[House Report 108-457]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-457

======================================================================



 
                   PENSION FUNDING EQUITY ACT OF 2004

                                _______
                                

                 April 1, 2004.--Ordered to be printed

                                _______
                                

 Mr. Boehner, from the committee of conference, submitted the following

                           CONFERENCE REPORT

                        [To accompany H.R. 3108]

      The committee of conference on the disagreeing votes of 
the two Houses on the amendment of the Senate to the bill (H.R. 
3108), to amend the Employee Retirement Income Security Act of 
1974 and the Internal Revenue Code of 1986 to temporarily 
replace the 30-year Treasury rate with a rate based on long-
term corporate bonds for certain pension plan funding 
requirements, and for other purposes, having met, after full 
and free conference, have agreed to recommend and do recommend 
to their respective Houses as follows:
      That the House recede from its disagreement to the 
amendment of the Senate and agree to the same with an amendment 
as follows:
      In lieu of the matter proposed to be inserted by the 
Senate amendment, insert the following:

1. SHORT TITLE.

    This Act may be cited as the ``Pension Funding Equity Act 
of 2004''.

                        TITLE I--PENSION FUNDING

SEC. 101. TEMPORARY REPLACEMENT OF 30-YEAR TREASURY RATE.

    (a) Employee Retirement Income Security Act of 1974.--
            (1) Determination of permissible range.--
                    (A) In general.--Clause (ii) of section 
                302(b)(5)(B) of the Employee Retirement Income 
                Security Act of 1974 is amended by 
                redesignating subclause (II) as subclause (III) 
                and by inserting after subclause (I) the 
                following new subclause:
                            ``(II) Special rule for years 2004 
                        and 2005.--In the case of plan years 
                        beginning after December 31, 2003, and 
                        before January 1, 2006, the term 
                        `permissible range' means a rate of 
                        interest which is not above, and not 
                        more than 10 percent below, the 
                        weighted average of the rates of 
                        interest on amounts invested 
                        conservatively in long-term investment 
                        grade corporate bonds during the 4-year 
                        period ending on the last day before 
                        the beginning of the plan year. Such 
                        rates shall be determined by the 
                        Secretary of the Treasury on the basis 
                        of 2 or more indices that are selected 
                        periodically by the Secretary of the 
                        Treasury and that are in the top 3 
                        quality levels available. The Secretary 
                        of the Treasury shall make the 
                        permissible range, and the indices and 
                        methodology used to determine the 
                        average rate, publicly available.''.
                    (B) Secretarial authority.--Subclause (III) 
                of section 302(b)(5)(B)(ii) of such Act, as 
                redesignated by subparagraph (A), is amended--
                            (i) by inserting ``or (II)'' after 
                        ``subclause (I)'' the first place it 
                        appears, and
                            (ii) by striking ``subclause (I)'' 
                        the second place it appears and 
                        inserting ``such subclause''.
                    (C) Conforming amendment.--Subclause (I) of 
                section 302(b)(5)(B)(ii) of such Act is amended 
                by inserting ``or (III)'' after ``subclause 
                (II)''.
            (2) Determination of current liability.--Clause (i) 
        of section 302(d)(7)(C) of such Act is amended by 
        adding at the end the following new subclause:
                                    ``(IV) Special rule for 
                                2004 and 2005.--For plan years 
                                beginning in 2004 or 2005, 
                                notwithstanding subclause (I), 
                                the rate of interest used to 
                                determine current liability 
                                under this subsection shall be 
                                the rate of interest under 
                                subsection (b)(5).''.
            (3) Conforming amendment.--Paragraph (7) of section 
        302(e) of such Act is amended to read as follows:
            ``(7) Special rule for 2002.--In any case in which 
        the interest rate used to determine current liability 
        is determined under subsection (d)(7)(C)(i)(III), for 
        purposes of applying paragraphs (1) and (4)(B)(ii) for 
        plan years beginning in 2002, the current liability for 
        the preceding plan year shall be redetermined using 120 
        percent as the specified percentage determined under 
        subsection (d)(7)(C)(i)(II).''.
            (4) PBGC.--Clause (iii) of section 4006(a)(3)(E) of 
        such Act is amended by adding at the end the following 
        new subclause:
            ``(V) In the case of plan years beginning after 
        December 31, 2003, and before January 1, 2006, the 
        annual yield taken into account under subclause (II) 
        shall be the annual rate of interest determined by the 
        Secretary of the Treasury on amounts invested 
        conservatively in long-term investment grade corporate 
        bonds for the month preceding the month in which the 
        plan year begins. For purposes of the preceding 
        sentence, the Secretary of the Treasury shall determine 
        such rate of interest on the basis of 2 or more indices 
        that are selected periodically by the Secretary of the 
        Treasury and that are in the top 3 quality levels 
        available. The Secretary of the Treasury shall make the 
        permissible range, and the indices and methodology used 
        to determine the rate, publicly available.''.
    (b) Internal Revenue Code of 1986.--
            (1) Determination of permissible range.--
                    (A) In general.--Clause (ii) of section 
                412(b)(5)(B) of the Internal Revenue Code of 
                1986 is amended by redesignating subclause (II) 
                as subclause (III) and by inserting after 
                subclause (I) the following new subclause:
                                    ``(II) Special rule for 
                                years 2004 and 2005.--In the 
                                case of plan years beginning 
                                after December 31, 2003, and 
                                before January 1, 2006, the 
                                term `permissible range' means 
                                a rate of interest which is not 
                                above, and not more than 10 
                                percent below, the weighted 
                                average of the rates of 
                                interest on amounts invested 
                                conservatively in long-term 
                                investment grade corporate 
                                bonds during the 4-year period 
                                ending on the last day before 
                                the beginning of the plan year. 
                                Such rates shall be determined 
                                by the Secretary on the basis 
                                of 2 or more indices that are 
                                selected periodically by the 
                                Secretary and that are in the 
                                top 3 quality levels available. 
                                The Secretary shall make the 
                                permissible range, and the 
                                indices and methodology used to 
                                determine the average rate, 
                                publicly available.''.
                    (B) Secretarial authority.--Subclause (III) 
                of section 412(b)(5)(B)(ii) of such Code, as 
                redesignated by subparagraph (A), is amended--
                            (i) by inserting ``or (II)'' after 
                        ``subclause (I)'' the first place it 
                        appears, and
                            (ii) by striking ``subclause (I)'' 
                        the second place it appears and 
                        inserting ``such subclause''.
                    (C) Conforming amendment.--Subclause (I) of 
                section 412(b)(5)(B)(ii) of such Code is 
                amended by inserting ``or (III)'' after 
                ``subclause (II)''.
            (2) Determination of current liability.--Clause (i) 
        of section 412(l)(7)(C) of such Code is amended by 
        adding at the end the following new subclause:
                                    ``(IV) Special rule for 
                                2004 and 2005.--For plan years 
                                beginning in 2004 or 2005, 
                                notwithstanding subclause (I), 
                                the rate of interest used to 
                                determine current liability 
                                under this subsection shall be 
                                the rate of interest under 
                                subsection (b)(5).''.
            (3) Conforming amendment.--Paragraph (7) of section 
        412(m) of such Code is amended to read as follows:
            ``(7) Special rule for 2002.--In any case in which 
        the interest rate used to determine current liability 
        is determined under subsection (l)(7)(C)(i)(III), for 
        purposes of applying paragraphs (1) and (4)(B)(ii) for 
        plan years beginning in 2002, the current liability for 
        the preceding plan year shall be redetermined using 120 
        percent as the specified percentage determined under 
        subsection (l)(7)(C)(i)(II).''.
            (4) Limitation on certain assumptions.--Section 
        415(b)(2)(E)(ii) of such Code is amended by inserting 
        ``, except that in the case of plan years beginning in 
        2004 or 2005, `5.5 percent' shall be substituted for `5 
        percent' in clause (i)'' before the period at the end.
            (5) Election to disregard modification for 
        deduction purposes.--Section 404(a)(1) of such Code is 
        amended by adding at the end the following new 
        subparagraph:
                    ``(F) Election to disregard modified 
                interest rate.--An employer may elect to 
                disregard subsections (b)(5)(B)(ii)(II) and 
                (l)(7)(C)(i)(IV) of section 412 solely for 
                purposes of determining the interest rate used 
                in calculating the maximum amount of the 
                deduction allowable under this paragraph.''.
    (c) Provisions Relating to Plan Amendments.--
            (1) In general.--If this subsection applies to any 
        plan or annuity contract amendment--
                    (A) such plan or contract shall be treated 
                as being operated in accordance with the terms 
                of the plan or contract during the period 
                described in paragraph (2)(B)(i), and
                    (B) except as provided by the Secretary of 
                the Treasury, such plan shall not fail to meet 
                the requirements of section 411(d)(6) of the 
                Internal Revenue Code of 1986 and section 
                204(g) of the Employee Retirement Income 
                Security Act of 1974 by reason of such 
                amendment.
            (2) Amendments to which section applies.--
                    (A) In general.--This subsection shall 
                apply to any amendment to any plan or annuity 
                contract which is made--
                            (i) pursuant to any amendment made 
                        by this section, and
                            (ii) on or before the last day of 
                        the first plan year beginning on or 
                        after January 1, 2006.
                    (B) Conditions.--This subsection shall not 
                apply to any plan or annuity contract amendment 
                unless--
                            (i) during the period beginning on 
                        the date the amendment described in 
                        subparagraph (A)(i) takes effect and 
                        ending on the date described in 
                        subparagraph (A)(ii) (or, if earlier, 
                        the date the plan or contract amendment 
                        is adopted), the plan or contract is 
                        operated as if such plan or contract 
                        amendment were in effect; and
                            (ii) such plan or contract 
                        amendment applies retroactively for 
                        such period.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraphs 
        (2) and (3), the amendments made by this section shall 
        apply to plan years beginning after December 31, 2003.
            (2) Lookback rules.--For purposes of applying 
        subsections (d)(9)(B)(ii) and (e)(1) of section 302 of 
        the Employee Retirement Income Security Act of 1974 and 
        subsections (l)(9)(B)(ii) and (m)(1) of section 412 of 
        the Internal Revenue Code of 1986 to plan years 
        beginning after December 31, 2003, the amendments made 
        by this section may be applied as if such amendments 
        had been in effect for all prior plan years. The 
        Secretary of the Treasury may prescribe simplified 
        assumptions which may be used in applying the 
        amendments made by this section to such prior plan 
        years.
            (3) Transition rule for section 415 limitation.--In 
        the case of any participant or beneficiary receiving a 
        distribution after December 31, 2003 and before January 
        1, 2005, the amount payable under any form of benefit 
        subject to section 417(e)(3) of the Internal Revenue 
        Code of 1986 and subject to adjustment under section 
        415(b)(2)(B) of such Code shall not, solely by reason 
        of the amendment made by subsection (b)(4), be less 
        than the amount that would have been so payable had the 
        amount payable been determined using the applicable 
        interest rate in effect as of the last day of the last 
        plan year beginning before January 1, 2004.

SEC. 102. ELECTION OF ALTERNATIVE DEFICIT REDUCTION CONTRIBUTION.

    (a) Amendment of ERISA.--Section 302(d) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1082(d)) is 
amended by adding at the end the following new paragraph:
            ``(12) Election for certain plans.--
                    ``(A) In general.--In the case of a defined 
                benefit plan established and maintained by an 
                applicable employer, if this subsection did not 
                apply to the plan for the plan year beginning 
                in 2000 (determined without regard to paragraph 
                (6)), then, at the election of the employer, 
                the increased amount under paragraph (1) for 
                any applicable plan year shall be the greater 
                of--
                            ``(i) 20 percent of the increased 
                        amount under paragraph (1) determined 
                        without regard to this paragraph, or
                            ``(ii) the increased amount which 
                        would be determined under paragraph (1) 
                        if the deficit reduction contribution 
                        under paragraph (2) for the applicable 
                        plan year were determined without 
                        regard to subparagraphs (A), (B), and 
                        (D) of paragraph (2).
                    ``(B) Restrictions on benefit increases.--
                No amendment which increases the liabilities of 
                the plan by reason of any increase in benefits, 
                any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan shall be adopted 
                during any applicable plan year, unless--
                            ``(i) the plan's enrolled actuary 
                        certifies (in such form and manner 
                        prescribed by the Secretary of the 
                        Treasury) that the amendment provides 
                        for an increase in annual contributions 
                        which will exceed the increase in 
                        annual charges to the funding standard 
                        account attributable to such amendment, 
                        or
                            ``(ii) the amendment is required by 
                        a collective bargaining agreement which 
                        is in effect on the date of enactment 
                        of this subparagraph.

                If a plan is amended during any applicable plan 
                year in violation of the preceding sentence, 
                any election under this paragraph shall not 
                apply to any applicable plan year ending on or 
                after the date on which such amendment is 
                adopted.
                    ``(C) Applicable employer.--For purposes of 
                this paragraph, the term `applicable employer' 
                means an employer which is--
                            ``(i) a commercial passenger 
                        airline,
                            ``(ii) primarily engaged in the 
                        production or manufacture of a steel 
                        mill product or the processing of iron 
                        ore pellets, or
                            ``(iii) an organization described 
                        in section 501(c)(5) of the Internal 
                        Revenue Code of 1986 and which 
                        established the plan to which this 
                        paragraph applies on June 30, 1955.
                    ``(D) Applicable plan year.--For purposes 
                of this paragraph--
                            ``(i) In general.--The term 
                        `applicable plan year' means any plan 
                        year beginning after December 27, 2003, 
                        and before December 28, 2005, for which 
                        the employer elects the application of 
                        this paragraph.
                            ``(ii) Limitation on number of 
                        years which may be elected.--An 
                        election may not be made under this 
                        paragraph with respect to more than 2 
                        plan years.
                    ``(E) Notice requirements for plans 
                electing alternative deficit reduction 
                contributions.--
                            ``(i) In general.--If an employer 
                        elects an alternative deficit reduction 
                        contribution under this paragraph and 
                        section 412(l)(12) of the Internal 
                        Revenue Code of 1986 for any year, the 
                        employer shall provide, within 30 days 
                        of filing the election for such year, 
                        written notice of the election to 
                        participants and beneficiaries and to 
                        the Pension Benefit Guaranty 
                        Corporation.
                            ``(ii) Notice to participants and 
                        beneficiaries.--The notice under clause 
                        (i) to participants and beneficiaries 
                        shall include with respect to any 
                        election--
                                    ``(I) the due date of the 
                                alternative deficit reduction 
                                contribution and the amount by 
                                which such contribution was 
                                reduced from the amount which 
                                would have been owed if the 
                                election were not made, and
                                    ``(II) a description of the 
                                benefits under the plan which 
                                are eligible to be guaranteed 
                                by the Pension Benefit Guaranty 
                                Corporation and an explanation 
                                of the limitations on the 
                                guarantee and the circumstances 
                                under which such limitations 
                                apply, including the maximum 
                                guaranteed monthly benefits 
                                which the Pension Benefit 
                                Guaranty Corporation would pay 
                                if the plan terminated while 
                                underfunded.
                            ``(iii) Notice to pbgc.--The notice 
                        under clause (i) to the Pension Benefit 
                        Guaranty Corporation shall include--
                                    ``(I) the information 
                                described in clause (ii)(I),
                                    ``(II) the number of years 
                                it will take to restore the 
                                plan to full funding if the 
                                employer only makes the 
                                required contributions, and
                                    ``(III) information as to 
                                how the amount by which the 
                                plan is underfunded compares 
                                with the capitalization of the 
                                employer making the election.
                    ``(F) Election.--An election under this 
                paragraph shall be made at such time and in 
                such manner as the Secretary of the Treasury 
                may prescribe.''
    (b) Amendment of 1986 Code.--Section 412(l) of the Internal 
Revenue Code of 1986 (relating to applicability of subsection) 
is amended by adding at the end the following new paragraph:
            ``(12) Election for certain plans.--
                    ``(A) In general.--In the case of a defined 
                benefit plan established and maintained by an 
                applicable employer, if this subsection did not 
                apply to the plan for the plan year beginning 
                in 2000 (determined without regard to paragraph 
                (6)), then, at the election of the employer, 
                the increased amount under paragraph (1) for 
                any applicable plan year shall be the greater 
                of--
                            ``(i) 20 percent of the increased 
                        amount under paragraph (1) determined 
                        without regard to this paragraph, or
                            ``(ii) the increased amount which 
                        would be determined under paragraph (1) 
                        if the deficit reduction contribution 
                        under paragraph (2) for the applicable 
                        plan year were determined without 
                        regard to subparagraphs (A), (B), and 
                        (D) of paragraph (2).
                    ``(B) Restrictions on benefit increases.--
                No amendment which increases the liabilities of 
                the plan by reason of any increase in benefits, 
                any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan shall be adopted 
                during any applicable plan year, unless--
                            ``(i) the plan's enrolled actuary 
                        certifies (in such form and manner 
                        prescribed by the Secretary) that the 
                        amendment provides for an increase in 
                        annual contributions which will exceed 
                        the increase in annual charges to the 
                        funding standard account attributable 
                        to such amendment, or
                            ``(ii) the amendment is required by 
                        a collective bargaining agreement which 
                        is in effect on the date of enactment 
                        of this subparagraph.

