[House Report 109-346]
[From the U.S. Government Publishing Office]



109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    109-346

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



 
  PROVIDING FOR CONSIDERATION OF H.R. 2830, PENSION PROTECTION ACT OF 
                                  2005

                                _______
                                

 December 14, 2006.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

Mr. Hastings of Washington, from the Committee on Rules, submitted the 
                               following

                              R E P O R T

                       [To accompany H. Res. 602]

    The Committee on Rules, having had under consideration 
House Resolution 602, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for the consideration of H.R. 2830, 
the Pension Protection Act of 2005, under a closed rule, 
providing ninety minutes of debate in the House on the bill as 
amended equally divided among and controlled by the chairman 
and ranking minority member of the Committee on Education and 
the Workforce and the chairman and ranking minority member of 
the Committee on Ways and Means. The rule waives all points of 
order against consideration of the bill.
    The rule provides that in lieu of the amendments 
recommended by the Committees on Education and the Workforce 
and Ways and Means now printed in the bill, the amendment in 
the nature of a substitute printed in part A of this report 
shall be considered as adopted. The rule waives all points of 
order against the bill, as amended. The rule provides one 
motion to recommit with or without instructions.
    Finally, the rule provides that, notwithstanding the 
operation of the previous question, the Chair may postpone 
further consideration of the bill to a time designated by the 
Speaker.

                         EXPLANATION OF WAIVERS

    The Committee is not aware of any points of order against 
the bill or its consideration. The waivers of all points of 
against the bill or its consideration are prophylactic in 
nature.

                            COMMITTEE VOTES

    Pursuant to clause 3(b) of House rule XIII the results of 
each record vote on an amendment or motion to report, together 
with the names of those voting for and against, are printed 
below:

                  RULES COMMITTEE RECORD VOTE NO. 137

    Date: December 14, 2005.
    Measure: H.R. 2830, Pension Protections Act of 2005.
    Motion by: Mrs. Slaughter.
    Summary of motion: To make in order and provide the 
appropriate waivers to the amendment offered by Representative 
George Miller of California which permits employers to value 
their pension liabilities by using the corporate bond interest 
rate in 2007 and 2008 and then returning to use of the 30-year 
Treasury bond interest rate. Requires companies to seek 
alternatives to termination before a pension plan could be 
terminated, permits the parties to restore a plan up to three 
years after a termination, and does not punish workers for 
employer funding decisions. The provisions would apply to 
companies still in bankruptcy, including United Airlines. 
Permits struggling airlines to freeze their pension plans and 
gives them up to 20 years to meet their pension obligations. 
Permits airline pilots who must retire at age 60 to receive 
unreduced PBGC pensions if their plan is terminated. Permits 
the United Airline employees to demand proof in bankruptcy that 
their pension plans cannot be maintained. Enables multiemployer 
pension plans to reorganize and agree to long term funding 
improvement plans to protect workers' pensions. Exempts 
military employees from being subject to withdrawal penalties 
if they need early access to their retirement funds and 
includes combat pay for purposes of IRA eligibility. Permits 
public safety officers to roll over lump sum distributions 
exempt from current law penalties. Permits disabled individuals 
to establish deductible IRAs to save for their retirement. 
Ensures that workers and executives equally be affected by 
pension benefit cuts. Encourages employers to automatically 
enroll their employees in the company 401(k) plans and expands 
the SAVER retirement savings tax credit for low and moderate 
savers. Imposes a surcharge on taxpayers earning over $1 
million a year.
    Results: Defeated 3 to 9.
    Vote by Members: Diaz-Balart--Nay; Hastings (WA)--Nay; Ses-
sions--Nay; Putnam--Nay; Capito--Nay; Cole--Nay; Bishop--Nay; 
Gingrey--Nay; Slaughter--Yea; McGovern--Yea; Hastings (FL)-- 
Yea; Dreier--Nay.

   PART A--SUMMARY OF AMENDMENT IN THE NATURE OF A SUBSTITUTE TO BE 
                         CONSIDERED AS ADOPTED

    Boehner/Thomas: Manager's Amendment. Treats plant shut down 
benefits as plan amendments. As a result, shutdown benefit 
cannot be paid out if the plan is less than 80 percent funded 
unless the full amount of the shutdown benefit is paid for. 
Provides for a 5-year phase-in for the rule that requires plans 
to be 100 percent funded in order to avoid any benefit 
restrictions. Requires collectively bargained plans to use any 
portion of the plan's credit balance to increase plan assets in 
order to avoid the benefit restriction rules. Requires plans to 
fund for projected mortality improvements annually. Provides 
for employer surcharges and certain benefit cutbacks for plans 
that are severely underfunded. Imposes new penalties and excise 
taxes for failure to timely certify the funded status of a plan 
or comply with the contribution requirements of a plan. Waives 
the funding deficiency excise tax for severely underfunded 
plans provided that all interested parties are in compliance 
with the rehabilitation plan of improvement. Requires severely 
underfunded plans to implement annual standards for meeting the 
requirements of the rehabilitation plan of improvement. 
Grandfathers the interest rate used by plans that have existing 
or pending (as of 6/30/05) IRS waivers/amortization extensions. 
ERISA Modernization/Prohibited Transactions. Makes conforming 
IRC changes for the Block Trading and a Correction Period for 
certain Transactions. Requires plans to file a Form 5500 within 
285 days after the end of the plan year. Modifies the general 
age discrimination rule for all defined benefit plans to 
provide that accrued benefits may be calculated as the balance 
of a hypothetical account or as the current value of the 
accumulated percentage of an employ-ee's final average 
compensation. Permits the Treasury Department to approve 
certain types of plan offsets to defined benefit plans. 
Provides that the market rate for crediting benefits to 
participants can be a fixed or variable rate. Amends the 
withdrawal rules related to erroneous corrections. Provides 
Preemption from state wage laws. Requires the Secretary of 
Labor to issue regulations on default investments that provide 
long-term capital appreciation. Directs the Secretary of Labor 
to issue regulations to clarify that the selection of an 
annuity as a form of distribution from the plan is subject to 
the current applicable fiduciary standards under ERISA. To keep 
participants invested in funds that meet their investment 
needs, the amendment requires plans to inform participants that 
if no contrary instruction is given, the portion of their 
accounts invested in the fund being eliminated will be 
``mapped'' to a designated fund with similar investment or 
risk/reward characteristics. If, in fact, no instruction is 
given, fiduciary protection is provided for when investment 
options are changed. Ensures that health plans and employers 
are able to enforce their routine reimbursement provisions with 
greater certainty and recover, as equitable relief, third party 
payments under ERISA.

         PART A--TEXT OF AMENDMENT TO BE CONSIDERED AS ADOPTED

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

Sec. 1. Short title and table of contents.

  TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT 
                              PENSION PLANS

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

Sec. 101. Minimum funding standards.
Sec. 102. Funding rules for single-employer defined benefit pension 
          plans.
Sec. 103. Benefit limitations under single-employer plans.
Sec. 104. Technical and conforming amendments.

         Subtitle B--Amendments to Internal Revenue Code of 1986

Sec. 111. Minimum funding standards.
Sec. 112. Funding rules for single-employer defined benefit pension 
          plans.
Sec. 113. Benefit limitations under single-employer plans.
Sec. 114. Technical and conforming amendments.

                      Subtitle C--Other Provisions

Sec. 121. Modification of transition rule to pension funding 
          requirements.
Sec. 122. Treatment of nonqualified deferred compensation plans when 
          employer defined benefit plan in at-risk status.

     TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS

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

Sec. 201. Funding rules for multiemployer defined benefit plans.
Sec. 202. Additional funding rules for multiemployer plans in endangered 
          or critical status.
Sec. 203. Measures to forestall insolvency of multiemployer plans.
Sec. 204. Withdrawal liability reforms.
Sec. 205. Removal of restrictions with respect to procedures applicable 
          to disputes involving withdrawal liability.

         Subtitle B--Amendments to Internal Revenue Code of 1986

Sec. 211. Funding rules for multiemployer defined benefit plans.
Sec. 212. Additional funding rules for multiemployer plans in endangered 
          or critical status.
Sec. 213. Measures to forestall insolvency of multiemployer plans.

                       TITLE III--OTHER PROVISIONS

Sec. 301. Interest rate for 2006 funding requirements.
Sec. 302. Interest rate assumption for determination of lump sum 
          distributions.
Sec. 303. Interest rate assumption for applying benefit limitations to 
          lump sum distributions.
Sec. 304. Distributions during working retirement.
Sec. 305. Other amendments relating to prohibited transactions.
Sec. 306. Correction period for certain transactions involving 
          securities and commodities.
Sec. 307. Recovery by reimbursement or subrogation with respect to 
          provided benefits.
Sec. 308. Exercise of control over plan assets in connection with 
          qualified changes in investment options.
Sec. 309. Clarification of fiduciary rules.
Sec. 310. Government Accountability Office pension funding report.

           TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

Sec. 401. Increases in PBGC premiums.

                           TITLE V--DISCLOSURE

Sec. 501. Defined benefit plan funding notices.
Sec. 502. Additional disclosure requirements.
Sec. 503. Section 4010 filings with the PBGC.

                       TITLE VI--INVESTMENT ADVICE

Sec. 601. Amendments to Employee Retirement Income Security Act of 1974 
          providing prohibited transaction exemption for provision of 
          investment advice.
Sec. 602. Amendments to Internal Revenue Code of 1986 providing 
          prohibited transaction exemption for provision of investment 
          advice.

                  TITLE VII--BENEFIT ACCRUAL STANDARDS

Sec. 701. Benefit accrual standards.

                    TITLE VIII--DEDUCTION LIMITATIONS

Sec. 801. Increase in deduction limits.
Sec. 802. Updating deduction rules for combination of plans.

  TITLE IX--ENHANCED RETIREMENTS SAVINGS AND DEFINED CONTRIBUTION PLANS

Sec. 901. Pensions and individual retirement arrangement provisions of 
          Economic Growth and Tax Relief Reconciliation Act of 2001 made 
          permanent.
Sec. 902. Saver's credit.
Sec. 903. Increasing participation through automatic contribution 
          arrangements.
Sec. 904. Penalty-free withdrawals from retirement plans for individuals 
          called to active duty for at least 179 days.
Sec. 905. Waiver of 10 percent early withdrawal penalty tax on certain 
          distributions of pension plans for public safety employees.
Sec. 906. Combat zone compensation taken into account for purposes of 
          determining limitation and deductibility of contributions to 
          individual retirement plans.
Sec. 907. Direct payment of tax refunds to individual retirement plans.
Sec. 908. IRA eligibility for the disabled.
Sec. 909. Allow rollovers by nonspouse beneficiaries of certain 
          retirement plan distributions.

         TITLE X--PROVISIONS TO ENHANCE HEALTH CARE AFFORDABILITY

Sec. 1001. Treatment of annuity and life insurance contracts with a 
          long-term care insurance feature.
Sec. 1002. Disposition of unused health and dependent care benefits in 
          cafeteria plans and flexible spending arrangements.
Sec. 1003. Distributions from governmental retirement plans for health 
          and long-term care insurance for public safety officers.

                       TITLE XI--GENERAL PROVISIONS

Sec. 1101. Provisions relating to plan amendments.

 TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT 
                             PENSION PLANS

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

SEC. 101. MINIMUM FUNDING STANDARDS.

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

                      ``MINIMUM FUNDING STANDARDS

  ``Sec. 302. (a) Requirement to Meet Minimum Funding 
Standard.--
          ``(1) In general.--A plan to which this part applies 
        shall satisfy the minimum funding standard applicable 
        to the plan for any plan year.
          ``(2) Minimum funding standard.--For purposes of 
        paragraph (1), a plan shall be treated as satisfying 
        the minimum funding standard for a plan year if--
                  ``(A) in the case of a defined benefit plan 
                which is a single-employer plan, the employer 
                makes contributions to or under the plan for 
                the plan year which, in the aggregate, are not 
                less than the minimum required contribution 
                determined under section 303 for the plan for 
                the plan year,
                  ``(B) in the case of a money purchase plan 
                which is a single-employer plan, the employer 
                makes contributions to or under the plan for 
                the plan year which are required under the 
                terms of the plan, and
                  ``(C) in the case of a multiemployer plan, 
                the employers make contributions to or under 
                the plan for any plan year which, in the 
                aggregate, are sufficient to ensure that the 
                plan does not have an accumulated funding 
                deficiency under section 304 as of the end of 
                the plan year.
  ``(b) Liability for Contributions.--
          ``(1) In general.--Except as provided in paragraph 
        (2), the amount of any contribution required by this 
        section (including any required installments under 
        paragraphs (3) and (4) of section 303(j)) shall be paid 
        by the employer responsible for making contributions to 
        or under the plan.
          ``(2) Joint and several liability where employer 
        member of controlled group.--In the case of a single-
        employer plan, if the employer referred to in paragraph 
        (1) is a member of a controlled group, each member of 
        such group shall be jointly and severally liable for 
        payment of such contributions.
  ``(c) Variance From Minimum Funding Standards.--
          ``(1) Waiver in case of business hardship.--
                  ``(A) In general.--If--
                          ``(i) an employer is (or in the case 
                        of a multiemployer plan, 10 percent or 
                        more of the number of employers 
                        contributing to or under the plan is) 
                        unable to satisfy the minimum funding 
                        standard for a plan year without 
                        temporary substantial business hardship 
                        (substantial business hardship in the 
                        case of a multiemployer plan), and
                          ``(ii) application of the standard 
                        would be adverse to the interests of 
                        plan participants in the aggregate,
                the Secretary of the Treasury may, subject to 
                subparagraph (C), waive the requirements of 
                subsection (a) for such year with respect to 
                all or any portion of the minimum funding 
                standard. The Secretary of the Treasury shall 
                not waive the minimum funding standard with 
                respect to a plan for more than 3 of any 15 (5 
                of any 15 in the case of a multiemployer plan) 
                consecutive plan years.
                  ``(B) Effects of waiver.--If a waiver is 
                granted under subparagraph (A) for any plan 
                year--
                          ``(i) in the case of a single-
                        employer plan, the minimum required 
                        contribution under section 303 for the 
                        plan year shall be reduced by the 
                        amount of the waived funding deficiency 
                        and such amount shall be amortized as 
                        required under section 303(e), and
                          ``(ii) in the case of a multiemployer 
                        plan, the funding standard account 
                        shall be credited under section 
                        304(b)(3)(C) with the amount of the 
                        waived funding deficiency and such 
                        amount shall be amortized as required 
                        under section 304(b)(2)(C).
                  ``(C) Waiver of amortized portion not 
                allowed.--The Secretary of the Treasury may not 
                waive under subparagraph (A) any portion of the 
                minimum funding standard under subsection (a) 
                for a plan year which is attributable to any 
                waived funding deficiency for any preceding 
                plan year.
          ``(2) Determination of business hardship.--For 
        purposes of this subsection, the factors taken into 
        account in determining temporary substantial business 
        hardship (substantial business hardship in the case of 
        a multiemployer plan) shall include (but shall not be 
        limited to) whether or not--
                  ``(A) the employer is operating at an 
                economic loss,
                  ``(B) there is substantial unemployment or 
                underemployment in the trade or business and in 
                the industry concerned,
                  ``(C) the sales and profits of the industry 
                concerned are depressed or declining, and
                  ``(D) it is reasonable to expect that the 
                plan will be continued only if the waiver is 
                granted.
          ``(3) Waived funding deficiency.--For purposes of 
        this part, the term `waived funding deficiency' means 
        the portion of the minimum funding standard under 
        subsection (a) (determined without regard to the 
        waiver) for a plan year waived by the Secretary of the 
        Treasury and not satisfied by employer contributions.
          ``(4) Security for waivers for single-employer plans, 
        consultations.--
                  ``(A) Security may be required.--
                          ``(i) In general.--Except as provided 
                        in subparagraph (C), the Secretary of 
                        the Treasury may require an employer 
                        maintaining a defined benefit plan 
                        which is a single-employer plan (within 
                        the meaning of section 4001(a)(15)) to 
                        provide security to such plan as a 
                        condition for granting or modifying a 
                        waiver under paragraph (1).
                          ``(ii)  special rules.--Any security 
                        provided under clause (i) may be 
                        perfected and enforced only by the 
                        Pension Benefit Guaranty Corporation, 
                        or at the direction of the Corporation, 
                        by a contributing sponsor (within the 
                        meaning of section 4001(a)(13)), or a 
                        member of such sponsor's controlled 
                        group (within the meaning of section 
                        4001(a)(14)).
                  ``(B) Consultation with the pension benefit 
                guaranty corporation.--Except as provided in 
                subparagraph (C), the Secretary of the Treasury 
                shall, before granting or modifying a waiver 
                under this subsection with respect to a plan 
                described in subparagraph (A)(i)--
                          ``(i) provide the Pension Benefit 
                        Guaranty Corporation with--
                                  ``(I) notice of the completed 
                                application for any waiver or 
                                modification, and
                                  ``(II) an opportunity to 
                                comment on such application 
                                within 30 days after receipt of 
                                such notice, and
                          ``(ii) consider--
                                  ``(I) any comments of the 
                                Corporation under clause 
                                (i)(II), and
                                  ``(II) any views of any 
                                employee organization (within 
                                the meaning of section 3(4)) 
                                representing participants in 
                                the plan which are submitted in 
                                writing to the Secretary of the 
                                Treasury in connection with 
                                such application.
                Information provided to the Corporation under 
                this subparagraph shall be considered tax 
                return information and subject to the 
                safeguarding and reporting requirements of 
                section 6103(p) of the Internal Revenue Code of 
                1986.
                  ``(C) Exception for certain waivers.--
                          ``(i) In general.--The preceding 
                        provisions of this paragraph shall not 
                        apply to any plan with respect to which 
                        the sum of--
                                  ``(I) the aggregate unpaid 
                                minimum required contribution 
                                for the plan year and all 
                                preceding plan years, and
                                  ``(II) the present value of 
                                all waiver amortization 
                                installments determined for the 
                                plan year and succeeding plan 
                                years under section 303(e)(2),
                        is less than $1,000,000.
                          ``(ii) Treatment of waivers for which 
                        applications are pending.--The amount 
                        described in clause (i)(I) shall 
                        include any increase in such amount 
                        which would result if all applications 
                        for waivers of the minimum funding 
                        standard under this subsection which 
                        are pending with respect to such plan 
                        were denied.
                          ``(iii) Unpaid minimum required 
                        contribution.--For purposes of this 
                        subparagraph--
                                  ``(I) In general.--The term 
                                `unpaid minimum required 
                                contribution' means, with 
                                respect to any plan year, any 
                                minimum required contribution 
                                under section 303 for the plan 
                                year which is not paid on or 
                                before the due date (as 
                                determined under section 
                                303(j)(1)) for the plan year.
                                  ``(II) Ordering rule.--For 
                                purposes of subclause (I), any 
                                payment to or under a plan for 
                                any plan year shall be 
                                allocated first to unpaid 
                                minimum required contributions 
                                for all preceding plan years on 
                                a first-in, first-out basis and 
                                then to the minimum required 
                                contribution under section 303 
                                for the plan year.
          ``(5) Special rules for single-employer plans.--
                  ``(A) Application must be submitted before 
                date 2\1/2\ months after close of year.--In the 
                case of a single-employer plan, no waiver may 
                be granted under this subsection with respect 
                to any plan for any plan year unless an 
                application therefor is submitted to the 
                Secretary of the Treasury not later than the 
                15th day of the 3rd month beginning after the 
                close of such plan year.
                  ``(B) Special rule if employer is member of 
                controlled group.--In the case of a single-
                employer plan, if an employer is a member of a 
                controlled group, the temporary substantial 
                business hardship requirements of paragraph (1) 
                shall be treated as met only if such 
                requirements are met--
                          ``(i) with respect to such employer, 
                        and
                          ``(ii) with respect to the controlled 
                        group of which such employer is a 
                        member (determined by treating all 
                        members of such group as a single 
                        employer).
                The Secretary of the Treasury may provide that 
                an analysis of a trade or business or industry 
                of a member need not be conducted if such 
                Secretary determines such analysis is not 
                necessary because the taking into account of 
                such member would not significantly affect the 
                determination under this paragraph.
          ``(6) Advance notice.--
                  ``(A) In general.--The Secretary of the 
                Treasury shall, before granting a waiver under 
                this subsection, require each applicant to 
                provide evidence satisfactory to such Secretary 
                that the applicant has provided notice of the 
                filing of the application for such waiver to 
                each affected party (as defined in section 
                4001(a)(21)). Such notice shall include a 
                description of the extent to which the plan is 
                funded for benefits which are guaranteed under 
                title IV and for benefit liabilities.
                  ``(B) Consideration of relevant 
                information.--The Secretary of the Treasury 
                shall consider any relevant information 
                provided by a person to whom notice was given 
                under subparagraph (A).
          ``(7) Restriction on plan amendments.--
                  ``(A) In general.--No amendment of a plan 
                which increases the liabilities of the plan by 
                reason of any increase in benefits, any change 
                in the accrual of benefits, or any change in 
                the rate at which benefits become 
                nonforfeitable under the plan shall be adopted 
                if a waiver under this subsection or an 
                extension of time under section 304(d) is in 
                effect with respect to the plan, or if a plan 
                amendment described in subsection (d)(2) has 
                been made at any time in the preceding 12 
                months (24 months in the case of a 
                multiemployer plan). If a plan is amended in 
                violation of the preceding sentence, any such 
                waiver, or extension of time, shall not apply 
                to any plan year ending on or after the date on 
                which such amendment is adopted.
                  ``(B) Exception.--Paragraph (1) shall not 
                apply to any plan amendment which--
                          ``(i) the Secretary of the Treasury 
                        determines to be reasonable and which 
                        provides for only de minimis increases 
                        in the liabilities of the plan,
                          ``(ii) only repeals an amendment 
                        described in subsection (d)(2), or
                          ``(iii) is required as a condition of 
                        qualification under part I of 
                        subchapter D of chapter 1 of the 
                        Internal Revenue Code of 1986.
          ``(8) Cross reference.--For corresponding duties of 
        the Secretary of the Treasury with regard to 
        implementation of the Internal Revenue Code of 1986, 
        see section 412(c) of such Code.
  ``(d) Miscellaneous Rules.--
          ``(1) Change in method or year.--If the funding 
        method, the valuation date, or a plan year for a plan 
        is changed, the change shall take effect only if 
        approved by the Secretary of the Treasury.
          ``(2) Certain retroactive plan amendments.--For 
        purposes of this section, any amendment applying to a 
        plan year which--
                  ``(A) is adopted after the close of such plan 
                year but no later than 2\1/2\ months after the 
                close of the plan year (or, in the case of a 
                multiemployer plan, no later than 2 years after 
                the close of such plan year),
                  ``(B) does not reduce the accrued benefit of 
                any participant determined as of the beginning 
                of the first plan year to which the amendment 
                applies, and
                  ``(C) does not reduce the accrued benefit of 
                any participant determined as of the time of 
                adoption except to the extent required by the 
                circumstances,
        shall, at the election of the plan administrator, be 
        deemed to have been made on the first day of such plan 
        year. No amendment described in this paragraph which 
        reduces the accrued benefits of any participant shall 
        take effect unless the plan administrator files a 
        notice with the Secretary of the Treasury notifying him 
        of such amendment and such Secretary has approved such 
        amendment, or within 90 days after the date on which 
        such notice was filed, failed to disapprove such 
        amendment. No amendment described in this subsection 
        shall be approved by the Secretary of the Treasury 
        unless such Secretary determines that such amendment is 
        necessary because of a substantial business hardship 
        (as determined under subsection (c)(2)) and that a 
        waiver under subsection (c) (or, in the case of a 
        multiemployer plan, any extension of the amortization 
        period under section 304(d)) is unavailable or 
        inadequate.
          ``(3) Controlled group.--For purposes of this 
        section, the term `controlled group' means any group 
        treated as a single employer under subsection (b), (c), 
        (m), or (o) of section 414 of the Internal Revenue Code 
        of 1986.''.
  (c) Clerical Amendment.--The table of contents in section 1 
of such Act is amended by striking the items relating to 
sections 302 through 308 and inserting the following new item:

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

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

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

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

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

  ``Sec. 303. (a) Minimum Required Contribution.--For purposes 
of this section and section 302(a)(2)(A), except as provided in 
subsection (f), the term `minimum required contribution' means, 
with respect to any plan year of a single-employer plan--
          ``(1) in any case in which the value of plan assets 
        of the plan (as reduced under subsection (f)(4)(B)) is 
        less than the funding target of the plan for the plan 
        year, the sum of--
                  ``(A) the target normal cost of the plan for 
                the plan year,
                  ``(B) the shortfall amortization charge (if 
                any) for the plan for the plan year determined 
                under subsection (c), and
                  ``(C) the waiver amortization charge (if any) 
                for the plan for the plan year as determined 
                under subsection (e);
          ``(2) in any case in which the value of plan assets 
        of the plan (as reduced under subsection (f)(4)(B)) 
        exceeds the funding target of the plan for the plan 
        year, the target normal cost of the plan for the plan 
        year reduced by such excess; or
          ``(3) in any other case, the target normal cost of 
        the plan for the plan year.
  ``(b) Target Normal Cost.--For purposes of this section, 
except as provided in subsection (i)(2) with respect to plans 
in at-risk status, the term `target normal cost' means, for any 
plan year, the present value of all benefits which are expected 
to accrue or to be earned under the plan during the plan year. 
For purposes of this subsection, if any benefit attributable to 
services performed in a preceding plan year is increased by 
reason of any increase in compensation during the current plan 
year, the increase in such benefit shall be treated as having 
accrued during the current plan year.
  ``(c) Shortfall Amortization Charge.--
          ``(1) In general.--For purposes of this section, the 
        shortfall amortization charge for a plan for any plan 
        year is the aggregate total of the shortfall 
        amortization installments for such plan year with 
        respect to the shortfall amortization bases for such 
        plan year and each of the 6 preceding plan years.
          ``(2) Shortfall amortization installment.--The plan 
        sponsor shall determine, with respect to the shortfall 
        amortization base of the plan for any plan year, the 
        amounts necessary to amortize such shortfall 
        amortization base, in level annual installments over a 
        period of 7 plan years beginning with such plan year. 
        For purposes of paragraph (1), the annual installment 
        of such amortization for each plan year in such 7-plan-
        year period is the shortfall amortization installment 
        for such plan year with respect to such shortfall 
        amortization base. In determining any shortfall 
        amortization installment under this paragraph, the plan 
        sponsor shall use the segment rates determined under 
        subparagraph (C) of subsection (h)(2), applied under 
        rules similar to the rules of subparagraph (B) of 
        subsection (h)(2).
          ``(3) Shortfall amortization base.--For purposes of 
        this section, the shortfall amortization base of a plan 
        for a plan year is the excess (if any) of--
                  ``(A) the funding shortfall of such plan for 
                such plan year, over
                  ``(B) the sum of--
                          ``(i) the present value (determined 
                        using the segment rates determined 
                        under subparagraph (C) of subsection 
                        (h)(2), applied under rules similar to 
                        the rules of subparagraph (B) of 
                        subsection (h)(2)) of the aggregate 
                        total of the shortfall amortization 
                        installments, for such plan year and 
                        the 5 succeeding plan years, which have 
                        been determined with respect to the 
                        shortfall amortization bases of the 
                        plan for each of the 6 plan years 
                        preceding such plan year, and
                          ``(ii) the present value (as so 
                        determined) of the aggregate total of 
                        the waiver amortization installments 
                        for such plan year and the 5 succeeding 
                        plan years, which have been determined 
                        with respect to the waiver amortization 
                        bases of the plan for each of the 5 
                        plan years preceding such plan year.
          ``(4) Funding shortfall.--For purposes of this 
        section, the funding shortfall of a plan for any plan 
        year is the excess (if any) of--
                  ``(A) the funding target of the plan for the 
                plan year, over
                  ``(B) the value of plan assets of the plan 
                (as reduced under subsection (f)(4)(B)) for the 
                plan year which are held by the plan on the 
                valuation date.
          ``(5) Exemption from new shortfall amortization 
        base.--
                  ``(A) In general.--In any case in which the 
                value of plan assets of the plan (as reduced 
                under subsection (f)(4)(A)) is equal to or 
                greater than the funding target of the plan for 
                the plan year, the shortfall amortization base 
                of the plan for such plan year shall be zero.
                  ``(B) Transition rule.--
                          ``(i) In general.--In the case of a 
                        non-deficit reduction plan, 
                        subparagraph (A) shall be applied to 
                        plan years beginning after 2006 and 
                        before 2011 by substituting, for the 
                        funding target of the plan for the plan 
                        year, the applicable percentage of such 
                        funding target determined under the 
                        following table:



                                                                 The
                                                             applicable
 ``In the case of a plan year beginning in calendar year:    percentage
                                                                 is:

2007......................................................    92 percent
2008......................................................    94 percent
2009......................................................    96 percent
2010......................................................   98 percent.

                          ``(ii) Limitation.--Clause (i) shall 
                        not apply with respect to any plan year 
                        after 2007 unless the ratio (expressed 
                        as a percentage) which--
                                  ``(I) the value of plan 
                                assets for each preceding plan 
                                year after 2006 (as reduced 
                                under subsection (f)(4)(A)), 
                                bears to
                                  ``(II) the funding target of 
                                the plan for such preceding 
                                plan year (determined without 
                                regard to subsection (i)(1)),
                        is not less than the applicable 
                        percentage with respect to such 
                        preceding plan determined under clause 
                        (i).
                          ``(iii) Non-deficit reduction plan.--
                        For purposes of clause (i), the term 
                        `non-deficit reduction plan' means any 
                        plan--
                                  ``(I) to which this part (as 
                                in effect on the day before the 
                                date of the enactment of the 
                                Pension Protection Act of 2005) 
                                applied for the plan year 
                                beginning in 2006, and
                                  ``(II) to which section 
                                302(d) (as so in effect) did 
                                not apply for such plan year.
          ``(6) Early deemed amortization upon attainment of 
        funding target.--In any case in which the funding 
        shortfall of a plan for a plan year is zero, for 
        purposes of determining the shortfall amortization 
        charge for such plan year and succeeding plan years, 
        the shortfall amortization bases for all preceding plan 
        years (and all shortfall amortization installments 
        determined with respect to such bases) shall be reduced 
        to zero.
  ``(d) Rules Relating to Funding Target.--For purposes of this 
section--
          ``(1) Funding target.--Except as provided in 
        subsection (i)(1) with respect to plans in at-risk 
        status, the funding target of a plan for a plan year is 
        the present value of all liabilities to participants 
        and their beneficiaries under the plan for the plan 
        year.
          ``(2) Funding target attainment percentage.--The 
        `funding target attainment percentage' of a plan for a 
        plan year is the ratio (expressed as a percentage) 
        which--
                  ``(A) the value of plan assets for the plan 
                year (as reduced under subsection (f)(4)(B)), 
                bears to
                  ``(B) the funding target of the plan for the 
                plan year (determined without regard to 
                subsection (i)(1)).
  ``(e) Waiver Amortization Charge.--
          ``(1) Determination of waiver amortization charge.--
        The waiver amortization charge (if any) for a plan for 
        any plan year is the aggregate total of the waiver 
        amortization installments for such plan year with 
        respect to the waiver amortization bases for each of 
        the 5 preceding plan years.
          ``(2) Waiver amortization installment.--The plan 
        sponsor shall determine, with respect to the waiver 
        amortization base of the plan for any plan year, the 
        amounts necessary to amortize such waiver amortization 
        base, in level annual installments over a period of 5 
        plan years beginning with the succeeding plan year. For 
        purposes of paragraph (1), the annual installment of 
        such amortization for each plan year in such 5-plan 
        year period is the waiver amortization installment for 
        such plan year with respect to such waiver amortization 
        base.
          ``(3) Interest rate.--In determining any waiver 
        amortization installment under this subsection, the 
        plan sponsor shall use the segment rates determined 
        under subparagraph (C) of subsection (h)(2), applied 
        under rules similar to the rules of subparagraph (B) of 
        subsection (h)(2).
          ``(4) Waiver amortization base.--The waiver 
        amortization base of a plan for a plan year is the 
        amount of the waived funding deficiency (if any) for 
        such plan year under section 302(c).
          ``(5) Early deemed amortization upon attainment of 
        funding target.--In any case in which the funding 
        shortfall of a plan for a plan year is zero, for 
        purposes of determining the waiver amortization charge 
        for such plan year and succeeding plan years, the 
        waiver amortization base for all preceding plan years 
        shall be reduced to zero.
  ``(f) Reduction of Minimum Required Contribution by Pre-
Funding Balance and Funding Standard Carryover Balance.--
          ``(1) Election to maintain balances.--
                  ``(A) Pre-funding balance.--The plan sponsor 
                of a single-employer plan may elect to maintain 
                a pre-funding balance.
                  ``(B) Funding standard carryover balance.--
                          ``(i) In general.--In the case of a 
                        single-employer plan described in 
                        clause (ii), the plan sponsor may elect 
                        to maintain a funding standard 
                        carryover balance, until such balance 
                        is reduced to zero.
                          ``(ii) Plans maintaining funding 
                        standard account in 2006.--A plan is 
                        described in this clause if the plan--
                                  ``(I) was in effect for a 
                                plan year beginning in 2006, 
                                and
                                  ``(II) had a positive balance 
                                in the funding standard account 
                                under section 302(b) as in 
                                effect for such plan year and 
                                determined as of the end of 
                                such plan year.
          ``(2) Application of balances.--A pre-funding balance 
        and a funding standard carryover balance maintained 
        pursuant to this paragraph--
                  ``(A) shall be available for crediting 
                against the minimum required contribution, 
                pursuant to an election under paragraph (3),
                  ``(B) shall be applied as a reduction in the 
                amount treated as the value of plan assets for 
                purposes of this section, to the extent 
                provided in paragraph (4), and
                  ``(C) may be reduced at any time, pursuant to 
                an election under paragraph (5).
          ``(3) Election to apply balances against minimum 
        required contribution.--
                  ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), in the case of any 
                plan year in which the plan sponsor elects to 
                credit against the minimum required 
                contribution for the current plan year all or a 
                portion of the pre-funding balance or the 
                funding standard carryover balance for the 
                current plan year (not in excess of such 
                minimum required contribution), the minimum 
                required contribution for the plan year shall 
                be reduced by the amount so credited by the 
                plan sponsor. For purposes of the preceding 
                sentence, the minimum required contribution 
                shall be determined after taking into account 
                any waiver under section 302(c).
                  ``(B) Coordination with funding standard 
                carryover balance.--To the extent that any plan 
                has a funding standard carryover balance 
                greater than zero, no amount of the pre-funding 
                balance of such plan may be credited under this 
                paragraph in reducing the minimum required 
                contribution.
                  ``(C) Limitation for underfunded plans.--The 
                preceding provisions of this paragraph shall 
                not apply for any plan year if the ratio 
                (expressed as a percentage) which--
                          ``(i) the value of plan assets for 
                        the preceding plan year (as reduced 
                        under paragraph (4)(C)), bears to
                          ``(ii) the funding target of the plan 
                        for the preceding plan year (determined 
                        without regard to subsection (i)(1)),
                is less than 80 percent.
          ``(4) Effect of balances on amounts treated as value 
        of plan assets.--In the case of any plan maintaining a 
        pre-funding balance or a funding standard carryover 
        balance pursuant to this subsection, the amount treated 
        as the value of plan assets shall be deemed to be such 
        amount, reduced as provided in the following 
        subparagraphs:
                  ``(A) Applicability of shortfall amortization 
                base.--For purposes of subsection (c)(5), the 
                value of plan assets is deemed to be such 
                amount, reduced by the amount of the pre-
                funding balance, but only if an election under 
                paragraph (2) applying any portion of the pre-
                funding balance in reducing the minimum 
                required contribution is in effect for the plan 
                year.
                  ``(B) Determination of excess assets, funding 
                shortfall, and funding target attainment 
                percentage.--
                          ``(i) In general.--For purposes of 
                        subsections (a), (c)(4)(B), and 
                        (d)(2)(A), the value of plan assets is 
                        deemed to be such amount, reduced by 
                        the amount of the pre-funding balance 
                        and the funding standard carryover 
                        balance.
                          ``(ii) Special rule for certain 
                        binding agreements with pbgc.--For 
                        purposes of subsection (c)(4)(B), the 
                        value of plan assets shall not be 
                        deemed to be reduced for a plan year by 
                        the amount of the specified balance if, 
                        with respect to such balance, there is 
                        in effect for a plan year a binding 
                        written agreement with the Pension 
                        Benefit Guaranty Corporation which 
                        provides that such balance is not 
                        available to reduce the minimum 
                        required contribution for the plan 
                        year. For purposes of the preceding 
                        sentence, the term `specified balance' 
                        means the pre-funding balance or the 
                        funding standard carryover balance, as 
                        the case may be.
                  ``(C) Availability of balances in plan year 
                for crediting against minimum required 
                contribution.--For purposes of paragraph 
                (3)(C)(i) of this subsection, the value of plan 
                assets is deemed to be such amount, reduced by 
                the amount of the pre-funding balance.
          ``(5) Election to reduce balance prior to 
        determinations of value of plan assets and crediting 
        against minimum required contribution.--
                  ``(A) In general.--The plan sponsor may elect 
                to reduce by any amount the balance of the pre-
                funding balance and the funding standard 
                carryover balance for any plan year (but not 
                below zero). Such reduction shall be effective 
                prior to any determination of the value of plan 
                assets for such plan year under this section 
                and application of the balance in reducing the 
                minimum required contribution for such plan for 
                such plan year pursuant to an election under 
                paragraph (2).
                  ``(B) Coordination between pre-funding 
                balance and funding standard carryover 
                balance.--To the extent that any plan has a 
                funding standard carryover balance greater than 
                zero, no election may be made under 
                subparagraph (A) with respect to the pre-
                funding balance.
          ``(6) Pre-funding balance.--
                  ``(A) In general.--A pre-funding balance 
                maintained by a plan shall consist of a 
                beginning balance of zero, increased and 
                decreased to the extent provided in 
                subparagraphs (B) and (C), and adjusted further 
                as provided in paragraph (8).
                  ``(B) Increases.--As of the valuation date 
                for each plan year beginning after 2007, the 
                pre-funding balance of a plan shall be 
                increased by the amount elected by the plan 
                sponsor for the plan year. Such amount shall 
                not exceed the excess (if any) of--
                          ``(i) the aggregate total of employer 
                        contributions to the plan for the 
                        preceding plan year, over
                          ``(ii) the minimum required 
                        contribution for such preceding plan 
                        year (increased by interest on any 
                        portion of such minimum required 
                        contribution remaining unpaid as of the 
                        valuation date for the current plan 
                        year, at the effective interest rate 
                        for the plan for the preceding plan 
                        year, for the period beginning with the 
                        first day of such preceding plan year 
                        and ending on the date that payment of 
                        such portion is made).
                  ``(C) Decreases.--As of the valuation date 
                for each plan year after 2007, the pre-funding 
                balance of a plan shall be decreased (but not 
                below zero) by the sum of--
                          ``(i) the amount of such balance 
                        credited under paragraph (2) (if any) 
                        in reducing the minimum required 
                        contribution of the plan for the 
                        preceding plan year, and
                          ``(ii) any reduction in such balance 
                        elected under paragraph (5).
          ``(7) Funding standard carryover balance.--
                  ``(A) In general.--A funding standard 
                carryover balance maintained by a plan shall 
                consist of a beginning balance determined under 
                subparagraph (B), decreased to the extent 
                provided in subparagraph (C), and adjusted 
                further as provided in paragraph (8).
                  ``(B) Beginning balance.--The beginning 
                balance of the funding standard carryover 
                balance shall be the positive balance described 
                in paragraph (1)(B)(ii)(II).
                  ``(C) Decreases.--As of the valuation date 
                for each plan year after 2007, the funding 
                standard carryover balance of a plan shall be 
                decreased (but not below zero) by the sum of--
                          ``(i) the amount of such balance 
                        credited under paragraph (2) (if any) 
                        in reducing the minimum required 
                        contribution of the plan for the 
                        preceding plan year, and
                          ``(ii) any reduction in such balance 
                        elected under paragraph (5).
          ``(8) Adjustments to balances.--In determining the 
        pre-funding balance or the funding standard carryover 
        balance of a plan as of the valuation date (before 
        applying any increase or decrease under paragraph (6) 
        or (7)), the plan sponsor shall, in accordance with 
        regulations which shall be prescribed by the Secretary 
        of the Treasury, adjust such balance so as to reflect 
        the rate of net gain or loss (determined, 
        notwithstanding subsection (g)(3), on the basis of fair 
        market value) experienced by all plan assets for the 
        period beginning with the valuation date for the 
        preceding plan year and ending with the date preceding 
        the valuation date for the current plan year, properly 
        taking into account, in accordance with such 
        regulations, all contributions, distributions, and 
        other plan payments made during such period.
          ``(9) Elections.--Elections under this subsection 
        shall be made at such times, and in such form and 
        manner, as shall be prescribed in regulations of the 
        Secretary of the Treasury.
  ``(g) Valuation of Plan Assets and Liabilities.--
          ``(1) Timing of determinations.--Except as otherwise 
        provided under this subsection, all determinations 
        under this section for a plan year shall be made as of 
        the valuation date of the plan for such plan year.
          ``(2) Valuation date.--For purposes of this section--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), the valuation date of a plan 
                for any plan year shall be the first day of the 
                plan year.
                  ``(B) Exception for small plans.--If, on each 
                day during the preceding plan year, a plan had 
                500 or fewer participants, the plan may 
                designate any day during the plan year as its 
                valuation date for such plan year and 
                succeeding plan years. For purposes of this 
                subparagraph, all defined benefit plans which 
                are single-employer plans and are maintained by 
                the same employer (or any member of such 
                employer's controlled group) shall be treated 
                as 1 plan, but only participants with respect 
                to such employer or member shall be taken into 
                account.
                  ``(C) Application of certain rules in 
                determination of plan size.--For purposes of 
                this paragraph--
                          ``(i) Plans not in existence in 
                        preceding year.--In the case of the 
                        first plan year of any plan, 
                        subparagraph (B) shall apply to such 
                        plan by taking into account the number 
                        of participants that the plan is 
                        reasonably expected to have on days 
                        during such first plan year.
                          ``(ii) Predecessors.--Any reference 
                        in subparagraph (B) to an employer 
                        shall include a reference to any 
                        predecessor of such employer.
          ``(3) Authorization of use of actuarial value.--For 
        purposes of this section, the value of plan assets 
        shall be determined on the basis of any reasonable 
        actuarial method of valuation which takes into account 
        fair market value and which is permitted under 
        regulations prescribed by the Secretary of the 
        Treasury, except that--
                  ``(A) any such method providing for averaging 
                of fair market values may not provide for 
                averaging of such values over more than the 36-
                month period ending with the month which 
                includes the valuation date, and
                  ``(B) any such method may not result in a 
                determination of the value of plan assets 
                which, at any time, is lower than 90 percent or 
                greater than 110 percent of the fair market 
                value of such assets at such time.
          ``(4) Accounting for contribution receipts.--For 
        purposes of this section--
                  ``(A) Contributions for prior plan years 
                taken into account.--For purposes of 
                determining the value of plan assets for any 
                current plan year, in any case in which a 
                contribution properly allocable to amounts owed 
                for a preceding plan year is made on or after 
                the valuation date of the plan for such current 
                plan year, such contribution shall be taken 
                into account, except that any such contribution 
                made during any such current plan year 
                beginning after 2007 shall be taken into 
                account only in an amount equal to its present 
                value (determined using the effective rate of 
                interest for the plan for the preceding plan 
                year) as of the valuation date of the plan for 
                such current plan year.
                  ``(B) Contributions for current plan year 
                disregarded.--For purposes of determining the 
                value of plan assets for any current plan year, 
                contributions which are properly allocable to 
                amounts owed for such plan year shall not be 
                taken into account, and, in the case of any 
                such contribution made before the valuation 
                date of the plan for such plan year, such value 
                of plan assets shall be reduced for interest on 
                such amount determined using the effective rate 
                of interest of the plan for the current plan 
                year for the period beginning when such payment 
                was made and ending on the valuation date of 
                the plan.
          ``(5) Accounting for plan liabilities.--For purposes 
        of this section--
                  ``(A) Liabilities taken into account for 
                current plan year.--In determining the value of 
                liabilities under a plan for a plan year, 
                liabilities shall be taken into account to the 
                extent attributable to benefits (including any 
                early retirement or similar benefit) accrued or 
                earned as of the beginning of the plan year.
                  ``(B) Accruals during current plan year 
                disregarded.--For purposes of subparagraph (A), 
                benefits accrued or earned during such plan 
                year shall not be taken into account, 
                irrespective of whether the valuation date of 
                the plan for such plan year is later than the 
                first day of such plan year.
  ``(h) Actuarial Assumptions and Methods.--
          ``(1) In general.--Subject to this subsection, the 
        determination of any present value or other computation 
        under this section shall be made on the basis of 
        actuarial assumptions and methods--
                  ``(A) each of which is reasonable (taking 
                into account the experience of the plan and 
                reasonable expectations), and
                  ``(B) which, in combination, offer the 
                actuary's best estimate of anticipated 
                experience under the plan.
          ``(2) Interest rates.--
                  ``(A) Effective interest rate.--For purposes 
                of this section, the term `effective interest 
                rate' means, with respect to any plan for any 
                plan year, the single rate of interest which, 
                if used to determine the present value of the 
                plan's liabilities referred to in subsection 
                (d)(1), would result in an amount equal to the 
                funding target of the plan for such plan year.
                  ``(B) Interest rates for determining funding 
                target.--For purposes of determining the 
                funding target of a plan for any plan year, the 
                interest rate used in determining the present 
                value of the liabilities of the plan shall be--
                          ``(i) in the case of liabilities 
                        reasonably determined to be payable 
                        during the 5-year period beginning on 
                        the first day of the plan year, the 
                        first segment rate with respect to the 
                        applicable month,
                          ``(ii) in the case of liabilities 
                        reasonably determined to be payable 
                        during the 15-year period beginning at 
                        the end of the period described in 
                        clause (i), the second segment rate 
                        with respect to the applicable month, 
                        and
                          ``(iii) in the case of liabilities 
                        reasonably determined to be payable 
                        after the period described in clause 
                        (ii), the third segment rate with 
                        respect to the applicable month.
                  ``(C) Segment rates.--For purposes of this 
                paragraph--
                          ``(i) First segment rate.--The term 
                        `first segment rate' means, with 
                        respect to any month, the single rate 
                        of interest which shall be determined 
                        by the Secretary of the Treasury for 
                        such month on the basis of the 
                        corporate bond yield curve for such 
                        month, taking into account only that 
                        portion of such yield curve which is 
                        based on bonds maturing during the 5-
                        year period commencing with such month.
                          ``(ii) Second segment rate.--The term 
                        `second segment rate' means, with 
                        respect to any month, the single rate 
                        of interest which shall be determined 
                        by the Secretary of the Treasury for 
                        such month on the basis of the 
                        corporate bond yield curve for such 
                        month, taking into account only that 
                        portion of such yield curve which is 
                        based on bonds maturing during the 15-
                        year period beginning at the end of the 
                        period described in clause (i).
                          ``(iii) Third segment rate.--The term 
                        `third segment rate' means, with 
                        respect to any month, the single rate 
                        of interest which shall be determined 
                        by the Secretary of the Treasury for 
                        such month on the basis of the 
                        corporate bond yield curve for such 
                        month, taking into account only that 
                        portion of such yield curve which is 
                        based on bonds maturing during periods 
                        beginning after the period described in 
                        clause (ii).
                  ``(D) Corporate bond yield curve.--For 
                purposes of this paragraph--
                          ``(i) In general.--The term 
                        `corporate bond yield curve' means, 
                        with respect to any month, a yield 
                        curve which is prescribed by the 
                        Secretary of the Treasury for such 
                        month and which reflects a 3-year 
                        weighted average of yields on 
                        investment grade corporate bonds with 
                        varying maturities.
                          ``(ii) 3-year weighted average.--The 
                        term `3-year weighted average' means an 
                        average determined by using a 
                        methodology under which the most recent 
                        year is weighted 50 percent, the year 
                        preceding such year is weighted 35 
                        percent, and the second year preceding 
                        such year is weighted 15 percent.
                  ``(E) Applicable month.--For purposes of this 
                paragraph, the term `applicable month' means, 
                with respect to any plan for any plan year, the 
                month which includes the valuation date of such 
                plan for such plan year or, at the election of 
                the plan sponsor, any of the 4 months which 
                precede such month. Any election made under 
                this subparagraph shall apply to the plan year 
                for which the election is made and all 
                succeeding plan years, unless the election is 
                revoked with the consent of the Secretary of 
                the Treasury.
                  ``(F) Publication requirements.--The 
                Secretary of the Treasury shall publish for 
                each month the corporate bond yield curve (and 
                the corporate bond yield curve reflecting the 
                modification described in section 
                205(g)(3)(B)(iii)(I)) for such month and each 
                of the rates determined under subparagraph (B) 
                for such month. The Secretary of the Treasury 
                shall also publish a description of the 
                methodology used to determine such yield curve 
                and such rates which is sufficiently detailed 
                to enable plans to make reasonable projections 
                regarding the yield curve and such rates for 
                future months based on the plan's projection of 
                future interest rates.
                  ``(G) Transition rule.--
                          ``(i) In general.--Notwithstanding 
                        the preceding provisions of this 
                        paragraph, for plan years beginning in 
                        2007 or 2008, the first, second, or 
                        third segment rate for a plan with 
                        respect to any month shall be equal to 
                        the sum of--
                                  ``(I) the product of such 
                                rate for such month determined 
                                without regard to this 
                                subparagraph, multiplied by the 
                                applicable percentage, and
                                  ``(II) the product of the 
                                rate determined under the rules 
                                of section 302(b)(5)(B)(ii)(II) 
                                (as in effect for plan years 
                                beginning in 2006), multiplied 
                                by a percentage equal to 100 
                                percent minus the applicable 
                                percentage.
                          ``(ii) Applicable percentage.--For 
                        purposes of clause (i), the applicable 
                        percentage is 33\1/3\ percent for plan 
                        years beginning in 2007 and 66\2/3\ 
                        percent for plan years beginning in 
                        2008.
                          ``(iii) New plans ineligible.--Clause 
                        (i) shall not apply to any plan if the 
                        first plan year of the plan begins 
                        after December 31, 2006.
          ``(3) Mortality table.--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), the mortality table used in 
                determining any present value or making any 
                computation under this section shall be the RP-
                2000 Combined Mortality Table using Scale AA 
                published by the Society of Actuaries (as in 
                effect on the date of the enactment of the 
                Pension Protection Act of 2005), projected as 
                of the plan's valuation date.
                  ``(B) Substitute mortality table.--
                          ``(i) In general.--Upon request by 
                        the plan sponsor and approval by the 
                        Secretary of the Treasury for a period 
                        not to exceed 10 years, a mortality 
                        table which meets the requirements of 
                        clause (ii) shall be used in 
                        determining any present value or making 
                        any computation under this section. A 
                        mortality table described in this 
                        clause shall cease to be in effect if 
                        the plan actuary determines at any time 
                        that such table does not meet the 
                        requirements of subclauses (I) and (II) 
                        of clause (ii).
                          ``(ii) Requirements.--A mortality 
                        table meets the requirements of this 
                        clause if the Secretary of the Treasury 
                        determines that--
                                  ``(I) such table reflects the 
                                actual experience of the 
                                pension plan and projected 
                                trends in such experience, and
                                  ``(II) such table is 
                                significantly different from 
                                the table described in 
                                subparagraph (A).
                          ``(iii) Deadline for disposition of 
                        application.--Any mortality table 
                        submitted to the Secretary of the 
                        Treasury for approval under this 
                        subparagraph shall be treated as in 
                        effect for the succeeding plan year 
                        unless such Secretary, during the 180-
                        day period beginning on the date of 
                        such submission, disapproves of such 
                        table and provides the reasons that 
                        such table fails to meet the 
                        requirements of clause (ii).
                  ``(C) Transition rule.--Under regulations of 
                the Secretary of the Treasury, any difference 
                in present value resulting from the difference 
                in the assumptions as set forth in the 
                mortality table specified in subparagraph (A) 
                and the assumptions as set forth in the 
                mortality table described in section 
                302(d)(7)(C)(ii) (as in effect for plan years 
                beginning in 2006) shall be phased in ratably 
                over the first period of 5 plan years beginning 
                in or after 2007 so as to be fully effective 
                for the fifth plan year. The preceding sentence 
                shall not apply to any plan if the first plan 
                year of the plan begins after December 31, 
                2006.
          ``(4) Probability of benefit payments in the form of 
        lump sums or other optional forms.--For purposes of 
        determining any present value or making any computation 
        under this section, there shall be taken into account--
                  ``(A) the probability that future benefit 
                payments under the plan will be made in the 
                form of optional forms of benefits provided 
                under the plan (including lump sum 
                distributions, determined on the basis of the 
                plan's experience and other related 
                assumptions), and
                  ``(B) any difference in the present value of 
                such future benefit payments resulting from the 
                use of actuarial assumptions, in determining 
                benefit payments in any such optional form of 
                benefits, which are different from those 
                specified in this subsection.
          ``(5) Approval of large changes in actuarial 
        assumptions.--
                  ``(A) In general.--No actuarial assumption 
                used to determine the funding target for a plan 
                to which this paragraph applies may be changed 
                without the approval of the Secretary of the 
                Treasury.
                  ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                          ``(i) the plan is a single-employer 
                        plan to which title IV applies,
                          ``(ii) the aggregate unfunded vested 
                        benefits as of the close of the 
                        preceding plan year (as determined 
                        under section 4006(a)(3)(E)(iii)) of 
                        such plan and all other plans 
                        maintained by the contributing sponsors 
                        (as defined in section 4001(a)(13)) and 
                        members of such sponsors' controlled 
                        groups (as defined in section 
                        4001(a)(14)) which are covered by title 
                        IV (disregarding plans with no unfunded 
                        vested benefits) exceed $50,000,000, 
                        and
                          ``(iii) the change in assumptions 
                        (determined after taking into account 
                        any changes in interest rate and 
                        mortality table) results in a decrease 
                        in the funding shortfall of the plan 
                        for the current plan year that exceeds 
                        $50,000,000, or that exceeds $5,000,000 
                        and that is 5 percent or more of the 
                        funding target of the plan before such 
                        change.
  ``(i) Special Rules for At-Risk Plans.--
          ``(1) Funding target for plans in at-risk status.--
                  ``(A) In general.--In any case in which a 
                plan is in at-risk status for a plan year, the 
                funding target of the plan for the plan year is 
                the sum of--
                          ``(i) the present value of all 
                        liabilities to participants and their 
                        beneficiaries under the plan for the 
                        plan year, as determined by using, in 
                        addition to the actuarial assumptions 
                        described in subsection (h), the 
                        supplemental actuarial assumptions 
                        described in subparagraph (B), plus
                          ``(ii) a loading factor determined 
                        under subparagraph (C).
                  ``(B) Supplemental actuarial assumptions.--
                The actuarial assumptions used in determining 
                the valuation of the funding target shall 
                include, in addition to the actuarial 
                assumptions described in subsection (h), an 
                assumption that all participants will elect 
                benefits at such times and in such forms as 
                will result in the highest present value of 
                liabilities under subparagraph (A)(i).
                  ``(C) Loading factor.--The loading factor 
                applied with respect to a plan under this 
                paragraph for any plan year is the sum of--
                          ``(i) $700, times the number of 
                        participants in the plan, plus
                          ``(ii) 4 percent of the funding 
                        target (determined without regard to 
                        this paragraph) of the plan for the 
                        plan year.
          ``(2) Target normal cost of at-risk plans.--In any 
        case in which a plan is in at-risk status for a plan 
        year, the target normal cost of the plan for such plan 
        year shall be the sum of--
                  ``(A) the present value of all benefits which 
                are expected to accrue or be earned under the 
                plan during the plan year, determined under the 
                actuarial assumptions used under paragraph (1), 
                plus
                  ``(B) the loading factor under paragraph 
                (1)(C), excluding the portion of the loading 
                factor described in paragraph (1)(C)(i).
          ``(3) Determination of at-risk status.--For purposes 
        of this subsection, a plan is in `at-risk status' for a 
        plan year if the funding target attainment percentage 
        of the plan for the preceding plan year was less than 
        60 percent.
          ``(4) Transition between applicable funding targets 
        and between applicable target normal costs.--
                  ``(A) In general.--In any case in which a 
                plan which is in at-risk status for a plan year 
                has been in such status for a consecutive 
                period of fewer than 5 plan years, the 
                applicable amount of the funding target and of 
                the target normal cost shall be, in lieu of the 
                amount determined without regard to this 
                paragraph, the sum of--
                          ``(i) the amount determined under 
                        this section without regard to this 
                        subsection, plus
                          ``(ii) the transition percentage for 
                        such plan year of the excess of the 
                        amount determined under this subsection 
                        (without regard to this paragraph) over 
                        the amount determined under this 
                        section without regard to this 
                        subsection.
                  ``(B) Transition percentage.--For purposes of 
                this paragraph, the `transition percentage' for 
                a plan year is the product derived by 
                multiplying--
                          ``(i) 20 percent, by
                          ``(ii) the number of plan years 
                        during the period described in 
                        subparagraph (A).
  ``(j) Payment of Minimum Required Contributions.--
          ``(1) In general.--For purposes of this section, the 
        due date for any payment of any minimum required 
        contribution for any plan year shall be 8\1/2\ months 
        after the close of the plan year.
          ``(2) Interest.--Any payment required under paragraph 
        (1) for a plan year that is made on a date other than 
        the valuation date for such plan year shall be adjusted 
        for interest accruing for the period between the 
        valuation date and the payment date, at the effective 
        rate of interest for the plan for such plan year.
          ``(3) Accelerated quarterly contribution schedule for 
        underfunded plans.--
                  ``(A) Interest penalty for failure to meet 
                accelerated quarterly payment schedule.--In any 
                case in which the plan has a funding shortfall 
                for the preceding plan year, if the required 
                installment is not paid in full, then the 
                minimum required contribution for the plan year 
                (as increased under paragraph (2)) shall be 
                further increased by an amount equal to the 
                interest on the amount of the underpayment for 
                the period of the underpayment, using an 
                interest rate equal to the excess of--
                          ``(i) 175 percent of the Federal mid-
                        term rate (as in effect under section 
                        1274 for the 1st month of such plan 
                        year), over
                          ``(ii) the effective rate of interest 
                        for the plan for the plan year.
                  ``(B) Amount of underpayment, period of 
                underpayment.--For purposes of subparagraph 
                (A)--
                          ``(i) Amount.--The amount of the 
                        underpayment shall be the excess of--
                                  ``(I) the required 
                                installment, over
                                  ``(II) the amount (if any) of 
                                the installment contributed to 
                                or under the plan on or before 
                                the due date for the 
                                installment.
                          ``(ii) Period of underpayment.--The 
                        period for which any interest is 
                        charged under this paragraph with 
                        respect to any portion of the 
                        underpayment shall run from the due 
                        date for the installment to the date on 
                        which such portion is contributed to or 
                        under the plan.
                          ``(iii) Order of crediting 
                        contributions.--For purposes of clause 
                        (i)(II), contributions shall be 
                        credited against unpaid required 
                        installments in the order in which such 
                        installments are required to be paid.
                  ``(C) Number of required installments; due 
                dates.--For purposes of this paragraph--
                          ``(i) Payable in 4 installments.--
                        There shall be 4 required installments 
                        for each plan year.
                          ``(ii) Time for payment of 
                        installments.--The due dates for 
                        required installments are set forth in 
                        the following table:


   ``In the case of the following
       required installment:                   The due date is:

  1st..............................  April 15
  2nd..............................  July 15
  3rd..............................  October 15
  4th..............................  January 15 of the following year

                  ``(D) Amount of required installment.--For 
                purposes of this paragraph--
                          ``(i) In general.--The amount of any 
                        required installment shall be 25 
                        percent of the required annual payment.
                          ``(ii) Required annual payment.--For 
                        purposes of clause (i), the term 
                        `required annual payment' means the 
                        lesser of--
                                  ``(I) 90 percent of the 
                                minimum required contribution 
                                (without regard to any waiver 
                                under section 302(c)) to the 
                                plan for the plan year under 
                                this section, or
                                  ``(II) in the case of a plan 
                                year beginning after 2007, 100 
                                percent of the minimum required 
                                contribution (without regard to 
                                any waiver under section 
                                302(c)) to the plan for the 
                                preceding plan year.
                        Subclause (II) shall not apply if the 
                        preceding plan year referred to in such 
                        clause was not a year of 12 months.
                  ``(E) Fiscal years and short years.--
                          ``(i) Fiscal years.--In applying this 
                        paragraph to a plan year beginning on 
                        any date other than January 1, there 
                        shall be substituted for the months 
                        specified in this paragraph, the months 
                        which correspond thereto.
                          ``(ii) Short plan year.--This 
                        subparagraph shall be applied to plan 
                        years of less than 12 months in 
                        accordance with regulations prescribed 
                        by the Secretary of the Treasury.
          ``(4) Liquidity requirement in connection with 
        quarterly contributions.--
                  ``(A) In general.--A plan to which this 
                paragraph applies shall be treated as failing 
                to pay the full amount of any required 
                installment under paragraph (3) to the extent 
                that the value of the liquid assets paid in 
                such installment is less than the liquidity 
                shortfall (whether or not such liquidity 
                shortfall exceeds the amount of such 
                installment required to be paid but for this 
                paragraph).
                  ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan (other than a 
                plan that would be described in subsection 
                (f)(2)(B) if `100' were substituted for `500' 
                therein) which--
                          ``(i) is required to pay installments 
                        under paragraph (3) for a plan year, 
                        and
                          ``(ii) has a liquidity shortfall for 
                        any quarter during such plan year.
                  ``(C) Period of underpayment.--For purposes 
                of paragraph (3)(A), any portion of an 
                installment that is treated as not paid under 
                subparagraph (A) shall continue to be treated 
                as unpaid until the close of the quarter in 
                which the due date for such installment occurs.
                  ``(D) Limitation on increase.--If the amount 
                of any required installment is increased by 
                reason of subparagraph (A), in no event shall 
                such increase exceed the amount which, when 
                added to prior installments for the plan year, 
                is necessary to increase the funding target 
                attainment percentage of the plan for the plan 
                year (taking into account the expected increase 
                in funding target due to benefits accruing or 
                earned during the plan year) to 100 percent.
                  ``(E) Definitions.--For purposes of this 
                subparagraph:
                          ``(i) Liquidity shortfall.--The term 
                        `liquidity shortfall' means, with 
                        respect to any required installment, an 
                        amount equal to the excess (as of the 
                        last day of the quarter for which such 
                        installment is made) of--
                                  ``(I) the base amount with 
                                respect to such quarter, over
                                  ``(II) the value (as of such 
                                last day) of the plan's liquid 
                                assets.
                          ``(ii) Base amount.--
                                  ``(I) In general.--The term 
                                `base amount' means, with 
                                respect to any quarter, an 
                                amount equal to 3 times the sum 
                                of the adjusted disbursements 
                                from the plan for the 12 months 
                                ending on the last day of such 
                                quarter.
                                  ``(II) Special rule.--If the 
                                amount determined under 
                                subclause (I) exceeds an amount 
                                equal to 2 times the sum of the 
                                adjusted disbursements from the 
                                plan for the 36 months ending 
                                on the last day of the quarter 
                                and an enrolled actuary 
                                certifies to the satisfaction 
                                of the Secretary of the 
                                Treasury that such excess is 
                                the result of nonrecurring 
                                circumstances, the base amount 
                                with respect to such quarter 
                                shall be determined without 
                                regard to amounts related to 
                                those nonrecurring 
                                circumstances.
                          ``(iii) Disbursements from the 
                        plan.--The term `disbursements from the 
                        plan' means all disbursements from the 
                        trust, including purchases of 
                        annuities, payments of single sums and 
                        other benefits, and administrative 
                        expenses.
                          ``(iv) Adjusted disbursements.--The 
                        term `adjusted disbursements' means 
                        disbursements from the plan reduced by 
                        the product of--
                                  ``(I) the plan's funding 
                                target attainment percentage 
                                for the plan year, and
                                  ``(II) the sum of the 
                                purchases of annuities, 
                                payments of single sums, and 
                                such other disbursements as the 
                                Secretary of the Treasury shall 
                                provide in regulations.
                          ``(v) Liquid assets.--The term 
                        `liquid assets' means cash, marketable 
                        securities, and such other assets as 
                        specified by the Secretary of the 
                        Treasury in regulations.
                          ``(vi) Quarter.--The term `quarter' 
                        means, with respect to any required 
                        installment, the 3-month period 
                        preceding the month in which the due 
                        date for such installment occurs.
                  ``(F) Regulations.--The Secretary of the 
                Treasury may prescribe such regulations as are 
                necessary to carry out this paragraph.
  ``(k) Imposition of Lien Where Failure to Make Required 
Contributions.--
          ``(1) In general.--In the case of a plan to which 
        this subsection applies (as provided under paragraph 
        (2)), if--
                  ``(A) any person fails to make a contribution 
                payment required by section 302 and this 
                section before the due date for such payment, 
                and
                  ``(B) the unpaid balance of such payment 
                (including interest), when added to the 
                aggregate unpaid balance of all preceding such 
                payments for which payment was not made before 
                the due date (including interest), exceeds 
                $1,000,000,
        then there shall be a lien in favor of the plan in the 
        amount determined under paragraph (3) upon all property 
        and rights to property, whether real or personal, 
        belonging to such person and any other person who is a 
        member of the same controlled group of which such 
        person is a member.
          ``(2) Plans to which subsection applies.--This 
        subsection shall apply to a single-employer plan for 
        any plan year for which the funding target attainment 
        percentage (as defined in subsection (d)(2)) of such 
        plan is less than 100 percent. This subsection shall 
        not apply to any plan to which section 4021 does not 
        apply (as such section is in effect on the date of the 
        enactment of the Pension Protection Act of 2005).
          ``(3) Amount of lien.--For purposes of paragraph (1), 
        the amount of the lien shall be equal to the aggregate 
        unpaid balance of contribution payments required under 
        this section and section 302 for which payment has not 
        been made before the due date.
          ``(4) Notice of failure; lien.--
                  ``(A) Notice of failure.--A person committing 
                a failure described in paragraph (1) shall 
                notify the Pension Benefit Guaranty Corporation 
                of such failure within 10 days of the due date 
                for the required contribution payment.
                  ``(B) Period of lien.--The lien imposed by 
                paragraph (1) shall arise on the due date for 
                the required contribution payment and shall 
                continue until the last day of the first plan 
                year in which the plan ceases to be described 
                in paragraph (1)(B). Such lien shall continue 
                to run without regard to whether such plan 
                continues to be described in paragraph (2) 
                during the period referred to in the preceding 
                sentence.
                  ``(C) Certain rules to apply.--Any amount 
                with respect to which a lien is imposed under 
                paragraph (1) shall be treated as taxes due and 
                owing the United States and rules similar to 
                the rules of subsections (c), (d), and (e) of 
                section 4068 shall apply with respect to a lien 
                imposed by subsection (a) and the amount with 
                respect to such lien.
          ``(5) Enforcement.--Any lien created under paragraph 
        (1) may be perfected and enforced only by the Pension 
        Benefit Guaranty Corporation, or at the direction of 
        the Pension Benefit Guaranty Corporation, by the 
        contributing sponsor (or any member of the controlled 
        group of the contributing sponsor).
          ``(6) Definitions.--For purposes of this subsection--
                  ``(A) Contribution payment.--The term 
                `contribution payment' means, in connection 
                with a plan, a contribution payment required to 
                be made to the plan, including any required 
                installment under paragraphs (3) and (4) of 
                subsection (i).
                  ``(B) Due date; required installment.--The 
                terms `due date' and `required installment' 
                have the meanings given such terms by 
                subsection (j), except that in the case of a 
                payment other than a required installment, the 
                due date shall be the date such payment is 
                required to be made under section 303.
                  ``(C) Controlled group.--The term `controlled 
                group' means any group treated as a single 
                employer under subsections (b), (c), (m), and 
                (o) of section 414 of the Internal Revenue Code 
                of 1986.
  ``(l) Qualified Transfers to Health Benefit Accounts.--In the 
case of a qualified transfer (as defined in section 420 of the 
Internal Revenue Code of 1986), any assets so transferred shall 
not, for purposes of this section, be treated as assets in the 
plan.''.
  (b) Clerical Amendment.--The table of sections in section 1 
of such Act (as amended by section 101) is amended by inserting 
after the item relating to section 302 the following new item:

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

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

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

  (a) Prohibition of Shutdown Benefits and Other Unpredictable 
Contingent Event Benefits Under Single-Employer Plans.--Section 
206 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1056) is amended by adding at the end the following new 
subsection:
  ``(g) Funding-Based Limitation on Shutdown Benefits and Other 
Unpredictable Contingent Event Benefits Under Single-Employer 
Plans.--
          ``(1) In general.--No defined benefit plan which is a 
        single-employer plan may provide benefits to which 
        participants are entitled solely by reason of the 
        occurrence of a plant shutdown or any other 
        unpredictable contingent event occurring during any 
        plan year if the funding target attainment percentage 
        as of the valuation date of the plan for such plan 
        year--
                  ``(A) is less than 80 percent, or
                  ``(B) would be less than 80 percent taking 
                into account such occurrence.
          ``(2) Exemption.--Paragraph (1) shall cease to apply 
        with respect to any plan year, effective as of the 
        first date of the plan year, upon payment by the plan 
        sponsor of a contribution (in addition to any minimum 
        required contribution under section 303) equal to--
                  ``(A) in the case of paragraph (1)(A), the 
                amount of the increase in the funding target of 
                the plan (under section 303) for the plan year 
                attributable to the occurrence referred to in 
                paragraph (1), and
                  ``(B) in the case of paragraph (1)(B), the 
                amount sufficient to result in a funding target 
                attainment percentage of 80 percent.
        Rules similar to the rules of subsection (h)(6) shall 
        apply for purposes of this paragraph.
          ``(3) Unpredictable contingent event.--For purposes 
        of this subsection, the term `unpredictable contingent 
        event' means an event other than--
                  ``(A) attainment of any age, performance of 
                any service, receipt or derivation of any 
                compensation, or the occurrence of death or 
                disability, or
                  ``(B) an event which is reasonably and 
                reliably predictable (as determined by the 
                Secretary of the Treasury).
          ``(4) New plans.--Paragraph (1) shall not apply to a 
        plan for the first 5 plan years of the plan. For 
        purposes of this subsection, the reference in this 
        subsection to a plan shall include a reference to any 
        predecessor plan.
          ``(5) Deemed reduction of funding balances.--A rule 
        similar to the rule of subsection (h)(8) shall apply 
        for purposes of this subsection.''.
  (b) Other Limits on Benefits and Benefit Accruals.--
          (1) In general.--Section 206 of such Act (as amended 
        by subsection (a)) is amended further by adding at the 
        end the following new subsection:
  ``(h) Funding-Based Limits on Benefits and Benefit Accruals 
Under Single-Employer Plans.--
          ``(1) Limitations on plan amendments increasing 
        liability for benefits.--
                  ``(A) In general.--No amendment to a defined 
                benefit plan which is a single-employer plan 
                which has the effect of increasing liabilities 
                of the plan by reason of increases in benefits, 
                establishment of new benefits, changing the 
                rate of benefit accrual, or changing the rate 
                at which benefits become nonforfeitable to the 
                plan may take effect during any plan year if 
                the funding target attainment percentage as of 
                the valuation date of the plan for such plan 
                year is--
                          ``(i) less than 80 percent, or
                          ``(ii) would be less than 80 percent 
                        taking into account such amendment.
                For purposes of this subparagraph, any increase 
                in benefits under the plan by reason of an 
                increase in the benefit rate provided under the 
                plan or on the basis of an increase in 
                compensation shall be treated as effected by 
                plan amendment.
                  ``(B) Exemption.--Subparagraph (A) shall 
                cease to apply with respect to any plan year, 
                effective as of the first date of the plan year 
                (or if later, the effective date of the 
                amendment), upon payment by the plan sponsor of 
                a contribution (in addition to any minimum 
                required contribution under section 303) equal 
                to--
                          ``(i) in the case of subparagraph 
                        (A)(i), the amount of the increase in 
                        the funding target of the plan (under 
                        section 303) for the plan year 
                        attributable to the amendment, and
                          ``(ii) in the case of subparagraph 
                        (A)(ii), the amount sufficient to 
                        result in a funding target attainment 
                        percentage of 80 percent.
          ``(2) Funding-based limitation on certain forms of 
        distribution.--
                  ``(A) In general.--A defined benefit plan 
                which is a single-employer plan shall provide 
                that, in any case in which the plan's funding 
                target attainment percentage as of the 
                valuation date of the plan for a plan year is 
                less than 80 percent, the plan may not after 
                such date pay any prohibited payment (as 
                defined in section 206(e)).
                  ``(B) Exception.--Subparagraph (A) shall not 
                apply to any plan for any plan year if the 
                terms of such plan (as in effect for the period 
                beginning on June 29, 2005, and ending with 
                such plan year) provide for no benefit accruals 
                with respect to any participant during such 
                period.
          ``(3) Limitations on benefit accruals for plans with 
        severe funding shortfalls.--A defined benefit plan 
        which is a single-employer plan shall provide that, in 
        any case in which the plan's funding target attainment 
        percentage as of the valuation date of the plan for a 
        plan year is less than 60 percent, all future benefit 
        accruals under the plan shall cease as of such date.
          ``(4) New plans.--Paragraphs (1) and (3) shall not 
        apply to a plan for the first 5 plan years of the plan. 
        For purposes of this subsection, the reference in this 
        subsection to a plan shall include a reference to any 
        predecessor plan.
          ``(5) Presumed underfunding for purposes of benefit 
        limitations based on prior year's funding status.--
                  ``(A) Presumption of continued 
                underfunding.--In any case in which a benefit 
                limitation under paragraph (1), (2), or (3) has 
                been applied to a plan with respect to the plan 
                year preceding the current plan year, the 
                funding target attainment percentage of the 
                plan as of the valuation date of the plan for 
                the current plan year shall be presumed to be 
                equal to the funding target attainment 
                percentage of the plan as of the valuation date 
                of the plan for the preceding plan year until 
                the enrolled actuary of the plan certifies the 
                actual funding target attainment percentage of 
                the plan as of the valuation date of the plan 
                for the current plan year.
                  ``(B) Presumption of underfunding after 10th 
                month.--In any case in which no such 
                certification is made with respect to the plan 
                before the first day of the 10th month of the 
                current plan year, for purposes of paragraphs 
                (1), (2), and (3), the plan's funding target 
                attainment percentage shall be conclusively 
                presumed to be less than 60 percent as of the 
                first day of such 10th month, and such day 
                shall be deemed, for purposes of such 
                subsections, to be the valuation date of the 
                plan for the current plan year.
                  ``(C) Presumption of underfunding after 4th 
                month for nearly underfunded plans.--In any 
                case in which--
                          ``(i) a benefit limitation under 
                        paragraph (1), (2), or (3) did not 
                        apply to a plan with respect to the 
                        plan year preceding the current plan 
                        year, but the funding target attainment 
                        percentage of the plan for such 
                        preceding plan year was not more than 
                        10 percentage points greater than the 
                        percentage which would have caused such 
                        subsection to apply to the plan with 
                        respect to such preceding plan year, 
                        and
                          ``(ii) as of the first day of the 4th 
                        month of the current plan year, the 
                        enrolled actuary of the plan has not 
                        certified the actual funding target 
                        attainment percentage of the plan as of 
                        the valuation date of the plan for the 
                        current plan year,
                until the enrolled actuary so certifies, such 
                first day shall be deemed, for purposes of such 
                subsection, to be the valuation date of the 
                plan for the current plan year and the funding 
                target attainment percentage of the plan as of 
                such first day shall, for purposes of such 
                paragraph, be presumed to be equal to 10 
                percentage points less than the funding target 
                attainment percentage of the plan as of the 
                valuation date of the plan for such preceding 
                plan year.
          ``(6) Restoration by plan amendment of benefits or 
        benefit accrual.--In any case in which a prohibition 
        under paragraph (2) of a payment described in paragraph 
        (2)(A) or a cessation of benefit accruals under 
        paragraph (3) is applied to a plan with respect to any 
        plan year and such prohibition or cessation, as the 
        case may be, ceases to apply to any subsequent plan 
        year, the plan may provide for the resumption of such 
        benefit payment or such benefit accrual only by means 
        of the adoption of a plan amendment after the valuation 
        date of the plan for such subsequent plan year. The 
        preceding sentence shall not apply to a prohibition or 
        cessation required by reason of paragraph (5).
          ``(7) Funding target attainment percentage.--
                  ``(A) In general.--For purposes of this 
                subsection, the term `funding target attainment 
                percentage' means, with respect to any plan for 
                any plan year, the ratio (expressed as a 
                percentage) which--
                          ``(i) the value of plan assets for 
                        the plan year (as determined under 
                        section 303(g)) reduced by the pre-
                        funding balance and the funding 
                        standard carryover balance (within the 
                        meaning of section 303(f)), bears to
                          ``(ii) the funding target of the plan 
                        for the plan year (as determined under 
                        section 303(d)(1), but without regard 
                        to section 303(i)(1)).
                  ``(B) Application to plans which are fully 
                funded without regard to reductions for funding 
                balances.--
                          ``(i) In general.--In the case of a 
                        plan for any plan year, if the funding 
                        target attainment percentage is 100 
                        percent or more (determined without 
                        regard to this subparagraph and without 
                        regard to the reduction under 
                        subparagraph (A)(i) for the pre-funding 
                        balance and the funding standard 
                        carryover balance), subparagraph (A) 
                        shall be applied without regard to such 
                        reduction.
                          ``(ii) Transition rule.--Clause (i) 
                        shall be applied to plan years 
                        beginning after 2006 and before 2011 by 
                        substituting for `100 percent' the 
                        applicable percentage determined in 
                        accordance with the following table:


                                                                 The
                                                             applicable
 ``In the case of a plan year beginning in calendar year:    percentage
                                                                 is:

2007......................................................    92 percent
2008......................................................    94 percent
2009......................................................    96 percent
2010......................................................   98 percent.

                          ``(iii) Limitation.--Clause (ii) 
                        shall not apply with respect to any 
                        plan year after 2007 unless the funding 
                        target attainment percentage 
                        (determined without regard to this 
                        subparagraph and without regard to the 
                        reduction under subparagraph (A)(i) for 
                        the pre-funding balance and the funding 
                        standard carryover balance) of the plan 
                        for each preceding plan year after 2006 
                        was not less than the applicable 
                        percentage with respect to such 
                        preceding plan year determined under 
                        clause (ii).
          ``(8) Deemed reduction of funding balances.--In the 
        case of a plan maintained pursuant to 1 or more 
        collective bargaining agreements between employee 
        representatives and 1 or more employers--
                  ``(A) In general.--In any case in which a 
                benefit limitation under paragraph (1), (2), or 
                (3) would (but for this paragraph and 
                determined without regard to paragraph (1)(B)) 
                apply to such plan for the plan year, the plan 
                sponsor of such plan shall be treated for 
                purposes of this Act as having made an election 
                under section 303(f)(5) to reduce the balance 
                of the pre-funding balance and the funding 
                standard carryover balance for the plan year 
                (in a manner consistent with the requirements 
                of section 303(f)(5)(B)) by such amount as is 
                necessary for such benefit limitation to not 
                apply to the plan for such plan year.
                  ``(B) Exception for insufficient funding 
                balances.--Subparagraph (A) shall not apply 
                with respect to a benefit limitation for any 
                plan year if the application of subparagraph 
                (A) would not result in the benefit limitation 
                not applying for such plan year.''.
          (2) Notice requirement.--
                  (A) In general.--Section 101 of such Act (29 
                U.S.C. 1021) is amended--
                          (i) by redesignating subsection (j) 
                        as subsection (k); and
                          (ii) by inserting after subsection 
                        (i) the following new subsection:
  ``(j) Notice of Funding-Based Limitation on Certain Forms of 
Distribution.--The plan administrator of a defined benefit plan 
which is a single-employer plan shall provide a written notice 
to plan participants and beneficiaries within 30 days after the 
plan has become subject to the restriction described in section 
206(h)(2) or at such other time as may be determined by the 
Secretary.''.
                  (B) Enforcement.--Section 502(c)(4) of such 
                Act (29 U.S.C. 1132(c)(4)) is amended by 
                striking ``section 302(b)(7)(F)(vi)'' and 
                inserting ``sections 101(j) and 
                302(b)(7)(F)(vi)''.
  (c) Effective Date.--
          (1) Shutdown benefits.--Except as provided in 
        paragraph (3), the amendments made by subsection (a) 
        shall apply with respect to plant shutdowns, or other 
        unpredictable contingent events, occurring after 2006.
          (2) Other benefits.--Except as provided in paragraph 
        (3), the amendments made by subsection (b) shall apply 
        with respect to plan years beginning after 2006.
          (3) Collective bargaining exception.--In the case of 
        a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives 
        and 1 or more employers ratified before the date of the 
        enactment of this Act, the amendments made by this 
        subsection shall not apply to plan years beginning 
        before the earlier of--
                  (A) the later of--
                          (i) the date on which the last 
                        collective bargaining agreement 
                        relating to the plan terminates 
                        (determined without regard to any 
                        extension thereof agreed to after the 
                        date of the enactment of this Act), or
                          (ii) the first day of the first plan 
                        year to which the amendments made by 
                        this subsection would (but for this 
                        subparagraph) apply, or
                  (B) January 1, 2009.
        For purposes of clause (i), any plan amendment made 
        pursuant to a collective bargaining agreement relating 
        to the plan which amends the plan solely to conform to 
        any requirement added by this subsection shall not be 
        treated as a termination of such collective bargaining 
        agreement.
  (d) Special Rule for 2007.--For purposes of applying 
paragraph (5) of section 206(h) of such Act (as added by this 
section) to current plan years (within the meaning of such 
paragraph) beginning in 2007, the modified funded current 
liability percentage of the plan for the preceding year shall 
be substituted for the funding target attainment percentage of 
the plan for the preceding year. For purposes of the preceding 
sentence, the term ``modified funded current liability 
percentage'' means the funded current liability percentage (as 
defined in section 302(l)(8) of such Act), reduced as described 
in subparagraph (E) thereof in the case of a plan with a funded 
current liability percentage (as so defined and before such 
reduction) which is less than 100 percent.

SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.

  (a) Miscellaneous Amendments to Title I.--Subtitle B of title 
I of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1021 et seq.) is amended--
          (1) in section 101(d)(3), by striking ``section 
        302(e)'' and inserting ``section 303(j)'';
          (2) in section 101(f)(2)(B), by striking clause (i) 
        and inserting the following:
                          ``(i) a statement as to whether--
                                  ``(I) in the case of a 
                                defined benefit plan which is a 
                                single-employer plan, the 
                                plan's funding target 
                                attainment percentage (as 
                                defined in section 303(d)(2)), 
                                or
                                  ``(II) in the case of a 
                                defined benefit plan which is a 
                                multiemployer plan, the plan's 
                                funded percentage (as defined 
                                in section 305(d)(2)),
                        is at least 100 percent (and, if not, 
                        the actual percentage);'';
          (3) in section 103(d)(8)(B), by striking ``the 
        requirements of section 302(c)(3)'' and inserting ``the 
        applicable requirements of sections 303(h) and 
        304(c)(3)'';
          (4) in section 103(d), by striking paragraph (11) and 
        inserting the following:
          ``(11) If the current value of the assets of the plan 
        is less than 70 percent of--
                  ``(A) in the case of a defined benefit plan 
                which is a single-employer plan, the funding 
                target (as defined in section 303(d)(1)) of the 
                plan, or
                  ``(B) in the case of a defined benefit plan 
                which is a multiemployer plan, the current 
                liability (as defined in section 304(c)(6)(D)) 
                under the plan,
        the percentage which such value is of the amount 
        described in subparagraph (A) or (B).'';
          (5) in section 203(a)(3)(C), by striking ``section 
        302(c)(8)'' and inserting ``section 302(d)(2)'';
          (6) in section 204(g)(1), by striking ``section 
        302(c)(8)'' and inserting ``section 302(d)(2)'';
          (7) in section 204(i)(2)(B), by striking ``section 
        302(c)(8)'' and inserting ``section 302(d)(2)'';
          (8) in section 204(i)(3), by striking ``funded 
        current liability percentage (within the meaning of 
        section 302(d)(8) of this Act)'' and inserting 
        ``funding target attainment percentage (as defined in 
        section 303(d)(2))'';
          (9) in section 204(i)(4), by striking ``section 
        302(c)(11)(A), without regard to section 
        302(c)(11)(B)'' and inserting ``section 302(b)(1), 
        without regard to section 302(b)(2)'';
          (10) in section 206(e)(1), by striking ``section 
        302(d)'' and inserting ``section 303(j)(4)'', and by 
        striking ``section 302(e)(5)'' and inserting ``section 
        303(j)(4)(E)(i)'';
          (11) in section 206(e)(3), by striking ``section 
        302(e) by reason of paragraph (5)(A) thereof'' and 
        inserting ``section 303(j)(3) by reason of section 
        303(j)(4)(A)''; and
          (12) in sections 101(e)(3), 403(c)(1), and 
        408(b)(13), by striking ``American Jobs Creation Act of 
        2004'' and inserting ``Pension Protection Act of 
        2005''.
  (b) Miscellaneous Amendments to Title IV.--Title IV of such 
Act is amended--
          (1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), 
        by striking ``302(c)(11)(A)'' and inserting 
        ``302(b)(1)'', by striking ``412(c)(11)(A)'' and 
        inserting ``412(b)(1)'', by striking ``302(c)(11)(B)'' 
        and inserting ``302(b)(2)'', and by striking 
        ``412(c)(11)(B)'' and inserting ``412(b)(2)'';
          (2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by 
        striking ``302(f)(1)(A) and (B)'' and inserting 
        ``303(k)(1)(A) and (B)'', and by striking 
        ``412(n)(1)(A) and (B)'' and inserting ``430(k)(1)(A) 
        and (B)'';
          (3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by 
        striking ``302(f)(1)(A) and (B)'' and inserting 
        ``303(k)(1)(A) and (B)'', and by striking 
        ``412(n)(1)(A) and (B)'' and inserting ``430(k)(1)(A) 
        and (B)'';
          (4) in section 4011(b) (29 U.S.C. 1311(b)), by 
        striking ``to which'' and all that follows and 
        inserting ``for any plan year for which the plan's 
        funding target attainment percentage (as defined in 
        section 303(d)(2)) is at least 90 percent.'';
          (5) in section 4062(c)(1) (29 U.S.C. 1362(c)(1)), by 
        striking paragraphs (1), (2), and (3) and inserting the 
        following:
          ``(1)(A) in the case of a single-employer plan, the 
        sum of the shortfall amortization charge (within the 
        meaning of section 303(c)(1) of this Act and 430(c)(1) 
        of the Internal Revenue Code of 1986) with respect to 
        the plan (if any) for the plan year in which the 
        termination date occurs, plus the aggregate total of 
        shortfall amortization installments (if any) determined 
        for succeeding plan years under section 303(c)(2) of 
        this Act and section 430(c)(2) of such Code (which, for 
        purposes of this subparagraph, shall include any 
        increase in such sum which would result if all 
        applications for waivers of the minimum funding 
        standard under section 302(c) of this Act and section 
        412(c) of such Code which are pending with respect to 
        such plan were denied and if no additional 
        contributions (other than those already made by the 
        termination date) were made for the plan year in which 
        the termination date occurs or for any previous plan 
        year), or
          ``(B) in the case of a multiemployer plan, the 
        outstanding balance of the accumulated funding 
        deficiencies (within the meaning of section 304(a)(2) 
        of this Act and section 431(a) of the Internal Revenue 
        Code of 1986) of the plan (if any) (which, for purposes 
        of this subparagraph, shall include the amount of any 
        increase in such accumulated funding deficiencies of 
        the plan which would result if all pending applications 
        for waivers of the minimum funding standard under 
        section 302(c) of this Act or section 412(c) of such 
        Code and for extensions of the amortization period 
        under section 304(d) of this Act or section 431(d) of 
        such Code with respect to such plan were denied and if 
        no additional contributions (other than those already 
        made by the termination date) were made for the plan 
        year in which the termination date occurs or for any 
        previous plan year),
          ``(2)(A) in the case of a single-employer plan, the 
        sum of the waiver amortization charge (within the 
        meaning of section 303(e)(1) of this Act and 430(j)(2) 
        of the Internal Revenue Code of 1986) with respect to 
        the plan (if any) for the plan year in which the 
        termination date occurs, plus the aggregate total of 
        waiver amortization installments (if any) determined 
        for succeeding plan years under section 303(e)(2) of 
        this Act and section 430(j)(3) of such Code, or
          ``(B) in the case of a multiemployer plan, the 
        outstanding balance of the amount of waived funding 
        deficiencies of the plan waived before such date under 
        section 302(c) of this Act or section 412(c) of such 
        Code (if any), and
          ``(3) in the case of a multiemployer plan, the 
        outstanding balance of the amount of decreases in the 
        minimum funding standard allowed before such date under 
        section 304(d) of this Act or section 431(d) of such 
        Code (if any);'';
          (6) in section 4071 (29 U.S.C. 1371), by striking 
        ``302(f)(4)'' and inserting ``303(k)(4)'';
          (7) in section 4243(a)(1)(B) (29 U.S.C. 
        1423(a)(1)(B)), by striking ``302(a)'' and inserting 
        ``304(a)'', and, in clause (i), by striking ``302(a)'' 
        and inserting ``304(a)'';
          (8) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by 
        striking ``303(a)'' and inserting ``302(c)'';
          (9) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by 
        striking ``303(c)'' and inserting ``302(c)(3)''; and
          (10) in section 4243(g) (29 U.S.C. 1423(g)), by 
        striking ``302(c)(3)'' and inserting ``304(c)(3)''.
  (c) Amendments to Reorganization Plan No. 4 of 1978.--Section 
106(b)(ii) of Reorganization Plan No. 4 of 1978 (ratified and 
affirmed as law by Public Law 98-532 (98 Stat. 2705)) is 
amended by striking ``302(c)(8)'' and inserting ``302(d)(2)'', 
by striking ``304(a) and (b)(2)(A)'' and inserting ``304(d)(1), 
(d)(2), and (e)(2)(A)'', and by striking ``412(c)(8), (e), and 
(f)(2)(A)'' and inserting ``412(d)(2) and 431(d)(1), (d)(2), 
and (e)(2)(A)''.
  (d) Repeal of Expired Authority for Temporary Variances.--
          (1) In general.--Section 207 of such Act (29 U.S.C. 
        1057) is repealed.
          (2) Conforming amendment.--The table of contents in 
        section 1 of such Act is amended by striking the item 
        relating to section 207.
  (e) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after 2006.

        Subtitle B--Amendments to Internal Revenue Code of 1986

SEC. 111. MINIMUM FUNDING STANDARDS.

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

``SEC. 412. MINIMUM FUNDING STANDARDS.

  ``(a) Requirement to Meet Minimum Funding Standard.--
          ``(1) In general.--A plan to which this section 
        applies shall satisfy the minimum funding standard 
        applicable to the plan for any plan year.
          ``(2) Minimum funding standard.--For purposes of 
        paragraph (1), a plan shall be treated as satisfying 
        the minimum funding standard for a plan year if--
                  ``(A) in the case of a defined benefit plan 
                which is not a multiemployer plan, the employer 
                makes contributions to or under the plan for 
                the plan year which, in the aggregate, are not 
                less than the minimum required contribution 
                determined under section 430 for the plan for 
                the plan year,
                  ``(B) in the case of a money purchase plan 
                which is not a multiemployer plan, the employer 
                makes contributions to or under the plan for 
                the plan year which are required under the 
                terms of the plan, and
                  ``(C) in the case of a multiemployer plan, 
                the employers make contributions to or under 
                the plan for any plan year which, in the 
                aggregate, are sufficient to ensure that the 
                plan does not have an accumulated funding 
                deficiency under section 431 as of the end of 
                the plan year.
  ``(b) Liability for Contributions.--
          ``(1) In general.--Except as provided in paragraph 
        (2), the amount of any contribution required by this 
        section (including any required installments under 
        paragraphs (3) and (4) of section 430(j)) shall be paid 
        by the employer responsible for making contributions to 
        or under the plan.
          ``(2) Joint and several liability where employer 
        member of controlled group.--In the case of a defined 
        benefit plan which is not a multiemployer plan, if the 
        employer referred to in paragraph (1) is a member of a 
        controlled group, each member of such group shall be 
        jointly and severally liable for payment of such 
        contributions.
  ``(c) Variance From Minimum Funding Standards.--
          ``(1) Waiver in case of business hardship.--
                  ``(A) In general.--If--
                          ``(i) an employer is (or in the case 
                        of a multiemployer plan, 10 percent or 
                        more of the number of employers 
                        contributing to or under the plan is) 
                        unable to satisfy the minimum funding 
                        standard for a plan year without 
                        temporary substantial business hardship 
                        (substantial business hardship in the 
                        case of a multiemployer plan), and
                          ``(ii) application of the standard 
                        would be adverse to the interests of 
                        plan participants in the aggregate,
                the Secretary may, subject to subparagraph (C), 
                waive the requirements of subsection (a) for 
                such year with respect to all or any portion of 
                the minimum funding standard. The Secretary 
                shall not waive the minimum funding standard 
                with respect to a plan for more than 3 of any 
                15 (5 of any 15 in the case of a multiemployer 
                plan) consecutive plan years.
                  ``(B) Effects of waiver.--If a waiver is 
                granted under subparagraph (A) for any plan 
                year--
                          ``(i) in the case of a defined 
                        benefit plan which is not a 
                        multiemployer plan, the minimum 
                        required contribution under section 430 
                        for the plan year shall be reduced by 
                        the amount of the waived funding 
                        deficiency and such amount shall be 
                        amortized as required under section 
                        430(e), and
                          ``(ii) in the case of a multiemployer 
                        plan, the funding standard account 
                        shall be credited under section 
                        431(b)(3)(C) with the amount of the 
                        waived funding deficiency and such 
                        amount shall be amortized as required 
                        under section 431(b)(2)(C).
                  ``(C) Waiver of amortized portion not 
                allowed.--The Secretary may not waive under 
                subparagraph (A) any portion of the minimum 
                funding standard under subsection (a) for a 
                plan year which is attributable to any waived 
                funding deficiency for any preceding plan year.
          ``(2) Determination of business hardship.--For 
        purposes of this subsection, the factors taken into 
        account in determining temporary substantial business 
        hardship (substantial business hardship in the case of 
        a multiemployer plan) shall include (but shall not be 
        limited to) whether or not--
                  ``(A) the employer is operating at an 
                economic loss,
                  ``(B) there is substantial unemployment or 
                underemployment in the trade or business and in 
                the industry concerned,
                  ``(C) the sales and profits of the industry 
                concerned are depressed or declining, and
                  ``(D) it is reasonable to expect that the 
                plan will be continued only if the waiver is 
                granted.
          ``(3) Waived funding deficiency.--For purposes of 
        this section and part III of this subchapter, the term 
        `waived funding deficiency' means the portion of the 
        minimum funding standard under subsection (a) 
        (determined without regard to the waiver) for a plan 
        year waived by the Secretary and not satisfied by 
        employer contributions.
          ``(4) Security for waivers for single-employer plans, 
        consultations.--
                  ``(A) Security may be required.--
                          ``(i) In general.--Except as provided 
                        in subparagraph (C), the Secretary may 
                        require an employer maintaining a 
                        defined benefit plan which is a single-
                        employer plan (within the meaning of 
                        section 4001(a)(15) of the Employee 
                        Retirement Income Security Act of 1974) 
                        to provide security to such plan as a 
                        condition for granting or modifying a 
                        waiver under paragraph (1).
                          ``(ii)  special rules.--Any security 
                        provided under clause (i) may be 
                        perfected and enforced only by the 
                        Pension Benefit Guaranty Corporation, 
                        or at the direction of the Corporation, 
                        by a contributing sponsor (within the 
                        meaning of section 4001(a)(13) of the 
                        Employee Retirement Income Security Act 
                        of 1974), or a member of such sponsor's 
                        controlled group (within the meaning of 
                        section 4001(a)(14) of such Act).
                  ``(B) Consultation with the pension benefit 
                guaranty corporation.--Except as provided in 
                subparagraph (C), the Secretary shall, before 
                granting or modifying a waiver under this 
                subsection with respect to a plan described in 
                subparagraph (A)(i)--
                          ``(i) provide the Pension Benefit 
                        Guaranty Corporation with--
                                  ``(I) notice of the completed 
                                application for any waiver or 
                                modification, and
                                  ``(II) an opportunity to 
                                comment on such application 
                                within 30 days after receipt of 
                                such notice, and
                          ``(ii) consider--
                                  ``(I) any comments of the 
                                Corporation under clause 
                                (i)(II), and
                                  ``(II) any views of any 
                                employee organization (within 
                                the meaning of section 3(4) of 
                                the Employee Retirement Income 
                                Security Act of 1974) 
                                representing participants in 
                                the plan which are submitted in 
                                writing to the Secretary in 
                                connection with such 
                                application.
                Information provided to the Corporation under 
                this subparagraph shall be considered tax 
                return information and subject to the 
                safeguarding and reporting requirements of 
                section 6103(p).
                  ``(C) Exception for certain waivers.--
                          ``(i) In general.--The preceding 
                        provisions of this paragraph shall not 
                        apply to any plan with respect to which 
                        the sum of--
                                  ``(I) the aggregate unpaid 
                                minimum required contribution 
                                (within the meaning of section 
                                4971(c)(4)) for the plan year 
                                and all preceding plan years, 
                                and
                                  ``(II) the present value of 
                                all waiver amortization 
                                installments determined for the 
                                plan year and succeeding plan 
                                years under section 430(e)(2),
                        is less than $1,000,000.
                          ``(ii) Treatment of waivers for which 
                        applications are pending.--The amount 
                        described in clause (i)(I) shall 
                        include any increase in such amount 
                        which would result if all applications 
                        for waivers of the minimum funding 
                        standard under this subsection which 
                        are pending with respect to such plan 
                        were denied.
          ``(5) Special rules for single-employer plans.--
                  ``(A) Application must be submitted before 
                date 2\1/2\ months after close of year.--In the 
                case of a defined benefit plan which is not a 
                multiemployer plan, no waiver may be granted 
                under this subsection with respect to any plan 
                for any plan year unless an application 
                therefor is submitted to the Secretary not 
                later than the 15th day of the 3rd month 
                beginning after the close of such plan year.
                  ``(B) Special rule if employer is member of 
                controlled group.--In the case of a defined 
                benefit plan which is not a multiemployer plan, 
                if an employer is a member of a controlled 
                group, the temporary substantial business 
                hardship requirements of paragraph (1) shall be 
                treated as met only if such requirements are 
                met--
                          ``(i) with respect to such employer, 
                        and
                          ``(ii) with respect to the controlled 
                        group of which such employer is a 
                        member (determined by treating all 
                        members of such group as a single 
                        employer).
                The Secretary may provide that an analysis of a 
                trade or business or industry of a member need 
                not be conducted if the Secretary determines 
                such analysis is not necessary because the 
                taking into account of such member would not 
                significantly affect the determination under 
                this paragraph.
          ``(6) Advance notice.--
                  ``(A) In general.--The Secretary shall, 
                before granting a waiver under this subsection, 
                require each applicant to provide evidence 
                satisfactory to the Secretary that the 
                applicant has provided notice of the filing of 
                the application for such waiver to each 
                affected party (as defined in section 
                4001(a)(21) of the Employee Retirement Income 
                Security Act of 1974). Such notice shall 
                include a description of the extent to which 
                the plan is funded for benefits which are 
                guaranteed under title IV of the Employee 
                Retirement Income Security Act of 1974 and for 
                benefit liabilities.
                  ``(B) Consideration of relevant 
                information.--The Secretary shall consider any 
                relevant information provided by a person to 
                whom notice was given under subparagraph (A).
          ``(7) Restriction on plan amendments.--
                  ``(A) In general.--No amendment of a plan 
                which increases the liabilities of the plan by 
                reason of any increase in benefits, any change 
                in the accrual of benefits, or any change in 
                the rate at which benefits become 
                nonforfeitable under the plan shall be adopted 
                if a waiver under this subsection or an 
                extension of time under section 431(d) is in 
                effect with respect to the plan, or if a plan 
                amendment described in subsection (d)(2) has 
                been made at any time in the preceding 12 
                months (24 months in the case of a 
                multiemployer plan). If a plan is amended in 
                violation of the preceding sentence, any such 
                waiver, or extension of time, shall not apply 
                to any plan year ending on or after the date on 
                which such amendment is adopted.
                  ``(B) Exception.--Paragraph (1) shall not 
                apply to any plan amendment which--
                          ``(i) the Secretary determines to be 
                        reasonable and which provides for only 
                        de minimis increases in the liabilities 
                        of the plan,
                          ``(ii) only repeals an amendment 
                        described in subsection (d)(2), or
                          ``(iii) is required as a condition of 
                        qualification under part I of 
                        subchapter D, of chapter 1.
  ``(d) Miscellaneous Rules.--
          ``(1) Change in method or year.--If the funding 
        method, the valuation date, or a plan year for a plan 
        is changed, the change shall take effect only if 
        approved by the Secretary.
          ``(2) Certain retroactive plan amendments.--For 
        purposes of this section, any amendment applying to a 
        plan year which--
                  ``(A) is adopted after the close of such plan 
                year but no later than 2\1/2\ months after the 
                close of the plan year (or, in the case of a 
                multiemployer plan, no later than 2 years after 
                the close of such plan year),
                  ``(B) does not reduce the accrued benefit of 
                any participant determined as of the beginning 
                of the first plan year to which the amendment 
                applies, and
                  ``(C) does not reduce the accrued benefit of 
                any participant determined as of the time of 
                adoption except to the extent required by the 
                circumstances,
        shall, at the election of the plan administrator, be 
        deemed to have been made on the first day of such plan 
        year. No amendment described in this paragraph which 
        reduces the accrued benefits of any participant shall 
        take effect unless the plan administrator files a 
        notice with the Secretary notifying him of such 
        amendment and the Secretary has approved such 
        amendment, or within 90 days after the date on which 
        such notice was filed, failed to disapprove such 
        amendment. No amendment described in this subsection 
        shall be approved by the Secretary unless the Secretary 
        determines that such amendment is necessary because of 
        a substantial business hardship (as determined under 
        subsection (c)(2)) and that a waiver under subsection 
        (c) (or, in the case of a multiemployer plan, any 
        extension of the amortization period under section 
        431(d)) is unavailable or inadequate.
          ``(3) Controlled group.--For purposes of this 
        section, the term `controlled group' means any group 
        treated as a single employer under subsection (b), (c), 
        (m), or (o) of section 414.
  ``(e) Plans to Which Section Applies.--
          ``(1) In general.--Except as provided in paragraph 
        (2), this section applies to a plan if, for any plan 
        year beginning after December 31, 2006--
                  ``(A) such plan included a trust which 
                qualified (or was determined by the Secretary 
                to have qualified) under section 401(a), or
                  ``(B) such plan satisfied (or was determined 
                by the Secretary to have satisfied) the 
                requirements of section 403(a).
          ``(2) Exceptions.--This section shall not apply to--
                  ``(A) any profit-sharing or stock bonus plan,
                  ``(B) any insurance contract plan described 
                in paragraph (3),
                  ``(C) any governmental plan (within the 
                meaning of section 414(d)),
                  ``(D) any church plan (within the meaning of 
                section 414(e)) with respect to which the 
                election provided by section 410(d) has not 
                been made,
                  ``(E) any plan which has not, at any time 
                after September 2, 1974, provided for employer 
                contributions, or
                  ``(F) any plan established and maintained by 
                a society, order, or association described in 
                section 501(c)(8) or (9), if no part of the 
                contributions to or under such plan are made by 
                employers of participants in such plan.
        No plan described in subparagraph (C), (D), or (F) 
        shall be treated as a qualified plan for purposes of 
        section 401(a) unless such plan meets the requirements 
        of section 401(a)(7) as in effect on September 1, 1974.
          ``(3) Certain insurance contract plans.--A plan is 
        described in this paragraph if--
                  ``(A) the plan is funded exclusively by the 
                purchase of individual insurance contracts,
                  ``(B) such contracts provide for level annual 
                premium payments to be paid extending not later 
                than the retirement age for each individual 
                participating in the plan, and commencing with 
                the date the individual became a participant in 
                the plan (or, in the case of an increase in 
                benefits, commencing at the time such increase 
                becomes effective),
                  ``(C) benefits provided by the plan are equal 
                to the benefits provided under each contract at 
                normal retirement age under the plan and are 
                guaranteed by an insurance carrier (licensed 
                under the laws of a State to do business with 
                the plan) to the extent premiums have been 
                paid,
                  ``(D) premiums payable for the plan year, and 
                all prior plan years, under such contracts have 
                been paid before lapse or there is 
                reinstatement of the policy,
                  ``(E) no rights under such contracts have 
                been subject to a security interest at any time 
                during the plan year, and
                  ``(F) no policy loans are outstanding at any 
                time during the plan year.
        A plan funded exclusively by the purchase of group 
        insurance contracts which is determined under 
        regulations prescribed by the Secretary to have the 
        same characteristics as contracts described in the 
        preceding sentence shall be treated as a plan described 
        in this paragraph.''.
  (b) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2006.

SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION 
                    PLANS.

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

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

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

  ``(a) Minimum Required Contribution.--For purposes of this 
section and section 412(a)(2)(A), except as provided in 
subsection (f), the term `minimum required contribution' means, 
with respect to any plan year of a defined benefit plan which 
is not a multiemployer plan--
          ``(1) in any case in which the value of plan assets 
        of the plan (as reduced under subsection (f)(4)(B)) is 
        less than the funding target of the plan for the plan 
        year, the sum of--
                  ``(A) the target normal cost of the plan for 
                the plan year,
                  ``(B) the shortfall amortization charge (if 
                any) for the plan for the plan year determined 
                under subsection (c), and
                  ``(C) the waiver amortization charge (if any) 
                for the plan for the plan year as determined 
                under subsection (e);
          ``(2) in any case in which the value of plan assets 
        of the plan (as reduced under subsection (f)(4)(B)) 
        exceeds the funding target of the plan for the plan 
        year, the target normal cost of the plan for the plan 
        year reduced by such excess; or
          ``(3) in any other case, the target normal cost of 
        the plan for the plan year.
  ``(b) Target Normal Cost.--For purposes of this section, 
except as provided in subsection (i)(2) with respect to plans 
in at-risk status, the term `target normal cost' means, for any 
plan year, the present value of all benefits which are expected 
to accrue or to be earned under the plan during the plan year. 
For purposes of this subsection, if any benefit attributable to 
services performed in a preceding plan year is increased by 
reason of any increase in compensation during the current plan 
year, the increase in such benefit shall be treated as having 
accrued during the current plan year.
  ``(c) Shortfall Amortization Charge.--
          ``(1) In general.--For purposes of this section, the 
        shortfall amortization charge for a plan for any plan 
        year is the aggregate total of the shortfall 
        amortization installments for such plan year with 
        respect to the shortfall amortization bases for such 
        plan year and each of the 6 preceding plan years.
          ``(2) Shortfall amortization installment.--The plan 
        sponsor shall determine, with respect to the shortfall 
        amortization base of the plan for any plan year, the 
        amounts necessary to amortize such shortfall 
        amortization base, in level annual installments over a 
        period of 7 plan years beginning with such plan year. 
        For purposes of paragraph (1), the annual installment 
        of such amortization for each plan year in such 7-plan-
        year period is the shortfall amortization installment 
        for such plan year with respect to such shortfall 
        amortization base. In determining any shortfall 
        amortization installment under this paragraph, the plan 
        sponsor shall use the segment rates determined under 
        subparagraph (C) of subsection (h)(2), applied under 
        rules similar to the rules of subparagraph (B) of 
        subsection (h)(2).
          ``(3) Shortfall amortization base.--For purposes of 
        this section, the shortfall amortization base of a plan 
        for a plan year is the excess (if any) of--
                  ``(A) the funding shortfall of such plan for 
                such plan year, over
                  ``(B) the sum of--
                          ``(i) the present value (determined 
                        using the segment rates determined 
                        under subparagraph (C) of subsection 
                        (h)(2), applied under rules similar to 
                        the rules of subparagraph (B) of 
                        subsection (h)(2)) of the aggregate 
                        total of the shortfall amortization 
                        installments, for such plan year and 
                        the 5 succeeding plan years, which have 
                        been determined with respect to the 
                        shortfall amortization bases of the 
                        plan for each of the 6 plan years 
                        preceding such plan year, and
                          ``(ii) the present value (as so 
                        determined) of the aggregate total of 
                        the waiver amortization installments 
                        for such plan year and the 5 succeeding 
                        plan years, which have been determined 
                        with respect to the waiver amortization 
                        bases of the plan for each of the 5 
                        plan years preceding such plan year.
          ``(4) Funding shortfall.--For purposes of this 
        section, the funding shortfall of a plan for any plan 
        year is the excess (if any) of--
                  ``(A) the funding target of the plan for the 
                plan year, over
                  ``(B) the value of plan assets of the plan 
                (as reduced under subsection (f)(4)(B)) for the 
                plan year which are held by the plan on the 
                valuation date.
          ``(5) Exemption from new shortfall amortization 
        base.--
                  ``(A) In general.--In any case in which the 
                value of plan assets of the plan (as reduced 
                under subsection (f)(4)(A)) is equal to or 
                greater than the funding target of the plan for 
                the plan year, the shortfall amortization base 
                of the plan for such plan year shall be zero.
                  ``(B) Transition rule.--
                          ``(i) In general.--In the case of a 
                        non-deficit reduction plan, 
                        subparagraph (A) shall be applied to 
                        plan years beginning after 2006 and 
                        before 2011 by substituting, for the 
                        funding target of the plan for the plan 
                        year, the applicable percentage of such 
                        funding target determined under the 
                        following table:



                                                                 The
                                                             applicable
 ``In the case of a plan year beginning in calendar year:    percentage
                                                                 is:

2007......................................................    92 percent
2008......................................................    94 percent
2009......................................................    96 percent
2010......................................................   98 percent.

