.C. 1021) 
     is amended--
       (i) by redesignating subsection (j) as subsection (k); and
       (ii) by inserting after subsection (i) the following new 
     subsection:
       ``(j) Notice of Funding-Based Limitation on Certain Forms 
     of Distribution.--The plan administrator of a single-employer 
     plan shall provide a written notice to plan participants and 
     beneficiaries within 30 days--
       ``(1) after the plan has become subject to the restriction 
     described in section 206(g)(2),
       ``(2) in the case of a plan to which section 206(g)(3) 
     applies, after--
       ``(A) the date in the plan year described in section 
     206(g)(3)(B) on which the plan's enrolled actuary certifies 
     that the plan's adjusted funding target attainment percentage 
     for the plan year is less than 60 percent (or, if earlier, 
     the date such percentage is deemed to be less than 60 percent 
     under section 206(g)(7)), and
       ``(B) the first day of the severe funding shortfall period, 
     and
       ``(3) at such other time as may be determined by the 
     Secretary of the Treasury.

     The notice required to be provided under this subsection 
     shall be in writing, except that such notice may be in 
     electronic or other form to the extent that such form is 
     reasonably accessible to the recipient.''.
       (B) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
     1132(c)(4)) is amended by striking ``section 
     302(b)(7)(F)(iv)'' and inserting ``sections 101(j) and 
     302(b)(7)(F)(iv)''.
       (b) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2006.
       (2) Collective bargaining exception.--In the case of a plan 
     maintained pursuant to 1 or more collective bargaining 
     agreements between employee representatives and 1 or more 
     employers ratified before January 1, 2007, the amendments 
     made by this section shall not apply to plan years beginning 
     before the earlier of--
       (A) the later of--
       (i) the date on which the last collective bargaining 
     agreement relating to the plan terminates (determined without 
     regard to any extension thereof agreed to after the date of 
     the enactment of this Act), or
       (ii) the first day of the first plan year to which the 
     amendments made by this subsection would (but for this 
     subparagraph) apply, or
       (B) January 1, 2010.

     For purposes of subparagraph (A)(i), any plan amendment made 
     pursuant to a collective bargaining agreement relating to the 
     plan which amends the plan solely to conform to any 
     requirement added by this section shall not be treated as a 
     termination of such collective bargaining agreement.

     SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.

       (a) Miscellaneous Amendments to Title I.--Subtitle B of 
     title I of such Act (29 U.S.C. 1021 et seq.) is amended--
       (1) in section 101(d)(3), by striking ``section 302(e)'' 
     and inserting ``section 303(j)'';
       (2) in section 103(d)(8)(B), by striking ``the requirements 
     of section 302(c)(3)'' and inserting ``the applicable 
     requirements of sections 303(h) and 304(c)(3)'';
       (3) in section 103(d), by striking paragraph (11) and 
     inserting the following:
       ``(11) If the current value of the assets of the plan is 
     less than 70 percent of--
       ``(A) in the case of a single-employer plan, the funding 
     target (as defined in section 303(d)(1)) of the plan, or
       ``(B) in the case of a multiemployer plan, the current 
     liability (as defined in section 304(c)(6)(D)) under the 
     plan,

     the percentage which such value is of the amount described in 
     subparagraph (A) or (B).'';
       (4) in section 203(a)(3)(C), by striking ``section 
     302(c)(8)'' and inserting ``section 302(d)(2)'';
       (5) in section 204(g)(1), by striking ``section 302(c)(8)'' 
     and inserting ``section 302(d)(2)'';
       (6) in section 204(i)(2)(B), by striking ``section 
     302(c)(8)'' and inserting ``section 302(d)(2)'';
       (7) in section 204(i)(3), by striking ``funded current 
     liability percentage (within the meaning of section 302(d)(8) 
     of this Act)'' and inserting ``funding target attainment 
     percentage (as defined in section 303(d)(2))'';
       (8) in section 204(i)(4), by striking ``section 
     302(c)(11)(A), without regard to section 302(c)(11)(B)'' and 
     inserting ``section 302(b)(1), without regard to section 
     302(b)(2)'';
       (9) in section 206(e)(1), by striking ``section 302(d)'' 
     and inserting ``section 303(j)(4)'', and by striking 
     ``section 302(e)(5)'' and inserting ``section 
     303(j)(4)(E)(i)'';
       (10) in section 206(e)(3), by striking ``section 302(e) by 
     reason of paragraph (5)(A) thereof'' and inserting ``section 
     303(j)(3) by reason of section 303(j)(4)(A)''; and
       (11) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by 
     striking ``American Jobs Creation Act of 2004'' and inserting 
     ``Pension Security and Transparency Act of 2005''.
       (b) Miscellaneous Amendments to Title IV.--Title IV of such 
     Act is amended--
       (1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by 
     striking ``302(c)(11)(A)'' and inserting ``302(b)(1)'', by 
     striking

[[Page 2595]]

     ``412(c)(11)(A)'' and inserting ``412(c)(1)'', by striking 
     ``302(c)(11)(B)'' and inserting ``302(b)(2)'', and by 
     striking ``412(c)(11)(B)'' and inserting ``412(c)(2)'';
       (2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by 
     striking ``302(f)(1)(A) and (B)'' and inserting 
     ``303(k)(1)(A) and (B)'', and by striking ``412(n)(1)(A) and 
     (B)'' and inserting ``430(k)(1)(A) and (B)'';
       (3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by 
     striking ``302(f)(1)(A) and (B)'' and inserting 
     ``303(k)(1)(A) and (B)'', and by striking ``412(n)(1)(A) and 
     (B)'' and inserting ``430(k)(1)(A) and (B)'';
       (4) in section 4062(c)(1) (29 U.S.C. 1362(c)(1)), by 
     striking paragraphs (1), (2), and (3) and inserting the 
     following:
       ``(1)(A) in the case of a single-employer plan, the sum of 
     the shortfall amortization charge (within the meaning of 
     section 303(c)(1) of this Act and 430(d)(1) of the Internal 
     Revenue Code of 1986) with respect to the plan (if any) for 
     the plan year in which the termination date occurs, plus the 
     aggregate total of shortfall amortization installments (if 
     any) determined for succeeding plan years under section 
     303(c)(2) of this Act and section 430(d)(2) of such Code 
     (which, for purposes of this subparagraph, shall include any 
     increase in such sum which would result if all applications 
     for waivers of the minimum funding standard under section 
     302(c) of this Act and section 412(d) of such Code which are 
     pending with respect to such plan were denied and if no 
     additional contributions (other than those already made by 
     the termination date) were made for the plan year in which 
     the termination date occurs or for any previous plan year), 
     or
       ``(B) in the case of a multiemployer plan, the outstanding 
     balance of the accumulated funding deficiencies (within the 
     meaning of section 304(a)(2) of this Act and section 431(a) 
     of the Internal Revenue Code of 1986) of the plan (if any) 
     (which, for purposes of this subparagraph, shall include the 
     amount of any increase in such accumulated funding 
     deficiencies of the plan which would result if all pending 
     applications for waivers of the minimum funding standard 
     under section 302(c) of this Act or section 412(d) of such 
     Code and for extensions of the amortization period under 
     section 304(d) of this Act or section 431(d) of such Code 
     with respect to such plan were denied and if no additional 
     contributions (other than those already made by the 
     termination date) were made for the plan year in which the 
     termination date occurs or for any previous plan year),
       ``(2)(A) in the case of a single-employer plan, the sum of 
     the waiver amortization charge (within the meaning of section 
     303(e)(1) of this Act and 430(e)(2) of the Internal Revenue 
     Code of 1986) with respect to the plan (if any) for the plan 
     year in which the termination date occurs, plus the aggregate 
     total of waiver amortization installments (if any) determined 
     for succeeding plan years under section 303(e)(3) of this Act 
     and section 430(e)(3) of such Code, or
       ``(B) in the case of a multiemployer plan, the outstanding 
     balance of the amount of waived funding deficiencies of the 
     plan waived before such date under section 302(c) of this Act 
     or section 412(d) of such Code (if any), and
       ``(3) in the case of a multiemployer plan, the outstanding 
     balance of the amount of decreases in the minimum funding 
     standard allowed before such date under section 304(d) of 
     this Act or section 431(d) of such Code (if any);'';
       (5) in section 4071 (29 U.S.C. 1371), by striking 
     ``302(f)(4)'' and inserting ``303(k)(4)'';
       (6) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by 
     striking ``302(a)'' and inserting ``304(a)'', and, in clause 
     (i), by striking ``302(a)'' and inserting ``304(a)'';
       (7) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by 
     striking ``303(a)'' and inserting ``302(c)'';
       (8) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by 
     striking ``303(c)'' and inserting ``302(c)(3)''; and
       (9) in section 4243(g) (29 U.S.C. 1423(g)), by striking 
     ``302(c)(3)'' and inserting ``304(c)(3)''.
       (c) Amendments to Reorganization Plan No. 4 of 1978.--
     Section 106(b)(ii) of Reorganization Plan No. 4 of 1978 
     (ratified and affirmed as law by Public Law 98-532 (98 Stat. 
     2705)) is amended by striking ``302(c)(8)'' and inserting 
     ``302(d)(2)'', by striking ``304(a) and (b)(2)(A)'' and 
     inserting ``304(d)(1), (d)(2), and (e)(2)(A)'', and by 
     striking ``412(c)(8), (e), and (f)(2)(A)'' and inserting 
     ``412(d)(2) and 431(d)(1), (d)(2), and (e)(2)(A)''.
       (d) Repeal of Expired Authority for Temporary Variances.--
     Section 207 of such Act (29 U.S.C. 1057) is repealed.
       (e) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after 2006.

     SEC. 105. SPECIAL RULES FOR MULTIPLE EMPLOYER PLANS OF 
                   CERTAIN COOPERATIVES.

       (a) General Rule.--Except as provided in this section, if a 
     plan in existence on July 26, 2005, was an eligible 
     cooperative plan for its plan year which includes such date, 
     the amendments made by section 401 of this Act, this 
     subtitle, and subtitle B shall not apply to plan years 
     beginning before the earlier of--
       (1) the first plan year for which the plan ceases to be an 
     eligible cooperative plan, or
       (2) January 1, 2017.
       (b) Interest Rate.--In applying section 302(b)(5)(B) of the 
     Employee Retirement Income Security Act of 1974 and section 
     412(b)(5)(B) of the Internal Revenue Code of 1986 (as in 
     effect before the amendments made by this subtitle and 
     subtitle B) and in applying section 4006(a)(3)(E)(iii) of 
     such Act (as in effect before the amendments made by section 
     401) to an eligible cooperative plan for plan years beginning 
     after December 31, 2006, and before the first plan year to 
     which such amendments apply, the third segment rate 
     determined under section 303(h)(2)(C)(iii) of such Act and 
     section 430(h)(2)(C)(iii) of such Code (as added by such 
     amendments) shall be used in lieu of the interest rate 
     otherwise used.
       (c) Eligible Cooperative Plan Defined.--For purposes of 
     this section, a plan shall be treated as an eligible 
     cooperative plan for a plan year if the plan is maintained by 
     more than 1 employer and at least 85 percent of the employers 
     are--
       (1) rural cooperatives (as defined in section 401(k)(7)(B) 
     of such Code without regard to clause (iv) thereof), or
       (2) organizations which are--
       (A) cooperative organizations described in section 1381(a) 
     of such Code which are more than 50-percent owned by 
     agricultural producers or by cooperatives owned by 
     agricultural producers, or
       (B) more than 50-percent owned, or controlled by, one or 
     more cooperative organizations described in subparagraph (A).

     A plan shall also be treated as an eligible cooperative plan 
     for any plan year for which it is described in section 210(a) 
     of the Employee Retirement Income Security Act of 1974 and is 
     maintained by a rural telephone cooperative association 
     described in section 3(40)(B)(v) of such Act.

     SEC. 106. TEMPORARY RELIEF FOR CERTAIN RESCUED PLANS.

       (a) General Rule.--Except as provided in this section, if a 
     plan in existence on July 26, 2005, was a rescued plan as of 
     such date, the amendments made by section 401 of this Act, 
     this subtitle, and subtitle B shall not apply to plan years 
     beginning before January 1, 2014.
       (b) Interest Rate.--In applying section 302(b)(5)(B) of the 
     Employee Retirement Income Security Act of 1974 and section 
     412(b)(5)(B) of the Internal Revenue Code of 1986 (as in 
     effect before the amendments made by this subtitle and 
     subtitle B), and in applying section 4006(a)(3)(E)(iii) of 
     such Act (as in effect before the amendments made by section 
     401), to a rescued plan for plan years beginning after 
     December 31, 2006, and before January 1, 2014, the third 
     segment rate determined under section 303(h)(2)(C)(iii) of 
     such Act and section 430(h)(2)(C)(iii) of such Code (as added 
     by such amendments) shall be used in lieu of the interest 
     rate otherwise used.
       (c) Rescued Plan.--For purposes of this section, the term 
     ``rescued plan'' means a defined benefit plan (other than a 
     multiemployer plan) to which section 302 of such Act and 
     section 412 of such Code apply and--
       (1) which was sponsored by an employer which was in 
     bankruptcy, giving rise to a claim by the Pension Benefit 
     Guaranty Corporation of at least $100,000,000, but not 
     greater than $150,000,000, and
       (2) the sponsorship of which was assumed by another 
     employer that was not a member of the same controlled group 
     as the bankrupt sponsor and the claim of the Pension Benefit 
     Guaranty Corporation was settled or withdrawn in connection 
     with the assumption of the sponsorship.

        Subtitle B--Amendments to Internal Revenue Code of 1986

     SEC. 111. MODIFICATIONS OF THE MINIMUM FUNDING STANDARDS.

       (a) In General.--Section 412 of the Internal Revenue Code 
     of 1986 (relating to minimum funding standards) is amended to 
     read as follows:

     ``SEC. 412. MINIMUM FUNDING STANDARDS.

       ``(a) Requirement To Meet Minimum Funding Standard.--
       ``(1) In general.--A plan to which this section applies 
     shall satisfy the minimum funding standard applicable to the 
     plan for any plan year.
       ``(2) Minimum funding standard.--For purposes of paragraph 
     (1), a plan shall be treated as satisfying the minimum 
     funding standard for a plan year if--
       ``(A) in the case of a defined benefit plan which is a 
     single-employer plan, the employer makes contributions to or 
     under the plan for the plan year which, in the aggregate, are 
     not less than the minimum required contribution determined 
     under section 430 for the plan for the plan year,
       ``(B) in the case of a money purchase pension plan which is 
     a single-employer plan, the employer makes contributions to 
     or under the plan for the plan year which are required under 
     the terms of the plan, and
       ``(C) in the case of a multiemployer plan, the employers 
     make contributions to or under the plan for the plan year 
     which, in the aggregate, are sufficient to ensure that the 
     plan does not have an accumulated funding deficiency under 
     section 431 as of the end of the plan year.
       ``(b) Plans to Which Section Applies.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), this section applies to a plan if, for any plan year 
     beginning on or after the effective date of this section for

[[Page 2596]]

     such plan under the Employee Retirement Income Security Act 
     of 1974--
       ``(A) the plan included a trust which qualified (or was 
     determined by the Secretary to have qualified) under section 
     401(a), or
       ``(B) the plan satisfied (or was determined by the 
     Secretary to have satisfied) the requirements of section 
     403(a).
       ``(2) Exceptions.--This section shall not apply to--
       ``(A) any profit-sharing or stock bonus plan,
       ``(B) any insurance contract plan described in subsection 
     (g)(3),
       ``(C) any governmental plan (within the meaning of section 
     414(d)),
       ``(D) any church plan (within the meaning of section 
     414(e)) with respect to which the election provided by 
     section 410(d) has not been made,
       ``(E) any plan which has not, at any time after September 
     2, 1974, provided for employer contributions, or
       ``(F) any plan established and maintained by a society, 
     order, or association described in section 501(c)(8) or (9), 
     if no part of the contributions to or under such plan are 
     made by employers of participants in such plan.

     No plan described in subparagraph (C), (D), or (F) shall be 
     treated as a qualified plan for purposes of section 401(a) 
     unless such plan meets the requirements of section 401(a)(7) 
     as in effect on September 1, 1974.
       ``(3) Certain terminated multiemployer plans.--This section 
     applies with respect to a terminated multiemployer plan to 
     which section 4021 of the Employee Retirement Income Security 
     Act of 1974 applies until the last day of the plan year in 
     which the plan terminates (within the meaning of section 
     4041A(a)(2) of such Act).
       ``(c) Liability for Contributions.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     amount of any contribution required by this section and any 
     required installments under section 430(j) shall be paid by 
     any employer responsible for making the contribution to or 
     under the plan.
       ``(2) Joint and several liability where employer member of 
     controlled group.--If the employer referred to in paragraph 
     (1) is a member of a controlled group, each member of such 
     group shall be jointly and severally liable for payment of 
     such contribution or required installment.
       ``(d) Variance From Minimum Funding Standards.--
       ``(1) Waiver in case of business hardship.--
       ``(A) In general.--If--
       ``(i) an employer is (or in the case of a multiemployer 
     plan, 10 percent or more of the number of employers 
     contributing to or under the plan are) unable to satisfy the 
     minimum funding standard for a plan year without temporary 
     substantial business hardship (substantial business hardship 
     in the case of a multiemployer plan), and
       ``(ii) application of the standard would be adverse to the 
     interests of plan participants in the aggregate,

     the Secretary may, subject to subparagraph (C), waive the 
     requirements of subsection (a) for such year with respect to 
     all or any portion of the minimum funding standard. The 
     Secretary of the Treasury shall not waive the minimum funding 
     standard with respect to a plan for more than 3 of any 15 (5 
     of any 15 in the case of a multiemployer plan) consecutive 
     plan years.
       ``(B) Effects of waiver.--If a waiver is granted under 
     subparagraph (A) for any plan year--
       ``(i) in the case of a single-employer plan, the minimum 
     required contribution under section 430 for the plan year 
     shall be reduced by the amount of the waived funding 
     deficiency and such amount shall be amortized as required 
     under section 430(e), and
       ``(ii) in the case of a multiemployer plan, the funding 
     standard account shall be credited under section 431(b)(3)(C) 
     with the amount of the waived funding deficiency and such 
     amount shall be amortized as required under section 
     431(b)(2)(C).
       ``(C) Waiver of amortized portion not allowed.--The 
     Secretary may not waive under subparagraph (A) any portion of 
     the minimum funding standard under subsection (a) for a plan 
     year which is attributable to any waived funding deficiency 
     for any preceding plan year.
       ``(2) Determination of business hardship.--For purposes of 
     this subsection, the factors taken into account in 
     determining temporary substantial business hardship 
     (substantial business hardship in the case of a multiemployer 
     plan) shall include (but shall not be limited to) whether or 
     not--
       ``(A) the employer is operating at an economic loss,
       ``(B) there is substantial unemployment or underemployment 
     in the trade or business and in the industry concerned,
       ``(C) the sales and profits of the industry concerned are 
     depressed or declining, and
       ``(D) it is reasonable to expect that the plan will be 
     continued only if the waiver is granted.
       ``(3) Waived funding deficiency.--For purposes of this 
     part, the term `waived funding deficiency' means the portion 
     of the minimum funding standard under subsection (a) 
     (determined without regard to the waiver) for a plan year 
     waived by the Secretary and not satisfied by employer 
     contributions.
       ``(4) Security for waivers for single-employer plans, 
     consultations.--
       ``(A) Security may be required.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     the Secretary may require an employer maintaining a defined 
     benefit plan which is a single-employer plan (within the 
     meaning of section 4001(a)(15) of the Employee Retirement 
     Income Security Act of 1974) to provide security to such plan 
     as a condition for granting or modifying a waiver under 
     paragraph (1).
       ``(ii)  Special rules.--Any security provided under clause 
     (i) may be perfected and enforced only by the Pension Benefit 
     Guaranty Corporation, or, at the direction of the 
     Corporation, by a contributing sponsor (within the meaning of 
     section 4001(a)(13) of such Act) or a member of such 
     sponsor's controlled group (within the meaning of section 
     4001(a)(14) of such Act).
       ``(B) Consultation with the pension benefit guaranty 
     corporation.--Except as provided in subparagraph (C), the 
     Secretary shall, before granting or modifying a waiver under 
     this subsection with respect to a plan described in 
     subparagraph (A)(i)--
       ``(i) provide the Pension Benefit Guaranty Corporation 
     with--

       ``(I) notice of the completed application for any waiver or 
     modification, and
       ``(II) an opportunity to comment on such application within 
     30 days after receipt of such notice, and

       ``(ii) consider--

       ``(I) any comments of the Corporation under clause (i)(II), 
     and
       ``(II) any views of any employee organization (within the 
     meaning of section 3(4) of such Act) representing 
     participants in the plan which are submitted in writing to 
     the Secretary of the Treasury in connection with such 
     application.

     Information provided to the Corporation under this 
     subparagraph shall be considered tax return information and 
     subject to the safeguarding and reporting requirements of 
     section 6103(p).
       ``(C) Exception for certain waivers.--
       ``(i) In general.--The preceding provisions of this 
     paragraph shall not apply to any plan with respect to which 
     the sum of--

       ``(I) the aggregate unpaid minimum required contributions 
     for the plan year and all preceding plan years, and
       ``(II) the present value of all waiver amortization 
     installments determined for the plan year and succeeding plan 
     years under section 430(e)(2),

     is less than $1,000,000.
       ``(ii) Treatment of waivers for which applications are 
     pending.--The amount described in clause (i)(I) shall include 
     any increase in such amount which would result if all 
     applications for waivers of the minimum funding standard 
     under this subsection which are pending with respect to such 
     plan were denied.
       ``(iii) Unpaid minimum required contribution.--For purposes 
     of this subparagraph--

       ``(I) In general.--The term `unpaid minimum required 
     contribution' means, with respect to any plan year, any 
     minimum required contribution under section 430 for the plan 
     year which is not paid on or before the due date (as 
     determined under section 430(j)(1)) for the plan year.
       ``(II) Ordering rule.--For purposes of subclause (I), any 
     payment to or under a plan for any plan year shall be 
     allocated first to unpaid minimum required contributions for 
     all preceding plan years on a first-in, first-out basis and 
     then to the minimum required contribution under section 430 
     for the plan year.

       ``(5) Special rules for single-employer plans.--
       ``(A) Application must be submitted before date 2\1/2\ 
     months after close of year.--In the case of a single-employer 
     plan, no waiver may be granted under this subsection with 
     respect to any plan for any plan year unless an application 
     therefor is submitted to the Secretary not later than the 
     15th day of the 3rd month beginning after the close of such 
     plan year.
       ``(B) Special rule if employer is member of controlled 
     group.--In the case of a single-employer plan, if an employer 
     is a member of a controlled group, the temporary substantial 
     business hardship requirements of paragraph (1) shall be 
     treated as met only if such requirements are met--
       ``(i) with respect to such employer, and
       ``(ii) with respect to the controlled group of which such 
     employer is a member (determined by treating all members of 
     such group as a single employer).

     The Secretary may provide that an analysis of a trade or 
     business or industry of a member need not be conducted if the 
     Secretary determines such analysis is not necessary because 
     the taking into account of such member would not 
     significantly affect the determination under this paragraph.
       ``(6) Advance notice.--
       ``(A) In general.--The Secretary shall, before granting a 
     waiver under this subsection, require each applicant to 
     provide evidence satisfactory to such Secretary that the 
     applicant has provided notice of the filing of the 
     application for such waiver to each affected party (as 
     defined in section 4001(a)(21)

[[Page 2597]]

     of the Employee Retirement Income Security Act of 1974) other 
     than the Pension Benefit Guaranty Corporation and in the case 
     of a multiemployer plan, to each employer required to 
     contribute to the plan under subsection (b)(1). Such notice 
     shall include a description of the extent to which the plan 
     is funded for benefits which are guaranteed under title IV of 
     such Act and for benefit liabilities.
       ``(B) Consideration of relevant information.--The Secretary 
     shall consider any relevant information provided by a person 
     to whom notice was given under subparagraph (A).
       ``(7) Restriction on plan amendments.--
       ``(A) In general.--No amendment of a plan which increases 
     the liabilities of the plan by reason of any increase in 
     benefits, any change in the accrual of benefits, or any 
     change in the rate at which benefits become nonforfeitable 
     under the plan shall be adopted if a waiver under this 
     subsection or an extension of time under section 431(d) is in 
     effect with respect to the plan, or if a plan amendment 
     described in subsection (e)(2) has been made at any time in 
     the preceding 24 months. If a plan is amended in violation of 
     the preceding sentence, any such waiver, or extension of 
     time, shall not apply to any plan year ending on or after the 
     date on which such amendment is adopted.
       ``(B) Exception.--Subparagraph (A) shall not apply to any 
     plan amendment which--
       ``(i) the Secretary determines to be reasonable and which 
     provides for only de minimis increases in the liabilities of 
     the plan,
       ``(ii) only repeals an amendment described in subsection 
     (e)(2), or
       ``(iii) is required as a condition of qualification under 
     part I of subchapter D, of chapter 1 of the Internal Revenue 
     Code of 1986.
       ``(e) Miscellaneous Rules.--For purposes of this section--
       ``(1) Change in method or year.--If the funding method, the 
     valuation date, or a plan year for a plan is changed, the 
     change shall take effect only if approved by the Secretary.
       ``(2) Certain retroactive plan amendments.--For purposes of 
     this section, any amendment applying to a plan year which--
       ``(A) is adopted after the close of such plan year but no 
     later than 2\1/2\ months after the close of the plan year 
     (or, in the case of a multiemployer plan, no later than 2 
     years after the close of such plan year),
       ``(B) does not reduce the accrued benefit of any 
     participant determined as of the beginning of the first plan 
     year to which the amendment applies, and
       ``(C) does not reduce the accrued benefit of any 
     participant determined as of the time of adoption except to 
     the extent required by the circumstances,

     shall, at the election of the plan administrator, be deemed 
     to have been made on the first day of such plan year. No 
     amendment described in this paragraph which reduces the 
     accrued benefits of any participant shall take effect unless 
     the plan administrator files a notice with the Secretary 
     notifying him of such amendment and the Secretary has 
     approved such amendment, or within 90 days after the date on 
     which such notice was filed, failed to disapprove such 
     amendment. No amendment described in this subsection shall be 
     approved by the Secretary unless the Secretary determines 
     that such amendment is necessary because of a temporary 
     substantial business hardship (as determined under subsection 
     (d)(2)) or a substantial business hardship (as so determined) 
     in the case of a multiemployer plan and that a waiver under 
     subsection (d)(1) (or in the case of a multiemployer plan, 
     any extension of the amortization period under section 
     431(d)) is unavailable or inadequate.
       ``(3) Certain insurance contract plans.--A plan is 
     described in this paragraph if--
       ``(A) the plan is funded exclusively by the purchase of 
     individual insurance contracts,
       ``(B) such contracts provide for level annual premium 
     payments to be paid extending not later than the retirement 
     age for each individual participating in the plan, and 
     commencing with the date the individual became a participant 
     in the plan (or, in the case of an increase in benefits, 
     commencing at the time such increase becomes effective),
       ``(C) benefits provided by the plan are equal to the 
     benefits provided under each contract at normal retirement 
     age under the plan and are guaranteed by an insurance carrier 
     (licensed under the laws of a State to do business with the 
     plan) to the extent premiums have been paid,
       ``(D) premiums payable for the plan year, and all prior 
     plan years, under such contracts have been paid before lapse 
     or there is reinstatement of the policy,
       ``(E) no rights under such contracts have been subject to a 
     security interest at any time during the plan year, and
       ``(F) no policy loans are outstanding at any time during 
     the plan year.

     A plan funded exclusively by the purchase of group insurance 
     contracts which are determined under regulations prescribed 
     by the Secretary to have the same characteristics as 
     contracts described in the preceding sentence shall be 
     treated as a plan described in this paragraph.
       ``(4) Controlled group.--For purposes of this section and 
     section 430, the term `controlled group' means any group 
     treated as a single employer under subsection (b), (c), (m), 
     or (o) of section 414.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to plan years beginning after December 31, 2006.

     SEC. 112. FUNDING RULES APPLICABLE TO SINGLE-EMPLOYER PENSION 
                   PLANS.

       Subchapter D of chapter 1 of the Internal Revenue Code of 
     1986 (relating to deferred compensation, etc.) is amended by 
     adding at the end the following new part:

  ``PART III--RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT 
                               LIMITATION

``430. Minimum funding standards for single-employer defined benefit 
              plans.
``431. Minimum funding standards for multiemployer plans.

     ``SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER 
                   DEFINED BENEFIT PLANS.

       ``(a) Minimum Required Contribution.--For purposes of this 
     section and section 412(a)(2)(A), except as provided in 
     subsection (f), the term `minimum required contribution' 
     means, with respect to any plan year of a defined benefit 
     plan which is a single employer plan--
       ``(1) in any case in which the value of plan assets of the 
     plan (as reduced under subsection (f)(4)) is less than the 
     funding target of the plan for the plan year, the sum of--
       ``(A) the target normal cost of the plan for the plan year,
       ``(B) the shortfall amortization charge (if any) for the 
     plan for the plan year determined under subsection (c), and
       ``(C) the waiver amortization charge (if any) for the plan 
     for the plan year as determined under subsection (e); or
       ``(2) in any case in which the value of plan assets of the 
     plan (as reduced under subsection (f)(4)) equals or exceeds 
     the funding target of the plan for the plan year, the target 
     normal cost of the plan for the plan year reduced (but not 
     below zero) by any such excess.
       ``(b) Target Normal Cost.--For purposes of this section, 
     except as provided in subsection (i)(2) with respect to plans 
     in at-risk status, the term `target normal cost' means, for 
     any plan year, the present value of all benefits which are 
     expected to accrue or to be earned under the plan during the 
     plan year. For purposes of this subsection, if any benefit 
     attributable to services performed in a preceding plan year 
     is increased by reason of any increase in compensation during 
     the current plan year, the increase in such benefit shall be 
     treated as having accrued during the current plan year.
       ``(c) Shortfall Amortization Charge.--
       ``(1) In general.--For purposes of this section, the 
     shortfall amortization charge for a plan for any plan year is 
     the aggregate total of the shortfall amortization 
     installments for such plan year with respect to the shortfall 
     amortization bases for such plan year and each of the 6 
     preceding plan years.
       ``(2) Shortfall amortization installment.--For purposes of 
     paragraph (1)--
       ``(A) Determination.--The shortfall amortization 
     installments are the amounts necessary to amortize the 
     shortfall amortization base of the plan for any plan year in 
     level annual installments over the 7-plan-year period 
     beginning with such plan year.
       ``(B) Shortfall installment.--The shortfall amortization 
     installment for any plan year in the 7-plan-year period under 
     subparagraph (A) with respect to any shortfall amortization 
     base is the annual installment determined under subparagraph 
     (A) for that year for that base.
       ``(C) Segment rates.--In determining any shortfall 
     amortization installment under this paragraph, the plan 
     sponsor shall use the segment rates determined under 
     subparagraph (C) of subsection (h)(2), applied under rules 
     similar to the rules of subparagraph (B) of subsection 
     (h)(2).
       ``(3) Shortfall amortization base.--For purposes of this 
     section, the shortfall amortization base of a plan for a plan 
     year is the excess (if any) of--
       ``(A) the funding shortfall of such plan for such plan 
     year, over
       ``(B) the present value (determined using the segment rates 
     determined under subparagraph (C) of subsection (h)(2), 
     applied under rules similar to the rules of subparagraph (B) 
     of subsection (h)(2)) of the aggregate total of the shortfall 
     amortization installments and waiver amortization 
     installments which have been determined for such plan year 
     and any succeeding plan year with respect to the shortfall 
     amortization bases and waiver amortization bases of the plan 
     for any plan year preceding such plan year.
       ``(4) Funding shortfall.--
       ``(A) In general.--For purposes of this section, except as 
     provided in subparagraph (B), the funding shortfall of a plan 
     for any plan year is the excess (if any) of--
       ``(i) the funding target of the plan for the plan year, 
     over
       ``(ii) the value of plan assets of the plan (as reduced 
     under subsection (f)(4)) for the plan year which are held by 
     the plan on the valuation date.
       ``(B) Transition rule for amortization of funding 
     shortfall.--
       ``(i) In general.--Solely for purposes of applying 
     paragraph (3) in the case of plan years

[[Page 2598]]

     beginning after 2006 and before 2011, only the applicable 
     percentage of the funding target shall be taken into account 
     under paragraph (3)(A) in determining the funding shortfall 
     for the plan year.
       ``(ii) Applicable percentage.--For purposes of subparagraph 
     (A)--

       ``(I) In general.--Except as provided in subclause (II), 
     the applicable percentage shall be 93 percent for plan years 
     beginning in 2007, 96 percent for plan years beginning in 
     2008, and 100 percent for any succeeding plan year.
       ``(II) Small plans.--In the case of a plan described in 
     subsection (g)(2)(B), the applicable percentage shall be 
     determined in accordance with the following table:

``In the case of a plan year beginning inThe applicable percentage is--
  2007..........................................................92 ....

  2008..........................................................94 ....

  2009..........................................................96 ....

  2010..........................................................98.....

       ``(5) Early deemed amortization upon attainment of funding 
     target.--In any case in which the funding shortfall of a plan 
     for a plan year is zero, for purposes of determining the 
     shortfall amortization charge for such plan year and 
     succeeding plan years, the shortfall amortization bases for 
     all preceding plan years (and all shortfall amortization 
     installments determined with respect to such bases) shall be 
     reduced to zero.
       ``(d) Rules Relating to Funding Target.--For purposes of 
     this section--
       ``(1) Funding target.--Except as provided in subsection 
     (i)(1) with respect to plans in at-risk status, the funding 
     target of a plan for a plan year is the present value of all 
     benefits accrued or earned under the plan as of the beginning 
     of the plan year.
       ``(2) Funding target attainment percentage.--The `funding 
     target attainment percentage' of a plan for a plan year is 
     the ratio (expressed as a percentage) which--
       ``(A) the value of plan assets for the plan year, bears to
       ``(B) the funding target of the plan for the plan year 
     (determined without regard to subsection (i)(1)).

       ``(e) Waiver Amortization Charge.--
       ``(1) Determination of waiver amortization charge.--The 
     waiver amortization charge (if any) for a plan for any plan 
     year is the aggregate total of the waiver amortization 
     installments for such plan year with respect to the waiver 
     amortization bases for each of the 5 preceding plan years.
       ``(2) Waiver amortization installment.--For purposes of 
     paragraph (1)--
       ``(A) Determination.--The waiver amortization installments 
     are the amounts necessary to amortize the waiver amortization 
     base of the plan for any plan year in level annual 
     installments over a period of 5 plan years beginning with the 
     succeeding plan year.
       ``(B) Waiver installment.--The waiver amortization 
     installment for any plan year in the 5-year period under 
     subparagraph (A) with respect to any waiver amortization base 
     is the annual installment determined under subparagraph (A) 
     for that year for that base.
       ``(3) Interest rate.--In determining any waiver 
     amortization installment under this subsection, the plan 
     sponsor shall use the segment rates determined under 
     subparagraph (C) of subsection (h)(2), applied under rules 
     similar to the rules of subparagraph (B) of subsection 
     (h)(2).
       ``(4) Waiver amortization base.--The waiver amortization 
     base of a plan for a plan year is the amount of the waived 
     funding deficiency (if any) for such plan year under section 
     412(d).
       ``(5) Early deemed amortization upon attainment of funding 
     target.--In any case in which the funding shortfall of a plan 
     for a plan year is zero, for purposes of determining the 
     waiver amortization charge for such plan year and succeeding 
     plan years, the waiver amortization bases for all preceding 
     plan years (and all waiver amortization installments with 
     respect to such bases) shall be reduced to zero.
       ``(f) Use of Prefunding Balances To Satisfy Minimum 
     Required Contributions.--
       ``(1) In general.--A plan sponsor may credit any amount of 
     a plan's prefunding balance for a plan year against the 
     minimum required contribution for the plan year and the 
     amount of the contributions an employer is required to make 
     under section 412(c) for the plan year shall be reduced by 
     the amount so credited. Any such amount shall be credited on 
     the first day of the plan year.
       ``(2) Prefunding balance.--
       ``(A) Beginning balance.--The beginning balance of a 
     prefunding balance maintained by a plan shall be zero, except 
     that if a plan was in effect for a plan year beginning in 
     2006 and had a positive balance in the funding standard 
     account under section 412(b) (as in effect for such plan 
     year) as of the end of such plan year, the beginning balance 
     for the plan for its first plan year beginning after 2006 
     shall be such positive balance.
       ``(B) Increases.--
       ``(i) In general.--As of the first day of each plan year 
     beginning after 2007, the prefunding balance of a plan shall 
     be increased by the excess (if any) of--

       ``(I) the aggregate amount of employer contributions to the 
     plan for the preceding plan year, over
       ``(II) the minimum required contribution for the preceding 
     plan year.

       ``(ii) Adjustments for interest.--Any excess contributions 
     under clause (i) shall be properly adjusted for interest 
     accruing for the periods between the first day of the current 
     plan year and the dates on which the excess contributions 
     were made, determined by using the effective interest rate 
     for the preceding plan year and by treating contributions as 
     being first used to satisfy the minimum required 
     contribution.
       ``(iii) Certain contributions disregarded.--Any 
     contribution which is required to be made under section 436 
     in addition to any contribution required under this section 
     shall not be taken into account for purposes of clause (i).
       ``(C) Decreases.--As of the first day of each plan year 
     after 2007, the prefunding balance of a plan shall be 
     decreased (but not below zero) by the amount of the balance 
     credited under paragraph (1) against the minimum required 
     contribution of the plan for the preceding plan year.
       ``(D) Adjustments for investment experience.--In 
     determining the prefunding balance of a plan as of the first 
     day of the plan year, the plan sponsor shall, in accordance 
     with regulations prescribed by the Secretary, adjust such 
     balance to reflect the rate of return on plan assets for the 
     preceding plan year. Notwithstanding subsection (g)(3), such 
     rate of return shall be determined on the basis of fair 
     market value and shall properly take into account, in 
     accordance with such regulations, all contributions, 
     distributions, and other plan payments made during such 
     period.
       ``(3) Limitation for underfunded plans.--
       ``(A) In general.--If the ratio (expressed as a percentage) 
     for any plan year which--
       ``(i) the value of plan assets for the preceding plan year, 
     bears to
       ``(ii) the funding target of the plan for the preceding 
     plan year (determined without regard to subsection (i)(1)),

     is less than 80 percent, the preceding provisions of this 
     subsection shall not apply unless employers liable for 
     contributions to the plan under section 412(c) make 
     contributions to the plan for the plan year in an aggregate 
     amount not less than the amount determined under subparagraph 
     (B). Any contribution required by this subparagraph may not 
     be reduced by any credit otherwise allowable under paragraph 
     (1).
       ``(B) Applicable amount.--The amount determined under this 
     subparagraph for any plan year is the greater of--
       ``(i) the target normal cost of the plan for the plan year, 
     or
       ``(ii) 25 percent of the minimum required contribution 
     under subsection (a) for the plan year without regard to this 
     subsection.
       ``(4) Reduction in value of assets.--Solely for purposes of 
     applying subsections (a) and (c)(4)(A)(ii) in determining the 
     minimum required contribution under this section, the value 
     of the plan assets otherwise determined without regard to 
     this paragraph shall be reduced by the amount of the 
     prefunding balance under this subsection.
       ``(g) Valuation of Plan Assets and Liabilities.--
       ``(1) Timing of determinations.--Except as otherwise 
     provided under this subsection, all determinations under this 
     section for a plan year shall be made as of the valuation 
     date of the plan for such plan year.
       ``(2) Valuation date.--For purposes of this section--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the valuation date of a plan for any plan year shall be the 
     first day of the plan year.
       ``(B) Exception for small plans.--If, on each day during 
     the preceding plan year, a plan had 100 or fewer 
     participants, the plan may designate any day during the plan 
     year as its valuation date for such plan year and succeeding 
     plan years. For purposes of this subparagraph, all defined 
     benefit plans (other than multiemployer plans) maintained by 
     the same employer (or any member of such employer's 
     controlled group) shall be treated as 1 plan, but only 
     employees of such employer or member shall be taken into 
     account.
       ``(C) Application of certain rules in determination of plan 
     size.--For purposes of this paragraph--
       ``(i) Plans not in existence in preceding year.--In the 
     case of the first plan year of any plan, subparagraph (B) 
     shall apply to such plan by taking into account the number of 
     participants that the plan is reasonably expected to have on 
     days during such first plan year.
       ``(ii) Predecessors.--Any reference in subparagraph (B) to 
     an employer shall include a reference to any predecessor of 
     such employer.
       ``(3) Determination of value of plan assets.--For purposes 
     of this section--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the value of plan assets shall be the fair market value of 
     the assets.
       ``(B) Averaging allowed.--A plan may determine the value of 
     plan assets on the basis of any reasonable actuarial method 
     of valuation providing for the averaging of fair market 
     values, but only if such method--
       ``(i) is permitted under regulations prescribed by the 
     Secretary, and

[[Page 2599]]

       ``(ii) does not provide for averaging of such values over 
     more than the period beginning on the last day of the 12th 
     month preceding the valuation date and ending on the 
     valuation date (or a similar period in the case of a 
     valuation date which is not the 1st day of a month).
       ``(4) Accounting for contribution receipts.--For purposes 
     of determining the value of assets under paragraph (3)--
       ``(A) Prior year contributions.--If--
       ``(i) an employer makes any contribution to the plan after 
     the valuation date for the plan year in which the 
     contribution is made, and
       ``(ii) the contribution is for a preceding plan year,

     the contribution shall be taken into account as an asset of 
     the plan as of the valuation date, except that in the case of 
     any plan year beginning after 2007, only the present value 
     (determined as of the valuation date) of such contribution 
     may be taken into account. For purposes of the preceding 
     sentence, present value shall be determined using the 
     effective interest rate for the preceding plan year to which 
     the contribution is properly allocable.
       ``(B) Special rule for current year contributions made 
     before valuation date.--If any contributions for any plan 
     year are made to or under the plan during the plan year but 
     before the valuation date for the plan year, the assets of 
     the plan as of the valuation date shall not include--
       ``(i) such contributions, and
       ``(ii) interest on such contributions for the period 
     between the date of the contributions and the valuation date, 
     determined by using the effective interest rate for the plan 
     year.
       ``(h) Actuarial Assumptions and Methods.--
       ``(1) In general.--Subject to this subsection, the 
     determination of any present value or other computation under 
     this section shall be made on the basis of actuarial 
     assumptions and methods--
       ``(A) each of which is reasonable (taking into account the 
     experience of the plan and reasonable expectations), and
       ``(B) which, in combination, offer the actuary's best 
     estimate of anticipated experience under the plan.
       ``(2) Interest rates.--
       ``(A) Effective interest rate.--For purposes of this 
     section, the term `effective interest rate' means, with 
     respect to any plan for any plan year, the single rate of 
     interest which, if used to determine the present value of the 
     plan's accrued or earned benefits referred to in subsection 
     (d)(1), would result in an amount equal to the funding target 
     of the plan for such plan year.
       ``(B) Interest rates for determining funding target.--For 
     purposes of determining the funding target of a plan for any 
     plan year, the interest rate used in determining the present 
     value of the benefits of the plan shall be--
       ``(i) in the case of benefits reasonably determined to be 
     payable during the 5-year period beginning on the first day 
     of the plan year, the first segment rate with respect to the 
     applicable month,
       ``(ii) in the case of benefits reasonably determined to be 
     payable during the 15-year period beginning at the end of the 
     period described in clause (i), the second segment rate with 
     respect to the applicable month, and
       ``(iii) in the case of benefits reasonably determined to be 
     payable after the period described in clause (ii), the third 
     segment rate with respect to the applicable month.
       ``(C) Segment rates.--For purposes of this paragraph--
       ``(i) First segment rate.--The term `first segment rate' 
     means, with respect to any month, the single rate of interest 
     which shall be determined by the Secretary for such month on 
     the basis of the corporate bond yield curve for such month, 
     taking into account only that portion of such yield curve 
     which is based on bonds maturing during the 5-year period 
     commencing with such month.
       ``(ii) Second segment rate.--The term `second segment rate' 
     means, with respect to any month, the single rate of interest 
     which shall be determined by the Secretary for such month on 
     the basis of the corporate bond yield curve for such month, 
     taking into account only that portion of such yield curve 
     which is based on bonds maturing during each of the years in 
     the 15-year period beginning at the end of the period 
     described in clause (i).
       ``(iii) Third segment rate.--The term `third segment rate' 
     means, with respect to any month, the single rate of interest 
     which shall be determined by the Secretary for such month on 
     the basis of the corporate bond yield curve for such month, 
     taking into account only that portion of such yield curve 
     which is based on bonds maturing during periods beginning 
     after the period described in clause (ii).
       ``(D) Corporate bond yield curve.--The term `corporate bond 
     yield curve' means, with respect to any month, a yield curve 
     which is prescribed by the Secretary for such month and which 
     reflects the average, for the 12-month period ending with the 
     month preceding such month, of yields on investment grade 
     corporate bonds with varying maturities.
       ``(E) Applicable month.--For purposes of this paragraph, 
     the term `applicable month' means, with respect to any plan 
     for any plan year, the month which includes the valuation 
     date of such plan for such plan year or, at the election of 
     the plan administrator, any of the 4 months which precede 
     such month. Any election made under this subparagraph shall 
     apply to the plan year for which the election is made and all 
     succeeding plan years, unless the election is revoked with 
     the consent of the Secretary.
       ``(F) Publication requirements.--The Secretary shall 
     publish for each month the corporate bond yield curve for 
     such month and each of the rates determined under this 
     paragraph for such month. The Secretary shall also publish a 
     description of the methodology used to determine such yield 
     curve and such rates which is sufficiently detailed to enable 
     plans to make reasonable projections regarding the yield 
     curve and such rates for future months based on the plan's 
     projection of future interest rates.
       ``(G) Transition rule.--
       ``(i) In general.--Notwithstanding the preceding provisions 
     of this paragraph, for plan years beginning in 2007 or 2008, 
     the first, second, or third segment rate for a plan with 
     respect to any month shall be equal to the sum of--

       ``(I) the product of such rate for such month determined 
     without regard to this subparagraph, multiplied by the 
     applicable percentage, and
       ``(II) the product of the rate determined under the rules 
     of section 412(b)(5)(B)(ii)(II) (as in effect for plan years 
     beginning in 2006), multiplied by a percentage equal to 100 
     percent minus the applicable percentage.

       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage is 33\1/3\ percent for plan years 
     beginning in 2007 and 66\2/3\ percent for plan years 
     beginning in 2008.
       ``(3) Mortality tables.--
       ``(A) In general.--Except as provided in subparagraphs (C) 
     and (D), the mortality table used in determining any present 
     value or making any computation under this section shall be 
     the RP-2000 Combined Mortality Table, using Scale AA, as 
     published by the Society of Actuaries, as in effect on the 
     date of the enactment of the Pension Security and 
     Transparency Act of 2005 and as revised from time to time 
     under subparagraph (B).
       ``(B) Periodic revision.--The Secretary shall (at least 
     every 10 years) make revisions in any table in effect under 
     subparagraph (A) to reflect the actual experience of pension 
     plans and projected trends in such experience.
       ``(C) Substitute mortality table.--
       ``(i) In general.--Upon request by the plan sponsor and 
     approval by the Secretary, a mortality table which meets the 
     requirements of clause (ii) shall be used in determining any 
     present value or making any computation under this section 
     during the 10-consecutive plan year period specified in the 
     request. A mortality table described in this clause shall 
     cease to be in effect if the plan actuary determines at any 
     time that such table does not meet the requirements of clause 
     (ii).
       ``(ii) Requirements.--A mortality table meets the 
     requirements of this clause if the Secretary determines 
     that--

       ``(I) there is a sufficient number of plan participants, 
     and the pension plans have been maintained for a sufficient 
     period of time, to have credible information necessary for 
     purposes of subclause (II),
       ``(II) such table reflects the actual experience of the 
     pension plans maintained by the sponsor and projected trends 
     in general mortality experience,
       ``(III) except as provided by the Secretary, such table 
     will be used by all plans maintained by the plan sponsor and 
     all members of any controlled group which includes the plan 
     sponsor, and
       ``(IV) such table is significantly different from the table 
     described in subparagraph (A).

       ``(iii) Deadline for disposition of application.--Any 
     mortality table submitted to the Secretary for approval under 
     this subparagraph shall be treated as in effect for the first 
     plan year in the 10-year period described in clause (i) 
     unless the Secretary, during the 180-day period beginning on 
     the date of such submission, disapproves of such table and 
     provides the reasons that such table fails to meet the 
     requirements of clause (ii). The 180-day period shall be 
     extended for any period during which the Secretary has 
     requested information from the plan sponsor and such 
     information has not been provided.
       ``(D) Separate mortality tables for the disabled.--
     Notwithstanding subparagraph (A)--
       ``(i) In general.--The Secretary shall establish mortality 
     tables which may be used (in lieu of the tables under 
     subparagraph (A)) 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

[[Page 2600]]

     within the meaning of title II of the Social Security Act and 
     the regulations thereunder.
       ``(iii) Periodic revision.--The Secretary shall (at least 
     every 10 years) make revisions in any table in effect under 
     clause (i) to reflect the actual experience of pension plans 
     and projected trends in such experience.
       ``(E) Transition rule.--Under regulations of the Secretary, 
     any difference in present value resulting from any 
     differences in assumptions as set forth in the mortality 
     table specified in subparagraph (A) and assumptions as set 
     forth in the mortality table described in section 
     412(l)(7)(C)(ii) (as in effect for plan years beginning in 
     2006) shall be phased in ratably over the first period of 5 
     plan years beginning in or after 2007 so as to be fully 
     effective for the fifth plan year.
       ``(4) Probability of benefit payments in the form of lump 
     sums or other optional forms.--For purposes of determining 
     any present value or making any computation under this 
     section, there shall be taken into account--
       ``(A) the probability that future benefit payments under 
     the plan will be made in the form of optional forms of 
     benefits provided under the plan (including lump sum 
     distributions, determined on the basis of the plan's 
     experience and other related assumptions), and
       ``(B) any difference in the present value of such future 
     benefit payments resulting from the use of actuarial 
     assumptions, in determining benefit payments in any such 
     optional form of benefits, which are different from those 
     specified in this subsection.
       ``(5) Approval of large changes in actuarial assumptions.--
       ``(A) In general.--No actuarial assumption used to 
     determine the funding target for a plan to which this 
     paragraph applies may be changed without the approval of the 
     Secretary.
       ``(B) Plans to which paragraph applies.--This paragraph 
     shall apply to a plan only if--
       ``(i) the aggregate unfunded 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 of such Act (disregarding plans with no 
     unfunded benefits) exceed $50,000,000; and
       ``(ii) the change in assumptions (determined after taking 
     into account any changes in interest rate and mortality 
     table) results in a decrease in the funding shortfall of the 
     plan for the current plan year that exceeds $50,000,000, or 
     that exceeds $5,000,000 and that is 5 percent or more of the 
     funding target of the plan before such change.
       ``(i) Special Rules for At-Risk Plans.--
       ``(1) Funding target for plans in at-risk status.--
       ``(A) In general.--In the case of a plan to which this 
     subsection applies for a plan year, the funding target of the 
     plan for the plan year is equal to the present value of all 
     liabilities to participants and their beneficiaries under the 
     plan for the plan year, as determined by using the additional 
     actuarial assumptions described in subparagraph (B).
       ``(B) Additional actuarial assumptions.--The actuarial 
     assumptions described in this subparagraph are as follows:
       ``(i) All employees who are not otherwise assumed to retire 
     as of the valuation date but who will be eligible to elect 
     benefits during the plan year and the 7 succeeding plan years 
     shall be assumed to retire at the earliest retirement date 
     under the plan but not before the end of the plan year for 
     which the at-risk target liability and at-risk target normal 
     cost are being determined.
       ``(ii) All employees shall be assumed to elect the 
     retirement benefit available under the plan at the assumed 
     retirement age (determined after application of clause (i)) 
     which would result in the highest present value of 
     liabilities.
       ``(2) Target normal cost of at-risk plans.--In the case of 
     a plan to which this subsection applies for a plan year, the 
     target normal cost of the plan for such plan year shall be 
     equal to the present value of all benefits which are expected 
     to accrue or be earned under the plan during the plan year, 
     determined using the additional actuarial assumptions 
     described in paragraph (1)(B).
       ``(3) Minimum amount.--In no event shall--
       ``(A) the at-risk target liability be less than the target 
     liability, as determined without regard to this subsection, 
     or
       ``(B) the at-risk target normal cost be less than the 
     target normal cost, as determined without regard to this 
     subsection.
       ``(4) Determination of at-risk status.--For purposes of 
     this subsection, a plan is in at-risk status for a plan year 
     if--
       ``(A) the plan is maintained by a financially-weak 
     employer, and
       ``(B) the funding target attainment percentage for the plan 
     year is less than 93 percent.
       ``(5) Financially-weak employer.--
       ``(A) In general.--For purposes of this subsection, the 
     term `financially-weak employer' means any employer if--
       ``(i) as of the valuation date for each of the years during 
     a period of at least 3 consecutive plan years ending with the 
     plan year--

       ``(I) the employer has an outstanding senior unsecured debt 
     instrument which is rated lower than investment grade by each 
     of the nationally recognized statistical rating organizations 
     for corporate bonds that has issued a credit rating for such 
     instrument, or
       ``(II) if no such debt instrument has been rated by such an 
     organization but 1 or more of such organizations has made an 
     issuer credit rating for such employer, all such 
     organizations which have so rated the employer have rated 
     such employer lower than investment grade, and

       ``(ii) at least 2 of the years during such period are 
     deterioration years.

     If an employer is treated as a financially-weak employer for 
     any plan year, clause (ii) shall not apply in determining 
     whether the employer is so treated for any succeeding plan 
     year in any continuous period of plan years for which the 
     employer is treated as a financially-weak employer.
       ``(B) Controlled group exception.--If an employer treated 
     as a financially-weak employer under subparagraph (A) is a 
     member of a controlled group (as defined in section 
     412(e)(4)), the employer shall not be treated as a 
     financially-weak employer if a significant member (as 
     determined under regulations prescribed by the Secretary) of 
     such group has an outstanding senior unsecured debt 
     instrument that is rated as being investment grade by an 
     organization described in subparagraph (A).
       ``(C) Employers with no ratings.--If--
       ``(i) an employer has no debt instrument described in 
     subparagraph (A)(i) which was rated by an organization 
     described in such subparagraph, and
       ``(ii) no such organization has made an issuer credit 
     rating for such employer,
     then such employer shall only be treated as a financially-
     weak employer to the extent provided in regulations 
     prescribed by the Secretary.
       ``(6) Determination of deterioration year.--For purposes of 
     paragraph (5), the term `deterioration year' means any year 
     during the period described in paragraph (5)(A)(i) for which 
     the rating described in subclause (I) or (II) of paragraph 
     (5)(A)(i) by each organization is either--
       ``(A) lower than the lowest rating of the employer by such 
     organization for a preceding year in such period, or
       ``(B) the lowest rating used by such organization.
       ``(7) Years before effective date.--For purposes of 
     paragraphs (5) and (6), plan years beginning before 2007 
     shall not be taken into account.
       ``(8) Transition between applicable funding targets and 
     between applicable target normal costs.--
       ``(A) In general.--In any case in which a plan which is in 
     at-risk status for a plan year has been in such status for a 
     consecutive period of fewer than 5 plan years, the applicable 
     amount of the funding target and of the target normal cost 
     shall be, in lieu of the amount determined without regard to 
     this paragraph, the sum of--
       ``(i) the amount determined under this section without 
     regard to this subsection, plus
       ``(ii) the transition percentage for such plan year of the 
     excess of the amount determined under this subsection 
     (without regard to this paragraph) over the amount determined 
     under this section without regard to this subsection.
       ``(B) Improvement years not taken into account.--
       ``(i) In general.--An improvement year shall not be taken 
     into account in determining any consecutive period of plan 
     years for purposes of subparagraph (A).
       ``(ii) Application of subsection after improvement year 
     ends.--Plan years immediately before and after an improvement 
     year (or consecutive period of improvement years) shall be 
     treated as consecutive for purposes of subparagraph (A).
       ``(iii) Improvement year.--For purposes of this 
     subparagraph, the term `improvement year' means any plan year 
     for which any rating described in subclause (I) or (II) of 
     paragraph (5)(A)(i) is higher than such rating for the 
     preceding plan year.
       ``(C) Transition percentage.--For purposes of subparagraph 
     (A), the transition percentage shall be determined in 
     accordance with the following table:

``If the consecutive number of years (including the plan year) the plan 
  is in at-risk status is--              The transition percentage is--
  1.............................................................20 ....

  2.............................................................40 ....

  3.............................................................60 ....

  4.............................................................80.....

       ``(D) Years before effective date.--For purposes of this 
     paragraph, plan years beginning before 2007 shall not be 
     taken into account.
       ``(9) Plans to which subsection applies.--
       ``(A) In general.--Except as provided in this paragraph, 
     this subsection shall apply to any plan to which this section 
     applies and which is in at-risk status for the plan year.
       ``(B) Exception for small plans.--This subsection shall not 
     apply to a plan for a plan year if the plan was described in 
     subsection (g)(2)(B) for the preceding plan year, determined 
     by substituting `500' for `100'.

[[Page 2601]]

       ``(C) Exception for plans maintained by certain 
     cooperatives.--This subsection shall not apply to an eligible 
     cooperative plan described in subparagraph (D).
       ``(D) Eligible cooperative plan defined.--For purposes of 
     subparagraph (C), a plan shall be treated as an eligible 
     cooperative plan for a plan year if the plan is maintained by 
     more than 1 employer and at least 85 percent of the employers 
     are--
       ``(i) rural cooperatives (as defined in section 
     401(k)(7)(B) without regard to clause (iv) thereof), or
       ``(ii) organizations which are--

       ``(I) cooperative organizations described in section 
     1381(a) which are more than 50-percent owned by agricultural 
     producers or by cooperatives owned by agricultural producers, 
     or
       ``(II) more than 50-percent owned, or controlled by, one or 
     more cooperative organizations described in subclause (I).

     A plan shall also be treated as an eligible cooperative plan 
     for any plan year for which it is described in section 210(a) 
     of the Employee Retirement Income Security Act of 1974 and is 
     maintained by a rural telephone cooperative association 
     described in section 3(40)(B)(v) of such Act.
       ``(E) Exception for plans secured by third parties bound by 
     pbgc agreements.--This subsection shall not apply to any plan 
     if--
       ``(i) a person other than the employer obligated to 
     contribute under the plan is, under the terms of an agreement 
     with the Pension Benefit Guaranty Corporation, liable for any 
     failure of the employer to meet its obligation to pay any 
     minimum required contribution or termination liability with 
     respect to the plan; and
       ``(ii) such person is not a financially-weak employer under 
     paragraph (5).
       ``(j) Payment of Minimum Required Contributions.--
       ``(1) In general.--For purposes of this section, the due 
     date for any payment of any minimum required contribution for 
     any plan year shall be 8\1/2\ months after the close of the 
     plan year.
       ``(2) Interest.--Any payment required under paragraph (1) 
     for a plan year made after the valuation date for such plan 
     year shall be increased by interest for the period from the 
     valuation date to the payment date, determined by using the 
     effective rate of interest for the plan for such plan year.
       ``(3) Accelerated quarterly contribution schedule for 
     underfunded plans.--
       ``(A) Interest penalty for failure to meet accelerated 
     quarterly payment schedule.--A plan shall make the required 
     installments under this paragraph for a plan year if the plan 
     had a funding shortfall for the preceding plan year. If the 
     required installment is not paid in full, then the minimum 
     required contribution for the plan year (as increased under 
     paragraph (2)) shall be further increased by an amount equal 
     to the interest on the amount of the underpayment for the 
     period of the underpayment, using an interest rate equal to 
     the excess of--
       ``(i) 175 percent of the Federal mid-term rate (as in 
     effect under section 1274 for the 1st month of such plan 
     year), over
       ``(ii) the effective rate of interest for the plan for the 
     plan year.
       ``(B) Amount of underpayment, period of underpayment.--For 
     purposes of subparagraph (A)--
       ``(i) Amount.--The amount of the underpayment shall be the 
     excess of--

       ``(I) the required installment, over
       ``(II) the amount (if any) of the installment contributed 
     to or under the plan on or before the due date for the 
     installment.

       ``(ii) Period of underpayment.--The period for which any 
     interest is charged under this paragraph with respect to any 
     portion of the underpayment shall run from the due date for 
     the installment to the date on which such portion is 
     contributed to or under the plan.
       ``(iii) Order of crediting contributions.--For purposes of 
     clause (i)(II), contributions shall be credited against 
     unpaid required installments in the order in which such 
     installments are required to be paid.
       ``(C) Number of required installments; due dates.--For 
     purposes of this paragraph--
       ``(i) Payable in 4 installments.--There shall be 4 required 
     installments for each plan year.
       ``(ii) Time for payment of installments.--The due dates for 
     required installments are set forth in the following table:

 
  In the case of the following  required
               installment:                       The due date is:
 
  1st.....................................  April 15
  2nd.....................................  July 15
  3rd.....................................  October 15
  4th.....................................  January 15 of the following
                                             year.
 


       ``(D) Amount of required installment.--For purposes of this 
     paragraph--
       ``(i) In general.--The amount of any required installment 
     shall be 25 percent of the required annual payment.
       ``(ii) Required annual payment.--For purposes of clause 
     (i), the term `required annual payment' means the lesser of--

       ``(I) 90 percent of the minimum required contribution 
     (without regard to any waiver under section 302(c)) to the 
     plan for the plan year under this section, or
       ``(II) in the case of a plan year beginning after 2007, 100 
     percent of the minimum required contribution (without regard 
     to any waiver under section 302(c)) to the plan for the 
     preceding plan year.

     Subclause (II) shall not apply if the preceding plan year 
     referred to in such clause was not a year of 12 months.
       ``(E) Fiscal years and short years.--
       ``(i) Fiscal years.--In applying this paragraph to a plan 
     year beginning on any date other than January 1, there shall 
     be substituted for the months specified in this paragraph, 
     the months which correspond thereto.
       ``(ii) Short plan year.--This subparagraph shall be applied 
     to plan years of less than 12 months in accordance with 
     regulations prescribed by the Secretary of the Treasury.
       ``(4) Liquidity requirement in connection with quarterly 
     contributions.--
       ``(A) In general.--A plan to which this paragraph applies 
     shall be treated as failing to pay the full amount of any 
     required installment under paragraph (3) to the extent that 
     the value of the liquid assets paid in such installment is 
     less than the liquidity shortfall (whether or not such 
     liquidity shortfall exceeds the amount of such installment 
     required to be paid but for this paragraph).
       ``(B) Plans to which paragraph applies.--This paragraph 
     shall apply to a plan which--
       ``(i) is required to pay installments under paragraph (3) 
     for a plan year, and
       ``(ii) has a liquidity shortfall for any quarter during 
     such plan year.
       ``(C) Period of underpayment.--For purposes of paragraph 
     (3)(A), any portion of an installment that is treated as not 
     paid under subparagraph (A) shall continue to be treated as 
     unpaid until the close of the quarter in which the due date 
     for such installment occurs.
       ``(D) Limitation on increase.--If the amount of any 
     required installment is increased by reason of subparagraph 
     (A), in no event shall such increase exceed the amount which, 
     when added to prior installments for the plan year, is 
     necessary to increase the funding target attainment 
     percentage of the plan for the plan year (taking into account 
     the expected increase in funding target due to benefits 
     accruing or earned during the plan year) to 100 percent.
       ``(E) Definitions.--For purposes of this subparagraph:
       ``(i) Liquidity shortfall.--The term `liquidity shortfall' 
     means, with respect to any required installment, an amount 
     equal to the excess (as of the last day of the quarter for 
     which such installment is made) of--

       ``(I) the base amount with respect to such quarter, over
       ``(II) the value (as of such last day) of the plan's liquid 
     assets.

       ``(ii) Base amount.--

       ``(I) In general.--The term `base amount' means, with 
     respect to any quarter, an amount equal to 3 times the sum of 
     the adjusted disbursements from the plan for the 12 months 
     ending on the last day of such quarter.
       ``(II) Special rule.--If the amount determined under 
     subclause (I) exceeds an amount equal to 2 times the sum of 
     the adjusted disbursements from the plan for the 36 months 
     ending on the last day of the quarter and an enrolled actuary 
     certifies to the satisfaction of the Secretary that such 
     excess is the result of nonrecurring circumstances, the base 
     amount with respect to such quarter shall be determined 
     without regard to amounts related to those nonrecurring 
     circumstances.

       ``(iii) Disbursements from the plan.--The term 
     `disbursements from the plan' means all disbursements from 
     the trust, including purchases of annuities, payments of 
     single sums and other benefits, and administrative expenses.
       ``(iv) Adjusted disbursements.--The term `adjusted 
     disbursements' means disbursements from the plan reduced by 
     the product of--

       ``(I) the plan's funding target attainment percentage for 
     the plan year, and
       ``(II) the sum of the purchases of annuities, payments of 
     single sums, and such other disbursements as the Secretary 
     shall provide in regulations.

       ``(v) Liquid assets.--The term `liquid assets' means cash, 
     marketable securities, and such other assets as specified by 
     the Secretary in regulations.
       ``(vi) Quarter.--The term `quarter' means, with respect to 
     any required installment, the 3-month period preceding the 
     month in which the due date for such installment occurs.
       ``(F) Regulations.--The Secretary may prescribe such 
     regulations as are necessary to carry out this paragraph.
       ``(k) Imposition of Lien Where Failure To Make Required 
     Contributions.--
       ``(1) In general.--In the case of a plan to which this 
     subsection applies, if--
       ``(A) any person fails to make a contribution payment 
     required by section 412 and this section before the due date 
     for such payment, and
       ``(B) the unpaid balance of such payment (including 
     interest), when added to the aggregate unpaid balance of all 
     preceding such payments for which payment was not made before 
     the due date (including interest), exceeds $1,000,000,


[[Page 2602]]


     then there shall be a lien in favor of the plan in the amount 
     determined under paragraph (3) upon all property and rights 
     to property, whether real or personal, belonging to such 
     person and any other person who is a member of the same 
     controlled group of which such person is a member.
       ``(2) Plans to which subsection applies.--This subsection 
     shall apply to a defined benefit plan which is a single-
     employer plan covered under section 4021 of the Employee 
     Retirement Income Security Act of 1974 for any plan year for 
     which the funding target attainment percentage (as defined in 
     subsection (d)(2)) of such plan is less than 100 percent.
       ``(3) Amount of lien.--For purposes of paragraph (1), the 
     amount of the lien shall be equal to the aggregate unpaid 
     balance of contribution payments required under this section 
     and section 302 for which payment has not been made before 
     the due date.
       ``(4) Notice of failure; lien.--
       ``(A) Notice of failure.--A person committing a failure 
     described in paragraph (1) shall notify the Pension Benefit 
     Guaranty Corporation of such failure within 10 days of the 
     due date for the required contribution payment.
       ``(B) Period of lien.--The lien imposed by paragraph (1) 
     shall arise on the due date for the required contribution 
     payment and shall continue until the last day of the first 
     plan year in which the plan ceases to be described in 
     paragraph (1)(B). Such lien shall continue to run without 
     regard to whether such plan continues to be described in 
     paragraph (2) during the period referred to in the preceding 
     sentence.
       ``(C) Certain rules to apply.--Any amount with respect to 
     which a lien is imposed under paragraph (1) shall be treated 
     as taxes due and owing the United States and rules similar to 
     the rules of subsections (c), (d), and (e) of section 4068 of 
     the Employee Retirement Income Security Act of 1974 shall 
     apply with respect to a lien imposed by subsection (a) and 
     the amount with respect to such lien.
       ``(5) Enforcement.--Any lien created under paragraph (1) 
     may be perfected and enforced only by the Pension Benefit 
     Guaranty Corporation, or at the direction of the Pension 
     Benefit Guaranty Corporation, by the contributing sponsor (or 
     any member of the controlled group of the contributing 
     sponsor).
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Contribution payment.--The term `contribution 
     payment' means, in connection with a plan, a contribution 
     payment required to be made to the plan, including any 
     required installment under paragraphs (3) and (4) of 
     subsection (j).
       ``(B) Due date; required installment.--The terms `due date' 
     and `required installment' have the meanings given such terms 
     by subsection (j), except that in the case of a payment other 
     than a required installment, the due date shall be the date 
     such payment is required to be made under section 303.
       ``(C) Controlled group.--The term `controlled group' means 
     any group treated as a single employer under subsections (b), 
     (c), (m), and (o) of section 414.
       ``(l) Qualified Transfers to Health Benefit Accounts.--In 
     the case of a qualified transfer (as defined in section 420), 
     any assets so transferred shall not, for purposes of this 
     section, be treated as assets in the plan.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to plan years beginning after 2006.

     SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

       (a) In General.--Part III of subchapter D of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to rules relating 
     to minimum funding standards) is amended by adding at the end 
     the following new subpart:

  ``Subpart B--Limitations on Benefit Improvements by Single-Employer 
                                 Plans

``Sec. 436. Funding-based limits on benefits and benefit accruals under 
              single-employer plans.

     ``SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT 
                   ACCRUALS UNDER SINGLE-EMPLOYER PLANS.

       ``(a) General Rule.--For purposes of section 401(a)(29), a 
     defined benefit plan which is a single-employer plan shall be 
     treated as meeting the requirements of this section if the 
     plan meets the requirements of subsections (b), (c), and (d).
       ``(b) Limitations on Plan Amendments Increasing Liability 
     for Benefits.--
       ``(1) In general.--Except as provided in this section, no 
     amendment to a single-employer plan which has the effect of 
     increasing liabilities of the plan by reason of increases in 
     benefits, establishment of new benefits, changing the rate of 
     benefit accrual, or changing the rate at which benefits 
     become nonforfeitable may take effect during any plan year if 
     the adjusted funding target attainment percentage as of the 
     valuation date of the plan for such plan year is--
       ``(A) less than 80 percent, or
       ``(B) would be less than 80 percent taking into account 
     such amendment.
       ``(2) Exemption.--Paragraph (1) shall cease to apply with 
     respect to any plan year, effective as of the first date of 
     the plan year (or if later, the effective date of the 
     amendment), upon payment by the plan sponsor of a 
     contribution (in addition to any minimum required 
     contribution under section 430) equal to--
       ``(A) in the case of paragraph (1)(A), the amount of the 
     increase in the funding target of the plan (under section 
     430) for the plan year attributable to the amendment, and
       ``(B) in the case of paragraph (1)(B), the amount 
     sufficient to result in a funding target attainment 
     percentage of 80 percent.
       ``(3) Exception for certain benefit increases.--Paragraph 
     (1) shall not apply to any amendment which provides for an 
     increase in benefits under a formula which is not based on a 
     participant's compensation, but only if the rate of such 
     increase is not in excess of the contemporaneous rate of 
     increase in average wages of participants covered by the 
     amendment.
       ``(c) Limitations on Accelerated Benefit Distributions.--
       ``(1) In general.--The requirements of this subsection are 
     met if the plan provides that, with respect to any plan 
     year--
       ``(A) if the plan's adjusted funded target liability 
     percentage as of the valuation date for the preceding plan 
     year was less than 60 percent and the preceding plan year is 
     not otherwise in a prohibited period, the plan sponsor shall, 
     in addition to any other contribution required under section 
     430, contribute for the current plan year and each succeeding 
     plan year in the prohibited period with respect to the 
     current plan year the amount (if any) which, when added to 
     the portion of the minimum required contribution for the plan 
     year described in subparagraphs (B) and (C) of section 
     430(a)(1), is sufficient to result in an adjusted funded 
     target liability percentage for the plan year of 60 percent, 
     and
       ``(B) no prohibited payments will be made during a 
     prohibited period.
       ``(2) Prohibited payment.--For purpose of this subsection--
       ``(A) In general.--The term `prohibited payment' means--
       ``(i) any payment, in excess of the monthly amount paid 
     under a single life annuity (plus any social security 
     supplements described in the last sentence of section 
     411(a)(9)), to a participant or beneficiary whose annuity 
     starting date (as defined in section 417(f)(2)) occurs during 
     a prohibited period,
       ``(ii) any payment for the purchase of an irrevocable 
     commitment from an insurer to pay benefits, and
       ``(iii) any other payment specified by the Secretary by 
     regulations.
       ``(B) Exception for certain payments.--In the case of any 
     prohibited period described in paragraph (3)(A), the term 
     `prohibited payment' shall not include any payment if the 
     amount of the payment does not exceed the lesser of--
       ``(i) 50 percent of the amount of the payment which could 
     be made without regard to this subsection, or
       ``(ii) the present value (determined under guidance 
     prescribed by the Pension Benefit Guaranty Corporation, using 
     the interest and mortality assumptions under section 417(e)) 
     of the maximum guarantee with respect to the participant 
     under section 4022 of the Employee Retirement Income Security 
     Act of 1974.