                If a plan is amended during any applicable plan 
                year in violation of the preceding sentence, 
                any election under this paragraph shall not 
                apply to any applicable plan year ending on or 
                after the date on which such amendment is 
                adopted.
                    ``(C) Applicable employer.--For purposes of 
                this paragraph, the term `applicable employer' 
                means an employer which is--
                            ``(i) a commercial passenger 
                        airline,
                            ``(ii) primarily engaged in the 
                        production or manufacture of a steel 
                        mill product or the processing of iron 
                        ore pellets, or
                            ``(iii) an organization described 
                        in section 501(c)(5) and which 
                        established the plan to which this 
                        paragraph applies on June 30, 1955.
                    ``(D) Applicable plan year.--For purposes 
                of this paragraph--
                            ``(i) In general.--The term 
                        `applicable plan year' means any plan 
                        year beginning after December 27, 2003, 
                        and before December 28, 2005, for which 
                        the employer elects the application of 
                        this paragraph.
                            ``(ii) Limitation on number of 
                        years which may be elected.--An 
                        election may not be made under this 
                        paragraph with respect to more than 2 
                        plan years.
                    ``(E) Election.--An election under this 
                paragraph shall be made at such time and in 
                such manner as the Secretary may prescribe.''
    (c) Effect of Election.--An election under section 
302(d)(12) of the Employee Retirement Income Security Act of 
1974 or section 412(l)(12) of the Internal Revenue Code of 1986 
(as added by this section) with respect to a plan shall not 
invalidate any obligation (pursuant to a collective bargaining 
agreement in effect on the date of the election) to provide 
benefits, to change the accrual of benefits, or to change the 
rate at which benefits become nonforfeitable under the plan.
    (d) Penalty for Failing To Provide Notice.--Section 
502(c)(3) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1132(c)(3)) is amended by inserting ``or who 
fails to meet the requirements of section 302(d)(12)(E) with 
respect to any person'' after ``101(e)(2) with respect to any 
person''.

SEC. 103. MULTIEMPLOYER PLAN FUNDING NOTICES.

    (a) In General.--Section 101 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1021) is amended by 
inserting after subsection (e) the following new subsection:
    ``(f) Multiemployer Defined Benefit Plan Funding Notices.--
            ``(1) In general.--The administrator of a defined 
        benefit plan which is a multiemployer plan shall for 
        each plan year provide a plan funding notice to each 
        plan participant and beneficiary, to each labor 
        organization representing such participants or 
        beneficiaries, to each employer that has an obligation 
        to contribute under the plan, and to the Pension 
        Benefit Guaranty Corporation.
            ``(2) Information contained in notices.--
                    ``(A) Identifying information.--Each notice 
                required under paragraph (1) shall contain 
                identifying information, including the name of 
                the plan, the address and phone number of the 
                plan administrator and the plan's principal 
                administrative officer, each plan sponsor's 
                employer identification number, and the plan 
                number of the plan.
                    ``(B) Specific information.--A plan funding 
                notice under paragraph (1) shall include--
                            ``(i) a statement as to whether the 
                        plan's funded current liability 
                        percentage (as defined in section 
                        302(d)(8)(B)) for the plan year to 
                        which the notice relates is at least 
                        100 percent (and, if not, the actual 
                        percentage);
                            ``(ii) a statement of the value of 
                        the plan's assets, the amount of 
                        benefit payments, and the ratio of the 
                        assets to the payments for the plan 
                        year to which the notice relates;
                            ``(iii) a summary of the rules 
                        governing insolvent multiemployer 
                        plans, including the limitations on 
                        benefit payments and any potential 
                        benefit reductions and suspensions (and 
                        the potential effects of such 
                        limitations, reductions, and 
                        suspensions on the plan); and
                            ``(iv) a general description of the 
                        benefits under the plan which are 
                        eligible to be guaranteed by the 
                        Pension Benefit Guaranty Corporation, 
                        along with an explanation of the 
                        limitations on the guarantee and the 
                        circumstances under which such 
                        limitations apply.
                    ``(C) Other information.--Each notice under 
                paragraph (1) shall include any additional 
                information which the plan administrator elects 
                to include to the extent not inconsistent with 
                regulations prescribed by the Secretary.
            ``(3) Time for providing notice.--Any notice under 
        paragraph (1) shall be provided no later than two 
        months after the deadline (including extensions) for 
        filing the annual report for the plan year to which the 
        notice relates.
            ``(4) Form and manner.--Any notice under paragraph 
        (1)--
                    ``(A) shall be provided in a form and 
                manner prescribed in regulations of the 
                Secretary,
                    ``(B) shall be written in a manner so as to 
                be understood by the average plan participant, 
                and
                    ``(C) may be provided in written, 
                electronic, or other appropriate form to the 
                extent such form is reasonably accessible to 
                persons to whom the notice is required to be 
                provided.''
    (b) Penalties.--Section 502(c)(1) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1132(c)(1)) 
is amended by striking ``or section 101(e)(1)'' and inserting 
``, section 101(e)(1), or section 101(f)''.
    (c) Regulations and Model Notice.--The Secretary of Labor 
shall, not later than 1 year after the date of the enactment of 
this Act, issue regulations (including a model notice) 
necessary to implement the amendments made by this section.
    (d) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2004.

SEC. 104. ELECTION FOR DEFERRAL OF CHARGE FOR PORTION OF NET EXPERIENCE 
                    LOSS.

    (a) Employee Retirement Income Security Act of 1974.--
            (1) In general.--Section 302(b)(7) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 
        1082(b)(7)) is amended by adding at the end the 
        following new subparagraph:
                    ``(F) Election for deferral of charge for 
                portion of net experience loss.--
                            ``(i) In general.--With respect to 
                        the net experience loss of an eligible 
                        multiemployer plan for the first plan 
                        year beginning after December 31, 2001, 
                        the plan sponsor may elect to defer up 
                        to 80 percent of the amount otherwise 
                        required to be charged under paragraph 
                        (2)(B)(iv) for any plan year beginning 
                        after June 30, 2003, and before July 1, 
                        2005, to any plan year selected by the 
                        plan from either of the 2 immediately 
                        succeeding plan years.
                            ``(ii) Interest.--For the plan year 
                        to which a charge is deferred pursuant 
                        to an election under clause (i), the 
                        funding standard account shall be 
                        charged with interest on the deferred 
                        charge for the period of deferral at 
                        the rate determined under section 
                        304(a) for multiemployer plans.
                            ``(iii) Restrictions on benefit 
                        increases.--No amendment which 
                        increases the liabilities of the plan 
                        by reason of any increase in benefits, 
                        any change in the accrual of benefits, 
                        or any change in the rate at which 
                        benefits become nonforfeitable under 
                        the plan shall be adopted during any 
                        period for which a charge is deferred 
                        pursuant to an election under clause 
                        (i), unless--
                                    ``(I) the plan's enrolled 
                                actuary certifies (in such form 
                                and manner prescribed by the 
                                Secretary of the Treasury) that 
                                the amendment provides for an 
                                increase in annual 
                                contributions which will exceed 
                                the increase in annual charges 
                                to the funding standard account 
                                attributable to such amendment, 
                                or
                                    ``(II) the amendment is 
                                required by a collective 
                                bargaining agreement which is 
                                in effect on the date of 
                                enactment of this subparagraph.
                        If a plan is amended during any such 
                        plan year in violation of the preceding 
                        sentence, any election under this 
                        paragraph shall not apply to any such 
                        plan year ending on or after the date 
                        on which such amendment is adopted.
                            ``(iv) Eligible multiemployer 
                        plan.--For purposes of this 
                        subparagraph, the term `eligible 
                        multiemployer plan' means a 
                        multiemployer plan--
                                    ``(I) which had a net 
                                investment loss for the first 
                                plan year beginning after 
                                December 31, 2001, of at least 
                                10 percent of the average fair 
                                market value of the plan assets 
                                during the plan year, and
                                    ``(II) with respect to 
                                which the plan's enrolled 
                                actuary certifies (not taking 
                                into account the application of 
                                this subparagraph), on the 
                                basis of the actuarial 
                                assumptions used for the last 
                                plan year ending before the 
                                date of the enactment of this 
                                subparagraph, that the plan is 
                                projected to have an 
                                accumulated funding deficiency 
                                (within the meaning of 
                                subsection (a)(2)) for any plan 
                                year beginning after June 30, 
                                2003, and before July 1, 2006.
                        For purposes of subclause (I), a plan's 
                        net investment loss shall be determined 
                        on the basis of the actual loss and not 
                        under any actuarial method used under 
                        subsection (c)(2).
                            ``(v) Exception to treatment of 
                        eligible multiemployer plan.--In no 
                        event shall a plan be treated as an 
                        eligible multiemployer plan under 
                        clause (iv) if--
                                    ``(I) for any taxable year 
                                beginning during the 10-year 
                                period preceding the first plan 
                                year for which an election is 
                                made under clause (i), any 
                                employer required to contribute 
                                to the plan failed to timely 
                                pay any excise tax imposed 
                                under section 4971 of the 
                                Internal Revenue Code of 1986 
                                with respect to the plan,
                                    ``(II) for any plan year 
                                beginning after June 30, 1993, 
                                and before the first plan year 
                                for which an election is made 
                                under clause (i), the average 
                                contribution required to be 
                                made by all employers to the 
                                plan does not exceed 10 cents 
                                per hour or no employer is 
                                required to make contributions 
                                to the plan, or
                                    ``(III) with respect to any 
                                of the plan years beginning 
                                after June 30, 1993, and before 
                                the first plan year for which 
                                an election is made under 
                                clause (i), a waiver was 
                                granted under section 303 of 
                                this Act or section 412(d) of 
                                the Internal Revenue Code of 
                                1986 with respect to the plan 
                                or an extension of an 
                                amortization period was granted 
                                under section 304 of this Act 
                                or section 412(e) of such Code 
                                with respect to the plan.
                            ``(vi) Notice.--If a plan sponsor 
                        makes an election under this 
                        subparagraph or section 412(b)(7)(F) of 
                        the Internal Revenue Code of 1986 for 
                        any plan year, the plan administrator 
                        shall provide, within 30 days of filing 
                        the election for such year, written 
                        notice of the election to participants 
                        and beneficiaries, to each labor 
                        organization representing such 
                        participants or beneficiaries, to each 
                        employer that has an obligation to 
                        contribute under the plan, and to the 
                        Pension Benefit Guaranty Corporation. 
                        Such notice shall include with respect 
                        to any election the amount of any 
                        charge to be deferred and the period of 
                        the deferral. Such notice shall also 
                        include the maximum guaranteed monthly 
                        benefits which the Pension Benefit 
                        Guaranty Corporation would pay if the 
                        plan terminated while underfunded.
                            ``(vii) Election.--An election 
                        under this subparagraph shall be made 
                        at such time and in such manner as the 
                        Secretary of the Treasury may 
                        prescribe.''
            (2) Penalty.--Section 502(c)(4) of such Act (29 
        U.S.C. 1132(c)(4)) is amended to read as follows:
            ``(4) The Secretary may assess a civil penalty of 
        not more than $1,000 a day for each violation by any 
        person of section 302(b)(7)(F)(vi).''
    (b) Internal Revenue Code of 1986.--Section 412(b)(7) of 
the Internal Revenue Code of 1986 (relating to special rules 
for multiemployer plans) is amended by adding at the end the 
following new subparagraph:
                    ``(F) Election for deferral of charge for 
                portion of net experience loss.--
                            ``(i) In general.--With respect to 
                        the net experience loss of an eligible 
                        multiemployer plan for the first plan 
                        year beginning after December 31, 2001, 
                        the plan sponsor may elect to defer up 
                        to 80 percent of the amount otherwise 
                        required to be charged under paragraph 
                        (2)(B)(iv) for any plan year beginning 
                        after June 30, 2003, and before July 1, 
                        2005, to any plan year selected by the 
                        plan from either of the 2 immediately 
                        succeeding plan years.
                            ``(ii) Interest.--For the plan year 
                        to which a charge is deferred pursuant 
                        to an election under clause (i), the 
                        funding standard account shall be 
                        charged with interest on the deferred 
                        charge for the period of deferral at 
                        the rate determined under subsection 
                        (d) for multiemployer plans.
                            ``(iii) Restrictions on benefit 
                        increases.--No amendment which 
                        increases the liabilities of the plan 
                        by reason of any increase in benefits, 
                        any change in the accrual of benefits, 
                        or any change in the rate at which 
                        benefits become nonforfeitable under 
                        the plan shall be adopted during any 
                        period for which a charge is deferred 
                        pursuant to an election under clause 
                        (i), unless--
                                    ``(I) the plan's enrolled 
                                actuary certifies (in such form 
                                and manner prescribed by the 
                                Secretary) that the amendment 
                                provides for an increase in 
                                annual contributions which will 
                                exceed the increase in annual 
                                charges to the funding standard 
                                account attributable to such 
                                amendment, or
                                    ``(II) the amendment is 
                                required by a collective 
                                bargaining agreement which is 
                                in effect on the date of 
                                enactment of this subparagraph.
                        If a plan is amended during any such 
                        plan year in violation of the preceding 
                        sentence, any election under this 
                        paragraph shall not apply to any such 
                        plan year ending on or after the date 
                        on which such amendment is adopted.
                            ``(iv) Eligible multiemployer 
                        plan.--For purposes of this 
                        subparagraph, the term `eligible 
                        multiemployer plan' means a 
                        multiemployer plan--
                                    ``(I) which had a net 
                                investment loss for the first 
                                plan year beginning after 
                                December 31, 2001, of at least 
                                10 percent of the average fair 
                                market value of the plan assets 
                                during the plan year, and
                                    ``(II) with respect to 
                                which the plan's enrolled 
                                actuary certifies (not taking 
                                into account the application of 
                                this subparagraph), on the 
                                basis of the acutuarial 
                                assumptions used for the last 
                                plan year ending before the 
                                date of the enactment of this 
                                subparagraph, that the plan is 
                                projected to have an 
                                accumulated funding deficiency 
                                (within the meaning of 
                                subsection (a)) for any plan 
                                year beginning after June 30, 
                                2003, and before July 1, 2006.
                        For purposes of subclause (I), a plan's 
                        net investment loss shall be determined 
                        on the basis of the actual loss and not 
                        under any actuarial method used under 
                        subsection (c)(2).
                            ``(v) Exception to treatment of 
                        eligible multiemployer plan.--In no 
                        event shall a plan be treated as an 
                        eligible multiemployer plan under 
                        clause (iv) if--
                                    ``(I) for any taxable year 
                                beginning during the 10-year 
                                period preceding the first plan 
                                year for which an election is 
                                made under clause (i), any 
                                employer required to contribute 
                                to the plan failed to timely 
                                pay any excise tax imposed 
                                under section 4971 with respect 
                                to the plan,
                                    ``(II) for any plan year 
                                beginning after June 30, 1993, 
                                and before the first plan year 
                                for which an election is made 
                                under clause (i), the average 
                                contribution required to be 
                                made by all employers to the 
                                plan does not exceed 10 cents 
                                per hour or no employer is 
                                required to make contributions 
                                to the plan, or
                                    ``(III) with respect to any 
                                of the plan years beginning 
                                after June 30, 1993, and before 
                                the first plan year for which 
                                an election is made under 
                                clause (i), a waiver was 
                                granted under section 412(d) or 
                                section 303 of the Employee 
                                Retirement Income Security Act 
                                of 1974 with respect to the 
                                plan or an extension of an 
                                amortization period was granted 
                                under subsection (e) or section 
                                304 of such Act with respect to 
                                the plan.
                            ``(vi) Election.--An election under 
                        this subparagraph shall be made at such 
                        time and in such manner as the 
                        Secretary may prescribe.''

                       TITLE II--OTHER PROVISIONS

SEC. 201. 2-YEAR EXTENSION OF TRANSITION RULE TO PENSION FUNDING 
                    REQUIREMENTS.

    (a) In General.--Section 769(c) of the Retirement 
Protection Act of 1994, as added by section 1508 of the 
Taxpayer Relief Act of 1997, is amended--
            (1) by inserting ``except as provided in paragraph 
        (3),'' before ``the transition rules'', and
            (2) by adding at the end the following:
    ``(3) Special rules.--In the case of plan years beginning 
in 2004 and 2005, the following transition rules shall apply in 
lieu of the transition rules described in paragraph (2):
                    ``(A) For purposes of section 412(l)(9)(A) 
                of the Internal Revenue Code of 1986 and 
                section 302(d)(9)(A) of the Employee Retirement 
                Income Security Act of 1974, the funded current 
                liability percentage for any plan year shall be 
                treated as not less than 90 percent.
                    ``(B) For purposes of section 412(m) of the 
                Internal Revenue Code of 1986 and section 
                302(e) of the Employee Retirement Income 
                Security Act of 1974, the funded current 
                liability percentage for any plan year shall be 
                treated as not less than 100 percent.
                    ``(C) For purposes of determining unfunded 
                vested benefits under section 
                4006(a)(3)(E)(iii) of the Employee Retirement 
                Income Security Act of 1974, the mortality 
                table shall be the mortality table used by the 
                plan.''
    (b) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2003.

SEC. 202. PROCEDURES APPLICABLE TO DISPUTES INVOLVING PENSION PLAN 
                    WITHDRAWAL LIABILITY.