                          ``(ii) Limitation.--Clause (i) shall 
                        not apply with respect to any plan year 
                        after 2007 unless the ratio (expressed 
                        as a percentage) which--
                                  ``(I) the value of plan 
                                assets for each preceding plan 
                                year after 2006 (as reduced 
                                under subsection (f)(4)(A)), 
                                bears to
                                  ``(II) the funding target of 
                                the plan for such preceding 
                                plan year (determined without 
                                regard to subsection (i)(1)),
                        is not less than the applicable 
                        percentage with respect to such 
                        preceding plan determined under clause 
                        (i).
                          ``(iii) Non-deficit reduction plan.--
                        For purposes of clause (i), the term 
                        `non-deficit reduction plan' means any 
                        plan--
                                  ``(I) to which this part (as 
                                in effect on the day before the 
                                date of the enactment of the 
                                Pension Protection Act of 2005) 
                                applied for the plan year 
                                beginning in 2006, and
                                  ``(II) to which section 
                                412(d) (as so in effect) did 
                                not apply for such plan year.
          ``(6) Early deemed amortization upon attainment of 
        funding target.--In any case in which the funding 
        shortfall of a plan for a plan year is zero, for 
        purposes of determining the shortfall amortization 
        charge for such plan year and succeeding plan years, 
        the shortfall amortization bases for all preceding plan 
        years (and all shortfall amortization installments 
        determined with respect to such bases) shall be reduced 
        to zero.
  ``(d) Rules Relating to Funding Target.--For purposes of this 
section--
          ``(1) Funding target.--Except as provided in 
        subsection (i)(1) with respect to plans in at-risk 
        status, the funding target of a plan for a plan year is 
        the present value of all liabilities to participants 
        and their beneficiaries under the plan for the plan 
        year.
          ``(2) Funding target attainment percentage.--The 
        `funding target attainment percentage' of a plan for a 
        plan year is the ratio (expressed as a percentage) 
        which--
                  ``(A) the value of plan assets for the plan 
                year (as reduced under subsection (f)(4)(B)), 
                bears to
                  ``(B) the funding target of the plan for the 
                plan year (determined without regard to 
                subsection (i)(1)).
  ``(e) Waiver Amortization Charge.--
          ``(1) Determination of waiver amortization charge.--
        The waiver amortization charge (if any) for a plan for 
        any plan year is the aggregate total of the waiver 
        amortization installments for such plan year with 
        respect to the waiver amortization bases for each of 
        the 5 preceding plan years.
          ``(2) Waiver amortization installment.--The plan 
        sponsor shall determine, with respect to the waiver 
        amortization base of the plan for any plan year, the 
        amounts necessary to amortize such waiver amortization 
        base, in level annual installments over a period of 5 
        plan years beginning with the succeeding plan year. For 
        purposes of paragraph (1), the annual installment of 
        such amortization for each plan year in such 5-plan 
        year period is the waiver amortization installment for 
        such plan year with respect to such waiver amortization 
        base.
          ``(3) Interest rate.--In determining any waiver 
        amortization installment under this subsection, the 
        plan sponsor shall use the segment rates determined 
        under subparagraph (C) of subsection (h)(2), applied 
        under rules similar to the rules of subparagraph (B) of 
        subsection (h)(2).
          ``(4) Waiver amortization base.--The waiver 
        amortization base of a plan for a plan year is the 
        amount of the waived funding deficiency (if any) for 
        such plan year under section 412(c).
          ``(5) Early deemed amortization upon attainment of 
        funding target.--In any case in which the funding 
        shortfall of a plan for a plan year is zero, for 
        purposes of determining the waiver amortization charge 
        for such plan year and succeeding plan years, the 
        waiver amortization base for all preceding plan years 
        shall be reduced to zero.
  ``(f) Reduction of Minimum Required Contribution by Pre-
Funding Balance and Funding Standard Carryover Balance.--
          ``(1) Election to maintain balances.--
                  ``(A) Pre-funding balance.--The plan sponsor 
                of a defined benefit plan which is not a 
                multiemployer plan may elect to maintain a pre-
                funding balance.
                  ``(B) Funding standard carryover balance.--
                          ``(i) In general.--In the case of a 
                        defined benefit plan (other than a 
                        multiemployer plan) described in clause 
                        (ii), the plan sponsor may elect to 
                        maintain a funding standard carryover 
                        balance, until such balance is reduced 
                        to zero.
                          ``(ii) Plans maintaining funding 
                        standard account in 2006.--A plan is 
                        described in this clause if the plan--
                                  ``(I) was in effect for a 
                                plan year beginning in 2006, 
                                and
                                  ``(II) had a positive balance 
                                in the funding standard account 
                                under section 412(b) as in 
                                effect for such plan year and 
                                determined as of the end of 
                                such plan year.
          ``(2) Application of balances.--A pre-funding balance 
        and a funding standard carryover balance maintained 
        pursuant to this paragraph--
                  ``(A) shall be available for crediting 
                against the minimum required contribution, 
                pursuant to an election under paragraph (3),
                  ``(B) shall be applied as a reduction in the 
                amount treated as the value of plan assets for 
                purposes of this section, to the extent 
                provided in paragraph (4), and
                  ``(C) may be reduced at any time, pursuant to 
                an election under paragraph (5).
          ``(3) Election to apply balances against minimum 
        required contribution.--
                  ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), in the case of any 
                plan year in which the plan sponsor elects to 
                credit against the minimum required 
                contribution for the current plan year all or a 
                portion of the pre-funding balance or the 
                funding standard carryover balance for the 
                current plan year (not in excess of such 
                minimum required contribution), the minimum 
                required contribution for the plan year shall 
                be reduced by the amount so credited by the 
                plan sponsor. For purposes of the preceding 
                sentence, the minimum required contribution 
                shall be determined after taking into account 
                any waiver under section 412(c).
                  ``(B) Coordination with funding standard 
                carryover balance.--To the extent that any plan 
                has a funding standard carryover balance 
                greater than zero, no amount of the pre-funding 
                balance of such plan may be credited under this 
                paragraph in reducing the minimum required 
                contribution.
                  ``(C) Limitation for underfunded plans.--The 
                preceding provisions of this paragraph shall 
                not apply for any plan year if the ratio 
                (expressed as a percentage) which--
                          ``(i) the value of plan assets for 
                        the preceding plan year (as reduced 
                        under paragraph (4)(C)), bears to
                          ``(ii) the funding target of the plan 
                        for the preceding plan year (determined 
                        without regard to subsection (i)(1)),
                is less than 80 percent.
          ``(4) Effect of balances on amounts treated as value 
        of plan assets.--In the case of any plan maintaining a 
        pre-funding balance or a funding standard carryover 
        balance pursuant to this subsection, the amount treated 
        as the value of plan assets shall be deemed to be such 
        amount, reduced as provided in the following 
        subparagraphs:
                  ``(A) Applicability of shortfall amortization 
                base.--For purposes of subsection (c)(5), the 
                value of plan assets is deemed to be such 
                amount, reduced by the amount of the pre-
                funding balance, but only if an election under 
                paragraph (2) applying any portion of the pre-
                funding balance in reducing the minimum 
                required contribution is in effect for the plan 
                year.
                  ``(B) Determination of excess assets, funding 
                shortfall, and funding target attainment 
                percentage.--
                          ``(i) In general.--For purposes of 
                        subsections (a), (c)(4)(B), and 
                        (d)(2)(A), the value of plan assets is 
                        deemed to be such amount, reduced by 
                        the amount of the pre-funding balance 
                        and the funding standard carryover 
                        balance.
                          ``(ii) Special rule for certain 
                        binding agreements with pbgc.--For 
                        purposes of subsection (c)(4)(B), the 
                        value of plan assets shall not be 
                        deemed to be reduced for a plan year by 
                        the amount of the specified balance if, 
                        with respect to such balance, there is 
                        in effect for a plan year a binding 
                        written agreement with the Pension 
                        Benefit Guaranty Corporation which 
                        provides that such balance is not 
                        available to reduce the minimum 
                        required contribution for the plan 
                        year. For purposes of the preceding 
                        sentence, the term `specified balance' 
                        means the pre-funding balance or the 
                        funding standard carryover balance, as 
                        the case may be.
                  ``(C) Availability of balances in plan year 
                for crediting against minimum required 
                contribution.--For purposes of paragraph 
                (3)(C)(i) of this subsection, the value of plan 
                assets is deemed to be such amount, reduced by 
                the amount of the pre-funding balance.
          ``(5) Election to reduce balance prior to 
        determinations of value of plan assets and crediting 
        against minimum required contribution.--
                  ``(A) In general.--The plan sponsor may elect 
                to reduce by any amount the balance of the pre-
                funding balance and the funding standard 
                carryover balance for any plan year (but not 
                below zero). Such reduction shall be effective 
                prior to any determination of the value of plan 
                assets for such plan year under this section 
                and application of the balance in reducing the 
                minimum required contribution for such plan for 
                such plan year pursuant to an election under 
                paragraph (2).
                  ``(B) Coordination between pre-funding 
                balance and funding standard carryover 
                balance.--To the extent that any plan has a 
                funding standard carryover balance greater than 
                zero, no election may be made under 
                subparagraph (A) with respect to the pre-
                funding balance.
          ``(6) Pre-funding balance.--
                  ``(A) In general.--A pre-funding balance 
                maintained by a plan shall consist of a 
                beginning balance of zero, increased and 
                decreased to the extent provided in 
                subparagraphs (B) and (C), and adjusted further 
                as provided in paragraph (8).
                  ``(B) Increases.--As of the valuation date 
                for each plan year beginning after 2007, the 
                pre-funding balance of a plan shall be 
                increased by the amount elected by the plan 
                sponsor for the plan year. Such amount shall 
                not exceed the excess (if any) of--
                          ``(i) the aggregate total of employer 
                        contributions to the plan for the 
                        preceding plan year, over
                          ``(ii) the minimum required 
                        contribution for such preceding plan 
                        year (increased by interest on any 
                        portion of such minimum required 
                        contribution remaining unpaid as of the 
                        valuation date for the current plan 
                        year, at the effective interest rate 
                        for the plan for the preceding plan 
                        year, for the period beginning with the 
                        first day of such preceding plan year 
                        and ending on the date that payment of 
                        such portion is made).
                  ``(C) Decreases.--As of the valuation date 
                for each plan year after 2007, the pre-funding 
                balance of a plan shall be decreased (but not 
                below zero) by the sum of--
                          ``(i) the amount of such balance 
                        credited under paragraph (2) (if any) 
                        in reducing the minimum required 
                        contribution of the plan for the 
                        preceding plan year, and
                          ``(ii) any reduction in such balance 
                        elected under paragraph (5).
          ``(7) Funding standard carryover balance.--
                  ``(A) In general.--A funding standard 
                carryover balance maintained by a plan shall 
                consist of a beginning balance determined under 
                subparagraph (B), decreased to the extent 
                provided in subparagraph (C), and adjusted 
                further as provided in paragraph (8).
                  ``(B) Beginning balance.--The beginning 
                balance of the funding standard carryover 
                balance shall be the positive balance described 
                in paragraph (1)(B)(ii)(II).
                  ``(C) Decreases.--As of the valuation date 
                for each plan year after 2007, the funding 
                standard carryover balance of a plan shall be 
                decreased (but not below zero) by the sum of--
                          ``(i) the amount of such balance 
                        credited under paragraph (2) (if any) 
                        in reducing the minimum required 
                        contribution of the plan for the 
                        preceding plan year, and
                          ``(ii) any reduction in such balance 
                        elected under paragraph (5).
          ``(8) Adjustments to balances.--In determining the 
        pre-funding balance or the funding standard carryover 
        balance of a plan as of the valuation date (before 
        applying any increase or decrease under paragraph (6) 
        or (7)), the plan sponsor shall, in accordance with 
        regulations which shall be prescribed by the Secretary, 
        adjust such balance so as to reflect the rate of net 
        gain or loss (determined, notwithstanding subsection 
        (g)(3), on the basis of fair market value) experienced 
        by all plan assets for the period beginning with the 
        valuation date for the preceding plan year and ending 
        with the date preceding the valuation date for the 
        current plan year, properly taking into account, in 
        accordance with such regulations, all contributions, 
        distributions, and other plan payments made during such 
        period.
          ``(9) Elections.--Elections under this subsection 
        shall be made at such times, and in such form and 
        manner, as shall be prescribed in regulations of the 
        Secretary.
  ``(g) Valuation of Plan Assets and Liabilities.--
          ``(1) Timing of determinations.--Except as otherwise 
        provided under this subsection, all determinations 
        under this section for a plan year shall be made as of 
        the valuation date of the plan for such plan year.
          ``(2) Valuation date.--For purposes of this section--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), the valuation date of a plan 
                for any plan year shall be the first day of the 
                plan year.
                  ``(B) Exception for small plans.--If, on each 
                day during the preceding plan year, a plan had 
                500 or fewer participants, the plan may 
                designate any day during the plan year as its 
                valuation date for such plan year and 
                succeeding plan years. For purposes of this 
                subparagraph, all defined benefit plans (other 
                than multiemployer plans) maintained by the 
                same employer (or any member of such employer's 
                controlled group) shall be treated as 1 plan, 
                but only participants with respect to such 
                employer or member shall be taken into account.
                  ``(C) Application of certain rules in 
                determination of plan size.--For purposes of 
                this paragraph--
                          ``(i) Plans not in existence in 
                        preceding year.--In the case of the 
                        first plan year of any plan, 
                        subparagraph (B) shall apply to such 
                        plan by taking into account the number 
                        of participants that the plan is 
                        reasonably expected to have on days 
                        during such first plan year.
                          ``(ii) Predecessors.--Any reference 
                        in subparagraph (B) to an employer 
                        shall include a reference to any 
                        predecessor of such employer.
          ``(3) Authorization of use of actuarial value.--For 
        purposes of this section, the value of plan assets 
        shall be determined on the basis of any reasonable 
        actuarial method of valuation which takes into account 
        fair market value and which is permitted under 
        regulations prescribed by the Secretary, except that--
                  ``(A) any such method providing for averaging 
                of fair market values may not provide for 
                averaging of such values over more than the 36-
                month period ending with the month which 
                includes the valuation date, and
                  ``(B) any such method may not result in a 
                determination of the value of plan assets 
                which, at any time, is lower than 90 percent or 
                greater than 110 percent of the fair market 
                value of such assets at such time.
          ``(4) Accounting for contribution receipts.--For 
        purposes of this section--
                  ``(A) Contributions for prior plan years 
                taken into account.--For purposes of 
                determining the value of plan assets for any 
                current plan year, in any case in which a 
                contribution properly allocable to amounts owed 
                for a preceding plan year is made on or after 
                the valuation date of the plan for such current 
                plan year, such contribution shall be taken 
                into account, except that any such contribution 
                made during any such current plan year 
                beginning after 2007 shall be taken into 
                account only in an amount equal to its present 
                value (determined using the effective rate of 
                interest for the plan for the preceding plan 
                year) as of the valuation date of the plan for 
                such current plan year.
                  ``(B) Contributions for current plan year 
                disregarded.--For purposes of determining the 
                value of plan assets for any current plan year, 
                contributions which are properly allocable to 
                amounts owed for such plan year shall not be 
                taken into account, and, in the case of any 
                such contribution made before the valuation 
                date of the plan for such plan year, such value 
                of plan assets shall be reduced for interest on 
                such amount determined using the effective rate 
                of interest of the plan for the current plan 
                year for the period beginning when such payment 
                was made and ending on the valuation date of 
                the plan.
          ``(5) Accounting for plan liabilities.--For purposes 
        of this section--
                  ``(A) Liabilities taken into account for 
                current plan year.--In determining the value of 
                liabilities under a plan for a plan year, 
                liabilities shall be taken into account to the 
                extent attributable to benefits (including any 
                early retirement or similar benefit) accrued or 
                earned as of the beginning of the plan year.
                  ``(B) Accruals during current plan year 
                disregarded.--For purposes of subparagraph (A), 
                benefits accrued or earned during such plan 
                year shall not be taken into account, 
                irrespective of whether the valuation date of 
                the plan for such plan year is later than the 
                first day of such plan year.
  ``(h) Actuarial Assumptions and Methods.--
          ``(1) In general.--Subject to this subsection, the 
        determination of any present value or other computation 
        under this section shall be made on the basis of 
        actuarial assumptions and methods--
                  ``(A) each of which is reasonable (taking 
                into account the experience of the plan and 
                reasonable expectations), and
                  ``(B) which, in combination, offer the 
                actuary's best estimate of anticipated 
                experience under the plan.
          ``(2) Interest rates.--
                  ``(A) Effective interest rate.--For purposes 
                of this section, the term `effective interest 
                rate' means, with respect to any plan for any 
                plan year, the single rate of interest which, 
                if used to determine the present value of the 
                plan's liabilities referred to in subsection 
                (d)(1), would result in an amount equal to the 
                funding target of the plan for such plan year.
                  ``(B) Interest rates for determining funding 
                target.--For purposes of determining the 
                funding target of a plan for any plan year, the 
                interest rate used in determining the present 
                value of the liabilities of the plan shall be--
                          ``(i) in the case of liabilities 
                        reasonably determined to be payable 
                        during the 5-year period beginning on 
                        the first day of the plan year, the 
                        first segment rate with respect to the 
                        applicable month,
                          ``(ii) in the case of liabilities 
                        reasonably determined to be payable 
                        during the 15-year period beginning at 
                        the end of the period described in 
                        clause (i), the second segment rate 
                        with respect to the applicable month, 
                        and
                          ``(iii) in the case of liabilities 
                        reasonably determined to be payable 
                        after the period described in clause 
                        (ii), the third segment rate with 
                        respect to the applicable month.
                  ``(C) Segment rates.--For purposes of this 
                paragraph--
                          ``(i) First segment rate.--The term 
                        `first segment rate' means, with 
                        respect to any month, the single rate 
                        of interest which shall be determined 
                        by the Secretary for such month on the 
                        basis of the corporate bond yield curve 
                        for such month, taking into account 
                        only that portion of such yield curve 
                        which is based on bonds maturing during 
                        the 5-year period commencing with such 
                        month.
                          ``(ii) Second segment rate.--The term 
                        `second segment rate' means, with 
                        respect to any month, the single rate 
                        of interest which shall be determined 
                        by the Secretary for such month on the 
                        basis of the corporate bond yield curve 
                        for such month, taking into account 
                        only that portion of such yield curve 
                        which is based on bonds maturing during 
                        the 15-year period beginning at the end 
                        of the period described in clause (i).
                          ``(iii) Third segment rate.--The term 
                        `third segment rate' means, with 
                        respect to any month, the single rate 
                        of interest which shall be determined 
                        by the Secretary for such month on the 
                        basis of the corporate bond yield curve 
                        for such month, taking into account 
                        only that portion of such yield curve 
                        which is based on bonds maturing during 
                        periods beginning after the period 
                        described in clause (ii).
                  ``(D) Corporate bond yield curve.--For 
                purposes of this paragraph--
                          ``(i) In general.--The term 
                        `corporate bond yield curve' means, 
                        with respect to any month, a yield 
                        curve which is prescribed by the 
                        Secretary for such month and which 
                        reflects a 3-year weighted average of 
                        yields on investment grade corporate 
                        bonds with varying maturities.
                          ``(ii) 3-year weighted average.--The 
                        term `3-year weighted average' means an 
                        average determined by using a 
                        methodology under which the most recent 
                        year is weighted 50 percent, the year 
                        preceding such year is weighted 35 
                        percent, and the second year preceding 
                        such year is weighted 15 percent.
                  ``(E) Applicable month.--For purposes of this 
                paragraph, the term `applicable month' means, 
                with respect to any plan for any plan year, the 
                month which includes the valuation date of such 
                plan for such plan year or, at the election of 
                the plan sponsor, any of the 4 months which 
                precede such month. Any election made under 
                this subparagraph shall apply to the plan year 
                for which the election is made and all 
                succeeding plan years, unless the election is 
                revoked with the consent of the Secretary.
                  ``(F) Publication requirements.--The 
                Secretary shall publish for each month the 
                corporate bond yield curve (and the corporate 
                bond yield curve reflecting the modification 
                described in section 417(e)(3)(D)(i) for such 
                month and each of the rates determined under 
                subparagraph (B) for such month. The Secretary 
                shall also publish a description of the 
                methodology used to determine such yield curve 
                and such rates which is sufficiently detailed 
                to enable plans to make reasonable projections 
                regarding the yield curve and such rates for 
                future months based on the plan's projection of 
                future interest rates.
                  ``(G) Transition rule.--
                          ``(i) In general.--Notwithstanding 
                        the preceding provisions of this 
                        paragraph, for plan years beginning in 
                        2007 or 2008, the first, second, or 
                        third segment rate for a plan with 
                        respect to any month shall be equal to 
                        the sum of--
                                  ``(I) the product of such 
                                rate for such month determined 
                                without regard to this 
                                subparagraph, multiplied by the 
                                applicable percentage, and
                                  ``(II) the product of the 
                                rate determined under the rules 
                                of section 412(b)(5)(B)(ii)(II) 
                                (as in effect for plan years 
                                beginning in 2006), multiplied 
                                by a percentage equal to 100 
                                percent minus the applicable 
                                percentage.
                          ``(ii) Applicable percentage.--For 
                        purposes of clause (i), the applicable 
                        percentage is 33\1/3\ percent for plan 
                        years beginning in 2007 and 66\2/3\ 
                        percent for plan years beginning in 
                        2008.
                          ``(iii) New plans ineligible.--Clause 
                        (i) shall not apply to any plan if the 
                        first plan year of the plan begins 
                        after December 31, 2006.
          ``(3) Mortality table.--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), the mortality table used in 
                determining any present value or making any 
                computation under this section shall be the RP-
                2000 Combined Mortality Table using Scale AA 
                published by the Society of Actuaries (as in 
                effect on the date of the enactment of the 
                Pension Protection Act of 2005), projected as 
                of the plan's valuation date.
                  ``(B) Substitute mortality table.--
                          ``(i) In general.--Upon request by 
                        the plan sponsor and approval by the 
                        Secretary for a period not to exceed 10 
                        years, a mortality table which meets 
                        the requirements of clause (ii) shall 
                        be used in determining any present 
                        value or making any computation under 
                        this section. A mortality table 
                        described in this clause shall cease to 
                        be in effect if the plan actuary 
                        determines at any time that such table 
                        does not meet the requirements of 
                        subclauses (I) and (II) of clause (ii).
                          ``(ii) Requirements.--A mortality 
                        table meets the requirements of this 
                        clause if the Secretary determines 
                        that--
                                  ``(I) such table reflects the 
                                actual experience of the 
                                pension plan and projected 
                                trends in such experience, and
                                  ``(II) such table is 
                                significantly different from 
                                the table described in 
                                subparagraph (A).
                          ``(iii) Deadline for disposition of 
                        application.--Any mortality table 
                        submitted to the Secretary for approval 
                        under this subparagraph shall be 
                        treated as in effect for the succeeding 
                        plan year unless the Secretary, during 
                        the 180-day period beginning on the 
                        date of such submission, disapproves of 
                        such table and provides the reasons 
                        that such table fails to meet the 
                        requirements of clause (ii).
                  ``(C) Transition rule.--Under regulations of 
                the Secretary, any difference in present value 
                resulting from the difference in the 
                assumptions as set forth in the mortality table 
                specified in subparagraph (A) and the 
                assumptions as set forth in the mortality table 
                described in section 412(l)(7)(C)(ii) (as in 
                effect for plan years beginning in 2006) shall 
                be phased in ratably over the first period of 5 
                plan years beginning in or after 2007 so as to 
                be fully effective for the fifth plan year. The 
                preceding sentence shall not apply to any plan 
                if the first plan year of the plan begins after 
                December 31, 2006.
          ``(4) Probability of benefit payments in the form of 
        lump sums or other optional forms.--For purposes of 
        determining any present value or making any computation 
        under this section, there shall be taken into account--
                  ``(A) the probability that future benefit 
                payments under the plan will be made in the 
                form of optional forms of benefits provided 
                under the plan (including lump sum 
                distributions, determined on the basis of the 
                plan's experience and other related 
                assumptions), and
                  ``(B) any difference in the present value of 
                such future benefit payments resulting from the 
                use of actuarial assumptions, in determining 
                benefit payments in any such optional form of 
                benefits, which are different from those 
                specified in this subsection.
          ``(5) Approval of large changes in actuarial 
        assumptions.--
                  ``(A) In general.--No actuarial assumption 
                used to determine the funding target for a plan 
                to which this paragraph applies may be changed 
                without the approval of the Secretary.
                  ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                          ``(i) the plan is a defined benefit 
                        plan (other than a multiemployer plan) 
                        to which title IV of the Employee 
                        Retirement Income Security Act of 1974 
                        applies,
                          ``(ii) the aggregate unfunded vested 
                        benefits as of the close of the 
                        preceding plan year (as determined 
                        under section 4006(a)(3)(E)(iii) of the 
                        Employee Retirement Income Security Act 
                        of 1974) of such plan and all other 
                        plans maintained by the contributing 
                        sponsors (as defined in section 
                        4001(a)(13) of such Act) and members of 
                        such sponsors' controlled groups (as 
                        defined in section 4001(a)(14) of such 
                        Act) which are covered by title IV 
                        (disregarding plans with no unfunded 
                        vested benefits) exceed $50,000,000, 
                        and
                          ``(iii) the change in assumptions 
                        (determined after taking into account 
                        any changes in interest rate and 
                        mortality table) results in a decrease 
                        in the funding shortfall of the plan 
                        for the current plan year that exceeds 
                        $50,000,000, or that exceeds $5,000,000 
                        and that is 5 percent or more of the 
                        funding target of the plan before such 
                        change.
  ``(i) Special Rules for at-Risk Plans.--
          ``(1) Funding target for plans in at-risk status.--
                  ``(A) In general.--In any case in which a 
                plan is in at-risk status for a plan year, the 
                funding target of the plan for the plan year is 
                the sum of--
                          ``(i) the present value of all 
                        liabilities to participants and their 
                        beneficiaries under the plan for the 
                        plan year, as determined by using, in 
                        addition to the actuarial assumptions 
                        described in subsection (h), the 
                        supplemental actuarial assumptions 
                        described in subparagraph (B), plus
                          ``(ii) a loading factor determined 
                        under subparagraph (C).
                  ``(B) Supplemental actuarial assumptions.--
                The actuarial assumptions used in determining 
                the valuation of the funding target shall 
                include, in addition to the actuarial 
                assumptions described in subsection (h), an 
                assumption that all participants will elect 
                benefits at such times and in such forms as 
                will result in the highest present value of 
                liabilities under subparagraph (A)(i).
                  ``(C) Loading factor.--The loading factor 
                applied with respect to a plan under this 
                paragraph for any plan year is the sum of--
                          ``(i) $700, times the number of 
                        participants in the plan, plus
                          ``(ii) 4 percent of the funding 
                        target (determined without regard to 
                        this paragraph) of the plan for the 
                        plan year.
          ``(2) Target normal cost of at-risk plans.--In any 
        case in which a plan is in at-risk status for a plan 
        year, the target normal cost of the plan for such plan 
        year shall be the sum of--
                  ``(A) the present value of all benefits which 
                are expected to accrue or be earned under the 
                plan during the plan year, determined under the 
                actuarial assumptions used under paragraph (1), 
                plus
                  ``(B) the loading factor under paragraph 
                (1)(C), excluding the portion of the loading 
                factor described in paragraph (1)(C)(i).
          ``(3) Determination of at-risk status.--For purposes 
        of this subsection, a plan is in `at-risk status' for a 
        plan year if the funding target attainment percentage 
        of the plan for the preceding plan year was less than 
        60 percent.
          ``(4) Transition between applicable funding targets 
        and between applicable target normal costs.--
                  ``(A) In general.--In any case in which a 
                plan which is in at-risk status for a plan year 
                has been in such status for a consecutive 
                period of fewer than 5 plan years, the 
                applicable amount of the funding target and of 
                the target normal cost shall be, in lieu of the 
                amount determined without regard to this 
                paragraph, the sum of--
                          ``(i) the amount determined under 
                        this section without regard to this 
                        subsection, plus
                          ``(ii) the transition percentage for 
                        such plan year of the excess of the 
                        amount determined under this subsection 
                        (without regard to this paragraph) over 
                        the amount determined under this 
                        section without regard to this 
                        subsection.
                  ``(B) Transition percentage.--For purposes of 
                this paragraph, the `transition percentage' for 
                a plan year is the product derived by 
                multiplying--
                          ``(i) 20 percent, by
                          ``(ii) the number of plan years 
                        during the period described in 
                        subparagraph (A).
  ``(j) Payment of Minimum Required Contributions.--
          ``(1) In general.--For purposes of this section, the 
        due date for any payment of any minimum required 
        contribution for any plan year shall be 8\1/2\ months 
        after the close of the plan year.
          ``(2) Interest.--Any payment required under paragraph 
        (1) for a plan year that is made on a date other than 
        the valuation date for such plan year shall be adjusted 
        for interest accruing for the period between the 
        valuation date and the payment date, at the effective 
        rate of interest for the plan for such plan year.
          ``(3) Accelerated quarterly contribution schedule for 
        underfunded plans.--
                  ``(A) Interest penalty for failure to meet 
                accelerated quarterly payment schedule.--In any 
                case in which the plan has a funding shortfall 
                for the preceding plan year, if the required 
                installment is not paid in full, then the 
                minimum required contribution for the plan year 
                (as increased under paragraph (2)) shall be 
                further increased by an amount equal to the 
                interest on the amount of the underpayment for 
                the period of the underpayment, using an 
                interest rate equal to the excess of--
                          ``(i) 175 percent of the Federal mid-
                        term rate (as in effect under section 
                        1274 for the 1st month of such plan 
                        year), over
                          ``(ii) the effective rate of interest 
                        for the plan for the plan year.
                  ``(B) Amount of underpayment, period of 
                underpayment.--For purposes of subparagraph 
                (A)--
                          ``(i) Amount.--The amount of the 
                        underpayment shall be the excess of--
                                  ``(I) the required 
                                installment, over
                                  ``(II) the amount (if any) of 
                                the installment contributed to 
                                or under the plan on or before 
                                the due date for the 
                                installment.
                          ``(ii) Period of underpayment.--The 
                        period for which any interest is 
                        charged under this paragraph with 
                        respect to any portion of the 
                        underpayment shall run from the due 
                        date for the installment to the date on 
                        which such portion is contributed to or 
                        under the plan.
                          ``(iii) Order of crediting 
                        contributions.--For purposes of clause 
                        (i)(II), contributions shall be 
                        credited against unpaid required 
                        installments in the order in which such 
                        installments are required to be paid.
                  ``(C) Number of required installments; due 
                dates.--For purposes of this paragraph--
                          ``(i) Payable in 4 installments.--
                        There shall be 4 required installments 
                        for each plan year.
                          ``(ii) Time for payment of 
                        installments.--The due dates for 
                        required installments are set forth in 
                        the following table:



   In the case of the following
       required installment:                  The due date is:

  1st.............................  April 15
  2nd.............................  July 15
  3rd.............................  October 15
  4th.............................  January 15 of the following year

                  ``(D) Amount of required installment.--For 
                purposes of this paragraph--
                          ``(i) In general.--The amount of any 
                        required installment shall be 25 
                        percent of the required annual payment.
                          ``(ii) Required annual payment.--For 
                        purposes of clause (i), the term 
                        `required annual payment' means the 
                        lesser of--
                                  ``(I) 90 percent of the 
                                minimum required contribution 
                                (without regard to any waiver 
                                under section 412(c)) to the 
                                plan for the plan year under 
                                this section, or
                                  ``(II) in the case of a plan 
                                year beginning after 2007, 100 
                                percent of the minimum required 
                                contribution (without regard to 
                                any waiver under section 
                                412(c)) to the plan for the 
                                preceding plan year.
                        Subclause (II) shall not apply if the 
                        preceding plan year referred to in such 
                        clause was not a year of 12 months.
                  ``(E) Fiscal years and short years.--
                          ``(i) Fiscal years.--In applying this 
                        paragraph to a plan year beginning on 
                        any date other than January 1, there 
                        shall be substituted for the months 
                        specified in this paragraph, the months 
                        which correspond thereto.
                          ``(ii) Short plan year.--This 
                        subparagraph shall be applied to plan 
                        years of less than 12 months in 
                        accordance with regulations prescribed 
                        by the Secretary.
          ``(4) Liquidity requirement in connection with 
        quarterly contributions.--
                  ``(A) In general.--A plan to which this 
                paragraph applies shall be treated as failing 
                to pay the full amount of any required 
                installment under paragraph (3) to the extent 
                that the value of the liquid assets paid in 
                such installment is less than the liquidity 
                shortfall (whether or not such liquidity 
                shortfall exceeds the amount of such 
                installment required to be paid but for this 
                paragraph).
                  ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan (other than a 
                plan that would be described in subsection 
                (f)(2)(B) if `100' were substituted for `500' 
                therein) which--
                          ``(i) is required to pay installments 
                        under paragraph (3) for a plan year, 
                        and
                          ``(ii) has a liquidity shortfall for 
                        any quarter during such plan year.
                  ``(C) Period of underpayment.--For purposes 
                of paragraph (3)(A), any portion of an 
                installment that is treated as not paid under 
                subparagraph (A) shall continue to be treated 
                as unpaid until the close of the quarter in 
                which the due date for such installment occurs.
                  ``(D) Limitation on increase.--If the amount 
                of any required installment is increased by 
                reason of subparagraph (A), in no event shall 
                such increase exceed the amount which, when 
                added to prior installments for the plan year, 
                is necessary to increase the funding target 
                attainment percentage of the plan for the plan 
                year (taking into account the expected increase 
                in funding target due to benefits accruing or 
                earned during the plan year) to 100 percent.
                  ``(E) Definitions.--For purposes of this 
                subparagraph:
                          ``(i) Liquidity shortfall.--The term 
                        `liquidity shortfall' means, with 
                        respect to any required installment, an 
                        amount equal to the excess (as of the 
                        last day of the quarter for which such 
                        installment is made) of--
                                  ``(I) the base amount with 
                                respect to such quarter, over
                                  ``(II) the value (as of such 
                                last day) of the plan's liquid 
                                assets.
                          ``(ii) Base amount.--
                                  ``(I) In general.--The term 
                                `base amount' means, with 
                                respect to any quarter, an 
                                amount equal to 3 times the sum 
                                of the adjusted disbursements 
                                from the plan for the 12 months 
                                ending on the last day of such 
                                quarter.
                                  ``(II) Special rule.--If the 
                                amount determined under 
                                subclause (I) exceeds an amount 
                                equal to 2 times the sum of the 
                                adjusted disbursements from the 
                                plan for the 36 months ending 
                                on the last day of the quarter 
                                and an enrolled actuary 
                                certifies to the satisfaction 
                                of the Secretary that such 
                                excess is the result of 
                                nonrecurring circumstances, the 
                                base amount with respect to 
                                such quarter shall be 
                                determined without regard to 
                                amounts related to those 
                                nonrecurring circumstances.
                          ``(iii) Disbursements from the 
                        plan.--The term `disbursements from the 
                        plan' means all disbursements from the 
                        trust, including purchases of 
                        annuities, payments of single sums and 
                        other benefits, and administrative 
                        expenses.
                          ``(iv) Adjusted disbursements.--The 
                        term `adjusted disbursements' means 
                        disbursements from the plan reduced by 
                        the product of--
                                  ``(I) the plan's funding 
                                target attainment percentage 
                                for the plan year, and
                                  ``(II) the sum of the 
                                purchases of annuities, 
                                payments of single sums, and 
                                such other disbursements as the 
                                Secretary shall provide in 
                                regulations.
                          ``(v) Liquid assets.--The term 
                        `liquid assets' means cash, marketable 
                        securities, and such other assets as 
                        specified by the Secretary in 
                        regulations.
                          ``(vi) Quarter.--The term `quarter' 
                        means, with respect to any required 
                        installment, the 3-month period 
                        preceding the month in which the due 
                        date for such installment occurs.
                  ``(F) Regulations.--The Secretary may 
                prescribe such regulations as are necessary to 
                carry out this paragraph.
  ``(k) Imposition of Lien Where Failure to Make Required 
Contributions.--
          ``(1) In general.--In the case of a plan to which 
        this subsection applies, if--
                  ``(A) any person fails to make a contribution 
                payment required by section 412 and this 
                section before the due date for such payment, 
                and
                  ``(B) the unpaid balance of such payment 
                (including interest), when added to the 
                aggregate unpaid balance of all preceding such 
                payments for which payment was not made before 
                the due date (including interest), exceeds 
                $1,000,000,
        then there shall be a lien in favor of the plan in the 
        amount determined under paragraph (3) upon all property 
        and rights to property, whether real or personal, 
        belonging to such person and any other person who is a 
        member of the same controlled group of which such 
        person is a member.
          ``(2) Plans to which subsection applies.--This 
        subsection shall apply to a defined benefit plan (other 
        than a multiemployer plan) for any plan year for which 
        the funding target attainment percentage (as defined in 
        subsection (d)(2)) of such plan is less than 100 
        percent. This subsection shall not apply to any plan to 
        which section 4021 of the Employee Retirement Income 
        Security Act of 1974 does not apply (as such section is 
        in effect on the date of the enactment of the Pension 
        Protection Act of 2005).
          ``(3) Amount of lien.--For purposes of paragraph (1), 
        the amount of the lien shall be equal to the aggregate 
        unpaid balance of contribution payments required under 
        this section and section 412 for which payment has not 
        been made before the due date.
          ``(4) Notice of failure; lien.--
                  ``(A) Notice of failure.--A person committing 
                a failure described in paragraph (1) shall 
                notify the Pension Benefit Guaranty Corporation 
                of such failure within 10 days of the due date 
                for the required contribution payment.
                  ``(B) Period of lien.--The lien imposed by 
                paragraph (1) shall arise on the due date for 
                the required contribution payment and shall 
                continue until the last day of the first plan 
                year in which the plan ceases to be described 
                in paragraph (1)(B). Such lien shall continue 
                to run without regard to whether such plan 
                continues to be described in paragraph (2) 
                during the period referred to in the preceding 
                sentence.
                  ``(C) Certain rules to apply.--Any amount 
                with respect to which a lien is imposed under 
                paragraph (1) shall be treated as taxes due and 
                owing the United States and rules similar to 
                the rules of subsections (c), (d), and (e) of 
                section 4068 of the Employee Retirement Income 
                Security Act of 1974 shall apply with respect 
                to a lien imposed by subsection (a) and the 
                amount with respect to such lien.
          ``(5) Enforcement.--Any lien created under paragraph 
        (1) may be perfected and enforced only by the Pension 
        Benefit Guaranty Corporation, or at the direction of 
        the Pension Benefit Guaranty Corporation, by the 
        contributing sponsor (or any member of the controlled 
        group of the contributing sponsor).
          ``(6) Definitions.--For purposes of this subsection--
                  ``(A) Contribution payment.--The term 
                `contribution payment' means, in connection 
                with a plan, a contribution payment required to 
                be made to the plan, including any required 
                installment under paragraphs (3) and (4) of 
                subsection (i).
                  ``(B) Due date; required installment.--The 
                terms `due date' and `required installment' 
                have the meanings given such terms by 
                subsection (j), except that in the case of a 
                payment other than a required installment, the 
                due date shall be the date such payment is 
                required to be made under section 430.
                  ``(C) Controlled group.--The term `controlled 
                group' means any group treated as a single 
                employer under subsections (b), (c), (m), and 
                (o) of section 414.
  ``(l) Qualified Transfers to Health Benefit Accounts.--In the 
case of a qualified transfer (as defined in section 420), any 
assets so transferred shall not, for purposes of this section, 
be treated as assets in the plan.''.
  (b) Effective Date.--The amendments made by this section 
shall apply with respect to plan years beginning after December 
31, 2006.

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

  (a) Prohibition of Shutdown Benefits and Other Unpredictable 
Contingent Event Benefits Under Single-Employer Plans.--
          (1) In general.--Part III of subchapter D of chapter 
        1 of the Internal Revenue Code of 1986 (relating to 
        deferred compensation, etc.) is amended--
                  (A) by striking the heading and inserting the 
                following:

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

``Subpart A. Minimum funding standards for pension plans.
``Subpart B. Benefit limitations under single-employer plans.

        ``Subpart A--Minimum Funding Standards for Pension Plans

``Sec. 430. Minimum funding standards for single-employer defined 
          benefit pension plans.'', and

                  (B) by adding at the end the following new 
                subpart:

      ``Subpart B--Benefit Limitations Under Single-employer Plans

``Sec. 436. Funding-based limitation on shutdown benefits and other 
          unpredictable contingent event benefits under single-employer 
          plans.

``SEC. 436. FUNDING-BASED LIMITATION ON SHUTDOWN BENEFITS AND OTHER 
                    UNPREDICTABLE CONTINGENT EVENT BENEFITS UNDER 
                    SINGLE-EMPLOYER PLANS.

  ``(a) In General.--No defined benefit plan (other than a 
multiemployer plan) may provide benefits to which participants 
are entitled solely by reason of the occurrence of a plant 
shutdown or any other unpredictable contingent event occurring 
during any plan year if the funding target attainment 
percentage as of the valuation date of the plan for such plan 
year--
          ``(1) is less than 80 percent, or
          ``(2) would be less than 80 percent taking into 
        account such occurrence.
  ``(b) Exemption.--Subsection (a) shall cease to apply with 
respect to any plan year, effective as of the first date of the 
plan year, upon payment by the plan sponsor of a contribution 
(in addition to any minimum required contribution under section 
430) equal to--
          ``(1) in the case of subsection (a)(1), the amount of 
        the increase in the funding target of the plan (under 
        section 430) for the plan year attributable to the 
        occurrence referred to in subsection (a), and
          ``(2) in the case of subsection (a)(2), the amount 
        sufficient to result in a funding target attainment 
        percentage of 80 percent.
Rules similar to the rules of section 437(f) shall apply for 
purposes of this subsection.
  ``(c) Unpredictable Contingent Event.--For purposes of this 
section, the term `unpredictable contingent event' means an 
event other than--
          ``(1) attainment of any age, performance of any 
        service, receipt or derivation of any compensation, or 
        the occurrence of death or disability, or
          ``(2) an event which is reasonably and reliably 
        predictable (as determined by the Secretary).
  ``(d) New Plans.--Subsection (a) shall not apply to a plan 
for the first 5 plan years of the plan. For purposes of this 
subsection, the reference in this subsection to a plan shall 
include a reference to any predecessor plan.
  ``(e) Deemed Reduction of Funding Balances.--A rule similar 
to the rule of section 437(h) shall apply for purposes of this 
section.''.
          (2) Clerical amendment.--The table of parts for 
        suchapter D of chapter 1 of the Internal Revenue Code 
        of 1986 is amended by adding at the end the following 
        new item:

  ``Part III--_Rules Relating to Minimum Funding Standards and Benefit 
                             Limitations''.

  (b) Other Limits on Benefits and Benefit Accruals.--
          (1) In general.--Subpart B of part III of subchapter 
        D of chapter 1 of such Code is amended by adding at the 
        end the following:

``SEC. 437. FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT ACCRUALS UNDER 
                    SINGLE-EMPLOYER PLANS.

  ``(a) Limitations on Plan Amendments Increasing Liability for 
Benefits.--
          ``(1) In general.--No amendment to a defined benefit 
        plan (other than a multiemployer plan) which has the 
        effect of increasing liabilities of the plan by reason 
        of increases in benefits, establishment of new 
        benefits, changing the rate of benefit accrual, or 
        changing the rate at which benefits become 
        nonforfeitable to the plan may take effect during any 
        plan year if the funding target attainment percentage 
        as of the valuation date of the plan for such plan year 
        is--
                  ``(A) less than 80 percent, or
                  ``(B) would be less than 80 percent taking 
                into account such amendment.
        For purposes of this paragraph, any increase in 
        benefits under the plan by reason of an increase in the 
        benefit rate provided under the plan or on the basis of 
        an increase in compensation shall be treated as 
        effected by plan amendment.
          ``(2) Exemption.--Paragraph (1) shall cease to apply 
        with respect to any plan year, effective as of the 
        first date of the plan year (or if later, the effective 
        date of the amendment), upon payment by the plan 
        sponsor of a contribution (in addition to any minimum 
        required contribution under section 430) equal to--
                  ``(A) in the case of paragraph (1)(A), the 
                amount of the increase in the funding target of 
                the plan (under section 430) for the plan year 
                attributable to the amendment, and
                  ``(B) in the case of paragraph (1)(B), the 
                amount sufficient to result in a funding target 
                attainment percentage of 80 percent.
  ``(b) Funding-Based Limitation on Certain Forms of 
Distribution.--
          ``(1) In general.--A defined benefit plan (other than 
        a multiemployer plan) shall provide that, in any case 
        in which the plan's funding target attainment 
        percentage as of the valuation date of the plan for a 
        plan year is less than 80 percent, the plan may not 
        after such date pay any payment described in section 
        401(a)(32)(B).
          ``(2) Exception.--Paragraph (1) shall not apply to 
        any plan for any plan year if the terms of such plan 
        (as in effect for the period beginning on June 29, 
        2005, and ending with such plan year) provide for no 
        benefit accruals with respect to any participant during 
        such period.
  ``(c) Limitations on Benefit Accruals for Plans With Severe 
Funding Shortfalls.--A defined benefit plan (other than a 
multiemployer plan) shall provide that, in any case in which 
the plan's funding target attainment percentage as of the 
valuation date of the plan for a plan year is less than 60 
percent, all future benefit accruals under the plan shall cease 
as of such date.
  ``(d) New Plans.--Subsections (a) and (c) shall not apply to 
a plan for the first 5 plan years of the plan. For purposes of 
this subsection, the reference in this subsection to a plan 
shall include a reference to any predecessor plan.
  ``(e) Presumed Underfunding for Purposes of Benefit 
Limitations Based on Prior Year's Funding Status.--
          ``(1) Presumption of continued underfunding.--In any 
        case in which a benefit limitation under subsection 
        (a), (b), or (c) has been applied to a plan with 
        respect to the plan year preceding the current plan 
        year, the funding target attainment percentage of the 
        plan as of the valuation date of the plan for the 
        current plan year shall be presumed to be equal to the 
        funding target attainment percentage of the plan as of 
        the valuation date of the plan for the preceding plan 
        year until the enrolled actuary of the plan certifies 
        the actual funding target attainment percentage of the 
        plan as of the valuation date of the plan for the 
        current plan year.
          ``(2) Presumption of underfunding after 10th month.--
        In any case in which no such certification is made with 
        respect to the plan before the first day of the 10th 
        month of the current plan year, for purposes of 
        subsections (a), (b), and (c), the plan's funding 
        target attainment percentage shall be conclusively 
        presumed to be less than 60 percent as of the first day 
        of such 10th month, and such day shall be deemed, for 
        purposes of such subsections, to be the valuation date 
        of the plan for the current plan year.
          ``(3) Presumption of underfunding after 4th month for 
        nearly underfunded plans.--In any case in which--
                  ``(A) a benefit limitation under subsection 
                (a), (b), or (c) did not apply to a plan with 
                respect to the plan year preceding the current 
                plan year, but the funding target attainment 
                percentage of the plan for such preceding plan 
                year was not more than 10 percentage points 
                greater than the percentage which would have 
                caused such subsection to apply to the plan 
                with respect to such preceding plan year, and
                  ``(B) as of the first day of the 4th month of 
                the current plan year, the enrolled actuary of 
                the plan has not certified the actual funding 
                target attainment percentage of the plan as of 
                the valuation date of the plan for the current 
                plan year,
        until the enrolled actuary so certifies, such first day 
        shall be deemed, for purposes of such subsection, to be 
        the valuation date of the plan for the current plan 
        year and the funding target attainment percentage of 
        the plan as of such first day shall, for purposes of 
        such subsection, be presumed to be equal to 10 
        percentage points less than the funding target 
        attainment percentage of the plan as of the valuation 
        date of the plan for such preceding plan year.
  ``(f) Restoration by Plan Amendment of Benefits or Benefit 
Accrual.--In any case in which a prohibition under subsection 
(b) of a payment described in subsection (b)(1) or a cessation 
of benefit accruals under subsection (c) is applied to a plan 
with respect to any plan year and such prohibition or 
cessation, as the case may be, ceases to apply to any 
subsequent plan year, the plan may provide for the resumption 
of such benefit payment or such benefit accrual only by means 
of the adoption of a plan amendment after the valuation date of 
the plan for such subsequent plan year. The preceding sentence 
shall not apply to a prohibition or cessation required by 
reason of subsection (e).
  ``(g) Funding Target Attainment Percentage.--
          ``(1) In general.--For purposes of this section, the 
        term `funding target attainment percentage' means, with 
        respect to any plan for any plan year, the ratio 
        (expressed as a percentage) which--
                  ``(A) the value of plan assets for the plan 
                year (as determined under section 430(g)) 
                reduced by the pre-funding balance and the 
                funding standard carryover balance (within the 
                meaning of section 430(f)), bears to
                  ``(B) the funding target of the plan for the 
                plan year (as determined under section 
                430(d)(1), but without regard to section 
                430(i)(1)).
          ``(2) Application to plans which are fully funded 
        without regard to reductions for funding balances.--
                  ``(A) In general.--In the case of a plan for 
                any plan year, if the funding target attainment 
                percentage is 100 percent or more (determined 
                without regard to this subparagraph and without 
                regard to the reduction under paragraph (1)(A) 
                for the pre-funding balance and the funding 
                standard carryover balance), paragraph (1) 
                shall be applied without regard to such 
                reduction.
                  ``(B) Transition rule.--Subparagraph (A) 
                shall be applied to plan years beginning after 
                2006 and before 2011 by substituting for `100 
                percent' the applicable percentage determined 
                in accordance with the following table:



                                                                 The
                                                             applicable
 ``In the case of a plan year beginning in calendar year:    percentage
                                                                 is:

2007......................................................    92 percent
2008......................................................    94 percent
2009......................................................    96 percent
2010......................................................   98 percent.

                  ``(C) Limitation.--Subparagraph (B) shall not 
                apply with respect to any plan year after 2007 
                unless the funding target attainment percentage 
                (determined without regard to this paragraph 
                and without regard to the reduction under 
                paragraph (1)(A) for the pre-funding balance 
                and the funding standard carryover balance) of 
                the plan for each preceding plan year after 
                2006 was not less than the applicable 
                percentage with respect to such preceding plan 
                year determined under subparagraph (B).
  ``(h) Deemed Reduction of Funding Balances.--In the case of a 
plan maintained pursuant to 1 or more collective bargaining 
agreements between employee representatives and 1 or more 
employers--
          ``(1) In general.--In any case in which a benefit 
        limitation under subsection (a), (b), or (c) would (but 
        for this subsection and determined without regard to 
        subsection (a)(2)) apply to such plan for the plan 
        year, the plan sponsor of such plan shall be treated 
        for purposes of this title as having made an election 
        under section 430(f)(5) to reduce the balance of the 
        pre-funding balance and the funding standard carryover 
        balance for the plan year (in a manner consistent with 
        the requirements of section 430(f)(5)(B)) by such 
        amount as is necessary for such benefit limitation to 
        not apply to the plan for such plan year.
          ``(2) Exception for insufficient funding balances.--
        Paragraph (1) shall not apply with respect to a benefit 
        limitation for any plan year if the application of 
        paragraph (1) would not result in the benefit 
        limitation not applying for such plan year.''.
          (2) Clerical amendment.--The table of sections for 
        such subpart is amended by adding at the end the 
        following new item:

``Sec. 437. Funding-based limits on benefits and benefit accruals under 
          single-employer plans.''.

  (c) Effective Date.--
          (1) Shutdown benefits.--Except as provided in 
        paragraph (3), the amendments made by subsection (a) 
        shall apply with respect to plant shutdowns, or other 
        unpredictable contingent events, occurring after 
        December 31, 2006.
          (2) Other benefits.--Except as provided in paragraph 
        (3), the amendments made by subsection (b) shall apply 
        with respect to plan years beginning after December 31, 
        2006.
          (3) Collective bargaining exception.--In the case of 
        a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives 
        and 1 or more employers ratified before the date of the 
        enactment of this Act, the amendments made by this 
        subsection shall not apply to plan years beginning 
        before the earlier of--
                  (A) the later of--
                          (i) the date on which the last 
                        collective bargaining agreement 
                        relating to the plan terminates 
                        (determined without regard to any 
                        extension thereof agreed to after the 
                        date of the enactment of this Act), or
                          (ii) the first day of the first plan 
                        year to which the amendments made by 
                        this subsection would (but for this 
                        subparagraph) apply, or
                  (B) January 1, 2009.
        For purposes of clause (i), any plan amendment made 
        pursuant to a collective bargaining agreement relating 
        to the plan which amends the plan solely to conform to 
        any requirement added by this subsection shall not be 
        treated as a termination of such collective bargaining 
        agreement.
  (d) Special Rule for 2007.--For purposes of applying 
subsection (e) of section 437 of such Code (as added by this 
section) to current plan years (within the meaning of such 
subsection) beginning in 2007, the modified funded current 
liability percentage of the plan for the preceding year shall 
be substituted for the funding target attainment percentage of 
the plan for the preceding year. For purposes of the preceding 
sentence, the term ``modified funded current liability 
percentage'' means the funded current liability percentage (as 
defined in section 412(l)(8) of such Code), reduced as 
described in subparagraph (E) thereof in the case of a plan 
with a funded current liability percentage (as so defined and 
before such reduction) which is less than 100 percent.

SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS.