     The exception under this subparagraph shall only apply once 
     with respect to any participant, except that, for purposes of 
     this sentence, a participant and any beneficiary on his 
     behalf (including an alternate payee, as defined in section 
     414(p)(8)) shall be treated as 1 participant. If the accrued 
     benefit of a participant is allocated to such an alternate 
     payee and 1 or more other persons, the amount under clause 
     (ii) shall be allocated among such persons in the same manner 
     as the accrued benefit is allocated unless the qualified 
     domestic relations order (as defined in section 414(p)(1)(A)) 
     provides otherwise.
       ``(3) Prohibited period.--For purposes of paragraph (1), 
     the term `prohibited period' means--
       ``(A) except as provided in paragraph (4), if a plan 
     sponsor is required to make the contribution for the current 
     plan year under paragraph (1), the period beginning on the 
     1st day of the plan year and ending on the last day of the 
     1st period of 2 consecutive plan years (beginning on or after 
     such 1st day) for which the plan's adjusted funded target 
     liability percentage was at least 60 percent,
       ``(B) any period the plan sponsor is in bankruptcy, or
       ``(C) any period during which the plan has a liquidity 
     shortfall (as defined in section 430(j)(4)(E)(i)).

     The prohibited period for purposes of subparagraph (B) shall 
     not include any portion of a plan year (even if the plan 
     sponsor is in bankruptcy during such period) which occurs on 
     or after the date the plan's enrolled actuary certifies that, 
     as of the valuation date for the plan year, the plan's 
     adjusted funded target liability percentage is at least 100 
     percent.
       ``(4) Satisfaction of requirement before close of plan 
     year.--If, before the close of the current plan year--
       ``(A) the plan sponsor makes the contribution required to 
     be made under paragraph (1), or

[[Page 2603]]

       ``(B) the plan's enrolled actuary certifies that, as of the 
     valuation date for the plan year, the adjusted funded target 
     liability percentage of the plan is at least 60 percent,
     this subsection shall be applied as if no prohibited period 
     had begun as of the beginning of such year and the plan 
     shall, under rules described by the Secretary, restore any 
     payments not made during the prohibited period in effect 
     before the application of this paragraph.
       ``(d) Limitation on Benefit Accruals for Plans With Severe 
     Funding Shortfalls.--
       ``(1) In general.--Except as provided in subsection (e), a 
     single-employer plan shall provide that all future benefit 
     accruals under the plan shall cease during a severe funding 
     shortfall period, but only to the extent the cessation of 
     such accruals would have been permitted under section 
     411(d)(6) if the cessation had been implemented by a plan 
     amendment adopted immediately before the severe funding 
     shortfall period.
       ``(2) Severe funding shortfall period.--For purposes of 
     paragraph (1), the term `severe funding shortfall period' 
     means in the case of a plan the adjusted funding target 
     attainment percentage of which as of the valuation date of 
     the plan for any plan year is less than 60 percent, the 
     period--
       ``(A) beginning on the 1st day of the succeeding plan year, 
     and
       ``(B) ending on the date the plan's enrolled actuary 
     certifies that the plan's funding target attainment 
     percentage is at least 60 percent.
       ``(3) Opportunity for increased funding.--For purposes of 
     paragraph (2)(A), a plan shall not be treated as described in 
     such paragraph for a plan year if the plan's enrolled actuary 
     certifies that the plan sponsor has before the end of the 
     plan year contributed (in addition to any minimum required 
     contribution under section 430) the amount sufficient to 
     result in an adjusted funding target attainment percentage as 
     of the valuation date for the plan year of 60 percent.
       ``(e) Exception for Certain Collectively Bargained 
     Benefits.--In the case of a plan maintained pursuant to a 
     collective bargaining agreement between employee 
     representatives and the plan sponsor and in effect before the 
     beginning of the first day on which a limitation would 
     otherwise apply under subsections (b), (c), or (d)--
       ``(1) such limitations shall not apply to any amendment, 
     prohibited payment, or accrual with respect to such plan, but
       ``(2) the plan sponsor shall contribute (in addition to any 
     minimum required contribution under section 430) the amount 
     sufficient to result in a funding target attainment 
     percentage (as of the valuation date for the plan year in 
     which any such limitation would otherwise apply) equal to the 
     percentage necessary to prevent the limitation from applying.
       ``(f) Rules Relating to Required Contributions.--
       ``(1) Security may be provided.--
       ``(A) In general.--For purposes of this section, the 
     adjusted funding target attainment percentage shall be 
     determined by treating as an asset of the plan any security 
     provided by a plan sponsor in a form meeting the requirements 
     of subparagraph (B) .
       ``(B) Form of security.--The security required under 
     subparagraph (A) shall consist of--
       ``(i) a bond issued by a corporate surety company that is 
     an acceptable surety for purposes of section 412 of the 
     Employee Retirement Income Security Act of 1974,
       ``(ii) cash, or United States obligations which mature in 3 
     years or less, held in escrow by a bank or similar financial 
     institution, or
       ``(iii) such other form of security as is satisfactory to 
     the Secretary and the parties involved.
       ``(C) Enforcement.--Any security provided under 
     subparagraph (A) may be perfected and enforced at any time 
     after the earlier of--
       ``(i) the date on which the plan terminates,
       ``(ii) if there is a failure to make a payment of the 
     minimum required contribution for any plan year beginning 
     after the security is provided, the due date for the payment 
     under section 430(j), or
       ``(iii) if the adjusted funding target attainment 
     percentage is less than 60 percent for a consecutive period 
     of 7 years, the valuation date for the last year in the 
     period.
       ``(D) Release of security.--The security shall be released 
     (and any amounts thereunder shall be refunded together with 
     any interest accrued thereon) at such time as the Secretary 
     may prescribe in regulations, including regulations for 
     partial releases of the security by reason of increases in 
     the funding target attainment percentage.
       ``(2) Prefunding balance may not be used.--No prefunding 
     balance under section 430(f) may be used to satisfy any 
     required contribution under this section.
       ``(3) Treatment as unpaid minimum required contribution.--
     The amount of any required contribution which a plan sponsor 
     fails to make under subsection (b) or (d) for any plan year 
     shall be treated as an unpaid minimum required contribution 
     for purposes of subsection (j) and (k) of section 430 and for 
     purposes of section 4971.
       ``(g) New Plans.--Subsections (b) and (d) shall not apply 
     to a plan for the first 5 plan years of the plan. For 
     purposes of this subsection, the reference in this subsection 
     to a plan shall include a reference to any predecessor plan.
       ``(h) Presumed Underfunding for Purposes of Benefit 
     Limitations Based on Prior Year's Funding Status.--
       ``(1) Presumption of continued underfunding.--In any case 
     in which a benefit limitation under subsection (b), (c), or 
     (d) has been applied to a plan with respect to the plan year 
     preceding the current plan year, the adjusted funding target 
     attainment percentage of the plan as of the valuation date of 
     the plan for the current plan year shall be presumed to be 
     equal to the adjusted funding target attainment percentage of 
     the plan as of the valuation date of the plan for the 
     preceding plan year until the enrolled actuary of the plan 
     certifies the actual adjusted funding target attainment 
     percentage of the plan as of the valuation date of the plan 
     for the current plan year.
       ``(2) Presumption of underfunding after 10th month.--In any 
     case in which no such certification is made with respect to 
     the plan before the first day of the 10th month of the 
     current plan year, for purposes of subsections (b), (c), and 
     (d), the plan's adjusted funding target attainment percentage 
     shall be conclusively presumed to be less than 60 percent as 
     of the first day of such 10th month.
       ``(i) Treatment of Plan as of Close of Prohibited or 
     Cessation Period.--For purposes of applying this part--
       ``(1) Operation of plan after period.--Unless the plan 
     provides otherwise, payments and accruals will resume 
     effective as of the day following the close of a period of 
     limitation of payment or accrual of benefits under subsection 
     (c) or (d).
       ``(2) Treatment of affected benefits.--Nothing in this 
     subsection shall be construed as affecting the plan's 
     treatment of benefits which would have been paid or accrued 
     but for this section.
       ``(j) Funding Target Attainment Percentage.--For purposes 
     of this section--
       ``(1) In general.--The term `funding target attainment 
     percentage' has the same meaning given such term by section 
     430(d)(2).
       ``(2) Adjusted funded target liability percentage.--The 
     term `adjusted funded target liability percentage' means the 
     funded target liability percentage which is determined under 
     subparagraph (A) by increasing each of the amounts under 
     subparagraphs (A) and (B) of section 430(d)(2) by the 
     aggregate amount of purchases of annuities, payments of 
     single sums, and such other disbursements as the Secretary 
     shall prescribe in regulations, which were made by the plan 
     during the preceding 2 plan years.
       ``(k) Special Rules.--
       ``(1) Bankruptcy.--In the case of a plan sponsor during any 
     period the plan is in bankruptcy--
       ``(A) subsection (b) shall be applied by substituting `100 
     percent' for `80 percent' each place it appears,
       ``(B) any exception under subsection (b) for any benefit 
     increases pursuant to a collective bargaining agreement shall 
     not apply, and
       ``(C) the exception under subsection (f) shall not apply 
     for purposes of subsection (b).
       ``(2) Years before effective date.--No plan year beginning 
     before 2007 shall be taken into account in determining 
     whether this section applies to any plan year beginning after 
     2006.''.
       (b) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2006.
       (2) Collective bargaining exception.--In the case of a plan 
     maintained pursuant to 1 or more collective bargaining 
     agreements between employee representatives and 1 or more 
     employers ratified before January 1, 2007, the amendments 
     made by this section shall not apply to plan years beginning 
     before the earlier of--
       (A) the later of--
       (i) the date on which the last collective bargaining 
     agreement relating to the plan terminates (determined without 
     regard to any extension thereof agreed to after the date of 
     the enactment of this Act), or
       (ii) the first day of the first plan year to which the 
     amendments made by this subsection would (but for this 
     subparagraph) apply, or
       (B) January 1, 2010.

     For purposes of subparagraph (A)(i), any plan amendment made 
     pursuant to a collective bargaining agreement relating to the 
     plan which amends the plan solely to conform to any 
     requirement added by this section shall not be treated as a 
     termination of such collective bargaining agreement.

     SEC. 114. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EMPLOYER 
                   PLANS.

       (a) In General.--Section 404 of the Internal Revenue Code 
     of 1986 (relating to deduction for contributions of an 
     employer to an employees' trust or annuity plan and 
     compensation under a deferred payment plan) is amended--
       (1) in subsection (a)(1)(A), by inserting ``in the case of 
     a defined benefit plan other than a multiemployer plan, in an 
     amount determined under subsection (o), and in the case of 
     any other plan'' after ``section 501(a),'', and
       (2) by inserting at the end the following new subsection:

[[Page 2604]]

       ``(o) Deduction Limit for Single-Employer Plans.--For 
     purposes of subsection (a)(1)(A)--
       ``(1) In general.--In the case of a defined benefit plan to 
     which subsection (a)(1)(A) applies (other than a 
     multiemployer plan), the amount determined under this 
     subsection for any taxable year shall be equal to the greater 
     of--
       ``(A) the sum of the amounts determined under paragraph (2) 
     with respect to each plan year ending with or within the 
     taxable year, or
       ``(B) the sum of the minimum required contributions under 
     section 430 for such plan years.
       ``(2) Determination of amount.--
       ``(A) In general.--The amount determined under this 
     paragraph for any plan year shall be equal to the excess (if 
     any) of--
       ``(i) the sum of--

       ``(I) the funding target for the plan year,
       ``(II) the target normal cost for the plan year, and
       ``(III) the cushion amount for the plan year, over

       ``(ii) the value (determined under section 430(g)(2)) of 
     the assets of the plan which are held by the plan as of the 
     valuation date for the plan year.
       ``(B) Special rule for certain employers.--If section 
     430(i) does not apply to a plan for a plan year, the amount 
     determined under subparagraph (A)(i) for the plan year shall 
     in no event be less than the sum of--
       ``(i) the funding target for the plan year (determined as 
     if section 430(i) applied to the plan), plus
       ``(ii) the target normal cost for the plan year (as so 
     determined).
       ``(3) Cushion amount.--For purposes of paragraph 
     (2)(A)(i)(III)--
       ``(A) In general.--The cushion amount for any plan year is 
     the sum of--
       ``(i) 80 percent of the funding target for the plan year, 
     and
       ``(ii) the amount by which the funding target for the plan 
     year would increase if the plan were to take into account--

       ``(I) increases in compensation which are expected to occur 
     in succeeding plan years, or
       ``(II) if the plan does not base benefits for service to 
     date on compensation, increases in benefits which are 
     expected to occur in succeeding plan years (determined on the 
     basis of the average annual increase in benefits over the 6 
     immediately preceding plan years).

       ``(B) Limitations.--
       ``(i) In general.--In making the computation under 
     subparagraph (A)(ii), the plan's actuary shall assume that 
     the limitations under subsection (l) and section 415(b) shall 
     apply.
       ``(ii) Expected increases.--In the case of a plan year 
     during which a plan is covered under section 4021 of the 
     Employee Retirement Income Security Act of 1974, the plan's 
     actuary may, notwithstanding subsection (j) or (l), take into 
     account increases in the limitations which are expected to 
     occur in succeeding plan years.
       ``(4) Special rules for plans with 100 or fewer 
     participants.--
       ``(A) In general.--For purposes of determining the amount 
     under paragraph (3) for any plan year, in the case of a plan 
     which has 100 or fewer participants for the plan year, the 
     liability of the plan attributable to benefit increases for 
     highly compensated employees (as defined in section 414(q)) 
     resulting from a plan amendment which is made or becomes 
     effective, whichever is later, within the last 2 years shall 
     not be taken into account in determining the target 
     liability.
       ``(B) Rule for determining number of participants.--For 
     purposes of determining the number of plan participants, all 
     defined benefit plans maintained by the same employer (or any 
     member of such employer's controlled group (within the 
     meaning of section 412(f)(4))) shall be treated as one plan, 
     but only participants of such member or employer shall be 
     taken into account.
       ``(5)  Special rule for terminating plans.--In the case of 
     a plan which, subject to section 4041 of the Employee 
     Retirement Income Security Act of 1974, terminates during the 
     plan year, the amount determined under paragraph (2) shall in 
     no event be less than the amount required to make the plan 
     sufficient for benefit liabilities (within the meaning of 
     section 4041(d) of such Act).
       ``(6) Actuarial assumptions.--Any computation under this 
     subsection for any plan year shall use the same actuarial 
     assumptions which are used for the plan year under section 
     430.
       ``(7) Definitions.--Any term used in this subsection which 
     is also used in section 430 shall have the same meaning given 
     such term by section 430.''.
       (b) Exception From Limitation on Deduction Where 
     Combination of Defined Contribution and Defined Benefit 
     Plans.--Section 404(a)(7)(C) of such Code, as amended by this 
     Act, is amended by adding at the end the following new 
     clause:
       ``(iv) Guaranteed plans.--In applying this paragraph, any 
     single-employer plan covered under section 4021 of the 
     Employee Retirement Income Security Act of 1974 shall not be 
     taken into account.''.
       (c) Technical and Conforming Amendments.--
       (1) The last sentence of section 404(a)(1)(A) of such Code 
     is amended by striking ``section 412'' each place it appears 
     and inserting ``section 431''.
       (2) Section 404(a)(1)(B) of such Code is amended--
       (A) by striking ``In the case of a plan'' and inserting 
     ``In the case of a multiemployer plan'',
       (B) by striking ``section 412(c)(7)'' each place it appears 
     and inserting ``section 431(c)(6)'',
       (C) by striking ``section 412(c)(7)(B)'' and inserting 
     ``section 431(c)(6)(A)(ii)'',
       (D) by striking ``section 412(c)(7)(A)'' and inserting 
     ``section 431(c)(6)(A)(i)'', and
       (E) by striking ``section 412'' and inserting ``section 
     431''.
       (3) Section 404(a)(7)(A) of such Code, as amended by this 
     Act, is amended--
       (A) by adding at the end of subparagraph (A) the following 
     new sentence: ``In the case of a defined benefit plan which 
     is a single employer plan, the amount necessary to satisfy 
     the minimum funding standard provided by section 412 shall 
     not be less than the plan's funding shortfall determined 
     under section 430.'', and
       (B) by striking subparagraph (D) and inserting:
       ``(D) Insurance contract plans.--For purposes of this 
     paragraph, a plan described in section 412(g)(3) shall be 
     treated as a defined benefit plan.''.
       (4) Section 404A(g)(3)(A) of such Code is amended by 
     striking ``paragraphs (3) and (7) of section 412(c)'' and 
     inserting ``paragraphs (3) and (6) of section 431(c)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2006.

     SEC. 115. TECHNICAL AND CONFORMING AMENDMENTS.

       (a) Amendments Related to Qualification Requirements.--
       (1) Section 401(a)(29) of the Internal Revenue Code of 1986 
     is amended to read as follows:
       ``(29) Benefit limitations on plans in at-risk status.--In 
     the case of a defined benefit plan (other than a 
     multiemployer plan) to which the requirements of section 412 
     apply, the trust of which the plan is a part shall not 
     constitute a qualified trust under this subsection unless the 
     plan meets the requirements of section 436.''.
       (2) Section 401(a)(32) of such Code is amended--
       (A) in subparagraph (A), by striking ``412(m)(5)'' each 
     place it appears and inserting ``section 430(j)(4)'', and
       (B) in subparagraph (C), by striking ``section 412(m)'' and 
     inserting ``section 430(j)''.
       (3) Section 401(a), as amended by this Act, is amended by 
     striking paragraph (33) and by redesignating paragraphs (34) 
     and (35) as paragraph (33) and (34).
       (b) Vesting Rules.--Section 411 of such Code is amended--
       (1) by striking ``section 412(c)(8)'' in subsection 
     (a)(3)(C) and inserting ``section 412(d)(2)'',
       (2) in subsection (b)(1)(F)--
       (A) by striking ``paragraphs (2) and (3) of section 
     412(i)'' in clause (ii) and inserting ``subparagraphs (B) and 
     (C) of section 412(e)(3)'', and
       (B) by striking ``paragraphs (4), (5), and (6) of section 
     412(i)'' and inserting ``subparagraphs (D), (E), and (F) of 
     section 412(e)(3)'', and
       (3) by striking ``section 412(c)(8)'' in subsection 
     (d)(6)(A) and inserting ``section 412(e)(2)''.
       (c) Mergers and Consolidations of Plans.--Subclause (I) of 
     section 414(l)(2)(B)(i) of such Code is amended to read as 
     follows:

       ``(I) the amount determined under section 431(c)(6)(A)(i) 
     in the case of a multiemployer plan (and the sum of the 
     funding shortfall and target normal cost determined under 
     section 430 in the case of any other plan), over''.

       (d) Transfer of Excess Pension Assets to Retiree Health 
     Accounts.--
       (1) Section 420(e)(2) of such Code is amended to read as 
     follows:
       ``(2) Excess pension assets.--The term `excess pension 
     assets' means the excess (if any) of--
       ``(A) the lesser of--
       ``(i) the fair market value of the plan's assets (reduced 
     by the prefunding balance determined under section 430(f)), 
     or
       ``(ii) the value of plan assets as determined under section 
     430(g)(3) after reduction under section 430(f), over
       ``(B) 125 percent of the sum of the funding shortfall and 
     the target normal cost determined under section 430 for such 
     plan year.''.
       (2) Section 420(e)(4) of such Code is amended to read as 
     follows:
       ``(4) Coordination with section 430.--In the case of a 
     qualified transfer, any assets so transferred shall not, for 
     purposes of this section, be treated as assets in the 
     plan.''.
       (e) Excise Taxes.--
       (1) In general.--Subsections (a) and (b) of section 4971 of 
     such Code are amended to read as follows:
       ``(a) Initial Tax.--If at any time during any taxable year 
     an employer maintains a plan to which section 412 applies, 
     there is hereby imposed for the taxable year a tax equal to--

[[Page 2605]]

       ``(1) in the case of a single-employer plan, 10 percent of 
     the aggregate unpaid minimum required contributions for all 
     plan years remaining unpaid as of the end of any plan year 
     ending with or within the taxable year, and
       ``(2) in the case of a multiemployer plan, 5 percent of the 
     accumulated funding deficiency determined under section 431 
     as of the end of any plan year ending with or within the 
     taxable year.
       ``(b) Additional Tax.--If--
       ``(1) a tax is imposed under subsection (a)(1) on any 
     unpaid required minimum contribution and such amount remains 
     unpaid as of the close of the taxable period, or
       ``(2) a tax is imposed under subsection (a)(2) on any 
     accumulated funding deficiency and the accumulated funding 
     deficiency is not corrected within the taxable period,

     there is hereby imposed a tax equal to 100 percent of the 
     unpaid minimum required contribution or accumulated funding 
     deficiency, whichever is applicable, to the extent not so 
     paid or corrected.''.
       (2) Section 4971(c) of such Code is amended--
       (A) by striking ``the last two sentences of section 
     412(a)'' in paragraph (1) and inserting ``section 431'', and
       (B) by adding at the end the following new paragraph:
       ``(4) Unpaid minimum required contribution.--
       ``(A) In general.--The term `unpaid minimum required 
     contribution' means, with respect to any plan year, any 
     minimum required contribution under section 430 for the plan 
     year which is not paid on or before the due date (as 
     determined under section 430(j)(1)) for the plan year.
       ``(B) Ordering rule.--Any payment to or under a plan for 
     any plan year shall be allocated first to unpaid minimum 
     required contributions for all preceding plan years on a 
     first-in, first-out basis and then to the minimum required 
     contribution under section 430 for the plan year.''.
       (3) Section 4971(e)(1) of such Code is amended by striking 
     ``section 412(b)(3)(A)'' and inserting ``section 
     412(a)(1)(A)''.
       (4) Section 4971(f)(1) of such Code is amended--
       (A) by striking ``section 412(m)(5)'' and inserting 
     ``section 430(j)(4)'', and
       (B) by striking ``section 412(m)'' and inserting ``section 
     430(j)''.
       (5) Section 4972(c)(7) of such Code is amended by striking 
     ``except to the extent that such contributions exceed the 
     full-funding limitation (as defined in section 412(c)(7), 
     determined without regard to subparagraph (A)(i)(I) 
     thereof)'' and inserting ``except, in the case of a 
     multiemployer plan, to the extent that such contributions 
     exceed the full-funding limitation (as defined in section 
     431(c)(6))''.
       (f) Reporting Requirements.--Section 6059(b) of such Code 
     is amended--
       (1) by striking ``the accumulated funding deficiency (as 
     defined in section 412(a))'' in paragraph (2) and inserting 
     ``the minimum required contribution determined under section 
     430, or the accumulated funding deficiency determined under 
     section 431,'', and
       (2) by striking paragraph (3)(B) and inserting:
       ``(B) the requirements for reasonable actuarial assumptions 
     under section 430(h)(1) or 431(c)(3), whichever are 
     applicable, have been complied with.''.

 Subtitle C--Interest Rate Assumptions and Deductible Amounts for 2006

     SEC. 121. EXTENSION OF REPLACEMENT OF 30-YEAR TREASURY RATES.

       (a) Amendments of ERISA.--
       (1) Determination of range.--Subclause (II) of section 
     302(b)(5)(B)(ii) of the Employee Retirement Income Security 
     Act of 1974 is amended--
       (A) by striking ``2006'' and inserting ``2007'', and
       (B) by striking ``and 2005'' in the heading and inserting 
     ``, 2005, and 2006''.
       (2) Determination of current liability.--Subclause (IV) of 
     section 302(d)(7)(C)(i) of such Act is amended--
       (A) by striking ``or 2005'' and inserting ``, 2005, or 
     2006'', and
       (B) by striking ``and 2005'' in the heading and inserting 
     ``, 2005, and 2006''.
       (3) PBGC premium rate.--Subclause (V) of section 
     4006(a)(3)(E)(iii) of such Act is amended by striking 
     ``2006'' and inserting ``2007''.
       (b) Amendments of Internal Revenue Code.--
       (1) Determination of range.--Subclause (II) of section 
     412(b)(5)(B)(ii) of the Internal Revenue Code of 1986 is 
     amended--
       (A) by striking ``2006'' and inserting ``2007'', and
       (B) by striking ``and 2005'' in the heading and inserting 
     ``, 2005, and 2006''.
       (2) Determination of current liability.--Subclause (IV) of 
     section 412(l)(7)(C)(i) of such Code is amended--
       (A) by striking ``or 2005'' and inserting ``, 2005, or 
     2006'', and
       (B) by striking ``and 2005'' in the heading and inserting 
     ``, 2005, and 2006''.
       (c) Plan Amendments.--Clause (ii) of section 101(c)(2)(A) 
     of the Pension Funding Equity Act of 2004 is amended by 
     striking ``2006'' and inserting ``2007''.

     SEC. 122. DEDUCTION LIMITS FOR PLAN CONTRIBUTIONS.

       (a) In General.--Clause (i) of section 404(a)(1)(D) of the 
     Internal Revenue Code of 1986 (relating to special rule in 
     case of certain plans) is amended by striking ``section 
     412(l)'' and inserting ``section 412(l)(8)(A), except that 
     section 412(l)(8)(A) shall be applied for purposes of this 
     clause by substituting `180 percent (130 percent in the case 
     of a multiemployer plan) of current liability' for `the 
     current liability' in clause (i).''
       (b) Conforming Amendment.--Section 404(a)(1) of the 
     Internal Revenue Code of 1986 is amended by striking 
     subparagraph (F).
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2005.

     SEC. 123. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.

       (a) In General.--Subparagraph (C) of section 404(a)(7) of 
     the Internal Revenue Code of 1986 (relating to limitation on 
     deductions where combination of defined contribution plan and 
     defined benefit plan) is amended by adding after clause (ii) 
     the following new clause:
       ``(iii) Limitation.--In the case of employer contributions 
     to 1 or more defined contribution plans, this paragraph shall 
     only apply to the extent that such contributions exceed 6 
     percent of the compensation otherwise paid or accrued during 
     the taxable year to the beneficiaries under such plans. For 
     purposes of this clause, amounts carried over from preceding 
     taxable years under subparagraph (B) shall be treated as 
     employer contributions to 1 or more defined contributions to 
     the extent attributable to employer contributions to such 
     plans in such preceding taxable years.''
       (b) Conforming Amendment.--Subparagraph (A) of section 
     4972(c)(6) of such Code (relating to nondeductible 
     contributions) is amended to read as follows:
       ``(A) so much of the contributions to 1 or more defined 
     contribution plans which are not deductible when contributed 
     solely because of section 404(a)(7) as does not exceed the 
     amount of contributions described in section 401(m)(4)(A), 
     or''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to contributions for taxable years beginning 
     after December 31, 2005.

TITLE II--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT 
                      PLANS AND RELATED PROVISIONS

                       Subtitle A--Funding Rules

 PART I--AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

     SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT 
                   PLANS.

       (a) In General.--Part 3 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 (as amended 
     by this Act) is amended by inserting after section 303 the 
     following new section:


          ``MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER PLANS

       ``Sec. 304. (a) In General.--For purposes of section 302, 
     the accumulated funding deficiency of a multiemployer plan 
     for any plan year is--
       ``(1) except as provided in paragraph (2), the amount, 
     determined as of the end of the plan year, equal to the 
     excess (if any) of the total charges to the funding standard 
     account of the plan for all plan years (beginning with the 
     first plan year for which this part applies to the plan) over 
     the total credits to such account for such years, and
       ``(2) if the multiemployer plan is in reorganization for 
     any plan year, the accumulated funding deficiency of the plan 
     determined under section 4243.
       ``(b) Funding Standard Account.--
       ``(1) Account required.--Each multiemployer plan to which 
     this part applies shall establish and maintain a funding 
     standard account. Such account shall be credited and charged 
     solely as provided in this section.
       ``(2) Charges to account.--For a plan year, the funding 
     standard account shall be charged with the sum of--
       ``(A) the normal cost of the plan for the plan year,
       ``(B) the amounts necessary to amortize in equal annual 
     installments (until fully amortized)--
       ``(i) separately, with respect to each plan year, the net 
     increase (if any) in unfunded past service liability under 
     the plan arising from plan amendments adopted in such year, 
     over a period of 15 plan years,
       ``(ii) separately, with respect to each plan year, the net 
     experience loss (if any) under the plan, over a period of 15 
     plan years, and
       ``(iii) separately, with respect to each plan year, the net 
     loss (if any) resulting from changes in actuarial assumptions 
     used under the plan, over a period of 15 plan years,
       ``(C) the amount necessary to amortize each waived funding 
     deficiency (within the meaning of section 302(c)(3)) for each 
     prior plan year in equal annual installments (until fully 
     amortized) over a period of 15 plan years,
       ``(D) the amount necessary to amortize in equal annual 
     installments (until fully amortized) over a period of 5 plan 
     years any amount credited to the funding standard account 
     under section 302(b)(3)(D) (as in effect

[[Page 2606]]

     on the day before the date of the enactment of the Pension 
     Security and Transparency Act of 2005), and
       ``(E) the amount necessary to amortize in equal annual 
     installments (until fully amortized) over a period of 20 
     years the contributions which would be required to be made 
     under the plan but for the provisions of section 
     302(c)(7)(A)(i)(I) (as in effect on the day before the date 
     of the enactment of the Pension Security and Transparency Act 
     of 2005).
       ``(3) Credits to account.--For a plan year, the funding 
     standard account shall be credited with the sum of--
       ``(A) the amount considered contributed by the employer to 
     or under the plan for the plan year,
       ``(B) the amount necessary to amortize in equal annual 
     installments (until fully amortized)--
       ``(i) separately, with respect to each plan year, the net 
     decrease (if any) in unfunded past service liability under 
     the plan arising from plan amendments adopted in such year, 
     over a period of 15 plan years,
       ``(ii) separately, with respect to each plan year, the net 
     experience gain (if any) under the plan, over a period of 15 
     plan years, and
       ``(iii) separately, with respect to each plan year, the net 
     gain (if any) resulting from changes in actuarial assumptions 
     used under the plan, over a period of 15 plan years,
       ``(C) the amount of the waived funding deficiency (within 
     the meaning of section 302(c)(3)) for the plan year, and
       ``(D) in the case of a plan year for which the accumulated 
     funding deficiency is determined under the funding standard 
     account if such plan year follows a plan year for which such 
     deficiency was determined under the alternative minimum 
     funding standard under section 305 (as in effect on the day 
     before the date of the enactment of the Pension Security and 
     Transparency Act of 2005), the excess (if any) of any debit 
     balance in the funding standard account (determined without 
     regard to this subparagraph) over any debit balance in the 
     alternative minimum funding standard account.
       ``(4) Special rule for amounts first amortized to plan 
     years before 2007.--In the case of any amount amortized under 
     section 302(b) (as in effect on the day before the date of 
     the enactment of the Pension Security and Transparency Act of 
     2005) over any period beginning with a plan year beginning 
     before 2007, in lieu of the amortization described in 
     paragraphs (2)(B) and (3)(B), such amount shall continue to 
     be amortized under such section as so in effect.
       ``(5) Combining and offsetting amounts to be amortized.--
     Under regulations prescribed by the Secretary of the 
     Treasury, amounts required to be amortized under paragraph 
     (2) or paragraph (3), as the case may be--
       ``(A) may be combined into one amount under such paragraph 
     to be amortized over a period determined on the basis of the 
     remaining amortization period for all items entering into 
     such combined amount, and
       ``(B) may be offset against amounts required to be 
     amortized under the other such paragraph, with the resulting 
     amount to be amortized over a period determined on the basis 
     of the remaining amortization periods for all items entering 
     into whichever of the two amounts being offset is the 
     greater.
       ``(6) Interest.--The funding standard account (and items 
     therein) shall be charged or credited (as determined under 
     regulations prescribed by the Secretary of the Treasury) with 
     interest at the appropriate rate consistent with the rate or 
     rates of interest used under the plan to determine costs.
       ``(7) Special rules relating to charges and credits to 
     funding standard account.--For purposes of this part--
       ``(A) Withdrawal liability.--Any amount received by a 
     multiemployer plan in payment of all or part of an employer's 
     withdrawal liability under part 1 of subtitle E of title IV 
     shall be considered an amount contributed by the employer to 
     or under the plan. The Secretary of the Treasury may 
     prescribe by regulation additional charges and credits to a 
     multiemployer plan's funding standard account to the extent 
     necessary to prevent withdrawal liability payments from being 
     unduly reflected as advance funding for plan liabilities.
       ``(B) Adjustments when a multiemployer plan leaves 
     reorganization.--If a multiemployer plan is not in 
     reorganization in the plan year but was in reorganization in 
     the immediately preceding plan year, any balance in the 
     funding standard account at the close of such immediately 
     preceding plan year--
       ``(i) shall be eliminated by an offsetting credit or charge 
     (as the case may be), but
       ``(ii) shall be taken into account in subsequent plan years 
     by being amortized in equal annual installments (until fully 
     amortized) over 30 plan years.

     The preceding sentence shall not apply to the extent of any 
     accumulated funding deficiency under section 4243(a) as of 
     the end of the last plan year that the plan was in 
     reorganization.
       ``(C) Plan payments to supplemental program or withdrawal 
     liability payment fund.--Any amount paid by a plan during a 
     plan year to the Pension Benefit Guaranty Corporation 
     pursuant to section 4222 of this Act or to a fund exempt 
     under section 501(c)(22) of the Internal Revenue Code of 1986 
     pursuant to section 4223 of this Act shall reduce the amount 
     of contributions considered received by the plan for the plan 
     year.
       ``(D) Interim withdrawal liability payments.--Any amount 
     paid by an employer pending a final determination of the 
     employer's withdrawal liability under part 1 of subtitle E of 
     title IV and subsequently refunded to the employer by the 
     plan shall be charged to the funding standard account in 
     accordance with regulations prescribed by the Secretary of 
     the Treasury.
       ``(E) Election for deferral of charge for portion of net 
     experience loss.--If an election is in effect under section 
     302(b)(7)(F) (as in effect on the day before the date of the 
     enactment of the Pension Security and Transparency Act of 
     2005) for any plan year, the funding standard account shall 
     be charged in the plan year to which the portion of the net 
     experience loss deferred by such election was deferred with 
     the amount so deferred (and paragraph (2)(B)(ii) shall not 
     apply to the amount so charged).
       ``(F) Financial assistance.--Any amount of any financial 
     assistance from the Pension Benefit Guaranty Corporation to 
     any plan, and any repayment of such amount, shall be taken 
     into account under this section and section 412 of the 
     Internal Revenue Code of 1986 in such manner as is determined 
     by the Secretary of the Treasury.
       ``(G) Short-term benefits.--To the extent that any plan 
     amendment increases the unfunded past service liability under 
     the plan by reason of an increase in benefits which are 
     payable under the terms of the plan for a period that does 
     not exceed 14 years from the effective date of the amendment, 
     paragraph (2)(B)(i) shall be applied separately with respect 
     to such increase in unfunded past service liability by 
     substituting the number of years of the period during which 
     such benefits are payable for `15'.
       ``(c) Additional Rules.--
       ``(1) Determinations to be made under funding method.--For 
     purposes of this part, normal costs, accrued liability, past 
     service liabilities, and experience gains and losses shall be 
     determined under the funding method used to determine costs 
     under the plan.
       ``(2) Valuation of assets.--
       ``(A) In general.--For purposes of this part, the value of 
     the plan's assets shall be determined on the basis of any 
     reasonable actuarial method of valuation which takes into 
     account fair market value and which is permitted under 
     regulations prescribed by the Secretary of the Treasury.
       ``(B) Election with respect to bonds.--The value of a bond 
     or other evidence of indebtedness which is not in default as 
     to principal or interest may, at the election of the plan 
     administrator, be determined on an amortized basis running 
     from initial cost at purchase to par value at maturity or 
     earliest call date. Any election under this subparagraph 
     shall be made at such time and in such manner as the 
     Secretary of the Treasury shall by regulations provide, shall 
     apply to all such evidences of indebtedness, and may be 
     revoked only with the consent of such Secretary.
       ``(3) Actuarial assumptions must be reasonable.--For 
     purposes of this section, all costs, liabilities, rates of 
     interest, and other factors under the plan shall be 
     determined on the basis of actuarial assumptions and 
     methods--
       ``(A) each of which is reasonable (taking into account the 
     experience of the plan and reasonable expectations), and
       ``(B) which, in combination, offer the actuary's best 
     estimate of anticipated experience under the plan.
       ``(4) Treatment of certain changes as experience gain or 
     loss.--For purposes of this section, if--
       ``(A) a change in benefits under the Social Security Act or 
     in other retirement benefits created under Federal or State 
     law, or
       ``(B) a change in the definition of the term `wages' under 
     section 3121 of the Internal Revenue Code of 1986, or a 
     change in the amount of such wages taken into account under 
     regulations prescribed for purposes of section 401(a)(5) of 
     such Code,
     results in an increase or decrease in accrued liability under 
     a plan, such increase or decrease shall be treated as an 
     experience loss or gain.
       ``(5) Full funding.--If, as of the close of a plan year, a 
     plan would (without regard to this paragraph) have an 
     accumulated funding deficiency in excess of the full funding 
     limitation--
       ``(A) the funding standard account shall be credited with 
     the amount of such excess, and
       ``(B) all amounts described in subparagraphs (B), (C), and 
     (D) of subsection (b) (2) and subparagraph (B) of subsection 
     (b)(3) which are required to be amortized shall be considered 
     fully amortized for purposes of such subparagraphs.
       ``(6) Full-funding limitation.--
       ``(A) In general.--For purposes of paragraph (5), the term 
     `full-funding limitation' means the excess (if any) of--
       ``(i) the accrued liability (including normal cost) under 
     the plan (determined under the entry age normal funding 
     method if such accrued liability cannot be directly 
     calculated under the funding method used for the plan), over
       ``(ii) the lesser of--

       ``(I) the fair market value of the plan's assets, or

[[Page 2607]]

       ``(II) the value of such assets determined under paragraph 
     (2).

       ``(B) Minimum amount.--
       ``(i) In general.--In no event shall the full-funding 
     limitation determined under subparagraph (A) be less than the 
     excess (if any) of--

       ``(I) 90 percent of the current liability of the plan 
     (including the expected increase in current liability due to 
     benefits accruing during the plan year), over
       ``(II) the value of the plan's assets determined under 
     paragraph (2).

       ``(ii) Assets.--For purposes of clause (i), assets shall 
     not be reduced by any credit balance in the funding standard 
     account.
       ``(C) Full funding limitation.--For purposes of this 
     paragraph, unless otherwise provided by the plan, the accrued 
     liability under a multiemployer plan shall not include 
     benefits which are not nonforfeitable under the plan after 
     the termination of the plan (taking into consideration 
     section 411(d)(3) of the Internal Revenue Code of 1986).
       ``(D) Current liability.--For purposes of this paragraph--
       ``(i) In general.--The term `current liability' means all 
     liabilities to employees and their beneficiaries under the 
     plan.
       ``(ii) Treatment of unpredictable contingent event 
     benefits.--For purposes of clause (i), any benefit contingent 
     on an event other than--

       ``(I) age, service, compensation, death, or disability, or
       ``(II) an event which is reasonably and reliably 
     predictable (as determined by the Secretary of the Treasury),

     shall not be taken into account until the event on which the 
     benefit is contingent occurs.
       ``(iii) Interest rate used.--The rate of interest used to 
     determine current liability under this paragraph shall be the 
     rate of interest determined under subparagraph (E).
       ``(iv) Mortality tables.--

       ``(I) Commissioners' standard table.--In the case of plan 
     years beginning before the first plan year to which the first 
     tables prescribed under subclause (II) apply, the mortality 
     table used in determining current liability under this 
     paragraph shall be the table prescribed by the Secretary of 
     the Treasury which is based on the prevailing commissioners' 
     standard table (described in section 807(d)(5)(A) of the 
     Internal Revenue Code of 1986) used to determine reserves for 
     group annuity contracts issued on January 1, 1993.
       ``(II) Secretarial authority.--The Secretary of the 
     Treasury may by regulation prescribe for plan years beginning 
     after December 31, 1999, mortality tables to be used in 
     determining current liability under this subsection. Such 
     tables shall be based upon the actual experience of pension 
     plans and projected trends in such experience. In prescribing 
     such tables, such Secretary shall take into account results 
     of available independent studies of mortality of individuals 
     covered by pension plans.

       ``(v) Separate mortality tables for the disabled.--
     Notwithstanding clause (iv)--

       ``(I) In general.--The Secretary of the Treasury shall 
     establish mortality tables which may be used (in lieu of the 
     tables under clause (iv)) to determine current liability 
     under this subsection for individuals who are entitled to 
     benefits under the plan on account of disability. Such 
     Secretary shall establish separate tables for individuals 
     whose disabilities occur in plan years beginning before 
     January 1, 1995, and for individuals whose disabilities occur 
     in plan years beginning on or after such date.
       ``(II) Special rule for disabilities occurring after 
     1994.--In the case of disabilities occurring in plan years 
     beginning after December 31, 1994, the tables under subclause 
     (I) shall apply only with respect to individuals described in 
     such subclause who are disabled within the meaning of title 
     II of the Social Security Act and the regulations thereunder.

       ``(vi) Periodic review.--The Secretary of the Treasury 
     shall periodically (at least every 5 years) review any tables 
     in effect under this subparagraph and shall, to the extent 
     such Secretary determines necessary, by regulation update the 
     tables to reflect the actual experience of pension plans and 
     projected trends in such experience.
       ``(E) Required change of interest rate.--For purposes of 
     determining a plan's current liability for purposes of this 
     paragraph--
       ``(i) In general.--If any rate of interest used under the 
     plan under subsection (b)(6) to determine cost is not within 
     the permissible range, the plan shall establish a new rate of 
     interest within the permissible range.
       ``(ii) Permissible range.--For purposes of this 
     subparagraph--

       ``(I) In general.--Except as provided in subclause (II), 
     the term `permissible range' means a rate of interest which 
     is not more than 5 percent above, and not more than 10 
     percent below, the weighted average of the rates of interest 
     on 30-year Treasury securities during the 4-year period 
     ending on the last day before the beginning of the plan year.
       ``(II) Secretarial authority.--If the Secretary of the 
     Treasury finds that the lowest rate of interest permissible 
     under subclause (I) is unreasonably high, such Secretary may 
     prescribe a lower rate of interest, except that such rate may 
     not be less than 80 percent of the average rate determined 
     under such subclause.

       ``(iii) Assumptions.--Notwithstanding paragraph (3)(A), the 
     interest rate used under the plan shall be--

       ``(I) determined without taking into account the experience 
     of the plan and reasonable expectations, but
       ``(II) consistent with the assumptions which reflect the 
     purchase rates which would be used by insurance companies to 
     satisfy the liabilities under the plan.

       ``(7) Annual valuation.--
       ``(A) In general.--For purposes of this section, a 
     determination of experience gains and losses and a valuation 
     of the plan's liability shall be made not less frequently 
     than once every year, except that such determination shall be 
     made more frequently to the extent required in particular 
     cases under regulations prescribed by the Secretary of the 
     Treasury.
       ``(B) Valuation date.--
       ``(i) Current year.--Except as provided in clause (ii), the 
     valuation referred to in subparagraph (A) shall be made as of 
     a date within the plan year to which the valuation refers or 
     within one month prior to the beginning of such year.
       ``(ii) Use of prior year valuation.--The valuation referred 
     to in subparagraph (A) may be made as of a date within the 
     plan year prior to the year to which the valuation refers if, 
     as of such date, the value of the assets of the plan are not 
     less than 100 percent of the plan's current liability (as 
     defined in paragraph (6)(D) without regard to clause (iv) 
     thereof).
       ``(iii) Adjustments.--Information under clause (ii) shall, 
     in accordance with regulations, be actuarially adjusted to 
     reflect significant differences in participants.
       ``(iv) Limitation.--A change in funding method to use a 
     prior year valuation, as provided in clause (ii), may not be 
     made unless as of the valuation date within the prior plan 
     year, the value of the assets of the plan are not less than 
     125 percent of the plan's current liability (as defined in 
     paragraph (6)(D) without regard to clause (iv) thereof).
       ``(8) Time when certain contributions deemed made.--For 
     purposes of this section, any contributions for a plan year 
     made by an employer after the last day of such plan year, but 
     not later than two and one-half months after such day, shall 
     be deemed to have been made on such last day. For purposes of 
     this subparagraph, such two and one-half month period may be 
     extended for not more than six months under regulations 
     prescribed by the Secretary of the Treasury.
       ``(d) Extension of Amortization Periods for Multiemployer 
     Plans.--
       ``(1) Automatic extension upon application by certain 
     plans.--
       ``(A) In general.--If the plan sponsor of a multiemployer 
     plan--
       ``(i) submits to the Secretary of the Treasury an 
     application for an extension of the period of years required 
     to amortize any unfunded liability described in any clause of 
     subsection (b)(2)(B) or described in subsection (b)(4), and
       ``(ii) includes with the application a certification by the 
     plan's actuary described in subparagraph (B),

     the Secretary of the Treasury shall extend the amortization 
     period for the period of time (not in excess of 5 years) 
     specified in the application. Such extension shall be in 
     addition to any extension under paragraph (2).
       ``(B) Criteria.--A certification with respect to a 
     multiemployer plan is described in this subparagraph if the 
     plan's actuary certifies that, based on reasonable 
     assumptions--
       ``(i) absent the extension under subparagraph (A), the plan 
     would have an accumulated funding deficiency in the current 
     plan year or any of the 9 succeeding plan years,
       ``(ii) the plan sponsor has adopted a plan to improve the 
     plan's funding status,
       ``(iii) the plan is projected to have sufficient assets to 
     timely pay expected benefits and anticipated expenditures 
     over the amortization period as extended, and
       ``(iv) the notice required under paragraph (3)(A) has been 
     provided.
       ``(2) Additional extension.--
       ``(A) In general.--If the plan sponsor of a multiemployer 
     plan submits to the Secretary of the Treasury an application 
     for an extension of the period of years required to amortize 
     any unfunded liability described in any clause of subsection 
     (b)(2)(B) or described in subsection (b)(4), the Secretary of 
     the Treasury may extend the amortization period for a period 
     of time (not in excess of 5 years) if the Secretary of the 
     Treasury makes the determination described in subparagraph 
     (B). Such extension shall be in addition to any extension 
     under paragraph (1).
       ``(B) Determination.--The Secretary make grant an extension 
     under subparagraph (A) if the Secretary determines that--
       ``(i) such extension would carry out the purposes of this 
     Act and would provide adequate protection for participants 
     under the plan and their beneficiaries, and
       ``(ii) the failure to permit such extension would--

[[Page 2608]]

       ``(I) result in a substantial risk to the voluntary 
     continuation of the plan, or a substantial curtailment of 
     pension benefit levels or employee compensation, and
       ``(II) be adverse to the interests of plan participants in 
     the aggregate.

       ``(C) Action by secretary.--The Secretary of the Treasury 
     shall act upon any application for an extension under this 
     paragraph within 180 days of the submission of such 
     application. If the Secretary rejects the application for an 
     extension under this paragraph, the Secretary shall provide 
     notice to the plan detailing the specific reasons for the 
     rejection, including references to the criteria set forth 
     above.
       ``(3) Advance notice.--
       ``(A) In general.--The Secretary of the Treasury shall, 
     before granting an extension under this subsection, require 
     each applicant to provide evidence satisfactory to such 
     Secretary that the applicant has provided notice of the 
     filing of the application for such extension to each affected 
     party (as defined in section 4001(a)(21)) with respect to the 
     affected plan. Such notice shall include a description of the 
     extent to which the plan is funded for benefits which are 
     guaranteed under title IV and for benefit liabilities.
       ``(B) Consideration of relevant information.--The Secretary 
     of the Treasury shall consider any relevant information 
     provided by a person to whom notice was given under paragraph 
     (1).''.
       (b) Shortfall Funding Method.--
       (1) In general.--A multiemployer plan meeting the criteria 
     of paragraph (2) may adopt, use, or cease using, the 
     shortfall funding method and such adoption, use, or cessation 
     of use of such method, shall be deemed approved by the 
     Secretary of the Treasury under section 302(d)(1) of the 
     Employee Retirement Income Security Act of 1974 and section 
     412(e)(1) of the Internal Revenue Code of 1986.
       (2) Criteria.--A multiemployer pension plan meets the 
     criteria of this clause if--
       (A) the plan has not used the shortfall funding method 
     during the 5-year period ending on the day before the date 
     the plan is to use the method under paragraph (1); and
       (B) the plan is not operating under an amortization period 
     extension under section 304(d) of such Act and did not 
     operate under such an extension during such 5-year period.
       (3) Shortfall funding method defined.--For purposes of this 
     subsection, the term ``shortfall funding method'' means the 
     shortfall funding method described in Treasury Regulations 
     section 1.412(c)(1)-2 (26 C.F.R. 1.412(c)(1)-2).
       (4) Benefit restrictions to apply.--The benefit 
     restrictions under section 302(c)(7) of such Act and section 
     412(d)(7) of such Code shall apply during any period a 
     multiemployer plan is on the shortfall funding method 
     pursuant to this subsection.
       (5) Use of shortfall method not to preclude other 
     options.--Nothing in this subsection shall be construed to 
     affect a multiemployer plan's ability to adopt the shortfall 
     funding method with the Secretary's permission under 
     otherwise applicable regulations or to affect a multiemployer 
     plan's right to change funding methods, with or without the 
     Secretary's consent, as provided in applicable rules and 
     regulations.
       (c) Conforming Amendments.--
       (1) Section 301 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1081) is amended by striking 
     subsection (d).
       (2) The table of contents in section 1 of such Act (as 
     amended by this Act) is amended by inserting after the item 
     relating to section 303 the following new item:

``Sec. 304. Minimum funding standards for multiemployer plans.''.

       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after 2006.
       (2) Special rule for certain amortization extensions.--If 
     the Secretary of the Treasury grants an extension under 
     section 304 of the Employee Retirement Income Security Act of 
     1974 and section 412(e) of the Internal Revenue Code of 1986 
     with respect to any application filed with the Secretary of 
     the Treasury on or before June 30, 2005, the extension (and 
     any modification thereof) shall be applied and administered 
     under the rules of such sections as in effect before the 
     enactment of this Act, including the use of the rate of 
     interest determined under section 6621(b) of such Code.

     SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN 
                   ENDANGERED OR CRITICAL STATUS.

       (a) In General.--Part 3 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 (as amended 
     by the preceding provisions of this Act) is amended by 
     inserting after section 304 the following new section:


``ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED STATUS 
                           OR CRITICAL STATUS

       ``Sec. 305. (a) General Rule.--For purposes of this part, 
     in the case of a multiemployer plan--
       ``(1) if the plan is in endangered status--
       ``(A) the plan sponsor shall adopt and implement a funding 
     improvement plan in accordance with the requirements of 
     subsection (c), and
       ``(B) the requirements of subsection (d) shall apply during 
     the funding plan adoption period and the funding improvement 
     period, and
       ``(2) if the plan is in critical status--
       ``(A) the plan sponsor shall adopt and implement a 
     rehabilitation plan in accordance with the requirements of 
     subsection (e), and
       ``(B) the requirements of subsection (f) shall apply during 
     the rehabilitation plan adoption period and the 
     rehabilitation period.
       ``(b) Determination of Endangered and Critical Status.--For 
     purposes of this section--
       ``(1) Endangered status.--A multiemployer plan is in 
     endangered status for a plan year if, as determined by the 
     plan actuary under paragraph (3), the plan is not in critical 
     status for the plan year and either--
       ``(A) the plan's funded percentage for such plan year is 
     less than 80 percent, or
       ``(B) the plan has an accumulated funding deficiency for 
     such plan year, or is projected to have such an accumulated 
     funding deficiency for any of the 6 succeeding plan years, 
     taking into account any extension of amortization periods 
     under section 304(d).

     For purposes of this section, a plan described in 
     subparagraph (B) shall be treated as in seriously endangered 
     status.
       ``(2) Critical status.--A multiemployer plan is in critical 
     status for a plan year if, as determined by the plan actuary 
     under paragraph (3), the plan is described in 1 or more of 
     the following subparagraphs as of the beginning of the plan 
     year:
       ``(A) A plan is described in this subparagraph if--
       ``(i) the funded percentage of the plan is less than 65 
     percent, and
       ``(ii) the sum of--

       ``(I) the market value of plan assets, plus
       ``(II) the present value of the reasonably anticipated 
     employer contributions for the current plan year and each of 
     the 5 succeeding plan years, assuming that the terms of all 
     collective bargaining agreements pursuant to which the plan 
     is maintained for the current plan year continue in effect 
     for succeeding plan years,

     is less than the present value of all benefits projected to 
     be payable under the plan during the current plan year and 
     each of the 5 succeeding plan years (plus administrative 
     expenses for such plan years).
       ``(B) A plan is described in this subparagraph if--
       ``(i) the plan has an accumulated funding deficiency for 
     the current plan year, not taking into account any extension 
     of amortization periods under section 304(d), or
       ``(ii) the plan is projected to have an accumulated funding 
     deficiency for any of the 3 succeeding plan years (4 
     succeeding plan years if the funded percentage of the plan is 
     65 percent or less), not taking into account any extension of 
     amortization periods under section 304(d).
       ``(C) A plan is described in this subparagraph if--
       ``(i)(I) the plan's normal cost for the current plan year, 
     plus interest (determined at the rate used for determining 
     costs under the plan) for the current plan year on the amount 
     of unfunded benefit liabilities under the plan as of the last 
     date of the preceding plan year, exceeds
       ``(II) the present value of the reasonably anticipated 
     employer contributions for the current plan year,
       ``(ii) the present value of nonforfeitable benefits of 
     inactive participants is greater than the present value of 
     nonforfeitable benefits of active participants, and
       ``(iii) the plan has an accumulated funding deficiency for 
     the current plan year, or is projected to have such a 
     deficiency for any of the 4 succeeding plan years, not taking 
     into account any extension of amortization periods under 
     section 304(d).
       ``(D) A plan is described in this subparagraph if the sum 
     of--
       ``(i) the market value of plan assets, plus
       ``(ii) the present value of the reasonably anticipated 
     employer contributions for the current plan year and each of 
     the 4 succeeding plan years, assuming that the terms of all 
     collective bargaining agreements pursuant to which the plan 
     is maintained for the current plan year continue in effect 
     for succeeding plan years,

     is less than the present value of all benefits projected to 
     be payable under the plan during the current plan year and 
     each of the 4 succeeding plan years (plus administrative 
     expenses for such plan years).
       ``(3) Annual certification by plan actuary.--
       ``(A) In general.--During the 90-day period beginning on 
     the first day of each plan year of a multiemployer plan, the 
     plan actuary shall certify to the Secretary of the Treasury--
       ``(i) whether or not the plan is in endangered status for 
     such plan year and whether or not the plan is in critical 
     status for such plan year, and
       ``(ii) in the case of a plan which is in a funding 
     improvement or rehabilitation period, whether or not the plan 
     is making the scheduled progress in meeting the requirements 
     of its funding improvement or rehabilitation plan.
       ``(B) Actuarial projections of assets and liabilities.--

[[Page 2609]]

       ``(i) In general.--In making the determinations and 
     projections under this subsection, the plan actuary shall 
     make projections required for the current and succeeding plan 
     years, using reasonable actuarial estimates, assumptions, and 
     methods, of the current value of the assets of the plan and 
     the present value of all liabilities to participants and 
     beneficiaries under the plan for the current plan year as of 
     the beginning of such year. The projected present value of 
     liabilities as of the beginning of such year shall be 
     determined based on the actuarial statement required under 
     section 103(d) with respect to the most recently filed annual 
     report or the actuarial valuation for the preceding plan 
     year.
       ``(ii) Determinations of future contributions.--Any 
     actuarial projection of plan assets shall assume--

       ``(I) reasonably anticipated employer contributions for the 
     current and succeeding plan years, assuming that the terms of 
     the one or more collective bargaining agreements pursuant to 
     which the plan is maintained for the current plan year 
     continue in effect for succeeding plan years, or
       ``(II) that employer contributions for the most recent plan 
     year will continue indefinitely, but only if the plan actuary 
     determines there have been no significant demographic changes 
     that would make such assumption unreasonable.

       ``(C) Penalty for failure to secure timely actuarial 
     certification.--Any failure of the plan's actuary to certify 
     the plan's status under this subsection by the date specified 
     in subparagraph (A) shall be treated for purposes of section 
     502(c)(2) as a failure or refusal by the plan administrator 
     to file the annual report required to be filed with the 
     Secretary under section 101(b)(4).
       ``(D) Notice.--In any case in which a multiemployer plan is 
     certified to be in endangered or critical status under 
     subparagraph (A), the plan sponsor shall, not later than 30 
     days after the date of the certification, provide 
     notification of the endangered or critical status to the 
     participants and beneficiaries, the bargaining parties, the 
     Pension Benefit Guaranty Corporation, the Secretary of the 
     Treasury, and the Secretary.
       ``(c) Funding Improvement Plan Must Be Adopted for 
     Multiemployer Plans in Endangered Status.--
       ``(1) In general.--In any case in which a multiemployer 
     plan is in endangered status for a plan year, the plan 
     sponsor, in accordance with this subsection--
       ``(A) shall adopt a funding improvement plan not later than 
     240 days following the required date for the actuarial 
     certification of endangered status under subsection 
     (b)(3)(A), and
       ``(B) within 30 days after the adoption of the funding 
     improvement plan--
       ``(i) in the case of a plan in seriously endangered status, 
     shall provide to the bargaining parties 1 or more schedules 
     showing revised benefit structures, revised contribution 
     structures, or both, which, if adopted, may reasonably be 
     expected to enable the multiemployer plan to meet the 
     applicable requirements under paragraph (3) in accordance 
     with the funding improvement plan, including a description of 
     the reductions in future benefit accruals and increases in 
     contributions that the plan sponsor determines are reasonably 
     necessary to meet the applicable requirements if the plan 
     sponsor assumes that there are no increases in contributions 
     under the plan other than the increases necessary to meet the 
     applicable requirements after future benefit accruals have 
     been reduced to the maximum extent permitted by law, and
       ``(ii) may, if the plan sponsor deems appropriate, prepare 
     and provide the bargaining parties with additional 
     information relating to contribution rates or benefit 
     reductions, alternative schedules, or other information 
     relevant to achieving the requirements under paragraph (3) in 
     accordance with the funding improvement plan.
       ``(2) Exception for years after process begins.--Paragraph 
     (1) shall not apply to a plan year if such year is in a 
     funding plan adoption period or funding improvement period by 
     reason of the plan being in endangered status for a preceding 
     plan year. For purposes of this section, such preceding plan 
     year shall be the initial determination year with respect to 
     the funding improvement plan to which it relates.
       ``(3) Funding improvement plan.--For purposes of this 
     section--
       ``(A) In general.--A funding improvement plan is a plan 
     which consists of the actions, including options or a range 
     of options to be proposed to the bargaining parties, which, 
     under reasonable actuarial assumptions, will result in the 
     plan meeting the requirements of this paragraph.
       ``(B) Plans other than seriously endangered plans.--In the 
     case of plan not in seriously endangered status, the 
     requirements of this paragraph are met if the plan's funded 
     percentage as of the close of the funding improvement period 
     exceeds the lesser of 80 percent or a percentage equal to the 
     sum of--
       ``(i) such percentage as of the beginning of such period, 
     plus
       ``(ii) 10 percent of the percentage under clause (i).
       ``(C) Seriously endangered plans.--In the case of a plan in 
     seriously endangered status, the requirements of this 
     paragraph are met if--
       ``(i) the plan's funded percentage as of the close of the 
     funding improvement period equals or exceeds the percentage 
     which is equal to the sum of--

       ``(I) such percentage as of the beginning of such period, 
     plus
       ``(II) 33 percent of the difference between 100 percent and 
     the percentage under subclause (I), and

       ``(ii) there is no accumulated funding deficiency for any 
     plan year during the funding improvement period (taking into 
     account any extension of amortization periods under section 
     304(d)).
       ``(4) Funding improvement period.--For purposes of this 
     section--
       ``(A) In general.--The funding improvement period for any 
     funding improvement plan adopted pursuant to this subsection 
     is the 10-year period beginning on the first day of the first 
     plan year of the multiemployer plan beginning after the 
     earlier of--
       ``(i) the second anniversary of the date of the adoption of 
     the funding improvement plan, or
       ``(ii) the expiration of the collective bargaining 
     agreements in effect on the due date for the actuarial 
     certification of endangered status for the initial 
     determination year under subsection (b)(3)(A) and covering, 
     as of such due date, at least 75 percent of the active 
     participants in such multiemployer plan.
       ``(B) Coordination with changes in status.--
       ``(i) Plans no longer in endangered status.--If the plan's 
     actuary certifies under subsection (b)(3)(A) for a plan year 
     in any funding plan adoption period or funding improvement 
     period that the plan is no longer in endangered status and is 
     not in critical status, the funding plan adoption period or 
     funding improvement period, whichever is applicable, shall 
     end as of the close of the preceding plan year.
       ``(ii) Plans in critical status.--If the plan's actuary 
     certifies under subsection (b)(3)(A) for a plan year in any 
     funding plan adoption period or funding improvement period 
     that the plan is in critical status, the funding plan 
     adoption period or funding improvement period, whichever is 
     applicable, shall end as of the close of the plan year 
     preceding the first plan year in the rehabilitation period 
     with respect to such status.
       ``(C) Plans in endangered status at end of period.--If the 
     plan's actuary certifies under subsection (b)(3)(A) for the 
     first plan year following the close of the period described 
     in subparagraph (A) that the plan is in endangered status, 
     the provisions of this subsection and subsection (d) shall be 
     applied as if such first plan year were an initial 
     determination year, except that the plan may not be amended 
     in a manner inconsistent with the funding improvement plan in 
     effect for the preceding plan year until a new funding 
     improvement plan is adopted.
       ``(5) Special rules for certain underfunded plans.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     if the funded percentage of a plan in seriously endangered 
     status was 70 percent or less as of the beginning of the 
     initial determination year, the following rules shall apply 
     in determining whether the requirements of paragraph 
     (3)(C)(i) are met:
       ``(i) The plan's funded percentage as of the close of the 
     funding improvement period must equal or exceed a percentage 
     which is equal to the sum of--

       ``(I) such percentage as of the beginning of such period, 
     plus
       ``(II) 20 percent of the difference between 100 percent and 
     the percentage under subclause (I).

       ``(ii) The funding improvement period under paragraph 
     (4)(A) shall be 15 years rather than 10 years.
       ``(B) Special rules for plans with funded percentage over 
     70 percent.--If the funded percentage described in 
     subparagraph (A) was more than 70 percent but less than 80 
     percent as of the beginning of the initial determination 
     year--
       ``(i) subparagraph (A) shall apply if the plan's actuary 
     certifies, within 30 days after the certification under 
     subsection (b)(3)(A) for the initial determination year, 
     that, based on the terms of the plan and the collective 
     bargaining agreements in effect at the time of such 
     certification, the plan is not projected to meet the 
     requirements of paragraph (3)(C)(i) without regard to this 
     paragraph, and
       ``(ii) if there is a certification under clause (i), the 
     plan may, in formulating its funding improvement plan, only 
     take into account the rules of subparagraph (A) for plan 
     years in the funding improvement period beginning on or 
     before the date on which the last of the collective 
     bargaining agreements described in paragraph (4)(A)(ii) 
     expires.

     Notwithstanding clause (ii), if for any plan year ending 
     after the date described in clause (ii) the plan actuary 
     certifies (at the time of the annual certification under 
     subsection (b)(3)(A) for such plan year) that, based on the 
     terms of the plan and collective bargaining agreements in 
     effect at the time of that annual certification, the plan is 
     not projected to be able to meet the requirements of 
     paragraph (3)(C)(i) without regard to this paragraph, the 
     plan may continue to

[[Page 2610]]

     assume for such year that the funding improvement period is 
     15 years rather than 10 years.
       ``(6) Updates to funding improvement plan and schedules.--
       ``(A) Funding improvement plan.--The plan sponsor shall 
     annually update the funding improvement plan and shall file 
     the update with the plan's annual report under section 104.
       ``(B) Schedules.--The plan sponsor may periodically update 
     any schedule of contribution rates provided under this 
     subsection to reflect the experience of the plan, except that 
     the schedule or schedules described in paragraph (1)(B)(i) 
     shall be updated at least once every 3 years.
       ``(C) Duration of schedule.--A schedule of contribution 
     rates provided by the plan sponsor and relied upon by 
     bargaining parties in negotiating a collective bargaining 
     agreement shall remain in effect for the duration of that 
     collective bargaining agreement.
       ``(7) Penalty if no funding improvement plan adopted.--A 
     failure of the plan sponsor to adopt a funding improvement 
     plan by the date specified in paragraph (1)(A) shall be 
     treated for purposes of section 502(c)(2) as a failure or 
     refusal by the plan administrator to file the annual report 
     required to be filed with the Secretary under section 
     101(b)(4).
       ``(8) Funding plan adoption period.--For purposes of this 
     section, the term `funding plan adoption period' means the 
     period beginning on the date of the certification under 
     subsection (b)(3)(A) for the initial determination year and 
     ending on the day before the first day of the funding 
     improvement period.
       ``(d) Rules for Operation of Plan During Adoption and 
     Improvement Periods; Failure To Meet Requirements.--
       ``(1) Special rules for plan adoption period.--During the 
     plan adoption period--
       ``(A) the plan sponsor may not accept a collective 
     bargaining agreement or participation agreement with respect 
     to the multiemployer plan that provides for--
       ``(i) a reduction in the level of contributions for any 
     participants,
       ``(ii) a suspension of contributions with respect to any 
     period of service, or
       ``(iii) any new direct or indirect exclusion of younger or 
     newly hired employees from plan participation,
       ``(B) no amendment of the plan which increases the 
     liabilities of the plan by reason of any increase in 
     benefits, any change in the accrual of benefits, or any 
     change in the rate at which benefits become nonforfeitable 
     under the plan may be adopted unless the amendment is 
     required as a condition of qualification under part I of 
     subchapter D of chapter 1 of the Internal Revenue Code of 
     1986 or to comply with other applicable law, and
       ``(C) in the case of a plan in seriously endangered status, 
     the plan sponsor shall take all reasonable actions which are 
     consistent with the terms of the plan and applicable law and 
     which are expected, based on reasonable assumptions, to 
     achieve--
       ``(i) an increase in the plan's funded percentage, and
       ``(ii) postponement of an accumulated funding deficiency 
     for at least 1 additional plan year.

     Actions under subparagraph (C) include applications for 
     extensions of amortization periods under section 304(d), use 
     of the shortfall funding method in making funding standard 
     account computations, amendments to the plan's benefit 
     structure, reductions in future benefit accruals, and other 
     reasonable actions consistent with the terms of the plan and 
     applicable law.
       ``(2) Compliance with funding improvement plan.--
       ``(A) In general.--A plan may not be amended after the date 
     of the adoption of a funding improvement plan under 
     subsection (c) so as to be inconsistent with the funding 
     improvement plan.
       ``(B) No reduction in contributions.--A plan sponsor may 
     not during any funding improvement period accept a collective 
     bargaining agreement or participation agreement with respect 
     to the multiemployer plan that provides for--
       ``(i) a reduction in the level of contributions for any 
     participants,
       ``(ii) a suspension of contributions with respect to any 
     period of service, or
       ``(iii) any new direct or indirect exclusion of younger or 
     newly hired employees from plan participation.
       ``(C) Special rules for benefit increases.--A plan may not 
     be amended after the date of the adoption of a funding 
     improvement plan under subsection (c) so as to increase 
     benefits, including future benefit accruals, unless--
       ``(i) in the case of a plan in seriously endangered status, 
     the plan actuary certifies that, after taking into account 
     the benefit increase, the plan is still reasonably expected 
     to meet the requirements under subsection (c)(3) in 
     accordance with the schedule contemplated in the funding 
     improvement plan, and
       ``(ii) in the case of a plan not in seriously endangered 
     status, the actuary certifies that such increase is paid for 
     out of contributions not required by the funding improvement 
     plan to meet the requirements under subsection (c)(3) in 
     accordance with the schedule contemplated in the funding 
     improvement plan.
       ``(3) Failure to meet requirements.--
       ``(A) In general.--Notwithstanding section 4971(g) of the 
     Internal Revenue Code of 1986, if a plan fails to meet the 
     requirements of subsection (c)(3) by the end of the funding 
     improvement period, the plan shall be treated as having an 
     accumulated funding deficiency for purposes of section 4971 
     of such Code for the last plan year in such period (and each 
     succeeding plan year until such requirements are met) in an 
     amount equal to the greater of the amount of the 
     contributions necessary to meet such requirements or the 
     amount of such accumulated funding deficiency without regard 
     to this paragraph.
       ``(B) Waiver.--In the case of a failure described in 
     subparagraph (A) which is due to reasonable cause and not to 
     willful neglect, the Secretary of the Treasury may waive part 
     or all of the tax imposed by section 4971 of such Code to the 
     extent that the payment of such tax would be excessive or 
     otherwise inequitable relative to the failure involved.
       ``(e) Rehabilitation Plan Must Be Adopted for Multiemployer 
     Plans in Critical Status.--
       ``(1) In general.--In any case in which a multiemployer 
     plan is in critical status for a plan year, the plan sponsor, 
     in accordance with this subsection--
       ``(A) shall adopt a rehabilitation plan not later than 240 
     days following the required date for the actuarial 
     certification of critical status under subsection (b)(3)(A), 
     and
       ``(B) within 30 days after the adoption of the 
     rehabilitation plan--
       ``(i) shall provide to the bargaining parties 1 or more 
     schedules showing revised benefit structures, revised 
     contribution structures, or both, which, if adopted, may 
     reasonably be expected to enable the multiemployer plan to 
     emerge from critical status in accordance with the 
     rehabilitation plan, and
       ``(ii) may, if the plan sponsor deems appropriate, prepare 
     and provide the bargaining parties with additional 
     information relating to contribution rates or benefit 
     reductions, alternative schedules, or other information 
     relevant to emerging from critical status in accordance with 
     the rehabilitation plan.

     The schedule or schedules described in subparagraph (B)(i) 
     shall reflect reductions in future benefit accruals and 
     increases in contributions that the plan sponsor determines 
     are reasonably necessary to emerge from critical status. One 
     schedule shall be designated as the default schedule and such 
     schedule shall assume that there are no increases in 
     contributions under the plan other than the increases 
     necessary to emerge from critical status after future benefit 
     accruals and other benefits (other than benefits the 
     reduction or elimination of which are not permitted under 
     section 204(g)) have been reduced to the maximum extent 
     permitted by law.
       ``(2) Exception for years after process begins.--Paragraph 
     (1) shall not apply to a plan year if such year is in a 
     rehabilitation plan adoption period or rehabilitation period 
     by reason of the plan being in critical status for a 
     preceding plan year. For purposes of this section, such 
     preceding plan year shall be the initial critical year with 
     respect to the rehabilitation plan to which it relates.
       ``(3) Rehabilitation plan.--For purposes of this section--
       ``(A) In general.--A rehabilitation plan is a plan which 
     consists of--
       ``(i) actions which will enable, under reasonable actuarial 
     assumptions, the plan to cease to be in critical status by 
     the end of the rehabilitation period and may include 
     reductions in plan expenditures (including plan mergers and 
     consolidations), reductions in future benefit accruals or 
     increases in contributions, if agreed to by the bargaining 
     parties, or any combination of such actions, or
       ``(ii) if the plan sponsor determines that, based on 
     reasonable actuarial assumptions and upon exhaustion of all 
     reasonable measures, the plan can not reasonably be expected 
     to emerge from critical status by the end of the 
     rehabilitation period, reasonable measures to emerge from 
     critical status at a later time or to forestall possible 
     insolvency (within the meaning of section 4245).