    (a) In General.--Section 4221 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1401) is amended by 
adding at the end the following new subsection:
    ``(f) Procedures Applicable to Certain Disputes.--
            ``(1) In general.--If--
                    ``(A) a plan sponsor of a plan determines 
                that--
                            ``(i) a complete or partial 
                        withdrawal of an employer has occurred, 
                        or
                            ``(ii) an employer is liable for 
                        withdrawal liability payments with 
                        respect to the complete or partial 
                        withdrawal of an employer from the 
                        plan,
                    ``(B) such determination is based in whole 
                or in part on a finding by the plan sponsor 
                under section 4212(c) that a principal purpose 
                of a transaction that occurred before January 
                1, 1999, was to evade or avoid withdrawal 
                liability under this subtitle, and
                    ``(C) such transaction occurred at least 5 
                years before the date of the complete or 
                partial withdrawal,
        then the special rules under paragraph (2) shall be 
        used in applying subsections (a) and (d) of this 
        section and section 4219(c) to the employer.
            ``(2) Special rules.--
                    ``(A) Determination.--Notwithstanding 
                subsection (a)(3)--
                            ``(i) a determination by the plan 
                        sponsor under paragraph (1)(B) shall 
                        not be presumed to be correct, and
                            ``(ii) the plan sponsor shall have 
                        the burden to establish, by a 
                        preponderance of the evidence, the 
                        elements of the claim under section 
                        4212(c) that a principal purpose of the 
                        transaction was to evade or avoid 
                        withdrawal liability under this 
                        subtitle.
                Nothing in this subparagraph shall affect the 
                burden of establishing any other element of a 
                claim for withdrawal liability under this 
                subtitle.
                    ``(B) Procedure.--Notwithstanding 
                subsection (d) and section 4219(c), if an 
                employer contests the plan sponsor's 
                determination under paragraph (1) through an 
                arbitration proceeding pursuant to subsection 
                (a), or through a claim brought in a court of 
                competent jurisdiction, the employer shall not 
                be obligated to make any withdrawal liability 
                payments until a final decision in the 
                arbitration proceeding, or in court, upholds 
                the plan sponsor's determination.''.
    (b) Effective Date.--The amendments made by this section 
shall apply to any employer that receives a notification under 
section 4219(b)(1) of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1399(b)(1)) after October 31, 2003.

SEC. 203. SENSE OF CONGRESS REGARDING DEFINED BENEFIT PENSION SYSTEM 
                    REFORM.

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

SEC. 204. EXTENSION OF TRANSFERS OF EXCESS PENSION ASSETS TO RETIREE 
                    HEALTH ACCOUNTS.

    (a) Amendment of Internal Revenue Code of 1986.--Paragraph 
(5) of section 420(b) of the Internal Revenue Code of 1986 
(relating to expiration) is amended by striking ``December 31, 
2005'' and inserting ``December 31, 2013''.
    (b) Amendments of ERISA.--
            (1) Section 101(e)(3) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1021(e)(3)) is 
        amended by striking ``Tax Relief Extension Act of 
        1999'' and inserting ``Pension Funding Equity Act of 
        2004''.
            (2) Section 403(c)(1) of such Act (29 U.S.C. 
        1103(c)(1)) is amended by striking ``Tax Relief 
        Extension Act of 1999'' and inserting ``Pension Funding 
        Equity Act of 2004''.
            (3) Paragraph (13) of section 408(b) of such Act 
        (29 U.S.C. 1108(b)(3)) is amended--
                    (A) by striking ``January 1, 2006'' and 
                inserting ``January 1, 2014'', and
                    (B) by striking ``Tax Relief Extension Act 
                of 1999'' and inserting ``Pension Funding 
                Equity Act of 2004''.

SEC. 205. REPEAL OF REDUCTION OF DEDUCTIONS FOR MUTUAL LIFE INSURANCE 
                    COMPANIES.

    (a) In General.--Section 809 of the Internal Revenue Code 
of 1986 (relating to reductions in certain deduction of mutual 
life insurance companies) is hereby repealed.
    (b) Conforming Amendments.--
            (1) Subsections (a)(2)(B) and (b)(1)(B) of section 
        807 of such Code are each amended by striking ``the sum 
        of (i)'' and by striking ``plus (ii) any excess 
        described in section 809(a)(2) for the taxable year,''.
            (2)(A) The last sentence of section 807(d)(1) of 
        such Code is amended by striking ``section 
        809(b)(4)(B)'' and inserting ``paragraph (6)''.
            (B) Subsection (d) of section 807 of such Code is 
        amended by adding at the end the following new 
        paragraph:
            ``(6) Statutory reserves.--The term `statutory 
        reserves' means the aggregate amount set forth in the 
        annual statement with respect to items described in 
        section 807(c). Such term shall not include any reserve 
        attributable to a deferred and uncollected premium if 
        the establishment of such reserve is not permitted 
        under section 811(c).''
            (3) Subsection (c) of section 808 of such Code is 
        amended to read as follows:
    ``(c) Amount of Deduction.--The deduction for policyholder 
dividends for any taxable year shall be an amount equal to the 
policyholder dividends paid or accrued during the taxable 
year.''
            (4) Subparagraph (A) of section 812(b)(3) of such 
        Code is amended by striking ``sections 808 and 809'' 
        and inserting ``section 808''.
            (5) Subsection (c) of section 817 of such Code is 
        amended by striking ``(other than section 809)''.
            (6) Subsection (c) of section 842 of such Code is 
        amended by striking paragraph (3) and by redesignating 
        paragraph (4) as paragraph (3).
            (7) The table of sections for subpart C of part I 
        of subchapter L of chapter 1 of such Code is amended by 
        striking the item relating to section 809.
    (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 2004.

SEC. 206. CLARIFICATION OF EXEMPTION FROM TAX FOR SMALL PROPERTY AND 
                    CASUALTY INSURANCE COMPANIES.

    (a) In General.--Section 501(c)(15)(A) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(A) Insurance companies (as defined in section 
        816(a)) other than life (including interinsurers and 
        reciprocal underwriters) if--
                    ``(i)(I) the gross receipts for the taxable 
                year do not exceed $600,000, and
                    ``(II) more than 50 percent of such gross 
                receipts consist of premiums, or
                    ``(ii) in the case of a mutual insurance 
                company--
                            ``(I) the gross receipts of which 
                        for the taxable year do not exceed 
                        $150,000, and
                            ``(II) more than 35 percent of such 
                        gross receipts consist of premiums.
        Clause (ii) shall not apply to a company if any 
        employee of the company, or a member of the employee's 
        family (as defined in section 2032A(e)(2)), is an 
        employee of another company exempt from taxation by 
        reason of this paragraph (or would be so exempt but for 
        this sentence).''.
    (b) Controlled Group Rule.--Section 501(c)(15)(C) of the 
Internal Revenue Code of 1986 is amended by inserting ``, 
except that in applying section 831(b)(2)(B)(ii) for purposes 
of this subparagraph, subparagraphs (B) and (C) of section 
1563(b)(2) shall be disregarded'' before the period at the end.
    (c) Definition of Insurance Company for Section 831.--
Section 831 of the Internal Revenue Code of 1986 is amended by 
redesignating subsection (c) as subsection (d) and by inserting 
after subsection (b) the following new subsection:
    ``(c) Insurance Company Defined.--For purposes of this 
section, the term `insurance company' has the meaning given to 
such term by section 816(a)).''.
    (d) Conforming Amendment.--Clause (i) of section 
831(b)(2)(A) of the Internal Revenue Code of 1986 is amended by 
striking ``exceed $350,000 but''.
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraph 
        (2), the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2003.
            (2) Transition rule for companies in receivership 
        or liquidation.--In the case of a company or 
        association which--
                    (A) for the taxable year which includes 
                April 1, 2004, meets the requirements of 
                section 501(c)(15)(A) of the Internal Revenue 
                Code of 1986, as in effect for the last taxable 
                year beginning before January 1, 2004, and
                    (B) on April 1, 2004, is in a receivership, 
                liquidation, or similar proceeding under the 
                supervision of a State court,
        the amendments made by this section shall apply to 
        taxable years beginning after the earlier of the date 
        such proceeding ends or December 31, 2007.

SEC. 207. CONFIRMATION OF ANTITRUST STATUS OF GRADUATE MEDICAL RESIDENT 
                    MATCHING PROGRAMS.

    (a) Findings and Purposes.--
            (1) Findings.--Congress makes the following 
        findings:
                    (A) For over 50 years, most United States 
                medical school seniors and the large majority 
                of graduate medical education programs 
                (popularly known as ``residency programs'') 
                have chosen to use a matching program to match 
                medical students with residency programs to 
                which they have applied. These matching 
                programs have been an integral part of an 
                educational system that has produced the finest 
                physicians and medical researchers in the 
                world.
                    (B) Before such matching programs were 
                instituted, medical students often felt 
                pressure, at an unreasonably early stage of 
                their medical education, to seek admission to, 
                and accept offers from, residency programs. As 
                a result, medical students often made binding 
                commitments before they were in a position to 
                make an informed decision about a medical 
                specialty or a residency program and before 
                residency programs could make an informed 
                assessment of students' qualifications. This 
                situation was inefficient, chaotic, and unfair 
                and it often led to placements that did not 
                serve the interests of either medical students 
                or residency programs.
                    (C) The original matching program, now 
                operated by the independent non-profit National 
                Resident Matching Program and popularly known 
                as ``the Match,'' was developed and implemented 
                more than 50 years ago in response to 
                widespread student complaints about the prior 
                process. This Program includes on its board of 
                directors individuals nominated by medical 
                student organizations as well as by major 
                medical education and hospital associations.
                    (D) The Match uses a computerized 
                mathematical algorithm, as students had 
                recommended, to analyze the preferences of 
                students and residency programs and match 
                students with their highest preferences from 
                among the available positions in residency 
                programs that listed them. Students thus obtain 
                a residency position in the most highly ranked 
                program on their list that has ranked them 
                sufficiently high among its preferences. Each 
                year, about 85 percent of participating United 
                States medical students secure a place in one 
                of their top 3 residency program choices.
                    (E) Antitrust lawsuits challenging the 
                matching process, regardless of their merit or 
                lack thereof, have the potential to undermine 
                this highly efficient, pro-competitive, and 
                long-standing process. The costs of defending 
                such litigation would divert the scarce 
                resources of our country's teaching hospitals 
                and medical schools from their crucial missions 
                of patient care, physician training, and 
                medical research. In addition, such costs may 
                lead to abandonment of the matching process, 
                which has effectively served the interests of 
                medical students, teaching hospitals, and 
                patients for over half a century.
            (2) Purposes.--It is the purpose of this section 
        to--
                    (A) confirm that the antitrust laws do not 
                prohibit sponsoring, conducting, or 
                participating in a graduate medical education 
                residency matching program, or agreeing to do 
                so; and
                    (B) ensure that those who sponsor, conduct 
                or participate in such matching programs are 
                not subjected to the burden and expense of 
                defending against litigation that challenges 
                such matching programs under the antitrust 
                laws.
    (b) Application of Antitrust Laws to Graduate Medical 
Education Residency Matching Programs.--
            (1) Definitions.--In this subsection:
                    (A) Antitrust laws.--The term ``antitrust 
                laws''--
                            (i) has the meaning given such term 
                        in subsection (a) of the first section 
                        of the Clayton Act (15 U.S.C. 12(a)), 
                        except that such term includes section 
                        5 of the Federal Trade Commission Act 
                        (15 U.S.C. 45) to the extent such 
                        section 5 applies to unfair methods of 
                        competition; and
                            (ii) includes any State law similar 
                        to the laws referred to in clause (i).
                    (B) Graduate medical education program.--
                The term ``graduate medical education program'' 
                means--
                            (i) a residency program for the 
                        medical education and training of 
                        individuals following graduation from 
                        medical school;
                            (ii) a program, known as a 
                        specialty or subspecialty fellowship 
                        program, that provides more advanced 
                        training; and
                            (iii) an institution or 
                        organization that operates, sponsors or 
                        participates in such a program.
                    (C) Graduate medical education residency 
                matching program.--The term ``graduate medical 
                education residency matching program'' means a 
                program (such as those conducted by the 
                National Resident Matching Program) that, in 
                connection with the admission of students to 
                graduate medical education programs, uses an 
                algorithm and matching rules to match students 
                in accordance with the preferences of students 
                and the preferences of graduate medical 
                education programs.
                    (D) Student.--The term ``student'' means 
                any individual who seeks to be admitted to a 
                graduate medical education program.
            (2) Confirmation of Antitrust Status.--It shall not 
        be unlawful under the antitrust laws to sponsor, 
        conduct, or participate in a graduate medical education 
        residency matching program, or to agree to sponsor, 
        conduct, or participate in such a program. Evidence of 
        any of the conduct described in the preceding sentence 
        shall not be admissible in Federal court to support any 
        claim or action alleging a violation of the antitrust 
        laws.
            (3) Applicability.--Nothing in this section shall 
        be construed to exempt from the antitrust laws any 
        agreement on the part of 2 or more graduate medical 
        education programs to fix the amount of the stipend or 
        other benefits received by students participating in 
        such programs.
    (c) Effective Date.--This section shall take effect on the 
date of enactment of this Act, shall apply to conduct whether 
it occurs prior to, on, or after such date of enactment, and 
shall apply to all judicial and administrative actions or other 
proceedings pending on such date of enactment.
      And the Senate agree to the same.

                From the Committee on Education and the 
                Workforce, for consideration of the House bill 
                and the Senate amendment, and modifications 
                committed to conference:
                                   John Boehner,
                                   Howard ``Buck'' McKeon,
                                   Sam Johnson,
                                   Patrick J. Tiberi,
                From the Committee on Ways and Means, for 
                consideration of the House bill and the Senate 
                amendment, and modifications committed to 
                conference:
                                   William Thomas,
                                   Rob Portman,
                                 Managers on the Part of the House.

                                   Chuck Grassley,
                                   Judd Gregg,
                                   Mitch McConnell,
                                Managers on the Part of the Senate.
       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

      The managers on the part of the House and the Senate at 
the conference on the disagreeing votes of the two Houses on 
the amendment of the Senate to the bill (H.R. 3108), to amend 
the Employee Retirement Income Security Act of 1974 and the 
Internal Revenue Code of 1986 to temporarily replace the 30-
year Treasury rate with a rate based on long-term corporate 
bonds for certain pension plan funding requirements, and for 
other purposes, submit the following joint statement to the 
House and the Senate in explanation of the effect of the action 
agreed upon by the managers and recommended in the accompanying 
conference report:
      The Senate amendment struck all of the House bill after 
``SECTION'' (page 2, line 3) and inserted a substitute text.
      The House recedes from its disagreement to the amendment 
of the Senate with an amendment that is a substitute for the 
House bill and the Senate amendment. The differences between 
the House bill, the Senate amendment, and the substitute agreed 
to in conference are noted below, except for clerical 
corrections, conforming changes made necessary by agreements 
reached by the conferees, and minor drafting and clarifying 
changes.

                                CONTENTS

                                                                   Page
Joint Explanatory Statement of the Committee of Conference.......    21
A. Temporary Replacement of Interest Rate Used for Certain 
  Pension Plan Purposes and Alternative Deficit Reduction 
  Contribution for Certain Plans (sec. 3 of the House bill, secs. 
  2-3 of the Senate amendment, secs. 302 and 4006 of ERISA, and 
  secs. 404, 412 and 415 of the Code)............................    22
B. Multiemployer Plan Funding Notices (sec. 4 of the Senate 
  amendment and secs. 101 and 502 of ERISA)......................    36
C. Election for Deferral of Charge for Portion of Net Experience 
  Loss of Multiemployer Plans (sec. 5 of the Senate amendment, 
  sec. 302(b)(7) of ERISA and sec. 412(b)(7) of the Code)........    39
D. Two-Year Extension of Transition Rule to Pension Funding 
  Requirements for Interstate Bus Company (sec. 6 of the Senate 
  amendment, and sec. 769(c) of the Retirement Protection Act of 
  1994 (as added by sec. 1508 of the Taxpayer Relief Act of 
  1997)).........................................................    43
E. Procedures Applicable to Disputes Involving Pension Plan 
  Withdrawal Liability (sec. 7 of the Senate amendment and sec. 
  4221 of ERISA).................................................    45
F. Modify Qualification Rules for Tax-Exempt Property and 
  Casualty Insurance Companies (sec. 10 of the Senate amendment 
  and secs. 501 and 831 of the Code).............................    47
G. Definition of Insurance Company for Property and Casualty 
  Insurance Company Tax Rules (sec. 11 of the Senate amendment 
  and sec. 831 of the Code)......................................    49
H. Repeal of Reduction of Deductions for Mutual Life Insurance 
  Companies (sec. 809 of the Code)...............................    51
I. Sense of Congress Regarding Defined Benefit Pension System 
  Reform (sec. 2 of the House bill and sec. 8 of the Senate 
  amendment).....................................................    52
J. Extension of Provision Permitting Qualified Transfers of 
  Excess Pension Assets to Retiree Health Accounts (sec. 9 of the 
  Senate amendment, sec. 420 of the Code, and secs. 101, 403, and 
  408 of ERISA)..................................................    54
K. Confirmation of Antitrust Status of Graduate Medical Resident 
  Matching Programs..............................................    56
L. Tax Complexity Analysis.......................................    57

A. Temporary Replacement of Interest Rate Used for Certain Pension Plan 
  Purposes and Alternative Deficit Reduction Contribution for Certain 
                                 Plans


(Sec. 3 of the House bill, secs. 2-3 of the Senate amendment, secs. 302 
        and 4006 of ERISA, and secs. 404, 412 and 415 of the Code)

                              PRESENT LAW

In general

      Under present law, the interest rate on 30-year Treasury 
securities is used for several purposes related to defined 
benefit pension plans. Specifically, the interest rate on 30-
year Treasury securities is used: (1) in determining current 
liability for purposes of the funding and deduction rules; (2) 
in determining unfunded vested benefits for purposes of Pension 
Benefit Guaranty Corporation (``PBGC'') variable rate premiums; 
and (3) in determining the minimum required value of lump-sum 
distributions from a defined benefit pension plan and maximum 
lump-sum values for purposes of the limits on benefits payable 
under a defined benefit pension plan.
      The IRS publishes the interest rate on 30-year Treasury 
securities on a monthly basis. The Department of the Treasury 
does not currently issue 30-year Treasury securities. As of 
March 2002, the IRS publishes the average yield on the 30-year 
Treasury bond maturing in February 2031 as a substitute.