  (a) Amendments Related to Qualification Requirements.--
          (1) Section 401(a)(29) of the Internal Revenue Code 
        of 1986 is amended to read as follows:
          ``(29) Benefit limitations on plans in at-risk 
        status.--In the case of a defined benefit plan (other 
        than a multiemployer plan) to which the requirements of 
        section 412 apply, the trust of which the plan is a 
        part shall not constitute a qualified trust under this 
        subsection unless the plan meets the requirements of 
        sections 436 and 437.''.
          (2) Section 401(a)(32) of such Code is amended--
                  (A) in subparagraph (A), by striking 
                ``412(m)(5)'' each place it appears and 
                inserting ``430(j)(4)'', and
                  (B) in subparagraph (C), by striking 
                ``section 412(m) by reason of paragraph (5)(A) 
                thereof'' and inserting ``section 430(j)(3) by 
                reason of section 430(j)(4)(A)''.
          (3) Section 401(a)(33) of such Code is amended--
                  (A) in subparagraph (B)(i), by striking 
                ``funded current liability percentage (as 
                defined in section 412(l)(8))'' and inserting 
                ``funding target attainment percentage (as 
                defined in section 430(d)(2))'',
                  (B) in subparagraph (B)(iii), by striking 
                ``subsection 412(c)(8)'' and inserting 
                ``section 412(d)(2)'', and
                  (C) in subparagraph (D), by striking 
                ``section 412(c)(11) (without regard to 
                subparagraph (B) thereof)'' and inserting 
                ``section 412(b) (without regard to paragraph 
                (2) thereof)''.
  (b) Vesting Rules.--Section 411 of such Code is amended--
          (1) by striking ``section 412(c)(8)'' in subsection 
        (a)(3)(C) and inserting ``section 412(d)(2)'',
          (2) in subsection (b)(1)(F)--
                  (A) by striking ``paragraphs (2) and (3) of 
                section 412(i)'' in clause (ii) and inserting 
                ``subparagraphs (B) and (C) of section 
                412(e)(3)'', and
                  (B) by striking ``paragraphs (4), (5), and 
                (6) of section 412(i)'' and inserting 
                ``subparagraphs (D), (E), and (F) of section 
                412(e)(3)'', and
          (3) by striking ``section 412(c)(8)'' in subsection 
        (d)(6)(A) and inserting ``section 412(d)(2)''.
  (c) Mergers and Consolidations of Plans.--Subclause (I) of 
section 414(l)(2)(B)(i) of such Code is amended to read as 
follows:
                                  ``(I) the amount determined 
                                under section 431(c)(6)(A)(i) 
                                in the case of a multiemployer 
                                plan (and the sum of the target 
                                liability amount and target 
                                normal cost determined under 
                                section 430 in the case of any 
                                other plan), over''.
  (d) Transfer of Excess Pension Assets to Retiree Health 
Accounts.--
          (1) Section 420(e)(2) of such Code is amended to read 
        as follows:
          ``(2) Excess pension assets.--The term `excess 
        pension assets' means the excess (if any) of--
                  ``(A) the lesser of--
                          ``(i) the fair market value of the 
                        plan's assets (reduced by the pre-
                        funding balance and the funding 
                        standard carryover balance, as 
                        determined under section 430(f)), or
                          ``(ii) the value of plan assets as 
                        determined under section 430(g)(3) 
                        (reduced by the pre-funding balance and 
                        the funding standard carryover balance, 
                        as determined under section 430(f)), 
                        over
                  ``(B) 125 percent of the sum of the target 
                liability amount and the target normal cost 
                determined under section 430 for such plan 
                year.''.
          (2) Section 420(e)(4) of such Code is amended to read 
        as follows:
          ``(4) Coordination with section 430.--In the case of 
        a qualified transfer, any assets so transferred shall 
        not, for purposes of this section, be treated as assets 
        in the plan.''.
  (e) Excise Taxes.--
          (1) In general.--Subsections (a) and (b) of section 
        4971 of such Code are amended to read as follows:
  ``(a) Initial Tax.--If at any time during any taxable year an 
employer maintains a plan to which section 412 applies, there 
is hereby imposed for the taxable year a tax equal to--
          ``(1) in the case of a defined benefit plan which is 
        not a multiemployer plan, 10 percent of the aggregate 
        unpaid minimum required contributions for all plan 
        years remaining unpaid as of the end of any plan year 
        ending with or within the taxable year, and
          ``(2) in the case of a multiemployer plan, 5 percent 
        of the accumulated funding deficiency determined under 
        section 431 as of the end of any plan year ending with 
        or within the taxable year.
  ``(b) Additional Tax.--If--
          ``(1) a tax is imposed under subsection (a)(1) on any 
        unpaid required minimum contribution and such amount 
        remains unpaid as of the close of the taxable period, 
        or
          ``(2) a tax is imposed under subsection (a)(2) on any 
        accumulated funding deficiency and the accumulated 
        funding deficiency is not corrected within the taxable 
        period,
there is hereby imposed a tax equal to 100 percent of the 
unpaid minimum required contribution or accumulated funding 
deficiency, whichever is applicable, to the extent not so paid 
or corrected.''.
          (2) Section 4971(c) of such Code is amended--
                  (A) by striking ``the last two sentences of 
                section 412(a)'' in paragraph (1) and inserting 
                ``section 431'', and
                  (B) by adding at the end the following new 
                paragraph:
          ``(4) Unpaid minimum required contribution.--
                  ``(A) In general.--The term `unpaid minimum 
                required contribution' means, with respect to 
                any plan year, any minimum required 
                contribution under section 430 for the plan 
                year which is not paid on or before the due 
                date (as determined under section 430(j)(1)) 
                for the plan year.
                  ``(B) Ordering rule.--Any payment to or under 
                a plan for any plan year shall be allocated 
                first to unpaid minimum required contributions 
                for all preceding plan years in the order in 
                which such contributions became due and then to 
                the minimum required contribution under section 
                430 for the plan year.''.
          (3) Section 4971(e)(1) of such Code is amended by 
        striking ``section 412(b)(3)(A)'' and inserting 
        ``section 412(a)(2)''.
          (4) Section 4971(f)(1) of such Code is amended--
                  (A) by striking ``section 412(m)(5)'' and 
                inserting ``section 430(j)(4)'', and
                  (B) by striking ``section 412(m)'' and 
                inserting ``section 430(j)(3)''.
          (5) Section 4972(c)(7) of such Code is amended by 
        striking ``except to the extent that such contributions 
        exceed the full-funding limitation (as defined in 
        section 412(c)(7), determined without regard to 
        subparagraph (A)(i)(I) thereof)'' and inserting 
        ``except, in the case of a multiemployer plan, to the 
        extent that such contributions exceed the full-funding 
        limitation (as defined in section 431(c)(6))''.
  (f) Reporting Requirements.--Section 6059(b) of such Code is 
amended--
          (1) by striking ``the accumulated funding deficiency 
        (as defined in section 412(a))'' in paragraph (2) and 
        inserting ``the minimum required contribution 
        determined under section 430, or the accumulated 
        funding deficiency determined under section 431,'', and
          (2) by striking paragraph (3)(B) and inserting:
                  ``(B) the requirements for reasonable 
                actuarial assumptions under section 430(h)(1) 
                or 431(c)(3), whichever are applicable, have 
                been complied with,''.
  (g) Effective Date.--The amendments made by this section 
shall apply to years beginning after December 31, 2006.

                      Subtitle C--Other Provisions

SEC. 121. MODIFICATION OF TRANSITION RULE TO PENSION FUNDING 
                    REQUIREMENTS.

  (a) In General.--In the case of a plan that--
          (1) was not required to pay a variable rate premium 
        for the plan year beginning in 1996,
          (2) has not, in any plan year beginning after 1995, 
        merged with another plan (other than a plan sponsored 
        by an employer that was in 1996 within the controlled 
        group of the plan sponsor); and
          (3) is sponsored by a company that is engaged 
        primarily in the interurban or interstate passenger bus 
        service,
the rules described in subsection (b) shall apply for any plan 
year beginning after December 31, 2006.
  (b) Modified Rules.--The rules described in this subsection 
are as follows:
          (1) For purposes of section 430(j)(3) of the Internal 
        Revenue Code of 1986 and section 303(j)(3) of the 
        Employee Retirement Income Security Act of 1974, the 
        plan shall be treated as not having a funding shortfall 
        for any plan year.
          (2) For purposes of--
                  (A) determining unfunded vested benefits 
                under section 4006(a)(3)(E)(iii) of such Act, 
                and
                  (B) determining any present value or making 
                any computation under section 412 of such Code 
                or section 302 of such Act,
        the mortality table shall be the mortality table used 
        by the plan.
          (3) Section 430(c)(5)(B) of such Code and section 
        303(c)(5)(B) of such Act (relating to phase-in of 
        funding target for exemption from new shortfall 
        amortization base) shall each be applied by 
        substituting ``2012'' for ``2011'' therein and by 
        substituting for the table therein the following:



                                                                 The
                                                             applicable
  In the case of a plan year beginning in calendar year:     percentage
                                                                 is:

2007......................................................    90 percent
2008......................................................    92 percent
2009......................................................    94 percent
2010......................................................    96 percent
2011......................................................   98 percent.
  (c) Definitions.--Any term used in this section which is also 
used in section 430 of such Code or section 303 of such Act 
shall have the meaning provided such term in such section. If 
the same term has a different meaning in such Code and such 
Act, such term shall, for purposes of this section, have the 
meaning provided by such Code when applied with respect to such 
Code and the meaning provided by such Act when applied with 
respect to such Act.
  (d) Special Rule for 2006.--
          (1)  in general.--Section 769(c)(3) of the Retirement 
        Protection Act of 1994, as added by section 201 of the 
        Pension Funding Equity Act of 2004, is amended by 
        striking ``and 2005'' and inserting ``, 2005, and 
        2006''.
          (2) Effective date.--The amendment made by paragraph 
        (1) shall apply to plan years beginning after December 
        31, 2005.
  (e) Conforming Amendment.--
          (1) Section 769 of the Retirement Protection Act of 
        1994 is amended by striking subsection (c).
          (2) The amendment made by paragraph (1) shall take 
        effect on December 31, 2006, and shall apply to plan 
        years beginning after such date.

SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION PLANS WHEN 
                    EMPLOYER DEFINED BENEFIT PLAN IN AT-RISK STATUS.

  (a) In General.--Subsection (b) of section 409A of the 
Internal Revenue Code of 1986 (providing rules relating to 
funding) is amended by redesignating paragraphs (3) and (4) as 
paragraphs (4) and (5), respectively, and by inserting after 
paragraph (2) the following new paragraph:
          ``(3) Employer's defined benefit plan in at-risk 
        status.--If--
                  ``(A) during any period in which a defined 
                benefit plan to which section 412 applies is in 
                an at-risk status (as defined in section 
                430(i)(3)), assets are set aside (directly or 
                indirectly) in a trust (or other arrangement 
                determined by the Secretary), or transferred to 
                such a trust or other arrangement, for purposes 
                of paying deferred compensation under a 
                nonqualified deferred compensation plan of the 
                employer maintaining the defined benefit plan, 
                or
                  ``(B) a nonqualified deferred compensation 
                plan of the employer provides that assets will 
                become restricted to the provision of benefits 
                under the plan in connection with such at-risk 
                status (or other similar financial measure 
                determined by the Secretary) of the defined 
                benefit plan, or assets are so restricted,
        such assets shall for purposes of section 83 be treated 
        as property transferred in connection with the 
        performance of services whether or not such assets are 
        available to satisfy claims of general creditors. 
        Subparagraph (A) shall not apply with respect to any 
        assets which are so set aside before the defined 
        benefit plan is in at-risk status.''.
  (b) Conforming Amendments.--Paragraphs (4) and (5) of section 
409A(b) of such Code, as redesignated by subsection (a) of this 
subsection, are each amended by striking ``paragraph (1) or 
(2)'' each place it appears and inserting ``paragraph (1), (2), 
or (3)''.
  (c)  Effective Date.--The amendments made by this section 
shall apply to transfers or reservations of assets after 
December 31, 2005.
  (d) Special Rule for 2006.--For purposes of determining if a 
plan is in at-risk status (within the meaning of section 409A 
of such Code, as added by this section) for any plan year 
beginning in 2006, such section shall be applied by 
substituting the plan's modified funded current liability 
percentage for the plan's funding target attainment percentage. 
For purposes of the preceding sentence, the term ``modified 
funded current liability percentage'' means the funded current 
liability percentage (as defined in section 412(l)(8) of such 
Code), reduced as described in subparagraph (E) thereof.

    TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS

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

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

  (a) In General.--Part 3 of subtitle B of title I of the 
Employee Retirement Income Security Act of 1974 (as amended by 
section 102) is amended further by inserting after section 303 
the following new section:

          ``MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER PLANS

  ``Sec. 304. (a) In General.--For purposes of section 302, the 
accumulated funding deficiency of a multiemployer plan for any 
plan year is--
          ``(1) except as provided in paragraph (2), the 
        amount, determined as of the end of the plan year, 
        equal to the excess (if any) of the total charges to 
        the funding standard account of the plan for all plan 
        years (beginning with the first plan year for which 
        this part applies to the plan) over the total credits 
        to such account for such years, and
          ``(2) if the multiemployer plan is in reorganization 
        for any plan year, the accumulated funding deficiency 
        of the plan determined under section 4243.
  ``(b) Funding Standard Account.--
          ``(1) Account required.--Each multiemployer plan to 
        which this part applies shall establish and maintain a 
        funding standard account. Such account shall be 
        credited and charged solely as provided in this 
        section.
          ``(2) Charges to account.--For a plan year, the 
        funding standard account shall be charged with the sum 
        of--
                  ``(A) the normal cost of the plan for the 
                plan year,
                  ``(B) the amounts necessary to amortize in 
                equal annual installments (until fully 
                amortized)--
                          ``(i) in the case of a plan in 
                        existence on January 1, 1974, the 
                        unfunded past service liability under 
                        the plan on the first day of the first 
                        plan year to which this part applies, 
                        over a period of 40 plan years,
                          ``(ii) in the case of a plan which 
                        comes into existence after January 1, 
                        1974, the unfunded past service 
                        liability under the plan on the first 
                        day of the first plan year to which 
                        this part applies, over a period of 15 
                        plan years,
                          ``(iii) separately, with respect to 
                        each plan year, the net increase (if 
                        any) in unfunded past service liability 
                        under the plan arising from plan 
                        amendments adopted in such year, over a 
                        period of 15 plan years,
                          ``(iv) separately, with respect to 
                        each plan year, the net experience loss 
                        (if any) under the plan, over a period 
                        of 15 plan years, and
                          ``(v) separately, with respect to 
                        each plan year, the net loss (if any) 
                        resulting from changes in actuarial 
                        assumptions used under the plan, over a 
                        period of 15 plan years,
                  ``(C) the amount necessary to amortize each 
                waived funding deficiency (within the meaning 
                of section 302(c)(3)) for each prior plan year 
                in equal annual installments (until fully 
                amortized) over a period of 15 plan years,
                  ``(D) the amount necessary to amortize in 
                equal annual installments (until fully 
                amortized) over a period of 5 plan years any 
                amount credited to the funding standard account 
                under section 302(b)(3)(D) (as in effect on the 
                day before the date of the enactment of the 
                Pension Protection Act of 2005), and
                  ``(E) the amount necessary to amortize in 
                equal annual installments (until fully 
                amortized) over a period of 20 years the 
                contributions which would be required to be 
                made under the plan but for the provisions of 
                section 302(c)(7)(A)(i)(I) (as in effect on the 
                day before the date of the enactment of the 
                Pension Protection Act of 2005).
          ``(3) Credits to account.--For a plan year, the 
        funding standard account shall be credited with the sum 
        of--
                  ``(A) the amount considered contributed by 
                the employer to or under the plan for the plan 
                year,
                  ``(B) the amount necessary to amortize in 
                equal annual installments (until fully 
                amortized)--
                          ``(i) separately, with respect to 
                        each plan year, the net decrease (if 
                        any) in unfunded past service liability 
                        under the plan arising from plan 
                        amendments adopted in such year, over a 
                        period of 15 plan years,
                          ``(ii) separately, with respect to 
                        each plan year, the net experience gain 
                        (if any) under the plan, over a period 
                        of 15 plan years, and
                          ``(iii) separately, with respect to 
                        each plan year, the net gain (if any) 
                        resulting from changes in actuarial 
                        assumptions used under the plan, over a 
                        period of 15 plan years,
                  ``(C) the amount of the waived funding 
                deficiency (within the meaning of section 
                302(c)(3)) for the plan year, and
                  ``(D) in the case of a plan year for which 
                the accumulated funding deficiency is 
                determined under the funding standard account 
                if such plan year follows a plan year for which 
                such deficiency was determined under the 
                alternative minimum funding standard under 
                section 305 (as in effect on the day before the 
                date of the enactment of the Pension Protection 
                Act of 2005), the excess (if any) of any debit 
                balance in the funding standard account 
                (determined without regard to this 
                subparagraph) over any debit balance in the 
                alternative minimum funding standard account.
          ``(4) Special rules for certain pre-2007 
        amortizations.--
                  ``(A) In general.--In the case of any amount 
                amortized under section 302(b) (as in effect on 
                the day before the date of the enactment of the 
                Pension Protection Act of 2005) over any period 
                beginning with a plan year beginning before 
                2007, in lieu of the amortization described in 
                paragraphs (2)(B) and (3)(B), such amount shall 
                continue to be amortized under such section as 
                so in effect.
                  ``(B) Interest rate.--For purposes of 
                amortizations under section 302(b) (as in 
                effect on the day before the date of the 
                enactment of the Pension Protection Act of 
                2005), in the case of any waiver under section 
                303 (as so in effect) or extension under 
                section 304 (as so in effect) with respect to 
                which application has been made before June 30, 
                2005, the interest rate under section 303(a)(2) 
                (as so in effect) or section 304(a) (as so in 
                effect), as the case may be, shall apply.
          ``(5) Combining and offsetting amounts to be 
        amortized.--Under regulations prescribed by the 
        Secretary of the Treasury, amounts required to be 
        amortized under paragraph (2) or paragraph (3), as the 
        case may be--
                  ``(A) may be combined into one amount under 
                such paragraph to be amortized over a period 
                determined on the basis of the remaining 
                amortization period for all items entering into 
                such combined amount, and
                  ``(B) may be offset against amounts required 
                to be amortized under the other such paragraph, 
                with the resulting amount to be amortized over 
                a period determined on the basis of the 
                remaining amortization periods for all items 
                entering into whichever of the two amounts 
                being offset is the greater.
          ``(6) Interest.--Except as provided in subsection 
        (c)(9), the funding standard account (and items 
        therein) shall be charged or credited (as determined 
        under regulations prescribed by the Secretary of the 
        Treasury) with interest at the appropriate rate 
        consistent with the rate or rates of interest used 
        under the plan to determine costs.
          ``(7) Certain amortization charges and credits.--In 
        the case of a plan which, immediately before the date 
        of the enactment of the Multiemployer Pension Plan 
        Amendments Act of 1980, was a multiemployer plan 
        (within the meaning of section 3(37) as in effect 
        immediately before such date)--
                  ``(A) any amount described in paragraph 
                (2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this 
                subsection which arose in a plan year beginning 
                before such date shall be amortized in equal 
                annual installments (until fully amortized) 
                over 40 plan years, beginning with the plan 
                year in which the amount arose,
                  ``(B) any amount described in paragraph 
                (2)(B)(iv) or (3)(B)(ii) of this subsection 
                which arose in a plan year beginning before 
                such date shall be amortized in equal annual 
                installments (until fully amortized) over 20 
                plan years, beginning with the plan year in 
                which the amount arose,
                  ``(C) any change in past service liability 
                which arises during the period of 3 plan years 
                beginning on or after such date, and results 
                from a plan amendment adopted before such date, 
                shall be amortized in equal annual installments 
                (until fully amortized) over 40 plan years, 
                beginning with the plan year in which the 
                change arises, and
                  ``(D) any change in past service liability 
                which arises during the period of 2 plan years 
                beginning on or after such date, and results 
                from the changing of a group of participants 
                from one benefit level to another benefit level 
                under a schedule of plan benefits which--
                          ``(i) was adopted before such date, 
                        and
                          ``(ii) was effective for any plan 
                        participant before the beginning of the 
                        first plan year beginning on or after 
                        such date,
                shall be amortized in equal annual installments 
                (until fully amortized) over 40 plan years, 
                beginning with the plan year in which the 
                change arises.
          ``(8) Special rules relating to charges and credits 
        to funding standard account.--For purposes of this 
        section--
                  ``(A) Withdrawal liability.--Any amount 
                received by a multiemployer plan in payment of 
                all or part of an employer's withdrawal 
                liability under part 1 of subtitle E of title 
                IV shall be considered an amount contributed by 
                the employer to or under the plan. The 
                Secretary of the Treasury may prescribe by 
                regulation additional charges and credits to a 
                multiemployer plan's funding standard account 
                to the extent necessary to prevent withdrawal 
                liability payments from being unduly reflected 
                as advance funding for plan liabilities.
                  ``(B) Adjustments when a multiemployer plan 
                leaves reorganization.--If a multiemployer plan 
                is not in reorganization in the plan year but 
                was in reorganization in the immediately 
                preceding plan year, any balance in the funding 
                standard account at the close of such 
                immediately preceding plan year--
                          ``(i) shall be eliminated by an 
                        offsetting credit or charge (as the 
                        case may be), but
                          ``(ii) shall be taken into account in 
                        subsequent plan years by being 
                        amortized in equal annual installments 
                        (until fully amortized) over 30 plan 
                        years.
                The preceding sentence shall not apply to the 
                extent of any accumulated funding deficiency 
                under section 4243(a) as of the end of the last 
                plan year that the plan was in reorganization.
                  ``(C) Plan payments to supplemental program 
                or withdrawal liability payment fund.--Any 
                amount paid by a plan during a plan year to the 
                Pension Benefit Guaranty Corporation pursuant 
                to section 4222 of this Act or to a fund exempt 
                under section 501(c)(22) of the Internal 
                Revenue Code of 1986 pursuant to section 4223 
                of this Act shall reduce the amount of 
                contributions considered received by the plan 
                for the plan year.
                  ``(D) Interim withdrawal liability 
                payments.--Any amount paid by an employer 
                pending a final determination of the employer's 
                withdrawal liability under part 1 of subtitle E 
                of title IV and subsequently refunded to the 
                employer by the plan shall be charged to the 
                funding standard account in accordance with 
                regulations prescribed by the Secretary of the 
                Treasury.
                  ``(E) Election for deferral of charge for 
                portion of net experience loss.--If an election 
                is in effect under section 302(b)(7)(F) (as in 
                effect on the day before the date of the 
                enactment of the Pension Protection Act of 
                2005) for any plan year, the funding standard 
                account shall be charged in the plan year to 
                which the portion of the net experience loss 
                deferred by such election was deferred with the 
                amount so deferred (and paragraph (2)(B)(iv) 
                shall not apply to the amount so charged).
                  ``(F) Financial assistance.--Any amount of 
                any financial assistance from the Pension 
                Benefit Guaranty Corporation to any plan, and 
                any repayment of such amount, shall be taken 
                into account under this section and section 302 
                in such manner as is determined by the 
                Secretary of the Treasury.
                  ``(G) Short-term benefits.--To the extent 
                that any plan amendment increases the unfunded 
                past service liability under the plan by reason 
                of an increase in benefits which are payable 
                under the plan during a period that does not 
                exceed 14 years, paragraph (2)(B)(iii) shall be 
                applied separately with respect to such 
                increase in unfunded past service liability by 
                substituting the number of years of the period 
                during which such benefits are payable for 
                `15'.
  ``(c) Additional Rules.--
          ``(1) Determinations to be made under funding 
        method.--For purposes of this section, normal costs, 
        accrued liability, past service liabilities, and 
        experience gains and losses shall be determined under 
        the funding method used to determine costs under the 
        plan.
          ``(2) Valuation of assets.--
                  ``(A) In general.--For purposes of this 
                section, the value of the plan's assets shall 
                be determined on the basis of any reasonable 
                actuarial method of valuation which takes into 
                account fair market value and which is 
                permitted under regulations prescribed by the 
                Secretary of the Treasury.
                  ``(B) Election with respect to bonds.--The 
                value of a bond or other evidence of 
                indebtedness which is not in default as to 
                principal or interest may, at the election of 
                the plan administrator, be determined on an 
                amortized basis running from initial cost at 
                purchase to par value at maturity or earliest 
                call date. Any election under this subparagraph 
                shall be made at such time and in such manner 
                as the Secretary of the Treasury shall by 
                regulations provide, shall apply to all such 
                evidences of indebtedness, and may be revoked 
                only with the consent of such Secretary.
          ``(3) Actuarial assumptions must be reasonable.--For 
        purposes of this section, all costs, liabilities, rates 
        of interest, and other factors under the plan shall be 
        determined on the basis of actuarial assumptions and 
        methods--
                  ``(A) each of which is reasonable (taking 
                into account the experience of the plan and 
                reasonable expectations), and
                  ``(B) which, in combination, offer the 
                actuary's best estimate of anticipated 
                experience under the plan.
          ``(4) Treatment of certain changes as experience gain 
        or loss.--For purposes of this section, if--
                  ``(A) a change in benefits under the Social 
                Security Act or in other retirement benefits 
                created under Federal or State law, or
                  ``(B) a change in the definition of the term 
                `wages' under section 3121 of the Internal 
                Revenue Code of 1986, or a change in the amount 
                of such wages taken into account under 
                regulations prescribed for purposes of section 
                401(a)(5) of such Code,
        results in an increase or decrease in accrued liability 
        under a plan, such increase or decrease shall be 
        treated as an experience loss or gain.
          ``(5) Full funding.--If, as of the close of a plan 
        year, a plan would (without regard to this paragraph) 
        have an accumulated funding deficiency in excess of the 
        full funding limitation--
                  ``(A) the funding standard account shall be 
                credited with the amount of such excess, and
                  ``(B) all amounts described in subparagraphs 
                (B), (C), and (D) of subsection (b)(2) and 
                subparagraph (B) of subsection (b)(3) which are 
                required to be amortized shall be considered 
                fully amortized for purposes of such 
                subparagraphs.
          ``(6) Full-funding limitation.--
                  ``(A) In general.--For purposes of paragraph 
                (5), the term `full-funding limitation' means 
                the excess (if any) of--
                          ``(i) the accrued liability 
                        (including normal cost) under the plan 
                        (determined under the entry age normal 
                        funding method if such accrued 
                        liability cannot be directly calculated 
                        under the funding method used for the 
                        plan), over
                          ``(ii) the lesser of--
                                  ``(I) the fair market value 
                                of the plan's assets, or
                                  ``(II) the value of such 
                                assets determined under 
                                paragraph (2).
                  ``(B) Minimum amount.--
                          ``(i) In general.--In no event shall 
                        the full-funding limitation determined 
                        under subparagraph (A) be less than the 
                        excess (if any) of--
                                  ``(I) 90 percent of the 
                                current liability of the plan 
                                (including the expected 
                                increase in current liability 
                                due to benefits accruing during 
                                the plan year), over
                                  ``(II) the value of the 
                                plan's assets determined under 
                                paragraph (2).
                          ``(ii) Assets.--For purposes of 
                        clause (i), assets shall not be reduced 
                        by any credit balance in the funding 
                        standard account.
                  ``(C) Full funding limitation.--For purposes 
                of this paragraph, unless otherwise provided by 
                the plan, the accrued liability under a 
                multiemployer plan shall not include benefits 
                which are not nonforfeitable under the plan 
                after the termination of the plan (taking into 
                consideration section 411(d)(3) of the Internal 
                Revenue Code of 1986).
                  ``(D) Current liability.--For purposes of 
                this paragraph--
                          ``(i) In general.--The term `current 
                        liability' means all liabilities to 
                        employees and their beneficiaries under 
                        the plan.
                          ``(ii) Treatment of unpredictable 
                        contingent event benefits.--For 
                        purposes of clause (i), any benefit 
                        contingent on an event other than--
                                  ``(I) age, service, 
                                compensation, death, or 
                                disability, or
                                  ``(II) an event which is 
                                reasonably and reliably 
                                predictable (as determined by 
                                the Secretary of the Treasury),
                        shall not be taken into account until 
                        the event on which the benefit is 
                        contingent occurs.
                          ``(iii) Interest rate used.--The rate 
                        of interest used to determine current 
                        liability under this paragraph shall be 
                        the rate of interest determined under 
                        subparagraph (E).
                          ``(iv) Mortality tables.--
                                  ``(I) Commissioners' standard 
                                table.--In the case of plan 
                                years beginning before the 
                                first plan year to which the 
                                first tables prescribed under 
                                subclause (II) apply, the 
                                mortality table used in 
                                determining current liability 
                                under this paragraph shall be 
                                the table prescribed by the 
                                Secretary of the Treasury which 
                                is based on the prevailing 
                                commissioners' standard table 
                                (described in section 
                                807(d)(5)(A) of the Internal 
                                Revenue Code of 1986) used to 
                                determine reserves for group 
                                annuity contracts issued on 
                                January 1, 1993.
                                  ``(II) Secretarial 
                                authority.--The Secretary of 
                                the Treasury may by regulation 
                                prescribe for plan years 
                                beginning after December 31, 
                                1999, mortality tables to be 
                                used in determining current 
                                liability under this 
                                subsection. Such tables shall 
                                be based upon the actual 
                                experience of pension plans and 
                                projected trends in such 
                                experience. In prescribing such 
                                tables, such Secretary shall 
                                take into account results of 
                                available independent studies 
                                of mortality of individuals 
                                covered by pension plans.
                          ``(v) Separate mortality tables for 
                        the disabled.--Notwithstanding clause 
                        (iv)--
                                  ``(I) In general.--In the 
                                case of plan years beginning 
                                after December 31, 1995, the 
                                Secretary of the Treasury shall 
                                establish mortality tables 
                                which may be used (in lieu of 
                                the tables under clause (iv)) 
                                to determine current liability 
                                under this subsection for 
                                individuals who are entitled to 
                                benefits under the plan on 
                                account of disability. Such 
                                Secretary shall establish 
                                separate tables for individuals 
                                whose disabilities occur in 
                                plan years beginning before 
                                January 1, 1995, and for 
                                individuals whose disabilities 
                                occur in plan years beginning 
                                on or after such date.
                                  ``(II) Special rule for 
                                disabilities occurring after 
                                1994.--In the case of 
                                disabilities occurring in plan 
                                years beginning after December 
                                31, 1994, the tables under 
                                subclause (I) shall apply only 
                                with respect to individuals 
                                described in such subclause who 
                                are disabled within the meaning 
                                of title II of the Social 
                                Security Act and the 
                                regulations thereunder.
                          ``(vi) Periodic review.--The 
                        Secretary of the Treasury shall 
                        periodically (at least every 5 years) 
                        review any tables in effect under this 
                        subparagraph and shall, to the extent 
                        such Secretary determines necessary, by 
                        regulation update the tables to reflect 
                        the actual experience of pension plans 
                        and projected trends in such 
                        experience.
                  ``(E) Required change of interest rate.--For 
                purposes of determining a plan's current 
                liability for purposes of this paragraph--
                          ``(i) In general.--If any rate of 
                        interest used under the plan under 
                        subsection (b)(6) to determine cost is 
                        not within the permissible range, the 
                        plan shall establish a new rate of 
                        interest within the permissible range.
                          ``(ii) Permissible range.--For 
                        purposes of this subparagraph--
                                  ``(I) In general.--Except as 
                                provided in subclause (II), the 
                                term `permissible range' means 
                                a rate of interest which is not 
                                more than 5 percent above, and 
                                not more than 10 percent below, 
                                the weighted average of the 
                                rates of interest on 30-year 
                                Treasury securities during the 
                                4-year period ending on the 
                                last day before the beginning 
                                of the plan year.
                                  ``(II) Secretarial 
                                authority.--If the Secretary of 
                                the Treasury finds that the 
                                lowest rate of interest 
                                permissible under subclause (I) 
                                is unreasonably high, such 
                                Secretary may prescribe a lower 
                                rate of interest, except that 
                                such rate may not be less than 
                                80 percent of the average rate 
                                determined under such 
                                subclause.
                          ``(iii) Assumptions.--Notwithstanding 
                        paragraph (3)(A), the interest rate 
                        used under the plan shall be--
                                  ``(I) determined without 
                                taking into account the 
                                experience of the plan and 
                                reasonable expectations, but
                                  ``(II) consistent with the 
                                assumptions which reflect the 
                                purchase rates which would be 
                                used by insurance companies to 
                                satisfy the liabilities under 
                                the plan.
          ``(7) Annual valuation.--
                  ``(A) In general.--For purposes of this 
                section, a determination of experience gains 
                and losses and a valuation of the plan's 
                liability shall be made not less frequently 
                than once every year, except that such 
                determination shall be made more frequently to 
                the extent required in particular cases under 
                regulations prescribed by the Secretary of the 
                Treasury.
                  ``(B) Valuation date.--
                          ``(i) Current year.--Except as 
                        provided in clause (ii), the valuation 
                        referred to in subparagraph (A) shall 
                        be made as of a date within the plan 
                        year to which the valuation refers or 
                        within one month prior to the beginning 
                        of such year.
                          ``(ii) Use of prior year valuation.--
                        The valuation referred to in 
                        subparagraph (A) may be made as of a 
                        date within the plan year prior to the 
                        year to which the valuation refers if, 
                        as of such date, the value of the 
                        assets of the plan are not less than 
                        100 percent of the plan's current 
                        liability (as defined in paragraph 
                        (6)(D) without regard to clause (iv) 
                        thereof).
                          ``(iii) Adjustments.--Information 
                        under clause (ii) shall, in accordance 
                        with regulations, be actuarially 
                        adjusted to reflect significant 
                        differences in participants.
                          ``(iv) Limitation.--A change in 
                        funding method to use a prior year 
                        valuation, as provided in clause (ii), 
                        may not be made unless as of the 
                        valuation date within the prior plan 
                        year, the value of the assets of the 
                        plan are not less than 125 percent of 
                        the plan's current liability (as 
                        defined in paragraph (6)(D) without 
                        regard to clause (iv) thereof).
          ``(8) Time when certain contributions deemed made.--
        For purposes of this section, any contributions for a 
        plan year made by an employer after the last day of 
        such plan year, but not later than two and one-half 
        months after such day, shall be deemed to have been 
        made on such last day. For purposes of this 
        subparagraph, such two and one-half month period may be 
        extended for not more than six months under regulations 
        prescribed by the Secretary of the Treasury.
          ``(9) Interest rule for waivers and extensions.--The 
        interest rate applicable for any plan year for purposes 
        of computing the amortization charge described in 
        subsection (b)(2)(C) and in connection with an 
        extension granted under subsection (d) shall be the 
        greater of--
                  ``(A) 150 percent of the Federal mid-term 
                rate (as in effect under section 1274 of the 
                Internal Revenue Code of 1986 for the 1st month 
                of such plan year), or
                  ``(B) the rate of interest used under the 
                plan for determining costs.
  ``(d) Extension of Amortization Periods for Multiemployer 
Plans.--In the case of a multiemployer plan--
          ``(1) Extension.--The period of years required to 
        amortize any unfunded liability (described in any 
        clause of subsection (b)(2)(B)) of any multiemployer 
        plan shall be extended by the Secretary of the Treasury 
        for a period of time (not in excess of 5 years) if it 
        is demonstrated to such Secretary that--
                  ``(A) absent the extension, the plan would 
                have an accumulated funding deficiency in any 
                of the next 10 plan years,
                  ``(B) the plan sponsor has adopted a plan to 
                improve the plan's funding status, and
                  ``(C) taking into account the extension, the 
                plan is projected to have sufficient assets to 
                timely pay its expected benefit liabilities and 
                other anticipated expenditures.
          ``(2) Additional extension.--The period of years 
        required to amortize any unfunded liability (described 
        in any clause of subsection (b)(2)(B)) of any 
        multiemployer plan may be extended (in addition to any 
        extension under paragraph (1)) by the Secretary of the 
        Treasury for a period of time (not in excess of 5 
        years) if such Secretary determines that such extension 
        would carry out the purposes of this Act and would 
        provide adequate protection for participants under the 
        plan and their beneficiaries and if such Secretary 
        determines that the failure to permit such extension 
        would--
                  ``(A) result in--
                          ``(i) a substantial risk to the 
                        voluntary continuation of the plan, or
                          ``(ii) a substantial curtailment of 
                        pension benefit levels or employee 
                        compensation, and
                  ``(B) be adverse to the interests of plan 
                participants in the aggregate.
          ``(3) Advance notice.--
                  ``(A) In general.--The Secretary of the 
                Treasury shall, before granting an extension 
                under this section, require each applicant to 
                provide evidence satisfactory to such Secretary 
                that the applicant has provided notice of the 
                filing of the application for such extension to 
                each affected party (as defined in section 
                4001(a)(21)) with respect to the affected plan. 
                Such notice shall include a description of the 
                extent to which the plan is funded for benefits 
                which are guaranteed under title IV and for 
                benefit liabilities.
                  ``(B) Consideration of relevant 
                information.--The Secretary of the Treasury 
                shall consider any relevant information 
                provided by a person to whom notice was given 
                under paragraph (1).''.
  (b) Conforming Amendments.--
          (1) Section 301 of such Act (29 U.S.C. 1081) is 
        amended by striking subsection (d).
          (2) The table of contents in section 1 of such Act 
        (as amended by section 102 of this Act) is amended 
        further by inserting after the item relating to section 
        303 the following new item:

``Sec. 304. Minimum funding standards for multiemployer plans.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2006.

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

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

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

  ``Sec. 305. (a) Annual Certification by Plan Actuary.--
          ``(1) In general.--During the 90-day period beginning 
        on first day of each plan year of a multiemployer plan, 
        the plan actuary shall certify to the Secretary of the 
        Treasury whether or not the plan is in endangered 
        status for such plan year and whether or not the plan 
        is in critical status for such plan year.
          ``(2) Actuarial projections of assets and 
        liabilities.--
                  ``(A) In general.--In making the 
                determinations under paragraph (1), the plan 
                actuary shall make projections under 
                subsections (b)(2) and (c)(2) for the current 
                and succeeding plan years, using reasonable 
                actuarial assumptions and methods, of the 
                current value of the assets of the plan and the 
                present value of all liabilities to 
                participants and beneficiaries under the plan 
                for the current plan year as of the beginning 
                of such year, as based on the actuarial 
                statement prepared for the preceding plan year 
                under section 103(d).
                  ``(B) Determinations of future 
                contributions.--Any such actuarial projection 
                of plan assets shall assume--
                          ``(i) reasonably anticipated employer 
                        and employee contributions for the 
                        current and succeeding plan years, 
                        assuming that the terms of the one or 
                        more collective bargaining agreements 
                        pursuant to which the plan is 
                        maintained for the current plan year 
                        continue in effect for succeeding plan 
                        years, or
                          ``(ii) that employer and employee 
                        contributions for the most recent plan 
                        year will continue indefinitely, but 
                        only if the plan actuary determines 
                        there have been no significant 
                        demographic changes that would make 
                        continued application of such terms 
                        unreasonable.
          ``(3) Presumed status in absence of timely actuarial 
        certification.--If certification under this subsection 
        is not made before the end of the 90-day period 
        specified in paragraph (1), the plan shall be presumed 
        to be in critical status for such plan year until such 
        time as the plan actuary makes a contrary 
        certification.
          ``(4) Notice.--In any case in which a multiemployer 
        plan is certified to be in endangered status under 
        paragraph (1) or enters into critical status, the plan 
        sponsor shall, not later than 30 days after the date of 
        the certification or entry, provide notification of the 
        endangered or critical status to the participants and 
        beneficiaries, the bargaining parties, the Pension 
        Benefit Guaranty Corporation, the Secretary of the 
        Treasury, and the Secretary of Labor.
  ``(b) Funding Rules for Multiemployer Plans in Endangered 
Status.--
          ``(1) In general.--In any case in which a 
        multiemployer plan is in endangered status for a plan 
        year and no funding improvement plan under this 
        subsection with respect to such multiemployer plan is 
        in effect for the plan year, the plan sponsor shall, in 
        accordance with this subsection, amend the 
        multiemployer plan to include a funding improvement 
        plan upon approval thereof by the bargaining parties 
        under this subsection. The amendment shall be adopted 
        not later than 240 days after the date on which the 
        plan is certified to be in endangered status under 
        subsection (a)(1).
          ``(2) Endangered status.--A multiemployer plan is in 
        endangered status for a plan year if, as determined by 
        the plan actuary under subsection (a)--
                  ``(A) the plan's funded percentage for such 
                plan year is less than 80 percent, or
                  ``(B) the plan has an accumulated funding 
                deficiency for such plan year under section 304 
                or is projected to have such an accumulated 
                funding deficiency for any of the 6 succeeding 
                plan years, taking into account any extension 
                of amortization periods under section 304(d).
          ``(3) Funding improvement plan.--
                  ``(A) Benchmarks.--A funding improvement plan 
                shall consist of amendments to the plan 
                formulated to provide, under reasonable 
                actuarial assumptions, for the attainment, 
                during the funding improvement period under the 
                funding improvement plan, of the following 
                benchmarks:
                          ``(i) Increase in funded 
                        percentage.--An increase in the plan's 
                        funded percentage such that--
                                  ``(I) the difference between 
                                100 percent and the plan's 
                                funded percentage for the last 
                                year of the funding improvement 
                                period, is not more than
                                  ``(II) \2/3\ of the 
                                difference between 100 percent 
                                and the plan's funded 
                                percentage for the first year 
                                of the funding improvement 
                                period.
                          ``(ii) Avoidance of accumulated 
                        funding deficiencies.--No accumulated 
                        funding deficiency for any plan year 
                        during the funding improvement period 
                        (taking into account any extension of 
                        amortization periods under section 
                        304(d)).
                  ``(B) Funding improvement period.--The 
                funding improvement period for any funding 
                improvement plan adopted pursuant to this 
                subsection is the 10-year period beginning on 
                the earlier of--
                          ``(i) the second anniversary of the 
                        date of the adoption of the funding 
                        improvement plan, or
                          ``(ii) the first day of the first 
                        plan year of the multiemployer plan 
                        following the plan year in which occurs 
                        the first date after the day of the 
                        certification as of which collective 
                        bargaining agreements covering on the 
                        day of such certification at least 75 
                        percent of active participants in such 
                        multiemployer plan have expired.
                  ``(C) Special rules for certain seriously 
                underfunded plans.--
                          ``(i) In the case of a plan in which 
                        the funded percentage of a plan for the 
                        plan year is 70 percent or less, 
                        subparagraph (A)(i)(II) shall be 
                        applied by substituting `\4/5\' for 
                        `\2/3\' and subparagraph (B) shall be 
                        applied by substituting `the 15-year 
                        period' for `the 10-year period'.
                          ``(ii) In the case of a plan in which 
                        the funded percentage of a plan for the 
                        plan year is more than 70 percent but 
                        less than 80 percent, and--
                                  ``(I) the plan actuary 
                                certifies within 30 days after 
                                certification under subsection 
                                (a)(1) that the plan is not 
                                able to attain the increase 
                                described in subparagraph 
                                (A)(i) over the period 
                                described in subparagraph (B), 
                                and
                                  ``(II) the plan year is prior 
                                to the day described in 
                                subparagraph (B)(ii),
                        subparagraph (A)(i)(II) shall be 
                        applied by substituting `\4/5\' for 
                        `\2/3\' and subparagraph (B) shall be 
                        applied by substituting `the 15-year 
                        period' for `the 10-year period'.
                          ``(iii) For any plan year following 
                        the year described in clause (ii)(II), 
                        subparagraph (A)(i)(II) and 
                        subparagraph (B) shall apply, except 
                        that for each plan year ending after 
                        such date for which the plan actuary 
                        certifies (at the time of the annual 
                        certification under subsection (a)(1) 
                        for such plan year) that the plan is 
                        not able to attain the increase 
                        described in subparagraph (A)(i) over 
                        the period described in subparagraph 
                        (B), subparagraph (B) shall be applied 
                        by substituting `the 15-year period' 
                        for `the 10-year period'.
                  ``(D) Reporting.--A summary of any funding 
                improvement plan or modification thereto 
                adopted during any plan year, together with 
                annual updates regarding the funding ratio of 
                the plan, shall be included in the annual 
                report for such plan year under section 104(a) 
                and in the summary annual report described in 
                section 104(b)(3).
          ``(4) Development of funding improvement plan.--
                  ``(A) Actions by plan sponsor pending 
                approval.--Pending the approval of a funding 
                improvement plan under this paragraph, the plan 
                sponsor shall take all reasonable actions, 
                consistent with the terms of the plan and 
                applicable law, necessary to ensure--
                          ``(i) an increase in the plan's 
                        funded percentage, and
                          ``(ii) postponement of an accumulated 
                        funding deficiency for at least 1 
                        additional plan year.
                Such actions include applications for 
                extensions of amortization periods under 
                section 304(d), use of the shortfall funding 
                method in making funding standard account 
                computations, amendments to the plan's benefit 
                structure, reductions in future benefit 
                accruals, and other reasonable actions 
                consistent with the terms of the plan and 
                applicable law.
                  ``(B) Recommendations by plan sponsor.--
                          ``(i) In general.--During the period 
                        of 90 days following the date on which 
                        a multiemployer plan is certified to be 
                        in endangered status, the plan sponsor 
                        shall develop and provide to the 
                        bargaining parties alternative 
                        proposals for revised benefit 
                        structures, contribution structures, or 
                        both, which, if adopted as amendments 
                        to the plan, may be reasonably expected 
                        to meet the benchmarks described in 
                        paragraph (3)(A). Such proposals shall 
                        include--
                                  ``(I) at least one proposal 
                                for reductions in the amount of 
                                future benefit accruals 
                                necessary to achieve the 
                                benchmarks, assuming no 
                                amendments increasing 
                                contributions under the plan 
                                (other than amendments 
                                increasing contributions 
                                necessary to achieve the 
                                benchmarks after amendments 
                                have reduced future benefit 
                                accruals to the maximum extent 
                                permitted by law), and
                                  ``(II) at least one proposal 
                                for increases in contributions 
                                under the plan necessary to 
                                achieve the benchmarks, 
                                assuming no amendments reducing 
                                future benefit accruals under 
                                the plan.
                          ``(ii) Requests by bargaining 
                        parties.--Upon the request of any 
                        bargaining party who--
                                  ``(I) employs at least 5 
                                percent of the active 
                                participants, or
                                  ``(II) represents as an 
                                employee organization, for 
                                purposes of collective 
                                bargaining, at least 5 percent 
                                of the active participants,
                        the plan sponsor shall provide all such 
                        parties information as to other 
                        combinations of increases in 
                        contributions and reductions in future 
                        benefit accruals which would result in 
                        achieving the benchmarks.
                          ``(iii) Other information.--The plan 
                        sponsor may, as it deems appropriate, 
                        prepare and provide the bargaining 
                        parties with additional information 
                        relating to contribution structures or 
                        benefit structures or other information 
                        relevant to the funding improvement 
                        plan.
          ``(5) Maintenance of contributions pending approval 
        of funding improvement plan.--Pending approval of a 
        funding improvement plan by the bargaining parties with 
        respect to a multiemployer plan, the multiemployer plan 
        may not be amended so as to provide--
                  ``(A) a reduction in the level of 
                contributions for participants who are not in 
                pay status,
                  ``(B) a suspension of contributions with 
                respect to any period of service, or
                  ``(C) any new direct or indirect exclusion of 
                younger or newly hired employees from plan 
                participation.
          ``(6) Benefit restrictions pending approval of 
        funding improvement plan.--Pending approval of a 
        funding improvement plan by the bargaining parties with 
        respect to a multiemployer plan--
                  ``(A) Restrictions on lump sum and similar 
                distributions.--In any case in which the 
                present value of a participant's accrued 
                benefit under the plan exceeds $5,000, such 
                benefit may not be distributed as an immediate 
                distribution or in any other accelerated form.
                  ``(B) Prohibition on benefit increases.--
                          ``(i) In general.--No amendment of 
                        the plan which increases the 
                        liabilities of the plan by reason of 
                        any increase in benefits, any change in 
                        the accrual of benefits, or any change 
                        in the rate at which benefits become 
                        nonforfeitable under the plan may be 
                        adopted.
                          ``(ii) Exception.--Clause (i) shall 
                        not apply to any plan amendment which 
                        is required as a condition of 
                        qualification under part I of 
                        subchapter D of chapter 1 of subtitle A 
                        of the Internal Revenue Code of 1986.
          ``(7) Default critical status if no funding 
        improvement plan adopted.--If no plan amendment 
        adopting a funding improvement plan has been adopted by 
        the end of the 240-day period referred to in subsection 
        (b)(1), the plan enters into critical status as of the 
        first day of the succeeding plan year.
          ``(8) Restrictions upon approval of funding 
        improvement plan.--Upon adoption of a funding 
        improvement plan with respect to a multiemployer plan, 
        the plan may not be amended--
                  ``(A) so as to be inconsistent with the 
                funding improvement plan, or
                  ``(B) so as to increase future benefit 
                accruals, unless the plan actuary certifies in 
                advance that, after taking into account the 
                proposed increase, the plan is reasonably 
                expected to meet the the benchmarks described 
                in paragraph (3)(A).
  ``(c) Funding Rules for Multiemployer Plans in Critical 
Status.--
          ``(1) In general.--In any case in which a 
        multiemployer plan is in critical status for a plan 
        year as described in paragraph (2) (or otherwise enters 
        into critical status under this section) and no 
        rehabilitation plan under this subsection with respect 
        to such multiemployer plan is in effect for the plan 
        year, the plan sponsor shall, in accordance with this 
        subsection, amend the multiemployer plan to include a 
        rehabilitation plan under this subsection. The 
        amendment shall be adopted not later than 240 days 
        after the date on which the plan enters into critical 
        status.
          ``(2) Critical status.--A multiemployer plan is in 
        critical status for a plan year if--
                  ``(A) the plan is in endangered status for 
                the preceding plan year and the requirements of 
                subsection (b)(1) were not met with respect to 
                the plan for such preceding plan year, or
                  ``(B) as determined by the plan actuary under 
                subsection (a), the plan is described in 
                paragraph (3).
          ``(3) Criticality description.--For purposes of 
        paragraph (2)(B), a plan is described in this paragraph 
        if the plan is described in at least one of the 
        following subparagraphs:
                  ``(A) A plan is described in this 
                subparagraph if, as of the beginning of the 
                current plan year--
                          ``(i) the funded percentage of the 
                        plan is less than 65 percent, and
                          ``(ii) the sum of--
                                  ``(I) the market value of 
                                plan assets, plus
                                  ``(II) the present value of 
                                the reasonably anticipated 
                                employer and employee 
                                contributions for the current 
                                plan year and each of the 6 
                                succeeding plan years, assuming 
                                that the terms of the one or 
                                more collective bargaining 
                                agreements pursuant to which 
                                the plan is maintained for the 
                                current plan year continue in 
                                effect for succeeding plan 
                                years,
                        is less than the present value of all 
                        nonforfeitable benefits for all 
                        participants and beneficiaries 
                        projected to be payable under the plan 
                        during the current plan year and each 
                        of the 6 succeeding plan years (plus 
                        administrative expenses for such plan 
                        years).
                  ``(B) A plan is described in this 
                subparagraph if, as of the beginning of the 
                current plan year, the sum of--
                          ``(i) the market value of plan 
                        assets, plus
                          ``(ii) the present value of the 
                        reasonably anticipated employer and 
                        employee contributions for the current 
                        plan year and each of the 4 succeeding 
                        plan years, assuming that the terms of 
                        the one or more collective bargaining 
                        agreements pursuant to which the plan 
                        is maintained for the current plan year 
                        remain in effect for succeeding plan 
                        years,
                is less than the present value of all 
                nonforfeitable benefits for all participants 
                and beneficiaries projected to be payable under 
                the plan during the current plan year and each 
                of the 4 succeeding plan years (plus 
                administrative expenses for such plan years).
                  ``(C) A plan is described in this 
                subparagraph if--
                          ``(i) as of the beginning of the 
                        current plan year, the funded 
                        percentage of the plan is less than 65 
                        percent, and
                          ``(ii) the plan has an accumulated 
                        funding deficiency for the current plan 
                        year or is projected to have an 
                        accumulated funding deficiency for any 
                        of the 4 succeeding plan years, not 
                        taking into account any extension of 
                        amortization periods under section 
                        304(d).
                  ``(D) A plan is described in this 
                subparagraph if--
                          ``(i)(I) the plan's normal cost for 
                        the current plan year, plus interest 
                        (determined at the rate used for 
                        determining cost under the plan) for 
                        the current plan year on the amount of 
                        unfunded benefit liabilities under the 
                        plan as of the last date of the 
                        preceding plan year, exceeds
                          ``(II) the present value, as of the 
                        beginning of the current plan year, of 
                        the reasonably anticipated employer and 
                        employee contributions for the current 
                        plan year,
                          ``(ii) the present value, as of the 
                        beginning of the current plan year, of 
                        nonforfeitable benefits of inactive 
                        participants is greater than the 
                        present value, as of the beginning of 
                        the current plan year, of 
                        nonforfeitable benefits of active 
                        participants, and
                          ``(iii) the plan is projected to have 
                        an accumulated funding deficiency for 
                        the current plan year or any of the 4 
                        succeeding plan years, not taking into 
                        account any extension of amortization 
                        periods under section 304(d).
                  ``(E) A plan is described in this 
                subparagraph if--
                          ``(i) the funded percentage of the 
                        plan is greater than 65 percent for the 
                        current plan year, and
                          ``(ii) the plan is projected to have 
                        an accumulated funding deficiency 
                        during any of the succeeding 3 plan 
                        years, not taking into account any 
                        extension of amortization periods under 
                        section 304(d).
          ``(4) Rehabilitation plan.--
                  ``(A) In general.--A rehabilitation plan 
                shall consist of--
                          ``(i) amendments to the plan 
                        providing (under reasonable actuarial 
                        assumptions) for measures, agreed to by 
                        the bargaining parties, to increase 
                        contributions, reduce plan expenditures 
                        (including plan mergers and 
                        consolidations), or reduce future 
                        benefit accruals, or to take any 
                        combination of such actions, determined 
                        necessary to cause the plan to cease, 
                        during the rehabilitation period, to be 
                        in critical status, or
                          ``(ii) reasonable measures to 
                        forestall possible insolvency (within 
                        the meaning of section 4245) if the 
                        plan sponsor determines that, upon 
                        exhaustion of all reasonable measures, 
                        the plan would not cease during the 
                        rehabilitation period to be in critical 
                        status.
                A rehabilitation must provide annual standards 
                for meeting the requirements of such 
                rehabilitation plan.
                  ``(B) Rehabilitation period.--The 
                rehabilitation period for any rehabilitation 
                plan adopted pursuant to this subsection is the 
                10-year period beginning on the earlier of--
                          ``(i) the second anniversary of the 
                        date of the adoption of the 
                        rehabilitation plan, or
                          ``(ii) the first day of the first 
                        plan year of the multiemployer plan 
                        following the plan year in which occurs 
                        the first date, after the date of the 
                        plan's entry into critical status, as 
                        of which collective bargaining 
                        agreements covering at least 75 percent 
                        of active participants in such 
                        multiemployer plan (determined as of 
                        such date of entry) have expired.
                  ``(C) Reporting.--A summary of any 
                rehabilitation plan or modification thereto 
                adopted during any plan year, together with 
                annual updates regarding the funding ratio of 
                the plan, shall be included in the annual 
                report for such plan year under section 104(a) 
                and in the summary annual report described in 
                section 104(b)(3).
          ``(5) Development of rehabilitation plan.--
                  ``(A) Proposals by plan sponsor.--
                          ``(i) In general.--Within 90 days 
                        after the date of entry into critical 
                        status (or the date as of which the 
                        requirements of subsection (b)(1) are 
                        not met with respect to the plan), the 
                        plan sponsor shall propose to all 
                        bargaining parties a range of 
                        alternative schedules of increases in 
                        contributions and reductions in future 
                        benefit accruals that would serve to 
                        carry out a rehabilitation plan under 
                        this subsection.
                          ``(ii) Proposal assuming no 
                        contribution increases.--Such proposals 
                        shall include, as one of the proposed 
                        schedules, a schedule of those 
                        reductions in future benefit accruals 
                        that would be necessary to cause the 
                        plan to cease to be in critical status 
                        if there were no further increases in 
                        rates of contribution to the plan.
                          ``(iii) Proposal where contributions 
                        are necessary.--If the plan sponsor 
                        determines that the plan will not cease 
                        to be in critical status during the 
                        rehabilitation period unless the plan 
                        is amended to provide for an increase 
                        in contributions, the plan sponsor's 
                        proposals shall include a schedule of 
                        those increases in contribution rates 
                        that would be necessary to cause the 
                        plan to cease to be in critical status 
                        if future benefit accruals were reduced 
                        to the maximum extent permitted by law.
                  ``(B) Requests for additional schedules.--
                Upon the request of any bargaining party who--
                          ``(i) employs at least 5 percent of 
                        the active participants, or
                          ``(ii) represents as an employee 
                        organization, for purposes of 
                        collective bargaining, at least 5 
                        percent of active participants,
                the plan sponsor shall include among the 
                proposed schedules such schedules of increases 
                in contributions and reductions in future 
                benefit accruals as may be specified by the 
                bargaining parties.
                  ``(C) Subsequent amendments.--Upon the 
                adoption of a schedule of increases in 
                contributions or reductions in future benefit 
                accruals as part of the rehabilitation plan, 
                the plan sponsor may amend the plan thereafter 
                to update the schedule to adjust for any 
                experience of the plan contrary to past 
                actuarial assumptions, except that such an 
                amendment may be made not more than once in any 
                3-year period.
                  ``(D) Allocation of reductions in future 
                benefit accruals.--Any schedule containing 
                reductions in future benefit accruals forming a 
                part of a rehabilitation plan shall be 
                applicable with respect to any group of active 
                participants who are employed by any bargaining 
                party (as an employer obligated to contribute 
                under the plan) in proportion to the extent to 
                which increases in contributions under such 
                schedule apply to such bargaining party.
                  ``(E) Limitation on reduction in rates of 
                future accruals.--Any schedule proposed under 
                this paragraph shall not reduce the rate of 
                future accruals below the lower of--
                          ``(i) a monthly benefit equal to 1 
                        percent of the contributions required 
                        to be made with respect to a 
                        participant or the equivalent standard 
                        accrual rate for a participant or group 
                        of participants under the collective 
                        bargaining agreements in effect as of 
                        the first day of the plan year in which 
                        the plan enters critical status, or
                          ``(ii) if lower, the accrual rate 
                        under the plan on such date.
                The equivalent standard accrual rate shall be 
                determined by the trustees based on the 
                standard or average contribution base units 
                that they determine to be representative for 
                active participants and such other factors as 
                they determine to be relevant.
                  ``(F) Protection of restored rates of 
                accrual.--
                          ``(i) In general.--Any schedule 
                        proposed under this paragraph shall not 
                        reduce the rate of future accruals 
                        below any restored accrual rate.
                          ``(ii) Restored accrual rate.--For 
                        purposes of clause (i), the term 
                        `restored accrual rate' means a rate of 
                        benefit accruals which was reduced and 
                        subsequently restored before entry of 
                        the plan into critical status.
          ``(6) Maintenance of contributions and restrictions 
        on benefits pending adoption of rehabilitation plan.--
        The rules of paragraphs (5) and (6) of subsection (b) 
        shall apply for purposes of this subsection by 
        substituting the term `rehabilitation plan' for 
        `funding improvement plan'.
          ``(7) Special rules.--
                  ``(A) Automatic employer surcharge.--
                          ``(i) 5 percent and 10 percent 
                        surcharge.--For the first plan year in 
                        which the plan is in critical status, 
                        each employer otherwise obligated to 
                        make a contribution for that plan year 
                        shall be obligated to pay to the plan a 
                        surcharge equal to 5 percent of the 
                        contribution otherwise required under 
                        the respective collective bargaining 
                        agreement (or other agreement pursuant 
                        to which the employer contributes). For 
                        each consecutive plan year thereafter 
                        in which the plan is in critical 
                        status, the surcharge shall be 10 
                        percent of the contribution otherwise 
                        required under the respective 
                        collective bargaining agreement (or 
                        other agreement pursuant to which the 
                        employer contributes).
                          ``(ii) Enforcement of surcharge.--The 
                        surcharges under clause (i) shall be 
                        due and payable on the same schedule as 
                        the contributions on which they are 
                        based. Any failure to make a surcharge 
                        payment shall be treated as a 
                        delinquent contribution under section 
                        515 and shall be enforceable as such.
                          ``(iii) Surcharge to terminate upon 
                        cba renegotiation.--The surcharge under 
                        this paragraph shall cease to be 
                        effective with respect to employees 
                        covered by a collective bargaining 
                        agreement, beginning on the date on 
                        which that agreement is renegotiated to 
                        include--
                                  ``(I) a schedule of benefits 
                                and contributions published by 
                                the trustees pursuant to the 
                                plan's rehabilitation plan, or
                                  ``(II) otherwise collectively 
                                bargained benefit changes.
                          ``(iv) Surcharge not to apply until 
                        employer receives 30-day notice.--The 
                        surcharge under this subparagraph shall 
                        not apply to an employer until 30 days 
                        after the employer has been notified by 
                        the trustees that the plan is in 
                        critical status and that the surcharge 
                        is in effect.
                          ``(v) Surcharge not to generate 
                        increased benefit accruals.--
                        Notwithstanding any provision of a plan 
                        to the contrary, the amount of any 
                        surcharge shall not be the basis for 
                        any benefit accruals under the plan.
                  ``(B) Benefit adjustments.--
                          ``(i) In general.--The trustees shall 
                        make appropriate reductions, if any, to 
                        adjustable benefits based upon the 
                        outcome of collective bargaining over 
                        the schedules provided under paragraph 
                        (5).
                          ``(ii) Retiree protection.--Except as 
                        provided in subparagraph (C), the 
                        trustees of a plan in critical status 
                        may not reduce adjustable benefits of 
                        any participant or beneficiary who was 
                        in pay status at least one year before 
                        the first day of the first plan year in 
                        which the plan enters into critical 
                        status.
                          ``(iii) Trustee flexibility.--The 
                        trustees shall include in the schedules 
                        provided to the bargaining parties an 
                        allowance for funding the benefits of 
                        participants with respect to whom 
                        contributions are not currently 
                        required to be made, and shall reduce 
                        their benefits to the extent permitted 
                        under this title and considered 
                        appropriate based on the plan's then 
                        current overall funding status and its 
                        future prospects in light of the 
                        results of the parties' negotiations.
                  ``(C) Adjustable benefit defined.--For 
                purposes of this paragraph, the term 
                `adjustable benefit' means--
                          ``(i) benefits, rights, and features, 
                        such as post-retirement death benefits, 
                        60-month guarantees, disability 
                        benefits not yet in pay status, and 
                        similar benefits,
                          ``(ii) retirement-type subsidies, 
                        early retirement benefits, and benefit 
                        payment options (other than the 50 
                        percent qualified joint-and-survivor 
                        benefit and single life annuity), and
                          ``(iii) benefit increases that would 
                        not be eligible for a guarantee under 
                        section 4022A on the first day of the 
                        plan year in which the plan enters into 
                        critical status because they were 
                        adopted, or if later, took effect less 
                        than 60 months before reorganization.
                  ``(D) Normal retirement benefits protected.--
                Nothing in this paragraph shall be construed to 
                permit a plan to reduce the level of a 
                participant's accrued benefit payable at normal 
                retirement age which is not an adjustable 
                benefit.
                  ``(E) Adjustments disregarded in withdrawal 
                liability determination.--
                          ``(i) Benefit reductions.--Any 
                        benefit reductions under this paragraph 
                        shall be disregarded in determining a 
                        plan's unfunded vested benefits for 
                        purposes of determining an employer's 
                        withdrawal liability under section 
                        4201.
                          ``(ii) Surcharges.--Any surcharges 
                        under this paragraph shall be 
                        disregarded in determining an 
                        employer's withdrawal liability under 
                        section 4211, except for purposes of 
                        determining the unfunded vested 
                        benefits attributable to an employer or 
                        under a modified attributable method 
                        adopted with the approval of the 
                        Pension Benefit Guaranty Corporation 
                        under subsection (c)(5) of that 
                        section.
          ``(8) Restrictions upon approval of rehabilitation 
        plan.--Upon adoption of a rehabilitation plan with 
        respect to a multiemployer plan, the plan may not be 
        amended--
                  ``(A) so as to be inconsistent with the 
                rehabilitation plan, or
                  ``(B) so as to increase future benefit 
                accruals, unless the plan actuary certifies in 
                advance that, after taking into account the 
                proposed increase, the plan is reasonably 
                expected to cease to be in critical status.
          ``(9) Implementation of default schedule upon failure 
        to adopt rehabilitation plan.--If the plan is not 
        amended by the end of the 240-day period after entry 
        into critical status to include a rehabilitation plan, 
        the plan sponsor shall amend the plan to implement the 
        schedule required by paragraph (5)(A)(ii).
          ``(10) Deemed withdrawal.--Upon the failure of any 
        employer who has an obligation to contribute under the 
        plan to make contributions in compliance with the 
        schedule adopted under paragraph (4) as part of the 
        rehabilitation plan, the failure of the employer may, 
        at the discretion of the plan sponsor, be treated as a 
        withdrawal by the employer from the plan under section 
        4203 or a partial withdrawal by the employer under 
        section 4205.
          ``(11) Special rule for plan amendments.--A 
        multiemployer plan in critical status shall not fail to 
        meet the requirements of section 204(g) or section 
        411(d)(6) of the Internal Revenue Code of 1986 solely 
        by reason of the adoption by the plan of an amendment 
        necessary to meet the requirements of this subsection.
  ``(d) Definitions.--For purposes of this section--
          ``(1) Bargaining party.--The term `bargaining party' 
        means, in connection with a multiemployer plan--
                  ``(A) an employer who has an obligation to 
                contribute under the plan, and
                  ``(B) an employee organization which, for 
                purposes of collective bargaining, represents 
                plan participants employed by such an employer.
          ``(2) Funded percentage.--The term `funded 
        percentage' means the percentage expressed as a ratio 
        of which--
                  ``(A) the numerator of which is the value of 
                the plan's assets, as determined under section 
                304(c)(2), and
                  ``(B) the denominator of which is the accrued 
                liability of the plan.
          ``(3) Accumulated funding deficiency.--The term 
        `accumulated funding deficiency' has the meaning 
        provided such term in section 304(a).
          ``(4) Active participant.--The term `active 
        participant' means, in connection with a multiemployer 
        plan, a participant who is in covered service under the 
        plan.
          ``(5) Inactive participant.--The term `inactive 
        participant' means, in connection with a multiemployer 
        plan, a participant who--
                  ``(A) is not in covered service under the 
                plan, and
                  ``(B) is in pay status under the plan or has 
                a nonforfeitable right to benefits under the 
                plan.
          ``(6) Pay status.--A person is in `pay status' under 
        a multiemployer plan if--
                  ``(A) at any time during the current plan 
                year, such person is a participant or 
                beneficiary under the plan and is paid an 
                early, late, normal, or disability retirement 
                benefit under the plan (or a death benefit 
                under the plan related to a retirement 
                benefit), or
                  ``(B) to the extent provided in regulations 
                of the Secretary of the Treasury, such person 
                is entitled to such a benefit under the plan.
          ``(7) Obligation to contribute.--The term `obligation 
        to contribute' has the meaning provided such term under 
        section 4212(a).
          ``(8) Entry into critical status.--A plan shall be 
        treated as entering into critical status as of the date 
        that such plan is certified to be in critical status 
        under subsection (a)(1), is presumed to be in critical 
        status under subsection (a)(3), or enters into critical 
        status under subsection (b)(7).''.
  (b) Enforcement.--Section 502 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1132) is amended--
          (1) in subsection (a)(6) by striking ``(6), or (7)'' 
        and inserting ``(6), (7), or (8)'';
          (2) by redesignating subsection (c)(8) as subsection 
        (c)(9); and
          (3) by inserting after subsection (c)(7) the 
        following new paragraph:
          ``(8) The Secretary may assess a civil penalty 
        against--
                  ``(A) any person of not more than $1,100 per 
                day for each violation by such person of 
                subsection (a)(1), (b)(1), or (c)(1) of section 
                305, or
                  ``(B) any plan sponsor for failure by the 
                plan sponsor to implement the terms of any 
                funding improvement plan or rehabilitation plan 
                adopted under section 305.''.
  (c) Conforming Amendment.--The table of contents in section 1 
of such Act (as amended by the preceding provisions of this 
Act) is amended further by inserting after the item relating to 
section 304 the following new item:

``Sec. 305. Additional funding rules for multiemployer plans in 
          endangered status or critical status.''.
  (d) Effective Date.--The amendments made by this section 
shall apply with respect to plan years beginning after 2005.
  (e) Special Rule for 2006.--In the case of any plan year 
beginning in 2006, any reference in section 305 of the Employee 
Retirement Income Security Act of 1974 (as added by this 
section) to section 304 of such Act (as added by this Act) 
shall be treated as a reference to the corresponding provision 
of the Employee Retirement Income Security Act of 1974 as in 
effect for plan years beginning in such year.

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

  (a) Advance Determination of Impending Insolvency Over 5 
Years.--Section 4245(d)(1) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1426(d)(1)) is amended--
          (1) by striking ``3 plan years'' the second place it 
        appears and inserting ``5 plan years''; and
          (2) by adding at the end the following new sentence: 
        ``If the plan sponsor makes such a determination that 
        the plan will be insolvent in any of the next 5 plan 
        years, the plan sponsor shall make the comparison under 
        this paragraph at least annually until the plan sponsor 
        makes a determination that the plan will not be 
        insolvent in any of the next 5 plan years.''.
  (b) Effective Date.--The amendments made by this section 
shall apply with respect to determinations made in plan years 
beginning after December 31, 2005.

SEC. 204. WITHDRAWAL LIABILITY REFORMS.

  (a) Repeal of Limitation on Withdrawal Liability in the Event 
of Certain Sales of Employer Assets to Unrelated Parties.--
          (1) In general.--Section 4225 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1405) 
        is repealed.
          (2) Conforming amendment.--The table of contents in 
        section 1 of such Act is amended by striking the item 
        relating to section 4225.
          (3) Effective date.--The amendments made by this 
        section shall apply with respect to sales occurring on 
        or after January 1, 2006.
  (b) Repeal of Limitation to 20 Annual Payments.--
          (1) In general.--Section 4219(c)(1) of such Act (29 
        U.S.C. 1399(c)(1)) is amended by striking subparagraph 
        (B).
          (2) Effective date.--The amendment made by this 
        section shall apply with respect to withdrawals 
        occurring on or after January 1, 2006.
  (c) Withdrawal Liability Continues If Work Contracted Out.--
          (1) In general.--Clause (i) of section 4205(b)(2)(A) 
        of such Act (29 U.S.C. 1385(b)(2)(A)) is amended by 
        inserting ``or to another party or parties'' after ``to 
        another location''.
          (2) Effective date.--The amendment made by this 
        subsection shall apply with respect to work transferred 
        on or after the date of the enactment of this Act.
  (d) Repeal of Special Rule for Long and Short Haul Trucking 
Industry.--
          (1) In general.--Subsection (d) of section 4203 of 
        such Act (29 U.S.C. 1383(d)) is repealed.
          (2) Effective date.--The repeal under this subsection 
        shall apply with respect to cessations to have 
        obligations to contribute to multiemployer plans and 
        cessations of covered operations under such plans 
        occurring on or after January 1, 2006.
  (e) Application of Forgiveness Rule to Plans Primarily 
Covering Employees in the Building and Construction.--
          (1) In general.--Section 4210(b) of such Act (29 
        U.S.C. 1390(b)) is amended--
                  (A) by striking paragraph (1); and
                  (B) by redesignating paragraphs (2) through 
                (4) as paragraphs (1) through (3), 
                respectively.
          (2) Effective date.--The amendments made by this 
        subsection shall apply with respect to plan withdrawals 
        occurring on or after January 1, 2006.

SEC. 205. REMOVAL OF RESTRICTIONS WITH RESPECT TO PROCEDURES APPLICABLE 
                    TO DISPUTES INVOLVING WITHDRAWAL LIABILITY.

  (a) In General.--Section 4221(f)(1) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1401(f)(1)) 
is amended--
          (1) in subparagraph (A) by inserting ``and'' after 
        ``plan,'', and
          (2) by striking subparagraphs (B) and (C) and 
        inserting the following new subparagraph:
                  ``(B) such determination is based in whole or 
                in part on a finding by the plan sponsor under 
                section 4212(c) that a principal purpose of any 
                transaction which occurred at least 5 years (2 
                years in the case of a small employer) before 
                the date of the complete or partial withdrawal 
                was to evade or avoid withdrawal liability 
                under this subtitle,''.
  (b) Small Employer.--Paragraph (2) of section 4221(f) of such 
Act is amended by adding at the end the following new 
subparagraph:
                  ``(C) Small employer.--For purposes of 
                paragraph (1)(B)--
                          ``(i) In general.--The term `small 
                        employer' means any employer who (as of 
                        immediately before the transaction 
                        referred to in paragraph (1)(B))--
                                  ``(I) employs not more than 
                                500 employees, and
                                  ``(II) is required to make 
                                contributions to the plan for 
                                not more than 250 employees.
                          ``(ii) Controlled group.--Any group 
                        treated as a single employer under 
                        subsection (b), (c), (m), or (o) of 
                        section 414 of the Internal Revenue 
                        Code of 1986 shall be treated as a 
                        single employer for purposes of this 
                        subparagraph.''.
  (c) Additional Amendments.--
          (1) Subparagraph (A) of section 4221(f)(2) of such 
        Act (29 U.S.C. 1401(f)(2)) is amended by striking 
        ``Notwithstanding'' and inserting ``In the case of a 
        transaction occurring before January 1, 1999, and at 
        least 5 years before the date of the complete or 
        partial withdrawal, notwithstanding''.
          (2) Section 4221(f)(2)(B) of such Act (29 U.S.C. 
        1401(f)(2)(B)) is amended--
                  (A) by inserting ``with respect to withdrawal 
                liability payments'' after ``determination'' 
                the first place it appears, and
                  (B) by striking ``any'' and inserting 
                ``the''.
  (d) Effective Date.--The amendments made by this section 
shall apply to any employer that receives a notification under 
section 4219(b)(1) of the Employee Retirement Income Security 
Act of 1974 on or after the date of the enactment of this Act.

        Subtitle B--Amendments to Internal Revenue Code of 1986

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

  (a) In General.--Subpart A of part III of subchapter D of 
chapter 1 of the Internal Revenue Code of 1986 (added by 
section 112 of this Act) is amended by adding at the end the 
following new section:

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

  ``(a) In General.--For purposes of section 412, the 
accumulated funding deficiency of a multiemployer plan for any 
plan year is--
          ``(1) except as provided in paragraph (2), the 
        amount, determined as of the end of the plan year, 
        equal to the excess (if any) of the total charges to 
        the funding standard account of the plan for all plan 
        years (beginning with the first plan year for which 
        section 412 applies to the plan) over the total credits 
        to such account for such years, and
          ``(2) if the multiemployer plan is in reorganization 
        for any plan year, the accumulated funding deficiency 
        of the plan determined under section 418B.
  ``(b) Funding Standard Account.--
          ``(1) Account required.--Each multiemployer plan to 
        which section 412 applies shall establish and maintain 
        a funding standard account. Such account shall be 
        credited and charged solely as provided in this 
        section.
          ``(2) Charges to account.--For a plan year, the 
        funding standard account shall be charged with the sum 
        of--
                  ``(A) the normal cost of the plan for the 
                plan year,
                  ``(B) the amounts necessary to amortize in 
                equal annual installments (until fully 
                amortized)--
                          ``(i) in the case of a plan in 
                        existence on January 1, 1974, the 
                        unfunded past service liability under 
                        the plan on the first day of the first 
                        plan year to which section 412 applies, 
                        over a period of 40 plan years,
                          ``(ii) in the case of a plan which 
                        comes into existence after January 1, 
                        1974, the unfunded past service 
                        liability under the plan on the first 
                        day of the first plan year to which 
                        section 412 applies, over a period of 
                        15 plan years,
                          ``(iii) separately, with respect to 
                        each plan year, the net increase (if 
                        any) in unfunded past service liability 
                        under the plan arising from plan 
                        amendments adopted in such year, over a 
                        period of 15 plan years,
                          ``(iv) separately, with respect to 
                        each plan year, the net experience loss 
                        (if any) under the plan, over a period 
                        of 15 plan years, and
                          ``(v) separately, with respect to 
                        each plan year, the net loss (if any) 
                        resulting from changes in actuarial 
                        assumptions used under the plan, over a 
                        period of 15 plan years,
                  ``(C) the amount necessary to amortize each 
                waived funding deficiency (within the meaning 
                of section 412(c)(3)) for each prior plan year 
                in equal annual installments (until fully 
                amortized) over a period of 15 plan years,
                  ``(D) the amount necessary to amortize in 
                equal annual installments (until fully 
                amortized) over a period of 5 plan years any 
                amount credited to the funding standard account 
                under section 412(b)(3)(D) (as in effect on the 
                day before the date of the enactment of the 
                Pension Protection Act of 2005), and
                  ``(E) the amount necessary to amortize in 
                equal annual installments (until fully 
                amortized) over a period of 20 years the 
                contributions which would be required to be 
                made under the plan but for the provisions of 
                section 412(c)(7)(A)(i)(I) (as in effect on the 
                day before the date of the enactment of the 
                Pension Protection Act of 2005).
          ``(3) Credits to account.--For a plan year, the 
        funding standard account shall be credited with the sum 
        of--
                  ``(A) the amount considered contributed by 
                the employer to or under the plan for the plan 
                year,
                  ``(B) the amount necessary to amortize in 
                equal annual installments (until fully 
                amortized)--
                          ``(i) separately, with respect to 
                        each plan year, the net decrease (if 
                        any) in unfunded past service liability 
                        under the plan arising from plan 
                        amendments adopted in such year, over a 
                        period of 15 plan years,
                          ``(ii) separately, with respect to 
                        each plan year, the net experience gain 
                        (if any) under the plan, over a period 
                        of 15 plan years, and
                          ``(iii) separately, with respect to 
                        each plan year, the net gain (if any) 
                        resulting from changes in actuarial 
                        assumptions used under the plan, over a 
                        period of 15 plan years,
                  ``(C) the amount of the waived funding 
                deficiency (within the meaning of section 
                412(c)(3)) for the plan year, and
                  ``(D) in the case of a plan year for which 
                the accumulated funding deficiency is 
                determined under the funding standard account 
                if such plan year follows a plan year for which 
                such deficiency was determined under the 
                alternative minimum funding standard under 
                section 412(g) (as in effect on the day before 
                the date of the enactment of the Pension 
                Protection Act of 2005), the excess (if any) of 
                any debit balance in the funding standard 
                account (determined without regard to this 
                subparagraph) over any debit balance in the 
                alternative minimum funding standard account.
          ``(4) Special rules for pre-2007 amortizations.--
                  ``(A) In general.--In the case of any amount 
                amortized under section 412(b) (as in effect on 
                the day before the date of the enactment of the 
                Pension Protection Act of 2005) over any period 
                beginning with a plan year beginning before 
                2007, in lieu of the amortization described in 
                paragraphs (2)(B) and (3)(B), such amount shall 
                continue to be amortized under such section as 
                so in effect.
                  ``(B) Interest rate.--For purposes of 
                amortizations under section 412(b) (as in 
                effect on the day before the date of the 
                enactment of the Pension Protection Act of 
                2005), in the case of any waiver under section 
                412(d) (as so in effect) or extension under 
                section 412(e) (as so in effect) with respect 
                to which application has been made before June 
                30, 2005, the interest rate under section 
                412(d)(1)(A) (as so in effect) or section 
                412(e) (as so in effect), as the case may be, 
                shall apply.
          ``(5) Combining and offsetting amounts to be 
        amortized.--Under regulations prescribed by the 
        Secretary, amounts required to be amortized under 
        paragraph (2) or paragraph (3), as the case may be--
                  ``(A) may be combined into one amount under 
                such paragraph to be amortized over a period 
                determined on the basis of the remaining 
                amortization period for all items entering into 
                such combined amount, and
                  ``(B) may be offset against amounts required 
                to be amortized under the other such paragraph, 
                with the resulting amount to be amortized over 
                a period determined on the basis of the 
                remaining amortization periods for all items 
                entering into whichever of the two amounts 
                being offset is the greater.
          ``(6) Interest.--Except as provided in subsection 
        (c)(9), the funding standard account (and items 
        therein) shall be charged or credited (as determined 
        under regulations prescribed by the Secretary) with 
        interest at the appropriate rate consistent with the 
        rate or rates of interest used under the plan to 
        determine costs.
          ``(7) Certain amortization charges and credits.--In 
        the case of a plan which, immediately before the date 
        of the enactment of the Multiemployer Pension Plan 
        Amendments Act of 1980, was a multiemployer plan 
        (within the meaning of section 414(f) as in effect 
        immediately before such date)--
                  ``(A) any amount described in paragraph 
                (2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this 
                subsection which arose in a plan year beginning 
                before such date shall be amortized in equal 
                annual installments (until fully amortized) 
                over 40 plan years, beginning with the plan 
                year in which the amount arose,
                  ``(B) any amount described in paragraph 
                (2)(B)(iv) or (3)(B)(ii) of this subsection 
                which arose in a plan year beginning before 
                such date shall be amortized in equal annual 
                installments (until fully amortized) over 20 
                plan years, beginning with the plan year in 
                which the amount arose,
                  ``(C) any change in past service liability 
                which arises during the period of 3 plan years 
                beginning on or after such date, and results 
                from a plan amendment adopted before such date, 
                shall be amortized in equal annual installments 
                (until fully amortized) over 40 plan years, 
                beginning with the plan year in which the 
                change arises, and
                  ``(D) any change in past service liability 
                which arises during the period of 2 plan years 
                beginning on or after such date, and results 
                from the changing of a group of participants 
                from one benefit level to another benefit level 
                under a schedule of plan benefits which--
                          ``(i) was adopted before such date, 
                        and
                          ``(ii) was effective for any plan 
                        participant before the beginning of the 
                        first plan year beginning on or after 
                        such date,
                shall be amortized in equal annual installments 
                (until fully amortized) over 40 plan years, 
                beginning with the plan year in which the 
                change arises.
          ``(8) Special rules relating to charges and credits 
        to funding standard account.--For purposes of this 
        section--
                  ``(A) Withdrawal liability.--Any amount 
                received by a multiemployer plan in payment of 
                all or part of an employer's withdrawal 
                liability under part 1 of subtitle E of title 
                IV of the Employee Retirement Income Security 
                Act of 1974 shall be considered an amount 
                contributed by the employer to or under the 
                plan. The Secretary may prescribe by regulation 
                additional charges and credits to a 
                multiemployer plan's funding standard account 
                to the extent necessary to prevent withdrawal 
                liability payments from being unduly reflected 
                as advance funding for plan liabilities.
                  ``(B) Adjustments when a multiemployer plan 
                leaves reorganization.--If a multiemployer plan 
                is not in reorganization in the plan year but 
                was in reorganization in the immediately 
                preceding plan year, any balance in the funding 
                standard account at the close of such 
                immediately preceding plan year--
                          ``(i) shall be eliminated by an 
                        offsetting credit or charge (as the 
                        case may be), but
                          ``(ii) shall be taken into account in 
                        subsequent plan years by being 
                        amortized in equal annual installments 
                        (until fully amortized) over 30 plan 
                        years.
                The preceding sentence shall not apply to the 
                extent of any accumulated funding deficiency 
                under section 418B(a) as of the end of the last 
                plan year that the plan was in reorganization.
                  ``(C) Plan payments to supplemental program 
                or withdrawal liability payment fund.--Any 
                amount paid by a plan during a plan year to the 
                Pension Benefit Guaranty Corporation pursuant 
                to section 4222 of the Employee Retirement 
                Income Security Act of 1974 or to a fund exempt 
                under section 501(c)(22) pursuant to section 
                4223 of such Act shall reduce the amount of 
                contributions considered received by the plan 
                for the plan year.
                  ``(D) Interim withdrawal liability 
                payments.--Any amount paid by an employer 
                pending a final determination of the employer's 
                withdrawal liability under part 1 of subtitle E 
                of title IV of such Act and subsequently 
                refunded to the employer by the plan shall be 
                charged to the funding standard account in 
                accordance with regulations prescribed by the 
                Secretary.
                  ``(E) Election for deferral of charge for 
                portion of net experience loss.--If an election 
                is in effect under section 412(b)(7)(F) (as in 
                effect on the day before the date of the 
                enactment of the Pension Protection Act of 
                2005) for any plan year, the funding standard 
                account shall be charged in the plan year to 
                which the portion of the net experience loss 
                deferred by such election was deferred with the 
                amount so deferred (and paragraph (2)(B)(iv) 
                shall not apply to the amount so charged).
                  ``(F) Financial assistance.--Any amount of 
                any financial assistance from the Pension 
                Benefit Guaranty Corporation to any plan, and 
                any repayment of such amount, shall be taken 
                into account under this section and section 412 
                in such manner as is determined by the 
                Secretary.
                  ``(G) Short-term benefits.--To the extent 
                that any plan amendment increases the unfunded 
                past service liability under the plan by reason 
                of an increase in benefits which are payable 
                under the plan during a period that does not 
                exceed 14 years, paragraph (2)(B)(iii) shall be 
                applied separately with respect to such 
                increase in unfunded past service liability by 
                substituting the number of years of the period 
                during which such benefits are payable for 
                `15'.
  ``(c) Additional Rules.--
          ``(1) Determinations to be made under funding 
        method.--For purposes of this section, normal costs, 
        accrued liability, past service liabilities, and 
        experience gains and losses shall be determined under 
        the funding method used to determine costs under the 
        plan.
          ``(2) Valuation of assets.--
                  ``(A) In general.--For purposes of this 
                section, the value of the plan's assets shall 
                be determined on the basis of any reasonable 
                actuarial method of valuation which takes into 
                account fair market value and which is 
                permitted under regulations prescribed by the 
                Secretary.
                  ``(B) Election with respect to bonds.--The 
                value of a bond or other evidence of 
                indebtedness which is not in default as to 
                principal or interest may, at the election of 
                the plan administrator, be determined on an 
                amortized basis running from initial cost at 
                purchase to par value at maturity or earliest 
                call date. Any election under this subparagraph 
                shall be made at such time and in such manner 
                as the Secretary shall by regulations provide, 
                shall apply to all such evidences of 
                indebtedness, and may be revoked only with the 
                consent of the Secretary.
          ``(3) Actuarial assumptions must be reasonable.--For 
        purposes of this section, all costs, liabilities, rates 
        of interest, and other factors under the plan shall be 
        determined on the basis of actuarial assumptions and 
        methods--
                  ``(A) each of which is reasonable (taking 
                into account the experience of the plan and 
                reasonable expectations), and
                  ``(B) which, in combination, offer the 
                actuary's best estimate of anticipated 
                experience under the plan.
          ``(4) Treatment of certain changes as experience gain 
        or loss.--For purposes of this section, if--
                  ``(A) a change in benefits under the Social 
                Security Act or in other retirement benefits 
                created under Federal or State law, or
                  ``(B) a change in the definition of the term 
                `wages' under section 3121, or a change in the 
                amount of such wages taken into account under 
                regulations prescribed for purposes of section 
                401(a)(5),
        results in an increase or decrease in accrued liability 
        under a plan, such increase or decrease shall be 
        treated as an experience loss or gain.
          ``(5) Full funding.--If, as of the close of a plan 
        year, a plan would (without regard to this paragraph) 
        have an accumulated funding deficiency in excess of the 
        full funding limitation--
                  ``(A) the funding standard account shall be 
                credited with the amount of such excess, and
                  ``(B) all amounts described in subparagraphs 
                (B), (C), and (D) of subsection (b)(2) and 
                subparagraph (B) of subsection (b)(3) which are 
                required to be amortized shall be considered 
                fully amortized for purposes of such 
                subparagraphs.
          ``(6) Full-funding limitation.--
                  ``(A) In general.--For purposes of paragraph 
                (5), the term `full-funding limitation' means 
                the excess (if any) of--
                          ``(i) the accrued liability 
                        (including normal cost) under the plan 
                        (determined under the entry age normal 
                        funding method if such accrued 
                        liability cannot be directly calculated 
                        under the funding method used for the 
                        plan), over
                          ``(ii) the lesser of--
                                  ``(I) the fair market value 
                                of the plan's assets, or
                                  ``(II) the value of such 
                                assets determined under 
                                paragraph (2).
                  ``(B) Minimum amount.--
                          ``(i) In general.--In no event shall 
                        the full-funding limitation determined 
                        under subparagraph (A) be less than the 
                        excess (if any) of--
                                  ``(I) 90 percent of the 
                                current liability of the plan 
                                (including the expected 
                                increase in current liability 
                                due to benefits accruing during 
                                the plan year), over
                                  ``(II) the value of the 
                                plan's assets determined under 
                                paragraph (2).
                          ``(ii) Assets.--For purposes of 
                        clause (i), assets shall not be reduced 
                        by any credit balance in the funding 
                        standard account.
                  ``(C) Full funding limitation.--For purposes 
                of this paragraph, unless otherwise provided by 
                the plan, the accrued liability under a 
                multiemployer plan shall not include benefits 
                which are not nonforfeitable under the plan 
                after the termination of the plan (taking into 
                consideration section 411(d)(3)).
                  ``(D) Current liability.--For purposes of 
                this paragraph--
                          ``(i) In general.--The term `current 
                        liability' means all liabilities to 
                        employees and their beneficiaries under 
                        the plan.
                          ``(ii) Treatment of unpredictable 
                        contingent event benefits.--For 
                        purposes of clause (i), any benefit 
                        contingent on an event other than--
                                  ``(I) age, service, 
                                compensation, death, or 
                                disability, or
                                  ``(II) an event which is 
                                reasonably and reliably 
                                predictable (as determined by 
                                the Secretary),
                        shall not be taken into account until 
                        the event on which the benefit is 
                        contingent occurs.
                          ``(iii) Interest rate used.--The rate 
                        of interest used to determine current 
                        liability under this paragraph shall be 
                        the rate of interest determined under 
                        subparagraph (E).
                          ``(iv) Mortality tables.--
                                  ``(I) Commissioners' standard 
                                table.--In the case of plan 
                                years beginning before the 
                                first plan year to which the 
                                first tables prescribed under 
                                subclause (II) apply, the 
                                mortality table used in 
                                determining current liability 
                                under this paragraph shall be 
                                the table prescribed by the 
                                Secretary which is based on the 
                                prevailing commissioners' 
                                standard table (described in 
                                section 807(d)(5)(A)) used to 
                                determine reserves for group 
                                annuity contracts issued on 
                                January 1, 1993.
                                  ``(II) Secretarial 
                                authority.--The Secretary may 
                                by regulation prescribe for 
                                plan years beginning after 
                                December 31, 1999, mortality 
                                tables to be used in 
                                determining current liability 
                                under this subsection. Such 
                                tables shall be based upon the 
                                actual experience of pension 
                                plans and projected trends in 
                                such experience. In prescribing 
                                such tables, the Secretary 
                                shall take into account results 
                                of available independent 
                                studies of mortality of 
                                individuals covered by pension 
                                plans.
                          ``(v) Separate mortality tables for 
                        the disabled.--Notwithstanding clause 
                        (iv)--
                                  ``(I) In general.--In the 
                                case of plan years beginning 
                                after December 31, 1995, the 
                                Secretary shall establish 
                                mortality tables which may be 
                                used (in lieu of the tables 
                                under clause (iv)) to determine 
                                current liability under this 
                                subsection for individuals who 
                                are entitled to benefits under 
                                the plan on account of 
                                disability. The Secretary shall 
                                establish separate tables for 
                                individuals whose disabilities 
                                occur in plan years beginning 
                                before January 1, 1995, and for 
                                individuals whose disabilities 
                                occur in plan years beginning 
                                on or after such date.
                                  ``(II) Special rule for 
                                disabilities occurring after 
                                1994.--In the case of 
                                disabilities occurring in plan 
                                years beginning after December 
                                31, 1994, the tables under 
                                subclause (I) shall apply only 
                                with respect to individuals 
                                described in such subclause who 
                                are disabled within the meaning 
                                of title II of the Social 
                                Security Act and the 
                                regulations thereunder.
                          ``(vi) Periodic review.--The 
                        Secretary shall periodically (at least 
                        every 5 years) review any tables in 
                        effect under this subparagraph and 
                        shall, to the extent the Secretary 
                        determines necessary, by regulation 
                        update the tables to reflect the actual 
                        experience of pension plans and 
                        projected trends in such experience.
                  ``(E) Required change of interest rate.--For 
                purposes of determining a plan's current 
                liability for purposes of this paragraph--
                          ``(i) In general.--If any rate of 
                        interest used under the plan under 
                        subsection (b)(6) to determine cost is 
                        not within the permissible range, the 
                        plan shall establish a new rate of 
                        interest within the permissible range.
                          ``(ii) Permissible range.--For 
                        purposes of this subparagraph--
                                  ``(I) In general.--Except as 
                                provided in subclause (II), the 
                                term `permissible range' means 
                                a rate of interest which is not 
                                more than 5 percent above, and 
                                not more than 10 percent below, 
                                the weighted average of the 
                                rates of interest on 30-year 
                                Treasury securities during the 
                                4-year period ending on the 
                                last day before the beginning 
                                of the plan year.
                                  ``(II) Secretarial 
                                authority.--If the Secretary 
                                finds that the lowest rate of 
                                interest permissible under 
                                subclause (I) is unreasonably 
                                high, the Secretary may 
                                prescribe a lower rate of 
                                interest, except that such rate 
                                may not be less than 80 percent 
                                of the average rate determined 
                                under such subclause.
                          ``(iii) Assumptions.--Notwithstanding 
                        paragraph (3)(A), the interest rate 
                        used under the plan shall be--
                                  ``(I) determined without 
                                taking into account the 
                                experience of the plan and 
                                reasonable expectations, but
                                  ``(II) consistent with the 
                                assumptions which reflect the 
                                purchase rates which would be 
                                used by insurance companies to 
                                satisfy the liabilities under 
                                the plan.
          ``(7) Annual valuation.--
                  ``(A) In general.--For purposes of this 
                section, a determination of experience gains 
                and losses and a valuation of the plan's 
                liability shall be made not less frequently 
                than once every year, except that such 
                determination shall be made more frequently to 
                the extent required in particular cases under 
                regulations prescribed by the Secretary.
                  ``(B) Valuation date.--
                          ``(i) Current year.--Except as 
                        provided in clause (ii), the valuation 
                        referred to in subparagraph (A) shall 
                        be made as of a date within the plan 
                        year to which the valuation refers or 
                        within one month prior to the beginning 
                        of such year.
                          ``(ii) Use of prior year valuation.--
                        The valuation referred to in 
                        subparagraph (A) may be made as of a 
                        date within the plan year prior to the 
                        year to which the valuation refers if, 
                        as of such date, the value of the 
                        assets of the plan are not less than 
                        100 percent of the plan's current 
                        liability (as defined in paragraph 
                        (6)(D) without regard to clause (iv) 
                        thereof).
                          ``(iii) Adjustments.--Information 
                        under clause (ii) shall, in accordance 
                        with regulations, be actuarially 
                        adjusted to reflect significant 
                        differences in participants.
                          ``(iv) Limitation.--A change in 
                        funding method to use a prior year 
                        valuation, as provided in clause (ii), 
                        may not be made unless as of the 
                        valuation date within the prior plan 
                        year, the value of the assets of the 
                        plan are not less than 125 percent of 
                        the plan's current liability (as 
                        defined in paragraph (6)(D) without 
                        regard to clause (iv) thereof).
          ``(8) Time when certain contributions deemed made.--
        For purposes of this section, any contributions for a 
        plan year made by an employer after the last day of 
        such plan year, but not later than two and one-half 
        months after such day, shall be deemed to have been 
        made on such last day. For purposes of this 
        subparagraph, such two and one-half month period may be 
        extended for not more than six months under regulations 
        prescribed by the Secretary.
          ``(9) Interest rule for waivers and extensions.--The 
        interest rate applicable for any plan year for purposes 
        of computing the amortization charge described in 
        subsection (b)(2)(C) and in connection with an 
        extension granted under subsection (d) shall be the 
        greater of--
                  ``(A) 150 percent of the Federal mid-term 
                rate (as in effect under section 1274 for the 
                1st month of such plan year), or
                  ``(B) the rate of interest used under the 
                plan for determining costs.
  ``(d) Extension of Amortization Periods for Multiemployer 
Plans.--In the case of a multiemployer plan--
          ``(1) Extension.--The period of years required to 
        amortize any unfunded liability (described in any 
        clause of subsection (b)(2)(B)) of any multiemployer 
        plan shall be extended by the Secretary for a period of 
        time (not in excess of 5 years) if it is demonstrated 
        to the Secretary that--
                  ``(A) absent the extension, the plan would 
                have an accumulated funding deficiency in any 
                of the next 10 plan years,
                  ``(B) the plan sponsor has adopted a plan to 
                improve the plan's funding status, and
                  ``(C) taking into account the extension, the 
                plan is projected to have sufficient assets to 
                timely pay its expected benefit liabilities and 
                other anticipated expenditures.
          ``(2) Additional extension.--The period of years 
        required to amortize any unfunded liability (described 
        in any clause of subsection (b)(2)(B)) of any 
        multiemployer plan may be extended (in addition to any 
        extension under paragraph (1)) by the Secretary for a 
        period of time (not in excess of 5 years) if the 
        Secretary determines that such extension would carry 
        out the purposes of the Employee Retirement Income 
        Security Act of 1974 and would provide adequate 
        protection for participants under the plan and their 
        beneficiaries and if the Secretary determines that the 
        failure to permit such extension would--
                  ``(A) result in--
                          ``(i) a substantial risk to the 
                        voluntary continuation of the plan, or
                          ``(ii) a substantial curtailment of 
                        pension benefit levels or employee 
                        compensation, and
                  ``(B) be adverse to the interests of plan 
                participants in the aggregate.
          ``(3) Advance notice.--
                  ``(A) In general.--The Secretary shall, 
                before granting an extension under this 
                section, require each applicant to provide 
                evidence satisfactory to the Secretary that the 
                applicant has provided notice of the filing of 
                the application for such extension to each 
                affected party (as defined in section 
                4001(a)(21) of the Employee Retirement Income 
                Security Act of 1974) with respect to the 
                affected plan. Such notice shall include a 
                description of the extent to which the plan is 
                funded for benefits which are guaranteed under 
                title IV of such Act and for benefit 
                liabilities.
                  ``(B) Consideration of relevant 
                information.--The Secretary shall consider any 
                relevant information provided by a person to 
                whom notice was given under paragraph (1).''.
  (b) Conforming Amendments.--
          (1) Section 418(b)(2) of such Code is amended--
                  (A) by striking ``section 412(b)(2)'' in 
                subparagraph (A) and inserting ``section 
                431(b)(2)'', and
                  (B) by striking ``section 412(b)(3)(B)'' in 
                subparagraph (B) and inserting ``section 
                431(b)(3)(B)''.
          (2) Section 418B of such Code is amended--
                  (A) by striking ``section 412(b)(2)(A) or 
                (B)'' in subsection (d)(1)(B) and inserting 
                ``section 431(b)(2)(A) or (B)'',
                  (B) by striking ``section 412(c)(8)'' in 
                subsection (e) and inserting ``section 
                412(d)(2)'', and
                  (C) by striking ``section 412(c)(3)'' in 
                subsection (g) and inserting ``section 
                431(c)(3)''.
          (3) Section 418D(a)(2) of such Code is amended--
                  (A) by striking ``section 412(c)(8)'' and 
                inserting ``section 412(d)(2)'', and
                  (B) by striking ``section 412(c)(10)'' and 
                inserting ``section 431(c)(8)''.
  (c) Clerical Amendment.--The table of sections for subpart A 
of part III of subchapter D of chapter 1 of such Code is 
amended by adding after the item relating to section 430 the 
following new item:

``Sec. 431. Minimum funding standards for multiemployer plans.''.

  (d) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2006.