     Such plan shall include the schedules required to be provided 
     under paragraph (1)(B)(i). If clause (ii) applies, such plan 
     shall set forth the alternatives considered, explain why the 
     plan is not reasonably expected to emerge from critical 
     status by the end of the rehabilitation period, and specify 
     when, if ever, the plan is expected to emerge from critical 
     status in accordance with the rehabilitation plan.
       ``(B) Updates to rehabilitation plan and schedules.--
       ``(i) Rehabilitation plan.--The plan sponsor shall annually 
     update the rehabilitation plan and shall file the update with 
     the plan's annual report under section 104.
       ``(ii) Schedules.--The plan sponsor may periodically update 
     any schedule of contribution rates provided under this 
     subsection to reflect the experience of the plan, except that 
     the schedule or schedules described in paragraph (1)(B)(i) 
     shall be updated at least once every 3 years.
       ``(iii) Duration of schedule.--A schedule of contribution 
     rates provided by the plan

[[Page 2611]]

     sponsor and relied upon by bargaining parties in negotiating 
     a collective bargaining agreement shall remain in effect for 
     the duration of that collective bargaining agreement.
       ``(C) Default schedule.--If the collective bargaining 
     agreement providing for contributions under a multiemployer 
     plan that was in effect at the time the plan entered critical 
     status expires and, after receiving a schedule from the plan 
     sponsor under paragraph (1)(B)(i), the bargaining parties 
     have not adopted a collective bargaining agreement with terms 
     consistent with such a schedule, the default schedule 
     described in the last sentence of paragraph (1) shall go into 
     effect with respect to those bargaining parties.
       ``(4) Rehabilitation period.--For purposes of this 
     section--
       ``(A) In general.--The rehabilitation period for a plan in 
     critical status is the 10-year period beginning on the first 
     day of the first plan year of the multiemployer plan 
     following the earlier of--
       ``(i) the second anniversary of the date of the adoption of 
     the rehabilitation plan, or
       ``(ii) the expiration of the collective bargaining 
     agreements in effect on the date of the due date for the 
     actuarial certification of critical status for the initial 
     critical year under subsection (a)(1) and covering, as of 
     such date at least 75 percent of the active participants in 
     such multiemployer plan.

     If a plan emerges from critical status as provided under 
     subparagraph (B) before the end of such 10-year period, the 
     rehabilitation period shall end with the plan year preceding 
     the plan year for which the determination under subparagraph 
     (B) is made.
       ``(B) Emergence.--A plan in critical status shall remain in 
     such status until a plan year for which the plan actuary 
     certifies, in accordance with subsection (b)(3)(A), that the 
     plan is not projected to have an accumulated funding 
     deficiency for the plan year or any of the 9 succeeding plan 
     years, without regard to use of the shortfall method or any 
     extension of amortization periods under section 304(d).
       ``(5) Penalty if no rehabilitation plan adopted.--A failure 
     of a plan sponsor to adopt a rehabilitation plan by the date 
     specified in paragraph (1)(A) shall be treated for purposes 
     of section 502(c)(2) as a failure or refusal by the plan 
     administrator to file the annual report required to be filed 
     with the Secretary under section 101(b)(4).
       ``(6) Rehabilitation plan adoption period.--For purposes of 
     this section, the term `rehabilitation plan adoption period' 
     means the period beginning on the date of the certification 
     under subsection (b)(3)(A) for the initial critical year and 
     ending on the day before the first day of the rehabilitation 
     period.
       ``(7) Limitation on reduction in rates of future 
     accruals.--Any reduction in the rate of future accruals under 
     any schedule described in paragraph (1)(B)(i) shall not 
     reduce the rate of future accruals below--
       ``(A) a monthly benefit (payable as a single life annuity 
     commencing at the participant's normal retirement age) equal 
     to 1 percent of the contributions required to be made with 
     respect to a participant, or the equivalent standard accrual 
     rate for a participant or group of participants under the 
     collective bargaining agreements in effect as of the first 
     day of the initial critical year, or
       ``(B) if lower, the accrual rate under the plan on such 
     first day.

     The equivalent standard accrual rate shall be determined by 
     the plan sponsor based on the standard or average 
     contribution base units which the plan sponsor determines to 
     be representative for active participants and such other 
     factors as the plan sponsor determines to be relevant. 
     Nothing in this paragraph shall be construed as limiting the 
     ability of the plan sponsor to prepare and provide the 
     bargaining parties with alternative schedules to the default 
     schedule that established lower or higher accrual and 
     contribution rates than the rates otherwise described in this 
     paragraph.
       ``(8) Employer impact.--For the purposes of this section, 
     the plan sponsor shall consider the impact of the 
     rehabilitation plan and contribution schedules authorized by 
     this section on bargaining parties with fewer than 500 
     employees and shall implement the plan in a manner that 
     encourages their continued participation in the plan and 
     minimizes financial harm to employers and their workers.
       ``(f) Rules for Operation of Plan During Adoption and 
     Rehabilitation Period.--
       ``(1) Compliance with rehabilitation plan.--
       ``(A) In general.--A plan may not be amended after the date 
     of the adoption of a rehabilitation plan under subsection (e) 
     so as to be inconsistent with the rehabilitation plan.
       ``(B) Special rules for benefit increases.--A plan may not 
     be amended after the date of the adoption of a rehabilitation 
     plan under subsection (e) so as to increase benefits, 
     including future benefit accruals, unless the plan actuary 
     certifies that such increase is paid for out of additional 
     contributions not contemplated by the rehabilitation plan, 
     and, after taking into account the benefit increase, the 
     multiemployer plan still is reasonably expected to emerge 
     from critical status by the end of the rehabilitation period 
     on the schedule contemplated in the rehabilitation plan.
       ``(2) Restriction on lump sums and similar benefits.--
       ``(A) In general.--Effective on the date the notice of 
     certification of the plan's critical status for the initial 
     critical year under subsection (b)(3)(D) is sent, and 
     notwithstanding section 204(g), the plan shall not pay--
       ``(i) any payment, in excess of the monthly amount paid 
     under a single life annuity (plus any social security 
     supplements described in the last sentence of section 
     204(b)(1)(G)),
       ``(ii) any payment for the purchase of an irrevocable 
     commitment from an insurer to pay benefits, and
       ``(iii) any other payment specified by the Secretary of the 
     Treasury by regulations.
       ``(B) Exception.--Subparagraph (A) shall not apply to a 
     benefit which under section 203(e) may be immediately 
     distributed without the consent of the participant or to any 
     makeup payment in the case of a retroactive annuity starting 
     date or any similar payment of benefits owed with respect to 
     a prior period.
       ``(3) Adjustments disregarded in withdrawal liability 
     determination.--Any benefit reductions under this subsection 
     shall be disregarded in determining a plan's unfunded vested 
     benefits for purposes of determining an employer's withdrawal 
     liability under section 4201.
       ``(4) Special rules for plan adoption period.--During the 
     rehabilitation plan adoption period--
       ``(A) the plan sponsor may not accept a collective 
     bargaining agreement or participation agreement with respect 
     to the multiemployer plan that provides for--
       ``(i) a reduction in the level of contributions for any 
     participants,
       ``(ii) a suspension of contributions with respect to any 
     period of service, or
       ``(iii) any new direct or indirect exclusion of younger or 
     newly hired employees from plan participation, and
       ``(B) no amendment of the plan which increases the 
     liabilities of the plan by reason of any increase in 
     benefits, any change in the accrual of benefits, or any 
     change in the rate at which benefits become nonforfeitable 
     under the plan may be adopted unless the amendment is 
     required as a condition of qualification under part I of 
     subchapter D of chapter 1 of the Internal Revenue Code of 
     1986 or to comply with other applicable law.
       ``(5) Failure to meet requirements.--
       ``(A) In general.--Notwithstanding section 4971(g) of the 
     Internal Revenue Code of 1986, if a plan--
       ``(i) fails to meet the requirements of subsection (e) by 
     the end of the rehabilitation period, or
       ``(ii) has received a certification under subsection 
     (b)(3)(A)(ii) for 3 consecutive plan years that the plan is 
     not making the scheduled progress in meeting its requirements 
     under the rehabilitation plan,

     the plan shall be treated as having an accumulated funding 
     deficiency for purposes of section 4971 of such Code for the 
     last plan year in such period (and each succeeding plan year 
     until such requirements are met) in an amount equal to the 
     greater of the amount of the contributions necessary to meet 
     such requirements or the amount of such accumulated funding 
     deficiency without regard to this paragraph.
       ``(B) Waiver.--In the case of a failure described in 
     subparagraph (A) which is due to reasonable cause and not to 
     willful neglect, the Secretary of the Treasury may waive part 
     or all of the tax imposed by section 4971 of such Code to the 
     extent that the payment of such tax would be excessive or 
     otherwise inequitable relative to the failure involved.
       ``(g) Expedited Resolution of Plan Sponsor Decisions.--If, 
     within 60 days of the due date for adoption of a funding 
     improvement plan under subsection (c) or a rehabilitation 
     plan under subsection (e), the plan sponsor of a plan in 
     endangered status or a plan in critical status has not agreed 
     on a funding improvement plan or rehabilitation plan, then 
     any member of the board or group that constitutes the plan 
     sponsor may require that the plan sponsor enter into an 
     expedited dispute resolution procedure for the development 
     and adoption of a funding improvement plan or rehabilitation 
     plan.
       ``(h) Nonbargained Participation.--
       ``(1) Both bargained and nonbargained employee-
     participants.--In the case of an employer that contributes to 
     a multiemployer plan with respect to both employees who are 
     covered by one or more collective bargaining agreements and 
     to employees who are not so covered, if the plan is in 
     endangered status or in critical status, benefits of and 
     contributions for the nonbargained employees, including 
     surcharges on those contributions, shall be determined as if 
     those nonbargained employees were covered under the first to 
     expire of the employer's collective bargaining agreements in 
     effect when the plan entered endangered or critical status.
       ``(2) Nonbargained employees only.--In the case of an 
     employer that contributes to a multiemployer plan only with 
     respect to employees who are not covered by a collective 
     bargaining agreement, this section shall

[[Page 2612]]

     be applied as if the employer were the bargaining parties, 
     and its participation agreement with the plan was a 
     collective bargaining agreement with a term ending on the 
     first day of the plan year beginning after the employer is 
     provided the schedule or schedules described in subsections 
     (c) and (e).
       ``(3) Employees covered by a collective bargaining 
     agreement.--The determination as to whether an employee 
     covered by a collective bargaining agreement for purposes of 
     this section shall be made without regard to the special rule 
     in Treasury Regulation section 1.410(b)-6(d)(ii)(D).
       ``(i) Definitions; Actuarial Method.--For purposes of this 
     section--
       ``(1) Bargaining party.--The term `bargaining party' 
     means--
       ``(A)(i) except as provided in clause (ii), an employer who 
     has an obligation to contribute under the plan; or
       ``(ii) in the case of a plan described under section 404(c) 
     of the Internal Revenue Code of 1986, or a continuation of 
     such a plan, the association of employers that is the 
     employee settlor of the plan; and
       ``(B) an employee organization which, for purposes of 
     collective bargaining, represents plan participants employed 
     by an employer who has an obligation to contribute under the 
     plan.
       ``(2) Funded percentage.--The term `funded percentage' 
     means the percentage equal to a fraction--
       ``(A) the numerator of which is the value of the plan's 
     assets, as determined under section 304(c)(2), and
       ``(B) the denominator of which is the accrued liability of 
     the plan, determined using actuarial assumptions described in 
     section 304(c)(3).
       ``(3) Accumulated funding deficiency.--The term 
     `accumulated funding deficiency' has the meaning given such 
     term in section 304(a).
       ``(4) Active participant.--The term `active participant' 
     means, in connection with a multiemployer plan, a participant 
     who is in covered service under the plan.
       ``(5) Inactive participant.--The term `inactive 
     participant' means, in connection with a multiemployer plan, 
     a participant, or the beneficiary or alternate payee of a 
     participant, who--
       ``(A) is not in covered service under the plan, and
       ``(B) is in pay status under the plan or has a 
     nonforfeitable right to benefits under the plan.
       ``(6) Pay status.--A person is in pay status under a 
     multiemployer plan if--
       ``(A) at any time during the current plan year, such person 
     is a participant or beneficiary under the plan and is paid an 
     early, late, normal, or disability retirement benefit under 
     the plan (or a death benefit under the plan related to a 
     retirement benefit), or
       ``(B) to the extent provided in regulations of the 
     Secretary of the Treasury, such person is entitled to such a 
     benefit under the plan.
       ``(7) Obligation to contribute.--The term `obligation to 
     contribute' has the meaning given such term under section 
     4212(a).
       ``(8) Actuarial method.--Notwithstanding any other 
     provision of this section, the actuary's determinations with 
     respect to a plan's normal cost, actuarial accrued liability, 
     and improvements in a plan's funded percentage under this 
     section shall be based upon the unit credit funding method 
     (whether or not that method is used for the plan's actuarial 
     valuation).
       ``(9) Plan sponsor.--In the case of a plan described under 
     section 404(c) of the Internal Revenue Code of 1986, or a 
     continuation of such a plan, the term `plan sponsor' means 
     the bargaining parties described under paragraph (1).''.
       (b) Cause of Action To Compel Adoption of Funding 
     Improvement or Rehabilitation Plan.--Section 502(a) of the 
     Employee Retirement Income Security Act of 1974 is amended by 
     striking ``or'' at the end of paragraph (8), by striking the 
     period at the end of paragraph (9) and inserting ``; or'' and 
     by adding at the end the following:
       ``(10) in the case of a multiemployer plan that has been 
     certified by the actuary to be in endangered or critical 
     status under section 305, if the plan sponsor has not adopted 
     a funding improvement or rehabilitation plan under subsection 
     (c) or (e) of that section by the deadline established in 
     that section, by an employer that has an obligation to 
     contribute with respect to the multiemployer plan or an 
     employee organization that represents active participants in 
     the multiemployer plan, for an order compelling the plan 
     sponsor to adopt a funding improvement or rehabilitation 
     plan.''.
       (c) 4971 Excise Tax Inapplicable.--Section 4971 of the 
     Internal Revenue Code of 1986 is amended by redesignating 
     subsection (g) as subsection (h), and inserting after 
     subsection (f) the following:
       ``(g) Multiemployer Plans in Critical Status.--No tax shall 
     be imposed under this section for a taxable year with respect 
     to a multiemployer plan if, for the plan years ending with or 
     within the taxable year, the plan is in critical status 
     pursuant to section 305 of the Employee Retirement Income 
     Security Act of 1974. This subsection shall only apply if the 
     plan adopts a rehabilitation plan in accordance with section 
     305(e) of such Act and complies with such rehabilitation plan 
     (and any modifications of the plan) and shall not apply if an 
     excise tax is required to be imposed under this section by 
     reason of a violation of such section 305.''.
       (d) No Additional Contributions Required.--
       (1) Section 302(b) of the Employee Retirement Income 
     Security Act of 1974, as amended by this Act , is amended by 
     adding at the end the following new paragraph:
       ``(3) Multiemployer plans in critical status.--Subparagraph 
     (A) shall not apply in the case of a multiemployer plan for 
     any plan year in which the plan is in critical status 
     pursuant to section 305. This paragraph shall only apply if 
     the plan adopts a rehabilitation plan in accordance with 
     section 305(e) and complies with such rehabilitation plan 
     (and any modifications of the plan).''.
       (2) Section 412(c) of the Internal Revenue Code of 1986, as 
     amended by this Act, is amended by adding at the end the 
     following new paragraph:
       ``(3) Multiemployer plans in critical status.--Subparagraph 
     (A) shall not apply in the case of a multiemployer plan for 
     any plan year in which the plan is in critical status 
     pursuant to section 305 of the Employee Retirement Income 
     Security Act of 1974. This paragraph shall only apply if the 
     plan adopts a rehabilitation plan in accordance with section 
     305(e) of such Act and complies with such rehabilitation plan 
     (and any modifications of the plan).''.
       (e) Conforming Amendment.--The table of contents in section 
     1 of such Act (as amended by the preceding provisions of this 
     Act) is amended by inserting after the item relating to 
     section 304 the following new item:

``Sec. 305. Additional funding rules for multiemployer plans in 
              endangered status or critical status.''.

       (f) Effective Dates.--
       (1) In general.--The amendment made by this section shall 
     apply with respect to plan years beginning after 2006.
       (2) Special rule for certain restored benefits.--In the 
     case of a multiemployer plan--
       (A) with respect to which benefits were reduced pursuant to 
     a plan amendment adopted on or after January 1, 2002, and 
     before June 30, 2005, and
       (B) which, pursuant to the plan document, the trust 
     agreement, or a formal written communication from the plan 
     sponsor to participants provided before June 30, 2005, 
     provided for the restoration of such benefits,
     the amendments made by this section shall not apply to such 
     benefit restorations to the extent that any restriction on 
     the providing or accrual of such benefits would otherwise 
     apply by reason of such amendments.

     SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER 
                   PLANS.

       (a) Advance Determination of Impending Insolvency Over 5 
     Years.--Section 4245(d)(1) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1426(d)(1)) is amended--
       (1) by striking ``3 plan years'' the second place it 
     appears and inserting ``5 plan years''; and
       (2) by adding at the end the following new sentence: ``If 
     the plan sponsor makes such a determination that the plan 
     will be insolvent in any of the next 5 plan years, the plan 
     sponsor shall make the comparison under this paragraph at 
     least annually until the plan sponsor makes a determination 
     that the plan will not be insolvent in any of the next 5 plan 
     years.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to determinations made in plan years 
     beginning after 2006.

     SEC. 204. SPECIAL RULE FOR CERTAIN BENEFITS FUNDED UNDER AN 
                   AGREEMENT APPROVED BY THE PENSION BENEFIT 
                   GUARANTY CORPORATION.

       In the case of a multiemployer plan that is a party to an 
     agreement that was approved by the Pension Benefit Guaranty 
     Corporation prior to June 30, 2005, and that--
       (1) increases benefits, and
       (2) provides for special withdrawal liability rules under 
     section 4203(f) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1383),

     the amendments made by sections 201, 202, 211, and 212 of 
     this Act shall not apply to the benefit increases under any 
     plan amendment adopted prior to June 30, 2005, that are 
     funded pursuant to such agreement if the plan is funded in 
     compliance with such agreement (and any amendments thereto).

     SEC. 205. WITHDRAWAL LIABILITY REFORMS.

       (a) Repeal of Limitation on Withdrawal Liability of 
     Insolvent Employers.--
       (1) In general.--Subsections (b) and (d) of section 4225 of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1405) are repealed.
       (2) Conforming amendments.--Subsections (c) and (e) of 
     section 4225 of such Act are redesignated as subsections (b) 
     and (c), respectively.
       (3) Effective date.--The amendments made by this section 
     shall apply with respect to sales occurring on or after 
     January 1, 2006.
       (b) Withdrawal Liability Continues if Work Contracted 
     Out.--
       (1) In general.--Clause (i) of section 4205(b)(2)(A) of 
     such Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting 
     ``or to an entity or entities owned or controlled by the 
     employer'' after ``to another location''.

[[Page 2613]]

       (2) Effective date.--The amendment made by this subsection 
     shall apply with respect to work transferred on or after the 
     date of the enactment of this Act.
       (c) Application of Forgiveness Rule to Plans Primarily 
     Covering Employees in the Building and Construction.--
       (1) In general.--Section 4210(b) of such Act (29 U.S.C. 
     1390(b)) is amended--
       (A) by striking paragraph (1); and
       (B) by redesignating paragraphs (2) through (4) as 
     paragraphs (1) through (3), respectively.
       (2) Effective date.--The amendments made by this subsection 
     shall apply with respect to plan withdrawals occurring on or 
     after January 1, 2006.

          PART II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

     SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT 
                   PLANS.

       (a) In General.--Subpart A of part III of subchapter D of 
     chapter 1 of the Internal Revenue Code of 1986 (as added by 
     this Act) is amended by inserting after section 430 the 
     following new section:

     ``SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER 
                   PLANS.

       ``(a) In General.--For purposes of section 412, the 
     accumulated funding deficiency of a multiemployer plan for 
     any plan year is--
       ``(1) except as provided in paragraph (2), the amount, 
     determined as of the end of the plan year, equal to the 
     excess (if any) of the total charges to the funding standard 
     account of the plan for all plan years (beginning with the 
     first plan year for which this part applies to the plan) over 
     the total credits to such account for such years, and
       ``(2) if the multiemployer plan is in reorganization for 
     any plan year, the accumulated funding deficiency of the plan 
     determined under section 4243 of the Employee Retirement 
     Income Security Act of 1974.
       ``(b) Funding Standard Account.--
       ``(1) Account required.--Each multiemployer plan to which 
     this part applies shall establish and maintain a funding 
     standard account. Such account shall be credited and charged 
     solely as provided in this section.
       ``(2) Charges to account.--For a plan year, the funding 
     standard account shall be charged with the sum of--
       ``(A) the normal cost of the plan for the plan year,
       ``(B) the amounts necessary to amortize in equal annual 
     installments (until fully amortized)--
       ``(i) separately, with respect to each plan year, the net 
     increase (if any) in unfunded past service liability under 
     the plan arising from plan amendments adopted in such year, 
     over a period of 15 plan years,
       ``(ii) separately, with respect to each plan year, the net 
     experience loss (if any) under the plan, over a period of 15 
     plan years, and
       ``(iii) separately, with respect to each plan year, the net 
     loss (if any) resulting from changes in actuarial assumptions 
     used under the plan, over a period of 15 plan years,
       ``(C) the amount necessary to amortize each waived funding 
     deficiency (within the meaning of section 412(d)(3)) for each 
     prior plan year in equal annual installments (until fully 
     amortized) over a period of 15 plan years,
       ``(D) the amount necessary to amortize in equal annual 
     installments (until fully amortized) over a period of 5 plan 
     years any amount credited to the funding standard account 
     under section 412(b)(3)(D) (as in effect on the day before 
     the date of the enactment of the Pension Security and 
     Transparency Act of 2005), and
       ``(E) the amount necessary to amortize in equal annual 
     installments (until fully amortized) over a period of 20 
     years the contributions which would be required to be made 
     under the plan but for the provisions of section 
     412(c)(7)(A)(i)(I) (as in effect on the day before the date 
     of the enactment of the Pension Security and Transparency Act 
     of 2005).
       ``(3) Credits to account.--For a plan year, the funding 
     standard account shall be credited with the sum of--
       ``(A) the amount considered contributed by the employer to 
     or under the plan for the plan year,
       ``(B) the amount necessary to amortize in equal annual 
     installments (until fully amortized)--
       ``(i) separately, with respect to each plan year, the net 
     decrease (if any) in unfunded past service liability under 
     the plan arising from plan amendments adopted in such year, 
     over a period of 15 plan years,
       ``(ii) separately, with respect to each plan year, the net 
     experience gain (if any) under the plan, over a period of 15 
     plan years, and
       ``(iii) separately, with respect to each plan year, the net 
     gain (if any) resulting from changes in actuarial assumptions 
     used under the plan, over a period of 15 plan years,
       ``(C) the amount of the waived funding deficiency (within 
     the meaning of section 412(d)(3)) for the plan year, and
       ``(D) in the case of a plan year for which the accumulated 
     funding deficiency is determined under the funding standard 
     account if such plan year follows a plan year for which such 
     deficiency was determined under the alternative minimum 
     funding standard under section 412(g) (as in effect on the 
     day before the date of the enactment of the Pension Security 
     and Transparency Act of 2005), the excess (if any) of any 
     debit balance in the funding standard account (determined 
     without regard to this subparagraph) over any debit balance 
     in the alternative minimum funding standard account.
       ``(4) Special rule for amounts first amortized to plan 
     years before 2007.--In the case of any amount amortized under 
     section 412(b) (as in effect on the day before the date of 
     the enactment of the Pension Security and Transparency Act of 
     2005) over any period beginning with a plan year beginning 
     before 2007, in lieu of the amortization described in 
     paragraphs (2)(B) and (3)(B), such amount shall continue to 
     be amortized under such section as so in effect.
       ``(5) Combining and offsetting amounts to be amortized.--
     Under regulations prescribed by the Secretary, amounts 
     required to be amortized under paragraph (2) or paragraph 
     (3), as the case may be--
       ``(A) may be combined into one amount under such paragraph 
     to be amortized over a period determined on the basis of the 
     remaining amortization period for all items entering into 
     such combined amount, and
       ``(B) may be offset against amounts required to be 
     amortized under the other such paragraph, with the resulting 
     amount to be amortized over a period determined on the basis 
     of the remaining amortization periods for all items entering 
     into whichever of the two amounts being offset is the 
     greater.
       ``(6) Interest.--The funding standard account (and items 
     therein) shall be charged or credited (as determined under 
     regulations prescribed by the Secretary of the Treasury) with 
     interest at the appropriate rate consistent with the rate or 
     rates of interest used under the plan to determine costs.
       ``(7) Special rules relating to charges and credits to 
     funding standard account.--For purposes of this part--
       ``(A) Withdrawal liability.--Any amount received by a 
     multiemployer plan in payment of all or part of an employer's 
     withdrawal liability under part 1 of subtitle E of title IV 
     of the Employee Retirement Income Security Act of 1974 shall 
     be considered an amount contributed by the employer to or 
     under the plan. The Secretary may prescribe by regulation 
     additional charges and credits to a multiemployer plan's 
     funding standard account to the extent necessary to prevent 
     withdrawal liability payments from being unduly reflected as 
     advance funding for plan liabilities.
       ``(B) Adjustments when a multiemployer plan leaves 
     reorganization.--If a multiemployer plan is not in 
     reorganization in the plan year but was in reorganization in 
     the immediately preceding plan year, any balance in the 
     funding standard account at the close of such immediately 
     preceding plan year--
       ``(i) shall be eliminated by an offsetting credit or charge 
     (as the case may be), but
       ``(ii) shall be taken into account in subsequent plan years 
     by being amortized in equal annual installments (until fully 
     amortized) over 30 plan years.

     The preceding sentence shall not apply to the extent of any 
     accumulated funding deficiency under section 4243(a) of such 
     Act as of the end of the last plan year that the plan was in 
     reorganization.
       ``(C) Plan payments to supplemental program or withdrawal 
     liability payment fund.--Any amount paid by a plan during a 
     plan year to the Pension Benefit Guaranty Corporation 
     pursuant to section 4222 of such Act or to a fund exempt 
     under section 501(c)(22) pursuant to section 4223 of such Act 
     shall reduce the amount of contributions considered received 
     by the plan for the plan year.
       ``(D) Interim withdrawal liability payments.--Any amount 
     paid by an employer pending a final determination of the 
     employer's withdrawal liability under part 1 of subtitle E of 
     title IV of such Act and subsequently refunded to the 
     employer by the plan shall be charged to the funding standard 
     account in accordance with regulations prescribed by the 
     Secretary.
       ``(E) Election for deferral of charge for portion of net 
     experience loss.--If an election is in effect under section 
     412(b)(7)(F) (as in effect on the day before the date of the 
     enactment of the Pension Security and Transparency Act of 
     2005) for any plan year, the funding standard account shall 
     be charged in the plan year to which the portion of the net 
     experience loss deferred by such election was deferred with 
     the amount so deferred (and paragraph (2)(B)(ii) shall not 
     apply to the amount so charged).
       ``(F) Financial assistance.--Any amount of any financial 
     assistance from the Pension Benefit Guaranty Corporation to 
     any plan, and any repayment of such amount, shall be taken 
     into account under this section and section 412 in such 
     manner as is determined by the Secretary.
       ``(G) Short-term benefits.--To the extent that any plan 
     amendment increases the unfunded past service liability under 
     the plan by reason of an increase in benefits which are 
     payable under the terms of the plan for a period that does 
     not exceed 14 years from the effective date of the amendment, 
     paragraph (2)(B)(i) shall be applied separately with respect 
     to such increase in unfunded past service liability by 
     substituting the number of years of the period during which 
     such benefits are payable for `15'.
       ``(c) Additional Rules.--

[[Page 2614]]

       ``(1) Determinations to be made under funding method.--For 
     purposes of this part, normal costs, accrued liability, past 
     service liabilities, and experience gains and losses shall be 
     determined under the funding method used to determine costs 
     under the plan.
       ``(2) Valuation of assets.--
       ``(A) In general.--For purposes of this part, the value of 
     the plan's assets shall be determined on the basis of any 
     reasonable actuarial method of valuation which takes into 
     account fair market value and which is permitted under 
     regulations prescribed by the Secretary.
       ``(B) Election with respect to bonds.--The value of a bond 
     or other evidence of indebtedness which is not in default as 
     to principal or interest may, at the election of the plan 
     administrator, be determined on an amortized basis running 
     from initial cost at purchase to par value at maturity or 
     earliest call date. Any election under this subparagraph 
     shall be made at such time and in such manner as the 
     Secretary shall by regulations provide, shall apply to all 
     such evidences of indebtedness, and may be revoked only with 
     the consent of the Secretary.
       ``(3) Actuarial assumptions must be reasonable.--For 
     purposes of this section, all costs, liabilities, rates of 
     interest, and other factors under the plan shall be 
     determined on the basis of actuarial assumptions and 
     methods--
       ``(A) each of which is reasonable (taking into account the 
     experience of the plan and reasonable expectations), and
       ``(B) which, in combination, offer the actuary's best 
     estimate of anticipated experience under the plan.
       ``(4) Treatment of certain changes as experience gain or 
     loss.--For purposes of this section, if--
       ``(A) a change in benefits under the Social Security Act or 
     in other retirement benefits created under Federal or State 
     law, or
       ``(B) a change in the definition of the term `wages' under 
     section 3121, or a change in the amount of such wages taken 
     into account under regulations prescribed for purposes of 
     section 401(a)(5),

     results in an increase or decrease in accrued liability under 
     a plan, such increase or decrease shall be treated as an 
     experience loss or gain.
       ``(5) Full funding.--If, as of the close of a plan year, a 
     plan would (without regard to this paragraph) have an 
     accumulated funding deficiency in excess of the full funding 
     limitation--
       ``(A) the funding standard account shall be credited with 
     the amount of such excess, and
       ``(B) all amounts described in subparagraphs (B), (C), and 
     (D) of subsection (b) (2) and subparagraph (B) of subsection 
     (b)(3) which are required to be amortized shall be considered 
     fully amortized for purposes of such subparagraphs.
       ``(6) Full-funding limitation.--
       ``(A) In general.--For purposes of paragraph (5), the term 
     `full-funding limitation' means the excess (if any) of--
       ``(i) the accrued liability (including normal cost) under 
     the plan (determined under the entry age normal funding 
     method if such accrued liability cannot be directly 
     calculated under the funding method used for the plan), over
       ``(ii) the lesser of--

       ``(I) the fair market value of the plan's assets, or
       ``(II) the value of such assets determined under paragraph 
     (2).

       ``(B) Minimum amount.--
       ``(i) In general.--In no event shall the full-funding 
     limitation determined under subparagraph (A) be less than the 
     excess (if any) of--

       ``(I) 90 percent of the current liability of the plan 
     (including the expected increase in current liability due to 
     benefits accruing during the plan year), over
       ``(II) the value of the plan's assets determined under 
     paragraph (2).

       ``(ii) Assets.--For purposes of clause (i), assets shall 
     not be reduced by any credit balance in the funding standard 
     account.
       ``(C) Full funding limitation.--For purposes of this 
     paragraph, unless otherwise provided by the plan, the accrued 
     liability under a multiemployer plan shall not include 
     benefits which are not nonforfeitable under the plan after 
     the termination of the plan (taking into consideration 
     section 411(d)(3)).
       ``(D) Current liability.--For purposes of this paragraph--
       ``(i) In general.--The term `current liability' means all 
     liabilities to employees and their beneficiaries under the 
     plan.
       ``(ii) Treatment of unpredictable contingent event 
     benefits.--For purposes of clause (i), any benefit contingent 
     on an event other than--

       ``(I) age, service, compensation, death, or disability, or
       ``(II) an event which is reasonably and reliably 
     predictable (as determined by the Secretary),

     shall not be taken into account until the event on which the 
     benefit is contingent occurs.
       ``(iii) Interest rate used.--The rate of interest used to 
     determine current liability under this paragraph shall be the 
     rate of interest determined under subparagraph (E).
       ``(iv) Mortality tables.--

       ``(I) Commissioners' standard table.--In the case of plan 
     years beginning before the first plan year to which the first 
     tables prescribed under subclause (II) apply, the mortality 
     table used in determining current liability under this 
     paragraph shall be the table prescribed by the Secretary 
     which is based on the prevailing commissioners' standard 
     table (described in section 807(d)(5)(A)) used to determine 
     reserves for group annuity contracts issued on January 1, 
     1993.
       ``(II) Secretarial authority.--The Secretary may by 
     regulation prescribe for plan years beginning after December 
     31, 1999, mortality tables to be used in determining current 
     liability under this subsection. Such tables shall be based 
     upon the actual experience of pension plans and projected 
     trends in such experience. In prescribing such tables, the 
     Secretary shall take into account results of available 
     independent studies of mortality of individuals covered by 
     pension plans.

       ``(v) Separate mortality tables for the disabled.--
     Notwithstanding clause (iv)--

       ``(I) In general.--The Secretary shall establish mortality 
     tables which may be used (in lieu of the tables under clause 
     (iv)) to determine current liability under this subsection 
     for individuals who are entitled to benefits under the plan 
     on account of disability. The Secretary shall establish 
     separate tables for individuals whose disabilities occur in 
     plan years beginning before January 1, 1995, and for 
     individuals whose disabilities occur in plan years beginning 
     on or after such date.
       ``(II) Special rule for disabilities occurring after 
     1994.--In the case of disabilities occurring in plan years 
     beginning after December 31, 1994, the tables under subclause 
     (I) shall apply only with respect to individuals described in 
     such subclause who are disabled within the meaning of title 
     II of the Social Security Act and the regulations thereunder.

       ``(vi) Periodic review.--The Secretary shall periodically 
     (at least every 5 years) review any tables in effect under 
     this subparagraph and shall, to the extent such Secretary 
     determines necessary, by regulation update the tables to 
     reflect the actual experience of pension plans and projected 
     trends in such experience.
       ``(E) Required change of interest rate.--For purposes of 
     determining a plan's current liability for purposes of this 
     paragraph--
       ``(i) In general.--If any rate of interest used under the 
     plan under subsection (b)(6) to determine cost is not within 
     the permissible range, the plan shall establish a new rate of 
     interest within the permissible range.
       ``(ii) Permissible range.--For purposes of this 
     subparagraph--

       ``(I) In general.--Except as provided in subclause (II), 
     the term `permissible range' means a rate of interest which 
     is not more than 5 percent above, and not more than 10 
     percent below, the weighted average of the rates of interest 
     on 30-year Treasury securities during the 4-year period 
     ending on the last day before the beginning of the plan year.
       ``(II) Secretarial authority.--If the Secretary finds that 
     the lowest rate of interest permissible under subclause (I) 
     is unreasonably high, the Secretary may prescribe a lower 
     rate of interest, except that such rate may not be less than 
     80 percent of the average rate determined under such 
     subclause.

       ``(iii) Assumptions.--Notwithstanding paragraph (3)(A), the 
     interest rate used under the plan shall be--

       ``(I) determined without taking into account the experience 
     of the plan and reasonable expectations, but
       ``(II) consistent with the assumptions which reflect the 
     purchase rates which would be used by insurance companies to 
     satisfy the liabilities under the plan.

       ``(7) Annual valuation.--
       ``(A) In general.--For purposes of this section, a 
     determination of experience gains and losses and a valuation 
     of the plan's liability shall be made not less frequently 
     than once every year, except that such determination shall be 
     made more frequently to the extent required in particular 
     cases under regulations prescribed by the Secretary.
       ``(B) Valuation date.--
       ``(i) Current year.--Except as provided in clause (ii), the 
     valuation referred to in subparagraph (A) shall be made as of 
     a date within the plan year to which the valuation refers or 
     within one month prior to the beginning of such year.
       ``(ii) Use of prior year valuation.--The valuation referred 
     to in subparagraph (A) may be made as of a date within the 
     plan year prior to the year to which the valuation refers if, 
     as of such date, the value of the assets of the plan are not 
     less than 100 percent of the plan's current liability (as 
     defined in paragraph (6)(D) without regard to clause (iv) 
     thereof).
       ``(iii) Adjustments.--Information under clause (ii) shall, 
     in accordance with regulations, be actuarially adjusted to 
     reflect significant differences in participants.
       ``(iv) Limitation.--A change in funding method to use a 
     prior year valuation, as provided in clause (ii), may not be 
     made unless as of the valuation date within the prior plan 
     year, the value of the assets of the plan are

[[Page 2615]]

     not less than 125 percent of the plan's current liability (as 
     defined in paragraph (6)(D) without regard to clause (iv) 
     thereof).
       ``(8) Time when certain contributions deemed made.--For 
     purposes of this section, any contributions for a plan year 
     made by an employer after the last day of such plan year, but 
     not later than two and one-half months after such day, shall 
     be deemed to have been made on such last day. For purposes of 
     this subparagraph, such two and one-half month period may be 
     extended for not more than six months under regulations 
     prescribed by the Secretary.
       ``(d) Extension of Amortization Periods for Multiemployer 
     Plans.--
       ``(1) Automatic extension upon application by certain 
     plans.--
       ``(A) In general.--If the plan sponsor of a multiemployer 
     plan--
       ``(i) submits to the Secretary an application for an 
     extension of the period of years required to amortize any 
     unfunded liability described in any clause of subsection 
     (b)(2)(B) or described in subsection (b)(4), and
       ``(ii) includes with the application a certification by the 
     plan's actuary described in subparagraph (B),

     the Secretary shall extend the amortization period for the 
     period of time (not in excess of 5 years) specified in the 
     application. Such extension shall be in addition to any 
     extension under paragraph (2).
       ``(B) Criteria.--A certification with respect to a 
     multiemployer plan is described in this subparagraph if the 
     plan's actuary certifies that, based on reasonable 
     assumptions--
       ``(i) absent the extension under subparagraph (A), the plan 
     would have an accumulated funding deficiency in the current 
     plan year or any of the 9 succeeding plan years,
       ``(ii) the plan sponsor has adopted a plan to improve the 
     plan's funding status,
       ``(iii) the plan is projected to have sufficient assets to 
     timely pay expected benefits and anticipated expenditures 
     over the amortization period as extended, and
       ``(iv) the notice required under paragraph (3)(A) has been 
     provided.
       ``(2) Additional extension.--
       ``(A) In general.--If the plan sponsor of a multiemployer 
     plan submits to the Secretary an application for an extension 
     of the period of years required to amortize any unfunded 
     liability described in any clause of subsection (b)(2)(B) or 
     described in subsection (b)(4), the Secretary may extend the 
     amortization period for a period of time (not in excess of 5 
     years) if the Secretary of the Treasury makes the 
     determination described in subparagraph (B). Such extension 
     shall be in addition to any extension under paragraph (1).
       ``(B) Determination.--The Secretary may grant an extension 
     under subparagraph (A) if the Secretary determines that--
       ``(i) such extension would carry out the purposes of this 
     Act and would provide adequate protection for participants 
     under the plan and their beneficiaries, and
       ``(ii) the failure to permit such extension would--

       ``(I) result in a substantial risk to the voluntary 
     continuation of the plan, or a substantial curtailment of 
     pension benefit levels or employee compensation, and
       ``(II) be adverse to the interests of plan participants in 
     the aggregate.

       ``(C) Action by secretary.--The Secretary shall act upon 
     any application for an extension under this paragraph within 
     180 days of the submission of such application. If the 
     Secretary rejects the application for an extension under this 
     paragraph, the Secretary shall provide notice to the plan 
     detailing the specific reasons for the rejection, including 
     references to the criteria set forth above.
       ``(3) Advance notice.--
       ``(A) In general.--The Secretary shall, before granting an 
     extension under this subsection, require each applicant to 
     provide evidence satisfactory to such Secretary that the 
     applicant has provided notice of the filing of the 
     application for such extension to each affected party (as 
     defined in section 4001(a)(21) of the Employee Retirement 
     Income Security Act of 1974) with respect to the affected 
     plan. Such notice shall include a description of the extent 
     to which the plan is funded for benefits which are guaranteed 
     under title IV of such Act and for benefit liabilities.
       ``(B) Consideration of relevant information.--The Secretary 
     shall consider any relevant information provided by a person 
     to whom notice was given under paragraph (1).''.
       (b) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after 2006.
       (2) Special rule for certain amortization extensions.--If 
     the Secretary of the Treasury grants an extension under 
     section 304 of the Employee Retirement Income Security Act of 
     1974 and section 412(e) of the Internal Revenue Code of 1986 
     with respect to any application filed with the Secretary of 
     the Treasury on or before June 30, 2005, the extension (and 
     any modification thereof) shall be applied and administered 
     under the rules of such sections as in effect before the 
     enactment of this Act, including the use of the rate of 
     interest determined under section 6621(b) of such Code.

     SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN 
                   ENDANGERED OR CRITICAL STATUS.

       (a) In General.--Subpart A of part III of subchapter D of 
     chapter 1 of the Internal Revenue Code of 1986 (as amended by 
     this Act) is amended by inserting after section 431 the 
     following new section:

     ``SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS 
                   IN ENDANGERED STATUS OR CRITICAL STATUS.

       ``(a) General Rule.--For purposes of this part, in the case 
     of a multiemployer plan--
       ``(1) if the plan is in endangered status--
       ``(A) the plan sponsor shall adopt and implement a funding 
     improvement plan in accordance with the requirements of 
     subsection (c), and
       ``(B) the requirements of subsection (d) shall apply during 
     the funding plan adoption period and the funding improvement 
     period, and
       ``(2) if the plan is in critical status--
       ``(A) the plan sponsor shall adopt and implement a 
     rehabilitation plan in accordance with the requirements of 
     subsection (e), and
       ``(B) the requirements of subsection (f) shall apply during 
     the rehabilitation plan adoption period and the 
     rehabilitation period.
       ``(b) Determination of Endangered and Critical Status.--For 
     purposes of this section--
       ``(1) Endangered status.--A multiemployer plan is in 
     endangered status for a plan year if, as determined by the 
     plan actuary under paragraph (3), the plan is not in critical 
     status for the plan year and either--
       ``(A) the plan's funded percentage for such plan year is 
     less than 80 percent, or
       ``(B) the plan has an accumulated funding deficiency for 
     such plan year, or is projected to have such an accumulated 
     funding deficiency for any of the 6 succeeding plan years, 
     taking into account any extension of amortization periods 
     under section 431(d).
     For purposes of this section, a plan described in 
     subparagraph (B) shall be treated as in seriously endangered 
     status.
       ``(2) Critical status.--A multiemployer plan is in critical 
     status for a plan year if, as determined by the plan actuary 
     under paragraph (3), the plan is described in 1 or more of 
     the following subparagraphs as of the beginning of the plan 
     year:
       ``(A) A plan is described in this subparagraph if--
       ``(i) the funded percentage of the plan is less than 65 
     percent, and
       ``(ii) the sum of--

       ``(I) the market value of plan assets, plus
       ``(II) the present value of the reasonably anticipated 
     employer contributions for the current plan year and each of 
     the 5 succeeding plan years, assuming that the terms of all 
     collective bargaining agreements pursuant to which the plan 
     is maintained for the current plan year continue in effect 
     for succeeding plan years,

     is less than the present value of all benefits projected to 
     be payable under the plan during the current plan year and 
     each of the 5 succeeding plan years (plus administrative 
     expenses for such plan years).
       ``(B) A plan is described in this subparagraph if--
       ``(i) the plan has an accumulated funding deficiency for 
     the current plan year, not taking into account any extension 
     of amortization periods under section 431(d), or
       ``(ii) the plan is projected to have an accumulated funding 
     deficiency for any of the 3 succeeding plan years (4 
     succeeding plan years if the funded percentage of the plan is 
     65 percent or less), not taking into account any extension of 
     amortization periods under section 431(d).
       ``(C) A plan is described in this subparagraph if--
       ``(i)(I) the plan's normal cost for the current plan year, 
     plus interest (determined at the rate used for determining 
     costs under the plan) for the current plan year on the amount 
     of unfunded benefit liabilities under the plan as of the last 
     date of the preceding plan year, exceeds
       ``(II) the present value of the reasonably anticipated 
     employer contributions for the current plan year,
       ``(ii) the present value of nonforfeitable benefits of 
     inactive participants is greater than the present value of 
     nonforfeitable benefits of active participants, and
       ``(iii) the plan has an accumulated funding deficiency for 
     the current plan year, or is projected to have such a 
     deficiency for any of the 4 succeeding plan years, not taking 
     into account any extension of amortization periods under 
     section 431(d).
       ``(D) A plan is described in this subparagraph if the sum 
     of--
       ``(i) the market value of plan assets, plus
       ``(ii) the present value of the reasonably anticipated 
     employer contributions for the current plan year and each of 
     the 4 succeeding plan years, assuming that the terms of all 
     collective bargaining agreements pursuant to which the plan 
     is maintained for the current plan year continue in effect 
     for succeeding plan years,

     is less than the present value of all benefits projected to 
     be payable under the plan during the current plan year and 
     each of the 4 succeeding plan years (plus administrative 
     expenses for such plan years).

[[Page 2616]]

       ``(3) Annual certification by plan actuary.--
       ``(A) In general.--During the 90-day period beginning on 
     the first day of each plan year of a multiemployer plan, the 
     plan actuary shall certify to the Secretary--
       ``(i) whether or not the plan is in endangered status for 
     such plan year and whether or not the plan is in critical 
     status for such plan year, and
       ``(ii) in the case of a plan which is in a funding 
     improvement or rehabilitation period, whether or not the plan 
     is making the scheduled progress in meeting the requirements 
     of its funding improvement or rehabilitation plan.
       ``(B) Actuarial projections of assets and liabilities.--
       ``(i) In general.--In making the determinations and 
     projections under this subsection, the plan actuary shall 
     make projections required for the current and succeeding plan 
     years, using reasonable actuarial estimates, assumptions, and 
     methods, of the current value of the assets of the plan and 
     the present value of all liabilities to participants and 
     beneficiaries under the plan for the current plan year as of 
     the beginning of such year. The projected present value of 
     liabilities as of the beginning of such year shall be 
     determined based on the actuarial statement required under 
     section 103(d) of the Employee Retirement Income Security Act 
     of 1974 with respect to the most recently filed annual report 
     or the actuarial valuation for the preceding plan year.
       ``(ii) Determinations of future contributions.--Any 
     actuarial projection of plan assets shall assume--

       ``(I) reasonably anticipated employer contributions for the 
     current and succeeding plan years, assuming that the terms of 
     the one or more collective bargaining agreements pursuant to 
     which the plan is maintained for the current plan year 
     continue in effect for succeeding plan years, or
       ``(II) that employer contributions for the most recent plan 
     year will continue indefinitely, but only if the plan actuary 
     determines there have been no significant demographic changes 
     that would make such assumption unreasonable.

       ``(C) Penalty for failure to secure timely actuarial 
     certification.--Any failure of the plan's actuary to certify 
     the plan's status under this subsection by the date specified 
     in subparagraph (A) shall be treated for purposes of section 
     502(c)(2) of such Act as a failure or refusal by the plan 
     administrator to file the annual report required to be filed 
     with the Secretary under section 101(b)(4) of such Act.
       ``(D) Notice.--In any case in which a multiemployer plan is 
     certified to be in endangered or critical status under 
     subparagraph (A), the plan sponsor shall, not later than 30 
     days after the date of the certification, provide 
     notification of the endangered or critical status to the 
     participants and beneficiaries, the bargaining parties, the 
     Pension Benefit Guaranty Corporation, the Secretary, and the 
     Secretary of Labor.
       ``(c) Funding Improvement Plan Must Be Adopted for 
     Multiemployer Plans in Endangered Status.--
       ``(1) In general.--In any case in which a multiemployer 
     plan is in endangered status for a plan year, the plan 
     sponsor, in accordance with this subsection--
       ``(A) shall adopt a funding improvement plan not later than 
     240 days following the required date for the actuarial 
     certification of endangered status under subsection 
     (b)(3)(A), and
       ``(B) within 30 days after the adoption of the funding 
     improvement plan--
       ``(i) in the case of a plan in seriously endangered status, 
     shall provide to the bargaining parties 1 or more schedules 
     showing revised benefit structures, revised contribution 
     structures, or both, which, if adopted, may reasonably be 
     expected to enable the multiemployer plan to meet the 
     applicable requirements under paragraph (3) in accordance 
     with the funding improvement plan, including a description of 
     the reductions in future benefit accruals and increases in 
     contributions that the plan sponsor determines are reasonably 
     necessary to meet the applicable requirements if the plan 
     sponsor assumes that there are no increases in contributions 
     under the plan other than the increases necessary to meet the 
     applicable requirements after future benefit accruals have 
     been reduced to the maximum extent permitted by law, and
       ``(ii) may, if the plan sponsor deems appropriate, prepare 
     and provide the bargaining parties with additional 
     information relating to contribution rates or benefit 
     reductions, alternative schedules, or other information 
     relevant to achieving the requirements under paragraph (3) in 
     accordance with the funding improvement plan.
       ``(2) Exception for years after process begins.--Paragraph 
     (1) shall not apply to a plan year if such year is in a 
     funding plan adoption period or funding improvement period by 
     reason of the plan being in endangered status for a preceding 
     plan year. For purposes of this section, such preceding plan 
     year shall be the initial determination year with respect to 
     the funding improvement plan to which it relates.
       ``(3) Funding improvement plan.--For purposes of this 
     section--
       ``(A) In general.--A funding improvement plan is a plan 
     which consists of the actions, including options or a range 
     of options to be proposed to the bargaining parties, which, 
     under reasonable actuarial assumptions, will result in the 
     plan meeting the requirements of this paragraph.
       ``(B) Plans other than seriously endangered plans.--In the 
     case of plan not in seriously endangered status, the 
     requirements of this paragraph are met if the plan's funded 
     percentage as of the close of the funding improvement period 
     exceeds the lesser of 80 percent or a percentage equal to the 
     sum of--
       ``(i) such percentage as of the beginning of such period, 
     plus
       ``(ii) 10 percent of the percentage determined under clause 
     (i).
       ``(C) Seriously endangered plans.--In the case of a plan in 
     seriously endangered status, the requirements of this 
     paragraph are met if--
       ``(i) the plan's funded percentage as of the close of the 
     funding improvement period equals or exceeds the percentage 
     which is equal to the sum of--

       ``(I) such percentage as of the beginning of such period, 
     plus
       ``(II) 33 percent of the difference between 100 percent and 
     the percentage under subclause (I), and

       ``(ii) there is no accumulated funding deficiency for any 
     plan year during the funding improvement period (taking into 
     account any extension of amortization periods under section 
     431(d)).
       ``(4) Funding improvement period.--For purposes of this 
     section--
       ``(A) In general.--The funding improvement period for any 
     funding improvement plan adopted pursuant to this subsection 
     is the 10-year period beginning on the first day of the first 
     plan year of the multiemployer plan beginning after the 
     earlier of--
       ``(i) the second anniversary of the date of the adoption of 
     the funding improvement plan, or
       ``(ii) the expiration of the collective bargaining 
     agreements in effect on the due date for the actuarial 
     certification of endangered status for the initial 
     determination year under subsection (b)(3)(A) and covering, 
     as of such due date, at least 75 percent of the active 
     participants in such multiemployer plan.
       ``(B) Coordination with changes in status.--
       ``(i) Plans no longer in endangered status.--If the plan's 
     actuary certifies under subsection (b)(3)(A) for a plan year 
     in any funding plan adoption period or funding improvement 
     period that the plan is no longer in endangered status and is 
     not in critical status, the funding plan adoption period or 
     funding improvement period, whichever is applicable, shall 
     end as of the close of the preceding plan year.
       ``(ii) Plans in critical status.--If the plan's actuary 
     certifies under subsection (b)(3)(A) for a plan year in any 
     funding plan adoption period or funding improvement period 
     that the plan is in critical status, the funding plan 
     adoption period or funding improvement period, whichever is 
     applicable, shall end as of the close of the plan year 
     preceding the first plan year in the rehabilitation period 
     with respect to such status.
       ``(5) Special rules for certain underfunded plans.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     if the funded percentage of a plan in seriously endangered 
     status was 70 percent or less as of the beginning of the 
     initial determination year, the following rules shall apply 
     in determining whether the requirements of paragraph 
     (3)(C)(i) are met:
       ``(i) The plan's funded percentage as of the close of the 
     funding improvement period must equal or exceed a percentage 
     which is equal to the sum of--

       ``(I) such percentage as of the beginning of such period, 
     plus
       ``(II) 20 percent of the difference between 100 percent and 
     the percentage under subclause (I).

       ``(ii) The funding improvement period under paragraph 
     (4)(A) shall be 15 years rather than 10 years.
       ``(B) Special rules for plans with funded percentage over 
     70 percent.--If the funded percentage described in 
     subparagraph (A) was more than 70 percent but less than 80 
     percent as of the beginning of the initial determination 
     year--
       ``(i) subparagraph (A) shall apply if the plan's actuary 
     certifies, within 30 days after the certification under 
     subsection (b)(3)(A) for the initial determination year, 
     that, based on the terms of the plan and the collective 
     bargaining agreements in effect at the time of such 
     certification, the plan is not projected to meet the 
     requirements of paragraph (3)(C)(i) without regard to this 
     paragraph, and
       ``(ii) if there is a certification under clause (i), the 
     plan may, in formulating its funding improvement plan, only 
     take into account the rules of subparagraph (A) for plan 
     years in the funding improvement period beginning on or 
     before the date on which the last of the collective 
     bargaining agreements described in paragraph (4)(A)(ii) 
     expires.
     Notwithstanding clause (ii), if for any plan year ending 
     after the date described in clause (ii) the plan actuary 
     certifies (at the time of the annual certification under 
     subsection (b)(3)(A) for such plan year) that,

[[Page 2617]]

     based on the terms of the plan and collective bargaining 
     agreements in effect at the time of that annual 
     certification, the plan is not projected to be able to meet 
     the requirements of paragraph (3)(C)(i) without regard to 
     this paragraph, the plan may continue to assume for such year 
     that the funding improvement period is 15 years rather than 
     10 years.
       ``(6) Updates to funding improvement plan and schedules.--
       ``(A) Funding improvement plan.--The plan sponsor shall 
     annually update the funding improvement plan and shall file 
     the update with the plan's annual report under section 104 of 
     the Employee Retirement Income Security Act of 1974.
       ``(B) Schedules.--The plan sponsor may periodically update 
     any schedule of contribution rates provided under this 
     subsection to reflect the experience of the plan, except that 
     the schedule or schedules described in paragraph (1)(B)(i) 
     shall be updated at least once every 3 years.
       ``(C) Duration of schedule.--A schedule of contribution 
     rates provided by the plan sponsor and relied upon by 
     bargaining parties in negotiating a collective bargaining 
     agreement shall remain in effect for the duration of that 
     collective bargaining agreement.
       ``(7) Penalty if no funding improvement plan adopted.--A 
     failure of the plan sponsor to adopt a funding improvement 
     plan by the date specified in paragraph (1)(A) shall be 
     treated for purposes of section 502(c)(2) of such Act as a 
     failure or refusal by the plan administrator to file the 
     annual report required to be filed with the Secretary of 
     Labor under section 101(b)(4) of such Act.
       ``(8) Funding plan adoption period.--For purposes of this 
     section, the term `funding plan adoption period' means the 
     period beginning on the date of the certification under 
     subsection (b)(3)(A) for the initial determination year and 
     ending on the day before the first day of the funding 
     improvement period.
       ``(d) Rules for Operation of Plan During Adoption and 
     Improvement Periods; Failure to Meet Requirements.--
       ``(1) Special rules for plan adoption period.--During the 
     plan adoption period--
       ``(A) the plan sponsor may not accept a collective 
     bargaining agreement or participation agreement with respect 
     to the multiemployer plan that provides for--
       ``(i) a reduction in the level of contributions for any 
     participants,
       ``(ii) a suspension of contributions with respect to any 
     period of service, or
       ``(iii) any new direct or indirect exclusion of younger or 
     newly hired employees from plan participation,
       ``(B) no amendment of the plan which increases the 
     liabilities of the plan by reason of any increase in 
     benefits, any change in the accrual of benefits, or any 
     change in the rate at which benefits become nonforfeitable 
     under the plan may be adopted unless the amendment is 
     required as a condition of qualification under part I of 
     subchapter D of chapter 1 or to comply with other applicable 
     law, and
       ``(C) in the case of a plan in seriously endangered status, 
     the plan sponsor shall take all reasonable actions which are 
     consistent with the terms of the plan and applicable law and 
     which are expected, based on reasonable assumptions, to 
     achieve--
       ``(i) an increase in the plan's funded percentage, and
       ``(ii) postponement of an accumulated funding deficiency 
     for at least 1 additional plan year.

     Actions under subparagraph (C) include applications for 
     extensions of amortization periods under section 431(d), use 
     of the shortfall funding method in making funding standard 
     account computations, amendments to the plan's benefit 
     structure, reductions in future benefit accruals, and other 
     reasonable actions consistent with the terms of the plan and 
     applicable law.
       ``(2) Compliance with funding improvement plan.--
       ``(A) In general.--A plan may not be amended after the date 
     of the adoption of a funding improvement plan under 
     subsection (c) so as to be inconsistent with the funding 
     improvement plan.
       ``(B) No reduction in contributions.--A plan sponsor may 
     not during any funding improvement period accept a collective 
     bargaining agreement or participation agreement with respect 
     to the multiemployer plan that provides for--
       ``(i) a reduction in the level of contributions for any 
     participants,
       ``(ii) a suspension of contributions with respect to any 
     period of service, or
       ``(iii) any new direct or indirect exclusion of younger or 
     newly hired employees from plan participation.
       ``(C) Special rules for benefit increases.--A plan may not 
     be amended after the date of the adoption of a funding 
     improvement plan under subsection (c) so as to increase 
     benefits, including future benefit accruals, unless--
       ``(i) in the case of a plan in seriously endangered status, 
     the plan actuary certifies that, after taking into account 
     the benefit increase, the plan is still reasonably expected 
     to meet the requirements under subsection (c)(3) in 
     accordance with the schedule contemplated in the funding 
     improvement plan, and
       ``(ii) in the case of a plan not in seriously endangered 
     status, the actuary certifies that such increase is paid for 
     out of contributions not required by the funding improvement 
     plan to meet the requirements under subsection (c)(3) in 
     accordance with the schedule contemplated in the funding 
     improvement plan.
       ``(3) Failure to meet requirements.--
       ``(A) In general.--Notwithstanding section 4971(g), if a 
     plan fails to meet the requirements of subsection (c)(3) by 
     the end of the funding improvement period, the plan shall be 
     treated as having an accumulated funding deficiency for 
     purposes of section 4971 for the last plan year in such 
     period (and each succeeding plan year until such requirements 
     are met) in an amount equal to the greater of the amount of 
     the contributions necessary to meet such requirements or the 
     amount of such accumulated funding deficiency without regard 
     to this paragraph.
       ``(B) Waiver.--In the case of a failure described in 
     subparagraph (A) which is due to reasonable cause and not to 
     willful neglect, the Secretary of the Treasury may waive part 
     or all of the tax imposed by section 4971 of such Code to the 
     extent that the payment of such tax would be excessive or 
     otherwise inequitable relative to the failure involved.
       ``(e) Rehabilitation Plan Must Be Adopted for Multiemployer 
     Plans in Critical Status.--
       ``(1) In general.--In any case in which a multiemployer 
     plan is in critical status for a plan year, the plan sponsor, 
     in accordance with this subsection--
       ``(A) shall adopt a rehabilitation plan not later than 240 
     days following the required date for the actuarial 
     certification of critical status under subsection (b)(3)(A), 
     and
       ``(B) within 30 days after the adoption of the 
     rehabilitation plan--
       ``(i) shall provide to the bargaining parties 1 or more 
     schedules showing revised benefit structures, revised 
     contribution structures, or both, which, if adopted, may 
     reasonably be expected to enable the multiemployer plan to 
     emerge from critical status in accordance with the 
     rehabilitation plan, and
       ``(ii) may, if the plan sponsor deems appropriate, prepare 
     and provide the bargaining parties with additional 
     information relating to contribution rates or benefit 
     reductions, alternative schedules, or other information 
     relevant to emerging from critical status in accordance with 
     the rehabilitation plan.

     The schedule or schedules described in subparagraph (B)(i) 
     shall reflect reductions in future benefit accruals and 
     increases in contributions that the plan sponsor determines 
     are reasonably necessary to emerge from critical status. One 
     schedule shall be designated as the default schedule and such 
     schedule shall assume that there are no increases in 
     contributions under the plan other than the increases 
     necessary to emerge from critical status after future benefit 
     accruals and other benefits (other than benefits the 
     reduction or elimination of which are not permitted under 
     section 411(d)(6)) have been reduced to the maximum extent 
     permitted by law.
       ``(2) Exception for years after process begins.--Paragraph 
     (1) shall not apply to a plan year if such year is in a 
     rehabilitation plan adoption period or rehabilitation period 
     by reason of the plan being in critical status for a 
     preceding plan year. For purposes of this section, such 
     preceding plan year shall be the initial critical year with 
     respect to the rehabilitation plan to which it relates.
       ``(3) Rehabilitation plan.--For purposes of this section--
       ``(A) In general.--A rehabilitation plan is a plan which 
     consists of--
       ``(i) actions which will enable, under reasonable actuarial 
     assumptions, the plan to cease to be in critical status by 
     the end of the rehabilitation period and may include 
     reductions in plan expenditures (including plan mergers and 
     consolidations), reductions in future benefit accruals or 
     increases in contributions, if agreed to by the bargaining 
     parties, or any combination of such actions, or
       ``(ii) if the plan sponsor determines that, based on 
     reasonable actuarial assumptions and upon exhaustion of all 
     reasonable measures, the plan can not reasonably be expected 
     to emerge from critical status by the end of the 
     rehabilitation period, reasonable measures to emerge from 
     critical status at a later time or to forestall possible 
     insolvency (within the meaning of section 4245 of the 
     Employee Retirement Income Security Act of 1974).

     Such plan shall include the schedules required to be provided 
     under paragraph (1)(B)(i). If clause (ii) applies, such plan 
     shall set forth the alternatives considered, explain why the 
     plan is not reasonably expected to emerge from critical 
     status by the end of the rehabilitation period, and specify 
     when, if ever, the plan is expected to emerge from critical 
     status in accordance with the rehabilitation plan.
       ``(B) Updates to rehabilitation plan and schedules.--
       ``(i) Rehabilitation plan.--The plan sponsor shall annually 
     update the rehabilitation plan and shall file the update with 
     the plan's annual report under section 104 of the Employee 
     Retirement Income Security Act of 1974.

[[Page 2618]]

       ``(ii) Schedules.--The plan sponsor may periodically update 
     any schedule of contribution rates provided under this 
     subsection to reflect the experience of the plan, except that 
     the schedule or schedules described in paragraph (1)(B)(i) 
     shall be updated at least once every 3 years.
       ``(iii) Duration of schedule.--A schedule of contribution 
     rates provided by the plan sponsor and relied upon by 
     bargaining parties in negotiating a collective bargaining 
     agreement shall remain in effect for the duration of that 
     collective bargaining agreement.
       ``(C) Default schedule.--If the collective bargaining 
     agreement providing for contributions under a multiemployer 
     plan that was in effect at the time the plan entered critical 
     status expires and, after receiving a schedule from the plan 
     sponsor under paragraph (1)(B)(i), the bargaining parties 
     have not adopted a collective bargaining agreement with terms 
     consistent with such a schedule, the default schedule 
     described in the last sentence of paragraph (1) shall go into 
     effect with respect to those bargaining parties.
       ``(4) Rehabilitation period.--For purposes of this 
     section--
       ``(A) In general.--The rehabilitation period for a plan in 
     critical status is the 10-year period beginning on the first 
     day of the first plan year of the multiemployer plan 
     following the earlier of--
       ``(i) the second anniversary of the date of the adoption of 
     the rehabilitation plan, or
       ``(ii) the expiration of the collective bargaining 
     agreements in effect on the date of the due date for the 
     actuarial certification of critical status for the initial 
     critical year under subsection (a)(1) and covering, as of 
     such date at least 75 percent of the active participants in 
     such multiemployer plan.

     If a plan emerges from critical status as provided under 
     subparagraph (B) before the end of such 10-year period, the 
     rehabilitation period shall end with the plan year preceding 
     the plan year for which the determination under subparagraph 
     (B) is made.
       ``(B) Emergence.--A plan in critical status shall remain in 
     such status until a plan year for which the plan actuary 
     certifies, in accordance with subsection (b)(3)(A), that the 
     plan is not projected to have an accumulated funding 
     deficiency for the plan year or any of the 9 succeeding plan 
     years, without regard to use of the shortfall method or any 
     extension of amortization periods under section 431(d).
       ``(5) Penalty if no rehabilitation plan adopted.--A failure 
     of a plan sponsor to adopt a rehabilitation plan by the date 
     specified in paragraph (1)(A) shall be treated for purposes 
     of section 502(c)(2) of the Employee Retirement Income 
     Security Act of 1974 as a failure or refusal by the plan 
     administrator to file the annual report required to be filed 
     with the Secretary of Labor under section 101(b)(4) of such 
     Act.
       ``(6) Rehabilitation plan adoption period.--For purposes of 
     this section, the term `rehabilitation plan adoption period' 
     means the period beginning on the date of the certification 
     under subsection (b)(3)(A) for the initial critical year and 
     ending on the day before the first day of the rehabilitation 
     period.
       ``(7) Limitation on reduction in rates of future 
     accruals.--Any reduction in the rate of future accruals under 
     any schedule described in paragraph (1)(B)(i) shall not 
     reduce the rate of future accruals below--
       ``(A) a monthly benefit (payable as a single life annuity 
     commencing at the participant's normal retirement age) equal 
     to 1 percent of the contributions required to be made with 
     respect to a participant, or the equivalent standard accrual 
     rate for a participant or group of participants under the 
     collective bargaining agreements in effect as of the first 
     day of the initial critical year, or
       ``(B) if lower, the accrual rate under the plan on such 
     first day.

     The equivalent standard accrual rate shall be determined by 
     the plan sponsor based on the standard or average 
     contribution base units which the plan sponsor determines to 
     be representative for active participants and such other 
     factors as the plan sponsor determines to be relevant. 
     Nothing in this paragraph shall be construed as limiting the 
     ability of the plan sponsor to prepare and provide the 
     bargaining parties with alternative schedules to the default 
     schedule that established lower or higher accrual and 
     contribution rates than the rates otherwise described in this 
     paragraph.
       ``(8) Employer impact.--For the purposes of this section, 
     the plan sponsor shall consider the impact of the 
     rehabilitation plan and contribution schedules authorized by 
     this section on bargaining parties with fewer than 500 
     employees and shall implement the plan in a manner that 
     encourages their continued participation in the plan and 
     minimizes financial harm to employers and their workers.
       ``(f) Rules for Operation of Plan During Adoption and 
     Rehabilitation Period.--
       ``(1) Compliance with rehabilitation plan.--
       ``(A) In general.--A plan may not be amended after the date 
     of the adoption of a rehabilitation plan under subsection (e) 
     so as to be inconsistent with the rehabilitation plan.
       ``(B) Special rules for benefit increases.--A plan may not 
     be amended after the date of the adoption of a rehabilitation 
     plan under subsection (e) so as to increase benefits, 
     including future benefit accruals, unless the plan actuary 
     certifies that such increase is paid for out of additional 
     contributions not contemplated by the rehabilitation plan, 
     and, after taking into account the benefit increase, the 
     multiemployer plan still is reasonably expected to emerge 
     from critical status by the end of the rehabilitation period 
     on the schedule contemplated in the rehabilitation plan.
       ``(2) Restriction on lump sums and similar benefits.--
       ``(A) In general.--Effective on the date the notice of 
     certification of the plan's critical status for the initial 
     critical year under subsection (b)(3)(D) is sent, and 
     notwithstanding section 411(d)(6), the plan shall not pay--
       ``(i) any payment, in excess of the monthly amount paid 
     under a single life annuity (plus any social security 
     supplements described in the last sentence of section 
     411(b)(1)(A)),
       ``(ii) any payment for the purchase of an irrevocable 
     commitment from an insurer to pay benefits, and
       ``(iii) any other payment specified by the Secretary by 
     regulations.
       ``(B) Exception.--Subparagraph (A) shall not apply to a 
     benefit which under section 411(a)(11) may be immediately 
     distributed without the consent of the participant or to any 
     makeup payment in the case of a retroactive annuity starting 
     date or any similar payment of benefits owed with respect to 
     a prior period.
       ``(3) Adjustments disregarded in withdrawal liability 
     determination.--Any benefit reductions under this subsection 
     shall be disregarded in determining a plan's unfunded vested 
     benefits for purposes of determining an employer's withdrawal 
     liability under section 4201 of the Employee Retirement 
     Income Security Act of 1974.
       ``(4) Special rules for plan adoption period.--During the 
     rehabilitation plan adoption period--
       ``(A) the plan sponsor may not accept a collective 
     bargaining agreement or participation agreement with respect 
     to the multiemployer plan that provides for--
       ``(i) a reduction in the level of contributions for any 
     participants,
       ``(ii) a suspension of contributions with respect to any 
     period of service, or
       ``(iii) any new direct or indirect exclusion of younger or 
     newly hired employees from plan participation, and
       ``(B) no amendment of the plan which increases the 
     liabilities of the plan by reason of any increase in 
     benefits, any change in the accrual of benefits, or any 
     change in the rate at which benefits become nonforfeitable 
     under the plan may be adopted unless the amendment is 
     required as a condition of qualification under part I of 
     subchapter D of chapter 1 or to comply with other applicable 
     law.
       ``(5) Failure to meet requirements.--
       ``(A) In general.--Notwithstanding section 4971(g), if a 
     plan--
       ``(i) fails to meet the requirements of subsection (e) by 
     the end of the rehabilitation period, or
       ``(ii) has received a certification under subsection 
     (b)(3)(A)(ii) for 3 consecutive plan years that the plan is 
     not making the scheduled progress in meeting its requirements 
     under the rehabilitation plan,

     the plan shall be treated as having an accumulated funding 
     deficiency for purposes of section 4971 for the last plan 
     year in such period (and each succeeding plan year until such 
     requirements are met) in an amount equal to the greater of 
     the amount of the contributions necessary to meet such 
     requirements or the amount of such accumulated funding 
     deficiency without regard to this paragraph.
       ``(B) Waiver.--In the case of a failure described in 
     subparagraph (A) which is due to reasonable cause and not to 
     willful neglect, the Secretary may waive part or all of the 
     tax imposed by section 4971 to the extent that the payment of 
     such tax would be excessive or otherwise inequitable relative 
     to the failure involved.
       ``(g) Expedited Resolution of Plan Sponsor Decisions.--If, 
     within 60 days of the due date for adoption of a funding 
     improvement plan under subsection (c) or a rehabilitation 
     plan under subsection (e), the plan sponsor of a plan in 
     endangered status or a plan in critical status has not agreed 
     on a funding improvement plan or rehabilitation plan, then 
     any member of the board or group that constitutes the plan 
     sponsor may require that the plan sponsor enter into an 
     expedited dispute resolution procedure for the development 
     and adoption of a funding improvement plan or rehabilitation 
     plan.
       ``(h) Nonbargained Participation.--
       ``(1) Both bargained and nonbargained employee-
     participants.--In the case of an employer that contributes to 
     a multiemployer plan with respect to both employees who are 
     covered by one or more collective bargaining agreements and 
     to employees who are not so covered, if the plan is in 
     endangered status or in critical status, benefits of and 
     contributions for the nonbargained employees, including 
     surcharges on those contributions, shall be determined as if 
     those

[[Page 2619]]

     nonbargained employees were covered under the first to expire 
     of the employer's collective bargaining agreements in effect 
     when the plan entered endangered or critical status.
       ``(2) Nonbargained employees only.--In the case of an 
     employer that contributes to a multiemployer plan only with 
     respect to employees who are not covered by a collective 
     bargaining agreement, this section shall be applied as if the 
     employer were the bargaining parties, and its participation 
     agreement with the plan was a collective bargaining agreement 
     with a term ending on the first day of the plan year 
     beginning after the employer is provided the schedule or 
     schedules described in subsections (c) and (e).
       ``(3) Employees covered by a collective bargaining 
     agreement.--The determination as to whether an employee 
     covered by a collective bargaining agreement for purposes of 
     this section shall be made without regard to the special rule 
     in Treasury Regulation section 1.410(b)-6(d)(ii)(D).
       ``(i) Definitions; Actuarial Method.--For purposes of this 
     section--
       ``(1) Bargaining party.--The term `bargaining party' 
     means--
       ``(A)(i) except as provided in clause (ii), an employer who 
     has an obligation to contribute under the plan; or
       ``(ii) in the case of a plan described under section 
     404(c), or a continuation of such a plan, the association of 
     employers that is the employee settlor of the plan; and
       ``(B) an employee organization which, for purposes of 
     collective bargaining, represents plan participants employed 
     by an employer who has an obligation to contribute under the 
     plan.
       ``(2) Funded percentage.--The term `funded percentage' 
     means the percentage equal to a fraction--
       ``(A) the numerator of which is the value of the plan's 
     assets, as determined under section 431(c)(2), and
       ``(B) the denominator of which is the accrued liability of 
     the plan, determined using actuarial assumptions described in 
     section 431(c)(3).
       ``(3) Accumulated funding deficiency.--The term 
     `accumulated funding deficiency' has the meaning given such 
     term in section 412(a).
       ``(4) Active participant.--The term `active participant' 
     means, in connection with a multiemployer plan, a participant 
     who is in covered service under the plan.
       ``(5) Inactive participant.--The term `inactive 
     participant' means, in connection with a multiemployer plan, 
     a participant, or the beneficiary or alternate payee of a 
     participant, who--
       ``(A) is not in covered service under the plan, and
       ``(B) is in pay status under the plan or has a 
     nonforfeitable right to benefits under the plan.
       ``(6) Pay status.--A person is in pay status under a 
     multiemployer plan if--
       ``(A) at any time during the current plan year, such person 
     is a participant or beneficiary under the plan and is paid an 
     early, late, normal, or disability retirement benefit under 
     the plan (or a death benefit under the plan related to a 
     retirement benefit), or
       ``(B) to the extent provided in regulations of the 
     Secretary, such person is entitled to such a benefit under 
     the plan.
       ``(7) Obligation to contribute.--The term `obligation to 
     contribute' has the meaning given such term under section 
     4212(a) of the Employee Retirement Income Security Act of 
     1974.
       ``(8) Actuarial method.--Notwithstanding any other 
     provision of this section, the actuary's determinations with 
     respect to a plan's normal cost, actuarial accrued liability, 
     and improvements in a plan's funded percentage under this 
     section shall be based upon the unit credit funding method 
     (whether or not that method is used for the plan's actuarial 
     valuation).
       ``(9) Plan sponsor.--In the case of a plan described under 
     section 404(c), or a continuation of such a plan, the term 
     `plan sponsor' means the bargaining parties described under 
     paragraph (1).''
       (b) Effective Dates.--
       (1) In general.--The amendment made by this section shall 
     apply with respect to plan years beginning after 2006.
       (2) Special rule for certain restored benefits.--In the 
     case of a multiemployer plan--
       (A) with respect to which benefits were reduced pursuant to 
     a plan amendment adopted on or after January 1, 2002, and 
     before June 30, 2005, and
       (B) which, pursuant to the plan document, the trust 
     agreement, or a formal written communication from the plan 
     sponsor to participants provided before June 30, 2005, 
     provided for the restoration of such benefits,
     the amendments made by this section shall not apply to such 
     benefit restorations to the extent that any restriction on 
     the providing or accrual of such benefits would otherwise 
     apply by reason of such amendments.