Funding rules

            In general
      The Internal Revenue Code (the ``Code'') and the Employee 
Retirement Income Security Act of 1974 (``ERISA'') impose 
minimum funding requirements with respect to defined benefit 
pension plans.\1\ Under the funding rules, the amount of 
contributions required for a plan year is generally the plan's 
normal cost for the year (i.e., the cost of benefits allocated 
to the year under the plan's funding method) plus that year's 
portion of other liabilities that are amortized over a period 
of years, such as benefits resulting from a grant of past 
service credit.
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    \1\ Code sec. 412; ERISA sec. 302. The Code also imposes limits on 
deductible contributions, as discussed below.
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            Additional contributions for underfunded plans
      Under special funding rules (referred to as the ``deficit 
reduction contribution'' rules),\2\ an additional contribution 
to a plan is generally required if the plan's funded current 
liability percentage is less than 90 percent.\3\ A plan's 
``funded current liability percentage'' is the actuarial value 
of plan assets \4\ as a percentage of the plan's current 
liability. In general, a plan's current liability means all 
liabilities to employees and their beneficiaries under the 
plan.
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    \2\ The deficit reduction contribution rules apply to single-
employer plans, other than single-employer plans with no more than 100 
participants on any day in the preceding plan year. Single-employer 
plans with more than 100 but not more than 150 participants are 
generally subject to lower contribution requirements under these rules.
    \3\ Under an alternative test, a plan is not subject to the deficit 
reduction contribution rules for a plan year if (1) the plan's funded 
current liability percentage for the plan year is at least 80 percent, 
and (2) the plan's funded current liability percentage was at least 90 
percent for each of the two immediately preceding plan years or each of 
the second and third immediately preceding plan years.
    \4\ The actuarial value of plan assets is the value determined 
under an actuarial valuation method that takes into account fair market 
value and meets certain other requirements. The use of an actuarial 
valuation method allows appreciation or depreciation in the market 
value of plan assets to be recognized gradually over several plan 
years. Sec. 412(c)(2); Treas. reg. sec. 1.412(c)(2)-1.
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      The amount of the additional contribution required under 
the deficit reduction contribution rules is the sum of two 
amounts: (1) the excess, if any, of (a) the deficit reduction 
contribution (as described below), over (b) the contribution 
required under the normal funding rules; and (2) the amount (if 
any) required with respect to unpredictable contingent event 
benefits.\5\ The amount of the additional contribution cannot 
exceed the amount needed to increase the plan's funded current 
liability percentage to 100 percent.
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    \5\ A plan may provide for unpredictable contingent event benefits, 
which are benefits that depend on contingencies that are not reliably 
and reasonably predictable, such as facility shutdowns or reductions in 
workforce. An additional contribution is generally not required with 
respect to unpredictable contingent event benefits unless the event 
giving rise to the benefits has occurred.
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      The deficit reduction contribution is the sum of (1) the 
``unfunded old liability amount,'' (2) the ``unfunded new 
liability amount,'' and (3) the expected increase in current 
liability due to benefits accruing during the plan year.\6\ The 
``unfunded old liability amount'' is the amount needed to 
amortize certain unfunded liabilities under 1987 and 1994 
transition rules. The ``unfunded new liability amount'' is the 
applicable percentage of the plan's unfunded new liability. 
Unfunded new liability generally means the unfunded current 
liability of the plan (i.e., the amount by which the plan's 
current liability exceeds the actuarial value of plan assets), 
but determined without regard to certain liabilities (such as 
the plan's unfunded old liability and unpredictable contingent 
event benefits). The applicable percentage is generally 30 
percent, but is reduced if the plan's funded current liability 
percentage. is greater than 60 percent.
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    \6\ If the Secretary of the Treasury prescribes a new mortality 
table to be used in determining current liability, as described below, 
the deficit reduction contribution may include an additional amount.
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            Required interest rate and mortality table
      Specific interest rate and mortality assumptions must be 
used in determining a plan's current liability for purposes of 
the special funding rule. The interest rate used to determine a 
plan's current liability must be within a permissible range of 
the weighted average \7\ of the interest rates on 30-year 
Treasury securities for the four-year period ending on the last 
day before the plan year begins. The permissible range is 
generally from 90 percent to 105 percent.\8\ The interest rate 
used under the plan must be consistent with the assumptions 
which reflect the purchase rates which would be used by 
insurance companies to satisfy the liabilities under the 
plan.\9\
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    \7\ The weighting used for this purpose is 40 percent, 30 percent, 
20 percent and 10 percent, starting with the most recent year in the 
four-year period. Notice 88-73, 1988-2 C.B. 383.
    \8\ If the Secretary of the Treasury determines that the lowest 
permissible interest rate in this range is unreasonably high, the 
Secretary may prescribe a lower rate, but not less than 80 percent of 
the weighted average of the 30-year Treasury rate.
    \9\ Code sec. 412(b)(5)(B)(iii)(II); ERISA sec. 
302(b)(5)(B)(iii)(II). Under Notice 90-11, 1990-1 C.B. 319, the 
interest rates in the permissible range are deemed to be consistent 
with the assumptions reflecting the purchase rates that would be used 
by insurance companies to satisfy the liabilities under the plan.
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      The Job Creation and Worker Assistance Act of 2002 \10\ 
amended the permissible range of the statutory interest rate 
used in calculating a plan's current liability for purposes of 
applying the additional contribution requirements. Under this 
provision, the permissible range is from 90 percent to 120 
percent for plan years beginning after December 31, 2001, and 
before January 1, 2004.
---------------------------------------------------------------------------
    \10\ Pub. L. No. 107-147.
---------------------------------------------------------------------------
      The Secretary of the Treasury is required to prescribe 
mortality tables and to periodically review (at least every 
five years) and update such tables to reflect the actuarial 
experience of pension plans and projected trends in such 
experience.\11\ The Secretary of the Treasury has required the 
use of the 1983 Group Annuity Mortality Table.\12\
---------------------------------------------------------------------------
    \11\ Code sec. 412(1)(7)(C)(ii); ERISA sec. 302(d)(7)(C)(ii).
    \12\ Rev. Rul. 95-28, 1995-1 C.B. 74. The IRS and the Treasury 
Department have announced that they are undertaking a review of the 
applicable mortality table and have requested comments on related 
issues, such as how mortality trends should be reflected. Notice 2003-
62, 2003-38 I.R.B. 576; Announcement 2000-7, 2000-1 C.B. 586.
---------------------------------------------------------------------------
            Full funding limitation
      No contributions are required under the minimum funding 
rules in excess of the full funding limitation. In 2004 and 
thereafter, the full funding limitation is the excess, if any, 
of (1) the accrued liability under the plan (including normal 
cost), over (2) the lesser of (a) the market value of plan 
assets or (b) the actuarial value of plan assets.\13\ However, 
the full funding limitation may not be less than the excess, if 
any, of 90 percent of the plan's current liability (including 
the current liability normal cost) over the actuarial value of 
plan assets. In general, current liability is all liabilities 
to plan participants and beneficiaries accrued to date, whereas 
the accrued liability under the full funding limitation may be 
based on projected future benefits, including future salary 
increases.
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    \13\ For plan years beginning before 2004, the full funding 
limitation was generally defined as the excess, if any, of (1) the 
lesser of (a) the accrued liability under the plan (including normal 
cost) or (b) a percentage (170 percent for 2003) of the plan's current 
liability (including the current liability normal cost), over (2) the 
lesser of (a) the market value of plan assets or (b) the actuarial 
value of plan assets, but in no case less than the excess, if any, of 
90 percent of the plan's current liability over the actuarial value of 
plan assets. Under the Economic Growth and Tax Relief Reconciliation 
Act of 2001 (``EGTRRA''), the full funding limitation based on 170 
percent of current liability is repealed for plan years beginning in 
2004 and thereafter. The provisions of EGTRRA generally do not apply 
for years beginning after December 31, 2010.
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            Timing of plan contributions
      In general, plan contributions required to satisfy the 
funding rules must be made within 8\1/2\ months after the end 
of the plan year. If the contribution is made by such due date, 
the contribution is treated as if it were made on the last day 
of the plan year.
      In the case of a plan with a funded current liability 
percentage of less than 100 percent for the preceding plan 
year, estimated contributions for the current plan year must be 
made in quarterly installments during the current plan 
year.\14\ The amount of each required installment is 25 percent 
of the lesser of (1) 90 percent of the amount required to be 
contributed for the current plan year or (2) 100 percent of the 
amount required to be contributed for the preceding plan 
year.\15\
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    \14\ Code sec. 412(m); ERISA sec. 302(e).
    \15\ In connection with the expanded interest rate range available 
for 2002 and 2003, special rules apply in determining current liability 
for the preceding plan year for purposes of applying the quarterly 
contributions requirements to plan years beginning in 2002 (when the 
expanded range first applies) and 2004 (when the expanded range no 
longer applies). In each of those years (``present year''), current 
liability for the preceding year is redetermined, using the permissible 
range applicable to the present year. This redetermined current 
liability will be used for purposes of the plan's funded current 
liability percentage for the preceding year, which may affect the need 
to make quarterly contributions, and for purposes of determining the 
amount of any quarterly contributions in the present year, which is 
based in part on the preceding year.
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            Funding waivers
      Within limits, the IRS is permitted to waive all or a 
portion of the contributions required under the minimum funding 
standard for a plan year.\16\ A waiver may be granted if the 
employer (or employers) responsible for the contribution could 
not make the required contribution without temporary 
substantial business hardship and if requiring the contribution 
would be adverse to the interests of plan participants in the 
aggregate. Generally, no more than three waivers may be granted 
within any period of 15 consecutive plan years.
---------------------------------------------------------------------------
    \16\ Code sec. 412(d); ERISA sec. 303.
---------------------------------------------------------------------------
      If a funding waiver is in effect for a plan, subject to 
certain exceptions, no plan amendment may be adopted that 
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 vest under the plan. In 
addition, the IRS is authorized to require security to be 
granted as a condition of granting a funding waiver if the sum 
of the plan's accumulated funding deficiency and the balance of 
any outstanding waived funding deficiencies exceeds $1 million.
            Excise tax
      An employer is generally subject to an excise tax if it 
fails to make minimum required contributions and fails to 
obtain a waiver from the IRS.\17\ The excise tax is generally 
10 percent of the amount of the funding deficiency. In 
addition, a tax of 100 percent may be imposed if the funding 
deficiency is not corrected within a certain period.
---------------------------------------------------------------------------
    \17\ Code sec. 4971.
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Deductions for contributions
      Employer contributions to qualified retirement plans are 
deductible, subject to certain limits. In the case of a defined 
benefit pension plan, the employer generally may deduct the 
greater of: (1) the amount necessary to satisfy the minimum 
funding requirement of the plan for the year; or (2) the amount 
of the plan's normal cost for the year plus the amount 
necessary to amortize certain unfunded liabilities over ten 
years, but limited to the full funding limitation for the 
year.\18\ However, the maximum amount of deductible 
contributions is generally not less than the plan's unfunded 
current liability.\19\
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    \18\ Code sec. 404(a)(1).
    \19\ Code sec. 404(a)(1)(D). In the case of a plan that terminates 
during the year, the maximum deductible amount is generally not less 
than the amount needed to make the plan assets sufficient to fund 
benefit liabilities as defined for purposes of the PBGC termination 
insurance program (sometimes referred to as ``termination liability'').
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PBGC premiums
      Because benefits under a defined benefit pension plan may 
be funded over a period of years, plan assets may not be 
sufficient to provide the benefits owed under the plan to 
employees and their beneficiaries if the plan terminates before 
all benefits are paid. The PBGC generally insures the benefits 
owed under defined benefit pension plans (up to certain limits) 
in the event a plan is terminated with insufficient assets. 
Employers pay premiums to the PBGC for this insurance coverage.
      PBGC premiums include a flat-rate premium and, in the 
case of an underfunded plan, a variable rate premium based on 
the amount of unfunded vested benefits.\20\ In determining the 
amount of unfunded vested benefits, the interest rate used is 
85 percent of the annual yield on 30-year Treasury securities 
for the month preceding the month in which the plan year 
begins.
---------------------------------------------------------------------------
    \20\ ERISA sec. 4006.
---------------------------------------------------------------------------
      Under the Job Creation and Worker Assistance Act of 2002, 
for plan years beginning after December 31, 2001, and before 
January 1, 2004, the interest rate used in determining the 
amount of unfunded vested benefits for PBGC variable rate 
premium purposes is increased to 100 percent of the annual 
yield on 30-year Treasury securities for the month preceding 
the month in which the plan year begins.
Lump-sum distributions
      Accrued benefits under a defined benefit pension plan 
generally must be paid in the form of an annuity for the life 
of the participant unless the participant consents to a 
distribution in another form. Defined benefit pension plans 
generally provide that a participant may choose among other 
forms of benefit offered under the plan, such as a lump-sum 
distribution. These optional forms of benefit generally must be 
actuarially equivalent to the life annuity benefit payable to 
the participant.
      A defined benefit pension plan must specify the actuarial 
assumptions that will be used in determining optional forms of 
benefit under the plan in a manner that precludes employer 
discretion in the assumptions to be used. For example, a plan 
may specify that a variable interest rate will be used in 
determining actuarial equivalent forms of benefit, but may not 
give the employer discretion to choose the interest rate.
      Statutory assumptions must be used in determining the 
minimum value of certain optional forms of benefit, such as a 
lump sum.\21\ That is, the lump sum payable under the plan may 
not be less than the amount of the lump sum that is actuarially 
equivalent to the life annuity payable to the participant, 
determined using the statutory assumptions. The statutory 
assumptions consist of an applicable mortality table (as 
published by the IRS) and an applicable interest rate.
---------------------------------------------------------------------------
    \21\ Code sec. 417(e)(3); ERISA sec. 205(g)(3).
---------------------------------------------------------------------------
      The applicable interest rate is the annual interest rate 
on 30-year Treasury securities, determined as of the time that 
is permitted under regulations. The regulations provide various 
options for determining the interest rate to be used under the 
plan, such as the period for which the interest rate will 
remain constant (``stability period'') and the use of 
averaging.
Limits on benefits
      Annual benefits payable under a defined benefit pension 
plan generally may not exceed the lesser of (1) 100 percent of 
average compensation, or (2) $165,000 (for 2004).\22\ The 
dollar limit generally applies to a benefit payable in the form 
of a straight life annuity beginning no earlier than age 62. 
The limit is reduced if benefits are paid before age 62. In 
addition, if the benefit is not in the form of a straight life 
annuity, the benefit generally is adjusted to an equivalent 
straight life annuity. In making these reductions and 
adjustments, the interest rate used generally must be not less 
than the greater of (1) five percent; or (2) the interest rate 
specified in the plan. However, for purposes of adjusting a 
benefit in a form that is subject to the minimum value rules 
(including the use of the interest rate on 30-year Treasury 
securities), such as a lump-sum benefit, the interest rate used 
must be not less than the greater of: (1) the interest rate on 
30-year Treasury securities; or (2) the interest rate specified 
in the plan.
---------------------------------------------------------------------------
    \22\ Code sec. 415(b).
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                               HOUSE BILL

Interest rate for determining current liability and PBGC premiums
      The House bill changes the interest rate used for plan 
years beginning after December 31, 2003, and before January 1, 
2006, in determining current liability for funding and 
deduction purposes and in determining PBGC variable rate 
premiums. For these purposes, the House bill replaces the 
interest rate on 30-year Treasury securities with the rate of 
interest on amounts conservatively invested in long-term 
corporate bonds.
      For purposes of determining a plan's current liability 
for plan years beginning after December 31, 2003, and before 
January 1, 2006, the interest rate used must be within a 
permissible range of the weighted average of the rates of 
interest on amounts conservatively invested in long-term 
corporate bonds during the four-year period ending on the last 
day before the plan year begins, as determined by the Secretary 
of the Treasury on the basis of one or more indices selected 
periodically by the Secretary. The permissible range for these 
years is from 90 percent to 100 percent. The Secretary of the 
Treasury is directed to publish the interest rate within the 
permissible range.
      In determining the amount of unfunded vested benefits for 
PBGC variable rate premium purposes for plan years beginning 
after December 31, 2003, and before January 1, 2006, the 
interest rate used is 85 percent of the annual yield on amounts 
conservatively invested in long-term corporate bonds for the 
month preceding the month in which the plan year begins, as 
determined by the Secretary of the Treasury on the basis of one 
or more indices selected periodically by the Secretary. The 
Secretary of the Treasury is directed to publish such annual 
yield.
Interest rate used to apply benefit limits to lump sums
      No provision.
Alternative deficit reduction contribution for certain plans
      No provision.\23\
---------------------------------------------------------------------------
    \23\ Section 2002 of H.R. 3521, the ``Tax Relief Extension Act of 
2003,'' as passed by the House of Representatives on November 20, 2003, 
provides for a reduced deficit reduction contribution for plan years 
beginning after December 27, 2003, and before December 28, 2005, in the 
case of plans maintained by commercial passenger airlines. For each 
year of these years, the reduced contribution is 20 percent of the 
otherwise required additional contribution.
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Effective date
      The House bill is generally effective for plan years 
beginning after December 31, 2003. For purposes of applying 
certain rules (``lookback rules'') to plan years beginning 
after December 31, 2003, the amendments made by the provision 
may be applied as if they had been in effect for all years 
beginning before the effective date. For purposes of the 
provision, ``lookback rules'' means: (1) the rule under which a 
plan is not subject to the additional funding requirements for 
a plan year if the plan's funded current liability percentage 
was at least 90 percent for each of the two immediately 
preceding plan years or each of the second and third 
immediately preceding plan years; and (2) the rule under which 
quarterly contributions are required for a plan year if the 
plan's funded current liability percentage was less than 100 
percent for the preceding plan year.