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

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

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

  ``(a) Annual Certification by Plan Actuary.--
          ``(1) In general.--During the 90-day period beginning 
        on first day of each plan year of a multiemployer plan, 
        the plan actuary shall certify to the Secretary whether 
        or not the plan is in endangered status for such plan 
        year and whether or not the plan is in critical status 
        for such plan year.
          ``(2) Actuarial projections of assets and 
        liabilities.--
                  ``(A) In general.--In making the 
                determinations under paragraph (1), the plan 
                actuary shall make projections under 
                subsections (b)(2) and (c)(2) for the current 
                and succeeding plan years, using reasonable 
                actuarial assumptions and methods, of the 
                current value of the assets of the plan and the 
                present value of all liabilities to 
                participants and beneficiaries under the plan 
                for the current plan year as of the beginning 
                of such year, as based on the actuarial 
                statement prepared for the preceding plan year 
                under section 103(d) of the Employee Retirement 
                Income Security Act of 1974.
                  ``(B) Determinations of future 
                contributions.--Any such actuarial projection 
                of plan assets shall assume--
                          ``(i) reasonably anticipated employer 
                        and employee contributions for the 
                        current and succeeding plan years, 
                        assuming that the terms of the one or 
                        more collective bargaining agreements 
                        pursuant to which the plan is 
                        maintained for the current plan year 
                        continue in effect for succeeding plan 
                        years, or
                          ``(ii) that employer and employee 
                        contributions for the most recent plan 
                        year will continue indefinitely, but 
                        only if the plan actuary determines 
                        there have been no significant 
                        demographic changes that would make 
                        continued application of such terms 
                        unreasonable.
          ``(3) Presumed status in absence of timely actuarial 
        certification.--If certification under this subsection 
        is not made before the end of the 90-day period 
        specified in paragraph (1), the plan shall be presumed 
        to be in critical status for such plan year until such 
        time as the plan actuary makes a contrary 
        certification.
          ``(4) Notice.--In any case in which a multiemployer 
        plan is certified to be in endangered status under 
        paragraph (1) or enters into critical status, the plan 
        sponsor shall, not later than 30 days after the date of 
        the certification or entry, provide notification of the 
        endangered or critical status to the participants and 
        beneficiaries, the bargaining parties, the Pension 
        Benefit Guaranty Corporation, the Secretary of the 
        Treasury, and the Secretary of Labor.
  ``(b) Funding Rules for Multiemployer Plans in Endangered 
Status.--
          ``(1) In general.--In any case in which a 
        multiemployer plan is in endangered status for a plan 
        year and no funding improvement plan under this 
        subsection with respect to such multiemployer plan is 
        in effect for the plan year, the plan sponsor shall, in 
        accordance with this subsection, amend the 
        multiemployer plan to include a funding improvement 
        plan upon approval thereof by the bargaining parties 
        under this subsection. The amendment shall be adopted 
        not later than 240 days after the date on which the 
        plan is certified to be in endangered status under 
        subsection (a)(1).
          ``(2) Endangered status.--A multiemployer plan is in 
        endangered status for a plan year if, as determined by 
        the plan actuary under subsection (a)--
                  ``(A) the plan's funded percentage for such 
                plan year is less than 80 percent, or
                  ``(B) the plan has an accumulated funding 
                deficiency for such plan year under section 431 
                or is projected to have such an accumulated 
                funding deficiency for any of the 6 succeeding 
                plan years, taking into account any extension 
                of amortization periods under section 431(d).
          ``(3) Funding improvement plan.--
                  ``(A) Benchmarks.--A funding improvement plan 
                shall consist of amendments to the plan 
                formulated to provide, under reasonable 
                actuarial assumptions, for the attainment, 
                during the funding improvement period under the 
                funding improvement plan, of the following 
                benchmarks:
                          ``(i) Increase in funded 
                        percentage.--An increase in the plan's 
                        funded percentage such that--
                                  ``(I) the difference between 
                                100 percent and the plan's 
                                funded percentage for the last 
                                year of the funding improvement 
                                period, is not more than
                                  ``(II) \2/3\ of the 
                                difference between 100 percent 
                                and the plan's funded 
                                percentage for the first year 
                                of the funding improvement 
                                period.
                          ``(ii) Avoidance of accumulated 
                        funding deficiencies.--No accumulated 
                        funding deficiency for any plan year 
                        during the funding improvement period 
                        (taking into account any extension of 
                        amortization periods under section 
                        431(d)).
                  ``(B) Funding improvement period.--The 
                funding improvement period for any funding 
                improvement plan adopted pursuant to this 
                subsection is the 10-year period beginning on 
                the earlier of--
                          ``(i) the second anniversary of the 
                        date of the adoption of the funding 
                        improvement plan, or
                          ``(ii) the first day of the first 
                        plan year of the multiemployer plan 
                        following the plan year in which occurs 
                        the first date after the day of the 
                        certification as of which collective 
                        bargaining agreements covering on the 
                        day of such certification at least 75 
                        percent of active participants in such 
                        multiemployer plan have expired.
                  ``(C) Special rules for certain seriously 
                underfunded plans.--
                          ``(i) In the case of a plan in which 
                        the funded percentage of a plan for the 
                        plan year is 70 percent or less, 
                        subparagraph (A)(i)(II) shall be 
                        applied by substituting `\4/5\' for 
                        `\2/3\' and subparagraph (B) shall be 
                        applied by substituting `the 15-year 
                        period' for `the 10-year period'.
                          ``(ii) In the case of a plan in which 
                        the funded percentage of a plan for the 
                        plan year is more than 70 percent but 
                        less than 80 percent, and--
                                  ``(I) the plan actuary 
                                certifies within 30 days after 
                                certification under subsection 
                                (a)(1) that the plan is not 
                                able to attain the increase 
                                described in subparagraph 
                                (A)(i) over the period 
                                described in subparagraph (B), 
                                and
                                  ``(II) the plan year is prior 
                                to the day described in 
                                subparagraph (B)(ii),
                        subparagraph (A)(i)(II) shall be 
                        applied by substituting `\4/5\' for 
                        `\2/3\' and subparagraph (B) shall be 
                        applied by substituting `the 15-year 
                        period' for `the 10-year period'.
                          ``(iii) For any plan year following 
                        the year described in clause (ii)(II), 
                        subparagraph (A)(i)(II) and 
                        subparagraph (B) shall apply, except 
                        that for each plan year ending after 
                        such date for which the plan actuary 
                        certifies (at the time of the annual 
                        certification under subsection (a)(1) 
                        for such plan year) that the plan is 
                        not able to attain the increase 
                        described in subparagraph (A)(i) over 
                        the period described in subparagraph 
                        (B), subparagraph (B) shall be applied 
                        by substituting `the 15-year period' 
                        for `the 10-year period'.
                  ``(D) Reporting.--A summary of any funding 
                improvement plan or modification thereto 
                adopted during any plan year, together with 
                annual updates regarding the funding ratio of 
                the plan, shall be included in the annual 
                report for such plan year under section 104(a) 
                of the Employee Retirement Income Security Act 
                of 1974 and in the summary annual report 
                described in section 104(b)(3) of such Act.
          ``(4) Development of funding improvement plan.--
                  ``(A) Actions by plan sponsor pending 
                approval.--Pending the approval of a funding 
                improvement plan under this paragraph, the plan 
                sponsor shall take all reasonable actions, 
                consistent with the terms of the plan and 
                applicable law, necessary to ensure--
                          ``(i) an increase in the plan's 
                        funded percentage, and
                          ``(ii) postponement of an accumulated 
                        funding deficiency for at least 1 
                        additional plan year.
                Such actions include applications for 
                extensions of amortization periods under 
                section 431(d), use of the shortfall funding 
                method in making funding standard account 
                computations, amendments to the plan's benefit 
                structure, reductions in future benefit 
                accruals, and other reasonable actions 
                consistent with the terms of the plan and 
                applicable law.
                  ``(B) Recommendations by plan sponsor.--
                          ``(i) In general.--During the period 
                        of 90 days following the date on which 
                        a multiemployer plan is certified to be 
                        in endangered status, the plan sponsor 
                        shall develop and provide to the 
                        bargaining parties alternative 
                        proposals for revised benefit 
                        structures, contribution structures, or 
                        both, which, if adopted as amendments 
                        to the plan, may be reasonably expected 
                        to meet the benchmarks described in 
                        paragraph (3)(A). Such proposals shall 
                        include--
                                  ``(I) at least one proposal 
                                for reductions in the amount of 
                                future benefit accruals 
                                necessary to achieve the 
                                benchmarks, assuming no 
                                amendments increasing 
                                contributions under the plan 
                                (other than amendments 
                                increasing contributions 
                                necessary to achieve the 
                                benchmarks after amendments 
                                have reduced future benefit 
                                accruals to the maximum extent 
                                permitted by law), and
                                  ``(II) at least one proposal 
                                for increases in contributions 
                                under the plan necessary to 
                                achieve the benchmarks, 
                                assuming no amendments reducing 
                                future benefit accruals under 
                                the plan.
                          ``(ii) Requests by bargaining 
                        parties.--Upon the request of any 
                        bargaining party who--
                                  ``(I) employs at least 5 
                                percent of the active 
                                participants, or
                                  ``(II) represents as an 
                                employee organization, for 
                                purposes of collective 
                                bargaining, at least 5 percent 
                                of the active participants,
                        the plan sponsor shall provide all such 
                        parties information as to other 
                        combinations of increases in 
                        contributions and reductions in future 
                        benefit accruals which would result in 
                        achieving the benchmarks.
                          ``(iii) Other information.--The plan 
                        sponsor may, as it deems appropriate, 
                        prepare and provide the bargaining 
                        parties with additional information 
                        relating to contribution structures or 
                        benefit structures or other information 
                        relevant to the funding improvement 
                        plan.
          ``(5) Maintenance of contributions pending approval 
        of funding improvement plan.--Pending approval of a 
        funding improvement plan by the bargaining parties with 
        respect to a multiemployer plan, the multiemployer plan 
        may not be amended so as to provide--
                  ``(A) a reduction in the level of 
                contributions for participants who are not in 
                pay status,
                  ``(B) a suspension of contributions with 
                respect to any period of service, or
                  ``(C) any new direct or indirect exclusion of 
                younger or newly hired employees from plan 
                participation.
          ``(6) Benefit restrictions pending approval of 
        funding improvement plan.--Pending approval of a 
        funding improvement plan by the bargaining parties with 
        respect to a multiemployer plan--
                  ``(A) Restrictions on lump sum and similar 
                distributions.--In any case in which the 
                present value of a participant's accrued 
                benefit under the plan exceeds $5,000, such 
                benefit may not be distributed as an immediate 
                distribution or in any other accelerated form.
                  ``(B) Prohibition on benefit increases.--
                          ``(i) In general.--No amendment of 
                        the plan which increases the 
                        liabilities of the plan by reason of 
                        any increase in benefits, any change in 
                        the accrual of benefits, or any change 
                        in the rate at which benefits become 
                        nonforfeitable under the plan may be 
                        adopted.
                          ``(ii) Exception.--Clause (i) shall 
                        not apply to any plan amendment which 
                        is required as a condition of 
                        qualification under part I of 
                        subchapter D of chapter 1 of subtitle 
                        A.
          ``(7) Default critical status if no funding 
        improvement plan adopted.--If no plan amendment 
        adopting a funding improvement plan has been adopted by 
        the end of the 240-day period referred to in subsection 
        (b)(1), the plan enters into critical status as of the 
        first day of the succeeding plan year.
          ``(8) Restrictions upon approval of funding 
        improvement plan.--Upon adoption of a funding 
        improvement plan with respect to a multiemployer plan, 
        the plan may not be amended--
                  ``(A) so as to be inconsistent with the 
                funding improvement plan, or
                  ``(B) so as to increase future benefit 
                accruals, unless the plan actuary certifies in 
                advance that, after taking into account the 
                proposed increase, the plan is reasonably 
                expected to meet the the benchmarks described 
                in paragraph (3)(A).
  ``(c) Funding Rules for Multiemployer Plans in Critical 
Status.--
          ``(1) In general.--In any case in which a 
        multiemployer plan is in critical status for a plan 
        year as described in paragraph (2) (or otherwise enters 
        into critical status under this section) and no 
        rehabilitation plan under this subsection with respect 
        to such multiemployer plan is in effect for the plan 
        year, the plan sponsor shall, in accordance with this 
        subsection, amend the multiemployer plan to include a 
        rehabilitation plan under this subsection. The 
        amendment shall be adopted not later than 240 days 
        after the date on which the plan enters into critical 
        status.
          ``(2) Critical status.--A multiemployer plan is in 
        critical status for a plan year if--
                  ``(A) the plan is in endangered status for 
                the preceding plan year and the requirements of 
                subsection (b)(1) were not met with respect to 
                the plan for such preceding plan year, or
                  ``(B) as determined by the plan actuary under 
                subsection (a), the plan is described in 
                paragraph (3).
          ``(3) Criticality description.--For purposes of 
        paragraph (2)(B), a plan is described in this paragraph 
        if the plan is described in at least one of the 
        following subparagraphs:
                  ``(A) A plan is described in this 
                subparagraph if, as of the beginning of the 
                current plan year--
                          ``(i) the funded percentage of the 
                        plan is less than 65 percent, and
                          ``(ii) the sum of--
                                  ``(I) the market value of 
                                plan assets, plus
                                  ``(II) the present value of 
                                the reasonably anticipated 
                                employer and employee 
                                contributions for the current 
                                plan year and each of the 6 
                                succeeding plan years, assuming 
                                that the terms of the one or 
                                more collective bargaining 
                                agreements pursuant to which 
                                the plan is maintained for the 
                                current plan year continue in 
                                effect for succeeding plan 
                                years,
                        is less than the present value of all 
                        nonforfeitable benefits for all 
                        participants and beneficiaries 
                        projected to be payable under the plan 
                        during the current plan year and each 
                        of the 6 succeeding plan years (plus 
                        administrative expenses for such plan 
                        years).
                  ``(B) A plan is described in this 
                subparagraph if, as of the beginning of the 
                current plan year, the sum of--
                          ``(i) the market value of plan 
                        assets, plus
                          ``(ii) the present value of the 
                        reasonably anticipated employer and 
                        employee contributions for the current 
                        plan year and each of the 4 succeeding 
                        plan years, assuming that the terms of 
                        the one or more collective bargaining 
                        agreements pursuant to which the plan 
                        is maintained for the current plan year 
                        remain in effect for succeeding plan 
                        years,
                is less than the present value of all 
                nonforfeitable benefits for all participants 
                and beneficiaries projected to be payable under 
                the plan during the current plan year and each 
                of the 4 succeeding plan years (plus 
                administrative expenses for such plan years).
                  ``(C) A plan is described in this 
                subparagraph if--
                          ``(i) as of the beginning of the 
                        current plan year, the funded 
                        percentage of the plan is less than 65 
                        percent, and
                          ``(ii) the plan has an accumulated 
                        funding deficiency for the current plan 
                        year or is projected to have an 
                        accumulated funding deficiency for any 
                        of the 4 succeeding plan years, not 
                        taking into account any extension of 
                        amortization periods under section 
                        431(d).
                  ``(D) A plan is described in this 
                subparagraph if--
                          ``(i)(I) the plan's normal cost for 
                        the current plan year, plus interest 
                        (determined at the rate used for 
                        determining cost under the plan) for 
                        the current plan year on the amount of 
                        unfunded benefit liabilities under the 
                        plan as of the last date of the 
                        preceding plan year, exceeds
                          ``(II) the present value, as of the 
                        beginning of the current plan year, of 
                        the reasonably anticipated employer and 
                        employee contributions for the current 
                        plan year,
                          ``(ii) the present value, as of the 
                        beginning of the current plan year, of 
                        nonforfeitable benefits of inactive 
                        participants is greater than the 
                        present value, as of the beginning of 
                        the current plan year, of 
                        nonforfeitable benefits of active 
                        participants, and
                          ``(iii) the plan is projected to have 
                        an accumulated funding deficiency for 
                        the current plan year or any of the 4 
                        succeeding plan years, not taking into 
                        account any extension of amortization 
                        periods under section 431(d).
                  ``(E) A plan is described in this 
                subparagraph if--
                          ``(i) the funded percentage of the 
                        plan is greater than 65 percent for the 
                        current plan year, and
                          ``(ii) the plan is projected to have 
                        an accumulated funding deficiency 
                        during any of the succeeding 3 plan 
                        years, not taking into account any 
                        extension of amortization periods under 
                        section 431(d).
          ``(4) Rehabilitation plan.--
                  ``(A) In general.--A rehabilitation plan 
                shall consist of--
                          ``(i) amendments to the plan 
                        providing (under reasonable actuarial 
                        assumptions) for measures, agreed to by 
                        the bargaining parties, to increase 
                        contributions, reduce plan expenditures 
                        (including plan mergers and 
                        consolidations), or reduce future 
                        benefit accruals, or to take any 
                        combination of such actions, determined 
                        necessary to cause the plan to cease, 
                        during the rehabilitation period, to be 
                        in critical status, or
                          ``(ii) reasonable measures to 
                        forestall possible insolvency (within 
                        the meaning of section 418E) if the 
                        plan sponsor determines that, upon 
                        exhaustion of all reasonable measures, 
                        the plan would not cease during the 
                        rehabilitation period to be in critical 
                        status.
                A rehabilitation must provide annual standards 
                for meeting the requirements of such 
                rehabilitation plan.
                  ``(B) Rehabilitation period.--The 
                rehabilitation period for any rehabilitation 
                plan adopted pursuant to this subsection is the 
                10-year period beginning on the earlier of--
                          ``(i) the second anniversary of the 
                        date of the adoption of the 
                        rehabilitation plan, or
                          ``(ii) the first day of the first 
                        plan year of the multiemployer plan 
                        following the plan year in which occurs 
                        the first date, after the date of the 
                        plan's entry into critical status, as 
                        of which collective bargaining 
                        agreements covering at least 75 percent 
                        of active participants in such 
                        multiemployer plan (determined as of 
                        such date of entry) have expired.
                  ``(C) Reporting.--A summary of any 
                rehabilitation plan or modification thereto 
                adopted during any plan year, together with 
                annual updates regarding the funding ratio of 
                the plan, shall be included in the annual 
                report for such plan year under section 104(a) 
                of the Employee Retirement Income Security Act 
                of 1974 and in the summary annual report 
                described in section 104(b)(3) of such Act.
          ``(5) Development of rehabilitation plan.--
                  ``(A) Proposals by plan sponsor.--
                          ``(i) In general.--Within 90 days 
                        after the date of entry into critical 
                        status (or the date as of which the 
                        requirements of subsection (b)(1) are 
                        not met with respect to the plan), the 
                        plan sponsor shall propose to all 
                        bargaining parties a range of 
                        alternative schedules of increases in 
                        contributions and reductions in future 
                        benefit accruals that would serve to 
                        carry out a rehabilitation plan under 
                        this subsection.
                          ``(ii) Proposal assuming no 
                        contribution increases.--Such proposals 
                        shall include, as one of the proposed 
                        schedules, a schedule of those 
                        reductions in future benefit accruals 
                        that would be necessary to cause the 
                        plan to cease to be in critical status 
                        if there were no further increases in 
                        rates of contribution to the plan.
                          ``(iii) Proposal where contributions 
                        are necessary.--If the plan sponsor 
                        determines that the plan will not cease 
                        to be in critical status during the 
                        rehabilitation period unless the plan 
                        is amended to provide for an increase 
                        in contributions, the plan sponsor's 
                        proposals shall include a schedule of 
                        those increases in contribution rates 
                        that would be necessary to cause the 
                        plan to cease to be in critical status 
                        if future benefit accruals were reduced 
                        to the maximum extent permitted by law.
                  ``(B) Requests for additional schedules.--
                Upon the request of any bargaining party who--
                          ``(i) employs at least 5 percent of 
                        the active participants, or
                          ``(ii) represents as an employee 
                        organization, for purposes of 
                        collective bargaining, at least 5 
                        percent of active participants,
                the plan sponsor shall include among the 
                proposed schedules such schedules of increases 
                in contributions and reductions in future 
                benefit accruals as may be specified by the 
                bargaining parties.
                  ``(C) Subsequent amendments.--Upon the 
                adoption of a schedule of increases in 
                contributions or reductions in future benefit 
                accruals as part of the rehabilitation plan, 
                the plan sponsor may amend the plan thereafter 
                to update the schedule to adjust for any 
                experience of the plan contrary to past 
                actuarial assumptions, except that such an 
                amendment may be made not more than once in any 
                3-year period.
                  ``(D) Allocation of reductions in future 
                benefit accruals.--Any schedule containing 
                reductions in future benefit accruals forming a 
                part of a rehabilitation plan shall be 
                applicable with respect to any group of active 
                participants who are employed by any bargaining 
                party (as an employer obligated to contribute 
                under the plan) in proportion to the extent to 
                which increases in contributions under such 
                schedule apply to such bargaining party.
                  ``(E) Limitation on reduction in rates of 
                future accruals.--Any schedule proposed under 
                this paragraph shall not reduce the rate of 
                future accruals below the lower of--
                          ``(i) a monthly benefit equal to 1 
                        percent of the contributions required 
                        to be made with respect to a 
                        participant or the equivalent standard 
                        accrual rate for a participant or group 
                        of participants under the collective 
                        bargaining agreements in effect as of 
                        the first day of the plan year in which 
                        the plan enters critical status, or
                          ``(ii) if lower, the accrual rate 
                        under the plan on such date.
                The equivalent standard accrual rate shall be 
                determined by the trustees based on the 
                standard or average contribution base units 
                that they determine to be representative for 
                active participants and such other factors as 
                they determine to be relevant.
                  ``(F) Protection of restored rates of 
                accrual.--
                          ``(i) In general.--Any schedule 
                        proposed under this paragraph shall not 
                        reduce the rate of future accruals 
                        below any restored accrual rate.
                          ``(ii) Restored accrual rate.--For 
                        purposes of clause (i), the term 
                        `restored accrual rate' means a rate of 
                        benefit accruals which was reduced and 
                        subsequently restored before entry of 
                        the plan into critical status.
          ``(6) Maintenance of contributions and restrictions 
        on benefits pending adoption of rehabilitation plan.--
        The rules of paragraphs (5) and (6) of subsection (b) 
        shall apply for purposes of this subsection by 
        substituting the term `rehabilitation plan' for 
        `funding improvement plan'.
          ``(7) Special rules.--
                  ``(A) Automatic employer surcharge.--
                          ``(i) 5 percent and 10 percent 
                        surcharge.--For the first plan year in 
                        which the plan is in critical status, 
                        each employer otherwise obligated to 
                        make a contribution for that plan year 
                        shall be obligated to pay to the plan a 
                        surcharge equal to 5 percent of the 
                        contribution otherwise required under 
                        the respective collective bargaining 
                        agreement (or other agreement pursuant 
                        to which the employer contributes). For 
                        each consecutive plan year thereafter 
                        in which the plan is in critical 
                        status, the surcharge shall be 10 
                        percent of the contribution otherwise 
                        required under the respective 
                        collective bargaining agreement (or 
                        other agreement pursuant to which the 
                        employer contributes).
                          ``(ii) Enforcement of surcharge.--The 
                        surcharges under clause (i) shall be 
                        due and payable on the same schedule as 
                        the contributions on which they are 
                        based. Any failure to make a surcharge 
                        payment shall be treated as a 
                        delinquent contribution under section 
                        515 of the Employee Retirement Income 
                        Security Act of 1974 and shall be 
                        enforceable as such.
                          ``(iii) Surcharge to terminate upon 
                        cba renegotiation.--The surcharge under 
                        this paragraph shall cease to be 
                        effective with respect to employees 
                        covered by a collective bargaining 
                        agreement, beginning on the date on 
                        which that agreement is renegotiated to 
                        include--
                                  ``(I) a schedule of benefits 
                                and contributions published by 
                                the trustees pursuant to the 
                                plan's rehabilitation plan, or
                                  ``(II) otherwise collectively 
                                bargained benefit changes.
                          ``(iv) Surcharge not to apply until 
                        employer receives 30-day notice.--The 
                        surcharge under this subparagraph shall 
                        not apply to an employer until 30 days 
                        after the employer has been notified by 
                        the trustees that the plan is in 
                        critical status and that the surcharge 
                        is in effect.
                          ``(v) Surcharge not to generate 
                        increased benefit accruals.--
                        Notwithstanding any provision of a plan 
                        to the contrary, the amount of any 
                        surcharge shall not be the basis for 
                        any benefit accruals under the plan.
                  ``(B) Benefit adjustments.--
                          ``(i) In general.--The trustees shall 
                        make appropriate reductions, if any, to 
                        adjustable benefits based upon the 
                        outcome of collective bargaining over 
                        the schedules provided under paragraph 
                        (5).
                          ``(ii) Retiree protection.--Except as 
                        provided in subparagraph (C), the 
                        trustees of a plan in critical status 
                        may not reduce adjustable benefits of 
                        any participant or beneficiary who was 
                        in pay status at least one year before 
                        the first day of the first plan year in 
                        which the plan enters into critical 
                        status.
                          ``(iii) Trustee flexibility.--The 
                        trustees shall include in the schedules 
                        provided to the bargaining parties an 
                        allowance for funding the benefits of 
                        participants with respect to whom 
                        contributions are not currently 
                        required to be made, and shall reduce 
                        their benefits to the extent permitted 
                        under this title and considered 
                        appropriate based on the plan's then 
                        current overall funding status and its 
                        future prospects in light of the 
                        results of the parties' negotiations.
                  ``(C) Adjustable benefit defined.--For 
                purposes of this paragraph, the term 
                `adjustable benefit' means--
                          ``(i) benefits, rights, and features, 
                        such as post-retirement death benefits, 
                        60-month guarantees, disability 
                        benefits not yet in pay status, and 
                        similar benefits,
                          ``(ii) retirement-type subsidies, 
                        early retirement benefits, and benefit 
                        payment options (other than the 50 
                        percent qualified joint-and-survivor 
                        benefit and single life annuity), and
                          ``(iii) benefit increases that would 
                        not be eligible for a guarantee under 
                        section 4022A of the Employee 
                        Retirement Income Security Act of 1974 
                        on the first day of the plan year in 
                        which the plan enters into critical 
                        status because they were adopted, or if 
                        later, took effect less than 60 months 
                        before reorganization.
                  ``(D) Normal retirement benefits protected.--
                Nothing in this paragraph shall be construed to 
                permit a plan to reduce the level of a 
                participant's accrued benefit payable at normal 
                retirement age which is not an adjustable 
                benefit.
                  ``(E) Adjustments disregarded in withdrawal 
                liability determination.--
                          ``(i) Benefit reductions.--Any 
                        benefit reductions under this paragraph 
                        shall be disregarded in determining a 
                        plan's unfunded vested benefits for 
                        purposes of determining an employer's 
                        withdrawal liability under section 4201 
                        of the Employee Retirement Income 
                        Security Act of 1974.
                          ``(ii) Surcharges.--Any surcharges 
                        under this paragraph shall be 
                        disregarded in determining an 
                        employer's withdrawal liability under 
                        section 4211 of the Employee Retirement 
                        Income Security Act of 1974, except for 
                        purposes of determining the unfunded 
                        vested benefits attributable to an 
                        employer or under a modified 
                        attributable method adopted with the 
                        approval of the Pension Benefit 
                        Guaranty Corporation under subsection 
                        (c)(5) of that section.
          ``(8) Restrictions upon approval of rehabilitation 
        plan.--Upon adoption of a rehabilitation plan with 
        respect to a multiemployer plan, the plan may not be 
        amended--
                  ``(A) so as to be inconsistent with the 
                rehabilitation plan, or
                  ``(B) so as to increase future benefit 
                accruals, unless the plan actuary certifies in 
                advance that, after taking into account the 
                proposed increase, the plan is reasonably 
                expected to cease to be in critical status.
          ``(9) Implementation of default schedule upon failure 
        to adopt rehabilitation plan.--If the plan is not 
        amended by the end of the 240-day period after entry 
        into critical status to include a rehabilitation plan, 
        the plan sponsor shall amend the plan to implement the 
        schedule required by paragraph (5)(A)(ii).
          ``(10) Deemed withdrawal.--Upon the failure of any 
        employer who has an obligation to contribute under the 
        plan to make contributions in compliance with the 
        schedule adopted under paragraph (4) as part of the 
        rehabilitation plan, the failure of the employer may, 
        at the discretion of the plan sponsor, be treated as a 
        withdrawal by the employer from the plan under section 
        4203 of the Employee Retirement Income Security Act of 
        1974 or a partial withdrawal by the employer under 
        section 4205 of such Act.
          ``(11) Special rule for plan amendments.--A 
        multiemployer plan in critical status shall not fail to 
        meet the requirements of section 204(g) of the Employee 
        Retirement Income Security Act of 1974 or section 
        411(d)(6) solely by reason of the adoption by the plan 
        of an amendment necessary to meet the requirements of 
        this subsection.
  ``(d) Definitions.--For purposes of this section--
          ``(1) Bargaining party.--The term `bargaining party' 
        means, in connection with a multiemployer plan--
                  ``(A) an employer who has an obligation to 
                contribute under the plan, and
                  ``(B) an employee organization which, for 
                purposes of collective bargaining, represents 
                plan participants employed by such an employer.
          ``(2) Funded percentage.--The term `funded 
        percentage' means the percentage expressed as a ratio 
        of which--
                  ``(A) the numerator of which is the value of 
                the plan's assets, as determined under section 
                431(c)(2), and
                  ``(B) the denominator of which is the accrued 
                liability of the plan.
          ``(3) Accumulated funding deficiency.--The term 
        `accumulated funding deficiency' has the meaning 
        provided such term in section 431(a).
          ``(4) Active participant.--The term `active 
        participant' means, in connection with a multiemployer 
        plan, a participant who is in covered service under the 
        plan.
          ``(5) Inactive participant.--The term `inactive 
        participant' means, in connection with a multiemployer 
        plan, a participant who--
                  ``(A) is not in covered service under the 
                plan, and
                  ``(B) is in pay status under the plan or has 
                a nonforfeitable right to benefits under the 
                plan.
          ``(6) Pay status.--A person is in `pay status' under 
        a multiemployer plan if--
                  ``(A) at any time during the current plan 
                year, such person is a participant or 
                beneficiary under the plan and is paid an 
                early, late, normal, or disability retirement 
                benefit under the plan (or a death benefit 
                under the plan related to a retirement 
                benefit), or
                  ``(B) to the extent provided in regulations 
                of the Secretary, such person is entitled to 
                such a benefit under the plan.
          ``(7) Obligation to contribute.--The term `obligation 
        to contribute' has the meaning provided such term under 
        section 4212(a) of the Employee Retirement Income 
        Security Act of 1974.
          ``(8) Entry into critical status.--A plan shall be 
        treated as entering into critical status as of the date 
        that such plan is certified to be in critical status 
        under subsection (a)(1), is presumed to be in critical 
        status under subsection (a)(3), or enters into critical 
        status under subsection (b)(7).''.
  (b) Excise Tax on Failures to Act With Respect to 
Multiemployer Plans in Critical Status.--Section 4971 of the 
Internal Revenue Code of 1986 is amended by redesignating 
subsection (g) as subsection (h) and by inserting after 
subsection (f) the following:
  ``(g) Multiemployer Plans in Critical Status.--
          ``(1) Substitution of excise tax for initial and 
        additional tax.--In the case of a multiemployer plan to 
        which section 432(c) applies for a period, subsections 
        (a) and (b) shall not apply with respect to such 
        period.
          ``(2) Failure to adopt rehabilitation plan.--
                  ``(A) In general.--In the case of a 
                multiemployer plan to which section 432(c) 
                applies, there is hereby imposed a tax on the 
                failure of such plan to adopt a rehabilitation 
                plan.
                  ``(B) Amount of tax.--The amount of the tax 
                imposed under subparagraph (A) with respect to 
                any plan sponsor shall be the greater of--
                          ``(i) the amount of tax imposed under 
                        subsection (a) (determined without 
                        regard to this subsection), or
                          ``(ii) the amount equal to $1,100 
                        multiplied by the number of days in the 
                        period beginning on the first day of 
                        the 240-day period described in section 
                        432(c)(1) and ending on the day on 
                        which the rehabilitation plan is 
                        adopted.
                  ``(C) Liability for tax.--
                          ``(i) In general.--The tax imposed by 
                        subparagraph (A) shall be paid by each 
                        plan sponsor.
                          ``(ii) Plan sponsor.--For purposes of 
                        clause (i), the term `plan sponsor' in 
                        the case of a multiemployer plan means 
                        the association, committee, joint board 
                        of trustees, or other similar group of 
                        representatives of the parties who 
                        establish or maintain the plan.
          ``(3) Failure to comply with rehabilitation plan.--
                  ``(A) In general.--In the case of a 
                multiemployer plan to which section 432(c) 
                applies, there is hereby imposed a tax on each 
                failure to make a required contribution under 
                the rehabilitation plan within the time 
                required under such plan.
                  ``(B) Amount of tax.--The amount of the tax 
                imposed by subparagraph (A) shall be, with 
                respect to each required contribution under the 
                rehabilitation plan, the amount equal to the 
                excess of the amount of such required 
                contribution over the amount contributed.
                  ``(C) Liability for tax.--The tax imposed by 
                subparagraph (A) shall be paid by the employer 
                responsible for contributing to or under the 
                rehabilitation plan which fails to make the 
                contribution.
          ``(4) Rehabilitation plan.--For purposes of this 
        subsection, the term `rehabilitation plan' means the 
        plan required to be adopted under section 432(c).''.
  (c) Clerical Amendment.--The table of sections for subpart A 
of part III of subchapter D of chapter 1 of such Code is 
amended by adding at the end the following new item:

``Sec. 432. Additional funding rules for multiemployer plans in 
          endangered status or critical status.''.

  (d) Effective Date.--The amendments made by this section 
shall apply with respect to plan years beginning after December 
31, 2005.
  (e) Special Rule for 2006.--In the case of any plan year 
beginning in 2006, any reference in section 432 of the Internal 
Revenue Code of 1986 (as added by this section) to section 431 
of such Code (as added by this Act) shall be treated as a 
reference to the corresponding provision of such Code as in 
effect for plan years beginning in such year.

SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.

  (a) Advance Determination of Impending Insolvency Over 5 
Years.--Section 418E(d)(1) of the Internal Revenue Code of 1986 
is amended--
          (1) by striking ``3 plan years'' the second place it 
        appears and inserting ``5 plan years'', and
          (2) by adding at the end the following new sentence: 
        ``If the plan sponsor makes such a determination that 
        the plan will be insolvent in any of the next 5 plan 
        years, the plan sponsor shall make the comparison under 
        this paragraph at least annually until the plan sponsor 
        makes a determination that the plan will not be 
        insolvent in any of the next 5 plan years.''.
  (b) Effective Date.--The amendments made by this section 
shall apply with respect to determinations made in plan years 
beginning after December 31, 2005.

                      TITLE III--OTHER PROVISIONS

SEC. 301. INTEREST RATE FOR 2006 FUNDING REQUIREMENTS.

  (a) Amendments to Employee Retirement Income Security Act of 
1974.--
          (1) In general.--Subclause (II) of section 
        302(b)(5)(B)(ii) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1082(b)(5)(B)(ii)) is 
        amended--
                  (A) by striking ``January 1, 2006'' and 
                inserting ``January 1, 2007'', and
                  (B) by striking ``and 2005'' in the heading 
                and inserting ``, 2005, and 2006''.
          (2) Current liability.--Subclause (IV) of section 
        302(d)(7)(C)(i) of such Act (29 U.S.C. 
        1082(d)(7)(C)(i)) is amended--
                  (A) by striking ``or 2005'' and inserting ``, 
                2005, or 2006'', and
                  (B) by striking ``and 2005'' in the heading 
                and inserting ``, 2005, and 2006''.
  (b) Amendments to Internal Revenue Code of 1986.--
          (1) In general.--Subclause (II) of section 
        412(b)(5)(B)(ii) of the Internal Revenue Code of 1986 
        is amended--
                  (A) by striking ``January 1, 2006'' and 
                inserting ``January 1, 2007'', and
                  (B) by striking ``and 2005'' in the heading 
                and inserting ``, 2005, and 2006''.
          (2) Current liability.--Subclause (IV) of section 
        412(l)(7)(C)(i) of such Code is amended--
                  (A) by striking ``or 2005'' and inserting ``, 
                2005, or 2006'', and
                  (B) by striking ``and 2005'' in the heading 
                and inserting ``, 2005, and 2006''.
  (c) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2005.

SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP SUM 
                    DISTRIBUTIONS.

  (a) Amendment to Employee Retirement Income Security Act of 
1974.--Paragraph (3) of section 205(g) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1055(g)(3)) 
is amended to read as follows:
  ``(3)(A) For purposes of paragraphs (1) and (2), the present 
value shall not be less than the present value calculated by 
using the applicable mortality table and the applicable 
interest rate.
  ``(B) For purposes of subparagraph (A)--
          ``(i) The term `applicable mortality table' means a 
        mortality table, modified as appropriate by the 
        Secretary of the Treasury, based on the mortality table 
        specified for the plan year under section 303(h)(3).
          ``(ii) The term `applicable interest rate' means the 
        adjusted first, second, and third segment rates applied 
        under rules similar to the rules of section 
        303(h)(2)(C) for the month before the date of the 
        distribution or such other time as the Secretary of the 
        Treasury may by regulations prescribe.
          ``(iii) For purposes of clause (ii), the adjusted 
        first, second, and third segment rates are the first, 
        second, and third segment rates which would be 
        determined under section 303(h)(2)(C) if--
                  ``(I) section 303(h)(2)(D)(i) were applied by 
                substituting `the yields' for `a 3-year 
                weighted average of yields',
                  ``(II) section 303(h)(2)(G)(i)(II) were 
                applied by substituting `section 
                205(g)(3)(A)(ii)(II)' for `section 
                302(b)(5)(B)(ii)(II)', and
                  ``(III) the applicable percentage under 
                section 303(h)(2)(G) were determined in 
                accordance with the following table:


    ``In the case of plan years
           beginning in:                The applicable percentage is:

  2007............................  20 percent
  2008............................  40 percent
  2009............................  60 percent
  2010............................  80 percent.''.

  (b) Amendment to Internal Revenue Code of 1986.--Paragraph 
(3) of section 417(e) of the Internal Revenue Code of 1986 is 
amended to read as follows:
          ``(3) Determination of present value.--
                  ``(A) In general.--For purposes of paragraphs 
                (1) and (2), the present value shall not be 
                less than the present value calculated by using 
                the applicable mortality table and the 
                applicable interest rate.
                  ``(B) Applicable mortality table.--For 
                purposes of subparagraph (A), the term 
                `applicable mortality table' means a mortality 
                table, modified as appropriate by the 
                Secretary, based on the mortality table 
                specified for the plan year under section 
                430(h)(3).
                  ``(C) Applicable interest rate.--For purposes 
                of subparagraph (A), the term `applicable 
                interest rate' means the adjusted first, 
                second, and third segment rates applied under 
                rules similar to the rules of section 
                430(h)(2)(C) for the month before the date of 
                the distribution or such other time as the 
                Secretary may by regulations prescribe.
                  ``(D) Applicable segment rates.--For purposes 
                of subparagraph (C), the adjusted first, 
                second, and third segment rates are the first, 
                second, and third segment rates which would be 
                determined under section 430(h)(2)(C) if--
                          ``(i) section 430(h)(2)(D)(i) were 
                        applied by substituting `the yields' 
                        for `a 3-year weighted average of 
                        yields',
                          ``(ii) section 430(h)(2)(G)(i)(II) 
                        were applied by substituting `section 
                        417(e)(3)(A)(ii)(II)' for `section 
                        412(b)(5)(B)(ii)(II)', and
                          ``(iii) the applicable percentage 
                        under section 430(h)(2)(G) were 
                        determined in accordance with the 
                        following table:


    ``In the case of plan years
           beginning in:                The applicable percentage is:

  2007............................  20 percent
  2008............................  40 percent
  2009............................  60 percent
  2010............................  80 percent.''.

  (c) Effective Date.--The amendments made by this section 
shall apply with respect to plan years beginning after December 
31, 2006.

SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT LIMITATIONS TO 
                    LUMP SUM DISTRIBUTIONS.

  (a) In General.--Clause (ii) of section 415(b)(2)(E) of the 
Internal Revenue Code of 1986 is amended to read as follows:
                          ``(ii) For purposes of adjusting any 
                        benefit under subparagraph (B) for any 
                        form of benefit subject to section 
                        417(e)(3), the interest rate assumption 
                        shall not be less than the greater of--
                                  ``(I) 5.5 percent,
                                  ``(II) the rate that provides 
                                a benefit of not more than 105 
                                percent of the benefit that 
                                would be provided if the 
                                applicable interest rate (as 
                                defined in section 417(e)(3)) 
                                were the interest rate 
                                assumption, or
                                  ``(III) the rate specified 
                                under the plan.''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall apply to distributions made in years beginning after 
December 31, 2005.

SEC. 304. DISTRIBUTIONS DURING WORKING RETIREMENT.

  (a) Amendment to the Employee Retirement Income Security Act 
of 1974.--Subparagraph (A) of section 3(2) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)) is 
amended by adding at the end the following new sentence: ``A 
distribution from a plan, fund, or program shall not be treated 
as made in a form other than retirement income or as a 
distribution prior to termination of covered employment solely 
because such distribution is made to an employee who has 
attained age 62 and who is not separated from employment at the 
time of such distribution.''.
  (b) Amendment to the Internal Revenue Code of 1986.--
Subsection (a) of section 401 of the Internal Revenue Code of 
1986 is amended by inserting after paragraph (34) the following 
new paragraph:
          ``(35) Distributions during working retirement.--A 
        trust forming part of a pension plan shall not be 
        treated as failing to constitute a qualified trust 
        under this section solely because a distribution is 
        made from such trust to an employee who has attained 
        age 62 and who is not separated from employment at the 
        time of such distribution.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to distributions in plan years beginning after 
December 31, 2005.

SEC. 305. OTHER AMENDMENTS RELATING TO PROHIBITED TRANSACTIONS.

  (a) Definition of Amount Involved.--Section 502(i) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1132(i)) is amended to read as follows:
  ``(i)(1) In the case of a transaction prohibited by section 
406 by a party in interest with respect to a plan to which this 
part applies, the Secretary may assess a civil penalty against 
such party in interest. Except as provided in paragraph (2), 
the amount of such penalty may not exceed 5 percent of the 
amount involved in each such transaction for each year or part 
thereof during which the prohibited transaction continues.
  ``(2) If the transaction is not corrected (in such manner as 
the Secretary shall prescribe in regulations) within 90 days 
after notice from the Secretary (or such longer period as the 
Secretary may permit), such penalty may be in an amount not 
more than 100 percent of the amount involved.
  ``(3) For purposes of paragraph (1)--
          ``(A) Except as provided in subparagraphs (C) and 
        (D), the term `amount involved' means, with respect to 
        a prohibited transaction, the greater of--
                  ``(i) the amount of money and the fair market 
                value of the other property given, or
                  ``(ii) the amount of money and the fair 
                market value of the other property received.
          ``(B) For purposes of subparagraph (A), fair market 
        value shall be determined as of the date on which the 
        prohibited transaction occurs, except that in the case 
        described in paragraph (2) fair market value shall be 
        the highest fair market value during the period between 
        the date of the transaction and the date of correction.
          ``(C) In the case of services described in subsection 
        (b)(2) or (c)(2) of section 408, the term `amount 
        involved' means only the amount of excess compensation.
          ``(D) In the case of principal transactions 
        prohibited under section 406(a) involving securities or 
        commodities, the term `amount involved' means only the 
        amount received by the disqualified person in excess of 
        the amount such person would have received in an arm's 
        length transaction with an unrelated party as of the 
        same date.
          ``(E) For the purposes of this paragraph--
                  ``(i) the term `security' has the meaning 
                given such term by section 475(c)(2) of the 
                Internal Revenue Code of 1986 (without regard 
                to subparagraph (F)(iii) and the last sentence 
                thereof), and
                  ``(ii) the term `commodity' has the meaning 
                given such term by section 475(e)(2) of such 
                Code (without regard to subparagraph (D)(iii) 
                thereof).''.
  (b) Exemption for Block Trading.--
          (1) Amendments to employee retirement income security 
        act of 1974.--Section 408(b) of such Act (29 U.S.C. 
        1108(b)), as amended by section 601, is further amended 
        by adding at the end the following new paragraph:
          ``(15)(A) Any transaction involving the purchase or 
        sale of securities between a plan and a party in 
        interest (other than a fiduciary described in section 
        3(21)(A)(ii)) with respect to a plan if--
                  ``(i) the transaction involves a block trade,
                  ``(ii) at the time of the transaction, the 
                interest of the plan (together with the 
                interests of any other plans maintained by the 
                same plan sponsor), does not exceed 10 percent 
                of the aggregate size of the block trade, and
                  ``(iii) the terms of the transaction, 
                including the price, are at least as favorable 
                to the plan as an arm's length transaction.
          ``(B) For purposes of this paragraph, the term `block 
        trade' includes any trade which will be allocated 
        across two or more client accounts of a fiduciary.''.
          (2) Amendments to internal revenue code of 1986.--
                  (A) In general.--Subsection (d) of section 
                4975 of the Internal Revenue Code of 1986 
                (relating to exemptions) is amended by striking 
                ``or'' at the end of paragraph (15), by 
                striking the period at the end of paragraph 
                (16) and inserting ``, or'', and by adding at 
                the end the following new paragraph:
          ``(17) any transaction involving the purchase or sale 
        of securities between a plan and a party in interest 
        (other than a fiduciary described in subsection 
        (e)(3)(B)) with respect to a plan if--
                  ``(A) the transaction involves a block trade,
                  ``(B) at the time of the transaction, the 
                interest of the plan (together with the 
                interests of any other plans maintained by the 
                same plan sponsor), does not exceed 10 percent 
                of the aggregate size of the block trade, and
                  ``(C) the terms of the transaction, including 
                the price, are at least as favorable to the 
                plan as an arm's length transaction.
          ``(D) For purposes of this paragraph, the term `block 
        trade' includes any trade which will be allocated 
        across two or more client accounts of a fiduciary.''.
                  (B) Special rule relating to block trade.--
                Subsection (f) of section 4975 of such Code 
                (relating to other definitions and special 
                rules) is amended by adding at the end the 
                following new paragraph:
          ``(8) Block trade.--For purposes of subsection 
        (d)(17), the term `block trade' includes any trade 
        which will be allocated across two or more client 
        accounts of a fiduciary.''.
  (c) Bonding Relief.--Section 412(a) of such Act (29 U.S.C. 
1112(a)) is amended--
          (1) by redesignating paragraph (2) as paragraph (3);
          (2) by striking ``and'' at the end of paragraph (1); 
        and
          (3) by inserting after paragraph (1) the following 
        new paragraph:
          ``(2) no bond shall be required of an entity which is 
        subject to regulation as a broker or a dealer under 
        section 15 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78a et seq.) or an entity registered under the 
        Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
        seq.), including requirements imposed by a self-
        regulatory organization (within the meaning of section 
        3(a)(26) of such Act (15 U.S.C. 78c(a)(26)), or any 
        affiliate with respect to which the broker or dealer 
        agrees to be liable to the same extent as if they held 
        the assets directly.''.
  (d) Exemption for Electronic Communication Network.--
          (1) In general.--Section 408(b) of such Act (as 
        amended by subsection (b)) is further amended by adding 
        at the end the following:
          ``(16) Any transaction involving the purchase or sale 
        of securities, or other property (as determined in 
        regulations of the Secretary) between a plan and a 
        fiduciary or a party in interest if--
                  ``(A) the transaction is executed through an 
                exchange, electronic communication network, 
                alternative trading system, or similar 
                execution system or trading venue subject to 
                regulation and oversight by--
                          ``(i) the applicable Federal 
                        regulating entity, or
                          ``(ii) such other applicable 
                        governmental regulating agency as the 
                        Secretary may determine appropriate in 
                        the case of any fiduciary or party in 
                        interest or class of fiduciaries or 
                        parties in interest or any transaction 
                        or class of transactions,
                  ``(B) neither the execution system nor the 
                parties to the transaction take into account 
                the identity of the parties in the execution of 
                trades,
                  ``(C) the transaction is effected pursuant to 
                rules designed to match purchases and sales at 
                the best price available through the execution 
                system,
                  ``(D) the price and compensation associated 
                with the purchase and sale are not greater than 
                an arm's length transaction with an unrelated 
                party,
                  ``(E) if the fiduciary or party in interest 
                has an ownership interest in the system or 
                venue described in subparagraph (A), the system 
                or venue has been authorized under the plan for 
                transactions described in this paragraph, and
                  ``(F) not less than 30 days prior to the 
                initial transaction described in this paragraph 
                executed through any system or venue described 
                in subparagraph (A), the plan administrator is 
                provided written notice of the execution of 
                such transaction through such system or 
                venue.''.
          (2) Effective date.--The amendment made by this 
        subsection shall take effect 30 days after the date of 
        the enactment of this Act.
  (e) Conforming ERISA's Prohibited Transaction Provision to 
FERSA.--Section 408(b) of such Act (29 U.S.C. 1106), as amended 
by subsection (d), is further amended by adding at the end the 
following new paragraph:
          ``(17)(A) transactions described in subparagraphs 
        (A), (B), and (D) of section 406(a)(1) between a plan 
        and a party that is a party in interest (under section 
        3(14)) solely by reason of providing services, but only 
        if in connection with such transaction the plan 
        receives no less, nor pays no more, than adequate 
        consideration.
          ``(B) For purposes of this paragraph, the term 
        `adequate consideration' means--
                  ``(i) in the case of a security for which 
                there is a generally recognized market--
                          ``(I) the price of the security 
                        prevailing on a national securities 
                        exchange which is registered under 
                        section 6 of the Securities Exchange 
                        Act of 1934, taking into account 
                        factors such as the size of the 
                        transaction and marketability of the 
                        security, or
                          ``(II) if the security is not traded 
                        on such a national securities exchange, 
                        a price not less favorable to the plan 
                        than the offering price for the 
                        security as established by the current 
                        bid and asked prices quoted by persons 
                        independent of the issuer and of the 
                        party in interest, taking into account 
                        factors such as the size of the 
                        transaction and marketability of the 
                        security, and
                  ``(ii) in the case of an asset other than a 
                security for which there is a generally 
                recognized market, the fair market value of the 
                asset as determined in good faith by a 
                fiduciary or fiduciaries in accordance with 
                regulations prescribed by the Secretary.''.
  (f) Relief for Foreign Exchange Transactions.--Section 408(b) 
of such Act (as amended by the preceding provisions of this 
section) is further amended by adding at the end the following 
new paragraph:
          ``(18) Any foreign exchange transactions, between a 
        bank or broker-dealer, or any affiliate of either 
        thereof, and a plan with respect to which the bank or 
        broker-dealer, or any affiliate, is a trustee, 
        custodian, fiduciary, or other party in interest, if--
                  ``(A) the transaction is in connection with 
                the purchase or sale of securities,
                  ``(B) at the time the foreign exchange 
                transaction is entered into, the terms of the 
                transaction are not less favorable to the plan 
                than the terms generally available in 
                comparable arm's length foreign exchange 
                transactions between unrelated parties, or the 
                terms afforded by the bank or the broker-dealer 
                (or any affiliate thereof) in comparable arm's-
                length foreign exchange transactions involving 
                unrelated parties, and
                  ``(C) the exchange rate used by the bank or 
                broker-dealer for a particular foreign exchange 
                transaction may not deviate by more than 3 
                percent from the interbank bid and asked rates 
                at the time of the transaction as displayed on 
                an independent service that reports rates of 
                exchange in the foreign currency market for 
                such currency.''.
  (g) Definition of Plan Asset Vehicle.--Section 3 of such Act 
(29 U.S.C. 1002) is amended by adding at the end the following 
new paragraph:
  ``(42) the term `plan assets' means plan assets as defined by 
such regulations as the Secretary may prescribe, except that 
under such regulations the assets of any entity shall not be 
treated as plan assets if, immediately after the most recent 
acquisition of any equity interest in the entity, less than 50 
percent of the total value of each class of equity interest in 
the entity is held by employee benefit plan investors. For 
purposes of determinations pursuant to this paragraph, the 
value of any equity interest owned by a person (other than such 
an employee benefit plan) who has discretionary authority or 
control with respect to the assets of the entity or any person 
who provides investment advice for a fee (direct or indirect) 
with respect to such assets, or any affiliate of such a person, 
shall be disregarded for purposes of calculating the 50 percent 
threshold. An entity shall be considered to hold plan assets 
only to the extent of the percentage of the equity interest 
owned by benefit plan investors. For purposes of this 
paragraph, the term `benefit plan investor' means an employee 
benefit plan subject to this part and any plan to which section 
4975 of the Internal Revenue Code of 1986 applies.''.

SEC. 306. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS INVOLVING 
                    SECURITIES AND COMMODITIES.

  (a) Amendment of Employee Retirement Income Security Act of 
1974.--Section 408(b) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1108(b)), as amended by 
sections 304 and 601, is further amended by adding at the end 
the following new paragraph:
          ``(19)(A) Except as provided in subparagraphs (B) and 
        (C), a transaction described in section 406(a) in 
        connection with the acquisition, holding, or 
        disposition of any security or commodity, if the 
        transaction is corrected before the end of the 
        correction period.
          ``(B) Subparagraph (A) does not apply to any 
        transaction between a plan and a plan sponsor or its 
        affiliates that involves the acquisition or sale of an 
        employer security (as defined in section 407(d)(1)) or 
        the acquisition, sale, or lease of employer real 
        property (as defined in section 407(d)(2)).
          ``(C) In the case of any fiduciary or other party in 
        interest (or any other person knowingly participating 
        in such transaction), subparagraph (A) does not apply 
        to any transaction if, at the time the transaction 
        occurs, such fiduciary or party in interest (or other 
        person) knew (or reasonably should have known) that the 
        transaction would (without regard to this paragraph) 
        constitute a violation of section 406(a).
          ``(D) For purposes of this paragraph, the term 
        `correction period' means, in connection with a 
        fiduciary or party in interest (or other person 
        knowingly participating in the transaction), the 14-day 
        period beginning on the date on which such fiduciary or 
        party in interest (or other person) discovers, or 
        reasonably should have discovered, that the transaction 
        would (without regard to this paragraph) constitute a 
        violation of section 406(a).
          ``(E) For purposes of this paragraph--
                  ``(i) The term `security' has the meaning 
                given such term by section 475(c)(2) of the 
                Internal Revenue Code of 1986 (without regard 
                to subparagraph (F)(iii) and the last sentence 
                thereof).
                  ``(ii) The term `commodity' has the meaning 
                given such term by section 475(e)(2) of such 
                Code (without regard to subparagraph (D)(iii) 
                thereof).
                  ``(iii) The term `correct' means, with 
                respect to a transaction--
                          ``(I) to undo the transaction to the 
                        extent possible and in any case to make 
                        good to the plan or affected account 
                        any losses resulting from the 
                        transaction, and
                          ``(II) to restore to the plan or 
                        affected account any profits made 
                        through the use of assets of the 
                        plan.''.
  (b) Amendment of Internal Revenue Code of 1986.--
          (1) In general.--Subsection (d) of section 4975 of 
        the Internal Revenue Code of 1986 (relating to 
        exemptions), as amended by this Act, is amended by 
        striking ``or'' at the end of paragraph (16), by 
        striking the period at the end of paragraph (17) and 
        inserting ``, or'', and by adding at the end the 
        following new paragraph:
          ``(18) except as provided in subsection (f)(9), a 
        transaction described in subparagraph (A), (B), (C), or 
        (D) of subsection (c)(1) in connection with the 
        acquisition, holding, or disposition of any security or 
        commodity, if the transaction is corrected before the 
        end of the correction period.''.
          (2) Special rules relating to correction period.--
        Subsection (f) of section 4975 of such Code (relating 
        to other definitions and special rules), as amended by 
        this Act, is amended by adding at the end the following 
        new paragraph:
          ``(9) Correction period.--
                  ``(A) In general.--For purposes of subsection 
                (d)(18), the term `correction period' means the 
                14-day period beginning on the date on which 
                the disqualified person discovers, or 
                reasonably should have discovered, that the 
                transaction would (without regard to this 
                paragraph and subsection (d)(18)) constitute a 
                prohibited transaction.
                  ``(B) Exceptions.--
                          ``(i) Employer securities.--
                        Subsection (d)(18) does not apply to 
                        any transaction between a plan and a 
                        plan sponsor or its affiliates that 
                        involves the acquisition or sale of an 
                        employer security (as defined in 
                        section 407(d)(1)) or the acquisition, 
                        sale, or lease of employer real 
                        property (as defined in section 
                        407(d)(2)).
                          ``(ii) Knowing prohibited 
                        transaction.--In the case of any 
                        disqualified person, subsection (d)(18) 
                        does not apply to a transaction if, at 
                        the time the transaction is entered 
                        into, the disqualified person knew (or 
                        reasonably should have known) that the 
                        transaction would (without regard to 
                        this paragraph) constitute a prohibited 
                        transaction.
                  ``(C) Abatement of tax where there is a 
                correction.--If a transaction is not treated as 
                a prohibited transaction by reason of 
                subsection (d)(18), then no tax under 
                subsection (a) and (b) shall be assessed with 
                respect to such transaction, and if assessed 
                the assessment shall be abated, and if 
                collected shall be credited or refunded as an 
                overpayment.
                  ``(D) Definitions.--For purposes of this 
                paragraph and subsection (d)(18)--
                          ``(i) Security.--The term `security' 
                        has the meaning given such term by 
                        section 475(c)(2) (without regard to 
                        subparagraph (F)(iii) and the last 
                        sentence thereof).
                          ``(ii) Commodity.--The term 
                        `commodity' has the meaning given such 
                        term by section 475(e)(2) (without 
                        regard to subparagraph (D)(iii) 
                        thereof).
                          ``(iii) Correct.--The term `correct' 
                        means, with respect to a transaction--
                                  ``(I) to undo the transaction 
                                to the extent possible and in 
                                any case to make good to the 
                                plan or affected account any 
                                losses resulting from the 
                                transaction, and
                                  ``(II) to restore to the plan 
                                or affected account any profits 
                                made through the use of assets 
                                of the plan.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to any transaction which the fiduciary or 
disqualified person discovers, or reasonably should have 
discovered, after the date of the enactment of this Act 
constitutes a prohibited transaction.

SEC. 307. RECOVERY BY REIMBURSEMENT OR SUBROGATION WITH RESPECT TO 
                    PROVIDED BENEFITS.

  (a) In General.--Section 502(a) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1132(a)) is amended by 
adding, after and below paragraph (9), the following new 
sentence:
``Actions described under paragraph (3) include an action by a 
fiduciary for recovery of amounts on behalf of the plan 
enforcing terms of the plan that provide a right of recovery by 
reimbursement or subrogation with respect to benefits provided 
to or for a participant or beneficiary.''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall take effect on January 1, 2006.

SEC. 308. EXERCISE OF CONTROL OVER PLAN ASSETS IN CONNECTION WITH 
                    QUALIFIED CHANGES IN INVESTMENT OPTIONS.

  (a) In General.--Section 404(c) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by 
adding at the end the following new paragraph:
  ``(4)(A) In any case in which a qualified change in 
investment options occurs in connection with an individual 
account plan, a participant or beneficiary shall not be treated 
for purposes of paragraph (1) as not exercising control over 
the assets in his account in connection with such change if the 
requirements of subparagraph (C) are met in connection with 
such change.
  ``(B) For purposes of subparagraph (A), the term `qualified 
change in investment options' means, in connection with an 
individual account plan, a change in the investment options 
offered to the participant or beneficiary under the terms of 
the plan, under which--
          ``(i) the participant's account is reallocated among 
        one or more new investment options which are offered in 
        lieu of one or more investment options offered 
        immediately prior to the effective date of the change, 
        and
          ``(ii) the characteristics of the new investment 
        options, including characteristics relating to risk and 
        rate of return, are, as of immediately after the 
        change, reasonably similar to those of the existing 
        investment options as of immediately before the change.
  ``(C) The requirements of this subparagraph are met in 
connection with a qualified change in investment options if--
          ``(i) at least 60 days prior to the effective date of 
        the change, the plan administrator furnishes written 
        notice of the change to the participants and 
        beneficiaries, including information comparing the 
        existing and new investment options and an explanation 
        that, in the absence of affirmative investment 
        instructions from the participant or beneficiary to the 
        contrary, the account of the participant or beneficiary 
        will be invested in the manner described in 
        subparagraph (B),
          ``(ii) the participant has not provided to the plan 
        administrator, in advance of the effective date of the 
        change, affirmative investment instructions contrary to 
        the change, and
          ``(iii) the investments under the plan of the 
        participant or beneficiary as in effect immediately 
        prior to the effective date of the change was the 
        product of the exercise by such participant or 
        beneficiary of control over the assets of the account 
        within the meaning of paragraph (1).''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall apply with respect to changes in investment options 
taking effect on or after January 1, 2006.

SEC. 309. CLARIFICATION OF FIDUCIARY RULES.

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

SEC. 310. GOVERNMENT ACCOUNTABILITY OFFICE PENSION FUNDING REPORT.

  (a) In General.--The Comptroller General of the Government 
Accountability Office shall transmit to the Congress a pension 
funding report not later than one year after the date of the 
enactment of this Act.
  (b) Report Content.--The pension funding report required 
under subsection (a) shall include an analysis of the 
feasibility, advantages, and disadvantages of--
          (1) requiring an employee pension benefit plan to 
        insure a portion of such plan's total investments;
          (2) requiring an employee pension benefit plan to 
        adhere to uniform solvency standards set by the Pension 
        Benefit Guaranty Corporation, which are similar to 
        those applied on a State level in the insurance 
        industry; and
          (3) amortizing a single-employer defined benefit 
        pension plan's shortfall amortization base (referred to 
        in section 303(c)(3) of the Employee Retirement Income 
        Security Act of 1974 (as amended by this Act)) over 
        various periods of not more than 7 years.

          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

SEC. 401. INCREASES IN PBGC PREMIUMS.

  (a) Flat-Rate Premiums.--Section 4006(a)(3) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) 
is amended--
          (1) by striking clause (i) of subparagraph (A) and 
        inserting the following:
          ``(i) in the case of a single-employer plan, an 
        amount equal to--
                  ``(I) for plan years beginning after December 
                31, 1990, and before January 1, 2006, $19, or
                  ``(II) for plan years beginning after 
                December 31, 2005, the amount determined under 
                subparagraph (F),
        plus the additional premium (if any) determined under 
        subparagraph (E) for each individual who is a 
        participant in such plan during the plan year;''; and
          (2) by adding at the end the following new 
        subparagraph:
  ``(F)(i) Except as otherwise provided in this subparagraph, 
for purposes of determining the annual premium rate payable to 
the corporation by a single-employer plan for basic benefits 
guaranteed under this title, the amount determined under this 
subparagraph is the greater of $30 or the adjusted amount 
determined under clause (ii).
  ``(ii) For plan years beginning after 2006, the adjusted 
amount determined under this clause is the product derived by 
multiplying $30 by the ratio of--
          ``(I) the national average wage index (as defined in 
        section 209(k)(1) of the Social Security Act) for the 
        first of the 2 calendar years preceding the calendar 
        year in which the plan year begins, to
          ``(II) the national average wage index (as so 
        defined) for 2004,
with such product, if not a multiple of $1, being rounded to 
the next higher multiple of $1 where such product is a multiple 
of $0.50 but not of $1, and to the nearest multiple of $1 in 
any other case.
  ``(iii) For purposes of determining the annual premium rate 
payable to the corporation by a single-employer plan for basic 
benefits guaranteed under this title for any plan year 
beginning after 2005 and before 2010--
          ``(I) except as provided in subclause (II), the 
        premium amount referred to in subparagraph (A)(i)(II) 
        for any such plan year is the amount set forth in 
        connection with such plan year in the following table:


   ``If the plan year begins in:               The amount is:

  2006............................  $21.20
  2007............................  $23.40
  2008............................  $25.60
  2009............................  $27.80; or

          ``(II) if the plan's funding target attainment 
        percentage for the plan year preceding the current plan 
        year was less than 80 percent, the premium amount 
        referred to in subparagraph (A)(i)(II) for such current 
        plan year is the amount set forth in connection with 
        such current plan year in the following table:


   ``If the plan year begins in:               The amount is:

  2006............................  $22.67
  2007............................  $26.33
  2008 or 2009....................  the amount provided under clause
                                     (i).