                   PART III--SUNSET OF FUNDING RULES

     SEC. 216. SUNSET OF FUNDING RULES.

       (a) Report.--Not later than December 31, 2011, the 
     Secretary of Labor, the Secretary of the Treasury, and the 
     Executive Director of the Pension Benefit Guaranty 
     Corporation shall conduct a study of the effect of the 
     amendments made by this subtitle on the operation and funding 
     status of multiemployer plans and shall report the results of 
     such study, including any recommendations for legislation, to 
     the Congress.
       (b) Matters Included in Study.--The study required under 
     subsection (a) shall include--
       (1) the effect of funding difficulties, funding rules in 
     effect before the date of the enactment of this Act, and the 
     amendments made by this subtitle on small businesses 
     participating in multiemployer plans,
       (2) the effect on the financial status of small employers 
     of--
       (A) funding targets set in funding improvement and 
     rehabilitation plans and associated contribution increases,
       (B) funding deficiencies,
       (C) excise taxes,
       (D) withdrawal liability,
       (E) the possibility of alternatives schedules and 
     procedures for financially-troubled employers, and
       (F) other aspects of the multiemployer system, and
       (3) the role of the multiemployer pension plan system in 
     helping small employers to offer pension benefits.
       (c) Sunset.--
       (1) In general.--Except as provided in this subsection, 
     notwithstanding any other provision of this Act, the 
     provisions of, and the amendments made by, this subtitle 
     shall not apply to plan years beginning after December 31, 
     2014, and the Employee Retirement Income Security Act of 1974 
     and the Internal Revenue Code of 1986 shall be applied to 
     such plan years under the provisions of sections 302 through 
     308 of such Act and 412 of such Code (as in effect before the 
     amendments made by this Act).
       (2) Funding improvement and rehabilitation plans.--If a 
     plan is operating under a funding improvement or 
     rehabilitation plan under section 305 of such Act or 432 of 
     such Code for its last year beginning before January 1, 2015, 
     such plan shall continue to operate under such funding 
     improvement or rehabilitation plan during any period after 
     December 31, 2014, such funding improvement or rehabilitation 
     plan is in effect and all provisions of such Act or Code 
     relating to the operation of such funding improvement or 
     rehabilitation plan shall continue in effect during such 
     period.
       (3) Amortization schedules.--In the case of any amount 
     amortized under section 304(b) of such Act or 431 of such 
     Code (as in effect after the amendments made by this 
     subtitle) over any period beginning with a plan year 
     beginning before January 1, 2015, such amount shall, in lieu 
     of the amortization which would apply after the application 
     of this subsection, continue to be amortized under such 
     section 304 or 431 (as so in effect).

              Subtitle B--Deduction and Related Provisions

     SEC. 221. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS.

       (a) Increase in Deduction.--Section 404(a)(1)(D) of the 
     Internal Revenue Code of 1986, as amended by this Act, is 
     amended to read as follows:
       ``(D) Amount determined on basis of unfunded current 
     liability.--
       ``(i) In general.--In the case of a defined benefit plan 
     which is a multiemployer plan, except as provided in 
     regulations, the maximum amount deductible under the 
     limitations of this paragraph shall not be less than the 
     unfunded current liability of the plan.
       ``(ii) Unfunded current liability.--For purposes of clause 
     (i), the term `unfunded current liability' means the excess 
     (if any) of--

       ``(I) 140 percent of the current liability of the plan 
     determined under section 431(c)(6)(C), over
       ``(II) the value of the plan's assets determined under 
     section 431(c)(2).''.

       (b) Exception From Limitation on Deduction Where 
     Combination of Defined Contribution and Defined Benefit 
     Plans.--
       (1) In general.--Section 404(a)(7)(C) of such Code, as 
     amended by this Act, is amended by adding at the end the 
     following new clause:
       ``(v) Multiemployer plans.--In applying this paragraph, any 
     multiemployer plan shall not be taken into account.''.
       (2) Conforming amendment.--Section 404(a)(7)(A) of such 
     Code is amended by striking the last sentence.
       (c) Effective Dates.--
       (1) Deduction limit.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 2006.
       (2) Exception.--The amendments made by subsection (b) shall 
     apply to years beginning after December 31, 2005.

     SEC. 222. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER 
                   HEALTH PLAN.

       (a) In General.--Section 420(e) of the Internal Revenue 
     Code of 1986 (relating to definitions and special rules) is 
     amended by adding at the end the following new paragraph:
       ``(5) Application to multiemployer plan.--In the case of 
     any plan to which section 404(c) applies (or any successor 
     plan primarily covering employees in the building and 
     construction industry)--
       ``(A) the prohibition under subsection (a) on the 
     application of this section to a multiemployer plan shall not 
     apply, and
       ``(B) this section shall be applied to any such plan--

[[Page 2620]]

       ``(i) by treating any reference in this section to an 
     employer as a reference to all employers maintaining the plan 
     (or, if appropriate, the plan sponsor), and
       ``(ii) in accordance with such modifications of this 
     section (and the provisions of this title and the Employee 
     Retirement Income Security Act of 1974 relating to this 
     section) as the Secretary determines appropriate to reflect 
     the fact the plan is not maintained by a single employer.''
       (b) Amendments of ERISA.--
       (1) Section 101(e)(3) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by 
     striking ``American Jobs Creation Act of 2004'' and inserting 
     ``Pension Security and Transparency Act of 2005''.
       (2) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is 
     amended by striking ``American Jobs Creation Act of 2004'' 
     and inserting ``Pension Security and Transparency Act of 
     2005''.
       (3) Section 408(b)(13) of such Act (29 U.S.C. 1108(b)(13)) 
     is amended by striking ``American Jobs Creation Act of 2004'' 
     and inserting ``Pension Security and Transparency Act of 
     2005''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to transfers made in taxable years beginning 
     after December 31, 2004.

                  TITLE III--INTEREST RATE ASSUMPTIONS

     SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP 
                   SUM DISTRIBUTIONS.

       (a) Amendments of ERISA.--
       (1) In general.--Section 205(g)(3)(A) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1055(g)(3)(A)) is amended by adding at the end the following 
     new sentence: ``In the case of plan years beginning after 
     2006, the preceding sentence shall be applied by using the 
     applicable yield curve method under subparagraph (C) rather 
     than the applicable interest rate.''.
       (2) Applicable yield curve method.--Section 205(g)(3) of 
     such Act (29 U.S.C. 1055(g)(3)) is amended by adding at the 
     end the following new subparagraphs:
       ``(C) Applicable yield curve method.--For purposes of 
     subparagraph (A), the term `applicable yield curve method' 
     means--
       ``(i) the phase-in yield curve method in the case of plan 
     years beginning in 2007, 2008, and 2009, and
       ``(ii) the yield curve method for years beginning after 
     2009.
       ``(D) Yield curve method.--For purposes of this paragraph--
       ``(i) In general.--The yield curve method is a method under 
     which present value is determined--

       ``(I) by using interest rates drawn from a yield curve 
     which is prescribed by the Secretary of the Treasury and 
     which reflects the yield on high-quality corporate bonds with 
     varying maturities, and
       ``(II) by matching the timing of the expected benefit 
     payments under the plan to the interest rates on such yield 
     curve.

       ``(ii) Publication.--Each month the Secretary of the 
     Treasury shall publish any yield curve prescribed under this 
     subparagraph which shall apply to plan years beginning in 
     such month and such yield curve shall be based on average 
     interest rates for business days occurring during the 3 
     preceding months.
       ``(E) Phase-in yield curve method.--
       ``(i) In general.--Present value determined under the 
     phase-in yield curve method shall be equal to the sum of--

       ``(I) the applicable percentage of such amount determined 
     under the yield curve method described in subparagraph (D), 
     and
       ``(II) the product of such amount determined by using the 
     applicable interest rate and a percentage equal to 100 
     percent minus the applicable percentage.

       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage is 25 percent for plan years 
     beginning in 2007, 50 percent for plan years beginning in 
     2008, and 75 percent for plan years beginning in 2009.''.
       (b) Amendments of Internal Revenue Code.--
       (1) In general.--Section 417(e)(3)(A) of the Internal 
     Revenue Code of 1986 (relating to determination of present 
     value) is amended by adding at the end the following new 
     sentence: ``In the case of plan years beginning after 2006, 
     the preceding sentence shall be applied by using the 
     applicable yield curve method under subparagraph (C) rather 
     than the applicable interest rate.''
       (2) Applicable yield curve method.--Section 417(e) of such 
     Code is amended by adding at the end the following new 
     subparagraphs:
       ``(C) Applicable yield curve method.--For purposes of 
     subparagraph (A), the term `applicable yield curve method' 
     means--
       ``(i) the phase-in yield curve method in the case of plan 
     years beginning in 2007, 2008, and 2009, and
       ``(ii) the yield curve method for years beginning after 
     2009.
       ``(D) Yield curve method.--For purposes of this paragraph--
       ``(i) In general.--The yield curve method is a method under 
     which present value is determined--

       ``(I) by using interest rates drawn from a yield curve 
     which is prescribed by the Secretary and which reflects the 
     yield on high-quality corporate bonds with varying 
     maturities, and
       ``(II) by matching the timing of the expected benefit 
     payments under the plan to the interest rates on such yield 
     curve.

       ``(ii) Publication.--Each month the Secretary shall publish 
     any yield curve prescribed under this subparagraph which 
     shall apply to plan years beginning in such month and such 
     yield curve shall be based on average interest rates for 
     business days occurring during the 3 preceding months.
       ``(E) Phase-in yield curve method.--
       ``(i) In general.--Present value determined under the 
     phase-in yield curve method shall be equal to the sum of--

       ``(I) the applicable percentage of such amount determined 
     under the yield curve method described in subparagraph (D), 
     and
       ``(II) the product of such amount determined by using the 
     applicable interest rate and a percentage equal to 100 
     percent minus the applicable percentage.

       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage is 25 percent for plan years 
     beginning in 2007, 50 percent for plan years beginning in 
     2008, and 75 percent for plan years beginning in 2009.''.
       (c) Special Rule for Plan Amendments.--A plan shall not 
     fail to meet the requirements of section 204(g) of the 
     Employee Retirement Income Security Act of 1974 or section 
     411(d)(6) of the Internal Revenue Code of 1986 solely by 
     reason of the adoption by the plan of an amendment necessary 
     to meet the requirements of the amendments made by this 
     section.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to plan years beginning after 2006.

     SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT 
                   LIMITATIONS TO LUMP SUM DISTRIBUTIONS.

       (a) In General.--Clause (ii) of section 415(b)(2)(E) of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(ii) For purposes of adjusting any benefit under 
     subparagraph (B) for any form of benefit subject to section 
     417(e)(3), clause (i) shall be applied by substituting `5.5 
     percent' for `5 percent'.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 2005.

     SEC. 303. RESTRICTIONS ON FUNDING OF NONQUALIFIED DEFERRED 
                   COMPENSATION PLANS BY EMPLOYERS MAINTAINING 
                   UNDERFUNDED OR TERMINATED SINGLE-EMPLOYER 
                   PLANS.

       (a) Amendments of ERISA.--
       (1) In general.--Part 3 of subtitle A of title I of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1081 et seq.), as amended by this Act, is amended by adding 
     at the end the following new section:


    ``NOTICE OF FUNDING OF NONQUALIFIED DEFERRED COMPENSATION PLANS

       ``Sec. 306. (a) Notice and Access.--
       ``(1) Notice relating to restricted period.--The plan 
     administrator of a defined benefit plan which is a single-
     employer plan shall notify each plan sponsor of the plan 
     within a reasonable period of time after the occurrence of an 
     event which results in a restricted period with respect to 
     the plan. Such notice shall include information--
       ``(A) as to the duration of the restricted period, and
       ``(B) the restrictions under section 409A(b)(3) of the 
     Internal Revenue Code of 1986 which apply during the 
     restricted period to the plan sponsor and any member of a 
     controlled group which includes such sponsor.
       ``(2) Notice of existence of, and transfers to, 
     nonqualified deferred compensation plans.--
       ``(A) Initial notice.--Within 30 days of receipt of a 
     notice under paragraph (1), each plan sponsor shall notify 
     the plan administrator of the plan described in paragraph 
     (1)--
       ``(i) of nonqualified deferred compensation plans 
     maintained by the plan sponsor or any member of a controlled 
     group which includes such sponsor, and
       ``(ii) the amount of any assets transferred or otherwise 
     reserved by the plan sponsor or such member in violation of 
     section 409A(b)(3) of such Code during any portion of the 
     restricted period occurring on or before the date the plan 
     sponsor provides such notice.
       ``(B) Additional notices.--If, after the date on which 
     notice is provided under subparagraph (A) and during any 
     portion of the remaining restricted period specified in the 
     notice provided under paragraph (1), the plan sponsor of a 
     plan described in paragraph (1) or a member of a controlled 
     group which includes such sponsor--
       ``(i) transfers or reserves assets in violation of section 
     409A(b)(3) of such Code, or
       ``(ii) establishes a new nonqualified deferred compensation 
     plan,

     the plan sponsor shall notify the plan administrator of the 
     plan described in paragraph (1) of such transfer, 
     reservation, or establishment within 3 days of the date of 
     such action.
       ``(3) Access to financial data.--Any fiduciary of the plan 
     shall have access to the financial records of a plan sponsor 
     or any member of a controlled group which includes

[[Page 2621]]

     such sponsor to determine if assets were transferred or 
     otherwise reserved in violation of section 409A(b)(3) of such 
     Code.
       ``(4) Form and manner.--The Secretary may prescribe the 
     form and manner of a notice required under this section. Such 
     a notice shall be written in a manner calculated to be 
     understood by the average plan participant and may be 
     delivered in written, electronic, or other appropriate form 
     to the extent that such form is reasonably accessible to the 
     recipient.
       ``(b) Restricted Period.--For purposes of this section, the 
     term `restricted period' means, with respect to any plan 
     described in subsection (a)(1)--
       ``(1) any period--
       ``(A) beginning on the first day of a plan year following a 
     plan year for which the plan's adjusted funding target 
     attainment percentage (as defined in section 303) was less 
     than 60 percent (determined as of the close of such year), 
     and
       ``(B) ending on the last day of the first period of 2 
     consecutive plan years (beginning on or after such first day) 
     for which such percentage was at least 60 percent,
       ``(2) any period the plan sponsor is in bankruptcy, and
       ``(3) the 12-month period beginning on the date which is 6 
     months before the termination date of the plan if, as of the 
     termination date, the plan is not sufficient for benefit 
     liabilities (within the meaning of section 4041).

     In the case of a plan which is in at-risk status, paragraph 
     (1) shall be applied by substituting `80 percent' for `60 
     percent' each place it appears.
       ``(c) Nonqualified Deferred Compensation Plan.--For 
     purposes of this section--
       ``(1) In general.--The term `nonqualified deferred 
     compensation plan' means any plan that provides for the 
     deferral of compensation, other than--
       ``(A) a qualified employer plan, and
       ``(B) any bona fide vacation leave, sick leave, 
     compensatory time, disability pay, or death benefit plan.
       ``(2) Qualified employer plan.--The term `qualified 
     employer plan' means--
       ``(A) any plan, contract, pension, account, or trust 
     described in subparagraph (A) or (B) of section 219(g)(5) of 
     the Internal Revenue Code of 1986 (without regard to 
     subparagraph (A)(iii)),
       ``(B) any eligible deferred compensation plan (within the 
     meaning of section 457(b)) of such Code, and
       ``(C) any plan described in section 415(m) of such Code.
       ``(3) Plan includes arrangements, etc.--The term `plan' 
     includes any agreement or arrangement, including an agreement 
     or arrangement that includes one person.
       ``(d) Other Definitions.--For purposes of this section--
       ``(1) Applicable covered employee.--
       ``(A) In general.--The term `applicable covered employee' 
     means any--
       ``(i) covered employee of a plan sponsor,
       ``(ii) covered employee of a member of a controlled group 
     which includes the plan sponsor, and
       ``(iii) former employee who was a covered employee at the 
     time of termination of employment with the plan sponsor or a 
     member of a controlled group which includes the plan sponsor.
       ``(B) Covered employee.--The term `covered employee' has 
     the meaning given such term by section 162(m)(3) of the 
     Internal Revenue Code of 1986.
       ``(2) Controlled group.--The term `controlled group' has 
     the meaning given such term by section 302(d)(3).''.
       (2) Enforcement.--
       (A) In general.--Section 502(a) of the Employee Retirement 
     Income Security Act (29 U.S.C. 1132(a)), as amended by this 
     Act, is amended--
       (i) by striking ``or'' at the end of paragraph (9), by 
     striking the period at the end of paragraph (10) and 
     inserting ``; or'', and by adding at the end the following 
     new paragraph:
       ``(11) by a fiduciary of a defined benefit plan which is a 
     single-employer plan against--
       ``(A) a plan sponsor, a member of a controlled group which 
     includes the plan sponsor, an applicable covered employee, or 
     a person holding assets which are part of a nonqualified 
     deferred compensation plan to recover on behalf of the plan--
       ``(i) assets which were set aside or transferred in 
     violation of section 409A(b)(3) of the Internal Revenue Code 
     of 1986 (and any earnings properly allocable to the assets); 
     or
       ``(ii) amounts equivalent to the assets and earnings 
     described in clause (i); or
       ``(B) a plan sponsor, or a member of a controlled group 
     which includes the plan sponsor, to compel the production of 
     records the fiduciary is entitled to under section 306.''; 
     and
       (ii) by adding at the end the following new flush sentence:

     ``For purposes of paragraph (11), any term used in such 
     paragraph which is also used in section 306 shall have the 
     meaning given such term by section 306.''.
       (B) Awarding of fees.--Section 502(g) of such Act (29 
     U.S.C. 1132(g)) is amended by adding at the end the following 
     new paragraph:
       ``(3) Actions to recover assets transferred to nonqualified 
     deferred compensation plans.--If, in any action under 
     subsection (a)(11) by a fiduciary for or on behalf of a plan 
     to enforce section 306 of this Act and section 409A(b)(3), a 
     judgment is awarded in favor of the plan, the court may, in 
     addition to any other amount, award the plan reasonable 
     attorney's fees and costs of the action, to be paid by the 
     defendant''.
       (3) Clerical amendment.--The table of contents in section 1 
     of such Act, as amended by this Act, is amended by adding at 
     the end the following new item:

``Sec. 306. Restrictions on funding of nonqualified deferred 
              compensation plans.''.

       (b) Amendments of Internal Revenue Code.--
       (1) In general.--Subsection (b) of section 409A of the 
     Internal Revenue Code of 1986 (providing rules relating to 
     funding) is amended by redesignating paragraphs (3) and (4) 
     as paragraphs (4) and (5), respectively, and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Employers of underfunded or terminated defined 
     benefit plans.--During any restricted period--
       ``(A) a plan sponsor of a defined benefit plan which is a 
     single-employer plan, or
       ``(B) any member of a controlled group which includes such 
     sponsor,

     shall not directly or indirectly transfer assets, or directly 
     or indirectly otherwise reserve assets, in a trust (or other 
     arrangement determined by the Secretary) for purposes of 
     paying deferred compensation of an applicable covered 
     employee under a nonqualified deferred compensation plan of 
     the plan sponsor or member. Any assets transferred or 
     reserved in violation of the preceding sentence shall, for 
     purposes of section 83, be treated as property transferred in 
     connection with the performance of services whether or not 
     such assets are available to satisfy claims of general 
     creditors. For purposes of this paragraph, any term used in 
     this paragraph which is also used in section 306 of the 
     Employee Retirement Income Security Act of 1974 shall have 
     the meaning given such term by such section.''.
       (2) Conforming amendments.--Paragraphs (4) and (5) of 
     section 409A(b) of such Code, as redesignated by subsection 
     (a) of this subsection, are each amended by striking 
     ``paragraph (1) or (2)'' each place it appears and inserting 
     ``paragraph (1), (2), or (3)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transfers or other reservation of assets after 
     December 31, 2006.

     SEC. 304. MODIFICATION OF PENSION FUNDING REQUIREMENTS FOR 
                   PLANS SUBJECT TO CURRENT TRANSITION RULE.

       (a) Plan Year Before New Funding Rules.--Section 769(c)(3) 
     of the Retirement Protection Act of 1994, as added by section 
     201 of the Pension Funding Equity Act of 2004, is amended by 
     striking ``and 2005'' and inserting ``, 2005, and 2006''.
       (b) Plan Years After New Funding Rules.--
       (1) In general.--In the case of a plan that--
       (A) was not required to pay a variable rate premium for the 
     plan year beginning in 1996,
       (B) has not, in any plan year beginning after 1995, merged 
     with another plan (other than a plan sponsored by an employer 
     that was in 1996 within the controlled group of the plan 
     sponsor), and
       (C) is sponsored by a company that is engaged primarily in 
     the interurban or interstate passenger bus service,

     the rules described in subsection (b) shall apply for any 
     plan year beginning after 2006.
       (2) Modified rules.--The rules described in this subsection 
     are as follows:
       (A) For purposes of--
       (i) determining unfunded benefits under section 
     4006(a)(3)(E)(ii) of the Employee Retirement Income Security 
     Act of 1974, and
       (ii) determining any present value or making any 
     computation under section 412 and section 430 of the Internal 
     Revenue Code of 1986 and sections 302 and 303 of such Act,

     the mortality table shall be the mortality table used by the 
     plan.
       (B) Notwithstanding section 303(f)(4) of such Act or 
     430(f)(4) of such Code, for purposes of section 
     303(c)(4)(A)(ii) of such Act and 430(c)(4)(A)(ii) of such 
     Code, the value of plan assets shall not be reduced by the 
     amount of the prefunding balance if, pursuant to a binding 
     written agreement with the Pension Benefit Guaranty 
     Corporation entered into before January 1, 2006, the 
     prefunding balance is not available to reduce the minimum 
     required contribution for the plan year.
       (3) Definitions.--Any term used in this section which is 
     also used in section 303 of such Act or section 430 of such 
     Code shall have the meaning provided such term in such 
     section.
       (4) Conforming amendment.--Section 769 of the Retirement 
     Protection Act of 1994 is amended by striking subsection (c).
       (5) Effective date.--The amendments made by this subsection 
     shall apply to plan years beginning after 2006.

[[Page 2622]]



          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

     SEC. 401. INCREASES IN PBGC PREMIUMS.

       (a) Flat-Rate Premiums.--
       (1) In general.--Section 4006(a)(3)(A)(i) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)(3)(A)(i)) is amended to read as follows:
       ``(i) in the case of a single-employer plan, an amount 
     equal to--

       ``(I) for plan years beginning after December 31, 1990, and 
     before January 1, 2006, $19, or
       ``(II) for plan years beginning after December 31, 2005, 
     the amount determined under subparagraph (H),

     plus the additional premium (if any) determined under 
     subparagraph (E) for each individual who is a participant in 
     such plan during the plan year;''.
       (2) Amount of premium after 2005.--Section 4006(a)(3) of 
     such Act (29 U.S.C. 1306(a)(3)), as amended by sections 406 
     and 407, is amended by adding at the end the following:
       ``(H) Amount of premium.--
       ``(i) In general.--The amount determined under this 
     subparagraph is the greater of $30 or in the case of plan 
     years beginning after December 31, 2006, the adjusted amount 
     determined under clause (ii).
       ``(ii) Adjusted amount.--The adjusted amount determined 
     under this clause is the product derived by multiplying $30 
     by the ratio of--

       ``(I) the contribution and benefit base (determined under 
     section 230 of the Social Security Act) in effect in the 
     calendar year in which the plan year begins, to
       ``(II) the contribution and benefit base in effect in 2006.

       ``(iii) Rounding.--If the amount determined under clause 
     (ii) is not a multiple of $1, such product shall be rounded 
     to the nearest multiple of $1.''.
       (b) Risk-Based Premiums.--
       (1) Conforming amendments related to funding rules for 
     single-employer plans.--Section 4006(a)(3)(E) of such Act is 
     amended by striking clauses (iii) and (iv) and inserting the 
     following:
       ``(iii)(I) For purposes of clause (ii), except as provided 
     in subclause (II), the term `unfunded benefits' means, for a 
     plan year, the amount which would be the plan's funding 
     shortfall (as defined in section 303(c)(4)) if the value of 
     plan assets of the plan were equal to the fair market value 
     of such assets.
       ``(II) The interest rate used in valuing benefits for 
     purposes of subclause (I) shall be equal to the first, 
     second, or third segment rate which would be determined under 
     section 303(h)(2)(C) if section 303(h)(2)(D) were applied by 
     using the yields on investment grade corporate bonds with 
     varying maturities rather than the average of such yields for 
     a 12-month period.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply with respect to plan years beginning after 2006.
       (c) Flat-Rate Premium Adjustment.--
       (1) In general.--Beginning in 2011, and every 5 years 
     thereafter, the Board of Directors of the Pension Benefit 
     Guaranty Corporation under title IV of the Employee 
     Retirement Income Security Act (29 U.S.C. 1301 et seq.) shall 
     submit to Congress a report that describes any 
     recommendations for adjusting the premium rate payable to the 
     Corporation described under section 4006(a)(3)(A)(i) of such 
     Act (as amended by subsection (a)).
       (2) Considerations.--In developing the report described 
     under paragraph (1), the Corporation shall consider--
       (A) the national average wage index (as defined in section 
     209(k)(1) of the Social Security Act (42 U.S.C. 409(k)(1)));
       (B) the finances of the Corporation as of the date of such 
     report and an actuarial evaluation of the expected operations 
     and status of the funds established under section 4005 of 
     such title IV (29 U.S.C. 1305) for the 5 years succeeding 
     such date;
       (C) the impact of any increases in such premium rate on 
     plan sponsors subject to such title IV; and
       (D) such other factors determined relevant by the 
     Corporation.

     SEC. 402. AUTHORITY TO ENTER ALTERNATIVE FUNDING AGREEMENTS 
                   TO PREVENT PLAN TERMINATIONS.

       (a) Authority To Enter Into Agreements.--
       (1) Distress terminations.--Section 4041(c) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)) is 
     amended by adding at the end the following:
       ``(4) Alternative funding agreements.--
       ``(A) In general.--If the corporation determines that--
       ``(i) a plan meets the requirements for a distress 
     termination under this subsection without regard to an 
     alternative funding agreement under section 4047(a), and
       ``(ii) the termination of the plan would not be necessary 
     if such an agreement were entered into,

     the corporation may request that the Secretary of the 
     Treasury, in consultation with the corporation, enter into 
     such an agreement with the contributing sponsors under the 
     plan.
       ``(B) Early action initiatives.--Subject to the limitations 
     in subsection (a)(3), if--
       ``(i) the corporation determines that it is reasonable to 
     believe that a plan may be subject to a distress termination 
     within 6 months unless action is taken, the corporation may 
     request that the Secretary of the Treasury, in consultation 
     with the corporation, enter into an alternative funding 
     agreement under section 4047(a); and
       ``(ii) the corporation, upon the request of the 
     contributing sponsor of a plan or other person, determines 
     that it is reasonable to believe that a plan may be subject 
     to a distress termination within 2 years unless action is 
     taken, the corporation may request that the Secretary of the 
     Treasury, in consultation with the corporation, enter into an 
     alternative funding agreement under section 4047(a).''.
       (2) Involuntary terminations.--Section 4042 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1342) is 
     amended by adding at the end the following:
       ``(i) Alternative Funding Agreements.--If--
       ``(1) the corporation determines that it is reasonable to 
     believe that a plan will meet the requirements for an 
     involuntary termination under this section without regard to 
     an alternative funding agreement under section 4047(a) within 
     6 months unless action is taken, or
       ``(B) the corporation, upon the request of the contributing 
     sponsor of a plan or other person, determines that it is 
     reasonable to believe that a plan may be subject to an 
     involuntary termination within 2 years unless action is 
     taken,

     and such a termination would not be necessary if such an 
     agreement is entered into, the corporation may request that 
     the Secretary of the Treasury, in consultation with the 
     corporation, enter into an alternative funding agreement 
     under section 4047(a).''.
       (b) Alternative Funding Schedules To Prevent Plan 
     Termination.--
       (1) In general.--Section 4047 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1347) is amended by--
       (A) striking the section heading and all that follows 
     through ``Whenever'' and inserting--

     ``SEC. 4047. ALTERNATIVE FUNDING SCHEDULES TO PREVENT 
                   TERMINATION; RESTORATION OF TERMINATED PLANS.

       ``(a) Alternative Funding Agreements.--
       ``(1) In general.--If the requirements of section 
     4041(c)(4) or 4042(i) are met with respect to any plan, the 
     Secretary of the Treasury, in consultation with the 
     corporation, may enter into an alternative funding agreement 
     with the contributing sponsors under the plan that meets the 
     requirements of this subsection.
       ``(2) Other requirements.--An alternative funding agreement 
     may be entered into by the Secretary of the Treasury, in 
     consultation with corporation, only if--
       ``(A) such Secretary finds the agreement to be in the best 
     interests of the participants and beneficiaries; and
       ``(B) the agreement meets the requirements set forth by 
     such Secretary in regulations.
       ``(3) Alternative funding agreement.--
       ``(A) In general.--An agreement meets the requirements of 
     this subsection if the agreement--
       ``(i) provides for an additional amortization schedule for 
     a period not to exceed 10 years,
       ``(ii) requires the plan to pay at the time the agreement 
     is entered into any professional fees or other expenses 
     incurred by the Secretary of the Treasury or the corporation 
     in connection with the agreements,
       ``(iii) requires approval by the corporation before the 
     contributing sponsor establishes or maintains any other 
     defined benefit plan other than any multiemployer plan that 
     covers a substantial number of employees who are covered by 
     the plan subject to the agreement or who perform 
     substantially the same type of work with respect to the same 
     business operations as employees covered by such plan, and
       ``(iv) provides for a termination date, or a schedule of 
     termination dates, for the purpose of the guarantee under 
     section 4022, to apply if a plan terminates during the period 
     that the agreement is in effect.
       ``(B) Other conditions.--Notwithstanding any other 
     provision of this Act, an agreement meeting the requirements 
     of this subsection may provide--
       ``(i) for restrictions on, or the elimination of, future 
     accruals, but only to the extent that such restrictions or 
     eliminations would have been permitted under section 204(g) 
     or section 411(d)(6) of the Internal Revenue Code of 1986 if 
     they had been implemented by a plan amendment adopted 
     immediately before the effective date of the agreement,
       ``(ii) that the contributing sponsors will provide security 
     or other collateral in such form and amount as specified in 
     the agreement,
       ``(iii) conditions under which the plan could be terminated 
     in a standard termination under section 4041(b) or conditions 
     under which accruals to which clause (i) applies could resume 
     in the future, and
       ``(iv) for such other terms and conditions as the Secretary 
     of the Treasury, in consultation with the corporation, 
     determines necessary to protect the interests of the 
     corporation.
       ``(C) Employee requirements.--
       ``(i) In general.--An agreement meets the requirements of 
     this subsection only if--

[[Page 2623]]

       ``(I) at least 60 days before the agreement is to take 
     effect the contributing sponsors notify affected parties 
     (other than the corporation) of the terms of the agreement 
     and its effect on such parties, and
       ``(II) each employee organization representing participants 
     in the plan approves the agreement before it takes effect.

       ``(ii) Form and manner of notice.--The notice under clause 
     (i) shall be written in a manner calculated to be understood 
     by the average plan participant and may be provided to a 
     person designated, in writing, by the person to which it 
     would otherwise be provided. Such notice may be provided in 
     written, electronic, or other appropriate form to the extent 
     such form is reasonably accessible to persons to whom the 
     notice is required to be provided.
       ``(4) Coordination with minimum funding requirements.--Any 
     alternative funding schedule under an agreement meeting the 
     requirements under this subsection shall supersede the 
     minimum funding requirements of this Act and the Internal 
     Revenue Code of 1986. For purposes of applying this Act or 
     such Code, any contribution required under such schedule 
     shall be treated in the same manner as contributions required 
     under section 302 of this Act and section 412 of such Code.
       ``(b) Restoration of Terminated Plans.--Whenever''.
       (2) Conforming amendment.--The table of contents for title 
     IV of such Act is amended by striking the item relating to 
     section 4047 and inserting the following:

``4047. Alternative funding schedules to prevent terminations; 
              restoration of terminated plans.''.

       (c) Amendments to Other Provisions.--
       (1) Qualification requirement.--Section 401(a) of the 
     Internal Revenue Code of 1986, as amended by sections 115 and 
     701 of this Act, is amended by inserting after paragraph (35) 
     the following new paragraph:
       ``(36) Successor plans to certain plans.--If--
       ``(A) an alternative funding agreement described in section 
     4047(a) of the Employee Retirement Income Security Act of 
     1974 is in effect with respect to any plan, and
       ``(B) the plan is maintained by an employer that 
     establishes or maintains 1 or more other defined benefit 
     plans (other than any multiemployer plan), and such other 
     plans in combination provide benefit accruals to any 
     substantial number of successor employees,

     the Secretary may, in the Secretary's discretion, determine 
     that any trust of which any other such plan is a part does 
     not constitute a qualified trust under this subsection unless 
     all benefit obligations of the plan to which the alternative 
     funding agreement applies have been satisfied. For purposes 
     of this paragraph, the term `successor employee' means any 
     employee who is or was covered by the plan to which the 
     alternative funding agreement applies and any employee who 
     performs substantially the same type of work with respect to 
     the same business operations as an employee covered by such 
     plan.''.
       (2) Limitation on deductions under certain plans.--Section 
     404(a)(7)(C) of the Internal Revenue Code of 1986 is amended 
     by adding at the end the following:
       ``(iii) Plans subject to alternative funding agreements.--
     This paragraph shall not apply to any plan for a plan year if 
     an alternative funding agreement described in section 4047(a) 
     of the Employee Retirement Income Security Act of 1974 is in 
     effect for such year.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of enactment of this Act.

     SEC. 403. SPECIAL FUNDING RULES FOR PLANS MAINTAINED BY 
                   COMMERCIAL AIRLINES THAT ARE AMENDED TO CEASE 
                   FUTURE BENEFIT ACCRUALS.

       (a) In General.--If an election is made to have this 
     section apply to an eligible plan--
       (1) in the case of any applicable plan year beginning 
     before January 1, 2007, the plan shall not have an 
     accumulated funding deficiency for purposes of section 302 of 
     the Employee Retirement Income Security Act of 1974 and 
     sections 412 and 4971 of the Internal Revenue Code of 1986 if 
     contributions to the plan for the plan year are not less than 
     the minimum required contribution determined under subsection 
     (d) for the plan for the plan year, and
       (2) in the case of any applicable plan year beginning on or 
     after January 1, 2007, the minimum required contribution 
     determined under sections 303 of such Act and 430 of such 
     Code shall, for purposes of sections 302 and 303 of such Act 
     and sections 412, 430, and 4971 of such Code, be equal to the 
     minimum required contribution determined under subsection (d) 
     for the plan for the plan year.
       (b) Eligible Plan.--For purposes of this section--
       (1) In general.--The term ``eligible plan'' means a defined 
     benefit plan (other than a multiemployer plan) to which 
     sections 302 of such Act and 412 of such Code applies--
       (A) which is sponsored by an employer--
       (i) which is a commercial airline passenger airline, or
       (ii) the principal business of which is providing catering 
     services to a commercial passenger airline, and
       (B) with respect to which the requirements of paragraphs 
     (2) and (3) are met.
       (2) Accrual restrictions.--
       (A) In general.--The requirements of this paragraph are met 
     if, effective as of the first day of the first applicable 
     plan year and at all times thereafter while an election under 
     this section is in effect, the plan provides that--
       (i) the accrued benefit, any death or disability benefit, 
     and any social security supplement described in the last 
     sentence of section 411(a)(9) of such Code and section 
     204(b)(1)(G) of such Act, of each participant are frozen at 
     the amount of such benefit or supplement immediately before 
     such first day, and
       (ii) all other benefits under the plan are eliminated,

     but only to the extent the freezing or elimination of such 
     benefits would have been permitted under section 411(d)(6) of 
     such Code and section 204(g) of such Act if they had been 
     implemented by a plan amendment adopted immediately before 
     such first day.
       (B) Increases in section 415 limits disregarded.--If a plan 
     provides that an accrued benefit of a participant which has 
     been subject to any limitation under section 415 of such Code 
     will be increased if such limitation is increased, the plan 
     shall not be treated as meeting the requirements of this 
     paragraph unless, effective as of the first day of the first 
     applicable plan year and at all times thereafter while an 
     election under this section is in effect, the plan provides 
     that any such increase shall not take effect. A plan shall 
     not fail to meet the requirements of section 411(d)(6) of 
     such Code and section 204(g) of such Act solely because the 
     plan is amended to meet the requirements of this 
     subparagraph.
       (3) Restriction on applicable benefit increases.--
       (A) In general.--The requirements of this paragraph are met 
     if no applicable benefit increase takes effect at any time 
     during the period beginning on July 26, 2005, and ending on 
     the day before the first day of the first applicable plan 
     year.
       (B) Applicable benefit increase.--For purposes of this 
     paragraph, the term ``applicable benefit increase'' means, 
     with respect to any plan year, any increase in liabilities of 
     the plan by plan amendment (or otherwise provided in 
     regulations provided by the Secretary) which, but for this 
     paragraph, would occur during the plan year by reason of--
       (i) any increase in benefits,
       (ii) any change in the accrual of benefits, or
       (iii) any change in the rate at which benefits become 
     nonforfeitable under the plan.
       (4) Exception for imputed disability service.--Paragraphs 
     (2) and (3) shall not apply to any accrual or increase with 
     respect to imputed service provided to a participant during 
     any period of the participant's disability occurring on or 
     after the effective date of the plan amendment providing the 
     restrictions under paragraph (2) if the participant--
       (A) was receiving disability benefits as of such date, or
       (B) was receiving sick pay and subsequently determined to 
     be eligible for disability benefits as of such date.
       (c) Elections and Related Terms.--
       (1) In general.--A plan sponsor shall make the election 
     under subsection (a) at such time and in such manner as the 
     Secretary of the Treasury may prescribe. Except as provided 
     in subsection (h)(5), such election, once made, may be 
     revoked only with the consent of such Secretary.
       (2) Years for which election made.--
       (A) In general.--The plan sponsor may select the first plan 
     year to which the election under subsection (a) applies from 
     among plan years ending after the date of the election. The 
     election shall apply to such plan year and all subsequent 
     years.
       (B) Election of new plan year.--The plan sponsor may 
     specify a new plan year in the election under subsection (a) 
     and the plan year of the plan may be changed to such new plan 
     year without the approval of the Secretary of the Treasury.
       (3) Applicable plan year.--The term ``applicable plan 
     year'' means each plan year to which the election under 
     subsection (a) applies under paragraph (1).
       (d) Minimum Required Contribution.--
       (1) In general.--In the case of any applicable plan year 
     during the amortization period, the minimum required 
     contribution shall be the amount necessary to amortize the 
     unfunded liability of the plan, determined as of the first 
     day of the plan year, in equal annual installments (until 
     fully amortized) over the remainder of the amortization 
     period. Such amount shall be separately determined for each 
     applicable plan year.
       (2) Years after amortization period.--In the case of any 
     plan year beginning after the end of the amortization period, 
     section 302(a)(2)(A) of such Act and section 412(a)(2)(A) of 
     such Code shall apply to such plan, but the prefunding 
     balance as of the first day of the first of such years under 
     section 303(f) of such Act and section 430(f) of such Code 
     shall be zero.
       (3) Definitions.--For purposes of this section--
       (A) Unfunded liability.--The term ``unfunded liability'' 
     means the unfunded accrued liability under the plan, 
     determined under the unit credit funding method.

[[Page 2624]]

       (B) Amortization period.--The term ``amortization period'' 
     means the 20-plan year period beginning with the first 
     applicable plan year.
       (4) Other rules.--In determining the minimum required 
     contribution and amortization amount under this subsection--
       (A) the provisions of section 302(c)(3) of such Act and 
     section 412(c)(3) of such Code, as in effect before the date 
     of enactment of this section, shall apply,
       (B) the rate of interest under section 302(b) of such Act 
     and section 412(b) of such Code, as so in effect, shall be 
     used for all calculations requiring an interest rate, and
       (C) the value of plan assets shall be equal to their fair 
     market value.
       (5) Special rule for certain plan spinoffs.--For purposes 
     of subsection (a), if, with respect to any eligible plan to 
     which this subsection applies--
       (A) any applicable plan year includes the date of the 
     enactment of this Act,
       (B) a plan was spun off from the eligible plan during the 
     plan year but before such date of enactment,

     the minimum required contribution under subsection (a)(1) for 
     the eligible plan for such applicable plan year shall be 
     determined as if the plans were a single plan for that plan 
     year (based on the full 12-month plan year in effect prior to 
     the spin-off). The employer shall designate the allocation of 
     the minimum required contribution between such plans for the 
     applicable plan year and direct the appropriate reallocation 
     between the plans of any contributions for the applicable 
     plan year.
       (e) Funding Standard Account and Prefunding Balance.--Any 
     charge or credit in the funding standard account under 
     section 302 of such Act or section 412 of such Code, and any 
     prefunding balance under section 303 of such Act or section 
     430 of such Code, as of the day before the first day of the 
     first applicable plan year, shall be reduced to zero.
       (f) Amendments to Other Provisions.--
       (1) Qualification requirement.--Section 401(a)(36) of the 
     Internal Revenue Code of 1986, as added by section 402 of 
     this Act, is amended by adding at the end the following: 
     ``This paragraph shall also apply to any plan during any 
     period during which an amortization schedule under section 
     403 of the Pension Security and Transparency Act of 2005 is 
     in effect.''
       (2) PBGC liability limited.--Section 4022 of the Employee 
     Retirement Income Security Act of 1974, as amended by this 
     Act, is amended by adding at the end the following new 
     subsection:
       ``(h) Special Rule for Plans Electing Certain Funding 
     Requirements.--During any period in which an election by a 
     plan under section 403 of the Pension Security and 
     Transparency Act of 2005 is in effect, then this section and 
     section 4044(a)(3) shall be applied by treating the first day 
     of the first applicable plan year as the termination date of 
     the plan. This subsection shall not apply to any plan for 
     which an election under section 403(h) of such Act is in 
     effect.''.
       (3) Limitation on deductions under certain plans.--Section 
     404(a)(7)(C)(iii) of the Internal Revenue Code of 1986, as 
     added by this Act, is amended by adding at the end the 
     following new sentence: ``This clause shall also apply to any 
     plan for a plan year if an election under section 403 of the 
     Pension Security and Transparency Act of 2005 is in effect 
     for such year.''
       (4) Notice.--In the case of a plan amendment adopted in 
     order to comply with this section, any notice required under 
     section 204(h) of such Act or section 4980F(e) of such Code 
     shall be provided within 15 days of the effective date of 
     such plan amendment. This subsection shall not apply to any 
     plan unless such plan is maintained pursuant to one or more 
     collective bargaining agreements between employee 
     representatives and 1 or more employers.
       (g) Special Rules for Termination of Eligible Plans.--
     During any period an election is in effect under this section 
     with respect to an eligible plan, the Pension Benefit 
     Guaranty Corporation shall, before it seeks or approves a 
     termination of such plan under section 4041(c) or 4042 of the 
     Employee Retirement Income Security Act of 1974--
       (1) make a determination under section 4041(c)(4) or 
     4042(i) of such Act whether the termination would be 
     necessary if the Secretary of the Treasury were to enter into 
     an agreement under section 4047(a) of such Act which provides 
     an alternative funding agreement to replace the amortization 
     schedule under this section, and
       (2) if the Corporation determines such an agreement would 
     make such termination unnecessary, take all necessary actions 
     to ensure the agreement is entered into.

     The Pension Benefit Guaranty Corporation shall make the 
     determination under paragraph (1) within 90 days of receiving 
     all information needed in connection with a request for a 
     termination (or if no such request is made, within 90 days of 
     consideration of the termination by the Corporation).
       (h) Certain Benefit Accruals and Increases Allowed if 
     Additional Contributions Made To Cover Costs.--
       (1) In general.--If an employer elects the application of 
     this subsection--
       (A) the requirements of paragraphs (2) and (3) of 
     subsection (b) shall not apply with respect to any eligible 
     plan maintained by the employer and specified in the 
     election, and
       (B) the minimum required contribution under subsection (d) 
     for any plan year with respect to the plan shall be increased 
     by the amounts described in paragraphs (2) and (3).

     Any liabilities and assets taken into account under this 
     subsection shall not be taken into account in determining the 
     unfunded liability of the plan for purposes of subsection 
     (d).
       (2) Current funding of accruals and increases.--The amount 
     determined under this paragraph for any plan year is the 
     target normal cost which would occur under section 303(b) of 
     such Act and 430(b) of such Code if--
       (A) any benefit accrual, or benefit increase taking effect, 
     during the plan year by reason of this subsection were 
     treated as having been accrued or earned during the plan 
     year, and
       (B) the plan were treated as if it were in at-risk status.
       (3) Funding must be maintained.--The amount determined 
     under this paragraph for any plan year is the amount of any 
     increase in the shortfall amortization charge which would 
     occur under section 303(c) of such Act and 430(c) of such 
     Code if--
       (A) the funding target were determined by only taking into 
     account benefits to which paragraph (2) applied for preceding 
     plan years,
       (B) the only assets taken into account were the 
     contributions required under this paragraph and paragraph (2) 
     for preceding plan years (and any earnings thereon),
       (C) the amortization period included only the plan year,
       (D) the transition rule under section 303(c)(4)(B) of such 
     Act and section 430(c)(4)(B) of such Code did not apply, and
       (E) the plan were treated as if it were in at-risk status.
       (4) Special rules for years before 2007.--Notwithstanding 
     any other provision of this Act, in the case of an applicable 
     plan year of an eligible plan to which this subsection 
     applies which begins before January 1, 2007, in determining 
     the amounts described in paragraphs (2) and (3) for such plan 
     year--
       (A) the provisions of, and amendments made by, sections 
     101, 102, 111, and 112 shall apply to such plan year, except 
     that
       (B) the interest rate used under section 303 of such Act 
     and section 430 of such Code for purposes of applying 
     paragraphs (2) and (3) to such plan year shall be the 
     interest rate determined under section 302(b)(5) of such Act 
     and section 412(b)(5) of such Code, as in effect for plan 
     years beginning in 2005.
       (5) Election out of section.--An employer maintaining an 
     eligible plan to which this subsection applies may make a 
     one-time election with respect to any applicable plan year 
     not to have this section apply to such plan year and all 
     subsequent plan years. Subject to subsection (d)(2), the 
     minimum required contribution under section 303 of such Act 
     and 430 of such Code for all such plan years shall be 
     determined without regard to this section.
       (i) Exclusion of Certain Employees From Minimum Coverage 
     Requirements.--
       (1) In general.--Section 410(b)(3) of such Code is amended 
     by striking the last sentence and inserting the following: 
     ``For purposes of subparagraph (B), management pilots who are 
     not represented in accordance with title II of the Railway 
     Labor Act shall be treated as covered by a collective 
     bargaining agreement described in such subparagraph if the 
     management pilots manage the flight operations of air pilots 
     who are so represented and the management pilots are, 
     pursuant to the terms of the agreement, included in the group 
     of employees benefitting under the trust described in such 
     subparagraph. Subparagraph (B) shall not apply in the case of 
     a plan which provides contributions or benefits for employees 
     whose principal duties are not customarily performed aboard 
     an aircraft in flight (other than management pilots described 
     in the preceding sentence).''
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning before, on, or after the date 
     of the enactment of this Act.
       (j) Effective Date.--Except as otherwise provided in this 
     section, the amendments made by this section shall apply to 
     plan years ending after the date of the enactment of this 
     Act.

     SEC. 404. LIMITATION ON PBGC GUARANTEE OF SHUTDOWN AND OTHER 
                   BENEFITS.

       (a) In General.--Section 4022(b) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1322(b)) is amended by 
     adding at the end the following:
       ``(8) If a benefit is payable by reason of--
       ``(A) a plant shutdown or similar event; or
       ``(B) any event other than attainment of any age, 
     performance of any service, receipt or derivation of any 
     compensation, or the occurrence of death or disability,

     this section shall be applied as if a plan amendment had been 
     adopted on the date such event occurred that provides for the 
     payment of such benefit.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to benefits that become payable as a result of a 
     plant shutdown or other similar event, as such terms are used 
     in the amendment made by subsection (a), that occurs after 
     July 26, 2005.

[[Page 2625]]



     SEC. 405. RULES RELATING TO BANKRUPTCY OF EMPLOYER.

       (a) Guarantee.--Section 4022 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1322), as amended by 
     this Act, is amended by adding at the end the following:
       ``(i) Bankruptcy Filing Substituted for Termination Date.--
     If a contributing sponsor of a plan has filed or has had 
     filed against such person a petition seeking liquidation or 
     reorganization in a case under title 11, United States Code, 
     or under any similar Federal law or law of a State or 
     political subdivision, and the case has not been dismissed as 
     of the termination date, then this section shall be applied 
     by treating the date such petition was filed as the 
     termination date of the plan.''.
       (b) Allocation of Assets Among Priority Groups in 
     Bankruptcy Proceedings.--Section 4044 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1344) is 
     amended by adding at the end the following:
       ``(e) Bankruptcy Filing Substituted for Termination Date.--
     If a contributing sponsor of a plan has filed or has had 
     filed against such person a petition seeking liquidation or 
     reorganization in a case under title 11, United States Code, 
     or under any similar Federal law or law of a State or 
     political subdivision, and the case has not been dismissed as 
     of the termination date, then subsection (a)(3) shall be 
     applied by treating the date such petition was filed as the 
     termination date of the plan.''.
       (c) Effective Date.--The amendments made this section shall 
     apply with respect to proceedings initiated under title 11, 
     United States Code, or under any similar Federal law or law 
     of a State or political subdivision, on or after the date 
     that is 30 days after the date of enactment of this Act.

     SEC. 406. PBGC PREMIUMS FOR NEW PLANS OF SMALL EMPLOYERS.

       (a) In General.--Subparagraph (A) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(A)) is amended--
       (1) in clause (i), by inserting ``other than a new single-
     employer plan (as defined in subparagraph (F)) maintained by 
     a small employer (as so defined),'' after ``single-employer 
     plan,'',
       (2) in clause (iii), by striking the period at the end and 
     inserting ``, and'', and
       (3) by adding at the end the following new clause:
       ``(v) in the case of a new single-employer plan (as defined 
     in subparagraph (F)) maintained by a small employer (as so 
     defined) for the plan year, $5 for each individual who is a 
     participant in such plan during the plan year.''

       (b) Definition of New Single-Employer Plan.--Section 
     4006(a)(3) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end 
     the following new subparagraph:
       ``(F)(i) For purposes of this paragraph, a single-employer 
     plan maintained by a contributing sponsor shall be treated as 
     a new single-employer plan for each of its first 5 plan years 
     if, during the 36-month period ending on the date of the 
     adoption of such plan, the sponsor or any member of such 
     sponsor's controlled group (or any predecessor of either) did 
     not establish or maintain a plan to which this title applies 
     with respect to which benefits were accrued for substantially 
     the same employees as are in the new single-employer plan.
       ``(ii)(I) For purposes of this paragraph, the term `small 
     employer' means an employer which on the first day of any 
     plan year has, in aggregation with all members of the 
     controlled group of such employer, 100 or fewer employees.
       ``(II) In the case of a plan maintained by two or more 
     contributing sponsors that are not part of the same 
     controlled group, the employees of all contributing sponsors 
     and controlled groups of such sponsors shall be aggregated 
     for purposes of determining whether any contributing sponsor 
     is a small employer.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to plans first effective after December 31, 2005.

     SEC. 407. PBGC PREMIUMS FOR SMALL AND NEW PLANS.

       (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)), as amended by this Act, is amended by 
     adding at the end the following new clause:
       ``(iv) In the case of a new defined benefit plan, the 
     amount determined under clause (ii) for any plan year shall 
     be an amount equal to the product of the amount determined 
     under clause (ii) and the applicable percentage. For purposes 
     of this clause, the term `applicable percentage' means--
       ``(I) 0 percent, for the first plan year.
       ``(II) 20 percent, for the second plan year.
       ``(III) 40 percent, for the third plan year.
       ``(IV) 60 percent, for the fourth plan year.
       ``(V) 80 percent, for the fifth plan year.

     For purposes of this clause, a defined benefit plan (as 
     defined in section 3(35)) maintained by a contributing 
     sponsor shall be treated as a new defined benefit plan for 
     each of its first 5 plan years if, during the 36-month period 
     ending on the date of the adoption of the plan, the sponsor 
     and each member of any controlled group including the sponsor 
     (or any predecessor of either) did not establish or maintain 
     a plan to which this title applies with respect to which 
     benefits were accrued for substantially the same employees as 
     are in the new plan.''
       (b) Small Plans.--Paragraph (3) of section 4006(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)), is amended--
       (1) by striking ``The'' in subparagraph (E)(i) and 
     inserting ``Except as provided in subparagraph (G), the'', 
     and
       (2) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) In the case of an employer who has 25 or fewer 
     employees on the first day of the plan year, the additional 
     premium determined under subparagraph (E) for each 
     participant shall not exceed $5 multiplied by the number of 
     participants in the plan as of the close of the preceding 
     plan year.
       ``(ii) For purposes of clause (i), whether an employer has 
     25 or fewer employees on the first day of the plan year is 
     determined by taking into consideration all of the employees 
     of all members of the contributing sponsor's controlled 
     group. In the case of a plan maintained by two or more 
     contributing sponsors, the employees of all contributing 
     sponsors and their controlled groups shall be aggregated for 
     purposes of determining whether the 25-or-fewer-employees 
     limitation has been satisfied.''
       (c) Effective Dates.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply to plans first effective after December 31, 2005.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to plan years beginning after December 31, 2005.

     SEC. 408. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM 
                   OVERPAYMENT REFUNDS.

       (a) In General.--Section 4007(b) of the Employment 
     Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is 
     amended--
       (1) by striking ``(b)'' and inserting ``(b)(1)'', and
       (2) by inserting at the end the following new paragraph:
       ``(2) The corporation is authorized to pay, subject to 
     regulations prescribed by the corporation, interest on the 
     amount of any overpayment of premium refunded to a designated 
     payor. Interest under this paragraph shall be calculated at 
     the same rate and in the same manner as interest is 
     calculated for underpayments under paragraph (1).''
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to interest accruing for periods beginning not 
     earlier than the date of the enactment of this Act.

     SEC. 409. RULES FOR SUBSTANTIAL OWNER BENEFITS IN TERMINATED 
                   PLANS.

       (a) Modification of Phase-In of Guarantee.--Section 
     4022(b)(5) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
       ``(5)(A) For purposes of this paragraph, the term `majority 
     owner' means an individual who, at any time during the 60-
     month period ending on the date the determination is being 
     made--
       ``(i) owns the entire interest in an unincorporated trade 
     or business,
       ``(ii) in the case of a partnership, is a partner who owns, 
     directly or indirectly, 50 percent or more of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(iii) in the case of a corporation, owns, directly or 
     indirectly, 50 percent or more in value of either the voting 
     stock of that corporation or all the stock of that 
     corporation.

     For purposes of clause (iii), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     (other than paragraph (3)(C) thereof) shall apply, including 
     the application of such rules under section 414(c) of such 
     Code.
       ``(B) In the case of a participant who is a majority owner, 
     the amount of benefits guaranteed under this section shall 
     equal the product of--
       ``(i) a fraction (not to exceed 1) the numerator of which 
     is the number of years from the later of the effective date 
     or the adoption date of the plan to the termination date, and 
     the denominator of which is 10, and
       ``(ii) the amount of benefits that would be guaranteed 
     under this section if the participant were not a majority 
     owner.''
       (b) Modification of Allocation of Assets.--
       (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
     striking ``section 4022(b)(5)'' and inserting ``section 
     4022(b)(5)(B)''.
       (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
     amended--
       (A) by striking ``(5)'' in paragraph (2) and inserting 
     ``(4), (5),'', and
       (B) by redesignating paragraphs (3) through (6) as 
     paragraphs (4) through (7), respectively, and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) If assets available for allocation under paragraph 
     (4) of subsection (a) are insufficient to satisfy in full the 
     benefits of all individuals who are described in that 
     paragraph, the assets shall be allocated first to benefits 
     described in subparagraph (A) of that paragraph. Any 
     remaining assets shall

[[Page 2626]]

     then be allocated to benefits described in subparagraph (B) 
     of that paragraph. If assets allocated to such subparagraph 
     (B) are insufficient to satisfy in full the benefits 
     described in that subparagraph, the assets shall be allocated 
     pro rata among individuals on the basis of the present value 
     (as of the termination date) of their respective benefits 
     described in that subparagraph.''
       (c) Conforming Amendments.--
       (1) Section 4021 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1321) is amended--
       (A) in subsection (b)(9), by striking ``as defined in 
     section 4022(b)(6)'', and
       (B) by adding at the end the following new subsection:
       ``(d) For purposes of subsection (b)(9), the term 
     `substantial owner' means an individual who, at any time 
     during the 60-month period ending on the date the 
     determination is being made--
       ``(1) owns the entire interest in an unincorporated trade 
     or business,
       ``(2) in the case of a partnership, is a partner who owns, 
     directly or indirectly, more than 10 percent of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(3) in the case of a corporation, owns, directly or 
     indirectly, more than 10 percent in value of either the 
     voting stock of that corporation or all the stock of that 
     corporation.
     For purposes of paragraph (3), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     (other than paragraph (3)(C) thereof) shall apply, including 
     the application of such rules under section 414(c) of such 
     Code.''
       (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
     is amended by striking ``section 4022(b)(6)'' and inserting 
     ``section 4021(d)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan 
     terminations--
       (A) under section 4041(c) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1341(c)) with respect to 
     which notices of intent to terminate are provided under 
     section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after 
     December 31, 2005, and
       (B) under section 4042 of such Act (29 U.S.C. 1342) with 
     respect to which proceedings are instituted by the 
     corporation after such date.
       (2) Conforming amendments.--The amendments made by 
     subsection (c) shall take effect on January 1, 2006.

     SEC. 410. ACCELERATION OF PBGC COMPUTATION OF BENEFITS 
                   ATTRIBUTABLE TO RECOVERIES FROM EMPLOYERS.

       (a) Modification of Average Recovery Percentage of 
     Outstanding Amount of Benefit Liabilities Payable by 
     Corporation to Participants and Beneficiaries.--Section 
     4022(c)(3)(B)(ii) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1322(c)(3)(B)(ii)) is amended to read 
     as follows:
       ``(ii) notices of intent to terminate were provided (or in 
     the case of a termination by the corporation, a notice of 
     determination under section 4042 was issued) during the 5-
     Federal fiscal year period ending with the third fiscal year 
     preceding the fiscal year in which occurs the date of the 
     notice of intent to terminate (or the notice of determination 
     under section 4042) with respect to the plan termination for 
     which the recovery ratio is being determined.''
       (b) Valuation of Section 4062(c) Liability for Determining 
     Amounts Payable by Corporation to Participants and 
     Beneficiaries.--
       (1) Single-employer plan benefits guaranteed.--Section 
     4022(c)(3)(A) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 13) is amended to read as follows:
       ``(A) In general.--Except as provided in subparagraph (C), 
     the term `recovery ratio' means the ratio which--
       ``(i) the sum of the values of all recoveries under section 
     4062, 4063, or 4064, determined by the corporation in 
     connection with plan terminations described under 
     subparagraph (B), bears to
       ``(ii) the sum of all unfunded benefit liabilities under 
     such plans as of the termination date in connection with any 
     such prior termination.''.
       (2) Allocation of assets.--Section 4044 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1362) is 
     amended by adding at the end the following new subsection:
       ``(e) Valuation of Section 4062(c) Liability for 
     Determining Amounts Payable by Corporation to Participants 
     and Beneficiaries.--
       ``(1) In general.--In the case of a terminated plan, the 
     value of the recovery of liability under section 4062(c) 
     allocable as a plan asset under this section for purposes of 
     determining the amount of benefits payable by the corporation 
     shall be determined by multiplying--
       ``(A) the amount of liability under section 4062(c) as of 
     the termination date of the plan, by
       ``(B) the applicable section 4062(c) recovery ratio.
       ``(2) Section 4062(c) recovery ratio.--For purposes of this 
     subsection--
       ``(A) In general.--Except as provided in subparagraph (C), 
     the term `section 4062(c) recovery ratio' means the ratio 
     which--
       ``(i) the sum of the values of all recoveries under section 
     4062(c) determined by the corporation in connection with plan 
     terminations described under subparagraph (B), bears to
       ``(ii) the sum of all the amounts of liability under 
     section 4062(c) with respect to such plans as of the 
     termination date in connection with any such prior 
     termination.
       ``(B) Prior terminations.--A plan termination described in 
     this subparagraph is a termination with respect to which--
       ``(i) the value of recoveries under section 4062(c) have 
     been determined by the corporation, and
       ``(ii) notices of intent to terminate were provided (or in 
     the case of a termination by the corporation, a notice of 
     determination under section 4042 was issued) during the 5-
     Federal fiscal year period ending with the third fiscal year 
     preceding the fiscal year in which occurs the date of the 
     notice of intent to terminate (or the notice of determination 
     under section 4042) with respect to the plan termination for 
     which the recovery ratio is being determined.
       ``(C) Exception.--In the case of a terminated plan with 
     respect to which the outstanding amount of benefit 
     liabilities exceeds $20,000,000, the term `section 4062(c) 
     recovery ratio' means, with respect to the termination of 
     such plan, the ratio of--
       ``(i) the value of the recoveries on behalf of the plan 
     under section 4062(c), to
       ``(ii) the amount of the liability owed under section 
     4062(c) as of the date of plan termination to the trustee 
     appointed under section 4042 (b) or (c).
       ``(3) Subsection not to apply.--This subsection shall not 
     apply with respect to the determination of--
       ``(A) whether the amount of outstanding benefit liabilities 
     exceeds $20,000,000, or
       ``(B) the amount of any liability under section 4062 to the 
     corporation or the trustee appointed under section 4042 (b) 
     or (c).
       ``(4) Determinations.--Determinations under this subsection 
     shall be made by the corporation. Such determinations shall 
     be binding unless shown by clear and convincing evidence to 
     be unreasonable.''
       (c) Effective Date.--The amendments made by this section 
     shall apply for any termination for which notices of intent 
     to terminate are provided (or in the case of a termination by 
     the corporation, a notice of determination under section 4042 
     under the Employee Retirement Income Security Act of 1974 is 
     issued) on or after the date which is 30 days after the date 
     of enactment of this section.

     SEC. 411. TREATMENT OF CERTAIN PLANS WHERE CESSATION OR 
                   CHANGE IN MEMBERSHIP OF A CONTROLLED GROUP.

       (a) In General.--Section 4041(b) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1341(b)) is amended by 
     adding at the end the following new paragraph:
       ``(5) Special rule for certain plans where cessation or 
     change in membership of a controlled group.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     if--
       ``(i) there is transaction or series of transactions which 
     result in a single-employer plan which is a defined benefit 
     plan being maintained by an employer which is not a member of 
     the same controlled group of which the employer maintaining 
     the plan before such transaction or series of transactions 
     was a member,
       ``(ii) the corporation treats the transaction or series of 
     transactions as resulting in a standard termination to which 
     this subsection applies, and
       ``(iii) the plan is fully funded,

     then the interest rate used in determining whether the plan 
     is sufficient for benefit liabilities for purposes of this 
     subsection shall be the interest rate used in determining 
     whether the plan is fully funded.
       ``(B) Limitations.--Subparagraph (A) shall not apply to any 
     transaction or series of transactions unless--
       ``(i) any employer maintaining the plan immediately before 
     or after such transaction or series of transactions--

       ``(I) has an outstanding senior unsecured debt instrument 
     which is rated investment grade by each of the nationally 
     recognized statistical rating organizations for corporate 
     bonds that has issued a credit rating for such instrument, or
       ``(II) if no such debt instrument of such employer has been 
     rated by such an organization but 1 or more of such 
     organizations has made an issuer credit rating for such 
     employer, all such organizations which have so rated the 
     employer have rated such employer investment grade, and

       ``(ii) the employer maintaining the plan after the 
     transaction or series of transactions employs at least 30 
     percent of the employees located in the United States who 
     were employed by such employer immediately before the 
     transaction or series of transactions.
       ``(C) Fully funded.--For purposes of subparagraph (A), a 
     plan shall be treated as fully funded with respect to any 
     transaction or series of transactions if--
       ``(i) in the case of a transaction or series of 
     transactions which occur in a plan year beginning before 
     January 1, 2007, the funded current liability percentage 
     determined under section 302(d) for the plan year is at least 
     100 percent, and

[[Page 2627]]

       ``(ii) in the case of a transaction or series of 
     transactions which occur in a plan year beginning on or after 
     such date, the funding target attainment percentage 
     determined under section 303 is, as of the valuation date for 
     such plan year, at least 100 percent.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to any transaction or series of transactions 
     occurring on and after the date of the enactment of this Act.

     SEC. 412. EFFECT OF TITLE.

       The decreases in Federal outlays resulting from the 
     enactment of this title, and the amendments made by this 
     title, shall be treated as in lieu of the decreases in 
     Federal outlays which--
       (1) resulted from amendments made to title IV of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1301 et seq.); and
       (2) were contained in an Act enacted pursuant to the 
     concurrent resolution on the budget for fiscal year 2006.

     SEC. 413. AGE REQUIREMENT FOR EMPLOYERS.

       (a) Single-Employer Plan Benefits Guaranteed.--Section 
     4022(b) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)) is amended in the flush matter 
     following paragraph (3), by adding at the end the following: 
     ``If, at the time of termination of a plan under this title, 
     regulations prescribed by the Federal Aviation Administration 
     require an individual to separate from service as a 
     commercial airline pilot after attaining any age before age 
     65, paragraph (3) shall be applied to an individual who is a 
     participant in the plan by reason of such service by 
     substituting such age for age 65.''.
       (b) Multiemployer Plan Benefits Guaranteed.--Section 
     4022B(a) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322b(a)) is amended by adding at the end the 
     following: ``If, at the time of termination of a plan under 
     this title, regulations prescribed by the Federal Aviation 
     Administration require an individual to separate from service 
     as a commercial airline pilot after attaining any age before 
     age 65, this subsection shall be applied to an individual who 
     is a participant in the plan by reason of such service by 
     substituting such age for age 65.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to benefits payable on or after the date of 
     enactment of this Act.

                          TITLE V--DISCLOSURE

     SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE.

       (a) In General.--Section 101(f) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021(f)) is amended to 
     read as follows:
       ``(f) Defined Benefit Plan Funding Notices.--
       ``(1) In general.--The administrator of a defined benefit 
     plan shall for each plan year provide a plan funding notice 
     to the Pension Benefit Guaranty Corporation, to each plan 
     participant and beneficiary, to each labor organization 
     representing such participants or beneficiaries, and, in the 
     case of a multiemployer plan, to each employer that has an 
     obligation to contribute to the plan.
       ``(2) Information contained in notices.--
       ``(A) Identifying information.--Each notice required under 
     paragraph (1) shall contain identifying information, 
     including the name of the plan, the address and phone number 
     of the plan administrator and the plan's principal 
     administrative officer, each plan sponsor's employer 
     identification number, and the plan number of the plan.
       ``(B) Specific information.--A plan funding notice under 
     paragraph (1) shall include--
       ``(i)(I) in the case of a single-employer plan, a statement 
     as to whether the plan's funding target attainment percentage 
     (as defined in section 303(d)(2)) for the plan year to which 
     the notice relates, and for the 2 preceding plan years, is at 
     least 100 percent (and, if not, the actual percentages), or
       ``(II) in the case of a multiemployer plan, a statement as 
     to whether the plan's funded percentage (as defined in 
     section 305(i)) for the plan year to which the notice 
     relates, and for the 2 preceding plan years, is at least 100 
     percent (and, if not, the actual percentages),
       ``(ii)(I) in the case of a single-employer plan, a 
     statement of the value of the plan's assets and liabilities 
     for the plan year to which the notice relates as of the last 
     day of the plan year to which the notice relates determined 
     using the asset valuation under subclause (I) of section 
     4006(a)(3)(E)(iii) and the interest rate under subclause (II) 
     of such section, and
       ``(II) in the case of a multiemployer plan, a statement of 
     the value of the plan's assets and liabilities for the plan 
     year to which the notice relates as the last day of such plan 
     year,
       ``(iii) a statement of the number of participants who are--

       ``(I) retired or separated from service and are receiving 
     benefits,
       ``(II) retired or separated participants entitled to future 
     benefits, and
       ``(II) active participants under the plan,

       ``(iv) a statement setting forth the funding policy of the 
     plan and the asset allocation of investments under the plan 
     (expressed as percentages of total assets) as of the end of 
     the plan year to which the notice relates,
       ``(v) in the case of a multiemployer plan, whether the plan 
     was in critical or endangered status under section 305 for 
     such plan year and, if so--

       ``(I) a list of the actions taken by the plan to improve 
     its funding status, and
       ``(II) a statement describing how a person may obtain a 
     copy of the plan's improvement or rehabilitation plan, as 
     appropriate, adopted under section 305 and the actuarial and 
     financial data that demonstrate any action taken by the plan 
     toward fiscal improvement,

       ``(vi) a summary of any funding improvement plan, 
     rehabilitation plan, or modification thereof adopted under 
     section 305 during the plan year to which the notice relates,
       ``(vii) in the case of any plan amendments, scheduled 
     benefit increase or reduction, or other known event taking 
     effect in the current plan year and having a material effect 
     on plan liabilities or assets for the year (as defined in 
     regulations by the Secretary), an explanation of the 
     amendment, schedule increase or reduction, or event, and a 
     projection to the end of such plan year of the effect of the 
     amendment, scheduled increase or reduction, or event on plan 
     liabilities,
       ``(viii)(I) in the case of a single-employer plan, a 
     summary of the rules governing termination of single-employer 
     plans under subtitle C of title IV, or
       ``(II) in the case of a multiemployer plan, a summary of 
     the rules governing reorganization or insolvency, including 
     the limitations on benefit payments and any potential benefit 
     reductions and suspensions (and the potential effects of such 
     limitations, reductions, and suspensions on the plan), and
       ``(ix) a general description of the benefits under the plan 
     which are eligible to be guaranteed by the Pension Benefit 
     Guaranty Corporation, along with an explanation of the 
     limitations on the guarantee and the circumstances under 
     which such limitations apply.
       ``(C) Other information.--Each notice under paragraph (1) 
     shall include--
       ``(i) in the case of a multiemployer plan, a statement that 
     the plan administrator shall provide, upon written request, 
     to any labor organization representing plan participants and 
     beneficiaries and any employer that has an obligation to 
     contribute to the plan, a copy of the annual report filed 
     with the Secretary under section 104(a), and
       ``(ii) any additional information which the plan 
     administrator elects to include to the extent not 
     inconsistent with regulations prescribed by the Secretary.
       ``(3) Time for providing notice.--
       ``(A) In general.--Any notice under paragraph (1) shall be 
     provided not later than 90 days after the end of the plan 
     year to which the notice relates.
       ``(B) Exception for small plans.--In the case of a small 
     plan (as such term is used under section 303(g)(2)(B)) any 
     notice under paragraph (1) shall be provided upon filing of 
     the annual report under section 104(a).
       ``(4) Form and manner.--Any notice under paragraph (1)--
       ``(A) shall be provided in a form and manner prescribed in 
     regulations of the Secretary,
       ``(B) shall be written in a manner so as to be understood 
     by the average plan participant, and
       ``(C) may be provided in written, electronic, or other 
     appropriate form to the extent such form is reasonably 
     accessible to persons to whom the notice is required to be 
     provided.''.
       (b) Model Notice.--Not later than 180 days after the date 
     of the enactment of this Act, the Secretary of Labor shall 
     publish a model version of the notice required by section 
     101(f) of the Employee Retirement Income Security Act of 
     1974. The Secretary of Labor may promulgate any interim final 
     rules as the Secretary determines appropriate to carry out 
     the provisions of this subsection.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2005.

     SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN INFORMATION.

       (a) Financial Information With Respect to Multiemployer 
     Plans.--
       (1) In general.--Section 101 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021) is amended--
       (A) by redesignating subsection (k) as subsection (l); and
       (B) by inserting after subsection (j) the following new 
     subsection:
       ``(k) Multiemployer Plan Information Made Available on 
     Request.--
       ``(1) In general.--Each administrator of a multiemployer 
     plan shall, upon written request, furnish to any plan 
     participant or beneficiary, employee representative, or any 
     employer that has an obligation to contribute to the plan--
       ``(A) a copy of any periodic actuarial report (including 
     sensitivity testing) received by the plan for any plan year 
     which has been in the plan's possession for at least 30 days, 
     and
       ``(B)(i) a copy of any quarterly, semi-annual, or annual 
     financial report prepared for the plan by any plan investment 
     manager or advisor or other fiduciary which has been in the 
     plan's possession for at least 30 days, or

[[Page 2628]]

       ``(ii) at the discretion of the person submitting the 
     written request, a copy of a quarterly summary of the 
     financial reports described clause (i).
       ``(2) Compliance.--Information required to be provided 
     under paragraph (1) --
       ``(A) shall be provided to the requesting participant, 
     beneficiary, or employer within 30 days after the request in 
     a form and manner prescribed in regulations of the Secretary,
       ``(B) may be provided in written, electronic, or other 
     appropriate form to the extent such form is reasonably 
     accessible to persons to whom the information is required to 
     be provided, and
       ``(C) shall not--
       ``(i) include any individually identifiable information 
     regarding any plan participant, beneficiary, employee, 
     fiduciary, or contributing employer, or
       ``(ii) reveal any proprietary information regarding the 
     plan, any contributing employer, or entity providing services 
     to the plan.
       ``(3) Limitations.--In no case shall a participant, 
     beneficiary, or employer be entitled under this subsection to 
     receive more than one copy of any report described in 
     paragraph (1) during any one 12-month period. The 
     administrator may make a reasonable charge to cover copying, 
     mailing, and other costs of furnishing copies of information 
     pursuant to paragraph (1). The Secretary may by regulations 
     prescribe the maximum amount which will constitute a 
     reasonable charge under the preceding sentence.''.
       (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
     1132(c)(4)) is amended by striking ``section 101(j)'' and 
     inserting ``subsection (j) or (k) of section 101''.
       (3) Regulations.--The Secretary shall prescribe regulations 
     under section 101(k)(2) of the Employee Retirement Income 
     Security Act of 1974 (added by paragraph (1)) not later than 
     270 days after the date of the enactment of this Act.
       (b) Notice of Potential Withdrawal Liability to 
     Multiemployer Plans.--
       (1) In general.--Section 101 of such Act (as amended by 
     subsection (a)) is amended--
       (A) by redesignating subsection (l) as subsection (m); and
       (B) by inserting after subsection (k) the following new 
     subsection:
       ``(l) Notice of Potential Withdrawal Liability.--
       ``(1) In general.--The plan sponsor or administrator of a 
     multiemployer plan shall, upon written request, furnish to 
     any employer who has an obligation to contribute to the plan 
     a notice of--
       ``(A) the estimated amount which would be the amount of 
     such employer's withdrawal liability under part 1 of subtitle 
     E of title IV if such employer withdrew on the last day of 
     the plan year preceding the date of the request, and
       ``(B) an explanation of how such estimated liability amount 
     was determined, including the actuarial assumptions and 
     methods used to determine the value of the plan liabilities 
     and assets, the data regarding employer contributions, 
     unfunded vested benefits, annual changes in the plan's 
     unfunded vested benefits, and the application of any relevant 
     limitations on the estimated withdrawal liability.

     For purposes of subparagraph (B), the term `employer 
     contribution' means, in connection with a participant, a 
     contribution made by an employer as an employer of such 
     participant.
       ``(2) Compliance.--Any notice required to be provided under 
     paragraph (1)--
       ``(A) shall be provided to the requesting employer within--
       ``(i) 180 days after the request in a form and manner 
     prescribed in regulations of the Secretary, or
       ``(ii) subject to regulations of the Secretary, such longer 
     time as may be necessary in the case of a plan that 
     determines withdrawal liability based on any method described 
     under paragraph (4) or (5) of section 4211(c); and
       ``(B) may be provided in written, electronic, or other 
     appropriate form to the extent such form is reasonably 
     accessible to employers to whom the information is required 
     to be provided.
       ``(3) Limitations.--In no case shall an employer be 
     entitled under this subsection to receive more than one 
     notice described in paragraph (1) during any one 12-month 
     period. The person required to provide such notice may make a 
     reasonable charge to cover copying, mailing, and other costs 
     of furnishing such notice pursuant to paragraph (1). The 
     Secretary may by regulations prescribe the maximum amount 
     which will constitute a reasonable charge under the preceding 
     sentence.''.
       (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
     1132(c)(4)) is amended by striking ``section 101(j) or (k)'' 
     and inserting ``subsection (j), (k), or (l) of section 101''.
       (c) Notice of Amendment Reducing Future Accruals.--Section 
     204(h)(1) of such Act (29 U.S.C. 1054(h)(1)) is amended by 
     inserting at the end before the period ``and to each employer 
     who has an obligation to contribute to the plan.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2005.

     SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIREMENTS.

       (a) Additional Annual Reporting Requirements With Respect 
     to Defined Benefit Plans.--
       (1) In general.--Section 103 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1023) is amended--
       (A) in subsection (a)(1)(B), by striking ``subsections (d) 
     and (e)'' and inserting ``subsections (d), (e), and (f)''; 
     and
       (B) by adding at the end the following new subsection:
       ``(f) Additional Information With Respect to Defined 
     Benefit Plans.--
       ``(1) General information.--With respect to any defined 
     benefit plan, an annual report under this section for a plan 
     year shall include the following:
       ``(A) In any case in which any liabilities to participants 
     or their beneficiaries under such plan as of the end of such 
     plan year consist (in whole or in part) of liabilities to 
     such participants and beneficiaries under 2 or more pension 
     plans as of immediately before such plan year, the funded 
     percentage of each of such 2 or more pension plans as of the 
     last day of such plan year and the funded percentage of the 
     plan with respect to which the annual report is filed as of 
     the last day of such plan year.
       ``(B) For purposes of this paragraph, the term `funded 
     percentage'--
       ``(i) in the case of a single-employer plan, means the 
     funding target attainment percentage, as defined in section 
     303(d)(2), and
       ``(ii) in the case of a multiemployer plan, has the meaning 
     given such term in section 305(i)(2).
       ``(2) Additional information for multiemployer plans.--With 
     respect to any defined benefit plan which is a multiemployer 
     plan, an annual report under this section for a plan year 
     shall include, in addition to the information required under 
     paragraph (1), the following, as of the end of the plan year 
     to which the notice relates:
       ``(A) The number of employers obligated to contribute to 
     the plan.
       ``(B) A list of the employers that contributed more than 5 
     percent of the total contributions to the plan during such 
     plan year.
       ``(C) The number of participants under the plan on whose 
     behalf no employer contributions have been made to the plan 
     for such plan year and for each of the 2 preceding plan 
     years. For purposes of this subparagraph, the term `employer 
     contribution' means, in connection with a participant, a 
     contribution made by an employer as an employer of such 
     participant.
       ``(D) The ratio of--
       ``(i) the number of participants under the plan on whose 
     behalf no employer had an obligation to make an employer 
     contribution during the plan year, to
       ``(ii) the number of participants under the plan on whose 
     behalf no employer had an obligation to make an employer 
     contribution during each of the 2 preceding plan years.
       ``(E) Whether the plan received an amortization extension 
     under section 304(d) or section 431(d) of the Internal 
     Revenue Code of 1986 for such plan year and, if so, the 
     amount of the difference between the minimum required 
     contribution for the year and the minimum required 
     contribution which would have been required without regard to 
     the extension, and the period of such extension.
       ``(F) Whether the plan used the shortfall funding method 
     (as such term is used in section 305) for such plan year and, 
     if so, the amount of the difference between the minimum 
     required contribution for the year and the minimum required 
     contribution which would have been required without regard to 
     the use of such method, and the period of use of such method.
       ``(G) Whether the plan was in critical or endangered status 
     under section 305 for such plan year, and if so, a summary of 
     any funding improvement or rehabilitation plan (or 
     modification thereto) adopted during the plan year, and the 
     funding ratio of the plan.
       ``(H) The number of employers that withdrew from the plan 
     during the preceding plan year and the aggregate amount of 
     withdrawal liability assessed, or estimated to be assessed, 
     against such withdrawn employers.
       ``(I) In the case of a multiemployer plan that has merged 
     with another plan or to which assets and liabilities have 
     been transferred, the actuarial valuation of the assets and 
     liabilities of each affected plan during the year preceding 
     the effective date of the merger or transfer, based upon the 
     most recent data available as of the day before the first day 
     of the plan year, or other valuation method performed under 
     standards and procedures as the Secretary may prescribe by 
     regulation.''.
       (2) Guidance by secretary of labor.--
       (A) In general.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary of Labor shall publish 
     guidance to assist multiemployer defined benefit plans to--
       (i) identify and enumerate plan participants for whom there 
     is no employer with an obligation to make an employer 
     contribution under the plan; and
       (ii) report such information under section 103(f)(2)(D) of 
     the Employee Retirement Income Security Act of 1974 (as added 
     by this section).
       (B) Waiver of requirement.--The Secretary of Labor shall 
     waive the requirement

[[Page 2629]]

     under section 103(f)(2)(D) of such Act (as added by this 
     section) for the construction and entertainment industries.
       (b) Additional Information in Annual Actuarial Statement 
     Regarding Plan Retirement Projections.--Section 103(d) of 
     such Act (29 U.S.C. 1023(d)) is amended--
       (1) by redesignating paragraphs (12) and (13) as paragraphs 
     (13) and (14), respectively; and
       (2) by inserting after paragraph (11) the following new 
     paragraph:
       ``(12) A statement explaining the actuarial assumptions and 
     methods used in projecting future retirements and forms of 
     benefit distributions under the plan.''.
       (c) Form and Manner of Report.--Section 104(b)(3) of such 
     Act (29 U.S.C. 1024(b)(3)) is amended by--
       (1) striking ``(3) Within'' and inserting--
       ``(A) In general.--Within''; and
       (2) adding at the end the following:
       ``(B) Form of report.--The material provided pursuant to 
     subparagraph (A) to summarize the latest annual report shall 
     be written in a manner calculated to be understood by the 
     average plan participant.
       (d) Furnishing Summary Plan Information to Employers and 
     Employee Representatives of Multiemployer Plans.--
       (1) In general.--Section 104 of such Act (29 U.S.C. 1024) 
     is amended--
       (A) in the header, by striking ``participants'' and 
     inserting ``participants and certain employers'';
       (B) redesignating subsection (d) as subsection (e); and
       (C) inserting after subsection (c) the following:
       ``(d) Furnishing Summary Plan Information to Employers and 
     Employee Representatives of Multiemployer Plans.--
       ``(1) In general.--With respect to a multiemployer plan 
     subject to this section, within 30 days after the due date 
     under subsection (a)(1) for the filing of the annual report 
     for the fiscal year of the plan, the administrators shall 
     furnish to each employee organization, employer with an 
     obligation to contribute to the plan, and the Pension Benefit 
     Guaranty Corporation, a report that contains--
       ``(A) a description of the contribution schedules and 
     benefit formulas under the plan, and any modification to such 
     schedules and formulas, during such plan year;
       ``(B) the number of employers obligated to contribute to 
     the plan;
       ``(C) a list of the employers that contributed more than 5 
     percent of the total contributions to the plan during such 
     plan year;
       ``(D) the number of participants under the plan on whose 
     behalf no employer contributions (which, for purposes of this 
     paragraph, means, in connection with a participant, a 
     contribution made by an employer as an employer of such 
     participant) have been made to the plan for such plan year 
     and for each of the 2 preceding plan years;
       ``(E) whether the plan was in critical or endangered status 
     under section 305 for such plan year and, if so, include--
       ``(i) a list of the actions taken by the plan to improve 
     its funding status; and
       ``(ii) a statement describing how a person may obtain a 
     copy of the plan's improvement or rehabilitation plan, as 
     appropriate, adopted under section 305 and the actuarial and 
     financial data that demonstrate any action taken by the plan 
     toward fiscal improvement;
       ``(H) the number of employers that withdrew from the plan 
     during the preceding plan year and the aggregate amount of 
     withdrawal liability assessed, or estimated to be assessed, 
     against such withdrawn employers, as reported on the annual 
     report for the plan year to which the report under this 
     subsection relates;
       ``(I) in the case of a multiemployer plan that has merged 
     with another plan or to which assets and liabilities have 
     been transferred, the actuarial valuation of the assets and 
     liabilities of each affected plan during the year preceding 
     the effective date of the merger or transfer, based upon the 
     most recent data available as of the day before the first day 
     of the plan year, or other valuation method performed under 
     standards and procedures as the Secretary may prescribe by 
     regulation;
       ``(J) a description as to whether the plan--
       ``(i) sought or received an amortization extension under 
     section 304(d) or section 431(d) of the Internal Revenue Code 
     of 1986 for such plan year;
       ``(ii) used the shortfall funding method (as such term is 
     used in section 305) for such plan year; or
       ``(iii) was in critical or endangered status under section 
     305 for such plan year; and
       ``(K) notification of the right under this section of the 
     recipient to a copy of the annual report filed with the 
     Secretary under subsection (a), summary annual report, 
     summary plan description, summary of any material 
     modification of the plan, upon written request, but that--
       ``(i) in no case shall a recipient be entitled to receive 
     more than one copy of any such report described during any 
     one 12-month period; and
       ``(ii) the administrator may make a reasonable charge to 
     cover copying, mailing, and other costs of furnishing copies 
     of information pursuant to this subparagraph.
       ``(2) Effect of section.--Nothing in this section waives 
     any other provision under this title requiring plan 
     administrators to provide, upon request, information to 
     employers that have an obligation to contribution under the 
     plan.''.
       (e) Model Form.--Not later than 270 days after the date of 
     the enactment of this Act, the Secretary of Labor shall 
     publish a model form for providing the statements, schedules, 
     and other material required to be provided under section 
     104(b)(3) of the Employee Retirement Income Security Act of 
     1974, as amended by this section. The Secretary of Labor may 
     promulgate any interim final rules as the Secretary 
     determines appropriate to carry out the provisions of this 
     subsection.
       (f) Five-year Report With Respect to Multiemployer Plans.--
     Section 4022A(f) of such Act (29 U.S.C. 1322a(f)) is amended 
     by adding at the end the following:
       ``(6) Not later than 5 years after the date of the 
     enactment of the Pension Security and Transparency Act of 
     2005, and at least every fifth year thereafter, the 
     corporation shall submit to Congress a report that contains a 
     description of the fiscal conditions of the multiemployer 
     pension plan system as of the date of such report based on 
     the information submitted to the corporation under section 
     104(d).''.
       (g) Conforming Amendment.--Title IV of such Act (29 U.S.C. 
     1301 et seq.) is amended by striking section 4011.
       (h) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2005.
       (2) Special rule.--Notwithstanding the provisions of 
     paragraph (1), the requirement under section 103(f)(2)(D) of 
     the Employee Retirement Income Security Act (as added by this 
     section) shall apply to plan years beginning after December 
     31, 2007.

     SEC. 504. TIMING OF ANNUAL REPORTING REQUIREMENTS.

       (a) Filing After 285 Days After Plan Year Only in Cases of 
     Hardship.--Section 104(a)(1) of such Act (29 U.S.C. 
     1024(a)(1)) is amended by inserting after the first sentence 
     the following new sentence: ``In the case of a pension plan, 
     the Secretary may extend the deadline for filing the annual 
     report for any plan year past 285 days after the close of the 
     plan year only on a case by case basis and only in cases of 
     hardship, in accordance with regulations which shall be 
     prescribed by the Secretary.''.
       (b) Internet Display of Information.--Section 104(b) of 
     such Act (29 U.S.C. 1024(b)) is amended by adding at the end 
     the following:
       ``(5) Identification and basic plan information and 
     actuarial information included in the annual report for any 
     plan year shall be filed with the Secretary in an electronic 
     format which accommodates display on the Internet, in 
     accordance with regulations which shall be prescribed by the 
     Secretary. The Secretary shall provide for display of such 
     information included in the annual report, within 90 days 
     after the date of the filing of the annual report, on an 
     Internet website maintained by the Secretary and other 
     appropriate media. Such information shall also be displayed 
     on any Internet website maintained by the plan sponsor (or by 
     the plan administrator on behalf of the plan sponsor), in 
     accordance with regulations which shall be prescribed by the 
     Secretary.''.
       (c) Summary Annual Report Filed Within 30 Days After 
     Deadline for Filing of Annual Report.--Section 104(b)(3) of 
     such Act (29 U.S.C. 1024(b)(3)), as amended by section 503, 
     is amended by--
       (1) striking ``(3)(A) Within 210 days after the close of 
     the fiscal year,'' and inserting ``(3)(A) Within 30 days 
     after the due date under subsection (a)(1) for the filing of 
     the annual report for the fiscal year of the plan'';
       (2) striking ``the latest'' and inserting ``such''; and
       (3) adding at the end the following
       ``(C) Date of internet display.--Display of the summary 
     annual report on the Internet website maintained by the plan 
     sponsor (or by the plan administrator on behalf of the plan 
     sponsor) by the date required under subparagraph (A) shall be 
     treated as furnishing such report to each participant and 
     beneficiary receiving benefits under the plan by such date, 
     except that such report shall be furnished to each such 
     participant and beneficiary as soon as practicable 
     thereafter, and in no event later the 30 days after such 
     date.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2005.

     SEC. 505. SECTION 4010 FILINGS WITH THE PBGC.

       (a) Change in Criteria for Persons Required To Provide 
     Information To PBGC.--Section 4010(b) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1310(b)) is 
     amended--
       (1) in paragraph (1)--
       (A) by striking ''(1) the aggregate'' and inserting 
     ``(1)(A) the aggregate'';
       (B) by striking the semicolon and inserting ``; and'';
       (C) by inserting after subparagraph (A) the following:

[[Page 2630]]

       ``(B)(i) the aggregate funding targets attainment 
     percentage of the plan (as defined in subsection (d)) is less 
     than 90 percent; or
       ``(ii) any debt instrument of the plan sponsor or the plan 
     sponsor has received a rating described in subclause (I) or 
     (II) of section 303(i)(5)(A)(i);''; and
       (2) by redesignating paragraphs (2) and (3) as paragraphs 
     (4) and (5), respectively, and by inserting before paragraph 
     (4) (as so redesignated) the following new paragraphs:
       ``(2) the aggregate funding targets attainment percentage 
     of the plan (as defined in subsection (d)) is less than 60 
     percent;
       ``(3)(A) the aggregate funding targets attainment 
     percentage of the plan (as defined in subsection (d)) is less 
     than 75 percent, and
       ``(B) the plan sponsor is in an industry with respect to 
     which the corporation determines that there is substantial 
     unemployment or underemployment and the sales and profits are 
     depressed or declining;''.
       (b) Additional Information Required.--Section 4010 of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1310) is amended by adding at the end the following new 
     subsection:
       ``(d) Additional Information Required.--
       ``(1) In General.--The information submitted to the 
     corporation under subsection (a) shall include--
       ``(A) the amount of benefit liabilities under the plan 
     determined using the assumptions used by the corporation in 
     determining liabilities;
       ``(B) the funding target of the plan determined as if the 
     plan has been in at-risk status for at least 5 plan years; 
     and
       ``(C) the funding target attainment percentage of the plan.
       ``(2) Definitions.--For purposes of this subsection:
       ``(A) Value of plan assets.--The term `value of plan 
     assets' means the value of plan assets, as determined under 
     section 303(g)(3).
       ``(B) Funding target.--The term `funding target' has the 
     meaning provided under section 303(d)(1).
       ``(C) Funding target attainment percentage.--The term 
     `funding target attainment percentage' has the meaning 
     provided in section 303(d)(2).
       ``(D) Aggregate funding targets attainment percentage.--The 
     term `aggregate funding targets attainment percentage' means, 
     with respect to a contributing sponsor for a plan year, the 
     percentage, taking into account all plans maintained by the 
     contributing sponsor and the members of its controlled group 
     as of the end of such plan year, which--
       ``(i) the aggregate total of the values of plan assets, as 
     of the end of such plan year, of such plans, is of
       ``(ii) the aggregate total of the funding targets of such 
     plans, as of the end of such plan year, taking into account 
     only benefits to which participants and beneficiaries have a 
     nonforfeitable right.
       ``(E) At-risk status.--The term `at-risk status' has the 
     meaning provided in section 303(i)(4).
       ``(e) Notice to Congress.--The Corporation shall, on an 
     annual basis, submit to the Committee on Health, Education, 
     Labor, and Pensions of the Senate and the Committee on 
     Education and the Workforce of the House of Representatives, 
     a summary report of the information submitted to the 
     Corporation under this section.''.
       (c) Effective Date.--The amendment made by this section 
     shall apply with respect to plan years beginning after 2006.

     SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO PLAN 
                   PARTICIPANTS.

       (a) Distress Terminations.--
       (1) In general.--Section 4041(c)(2) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)(2)) 
     is amended by adding at the end the following:
       ``(D) Disclosure of termination information.--
       ``(i) In general.--A plan administrator that has filed a 
     notice of intent to terminate under subsection (a)(2) shall 
     provide to an affected party any information provided to the 
     corporation under paragraph (2) not later than 15 days 
     after--

       ``(I) receipt of a request from the affected party for the 
     information; or
       ``(II) the provision of new information to the corporation 
     relating to the previous request.

       ``(ii) Confidentiality.--

       ``(I) In general.--The plan administrator shall not provide 
     information under clause (i) in a form that includes any 
     information that may directly or indirectly be associated 
     with, or otherwise identify, an individual participant or 
     beneficiary.
       ``(II) Limitation.--A court may limit disclosure under this 
     subparagraph of confidential information described in section 
     552(b) of title 5, United States Code, to any authorized 
     representative of the participants or beneficiaries that 
     agrees to ensure the confidentiality of such information.

       ``(iii) Form and manner of information; charges.--

       ``(I) Form and manner.--The corporation may prescribe the 
     form and manner of the provision of information under this 
     subparagraph, which shall include delivery in written, 
     electronic, or other appropriate form to the extent that such 
     form is reasonably accessible to individuals to whom the 
     information is required to be provided.
       ``(II) Reasonable charges.--A plan sponsor may charge a 
     reasonable fee for any information provided under this 
     subparagraph in other than electronic form.

       ``(iv) Authorized representative.--For purposes of this 
     subparagraph, the term `authorized representative' means any 
     employee organization representing participants in the 
     pension plan.''.
       (2) Conforming amendment.--Section 4041(c)(1) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1341(c)(1)) is amended in subparagraph (C) by striking 
     ``subparagraph (B)'' and inserting ``subparagraphs (B) and 
     (D)''.
       (b) Involuntary Terminations.--
       (1) In general.--Section 4042(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1342(c)) is amended 
     by--
       (A) striking ``(c) If the'' and inserting ``(c)(1) If 
     the'';
       (B) redesignating paragraph (3) as paragraph (2); and
       (C) adding at the end the following:
       ``(3) Disclosure of termination information.--
       ``(A) In general.--
       ``(i) Information from plan sponsor or administrator.--A 
     plan sponsor or plan administrator of a single-employer plan 
     that has received a notice from the corporation of a 
     determination that the plan should be terminated under this 
     section shall provide to an affected party any information 
     provided to the corporation in conjunction with the plan 
     termination.
       ``(ii) Information from corporation.--The corporation shall 
     provide a copy of the administrative record, including the 
     trusteeship decision record of a termination of a plan 
     described under clause (i).
       ``(B) Timing of disclosure.--The plan sponsor, plan 
     administrator, or the corporation, as applicable, shall 
     provide the information described in subparagraph (A) not 
     later than 15 days after--
       ``(i) receipt of a request from an affected party for such 
     information; or
       ``(ii) in the case of information described under 
     subparagraph (A)(i), the provision of any new information to 
     the corporation relating to a previous request by an affected 
     party.
       ``(C) Confidentiality.--
       ``(i) In general.--The plan administrator and plan sponsor 
     shall not provide information under subparagraph (A)(i) in a 
     form which includes any information that may directly or 
     indirectly be associated with, or otherwise identify, an 
     individual participant or beneficiary.
       ``(ii) Limitation.--A court may limit disclosure under this 
     paragraph of confidential information described in section 
     552(b) of title 5, United States Code, to authorized 
     representatives (within the meaning of section 
     4041(c)(2)(D)(iv)) of the participants or beneficiaries that 
     agree to ensure the confidentiality of such information.
       ``(D) Form and manner of information; charges.--
       ``(i) Form and manner.--The corporation may prescribe the 
     form and manner of the provision of information under this 
     paragraph, which shall include delivery in written, 
     electronic, or other appropriate form to the extent that such 
     form is reasonably accessible to individuals to whom the 
     information is required to be provided.
       ``(ii) Reasonable charges.--A plan sponsor may charge a 
     reasonable fee for any information provided under this 
     paragraph in other than electronic form.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any plan termination under title IV of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1301 et seq.) with respect to which the notice of intent to 
     terminate (or in the case of a termination by the Pension 
     Benefit Guaranty Corporation, a notice of determination under 
     section 4042 of such Act (29 U.S.C. 1342)) occurs after the 
     date of enactment of this Act.

     SEC. 507. BENEFIT SUSPENSION NOTICE.

       (a) Modification of Regulation.--The Secretary of Labor 
     shall modify the regulation under subparagraph (B) of section 
     203(a)(3) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1053(a)(3)(B)) to provide that the 
     notification required by such regulation in connection with 
     any suspension of benefits described in such subparagraph--
       (1) in the case of an employee who returns to service 
     described in section 203(a)(3)(B) (i) or (ii) of such Act 
     after commencement of payment of benefits under the plan, 
     shall be made during the first calendar month or the first 4- 
     or 5-week payroll period ending in a calendar month in which 
     the plan withholds payments, and
       (2) in the case of any employee who is not described in 
     paragraph (1)--
       (A) may be included in the summary plan description for the 
     plan furnished in accordance with section 104(b) of such Act 
     (29 U.S.C. 1024(b)), rather than in a separate notice, and
       (B) need not include a copy of the relevant plan 
     provisions.
       (b) Effective Date.--The modification made under this 
     section shall apply to plan years beginning after December 
     31, 2005.

[[Page 2631]]



     SEC. 508. STUDY AND REPORT BY GOVERNMENT ACCOUNTABILITY 
                   OFFICE.

       (a) In General.--The Comptroller General of the United 
     States shall conduct a study to determine the effectiveness 
     of the enforcement of provisions in the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1001 et seq.) and in 
     other Federal laws designed to protect pension plans and the 
     assets and participants of such plan from fraud and 
     mismanagement, including excessive investment management 
     fees, violations of fiduciary duties under Title I of such 
     Act, and the quality of plan assets.
       (b) Content of Study.--The study described in subsection 
     (a) shall include:
       (1) An identification of which Federal departments and 
     agencies have responsibility for enforcement of these 
     provisions, including the recovery of lost plan assets due to 
     fraud and mismanagement.
       (2) Identification of all administrative enforcement 
     powers, procedures, and strategies used by the Securities and 
     Exchange Commission that have the potential to improve the 
     Department of Labor's enforcement of the fiduciary provisions 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1001 et seq.).
       (3) Identification of any statutory or other barriers that 
     restrict the Department of Labor's authority to use such 
     powers, procedures, and strategies identified in paragraph 
     (2).
       (4) An evaluation of whether giving additional 
     investigative or enforcement authority to the Pension Benefit 
     Guaranty Corporation or the Securities and Exchange 
     Commission would significantly improve enforcement of those 
     provisions.
       (5) An evaluation of the current authority of the Pension 
     Benefit Guaranty Corporation to bring actions to recover any 
     funds lost by pension plans due to violations of any 
     fiduciary standards under Title I of such Act or other 
     Federal statutes.
       (6) The impact that expanding any such authority by the 
     Pension Benefit Guaranty Corporation to bring such actions 
     would have on the Corporation's solvency.
       (c) Report.--Not later than 6 months after the enactment of 
     this Act, the Comptroller General shall submit a report to 
     Congress on the study conducted under subsection (a) that 
     includes such recommendations for legislation or 
     administrative action as the Comptroller General determines 
     are appropriate.

 TITLE VI--TREATMENT OF CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT 
                             PENSION PLANS

     SEC. 601. PROSPECTIVE APPLICATION OF AGE DISCRIMINATION, 
                   CONVERSION, AND PRESENT VALUE ASSUMPTION RULES.

       (a) Application of Age Discrimination Prohibitions.--
       (1) Amendment of erisa.--Section 204(b) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(b)) is 
     amended by adding at the end the following:
       ``(5) Special rules for cash balance and other hybrid 
     defined benefit plans.--
       ``(A) In general.--A qualified cash balance plan shall not 
     be treated as violating the requirements of paragraph (1)(H) 
     merely because it may reasonably be expected that the period 
     over which interest credits will be made to a participant's 
     accumulation account (or its equivalent) is longer for a 
     younger participant. This paragraph shall not apply to any 
     plan if the rate of any pay credit or interest credit to such 
     an account under the plan decreases by reason of the 
     participant's attainment of any age.
       ``(B) Qualified cash balance plan.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `qualified cash balance plan' 
     means a cash balance plan which meets the vesting requirement 
     under clause (ii) and the interest credit requirement under 
     clause (iii).
       ``(ii) Vesting requirements.--A plan meets the requirements 
     of this clause if an employee who has completed at least 3 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(iii) Interest credits.--A plan meets the requirements of 
     this clause if the terms of the plan provide that any 
     interest credit (or equivalent amount) for any plan year 
     shall be at a rate which--

       ``(I) is not less than the applicable Federal mid-term 
     interest rate (as determined under section 1274(d)(1) of the 
     Internal Revenue Code of 1986), and
       ``(II) is not greater than the greater of the rate 
     determined under subclause (I) or a rate equal to the rate of 
     interest on amounts invested conservatively in long-term 
     investment grade corporate bonds.

       ``(iv) Determination of rates.--For purposes of clause 
     (iii)(II), the rate of interest on amounts invested 
     conservatively in long-term investment grade corporate bonds 
     shall be determined by the Secretary of the Treasury on the 
     basis of 2 or more indices that are selected periodically by 
     the Secretary of the Treasury. The Secretary of the Treasury 
     shall make publicly available the indices and methodology 
     used to determine the rate.
       ``(v) Variable rate of interest.--If the interest credit 
     rate under the plan is a variable rate, the plan shall 
     provide that, upon the termination of the plan, the rate of 
     interest used to determine accrued benefits under the plan 
     shall be equal to the average of the rates of interest used 
     under the plan during the 5-year period ending on the 
     termination date.
       ``(C) Cash balance plan.--For purposes of this paragraph, 
     the term `cash balance plan' means a defined benefit plan 
     under which--
       ``(i) the accrued benefit is determined by reference to the 
     balance of a hypothetical accumulation account, and
       ``(ii) pay credits and interest credits are credited to 
     such account.
       ``(D) Regulations to include similar or other hybrid 
     plans.--
       ``(i) Cash balance plan.--The Secretary of the Treasury 
     shall issue regulations which include in the definition of 
     cash balance plan any defined benefit plan (or any portion of 
     such a plan) which has an effect similar to a cash balance 
     plan. Such regulations may provide that if a plan sponsor 
     represents in communications to participants and 
     beneficiaries that a plan amendment results in a plan being 
     described in the preceding sentence, such plan shall be 
     treated as a cash balance plan.
       ``(ii) Qualified cash balance plan.--The Secretary of the 
     Treasury may in the regulations issued under clause (i) 
     provide for the treatment of a cash balance plan as a 
     qualified cash balance plan in cases where the cash balance 
     plan has an effect similar to the qualified cash balance 
     plan.''.
       (2) Age discrimination in employment act.--Section 4(i)(2) 
     of the Age Discrimination of Employment Act of 1967 (29 
     U.S.C. 623(i)(2)) is amended--
       (A) by inserting ``(A)'' after ``(2)'', and
       (B) by adding at the end the following new subparagraph:
       ``(B) A defined benefit plan which is treated as a 
     qualified cash balance plan for purposes of section 204(b)(5) 
     of the Employee Retirement Income Security Act of 1974 shall 
     not be treated as violating the requirements of paragraph 
     (1)(A) merely because it may reasonably be expected that the 
     period over which interest credits will be made under the 
     plan to a participant's accumulation account (or its 
     equivalent) is longer for a younger participant. This 
     subparagraph shall not apply to any plan if the rate of any 
     pay credit or interest credit to such an account under the 
     plan decreases by reason of the participant's attainment of 
     any age.''.
       (3) Amendment of internal revenue code.--Section 411(b) of 
     the Internal Revenue Code of 1986 (relating to accrued 
     benefit requirements) is amended by adding at the end the 
     following:
       ``(5) Special rules for cash balance and other hybrid 
     defined benefit plans.--
       ``(A) In general.--A qualified cash balance plan shall not 
     be treated as violating the requirements of paragraph (1)(H) 
     merely because it may reasonably be expected that the period 
     over which interest credits will be made to a participant's 
     accumulation account (or its equivalent) is longer for a 
     younger participant. This paragraph shall not apply to any 
     plan if the rate of any pay credit or interest credit to such 
     an account under the plan decreases by reason of the 
     participant's attainment of any age.
       ``(B) Qualified cash balance plan.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `qualified cash balance plan' 
     means a cash balance plan which meets the vesting requirement 
     under clause (ii) and the interest credit requirement under 
     clause (iii).
       ``(ii) Vesting requirements.--A plan meets the requirements 
     of this clause if an employee who has completed at least 3 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(iii) Interest credits.--A plan meets the requirements of 
     this clause if the terms of the plan provide that any 
     interest credit (or equivalent amount) for any plan year 
     shall be at a rate which--

       ``(I) is not less than the applicable Federal mid-term 
     interest rate (as determined under section 1274(d)(1)), and
       ``(II) is not greater than the greater of the rate 
     determined under subclause (I) or a rate equal to the rate of 
     interest on amounts invested conservatively in long-term 
     investment grade corporate bonds.

       ``(iv) Determination of rates.--For purposes of clause 
     (iii)(II), the rate of interest on amounts invested 
     conservatively in long-term investment grade corporate bonds 
     shall be determined by the Secretary on the basis of 2 or 
     more indices that are selected periodically by the Secretary. 
     The Secretary shall make publicly available the indices and 
     methodology used to determine the rate.
       ``(v) Variable rate of interest.--If the interest credit 
     rate under the plan is a variable rate, the plan shall 
     provide that, upon the termination of the plan, the rate of 
     interest used to determine accrued benefits under the plan 
     shall be equal to the average of the rates of interest used 
     under the plan during the 5-year period ending on the 
     termination date.
       ``(C) Cash balance plan.--For purposes of this paragraph, 
     the term `cash balance plan' means a defined benefit plan 
     under which--
       ``(i) the accrued benefit is determined by reference to the 
     balance of a hypothetical accumulation account, and
       ``(ii) pay credits and interest credits are credited to 
     such account.

[[Page 2632]]

       ``(D) Regulations to include similar or other hybrid 
     plans.--
       ``(i) Cash balance plan.--The Secretary shall issue 
     regulations which include in the definition of cash balance 
     plan any defined benefit plan (or any portion of such a plan) 
     which has an effect similar to a cash balance plan. Such 
     regulations may provide that if a plan sponsor represents in 
     communications to participants and beneficiaries that a plan 
     amendment results in a plan being described in the preceding 
     sentence, such plan shall be treated as a cash balance plan.
       ``(ii) Qualified cash balance plan.--The Secretary may in 
     the regulations issued under clause (i) provide for the 
     treatment of a cash balance plan as a qualified cash balance 
     plan in cases where the cash balance plan has an effect 
     similar to the qualified cash balance plan.''.
       (b) Rules Applicable to Accrued Benefits Under Converted 
     Plans.--
       (1) Amendment of erisa.--Section 204(g) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
     amended by adding at the end the following new paragraph:
       ``(6) Treatment of conversions to cash balance or other 
     hybrid plans.--
       ``(A) In general.--For purposes of this subsection, an 
     applicable plan amendment shall be treated as reducing the 
     accrued benefit of a participant if, under the terms of the 
     plan as in effect after the amendment, the accrued benefit of 
     any participant who was a participant as of the effective 
     date of the amendment may at any time be less than the 
     accrued benefit determined under the method under 
     subparagraph (B), (C), or (D) which is specified in the plan 
     and applies uniformly to all participants. An applicable plan 
     amendment shall in no event be treated as meeting the 
     requirements of any such subparagraph if the conversion 
     described in subparagraph (G)(i) is into a cash balance plan 
     other than a qualified cash balance plan (as defined in 
     subsection (b)(5)(B)).
       ``(B) No wearaway.--
       ``(i) In general.--The accrued benefit determined under 
     this subparagraph is the sum of--

       ``(I) the participant's accrued benefit for years of 
     service before the effective date of the amendment, 
     determined under the terms of the plan as in effect before 
     the amendment, plus
       ``(II) except as provided in clause (ii), the participant's 
     accrued benefit for years of service after the effective date 
     of the amendment, determined under the terms of the plan as 
     in effect after the amendment.

       ``(ii) Required amounts for certain periods.--
     Notwithstanding clause (i)(II), the plan shall provide that 
     either--

       ``(I) the accrued benefit of all participants for each of 
     the first 5 plan years to which the amendment applies shall 
     be equal to the greater of the accrued benefit determined 
     under the terms of the plan as in effect both before and 
     after the amendment, or
       ``(II) the accrued benefit for periods after the effective 
     date of the amendment of all participants who, as of the 
     effective date of the amendment, had attained the age of 40 
     and had a combined age and years of service under the plan of 
     not less than 55 shall be determined under either of the 
     methods described in clause (iii) which is selected by the 
     plan and which is specified in the amendment.

       ``(iii) Applicable method.--For purposes of clause 
     (ii)(II), the plan shall select 1 of the following methods:

       ``(I) The accrued benefit shall be equal to the greater of 
     the accrued benefit determined under the terms of the plan as 
     in effect both before and after the amendment.
       ``(II) At the election of the participant, the accrued 
     benefit shall be determined under the terms of the plan as in 
     effect either before or after the amendment.

       ``(C) Greater of old or new or election of either.--The 
     accrued benefit determined under this subparagraph is the 
     accrued benefit determined under 1 of the following methods 
     which is selected by the plan and which is specified in the 
     amendment:
       ``(i) The accrued benefit shall be equal to the greater of 
     the accrued benefit determined under the terms of the plan as 
     in effect both before and after the amendment.
       ``(ii) At the election of the participant, the accrued 
     benefit shall be determined under the terms of the plan as in 
     effect either before or after the amendment.
       ``(D) Method prescribed by secretary.--The accrued benefit 
     determined under this subparagraph shall be determined under 
     regulations prescribed by the Secretary which are consistent 
     with the purposes of this paragraph and which may require a 
     plan to provide a credit of additional amounts or increases 
     in initial account balances in amounts substantially 
     equivalent to the benefits that would be required to be 
     provided to meet the requirements of subparagraphs (B) or 
     (C).
       ``(E) Inclusion of prior accrued benefit into initial 
     account balance.--
       ``(i) In general.--If, for purposes of subparagraphs (B), 
     (C), or (D), an applicable plan amendment provides that an 
     amount will be initially credited to a participant's 
     accumulation account (or its equivalent) on the effective 
     date of the amendment with respect to the participant's 
     accrued benefit for periods before such date, the 
     requirements of such subparagraph shall be treated as met 
     with respect to such accrued benefit if the amount initially 
     credited is not less than the present value of the 
     participant's accrued benefit determined by using the 
     applicable mortality table and the lower of the applicable 
     interest rate under section 205(g)(3)(A), or the interest 
     rate used to credit interest under the plan, as of such date.
       ``(ii) Adjustments for certain subsidized benefits.--For 
     purposes of subparagraph (B), if any early retirement benefit 
     or retirement-type subsidy (within the meaning of paragraph 
     (6)(B)(i)) is not included in the initial account balance 
     under clause (i), the plan shall credit the accumulation 
     account with the amount of such benefit or subsidy for the 
     plan year in which the participant retires if, as of such 
     time, the participant has met the age, years of service, and 
     other requirements under the plan for entitlement to such 
     benefit or subsidy.
       ``(F) Requirements where participant offered choice.--If a 
     plan provides a participant with an election described in 
     subparagraph (B)(iii)(II) or (C)(ii), the following rules 
     shall apply:
       ``(i) Notice.--The plan shall not be treated as meeting the 
     requirements of either such subparagraph unless the plan 
     provides the participant a notice of the right to make such 
     election which includes information (meeting such 
     requirements as may be prescribed by the Secretary of the 
     Treasury)--

       ``(I) by which the participant may project benefits under 
     the formulas from which the participant may choose and may 
     model the impact of any such choice, and
       ``(II) with respect to circumstances under which a 
     participant may not receive the projected accrued benefits by 
     reason of a plan termination or otherwise.

       ``(ii) Significant reduction of rate of accrual.--The plan 
     shall provide that if, during any of the first 5 plan years 
     during which such an election is in effect, the plan adopts 
     an amendment which results in a significant reduction in the 
     rate of future benefit accrual (within the meaning of section 
     204(h)), the accrued benefit of the participant shall be 
     determined as if the participant had made the election which 
     resulted in the greatest accrued benefit.
       ``(iii) Benefits must not be contingent on election.--The 
     plan shall not be treated as meeting the requirements of 
     either such subparagraph if any other benefit is conditioned 
     (directly or indirectly) on such election.
       ``(G) Applicable plan amendment.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `applicable plan amendment' 
     means an amendment to a defined benefit plan which has the 
     effect of converting the plan to a cash balance plan.
       ``(ii) Special rule for coordinated benefits.--If the 
     benefits of 2 or more defined benefit plans established or 
     maintained by an employer are coordinated in such a manner as 
     to have the effect of the adoption of an amendment described 
     in clause (i), the sponsor of the defined benefit plan or 
     plans providing for such coordination shall be treated as 
     having adopted such a plan amendment as of the date such 
     coordination begins.
       ``(iii) Multiple amendments.--The Secretary of the Treasury 
     shall issue regulations to prevent the avoidance of the 
     purposes of this paragraph through the use of 2 or more plan 
     amendments rather than a single amendment.
       ``(iv) Cash balance plan.--For purposes of this paragraph, 
     the term `cash balance plan' has the meaning given such term 
     by subsection (b)(5)(C).
       ``(v) Coordination with accrual rules.--If a plan amendment 
     is treated as meeting the requirements of this paragraph with 
     respect to any participant because such participant is 
     eligible to continue to accrue benefits in the same manner as 
     under the terms of the plan in effect before the amendment, 
     the Secretary of the Treasury shall prescribe regulations 
     under which the plan shall not be treated as failing to meet 
     the requirements of subparagraph (A), (B), or (C) of section 
     204(b)(1) if the requirements of this paragraph are met.
       ``(H) Application of certain rules to early-retirement 
     benefits.--Rules similar to the rules of clauses (i), (ii), 
     and (iii) of subparagraph (B) and subparagraph (C) shall 
     apply in the case of any early retirement benefit or 
     retirement-type subsidy (within the meaning of section 
     204(g)(2)(A)).''.
       (2) Amendment of internal revenue code.--Section 411(d) of 
     the Internal Revenue Code of 1986 (relating to special rules) 
     is amended by adding at the end the following new paragraph:
       ``(7) Treatment of conversions to cash balance or other 
     hybrid plans.--
       ``(A) In general.--For purposes of paragraph (6), an 
     applicable plan amendment shall be treated as reducing the 
     accrued benefit of a participant if, under the terms of the 
     plan as in effect after the amendment, the accrued benefit of 
     any participant who was a participant as of the effective 
     date of the amendment may at any time be less than the 
     accrued benefit determined under the method under 
     subparagraph (B), (C), or (D) which is specified in the plan 
     and applies uniformly to all participants. An applicable plan 
     amendment shall in no event be treated as meeting the 
     requirements of any such

[[Page 2633]]

     subparagraph if the conversion described in subparagraph 
     (G)(i) is into a cash balance plan other than a qualified 
     cash balance plan (as defined in subsection (b)(5)(B)).
       ``(B) No wearaway.--
       ``(i) In general.--The accrued benefit determined under 
     this subparagraph is the sum of--

       ``(I) the participant's accrued benefit for years of 
     service before the effective date of the amendment, 
     determined under the terms of the plan as in effect before 
     the amendment, plus
       ``(II) except as provided in clause (ii), the participant's 
     accrued benefit for years of service after the effective date 
     of the amendment, determined under the terms of the plan as 
     in effect after the amendment.

     A similar rule shall apply in the case of any early 
     retirement benefit or retirement-type subsidy (within the 
     meaning of section 411(d)(6)(B)(i)).
       ``(ii) Required amounts for certain periods.--
     Notwithstanding clause (i)(II), the plan shall provide that 
     either--

       ``(I) the accrued benefit of all participants for each of 
     the first 5 plan years to which the amendment applies shall 
     be equal to the greater of the accrued benefit determined 
     under the terms of the plan as in effect both before and 
     after the amendment, or
       ``(II) the accrued benefit for periods after the effective 
     date of the amendment of all participants who, as of the 
     effective date of the amendment, had attained the age of 40 
     and had a combined age and years of service under the plan of 
     not less than 55 shall be determined under either of the 
     methods described in clause (iii) which is selected by the 
     plan and which is specified in the amendment.

       ``(iii) Applicable method.--For purposes of clause 
     (ii)(II), the plan shall select 1 of the following methods:

       ``(I) The accrued benefit shall be equal to the greater of 
     the accrued benefit determined under the terms of the plan as 
     in effect both before and after the amendment.
       ``(II) At the election of the participant, the accrued 
     benefit shall be determined under the terms of the plan as in 
     effect either before or after the amendment.

       ``(C) Greater of old or new or election of either.--The 
     accrued benefit determined under this subparagraph is the 
     accrued benefit determined under 1 of the following methods 
     which is selected by the plan and which is specified in the 
     amendment:
       ``(i) The accrued benefit shall be equal to the greater of 
     the accrued benefit determined under the terms of the plan as 
     in effect both before and after the amendment.
       ``(ii) At the election of the participant, the accrued 
     benefit shall be determined under the terms of the plan as in 
     effect either before or after the amendment.
       ``(D) Method prescribed by secretary.--The accrued benefit 
     determined under this subparagraph shall be determined under 
     regulations prescribed by the Secretary which are consistent 
     with the purposes of this paragraph and which may require a 
     plan to provide a credit of additional amounts or increases 
     in initial account balances in amounts substantially 
     equivalent to the benefits that would be required to be 
     provided to meet the requirements of subparagraphs (B) or 
     (C).
       ``(E) Inclusion of prior accrued benefit into initial 
     account balance.--
       ``(i) In general.--If, for purposes of subparagraphs (B), 
     (C), or (D), an applicable plan amendment provides that an 
     amount will be initially credited to a participant's 
     accumulation account (or its equivalent) on the effective 
     date of the amendment with respect to the participant's 
     accrued benefit for periods before such date, the 
     requirements of such subparagraph shall be treated as met 
     with respect to such accrued benefit if the amount initially 
     credited is not less than the present value of the 
     participant's accrued benefit determined by using the 
     applicable mortality table and the lower of the applicable 
     interest rate under section 417(e)(3)(A), or the interest 
     rate used to credit interest under the plan, as of such date.
       ``(ii) Adjustments for certain subsidized benefits.--For 
     purposes of subparagraph (B), if any early retirement benefit 
     or retirement-type subsidy (within the meaning of paragraph 
     (6)(B)(i)) is not included in the initial account balance 
     under clause (i), the plan shall credit the accumulation 
     account with the amount of such benefit or subsidy for the 
     plan year in which the participant retires if, as of such 
     time, the participant has met the age, years of service, and 
     other requirements under the plan for entitlement to such 
     benefit or subsidy.
       ``(F) Requirements where participant offered choice.--If a 
     plan provides a participant with an election described in 
     subparagraph (B)(iii)(II) or (C)(ii), the following rules 
     shall apply:
       ``(i) Notice.--The plan shall not be treated as meeting the 
     requirements of either such subparagraph unless the plan 
     provides the participant a notice of the right to make such 
     election which includes information (meeting such 
     requirements as may be prescribed by the Secretary)--

       ``(I) by which the participant may project benefits under 
     the formulas from which the participant may choose and may 
     model the impact of any such choice, and
       ``(II) with respect to circumstances under which a 
     participant may not receive the projected accrued benefits by 
     reason of a plan termination or otherwise.

       ``(ii) Significant reduction of rate of accrual.--The plan 
     shall provide that if, during any of the first 5 plan years 
     during which such an election is in effect, the plan adopts 
     an amendment which results in a significant reduction in the 
     rate of future benefit accrual (within the meaning of section 
     4980F(e)), the accrued benefit of the participant shall be 
     determined as if the participant had made the election which 
     resulted in the greatest accrued benefit.
       ``(iii) Benefits must not be contingent on election.--The 
     plan shall not be treated as meeting the requirements of 
     either such subparagraph if any other benefit is conditioned 
     (directly or indirectly) on such election.
       ``(G) Applicable plan amendment.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `applicable plan amendment' 
     means an amendment to a defined benefit plan which has the 
     effect of converting the plan to a cash balance plan.
       ``(ii) Special rule for coordinated benefits.--If the 
     benefits of 2 or more defined benefit plans established or 
     maintained by an employer are coordinated in such a manner as 
     to have the effect of the adoption of an amendment described 
     in clause (i), the sponsor of the defined benefit plan or 
     plans providing for such coordination shall be treated as 
     having adopted such a plan amendment as of the date such 
     coordination begins.
       ``(iii) Multiple amendments.--The Secretary shall issue 
     regulations to prevent the avoidance of the purposes of this 
     paragraph through the use of 2 or more plan amendments rather 
     than a single amendment.
       ``(iv) Cash balance plan.--For purposes of this paragraph, 
     the term `cash balance plan' has the meaning given such term 
     by subsection (b)(5)(C).
       ``(v) Coordination with accrual and nondiscrimination 
     rules.--If a plan amendment is treated as meeting the 
     requirements of this paragraph with respect to any 
     participant because such participant is eligible to continue 
     to accrue benefits in the same manner as under the terms of 
     the plan in effect before the amendment, the Secretary shall 
     prescribe regulations under which--

       ``(I) the plan shall not be treated as failing to meet the 
     requirements of subparagraph (A), (B), or (C) of section 
     411(b)(1) if the requirements of this paragraph are met, and
       ``(II) the plan shall, subject to such terms and conditions 
     as may be provided in such regulations, not be treated as 
     failing to meet the requirements of section 401(a)(4) merely 
     because the plan provides any accrual or benefit which is 
     required to be provided under subparagraph (B), (C), or (D) 
     or because only participants as of the effective date of the 
     amendment are so eligible, except that this subclause shall 
     only apply if the plan met the requirements of section 
     401(a)(4) under the terms of the plan as in effect before the 
     amendment.

       ``(H) Application of certain rules to early-retirement 
     benefits.--Rules similar to the rules of clauses (i), (ii), 
     and (iii) of subparagraph (B) and subparagraph (C) shall 
     apply in the case of any early retirement benefit or 
     retirement-type subsidy (within the meaning of section 
     411(d)(6)(B)(i)).''.
       (c) Assumptions Used in Computing Present Value of Accrued 
     Benefit.--
       (1) Amendment of erisa.--Section 205(g)(3) of such Act (29 
     U.S.C. 1055(g)(3)), is amended--
       (A) by striking ``or (B)'' in subparagraph (A)(i) and 
     inserting ``, (B), or (C)'', and
       (B) by adding at the end the following new subparagraph:
       ``(C) Present value of accrued benefit under cash balance 
     plan.--Except as provided in regulations, in the case of a 
     qualified cash balance plan (as defined in section 
     204(g)(6)(B)), the present value of the accrued benefit of 
     any participant shall, for purposes of paragraphs (1) and 
     (2), be equal to the balance in the participant's 
     accumulation account (or its equivalent) as of the time the 
     present value determination is being made.''.
       (2) Amendment of internal revenue code.--Section 417(e)(3) 
     of such Code, is amended--
       (A) by striking ``or (B)'' in subparagraph (A)(i) and 
     inserting ``, (B), or (C)'', and
       (B) by adding at the end the following new subparagraph:
       ``(C) Present value of accrued benefit under cash balance 
     plan.--Except as provided in regulations, in the case of a 
     qualified cash balance plan (as defined in section 
     411(d)(7)(B)), the present value of the accrued benefit of 
     any participant shall, for purposes of paragraphs (1) and 
     (2), be equal to the balance in the participant's 
     accumulation account (or its equivalent) as of the time the 
     present value determination is being made.''
       (d) No Inference.--Nothing in the amendments made by this 
     section shall be construed to infer the proper treatment of 
     cash balance plans or conversions to cash balance plans under 
     sections 204(b)(1)(H) of the Employee Retirement Income 
     Security Act of 1974, 4(i)(1) of the Age Discrimination in 
     Employment Act of 1967, and 411(b)(1)(H) of the Internal 
     Revenue Code of 1986, as in effect before such amendments.
       (e) Effective Dates.--

[[Page 2634]]

       (1) Age discrimination and lump-sum distributions.--
       (A) In general.--The amendments made by subsections (a) and 
     (c) shall apply to periods after July 31, 2005.
       (B) Vesting and interest credit requirements.--In the case 
     of a plan in existence on July 31, 2005, the requirements of 
     clauses (ii) and (iii) of section 411(b)(5)(B) of the 
     Internal Revenue Code of 1986, and of clauses (ii) and (iii) 
     of 204(b)(5)(B) of the Employee Retirement Income Security 
     Act of 1974 shall, for purposes of applying the amendments 
     made by subsections (a) and (c), apply to years beginning 
     after December 31, 2006, unless the plan sponsor elects the 
     application of such requirements for any period after July 
     31, 2005, and before the first year beginning after December 
     31, 2006.
       (C) Special rule for collectively bargained plans.--In the 
     case of a plan maintained pursuant to 1 or more collective 
     bargaining agreements between employee representatives and 1 
     or more employers ratified on or before the date of the 
     enactment of this Act, the requirements described in 
     subparagraph (B) shall, for purposes of applying the 
     amendments made by subsections (a) and (c), not apply to plan 
     years beginning before--
       (i) the earlier of--

       (I) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of enactment), 
     or
       (II) January 1, 2007, or

       (ii) January 1, 2009.
       (2) Conversions.--The amendments made by subsection (b) 
     shall apply to plan amendments adopted after, and taking 
     effect after, July 31, 2005, except that the plan sponsor may 
     elect to have such amendments apply to plan amendments 
     adopted before, and taking effect after, such date.

     SEC. 602. REGULATIONS RELATING TO MERGERS AND ACQUISITIONS.

       The Secretary of the Treasury or his delegate shall, not 
     later than 12 months after the date of the enactment of this 
     Act, prescribe regulations for the application of the 
     amendments made by, and the provisions of, this title in 
     cases where the conversion of a plan to a cash balance plan 
     is made with respect to a group of employees who become 
     employees by reason of a merger, acquisition, or similar 
     transaction.

  TITLE VII--DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS 
                    UNDER DEFINED CONTRIBUTION PLANS

     SEC. 701. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE 
                   EMPLOYEES WITH FREEDOM TO INVEST THEIR PLAN 
                   ASSETS.

       (a) Amendments of Internal Revenue Code.--
       (1) Qualification requirement.--Section 401(a) of the 
     Internal Revenue Code of 1986 (relating to qualified pension, 
     profit-sharing, and stock bonus plans), as amended by section 
     115 of this Act, is amended by inserting after paragraph (34) 
     the following new paragraph:
       ``(35) Diversification requirements for certain defined 
     contribution plans.--
       ``(A) In general.--A trust which is part of an applicable 
     defined contribution plan shall not be treated as a qualified 
     trust unless the plan meets the diversification requirements 
     of subparagraphs (B), (C), and (D).
       ``(B) Employee contributions and elective deferrals 
     invested in employer securities or real property.--In the 
     case of the portion of an applicable individual's account 
     attributable to employee contributions and elective deferrals 
     which is invested in employer securities or employer real 
     property, a plan meets the requirements of this subparagraph 
     if the applicable individual may elect to direct the plan to 
     divest any such securities or real property and to reinvest 
     an equivalent amount in other investment options meeting the 
     requirements of subparagraph (D).
       ``(C) Employer contributions invested in employer 
     securities or real property.--In the case of the portion of 
     the account attributable to employer contributions other than 
     elective deferrals which is invested in employer securities 
     or employer real property, a plan meets the requirements of 
     this subparagraph if each applicable individual who--
       ``(i) is a participant who has completed at least 3 years 
     of service, or
       ``(ii) is a beneficiary of a participant described in 
     clause (i) or of a deceased participant,

     may elect to direct the plan to divest any such securities or 
     real property and to reinvest an equivalent amount in other 
     investment options meeting the requirements of subparagraph 
     (D).
       ``(D) Investment options.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if the plan offers not less than 3 investment 
     options, other than employer securities or employer real 
     property, to which an applicable individual may direct the 
     proceeds from the divestment of employer securities or 
     employer real property pursuant to this paragraph, each of 
     which is diversified and has materially different risk and 
     return characteristics.
       ``(ii) Treatment of certain restrictions and conditions.--

       ``(I) Time for making investment choices.--A plan shall not 
     be treated as failing to meet the requirements of this 
     subparagraph merely because the plan limits the time for 
     divestment and reinvestment to periodic, reasonable 
     opportunities occurring no less frequently than quarterly.
       ``(II) Certain restrictions and conditions not allowed.--
     Except as provided in regulations, a plan shall not meet the 
     requirements of this subparagraph if the plan imposes 
     restrictions or conditions with respect to the investment of 
     employer securities or employer real property which are not 
     imposed on the investment of other assets of the plan. This 
     subclause shall not apply to any restrictions or conditions 
     imposed by reason of the application of securities laws.

       ``(E) Applicable defined contribution plan.--For purposes 
     of this paragraph--
       ``(i) In general.--The term `applicable defined 
     contribution plan' means any defined contribution plan which 
     holds any publicly traded employer securities.
       ``(ii) Exception for certain esops.--Such term does not 
     include an employee stock ownership plan if--

       ``(I) there are no contributions to such plan (or earnings 
     thereunder) which are held within such plan and are subject 
     to subsection (k) or (m), and
       ``(II) such plan is a separate plan for purposes of section 
     414(l) with respect to any other defined benefit plan or 
     defined contribution plan maintained by the same employer or 
     employers.

       ``(iii) Exception for one participant plans.--Such term 
     does not include a one-participant retirement plan.
       ``(iv) One-participant retirement plan.--For purposes of 
     clause (iii), the term `one-participant retirement plan' 
     means a retirement plan that--

       ``(I) on the first day of the plan year covered only one 
     individual (or the individual and the individual's spouse) 
     and the individual owned 100 percent of the plan sponsor 
     (whether or not incorporated), or covered only one or more 
     partners (or partners and their spouses) in the plan sponsor,
       ``(II) meets the minimum coverage requirements of section 
     410(b) without being combined with any other plan of the 
     business that covers the employees of the business,
       ``(III) does not provide benefits to anyone except the 
     individual (and the individual's spouse) or the partners (and 
     their spouses),
       ``(IV) does not cover a business that is a member of an 
     affiliated service group, a controlled group of corporations, 
     or a group of businesses under common control, and
       ``(V) does not cover a business that uses the services of 
     leased employees (within the meaning of section 414(n)).

     For purposes of this clause, the term `partner' includes a 2-
     percent shareholder (as defined in section 1372(b)) of an S 
     corporation.
       ``(F) Certain plans treated as holding publicly traded 
     employer securities.--
       ``(i) In general.--Except as provided in regulations or in 
     clause (ii), a plan holding employer securities which are not 
     publicly traded employer securities shall be treated as 
     holding publicly traded employer securities if any employer 
     corporation, or any member of a controlled group of 
     corporations which includes such employer corporation, has 
     issued a class of stock which is a publicly traded employer 
     security.
       ``(ii) Exception for certain controlled groups with 
     publicly traded securities.--Clause (i) shall not apply to a 
     plan if--

       ``(I) no employer corporation, or parent corporation of an 
     employer corporation, has issued any publicly traded employer 
     security, and
       ``(II) no employer corporation, or parent corporation of an 
     employer corporation, has issued any special class of stock 
     which grants particular rights to, or bears particular risks 
     for, the holder or issuer with respect to any corporation 
     described in clause (i) which has issued any publicly traded 
     employer security.

       ``(iii) Definitions.--For purposes of this subparagraph, 
     the term--

       ``(I) `controlled group of corporations' has the meaning 
     given such term by section 1563(a), except that `50 percent' 
     shall be substituted for `80 percent' each place it appears,
       ``(II) `employer corporation' means a corporation which is 
     an employer maintaining the plan, and
       ``(III) `parent corporation' has the meaning given such 
     term by section 424(e).

       ``(G) Other definitions.--For purposes of this paragraph--
       ``(i) Applicable individual.--The term `applicable 
     individual' means--

       ``(I) any participant in the plan, and
       ``(II) any beneficiary who has an account under the plan 
     with respect to which the beneficiary is entitled to exercise 
     the rights of a participant.

       ``(ii) Elective deferral.--The term `elective deferral' 
     means an employer contribution described in section 
     402(g)(3)(A).
       ``(iii) Employer security.--The term `employer security' 
     has the meaning given such term by section 407(d)(1) of the 
     Employee Retirement Income Security Act of 1974.
       ``(iv) Employer real property.--The term `employer real 
     property' has the meaning given such term by section 
     407(d)(2) of the

[[Page 2635]]

     Employee Retirement Income Security Act of 1974.
       ``(v) Employee stock ownership plan.--The term `employee 
     stock ownership plan' has the meaning given such term by 
     section 4975(e)(7).
       ``(vi) Publicly traded employer securities.--The term 
     `publicly traded employer securities' means employer 
     securities which are readily tradable on an established 
     securities market.
       ``(vii) Year of service.--The term `year of service' has 
     the meaning given such term by section 411(a)(5).
       ``(H) Transition rule for securities or real property 
     attributable to employer contributions.--
       ``(i) Rules phased in over 3 years.--

       ``(I) In general.--In the case of the portion of an account 
     to which subparagraph (C) applies and which consists of 
     employer securities or employer real property acquired in a 
     plan year beginning before January 1, 2006, subparagraph (C) 
     shall only apply to the applicable percentage of such 
     securities or real property. This subparagraph shall be 
     applied separately with respect to each class of securities 
     and employer real property.
       ``(II) Exception for certain participants aged 55 or 
     over.--Subclause (I) shall not apply to an applicable 
     individual who is a participant who has attained age 55 and 
     completed at least 3 years of service before the first plan 
     year beginning after December 31, 2005.

       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage shall be determined as follows:

Plan year to which                                       The applicable
  subparagraph (C) applies:                              percentage is:
  1st...........................................................33 ....

  2d............................................................66 ....

  3d and following..........................................100.''.....

       (2) Conforming amendments.--
       (A) Section 401(a)(28)(B) of such Code (relating to 
     additional requirements relating to employee stock ownership 
     plans) is amended by adding at the end the following new 
     clause:
       ``(v) Exception.--This subparagraph shall not apply to an 
     applicable defined contribution plan (as defined in paragraph 
     (35)(E)).''
       (B) Section 409(h)(7) of such Code is amended by inserting 
     ``or subparagraph (B) or (C) of section 401(a)(35)'' before 
     the period at the end.
       (C) Section 4980(c)(3)(A) of such Code is amended by 
     striking ``if--'' and all that follows and inserting ``if the 
     requirements of subparagraphs (B), (C), and (D) are met.''
       (b) Amendments of ERISA.--
       (1) In general.--Section 204 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1054) is amended by 
     redesignating subsection (j) as subsection (k) and by 
     inserting after subsection (i) the following new subsection:
       ``(j) Diversification Requirements for Certain Individual 
     Account Plans.--
       ``(1) In general.--An applicable individual account plan 
     shall meet the diversification requirements of paragraphs 
     (2), (3), and (4).
       ``(2) Employee contributions and elective deferrals 
     invested in employer securities or real property.--In the 
     case of the portion of an applicable individual's account 
     attributable to employee contributions and elective deferrals 
     which is invested in employer securities or employer real 
     property, a plan meets the requirements of this paragraph if 
     the applicable individual may elect to direct the plan to 
     divest any such securities or real property and to reinvest 
     an equivalent amount in other investment options meeting the 
     requirements of paragraph (4).
       ``(3) Employer contributions invested in employer 
     securities or real property.--In the case of the portion of 
     the account attributable to employer contributions other than 
     elective deferrals which is invested in employer securities 
     or employer real property, a plan meets the requirements of 
     this paragraph if each applicable individual who--
       ``(A) is a participant who has completed at least 3 years 
     of service, or
       ``(B) is a beneficiary of a participant described in 
     subparagraph (A) or of a deceased participant,

     may elect to direct the plan to divest any such securities or 
     real property and to reinvest an equivalent amount in other 
     investment options meeting the requirements of paragraph (4).
       ``(4) Investment options.--
       ``(A) In general.--The requirements of this paragraph are 
     met if the plan offers not less than 3 investment options, 
     other than employer securities or employer real property, to 
     which an applicable individual may direct the proceeds from 
     the divestment of employer securities or employer real 
     property pursuant to this subsection, each of which is 
     diversified and has materially different risk and return 
     characteristics.
       ``(B) Treatment of certain restrictions and conditions.--
       ``(i) Time for making investment choices.--A plan shall not 
     be treated as failing to meet the requirements of this 
     paragraph merely because the plan limits the time for 
     divestment and reinvestment to periodic, reasonable 
     opportunities occurring no less frequently than quarterly.
       ``(ii) Certain restrictions and conditions not allowed.--
     Except as provided in regulations, a plan shall not meet the 
     requirements of this paragraph if the plan imposes 
     restrictions or conditions with respect to the investment of 
     employer securities or employer real property which are not 
     imposed on the investment of other assets of the plan. This 
     subparagraph shall not apply to any restrictions or 
     conditions imposed by reason of the application of securities 
     laws.
       ``(5) Applicable individual account plan.--For purposes of 
     this subsection--
       ``(A) In general.--The term `applicable individual account 
     plan' means any individual account plan (as defined in 
     section 3(34)) which holds any publicly traded employer 
     securities.
       ``(B) Exception for certain esops.--Such term does not 
     include an employee stock ownership plan if--
       ``(i) there are no contributions to such plan (or earnings 
     thereunder) which are held within such plan and are subject 
     to subsection (k) or (m) of section 401 of the Internal 
     Revenue Code of 1986, and
       ``(ii) such plan is a separate plan (for purposes of 
     section 414(l) of such Code) with respect to any other 
     defined benefit plan or individual account plan maintained by 
     the same employer or employers.
       ``(C) Exception for one participant plans.--Such term shall 
     not include a one-participant retirement plan (as defined in 
     section 101(i)(8)(B)).
       ``(D) Certain plans treated as holding publicly traded 
     employer securities.--
       ``(i) In general.--Except as provided in regulations or in 
     clause (ii), a plan holding employer securities which are not 
     publicly traded employer securities shall be treated as 
     holding publicly traded employer securities if any employer 
     corporation, or any member of a controlled group of 
     corporations which includes such employer corporation, has 
     issued a class of stock which is a publicly traded employer 
     security.
       ``(ii) Exception for certain controlled groups with 
     publicly traded securities.--Clause (i) shall not apply to a 
     plan if--

       ``(I) no employer corporation, or parent corporation of an 
     employer corporation, has issued any publicly traded employer 
     security, and
       ``(II) no employer corporation, or parent corporation of an 
     employer corporation, has issued any special class of stock 
     which grants particular rights to, or bears particular risks 
     for, the holder or issuer with respect to any corporation 
     described in clause (i) which has issued any publicly traded 
     employer security.

       ``(iii) Definitions.--For purposes of this subparagraph, 
     the term--

       ``(I) `controlled group of corporations' has the meaning 
     given such term by section 1563(a) of the Internal Revenue 
     Code of 1986, except that `50 percent' shall be substituted 
     for `80 percent' each place it appears,
       ``(II) `employer corporation' means a corporation which is 
     an employer maintaining the plan, and
       ``(III) `parent corporation' has the meaning given such 
     term by section 424(e) of such Code.

       ``(6) Other definitions.--For purposes of this paragraph--
       ``(A) Applicable individual.--The term `applicable 
     individual' means--
       ``(i) any participant in the plan, and
       ``(ii) any beneficiary who has an account under the plan 
     with respect to which the beneficiary is entitled to exercise 
     the rights of a participant.
       ``(B) Elective deferral.--The term `elective deferral' 
     means an employer contribution described in section 
     402(g)(3)(A) of the Internal Revenue Code of 1986.
       ``(C) Employer security.--The term `employer security' has 
     the meaning given such term by section 407(d)(1).
       ``(D) Employer real property.--The term `employer real 
     property' has the meaning given such term by section 
     407(d)(2).
       ``(E) Employee stock ownership plan.--The term `employee 
     stock ownership plan' has the meaning given such term by 
     section 4975(e)(7) of such Code.
       ``(F) Publicly traded employer securities.--The term 
     `publicly traded employer securities' means employer 
     securities which are readily tradable on an established 
     securities market.
       ``(G) Year of service.--The term `year of service' has the 
     meaning given such term by section 203(b)(2).
       ``(7) Transition rule for securities or real property 
     attributable to employer contributions.--
       ``(A) Rules phased in over 3 years.--
       ``(i) In general.--In the case of the portion of an account 
     to which paragraph (3) applies and which consists of employer 
     securities or employer real property acquired in a plan year 
     beginning before January 1, 2006, paragraph (3) shall only 
     apply to the applicable percentage of such securities or real 
     property. This subparagraph shall be applied separately with 
     respect to each class of securities and employer real 
     property.
       ``(ii) Exception for certain participants aged 55 or 
     over.--Clause (i) shall not apply to an applicable individual 
     who is a participant who has attained age 55 and completed at 
     least 3 years of service before the first plan year beginning 
     after December 31, 2005.