                            SENATE AMENDMENT

Interest rate for determining current liability and PBGC premiums
      The Senate amendment is the same as the House bill, with 
the following modifications.
      The Senate amendment replaces the interest rate on 30-
year Treasury securities with a conservative long-term bond 
rate reflecting the rates of interest on amounts invested 
conservatively in long term corporate bonds and based on the 
use of two or more indices that are in the top two quality 
levels available reflecting average maturities of 20 years or 
more. The Secretary of the Treasury is directed to prescribe by 
regulation a method for periodically determining conservative 
long-term corporate bond rates.\24\
---------------------------------------------------------------------------
    \24\ The Senate amendment also repeals the present-law rule under 
which, for purposes of applying the quarterly contributions 
requirements to plan years beginning in 2004, current liability for the 
preceding year is redetermined.
---------------------------------------------------------------------------
      Under the Senate amendment, an employer may elect to 
disregard the temporary interest rate change for purposes of 
determining the maximum amount of deductible contributions to a 
defined benefit pension plan (regardless of whether the plan is 
subject to the deficit reduction contribution requirements). In 
such a case, the present-law interest rate rules apply, i.e., 
the interest rate used in determining current liability for 
that purpose must be within the permissible range (90 to 105 
percent) of the weighted average of the interest rates on 30-
year Treasury securities for the preceding four-year period.
Interest rate used to apply benefit limits to lump sums
      Under the Senate amendment, in the case of plan years 
beginning in 2004 or 2005, in adjusting a form of benefit that 
is subject to the minimum value rules, such as a lump-sum 
benefit, for purposes of applying the limits on benefits 
payable under a defined benefit pension plan, the interest rate 
used must be not less than the greater of: (1) 5.5 percent; or 
(2) the interest rate specified in the plan.
Alternative deficit reduction contribution for certain plans
            In general
      The Senate amendment allows certain employers 
(``applicable employers'') to elect a reduced amount of 
additional required contribution under the deficit reduction 
contribution rules (an ``alternative deficit reduction 
contribution'') with respect to certain plans for applicable 
plan years. An applicable plan year is a plan year beginning 
after December 27, 2003, and before December 28, 2005, for 
which the employer elects a reduced contribution. If an 
employer so elects, the amount of the additional deficit 
reduction contribution for an applicable plan year is the 
greater of: (1) 20 percent (40 percent in the case of a plan 
year beginning after December 27, 2004) of the amount of the 
additional contribution that would otherwise be required; or 
(2) the additional contribution that would be required if the 
deficit reduction contribution for the plan year were 
determined as the expected increase in current liability due to 
benefits accruing during the plan year.
      An election of an alternative deficit reduction 
contribution may be made only with respect to a plan that was 
not subject to the deficit reduction contribution rules for the 
plan year beginning in 2000. An election may not be made with 
respect to more than two plan years. An election is to be made 
at such time and in such manner as the Secretary of the 
Treasury prescribes. An election does not invalidate any 
obligation pursuant to a collective bargaining agreement in 
effect on the date of the election to provide benefits, to 
change the accrual of benefits, or to change the rate at which 
benefits vest under the plan.
      An applicable employer is an employer that is: (1) a 
commercial passenger airline; (2) primarily engaged in the 
production or manufacture of a steel mill product, or in the 
mining or processing of iron ore or beneficiated iron ore 
products; or (3) an organization described in section 501(c)(5) 
that established the plan for which an alternative deficit 
reduction contribution is elected on June 30, 1955. In 
addition, an employer not described in the preceding sentence 
is treated as an applicable employer if the employer files an 
application (at such time and in such manner as the Secretary 
of the Treasury prescribes) to be treated as an applicable 
employer. However, an employer making such an application is 
not treated as an applicable employer if, within 90 days of the 
application, the Secretary determines (taking into account the 
application of the provision) that there is a reasonable 
likelihood that the employer will be unable to make required 
future contributions to the plan in a timely manner.
            Restrictions on amendments
      Certain plan amendments may not be adopted during an 
applicable plan year (i.e., a plan year for which an 
alternative deficit reduction contribution is elected). This 
restriction applies to an amendment that 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 vest under the plan. The restriction 
applies unless: (1) the plan's funded current liability 
percentage as of the end of the applicable plan year is 
projected to be at least 75 percent (taking into account the 
effect of the amendment); (2) the amendment provides for an 
increase in benefits under a formula that is not based on a 
participant's compensation, but only if the rate of the 
increase does not exceed the contemporaneous rate of increase 
in average wages of participants covered by the amendment; (3) 
the amendment is required by a collective bargaining agreement 
that is in effect on the date of enactment of the provision; 
(4) the amendment is determined by the Secretary of Labor to be 
reasonable and provides for only de minimis increases in plan 
liabilities; or (5) the amendment is required as a condition of 
qualified retirement plan status.
      If a plan is amended during an applicable plan year in 
violation of the provision, an election of an alternative 
deficit reduction contribution does not apply to any applicable 
plan year ending on after the date on which the amendment is 
adopted.
            Notice requirement
      The Senate amendment amends ERISA to provide that, if an 
employer elects an alternative deficit reduction contribution 
for any applicable plan year, the employer must provide written 
notice of the election to participants and beneficiaries within 
30 days of filing the election (120 days in the case of an 
employer that files an application to be treated as an 
applicable employer). The notice to participants must include: 
(1) the due date of the alternative deficit reduction 
contribution; (2) the amount by which the required contribution 
to the plan was reduced as a result of the election; (3) a 
description of the benefits under the plan that are eligible 
for guarantee by the PBGC; and (4) an explanation of the 
limitations on the PBGC guarantee and the circumstances in 
which the limitations apply, including the maximum guaranteed 
monthly benefits that the PBGC would pay if the plan terminated 
while underfunded. An employer that fails to provide the 
required notice to a participant or beneficiary may (in the 
discretion of a court) be liable to the participant or 
beneficiary in the amount of up to $100 a day from the date of 
the failure, and the court may in its discretion order such 
other relief as it deems proper.
      The Senate amendment also amends ERISA to require that an 
employer electing an alternative deficit reduction contribution 
for any year must provide written notice of the election to the 
PBGC within 30 days of the election (120 days in the case of an 
employer that files an application to be treated as an 
applicable employer). The notice to the PBGC must include: (1) 
the due date of the alternative deficit reduction contribution; 
(2) the amount by which the required contribution to the plan 
was reduced as a result of the election; (3) the number of 
years it will take to restore the plan to full funding if the 
employer makes only the required contributions; and (4) 
information as to how the amount by which the plan is 
underfunded compares with the capitalization of the employer.
Effective date
            Interest rate for determining current liability and PBGC 
                    premiums
      The Senate amendment is generally effective for plan 
years beginning after December 31, 2003. For purposes of 
applying certain rules (``lookback rules'') to plan years 
beginning after December 31, 2003, the amendments made by the 
provision may be applied as if they had been in effect for all 
years beginning before the effective date. For purposes of the 
provision, ``lookback rules'' means: (1) the rule under which a 
plan is not subject to the additional funding requirements for 
a plan year if the plan's funded current liability percentage 
was at least 90 percent for each of the two immediately 
preceding plan years or each of the second and third 
immediately preceding plan years; and (2) the rule under which 
quarterly contributions are required for a plan year if the 
plan's funded current liability percentage was less than 100 
percent for the preceding plan year.
            Interest rate used to apply benefit limits to lump sums
      The Senate amendment is generally effective for plan 
years beginning after December 31, 2003. Under a special rule, 
in the case of a distribution made to a participant or 
beneficiary after December 31, 2003, and before January 1, 
2005, in a form of benefit that is subject to the minimum value 
rules, such as a lump-sum benefit, and that is subject to 
adjustment in applying the limit on benefits payable under a 
defined benefit pension plan, the amount payable may not, 
solely by reason of the Senate amendment, be less than the 
amount that would have been payable if the amount payable had 
been determined using the applicable interest rate in effect as 
of the last day of the last plan year beginning before January 
31, 2004.
            Alternative deficit reduction contribution for certain 
                    plans
      The Senate amendment is effective on the date of 
enactment.

                          CONFERENCE AGREEMENT

Interest rate for determining current liability and PBGC premiums
      The conference agreement follows the House bill with 
modifications.
      Under the conference agreement, the interest rate used 
for plan years beginning after December 31, 2003, and before 
January 1, 2006, in determining current liability for funding 
and deduction purposes and in determining PBGC variable rate 
premiums is generally the rate of interest on amounts invested 
conservatively in long-term investment-grade corporate 
bonds.\25\
---------------------------------------------------------------------------
    \25\ The conference agreement also repeals the present-law rule 
under which, for purposes of applying the quarterly contributions 
requirements to plan years beginning in 2004, current liability for the 
preceding year is redetermined.
---------------------------------------------------------------------------
      For purposes of determining a plan's current liability 
for plan years beginning after December 31, 2003, and before 
January 1, 2006, the interest rate used must be within a 
permissible range of the weighted average of the rates of 
interest on amounts invested conservatively in long-term 
investment-grade corporate bonds during the four-year period 
ending on the last day before the plan year begins. The 
permissible range for these years is from 90 percent to 100 
percent. The interest rate is to be determined by the Secretary 
of the Treasury on the basis of two or more indices that are 
selected periodically by the Secretary and are in the top three 
quality levels available.
      The interest rate on long-term corporate bonds shall be 
calculated pursuant to a method, prescribed by the Secretary of 
the Treasury, which relies on publicly available indices of 
high-quality bonds (i.e., the top three quality levels). The 
Secretary may use bonds with average maturities of 20 years or 
more in determining the rate. The Secretary of Treasury may 
prescribe that two thirds of the rate may be based on two or 
more indices that are in the top three quality levels, and one 
third of such rate may be based on two or more indices that are 
in the third quality level. The Secretary shall have discretion 
to determine which publicly available indices to use.
      The Secretary is directed to make the permissible range 
of the interest rate, as well as the indices and methodology 
used to determine the average rate, publicly available. The 
methodology used by the Secretary to arrive at a single rate 
shall be publicly available (including for a subscription fee 
or other charge). The Secretary shall publish the rate on a 
monthly basis, along with an updated four-year weighted average 
of the rate and an updated permissible range. The Secretary 
shall consider and monitor the current marketplace indices to 
produce the specified rate to ensure that the indices continue 
to be appropriate for this purpose. Through regulations, the 
Secretary shall, as appropriate, make prospective changes in 
the indices used to determine the rate.
      For purposes of determining the four-year weighted 
average of interest rates under the temporary provision, the 
weighting applicable under present law applies (i.e., 40 
percent, 30 percent, 20 percent and 10 percent, starting with 
the most recent year in the four-year period). In addition, 
consistent with current IRS guidance, the interest rates in the 
permissible range under the temporary provision are deemed to 
be consistent with the assumptions reflecting the purchase 
rates that would be used by insurance companies to satisfy the 
liabilities under the plan. Thus, any interest rate in the 
permissible range may be used in determining current liability 
while the temporary provision is in effect.
      The temporary interest rate generally applies in 
determining current liability for purposes of determining the 
maximum amount of deductible contributions to a defined benefit 
pension plan (regardless of whether the plan is subject to the 
deficit reduction contribution requirements). However, under 
the conference agreement, an employer may elect to disregard 
the temporary interest rate change for purposes of determining 
the maximum amount of deductible contributions (regardless of 
whether the plan is subject to the deficit reduction 
contribution requirements). In such a case, the present-law 
interest rate rules apply, i.e., the interest rate used in 
determining current liability for that purpose must be within 
the permissible range (90 to 105 percent) of the weighted 
average of the interest rates on 30-year Treasury securities 
for the preceding four-year period. This is intended solely as 
a temporary provision to ensure that, pending long-term reform 
of the funding and deduction rules, the deduction limit is 
neither increased nor decreased so that employers are not 
penalized for fully funding their plans. Because the 30-year 
Treasury rate is an obsolete rate, its use must be revisited 
promptly in the context of long-term funding and deduction 
reform. However, the use of the 30-year Treasury rate for the 
purposes of determining maximum deduction limits should not be 
considered precedent for the determination of other pension 
plan calculations. Furthermore, the use of different interest 
rates for certain pension plan calculations in the context of 
this temporary bill should not be considered precedent for the 
use of different discount rates to measure pension plan 
liabilities.
      Under the conference agreement, in determining the amount 
of unfunded vested benefits for PBGC variable rate premium 
purposes for plan years beginning after December 31, 2003, and 
before January 1, 2006, the interest rate used is 85 percent of 
the annual rate of interest determined by the Secretary of the 
Treasury on amounts invested conservatively in long-term 
investment-grade corporate bonds for the month preceding the 
month in which the plan year begins (subject to the same 
requirements applicable to the determination of the interest 
rate used in determining current liability).
Interest rate used to apply benefit limits to lump sums
      The conference agreement follows the Senate amendment.
      Under the conference agreement, in the case of plan years 
beginning in 2004 or 2005, in adjusting a form of benefit that 
is subject to the minimum value rules, such as a lump-sum 
benefit, for purposes of applying the limits on benefits 
payable under a defined benefit pension plan, the interest rate 
used must be not less than the greater of: (1) 5.5 percent; or 
(2) the interest rate specified in the plan.
Plan amendments
      The conference agreement permits certain plan amendments 
made pursuant to the interest rate provision of the bill to be 
retroactively effective. If certain requirements are met, the 
plan will be treated as being operated in accordance with its 
terms, and the amendment will not violate the anticutback rules 
(except as provided by the Secretary of the Treasury).\26\ In 
order for this treatment to apply, the plan amendment must be 
made on or before the last day of the first plan year beginning 
on or after January 1, 2006. In addition, the amendment must 
apply retroactively as of the date on which the interest rate 
provision became effective with respect to the plan and the 
plan must be operated in compliance with the interest rate 
provision until the amendment is made.
---------------------------------------------------------------------------
    \26\ Code sec. 411(d)(6); ERISA sec. 204(g).
---------------------------------------------------------------------------
      A plan amendment will not be considered to be pursuant to 
the interest rate provision of the bill if it has an effective 
date before the effective date of the interest rate provision. 
Similarly, relief from the anticutback rules does not apply for 
periods prior to the effective date of the interest rate 
provision or the plan amendment.
Alternative deficit reduction contribution for certain plans
            In general
      The conference agreement follows the Senate amendment 
with modifications.
      The conference agreement allows certain employers 
(``applicable employers'') to elect a reduced amount of 
additional required contribution under the deficit reduction 
contribution rules (an ``alternative deficit reduction 
contribution'') with respect to certain plans for applicable 
plan years. An applicable plan year is a plan year beginning 
after December 27, 2003, and before December 28, 2005, for 
which the employer elects a reduced contribution. If an 
employer so elects, the amount of the additional deficit 
reduction contribution for an applicable plan year is the 
greater of: (1) 20 percent of the amount of the additional 
contribution that would otherwise be required; or (2) the 
additional contribution that would be required if the deficit 
reduction contribution for the plan year were determined as the 
expected increase in current liability due to benefits accruing 
during the plan year.
      An election of an alternative deficit reduction 
contribution may be made only with respect to a plan that was 
not subject to the deficit reduction contribution rules for the 
plan year beginning in 2000.\27\ An election may not be made 
with respect to more than two plan years. An election is to be 
made at such time and in such manner as the Secretary of the 
Treasury prescribes. Guidance relating to the time and manner 
in which an election is made is to be issued expeditiously. An 
election does not invalidate any obligation pursuant to a 
collective bargaining agreement in effect on the date of the 
election to provide benefits, to change the accrual of 
benefits, or to change the rate at which benefits vest under 
the plan.
---------------------------------------------------------------------------
    \27\ Whether a plan was subject to the deficit reduction 
contribution rules for the plan year beginning in 2000 is determined 
without regard to the rule that allows the temporary interest rate 
based on amounts invested conservatively in long-term investment-grade 
corporate bonds to be used for lookback rule purposes, as discussed 
below.
---------------------------------------------------------------------------
      An applicable employer is an employer that is: (1) a 
commercial passenger airline; (2) primarily engaged in the 
production or manufacture of a steel mill product, or the 
processing of iron ore pellets; or (3) an organization 
described in section 501(c)(5) that established the plan for 
which an alternative deficit reduction contribution is elected 
on June 30, 1955.
            Restrictions on amendments
      Certain plan amendments may not be adopted during an 
applicable plan year (i.e., a plan year for which an 
alternative deficit reduction contribution is elected). This 
restriction applies to an amendment that 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 vest under the plan. The restriction 
applies unless: (1) the plan's enrolled actuary certifies (in 
such form and manner as prescribed by the Secretary of the 
Treasury) that the amendment provides for an increase in annual 
contributions that will exceed the increase in annual charges 
to the funding standard account attributable to such amendment; 
or (2) the amendment is required by a collective bargaining 
agreement that is in effect on the date of enactment of the 
provision.
      If a plan is amended during an applicable plan year in 
violation of the provision, an election of an alternative 
deficit reduction contribution does not apply to any applicable 
plan year ending on after the date on which the amendment is 
adopted.
            Notice requirement
      The conference agreement amends ERISA to provide that, if 
an employer elects an alternative deficit reduction 
contribution for any applicable plan year, the employer must 
provide written notice of the election to participants and 
beneficiaries and to the PBGC within 30 days of filing the 
election. The notice to participants and beneficiaries must 
include: (1) the due date of the alternative deficit reduction 
contribution; (2) the amount by which the required contribution 
to the plan was reduced as a result of the election; (3) a 
description of the benefits under the plan that are eligible 
for guarantee by the PBGC; and (4) an explanation of the 
limitations on the PBGC guarantee and the circumstances in 
which the limitations apply, including the maximum guaranteed 
monthly benefits that the PBGC would pay if the plan terminated 
while underfunded. The notice to the PBGC must include: (1) the 
due date of the alternative deficit reduction contribution; (2) 
the amount by which the required contribution to the plan was 
reduced as a result of the election; (3) the number of years it 
will take to restore the plan to full funding if the employer 
makes only the required contributions; and (4) information as 
to how the amount by which the plan is underfunded compares 
with the capitalization of the employer.
      An employer that fails to provide the required notice to 
a participant, beneficiary, or the PBGC may (in the discretion 
of a court) be liable to the participant, beneficiary, or PBGC 
in the amount of up to $100 a day from the date of the failure, 
and the court may in its discretion order such other relief as 
it deems proper.
Effective date
            Interest rate for determining current liability and PBGC 
                    premiums
      The conference agreement is generally effective for plan 
years beginning after December 31, 2003. For purposes of 
applying certain rules (``lookback rules'') to plan years 
beginning after December 31, 2003, the amendments made by the 
provision may be applied as if they had been in effect for all 
years beginning before the effective date. For purposes of the 
provision, ``lookback rules'' means: (1) the rule under which a 
plan is not subject to the additional funding requirements for 
a plan year if the plan's funded current liability percentage 
was at least 90 percent for each of the two immediately 
preceding plan years or each of the second and third 
immediately preceding plan years; and (2) the rule under which 
quarterly contributions are required for a plan year if the 
plan's funded current liability percentage was less than 100 
percent for the preceding plan year. The amendments made by the 
provision may be applied for purposes of the lookback rules, 
regardless of the funded current liability percentage reported 
for the plan on the plan's annual reports (i.e., Form 5500) for 
preceding years.
            Interest rate used to apply benefit limits to lump sums
      The conference agreement is generally effective for plan 
years beginning after December 31, 2003. Under a special rule, 
in the case of a distribution made to a participant or 
beneficiary after December 31, 2003, and before January 1, 
2005, in a form of benefit that is subject to the minimum value 
rules, such as a lump-sum benefit, and that is subject to 
adjustment in applying the limit on benefits payable under a 
defined benefit pension plan, the amount payable may not, 
solely by reason of the conference agreement, be less than the 
amount that would have been payable if the amount payable had 
been determined using the applicable interest rate in effect as 
of the last day of the last plan year beginning before January 
31, 2004.
            Alternative deficit reduction contribution for certain 
                    plans
      The conference agreement is effective on the date of 
enactment.