  ``(iv) For purposes of this subparagraph, the term `funding 
target attainment percentage' has the meaning provided such 
term in section 303(d)(2).''.
  (b) Premium Rate for Certain Terminated Single-Employer 
Plans.--Subsection (a) of section 4006 of such Act (29 U.S.C. 
1306) is amended by adding at the end the following:
  ``(7) Premium Rate for Certain Terminated Single-Employer 
Plans.--
          ``(A) In general.--If there is a termination of a 
        single-employer plan under clause (ii) or (iii) of 
        section 4041(c)(2)(B) or section 4042, there shall be 
        payable to the corporation, with respect to each 
        applicable 12-month period, a premium at a rate equal 
        to $1,250 multiplied by the number of individuals who 
        were participants in the plan immediately before the 
        termination date. Such premium shall be in addition to 
        any other premium under this section.
          ``(B) Special rule for plans terminated in bankruptcy 
        reorganization.--If the plan is terminated under 
        4041(c)(2)(B)(ii) or under section 4042 and, as of the 
        termination date, a person who is (as of such date) a 
        contributing sponsor of the plan or a member of such 
        sponsor's controlled group has filed or has had filed 
        against such person a petition seeking reorganization 
        in a case under title 11 of the United States Code, or 
        under any similar law of a State or a political 
        subdivision of a State (or a case described in section 
        4041(c)(2)(B)(i) filed by or against such person has 
        been converted, as of such date, to such a case in 
        which reorganization is sought), subparagraph (A) shall 
        not apply to such plan until the date of the discharge 
        of such person in such case.
          ``(C) Applicable 12-month period.--For purposes of 
        subparagraph (A)--
                  ``(i) In general.--The term `applicable 12-
                month period' means--
                          ``(I) the 12-month period beginning 
                        with the first month following the 
                        month in which the termination date 
                        occurs, and
                          ``(II) each of the first two 12-month 
                        periods immediately following the 
                        period described in subclause (I).
                  ``(ii) Plans terminated in bankruptcy 
                reorganization.--In any case in which the 
                requirements of subparagraph (B) are met in 
                connection with the termination of the plan 
                with respect to 1 or more persons described in 
                such subparagraph, the 12-month period 
                described in clause (i)(I) shall be the 12-
                month period beginning with the first month 
                following the month which includes the earliest 
                date as of which each such person is discharged 
                in the case described in such clause in 
                connection with such person.
          ``(D) Coordination with section 4007.--
                  ``(i) Notwithstanding section 4007--
                          ``(I) premiums under this paragraph 
                        shall be due within 30 days after the 
                        beginning of any applicable 12-month 
                        period, and
                          ``(II) the designated payor shall be 
                        the person who is the contributing 
                        sponsor as of immediately before the 
                        termination date.
                  ``(ii) The fifth sentence of section 4007(a) 
                shall not apply in connection with premiums 
                determined under this paragraph.''.
  (c) Risk-Based Premiums.--
          (1) Extension through 2006.--Section 
        4006(a)(3)(E)(iii)(V) of such Act is amended by 
        striking ``January 1, 2006'' and inserting ``January 1, 
        2007''.
          (2) Conforming amendments related to funding rules 
        for single-employer plans.--Section 4006(a)(3)(E) of 
        such Act is amended by striking clauses (iii) and (iv) 
        and inserting the following:
  ``(iii)(I) For purposes of clause (ii), except as provided in 
subclause (II), the term `unfunded vested benefits' means, for 
a plan year, the amount which would be the plan's funding 
shortfall (as defined in section 303(c)(4)), if the value of 
plan assets of the plan were equal to the fair market value of 
such assets and only vested benefits were taken into account.
  ``(II) The interest rate used in valuing vested benefits for 
purposes of subclause (I) shall be equal to the first, second, 
or third segment rate which would be determined under section 
303(h)(2)(C) if section 303(h)(2)(D)(i) were applied by 
substituting `the yields' for `the 3-year weighted average of 
yields', as applicable under rules similar to the rules under 
section 303(h)(2)(B).''.
  (d) Effective Dates.--
          (1) In general.--The amendments made by subsection 
        (a) and (c)(1) shall apply to plan years beginning 
        after December 31, 2005.
          (2) Premium rate for certain terminated single-
        employer plans.--The amendment made by subsection (b) 
        shall apply with respect to cases commenced under title 
        11, United States Code, or under any similar law of a 
        State or political subdivision of a State after October 
        26, 2005.
          (3) Conforming amendments related to funding rules 
        for single-employer plans.--The amendments made by 
        subsection (c)(2) shall take effect on December 31, 
        2006, and shall apply to plan years beginning after 
        such date.

                          TITLE V--DISCLOSURE

SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICES.

  (a) Application of Plan Funding Notice Requirements to All 
Defined Benefit Plans.--Section 101(f) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1021(f)) is 
amended--
          (1) in the heading, by striking ``Multiemployer'';
          (2) in paragraph (1), by striking ``which is a 
        multiemployer plan''; and
          (3) by striking paragraph (2)(B)(iii) and inserting 
        the following:
                          ``(iii)(I) in the case of a single-
                        employer plan, a summary of the rules 
                        governing termination of single-
                        employer plans under subtitle C of 
                        title IV, or
                          ``(II) in the case of a multiemployer 
                        plan, a summary of the rules governing 
                        insolvent multiemployer plans, 
                        including the limitations on benefit 
                        payments and any potential benefit 
                        reductions and suspensions (and the 
                        potential effects of such limitations, 
                        reductions, and suspensions on the 
                        plan); and''.
  (b) Inclusion of Statement of the Ratio of Inactive 
Participants to Active Participants.--Section 101(f)(2)(B) of 
such Act (29 U.S.C. 1021(f)(2)(B)) is amended--
          (1) in clause (iii)(II) (added by subsection (a)(3) 
        of this section), by striking ``and'' at the end;
          (2) in clause (iv), by striking ``apply.'' and 
        inserting ``apply; and''; and
          (3) by adding at the end the following new clause:
                          ``(v) a statement of the ratio, as of 
                        the end of the plan year to which the 
                        notice relates, of--
                                  ``(I) the number of 
                                participants who are not in 
                                covered service under the plan 
                                and are in pay status under the 
                                plan or have a nonforfeitable 
                                right to benefits under the 
                                plan, to
                                  ``(II) the number of 
                                participants who are in covered 
                                service under the plan.''.
  (c) Comparison of Monthly Average of Value of Plan Assets to 
Projected Current Liabilities.--Section 101(f)(2)(B) of such 
Act (29 U.S.C. 1021(f)(2)(B)) (as amended by the preceding 
provisions of this section) is amended further--
          (1) by striking clause (ii) and inserting the 
        following:
                          ``(ii) a statement of a reasonable 
                        estimate of--
                                  ``(I) the value of the plan's 
                                assets for the plan year to 
                                which the notice relates,
                                  ``(II) projected liabilities 
                                of the plan for the plan year 
                                to which the notice relates, 
                                and
                                  ``(III) the ratio of the 
                                estimated amount determined 
                                under subclause (I) to the 
                                estimated amount determined 
                                under subclause (II);''; and
          (2) by adding at the end (after and below clause (v)) 
        the following:
                ``For purposes of determining a plan's 
                projected liabilities for a plan year under 
                clause (ii)(II), such projected liabilities 
                shall be determined by projecting forward in a 
                reasonable manner to the end of the plan year 
                the liabilities of the plan to participants and 
                beneficiaries as of the first day of the plan 
                year, taking into account any significant 
                events that occur during the plan year and that 
                have a material effect on such liabilities, 
                including any plan amendments in effect for the 
                plan year.''.
  (d) Statement of Plan's Funding Policy and Method of Asset 
Allocation.--Section 101(f)(2)(B) of such Act (as amended by 
the preceding provisions of this section) is amended further--
          (1) in clause (iv), by striking ``and'' at the end;
          (2) in clause (v), by striking the period and 
        inserting ``; and''; and
          (3) by inserting after clause (v) the following new 
        clause:
                          ``(vi) a statement setting forth the 
                        funding policy of the plan and the 
                        asset allocation of investments under 
                        the plan (expressed as percentages of 
                        total assets) as of the end of the plan 
                        year to which the notice relates.''.
  (e) Notice of Funding Improvement Plan or Rehabilitation Plan 
Adopted by Multiemployer Plan.--Section 101(f)(2)(B) of such 
Act (as amended by the preceding provisions of this section) is 
amended further--
          (1) in clause (v), by striking ``and'' at the end;
          (2) in clause (vi), by striking the period and 
        inserting ``; and''; and
          (3) by inserting after clause (vi) the following new 
        clause:
                          ``(vii) a summary of any funding 
                        improvement plan, rehabilitation plan, 
                        or modification thereof adopted under 
                        section 305 during the plan year to 
                        which the notice relates.''.
  (f) Notice Due 90 Days After Plan's Valuation Date.--
          (1) In general.--Section 101(f)(3) of such Act (29 
        U.S.C. 1021(f)(3)) is amended by striking ``two months 
        after the deadline (including extensions) for filing 
        the annual report for the plan year'' and inserting 
        ``90 days after the end of the plan year''.
          (2) Model notice.--Not later than 180 days after the 
        date of the enactment of this Act, the Secretary of 
        Labor shall publish a model version of the notice 
        required by section 101(f) of the Employee Retirement 
        Income Security Act of 1974.
  (g) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2005.

SEC. 502. ADDITIONAL DISCLOSURE REQUIREMENTS.

  (a) Additional Annual Reporting Requirements.--Section 103 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1023) is amended--
          (1) in subsection (a)(1)(B), by striking 
        ``subsections (d) and (e)'' and inserting ``subsections 
        (d), (e), and (f)''; and
          (2) by adding at the end the following new 
        subsection:
  ``(f)(1) With respect to any defined benefit plan, an annual 
report under this section for a plan year shall include the 
following:
          ``(A) The ratio, as of the end of such plan year, 
        of--
                  ``(i) the number of participants who, as of 
                the end of such plan year, are not in covered 
                service under the plan and are in pay status 
                under the plan or have a nonforfeitable right 
                to benefits under the plan, to
                  ``(ii) the number of participants who are in 
                covered service under the plan as of the end of 
                such plan year.
          ``(B) In any case in which any liabilities to 
        participants or their beneficiaries under such plan as 
        of the end of such plan year consist (in whole or in 
        part) of liabilities to such participants and 
        beneficiaries borne by 2 or more pension plans as of 
        immediately before such plan year, the funded ratio of 
        each of such 2 or more pension plans as of immediately 
        before such plan year and the funded ratio of the plan 
        with respect to which the annual report is filed as of 
        the end of such plan year.
          ``(C) For purposes of this paragraph, the term 
        `funded ratio' means, in connection with a plan, the 
        percentage which--
                  ``(i) the value of the plan's assets is of
                  ``(ii) the liabilities to participants and 
                beneficiaries under the plan.
  ``(2) With respect to any defined benefit plan which is a 
multiemployer plan, an annual report under this section for a 
plan year shall include the following:
          ``(A) The number of employers obligated to contribute 
        to the plan as of the end of such plan year.
          ``(B) The number of participants under the plan on 
        whose behalf no employer contributions have been made 
        to the plan for such plan year. For purposes of this 
        subparagraph, the term `employer contribution' means, 
        in connection with a participant, a contribution made 
        by an employer as an employer of such participant.''.
  (b) Additional Information in Annual Actuarial Statement 
Regarding Plan Retirement Projections.--Section 103(d) of such 
Act (29 U.S.C. 1023(d)) is amended--
          (1) by redesignating paragraphs (12) and (13) as 
        paragraphs (13) and (14), respectively; and
          (2) by inserting after paragraph (11) the following 
        new paragraph:
          ``(12) A statement explaining the actuarial 
        assumptions and methods used in projecting future 
        retirements and forms of benefit distributions under 
        the plan.''.
  (c) Filing After 285 Days After Plan Year Only in Cases of 
Hardship.--Section 104(a)(1) of such Act (29 U.S.C. 1024(a)(1)) 
is amended by inserting after the first sentence the following 
new sentence: ``In the case of a pension plan, the Secretary 
may extend the deadline for filing the annual report for any 
plan year past 285 days after the close of the plan year only 
on a case by case basis and only in cases of hardship, in 
accordance with regulations which shall be prescribed by the 
Secretary.''.
  (d) Internet Display of Information.--Section 104(b) of such 
Act (29 U.S.C. 1024(b)) is amended by adding at the end the 
following:
  ``(5) Identification and basic plan information and actuarial 
information included in the annual report for any plan year 
shall be filed with the Secretary in an electronic format which 
accommodates display on the Internet, in accordance with 
regulations which shall be prescribed by the Secretary. The 
Secretary shall provide for display of such information 
included in the annual report, within 90 days after the date of 
the filing of the annual report, on a website maintained by the 
Secretary on the Internet and other appropriate media. Such 
information shall also be displayed on any website maintained 
by the plan sponsor (or by the plan administrator on behalf of 
the plan sponsor) on the Internet, in accordance with 
regulations which shall be prescribed by the Secretary.''.
  (e) Summary Annual Report Filed Within 15 Days After Deadline 
for Filing of Annual Report.--Section 104(b)(3) of such Act (29 
U.S.C. 1024(b)(3)) is amended--
          (1) by striking ``Within 210 days after the close of 
        the fiscal year of the plan,'' and inserting ``Within 
        15 business days after the due date under subsection 
        (a)(1) for the filing of the annual report for the 
        fiscal year of the plan,''; and
          (2) by striking ``the latest'' and inserting 
        ``such''.
  (f) Disclosure of Plan Assets and Liabilities in Summary 
Annual Report.--
          (1) In general.--Section 104(b)(3) of such Act (as 
        amended by subsection (a)) is amended further--
                  (A) by inserting ``(A)'' after ``(3)''; and
                  (B) by adding at the end the following:
  ``(B) The material provided pursuant to subparagraph (A) to 
summarize the latest annual report shall be written in a manner 
calculated to be understood by the average plan participant and 
shall set forth the total assets and liabilities of the plan 
for the plan year for which the latest annual report was filed 
and for each of the 2 preceding plan years, as reported in the 
annual report for each such plan year under this section.''.
  (g) Information Made Available to Participants, 
Beneficiaries, and Employers With Respect to Multiemployer 
Plans.--
          (1) In general.--Section 101 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1021) 
        (as amended by section 103(b)(2)(A)) is further 
        amended--
                  (A) by redesignating subsection (k) as 
                subsection (l); and
                  (B) by inserting after subsection (j) the 
                following new subsection:
  ``(k) Multiemployer Plan Information Made Available on 
Request.--
          ``(1) In general.--Each administrator of a 
        multiemployer plan shall furnish to any plan 
        participant or beneficiary or any employer having an 
        obligation to contribute to the plan, who so requests 
        in writing--
                  ``(A) a copy of any actuarial report received 
                by the plan for any plan year which has been in 
                receipt by the plan for at least 30 days, and
                  ``(B) a copy of any financial report prepared 
                for the plan by any plan investment manager or 
                advisor or other person who is a plan fiduciary 
                which has been in receipt by the plan for at 
                least 30 days.
          ``(2) Compliance.--Information required to be 
        provided under paragraph (1)--
                  ``(A) shall be provided to the requesting 
                participant, beneficiary, or employer within 30 
                days after the request in a form and manner 
                prescribed in regulations of the Secretary, and
                  ``(B) may be provided in written, electronic, 
                or other appropriate form to the extent such 
                form is reasonably accessible to persons to 
                whom the information is required to be 
                provided.
          ``(3) Limitations.--In no case shall a participant, 
        beneficiary, or employer be entitled under this 
        subsection to receive more than one copy of any report 
        described in paragraph (1) during any one 12-month 
        period. The administrator may make a reasonable charge 
        to cover copying, mailing, and other costs of 
        furnishing copies of information pursuant to paragraph 
        (1). The Secretary may by regulations prescribe the 
        maximum amount which will constitute a reasonable 
        charge under the preceding sentence.''.
          (2) Enforcement.--Section 502(c)(4) of such Act (29 
        U.S.C. 1132(c)(4)) (as amended by section 103(b)(2)(B)) 
        is further amended by striking ``sections 101(j) and 
        302(b)(7)(F)(iv)'' and inserting ``sections 101(j), 
        101(k), and 302(b)(7)(F)(iv)''.
          (3) Regulations.--The Secretary shall prescribe 
        regulations under section 101(k)(2) of the Employee 
        Retirement Income Security Act of 1974 (added by 
        paragraph (1) of this subsection) not later than 90 
        days after the date of the enactment of this Act.
  (h) Notice of Potential Withdrawal Liability to Multiemployer 
Plans.--
          (1) In general.--Section 101 of such Act (as amended 
        by subsection (g) of this section) is further amended--
                  (A) by redesignating subsection (l) as 
                subsection (m); and
                  (B) by inserting after subsection (k) the 
                following new subsection:
  ``(l) Notice of Potential Withdrawal Liability.--
          ``(1) In general.--The plan sponsor or administrator 
        of a multiemployer plan shall furnish to any employer 
        who has an obligation to contribute under the plan and 
        who so requests in writing notice of--
                  ``(A) the amount which would be the amount of 
                such employer's withdrawal liability under part 
                1 of subtitle E of title IV if such employer 
                withdrew on the last day of the plan year 
                preceding the date of the request, and
                  ``(B) the average increase, per participant 
                under the plan, in accrued liabilities under 
                the plan as of the end of such plan year to 
                participants under such plan on whose behalf no 
                employer contributions are payable (or their 
                beneficiaries), which would be attributable to 
                such a withdrawal by such employer.
        For purposes of subparagraph (B), the term `employer 
        contribution' means, in connection with a participant, 
        a contribution made by an employer as an employer of 
        such participant.
          ``(2) Compliance.--Any notice required to be provided 
        under paragraph (1)--
                  ``(A) shall be provided to the requesting 
                employer within 180 days after the request in a 
                form and manner prescribed in regulations of 
                the Secretary, and
                  ``(B) may be provided in written, electronic, 
                or other appropriate form to the extent such 
                form is reasonably accessible to employers to 
                whom the information is required to be 
                provided.
          ``(3) Limitations.--In no case shall an employer be 
        entitled under this subsection to receive more than one 
        notice described in paragraph (1) during any one 12-
        month period. The person required to provide such 
        notice may make a reasonable charge to cover copying, 
        mailing, and other costs of furnishing such notice 
        pursuant to paragraph (1). The Secretary may by 
        regulations prescribe the maximum amount which will 
        constitute a reasonable charge under the preceding 
        sentence.''.
          (2) Enforcement.--Section 502(c)(4) of such Act (29 
        U.S.C. 1132(c)(4)) (as amended by paragraph (1)) is 
        further amended by striking ``sections 101(j), 101(k), 
        and 302(b)(7)(F)(iv)'' and inserting ``sections 101(j), 
        101(k), 101(l), and 302(b)(7)(F)(iv)''.
  (i) Model Form.--Not later than 180 days after the date of 
the enactment of this Act, the Secretary of Labor shall publish 
a model form for providing the statements, schedules, and other 
material required to be provided under section 104(b)(3) of the 
Employee Retirement Income Security Act of 1974, as amended by 
this section.
  (j) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2005.

SEC. 503. SECTION 4010 FILINGS WITH THE PBGC.

  (a) Change in Criteria for Persons Required to Provide 
Information to PBGC.--Section 4010(b) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1310(b)) is 
amended by striking paragraph (1), by redesignating paragraphs 
(2) and (3) as paragraphs (3) and (4), respectively, and by 
inserting before paragraph (3) (as so redesignated) the 
following new paragraphs:
          ``(1) the aggregate funding target attainment 
        percentage of the plan (as defined in subsection 
        (d)(2)) is less than 60 percent;
          ``(2)(A) the aggregate funding target attainment 
        percentage of the plan (as defined in subsection 
        (d)(2)) is less than 75 percent, and
          ``(B) the plan sponsor is in an industry with respect 
        to which the corporation determines that there is 
        substantial unemployment or underemployment and the 
        sales and profits are depressed or declining;''.
  (b) Notice to Participants and Beneficiaries.--Section 4010 
of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1310) is amended by adding at the end the following new 
subsection:
  ``(d) Notice to Participants and Beneficiaries.--
          ``(1) In general.--Not later than 90 days after the 
        submission by any person to the corporation of 
        information or documentary material with respect to any 
        plan pursuant to subsection (a), such person shall 
        provide notice of such submission to each participant 
        and beneficiary under the plan (and under all plans 
        maintained by members of the controlled group of each 
        contributing sponsor of the plan). Such notice shall 
        also set forth--
                  ``(A) the number of single-employer plans 
                covered by this title which are in at-risk 
                status and are maintained by contributing 
                sponsors of such plan (and by members of their 
                controlled groups) with respect to which the 
                funding target attainment percentage for the 
                preceding plan year of each plan is less than 
                60 percent;
                  ``(B) the value of the assets of each of the 
                plans described in subparagraph (A) for the 
                plan year, the funding target for each of such 
                plans for the plan year, and the funding target 
                attainment percentage of each of such plans for 
                the plan year; and
                  ``(C) taking into account all single-employer 
                plans maintained by the contributing sponsor 
                and the members of its controlled group as of 
                the end of such plan year--
                          ``(i) the aggregate total of the 
                        values of plan assets of such plans as 
                        of the end of such plan year,
                          ``(ii) the aggregate total of the 
                        funding targets of such plans, as of 
                        the end of such plan year, taking into 
                        account only benefits to which 
                        participants and beneficiaries have a 
                        nonforfeitable right, and
                          ``(iii) the aggregate funding targets 
                        attainment percentage with respect to 
                        the contributing sponsor for the 
                        preceding plan year.
          ``(2) Definitions.--For purposes of this subsection--
                  ``(A) Value of plan assets.--The term `value 
                of plan assets' means the value of plan assets, 
                as determined under section 303(g)(3).
                  ``(B) Funding target.--The term `funding 
                target' has the meaning provided under section 
                303(d)(1).
                  ``(C) Funding target attainment percentage.--
                The term `funding target attainment percentage' 
                has the meaning provided in section 303(d)(2).
                  ``(D) Aggregate funding targets attainment 
                percentage.--The term `aggregate funding 
                targets attainment percentage' with respect to 
                a contributing sponsor for a plan year is the 
                percentage, taking into account all plans 
                maintained by the contributing sponsor and the 
                members of its controlled group as of the end 
                of such plan year, which
                          ``(i) the aggregate total of the 
                        values of plan assets, as of the end of 
                        such plan year, of such plans, is of
                          ``(ii) the aggregate total of the 
                        funding targets of such plans, as of 
                        the end of such plan year, taking into 
                        account only benefits to which 
                        participants and beneficiaries have a 
                        nonforfeitable right.
                  ``(E) At-risk status.--The term `at-risk 
                status' has the meaning provided in section 
                303(i)(3).
          ``(3) Compliance.--
                  ``(A) In general.--Any notice required to be 
                provided under paragraph (1) may be provided in 
                written, electronic, or other appropriate form 
                to the extent such form is reasonably 
                accessible to individuals to whom the 
                information is required to be provided.
                  ``(B) Limitations.--In no case shall a 
                participant or beneficiary be entitled under 
                this subsection to receive more than one notice 
                described in paragraph (1) during any one 12-
                month period. The person required to provide 
                such notice may make a reasonable charge to 
                cover copying, mailing, and other costs of 
                furnishing such notice pursuant to paragraph 
                (1). The corporation may by regulations 
                prescribe the maximum amount which will 
                constitute a reasonable charge under the 
                preceding sentence.
          ``(4) Notice to congress.--Concurrent with the 
        provision of any notice under paragraph (1), such 
        person shall provide such notice to the Committee on 
        Education and the Workforce and the Committee on Ways 
        and Means of the House of Representatives and the 
        Committee on Health, Education, Labor, and Pensions and 
        the Committee on Finance of the Senate, which shall be 
        treated as materials provided in executive session.''.
  (c) Effective Date.--The amendment made by this section shall 
apply with respect to plan years beginning after December 31, 
2006.

                      TITLE VI--INVESTMENT ADVICE

SEC. 601. AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 
                    PROVIDING PROHIBITED TRANSACTION EXEMPTION FOR 
                    PROVISION OF INVESTMENT ADVICE.

  (a) Exemption From Prohibited Transactions.--Section 408(b) 
of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1108(b)) is amended by adding at the end the following 
new paragraph:
          ``(14)(A) Any transaction described in subparagraph 
        (B) in connection with the provision of investment 
        advice described in section 3(21)(A)(ii), in any case 
        in which--
                  ``(i) the investment of assets of the plan is 
                subject to the direction of plan participants 
                or beneficiaries,
                  ``(ii) the advice is provided to the plan or 
                a participant or beneficiary of the plan by a 
                fiduciary adviser in connection with any sale, 
                acquisition, or holding of a security or other 
                property for purposes of investment of plan 
                assets, and
                  ``(iii) the requirements of subsection (g) 
                are met in connection with the provision of the 
                advice.
          ``(B) The transactions described in this subparagraph 
        are the following:
                          ``(i) the provision of the advice to 
                        the plan, participant, or beneficiary;
                          ``(ii) the sale, acquisition, or 
                        holding of a security or other property 
                        (including any lending of money or 
                        other extension of credit associated 
                        with the sale, acquisition, or holding 
                        of a security or other property) 
                        pursuant to the advice; and
                          ``(iii) the direct or indirect 
                        receipt of fees or other compensation 
                        by the fiduciary adviser or an 
                        affiliate thereof (or any employee, 
                        agent, or registered representative of 
                        the fiduciary adviser or affiliate) in 
                        connection with the provision of the 
                        advice or in connection with a sale, 
                        acquisition, or holding of a security 
                        or other property pursuant to the 
                        advice.''.
  (b) Requirements.--Section 408 of such Act is amended further 
by adding at the end the following new subsection:
  ``(g) Requirements Relating to Provision of Investment Advice 
by Fiduciary Advisers.--
          ``(1) In general.--The requirements of this 
        subsection are met in connection with the provision of 
        investment advice referred to in section 3(21)(A)(ii), 
        provided to an employee benefit plan or a participant 
        or beneficiary of an employee benefit plan by a 
        fiduciary adviser with respect to the plan in 
        connection with any sale, acquisition, or holding of a 
        security or other property for purposes of investment 
        of amounts held by the plan, if--
                  ``(A) in the case of the initial provision of 
                the advice with regard to the security or other 
                property by the fiduciary adviser to the plan, 
                participant, or beneficiary, the fiduciary 
                adviser provides to the recipient of the 
                advice, at a time reasonably contemporaneous 
                with the initial provision of the advice, a 
                written notification (which may consist of 
                notification by means of electronic 
                communication)--
                          ``(i) of all fees or other 
                        compensation relating to the advice 
                        that the fiduciary adviser or any 
                        affiliate thereof is to receive 
                        (including compensation provided by any 
                        third party) in connection with the 
                        provision of the advice or in 
                        connection with the sale, acquisition, 
                        or holding of the security or other 
                        property,
                          ``(ii) of any material affiliation or 
                        contractual relationship of the 
                        fiduciary adviser or affiliates thereof 
                        in the security or other property,
                          ``(iii) of any limitation placed on 
                        the scope of the investment advice to 
                        be provided by the fiduciary adviser 
                        with respect to any such sale, 
                        acquisition, or holding of a security 
                        or other property,
                          ``(iv) of the types of services 
                        provided by the fiduciary adviser in 
                        connection with the provision of 
                        investment advice by the fiduciary 
                        adviser,
                          ``(v) that the adviser is acting as a 
                        fiduciary of the plan in connection 
                        with the provision of the advice, and
                          ``(vi) that a recipient of the advice 
                        may separately arrange for the 
                        provision of advice by another adviser, 
                        that could have no material affiliation 
                        with and receive no fees or other 
                        compensation in connection with the 
                        security or other property,
                  ``(B) the fiduciary adviser provides 
                appropriate disclosure, in connection with the 
                sale, acquisition, or holding of the security 
                or other property, in accordance with all 
                applicable securities laws,
                  ``(C) the sale, acquisition, or holding 
                occurs solely at the direction of the recipient 
                of the advice,
                  ``(D) the compensation received by the 
                fiduciary adviser and affiliates thereof in 
                connection with the sale, acquisition, or 
                holding of the security or other property is 
                reasonable, and
                  ``(E) the terms of the sale, acquisition, or 
                holding of the security or other property are 
                at least as favorable to the plan as an arm's 
                length transaction would be.
          ``(2) Standards for presentation of information.--
                  ``(A) In general.--The notification required 
                to be provided to participants and 
                beneficiaries under paragraph (1)(A) shall be 
                written in a clear and conspicuous manner and 
                in a manner calculated to be understood by the 
                average plan participant and shall be 
                sufficiently accurate and comprehensive to 
                reasonably apprise such participants and 
                beneficiaries of the information required to be 
                provided in the notification.
                  ``(B) Model form for disclosure of fees and 
                other compensation.--The Secretary shall issue 
                a model form for the disclosure of fees and 
                other compensation required in paragraph 
                (1)(A)(i) which meets the requirements of 
                subparagraph (A).
          ``(3) Exemption conditioned on making required 
        information available annually, on request, and in the 
        event of material change.--The requirements of 
        paragraph (1)(A) shall be deemed not to have been met 
        in connection with the initial or any subsequent 
        provision of advice described in paragraph (1) to the 
        plan, participant, or beneficiary if, at any time 
        during the provision of advisory services to the plan, 
        participant, or beneficiary, the fiduciary adviser 
        fails to maintain the information described in clauses 
        (i) through (iv) of subparagraph (A) in currently 
        accurate form and in the manner described in paragraph 
        (2) or fails--
                  ``(A) to provide, without charge, such 
                currently accurate information to the recipient 
                of the advice no less than annually,
                  ``(B) to make such currently accurate 
                information available, upon request and without 
                charge, to the recipient of the advice, or
                  ``(C) in the event of a material change to 
                the information described in clauses (i) 
                through (iv) of paragraph (1)(A), to provide, 
                without charge, such currently accurate 
                information to the recipient of the advice at a 
                time reasonably contemporaneous to the material 
                change in information.
          ``(4) Maintenance for 6 years of evidence of 
        compliance.--A fiduciary adviser referred to in 
        paragraph (1) who has provided advice referred to in 
        such paragraph shall, for a period of not less than 6 
        years after the provision of the advice, maintain any 
        records necessary for determining whether the 
        requirements of the preceding provisions of this 
        subsection and of subsection (b)(14) have been met. A 
        transaction prohibited under section 406 shall not be 
        considered to have occurred solely because the records 
        are lost or destroyed prior to the end of the 6-year 
        period due to circumstances beyond the control of the 
        fiduciary adviser.
          ``(5) Exemption for plan sponsor and certain other 
        fiduciaries.--
                  ``(A) In general.--Subject to subparagraph 
                (B), a plan sponsor or other person who is a 
                fiduciary (other than a fiduciary adviser) 
                shall not be treated as failing to meet the 
                requirements of this part solely by reason of 
                the provision of investment advice referred to 
                in section 3(21)(A)(ii) (or solely by reason of 
                contracting for or otherwise arranging for the 
                provision of the advice), if--
                          ``(i) the advice is provided by a 
                        fiduciary adviser pursuant to an 
                        arrangement between the plan sponsor or 
                        other fiduciary and the fiduciary 
                        adviser for the provision by the 
                        fiduciary adviser of investment advice 
                        referred to in such section,
                          ``(ii) the terms of the arrangement 
                        require compliance by the fiduciary 
                        adviser with the requirements of this 
                        subsection, and
                          ``(iii) the terms of the arrangement 
                        include a written acknowledgment by the 
                        fiduciary adviser that the fiduciary 
                        adviser is a fiduciary of the plan with 
                        respect to the provision of the advice.
                  ``(B) Continued duty of prudent selection of 
                adviser and periodic review.--Nothing in 
                subparagraph (A) shall be construed to exempt a 
                plan sponsor or other person who is a fiduciary 
                from any requirement of this part for the 
                prudent selection and periodic review of a 
                fiduciary adviser with whom the plan sponsor or 
                other person enters into an arrangement for the 
                provision of advice referred to in section 
                3(21)(A)(ii). The plan sponsor or other person 
                who is a fiduciary has no duty under this part 
                to monitor the specific investment advice given 
                by the fiduciary adviser to any particular 
                recipient of the advice.
                  ``(C) Availability of plan assets for payment 
                for advice.--Nothing in this part shall be 
                construed to preclude the use of plan assets to 
                pay for reasonable expenses in providing 
                investment advice referred to in section 
                3(21)(A)(ii).
          ``(6) Definitions.--For purposes of this subsection 
        and subsection (b)(14)--
                  ``(A) Fiduciary adviser.--The term `fiduciary 
                adviser' means, with respect to a plan, a 
                person who is a fiduciary of the plan by reason 
                of the provision of investment advice by the 
                person to the plan or to a participant or 
                beneficiary and who is--
                          ``(i) registered as an investment 
                        adviser under the Investment Advisers 
                        Act of 1940 (15 U.S.C. 80b-1 et seq.) 
                        or under the laws of the State in which 
                        the fiduciary maintains its principal 
                        office and place of business,
                          ``(ii) a bank or similar financial 
                        institution referred to in section 
                        408(b)(4) or a savings association (as 
                        defined in section 3(b)(1) of the 
                        Federal Deposit Insurance Act (12 
                        U.S.C. 1813(b)(1))), but only if the 
                        advice is provided through a trust 
                        department of the bank or similar 
                        financial institution or savings 
                        association which is subject to 
                        periodic examination and review by 
                        Federal or State banking authorities,
                          ``(iii) an insurance company 
                        qualified to do business under the laws 
                        of a State,
                          ``(iv) a person registered as a 
                        broker or dealer under the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78a et 
                        seq.),
                          ``(v) an affiliate of a person 
                        described in any of clauses (i) through 
                        (iv), or
                          ``(vi) an employee, agent, or 
                        registered representative of a person 
                        described in any of clauses (i) through 
                        (v) who satisfies the requirements of 
                        applicable insurance, banking, and 
                        securities laws relating to the 
                        provision of the advice.
                  ``(B) Affiliate.--The term `affiliate' of 
                another entity means an affiliated person of 
                the entity (as defined in section 2(a)(3) of 
                the Investment Company Act of 1940 (15 U.S.C. 
                80a-2(a)(3))).
                  ``(C) Registered representative.--The term 
                `registered representative' of another entity 
                means a person described in section 3(a)(18) of 
                the Securities Exchange Act of 1934 (15 U.S.C. 
                78c(a)(18)) (substituting the entity for the 
                broker or dealer referred to in such section) 
                or a person described in section 202(a)(17) of 
                the Investment Advisers Act of 1940 (15 U.S.C. 
                80b-2(a)(17)) (substituting the entity for the 
                investment adviser referred to in such 
                section).''.
  (c) Effective Date.--The amendments made by this section 
shall apply with respect to advice referred to in section 
3(21)(A)(ii) of the Employee Retirement Income Security Act of 
1974 provided on or after January 1, 2006.

SEC. 602. AMENDMENTS TO INTERNAL REVENUE CODE OF 1986 PROVIDING 
                    PROHIBITED TRANSACTION EXEMPTION FOR PROVISION OF 
                    INVESTMENT ADVICE.

  (a) Exemption From Prohibited Transactions.--Subsection (d) 
of section 4975 of the Internal Revenue Code of 1986 (relating 
to exemptions from tax on prohibited transactions), as amended 
by this Act, is amended--
          (1) in paragraph (17), by striking ``or'' at the end;
          (2) in paragraph (18), by striking the period at the 
        end and inserting ``; or''; and
          (3) by adding at the end the following new paragraph:
          ``(19) any transaction described in subsection 
        (f)(10)(A) in connection with the provision of 
        investment advice described in subsection (e)(3)(B)(i), 
        in any case in which--
                  ``(A) the investment of assets of the plan is 
                subject to the direction of plan participants 
                or beneficiaries,
                  ``(B) the advice is provided to the plan or a 
                participant or beneficiary of the plan by a 
                fiduciary adviser in connection with any sale, 
                acquisition, or holding of a security or other 
                property for purposes of investment of plan 
                assets, and
                  ``(C) the requirements of subsection 
                (f)(10)(B) are met in connection with the 
                provision of the advice.''.
  (b) Allowed Transactions and Requirements.--Subsection (f) of 
such section 4975 (relating to other definitions and special 
rules), as amended by this Act, is amended by adding at the end 
the following new paragraph:
          ``(10) Provisions relating to investment advice 
        provided by fiduciary advisers.--
                  ``(A) Transactions allowable in connection 
                with investment advice provided by fiduciary 
                advisers.--The transactions referred to in 
                subsection (d)(19), in connection with the 
                provision of investment advice by a fiduciary 
                adviser, are the following:
                          ``(i) the provision of the advice to 
                        the plan, participant, or beneficiary;
                          ``(ii) the sale, acquisition, or 
                        holding of a security or other property 
                        (including any lending of money or 
                        other extension of credit associated 
                        with the sale, acquisition, or holding 
                        of a security or other property) 
                        pursuant to the advice; and
                          ``(iii) the direct or indirect 
                        receipt of fees or other compensation 
                        by the fiduciary adviser or an 
                        affiliate thereof (or any employee, 
                        agent, or registered representative of 
                        the fiduciary adviser or affiliate) in 
                        connection with the provision of the 
                        advice or in connection with a sale, 
                        acquisition, or holding of a security 
                        or other property pursuant to the 
                        advice.
                  ``(B) Requirements relating to provision of 
                investment advice by fiduciary advisers.--The 
                requirements of this subparagraph (referred to 
                in subsection (d)(19)(C)) are met in connection 
                with the provision of investment advice 
                referred to in subsection (e)(3)(B), provided 
                to a plan or a participant or beneficiary of a 
                plan by a fiduciary adviser with respect to the 
                plan in connection with any sale, acquisition, 
                or holding of a security or other property for 
                purposes of investment of amounts held by the 
                plan, if--
                          ``(i) in the case of the initial 
                        provision of the advice with regard to 
                        the security or other property by the 
                        fiduciary adviser to the plan, 
                        participant, or beneficiary, the 
                        fiduciary adviser provides to the 
                        recipient of the advice, at a time 
                        reasonably contemporaneous with the 
                        initial provision of the advice, a 
                        written notification (which may consist 
                        of notification by means of electronic 
                        communication)--
                                  ``(I) of all fees or other 
                                compensation relating to the 
                                advice that the fiduciary 
                                adviser or any affiliate 
                                thereof is to receive 
                                (including compensation 
                                provided by any third party) in 
                                connection with the provision 
                                of the advice or in connection 
                                with the sale, acquisition, or 
                                holding of the security or 
                                other property,
                                  ``(II) of any material 
                                affiliation or contractual 
                                relationship of the fiduciary 
                                adviser or affiliates thereof 
                                in the security or other 
                                property,
                                  ``(III) of any limitation 
                                placed on the scope of the 
                                investment advice to be 
                                provided by the fiduciary 
                                adviser with respect to any 
                                such sale, acquisition, or 
                                holding of a security or other 
                                property,
                                  ``(IV) of the types of 
                                services provided by the 
                                fiduciary adviser in connection 
                                with the provision of 
                                investment advice by the 
                                fiduciary adviser,
                                  ``(V) that the adviser is 
                                acting as a fiduciary of the 
                                plan in connection with the 
                                provision of the advice, and
                                  ``(VI) that a recipient of 
                                the advice may separately 
                                arrange for the provision of 
                                advice by another adviser, that 
                                could have no material 
                                affiliation with and receive no 
                                fees or other compensation in 
                                connection with the security or 
                                other property,
                          ``(ii) the fiduciary adviser provides 
                        appropriate disclosure, in connection 
                        with the sale, acquisition, or holding 
                        of the security or other property, in 
                        accordance with all applicable 
                        securities laws,
                          ``(iii) the sale, acquisition, or 
                        holding occurs solely at the direction 
                        of the recipient of the advice,
                          ``(iv) the compensation received by 
                        the fiduciary adviser and affiliates 
                        thereof in connection with the sale, 
                        acquisition, or holding of the security 
                        or other property is reasonable, and
                          ``(v) the terms of the sale, 
                        acquisition, or holding of the security 
                        or other property are at least as 
                        favorable to the plan as an arm's 
                        length transaction would be.
                  ``(C) Standards for presentation of 
                information.--The notification required to be 
                provided to participants and beneficiaries 
                under subparagraph (B)(i) shall be written in a 
                clear and conspicuous manner and in a manner 
                calculated to be understood by the average plan 
                participant and shall be sufficiently accurate 
                and comprehensive to reasonably apprise such 
                participants and beneficiaries of the 
                information required to be provided in the 
                notification.
                  ``(D) Exemption conditioned on making 
                required information available annually, on 
                request, and in the event of material change.--
                The requirements of subparagraph (B)(i) shall 
                be deemed not to have been met in connection 
                with the initial or any subsequent provision of 
                advice described in subparagraph (B) to the 
                plan, participant, or beneficiary if, at any 
                time during the provision of advisory services 
                to the plan, participant, or beneficiary, the 
                fiduciary adviser fails to maintain the 
                information described in subclauses (I) through 
                (IV) of subparagraph (B)(i) in currently 
                accurate form and in the manner required by 
                subparagraph (C), or fails--
                          ``(i) to provide, without charge, 
                        such currently accurate information to 
                        the recipient of the advice no less 
                        than annually,
                          ``(ii) to make such currently 
                        accurate information available, upon 
                        request and without charge, to the 
                        recipient of the advice, or
                          ``(iii) in the event of a material 
                        change to the information described in 
                        subclauses (I) through (IV) of 
                        subparagraph (B)(i), to provide, 
                        without charge, such currently accurate 
                        information to the recipient of the 
                        advice at a time reasonably 
                        contemporaneous to the material change 
                        in information.
                  ``(E) Maintenance for 6 years of evidence of 
                compliance.--A fiduciary adviser referred to in 
                subparagraph (B) who has provided advice 
                referred to in such subparagraph shall, for a 
                period of not less than 6 years after the 
                provision of the advice, maintain any records 
                necessary for determining whether the 
                requirements of the preceding provisions of 
                this paragraph and of subsection (d)(19) have 
                been met. A transaction prohibited under 
                subsection (c)(1) shall not be considered to 
                have occurred solely because the records are 
                lost or destroyed prior to the end of the 6-
                year period due to circumstances beyond the 
                control of the fiduciary adviser.
                  ``(F) Exemption for plan sponsor and certain 
                other fiduciaries.--A plan sponsor or other 
                person who is a fiduciary (other than a 
                fiduciary adviser) shall not be treated as 
                failing to meet the requirements of this 
                section solely by reason of the provision of 
                investment advice referred to in subsection 
                (e)(3)(B) (or solely by reason of contracting 
                for or otherwise arranging for the provision of 
                the advice), if--
                          ``(i) the advice is provided by a 
                        fiduciary adviser pursuant to an 
                        arrangement between the plan sponsor or 
                        other fiduciary and the fiduciary 
                        adviser for the provision by the 
                        fiduciary adviser of investment advice 
                        referred to in such section,
                          ``(ii) the terms of the arrangement 
                        require compliance by the fiduciary 
                        adviser with the requirements of this 
                        paragraph,
                          ``(iii) the terms of the arrangement 
                        include a written acknowledgment by the 
                        fiduciary adviser that the fiduciary 
                        adviser is a fiduciary of the plan with 
                        respect to the provision of the advice, 
                        and
                          ``(iv) the requirements of part 4 of 
                        subtitle B of title I of the Employee 
                        Retirement Income Security Act of 1974 
                        are met in connection with the 
                        provision of such advice.
                  ``(G) Definitions.--For purposes of this 
                paragraph and subsection (d)(19)--
                          ``(i) Fiduciary adviser.--The term 
                        `fiduciary adviser' means, with respect 
                        to a plan, a person who is a fiduciary 
                        of the plan by reason of the provision 
                        of investment advice by the person to 
                        the plan or to a participant or 
                        beneficiary and who is--
                                  ``(I) registered as an 
                                investment adviser under the 
                                Investment Advisers Act of 1940 
                                (15 U.S.C. 80b-1 et seq.) or 
                                under the laws of the State in 
                                which the fiduciary maintains 
                                its principal office and place 
                                of business,
                                  ``(II) a bank or similar 
                                financial institution referred 
                                to in subsection (d)(4) or a 
                                savings association (as defined 
                                in section 3(b)(1) of the 
                                Federal Deposit Insurance Act 
                                (12 U.S.C. 1813(b)(1))), but 
                                only if the advice is provided 
                                through a trust department of 
                                the bank or similar financial 
                                institution or savings 
                                association which is subject to 
                                periodic examination and review 
                                by Federal or State banking 
                                authorities,
                                  ``(III) an insurance company 
                                qualified to do business under 
                                the laws of a State,
                                  ``(IV) a person registered as 
                                a broker or dealer under the 
                                Securities Exchange Act of 1934 
                                (15 U.S.C. 78a et seq.),
                                  ``(V) an affiliate of a 
                                person described in any of 
                                subclauses (I) through (IV), or
                                  ``(VI) an employee, agent, or 
                                registered representative of a 
                                person described in any of 
                                subclauses (I) through (V) who 
                                satisfies the requirements of 
                                applicable insurance, banking, 
                                and securities laws relating to 
                                the provision of the advice.
                          ``(ii) Affiliate.--The term 
                        `affiliate' of another entity means an 
                        affiliated person of the entity (as 
                        defined in section 2(a)(3) of the 
                        Investment Company Act of 1940 (15 
                        U.S.C. 80a-2(a)(3))).
                          ``(iii) Registered representative.--
                        The term `registered representative' of 
                        another entity means a person described 
                        in section 3(a)(18) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 
                        78c(a)(18)) (substituting the entity 
                        for the broker or dealer referred to in 
                        such section) or a person described in 
                        section 202(a)(17) of the Investment 
                        Advisers Act of 1940 (15 U.S.C. 80b-
                        2(a)(17)) (substituting the entity for 
                        the investment adviser referred to in 
                        such section).''.
  (c) Effective Date.--The amendments made by this section 
shall apply with respect to advice referred to in section 
4975(c)(3)(B) of the Internal Revenue Code of 1986 provided on 
or after January 1, 2006.

                  TITLE VII--BENEFIT ACCRUAL STANDARDS

SEC. 701. BENEFIT ACCRUAL STANDARDS.

  (a) Amendments to the Employee Retirement Income Security Act 
of 1974.--
          (1) Rules relating to reduction in rate of benefit 
        accrual.--Section 204(b)(1)(H) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 
        1054(b)(1)(H)) is amended by adding at the end the 
        following new clauses:
  ``(vii)(I) A plan shall not be treated as failing to meet the 
requirements of clause (i) if a participant's entire accrued 
benefit, as determined as of any date under the formula for 
determining benefits as set forth in the text of the plan 
documents, would be equal to or greater than that of any 
similarly situated, younger individual.
  ``(II) For purposes of this clause, an individual is 
similarly situated to a participant if such individual is 
identical to such participant in every respect (including 
period of service, compensation, position, date of hire, work 
history, and any other respect) except for age.
  ``(III) In determining the entire accrued benefit for 
purposes of this clause, the subsidized portion of any early 
retirement benefit (including any early retirement subsidy that 
is fully or partially included or reflected in an employee's 
opening balance or other transition benefits) shall be 
disregarded.
  ``(IV) In determining the entire accrued benefit for purposes 
of this clause, such benefit may be calculated as the present 
value of accrued benefits projected to normal retirement age, 
as an account balance, or as the current value of the 
accumulated percentage of the employee's final average 
compensation.
  ``(viii) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan 
provides allowable offsets against those benefits under the 
plan which are attributable to employer contributions, based on 
benefits which are provided under title II of the Social 
Security Act, under the Railroad Retirement Act of 1974, under 
another plan described in section 401(a) of the Internal 
Revenue Code of 1986 maintained by the same employer, under any 
retirement program for officers or employees of the Federal 
Government or of the government of any State or political 
subdivision thereof, or under such other arrangements as the 
Secretary of the Treasury may provide. For purposes of this 
clause, allowable offsets based on such benefits consist of 
offsets equal to all or part of the actual benefit payment 
amounts, reasonable projections or estimations of such benefit 
payment amounts, or actuarial equivalents of such actual 
benefit payment amounts, projections, or estimations 
(determined on the basis of reasonable actuarial assumptions).
  ``(ix) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan 
provides a disparity in contributions or benefits with respect 
to which the requirements of section 401(l) of the Internal 
Revenue Code of 1986 are met.
  ``(x)(I) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan 
provides for indexing of accrued benefits under the plan.
  ``(II) Except in the case of any benefit provided in the form 
of a variable annuity, subclause (I) shall not apply with 
respect to any indexing which results in an accrued benefit 
less than the accrued benefit determined without regard to such 
indexing.
  ``(III) For purposes of this clause, the term `indexing' 
means, in connection with an accrued benefit, the periodic 
adjustment of the accrued benefit by means of the application 
of a recognized investment index or methodology.''.
          (2) Determinations of accrued benefit as balance of 
        benefit account.--Section 203 of such Act (29 U.S.C. 
        1053) is amended by adding at the end the following new 
        subsection:
  ``(f)(1) A defined benefit plan under which the accrued 
benefit payable under the plan upon distribution (or any 
portion thereof) is expressed as the balance of a hypothetical 
account maintained for the participant shall not be treated as 
failing to meet the requirements of subsection (a)(2), section 
204(c) (but only in the case of a plan which does not provide 
for employee contributions), or section 205(g) solely because 
of the amount actually made available for such distribution 
under the terms of the plan, in any case in which the 
applicable interest rate that would be used under the terms of 
the plan to project the amount of the participant's account 
balance to normal retirement age is not greater than a market 
rate of return.
  ``(2) The Secretary of the Treasury may provide by regulation 
for rules governing the calculation of a market rate of return 
for purposes of paragraph (1) and for permissible methods of 
crediting interest to the account (including fixed or variable 
interest rates) resulting in effective rates of return meeting 
the requirements of paragraph (1).''.
  (b) Amendments to the Internal Revenue Code of 1986.--
          (1) Rules relating to reduction in rate of benefit 
        accrual.--Subparagraph (H) of section 411(b)(1) of the 
        Internal Revenue Code of 1986 is amended by adding at 
        the end the following new clauses:
                          ``(vi) Comparison to similarly 
                        situated younger individual.--
                                  ``(I) In general.--A plan 
                                shall not be treated as failing 
                                to meet the requirements of 
                                clause (i) if a participant's 
                                entire accrued benefit, as 
                                determined as of any date under 
                                the formula for determining 
                                benefits as set forth in the 
                                text of the plan documents, 
                                would be equal to or greater 
                                than that of any similarly 
                                situated, younger individual.
                                  ``(II) Similarly situated.--
                                For purposes of this clause, an 
                                individual is similarly 
                                situated to a participant if 
                                such individual is identical to 
                                such participant in every 
                                respect (including period of 
                                service, compensation, 
                                position, date of hire, work 
                                history, and any other respect) 
                                except for age.
                                  ``(III) Disregard of 
                                subsidized early retirement 
                                benefits.--In determining the 
                                entire accrued benefit for 
                                purposes of this clause, the 
                                subsidized portion of any early 
                                retirement benefit (including 
                                any early retirement subsidy 
                                that is fully or partially 
                                included or reflected in an 
                                employee's opening balance or 
                                other transition benefits) 
                                shall be disregarded.
                                  ``(IV) Entire accrued 
                                benefit.--In determining the 
                                entire accrued benefit for 
                                purposes of this clause, such 
                                benefit may be calculated as 
                                the present value of accrued 
                                benefits projected to normal 
                                retirement age, as an account 
                                balance, or as the current 
                                value of the accumulated 
                                percentage of the employee's 
                                final average compensation.
                          ``(vii) Certain offsets permitted.--A 
                        plan shall not be treated as failing to 
                        meet the requirements of this 
                        subparagraph solely because the plan 
                        provides allowable offsets against 
                        those benefits under the plan which are 
                        attributable to employer contributions, 
                        based on benefits which are provided 
                        under title II of the Social Security 
                        Act, under the Railroad Retirement Act 
                        of 1974, under another plan described 
                        in section 401(a) maintained by the 
                        same employer, under any retirement 
                        program for officers or employees of 
                        the Federal Government or of the 
                        government of any State or political 
                        subdivision thereof, or under such 
                        other arrangements as the Secretary may 
                        provide. For purposes of this clause, 
                        allowable offsets based on such 
                        benefits consist of offsets equal to 
                        all or part of the actual benefit 
                        payment amounts, reasonable projections 
                        or estimations of such benefit payment 
                        amounts, or actuarial equivalents of 
                        such actual benefit payment amounts, 
                        projections, or estimations (determined 
                        on the basis of reasonable actuarial 
                        assumptions).
                          ``(viii) Permitted disparities in 
                        plan contributions or benefits.--A plan 
                        shall not be treated as failing to meet 
                        the requirements of this subparagraph 
                        solely because the plan provides a 
                        disparity in contributions or benefits 
                        with respect to which the requirements 
                        of section 401(l) are met.
                          ``(ix) Indexing permitted.--
                                  ``(I) In general.--A plan 
                                shall not be treated as failing 
                                to meet the requirements of 
                                this subparagraph solely 
                                because the plan provides for 
                                indexing of accrued benefits 
                                under the plan.
                                  ``(II) Protection of economic 
                                value.--Except in the case of 
                                any benefit provided in the 
                                form of a variable annuity, 
                                subclause (I) shall not apply 
                                with respect to any indexing 
                                which results in an accrued 
                                benefit less than the accrued 
                                benefit determined without 
                                regard to such indexing.
                                  ``(III) Indexing.--For 
                                purposes of this clause, the 
                                term `indexing' means, in 
                                connection with an accrued 
                                benefit, the periodic 
                                adjustment of the accrued 
                                benefit by means of the 
                                application of a recognized 
                                investment index or 
                                methodology.''.
          (2) Determinations of accrued benefit as balance of 
        benefit account.--Subsection (a) of section 411 of such 
        Code is amended by adding at the end the following new 
        paragraph:
          ``(13) Determinations of accrued benefit as balance 
        of benefit account.--
                  ``(A) In general.--A defined benefit plan 
                under which the accrued benefit payable under 
                the plan upon distribution (or any portion 
                thereof) is expressed as the balance of a 
                hypothetical account maintained for the 
                participant shall not be treated as failing to 
                meet the requirements of subsection (a)(2), 
                subsection (c) (but only in the case of a plan 
                which does not provide for employee 
                contributions), or section 417(e) solely 
                because of the amount actually made available 
                for such distribution under the terms of the 
                plan, in any case in which the applicable 
                interest rate that would be used under the 
                terms of the plan to project the amount of the 
                participant's account balance to normal 
                retirement age is not greater than a market 
                rate of return.
                  ``(B) Regulations.--The Secretary may provide 
                by regulation for rules governing the 
                calculation of a market rate of return for 
                purposes of subparagraph (A) and for 
                permissible methods of crediting interest to 
                the account (including fixed or variable 
                interest rates) resulting in effective rates of 
                return meeting the requirements of subparagraph 
                (A).''.
  (c) Effective Date.--The amendments made by this section 
shall apply to periods beginning on or after June 29, 2005.