[[Page 2636]]

       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined as 
     follows:

Plan year to which                                       The applicable
  paragraph (3) applies:                                 percentage is:
  1st...........................................................33 ....

  2d............................................................66 ....

  3d and following..........................................100.''.....

       (2) Conforming amendment.--Section 407(b)(3) of such Act 
     (29 U.S.C. 1107(b)(3)) is amended by adding at the end the 
     following:

  ``(D) For diversification requirements for qualifying employer 
securities and qualifying real property held in certain individual 
account plans, see section 204(j).''
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by this section shall apply to plan 
     years beginning after December 31, 2005.
       (2) Special rule for collectively bargained agreements.--In 
     the case of a plan maintained pursuant to 1 or more 
     collective bargaining agreements between employee 
     representatives and 1 or more employers ratified on or before 
     the date of the enactment of this Act, paragraph (1) shall be 
     applied to benefits pursuant to, and individuals covered by, 
     any such agreement by substituting for ``December 31, 2005'' 
     the earlier of--
       (A) the later of--
       (i) December 31, 2006, or
       (ii) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof after such date of enactment), or
       (B) December 31, 2007.
       (3) Special rule for certain employer securities held in an 
     esop.--
       (A) In general.--In the case of employer securities to 
     which this paragraph applies, the amendments made by this 
     section shall apply to plan years beginning after the earlier 
     of--
       (i) December 31, 2006, or
       (ii) the first date on which the fair market value of such 
     securities exceeds the guaranteed minimum value described in 
     subparagraph (B)(ii).
       (B) Applicable securities.--This paragraph shall apply to 
     employer securities which are attributable to employer 
     contributions other than elective deferrals, and which, on 
     September 17, 2003--
       (i) consist of preferred stock, and
       (ii) are within an employee stock ownership plan (as 
     defined in section 4975(e)(7) of the Internal Revenue Code of 
     1986), the terms of which provide that the value of the 
     securities cannot be less than the guaranteed minimum value 
     specified by the plan on such date.
       (C) Coordination with transition rule.--In applying section 
     401(a)(35)(H) of the Internal Revenue Code of 1986 and 
     section 204(j)(7) of the Employee Retirement Income Security 
     Act of 1974 (as added by this section) to employer securities 
     to which this paragraph applies, the applicable percentage 
     shall be determined without regard to this paragraph.

     SEC. 702. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES OR 
                   REAL PROPERTY.

       (a) In general.--Section 101 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021), as amended by 
     this Act, is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following:
       ``(m) Notice of Right To Divest.--Not later than 30 days 
     before the first date on which an applicable individual of an 
     applicable individual account plan is eligible to exercise 
     the right under section 204(j) to direct the proceeds from 
     the divestment of employer securities or employer real 
     property with respect to any type of contribution, the 
     administrator shall provide to such individual a notice--
       ``(1) setting forth such right under such section, and
       ``(2) describing the importance of diversifying the 
     investment of retirement account assets.

     The notice required by this subsection shall be written in a 
     manner calculated to be understood by the average plan 
     participant and may be delivered in written, electronic, or 
     other appropriate form to the extent that such form is 
     reasonably accessible to the recipient.''
       (b) Penalties.--Section 502(c)(7) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1132(c)(7)) 
     is amended by striking ``section 101(i)'' and inserting 
     ``subsection (i) or (m) of section 101''.
       (c) Model Notice.--The Secretary of the Treasury shall, 
     within 180 days after the date of the enactment of this 
     subsection, prescribe a model notice for purposes of 
     satisfying the requirements of the amendments made by this 
     section.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2005.
       (2) Transition rule.--If notice under section 101(m) of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     this section) would otherwise be required to be provided 
     before the 90th day after the date of the enactment of this 
     Act, such notice shall not be required to be provided until 
     such 90th day.

     SEC. 703. PERIODIC PENSION BENEFIT STATEMENTS.

       (a) Amendments of ERISA.--
       (1) In general.--Section 105(a) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1025(a)) is amended to 
     read as follows:
       ``(a) Requirements To Provide Pension Benefit Statements.--
       ``(1) Requirements.--
       ``(A) Individual account plan.--The administrator of an 
     individual account plan (other than a one-participant 
     retirement plan described in section 101(i)(8)(B)) shall 
     furnish a pension benefit statement--
       ``(i) at least once each calendar quarter to a participant 
     or beneficiary who has the right to direct the investment of 
     assets in his or her account under the plan,
       ``(ii) at least once each calendar year to a participant or 
     beneficiary who has his or her own account under the plan but 
     does not have the right to direct the investment of assets in 
     that account, and
       ``(iii) upon written request to a plan beneficiary not 
     described in clause (i) or (ii).
       ``(B) Defined benefit plan.--The administrator of a defined 
     benefit plan (other than a one-participant retirement plan 
     described in section 101(i)(8)(B)) shall furnish a pension 
     benefit statement--
       ``(i) at least once every 3 years to each participant with 
     a nonforfeitable accrued benefit and who is employed by the 
     employer maintaining the plan at the time the statement is to 
     be furnished, and
       ``(ii) to a participant or beneficiary of the plan upon 
     written request.

     Information furnished under clause (i) to a participant may 
     be based on reasonable estimates determined under regulations 
     prescribed by the Secretary, in consultation with the Pension 
     Benefit Guaranty Corporation.
       ``(2) Statements.--
       ``(A) In general.--A pension benefit statement under 
     paragraph (1)--
       ``(i) shall indicate, on the basis of the latest available 
     information--

       ``(I) the total benefits accrued, and
       ``(II) the nonforfeitable pension benefits, if any, which 
     have accrued, or the earliest date on which benefits will 
     become nonforfeitable,

       ``(ii) shall include an explanation of any permitted 
     disparity under section 401(l) of the Internal Revenue Code 
     of 1986 or any floor-offset arrangement that may be applied 
     in determining any accrued benefits described in clause (i),
       ``(iii) shall be written in a manner calculated to be 
     understood by the average plan participant, and
       ``(iv) may be delivered in written, electronic, or other 
     appropriate form to the extent such form is reasonably 
     accessible to the participant or beneficiary.
       ``(B) Additional information.--In the case of an individual 
     account plan, any pension benefit statement under clause (i) 
     or (ii) of paragraph (1)(A) shall include--
       ``(i) the value of each investment to which assets in the 
     individual account have been allocated, determined as of the 
     most recent valuation date under the plan, including the 
     value of any assets held in the form of employer securities 
     or employer real property, without regard to whether such 
     securities or real property were contributed by the plan 
     sponsor or acquired at the direction of the plan or of the 
     participant or beneficiary, and
       ``(ii) in the case of a pension benefit statement under 
     paragraph (1)(A)(i)--

       ``(I) an explanation of any limitations or restrictions on 
     any right of the participant or beneficiary under the plan to 
     direct an investment, and
       ``(II) a notice that investments in any individual account 
     may not be adequately diversified if the value of any 
     investment in the account exceeds 20 percent of the fair 
     market value of all investments in the account.

       ``(C) Alternative notice.--The requirements of subparagraph 
     (A)(i)(II) are met if, at least annually and in accordance 
     with requirements of the Secretary, the plan--
       ``(i) updates the information described in such paragraph 
     which is provided in the pension benefit statement, or
       ``(ii) provides in a separate statement such information as 
     is necessary to enable a participant or beneficiary to 
     determine their nonforfeitable vested benefits.
       ``(3) Defined benefit plans.--
       ``(A) Alternative notice.--In the case of a defined benefit 
     plan, the requirements of paragraph (1)(B)(i) shall be 
     treated as met with respect to a participant if at least once 
     each year the administrator provides to the participant 
     notice of the availability of the pension benefit statement 
     and the ways in which the participant may obtain such 
     statement. Such notice may be delivered in written, 
     electronic, or other appropriate form to the extent such form 
     is reasonably accessible to the participant.
       ``(B) Years in which no benefits accrue.--The Secretary may 
     provide that years in which no employee or former employee 
     benefits (within the meaning of section 410(b) of the 
     Internal Revenue Code of 1986) under the plan need not be 
     taken into account in determining the 3-year period under 
     paragraph (1)(B)(i).''
       (2) Conforming amendments.--

[[Page 2637]]

       (A) Section 105 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1025) is amended by striking 
     subsection (d).
       (B) Section 105(b) of such Act (29 U.S.C. 1025(b)) is 
     amended to read as follows:
       ``(b) Limitation on Number of Statements.--In no case shall 
     a participant or beneficiary of a plan be entitled to more 
     than 1 statement described in subparagraph (A)(iii) or 
     (B)(ii) of subsection (a)(1), whichever is applicable, in any 
     12-month period.''
       (C) Section 502(c)(1) of such Act (29 U.S.C. 1132(c)(1)) is 
     amended by striking ``or section 101(f)'' and inserting 
     ``section 101(f), or section 105(a)''.
       (b) Model Statements.--
       (1) In general.--The Secretary of Labor shall, within 180 
     days after the date of the enactment of this section, develop 
     1 or more model benefit statements that are written in a 
     manner calculated to be understood by the average plan 
     participant and that may be used by plan administrators in 
     complying with the requirements of section 105 of the 
     Employee Retirement Income Security Act of 1974.
       (2) Interim final rules.--The Secretary of Labor may 
     promulgate any interim final rules as the Secretary 
     determines appropriate to carry out the provisions of this 
     subsection.
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2006.
       (2) Special rule for collectively bargained agreements.--In 
     the case of a plan maintained pursuant to 1 or more 
     collective bargaining agreements between employee 
     representatives and 1 or more employers ratified on or before 
     the date of the enactment of this Act, paragraph (1) shall be 
     applied to benefits pursuant to, and individuals covered by, 
     any such agreement by substituting for ``December 31, 2006'' 
     the earlier of--
       (A) the later of--
       (i) December 31, 2007, or
       (ii) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof after such date of enactment), or
       (B) December 31, 2008.

     SEC. 704. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT 
                   PERIODS.

       (a) Amendments of ERISA.--
       (1) In general.--Section 101(i) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021(i)) is amended--
       (A) by striking clauses (i) through (iv) of paragraph 
     (8)(B) and inserting:
       ``(i) on the first day of the plan year--

       ``(I) covered only one individual (or the individual and 
     the individual's spouse) and the individual (or the 
     individual and the individual's spouse) owned 100 percent of 
     the plan sponsor (whether or not incorporated), or
       ``(II) covered only one or more partners (or partners and 
     their spouses) in the plan sponsor, and'', and

       (B) in paragraph (8)(B), by redesignating clause (v) as 
     clause (ii).
       (2) Effective date.--The amendments made by this subsection 
     shall take effect as if included in the provisions of section 
     306 of Public Law 107-204 (116 Stat. 745 et seq.).

     SEC. 705. ALLOWANCE OF, AND CREDIT FOR, ADDITIONAL IRA 
                   PAYMENTS IN CERTAIN BANKRUPTCY CASES.

       (a) Allowance of Contributions.--Section 219(b)(5) of the 
     Internal Revenue Code of 1986 (relating to deductible amount) 
     is amended by redesignating subparagraph (C) as subparagraph 
     (D) and by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Catchup contributions for certain individuals.--
       ``(i) In general.--In the case of an applicable individual 
     who elects to make a qualified retirement contribution in 
     addition to the deductible amount determined under 
     subparagraph (A)--

       ``(I) the deductible amount for any taxable year shall be 
     increased by an amount equal to 3 times the applicable amount 
     determined under subparagraph (B) for such taxable year, and
       ``(II) subparagraph (B) shall not apply.

       ``(ii) Applicable individual.--For purposes of this 
     subparagraph, the term `applicable individual' means, with 
     respect to any taxable year, any individual who was a 
     qualified participant in a qualified cash or deferred 
     arrangement (as defined in section 401(k)) of an employer 
     described in clause (iii) under which the employer matched at 
     least 50 percent of the employee's contributions to such 
     arrangement with stock of such employer.
       ``(iii) Employer described.--An employer is described in 
     this clause if, in any taxable year preceding the taxable 
     year described in clause (ii)--

       ``(I) such employer (or any controlling corporation of such 
     employer) was a debtor in a case under title 11 of the United 
     States Code, or similar Federal or State law, and
       ``(II) such employer (or any other person) was subject to 
     an indictment or conviction resulting from business 
     transactions related to such case.

       ``(iv) Qualified participant.--For purposes of clause (ii), 
     the term `qualified participant' means any applicable 
     individual who was a participant in the cash or deferred 
     arrangement described in clause (i) on the date that is 6 
     months before the filing of the case described in clause 
     (iii).
       ``(v) Termination.--This subparagraph shall not apply to 
     taxable years beginning after December 31, 2009.''
       (b) Saver's Credit Expanded To Include Catchup 
     Contributions.--
       (1) In general.--Section 25B of the Internal Revenue Code 
     of 1986 (relating to credit for elective deferrals and IRA 
     contributions by certain individuals) is amended by 
     redesignating subsection (h) as subsection (i) and by 
     inserting after subsection (g) the following new subsection:
       ``(h) Additional Credit for Certain Catchup 
     Contributions.--
       ``(1) In general.--In the case of an eligible individual 
     who is an applicable individual under section 219(b)(5)(C) 
     for any taxable year, the amount of the credit allowable 
     under subsection (a) for the taxable year shall be increased 
     by 50 percent of so much of the qualified retirement 
     contributions (as defined in section 219(e)) of the 
     individual for the taxable year as exceeds the deductible 
     amount for the taxable year under section 219(b)(5) (without 
     regard to subparagraphs (B) and (C) thereof).
       ``(2) Coordination with other contributions.--For purposes 
     of this section--
       ``(A) any contribution to which this subsection applies 
     shall not be taken into account in determining the amount of 
     the credit allowable under subsection (a) without regard to 
     this subsection, and
       ``(B) in applying any reduction in qualified retirement 
     savings contributions under subsection (d)(2), the reduction 
     shall be applied first to qualified retirement savings 
     contributions other than contributions to which this 
     subsection applies.''.
       (2) Extension of termination date for catchup credit.--
     Section 25B(i) of such Code, as redesignated by paragraph 
     (1), is amended by inserting ``(December 31, 2007, in the 
     case of the portion of the credit allowed under subsection 
     (h))'' after ``2006''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

     SEC. 706. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY 
                   DURING SUSPENSION OF ABILITY OF PARTICIPANT OR 
                   BENEFICIARY TO DIRECT INVESTMENTS.

       (a) In General.--Section 404(c)(1) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1104(c)(1)) 
     is amended--
       (1) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii), respectively, and by inserting ``(A)'' after 
     ``(c)(1)'',
       (2) in subparagraph (A)(ii) (as redesignated by paragraph 
     (1)), by inserting before the period the following: ``, 
     except that this clause shall not apply in connection with 
     such participant or beneficiary for any blackout period 
     during which the ability of such participant or beneficiary 
     to direct the investment of the assets in his or her account 
     is suspended by a plan sponsor or fiduciary'', and
       (3) by adding at the end the following new subparagraphs:
       ``(B)(i) If a person referred to in subparagraph (A)(ii) 
     meets the requirements of this title in connection with 
     authorizing and implementing the blackout period, any person 
     who is otherwise a fiduciary shall not be liable under this 
     title for any loss occurring during such period as a result 
     of any exercise by the participant or beneficiary of control 
     over assets in his or her account before the period. Matters 
     to be considered in determining whether such person has 
     satisfied the requirements of this title include, but are not 
     limited to, whether such person--
       ``(I) has considered the reasonableness of the expected 
     blackout period,
       ``(II) has provided the notice required under section 
     101(i)(1), and
       ``(III) has acted in accordance with the requirements of 
     subsection (a) in determining whether to enter into the 
     blackout period.
       ``(ii) For purposes of this subsection, if a blackout 
     period arises in connection with a change in the investment 
     options offered under the plan, a participant or beneficiary 
     shall be deemed to have exercised control over the assets in 
     his or her account prior to the blackout period if, after 
     notice of the change in investment options is given to such 
     participant or beneficiary, assets in the account of the 
     participant or beneficiary are transferred--
       ``(I) to plan investment options in accordance with the 
     affirmative election of the participant or beneficiary; or
       ``(II) in the absence of such an election and in the case 
     in which fiduciary relief was provided under this subsection 
     for the prior investment options, to plan investment options 
     in the manner set forth in such notice.
       ``(C) For purposes of this paragraph, the term `blackout 
     period' has the meaning given such term by section 
     101(i)(7).''
       (b) Guidance.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary of Labor, in 
     consultation with the Secretary of the Treasury, shall issue 
     interim final regulations providing guidance, including safe 
     harbors, on how plan sponsors or any other affected 
     fiduciaries can satisfy their fiduciary responsibilities 
     during any blackout period during which the ability of a 
     participant or beneficiary to direct the investment of assets 
     in his or her individual account is suspended.
       (c) Effective Date.--

[[Page 2638]]

       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2005.
       (2) Special rule for collectively bargained agreements.--In 
     the case of a plan maintained pursuant to 1 or more 
     collective bargaining agreements between employee 
     representatives and 1 or more employers ratified on or before 
     the date of the enactment of this Act, paragraph (1) shall be 
     applied to benefits pursuant to, and individuals covered by, 
     any such agreement by substituting for ``December 31, 2005'' 
     the earlier of--
       (A) the later of--
       (i) December 31, 2006, or
       (ii) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof after such date of enactment), or
       (B) December 31, 2007.

     SEC. 707. INCREASE IN MAXIMUM BOND AMOUNT.

       (a) In General.--Section 412(a) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1112) is amended by 
     adding at the end the following: ``In the case of a plan that 
     holds employer securities (within the meaning of section 
     407(d)(1)), this subsection shall be applied by substituting 
     `$1,000,000' for `$500,000' each place it appears.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to plan years beginning after December 31, 2005.

      TITLE VIII--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS

     SEC. 801. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE 
                   ADEQUATE INVESTMENT EDUCATION TO PARTICIPANTS.

       (a) Adequate Investment Education.--
       (1) In general.--Section 101 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1024), as amended by 
     this Act, is amended by redesignating subsection (n) as 
     subsection (o) and by inserting after subsection (m) the 
     following:
       ``(n) Basic Investment Guidelines.--
       ``(1) In general.--The administrator of an individual 
     account plan (other than a one-participant retirement plan 
     described in subsection (i)(8)(B)) shall furnish at least 
     once each year to each participant or beneficiary who has the 
     right to direct the investment of assets in his or her 
     account the model form relating to basic investment 
     guidelines which is described in paragraph (2).
       ``(2) Model form.--
       ``(A) In general.--The Secretary shall, in consultation 
     with the Secretary of Treasury, develop and make available to 
     individual account plans for distribution under paragraph (1) 
     a model form containing basic guidelines for investing for 
     retirement. Except as otherwise provided by the Secretary, 
     such guidelines shall include--
       ``(i) information on the benefits of diversification,
       ``(ii) information on the essential differences, in terms 
     of risk and return, of pension plan investments, including 
     stocks, bonds, mutual funds, and money market investments,
       ``(iii) information on how an individual's pension plan 
     investment allocations may differ depending on the 
     individual's age and years to retirement and on other factors 
     determined by the Secretary,
       ``(iv) sources of information where individuals may learn 
     more about pension rights, individual investing, and 
     investment advice, and
       ``(v) such other information related to individual 
     investing as the Secretary determines appropriate.
       ``(B) Calculation information.--The model form under 
     subparagraph (A) shall include addresses for Internet sites, 
     and a worksheet, which a participant or beneficiary may use 
     to calculate--
       ``(i) the retirement age value of the participant's or 
     beneficiary's nonforfeitable pension benefits under the plan 
     (expressed as an annuity amount and determined by reference 
     to varied historical annual rates of return and annuity 
     interest rates), and
       ``(ii) other important amounts relating to retirement 
     savings, including the amount which a participant or 
     beneficiary would be required to save annually to provide a 
     retirement income equal to various percentages of their 
     current salary (adjusted for expected growth prior to 
     retirement).

     The Secretary shall develop an Internet site which an 
     individual may use in making such calculations and the 
     address for such site shall be included with the form.
       ``(C) Public comment.--The Secretary of Labor shall provide 
     at least 90 days for public comment before publishing final 
     notice of the model form.
       ``(3) Rules relating to form and statement.--The model form 
     under paragraph (2)--
       ``(A) shall be written in a manner calculated to be 
     understood by the average plan participant, and
       ``(B) may be delivered in written, electronic, or other 
     appropriate form to the extent such form is reasonably 
     accessible to participants and beneficiaries.''
       (2) Enforcement.--Section 502(c)(7) of such Act (29 U.S.C. 
     1132(c)(7)), as amended by this Act, is amended by striking 
     ``or (l)'' and inserting ``, (l), or (n)''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2006.
       (2) Special rule for collectively bargained agreements.--In 
     the case of a plan maintained pursuant to 1 or more 
     collective bargaining agreements between employee 
     representatives and 1 or more employers ratified on or before 
     the date of the enactment of this Act, paragraph (1) shall be 
     applied to benefits pursuant to, and individuals covered by, 
     any such agreement by substituting for ``December 31, 2006'' 
     the earlier of--
       (A) the later of--
       (i) December 31, 2007, or
       (ii) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof after such date of enactment), or
       (B) December 31, 2008.

     SEC. 802. INDEPENDENT INVESTMENT ADVICE PROVIDED TO PLAN 
                   PARTICIPANTS.

       (a) In General.--Section 404 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1104) is amended by 
     adding at the end the following new subsection:
       ``(e) Independent Investment Adviser.--
       ``(1) In general.--In the case of an individual account 
     plan which permits a plan participant or beneficiary to 
     direct the investment of the assets in his or her account, if 
     a plan sponsor or other person who is a fiduciary designates 
     and monitors a qualified investment adviser pursuant to the 
     requirements of paragraph (3), such fiduciary--
       ``(A) shall be deemed to have satisfied the requirements 
     under this section for the prudent designation and periodic 
     review of an investment adviser with whom the plan sponsor or 
     other person who is a fiduciary enters into an arrangement 
     for the provision of advice referred to in section 
     3(21)(A)(ii),
       ``(B) shall not be liable under this section for any loss, 
     or by reason of any breach, with respect to the provision of 
     investment advice given by such adviser to any plan 
     participant or beneficiary, and
       ``(C) shall not be liable for any co-fiduciary liability 
     under subsections (a)(2) and (b) of section 405 with respect 
     to the provision of investment advice given by such adviser 
     to any plan participant or beneficiary.
       ``(2) Qualified investment adviser.--
       ``(A) In general.--For purposes of this subsection, the 
     term `qualified investment adviser' means, with respect to a 
     plan, a person--
       ``(i) who is a fiduciary of the plan by reason of the 
     provision of investment advice by such person to a plan 
     participant or beneficiary;
       ``(ii) who--

       ``(I) is registered as an investment adviser under the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.),
       ``(II) is registered as an investment adviser under the 
     laws of the State in which such adviser maintains the 
     principal office and place of business of such adviser, but 
     only if such State laws are consistent with section 203A of 
     the Investment Advisers Act of 1940 (15 U.S.C. 80b-3a),
       ``(III) is a bank or similar financial institution referred 
     to in section 408(b)(4),
       ``(IV) is an insurance company qualified to do business 
     under the laws of a State, or
       ``(V) is any other comparably qualified entity which 
     satisfies such criteria as the Secretary determines 
     appropriate, consistent with the purposes of this subsection, 
     and

       ``(iii) who meets the requirements of subparagraph (B).
       ``(B) Adviser requirements.--The requirements of this 
     subparagraph are met if every individual employed (or 
     otherwise compensated) by a person described in subparagraph 
     (A)(ii) who provides investment advice on behalf of such 
     person to any plan participant or beneficiary is--
       ``(i) an individual described in subclause (I) of 
     subparagraph (A)(ii),
       ``(ii) an individual described in subclause (II) of 
     subparagraph (A)(ii), but only if such State has an 
     examination requirement to qualify for registration,
       ``(iii) registered as a broker or dealer under the 
     Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
       ``(iv) a registered representative as described in section 
     3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78c(a)(18)) or section 202(a)(17) of the Investment Advisers 
     Act of 1940 (15 U.S.C. 80b-2(a)(17)), or
       ``(v) any other comparably qualified individual who 
     satisfies such criteria as the Secretary determines 
     appropriate, consistent with the purposes of this subsection.
       ``(3) Verification requirements.--The requirements of this 
     paragraph are met if--
       ``(A) the plan sponsor or other person who is a fiduciary 
     in designating a qualified investment adviser receives at the 
     time of the designation, and annually thereafter, a written 
     verification from the qualified investment adviser that the 
     investment adviser--
       ``(i) is and remains a qualified investment adviser,
       ``(ii) acknowledges that the investment adviser is a 
     fiduciary with respect to the plan and is solely responsible 
     for its investment advice,
       ``(iii) has reviewed the plan documents (including 
     investment options) and has determined that its relationship 
     with the plan and the investment advice provided to any plan 
     participant or beneficiary, including any fees

[[Page 2639]]

     or other compensation it will receive, will not constitute a 
     violation of section 406,
       ``(iv) will, in providing investment advice to any 
     participant or beneficiary, consider any employer securities 
     or employer real property allocated to his or her account, 
     and
       ``(v) has the necessary insurance coverage (as determined 
     by the Secretary) for any claim by any plan participant or 
     beneficiary,
       ``(B) the plan sponsor or other person who is a fiduciary 
     in designating a qualified investment adviser reviews the 
     documents described in paragraph (4) provided by such adviser 
     and determines that there is no material reason not to enter 
     into an arrangement for the provision of advice by such 
     qualified investment adviser, and
       ``(C) the plan sponsor or other person who is a fiduciary 
     in designating a qualified investment adviser, within 30 days 
     of having information brought to its attention that the 
     investment adviser is no longer qualified or that a 
     substantial number of plan participants or beneficiaries have 
     raised concerns about the services being provided by the 
     investment adviser--
       ``(i) investigates such information and concerns, and
       ``(ii) determines that there is no material reason not to 
     continue the designation of the adviser as a qualified 
     investment adviser.
       ``(4) Documentation.--A qualified investment adviser shall 
     provide the following documents to the plan sponsor or other 
     person who is a fiduciary in designating the adviser:
       ``(A) The contract with the plan sponsor or other person 
     who is a fiduciary for the services to be provided by the 
     investment adviser to the plan participants and 
     beneficiaries.
       ``(B) A disclosure as to any fees or other compensation 
     that will be received by the investment adviser for the 
     provision of such investment advice and as to any fees and 
     other compensation that will be received as a result of a 
     participant's investment election.
       ``(C) The Uniform Application for Investment Adviser 
     Registration as filed with the Securities and Exchange 
     Commission or a substantially similar disclosure application 
     as determined by and filed with the Secretary.
       ``(5) Treatment as fiduciary.--Any qualified investment 
     adviser that acknowledges it is a fiduciary pursuant to 
     paragraph (3)(A)(ii) shall be deemed a fiduciary under this 
     part with respect to the provision of investment advice to a 
     plan participant or beneficiary.''
       (b) Fiduciary Liability.--Section 404(c)(1)(B) of such Act 
     is amended by inserting ``(other than a qualified investment 
     adviser)'' after ``fiduciary''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to investment advisers designated 
     after the date of the enactment of this Act.

     SEC. 803. TREATMENT OF QUALIFIED RETIREMENT PLANNING 
                   SERVICES.

       (a) In General.--Subsection (m) of section 132 of the 
     Internal Revenue Code of 1986 (defining qualified retirement 
     services) is amended by adding at the end the following new 
     paragraph:
       ``(4) No constructive receipt.--
       ``(A) In general.--No amount shall be included in the gross 
     income of any employee solely because the employee may choose 
     between any qualified retirement planning services provided 
     by an eligible investment advisor and compensation which 
     would otherwise be includible in the gross income of such 
     employee. The preceding sentence shall apply to highly 
     compensated employees only if the choice described in such 
     sentence is available on substantially the same terms to each 
     member of the group of employees normally provided education 
     and information regarding the employer's qualified employer 
     plan.
       ``(B) Limitation.--The maximum amount which may be excluded 
     under subparagraph (A) with respect to any employee for any 
     taxable year shall not exceed $1,000.
       ``(C) Eligible investment adviser.--For purposes of this 
     paragraph, the term `eligible investment adviser' means, with 
     respect to a plan, a person--
       ``(i) who--

       ``(I) is registered as an investment adviser under the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.),
       ``(II) is registered as an investment adviser under the 
     laws of the State in which such adviser maintains the 
     principal office and place of business of such adviser, but 
     only if such State laws are consistent with section 203A of 
     the Investment Advisers Act of 1940 (15 U.S.C. 80b-3a),
       ``(III) is a bank or similar financial institution referred 
     to in section 408(b)(4),
       ``(IV) is an insurance company qualified to do business 
     under the laws of a State, or
       ``(V) is any other comparably qualified entity which 
     satisfies such criteria as the Secretary determines 
     appropriate, consistent with the purposes of this subsection, 
     and

       ``(ii) who meets the requirements of subparagraph (D).
       ``(D) Adviser requirements.--The requirements of this 
     subparagraph are met if every individual employed (or 
     otherwise compensated) by a person described in subparagraph 
     (C)(i) who provides investment advice on behalf of such 
     person to any plan participant or beneficiary is--
       ``(i) an individual described in subclause (I) of 
     subparagraph (C)(i),
       ``(ii) an individual described in subclause (II) of 
     subparagraph (C)(i), but only if such State has an 
     examination requirement to qualify for registration,
       ``(iii) registered as a broker or dealer under the 
     Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
       ``(iv) a registered representative as described in section 
     3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78c(a)(18)) or section 202(a)(17) of the Investment Advisers 
     Act of 1940 (15 U.S.C. 80b-2(a)(17)), or
       ``(v) any other comparably qualified individual who 
     satisfies such criteria as the Secretary determines 
     appropriate, consistent with the purposes of this paragraph.
       ``(E) Termination.--This paragraph shall not apply to 
     taxable years beginning after December 31, 2010.''.
       (b) Conforming Amendments.--
       (1) Section 403(b)(3)(B) of such Code is amended by 
     inserting ``132(m)(4),'' after ``132(f)(4),''.
       (2) Section 414(s)(2) of such Code is amended by inserting 
     ``132(m)(4),'' after ``132(f)(4),''.
       (3) Section 415(c)(3)(D)(ii) of such Code is amended by 
     inserting ``132(m)(4),'' after ``132(f)(4),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2005.

     SEC. 804. INCREASE IN PENALTIES FOR COERCIVE INTERFERENCE 
                   WITH EXERCISE OF ERISA RIGHTS.

       (a) In General.--Section 511 of the Employment Retirement 
     Income Security Act of 1974 (29 U.S.C. 1141) is amended--
       (1) by striking ``$10,000'' and inserting ``$100,000'', and
       (2) by striking ``one year'' and inserting ``10 years''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to violations occurring on and after the date of 
     the enactment of this Act.

     SEC. 805. ADMINISTRATIVE PROVISION.

       The Secretary of the Treasury shall have the authority to 
     prescribe rules applicable to the statements required under 
     sections 101(j) and 101(m) of the Employee Retirement Income 
     Security Act of 1974 (as added by this Act).

      TITLE IX--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

     SEC. 901. REGULATIONS ON TIME AND ORDER OF ISSUANCE OF 
                   DOMESTIC RELATIONS ORDERS.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary of Labor shall issue regulations 
     under section 206(d)(3) of the Employee Retirement Security 
     Act of 1974 and section 414(p) of the Internal Revenue Code 
     of 1986 which clarify that--
       (1) a domestic relations order otherwise meeting the 
     requirements to be a qualified domestic relations order, 
     including the requirements of section 206(d)(3)(D) of such 
     Act and section 414(p)(3) of such Code, shall not fail to be 
     treated as a qualified domestic relations order solely 
     because--
       (A) the order is issued after, or revises, another domestic 
     relations order or qualified domestic relations order; or
       (B) of the time at which it is issued; and
       (2) any order described in paragraph (1) shall be subject 
     to the same requirements and protections which apply to 
     qualified domestic relations orders, including the provisions 
     of section 206(d)(3)(H) of such Act and section 414(p)(7) of 
     such Code.

     SEC. 902. ENTITLEMENT OF DIVORCED SPOUSES TO RAILROAD 
                   RETIREMENT ANNUITIES INDEPENDENT OF ACTUAL 
                   ENTITLEMENT OF EMPLOYEE.

       (a) In General.--Section 2 of the Railroad Retirement Act 
     of 1974 (45 U.S.C. 231a) is amended--
       (1) in subsection (c)(4)(i), by striking ``(A) is entitled 
     to an annuity under subsection (a)(1) and (B)''; and
       (2) in subsection (e)(5), by striking ``or divorced wife'' 
     the second place it appears.
       (b) Effective Date.--The amendments made by this section 
     shall take effect 1 year after the date of the enactment of 
     this Act.

     SEC. 903. EXTENSION OF TIER II RAILROAD RETIREMENT BENEFITS 
                   TO SURVIVING FORMER SPOUSES PURSUANT TO DIVORCE 
                   AGREEMENTS.

       (a) In General.--Section 5 of the Railroad Retirement Act 
     of 1974 (45 U.S.C. 231d) is amended by adding at the end the 
     following:
       ``(d) Notwithstanding any other provision of law, the 
     payment of any portion of an annuity computed under section 
     3(b) to a surviving former spouse in accordance with a court 
     decree of divorce, annulment, or legal separation or the 
     terms of any court-approved property settlement incident to 
     any such court decree shall not be terminated upon the death 
     of the individual who performed the service with respect to 
     which such annuity is so computed unless such termination is 
     otherwise required by the terms of such court decree.''
       (b) Effective Date.--The amendment made by this section 
     shall take effect 1 year after the date of the enactment of 
     this Act.

     SEC. 904. REQUIREMENT FOR ADDITIONAL SURVIVOR ANNUITY OPTION.

       (a) Amendments to Internal Revenue Code.--
       (1) Election of survivor annuity.--Section 417(a)(1)(A) of 
     the Internal Revenue Code of 1986 is amended--

[[Page 2640]]

       (A) in clause (i), by striking ``, and'' and inserting a 
     comma;
       (B) by redesignating clause (ii) as clause (iii); and
       (C) by inserting after clause (i) the following:
       ``(ii) if the participant elects a waiver under clause (i), 
     may elect the qualified optional survivor annuity at any time 
     during the applicable election period, and''.
       (2) Definition.--Section 417 of such Code is amended by 
     adding at the end the following:
       ``(g) Definition of Qualified Optional Survivor Annuity.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified optional survivor annuity' means an annuity--
       ``(A) for the life of the participant with a survivor 
     annuity for the life of the spouse which is equal to the 
     applicable percentage of the amount of the annuity which is 
     payable during the joint lives of the participant and the 
     spouse, and
       ``(B) which is the actuarial equivalent of a single annuity 
     for the life of the participant.
     Such term also includes any annuity in a form having the 
     effect of an annuity described in the preceding sentence.
       ``(2) Applicable percentage.--
       ``(A) In general.--For purposes of paragraph (1), if the 
     survivor annuity percentage--
       ``(i) is less than 75 percent, the applicable percentage is 
     75 percent, and
       ``(ii) is greater than or equal to 75 percent, the 
     applicable percentage is 50 percent.
       ``(B) Survivor annuity percentage.--For purposes of 
     subparagraph (A), the term `survivor annuity percentage' 
     means the percentage which the survivor annuity under the 
     plan's qualified joint and survivor annuity bears to the 
     annuity payable during the joint lives of the participant and 
     the spouse.''.
       (3) Notice.--Section 417(a)(3)(A)(i) of such Code is 
     amended by inserting ``and of the qualified optional survivor 
     annuity'' after ``annuity''.
       (b) Amendments to ERISA.--
       (1) Election of survivor annuity.--Section 205(c)(1)(A) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1055(c)(1)(A)) is amended--
       (A) in clause (i), by striking ``, and'' and inserting a 
     comma;
       (B) by redesignating clause (ii) as clause (iii); and
       (C) by inserting after clause (i) the following:
       ``(ii) if the participant elects a waiver under clause (i), 
     may elect the qualified optional survivor annuity at any time 
     during the applicable election period, and''.
       (2) Definition.--Section 205(d) of such Act (29 U.S.C. 
     1055(d)) is amended--
       (A) by inserting ``(1)'' after ``(d)'';
       (B) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively; and
       (C) by adding at the end the following:
       ``(2)(A) For purposes of this section, the term `qualified 
     optional survivor annuity' means an annuity--
       ``(i) for the life of the participant with a survivor 
     annuity for the life of the spouse which is equal to the 
     applicable percentage of the amount of the annuity which is 
     payable during the joint lives of the participant and the 
     spouse, and
       ``(ii) which is the actuarial equivalent of a single 
     annuity for the life of the participant.
     Such term also includes any annuity in a form having the 
     effect of an annuity described in the preceding sentence.
       ``(B)(i) For purposes of subparagraph (A), if the survivor 
     annuity percentage--
       ``(I) is less than 75 percent, the applicable percentage is 
     75 percent, and
       ``(II) is greater than or equal to 75 percent, the 
     applicable percentage is 50 percent.
       ``(ii) For purposes of clause (i), the term `survivor 
     annuity percentage' means the percentage which the survivor 
     annuity under the plan's qualified joint and survivor annuity 
     bears to the annuity payable during the joint lives of the 
     participant and the spouse.''.
       (3) Notice.--Section 205(c)(3)(A)(i) of such Act (29 U.S.C. 
     1055(c)(3)(A)(i)) is amended by inserting ``and of the 
     qualified optional survivor annuity'' after ``annuity''.
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2005.
       (2) Special rule for collectively bargained plans.--In the 
     case of a plan maintained pursuant to 1 or more collective 
     bargaining agreements between employee representatives and 1 
     or more employers ratified on or before the date of the 
     enactment of this Act, the amendments made by this section 
     shall apply to the first plan year beginning on or after the 
     earlier of--
       (A) the later of--
       (i) January 1, 2006, or
       (ii) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof after the date of enactment of this 
     Act), or
       (B) January 1, 2007.

      TITLE X--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES

     SEC. 1001. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE 
                   SERVICE CREDIT.

       (a) In General.--Section 415(n) of the Internal Revenue 
     Code of 1986 (relating to special rules for the purchase of 
     permissive service credit) is amended--
       (1) by striking ``an employee'' in paragraph (1) and 
     inserting ``a participant'', and
       (2) by adding at the end of paragraph (3)(A) the following 
     new flush sentence:

     ``Such term may include service credit for periods for which 
     there is no performance of service, and notwithstanding 
     clause (ii), may include service credited in order to provide 
     an increased benefit for service credit which a participant 
     is receiving under the plan.''
       (b) Special Rules for Trustee-to-Trustee Transfers.--
     Section 415(n)(3) of such Code is amended by adding at the 
     end the following new subparagraph:
       ``(D) Special rules for trustee-to-trustee transfers.--In 
     the case of a trustee-to-trustee transfer to which section 
     403(b)(13)(A) or 457(e)(17)(A) applies (without regard to 
     whether the transfer is made between plans maintained by the 
     same employer)--
       ``(i) the limitations of subparagraph (B) shall not apply 
     in determining whether the transfer is for the purchase of 
     permissive service credit, and
       ``(ii) the distribution rules applicable under this title 
     to the defined benefit governmental plan to which any amounts 
     are so transferred shall apply to such amounts and any 
     benefits attributable to such amounts.''.
       (c) Nonqualified Service.--Section 415(n)(3) of such Code 
     is amended--
       (1) by striking ``permissive service credit attributable to 
     nonqualified service'' each place it appears in subparagraph 
     (B) and inserting ``nonqualified service credit'',
       (2) by striking so much of subparagraph (C) as precedes 
     clause (i) and inserting:
       ``(C) Nonqualified service credit.--For purposes of 
     subparagraph (B), the term `nonqualified service credit' 
     means permissive service credit other than that allowed with 
     respect to--'', and
       (3) by striking ``elementary or secondary education 
     (through grade 12), as determined under State law'' and 
     inserting ``elementary or secondary education (through grade 
     12), or a comparable level of education, as determined under 
     the applicable law of the jurisdiction in which the service 
     was performed''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by subsections (a) and 
     (c) shall take effect as if included in the amendments made 
     by section 1526 of the Taxpayer Relief Act of 1997.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall take effect as if included in the amendments made by 
     section 647 of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001.

     SEC. 1002. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY 
                   CONTRACTS.

       (a) In General.--Subparagraph (A) of section 402(c)(2) 
     (relating to the maximum amount which may be rolled over) is 
     amended--
       (1) by striking ``which is part of a plan which is a 
     defined contribution plan and which agrees to separately 
     account'' and inserting ``or to an annuity contract described 
     in section 403(b) and such trust or contract provides for 
     separate accounting''; and
       (2) by inserting ``(and earnings thereon)'' after ``so 
     transferred''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2005.

     SEC. 1003. CLARIFICATION OF MINIMUM DISTRIBUTION RULES FOR 
                   GOVERNMENTAL PLANS.

       The Secretary of the Treasury shall issue regulations under 
     which a governmental plan (as defined in section 414(d) of 
     the Internal Revenue Code of 1986) shall, for all years to 
     which section 401(a)(9) of such Code applies to such plan, be 
     treated as having complied with such section 401(a)(9) if 
     such plan complies with a reasonable good faith 
     interpretation of such section 401(a)(9).

     SEC. 1004. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX 
                   ON CERTAIN DISTRIBUTIONS OF PENSION PLANS FOR 
                   PUBLIC SAFETY EMPLOYEES.

       (a) In General.--Section 72(t) of the Internal Revenue Code 
     of 1986 (relating to subsection not to apply to certain 
     distributions) is amended by adding at the end the following 
     new paragraph:
       ``(10) Distributions to qualified public safety employees 
     in governmental plans.--
       ``(A) In general.--In the case of a distribution to a 
     qualified public safety employee from a governmental plan 
     (within the meaning of section 414(d)) which is a defined 
     benefit plan, paragraph (2)(A)(v) shall be applied by 
     substituting `age 50' for `age 55'.
       ``(B) Qualified public safety employee.--For purposes of 
     this paragraph, the term `qualified public safety employee' 
     means any employee of a State or political subdivision of a 
     State who provides police protection, firefighting services, 
     or emergency medical services for any area within the 
     jurisdiction of such State or political subdivision.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions after the date of the enactment 
     of this Act.

     SEC. 1005. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF 
                   CERTAIN RETIREMENT PLAN DISTRIBUTIONS.

       (a) In General.--

[[Page 2641]]

       (1) Qualified plans.--Section 402(c) of the Internal 
     Revenue Code of 1986 (relating to rollovers from exempt 
     trusts) is amended by adding at the end the following new 
     paragraph:
       ``(11) Distributions to inherited individual retirement 
     plan of nonspouse beneficiary.--
       ``(A) In general.--If, with respect to any portion of a 
     distribution from an eligible retirement plan of a deceased 
     employee, a direct trustee-to-trustee transfer is made to an 
     individual retirement plan described in clause (i) or (ii) of 
     paragraph (8)(B) established for the purposes of receiving 
     the distribution on behalf of an individual who is a 
     designated beneficiary (as defined by section 401(a)(9)(E)) 
     of the employee and who is not the surviving spouse of the 
     employee--
       ``(i) the transfer shall be treated as an eligible rollover 
     distribution for purposes of this subsection,
       ``(ii) the individual retirement plan shall be treated as 
     an inherited individual retirement account or individual 
     retirement annuity (within the meaning of section 
     408(d)(3)(C)) for purposes of this title, and
       ``(iii) section 401(a)(9)(B) (other than clause (iv) 
     thereof) shall apply to such plan.
       ``(B) Certain trusts treated as beneficiaries.--For 
     purposes of this paragraph, to the extent provided in rules 
     prescribed by the Secretary, a trust maintained for the 
     benefit of one or more designated beneficiaries shall be 
     treated in the same manner as a designated beneficiary.''.
       (2) Section 403(a) plans.--Subparagraph (B) of section 
     403(a)(4) of such Code (relating to rollover amounts) is 
     amended by striking ``and (9)'' and inserting ``, (9), and 
     (11)''.
       (3) Section 403(b) plans.--Subparagraph (B) of section 
     403(b)(8) of such Code (relating to rollover amounts) is 
     amended by striking ``and (9)'' and inserting ``, (9), and 
     (11)''.
       (4) Section 457 plans.--Subparagraph (B) of section 
     457(e)(16) of such Code (relating to rollover amounts) is 
     amended by striking ``and (9)'' and inserting ``, (9), and 
     (11)''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2005.

     SEC. 1006. FASTER VESTING OF EMPLOYER NONELECTIVE 
                   CONTRIBUTIONS.

       (a) Amendments to the Internal Revenue Code of 1986.--
       (1) In general.--Paragraph (2) of section 411(a) of the 
     Internal Revenue Code of 1986 (relating to employer 
     contributions) is amended to read as follows:
       ``(2) Employer contributions.--
       ``(A) Defined benefit plans.--
       ``(i) In general.--In the case of a defined benefit plan, a 
     plan satisfies the requirements of this paragraph if it 
     satisfies the requirements of clause (ii) or (iii).
       ``(ii) 5-year vesting.--A plan satisfies the requirements 
     of this clause if an employee who has completed at least 5 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(iii) 3 to 7 year vesting.--A plan satisfies the 
     requirements of this clause if an employee has a 
     nonforfeitable right to a percentage of the employee's 
     accrued benefit derived from employer contributions 
     determined under the following table:

                                                     The nonforfeitable
      ``Years of service:                               percentage is: 
     3..............................................................20 
     4..............................................................40 
     5..............................................................60 
     6..............................................................80 
     7 or more.....................................................100.

       ``(B) Defined contribution plans.--
       ``(i) In general.--In the case of a defined contribution 
     plan, a plan satisfies the requirements of this paragraph if 
     it satisfies the requirements of clause (ii) or (iii).
       ``(ii) 3-year vesting.--A plan satisfies the requirements 
     of this clause if an employee who has completed at least 3 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(iii) 2 to 6 year vesting.--A plan satisfies the 
     requirements of this clause if an employee has a 
     nonforfeitable right to a percentage of the employee's 
     accrued benefit derived from employer contributions 
     determined under the following table:

                                                     The nonforfeitable
      ``Years of service:                               percentage is: 
     2..............................................................20 
     3..............................................................40 
     4..............................................................60 
     5..............................................................80 
     6 or more..................................................100.''.

       (2) Conforming amendment.--Section 411(a) of such Code 
     (relating to general rule for minimum vesting standards) is 
     amended by striking paragraph (12).
       (b) Amendments to the Employee Retirement Income Security 
     Act of 1974.--
       (1) In general.--Paragraph (2) of section 203(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1053(a)(2)) is amended to read as follows:
       ``(2)(A)(i) In the case of a defined benefit plan, a plan 
     satisfies the requirements of this paragraph if it satisfies 
     the requirements of clause (ii) or (iii).
       ``(ii) A plan satisfies the requirements of this clause if 
     an employee who has completed at least 5 years of service has 
     a nonforfeitable right to 100 percent of the employee's 
     accrued benefit derived from employer contributions.
       ``(iii) A plan satisfies the requirements of this clause if 
     an employee has a nonforfeitable right to a percentage of the 
     employee's accrued benefit derived from employer 
     contributions determined under the following table:

                                                     The nonforfeitable
      ``Years of service:                               percentage is: 
 3..................................................................20 
 4..................................................................40 
 5..................................................................60 
 6..................................................................80 
 7 or more.........................................................100.

       ``(B)(i) In the case of an individual account plan, a plan 
     satisfies the requirements of this paragraph if it satisfies 
     the requirements of clause (ii) or (iii).
       ``(ii) A plan satisfies the requirements of this clause if 
     an employee who has completed at least 3 years of service has 
     a nonforfeitable right to 100 percent of the employee's 
     accrued benefit derived from employer contributions.
       ``(iii) A plan satisfies the requirements of this clause if 
     an employee has a nonforfeitable right to a percentage of the 
     employee's accrued benefit derived from employer 
     contributions determined under the following table:

                                                     The nonforfeitable
      ``Years of service:                               percentage is: 
 2..................................................................20 
 3..................................................................40 
 4..................................................................60 
 5..................................................................80 
 6 or more......................................................100.''.

       (2) Conforming amendment.--Section 203(a) of such Act is 
     amended by striking paragraph (4).
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (4), the amendments made by this section shall apply to 
     contributions for plan years beginning after December 31, 
     2005.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to one or more collective bargaining 
     agreements between employee representatives and one or more 
     employers ratified before the date of the enactment of this 
     Act, the amendments made by this section shall not apply to 
     contributions on behalf of employees covered by any such 
     agreement for plan years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of the 
     enactment); or
       (ii) January 1, 2006; or
       (B) January 1, 2008.
       (3) Service required.--With respect to any plan, the 
     amendments made by this section shall not apply to any 
     employee before the date that such employee has 1 hour of 
     service under such plan in any plan year to which the 
     amendments made by this section apply.
       (4) Special rule for stock ownership plans.--
     Notwithstanding paragraph (1) or (2), in the case of an 
     employee stock ownership plan (as defined in section 
     4975(e)(7) of the Internal Revenue Code of 1986) which had 
     outstanding on September 26, 2005, a loan incurred for the 
     purpose of acquiring qualifying employer securities (as 
     defined in section 4975(e)(8) of such Code), the amendments 
     made by this section shall not apply to any plan year 
     beginning before the earlier of--
       (A) the date on which the loan is fully repaid, or
       (B) the date on which the loan was, as of September 26, 
     2005, scheduled to be fully repaid.

     SEC. 1007. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO 
                   ROTH IRAS.

       (a) In General.--Subsection (e) of section 408A of the 
     Internal Revenue Code of 1986 (defining qualified rollover 
     contribution) is amended to read as follows:
       ``(e) Qualified Rollover Contribution.--For purposes of 
     this section, the term `qualified rollover contribution' 
     means a rollover contribution--
       ``(1) to a Roth IRA from another such account,
       ``(2) from an eligible retirement plan, but only if--
       ``(A) in the case of an individual retirement plan, such 
     rollover contribution meets the requirements of section 
     408(d)(3), and
       ``(B) in the case of any eligible retirement plan (as 
     defined in section 402(c)(8)(B) other than clauses (i) and 
     (ii) thereof), such rollover contribution meets the 
     requirements of section 402(c), 403(b)(8), or 457(e)(16), as 
     applicable.

     For purposes of section 408(d)(3)(B), there shall be 
     disregarded any qualified rollover contribution from an 
     individual retirement plan (other than a Roth IRA) to a Roth 
     IRA.''
       (b) Conforming Amendments.--
       (1) Section 408A(c)(3)(B) of such Code is amended--
       (A) in the text by striking ``individual retirement plan'' 
     and inserting ``an eligible retirement plan (as defined by 
     section 402(c)(8)(B))'', and
       (B) in the heading by striking ``IRA'' and inserting 
     ``Eligible Retirement Plan''.

[[Page 2642]]

       (2) Section 408A(d)(3) of such Code is amended--
       (A) in subparagraph (A), by striking ``section 408(d)(3)'' 
     inserting ``sections 402(c), 403(b)(8), 408(d)(3), and 
     457(e)(16)'',
       (B) in subparagraph (B), by striking ``individual 
     retirement plan'' and inserting ``eligible retirement plan 
     (as defined by section 402(c)(8)(B))'',
       (C) in subparagraph (D), by inserting ``or 6047'' after 
     ``408(i)'',
       (D) in subparagraph (D), by striking ``or both'' and 
     inserting ``persons subject to section 6047(d)(1), or all of 
     the foregoing persons'', and
       (E) in the heading, by striking ``IRA'' and inserting 
     ``Eligible Retirement Plan''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2005.

     SEC. 1008. ELIMINATION OF HIGHER PENALTY ON CERTAIN SIMPLE 
                   PLAN DISTRIBUTIONS.

       (a) In General.--Subsection (t) of section 72 of the 
     Internal Revenue Code of 1986 (relating to 10-percent 
     additional tax on early distributions from qualified 
     retirement plans), as amended by section 1004, is amended by 
     striking paragraph (6) and redesignating paragraphs (7), (8), 
     (9), and (10) as paragraphs (6), (7), (8), and (9), 
     respectively.
       (b) Conforming Amendments.--
       (1) Section 72(t)(2)(E) of such Code is amended by striking 
     ``paragraph (7)'' and inserting ``paragraph (6)''.
       (2) Section 72(t)(2)(F) of such Code is amended by striking 
     ``paragraph (8)'' and inserting ``paragraph (7)''.
       (3) Section 408(d)(3)(G) of such Code is amended by 
     striking ``applies'' and inserting ``applied on the day 
     before the date of the enactment of the Pension Security and 
     Transparency Act of 2005)''.
       (4) Section 457(a)(2) of such Code is amended by striking 
     ``section 72(t)(9)'' and inserting ``section 72(t)(8)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2005.

     SEC. 1009. SIMPLE PLAN PORTABILITY.

       (a) Repeal of Limitation.--Paragraph (3) of section 408(d) 
     of the Internal Revenue Code of 1986 (relating to rollover 
     contributions), as amended by this Act, is amended by 
     striking subparagraph (G) and redesignating subparagraphs (H) 
     and (I) as subparagraphs (G) and (H), respectively.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2005.

     SEC. 1010. ELIGIBILITY FOR PARTICIPATION IN RETIREMENT PLANS.

       An individual shall not be precluded from participating in 
     an eligible deferred compensation plan by reason of having 
     received a distribution under section 457(e)(9) of the 
     Internal Revenue Code of 1986, as in effect prior to the 
     enactment of the Small Business Job Protection Act of 1996.

     SEC. 1011. TRANSFERS TO THE PBGC.

       (a) Mandatory Distributions to PBGC.--Clause (i) of section 
     401(a)(31)(B) of the Internal Revenue Code of 1986 (relating 
     to general rule for certain mandatory distributions) is 
     amended by inserting ``to the Pension Benefit Guaranty 
     Corporation in accordance with section 4050(e) of the 
     Employee Retirement Income Security Act of 1974 or'' after 
     ``such transfer''.
       (b) Tax Treatment of Distributions.--Subparagraph (B) of 
     section 401(a)(31) of such Code is amended by adding at the 
     end the following new clause:
       ``(iii) Income tax treatment of transfers to pbgc.--For 
     purposes of determining the income tax treatment relating to 
     transfers to the Pension Benefit Guaranty Corporation under 
     clause (i)--

       ``(I) the transfer of amounts to the Pension Benefit 
     Guaranty Corporation pursuant to clause (i) shall be treated 
     as a transfer to an individual retirement plan under such 
     clause, and
       ``(II) the distribution of such amounts from the Pension 
     Benefit Guaranty Corporation shall be treated as a 
     distribution from an individual retirement plan.''.

       (c) Missing Participants and Beneficiaries.--Section 4050 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1350), as amended by section 1012, is amended by 
     redesignating subsection (e) as subsection (g) and by 
     inserting after subsection (d) the following new subsections:
       ``(e) Involuntary Cashouts.--
       ``(1) Payment by the corporation.--If benefits under a plan 
     described in paragraph (3) were transferred to the 
     corporation under section 401(a)(31)(B) of the Internal 
     Revenue Code of 1986, the corporation shall, upon application 
     filed by the participant or beneficiary with the corporation 
     in such form and manner as may be prescribed in regulations 
     of the corporation, pay to the participant or beneficiary the 
     amount transferred (or the appropriate survivor benefit) 
     either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (3) shall, upon a transfer of benefits 
     to the corporation under section 401(a)(31)(B) of such Code, 
     provide the corporation information with respect to benefits 
     of the participant or beneficiary so transferred.
       ``(3) Plans described.--A plan is described in this 
     paragraph if the plan is a pension plan (within the meaning 
     of section 3(2))--
       ``(A) which provides for mandatory distributions under 
     section 401(a)(31)(B) of the Internal Revenue Code of 1986, 
     and
       ``(B) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b).
       ``(4) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (3).
       ``(f) Authority To Charge Fee.--The corporation may charge 
     a reasonable fee for costs incurred in connection with the 
     transfer and management of amounts transferred to the 
     corporation under this section. Such fee may be imposed on 
     the transferor and may be deducted from amounts so 
     transferred.''.
       (d) Effective Dates.--
       (1) Internal revenue code provisions.--The amendments made 
     by subsections (a) and (b) shall take effect as if included 
     in the amendments made by section 657 of the Economic Growth 
     and Tax Relief Reconciliation Act of 2001.
       (2) Employee retirement income security act of 1974 
     provisions.--The amendments made by subsection (c) shall 
     apply to distributions made after final regulations 
     implementing subsections (e) and (f) of section 4050 of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     subsection (c)) are prescribed.
       (3) Regulations.--The Pension Benefit Guaranty Corporation 
     shall issue regulations necessary to carry out the amendments 
     made by subsection (c) not later than December 31, 2006.

     SEC. 1012. MISSING PARTICIPANTS.

       (a) In General.--Section 4050 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1350) is amended by 
     redesignating subsection (c) as subsection (e) and by 
     inserting after subsection (b) the following new subsections:
       ``(c) Multiemployer Plans.--The corporation shall prescribe 
     rules similar to the rules in subsection (a) for 
     multiemployer plans covered by this title that terminate 
     under section 4041A.
       ``(d) Plans Not Otherwise Subject to Title.--
       ``(1) Transfer to corporation.--The plan administrator of a 
     plan described in paragraph (4) may elect to transfer a 
     missing participant's benefits to the corporation upon 
     termination of the plan.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (4) shall, upon termination of the 
     plan, provide the corporation information with respect to 
     benefits of a missing participant if the plan transfers such 
     benefits--
       ``(A) to the corporation, or
       ``(B) to an entity other than the corporation or a plan 
     described in paragraph (4)(B)(ii).
       ``(3) Payment by the corporation.--If benefits of a missing 
     participant were transferred to the corporation under 
     paragraph (1), the corporation shall, upon location of the 
     participant or beneficiary, pay to the participant or 
     beneficiary the amount transferred (or the appropriate 
     survivor benefit) either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(4) Plans described.--A plan is described in this 
     paragraph if--
       ``(A) the plan is a pension plan (within the meaning of 
     section 3(2))--
       ``(i) to which the provisions of this section do not apply 
     (without regard to this subsection), and
       ``(ii) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b), and
       ``(B) at the time the assets are to be distributed upon 
     termination, the plan--
       ``(i) has missing participants, and
       ``(ii) has not provided for the transfer of assets to pay 
     the benefits of all missing participants to another pension 
     plan (within the meaning of section 3(2)).
       ``(5) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (4).''.
       (b) Conforming Amendments.--Section 206(f) of such Act (29 
     U.S.C. 1056(f)) is amended--
       (1) by striking ``title IV'' and inserting ``section 
     4050''; and
       (2) by striking ``the plan shall provide that,''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions made after final regulations 
     implementing subsections (c) and (d) of section 4050 of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     subsection (a)), respectively, are prescribed.

     SEC. 1013. MODIFICATIONS OF RULES GOVERNING HARDSHIPS AND 
                   UNFORSEEN FINANCIAL EMERGENCIES.

       Within 180 days after the date of the enactment of this 
     Act, the Secretary of the Treasury shall modify the rules for 
     determining whether a participant has had a hardship for 
     purposes of section 401(k)(2)(B)(i)(IV) of the Internal 
     Revenue Code of 1986 to provide that if an event (including 
     the occurrence of a medical expense) would constitute a 
     hardship under the plan if it occurred with respect to the 
     participant's spouse or dependent (as defined in section 152 
     of such Code),

[[Page 2643]]

     such event shall, to the extent permitted under a plan, 
     constitute a hardship if it occurs with respect to a person 
     who is a beneficiary under the plan with respect to the 
     participant. The Secretary of the Treasury shall issue 
     similar rules for purposes of determining whether a 
     participant has had--
       (1) a hardship for purposes of section 403(b)(11)(B) of 
     such Code; or
       (2) an unforeseen financial emergency for purposes of 
     sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii), and 
     457(d)(1)(A)(iii) of such Code.

                  TITLE XI--ADMINISTRATIVE PROVISIONS

     SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.

       (a) In General.--The Secretary of the Treasury shall have 
     full authority to establish and implement the Employee Plans 
     Compliance Resolution System (or any successor program) and 
     any other employee plans correction policies, including the 
     authority to waive income, excise, or other taxes to ensure 
     that any tax, penalty, or sanction is not excessive and bears 
     a reasonable relationship to the nature, extent, and severity 
     of the failure.
       (b) Improvements.--The Secretary of the Treasury shall 
     continue to update and improve the Employee Plans Compliance 
     Resolution System (or any successor program), giving special 
     attention to--
       (1) increasing the awareness and knowledge of small 
     employers concerning the availability and use of the program;
       (2) taking into account special concerns and circumstances 
     that small employers face with respect to compliance and 
     correction of compliance failures;
       (3) extending the duration of the self-correction period 
     under the Self-Correction Program for significant compliance 
     failures;
       (4) expanding the availability to correct insignificant 
     compliance failures under the Self-Correction Program during 
     audit; and
       (5) assuring that any tax, penalty, or sanction that is 
     imposed by reason of a compliance failure is not excessive 
     and bears a reasonable relationship to the nature, extent, 
     and severity of the failure.

     SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

       (a) Expansion of Period.--
       (1) Amendment of internal revenue code.--
       (A) In general.--Section 417(a)(6)(A) of the Internal 
     Revenue Code of 1986 is amended by striking ``90-day'' and 
     inserting ``180-day''.
       (B) Modification of regulations.--The Secretary of the 
     Treasury shall modify the regulations under sections 402(f), 
     411(a)(11), and 417 of the Internal Revenue Code of 1986 by 
     substituting ``180 days'' for ``90 days'' each place it 
     appears in Treasury Regulations sections 1.402(f)-1, 
     1.411(a)-11(c), and 1.417(e)-1(b).
       (2) Amendment of erisa.--
       (A) In general.--Section 205(c)(7)(A) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1055(c)(7)(A)) is amended by striking ``90-day'' and 
     inserting ``180-day''.
       (B) Modification of regulations.--The Secretary of the 
     Treasury shall modify the regulations under part 2 of 
     subtitle B of title I of the Employee Retirement Income 
     Security Act of 1974 relating to sections 203(e) and 205 of 
     such Act by substituting ``180 days'' for ``90 days'' each 
     place it appears.
       (3) Effective date.--The amendments and modifications made 
     or required by this subsection shall apply to years beginning 
     after December 31, 2005.
       (b) Notification of Right To Defer.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the regulations under section 411(a)(11) of the Internal 
     Revenue Code of 1986 and under section 205 of the Employee 
     Retirement Income Security Act of 1974 to provide that the 
     description of a participant's right, if any, to defer 
     receipt of a distribution shall also describe the 
     consequences of failing to defer such receipt.
       (2) Effective date.--
       (A) In general.--The modifications required by paragraph 
     (1) shall apply to years beginning after December 31, 2005.
       (B) Reasonable notice.--A plan shall not be treated as 
     failing to meet the requirements of section 411(a)(11) of 
     such Code or section 205 of such Act with respect to any 
     description of consequences described in paragraph (1) made 
     within 90 days after the Secretary of the Treasury issues the 
     modifications required by paragraph (1) if the plan 
     administrator makes a reasonable attempt to comply with such 
     requirements.

     SEC. 1103. REPORTING SIMPLIFICATION.

       (a) Simplified Annual Filing Requirement for Owners and 
     Their Spouses.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the requirements for filing annual returns with respect to 
     one-participant retirement plans to ensure that such plans 
     with assets of $250,000 or less as of the close of the plan 
     year need not file a return for that year.
       (2) One-participant retirement plan defined.--For purposes 
     of this subsection, the term ``one-participant retirement 
     plan'' means a retirement plan with respect to which the 
     following requirements are met:
       (A) on the first day of the plan year--
       (i) the plan covered only one individual (or the individual 
     and the individual's spouse) and the individual owned 100 
     percent of the plan sponsor (whether or not incorporated), or
       (ii) the plan covered only one or more partners (or 
     partners and their spouses) in the plan sponsor;
       (B) the plan meets the minimum coverage requirements of 
     section 410(b) of the Internal Revenue Code of 1986 without 
     being combined with any other plan of the business that 
     covers the employees of the business;
       (C) the plan does not provide benefits to anyone except the 
     individual (and the individual's spouse) or the partners (and 
     their spouses);
       (D) the plan does not cover a business that is a member of 
     an affiliated service group, a controlled group of 
     corporations, or a group of businesses under common control; 
     and
       (E) the plan does not cover a business that uses the 
     services of leased employees (within the meaning of section 
     414(n) of such Code).
     For purposes of this paragraph, the term ``partner'' includes 
     a 2-percent shareholder (as defined in section 1372(b) of 
     such Code) of an S corporation.
       (3) Other definitions.--Terms used in paragraph (2) which 
     are also used in section 414 of the Internal Revenue Code of 
     1986 shall have the respective meanings given such terms by 
     such section.
       (4) Effective date.--The provisions of this subsection 
     shall apply to plan years beginning on or after January 1, 
     2006.
       (b) Simplified Annual Filing Requirement for Plans With 
     Fewer Than 25 Participants.--In the case of plan years 
     beginning after December 31, 2006, the Secretary of the 
     Treasury and the Secretary of Labor shall provide for the 
     filing of a simplified annual return for any retirement plan 
     which covers less than 25 participants on the first day of a 
     plan year and which meets the requirements described in 
     subparagraphs (B), (D), and (E) of subsection (a)(2).

     SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE AND 
                   EMPLOYMENT RETENTION PLANS MAINTAINED BY LOCAL 
                   EDUCATIONAL AGENCIES AND OTHER ENTITIES.

       (a) Voluntary Early Retirement Incentive Plans.--
       (1) Treatment as plan providing severance pay.--Section 
     457(e)(11) of the Internal Revenue Code of 1986 (relating to 
     certain plans excluded) is amended by adding at the end the 
     following new subparagraph:
       ``(D) Certain voluntary early retirement incentive plans.--
       ``(i) In general.--If an applicable voluntary early 
     retirement incentive plan--

       ``(I) makes payments or supplements as an early retirement 
     benefit, a retirement-type subsidy, or a benefit described in 
     the last sentence of section 411(a)(9), and
       ``(II) such payments or supplements are made in 
     coordination with a defined benefit plan which is described 
     in section 401(a) and includes a trust exempt from tax under 
     section 501(a) and which is maintained by an eligible 
     employer described in paragraph (1)(A) or by an education 
     association described in clause (ii)(II),

     such applicable plan shall be treated for purposes of 
     subparagraph (A)(i) as a bona fide severance pay plan with 
     respect to such payments or supplements to the extent such 
     payments or supplements could otherwise have been provided 
     under such defined benefit plan (determined as if section 411 
     applied to such defined benefit plan).
       ``(ii) Applicable voluntary early retirement incentive 
     plan.--For purposes of this subparagraph, the term 
     `applicable voluntary early retirement incentive plan' means 
     a voluntary early retirement incentive plan maintained by--

       ``(I) a local educational agency (as defined in section 
     9101 of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 7801)), or
       ``(II) an education association which principally 
     represents employees of 1 or more agencies described in 
     subclause (I) and which is described in section 501(c) (5) or 
     (6) and exempt from tax under section 501(a).''

       (2) Age discrimination in employment act.--Section 4(l)(1) 
     of the Age Discrimination in Employment Act of 1967 (29 
     U.S.C. 623(l)(1)) is amended--
       (A) by inserting ``(A)'' after ``(1)'',
       (B) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii), respectively,
       (C) by redesignating clauses (i) and (ii) of subparagraph 
     (B) (as in effect before the amendments made by subparagraph 
     (B)) as subclauses (I) and (II), respectively, and
       (D) by adding at the end the following:
       ``(B) A voluntary early retirement incentive plan that--
       ``(i) is maintained by--
       ``(I) a local educational agency (as defined in section 
     9101 of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 7801), or
       ``(II) an education association which principally 
     represents employees of 1 or more agencies described in 
     subclause (I) and which is described in section 501(c) (5) or 
     (6) of the Internal Revenue Code of 1986 and exempt from 
     taxation under section 501(a) of such Code, and
       ``(ii) makes payments or supplements described in 
     subclauses (I) and (II) of subparagraph (A)(ii) in 
     coordination with a defined benefit plan (as so defined) 
     maintained by an eligible employer described in section 
     457(e)(1)(A) of such Code or by an education association 
     described in clause (i)(II),

[[Page 2644]]

     shall be treated solely for purposes of subparagraph (A)(ii) 
     as if it were a part of the defined benefit plan with respect 
     to such payments or supplements. Payments or supplements 
     under such a voluntary early retirement incentive plan shall 
     not constitute severance pay for purposes of section 4(l)(2) 
     of the Age Discrimination in Employment Act (29 U.S.C. 
     623(l)(2)).''.
       (b) Employment Retention Plans.--
       (1) In general.--Section 457(f)(2) of the Internal Revenue 
     Code of 1986 (relating to exceptions) is amended by striking 
     ``and'' at the end of subparagraph (D), by striking the 
     period at the end of subparagraph (E) and inserting ``, 
     and'', and by adding at the end the following:
       ``(F) that portion of any applicable employment retention 
     plan described in paragraph (4) with respect to any 
     participant.''
       (2) Definitions and rules relating to employment retention 
     plans.--Section 457(f) of such Code is amended by adding at 
     the end the following new paragraph:
       ``(4) Employment retention plans.--For purposes of 
     paragraph (2)(F)--
       ``(A) In general.--The portion of an applicable employment 
     retention plan described in this paragraph with respect to 
     any participant is that portion of the plan which provides 
     benefits payable to the participant not in excess of twice 
     the applicable dollar limit determined under subsection 
     (e)(15).
       ``(B) Other rules.--
       ``(i) Limitation.--Paragraph (2)(F) shall only apply to the 
     portion of the plan described in subparagraph (A) for years 
     preceding the year in which such portion is paid or otherwise 
     made available to the participant.
       ``(ii) Treatment.--A plan shall not be treated for purposes 
     of this title as providing for the deferral of compensation 
     for any year with respect to the portion of the plan 
     described in subparagraph (A).
       ``(C) Applicable employment retention plan.--The term 
     `applicable employment retention plan' means an employment 
     retention plan maintained by--
       ``(i) a local educational agency (as defined in section 
     9101 of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 7801), or
       ``(ii) an education association which principally 
     represents employees of 1 or more agencies described in 
     clause (i) and which is described in section 501(c) (5) or 
     (6) and exempt from taxation under section 501(a).
       ``(D) Employment retention plan.--The term `employment 
     retention plan' means a plan to pay, upon termination of 
     employment, compensation to an employee of a local 
     educational agency or education association described in 
     subparagraph (C) for purposes of--
       ``(i) retaining the services of the employee, or
       ``(ii) rewarding such employee for the employee's service 
     with 1 or more such agencies or associations.''.
       (c) Coordination With ERISA.--Section 3(2)(B) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(2)(B)) is amended by adding at the end the following: 
     ``An applicable voluntary early retirement incentive plan (as 
     defined in section 457(e)(11)(D)(ii) of the Internal Revenue 
     Code of 1986) making payments or supplements described in 
     section 457(e)(11)(D)(i) of such Code, and an applicable 
     employment retention plan (as defined in section 457(f)(4)(C) 
     of such Code) making payments of benefits described in 
     section 457(f)(4)(A) of such Code, shall, for purposes of 
     this title, be treated as a welfare plan (and not a pension 
     plan) with respect to such payments and supplements.''
       (d) Effective Dates.--
       (1) In general.--The amendments made by this Act shall take 
     effect on the date of the enactment of this Act.
       (2) Tax amendments.--The amendments made by subsections 
     (a)(1) and (b) shall apply to taxable years ending after the 
     date of the enactment of this Act.
       (3) ERISA amendments.--The amendment made by subsection (c) 
     shall apply to plan years ending after the date of the 
     enactment of this Act.
       (4) Construction.--Nothing in the amendments made by this 
     section shall alter or affect the construction of the 
     Internal Revenue Code of 1986, the Employee Retirement Income 
     Security Act of 1974, or the Age Discrimination in Employment 
     Act of 1967 as applied to any plan, arrangement, or conduct 
     to which such amendments do not apply.

     SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSATION AS A 
                   RESULT OF PENSION ROLLOVERS.

       (a) In General.--Section 3304(a) of the Internal Revenue 
     Code of 1986 (relating to requirements for State unemployment 
     laws) is amended by adding at the end the following new flush 
     sentence:

     ``Compensation shall not be reduced under paragraph (15) for 
     any pension, retirement or retired pay, annuity, or similar 
     payment which is not includible in gross income of the 
     individual for the taxable year in which paid because it was 
     part of a rollover distribution.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to weeks beginning on or after the date of the 
     enactment of this Act.

     SEC. 1106. WITHHOLDING ON DISTRIBUTIONS FROM GOVERNMENTAL 
                   SECTION 457 PLANS.

       (a) In General.--Section 641(f) of the Economic Growth and 
     Tax Relief Reconciliation Act of 2001 is amended by adding at 
     the end the following new paragraph:
       ``(4) Transition rule for certain governmental plans.--In 
     the case of distributions from an eligible deferred 
     compensation plan of an employer described in section 
     457(e)(1)(A) of the Internal Revenue Code of 1986 which are 
     made after December 31, 2001, and which are part of a series 
     of distributions which--
       ``(A) began before January 1, 2002, and
       ``(B) are payable for 10 years or less, the Internal 
     Revenue Code of 1986 may be applied to such distributions 
     without regard to the amendments made by subsection 
     (a)(1)(D).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the provisions of section 
     641 of the Economic Growth and Tax Relief Reconciliation Act 
     of 2001.

     SEC. 1107. TREATMENT OF DEFINED BENEFIT PLAN AS GOVERNMENTAL 
                   PLAN.

       (a) In General.--For purposes of the Internal Revenue Code 
     of 1986 and the Employee Retirement Income Security Act of 
     1974, an eligible defined benefit plan shall be treated as a 
     governmental plan (within the meaning of section 414(d) of 
     such Code and section 3(32) of such Act).
       (b) Eligible Defined Benefit Plan.--For purposes of this 
     section, an eligible defined benefit plan is a defined 
     benefit plan maintained by a nonprofit corporation which 
     was--
       (1) incorporated on September 16, 1998, under a State 
     nonprofit corporation statute; and
       (2) organized for the express purpose of supporting the 
     missions and goals of a public corporation which--
       (A) was created by a State statute effective on July 1, 
     1995;
       (B) is a governmental entity under State law; and
       (C) is a member of the nonprofit corporation.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any year beginning before, on, or after the 
     date of the enactment of this Act.

     SEC. 1108. INCREASING PARTICIPATION IN CASH OR DEFERRED PLANS 
                   THROUGH AUTOMATIC CONTRIBUTION ARRANGEMENTS.

       (a) In General.--Section 401(k) of the Internal Revenue 
     Code of 1986 (relating to cash or deferred arrangement) is 
     amended by adding at the end the following new paragraph:
       ``(13) Nondiscrimination requirements for automatic 
     contribution trusts.--
       ``(A) In general.--A cash or deferred arrangement shall be 
     treated as meeting the requirements of paragraph (3)(A)(ii) 
     if such arrangement constitutes an automatic contribution 
     trust.
       ``(B) Automatic contribution trust.--
       ``(i) In general.--For purposes of this paragraph, the term 
     `automatic contribution trust' means an arrangement--

       ``(I) except as provided in clauses (ii) and (iii), under 
     which each employee eligible to participate in the 
     arrangement is treated as having elected to have the employer 
     make elective contributions in an amount equal to the 
     applicable percentage of the employee's compensation, and
       ``(II) which meets the requirements of subparagraphs (C), 
     (D), (E), and (F).

       ``(ii) Exception for existing employees.--In the case of 
     any employee--

       ``(I) who was eligible to participate in the arrangement 
     (or a predecessor arrangement) immediately before the first 
     date on which the arrangement is an automatic contribution 
     trust, and
       ``(II) whose rate of contribution immediately before such 
     first date was less than the applicable percentage for the 
     employee,

     clause (i)(I) shall not apply to such employee until the date 
     which is 1 year after such first date (or such earlier date 
     as the employee may elect).
       ``(iii) Election out.--Each employee eligible to 
     participate in the arrangement may specifically elect not to 
     have contributions made under clause (i), and such clause 
     shall cease to apply to compensation paid on or after the 
     effective date of the election.
       ``(iv) Applicable percentage.--For purposes of this 
     subparagraph--

       ``(I) In general.--The term `applicable percentage' means, 
     with respect to any employee, the uniform percentage (not 
     less than 3 percent) determined under the arrangement. In the 
     case of an employee who was eligible to participate in the 
     arrangement (or a predecessor arrangement) immediately before 
     the first date on which the arrangement is an automatic 
     contribution trust, the initial applicable percentage shall 
     in no event be less than the percentage in effect with 
     respect to the employee under the arrangement immediately 
     before the employee first begins participation in the 
     automatic contribution trust.
       ``(II) Increase in percentage.--In the case of the second 
     plan year beginning after the first date on which the 
     election under clause (i)(I) is in effect with respect to the 
     employee and any succeeding plan year, the applicable 
     percentage shall be a percentage (not greater than 10 percent 
     or such higher uniform percentage determined under the 
     arrangement) equal to the sum of the applicable percentage 
     for the employee as of the

[[Page 2645]]

     close of the preceding plan year plus 1 percentage point (or 
     such higher percentage specified by the plan). A plan may 
     elect to provide that, in lieu of any increase under the 
     preceding sentence, the increase in the applicable percentage 
     required under this subclause shall occur after each increase 
     in compensation an employee receives on or after the first 
     day of such second plan year and that the applicable 
     percentage after each such increase in compensation shall be 
     equal to the applicable percentage for the employee 
     immediately before such increase in compensation plus 1 
     percentage point (or such higher percentage specified by the 
     plan).

       ``(C) Matching or nonelective contributions.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if, under the arrangement, the employer--

       ``(I) makes matching contributions on behalf of each 
     employee who is not a highly compensated employee in an 
     amount equal to 50 percent of the elective contributions of 
     the employee to the extent such elective contributions do not 
     exceed 7 percent of compensation; or
       ``(II) is required, without regard to whether the employee 
     makes an elective contribution or employee contribution, to 
     make a contribution to a defined contribution plan on behalf 
     of each employee who is not a highly compensated employee and 
     who is eligible to participate in the arrangement in an 
     amount equal to at least 3 percent of the employee's 
     compensation,

     The rules of clauses (ii) and (iii) of paragraph (12)(B) 
     shall apply for purposes of subclause (I). The rules of 
     paragraph (12)(E)(ii) shall apply for purposes of subclauses 
     (I) and (II).
       ``(ii) Other plans.--An arrangement shall be treated as 
     meeting the requirements under clause (i) if any other plan 
     maintained by the employer meets such requirements with 
     respect to employees eligible under the arrangement.
       ``(D) Notice requirements.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if the requirements of clauses (ii) and (iii) are 
     met.
       ``(ii) Reasonable period to make election.--The 
     requirements of this clause are met if each employee to whom 
     subparagraph (B)(i) applies--

       ``(I) receives a notice explaining the employee's right 
     under the arrangement to elect not to have elective 
     contributions made on the employee's behalf, and how 
     contributions made under the arrangement will be invested in 
     the absence of any investment election by the employee, and
       ``(II) has a reasonable period of time after receipt of 
     such notice and before the first elective contribution is 
     made to make such election.

       ``(iii) Annual notice of rights and obligations.--The 
     requirements of this clause are met if each employee eligible 
     to participate in the arrangement is, within a reasonable 
     period before any year (or if the plan elects to change the 
     applicable percentage after any increase in compensation, 
     before the increase), given notice of the employee's rights 
     and obligations under the arrangement.

     The requirements of clauses (i) and (ii) of paragraph (12)(D) 
     shall be met with respect to the notices described in clauses 
     (ii) and (iii) of this subparagraph.
       ``(E) Participation, withdrawal, and vesting 
     requirements.--The requirements of this subparagraph are met 
     if--
       ``(i) the arrangement requires that each employee eligible 
     to participate in the arrangement (determined without regard 
     to any minimum service requirement otherwise applicable under 
     section 410(a) or the plan) commences participation in the 
     arrangement no later than the 1st day of the 1st calendar 
     quarter beginning after the date on which employee first 
     becomes so eligible,
       ``(ii) the withdrawal requirements of paragraph (2)(B) are 
     met with respect to all employer contributions (including 
     matching and elective contributions) taken into account in 
     determining whether the arrangement meets the requirements of 
     subparagraph (C), and
       ``(iii) the arrangement requires that an employee's right 
     to the accrued benefit derived from employer contributions 
     described in clause (ii) (other than elective contributions) 
     is nonforfeitable after the employee has completed at least 2 
     years of service.
       ``(F) Certain withdrawals must be allowed.--Notwithstanding 
     any other provision of this subsection, the requirements of 
     this subparagraph are met if the arrangement allows employees 
     to elect to make permissible withdrawals in accordance with 
     section 414(w).''
       (b) Matching Contributions.--Section 401(m) of the Internal 
     Revenue Code of 1986 (relating to nondiscrimination test for 
     matching contributions and employee contributions) is amended 
     by redesignating paragraph (12) as paragraph (13) and by 
     inserting after paragraph (11) the following new paragraph:
       ``(12) Alternate method for automatic contribution 
     trusts.--A defined contribution plan shall be treated as 
     meeting the requirements of paragraph (2) with respect to 
     matching contributions if the plan--
       ``(A) meets the contribution requirements of subparagraphs 
     (B)(i) and (C) of subsection (k)(13);
       ``(B) meets the notice requirements of subparagraph (D) of 
     subsection (k)(13); and
       ``(C) meets the requirements of paragraph (11)(B) (ii) and 
     (iii).''.
       (c) Exclusion From Definition of Top-Heavy Plans.--
       (1) Elective contribution rule.--Clause (i) of section 
     416(g)(4)(H) of the Internal Revenue Code of 1986 is amended 
     by inserting ``or 401(k)(13)'' after ``section 401(k)(12)''.
       (2) Matching contribution rule.--Clause (ii) of section 
     416(g)(4)(H) of such Code is amended by inserting ``or 
     401(m)(12)'' after ``section 401(m)(11)''.
       (d) Section 403(b) contracts.--Paragraph (11) of section 
     401(m) of the Internal Revenue Code of 1986 is amended by 
     adding at the end the following:
       ``(C) Section 403(b) contracts.--An annuity contract under 
     section 403(b) shall be treated as meeting the requirements 
     of paragraph (2) with respect to matching contributions if 
     such contract meets requirements similar to the requirements 
     under subparagraph (A).''.
       (e) Preemption of Conflicting State Regulation.--Section 
     514 of the Employee Retirement Income Security of 1974 (29 
     U.S.C. 1144) is amended by inserting at the end the following 
     new subsection:
       ``(e) Automatic Contribution Arrangements.--
       ``(1) In general.--Notwithstanding any other provision of 
     this section, any law of a State shall be superseded if it 
     would directly or indirectly prohibit or restrict the 
     inclusion in any plan of an eligible automatic contribution 
     arrangement.
       ``(2) Eligible automatic contribution arrangement.--For 
     purposes of this subsection, the term `eligible automatic 
     contribution arrangement' means an arrangement--
       ``(A) under which a participant may elect to have the 
     employer make payments as contributions under the plan on 
     behalf of the participant, or to the participant directly in 
     cash,
       ``(B) under which the participant is treated as having 
     elected to have the employer make such contributions in an 
     amount equal to a uniform percentage of compensation provided 
     under the plan until the participant specifically elects not 
     to have such contributions made (or specifically elects to 
     have such contributions made at a different percentage),
       ``(C) under which contributions described in subparagraph 
     (B) are invested in accordance with regulations prescribed by 
     the Secretary under section 404(c)(4), and
       ``(D) which meets the requirements of paragraph (3).
       ``(3) Notice requirements.--
       ``(A) In general.--The administrator of an individual 
     account plan shall, within a reasonable period before each 
     plan year, give to each employee to whom an arrangement 
     described in paragraph (2) applies for such plan year notice 
     of the employee's rights and obligations under the 
     arrangement which--
       ``(i) is sufficiently accurate and comprehensive to apprise 
     the employee of such rights and obligations, and
       ``(ii) is written in a manner calculated to be understood 
     by the average employee to whom the arrangement applies.
       ``(B) Time and form of notice.--A notice shall not be 
     treated as meeting the requirements of subparagraph (A) with 
     respect to an employee unless--
       ``(i) the notice includes a notice explaining the 
     employee's right under the arrangement to elect not to have 
     elective contributions made on the employee's behalf (or to 
     elect to have such contributions made at a different 
     percentage),
       ``(ii) the employee has a reasonable period of time after 
     receipt of the notice described in clause (i) and before the 
     first elective contribution is made to make such election, 
     and
       ``(iii) the notice explains how contributions made under 
     the arrangement will be invested in the absence of any 
     investment election by the employee.''.
       (f) Treatment of Withdrawals of Contributions During First 
     60 Days.--Section 414 of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new subsection:
       ``(w) Special Rules for Certain Withdrawals From Eligible 
     Automatic Contribution Arrangements.--
       ``(1) In general.--If an eligible automatic contribution 
     arrangement allows an employee to elect to make permissible 
     withdrawals--
       ``(A) the amount of any such withdrawal shall be includible 
     in the gross income of the employee for the taxable year of 
     the employee in which the distribution is made,
       ``(B) no tax shall be imposed under section 72(t) with 
     respect to the distribution, and
       ``(C) the arrangement shall not be treated as violating any 
     restriction on distributions under this title solely by 
     reason of allowing the withdrawal.

     In the case of any distribution to an employee by reason of 
     an election under this paragraph, employer matching 
     contributions shall be forfeited or subject to such other 
     treatment as the Secretary may prescribe.
       ``(2) Permissible withdrawal.--For purposes of this 
     subsection--
       ``(A) In general.--The term `permissible withdrawal' means 
     any withdrawal from an

[[Page 2646]]

     eligible automatic contribution arrangement meeting the 
     requirements of this paragraph which--
       ``(i) is made pursuant to an election by an employee, and
       ``(ii) consists of elective contributions described in 
     paragraph (3)(B) (and earnings attributable thereto).
       ``(B) Time for making election.--Subparagraph (A) shall not 
     apply to an election by an employee unless the election is 
     made no later than the date which is 60 days after the date 
     of the first elective contribution with respect to the 
     employee under the arrangement.
       ``(C) Amount of distribution.--Subparagraph (A) shall not 
     apply to any election by an employee unless the amount of any 
     distribution by reason of the election is equal to the amount 
     of elective contributions made with respect to the first 
     payroll period to which the eligible automatic contribution 
     arrangement applies to the employee and any succeeding 
     payroll period beginning before the effective date of the 
     election (and earnings attributable thereto).
       ``(3) Eligible automatic contribution arrangement.--For 
     purposes of this subsection, the term `eligible automatic 
     contribution arrangement' means an arrangement--
       ``(A) under which a participant may elect to have the 
     employer make payments as contributions under the plan on 
     behalf of the participant, or to the participant directly in 
     cash,
       ``(B) under which the participant is treated as having 
     elected to have the employer make such contributions in an 
     amount equal to a uniform percentage of compensation provided 
     under the plan until the participant specifically elects not 
     to have such contributions made (or specifically elects to 
     have such contributions made at a different percentage),
       ``(C) under which contributions described in subparagraph 
     (B) are invested in accordance with regulations prescribed by 
     the Secretary of Labor under section 404(c)(4) of the 
     Employee Retirement Income Security Act of 1974, and
       ``(D) which meets the requirements of paragraph (4).
       ``(4) Notice requirements.--
       ``(A) In general.--The administrator of a plan containing 
     an arrangement described in paragraph (3) shall, within a 
     reasonable period before each plan year, give to each 
     employee to whom an arrangement described in paragraph (3) 
     applies for such plan year notice of the employee's rights 
     and obligations under the arrangement which--
       ``(i) is sufficiently accurate and comprehensive to apprise 
     the employee of such rights and obligations, and
       ``(ii) is written in a manner calculated to be understood 
     by the average employee to whom the arrangement applies.
       ``(B) Time and form of notice.--A notice shall not be 
     treated as meeting the requirements of subparagraph (A) with 
     respect to an employee unless--
       ``(i) the notice includes a notice explaining the 
     employee's right under the arrangement to elect not to have 
     elective contributions made on the employee's behalf (or to 
     elect to have such contributions made at a different 
     percentage),
       ``(ii) the employee has a reasonable period of time after 
     receipt of the notice described in clause (i) and before the 
     first elective contribution is made to make such election, 
     and
       ``(iii) the notice explains how contributions made under 
     the arrangement will be invested in the absence of any 
     investment election by the employee.''.
       (g) Effective Date.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to plan years 
     beginning after December 31, 2005.
       (2) Section 403(b) contracts.--The amendments made by 
     subsection (d) shall apply to years ending after the date of 
     the enactment of this Act.

     SEC. 1109. TREATMENT OF INVESTMENT OF ASSETS BY PLAN WHERE 
                   PARTICIPANT FAILS TO EXERCISE INVESTMENT 
                   ELECTION.

       (a) In General.--Section 404(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by 
     adding at the end the following new paragraph:
       ``(4) Default investment arrangements.--
       ``(A) In general.--For purposes of paragraph (1), a 
     participant in an individual account plan meeting the notice 
     requirements of subparagraph (B) shall be treated as 
     exercising control over the assets in the account with 
     respect to the amount of contributions and earnings which, in 
     the absence of an investment election by the participant, are 
     invested by the plan in accordance with regulations 
     prescribed by the Secretary. The regulations under this 
     subparagraph shall provide guidance on the appropriateness of 
     designating default investments that include a mix of asset 
     classes consistent with capital preservation, long-term 
     capital appreciation, or a blend of both.
       ``(B) Notice requirements.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if each participant--

       ``(I) receives, within a reasonable period of time before 
     each plan year, a notice explaining the employee's right 
     under the plan to designate how contributions and earnings 
     will be invested and explaining how, in the absence of any 
     investment election by the participant, such contributions 
     and earnings will be invested, and
       ``(II) has a reasonable period of time after receipt of 
     such notice and before the beginning of the plan year to make 
     such designation.

       ``(ii) Form of notice.--The requirements of clauses (i) and 
     (ii) of section 401(k)(12)(D) of the Internal Revenue Code of 
     1986 shall be met with respect to the notices described in 
     this subparagraph.''.
       (b) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2005.
       (2) Regulations.--Final regulations under section 
     404(c)(4)(A) of the Employee Retirement Income Security Act 
     of 1974 (as added by this section) shall be issued no later 
     than 6 months after the date of the enactment of this Act.

     SEC. 1110. CLARIFICATION OF FIDUCIARY RULES.

       (a) In General.--Not later than 1 year after the date of 
     the enactment of this Act, the Secretary of Labor shall issue 
     final regulations clarifying that the selection of an annuity 
     contract as an optional form of distribution from an 
     individual account plan to a participant or beneficiary--
       (1) is not subject to the safest available annuity standard 
     under Interpretive Bulletin 95-1 (29 C.F.R. 2509.95-1), and
       (2) is subject to all otherwise applicable fiduciary 
     standards.
       (b) Effective Date.--This section shall take effect on the 
     date of enactment of this Act.

            TITLE XII--UNITED STATES TAX COURT MODERNIZATION

     SEC. 1200. AMENDMENT OF 1986 CODE.

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

     SEC. 1201. ANNUITIES FOR SURVIVORS OF TAX COURT JUDGES WHO 
                   ARE ASSASSINATED.

       (a) Eligibility in Case of Death by Assassination.--
     Subsection (h) of section 7448 (relating to annuities to 
     surviving spouses and dependent children of judges) is 
     amended to read as follows:
       ``(h) Entitlement to Annuity.--
       ``(1) In general.--
       ``(A) Annuity to surviving spouse.--If a judge described in 
     paragraph (2) is survived by a surviving spouse but not by a 
     dependent child, there shall be paid to such surviving spouse 
     an annuity beginning with the day of the death of the judge 
     or following the surviving spouse's attainment of the age of 
     50 years, whichever is the later, in an amount computed as 
     provided in subsection (m).
       ``(B) Annuity to child.--If such a judge is survived by a 
     surviving spouse and a dependent child or children, there 
     shall be paid to such surviving spouse an immediate annuity 
     in an amount computed as provided in subsection (m), and 
     there shall also be paid to or on behalf of each such child 
     an immediate annuity equal to the lesser of--
       ``(i) 10 percent of the average annual salary of such judge 
     (determined in accordance with subsection (m)), or
       ``(ii) 20 percent of such average annual salary, divided by 
     the number of such children.
       ``(C) Annuity to surviving dependent children.--If such a 
     judge leaves no surviving spouse but leaves a surviving 
     dependent child or children, there shall be paid to or on 
     behalf of each such child an immediate annuity equal to the 
     lesser of--
       ``(i) 20 percent of the average annual salary of such judge 
     (determined in accordance with subsection (m)), or
       ``(ii) 40 percent of such average annual salary, divided by 
     the number of such children.
       ``(2) Covered judges.--Paragraph (1) applies to any judge 
     electing under subsection (b)--
       ``(A) who dies while a judge after having rendered at least 
     5 years of civilian service computed as prescribed in 
     subsection (n), for the last 5 years of which the salary 
     deductions provided for by subsection (c)(1) or the deposits 
     required by subsection (d) have actually been made or the 
     salary deductions required by the civil service retirement 
     laws have actually been made, or
       ``(B) who dies by assassination after having rendered less 
     than 5 years of civilian service computed as prescribed in 
     subsection (n) if, for the period of such service, the salary 
     deductions provided for by subsection (c)(1) or the deposits 
     required by subsection (d) have actually been made.
       ``(3) Termination of annuity.--
       ``(A) In the case of a surviving spouse.--The annuity 
     payable to a surviving spouse under this subsection shall be 
     terminable upon such surviving spouse's death or such 
     surviving spouse's remarriage before attaining age 55.
       ``(B) In the case of a child.--The annuity payable to a 
     child under this subsection shall be terminable upon (i) the 
     child attaining the age of 18 years, (ii) the child's 
     marriage, or (iii) the child's death, whichever first occurs, 
     except that if such child is incapable of

[[Page 2647]]

     self-support by reason of mental or physical disability the 
     child's annuity shall be terminable only upon death, 
     marriage, or recovery from such disability.
       ``(C) In the case of a dependent child after death of 
     surviving spouse.--In case of the death of a surviving spouse 
     of a judge leaving a dependent child or children of the judge 
     surviving such spouse, the annuity of such child or children 
     shall be recomputed and paid as provided in paragraph (1)(C).
       ``(D) Recomputation.--In any case in which the annuity of a 
     dependent child is terminated under this subsection, the 
     annuities of any remaining dependent child or children, based 
     upon the service of the same judge, shall be recomputed and 
     paid as though the child whose annuity was so terminated had 
     not survived such judge.
       ``(4) Special rule for assassinated judges.--In the case of 
     a survivor or survivors of a judge described in paragraph 
     (2)(B), there shall be deducted from the annuities otherwise 
     payable under this section an amount equal to--
       ``(A) the amount of salary deductions provided for by 
     subsection (c)(1) that would have been made if such 
     deductions had been made for 5 years of civilian service 
     computed as prescribed in subsection (n) before the judge's 
     death, reduced by
       ``(B) the amount of such salary deductions that were 
     actually made before the date of the judge's death.'.'
       (b) Definition of Assassination.--Section 7448(a) (relating 
     to definitions) is amended by adding at the end the following 
     new paragraph:
       ``(8) The terms `assassinated' and `assassination' mean the 
     killing of a judge that is motivated by the performance by 
     that judge of his or her official duties.''.
       (c) Determination of Assassination.--Subsection (i) of 
     section 7448 is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(i) Determinations by Chief Judge.--
       ``(1) Dependency and disability.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Assassination.--The chief judge shall determine 
     whether the killing of a judge was an assassination, subject 
     to review only by the Tax Court. The head of any Federal 
     agency that investigates the killing of a judge shall provide 
     information to the chief judge that would assist the chief 
     judge in making such a determination.''.
       (d) Computation of Annuities.--Subsection (m) of section 
     7448 is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(m) Computation of Annuities.--
       ``(1) In general.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Assassinated judges.--In the case of a judge who is 
     assassinated and who has served less than 3 years, the 
     annuity of the surviving spouse of such judge shall be based 
     upon the average annual salary received by such judge for 
     judicial service.''.
       (e) Other Benefits.--Section 7448 is amended by adding at 
     the end the following:
       ``(u) Other Benefits.--In the case of a judge who is 
     assassinated, an annuity shall be paid under this section 
     notwithstanding a survivor's eligibility for or receipt of 
     benefits under chapter 81 of title 5, United States Code, 
     except that the annuity for which a surviving spouse is 
     eligible under this section shall be reduced to the extent 
     that the total benefits paid under this section and chapter 
     81 of that title for any year would exceed the current salary 
     for that year of the office of the judge.''.

     SEC. 1202. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL 
                   SURVIVOR ANNUITIES.

       (a) In General.--Subsection (s) of section 7448 (relating 
     to annuities to surviving spouses and dependent children of 
     judges) is amended to read as follows:
       ``(s) Increases in Survivor Annuities.--Each time that an 
     increase is made under section 8340(b) of title 5, United 
     States Code, in annuities payable under subchapter III of 
     chapter 83 of that title, each annuity payable from the 
     survivors annuity fund under this section shall be increased 
     at the same time by the same percentage by which annuities 
     are increased under such section 8340(b).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to increases made under section 
     8340(b) of title 5, United States Code, in annuities payable 
     under subchapter III of chapter 83 of that title, taking 
     effect after the date of the enactment of this Act.

     SEC. 1203. LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES.

       (a) In General.--Section 7447 (relating to retirement of 
     judges) is amended by adding at the end the following new 
     subsection:
       ``(j) Life Insurance Coverage.--For purposes of chapter 87 
     of title 5, United States Code (relating to life insurance), 
     any individual who is serving as a judge of the Tax Court or 
     who is retired under this section is deemed to be an employee 
     who is continuing in active employment.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any individual serving as a judge of the 
     United States Tax Court or to any retired judge of the United 
     States Tax Court on the date of the enactment of this Act.

     SEC. 1204. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT 
                   JUDGES AGE 65 OR OVER.

       Section 7472 (relating to expenditures) is amended by 
     inserting after the first sentence the following new 
     sentence: ``Notwithstanding any other provision of law, the 
     Tax Court is authorized to pay on behalf of its judges, age 
     65 or over, any increase in the cost of Federal Employees' 
     Group Life Insurance imposed after April 24, 1999, including 
     any expenses generated by such payments, as authorized by the 
     chief judge in a manner consistent with such payments 
     authorized by the Judicial Conference of the United States 
     pursuant to section 604(a)(5) of title 28, United States 
     Code.''

     SEC. 1205. MODIFICATION OF TIMING OF LUMP-SUM PAYMENT OF 
                   JUDGES' ACCRUED ANNUAL LEAVE.

       (a) In General.--Section 7443 (relating to membership of 
     the Tax Court) is amended by adding at the end the following 
     new subsection:
       ``(h) Lump-Sum Payment of Judges' Accrued Annual Leave.--
     Notwithstanding the provisions of sections 5551 and 6301 of 
     title 5, United States Code, when an individual subject to 
     the leave system provided in chapter 63 of that title is 
     appointed by the President to be a judge of the Tax Court, 
     the individual shall be entitled to receive, upon appointment 
     to the Tax Court, a lump-sum payment from the Tax Court of 
     the accumulated and accrued current annual leave standing to 
     the individual's credit as certified by the agency from which 
     the individual resigned.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any judge of the United States Tax Court who 
     has an outstanding leave balance on the date of the enactment 
     of this Act and to any individual appointed by the President 
     to serve as a judge of the United States Tax Court after such 
     date.

     SEC. 1206. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT 
                   SAVINGS PLAN.

       (a) In General.--Section 7447 (relating to retirement of 
     judges), as amended by this Act, is amended by adding at the 
     end the following new subsection:
       ``(k) Thrift Savings Plan.--
       ``(1) Election to contribute.--
       ``(A) In general.--A judge of the Tax Court may elect to 
     contribute to the Thrift Savings Fund established by section 
     8437 of title 5, United States Code.
       ``(B) Period of election.--An election may be made under 
     this paragraph only during a period provided under section 
     8432(b) of title 5, United States Code, for individuals 
     subject to chapter 84 of such title.
       ``(2) Applicability of title 5 provisions.--Except as 
     otherwise provided in this subsection, the provisions of 
     subchapters III and VII of chapter 84 of title 5, United 
     States Code, shall apply with respect to a judge who makes an 
     election under paragraph (1).
       ``(3) Special rules.--
       ``(A) Amount contributed.--The amount contributed by a 
     judge to the Thrift Savings Fund in any pay period shall not 
     exceed the maximum percentage of such judge's basic pay for 
     such period as allowable under section 8440f of title 5, 
     United States Code. Basic pay does not include any retired 
     pay paid pursuant to this section.
       ``(B) Contributions for benefit of judge.--No contributions 
     may be made for the benefit of a judge under section 8432(c) 
     of title 5, United States Code.
       ``(C) Applicability of section 8433(b) of title 5 whether 
     or not judge retires.--Section 8433(b) of title 5, United 
     States Code, applies with respect to a judge who makes an 
     election under paragraph (1) and who either--
       ``(i) retires under subsection (b), or
       ``(ii) ceases to serve as a judge of the Tax Court but does 
     not retire under subsection (b).
     Retirement under subsection (b) is a separation from service 
     for purposes of subchapters III and VII of chapter 84 of that 
     title.
       ``(D) Applicability of section 8351(b)(5) of title 5.--The 
     provisions of section 8351(b)(5) of title 5, United States 
     Code, shall apply with respect to a judge who makes an 
     election under paragraph (1).
       ``(E) Exception.--Notwithstanding subparagraph (C), if any 
     judge retires under this section, or resigns without having 
     met the age and service requirements set forth under 
     subsection (b)(2), and such judge's nonforfeitable account 
     balance is less than an amount that the Executive Director of 
     the Office of Personnel Management prescribes by regulation, 
     the Executive Director shall pay the nonforfeitable account 
     balance to the participant in a single payment.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act, 
     except that United States Tax Court judges may only begin to 
     participate in the Thrift Savings Plan at the next open 
     season beginning after such date.

[[Page 2648]]



     SEC. 1207. EXEMPTION OF TEACHING COMPENSATION OF RETIRED 
                   JUDGES FROM LIMITATION ON OUTSIDE EARNED 
                   INCOME.

       (a) In General.--Section 7447 (relating to retirement of 
     judges), as amended by this Act, is amended by adding at the 
     end the following new subsection:
       ``(l) Teaching Compensation of Retired Judges.--For 
     purposes of the limitation under section 501(a) of the Ethics 
     in Government Act of 1978 (5 U.S.C. App.), any compensation 
     for teaching approved under section 502(a)(5) of such Act 
     shall not be treated as outside earned income when received 
     by a judge of the Tax Court who has retired under subsection 
     (b) for teaching performed during any calendar year for which 
     such a judge has met the requirements of subsection (c), as 
     certified by the chief judge of the Tax Court.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any individual serving as a retired judge of 
     the United States Tax Court on or after the date of the 
     enactment of this Act.

     SEC. 1208. GENERAL PROVISIONS RELATING TO MAGISTRATE JUDGES 
                   OF THE TAX COURT.

       (a) Title of Special Trial Judge Changed to Magistrate 
     Judge of the Tax Court.--The heading of section 7443A is 
     amended to read as follows:

     ``SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.''

       (b) Appointment, Tenure, and Removal.--Subsection (a) of 
     section 7443A is amended to read as follows:
       ``(a) Appointment, Tenure, and Removal.--
       ``(1) Appointment.--The chief judge may, from time to time, 
     appoint and reappoint magistrate judges of the Tax Court for 
     a term of 8 years. The magistrate judges of the Tax Court 
     shall proceed under such rules as may be promulgated by the 
     Tax Court.
       ``(2) Removal.--Removal of a magistrate judge of the Tax 
     Court during the term for which he or she is appointed shall 
     be only for incompetency, misconduct, neglect of duty, or 
     physical or mental disability, but the office of a magistrate 
     judge of the Tax Court shall be terminated if the judges of 
     the Tax Court determine that the services performed by the 
     magistrate judge of the Tax Court are no longer needed. 
     Removal shall not occur unless a majority of all the judges 
     of the Tax Court concur in the order of removal. Before any 
     order of removal shall be entered, a full specification of 
     the charges shall be furnished to the magistrate judge of the 
     Tax Court, and he or she shall be accorded by the judges of 
     the Tax Court an opportunity to be heard on the charges.''.
       (c) Salary.--Section 7443A(d) (relating to salary) is 
     amended by striking ``90'' and inserting ``92''.
       (d) Exemption From Federal Leave Provisions.--Section 7443A 
     is amended by adding at the end the following new subsection:
       ``(f) Exemption From Federal Leave Provisions.--
       ``(1) In general.--A magistrate judge of the Tax Court 
     appointed under this section shall be exempt from the 
     provisions of subchapter I of chapter 63 of title 5, United 
     States Code.
       ``(2) Treatment of unused leave.--
       ``(A) After service as magistrate judge.--If an individual 
     who is exempted under paragraph (1) from the subchapter 
     referred to in such paragraph was previously subject to such 
     subchapter and, without a break in service, again becomes 
     subject to such subchapter on completion of the individual's 
     service as a magistrate judge, the unused annual leave and 
     sick leave standing to the individual's credit when such 
     individual was exempted from this subchapter is deemed to 
     have remained to the individual's credit.
       ``(B) Computation of annuity.--In computing an annuity 
     under section 8339 of title 5, United States Code, the total 
     service of an individual specified in subparagraph (A) who 
     retires on an immediate annuity or dies leaving a survivor or 
     survivors entitled to an annuity includes, without regard to 
     the limitations imposed by subsection (f) of such section 
     8339, the days of unused sick leave standing to the 
     individual's credit when such individual was exempted from 
     subchapter I of chapter 63 of title 5, United States Code, 
     except that these days will not be counted in determining 
     average pay or annuity eligibility.
       ``(C) Lump sum payment.--Any accumulated and current 
     accrued annual leave or vacation balances credited to a 
     magistrate judge as of the date of the enactment of this 
     subsection shall be paid in a lump sum at the time of 
     separation from service pursuant to the provisions and 
     restrictions set forth in section 5551 of title 5, United 
     States Code, and related provisions referred to in such 
     section.''.
       (e) Conforming Amendments.--
       (1) The heading of subsection (b) of section 7443A is 
     amended by striking ``Special Trial Judges'' and inserting 
     ``Magistrate Judges of the Tax Court''.
       (2) Section 7443A(b) is amended by striking ``special trial 
     judges of the court'' and inserting ``magistrate judges of 
     the Tax Court''.
       (3) Subsections (c) and (d) of section 7443A are amended by 
     striking ``special trial judge'' and inserting ``magistrate 
     judge of the Tax Court'' each place it appears.
       (4) Section 7443A(e) is amended by striking ``special trial 
     judges'' and inserting ``magistrate judges of the Tax 
     Court''.
       (5) Section 7456(a) is amended by striking ``special trial 
     judge'' each place it appears and inserting ``magistrate 
     judge''.
       (6) Subsection (c) of section 7471 is amended--
       (A) by striking the subsection heading and inserting 
     ``Magistrate Judges of the Tax Court.--'', and
       (B) by striking ``special trial judges'' and inserting 
     ``magistrate judges''.

     SEC. 1209. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT 
                   CHILDREN OF MAGISTRATE JUDGES OF THE TAX COURT.

       (a) Definitions.--Section 7448(a) (relating to 
     definitions), as amended by this Act, is amended by 
     redesignating paragraphs (5), (6), (7), and (8) as paragraphs 
     (7), (8), (9), and (10), respectively, and by inserting after 
     paragraph (4) the following new paragraphs:
       ``(5) The term `magistrate judge' means a judicial officer 
     appointed pursuant to section 7443A, including any individual 
     receiving an annuity under section 7443B, or chapters 83 or 
     84, as the case may be, of title 5, United States Code, 
     whether or not performing judicial duties under section 
     7443C.
       ``(6) The term `magistrate judge's salary' means the salary 
     of a magistrate judge received under section 7443A(d), any 
     amount received as an annuity under section 7443B, or 
     chapters 83 or 84, as the case may be, of title 5, United 
     States Code, and compensation received under section 
     7443C.''.
       (b) Election.--Subsection (b) of section 7448 (relating to 
     annuities to surviving spouses and dependent children of 
     judges) is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(b) Election.--
       ``(1) Judges.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Magistrate judges.--Any magistrate judge may by 
     written election filed with the chief judge bring himself or 
     herself within the purview of this section. Such election 
     shall be filed not later than the later of 6 months after--
       ``(A) 6 months after the date of the enactment of this 
     paragraph,
       ``(B) the date the judge takes office, or
       ``(C) the date the judge marries.''.
       (c) Conforming Amendments.--
       (1) The heading of section 7448 is amended by inserting 
     ``AND MAGISTRATE JUDGES'' after ``JUDGES''.
       (2) The item relating to section 7448 in the table of 
     sections for part I of subchapter C of chapter 76 is amended 
     by inserting ``and magistrate judges'' after ``judges''.
       (3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n), 
     and (u) of section 7448, as amended by this Act, are each 
     amended--
       (A) by inserting ``or magistrate judge'' after ``judge'' 
     each place it appears other than in the phrase ``chief 
     judge'', and
       (B) by inserting ``or magistrate judge's'' after 
     ``judge's'' each place it appears.
       (4) Section 7448(c) is amended--
       (A) in paragraph (1), by striking ``Tax Court judges'' and 
     inserting ``Tax Court judicial officers'',
       (B) in paragraph (2)--
       (i) in subparagraph (A), by inserting ``and section 
     7443A(d)'' after ``(a)(4)'', and
       (ii) in subparagraph (B), by striking ``subsection (a)(4)'' 
     and inserting ``subsections (a)(4) and (a)(6)''.
       (5) Section 7448(g) is amended by inserting ``or section 
     7443B'' after ``section 7447'' each place it appears, and by 
     inserting ``or an annuity'' after ``retired pay''.
       (6) Section 7448(j)(1) is amended--
       (A) in subparagraph (A), by striking ``service or retired'' 
     and inserting ``service, retired'', and by inserting ``, or 
     receiving any annuity under section 7443B or chapters 83 or 
     84 of title 5, United States Code,'' after ``section 7447'', 
     and
       (B) in the last sentence, by striking ``subsections (a) (6) 
     and (7)'' and inserting ``paragraphs (8) and (9) of 
     subsection (a)''.
       (7) Section 7448(m)(1), as amended by this Act, is 
     amended--
       (A) by inserting ``or any annuity under section 7443B or 
     chapters 83 or 84 of title 5, United States Code'' after 
     ``7447(d)'', and
       (B) by inserting ``or 7443B(m)(1)(B) after ``7447(f)(4)''.
       (8) Section 7448(n) is amended by inserting ``his years of 
     service pursuant to any appointment under section 7443A,'' 
     after ``of the Tax Court,''.
       (9) Section 3121(b)(5)(E) is amended by inserting ``or 
     magistrate judge'' before ``of the United States Tax Court''.
       (10) Section 210(a)(5)(E) of the Social Security Act is 
     amended by inserting ``or magistrate judge'' before ``of the 
     United States Tax Court''.

     SEC. 1210. RETIREMENT AND ANNUITY PROGRAM.

       (a) Retirement and Annuity Program.--Part I of subchapter C 
     of chapter 76 is amended by inserting after section 7443A the 
     following new section:

     ``SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF THE TAX 
                   COURT.

       ``(a) Retirement Based on Years of Service.--A magistrate 
     judge of the Tax Court to

[[Page 2649]]

     whom this section applies and who retires from office after 
     attaining the age of 65 years and serving at least 14 years, 
     whether continuously or otherwise, as such magistrate judge 
     shall, subject to subsection (f), be entitled to receive, 
     during the remainder of the magistrate judge's lifetime, an 
     annuity equal to the salary being received at the time the 
     magistrate judge leaves office.
       ``(b) Retirement Upon Failure of Reappointment.--A 
     magistrate judge of the Tax Court to whom this section 
     applies who is not reappointed following the expiration of 
     the term of office of such magistrate judge and who retires 
     upon the completion of the term shall, subject to subsection 
     (f), be entitled to receive, upon attaining the age of 65 
     years and during the remainder of such magistrate judge's 
     lifetime, an annuity equal to that portion of the salary 
     being received at the time the magistrate judge leaves office 
     which the aggregate number of years of service, not to exceed 
     14, bears to 14, if--
       ``(1) such magistrate judge has served at least 1 full term 
     as a magistrate judge, and
       ``(2) not earlier than 9 months before the date on which 
     the term of office of such magistrate judge expires, and not 
     later than 6 months before such date, such magistrate judge 
     notified the chief judge of the Tax Court in writing that 
     such magistrate judge was willing to accept reappointment to 
     the position in which such magistrate judge was serving.
       ``(c) Service of at Least 8 Years.--A magistrate judge of 
     the Tax Court to whom this section applies and who retires 
     after serving at least 8 years, whether continuously or 
     otherwise, as such a magistrate judge shall, subject to 
     subsection (f), be entitled to receive, upon attaining the 
     age of 65 years and during the remainder of the magistrate 
     judge's lifetime, an annuity equal to that portion of the 
     salary being received at the time the magistrate judge leaves 
     office which the aggregate number of years of service, not to 
     exceed 14, bears to 14. Such annuity shall be reduced by \1/
     6\ of 1 percent for each full month such magistrate judge was 
     under the age of 65 at the time the magistrate judge left 
     office, except that such reduction shall not exceed 20 
     percent.
       ``(d) Retirement for Disability.--A magistrate judge of the 
     Tax Court to whom this section applies, who has served at 
     least 5 years, whether continuously or otherwise, as such a 
     magistrate judge and who retires or is removed from office 
     upon the sole ground of mental or physical disability shall, 
     subject to subsection (f), be entitled to receive, during the 
     remainder of the magistrate judge's lifetime, an annuity 
     equal to 40 percent of the salary being received at the time 
     of retirement or removal or, in the case of a magistrate 
     judge who has served for at least 10 years, an amount equal 
     to that proportion of the salary being received at the time 
     of retirement or removal which the aggregate number of years 
     of service, not to exceed 14, bears to 14.
       ``(e) Cost-of-Living Adjustments.--A magistrate judge of 
     the Tax Court who is entitled to an annuity under this 
     section is also entitled to a cost-of-living adjustment in 
     such annuity, calculated and payable in the same manner as 
     adjustments under section 8340(b) of title 5, United States 
     Code, except that any such annuity, as increased under this 
     subsection, may not exceed the salary then payable for the 
     position from which the magistrate judge retired or was 
     removed.
       ``(f) Election; Annuity in Lieu of Other Annuities.--
       ``(1) In general.--A magistrate judge of the Tax Court 
     shall be entitled to an annuity under this section if the 
     magistrate judge elects an annuity under this section by 
     notifying the chief judge of the Tax Court not later than the 
     later of--
       ``(A) 5 years after the magistrate judge of the Tax Court 
     begins judicial service, or
       ``(B) 5 years after the date of the enactment of this 
     subsection.
     Such notice shall be given in accordance with procedures 
     prescribed by the Tax Court.
       ``(2) Annuity in lieu of other annuity.--A magistrate judge 
     who elects to receive an annuity under this section shall not 
     be entitled to receive--
       ``(A) any annuity to which such magistrate judge would 
     otherwise have been entitled under subchapter III of chapter 
     83, or under chapter 84 (except for subchapters III and VII), 
     of title 5, United States Code, for service performed as a 
     magistrate or otherwise,
       ``(B) an annuity or salary in senior status or retirement 
     under section 371 or 372 of title 28, United States Code,
       ``(C) retired pay under section 7447, or
       ``(D) retired pay under section 7296 of title 38, United 
     States Code.
       ``(3) Coordination with title 5.--A magistrate judge of the 
     Tax Court who elects to receive an annuity under this 
     section--
       ``(A) shall not be subject to deductions and contributions 
     otherwise required by section 8334(a) of title 5, United 
     States Code,
       ``(B) shall be excluded from the operation of chapter 84 
     (other than subchapters III and VII) of such title 5, and
       ``(C) is entitled to a lump-sum credit under section 
     8342(a) or 8424 of such title 5, as the case may be.
       ``(g) Calculation of Service.--For purposes of calculating 
     an annuity under this section--
       ``(1) service as a magistrate judge of the Tax Court to 
     whom this section applies may be credited, and
       ``(2) each month of service shall be credited as \1/12\ of 
     a year, and the fractional part of any month shall not be 
     credited.
       ``(h) Covered Positions and Service.--This section applies 
     to any magistrate judge of the Tax Court or special trial 
     judge of the Tax Court appointed under this subchapter, but 
     only with respect to service as such a magistrate judge or 
     special trial judge after a date not earlier than 9\1/2\ 
     years before the date of the enactment of this subsection.
       ``(i) Payments Pursuant to Court Order.--
       ``(1) In general.--Payments under this section which would 
     otherwise be made to a magistrate judge of the Tax Court 
     based upon his or her service shall be paid (in whole or in 
     part) by the chief judge of the Tax Court to another person 
     if and to the extent expressly provided for in the terms of 
     any court decree of divorce, annulment, or legal separation, 
     or the terms of any court order or court-approved property 
     settlement agreement incident to any court decree of divorce, 
     annulment, or legal separation. Any payment under this 
     paragraph to a person bars recovery by any other person.
       ``(2) Requirements for payment.--Paragraph (1) shall apply 
     only to payments made by the chief judge of the Tax Court 
     after the date of receipt by the chief judge of written 
     notice of such decree, order, or agreement, and such 
     additional information as the chief judge may prescribe.
       ``(3) Court defined.--For purposes of this subsection, the 
     term `court' means any court of any State, the District of 
     Columbia, the Commonwealth of Puerto Rico, Guam, the Northern 
     Mariana Islands, or the Virgin Islands, and any Indian tribal 
     court or courts of Indian offense.
       ``(j) Deductions, Contributions, and Deposits.--
       ``(1) Deductions.--Beginning with the next pay period after 
     the chief judge of the Tax Court receives a notice under 
     subsection (f) that a magistrate judge of the Tax Court has 
     elected an annuity under this section, the chief judge shall 
     deduct and withhold 1 percent of the salary of such 
     magistrate judge. Amounts shall be so deducted and withheld 
     in a manner determined by the chief judge. Amounts deducted 
     and withheld under this subsection shall be deposited in the 
     Treasury of the United States to the credit of the Tax Court 
     Judicial Officers' Retirement Fund. Deductions under this 
     subsection from the salary of a magistrate judge shall 
     terminate upon the retirement of the magistrate judge or upon 
     completion of 14 years of service for which contributions 
     under this section have been made, whether continuously or 
     otherwise, as calculated under subsection (g), whichever 
     occurs first.
       ``(2) Consent to deductions; discharge of claims.--Each 
     magistrate judge of the Tax Court who makes an election under 
     subsection (f) shall be deemed to consent and agree to the 
     deductions from salary which are made under paragraph (1). 
     Payment of such salary less such deductions (and any 
     deductions made under section 7448) is a full and complete 
     discharge and acquittance of all claims and demands for all 
     services rendered by such magistrate judge during the period 
     covered by such payment, except the right to those benefits 
     to which the magistrate judge is entitled under this section 
     (and section 7448).
       ``(k) Deposits for Prior Service.--Each magistrate judge of 
     the Tax Court who makes an election under subsection (f) may 
     deposit, for service performed before such election for which 
     contributions may be made under this section, an amount equal 
     to 1 percent of the salary received for that service. Credit 
     for any period covered by that service may not be allowed for 
     purposes of an annuity under this section until a deposit 
     under this subsection has been made for that period.
       ``(l) Individual Retirement Records.--The amounts deducted 
     and withheld under subsection (j), and the amounts deposited 
     under subsection (k), shall be credited to individual 
     accounts in the name of each magistrate judge of the Tax 
     Court from whom such amounts are received, for credit to the 
     Tax Court Judicial Officers' Retirement Fund.
       ``(m) Annuities Affected in Certain Cases.--
       ``(1) 1-year forfeiture for failure to perform judicial 
     duties.--Subject to paragraph (3), any magistrate judge of 
     the Tax Court who retires under this section and who fails to 
     perform judicial duties required of such individual by 
     section 7443C shall forfeit all rights to an annuity under 
     this section for a 1-year period which begins on the 1st day 
     on which such individual fails to perform such duties.
       ``(2) Permanent forfeiture of retired pay where certain 
     non-government services performed.--Subject to paragraph (3), 
     any magistrate judge of the Tax Court who retires under this 
     section and who thereafter performs (or supervises or directs 
     the performance of) legal or accounting services in the field 
     of Federal taxation for the individual's client, the 
     individual's employer, or any of such employer's clients, 
     shall forfeit all rights to an annuity under this section

[[Page 2650]]

     for all periods beginning on or after the first day on which 
     the individual performs (or supervises or directs the 
     performance of) such services. The preceding sentence shall 
     not apply to any civil office or employment under the 
     Government of the United States.
       ``(3) Forfeitures not to apply where individual elects to 
     freeze amount of annuity.--
       ``(A) In general.--If a magistrate judge of the Tax Court 
     makes an election under this paragraph--
       ``(i) paragraphs (1) and (2) (and section 7443C) shall not 
     apply to such magistrate judge beginning on the date such 
     election takes effect, and
       ``(ii) the annuity payable under this section to such 
     magistrate judge, for periods beginning on or after the date 
     such election takes effect, shall be equal to the annuity to 
     which such magistrate judge is entitled on the day before 
     such effective date.
       ``(B) Election requirements.--An election under 
     subparagraph (A)--
       ``(i) may be made by a magistrate judge of the Tax Court 
     eligible for retirement under this section, and
       ``(ii) shall be filed with the chief judge of the Tax 
     Court.
     Such an election, once it takes effect, shall be irrevocable.
       ``(C) Effective date of election.--Any election under 
     subparagraph (A) shall take effect on the first day of the 
     first month following the month in which the election is 
     made.
       ``(4) Accepting other employment.--Any magistrate judge of 
     the Tax Court who retires under this section and thereafter 
     accepts compensation for civil office or employment under the 
     United States Government (other than for the performance of 
     functions as a magistrate judge of the Tax Court under 
     section 7443C) shall forfeit all rights to an annuity under 
     this section for the period for which such compensation is 
     received. For purposes of this paragraph, the term 
     `compensation' includes retired pay or salary received in 
     retired status.
       ``(n) Lump-Sum Payments.--
       ``(1) Eligibility.--
       ``(A) In general.--Subject to paragraph (2), an individual 
     who serves as a magistrate judge of the Tax Court and--
       ``(i) who leaves office and is not reappointed as a 
     magistrate judge of the Tax Court for at least 31 consecutive 
     days,
       ``(ii) who files an application with the chief judge of the 
     Tax Court for payment of a lump-sum credit,
       ``(iii) is not serving as a magistrate judge of the Tax 
     Court at the time of filing of the application, and
       ``(iv) will not become eligible to receive an annuity under 
     this section within 31 days after filing the application,

     is entitled to be paid the lump-sum credit. Payment of the 
     lump-sum credit voids all rights to an annuity under this 
     section based on the service on which the lump-sum credit is 
     based, until that individual resumes office as a magistrate 
     judge of the Tax Court.
       ``(B) Payment to survivors.--Lump-sum benefits authorized 
     by subparagraphs (C), (D), and (E) of this paragraph shall be 
     paid to the person or persons surviving the magistrate judge 
     of the Tax Court and alive on the date title to the payment 
     arises, in the order of precedence set forth in subsection 
     (o) of section 376 of title 28, United States Code, and in 
     accordance with the last 2 sentences of paragraph (1) of that 
     subsection. For purposes of the preceding sentence, the term 
     `judicial official' as used in subsection (o) of such section 
     376 shall be deemed to mean `magistrate judge of the Tax 
     Court' and the terms `Administrative Office of the United 
     States Courts' and `Director of the Administrative Office of 
     the United States Courts' shall be deemed to mean `chief 
     judge of the Tax Court'.
       ``(C) Payment upon death of judge before receipt of 
     annuity.--If a magistrate judge of the Tax Court dies before 
     receiving an annuity under this section, the lump-sum credit 
     shall be paid.
       ``(D) Payment of annuity remainder.--If all annuity rights 
     under this section based on the service of a deceased 
     magistrate judge of the Tax Court terminate before the total 
     annuity paid equals the lump-sum credit, the difference shall 
     be paid.
       ``(E) Payment upon death of judge during receipt of 
     annuity.--If a magistrate judge of the Tax Court who is 
     receiving an annuity under this section dies, any accrued 
     annuity benefits remaining unpaid shall be paid.
       ``(F) Payment upon termination.--Any accrued annuity 
     benefits remaining unpaid on the termination, except by 
     death, of the annuity of a magistrate judge of the Tax Court 
     shall be paid to that individual.
       ``(G) Payment upon accepting other employment.--Subject to 
     paragraph (2), a magistrate judge of the Tax Court who 
     forfeits rights to an annuity under subsection (m)(4) before 
     the total annuity paid equals the lump-sum credit shall be 
     entitled to be paid the difference if the magistrate judge of 
     the Tax Court files an application with the chief judge of 
     the Tax Court for payment of that difference. A payment under 
     this subparagraph voids all rights to an annuity on which the 
     payment is based.
       ``(2) Spouses and former spouses.--
       ``(A) In general.--Payment of the lump-sum credit under 
     paragraph (1)(A) or a payment under paragraph (1)(G)--
       ``(i) may be made only if any current spouse and any former 
     spouse of the magistrate judge of the Tax Court are notified 
     of the magistrate judge's application, and
       ``(ii) shall be subject to the terms of a court decree of 
     divorce, annulment, or legal separation, or any court or 
     court approved property settlement agreement incident to such 
     decree, if--

       ``(I) the decree, order, or agreement expressly relates to 
     any portion of the lump-sum credit or other payment involved, 
     and
       ``(II) payment of the lump-sum credit or other payment 
     would extinguish entitlement of the magistrate judge's spouse 
     or former spouse to any portion of an annuity under 
     subsection (i).

       ``(B) Notification.--Notification of a spouse or former 
     spouse under this paragraph shall be made in accordance with 
     such procedures as the chief judge of the Tax Court shall 
     prescribe. The chief judge may provide under such procedures 
     that subparagraph (A)(i) may be waived with respect to a 
     spouse or former spouse if the magistrate judge establishes 
     to the satisfaction of the chief judge that the whereabouts 
     of such spouse or former spouse cannot be determined.
       ``(C) Resolution of 2 or more orders.--The chief judge 
     shall prescribe procedures under which this paragraph shall 
     be applied in any case in which the chief judge receives 2 or 
     more orders or decrees described in subparagraph (A).
       ``(3) Definition.--For purposes of this subsection, the 
     term `lump-sum credit' means the unrefunded amount consisting 
     of--
       ``(A) retirement deductions made under this section from 
     the salary of a magistrate judge of the Tax Court,
       ``(B) amounts deposited under subsection (k) by a 
     magistrate judge of the Tax Court covering earlier service, 
     and
       ``(C) interest on the deductions and deposits which, for 
     any calendar year, shall be equal to the overall average 
     yield to the Tax Court Judicial Officers' Retirement Fund 
     during the preceding fiscal year from all obligations 
     purchased by the Secretary during such fiscal year under 
     subsection (o); but does not include interest--
       ``(i) if the service covered thereby aggregates 1 year or 
     less, or
       ``(ii) for the fractional part of a month in the total 
     service.
       ``(o) Tax Court Judicial Officers' Retirement Fund.--
       ``(1) Establishment.--There is established in the Treasury 
     a fund which shall be known as the `Tax Court Judicial 
     Officers' Retirement Fund'. Amounts in the Fund are 
     authorized to be appropriated for the payment of annuities, 
     refunds, and other payments under this section.
       ``(2) Investment of fund.--The Secretary shall invest, in 
     interest bearing securities of the United States, such 
     currently available portions of the Tax Court Judicial 
     Officers' Retirement Fund as are not immediately required for 
     payments from the Fund. The income derived from these 
     investments constitutes a part of the Fund.
       ``(3) Unfunded liability.--
       ``(A) In general.--There are authorized to be appropriated 
     to the Tax Court Judicial Officers' Retirement Fund amounts 
     required to reduce to zero the unfunded liability of the 
     Fund.
       ``(B) Unfunded liability.--For purposes of subparagraph 
     (A), the term `unfunded liability' means the estimated 
     excess, determined on an annual basis in accordance with the 
     provisions of section 9503 of title 31, United States Code, 
     of the present value of all benefits payable from the Tax 
     Court Judicial Officers' Retirement Fund over the sum of--
       ``(i) the present value of deductions to be withheld under 
     this section from the future basic pay of magistrate judges 
     of the Tax Court, plus
       ``(ii) the balance in the Fund as of the date the unfunded 
     liability is determined.
       ``(p) Participation in Thrift Savings Plan.--
       ``(1) Election to contribute.--
       ``(A) In general.--A magistrate judge of the Tax Court who 
     elects to receive an annuity under this section or under 
     section 611 of the Pension Security and Transparency Act of 
     2005 may elect to contribute an amount of such individual's 
     basic pay to the Thrift Savings Fund established by section 
     8437 of title 5, United States Code.
       ``(B) Period of election.--An election may be made under 
     this paragraph only during a period provided under section 
     8432(b) of title 5, United States Code, for individuals 
     subject to chapter 84 of such title.
       ``(2) Applicability of title 5 provisions.--Except as 
     otherwise provided in this subsection, the provisions of 
     subchapters III and VII of chapter 84 of title 5, United 
     States Code, shall apply with respect to a magistrate judge 
     who makes an election under paragraph (1).
       ``(3) Special rules.--
       ``(A) Amount contributed.--The amount contributed by a 
     magistrate judge to the Thrift Savings Fund in any pay period 
     shall not exceed the maximum percentage of such judge's basic 
     pay for such pay period as allowable under section 8440f of 
     title 5, United States Code.
       ``(B) Contributions for benefit of judge.--No contributions 
     may be made for

[[Page 2651]]

     the benefit of a magistrate judge under section 8432(c) of 
     title 5, United States Code.
       ``(C) Applicability of section 8433(b) of title 5.--Section 
     8433(b) of title 5, United States Code, applies with respect 
     to a magistrate judge who makes an election under paragraph 
     (1) and--
       ``(i) who retires entitled to an immediate annuity under 
     this section (including a disability annuity under subsection 
     (d) of this section) or section 611 of the Pension Security 
     and Transparency Act of 2005,
       ``(ii) who retires before attaining age 65 but is entitled, 
     upon attaining age 65, to an annuity under this section or 
     section 611 of the Pension Security and Transparency Act of 
     2005, or
       ``(iii) who retires before becoming entitled to an 
     immediate annuity, or an annuity upon attaining age 65, under 
     this section or section 611 of the Pension Security and 
     Transparency Act of 2005.
       ``(D) Separation from service.--With respect to a 
     magistrate judge to whom this subsection applies, retirement 
     under this section or section 611 of the Pension Security and 
     Transparency Act of 2005 is a separation from service for 
     purposes of subchapters III and VII of chapter 84 of title 5, 
     United States Code.
       ``(4) Definitions.--For purposes of this subsection, the 
     terms `retirement' and `retire' include removal from office 
     under section 7443A(a)(2) on the sole ground of mental or 
     physical disability.
       ``(5) Offset.--In the case of a magistrate judge who 
     receives a distribution from the Thrift Savings Fund and who 
     later receives an annuity under this section, that annuity 
     shall be offset by an amount equal to the amount which 
     represents the Government's contribution to that person's 
     Thrift Savings Account, without regard to earnings 
     attributable to that amount. Where such an offset would 
     exceed 50 percent of the annuity to be received in the first 
     year, the offset may be divided equally over the first 2 
     years in which that person receives the annuity.
       ``(6) Exception.--Notwithstanding clauses (i) and (ii) of 
     paragraph (3)(C), if any magistrate judge retires under 
     circumstances making such magistrate judge eligible to make 
     an election under subsection (b) of section 8433 of title 5, 
     United States Code, and such magistrate judge's 
     nonforfeitable account balance is less than an amount that 
     the Executive Director of the Office of Personnel Management 
     prescribes by regulation, the Executive Director shall pay 
     the nonforfeitable account balance to the participant in a 
     single payment.''.
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter C of chapter 76 is amended by inserting after 
     the item relating to section 7443A the following new item:

``Sec. 7443B. Retirement for magistrate judges of the Tax Court.''.

     SEC. 1211. INCUMBENT MAGISTRATE JUDGES OF THE TAX COURT.

       (a) Retirement Annuity Under Title 5 and Section 7443B of 
     the Internal Revenue Code of 1986.--A magistrate judge of the 
     United States Tax Court in active service on the date of the 
     enactment of this Act shall, subject to subsection (b), be 
     entitled, in lieu of the annuity otherwise provided under the 
     amendments made by this title, to--
       (1) an annuity under subchapter III of chapter 83, or under 
     chapter 84 (except for subchapters III and VII), of title 5, 
     United States Code, as the case may be, for creditable 
     service before the date on which service would begin to be 
     credited for purposes of paragraph (2), and
       (2) an annuity calculated under subsection (b) or (c) and 
     subsection (g) of section 7443B of the Internal Revenue Code 
     of 1986, as added by this Act, for any service as a 
     magistrate judge of the United States Tax Court or special 
     trial judge of the United States Tax Court but only with 
     respect to service as such a magistrate judge or special 
     trial judge after a date not earlier than 9\1/2\ years prior 
     to the date of the enactment of this Act (as specified in the 
     election pursuant to subsection (b)) for which deductions and 
     deposits are made under subsections (j) and (k) of such 
     section 7443B, as applicable, without regard to the minimum 
     number of years of service as such a magistrate judge of the 
     United States Tax Court, except that--
       (A) in the case of a magistrate judge who retired with less 
     than 8 years of service, the annuity under subsection (c) of 
     such section 7443B shall be equal to that proportion of the 
     salary being received at the time the magistrate judge leaves 
     office which the years of service bears to 14, subject to a 
     reduction in accordance with subsection (c) of such section 
     7443B if the magistrate judge is under age 65 at the time he 
     or she leaves office, and
       (B) the aggregate amount of the annuity initially payable 
     on retirement under this subsection may not exceed the rate 
     of pay for the magistrate judge which is in effect on the day 
     before the retirement becomes effective.
       (b) Filing of Notice of Election.--A magistrate judge of 
     the United States Tax Court shall be entitled to an annuity 
     under this section only if the magistrate judge files a 
     notice of that election with the chief judge of the United 
     States Tax Court specifying the date on which service would 
     begin to be credited under section 7443B of the Internal 
     Revenue Code of 1986, as added by this Act, in lieu of 
     chapter 83 or chapter 84 of title 5, United States Code. Such 
     notice shall be filed in accordance with such procedures as 
     the chief judge of the United States Tax Court shall 
     prescribe.
       (c) Lump-Sum Credit Under Title 5.--A magistrate judge of 
     the United States Tax Court who makes an election under 
     subsection (b) shall be entitled to a lump-sum credit under 
     section 8342 or 8424 of title 5, United States Code, as the 
     case may be, for any service which is covered under section 
     7443B of the Internal Revenue Code of 1986, as added by this 
     Act, pursuant to that election, and with respect to which any 
     contributions were made by the magistrate judge under the 
     applicable provisions of title 5, United States Code.
       (d) Recall.--With respect to any magistrate judge of the 
     United States Tax Court receiving an annuity under this 
     section who is recalled to serve under section 7443C of the 
     Internal Revenue Code of 1986, as added by this Act--
       (1) the amount of compensation which such recalled 
     magistrate judge receives under such section 7443C shall be 
     calculated on the basis of the annuity received under this 
     section, and
       (2) such recalled magistrate judge of the United States Tax 
     Court may serve as a reemployed annuitant to the extent 
     otherwise permitted under title 5, United States Code.
     Section 7443B(m)(4) of the Internal Revenue Code of 1986, as 
     added by this Act, shall not apply with respect to service as 
     a reemployed annuitant described in paragraph (2).

     SEC. 1212. PROVISIONS FOR RECALL.

       (a) In General.--Part I of subchapter C of chapter 76, as 
     amended by this Act, is amended by inserting after section 
     7443B the following new section:

     ``SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX COURT.

       ``(a) Recalling of Retired Magistrate Judges.--Any 
     individual who has retired pursuant to section 7443B or the 
     applicable provisions of title 5, United States Code, upon 
     reaching the age and service requirements established 
     therein, may at or after retirement be called upon by the 
     chief judge of the Tax Court to perform such judicial duties 
     with the Tax Court as may be requested of such individual for 
     any period or periods specified by the chief judge; except 
     that in the case of any such individual--
       ``(1) the aggregate of such periods in any 1 calendar year 
     shall not (without such individual's consent) exceed 90 
     calendar days, and
       ``(2) such individual shall be relieved of performing such 
     duties during any period in which illness or disability 
     precludes the performance of such duties.

     Any act, or failure to act, by an individual performing 
     judicial duties pursuant to this subsection shall have the 
     same force and effect as if it were the act (or failure to 
     act) of a magistrate judge of the Tax Court.
       ``(b) Compensation.--For the year in which a period of 
     recall occurs, the magistrate judge shall receive, in 
     addition to the annuity provided under the provisions of 
     section 7443B or under the applicable provisions of title 5, 
     United States Code, an amount equal to the difference between 
     that annuity and the current salary of the office to which 
     the magistrate judge is recalled. The annuity of the 
     magistrate judge who completes that period of service, who is 
     not recalled in a subsequent year, and who retired under 
     section 7443B, shall be equal to the salary in effect at the 
     end of the year in which the period of recall occurred for 
     the office from which such individual retired.
       ``(c) Rulemaking Authority.--The provisions of this section 
     may be implemented under such rules as may be promulgated by 
     the Tax Court.''
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter C of chapter 76, as amended by this Act, is 
     amended by inserting after the item relating to section 7443B 
     the following new item:

``Sec. 7443C. Recall of magistrate judges of the Tax Court.''.

     SEC. 1213. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     subtitle shall take effect on the date of the enactment of 
     this Act.

                      TITLE XIII--OTHER PROVISIONS

                  Subtitle A--Administrative Provision

     SEC. 1301. PROVISIONS RELATING TO PLAN AMENDMENTS.

       (a) In General.--If this section applies to any plan or 
     contract amendment--
       (1) such plan or contract shall be treated as being 
     operated in accordance with the terms of the plan during the 
     period described in subsection (b)(2)(A), and
       (2) except as provided by the Secretary of the Treasury, 
     such plan shall not fail to meet the requirements of section 
     411(d)(6) of the Internal Revenue Code of 1986 and section 
     204(g) of the Employee Retirement Income Security Act of 1974 
     by reason of such amendment.
       (b) Amendments to Which Section Applies.--
       (1) In general.--This section shall apply to any amendment 
     to any plan or annuity contract which is made--
       (A) pursuant to any amendment made by this Act or the 
     Economic Growth and Tax Relief Reconciliation Act of 2001, or 
     pursuant

[[Page 2652]]

     to any regulation issued by the Secretary of the Treasury or 
     the Secretary of Labor under such Acts, and
       (B) on or before the last day of the first plan year 
     beginning on or after January 1, 2007, or such later date as 
     the Secretary of the Treasury may prescribe.

     In the case of a governmental plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), subparagraph 
     (B) shall be applied by substituting the date which is 2 
     years after the date otherwise applied under subparagraph 
     (B).
       (2) Conditions.--This section shall not apply to any 
     amendment unless--
       (A) during the period--
       (i) beginning on the date the legislative or regulatory 
     amendment described in paragraph (1)(A) takes effect (or in 
     the case of a plan or contract amendment not required by such 
     legislative or regulatory amendment, the effective date 
     specified by the plan), and
       (ii) ending on the date described in paragraph (1)(B) (or, 
     if earlier, the date the plan or contract amendment is 
     adopted),

     the plan or contract is operated as if such plan or contract 
     amendment were in effect; and
       (B) such plan or contract amendment applies retroactively 
     for such period.

     SEC. 1302. AUTHORITY TO THE SECRETARY OF LABOR, SECRETARY OF 
                   THE TREASURY, AND THE PENSION BENEFIT GUARANTY 
                   CORPORATION TO POSTPONE CERTAIN DEADLINES.

       The Secretary of Labor, the Secretary of the Treasury, and 
     the Executive Director of the Pension Benefit Guaranty 
     Corporation shall exercise their authority under section 518 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1148) and section 7508A of the Internal Revenue Code 
     of 1986 to postpone certain deadlines by reason of the 
     Presidentially declared disaster areas in Louisiana, 
     Mississippi, Alabama, Texas, Florida, or elsewhere, due to 
     the effect of Hurricane Katrina, Rita, or Wilma. The 
     Secretaries and the Executive Director of the Corporation 
     shall issue guidance as soon as is practicable to plan 
     sponsors and participants regarding extension of deadlines 
     and rules applicable to these extraordinary circumstances. 
     Nothing in this section shall be construed to relieve any 
     plan sponsor from any requirement to pay benefits or make 
     contributions under the plan of the sponsor.

           Subtitle B--Governmental Pension Plan Equalization

     SEC. 1311. DEFINITION OF GOVERNMENTAL PLAN.

       (a) Amendment to Internal Revenue Code of 1986.--Section 
     414(d) of the Internal Revenue Code of 1986 (definition of 
     governmental plan) is amended by adding at the end the 
     following: ``The term `governmental plan' includes a plan 
     established or maintained for its employees by an Indian 
     tribal government (as defined in section 7701(a)(40)), a 
     subdivision of an Indian tribal government (determined in 
     accordance with section 7871(d)), an agency instrumentality 
     (or subdivision) of an Indian tribal government, or an entity 
     established under Federal, State, or tribal law which is 
     wholly owned or controlled by any of the foregoing.''.
       (b) Amendment to Employee Retirement Income Security Act of 
     1974.--Section 3(32) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1002(32)) is amended by 
     adding at the end the following: ``The term `governmental 
     plan' includes a plan established or maintained for its 
     employees by an Indian tribal government (as defined in 
     section 7701(a)(40)), a subdivision of an Indian tribal 
     government (determined in accordance with section 7871(d)), 
     an agency instrumentality (or subdivision) of an Indian 
     tribal government, or an entity established under Federal, 
     State, or tribal law that is wholly owned or controlled by 
     any of the foregoing.''.

     SEC. 1312. EXTENSION TO ALL GOVERNMENTAL PLANS OF CURRENT 
                   MORATORIUM ON APPLICATION OF CERTAIN 
                   NONDISCRIMINATION RULES APPLICABLE TO STATE AND 
                   LOCAL PLANS.

       (a) In General.--
       (1) Subparagraph (G) of section 401(a)(5) and subparagraph 
     (G) of section 401(a)(26) of the Internal Revenue Code of 
     1986 are each amended by striking ``section 414(d))'' and all 
     that follows and inserting ``section 414(d)).''.
       (2) Subparagraph (G) of section 401(k)(3) of such Code and 
     paragraph (2) of section 1505(d) of the Taxpayer Relief Act 
     of 1997 (Public Law 105-34; 111 Stat. 1063) are each amended 
     by striking ``maintained by a State or local government or 
     political subdivision thereof (or agency or instrumentality 
     thereof)''.
       (b) Conforming Amendments.--
       (1) The heading of subparagraph (G) of section 401(a)(5) of 
     the Internal Revenue Code of 1986 is amended by striking 
     ``State and local governmental'' and inserting 
     ``Governmental''.
       (2) The heading of subparagraph (G) of section 401(a)(26) 
     of such Code is amended by striking ``Exception for state and 
     local'' and inserting ``Exception for''.
       (3) Section 401(k)(3)(G) of such Code is amended by 
     inserting ``Governmental plan.--'' after ``(G)''.

     SEC. 1313. CLARIFICATION THAT TRIBAL GOVERNMENTS ARE SUBJECT 
                   TO THE SAME DEFINED BENEFIT PLAN RULES AND 
                   REGULATIONS APPLIED TO STATE AND OTHER LOCAL 
                   GOVERNMENTS, THEIR POLICE AND FIREFIGHTERS.