                 B. Multiemployer Plan Funding Notices

(Sec. 4 of the Senate amendment and secs. 101 and 502 of ERISA)

                              PRESENT LAW

      Under present law, defined benefit plans are generally 
required to meet certain minimum funding rules. These rules are 
designed to help ensure that such plans are adequately funded. 
Both single-employer plans and multiemployer plans are subject 
to minimum funding requirements; however, the requirements are 
different for each type of plan.
      Similarly, the Pension Benefit Guaranty Corporation 
(``PBGC'') insures certain benefits under both single-employer 
and multiemployer defined benefit plans, but the rules relating 
to the guarantee vary for each type of plan. In the case of 
multiemployer plans, the PBGC guarantees against plan 
insolvency. Under its multiemployer program, PBGC provides 
financial assistance through loans to plans that are insolvent 
(that is, plans that are unable to pay basic PBGC-guaranteed 
benefits when due).
      Employers maintaining single-employer defined benefit 
plans are required to provide certain notices to plan 
participants relating to the funding status of the plan. For 
example, ERISA requires an employer of a single-employer 
defined benefit plan to notify plan participants if the 
employer fails to make required contributions (unless a request 
for a funding waiver is pending).\28\ In addition, in the case 
of an underfunded plan for which variable rate PBGC premiums 
are required, the plan administrator generally must notify plan 
participants of the plan's funding status and the limits on the 
PBGC benefit guarantee if the plan terminates while 
underfunded.\29\
---------------------------------------------------------------------------
    \28\ ERISA sec. 101(d).
    \29\ ERISA sec. 4011. Multiemployer plans are not required to pay 
variable rate premiums.
---------------------------------------------------------------------------

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

In general
      The Senate amendment requires the administrator of a 
defined benefit plan which is a multiemployer plan to provide 
an annual funding notice to: (1) each participant and 
beneficiary; (2) each labor organization representing such 
participants or beneficiaries; and (3) each employer that has 
an obligation to contribute under the plan.
      Such a notice must include: (1) 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 identification number; (2) a statement as to 
whether the plan's funded current liability percentage for the 
plan year to which the notice relates is at least 100 percent 
(and if not, a statement of the percentage); (3) a statement of 
the value of the plan's assets, the amount of benefit payments, 
and the ratio of the assets to the payments for the plan year 
to which the report relates; (4) a summary of the rules 
governing insolvent multiemployer plans, including the 
limitations on benefit payments and any potential benefit 
reductions and suspensions (and the potential effects of such 
limitations, reductions, and suspensions on the plan); (5) a 
general description of the benefits under the plan which are 
eligible to be guaranteed by the PBGC and the limitations of 
the guarantee and circumstances in which such limitations 
apply; and (6) any additional information which the plan 
administrator elects to include to the extent it is not 
inconsistent with regulations prescribed by the Secretary of 
Labor.
      The annual funding notice must be provided no later than 
two months after the deadline (including extensions) for filing 
the plan's annual report for the plan year to which the notice 
relates. The funding notice must be provided in a form and 
manner prescribed in regulations by the Secretary of Labor. 
Additionally, it must be written so as to be understood by the 
average plan participant and may be provided in written, 
electronic, or some other appropriate form to the extent that 
it is reasonably accessible to persons to whom the notice is 
required to be provided.
      The Secretary of Labor is directed to issue regulations 
(including a model notice) necessary to implement the provision 
no later than one year after the date of enactment.
Sanction for failure to provide notice
      In the case of a failure to provide the annual 
multiemployer plan funding notice, the Secretary of Labor may 
assess a civil penalty against a plan administrator of up to 
$100 per day for each failure to provide a notice. For this 
purpose, each violation with respect to a single participant or 
beneficiary is treated as a separate violation.
Effective date
      The Senate amendment is effective for plan years 
beginning after December 31, 2004.

                          CONFERENCE AGREEMENT

In general
      The conference agreement follows the Senate amendment, 
with the following modification. The administrator of a defined 
benefit plan which is a multiemployer plan is also required to 
provide an annual funding notice to the PBGC.
      The conference agreement requires the administrator of a 
defined benefit plan which is a multiemployer plan to provide 
an annual funding notice to: (1) each participant and 
beneficiary; (2) each labor organization representing such 
participants or beneficiaries; (3) each employer that has an 
obligation to contribute under the plan; and (4) the PBGC.
      Such a notice must include: (1) 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 identification number; (2) a statement as to 
whether the plan's funded current liability percentage for the 
plan year to which the notice relates is at least 100 percent 
(and if not, a statement of the percentage); (3) a statement of 
the value of the plan's assets, the amount of benefit payments, 
and the ratio of the assets to the payments for the plan year 
to which the report relates; (4) a summary of the rules 
governing insolvent multiemployer plans, including the 
limitations on benefit payments and any potential benefit 
reductions and suspensions (and the potential effects of such 
limitations, reductions, and suspensions on the plan); (5) a 
general description of the benefits under the plan which are 
eligible to be guaranteed by the PBGC and the limitations of 
the guarantee and circumstances in which such limitations 
apply; and (6) any additional information which the plan 
administrator elects to include to the extent it is not 
inconsistent with regulations prescribed by the Secretary of 
Labor.
      The annual funding notice must be provided no later than 
two months after the deadline (including extensions) for filing 
the plan's annual report for the plan year to which the notice 
relates. The funding notice must be provided in a form and 
manner prescribed in regulations by the Secretary of Labor. 
Additionally, it must be written so as to be understood by the 
average plan participant and may be provided in written, 
electronic, or some other appropriate form to the extent that 
it is reasonably accessible to persons to whom the notice is 
required to be provided.
      The Secretary of Labor is directed to issue regulations 
(including a model notice) necessary to implement the provision 
no later than one year after the date of enactment.
Sanction for failure to provide notice
      In the case of a failure to provide the annual 
multiemployer plan funding notice, the Secretary of Labor may 
assess a civil penalty against a plan administrator of up to 
$100 per day for each failure to provide a notice. For this 
purpose, each violation with respect to a single participant or 
beneficiary is treated as a separate violation.
Effective date
      The conference agreement is effective for plan years 
beginning after December 31, 2004.

 C. Election for Deferral of Charge for Portion of Net Experience Loss 
                         of Multiemployer Plans

(Sec. 5 of the Senate amendment, sec. 302(b)(7) of ERISA, and sec. 
        412(b)(7) of the Code)

                              PRESENT LAW

General funding requirements
      The Code and ERISA impose minimum funding requirements 
with respect to defined benefit plans.\30\ Under the minimum 
funding rules, the amount of contributions required for a plan 
year is generally the plan's normal cost for the year (i.e., 
the cost of benefits allocated to the year under the plan's 
funding method) plus that year's portion of other liabilities 
that are amortized over a period of years, such as benefits 
resulting from a grant of past service credit.\31\ A plan's 
normal cost and other liabilities must be determined under an 
actuarial cost method permissible under the Code and ERISA.
---------------------------------------------------------------------------
    \30\ Code sec. 412; ERISA sec. 302.
    \31\ Under special funding rules (referred to as the ``deficit 
reduction contribution'' rules), an additional contribution may be 
required to a single-employer plan if the plan's funded current 
liability percentage is less than 90 percent. The deficit reduction 
contribution rules do not apply to multiemployer plans.
---------------------------------------------------------------------------
Funding standard account
      As an administrative aid in the application of the 
funding requirements, a defined benefit plan is required to 
maintain a special account called a ``funding standard 
account'' to which specified charges and credits (including 
credits for contributions to the plan), plus interest, are made 
for each plan year. If, as of the close of a plan year, the 
account reflects credits equal to or in excess of charges, the 
plan is generally treated as meeting the minimum funding 
standard for the year. Thus, as a general rule, the minimum 
contribution for a plan year is determined as the amount by 
which the charges to the account would exceed credits to the 
account if no contribution were made to the plan. If, as of the 
close of the plan year, charges to the funding standard account 
exceed credits to the account, then the excess is referred to 
as an ``accumulated funding deficiency.'' \32\
---------------------------------------------------------------------------
    \32\ In addition to the funding standard account, a reconciliation 
account is sometimes used to balance certain items for purposes of 
reporting actuarial information about the plan on the plan's annual 
report (Schedule B of Form 5500).
---------------------------------------------------------------------------
Experience gains and losses
      In determining plan funding under an actuarial cost 
method, a plan's actuary generally makes certain assumptions 
regarding the future experience of a plan. These assumptions 
typically involve rates of interest, mortality, disability, 
salary increases, and other factors affecting the value of 
assets and liabilities, such as increases or decreases in asset 
values. The actuarial assumptions are required to be reasonable 
and may be subject to other restrictions. If, on the basis of 
these assumptions, the contributions made to the plan result in 
actual unfunded liabilities that are less than those 
anticipated by the actuary, then the excess is an experience 
gain. If the actual unfunded liabilities are greater than those 
anticipated, then the difference is an experience loss.
      If a plan has a net experience gain, the funding standard 
account is credited with the amount needed to amortize the net 
experience gain over a certain period. If a plan has a net 
experience loss, the funding standard account is charged with 
the amount needed to amortize the net experience loss over a 
certain period. In the case of a multiemployer plan, the 
amortization period for net experience gains and losses is 15 
years.
Funding waivers
      Within limits, the IRS is permitted to waive all or a 
portion of the contributions required under the minimum funding 
standard for a plan year.\33\ A waiver may be granted if the 
employer (or employers) responsible for the contribution could 
not make the required contribution without temporary 
substantial business hardship and if requiring the contribution 
would be adverse to the interests of plan participants in the 
aggregate. In the case of a multiemployer plan, no more than 
five waivers may be granted within any period of 15 consecutive 
plan years.
---------------------------------------------------------------------------
    \33\ Sec. 412(d).
---------------------------------------------------------------------------
      If a funding waiver is in effect for a plan, subject to 
certain exceptions, no plan amendment may be adopted that 
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 vest under the plan.
Excise tax
      An employer is generally subject to an excise tax if it 
fails to make minimum required contributions and fails to 
obtain a waiver from the IRS.\34\ The excise tax is 10 percent 
of the amount of the funding deficiency (five percent in the 
case of a multiemployer plan). In addition, a tax of 100 
percent may be imposed if the funding deficiency is not 
corrected within a certain period.
---------------------------------------------------------------------------
    \34\ Sec. 4971.
---------------------------------------------------------------------------

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

      The Senate amendment allows certain multiemployer plans 
to elect to defer the beginning of the amortization of certain 
net experience losses for up to three plan years. The period 
during which the amortization of a net experience loss is 
deferred by reason of such an election is referred to as a 
``hiatus period.'' The Senate amendment applies to a 
multiemployer plan that has a net experience loss for any plan 
year beginning after June 30, 2002, and before July 1, 2006. 
Such a plan may elect to begin the 15-year amortization period 
with respect to such a loss in any of the three immediately 
succeeding plan years as selected by the plan. A plan may elect 
to delay the beginning of the amortization of net experience 
losses with respect to net experience losses occurring for only 
two plan years beginning after June 30, 2002, and before July 
1, 2006 (regardless of the number of plan years in that period 
for which the plan has net experience losses). An election 
under the Senate amendment is to be made at such time and in 
such manner as the Secretary of Labor prescribes, after 
consultation with the Secretary of the Treasury.
      If an election is made, the net experience loss is 
treated, for purposes of determining any charge to the funding 
standard account (or interest) with respect to the loss, in the 
same manner as if the net experience loss occurred in the year 
selected by the plan for the amortization period to begin 
(without regard to any net experience loss or gain otherwise 
determined for such year). Interest accrued on any net 
experience loss during a hiatus period is charged to a 
reconciliation account and not to the funding standard account.
      Certain plan amendments may not take effect for any plan 
year in the hiatus period. This restriction applies to an 
amendment that 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 vest 
under the plan. The restriction applies unless: (1) the plan's 
funded current liability percentage as of the end of the plan 
year is projected to be at least 75 percent (taking into 
account the effect of the amendment); (2) the plan's actuary 
certifies that, due to an increase in the rates of 
contributions to the plan, the normal cost attributable to the 
benefit increase or other change is expected to be fully funded 
in the year following the year in which the increase or other 
change takes effect, and any increase in the plan's accrued 
liabilities attributable to the benefit increase or other 
change is expected to be fully funded by the end of the third 
plan year following the end of the plan hiatus period of the 
plan; (3) the amendment is determined by the Secretary of Labor 
to be reasonable and provides for only de minimis increases in 
plan liabilities; or (4) the amendment is required as a 
condition of qualified retirement plan status. The restriction 
on amendments does not apply to an increase in benefits for a 
group of participants resulting solely from a collectively 
bargained increase in the contributions on their behalf. 
Failure to comply with this restriction is a violation of ERISA 
and of the qualification requirements of the Code.
      If a plan elects to defer the beginning of an 
amortization period, the plan administrator must provide 
written notice of the election within 30 days to participants 
and beneficiaries, to each labor organization representing 
participants and beneficiaries, and to each employer that has 
an obligation to contribute under the plan. The notice must 
include: (1) the amount of the net experience loss to be 
deferred under the election and the period of the deferral; and 
(2) the maximum guaranteed monthly benefits that the PBGC would 
pay if the plan terminated while underfunded. If a plan 
administrator fails to comply with the notice requirement, the 
Secretary of Labor may assess a civil penalty of not more than 
$1,000 a day for each violation.
      Effective date.--The Senate amendment is effective on the 
date of enactment.

                          CONFERENCE AGREEMENT

      The conference agreement allows the plan sponsor of an 
eligible multiemployer plan to elect to defer certain charges 
to the funding standard account that would otherwise be made to 
the plan's funding standard account for a plan year beginning 
after June 30, 2003, and before July 1, 2005. The charges may 
be deferred to any plan year selected by the plan sponsor from 
either of the two plan years immediately succeeding the plan 
year for which the charge would otherwise be made. An election 
may be made with respect to up to 80 percent of the charge to 
the funding standard account attributable to the amortization 
of a net experience loss for the first plan year beginning 
after December 31, 2001. An election is to be made at such time 
and in such manner as the Secretary of the Treasury prescribes. 
For the plan year to which a charge is deferred under the plan 
sponsor's election, the funding standard account is required to 
be charged with interest at the short-term Federal rate on the 
deferred charge for the period of the deferral.
      An eligible multiemployer plan is a multiemployer plan: 
(1) that, for the first plan year beginning after December 31, 
2001, had an actual net investment loss of at least 10 percent 
of the average fair market value of plan assets during the plan 
year; and (2) with respect to which the plan's enrolled actuary 
certifies that (not taking into account the deferral of charges 
under the provision and based on the actuarial assumptions used 
for the last plan year before date of enactment of the 
provision), the plan is projected to have an accumulated 
funding deficiency for any plan year beginning after June 30, 
2003, and before July 1, 2006. In addition, a plan is not 
treated as an eligible multiemployer plan if: (1) for any 
taxable year beginning during the ten-year period preceding the 
first plan year for which an election is made under the 
provision, any employer required to contribute to the plan 
failed to timely pay an excise tax imposed on the plan for 
failure to make required contributions; (2) for any plan year 
beginning after June 30, 1993, and before the first plan year 
for which an election is made under the provision, the average 
contribution required to be made to the plan by all employers 
does not exceed 10 cents per hour, or no employer is required 
to make contributions to the plan; or (3) with respect to any 
plan year beginning after June 30, 1993, and before the first 
plan year for which an election is made under the provision, a 
funding waiver or extension of an amortization period was 
granted to the plan.
      Certain plan amendments may not be adopted during the 
period for which a charge is deferred. This restriction applies 
to an amendment that 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 vest 
under the plan. The restriction applies unless: (1) the plan's 
enrolled actuary certifies (in such form and manner as 
prescribed by the Secretary of the Treasury) that the amendment 
provides for an increase in annual contributions that will 
exceed the increase in annual charges to the funding standard 
account attributable to such amendment; or (2) the amendment is 
required by a collective bargaining agreement that is in effect 
on the date of enactment of the provision. If a plan is amended 
in violation of the provision, an election under the provision 
does not apply to any plan year ending on after the date on 
which the amendment is adopted.
      If a plan sponsor elects to defer charges attributable to 
a net experience loss, the plan administrator must provide 
written notice of the election within 30 days to participants 
and beneficiaries, to each labor organization representing 
participants and beneficiaries, to each employer that has an 
obligation to contribute under the plan, and to the PBGC. The 
notice must include: (1) the amount of the charges to be 
deferred under the election and the period of the deferral; and 
(2) the maximum guaranteed monthly benefits that the PBGC would 
pay if the plan terminated while underfunded. If a plan 
administrator fails to comply with the notice requirement, the 
Secretary of Labor may assess a civil penalty of not more than 
$1,000 a day for each violation.
      Effective date.--The conference agreement is effective on 
the date of enactment.