                   TITLE VIII--DEDUCTION LIMITATIONS

SEC. 801. INCREASE IN DEDUCTION LIMITS.

  (a) Increase in Deduction Limit for Single-Employer Plans.--
Section 404 of the Internal Revenue Code of 1986 (relating to 
deduction for contributions of an employer to an employees' 
trust or annuity plan and compensation under a deferred payment 
plan) is amended--
          (1) in subsection (a)(1)(A), by inserting ``in the 
        case of a defined benefit plan other than a 
        multiemployer plan, in an amount determined under 
        subsection (o), and in the case of any other plan'' 
        after ``section 501(a),'', and
          (2) by inserting at the end the following new 
        subsection:
  ``(o) Deduction Limit for Single-Employer Plans.--For 
purposes of subsection (a)(1)(A)--
          ``(1) In general.--In the case of a defined benefit 
        plan to which subsection (a)(1)(A) applies (other than 
        a multiemployer plan), the amount determined under this 
        subsection for any taxable year shall be equal to the 
        amount determined under paragraph (2) with respect to 
        each plan year ending with or within the taxable year.
          ``(2) Determination of amount.--The amount determined 
        under this paragraph for any plan year shall be equal 
        to the excess (if any) of--
                  ``(A) the greater of--
                          ``(i) the sum of--
                                  ``(I) 150 percent of the 
                                funding target applicable to 
                                the plan for such plan year, 
                                determined under section 430, 
                                plus
                                  ``(II) the target normal cost 
                                applicable to the plan for such 
                                plan year, determined under 
                                section 430(b), or
                          ``(ii) in the case of a plan that is 
                        not in an at-risk status (as determined 
                        under 430(i)), the sum of--
                                  ``(I) the funding target 
                                which would be applicable to 
                                the plan for such plan year if 
                                such plan were in an at-risk 
                                status, determined under 
                                section 430(d) (with regard to 
                                section 430(i)), plus
                                  ``(II) the target normal cost 
                                which would be applicable to 
                                the plan for such plan year if 
                                such plan were in an at-risk 
                                status, determined under 
                                section 430(d) (with regard to 
                                section 430(i)), over
                  ``(B) the value of the plan assets 
                (determined under section 430(g)).
          ``(3) Special rule for terminating plans.--In the 
        case of a plan which, subject to section 4041 of the 
        Employee Retirement Income Security Act of 1974, 
        terminates during the plan year, the amount determined 
        under paragraph (2) shall not be less than the amount 
        required to make the plan sufficient for benefit 
        liabilities (within the meaning of section 4041(d) of 
        such Act).
          ``(4) Definitions.--Any term used in this subsection 
        which is also used in section 430 shall have the same 
        meaning given such term by section 430.''.
  (b) Increase in Deduction Limit for Multiemployer Plans.--
Section 404(a)(1)(D) of such Code is amended to read as 
follows:
                  ``(D) Minimum deduction for multiemployer 
                plans.--In the case of a defined benefit plan 
                which is a multiemployer plan, except as 
                provided in regulations, the maximum amount 
                deductible under the limitations of this 
                paragraph shall not be less than the excess (if 
                any) of--
                          ``(i) 140 percent of the current 
                        liability of the plan determined under 
                        section 431(c)(6)(D), over
                          ``(ii) the value of the plan's assets 
                        determined under section 431(c)(2).''.
  (c) Technical and Conforming Amendments.--
          (1) The last sentence of section 404(a)(1)(A) of such 
        Code is amended by striking ``section 412'' each place 
        it appears and inserting ``section 431''.
          (2) Section 404(a)(1)(B) of such Code is amended--
                  (A) by striking ``In the case of a plan'' and 
                inserting ``In the case of a multiemployer 
                plan'',
                  (B) by striking ``section 412(c)(7)'' each 
                place it appears and inserting ``section 
                431(c)(6)'',
                  (C) by striking ``section 412(c)(7)(B)'' and 
                inserting ``section 431(c)(6)(D)'',
                  (D) by striking ``section 412(c)(7)(A)'' and 
                inserting ``section 431(c)(6)(A)'', and
                  (E) by striking ``section 412'' and inserting 
                ``section 431''.
          (3) Section 404(a)(1) of such Code is amended by 
        striking subparagraph (F).
          (4) Section 404(a)(7) of such Code is amended--
                  (A) in subparagraph (A)(ii), by striking 
                ``for the plan year'' and all that follows and 
                inserting ``which are multiemployer plans for 
                the plan year which ends with or within such 
                taxable year (or for any prior plan year) and 
                the maximum amount of employer contributions 
                allowable under subsection (o) with respect to 
                any such defined benefit plans which are not 
                multiemployer plans for the plan year.'',
                  (B) by striking ``section 412(l)'' in the 
                last sentence of subparagraph (A) and inserting 
                ``paragraph (1)(D)(ii)'', and
                  (C) by striking subparagraph (D) and 
                inserting:
                  ``(D) Insurance contract plans.--For purposes 
                of this paragraph, a plan described in section 
                412(e)(3) shall be treated as a defined benefit 
                plan.''.
          (5) Section 404A(g)(3)(A) of such Code is amended by 
        striking ``paragraphs (3) and (7) of section 412(c)'' 
        and inserting ``sections 430(h)(1) and 431(c)(3) and 
        (6)''.
  (d) Effective Date.--The amendments made by this section 
shall apply to contributions for taxable years beginning after 
December 31, 2006.

SEC. 802. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.

  (a) In General.--Subparagraph (C) of section 404(a)(7) of the 
Internal Revenue Code of 1986 (relating to limitation on 
deductions where combination of defined contribution plan and 
defined benefit plan) is amended by adding after clause (ii) 
the following new clause:
                          ``(iii) Limitation.--In the case of 
                        employer contributions to 1 or more 
                        defined contribution plans, this 
                        paragraph shall only apply to the 
                        extent that such contributions exceed 6 
                        percent of the compensation otherwise 
                        paid or accrued during the taxable year 
                        to the beneficiaries under such plans. 
                        For purposes of this clause, amounts 
                        carried over from preceding taxable 
                        years under subparagraph (B) shall be 
                        treated as employer contributions to 1 
                        or more defined contributions to the 
                        extent attributable to employer 
                        contributions to such plans in such 
                        preceding taxable years.''.
  (b) Conforming Amendments.--Subparagraph (A) of section 
4972(c)(6) of such Code (relating to nondeductible 
contributions) is amended to read as follows:
                  ``(A) so much of the contributions to 1 or 
                more defined contribution plans which are not 
                deductible when contributed solely because of 
                section 404(a)(7) as does not exceed the amount 
                of contributions described in section 
                401(m)(4)(A), or''.
  (c) Effective Date.--The amendments made by this section 
shall apply to contributions for taxable years beginning after 
December 31, 2006.

 TITLE IX--ENHANCED RETIREMENTS SAVINGS AND DEFINED CONTRIBUTION PLANS

SEC. 901. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS OF 
                    ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT 
                    OF 2001 MADE PERMANENT.

  Title IX of the Economic Growth and Tax Relief Reconciliation 
Act of 2001 shall not apply to the provisions of, and 
amendments made by, subtitles (A) through (F) of title VI of 
such Act (relating to pension and individual retirement 
arrangement provisions).

SEC. 902. SAVER'S CREDIT.

  (a) Permanency.--Section 25B of the Internal Revenue Code of 
1986 (relating to elective deferrals and IRA contributions by 
certain individuals) is amended by striking subsection (h).
  (b) Voluntary Deposit Into Qualified Account.--
          (1) Section 25B of such Code, as amended by 
        subsection (a), is further amended by adding at the end 
        the following new subsection:
  ``(h) Voluntary Deposit Into Qualified Account.--
          ``(1) In general.--So much of any overpayment under 
        section 6401(b) as does not exceed the amount allowed 
        as a tax credit under subsection (a) shall, at the 
        election of the taxpayer, be paid on behalf of the 
        individual taxpayer to an applicable retirement plan 
        designated by the individual, except that in the case 
        of a joint return, each spouse shall be entitled to 
        designate an applicable retirement plan with respect to 
        payments attributable to such spouse.
          ``(2) Applicable retirement plan.--For purposes of 
        this subsection, the term `applicable retirement plan' 
        means any eligible retirement plan (as defined in 
        section 402(c)(8)(B)) that elects to accept deposits 
        under this subsection.''.
          (2) Effective date.--The amendment made by paragraph 
        (1) shall apply to taxable years beginning after 
        December 31, 2006.

SEC. 903. INCREASING PARTICIPATION THROUGH AUTOMATIC CONTRIBUTION 
                    ARRANGEMENTS.

  (a) In General.--Section 401(k) of the Internal Revenue Code 
of 1986 (relating to cash or deferred arrangement) is amended 
by adding at the end the following new paragraph:
          ``(13) Alternative method for automatic contribution 
        arrangements to meet nondiscrimination requirements.--
                  ``(A) In general.--A qualified automatic 
                contribution arrangement shall be treated as 
                meeting the requirements of paragraph 
                (3)(A)(ii).
                  ``(B) Qualified automatic contribution 
                arrangement.--For purposes of this paragraph, 
                the term `qualified automatic contribution 
                arrangement' means any cash or deferred 
                arrangement which meets the requirements of 
                subparagraphs (C) through (F).
                  ``(C) Automatic deferral.--
                          ``(i) In general.--The requirements 
                        of this subparagraph are met if, under 
                        the arrangement, each employee eligible 
                        to participate in the arrangement is 
                        treated as having elected to have the 
                        employer make elective contributions in 
                        an amount equal to a qualified 
                        percentage of compensation.
                          ``(ii) Election out.--The election 
                        treated as having been made under 
                        clause (i) shall cease to apply with 
                        respect to any employee if such 
                        employee makes an affirmative 
                        election--
                                  ``(I) to not have such 
                                contributions made, or
                                  ``(II) to make elective 
                                contributions at a level 
                                specified in such affirmative 
                                election.
                          ``(iii) Qualified percentage.--For 
                        purposes of this subparagraph, the term 
                        `qualified percentage' means, with 
                        respect to any employee, any percentage 
                        determined under the arrangement if 
                        such percentage is applied uniformly, 
                        does not exceed 10 percent, and is at 
                        least--
                                  ``(I) 3 percent during the 
                                period ending on the last day 
                                of the first plan year which 
                                begins after the date on which 
                                the first elective contribution 
                                described in clause (i) is made 
                                with respect to such employee,
                                  ``(II) 4 percent during the 
                                first plan year following the 
                                plan year described in 
                                subclause (I),
                                  ``(III) 5 percent during the 
                                second plan year following the 
                                plan year described in 
                                subclause (I), and
                                  ``(IV) 6 percent during any 
                                subsequent plan year.
                          ``(iv) Automatic deferral for current 
                        employees not required.--Clause (i) 
                        shall be applied without taking into 
                        account any employee who was eligible 
                        to participate in the arrangement (or a 
                        predecessor arrangement) immediately 
                        before the date on which such 
                        arrangement becomes a qualified 
                        automatic contribution arrangement 
                        (determined after application of this 
                        clause).
                  ``(D) Participation.--
                          ``(i) In general.--An arrangement 
                        meets the requirements of this 
                        subparagraph for any year if, during 
                        the plan year or the preceding plan 
                        year, elective contributions are made 
                        on behalf of at least 70 percent of the 
                        employees eligible to participate in 
                        the arrangement other than--
                                  ``(I) highly compensated 
                                employees, and
                                  ``(II) at the election of the 
                                plan administrator, employees 
                                described in subparagraph 
                                (C)(iv).
                          ``(ii) First plan year.--An 
                        arrangement (other than a successor 
                        arrangement) shall be treated as 
                        meeting the requirements of this 
                        subparagraph with respect to the first 
                        plan year with respect to which such 
                        arrangement is a qualified automatic 
                        contribution arrangement (determined 
                        without regard to this subparagraph).
                  ``(E) Matching or nonelective 
                contributions.--
                          ``(i) In general.--The requirements 
                        of this subparagraph are met if, under 
                        the arrangement, the employer--
                                  ``(I) makes matching 
                                contributions on behalf of each 
                                employee who is not a highly 
                                compensated employee in an 
                                amount equal to 50 percent of 
                                the elective contributions of 
                                the employee to the extent such 
                                elective contributions do not 
                                exceed 6 percent of 
                                compensation, or
                                  ``(II) is required, without 
                                regard to whether the employee 
                                makes an elective contribution 
                                or employee contribution, to 
                                make a contribution to a 
                                defined contribution plan on 
                                behalf of each employee who is 
                                not a highly compensated 
                                employee and who is eligible to 
                                participate in the arrangement 
                                in an amount equal to at least 
                                2 percent of the employee's 
                                compensation.
                          ``(ii) Application of rules for 
                        matching contributions.--The rules of 
                        clauses (ii) and (iii) of paragraph 
                        (12)(B) shall apply for purposes of 
                        clause (i)(I).
                          ``(iii) Withdrawal and vesting 
                        restrictions.--An arrangement shall not 
                        be treated as meeting the requirements 
                        of clause (i) unless, with respect to 
                        employer contributions (including 
                        matching contributions) taken into 
                        account in determining whether the 
                        requirements of clause (i) are met--
                                  ``(I) any employee who has 
                                completed at least 2 years of 
                                service (within the meaning of 
                                section 411(a)) has a 
                                nonforfeitable right to 100 
                                percent of the employee's 
                                accrued benefit derived from 
                                such employer contributions, 
                                and
                                  ``(II) the requirements of 
                                subparagraph (B) of paragraph 
                                (2) are met with respect to all 
                                such employer contributions.
                          ``(iv) Application of certain other 
                        rules.--The rules of subparagraphs 
                        (E)(ii) and (F) of paragraph (12) shall 
                        apply for purposes of subclauses (I) 
                        and (II) of clause (i).
                  ``(F) Notice requirements.--
                          ``(i) In general.--The requirements 
                        of this subparagraph are met if, within 
                        a reasonable period before each plan 
                        year, each employee eligible to 
                        participate in the arrangement for such 
                        year receives written notice of the 
                        employee's rights and obligations under 
                        the arrangement which--
                                  ``(I) is sufficiently 
                                accurate and comprehensive to 
                                apprise the employee of such 
                                rights and obligations, and
                                  ``(II) is written in a manner 
                                calculated to be understood by 
                                the average employee to whom 
                                the arrangement applies.
                          ``(ii) Timing and content 
                        requirements.--A notice shall not be 
                        treated as meeting the requirements of 
                        clause (i) with respect to an employee 
                        unless--
                                  ``(I) the notice explains the 
                                employee's right under the 
                                arrangement to elect not to 
                                have elective contributions 
                                made on the employee's behalf 
                                (or to elect to have such 
                                contributions made at a 
                                different percentage),
                                  ``(II) in the case of an 
                                arrangement under which the 
                                employee may elect among 2 or 
                                more investment options, the 
                                notice explains how 
                                contributions made under the 
                                arrangement will be invested in 
                                the absence of any investment 
                                election by the employee, and
                                  ``(III) the employee has a 
                                reasonable period of time after 
                                receipt of the notice described 
                                in subclauses (I) and (II) and 
                                before the first elective 
                                contribution is made to make 
                                either such election.''.
  (b) Matching Contributions.--Section 401(m) of such Code 
(relating to nondiscrimination test for matching contributions 
and employee contributions) is amended by redesignating 
paragraph (12) as paragraph (13) and by inserting after 
paragraph (11) the following new paragraph:
          ``(12) Alternative method for automatic contribution 
        arrangements.--A defined contribution plan shall be 
        treated as meeting the requirements of paragraph (2) 
        with respect to matching contributions if the plan--
                  ``(A) is a qualified automatic contribution 
                arrangement (as defined in subsection (k)(13)), 
                and
                  ``(B) meets the requirements of paragraph 
                (11)(B).''.
  (c) Exclusion From Definition of Top-Heavy Plans.--
          (1) Elective contribution rule.--Clause (i) of 
        section 416(g)(4)(H) of such Code is amended by 
        inserting ``or 401(k)(13)'' after ``section 
        401(k)(12)''.
          (2) Matching contribution rule.--Clause (ii) of 
        section 416(g)(4)(H) of such Code is amended by 
        inserting ``or 401(m)(12)'' after ``section 
        401(m)(11)''.
  (d) Corrective Distributions.--
          (1) In general.--Section 414 of the Internal Revenue 
        Code of 1986 (relating to definitions and special 
        rules) is amended by adding at the end the following 
        new subsection:
  ``(w) Automatic Contribution Arrangements.--
          ``(1) In general.--No tax shall be imposed under 
        section 72(t) on a distribution from an applicable 
        employer plan to the employee with respect to whom such 
        contribution relates if such distribution does not 
        exceed the erroneous automatic contribution amount and 
        is made not later than the 1st April 15 following the 
        close of the taxable year in which such contribution 
        was made.
          ``(2) Erroneous automatic contribution amount.--For 
        purposes of this subsection--
                  ``(A) In general.--The term `erroneous 
                automatic contribution amount' means the lesser 
                of--
                          ``(i) the amount of automatic 
                        contributions made during the 
                        applicable period which the employee 
                        elects in a notice to the plan 
                        administrator to treat as an erroneous 
                        automatic contribution amount for 
                        purposes of this subsection, or
                          ``(ii) $500.
                  ``(B) Automatic contribution.--The term 
                `automatic contribution' means contributions 
                which, under the terms of the plan--
                          ``(i) the employee can elect to be 
                        made as contributions under the plan on 
                        behalf of the employee, or to the 
                        employee directly in cash, and
                          ``(ii) which are made on behalf of 
                        the employee under the plan pursuant to 
                        a plan provision treating the employee 
                        as having elected to have the employer 
                        make such contributions on behalf of 
                        the employee until the employee 
                        affirmatively elects not to have such 
                        contribution made or affirmatively 
                        elects to make contributions as a 
                        specified level.
          ``(3) Applicable employer plan.--For purposes of this 
        subsection, the term `applicable employer plan' means--
                  ``(A) an employees' trust described in 
                section 401(a) which is exempt from tax under 
                section 501(a),
                  ``(B) a plan under which amounts are 
                contributed by an individual's employer for an 
                annuity contract described in section 403(b), 
                and
                  ``(C) an eligible deferred compensation plan 
                described in section 457(b) which is maintained 
                by an eligible employer described in section 
                457(e)(1)(A).
          ``(4) Applicable period.--For purposes of this 
        subsection, the term `applicable period' means, with 
        respect to any employee, the three month period that 
        begins on the first date that an automatic contribution 
        described in paragraph (2)(B) is made with respect to 
        such employee.
          ``(5) Special rules.--A distribution described in 
        paragraph (1) (subject to the limitation of paragraph 
        (2))--
                  ``(A) shall not be treated as a distribution 
                for purposes of sections 401(k)(2)(B)(i), 
                403(b)(7), 403(b)(11), and 457(d)(1)(A), and
                  ``(B) shall not be taken into account for 
                purposes of section 401(k)(3).''.
          (2) Vesting conforming amendments.--
                  (A) Section 411(a)(3)(G) of such Code is 
                amended by inserting ``an erroneous automatic 
                contribution under section 414(w),'' after 
                ``402(g)(2)(A),''.
                  (B) The heading of section 411(a)(3)(G) of 
                such Code is amended by inserting ``or 
                erroneous automatic contribution'' before the 
                period.
                  (C) Section 401(k)(8)(E) of such Code is 
                amended by inserting ``an erroneous automatic 
                contribution under section 414(w),'' after 
                ``402(g)(2)(A),''.
                  (D) The heading of section 401(k)(8)(E) of 
                such Code is amended by inserting ``or 
                erroneous automatic contribution'' before the 
                period.
                  (E) Section 203(a)(3)(F) of the Employee 
                Retirement Income Security Act of 1974 (29 
                U.S.C. 1053(a)(3)(F)) is amended by inserting 
                ``an erroneous automatic contribution under 
                section 414(w) of such Code,'' after 
                ``402(g)(2)(A) of such Code,''.
  (e) Control Over Plan Assets Deemed to Have Been Exercised 
With Respect to Default Investment Arrangements.--Section 
404(c) of the Employee Retirement Income Security Act of 1974, 
as amended by section 308, is further amended by adding at the 
end the following new paragraph:
  ``(5)(A) For purposes of paragraph (1), a participant in an 
individual account plan shall be treated as exercising control 
over the assets in the account with respect to the amount of 
contributions made under a default investment arrangement.
  ``(B)(i) For purposes of this paragraph, the term `default 
investment arrangement' means an arrangement--
          ``(I) which meets the requirements of subparagraph 
        (C),
          ``(II) under which the participant is treated as 
        having elected to have the plan sponsor exercise 
        control over the assets in the participant's account 
        until the participant specifically elects to exercise 
        such control, and
          ``(III) under which assets described in subclause 
        (II) are invested in accordance with regulations 
        prescribed by the Secretary.
  ``(ii) The regulations prescribed pursuant to clause (i)(III) 
shall provide guidance on the appropriateness of certain 
investments for designation as default investments under the 
arrangement, which shall include guidance regarding--
          ``(I) appropriate mixes of default investments and 
        asset classes which the Secretary considers consistent 
        with long-term capital appreciation, and
          ``(II) the designation of other default investments.
  ``(C)(i) For purposes of subparagraph (B)(i)(I), an 
arrangement meets the requirements of this subparagraph for any 
plan year if, within a reasonable period before such plan year, 
the plan administrator gives to each participant to whom the 
arrangement applies for such plan year notice of the 
participant's rights and obligations under the arrangement 
which--
          ``(I) is sufficiently accurate and comprehensive to 
        apprise the participant of such rights and obligations, 
        and
          ``(II) is written in a manner calculated to be 
        understood by the average participant to whom the 
        arrangement applies.
  ``(ii) A notice shall not be treated as meeting the 
requirements of clause (i) with respect to a participant 
unless--
          ``(I) the notice includes an explanation of the 
        participant's right under the arrangement to 
        specifically elect to exercise control over the assets 
        in the participant's account,
          ``(II) the employee has a reasonable period of time, 
        after receipt of the notice described in subclause (I) 
        and before the assets are first invested, to 
        specifically make such an election, and
          ``(III) the notice explains how contributions made 
        under the arrangement will be invested in the absence 
        of any investment election specifically made by the 
        employee.''.
  (f) Preemption of Conflicting State Regulation.--Section 514 
of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1144) is amended by adding at the end the following new 
subsection:
  ``(e)(1) Notwithstanding any other provision of this section, 
this title shall supersede any law of a State which would 
directly or indirectly prohibit or restrict the inclusion in 
any plan of an automatic contribution arrangement. The 
Secretary may prescribe regulations which would establish 
minimum standards that such an arrangement would be required to 
satisfy in order for this subsection to apply in the case of 
such arrangement.
  ``(2)(A) For purposes of this subsection, the term `automatic 
contribution arrangement' means an arrangement--
          ``(i) which meets the requirements of paragraph (3),
          ``(ii) under which a participant may elect to have 
        the plan sponsor make payments as contributions under 
        the plan on behalf of the participant, or to the 
        participant directly in cash,
          ``(iii) under which a participant is treated as 
        having elected to have the plan sponsor make such 
        contributions in an amount equal to a uniform 
        percentage of compensation provided under the plan 
        until the participant specifically elects not to have 
        such contributions made (or specifically elects to have 
        such contributions made at a different percentage), and
          ``(iv) under which such contributions are invested in 
        accordance with regulations prescribed by the 
        Secretary.
  ``(B) The regulations prescribed pursuant to subparagraph 
(A)(iv) shall provide guidance on the appropriateness of 
certain investments for designation as default investments 
under the arrangement, which shall include guidance regarding 
appropriate mixes of default investments and asset classes 
which the Secretary considers consistent with long-term capital 
appreciation
  ``(3)(A) For purposes of paragraph (2)(A)(i), an arrangement 
meets the requirements of this paragraph for any plan year if, 
within a reasonable period before such plan year, the plan 
administrator gives to each participant to whom the arrangement 
applies for such plan year notice of the participant's rights 
and obligations under the arrangement which--
          ``(i) is sufficiently accurate and comprehensive to 
        apprise the participant of such rights and obligations, 
        and
          ``(ii) is written in a manner calculated to be 
        understood by the average participant to whom the 
        arrangement applies.
  ``(B) A notice shall not be treated as meeting the 
requirements of subparagraph (A) with respect to a participant 
unless--
          ``(i) the notice includes an explanation of the 
        participant's right under the arrangement not to have 
        elective contributions made on the participant's behalf 
        (or to elect to have such contributions made at a 
        different percentage),
          ``(ii) the participant has a reasonable period of 
        time, after receipt of the notice described in clause 
        (i) and before the first elective contribution is made, 
        to make such election, and
          ``(iii) the notice explains how contributions made 
        under the arrangement will be invested in the absence 
        of any investment election by the participant.''.
  (g) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2005.

SEC. 904. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR 
                    INDIVIDUALS CALLED TO ACTIVE DUTY FOR AT LEAST 179 
                    DAYS.

  (a) In General.--Paragraph (2) of section 72(t) of the 
Internal Revenue Code of 1986 (relating to 10-percent 
additional tax on early distributions from qualified retirement 
plans) is amended by adding at the end the following new 
subparagraph:
                  ``(G) Distributions from retirement plans to 
                individuals called to active duty.--
                          ``(i) In general.--Any qualified 
                        reservist distribution.
                          ``(ii) Amount distributed may be 
                        repaid.--Any individual who receives a 
                        qualified reservist distribution may, 
                        at any time during the 2-year period 
                        beginning on the day after the end of 
                        the active duty period, make one or 
                        more contributions to an individual 
                        retirement plan of such individual in 
                        an aggregate amount not to exceed the 
                        amount of such distribution. The dollar 
                        limitations otherwise applicable to 
                        contributions to individual retirement 
                        plans shall not apply to any 
                        contribution made pursuant to the 
                        preceding sentence. No deduction shall 
                        be allowed for any contribution 
                        pursuant to this clause.
                          ``(iii) Qualified reservist 
                        distribution.--For purposes of this 
                        subparagraph, the term `qualified 
                        reservist distribution' means any 
                        distribution to an individual if--
                                  ``(I) such distribution is 
                                from an individual retirement 
                                plan, or from amounts 
                                attributable to employer 
                                contributions made pursuant to 
                                elective deferrals described in 
                                subparagraph (A) or (C) of 
                                section 402(g)(3) or section 
                                501(c)(18)(D)(iii),
                                  ``(II) such individual was 
                                (by reason of being a member of 
                                a reserve component (as defined 
                                in section 101 of title 37, 
                                United States Code)), ordered 
                                or called to active duty for a 
                                period in excess of 179 days or 
                                for an indefinite period, and
                                  ``(III) such distribution is 
                                made during the period 
                                beginning on the date of such 
                                order or call and ending at the 
                                close of the active duty 
                                period.
                          ``(iv) Application of subparagraph.--
                        This subparagraph applies to 
                        individuals ordered or called to active 
                        duty after September 11, 2001, and 
                        before September 12, 2007. In no event 
                        shall the 2-year period referred to in 
                        clause (ii) end before the date which 
                        is 2-years after the date of the 
                        enactment of this subparagraph.''.
  (b) Conforming Amendments.--
          (1) Section 401(k)(2)(B)(i) of such Code is amended 
        by striking ``or'' at the end of subclause (III), by 
        striking ``and'' at the end of subclause (IV) and 
        inserting ``or'', and by inserting after subclause (IV) 
        the following new subclause:
                                  ``(V) in the case of a 
                                qualified reservist 
                                distribution (as defined in 
                                section 72(t)(2)(G)(iii)), the 
                                date on which a period referred 
                                to in subclause (III) of such 
                                section begins, and''.
          (2) Section 403(b)(7)(A)(ii) of such Code is amended 
        by inserting ``(unless such amount is a distribution to 
        which section 72(t)(2)(G) applies)'' after 
        ``distributee''.
          (3) Section 403(b)(11) of such Code is amended by 
        striking ``or'' at the end of subparagraph (A), by 
        striking the period at the end of subparagraph (B) and 
        inserting ``, or'', and by inserting after subparagraph 
        (B) the following new subparagraph:
                  ``(C) for distributions to which section 
                72(t)(2)(G) applies.''.
  (c) Effective Date; Waiver of Limitations.--
          (1) Effective date.--The amendment made by this 
        section shall apply to distributions after September 
        11, 2001.
          (2) Waiver of limitations.--If refund or credit of 
        any overpayment of tax resulting from the amendments 
        made by this section is prevented at any time before 
        the close of the 1-year period beginning on the date of 
        the enactment of this Act by the operation of any law 
        or rule of law (including res judicata), such refund or 
        credit may nevertheless be made or allowed if claim 
        therefor is filed before the close of such period.

SEC. 905. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX ON CERTAIN 
                    DISTRIBUTIONS OF PENSION PLANS FOR PUBLIC SAFETY 
                    EMPLOYEES.

  (a) In General.--Section 72(t)(2) of the Internal Revenue 
Code of 1986 (relating to subsection not to apply to certain 
distributions), as amended by section 904, is amended by adding 
at the end the following new subsection:
                  ``(H) DROP distributions to qualified public 
                safety employees in governmental plans.--
                          ``(i) In general.--Distributions to 
                        an individual who is a qualified public 
                        safety employee from a governmental 
                        plan within the meaning of section 
                        414(d) to the extent such distributions 
                        are attributable to a DROP benefit.
                          ``(ii) Definitions.--For purposes of 
                        this subparagraph--
                                  ``(I) DROP benefit.--The term 
                                `DROP benefit' means a feature 
                                of a governmental plan which is 
                                a defined benefit plan and 
                                under which an employee elects 
                                to receive credits to an 
                                account (including a notional 
                                account) in the plan which are 
                                not in excess of the plan 
                                benefits (payable in the form 
                                of an annuity) that would have 
                                been provided if the employee 
                                had retired under the plan at a 
                                specified earlier retirement 
                                date and which are in lieu of 
                                increases in the employee's 
                                accrued pension benefit based 
                                on years of service after the 
                                effective date of the DROP 
                                election.
                                  ``(II) Qualified public 
                                safety employee.--The term 
                                `qualified public safety 
                                employee' means any employee of 
                                any police department or fire 
                                department organized and 
                                operated by a State or 
                                political subdivision of a 
                                State if the employee provides 
                                police protection, firefighting 
                                services, or emergency medical 
                                services for any area within 
                                the jurisdiction of such State 
                                or political subdivision and if 
                                the employee was eligible to 
                                retire on or before the date of 
                                such election and receive 
                                immediate retirement 
                                benefits.''.
  (b) Effective Date.--The amendments made by this section 
shall apply to distributions after the date of the enactment of 
this Act.

SEC. 906. COMBAT ZONE COMPENSATION TAKEN INTO ACCOUNT FOR PURPOSES OF 
                    DETERMINING LIMITATION AND DEDUCTIBILITY OF 
                    CONTRIBUTIONS TO INDIVIDUAL RETIREMENT PLANS.

  (a) In General.--Subsection (f) of section 219 of the 
Internal Revenue Code of 1986 is amended by redesignating 
paragraph (7) as paragraph (8) and by inserting after paragraph 
(6) the following new paragraph:
          ``(7) Special rule for compensation earned by members 
        of the armed forces for service in a combat zone.--For 
        purposes of subsections (b)(1)(B) and (c), the amount 
        of compensation includible in an individual's gross 
        income shall be determined without regard to section 
        112.''.
  (b) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 2005.

SEC. 907. DIRECT PAYMENT OF TAX REFUNDS TO INDIVIDUAL RETIREMENT PLANS.

  (a) In General.--The Secretary of the Treasury (or the 
Secretary's delegate) shall make available a form (or modify 
existing forms) for use by individuals to direct that a portion 
of any refund of overpayment of tax imposed by chapter 1 of the 
Internal Revenue Code of 1986 be paid directly to an individual 
retirement plan (as defined in section 7701(a)(37) of such 
Code) of such individual.
  (b) Effective Date.--The form required by subsection (a) 
shall be made available for taxable years beginning after 
December 31, 2006.

SEC. 908. IRA ELIGIBILITY FOR THE DISABLED.

  (a) In General.--Subsection (f) of section 219 of the 
Internal Revenue Code of 1986 (relating to other definitions 
and special rules), as amended by this Act, is further amended 
by redesignating paragraph (8) as paragraph (9) and by 
inserting after paragraph (7) the following new paragraph:
          ``(8) Special rule for certain disabled 
        individuals.--In the case of an individual--
                  ``(A) who is disabled (within the meaning of 
                section 72(m)(7)), and
                  ``(B) who has not attained the applicable age 
                (as defined in section 401(a)(9)(H)) before the 
                close of the taxable year,
        subparagraph (B) of subsection (b)(1) shall not 
        apply.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 909. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF CERTAIN 
                    RETIREMENT PLAN DISTRIBUTIONS.

  (a) In General.--
          (1) Qualified plans.--Section 402(c) of the Internal 
        Revenue Code of 1986 (relating to rollovers from exempt 
        trusts) is amended by adding at the end the following 
        new paragraph:
          ``(11) Distributions to inherited individual 
        retirement plan of nonspouse beneficiary.--
                  ``(A) In general.--If, with respect to any 
                portion of a distribution from an eligible 
                retirement plan of a deceased employee, a 
                direct trustee-to-trustee transfer is made to 
                an individual retirement plan described in 
                clause (i) or (ii) of paragraph (8)(B) 
                established for the purposes of receiving the 
                distribution on behalf of an individual who is 
                a designated beneficiary (as defined by section 
                401(a)(9)(E)) of the employee and who is not 
                the surviving spouse of the employee--
                          ``(i) the transfer shall be treated 
                        as an eligible rollover distribution 
                        for purposes of this subsection,
                          ``(ii) the individual retirement plan 
                        shall be treated as an inherited 
                        individual retirement account or 
                        individual retirement annuity (within 
                        the meaning of section 408(d)(3)(C)) 
                        for purposes of this title, and
                          ``(iii) section 401(a)(9)(B) (other 
                        than clause (iv) thereof) shall apply 
                        to such plan.
                  ``(B) Certain trusts treated as 
                beneficiaries.--For purposes of this paragraph, 
                to the extent provided in rules prescribed by 
                the Secretary, a trust maintained for the 
                benefit of one or more designated beneficiaries 
                shall be treated in the same manner as a trust 
                designated beneficiary.''.
          (2) Section 403(a) plans.--Subparagraph (B) of 
        section 403(a)(4) of such Code (relating to rollover 
        amounts) is amended by inserting ``and (11)'' after 
        ``(7)''.
          (3) Section 403(b) plans.--Subparagraph (B) of 
        section 403(b)(8) of such Code (relating to rollover 
        amounts) is amended by striking ``and (9)'' and 
        inserting ``, (9), and (11)''.
          (4) Section 457 plans.--Subparagraph (B) of section 
        457(e)(16) of such Code (relating to rollover amounts) 
        is amended by striking ``and (9)'' and inserting ``, 
        (9), and (11)''.
  (b) Effective Date.--The amendments made by this section 
shall apply to distributions after December 31, 2005.

        TITLE X--PROVISIONS TO ENHANCE HEALTH CARE AFFORDABILITY

SEC. 1001. TREATMENT OF ANNUITY AND LIFE INSURANCE CONTRACTS WITH A 
                    LONG-TERM CARE INSURANCE FEATURE.

  (a) Exclusion From Gross Income.--Subsection (e) of section 
72 of the Internal Revenue Code of 1986 (relating to amounts 
not received as annuities) is amended by redesignating 
paragraph (11) as paragraph (12) and by inserting after 
paragraph (10) the following new paragraph:
          ``(11) Special rules for certain combination 
        contracts providing long-term care insurance.--
        Notwithstanding paragraphs (2), (5)(C), and (10), in 
        the case of any charge against the cash value of an 
        annuity contract or the cash surrender value of a life 
        insurance contract made as payment for coverage under a 
        qualified long-term care insurance contract which is 
        part of or a rider on such annuity or life insurance 
        contract--
                  ``(A) the investment in the contract shall be 
                reduced (but not below zero) by such charge, 
                and
                  ``(B) such charge shall not be includible in 
                gross income.''.
  (b) Tax-Free Exchanges Among Certain Insurance Policies.--
          (1) Annuity contracts can include qualified long-term 
        care insurance riders.--Paragraph (2) of section 
        1035(b) of such Code is amended by adding at the end 
        the following new sentence: ``For purposes of the 
        preceding sentence, a contract shall not fail to be 
        treated as an annuity contract solely because a 
        qualified long-term care insurance contract is a part 
        of or a rider on such contract.''.
          (2) Life insurance contracts can include qualified 
        long-term care insurance riders.--Paragraph (3) of 
        section 1035(b) of such Code is amended by adding at 
        the end the following new sentence: ``For purposes of 
        the preceding sentence, a contract shall not fail to be 
        treated as a life insurance contract solely because a 
        qualified long-term care insurance contract is a part 
        of or a rider on such contract.''.
          (3) Expansion of tax-free exchanges of life 
        insurance, endowment, and annuity contracts for long-
        term care contracts.--Subsection (a) of section 1035 of 
        such Code (relating to certain exchanges of insurance 
        policies) is amended--
                  (A) in paragraph (1) by striking 
                ``contract;'' and inserting ``contract or for a 
                qualified long-term care insurance contract;'',
                  (B) in paragraph (2) by striking 
                ``contract;'' and inserting ``contract, or (C) 
                for a qualified long-term care insurance 
                contract;'', and
                  (C) in paragraph (3) by striking 
                ``contract.'' and inserting ``contract or for a 
                qualified long-term care insurance contract.''.
          (4) Tax-free exchanges of qualified long-term care 
        insurance contract.--Subsection (a) of section 1035 of 
        such Code (relating to certain exchanges of insurance 
        policies) is amended by striking ``or'' at the end of 
        paragraph (2), by striking the period at the end of 
        paragraph (3) and inserting ``; or'', and by inserting 
        after paragraph (3) the following new paragraph:
          ``(4) a qualified long-term care insurance contract 
        for a qualified long-term care insurance contract.''.
  (c) Treatment of Coverage Provided as Part of a Life 
Insurance or Annuity Contract.--Subsection (e) of section 7702B 
of such Code (relating to treatment of qualified long-term care 
insurance) is amended to read as follows:
  ``(e) Treatment of Coverage Provided as Part of a Life 
Insurance or Annuity Contract.--
          ``(1) Coverage treated as contract.--Except as 
        otherwise provided in regulations prescribed by the 
        Secretary, in the case of any long-term care insurance 
        coverage (whether or not qualified) provided by a rider 
        on or as part of a life insurance contract or an 
        annuity contract, this title shall apply as if the 
        portion of the contract providing such coverage is a 
        separate contract.
          ``(2) Denial of deduction under section 213.--No 
        deduction shall be allowed under section 213(a) for any 
        payment made for coverage under a qualified long-term 
        care insurance contract if such payment is made as a 
        charge against the cash value of an annuity contract or 
        the cash surrender value of a life insurance contract.
          ``(3) Application of section 7702.--Section 
        7702(c)(2) (relating to the guideline premium 
        limitation) shall be applied by increasing the 
        guideline premium limitation with respect to the life 
        insurance contract, as of any date--
                  ``(A) by the sum of any charges (but not 
                premium payments) against the life insurance 
                contract's cash surrender value (within the 
                meaning of section 7702(f)(2)(A)) for coverage 
                under the qualified long-term care insurance 
                contract made to that date under the life 
                insurance contract, less
                  ``(B) any such charges the imposition of 
                which reduces the premiums paid for the life 
                insurance contract (within the meaning of 
                section 7702(f)(1)).
          ``(4) Portion defined.--For purposes of this 
        subsection, the term `portion' means only the terms and 
        benefits under a life insurance contract or annuity 
        contract that are in addition to the terms and benefits 
        under the contract without regard to long-term care 
        insurance coverage.
          ``(5) Annuity contracts to which paragraph (1) does 
        not apply.--For purposes of this subsection, none of 
        the following shall be treated as an annuity contract:
                  ``(A) A trust described in section 401(a) 
                which is exempt from tax under section 501(a).
                  ``(B) A contract--
                          ``(i) purchased by a trust described 
                        in subparagraph (A),
                          ``(ii) purchased as part of a plan 
                        described in section 403(a),
                          ``(iii) described in section 403(b),
                          ``(iv) provided for employees of a 
                        life insurance company under a plan 
                        described in section 818(a)(3), or
                          ``(v) from an individual retirement 
                        account or an individual retirement 
                        annuity.
                  ``(C) A contract purchased by an employer for 
                the benefit of the employee (or the employee's 
                spouse).
        Any dividend described in section 404(k) which is 
        received by a participant or beneficiary shall, for 
        purposes of this paragraph, be treated as paid under a 
        separate contract to which subparagraph (B)(i) 
        applies.''.
  (d) Information Reporting.--
          (1) Subpart B of part III of subchapter A of chapter 
        61 of such Code (relating to information concerning 
        transactions with other persons) is amended by adding 
        at the end the following new section:

``SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED LONG-TERM CARE 
                    INSURANCE CONTRACTS UNDER COMBINED ARRANGEMENTS.

  ``(a) Requirement of Reporting.--Any person who makes a 
charge against the cash value of an annuity contract, or the 
cash surrender value of a life insurance contract, which is 
excludible from gross income under section 72(e)(11) shall make 
a return, according to the forms or regulations prescribed by 
the Secretary, setting forth--
          ``(1) the amount of the aggregate of such charges 
        against each such contract for the calendar year,
          ``(2) the amount of the reduction in the investment 
        in each such contract by reason of such charges, and
          ``(3) the name, address, and TIN of the individual 
        who is the holder of each such contract.
  ``(b) Statements To Be Furnished to Persons With Respect to 
Whom Information Is Required.--Every person required to make a 
return under subsection (a) shall furnish to each individual 
whose name is required to be set forth in such return a written 
statement showing--
          ``(1) the name, address, and phone number of the 
        information contact of the person making the payments, 
        and
          ``(2) the information required to be shown on the 
        return with respect to such individual.
The written statement required under the preceding sentence 
shall be furnished to the individual on or before January 31 of 
the year following the calendar year for which the return under 
subsection (a) was required to be made.''.
          (2) Clerical amendment.--The table of sections for 
        subpart B of part III of subchapter A of such chapter 
        61 of such Code is amended by adding at the end the 
        following new item:

``Sec. 6050U. Charges or payments for qualified long-term care insurance 
          contracts under combined arrangements.''.
  (e) Treatment of Policy Acquisition Expenses.--Subsection (e) 
of section 848 of such Code (relating to classification of 
contracts) is amended by adding at the end the following new 
paragraph:
          ``(6) Treatment of certain qualified long-term care 
        insurance contract arrangements.--An annuity or life 
        insurance contract which includes a qualified long-term 
        care insurance contract as a part of or a rider on such 
        annuity or life insurance contract shall be treated as 
        a specified insurance contract not described in 
        subparagraph (A) or (B) of subsection (c)(1).''.
  (f) Treatment as Qualified Additional Benefit.--Subparagraph 
(A) of section 7702(f)(5) of such Code (relating to qualified 
additional benefits) is amended by striking ``or'' at the end 
of clause (iv), by redesignating clause (v) as clause (vi), and 
by inserting after clause (iv) the following new clause:
                          ``(v) qualified long-term care 
                        insurance contract which is a part of 
                        or a rider on the contract, or''.
  (g) Effective Dates.--
          (1) In general.--Except as provided by paragraph (2), 
        the amendments made by this section shall apply to 
        contracts issued before, on, or after December 31, 
        2006, but only with respect to periods beginning after 
        such date.
          (2) Subsection (B).--The amendments made by 
        subsection (b) shall apply with respect to exchanges 
        occurring after December 31, 2006.

SEC. 1002. DISPOSITION OF UNUSED HEALTH AND DEPENDENT CARE BENEFITS IN 
                    CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

  (a) In General.--Section 125 of the Internal Revenue Code of 
1986 (relating to cafeteria plans) is amended by redesignating 
subsections (h) and (i) as subsections (i) and (j), 
respectively, and by inserting after subsection (g) the 
following:
  ``(h) Contributions of Certain Unused Health and Dependent 
Care Benefits.--
          ``(1) In general.--For purposes of this title, a plan 
        or other arrangement shall not fail to be treated as a 
        cafeteria plan solely because under such plan qualified 
        benefits include--
                  ``(A) a health flexible spending arrangement 
                under which not more than $500 of unused 
                benefits under such arrangement may be--
                          ``(i) carried forward to the 
                        succeeding plan year of such health 
                        flexible spending arrangement, or
                          ``(ii) to the extent permitted by 
                        section 106(d), contributed by the 
                        employer to a health savings account 
                        (as defined in section 223(d)) 
                        maintained for the benefit of the 
                        employee, and
                  ``(B) a dependent care flexible spending 
                arrangement under which not more than $500 of 
                unused benefits under such arrangement may be 
                carried forward to the succeeding plan year of 
                such dependent care flexible spending 
                arrangement.
          ``(2) Health flexible spending arrangement.--For 
        purposes of this subsection, the term `health flexible 
        spending arrangement' means a flexible spending 
        arrangement (as defined in section 106(c)) that is a 
        qualified benefit and only permits reimbursement for 
        expenses for medical care (as defined in section 
        213(d)(1), without regard to subparagraphs (C) and (D) 
        thereof).
          ``(3) Dependent care flexible spending arrangement.--
        For purposes of this subsection, the term `dependent 
        care flexible spending arrangement' means a flexible 
        spending arrangement (as defined in section 106(c)) 
        that is a qualified benefit and only permits 
        reimbursement for expenses for dependent care 
        assistance which meets the requirements of section 
        129(d).
          ``(4) Unused benefits.--For purposes of this 
        subsection, with respect to an employee, the term 
        `unused benefits' means the excess of--
                  ``(A) the maximum amount of reimbursement 
                allowable to the employee for a plan year under 
                a health flexible spending arrangement or the 
                dependent care flexible spending arrangement, 
                as the case may be, over
                  ``(B) the actual amount of reimbursement for 
                such year under such arrangement.''.
  (b) Effective Date.--The amendments made by subsection (a) 
shall apply to taxable years beginning after December 31, 2005.

SEC. 1003. DISTRIBUTIONS FROM GOVERNMENTAL RETIREMENT PLANS FOR HEALTH 
                    AND LONG-TERM CARE INSURANCE FOR PUBLIC SAFETY 
                    OFFICERS.

  (a) In General.--Section 402 of the Internal Revenue Code of 
1986 (relating to taxability of beneficiary of employees' 
trust) is amended by adding at the end the following new 
subsection:
  ``(l) Distributions From Governmental Plans for Health and 
Long-Term Care Insurance.--
          ``(1) In general.--In the case of an employee who is 
        an eligible retired public safety officer who makes the 
        election described in paragraph (6) with respect to any 
        taxable year of such employee, gross income of such 
        employee for such taxable year does not include any 
        distribution from an eligible retirement plan to the 
        extent that the aggregate amount of such distributions 
        does not exceed the amount paid by such employee for 
        qualified health insurance premiums of the employee, 
        his spouse, or dependents (as defined in section 152) 
        for such taxable year.
          ``(2) Limitation.--The amount which may be excluded 
        from gross income for the taxable year by reason of 
        paragraph (1) shall not exceed $5,000.
          ``(3) Distributions must otherwise be includible.--
                  ``(A) In general.--An amount shall be treated 
                as a distribution for purposes of paragraph (1) 
                only to the extent that such amount would be 
                includible in gross income without regard to 
                paragraph (1).
                  ``(B) Application of section 72.--
                Notwithstanding section 72, in determining the 
                extent to which an amount is treated as a 
                distribution for purposes of subparagraph (A), 
                the aggregate amounts distributed from an 
                eligible retirement plan in a taxable year (up 
                to the amount excluded under paragraph (1)) 
                shall be treated as includible in gross income 
                (without regard to subparagraph (A)) to the 
                extent that such amount does not exceed the 
                aggregate amount which would have been so 
                includible if all amounts distributed from all 
                eligible retirement plans were treated as 1 
                contract for purposes of determining the 
                inclusion of such distribution under section 
                72. Proper adjustments shall be made in 
                applying section 72 to other distributions in 
                such taxable year and subsequent taxable years.
          ``(4) Definitions.--For purposes of this subsection--
                  ``(A) Eligible retirement plan.--For purposes 
                of paragraph (1), the term `eligible retirement 
                plan' means a governmental plan (within the 
                meaning of section 414(d)) which is described 
                in clause (iii), (iv), (v), or (vi) of 
                subsection (c)(8)(B).
                  ``(B) Eligible retired public safety 
                officer.--The term `eligible retired public 
                safety officer' means an individual who, by 
                reason of disability or attainment of normal 
                retirement age, is separated from service as a 
                public safety officer with the employer who 
                maintains the eligible retirement plan from 
                which distributions subject to paragraph (1) 
                are made.
                  ``(C) Public safety officer.--The term 
                `public safety officer' shall have the same 
                meaning given such term by section 1204(8)(A) 
                of the Omnibus Crime Control and Safe Streets 
                Act of 1968 (42 U.S.C. 3796b(8)(A)).
                  ``(D) Qualified health insurance premiums.--
                The term `qualified health insurance premiums' 
                means premiums for coverage for the eligible 
                retired public safety officer, his spouse, and 
                dependents, by an accident or health insurance 
                plan or qualified long-term care insurance 
                contract (as defined in section 7702B(b)).
          ``(5) Special rules.--For purposes of this 
        subsection--
                  ``(A) Direct payment to insurer required.--
                Paragraph (1) shall only apply to a 
                distribution if payment of the premiums is made 
                directly to the provider of the accident or 
                health insurance plan or qualified long-term 
                care insurance contract by deduction from a 
                distribution from the eligible retirement plan.
                  ``(B) Related plans treated as 1.--All 
                eligible retirement plans of an employer shall 
                be treated as a single plan.
          ``(6) Election described.--
                  ``(A) In general.--For purposes of paragraph 
                (1), an election is described in this paragraph 
                if the election is made by an employee after 
                separation from service with respect to amounts 
                not distributed from an eligible retirement 
                plan to have amounts from such plan distributed 
                in order to pay for qualified health insurance 
                premiums.
                  ``(B) Special rule.--A plan shall not be 
                treated as violating the requirements of 
                section 401, or as engaging in a prohibited 
                transaction for purposes of section 503(b), 
                merely because it provides for an election with 
                respect to amounts that are otherwise 
                distributable under the plan or merely because 
                of a distribution made pursuant to an election 
                described in subparagraph (A).
          ``(7) Coordination with medical expense deduction.--
        The amounts excluded from gross income under paragraph 
        (1) shall not be taken into account under section 213.
          ``(8) Coordination with deduction for health 
        insurance costs of self-employed individuals.--The 
        amounts excluded from gross income under paragraph (1) 
        shall not be taken into account under section 
        162(l).''.
  (b) Conforming Amendments.--
          (1) Section 403(a) of such Code (relating to 
        taxability of beneficiary under a qualified annuity 
        plan) is amended by inserting after paragraph (1) the 
        following new paragraph:
          ``(2) Special rule for health and long-term care 
        insurance.--To the extent provided in section 402(l), 
        paragraph (1) shall not apply to the amount distributed 
        under the contract which is otherwise includible in 
        gross income under this subsection.''.
          (2) Section 403(b) of such Code (relating to 
        taxability of beneficiary under annuity purchased by 
        section 501(c)(3) organization or public school) is 
        amended by inserting after paragraph (1) the following 
        new paragraph:
          ``(2) Special rule for health and long-term care 
        insurance.--To the extent provided in section 402(l), 
        paragraph (1) shall not apply to the amount distributed 
        under the contract which is otherwise includible in 
        gross income under this subsection.''.
          (3) Section 457(a) of such Code (relating to year of 
        inclusion in gross income) is amended by adding at the 
        end the following new paragraph:
          ``(3) Special rule for health and long-term care 
        insurance.--In the case of a plan of an eligible 
        employer described in subsection (e)(1)(A), to the 
        extent provided in section 402(l), paragraph (1) shall 
        not apply to amounts otherwise includible in gross 
        income under this subsection.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to distributions in taxable years beginning after 
December 31, 2005.

                      TITLE XI--GENERAL PROVISIONS

SEC. 1101. PROVISIONS RELATING TO PLAN AMENDMENTS.

  (a) In General.--If this section applies to any pension plan 
or contract amendment--
          (1) such pension plan or contract shall be treated as 
        being operated in accordance with the terms of the plan 
        during the period described in subsection (b)(2)(A), 
        and
          (2) except as provided by the Secretary of the 
        Treasury, such pension plan shall not fail to meet the 
        requirements of section 411(d)(6) of the Internal 
        Revenue Code of 1986 and section 204(g) of the Employee 
        Retirement Income Security Act of 1974 by reason of 
        such amendment.
  (b) Amendments to Which Section Applies.--
          (1) In general.--This section shall apply to any 
        amendment to any pension plan or annuity contract which 
        is made--
                  (A) pursuant to any amendment made by this 
                Act or pursuant to any regulation issued by the 
                Secretary of the Treasury or the Secretary of 
                Labor under this Act, and
                  (B) on or before the last day of the first 
                plan year beginning on or after January 1, 
                2008.
        In the case of a governmental plan (as defined in 
        section 414(d) of the Internal Revenue Code of 1986), 
        this paragraph shall be applied by substituting 
        ``2010'' for ``2008''.
          (2) Conditions.--This section shall not apply to any 
        amendment unless--
                  (A) during the period--
                          (i) beginning on the date the 
                        legislative or regulatory amendment 
                        described in paragraph (1)(A) takes 
                        effect (or in the case of a plan or 
                        contract amendment not required by such 
                        legislative or regulatory amendment, 
                        the effective date specified by the 
                        plan), and
                          (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the 
                        date the plan or contract amendment is 
                        adopted),
                the plan or contract is operated as if such 
                plan or contract amendment were in effect; and
                  (B) such plan or contract amendment applies 
                retroactively for such period.

                                  
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