       (a) Amendments to Internal Revenue Code of 1986.--
       (1) Police and firefighters.--Subparagraph (H) section 
     415(b)(2) of the Internal Revenue Code of 1986 (defining 
     participant) is amended--
       (A) in clause (i), by striking ``State or political 
     subdivision'' and inserting ``State, Indian tribal government 
     (as defined in section 7701(a)(40)), or any political 
     subdivision''; and
       (B) in clause (ii)(I), by striking ``State or political 
     subdivision'' each place it appears and inserting ``State, 
     Indian tribal government (as so defined), or any political 
     subdivision''.
       (2) State and local government plans.--
       (A) In general.--Subparagraph (A) of section 415(b)(10) of 
     such Code (relating to limitation to equal accrued benefit) 
     is amended--
       (i) by inserting ``, Indian tribal government (as defined 
     in section 7701(a)(40)),'' after ``State'';
       (ii) by inserting ``any'' before ``political subdivision''; 
     and
       (iii) by inserting ``any of'' before ``the foregoing''.
       (B) Conforming amendment.--The heading of paragraph (1) of 
     section 415(b) of such Code is amended by striking ``Special 
     rule for state and'' and inserting ``Special rule for state, 
     indian tribal, and''.
       (3) Government pick up contributions.--Paragraph (2) of 
     section 414(h) of such Code (relating to designation by units 
     of government) is amended by striking ``State or political 
     subdivision'' and inserting ``State, Indian tribal government 
     (as defined in section 7701(a)(40)), or any political 
     subdivision''.
       (b) Amendments to Employee Retirement Income Security Act 
     of 1974.--Section 4021(b) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1321(b)) is amended--
       (1) in paragraph (12), by striking ``or'' at the end;
       (2) in paragraph (13), by striking ``plan.'' and inserting 
     ``plan; or''; and
       (3) by adding at the end the following:
       ``(14) established and maintained for its employees by an 
     Indian tribal government (as defined in section 7701(a)(40) 
     of the Internal Revenue Code of 1986), a subdivision of an 
     Indian tribal government (determined in accordance with 
     section 7871(d) of such Code), an agency or instrumentality 
     of an Indian tribal government or subdivision thereof, or an 
     entity established under Federal, State, or tribal law that 
     is wholly owned or controlled by any of the foregoing.''.

     SEC. 1314. EFFECTIVE DATE.

       The amendments made by this subtitle shall apply to any 
     year beginning before, on, or after the date of the enactment 
     of this Act.

                  Subtitle C--Miscellaneous Provisions

     SEC. 1321. TRANSFER OF EXCESS FUNDS FROM BLACK LUNG 
                   DISABILITY TRUSTS TO UNITED MINE WORKERS OF 
                   AMERICA COMBINED BENEFIT FUND.

       (a) In General.--So much of section 501(c)(21)(C) of the 
     Internal Revenue Code of 1986 (relating to black lung 
     disability trusts) as precedes the last sentence is amended 
     to read as follows:
       ``(C) Payments described in subparagraph (A)(i)(IV) may be 
     made from such trust during a taxable year only to the extent 
     that the aggregate amount of such payments during such 
     taxable year does not exceed the excess (if any), as of the 
     close of the preceding taxable year, of--
       ``(i) the fair market value of the assets of the trust, 
     over
       ``(ii) 110 percent of the present value of the liability 
     described in subparagraph (A)(i)(I) of such person.''
       (b) Transfer.--Section 9705 of such Code (relating to 
     transfer) is amended by adding at the end the following new 
     subsection:
       ``(c) Transfer From Black Lung Disability Trusts.--
       ``(1) In general.--The Secretary shall transfer each fiscal 
     year to the Fund from the general fund of the Treasury an 
     amount which the Secretary estimates to be the additional 
     amounts received in the Treasury for that fiscal year by 
     reason of the amendment made by section 1321(a) of the 
     Pension Security and Transparency Act of 2005. The Secretary 
     shall adjust the amount transferred for any year to the 
     extent necessary to correct errors in any estimate for any 
     prior year.
       ``(2) Use of funds.--Any amount transferred to the Combined 
     Fund under paragraph (1) shall be used to proportionately 
     reduce the unassigned beneficiary premium under section 
     9704(a)(3) of each assigned operator for any plan year 
     beginning after December 31, 2002.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 1322. TREATMENT OF DEATH BENEFITS FROM CORPORATE-OWNED 
                   LIFE INSURANCE.

       (a) In General.--Section 101 of the Internal Revenue Code 
     of 1986 (relating to certain death benefits) is amended by 
     adding at the end the following new subsection:
       ``(j) Treatment of Certain Employer-Owned Life Insurance 
     Contracts.--
       ``(1) General rule.--In the case of an employer-owned life 
     insurance contract, the

[[Page 2653]]

     amount excluded from gross income of an applicable 
     policyholder by reason of paragraph (1) of subsection (a) 
     shall not exceed an amount equal to the sum of the premiums 
     and other amounts paid by the policyholder for the contract.
       ``(2) Exceptions.--In the case of an employer-owned life 
     insurance contract with respect to which the notice and 
     consent requirements of paragraph (4) are met, paragraph (1) 
     shall not apply to any of the following:
       ``(A) Exceptions based on insured's status.--Any amount 
     received by reason of the death of an insured who, with 
     respect to an applicable policyholder--
       ``(i) was an employee at any time during the 12-month 
     period before the insured's death, or
       ``(ii) is, at the time the contract is issued--

       ``(I) a director,
       ``(II) a highly compensated employee within the meaning of 
     section 414(q) (without regard to paragraph (1)(B)(ii) 
     thereof), or
       ``(III) a highly compensated individual within the meaning 
     of section 105(h)(5), except that `35 percent' shall be 
     substituted for `25 percent' in subparagraph (C) thereof.

       ``(B) Exception for amounts paid to insured's heirs.--Any 
     amount received by reason of the death of an insured to the 
     extent--
       ``(i) the amount is paid to a member of the family (within 
     the meaning of section 267(c)(4)) of the insured, any 
     individual who is the designated beneficiary of the insured 
     under the contract (other than the applicable policyholder), 
     a trust established for the benefit of any such member of the 
     family or designated beneficiary, or the estate of the 
     insured, or
       ``(ii) the amount is used to purchase an equity (or capital 
     or profits) interest in the applicable policyholder from any 
     person described in clause (i).
       ``(3) Employer-owned life insurance contract.--
       ``(A) In general.--For purposes of this subsection, the 
     term `employer-owned life insurance contract' means a life 
     insurance contract which--
       ``(i) is owned by a person engaged in a trade or business 
     and under which such person (or a related person described in 
     subparagraph (B)(ii)) is directly or indirectly a beneficiary 
     under the contract, and
       ``(ii) covers the life of an insured who is an employee 
     with respect to the trade or business of the applicable 
     policyholder on the date the contract is issued.

     For purposes of the preceding sentence, if coverage for each 
     insured under a master contract is treated as a separate 
     contract for purposes of sections 817(h), 7702, and 7702A, 
     coverage for each such insured shall be treated as a separate 
     contract.
       ``(B) Applicable policyholder.--For purposes of this 
     subsection--
       ``(i) In general.--The term `applicable policyholder' 
     means, with respect to any employer-owned life insurance 
     contract, the person described in subparagraph (A)(i) which 
     owns the contract.
       ``(ii) Related persons.--The term `applicable policyholder' 
     includes any person which--

       ``(I) bears a relationship to the person described in 
     clause (i) which is specified in section 267(b) or 707(b)(1), 
     or
       ``(II) is engaged in trades or businesses with such person 
     which are under common control (within the meaning of 
     subsection (a) or (b) of section 52).

       ``(4) Notice and consent requirements.--The notice and 
     consent requirements of this paragraph are met if, before the 
     issuance of the contract, the employee--
       ``(A) is notified in writing that the applicable 
     policyholder intends to insure the employee's life and the 
     maximum face amount for which the employee could be insured 
     at the time the contract was issued,
       ``(B) provides written consent to being insured under the 
     contract and that such coverage may continue after the 
     insured terminates employment, and
       ``(C) is informed in writing that an applicable 
     policyholder will be a beneficiary of any proceeds payable 
     upon the death of the employee.
       ``(5) Definitions.--For purposes of this subsection--
       ``(A) Employee.--The term `employee' includes an officer, 
     director, and highly compensated employee (within the meaning 
     of section 414(q)).
       ``(B) Insured.--The term `insured' means, with respect to 
     an employer-owned life insurance contract, an individual 
     covered by the contract who is a United States citizen or 
     resident. In the case of a contract covering the joint lives 
     of 2 individuals, references to an insured include both of 
     the individuals.''.
       (b) Reporting Requirements.--Subpart A of part III of 
     subchapter A of chapter 61 of the Internal Revenue Code of 
     1986 (relating to information concerning persons subject to 
     special provisions) is amended by inserting after section 
     6039H the following new section:

     ``SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO EMPLOYER-
                   OWNED LIFE INSURANCE CONTRACTS.

       ``(a) In General.--Every applicable policyholder owning 1 
     or more employer-owned life insurance contracts issued after 
     the date of the enactment of this section shall file a return 
     (at such time and in such manner as the Secretary shall by 
     regulations prescribe) showing for each year such contracts 
     are owned--
       ``(1) the number of employees of the applicable 
     policyholder at the end of the year,
       ``(2) the number of such employees insured under such 
     contracts at the end of the year,
       ``(3) the total amount of insurance in force at the end of 
     the year under such contracts,
       ``(4) the name, address, and taxpayer identification number 
     of the applicable policyholder and the type of business in 
     which the policyholder is engaged, and
       ``(5) that the applicable policyholder has a valid consent 
     for each insured employee (or, if all such consents are not 
     obtained, the number of insured employees for whom such 
     consent was not obtained).
       ``(b) Recordkeeping Requirement.--Each applicable 
     policyholder owning 1 or more employer-owned life insurance 
     contracts during any year shall keep such records as may be 
     necessary for purposes of determining whether the 
     requirements of this section and section 101(j) are met.
       ``(c) Definitions.--Any term used in this section which is 
     used in section 101(j) shall have the same meaning given such 
     term by section 101(j).''.
       (c) Conforming Amendments.--
       (1) Paragraph (1) of section 101(a) of the Internal Revenue 
     Code of 1986 is amended by striking ``and subsection (f)'' 
     and inserting ``subsection (f), and subsection (j)''.
       (2) The table of sections for subpart A of part III of 
     subchapter A of chapter 61 of such Code is amended by 
     inserting after the item relating to section 6039H the 
     following new item:

``Sec. 6039I. Returns and records with respect to employer-owned life 
              insurance contracts.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to life insurance contracts issued after the date 
     of the enactment of this Act, except for a contract issued 
     after such date pursuant to an exchange described in section 
     1035 of the Internal Revenue Code of 1986 for a contract 
     issued on or prior to that date. For purposes of the 
     preceding sentence, any material increase in the death 
     benefit or other material change shall cause the contract to 
     be treated as a new contract except that, in the case of a 
     master contract (within the meaning of section 264(f)(4)(E) 
     of such Code), the addition of covered lives shall be treated 
     as a new contract only with respect to such additional 
     covered lives.

              Subtitle D--Other Related Pension Provisions

                  PART I--HEALTH AND MEDICAL BENEFITS

     SEC. 1331. USE OF EXCESS PENSION ASSETS FOR FUTURE RETIREE 
                   HEALTH BENEFITS.

       (a) In General.--Section 420 of the Internal Revenue Code 
     of 1986 (relating to transfers of excess pension assets to 
     retiree health accounts), as amended by this Act, is amended 
     by adding at the end the following new subsection:
       ``(f) Qualified Transfer To Cover Future Retiree Health 
     Costs.--
       ``(1) In general.--An employer maintaining a defined 
     benefit plan (other than a multiemployer plan) may elect for 
     any taxable year to have the plan make a qualified future 
     transfer rather than a qualified transfer for the taxable 
     year. Except as provided in this subsection, a qualified 
     future transfer shall be treated for purposes of this title 
     and the Employee Retirement Income Security Act of 1974 as if 
     it were a qualified transfer.
       ``(2) Qualified future transfer.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified future transfer' 
     means a transfer which meets all of the requirements for a 
     qualified transfer, except that--
       ``(i) the determination of excess pension assets shall be 
     made under subparagraph (B),
       ``(ii) the limitation on the amount transferred shall be 
     made under subparagraph (C), and
       ``(iii) the minimum cost requirements of subsection (c)(3) 
     shall be modified as provided under subparagraph (D).
       ``(B) Excess pension assets.--
       ``(i) In general.--In determining excess pension assets for 
     purposes of this subsection, subsection (e)(2) shall be 
     applied by substituting `115 percent' for `125 percent'.
       ``(ii) Requirement to maintain funded status.--If, as of 
     any valuation date of any plan year in the transfer period, 
     the amount determined under subsection (e)(2)(B) (after 
     application of clause (i)) exceeds the amount determined 
     under subsection (e)(2)(A), either--

       ``(I) the employer maintaining the plan shall make 
     contributions to the plan in an amount not less than the 
     amount required to reduce such excess to zero as of such 
     date, or
       ``(II) there is transferred from the health benefits 
     account to the plan an amount not less than the amount 
     required to reduce such excess to zero as of such date.

       ``(C) Limitation on amount transferred.--Notwithstanding 
     subsection (b)(3), the amount of the excess pension assets 
     which may be transferred in a qualified future transfer shall 
     be equal to the sum of--

[[Page 2654]]

       ``(i) if the transfer period includes the taxable year of 
     the transfer, the amount determined under subsection (b)(3) 
     for such taxable year, plus
       ``(ii) in the case of all other taxable years in the 
     transfer period, the sum of the qualified current retiree 
     health liabilities which the plan reasonably estimates, in 
     accordance with guidance issued by the Secretary, will be 
     incurred for each of such years.
       ``(D) Minimum cost requirements.--
       ``(i) In general.--The requirements of subsection (c)(3) 
     shall be treated as met if each group health plan or 
     arrangement under which applicable health benefits are 
     provided provides applicable health benefits during the 
     period beginning with the first year of the transfer period 
     and ending with the last day of the 4th year following the 
     transfer period such that the annual average amount of such 
     benefits provided during such period is not less than the 
     applicable employer cost determined under subsection 
     (c)(3)(A) with respect to the transfer.
       ``(ii) Election to maintain benefits.--An employer may 
     elect, in lieu of the requirements of clause (i), to meet the 
     requirements of subsection (c)(3) by meeting the requirements 
     of such subsection (as in effect before the amendments made 
     by section 535 of the Tax Relief Extension Act of 1999) for 
     each of the years described in the period under clause (i).
       ``(3) Coordination with other transfers.--In applying 
     subsection (b)(3) to any subsequent transfer during a taxable 
     year in a transfer period, qualified current retiree health 
     liabilities shall be reduced by any such liabilities taken 
     into account with respect to the qualified future transfer to 
     which such period relates.
       ``(4) Transfer period.--For purposes of this subsection, 
     the term `transfer period' means, with respect to any 
     transfer, a period of consecutive taxable years specified in 
     the election under paragraph (1) which begins and ends during 
     the 10-taxable-year period beginning with the taxable year of 
     the transfer.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transfers after the date of the enactment of 
     this Act.

     SEC. 1332. SPECIAL RULES FOR FUNDING OF COLLECTIVELY 
                   BARGAINED RETIREE HEALTH BENEFITS.

       (a) Collectively Bargained Transfer Treated as a Qualified 
     Transfer.--
       (1) In general.--Section 420(b) of the Internal Revenue 
     Code of 1986 (defining qualified transfer) is amended by 
     redesignating paragraph (5) as paragraph (6) and by inserting 
     after paragraph (4) the following new paragraph:
       ``(5) A collectively bargained transfer (as defined in 
     subsection (e)(5)) shall be treated as a qualified 
     transfer.''.
       (2) Conforming amendments.--
       (A) Subparagraph (B) of section 420(b)(2) of such Code is 
     amended by inserting ``or a collectively bargained transfer'' 
     after ``paragraph (4)''.
       (B) Paragraph (3) of section 420(b) of such Code is amended 
     to read as follows:
       ``(3) Limitation on amount transferred.--
       ``(A) In general.--The amount of excess pension assets 
     which may be transferred in a qualified transfer (other than 
     a collectively bargained transfer) shall not exceed the 
     amount which is reasonably estimated to be the amount the 
     employer maintaining the plan will pay (whether directly or 
     through reimbursement) out of such account during the taxable 
     year of the transfer for qualified current retiree health 
     liabilities.
       ``(B) Exception for collectively bargained transfers.--The 
     amount of excess pension assets which may be transferred in a 
     collectively bargained transfer shall not exceed the amount 
     which is reasonably estimated, in accordance with the 
     provisions of the collective bargaining agreement and 
     generally accepted accounting principles, to be the amount 
     the employer maintaining the plan will pay (whether directly 
     or through reimbursement) out of such account during the 
     collectively bargained cost maintenance period for 
     collectively bargained retiree health liabilities.''.
       (b) Requirements of Plans Making Collectively Bargained 
     Transfers.--
       (1) In general.--Paragraph (1) of section 420(c) of the 
     Internal Revenue Code of 1986 (relating to requirements of 
     plan transferring assets) is amended to read as follows:
       ``(1) Use of transferred assets.--
       ``(A) In general.--Except in the case of a collectively 
     bargained transfer, any assets transferred to a health 
     benefits account in a qualified transfer (and any income 
     allocable thereto) shall be used only to pay qualified 
     current retiree health liabilities (other than liabilities of 
     key employees not taken into account under subsection 
     (e)(1)(D)) for the taxable year of the transfer (whether 
     directly or through reimbursement).
       ``(B) Collectively bargained transfer.--Any assets 
     transferred to a health benefits account in a collectively 
     bargained transfer (and any income allocable thereto) shall 
     be used only to pay collectively bargained retiree health 
     liabilities (other than liabilities of key employees not 
     taken into account under subsection (e)(6)(D)) for the 
     taxable year of the transfer or for any subsequent taxable 
     year during the collectively bargained cost maintenance 
     period (whether directly or through reimbursement).
       ``(C) Amounts not used to pay for health benefits.--
       ``(i) In general.--Any assets transferred to a health 
     benefits account in a qualified transfer (and any income 
     allocable thereto) which are not used as provided in 
     subparagraph (A) (in the case of a qualified transfer other 
     than a collectively bargained transfer) or cannot be used as 
     provided in subparagraph (B) (in the case of a collectively 
     bargained transfer) shall be transferred out of the account 
     to the transferor plan.
       ``(ii) Tax treatment of amounts.--Any amount transferred 
     out of an account under clause (i)--

       ``(I) shall not be includible in the gross income of the 
     employer, but
       ``(II) shall be treated as an employer reversion for 
     purposes of section 4980 (without regard to subsection (d) 
     thereof).

       ``(D) Ordering rule.--For purposes of this section, any 
     amount paid out of a health benefits account shall be treated 
     as paid first out of the assets and income described in 
     subparagraph (A) (in the case of a qualified transfer other 
     than a collectively bargained transfer) or subparagraph (B) 
     (in the case of a collectively bargained transfer).''.
       (2) Conforming amendments.--
       (A) Subparagraph (A) of section 420(c)(3) of such Code is 
     amended to read as follows:
       ``(A) In general.--The requirements of this paragraph are 
     met if--
       ``(i) except as provided in clause (ii), each group health 
     plan or arrangement under which applicable health benefits 
     are provided provides that the applicable employer cost for 
     each taxable year during the cost maintenance period shall 
     not be less than the higher of the applicable employer costs 
     for each of the 2 taxable years immediately preceding the 
     taxable year of the qualified transfer, and
       ``(ii) in the case of a collectively bargained transfer, 
     each collectively bargained group health plan under which 
     collectively bargained health benefits are provided provides 
     that the collectively bargained employer cost for each 
     taxable year during the collectively bargained cost 
     maintenance period shall not be less than the amount 
     specified by the collective bargaining agreement.''.
       (B) Section 420(c)(3) of such Code is amended by 
     redesignating subparagraphs (C), (D), and (E) as 
     subparagraphs (D), (E), and (F), respectively, and by 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Collectively bargained employer cost.--For purposes 
     of this paragraph, the term `collectively bargained employer 
     cost' means the average cost per covered individual of 
     providing collectively bargained retiree health benefits as 
     determined in accordance with the applicable collective 
     bargaining agreement. Such agreement may provide for an 
     appropriate reduction in the collectively bargained employer 
     cost to take into account any portion of the collectively 
     bargained retiree health benefits that is provided or 
     financed by a government program or other source.''.
       (C) Subparagraph (E) of section 420(c)(3) of such Code (as 
     redesignated by subparagraph (B)) is amended to read as 
     follows:
       ``(E) Maintenance period.--For purposes of this paragraph--
       ``(i) Cost maintenance period.--The term `cost maintenance 
     period' means the period of 5 taxable years beginning with 
     the taxable year in which the qualified transfer occurs. If a 
     taxable year is in 2 or more overlapping cost maintenance 
     periods, this paragraph shall be applied by taking into 
     account the highest applicable employer cost required to be 
     provided under subparagraph (A)(i) for such taxable year.
       ``(ii) Collectively bargained cost maintenance period.--The 
     term `collectively bargained cost maintenance period' means, 
     with respect to each covered retiree and his covered spouse 
     and dependents, the shorter of--

       ``(I) the remaining lifetime of such covered retiree and 
     his covered spouse and dependents, or
       ``(II) the period of coverage provided by the collectively 
     bargained health plan (determined as of the date of the 
     collectively bargained transfer) with respect to such covered 
     retiree and his covered spouse and dependents.''.

       (c) Limitations on Employer.--Subsection (d) of section 420 
     of the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(d) Limitations on Employer.--For purposes of this 
     title--
       ``(1) Deduction limitations.--No deduction shall be 
     allowed--
       ``(A) for the transfer of any amount to a health benefits 
     account in a qualified transfer (or any retransfer to the 
     plan under subsection (c)(1)(C)),
       ``(B) for qualified current retiree health liabilities or 
     collectively bargained retiree health liabilities paid out of 
     the assets (and income) described in subsection (c)(1), or
       ``(C) except in the case of a collectively bargained 
     transfer, for any amounts to which subparagraph (B) does not 
     apply and which are paid for qualified current retiree health 
     liabilities for the taxable year to the extent such amounts 
     are not greater than the excess (if any) of--
       ``(i) the amount determined under subparagraph (A) (and 
     income allocable thereto), over

[[Page 2655]]

       ``(ii) the amount determined under subparagraph (B).
       ``(2) Other limitations.--
       ``(A) No contributions allowed.--Except as provided in 
     subparagraph (B), an employer may not contribute after 
     December 31, 1990, any amount to a health benefits account or 
     welfare benefit fund (as defined in section 419(e)(1)) with 
     respect to qualified current retiree health liabilities for 
     which transferred assets are required to be used under 
     subsection (c)(1)(A).
       ``(B) Exception.--An employer may contribute an amount to a 
     health benefits account or welfare benefit fund (as defined 
     in section 419(e)(1)) with respect to collectively bargained 
     retiree health liabilities for which transferred assets are 
     required to be used under subsection (c)(1)(B), and the 
     deductibility of any such contribution shall be governed by 
     the limits applicable to the deductibility of contributions 
     to a welfare benefit fund under a collective bargaining 
     agreement (as determined under section 419A(f)(5)(A)) without 
     regard to whether such contributions are made to a health 
     benefits account or welfare benefit fund and without regard 
     to the provisions of section 404 or the other provisions of 
     this section. The Secretary shall provide rules to ensure 
     that the application of this section does not result in a 
     deduction being allowed more than once for the same 
     contribution or for 2 or more contributions or expenditures 
     relating to the same collectively bargained retiree health 
     liabilities.''.
       (d) Definitions.--Section 420(e) of the Internal Revenue 
     Code of 1986 (relating to definition and special rules) is 
     amended by adding at the end the following new paragraphs:
       ``(5) Collectively bargained transfer.--The term 
     `collectively bargained transfer' means a transfer--
       ``(A) of excess pension assets to a health benefits account 
     which is part of such plan in a taxable year beginning after 
     December 31, 2005, and
       ``(B) which does not contravene any other provision of law,
       ``(C) with respect to which are met in connection with the 
     plan--
       ``(i) the use requirements of subsection (c)(1),
       ``(ii) the vesting requirements of subsection (c)(2), and
       ``(iii) the minimum cost requirements of subsection (c)(3),
       ``(D) which is made in accordance with a collective 
     bargaining agreement,
       ``(E) which, before the transfer, the employer designates, 
     in a written notice delivered to each employee organization 
     that is a party to the collective bargaining agreement, as a 
     collectively bargained transfer in accordance with this 
     section, and
       ``(F) which involves--
       ``(i) a plan maintained by an employer which, in its 
     taxable year ending in 2005, provided health benefits or 
     coverage to retirees and their spouses and dependents under 
     all of the benefit plans maintained by the employer, but only 
     if the aggregate cost (including administrative expenses) of 
     such benefits or coverage which would have been allowable as 
     a deduction to the employer (if such benefits or coverage had 
     been provided directly by the employer and the employer used 
     the cash receipts and disbursements method of accounting) is 
     at least 5 percent of the gross receipts of the employer 
     (determined in accordance with the last sentence of 
     subsection (c)(2)(E)(ii)(II)) for such taxable year,
       ``(ii) or a plan maintained by a successor to such 
     employer.
     Such term shall not include a transfer after December 31, 
     2013.
       ``(6) Collectively bargained retiree health liabilities.--
       ``(A) In general.--The term `collectively bargained retiree 
     health liabilities' means the present value, as of the 
     beginning of a taxable year and determined in accordance with 
     the applicable collective bargaining agreement, of all 
     collectively bargained health benefits (including 
     administrative expenses) for such taxable year and all 
     subsequent taxable years during the collectively bargained 
     cost maintenance period.
       ``(B) Reduction for amounts previously set aside.--The 
     amount determined under subparagraph (A) shall be reduced by 
     the value (as of the close of the plan year preceding the 
     year of the collectively bargained transfer) of the assets in 
     all health benefits accounts or welfare benefit funds (as 
     defined in section 419(e)(1)) set aside to pay for the 
     collectively bargained retiree health liabilities.
       ``(C) Key employees excluded.--If an employee is a key 
     employee (within the meaning of section 416(I)(1)) with 
     respect to any plan year ending in a taxable year, such 
     employee shall not be taken into account in computing 
     collectively bargained retiree health liabilities for such 
     taxable year or in calculating collectively bargained 
     employer cost under subsection (c)(3)(C).
       ``(7) Collectively bargained health benefits.--The term 
     `collectively bargained health benefits' means health 
     benefits or coverage which are provided to--
       ``(A) retired employees who, immediately before the 
     collectively bargained transfer, are entitled to receive such 
     benefits upon retirement and who are entitled to pension 
     benefits under the plan, and their spouses and dependents, 
     and
       ``(B) if specified by the provisions of the collective 
     bargaining agreement governing the collectively bargained 
     transfer, active employees who, following their retirement, 
     are entitled to receive such benefits and who are entitled to 
     pension benefits under the plan, and their spouses and 
     dependents.
       ``(8) Collectively bargained health plan.--The term 
     `collectively bargained health plan' means a group health 
     plan or arrangement for retired employees and their spouses 
     and dependents that is maintained pursuant to 1 or more 
     collective bargaining agreements.''.
       (e) Conforming Amendment.--The last sentence of section 
     401(h) of the Internal Revenue Code of 1986 is amended by 
     inserting ``(other than contributions with respect to 
     collectively bargained retiree health liabilities within the 
     meaning of section 420(e)(6))'' after ``medical benefits''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2004.

     SEC. 1333. ALLOWANCE OF RESERVE FOR MEDICAL BENEFITS OF PLANS 
                   SPONSORED BY BONA FIDE ASSOCIATIONS.

       (a) In General.--Section 419A(c) of the Internal Revenue 
     Code of 1986 (relating to account limit) is amended by adding 
     at the end the following new paragraph:
       ``(6) Additional reserve for medical benefits of bona fide 
     association plans.--
       ``(A) In general.--An applicable account limit for any 
     taxable year may include a reserve in an amount not to exceed 
     35 percent of the sum of--
       ``(i) the qualified direct costs, and
       ``(ii) the change in claims incurred but unpaid,

     for such taxable year with respect to medical benefits (other 
     than post-retirement medical benefits).
       ``(B) Applicable account limit.--For purposes of this 
     subsection, the term `applicable account limit' means an 
     account limit for a qualified asset account with respect to 
     medical benefits provided through a plan maintained by a bona 
     fide association (as defined in section 2791(d)(3) of the 
     Public Health Service Act (42 U.S.C. 300gg-91(d)(3))''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years ending after December 31, 2005.

                 PART II--CASH OR DEFERRED ARRANGEMENTS

     SEC. 1336. TREATMENT OF ELIGIBLE COMBINED DEFINED BENEFIT 
                   PLANS AND QUALIFIED CASH OR DEFERRED 
                   ARRANGEMENTS.

       (a) Amendments of Internal Revenue Code.--Section 414 of 
     the Internal Revenue Code of 1986, as amended by this Act, is 
     amended by adding at the end the following new subsection:
       ``(x) Special Rules for Eligible Combined Defined Benefit 
     Plans and Qualified Cash or Deferred Arrangements.--
       ``(1) General rule.--Except as provided in this subsection, 
     the requirements of this title shall be applied to any 
     defined benefit plan or applicable defined contribution plan 
     which are part of an eligible combined plan in the same 
     manner as if each such plan were not a part of the eligible 
     combined plan.
       ``(2) Eligible combined plan.--For purposes of this 
     subsection--
       ``(A) In general.--The term `eligible combined plan' means 
     a plan--
       ``(i) which is maintained by an employer which, at the time 
     the plan is established, is a small employer,
       ``(ii) which consists of a defined benefit plan and an 
     applicable defined contribution plan,
       ``(iii) the assets of which are held in a single trust 
     forming part of the plan and are clearly identified and 
     allocated to the defined benefit plan and the applicable 
     defined contribution plan to the extent necessary for the 
     separate application of this title under paragraph (1), and
       ``(iv) with respect to which the benefit, contribution, 
     vesting, and nondiscrimination requirements of subparagraphs 
     (B), (C), (D), (E), and (F) are met.

     For purposes of this subparagraph, the term `small employer' 
     has the meaning given such term by section 4980D(d)(2), 
     except that such section shall be applied by substituting 
     `500' for `50' each place it appears.
       ``(B) Benefit requirements.--
       ``(i) In general.--The benefit requirements of this 
     subparagraph are met with respect to the defined benefit plan 
     forming part of the eligible combined plan if the accrued 
     benefit of each participant derived from employer 
     contributions, when expressed as an annual retirement 
     benefit, is not less than the applicable percentage of the 
     participant's final average pay. For purposes of this clause, 
     final average pay shall be determined using the period of 
     consecutive years (not exceeding 5) during which the 
     participant had the greatest aggregate compensation from the 
     employer.
       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage is the lesser of--

       ``(I) 1 percent multiplied by the number of years of 
     service with the employer, or
       ``(II) 20 percent.

       ``(iii) Special rule for cash balance plans.--If the 
     defined benefit plan under

[[Page 2656]]

     clause (i) is a qualified cash balance plan (within the 
     meaning of section 411(b)(5)), the plan shall be treated as 
     meeting the requirements of clause (i) with respect to any 
     plan year if each participant receives pay credit for the 
     year which is not less than the percentage of compensation 
     determined in accordance with the following table:

``If the participant's age as of the beginning of thThe percentage is--
  30 or less....................................................2  ....

  Over 30 but less than 40......................................4  ....

  40 or over but less than 50...................................6  ....

  50 or over....................................................8  ....

       ``(iv) Years of service.--For purposes of this 
     subparagraph, years of service shall be determined under the 
     rules of paragraphs (4), (5), and (6) of section 411(a), 
     except that the plan may not disregard any year of service 
     because of a participant making, or failing to make, any 
     elective deferral with respect to the qualified cash or 
     deferred arrangement to which subparagraph (C) applies.
       ``(C) Contribution requirements.--
       ``(i) In general.--The contribution requirements of this 
     subparagraph with respect to any applicable defined 
     contribution plan forming part of eligible combined plan are 
     met if--

       ``(I) the qualified cash or deferred arrangement included 
     in such plan constitutes an automatic contribution 
     arrangement, and
       ``(II) the employer is required to make matching 
     contributions on behalf of each employee eligible to 
     participate in the arrangement in an amount equal to 50 
     percent of the elective contributions of the employee to the 
     extent such elective contributions do not exceed 4 percent of 
     compensation.

     Rules similar to the rules of clauses (ii) and (iii) of 
     section 401(k)(12)(B) shall apply for purposes of this 
     clause.
       ``(ii) Nonelective contributions.--An applicable defined 
     contribution plan shall not be treated as failing to meet the 
     requirements of clause (i) because the employer makes 
     nonelective contributions under the plan but such 
     contributions shall not be taken into account in determining 
     whether the requirements of clause (i)(II) are met.
       ``(D) Vesting requirements.--The vesting requirements of 
     this subparagraph are met if--
       ``(i) in the case of a defined benefit plan forming part of 
     an eligible combined plan an employee who has completed at 
     least 3 years of service has a nonforfeitable right to 100 
     percent of the employee's accrued benefit under the plan 
     derived from employer contributions, and
       ``(ii) in the case of an applicable defined contribution 
     plan forming part of eligible combined plan--

       ``(I) an employee has a nonforfeitable right to any 
     matching contribution made under the qualified cash or 
     deferred arrangement included in such plan by an employer 
     with respect to any elective contribution, including matching 
     contributions in excess of the contributions required under 
     subparagraph (C)(i)(II), and
       ``(II) an employee who has completed at least 3 years of 
     service has a nonforfeitable right to 100 percent of the 
     employee's accrued benefit derived under the arrangement from 
     nonelective contributions of the employer.

     For purposes of this subparagraph, the rules of section 411 
     shall apply to the extent not inconsistent with this 
     subparagraph.
       ``(E) Uniform provision of benefits.--In the case of a 
     defined benefit plan or applicable defined contribution plan 
     forming part of an eligible combined plan, the requirements 
     of this subparagraph are met if all benefits under each such 
     plan, and all rights and features under each such plan, must 
     be provided uniformly to all participants.
       ``(F) Requirements must be met without taking into account 
     social security and similar contributions and benefits or 
     other plans.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if the requirements of clauses (ii) and (iii) are 
     met.
       ``(ii) Social security and similar contributions.--The 
     requirements of this clause are met if--

       ``(I) the requirements of subparagraphs (B) and (C) are met 
     without regard to section 401(l), and
       ``(II) the requirements of sections 401(a)(4) and 410(b) 
     are met with respect to both the applicable defined 
     contribution plan and defined benefit plan forming part of an 
     eligible combined plan without regard to section 401(l).

       ``(iii) Other plans and arrangements.--The requirements of 
     this clause are met if the applicable defined contribution 
     plan and defined benefit plan forming part of an eligible 
     combined plan meet the requirements of sections 401(a)(4) and 
     410(b) without being combined with any other plan.
       ``(3) Nondiscrimination requirements for qualified cash or 
     deferred arrangement.--
       ``(A) In general.--A qualified cash or deferred arrangement 
     which is included in an applicable defined contribution plan 
     forming part of an eligible combined plan shall be treated as 
     meeting the requirements of section 401(k)(3)(A)(ii) if the 
     requirements of paragraph (2)(C) are met with respect to such 
     arrangement.
       ``(B) Matching contributions.--In applying section 
     401(m)(11) to any matching contribution with respect to a 
     contribution to which paragraph (2)(C) applies, the 
     contribution requirement of paragraph (2)(C) and the notice 
     requirements of paragraph (5)(B) shall be substituted for the 
     requirements otherwise applicable under clauses (i) and (ii) 
     of section 401(m)(11)(A).
       ``(4) Satisfaction of top-heavy rules.--A defined benefit 
     plan and applicable defined contribution plan forming part of 
     an eligible combined plan for any plan year shall be treated 
     as meeting the requirements of section 416 for the plan year.
       ``(5) Automatic contribution arrangement.--For purposes of 
     this subsection--
       ``(A) In general.--A qualified cash or deferred arrangement 
     shall be treated as an automatic contribution arrangement if 
     the arrangement--
       ``(i) provides that each employee eligible to participate 
     in the arrangement is treated as having elected to have the 
     employer make elective contributions in an amount equal to 4 
     percent of the employee's compensation unless the employee 
     specifically elects not to have such contributions made or to 
     have such contributions made at a different rate, and
       ``(ii) meets the notice requirements under subparagraph 
     (B).
       ``(B) Notice requirements.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if the requirements of clauses (ii) and (iii) are 
     met.
       ``(ii) Reasonable period to make election.--The 
     requirements of this clause are met if each employee to whom 
     subparagraph (A)(i) applies--

       ``(I) receives a notice explaining the employee's right 
     under the arrangement to elect not to have elective 
     contributions made on the employee's behalf or to have the 
     contributions made at a different rate, and
       ``(II) has a reasonable period of time after receipt of 
     such notice and before the first elective contribution is 
     made to make such election.

       ``(iii) Annual notice of rights and obligations.--The 
     requirements of this clause are met if each employee eligible 
     to participate in the arrangement is, within a reasonable 
     period before any year, given notice of the employee's rights 
     and obligations under the arrangement.

     The requirements of clauses (i) and (ii) of section 
     401(k)(12)(D) shall be met with respect to the notices 
     described in clauses (ii) and (iii) of this subparagraph.
       ``(6) Coordination with other requirements.--
       ``(A) Treatment of separate plans.--Section 414(k) shall 
     not apply to an eligible combined plan.
       ``(B) Reporting.--An eligible combined plan shall be 
     treated as a single plan for purposes of sections 6058 and 
     6059.
       ``(7) Applicable defined contribution plan.--For purposes 
     of this subsection--
       ``(A) In general.--The term `applicable defined 
     contribution plan' means a defined contribution plan which 
     includes a qualified cash or deferred arrangement.
       ``(B) Qualified cash or deferred arrangement.--The term 
     `qualified cash or deferred arrangement' has the meaning 
     given such term by section 401(k)(2).''.
       (b) Amendments of ERISA.--
       (1) In general.--Section 210 of the Employee Retirement 
     Income Security Act of 1974 is amended by adding at the end 
     the following new subsection:
       ``(e) Special Rules for Eligible Combined Defined Benefit 
     Plans and Qualified Cash or Deferred Arrangements.--
       ``(1) General rule.--Except as provided in this subsection, 
     this Act shall be applied to any defined benefit plan or 
     applicable individual account plan which are part of an 
     eligible combined plan in the same manner as if each such 
     plan were not a part of the eligible combined plan.
       ``(2) Eligible combined plan.--For purposes of this 
     subsection--
       ``(A) In general.--The term `eligible combined plan' means 
     a plan--
       ``(i) which, at the time the plan is established, is 
     maintained by a small employer,
       ``(ii) which consists of a defined benefit plan and an 
     applicable individual account plan each of which qualifies 
     under section 401(a) of the Internal Revenue Code of 1986,
       ``(iii) the assets of which are held in a single trust 
     forming part of the plan and are clearly identified and 
     allocated to the defined benefit plan and the applicable 
     individual account plan to the extent necessary for the 
     separate application of this Act under paragraph (1), and
       ``(iv) with respect to which the benefit, contribution, 
     vesting, and nondiscrimination requirements of subparagraphs 
     (B), (C), (D), (E), and (F) are met.

     For purposes of this subparagraph, the term `small employer' 
     has the meaning given such term by section 4980D(d)(2), 
     except that such section shall be applied by substituting 
     `500' for `50' each place it appears.
       ``(B) Benefit requirements.--
       ``(i) In general.--The benefit requirements of this 
     subparagraph are met with respect to the defined benefit plan 
     forming part of the eligible combined plan if the accrued 
     benefit of each participant derived from employer 
     contributions, when expressed as an annual

[[Page 2657]]

     retirement benefit, is not less than the applicable 
     percentage of the participant's final average pay. For 
     purposes of this clause, final average pay shall be 
     determined using the period of consecutive years (not 
     exceeding 5) during which the participant had the greatest 
     aggregate compensation from the employer.
       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage is the lesser of--

       ``(I) 1 percent multiplied by the number of years of 
     service with the employer, or
       ``(II) 20 percent.

       ``(iii) Special rule for cash balance plans.--If the 
     defined benefit plan under clause (i) is a qualified cash 
     balance plan (within the meaning of section 204(b)(5)), the 
     plan shall be treated as meeting the requirements of clause 
     (i) with respect to any plan year if each participant 
     receives pay credit for the year which is not less than the 
     percentage of compensation determined in accordance with the 
     following table:

``If the participant's age as of the beginning of thThe percentage is--
  30 or less....................................................2  ....

  Over 30 but less than 40......................................4  ....

  40 or over but less than 50...................................6  ....

  50 or over....................................................8  ....

       ``(iv) Years of service.--For purposes of this 
     subparagraph, years of service shall be determined under the 
     rules of paragraphs (1), (2), and (3) of section 203(b), 
     except that the plan may not disregard any year of service 
     because of a participant making, or failing to make, any 
     elective deferral with respect to the qualified cash or 
     deferred arrangement to which subparagraph (C) applies.
       ``(C) Contribution requirements.--
       ``(i) In general.--The contribution requirements of this 
     subparagraph with respect to any applicable individual 
     account plan forming part of eligible combined plan are met 
     if--

       ``(I) the qualified cash or deferred arrangement included 
     in such plan constitutes an automatic contribution 
     arrangement, and
       ``(II) the employer is required to make matching 
     contributions on behalf of each employee eligible to 
     participate in the arrangement in an amount equal to 50 
     percent of the elective contributions of the employee to the 
     extent such elective contributions do not exceed 4 percent of 
     compensation.

     Rules similar to the rules of clauses (ii) and (iii) of 
     section 401(k)(12)(B) of the Internal Revenue Code of 1986 
     shall apply for purposes of this clause.
       ``(ii) Nonelective contributions.--An applicable individual 
     account plan shall not be treated as failing to meet the 
     requirements of clause (i) because the employer makes 
     nonelective contributions under the plan but such 
     contributions shall not be taken into account in determining 
     whether the requirements of clause (i)(II) are met.
       ``(D) Vesting requirements.--The vesting requirements of 
     this subparagraph are met if--
       ``(i) in the case of a defined benefit plan forming part of 
     an eligible combined plan an employee who has completed at 
     least 3 years of service has a nonforfeitable right to 100 
     percent of the employee's accrued benefit under the plan 
     derived from employer contributions, and
       ``(ii) in the case of an applicable individual account plan 
     forming part of eligible combined plan--

       ``(I) an employee has a nonforfeitable right to any 
     matching contribution made under the qualified cash or 
     deferred arrangement included in such plan by an employer 
     with respect to any elective contribution, including matching 
     contributions in excess of the contributions required under 
     subparagraph (C)(i)(II), and
       ``(II) an employee who has completed at least 3 years of 
     service has a nonforfeitable right to 100 percent of the 
     employee's accrued benefit derived under the arrangement from 
     nonelective contributions of the employer.

     For purposes of this subparagraph, the rules of section 203 
     shall apply to the extent not inconsistent with this 
     subparagraph.
       ``(E) Uniform provision of benefits.--In the case of a 
     defined benefit plan or applicable individual account plan 
     forming part of an eligible combined plan, the requirements 
     of this subparagraph are met if all benefits under each such 
     plan, and all rights and features under each such plan, must 
     be provided uniformly to all participants.
       ``(F) Requirements must be met without taking into account 
     social security and similar contributions and benefits or 
     other plans.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if the requirements of clauses (ii) and (iii) are 
     met.
       ``(ii) Social security and similar contributions.--The 
     requirements of this clause are met if--

       ``(I) the requirements of subparagraphs (B) and (C) are met 
     without regard to section 401(l) of the Internal Revenue Code 
     of 1986, and
       ``(II) the requirements of sections 401(a)(4) and 410(b) of 
     the Internal Revenue Code of 1986 are met with respect to 
     both the applicable defined contribution plan and defined 
     benefit plan forming part of an eligible combined plan 
     without regard to section 401(l) of the Internal Revenue Code 
     of 1986.

       ``(iii) Other plans and arrangements.--The requirements of 
     this clause are met if the applicable defined contribution 
     plan and defined benefit plan forming part of an eligible 
     combined plan meet the requirements of sections 401(a)(4) and 
     410(b) of the Internal Revenue Code of 1986 without being 
     combined with any other plan.
       ``(3) Nondiscrimination requirements for qualified cash or 
     deferred arrangement.--
       ``(A) In general.--A qualified cash or deferred arrangement 
     which is included in an applicable individual account plan 
     forming part of an eligible combined plan shall be treated as 
     meeting the requirements of section 401(k)(3)(A)(ii) of the 
     Internal Revenue Code of 1986 if the requirements of 
     subparagraph (C) are met with respect to such arrangement.
       ``(B) Matching contributions.--In applying section 
     401(m)(11) of such Code to any matching contribution with 
     respect to a contribution to which paragraph (2)(C) applies, 
     the contribution requirement of paragraph (2)(C) and the 
     notice requirements of paragraph (5)(B) shall be substituted 
     for the requirements otherwise applicable under clauses (i) 
     and (ii) of section 401(m)(11)(A) of such Code.
       ``(4) Automatic contribution arrangement.--For purposes of 
     this subsection--
       ``(A) In general.--A qualified cash or deferred arrangement 
     shall be treated as an automatic contribution arrangement if 
     the arrangement--
       ``(i) provides that each employee eligible to participate 
     in the arrangement is treated as having elected to have the 
     employer make elective contributions in an amount equal to 4 
     percent of the employee's compensation unless the employee 
     specifically elects not to have such contributions made or to 
     have such contributions made at a different rate, and
       ``(ii) meets the notice requirements under subparagraph 
     (B).
       ``(B) Notice requirements.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if the requirements of clauses (ii) and (iii) are 
     met.
       ``(ii) Reasonable period to make election.--The 
     requirements of this clause are met if each employee to whom 
     subparagraph (A)(i) applies--

       ``(I) receives a notice explaining the employee's right 
     under the arrangement to elect not to have elective 
     contributions made on the employee's behalf or to have the 
     contributions made at a different rate, and
       ``(II) has a reasonable period of time after receipt of 
     such notice and before the first elective contribution is 
     made to make such election.

       ``(iii) Annual notice of rights and obligations.--The 
     requirements of this clause are met if each employee eligible 
     to participate in the arrangement is, within a reasonable 
     period before any year, given notice of the employee's rights 
     and obligations under the arrangement.

     The requirements of clauses (i) and (ii) of section 
     401(k)(12)(D) of the Internal Revenue Code of 1986 shall be 
     met with respect to the notices described in clauses (ii) and 
     (iii) of this subparagraph.
       ``(5) Coordination with other requirements.--
       ``(A) Treatment of separate plans.--Section 414(k) of the 
     Internal Revenue Code of 1986 shall not apply to an eligible 
     combined plan.
       ``(B) Reporting.--An eligible combined plan shall be 
     treated as a single plan for purposes of section 103.
       ``(6) Applicable individual account plan.--For purposes of 
     this subsection--
       ``(A) In general.--The term `applicable individual account 
     plan' means an individual account plan which includes a 
     qualified cash or deferred arrangement.
       ``(B) Qualified cash or deferred arrangement.--The term 
     `qualified cash or deferred arrangement' has the meaning 
     given such term by section 401(k)(2) of the Internal Revenue 
     Code of 1986.''.
       (2) Conforming changes.--
       (A) The heading for section 210 of such Act is amended to 
     read as follows:

     ``SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPECIAL 
                   RULES.''.

       (B) The table of contents in section 1 of such Act is 
     amended by striking the item relating to section 210 and 
     inserting the following new item:

``Sec. 210. Multiple employer plans and other special rules''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2008.

     SEC. 1337. STATE AND LOCAL GOVERNMENTS ELIGIBLE TO MAINTAIN 
                   SECTION 401(K) PLANS.

       (a) In General.--Clause (ii) of section 401(k)(4)(B) of the 
     Internal Revenue Code of 1986 (relating to governments 
     ineligible) is amended to read as follows:
       ``(ii) Governments eligible.--A State or local government 
     or political subdivision thereof, or any agency or 
     instrumentality thereof, may include a qualified cash or 
     deferred arrangement as part of a plan maintained by it.''
       (b) Coordination With Section 457 Limits.--Section 402(g) 
     of the Internal Revenue

[[Page 2658]]

     Code of 1986 is amended by adding at the end the following:
       ``(9) Coordination of section 457 limits for state and 
     local governmental plans.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     in the case of an individual who is a participant in 1 or 
     more qualified cash or deferred arrangements maintained by a 
     governmental entity described in section 401(k)(4)(B)(ii), 
     the amount excludable from gross income under paragraph (1) 
     with respect to the individual for any taxable year with 
     respect to elective deferrals under such arrangements shall 
     be reduced by the aggregate amounts deferred under section 
     457 with respect to the individual for the taxable year under 
     1 or more eligible deferred compensation plans (as defined in 
     section 457(b)) maintained by an employer described in 
     section 457(e)(1)(A).
       ``(B) Special rule for pre-1986 grandfathered plans.--
     Subparagraph (A) shall not apply to any qualified cash or 
     deferred arrangement maintained by a governmental entity 
     described in section 401(k)(4)(B)(ii) if the arrangement (or 
     any predecessor) was adopted by the entity before May 6, 
     1986, or treated as so adopted under section 1116(f)(2)(B) of 
     the Tax Reform Act of 1986.''
       (c) Effective Dates.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2005.

                     PART III--EXCESS CONTRIBUTIONS

     SEC. 1339. EXCESS CONTRIBUTIONS.

       (a) Expansion of Corrective Distribution Period for 
     Automatic Contribution Arrangements.--Subsection (f) of 
     section 4979 of the Internal Revenue Code of 1986 is 
     amended--
       (1) by and inserting ``(6 months in the case of an excess 
     contribution or excess aggregate contribution to an eligible 
     automatic contribution arrangement (as defined in section 
     414(w)(3)))'' after ``2\1/2\ months'' in paragraph (1), and
       (2) by striking ``2\1/2\ Months of'' in the heading and 
     inserting ``Specified Period After''.
       (b) Year of Inclusion.--Paragraph (2) of section 4979(f) of 
     such Code is amended to read as follows:
       ``(2) Year of inclusion.--Any amount distributed as 
     provided in paragraph (1) shall be treated as earned and 
     received by the recipient in the recipient's taxable year in 
     which such distributions were made.''.
       (c) Simplification of Allocable Earnings.--
       (1) Section 4979.--Subsection (f) of section 4979 of such 
     Code is amended--
       (A) by adding ``through the end of the plan year for which 
     the contribution was made'' after ``thereto'' in paragraph 
     (1), and
       (B) by adding ``through the end of the plan year for which 
     the contributions were made'' after ``thereto'' in paragraph 
     (2)(B).
       (2) Section 401(k) and 401(m).--
       (A) Clause (i) of section 401(k)(8)(A) is amended by adding 
     ``through the end of such year'' after ``such 
     contributions''.
       (B) Subparagraph (A) of section 401(m)(6) of such Code is 
     amended by adding ``through the end of such year'' after ``to 
     such contributions''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2005.

                       PART IV--OTHER PROVISIONS

     SEC. 1341. AMENDMENTS RELATING TO PROHIBITED TRANSACTIONS.

       (a) Exemption for Block Trading.--
       (1) In general.--Section 408(b) of the Employee Retirement 
     Income Security Act (29 U.S.C. 1108(b)) is amended by adding 
     at the end the following new paragraph:
       ``(14) Block trading.--
       ``(A) In general.--Any transaction involving the purchase 
     or sale of securities between a plan and a party in interest 
     (other than a fiduciary who has investment discretion or 
     control with respect to the assets involved in the 
     transaction or is providing investment advice as a fiduciary 
     for purposes of this title to enter into the transaction) 
     with respect to a plan if--
       ``(i) the transaction involves a block trade,
       ``(ii) at the time of the transaction, the interest of the 
     plan (together with the interests of any other plans 
     maintained by the same plan sponsor) does not exceed 10 
     percent of the aggregate size of the block trade,
       ``(iii) the terms of the transaction, including the price, 
     are at least as favorable to the plan as an arm's length 
     transaction, and
       ``(iv) compensation associated with the purchase and sale 
     is not greater than an arm's length transaction with an 
     unrelated party.
       ``(B) Block trade.--For purposes of this paragraph, the 
     term `block trade' includes any trade of at least 10,000 
     shares or with a market value of at least $200,000 which will 
     be allocated across two or more unrelated client accounts of 
     a fiduciary.''.
       (2) Conforming amendments.--
       (A) Section 4975(d) of such Code is amended--
       (i) by striking ``or'' at the end of paragraph (15),
       (ii) by striking the period at the end of paragraph (16)(F) 
     and inserting ``; or'', and
       (iii) by adding at the end the following new paragraph:
       ``(17) any transaction involving the purchase or sale of 
     securities between a plan and a disqualified person (other 
     than a fiduciary who has investment discretion or control 
     over the transaction or is providing investment advice as a 
     fiduciary for purposes of title I of the Employee Retirement 
     Income Security Act to enter into the transaction) with 
     respect to a plan if--
       ``(A) the transaction involves a block trade,
       ``(B) at the time of the transaction, the interest of the 
     plan (together with the interests of any other plans 
     maintained by the same plan sponsor) does not exceed 10 
     percent of the aggregate size of the block trade,
       ``(C) the terms of the transaction, including the price, 
     are at least as favorable to the plan as an arm's length 
     transaction, and
       ``(D) compensation associated with the purchase and sale is 
     not greater than an arm's length transaction with an 
     unrelated party.''.
       (B) Section 4975(e) of such Code is amended by adding at 
     the end the following new paragraph:
       ``(11) Block trade.--The term `block trade' includes any 
     trade of at least 10,000 shares or with a market value of at 
     least $200,000 which will be allocated across two or more 
     unrelated client accounts of a fiduciary.''.
       (b) Bonding Relief.--Section 412(a) of such Act (29 U.S.C. 
     1112(a)) is amended--
       (1) by redesignating paragraph (2) as paragraph (3),
       (2) by striking ``and'' at the end of paragraph (1), and
       (3) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) no bond shall be required of any entity which is 
     registered as a broker or a dealer under section 15(b) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) if the 
     broker or dealer is subject to the fidelity bond requirements 
     of a self-regulatory organization (within the meaning of 
     section 3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).''.
       (c) Exemption for Financial Markets Trading Systems.--
       (1) In general.--Section 408(b) of such Act, as amended by 
     subsection (b)(1), is amended by adding at the end the 
     following new paragraph:
       ``(15) Financial markets trading systems.--Any transaction 
     involving the purchase and sale of securities between a plan 
     and a fiduciary or a party in interest if--
       ``(A) the transaction is executed through--
       ``(i) a national securities exchange or a trading system 
     owned by a national securities association registered with 
     the Securities and Exchange Commission, regardless of whether 
     such fiduciary or party in interest (or any affiliate of 
     either) has an interest in such exchange or trading system,
       ``(ii) an alternative trading system or electronic 
     communication network subject to regulation and oversight by 
     the Securities and Exchange Commission, regardless of whether 
     such fiduciary or party in interest (or any affiliate of 
     either) has an interest in such alternative trading system or 
     electronic communications network, or
       ``(iii) any other trading system for securities or other 
     property approved by the Secretary through regulatory or 
     exemptive relief,
       ``(B) the price associated with the purchase and sale is at 
     least as favorable as an arm's length transaction with an 
     unrelated party,
       ``(C) the compensation associated with the purchase and 
     sale is not greater than an arm's length transaction with an 
     unrelated party,
       ``(D) in the event the fiduciary or party in interest 
     directing the transaction (or any affiliate of either) has an 
     ownership interest in the trading system (other than an 
     exchange or trading system described in subparagraph (A)(i)), 
     the execution of transactions on such system is annually 
     authorized by a plan fiduciary,
       ``(E) the transaction is executed in accordance with the 
     nondiscretionary rules and procedures adopted by such trading 
     system to match offsetting orders, and
       ``(F) in the event the transaction is not executed on an 
     exchange or trading system described in subparagraph (A)(i)--
       ``(i) neither the trading system nor the parties to the 
     transaction take into account the identity of the parties in 
     the execution of trades, and the parties to the transaction 
     do not actually know the identity of the other at the time 
     that the terms and price of the transaction are agreed to, or
       ``(ii) the transaction is effected pursuant to rules 
     designed to match purchases and sales at the best price 
     available through the trading system.''.
       (2) Conforming amendment.--Section 4975(d) of such Code (as 
     amended by subsection (b)(2)) is amended--
       (A) by striking ``or'' at the end of paragraph (16),
       (B) by striking the period at the end of paragraph (17)(E) 
     and inserting ``; or'', and
       (C) by adding at the end the following new paragraph:
       ``(18) any transaction involving the purchase and sale of 
     securities or other property between a plan and a fiduciary 
     or a disqualified person if--
       ``(A) the transaction is executed through--
       ``(i) a national securities exchange or a trading system 
     owned by a national securities association registered with 
     the Securities and Exchange Commission, regardless of

[[Page 2659]]

     whether such fiduciary or disqualified person (or any 
     affiliate of either) has an interest in such exchange or 
     trading system,
       ``(ii) an alternative trading system or electronic 
     communication network subject to regulation and oversight by 
     the Securities and Exchange Commission, regardless of whether 
     such fiduciary or disqualified person (or any affiliate of 
     either) has an interest in such alternative trading system or 
     electronic communications network, or
       ``(iii) any other trading system for securities or other 
     property approved by the Secretary through regulatory or 
     exemptive relief,
       ``(B) the price associated with the purchase and sale is at 
     least as favorable as an arm's length transaction with an 
     unrelated party,
       ``(C) the compensation associated with the purchase and 
     sale is not greater than an arm's length transaction with an 
     unrelated party,
       ``(D) in the event the fiduciary or disqualified person 
     directing the transaction (or any affiliate of either) has an 
     ownership interest in the trading system (other than an 
     exchange or trading system described in subparagraph (A)(i)), 
     the execution of transactions on such system is annually 
     authorized by a plan fiduciary,
       ``(E) the transaction is executed in accordance with the 
     nondiscretionary rules and procedures adopted by such trading 
     system to match offsetting orders, and
       ``(F) in the event the transaction is not executed on an 
     exchange or trading system described in subparagraph (A)(i)--
       ``(i) neither the trading system nor the parties to the 
     transaction take into account the identity of the parties in 
     the execution of trades, and the parties to the transaction 
     do not actually know the identity of the other at the time 
     that the terms and price of the transaction are agreed to, or
       ``(ii) the transaction is effected pursuant to rules 
     designed to match purchases and sales at the best price 
     available through the trading system.''.
       (d) Relief for Foreign Exchange Transactions.--
       (1) In general.--Section 408(b) of such Act (29 U.S.C. 
     1108(b)), as amended by subsection (c)(1), is amended by 
     adding at the end the following new paragraph:
       ``(16) Any foreign exchange transactions, between a bank or 
     broker-dealer (or any affiliate of either), and a plan or an 
     individual retirement account (within the meaning of section 
     408 of the Internal Revenue Code of 1986) with respect to 
     which such bank or broker-dealer (or affiliate) is a trustee, 
     custodian, fiduciary, or other party in interest, if--
       ``(A) the transaction is in connection with the purchase, 
     holding, or sale of securities,
       ``(B) at the time the foreign exchange transaction is 
     entered into, the terms of the transaction are not less 
     favorable to the plan than the terms generally available in 
     comparable arm's length foreign exchange transactions between 
     unrelated parties, or the terms afforded by the bank or 
     broker-dealer (or any affiliate of either) in comparable 
     arm's-length foreign exchange transactions involving 
     unrelated parties,
       ``(C) the exchange rate used by such bank or broker-dealer 
     (or affiliate) for a particular foreign exchange transaction 
     does not deviate by more or less than 3 percent from the 
     interbank bid and asked rates at the time of the transaction 
     as displayed on an independent service that reports rates of 
     exchange in the foreign currency market for such currency, 
     and
       ``(D) the bank or broker-dealer (or any affiliate of 
     either) does not have investment discretion, or provide 
     investment advice, with respect to the transaction.''.
       (2) Conforming amendment.--Section 4975(d) of such Code, as 
     amended by subsection (c)(2), is amended--
       (A) by striking ``or'' at the end of paragraph (17)(E),
       (B) by striking the period at the end of paragraph 
     (18)(F)(ii) and inserting ``; or'', and
       (C) by adding at the end the following new paragraph:
       ``(19) any foreign exchange transactions, between a bank or 
     broker-dealer (or any affiliate of either) and a plan or an 
     individual retirement account (within the meaning of section 
     408) with respect to which such bank or broker-dealer (or 
     affiliate) is a trustee, custodian, fiduciary, or 
     disqualified person, if--
       ``(A) the transaction is in connection with the purchase, 
     holding, or sale of securities,
       ``(B) at the time the foreign exchange transaction is 
     entered into, the terms of the transaction are not less 
     favorable to the plan than the terms generally available in 
     comparable arm's length foreign exchange transactions between 
     unrelated parties, or the terms afforded by the bank or 
     broker-dealer (or any affiliate of either) in comparable 
     arm's-length foreign exchange transactions involving 
     unrelated parties,
       ``(C) the exchange rate used by such bank or broker-dealer 
     (or affiliate) for a particular foreign exchange transaction 
     does not deviate by more or less than 3 percent from the 
     interbank bid and asked rates at the time of the transaction 
     as displayed on an independent service that reports rates of 
     exchange in the foreign currency market for such currency, 
     and
       ``(D) the bank or broker-dealer (or any affiliate of 
     either) does not have investment discretion, or provide 
     investment advice, with respect to the transaction.''.
       (e) Correction Period for Certain Transactions Involving 
     Securities and Commodities.--
       (1) In general.--Section 408(b) of such Act (29 U.S.C. 
     1108(b)), as amended by subsection (d)(1), is amended by 
     adding at the end the following new paragraph:
       ``(17) Correction period for certain transactions involving 
     securities and commodities.--
       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), a transaction described in section 406(a) in 
     connection with the acquisition, holding, or disposition of 
     any security or commodity, if the transaction is corrected 
     before the end of the correction period.
       ``(B) Exception for employer securities and real 
     property.--Subparagraph (A) does not apply to any transaction 
     between a plan and a plan sponsor or its affiliates that 
     involves the acquisition or sale of an employer security (as 
     defined in section 407(d)(1)) or the acquisition, sale, or 
     lease of employer real property (as defined in section 
     407(d)(2)).
       ``(C) Exception for knowing violations.--In the case of any 
     fiduciary or other party in interest (or any other person 
     knowingly participating in such transaction), subparagraph 
     (A) does not apply to any prohibited transaction if, at the 
     time such transaction occurs, such fiduciary or party in 
     interest (or other person) knew that the transaction would 
     (without regard to this paragraph) constitute a violation of 
     section 406(a).
       ``(D) Correction period.--For purposes of this paragraph, 
     the term `correction period' means the 14-day period 
     beginning on the date on which such transaction occurs.
       ``(E) Other definitions.--For purposes of this paragraph--
       ``(i) the term `security' has the meaning given such term 
     by section 475(c)(2) of the Internal Revenue Code of 1986 
     (without regard to subparagraph (F)(iii) and the last 
     sentence thereof),
       ``(ii) the term `commodity' has the meaning given such term 
     by section 475(e)(2) of such Code (without regard to 
     subparagraph (D)(iii) thereof), and
       ``(iii) the terms `correction' and `correct' mean, with 
     respect to a transaction, undoing the transaction to the 
     extent possible, but in any case, making good to the plan or 
     affected account any losses resulting from the transaction 
     and restoring to the plan or affected account any profits 
     made through use of the plan.''.
       (2) Conforming amendments.--
       (A) Section 4975(d) of such Code, as amended by subsection 
     (d)(2), is amended--
       (i) by striking ``or'' at the end of paragraph (18)(F)(2),
       (ii) by striking the period at the end of paragraph (19)(D) 
     and inserting ``; or'', and
       (iii) by adding at the end the following new paragraph:
       ``(20) except as provided in subparagraph (B) or (C) of 
     subsection (f)(8), a transaction described in subparagraph 
     (A), (B), (C), or (D) of subsection (c)(1) in connection with 
     the acquisition, holding, or disposition of any security or 
     commodity, if the transaction is corrected before the end of 
     the correction period.''.
       (B) Section 4975(f) of such Code is amended by adding at 
     the end the following new paragraph:
       ``(8) Correction period.--
       ``(A) In general.--For purposes of subsection (d)(20), the 
     term `correction period' means the 14-day period beginning on 
     the date on which such transaction occurs.
       ``(B) Exception for employer securities and real 
     property.--Subsection (d)(20) does not apply to any 
     transaction between a plan and a plan sponsor or its 
     affiliates that involves the acquisition or sale of an 
     employer security (as defined in section 407(d)(1) of the 
     Employee Retirement Income Security Act) or the acquisition, 
     sale, or lease of employer real property (as defined in 
     section 407(d)(2) of such Act).
       ``(C) Exception for knowing violations.--In the case of any 
     fiduciary or other disqualified person (or any other person 
     knowingly participating in such transaction), subsection 
     (d)(20) does not apply to any prohibited transaction if, at 
     the time such transaction occurs, such fiduciary or 
     disqualified person (or other person) knew that the 
     transaction would (without regard to subsection (d)(20) or 
     this paragraph) constitute a violation of subparagraph (A), 
     (B), (C), or (D) of subsection (c)(1).
       ``(D) Abatement of tax where there is a correction.--If a 
     transaction is not treated as a prohibited transaction by 
     reason of subsection (d)(20), then no tax under subsections 
     (a) and (b) shall be assessed with respect to such 
     transaction, and, if assessed, the assessment shall be 
     abated, and, if collected, shall be credited or refunded as 
     an overpayment.
       ``(E) Other definitions.--For purposes of this paragraph 
     and subsection (d)(20)--
       ``(i) the term `security' has the meaning given such term 
     by section 475(c)(2) (without regard to subparagraph (F)(iii) 
     and the last sentence thereof),
       ``(ii) the term `commodity' has the meaning given such term 
     by section 475(e)(2) (without regard to subparagraph (D)(iii) 
     thereof), and

[[Page 2660]]

       ``(iii) the terms `correction' and `correct' mean, with 
     respect to a transaction, undoing the transaction to the 
     extent possible, but in any case, making good to the plan or 
     affected account any losses resulting from the transaction 
     and restoring to the plan or affected account any profits 
     made through use of the plan.''.
       (C) Section 4975(f)(5) of such Code is amended by striking 
     ``The terms'' and inserting ``Except as provided in paragraph 
     (8)(E)(iii), the terms''.
       (f) Cross Trades Study.--Not later than 2 years after the 
     date of the enactment of this Act, the Secretary of Labor, in 
     consultation with the President's Working Group on Financial 
     Markets, shall report to the President and Congress the 
     results of a study on the implications for pension plans, 
     plan sponsors, plan fiduciaries, and plan participants of a 
     prohibited transaction exemption for active cross trades and 
     the impact that such a prohibited transaction exemption could 
     have on the safety and security of pension plan assets. The 
     study shall review and include recommendations regarding--
       (1) the regulation and practice of passive and active cross 
     trades in United States securities markets,
       (2) the potential benefits and drawbacks of permitting 
     active cross trades for retirement funds, and
       (3) the ease or difficulty in policing cross trading 
     activities for plan sponsors, plan fiduciaries, and any 
     Federal agency charged with safeguarding the Nation's 
     retirement funds.
       (g) GAO Study.--The Comptroller General of the United 
     States shall prepare a preliminary report not later than 2 
     years after the date of the enactment of this Act and a final 
     report not later than 3 years after such date regarding the 
     effects of the amendments made by this section, focusing on 
     the effect of electronic communication networks and block 
     trading on plan investments and on the oversight and 
     enforcement activities of the Department of Labor to protect 
     the rights of plan participants and beneficiaries. The 
     Comptroller General of the United States shall submit the 
     reports required under the preceding sentence to the 
     Committees on Finance and Health, Education, Labor, and 
     Pensions of the Senate and the Committees on Ways and Means 
     and Education and the Workforce of the House of 
     Representatives.
       (h) Effective Date.--The amendments made by this section 
     shall apply to any transaction after the date of the 
     enactment of this Act.

     SEC. 1342. FEDERAL TASK FORCE ON OLDER WORKERS.

       (a) Establishment.--Not later than 90 days after the date 
     of enactment of this section, the Secretary of Labor shall 
     establish a Federal Task Force on Older Workers (referred to 
     in this section as the ``Task Force'').
       (b) Membership.--The Task Force established pursuant to 
     subsection (a) shall be composed of representatives from all 
     relevant Federal agencies that have regulatory jurisdiction 
     over, or a clear policy interest in, pension issues relating 
     to older workers, including the Internal Revenue Service and 
     the Equal Employment Opportunity Commission.
       (c) Activities.--
       (1) In general.--Not later than 1 year after the date of 
     establishment of the Task Force, the Task Force shall--
       (A) identify statutory and regulatory provisions in current 
     pension law that are disincentives to work and develop 
     legislative and regulatory proposals to address such 
     disincentives; and
       (B) identify best pension practices in the private sector 
     for hiring and retaining older workers, and serve as a 
     clearinghouse of such information.
       (2) Report.--Not later than 1 year after the date of 
     establishment of the Task Force, the Task Force shall submit 
     a report to Congress on the activities of the Task Force 
     pursuant to paragraph (1). Such report shall be made 
     available to the public.
       (d) Consultation.--In carrying out activities pursuant to 
     this section, the Task Force shall consult with senior, 
     business, labor, and other interested organizations.
       (e) Applicability of FACA; Termination of Task Force.--
       (1) FACA.--The Federal Advisory Committee Act (5 U.S.C. 
     App.) shall not apply to the Task Force established pursuant 
     to this section.
       (2) Termination.--The Task Force shall terminate 30 days 
     after the date the Task Force completes all of its duties 
     under this section.

     SEC. 1343. TECHNICAL CORRECTIONS TO SAVER ACT.

       Section 517 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1147) is amended--
       (1) in subsection (a), by striking ``2001 and 2005 on or 
     after September 1 of each year involved'' and inserting 
     ``2006 and 2010'';
       (2) in subsection (b), by adding at the end the following 
     new sentence: ``To effectuate the purposes of this paragraph, 
     the Secretary may enter into a cooperative agreement, 
     pursuant to the Federal Grant and Cooperative Agreement Act 
     of 1977 (31 U.S.C. 6301 et seq.), with any appropriate, 
     qualified entity.'';
       (3) in subsection (e)(2)--
       (A) by striking ``Committee on Labor and Human Resources'' 
     in subparagraph (D) and inserting ``Committee on Health, 
     Education, Labor, and Pensions'';
       (B) by striking subparagraph (F) and inserting the 
     following:
       ``(F) the Chairman and Ranking Member of the Subcommittee 
     on Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the House of Representatives 
     and the Chairman and Ranking Member of the Subcommittee on 
     Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the Senate;'';
       (C) by redesignating subparagraph (G) as subparagraph (J); 
     and
       (D) by inserting after subparagraph (F) the following new 
     subparagraphs:
       ``(G) the Chairman and Ranking Member of the Committee on 
     Finance of the Senate;
       ``(H) the Chairman and Ranking Member of the Committee on 
     Ways and Means of the House of Representatives;
       ``(I) the Chairman and Ranking Member of the Subcommittee 
     on Employer-Employee Relations of the Committee on Education 
     and the Workforce of the House of Representatives; and'';
       (4) in subsection (e)(3)(B), by striking ``January 31, 
     1998'' and inserting ``3 months before the convening of each 
     summit;'';
       (5) in subsection (f)(1)(C), by inserting ``, no later than 
     90 days prior to the date of the commencement of the National 
     Summit,'' after ``comment'';
       (6) in subsection (g), by inserting ``, in consultation 
     with the congressional leaders specified in subsection 
     (e)(2),'' after ``report'' the first place it appears in the 
     text;
       (7) in subsection (i)--
       (A) by striking ``for fiscal years beginning on or after 
     October 1, 1997,''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Reception and representation authority.--The 
     Secretary is hereby granted reception and representation 
     authority limited specifically to the events at the National 
     Summit. The Secretary shall use any private contributions 
     accepted in connection with the National Summit prior to 
     using funds appropriated for purposes of the National Summit 
     pursuant to this paragraph.''; and
       (8) in subsection (k)--
       (A) by striking ``shall enter into a contract on a sole-
     source basis'' and inserting ``may enter into a contract on a 
     sole-source basis''; and
       (B) by striking ``in fiscal year 1998''.

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