      D. Two-Year Extension of Transition Rule to Pension Funding 
                Requirements for Interstate Bus Company

(Sec. 6 of the Senate amendment, and sec. 769(c) of the Retirement 
        Protection Act of 1994 (as added by sec. 1508 of the Taxpayer 
        Relief Act of 1997))

                              PRESENT LAW

      Under present law, defined benefit plans are required to 
meet certain minimum funding rules. In some cases, additional 
contributions are required if a defined benefit plan is 
underfunded. Additional contributions generally are not 
required in the case of a plan with a funded current liability 
percentage of at least 90 percent. A plan's funded current 
liability percentage is the value of plan assets as a 
percentage of current liability. In general, a plan's current 
liability means all liabilities to employees and their 
beneficiaries under the plan. In the case of a plan with a 
funded current liability percentage of less than 100 percent 
for the preceding plan year, estimated contributions for the 
current plan year must be made in quarterly installments during 
the current plan year.
      The PBGC insures benefits under most single-employer 
defined benefit plans in the event the plan is terminated with 
insufficient assets to pay for plan benefits. The PBGC is 
funded in part by a flat-rate premium per plan participant, and 
a variable rate premium based on the amount of unfunded vested 
benefits under the plan. A specified interest rate and a 
specified mortality table apply in determining unfunded vested 
benefits for this purpose.
      Under present law, a special rule modifies the minimum 
funding requirements in the case of certain plans. The special 
rule applies in the case of plans that (1) were not required to 
pay a variable rate PBGC premium for the plan year beginning in 
1996, (2) do not, in plan years beginning after 1995 and before 
2009, merge with another plan (other than a plan sponsored by 
an employer that was a member of the controlled group of the 
employer in 1996), and (3) are sponsored by a company that is 
engaged primarily in interurban or interstate passenger bus 
service.
      The special rule treats a plan to which it applies as 
having a funded current liability percentage of at least 90 
percent for plan years beginning after 1996 and before 2005 if 
for such plan year the funded current liability percentage is 
at least 85 percent. If the funded current liability of the 
plan is less than 85 percent for any plan year beginning after 
1996 and before 2005, the relief from the minimum funding 
requirements applies only if certain specified contributions 
are made.
      For plan years beginning after 2004 and before 2010, the 
funded current liability percentage will be deemed to be at 
least 90 percent if the actual funded current liability 
percentage is at least at certain specified levels. The relief 
from the minimum funding requirements applies for a plan year 
beginning in 2005, 2006, 2007, or 2008 only if contributions to 
the plan for the plan year equal at least the expected increase 
in current liability due to benefits accruing during the plan 
year.

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

      The Senate amendment modifies the special funding rules 
for plans sponsored by a company engaged primarily in 
interurban or interstate passenger bus service by providing 
that, for plan years beginning in 2004 and 2005, the funded 
current liability percentage of the plan will be treated as at 
least 90 percent for purposes of determining the amount of 
required contributions (100 percent for purposes of determining 
whether quarterly contributions are required). As a result, for 
these years, additional contributions and quarterly 
contributions are not required with respect to the plan. In 
addition, for these years, the mortality table used under the 
plan is used in determining the amount of unfunded vested 
benefits under the plan for purposes of calculating PBGC 
variable rate premiums.
      Effective date.--The Senate amendment is effective for 
plan years beginning after December 31, 2003.

                          CONFERENCE AGREEMENT

      The conference agreement follows the Senate amendment.
      The conference agreement modifies the special funding 
rules for plans sponsored by a company engaged primarily in 
interurban or interstate passenger bus service by providing 
that, for plan years beginning in 2004 and 2005, the funded 
current liability percentage of the plan will be treated as at 
least 90 percent for purposes of determining the amount of 
required contributions (100 percent for purposes of determining 
whether quarterly contributions are required). As a result, for 
these years, additional contributions and quarterly 
contributions are not required with respect to the plan. In 
addition, for these years, the mortality table used under the 
plan is used in determining the amount of unfunded vested 
benefits under the plan for purposes of calculating PBGC 
variable rate premiums.
      Effective date.--The Senate amendment is effective for 
plan years beginning after December 31, 2003.

E. Procedures Applicable to Disputes Involving Pension Plan Withdrawal 
                               Liability

(Sec. 7 of the Senate amendment and sec. 4221 of ERISA)

                              PRESENT LAW

      Under ERISA, when an employer withdraws from a 
multiemployer plan, the employer is generally liable for its 
share of unfunded vested benefits, determined as of the date of 
withdrawal (generally referred to as the ``withdrawal 
liability''). Whether and when a withdrawal has occurred and 
the amount of the withdrawal liability is determined by the 
plan sponsor. The plan sponsor's assessment of withdrawal 
liability is presumed correct unless the employer shows by a 
preponderance of the evidence that the plan sponsor's 
determination of withdrawal liability was unreasonable or 
clearly erroneous. A similar standard applies in the event the 
amount of the plan's unfunded vested benefits is challenged.
      The first payment of withdrawal liability determined by 
the plan sponsor is due no later than 60 days after demand, 
even if the employer contests the determination of liability. 
Disputes between an employer and plan sponsor concerning 
withdrawal liability are resolved through arbitration, which 
can be initiated by either party. Even if the employer contests 
the determination, payments of withdrawal liability must be 
made by the employer until the arbitrator issues a final 
decision with respect to the determination submitted for 
arbitration.
      For purposes of withdrawal liability, all trades or 
businesses under common control are treated as a single 
employer. In addition, the plan sponsor may disregard a 
transaction in order to assess withdrawal liability if the 
sponsor determines that the principal purpose of the 
transaction was to avoid or evade withdrawal liability. For 
example, if a subsidiary of a parent company is sold and the 
subsidiary then withdraws from a multiemployer plan, the plan 
sponsor may assess withdrawal liability as if the subsidiary 
were still part of the parent company's controlled group if the 
sponsor determines that a principal purpose of the sale of the 
subsidiary was to evade or avoid withdrawal liability.

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

      Under the Senate amendment, a special rule may apply if a 
transaction is disregarded by a plan sponsor in determining 
that a withdrawal has occurred or that an employer is liable 
for withdrawal liability. If the transaction that is 
disregarded by the plan sponsor occurred before January 1, 
1999, and at least five years before the date of the 
withdrawal, then (1) the determination by the plan sponsor that 
a principal purpose of the transaction was to evade or avoid 
withdrawal liability is not presumed to be correct, (2) the 
plan sponsor, rather than the employer, has the burden to 
establish, by a preponderance of the evidence, the elements of 
the claim that a principal purpose of the transaction was to 
evade or avoid withdrawal liability, and (3) if an employer 
contests the plan sponsor's determination through an 
arbitration proceeding, or through a claim brought in a court 
of competent jurisdiction, the employer is not obligated to 
make any withdrawal liability payments until a final decision 
in the arbitration proceeding, or in court, upholds the plan 
sponsor's determination. The provision does not modify the 
burden of establishing other elements of a claim for withdrawal 
liability other than whether the purpose of the transaction was 
to evade or avoid withdrawal liability.
      Effective date.--The provision applies to an employer 
that receives a notification of withdrawal liability and demand 
for payment under ERISA section 4219(b)(1) after October 31, 
2003.

                          CONFERENCE AGREEMENT

      The conference agreement follows the Senate amendment.
      Under the conference agreement, a special rule may apply 
if a transaction is disregarded by a plan sponsor in 
determining that a withdrawal has occurred or that an employer 
is liable for withdrawal liability. If the transaction that is 
disregarded by the plan sponsor occurred before January 1, 
1999, and at least five years before the date of the 
withdrawal, then (1) the determination by the plan sponsor that 
a principal purpose of the transaction was to evade or avoid 
withdrawal liability is not presumed to be correct, (2) the 
plan sponsor, rather than the employer, has the burden to 
establish, by a preponderance of the evidence, the elements of 
the claim that a principal purpose of the transaction was to 
evade or avoid withdrawal liability, and (3) if an employer 
contests the plan sponsor's determination through an 
arbitration proceeding, or through a claim brought in a court 
of competent jurisdiction, the employer is not obligated to 
make any withdrawal liability payments until a final decision 
in the arbitration proceeding, or in court, upholds the plan 
sponsor's determination. The provision does not modify the 
burden of establishing other elements of a claim for withdrawal 
liability other than whether the purpose of the transaction was 
to evade or avoid withdrawal liability.
      Effective date.--The provision applies to an employer 
that receives a notification of withdrawal liability and demand 
for payment under ERISA section 4219(b)(1) after October 31, 
2003.

  F. Modify Qualification Rules for Tax-Exempt Property and Casualty 
                          Insurance Companies

(Sec. 10 of the Senate amendment and secs. 501 and 831 of the Code)

                              PRESENT LAW

      A property and casualty insurance company generally is 
subject to tax on its taxable income (sec. 831(a)). The taxable 
income of a property and casualty insurance company is 
determined as the sum of its underwriting income and investment 
income (as well as gains and other income items), reduced by 
allowable deductions (sec. 832).
      A property and casualty insurance company is eligible to 
be exempt from Federal income tax if its net written premiums 
or direct written premiums (whichever is greater) for the 
taxable year do not exceed $350,000 (sec. 501(c)(15)).
      A property and casualty insurance company may elect to be 
taxed only on taxable investment income if its net written 
premiums or direct written premiums (whichever is greater) for 
the taxable year exceed $350,000, but do not exceed $1.2 
million (sec. 831(b)).
      For purposes of determining the amount of a company's net 
written premiums or direct written premiums under these rules, 
premiums received by all members of a controlled group of 
corporations of which the company is a part are taken into 
account. For this purpose, a more-than-50-percent threshhold 
applies under the vote and value requirements with respect to 
stock ownership for determining a controlled group, and rules 
treating a life insurance company as part of a separate 
controlled group or as an excluded member of a group do not 
apply (secs. 501(c)(15), 831(b)(2)(B) and 1563).

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

      The Senate amendment modifies the requirements for a 
property and casualty insurance company to be eligible for tax-
exempt status, and to elect to be taxed only on taxable 
investment income.
      Under the Senate amendment, a property and casualty 
insurance company is eligible to be exempt from Federal income 
tax if (a) its gross receipts for the taxable year do not 
exceed $600,000, and (b) the premiums received for the taxable 
year are greater than 50 percent of its gross receipts. For 
purposes of determining gross receipts, the gross receipts of 
all members of a controlled group of corporations of which the 
company is a part are taken into account. The Senate amendment 
expands the present-law controlled group rule so that it also 
takes into account gross receipts of foreign and tax-exempt 
corporations.
      A company that does not meet the definition of an 
insurance company is not eligible to be exempt from Federal 
income tax under the Senate amendment. For this purpose, the 
term ``insurance company'' means any company, more than half of 
the business of which during the taxable year is the issuing of 
insurance or annuity contracts or the reinsuring of risks 
underwritten by insurance companies (sec. 816(a) and new sec. 
831(c)). A company whose investment activities outweigh its 
insurance activities is not considered to be an insurance 
company for this purpose.\35\ It is intended that IRS 
enforcement activities address the misuse of present-law 
section 501(c)(15).
---------------------------------------------------------------------------
    \35\ See, e.g., Inter-American Life Insurance Co. v. Comm'r, 56 
T.C. 497, aff'd per curiam, 469 F.2d 697 (9th Cir. 1972).
---------------------------------------------------------------------------
      The Senate amendment also provides that a property and 
casualty insurance company may elect to be taxed only on 
taxable investment income if its net written premiums or direct 
written premiums (whichever is greater) do not exceed $1.2 
million (without regard to whether such premiums exceed 
$350,000) (sec. 831(b)). As under present law, for purposes of 
determining the amount of a company's net written premiums or 
direct written premiums under this rule, premiums received by 
all members of a controlled group of corporations (as defined 
in section 831(b)) of which the company is a part are taken 
into account.
      It is intended that regulations or other Treasury 
guidance provide for anti-abuse rules so as to prevent improper 
use of the provision, including, for example, by attempts to 
characterize as premiums any income that is other than premium 
income.
      Effective date.--The Senate amendment provisions are 
effective for taxable years beginning after December 31, 2003.

                          CONFERENCE AGREEMENT

      The conference agreement follows the Senate amendment, 
with modifications.
      Under the conference agreement, an additional special 
rule provides that a mutual property and casualty insurance 
company is eligible to be exempt from Federal income tax under 
the provision if (a) its gross receipts for the taxable year do 
not exceed $150,000, and (b) the premiums received for the 
taxable year are greater than 35 percent of its gross receipts, 
provided certain requirements are met. The requirements are 
that no employee of the company or member of the employee's 
family is an employee of another company that is exempt from 
tax under section 501(c)(15). The limitation to mutual 
companies and the limitation on employees are intended to 
address the conferees' concern about the inappropriate use of 
tax-exempt insurance companies to shelter investment income, 
including in the case of companies with gross receipts under 
$150,000. For example, it is intended that the provision not 
permit the use of small companies with common owners or 
employees to shelter investment income for the benefit of such 
owners or employees.
      Effective date.--The provision generally is effective for 
taxable years beginning after December 31, 2003.
      Under the conference agreement, a special transition rule 
applies with respect to certain companies. This transition rule 
applies in the case of a company that, (1) for its taxable year 
that includes April 1, 2004, meets the requirements of present 
law section 501(c)(15)(A) (as in effect for the taxable year 
beginning before January 1, 2004), and (2) on April 1, 2004, is 
in a receivership, liquidation or similar proceeding under the 
supervision of a State court. Under the transition rule, in the 
case of such a company, the general rule of the provision in 
the conference agreement applies to taxable years beginning 
after the earlier of (1) the date the proceeding ends, or (2) 
December 31, 2007.
      For such a company, present-law limitations on the 
carryover of net operating losses to or from years in which the 
company was not subject to tax (including section 831(b)(3)) 
continue to apply. A company that is not otherwise eligible for 
tax-exempt status under present-law section 501(c)(15) (e.g., a 
company that is or becomes a life insurance company, or a 
company with net (or, if greater, direct) written premiums 
exceeding $350,000 for the taxable year) is not eligible for 
the transition rule.

G. Definition of Insurance Company for Property and Casualty Insurance 
                           Company Tax Rules

(Sec. 11 of the Senate amendment and sec. 831 of the Code)

                              PRESENT LAW

      Present law provides specific rules for taxation of the 
life insurance company taxable income of a life insurance 
company (sec. 801), and for taxation of the taxable income of 
an insurance company other than a life insurance company (sec. 
831) (generally referred to as a property and casualty 
insurance company). For Federal income tax purposes, a life 
insurance company means an insurance company that is engaged in 
the business of issuing life insurance and annuity contracts, 
or noncancellable health and accident insurance contracts, and 
that meets a 50-percent test with respect to its reserves (sec. 
816(a)). This statutory provision applicable to life insurance 
companies explicitly defines the term ``insurance company'' to 
mean any company, more than half of the business of which 
during the taxable year is the issuing of insurance or annuity 
contracts or the reinsuring of risks underwritten by insurance 
companies (sec. 816(a)).
      The life insurance company statutory definition of an 
insurance company does not explicitly apply to property and 
casualty insurance companies, although a long-standing Treasury 
regulation \36\ that is applied to property and casualty 
companies provides a somewhat similar definition of an 
``insurance company'' based on the company's ``primary and 
predominant business activity.'' \37\
---------------------------------------------------------------------------
    \36\ The Treasury regulation provides that ``the term `insurance 
company' means a company whose primary and predominant business 
activity during the taxable year is the issuing of insurance or annuity 
contracts or the reinsuring of risks underwritten by insurance 
companies. Thus, though its name, charter powers, and subjection to 
State insurance laws are significant in determining the business which 
a company is authorized and intends to carry on, it is the character of 
the business actually done in the taxable year which determines whether 
a company is taxable as an insurance company under the Internal Revenue 
Code.'' Treas. Reg. sec. 1.801-3(a)(1).
    \37\ Court cases involving a determination of whether a company is 
an insurance company for Federal tax purposes have examined all of the 
business and other activities of the company. In considering whether a 
company is an insurance company for such purposes, courts have 
considered, among other factors, the amount and source of income 
received by the company from its different activities. See Bowers v. 
Lawyers Mortgage Co., 285 U.S. 182 (1932); United States v. Home Title 
Insurance Co., 285 U.S. 191 (1932). See also Inter-American Life 
Insurance Co. v. Comm'r, 56 T.C. 497, aff'd per curiam, 469 F.2d 697 
(9th Cir. 1972), in which the court concluded that the company was not 
an insurance company: ``The . . . financial data clearly indicates that 
petitioner's primary and predominant source of income was from its 
investments and not from issuing insurance contracts or reinsuring 
risks underwritten by insurance companies. During each of the years in 
issue, petitioner's investment income far exceeded its premiums and the 
amounts of earned premiums were de minimis during those years. It is 
equally as clear that petitioner's primary and predominant efforts were 
not expended in issuing insurance contracts or in reinsurance. Of the 
relatively few policies directly written by petitioner, nearly all were 
issued to [family members]. Also, Investment Life, in which [family 
members] each owned a substantial stock interest, was the source of 
nearly all of the policies reinsured by petitioner. These facts, 
coupled with the fact that petitioner did not maintain an active sales 
staff soliciting or selling insurance policies . . ., indicate a lack 
of concentrated effort on petitioner's behalf toward its chartered 
purpose of engaging in the insurance business. . . . For the above 
reasons, we hold that during the years in issue, petitioner was not `an 
insurance company . . . engaged in the business of issuing life 
insurance' and hence, that petitioner was not a life insurance company 
within the meaning of section 801.'' 56 T.C. 497, 507-508.
---------------------------------------------------------------------------
      When enacting the statutory definition of an insurance 
company in 1984, Congress stated, ``[b]y requiring [that] more 
than half rather than the `primary and predominant business 
activity' be insurance activity, the bill adopts a stricter and 
more precise standard for a company to be taxed as a life 
insurance company than does the general regulatory definition 
of an insurance company applicable for both life and nonlife 
insurance companies . . . Whether more than half of the 
business activity is related to the issuing of insurance or 
annuity contracts will depend on the facts and circumstances 
and factors to be considered will include the relative 
distribution of the number of employees assigned to, the amount 
of space allocated to, and the net income derived from, the 
various business activities.'' \38\
---------------------------------------------------------------------------
    \38\ H.R. Rep. 98-432, part 2, at 1402-1403 (1984); S. Prt. No. 98-
169, vol. I, at 525-526 (1984); see also H.R. Rep. No. 98-861 at 1043-
1044 (1985) (Conference Report).
---------------------------------------------------------------------------

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

      The Senate amendment provides that, for purposes of 
determining whether a company is a property and casualty 
insurance company, the term ``insurance company'' is defined to 
mean any company, more than half of the business of which 
during the taxable year is the issuing of insurance or annuity 
contracts or the reinsuring of risks underwritten by insurance 
companies. Thus, the Senate amendment conforms the definition 
of an insurance company for purposes of the rules taxing 
property and casualty insurance companies to the rules taxing 
life insurance companies, so that the definition is uniform. 
The Senate amendment adopts a stricter and more precise 
standard than the ``primary and predominant business activity'' 
test contained in Treasury Regulations. A company whose 
investment activities outweigh its insurance activities is not 
considered to be an insurance company under the Senate 
amendment.\39\ It is not intended that a company whose sole 
activity is the run-off of risks under the company's insurance 
contracts be treated as a company other than an insurance 
company, even if the company has little or no premium income.
---------------------------------------------------------------------------
    \39\ See Inter-American Life Insurance Co. v. Comm'r, supra.
---------------------------------------------------------------------------
      Effective date.--The Senate amendment provision applies 
to taxable years beginning after December 31, 2003.

                          CONFERENCE AGREEMENT

      The conference agreement follows the Senate amendment.
      Effective date.--The Senate amendment provision applies 
to taxable years beginning after December 31, 2003.

    H. Repeal of Reduction of Deductions for Mutual Life Insurance 
                               Companies

(Sec. 809 of the Code)

                         PRIOR AND PRESENT LAW

      In general, a corporation may not deduct amounts 
distributed to shareholders with respect to the corporation's 
stock. The Deficit Reduction Act of 1984 added a provision to 
the rules governing insurance companies that was intended to 
remedy the failure of prior law to distinguish between amounts 
returned by mutual life insurance companies to policyholders as 
customers, and amounts distributed to them as owners of the 
mutual company.
      Under the provision, section 809, a mutual life insurance 
company is required to reduce its deduction for policyholder 
dividends by the company's differential earnings amount. If the 
company's differential earnings amount exceeds the amount of 
its deductible policyholder dividends, the company is required 
to reduce its deduction for changes in its reserves by the 
excess of its differential earnings amount over the amount of 
its deductible policyholder dividends. The differential 
earnings amount is the product of the differential earnings 
rate and the average equity base of a mutual life insurance 
company.
      The differential earnings rate is based on the difference 
between the average earnings rate of the 50 largest stock life 
insurance companies and the earnings rate of all mutual life 
insurance companies. The mutual earnings rate applied under the 
provision is the rate for the second calendar year preceding 
the calendar year in which the taxable year begins. Under 
present law, the differential earnings rate cannot be a 
negative number.
      A company's equity base equals the sum of: (1) Its 
surplus and capital increased by 50 percent of the amount of 
any provision for policyholder dividends payable in the 
following taxable year; (2) the amount of its nonadmitted 
financial assets; (3) the excess of its statutory reserves over 
its tax reserves; and (4) the amount of any mandatory security 
valuation reserves, deficiency reserves, and voluntary 
reserves. A company's average equity base is the average of the 
company's equity base at the end of the taxable year and its 
equity base at the end of the preceding taxable year.
      A recomputation or ``true-up'' in the succeeding year is 
required if the differential earnings amount for the taxable 
year either exceeds, or is less than, the recomputed 
differential earnings amount. The recomputed differential 
earnings amount is calculated taking into account the average 
mutual earnings rate for the calendar year (rather than the 
second preceding calendar year, as above). The amount of the 
true-up for any taxable year is added to, or deducted from, the 
mutual company's income for the succeeding taxable year.
      For taxable years beginning in 2001, 2002, or 2003, the 
differential earnings amount is treated as zero for purposes of 
computing both the differential earnings amount and the 
recomputed differential earnings amount (true-up).

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

      No provision.

                          CONFERENCE AGREEMENT

      The conference agreement repeals the rule requiring 
reduction in certain deductions of a mutual life insurance 
company (section 809).
      Effective date.--The provision is effective for taxable 
years beginning after December 31, 2004. Thus, for taxable 
years beginning in 2003, the differential earnings amount is 
treated as zero under present law; for taxable years beginning 
in 2004, this rule does not apply and section 809 is in effect 
(including the true-up applicable with respect to taxable years 
beginning in 2004).

  I. Sense of Congress Regarding Defined Benefit Pension System Reform

(Sec. 2 of the House bill and sec. 8 of the Senate amendment)

                              PRESENT LAW

      No provision.

                               HOUSE BILL

      The House bill makes various findings and expresses the 
sense of the Congress with respect to the interest rate used to 
value pension plan liabilities.
      Specifically, the House bill provides that the Congress 
finds the following:
            The defined benefit pension system has recently 
        experienced severe difficulties due to an unprecedented 
        economic climate of low interest rates, market losses 
        and an increased number of retirees;
            The discontinuance of the issuance of 30-year 
        Treasury securities has made the interest rate on such 
        securities an inappropriate and inaccurate benchmark 
        for measuring pension liabilities;
            Using the current 30-year Treasury bond interest 
        rate has artificially inflated pension liabilities and 
        adversely affected employers offering defined benefit 
        pension plans and working families who rely on the safe 
        and secure benefits these plans provide;
            There is consensus among pension experts that an 
        interest rate based on long-term, conservative 
        corporate bonds would provide a more accurate benchmark 
        for measuring pension plan liabilities; and
            A temporary replacement for the 30-year Treasury 
        bond interest rate should be enacted while the Congress 
        evaluates permanent and comprehensive funding reforms.
      In addition, the House bill provides that it is the sense 
of the Congress that the Congress must ensure the financial 
health of the defined benefit pension system by working to 
promptly implement: (1) a permanent replacement for the 
discount rate used for defined benefit pension plan 
calculations; and (2) comprehensive funding reforms aimed at 
achieving accurate and sound pension plan funding to enhance 
retirement security for workers who rely on defined benefit 
pension plan benefits, to reduce the volatility of 
contributions, to provide plan sponsors with predictability for 
plan contributions, and to ensure adequate disclosures for plan 
participants in the case of underfunded plans.
      Effective date.--The provision is effective on the date 
of enactment.

                            SENATE AMENDMENT

      The Senate amendment makes various findings of the 
Congress relating to the private pension system and the Pension 
Benefit Guaranty Corporation (``PBGC'') and expresses the sense 
of the Senate with respect to future legislative action.
      Specifically, the Senate amendment provides that the 
Congress makes the following findings:
            The private pension system is integral to the 
        retirement security of Americans, along with individual 
        savings and Social Security.
            The PBGC is responsible for insuring the nation's 
        private pension system, and currently insures the 
        pensions of 34,500,000 participants in 29,500 single-
        employer plans, and 9,700,000 participants in more than 
        1,600 multiemployer plans;
            The PBGC announced on January 15, 2004, that it 
        suffered a net loss in fiscal year 2003 of 
        $7,600,000,000 for single-employer pension plans, 
        bringing the PBGC's deficit to $11,200,000,000. This 
        deficit is the PBGC's worst on record, three times 
        larger than the $3,600,000,000 deficit experienced in 
        fiscal year 2002.
            The PBGC also announced that the separate insurance 
        program for multiemployer pension plans sustained a net 
        loss of $419,000,000 in fiscal year 2003, resulting in 
        a fiscal year-end deficit of $261,000,000. The 2003 
        multiemployer plan deficit is the first deficit in more 
        than 20 years and is the largest deficit on record.
            The PBGC estimates that the total underfunding in 
        multiemployer pension plans is roughly $100,000,000,000 
        and in single-employer plans is approximately 
        $400,000,000,000. This underfunding is due in part to 
        the recent decline in the stock market and low interest 
        rates, but is also due to demographic changes. For 
        example, in 1980, there were four active workers for 
        every one retiree in a multiemployer plan, but in 2002, 
        there was only one active worker for every one retiree.
            This pension plan underfunding is concentrated in 
        mature and often-declining industries, where plan 
        liabilities will come due sooner.
            Neither the Senate Committee on Finance nor the 
        Senate Committee on Health, Education, Labor and 
        Pensions (``HELP''), the committees of jurisdiction 
        over pension matters, has held hearings this Congress 
        nor reported legislation addressing the funding of 
        multiemployer pension plans.
            The Senate is concerned about the current funding 
        status of the private pension system, both single and 
        multiemployer plans.
            The Senate is concerned about the potential 
        liabilities facing the PBGC and, as a result, the 
        potential burdens facing healthy pension plans and 
        taxpayers.
      In addition, the Senate amendment provides that it is the 
sense of the Senate that the Committee on Finance and the 
Committee on Health, Education, Labor and Pensions should 
conduct hearings on the status of multiemployer pension plans 
and should work in consultation with the Departments of Labor 
and Treasury on permanent measures to strengthen the integrity 
of the private pension system in order to protect the benefits 
of current and future pension plan beneficiaries.
      Effective date.--The Senate amendment is effective on the 
date of enactment.

                          CONFERENCE AGREEMENT

      The conference agreement follows the House bill, with 
modifications. Under the conference agreement, it is the sense 
of the Congress that the Congress must ensure the financial 
health of the defined benefit pension system by working to 
promptly implement: (1) a permanent replacement for the 
discount rate used for defined benefit pension plan 
calculations; and (2) comprehensive funding reforms for all 
defined benefit pension plans aimed at achieving accurate and 
sound pension plan funding to enhance retirement security for 
workers who rely on defined benefit pension plan benefits, to 
reduce the volatility of contributions, to provide plan 
sponsors with predictability for plan contributions, and to 
ensure adequate disclosures for plan participants in the case 
of underfunded plans.
      Effective date.--The conference agreement is effective on 
the date of enactment.

  J. Extension of Provision Permitting Qualified Transfers of Excess 
               Pension Assets to Retiree Health Accounts

(Sec. 9 of the Senate amendment, sec. 420 of the Code, and secs. 101, 
        403, and 408 of ERISA)

                              PRESENT LAW

      Defined benefit plan assets generally may not revert to 
an employer prior to termination of the plan and satisfaction 
of all plan liabilities. In addition, a reversion may occur 
only if the plan so provides. A reversion prior to plan 
termination may constitute a prohibited transaction and may 
result in plan disqualification. Any assets that revert to the 
employer upon plan termination are includible in the gross 
income of the employer and subject to an excise tax. The excise 
tax rate is 20 percent if the employer maintains a replacement 
plan or makes certain benefit increases in connection with the 
termination; if not, the excise tax rate is 50 percent. Upon 
plan termination, the accrued benefits of all plan participants 
are required to be 100-percent vested.
      A pension plan may provide medical benefits to retired 
employees through a separate account that is part of such plan. 
A qualified transfer of excess assets of a defined benefit plan 
to such a separate account within the plan may be made in order 
to fund retiree health benefits.\40\ A qualified transfer does 
not result in plan disqualification, is not a prohibited 
transaction, and is not treated as a reversion. Thus, 
transferred assets are not includible in the gross income of 
the employer and are not subject to the excise tax on 
reversions. No more than one qualified transfer may be made in 
any taxable year. A qualified transfer can be made only from a 
single-employer plan.
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    \40\ Sec. 420.
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      Excess assets generally means the excess, if any, of the 
value of the plan's assets \41\ over the greater of (1) the 
accrued liability under the plan (including normal cost) or (2) 
125 percent of the plan's current liability.\42\ In addition, 
excess assets transferred in a qualified transfer may not 
exceed the amount reasonably estimated to be the amount that 
the employer will pay out of such account during the taxable 
year of the transfer for qualified current retiree health 
liabilities. No deduction is allowed to the employer for (1) a 
qualified transfer or (2) the payment of qualified current 
retiree health liabilities out of transferred funds (and any 
income thereon).
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    \41\ The value of plan assets for this purpose is the lesser of 
fair market value or actuarial value.
    \42\ In the case of plan years beginning before January 1, 2004, 
excess assets generally means the excess, if any, of the value of the 
plan's assets over the greater of (1) the lesser of (a) the accrued 
liability under the plan (including normal cost) or (b) 170 percent of 
the plan's current liability (for 2003), or (2) 125 percent of the 
plan's current liability. The current liability full funding limit was 
repealed for years beginning after 2003. Under the general sunset 
provision of EGTRRA, the limit is reinstated for years after 2010.
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      Transferred assets (and any income thereon) must be used 
to pay qualified current retiree health liabilities for the 
taxable year of the transfer. Transferred amounts generally 
must benefit pension plan participants, other than key 
employees, who are entitled upon retirement to receive retiree 
medical benefits through the separate account. Retiree health 
benefits of key employees may not be paid out of transferred 
assets.
      Amounts not used to pay qualified current retiree health 
liabilities for the taxable year of the transfer are to be 
returned to the general assets of the plan. These amounts are 
not includible in the gross income of the employer, but are 
treated as an employer reversion and are subject to a 20-
percent excise tax.
      In order for the transfer to be qualified, accrued 
retirement benefits under the pension plan generally must be 
100-percent vested as if the plan terminated immediately before 
the transfer (or in the case of a participant who separated in 
the one-year period ending on the date of the transfer, 
immediately before the separation).
      In order for a transfer to be qualified, the employer 
generally must maintain retiree health benefits at the same 
level for the taxable year of the transfer and the following 
four years.
      In addition, the ERISA provides that, at least 60 days 
before the date of a qualified transfer, the employer must 
notify the Secretary of Labor, the Secretary of the Treasury, 
employee representatives, and the plan administrator of the 
transfer, and the plan administrator must notify each plan 
participant and beneficiary of the transfer.\43\
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    \43\ ERISA sec. 101(e). ERISA also provides that a qualified 
transfer is not a prohibited transaction under ERISA or a prohibited 
reversion.
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      No qualified transfer may be made after December 31, 
2005.

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

      The Senate amendment allows qualified transfers of excess 
defined benefit plan assets through December 31, 2013.
      Effective date.--The provision is effective on the date 
of enactment.

                          CONFERENCE AGREEMENT

      The conference agreement follows the Senate amendment. 
The conference agreement allows qualified transfers of excess 
defined benefit plan assets through December 31, 2013.
      Effective date.--The provision is effective on the date 
of enactment.

   K. Confirmation of Antitrust Status of Graduate Medical Resident 
                           Matching Programs

                               HOUSE BILL

      No provision.

                            SENATE AMENDMENT

      No provision.

                          CONFERENCE AGREEMENT

      The conference agreement confirms that the antitrust laws 
do not prohibit the sponsorship, conduct, or participation in a 
graduate medical education residency matching program and that 
evidence of that conduct shall not be admissible to support any 
claim or action alleging a violation of the antitrust laws.
      Effective date.--The provision is effective on the date 
of enactment. It applies to conduct whether it occurs prior to, 
on, or after such date and applies to all judicial and 
administrative actions or other proceedings pending on such 
date.

                       L. Tax Complexity Analysis

      Section 4022(b) of the Internal Revenue Service Reform 
and Restructuring Act of 1998 (the ``IRS Reform Act'') requires 
the Joint Committee on Taxation (in consultation with the 
Internal Revenue Service and the Department of the Treasury) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
(the ``Code'') and has widespread applicability to individuals 
or small businesses.
      The staff of the Joint Committee on Taxation has 
determined that a complexity analysis is not required under 
section 4022(b) of the IRS Reform Act because the bill contains 
no provisions that amend the Internal Revenue Code and that 
have ``widespread applicability'' to individuals or small 
businesses.


                From the Committee on Education and the 
                Workforce, for consideration of the House bill 
                and the Senate amendment, and modifications 
                committed to conference:
                                   John Boehner,
                                   Howard ``Buck'' McKeon,
                                   Sam Johnson,
                                   Patrick J. Tiberi,
                From the Committee on Ways and Means, for 
                consideration of the House bill and the Senate 
                amendment, and modifications committed to 
                conference:
                                   William Thomas,
                                   Rob Portman,
                                 Managers on the Part of the House.

                                   Chuck Grassley,
                                   Judd Gregg,
                                   Mitch McConnell,
                                Managers on the Part of the Senate.

                                
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